Is Emergency Room Care Really More Expensive?

I previously pulled a passage from David Goldhill’s article in The Atlantic, “How American Health Care Killed My Father.” However, the entire article is worth reading. Here is another tidbit:

Consider the oft-quoted “statistic” that emergency-room care is the most expensive form of treatment. Has anyone who believes this ever actually been to an emergency room?…. ER docs usually work on scheduled shifts and are paid fixed salaries that place them in the lower ranks of physician compensation…. They have access to the facilities and equipment of the entire hospital, but require very few dedicated resources of their own. They benefit from the group buying power of the entire institution. No expensive art decorates the walls, and the waiting rooms resemble train-station waiting areas. So what exactly makes an ER more expensive than other forms of treatment?

Perhaps it’s the accounting. Since charity care, which is often performed in the ER, is one justification for hospitals’ protected place in law and regulation, it’s in hospitals’ interest to shift costs from overhead and other parts of the hospital to the ER, so that the costs of charity care—the public service that hospitals are providing—will appear to be high. Hospitals certainly lose money on their ERs; after all, many of their customers pay nothing. But to argue that ERs are costly compared with other treatment options, hospitals need to claim expenses well beyond the marginal (or incremental) cost of serving ER patients.

In a recent IRS survey of almost 500 nonprofit hospitals, nearly 60 percent reported providing charity care equal to less than 5 percent of their total revenue, and about 20 percent reported providing less than 2 percent. Analyzing data from the American Hospital Directory, The Wall Street Journal found that the 50 largest nonprofit hospitals or hospital systems made a combined “net income” (that is, profit) of $4.27 billion in 2006, nearly eight times their profits five years earlier.

I’m not sure I agree with the “accounting” explanation. Third-party payers are paying ridiculously high prices for ER care — regardless of the accounting.

Comments (5)

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  1. Larry C. says:

    Interesting. ER care may actually be inexpensive care if the accounting were done correctly.

  2. Bart Ingles says:

    Very interesting. I’ve been wondering about this. I can agree with “Perhaps it’s the accounting” if “the accounting” includes “the billing.”

    If charity care is merely using otherwise idle capacity in a facility which is open and staffed 24/7 anyway, then perhaps the actual cost to the hospital for non-emergency services via the ER are actually lower than for normal office visits.

  3. Bruce says:

    Bart makes a good point. If the equipment and the facilities would have been there anyway and all that is being added is personnel who aren’t paid very well – at least by medical standards — the marginal cost of ER care may be quite low.

  4. Stephen C. says:

    Think of it this way, why are MRIs for pets in Canada in the evenings and on weekends so cheep? If the fixed cost is completely allocated to human care, then all you have to do is cover the variable costs for the pets.

  5. Syed Hussaini says:

    Odd piece of news. I always wondered why hospitals made enormous claims about the cost of emergency medicine, which actually seems believable when we realize the number of patients go through the ER. the accounting aspect of all this should be investigated and an itemized cost should be prepared.