Outpatient Costs Higher in States Without Fee Schedules: Workers’ Comp Study

January 11, 2012

States without fee schedules have higher hospital outpatient costs for common surgeries compared to states with fee schedules, according to a workers’ compensation study.

The study found that significant variations in hospital outpatient/ambulatory surgical center (ASC) costs were also found across states. Compared with the 17 state median, the average hospital outpatient/ASC cost per surgical episode in Massachusetts—the state with the lowest costs—was 60 percent lower than the median study state, while the average cost in Illinois— the state with the highest costs—was 45 percent higher, as of 2009.

As legislators slash state budgets due to rising healthcare costs, the Cambridge, Mass.-based Workers Compensation Research Institute (WCRI) says its study, the Hospital Outpatient Cost Index for Workers’ Compensation, provides policymakers and others with a tool to identify and better understand hospital costs.

“Rising hospital costs have been a concern and focus of recent policy debates in many states. To manage this growth, WCRI has created a tool to help public policymakers and business decision makers compare hospital outpatient costs across states, identify key cost drivers, and measure the impact of reforms,” said Dr. Richard Victor, executive director of WCRI.

The WCRI study shows states without fee schedules have higher hospital outpatient/ASC costs for common surgeries compared to states with fee schedules. The costs in states without fee schedules are 27 percent to 73 percent higher than the median of the study states with fee schedules.

In addition, states with fee schedule regulations that are 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 (APC) based fee schedules, with the exception of Illinois.

The study also noted that after fee schedule changes, growth in hospital outpatient/ASC costs resumed at faster rates in states with fee schedule regulations that were based on a percentage-of-charges. An example of this is found in California and Florida, both of which enacted fee schedule reforms around the same time, but the APC-based fee schedule in California constrained cost growth more than the percent-of-charge-based fee schedules in Florida.

WCRI said its study measures hospital outpatient/ASC costs actually paid over a seven year period from 2003 to 2009. It focuses on services that are associated with the most common surgeries performed in workers’ compensation cases since surgery-related costs make up approximately 60 to 70 percent of all outpatient costs.

The states included in the study, which represent 60 percent of the workers’ compensation benefits paid in the United States, include: California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia and Wisconsin.

WCRI is a not-for-profit research organization. Its members include 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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