Emergency rooms in poorer places are “cost centers” where hospitals lose money due to a less favorable payer … [+]
Across the country, from San Francisco to Boston and Chicago to Atlanta, hospitals have closed and continue to close emergency services completely. This is happening not only in large urban areas, but also in rural communities that already face shortages in access to health care. What is the common thread?
While many factors influence a hospital’s decision to remain open or close, the most common cause is financial. It’s not rocket science to understand that hospitals with higher profit margins are more likely to survive than hospitals with lower profit margins. This applies to any company, whether it is McDonald’s or Marriott. The crucial difference, however, is that hospitals are a life-and-death “industry” versus food and travel.
In the United States, 80% of hospitals are privately owned, whether nonprofit or for-profit. Only a minority of hospitals are publicly owned by local, regional or federal governments. This means that most hospitals are responsible for maintaining healthy profit margins to sustain their mission. That makes sense, you say, since hospitals have to compete based on their ability to deliver good care. If the local fast food chain starts offering soggy fries or if the nearby hotel has smelly sheets, for example, people stop visiting these places, and the market “adjusts” through reduced demand and then possible closure due to low profitability. But that doesn’t happen in healthcare.
The problem is that it is difficult to measure the quality of hospital care, making it difficult for patients to decide where to go. Most patients seek care at a particular facility simply because of geographic proximity.
As a result, emergency rooms serve a greater share of patients in poverty more likely then close emergency rooms that treat affluent patients. That means low-income communities are left without services, and wealthier communities may have more than they need. But in that case, wouldn’t people from low-income areas simply flood into their empty beds, and the system would balance out?
That would make sense if finances weren’t involved. As I wrote in another article, ERs are required to evaluate and medically stabilize all patients, regardless of their ability to pay, due to a law called the Emergency Medical Treatment and Labor Act. As a result, the “tale of two cities” occurs because ERs in low-income areas are “cost centers” where hospitals lose money due to a less favorable payer mix, and ERs in wealthier areas are “revenue centers” that generate profits for the hospital. Therefore, hospitals deliberately locate in regions further away from poorer areas, resulting in busier conditions for low-income patients when they go to the nearest available ER. Unfortunately, this not only leads to longer waiting times; there is empirical evidence that emergency department crowding results in higher mortality rates, not just for patients with critical conditions such as heart attacks And traumafor example, but for all newcomersat.
That’s tragic, you might say. And indeed, it is. However, there are also adverse effects of ‘too much’ care.
Unfortunately, there have been several reports of hospitals engaging in predatory behavior. A recent New York Times research featured truly terrifying stories of patients unlawfully held against their will by hospital systems. Other health care systems, from California to Arizona and Florida, have also been sued and settled under the False Claims Act for admitting patients who did not require inpatient care and fraudulently “upcoding” their claims to receive higher reimbursement to receive. The US Department of Justice remains busy in this area.
To be clear: I am not advocating first aid on every street corner. It is common knowledge that hospitals that treat more specific conditions are better at it. Concentrating procedures in high-volume hospitals reduces hospitalization days and mortality. But it must be recognized that the market, if left to its own devices, will not correct certain things, and access to critical services such as Emergency Room is a good example of this.
Some people don’t care when they hear about an emergency room or hospital closure, as long as it’s not near them. But research has shown that they do exist overflow effects too. If someone’s emergency room is closed, the emergency doesn’t just disappear. They will then seek help at the adjacent Emergency Room, which will then also impact your care. ERs are known as “safety nets” for a reason, whether they’re treating an NFL player with a concussion, a president with a heart attack, or a homeless patient in need of wound care. The safety net is not just for some people, it catches us all.
