California's Emergency Departments: Do They Contribute to Hospital Profitability?

Publication Date: July 2003

Publisher: California HealthCare Foundation

Author(s): Policy and Management University of Southern California. Center for Health Financing

Research Area: Health

Type: Brief

Coverage: California

Abstract:

This issue brief examines the question of how emergency departments (ED) influence overall hospital finances. Researchers from the USC Center for Health Financing, Policy, and Management developed a new statistical accounting model that examined ED costs in the context of hospital-wide operations and economic costs by type of emergency department. The researchers compared two approaches in viewing ED economics--the traditional accounting model and a new statistical accounting model. The analysis revealed that EDs generate costs in excess of those recognized by the traditional accounting model, but EDs also generate more revenue than is captured using the traditional accounting model. While at least one-third of all hospital admissions come through the emergency department, none of the revenue generated by those inpatients is credited to the department, nor is the revenue generated by payments for ancillary services used by ED patients.