North Carolina: Study finds payments per claim growing rapidly

Payments per workers' compensation claim to hospitals in North Carolina are growing at a rapid pace and are significantly higher than in many states, according to a study.

The Workers Compensation Research Institute recently issued the findings from a 14-state study. The report that highlighted North Carolina found that medical payments per claim in the state were 13 percent higher than the median of the other states. Researchers said this was the main driver of North Carolina's somewhat higher-than-typical medical costs per claim and the focus of recent fee schedule changes that went into effect in July.

Reimbursement rates were lowered for hospital inpatient and outpatient services and for ambulatory surgery centers under the fee schedule changes. According to the financial impact statement prepared by the Office of State Budget and Management, the changes to the fee schedule are expected to cut costs by an estimated $35.4 million -- or about 10 percent of the amount projected to be spent on hospitals and ambulatory surgery centers during FY 2009.

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Payments higher than average. According to the study, payments per claim to hospital providers were 43 percent above the median -- the highest among the study states. That result, researchers said, stems from higher hospital outpatient payments per service for similar services, somewhat higher inpatient payments per claim, and a higher surgery rate. WCRI concluded that the higher surgery rate suggested a different mix of care that leads to a more costly mix of services than in a state where hospital providers have a lower surgery rate and provide more primary care.

Researchers also noted that the average hospital outpatient payment per service in North Carolina ($361) was 58 percent higher than the median state and nearly $100 higher than in the next highest states. For example, payments per hospital outpatient service were much higher than typical for important service groups -- more than 70 percent higher for minor radiology (X-rays and ultrasounds); more than 40 percent higher for laboratory services, physical medicine, and major radiology (MRIs and CT scans); and roughly 15 to 20 percent higher for evaluation and management services and treatment/recovery/operating room services.

Under the new fee schedule, the hospital outpatient reimbursement rate was reduced to 79 percent of charges from 95 percent of charges for most hospitals. Researchers said the number of services per claim was not a driver of higher payments per claim to hospital outpatient providers.

Key findings. Among the highlights of the study, researchers discovered that:

Many lost time claims involved surgery. The study found that about 38 percent of claims with more than seven days of lost time in North Carolina involved surgery, compared to 35 percent in the 14-state median.
Payments to nonhospital providers were lower than most states. The study found that payments per claim to nonhospital providers were lower in North Carolina than average, largely because of typical-to-lower prices paid, especially for frequently provided services like evaluation and management and physical medicine. Researchers said the lower prices paid were in line with the fee schedule, which was lower than the median of 42 states with fee schedules for all categories except surgery.
Chiropractor utilization was low. Although utilization for nonhospital services was generally typical of the study states, the study found that chiropractor involvement in North Carolina claims was among the lowest of the study states. When involved, researchers said that chiropractors had significantly fewer visits per claim in the state. This may raise questions about access to chiropractor care for injured workers, they said.
Medical payments per claim grew at steady rate. According to the study, medical payments per claim grew steadily in North Carolina -- 7 to 12 percent per year from 2001 to 2005 and at a somewhat slower rate (5 percent) in 2006 for claims at an average 12 months of experience. Researchers said the growth rate was slightly slower than in the median study state in 2006 but had been higher than the median in most prior years.
Hospital costs driving medical cost growth. The study found that rising hospital costs per claim were the main reason for the medical cost growth, with rapid growth for both inpatient and outpatient services through 2005. In 2006, hospital outpatient payments were the main driver of the increase. Hospital inpatient payments were stable, researchers said, and payments to nonhospital providers declined 5 percent.

The study also found that hospital outpatient payments per service rose at double-digit rates for most important service groups in 2006, offset to some extent by a decline in the number of services per claim for many of the groups.

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July 30, 2009

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