State workers' compensation systems with fee schedules pay higher medical costs than employer-sponsored group health plans, and comp systems without a schedule pay even more, a study has found.

The findings were made by the National Council on Compensation Insurance, which also reported that compared to other medical services, radiology and surgery had the highest markups over employer group health.

Boca Raton, Fla.-based NCCI, a statistical and rate analysis group, said in a statement that cost containment is critical to maintaining a viable workers' comp system, and the rising cost of delivering healthcare services underscores the need to control workers compensation medical costs.

According to NCCI, fee schedules are the oldest and most widely used device to regulate workers compensation medical payments, but there is a question as to what makes for an effective fee schedule.

NCCI said it found that comp fee schedules are effective at controlling workers compensation medical costs when it comes to primary care, but not as well for specialty medicine.

The company advised policymakers, however, should look beyond the initial role of fee schedules as only price controls and view fee schedules as a way to help workers comp insurers build networks that deliver high quality, readily accessible, and cost-effective medical care.

NCCI said schedules based on what services should cost reference a relative value scale (RVS), explaining that RVS schedules are based on analyses of the resources of time, equipment, and expense required to deliver the various medical services. The Medicare Resource-Based RVS, or RBRVS, the company said, is used by many states as the starting point for their comp fee schedules, but state fees schedules generally allow a higher maximum fee than the Medicare reimbursement amount.

NCCI's report said the more effective fee schedules are those that set maximum allowable fees that are no more than 40 percent above Medicare, but in practice, that was only achieved among fee schedules based on what reimbursements should be (RVS approach) as opposed to schedules geared to what is being billed.

Fee schedules were also found to be more effective in combination with the use of provider networks.

NCCI said when prices are lower, utilization is not higher whether the comparison is made between states and on an overall basis.

“In general, greater utilization of comp services than for GH [group health] is a commonality among states that is not responsive to the presence or design of a fee schedule.”

However, NCCI noted that other studies suggest that within a geographic area, utilization is responsive to fee schedules.

NCCI said the effectiveness of comp fee schedules varies by type of service and they are best at controlling physical therapy and are generally effective at controlling the cost of primary care. Although fee schedules may be less effective at controlling the price of radiology and surgery, the lack of any maximum fee for those services is of still greater concern, since that is associated with much higher comp medical costs, the study advised.

The study said also that among states with fee schedules:

o Office visits and physical therapy are reimbursed at about the same prices as group health.

In a study comparison of Maryland and Nebraska comp systems, NCCI said both generally paid higher medical fees than the Medicare system, but Nebraska paid a significantly greater amount. For surgery procedures, Nebraska was found to pay 155 percent above Medicare while Maryland paid 39 percent more.

An examination of 22 states comparing average maximum medical charge found that Florida was actually below Medicare, while Oregon was almost 100 percent higher.

Making a comparison with group health, NCCI found that Florida was paying 28 percent less and Maryland Georgia Arizona and Colorado were paying about the same but in a 14-state universe, nine states were paying more. The highest was Tennessee at 38 percent above the group health rate.

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