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States Without Fee Schedule Still Highest Priced; N.C. Moves Up in Rankings

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An update to its workers’ comp fee schedule in mid-2015 has propelled North Carolina up seven places in a state-by-state ranking of the cost of medical professional services, released Thursday by the Workers’ Compensation Research Institute.

Among 31 states studied, North Carolina was No. 26 in WCRI’s medical price index ranking in 2015, meaning 25 other states paid more for a “market basket” of medical services commonly provided to injured workers. At the time, the state’s fee schedule rates for most medical professional services were set at 158% of 1995 Medicare values, according to WCRI.

But effective July 2015, North Carolina changed its fee schedule to incorporate 2015 Medicare rates with multipliers ranging from 140% to 195%, depending on the type of service. The state shot up seven places in terms of the medical price index, to No. 19, in 2016, WCRI reported. From 2014 to 2016, prices paid for medical professional service in the Tar Heel State went up 18%.

States without a fee schedule ranked highest in their medical price indices, according to the study, by WCRI researchers Rebecca (Rui) Yang and Olesya Fomenko.

The six non-fee-schedule states in the study landed in the top seven spots of the ranking. Wisconsin took the top spot in 2016, followed by Indiana, New Jersey and Missouri. All four lacked fee schedules at the time, and their ranking was the same as in 2015. Two other non-fee-schedule states, Iowa and Virginia, took the No. 6 and No. 7 spots, respectively, in 2016. Oregon, a fee schedule state, was wedged in at No. 5.

At the bottom end of the 31-state medical price index ranking were Florida, at No. 31, followed by California, New York, South Carolina and Oklahoma. The bottom five was the same in 2015 and 2016.

Todd Brown, practice leader for compliance and regulatory affairs at Medata Inc., said states such as North Carolina may be slow to adopt or make changes to their fee schedules because their workers’ compensation divisions are set up with an emphasis on the judiciary to resolve workers’ comp disputes. Staff available to work on issues such as fee schedules is limited, Brown said, and may be overwhelmed by lobbyist opposition to fee schedules or fee schedule changes.

In Wisconsin, for example, “every time they’ve tried to put anything together, the medical associations have blocked it,” Brown said. “They don’t want to be regulated.”

In addition, jurisdictions need to consider the ramifications of fee schedule changes, Brown said. Clinicians may be inclined to provide more services to offset reduced payment under a fee schedule, he said, and medical treatment guidelines might be the next step the state considers.

The authors of the WCRI report note that fee schedules have many moving parts, and changes to any of the components may have a substantial impact on prices paid for medical services. States must decide whether to base their fee schedules on Medicare or other benchmarks, what conversion factors or multipliers to use for different services, and whether to include geographic variations.

In an example of a base change, Kentucky switched in June 2014 from Medicare’s resource-based relative value scale, or RBRVS, for its professional fee schedule, to state-specific relative values. Prices paid for medical professional services in Kentucky rose 19% from 2013 to 2015, WCRI said.

Looking at costs for different types of medical services in Kentucky from 2013 to 2015, WCRI found that prices were up 33% for physical medicine, 31% for emergency services and 21% for office visits, while costs for major surgery rose only 4%.

California and Colorado have also changed their fee-schedule base recently. Costs went up for some medical services and down for others in the two states, resulting in minimal change overall.

Colorado switched from relative values for physicians published by Optum360 to Medicares’s RBRVS, effective January 2016. Prices for radiology and neuromuscular testing went up in 2016, while prices for emergency services, major surgery and major radiology went down.

California began a four-year transition to an RBRVS-based fee schedule for professional services starting in January 2014. From 2013 to 2014, prices went up 27% for physical medicine and 30% for evaluation and management, while prices fell for major surgery, emergency services and pain injections.

A free copy of the WCRI report, "WCRI Medical Price Index for Workers’ Compensation, Ninth Edition," is available here.

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