Hospital Physician Subsidies Are Increasing

In addition to facing difficult reimbursement realities, emergency departments are experiencing staff burnout, and hospitals and group practices are facing a high inflationary environment and increased expenses. The American Medical Association has reported that practice expenses have increased by 46 percent. On the hospital side, widely publicized strikes and unionization have successfully led to increased wages for hospital employees. Revenue cycle management processes have become more difficult due to commercial payers increasingly interfering with smooth payment processes, requesting records, and downcoding or outright denying services, all of which are time consuming and costly. Setting legal precedent, Virginia ACEP, alongside the Medical Society of Virginia (MSV) and the Virginia Hospital and Healthcare Association (VHHA), successfully sued Virginia’s Department of Medical Assistance (DMAS) and CMS over diagnosis-based downcodes.⁵

HCA Healthcare, the nation’s largest hospital chain, reported during its October 2023 quarterly earnings call that physician subsidies had increased 20 percent year to date, and that losses in the former HCA-Envision joint venture (Valesco) exceeded $100 million in the 3rd quarter. Separately, the Universal Health Services hospital system stated during its conference call in October 2023, that physician expenses had increased 35–40 percent during the past year. The combination of decreased professional service revenue, with increased management costs often results in the need for a new or higher subsidy.

Planning for the Future

Emergency physician reimbursement is steadily decreasing with no signs of slowing down, and group costs are increasing. Emergency medicine has consistently demonstrated the ability to innovate and adapt. The economic forces and challenges associated with managing revenue and expenses are being faced by both hospital employed and independent groups. In response, budgets and/or subsidies are being significantly adjusted. Expected revenue is being adjusted downward, and staffing metrics, ways to reduce left without being seen, and negotiating sustainable contracts with commercial payers are being carefully evaluated.

Dr. Adler is Vice President of Coding for LogixHealth, a national ED coding and billing company, and chairs the ICD-10 workgroup of the ACEP Coding and Nomenclature Committee. He is a clinical assistant professor at the University of Maryland School of Medicine Department of Emergency Medicine.

References

1. American Medical Association. Medicare physician payment is NOT keeping up with practice cost inflation. May 2024. Accessed June 20, 2024.
2. Ehrenfeld, JM. 2024 Annual Meeting HOD Address. Why we fight. June 7, 2024. Accessed June 20, 2024.
3. Pines JM, Zocchi MS, Black BS, et al. The cost shifting economics of United States emergency department professional services (2016-2019). Ann Emerg Med. 2023;82(6):637-646.
4. FTI Consulting Strategic Communications. End of year update: payer-provider disputes in the public eye in 2023. January 16, 2024. Accessed June 20, 2024.
5. Parker T, Gaines E, Boessler E. ACEP Now. VACEP legal victory illustrates why the prudent layperson standard still matters. October 26, 2023. Accessed June 26, 2023.