The impact of Florida Senate Bill # 362 on the cost of workers’ compensation, A physician’s perspective

Ali Alhimiri, MD, A practicing Physical Medicine & Rehabilitation Physician and the Founder and CEO of Modus, a Thoughtful Care Procurement business

Florida Medical providers fees:

In 2024, significant changes to Florida’s workers’ compensation fee schedule were introduced, impacting medical reimbursement rates. Notably, Senate Bill 362 raised healthcare providers’ maximum reimbursement allowances (MRAs). For non-surgical services, the MRA increased from 110% to 175% of Medicare’s reimbursement rates. Similarly, the MRA increased from 140% to 210% of the Medicare rate for surgical procedures.
Additionally, expert witness fees for healthcare providers involved in workers’ compensation cases have been raised from $200 to $300 per hour. These changes will take effect on January 1, 2025.

These adjustments aim to address the shortage of providers willing to treat workers’ compensation patients by offering more competitive reimbursement rates. However, this will also increase medical costs for employers and carriers.

The percentage increases in Florida’s workers’ compensation fee schedule for 2025 are as follows:

  1. Physician reimbursement: A 59.1% increase (from 110% to 175% of Medicare rates).
  2. Surgical procedures: A 50% increase (from 140% to 210% of Medicare rates).
  3. Expert witness fees: A 50% increase (from $200 to $300 per hour).

Various Industry Predictions:

Predictions for the cost of workers’ compensation claims in Florida show varying trends for the future.

  1. Workers Compensation Research Institute (WCRI) Increase in Claims Costs: In 2022-2023, Florida’s average total cost per workers’ compensation claim increased by 7%, bringing the average claim to just over $30,000. This rise is attributed mainly to higher wages and longer temporary disability durations.
  2. National Correct Coding Initiative (NCCI) Medical Inflation Impact: Medical inflation is expected to continue increasing at around 3% per year, higher than the historical 1.5% average. This inflation will likely contribute to rising costs for medical claims, although workers’ comp medical inflation remains below general healthcare inflation.
  3. NCCI Neutral impact of New Fee Schedule: While the upcoming increase in reimbursement rates for medical providers (as per Senate Bill 362) could drive up medical costs, this is expected to be partially offset by claim frequency and severity reductions. Despite this, some upward pressure on overall claim costs is anticipated due to higher medical reimbursements. While certain cost increases are expected, the Florida workers’ compensation system is predicted to remain stable in the coming years.

Current Florida data compared to other states

Potential impact on physicians’ behaviors:

Supplier-induced demand (SID) suggests that an increase in the supply of surgeons can lead to more surgeries being performed, sometimes beyond what is strictly necessary. This happens particularly when surgeons can influence patient decisions, especially for elective or less urgent procedures. In such cases, the availability of more surgeons can lead to increased surgical intervention, even when the clinical need may not be pressing.

  1. Physician-Induced Demand published by MIT: Studies have shown that when physician fees decrease (like changes in Medicare reimbursements), surgeons may increase the volume of surgeries to maintain their income levels. For example, a study found that a 10% decrease in Medicare reimbursements led to a 2.7% increase in surgeries performed
  2. Elective Surgeries: In contexts where there is a financial incentive (such as fee-for-service payment models), surgeons may perform more elective procedures, such as joint replacements or cosmetic surgeries, as a way of increasing income. This aligns with the concept of SID, where the provider (the surgeon) induces demand for services. References:
    • The National Bureau of Economic Research (NBER) studies Physician-induced demand.
    • Studies on Medicare fee changes and their effects on surgical volumes.

We predict that future Workers’ compensation costs in Florida will increase; the question is, by what percentage?

Throughout my 20-plus years treating injured workers, I observed vulnerable, injured workers sold on unnecessary major surgery, which leads to long-term disability that requires indemnity payment.

In the best-case scenario, the cost will remain flat 7% as in past years, and in the worst-case scenario, it will increase by 50%. If we split the difference, we end up with around a 28% increase in cost.

Hopeful Prospective

There is a bright side to this: Florida is a direct state, and workers comp payers can navigate, find, and contract with doctors who practice Thoughtful Care and hold them accountable to quality and cost.

Workers Comp claims will benefit from the stability and predictability of embedding an Accountable Team of Thoughtful Clinicians into your claims team.