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Sicker Medicaid, Medicare emergency patients less profitable

By Anne Harding

NEW YORK (Reuters Health) - When a patient with private health insurance seeks outpatient care at the emergency room, the sicker he or she is, the more money the hospital stands to make, a new study shows.

But the opposite is true for patients with Medicaid or Medicare insurance: the sicker the patient, the less profitable he or she is to the hospital, Dr. Philip Henneman of the Tufts University School of Medicine in Boston and his colleagues report in the Annals of Emergency Medicine.

The results suggest hospitals that seek to move outpatient services off-site (for example, to stand-alone "doc-in-a-box" clinics) may wind up losing money, according to Henneman.

To investigate the profitability of patients cared for at the emergency department, but not admitted to the hospital, based on how sick they are and what type of insurance they have, Henneman and his team looked at data from 2003 to 2009, including 523,882 outpatient emergency department visits, at an urban teaching hospital.

The per-hour profit for treating privately insured patients ranged from $70 for those requiring the least care to $177 for those requiring the most care. But for patients with Medicare, the per-hour profit ranged from $44 per hour for the least-ill patients to $29 for the sickest patients.

"They found what we've always kind of known and accepted to be true, which is that patients with commercial insurance … are of course more profitable to hospitals than other patients, particularly Medicaid patients," Dr. Megan Colleen McHugh, a research assistant professor at the Center for Health Care Studies at Northwestern University Feinberg School of Medicine in Chicago, told Reuters Health.

"Some patients are profitable to emergency departments, even if they're not admitted to the hospital, and because of that we do see hospitals engaging in this recent behavior of trying to capture these individuals in areas where there are a lot of private payers," added McHugh, who studies the financing of emergency care, but was not involved in the new study.

"These are in the forms of these stand-alone emergency departments and these stand-alone care clinics, which is kind of changing the landscape of the health care system," she said.

The fact that hospitals are making less money caring for sicker patients on Medicare "could be an indicator that policy makers or payers need to revisit how payment is structured ... but it could also be a fluke of this one institution," McHugh said. "I wouldn't want to put too much stake in findings from just one presumably large academic teaching hospital. I don't know that we have enough evidence yet to recommend changes in the reimbursement system."

Now that the Affordable Care Act has become law, McHugh noted, hospital emergency rooms will be seeing more patients with commercial insurance and more publicly insured patients.

"There's this push, especially after the Affordable Care Act, for physician practices to develop new models of care like patient-centered medical homes, with the specific goal of reducing emergency department utilization," she said.

Given the profitability of treating commercially insured patients who don't require hospital admission in the emergency room, she added, hospitals "might not view the reduction in those services to be a good thing financially."

SOURCE: http://bit.ly/1bK0Qtq Annals of Emergency Medicine, September 19, 2013.

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