The Grey Zone: The Mysterious, but Predictable Source of Additional Revenue

Approximately 20% of all small to mid-sized community hospital (CH) Emergency Department (ED) patients have medical conditions that require further treatment beyond the ED. Typically, a CH always admits 5% and transfers 5%. That leaves a 10% “grey zone.”

In a CH with 10,000 ED patient visits per year, the 10% grey zone would encompass 1,000 patients. In order to capture those patients, it would be equivalent to two to three additional admissions per day. This small number is deceptively significant. This represents roughly $6,000,000 of potential net revenue, at an average of $6,000 per discharge. For many CHs, this small number of additional inpatients is a matter of financial viability.

EM physicians exercise different medical judgment based on different experiences regarding the setting for continued treatment. The decision to treat a patient, within the local hospital, or to transfer can cost the CH significant revenue. However, this significant revenue potential often flies under the radar of many CHs. Why?

Current Expectations

You expect your Emergency Medicine (EM) physicians to see these medical conditions the same and make the same decisions to admit all appropriate patients and transfer only those that cannot be treated locally. And likewise, you expect your inpatient attending physicians (referred to as HMs, even if local PCPs), for the same reasons, to accept all patients that can be treated locally. Although typically, admissions for most CHs fall far short of their potential. How can each physician see patient conditions so differently? What actually determines how much of $6,000,000 you should keep locally? The answer to this question more objective than it might seem. But first, let’s put the CH’s capabilities in perspective.

Skills and Experience Gap

As a point of reference, tertiary hospitals will achieve a 20% or higher potential because they have most of the medical subspecialties and service lines needed to treat essentially all patients and transfer only a few if any at all. As hospitals become smaller, it becomes more difficult to financially have access to the same wide range of skills and experiences as a tertiary hospital. Fewer physicians result in skill and experience gaps that limit the full range of admissions possible.

Silo Paradigm

In the traditional silo organization, EM and HM physicians work in separate departments and each has the authority to make independent decisions. There is no “team medicine.” The EM can make a judgment that the patient should not be admitted locally and transfer without referring the patient to the HM. This can occur because the EM traditionally does not have inpatient skills or experience and can make a transfer decision based on doubts regarding the capabilities of the HM or the nursing staff on duty. On the other hand, the EM can decide to refer a patient to the HM who does not accept and transfers the patient. The local admission decision always requires an agreement by both the EM and HM. And as we pointed out earlier, the opportunities missed on even two or three additional admissions are costly.


Medicine is complex. We know intuitively that not all physicians, even within the same specialty, are equivalent. Knowledge and skills erode over time and physicians become limited by their recent practice experience. This erosion leads to systemic and persistent variations in care that Dr. John E. Wennberg, of The Dartmouth Institute and founder of the Dartmouth Atlas of Health Care, describes as “practice style factors.” These variations are influenced by “subjective factors related to the attitudes of individual physicians rather than the scientific norms based on previously tested and proven treatments (i.e., standards of care).

The current didactic approach for continuing medical education has proven to have its limitations. Our experience has confirmed the conclusion of the Josiah Macy Foundation that didactic education is contrary to the way physicians learned to practice medicine through a form of “on the job” apprenticeship. The Macy Foundation is working with teaching institutions to adopt the use of case studies, which are a pattern similar to residency, requiring physicians to work through real cases in problem-solving.

What should we do about the “grey zone?” 

How much of this 10% “grey zone” should you expect to admit locally?
And how do you actually achieve this potential?

Our Experience

HMD confirmed the Macy Foundation’s conclusion through our experience. We recruited a board-certified FP physician as a HM who worked in a large urban tertiary hospital. At the time, we and our client believed that this physician would be well qualified for the smaller CH since he had experience in an urban hospital HM service. However, this physician’s acceptance rate of local admissions from the ED was unusually low compared to his peers and our expectations. Following months of agonizing discussions with his peers, the entire group met to discuss case studies based on seven patients. Unbeknownst to the group, all seven patients had been transferred. After the discussions, each physician agreed that every one of these patients could have been treated locally.

The highly “risk-averse” HM agreed that discussing these cases with his peers enabled him to gain the knowledge and confidence he needed to be comfortable with treating these patients locally. He knew the science of medicine but his limited experience with these cases and working alone in the CH prompted him to “second guess” and play the “what if” scenario. We realized, upon reflection, that our initial misjudgment of him should not have been surprising since his role at the urban hospital was to attend less risky conditions with low acuity.

Where wide variation exists among a few physicians in a CH, the continuity and consistency among them will be insufficient for quality care. In our experience, this variation is a leading cause of loss of local admissions through the ED. Further, the unique risk tolerances of all physicians further limit the conditions and acuities a physician is willing to treat alone. The net effect is that your maximum local admissions are determined by the limitations of specific physicians with unique skills, experiences, and risk tolerances.


We have identified some of the conditions that impact financial success. How do we avoid these conditions in the future? Choose the right doctor. The success of the CH should not be left to the selection of EM and HM physicians responsible for generating much of the CH’s revenue based on similar work experiences on their CV. The CV tells nothing about their medical decision skills and judgment. Our selection process makes use of actual case studies to try to better match the treatment requirements of the CH to physician prospects and acquire physicians that are effectively “equivalent”.


Furthermore, the perspective of the EM physician is to move patients quickly out of the ED into either a home setting or into an inpatient medical unit. The fast pace of peak times in a small ED requires an EM physician that is conditioned to take the time to comprehensively assess “grey zone” patients to determine the appropriateness of a local admission. Standardization of (1) the processes for medical decisions and treatments, (2) physician and nursing staff workflows, and (3) development of checklists for critical activity and events can limit the stress of spending sufficient time on comprehensive assessments.

One Solution™

HospitalMD™ (HMD™) is a hospital-based EM and HM physician practice. We understand these relationships and motivations that lead to limited success. We have created a new practice model designed to address these deficiencies. We have learned to analyze the “grey zone” (local admissions, observations, and transfers) by primary and secondary diagnosis, and by EM, HM, and PCP, to determine revenue potential.

With our ability to establish an objective and predictable forecast of potential, we are able to achieve the forecast revenue potential because we have selected physicians with the right skills and experiences. These physicians are taught through the use of case studies that are designed to replicate the local admission requirements to treat 90% of the diagnoses that fit the scope of services. All physicians are credentialed to provide EM and HM services. These physicians become “equivalent” and work interchangeably within an integrated EM and HM service.

In effect, we achieve the Right Physician, at the Right Place, and Right Time.