Study objective: This article addresses 2 questions: (1) to what extent do emergency departments (EDs) exhibit economies of scale; and (2) to what extent do publicly available accounting data understate the marginal cost of an outpatient ED visit? Understanding the appropriate role for EDs in the overall health care system is crucially dependent on answers to these questions. The literature on these issues is sparse and somewhat dated and fails to differentiate between trauma and nontrauma hospitals. We believe a careful review of these questions is necessary because several changes (greater managed care penetration, increased price competition, cost of compliance with Emergency Medical Treatment and Active Labor Act regulations, and so on) may have significantly altered ED economics in recent years.
Methods: We use a 2-pronged approach, 1 based on descriptive analyses of publicly available accounting data and 1 based on statistical cost models estimated from a 9-year panel of hospital data, to address the above-mentioned questions.
Results: Neither the descriptive analyses nor the statistical models support the existence of significant scale economies. Furthermore, the marginal cost of outpatient ED visits, even without the emergency physician component, appear quite high--in 1998 dollars, US295 dollars and US412 dollars for nontrauma and trauma EDs, respectively. These statistical estimates exceed the accounting estimates of per-visit costs by a factor of roughly 2.
Conclusion: Our findings suggest that the marginal cost of an outpatient ED visit is higher than is generally believed. Hospitals thus need to carefully review how EDs fit within their overall operations and cost structure and may need to pay special attention to policies and procedures that guide the delivery of nonurgent care through the ED.