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Workers Comp Medical Cost Terms – Back To Basics


Workers Comp Medical Cost Terms – A Few That Have Caused Confusion

Most Workers Comp medical cost terms are very easy to understand.   However, there are a few that, in my recent conversations, have caused confusion and concern.

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Wikimedia Commons Tony Berkshire

Workers Comp Medical Cost Terms

These terms are a little more specific than the general terms that you will see in a Workers Comp claim or medical network.  Some of these workers comp medical cost terms are easily recognizable.   Others may look new.


The health insurance industry first coined this term in the 1980s.   A  medical provider in a PPO or preferred provider organization will discount their services in some way to patients.  These patients, their insurance company,  and the medical provider have all operated under some discount agreement.   The agreement stems from the medical provider receiving higher volumes of patients for a discount.

Workers Comp PPO networks flourished in the 1990s until today.   However, many Work Comp insurance carriers and their insureds may only receive a PPO network discount as part of a drive-by arrangement where the employee just happens to use one of the PPO network providers.

The drive-by situation, of course, is not a good use of the PPO network.  After all, most workers compensation adjusters have their set of physicians that they like to deal with in claims.  If the adjusters’ preferred medical providers are on the PPO list, then the optimal situation has occurred for the injured employee’s treatment.

One of the large conundrums is matching up the claim department’s favorite industrial-minded medical providers with the PPO providers.

PPO Penetration Rate

If the situation in the previous passage caused the injured employee to treat at a non-PPO medical provider, the penetration rate to be much lower than what is optimal.   Then again, if the employee is receiving adequate care outside of the PPO network, should her/his treatment be moved to a medical provider just to save 15% on some of the medical costs?

This workers comp medical term is another conundrum for claims departments and PPO’s.

Durable Medical Equipment – One of the most important workers comp medical cost terms

Durable medical equipment remains a highly concerning workers comp medical term – why?  Most states do not fee schedule DME’s.  DME’s costs can be extremely high in WC.

The PPO network mentioned previously should have access to DME providers.  If a state does not have a fee schedule for DME’s then the cost savings would generate from the adjuster’s direct negotiation with a DME provider.   The PPO penetration rate goal for DME’s should be set at 100%.   That is if the PPO network used has a viable DME component.

Usual and Customary Rate

If no fee schedule exists in a state, then a Usual and Customary or U&C rate becomes the claims payor rates in a certain state.  U&C rates are considered another frustrating workers comp medical term.   U&C can be calculated by Zip Code, phone number, or a certain part of a city.    The variation in these rates is extreme in a certain state.

When I was assisting in closing out a claims load for a defunct captive, the providers (often hospitals) would have attorneys sue the captive very quickly if the carrier questioned or tried to negotiate the U&C rate.

The PPO penetration rate becomes even more critical in a U&C state.  How does an adjuster set medical reserves when they have no fixed rates to estimate what the medical cost of a claim will be over the life of a claim?


These are only a few of the workers comp medical cost terms that have caused confusion over the years.


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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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