States that have percent-of-charge-based fee regulations or no fee schedules also have substantially higher hospital outpatient payments per surgical episode, according to a new study.

“Hospital Outpatient Payment Index: Interstate Variations and Policy Analysis, 6th Edition,” from the Workers Compensation Research Institute, is the latest in a series which compares hospital payments for a group of common outpatient surgeries in workers’ compensation across 35 states; those states represent 88 percent of the workers’ compensation benefits paid in the U.S. The study also monitors the trends within each state from 2005–2015.

Among the study’s findings: In states with percent-of-charge-based fee regulations, hospital outpatient payments per surgical episode were 37 percent to 151 percent higher than the median of the study states with fixed-amount fee schedules in 2015. In states with no fee schedules, hospital outpatient payments per episode were also higher. In fact, they were 44 to 136 percent higher than the median of the study states with fixed-amount fee schedules in 2015.

The study also indicates 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.

WCRI explains: “Medicare rates capture payments to hospital outpatient providers for similar services by a large payor other than workers’ compensation.”

Therefore, a comparison of workers’ compensation hospital outpatient payments and Medicare rates for the most common group of surgical procedures across states can put the study’s findings in perspective.

The variation in the difference between average workers’ compensation payments and Medicare rates for a common group of arthroscopic procedures across states is “tremendous,” the study says, “ranging from below Medicare levels in Nevada, New York, and Massachusetts to as high as 527 percent (or $9,927) above Medicare in Alabama.”

The study says, “In non-fee schedule states, workers’ compensation paid between $4,189 (or 170 percent) and $8,150 (or 381 percent) in excess of what Medicare paid for similar hospital outpatient services,” while “in states with percent-of-charge-based fee regulations, workers’ compensation payments for common surgical procedures were at least $4,310 (or 217 percent) and as much as $9,927 (or 527 percent) higher than the Medicare hospital outpatient rate.”

The study, WCRI writes, “captures payments for services provided and billed by hospitals; it excludes professional services billed by non-hospital medical providers (such as physicians, physical therapists, and chiropractors) and transactions for durable medical equipment and pharmaceuticals billed by providers other than hospitals. The analysis also excludes payments made to ambulatory surgery centers.”

It also includes an analysis of major policy changes in Connecticut, Florida, and North Carolina, all states that have recently implemented fee schedule reforms. In the case of Connecticut, which adopted a fee schedule for hospital and ambulatory surgery center services, with the hospital outpatient reimbursement rate set at 210 percent of the Medicare rate, once the fee schedule was introduced, “the average hospital outpatient payment per surgical episode decreased in Connecticut by about 14 percent from 2014 to 2015.”

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Hospital outpatient payments higher, rising faster without fee schedules

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