Workers’ comp is wildly inefficient in California, according to the Workers’ Compensation Insurance Rating Bureau (WCIRB).

The WCIRB used hard data to clearly demonstrate the enormous administrative costs associated with delivering benefits in California workers’ comp. That comes as no surprise to us.

California burdens its workers’ comp doctors with enormous administrative cost, while simultaneously allowing discount entities to claim significant portions of the reimbursements due to providers who treat injured workers.

The WCIRB’s numbers demonstrate just how dire the situation is. This research paints an extremely gloomy picture as to how little financial sense it makes to treat injured workers in California.

Why CA Workers’ Comp Is in Trouble (by the Numbers)

According to workcompcentral’s reporting on recent WCIRB efforts, costs like medical-legal expenses, attorney fees, and everything else that burns money without actually treating patients are much higher in California than elsewhere. 

WCIRB Senior Vice President and Chief Actuary Dave Bellusci calculates that California spends twice as much on such “frictional” costs as the national median.

To illustrate just how wasteful CA workers’ comp is, the WCIRB compares the cost of delivering one dollar’s worth of medical benefits in three systems - California’s Medicare program, private group health insurance in California, and California workers’ comp.

The number for workers’ comp is not a typo. According to the WCIRB, delivering a dollar in benefits via workers’ compensation in California costs 48 cents, or 24X what it costs under Medicare.

Want to Lose Money? Treat Injured Workers

While the WCIRB data do not focus on the direct additional frictional costs absorbed by doctors, California burdens doctors with a growing heap of administrative demands when delivering care to injured workers.

Without additional reimbursement, California workers’ comp demands that providers somehow absorb the following administrative expenses to treat an injured worker:

• The administrative effort to gather all of the necessary intake information for each new injured worker (there is no automatic eligibility for injured workers)
• Requests for authorization (RFAs) required prior to every recommended treatment
• Required reporting that must be completed after each visit
• Managing hundreds of Medical Provider Networks (MPN)
• Extraordinary and endless billing complexities to receive payment
• (Lack of any enforcement of laws meant to protect providers)

California OMFS reimbursement rates for treating injured workers are pegged at roughly 130% of Medicare rates. HOWEVER, a provider rarely receives 130% of Medicare.

Rather than paying providers 100% of the OMFS (130% of Medicare), discount entities take revenue from worker’s compensation providers. As of this writing, claims administrators have paid DaisyBill providers cumulatively only 82% of total reimbursement due per the OMFS in 2021. 

Our data clearly show PPOs and Networks reduce workers’ comp doctors’ actual reimbursements to around 107% of Medicare rates, not 130%. 

Unfortunately for workers’ comp providers, California allows discount entities to reduce providers’ revenue to rates below the OMFS, even though the discount entities provide no services to injured workers (think of this revenue reduction as a state-sanctioned provider “treatment tax” that is collected by discount entities).

Even if providers actually received 130% of Medicare, the WCIRB also reports this is one of the lowest reimbursement rates in the nation, in a state with some of the highest frictional costs.

In real life, workers’ comp providers receive only 7% more for treating injured workers as they would treating Medicare patients — but with far, far more administrative expenses. (For some providers, the effective reimbursement rates for treating workers are even lower than Medicare, once the extreme PPO discounts are factored in.)

Add the cost of time and resources to constantly appeal improper adjustments and denials, and workers’ comp hardly seems worth the effort, and is definitely a money-losing proposition. 

Get paid in full and on time — without the hassle. DaisyBill makes authorization, billing, and appeals quicker, easier, better. Reach out to see how our software and services can help your practice.

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