Treating California’s injured workers is much, much more costly in terms of time and administrative resources than treating Medicare patients. And, most California providers refuse to treat injured workers because of the administrative burdens and payment complexities that make workers’ comp a shaky financial proposition.

To entice physicians to treat injured workers, California law requires the Division of Workers’ Compensation (DWC) to establish a Physician Fee Schedule that reimburses providers at rates higher than Medicare. This higher reimbursement rate makes perfect sense, given the additional administrative costs of practices and physician work required to treat injured workers compared to Medicare patients.

However, the difference between Medicare and OMFS rates can vary yearly — including 2024, when Medicare rates will decrease.

Below, see a historical breakdown (since 2014) of the relationship between Medicare and the California Physician Fee Schedule rates established by the DWC. This data shows that since 2014, the Physician Fee Schedule rates have increased as a percentage of Medicare rates.

Unfortunately (for injured workers throughout California), the increased reimbursement is moot in the face of PPO discount reimbursement contracts that reduce reimbursements to rates significantly below the increasing reimbursements established by the Physician Fee Schedule.

Historical Conversion Factor Data

California physicians treating injured workers assume a substantial administrative workload due to onerous workers’ comp machinations, including

• Navigating MPN chaos to confirm the provider’s eligibility to treat
• Extensive medical documentation requirements
• Obtaining authorization from the payer for all treatment, services, medicines, and goods
• Billing compliantly and successfully delivering bills
• Appealing incorrect denials and adjustments

Also, add to the California workers’ comp morass 1) too-frequent rampant non-compliance by claims administrators that fail to adhere to payment laws and regulations and 2) absent regulatory enforcement of the rules and regulations.

Since 2014, California law has structured its OMFS physician reimbursement rates on Medicare’s Relative Value Unit (RVU) system. The Physician Fee Schedule uses the following Medicare reimbursement formula to calculate reimbursements:

1. The Medicare RVUs assigned to a CPT code are multiplied by the Medicare location-specific Geographic Practice Cost Index (GPCI)
2. The above is multiplied by the DWC-established workers’ comp conversion factor (CF), rather than the Medicare conversion factor (CF)

Over the last few years, the Medicare conversion factor has decreased while DWC has mostly increased the Physician Fee Schedule conversion factor. As shown below, since 2014, the Physician Fee Schedule as a percentage of Medicare rates has climbed from 107% to almost 140%. 

Following 2024’s planned 3.4% cut to the Medicare Conversion Factor, if the DWC maintains the 2023 Physician Fee Schedule conversion factor at 47.2100 in 2024, Physician Fee Schedule rates as a percentage of 2024 Medicare rates will climb to over 144%. 

The PPO Problem

In the real world of California workers’ compensation, providers are victimized by PPO reimbursement discount contracts and rarely receive the reimbursements owed per the Physician Fee Schedule.

Providers often sign these contracts under threat of exclusion from Medical Provider Networks (MPNs); if the provider refuses a contract, they’re booted from the associated MPN and rendered ineligible to treat injured workers restricted to that MPN.

PPO reimbursement rates can be drastically, tragically low. We keep tabs on the real-world reimbursement rates paid to our provider clients, using data from the millions of e-bills sent through daisyBill. The numbers are disheartening and almost entirely due to PPO reductions.

That’s California’s “pay-to-treat” system — no matter how high the DWC sets the Physician Fee Schedule conversion factor, PPOs and other discount entities can negate the increased revenue meant for physicians who treat injured workers.

With services ranging from fee schedule calculators to fully managed workers’ comp billing, daisyBill can help protect and empower your practice. Reach out to learn more.

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