Physician fee schedules specify a maximum amount reimbursable (MAR) for a large number of medical services identified by Current Procedural Terminology (CPT)* code. Properly designed physician fee schedules can help to contain workers compensation (WC) medical costs.
While WC fee schedules have been shown to be effective at controlling costs, particular circumstances can undermine their effectiveness, such as when fee schedule amounts are high relative to Group Health. Generally, high shares of WC payments are at or near the fee schedule MAR.
Whether due to negotiated arrangements between WC insurers and their provider networks or to doctors acting individually, this occurs so frequently to suggest that fee schedules in fact set the prices that many medical providers charge for WC services. One consequence is that high MARs (relative to Group Health) may result in some providers charging WC claimants more than they would patients covered under Group Health.
By examining the entire distribution of payments, we show that the influence of fee schedules is not confined to limiting reimbursements and, moreover, their consequences are not always as intended. We look at how fee schedules relate to the broader marketplace for medical care, using experience from Group Health and fees paid by Medicare.
- Large discounts off the WC physician fee schedule maximum allowable reimbursements do not ensure low prices
- WC fee schedule MARs not only limit payments, they may also become common WC prices—the median WC price is always at or very near the fee schedule
- Surgery has higher fee schedules than Evaluation and Management relative to Group Health payments
- Similar WC discounts do not necessarily imply similar prices relative to Group Health
- In some states, even after large discounts off the state physician fee schedule, the prices for some services may remain high relative to Group Health payments
- In other states, a smaller discount off the fee schedule may produce prices more in line with Group Health payments
*CPT (Current Procedural Terminology) assigns numbers to the specific tasks and services of medical providers, including medical, surgical, and diagnostic services. These codes are uniformly applied by providers and are used by insurers to determine reimbursements.