Kentucky Workers Compensation Fee Schedule: Rates and Disputes

The Kentucky workers’ compensation fee schedule caps what medical providers can charge for treating a work injury, and it is administered by the Department of Workers’ Claims under KRS 342.035. Three separate schedules control the rates: one for physicians, one for hospitals and ambulatory surgery centers, and one for pharmacies. Each uses a different calculation method, and each binds every provider, insurance carrier, and self-insured employer involved in a Kentucky claim. The statute requires that fees be “fair, current, and reasonable” compared to what general health insurers pay for similar treatment in the same community.¹

You Cannot Be Billed Above the Schedule

The most important protection in the system, if you are the injured worker, is the ban on balance billing. A provider who treats a workers’ compensation patient cannot collect, or even attempt to collect, any charge above the fee schedule amount from the employee. If the provider’s normal rate is higher than what the schedule allows, the provider has to accept the schedule rate as payment in full.² On a valid claim, you should not see a personal bill for covered treatment.

KRS 342.035 also makes it unlawful for a provider, or anyone acting on their behalf, to pursue excess charges or damage an employee’s credit for refusing to pay them. Beyond the criminal penalties in KRS 342.990, a worker who suffers damages from that kind of overcharge can sue in circuit court for actual damages, attorney’s fees, and an injunction against further violations.¹ A bill for amounts above the fee schedule on a compensable claim is worth raising with the Department of Workers’ Claims.

Physician Rates

Physician reimbursement is set by 803 KAR 25:089, which establishes the Official Medical Fee Schedule for Physicians and covers all medical services provided to injured employees by physicians under KRS Chapter 342.³ Each procedure is identified by a standard Current Procedural Terminology (CPT) code, and the schedule assigns a dollar amount to each code that represents the maximum a physician can bill. Conversion factors translate procedure values into those dollar amounts, and the factors vary by service category. Adjusters compare billed CPT codes against the schedule to confirm the charges match both the treatment provided and the maximum allowed.

Hospital and Facility Rates

Hospitals and ambulatory surgery centers work under 803 KAR 25:091, and the method is different. Rather than a flat rate per procedure code, Kentucky calculates hospital payments using a cost-to-charge ratio.⁴ The hospital submits its charges, and the insurer multiplies those charges by the facility’s adjusted cost-to-charge ratio after removing duplicative charges, billing errors, charges for services not confirmed by medical records, and charges for surgical implants and hardware. The result reflects what the care actually cost the hospital to deliver rather than list price, which is often significantly higher.⁵ Ambulatory surgery centers go through the same calculation using their own assigned ratio. The Department periodically updates these ratios.

Pharmacy Rates

Prescription reimbursement is governed by 803 KAR 25:092 and uses Average Wholesale Price (AWP) as the benchmark. The maximum a pharmacy receives is a $5 dispensing fee plus the lesser of the following:⁶

the pharmacy’s usual and customary charge for that drug
for generics, 85% of the AWP of the lowest-priced equivalent
for brand-name drugs, 90% of AWP

AWP is pulled from Medi-Span, published by Wolters-Kluwer, as of the date of service. If a drug is not listed there, the pharmacist uses the Red Book from Micromedex.⁶

Generic substitution is the default. A pharmacist must dispense the generic equivalent unless the prescribing provider writes “Do Not Substitute” on the prescription, in which case the insurer pays the brand-name AWP. If a worker personally asks for the brand-name drug and the prescriber has not prohibited substitution, the worker pays the difference between the generic and brand-name prices out of pocket.⁶ That is the one scenario where the balance billing ban does not shield you from paying something yourself.

Formulary and Preauthorization

KRS 342.035 required the Commissioner to develop or adopt a pharmaceutical formulary for medications used to treat work injuries and occupational diseases.¹ The formulary assigns each drug either a “Y” or “N” status. Drugs with “Y” status can be dispensed without preauthorization and do not trigger utilization review. Drugs with “N” status require preauthorization before the insurer is obligated to pay.

If your doctor prescribes an “N” drug without getting preauthorization first, you can end up in limbo while the carrier decides whether to cover it. Ask about the timeline. Providers who follow the formulary receive a legal presumption that they met the appropriate standard of care, which gives everyone reason to stay within it when clinically appropriate.¹

When Utilization Review Kicks In

Utilization review, governed by 803 KAR 25:195, is how carriers evaluate whether treatment is medically necessary. Not every claim goes through it. The regulation triggers review when any of these apply:⁷

a provider requests preauthorization for a treatment or procedure
surgical procedure notification is received under a treatment plan
cumulative medical costs exceed $3,000
cumulative lost work days exceed 30
an administrative law judge orders a review

The $3,000 threshold is where most claims first hit review, and it catches people off guard. A few months of physical therapy and imaging can cross that line, after which the carrier can scrutinize each additional service for medical necessity.

Only a licensed physician can issue an initial utilization review denial. If your treatment is denied, you have 14 calendar days from receiving the written denial to request reconsideration. Your treating physician can also demand a peer-to-peer conference with the reviewing physician, and if the reviewing physician fails to appear for the scheduled conference, the treatment is automatically approved.⁷ That rule gives providers real leverage against rubber-stamp denials.

Disputing a Bill or Denial

When a provider, employee, employer, or carrier disagrees about payment, medical necessity, or work-relatedness of a charge, the dispute is resolved by filing a Form 112 (Medical Dispute) with an administrative law judge. Any party can file. The form must be filed with copies of all disputed bills, a supporting affidavit explaining the basis for relief, any necessary expert testimony, and the final decision from a utilization review or medical bill audit with a supporting physician opinion.⁸

One requirement trips people up: if the expense at issue is subject to utilization review, you have to exhaust the utilization review process before filing a medical dispute. Filing too early can result in sanctions. The opposing party then has 20 days after service to file a response with its own supporting affidavit.⁸

The regulation has teeth on both sides. A carrier that challenges a bill without a reasonable medical or factual basis faces mandatory sanctions, and a provider who submits a bill for a condition unrelated to the work injury without reasonable foundation faces the same.⁸

Out-of-State Treatment

Kentucky’s fee schedule still controls when an injured Kentucky worker is treated by a provider outside the Commonwealth. Under 803 KAR 25:089, an out-of-state physician or medical services provider who treats a patient covered under KRS Chapter 342 is deemed to have agreed to comply with Kentucky’s fee schedule, and reimbursement is calculated the same way as for an in-state provider.⁹ You do not need special approval to seek out-of-state care, and the carrier cannot refuse to pay solely because the provider is across state lines. The bill will be audited against Kentucky’s standards before payment, regardless of what the provider’s home state might allow.

1
Kentucky Legislative Research Commission. Kentucky Code 342.035 – Administrative Regulations, Medical Fee Schedule
2
Commonwealth of Kentucky Personnel Cabinet. Workers’ Compensation Manual
3
Kentucky Legislative Research Commission. 803 KAR 25:089 – Workers’ Compensation Medical Fee Schedule for Physicians
4
Kentucky Legislative Research Commission. 803 KAR 25:091 – Workers’ Compensation Hospital Fee Schedule
5
Kentucky Education and Labor Cabinet. Clarification Regarding 803 KAR 25:091
6
Kentucky Legislative Research Commission. 803 KAR 25:092 – Workers’ Compensation Pharmacy Fee Schedule
7
Kentucky Legislative Research Commission. 803 KAR 25:195 – Utilization Review
8
Kentucky Legislative Research Commission. 803 KAR 25:012 – Procedure for Resolution of Medical Disputes
9
Legal Information Institute. Kentucky Code 803 KAR 25:089 – Workers’ Compensation Medical Fee Schedule for Physicians