What’s Driving Increased Medical Costs?

Facility costs represented around 40% of workers’ compensation costs in Service Year 2021, and facility cost per claim increased 3.3% per year over the past decade, according to a recent NCCI report that is the second in a four-part series.

The first installment of NCCI’s “Inflation and Workers Compensation Medical Costs” series, released in October 2022, found that workers’ compensation medical costs increased 2% annually on average from 2012 to 2021. More than 60% of that growth came from facilities, according to the report.

In the second installment, released on Jan. 18, NCCI dove into medical facility costs specifically. NCCI examined three different types of facilities—hospital inpatient, hospital outpatient, and ambulatory surgical centers (ASC)—and broke down facility costs by region. On a countrywide basis, outpatient was the most significant driver of facility cost increases, followed by ASCs, and then inpatient. However, inpatient facility costs were the largest driver in the Southeastern region. Looking at each facility type’s contribution to the change in facility-paid cost per claim spanning the decade from 2012 to 2021, outpatient grew by 1.6% annually countrywide, while inpatient grew by 0.7% and ASC by 1%.

NCCI says two factors help explain the changes in medical facility costs: the amount paid per visit and the number of visits per claim, and NCCI notes that, across facility types, increases in the amount paid per visit were the main drivers of increased facility costs for the past decade. Inpatient payments per visit grew the fastest at 6.6% per year, followed by ASC at 5.4%, and outpatient at 3.3%.

Regarding the annual change in facility visits per claim across Service Years 2012 to 2021, both outpatient and ASC increased modestly countrywide by 0.4% and 0.6%, respectively. Impatient decreased by 3%. Broken down by region, outpatient saw 0.7% increases in both the Midwestern and Northeastern regions. The Southeast saw a 0.8% increase while the West saw a 0.2% decrease. Decreases for inpatient were seen across all regions. ASC saw the biggest swings across regions, ranging from a 3.4% increase in the Northeast to a 2.6% decrease in the West.