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ACA Could Spur More Cost-Shifting to Workers’ Comp

As the Affordable Care Act prompts more health plans to use the capitation payment model for health care providers, more treatment costs may be shifted to the workers’ comp system, according to a new study. That would mean higher premiums for employers.

The Worker’s Compensation Research Institute (WCRI) analyzed health plans in 30 states and noted in its research that as more health plans use capitation, doctors will try to get more patients treated under workers’ comp.

This expected cost-shifting, which the institute said is already underway, will end up increasing workers’ comp claims and costs, which will be passed on to employers in the form of higher premiums.

Claims-shifting is already taking place in states where capitated plans are popular, especially California, California, New York, Pennsylvania, Michigan and Massachusetts. That’s because workers’ comp pays physicians more than they receive under capitated health plans.

In the workers’ comp system doctors are paid a fee for service, while capitated health plans pay them a monthly fee per patient regardless of whether they treat them or not.

The other factor contributing to the trend is the formation of accountable care organizations (ACOs), which follow the capitation model. The Affordable Care Act encourages the creation of these organizations, in which doctors and hospitals share financial and medical responsibility for coordinating services to patients.

In an ACO, doctors and hospitals are rewarded for the quality of medical outcomes and for keeping costs low. In addition to rewarding doctors with higher payments, shifting cases to workers’ compensation has the possible benefit of removing these cases from an ACO’s accountability formula, the study notes.

The report predicts that the expected trend will result in tens of millions of dollars in additional costs flowing into the workers’ comp system.

Richard Victor, executive director of the Cambridge, Massachusetts-based WCRI, told the media on a conference call that under capitation doctors are indirectly incentivized to move treatment into workers’ comp because they’ve already been paid the capitated rate from the health insurer. They get paid whether they treat the payment or not.

But if the patient is treated under workers’ comp, they can generate additional revenues because they’ll get paid for the services they provide.

“If it’s work-related, then the provider gets the same fee for service as what’s paid by workers’ comp,” Victor said. “If it’s not work-related, the provider’s already been prepaid for any care that they give.”

The doctor typically determines if an injury is work-related. If a patient comes in complaining of back or joint pain, those could be caused by a combination of their job or factors outside of work.

Victor emphasized that he’s not alleging fraud on the part of providers, just that they will ask more questions to determine if there is any causality from the patient’s work.

While it’s usually obvious if an injury is work-related, like broken bones, cuts or impact injuries from falls, soft-tissue injuries to the back, a knee or shoulder aren’t as clear-cut. The injuries could be the result of years on the job performing the same task, or sitting every day.

This ambiguity creates an opportunity for financial incentives to influence a doctor’s decisions, the study says.

Preliminary findings from the study found that in states where most group health plans are fee-for-service (like workers’ compensation) and where capitation plans serve less than 10% of the market, there was no case-shifting effect.

But in states where capitated health plans have a market share of more than 22%, there was a 30% increase in soft-tissue workers’ comp claims.

The WCRI provided the following examples:

  • If capitation increased from 30% to 55% in Pennsylvania (a state with high capitation), there would be an 8.5% shift of soft-tissue claims to workers’ comp.
  • In Illinois (which has a low capitation rate), if capitation jumped from 12% to 27%, there would be a 12% increase in soft-tissue workers’ comp claims.

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