This week’s contributor is Sayeh Nikpay, an associate professor in the Division of Health Policy and Management at the University of Minnesota School of Public Health. Her research focuses on the impact of health reform on labor market decisions of individuals and hospital finance. Sayeh oversees the Research Corner as Tradeoffs’ Research Editor.

Trauma injuries cause harm to more than 3 million people in the U.S. each year. Only some hospitals are certified to care for these patients, and those that do are assigned trauma levels based on the acuity of care they are equipped to provide. These rankings range from level 4 (lowest) to 1 (highest) and reflect the staffing and surgical capabilities a hospital has.

Historically, trauma care has been unprofitable for hospitals, due to the large number of uninsured patients, high costs, and the uncertain nature of traumas. That began to change in the mid-2000s, as trauma centers started to charge for trauma activation – a flat fee covering the costs of assembling and maintaining resources when it is expected that a patient needs trauma care.

The introduction of this kind of fee has led to numerous reports of expensive emergency department bills – even for patients who never get admitted to the hospital. In addition, there are anecdotal reports of more hospitals pursuing trauma certification, which allows them to charge activation fees, in order to generate revenue for the hospital. 

In a paper published in JAMA Network Open earlier this spring, Vivian Ho and colleagues at Rice University examined the growth of trauma centers and use of trauma activation fees in their own backyard to better understand this phenomenon.

Using claims data compiled by a large insurer between 2011 and 2019 from three metropolitan areas in Texas, the researchers found:

• The number of hospitals with level 1 or 2 certification in these areas nearly doubled from 2011 to 2019.

• As the new level 1 and 2 trauma centers opened, they saw an increasing share of total trauma visits, rising from 18% in 2011 to 35% in 2019.

• By 2019, newer trauma centers charged activation fees for about the same share of patients (63%) as older centers, suggesting they were not using trauma activation more aggressively than the incumbents.

• Prices for trauma visits at new centers increased slightly more over time than at old centers, although there was no difference between the two by 2019.

This study tells us that trauma care is an increasingly appealing service for hospitals to provide, potentially due to trauma activation fees. However, in contrast to anecdotes from other states, new trauma centers in Texas did not appear to use trauma activation fees differently than old centers, and they did not raise the price of trauma care for this insurer or its patients.

Although this study suggests that insurers may be able to prevent significant growth of trauma activation fees, the variation in trauma center costs nationwide highlights the need for more regulatory guardrails. At least one state requires hospitals to disclose trauma activation fees.

Guardrails are especially important considering the astronomical costs trauma visits can incur, especially for patients who are uninsured or have insurance that puts them on the hook for a large share of out of pocket costs.