Emergency Department

The Effect Of Free-Standing Emergency Departments

Freestanding emergency departments can provide emergency care in locations not immediately served by emergency departments contained in a hospital and in theory, this should improve access to healthcare, particularly in rural areas.  However, there are hidden costs of freestanding emergency departments that can lower the overall value of healthcare in the community.

Beginning in 2004, Medicare allowed payment for services provided at freestanding emergency departments. By 2016, there were 566 freestanding EDs, almost all of which were in metropolitan areas. In contrast, there are about 7,000 urgent care centers and 2,800 retail clinics (generally in pharmacies). A major difference between freestanding emergency departments versus urgent care centers is the availability of more advanced imaging and laboratory testing and this results in higher costs per visit for any given medical problem in freestanding emergency departments as shown in this graph of data from Colorado.

As opposed to hospital-associated emergency departments, freestanding emergency departments do not accept trauma patients and the patients seen have an overall lower acuity. Data from Medicare indicates that in freestanding emergency departments, 44.7% of patients are low acuity (acuity level 1 or 2) whereas in hospital-associated emergency departments, only 11.0% of patients are low acuity. In contrast, hospital-associated emergency departments, 60.0% of patients are high acuity (acuity level 4 or 5), whereas in freestanding emergency departments, only 15.4% of patients are high acuity. The vast majority of patients who go to freestanding emergency departments are walk-ins (95%) as opposed to arriving by emergency squad. Furthermore only a very small percentage of patients at freestanding EDs require hospital admission (<5% as opposed to 15-35% at hospital-associated EDs). In other words, the patients are less sick and less likely to be brought by emergency squad.

Freestanding emergency departments are most commonly located in high-income areas. The three states with the largest numbers of freestanding EDs are Colorado, Texas, and Ohio. In an article from The Annals of Emergency Medicine in 2017, it was found that freestanding emergency departments were considerably more likely to be located in high-income ZIP code areas with a greater percentage of the population covered by commercial health insurance compared to those ZIP codes without freestanding EDs. Thus, freestanding EDs are located in areas with the best payer mix.

An article from 2017 found that for every additional freestanding ED in a county, the cost per Medicare beneficiary increases by $55 per person. This is consistent with other studies that have shown that if there is a hospital in a county, the overall Medicare costs per beneficiary goes up – in other words, if there is more access to healthcare in an area, there is more utilization of healthcare resources.

There are 9 acute care hospitals in Central Ohio (green dots). In addition, there are 9 freestanding emergency departments (red dots). The free standing EDs tend to be more in the suburban areas as opposed to the central city area where the acute care hospitals are clustered. The are also located in the areas with the highest income density, that is population density x average income (darker brown shaded ZIP codes).  In 2 cases, there is a freestanding ED in close proximity to an acute care hospital – in both cases, the freestanding ED is owned by a different hospital system than the acute care hospital resulting in local competition for ED patients.

Advocates for freestanding emergency departments state that they bring healthcare resources to areas not served by hospital-associated emergency departments. This map indicates that this is generally true but they are located in high income areas close to the I-270 outer belt where they can intercept patients coming from rural areas not served by emergency care and then direct those patients to a hospital owned by that health system for admission or further testing. Advocates also state that freestanding EDs can reduce wait times in local emergency departments and improve patient satisfaction. These statements are likely true.

The downside of freestanding emergency departments is that they increase overall healthcare costs by making it easier for patients to go to an ED than to seek alternative sites of care for acute medical problems. In Central Ohio, they are located in suburban areas with high income and in high penetrance of commercial insurance. The result of this is that hospital-associated emergency departments will increasingly see a greater percentage of patients who are lower income and have a lower payer mix (Medicaid and uninsured) and will become less profitable than the freestanding emergency departments. From a business standpoint, freestanding EDs are a great business decision – they are placed where they can improve a health system’s access to people with the highest income. But from a society standpoint, they do not improve the overall access to healthcare to the majority of people.

April 29, 2018

By James Allen, MD

I am a Professor Emeritus of Internal Medicine at the Ohio State University and former Medical Director of Ohio State University East Hospital