Hospital Outpatient Costs Higher and Growing Faster In States with Percent-Of-Charge-Based Fee Regulations or No Fee Schedules

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As policymakers attempt to grapple with increasing medical costs in state workers’ compensation systems, a new study, Hospital Outpatient Cost Index for Workers’ Compensation, 3rd Edition, from the Workers Compensation Research Institute (WCRI) helps them better understand one piece of the puzzle―hospital payments associated with outpatient surgeries.

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To assist policymakers in managing this growth, WCRI has created a tool to help policymakers and business decision makers compare hospital outpatient costs.

As policymakers attempt to grapple with increasing medical costs in state workers’ compensation systems, a new study, Hospital Outpatient Cost Index for Workers’ Compensation, 3rd Edition, from the Workers Compensation Research Institute (WCRI) helps them better understand one piece of the puzzle―hospital payments associated with outpatient surgeries.

“Rising hospital costs have been a concern and focus of recent public policy debates in many states. To assist policymakers in managing this growth, WCRI has created a tool to help policymakers and business decision makers compare hospital outpatient costs across states, identify key cost drivers, and measure the impact of reforms,” said Dr. Olesya Fomenko, co-author of the report and an economist at WCRI.

According to the study, payments to hospitals for outpatient surgical episodes for knee and shoulder surgeries were highest in study states with percent-of-charge-based fee regulations or no fee schedules. In particular, states with percent-of-charge-based fee regulations had substantially higher hospital outpatient payments per surgical episode than states with fixed-amount fee schedules—33 to 203 percent higher than the median of the study states with fixed-amount fee schedules in 2012.

In terms of growth, the study found most states with percent-of-charge-based fee regulations or no fee schedules experienced more rapid growth in hospital outpatient payments per episode. More specifically, in most non-fee schedule states, growth in hospital outpatient payments per episode was at least 90 percent higher and as much as 160 percent higher than in the median fixed-amount fee schedule state over the study period.

The hospital outpatient cost indices compare payments paid for common outpatient surgical episodes under workers’ compensation from state to state in each study year and compare the trends within each state from 2005 to 2012. This study covers 33 large states representing nearly 90 percent of the workers’ compensation benefits paid in the United States. Nine study states had substantial changes in their hospital outpatient fee regulations from 2005 to 2012, and this study monitors changes in hospital outpatient payments per episode around the policy changes.

The states included in the study are Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.

For more information about this study or to purchase a copy, visit http://www.wcrinet.org/result/hosp_cost_index_3_result.html.

ABOUT WCRI:

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. Organized in late 1983, the Institute does not take positions on the issues it researches; rather, it provides information obtained through studies and data collection efforts, which conform to recognized scientific methods. Objectivity is further ensured through rigorous, unbiased peer review procedures. WCRI's diverse membership includes employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia and New Zealand.

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Andrew Kenneally
Workers Compensation Research Institute
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