Freestanding Emergency Departments Might Drive Up Medical Costs

Published: Monday, February 10, 2020 - 5:05am
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Proponents have hailed freestanding emergency departments (FrEDs) as faster, more convenient alternatives to crowded hospital emergency departments.

But a new study of 495 populous census areas across Arizona, Florida, North Carolina and Texas suggests FrEDs might in fact drive up costs. Together, the four states account for more than 20% of the U.S. population.

The research, which appears in the journal Academic Emergency Medicine, suggests policymakers, consumers and providers pay closer attention to the costs and usage patterns associated with FrEDs, which today number in the hundreds across 30 states, most notably Texas, Ohio and Colorado.

FrEDs provide emergency care in facilities not physically connected to hospitals, although they are often satellites of major healthcare providers. Of the four states studied, only Texas allows independent FrEDs.

Unlike urgent cares, freestanding emergency departments (FrEDs), are equipped to treat life-threatening conditions.

Co-author Dr. Murtaza Akhter, an emergency physician and an assistant professor at the University of Arizona College of Medicine – Phoenix, said advocates argued people would use FrEDs instead of hospital-based EDs.

"But it turned out that people may be using them in addition to hospital-based emergency departments. And that's why we think there's actually an increase overall in cost," he said.

Researchers found adding a FrED to a given geographic area of 100,000-plus people drove up provider bills by 3.6 percentage points in Texas, Florida and North Carolina.

Arizona providers did not receive more money. The authors suggested this might result from more aggressive price competition here than in other states, but could not confirm their hypothesis.

However, Arizona, Texas and Florida did have 18% more ED visits.

Adding a FrED also drove up out-of-pocket costs by 3.6 percentage points in Texas, Florida and Arizona.

The paper attributes much of the cost increases to higher utilization, which Akhter said follows the Field of Dreams logic, "If you build it, they will come."

"If I put a Walmart in your neighborhood, all of a sudden you'll start buying stuff that you weren't buying before. Similarly, if I put a freestanding emergency department in your neighborhood, you might use that freestanding emergency department, even though in the past you may have just stayed home."

Money, too, influences where patients receive treatment.

According to the paper, the Medicare payment system incentivizes providers to treat non-emergency patients in EDs instead of urgent care centers, "which are paid less than half the Type A payment rates for ED services."

It also said hospital EDs and FrEDs charge a facility fee for each visit, whereas retail and urgent care clinics or doctors' offices do not. A previous study found prices in Texas for certain procedures ran 10 times higher at FrEDs than in urgent care clinics. Facility fees accounted for more than four-fifths of the difference.

Moreover, Akhter observed freestanding emergency departments and urgent cares alike, far from providing for underserved areas, open instead in wealthier neighborhoods with large insured populations.

"Regardless of what people tell you one way or the other, we know that money plays a big role in terms of when certain healthcare centers open and why they open," he said.

The authors argue FrEDs might still effectively provide timely local healthcare if their owners and insurers could agree to reduce facility fees for non-emergency patients.

In the meantime, Akhter recommends consumers use EDs only in true emergencies.

"If you've got a cough or a cold, go to an urgent care clinic. Because a freestanding emergency department is that – it's an emergency department, and they will bill you as an emergency department would."

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