Evaluation and Management Costs in Workers Compensation


Payments for physician and professional services are the largest category of benefits paid for workers compensation medical services. While most states have fee schedules that establish maximum allowable reimbursements (MARs) for physician services, the structure of fee schedules may vary by state. However, it is common for states to set the MAR for each physician service at a percentage of the maximum rate published by the Centers for Medicare & Medicaid Services (CMS) for medical services provided to Medicare enrollees. This percentage in part reflects the additional administrative requirements under the state workers compensation system compared with those under Medicare. Typically, state Medicare-based fee schedules are updated annually, corresponding with changes to Medicare (i.e., changes to Medicare’s MARs and reimbursement rules).

Effective January 1, 2019, the CMS implemented policies to reduce the burden regarding documentation requirements for Evaluation and Management (E/M) services. Beginning in 2021, the CMS will implement additional burden-reducing measures related to reimbursement rates, coding, and documentation for these services.

In this article, we examine the 2021 Medicare E/M changes and their potential impacts on a state’s workers compensation system.


In workers compensation, E/M services largely consist of the office or outpatient visits for a new or established patient. Currently, there are five levels of office or outpatient visits for new or established patients. The levels are reported with Current Procedural Terminology (CPT)1 codes 99201 through 99205 for new patients, and 99211 through 99215 for established patients, as described in Chart 1.

Chart 1
Description of E/M Office or Outpatient Visit by Code

Chart 1

To justify the selection of a specific level, the medical record must be documented in accordance with the E/M Documentation Guidelines for components2 such as the number of body systems reviewed or the risk of complications and/or mortality.

Charts 2 and 3 show the distribution of payments and transactions by level for new and established patients, respectively. Approximately 90% of the experience is in levels 3 and 4.

Chart 2
Distribution of Payments and Transactions for New Patients by Level

Chart 2

Chart 3
Distribution of Payments and Transactions for Established Patients by Level

Chart 3

For Service Year (SY) 2017, office or outpatient visits for new and established patients represent approximately 19% of total physician costs countrywide,3 and physician costs represent approximately 40% of total medical costs. Assuming all states have a fee schedule based on Medicare’s physician fee schedule (PFS), a change to the E/M MARs and rules has the potential to impact, on average, 8% (= 19% x 40%) of total medical costs.

Chart 4 shows the portion of payments for E/M office or outpatient visits for new and established patients as a percentage of total medical costs in each state.

Chart 4
E/M Office/Outpatient Visits as a Percentage of Total Medical Costs by State*

Chart 4

*NCCI does not provide ratemaking services to the states in gray; therefore, these states are not included in the analysis.


Currently under Medicare, the five levels of office or other outpatient E/M visits are based on the complexity of the visit and length of time spent with the patient. In determining the level of visit to bill, practitioners rely on either the 1995 or 1997 E/M Documentation Guidelines, which are generally regarded as being overly burdensome and requiring unnecessary duplication of documentation. The CMS, as part of its finalized changes,4 has implemented the following:

Effective January 1, 2019:

  • Eliminated the requirement to document the medical necessity of a home visit.
  • For established patients, practitioners may focus their documentation on changes since the patient’s last visit, or on pertinent information that has not changed.
  • For new and established patients, the practitioner is no longer required to reenter the patient’s chief complaint and history if that information was entered by staff. The practitioner can indicate that this information was reviewed and verified.

Effective January 1, 2021:

  • Establish a single payment rate for levels 2 through 4 office visits for both new and established patients. The 2018 and estimated 2021 national payment rates for nonfacility E/M visits from the 2019 Federal Register5 are shown in Chart 5.
  • Establish add-on codes to account for additional resources involved in furnishing certain E/M services beyond the typical resources accounted for in the single payment rate.
    • Such instances include visit complexity associated with certain primary care services, visit complexity associated with certain nonprocedural specialty care, and prolonged E/M or psychotherapy services beyond the typical service time of the primary procedure

Chart 5
National Payment Rates for Nonfacility E/M Visits

Chart 5
  • Allow the use of medical decision-making or time, in addition to the current 1995 or 1997 E/M Documentation Guidelines. For levels 2 through 4 visits, when using medical decision-making or the current standards, practitioners will only need documentation appropriate to support a level 2 visit.

The extent of the actual changes may vary since state-specific workers compensation regulation may require similar or different rules of documentation.


Workers compensation E/M services largely consist of office or outpatient visits for a new or established patient. Thus, Medicare’s consolidation of E/M levels 2 through 4 services into a single payment rate will have a direct impact on workers compensation system costs in states that base their PFS on Medicare.6

The impact of the 2021 CMS changes will vary by state, depending on a variety of factors including the finalized MARs from Medicare’s 2021 PFS, the utilization of add-on codes, and the structure of a state’s PFS. Based on countrywide workers compensation experience, NCCI has estimated that the impact on physician costs will range from +1% to +4%, which translates to a range of +0.5% to +1.5% on overall medical costs. NCCI will continue to monitor these changes as the fee schedule rules and MARs become finalized.


1 CPT Copyright 2019 American Medical Association. All rights reserved. CPT is a registered trademark of the American Medical Association.

2 Federal Register, Vol. 83, No. 226, Friday, November 23, 2018, Rules and Regulations, Table 18.

3 Countrywide includes data from the following states for Service Year 2017: AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MD, ME, MO, MS, MT, NC, NE, NH, NM, NV, OK, OR, RI, SC, SD, TN, TX, UT, VA, VT, and WV.

4 Federal Register, Vol. 83, No. 226, Friday, November 23, 2018, Rules and Regulations.

5 Federal Register, Vol. 83, No. 226, Friday, November 23, 2018, Rules and Regulations, Table 24B. Table 24B from the Federal Register contains current and estimated payment rates for nonfacility E/M visits only. The hypothetical impact assumes the same percentage change by level for both nonfacility and facility visits.

6 Non-Medicare states may also be impacted to the extent that they adopt a similar fee schedule structure. Currently, NCCI Medicare-based states include AK, AR, AZ, CO, CT, DC, FL, GA, HI, ID, KS, MD, ME, MT, NC, NE, OK, SC, TN, TX, UT, and WV.

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