workers’ compensation claim and professional medical service denials: an examination of 1998- 2004...
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Workers’ Compensation Claim and Professional Medical Service Denials: An Examination of 1998-2004 Trends
Texas Department of InsuranceWorkers’ Compensation Research and Evaluation GroupJune 2006
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This Presentation Will Highlight:Initial Claim Denials/Dispute Trends
Have the # of reportable claims (i.e., claims with more than one day of lost time) that are initially denied or disputed remained stable, decreased, or increased from injury year 1998-2004 for the top 25 insurance carriers in Texas? 1
Is there significant variation in initial claim denial/dispute rates among individual insurance carriers?
Do initial claim denial/dispute rates vary by geographic region and injury type?
1 The top 25 workers’ compensation insurance carriers represent the 25 insurance carriers/carrier groups that account for over 90 percent of the workers’ compensation premiums in 2003 and 2004 and account for 60-70 percent of the total amount of medical payments made during 1998-2004. For the purpose of this analysis, the same 25 insurance carriers were used in each year to calculate both the claim and medical billing denial rates.
3
This Presentation Will Highlight: (cont’d)Professional Medical Service Denials Trends
Have professional medical service denials remained stable, decreased, or increased during service year 1998-2004 for the top 25 insurance carriers in Texas? 1
Is there significant variation in professional medical service denial rates among individual insurance carriers?
Have professional medical service claim denials remained stable, decreased, or increased for the most frequently billed and most costly services in the Texas workers’ compensation system?
Do professional medical service denials vary by injury type?
What are the most frequent reasons insurance carriers give for professional medical service denials?
1 The Top 25 Workers’ Compensation Insurance Carriers represent the 25 insurance carriers/carrier groups that account for over 90 percent of the workers’ compensation premiums in 2003 and 2004 and account for 60-70 percent of the total amount of medical payments made during 1998-2004. For the purpose of this analysis, the same 25 insurance carriers were used in each year to calculate both the claim and medical billing denial rates.
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Data, Methods, and CaveatsInitial Claim Denial/Dispute Trends
Reportable claim denials/disputes were calculated using a combination of data collected by the Texas Department of Insurance, Division of Workers’ Compensation and its predecessor, the Texas Workers’ Compensation Commission;
Claim denial/dispute rates can only be calculated for claims that are reported to the Texas Department of Insurance, Division of Workers’ Compensation. As a result, claim denial/dispute rates cannot be calculated for medical only claims.
Claim denial/dispute rates shown in this presentation represent the percentage of claims that were initially denied or disputed because of compensability and/or extent of injury issues generally. These denial/dispute rates do not take into account denials/disputes that were later adjudicated in favor of the injured worker or mutually resolved by the injured worker and the insurance carrier.
Initial claim denials/disputes were identified using an Electronic Data Interchange (EDI) 148 or A49 transaction with a maintenance reason code '04' (denial) or a TWCC/DWC 21 form with box 43 of that form (notice of refused or disputed claim) containing at least one of the following words: “deny”, “scope”, “disput”, “denial”, “non-co”, “denies”, “compen”, “liabil”, “liable”, “extent”, “course”, “contest”, “C&S” or “C/S”.
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Data, Methods, and CaveatsInitial Claim Denial/Dispute Trends
However, the data currently collected on claim denials is currently inadequate because: some of the data is coming in electronically and some of the data is coming in
on paper forms; and there is not a single field on any of the DWC claim forms to indicate whether a
claim is being denied and as a result, TDI must look for key words in a text box to determine whether a claim has been denied/disputed – this method is extremely imprecise.
TDI attempted to validate individual claim denial/dispute rates with four insurance carriers. The results of this validation showed that the claim denial/dispute rates calculated by TDI for individual insurance carriers are generally overestimated by as little as 10% and as much as 30-40%. However, using the data collected by TDI, it is possible to observe general claim denial trends over time.
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Data, Methods, and CaveatsProfessional Medical Service Denials Trends
Professional medical service denials were calculated using data collected by the Texas Workers’ Compensation Commission through February 2005 (the most recent medical data available for research purposes);
The medical service denial rates shown in this presentation represent the percentage of individual medical billing lines that had an exception code indicating that the billing line was denied, not the % of medical bills that were denied – each billing line corresponds to one medical service billed by a health care provider;
These medical service denial rates do not take into account denials that were later adjudicated in favor of the health care provider during medical dispute resolution;
The medical service denial rates shown in this presentation do not take into account medical services that were billed, but not processed by the insurance carrier because the bills were incomplete or medical services that were denied because the health care provider submitted duplicate bills.
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Claim Denials/Disputes
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Figure 1: Percentage of Reportable Claims That Are Initially Denied/Disputed, Injury Years 1998-
20041, 2
31%
35%37% 37% 37%
40% 41%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%%
of
Cla
ims
Den
ied
/Dis
pu
ted
1998 1999 2000 2001 2002 2003 2004
Injury Year
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The 2004 figures should be interpreted with caution since the data are incomplete.2 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs was passed in 2001.
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Figure 1: Percentage of Reportable Claims That Are Initially Denied/Disputed for the Top 25 Workers’ Compensation Carriers, Injury Years 1998-20041, 2
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The 2004 figures should be interpreted with caution since the data are incomplete.2 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs was passed in 2001.
24%
26%
29% 28%
31%32%
34%
0%
5%
10%
15%
20%
25%
30%
35%
% o
f C
laim
s D
en
ied
/Dis
pu
ted
1998 1999 2000 2001 2002 2003 2004
Injury Year
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Table 1: Range and Classification of Reportable Claim Denial Percentages for the Top 25 Workers’
Compensation Carriers1, 4
Denial Level2
Injury Year1998
Injury Year1999
Injury Year2000
Injury Year2001
Injury Year2002
Injury Year2003
Injury Year20043
Low 15%-26% 17%-30% 21%-30% 22%-33% 20%-30% 22%-31% 24%-33%
Medium 26%-35% 30%-37% 31%-41% 34%-39% 31%-42% 32%-46% 34%-47%
High 36%-54% 38%-56% 42%-56% 40%-52% 43%-53% 47%-55% 48%-62%
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.
1 The number of carriers in the low denial level categories range from 6-8 for 1998-2004, the number of carriers in the medium denial level categories range from 9-13 for 1998-2004 and the number of carriers in high denial level categories range from 6-10 for 1998-2004.2 The denial categories were defined using the yearly denial rate distributions for the top 25 workers’ compensation carriers in 2003 & 2004. For each service year, carriers whose denial rate fell at or below the 25th percentile of the denial rate distribution were assigned into the “low” denial category, carriers whose denial rate fell at the 26th-74th percentile of the denial rate distribution were assigned into the “medium” denial category, and carriers whose denial rate fell at or above the 75th percentile of the denial rate distribution
were assigned into the high denial category. Carriers could fall into a different category each injury year. 3 The 2004 figures should be interpreted with caution since the data are incomplete.4 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001.
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Table 2: Percent and Number of Reportable Claims Initially Denied/Disputed by Injury Year and Geographic
Region1Injury Year1998
Injury Year1999
Injury Year2000
Injury Year20013
Injury Year2002
Injury Year2003
Injury Year20042
North 29% 31% 34% 33% 36% 38% 42%
South 29% 32% 34% 34% 36% 38% 42%
West 31% 34% 36% 36% 38% 41% 48%
East 32% 33% 35% 34% 36% 36% 39%
Central 29% 32% 33% 33% 33% 36% 40%
Region Unknown
23% 28% 40% 42% 44% 40% 47%
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The injury year or region could not be identified for approximately 19% or 87,405 of denied claims and are therefore not reflected in the figures presented above.
2 The 2004 figures should be interpreted with caution since the data are incomplete.3 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001.
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Table 3: Percentage of Reportable Claims Initially Denied/Disputed By Injury Type and Injury Year, One
Year Post-Injury1Injury Year1998
Injury Year 1999
Injury Year 2000
Injury Year20013
Injury Year2002
Injury Year2003
Injury Year20042
Low Back Soft Tissue Injuries
25% 27% 30% 28% 29% 31% 32%
Shoulder Soft Tissue Injury
26% 28% 30% 29% 30% 32% 32%
Neck Soft Tissue Injuries
31% 33% 35% 34% 34% 36% 37%
Hand & Wrist Soft Tissue Injuries
24% 26% 28% 28% 30% 33% 34%
Knee Internal Derangement
23% 24% 28% 27% 28% 30% 29%
Hand & Wrist Superficial Trauma
19% 20% 20% 18% 21% 21% 23%
Musculoskeletal Soft Tissue Injuries
26% 28% 29% 29% 29% 30% 31%
Lower Back Nerve Compression
38% 39% 43% 40% 40% 40% 41%
Ankle & Foot Soft Tissue Injuries
20% 21% 23% 22% 22% 23% 25%
Hand and Wrist Nerve Compression
36% 39% 41% 41% 41% 44% 50%
Other 23% 25% 26% 25% 27% 27% 28%Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The injury year or type could not be identified for approximately 19% or 87,405 of denied claims and are therefore not reflected in the figures presented above.
2 The 2004 figures should be interpreted with caution since the data are incomplete.3 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001.
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SummaryInitial Claim Denials/Disputes Initial reportable claim denials/disputes have increased since the passage of HB
2600 in 2001;
There is significant variation in denial/dispute rates for reportable claims among the top 25 workers’ compensation insurance carriers;
There is also variation in the denial/dispute rates for reportable claims by geographic region and injury type, with the highest denial/dispute rates in West Texas and for low back nerve compression and hand and wrist nerve compression injuries;
However, the data collected on claim denials is currently inadequate, and therefore, it is difficult to precisely calculate claim denial rates for individual insurance carriers, although it is possible to observe general trends over time;
In order to precisely calculate the denial rate for all claims in the system (including medical only claims) in the future and the denial rates for individual insurance carriers, new data collection requirements and methods are needed.
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Professional Medical Service Denials
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Figure 2: Total Number of Professional Medical Services and Percentage of Medical Services Denied for the Top 25 Workers’ Compensation Carriers for Service Years 1998-
2004 1, 2
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 Denial rates and billing line counts for 2004 should be interpreted with caution since these number are tentative and are current as of February 2005.
2 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001. In August 2003, the most recent professional medical fee guideline, which incorporated Medicare’s payment policies, went into effect.
15%16%
17% 17%
22%
25%26%
0%
5%
10%
15%
20%
25%
30%
Per
cent
age
of M
edic
al S
ervi
ces
Den
ied
1998 1999 2000 2001 2002 2003 2004
Service Year
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Table 4: Range and Classification of Professional Medical Service Denial Percentages for the Top 25
Workers’ Compensation Carriers1 Denial Level 2
Service Year1998
Service Year1999
Service Year2000
Service Year20014
Service Year2002
Service Year2003
Service Year2004 3
Low 4%-11% 4%-12% 5%-14% 5%-13% 4%-15% 7%-16% 15%-19%
Medium 12%-19% 13%-25% 15%-23% 15%-24% 15%-22% 17%-29% 20%-28%
High 19%-26% 26%-44% 24%-50% 25%-32% 23%-43% 31%-50% 29%-50%
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The number of carriers in the low denial level categories range from 6-9 for 1998-2004, the number of carriers in the medium denial level categories range from 9-11 for 1998-2004 and the number of carriers in high denial level categories range from 7-8 for 1998-2004.2 The denial categories were defined using the yearly denial rate distributions for the top 25 workers’ compensation carriers in 2003 & 2004. For each service year, carriers whose denial rate fell at or below the 25th percentile of the denial rate distribution were assigned into the “low” denial category, carriers whose denial rate fell at the 26th-74th percentile of the denial rate distribution were assigned into the “medium” denial category, and carriers whose denial rate fell at or above the 75th percentile of the denial rate distribution
were assigned into the high denial category. Carriers could fall into a different category each professional medical service year. 3 The 2004 figures should be interpreted with caution since these number are tentative and are current as of February 2005.4 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001. In August 2003, the most recent professional medical fee guideline, which incorporated Medicare’s payment policies, went into effect.
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Table 5: Percent and Number of Professional Medical Service Denials for the Most Frequently Billed Professional
Medical Services in 2003 1,3Type of Medical Service ServiceYear1998
Service Year1999
Service Year2000
Service Year2001
Service Year2002
Service Year2003
Service Year2004 2
1 Therapeutic Procedure-97110 11%126,003
13%167,631
13%206,524
15%260,350
25%618,067
28%694,617
25%451,478
2 Office or Outpatient Visit -99213 13%177,448
14%189,081
15%216,150
15%232,221
24%406,711
24%332,585
21%155,857
3 Special Reports-99080 16%91,450
18%89,460
22%112,317
15%102,468
15%122,087
15%114,937
15%88,889
4 Hot or Cold Packs-97010 17%150,864
19%150,009
20%142,793
19%132,503
23%192,314
34%216,094
80%181,339
5 Therapeutic Activity-97530 12%57,248
13%59,658
14%64,793
16%69,570
25%153,471
29%174,482
28%109,750
6 Ultrasound-97035 12%60,450
13%61,639
15%69,104
15%72,722
21%121,934
24%124,320
25%89,721
7 Electrical Stimulation (unattended)-97014
18%104,112
19%104,578
20%107,397
19%105,533
23%157,434
25%114,082
49%20,647
8 Myofacial Release-97250 18%67,977
19%82,243
19%91,082
19%105,036
28%205,620
29%129,339
52%1,194
9 Neuromuscular Reeducation of Movement-97112
19%25,740
18%23,258
17%28,879
16%31,683
27%77,932
30%118,470
32%107,734
10 Electrical Stimulation (attended)-97032 16%39,491
19%47,753
19%50,580
18%52,263
26%100,849
30%115,455
32%92,128
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The “most frequently billed medical services” are defined as the services most frequently billed in 2003.2 Denial rates for 2004 should be interpreted with caution since these numbers are tentative and are current as of
February 2005. 3 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001. In August 2003, the most recent professional medical fee guideline, which incorporated Medicare’s payment policies, went into effect .
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Table 6: Percent and Number of Professional Medical Services Denials for the Most Costly Professional
Medical Services Rendered1Type of Medical Service ServiceYear1998
Service Year1999
Service Year2000
Service Year20013
Service Year2002
Service Year2003
Service Year2004 2
1 Therapeutic Procedure-97110 11%126,003
13%167,631
13%206,524
15%260,350
25%618,067
28%694,617
25%451,478
2 Unlisted Medicine/Rehabilitation Procedure-97799
13%10,758
15%13,117
16%16,995
12%17,359
14%29,114
19%39,707
17%20,172
3 Office or Outpatient Visit -99213 13%177,448
14%189,081
15%216,150
15%232,221
24%406,711
24%332,585
21%155,857
4 Disability Examination-99456 12%3,411
9%2,367
9%2,349
8%2,204
6%3,708
9%6,603
9%7,575
5 Additional Hour of Work Hardening/Conditioning-97546
17%57,716
20%80,648
23%107,300
24%131,442
21%89,204
24%84,459
20%35,203
6 Therapeutic Activity-97530 12%57,248
13%59,658
14%64,793
16%69,570
25%153,471
29%174,482
28%109,750
7 Office or Outpatient Visit -99214 11%23,369
13%25,747
15%30,600
14%30,367
20%51,618
20%50,134
18%32,921
8 Work Hardening/Conditioning-97545 19%41,110
19%46,391
21%56,345
21%63,051
23%50,217
23%42,674
20%22,576
9 Myofacial Release-97250, 18%67,977
19%82,243
19%91,082
19%105,036
28%205,620
29%129,339
52%1,194
10 Physical Performance Test-97750 20%14,605
21%16,626
21%16,651
19%18,079
21%25,008
21%25,248
18%14,749
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The “most costly medical services” are defined as the services with the highest total amount billed during 2003.2 Denial rates for 2004 should be interpreted with caution since these numbers are tentative and are current as of
February 2005. 3 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001. In August 2003, the most recent professional medical fee guideline, which incorporated Medicare’s payment policies, went into effect .
Table 7: Percentage and Number of Denied Professional Medical Services By Injury Type and Injury Year, One Year Post-Injury
Injury Type Injury Year1998
Injury Year1999
Injury Year2000
Injury Year20011
Injury Year2002
Injury Year2003
Low Back Soft Tissue Injuries
11%479,886
14%529,801
14%549,701
15%600,263
19%789,568
21%786,869
Shoulder Soft Tissue Injury
13%77,216
14%83,577
14%94,587
15%123,363
19%176,667
22%186,385
Neck Soft Tissue Injuries 17%149,172
20%168,201
19%167,842
21%199,372
27%257,931
30%239,252
Hand & Wrist Soft Tissue Injuries
11%27,876
17%44,787
16%48,306
19%77,161
23%94,829
23%78,112
Knee Internal Derangement
12%32,613
14%42,449
13%40,027
16%54,888
19%75,900
21%79,333
Hand & Wrist Superficial Trauma
10%13,596
12%16,262
13%18,397
14%22,376
17%31,566
19%32,186
Musculoskeletal Soft Tissue Injuries
17%33,879
19%39,204
20%40,568
24%60,848
30%86,888
29%63,123
Lower Back Nerve Compression
20%611,611
21%595,065
20%626,131
23%727,597
27%866,109
31%740,589
Ankle & Foot Soft Tissue Injuries
12%21,653
14%25,185
14%26,199
15%34,021
20%45,976
23%50,907
Hand and Wrist Nerve Compression
16%56,522
19%68,321
20%83,891
21%97,988
27%103,469
29%78,431
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001.
Table 8: Percentage of Denied Professional Medical Services by Top 10 Denial Reasons for Service Years 1998-20041
Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2006.1 The 2004 figures should be interpreted with caution since these numbers are tentative and are current as of February 2005. 2 “Other reasons” include “not timely filed”, “not treating doctor”, “inappropriate health care provider”, “final adjudication”, preauthorization requested, but denied”, etc. 3 House Bill (HB) 2600, a workers’ compensation reform bill aimed at reducing medical costs, was passed in 2001. In August 2003, the most recent professional medical fee guideline, which incorporated Medicare’s payment policies, went into effect .
Service Year1998
Service Year1999
Service Year2000
Service Year20013
Service Year2002
Service Year2003
Service Year20041
Unnecessary Treatment (without peer review)
10% 12% 12% 13% 25% 26% 22%
Unnecessary Treatment (with peer review)
<1% 0.3% 1.0% 3.5% 12.7% 15.7% 14.9%
Inappropriate Documentation
36% 42% 39% 26% 21% 14% 10%
Preauthorization Required But Not Requested
19% 17% 16% 16% 3% 2% 2%
Not by Treatment Guidelines
13% 7% 8% 10% 4% -- --
Entitlement to Benefits
6% 8% 9% 10% 9% 7% 7%
Extent of Injury 7% 6% 6% 7% 8% 8% 8%
Final Adjudication <1% <1% <1% <1% <1% <1% 1.6%
Unbundling 5% 4% 4% 5% 4% 7% 13%
Payment Policy <1% -- <1% <1% <1% 3.7% 10.5%
Other reasons2 4% 4% 5% 9% 13% 16% 11%
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SummaryProfessional Medical Service Denials
Professional medical service denials have increased since the passage of HB 2600 in 2001;
There is significant variation in denial rates for professional medical services among the top 25 workers’ compensation insurance carriers, with the lowest denial rates ranging from 7-16% to the highest denial rates ranging from 31-50% for service year 2003 (the last injury year with complete year medical data available);
Denial rates have also significantly increased for the top 10 most frequently billed and most costly individual medical services over time – these services consist of mostly evaluation and management and physical medicine services;
22
Summary, cont.Professional Medical Service Denials, cont.
In particular, denial trends increased first in 2001 and then changed again in 2003 based on the adoption of the professional services fee guideline;
Reasons insurance carriers used to classify denials of professional medical services have also changed significantly over time. Prior to 2001, the two most common reasons for denying medical services were
“inappropriate documentation” and “preauthorization required but not requested”;
Since 2001, the two most common reasons for denying medical services have been “ unnecessary treatment” either with or without a “peer review”;
Additionally, since the fee guideline change in 2003, more professional medical services are being denied because of Medicare payment policies and unbundling edits that were adopted by reference in the rule as a result of HB 2600 (77 th Legislature, 2001).
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Summary, cont.Professional Medical Service Denials, cont.
Without individual reviews of insurance carrier claims processing practices, it is impossible to say whether these denial rates are “appropriate” just by looking at the data;
However, the data does confirm that insurance carriers have become more aggressive in reviewing the medical necessity of services billed by health care providers since 2001, most likely in response to increasing average medical costs per claim during the same time.
Additionally, since the adoption of the professional services fee guideline in August 2003, an increasing number of medical billing line denials appear to be due to issues relating to health care providers not billing in accordance with Medicare rules.