Readjusting emergency department reimbursement rates could reduce unnecessary health care spending in Virginia

In the interest of reducing unnecessary health care spending in Virginia, members of the Joint Commission on Health Care reviewed an analysis of emergency department (ED) utilization and related costs this week. The overarching policy recommendation from the report was to adjust certain facilities’ reimbursement rates based on their levels of operation and care provided. 

 

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Health care spending in Virginia increased 20.9%, or $13.2 billion, from 2014-2018, according to Mark Miller, PhD, executive vice president of health care at the philanthropy Arnold Ventures. Miller said this growth was driven by increasing cost of services, particularly within EDs. According to national data gathered by Arnold Ventures, ED visits are over six times the cost of primary care visits, despite treating patients with similar conditions. The data also indicates 30% of ED visits could have been treated in a primary care clinic or other alternative setting. 

According to the analysis, Virginia spends disproportionately more on hospital systems than through Medicare programs. Miller, who studied three of the state’s largest hospital systems, said their ED rates were as much as 326% higher than Medicare services.

Miller said that savings accrued from decreasing unnecessary health spending could be relocated to other areas of need in health care. 

He outlined several policy solutions for the commission to consider to reduce unnecessary spending:

  • Develop uniform coding standards across hospitals, which would prevent certain hospitals from charging more for a similar level of care than at other facilities
  • Develop incentives to avoid ED utilization, and instead focus on building a coordinated or integrated system of care
  • Redetermine reimbursement rates based on a facilities’ hours of operation or level of care provided

Miller said one exception to the last recommendation would be rural urgent care centers or free-standing EDs. He said these facilities should be considered as in-hospital EDs.

“I would suggest that you may want to maintain higher rates and rates that may not entirely match the patient mix that’s going in the door, just because it is the only source of care in an isolated, rural community.”

Senator Barbara Favola (D – Arlington), voiced an argument hospitals might make in light of possible reimbursement decreases. 

“Hospitals would argue that some of their emergency room patients really are very high-acuity care. They have complex medical diagnoses and they in fact should not be penalized for costs associated with caring for these very sick individuals. How do we encourage this coordination of care for every patient, but still acknowledge that a cost reimbursement reduction for different patient models has to be valued?”

Miller responded that any changes to reimbursement rates should focus on determining whether a facility operates more like a 24/7 ED (with higher reimbursement) or a walk-in urgent care center or primary care setting (with lower reimbursement than EDs).

Current payment reform initiatives in Virginia include the Department of Medical Assistance Services’ (DMAS) value-based purchasing program, which focuses on performance metrics for quality of care provided. 

DMAS is working to implement a pilot program for a value-based purchasing model in nursing homes. The initial methodology for the program is due to the legislature for review by the end of 2021. If successful, the program could expand to other health care services, such as hospitals and EDs.