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Freestanding EDs in Texas Closing One after Another

Shaw, Gina

doi: 10.1097/01.EEM.0000547194.93772.f4

Ms. Shaw is a freelance writer with more than 20 years of experience writing about health and medicine. She is also the author of Having Children After Cancer, the only guide for cancer survivors hoping to build their families after a cancer diagnosis. You can find her work at

Since the Texas legislature passed a law in 2009 allowing freestanding emergency departments to operate in the state, a virtual tidal wave of FSEDs swept across the landscape.

Fewer than 20 operated in 2010, but that number grew to more than 220 by July 2018, according to Kelli Weldon, a press officer at the Texas Health & Human Services Commission. That growth may have been too much, too fast, however, and the resulting glut now appears to be leading to the closure of multiple FSEDs and the bankruptcy of others.

Mercer ER, a freestanding emergency department (FSED) in Victoria about halfway between San Antonio and Houston, went under this May. FSED giant Adeptus Health, which operated more than 90 FSEDs in five states—including 31 in north Texas—declared bankruptcy in April 2017, citing chronic underpayment by insurance companies. It was later acquired by Deerfield Management.

And as this issue went to press, Neighbors Health, which operates 22 FSEDs across Texas, filed for Chapter 11 bankruptcy on the heels of closing one of its two El Paso locations in April 2017, just as it was opening a new site in Amarillo, which already had four FSEDs. The Amarillo location shut its doors in September 2017. The company has already lined up a buyer for its Houston-area emergency centers, and an auction was set for August 27 for the others.

The boon was perhaps the reason for these FSEDs' demise—too many FSEDs oversaturated the market. A couple of big players built facilities quickly and often geographically close to each other. Some of the big companies also had problems with the revenue cycle, said Carrie de Moor, MD, who launched Frisco-based Code 3 Emergency Partners in 2015 with one FSED and six emergency physicians. Her company has since grown to six FSEDs and eight urgent care centers staffed by 120 physicians. “Honestly, people were building on every corner. To this day I get calls from corporate real estate agents: ‘Don't you want to put an ER on this corner?’ They see that it can make a relatively low income-producing real estate property get more rent,” she said.

What this all means for emergency physicians in Texas remains unclear. Anecdotal reports to Emergency Medicine News suggested that EPs have lost jobs when FSEDs closed, have seen salaries plummet, and have had difficulty finding new positions, but we were unable to verify these claims. “As far as emergency physicians looking for work, we are seeing more coming to us from the big, publicly-traded groups in hospitals than those who lost positions in other FSEDs,” said Dr. de Moor. “There still aren't enough of us to fill the void of how much we're needed in emergency medicine.”

But Cedric Dark, MD, MPH, an assistant professor of emergency medicine at Baylor College of Medicine in Houston and an expert on FSEDs, had a different take. “It looks like the bubble is bursting,” he said, noting that Houston-area physicians had difficulty finding jobs in the area this year because the market has condensed as a result of post-Harvey hospital closures. “We are going to reach the saturation point” for emergency physicians, he said.

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EP Ownership

FSEDs hold wide appeal for emergency physicians. Dr. de Moor said she believes their success is due to its emergency physician ownership structure; all of the 65 invested partners in Code 3 are board-certified emergency physicians.

Like Code 3, ER Now has two locations in Amarillo and seven board-certified emergency physician owners, said co-founder Gerad Troutman, MD. He said he decided to launch them because of the lack of control he felt in a hospital-based ED. “I felt like a hamster on a wheel,” he said. “You try to make things better, and they get bogged down in administration. When I saw the opportunity to be part of an ED that physicians could control, that was exciting.”

FSEDs have been criticized as costly, however, with patients complaining about surprise out-of-pocket and out-of-network charges. One study by Dr. Dark and colleagues found the average price per visit of a hospital-based ED and freestanding ED were similar at about $2,200 in 2015, while the price for urgent care centers was $168. (Ann Emerg Med 2017;70[6]:846; Between 2012 and 2015, the average price per visit at freestanding EDs increased 54 percent, from $1,431 to $2,199. The average price per visit at hospital-based EDs during this period increased 23 percent, from $1,842 to $2,259 while prices at urgent care centers increased only two percent (from $164 to $168) between 2012 and 2015.

Those patient complaints about costs are largely a result of patient confusion about the differences among FSEDs, hospital EDs, and urgent care. Patients have been quite vocal in complaining about high FSED facility fees, perceiving them as urgent care offices instead of thinking of them as similar to hospital EDs that just happen to be freestanding. Texas recently passed legislation requiring FSEDs to post information clarifying the differences. Others have said that FSEDs provide misleading information about their fees and how insurance covers services, but FSEDs that accept Medicare and Medicaid are governed by EMTALA and cannot discuss fees with patients before they are stabilized. Whether this leads to patient backlash and leads to FSED closures remains to be seen.

Dr. de Moor said EPs face a bigger threat from the corporate practice of medicine and being replaced by lower-cost practitioners, such as nurse practitioners and physician assistants, than from FSED closures. “That's what we're seeing more of,” she said. “I've had a number of friends move to the freestanding industry because of fear of bigger groups coming in and taking their contracts.”

She predicted that the market in Texas will continue to consolidate. “But if you look at the success of the smaller, locally-owned groups with emergency physicians in charge, I think that type of model could spread throughout a number of states,” Dr. de Moor said.

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