Inflation and Workers Compensation Medical Costs—Facility Services
Posted Date: January 18, 2023 ``
Key Observations
- Two factors help explain the changes in medical facility costs: the amount paid per visit and the number of visits per claim.1
- Facility-paid cost per claim grew 3.3% annually, with regional averages ranging from 2.5% to 4.1%.
- Across facility types, increases in the amount paid per visit were the main drivers of increased facility costs for the past decade.
- Hospital outpatient services are the most prominent contributor to the increase in facility costs.
- The number of inpatient visits decreased about 3% per year, while the number of surgery visits for ambulatory surgical centers (ASCs) grew across the regions.
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.
Introduction
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.
Facility-Paid Cost per Claim
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
Trends for Different Types of Facility Services
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 average number of visits per claim
- The average amount paid for each visit
Facility Visits 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
Facility Paid per Visit
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
Outpatient
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
Inpatient
Inpatient visits can be split into two categories to observe trends: surgery and other. The following charts show the share of inpatient costs attributed to each visit type for SYs 2012 and 2021. Surgery increased in the share of total inpatient costs across all regions between these years.
Share of Inpatient Costs by Surgery and Other
Regions and Countrywide
Alaska, Western Region, and Countrywide
This chart displays the change in average inpatient visits per claim by visit type. Across all regions, the number of visits per claim for all types of inpatient visits has decreased. However, other visits have decreased at a greater rate. Many factors may contribute to the reduction in inpatient visits. One potentially significant factor is the emergence of new technology and methods that allow procedures that historically could only be performed in an inpatient setting to be performed on an outpatient basis.
Change in Inpatient Visits per Claim by Visit Type, 2012 to 2021
This next chart displays the change in average inpatient paid per visit by visit type. All regions experienced growth in average paid per visit for both surgery and other. One factor that mitigates increases in inpatient paid per visit is an effective fee schedule.
Change in Inpatient Paid per Visit by Visit Type, 2012 to 2021
Ambulatory Surgical Centers
ASC visits are split into two categories to observe trends: major surgery and other. Other ASC visits typically include minor procedures, with injections for therapeutic or diagnostic purposes being the most common. The following charts show the share of ASC costs attributed to each visit type across service years. Major surgery has increased the share of total ASC costs across all regions between 2012 and 2021.
Share of ASC Costs by Major Surgery and Other
Regions and Countrywide
Alaska, Western Region, and Countrywide
This next chart displays the change in average ASC visits per claim by visit type. All regions saw an increase in the average number of major surgery visits per claim since 2012. “Other” visits decreased in most regions with the Northeastern region as the exception.
Change in ASC Visits per Claim by Visit Type, 2012 to 2021
This last chart displays the change in average ASC paid per visit by visit type. For major surgery, all regions experienced increases in the average annual paid per visit.
Change in ASC Paid per Visit by Visit Type, 2012 to 2021
Closing
As the second installment in NCCI’s “Inflation and WC Medical Costs” series, this article provides insight into the drivers of facility costs in WC across the country and by region. Facilities were the largest contributor to WC medical cost changes. As seen in the first installment of this series, WC medical costs increased 2.0% annually on average from 2012 to 2021 and more than 60% of that growth came from facilities.
Within facilities, outpatient generally was the largest driver, with the exception of the Southeastern region, where inpatient was the largest contributor. This may be a result of reimbursement rules in the region and how reimbursement rates change from year to year. Most of the increases in cost were due to increases in the amount paid per visit. Surgical visits account for the majority of facility costs and were a significant driver of cost increases across all facility types. The third and fourth installments of this series will examine physician and prescription drug trends.
In this article, references to claims include all WC claims that receive any medical services in a given year.↩︎
“Inflation and Workers Compensation Medical Costs—Overall Medical.”↩︎
Countrywide includes AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MD, ME, MI, MN, MO, MS, MT, NC, NE, NH, NJ, NM, NV, OK, OR, RI, SC, SD, TN, UT, VA, VT, WI, and WV.↩︎
Regions are based on the National Association of Insurance Commissioners (NAIC) designations for states included in the countrywide list above, except NJ and WI.↩︎