Contracting the Hospital’s Emergency Department Mission

smoke and mirrors in emergency medicine

smoke and mirrors in emergency medicine

Lately I have been hearing complaints from Emergency Medicine Groups across the nation about hospitals that are cutting back on their financial support of EM groups, and sometimes firing one group in order to hire another that will agree to staff the ED without any financial support. Hospital chains have threatened to replace EM groups across their entire string of hospitals in order to shift to EM groups that will take on several EDs at once with no subsidies for any of the sites. This raises many questions. Why do EM groups need subsidies to staff an ED? Why are hospitals threatening to withdraw these stipends? Why would an EM group agree to staff one, or several, EDs without stipends when the existing groups believed they needed such stipends to succeed?

A little history is helpful in order to answer these questions. Many years ago, when emergency physicians first began forming groups to staff EDs, the hospitals often paid a lump sum to the group, based on a percentage of charges billed, and these hospitals would bill government and private payers and patients to cover the cost of staffing the ED. Over time, hospitals began forcing their EM groups to do their own billing and collections, in order to get their EM groups to assume the uncompensated care burden that came with providing emergency care, and to focus the hospital’s billing staff on collecting for hospital services. At some hospitals, the financial mix of ED patients was sufficient to allow these EM groups to be self-sustaining (i.e. there were enough privately insured patients such that cost-shifting would cover the care provided to the un- and under-insured). In other hospitals, the payer mix was insufficient to allow the EM group to recruit and retain qualified physicians to staff the ED – there were just too many uninsured and Medicaid patients and too few commercially insured patients to generate the revenues needed to meet the mission – to provide care to everyone regardless of insurance status or ability to pay.   On top of that, EDs were being pressured to expand their mission to include: faster care for time-critical conditions like trauma, MI, and stroke; the ability to respond to multiple casualty incidents and epidemics; boarding patients in the ED waiting for inpatient beds; performing ever more complicated diagnostic workups that previously would be done on an inpatient unit; providing evaluation and care for an increasing number of mental health patients who were falling through the cracks of a failing and contracting inpatient mental health system; and initiating treatments that had previously been started once the patient reached the ICU or hospital floor. Expansion of this mission, and the demands of reducing waiting times and improving patient satisfaction required more physicians in the ED, even if the revenues were insufficient to meet these demands.

Some EM groups were able to deal with these issues by sharing the revenues of sites with good payer mixes with sites that had poor payer mixes, others responded by hiring non-physician practitioners to help the physicians meet the demands; and some were able to negotiate subsidies from their hospitals to help meet staffing needs. Often EM groups relied on all three methods to succeed, or chose to refuse to contract with managed care plans at discounted rates (when they could) and balance billed patients aggressively, or raised their fees considerably. Some EM groups that had grown large enough, though good management, or mergers, or by using Wall Street to fund their acquisition of smaller EM groups, were able to meet these needs by lowering the per-physician overhead associated with managing and billing for EPs, or by recruiting less qualified physicians to staff financially distressed EDs. Curiously, as more and more hospitals decided they needed more control over physician performance and better alignment of their medical staff; many hospitals have begun to hire Emergency Physicians as employees rather than contract with independent EM groups. As a result, there are EDs that are staffed by employed physicians, or large EM groups and smaller or single hospital EM groups that are either self-sustaining, or to some greater or lesser extent supported by their hospitals; and there is a wide variance in productivity, staffing quality, coverage, and service across all of these different EDs.

Also, as the pressure on hospital CEOs and CFOs to improve their bottom line inexorably increases, more and more of these C-suite managers are looking for every possible means to reduce overhead; and subsidies (or high salaries) for emergency physicians and EM groups, for on-call specialists, and for other hospital-based physician specialists like anesthesiologists and hospitalists, have become a ripe target. All of these physicians are being asked to do more for less, or give up subsidies altogether, or face being replaced by physicians who will work for less, or groups that will rely on the other methods described above to meet the demands of their hospital administrators. There may indeed be some EM groups that could find ways to make their physicians more productive while maintaining quality of care, or improve their collections without relying on fraudulent billing, or reduce physician income a bit without losing the best and brightest; but inexorably by paring back on hospital financial support for EM groups that work in economically stressed EM practices: these CEOs are being penny wise and pound foolish, and putting their patients and their communities at risk.

The EM groups that take advantage of such circumstances, driven by a growth imperative to redouble their cadre of ED practices, always argue that they can do without these subsidies and still make the EM practice work well, even better, by working their magic on all aspects of the practice, and even continue to reimburse the docs well and recruit even better docs to the ED. Some of these EM groups might even be able to meet these expectations, especially if the existing EM group is poorly managed and the docs are not engaged in making the practice work well. Mostly, however, the magic is all smoke and mirrors, and when the smoke clears and the mirrors crack, many ED physicians who have worked for years in their favorite ED, served their patients and their medical colleagues well, and lived in the communities they serve; will be replaced by docs who could not make it elsewhere, work far from where they live, will over-charge and under-perform, generate more complaints, and make ED nurses look for work elsewhere: all to make some administrator’s short-term bonus target. Hospital CEOs might believe that because of Obamacare, their EM group no longer needs a subsidy.  Regular readers of this blog know, however, that the full impact of payment reform on EPs is uncertain at best, with the reduction in commercial plan payments, and below-cost reimbursements for an increasing Medicaid population, while hospitals themselves appear to be fairing better (and can better afford these subsidies).  When you come right down to it, eliminating these subsidies and support mechanisms for EM groups and other hospital-based specialties, when they really are appropriate and necessary, simply results in a contraction of the emergency department mission.   Ultimately, the consequences of this contraction only become apparent when you look closely at the quality of care in the ED, or the bungled response to the inevitable multi-casualty incident, or the malpractice claims that show up years later. Most of these hospital administrators will have moved on by then.



Contracting the Hospital’s Emergency Department Mission — 4 Comments

  1. Myles-
    Once again, your insights are pithy and on-point. With so much critical health care being delivered in the ED, “cheap docs” definitely do not equate to less expensive care. And definitely not to higher quality care.

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