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The Division of Workers’ Compensation has posted an order adjusting the Physician Services/Non-Physician Practitioner Services section of the Official Medical Fee Schedule (OMFS) to conform to relevant 2017 changes in the Medicare payment system as required by Labor Code section 5307.1.

The Physician and Non-Physician Practitioner Fee Schedule based on the federal Resource Based Relative Value Scale (RBRVS) was adopted pursuant to the requirements of Senate Bill 863 (SB 863) and became effective for services rendered on or after January 1, 2014. The Physician Fee Schedule uses the Medicare 2014 relative value units and 2014 CPT codes.

Relative Value Units (RVUs) for each medical service measure the relative resources associated with the physician’s work (the time and skill required for the procedure), practice expenses (the staff time and costs of maintaining an office), and malpractice expenses. The RVUs compare the resources required for one service to those required for other services. Relative to the pre-2014 OMFS, the RBRVS tends to provide lower relative values for surgical and other technical procedures and higher relative values for E&M services. Most RVUs will be based on Medicare’s RVUs. If Medicare has not established RVUs for a reimbursable procedure code the services will be priced By Report.

A conversion factor (CF) is a dollar amount that is used in a formula to convert the RVUs into a payment amount for a service. The CF determines overall fee schedule payment levels. The fee schedule starts with separate conversion factors for surgery, radiology, and “all other services” in 2014 and transitions to a single CF beginning 2017, for all services except anesthesia. Anesthesia is priced under a different scale (using base units and time units) and will continue to have a separate conversion factor. The Anesthesia conversion factor also transitions during the period 2014 through 2017.

A geographic adjustment factor (GAF) adjusts for geographic differences in the costs of maintaining a physician practice. Medicare uses adjustment factors for nine geographic areas or localities in California, but for California workers’ compensation the regulations adopt statewide average GAFs. For services other than Anesthesia, the RBRVS-based regulation reduces administrative complexity by using statewide average geographic adjustment factors for each RVU component, instead of Medicare’s nine locality adjustments. For Anesthesia, there is one statewide GAF for all anesthesia procedures since anesthesia “base units” are not broken down into work, practice expense and malpractice components.

As mandated by SB 863, the fee schedule started with separate conversion factors for surgery, radiology, and “all other services” in 2014 and transitions to a single conversion factor (CF) in 2017, for all services except anesthesia, which has its own CF. The 2017 CFs were adjusted for the cumulative change in the Medicare Economic Index and the relative value scale adjustment factors.

The acting administrative director update order adopting the OMFS adjustments effective for services rendered on or after March 1, 2017, can be found at the DWC OMFS page. An explanation of changes is attached to the order.