Emergency medicine faces economic headwinds that threaten the financial viability of independent practices, the budgets of hospital employed physicians, and diminishes the strength of the nation’s emergency care safety net. The safety net proved resilient during the COVID-19 pandemic, yet it is now fraying in the aftermath. Administrative burdens, barriers to payment (e.g., the use of inappropriate diagnosis lists in violation of prudent layperson), and termination of private payer contracts in the wake of the No Surprises Act has hindered the practice of emergency medicine.

ACEP has been a strong advocate for emergency medicine reimbursement: In 2021, ACEP successfully lobbied for the 99284 work RVUs to increase from 2.60 RVUs in 2020 to 2.74 RVUs in 2021. Subsequently, in 2022 the AMA Relative Update Committee (RUC) proposed to reduce 99284 RVUS, and ACEP successfully advocated against the proposed decrease. The 99284 RVUs have remained stable ever since.

While ACEP has been successful in advocacy efforts to address many key reimbursement issues, the myriad negative financial pressures have significantly impacted emergency physician groups resulting in many groups requiring new (or increased) hospital subsidies.

Declining Reimbursement

Centers for Medicare and Medicaid Services (CMS) has decreased physician reimbursement by nearly 1.7 percent for 2024, on top of the approximately two percent cut in 2023. Several other factors are exacerbating longer term downward reimbursement pressure.

Medicare Headwinds Mounting Due to Budget Neutrality

Whenever anticipated CMS expenditures exceed 20 million dollars, the conversion factor (CF) must be decreased to preserve budget neutrality. Medicare anticipates increased cost from the outpatient/office codes and the brand-new use of a code for long term complex patients; in order to remain budget neutral, the CF is being continually decreased. The result is that 2024 had the lowest published CF since 1993. According to the American Medical Association, physician payment rates are down 29 percent compared to 2001 after accounting for inflation.¹ In his final address as AMA President, on June 7, 2024, Jesse Ehrenfeld, MD, MPH, stated, “Medicare reform is our top advocacy priority because it’s crippling the sustainability of physician practices, threatening patient access care, and choking the pipeline for future physicians.”²

Commercial Reimbursement and the No Surprises Act

Commercial reimbursement rates have been negatively impacted since the implementation of the No Surprises Act on January 1, 2022. The regulatory implementation of the law has been unfavorable to physicians. There have been four successful lawsuits challenging the regulations, and advocacy for fair regulations will continue, however the uncertainty and difficult landscape continues in 2024. Throughout our health care system, physicians depend on higher commercial payments in order to make up for the relatively lower Medicare and Medicaid payments.³ This balance is now being threatened. Out-of-network commercial insurance payments have decreased and there is an associated downward pressure on in-network rates, including payers unilaterally terminating contracts. While most payer negotiations are private, FTI Consulting has been tracking media reports since 2022. In their end-of-year report, FTI notes the following: a 69 percent increase in the number of contracting disputes covered in the media in 2023 compared to 2022, and 44 percent of disputes did not reach an agreement in 2023–24.⁴ The result has been widespread negative financial variances, including the highly visible bankruptcy examples of both Envision Healthcare, which declared chapter 11 bankruptcy, and the sudden collapse of American Physician Partners, which in late July 2023 provided just two weeks termination notice to more than 100 hospitals and subsequently declared chapter 7 bankruptcy.

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.

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