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Sg2 Projects Flattening ED Demand Nationally, Despite Recent Increase in ED Use

At Sg2, we update our Impact of Change® demand forecast annually. Our 10-year forecast projects year-over-year inpatient and outpatient demand by service line and care setting based on Sg2 experts’ analysis of multiple impact factors. Of note, our emergency department projections indicate that ED demand will flatten across the nation, largely due to nonemergent visits shifting to lower-cost settings. Specifically, urgent and emergent visit volumes (which each currently represent about half of total ED visits) are expected to remain flat over the next 5 years, with urgent visits decreasing by 2% and emergent visits growing modestly at +3%.

ED demand is highly sensitive to 3 near-term drivers of change: policy (including expanded coverage under the Patient Protection and Affordable Care Act [ACA]); alternative urgent care infrastructure; and consumerism. In the long-term, the shift to value-based payment will alter traditional care pathways and either prevent some ED use or shift demand from the ED to lower-cost settings. Changes to our 2016 forecast for ED demand include the incorporation of the most recent historical use rate trends, along with the convergence of these near- and long-term drivers. While most markets experienced a recent bump in ED utilization because of expanded coverage, Sg2 does not expect this growth to continue.

ED Utilization Trends Show Decline, But Market Differences Remain
Healthcare Cost and Utilization Project (HCUP) ED use rate trends just prior to the adoption of the ACA indicated a slowing down in national ED utilization, though rates varied across markets. Of note, there was a 0.4% decline in use rates for the last year of data, from 2012 to 2013. Why the slowdown? Because these trends occurred prior to the shift to value-based payment, we believe market differences in the level of consumerism (including penetration of high-deductible health plans [HDHPs]) and the supply of alternative urgent care sites played a large role. While value-based payment incentives may have been a factor in select markets, it was still very early in this transformation and they were unlikely to have a quantifiable impact overall.

HCUP state ED utilization data showed that in states reporting declines (in both use rates and overall volumes), the declines were most pronounced in the latter years of analysis. Even in states with a rise in ED utilization from 2010 to 2012, this trend did not persist in the final year of analysis (2012–2013).

ED Utilization Will Soften Across the US
Sg2’s year-over-year forecast previously projected boosts in ED volumes from 2014 to 2016, due to expanded coverage under the ACA. Many organizations have experienced this increased demand and some are expanding their ED footprints. However, moving past the initial ACA rollout, it is important to consider the key trends sweeping across the US that will lessen demand for ED utilization.

As mentioned above, emergent visits are projected to grow modestly, while lower-acuity urgent visits will decline by 2% in the next 5 years. Conditions such as injuries and infections are forecasted to shift to lower-cost, convenient sites of care, including urgent care centers, physician offices and emerging virtual health alternatives.

In addition, new payment incentives, such as patient-centered medical home fee enhancements, bundled payment and Medicare Advantage (MA), are emphasizing coordination, access and adherence to evidence-based guidelines, all of which may help reduce nonemergent ED visits over the long-term.

ED growth trends will vary by condition. Bucking the overall projections, demand for emergency services in psychiatry is projected to exhibit high growth for both urgent and emergent visits (13% and 20% respectively, over the next 5 years). Complex, emergent visits are also expected to grow modestly. EDs with higher proportions of these conditions are likely to see overall ED volumes bolstered.

Understanding Sg2’s ED Forecast at the Market Level
The urgent care infrastructure, level of consumerism, demographics, local policy initiatives and the adoption of value-based payment models will all affect ED utilization and growth rates within individual markets.

  1. Urgent Care Infrastructure: The supply of alternative urgent care sites is essential in determining whether a market is primed for a commercial payer shift away from the ED for nonemergent care. Urgent and retail sites are increasing across the US, but variation in supply remains. For example, Merchant Medicine data from 2013 revealed that, within the 10 US metro regions with the highest volume of urgent care clinics, the number of urgent care clinics per capita varied by more than 200%, from 0.37 to 1.8 per 100,000 population.

    Emerging virtual urgent care offerings have also resulted in decreased ED utilization. For example, CHI Franciscan Health, a large nonprofit health system in the Pacific Northwest, reported that 11% of patients surveyed who used its virtual urgent care option would have gone to the ED if not for this virtual offering.

    In addition to traditional urgent care sites, physician specialty urgent care clinics have emerged for orthopedics, cardiovascular and cancer care. These programs emphasize high-quality, lower-cost services for more complex conditions traditionally managed in the ED. Expect supply-driven market forces, specifically the increased supply of these urgent care sites, to augment the shift away from the ED.

  2. Consumerism: In addition to urgent care supply, the level of consumerism in a market will be an important factor driving the shift to alternative care sites. Urgent care is one of the main services consumers are shopping for with regards to both price and convenience. Markets with a high proportion of HDHPs and/or steerage programs are primed for this shift in care setting. When alternative care supply is ample in a market, we project that rising consumerism will further decrease ED utilization. For example, Castlight Health, a leading health benefits platform provider, recently reported a 21% reduction in overall ED visits when patients and employers had access to their price transparency tools.
  3. Demographics (Age, Payer and Case Mix): Markets or institutions with a higher proportion of complex, elderly or psychiatric patients will likely continue to see growth in ED visits, as these populations are projected to have increased demand for ED services. In addition, the Medicaid population will be less impacted by consumer-driven incentives and will likely remain heavy utilizers of the ED. Until scalable state-based care redesign takes hold, EDs with a high penetration of Medicaid patients will continue to experience demand for urgent care services.
  4. Policy: Medicaid expansion has largely taken place across the US under the ACA. However, there will be additional states that have not undergone Medicaid expansion that will legislate this in the future. These select states should plan for a boost in ED volumes that parallels the boost seen from 2014 to 2016 in Medicaid expansion states.
  5. Penetration of Value-Based Incentives: Advanced markets in terms of adoption of value-based incentives have already begun to experience a decline in ED utilization. Payment incentives in these markets emphasize reductions in nonemergent ED visits through rigorous chronic disease management programs, 24/7 nurse triage, remote monitoring and extended after-hours clinics. For example, a 2012 study in Health Affairs that compared over 3 million Medicare Advantage enrollees to a fee-for-service Medicare control group found that ED use rates were 25% to 30% lower in the MA population. A growing body of evidence on medical homes outcomes also points to lower ED utilization as a result of this model.

 

Since individual market experience will differ in both timing and extent of the shift, organizations should factor in market adoption of the 5 key variables highlighted above when planning for long-term ED utilization.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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