Analysis of the Workers Compensation Medical Fee Schedules in Illinois. Stacey M. Eccleston

Transcription

1 Analysis of the Workers Compensation Medical Fee Schedules in Illinois Stacey M. Eccleston

2 ANALYSIS OF THE WORKERS COMPENSATION MEDICAL FEE SCHEDULES IN ILLINOIS

3 ANALYSIS OF THE WORKERS COMPENSATION MEDICAL FEE SCHEDULES IN ILLINOIS STACEY M. ECCLESTON July 2006 WC WORKERS COMPENSATION RESEARCH INSTITUTE CAMBRIDGE, MASSACHUSETTS

4 COPYRIGHT 2006 BY THE WORKERS COMPENSATION RESEARCH INSTITUTE ALL RIGHTS RESERVED. NO PART OF THIS BOOK MAY BE COPIED OR REPRODUCED IN ANY FORM OR BY ANY MEANS WITHOUT WRITTEN PERMISSION OF THE WORKERS COMPENSATION RESEARCH INSTITUTE. LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA [TO COME] PUBLICATIONS OF THE WORKERS COMPENSATION RESEARCH INSTITUTE DO NOT NECESSARILY REFLECT THE OPINIONS OR POLICIES OF THE INSTITUTE S RESEARCH SPONSORS.

5 ACKNOWLEDGMENTS This study would not have been possible without the assistance and expertise of several individuals. Technical reviewer Dr. Peter Barth made valuable and insightful comments and suggestions that led to substantial improvement in the book s presentation and focal points. Colleagues Xiaoping Zhao, Dawn Albright, and Michael Watson lent their expertise in the programming and analysis of the data. We thank WCRI s Disability Management/Benefit Integration (DMBI) Core Funder group for their continued support that makes this and similar studies possible. Linda Carrubba, Stephanie Deeley, and Jammie Middleton provided invaluable administrative assistance in the draft and final stages of the study, and Karen Holt ushered it through the publication process. Finally, the insight and guidance of the Institute s executive director, Dr. Richard Victor, was invaluable to the publication s success. Of course, any errors or omissions that remain are the responsibility of the author. Stacey M. Eccleston Cambridge, Massachusetts July 2006 iv

6 TABLE OF CONTENTS List of Tables... vi List of Figures...viii Analysis of the Workers Compensation Medical Fee Schedules in Illinois... 1 Summary of Major Findings...2 Background... 5 HISTORIC PRICES IN ILLINOIS... 6 The Illinois Fee Schedule Is One of the Highest in the Nation... 8 The 2006 Fee Schedule Price Often Exceeds the Pre-Fee Schedule Average Price Paid in Illinois Possible Unintended Consequences Arising from 29 Different Fee Schedules in Illinois Indexing the Fee Schedule to the Consumer Price Index May Reduce the Rate of Growth Methods and Data SCOPE OF ANALYSIS THE MARKETBASKET APPROACH AND REPRESENTATIVENESS CREATING THE MARKETBASKET CREATING THE FEE SCHEDULE INDEX ANALYSIS OF PRICES PAID IN ILLINOIS References Web Site Address for Supplementary Material Analysis of the Workers Compensation Medical Fee Schedules in Illinois: Statistical Appendix v

7 LIST OF TABLES 1 Workers' Compensation Premiums over Medicare by Service Group, 2005/2006 / 9 2a 2b 3a 3b 4a 4b 5a 5b 6a 6b 7a 7b Commonly Billed Evaluation and Management Services: % By Which Fee Schedule Amount Exceeds Average Price Paid / 14 Commonly Billed Evaluation and Management Services: % That Were Paid at Prices above the Fee Schedule / 15 Commonly Billed Major Surgery Services: % By Which Fee Schedule Amount Exceeds Average Price Paid / 16 Commonly Billed Major Surgery Services: % That Were Paid at Prices above the Fee Schedule / 18 Commonly Billed Major Radiology Services: % By Which Fee Schedule Amount Exceeds Average Price Paid / 19 Commonly Billed Major Radiology Services: % That Were Paid at Prices above the Fee Schedule / 20 Commonly Billed Minor Radiology Services: % By Which Fee Schedule Amount Exceeds Average Price Paid / 21 Commonly Billed Minor Radiology Services: % That Were Paid at Prices above the Fee Schedule / 22 Commonly Billed Physical Medicine Services: % By Which Fee Schedule Exceeds Average Price Paid / 23 Commonly Billed Physical Medicine Services: % That Were Paid at Prices above the Fee Schedule / 25 Commonly Billed Neurological Testing Services: % By Which Fee Schedule Amount Exceeds Average Price Paid / 26 Commonly Billed Neurological Testing Services: % That Were Paid at Prices above the Fee Schedule / 27 vi

8 8 Fee Schedule Prices Top 5 Most Frequently Billed Codes in Each Service Group Eleven Different Illinois Zip Code Areas (Metropolitan Chicago, Champaign, East St. Louis) / 27 9 Fee Schedules Compared to Price Paid for Electromyography (CPT 95860) in Highest and Lowest Fee Schedule Areas / Fee Schedules Compared to Price Paid for Shoulder Arthroscopy (CPT 29826) in Highest and Lowest Fee Schedule Areas / Coverage of Illinois Medical Fee Schedule Analysis / Summary of Marketbasket and Representation / Distribution of Employment Population by the 29 Geozips in Illinois / 37 vii

9 LIST OF FIGURES 1 Illinois Average Prices Were Second Highest among Study States for Nonhospital Providers / 7 2 Average Prices Paid to Nonhospital Providers Grew Somewhat Faster Than the Median State / 7 3 Illinois* Fee Schedule Is Third Highest Nationally, on Average, 2005 / Illinois Area Fee Schedules Range from 115 to 219% above Medicare / 12 5 CPI Grew 3 4% More Slowly Each Year Than Average Prices Paid / 33 viii

10 ANALYSIS OF THE WORKERS COMPENSATION MEDICAL FEE SCHEDULES IN ILLINOIS Illinois House Bill 2137 was signed into law on July 20, As part of that bill, the first Illinois workers compensation medical fee schedule became effective on February 1, This study analyzes the professional medical fees established in that fee schedule for each of the 29 geographic areas mandated by statute. This study: Compares the Illinois workers compensation medical fee schedules for professional services to actual prices paid in each area of Illinois for 2006; the corresponding 2006 Medicare fee schedule for each area; other state workers compensation fee schedules. Describes the extent of variation in fee schedule levels among the 29 different fee schedules in Illinois. Identifies some incentives in the fee schedules that may lead to unintended consequences Examines the provision of the statute that provides for the fee schedule to be annually increased by the change in the U.S. Consumer Price Index (CPI). The analysis in this study is limited to the nonfacility, professional services billed under Current Procedural Terminology (CPT) codes 1. This study does not address hospital inpatient fees, or hospital outpatient or ambulatory surgery treatment center (ASTC) fees, for which the fee schedule amounts are generally 76 percent of charges. To combine diverse medical services into a single value for each area, the analysis uses a standard approach that is similar to the construction of the CPI. We use a marketbasket of medical services that are frequently billed in the Illinois workers compensation 1 Fees for anesthesia are excluded because of the use of time units, which make it difficult to make comparisons of prices paid. Pathology services are excluded because very few pathology services are included in the Medicare fee schedules. Together these services make up less than 6 percent of total nonhospital medical payments. 1

11 system. These important services make up 82 percent of nonfacility workers compensation medical expenditures for professional services. More detail on the methodology can be found in the section entitled Data and Methods. For simplicity, we sometimes use the term Illinois* fee schedule. By Illinois*, we mean a single number that represents the aggregate of the 29 regional fee schedules. To compute this, we take the fee schedule value for each of the 29 areas. Then we add them together giving the greatest weight to the largest areas. The weights used are the number of employed workers in each area, based on the location of the worker s residence. SUMMARY OF MAJOR FINDINGS The Illinois* fee schedule is one of the highest in the nation in The fee schedules in most states in December 2005 were percent above the Medicare rates in the state. The Illinois* fee schedule averaged 167 percent above the Illinois Medicare rates for Even the lowest of the 29 area fee schedules in Illinois (622-East St. Louis) was one of the highest in the nation 115 percent above the Medicare rates in the area. The highest of the 29 areas (618-Champaign) was 219 percent above that area s Medicare rates. The Illinois fee schedule preserves the historic incentives for invasive and specialty care that the Medicare program has significantly reduced. The fee schedule for Illinois* for surgery was 418 percent above the Illinois Medicare rates for surgery. The fee schedule for radiology was 175 percent above the Medicare rates. By contrast, the Illinois* fee schedule for evaluation and management services (largely office visits) was 52 percent above the Medicare rates. The relatively higher rates for surgery versus office visits reward specialty and invasive care far more than primary care. 2

12 The Illinois* fee schedule was higher than the average prices paid 2 in Illinois for many services, especially for surgery and radiology. For example, the fee schedule amounts for some of the common major surgeries were generally percent higher than the average prices paid for these surgeries in workers compensation. However, the fee schedule amounts were similar to or lower than prices that were commonly paid for other services. Even though most common major radiology and surgical services were paid below the new fee schedule levels, the fee schedule might produce some savings for some payors, since a small to moderate proportion of the bills were paid above the new fee schedule. For some other common services, nearly one-half of bills were paid above the new fee schedule. We would expect to see greater savings for these services. The savings potential for payors that are covered by networks and have relatively high network penetration might be much less than that for nonnetwork payors, assuming networks already pay at substantial discounts from charges. The Illinois workers compensation fee schedule is unique in its design setting different maximum reimbursement rates for the same services for each of 29 different areas of the state. Areas were defined according to the first three digits of the zip code where the service was delivered including nine different fee schedules in the greater Chicago metropolitan area. Only three other states (Florida, New York, and Pennsylvania) had different workers compensation medical fee schedules for different parts of the state, and of those, the maximum number of areas was four. The Illinois Medicare fee schedule sets different rates for only four different geographic regions within Illinois. The Medicare differentials are based on research studies that measure the costs to the providers of delivering services including differences from area to area in office practice expenses and medical malpractice insurance premiums. The difference between the lowest and highest of the Medicare areas is 17 percentage 2 Prices paid are derived from actual payments from WCRI s database containing line item billing and payment information from a representative group of payors in the state. The prices paid could differ from actual prices paid across the state if our data sources represent a higher proportion of network discounts than is found in the state. Fortyone percent of the payments in our database are made for network services (see Methods and Data section for more detail). 3

13 points. By contrast, the 29 fee schedules in Illinois ranged from a low of 115 percent above Medicare (622-East St. Louis) to a high of 219 percent above Medicare (618- Champaign) a difference of 104 percentage points. Unlike Medicare, the differences in the Illinois fee schedule reflect differences in provider charges, which did not appear to be consistently related to differences among areas in the actual costs incurred by providers. It should be noted that the five largest fee schedule areas in Illinois represent nearly two-thirds of the employment in the state. The use of 29 different area fee schedules sometimes leads to odd results, due, in part, to (1) the inconsistent relationship between provider charges and the actual costs incurred by providers to deliver the service, and (2) the relatively small numbers of procedures that were necessarily used to estimate average charges for many procedures, given the relatively small areas that result when a state is divided into 29 regions. These small numbers as small as 9 procedures inevitably introduce significant random variation to some of the estimates that underlie the fee schedule. These oddities may create unintended incentives for providers to increase revenues by moving the site of service or otherwise zip-gaming the system. While these instances are not pervasive, they occur with sufficient frequency that one might question the wisdom of having so many different reimbursement rates, especially within the Chicago metropolitan area. Prices paid are generally determined by local market conditions, including the supply of and demand for different providers services, the rates paid by group health payors, and negotiated workers compensation prices between payors and workers compensation networks. If areas with higher (lower) prices actually paid had higher (lower) fee schedule amounts, we would say that the fee schedule was rationally related to the local market conditions. For most common services in Illinois, we found that the areas with the highest fee schedules were not the areas where market conditions led to the highest prices having been paid. For some common services, we observed little rational relationship between the fee schedule and prices actually paid for some services, for others the relationship was weak and for still others the relationship was stronger. But across most common services analyzed, the higher fee schedule areas were frequently not the areas with proportionately higher prices 4

14 actually paid. With a fee schedule based on charges (like Illinois), this could occur if charges are not well-reflective of true market conditions. This situation is similar to the sticker price on an automobile, where the true price is closer to the sticker price for cars where demand exceeds supply, but not for slower sellers. The annual increases in the fee schedule amounts are tied to the change in the CPI. Workers compensation medical prices actually paid in Illinois have historically grown by 3 to 4 percentage points per year faster than the CPI. Where the fee schedule levels are binding on the actual prices paid, and unless offset by changes in billing and treatment practices by providers, we would expect this approach to dampen the increase in prices paid compared to what the increase in prices would have been without the fee schedule. However, this is true only for the services covered by the fee schedule and does not apply to services or providers not covered by Illinois fee schedules or for those services set at a moving 76 percent of charges. WCRI has found that charges have historically increased at an average annual rate of between 7 and 8 percent per year (see Figure 5). BACKGROUND The Illinois Workers Compensation Commission promulgated a fee schedule to establish maximum medical payments for both professional and facility fees provided to workers compensation patients. (cite. 820 ILCS 305/8.2: Public Act ) The fee schedule covers professional nonhospital services billed under CPT codes (analyzed in this report) as well as sets maximum fees for ambulatory surgical treatment centers (76 percent of the charged amounts) and hospital inpatient and outpatient services. The maximum fees for nonhospital services in the Illinois fee schedule were set by determining 90 percent of the 80 th percentile of health care provider charges (billed amounts) from August 1, 2002, through August 1, By statute, fee schedule amounts were established for 29 geozips (the three-digit zip code where the treatment was provided) in Illinois. The fee schedule developers note that some zip code areas may have been combined with up to four other areas to get a minimum of nine charged services for any given code. If there were less than nine billed services for a given code, the fee schedule maximum is set at 5

15 76 percent of the charged amount. Future WCRI studies will likely track the impact of the fee schedule on Illinois payments and billing behavior and will evaluate, among other things, whether providers increase charges for services covered under the 76 percent rule, and/or whether there is a shift into billing more of these codes and the extent to which there is a shift in the billing volume across the different geographic areas subject to differing fees. The fees from 2002 to 2004 were then increased by an amount equal to the increase in the CPI for the period August 1, 2004, through September 30, 2005 (4.96 percent). 3 The maximum fees in the fee schedule will automatically increase or decrease each year based upon the annual change in the general CPI. HISTORIC PRICES IN ILLINOIS The effort to create an Illinois fee schedule may be the result of the fact that medical prices in Illinois were higher and growing faster than many other large states, and that Illinois was one of only seven states nationally that did not have a workers compensation medical fee schedule (Eccleston and Zhao, 2005). In addition, other WCRI studies have shown that the medical cost per claim in Illinois was among a higher group of study states (Telles, Wang, and Tanabe, 2006). The higher medical costs per claim were cited to be due in part to higher prices paid for medical services compared to the other study states. Figure 1 shows a price index for nonfacility services delivered in calendar year 2003 for Illinois. The price index measures the average prices paid compared to 12 other study states. It shows that Illinois had the second highest average prices among the 13 study states. Figure 2 shows that average prices paid in Illinois grew at a faster rate compared to other study states. 3 See Introduction and Purpose section. 6

16 Figure 1 Illinois Average Prices Were Second Highest among Study States for Nonhospital Providers Price Index (Median=100) MD FL MA CA PA NC TX AR LA TN* IN* IL* WI* Price Index for Nonhospital Services Rendered in Calendar Year 2003 *No fee schedule at the time Source: Eccleston, Petrova, and Zhao, forthcoming. Figure 2 Average Prices Paid to Nonhospital Providers Grew Somewhat Faster Than the Median State Average Annual % Change 2001 to % 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% TX CA LA NC AR MD IN PA TN FL MA IL WI Source: Eccleston, Petrova, and Zhao, forthcoming. 7

17 THE ILLINOIS FEE SCHEDULE IS ONE OF THE HIGHEST IN THE NATION We compared the Illinois workers compensation fee schedules to 41 other state fee schedules, effective December 31, To standardize for differences in medical office practice and malpractice expenses, we compared each fee schedule to the Medicare rates in that state. 5 As Figure 3 shows, the Illinois* fee schedule was 167 percent above the 2006 Illinois Medicare rates (applied to common workers compensation medical procedures) third highest in the nation. By contrast, 29 of the 42 states had workers compensation fee schedule levels that averaged between 25 and 85 percent higher than their state Medicare fee level. Figure 3 Illinois* Fee Schedule Is Third Highest Nationally, on Average, 2005 % Greater Than State Medicare Rates States with Fee Schedules Illinois* Illinois* = weighted average of 29 Illinois regions The Illinois* fee schedule was higher than most other states for all service groups (see Table 1). It was the third highest for major surgery (418 percent above Illinois 4 For the interstate comparisons, we use a single marketbasket of services that is identical for all states a composite of multiple states. For the other analyses in subsequent sections, we used a marketbasket of services that is specific to Illinois. The differences are small, but it is methodologically correct to use different marketbaskets for the different comparisons. 5 The Medicare rates include adjustment factors for interregional differences in medical office practice expenses and malpractice expenses. 8

18 Medicare) and surgical treatment (185 percent above), second highest for physical medicine (101 percent above), fourth highest for radiology (175 percent above) and seventh highest for evaluation and management services (52 percent above). Table SA.1 in the Statistical Appendix ( IL_Fee_Schedule_SA.pdf) shows the percentage over Medicare for each of Illinois 29 different fee schedules for each service group. The Illinois fee schedule preserves the historic incentives for invasive and specialty care that the Medicare program has significantly reduced by realigning prices with the resource costs to providers of delivering services and reducing prices for certain surgical and diagnostic procedures. 6 The fee schedule for Illinois* for major surgery was 418 percent above Medicare rates. The fee schedule for radiology was 175 percent above the Medicare rates. By contrast, the Illinois* fee schedule for evaluation and management services (largely office visits) was 52 percent above the Medicare rates. Medicare sought to reduce the disparities between the prices of these different types of services to neutralize the incentives to provide invasive and specialty care because they might be more profitable than primary care and physical medicine services. Such incentives to provide care without evidence of betterment of health status is not in interests of patients. Table 1 Workers' Compensation Premiums over Medicare by Service Group, 2005/2006 State Percentage Greater Than or Less Than Medicare Overall Major Surgery Surgical Treatment Radiology General Medicine Physical Medicine Evaluation and Management Alaska Idaho Illinois a Oregon Rhode Island b N/C 13 6 Physician Payment Review Commission, Annual Report

19 Table 1 Workers' Compensation Premiums over Medicare by Service Group, 2005/2006 (continued) State Percentage Greater Than or Less Than Medicare Overall Major Surgery Surgical Treatment Radiology General Medicine Physical Medicine Evaluation and Management Nebraska Connecticut Nevada Tennessee Mississippi New Mexico Louisiana Alabama Arizona Maine Montana Oklahoma South Dakota Minnesota Arkansas Wyoming Kansas Georgia South Carolina North Dakota Ohio Vermont New York a Colorado Washington North Carolina Kentucky Pennsylvania a Utah Michigan Texas California Florida a

20 Table 1 Workers' Compensation Premiums over Medicare by Service Group, 2005/2006 (continued) State Percentage Greater Than or Less Than Medicare Overall Major Surgery Surgical Treatment Radiology General Medicine Physical Medicine Evaluation and Management West Virginia Hawaii Maryland Massachusetts Notes: Fees schedules are those in effect in December 2005 except Alaska Medicare fee schedule and Illinois workers' compensation and Medicare fee schedules, where we used 2006 fee schedules. In Alaska, there was a temporary significant increase in the Medicare fee schedule due to a dramatic increase in geographic practice cost indices in 2004 and 2005, which was mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, but was removed in Because the increase in 2005 was temporary, we decided to use the 2006 Medicare fee schedule to make comparisons. In Illinois, to have a compatible comparison between the 2006 workers' compensation fee schedule and Medicare, we used the 2006 Medicare fee schedule for Illinois. About one quarter of the other states had updates to their fee schedules in the first quarter of 2006, but in most cases, the changes are minimal and are often tied to any change in the Medicare fees. a For Florida, Illinois, New York and Pennsylvania, we created a single statewide index using employment population weights of the regions as defined in the states' workers' compensation fee schedules. Fourteen states establish Medicare fee schedules for multiple geographic regions in their states. We also created a single statewide index using employment population weights of the regions as defined in the states' Medicare fee schedules. b Rhode Island bills physical medicine procedures differently than other states do; thus we were unable to compare Rhode Island to other states in that service group. The overall index, therefore, is based on the fee levels of the following service groups in 2005: surgery, radiology, general medicine, and evaluation and management. Key: N/C: noncomparable. Figure 4 shows the 29 different area fee schedules in Illinois. When contrasted with Figure 3, one can see that even the lowest of the 29 area fee schedules in Illinois (622-East St. Louis) was one of the highest in the nation 115 percent above the Medicare rates in the area. The highest of the 29 areas (618-Champaign) was 219 percent above the area s Medicare rates. 11

21 Figure 4 29 Illinois Area Fee Schedules Range from 115 to 219% above Medicare 225% % Greater Than Area Medicare Rates 200% 175% 150% 125% 100% 75% 50% 25% 0% THE 2006 FEE SCHEDULE AMOUNT OFTEN EXCEEDS THE PRE-FEE SCHEDULE AVERAGE PRICE PAID IN ILLINOIS With the exception of fees for X rays, the Illinois fee schedules were typically higher than the pre-fee schedule average prices paid in the corresponding areas in Illinois for many services, especially for surgery and radiology. We analyze the relationship between the prices actually paid and the fee schedule amounts by focusing on the most commonly used medical procedures for each major service group; making comparisons for each of the 29 individual areas. However, we do not report data where we observe fewer than 30 instances of an individual procedure (billing code) in a specific geographic area. Our inspection of the data, and our own conservative practices, suggested that using fewer than 30 observations risks introducing material random error. As a result, for some procedures discussed here, we do not report values for all 29 areas. Detail on the average price paid for each of the 12

22 areas with 30 or more observations can be found in the Statistical Appendix tables SA.600 through SA.629 ( IL_Fee_Schedule_SA.pdf). For common evaluation and management procedures (e.g., office visits), the fee schedule amount was within 10 percent of the average payment for that service in many of the 29 areas (see Table 2a). However, it was not unusual in some areas for the fee schedule to be percent higher than the average pre-fee schedule amount paid. In a few isolated instances, the fee schedule amount was up to 25 to 50 percent higher than the average price paid for that service in that area. Where the fee schedule was near the average prices paid for the service, typically about 40 to 70 percent of the services billed were paid at levels above the fee schedule. The new fee schedule will likely have an impact on lowering those payments. For other services and other zip code areas where the evaluation and management fee schedule was substantially higher than the average price paid, less than 40 percent of services billed were paid at an average price higher than the fee schedule (see Oak Park (zip 603), Evanston (zip 602) or Champaign (zip 618), for example) (Table 2b). For common surgical procedures, there was little relationship between the price paid in the area and the fee schedule amount. In some areas, the fee schedule amount was 50 percent or more above the average price paid; while in other areas the fee schedule amount was similar to the average price paid for that procedure in that area prior to the fee schedule (Table 3a). For example, in East St. Louis (zip 622), the fee schedule was 39 percent higher than the average price paid for a knee arthroscopic procedure, but for shoulder arthroscopy or neuroplasty, the fee schedule was closer to the average price paid. In many areas, the majority of services were paid at average prices that were below the fee schedule. In many of the metropolitan Chicago areas, for example, only 10 to 30 percent of services were paid at a rate higher than the fee schedule. In some other areas for certain services, there may be more potential for lowering prices paid where the payments for more than one half 13

23 Table 2a Commonly Billed Evaluation and Management Services: % By Which Fee Schedule Amount Exceeds Average Price Paid a CPT Code Definition (abbreviated) Des Plaines 600xx Elgin 601xx Evanston 602xx Oak Park 603xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx Niles 607xx Cicero 608xx Kankakee 609xx Evaluation and management Office visit, established patient (expanded) Office visit, established patient (detailed) Office visit, new patient (detailed problem focused) Office visit, new patient (comprehensive) Galena 610xx Rockford 611xx Rock Island 612xx Streator 613xx Galesburg 614xx Pekin 615xx Peoria 616xx Bloomington 617xx Champaign 618xx Mattoon 619xx Office visit, established patient (expanded) Office visit, established patient (detailed) Office visit, new patient (detailed problem focused) Office visit, new patient (comprehensive) N/A Alton 620xx East St. Louis 622xx Quincy 623xx Effingham 624xx Decatur 625xx Lincoln 626xx Springfield 627xx Centralia 628xx Office visit, established patient (expanded) Office visit, established patient (detailed) Carbondale 629xx Office visit, new patient (detailed problem focused) Office visit, new patient (comprehensive) 11-4 N/A Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service listed above. a A positive number indicates that the fee schedule amount exceeds average price paid; a negative number indicates the reverse. 14

24 Table 2b Commonly Billed Evaluation and Management Services: % That Were Paid at Prices above the Fee Schedule CPT Code Definition (abbreviated) Des Plaines 600xx Elgin 601xx Evanston 602xx Oak Park 603xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx Niles 607xx Cicero 608xx Kankakee 609xx Evaluation and management Office visit, established patient (expanded) Office visit, established patient (detailed) Office visit, new patient (detailed problem focused) Office visit, new patient (comprehensive) Galena 610xx Rockford 611xx Rock Island 612xx Streator 613xx Galesburg 614xx Pekin 615xx Peoria 616xx Bloomington 617xx Champaign 618xx Mattoon 619xx Office visit, established patient (expanded) Office visit, established patient (detailed) Office visit, new patient (detailed problem focused) Office visit, new patient (comprehensive) N/A Alton 620xx East St. Louis 622xx Quincy 623xx Effingham 624xx Decatur 625xx Lincoln 626xx Springfield 627xx Centralia 628xx Carbondale 629xx Office visit, established patient (expanded) Office visit, established patient (detailed) Office visit, new patient (detailed problem focused) Office visit, new patient (comprehensive) Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service ( 15

25 Table 3a Commonly Billed Major Surgery Services: % By Which Fee Schedule Amount Exceeds Average Price Paid a CPT Code Definition (abbreviated) Des Plaines 600xx Elgin 601xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx Galena 610xx Rockford 611xx Rock Island 612xx Major surgery Arthroscopy with partial acromioplasty (shoulder) N/A 21 N/A Arthroscopy with meniscectomy (knee) N/A N/A N/A Neuroplasty and/or transposition; carpal tunnel Streator 613xx Peoria 616xx Bloomington 617xx Champaign 618xx Mattoon 619xx Alton 620xx East St. Louis 622xx Quincy 623xx Arthroscopy with partial acromioplasty (shoulder) N/A -2 N/A N/A N/A N/A Arthroscopy with meniscectomy (knee) N/A 9 N/A N/A N/A N/A Neuroplasty and/or transposition; carpal tunnel Effingham 624xx Decatur 625xx Lincoln 626xx Springfield 627xx Centralia 628xx Carbondale 629xx Arthroscopy with partial acromioplasty (shoulder) N/A N/A N/A N/A 0 N/A Arthroscopy with meniscectomy (knee) N/A N/A N/A N/A N/A N/A Neuroplasty and/or transposition; carpal tunnel Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service listed above ( a A positive number indicates that the fee schedule amount exceeds average price paid; a negative number indicates the reverse. 16

26 of services billed were paid at rates higher than the fee schedule (see, for example, Peoria (zip 616)) (Table 3b). For some common major radiology procedures (e.g., MRIs), the fee schedule amount was 40 to as much as 80 percent higher than average prices paid in many of the areas (even higher in Springfield (zip 627)). Still, in a few areas, the fee schedule was closer to the average prices paid, such as Alton (zip 620), for example. Because MRIs do not occur as frequently as many other services, there were fewer areas in our data with 30 or more occurrences, which limits the number of areas included in the analysis (Table 4a). In areas where the fee schedule was 40 to 80 percent higher than the average prices paid, only about 15 to 25 percent of the services were paid at a price higher than the fee schedule amount (see Elgin (zip 601), Bolingbrook (zip 604), Downers Grove (zip 605), and the City of Chicago (zip 606) for example). In other areas where the average price was closer to the fee schedule amount, there is greater potential for reduced prices for these services. See, for example, Alton (zip 620) and Carbondale (zip 629) (Table 4b). For the common minor radiology (e.g., X rays and ultrasound) procedures analyzed, the fee schedule amount was often within 20 percent of the average prices paid in most areas (Table 5a). Table 5b shows that in many cases, the majority of the minor radiology services billed (generally more than one-half) were paid at rates higher than the fee schedule, indicating a greater potential for lowering the prices paid for these services for some payors. For the common physical medicine procedures analyzed, the fee schedule amount was often within 20 percent of the average pre-fee schedule prices paid in most areas (Table 6a). However, in some areas, the fee schedule amount for some procedures was more than 20 percent higher than the average prices paid for that service in the area. For other areas or common procedures, the fee schedule amounts were more than 20 percent lower than the average prices paid. 17

27 Table 3b Commonly Billed Major Surgery Services: % That Were Paid at Prices above the Fee Schedule CPT Code Definition (abbreviated) Des Plaines 600xx Elgin 601xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx Galena 610xx Rockford 611xx Rock Island 612xx Major surgery Arthroscopy with partial acromioplasty (shoulder) N/A Arthroscopy with meniscectomy (knee) N/A N/A N/A Neuroplasty and/or transposition; carpal tunnel Streator 613xx Peoria 616xx Bloomington 617xx Champaign 618xx Mattoon 619xx Alton 620xx East St. Louis 622xx Quincy 623xx Arthroscopy with partial acromioplasty (shoulder) N/A 63 N/A N/A N/A N/A Arthroscopy with meniscectomy (knee) N/A 68 N/A N/A N/A N/A Neuroplasty and/or transposition; carpal tunnel Effingham 624xx Decatur 625xx Lincoln 626xx Springfield 627xx Centralia 628xx Carbondale 629xx Arthroscopy with partial acromioplasty (shoulder) N/A N/A N/A N/A 46 N/A Arthroscopy with meniscectomy (knee) N/A N/A N/A N/A N/A N/A Neuroplasty and/or transposition; carpal tunnel Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service ( 18

28 Table 4a Commonly Billed Major Radiology Services: % By Which Fee Schedule Amount Exceeds Average Price Paid a CPT Code Definition (abbreviated) Major radiology Des Plaines 600xx Elgin 601xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx Rockford 611xx Champaign 618xx Alton 620xx East St. Louis 622xx Springfield 627xx Centralia MRI, upper extremity without contrast MRI, lumbar without contrast N/A N/A MRI, lower extremity without contrast N/A N/A N/A MRI, cervical without contrast N/A N/A N/A N/A 105 N/A N/A Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service listed above ( a A positive number indicates that the fee schedule amount exceeds average price paid; a negative number indicates the reverse. 628xx Carbondale 629xx 19

29 Table 4b Commonly Billed Major Radiology Services: % That Were Paid at Prices above the Fee Schedule CPT Code Definition (abbreviated) Des Plaines 600xx Elgin 601xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx Rockford 611xx Champaign 618xx Alton 620xx East St. Louis 622xx Springfield 627xx Centralia 628xx Carbondale 629xx Major radiology MRI, upper extremity without contrast MRI, lumbar without contrast N/A N/A MRI, lower extremity without contrast N/A N/A N/A 62 MRI, cervical without contrast N/A N/A N/A N/A 11 N/A N/A Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service ( 20

30 Table 5a Commonly Billed Minor Radiology Services: % By Which Fee Schedule Amount Exceeds Average Price Paid a CPT Code Minor radiology Definition (abbreviated) Des Plaines 600xx Elgin 601xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx X ray, complete, two views N/A Radiologic examination, spine, minimum of four views N/A N/A Radiologic examination, finger(s), minimum of two views Rockford 611xx Rock Island 612xx Peoria 616xx Bloomington 617xx Champaign 618xx Niles 607xx Mattoon 619xx X ray, complete, two views N/A Radiologic examination, spine, minimum of four views N/A N/A N/A N/A 10 N/A N/A Radiologic examination, finger(s), minimum of two views N/A East St. Louis 622xx Quincy 623xx Effingham 624xx Decatur 625xx Springfield 627xx Centralia 628xx X ray, complete, two views -23 N/A Galena 610xx Alton 620xx Carbondale 629xx Radiologic examination, spine, minimum of four views N/A N/A N/A N/A N/A -13 N/A Radiologic examination, finger(s), minimum of two views N/A Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service listed above ( a A positive number indicates that the fee schedule amount exceeds average price paid; a negative number indicates the reverse. 21

31 Table 5b Commonly Billed Minor Radiology Services: % That Were Paid at Prices above the Fee Schedule CPT Code Minor radiology Definition (abbreviated) Des Plaines 600xx Elgin 601xx Bolingbrook 604xx Downers Grove 605xx City of Chicago 606xx X ray, complete, two views N/A Radiologic examination, spine, minimum of four views N/A N/A Radiologic examination, finger(s), minimum of two views Rockford 611xx Rock Island 612xx Peoria 616xx Bloomington 617xx Champaign 618xx Niles 607xx Mattoon 619xx X ray, complete, two views N/A Radiologic examination, spine, minimum of four views N/A N/A N/A N/A 35 N/A N/A Radiologic examination, finger(s), minimum of two views N/A East St. Louis 622xx Quincy 623xx Effingham 624xx Decatur 625xx Springfield 627xx Centralia 628xx X ray, complete, two views 77 N/A Galena 610xx Alton 620xx Carbondale 629xx Radiologic examination, spine, minimum of four views N/A N/A N/A N/A N/A 80 N/A Radiologic examination, finger(s), minimum of two views N/A Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service ( 22

32 Table 6a Commonly Billed Physical Medicine Services: % By Which Fee Schedule Exceeds Average Price Paid a CPT Code Physical medicine Definition (abbreviated) Des Plaines 600xx Elgin 601xx 23 Evanston 602xx Oak Park 603xx Bolingbrook 604xx Downers Grove 605xx Therapeutic procedure one or more areas Manual therapy techniques Application of modality to one or more areas; electrical stimulation Application of modality to one or more areas; hot or cold packs Application of modality, ultrasound Galena 610xx Rockford 611xx Rock Island 612xx Streator 613xx Galesburg 614xx Pekin 615xx City of Chicago 606xx Peoria 616xx Niles 607xx Cicero 608xx Bloomington Champaign 617xx 618xx Therapeutic procedure one or more areas Manual therapy techniques Application of modality to one or more areas; electrical stimulation Application of modality to one or more areas; hot or cold packs Application of modality, ultrasound Alton 620xx East St. Louis 622xx Quincy 623xx Effingham 624xx Decatur 625xx Lincoln 626xx Springfield 627xx Centralia 628xx Therapeutic procedure one or more areas Manual therapy techniques Application of modality to one or more areas; electrical stimulation Application of modality to one or more areas; hot or cold packs Application of modality, ultrasound Carbondale 629xx Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service listed above ( a A positive number indicates that the fee schedule amount exceeds average price paid; a negative number indicates the reverse. Kankakee 609xx Mattoon 619xx

33 In some areas, the majority (60 to 90 percent) of the physical medicine services were paid at a rate higher than the fee schedule (Table 6b). See Effingham (zip 624), for example. In others, only about one-fourth of services were paid at a rate higher than the fee schedule for many of the services. See, for example, Galesburg (zip 614) or Rockford (zip 611). For common neurological testing services analyzed, the fee schedule was close to the average prices paid in a few areas, was up to 40 percent lower than prices paid in other areas, and was more than 50 percent higher than the average prices paid in still other areas (Table 7a). Similarly, there was a great deal of variation in the percent of services billed that were paid at rates higher than the fee schedule, ranging from less than 10 percent of services in some areas (see Des Plaines (zip 600), for example) to as much as 95 percent of services in still others (see Effingham (zip 624), for example) (Table 7b). POSSIBLE UNINTENDED CONSEQUENCES ARISING FROM 29 DIFFERENT FEE SCHEDULES IN ILLINOIS The Illinois workers compensation fee schedule is unique in its design setting different maximum reimbursement rates for the same services for 29 different areas of the state. Each area is defined according to the first 3 digits of the zip code where the service was delivered including 9 different fee schedules in the greater Chicago metropolitan area. Only 3 other states (Florida, New York, and Pennsylvania) have different workers compensation medical fee schedules for different parts of the state, and of those, the maximum number of areas is four. For example, there are more than twice as many workers compensation fee schedules in the Chicago metropolitan area than there are in the entire state of New York. The Illinois Medicare fee schedule sets different rates for four different geographic regions within Illinois. The use of 29 different area fee schedules sometimes leads to odd results. These oddities may create unintended incentives for providers to increase revenues by moving the site of service or otherwise zip-gaming the system. While these instances where 24

34 Table 6b Commonly Billed Physical Medicine Services: % That Were Paid at Prices above the Fee Schedule CPT Code Physical medicine Definition (abbreviated) Des Plaines 600xx Elgin 601xx Evanston 602xx Oak Park 603xx Bolingbrook 604xx Downers Grove 605xx Therapeutic procedure one or more areas Manual therapy techniques Application of modality to one or more areas; electrical stimulation Application of modality to one or more areas; hot or cold packs Application of modality, ultrasound Galena 610xx Rockford 611xx Rock Island 612xx Streator 613xx Galesburg 614xx Pekin 615xx City of Chicago 606xx Peoria 616xx Niles 607xx Cicero 608xx Bloomington Champaign 617xx 618xx Therapeutic procedure one or more areas Manual therapy techniques Application of modality to one or more areas; electrical stimulation Application of modality to one or more areas; hot or cold packs Application of modality, ultrasound Alton 620xx East St. Louis 622xx Quincy 623xx Effingham 624xx Decatur 625xx Lincoln 626xx Springfield 627xx Centralia 628xx Therapeutic procedure one or more areas Manual therapy techniques Application of modality to one or more areas; electrical stimulation Application of modality to one or more areas; hot or cold packs Application of modality, ultrasound Carbondale 629xx Note: N/A means there were less than 30 occurrences of the listed service. We do not report such values. Excluded areas do not have at least 30 occurrences of any of these services. See Tables SA.600 through SA.629 for more detail showing the average price and fee schedule price for each service ( Kankakee 609xx Mattoon 619xx 25