WCRI: Hospital Outpatient Payments at Least 60% Higher in Most States without Fixed-Amount Fee Schedules

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 2020.

“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. “The study includes early data on the effects of COVID-19 on hospital payments.”

According to the study, Hospital Outpatient Payment Index: Interstate Variations and Policy Analysis, 11th Edition, hospital payments per surgical episode in states with percent-of-charge-based fee regulations were 69 to 217 percent higher than the median of the study states with fixed-amount fee schedules in 2020. In states with no fee schedules, they were 61 to 134 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 43 percent (or $2,740) below Medicare in Nevada and as high as 530 percent (or $28,229) above Medicare in Alabama.

The study also provides an analysis of major policy changes in states with recent fee schedule reforms. For example, effective July 1, 2020, Oklahoma adopted an APC-based fee schedule for hospital outpatient services. The average hospital outpatient payment for common surgical episodes in Oklahoma grew materially in 2020—by 17 percent. However, after this change, Oklahoma did not change its interstate ranking in 2020 and remained among the states with relatively lower hospital outpatient payments.

Payments for services provided and billed by hospitals are captured in this study. Professional services billed by nonhospital medical providers (e.g., physicians, physical therapists, and chiropractors), transactions for durable medical equipment and pharmaceuticals billed by providers other than hospitals, and payments made to ambulatory surgery centers are excluded. This study covers 36 states that represent 88 percent of the workers’ compensation benefits paid in the United States.

For more information about this report or to download a copy, visit https://www.wcrinet.org/reports/hospital-outpatient-payment-index-interstate-variations-and-policy-analysis-11th-edition. The report was authored by Olesya Fomenko and Rebecca Yang.

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