Comp Community Reacts to WCRI Medical Benchmarks and the Oregon Premium Study: Louisiana Remains Conflicted

WCRI recently released its 15th edition of the CompScope Medical Benchmarks for Louisiana. The CompScope reports are individualized analyses of each of the sixteen WCRI study states, designed to provide a comparative basis – and to influence policy. Louisiana Comp Blog sought out our most seasoned commentators to provide their thoughts on the results of this study and WCRI’s methods, as well as their perspective on the controversial Oregon Premium Study, which was published almost concurrently.

As a basis for the commentary that follows, the key findings for this edition’s study of Louisiana, identified by the WCRI, are as follows:

  • Louisiana medical payments per claim were higher than the sixteen-state median, and growing faster than most states until 2012.
  • There was little change in medical payments per claim in 2012. Possible contributing factors to this stabilization could be:
      • Decrease in hospital outpatient payments per service
      • Fewer visits per claim for hospital and non-hospital care; which may be related in part to the implementation of the medical treatment guidelines
      • Hospital payments per inpatient episode were stable
  • Hospital outpatient payments were a key driver of Louisiana medical payments, likely reflecting reimbursement regulation (i.e. “the ninety percent rule”)

Additionally, a ripple ran through Louisiana’s carrier community upon the release of the Oregon Premium Study (a biannual review which simply compares premium rates across all fifty states with a national median rate) which revealed that Louisiana now has the tenth highest workers’ comp premium rates in the country.

In terms of the actual rate determined for our state in the Oregon study, $2.23 per standard $100 of payroll, Louisiana falls in the middle of the rate scheme. However, some stakeholders are alarmed about Louisiana’s rise from 15th highest in 2012 to 10th highest in 2014. $2.23 represents 120% of the study median. All of our neighboring states, with the notable exception of Oklahoma which has just instituted an opt-out provision, have lower rates, which some believe makes Louisiana a less attractive candidate for businesses seeking to enter the region.

Gary Patureau, Executive Director of the Louisiana Association of Self-Insured Employers (LASIE), was adamant that the Oregon Premium Study is a solid benchmark to determine whether or not a state’s workers’ compensation system is doing what it should – providing effective and efficient medical treatment – in which “efficient” means reducing unnecessary costs and treatments.

“If everything was working as it should then we should have seen a premium decrease,” Patureau said. “The [medical treatment] guidelines are a step in the right direction, but they need to be more restrictive…States that have hybrid guidelines [of which Louisiana is one] have higher costs than states with guidelines approved by the National Guideline Clearinghouse [i.e. The Official Disability Guidelines.] We failed in thinking that the [medical treatment guidelines] were going to fix everything.”

With regards to the CompScope report, Patureau believes that the WCRI has identified a major impending economic issue for Louisiana. “If you have higher medical costs, then you’re less competitive,” he said. As for Patureau’s solutions? “I’d like to see stronger administration and and more stakeholders held accountable. I’d also question if hybrid guidelines actually provide the most appropriate care.”

For John Kocke, founder and owner of AMC Resources, which provides utilization review and other medical cost containment services, the WCRI report on Louisiana was illustrative of his experience.

In response to the finding that, for claims at an average of twelve months of experience, the average medical cost per claim in Louisiana was fourteen percent higher than the sixteen state median, and that at thirty-six months, it was eighteen percent higher, Kocke explained, “These numbers are very accurate. I’m surprised it isn’t higher than fourteen percent.”

As for the reasons behind these higher averages with respect to medical costs, Kocke is sure of the major problem. “The biggest thing is outpatient hospitals. Here, [WCRI] found that workers’ comp is sixty percent higher for shoulders than ordinary health insurance,” he said. “That’s no surprise, because our Fee Schedule allows these facilities to charge whatever they want and then expect reimbursement at ninety percent of billed charges.”

According to Kocke, exorbitant fee inflation for some services has created additional dispute in the system. “[Because of the ninety percent rule,] there is this cost-shifting to workers’ comp to take advantage of this reimbursement rate: that’s one of the reasons we have so many surgical specialty hospitals in the state.” Kocke emphasized that some denials of medical treatment by carriers are probably related to this attempt to force carriers to foot an inflated bill.

And why do the hospitals utilize this reimbursement rate to cost-shift? As Kocke sees it, it all comes down to disparities in the hospital fee schedule. “The reimbursement for inpatient hospital stays was set back in 1993-1994,” he said. “There is little doubt that this reimbursement is usually insufficient to cover most hospital costs associated with surgery or medical stays. Outpatient rates were also set at the same time, but compared to today, there were very few outpatient surgical procedures. Now they are doing almost all orthopedic procedures, as well as certain spinal surgeries, as an outpatient. This was unheard of back in 1993.”

However, one area in the CompScope report that appeared contrary to Patureau and Kocke’s pessimistic outlook was a stabilizing of the data on medical claim costs. WCRI states in the report that, “Louisiana medical costs per claim changed little in 2012, after growing eight percent per year.” Kocke however, is reluctant to say that the results from 2012 are sustainable. “I attribute that almost entirely to the advent of evidence-based medicine through the use of the medical treatment guidelines.” he said.

Contrary to the views above, local attorney Greg Hubachek, with Workers’ Compensation LLC, disagrees with the interpretation of rising costs and the need for more restrictive medical guidelines. Instead, he points to both flawed statistical methods in the studies, and a general misunderstanding among the employer/carrier community about how the consequences of economic “progress” should be balanced.

Map displaying each state's premium category (Oregon Premium Study 2014)

Map displaying each state’s premium category (Oregon Premium Study 2014)

With regards to the median methodology of both studies, Hubachek explained: “It stands to reason that half the states must be below the ‘median’ data standard. I would ask, ‘has anyone looked at these states to determine whether each state’s Workers’ Compensation Act is below the median standard of benefits?’ Certainly, recent developments in Florida [the Padgett case, which is challenging the overall constitutionality of the state’s workers’ comp system] have highlighted the problems associated with diminished and/or insufficient benefits. Also, scale of economy is not the only variable; specifically, all states do not have the same economic components. Our economy has a large component of natural resource exploitation and, therefore, comparison to other, various state economies may not always result in meaningful findings as it pertains to comparative rates of workers’ compensation insurance.”

It is worth noting that WCRI provides some explanation for their methodology, including three factors that are meant to enhance the comparability of their data:

  1. standardizing definitions of variables that state regulators might have defined differently from state to state
  2. standardizing the reporting on cases with more than seven days of lost time to control for differences in state waiting periods for income benefits
  3. adjusting for interstate differences in injury and industry mix

The reaction surrounding the Oregon Premium Study is particularly troubling for Hubachek; he emphasizes the disparity between profitability and apparent costs or loss of economic opportunity. “LWCC and other in-state workers’ compensation insurers are reporting unprecedented profits,” he said. “I would suggest that Louisiana’s thriving economy and, concurrently, profitable workers’ comp insurance market demonstrate that the Louisiana Workers’ Compensation Act (LWCA) is well-balanced.” LWCC announced in March 2014 that it would be distributing its largest dividend ever, a total of $69.1 million, paid to qualified policyholders the following month. That figure contributes to their cumulative total dividend from the past eleven years which is, according to the company, equal to more than $300 million.

As for the cries that the system is far from reaching its efficient potential? Hubachek chalks that up to politics. “For their part, WCRI and the Oregon Study focus attention on the ratio of rate/cost,” he said. “The WCRI and the Oregon Study information is utilized by the insurer and business lobbies to create hysteria…[and] encourage more cost-cutting relative to benefits paid to injured workers as ‘the only solution’ to control rate/cost. Of course, the insurer and business lobbies’ approach entirely ignores workplace safety issues, employer payroll fraud and/or misclassification. It is not necessary for the citizen-employees of Louisiana to accept all of the burdens associated with creating a ‘business friendly’ environment in Louisiana.”

WCRI CompScope reports can be purchased in their entirety here. A summary of The 2014 Oregon Workers’ Compensation Premium Rate Ranking Study is available to read and download here.

Image Credits: WCRI and The Oregon Premium Study 2014 summary.


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