The Workers Compensation Research Institute released the 2026 edition of its Hospital Outpatient Payment Index on May 5, benchmarking workers’ comp hospital outpatient surgery payments across 36 states that account for 88% of national WC benefits paid. The headline finding: for the same knee and shoulder surgeries, payments range from $2,711 per benchmarked procedure in Nevada (35% below Medicare) to $28,713 in Alabama (471% above Medicare). That is a tenfold spread for clinically identical work.
The gap is not random. It tracks directly to how states regulate hospital outpatient fees. States with fixed-amount fee schedules pay substantially less than states using percent-of-charge or no fee schedule at all. WCRI found that payments in charge-based and no-fee-schedule states grew at roughly twice the rate of fixed-amount states from 2011 to 2024.
Who It Affects
Multi-state self-insured employers carry the most direct exposure. A manufacturer with operations in both Alabama and Nevada is booking WC medical case reserves for shoulder surgery that differ by a factor of ten, for the same diagnosis and the same CPT codes. Public entities, school districts, and self-insured hospital systems operating across state lines face the same jurisdictional pricing disparity.
Captive programs and pools that aggregate WC exposure from multiple states also need to account for this. If the membership mix shifts toward high-cost states (or a new member joins from one), the historical medical severity assumptions used in the reserve study may understate the tail.
The Reserve Mechanism
The operative driver is medical severity. Hospital outpatient surgery is a large and growing share of WC medical spend, and the price a self-insured employer pays for that surgery depends almost entirely on the state fee schedule structure rather than clinical complexity.
For actuaries building WC reserve estimates, this creates a jurisdictional mix problem. Loss development factors calibrated on a blended book will understate severity in charge-based states and overstate it in fixed-amount states. If a self-insured employer’s exposure base shifts (opening a facility in Alabama, closing one in Nevada), development patterns built on historical data will not reflect the new cost environment until several accident years of new data emerge.
The growth rate differential compounds the problem. When medical payments in charge-based states grow at twice the rate of fee-schedule states, a static severity trend assumption applied uniformly across jurisdictions will miss the divergence. The WCRI CompScope 2026 data already flagged 6% annual claim cost growth across all components; this report shows that growth is not uniform by geography.
What This Means for Your Next Review
Ask your actuary whether WC medical loss development factors are segmented by fee schedule type or at least by state. If your program spans both fixed-amount and charge-based jurisdictions, a single blended severity trend may be masking significant divergence. For multi-state captives and pools, request a breakdown of medical severity by state and compare it against the WCRI index to see where your program sits relative to the benchmark.