Hospital Outpatient Payments at Least 50% Higher in Most States without Fixed-Amount Fee Schedules, Finds WCRI Study
Cambridge, MA (WorkersCompensation.com) - Hospital outpatient payments were higher and growing faster in states with percent-of-charge-based fee regulations or no fee schedules, finds a study from the Workers Compensation Research Institute (WCRI). The study, the latest in an annual series, compares hospital payments for a group of common outpatient surgeries in workers' compensation across 36 states from 2005 to 2018.
“This study provides meaningful comparisons of hospital outpatient payments across states, as well as hospital payment trends in relation to reforms of hospital outpatient fee regulations,” said Ramona Tanabe, WCRI's executive vice president and counsel. “While the full impact of COVID-19 is currently unclear, this study will be a useful baseline to monitor the effects on hospital payments.”
The study, Hospital Outpatient Payment Index: Interstate Variations and Policy Analysis, 9th Edition, found that hospital payments per surgical episode in states with percent-of-charge-based fee regulations were 74 to 168 percent higher than the median of the study states with fixed-amount fee schedules in 2018. In states with no fee schedules, they were 51 to 131 percent higher. WCRI also found that hospital outpatient payments per episode in most states with percent-of-charge-based fee regulations or no fee schedules grew faster than in states with fixed-amount fee schedules.
To put these reimbursement rates in perspective, the study provides a comparison between workers' compensation hospital outpatient payments and Medicare rates for the most common group of surgical procedures across states. Medicare rates capture payments to hospital outpatient providers for similar services by a large payor other than workers' compensation. 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 42 percent (or $2,574) below Medicare in Nevada and as high as 365 percent (or $17,713) above Medicare in Alabama.
The study also provides an analysis of major policy changes in states with recent fee schedule reforms. For example, on January 1, 2018, Virginia implemented a fee schedule for hospital outpatient services that combines elements of a fixed-amount fee schedule and a percent-of-charge-based fee regulation. Consistent with the objective of revenue neutrality, the average hospital payment per common outpatient surgical episode remained fairly stable after the change, increasing by 2 percent in 2018. Additionally, Virginia preserved its interstate position as the state with the second highest average hospital outpatient payment.
This study captures payments for services provided and billed by hospitals; it excludes professional services billed by nonhospital medical providers (such as physicians, physical therapists, and chiropractors) and transactions for durable medical equipment and pharmaceuticals billed by providers other than hospitals. The analysis also excludes payments made to ambulatory surgery centers.
The 36 states included in this study are Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.