Study Finds TX Reforms Lowered Medical Costs Per Claim

Cambridge, MA (CompNewsNetwork) - Medical costs per workers' compensation claim in Texas declined dramatically over a relatively short period following a series of reforms, according to a new study by the Workers Compensation Research Institute (WCRI). However, Texas still had higher costs and utilization than many study states for some types of medical care.

The Cambridge, Mass.-based WCRI reported that in 2001, prior to system reforms, medical costs per claim in Texas were among the highest of 14 states studied, driven mainly by higher utilization, particularly higher use of chiropractic care. But by 2006, medical costs per claim in Texas were 14 percent lower than the median study state.

The study, Monitoring the Impact of Reforms in Texas: CompScope™ Medical Benchmarks, 9th Edition, found that a combination of factors contributed to that result, among them, a lower fee schedule and more active management of medical care by payors, which led to large decreases in both prices paid and utilization of services.

Despite these significant decreases, the study noted that Texas still ranked higher than many of the study states on a number of important metrics of medical care.

For example, the number of visits per claim to chiropractors was cut by one-half from 2001 to 2006; still, Texas had more chiropractor visits than any other study state in 2006.

From 2002 to 2004, medical costs per claim fell 8 percent—largely due to the lower fee schedule and more active management of medical care by payors. In 2004, medical costs per claim in Texas were typical of study states. From 2004 to 2006, but prior to much of the effect of the medical networks under House Bill (HB) 7, medical costs per claim dropped 11 percent.

Growth in medical payments per claim in Texas began to slow and then reverse prior to the implementation of medical networks under HB 7.

The decrease in medical costs per claim observed from 2002 until 2006 (the very early use of medical networks) was likely the result of the fee schedule decreases under HB 2600 combined with an increased management of medical care by payors.

Medical payments per claim fell significantly for chiropractors, especially from 2005 to 2006, mainly because of fewer visits per claim. The study reported that visits to chiropractors in Texas were cut by about one-half, with the most significant decreases occurring from 2001 to 2002 (dropping from nearly 40 visits per claim to 33) and from 2005 to 2006 (dropping from about 27 visits per claim to 21).

The decrease in the number of chiropractor visits per claim was largely the result of a substantial decrease in the percent of claims with more than 50 visits. Despite these large decreases, Texas still had the highest number of chiropractor visits per claim in 2006—20 compared to 12 in the typical study state.

Similarly, the percentage of claims with chiropractic treatment and the share of total medical costs paid to chiropractors in Texas in 2006 were still highest among the 14 study states.

Medical payments per claim to physicians declined 16 percent overall from 2002 to 2004, largely the result of fee schedule changes under HB 2600 over that period. A further decrease of 9 percent occurred from 2005 to 2006, driven mainly by a drop in office visits that was offset in part by more complex office visits being billed.

Still, in 2006, Texas had more office visits per claim than typical, about eight compared to six in the median study state.

The pattern for diagnostic tests was similar, with decreases in the percentage of claims with these services from 2005 to 2006, but with Texas still showing somewhat higher use of these tests than typical. By contrast, Texas had among the lowest number of visits per claim to physical/occupational therapists in 2006.

The increase in the 2008 medical fee schedule conversion factors to reflect increases in practice expenses since 2002 and the separate conversion factor established for surgery will likely result in a one-time increase in prices paid for services from an estimated 16 to up to 40 percent.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers' compensation, health care and disability issues. Its members include employers, insurers, and governmental entities, insurance regulators and state administrative agencies, as well as several state labor organizations.

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