Direct costs of emergency medical care: A diagnosis-based case-mix classification system

Abstract

To develop a diagnosis-based case mix classification system for emergency department patient visits based on direct costs of care designed for an outpatient setting. Prospective provider time study with collection of financial data from each hospital's accounts receivable system and medical information, including discharge diagnosis, from hospital medical records. Three community hospital EDs in Los Angeles County during selected times in 1984. Only direct costs of care were included: health care provider time, ED management and clerical personnel excluding registration, nonlabor ED expense including supplies, and ancillary hospital services. Indirect costs for hospitals and physicians, including depreciation and amortization, debt service, utilities, malpractice insurance, administration, billing, registration, and medical records were not included. Costs were derived by valuing provider time based on a formula using annual income or salary and fringe benefits, productivity and direct care factors, and using hospital direct cost to charge ratios. Physician costs were based on a national study of emergency physician income and excluded practice costs. Patients were classified into one of 216 emergency department groups (EDGs) on the basis of the discharge diagnosis, patient disposition, age, and the presence of a limited number of physician procedures. Total mean direct costs ranged from $23 for follow-up visit to $936 for trauma, admitted, with critical care procedure. The mean total direct costs for the 16,771 nonadmitted patients was $69. Of this, 34% was for ED costs, 45% was for ancillary service costs, and 21% was for physician costs. The mean total direct costs for the 1,955 admitted patients was $259. Of this, 23% was for ED costs, 63% was for ancillary service costs, and 14% was for physician costs. Laboratory and radiographic services accounted for approximately 85% of all ancillary service costs and 38% of total direct costs for nonadmitted patients versus 80% of ancillary service costs and 51% of total direct costs for admitted patients. We have developed a diagnosis-based case mix classification system for ED patient visits based on direct costs of care designed for an outpatient setting which, unlike diagnosis-related groups, includes the measurement of time-based cost for physician and nonphysician services. This classification system helps to define direct costs of hospital and physician emergency services by type of patient.