Emergency department utilization and its impact on health care reform

by James P. Davison, DO

Emergency department utilization and its impact on health care reform legislation has been a hot topic of conversation in healthcare journals and the blogosphere. It is a tenet of the currant legislation that ER visits and cost growth will go down, contributing to a decreased health cost growth curve.

Opponents state the newly insured will flock to the nation’s emergency rooms. Proponents point to and are betting on funding contained in the bill, $11 billion dollars to double the population severed by Community Health Clinics and $250 million dollars to increase the number of primary care providers, as evidence reform will keep the newly insured out of the emergency room and decrease unnecessary visits. Some feel that being only 3% of the overall health cost in U.S., ER expenses and small fluctuations in ER visits will not affect the overall financial stability of the bill.

The following historical perspective shows that the bills proponents have made a “Bad Bet” and will cost the patients and their providers more than they realize.

The phenomenon of increasing ER utilization and unnecessary ER visits is not limited to the US, but of international scope. All Organisation for Economic Co-operation and Development (OECD) countries are experiencing it and most, except for the US, have taken steps to alleviate the consequences of unbridled ER utilization. A country’s primary care physician density does not protect it from the forces causing the increased utilization. Countries with many more PCPs/1000 than the US and those with fewer all are affected by increasing ER visits. The number of visits declared “unnecessary” remains strikingly similar from country to country, 30-40% of the total visits. Comparing apples and oranges you say?

ER visits in the US have been increasing since the 1950’s. In 1990 there were 90 million ER visits contributing 1.9% of the total US health expenditures. In 2008 there were 124 million visits and a doubling of the percentage of total US costs to 3.7%, about $84 billion. The rate of growth in ER visits is also increasing. From 1990 to 2000 ER visits increased 15%. From 1998 to 2008 visits increased 24%. The year 2008 saw the largest single yearly increase in ER visits on record.

All of this growth occurred during a dramatic rise in the number of primary care physicians. In 1990 there were a total of 210,600 PCPs with 143,100 office-based. Those numbers rose 56% and 66% respectively to 328,800 total and 237,900 office-based PCPs. Primary care physician density, PCPs/1000 population, increased over 40%. The US population grew 25% over the same time period. For various reasons, it is doubtful that the above large increases in PCPs or their density can be maintained, even if they were able to bend the ER growth curve.

As the number of PCPs was increasing, Federal and state legislation increased the population severed by community health centers from 6 million in 1991 to 20 million by 2008, all without changing ER utilization by those on Medicaid or the uninsured. The number of Urgent Care Centers more than doubled to over 8000 sites with total visits now exceeding 124,000,000 visits per year. The year 2000 saw the onset of the retail clinic industry growing to over 1200 locations and a rapid growth in the work-site clinic industry by private and governmental employers.

None of the above areas of health care delivery have been able to bend the ER cost curve downward and as mentioned before it has increased. At 3% of the total health care costs, how important can it be?

ER expenses for the US in 2010 will be approximately $94 billion and estimates place $18 billion of that as “unnecessary”. With 32 million more people insured, millions of baby boomers becoming 65 every year, life expectancy increasing, and multiple other ER cost drivers, a 1-2 % yearly increase in the ER cost growth curve is not only likely, but almost certain.

What would this mean? At a 6% annual growth rate, the total ER bill for the US will climb from $94 billion in 2010 to $170 billion in 2020 for a decade total of $1.323 trillion. A 1% rise in the growth rate to 7% will increase the total to $186 billion in 2020 and $1.399 trillion for the decade or $76 billion above the historical growth rate. If the growth rate continues at 7% instead of 6% the difference grows to a total of $ 372 billion for the decade 2021-2030. Likewise, a 1% decrease in the ER growth curve over the next 20 years would save about $448 billion dollars.

Who will pay for the extra $448 billion over the next 20 years? The usual suspects; the patients, employers and private insurance companies, but the government will be responsible for the lion share of the increased costs. The primary care providers and other specialists will pay through decreased reimbursements to balance the increased ER costs. Ironically, it is these same groups who can and must begin to implement more active interventions to reduce the ER cost growth curve.

James Davison is an emergency physician and member of the Hillsborough County Indigent Health Care Plan Task Force in Florida.

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  • Donald Green MD

    The cost of the ER continues upward in either scenario.

    If people go to their physician instead of the ER then it is lost revenue to the hospital and will have to be made up elsewhere. This usually means some sort of short term solution by the hospital that in itself eventually becomes a problem. They expand where it is not necessary to gain “market share” and end up having to increase their bottom line to cover such projects when they don’t pan out.

    If there is not room in MD’s offices then they do go to the ER and the insurer or state or hospital bears the extra expense. There has to be some realization that the readiness of health care to attend the sick has relatively fixed costs since a certain number of personnel are needed to assure service. It is a catch 22 situation.

    Savings only comes from streamlined administration across the board in health care and a change in payment that reflects uniform pricing for the same services delivered by the same medical practitioner or team with as large a risk pool as possible. The expense must be shared in an equitable manner.

    Until this happens we are just figuring out how many angels dance on the proverbial pin.

  • Marc Gorayeb, MD

    Urban hospital ER charge to the patient for a 2 cm laceration: $1000 for the hospital component, and $390 for the physician/PA component. Individuals are willing to go to the ER for this problem at this price because it is relatively cost-free to them. The solution is staring us all in the face. But we refuse to acknowledge that most medical services are no different from any other services; they will respond to the laws of market economics, if we only let them.

    • gzuckier

      Yes, but how much of that $1000 is marginal cost, specific to the individual visit, and how much is simply an apportionment of the fixed costs of maintaining the ER, and would be charged elsewhere if that visit never happened? After all, regardless of the patient’s laceration, the ER must be open at that time, the MDs, nurses, receptionists, security guards, etc. have to be at work, etc. etc. Although it crowds the ER in busy times, nonurgent visits get triaged to the bottom of the list, even if that means waiting all day for your laceration to get stitched; and in empty times, these visits actually help carry the fixed costs, bringing in revenue that would not be there if the ER was actually empty, which would require raising fees to other patients.

      “Williams (Williams, R.M. (1996). The costs of visits to emergency departments. The New England Journal of Medicine, 334(10), 642-646.) examined charges, costs, and marginal costs of ER visits in six community hospitals. Findings revealed that the average cost for urgent visits was $312 and the marginal cost was $67. For nonurgent visits the average cost was $159 and the marginal cost was only $24. Williams (1996) argues, therefore, that unless the marginal cost for a visit to a physician’s office or outpatient clinic is less than the marginal cost for a nonurgent visit in the ER, no cost savings will be realized. Although evidence of marginal costs for office visits is lacking in the literature, Williams states that estimated marginal costs for office visits made during the weekday may result in a cost savings but that weekend, night, and/or holiday visits may not be less costly than ER care during those times. Additionally, Williams acknowledges that many ER users do not have access to sources of care other than the ER, thus making the potential cost savings from utilizing other sources a mute [sic] point.”

  • FBK

    I’m hoping Community Health Centers are currently (as in now, not currantly as in berries) serving, not “severing” the population.

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