The financial effects of emergency department-generated admissions under prospective payment systems
E. Munoz, A. Laughlin, D. M. Regan, I. Teicher, I. B. Margolis and L. Wise
The purpose of this study was to assess the financial impact (revenues vs
expenses) as measured by hospital charges and costs vs diagnosis-related
group (DRG) revenues of prospective payment systems on emergency
department-generated admissions for a large teaching hospital under two
payment systems: Medicare and an all-payor system. All emergency department
admissions were analyzed for the years 1983 (N = 4,273) and 1984 (N =
4,125) under both systems, using standard DRG methodology. Our findings
were as follows: (1) With charges as a measure of expense under both
payment schemes, all clinical departments had large groups of unprofitable
patients: Medicare, $12,895,038; all-payor system, $15,553,893. (2) When
costs were computed as the expense measure (using our hospital's
cost-to-charge ratio), Medicare patients produced a deficit ($2,363,163);
however, under an all-payor system there was a small net profit
($4,267,859). (3) The implementation of federalized DRG reimbursement rates
increased our losses for this population from 1983 to 1984. (4) Reductions
in outlier reimbursement (10%) and teaching costs (25%) caused our revenues
to drop substantially, potentiating our losses. These findings suggest that
hospitals with large emergency department admission populations,
particularly Medicare patients, may be at a significant financial
disadvantage under prospective payment systems.
