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1 W o r k e r s C o m p e n s a t i o n I n s u r a n c e R a t i n g B u r e a u o f C a l i f o r n i a WCIRB Research Forum Post SB 863 Medical Payment Trends The webinar will begin shortly. Notice This presentation was developed by the Workers' Compensation Insurance Rating Bureau of California (WCIRB) for informational purposes only. The WCIRB shall not be liable for any damages of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use, inability to use, or reliance upon information provided in this presentation Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted by federal copyright law. No copyright is claimed in the test of statutes and regulations quoted within this work. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Online, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the Workers Compensation Insurance Rating Bureau of California at customerservice@wcirb.com. WCIRB Research Forum Presenters Dave Bellusci EVP, Chief Actuary Greg Johnson, Ph. D. Director, Medical Analytics Tim Basuino Medical Analytics Specialist 2 WCIRB California. All Rights Reserved. 1
2 Question and Answer Period Asking a Question You may submit questions using the Questions panel. 3 Background Prior to SB 863 (2012), California workers compensation medical costs had risen at a rate of approximately 6% per year from 2005 to The purpose of this report is to document changes in medical cost trends since 2013 and understand the role of the SB 863 reforms in influencing these trends. The study is part of the WCIRB s SB 863 Cost Monitoring Efforts. This study supplements a recent WCIRB report which showed that, on an Accident Year basis, medical severity declined by 3.2% in 2013 compared to 2012 and 1.3% in 2014 compared to (Table One) 4 WCIRB California. All Rights Reserved. 2
3 Table 1: Change in Ultimate Medical Severity By Accident Year % Change 20 As of June 30, Accident Year * This chart is included in Senate Bill No. 863 Cost Monitoring Report issued by the WCIRB on November 16, Approach The data in this report have been collected from all claims on a Calendar Year basis, and include $5.7 billion in medical payments for services from July 2012 through June This report includes two sections: Section One: Medical development trends for all types of medical service through the first half of 2015, with the second half of 2012 (pre SB 863) as the comparative baseline. Section Two: The impact of the RBRVS payment model on each section of the Physician Fee Schedule before and after its implementation in January WCIRB California. All Rights Reserved. 3
4 Section One: Medical Payment Trends by Type of Service This report analyzed payment development for each type of medical service in six month service date intervals, including incremental comparisons to the prior period and cumulative comparisons to the second half of Each type of medical service was measured according to unit costs (paid per transaction), utilization (transactions per claim) and combined impact (cost per claim). Tables 3 through 9 display each type of medical service according to these three measures. Table 2 depicts grand totals on a cost per claim basis for all services through the first half of Medical Payment Trends by Type of Service Table 2: Paid Per Claim by Type of Service Service Period Physician Fee Schedule Pharmacy Inpatient Facilities Outpatient Facilities HCPCS Medical- Legal Total Medical Paid All Services % of Paid Medical 46% 15% 12% 7% 8% 11% 100% 1 st Half % +5% -5% -14% -3% +2% -1% 2 nd Half % -4% +2% -9% -5% +2% -4% 1 st Half % -5% +4% +7% -15% +9% -1% 2 nd Half % -15% +7% -7% -3% -5% -7% +3% -5% +6% +21% +16% +5% +4% Cumulative Change Through 1 st Half % -22% +14% -7% -12% +12% -8% 8 WCIRB California. All Rights Reserved. 4
5 Medical Payment Trends by Type of Service Table 3: Physician Fee Schedule 1 st Half % +3% -1% 2 nd Half % -2% -4% 1 st Half % -11% -1% 2 nd Half % -1% -6% +10% -6% +3% +10% -17% -9% 9 Medical Payment Trends by Type of Service Table 4: Pharmacy Services 1 st Half % +1% +5% 2 nd Half % -3% -4% 1 st Half % -8% -5% 2 nd Half % -13% -15% -1% -5% -5% Cumulative Change Through +4% -25% -22% 10 WCIRB California. All Rights Reserved. 5
6 Medical Payment Trends by Type of Service Table 5: Inpatient Services Change by 6 month Service Period Compared to Prior Service Period 1 st Half % -1% -5% 2 nd Half % +3% +2% 1 st Half % +12% +4% 2 nd Half % +3% +7% +6% 0% +6% Cumulative Change Through -3% +17% +14% 11 Medical Payment Trends by Type of Service Table 6: Outpatient Services 1 st Half % 0% -14% 2 nd Half % -1% -9% 1 st Half % +1% +7% 2 nd Half % -4% -7% +24% -3% +21% Cumulative Change Through 0% -6% -7% 12 WCIRB California. All Rights Reserved. 6
7 Medical Payment Trends by Type of Service Table 7: HCPCS Schedule 1 st Half % 0% -3% 2 nd Half % -6% -5% 1 st Half % +24% -15% 2 nd Half % -6% -3% +14% +2% +16% Cumulative Change Through -21% +12% -12% 13 Medical Payment Trends by Type of Service Table 8: Medical Legal Schedule 1 st Half % -3% +2% 2 nd Half % -1% +2% 1 st Half % +1% +9% 2 nd Half % -4% -5% 0% +5% +5% +15% -3% +12% 14 WCIRB California. All Rights Reserved. 7
8 Medical Payment Trends by Type of Service Table 9: All Services 1 st Half % +3% -1% 2 nd Half % -3% -4% 1 st Half % -7% -1% 2 nd Half % -4% -7% +11% -6% +4% +10% -16% -8% 15 Summary: Medical Payment Trends by Type of Service For all medical services, costs per claim dropped by 8% over a three year period from the second half of This development was primarily driven by a reduction in medical utilization which offset unit cost increases. Although not directly addressed in SB 863, pharmacy costs per claim declined by 22% since 2012, largely due to a drop in utilization. With the exception of pharmacy, all other services experienced increases in the first half of 2015 compared to the second half of Although unable to isolate the impact of the IMR provisions of SB 863 from other components of SB 863, in total SB 863 has significantly reduced the utilization of medical services 16 WCIRB California. All Rights Reserved. 8
9 Section Two: Impact of RBRVS The most immediate impact of SB 863 was the transition of the Physician Fee Schedule to a Resource Based Relative Value Scale (RBRVS) over a four year period starting January 1, Given that physician fees account for 46% of all payments, it is important to examine the impact of RBRVS on each component of the fee schedule. Table 10 depicts the changes in cost per claim for each section of the schedule. Tables 11 through 18 show measures of paid unit costs, utilization and overall cost per claim for each section of the fee schedule 17 Impact of RBRVS Table 10: Paid Per Claim by Physician Fee Schedule Section (PFSS) Service Period E&M Medicine Surgery Anesthesiology Radiology Pathology & Lab. Special Services & Reports Total Phy. Fee Schedule Payments % of Physician Fee Schedule Payments 29% 25% 19% 2% 10% 5% 10% 1 st Half % +2% -14% -1% -4% -3% +11% -1% 2 nd Half % -5% -10% -2% +1% +3% +1% -4% 1 st Half % +7% +17% -5% -13% -10% -28% -1% 2 nd Half % 0% -8% -2% -1% -18% -18% -6% +6% +8% +6% -3% -5% -58% +42% +3% Cumulative Change Through +23% +12% -11% -12% -21% -68% -7% -9% 18 WCIRB California. All Rights Reserved. 9
10 Impact of RBRVS Table 11: Evaluation & Management 1 st Half % +3% +3% 2 nd Half % 0% -1% 1 st Half % -10% +13% 2 nd Half % -1% 0% +2% +4% +6% +28% -4% +23% 19 Impact of RBRVS Table 12: Medicine (Including Physical Therapy, Chiropractic, Acupuncture) 1 st Half % +2% +2% 2 nd Half % -2% -5% 1 st Half % -3% +7% 2 nd Half % +1% 0% +4% +4% +8% +11% +1% +12% 20 WCIRB California. All Rights Reserved. 10
11 Impact of RBRVS Table 13: Surgery Change by 6 month Service Period Compared to Prior Service Period 1 st Half % -1% -14% 2 nd Half % -5% -10% 1 st Half % +2% +17% 2 nd Half % -5% -8% +6% 0% +6% -3% -9% -11% 21 Impact of RBRVS Table 14: Anesthesiology 1 st Half % -1% -1% 2 nd Half % -1% -2% 1 st Half % -5% -5% 2 nd Half % 0% -2% -4% +1% -3% Cumulative Change Through -7% -6% -12% 22 WCIRB California. All Rights Reserved. 11
12 Impact of RBRVS Table 15: Radiology 1 st Half % 0% -4% 2 nd Half % 0% +1% 1 st Half % -1% -13% 2 nd Half % -2% -1% -6% +1% -5% -19% -3% -21% 23 Impact of RBRVS Table 16: Pathology & Laboratory 1 st Half % +6% -3% 2 nd Half % +2% +3% 1 st Half % +9% -10% 2 nd Half % +13% -18% -26% -43% -58% -59% -23% -68% 24 WCIRB California. All Rights Reserved. 12
13 Impact of RBRVS Table 17: Special Services & Reports 1 st Half % +2% +11% 2 nd Half % 0% +1% 1 st Half % -20% -28% 2 nd Half % -1% -18% +54% -8% +42% +26% -26% -7% 25 Impact of RBRVS Table 18: All Fee Schedule Sections 1 st Half % +3% -1% 2 nd Half % -2% -4% 1 st Half % -11% -1% 2 nd Half % -1% -6% +10% -6% +3% +10% -17% -9% 26 WCIRB California. All Rights Reserved. 13
14 Summary: Impact of RBRVS For all fee schedule sections, costs per claim dropped by 9% over a three year period. This development was primarily driven by a reduction in medical utilization which offset unit cost increases. Consistent with RBRVS objectives, payment shares to primary care services increased starting in 2013, while payments to specialty services showed corresponding declines. It appears that the most significant RBRVS savings were generated in 2014, especially through drops in payments for Special Services and Reports. These trends appear to be levelling off in Conclusions Post-SB 863 Medical Cost Trends SB 863 had a significant and measurable impact on workers compensation medical costs. Costs per claim declined by 8% from the second half of 2012 through the first half of These savings were attributable to: (a) Paid unit cost reductions in ASC and surgical implants in (b) The introduction of the RBRVS schedule in January (c) The likely role of IMR on pharmacy utilization which has declined over the past two years. In the first half of 2015, costs per claim for most medical services show increases when compared to the second half of This trend may signal the potential erosion of the SB 863 savings and bears close scrutiny in the future. 28 WCIRB California. All Rights Reserved. 14
WCIRB California. All Rights Reserved. 1
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