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Industry Insights

Paduda: Price and Spend in Work Comp Medical

  • National

These are the basics here, folks.

Joe Paduda

Joe Paduda

Facility costs soak up two of every five dollars of work comp medical spend.

“Physician” costs take up another two bucks. However, that is misleading.

In National Council on Compensation Insurance-speak, “physician” is a catchall for most practitioners: medical doctors, osteopaths, physical therapists, chiropractors and physician assistants. And, the physician fee schedule in most states doesn’t apply to things like physical medicine.

Historically, PM accounts for right around one of every six work comp medical dollars (yes, that is a very solid number based on a ton of work I’ve done), although like everything in work comp, it varies somewhat by state.

Then there are drugs, diagnostic imaging, durable medical equipment, etc.

Drugs account for less than 10% of spend, a figure that has been declining for years thanks to much better clinical management — mostly by pharmacy benefits managers — more generic usage, a massive decrease in overuse of opioids, fewer new brand drugs used for musculoskeletal injuries, and declining fee schedules.

Risk and Insurance’s Annemarie Mannion penned an excellent explanation of how Medicare reimbursement affects work comp fee schedules. Read her piece and save it in your reference files. You will need it in the future.

Finally, network penetration does have some effect on prices paid, although that impact has declined over the last few years, as providers have figured out that when it comes to negotiating with health systems, workers’ comp is pretty much clueless. Here’s a synopsis of network impact from a couple of years back.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.

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