Skip to content
Quick Start for:

Chapter 5.10

Extend the Use of Medical Provider Networks to the TxDOT Employees Workers’ Compensation Program


Summary

The medical care offered to Texas Department of Transportation (TxDOT) employees with work-related injuries or illnesses is costly and does not discourage unnecessary use of medical services. To help control these costs, TxDOT should be authorized to use medical provider networks to provide medical, pharmaceutical, and hospital services under workers’ compensation, and require employees with work-related injuries or illnesses to use the networks to obtain treatment.


Background

Texas provides state employees with comprehensive health care benefits. Health care networks contract with the state, giving employees access to high-quality health care while allowing the state to monitor and control usage and costs. As incentives to participants to control costs, these networks use primary care physicians, preferred providers, and a system of variable co-payments or deductibles. The use of medical provider networks generally is accepted as a reasonable arrangement that has not jeopardized the quality of state employees’ health care.

Medical provider networks are not used, however, to treat state employees with on-the-job injuries. Texas law does not permit employers or insurers to restrict an injured worker’s choice of doctor or pharmacy. Under workers’ compensation, an injured state employee in effect can direct his or her own medical care, leading to steady increases in Texas’ workers’ compensation costs.[1] The total cost of workers’ compensation for TxDOT reached $5.05 million in fiscal 1999-2000.[2] Workers’ compensation medical care claim costs per TxDOT employee rose from $181 in fiscal 1996 to $184 in fiscal 2000.[3] Such figures are expected to rise due to increased usage and medical inflation rates.

According to the Texas Research and Oversight Council on Workers’ Compensation (ROC), Texas workers’ compensation medical costs are 49 percent higher than the national average.[4] ROC also reports that the average medical cost of Texas’ workers’ compensation claims is rising faster than in other states.[5]

Other states and jurisdictions have incorporated some features of medical networks into workers’ compensation systems to limit the number of available care providers. In these programs, employees must obtain treatment from an employer-selected provider, or from a list of providers developed by the employer or a network provider organization.[6] A total of 37 states, including California, Florida, Michigan, New Mexico, New York, Ohio, Oklahoma, Pennsylvania and Virginia, impose some type of restriction.[7] To address concerns about such restrictions, some states allow the employee to change providers after the initial visit or after a specific period of time. In California, for instance, injured workers must use their employer’s group coverage, if available, for 60 days before they can change providers.[8]

The State Office of Risk Management (SORM), which administers the state employee workers’ compensation program, is already experimenting with medical provider networks and is reporting savings through use of an optional pharmaceutical preferred provider organization (PPO). Under SORM’s current agreement, the state is guaranteed 10 percent savings below fee guidelines on each prescription that a participating pharmacy fills for an injured state employee.[9] From May 22, 2000 through November 1, 2000, the state saved $69,721 on 6,722 prescriptions filled through the voluntary program, an average savings of 10.4 percent per prescription.[10] SORM reports that requiring injured state employees to use the pharmaceutical PPO would save the state even more and allow SORM to negotiate better discounts for the state.[11]

Opportunities to use medical provider networks extend beyond pharmacy services. Workers’ compensation medical networks, similar to those networks already used to deliver medical services to state employees but focused on meeting the specific needs of injured workers, can reduce medical costs and could be used to provide medical and hospital services for injured state employees.[12] A survey conducted by the Oregon Department of Commerce and Business Services reports that private employers have saved 27 percent by using network providers for workers’ compensation claims.[13]


Recommendation

The Legislature should authorize the Texas Department of Transportation (TxDOT) to use medical provider networks to provide medical, pharmaceutical, and hospital services under TxDOT’s workers’ compensation program, and should require employees with work-related injuries or illnesses to use the networks to obtain treatment.

To implement this recommendation, the Texas Labor Code would be amended to exempt TxDOT from prohibitions related to directing the medical care of an injured worker. Injured TxDOT employees would be required to obtain medical, hospital, and pharmacy services through state-approved medical provider networks wherever practicable. This would create a system to provide injured TxDOT employees with quality care along with cost and usage control for TxDOT’s workers’ compensation program.


Fiscal Impact

Authorizing TxDOT to use medical provider networks to provide medical, pharmaceutical, and hospital services under that agency’s workers’ compensation program and requiring state employee participation where possible would reduce workers’ compensation medical costs.

Savings would be $179,000 each year. This estimate assumes TxDOT negotiates a minimum discount of 10 percent for all medical, hospital, and pharmaceutical services provided to injured TxDOT employees, and that injured workers in Standard Metropolitan Statistical Areas, where 66 percent of all TxDOT workers’ compensation claims originate, are required to utilize the network. The savings would be reflected in increased funds available for road construction, rehabilitation, and maintenance.

Fiscal
Year
Savings/(Cost) to the
State Highway Fund
2002
$179,000
2003
$179,000
2004
$179,000
2005
$179,000
2006
$179,000

Endnotes

[1] Texas H.B. 1, 76th Leg., Reg. Sess. (1999), pp. I-77-78; and interview with Stuart B. Cargile, manager, Fund Accounting, State Office of Risk Management, Austin, Texas, August 28, 2000.

[2] Texas Department of Transportation, Occupational Safety Division’s Statistical Summary Report, (Austin, Texas, October 2000), p. C-2.

[3] Texas Department of Transportation, Occupational Safety Division’s Statistical Summary Report, (Austin, Texas, October 2000), p. C-3; and average TxDOT FTE numbers e-mailed byJefferson Grimes, manager, State Legislative Affairs, Texas Department of Transportation.

[4] Research and Oversight Council on Workers’ Compensation, Medical Cost Trend Analysis Data from Three Workers’ Compensation Insurance Carriers, 1991-1998 (Austin, Texas, May 1999), p. 1.

[5] Research and Oversight Council on Workers’ Compensation, Medical Cost Trend Analysis Data from Three Workers’ Compensation Insurance Carriers, 1991-1998, p. 5.

[6] Workers’ Compensation Research Institute, Managed Care and Medical Cost Containment in Workers’ Compensation: A National Inventory, 1998-1999 (Austin, Texas, August 2000), p. 9.

[7] Workers’ Compensation Research Institute, Managed Care and Medical Cost Containment in Workers’ Compensation: A National Inventory, 1998-1999, p. 12.

[8] Workers’ Compensation Research Institute, Managed Care and Medical Cost Containment in Workers’ Compensation: A National Inventory, 1998-1999, pp. 12-14.

[9] Interview with Jonathan Bow, general counsel, State Office of Risk Management, Austin, Texas, August 10, 2000.

[10] Memorandum from ScripNet PPO to Jonathan Bow, general counsel, State Office of Risk Management, November 1, 2000.

[11] Interview with Jonathan Bow, general counsel, State Office of Risk Management, Austin, Texas, August 10, 2000.

[12] Workers’ Compensation Research Institute, The Impact of Workers’ Compensation Networks on Medical Costs and Disability Payments (November 1999), p. 1.

[13] Research and Oversight Council on Workers’ Compensation, Managed Care and Workers’ Compensation: A Review of Research (Austin, Texas, August 1996), pp. 20-21.