Reducing Admissions from the Emergency Department to Improve Hospital Financials

There are various ways in which a hospital can improve its overall financial picture in these challenging economic times. For those facilities with a high percentage of Medicaid inpatients, one approach is to reduce the number of inpatient beds allocated to the hospital emergency department, the origin of most hospital admissions of uninsured patients of limited means. This topic aligns closely with previous notes that I have posted on the non-profit status of hospitals. Below is a story about a policy decision regarding "emergency patient beds" at the prestigious University of Chicago Medical Center from the Wall Street Journal with boldface emphasis mine (see: Chicago Hospital Doctors Protest Planned Bed Cuts):

More than 190 doctors at the University of Chicago Medical Center signed a letter to trustees protesting plans to reduce the number of beds available to emergency patients as "unnecessarily risky" and a threat to patient safety. The controversy over the prestigious hospital's unusual plan is being closely watched by emergency physicians across the U.S. as hospitals wrestle with rising costs and sometimes inadequate reimbursements from federal and state programs....Hospital officials acknowledge long waiting times and a high rate of patients leaving without being seen and say they planned to address them by diverting some ER patients to other hospitals and, in many cases, have them seen by University of Chicago doctors....Hospital administrators said in recent weeks that they have planned to cut 24 beds out of about 50 available to ER patients who needed to be admitted for general-medicine care, and nine out of 63 intensive-care beds to which the most acutely ill ER patients can be admitted....Administration officials say they face a unique challenge because of the hospital's location near poor neighborhoods on the city's South Side. The hospital said 35.6% of patients it admits are on Medicaid -- one of the highest rates of any hospital in the Chicago area, according to the hospital's estimates. Like other entities, the nonprofit hospital faces difficult economic times, though its revenue exceeded expenses by $87 million last year and $85 million in 2007.

The purpose of this note is not to criticize the executives at the University of Chicago Medical Center for their actions but rather to better understand one of the financial survival mechanisms being pursued by large hospitals serving inner city populations, many of them large academic teaching institutions. Every Medicaid hospital admission is a money-losing proposition. This rule-of-thumb is becoming increasingly true these days when many states are running at a deficit and may seek to reduce their healthcare budget even more which may affect Medicaid funding. One of the spigots for Medicaid inpatient admissions is the number of beds allocated to emergency patients, as described above.

The consequences of reducing the number of such beds are that the emergency department patient wait-time is increased. As noted above, some patients lose patience and exit the scene. Others can be diverted to neighboring hospitals which sets up a set of negotiations with the hospitals selected to receive the transfers. Plans such as these can also prompt internal physician protests, as are occurring at the Chicago Medical Center.