Premiums Charged by Hospitals for Treating Workers’ Comp Claimants - Study Verifies Different Costs in General Healthcare and Workers’ Compensation Systems

Premiums Charged by Hospitals for Treating Workers’ Comp Claimants - Study Verifies Different Costs in General Healthcare and Workers’ Compensation Systems

By John Stahl, Esq.

A recent report titled “Comparing Workers’ Compensation and Group Health Hospital Outpatient Payments” from the Workers’ Compensation Research Institute (WCRI) documented the premiums that hospitals charged workers’ compensation systems for outpatient procedures. One purpose of that documentation was to provide concrete proof that, as a rule, hospitals attached a premium to outpatient care that those facilities provided workers’ compensation claimants. A related purpose was to contribute to the debate regarding whether administrative burdens, such as additional paperwork, that were associated with workers’ compensation justified the often significantly higher fees.

WCRI followed up that report with a broader study titled “A New Benchmark for Workers’ Compensation Fee Schedules: Prices Paid by Commercial Insurers?” WCRI Executive Director Richard Victor, PhD, and WCRI Economist Olesya Fomenko, PhD, (collectively, the researchers) conducted the study.

The researchers initially concluded that determining that the current hardships associated with treating workers’ compensation claimants contributed to the worrisome high costs of workers’ compensation presented a good opportunity for state lawmakers to enact reforms that reduced those burdens.

Overview of Study

The introductory portion of the study emphasized that its scope was limited to comparing the prices that medical service professionals, rather than hospitals and other medical care facilities, received for services within a workers’ compensation system with the prices that the general healthcare system paid for comparable treatment. This data consisted of the prices that those professionals in 22 states charged for care in 2009; seventeen of those states had workers’ compensation fee schedules that year.

The logic behind comparing the prices that workers’ compensation systems paid for care with the fees obtained for patients within the general healthcare system was that insurers who participated in the general healthcare system typically constituted the largest population of healthcare insurers in a state, and setting a fee schedule below the amount that was negotiated with those insurers likely would be detrimental to claimants. This was because an ability to earn more by treating other patient populations would hinder finding medical care providers who would participate in the workers’ compensation system.

The researchers added that their intent was to help policymakers who were considering new or revised fee schedules determine appropriate amounts for those guidelines. The stated concerns included ensuring that the reimbursement rate under a fee schedule was not so low that it created the aforementioned challenge regarding finding a medical service professional who would provide a workers’ compensation claimant the “reasonable and necessary” medical treatment to which the workers’ compensation system entitled him or her. The reported desired level was an adequately high amount to motivate healthcare providers to properly treat claimants but did not rise above the level that ensuring that claimants received that care required.

The researchers studied the median prices for what they described as “five common surgeries and four common established patient office visits.” They noted that they limited their scrutiny to the amounts that medical care providers charged under a Current Procedural Terminology (CPT) code, and that the data did not include the costs of the professional surgical services that were associated with an operation. The study emphasized that the underlying data regarding surgical procedures was further limited to the payment to the primary surgeon for the primary surgery that was conducted on the patient. This specificity related to many operations involving an assistant surgeon and some surgeries involving a secondary procedure.

The analysis also stated that the CPT codes for the four types of established patient office visits that the study included encompassed 61 percent of workers’ compensation payments within the “evaluation and management” service category.

The reported data was the median price that was paid for the discussed services, and it included both in-network and out-of-network care. More specifically, half of the prices that were paid were either high or lower than the median price. Additionally, that price reflected the total amount that insurer paid and any copayments or deductibles.

Impact of Fee Schedules

The researchers identified the presence or absence of a fee schedule and differences among fee schedules in the states that had enacted that type of reform as primary reasons for variations among states regarding the workers’ compensation price for a surgery.

A reported statistic for Florida, which was at the low end of the scale regarding the fee-schedule amount for the relevant procedure, was that the fee schedule amount for a common knee arthroscopy was $868 and the median workers’ compensation price for that procedure was $804. The difference in those amounts reflected the ability of some workers’ compensation insurers to negotiate rates that were below the fee schedule amount.

The fee schedule amount for a comparable procedure in Illinois was $4,010, and the median workers’ compensation price that was paid was $3,886. Results regarding common office visits were consistent with those regarding the knee surgery.

Actual Price Comparisons

Other statistics showed that, regarding the most common knee surgery, workers’ compensation systems in 21 of the 22 states in the study typically paid more than group-health insurers for comparable operations. The researchers more specifically concluded that the median price that workers’ compensation systems in seven study states paid was more than twice as much as the amount that group-health insurers paid for the same surgery.

The general breakdown regarding variations in the prices paid for common office visits in the 22 study states were:

·  The median price paid under workers’ compensation was less than the amount paid under group-health insurance in four states;

·  The median price paid under workers’ compensation was more than the amount paid under group-health insurance in 10 states; and

·  The median price paid under workers’ compensation was similar to the amount paid under group-health insurance in eight states.

This data reflected findings that included that the workers’ compensation system in New Jersey paid a 31-percent premium for an intermediate office visit; the result for the neighboring state of New York, which had a fee schedule that provided for workers’ compensation paying less than the general healthcare system for an intermediate office visit, the price for a claimant was 27-percent less than the price comparable treatment under group-health insurance.

The researchers generally observed regarding all the price comparisons related to office visits was that “even when the median price paid under workers’ compensation was higher than in group health, the differences were not as large as they were for surgical prices.” In simpler terms, the price gap between care provided within a workers’ compensation system and the general healthcare system was larger for surgical procedures than for office visits.

Interstate Variation

The study further revealed that the variations among states regarding the median prices of surgeries were larger within the workers’ compensation system than the general healthcare system. The researchers cited the examples of a range from $919 to $3,728 for a common knee surgery within workers’ compensation and the range for a comparable procedure under group-health insurance running from $683 to $1,108.

The data additionally showed that the variation regarding workers’ compensation and group-health insurance was relatively lower regarding common office visits. The relevant numbers regarding that type of care were that a roughly 70 percent difference existed regarding the study state with the second highest median workers’ compensation price paid and jurisdictions at the lower end of the scale. A 50 percent difference existed regarding the general healthcare system in the relevant states.

The researchers largely attributed the large variations regarding the median prices paid for services within workers’ compensation systems on elements that included the following factors:

·  Whether price regulation existed in the form of fee schedules;

·  Reimbursement rate differences among fee schedules; and

·  The extent to which workers’ compensation insurers in fee-schedule states negotiated payment rates below the fee schedule amounts.

Study’s Significance

The researchers demonstrated the value of fee schedules that reflected the going rate for comparable care within the general healthcare system. Those numbers additionally showed that differences in the costs of living in various parts of the country may not have justified the extent to which the price for healthcare varied among states.

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