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How the Freestanding Emergency Department Boom Can Help Patients

Article · October 24, 2016

One of the fastest-growing trends in health care is not happening on a hospital campus or a smartphone, but at your neighborhood shopping center, next door to Starbucks.

Freestanding emergency departments (FSEDs) — EDs not attached to a hospital — first surfaced during the 1970s. Their purpose was to provide emergency services to rural areas that could not financially sustain a hospital. Until recently, the idea of an FSED in suburbia was almost inconceivable. But FSEDs are now proliferating, thanks to cheaper, faster innovations in advanced imaging and testing; an almost insatiable demand for immediate, 24/7 access to care; and, of course, the potential for profit. The growth of FSEDs has been so fast in some states — more than tenfold within 5 years in Texas (Colorado is catching up) — that it’s not uncommon to find two FSEDs within sight of each other.

Nationally, 323 hospitals operate 387 FSEDs, a 76% increase from 2008 to 2015. The majority are in Texas, Colorado, and Arizona — states that do not require a license-seeking FSED to meet “determination of need” regulations. Such regulations aim to prevent service redundancy and ensure that other local care providers will not suffer financially from competition.

Another 172 FSEDs are owned independently, by 17 for-profit entities. These FSEDs (90% located in Texas) are not permitted to participate in Medicare, Medicaid, and TRICARE because they are not “outpatient departments of an acute care hospital” and, therefore, not subject to relevant federal regulations. Many independent FSED companies are affiliating with hospital systems or building their own hospitals in order to meet federal requirements, accept ambulances, and care for all patients regardless of their ability to pay.

How Freestanding EDs Work

FSEDs are not retail medical clinics or urgent care centers.

Retail providers perform some very basic testing (e.g., blood pressure, blood sugar, strep throat), but they usually offer no radiology services and are staffed by advanced practice providers (APPs), such as nurse practitioners or physician assistants. They are also strategically located in pharmacies or stores where patients are likely to purchase products that the clinics recommended. Urgent care centers (UCCs) have capabilities that vary widely by town and by state, ranging from those that offer advanced testing and therapeutics and are staffed by various physician specialties to those that have almost no testing capabilities and are staffed by APPs. Neither retail clinics nor UCCs are typically open 24/7, as an FSED is.

Like a hospital-based ED, an FSED provides, at minimum, 24/7 access to an emergency physician, an emergency nurse, laboratory and radiology technicians, moderate-complexity blood testing (much more than BP, blood sugar, and strep testing), and advanced imaging such as computed tomography and ultrasound (in addition to X-ray). And FSEDs can care for most emergent illnesses, including heart attack, stroke, and minor trauma.

But unlike hospital-based FSEDs, which receive 10% to 40% of their patients by ambulance, more than 95% of FSED patients are walk-ins, and very few require hospital admission (<5%, vs. 15–35% for hospital-based EDs). It is a rare FSED that can observe a patient overnight; most transfer patients to a full-service hospital for any emergent subspecialty need, an operation, or hospitalization (more on that later).

The Current Debate

Like most innovations, FSEDs have supporters and detractors. Advocates highlight that FSEDs boast little or no wait times, convenient locations, and very high patient-satisfaction scores. Studies show that FSEDs can achieve hospital-level quality of care, even for the most serious, time-critical conditions, such as heart attack and stroke.

But with booming growth comes the legitimate concern that FSEDs could exploit the health care marketplace. After all, FSEDs can charge the same fees with a fraction of the overhead costs required to run a full-service hospital. Low overhead plus high fees equal big opportunity for profit. And for the FSEDs operated by hospitals, it’s an opportunity to maintain quality and continuity of care across all sites as they keep the patient in their network.

Some argue that charging hospital-type fees for a small, freestanding facility is unfair — fees that are invisible to people with traditional insurance but downright startling to those who have high-deductible plans or pay out of pocket. (These fees are similar to those charged by any ED, but somehow they have generated much more disquiet.) Detractors also contend that FSEDs’ convenience and efficiency may steer patients away from lower-cost primary care (even for minor conditions), thereby further escalating costs and fragmenting the care continuum. In addition, some say that UCCs could provide many of the services offered by FSEDs and that the often prominent “emergency” signage on FSEDs may be insufficient to visually distinguish them from UCCs for prospective patients.

Arguments on both sides have merit. But given that existing FSEDs offer high-quality services that patients want, policy makers and other health care leaders should consider the overall value that FSEDs could bring, before dismissing them as transient pots of gold in a dysfunctional marketplace. Here are four possible sources of value from FSEDs that, if cultivated responsibly, would disrupt health care delivery in a way that better serves patients.

1. Pioneer new pricing and payment models. In most EDs, freestanding or hospital-based, patients are charged emergency-level facility and professional fees whether they present with a sore throat or a stroke. In Minnesota, AllinaHealth’s freestanding WestHealth facility prices minor and emergency conditions separately, so that patients with a sore throat don’t get charged a facility fee at all. That’s not as ideal as first seeing a PCP for a sore throat, but if such patients end up seeking emergency care, at least they avoid the unnecessary fees.

By taking advantage of their lower overhead costs, FSEDs are well positioned to pioneer pricing and payment models that will help them deliver high-quality care while remaining profitable, growing their market share, and saving both patients and payers money. And when they are part of a larger health care system, FSEDs ensure that their patients stay within the care continuum.

2. Become a gateway to targeted care. Within the fragmented health care system, FSEDs can efficiently connect patients with needed care closer to where they live. In hospital-based EDs, roughly 75–85% of patients are discharged home. For the patients who do require hospital care, FSEDs can get them to the right hospital for their needs, rather than whichever one is closest to home.

Kaiser Permanente has embraced an FSED-like model in the mid-Atlantic region with its Clinical Decision Units, where patients are encouraged to visit first and, if required, are transferred to a hospital whose expertise matches their specific needs, such as stroke care, cancer care, or simply observation. The result: They get services where and when they need them.

3. Offer an alternative to hospitalization. Hospital admissions make up a third of all U.S. health spending. At least 10% of hospital admissions are for patients with conditions, such as pneumonia, that require care and observation but don’t require a hospital admission with its full array of services, such as in-house specialists or operating rooms.

To serve such patients, University of Colorado Health has partnered with Adeptus Health, a publicly traded, for-profit operator of FSEDs. Together, they have integrated FSEDs and, soon, “micro-hospitals” into the UC Health System. The micro-hospitals will offer patients initial emergency care, observation, and short-stay admissions in a lower-cost environment close to home, while still being fully connected to the larger system of care with the same electronic medical record. And all of the FSEDs and micro-hospitals are equipped with telemedicine services to offer consultations with hospital-based specialty physicians, without the time and costs of transportation to the hospital.

4. Partner with primary and specialty care providers. The ED is often seen as the hospital’s front door. FSEDs could reposition the ED as the “porch” to the medical home — a 24-hour extension of the outpatient clinic rather than a revolving door to the inpatient ward. FSEDs can provide hospital-level services in outpatient, even home-based, settings.

Consider the example of ReadyMed Plus, a unique facility — essentially, an ultra-UCC, similar to an FSED — in Worcester, Massachusetts (a state that does not allow FSEDs). ReadyMed Plus partners with local specialists, including oncologists, and the local cancer center. It recently began offering appointments for intravenous medication infusions, under the direction of the referring doctors, that would typically be administered at a hospital-based infusion center. By partnering with primary and specialty care providers in creative ways like this, FSEDs could strengthen their ability to safely care for patients closer to home and without admitting them to the hospital.

As the U.S. strives for more-efficient, lower-cost, higher-quality health care, we need innovators that are willing to experiment with new payment models, delivery systems, and care processes. Hospitals, with their thousands of employees, entrenched cultures, and high fixed costs, might be the least nimble players in all of health care. Let’s not close the door on an innovative, potentially disruptive model like freestanding EDs. Instead, let’s recognize what they do well — timely, high-quality care, close to home — and figure out how they can complement, rather than compete with, the overall care-delivery system.


This article originally appeared in NEJM Catalyst on February 18, 2016.

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