Reader Response: CA Physician Fee Schedule vs Medicare Rates

Reader Response: CA Physician Fee Schedule vs Medicare Rates

Make no mistake: 2024 cuts to Medicare reimbursement rates will affect reimbursement rates for treating injured workers — but only for providers under discount reimbursement contracts with specific Medicare-related terms.

Our article on Prime Health’s onerous discount terms elicited a comment from one reader who questioned the relationship between:

  • Medicare reimbursement rates, and
  • State workers’ comp fee schedule reimbursement rates

Medicare reimbursement rates apply to workers’ comp treatment if the physician agrees to a PPO discount reimbursement contract that pays at the “lesser of” Medicare or state fee schedule rates.

Under such contracts, reimbursement for treating injured workers is often reduced to Medicare rates — which will decrease in 2024. Below, we address this reader's comment in detail.

Conversion Factors Explained

Rather than maintaining complex, proprietary workers’ comp fee schedules, some states structure workers’ comp reimbursement on the Medicare RVU system as follows:

  1. Each Current Procedural Terminology (CPT) code is assigned a Relative Value Unit (RVU).
  2. The RVUs assigned to a CPT code combine components related to the physician's work, the practice's expenses, and liability protection.
  3. The RVUs assigned to a CPT code are multiplied by a geographical adjustment (GPCI) and the monetary conversion factor (CF) to determine reimbursement.

To account for the massive practice expense of treating injured workers, states use a higher workers’ comp-specific monetary CF to calculate the reimbursement amounts owed for treating injured workers.

For 2023 dates of service, California set the Physician Fee Schedule CF at $47.21 compared to the Medicare CF of $32.8872. The California CF is approximately 39% higher than the Medicare CF. Accordingly, the reimbursement paid to physicians who treat injured workers should be 39% higher than for treating a Medicare patient.

Unfortunately, if a California physician has signed a PPO contract agreeing to accept the “lesser of” OMFS or Medicare rates, Medicare will surely be the “lesser of” the two.

The “Lesser Of”: Why Workers’ Comp Providers Receive Medicare Rates

The reimbursement complication: While California Physician Fee Schedule rates are higher than Medicare rates, providers sign agreements with Preferred Provider Organizations (PPOs) like Prime Health, which contractually reduce reimbursements to Medicare rates — rendering the state workers’ comp fee schedule moot.

Prime Health PPO contract lists the reimbursement terms using “lesser of” language; as in, the provider agrees to accept the “lesser of” several reimbursement options:

  • 70% of the provider’s billed charges
  • 100% of Medicare rates 
  • 80% of OMFS rates

For 2024 dates of service, Medicare is proposing a 3.4% decrease in the Medicare CF, which will result in a 3.4% reimbursement reduction when a physician treats a Medicare patient. For physicians who signed a PPO contract with “lesser of” Medicare terms, the physicians' reimbursement will be 3.4% less in 2024 for treatment rendered to injured workers.

Even if California increases its workers’ comp 2024 CF, the Prime Health “lesser of” contract terms guarantee the provider will only receive the reduced 2024 Medicare reimbursements for treating injured workers.

Detailed Response to Reader Comment

We welcome reader comments (especially when the reader believes we got our facts wrong). Here we unpack and address each point of the comment from our reader for clarification:

This is an incredibly misleading article. While the majority of states use Medicare for fee schedules, including California, it is on the basis of the annual Medicare RVU updates.

It was certainly not our intent to mislead, nor did we contradict the above (accurate) statement regarding Medicare and fee schedules. However, PPO discount contracts add another layer of complexity to the Medicare/OMFS relationship.

These RVUs are calculated with a state-specific conversion factor to determine rates for physician services. California is one such state that uses Medicare RVUs and its own unique conversion factor to calculate provider reimbursement rates, NOT the Medicare conversion factor.

That is correct. The Medicare CFs are different from the “unique” OMFS Physician Fee Schedule CFs adopted by the DWC.

The reason for the nationwide 3.4% rate decrease is because of the decrease in the Medicare conversion factor, NOT state conversion factors which normally are not correlated with Medicare.  

Correct again. We do not assert that any state CF will decrease (in fact, California has generally increased the workers’ comp CF over time). However, any state increase in workers’ comp CF is irrelevant when PPO contracts mandate that providers accept Medicare rates for injured worker treatment.

The Medicare RVUs for most physician fee services have actually increased.

We do not believe the CMS final rule announcement supports the notion that CPT RVUs have “actually increased.”

Thus, the California workers’ compensation fee schedule is not going to be impacted by the reduction Medicare conversion factor.

This statement may be technically true, but it misses the point. Suppose a provider has signed a PPO contract with “lesser of” language, resulting in reimbursement at Medicare rates. In that case, the physician’s workers’ comp reimbursement will decrease by 3.4% for 2024 dates of service.

Get your facts straight before you publish inaccurate information.

We stand by the facts asserted in the article, none of which have proven inaccurate. We can understand, however, that headlines like “...Medicare Cuts May Decrease Workers’ Comp Reimbursement” can be misconstrued if the impact of discount contracts is not considered.

Once again, when Medicare rates decrease, workers’ comp reimbursements decrease for providers who are contractually paid Medicare rates for injured worker treatment.

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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