Emergency Rooms: Massive Cost Center, or Crucial Healthcare Gateway?

There is a persistent narrative about emergency rooms. This narrative says that emergency rooms are overly expensive places to receive healthcare, that they are a cost drain on the hospitals they are attached to, and that they are a key driver of rising healthcare costs.

A RAND study released this week challenges most of that narrative, and lends support to a view that most of us emergency physicians have long held: that the ER is actually a key hub of medical decision-making, as much responsible for saving healthcare dollars as spending them, and one of the most cost-effective places to receive acute care in the country. 

According to the RAND report: “Politicians are fond of asserting that ‘emergency department care is the most expensive care there is.’ The numbers suggest otherwise. EDs provide 11 percent of all outpatient visits and are the portal of entry for roughly half of all hospital admissions; however they account for only 2-4 percent of total annual health care expenditures.”

The report also noted that of the roughly $850 billion that was spent on outpatient care in 2006, less than 10 percent of that could be attributed to EDs, “suggesting that aggregate spending for ED care is in line with its share of outpatient care delivery.”

So if emergency rooms aren’t the massive cost suck that we’ve been repeatedly told they are, then what are they? In fact, EDs are occupying an increasingly central role when it comes to determining who is admitted to hospitals, when, and under what circumstances.

One of the study’s key findings is that the share of hospital admissions coming from the ED is growing, mostly because primary care physicians are diverting their patients there. Whereas historically, PCPs sent a larger portion of their patients directly to the hospitals, they are increasingly taking advantage of the ER’s capacity to rapidly assess and treat complex diseases.

This trend toward increasing use of the ER to diagnose and treat complex health problems fits in to a larger narrative to come out of the report: the increasingly central role that emergency physicians occupy within the nation’s healthcare system. Emergency physicians in the ER are now the key decision maker and gatekeeper for nearly half of all hospital admissions. And since inpatient care accounts for 31 percent of all U.S. healthcare spending, that means emergency physicians are essentially deciding how, when, or even if that money is spent.

Which leads me to another key takeaway, which is that EDs are increasingly responsible for money not being spent. If emergency physicians are able to divert patients away from hospital stays, either by effectively managing their treatment through some sort of transition care program, or by placing them in a temporary (and much lower cost) observation care unit, that means less money is being spent overall.

The bottom line is that the existing narrative of ERs as simply cost centers to be contained is not supported by the changing realities of healthcare. Rather, emergency departments and emergency physicians are increasingly crucial front-line players in containing healthcare costs.