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Hospital ER's – An Important Source of Revenue for Hospitals

Hospital ER's – An Important Source of Revenue for Hospitals


The average patient probably doesn’t see a hospital, or the emergency department, as what it truly is – a business. Like any business, there are financial strengths and weaknesses within the model structure. As the push to control rising health costs continues, it is critical that administrators start trimming the fat in medical facilities and put funds into areas that are actually moneymakers.

A recent study conducted by RAND Health reports that the emergency department is a real revenue stream. According to RAND, about half of all admissions come from this one area. It is time for hospitals to see the ER for what it truly is – a major revenue source and start shifting investment funds accordingly.

What the Numbers Say

Reed Abelson from the New York Times reports that although the ER has a reputation for being expensive, it also brings in business. ER offered the only real rise in numbers over the last few years. Admissions from traditional sources took a nosedive  – even though overall hospital admissions were up by 4 percent, the emergency department admits rose by 17 percent.

Upgrading Where the Money Is

Even if administrators pull their heads out of the revenue stream for a second and focus on the medicine, this increase shows where patients are going for medical help in many different circumstances. In the past, administrators believed this was the place uninsured people came to for medical attention when they had no other options. A large part of the expense ended up being uncompensated. This fact pushed hospital funding out of the emergency department and into other areas.

The problem with this thinking is that most referral business actually comes through the emergency room. Doctors don’t send patients to the admit desk if they need assistance during off hours. They go to the emergency room first for assessment and then get admitted. That shifts the focus from indigent patients in need of nonemerging care to those who actually have insurance but are showing up at the ER at their physician’s request.

Looking Towards the Future

The Affordable Health Care Act is providing more people in this country with health insurance. Even if one assumes that most of the patients going into the ER are without it that is likely to change as the nation revamps its healthcare process. The goal of Obamacare is to turn the attention on primary care and wellness, shifting patients away from reliance on the emergency department for nonemerging help. That means more of the service given in the emergency department will be from paying customers.

Doctors unable to see a patient or to provide the proper care in the office will refer them to the local ER instead. The RAND study shows that, despite assumptions made by hospital stakeholders, many of these patients have insurance or are able to pay out of pocket.

As more people get insurance through Obamacare, the numbers will just get better. The practice of sending patients to the ER for more extensive help will not change, however. That means the emergency department will continue to be a valuable income source.

It is past time for the decision makers to realize where the money comes from in the hospital infrastructure and invest to shore up emergency department staffing, upgrade equipment and improve efficiency. The real money for hospitals comes via admissions. If half the admits enter through the ER, it makes sense that this department is a significant revenue source.

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