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Sharp Increase in California Workers’ Comp Med-Legal Costs

Payments for medical-legal services used to resolve medical disputes over compensability issues in California work injury claims have risen sharply under the new Medical-Legal Fee Schedule that took effect last year, a new report shows.

The report from the California Workers’ Compensation Institute shows an increase in aggregate med-legal fees in the first seven months after the schedule took effect far exceeding the 25% increase anticipated by the Division of Workers’ Compensation.

The DWC last year implemented a new fee schedule that changed the payment formulas for med-legal evaluations and reports for the first time since 2006.

The old MLFS had provided varying flat fee payments for “basic” and “complex” comprehensive evaluations, and time-based payments for evaluations involving “extraordinary circumstances.”

The new schedule replaced those levels of service with a single code (ML201), for which forensic physicians are paid a single, flat fee, plus $3 per page for record reviews exceeding 200 pages (MLPRR), and time-based payments for sub rosa video reviews (ML205). The new MLFS also continued to allow additional fees for evaluations by an Agreed Medical Evaluator or those involving an interpreter, and expanded fee multipliers to certain medical specialists, according to the CWCI.

CWCI’s report compared the utilization and reimbursement of med-legal services rendered before and after the new schedule’s April 1, 2021 effective date, using data from accident year 2015 through 2021 claims, with service dates limited to January through October of each year to account for the timing of billing and payment.

The results show that replacing the three levels of evaluations with a single comprehensive evaluation reimbursed at a flat fee of $2,015 likely had the biggest impact on average payments. Basic evaluations (previously billed under ML102) accounted for about 40% of the evaluations paid under the new ML201 comprehensive service code, and the new flat fee increased the payment for these services by 222%. More complex evaluations (previously billed under ML103) represented 18% of the new ML201 evaluations, and payments for these services increased by 115%, according to the CWCI.

Other findings from the study:

It was hoped that the new MLFS would lead to a redistribution of med-legal services, with fewer supplemental reports, but these reports increased from 34.2% of med-legal services in 2019 to 37.8% under the new schedule.

Compared to the same time period in 2019, the average payment for a comprehensive evaluation that includes a face-to-face exam of the injured worker rose 52.9%, and the average payment for a supplemental evaluation rose 39.1%.

The new per-page record review fee also contributed to the increase in med-legal payments, adding an average of $1,917 to the base fee for comprehensive evaluations, $1,410 to the base fee for follow-up evaluations and $1,437 to the base fee for supplemental evaluations.

Physicians specializing in orthopedic surgery provided 53% of the med-legal services during 2021, while internal medicine physicians were a distant second, providing 9% of the services.

One goal of the new fee structure was to attract and retain more Qualified Medical Evaluators. A review of DWC data shows that 211 new physicians joined the pool of certified QMEs in 2021, while only 18 became inactive, resulting in 2,554 active evaluators, a 3% increase from 2020 yet a 1% decrease from 2019.

CWCI has published its study in a Research Update Report, which is available to CWCI members and subscribers who log on to the Research section of the institute’s website. Others may purchase the report from CWCI’s online store.

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California Trends Workers’ Compensation

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