Freestanding Emergency Departments: Reimbursements & Patient Costs May Surprise You

Freestanding emergency departments may increase utilization rates and emergency medicine reimbursement. Others say they’re raising emergency department costs and should face regulation.

Freestanding Emergency Departments Reimbursements & Patient Costs May Surprise You

Do freestanding emergency departments increase emergency visits or alleviate overcrowding at traditional emergency departments?

The annual number of emergency department (ED) visits rose by 18.4% between 2006 and 2014[*]. So many providers in populated states have decided to meet this increase in demand by opening freestanding emergency departments (FrEDs). But is this trend in ED and FrED use a good or bad thing for insurance providers?

Freestanding Emergency Departments (FrED): by the numbers

More than half of FrEDs (54.2%) are owned by a parent hospital (known as a “satellite”), 36.6% are independent, and 9.2% are not classifiable(*)(*). There are over 350 FrEDs across 30 states(*). And over 90% of FrEDs are located in urban as opposed to rural areas(*). 

Freestanding emergency departments are convenient alternatives to hospitals that help relieve overcrowding and reduce wait times. However, those against them say the cost of doing so isn’t worth the expense.

Do FrEDs Increase or Decrease Emergency Department Costs or Emergency Medicine Reimbursement?

One study analyzed the relationship between the number of FrEDs and overall spending for emergency care[*]. Researchers compared data from EDs in 495 different local markets in Arizona, Florida, North Carolina, and Texas. People in these markets are getting more FrEDs in their areas than others.

They assessed claims and usage to find total spending on emergency care, out‐of‐pocket expenses, utilization, and price per visit from January 2013 to December 2017. 

They learned that having a FrED in the area, or having another one enter the market, was associated with a/an:

  • Increase in emergency department utilization in Texas, Florida, and Arizona between roughly 3% and 5%. Another study showed freestanding ED utilization in Texas alone increased by 236% between 2012 and 2015(*).
  • Increase in emergency provider reimbursement per insured beneficiary by 3.6% in three out of four states (Texas, Florida, and North Carolina). 
  • 3.6% increase in estimated out‐of‐pocket spending per beneficiary in Texas. Keep in mind that spending per enrollee is also much higher in Texas than in other states studied. During the trial, spending per enrollee in Texas grew from $132 to $216, and out-of-pocket costs jumped from $54 to $72. Mean spending per enrollee in Texas was more than twice as high as other states in the study[*].
  • 15.3% reduction in out‐of‐pocket spending per enrollee in North Carolina.
  • 10.1% decrease in the price per ED visit in Arizona.

This data suggests freestanding emergency departments increase local market spending for emergency care in 75% of markets they enter. But this modest rise in spending matched the emergency medicine reimbursement rate. This suggests insurance providers are covering the higher costs associated with FrED usage. But how long will they continue to pay these higher-than-average bills?

And will it continue long enough to help patients decrease medical bills like FrEDs in states like North Carolina and Arizona did?

How to Keep Your ED or Stand-Alone Emergency Department On Everyone’s Good Side

In June 2018, The Medicare Payment Advisory Commission recommended reducing Type A ED payment rates by 30% for satellite EDs within six miles of a hospital‐based ED. MedPAC believes that the current Medicare payment system incentivizes providers to treat lower‐intensity patients in the ED rather than in urgent care centers, which are paid less than half the Type A payment rates for ED services[*]. 

As more FrEDs open, legislation may standardize care or covered services so the use of them doesn’t skyrocket insurance prices. Here’s what EDs can do in the meantime:

Stay competitive. Patients will soon get to price services and compare their options for care. 

In Arizona, aggressive price competition ultimately saved patients and insurers over 10%[*]. Transparent pricing online may save patients and insurers money so reimbursements continue. Aggressive price competition ultimately saves patients and insurers money so they continue to reimburse independent EDs. Patients should know they’re paying a premium at a FrED and understand that they may not receive the lowest cost care.

Post your in-network and out-of-network policies. In-network EDs provide patients with lower prices for services. But most FrEDs are usually out-of-network for patients, which costs them much more. Be as transparent as possible to avoid surprise medical bills and tanking self-pay collections.

Freestanding Emergency Departments Reimbursements & Patient Costs May Surprise You

Reduce expensive visits and facility fees. A recent study found that prices for patients with similar diagnoses were ten times higher at FrEDs in Texas compared to urgent care clinics[*].   

Researchers theorized that if insurers and FrED owners could reach an agreement to reduce facility fees for patients with non-emergent conditions, patients could receive timely and affordable access to care while FrED operators could still earn revenues for filling an unmet need in the market.

Inform patients about alternative care in lower-cost settings at a doctor’s office or traditional ED. Most patients don’t know FrEDs charge a facility fee for each visit. The facility fee originated under the Medicare program and was intended to compensate hospitals for the operational expenses of maintaining an outpatient facility(*). However, facility fees are also charged to patients with private insurance coverage much to their surprise(*). Retail and urgent care clinics and doctors’ offices do not charge this fee.

Despite freestanding EDs increasing local market spending, they can also increase utilization rates and even lower the price of ED visits. 

To gauge the competitiveness of your ED for your market area, click here for a complimentary practice analysis from the experts at DuvaSawko now!

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