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EDs Are Profitable — Barely

Medford-Davis, Laura MD

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doi: 10.1097/01.EEM.0000462415.10038.b7
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    It will come as no surprise to hear any physician say that Medicare and Medicaid underpay us or that government reimbursement of ED services cannot be cut further without risking the demise of our critical health access centers.

    Michael Wilson, MD, PhD, an emergency medicine and health economics professor at Harvard University, and David Cutler, PhD, an economics professor there, however, put a fine point on that, analyzing several large databases to calculate the profit margin for all 120 million ED visits in the United States in 2009. The numbers they used for Medicare patients were real; the numbers for Medicaid and the uninsured were estimated. (Health Aff 2014;33[5]:792; http://bit.ly/1uydINm.)

    Patients with private insurance (35% of visits) brought in $17 billion in profits (a 40% margin). EDs, however, lost 16 percent of costs on Medicare patients (21% of visits), 36 percent on Medicaid visits (26%), and 54 percent on uninsured visits (18%), leaving them with just $6.1 billion in profits in 2009 (a 7.8% profit margin).

    ED patients were admitted to the hospital for inpatient care 15 percent of the time, resulting in a higher profit margin (22% for hospitalized patients versus just 3% for discharged patients). Similar to a simple ED visit, however, hospitals profit by admitting privately insured and Medicare patients but actually lose money when admitting Medicaid or uninsured patients.

    If all pre-2009 trends remain constant, the authors estimate that the ED profit margin will decrease slightly to 7.3 percent by 2023. The shift of uninsured patients to private insurance and Medicaid, though, could increase ED profit margins 4.4 percentage points higher than anticipated without health care reform.

    A lot of political discussion recently has focused on how much Medicare pays hospitals and physicians and how much profit the health system is making. Overall health care spending keeps rising for EDs, Medicare, and Medicaid, but it represents financial losses with every additional patient seen.

    Although $6.1 billion in profits sounds like a lot, this number must be put into perspective: Total national health care spending in 2009 was $2.5 trillion. The ED accounts only for 3.1 percent of total health care costs. (ACEP Cost of Emergency Care Fact Sheet; http://bit.ly/1GBxH2F.) The 7.8 percent profit margin for EDs is lower than Pfizer's 15.3 percent profit margin in 2009 or Coca-Cola's 22.9 percent.

    EDs serve an important public role, available 24 hours a day in case you are in a car wreck, have a heart attack, or become the victim of a crime or terrorism. Keeping staff and supplies always ready for worst-case scenarios costs money. EDs also serve more vulnerable (uninsured and mentally ill) patients than other area of the health care system. For these reasons, it is vital to community health to keep EDs operating. Based on this analysis, Medicare and Medicaid are already underpaying. No further cuts can be made to government reimbursement of ED services or society risks shutting down these critical health access centers.

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