SB 537: Say NO to Medicare Reimbursements

A proposed California bill, though seemingly benign, may establish Medicare rates as a standard for workers’ comp reimbursements, which would be a mistake.

The bill, which proposes Medicare reimbursement as a minimum reimbursement, fails to take into account that workers’ comp patients require substantially more work than Medicare patients.  When a provider agrees to Medicare reimbursement for a workers' comp patient, the provider is actually agreeing to a payment amount below that of the Medicare equivalent.

Currently, California Senate Bill 537 is winding its way through the legislative process.

This bill would prohibit contracted workers’ comp reimbursement rates from being less than the corresponding Medicare fee schedule payment. Though well-intentioned and designed to protect providers from low-paying contracts, this bill would actually establish a potentially dangerous Medicare reimbursement precedent that is not applicable to California workers’ comp.

Currently, the California Official Medical Fee Schedule (OMFS) reimbursements exceed Medicare reimbursements because the Division of Workers’ Compensation (DWC) recognizes that treating workers’ comp patients requires more physician resources than treating Medicare patients requires. Instead of foisting inappropriate Medicare reimbursements on providers, SB 537 should protect the OMFS reimbursements established by the DWC.

Medicare Uses RVUs to Calculate Medicare Reimbursement

To calculate reimbursement, Medicare uses a payment formula that assigns each service three Relative Value Units (RVUs). These RVUs are intended to reflect the amount of resources required to perform each specific service.    

  1. Physician Work RVU reflects the relative time and intensity associated with furnishing services to a Medicare patient.
  2. Practice Expense (PE) RVU reflects the costs of maintaining a practice (such as renting office space, buying supplies and equipment, and staff costs).
  3. Malpractice RVU reflects the cost of malpractice insurance premiums.

In the example below, RVUs for physician record review are compared to RVUs assigned to surgery to the ulnar nerve. For the surgery, all three assigned RVUs are much higher than the RVUs assigned for record review. These higher surgical RVUs reflect the additional physician work, practice expense and malpractice expense of surgery compared to record review, at least for Medicare patients.

CPT

Physician Work RVU

Practice Expense RVU

Malpractice RVU

RVU Definition

Relative time and intensity associated with furnishing services to a Medicare patient

Costs of maintaining a practice (such as equipment, and staff costs)

Cost of malpractice insurance premiums

99358 - Prolonged service without contact (record review)

2.1

0.9

0.15

64718 - Revise the ulnar nerve at elbow (surgery)

7.26

8.37

1.41

On average, the proportion of costs for Medicare are 52%, 44% and 4%, respectively.[1] 

Workers’ Comp Patients Are NOT Medicare Patients

For a provider to agree to accept Medicare reimbursement for treating workers’ comp patients essentially assumes that the amount of work required for a workers’ comp patient and a Medicare patient are equivalent.

EXCEPT workers' comp patients require substantially more resources than Medicare patients. Specifically, California workers’ comp laws and regulations mandate treatment authorization, extensive reports, and complex billing requirements.

While the OMFS uses Medicare RVUs to calculate reimbursement, the DWC uses a higher conversion factor than Medicare to calculate a higher reimbursement for treating injured workers. This higher conversion factor used by the DWC is intended to reimburse providers for the complexity of the myriad reporting and billing requirements which make treating injured workers’ far more expensive than Medicare patients.  

Providers Should Not Agree to Discounted OMFS Reimbursements

When a provider agrees to Medicare reimbursement for a workers' comp patient the provider is actually agreeing to a reimbursement below the Medicare reimbursement. The correct Medicare-equivalent reimbursement would be higher to reflect the reality that a workers' comp patient requires more Physician Work and greater Practice Expense than a Medicare patient.

These excess workers' comp Physician Work and Practice Expense resources include, but are not limited to:

Physician Work - Workers’ Comp

Practice Expense - Workers’ Comp

Submission of Requests for Authorization (RFA) for all treatment

Submission of RFAs and tracking receipt of utilization review decisions

Submission of RFAs for diagnostic tests, therapy, and pharmaceuticals, including documentation of MTUS guidelines and formulary research for pharmaceuticals

Submission of RFAs and forwarding utilization review decisions to the appropriate provider

Completing the required reports (Doctor’s First Report, PR-2, PR-4)

Submission of documentation with billing, including reports and authorization

Primary Treating Physician review of secondary physician reporting

Forwarding secondary reports to claims administrators

Peer-to-peer calls

Time spent intaking new workers’ comp patients (no automatic eligibility)

Management of hundreds of workers’ comp payers

Inaccurate reimbursements from payers requiring timely Second Reviews and $195 for Independent Bill Review

Contact Both Your Senator and Senator Gerald Hill

Treating injured workers is difficult enough, and providers should not accept reductions that bring their reimbursements below the OMFS, whether as part of a contract or not.

All stakeholders should be alarmed by this attempt to undermine the California Official Medical Fee Schedule. Instead of forcing down reimbursements, California legislators should be protecting the OMFS.

To express your opinions on SB 537, contact your senator, whose name and contact information you can find here. Or, if you know your senator’s name, you can contact your senator through the California State Senator Roster website.

Also submit your comments about this bill to its sponsor, Senator Gerald Hill, by either:

  1. Using this contact form on the website of the California State Senate, or
  2. Clicking this link to SB 537 and choosing the “Comments To Author” tab. To comment, you may have to register on the California Legislature site if you haven’t previously done so.


[1] The three RVUs for a given service are each multiplied by a unique geographic practice cost index, referred to as the GPCI adjustment. The GPCI adjustment has been implemented to account for differences in wages and overhead costs across regions of the country. The sum of the three geographically weighted RVU values is then multiplied by the Medicare conversion factor to obtain a final price.

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