Price increases – not upcoding - to blame for rising emergency department costs to patients

An analysis of more than three million emergency room visits across five states found that price increases were the largest source of spending per visit over the past decade in four of the five states. The study, from researchers at Rice University and the UTHealth Houston School of Public Health, looked at insurance claims from Blue Cross Blue Shield Association to better understand the source of growing costs in health care, particularly with emergency department visits.

“Americans are feeling increasingly vulnerable to the rising costs of health care, particularly when it comes to ER visits,” said Vivian Ho, a professor in the Rice Department of Economics and the study’s lead author, in a statement. “However, it has been difficult to analyze the underlying reasons for these rising costs.”

Ho said that health care facilities defend rising costs, arguing that ER patients have more complex and severe illnesses and injuries. Insurers counter that hospitals are engaging in upcoding. Meanwhile, other research suggests that most increases in health care spending are due to price increases in health care services and drugs.

According to the study results, price increases accounted for 51%, 70%, 57%, and 79% of ER spending for Colorado, North Carolina, Ohio and Texas, respectively. In contrast, upcoding represented 30%, 23%, 8%, and 16% of these states’ increases in spending per visit.

The outlier was Massachusetts, where price increases accounted for 26% of the increase in average spending per visit, while upcoding accounted for 49%. However, spending per ER visit only rose $228 in Massachusetts between 2012 and 2019, the years covered by the study, whereas average spending increases for the other states ranged from $703 to $976. The researchers noted that Massachusetts’ Health Policy Commission conducts detailed cost benchmarking, which may have restrained price growth.

“We suspected upcoding and price increases were both important sources of rising costs for patients, but we were surprised by how much more dramatically price increases explained cost growth,” said co-author Heidi Russell, a professor of management, policy, and community health from UTHealth Houston School of Public Health.

“Other research suggests that health system consolidation has increased hospitals’ negotiating power with insurers, which may explain these significant price rises,” Ho said. “Next, we need to identify which provider types are most closely related to the largest price increases and upcoding. Knowing which of these are responsible for cost increases and why is crucial for formulating strategies for payers and policy makers to restrain spending growth.”