Editor's Note: This article originally appeared inNational Underwriter,P&C.

Hospitals have driven up auto insurers' costs by more than $1billion with charges for treating accident victims that wouldnormally be paid by Medicare or Medicaid, an industry group studyhas found.

Low reimbursements from Medicare, Medicaid and other publichealth insurance programs have prompted the shift, announced theInsurance Research Council in Malvern, Pa., which did theresearch.

The IRC said this activity has meant auto injury claim costshave risen and auto insurers have been forced to scrutinizehospital bills more closely and negotiate them prior topayment.

The IRC estimated that bodily injury cost shifting in 2007resulted in $1.2 billion in excess hospital charges from 38 states.Twenty-eight of those states do not have no-fault insurance, andanother 10 have no-fault insurance but without thresholdrestrictions on injury lawsuits.

The IRC said that "The full impact of hospital cost shifting,including that occurring in other insurance coverages and in otherstates, is likely much greater."

"The conventional wisdom is that hospitals aggressively seek toshift costs from public insurance programs to private payers, suchas auto insurance companies," said Elizabeth Sprinkel, senior vicepresident of the IRC, in a statement.

Sprinkel added that, "With this study, we now have informationon the magnitude of cost shifting and a better understanding of theneed for supportive state laws and effective tools that will enableauto insurers to pay hospitals appropriately and help control autoinjury claim costs."

Hospital cost shifting to auto injury claims, according to theIRC, illustrates the complex relationship between property-casualtyinsurance and the broader health care and insurance system.

"Health care legislation enacted by Congress last monthunderscores the complexity of this relationship," said Sprinkel."It will take months, if not years, to understand the full impactof the reforms on hospital cost shifting and the auto insurancesystem."

To explore the relationship between key health system featuresand auto injury hospital costs, the IRC said it developed astatistical model of average hospital charges for auto injuryclaims in different states.

Key predictors of average hospital charges confirmed by themodel are the percentage of a state's population who goes withouthealth insurance coverage and the percentage of the populationcovered by Medicaid.

To estimate excess hospital charges due to hospital costshifting, the IRC compared average hospital charges for bodilyinjury liability claims in Maryland with average charges in the 38states without no-fault or without no-fault threshold restrictionson lawsuits.

In the 1970s, Maryland received a waiver from the federalgovernment allowing it to regulate hospital reimbursement rates forall purchasers of hospital services. As a result, virtually allhospital cost shifting in the state was eliminated, the IRCexplained.

The researchers said, "Maryland's unique approach to hospitalreimbursement, while unlikely to be replicated in other states,provides an opportunity to examine costs in an environment withminimal cost shifting."

In all instances, the IRC said it found that average hospitalcharges for auto injury claims in Maryland were substantially lowerthan hospital charges in most other states.

The IRC also found that the costs of expensive diagnosticprocedures performed in Maryland hospitals were much lower than inother states, but were more similar to costs in other states whenthe procedures were performed outside a hospital.

Its study, "Hospital Cost Shifting and Auto Injury InsuranceClaims," the IRC said, is based on data from more than 42,000 autoinjury claims closed with payment under the five principle privatepassenger coverages.

Twenty-two insurers, representing 58 percent of the privatepassenger auto insurance market in the United States in 2006,participated in the study.

The IRC closed claim study collected detailed data on injury;medical treatment; claimed losses and total payments; claimhandling techniques; and attorney involvement.

Copies of the study are available at $125 for an electronicversion, or $140 for a printed copy.

More information on the study's methodology and findings isavailable by contacting David Corum at (484) 831-9046, or [email protected].IRC's website is www.ircweb.org.