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The profitability of Medicare admissions based on source of admission
Megan McHugh1, Marsha Regenstein, Bruce Siegel
1George Washington University, Washington, DC, USA. mmchugh@aha.org
Objectives:
This study investigates whether admissions from the emergency department (ED) have lower dollar margins than elective admissions under Medicare and explores two possible reasons for differences in margins.
Methods:
The authors developed patient-level Medicare dollar margins (calculated as patient revenue minus cost) for 1,159,243 Medicare admissions from 321 hospitals using data from the 2003 Nationwide Inpatient Sample (NIS) and the Medicare Impact File. Differences in margins between ED and elective admissions were explored across a number of diagnosis-related groups (DRGs) using t-tests. Chi-square tests were used explore whether ED admission was more common among patients in low-profit DRGs and/or patients with greater severity of illness.
Results:
The average Medicare dollar margins were -$712 (95% confidence interval [CI] = -$729 to -$695) for ED admissions and $22 (95% CI = -$2 to $47) for elective admissions. Medicare dollar margins for ED admissions were lower than those of elective admission for the most common DRGs. ED admission was associated with greater patient severity of illness.
Conclusions:
Source of admission is a financially meaningful classification. Because Medicare payment policy does not recognize differences in cost based on patients' route of admission, hospitals may have a financial incentive to favor elective admissions over ED admissions.
Insights
Emergency department (ED) admissions result in significantly lower Medicare dollar margins compared to elective admissions. This financial disparity may incentivize hospitals to favor elective over ED patient pathways.
Area of Science:
- Health Economics
- Hospital Financial Management
- Medicare Policy
Background:
- Understanding the financial implications of different patient admission sources is crucial for hospital sustainability.
- Medicare reimbursement policies significantly impact hospital profitability.
Purpose of the Study:
- To compare Medicare dollar margins between emergency department (ED) and elective admissions.
- To investigate factors contributing to potential differences in financial margins.
Main Methods:
- Analysis of patient-level Medicare dollar margins (revenue minus cost) for over 1.1 million admissions.
- Utilized data from the Nationwide Inpatient Sample (NIS) and Medicare Impact File.
- Employed t-tests and chi-square tests to compare margins and explore admission characteristics.
Main Results:
- ED admissions incurred an average Medicare dollar margin of -$712, while elective admissions yielded $22.
- Lower margins for ED admissions were observed across common diagnosis-related groups (DRGs).
- ED admissions were associated with higher patient severity of illness.
Conclusions:
- The route of patient admission (ED vs. elective) has significant financial consequences for hospitals.
- Current Medicare payment policies, which do not account for admission source, may create a financial incentive to prioritize elective admissions.
- This disparity highlights a potential misalignment between patient care needs and hospital financial strategies.
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