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Financial Impact of Emergency Hand Trauma on the Healthcare System

Amy K. Alderman, MD, MPH

Amy F. Storey, MPP

Kevin C. Chung, MD, MS

INTRODUCTION: The US has a crisis in the coverage of surgical emergency care.1 The specialties that are urgently needed for emergency room coverage are surgical specialties, which include plastic surgery, hand surgery, otolaryngology and neurosurgery.2 In the next decade, many forces will drive a more dire outlook for solving the nation’s declining surgical emergency care. These forces include surgical workforce shortages,3, 4 physician reimbursement decline,5 uninsured population growth6 and a growing emergency department (ED) population.2 The stormy liability climates in many states also discourage surgeons from providing emergency care. The lack of tort reform in many states are causing a brain-drain of much needed surgical specialties in the states in need of these expertise.7, 8 Both the Institute of Medicine and the American College of Surgeons (ACS) are deeply concerned about the future of surgical care for the trauma patient, in particular the shortage of willing hand surgeons to care for the hand injured patients.1, 9, 10 Both organizations support the idea that poor physician reimbursement for these complex cases greatly contribute to the physician shortage.11 They are calling on Congress to take aggressive measures to limit the proportion on uninsured Americans.11 And the IOM has recommended to Congress an additional $50 million endowment to healthcare institutions that provide large amounts of uncompensated emergency and trauma care.11

Plastic and orthopedic surgeons are among the specialists identified as having an undersupply of emergency on-call care.2, 12 In addition, nearly three-quarters of emergency medical directors cited that hand surgeons are in short supply for their healthcare system.13 Compounding this problem are physicians’ concerns about declining reimbursement. Surgical specialists, compared to primary care physicians, are overly burdened to provide charity care imposed on surgeons during their emergency on-call responsibilities.14 However, declining insurance reimbursement for elective surgery is making charity care financially more burdensome.

To examine these issues, we evaluated the financial aspects of caring for the hand trauma patient at a single academic institution. Our purpose was to study the financial impact of this patient group on both the academic surgical department and the health care institution. In addition, we investigated the impact of different payer mixes on the financial outcomes in order to help translate our experience to other health care settings.

METHOD: We examined the billing records for 2,632 hand patients seen in the emergency department in 2005 at the University of Michigan. The financial data were separated into inpatient professional and facility revenues and costs. Professional net revenue was calculated by applying actual collection rates to procedural charges. Facility revenue was calculated by applying actual collection rates to the following downstream charge categories: inpatient/OR (including nursing, anesthesia and pharmacy), clinic facility, radiology and occupational therapy.

RESULTS: The payer mix for this analysis was 60.7% private insurance, 15.3% Medicare, 4.2% uninsured, 8.3% Medicaid and 11.5% other. The net professional revenue and total cost for physician salary, malpractice and benefits allocated to hand patients was $698,578 and $574,880, respectively, for a net profit margin of $123,698 (18%) (Table 1). Net health system facility revenue and total costs were $2,420,899 and $2,389,901, respectively, for a net profit margin of $30,998 (1%) (Table 2).

|Table 1. Professional costs, revenues and income |

| | |

|Charges & Revenue | |

|Professional surgical charges |1,796,839 |

|Professional ED consult charges | 101,471 |

|Les: contractual adjustments |(1,199,731) |

|Total net professional revenue | 698,578 |

| | |

|Costs | |

|Physician salary, benefits and CME |435,072 |

|Malpractice | 15,450 |

|Department & health system taxes (10.7% of professional net revenue) | 74,748 |

|Total professional expenses |525,270 |

| | |

|Earnings-Professional perspective | |

|Net professional revenue |698,578 |

|Net professional expenses |525,270 |

|Operating Income |173,308 |

|Operating income as % of net revenue | 24.8% |

|Table 2. Facility costs, revenues and earnings |

| | |

|Charges & Revenue | |

|Facility inpatient/OR charges |3,906,471 |

|Facility clinic charges | 22,070 |

|Radiology charges | 738,990 |

|Occupational therapy charges | 65,410 |

|Les: contractual adjustments | (2,312,042) |

|Total net facility revenue |2,420,899 |

| | |

|Costs | |

|Fixed expenses- Inpatient/OR |514,064 |

|Variable expenses- Inpatient/OR |879,610 |

|Indirect expenses- Inpatient/OR |706,916 |

|Clinic expenses | 13,778 |

|Radiology expenses |240,436 |

|Occupational therapy expenses | 35,097 |

|Total facility costs | 2,389,901 |

| | |

|Earnings-Facility perspective | |

|Total net facility revenue |2,420,899 |

|Total facility expenses |2,389,901 |

|Operating Income | 30,998 |

|Operating income as % of net revenue | 1% |

CONCLUSIONS: Our data do support the financial feasibility of caring for the surgical hand trauma patient, although we can only speculate on the generalizability of our financial data to other healthcare settings. However, there are several critical issues to maintain financial feasibility with surgical hand patients: 1) controlling the proportion of poorly reimbursed care, 2) controlling negative changes to collection rates, and 3) limiting medical malpractice. We have 46.6 million uninsured Americans,15 of which a substantial proportion will rely on ED care. Physicians can not be mandated to provide uncompensated services in the current environment of declining reimbursement. As a society, we need to either provide universal healthcare coverage or affordable health insurance. Congress must also stop the progressive decline in Medicare reimbursement.16 Even small changes in collection rates result in draining financial losses that impact the healthcare system’s ability to absorb the cost of emergency services. Finally, medical malpractice expenses must be controlled. Physicians who care for the trauma patient incur higher medical liability due to treating sicker patients who they do not have a prior professional relationship with and who often have difficulty complying with prescribed care. 11 17 There is a definitely healthcare crisis in surgical emergency care, and society has a responsibility to shoulder this burden equally.

REFERENCES

1. A growing crisis in patient access to emergency surgical care. Bulletin of the American College of Surgeons 2006; 91:8-19.

2. Burt CW, McCaig LF. Staffing, capacity, and ambulance diversion in emergency departments: United States, 2003-04. Advance Data 2006(376):1-23.

3. Exodus of older physicians could create shortages. Phys Financial News 2000; Aug:3.

4. Page L. Some California physicians hanging up on hospital call. Am Med News 2000(Jun 26):12-13.

5. Taylor TB. Threats to the health care safety net. Acad Emerg Med 2001; 8(11):1080-7.

6. American Hospital Association. Uncompensated hospital care cost fact sheet, American Hospital Association. 2005. Available at .

7. McKinley A. Health care providers and facilities: medical malpractice and tort reform--2005. End of Year Issue Brief. Issue Brief - Health Policy Tracking Service 2005:1-19.

8. Donlen J, Puro JS. The impact of the medical malpractice crisis on OB-GYNs and patients in southern New Jersey. New Jersey Medicine 2003; 100(9):12-9.

9. Institute of Medicine Board on Health Care Services. Hospital-Based Emergency Care: At the Breaking Point. Available at: iom.edu/CMS/3809/16107/35007.aspx. Accessed April 4, 2007.

10. Institute of Medicine Board on Health Care Services. Emergency Medical Services at the Crossroads. Available at: . Accessed April 7, 2007.

11. Werth G. IOM and ACS Warn of the Impending Crisis in Emergency Care: Emergency Departments Overwhelmed, Underfunded, and Dangerously Fragmented. Bulletin of the American College of Surgeons 2007; 92:20-26.

12. The Lewin Group Analysis of AHA ED Hospital Capacity Survey, 2002. April 2002, 7-18. Available at . Accessed January 30, 2007.

13. On-Call Specialist Coverage in the U.S. Emergency Departments, American College of Emergency Physicians Survey of Emergency Department Directors. April 2006. Available at Oncall report2006.pdf.

14. Cunningham P, May, JH. A growing hole in the safety net: physician charity care declines again. Tracking report 13, Center for Studying Health System Change:March 2006. Available at .

15. Aston G. Uninsured climb to 46.6 million. American Medical News 2006; 49:1–2.

16. DoBias M. Congress: over and out. Just before the session ended, Congress approved legislation that could lead to a 7.5% Medicare reimbursement cut in '08. Modern Healthcare; 36(50):6-7.

17. Taylor TB. Threats to the health care safety net. Acad Emerg Med 2001; 8:1080-7.

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