WCRI: Massachusetts lowest, Illinois highest in hospital outpatient costs

Fee schedules seem to be a key factor in holding down hospital outpatient/ambulatory surgical center costs in the workers' comp system. At least, that notion is indicated in a new study from the Workers Compensation Research Institute.

In a report comparing outpatient hospital costs among 17 states, WCRI researchers found the costs in states without fee schedules were "27 to 73 percent higher than the median of the study states with fee schedules."Also, "states with fee schedule regulations that were based on a percentage-of-charges had higher costs compared to states with other types of fee schedules, such as per-procedure based or ambulatory payment classification based fee schedules -- with the exception of Illinois."

The study measured hospital outpatient/ASC costs paid over a seven-year period from 2003 to 2009 (before Illinois adopted reforms). Illinois had the highest costs among the 17 states and was 45 percent above the median study state, as of 2009.

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The researchers focused on services that are associated with the most common surgeries performed in workers' comp cases "since surgery-related costs make up approximately 60 to 70 percent of all outpatient costs," the report says. The services included diagnostic conditions involving the knee and the shoulder.

The 17 states studied were California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia, and Wisconsin. They represent 60 percent of the workers' comp benefits paid in the U.S., according to the researchers.

While Illinois had the highest costs among the states, Massachusetts had the lowest and was 60 percent lower than the 17-state median. Illinois' cost was more than three times the cost in Massachusetts for similar outpatient surgical episodes.

Five states studied had no fee schedule regulation as of 2009 -- Iowa, Indiana, New Jersey, Virginia, and Wisconsin. All had higher costs compared to states with fee schedules.

Four states had fee schedule regulations based on percent of charges -- Florida, Louisiana, Minnesota, and North Carolina. The costs in those states were "67 to 113 percent higher than the median of the study states with other types of fee schedules," the study says.

With the exception of Illinois, states with per-procedure based or ambulatory payment classification-based fee schedules had relatively lower costs among the states studied. That held true for six states -- California, Maryland, Massachusetts, Pennsylvania, Tennessee, and Texas.

The researchers found that the growth in hospital outpatient/ASC costs resumed at faster rates after fee schedule changes in states with fee schedule regulations based on percent of charges rather than other types of fee schedules. For example, both Florida and California saw short-term cost decreases due to fee schedule reductions imposed around the same time. However, the costs in Florida resumed at faster rates than in California.

In 2004, California adopted an ambulatory payment classification-based fee schedule with maximum facility fees set at 120 percent of Medicare, while Florida adopted a percent of charge-based fee schedule. The following year, the hospital outpatient/ASC costs in Florida grew at 7 percent a year and increased 42 percent from 2004 to 2009. California, on the other hand, saw a slower increase of 30 percent, driven mainly by increases in the components of the fee schedule regulation, according to the report.

Read more at the WorkersComp Forum homepage.

February 2, 2012

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