Freestanding Emergency Departments Can Increase Patient Spending

The research generated three key observations, the lead author of the study told HealthLeaders.

“Entry of an additional freestanding emergency department in a local market was associated with an increase in spending per capita in three of four states. Entry was generally associated with an increase in emergency visits per capita, as well as out-of-pocket spending,” said Vivian Ho, PhD, director of the Center for Health and Biosciences at Rice University’s Baker Institute for Public Policy in Houston.

The research features several data points:

• In local markets in Florida, North Carolina, and Texas, entry of an additional freestanding emergency department resulted in a 3.6 percentage point increase in emergency provider reimbursement per insured beneficiary
• In local markets in Arizona, entry of an additional freestanding emergency department resulted no significant reimbursement change
• In local markets in Arizona, Florida, and Texas, entry of an additional freestanding emergency department increased the number of emergency care visits by 0.18 per 100 insured beneficiaries
• In local markets in North Carolina, entry of an additional freestanding emergency department did not significantly change the utilization rate
• In local markets in Arizona, Florida, and Texas, entry of an additional freestanding emergency department increased the average estimated out-of-pocket payments for emergency care by 3.6 percentage points, but out-of-pocket payments decreased 15.3 percentage points in North Carolina

Interpreting the data

The research is a cautionary tale about freestanding emergency departments (FrED), Ho and her co-authors wrote. “Rather than functioning as substitutes for hospital‐based EDs, FrEDs have increased local market spending on emergency care in three of four states’ markets where they have entered. State policy makers and researchers should carefully track spending and utilization of emergency care as FrEDs disseminate to better understand their potential health benefits and cost implications for patients.”

The utilization findings provide weak support for proponents of FrEDs, Ho told HealthLeaders.

“Some of the observed increase in utilization may have led to increased convenience for patients seeking emergency care. However, the overall increase suggests that FrEDs don’t serve as a substitute for hospital-based emergency care. And other studies in the literature have found that entry of FrEDs do not lower waiting times at nearby hospital emergency departments,” she said.

The spending findings support the claims of FrED critics, Ho said. “The results are consistent with critics’ concerns that FrEDs increase spending on emergency care. FrED operators have come to realize that, ‘If you build it, they will come.’ Other research suggests that much of the care that patients receive at FrEDs could be obtained at much lower costs at urgent care centers.”