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 showing no growth and emergent visits growing modestly at +4%.

ED demand is highly sensitive to 3 near-term drivers of change: policy (including changes in enrollment and coverage of services due to state Medicaid waivers);  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 2017 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 Patient Protection and Affordable Care Act (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 remain flat 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 (25% and 17%, 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.

  • 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.
  • Consumerism: In addition to urgent care supply, the level of consumerism in a market is 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.
  • 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, due to increased demand among these populations. 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.
  • Policy: Medicaid expansion occurred in 32 states and Washington, DC, under the ACA, and one of its impacts was an increase in ED utilization. Looking ahead, we see the impact of Medicaid waivers and the erosion in coverage gains in the exchange market reversing this trend. Across the US, the increase in the uninsured rate will vary significantly by state. States that are implementing Medicaid waivers that restrict enrollment and coverage of services will more likely experience a greater impact on ED utilization, with a decrease in overall ED demand. Historic trends demonstrate that overall ED utilization declines for the uninsured population, although there are select conditions for which it rises, including some chronic diseases and psychiatric conditions (due to limited access to disease management services). Our forecast takes these historic trends into account, forecasting ED demand changes at the disease level, with overall ED demand expected to modestly decline due to changes in coverage. Because this impact will depend on individual states’ policies, Sg2’s 2017 market forecast has been enhanced with hyperlocalization to model future ED utilization changes based on each state’s projected increase in its uninsured rate.
  • 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.

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.

Sources: Landon BE et al. Health Aff (Millwood). 2012;31:2609–2617; Healthcare Cost and Utilization Project. National Statistics on All ED Visits. State Statistics on ED Visits. Accessed June 2016; Merchant Medicine. The ConvUrgentCare Report. July 2013; United States Census Bureau. Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2014; Sg2 Analysis, 2016 and 2017.

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