Workers Comp surgery costs vary among states

WCRI study examines medical billing data from 17 states over a seven-year period

Common surgeries for workplace injuries generally cost less in states that have adopted per-procedure fee schedules, versus states that don’t use fee schedules, according to a recent report by a Massachusetts-based industry research group. The Workers Compensation Research Institute of Cambridge, Mass., examined medical cost data from 17 high-population states between 2003 and 2009.

Among the institute’s findings were that outpatient hospital costs trended significantly higher in states that did not use medical fee schedules for insurance reimbursement, such as Virginia and Wisconsin, as well as states that used fee schedules based on a percentage of total hospital charges, such as Louisiana and Florida.

On the flip side, states that regulated reimbursement fees based on specific procedures, or ambulatory payment classification, scored best on the WCRI’s “cost index.” Those states included Massachusetts, Maryland, Pennsylvania and California.

The study also showed a wide variation among states for the same type of procedures. Using a common arthroscopic knee surgery as an example, the outpatient fee schedule rate in Illinois was twice as much as the rate in Texas, and eight times higher than the rate in Maryland.

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

In the WCRI study “Hospital Outpatient Cost Index for Workers Compensation,” researchers compiled data from 17 states that represent 60 percent of the workers’ compensation benefits paid in the U.S.: California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia and Wisconsin.

The study focused on costs paid for outpatient knee and shoulder surgeries, two of the most common procedures for on-the-job injuries. The research team compiled medical billing data from 30 different sources, Victor said. In recent years, more states have adopted a per-procedure fee schedule system for workers’ compensation claims, in an effort to control costs, he said.

William G. Johnson, director of the Center For Health Information and Research at Arizona State University, said fee schedules have been around in several contexts since at least the 1930s.

“Fee schedules at least in the late 1990s missed the fact that controlling fees without controlling utilization is more or less a useless practice,” Johnson said. “The more recent emphasis on utilization review may have reduced the problem.”

The Workers Compensation Research Institute, by design, avoids direct involvement in the politics of healthcare. The Institute’s board of directors and research committee, which establishes research priorities for the non-profit Institute, are largely comprised of insurance industry representatives. According to the WCRI website: “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.”

Don May, vice president for policy at the American Hospital Association, said the state-versus-state comparison, from the perspective of the research community, “is an interesting data point to look at. From a consumer perspective, I think it is less so.”

Transparency in pricing – whether it comes from hospitals, insurance providers, industry groups, watchdogs or others – has been increasing in the U.S., May said. He sees that as a positive trend for consumers, policymakers and the healthcare industry as a whole.

“Forty-three states have different initiatives to ensure that pricing information is made available to the public,” said May.