To Reduce Emergency Room Wait Times, Tie Them to Payments
The average hospital emergency department (ED) patient in the United States waits more than an hour and half to be taken to his or her room and 2.25 hours before being discharged. Patients who arrive at EDs with broken bones wait a painful 54 minutes, on average, before receiving any pain medication. And worryingly, the number of patients who leave EDs without being seen has almost doubled in recent years. Despite the wide publicity excessive ED waiting time has attracted, this problem has persisted for a long time. In our latest research with Ozlem Yildiz of the University of Virginia’s Darden School of Business, which employed a mathematical model, we came up with a new way to tackle the waiting time problem in EDs: tie a portion of payments to the national (risk-adjusted) average waiting time of ED patients with similar conditions.
The average hospital emergency department (ED) patient in the United States waits more than an hour and half to be taken to his or her room and 2.25 hours before being discharged. Patients who arrive at EDs with broken bones wait a painful 54 minutes, on average, before receiving any pain medication. And worryingly, the number of patients who leave EDs without being seen has almost doubled in recent years.
Despite the wide publicity excessive ED waiting time has attracted, this problem has persisted for a long time. In our latest research with Ozlem Yildiz of the University of Virginia’s Darden School of Business, which employed a mathematical model, we came up with a new way to tackle the waiting time problem in EDs: tie a portion of payments to the national (risk-adjusted) average waiting time of ED patients with similar conditions.
Why we wait. That some people will have to wait — whether at the ED, grocery store, or other service point — is inevitable. Many people think this due to insufficient capacity (the ED doesn’t have enough physicians and nurses) or due to lack of funds. Yet the average charge for an outpatient emergency room trip was $1,026 in 2010 (and it grew to over $1,900 in 2016), twice the average monthly rent Americans paid at the time, and $13,198 for admitted patients. Barring exceptional cases in a few hospitals, EDs have failed to use these funds effectively to reduce waiting times for treatment.
Sure enough, if average patient demand exceeds the capacity of physicians, nurses, or beds, people will have to wait. But most service systems experience waiting times despite having enough staff and resources, on average. So, what’s really driving the wait? Variability. At any moment in time, the number of people who walk through the ED door may be larger than the number of physicians available. When this happens, some patients must wait. It’s a matter of fact.
In some industries, businesses can reduce variability by regulating when customers show up. At Disney World, for example, managers allocate express tickets for pre-booked slots on popular rides. In health care, however, providers have no such luxury. People don’t plan an emergency. In addition, there is variability in patients’ treatment needs; one patient may require only a few stitches, while another may need a series of tests to reach a diagnosis. And when it just so happens that more of these time-consuming patients show up at roughly the same time, everyone else will wait longer to be treated.
Of course, such waits could be reduced if the ED invests in additional beds, employs a surplus of physicians, and uses faster diagnostic technology. The problem with this solution is these costly resources will be sitting idle most of the time.
Why other industries have shorter waits. One important difference between other settings and EDs that may explain the divergence, is competition. For example, market forces push competing grocers to improve the quality of their produce and reduce the prices of their assortment while at the same time investing in staff and technology that reduce waiting times to an acceptable level. If they don’t, most shoppers opt for an alternative store that offers competitive pricing and shorter waits. But when you need urgent medical attention, you rarely have the time or option to shop around. Therefore, hospitals can get away with waiting times that, from a patient perspective, are too long.
The way hospitals are paid by Medicare and private payers exacerbates the problem. In an attempt to provide incentives for cost reduction, payers give hospitals a fixed amount per patient episode (e.g., the hospital gets a fixed amount for setting a broken leg or treating a burn). This amount is set to the national average cost of providing an equivalent treatment in all similar hospitals with adjustments for regional differences in costs. Naturally, if hospitals are paid a fixed fee, they have every incentive to reduce the cost of providing treatment at, or below, national average cost. And this is desirable because if every hospital is under pressure to reduce costs, the national average itself will be under pressure to come down. However, this scheme provides no incentives to invest in excess capacity or technology that would reduce waiting time. Such investment costs money, and hospitals are made to compete on which ones can reduce costs the most.
Our recent research, which is going to be published in Management Science, identifies a much better approach that would be relatively easy to implement. Using the same relative benchmarking idea that is currently used to incentivize cost reduction, hospitals’ waiting times should be measured (as they are) and benchmarked against the national (risk-adjusted) average waiting time of patients with similar conditions. Hospitals that exhibit shorter waiting times than the average should be financially rewarded, while underperforming hospitals should be penalized.
The Centers for Medicare & Medicaid Services (CMS) has already introduced various programs that reward or penalize hospitals along various dimensions (e.g., readmissions for treating a condition, patient safety, patient satisfaction, hospital-acquired infections, etc.), and private payers followed CMS’s Lead and adopted some of these programs. A financial reward system, based on average waiting time of patient, tied to ED payments could easily be added.
Our research shows that such financial and outcomes-based incentives create indirect competition on waiting times and have the same effect on outcomes as direct competition has on other service points, without patients needing to exercise choice. This solution would work without requiring the regulator to figure out the thorny question: What is an acceptable waiting time and how much would it cost?
Nicos Savva is an associate professor of management science and operations at London Business School. He holds an honorary appointment at Guy’s and St Thomas’ NHS Foundation Trust in London and has acted as a consultant to hospitals and biotech companies.
Tolga Tezcan is an associate professor of management science and operations at London Business School. He has worked with hospitals and emergency departments.
To Reduce Emergency Room Wait Times, Tie Them to Payments
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