What happens when a fee schedule goes up?

I’ve always been a ‘non-advocate’ of tight fee schedules and broad based discounted networks. Actually it’s a little more than that – I believe mandated across-the-board low fees are counterproductive, ill-conceived, harmful, and may actually increase costs while decreasing access to good providers.
Other than that. they’re fine.
The final presentation at WCRI’s 2007 conference was an analysis of the pre- and post-reform changes after Florida changed its fee schedule on 1/1/2004 (raising it significantly for physicians and decreasing it for facilities).

Florida dramatically increased their physician fee schedule in 2004 – particularly for primary care. Surgical fees increased, although more modestly, and facility fees were generally reduced, especially for outpatient services. The reform legislation also made it tougher for claimants to get permanent and total benefits, reduced involvement of and compensation for attorneys, and reduced the Rx fee schedule.
As a result of the fee schedule change, prices paid for office visits were up dramatically, while imaging and surgery price increases were significantly lower. This is somewhat puzzling, as the fee schedule increase for surgery was up to 140% of Medicare. However, it was so hard to get surgeons to treat WC claimants at the old fee schedule that the actual prices paid (pre-reform) were significantly higher than the FS. So, when the FS increased, there was no real change in reimbursement for surgery.
Since reform, it looks like there have been some positive, and some not-so-positive trends. These include slightly improved access to care, shorter temporary disability duration, improved satisfaction rates among claimants with more severe conditions and somewhat higher medical costs.
What does this all mean?
Can we separate out the impact of the reform initiative from macro factors such as the decline in frequency, overall medical trend, an increase in the percentage of employees in the Sunshine state with no health insurance, the overall dramatic increase in prescription drug costs during the study period, reductions in real terms in physician income, and increases in utilization?
Here’s my quick take. Increasing the fee schedule resulted in the actual prices paid for surgery reflecting the market prices – implying that the regulatory change had no meaningful effect on surgical prices.
The reductions in facility reimbursement may have had little real impact on prices, as most facility costs are still based on a percentage of charges, so facilities can just raise their charges to make up for lost revenue (although no evidence was presented to support or contradict this).
But the macro factors likely have had much more of an impact than we realize. One problem endemic to comp wonks is our all-too-common tendency to navel-gaze and thus fail to recognize that there is a real world outside our tiny bubble. That bubble is buffeted about by changes to Medicare, drug pricing methodologies, medical technology, employment and demographic dynamics, and myriad other factors.
That’s where the real power lies.