Hospital Outpatient Cost Index for Workers' Compensation

As legislators slash state budgets due to rising healthcare costs, a recent study, Hospital Outpatient Cost Index for Workers’ Compensation, by the Workers Compensation Research Institute (WCRI) provides policymakers and other stakeholders with a tool to indentify and better understand hospital costs. 

The WCRI study allows policy makers and other stakeholders the ability to conduct more meaningful comparisons of hospital outpatient costs across states, identify key cost drivers, and measure the impact of reforms over time.  The index measures hospital outpatient and/or ambulatory surgical center (ASC) costs for the most common surgeries performed in workers’ compensation cases.

Sample of Major findings: 

• States with no fee schedule regulation on reimbursement had higher hospital outpatient/ASC costs than states with fee schedules.  The costs in states without fee schedules were 27 percent to 73 percent higher than the median of the study states with fee schedules.
• 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 (APC) based fee schedules, with the exception of Illinois.
• 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.
• Significant variations in hospital outpatient/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.

This study includes 17 large states that represent 60 percent of the workers’ compensation benefits paid in the U.S., and covers a seven-year period from 2003 to 2009.  The states included in the study are: California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia and Wisconsin. 

Hospital Outpatient Cost Index for Workers’ Compensation. Rui Yang and Olesya Fomenko. January 2012. WC-12-01