WCRI Report Shows Wide Variety in How States Control Work Comp Medical Costs

Workers’ compensation medical costs vary widely among the states both in terms of price and how often services are used. The differences appear to relate closely to which cost-drivers each state legislature tried to control and which were overlooked, according to a report released by the Workers’ Compensation Research Institute on Thursday.

The WCRI benchmark report provides detailed data on medical cost trends in 18 states that together represent 60% of the nation’s workers’ compensation benefit payments. Medical costs make up 60% of total spending on comp, according to the National Council of Compensation Insurance.

The new WCRI data shows that states that tackled specific problems, such as high hospital costs, achieved results, but also left other high-cost areas untouched. Some states were high cost in one area, but low cost in others. Each state has its own quirks.

Illinois, for example, slashed the cap on all medical fees by 30% in 2011, but hasn’t passed substantive workers’ compensation legislation since. Gov. Bruce Rauner, who fought in vain to pass further reforms, was replaced after one term in 2018 by Democrat J.B. Pritzker.

The WCRI benchmark report showed that Illinois’ medical costs, relative to the other study states, moved more toward the middle of the pack after the 30% fee cut, but still remain high.

The average medical payment per claim after 36 months for 2015 claims was 30% higher than the median of the 18 study states. For 2017 claims at 12 months of experience, Illinois was 15 percent higher than the median.

The statistics given apply to claims with seven or more days of lost time. Short term “medical-only” claims were included in the study.

The average cost of a medical claim is based both on the price paid for each visit and the number of visits per claim. Illinois is at the high end on both spectrums.

While Illinois caps prices for evaluation and management services lower than other states, it has higher prices for everything else. Prices for physical therapy, emergency, radiology and surgery all cost more. Altogether, Illinois medical services cost 31 percent more than the median of the 18 study states.

Illinois injured workers more medical service visits per claim than workers in most of the other study states. For professional service visits, Illinois ranked second-highest among the 18 states with 25 visits per claim.

The report said the high number of physical medicine visits in Illinois especially stood out. It was the highest of the study states in 2017. The report notes that Illinois has no specific regulations addressing physical medicine, while other states use treatment guidelines or have set specific caps on the number of visits allowed per claim.

Even without guidelines in Illinois, workers’ compensation insurers still deny care if they think claimants are going to the doctor too much, says Chicago claimant’s attorney Michael J. Helfand. He recently posted a blog on his law firm’s website advising injured workers that their treating physician, not the insurer, gets to decide how many visits are required.

In a telephone interview, Helfand acknowledged that workers’ comp medical treatment isn’t always on the up and up.

“There are some attorneys who have their offices next to physical therapy clinics, and they are getting bankrolled by those referrals,” he said. “Those aren’t credible doctors. If the insurance company denies that, that’s totally legit.”

But more often, insurers deny legitimate medical care, he said. Helfand said physical therapy can often render surgery unnecessary, saving insurers money over the long run. He says he is treated regularly by a physical therapist for a shoulder he injured while playing soccer, saving his health insurer the cost of an operation.

He said he doesn’t want the Illinois workers’ compensation system to look anything like Indiana, where injured workers can’t find a lawyer to represent them.

“We get calls two of three times a week asking if we can go to Indiana because they can’t find an attorney there,” Helfand said. “To me, that’s shameful.”

Indiana, as it happens, has been a perennial low-cost leader in regular surveys of employer workers’ compensation costs conducted by the Oregon Department of Consumer Services. In 2018 it ranked No. 50 among all the other states and the District of Columbia, just above North Dakota, with employer costs of just 87 cents per payroll. By comparison, Illinois ranked No. 22 in employer costs in that survey.

But those savings are not coming from the medical side. The WCRI benchmark report showed that Indiana’s medical payments per claim with three years experience were 35% higher than the median of the 18 states studied from 2015 and 2018.

Indiana adopted a hospital fee schedule that took effect in 2014, but capped fees at 200% of the Medicare rate. Most of the other states studied set their hospital fee schedules at 130% to 150% of Medicare. The fee schedule was enough, however, to move Indiana toward the middle of the pack in hospital payments per inpatient episode, whereas before the state had higher costs than any of the states studied.

Indiana is one of a handful of states that does not have a fee schedule for professional services. And in that arena, the state continues to be a cost leader.

The WCRI report the price of professional services in Indiana was the third-highest of 36 states for which it had data, behind Wisconsin and New Hampshire. All categories of services cost more than the median — some services more than twice as much.

Indiana also was among the highest states for payments to ambulatory surgery centers, which aren’t regulated by the hospital fee schedule.

On the other side of Illinois, Wisconsin is also a high-cost state for workers’ comp medical services. It had the highest medical payments per claim of any of the study states, 51% higher than the median for claims with 12 months of experience and 50% higher for three-year old claims.

The prices for professional services in Wisconsin were the highest of 36 states for which the WCRI had data, 164% higher than the median state. Wisconsin hospital payments were 19% more expensive than the median.

On the other hand, Wisconsin injured workers visit their doctor less frequently than the average: 17 visits compared to median of 23 in 2017/2018. Wisconsin had a lower percentage of claims that required hospitalization, even though those “inpatient episodes” cost 19% more than the median cost among the study states.

Wisconsin lawmakers have been battling over legislation to impose a fee schedule in the state for years. No bill has passed, despite an endorsement by the state’s labor-management advisory council.

Other highlights in the report:

• California saw moderate growth in medical payments per claim in 2017, after a decrease following the implementation of Senate Bill 863. Since then the state has adopted two fraud-fighting measures and multiple medical fee schedule updates.
• Medical payments per claim in Florida have been typical of 18 states, a result masking the lowest prices paid for professional services and higher-than-typical payments per claim for ambulatory surgery centers and for hospital outpatient and inpatient services. These results were mainly related to fee regulations.
• Medical payments per claim in Minnesota remained stable from 2012 to 2017. Several trends offset one another to produce the stable results. For example, hospital inpatient payments per episode decreased following the 2016 inpatient fee schedule change, while ASC and hospital outpatient facility payments per claim increased.
• Medical payments per claim in North Carolina decreased 5 to 7 percent per year since 2014. These decreases likely reflect 2015 Medicare-based fee schedule changes for hospitals, ASCs, and professional services.

The WCRI study covered the period from 2012 through 2017, with claims experience through March 2018. The states studied were Arkansas, California, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia, and Wisconsin.