The New Payment Paradigm


10 reasons why emergency medicine shouldn’t bear the blame for healthcare’s “value” problem

Listen up: the way that insurers pay for medical care is going to radically transform in the next 5-10 years. Along with the many health policy changes that come with the Affordable Care Act of 2010, payment reform will bring new “models” that will move away from traditional fee-for-service (FFS) medicine – where the doctor and hospital gets paid for each encounter.

In its place will be new payment models, such as global payments, episode-based payments, payment bundles, and value-based modifiers. In various ways, these new systems will provide incentives to improve quality of care, and reward providers who can deliver fewer services to manage a population’s health. The theory is that if we incentivize “value,” costs will fall, care will improve, and everyone will be able to see a doctor right away when they feel sick or get injured.

The “value” discussion in this new payment paradigm immediately brings emergency medicine into the crosshairs because it is seen by many as tremendously inefficient. First, it is widely assumed that most ED care is unnecessary. Ask your mom: ED care is about poor people getting free, government subsidized care for stubbed toes, right? Second, it is also assumed that ED care is incredibly expensive compared to alternatives, as ED doctors charge much more for low-acuity visits than doctors offices. Third, EDs are seen to provide equivalent, if not inferior, services to doctors offices because they don’t provide preventive care and they don’t know the patient. Finally, EPs order far too many tests, including unnecessary CTs and blood tests, and then tell patients to follow-up with their primary care doctors in 2-3 days whether they need a follow-up visit or not.

For these reasons, emergency medicine is under the intense scrutiny of policymakers and insurers. If they wish to cut costs and add value, surely this is a good place to start.

In reality, however, it isn’t nearly this simple. Sure, there are many inefficiencies in our emergency care system. But simply cutting reimbursements for emergency care – or closing emergency departments altogether – isn’t going to take care of the problem. Here are 10 reasons why the issue is much more complicated.

1. The high costs of ED visits are primarily hospital facility fees, not payments to doctors. When you actually break down an ED bill, more than 85-90% goes to the hospital, not the doctor.  These payments are used to support the high technology services such as CT and MRI scanners, and having a full suite of specialists available 24-7. The reason why that urinary tract infection gets a higher bill than the doctor’s office for the same nitrofurantoin prescription is because of cost-shifting: you can’t charge the sick, critically injured 2AM rollover crash $1 million for what it actually costs to maintain all the technology and staffing to have 24-7 high-quality services at the ready. Pulling the low acuity cases out of the denominator may not necessarily reduce the cost of ED care, it just means that we’ll have to charge critically ill patients more.

2. Expanding the capacity of services outside of hospitals, especially urgent care centers may not reduce ED visits. While there is some evidence that changing the way that improving access to primary care through patient-centered medical homes reduces outpatient ED visits, there is reason to believe that expanding access may actually increase overall visits. The reason is this: In many communities there is more demand than the current system can meet. Therefore, opening urgent care centers, expanding clinic hours, and providing telemedicine services will drive up service delivery use overall. The economic theory here is called supply-induced demand. While some people may choose lower cost venues like urgent care centers over EDs, this demand-substitution effect may be vastly smaller than the demand-supply problem in the old, inaccessible system that drove people into EDs.

3. Emergency departments, for the most part, don’t control their own demand. Several years ago, when Washington State Medicaid threatened not to pay for ED visits, the verdict of local policymakers was that ED visits for Medicaid patients were high because EPs were not good “stewards of resources.” Obviously, whoever said this had never spent a Friday night shift in their local ED. As we know, many ED visits are really a function of social determinants, like poverty, violence, substance use and the lack of lack of access to timely alternatives. These are broader societal problems. It’s a bit like threatening to close fire stations because fighting fires is so expensive. Effort would be better spent simply preventing the fires from happening.

4. Sharp-ended programs intended to change how emergency care is practiced could harm patient safety. The way we practice U.S. ED care today is pretty darn conservative in most places. People get admitted to the hospital or put in chest pain observation units when their risk of acute coronary syndrome is 2%. People without peritoneal signs get CT scans of their abdomens to look for serious intra-abdominal emergencies. While there are a lot of inefficiencies in these practices, the result is that patients with occult, serious disease rarely get sent home. Our system is designed to be sensitive, but not specific. This happens for many reasons, including defensive medicine, how U.S. doctors are trained, and societal expectations of EDs. Hell rains down upon EPs who miss subtle presentations of serious illness. The ACA doesn’t change this. Payment reform tells us to spend less through lowering admissions and avoiding expensive tests such as CT scans. However, if payment incentives are so strong that they interfere with diagnosing subtle cases, there could be a new epidemic of missed diagnoses creating a massive patient safety nightmare.

5. There are many ways that EDs can actually reduce costs of care without sacrificing safety. Validated clinical decision rules provide evidence-based guides to safely avoid work-ups for head injury, neck injury, pulmonary embolism, and tell us which patients with pneumonia can safely be discharged. EDs have also been able to impact re-visit rates for “frequent” users through implementing multi-disciplinary care plans. Clinical pathways are also effective in reducing variation, and promoting the use of cheaper alternatives such as ED observation units.

6. Care coordination takes time and effort, and EDs need the right incentives, extra resources, and functioning systems to do it effectively. Trying to figure out an outpatient plan for a moderate risk or complex patient is sometimes more work than admitting the patient to the hospital – where we know the patient will get the care they need. Think behavioral economics: to get an already super-busy group of people in an overcrowded system to do extra work, a few things need to happen. 1) There needs to be the right incentives to coordinate care: a real economic (or other) reason to spend the extra time and effort. 2) Care coordination needs to be made easier through increased resources in the ED like social workers and case managers. 3) There needs to be a serious system upgrade to facilitate care coordination, specifically when it comes to inter-operable health information across health systems.

7. Quality metrics for emergency care are, well, not so good. The last decade in the ED community focused heavily on ED crowding (myself included), which resulted in some of the only broad measures of ED quality being related to ED throughput and boarding.  While there are some measures for specific conditions such as pneumonia, acute myocardial infarction, and stroke, the science of knowing whether the average patient got the right ED care is really in its infancy. This presents a real problem when we want to place a “value-modifier” on ED visits. Given that value-based payment is coming whether we like it or not, the ED community needs to quickly figure out what and how to measure quality. The alternative? Rely on patient experience surveys, which are long (more than 50 questions) and have low response rates. These generate  a systematically incomplete picture of the care for the average ED patient.

8. Health reform efforts so far have increased visits to the ED through Medicaid expansion. The ACA has pushed America’s uninsured into health insurance programs, either through the Medicaid program, by increasing employer-based insurance programs, creating health insurance exchanges, and requiring people to pay a penalty if they don’t have insurance. Plain and simple: the more people have insurance, the more people use healthcare services. We are already seeing this with more and more people coming into the ED for care. Insurance gives you the ability to access services with lower out of pocket costs, but does not require that a doctor see you (thus people come to the ED more). Whether the long-term effects of payment reform will reduce ED visits still remains to be seen, insurance reform is causing a positive upward trend in visits and one that will probably be sustained.

9. ED physicians need a seat at the table for discussion about how to fix healthcare. If you ask many primary care physicians and health reformers what to do about the “ED” problem, they answer that their patients should not go to EDs unnecessarily, that they will create alternatives, and in the end, we won’t need EDs anymore. The reality is that while primary care interventions may reduce some ED visits, people will continue to flood into EDs, particularly when they are sick or injured and need to get admitted to the hospital. Because EDs are the key pivot point for hospital admission decisions and high-cost radiography, and there are a lot of interventions that can improve the value of ED care, not engaging the ED is clearly a huge tactical mistake for people who want to improve healthcare value.

10. EDs are a vital component of the healthcare safety net. One of the key functions of ED care is to be the safety net for the poor and disenfranchised. EDs perform many social service functions for the community like caring for the homeless, serving as sobering centers for the intoxicated, and seeing patients who other doctors can’t or won’t treat. This function is written into federal law through EMTALA. If payment reform efforts marginalize this system – or marginalize EDs in the system on less secure financial footing like inner-city hospitals in poor neighborhoods and rural EDs, the fabric of the safety net has a good chance of unraveling.


HEALTH POLICY SECTION EDITOR Dr. Pines is a practicing emergency physician and a Professor of Emergency Medicine and Health Policy at the George Washington University.


  1. Greg Henry on

    Jessie, I agree with MOST of what you say but we are also part of the problem. We must accept this or we can’t move on. A doctor orders 10 times his yearly income in tests. We have doctors who order 15 times the number of CTs as other doctors with no difference in outcomes.There is not any proper alignment of incentives. This is a more complex problem than we would like to think. We always blame the lawyers but having the largest series in the country at looking at at ED lawsuits I can say that the doing OR not doing of a test is rarley the problem. Greg

  2. Jesse Pines on

    Hi Greg,

    Thanks for the feedback. There is so much focus on cost these days and I think we often lose the big picture of what we’re doing.

    I agree with you that there is variation in how we practice in the ED which has major cost implications. But I don’t think the jury is out on whether doctors who practice more conservatively have better, worse, or similar outcomes.

    Asking a doctor who practices conservatively to immediately change practice behavior to contain costs assumes that:

    1) We have developed sufficient science to measure resource utilization within an ED practice and accurately compare doctors. In fact, the data we are feeding back to doctors these days has major limitations. See this paper we did on adjusted v. unadjusted use of advanced imaging for pulmonary embolism.(1)

    2) The physician who is an “overutilizer” can safely reduce their utilization without leading to misdiagnosis. More concretely, that they know which CTs or admissions are avoidable and which aren’t.

    The problem is that neither of these assumptions is really true for every practice and every physician. While there are clinical decision rules that are evidence-based, they are only for a minority of conditions in the ED, and there are very few validated rules for admissions which is the major cost decision.

    We are amidst a major structural push to lower costs in this country, but the science of quality and how to do that safely is not there yet in many ways. ED care is on the sharp edge of clinical practice where changing approach solely in the name of cost-containment will cause problems.

    The point is that this has to happen VERY carefully and thoughtfully. People who don’t work in the ED need to hear this message too.


    (1) Kindermann DR1, McCarthy ML2, Ding R2, Frohna WJ3, Hansen J4, Maloy K3, Milzman DP3, Pines JM2. Emergency department variation in utilization and diagnostic yield of advanced radiography in diagnosis of pulmonary embolus.J Emerg Med. 2014 Jun;46(6):791-9.doi: 10.1016/j.jemermed.2013.12.002.

Leave A Reply