issue 009, 2017

Edging up

Short takes on emerging industry issues – physical therapy costs, state legislative changes and fraud control

Rising physical therapy costs – Balancing the budget as price tags surge

Vice President, Medical Networks, Sedgwick

Employers and risk managers watching physical therapy spend rising may assume that the rising cost is because of increasing utilization. After all, the workforce is aging and co-morbidities are on the rise. These factors can lead to more frequent and longer durations of physical therapy. However, the primary reason for rising physical therapy cost is a trend of increasing state fee schedules, especially in states with a higher number of occupational injuries.

Risk managers often closely scrutinize high-cost treatment items, such as high-end diagnostic studies and surgery. Historically, physical therapy costs sometimes crept beneath the radar because the unit and per visit costs are relatively low compared with other healthcare services. State fee schedule increases in recent years have drawn attention to the overall cost of physical therapy. 

Below are the physical therapy fee schedule increases from 2011 through 2016 in states with some of the highest volumes of treatment in the nation (as reported by WCRI).

  • California – 57%
  • Florida – 4%
  • Georgia – 13%
  • North Carolina – 71%
  • Texas – 12%

Physical therapy is frequently the first line of defense for doctors trying to help patients recover from occupational injuries. With the increasing scrutiny on limiting prescription pain medications, and the standard treatment required to strengthen and rehabilitate older employees who need to return to the job, the demand for physical therapy will likely continue to rise.


There are many components that drive price increases in any given state, including politics, care access needs and the application of conversion factors to increase provider reimbursement above Medicare fee schedule rates. State regulators walk a fine line to balance cost containment needs and provider access. They have to control cost, yet keep compensation feasible for providers. Specialists generally have higher conversion factors intended to incentivize them to work in a state. That means they are allowed a higher pay rate above the Medicare fee schedule than, say, a general practitioner. For example, surgeons are likely given the highest conversion factors among the medical providers in a given state.   

The variable application of Medicare rules at the state level can also impact prices. Trying to stem the tide of fee schedule increases and influencing variables would be futile for an employer-based risk manager. However, there are key strategies that can help lower the cost of risk in any medical category including:

  • Knowing and addressing geographic and nationwide utilization trends
  • Maintaining consistent treatment plan review and case management practices to keep treatments within guidelines
  • Making sure that a physical therapy specialty network is deployed that supports care coordination by nurses and claims examiners for early and appropriate intervention, and provides discounts below fee schedule
  • Ensuring that co-morbidities and psychosocial and behavioral health issues are consistently identified and documented early, and that cost containment strategies are tailored to mitigate these factors
  • Addressing all care provided for the injury; falling costs in one area often create increasing costs in another 
  • Understanding the state-level political climate and provider lobbies, and joining organized lines of communications to lawmakers


The consistent coordination with specialty network partners and application of utilization review and case management services can help control costs. When physical therapy is needed, we have seen that early and accurate guidance to appropriate care frequently drives earlier improvement in functional capabilities and return to work.

When utilization review is needed, nurses reference guidelines, such as the Official Disability Guidelines and American College of Occupational and Environmental Medicine guidelines, and evaluate treatment for the employee’s injury to ensure it is appropriately synchronized with the guidelines.

Telephonic case managers evaluate the need for physical therapy during case management. This ensures the timing of testing, therapy and prescription drugs makes sense and continually follows applicable guidelines to support the employee’s recovery and help the claim progress. A telephonic case manager can also build a rapport with the primary treating physician, and provide them with details on the employee’s situation, medical needs, return to work opportunities and motivation for recovery.

Co-morbidities and psychosocial issues, including opiate sensitivity or addiction, must be addressed early. If physical therapy is being considered as an alternative to opioids, it may need to run alongside cognitive therapy or behavioral health services to eliminate recovery delays.


CA SB 1160 brings UR changes and increased fraud control

VP, Workers’ Compensation Practice and Compliance, Sedgwick

California Senate Bill 1160 aims to provide quality care for employees as soon as possible following a workplace injury. For injuries occurring on or after January 1, 2018, California physicians can provide certain types of medical care without the need for prospective utilization review (UR) for the first 30 days after the injury occurs. 

Under SB 1160, prospective UR will be required in situations that involve:

  • Pharmaceuticals
  • Non-emergency surgical procedures (including all pre-surgical and post-surgical services)
  • Psychiatric care
  • Diagnostic tests (excluding x-rays)
  • Home healthcare
  • Durable medical equipment (exceeding $250)
  • Electro diagnostic medicine

Beginning July 1, 2018, each UR process must be accredited by an independent, nonprofit organization certifying that it meets certain criteria such as timeliness in issuing a decision and the scope of medical material used, and requiring a policy preventing financial incentives to doctors and other providers based on the UR decision. Sedgwick is URAC accredited and our UR program ensures injured employees receive the best level of care at the appropriate cost throughout their recovery.

In addition to the changes in the UR process, California SB 1160 also prohibits providers who are indicted on suspicion of insurance fraud from adjudicating and collecting on liens.

To help shape this bill, the California Department of Industrial Relations worked with Sedgwick to better understand UR best practices and how our team handles requests for medical treatment.

Arizona changes claim settlement options

VP, Workers’ Compensation Practice and Compliance, Sedgwick

As of October 31, 2017, injured employees in Arizona could, for the first time, waive the right to future medical care when settling a workers’ compensation claim. This change was a key part of Senate Bill 1332, which was signed by Arizona Governor Doug Ducey on May 8, 2017.

The bill includes several safeguards intended to ensure that employees who agree to full and final settlements understand what rights they relinquish as part of the agreement. All settlements waiving the right to future medical treatment must be approved by the Industrial Commission of Arizona (ICA), and consider the permanency of the employee’s injury and whether it has stabilized, and the fairness of the agreement to the employee. 

To avoid the need for evidentiary hearings on the issue of fairness, the ICA requires that parties provide with their petition for approval information about the employee, including work history and education background, as well as an itemization of the employee’s monthly expenses and current debt.

The ICA also recommends that the parties submit a detailed financial analysis of the proposed settlements that identifies the portion to the settlement intended to cover medical costs and wage replacement, as well as any present value calculations for benefits owed to the employee.

If an injured employee is receiving or anticipates receiving Social Security disability benefits, the petition should also include an explanation of the potential that a settlement would have on the payments.

For additional information from the ICA and suggested best practices for seeking approval for full and final settlements, please see the Arizona Revised Statutes § 23-941.01 document.

Premium decrease announced in Florida

VP, Workers’ Compensation Practice and Compliance, Sedgwick

On November 9, 2017, the Florida Insurance Commissioner issued a Final Order granting approval to the National Council on Compensation Insurance (NCCI) for a statewide overall rate level decrease of 9.5%. The recommendation was primarily driven by a decrease in claim frequency of more than 8% from 2014 and 2015. This new rate applies to both new and renewal workers’ compensation insurance policies effective in Florida as of January 1, 2018.

This rate level decrease comes just a year after NCCI recommended a 19.6% increase driven by two separate Florida Supreme Court decisions – Castellanos vs. Next Door Company, et al. (April 28, 2016) and Westphal vs. City of St. Petersburg, et al. (June 9, 2016) – which brought about retroactive changes to claimant attorney fee and potential indemnity benefit duration. A suit was filed against NCCI contending their process for calculating recommended rates violated Florida’s “sunshine law.” An appeals court ultimately affirmed the NCCI process and Florida regulators approved a 14.5% rate increase effective December 1, 2016.

Despite the state’s recent rate decrease, future increases remain a possibility as experience data relating to the impact of the Castellanos and Westphal court decisions continues to mature.

Enhanced Nurse Licensure Compact introduced

Director, Regulatory Compliance, Sedgwick

Beginning January 19, 2018, 26 states will implement the enhanced version of the nurse licensure compact (NLC). For state-specific information, see the National Council of State Boards of Nursing website.

Since 2005, the NLC has allowed nurses with a multi-state license to practice in their home state and other original NLC states. This has allowed Sedgwick’s nurses handling claims across multiple jurisdictions to practice nursing without obtaining individual licenses in each state. In 2015, there were 25 states that had implemented the NLC. In May 2015, the original NLC was updated to an enhanced version called the eNLC. It became effective July 20, 2017 and 26 states enacted legislation to adopt the new model. Under the eNLC, nurses are able to provide care to patients in other eNLC states without having to obtain licenses. Nurses with an original NLC multistate license are grandfathered into the eNLC.

As of now, Wisconsin, Colorado, New Mexico and Rhode Island are members of the original NLC and have not yet joined the eNLC. These states plan to introduce legislation in 2018. This means that a nurse in Wisconsin, Colorado, New Mexico and Rhode Island will hold a multistate license valid in these four states, rather than in 26, and will need to obtain additional licensure in order to practice in any of the eNLC states.

The eNLC adopts 11 uniform licensure requirements in order for an applicant to obtain a multistate license; among them is the submission of federal and state fingerprint-based criminal background checks. These revisions will remove barriers that kept other states from joining the licensure compact and allow nurses to practice in a variety of states without the burden of obtaining individual licenses.

DaVone Hughes-Craig, regional licensing coordinator, and Sedgwick’s centralized licensing team have been following the transition to the eNLC and, they are monitoring the individual state boards of nursing websites to ensure our nurses are compliant with all regulations, and internal policies and procedures. We applaud the National Council of State Boards of Nursing and the individual state boards on adopting uniform requirements across multiple jurisdictions to benefit current practices in case management and nurse call centers, as well as emerging technologies such as telehealth nursing.


Workers Compensation Research Institute (WCRI).


California Senate Bill 1160. California Legislative Information website.


Senate Bill 1332. State of Arizona Senate. Fifty-third Legislature. First Regular Session 2017.


Arizona Revised Statutes § 23-941.01: Full and final settlements – Information and best practices. October 19, 2017.


Office approves a 9.5% decrease to Florida’s workers’ compensation insurance rates. Florida Office of Insurance Regulation website. November 9, 2017.


Castellanos vs. Next Door Company, et al. April 28, 2016.


Westphal vs. City of St. Petersburg, et al. June 9, 2016.


Enhanced Nurse Licensure Compact (eNLC) Implementation. National Council of State Boards of Nursing website.