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The Financial Effects of Emergency Department-Generated Admissions Under Prospective Payment Systems
Eric Muñoz, MD, MBA;
Ann Laughlin;
David M. Regan, MS;
Ira Teicher, MD;
Irving B. Margolis, MD;
Leslie Wise, MD
JAMA. 1985;254(13):1763-1771.
Abstract
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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.
(JAMA 1985;254:1763-1771)
Author Affiliations
From the Department of Surgery, Long Island Jewish Medical Center, New Hyde Park, NY, and the State University of New York, Stony Brook.
Footnotes
Reprint requests to Research Division, Department of Surgery, Long Island Jewish Medical Center, New Hyde Park, NY 11042 (Dr Muñoz).
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