Quick Take
- Medical costs are increasing claim values across California workers’ compensation.
- Unlisted medical services can cost significantly more than treatment covered by the standard fee schedule.
- Medical-legal evaluations are another major source of rising claim expenses.
- Higher medical costs can increase reserves, litigation expenses, and settlement values.
- Restaurant operators can still reduce surprises by providing prompt reports, complete information, and regular communication with the claims team.
One of the things we’re seeing in California workers’ compensation is that medical costs are putting more pressure on claim values.
The numbers help explain why. Between 2017 and 2024, costs increased across most major medical categories, with some of the biggest increases coming from services that fall outside the standard fee schedule and from medical-legal evaluations.
For restaurant operators, the practical issue is fairly simple: when medical costs rise, reserves and settlement values can rise with them.
Where the Pressure Is Coming From
California uses an Official Medical Fee Schedule to set payment limits for many types of medical treatment.
For standard services, that gives the system some cost control. The problem comes when treatment does not fit neatly within one of those established codes.
Providers may then use an unlisted procedure code.
That matters because these services can fall outside the same pricing controls that apply to scheduled treatment.
Functional Restoration Programs and other specialized or multidisciplinary treatments are examples of services that may be billed this way.
From the claims side, that is something we have to pay attention to. A treatment may be appropriate, but when it falls outside the standard schedule, the cost can look very different from what an employer might expect.
Scheduled Costs and Unlisted Costs Are Moving Differently
The difference becomes clearer when you look at the 2017 to 2024 data.
Average costs for scheduled professional services increased by about 24 percent, while utilization remained relatively stable.
Unlisted professional services moved much faster.
Use of unlisted professional codes increased by nearly 35 percent, and average reimbursement for those codes more than doubled.
We’re seeing a similar pattern with medical equipment and supplies. The use of unlisted supply codes increased steadily and eventually surpassed scheduled supply codes.
That is important because a claim does not become more expensive only when someone receives more treatment. It can also become more expensive because the treatment itself costs more.
Medical-Legal Evaluations Are Another Major Cost Driver
One of the big areas I watch is medical-legal evaluations.
These evaluations are used when there is a dispute over issues such as the cause of an injury, permanent disability, or other medical questions in the claim.
Following changes to California’s medical-legal fee schedule in April 2021, the average cost of these evaluations increased significantly. Record-review charges were one of the major reasons.
Once a claim becomes disputed, it may require more than one medical-legal report.
That can add cost before the claim is anywhere close to resolution.
And when those expenses start adding up, they become part of the financial question when the parties eventually discuss settlement.
Why Restaurant Operators Should Care
A restaurant operator does not need to understand every billing code or fee-schedule rule.
You do need to understand what those changes can do to the life of a claim.
Higher medical expenses can affect:
- The amount carried in reserves.
- The total medical spend on the claim.
- The cost of disputed claims.
- The value of a potential settlement.
A lot of times, people look at a claim and focus on the original injury. But claims do not stay frozen at the value they had on day one.
As treatment develops, medical issues become disputed, or additional evaluations are required, the financial picture can change.
That is why the claims team has to keep reassessing what the claim is likely to cost and what information may affect that estimate.
What Employers Can Influence
Restaurant operators are not setting medical prices, and they are not controlling California’s fee schedules.
There are still things the employer can influence.
Report injuries promptly. Provide the claims team with complete information. Keep communication open as treatment develops. If something changes in the claim, make sure the administrator knows about it.
Consider your claims administrator part of your team.
The earlier we understand what is happening with treatment, medical disputes, and claim exposure, the fewer surprises there are later.
Medical inflation is going to affect some claims regardless of what an employer does. The goal is to understand where those costs are coming from and make sure the claim is being evaluated with current information rather than assumptions.
That is one of the ways you take some of the surprises out of the claims process.
Not Yet a Member?
Talk with CRMBC about whether a self-insured group is a fit for your restaurant.
Randy Bugg is Senior Vice President at Pacific Claims Management (PCM), a third-party administrator specializing in workers’ compensation claims management. With more than 34 years of experience in the workers’ compensation industry, Mr. Bugg brings extensive expertise in claims administration, investigation, cost containment, and strategies designed to achieve timely and effective claim resolution.
Throughout his career, Mr. Bugg has worked closely with employers and self-insured organizations to improve claims outcomes and manage the financial impact of workplace injuries. At Pacific Claims Management, he emphasizes proactive claims handling, early reporting, thorough documentation, and individualized service. He also works closely with CRMBC and its members, providing guidance on claims management, return-to-work strategies, settlement practices, and the advantages of effective self-insurance programs.
