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Rapid Growth of Freestanding ERs Raises Cost Concerns

Speedy care comes at a steep price (July 15)

According to a new report from the Kaiser Family Foundation, freestanding emergency rooms (ERs), which are springing up in many states, including Texas, Florida, and North Carolina, offer speedier care, but at a steep price. Stand-alone ERs, which are often located near high-end shopping centers and target consumers with private insurance, bill like regular ERs — and those prices, which can exceed $1,000 for a single encounter, are causing worries that the rapid growth of the facilities will lead to higher insurance premiums.

Nationally, the number of such centers has doubled to more than 400 in the past 4 years, according to data from the American Hospital Association and state health agencies. “It's a great added benefit [for patient convenience], but I think it will lead to overall higher costs for everyone,” says Vivian Ho, a health economist at Rice University in Houston.

Nowhere is the trend hotter than in the Houston metropolitan area, with 41 freestanding ERs and 10 more under development. Many of these facilities are owned by ER doctors. Like hospitals, the docs see them as more profitable than urgent care centers, which are not designed to handle life-threatening conditions, such as chest pain, difficulty breathing, or severe bleeding.

While the freestanding ERs charge insurers double or triple the amount per patient as an urgent care center or doctor’s office, patients use them for routine care that could be provided in less costly settings, Ho says. That’s the case with standard ERs as well.

Insured patients have little incentive to drive past the more expensive, stand-alone ERs because their co-payment is only $50 or $100, just modestly more than what it might cost for a visit to an urgent care center or a doctor’s office. Generally, their insurers pay the balance.

“If the centers were being truly used for emergencies, it would be one thing,” says Alan Ayers, vice president of market development at Concentra Urgent Care, the nation’s largest urgent care chain. “But here you mostly are just adding cost to the health care system because a high percentage of the cases could be treated in urgent care.”

He says the doctor-owned freestanding ERs look like urgent care centers — until patients see their bills.

The main reason these centers are more costly than urgent care is that they charge a “facility fee” on top of a fee for the physician's time — just like traditional ERs. The facility fee was originally intended as a way to help hospitals recoup overhead costs, including 24-hour staffing, administration, and equipment.

Worried that insurers will eventually cut payments to free-standing ERs unaffiliated with hospitals, some facility owners in the Houston area are converting their centers into “micro hospitals,” with a few beds that treat patients, such as those needing drug detox or hospice.

Shara McClure, a vice president at Blue Cross and Blue Shield of Texas, observed: “When they build it, people will come and use it. But they need to know it’s not free.”

Source: Kaiser Family Foundation; July 15, 2013.

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