A review of Milliman's normative healthcare database indicates that nearly all of the recent increase in the cost of emergency rooms (ER) is due to significant increase in the prevalence of supporting services (laboratory, radiology, drugs, supplies, etc.) provided while in the ER.

My study included claim and enrollment data for commercial (employer-sponsored and individual) coverage from 2007 through 2011. It revealed an annual rate of increase in allowed per member per month (PMPM) costs for ER of slightly over 10%, which is substantially above the inflation rate during that same period of time. Interestingly, the actual number of ER cases per 1,000 covered members decreased very slightly during that period of time, while the unit costs for the individual services provided as part of a typical ER case only increased 1% annually.

So, what caused the double-digit annual total cost increase?

It appears to be almost solely caused by an increase in the number of services provided during an ER case. My study shows that a patient is likely to receive 50% more services, as part of their ER visit, in 2011 than in 2007. Of these additional services, 93% are related to lab, drugs, IV therapy, and radiology. Lab is most prevalent, with a 79% total increase in use from 2007 to 2011, but the unit cost of lab services decreased by about 25% during that same period. Combined drug and IV therapy prevalence rose 166% during the study period, but in this case, also experienced a marginal increase in unit cost. As a result, drug and IV therapy services explained nearly 35% of the total increase in ER costs. Finally, radiological services increased in prevalence per case by 22% during the period, and contributed 17% of the total increase in ER costs.

Further study might be necessary to understand the efficacy and value of the increase in these supporting ER services, and whether ER costs are continuing to increase in 2012 and in the future.

This article first appeared at Milliman MedInsight.