Emergency Department Profits Are Likely To Continue As The Affordable Care Act Expands Coverage

Michael Wilson and David M. Cutler

Scholarly Articles from Harvard University Department of Economics

Abstract: To better understand the financial viability of hospital emergency departments (EDs), we created national estimates of the cost to hospitals of providing ED care and the associated hospital revenue using hospital financial reports and patient claims data from 2009. We then estimated the effect the Affordable Care Act (ACA) will have on the future profitability of providing ED care. We estimated that hospital revenue from ED care exceeded costs for that care by $6.1 billion in 2009, representing a profit margin of 7.8 percent (net revenue expressed as a percentage of total revenue). However, this is primarily because hospitals make enough profit on the privately insured ($17 billion) to cover underpayment from all other payer groups, such as Medicare, Medicaid, and unreimbursed care. Assuming current payer reimbursement rates, ACA reforms could result in an additional 4.4-percentage-point increase in profit margins for hospital-based EDs compared to what could be the case without the reforms.

Date: 2014
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Published in Health Affairs

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