Measuring the Factors Driving Medical Severity: Price, Utilization, Mix

Posted Date: Spring 2007

It is clear that in recent years, workers compensation medical claims severities have been increasing at a faster rate than would be expected based on medical inflation alone. Over the 1996/1997 to 2001/2002 period, the medical care component of the Consumer Price Index increased by 21% compared with an increase of 73% for paid medical severity on lost-time claims closed within 24 months of date of injury. This NCCI research study seeks to identify and quantify factors other than price inflation that contribute to the significant increase.

The key findings include the following:

  • There has been a shift to relatively more severe injuries. The share of closed lost-time claims at 24 months with diagnosis codes with high medical severity increased by 2 percentage points from 1996 to 2002, while the share with low severity declined by 8 percentage points over the same period. Among the top 10 leading diagnoses, there was a shift toward more higher-cost sprains of rotator cuffs and fewer lower-cost sprains of the lumbosacral.
  • This shift to more serious injuries led to a modest increase (about 10%) in medical severities from accident years 1996/1997 to 2001/2002.
  • The key driver, accounting for approximately a 35% increase in medical severities over the years studied, is the markedly higher number of treatments within each diagnosis and a different mix of treatments across service categories. For example, there might be a shift from diagnostic radiology to complex diagnostic testing or from complex surgery to physical therapy.
  • A combination of price increases for medical services and additional changes in the treatment mix accounts for about a 25% increase in medical severity over the time period. In this case, we capture treatment mix shifts within a service category. For example, within the broad service category "drugs, supplies, and durable medical equipment," there might be a relative shift from lower-priced drugs to high-priced durable medical equipment or a shift within "complex surgery and anesthesia" from one type of complex surgery to another.