Fee Schedule Slowed Growth of Illinois Injured Workers’ Medical Costs

September 3, 2010

Medical costs per workers’ compensation claim in Illinois showed slower growth in 2007 following implementation of the medical fee schedule in 2006, according to a study from the Workers Compensation Research Institute (WCRI).

The study, Monitoring the Impact of Illinois Regulatory Changes: CompScope Medical Benchmarks, 10th Edition, reported that growth in medical costs per claim slowed to 5 percent after a 12 percent average annual growth in the three prior years.

The decrease in growth rates likely reflected the impact of regulations on nonhospital and hospital providers, according to Cambridge, Mass.-based WCRI.

Hospital payments per claim in Illinois were among the highest of the study states before 2006 and 2009 regulations.

The study showed that after 2006 regulations, hospital outpatient payments per service and hospital payment per inpatient episode grew at a slower rate.

Hospital outpatient payments per service for claims with more than seven days of lost time grew on average four percent (2005/2006 to 2007/2008) compared to a seven percent average annual growth rate prior to these changes.

Hospital inpatient payments per episode were stable (0.4 percent) in 2005/2006 to 2007/2008 and the result might be related to the new diagnosis-related group (DRG) based fee schedule.

Although Illinois put in place DRG rates that were significantly higher than many states with similar regulations, the growth in hospital inpatient payments per episode slowed in this first post-fee schedule period. Prior to the DRG based fee schedule, hospital inpatient payments per episode in Illinois grew on average 20 percent per year – among the fastest growth rate of the 15 study states.

The WCRI study also found that Illinois had significantly higher hospital costs per claim of the study states prior to the implementation of the 2006 and 2009 fee schedules. This result was driven by substantially higher payments per service for many major hospital outpatient services as well as among the highest average payment per hospital inpatient episode of the study states for 2006/2008 claims with more than seven days of lost time.

The introduction of the professional services fee schedule in Illinois in 2006 had a direct impact on prices paid to nonhospital providers such as physicians, chiropractors, and physical/occupational therapists.

In 2007, prices paid resumed the growth of 6 percent – an increase generally consistent with the annual updates in fee schedule rates. In contrast to the slower growth in prices paid for many services billed by nonhospital providers, prices paid for major surgeries (such as knee, shoulder, back and wrist surgeries) grew 14 percent from 2006 to 2007.

After the introduction of the professional services fee schedule, prices paid in Illinois remained among the highest of the study states. According to the WCRI Medical Price Index for Workers’ Compensation (forthcoming), prices paid to nonhospital providers in Illinois were 65 percent higher than the median of 25 study states in 2007.

Another component of medical costs is utilization of medical services. The study found that Illinois had higher utilization of medical services delivered by nonhospital providers among the study states in 2007/2008. This result was largely driven by higher utilization of physical medicine services in Illinois than in most study states.

For example, when physical medicine services were involved, physical/occupational therapists treated injured workers with on average 20 visits per claim compared to 16 visits per claim in the typical study state.

Physicians delivering physical medicine treated injured workers with 15 visits per claim, as opposed to 10 visits per claim in the median study state. In terms of annual changes, the number of visits per claim for physical medicine rendered by providers was stable in Illinois over the analysis period.

Source: Workers Compensation Research Institute

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