New Study Shows Large Variations in Payments for Hospital Outpatient Care to Injured Workers across States and in Comparison with Medicare Reimbursements

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This 33-state study from the Workers Compensation Research Institute (WCRI) helps public policymakers and system stakeholders compare hospital outpatient payments across states and monitor the impact of fee schedule reforms. The study also includes an additional benchmark comparing workers’ compensation hospital outpatient payments and Medicare rates.

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Medicare rates capture payments to hospital outpatient providers for similar services by a large payor, and the report offers an additional benchmark that helps states better understand their hospital payments.

Rising hospital costs in the treatment of injured workers receives attention from public policymakers and system stakeholders in many states. To assist in better understanding these costs, the Workers Compensation Research Institute (WCRI) released a new study, Hospital Outpatient Payment Index: Interstate Variations and Policy Analysis, 5th Edition, that compares hospital outpatient payments across states and monitors the impact of fee schedule reforms.

“This report found that hospital outpatient payments per surgical episode varied significantly across states, ranging from 69 percent below the study-state median in New York to 142 percent above the study-state median in Alabama in 2014,” said Dr. Olesya Fomenko, co-author of the study and economist at WCRI. Variation in the difference between average workers’ compensation payments and Medicare rates for a common group of procedures across states was even greater—reaching as low as 27 percent (or $631) below Medicare in New York and as much as 430 percent (or $8,244) above Medicare in Louisiana.

“We have included a comparison of workers’ compensation hospital outpatient payments and Medicare rates,” said Ramona Tanabe, executive vice president and counsel at WCRI. “Medicare rates capture payments to hospital outpatient providers for similar services by a large payor, and the report offers an additional benchmark that helps states better understand their hospital payments.”

The following are some major findings from the study:

  • States with no workers’ compensation fee schedules for hospital outpatient reimbursement had higher hospital outpatient payments per episode compared with states with fixed-amount fee schedules—63 to 150 percent higher than the median of the study states with fixed-amount fee schedules. Also, in non-fee schedule states, workers’ compensation paid between $4,262 (or 166 percent) and $8,107 (or 378 percent) more than Medicare for similar hospital outpatient services.
  • States with percent-of-charge-based fee regulations had substantially higher hospital outpatient payments per surgical episode than states with fixed-amount fee schedules—32 to 211 percent higher than the median of the study states with fixed-amount fee schedules. Similar to non-fee schedule states, workers’ compensation payments in states with percent-of-change based fee regulations for common surgical procedures were at least $3,792 (or 190 percent) and as much as $8,244 (or 430 percent) higher than Medicare hospital outpatient rates.
  • Most states with fixed-amount fee schedules and states with cost-to-charge ratio fee regulations had relatively lower payments per episode among the study states. In particular, for states with fixed-amount fee schedules, the difference between workers’ compensation payments and Medicare rates ranged between negative 27 percent (or -$631) and 144 percent (or $2,916).

The hospital outpatient payment indices compare payments (per surgical episode) for common outpatient surgeries under workers’ compensation from state to state for each study year and the trends within each state from 2005 to 2014. The analysis captures payments for services provided and billed by hospitals, and it excludes professional services billed by nonhospital medical providers (such as physicians, physical therapists, and chiropractors) and transactions for durable medical equipment and pharmaceuticals billed by providers other than hospitals. The analysis also excludes payments made to ambulatory surgery centers.

The 33 states included in this study represent 87 percent of the workers’ compensation benefits paid in the United States. The states 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. Note the 2014 workers’ compensation and Medicare comparison is conducted for 31 states.

To purchase this study, visit http://www.wcrinet.org/studies/public/books/hci_5_book.html.

ABOUT WCRI:

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. Organized in 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 - WCRI
since: 06/2011
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