Mitchell: Charged Fees from Medical Providers Have Increased 10 Percent in Last 3 Years

Sarasota, FL (WorkersCompensation.com) – Costs for evaluation and management services have increased by 24 percent in the last three years. While that could be an office or telemedicine visit, an emergency room visit or a consult, it has become one of the major drivers of severity in the worker’s compensation system. 

“If I was just looking at an index for the particular group of what’s being billed to workers’ compensation carriers, I’d be very nervous,” said Michele Hibbert SVP of Regulatory Compliance Management for Mitchell’s Casualty Solutions Group. “That’s an area we really need to focus on and put extra cost containment on.” 

During a session at the Risk Insurance Management Society’s annual conference, Hibbert discussed trends in severity for both workers’ compensation and auto. She advised attendees to look at evaluation and management services in the largest claim volume, monitor frequently, and be proactive. 

Severity Analyses 

One of the questions Hibbert is frequently asked is, what is severity in the first place. “Our measurement is based on what we are seeing in our bill review applications,” she explained. “The billions [of dollars] we see in workers’ compensation, auto, were used to construct the view we are talking about today.” 

Medical severity, in particular was the focus of Hibbert’s analysis. The goal she said is to understand the cost at the unit level. For example, if there are four units of electrical stimulation, the question is what the electrical stimulation actually costs, in a particular zip code, by a specific provider. “We are analyzing the cost of the claim based on unit value,” Hibbert said. “You could have thousands of procedures done but we want to figure out what the main cost of that is.” 

The Mitchell analysts looked at their data from 2017 to the end of 2021 for the two insurance lines. They were looking at the total cost of the claim.  

“For workers’ compensation, what we’ve seen on the charge side, we’ve seen providers charge 10 percent higher since 2017 to the end of 2021,” Hibbert said. “In relation to what they are charging, we’ve seen the allowed amounts per unit increase 8 percent.” 

That differs from medical costs in auto insurance, where charged amounts from first party claims increased by 4 percent, while the paid – or allowed – amount was actually higher.  

“The allowed per cost is lower [in workers’ compensation] because we have a lot more cost containment on the workers’ compensation side than on the auto side,” Hibbert said. Also, “the extensive use of provider networks in auto first party claims has been a huge bonus to payers.” 

Workers’ Compensation Costs 

The 10 percent increase in charges from workers’ compensation providers is especially significant, when one considers the medical consumer price index is 6 percent. The pandemic has caused changes in trends that are driving severity, Hibbert said. 

Inflation is among the factors driving workers’ compensation severity these days. “Two years ago it would not be on the list because it’s a normal part of what we do,” Hibbert explained. “But because it’s so high right now and because of COVID, you can see the effect of what’s happened as a result.” 

The inflation factor is higher in some areas of the country than others. In fact, costs for overall medical services in workers’ compensation claims vary significantly among jurisdictions.  

Physical medicine and rehabilitation is yet another driver of higher severity in workers’ compensation, up 10 percent from 2017 to the end of 2021. That may include anything from electrical stimulation to chiropractic manipulation. The increased costs are especially prevalent in emergency departments. 

“We feel that is part of a necessary shift a lot of hospitals have to do because that is a profit center and hospital inpatient stays have gone down, down, down,” Hibert said. The increase is also seen in auto claims. 

Auto Claims  

While the charge amounts for first party auto claims are just 4 percent higher over the last three years, third party claims have increased by 9 percent. There may be a couple of reasons for that. 

“First, in first party claims we have policy limits … overutilization doesn’t occur,” Hibbert said. “But in third party claims there are no policy limits … also, more expensive treatments are happening on third party claims as well.” 

Bad faith is also driving severity in auto claims, Hibbert said. She cited a new law passed in New Jersey that says ‘reasonable payments’ should be made on a consistent basis and ‘reasonable timelines’ need to be met. However, the law does not define ‘reasonable.’ 

“So what is going to happen?” she asked. “We’re going to have to wait until the courts define it. It will probably take a couple of years in New Jersey.” 

Such laws, she said, are driven by outside influences and often bad language is put into the legislation.   

The nature of auto crashes changed during the pandemic, resulting in higher severity. Instead of fender benders among drivers going to or from work, truck-to-truck and truck-to-car accidents dominated. 

“Crash types and severity of injuries data showed a 12 percent increase in traumatic brain injuries in the last two years,” Hibbert said. “Those are not cheap claims.” 

The rate of auto claims involving trucks and severe injuries has decreased lately. However, there has been an increase in accidents involving pedestrians – involving both cars and trucks. “People are more on foot and not paying attention,” Hibbert said. “These are causing more severity to the claim; they can linger and last and be more expensive in the long run.” 

An increase in large jury verdicts, or ‘nuclear verdicts’ has also increased claim costs. Those have led to an increase in ‘social inflation,’ where people on social media announce high settlements. 

“The Insurance Information Institute … reported about a 1,000 percent increase in jury verdicts in costs over the last 10 years,” Hibbert said. “It’s no longer $2 million; now it’s $23 million. It’s super important for us to pay attention to what is going on there and use our legislative voice to make changes.”