Definition of a prospective payment system to reimburse emergency departments

BACKGROUND: Payers are increasingly turning to Prospective Payment Systems (PPSs) because they incentivize efficiency, but their application to emergency departments (EDs) is difficult because of the high level of uncertainty and variability in the cost of treating each patient. To the best of our knowledge, our work represents the first attempt at defining a PPS for this part of hospital activity. METHODS: Data were specifically collected for this study and relate to 1011 patients who were triaged at an ED of a major Italian hospital, during 1 week in December 2010. The cost for each patient was analytically estimated by adding up several components: 1) physician and other staff costs that were imputed on the basis of the time each physician claimed to have spent treating the patient; 2) the cost for each test/treatment each patient actually underwent; 3) overhead costs, shared among patients using the time elapsed between first examination and discharge from the ED. RESULTS: The distribution of costs by triage code shows that, although the average cost increases across the four triage groups, the variance within each code is quite high. The maximum cost for a yellow code is €1074.7, compared with €680 for red, the most serious code. Using cluster analysis, the red code cluster is enveloped by yellow, and their costs are therefore indistinguishable, while green codes span all cost groups. This suggests that triage code alone is not a good proxy for the patient cost, and that other cost drivers need to be included. CONCLUSIONS: Crude triage codes cannot be used to define PPSs because they are not sufficiently correlated with costs and are characterized by large variances. However, if combined with other information, such as the number of laboratory and non-laboratory tests/examinations, it is possible to define cost groups that are sufficiently homogeneous to be reimbursed prospectively. This should discourage strategic behavior and allow the ED to break even or create profits, which can be reinvested to improve services. The study provides health policy administrators with a new and feasible tool to implement prospective payment for EDs, and improve planning and cost control.