Posted Date: January 18, 2023 ``
About this article: This is the second of four installments in NCCI’s series on inflation and workers compensation (WC) medical costs. This one focuses on facility services by drilling down on price and utilization trends for different types of facilities and how each contributes to WC costs in the different US geographical regions. This article also provides state-specific results.
The first installment2of this series explored medical cost trends across different types of medical services to better explain how the current inflationary environment is affecting WC. One key observation from that article was that facility services have been the biggest driver of increased medical costs for WC in recent years. This article examines how different types of facility services contribute to countrywide (CW)3 and regional4 WC facility cost trends.
In Service Year (SY) 2021, CW facility costs were about 40% of WC costs and increased by about 3% per year on average over the past decade, which is more than twice as fast as physicians’ costs. Facility costs for the Southeastern region increased at a faster rate compared to other regions. Facility costs for the Midwestern, Western, and Northeastern regions all increased at a slower rate than the CW average.
Cumulative Change in WC Facility-Paid Medical Costs Indexed to 2012
Regions and Countrywide
Alaska, Western Region, and Countrywide
There are three different types of facilities: (hospital) inpatient, (hospital) outpatient, and ASCs. Due to differences in the nature of the services rendered at each type of facility, it is helpful to analyze costs separately by facility type. Each facility type contributes in varying ways to the overall average change in facility cost. The following charts show the contribution of each facility type to the change in overall average facility costs since 2012. On a CW basis, outpatient was the most significant driver of facility cost increases, followed by ASCs, and then inpatient. In the Southeastern region, however, inpatient facility costs were the largest driver.
Contribution to Change in Facility-Paid Cost per Claim by Facility Type, 2012 to 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide
The chart below shows the share of costs by facility type in SYs 2012 and 2021. In any given year, the share of services provided in each facility type varies across regions. In SY 2021, the share of outpatient services is highest in the Midwestern region at 54%, while the Southeastern region is lowest at 43%. In contrast, the share of inpatient services is highest in the Southeastern region at 38%, while the Midwestern region is lowest at 25%.
This reflects not only the frequency of services provided in the type of facility, but also the price per visit. From 2012 to 2021, the CW distribution had a reduction in inpatient costs with a corresponding increase in ASCs. Many factors can influence the distribution of costs by facility type and how it changes across years. The type of injuries, the relative cost of the procedures, and the accessibility of each facility type can play a role. Also impactful are fee schedules and how they are updated over the period as well as changes in contractual agreements between providers and payers.
Share of Facility Medical Paid Costs by Facility Type, SY 2012 to SY 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide
Looking at the cost trends by each facility type provides greater insight into what may have caused these shifts across years. The chart below illustrates how the costs for each type of facility have changed over the years. Outpatient costs increased at about 3% per year on average on a CW basis. All but the Northeastern region experienced an annual growth rate in outpatient costs in the 3% range. Inpatient costs increased by about 2% per year on average, with the Southeastern region increasing the fastest at about 4% per year. ASC costs have had the fastest average annual growth among all types of facilities at about 6% per year with only the Western region experiencing a lower rate of about 4%.
Annual Change in WC Medical Paid Costs by Facility Type Between SY 2012 and SY 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide
For each facility type there are two principal drivers of change in cost per claim:
The chart below shows the change in the number of visits per claim by facility type. On a CW basis, ASCs and outpatient saw modest average annual increases of around half a percent, while the average annual change in inpatient visits decreased at 3%. The observed annual decrease in inpatient visits is fairly consistent across the four regions, with ASCs having the greatest variation.
Annual Change in Facility Visits per Claim, SY 2012 to SY 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide
Over the past decade, the payment per visit has grown across all facility types and regions. CW, the inpatient payments per visit grew the fastest at +6.6% per year on average, with the Southeastern region showing the highest average rate of growth at +8.3% per year. ASCs had the second highest average growth rate at +5.4% per year, while outpatient came in at the lowest at +3.3% per year.
Annual Change in Facility Paid per Visit, SY 2012 to SY 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide
The increase in the amount paid per facility visit primarily drives the increase in cost per claim observed across facility types. The average number of visits per claim was relatively flat or declined across all facility types. Within each facility type, the amount paid on any individual visit can vary significantly depending on a number of factors. One significant factor is the type of procedure or service performed during the visit. For example, surgical visits are more costly on average than visits that do not involve surgery.
Outpatient visits are split into three categories to observe trends: major surgery, emergency room (ER), and other. Other visits include services such as evaluation and management, radiology, and physical therapy performed in a hospital outpatient setting. The chart below shows a comparison of the share of outpatient costs attributed to each visit type between SYs 2012 and 2021. It illustrates that the share of outpatient facility costs attributed to major surgery increased in all regions since 2012.
Share of Outpatient Paid Costs by Major Surgery, ER, and Other
Regions and Countrywide
Alaska, Western Region, and Countrywide
This next chart displays the change in the average outpatient visits per claim by visit type. The change in visits per claim was relatively flat across all types of facility visits on a CW basis.
Annual Change in Outpatient Visits per Claim by Visit Type, 2012 to 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide
The set of charts below examine the amount paid per each outpatient visit by visit type. Across all regions, both major surgery and ER visits increased significantly in the average amount paid per visit. The Other category experienced smaller increases in the average paid per visit.
Change in Outpatient Paid per Visit by Visit Type, 2012 to 2021
Regions and Countrywide
Alaska, Western Region, and Countrywide