WCRI study

Healthcare providers gaming workers' comp

Healthcare providers who are paid a fixed sum per insured employee are more likely to call an injury work-related so they can shift costs to workers' compensation programs, which reimburse them on a fee-for-service basis.

A recent study by the Workers Compensation Research Institute asserts a back injury was as much as 30% more likely to be called "work-related" (and paid by workers' compensation) if the patient's group health insurance was capitated rather than fee-for-service. Specifically, the study concludes "workers covered by capitated health plans were more likely to have treatment for soft tissue conditions paid for by workers' compensation than workers covered by fee-for-service health insurance plans."

The WCRI study spells out the logic and dynamics in distressing detail. When a patient covered by a capitated health insurance plan seeks treatment for, say, back care, the physician and his healthcare facility are well-aware they will not earn incremental revenue for their services since they were paid a fixed amount for that patient at the outset of the policy year. But if the condition is deemed work-related, the providers know they will be paid for each service they provide.

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The temptation is there and the opportunity arises when the cause of injury is not certain, as is the case with a soft-tissue condition or non-specific back pain or strain/sprain of knee or shoulder. WCRI notes it is notoriously difficult to pinpoint the cause of back pain; some cases of back pain are said to be caused by a specific event, others are said to be caused by repetitive motion, and still other cases of back pain are attributed to the aging process.

A lot hinges on the professional judgment of the physician, and given the choice between receiving additional revenue and not receiving additional revenue, many prefer the former. WCRI says providers are more likely to shift cases to workers' compensation in states where capitated group health plans are more common and, therefore, providers are more aware of the rewards of classifying an injury "work-related."

WCRI adds its findings are reinforced by the fact caseshifting is not common in states where capitation is not common, and there is no case-shifting for patients with conditions where the causation is more certain (for e.g. fractures, lacerations, contusions). WCRI is not the first to find evidence of caseshifting; nearly a dozen studies in the 1980s and 1990s documented a similar phenomenon under health maintenance organizations, which paid healthcare providers on a capitated basis.

Since the U.S. healthcare system is moving away from fee-for-service in favor of capitated or lump-sum payments, workers' compensation is an inviting target because it not only pays on a fee-for-service basis but pays higher prices. An earlier WCRI study found that in almost all states, workers' compensation programs were charged higher prices for common surgeries than paid by group health insurance plans. In some states, prices paid by workers' compensation were two to four times higher.

Employers should be aware how case-shifting adds to their costs, WCRI says. Workers' compensation commissioners should also be aware physicians are more likely to classify an injury as work-related if it means they will get paid on a fee-forservice basis.

"This distinction may also be relevant to system designers who might want to give adjudicators access to an independent medical assessment in certain cases," WCRI concludes.