2-8-12; The Workers Compensation Research Institute reports Illinois highest in WC hospital outpatient costs. Sort of.

Please note some of these research results are from prior to the modified Illinois Medical Fee Schedule and some results are after it. Most important, this research cannot evaluate the impact of the sweeping cuts implemented by the 2011 Amendments to the Illinois Workers’ Compensation Act where actual treatment costs were brought down to just over 50% of hospital billings in the workers’ comp sector. For those reasons, we don’t consider their report/research to be critically important for our administrators and legislators to be concerned about. We do feel the report is noteworthy and wanted to give our readers the chance to review and understand this national news story.

Either way, WCRI just issued a report comparing outpatient hospital costs among 17 different states. WCRI researchers found the costs in states without fee schedules were 27-73 percent higher than the median of the study states with fee schedules. Also, states with fee schedule regulations 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 based fee schedules with the exception of Illinois. The study measured hospital outpatient/ASC costs paid over a seven-year period from 2003 to 2009. Please note Illinois adopted medical cost reforms in 2005-6 and additional medical cost controls were enacted in 2011. The cost impact of PPP’s has not yet hit, as the concept is still tied up in rules committees.

Either way, WCRI found Illinois had the highest hospital outpatient costs among the 17 states and was 45 percent above the median study state, as of 2009. Researchers focused on services associated with the most common surgeries performed in workers' comp cases "since surgery-related costs make up approximately 60 to 70 percent of all outpatient costs," the report says. The services included diagnostic conditions involving knees and shoulders.

The 17 states studied were California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Tennessee, Texas, Virginia, and Wisconsin. They represent 60 percent of the workers' comp benefits paid in the U.S., according to the researchers. While Illinois had the highest costs among the states, Massachusetts had the lowest and was 60 percent lower than the 17-state median. Illinois' cost was more than three times the cost in Massachusetts for similar outpatient surgical episodes.

Five states studied had no fee schedule regulation as of 2009 -- Iowa, Indiana, New Jersey, Virginia, and Wisconsin. All had higher costs compared to states with fee schedules. Four states had fee schedule regulations based on percent of charges -- Florida, Louisiana, Minnesota, and North Carolina. The costs in those states were "67 to 113 percent higher than the median of the study states with other types of fee schedules," the study says.

With the exception of Illinois, states with per-procedure based or ambulatory payment classification-based fee schedules had relatively lower costs among the states studied. This analysis held true for six states including California, Maryland, Massachusetts, Pennsylvania, Tennessee, and Texas.

The researchers found growth in hospital outpatient/ASC costs resumed at faster rates after fee schedule changes in states with fee schedule regulations based on percent of charges rather than other types of fee schedules. For example, both Florida and California saw short-term cost decreases due to fee schedule reductions imposed around the same time. However, the costs in Florida resumed at faster rates than California. In 2004, California adopted an ambulatory payment classification-based fee schedule with maximum facility fees set at 120 percent of Medicare, while Florida adopted a percent of charge-based fee schedule. The following year, the hospital outpatient/ASC costs in Florida grew at 7 percent a year and increased 42 percent from 2004 to 2009. California, on the other hand, saw a slower increase of 30 percent, driven mainly by increases in the components of the fee schedule regulation, according to the report.

We thank the nice reader who sent this article for review and analysis. If you want the link to the WCRI article, send a reply. We appreciate your thoughts and comments.