When evaluated on key metrics such as denial of payments and reimbursement amounts, some claims administrators embody the major issues plaguing the California workers' compensation system.

In this article, we compare Gallagher Bassett and the State Compensation Insurance Fund (SCIF), two of the largest claims administrators, based on the volume of bills submitted by daisyBill providers.

SCIF is a quasi-governmental organization that provides workers' compensation insurance to employers in California. It operates on a not-for-profit basis, at least in theory. Gallagher Bassett, a private, for-profit Third-Party Administrator (TPA), offers claims administration services to multiple insurance companies and self-insured employers.

We begin with a look at reimbursement data for Evaluation and Management (E&M) services rendered during an injured worker’s initial visit to the practice. E&M billing codes, some of the most frequently reported, are a reliable barometer for assessing claims administrator reimbursement performance.

The data below demonstrates the alarmingly high rate at which Gallagher Bassett denies payment for new patient E&M services.

Moreover, the data reveal that both claims administrators pay roughly Medicare rates for new-patient E&M services. This is despite the higher state fee schedule reimbursement rates to account for the exceptional administrative costs of treating California’s injured workers.

New Patient E&M Data Breakdown

E&M services for an injured worker’s first visit to the practice are billed by providers using Current Procedural Terminology (CPT) codes 99202 through 99205.

Using the data above from tens of thousands of new-patient E&M bills submitted via daisyBill with dates of service from January 1, 2021, and March 31, 2023, we can see a snapshot of how the two claims administrators operate.

E&M Denial Rates

The first significant takeaway: Gallagher Bassett denied payment for new-patient E&M services 18% of the time. Could 18% of new-patient E&M services in the specified time frame be invalid?

We can’t help but wonder if refusing to pay nearly a fifth of providers’ charges for E&M services reflects that the California appeals process monetarily incentivizes claims administrators to deny reimbursement. With such a high denial rate, is Gallagher Bassett torturing providers through IBR Chicken? 

SCIF, meanwhile, denied 9% of new-patient E&M charges. Not as ugly as Gallagher Bassett’s denial rate, but still tough to swallow — and SCIF is no stranger to IBR Chicken either. Not-for-profit indeed.

California workers’ comp laws make it too easy and consequence-free for claims administrators to adopt a “deny first” policy, and see if the provider can endure the gauntlet of Second Review appeals and requests for Independent Bill Review (IBR).

E&M Fee Schedule Reimbursement Rates

Between 2021 and 2023, the Physician and Non-Physician Practitioner portion of California’s Official Medical Fee Schedule (OMFS) set reimbursement rates between 131% and 139% of Medicare rates.

Both Gallagher Bassett and SCIF essentially render the Official Medical Fee Schedule (OMFS) irrelevant. They do so by leveraging the risk of exclusion from Medical Provider Networks (MPNs) to compel physicians to accept Preferred Provider Organization (PPO) and other network-related reimbursement discounts.

The result of these contractual PPO/MPN discounts is:  

• Gallagher Bassett paid doctors just 76% of OMFS rates for new-patient E&M services. That’s equivalent to 101% of Medicare rates for the same services.

• SCIF paid doctors only 73% of OMFS rates for new-patient E&M services — literally less than Medicare. SCIF paid doctors only 97% of Medicare rates, to be precise.

The (much) higher reimbursement rates set by the Division of Workers' Compensation (DWC) in the Physician Fee Schedule reflects a fact we often discuss on this blog: treating injured workers demands considerably more time and administrative resources than treating Medicare or group health patients — about 39% more, according to the 2023 OMFS.

The data is clear. If you are a doctor caring for injured workers, Gallagher Bassett will deny your bill nearly 20% of the time, and reimburse you at approximately Medicare rates. SCIF, meanwhile, will deny your bill almost 10% of the time, and compensate you at rates lower than Medicare.

No wonder doctors hesitate to treat injured workers. Providers simply cannot afford the administrative expenses of workers’ comp at Medicare reimbursement rates.

California's lawmakers and regulators set the Physician Fee Schedule rates 39% higher than Medicare. But claims administrators like Gallagher Bassett and SCIF, along with PPOs, MPNs, and other network-based discount contracting entities, have effectively negated the state's efforts to retain doctors in the workers' compensation system.

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