Fast tracks are posing a financial threat to EDs— Is this a myth?

Reducing ED overcrowding doesn’t offset the drain on your revenue, some say

Are hospital-based urgent care centers (UCCs) becoming more of a hindrance than a help to emergency departments (EDs)? What began as a great idea for relieving patient overcrowding and screening out non-emergency cases has some emergency providers taking a second look.

Not that primary care UCCs aren’t effective at doing their job, but some providers are beginning to think these fast-track centers may be doing their jobs too well. In fact, emergency physicians who have spoken to The Managed Care Emergency Department privately in recent months have voiced concerns that some UCCs are posing a competitive threat to emergency medicine.

These hospital-based ambulatory care centers are threatening EDs by drawing away badly needed patient revenue even while they are offering opportunities for redirecting patients with non-emergencies and reducing overcrowding in the ED that has often hampered efficiency and marred patient satisfaction measures, they say.

Self-pay and managed care cases are going to UCCs

But much of the patient business going to UCCs, these physicians assert, comes from cash-rich private self-pay or managed care sources that generally pay full freight for the primary care services rendered. The resulting revenue directed away from EDs goes directly to the fast-track center’s bottom line.

Conversely, emergency physicians are left seeing large numbers of indigent care and heavily discounted Medicaid fee-for-service cases that tend only to increase the department’s level of bad debt and uncompensated care. As a result, the ED loses large amounts of money while the UCC tends to run in the black, according to one complaining ED administrator at a hospital in Raleigh, NC.

Ultimately, administrators are going to have to weigh the financial value of fast-track centers against the potential revenue drain they pose on the department’s financial statement, says Carl D. Stevens, MD, MPH. Stevens, clinical associate professor of medicine at Harbor-UCLA Medical Center in Los Angeles, CA, is not among those providers who subscribe to the competitive-threat theory. However, he does not rule it out as a possibility at certain hospitals. Harbor UCLA has a large ED and a busy fast track.

Yet, there is no concrete evidence supporting the competitive-threat theory. Many hospital-based fast track centers are barely breaking even financially, mostly due to poor management or under-utilization. And in many communities, they are themselves competing with off-campus physician offices and clinics that do a better job of attracting non-emergencies and primary care patients.

But belief in this theory persists and generally springs from interpretations of a landmark financial analysis of cost in emergency medicine that has been the pioneering work of Robert M. Williams, MD, DPH at the University of Michigan in Ann Arbor.

Williams, an emergency physician and adjunct lecturer at the university’s school of public health, has become a guru to emergency medicine advocates who believe that the social and economic value of EDs as a safety net for communities far outweigh the financial cost of keeping departments open 24 hours a day. The also believe that the cost of running EDs is relatively small in relation to other sources of primary care, especially physicians’ offices.

Famed Williams study forms core of theory

In his landmark study, The Cost of Visits to Emergency Departments, Williams argues that hospitals should not close EDs or see fewer patients in them, including primary care cases. "It makes more sense to use [the ED] more, not less" because the additional cost of seeing each additional non-urgent patient is actually low and doesn’t affect the already fixed cost of running the department, Williams says.1

According to Williams, there are three widely held myths about cost in hospital-based emergency medicine. They are as follows:

• Non-urgent patient cases typically comprise half of all ED visits and should not be seen in the ED.

• The cost of providing services for these minor problems is a magnitude of about three times the cost in a physician’s office.

• The more patients you can transfer out of the ED, the more money you will save.

According to Williams, each one of these beliefs is incorrect. In his study, he offers convincing proof for his convictions.

But the argument has served as the basis for some emergency physicians in UCCs financially as a competitive threat. If Williams’ observations are correct, then emergency physicians would actually be lowering the overall impact of a hospital’s fixed costs (bricks and mortar) in the ED by seeing more, not fewer patients there.

Furthermore, the cost of treating each additional non-emergency patient in the ED would be comparable, if not lower, than that of the UCC, especially if the clinic is fully staffed with a licensed physician throughout the day. Whenever the fast track is closed (most UCCs are not open around the clock), the hospital still has to cover the fixed cost associated with it, the argument goes.

However, Williams’s disciples often fail to acknowledge that Williams saw promise for hospitals in fast track options as a means of lowering the fixed cost of emergency medicine. UCCs offer hospitals an opportunity to lower the largest sector of the fixed costs, which is labor at about 60%, by shifting non-emergency cases to a UCC. "Hospitals can be more cost-efficient if they look at how they’re staffed," Williams says.

But hampering matters for EDs isn’t so much the cost debate but an inherent difference in the nature of their cash flow compared with other primary care providers, says L. Scott Larsen, MD, an emergency physician with Emergency Medical Consultants in Livingston, NJ, and a Williams disciple.

EDs are at a cash flow disadvantage when competing with UCCs

Writing in the Annals of Emergency Medicine, Larsen says that due to wide collections disparities hospital EDs cannot lower their charges to be in parity with physician offices. Also, physician offices and presumably UCCs are better able to collect revenue from their patients and, therefore, can afford to charge lower rates for comparable services and, therefore, seem more attractive to health plans and the public.

"If we could have collections rates similar to those of private practitioners, which approach 100% [compared with EDs at about 50%, according to Larsen], we could decrease our fees by 50%," he says. Once you rule out the collections problem, EDs can actually afford to deliver primary care that is equal to if not better than most primary care practices.

"I contend that not only is emergency care cost-effective, it is actually more appropriate to have patients with minor illnesses seen in the ED," Larsen says.

In reality, the debate between hospital EDs and UCCs isn’t so simple, says Stevens of Harbor-UCLA. At many hospitals, emergency physicians hold equity stakes in fast track clinics. Others own them outright in partnerships with a large, multi-disciplinary group or integrated system.

These facilities are often capitated through contracts between large health plans or independent practice associations. The UCC is sometimes capitated for primary care while emergency medicine is usually contracted under a fee-for-service or discounted rate. Therefore, pro-or-con arguments as to the financial threat of UCC aren’t so black-or-white, Stevens says.

Instead, "the bottom line regarding fast tracks should be: Is there sufficient demand for care at my UCC?," Stevens says. "Can people get in and out easily? Will it improve the efficiency of the ED?"

This, of course, raises questions, such as: How do you adequately gauge urgency in measuring demand for fast track services? And how can EDs establish protocols for screening out non-urgent cases? Nationally, about 43% of all patient visits to EDs are regarded as non-urgent, according to the American College of Emergency Physicians (ACEP) in Dallas, TX. (The ACEP assessment of non-urgency is based on final diagnosis, not presenting symptoms.)

In 1995, researchers at the University of California in Davis studied whether a set of formal criteria will work to safely triage patients out of the ED to a lower-acuity option.2 The research team devised a set of algorithmic standards to help physicians. (See the chart on page 112.)

While acknowledging that the system is far from perfect, the UC Davis team asserted that the criteria are more conservative and better studied than standards currently applied by managed care organizations. "We’ve taken a small step and shown that it’s safe," concluded Donna Kinser, MD, an emergency physician and member of the UC Davis study.

References

1. Williams RM. The costs of visits to emergency departments. N Engl J Med 1996;334:642-646.

2. Derlet RW, Kinser D, et al. Prospective identification and triage of non-emergency patients out of an emergency department: A 5-year study. Ann Emerg Med 1995;25:215-223.