10 steps toward ED profitability

Healthcare Financial Management,  May, 2008  by John G. Holstein

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It is almost impossible to find a hospital in the United States that has not either built a new emergency department (ED) or considered an ED expansion or renovation plan. All EDs are challenged by increasing volume, with a corresponding increase in ED admission rates.

In a June 2006 study, the U.S. Department of Health and Human Services reported an 18 percent increase in ED visits from 1994 to 2004, while the number of hospital EDs decreased 12.4 percent (McCraig, L. F., et al., "National Hospital Ambulatory Medical CARE Survey: 2004 Emergency Department Summary," U.S. Department of Health and Human Services, Center for Disease Control and Prevention, National Center for Health Statistics, June 23, 2006). In 2007, one New York City hospital, Montefiore Hospital, experienced a staggering 30 percent increase in ED visits within a five-year period (Kershaw, S., "City Hospitals Reinvent Role of Emergency," New York Times, Feb. 12, 2008).

Today, EDs are without question the front doors into our health systems. They can also be a solid revenue source when pro-fee payer contracts are addressed with scrutiny, specifically addressing key components pertinent to emergency medicine in general and the ED practice in particular.

10 Key Contract Issues for EDs

Following are 10 key pro-fee ED contract issues that all hospitals with EDs should address with payer representatives.

Prudent layperson definition of an emergency medical condition and service. The loss or absence of a prudent layperson's definition of an emergency medical condition or service from ED contracts leaves open the possibility of claim payment problems, typically evidenced in delays, denials, or clown-coded charges (see the sidebar on page 43). As long as the ED represents the safety net of a healthcare system, it is imperative that this definition remain in ED pro-fee contracts. Conversely, the loss of or elimination of this definition from ED pro-fee contracts will likely set the claims adjudication process back.

Covered services and medical necessity. The ED is a unique setting within every hospital. Each day, patients can present with virtually any illness, injury, or malady. The presenting symptoms are the critical criteria for determining whether ED services are needed and which ED services to provide. Logically, it follows that emergency medicine should be the arbiter of medical necessity.

However, virtually every pro-fee contract states that the payer's medical director, after the fact, becomes the ultimate decision maker for medical necessity, and that this exchange of information, specifically regarding actual clinical scenarios, becomes a part of the negotiation process. This issue can be addressed by developing a relationship between the carrier medical directors, the ED medical director, and a finance department representative. Every ED practice should establish a rapport with the payer, inclusive of an exchange of clinical scenarios. It is important that both sides of the negotiation understand which claims will be paid under the contract, and under what circumstances services will be paid.

Assignment of benefits. The signing of an assignment of benefits statement by, or for, virtually every ED patient is the defining statement of the ED's right to payment for services. Assignment of benefits for ED patients is a high-profile flashpoint issue today in the industry, particularly in regard to nonparticipating providers. Every patient or patient representative is asked to sign an assignment of benefits form, typically upon presentation in the ED. This form represents a contract between the patient and provider (i.e., the physician and the hospital). However, assignment of benefits should also be formally addressed within ED contracts to ensure payment to the provider. We live in a consumer-driven and focused society, where goods and services are reasonably paid for upon delivery of the item or service. Redirecting payments to patients places an undue cash flow hardship on the very individuals serving to preserve and/or restore patients' health--the ED physicians.

Credentialing/enrollment. The credentialing/enrollment process for physicians can be a long and tedious process, sometimes taking months to complete. Some payers today have streamlined the process and will work with ED practices using a delegated credentialing process. In some instances, ED physicians are even considered exceptions to the typical process.

The fact is that every ED physician has been accepted and credentialed at his/her own hospital. Using a single physician list with the attendant supporting documents can be the de facto credentialing document used by payers for ED physicians. Delegated credentialing is a very reasonable protocol to administer and monitor. Conversely, the delays associated with prolonged credentialing processes typically cause charge backlogs and consequent cash flow problems. It simply does not have to be this way for ED physicians.