Geographic variation in expenditures for Workers' Compensation hospitalized claims.

OBJECTIVE: Past literature finds considerable variation in the cost of physician care and in the utilization of medical procedures. Variation in the cost of hospitalized care has received little attention. We examine injury costs of hospitalized claims across states.

DESIGN: Multivariate regression analysis is used to isolate state variations, while controlling for personal and injury characteristics, and state characteristics.

SETTING: Injuries to workers filing Workers' Compensation lost workday claims.

PARTICIPANTS: About 35,000 randomly sampled Workers' Compensation claims from 17 states filed between 1979 and 1988.

MAIN OUTCOME MEASURE: Medical payments per episode of three injury groups: upper and lower extremity fractures and dislocations, other upper extremity injuries, and back strains and sprains.

RESULTS: Statistical analyses reveal considerable variation in expenditures for hospitalized injuries across states, even after controlling for case mix and state characteristics. A substantial portion of the variation is explained by state rate regulations; regulated states have lower costs.

CONCLUSIONS: The large variation in costs suggests a potential to affect the costs of hospitalized care. Efforts should be directed at those areas that have higher costs without sufficient input price, quality, or case mix justification.