Department of Health and Human 
Services

OFFICE 
INSPECTOR GENERAL

CONTROLLING

EMERGENCY ROOM USE:

ST A TE  MEDICAID REPORTS

:vCE. 
Richard P. Kusserow 
INSPECTOR GENERAL 
MARCH 1992 
'lq.d'ia  OFFCE OF INSPECTOR GENERA

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95
452 , as amended, is to protect the integrity of the Deparment of Heath and Human 
Services' (HHS) programs as well as the heath and welfare of beneficiares served by 
those programs. This statutory mission is cared out through a nationwide network of 
audits, investigations, and inspections conducted by three DIG operating components: the 
Office of Audit Services, the Office of Investigations, and the Office of Evaluation and 
Inspections. The DIG also informs the Secreta of HHS of program, and management 
problems, and recommends courses to correct them. 
OFFCE OF AUDIT SERVICES 
The DIG's Office of Audit Services (OAS) provides all auditing services for HHS , either 
by conducting audits with its own audit resources or by overseeing audit work done by 
others. Audits examine the performance of HHS programs and/or its grantees and 
contractors in caring out their respective responsibilities and are intended to provide 
independent assessments of HHS programs and operations in order to reduce waste
, abuse
and mismanagement and to promote economy and efficiency throughout the Deparment. 
OFFCE OF INESTIGATIONS 
The DIG's Office of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiares and 
of unjust enrichment by providers. The investigative efforts of 01 lead to criminal 
convictions, administrative sanctions, or civil money 
penalties. The 01 also oversees 
State Medicaid fraud control units which investigate and prosecute fraud and patient abuse 
in the Medicaid program. 
OFFCE OF EV ALVA TION AN INSPECTIONS 
The DIG's Offce of Evaluation and Inspections (DEI) conducts short-term management 
and program evaluations (called inspections) that focus on issues of concern to the 
Deparment, the Congress, and the public. The findings and recommendations contaned 
in these inspection reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of deparmenta programs. 
This report was prepared in the Dallas Regional Office under the direction of Regional 
Inspector General Ralph Tunnell and Deputy Regional Inspector General Chester 
Slaughter. Project staff are: 
Pamela A. Smith  Proj ect Leder, Dallas 
Judith V. Tyler  Program Analyst, Dallas 
Thomas A. Noplock  Program Specialist, Headquarers  \ ~ 
Department of Health and Human 
Services

OFFICE 
INSPECTOR GENERAL

CONTROLLING

EMERGENCY ROOM USE:

STATE MEDICAID REPORTS

:vCE. 
Richard P. Kusserow 
INSPECTOR GENERAL 
OEI 06-90-00181 
'lq.d'ia  . . .....     ......     .......       .......       .......       .......       ......      ......      ......      .....     .....     ......      ......      .....     ....    ....    ....    ....    ....    ....    ....    .....     .....     .......       .......       .......       .......       ........        ........        .........         .........         .........         ..........          ..........          ..........          ..........          .........         ........        .......       .....     .....     ....   .
. ..  ..  ...   ...   ...   ...   ....    .....     .....     .....     .....     .....     .....     .....    .....     .....     ...   ...   ...   ...   ..  ..  . . . 
TABLE OF CONTENTS

INTRODUCTION 
. . 1

STATE MEDICAID REPORTS

Arkasas 
. 6

Kentucky 
. . . . 8

Michigan 
. . . . . . 11

Minnesota 
. . . . . 14

Missouri 
. . . 18

Pennsylvania. . . . . 

ENDNOTES

APPENDIX A: . Public Heath Service Comments  . . . A-
 , "
INTRODUCTION

PURPOSE 
This report describes six States' procedures for controllng emergency room use by 
Medicaid recipients, obstacles they encountered in developing the controls, and self-
evaluations of their success.

BACKGROUND 
The non-emergency use of emergency rooms by Medicaid recipients has long been 
recognized as a costly problem. In September 1983, the DIG reported a very high misuse 
of hospita emergency rooms by Medicaid recipients. 1 Studies continue to show that 
Medicaid recipients consistently make a higher proportion of non-emergency visits ranging 
from 17 percent  to 61 percent. 3 4 In contrast, recent studies show non-emergency visits 
for the general public range from 11 percenf to 38 percent 7 of all emergency room 
visits. The DIG report also found that emergency room visits normally cost at least three 
times the charge of a community-based physician for the same care. 
States attempting to control emergency room use must consider several Federal 
requirements. Medicaid recipients have the right to choose their heath care providers. 

If access to care of adequate quality is not denied, Medicaid agencies can restrict 
recipients in choice of providers. However, a State must request a freeom of choice 
waiver. 9 States must also obtan waivers for a Medicaid demonstration project.lO 
Finally, Federal anti-dumping legislation prohibits an emergency room s refusal to treat 
patients who cannot pay for services, and requires screening examinations of patients 
presenting for care. 
METHODOLOGY 
We chose six States from the nine presented in the companion report  Use of Emergency 
Rooms by Medicaid Recipients  , OEI06-90-00180. The sampled nine States had mature 
programs13 of utilzation control. The 
six States selected ilustrate a varety of 
emergency room controls developed, implemented and/or discarded. The sites include a 
mix of rural and urban populations. 
We collected descriptive and quantitative data from each sampled State. 
Using a 
structured interview guide, we interviewed Medicaid managers and/or staff directly 
responsible for establishing the emergency room controls. Topics covered were specific 
detals of States' procedures , reasons for implementation, barriers and opposition 
overcome, perceived successes and utilzation statistics. In addition, States provided 
copies of internal documentation that describes and evaluates their programs.  , "
FINDINGS 
As a context for the individual State reports, the following briefly summarzes key 
findings in our companion report  Use of Emergency Rooms by Medicaid Recipients. 
Heavy Emergency Room Use By Medicaid Recipients Is A Continuing Problem. 
Medicaid recipients stil use the emergency room for non-emergency care at high rates. 
Among the study States, the mea of non-emergency use as a percent of all their 1990 
Medicaid emergency room visits was 55 percent. Figure 1 shows the individual non-
emergency rates for the nine sample States. 
1990 Non-Emergency Use Of The Emergency Room 
100 
Percent Of Tota Medcad Emergency Room Use 
Missuri 
AranCsaalsif oKrneinat Mucikc hMiginanne sota PennsylvaUntaiha 
Wisconsin 
Dat 
Figure  1 -- source: Stae reported  (6  sites); HCFA MSIS program  (3  sites). 
Substantial Medicaid Savings Could Be Realized By Redirecting Non-Emergency
Visits To More Appropriate And Less Costly Care Sites. 
If four sample States had reduced non-emergency visits to 40 percent, the highest rate for 
the general public noted in the literature, they could have saved $39. 
5 milion in 1990. 
This assumes that patients originally seeking non-emergency care in the emergency room 
were diverted to less expensive community care. 
States Developed Controls To Improve Access And Continuity Of Care, As Well 
As To Reduce Costs. 
Staffs knew Medicaid recipients were using the emergency room for primar care which 
increased expenditures. Thus, improving access to and continuity of alternative medical 
care was imperative to decreasing non-emergency use of the emergency room. 
States also 
listed cost savings as a major concern leading them to develop program controls.  Since both recipient and provider behavior caused non-emergency use of emergency 
rooms, States developed controls that attempted to change both. Sampled States had 
developed 23 controls of emergency room use summarzed in the following table. 
EMERGENCY ROOM CONTROLS DEVELOPED BY STATES 
EMERGENCY ROOM CONTROLS

NAME OF  NUMBER  NUMBER  NUMBER 
PROGRA/PROCEDURE  DEVELOPED  IMPLEMENTED  REMAINING 
MANAGED CAR 
CO-PAYMENT 
ER CLAIMS REVIEW 
1 (1 altered) 
PRE-PAID HEALTH PLANS 
LOCK
ER VISIT LIMIT 
PAYMENT DIFFERENTIATION 
OTHER (NURSE PHONE LINE) 
TOTAL  18 (1 altered) 
Recipients had used the emergency room for primar care, during and after physician 
office hours, because they lacked access to an ongoing relationship with a primar care 
provider. Further, physicians and hospitas frequently encouraged Medicaid recipients in 
this usage pattern. States developed controls that provided recipients either mandatory or
volunta access to an ongoing relationship with a primar  , or referred a 
care giver
patient to an appropriate setting based on screening of symptoms. States also altered 
behavior by limiting access to the emergency room. They limited numbers of emergency 
room visits, required recipient co-payments, and denied/reduced hospita payments for 
non-emergency care. 
Prior to 1982, State systems did not distinguish between emergency and non-emergency 
care and/or did not differentiate reimbursement rates. Without this data, States could not 
determine the cost of non-emergency care and the extent of the problem. By defining 
levels of emergency room care and by establishing payments based on the level 
of care 
provided (tiered pricing), some States could control costs and document non-emergency 
use. Also, paying trage fees to hospitas for assessing patients encouraged them to refer 
non-emergency patients to more appropriate settings. 
The Majority of Program/Procedures Considered Successful Address 
Access To 
Care Through Managed Care/Pre-Paid Programs. 
Thirteen of fifteen program controls, stil in place and considered successful, address 
access to care. The controls provide recipients with ongoing primar care and referral to 
other services. Nine are managed care or pre-paid heath plans. The other four address  access based on patient' s age and condition, or lock-in to a physician. Data indicate a 
greater reduction in non-emergency visits might be possible if more Medicaid recipients 
were enrolled in managed care/pre-paid programs. These programs control referrals to 
care outside the normal setting and decrease the number of non-emergency visits. 
Further, comprehensive programs that include managed or pre-paid care appea to be 
more effective in controlling emergency room use. 
States Have Been Successful In Overcoming Opposition To Controls On Non-
Emergency Use Of Emergency Rooms.

Opposition to program controls came primarly from three groups: providers (both 
physicians and hospitas), the Medicaid population and advocacy groups. The opposition 
focused on payment and administrative problems for providers, and access to care and 
freeom of choice issues for recipients. For the most par, States reduced opposition over 
time as all paries gained experience and refined procedures. Anti-dumping legislation 
was not significant to developing controls of emergency room use. 
Despite The Positive Actions Taken By Study States, Non-Emergency Use Of
Emergency Rooms Is Stil A Problem. 
State data tend to describe overall trends in emergency room use and program savings
, but 
data do not always link either to specific program controls or reduced non-emergency use 
of the emergency room. Available information shows some successes and some 
continuing problems in controllng emergency room use. The development of tiered 
pricing and corresponding procedure codes has enabled some States to demonstrate 
program savings. However, data describing patterns of emergency room use, in some 
instaces, is stil flawed. While savings cannot always be directly attributed to a 
reduction in non-emergency use, seven States reported, for 1987 through 1989, savings of 
$181 969 699 from implemented controls. Some States did not, in fact, reduce emergency 
room utilization; they simply denied or reduced payment.  ST A TE MEDICAID REPORTS
 ARKANSAS

State Medicaid Population: 221 139 
Reasons For Developing Controls Of Emergency Room Use 
The primar impetus was the Agency s lack of policy distinguishing emergency from non-
emergency care. The consequences, as Surveilance and Utilization Reviews (SURS) in 
late 1983 showed, were Medicaid recipients over-utilzing emergency room services and 
providers billng too many emergency room services. Related to these concerns was the 
Agency s desire to contan program costs. Thus, the Agency decided to curb what it 
described as "a wide open program with no controls. " It also wanted to improve 
continuity of care by discouraging use of the emergency room for primar care. 
Description of Controls 
Emergency room claims review 
First, the Agency defined emergency care. With assistace from State and national 
associations of emergency room specialists , the Agency developed specific criteria to 
determine a patient's nee for emergency services. The criteria are: significant trauma 
fever of 103 degrees or above, reduced menta alertness, drug or substace overdose 
respiratory distress, substernal pain, onset of labor, shock, and significant bleeing. 
Children under two yeas of age 
are not screened. 
Next, the Agency contracted with a professional review organization (PRO) to review all 
claims for emergency services. Since 1984, PRO staff compare medical record 
documentation for each emergency room claim with the Agency s emergency criteria. 
the medical documentation does not appea to meet the criteria, a physician consultat also 
reviews the case for a final determination. With two exceptions, all claims not meeting 
the criteria for emergency care are denied. Associated claims for emergency room 
supplies and drugs are also denied. The exceptions allowed are an out-patient hospita' 
provision of non-emergency services in the emergency room when community-
based 
physicians are not available, and care provided to children under two. Length of time 
symptoms have been evident and potential problems of further delaying treatment are 
considered in claim adjudication. 
Other improvements 
Over time the Agency has improved its control procedures. It established an "  hour 
observation bed" to determine if a true emergency exists in some cases (primarly for 
threatened labor). Hospitas bil this service at a non-emergency rate. The Agency also 
plans to notify emergency rooms of over-utilizers of emergency care and to investigate 
whether they could obtan services elsewhere.  Implementation 
Implementation of the control proceeed quickly. The Agency developed its policy in 
three months, made systems changes and immediately implemented the control State-wide. 
In fact, the Agency did not report any legal or resource barers to the initiation of the 
program control. It experienced some opposition from emergency room physician groups 
that provided services to varous facilities. The strongest resistace came from a group 
that worked in both Arkasas and Louisiana. The physicians did not want to dea with 
two sets of State criteria, and they felt they had not been allowed input when the Agency 
developed its emergency care criteria. However, when they leaed that one of their own 
physicians had been involved in the control' s development, they dropped their opposition. 
Results Achieved 
The Agency considers its control of emergency room use financially 
successful. Available 
data show that since Januar 1988, it has saved a net of $1.6 milion (after deducting the
PRO review expenses) by denying claims for non-emergency care at emergency rates. 
Deducting the entire cost of the PRO contract since 1984 from program savings of the last 
three-and-a-half yeas stil puts the Agency substatially ahead. These calculations assume 
that claims for supplies and drugs accompany each claim for facilty emergency services 
and that the hospitas resubmit claims for non-emergency services. The tota number of 
emergency room visits has increased over the yeas, and the denial rate for emergency
room claims has remained relatively constat. 
Transferability 
The Agency believes its procedure is transferable. The concept is not complicated nor 
were the systems changes. The Agency emphasizes, however, that a prerequisite to a 
successful program like this one is a good relationship between the State and its PRO. 
State Contact For Further Information 
Roy Jeffus , Administrator 
Utilization Review Section, Medical Services 
Division of Economic and Medical Services 
O. Box 1437, Slot 1102 
Litte Rock, AR 72203  KENTUCKY

State Medicaid Population: 417 716 
Reasons For Developing Controls Of Emergency Room Use 
The Agency s desire to improve continuity of care, assure access to appropriate care and 
contan Medicaid costs motivated development of program controls. Prior to

implementation of the controls, 44 percent of Medicaid patients had no regular family 
physician and used the emergency room for primar care. Even patients with a regular 
physician used the emergency room for primar care after hours. Cost and utilzation 
information reveaed an increase in outpatient hospita visits with 65 percent to 80 percent 
of emergency room admissions being routine care. Patients often cited 24-hour 
availabilty of emergency room care without an appointment as the primar attraction. 
Furthermore, after hospita anti-dumping regulations became effective, emergency room 
staffs felt increasingly obligated to treat everyone who presented for care. 
Description of Controls 
Pre-paid health plan 
The Agency first tried a pre-paid heath plan called Citicare. A small program that 
contracted with a private heath insuring organization, Citicare covered about 40 000 
AFDC eligibles in Jefferson County (Louisvile). The State allotted limited funds as pre
payment for patient care. Citicare arranged for primar care case management with local 
physicians who received $44 per month for each patient they managed regardless of 
whether they delivered services. Medicaid recipients required their case manager s prior 
authorization for emergency room use. However, the program did not distinguish 
between emergency and non-emergency care. 
Managed care program 
After Citicare, the Agency developed its own managed care program called Kentucky 
Patient Access and Care Program (KenPAC). This program does not use a 
capitation fee 
nor contract with a private for-profit company for patient case management. Instead, the 
Agency pays doctors a monthly case management fee and also reimburses them on a fee-
for-service basis. The program covers about 265 000 AFDC or AFDC-related eligibles in 
all but 11 counties. Enrollment is mandatory, but most recipients select their own 
physician or clinic rather than having one assigned. 
KenP AC doctors provide patient care, authorize other service and make referrals as 
neeed. They also should provide 24-hour access to medical care. Recipients who 
believe they are il are asked to contact their case managers first, rather than presenting at 
the emergency room. Urgent care requires prior authorization unless the hospita cannot  -- 
reach the primar care physician. Hospitas may treat true medical emergencies without 
prior authorization. In any event, case managers must eventually authorize emergency or 
urgent care provided in the emergency room. Routine care in the emergency room cannot 
be authorized by the physician, and is not payable under the program. 
Future improvements  trige fee and revised diagnosis codes

The KenP AC program plans several improvements. The first is a triage fee to 
compensate hospitas for screening patients and providing non-emergency care. This 
would apply when the primary care physician has not prior-authorized care or when the 
emergency room s assessment and the primar care physician s assessment of the patient 
do not agree. A second improvement is establishing more specific diagnosis codes to 
assure that emergency room treatment is truly an emergency. 
Implementation 
The Agency implemented Citicare in July 1983. Physicians and welfare rights 
organizations, however, opposed the program. Under Citicare, with limited funds for 
patient care, doctors felt they had little control over the allocation of services. They also 
believed they had to make care decisions based on available funds. Interested paries 
generally perceived a limited access to care and an inherent incentive to deny neeed 
specialty care.

Implementation of KenP AC proceeed smoothly in 1986. The Legislature approved 
administrative regulations, but did not require budget approval since it assumed the 
program would save money. In fact, the Agency did not report any barers or opposition 
to the program. 
Results Achieved 
The Agency did not renew the Citicare contract after the first yea. The public continued 
to believe the program was not effective in that it was poorly designed and operated. Cost 
was also a factor. A State revenue shortfall in 1984 led to many budget cuts, but the 
Agency was unable to renegotiate the Citicare contract. Thus, expenditures for the pre
paid heath plan exceeed what the Agency would have spent for the 
taget population in 
the absence of Citicare. 
The Agency believes KenPAC has been a successful program. 
In 1989 an independent 
evaluation forecast savings for KenP AC by comparng its program costs to what costs 
would have been without it. Tota savings to Medicaid from May 1986 to June 1989 were 
estimated at $69.4 milion after adjustments for administrative costs and management fees. 
Gross savings for outpatient emergency services were $12. 1 millon, second only to gross 
savings for physician services of $72.6 milion. A client survey conducted for the  evaluation suggested most KenP AC clients understood how to arange office visits with 
their case managers and knew to call their case manager for emergency room treatment. 
KenPAC could benefit from further improvements according to the same 1989 evaluation. 
While most emergency room nurses and physicians at 15 sample hospitas felt overall 
emergency room utilization was reduced , they believed large numbers of KenP 
recipients stil used the emergency room for primar care. The Agency noted, however 
that emergency room staffs do not always distinguish between KenP AC patients and other 
Medicaid patients. In contrast to emergency room personnel
, 54 percent of KenP 
physicians believed the program was doing an "above average" to "excellent" job in 
preventing inappropriate use of hospita emergency rooms. Many suggested that KenP 
clients neeed to be better educated about when and how to use heath care, and implied 
they did not see this as being the case managers' responsibilty. Clients reported very 
good success in reaching their case managers during regular office hours, but many had 
problems when the doctors closed their offices. As a result, a large number of clients by
passed their case managers and went directly to the emergency room. 
Transferability 
The Agency believes the KenP AC approach is transferable. Many States have already 
contacted Kentucky for information, and subsequently, modeled their programs after 
KenPAC. The program is a simple concept requiring no additional paperwork for 
physicians and few Agency staff to administer, eight in this case. The program is feasible 
in urban and rural areas. Case management is easier, however, in urban areas where 
competition for medical services is greatest. In sparsely populated areas, finding 
physicians who are able to accommodate a larger patient caseload is more difficult. The 
Agency also suggests consulting with physicians and medical organizations to ensure their 
support and paricipation. 
State Contact For Further Information 
Roy Butler, Commissioner 
Deparment for Medicaid Services 
Cabinet for Human Resources 
275 East Main Street 
Frankfort, KY 40621-0001  MICHIGAN

State Medicaid Population: 1 100 000 
Reasons For Developing Controls Of Emergency Room Use 
Data from 1977 and 1978 postpayment utilzation reviews indicated a problem existed. 
Payments for emergency room care, which were sizeable and too high , led the Agency to 
identify over-users of emergency services. The Agency staff put these clients into a lock-
in program, but they reaized other clients stil used costly emergency care services for 
non-emergency care. At the same time, cost contanment for medical services in general 
concerned State officials. 
Description of Controls 
Emergency room claims review 
By a Governor s Executive Order in December 1981 , Medicaid stopped covering any non-
emergency services provided in an emergency room. Cost savings were the primar 
motivation for the order. The claims payment system was modified to recognize a list of 
acceptable emergency diagnoses. Unlisted diagnoses suspended the claim for review even 
if the hospita had marked a literal description of emergency on the claim form. The 
payment system denied suspended claims stil considered non-emergency services after 
review. The Agency also intensively educated the hospitas about the change and 
encouraged the hospitas, in turn, to educate patients. 
Liberalized "emergency " for children; hospital trige fee 
After initial implementation , the Agency adjusted some procedures. Staff developed a 
more liberal interpretation of "emergency " for children. They considered such factors as 
the time of day or a doctor s recommendation of an emergency room visit. Beginning in 
1989 the Agency allowed hospitas to claim a triage fee for assessing the condition of non-
emergency patients. The trage fee is one procedure code which hospitas can only bil 
alone and not in connection with another procedure. 
Implementation 
Implementation of the Executive Order proceeed quickly. The new policy and 
procedures were fully operational by Januar 1982. The Legislature had already approved 
the measure, and the required changes to the claims payment system were not labor 
intensive. The Agency had sufficient staff to review pended claims. Finally, the hospitas 
did not initially oppose the program change.  Results Achieved 
In one sense, the Agency considers this control of emergency room use successful. The 
estimated number of paid emergency room visits declined from 650 
000 in 1981 to 
310 000 in 1984. Estimated administrative costs and emergency room facility fees also 
declined from $18. 7 milion in 1981 to $14.4 millon in 1984. 
In another sense, however, the Agency says the program was not successful. Non-
emergency Medicaid clients were not actually using the emergency room less. When the 
Agency denied payment to the hospitas for the non-emergency services 
, the hospitas 
then tred to bil the client. This proved to be a wasted administrative effort, and 
eventually, the hospitas wrote off the costs. In addition, the Agency had to address a 
legal challenge to their policy. 
A class action suit fied by Medicaid clients named the Agency. The clients claimed 
hospitas inappropriately biled them for non-emergency services, and harmed their credit 
records by seeking collection. Medicaid notice of denial rules required the Agency to 
give notice, but the Agency believed the hospitas should have done it. To solve the legal 
question, in Februar 1989 , the Agency staed paying triage fees to hospitas as 
compensation for assessments of non-emergency patients presenting to emergency rooms. 
A second reason for instituting the triage fee was also a legal one. Hospita anti-dumping 
regulations, which prohibit hospitas from refusing to provide emergency treatment, were 
not in effect when the Agency originally implemented this program. The Agency believed 
the trage fee would support compliance with the anti-dumping regulations. 
The triage fee is worth the cost to the Agency. Estimates of 1990 paid administrative 
costs, emergency room facility fees and triage fees were $27.
9 milion for approximately 
690 000 emergency room visits. This compares favorably to their estimated 1981 
emergency room payments of $18. 7 millon which, in 1990 dollars, would equal $37.
millon. Staff are satisfied they are coming out ahead in program expenditures for 
services and avoidance of legal costs. 
Transferability 
The Agency believes their modified program , which includes the triage fee
, is 
transferable. The Agency notes that refusing to pay non-emergency services provided in 
the emergency room does cause a drop in claims paid, but does not change client 
behavior. At least, adding the triage fee helped to solve some program difficulties for the 
hospitas and the Agency. Systems changes to accommodate the acceptable diagnosis 
codes for emergency and the one triage code were not difficult.  State Contact For Further Information 
Esther Reagan
, Assistat to the Director 
Bureau of Program Policy 
Medical Services Administration 
P. O. Box 30037 
Lasing, MI48909  MINNESOT A

State Medicaid Population: 345 573 
Reasons For Developing Controls Of Emergency Room Use 
A desire to control costs and to improve continuity of care motivated the Agency to 
develop controls of emergency room use. Disproportionate increases in outpatient hospita 
expenditures signaled a problem area. In addition, the Agency neeed a procedure coding 
system that clealy identified the actual outpatient services rendered. Specific areas of 
interest were reimbursing only medically necessar services and assuring recipients 
access to quality heath care at the appropriate level. 
Description of Controls 
Diferentied care and payment levels, including trige fees 
A revised coding scheme for outpatient hospita and emergency room services is the most 
extensive of three fee-for-service controls. Developed in 1989, the coding identifies three 
distinct levels of facility fees for outpatient hospita care -- emergency, urgent and clinic. 
These fees do not include laboratory, radiology or professional component fees, but they 
do include overhead incurred in an outpatient hospita visit. The emergency room facility 
fee is reimbursed in 15 minute increments at the lesser of the provider s usual and 
customar charge or at $25. The urgent care and clinic care facility fees are flat rates per 
visit. In 1990, the Agency added a triage facility fee to compensate hospitas for 
assessing patients prior to the delivery of emergency or urgent care services. While the 
coding scheme did not ensure recipients access to heath care, it and the triage fee did 
promote better access. The program applies State-wide to all Medicaid recipients not in 
the Pre-paid Medical Assistance Program. 
Managed care program and telephone trige 
Primar Care Utilization Review (PCUR) and a telephone triage line called Nurse Line 
the other fee-for-service controls, are smaller programs. PCUR is a managed care 
program for Medicaid eligibles who have abused heath care services. PCUR paricipants 
must select a primar care physician, pharmacy, inpatient hospita and outpatient hospita. 
In medical emergencies, access to any emergency room is available. However, without a 
referral from the primar care physician , if the patient is not an emergency or presents for 
care at a non-designated provider, the Agency would deny the claim. PCUR has 
approximately 239 paricipants. Nurse Line, a pilot project implemented in Januar 1991 
in one county, provides 24-hour triage. A nurse answers questions about heath 
conditions, advises of the nee for urgent or emergency care and directs the patient to the 
appropriate care delivery site.  Pre-paid health plan 
The Prepaid Medical Assistance Program (PMAP) is the other major program control. 
The Agency contracts with heath maintenance organizations (HMO) to provide all 
covered services for an established monthly payment. HMOs, concerned with appropriate 
service use, require recipients to contact them before presenting to the emergency room. 
Exceptions are "life threatening" emergencies when the recipient may contact the public 
emergency network (911) for services. The Agency requires the contracting HMOs to 
provide 24-hour access to health care services. Begun in 1985 as an demonstration 
project, PMAP now serves approximately 58 755 Medicaid recipients in 8 counties -- 3 
counties have freeom-of-choice waivers, and 5 do not since enrollment is volunta. 
AFDC eligibles in three counties account for the bulk of the program s population. The 
Agency recently received approval to extend mandatory HMO enrollment to another 
county. 
Implementation 
Implementation of the four program controls was relatively problem-
free. Three required 
the Legislature s approval, which it gave. In fact, the Agency reported no legal or 
resource barers to the initiation of the program controls. However, two programs
, the 
revised coding scheme in fee-for-service and the PMAP, faced opposition from groups 
outside the Agency. 
Physicians and outpatient hospitas objected to the revised coding scheme primarly 
because of reductions in payment rates. Since the Legislature mandated the new coding 
scheme to be budget neutral, the Agency reduced, by 40 percent, payments for outpatient 
physician services that are performed more than 50 percent of the time in a physician 
office. The Agency reasoned that doctors in outpatient hospitas are not assuming the 
overhead costs, such as personnel, space and utilities. The 40 percent reduction offset the 
reimbursement of the facility fees. The Agency also created ambulatory surgical center 
(ASC) grouper rates and changed rates for some ancilar services to a different coding 
range at a reduced rate. Physicians and outpatient hospitas also disliked distinguishing 
emergency, urgent and clinic services. 
The concerns of emergency care physicians and outpatient hospitas have been relieved 
somewhat. Through training sessions and seminars, they have gained a better 
understading of the facilty fee concept. In addition, they leaed the professional 
services in an emergency deparment are coded as prescribed by the Current Procedural 
Terminology (CPT) manual. They stil do not regard the payment rates favorably. 
Because the PMAP was a new concept in providing heath care to public assistace 
recipients, providers, recipients, counties and some Deparment staff voiced opposition
initially. Recipients in urban areas regarded it as a freeom of choice issue while rural 
counties and their recipients feaed losing physicians. Providers regarded the PMAP 
heath plans as another layer of regulation. Counties resisted the PMAP because, in a few  instaces, recipients had to select new providers. Experience with the program has 
overcome much of the opposition of these groups. 
Results Achieved 
The Agency believes the controls within fee-for-service have been successful. Staff can 
now readily identify types of service provided and whether services were 
biled in the 
appropriate categories. Units of service and costs for emergency care have remained 
fairly stable in 1989 and 1990, even though the number of eligible recipients has 
continued to increase. Tota outpatient costs have decreased due to more specific coding 
and the payment of ASC grouper rates. In FY 1989 , before the Agency implemented the 
revised coding scheme, Medicaid payments for outpatient hospita services were 
$31 764 653. In FY 1990, payments for the same service category were $29 409 906 
with only three-quarers of claims submitted using the new coding scheme. The Agency 
also notes that from CY 1989 to CY 1990, outpatient hospita charges submitted to 
Medicaid and two much smaller heath care programs increased by 25. 1 percent while 
payments increased by only 4. 1 percent. 
The PMAP has been successful as well. An Agency analysis of cost savings for CY 1987 
to CY 1989 showed a tota net savings of $14 282 488. The analysis notes some " serious 
limitations to the precision of these results " but concludes "the numbers indicate an 
abilty to control heath care cost trends through a managed, capitated system of heath 
care provision." The Agency believes savings in the whole program translate into savings 
in emergency room services. Client satisfaction is another factor for judging program 
success. Agency surveys of HMO clients indicated an extreme 
reluctace to change 
providers or to enroll in heath plans, but considerable satisfaction once they had 
established relationships with heath plan providers and understood their methods of 
providing heath care. 
Transferability 
The Agency believes all four program controls are transferable. The coding 
scheme to 
identify specific services does not require extensive systems changes if a State 
management information system can accommodate the implementation of procedure codes. 
The initiation of specific service codes did not require extensive Federal or State 
legislation. Any State considering this coding scheme, however, must have the flexibilty 
to create HCPCS17 codes or their own codes. For PCUR the Agency notes that other 
States already have in place the basis for PCUR through their recipient 
SURS programs. 
A program similar to Nurse Line only requires a State to contract with an organization 
that can provide a 24-hour telephone triage service. Finally, in areas where HMO or 
primar care case management networks exist, the Agency s model is transferable.  State Contact For Further Information 
Nancy McMorran, Program Consultat 
Deparment of Human Services 
Heath Care Management Division 
444 Lafayette Road 
St. Paul, MN 55155-3853  MISSOURI

State Medicaid Population: 409 223 
Reasons For Developing Controls Of Emergency Room Use 
Initially, the Agency developed controls of non-emergency use to improve recipients 
continuity of care and linkage with primar care physicians. Although it had not fully 
documented the problem , the Agency knew Medicaid recipients could easily obtan non-
emergency care at the emergency rooms. Thus, it specifically wanted to deter recipients 
from using the emergency room for primar care, to reduce the number of recipients 
over-utilizing emergency room services, and to provide access to care at an appropriate 
level. An added benefit of these efforts was cost savings resulting from reduced 
emergency room utilzation. Cost contanment efforts also neeed to address lower 
reimbursement for non-emergency care in the emergency room. 
Description of Controls 
. Limitng emergency room visits 
In 1982 the Agency developed a State-wide control to limit non-emergency visits to two 
per month. This control applied to both outpatient hospita clinics and emergency room 
services. For any visit over the limit, a claims review determined payment based upon 
medical necessity. However, the Agency allowed exceptions to the limit for recipients 
with both Medicaid and Medicare coverage, and for certn services: pre-nata care 
physical therapy, chemotherapy, radiation therapy, psychotherapy, and chronic renal 
dialysis. 
. Recipient co-payments 
To lower costs, the Agency has required co-payments of all Medicaid recipients since 
1983. Subject services are outpatient clinic and non-emergency use of emergency rooms 
as well as physician care in these settings. With exceptions, the recipient co-payment is
$2 for the facility fee and $1 for the 
physician fee. Providers must submit charges 
reduced by the co-payment amounts. However, a recipient's inability to pay cannot be 
used to deny or reduce services. 
. Recipient lock-

Administrative lock- , a small program , applies to recipients who over-utilize hospita 
emergency room services. Developed in 1990, the program requires over-utilizers to 
select a medical provider from which they must obtan all medical services or referrals 
except in the case of a true emergency. The Agency identified these recipients from 
computer-generated utilization reports and by examining the medical service history of 300  possible over-utilzers reported by providers. Currently, about 48 recipients paricipate in 
the administrative lock-in program. 
Managed care program 
The Jackson County Managed Heath Care program is mandatory for those county AFDC 
recipients determined eligible. Originally a Federal demonstration project in 1982, the 
Jackson County program now operates under a freeom-of-choice waiver. Thirty-six 
physician sponsors and four heath plans (one State HMO, two clinics and one hospita 
qualified as a Federal HMO) provide enrollees with primary care services and referrals to 
specialized care. The program guarantees 7-day-a-week provider availabilty and 24-hour 
telephone contact. Recipients may select their managed heath care plan, or the Agency 
wil randomly assign them to one. Currently, 29 000 recipients (7 percent of State 
Medicaid eligibles) are enrolled. The Agency emphasizes recipient education to promote 
better understading and more efficient use of services. For example, recipients are 
aware of their financial liabilty for non-emergency care if it is not authorized by their 
provider. 
Implementation 
The Agency did not implement the monthly limit of non-emergency visits due to 
administrative concerns and changes in physician reimbursement. The Agency determined 
the monthly limit was too complex and too expensive to manage. In addition, shortly 
after development of the monthly limit, but not as par of it, the Agency raised physician 
office fees to encourage them to treat clients there. However, the Agency did not raise 
physician fees for comparable care provided in an outpatient hospita clinic or the 
emergency room. Further, new procedure codes were developed to differentiate charges 
and settings, and to differentiate non-emergency visits in the emergency room and 
outpatient clinics. 
Implementation of administrative lock-in faced no resistace, but co-payments encountered 
some. Providers have been very supportive in reporting over-utilizers of emergency room 
services for potential inclusion in administrative lock-in. However, providers did not 
understad the co-payment requirements which , in turn, caused confusion over the 
systems process neeed to deduct and collect fees. Some hospitas wrote off uncollected 
fees. Some objected to the extra administrative work and the difficulty in getting people 
to pay. The Agency alleviated these problems by drawing on experience with co
payments in other areas before implementing them in the emergency room and by 
disseminating clarfications to the co-payment requirements. 
The managed heath care program in Jackson County did not face opposition. The 
Legislature provided statutory guidance to the Agency for developing the program. When 
the Agency attempted to expand the program to St. Louis, however, providers there 
opposed it. They feaed losing Medicaid paricipants to competing managed heath care  plans. Physicians also believed the monthly case management fee of $1.50 per paricipant
was too low. Due to these objections, the Agency did not expand the program. 
Results Achieved 
The success of co-payments and administrative lock-in is not certn. The tota number of 
emergency room visits continues to increase, but the rate of non-emergency use has 
fluctuated over the yeas and is currently rising. While the Agency reports co-payments
are importt, the program s results are unclea. The Agency believes MMIS data may 
be unreliable due to provider coding errors. The administrative lock-in program has been 
reported as " somewhat successful" ; however, data is not available to determine if 
emergency room use by program paricipants has decreased. 
The Agency believes the managed heath care program in Jackson County has been 
successful. According to a cost effectiveness report, the Agency has reaized savings of
$2 milion to $3 millon per yea from 1987 through 1989. Quality 
assurance reviews 
show that continuity of care has improved, and is as good or better than that of the 
general population. Additionally, emergency room visits appea to have decreased. 
Although the Agency is not sure about the reliability of data on which this emergency 
room information is based, the Agency considers it logical to conclude that emergency 
room use is being controlled due to the program requirement for physician referrals. 
Transferabilty 
The Agency feels the co-payment and managed heath care programs are transferable. 
Missouri suggests other Agencies try co-payments, but notes it is a difficult procedure to
implement. A managed heath care program requires a freeom-of-choice waiver which is 
available to any State. In addition , managed heath care has many forms and is adaptable. 
The Agency did not comment on the transferability of the administrative lock-in program. 
State Contact For Further Information 
Gar 
Bailey, Designated Principal Assistant 
Deparment of Social Services 
Division of Medical Services

O. Box 6500

Jefferson City, MO 65102-6500  PENNSYLVANIA

State Medicaid Population: 1 400 000 
Reasons For Developing Controls Of Emergency Room Use 
A nee for cost contanment and continuity of care motivated the Medicaid Agency to 
develop controls for non-emergency use. The Agency had been aware that recipients were 
receiving primar care in the emergency room since the Medicaid program began. Letters 
from providers, as well as information from Agency advisory committees, heightened its
awareness. Limiting emergency room access for non-emergency care, enhancing access 
to alternative care, and compensating emergency and non-emergency care more fairly 
were the Agency s goals. 
Description of Controls 
Diferentied care and payment levels; recipient co-payments 
The Agency instituted differentiated reimbursement levels and double co-payments for 
emergency room services to address care access and cost contanment under fee-
for
service. The differentiated reimbursement levels with corresponding procedure codes aim 
at more fairly compensating emergency room services. Charges are divided into hospita 
and physician components for both emergency and non-emergency care. Emergency care 
receives a higher fee in both components. This taloring of payments to service intensity, 
developed in 1985, generally follows the Blue Cross/Blue Shield scheme. The double co
payment, developed in 1984, imposes a fee on recipients for 
non-emergency care. The 
co-payment amount, ranging between $1 and $2 , is double the co-payment for other 
medical services. 
Managed care program 
In 1976, the Agency designed the HMO program to improve access to heath 
care for 
Medicaid recipients State-wide. Recipients have 24-hour telephone access to their primar 
care physician, who must prior-authorize emergency room care. In addition, recipient 
education cautions them not to misuse high cost emergency room services and informs 
them of their responsibility to pay for unauthorized emergency room care. Enrollment is 
volunta 
with 77 000 recipients currently paricipating. 
Pre-paid health plans 
HeathP ASS (Heath Pennsylvania 
Accessible Service System) is a heath insuring 
organization (HID) program that serves as a fiscal 
intermediar between the Agency and 
patients in specific sections of Philadelphia. Paricipating providers of primar 
care agree 
to 24-hour telephone access by their patients. When contacted, the provider decides  whether to authorize emergency room care, see the patient after hours, or schedule an 
office visit the next day. In addition, a HeathP ASS Hotline operates 24 hours a day, 7 
days a week to provide assistace to recipients. Developed in 1983 under a freeom-of
choice waiver, HeathPASS is the Agency s response to a legislative mandate for managed 
care of 100 000 Medicaid recipients. Currently, 82 000 recipients paricipate. 
The Community Heath Centers Program is a volunta, pre-paid program concerned 
primarly with improving access to care in Harsburg. Recipients receive ongoing heath 
care from community heath centers which must provide 24-hour telephone access to a 
parcipating provider. The telephone access is monitored to assure 24-hour availabilty. 
In addition, site visits are made to the heath centers to ensure provision of patient care. 
Recipients who receive non-emergency care are responsible for its payment. Developed 
in 1987 and fully operational in 1988, the program currently serves 5 500 recipients. 
Implementation 
The fee-for-service controls met different ends. The differentiation of reimbursement 
levels was implemented quickly over a four-month period, without opposition. The 
differentiated fee schedule was not subject to the regulatory process. The Agency 
published new fees in the Pennsylvania Bulletin so providers would be aware of the 
changes. Although not par of this procedure, the Agency also raised physician fees for 
office visits at the same time. However, the Agency did not implement the double co
payment due to opposition from Medicaid recipients, their legal counsel and hospitas. 
Opposition focused on the potential limitations on access to care, especially in rural areas. 
In addition, hospitas objected to the additional administrative activity required to collect 
co-payments. 
The managed care programs also had different implementation experiences. The 
Community Heath Centers Program encountered no implementation difficulties. The 
HMO program, unfortunately, found HMO' s reluctat to paricipate. Although enrollment 
of HMOs and recipients continues , the program does not operate in every county. 
HeathPASS faced opposition from many groups: Medicaid recipients, their advocacy 
groups, and certn providers. Recipients and their supporters perceived this as a 
mandatory program disallowing choice, although recipients could choose an HMO over a 
HeathPASS physician. They also felt recipients might receive less adequate care or were 
tagets of racial discrimination. Providers voiced doubts about the referral process for
primar care physicians and the different payment systems. 
The Agency has made progress in overcoming opposition to HeathP ASS. It has worked 
through the problems with the advocacy groups and has become more sensitive to client 
nees. 
Emphasis on heath education has been encouraged as well. Providers now like 
the program. They have seen they wil be paid on time, and have reaized their fee for 
office treatment is often greater than their fee for hospita emergency room treatment.  Results Achieved 
The Agency reports that the differentiation of reimbursement levels has been 
successful. 
Providers have complied with the program , and rates paid for true emergency care are a 
higher percent of the usual charge than before. However
, the Agency believes hospitas 
tend to claim more visits as emergencies when payment is higher. Agency quality 
assurance staff conduct random reviews to determine if this is a problem. 
The Agency feels the HMO and HeathP ASS programs have been successful, but reserves 
judgment on the Community Heath Centers Program, due to its relative newness. The 
HMO and HeathP ASS programs report increased continuity and access to care from July 
1989 to December 1990 while holding the rate of non-emergency use relatively constat. 
Additionally, the number of HMO paricipants has more than doubled in the past two 
yeas. For HeathPASS, the Agency has estimated State savings of $40. 
6 millon ($72. 
milion tota Medicaid funds) from March 1986 to December 1990. The estimates are 
based on payments for HeathPASS services compared to the fee-
for-service costs for 
providing the same care. In addition, emergency room use by HeathP ASS paricipants is 
less than emergency room use by Medicaid recipients receiving fee-
for-service care in 
Philadelphia. 
Transferabilty 
The Agency feels all their program controls are transferable. The differentiation in 
reimbursement levels requires the present availabilty or future development of procedures 
codes distinguishing emergency from non-emergency care. The Agency recommends the 
establishment of payment differentials since non-emergency treatment should use less 
resources. The HMO program improves access, is cost effective, and requires less work 
than other options since its volunta 
enrollment does not require a waiver. The whole 
design of HeathP ASS is transferable, if State law does not prohibit the formation of 
HIOs. The advantage of an HID is its capabilty to handle risk more creatively. HIOs 
also permit more flexible heath care delivery and can talor services offered to the heath 
care nees of a taget population. 
State Contact For Further Information 
Director of Outpatient Programs 
Bureau of Hospita and Outpatient Programs 
Rm 216, Cherr wood Building 
O. Box 2675

Harsburg, PA 
17015  , " , " , "
ENDNOTES

Non-Urgent Use of Hospita Emergency Deparments by Medicaid and Medicare 
Beneficiares  , Office of Analysis and Inspections, September 1983. 
Gifford, Marlyn J. , Jacek B. Franaszek, and Geoff Gibson  Emergency 
Physicians' and Patients Assessments: Urgency of Nee for Medical Care  Annals 
of Emergency Medicine  vol. 9, n. 10, October 1980, pp. 502-507. 
Philadelphia Heath Management Corporation  Emergency Deparment Use in 
Philadelphia: Urgent and Nonurgent Heath Care  , March 1987. 
Dickhundt, John S. , Dwenda K. Gjerdingen, and Donald S. Asp, "Emergency 
Room Use and Abuse, How It Vares With Payment Mechanism  Minnesota 
Medicine  vol. 70, October 1987, pp. 571-574. 
Buesching, Don P. , Alexander Jablonowski, Ernest Vesta, Wiliam Dilts, Charles 
Runge, Johanna Lund, and Robert Porter  Inappropriate Emergency Deparment 
Visits  Annals of Emergency Medicine  vol. 14, n. 7, July 1985 , pp. 672-676. 
Gifford, Marlyn J. , et al  ibid. 
Dickhundt, John S.  ibid. 
, et al. 
Section 1902(a)(23) of the Social Security Act. 
Section 1915(b) of the Social Security Act. Other sections may also be waived. 
Those most frequently cited are 1902(a)(I) for statewideness
, 1902(a)(IO) for 
comparabilty of services , 1902(a)(30) for upper payment limits
, 1902(a)(4) for 
provisions relating to pre-paid heath plans. 
10.  Section 1115 of the Social Security Act. 
11.  The Omnibus Budget Reconciliation Acts of 1981 and 1987 expanded the waivers 
mentioned above per  Commerce Clearing House  Section 14 625 , p. 6314. 
12.  42 U.  C. section 1395dd. (section 1867 of the Social Security Act). 
13.  We defined mature programs as those having several years ' experience with their 
controls, comprehensive in scope or number of controls developed, and able to 
produce annual cost and utilzation data. 
14.  These calculations require a complete set of charge data. All sample States 
submitted cost and utilization data, but due to time and resource restraints only 
four could submit complete sets. 
15.  Average monthly census for FY 1991.  16.	 Michigan also has implemented managed care programs in Wayne County 
(Detroit). They chose not to include their experience with them in this report since 
they do not believe their managed care programs are directly related to control of 
emergency room utilzation. 
17.	 HCF A Common Procedural Coding System  , "
APPENDIX A

PUBLIC HEALTH SERVICE COMMENTS 
Although this report did not make recommendations, the Public Heath Service (PHS) 
provided general comments on other importt issues involved in non-emergency use of 
emegency rooms. The full text of their comments follows. Based on their letter and the 
intent of this report, we changed the word "inappropriate" to "non-emergency. " PHS also 
urges us to distinguish between State controls that result in less care and those that result 
in more appropriate care. Although we did not specifically ask States for this 
information, we did include it in the individual State profiles when they provided it. The 
other concerns PHS raises are treated in the companion report  Use of Emergency 
Rooms by Medicaid Recipients " OEI 06-90-00180, but they were not pertinent to the 
narow focus of this report.  \ -'; 	
' " ~~~~
...." &.  . - ~~~ ,,..(-!'p",,,   .. \,  \ (\.  :," "' \ 
SERVICES 
DE?ARTMENT OF HETH  HUMA  Public Helt Serice 
--"f	
.c'''''IC! Memornndum 
JAN 2 3 199 
Date 
\, "ti6 n't 
Deputy Assistant Secretary for Health Manageme 
From 
;1r:\\.  A. 
//''N 
Subjec	 Office of Inspector General (OIG) Draft Repor  ",I"lin 
Use: 
Emergency Room  State Medicaid Reports  Q01 
U-S. 1EX
f'  ections, 
Deputy Inspector General 
for Evaluations and 	
.4.  0-J1 
;;: u/ r, 

The subj  ct report profiles the efforts and descr1'b:  s-.t-f(e 
obstacles encountered by six State Medicaid agencies 
developing controls over the non-emergency use of emergency rooms 
by Medicaid recipients. It is a companion document to OIG' s more 
com pre hen s i v e ins p e c t ion r e p 0 r t  en tit 1 e d " U s e  Em erg e n c y Roo m 
by Medicaid Recipients.  The Public Health Service (PHS) 
17, 
commented on this comprehensive report on December  1991. 
Neither 
the subject report nor its companion contain 
PHS. 
recommendations for  However, we believe that some of the 
issues we raised in our December 17 comments are applicable 
the subj ect report also. For example, to enhance the usefulness 
of this report, we offer the following suggestions and comments: 
Inappropriate use of emergency rooms should be clearly

defined. 
Additional discussion of the fac ors that may lead 
Medicaid recipients to use emergency rooms 
inappropriately would be beneficial. 
Additional discussion of what really is inappropriate 
useful. 
emergency room care would be 
the 
It would be useful for the report to consider whether 
controls (proposed or  erwise) result in less care, or 
care. 
more appropriate 
For a more detailed discussion of these points, please refer to 
above. 
the December 17 PHS comments mentioned 
Antho