Value Based Purchasing of Emergency Care – Part 1 Recommendations for Payers


Value based purchasing is a strategy for health care financing that attempts to hold the provider accountable for both quality and cost, through a combination of reductions in inappropriate or ineffective care and rewards for those providers that are ‘the best performers’. 1 Unfortunately, most insurance plans, and employer purchasers of health care, are simply looking to reduce payments to providers, and they all but ignoring the issue of quality or even cost-effectiveness. When it comes to the purchase of emergency care, the payers really seem to have taken a wrong turn, predicated on a lot of misconceptions about the role of the emergency department and the value equation for emergency care services.

This blog is aimed at the primary purchasers of health care: the plans, employers, and government programs that purportedly aim to adopt value based purchasing as an adjunct to, or replacement for, fee for service medicine. For every ‘don’t do that’ I will include a ‘consider doing this’, because up until now many emergency care advocates have either advocated some sort of carve-out for emergency medicine, or focused on the defense of the emergency care value proposition (like ACEP’s ‘just 2% campaign‘). Emergency care providers have to become part of the solution to the cost-of-care conundrum if they hope to retain any credibility with insurers and legislators. In Part II, I will outline some do’s and don’ts for providers under value based purchasing. So, I suggest that the purchasers:

• Don”t expect emergency physicians to act as ‘gatekeepers for acute care’. Emergency physicians are trained and motivated to provide care, not deny care. Coercing emergency physicians to ‘defer ER care’ for so-called non-urgent patients by down-coding claims or denying coverage is a low-gain, moderately high risk strategy that is a distraction from pursuing more cost-effective strategies (see:

Do encourage and incent primary care physicians and clinics to provide more after hours and next-day appointments. It is better to pull patients who do not need to go to the ED into other venues than to insist that ED physicians push them out.

• Don’t punish emergency care providers through non-payment and under-payment with the expectation that it will teach patients not to misuse the ED.

Do consider assisting EDs in identifying patients who use the ED repeatedly for acute exacerbations of chronic conditions, and who could benefit from active case management starting in the ED (and compensate providers for this case management – this is a strategy with an excellent ROI).

• Don’t assume that if a patient is admitted from the ED to an observation unit, and then subsequently admitted as an inpatient; this necessarily represents ‘double-dipping’ by the emergency physician. Payment for observation services is a cost-effective way to keep patients out of the hospital, and identify patients who, if discharged inappropriately, might return later for more expensive service.

Do provide feedback to emergency care providers about the population-based financial consequences of their use of chest pain centers and observation units, so that these services can be used more cost-effectively.

• Don’t use coercive contracting of EMTALA-obligated providers as a means of achieving cost-savings: it is abusive, and undermines the financial viability of the emergency care safety net. Commercially insured enrollees and their insurance plans depend on the availability of qualified emergency physicians and on-call specialists to SAVE them from unnecessary disability and higher costs down the road.

Do consider implementing shared-savings, utilization risk-pools, case-limit rates, and other contractual incentives (with appropriate guidelines and benchmarks) to encourage emergency physicians to adopt cost-effective care strategies in the ED, when the hospital is appropriately aligned with such strategies in their financial models.

• Don’t try to undermine, work around, or revoke the prudent layperson standard through the use of ‘non-emergency diagnoses’ lists or high ED visit co-pays. This standard ensures that enrollees will go to the ED when they should, reducing avoidable delays in care that result in unnecessary long-term disability and even greater long term costs to insurers. A single case of a missed opportunity to treat a stroke can cost insurers far more than it costs to treat fifty patients in the ED whose symptoms turn out to be non-serious.

• Do focus on where the ‘real money’ is spent, that is, where the major health care costs, on a population basis, are incurred, and the real opportunities for cost-savings and quality improvement exist. No doubt the ED is one place where such opportunities lie, but at only 3% of the health care dollar, the ED is by no means the target of opportunity that it is made out to be.

• Don’t automatically down-code ED physician claims, especially E&M level 4 and 5 claims, simply because these providers have to care for your enrollees whether they get paid appropriately or not. It is also abusive, and undermines your credibility as an insurer or payer.

Do, if you identify outliers who appear to be overcoding claims, utilize medical records audits by trained coders and recognized standards of coding, to explore these apparent overcoders in depth, and offer to adjudicate these claims in a fair and reasonable process.

If any of you have additional do and don’t suggestions, please reply below.

1. Theory and Reality of Value-Based Purchasing – AHRQ

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