Sector spotlight: Emergency Departments
Emergency department (ED) utilization has been growing for decades now, with an aging US population and increased accessibility due to expanding Medicaid coverage. In 2016, the number of ED visits totaled 145.6 million, or 45.8 per 100 people- up 13.1 percent from the 2006 rate of 40.5 per 100 people. While ED utilization has increased, the specialty has been challenged by an uphill battle to recruit physicians and rising costs amidst declining reimbursement.
Emergency medicine (EM) tends to be the one of the more stressful medical specialties, with 52 percent of emergency medicine physicians reporting burnout, a rate three times greater than the average physicians’. Duties under EMTALA (Emergency Medical Treatment and Labor Act, which requires emergency departments to provide care for all individuals regardless of ability to pay) and increasing administrative responsibilities for CMS reporting are often mentioned as contributing factors to emergency physician stress. Emergency departments are consequently understaffed and face ongoing difficulty in recruiting physicians. Along with challenges in staffing, emergency departments have historically been one of the more expensive cost-centers in the hospital setting. These factors have led to outsourcing of EDs to MSOs (managed service organizations) and the relinquishment of physician ownership. Freestanding EDs have also grown in popularity in some states, with third-party companies aiming to capture patients away from crowded hospital ER settings.
However, concerns have been raised over the costs associated with utilization of freestanding EDs (which are often not eligible for Medicare or Medicaid benefits) in today’s environment of value-based care. The bankruptcy of Adeptus Health in 2017 could be pointed to as a byproduct of the challenges faced by freestanding EDs.
EDs associated with hospitals continue to see challenges, as insurers and administrators are beginning to take note of the increase in ED utilization and resultant spending. Here are some trends, which could affect the emergency department space moving forward:
- Continued Consolidation of EM Physician Groups/MSOs: Rising costs and reimbursement challenges have forced emergency medicine physicians to relinquish practice ownership. According to the AMA Physician Practice Benchmark Survey, the distribution of EM physicians in physician-owned practices has fallen from 38.4 percent in 2012 to 27.9 percent in 2016 and 26.2 percent in 2018, a level lower than that of any other specialty. While mega PE funds have been leaders in consolidation of these EM practices, notably Blackstone’s Team Health and Envision Healthcare, which was taken private in 2018 by KKR, smaller PE groups are now stepping into the space. BBH Capital Partners’ platform American Physician Partners and Varsity Healthcare Partners’ platform Emergency Care Partners have led the trend with several recent add-on acquisitions. As consolidation increases, PE-owned groups are beginning to come under the microscope for billing practices.
- Legislative Action on Surprise Billing: There has been increasing scrutiny over “surprise bills”, with 26 percent of patients admitted to hospitals from emergency rooms reporting unexpected, out-of-network medical charges. In September 2019, Congress launched an investigation into surprise bills from PE-owned, third-party medical providers, with KKR, Blackstone and Welsh, Carson, Anderson & Stowe being the subjects. This has led to debate between payers and providers over proposed legislation to benchmark rates for providers. Such legislation could have significant effects on reimbursement for emergency medicine and further constrict patient access to EDs.
- New ET3 Payment Model from CMS: The ET3 Model (Emergency Triage, Treat and Transport Model) is set to incentivize participating EMS responders to provide care prior to arriving to the ED setting, as well as for transporting patients to alternative out-of-hospital care sites including urgent care. This could lead to reduced overcrowding of EDs and higher percentages of high-acuity patients being admitted. While these represent benefits to hospitals and providers, the model could also lead to decreased hospital inpatient admissions resulting from ED diversion. The model is set to go-live in spring 2020.
- Revisions to ED Coding and Documentation Standards: On November 1, 2019 in its Medicare Physician Fee Schedule Final Rule, CMS finalized increased valuation for evaluation and management codes for the Emergency Department in 2020. However, they also finalized a proposal that will lead to decreased reimbursement in 2021. They have also loosened documentation guidelines in recognition of the administrative burden being placed on physicians.
Sources: American Action Forum; American College of Emergency Physicians; American Medical Association; Becker’s Hospital Review; Centers for Disease Control & Prevention; HealthLeaders Media; Healthcare Dive; Merritt Hawkins
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