Workers` Compensation Payments Per Claim to North Carolina Hospitals Higher Than Typical of 14 States and Growing, Says WCRI Study

CAMBRIDGE, Mass.--(Business Wire)--
Payments per workers` compensation claim to hospitals in North Carolina were
much higher than typical of states in a 14-state study and growing rapidly,
according to a new study by the Workers Compensation Research Institute (WCRI).

This was the main driver of the state`s somewhat higher-than-typical medical
costs per claim and the focus of recent regulation in the form of fee schedule
changes that will become effective in July 2009, WCRI said.

Reimbursement rates were lowered for hospital inpatient and outpatient services
and for ambulatory surgery centers under the 2009 fee schedule changes.
According to the financial impact statement prepared by the Office of State
Budget and Management, the changes to the fee schedule would cut costs by an
estimated $35.4 million, or about 10 percent of the amount projected to be spent
on hospitals and ambulatory surgery centers during the 2009 to 2010 fiscal year.

The study, CompScopeTM Medical Benchmarks for North Carolina, 9th Edition, found
that medical payments per claim in North Carolina were 13 percent higher than
the median of the 14 states, but that result masked offsetting factors-higher
payments to hospital providers and lower payments to nonhospital providers,
compared to other study states.

Payments per claim to hospital providers were 43 percent above the median, the
highest among the study states. That result stems from higher hospital
outpatient payments per service for similar services, somewhat higher inpatient
payments per claim, and a higher surgery rate.

The higher surgery rate suggests a different mix of care that leads to a more
costly mix of services than in a state where hospital providers have a lower
surgery rate and provide more primary care than in other states.

The study noted that the average hospital outpatient payment per service in
North Carolina at $361 was 58 percent higher than the median state and nearly
$100 higher than in the next highest states.

For example, payments per hospital outpatient service were much higher than
typical for important service groups: more than 70 percent higher for minor
radiology (X rays and ultrasounds), more than 40 percent higher for laboratory
services, physical medicine, and major radiology (MRIs and CT scans), and
roughly 15 to 20 percent higher for evaluation and management services and
treatment/recovery/operating room services.

Under the new fee schedule, the hospital outpatient reimbursement rate was
reduced to 79 percent of charges from 95 percent of charges for most hospitals.
The number of services per claim was not a driver of higher payments per claim
to hospital outpatient providers.

The study reported that about 38 percent of claims with more than seven days of
lost time in North Carolina involved surgery, compared to 35 percent in the
14-state median.

By contrast, payments per claim to nonhospital providers were lower in North
Carolina than typical, largely because of typical to lower prices paid (lower
especially for frequently- provided services like evaluation and management and
physical medicine). The lower prices paid were in line with the fee schedule,
which was lower than the median of 42 states with fee schedules for all
categories except surgery.

Although utilization for nonhospital services was generally typical of the study
states, chiropractor involvement in North Carolina claims was among the lowest
of the study states and, when involved, chiropractors had significantly fewer
visits per claim. This may raise questions about access to chiropractor care for
injured workers.

Medical payments per claim grew steadily-seven to 12 percent per year from 2001
to 2005 and at a somewhat slower rate (five percent) in 2006 for claims at an
average 12 months of experience. The growth rate was slightly slower than in the
median study state in 2006, but had been higher than the median in most prior
years.

The study found rising hospital costs per claim were the main reason for the
medical cost growth, with rapid growth for both inpatient and outpatient
services through 2005. In 2006, hospital outpatient payments were the main
driver of the increase; hospital inpatient payments were stable and payments to
nonhospital providers declined five percent.

Hospital outpatient payments per service rose at double-digit rates for most
important service groups in 2006, offset to some extent by a decline in the
number of services per claim for many of the groups.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit
membership organization conducting public policy research on workers`
compensation, health care and disability issues. Its members include employers,
insurers, and governmental entities, insurance regulators and state
administrative agencies, as well as several state labor organizations.

To order this report, visit the WCRI website: www.wcrinet.org.

Workers Compensation Research Institute
Richard A. Victor, 617-661-9274

Copyright Business Wire 2009