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California Workers' Comp Med-Legal Costs Up Sharply Under New Fee Schedule

Oakland, CA -- Payments for medical-legal evaluations and reports used to resolve medical disputes in California work injury claims have increased more than expected since a new Med-Legal Fee Schedule (MLFS) took effect in April 2021 according to a new CWCI study, with the average payment for a comprehensive exam up 52%, primarily due to new per-page fees for record review that are paid on top of flat fees for med-legal evaluations services.  In addition, 2023 saw a 6 percent increase in Qualified Medical Evaluators (QMEs) compared with pre-pandemic levels

Implementation of the updated MLFS for the California workers’ compensation system three years ago led to a comprehensive overhaul of the payment formulas for med-legal evaluations and reports.  Complexity and time-based payments that had been in effect since 2006 were replaced with flat fees and payments for record reviews exceeding specific page thresholds were added.  When the Division of Workers’ Compensation (DWC) adopted the new schedule, it anticipated it would result in a 25% increase in payment levels to adequately compensate med-legal evaluators.

CWCI’s study, which updates a preliminary analysis from 2021, uses payment data for med-legal evaluations and reports with dates of service from January 2015 through October 2023, valued as of December 2023, to compare the utilization and reimbursement of med-legal services rendered before and after the new schedule’s April 1, 2021, effective date.  The study analyzed changes in evaluation and report patterns and payments.  One goal of the new MLFS was to attract and retain Qualified Medical Evaluators (QMEs) to conduct medical-legal evaluations to better meet demand.  CWCI used DWC data from calendar years 2019 to 2023 to track changes in the number of registered QMEs and the number of QME panel assignments by medical specialty.

A review of the mix of med-legal services found that between April 2021 and 2023 there was a big shift in the use of follow-up exams, which was anticipated as the new MLFS calls for the follow-up evaluation code to be used for 18 months after the preceding comprehensive exam, versus 9 months under the 2006 schedule.  Other key findings include:

• There has been a 52% increase in the average reimbursement for comprehensive evaluations, and a 29% increase for supplemental reports since the new MLFS took effect.

• Additional charges for excess record review were found on 43.3% of the comprehensive evaluations, 24.9% of the follow-up evaluations, and 30.8% of the supplemental reports. For comprehensive evaluations, the new per-page record review fee added an average of $1,817 to the $2,015 flat fee payment for services with page-review.  Page-review payments drove nearly three quarters of the increase in comprehensive evaluation payments under the new schedule.  In addition, the per-page record review payments added an average of $1,338 to the flat fee for follow-up evaluations with excess page review and $1,335 to the flat fee for supplemental reports with excess page-review.

• The number of certified QMEs has increased 5.9% from 2,561 in 2019 to 2,712 in 2023. That improvement, however, has been offset somewhat by a 2.9% increase in the number of panel assignments over the same period, resulting in a net gain of about 3 percent.

• Physicians specializing in orthopedic surgery provided 44% of the med-legal services in 2023, followed by chiropractors who provided 11% of the services.

CWCI has published its study in a Research Update Report, “Increased Medical-Legal Costs and Current QME Supply – Impact of the 2021 Medical-Legal Fee Schedule.”  The report is available to CWCI members and subscribers who log on to the Research section at www.cwci.org.  Others may purchase the report from CWCI’s online store, here.