Fee Schedule Options for Services Furnished by Hospitals to Outpatients under 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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A RAND study used 2011 medical data to examine fee schedule options for setting maximum allowable amounts for certain facility services provided by hospitals on an outpatient basis under California's workers' compensation system. These are mostly diagnostic procedures and clinic visits that prior to January 1, 2014 were paid under the same fee schedule as physician and other practitioner services. They account for approximately seven percent of total workers' compensation allowances for hospital outpatient services. In consultation with the California Division of Workers' Compensation, two fee schedule options based on Medicare fee schedules were modeled. The first option set the allowances for the hospital's facility costs at 1.2 times the Medicare allowance paid to physicians for their practice expenses when comparable services are provided in office settings. This is the same as the amount paid for practice expenses under the resource-based relative value scale that was implemented for physician and other practitioner services effective January 1, 2014. Under this option, aggregate allowances for the services would decrease 7.6 percent, which represents an estimated 0.5 percent reduction in total expenditures for services furnished by hospitals to outpatients. The second option set the allowances at the Medicare payment rates for hospital outpatient services (with no multiplier). This option would increase aggregate allowances 48-65 percent, which represents an estimated 3-5 percent increase in overall expenditures for hospital outpatient services under California's workers' compensation program.

The research described in this report was prepared for the California Department of Industrial Relations and conducted by the RAND Center for Health and Safety in the Workplace.

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