Tag Archives: Outpatient Costs

Large Variations in Payments for Hospital Outpatient Care to Injured Workers

Back in April of this year, I wrote about a study by the Workers’ Compensation Research Institute (WCRI) in which it was found that fee schedules may increase the number of workers’ comp claims.

Today, the WCRI released a new study that said that “hospital outpatient payments per surgical episode varied significantly across states, ranging from 69 percent below the study-state median in New York to 142 percent above the study-state median in Alabama in 2014,” according to Dr. Olesya Fomenko, co-author of the study and economist at WCRI, and who also is mentioned in my previous post.

The report also stated that “variation in the difference between average workers’ compensation payments and Medicare rates for a common group of procedures across states was even greater—reaching as low as 27 percent (or $631) below Medicare in New York and as much as 430 percent (or $8,244) above Medicare in Louisiana.”

Here are the major findings:

  • States with no workers’ compensation fee schedules for hospital outpatient reimbursement had higher hospital outpatient payments per episode compared with states with fixed-amount fee schedules—63 to 150 percent higher than the median of the study states with fixed-amount fee schedules. Also, in non-fee schedule states, workers’ compensation paid between $4,262 (or 166 percent) and $8,107 (or 378 percent) more than Medicare for similar hospital outpatient services.
  • States with percent-of-charge-based fee regulations had substantially higher hospital outpatient payments per surgical episode than states with fixed-amount fee schedules—32 to 211 percent higher than the median of the study states with fixed-amount fee schedules. Similar to non-fee schedule states, workers’ compensation payments in states with percent-of-change based fee regulations for common surgical procedures were at least $3,792 (or 190 percent) and as much as $8,244 (or 430 percent) higher than Medicare hospital outpatient rates.
  • Most states with fixed-amount fee schedules and states with cost-to-charge ratio fee regulations had relatively lower payments per episode among the study states. In particular, for states with fixed-amount fee schedules, the difference between workers’ compensation payments and Medicare rates ranged between negative 27 percent (or -$631) and 144 percent (or $2,916).

Still think that workers’ comp is doing okay? Still think that keeping the status quo is the best option for injured workers? Still think that thinking outside the box, and considering alternatives to the ever increasing cost of medical care for workers’ comp is stupid, ridiculous and a non-starter?

Or do you believe, as Joe Paduda wrote about today in his blog, that workers’ comp is no longer needed for 90% of America’s employees, as the workplace has become safer than the non-occ environment.

The idea brought forth, and as Joe said, it is an intriguing, but wrong one, is that the medical care can be provided under health insurance, and the disability coverage can be added to long-term or short-term disability insurance.

Whichever way you look at the issue, workers’ comp is not going away, but it is getting more expensive to pay for medical care. The problem here is, too many Americans are slavishly wedded to outmoded ways of thinking, outmoded economic policies and models, as well as an outmoded economic ideology, to think rationally and seriously about alternatives.

Lastly, there are too many cooks (or should that be crooks) with their hands in the pot who have a vested interest in keeping things the way they are. If that is so, then the WCRI is only telling us what we should already know…injured workers are screwed and so are the carriers and employers. As long as outside interests have a hand in the system, and those who profit from higher costs block real change, this situation will only get worse.

I am sure glad it is not my money being wasted like this.

As always, to purchase the study click this link:



Average Medical Claim Costs Still Rising for Workers’ Compensation: 2014 Edition

Last year at this time, I wrote an article called, Average Medical Claim Costs Still Rising for Workers’ Compensation. It was based on the 2013 State of the Line Report from the National Council on Compensation Insurance (NCCI).

While I was attending the Miami Beach Medical Travel Summit, NCCI released their 2014 State of the Line Report at their Annual Issues Symposium in Orlando. This year, the report was presented by the new Chief Actuary, Kathy Antonello. She replaces Dennis Mealy, who retired last year.

The chart from the 2013 State of the Line Report, which appears below, indicated that the average medical cost for lost-time claims in 2012, was $28,500, and was a preliminary figure (based on data valued as of 12/31/2012). The revised figure for 2012 in this year’s report (see Chart 2), was $27,900, a slight decrease. However, the preliminary figure for the average medical cost for 2013 in this year’s report, was $28,800 (based on data valued as of 12/31/13), an increase of $300, which does not seem like much, but still a sign that costs are going up, not down, if only slightly.

That brings me to the dialogue I used last year to highlight that costs are still rising:

Doctor:       “Good news, Mr. Jones. We’ve managed to slow the progression of your disease.” 
Mr. Jones   “What’s so good about that? I’m still dying, only slower.”

Chart 1 ― Avg. Medical Cost per Lost-time Claim As of May 2013


The glaring difference between the two charts is that four years have been knocked off from this year’s chart, and begins at 1995, instead of 1991, as above. Last year’s State of the Line Report showed the Annual Change from selected years as follows:

Annual Change 1991–1993: +1.9%
Annual Change 1994–2001: +8.9%
Annual Change 2002–2011: +5.7%

This year’s report showed that the Annual Change 1995―2012 was +6.7%. While the annual percentage change dropped from its high of 10.6% in 1999, the annual percentage change held the same from 2012 to 2013, at 3%. Yet, the trendlines in both charts shows that medical costs are still trending upwards.

Chart 2 ― Avg. Medical Claim Cost per Lost-time Claim As of May 2014


When I cited the State of the Line Reports in my White Paper and last year’s post, I was unable to determine if these figures included claims that had surgeries, because the figures seemed a little low for claims that had surgical procedures attached to them. However, this year, I contacted NCCI, and received a response today from Juan Restrepo, Research Consultant at NCCI in Boca Raton.

He told me that the medical severity presented is derived from reported losses from all claims involving lost-time.  Those losses and claims are subsequently developed to ultimate and serve as the basis for the aggregates presented.  Medical-only losses are specifically excluded.  The only added caveat is that the metric represents an aggregate for the states where NCCI provides ratemaking services (currently 37), including state funds and excludes WV. In addition, the data excludes high deductible policies, so the true cost of medical care is probably far higher than reported.

To further illustrate the rising cost of medical care for workers’ comp, the Workers’ Compensation Research Institute (WCRI) released a study last month that stated that medical costs per claim for injured workers in Indiana were higher and rising faster than most in a 16-state study conducted by the WCRI. The study found that the main reason for higher medical payments per claim was higher and growing prices, as in other states with no price regulation. Lower to typical utilization, however, helped offset the higher prices paid.

Yet, the cost for hospital care was an important factor in the higher overall costs per claim in Indiana, especially for outpatient services. These two issues were addressed in my post last year, Outpatient Facility Costs Rising Could Benefit Medical Tourism Industry and Rising Hospital Costs: What they mean for Workers’ Compensation and Medical Tourism from 2012.

In Indiana, hospital payments were among the highest at nearly $12,000 per 2010 claim, evaluated in 2012. This was attributed to higher prices and inpatient payments. Overall, medical payments per workers’ compensation claim in Indiana grew 8% per year; on average, from 2006 to 2001, faster than in any other state.

That medical costs in workers’ comp and health care in general are rising is not in doubt. What is in doubt is what to do to solve this problem. The workers’ compensation industry goes on about more cost containment strategies, more legislation and more regulation, and more attempts to reform a broken and dysfunctional system.

An article in Insurance Journal by Andrea Wells discussing the 10 Challenges Ahead for Workers’ Compensation cited that technology and innovation was one of the challenges ahead for workers’ comp, and quoted Thomas Lynch, the founder and CEO of Lynch Ryan & Associates Inc., a management consulting firm for workers’ comp cost control, as well as publisher of the blog, WorkersCompInsider.com.

According to Lynch, the health care industry has dwarfed any advancement that has been developed in the workers’ comp industry. He went on to add that the Property & Casualty (P/C) industry is very slow to innovate and lags behind other industries, including other parts of the insurance industry, and the workers’ comp industry is way behind and must catch up.

While much of what Lynch had to say related to technology and innovation of that technology, the same can be said for other aspects of innovation that the health care industry is pursuing, such as medical tourism. The workers’ comp industry needs to seriously look at what it has done for decades and that has not worked, and then decide that the health care industry, particularly the medical tourism industry can offer an alternative to doing the same thing over and over again and expecting different results.

Yes, it is difficult. Yes, there are barriers and obstacles. And yes, there are certifications and accreditations, and licensing and all the other legal roadblocks that have been erected to prevent other medical providers from handling workers’ comp claims, but when you stand back and look at the bigger picture and see that when one person injures themselves on the job and another is injured riding a horse, and both injure the same body part, the surgery is the same, the surgeon can even be the same, but one patient can only be treated if the physician has jumped through all the hoops required by workers comp, and the other can go ahead and treat the patient without going through those same hoops. Of course, the physician has to have a license to perform medicine, and what does it matter if he got trained at Harvard Medical School or trained in a well-known medical school in his home country or region? Is the teaching of medicine any different? Are American patients somehow different than Latin Americans, Asians, or Europeans? Or, is the reality that once the scalpel goes in, we are all the same and look the same when the blood starts flowing? Listening to the so-called “workers’ comp experts” one would have to say no, but I know otherwise.

I don’t have all the answers, but like Robert Goddard, the father of modern rocketry, or the first person to say that it was possible to split the atom, I have the idea to do it. Neither men were there when we landed men on the moon or dropped the first atomic bomb on Hiroshima. Yet, Goddard and the man who thought it was possible to split the atom gave others, like Werner von Braun and Robert Oppenheimer, the idea that we could. Those feats were certainly more difficult and more perilous than opening up a man-made, medical-legal system to an alternative that offers lower cost and better quality health care. Or are we content to let working people suffer the indignity of a broken and dysfunctional system just to placate doctors, lawyers and other service providers?