L.A. County Medi-Cal tests strategy to lower costs by authorizing all requests for emergency room care

ER visits will be used to educate patients on how to use services effectively

Horror stories about delays in getting authorization for emergency care have health plan officials in Los Angeles County ready to try something dramatic: authorizing everybody.

"It probably costs more money to deny an emergency room service than to just approve it," explains Ed Benjamins, RN. Mr. Benjamins is director of utilization management and case management activities for L.A. Care Health Plan, which serves about 587,000 enrollees—more than half the county’s managed care Medi-Cal population—through about seven health plan subcontractors.

A six-month pilot project under development at selected emergency departments in the county will eliminate the need for prior authorization for emergency services while educating plan members on appropriate use of emergency services. The pilot is slated to begin in May at St. Francis Medical Center, a central Los Angeles county hospital that sees about 150 L.A. Care patients each month.

If the pilot suggests that "auto-authorization" lowers costs, the strategy will be promoted to all of the enrollees in L.A. Care, says L.A. Care Health Plan spokesman Keith Malone.

Denials are too expensive

In the current system, denials account for an estimated 13% of the requests for ER authorization in the L.A. Care network. A survey last year showed that 67% of emergency department authorizations for "post-stabilization care" were fully approved; another 11% were partially approved. The study did not examine figures for medical screening exams, which are mandated under California law and the federal Emergency Medical Treatment and Active Labor Act.

Nuggets gleaned from brainstorming sessions among HMO representatives, hospital administrators, and ER staffs helped suggest the "auto-authorization" strategy for unclogging emergency departments:

• Rarely do physicians send Medicaid HMO enrollees to emergency departments for care; patients self-refer. A high rate of walk-in demand for emergency care—an average of 86% for L.A. Care and another large Medi-Cal plan in the 1998 survey—suggested that physician or EMS education would not be enough to fully address the problem.

• About 80% of the authorizations were secured within 20 minutes or less. This suggested to L.A. Care officials and others that they concentrate on the remaining 20% that were consuming an extended period of time.

All visits paid global rate

The heart of the experiment is implementation of a global capitated fee for hospital and physician services. Except for cases in which a patient is admitted to the hospital, all emergency room services for L.A. Care-managed Medi-Cal enrollees will be reimbursed at a global rate still being hammered out between L.A. Care and its payers.

While calculating the physician component of the reimbursement rate has been relatively straightforward, developing an average hospital reimbursement rate has been a challenge.

Even identifying the direct medical costs is difficult, as many hospitals do not code to indicate where a particular service is provided in the facility. On top of that, researchers are trying to isolate the cost of clerical staff required for phone calls and copying records, as well as the clinical staff required to perform medical reviews.

Early attempts to identify the total facility costs for emergency room care produced estimates among network hospitals that ranged from $400 down to an astonishing $25.

"It’s not because that’s their actual costs," says Mr. Benjamins. "It’s because the data they’re using to produce that average is inconsistent and inaccurate. I’m struggling with that," he says.

The reimbursement rates will be set to maintain expenditures at existing levels. To develop the rates, researchers are using paid claims data from Medi-Cal fee-for-service and Los Angeles Medi-Cal managed care provider claims.

To help win provider support for the project, researchers have promised payment within 30 days of the date of service. For their part, providers are responsible for faxing encounter data to the plan at financial risk and the enrollee’s primary care physician no later than the working day after service.

The educational component of the pilot project includes the development of a scripted patient education protocol, to be delivered by emergency department staff after services have been provided. The script is intended to help members identify their primary care physician and establish a relationship.

"We think once they’ve established that relationship, their inappropriate utilization of the emergency department will decrease," says Mr. Benjamins.

The logistics of an expansion would be daunting. Los Angeles County’s square mileage is greater than that of Delaware and Rhode Island combined. Its 9.3 million residents make it more populous than 42 states. L.A. Care alone has in its network 87 emergency departments in 109 hospitals.

Contact Mr. Benjamins at (213) 637-2403.