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


Pennsylvania. . . . . 


ENDNOTES


APPENDIX A: . Public Heath Service Comments . . . A-


Kentucky . . . . 8


Michigan . . . . . . 11


Minnesota . . . . . 14


Missouri . . . 18

, 

INTRODUCTION


PURPOSE 

This report describes six States' procedures for controllng emergency room use by 

Medicaid recipients, obstacles they encountered in developing the controls, and selfevaluations 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 nonemergency rates for the nine sample States. 

1990 Non-Emergency Use Of The Emergency Room 

100 Percent Of Tota Medcad Emergency Room Use 

Aransas California Kentuck Michigan Missuri Utah Minnesota Pennsylvania Wisconsin 

Figure 1 -- Dat 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 

LOCKER 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 care giver, or referred a 

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 NonEmergency 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 nonemergency 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 prepayment 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 feefor-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 prepaid 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 bypassed 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 lockin 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 nonemergency 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 nonemergency 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. Nonemergency 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 nonemergency 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 copayments 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-forservice. 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 copayment, 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-ofchoice 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 copayment 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


10. 

11. 

12. 

13. 

14. 

15. 

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. , et al. ibid. 

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. 

Section 1115 of the Social Security Act. 

The Omnibus Budget Reconciliation Acts of 1981 and 1987 expanded the waivers 

mentioned above per Commerce Clearing House Section 14 625 , p. 6314. 

42 U. C. section 1395dd. (section 1867 of the Social Security Act). 

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. 

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. 

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, ,, .. \, \ (\:, \ 

DE?ARTMENT OF HETH HUMA SERVICES Public Helt Serice 

.c'''''IC! --"f	 Memornndum 

Date JAN 2 3 199 

From Deputy Assistant Secretary for Health Manag eme i6n't 

;1r:\\. A. 

//''N \, "t 

Subjec	 Office of Inspector General (OIG) Draft Re por lin 

Emergency Room Use: State Medicaid Reports Q01 

f' ",I" U-S. 1EX

Deputy Inspector General for Evaluations and 	 ections, 

.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) 

commented on this comprehensive report on December 17, 1991. 

Neither the subject report nor its companion contain 

recommendations for PHS. 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 

emergency room care would be useful. 

It would be useful for the report to consider whether the 

controls (proposed or erwise) result in less care, or 

more appropriate care. 

For a more detailed discussion of these points, please refer to 

the December 17 PHS comments mentioned above. 

Antho