Why MARYLAND Workers Comp Medical Payments are Low

Medical payments in Maryland per workers’ compensation claim are among the lowest of 14 states. According to a new study by the Workers’ Compensation Research Institute (WCRI), a main driver was lower prices paid for all major non-hospital services related to the lower fee schedule rates

The study, Monitoring the Impact of Fee Schedule Changes in Maryland: CompScope^TM Medical Benchmarks, 9th Edition, observed that Maryland implemented three changes to its non-hospital provider fee schedule between 2004 and 2008. The study analyzes claims with experience as of March 2007 and captures the impact of the first two changes, including the 2006 change that substantially increased the rates for orthopedic and neurological surgeries.

WCRI observed prices paid for major surgery services increased 21% from 2005 to 2006, corresponding to the 2006 fee schedule change. Previously, the prices paid for major surgery services decreased nearly 40% from 2003 to 2005, related to the significant reduction in fee schedule rates in September 2004.

The average price paid for major surgery services in Maryland was still among the lowest of the 14 study states in 2006 despite the significant price increase in that year. This is not a surprising result given that, according to WCRI’s Benchmarks for Designing Workers’ Compensation Medical Fee Schedules: 2006 study, the surgery fee schedule rate in Maryland was still among the lowest in the nation, even after the 2006 increase. In addition, the percentage of claims with major surgery in Maryland was among the lowest of the 14 states throughout the study period.

Furthermore, a main driver of the rapid growth in total medical costs per claim in 2005 and 2006 was double-digit rate increases in hospital payments per inpatient episode in that period.

One possible factor underlying this trend might be the transition to the All Patient Refined-Diagnosis Related Groups (APR-DRG) system in hospital rate setting beginning in July 2005. This new grouping system provides a more detailed classification of a case’s severity and risk of mortality, and may lead to differing case-mix weights and hence differing rates than used in the pre-2005 methods. Despite the increases, the average hospital payment per inpatient episode in Maryland was still lower than many study states in 2005 for claims with 24 months of experience.

Utilization for most non-hospital services was typical in Maryland, except for physical medicine services, which were higher than typical. In addition, hospital outpatient care was used less frequently in Maryland than in many other study states. Among the cases with such care, the average hospital outpatient payment per claim in Maryland was among the lowest of the 14 states. These results all contributed to the lower medical costs per claim in Maryland.

While employers in Maryland paid less for medical costs per claim, injured workers in the state reported generally typical outcomes, according to WCRI’s Comparing Outcomes for Injured Workers in Michigan 2009 study, which contains worker outcome results for Maryland for comparison. Despite the lower fee schedule rates, workers in Maryland reported typical access to care and satisfaction with care when compared with other states in that study.

Maryland injured workers also reported typical physical recoveries and fairly typical return-to-work rate and speed. In general, the Maryland workers’ compensation system provided both workers and employers with a better value proposition compared to other states studied.

In addition, the study found that utilization for physical medicine services in Maryland was higher than typical, driven by more visits per claim compared to other study states. Over the study period, the number of visits per claim for physical medicine in Maryland had steady, small increases each year. (workersxzcompxzkit)

This result masks offsetting trends: the number of visits per claim for physical medicine services provided by chiropractors decreased 15% from 2001 to 2006, while the number of visits per claim for physical medicine services billed by other non-hospital providers, such as physical/occupational therapists and physicians, increased 20% over the same time period.

Author: Robert Elliott, J.D.

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