Implementation of the Affordable Care Act is likely to lead to increased profitability for hospital emergency departments, concludes a new study published in the May issue of Health Affairs.
Researchers found that in 2009 the estimated hospital revenue from emergency department care exceeded the costs for that care by $6.1 billion, representing a profit margin of 7.8 percent. Hospitals make enough profit on the privately insured ($17 billion) to cover underpayment from all the other pay groups, such as Medicare, Medicaid and the uninsured, said Michael Wilson, study author and associate physician in emergency medicine at Brigham and Women's Hospital in Boston.
[See also: Emergency departments now account for half of all hospital inpatient admissions]
Wilson and his coauthor, David Cutler, research associate at the National Bureau of Economic Research in Cambridge, Mass., analyzed data representing 120 million ED visits in 2009 from patients in a variety of payer groups.
Wilson and Cutler estimated that hospitals generated approximately $78.7 billion in revenue for care at a cost of about $72.5 billion. When the data was broken down by payer groups, patients with private insurance were the only group producing a positive profit margin, at 39.6 percent. Meanwhile, people covered by Medicare for care in the ED produced a -15.6 percent financial loss, and those that were uninsured produced a -54.4 percent loss. Those with private insurance represented 35 percent of the overall ED visits, 26 percent were Medicaid, 21 percent were Medicare and 18 percent were uninsured.
"I think that overall, EDs have shown they are profitable for hospitals, especially since in the past the ED has sometimes been seen as the financial sinkhole for hospitals," said Wilson.
And these profits are only likely to continue, Wilson and his colleagues found. Assuming current payer reimbursement rates, ACA reforms could result in an additional 4.4 percentage-point increase in profit margins for EDs compared to what could be the case without the reforms.
Wilson added that it makes sense that hospital EDs will likely see increased profits because uninsured patients currently represent 18 percent of all ED visits and are associated with the highest negative profit margins for hospitals. Through health insurance exchanges, it's expected that 25 percent of those uninsured will likely obtain private insurance.
According to Wilson, an important area for future research will be to see how accountable care organizations (ACOs) fare with ED profitability during healthcare reform. He believes that ACOs associated with a payer mix within the national average could continue to see profits from the ED. However, for those ACOs with EDs characterized by a low percentage of privately insured patients, ED care will not likely be profitable unless those EDs are significantly more efficient than average.