Implementing a Resource-Based Relative Value Scale Fee Schedule for Physician Services

An Assessment of Policy Options for the California Workers' Compensation Program

by Barbara O. Wynn, Harry H. Liu, Andrew W. Mulcahy, Edward N. Okeke, Neema Iyer, Lawrence S. Painter

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Research Questions

  1. How might implementing the resource-based relative value scale over a four-year transition period affect fees for California workers' compensation service providers?
  2. What other policy options are there for managing fees for California workers' compensation service providers?

A RAND study used 2011 medical data to examine the impact of implementing a resource-based relative value scale to pay for physician services under the California workers' compensation system. Current allowances under the Official Medical Fee Schedule are approximately 116 percent of Medicare-allowed amounts and, by law, will transition to 120 percent of Medicare over four years. Using Medicare policies to establish the fee-schedule amounts, aggregate allowances are estimated to decrease for four types of service by the end of the transition in 2017: anesthesia (–16.5 percent), surgery (–19.9 percent), radiology (–16.5 percent), and pathology (–29.0 percent). Aggregate allowances for evaluation and management visits are estimated to increase by 39.5 percent. Allowances for services classified as "medicine" in the Current Procedural Terminology codebook will increase by 17.3 percent. In the aggregate, across all services, allowances are projected to increase 11.9 percent. Because most specialties furnish different types of services, the impacts by specialty are generally less than the impacts by type of service.

Key Findings

The Resource-Based Relative Value Scale Addresses Major Shortcomings in the Current System

  • The Official Medical Fee Schedule uses outdated procedure codes to describe medical services. The percentage of payments that would be using fee-schedule rates would increase from 90 percent to 96 percent. This percentage would increase with improved coding and less-frequent use of unlisted procedure codes.
  • The relative values in the current fee schedule are based on historical charges. The resource-based relative value scale reflects the resources (costs) required to furnish services and would offer budget-neutral incentives for providing services.
  • The current fee schedule does not provide for regular updates for changes in coding, practice patterns, or inflation. Linking the Official Medical Fee Schedule to the Medicare Physician Fee Schedule would provide a mechanism for annual updates.
  • Over the four-year period, total allowable fees are estimated to increase 11.9 percent.
  • Because most specialties furnish a range of services, the impacts by specialty are generally less than the impacts by type of service.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data

  • Chapter Three

    Analytical Approach

  • Chapter Four

    Descriptive Results

  • Chapter Five

    Impact Analysis

  • Chapter Six

    Alternative Ground Rules for the Resource-Based Relative Value Fee Scale

  • Chapter Seven

    Other Official Medical Fee Schedule Issues

  • Chapter Eight

    Summary

  • Appendix A

    Comparison of the Official Medical Fee Schedule and Medicare Ground Rules

  • Appendix B

    Crosswalk: Official Medical Fee Schedule to 2013 Current Procedural Terminology

  • Appendix C

    Official Medical Fee Schedule Codes with No 2013 Equivalent Codes in the Current Procedural Terminology

  • Appendix D

    Analysis of Alternative Pricing Policies for Physician-Administered Drugs

The research described in this report was supported by the California Department of Industrial Relations/Division of Workers' Compensation and was conducted in the RAND Center for Health and Safety in the Workplace.

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