patients. Four States reported resource barriers, related to development of systems for
collecting co-payments, budget limits and the waiver application process.

Despite The Positive Actions Taken By Study States, Non-Emergency Use Of
Emergency Rooms Is Still A Problem.

While most States believe implemented emergency room controls have been effective,
only some States can produce utilization data to support their perceptions.

States generally have data on overall Medicaid emergency room visits for the State, but
few have data reporting visits for specific programs. Wisconsin reports that emergency
room use appears to be going down in two counties where HMO programs were
implemented, with a 30 percent drop noted between 1985 and 1988. Two States,
Michigan and Minnesota, report their emergency room utilization has remained constant
over time. However, they viewed this as a positive achievement, since the overall number
of Medicaid recipients had increased during this time of constant emergency room
utilization. In addition, during 1990 Minnesota reported the lowest rate (11%) of non-
emergency use of emergency rooms of all the sample States.

Five States, Arkansas, California, Kentucky, Missouri and Utah report the overall trend
for emergency room visits has continued upward since implementation of their programs.
Kentucky, however, said the increase has been at a lesser rate than projected had the
program not been implemented. When examining emergency room visits in managed
care/pre-paid programs, two States report a decrease in overall emergency room
utilization. Missouri, believes that emergency room visits are down in their managed care
program, since this program’s utilization of medical care is lower than the general
Medicaid population. In Pennsylvania, emergency room use is reported to be down in
their Health Insuring Organization (HIO) program when compared with fee for service
Medicaid recipients. Both of these States, however, stated they are unsure of the accuracy
of the data supporting these findings.

States report only mixed results in controlling non-emergency utilization. Data are
available for six States, either from the State or the HCFA MSIS data, for reviewing the
trend of non-emergency visits as a percent of all emergency room visits. These data
exclude emergency room visits made by recipients enrolled in HMOs, pre-paid plans and
community health centers. Two States, Pennsylvania and California, have demonstrated a
decrease in the percent of non-emergency visits reported from 1986 through 1990.
Arkansas has experienced an increase and then a decrease in percent of non-emergency
visits since 1987. Missouri has seen a fluctuating non-emergency rate since 1981 with an
increase noted in recent years. Wisconsin demonstrated a decrease and then an increase
from 1988 to 1990, Finally, Kentucky reported a rise and then leveling off of non-
emergency visits as a percent of total emergency room visits from 1988 through 1990.

13


APPENDIX G

AGENCY COMMENTS:
HEALTH CARE FINANCING ADMINISTRATION AND PUBLIC HEALTH SERVICE



continuing benefits until and after it is in place. As the President’s proposal has yet to be
enacted, and even when enacted will experience a lag time between passage and
implementation, these suggestions will help States initiate and maintain a decrease in non-
emergency use of the emergency room.

While there is some evidence that various types of managed care programs help in reducing
non-emergency use, the change has been achieved very slowly and requires continued efforts
over time to significantly reduce the visits. Most of our sample States who have achieved
such reductions employ comprehensive control programs that in addition to managed care
approaches also include differentiated payment rates, definitions of levels of emergency care
and/or triage fees. Finally, because the use of emergency rooms for non-emergency care is
a complex issue, even States that have used such comprehensive programs continue to have
difficulty controlling non-emergency use. Without some way of determining the level of care
Provided in the emergency room, either through defining levels of care, or using triage to
determine level of care required, the fundamental difficulty of determining whether non-
emergency visits are a continuing problem will remain. This inspection found that without
adequate data, the true extent of the problem is difficult to measure. Therefore, OIG
continues to recommend that States consider development of definitions of levels of care
provided in the emergency room, differentiated payment rates for care provided, and triage
fees when developing initiatives to control emergency room use.

SUMMARY: RECOMMENDATION 2

HCFA should require States to develop initiatives to review and reduce non-emergency use
of emergency rooms by Medicaid recipients and should assist States by:

° Providing instructions on access and use of emergency room data in
conducting annual reviews of emergency room utilization.

e Encouraging development of managed care programs and expediting the review
of State applications for waivers to implement their managed care efforts and
emergency room controls; and

. Disseminating annual reports on effective practices for reducing non-
emergency use of emergency rooms by Medicaid recipients.

HCFA Comments

The HCFA concurs with the part of this recommendation that encourages the development
of managed care options and expediting the application process for State waivers. Once
again, they cite the President’s health care proposal, which will require States to adopt
coordinated care plans for all Medicaid beneficiaries, as being in agreement with our call for
the use of managed care. Additionally, they state they have developed a streamlined Waiver

F-2


“yO [Owe

DEPARTMENT OF HEALTH & HUMAN SERVICES (era frnic_Heatin Service

C ‘Memorandum

From Assistant Secretary for Health

pre * peti? wel

Subject Office of Inspector General (OIG) Draft Report "Use of
Emergency Rooms by Medicaid Recipients”

To Inspector Geferal, 0S

Attached are the Public Health Service”s (PHS) comments on the
subject OIG draft report. Although there were no
recommendations directed to PHS, we offer general comments and
suggestions for your consideration.

mes O. Mason, M.D., Dr-P.H.

Attachment


States Developed Controls To Improve Access And Continuity Of Care, As Well As
To Reduce Costs.

States in our sample had developed 23 programs/procedures to control non-emergency
utilization of the emergency room.

CONTROL PROGRAMS/PROCEDURES
TYPE OF NUMBER NUMBER NUMBER
PROGRAM/PROCEDURE DEVELOPED IMPLEMENTED REMAINING
A 8

PAYMENT DIFFERENTIATION
OTHER (NURSE PHONE LINE)

Te (aered)

Information regarding the impact of these programs/procedures are contained within the
body of this report. Additional information regarding the implementation of these
programs/procedures by States and definitions are presented in Appendix D.

States found Medicaid recipients were using the emergency room as their primary care
source, resulting in increased expenditures.

States reported that improving access to medical care was imperative in order to provide
medical attention in more appropriate sites and eventually decrease non-emergency use of
the emergency room, This was based on findings that access to primary care either
during or after regular office hours was a problem for recipients, causing them to seek
care in the emergency room. States reported considering access to care when developing
20 of the 23 programs/procedures. However, providing access to or continuity of care
was reported as the most important reason for implementing six of the programs. The
respondent from Kentucky stated that 44 percent of all recipients did not have a regular
doctor before enrolling in the managed care program they developed. Thus, providing
specific access alternatives was imperative. In an effort to deal effectively with the access
issue, Pennsylvania wrote legislation allowing the State to explore and develop provisions
for alternative care for Medicaid recipients. This exploration resulted in the development
of two pre-paid care programs to provide for the medical needs of specific Medicaid
recipients in two urban areas.

The need to control costs was also noted prior to implementing programs/procedures to
control non-emergency use of emergency rooms”. Four States had specifically noted
cost overruns or large expenditures in either the hospital sector in general, or in
emergency rooms specifically, before determining that emergency room use was


The Health Care Financing Administration Should Encourage States To Develop
Initiatives To Review And Reduce Non-Emergency Use Of Emergency Rooms By
Medicaid Recipients And Should Assist States By:

e Providing instructions on access and use of emergency room data in
conducting annual reviews of emergency room utilization.

e Encouraging development of managed care/pre-paid programs and
expediting the review of State applications for waivers to implement their
managed care efforts and emergency room controls.

e Disseminating annual reports on effective practices for reducing non-
emergency use of emergency rooms by Medicaid recipients.

17


ones,

Date

From

Subject

To

. -DEPARTMENT OF HEALTH & HUMAN SERVICES Financing Administration

“Dope shal Bas —
' Brom Memorandum

_ WAR 2 wee

7

Gail R. Wilensky, Ph.D. qd

Administrator

OIG Draft Report: "Use of Emergency Rooms by Medicaid Recipients” Os
OEI-06-90-00180 ie &

ae) ek sont a
Inspector General os oh ig =
Office of the Secretary c one ‘cane

We have reviewed the subject draft report which examinéd/the efforts.of
nine States to control non-emergency use of emergency rooms (ERs)'by
Medicaid recipients. States have tried to control ER usage to help control
escalating program costs. ,

OIG found that one-half to two-thirds of Medicaid ER visits are non-
emergency in nature. OIG estimated that total savings of up to $39.9 million
in four of the sampled States could be achieved if non-emergency room usage
was reduced to 40 percent of all Medicaid ER visits. OIG recommends that
States should develop a comprehensive initiative to reduce costly non-
emergency use of hospital ERs. HCFA agrees in part with OIG’s
recommendation. .

The OIG also recommends that HCFA should require States to develop
initiatives to review and reduce non-emergency use of ERs by Medicaid
recipients, and assist States by (1) providing instructions for review of ER
usage, (2) encouraging the development of managed care programs, and
(3) providing annual reports to States on effective practices for reducing non-
emergency use of ERs by Medicaid recipients. HCFA agrees in part with this
recommendation. Our specific comments on both recommendations are
attached for your consideration.

Thank you for the opportunity to review and comment on this draft
report. Please advise us whether you agree with our position on the report's
recommendations at your earliest convenience.

Attachment

1G = ~~

IG-AS —
D
,DIGEI eS
DIG-O1

AIG-MP

oOGC/IG

EX SEC _—

DATE SENT 3/2



Substantial Medicaid Savings Could Be Realized By Redirecting Non-emergency
Visits To More Appropriate And Less Costly Care Sites.

States Developed Controls To Improve Access And Continuity Of Care, As Well As
To Reduce Costs.

States in our sample had developed 23 programs/procedures to control non-emergency
utilization of the emergency room. These include:

Managed Care

Co-payment

Emergency Room Claims Review
Pre-paid Health Plans

Lock-in

Emergency Room Visit Limit
Payment Differentiation

Other (Nurse Phone Line)

The Majority Of Programs/Procedures Considered Successful Address Access To
Care Through Managed Care/Pre-paid Programs.

States Have Been Successful In Overcoming Opposition To Controls On Non-
Emergency Use Of Emergency Rooms.

Despite The Positive Actions Taken By Study States, Non-Emergency Use Of
Emergency Rooms Is Still A Problem.

RECOMMENDATIONS

Each State should develop a comprehensive initiative to reduce costly non-emergency
use of emergency rooms.

The HCFA should encourage States to develop initiatives to review and reduce non-
emergency use of emergency rooms by Medicaid recipients and assist them through
data analysis instructions, expedited review of waiver applications for managed care
and dissemination of effective emergency room control practices.

ii


Gary Bailey, Designated Principal Assistant
Department of Social Services

Division of Medical Services

P.O. Box 6500

Jefferson City, MO 65102-6500

Director of Outpatient Programs

Bureau of Hospital and Outpatient Programs
Rm 216 Cherrywood Building

P.O. Box 2675

Harrisburg, PA 17105

Edward V. Furia, Deputy Director
Department of Health

Division of Health Care Financing
P.O. Box 16580

Salt Lake City, UT 84116-0580

Mike Fox

Division of Health

Bureau of Health Care Financing
1 West Wilson

P.O. Box 309

Madison, WI 53701-0309


Development of tiered payment rates and treatment codes has enabled States to collect
data distinguishing emergencies from other levels of care provided in the emergency
room and to demonstrate savings. Due to certain exemptions, however, this data does
not always accurately reflect utilization of services.

Differentiating payment based on care required has provided these States with a possible
means of assessing cost savings to the Medicaid program from these procedures.
Arkansas can easily demonstrate a net saving of $1.6 million since 1988 by denying
emergency room reimbursement rates for non-emergency care provided. In States where
tiered payment levels are clearly defined, savings, in theory, can be documented by
determining the cost to the program if all patients had been reimbursed at one level.

Although data collection procedures are greatly improved, data do not always reflect true
usage. During the 1980’s six of nine States began recording data differentiating levels of
care provided in the emergency room. However, these data do not always represent all of
the individuals covered by Medicaid. Many managed care and pre-paid health programs
do not report emergency room visits, or they provide dummy claims that are not
considered reliable. In addition, many groups are exempted from emergency room
controls, thus specification of the level of care provided them is not questioned. Arkansas
exempts all children under the age of two from claims review, Missouri exempts children
under 18, pregnant women and family planning services from their co-pay program,
California exempts individuals under 21 and pregnant women under their voluntary co-pay
program, and Michigan applies a more liberal interpretation of emergency for children.

Despite developing definitions and codes denoting levels of care, some States continue to
have problems with accuracy of coding and quantifying true non-emergency visits.

Although they have developed definitions and codes for differentiating care, two States
feel the coding of these visits may not be accurate. This may be due to the lack of
differentiation in payment rates, the inclusion of non-emergency visits with other levels of
care, or the incentive to obtain the higher emergency room payment rate. Kentucky is in
the process of establishing diagnosis codes for determining if care provided is truly an
emergency. Two additional States code non-emergency visits in the same manner as other
types of care, outpatient and examination room. This causes difficulty in determining the
true number of non-emergency cases that initially come to the emergency room.

State data to support cost savings resulting from emergency room controls are limited.

While savings cannot always be attributed to a reduction in non-emergency use of
emergency rooms, controls implemented to limit this behavior have reported savings to
the Medicaid program. During the years 1987 through 1989 a savings of $181,969,699
was reported by seven States. Six of the seven States with managed care/pre-paid
programs have reported savings based on these programs, although they are not claimed
as a direct result of decreased emergency room use.

14


APPENDIX A

STATE SELECTION PROCESS

FIRST PHASE

INITIAL UNIVERSE OF STATES HAVING
WAIVER-RESTRICTION, LOCK-IN OR STATEWIDE PROGRAM

AZ, AR, CA, CO, CT, FL, GA, ID, IL, IA, KS, KY, MD, MA, MI, MN, MS, MO, |
NB, NV, NJ, NM, NY, NC, OH, OR, PA, SC, SD, TN, TX, UT, VT, VA, WA, WI

WAIVER PROGRAMS EMERGENCY ROOM
RESTRICTIONS

CA, CO, CT, FL, IL, IA, AZ, AR, CA, GA, KY,
KS, KY, MD, MI, MN, MO, MD, MI, MN, MS,

NV, NM, NY, NC, OH, OR, MO, NM, NY, OH, PA,
PA, TN, UT, WA, WI SC, SD, UT, VT,

VA, WA, WI

STATEWIDE
PROGRAMS

AZ, AR, KY, Ml

STATES SELECTED IN 1ST ROUND: APPEARED IN AT LEAST TWO
CATEGORIES

AZ, AR, CA, KY, MD, MI, MN, MO, NM, NY, OH, PA, UT, WA, WI

SECOND PHASE

1ST ROUND STATES
AZ, AR, CA, KY, MD, MI, MN, MO, NM, NY, OH, PA, UT, WA, WI

MATURE PROGRAMS REFERENCED PROGRAMS

AR, CA, MI, MN, MO, NV, CA, FL, IL, KY, MI,
NY, NC, PA, UT, WI MN, MO, NY, PA, WI

FIRST ROUND STATES APPEARING IN MATURE AND/OR REFERENCED
PROGRAMS

FINAL SAMPLE SELECTION: AR, CA, KY, MI, MN, MO, NY, PA, UT, WI



RECOMMENDATIONS

During the past decade the issue of non-emergency use of the emergency room has been
addressed in several ways by the nine States reviewed. The major finding of interest from
this inspection is the importance of providing access to care to Medicaid recipients when
trying to reduce the use of the emergency room. All but one of the States reviewed had
developed managed care or pre-paid care programs that provided access to care. Six of
the States with managed care/pre-paid programs have been able to identify cost savings
from the implementation of these programs. In addition, several of the programs have
demonstrated some reduction in emergency room use for individuals enrolled in these
Programs. Involvement of a greater number of Medicaid recipients in managed care/pre-
paid programs could lead to further reductions in non-emergency use of the emergency
toom. This, in turn, would result in significant cost savings to the Medicaid program and
to society in general.

Sample States have also clarified the levels of care provided in the emergency room and
established differential payment rates coinciding with these levels of care. This has
enabled them to reduce expenditures on emergency room care, by paying for reduced
needs at reduced levels. Differentiating levels of emergency room care has also led to the
collection of better data for use in reviewing non-emergency use of the emergency room.

The programs/procedures discussed in this report to control the non-emergency use of
emergency rooms demonstrate both the capacity to improve access to care and achieve
savings in the Medicaid program. These savings can be redirected to other Medicaid
expansions and existing programs to improve the quality of health care for Medicaid
recipients. For these reasons the following recommendations are being made to the States
and to HCFA.

Each State Should Develop A Comprehensive Initiative To Reduce Costly Non-
Emergency Use Of Hospital Emergency Rooms. These Initiatives Could Address:

e Increased use of managed care/pre-paid options to improve overall care
access and quality.

e Community based access to after hours care.

e Increased reimbursements to physicians and clinics who see Medicaid
recipients after hours.

e Defining different levels of emergency room care and providing
corresponding tiered pricing and reimbursement levels.

e Triage payments to providers for screening patients not treated in the
emergency room.

16


APPENDIX F

SUMMARY OF HCFA’S COMMENTS TO SPECIFIC RECOMMENDATIONS
AND OIG’S RESPONSE*

SUMMARY: RECOMMENDATION 1

Each State should develop a comprehensive initiative to reduce costly non-emergency use of
hospital emergency rooms (ERs). These initiatives should address:

e Increased use of managed care options to improve overall care access and
quality:

e Community based access to after-hours care;

e Increased reimbursements to physicians and clinics who see Medicaid
recipients after hours;

° Defining different levels of ER care and providing corresponding tiered pricing
and reimbursement levels; and

° Triage payments to providers for screening patients not treated in the ER.
HCFA Comments

The HCFA concurs with the parts of the recommendations that address increased use of
managed care options. They believe that the President’s Comprehensive Health Reform
Program will go well beyond the components of this recommendation. They also state that
they will encourage States to develop initiatives to reduce non-emergency use. The HCFA
however, does not believe that the remaining components of the recommendation are
necessary, due to the proposed health initiative. While they state triage fees are an effective
method of ensuring that States do not pay for the provision of non-emergency services at ER
rates, they feel there is no need for this or the creation of definitions for levels of ER care
when a comprehensive coordinated care system in Medicaid is put in place.

OIG Response

The use of a comprehensive coordinated care system by Medicaid, which includes case
management, is an excellent proposal for providing access to care and discouraging use of
the emergency room for non-emergency care. Nevertheless, the OIG believes the remaining
components of the recommendation suggesting definitions of levels of ER care, corresponding
tiered payment rates, use of triage fees, and increased payments for after hours care would
not only complement successful implementation of the proposed initiative, but yield

F-1


A greater reduction in non-emergency visits might be achieved if more Medicaid
recipients were enrolled in managed care/pre-paid programs.

Since 1982, seven of the nine States have implemented managed care/pre-paid health
systems to provide opportunities for recipients to establish ongoing relationships with a
primary care giver, either on a voluntary or mandatory basis. The total involvement of
Medicaid recipients in State managed care/pre-paid programs ranges from seven percent to
71 percent. These programs require 24 hour phone access to a care giver for the purpose
of providing an assessment of the appropriate site for care. By having an individual or
group act as a gate keeper, and controlling referrals to care outside the normal setting, the
number of non-emergency visits to the emergency room can be reduced. Three of the
sample States have reported information pertaining to emergency room use by individuals
enrolled in a managed care/pre-paid program. In one State, emergency room visits by
these individuals have declined despite an increase in enrollment. In a second State,
emergency room visits per client have decreased and are lower than those reported for
Medicaid recipients in the fee-for-service program. In a third State, the percent of
non-emergency visits by enrolled individuals has stayed stable as a percent of total
emergency room visits but is lower than that of Medicaid recipients in the traditional fee-
for-service Medicaid program.

Comprehensive approaches that include managed or pre-paid care appear to be more
effective in controlling emergency room use.

Five States reporting and demonstrating more effective control of emergency room
utilization have implemented managed or pre/paid care programs. Four of these,
California, Minnesota, Missouri and Pennsylvania, have a more comprehensive network
of three or more types of programs/procedures to control emergency room use. The two
States who have shown a consistent decrease in non-emergency use of the emergency
room over time have implemented a number of managed care and pre-paid programs, 24
in California and 6 in Pennsylvania. Pennsylvania has. also differentiated a number of
possible levels of care and respective payments for cases presenting to the emergency
room. Arkansas and Kentucky, two of three States who experienced difficulty controlling
utilization, have only one control program in place.

Most programs never implemented, terminated or reported as unsuccessful, such as
copayment procedures, did not address access issues.

Programs/procedures that were not successful did not address access to care. Four of the
five programs/procedures that were either terminated, changed or never implemented did
not address access. Copayment programs generally were not successful due to opposition.
Two of the four copay procedures were either never implemented or terminated and one
of the two remaining copay programs has been judged to be unsuccessful.

11


obtained under section 1115 of the Social Security Act. The Omnibus Budget
Reconciliation Acts of 1981 and Section 4102 of OBRA 1987 expanded the waivers
mentioned above'*. Waiver programs have been used by several States to implement
programs to reduce non-emergency use of the emergency room.

Additional concerns regarding access to care are expressed in patient anti-dumping
legislation’’. This restricts hospital emergency rooms in refusing treatment to patients
who lack the ability to pay for services, and requires the provision of screening
examinations for patients presenting for care’*. Due to the reduced numbers of
physicians participating in Medicaid, recipients may feel compelled to seek care in the
hospital emergency room. The anti-dumping legislation has caused State Medicaid
agencies to proceed carefully when developing programs to limit non-emergency use of
the emergency room.

METHODOLOGY
Scope/sample selection

The inspection focused on the specific procedures implemented by selected State Medicaid
agencies to control non-emergency use of hospital emergency rooms (either as a primary
or secondary objective). Since our purpose was to examine successes or failures of these
procedures, States with mature procedures were purposely selected. For the purposes of
this report, mature was defined as:

1. Having examined this issue since the early 1980s, which demonstrated a
lengthy history in this area.
2. Having comprehensive procedures, either in terms of scope of the

procedure (geographical locations covered) or in terms of number of
procedures developed.

3. Having a greater likelihood of having data available on cost and utilization
due to the development of programs/procedures that require annual or bi-
annual reporting.

The selection process was based on several criteria. In addition, a two tier selection
system was used to determine which States, from an original universe of 36 States, met
criteria at each level. Appendix A depicts factors considered and the two tiers of review
in the selection process.

Nine sample States were selected: Arkansas, Kentucky, Michigan, Minnesota, Missouri,
New York, Pennsylvania, Utah and Wisconsin, with California selected as an alternate.
Early in the inspection, New York dropped out of the sample and California was
substituted.


Managed Care

Co-payment

Emergency Room
Claims Review

Pre-paid Health
Plans

Lock-in

Emergency Room
Visit Limit

Payment
Differentiation

Other (Nurse Line)

PROGRAM DEFINITIONS

Health care provided under the direction of an individual or group,
requiring recipients to obtain referrals for specialists, the emergency room
or hospital care from their primary care physician. Generally, a monthly
management fee will be paid to the case manager, whether the recipient
receives care during the month or not. Managed care may be provided
by HMO’s, private physicians, or clinics.

Payment of a minimal fee by the individual receiving care for non-
emergency care provided in the emergency room.

Review of emergency room claims marked "Emergency" to determine if
the care provided was truly an emergency condition. All claims marked
"Emergency" may be reviewed or only claims not meeting specific
emergency criteria. If the claim is determined to be for non-emergency
care, payment may either be denied, reduced, or reimbursed at a triage
fee level.

Form of pre-paid health plan, other than an HMO, providing care to
Medicaid recipients. These plans do not receive a monthly management
fee for recipients. For the purposes of this study this includes Health
Insuring Organizations and Community Health Centers.

Medicaid recipients identified as overutilizers of emergency rooms for
non-emergency purposes are required to receive care from only one
physician or health plan. Assignment may be made by the Agency, or the
recipient may be allowed to select a health care provider.

Medicaid recipients will be allowed to make only a specified number of
reimbursed non-emergency visits to the emergency room each month.
After the specified number is reached, all visits to the emergency room
will be reviewed. If care provided is for a non-emergency, the recipient
will be responsible for payment.

Care provided in the emergency room is differentiated by levels of
severity. Payment for the care is billed at different rates according to the
level of severity. Triage fees may also be included as a level in order to
reimburse the hospital for assessing the condition of the patient.

A 24 hour phone staffed by a nurse to provide information to Medicaid
recipients. The service involves determining the nature of the health
problem and providing information regarding the nearest facility that can
provide treatment at the most appropriate level of care.


Medicaid Program Savings Calculations Formula

True E; ency Visits Reported From State = # New Total Emergency Visits With
-60 Non-Emergencies Equaling 40%

# New Total ER Visits - # Reported True Emergency Visits = # New Non-Emergency Visits

# Non-Emergency Visits Reported - # New Non-Emergency Visits = # Visits Reduced by Redirecting
All But 40% of Non-Emergency

Visits to Alternative Sites
# Visits Reduced x (Avg Non-ER Charge - Avg Community = State Savings Obtained by
Reimbursed M.D. Charge) Redirecting Visits to

Community M.D.

Repeat using average clinic charge, obtain State savings by redirecting visits to community clinics

Repeat using high Medicaid reimbursement for sample States ($24.75), obtain State savings by paying a
more conservative rate for visits directed to community M.D. or clinics

Add the four State savings from redirecting visits to community M.D. to obtain total low range savings
figure

Add the four State savings from redirecting visits to community clinic to obtain total high range savings
figure

Add the four State savings from redirecting visits to community M.D. or clinic and paying conservative
payment rate to obtain total conservative savings figure

e Example of Savings Calculations for the State of Kentucky
Based on State and MSIS Data for 1990.

L 52,565 = 87,608

-60
2. 87,608 - 52,565 = 35,043
3. 166,455 - 35,043 = 131,412
4. 131,412 x ($104.94 - $60.40) = $5,853,090
5. 131,412 x ($104.94 - $46.52) = $7,677,089
6. 131,412 x ($104.94 - $24.75) = $10,537,928



TABLE OF CONTENTS

EXECUTIVE SUMMARY

INTRODUCTION ......... 0... ccc ccc teen eens 1
Purpose 2. eee eee eens 1
Background ... 6... 0... eee eee eee eee eee 1
Methodology ©... 1... ccc eee eee eee 3

FINDINGS .. 0.0... een eee eee 5
Heavy Non-Emergency Use Of Emergency Rooms Continues .......... 5

Substantial Savings Could Be Realized By Redirecting Non-Emergency

Visits To More Appropriate And Less Costly Care Sites ............. 6

States Developed Controls To Improve Access And Reduce Costs ........ 6

The Majority of Programs/Procedures Considered Successful Address

Access Through Managed Care/Pre-paid Programs ...........22.005 10

States Have Been Successful In Overcoming Opposition To Controls ..... il

Despite The Positive Actions Taken By Study States, Non-Emergency

Use of Emergency Rooms Is Still A Problem ..............00008 12
RECOMMENDATIONS .......0 0.0.0.0... cece eee eee 16
ENDNOTES ... 0.0.0.0... ce cece teen eee 18
APPENDIX A: State Selection Process 1.1.2.0... 000 e eee eee eee A-l
APPENDIX B: Average Charges For Medicaid Visits ...............0. B-1
APPENDIX C: Medicaid Program and Society Savings Calculations ........ C-1
APPENDIX D: Programs/Procedures Developed In Each State............ D-1
APPENDIX E: State Contacts... 0... eee eee eee El
APPENDIX F: Summary of Agency Comments and OIG Response ......... F-l

APPENDIX G: Agency Comments... 6.0.2... 0... 00. Gl


AGENCY COMMENTS

We received comments from the Health Care Financing Administration (HCFA) and the
Public Health Service (PHS). HCFA concurred with the parts of the recommendations
related to the increased use of managed care for Medicaid recipients and expediting the
review of State applications for waivers to implement managed care efforts and emergency
room controls. They stated that the President’s proposed Comprehensive Health Care
Program would go beyond our first recommendation. Further, they stated they had
implemented a streamlined Waiver Application in November 1991. Because of the
President’s proposed initiative, HCFA did not believe the remaining portions of the first
recommendation were necessary. In addition, the HCFA believes providing specific
instructions on accessing and using ER data for annual reviews of utilization would
require extensive research. The HCFA also provided technical comments pertaining to
the methodology used to estimate program savings and savings to society which could
result from redirecting Medicaid recipients to community care facilities. (See Appendix G
for the full text of the HCFA comments.)

The PHS acknowledged the relevance of the general findings that (1) lack of access to
primary care is a major cause of inappropriate usage of the emergency room and (2)
access to alternate care is an important component in developing effective control of
emergency room use. However, they felt more discussion of problems facing Medicaid
recipients in gaining access to more appropriate care would have been helpful. PHS also
expressed concern about our use of the word "inappropriate." (See Appendix G for the
full text of the PHS comments.)

OIG RESPONSE

The OIG believes the use of a comprehensive coordinated care system by Medicaid, which
includes case management, is an excellent proposal and will address both access and non-
emergency use of the emergency room. However, we feel that the remaining components
of the first recommendation complement this initiative and will help States initiate and
maintain a decrease in non-emergency use of the emergency room. The OIG also believes
that providing guidance on access and use of emergency room data for annual review is
important and would not require extensive research, as many States appear to have data on
emergency room visits available. Based on HCFA comments the wording of the second
recommendation was changed from "require" to "encourage". In response to technical
comments, clarifications were made on the assumptions underlying our methodology and
our approach for calculating savings to society.

The PHS comments were considered and resulted in clarifications within the report. With
regard to access to alternate care, we agree that this is an important issue warranting
continued study. However, this is a broad subject and beyond the scope of this
inspection. We agree that it is difficult to define the appropriateness of emergency room
visits. However, the focus of this inspection was narrower, examining only non-
emergency care. Hence, we changed the word "inappropriate" to "non-emergency" in the
few places it was used in this report.

iii


States Have Been Successful In Overcoming Opposition To Controls On Non-
Emergency Use of Emergency Rooms.

Opposition to control procedures came primarily from three groups: providers, both
physicians and hospitals, the Medicaid population, and advocacy groups. The opposition
focused on payment and administrative problems, access to care and freedom of choice
issues. Provider groups were concerned with payment and administrative problems.
Hospitals were particularly concerned with the additional mechanisms that would have to
be developed to collect co-payments. Many hospitals found co-payments so troublesome
hey regularly did not collect them. The Medicaid population and advocacy groups were
primarily concerned with access to care and freedom of choice issues.

Twelve of 23 programs/procedures reported opposition. Eight of the States reporting
opposition were able to overcome it. The only program categories that faced no
opposition were the triage fee, differentiation of payment rates, and a lock-in program.
Opposition to managed care/pre-paid programs was overcome by time, communication
with and acceptance of input from concerned groups, and clarification of governing
regulations. While opposition was basically overcome, three managed care programs still
face some resistance. One of the programs experiencing resistance was not expanded, and
the others continue to modify their programs as necessary. Opposition to other programs
was overcome by time, experience, education and clarification of procedures.

Four programs/procedures were unable to overcome opposition. Two of the four
programs/procedures were terminated, one was never implemented and one was
significantly altered. Only one pre-paid program was terminated due to opposition,
however two co-pay programs were defeated by opposition. One State’s denial of
payment procedure was changed to pay a triage fee.

Resource and legislative barriers were minimal.

Securing legislative approvals and required resources to implement emergency room
controls were only minor problems for most States. Ten of the 23 programs required
legislative approval, with two States already having legislation permitting the development
of managed care/pre-paid programs. Only one State reported problems related to
implementation of their programs/procedures due to the legislature.

Interestingly, anti-dumping legislation was not reported as a significant factor in
developing emergency room control procedures. Seven of the nine States reported they
had already implemented programs/procedures prior to the implementation of this
legislation; thus, it was not an issue. Only two States reported considering anti-dumping
legislation when developing control procedures. These States felt they must see all
patients presenting to the emergency room, regardless of their condition, due to possible
liability issues. Both States later made structural changes to their Medicaid program by
implementing a triage fee in order to compensate emergency rooms’ for screening

12


studies in Pennsylvania and Illinois which used less stringent definitions of non-emergency
use also found the highest percent of non-emergency use in the Medicaid population.
Using these less stringent definitions, Philadelphia Medicaid recipients accounted for 40
percent’? of non-emergency use during a one year period, and Medicaid recipients in
three hospitals in a city in Illinois, during a two week period, accounted for 17.8%!" of
the non-emergency use.

Mechanisms for controlling use

Medicaid policy generally recognizes the need for requiring medical necessity and
controlling the utilization of covered services. Likewise most States recognize the specific
need to control non-emergency Medicaid emergency room use. Many States have
considered and tried a variety of mechanisms to control non-emergency room visits.
Included among such State efforts are primary care case management, HMOs and other
contracted services, recipient cost sharing or co-payments, non-payment for non-urgent
care, denial of non-urgent care after initial assessment and annual limits on individual
emergency/outpatient expenditures or visits. Two recent studies in California’? and
Pennsylvania’ reviewed outcomes of emergency room screening programs implemented
to control non-emergency use of the emergency room and determined outcomes for those
patients denied service. Study findings showed that non-emergency visits to the
emergency room were reduced and the majority of patients received a more appropriate
level of care in the community. A federally funded Medicaid demonstration project
operating in six States, resulted in the control or reduction of the misuse of emergency
rooms. However, cost data for the first year indicated an increase in expenditures due to
initial administrative start-up costs.'*

Medicaid Jaw also requires States to review patient overuse/abuse of services. This is
possible through the Medicaid Management Information System (MMIS). However, there
is no policy stating the types of abuse that must be reviewed or norms to use in defining
abuse’. Currently, there is no national data base that can be utilized to determine
aggregate numbers of non-emergency Medicaid visits to the emergency room.

Legislation affecting development of control mechanisms

States attempting to control non-emergency use of emergency rooms must consider several
Federal requirements. Medicaid recipients must have the right to freedom of choice of a
health care provider as stated in Section 1902(a)(23) of the Social Security Act. However,
the Social Security Act has provided for exceptions to this ruling, if access to care of
adequate quality is not denied. When recipients are restricted in choices of providers a
waiver under section 1915(b) must be obtained. Other sections may also be waived and
those most frequently cited are 1902(a)(1) for statewideness, 1902(a)(10) for comparability
of services, 1902(a)(30) for upper payment limits, 1902(a)(4) for provisions relating to
pre-paid health plans. If involvement in alternative health provision programs is
voluntary, no waiver is required. A waiver for a Medicaid demonstration project can be


ENDNOTES

1. Medicare and Medicaid Guide, #643, Commerce Clearing House February 7, 1991.

2. Testimony of Richard P. Kusserow, Inspector General, U.S. Department Of Health
and Human Services, Before the Subcommittee on Oversight and Investigations Committee
on Energy and Commerce on The Medicaid Program, June 20, 1991, pg. 1.

3. Gifford, Marilyn J., Franaszek, Jacek B., and Gibson Geoff, "Emergency Physicians’
and Patients Assessments: Urgency of Need for Medical Care", Annals of Emergency
Medicine, Vol 9, #10, October 1980 pp. 502-507.

4. Philadelphia Health Management Corporation, "Emergency Department Use in
Philadelphia: Urgent and Nonurgent Health Care", March 1987.

5. Dickhundt, John S., Gjerdingen, Dwenda K., and Asp, Donald S., "Emergency Room
Use and Abuse, How It Varies With Payment Mechanism", Minnesota Medicine, Vol 70,
October 1987, pp, 571-574.

6. Buesching, Don P., Jablonowski, Alexander; Vesta, Ernest; Dilts, William; Runge,
Charles; Lund, Johanna , and Porter, Robert, "Inappropriate Emergency Department
Visits", Annals of Emergency Medicine, vol 14, #7, July 1985, pp. 672-676.

7. Gifford, Marilyn J., Franaszek, Jacek B., and Gibson Geoff, “Emergency Physicians’
and Patients Assessments: Urgency of Need for Medical Care", Annals of Emergency
Medicine, Vol 9, #10, October 1980, pp. 502-507.

8. Dickhundt, John S., Gjerdingen, Dwenda K., and Asp, Donald S.,"Emergency Room
Use and Abuse, How It varies With Payment Mechanism", Minnesota Medicine, Vol 70,
October 1987, pp 571-574.

9. Dickhundt, John S., Gjerdingen, Dwenda K., and Asp, Donald S., “Emergency Room
Use and Abuse, How It Varies With Payment Mechanism", Minnesota Medicine, Vol 70,
October 1987, pp. 571-574.

10. Philadelphia Health Management Corporation, op. cit.

11. Buesching, Don P., Jablonowski, Alexander; Vesta, Ernest; Dilts, William; Lund,
Johanna, and Porter, Robert, "Inappropriate Emergency Department Visits", Annals of

Emergency Medicine, vol 14, #7, July 1985, pp 672-676.
12. Derlet, Robert W. and Nishio, Denyse, A., "Refusing Care to Patients Who Present

to an Emergency Department", Annals of Emergency Medicine, vol 19, #3, March 1990,
pp. 262-267.

18


Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL

USE OF EMERGENCY ROOMS BY
MEDICAID RECIPIENTS

—
z v7 Richard P. Kusserow
i INSPECTOR GENERAL
“eg MARCH 1992
Yea



regular office hours. Lack of adequate resources may
lead to delays in the treatment of patients with acute,
usually self-limiting conditions such as sore throats
ox urinary tract infections, which in turn lead
patients to seek care elsewhere. Fear of malpractice
may lead some providers to direct Medicaid patients to
emergency rooms. Even managed care programs that are
supposed to have 24-hour coverage may not always
provide easily accessible options to patients who
believe they are having a medical emergency.

It would be useful if additional questions about what

al is inappropriate emer cy room care were
addressed.

For example, many past studies of emergency versus non-
emergency care were based on diagnosis rather than the
presenting condition. A chest pain is often not a
genuine condition. But to define it as inappropriate
based upon a screening which rules out myocardial
infarction is spurious.

The critical feature of a true emergency is the
importance of the time factor. When a small number of
life-threatening conditions end up being delayed in
getting appropriate care, this also constitutes a
system error. The National Heart Attack Awareness
Program has established a subcommittee on access to
care; this group is concerned about barriers to
appropriate access to emergency room care that might be
posed by managed care systems.

It would be useful for the report to consider the
effects of diverting people from the emergency room on:
(1) health outcomes, and (2) the extent to which access
to_ appropriate care was achieved.

For example, do the controls (proposed or otherwise)
result in less care - such as denial of services, or
more appropriate care - patients actually receiving the
care that was needed. ,

It would be useful to have a discussion on the use of

the savings achieved.

For example, would the savings to the Medicaid program
be used to build an effective system of primary care?


FINDINGS

Heavy Non-Emergency Use Of Emergency Rooms By Medicaid Recipients Is A
Continuing Problem.

Over one-half to two-thirds of Medicaid emergency room visits are non-emergency.

Medicaid recipients continue to use the emergency room for non-emergency care. The
mean of non-emergency use as a percent of total Medicaid emergency room visits reported
in 1990 for the study States was 55 percent’®. Excluding Minnesota (the only State
reporting non-emergency use below 40%) from this list would result in a mean of 61
percent. The mean for non-emergency use of five additional States not contained in the
sample was 67 percent. The data for these States were obtained from the HCFA
Medicaid Statistical Information System (MSIS).

1990 Non-Emergency Use Of The Emergency Room

Petcent Of Total Medicaid ER Use

all

California Michigan Missouri

Arkansas. Kentucky innesota Pennsyivania Wisconsin

Figure 1

Reasons reported for non-emergency use of emergency rooms are consistent across States.
Such use continues to result from recipient lack of access to primary care during or after
office hours. This lack of access may be related to either general access issues related to


Data collection

Data was collected by phone, in person and by mail from individuals who had a major
responsibility for the Medicaid program and/or individuals directly responsible for
programs/procedures established to control emergency room utilization. Interview guides
were structured to capture descriptive information about each State’s procedures, reasons
for implementation, systems capabilities, barriers and opposition overcome, perceived
successes and recent management decisions affecting the control of emergency room use.
Site visits were made to two States, Arkansas and Kentucky, and phone interviews were
conducted with five States, Missouri, Pennsylvania, Wisconsin, Michigan and Utah.
Discussion guides were completed and returned from Minnesota and California, with
subsequent phone interviews to clarify the information. In addition, we were provided
with excerpts from the policy manuals and/or written descriptions of each site’s program
control policy(ies). Copies of Medicaid waiver reports from States having waiver
programs were also obtained.

Quantitative utilization and cost data were requested from each State. Utilization data
were requested for multiple years during the tenure of the program/procedure to detect
any noticeable programs impact on total emergency, and when available, non-emergency
visits to the emergency room. Charge data was requested on the average charge for a visit
to a private community physician, community clinic, and out-patient hospital clinic based
on Medicaid billings. Additional average charge information was requested on visits to
the outpatient emergency room facility, emergency room physician, emergency room
ancillary charges and total emergency room visit based on Medicaid billings. Where data
was collected for emergency and non-emergency visits, emergency room charge
information was obtained for each category.


Page 2

We agree that initiatives such as triage fees are an effective method of ensuring that States
do not pay for the provision of non-emergency services at ER rates. However, with a

comprehensive coordinated care system within Medicaid, there is no need to mandate that
States provide triage payments to physicians in the ERs or to define different levels of ER

care.

The increased use of coordinated care would incorporate these and other cost-effective
access oriented principles into a continuum of care system that will alleviate many of the
problems associated with high rates of inappropriate use of ERs among Medicaid recipients,
such as the use of triage fees. In any case, HCFA will still encourage States to develop
initiatives to reduce non-emergency ER use. We do not agree that States should be
mandated to adopt the specific approaches outlined in thc OIG report. Each State’s
Medicaid program is unique and tailored to that State's needs and resources. It would be
inappropriate to require all States to have identical approaches to address the problem of

inappropriate ER use.

Recommendation 2

HCFA should require States to develop initiatives to review and reduce non-emergency use
of emergency rooms by Medicaid recipients and should assist States by:

° Providing instructions on access and use of emergency room data in conducting
annual reviews of emergency room utilization;

fo) Encouraging development of managed care programs and expediting the review
of State applications for waivers to implement their managed care efforts and
emergency room controls; and

° Disseminating annual reports on effective practices for reducing non-emergency
use of emergency rooms by Medicaid recipients.

HCFA Response

HCFA agrees in part with this recommendation because, as stated above, under the
President's proposal for health care reform, HCFA will require States to adopt State-wide
coordinated care plans for all Medicaid bencficiaries. Additionally, we will encourage States
to develop initiatives to reduce non-emergency use of ERs by Medicaid recipients.

However, as we stated in our comments to the previous recommendation, we believe it
would be inappropriate for HCFA to "mandate" that States develop these initiatives.

HCFA has and will continue to provide States with technical assistance to develop initiatives
that will be suitable for their State Medicaid programs. However, we believe that it would
be necessary for HCFA and the States to conduct extensive research to effectively provide
specific instructions on access and use of ER data in conducting annual reviews of ER
utilization. This is not practical within current Federal and State budgetary limitations.


APPENDIX D

a SA

D/L D/ D/I, D/L D/A D/L
1973 1986- 1985, 1986 fully |1976, 1983 fully 1986 fully
(Voluntary and| ‘Voluntary and | Waiver, [waiver and joperating, |voluntary | operating, operating,
|| Waiver) Waiver, voluntary | Waiver voluntary |voluntary
+ D/L, and waiver] and

D/L D/I ‘D/N [DAT

1981 1988 1984 1982-82
(voluntary)
ER Claims = |[D/I D/A |(part of
Review and/or | 1984 1982/  |1989
Denial |A 1989 |M.C.)
Pre-Paid (DA part of =|D/V/T D/L,
Health Plans M.C.) 1983-84 1986
(Health Waiver, fully
Insuring operating
Organization, waiver
‘Community D/L,
Health Center 1988
fully
operating
voluntary
[Lock-In DA, 1990

ER Visit Limit

included |part of ER part of

developing

in ER |review & payment

review/ |payment differential

denial differential
Coding ER —- {ER and Non- |ER and ER, and |ER, Urgent|ER and JER and {ER and ER and
Differentiating Jand |ER Urgent Urgent Jand clinic {Non-ER {Non-ER |Triage Urgent
Levels of Care|Non- |(examination) (outpatient)

Yes Yes [No Yes Yes Yes Yes Yes Do Not

D= Developed I= Implemented N= Never Implemented T= Terminated A= Altered


Societal Savings Formula
Average Non-Emergency - Average Non-Emergency = Savings to Society Per Case from
Charge Reimbursement Not Treating In the ER

Savings to Society x # Redirected Non-Emergency = State Savings to Society from
Per Case Cases for State Not Treating in the ER

Add the four State savings to society to obtain total savings to society from not providing
treatment in the emergency room

e Example of Societal Savings Calculation for the State of Kentucky
Based on State and MSIS Data for 1990

1. $161.46 - $104.94 = $56.52

2. $56.52 x 131,412 = $7,427,406



INTRODUCTION

PURPOSE

This report describes programs or procedures developed by nine States to control the non-
emergency use of emergency rooms by Medicaid recipients and evidence of their success.

A companion report entitled "Controlling Emergency Room Use: State Medicaid
Reports," OEI 06-90-00181, includes profiles for six of the nine study States.

BACKGROUND

During the last decade, medical care costs have increased rapidly, the percentage of
Medicaid reimbursement for hospital charges has declined’ and Congress has mandated
expansions of Medicaid’s covered population and services. Federal Medicaid costs
specifically have risen from $30 billion in 1988 to $65 billion estimated in 1992?. State
Medicaid agencies, feeling the financial pinch caused by these events and others, have
sought to control programs costs through various means while maintaining quality care.
One method has been tighter controls on the use of Medicaid services, including hospital
emergency rooms.

Prior findings on non-emergency use of the emergency room

The non-emergency use of emergency departments by Medicaid recipients has long been
recognized as a problem. In September 1983 the OIG released a report (OAI-"Non-
Urgent Use of Hospital Emergency Departments by Medicaid and Medicare
Beneficiaries") which found a very high misuse of hospital emergency rooms by Medicaid
recipients. It estimated that at least 50 percent of Medicaid emergency room visits were
non-emergency and could be adequately treated in community care settings. Recent
studies supporting these findings estimate that Medicaid recipients continue to demonstrate
a significantly higher proportion of non-emergency and marginally appropriate emergency
toom visits of 17 percent’ to 61 percent’ when compared to other populations. These
and other studies suggest non-emergency visits in the general public, including Medicaid
recipients, range between 10.8 percent’ and 37.6 percent”*. The OIG report also found
that emergency room visits normally cost at least three times the charge for a community-
based physician for the same care. Not only does non-emergency use greatly escalate
program costs, it also decreases the quality and continuity of care received, since
emergency rooms are not designed to provide on-going primary care.

In a study in St. Paul, Minnesota, welfare patients made a significantly higher proportion
(61%) of non-emergency and marginally appropriate emergency room visits over a four
week period than did individuals enrolled in other public and private plans’. Other


Upon closer examination of data provided, only three States have cost savings directly
attributable to implemented emergency room controls to limit non-emergency use of
emergency rooms or reimbursement. An independent review of the Kentucky waiver
Program projected a savings of $12 million over what would have been spent in the area
of outpatient emergency room services from 1986-89. Arkansas demonstrated a net
savings of $1,624,562 for the period of 1-88 to 6-91. In addition, Arkansas reported the
amount saved from the review of the appropriateness of emergency room services in 1990
is almost the same amount as the cost of its review program since its inception in 1984.
Minnesota estimated its newly implemented Nurse Line serving one county saved $12,579
in its first quarter of operation, by diverting non-emergency visits from the emergency
room.

While additional States believe savings are resulting from their emergency room controls,
they cannot specifically link them to reduced non-emergency use of the emergency room
use, and are unable to provide specific data. Missouri feels a portion of its average
savings of $3 million a year would be attributed to reduced emergency room utilization.
Michigan stated that if an estimate is made of what 1981 emergency room payments
would be in 1990 dollars ($37.2 million) the program is coming out ahead, since 1990
emergency facility and triage payments are $27.8 million. Minnesota reports total
outpatient costs have decreased due to more specific coding of all outpatient services and
that general HMO cost savings include some savings in emergency room services.

Two of the States citing cost savings, Arkansas and Michigan (until recently), did not, in
fact, reduce emergency room utilization, they simply denied or reduced payment. The net
effect is that care was provided that in some way had to be accounted for, either through
cost shifting or write off as charity care. While savings were realized by the program,
this resulted in an increased cost to society. Michigan implemented a triage fee in 1989.
One of the reasons was to alleviate some of the cost to society that occurred when denying
payment to the hospital for non-emergency visits by paying for assessments of the level of
care required.

15


QIG Response

In the text we stated that our estimates were based on the assumption that "...the reported
Medicaid non-emergency visits could have been reduced to 40 percent". It appears HCFA
misunderstood the meaning of this assumption and thus our method for obtaining the number
of emergency room visits that could be reduced along with the resultant savings. This
assumption was clarified on page six to indicate that the number of non-emergency visits to
the emergency room “could be reduced to 40% of all Medicaid emergency room visits".
Furthermore, in developing our estimates it is important to note that the savings calculations
were based on four States data, although we used only one in Appendix C as an illustration.
We continued to use this method for estimating savings.

Regarding the HCFA comments on the savings to society calculation, the OIG continues to
believe that additional savings to society would occur. These savings would be beyond those
accruing to the Medicaid program if Medicaid patients were redirected to more appropriate
community settings. Savings would be in the form of averting cost shifts to other segments
of society since Medicaid reimbursement is lower than actual costs of providing care.
Because of the high overhead associated with operating an emergency room (equipment,
physicians, etc.), it is more expensive to treat a non-urgent problem in the emergency room
than in a community setting. To the extent that such legitimate costs of providing care are
not reimbursed by Medicaid, they are shifted to other payers. Our approach to calculating
these savings, which we have further clarified on page six, represents a rough estimate of the
extent of savings accruing from avoidance of cost-shifting.

SUMMARY OF PHS’ COMMENTS TO RECOMMENDATIONS AND OIG’S RESPONSE

GENERAL COMMENTS

PHS Comments

The PHS acknowledged the relevance of the general findings that (1) lack of access to
primary care is a major cause of non-emergency use of the emergency room and (2) access
to alternate care is an important component in developing effective control of emergency
room use. However, they felt more discussion of problems facing Medicaid recipients in
gaining access to more appropriate care would have been helpful. Since none of the
recommendations were directed to PHS, they did not comment on them. They did, however,
Provide several general comments. Three of the comments relate to definitions and
methodology. The definitional concerns pertained to the word "inappropriate" when referring
to emergency room use. The methodological problem concerned combining reports across
States, since it was not clear that a uniform definition of emergency was used by all sample
States. Additional comments suggested greater discussion of access and quality problems that
might arise when redirecting care from the emergency room. (The full text of the PHS
comments are contained in Appendix G.)

F-4


OIG Response

The PHS comments were considered and resulted in clarifications within the Teport. With
regard to access to alternate care, we agree that this is an important issue warranting
continued study. However, this is a broad subject and beyond the scope of this inspection.
We agree that it is difficult to define the appropriateness of emergency room visits.
However, the focus of this inspection was narrower, examining only non-emergency care.
Hence, we changed the word "inappropriate" to "non-emergency" in the few places it was
used in this report. To address the methodological issue regarding a uniform definition of
“emergency”, a clarification was made on page nine. The clarification indicates that while
definitions for the term "emergency" are very similar, terms used to classify other types of
care provided in the emergency room differ.


APPENDIX B

Average Charges And Reimbursements For Non-Emergency Care In The Emergency Room
Compared To Alternative Care Sites

STATE AVERAGE CHARGE PER SITE/RATIO BASED ON
TOTAL NON-EMERGENCY CHARGE
PRIVATE M.D. |COMMUNITY [CURRENT M.D. | TOTAL TOTAL NON-
IN COMMUNITY | CLINIC MEDICAID EMERGENCY | EMERGENCY
PAYMENT
AR $30.84/3.6 $39.62/2.8 $24.75/4.5 $193.71/.57 $111.47
CA* $50.92/3.2 $36.75/4.4 $18.40/8.7 $287.71/.56 $161.36
KY $60.40/2.7 $46,52/3.5 $17.77/9.0 $161.46 $161.46
MI $41.62/1.2 $16.60/3.1 $104,007.50 | $ 52.00%
MN $50.89 $63.41/ $20/00/
MO $49.82/4.8 $41.11/5.8 $17.00/14.1 $179.22/1.3 $240.13**
PA $27.80/3.2 $30.36/2.9 $18.00/4.9 $108.68%*/.82 | § 89.56%
UT $37.43/5.4 $38.66/5.2 $19.65/10.3 $203.15 $203.15
WI $16.88/

AVERAGE CHARGE PER SITE/RATIO BASED ON
PERCENT NON-EMERGENCY AMOUNT REIMBURSED

PRIVATE M.D. |COMMUNITY | CURRENT M.D. | PERCENT OF AMOUNT OF
IN COMMUNITY | CLINIC MEDICAID NON- TOTAL NON-
PAYMENT EMERGENCY | EMERGENCY
CHARGE CHARGE
REIMBURSED _ | REIMBURSED
AR $30.84/1.15 $39.62/.90 $24.75/1.4 32% $ 35.67
CA* $50.92/1.23 $36.75/1.7 $18.40/3.4 39% $ 62.93
KY $60.40/1.7 $46.52/2.25 $17.77/5.9 67% $104.94
MI $41.62/0.20 $16.60/0.48 16% $ 8.12%
MN $50.89 $63.41/ $20.00/
MO $49.82/2.45 $41.11/2.97 $17.00/7.2 51% $122.46**
PA $27.80/ $30.36/ $18.00/
$37.43/2.9 $38.66/2.8 $19.65/5.6 54% $110.50
$16.88/

* — Information based on 5 percent sample and includes all non-emergency and other care provided in the hospital
outpatient emergency room and examination room

** -- Based on all non-emergency care provided in either emergency room or outpatient hospital clinic, as of 1985 this
figure included outpatient surgeries,

eee Based on emergency room facility fee only


EXECUTIVE SUMMARY

PURPOSE

This report describes programs or procedures developed by nine States to control the non-
emergency use of emergency rooms by Medicaid recipients and evidence of their success.

BACKGROUND

During the last decade, Medicaid agencies have felt the financial pinch of program
expansions and rising costs. Medicaid Programs have sought to control program costs
through various means while maintaining quality care. One method has been tighter
controls on the use of Medicaid services, including hospital emergency rooms.

The non-emergency use of emergency rooms by Medicaid recipients has long been
recognized as a problem. In September 1983 the OIG released a report (OAI-"Non-
emergency Use of Hospital Emergency Departments by Medicaid and Medicare
Beneficiaries") which found a very high misuse of hospital emergency rooms by Medicaid
recipients. Studies continue to show that Medicaid recipients consistently make a higher
proportion of non-emergency and marginally appropriate emergency room visits ranging
from 17 percent to 61 percent. In contrast, recent studies show non-emergency visits for
the general public range between 11 percent to 38 percent of all emergency room visits.
These findings indicate significant potential for containing costs and improving the quality
of care through reducing non-emergency utilization and redirecting recipients to more
appropriate care sites.

We interviewed 17 Medicaid directors and managers in nine different States about the
programs/procedures they have established to control non-emergency use of the
emergency room, their motivations for development, and their perceived and actual
success. In addition we obtained utilization and charge data from the States and the
Medicaid Statistical Information System (MSIS) program at the Health Care Financing
Administration (HCFA). States were selected on the basis that they had "mature" controls
in place. Mature was defined by length of establishment, comprehensiveness and/or
likelihood of having cost and utilization data available.

FINDINGS

Heavy Non-Emergency Use of Emergency Rooms By Medicaid Recipients Is A
Continuing Problem.

e Over one-half to two-thirds of Medicaid emergency room visits are non-emergency.


UBLIC_E ER P OF INSPECTOR
GEN TG) DRAFT REPORT “USE OF R BY MEDICAL
CIPI " OFI-06-90— BER 1991

This report describes programs or procedures developed by nine
States to control the non-emergency use of emergency rooms by
Medicaid recipients. Although there are no recommendations
directed to PHS, we offer the following general comments for
your consideration.

General Comments

As noted in the report, the major cause for inappropriate usage
of emergency rooms by Medicaid recipients is a lack of access
to primary and preventive health care services for Medicaid
covered patients. For over 25 years, the community and migrant
health centers programs (which currently provide care to over
6 million persons from medically underserved areas) have helped
provide access to primary care services. When present ina
community, these centers have been responsible for reducing
usage of emergency rooms for non-emergency care.

The report addresses a complex set of issues involving
questions of access to and costs of care for populations with
multiple social, economic, and medical problems. We do not
disagree with the goal of redirecting Medicaid beneficiaries
from emergency rooms to alternate care sites. We believe,
however, that the report does not adequately address the range
of problems inherent in assuring access to appropriate
emergency care for Medicaid beneficiaries. Following are
comments, questions and suggestions which we believe could
enhance the usefulness of the report.

o Inappropriate use of emergency rooms should be clearly

defined.

The report focuses on the identification of
inappropriate use of emergency rooms, but does not
present a clear definition of inappropriate (or
appropriate) use. Also, since it is not clear that the
definitions used by the States included in this study
are uniform, combining the reports across States is
methodologically questionable. Also, terms like
"misuse" and "inappropriate use" do not describe the
frustration and concern from the patient’s perspective.

© Additional discussion of the factoys that may lead

Medicaid recipients to use emergency rooms
inappropriately would be useful.

Medicaid patients may have difficulty finding community
physicians who will treat them, particularly outside of


Page 3

Under the President's proposal for health care reform, HCFA will require development of
coordinated care programs. Until that time, HCFA will continue to expedite the review of
State applications for waivers to implement their coordinated care efforts and ER controls.

We have developed a streamlined Waiver Application for this purpose which was released in
November 1991.

In regards to the last part of the recommendation, there are indications in the report that
many States are aware of the overuse of ER services and have taken steps to curb the
situation by developing programs and procedures to redirect Medicaid recipients and others
seeking care to more appropriate and less costly settings. We believe that we should draw
on the experience of these States in encouraging other States to implement similar measures.

The OIG report is a strong endorsement for the increased use of coordinated care programs.
This approach appears to best deal with the basic problem which is the lack of access to
primary care during and after office hours. We believe that the President's proposal
requiring an increased use of coordinated care should be HCFA's primary thrust for
relieving the use of ERs for non-emergency purposes and providing access to care in the
appropriate setting. The President's proposal also addresses the issue of inappropriate use
of ERs by the non-Medicaid eligible poor. Under the proposal, it a hospital emergency
room is an uninsured tax credit-eligible individual's first point of contact with the health care
system, that individual would immediately be enrolled in a health plan. The individual
would then have a medical home and would no longer need to reply on the ER for basic
health care.

Technical Comments

The savings estimate appears to be overstated due to OIG's assumptions and the
methodology employed. It would seem that a more reasonable and accurate methodology
would be to reduce the total number of reported non-emergency visits (166,455) by 60
percent, or 99,873 visits. These visits would then be multiplied by the difference between
the average payment ($104.94) for all services provided in an ER setting and the average
payment made to physicians, community health centers, or by Medicaid for non-emergency
services. Using this methodology and the categories of payment specified in Appendix B of
the report, the savings estimate would range from $4,448,343 to $8,008,816.

When calculating the societal savings, OIG should have considered that the average charge
of $161.46 is never paid by Medicaid. Therefore, the difference between that charge and the
Medicaid payment of $104.94 would never be realized by the hospital. In fact, the average
charge may not be paid by any third party payer. Consequently, the societal savings are
already calculated in the range provided above.

We also question how the savings of $39.9 million and $83.5 million were derived. We are
requesting that OIG explain this more thoroughly in the final report.


problematic. States listed cost savings as a major concern when developing 15 of the 23
programs with eleven of the programs reporting this as the most important reason for
deciding to implement their program. The potential for savings encouraged these States to
develop programs to review claims for the appropriate level of care and corresponding
billing or to develop or review their current managed care/pre-paid programs.

Recipient and provider behavior both caused non-emergency use of the emergency room.

Recipients were using the emergency room for primary care, both during and after
physician office hours, before controls were implemented due to a lack of access to an
ongoing relationship with a primary care provider. Three States said that many Medicaid
recipients either did not have a primary care physician, or did not know how to access
one, and instead chose to use the emergency room. Recipients who historically had a
difficult time reaching their physician either due to unavailability or to lack of a telephone,
frequently would proceed to the emergency room for medical care. Medicaid recipients
would also proceed to the emergency room for care after office hours if their physician
instructed them to do so after (s)he was contacted. States also reported that some
Medicaid recipients would say they did not have a primary care physician, even when they
did.

Physicians and hospitals both acted in ways that did not discourage, and frequently
encouraged, Medicaid recipients to use the emergency room for non-emergency purposes.
Physicians would refer recipients to the emergency room after office hours or they would
not be accessible to patients after office hours. Some physicians would also verify the
need for care in the emergency room when contacted by the hospital after office hours,
even if the level of care required was not an emergency. Hospitals would often treat a
patient before trying to contact their primary care physician, whether the care was an
emergency or not. Frequently, hospitals would treat the patient because the individuals
indicated they did not have an ongoing relationship with a physician.

States’ controls provided opportunities to change recipient and provider behavior.

States developed programs that attempt to change recipient behavior by providing access
to care in a more appropriate setting. These programs provide either mandatory or
voluntary access to an ongoing relationship with a primary care giver, or refer a patient to
an appropriate setting based on screening of symptoms. Eleven programs have addressed
non-emergency use as a secondary focus by providing access to care through managed and
pre-paid plans. One program has addressed this issue through a 24 hour Nurse Line.
Three of the managed care/pre-paid programs have reported a decrease in emergency
room utilization and the Nurse Line has estimated a decrease in non-emergency visits
during its first quarter due to alternative referrals.

States have also developed programs that attempt to change behavior through limiting
access to the emergency room in several ways. Eleven programs had as their primary


Tiered pricing and triage fees provide opportunities for savings by differentiating
payments for levels of emergency room care provided.

Payments based on level of care provided, or tiered pricing, have been developed by all
but one of the States in the sample. Three of the States, Pennsylvania, Missouri and
Arkansas specify differential payment rates for care provided to emergency and non-
emergency cases in the emergency room. Minnesota differentiates between facility
payment rates for care provided to emergency and urgent cases in the emergency room.
In California, recipients presenting to the emergency room but determined not in need of
that level of care are referred to the examination room which is billed at a lower rate.

Kentucky does not provide different payments for urgent and emergency care provided in
the emergency room. While in theory non-emergency cases are not treated in the
emergency room, the Kentucky respondent stated that, in fact, this is not always the case.
If physicians authorize treatment in the emergency room, this is taken as an indicator that
the cases are emergencies. However the State Medicaid agency is aware that not all the
cases authorized are emergencies. Kentucky is in the process of establishing a triage fee
in an effort to assure only appropriate cases are being treated in the emergency room.

Payment of a triage fee reimburses the hospital for the time spent determining patient need
and also encourages hospitals to refer patients needing lesser levels of care to a more
appropriate setting. Minnesota provides a triage fee for assessing the level of care
required by any patient presenting to the emergency room. Two additional States,
Michigan and Utah, also provide a triage fee for patient assessment. Flexibility has been
built into the triage system in these States by allowing urgent cases to be seen in the
emergency room if the patient presents after hours or on the weekend.

The Majority of Programs/Procedures Considered Successful Address Access To Care
Through Managed Care/Pre-paid Programs.

Of the fifteen programs/procedures that are considered successful and are still in place,
thirteen address access to care. The primary function of these plans is to provide
recipients with an ongoing source of primary care and referral to other services. Nine of
the 13 programs/procedures addressing access are managed care or pre-paid health plans.
Four of the 13 address access based on time, age and geographical location, or lock-in to
a physician. Missouri has provided for access to care by recipients who overutilize
services by locking them in to a specific primary care physician. Michigan and Utah
consider the time until regular office hours, based on day of week and time of day, when
determining if urgent care may be provided in the emergency room and reimbursed at a
higher level. Arkansas has added availability of physicians in the geographic location to
consideration of day and time when determining if non-emergency care will be reimbursed
at a higher level. Arkansas and Michigan both consider the age of the individual
presenting to the emergency room. Arkansas also makes greater allowances for
emergency room visits by children under the age of two, with no reviews being made of
their claims.

10


Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL

USE OF EMERGENCY ROOMS BY
MEDICAID RECIPIENTS

OET 06-90-00180

—

i v/ Richard P. Kusserow
‘. INSPECTOR GENERAL
at



Application, which was released in November 1991, to expedite the review of State waiver
applications. The HCFA does not agree with the section of the recommendation to provide
instructions to the States on access and use of emergency room data for annual review. They
believe that extensive research would be required to effectively provide specific instructions
on access and use of ER data in conducting annual reviews of ER utilization. Finally, the
HCFA believes the final part of the recommendation, regarding disseminating annual reports
on effective practices for reducing non-emergency use, should be addressed by drawing on
the experience of States in controlling emergency room use in encouraging other States to
implement similar measures.

OIG Response

The OIG appreciates the autonomy of the State Medicaid programs, and understands the need
to encourage rather than require certain program activities. Based on this, the word "require"
will be changed to "encourage" in this recommendation. The OIG continues to believe the
provision of instructions on access and use or emergency room data for conducting annual
reviews of utilization are important. Based on the findings of this inspection, it appears some
States have collected data on emergency room utilization, but do not access it on a regular
basis. We do not agree that extensive and expensive research would be required in order for
HCFA to issue some general guidance regarding the need for collection and annual review
of emergency room use data. This action would have the benefit of periodically and
systematically focusing State attention on this important information. The OIG believes this
guidance would lead to a more in-depth understanding of the problem of emergency room
utilization and result in better plans of action for addressing the issue. The HCFA response
to the final part of our recommendation expresses the intent of the OIG on the dissemination
of information to the States on effective practices for reducing non-emergency use of the
emergency room.

TECHNICAL COMMENTS

ents,

The HCFA made technical comments questioning our assumptions and methods for
calculating the program and societal savings estimates. The HCFA feels the savings to
society, representing the difference in the charges billed to Medicaid and those reimbursed
by Medicaid for non-emergency care, would be included in the savings to the program
previously calculated. They state that the difference between the average charge and the
Medicaid payment would never be realized by the hospital. Furthermore, they stated that the
average charge may not be paid by any third party payer, therefore the societal savings would
be included in the previous savings calculation.

*(The full text of the HCFA comments are contained in Appendix G.)


13. Shaw, Kathy N., Selbst, Steven M. and Gill, Frances M., "Indigent Children Who

Are Denied Care in the Emergency Department", Annals of Emergency Medicine, vol 19,
#1, January 1990, pp. 59-62.

14. Freund, Deborah A:, Rossiter, Louis F., Dox, Peter D., Meyer, Jack A., Hurlye,
Robert R., Carey, Timothy S. and Paul, John E., “Evaluation of the Medicaid

Competition Demonstration" Health Care Financing Review, vol 11, #2, Winter 1989, pp.
81-97.

15. Commerce Clearing House, 15,028, Section 36,627, 1987.
16. Commerce Clearing House, Section 14,625, p. 6314.

17, Omnibus Reconciliation Act of 1989, P.L. (101-239).

18. 42 U.S.C. section 1395dd. (1867 of the Social Security Act).

19. The numbers on which these figures are based exclude emergency room visits made
by Medicaid recipients enrolled in HMO, pre-paid and community health center programs
in the States of California, Michigan, Minnesota, Missouri, Pennsylvania, Utah and
Wisconsin. Numbers representing the percent of non-emergency visits for the States of
Kentucky, Utah and Wisconsin were obtained from the HCFA MSIS. This clarification
also holds for information presented in Figure 1.

20. Due to the limited data, estimates could not be made for the entire sample.

21. Grannemann, Thomas W., Brown, Randall S. and Pauly, Mark V., “Estimating
Hospital Costs: A Multiple Output Analysis," Journal of Health Economics, Vol 5, 1986,
pp. 107-127.

22. Non-emergency use of the emergency room was brought to the attention of the States
in a number of ways. Utilization Review, provider complaints and cost overruns were
most frequently cited as means of discovering the problem. Seven of the nine States
interviewed reported having data to support the extent to which emergency room use was
a problem prior to program implementation. The sources of data were the Medicaid
Management Information System (MMIS), Surveillance and Utilization Review Subsystem
(SURS) program, Utilization Review, Exception Profiles, Target SURS Report, an
emergency room study and a Legislative Audit Report. While data was available, it was
frequently not reviewed by States on an ongoing basis. Rather, it was utilized as a tool to
investigate the issue when it appeared to be a problem.

19


OFFICE OF INSPECTOR GENERAL

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 Department of Health and Human
Services’ (HHS) programs as well as the health and welfare of beneficiaries served by
those programs. This statutory mission is carried out through a nationwide network of
audits, investigations, and inspections conducted by three OIG operating components: the
Office of Audit Services, the Office of Investigations, and the Office of Evaluation and
Inspections. The OIG also informs the Secretary of HHS of program, and management
problems, and recommends courses to correct them.

OFFICE OF AUDIT SERVICES

The OIG’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 carrying 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 Department.

OFFICE OF INVESTIGATIONS

The OIG’s Office of Investigations (OI) conducts criminal, civil, and administrative
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and
of unjust enrichment by providers. The investigative efforts of OI lead to criminal
convictions, administrative sanctions, or civil money penalties. The OI also oversees
State Medicaid fraud control units which investigate and prosecute fraud and patient abuse
in the Medicaid program.

OFFICE OF EVALUATION AND INSPECTIONS

The OIG’s Office of Evaluation and Inspections (OEI) conducts short-term management
and program evaluations (called inspections) that focus on issues of concern to the
Department, the Congress, and the public. The findings and recommendations contained
in these inspection reports generate rapid, accurate, and up-to-date information on the
efficiency, vulnerability, and effectiveness of departmental 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 Project Leader, Dallas
Judith V. Tyler Program Analyst, Dallas
Thomas A. Noplock Program Specialist, Headquarters


APPENDIX E

STATE CONTACTS FOR FURTHER INFORMATION

Roy Jeffus, Administrator, Utilization Review
Arkansas Division of Economic and Medical Services
Utilization Review Section

Medical Services

P.O. Box 1437

Slot 1102

Little Rock, AR 72203

John Rodriguez, Deputy Director
Medical Care Services
Department of Health Services
714 P Street, Rm 1253
Sacramento, CA 95814

Janie Miller, Deputy Commissioner For Medicaid
Cabinet for Human Resources

Department for Medicaid Services

275 E. Main

Frankfort, KY 40621-0001

Esther Reagan, Assistant to the Director
Bureau of Program Policy

Medical Services Administration

P.O. Box 30037

Lansing, MI 48909

Nancy McMorran, Program Consultant
Department of Human Services

Health Care Management Division

444 Lafayette Road

St. Paul, MN 55155-3853


‘omments of the Health Care Financit inistrati
(HCFA) on the OIG Draft Report: "Use

of Emergency Rooms by Medicaid Recipients,”
OEI-06-90-00180

Recommendation I

Each State should develop a comprehensive initiative to reduce costly non-emergency use of
hospital emergency rooms (ERs). These initiatives should address:

o Increased use of managed care options to improve overall care access and quality;
o Community based access to after-hours care;

o _ Increased reimbursements to physicians and clinics who see Medicaid recipients after
hours;

o Defining different levels of ER care and providing corresponding tiered pricing and
reimbursement levels; and

o Triage payments to providers for scrcening patients not treated in the ER.

HCFA Response

In his Comprehensive Health Reform Program, the President goes well beyond this
recommendation by proposing an increased use of coordinated care options within Medicaid
to improve access to high quality care. Under the President's proposal, States would be
required to enroll all Medicaid recipients in coordinated care plans or receive a waiver to
offer the traditional fee-for-service system. This proposal is consistent with the
Administration's goals of improving health outcomes and quality assurance through
coordinated care and reducing costs.

HCFA believes that State-wide adoption of coordinated care plans for all Medicaid
recipients would substantially reduce the non-emergency use of hospital emergency rooms
(ERs) that is outlined in your report. For example, under the coordinated care "case
management” approach, patients are assigned a primary physician who guides them through
the health care system and provides them with 24 hour access by phone if not in person. A
number of States already pay primary care physicians an additional monthly fee for this
service which reduces need for community based access to after-hours care.


APPENDIX C

SAVINGS CALCULATIONS

ASSUMPTIONS:

Potential total savings to both the Medicaid Programs and society were estimated for Arkansas,
California, Kentucky and Utah based on the following assumptions:

1.

Non-emergency visits to the emergency room could be reduced to the upper range of
non-emergency visits for the general public, which includes Medicaid recipients, based
on findings in the literature. The upper limits cited in the literature are 38 percent,
which we rounded to 40 percent. Thus Medicaid non-emergency visits to the
emergency room could be reduced to 40 percent of all Medicaid emergency room visits.

Some patients originally seen in the emergency room as non-emergency care could be
redirected to care in the community. Thus, a range of savings based on lower average
charges for community physicians and clinics would be realized.

To construct a more conservative model where Medicaid physicians are not reimbursed
at the rate of their full charges, savings were also estimated based on the highest
Medicaid physician reimbursement rate among the four States ($24.75 per Physician
Payment Review Commission 1991 Annual Report to Congress). This rate would be
a more realistic reimbursement fee for redirected Medicaid recipients.

Non-emergency visits are reimbursed at a percentage of actual charges. The average
amount reimbursed for these charges would represent the amount spent by the Medicaid
program on non-emergency care in the emergency room. Savings would result from
calculating the difference between these charges for the number of patients redirected
and average charges for their care in the community.

Savings to society might also be generated from diverting non-emergency cases from
the emergency room. These savings were calculated based on the difference between
the amount charged by the emergency room and the amount reimbursed by the
Medicaid program for the non-emergency care provided. It is reasonable to consider
this as a possible savings to society based on the reality that low levels of care provided
in the emergency room still incur high costs due to the expense of the setting and the
greater number of procedures performed. The costs associated with these items must
be accounted for, as they are not diminished simply by distinguishing between levels
of care.


proximity of care, or transportation problems or after working hours access due to being
unable to reach a physician in a timely manner, or lacking a telephone. Physicians and
hospital providers also continue to exacerbate the problem by their behavior. Physicians
refer recipients to the emergency room after office hours, or verify the need for non-
emergency care in the emergency room when contacted by the hospital. Additionally,
hospitals do not always contact physicians before treating patients enrolled in managed

care programs.

Substantial Medicaid Savings Could Be Realized By Redirecting Non-Emergency
Visits To More Appropriate And Less Costly Care Sites.

Non-emergency care can be provided at less cost in the community. Average charges for
non-emergency care provided in the emergency room ranged from 1.2 to 5.4 times the
average charge of a Medicaid visit in the community (See Appendix B). While Medicaid
reimbursement for non-emergency care in the emergency room ranges from 16 percent to
67 percent of billed charges in the sample States, these levels are still greater than average
charges in the community in all but one State. Assuming non-emergency visits could be
reduced to 40 percent of all Medicaid emergency room visits, the rate for the general
public based on previous research, and individuals could be redirected to community care,
we estimated potential Medicaid savings. In 1990, $39.5 million could have been saved
in just four” of the sample States by redirecting non-emergency care. This estimate
applies a community reimbursement rate of $24.75, the highest of the four State Medicaid
physician reimbursement rates for an office visit. Even if the redirected visits were
reimbursed at the average charge billed to Medicaid for a community clinic visit, program
savings of $27.2 million could still have been realized. Likewise, $16 million could have
been saved by reimbursing average charges for a physician office visit in the community.
(See Appendix C for a sample calculation)

Additionally, we believe significant savings to society may also be realized by reducing
the number of non-emergency Medicaid visits to the emergency room, and redirecting
recipients to alternative community sites. These savings would accrue through averting
shifts of unreimbursed emergency room costs to other payers. Because of the difference
that exists between emergency room costs and the low amounts reimbursed by Medicaid,
hospitals have a strong incentive toward cost shifting. Those costs, not paid by Medicaid,
cannot be billed to recipients and may become uncompensated care costs. Typically, these
uncompensated costs are shifted to society in the form of higher health care costs for the
entire population, higher insurance premiums, or redirection of charity dollars. We have
made a rough calculation of societal savings by using emergency room charges as a proxy
for costs." Using this method, we estimate savings to society might have been as high

as $83.8 million in 1990 in four sample States (see Appendix C).


focus changing behavior through limiting access, sharing of financial responsibility
through co-payments and denying or reducing payment to hospitals when non-emergency
care is provided in the emergency room setting. Seven of these programs are still in
place, but one has been significantly altered. Two of the programs in Arkansas and
Michigan have not changed behavior by reducing non-emergency visits. According to
respondents, it is not clear whether the remaining programs/procedures have had the
desired effect of changing recipient or provider behavior.

States’ lack of specific reimbursement levels and definitions of emergency care permitted
non-emergency use of the emergency room.

Prior to 1982 States lacked policies and diagnosis codes or criteria to differentiate between
levels of care and reimbursement rates for levels of care. None of the States interviewed
had differentiated levels of care or reimbursements prior to implementing their control
programs/procedures. For this reason, data did not distinguish between emergency and
non-emergency care provided in the emergency room. Without this data, the amount of
non-emergency care provided could not be determined, and the extent of the problem was
not clear. Five States reported difficulty in determining if they had a problem because
they could not differentiate the level of care being provided in the emergency room before
implementing their programs. Five States also reported perceiving a problem with non-
emergency use of the emergency room due to high hospital and/or outpatient charges.
However, they could not determine how much of these charges were due to non-
emergency care due to the lack of differentiation in the data. Providers were also
motivated to treat anyone presenting to the emergency room and label the care as
emergency to receive a higher reimbursement level for care provided in a less than
appropriate setting. This led to greater sums of money being spent on care in the
emergency room that could have been provided in a less costly setting.

Differentiating levels of emergency room care helped some States document non-
emergency use of the emergency room.

States have made efforts to implement procedures allowing them to specify criteria,
diagnoses, or codes that differentiate levels of care. While the State definitions of
“emergency” care are quite similar, the means of defining other levels of emergency room
visits are not consistent among States. Five States have developed definitions
differentiating between emergency and urgent levels of care. Four of these States
recognize other levels of care, either routine or clinic levels of care, which are referred to
other treatment sites. In Michigan and Utah, coverage of urgent level care in the
emergency room depends on factors such as time of day and day of the week. During
regular office hours, urgent care may be referred to a special clinic or to the private
physician’s office. Four States have developed definitions differentiating between
emergency and non-emergency care. However, two of these States denote non-emergency
visits as either outpatient or examination room visits.