The shifting landscape in utilization of inpatient, observation, and emergency department services across payers

For over a decade, private and public payers have implemented policies aimed at reducing rates of inpatient hospitalization. One approach for doing so is to improve ambulatory care, which can reduce the need for hospital-based acute care. Another approach is to stabilize acutely ill patients and discharge them from the emergency department (ED) or following a period of observation.¹ Private payers are entering into value-based contracting arrangements with hospitals and health systems to improve the quality of ambulatory care and lower healthcare expenditures.² Enrollment in managed care programs has grown among Medicaid recipients for similar reasons.³ Policies of the Centers for Medicare & Medicaid Services (CMS) encourage improvements in ambulatory care as well as observation of Medicare beneficiaries instead of inpatient admission in certain situations.⁴

Recent studies have documented declines in inpatient admissions and increases in treat-and-release observation stays and ED visits among Medicare beneficiaries.^4-7 However, almost half of all hospitalizations unrelated to childbirth occur among patients with private insurance, Medicaid, or no insurance.⁸ Less is known about shifts in the nature of hospital-based acute care among these populations. Such shifts would have implications for quality of care, patient outcomes, and costs. Therefore, further investigation is warranted.

Our objective was to investigate recent trends in payer-specific population-based rates of adults using inpatient, observation, and ED services. We focused on 10 medical conditions that are common reasons for hospital-based acute care: heart failure, bacterial pneumonia, chronic obstructive pulmonary disease, asthma, dehydration, urinary tract infection, uncontrolled diabetes, diabetes with long-term complications, diabetes with short-term complications, and hypertension. These conditions constitute more than 20% of inpatient stays in the general medical service line, can be affected by improvements in ambulatory care, and provided a consistent set of diagnoses to track trends over time.⁹ We used 2009 and 2013 data from four states to examine trends among individuals with private insurance, Medicare, Medicaid, and no insurance.

We obtained encounter-level data for Georgia, Nebraska, South Carolina, and Tennessee from the Agency for Healthcare Research and Quality (AHRQ), Healthcare Cost and Utilization Project (HCUP).¹⁰ Using encrypted patient identifiers, we linked inpatient admissions from the 2009 and 2013 State Inpatient Databases, observation stays from the State Ambulatory Surgery and Services Databases, and ED visits from State Emergency Department Databases.

We defined the 10 medical conditions using numerator specifications from the ICD-9-CM v 5.0 AHRQ Prevention Quality Indicators (see Appendix). At most, 1 inpatient admission, 1 observation stay, and 1 ED visit for a study condition was counted for each adult in each year. Limiting the number of visits minimized the skew caused by multiple uses of the same service.

Using the American Community Survey, we calculated utilization rates for each type of service per 100,000 population in four payer and age groups: privately insured adults, Medicaid recipients, and uninsured adults 18 to 64 years, as well as Medicare beneficiaries 65 years and older. For each group, we also examined the origin of inpatient admissions—those who were directly admitted without evaluation in the ED, those admitted from the ED, and ED visits leading to observation stays and then inpatient admission.