Fuzzy math: ED costs estimates don't add up

Recent research has challenged the American College of Emergency Physicians’ (ACEP) advocacy positions on pricing and costs, revealing emergency department (ED) care to be a larger slice of the overall healthcare spending pie than previously thought, according to an editorial published online July 18 in Annals of Emergency Medicine (AEM).

Whatever the true cost, however, the key issue for EDs moving forward is figuring out how to deliver better care at a lower cost, wrote Ronald B. Low, MD, MS, of New York University in New York City and Donald M. Yealy, MD, of the University of Pittsburgh.

ACEP’s two cost-relevant advocacy positions are that ED charges amount to less than 2 percent of total healthcare costs and that the marginal cost of seeing an additional nonurgent patient in the ED is low, explained the authors. The first position can be interpreted by policy makers and ED stakeholders as a signal that the ED shouldn’t be a target for cuts since it makes up only a small part of the total budget. “This approach is threatened by basic economic sense; splitting one large pot of money into many smaller pots and then arguing for each to be maintained does not solve the problem that the original pot was too large,” wrote Low and Yealy.

Moreover, the 2 percent figure advocated by ACEP is likely an underestimate of the true cost burden of emergency care. A study from Michael H. Lee, MD, of Brown University in Providence, R.I., and colleagues, published online in April by AEM, found the ED’s true share of total costs to be somewhere in the 5 - 10 percent range. “Even if ED care is only 2 percent of the total health care spending, the total ED share is $52 billion, a figure larger than the current $42 billion 2013 fiscal year sequester and an ample source in which to look for improvements,” wrote Low and Yealy.

In that assessment of ED costs, Lee and colleagues proposed the activity-based costing (ABC) accounting system, a method derived from the manufacturing sector, to measure expenses more accurately by mapping costs to each individual step in a patient encounter. Low and Yealy, however, took aim at the ABC system—along with the ACEP assertion that marginal costs of additional nonurgent patients are low—and stated that marginal costs are so complex that methods to capture them will be loaded with assumptions and estimates.

“We believe that there are fundamental economic reasons why any accounting method will have limited effect on the evolving medical economy,” they wrote. “To have an effect, ABC would have to change supply, demand, regulation, or the ability of participants to more clearly see supply and demand. We see no evidence of this occurring.”

While primary care, urgent care and retail convenience clinics offer seemingly attractive options to lighten the ED load, they cannot fully bridge the gap, according to Low and Yealy. “In the end, counting on the ED to provide nonurgent care is going to be an ongoing part of the solution, coupled with gradual deployment of other care options. ED providers will continue being a necessary option for some patients who in an ideal world could have received care in a less urgent and cheaper setting.”

The authors suggested that to limit emergency care costs, EDs need to collaborate with social services, outpatient care centers, addiction services and other areas to develop arrangements to have certain patients treated outside the ED when appropriate.

“Our ED total cost may be more than 2 percent of total health care spending, but no matter what the number is, society demands that we find a way to do better with less cost,” wrote Low and Yealy.