Paduda: Is California the Canary in the Coal Mine?

Thursday, September 24, 2026 | 0

Two reports indicate that workers’ comp medical costs in California are climbing. That’s important for two reasons:

• 

  Joe Paduda

  The Golden State accounts for about one of every five work comp premium/equivalent dollars.
• Trends tend to start/grow in California (unlisted codes, physician dispensing, cumulative trauma, patient harvesting) and work their way eastward.

That said, remember that three of California’s cost drivers are unique to the state.

Earlier this month, the Workers Compensation Research Institute released a report indicating that medical costs increased 7% last year, a bigger increase than the 6% annual increase for the previous two years. One notable finding, which won’t come as a surprise to regular readers, is that the biggest driver is hospitals.

A Workers' Compensation Insurance Rating Bureau report shows slightly different figures, likely due to different underlying data (WCRI uses lost-time claim data; WCIRB is all-inclusive).

A couple of notable takeaways:

• Costs in Southern California increased more than elsewhere, a full 8%, driven by higher prices across the board.
• Hospital outpatient costs more than doubled since 2014, driven by higher payments per visit.
• Inpatient costs jumped 9% from 2024 to 2025.

What does this all mean?

California does have unique characteristics. However, the hospital cost increases are not unique to the Golden State. 

Those are especially notable, as California’s comp inpatient reimbursement is based on Medicare diagnosis-related groups, which tend to limit cost increases (but are increasingly being manipulated by revenue cycle management).

So what does this mean for you?

Better up your facility cost management game.

For hospitals’ perspective, read this. Yeah, it’s pretty bizarre.

Joseph Paduda is the principal of Health Strategy Associates, a consulting firm focused on improving medical management programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.