Why comp hospital expenses are rising so fast

NCCI’s newly released report on fee schedules provides interesting reading. If you don’t have the time right now, here’s the key quote:
“For comparable injuries, when WC pays higher prices than GH for specific services, those services tend to be used more often in WC than in GH. [emphasis added]”
No kidding.
Before you dismiss this as common knowledge, remember that (in most states) work comp hospital reimbursement is much higher than for group health. That’s why hospital costs are the fastest growing sector of comp medical expense.
Here’s another quote: “Reimbursement for care that physicians provide at hospitals and other facilities is more likely to exceed the fee schedule than care provided in their offices.”
So, physician reimbursement is usually higher in facilities, and the facility’s costs are typically higher as well.
Yet regulators in Florida are adopting fee schedules that continue, if not worsen, this situation by dramatically increasing reimbursement for outpatient services. The reimbursement scheme will pay hospitals 74% more than Medicare for surgeries and four times Medicare for other outpatient services. And the comp system in South Carolina is deteriorating daily, due in large part to overpayment of hospitals. The state adopted a Medicare+40% hospital fee schedule on 10/01/06. Now, per NCCI, there is a 23.7% WC rate increase filed and pending.
Minnesota is considering similarly suicidal behavior, specifically a hospital inpatient payment standard that would pay smaller Minnesota hospitals about 90% of their billed charges; larger hospitals would get about 85% of their billed charges on higher-dollar inpatient bills.
What does this mean for you?
Clients are reporting hospital expenses are rising faster that at any time in recent memory. Don’t look for any help from the regulators.
Tip of the hat to workcompcentral.com for the NCCI report info.