A new California Workers’ Compensation Institute (CWCI) study examined the initial impact of replacing the statewide average GAF in the workers’ comp Official Medical Fee Schedule (OMFS) with a system that uses smaller Metropolitan Statistical Area (MSA) localities when applying regional cost adjustments as part of the fee schedule formula.
The state adopted the GAF change for services rendered to injured workers on or after 1/1/19 to improve payment accuracy and align OMFS allowable fees with those allowed by Medicare and other systems.
Under the new structure developed by Medicare in 2017, there are 32 payment localities in California.
The CWCI study found that switching from statewide to locality-specific geographic adjustment factors (GAFs) in the calculation of California workers’ comp physician and non-physician service fees has not resulted in a major shift in where the dollars go, and despite concerns, the switch does not appear to have generated inappropriate shifting of billing to higher reimbursed areas, or caused rural providers to leave the system.
The study found that both before and after the switch, medical providers in Los Angeles County accounted for a much larger share of the office visit services and payments than providers in any other locality, though their proportion of services and payments did decrease by about 5 percentage points in the first year after the locality specific GAFs were adopted.
Those decreases, however, were offset by 5 percentage point increases in the proportion of E&M visits and payments to providers in nearby San Bernardino/Riverside Counties, a shift that occurred after a large occupational medicine group expanded into the Inland Empire.
Other than that, the study found no significant changes in the proportion of E&M services or payments among the geographic localities, and no indication of a shift in services or payments to providers in either urban or rural areas of the state
The study also showed that the switch to the new GAF had little effect on the types of E&M services used, as follow-up visits by established patients remained the most prevalent type of office visits, accounting for 86.5% of the E&M services in 2018 and 80.5% in 2019.
A key factor influencing the average payments in each locality was the use of discount contracts, such as those paid to providers within an employer’s medical provider network, which allow payments below the fee schedule amounts.
The percentage of E&M services in the study sample that were paid at a discounted rate fell from 78.3% to 76.6%, but the average discount increased from 15.5% to 17.1%, so thus far the use of these contracts has helped mitigate the impact that the change to the fee schedule’s geographic adjustment factor has had on the average amounts paid for E&M services.