How Payers Can Reduce Emergency Department Admission Rates, Costs

August 09, 2023 - Members and payers do not always see eye-to-eye, but one point on which they closely align is their desire for members to stay out of the emergency department.

Emergency department visits are associated with higher healthcare spending. A single trip to the emergency room costs $2,453, on average, under a large employer-sponsored health plan. The out-of-pocket costs can range from $128 or less to more than $907.

And, in recent decades, evidence indicates that these costs are only growing.

Emergency department services account for a small share of overall health system spending, absorbing 3.2 cents out of every healthcare premium dollar. But current data points figure into a long, upward trend in emergency department spending and use. Out-of-pocket and emergency room spending grew 85 percent and 51 percent, respectively, from 2012 to 2019.

These visits strain both the healthcare system and members’ savings accounts.

As a result, emergency department visits represent one of the key utilization metrics for payers’ value-based care initiatives. Insurers not only want to track this measure, but they also seek to lower instances of unnecessary emergency department use.

Payers leverage telehealth capabilities, use machine learning and advanced analytics tools, and implement value-based contracts to lower emergency department use and spending, among other strategies.

Using virtual care, telehealth

The explosion of telehealth led to the rapid ascension of virtual care plans. Many of these plans sought, in part, to control unnecessary emergency department visits along with other quality measures.

To accomplish this, the plans provided 24/7 support with an emphasis on primary care. Some offered zero-dollar copays on urgent care services. They may also replace after-hours consultations and lower-acuity emergency department trips, a McKinsey report projected. Around one in five of all emergency department visits could be diverted to virtual care.

In their nascency, virtual-first health plans were expected to reduce the costs normally attributed to emergency care. Experts anticipated improved patient outcomes and lower costs. A separate McKinsey analysis estimated that virtual-first care could reduce emergency care costs to $50.

As virtual care plans took off, payers continued to invest energy and funds in telehealth solutions. For members who have been advised to seek care within 24 hours, payers found that tele-emergency care can reduce emergency department visits.

A study of 7,845 Veterans Affairs member calls to a tele-emergency care pilot revealed that this form of care was associated with fewer emergency department visits when compared to typical nurse triage. Additionally, the Veterans Affairs pilot resulted in lower hospitalization and lower out-of-network spending.

Establishing value-based contracts

Value-based care aims to reduce unnecessary expenditures and low-value care. One way that payers achieve this is by lowering emergency department visits.

Medicare Advantage beneficiaries have seen significant impacts from value-based care. After infants under the age of a year, adults over the age of 75 have the highest emergency department admission rate. But Medicare Advantage’s value-based model has been key to lowering these rates.

In a study of almost 489, 800 Medicare Advantage beneficiaries, value-based care outperformed fee-for-service Medicare on acute care use. Beneficiaries covered under two-sided risk models saw 375.8 emergency department visits for every 1,000 beneficiaries. In contrast, fee-for-service beneficiaries saw 434.1 visits.

Avoidable emergency department visits were lower in value-based care than in fee-for-service as well, with 21 visits per 1,000 beneficiaries in the former models and 26.8 in the second model.

Significant differences were only perceptible in two-sided risk models in which providers agreed to both upside and downside risk. Upside-risk only models did not see significant results.

One major payer found that value-based contracts decreased its members’ emergency department visits by 16 percent. Utilization of hospital admissions dropped as well, while primary care visits and preventive screenings increased.

Leveraging machine learning, advanced analytics

Machine learning and advanced analytics tools can condense medical record data, hypertarget members who have experienced care gaps, and support Medicare Advantage risk adjustment.

For emergency department utilization rates, these tools assist payers in recognizing members that are at risk of an emergency department visit or readmission.

Payers do not have to sift through hundreds of pages of electronic health records to assess retroactively why members went to the emergency department. Instead, they can condense the information and predict whether a set of symptoms or an ongoing condition is likely to send a member to the emergency room. This allows payers to be less reactive and more proactive.

However, these tools should be used with care. Algorithm-based methods of identifying unnecessary care to determine reimbursement have been known to perpetuate biases against people of color.

Bolstering social determinants of health initiatives

Social determinants of health (SDOH) touch on many aspects of members’ lives. The impacts affect members’ ability to maintain healthy lifestyles and manage chronic diseases.

Loneliness, lack of access to healthy foods, and lack of transportation may contribute to emergency room use, particularly among members with chronic diseases, according to a study of over 21,500 Medicare Advantage members with type 2 diabetes.

Individuals who suffered from loneliness or who lacked transportation had high rates of emergency department visits, with 173.0 and 244.6 visits per 1,000 beneficiaries, respectively. Additionally, food insecurity was associated with consistent acute care use, including 84.9 emergency room visits per 1,000 beneficiaries.

Separately, the US Census Bureau found that individuals without access to transportation have a 2.5 higher rate of emergency department admissions than those who can access a vehicle.

When payers identify and address SDOH factors, they can drive down their emergency department admission and readmission rates.

For example, one health plan partnered with a meal delivery service to bring food to Medicaid beneficiaries with chronic diseases that required certain diets. Beneficiaries received the deliveries for 13 weeks.

Emergency department use dropped 31 percent as a result of these efforts. However, due to the pandemic, a control group saw a 17 percent decrease in emergency department visits.

A CMS program for fee-for-service Medicare beneficiaries also found that addressing social determinants of health decreased trips to the emergency room.

The program used a survey to identify beneficiaries with SDOH needs including housing, food, and transportation insecurity. Then the payer offered assistance navigating community services. Navigational services reduced emergency department visits by 9 percent.

Diverting care to urgent care centers may produce mixed results

One approach that some major payers tried has not served them well: limiting emergency department coverage in the hopes of diverting patients to lower cost urgent care centers.

Urgent care visits cost, on average, around $1,475 less than emergency department visits—$171 compared to $1,646, respectively, a nationwide study spanning over ten years found. Moreover, opening a new urgent care center was tied to a decline in emergency department visits in that area.

However, the same study discovered that the savings of an individual urgent care visit compared to an individual emergency room visit were overshadowed by the increase in costs associated with an increase in urgent care visits. Due to higher utilization, urgent care costs grew by $6,327.

This strategy has backfired against major payers in the past. When one large payer announced that it would be changing its emergency department facility coverage standards and urged members to seek out urgent care first, it anticipated saving $32 billion each year. However, the payer received such severe backlash that it stopped the policy.

Providers argued that reducing emergency care coverage would deter patients from accessing healthcare services and lead to unexpected, high bills in the emergency room.

While limiting emergency care coverage to redirect members to urgent care might not be effective, payers have a number of solutions at their disposal to reduce emergency department visits.