CWCI: California Workers’ Comp Medical Inflation Driven by Growing Use of Unlisted Codes

OAKLAND, Calif.--(BUSINESS WIRE)--California’s workers’ compensation fee schedules continue to hold the line on inflation for most scheduled medical services, but a new California Workers’ Compensation Institute (CWCI) study finds that a growing share of treatment rendered to injured workers in the state is billed under unlisted codes that fall outside fee schedule pricing controls, creating a new and increasingly important source of medical cost growth.

The CWCI study, the second in a series on workers’ comp medical inflation, uses data from the Institute’s Industry Research Information System (IRIS) database to examine medical payments from 2017 through 2024. The results show that while professional services and facility fees consistently accounted for about 70% of all California workers’ comp medical spending, the strongest inflationary pressures came from professional services billed under codes that are not listed in the state’s Official Medical Fee Schedule (OMFS), where prices often grew far faster than applicable fee schedule benchmarks. Among the key findings:

• The average payment per professional service transaction increased 33.2% between 2017 and 2024, exceeding the 25.9% growth in the Medicare Economic Index (MEI).
• Total reimbursements for unlisted professional service codes more than doubled during the 8-year study period, as average payments rose 106.7%, while their share of professional service payments increased from 5.6% to 14.4%.
• A single code, 97799 (unlisted physical medicine and rehabilitation), accounted for nearly half of all unlisted professional service payments in 2024, with an average payment of $1,663 per transaction.
• Unlisted codes for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) increased from 41.9% of DMEPOS payments in 2017 to 50.1% in 2024, surpassing scheduled DMEPOS codes for the first time.
• Medical-legal costs surged following the 2021 Medical-Legal Fee Schedule revision, with average payments increasing 35.1% above 2017 levels by the first full year of implementation.
• Medical interpreter expenses were driven primarily by utilization rather than price, as the percentage of claims involving interpreter services nearly tripled between 2017 and 2024.
• Pharmacy was the only major medical category to show sustained spending declines, largely due to reduced utilization following adoption of the MTUS Drug Formulary and opioid prescribing reforms.
• Inpatient hospital utilization continued a long-term decline as inpatient discharges fell 33.8% from 2017 to 2024.

The analysis noted that the scheduled professional services generally behaved as intended under the OMFS, with price growth closely tracking established inflation benchmarks. In contrast, the unlisted professional service codes experienced substantially higher price growth and increased utilization, while in DMEPOS, the growing use of unlisted codes was the key cost driver. Thus, the report concludes that while the OMFS remains effective at controlling payments for scheduled services, its influence is diminishing as more treatment is billed under unlisted codes. Given the growing use of multidisciplinary pain programs, platelet-rich plasma injections, specialized medical equipment, and other unlisted medical services, policymakers and system stakeholders are likely to face growing pressure to address the widening gap between fee schedule-governed and market-rate pricing.

CWCI has issued its study, Medical Inflation and Cost Drivers in California Workers’ Compensation as a Report to the Industry, available free to CWCI members and subscribers. Others may purchase a copy for $23 by calling 510-251-9470.