The Rising Cost of ER Visits: What the Data Tells Us and How Employers Can Respond

Emergency Room (ER) visits have become an increasing financial burden on employer-sponsored health plans, now accounting for approximately 6% of total spend, according to Al Lewis on the?Relentless Health Value?podcast (Episode 464). However, other data sources provide different perspectives on ER-related spending. For instance, a study published in the?International Journal of Health Services?in 2018 found that ER spending constituted about 5.0% of total U.S. health expenditures in 2016, up from 3.9% in 2006. Meanwhile, the National Health Expenditure Accounts indicate that hospital care, which includes ER services, represented 31.4% of national health expenditures in 2019. However,?this figure encompasses all hospital services, not just ER visits. These variations highlight differences in data collection methods, definitions of ER services, and the specific populations analyzed. For employers, understanding these nuances is critical in managing healthcare costs effectively. The question isn’t just?why?this is happening but also?how?plan sponsors can take action. Using insights derived from Health Analytics Connect’s (HAC) data-driven approach, we break down the underlying factors and propose strategies to address the issue.

Understanding the Drivers Behind Increased ER Spend

The rising costs associated with ER visits can be attributed to two key factors: increasing utilization and escalating per-visit costs. Nationwide, ER visits per capita have been on an upward trend, surpassing population growth. While the pandemic temporarily distorted healthcare patterns, the demand for ER services has remained strong, partially due to challenges in accessing primary care. Many individuals turn to the ER not just for emergencies but because they cannot secure timely appointments with primary care providers or specialists.

At the same time, the cost per ER visit has risen substantially. The Health Care Cost Institute (HCCI) reports indicate that the average price for an emergency department evaluation and management (E&M) visit increased by 73% between 2012 and 2021. Although exact figures for 2023 are still emerging, historical trends show that these costs have continued to climb. Part of this increase stems from a shift in billing practices—more visits are now being coded at higher acuity levels, leading to higher reimbursement rates. Hospitals?facing rising operational costs?have also increased in-network ER charges, compounding the financial burden on employers and plan sponsors.

Understanding these trends requires distinguishing between hospital costs?and payer costs. While organizations like the American Hospital Association (AHA) report rising hospital supply and labor expenses, these figures do not always translate directly into the costs that insurers and self-funded employers bear. Instead, employer-sponsored health plans experience cost growth due to a mix of upcoding, increased diagnostic testing, and shifts in the way care is delivered. A broader perspective—including employer-specific claims analysis—is essential for effectively developing targeted strategies to manage these expenses.

Two significant trends are driving the increase in ER spending: the rising number of visits and the growing cost per visit. Nationwide, ER visits per capita have been trending upward, outpacing population growth. While the pandemic temporarily skewed trends, the overall trajectory remains clear—more people are seeking ER care. Despite the proliferation of urgent care centers, ER visit rates continue to climb, partially due to challenges in accessing timely primary care. At the same time, the average cost per visit has also increased significantly, rising by 15% in 2023 alone. A significant factor here is the shift in billing practices, with a greater share of visits coded at higher acuity levels, driving up reimbursement rates. Additionally, in-network ER charges have risen as hospitals attempt to offset financial pressures, further exacerbating the issue for plan sponsors.

The Member Impact: Rising Costs and Financial Strain

For employees and their families, the impact of these rising costs is personal and immediate. Many individuals, especially those covered under high-deductible health plans, find themselves responsible for thousands of dollars in medical expenses, leading to financial distress. Even insured members are struggling with unpredictable ER charges, including facility fees and upcoded visits. Limited access to primary care, urgent care, or telemedicine often leaves ER visits as the only viable option, forcing individuals to seek care in the most expensive setting available. As a result, some employees delay or avoid necessary care altogether, leading to worsened health outcomes and increased long-term costs.

Are Patients Sicker, or Are Visits Being Upcoded?

A key debate in healthcare is whether the increase in ER costs is due to sicker patients or a shift in coding practices. Data suggests that ER visits are increasingly being coded at higher acuity levels, with a significant shift toward level 4 and level 5 codes. The rise in high-severity coding has outpaced actual changes in patient acuity, raising concerns about whether this reflects true medical necessity or a billing strategy. While the proliferation of urgent care centers has reduced lower-acuity ER visits, leaving ERs with a proportionally higher share of more complex cases, this does not fully explain the increased cost per visit. Coding practices and reimbursement structures incentivize higher-acuity coding, and increased diagnostic testing, including expensive imaging scans, is driving up ER charges per visit. Additionally, the?No Surprises Act?has curbed some out-of-network billing abuses. However,?this has led hospitals to increase their in-network pricing strategies, adding yet another layer of complexity to cost management.

Employer Strategies to Manage ER Utilization and Costs

Employers don’t need an entirely new system to address these challenges—they need better insights and strategic action based on their existing data. This is where Health Analytics Connect (HAC) steps in. Instead of requiring a disruptive technology change, HAC works within an employer’s current infrastructure, enhancing their analytic capabilities to pinpoint areas of concern and develop data-driven solutions.

One of the most effective approaches is data-driven ER utilization analysis. Employers can leverage de-identified claims data to track ER trends over time, segment their workforce into risk groups, and benchmark their ER utilization against industry standards. By understanding where high-cost ER usage occurs—whether due to upcoding, avoidable visits, or provider-level cost variations—employers can make more informed decisions. HAC helps plan sponsors use this data without identifying specific employees, ensuring privacy compliance while still providing valuable insights to shape policy and benefit design.

Another strategy is?improving access to lower-cost alternatives. Many ER visits stem from issues that could be handled more affordably in an urgent care center or via telemedicine. Employers can modify benefit structures to encourage employees to seek care in these lower-cost settings, whether by adjusting copays, expanding telehealth options, or increasing awareness of available alternatives. Education plays a critical role here, and HAC supports targeted communication efforts to inform employees about when and where to seek care. Workplace campaigns, webinars, and direct outreach can help shift utilization patterns, reducing unnecessary ER reliance.

Employers can provide third-party advocacy and bill negotiation services for employees who face excessive ER bills. Most HR departments don’t have the bandwidth or expertise to dispute medical charges on behalf of employees, but by partnering with vendors specializing?in medical bill negotiation and patient advocacy, employers can offer a valuable resource without taking on an administrative burden. HAC helps employers identify and connect with these services, ensuring employees have the support they need while controlling costs.

Leveraging HAC’s Advanced Analytics: Report Generator and Outcomes Analyzer

A key component of HAC’s approach is?Report Generator, a powerful analytics tool designed to integrate seamlessly into an employer’s existing data infrastructure. Report Generator enhances the ability to track and analyze ER utilization, connecting effortlessly with claims and non-claims data, including medical, pharmacy, eligibility, wellness programs, biometrics, and lab results. This tool provides customizable reporting capabilities, allowing employers to create visually precise reports that uncover the key drivers of ER spending. Employers can use Report Generator to automate updates, reducing the need for IT intervention while ensuring timely and accurate insights. With a robust library of report templates, it becomes easier to analyze network performance, detect risks, and perform deep dives into specific conditions affecting ER usage.

In addition to Report Generator,?Outcomes Analyzer?takes ER utilization analysis a step further. As an AI-powered solution, Outcomes Analyzer helps health plans and employers quantify program cost and quality while automatically reporting ROI to employer accounts. Built on an independent, rigorous methodology, it objectively evaluates how population health programs impact healthcare costs and patient outcomes. Whether assessing the effectiveness of chronic disease management initiatives or tracking the impact of new care models, Outcomes Analyzer delivers credible, data-driven insights to help stakeholders make informed decisions.

HAC also brings deep expertise in?Analytic Recipes, customized reports that address emerging healthcare concerns. Focusing on actionable insights, our Analytic Recipes have explored topics such as GLP-1s, childhood obesity, vaping, and peripheral artery disease (PAD). These reports empower employers and health plans with the intelligence to anticipate market shifts and optimize health program investments.

The Path Forward

Understanding ER usage patterns and cost drivers is the first step in controlling rising expenses. Health Analytics Connect’s approach of working within existing plan sponsor systems allows employers to gain real-time visibility into cost trends without disruptive technology changes.

With tailored reporting, predictive analytics, and customized intervention strategies, HAC enables employers to regain control over ER-related costs while supporting a healthier, financially secure workforce. By integrating tools like Report Generator and Outcomes Analyzer, employers can take a proactive approach to managing ER utilization, ensuring that cost containment and quality care remain priorities.

For more information on how HAC can enhance your healthcare analytics, visit?www.healthanalyticsconnect.com or email us at [email protected].