Objectives: This study investigates whether admissions from the emergency department (ED) have lower dollar margins than elective admissions under Medicare and explores two possible reasons for differences in margins.
Methods: The authors developed patient-level Medicare dollar margins (calculated as patient revenue minus cost) for 1,159,243 Medicare admissions from 321 hospitals using data from the 2003 Nationwide Inpatient Sample (NIS) and the Medicare Impact File. Differences in margins between ED and elective admissions were explored across a number of diagnosis-related groups (DRGs) using t-tests. Chi-square tests were used explore whether ED admission was more common among patients in low-profit DRGs and/or patients with greater severity of illness.
Results: The average Medicare dollar margins were -$712 (95% confidence interval [CI] = -$729 to -$695) for ED admissions and $22 (95% CI = -$2 to $47) for elective admissions. Medicare dollar margins for ED admissions were lower than those of elective admission for the most common DRGs. ED admission was associated with greater patient severity of illness.
Conclusions: Source of admission is a financially meaningful classification. Because Medicare payment policy does not recognize differences in cost based on patients' route of admission, hospitals may have a financial incentive to favor elective admissions over ED admissions.