A team of researchers at Rice University investigated the relationship between the number of freestanding emergency departments (FSEDs) and local market spending on emergency care. They found that, while FSEDs may reduce wait times in overcrowded emergency departments (EDs), the increasing number of FSEDs into the local market might also increase emergency care usage and overall spending.
In their findings, published in Academic Emergency Medicine, the team found that FSEDs increased local market spending on emergency care in three out of the four states’ markets they have already entered.
FSEDs deliver emergency care in strip malls and in other facilities that are physically separate from acute care hospitals. Freestanding EDs first emerged in the 1970s to fill the need for emergency care in underserved rural areas that could not financially sustain inpatient hospitals, but FSEDs are now popping up primarily in urban and suburban areas.
Proponents claim the FSEDs can reduce overcrowding at hospital-based ED waiting rooms. Others worry that introducing additional freestanding EDs will inflate costs, and surprise patients with unexpectedly high bills not covered by their insurance.
In a recent brief, UnitedHealth Group detailed how FSEDs cost significantly more than physician offices or urgent care centers for common, non-emergent conditions. UnitedHealth Group also noted that consumers do not always realize that FSEDs cost more. In fact, a number of consumers now report receiving high bills for care from a freestanding ED — sometimes as much as double the amount in a hospital ED or as much as 20 times that of a regular doctor’s office.
“Consumers mistakenly thought that freestandings would be low-cost because they look so much like a neighborhood clinic, and facility staff often told patients that their care would be covered by their health insurance, when in fact it wasn’t,” said lead author Vivian Ho, who serves as the James A. Baker III Institute Chair in Health Economics and director of the Center for Health and Biosciences at Rice’s Baker Institute for Public Policy. Ho is also a professor of economics at Rice and a professor of medicine at Baylor College of Medicine.
Ho and her team of researchers from Rice University wanted to determine whether FSEDs increase spending, which would suggest that freestanding emergency departments might serve well as supplements, rather than substitutes, to traditional EDs.
Rice participates in the Blue Cross Blue Shield Alliance for Health Research, which helps researchers collaborate and explore critical issues in healthcare. This collaboration allows researcher to access HIPAA-compliant data from Blue Cross Blue Shield Axis, which is the nation’s largest collection of medical professional data, commercial insurance claims, and cost of care information.
Using a secure portal, the researchers accessed the de-identified claims data from FSEDs in Arizona, Texas, North Carolina, and Florida. The researchers chose these four states because while freestanding emergency departments have a relatively large presence there, the states had also experienced a significant increase in the number of FSEDs entering the markets there.
The investigators aggregated the information on ED spending at hospitals and FSEDs into 495 different local markets, known as Public Use Microdata Areas (PUMAs), by quarter and year. The researchers merged the spending data with the number of FSEDs by quarter and year in each PUMA, and by demographic characteristics of the population in each local market.
The team used regression analysis to estimate the association between changes in the number of FSEDs and total spending on emergency care, utilization, out‐of‐pocket spending, and price per visit from January 2013 to December 2017. The researchers adjusted the results with controls for state, quarter, and sociodemographics.
They found that bringing a freestanding emergency department into a local market bumped emergency provider reimbursement by 3.6% per insured beneficiary in Texas, Florida and North Carolina. They found no change in spending with the entry of an FSED in Arizona.
The team also found that entry of an additional FSED increased ED utilization in Texas, Florida and Arizona by approximately 3 to 5%. There was no such increase in ED utilization associated with the entry of an additional freestanding ED in North Carolina.
The researchers calculated a 3.6% increase in out-of-pocket payments for emergency care with the entry of an FSED into the local market in Texas, Florida and Arizona. These out-of-pocket payments declined by 15.3 percentage points in North Carolina.
“Health care continues to account for an increasing share of the U.S. economy, and emergency care spending as a share total health care costs is also rising,” Ho said. “Therefore it is troubling that in three of four states, entry of freestanding emergency departments results in higher spending, which may not yield significant health benefits. Given that previous studies suggest that much care provided by freestanding emergency departments could be delivered in lower-cost settings, policy makers should carefully regulate entry of these providers as well as their billing practices.”