Rising Hospital Costs: What they mean for Workers’ Compensation and Medical Tourism

Richard Krasner

Thanks again to Joe Paduda for today’s blog post topic.

In Joe’s post, workers’ compensation carriers are noticing their bills and payments to hospitals for inpatient and outpatient services increasing significantly faster than other costs. He predicts that all indications lead to further increases in these increases.

He cites a report from the Workers’ Compensation Research Institute (WCRI) that shows that facility costs are up in several states, including Indiana, which was the focus of the report. The WCRI reported that Indiana’s costs were substantially higher than the median states WCRI mentioned in the report. This increase was driven by prices. Indiana, which does not have a fee schedule for facilities, Paduda says, means hospitals can raise prices whenever they want, and are doing so.

The WCRI also reported that overall hospital payments per stay increased 12% per year from April 2005 to September 2010. Paduda predicted that at that rate, workers’ compensation carrier’s costs will double every six years.

Paduda also points to an article in the New York Times (December 18^th, 2012) that stated that hospitals are likely to get huge cuts from the fiscal cliff deal, and that Medicare cuts will target hospital reimbursements.

What this all means for workers’ compensation payors and the medical tourism industry is this. Facility costs are going to increase when the cuts are announced. In Indiana and other similar states, these increases will be driven by a combination of higher prices and more services per episode. In states that have fee schedules, there will be increases in utilization, which translates into more and higher-intensity services per stay. For the medical tourism industry as a whole, the increase in costs for outpatient services is not a factor, since it will be more expensive to provide outpatient services in medical tourism destinations if airfare, hotel and cost of treatment are packaged, as is the norm, than with the increases here in the US.

One respondent to Joe’s post commented that cost shifting to workers’ compensation will be more attractive to financially strapped hospitals, which will be another reason why payors will seek out lower cost alternatives.

Where medical tourism, and more specifically, medical tourism destinations and the hospitals that serve them can benefit, is in the inpatient services. Rising US hospital costs may force US workers’ compensation carriers to look for lower cost, better quality health care services for their insured’s injured employees, something which medical tourism is already offering the private insurance market in the US.

Richard Krasner has worked in the Insurance and Risk Management industry for more than 30 years in New York, Florida and Texas in the Claims and Risk Management spheres, primarily in Workers’ Compensation Claims, Auto No-Fault and Property & Casualty Claims Administration and Claims Management. He has experience in Risk and Insurance Business Analysis, Risk Management Information Systems, and Insurance Data Processing and Data Management. Received my Master’s in Health Administration (MHA) degree from Florida Atlantic University in Boca Raton, Florida in December 2011. I am looking for new opportunities that will utilize my previous experience and MHA degree. I am available for speaking engagements and am willing to travel. Contact Richard.

Comments

[Jonena]

Hi Richard, This is all so confusing to the payors let alone the insured. Any chance you could provide a graphic or two that depicts how you think this will all play out in the coming months? Thanks!