ED Revenues Are Falling. Can Hospitals Reverse This Trend?

A new RAND report finds that reimbursement for Emergency Department services is declining, and emergency care could be at risk unless changes are made.

Emergency departments (ED) are crucial components of the healthcare system, playing a significant role in public health, providing around-the-clock access to timely care, and delivering services regardless of a patient’s ability to pay. But a new report questions their future unless changes are made.

Despite their importance, EDs face numerous challenges that threaten their ongoing sustainability, according to the recent RAND report, funded by the Emergency Medicine Policy Institute (EMPI).

The results offer useful insights for revenue cycle leaders tasked with monitoring cash flows while balancing legal obligations for patient access and billing under laws like EMTALA and the No Surprises Act.

However, while healthcare leadership can continue to pursue best practices and emerging technologies to achieve efficiencies that boost patient payment rates and reduce friction in claims processing, RAND researchers suggest the viability of emergency care is at risk unless policymakers take action on multiple fronts.

High demand and insufficient capacity

ED visits, which declined during the height of the COVID-19 pandemic, have returned to near pre-pandemic levels.

While the current volume is not unprecedented, EDs are being asked to do more with the patients they tend to, according to RAND. Many of these patients – including the elderly, unhoused individuals, and undocumented immigrants – come from populations with complex medical and social needs. 

Increases in demand for ED services, combined with increases in patient complexity and acuity, have resulted in overcrowding that weighs on both patient satisfaction and provider stress levels.

Lower pay for more work

While their scope of work has expanded, payments to ED physicians have fallen, according to RAND.

After adjusting for inflation, Medicare and Medicaid paid 3.8% less per ED visit from 2018 to 2022. Payments for commercially insured patients have dropped even more significantly – by 10.9% for in-network visits and 47.7% for out-of-network visits over the same time period.

ED providers interviewed by RAND researchers expressed significant concern over existing fee-for-service payment models, which they say increasingly fails to compensate EDs for the services they provide. Around 20% of all ED physician expected payments are unpaid across all payer type, according to RAND. This amounts to roughly $6 billion per year in unpaid ED physician services.

The negative impact of the No Surprises Act

Enacted in 2022, the No Surprises Act (NSA) protects patients from receiving surprise bills when they receive out-of-network emergency care at in-network facilities. While intended to help patients, many ED providers argue that the new law gives too much power to payers in contract negotiations.

“The NSA is probably the biggest threat to us right now,” one provider told RAND researchers. “It takes away any leverage that we have to negotiate with payers.”

Additionally, the NSA established a process to facilitate disagreements over payment amounts between payers and providers. However, this process has added another layer of administrative complexity for EDs and caused delays in reimbursement.

Hope on the horizon?

RAND researchers propose several policy prescriptions to help relieve EDs of financial strains:

• The American College of Emergency Physicians (ACEP), healthcare organizations, and other stakeholders should advocate funding for the EMTALA mandate, which guarantees access to emergency care regardless of an individual’s ability to pay.
• Local governments and other stakeholders should pursue policies to allocate city and local funds to ED care and related activities that confer value to the broader community, such as care for substance use disorders and mental health conditions.
• ACEP, healthcare organizations, and other stakeholders should develop uninsured and underinsured patient compensation benchmarks so that EDs are compensated commensurate with the level of indigent care they provide.
• Healthcare organizations and legislatures should invest in expanding primary care capacity and develop and implement strategies to address ED crowding.
• Legislatures should institute state or federal laws that protect healthcare workers by increasing the legal consequences for violence against healthcare workers.
• ACEP, patient advocacy groups, and other stakeholders should advocate Medicaid expansion in states that have not adopted it yet and should advocate Medicaid parity with Medicare; and
• Legislatures should require payers, rather than emergency care professionals or hospitals, to collect deductibles and copays from their enrollees and should implement a legislative fix to No Surprises Act flaws so that payers must pay in full any independent dispute resolution judgments to the prevailing physicians within a preset time frame.

Of course, these solutions require lawmakers to act. In the meantime, revenue cycle leaders should continue to utilize the dispute resolution process under the NSA while working with facility partners to stabilize practice revenue and cash flow, according to Patrick Velliky, senior vice president of government affairs for Envision Health and chairperson of the EMPI board of governors.

“ED physicians already face high levels of burnout as a result of being asked to do more with less,” Velliky wrote in an email to HealthLeaders. “Both organizational and public policy must consider the impact of increasing acuity and declining reimbursement on the well-being of physicians and their patients.”