Cherry-Picking and Cost-Shifting Are the Name of the Game

The following letter was published in the August 27, 2018 issue of Modern Healthcare magazine.

MH Sept 27 2018 cover.jpg


The statistics in the Aug. 13 Data Points regarding where emergency services providers choose to locate (“Stand-alone EDs flock to affluent ZIP codes,” Data Points, p. 31) point to a trend that some fail to grasp. I agree that in most retail situations – cars, flat screen TVs, etc. – competition encourages increased quality and tamps down prices. Your data reveals that potentially profitable service lines gravitate toward more affluent areas. This is especially true for facilities like free-standing surgery centers, and it amounts to cherry-picking. I don’t see people rushing to set up trauma centers in downtown Atlanta or Chicago to siphon off the uninsured car wreck, overdose and gunshot cases.

Everyone knows about the cost shifting to commercial payers because of less-than-cost payments from Medicaid, the uninsured and, in many cases, Medicare. But there is another type of cost shifting that takes place within the hospital. Since many of the vital services they offer cause a financial drain, they make up the difference from other areas that do yield net income. If they lose too many profitable patients, their ability to prop up the necessary but financially draining service areas declines.

One bright spot in your statistics is that two-thirds of the freestanding EDs are hospital-affiliated, meaning they are presumably helping the profitability of the hospitals that operate them.

Glenn E. Pearson, FACHE

Principal

Pearson Health Tech Insights, LLC

Marietta, Ga.