A report from the Workers’ Compensation Insurance Rating Bureau (WCIRB) of California asserts that in 2021, “overall medical payments per claim increased significantly.” However, as the WCIRB acknowledges, the report is based on unverified, self-reported data submitted only by insurers.

Despite this caveat, industry commentators present the report’s conclusions uncritically and without reference to the report’s data sources, broader context, or the WCIRB’s debatable presumptions regarding what constitutes “medical payments.”

Below, reimbursement data from daisyBill provide an important counterpoint.

Our payment data are 100% verifiable, and not limited to payments from insurers. These data are inclusive of the hundreds of payers in our system, including insurers, self-employed insurers, and Third-Party Administrators (TPA).

Most importantly, our reimbursement data come straight from the actual payment amounts reported on 1.34 million electronic Explanations of Review (e-EORs) sent to daisyBill providers by the payers.

Our data reveal that in 2021 payers reimbursed our California providers at just 102% of Medicare rates for Evaluation and Management (E/M) services, one of the most commonly billed medical services in workers’ comp. Despite state fee schedules establishing rates at over 130% of Medicare, California doctors are paid, on average, at or near Medicare rates for treating injured workers.

This reimbursement reality represents a crisis for California workers’ comp doctors, the injured workers struggling to find care, and the employers whose premiums are not adequately invested into the healing of the workforce.

This crisis must be addressed on the basis of objective, independently verifiable data.

In this article, we unpack the reasons the WCIRB report should be questioned, and share 2019 through 2022 data that more constructively defines the challenges facing injured workers, employers, and providers.

WCIRB Report: Selective and Unverified Data

The WCIRB report’s appendix, under “Conditions and Limitations,” discloses key facts regarding the data on which the WCIRB rests its claims of “significantly increased” reimbursements:

• The data is only collected from insurers, and
• The WCIRB did not verify the data

“This report reflects a compilation of individual insurer submissions of medical transaction data to the WCIRB. While an insurer’s medical data submissions are regularly checked for consistency and comparability with other data submitted by the insurer, as well with other insurers’ medical data submissions, the source information underlying each insurer’s data submission is not verified by the WCIRB.” [emphasis added]

The WCIRB admits restricting its data analysis to payments made by insurers — which are not the only payers in California workers’ comp. The WCIRB report says nothing about payments from:

• Self-insured employers, which cover 1 in 8 California employees according to the Office of Self-Insurance Plans (OSIP)
• Public/JPA Self-Insured California employers, which represent 2 million employees
• TPAs handling claims on behalf of self-insured employers and insurers

In other words, the WCIRB report offers only a limited (insurer’s) view of workers’ comp payment trends. For example, so far in 2022, California daisyBill providers have sent over 1.3 million bills to the various kinds of claims administrators; over 51% of those bills went to entities that are not included in the WCRIB membership list.

Credible reimbursement data should be verified and representative of all payers, not just insurers.

E/M Increases: CA Workers’ Comp vs Medicare

The WCIRB report identifies E/M and Medical-Legal services as the primary reasons for the  overall 2021 “significant” increase in workers’ comp payments per claim:  

“Overall medical payments per claim increased significantly, mostly driven by increases in payments per transaction. The increase in payments per transaction was largely because of the 2021 fee schedule updates to Medical-Legal and Evaluation and Management services.” [emphasis added]

Regarding E/M (we tackle Medical-Legal expenses further below), California maintains an Official Medical Fee Schedule (OMFS), which reimburses Physician Services at rates pegged to — but nominally higher than — Medicare rates. To tie workers’ comp physician reimbursement rates to Medicare, the OMFS adopted:

• Medicare Relative Value Units (RVUs), and
• Medicare Geographic Practice Cost Indices (GPCI) by locality

But to account for the extra administrative expenses and effort required to treat injured workers, the Physician Fee Schedule uses a higher dollar Conversion Factor than Medicare. The result: for Physician Services, the OMFS (again, nominally) reimburses doctors at 134% of Medicare rates.

But in reality, doctors rarely receive this higher OMFS rate (as in 134% of Medicare) for treating injured workers. Instead, the complex machinations of Medical Provider Networks (MPNs), Preferred Provider Organizations (PPOs), and other entities significantly reduce reimbursements to rates significantly below the OMFS.

Using the actual payment amounts sent to our providers for E/M services, our data demonstrate that reimbursement for treating injured workers barely keeps pace with Medicare. Below, our data show that in 2021, for E/M services, claims administrators paid daisyBill providers on average:

• 77% of the OMFS rates for E/M services, which is equivalent to
• 102% of Medicare rates for E/M services, or
• $142 per visit, on average

2019 - 2021 California E/M Reimbursement Data -  CPT Codes 99202 - 99215

It is true that E/M reimbursements increased in 2021 from previous years — but only because, as explained above, California law aligns the OMFS to Medicare rates. Since Medicare increased its reimbursement rates in 2021, the OMFS rates rose accordingly.

More importantly, even with the year-to-year increase, actual average payments to providers for E/M services come nowhere near the OMFS Physician Fee Schedule rates.

And despite its overall conclusions about rising payments, the WCIRB reports that on average, the providers in the WCIRB data set were paid even less than daisyBill providers for E/M services. The average WCIRB-reported E/M reimbursement in 2021 was $138 — below the average E/M reimbursement for daisyBill providers at $142.

In 2022 so far, the trend continues: For over 360,000 bills listing an E/M service, our data notes a slight increase in the average E/M payment to $149, compared to $142 in 2021. This higher reimbursement puts the current (real) reimbursement rate for E/M services at 78% of the OMFS, and just 105% of Medicare.

2022 California E/M Reimbursement Data -  CPT Codes 99202 - 99215

Medical-Legal Expenses Unfairly Inflate Perceived Costs

In addition to E/M, the WCIRB identifies Medical-Legal expenses as a primary cause of rising payment trends. This again lacks critical context.

Medical-Legal expenses do not reflect the cost to provide care; these expenses reflect the cost of the battle waged to avoid paying for care when liability is denied. Moreover, the 2021 Medical-Legal Fee Schedule (MLFS) update was the first increase for Medical-Legal services in 15 years, designed to better reflect the time and effort physician evaluators expend to help resolve disputes — often at the request of payers.

Any serious analysis of “medical payment trends” should address medical payment trends, independent of adjacent, non-medical costs. It is therefore misleading to lump in the substantial costs of Medical-Legal services with the costs of treating injured workers.

Real Reimbursement Rates Unsustainable for CA Workers’ Comp

Since California legislators specifically designed the OMFS to pay more than Medicare, we can conclude that these legislators are aware that treating an injured worker requires substantially greater effort and practice expense than treating a Medicare patient.

But the grim truth is that these higher OMFS rates do not reflect the reality on the ground. As our data show, the “significant increase” in payments per claim reported by the WCIRB reflect providers’ being paid at or near Medicare reimbursement rates.

There is little argument that California workers find it increasingly difficult to access care — surely not the outcome employers envisioned in exchange for their (increasing) workers’ comp premiums. It’s time to address the real crisis: unsustainable reimbursement rates paid to doctors that reflect neither the California OMFS nor the administrative expenses of treating injured workers.

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