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Outpatient costs much higher in states with fee schedule challenges

outpatient costs

Hospital outpatient payments were higher and growing faster in states with percent-of-charge-based fee regulations or no fee schedules, according to a study released Thursday by the Workers Compensation Research Institute.

Researchers with the Cambridge, Massachusetts-based institute compared hospital payments for a group of common outpatient surgeries, such as shoulder and knee surgeries, in workers compensation across 36 states between 2005 and 2017.

The study found that hospital payments per surgical episode in states with percent-of-charge-based fee regulations, which allow comp payers to pay a set percentage of the provider or hospital bill for service, were 67% to 212% higher than the median of the study states with fixed-amount fee schedules in 2017.

In states with no fee schedules, costs were 62% to 148% higher. WCRI also found that 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, according to an outline of the 163-page report.

Researchers also found variation in the difference between average workers compensation payments and Medicare rates for the common group of procedures across states was even greater, reaching as low as 35%, or $1,961 below Medicare in Nevada, and as high as 508%, or $23,020, above Medicare in Alabama.

The study also analyzed policy changes in states with recent fee schedule reforms. State changes highlights included:

  • In 2017, Kansas adopted a per-procedure-based fee schedule for hospital outpatient surgical services, while reimbursement for nonsurgical medical outpatient services remained subject to the charge-based fee regulation following the same tier approach. After the new fee schedule went into effect that year, hospital outpatient payments for common surgeries decreased 8.4%, while the 27-state average growth rate was 8%, according to the findings.
  • In 2017, Colorado updated its hospital outpatient fee schedule by increasing the multiplier from 170% to 180% of Medicare and incorporating the 2016 Medicare ambulatory payment classification rates, or the federal government’s code for outpatient services under Medicare. Following this update, Colorado hospital outpatient rates showed a substantial increase of 35% from 2016 to 2017.
  • In 2016, Mississippi updated from the 2013 Medicare ambulatory payment classification rates to that of the 2016 rates, which increased rates for common shoulder and knee procedures. Mississippi then experienced a 19% increase in hospital outpatient payments in 2016, followed by 12% in 2017, resulting in the overall increase of 34% from 2015 to 2017.


The 36 states studied were Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wisconsin.



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