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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 and 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 for 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.

And the IRC said that "The full impact of hospital costshifting, including that occurring in other insurance coverages andin other states, 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 a statement from ElizabethSprinkel, Senior Vice President of the IRC.

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 healthcare and insurance system.

"Healthcare 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 without healthinsurance coverage and the percentage of the population covered byMedicaid.

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 principal privatepassenger coverages.

Twenty-two insurers, representing 58 percent of the privatepassenger auto insurance market in the Unites Sates 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 each, 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 iswww.ircweb.org.