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The practice of medicine differs from other businesses in the private sector in some important ways. Foremost among these is that physicians, nurses, and other healthcare workers often do not view return on invested capital as the prime measure of their performance. This is particularly true in academic teaching institutions, in which education of residents and medical students, as well as research and scholarly output, often overshadow operating profits as concerns among physician leadership. These nonfinancial goals can pose a challenge to, and may actively conflict with, institutional financial goals. Furthermore, academic leaders confront profound problems when measuring financial performance because of ill-defined internal cost-accounting practices. This difficulty measuring financial performance is particularly true among hospital-based specialties such as emergency medicine (EM). This chapter examines the challenges and complexities involved in achieving financial success while meeting the critical missions of an academic EM department.

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Currently, there are an estimated 40,000 physicians working in emergency departments (EDs) in the United States. As of early 2013, there were approximately 29,000 “active” American Board of Emergency Medicine (ABEM)-certified physicians. Training the workforce of board-certified emergency physicians (EPs) is one of the primary roles of academic EDs.

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Additionally, physicians in academic EDs generally undertake research and other scholarly activities for publication. These activities play a critical role in the advancement of knowledge and improvement in practice quality in the specialty and in medicine generally. Physicians who join academic EDs as faculty generally receive lower financial compensation than physicians in nonacademic ED settings. They are often less driven by monetary rewards, and perhaps less focused upon financial performance.

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The objectives of this chapter are to

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  • Define financial success for an academic ED and the factors that contribute to this success.
  • Define metrics of financial success.
  • Describe best practices utilized for improvement.
  • Discuss methods for implementing and evaluating change in an academic ED.
  • Describe common pitfalls and tactics to avoid.

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The Financial Value of the ED to the Institution

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Defining a financially successful academic ED can be difficult because of ill-defined managerial accounting within hospitals, and particularly academic hospitals. The majority (70%-90%) of patients who visit an ED are discharged to home, but a substantial portion (10%-30%) are admitted to the hospital. The ED visit itself generates revenue, but depending upon the payor status of the ED patients and the accounting system of the institution, this revenue may not cover operating costs of the ED. However, admissions from the ED bring in far larger revenue flows and greater contributions to the bottom line. Depending on the institution, the ED accounts for 30% to 90% of all hospital admissions, with an average of 66% in 2008.

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Many hospitals historically have not attributed revenue from admissions to the ED, and consequently the ED has been viewed as revenue negative, rather than revenue positive. Increasingly, academic hospitals recognize that an ED is a “rainmaker” ...

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