1. TDI Impacts of the 2007 Adoption of ODG-TWC Treatment Guidelines on Medical Utilization and Costs Workers’ Compensation Research & Evaluation Group Texas Department of Insurance http://www.tdi.state.tx.us/wc/regulation/roc/ A Preliminary Report September 28, 2009

2. TDI 2 Reforms Affecting Utilization  Changes in medical service utilization and costs may be affected by Physician fee schedule  TAC §134 Subchapter C. Preauthorization requirements  TAC §134.600 Treatment guidelines  TAC § 137.100 TAC rules are based on legal mandates in Texas Labor Code 413 Subchapter B. Medical Services and Fees

3. TDI 3 Timeline of the Reforms

4. TDI 4 Factor 1: Physician Fee Schedule  Changing unit prices of health care services  HB 2600 (2001) 125% of Medicare (effective May 2003) Relative impacts on service prices Evaluation & Management  Physical medicine 

5. TDI 5 Factor 2: Preauthorization Requirements  Targeted medical necessity & utilization guidelines/reviews  First implemented in 1991 Non-emergency inpatient hospital admissions Outpatient surgical or ambulatory services  In 2002 Spinal surgery  In 2004 Work hardening/conditioning Rehabilitation services  In 2005 Physical and occupational therapies

6. TDI 6 Factor 3: Treatment Guidelines  HB 2600 (2001) repealed treatment guidelines  HB 7 (2005) authorized the Commissioner to adopt treatment guidelines and/or individual treatment protocols that are ‘evidence-based, scientifically valid, and outcome-focused’ (TLC §413.011)  TDI-DWC adopted the Official Disability Guidelines – Treatment in Workers’ Comp (ODG- TWC) as the treatment guidelines effective May, 2007, for all non-emergency, non-network health care

7. TDI 7 Effects of Pre-ODG Adoption Reforms Trends in total and average costs per claim Total cost declined from 2003 2003: new fee schedules 2004: pre- authorization for work hardening/ conditioning 2005: preauthorization for PT/OT Average cost stable or increasing Fewer claims * 2004 data are omitted due to data problems.

8. TDI 8 Trends in Number of Claims Total number of claims by service year, by injury year Includes indemnity & medical-only claims Mirrors injury rates (an increase in 2006) Two thirds are new injury claims in each service year – one half with indemnity claim Relative shares of ‘old’ injuries are stable

9. TDI 9 Total Costs by Medical Type Professional: declining total costs Hospital: relatively high costs; rapid increase until 2007 Pharmacy: increased until 2007 Note: All data in this presentation are by service year unless noted otherwise.

10. TDI 10 Average Costs per Claim by Medical Type Average cost per claim is stable. Increasing cost in hospital services (till 2007) Decreasing cost in professional services Steady increases in pharmacy costs Averages are calculated using the number of claims receiving at least one particular service.

11. TDI 11 Number of Claims by Injury Type Treatment paths, maturity, cost spreads are different Low-back Upper extremities Lower extremities Shoulder Neck Knee Assigning body part complicated by multiple primary ICD9s

12. TDI 12 Number of Claims Receiving a Service by Provider Type Most receive at least one MD/DO service PT/OT services are next most common, but under 20% of claims receive these services DC third most frequent in 2005, but sixth in 2008

13. TDI 13 Share of Claims Receiving Services by Provider Type 2006: Injured workers received a wider range of service types  increased utilization 2007: trend reversed for most provider types Increase in ‘others’ category  includes durable medical equipment (DME) Left scale

14. TDI 14 Percent of Claims by Provider Type Percent of claims receiving at least one service by provider type In 2008, about 7.4% of injured workers received Chiropractic services, a 44% decrease compared to 13% in 2005. MD/DO and Others increased share of injured workers receiving services their.

15. TDI 15 Utilization Patterns: Average Number of Services per Claim by Year after Injury On average, claims show the highest level of utilization in the 2 nd and 3 rd years after injury  Consist of more severe, long-term injuries Low averages in the 1 st year are due to the inclusion of many, less severe, short term injuries. Overall, significant decreases in utilization in 2006 (pre-ODG adoption), which continued in 2007 and 2008 (post-ODG adoption)

16. TDI 16 Utilization Patterns: Frequency & Intensity by Year after Injury Frequency: Number of visits per claim Intensity: Number of services per visit Decrease in intensity - Largest decrease in 2006 - Large for both low and high severity injuries Frequency decreased faster than intensity

17. TDI 17 Utilization Patterns: Decrease in Utilization by Provider Type Overall utilization: number of services per claim Significant and continuous decrease in Chiropractic services Substantial decrease in PT/OT services in 2006, but decrease rate slowed after 2006 Other provider types: minor changes in utilization

18. TDI 18 Utilization Patterns: Decrease in Utilization by Provider Type Frequency: Number of visits per claim Intensity: Number of services per visit Decomposition into Frequency & Intensity Total utilization = (frequency) x (intensity) Chiropractors with large decreases in frequency (38%) and intensity (17%, mostly in 2006) MD/DO: minor decreases in frequency and intensity PT/OT: frequency decreasing but intensity increasing

19. TDI 19 Billing Effects: MD/DO Type by Service Groups Rates of change Number of services per claim Payment per service Utilization decreasing at a higher rate since 2007 Payment per service increasing Spinal surgery changes most pronounced

20. TDI 20 Post-Billing Effects: Bill Review Patterns Post-Billing Effects Excessive/inappropriate services  Denial of payment Post-Billing Effects Excessive/inappropriate services  Denial of payment Fee adjustment (reduced payment): 60% of total in 2005  65% in 2008 Denied at about 20% - Medical necessity denials - Procedural denials 10% - 14% of accepted bills/paid as billed  Less charges paid or denied  More charges reduced for fee adjustments Number of bills by bill review action

21. TDI 21 Post-Billing Effects: Bill Review Patterns Paid amount as a percentage of billed amount Chiropractors (who showed fastest decrease in utilization) have the highest pay/charge ratio. Most provider types experienced improved pay/charge ratios since 2007  More carrier confidence in submitted bills? Possibly due to: Reduction in excessive/ inappropriate bills Lower total costs

22. TDI 22 Utilization Analysis Issue & Method  Question: the degree by which health care providers actually consult ODG-TWC in treatment planning and delivery Observation and/or survey impractical  Method: Pattern analysis using similar samples before and after the ODG-TWC adoption Compare distribution patterns of metrics (number of services per claim/median days before first service) Statistical tests of similarity/dissimilarity of the distribution patterns

23. TDI 23 Utilization Pattern Analysis: Sampling  Soft tissue low-back injury cases ICD9s: 724.2, 724.5, 724.8, 724.9, 846.0, 847.2, and 847.9  2005 cohort New injuries between 1/1/2005 and 12/31/2005 All services evaluated at 12 months maturity 24,607 unique claims  2007/2008 cohort New injuries between 7/1/2007 and 6/30/2008 All services evaluated at 12 months maturity 22,821 unique claims

24. TDI 24 Utilization Pattern Analysis: Treatment Paths  Soft tissue injuries; Texas samples Path B: X-Ray/MRI/Surgery Path A: Activity modification, PT/OT, exercises, medication

25. TDI 25 Utilization Pattern Analysis: Utilization Rates Too High Median number same except top 5% No difference

26. TDI 26 Utilization Pattern Analysis: Service Timing Same day: X-ray as a routine first service Delayed service Later intervention

27. TDI 27 Utilization Pattern Analysis: Result Summary Utilization measures (median number of services) Slightly lower # of E&M services, contrary to ODG- TWC recommendation High % of X-Ray & MRI services for soft-tissue injuries No change in X-Ray/MRI service delivery pattern to soft tissue injury cases Service reductions generally limited to top 10% or 5% cases Timing measures E&M service takes more days (in outlying cases) X-Ray services on the first visit (not recommended) and this pattern consistent pre and post-ODG MRI and surgery patterns changed, more services delayed post-ODG

28. TDI 28 Effects on Return to Work Outcome Comparisons of RTW rates for 2005 sample and 2007/2008 sample used in the previous utilization pattern analysis (soft- tissue low-back injuries) ‘Within 3 months’ (initial) RTW rate is significantly higher for Post-ODG adoption sample Initial RTW rates somewhat higher for Post- ODG adoption sample (6 months after injury) Samples have lower RTW rates than those of the overall population

29. TDI 29 Effects on Medical Disputes Medical necessity disputes declined significantly, especially after 2004 and 2006 preauthorization changes Decline continued after 2007 ODG adoption Preauthorization disputes increasing Fee disputes increasing (unrelated to utilization disputes)

30. TDI 30 Conclusions  Excessive service utilization have reduced significantly since 2003.  From 2005 to 2008: The number of claims decreased by 8%. Total costs decreased by 24%. Average claim cost lower by 17%. 12% from preauthorization effect in 2006; 5% in 2007 from ODG guideline effect and residual preauthorization effect  Given stable fees, cost reductions are attributed primarily to decreases in service utilization.

31. TDI 31 Conclusions  Utilization reductions occurred mainly in ‘excessive’ physical medicine services, especially in chiropractic procedures. Main force behind this decline is preauthorization requirements prior to the adoption of treatment guidelines. The rules subjected PT/OT services after the first 6 visits to prospective reviews (TAC §134.600) irrespective of treatment guidelines.  Due to their wide-ranging scope and treatment planning aspects, treatment guidelines may impact the MD/DO provider group the most.  Utilization and billing patterns of MD/DO indicate a downward trend beginning in 2007, possibly as a result of the guidelines’ adoption.

32. TDI 32 Conclusions  Reductions in service utilization are more general.  Utilization reduction by service providers resulted in less denials at bill review stage.  As voluntary reductions and preauthorization denials increase, medical necessity denials decrease.  Besides general reductions in extreme cases, specific, diagnosis-related treatment patterns have not changed significantly, with little indication that providers are consulting treatment guidelines to determine excessiveness and inappropriateness of particular services.  More post-ODG adoption time and data needed to determine full extent of the impacts.