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Special Report: Insured Patients Flock to Freestanding EDs While Hospital EDs Feel the Financial Pressure

Shaw, Gina

doi: 10.1097/01.EEM.0000508277.01064.0f
Special Report
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Freestanding emergency departments are growing rapidly across the United States, increasing from 222 in 2009 to 360 across 30 states as of March 2015, according to a recently published study. (Ann Emerg Med 2015;66[4]:S3.) The researchers, using a ZIP code analysis, found that these EDs in the three states with the highest concentrations of freestanding EDs — Texas, Colorado, and Ohio — were located in areas with population growth, higher incomes, a higher proportion of the population with private insurance, a lower proportion of the population with Medicaid, and more hospital EDs. This also raises questions of access to care and how it will affect hospital EDs, which increasingly are losing paying patients to these facilities.

Meanwhile, at least 45 hospitals in less populated parts of the United States shut their doors between 2010 and 2016, a quarter of those in Texas, according to the Texas Organization of Rural and Community Hospitals.

The Annals researchers, led by Jeremiah Schuur, MD, MHS, the vice chair of clinical affairs in emergency medicine at Brigham and Women's Hospital, found that 54.2 percent of freestanding EDs nationwide are owned by or affiliated with hospitals, while 36.6 percent are independently run by physician groups or other entrepreneurs. Some 45.3 percent of freestanding EDs were for-profit; 43.9 percent were non-profit.

This proportion varied significantly by state, however. Only 22.1 percent were owned by or affiliated with hospitals and 71.3 percent were for-profit in Texas, for example. The freestanding EDs are more likely to be located in ZIP codes with existing hospital EDs. All but one of Ohio's 34 freestanding EDs, by contrast, were affiliated with hospitals, only 5.8 percent were for-profit, and they were more likely to be located in areas without hospital EDs. Colorado was more evenly divided: Nearly 46 percent of its 24 freestanding EDs were affiliated with hospitals, and 61.9 percent were for-profit.

“Since independent, freestanding EDs are more likely to see themselves as competitors to hospital EDs, it makes sense that in Texas — where the majority of them are independent — that they are more likely to be located in the same ZIP code with hospital EDs,” Dr. Schuur said. “In Ohio, more of them are either owned by or very tightly affiliated with hospitals, and they may be less likely to open up a freestanding ED in a location that's so directly in competition with a hospital ED.”

Freestanding EDs have experienced so much growth since 2009 that they now have their own trade association, the National Association of Freestanding Emergency Centers, which held its first annual conference in 2015.

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Blurred Lines

The American College of Emergency Physicians refers to freestanding EDs that are affiliated with hospitals as “hospital outpatient departments” or HOPDs, and independently owned freestanding EDs as “independent freestanding emergency centers” or IFECs. But the distinctions between hospital-owned vs. independent freestanding EDs and for-profit vs. not-for-profit are becoming more blurred, said Dr. Schuur.

“At one point, there was a fairly clear distinction between hospital-owned freestanding EDs and those that were independent and privately-owned. Most of the hospital freestanding EDs were on the larger side and more likely to accept ambulances and have other features that were more typical of a hospital emergency department,” he said. “They just weren't located in the hospital. Independent freestanding EDs tended to be smaller — one nurse, one doctor, one tech, much lower volume, and unlikely to accept ambulances.”

Some of the independent freestanding EDs have sought affiliation with hospitals in recent years, although they still may not necessarily be owned by the hospital or bill under the hospital's Medicare number. “And hospitals have been more likely to open their own smaller facilities as they've seen the market evolve. There are more gray areas,” Dr. Schuur said.

And the lines between hospitals and for-profit freestanding ED operators are also becoming increasingly indistinct. University of Colorado Health announced a joint venture in 2015 with freestanding ED behemoth Adeptus Health, Inc., which operates facilities in Colorado and Texas. UCHealth has majority ownership of the 14 First Choice freestanding EDs run by Adeptus in the state (at press time, only in and around Denver and Colorado Springs). They've been rebranded as UCHealth ER. “Partnering with Adeptus Health allows patients to receive care in a more convenient way while also offering seamless transfers to hospitals for patients who need hospitalization,” said Elizabeth Concordia, UCHealth's president and CEO, in a statement at the time.

Adeptus inked a deal with Columbus, Ohio-based Mount Carmel Health System in February to seek sites for several freestanding EDs. (Mount Carmel already has a handful of freestanding EDs of its own.) And Adeptus entered into a joint venture with Texas Health in May for a group of 25 acute and short-stay hospitals in North Texas. Adeptus' 27 First Choice facilities in North Texas and its First Texas Hospital in Carrollton will become aligned with Texas Health under the agreement.

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Cost and Care

“As many EDs nationwide experience crowding and long wait times, especially those in urban areas, freestanding EDs offer the potential to improve access to emergency care,” said Dr. Schuur. “But in the states with the most freestanding EDs, it seems less likely that they will expand access to underserved populations as they are preferentially located in areas where people had more available health services, higher rates of private health insurance, lower rates of Medicaid, and higher median incomes.”

Ron Hellstern, MD, a Dallas emergency physician who is the president of Medical Practice Productivity Consultants, has written extensively about physician/investor-owned freestanding emergency departments. He noted that he passes at least seven such facilities between his home and a nearby lake where he keeps a boat. He said he is worried that patients with better health insurance coverage and the ability to pay who are wooed to these freestanding EDs will significantly increase the reimbursement pressure on hospital-based emergency departments. “Hospital-based emergency medicine, especially trauma care, has historically been paid for, to a certain degree, by patients like these with insurance who are used to cost-shift to cover the cost of care for the un- and under-insured,” Dr. Hellstern said.

Another drawback to freestanding EDs is their cost. Some patients who visit them have complained that they didn't realize they would have to pay the same kind of “facility fee” charged by hospital-based EDs. A July 2016 analysis by the Colorado-based Center for Improving Value in Health Care (CIVHC) suggested that many patients may erroneously see freestanding EDs as more like urgent care centers. They found that seven of the top 10 reasons for freestanding ED visits in Colorado in 2014 were non-life-threatening events like colds, sore throats, and ear infections. By contrast, only three of 10 hospital-based ED visits were nonemergent.

The CIVHC analysis also found that the cost of treatment for the same condition at an emergency facility — whether freestanding or hospital-based — exceeded the rates at an urgent care center by $400 to $800.

Legislation passed by the Colorado House of Representatives in April 2016 would have required freestanding EDs to post signage making it clear to patients that they are not visiting an urgent care facility but an ED — with ED-level charges. But the bill died in the Senate in May. Colorado resident Richard Marshall, who testified at a hearing in support of the bill, told legislators that his family owed thousands of dollars, even with insurance coverage, after visiting a freestanding ED twice in one month. “The total bill was $8,000. That didn't include the doctor's visit, which was an additional $575 for the physician,” he said.

The Texas legislature did manage to pass a similar law in its last session, which requires these centers to post notices that they are emergency departments and will charge like them. A requirement that centers notify the patients when costs exceed $1,000 was cut from the final version of the bill.

Some freestanding EDs are trying to develop their own solutions to this problem. The freestanding WestHealth facility owned by Allina Health in Plymouth, MN, is actually a combined urgent care and ED. Minor conditions and emergency conditions are priced on separate schedules, with no facility fee for urgent care.

And some freestanding EDs affiliated with hospitals are built for the express purpose of easing volume at the primary ED site. Nationwide Children's Hospital in Columbus, OH, is building a freestanding ED at a hospital in Lewis Center, about 20 miles from its main campus. About 9,000 of the more than 87,000 pediatric patients who visited the ED at Nationwide Children's in 2015 live within five miles of the Lewis Center location, Patty McClimon, the hospital's senior vice president for strategic and facilities planning, told the Columbus Dispatch in February.

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The Lure for Physicians

Many emergency physicians have been drawn to freestanding ED practice by the frustrations and burdens of the hospital-based emergency department, Dr. Hellstern pointed out. “The ED has become a dumping ground for all the problem areas in health care: the truly uninsured, the underinsured, patients without access to primary care, and other specialty deficiencies, most notably psychiatric patient care.”

Unlike many other specialties, he added, hospital-based emergency physicians often have very little input in the operation of their practice. “Patient volumes are up, reimbursement is down, and specialty backup is evaporating for uninsured patients. The stress level of practicing in the hospital has gone up exponentially,” Dr. Hellstern said. “Emergency medicine has historically been a young person's specialty, but it's even more so today. With the average age of board-certified ED physicians increasing, it's no surprise that they are looking around for a more manageable alternative.

“The freestanding ED offers them the ability to have input on practice operations and even own the practice, with a better clientele and lower volume. When they call a specialist for backup, they arrive in an instant for a paying patient. It's not surprising that many emergency physicians are making this choice based on the hospital conditions they're working under.”

In addition to cross-subsidization of care, Dr. Schuur said hospital ED leaders worry about the impact of freestanding EDs on their staffing. “It's much harder to retain staff with the growth of these facilities drawing away experienced nursing and physician staff,” he said. “On the other hand, people who operate or work in freestanding EDs suggest that they are providing high-quality service to the people who choose to go there, and that they may actually help alleviate crowding in hospital EDs.”

But Dr. Schuur has a broader concern: the impact of freestanding EDs on integration of the overall emergency care system. “The conditions for which we've documented dramatic improvements in outcomes for emergency care are areas where we've coordinated care: emergency medical services to the ED, trauma, cardiac care, inpatient care and transitions out of the hospital,” he said. “My question is, are freestanding EDs contributing to that integrated emergency care? Are they creating some separate system that's in parallel, that's equal, or is it potentially better or potentially not as good? I don't think we know that yet.”

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