The Commission on Health and Safety and Workers’ Compensation (CHSWC) examines the health and safety and workers’ compensation systems in California and makes recommendations to improve their operation. At the request of the Executive Branch, the Legislature and the Commission, CHSWC conducts research, releases public reports, presents findings, and provides information on the health and safety and workers’ compensation systems. Accordingly, CHSWC has now published its 352 page 2013 Annual Report.

CHSWC is again this year recommending the integration of workers’ compensation medical care with general medical care insurance. The Report notes that health costs have been rising more quickly than inflation and wages. These costs create financial challenges for employers, especially those in industries with already high workers’ compensation costs. Furthermore, group health care and workers’ compensation medical care are typically delivered through separate provider systems, resulting in unnecessary, duplicative and contraindicated treatment and inefficient administration.  Suggestions have been made to integrate workers’ compensation medical care with the general medical care provided to patients by group health insurers in order to improve the quality and coordination of care, lower overall medical expenditure, reduce administrative costs, and derive other efficiencies in care. Research also supports the contention that an integrated 24-hour care system could potentially provide medical cost savings, as well as shorten the duration of disability for workers.

Nonetheless, CHSWC determined that SB 863 has indeed resulted in some medical cost savings. In 2012, based on a California Workers’ Compensation Institute analysis, the WCIRB estimated an approximate $20,000 per claim reduction on claims involving spinal implant hardware due to the SB 863 provisions related to duplicate reimbursement for spinal implant hardware. Preliminary WCIRB data suggests savings of more than $15,000 per claim on affected spinal surgery claims in 2013. In 2012, the WCIRB estimated that the revised fee schedule for ambulatory surgery center (ASC) facility fees required by SB 863 would reduce those fees by approximately 25 percent. Preliminary WCIRB data for 2013 services suggest a 26 percent reduction in ASC fees.

The cost of the total medical benefit decreased by 23 percent from 2003 to 2007, and then increased by 35 percent from 2007 to 2012. Payments to physicians decreased by 42 percent from 2003 to 2009, and then increased 20.5 percent from 2009 to 2012. Pharmacy costs peaked in 2004, declined by 27 percent from 2004 to 2007, and then increased overall by 26 percent from 2007 to 2012. Hospital costs declined by 39 percent from 2003 to 2006, increased overall by 37 percent from 2006 to 2011, and then decreased by 18 percent from 2011 to 2012. Direct payments to patients averaged $226 million from 2003 to 2005, increased sharply 4 times from 2005 to 2006, and then more than doubled from 2006 to 2012. Expenditures on medical cost-containment programs in 2005 were less than a half of what they were in 2003, increased 4 times from 2005 to 2010, and then decreased by 29 percent from 2010 to 2012.

CHSWC complains about the high cost of medical legal examinations. Medical-legal evaluation costs peaked in 2008 at $289 million (an increase of 58 percent from 2003), decreased by 19 percent from 2008 to 2009, and then gradually went back to 2008 level from 2009 to 2012. The average number of psychiatric evaluations per claim in California increased by 19 percent from 0.062 in 2002 to 0.074 in 2010. Psychiatric evaluations are nearly always billed under the ML-104 code that is the most expensive. The average cost of a psychiatric evaluation more than doubled from $1,528 in 2002 to $3,719 in 2010. It was an increase of 13 percent from $3,302 in 2010. The Southern region produces over 60 percent of all psychiatric evaluations in California and has the biggest impact on both the frequency and cost of medical-legal evaluations statewide.The complexity of impairment rating under the AMA Guides, new rules for apportionment, and the criteria for medical treatment decisions under the Medical Treatment Utilization Schedule are among the reasons cited for rising costs per exam. Thus, the Report recommends that a study of the operation and potential improvements of the QME system.