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Workers Comp Outpatient Medical Costs – Fee Schedules Win Again


States With Fee Schedules Have Lower Workers Comp Outpatient Medical Costs – WCRI

Fee schedules have appeared in this blog many times due to the economic effects they have on medical bills.   WCRI (Workers Comp Research Institute) published a study this week showing that fee schedules lower Workers Comp outpatient medical costs.   The study specifically covered hospital outpatient costs.

picture of 100 dollar bill workers comp outpatient medical
Copyright Public Domain US Treasury

The outpatient medical cost study is produced by WCRI yearly.   We here at J&L watch for this study every year as a bellwether for fee schedules versus the other billing methods.

We liked the depth of the study – 13 years for you triskaidekaphobia sufferers.

The study, the latest in an annual series, compares hospital payments for a group of common outpatient surgeries in workers’ compensation across 36 states from 2005 to 2018.

Let us look at these numbers.  The increased charges remain outstandingly high each year this study is published.   The name of the study is the Hospital Outpatient Payment Index: Interstate Variations and Policy Analysis, 9th Edition.

WCRI came to two astounding conclusions (are you ready for these numbers?).  The two researchers Dr. Formenko and Dr. Yang.  They split the numbers between % of charge-based states and states without any fee schedule.

  • Percent-of-charge-based fee regulations were 74 to 168 percent higher than the median of the study states with fixed-amount fee schedules in 2018.
  • No fee schedules, they were 51 to 131 percent 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.

Variation in the difference between average workers’ compensation payments and Medicare rates for a common group of procedures across states was even greater — reaching as low as 42 percent (or $2,574) below Medicare in Nevada and as high as 365 percent (or $17,713) above Medicare in Alabama.

This means that when using the most stable statistic among the states (Medicare rates), the statistic the hospitals have a workers comp outpatient medical cost variance of $20,287.

Overall, the figures show a 50% difference between fee schedules states and states without them.

Often Unmentioned Fee Schedule Benefit

Setting medical reserves can easily confound the most experienced claims adjuster or supervisor.   States with fee schedules lessen the inaccuracy of setting medical reserves.  Some adjusters use old fee scheduled bills to compare procedure costs.  (secret shortcut).

After 10 years of experience, most adjusters and supervisors more easily develop a sixth sense of how much a medical procedure costs in states with fee schedules.

Workers Comp Outpatient Medical Excluded Data and States Covered

Male Doctor of workers comp outpatient medical analyzing x-ray report

This study captures payments for services provided and billed by hospitals; it excludes professional services billed by nonhospital 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.

Go here for more info and to download the study.

The 36 states included in this study are 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.

Related: Third Party Administrator Adjusts Workers Comp Claims For Self Insureds

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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