Workers’ comp hospital costs – implications for payers

WCRI’s report on variations in hospital outpatient costs is yet more evidence of the wide and seemingly nonsensical variations in work comp regulations, fees, payments, and practices among and between states.

Among the findings:

  • an eight-fold variation in costs from the lowest-cost state – NY – to the highest – AL.
  • Shockingly, fee schedule states’ costs are a LOT lower than non-fee schedule state costs.
  • Costs in percentage-of-charge fee schedule states were much higher than those in states with Medicare-based fee schedules.

There’s a wealth of information in the report; here’s my takeaways.

Captain Obvious Alert.

In many states, workers’ comp is a huge profit generator for hospitals and health care systems.  Anyone following the drama in Florida surrounding “negotiations” around facility reimbursement in past years saw this play out in vivid color.

Hospitals are almost always much more politically influential than workers’ comp stakeholders, giving them a decided advantage in influencing legislation, and sometimes regulation as well.

As Medicaid and Medicare continue to clamp down on costs, hospitals and health care systems will get even better at maximizing revenue from workers’ comp.  Moreover, network discounts provided to workers’ comp payers are fading as payers realize the opportunity inherent in comp, and work comp PPO contractors confront the “yeah but you’re only 1 percent of my revenue” argument.

There is an entire industry devoted to revenue maximization; claims adjusters and bill review folks would be well-served to brush up on the techniques used by these folks. Here’s just a couple examples from quick research…

Considering the dollars paid to facilities and hospitals account for at least a third of work comp medical spend in most states, this is a big problem.

So, what to do?

  1. Analyze your data! Where are you spending your dollars – by state, facility, employer.
  2. Compare it to WCRI’s information – not just in this report, but the others these brilliant researchers have produced
  3. Direct, channel, refer – even in states where you don’t have an absolute right to “direct”, you CAN influence where your patients go to get care.
  4. Find and work with a medical bill review specialist with expertise in the specific states of most concern.
  5. Get creative – talk to your adjusters with long and deep experience to find out what works and what doesn’t.

Kudos to WCRI’s Olesya Fomenko and Rui Yang for their work – they’ve taken a shipload of data and turned it into information that’s understandable  – and actionable.

One thought on “Workers’ comp hospital costs – implications for payers

  1. Captain Obvious,

    What isn’t being said because it is obviously not as apparent… in a number of other states hospitals that provide workers comp services are losing money on them, significantly. When a hospital has a cost to charge ratio of about 18% and they are being paid about 13-15%…there seems to be a problem. Industry reliance on the Medicare fee schedule for a base isn’t a bad idea, but everyone has to understand that it has never been the intent of Medicare to pay a hospital even their costs. Last I heard, Medicare was paying about 85% of costs.

    Captain, I’m just saying that there is another side to the story and an article that focuses on only one side isn’t doing justice to the industry.

Leave a Reply

Your email address will not be published. Required fields are marked *