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Why Moving to Variable Capacity Matters

April 8, 2019

The problem of addressing variable demand with fixed resources costs healthcare systems millions of dollars per year. Examples for a typical 6 hospital system with 200,000 annual ED visits include:

$4 Million Lost ED Revenue Annually

The increased length of stay and variation
in throughput metrics that occur on the high volume days result in patients leaving without being seen. The nationwide LWBS rate is over 2 percent. At this rate, a typical hospital system loses $4 million of annual revenue based on the nationwide LWBS rate at an industry average $1,000 incremental revenue per visit.

$1.8 Million Lost Inpatient Margin Annually

A typical hospital system loses $1.8 million in inpatient margin from patients that leave without being seen at an industry average 15% admission rate and margin contribution of $3,000 per admitted patient.

$5 Million Wasted Staffing Capacity Per Year

The excess capacity that is wasted on slow days across a typical hospital system can
be addressed by trimming staff levels to decrease the cost per visit and/or by
seeing more patients with the same facility and staffing levels. (Assuming this can be done without negative impact on patient throughput metrics). This model health system should have the capacity to see an additional 50,000 patients per year (worth up to $50 million at $1,000 per incremental patient visit) without adding staff, or the facilities could potentially reduce their staffing costs by up to $5 million per year at a constant patient census.

Beyond the obvious financial benefits, other significant industry trends driving a change to better meet the variable demand include:

Increasing Competition

Hospital-based emergency department visits have continued to increase every year for decades, leading many providers to believe that their business will grow regardless of the patient experience. However, poor service and high cost continues to put emergency visits in the crosshairs of efforts to decrease utilization by regulators and insurers alike. Competition is increasingly offering lower cost solutions with better service levels. In many markets, overall numbers of visits to hospital-based emergency departments has flattened or even decreased, as alternatives such as urgent care centers and freestanding emergency departments spring up in larger numbers.


The growth of alternative care sites creates even more pressure on hospitals to recruit and retain adequate staff. Well-trained emergency clinicians and nurses are in short supply across the country. Many are being drawn away from hospital-based practices to alternative sites that are either less stressful and/or provide higher compensation.

Regulation and Transparency

Regulatory pressures on hospitals continue to grow unabated. The CMS Hospital Compare website shows throughput metrics, other quality metrics and patient satisfaction scores of hospitals and emergency departments throughout the country. CMS is now incorporating emergency department throughput metrics into its prospective payment formula so that adequate performance will be directly linked to future overall hospital reimbursement.

Clinician Satisfaction

A substantial portion of clinicians and nurses in emergency medicine report significant symptoms of burnout, with some studies showing the specialty with the highest burnout rates in all of medicine. Dealing with critical medical situations is inherently stressful, and when departments operate with high levels of crowding it only exacerbates the situation.

Patient Experience

Emergency department visits account for over half of all hospital admissions. The impact to the organization’s reputation frequently extends past the initial visit, into the subsequent admission and future inpatient/outpatient utilization due to the “Front Door of the Hospital” nature of ED encounters.


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