NU Online News Service, Jan. 20, 2:38 p.m. EST

Workers' compensation systems sometimes allow medical payments to specialists at excessive levels because of a flawed linkage to Medicare reimbursement rates, a new report said.

The findings were made in a study by the Boca Raton, Fla.-based National Council on Compensation Insurance.

"Failures to account for changes to Medicare's methodology or for trends in how Medicare reimburses physicians in the various medical specialties might have reduced the effectiveness of some workers' compensation physician fee schedules," said the report.

It commented, "In states that base their workers' compensation medical fee schedules on the Medicare physician reimbursement schedule, clearly workers' compensation medical costs can be affected by changes to Medicare reimbursement rates.

"But workers' compensation medical costs can also be affected by changes to either the underlying formulas Medicare uses to determine those reimbursement amounts or to the way Medicare allocates payments by type of service."

Medicare, the report said, influences workers' compensation medical cost containment in several important ways, including:

o Medicare pays a significant share of overall U.S. medical costs. As a result, Medicare reimbursement rates influence prices generally paid for medical services, including prices paid for medical services for workers' comp.

o Many states base their workers' comp medical fee schedules on the Medicare physician reimbursement schedule.

o Some states control costs for services provided by facilities through systems based on either Medicare's DRG system for hospital stays or Medicare's APC system for services provided at ambulatory surgical centers.

The report said tactics that Medicare uses to address cost containment challenges might, in some cases, be worth considering for use in workers' comp.

While there are administrative efficiencies from referencing the Medicare reimbursement formula, workers' comp fee schedules that do so must react appropriately to ongoing changes in Medicare methodology, the report advised.

It found that the proportion of workers' compensation medical costs that are subject to physician fee schedules is declining, with proportionally more billings by facilities.

To maintain the effectiveness of medical fee schedules, workers' comp might consider using Medicare billing approaches for hospital stays (DRG) and ambulatory services (APC), but in doing so should adapt Medicare models to workers' comp priorities, the report recommended.

NCCI's study also said that as the workforce ages, workers' comp might focus safety initiatives toward falls and hip injuries, where Medicare protocols should provide valuable insight in designing treatment guidelines.

"Medicare faces enormous demographic and fiscal challenges. Workers' compensation shares some of those challenges, and Medicare's response might offer suggestions to enhance workers' compensation medical cost containment," said the report.