Best practices to decrease growing emergency department costs

The costs of services provided by hospital emergency departments have become a source of major concern for payers. When a member receives care at an emergency department (ED), the facility and physicians separately submit evaluation and management (E/M) codes on the claim for services performed.

E/M codes are based on services performed while caring for a patient. The Centers for Medicare & Medicaid Services (CMS) has 11 guidelines on how facilities should code E/M levels in the ED. Guideline 1 states that the E/M code has to align with the Current Procedural Terminology (CPT®) code description. Guideline 2 states that E/M codes should be based on hospital facility resources, not on physician resources.

A growing trend

ED facility visit codes range from low severity (1) to high severity (5). Data shows levels 2–3 are declining, while level 4 and level 5 codes on claims submitted by ED facilities are on the rise. This increase is projected to continue. Level 5 codes should be used when an immediate, significant threat to life or physiologic function is present. Normal trend for submitting level 4 and 5 codes has historically been a bell curve, but now we’re seeing that the curve is beginning to shift to the right. Patient acuity is not increasing but the coding level is increasing.

A sizable amount of facility revenue is generated by E/M codes. Facilities believe that services such as X-rays or bloodwork justify the higher-level E/M codes. About 15 percent of facilities are significantly upcoding to level 4 and 5, causing a considerable increase in medical costs.

Health plans want to pay appropriately and fairly, consistent with CPT code descriptions and guidance, but not overpay based on services such as X-rays, MRIs or bloodwork.

Whenever a health plan encounters increasing claim costs, generally there is a divergence in what the medical entities are doing compared to what the health plan expects. Facilities are placing an increased emphasis on the procedures being performed in an ED to arrive at an inflated E/M level, causing a divergence from the actual CPT code descriptions.

Health plans are aware that there is a problem and are monitoring the issue. Some are employing solutions IF they find a problem. However, they are still overpaying for ED visits.

Three actions health plans can take to help decrease ED costs

There is a lack of awareness in surveillance and analysis in this space, but health plans can take three actions to help decrease ED costs:

  1. Analyze claims data to look for upcoding and overpayments
  2. Align facility payments with severity of ED visits
  3. Inform and educate facilities on correct coding

Want to learn more?

Download the Emergency Department Claim (EDC) Analyzer product information sheet.

About the author:

karazija_2016Dr. Paul Karazija
Medical Director, Payment Integrity Ideation, Optum

Dr. Karazija is a board-certified internist and former chief medical officer for two large Blue Cross Blue Shield plans with expertise in payment integrity, utilization management and policy. He has been an administrative physician for 22 years and has a passion for payment integrity and stewardship of the health care premium dollar.

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