Insight, analysis & opinion from Joe Paduda


Work Comp Outpatient facility costs – the summary

With the release of WCRI’s latest report – this on on outpatient facility surgery costs – I’ll have to leave the next and last wave of crystal ball gazing to tomorrow. That’ll ensure it has a full charge before I polish it up one more time for some serious prognosticating.
The report is typical WCRI – carefully researched, stuffed full of appendices, state-specific information, methodological discussions and data dissection. Fortunately authors Rui Yang and Olesya Fomenko have provided a quick summary of major findings for those who don’t want to read all 123 pages. We’ll get to them after a (very) quick synopsis of the methodology.
For trending purposes, Yang, Fomenko, and assistant Juxiang Liu analyzed payments for the 2003 – 2009 service years for knee and shoulder arthroscopy, surgical episodes common in workers comp, thereby taking into account fee schedule, coding, negotiated, and network discounts. The cost differentials were based on 2009 data.
– It will come as no surprise that states with no fee schedule, or one based on percentage of charges – had higher costs in 2009. And, those costs increased more over time than states with fees based on standards such as APCs (Ambulatory Payment Classification groupers)
– Illinois had the highest costs, 45% above the median (recall that work comp is already a v very profitable payer, so paying 45% more than median means WC is really profitable business for facilities)
– Massachusetts had the lowest cost, at 40% of the median. However, Mass had the highest rate of increase over the six year period at 85%.
– Notably, Maryland, the only state that sets costs level across all (well, mostly all) payers was the second lowest cost state at around 55% of the median.
– looking at arthroscopic knee surgery, Maryland’s FS rates were $928, about an eighth of Illinois’ at $7.713. For shoulder surgery, IL’s outpatient FS rates were more than twelve times higher than Maryland’s…
So, a couple of observations.
1. the information is a couple years old, and therefore doesn’t factor in changes since then. There’s no way WCRI could as many changes don’t make their impact felt for some time. That said, I’d note that Illinois’ new FS is ‘more of the same’, using a percentage reduction below charges that, as the study shows, won’t control costs.
2. the average cumulative trend rate from 2003 – 2009 was 38%, not terribly different from the overall CPI for similar services (6% per year). That’s encouraging, if you’re average. Texas’ increase was 73%…
3. With the expansion of Medicaid, pressure on hospital reimbursement from Medicare and the rapid increase in the number of uninsured, workers comp’s unenviable position as the best payer in the business is ever more firmly established.
And a conclusion.
Fee schedules and network discounts based on a reduction off charges DO NOT WORK, if “work” is defined as controlling costs.
If “work” is defined as making money for network companies, they work really, really well.

One thought on “Work Comp Outpatient facility costs – the summary”

  1. Maryland does not allow imaging self referral which in other states allows the self referring physician to “find” imaging “justification” for procedures.

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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