California’s a fifth of U.S. workers’ comp benefits, and medical expenses are on the rise. 

Joe Paduda

Why?

Monday, we learned that unlisted codes, especially in physical medicine, are a big contributor. Today, we’re all about the fee schedule.

California’s Official Medical Fee Schedule for providers (physicians, PTs, etc.), aka the OMFS, is, like many states’ fee schedules, based on Medicare. 

And like some other states, California’s Division of Workers' Compensation finagles Medicare’s fee schedule, specifically by updating the conversion factor every year. Briefly, DWC applies the annual percentage change in the Medicare Economic Index. The MEI factors in cost changes for stuff providers need — workers, materials, space, etc. So, as those costs increase, so does the OMFS.

DWC can also change the OMFS if the Centers for Medicare and Medicaid makes temporary adjustments, as it did during COVID.

OK, which means what?

So glad you asked: 

Thanks to the California Workers' Compensation Institute for the graphic.

What does this mean for you?

DWC’s use of the MEI has increased provider fees faster and is higher than Medicare’s reimbursement.

While medical inflation in California work comp has been significant, two of the three drivers are specific to California. 

One more to come.

Note: The brilliant explainers at CWCI published an excellent report on this issue last year. It’s available here.

Joseph Paduda is the principal of Health Strategy Associates, a consulting firm focused on improving medical management programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.