The Affordable Care Act has expanded coverage and increased demands on the health care system. In many states, patients without a regular source of care are defaulting to emergency departments as their touch point in health care, even though coverage expansion holds the promise to create more-stable and appropriate primary care options. At the same time, in many states such as Texas, Ohio and Colorado, freestanding EDs and urgent care centers are growing like wildfire, worrying critics that cherry-picking will undermine the economics of emergency medicine for many community providers. Where are we headed with emergency care?
Emergency and urgent care
Across America, there is a wide and growing array of ambulatory care options for urgent or emergency care. According to industry sources, there are more than 5,000 hospital EDs, 10,000 urgent care centers, 5,000 ambulatory surgery centers, 2,800 retail clinics and more than 500 freestanding EDs (a phenomenon we will focus on in detail below). This growth in options reflects a broader shift to the ambulatory environment enabled by technology (such as rapid recovery anesthesia) and by consumer preference for rapid treatment in convenient locations.
With the passage of the Affordable Care Act, ED activity seems to have increased across the country. Overall in the United States, the number of ED visits per 1,000 people annually has increased from 350 to approximately 434 in the last 20 years. Nationally, the promise of the ACA was that providing health insurance would dampen the use of EDs because newly insured patients would have access to a regular source of primary care, but this promise has not been completely fulfilled.
Medicaid recipients are largely immunized from the higher out-of-pocket cost of ED visits experienced by exchange or commercially insured patients, and this may lead them to seek routine care in the ED more often. While there is evidence that (over time) primary care options are put in place for the newly covered under Medicaid and through exchanges (see an excellent review by Deloitte), the experience of most provider groups I talk to is that ED use is up, driven largely by Medicaid expansion. We are not going to litigate that particular argument here; suffice it to say there is scholarly research being developed to analyze both the short-term and long-term effects of coverage expansion on sources of care. Stay tuned for a definitive history five years from now.
I became interested in the changing landscape of ED use following a Martin Luther King, Jr. Community Hospital board discussion. I have the honor to sit on the hospital board in Los Angeles and I am very proud of the work CEO Elaine Batchlor, M.D., and her colleagues have done in successfully opening a new community hospital in a unique public-private partnership with Los Angeles County, the regents of the University of California, UCLA and an independent nonprofit community hospital board (a topic for a future column).
The hospital is doing really well and, in particular, its ED is providing its underserved community a vital element in a high-quality health care system.
Wally Ghurabi, M.D., a distinguished UCLA emergency department physician, is the chief of staff. Ghurabi’s group serves not only the ED at Martin Luther King but also UCLA’s Nethercutt Emergency Center in Santa Monica (thereby nobly treating the whole range of socioeconomic populations in Southern California). Martin Luther King opened just over a year ago but now sees 70,000 ED visits per year.
Ghurabi told me in an interview that this growth is bimodal. At one extreme is a significant group of patients who could be treated by primary care. At the other extreme, a significant proportion of patients are extremely sick — many with psychiatric and behavioral health issues, or with severe untreated diseases such as diabetes and hypertension. Patients are attracted to the new hospital because of its emerging reputation for quality and service and because of its location in the heart of a community with a history of limited access to primary and specialty care.
I asked Ghurabi during our board conversation about freestanding EDs. (California is the only state that prohibits outright freestanding EDs through its stringent regulatory environment for ED status.) Ghurabi is a veteran ED physician who has trained many residents and fellows in emergency medicine in the United States and has a keen understanding of all ED trends in California and the nation. In an interview, Ghurabi provided his perspective on what is happening across the country with urgent care and freestanding EDs.
Urgent care centers
Ghurabi explained that urgent care centers are usually open from 8 a.m. until 10 p.m. (California urgent care clinics cannot keep patients over 23½ hours in the facility.) Typically, urgent care centers charge at rates that are a third of ED rates. A facility fee is included in the single bill for services rendered in these facilities. They can be almost anywhere, but typically the desired location is in high-traffic areas. (Because this is episodic care, service may be needed by patients only once every few months.) The socioeconomic status of residents near the location is not that important because the goal is volume.
Urgent care centers generally offer basic on-site diagnostic services such as plain film X-rays and minimal laboratory services, like point-of-care testing, with no advanced imaging such as CT scans or MRI. Industry estimates indicate that 20 to 24 patients per day are required to break even. The regulatory barriers are relatively low as urgent care centers need only the same licenses as any medical office or clinic. In terms of hospital referrals, they’re not engaged in high-referral patterns to hospitals unless they’re tied by ownership or geography to a specific health system or hospital partner. Urgent care centers are typically staffed by primary care physicians and nurse practitioners; formal emergency medical training is not required.
Urgent care centers are well-received by consumers in almost every survey I have seen: Patients greatly value the convenience, short waiting time and speedy resolution of episodic care issues. In many parts of the country, urgent care is being systematized into franchise-like offerings. The market leader MedExpress (which was purchased by UnitedHealth Group's Optum in 2015) operates, according to its website, in 15 states and has approximately 200 urgent care centers in those states. The clinics are open 12 hours a day, seven days a week to serve consumers. A relatively low percentage (perhaps as low as 2 percent to 3 percent) of visits result in a hospital admission compared with the 10 percent to 30 percent of visits to a typical hospital ED. The driving force behind urgent care is convenience.
Freestanding emergency departments
A thoroughly researched Health Affairs article by Harvard researchers estimated that there were 400 freestanding EDs operating in 32 states by December 2015. More-recent industry assessments, however, put the number at over 500. Regulations about these facilities vary by state, but only one, California, specifically precludes them.
Texas, Colorado, Ohio, Minnesota and Arizona are the states with the most freestanding EDs per capita. Harvard researchers estimated that if the rate of penetration of these early adopter states is emulated in areas where regulations provide for them, there could be as many as 2,000 of these facilities in the near future.
There are two basic types of freestanding EDs: those affiliated with hospitals that are recognized by the Centers for Medicare & Medicaid Services as being part of a hospital billing number and that therefore can be reimbursed for a facility fee under Medicare, and those that are independent and not recognized by CMS. The latter also tend not to accept Medicaid patients because they cannot bill for the facility fee.
Nationally, according to researchers, 54 percent of all freestanding EDs are hospital-affiliated, while 37 percent are independent. In Texas, however, only 22 percent are hospital-affiliated, and a full 71 percent are for-profit. In Ohio, virtually all the freestanding EDs are hospital-based. In Colorado, the split is 60 percent hospital and 40 percent independent.
According to Ghurabi, freestanding EDs are fundamentally different from urgent care in that they are open 24/7, 365 days a year. And while some have no beds (as in Texas), other states require a small number (typically two to four beds) to qualify for hospital-based charges.
Most freestanding EDs charge standard ED rates. Physicians bill a professional fee, and a facility fee is collected (usually three times the professional fee). The facility fee can be collected by the owner, which can be a professional group, a sponsoring hospital or an investor group depending who is providing the technical services. In some states, new locations require certificate-of-need clearance through which nearby hospitals can veto freestanding EDs by challenging the need.
Again, as with urgent care centers, the desired location is a high-traffic area because the facility provides episodic care. But research has shown that these freestanding EDs are disproportionately in affluent communities where a high percentage of privately insured patients either live or work. Because the charges are so high, the EDs don’t need high volume and depend more on high acuity. The break-even point is a remarkably low eight to 10 patients per day. Typically, freestanding EDs offer more-advanced diagnostic equipment than urgent care centers do, including X-ray machines, labs and CT scanners.
Freestanding EDs are more complex to license than urgent care centers are and require medical practice committees as in a hospital. Referrals from freestanding EDs, though again relatively infrequent compared with those provided by typical hospital EDs, are extremely attractive to the hospital because almost every admission will be a commercially insured patient. Freestanding EDs require staff with formal training in emergency medicine.
Texas is the hotbed of freestanding EDs. Adeptus Health, a for-profit publicly traded corporation, is the oldest and largest provider in the freestanding ED business. Under its First Choice Emergency Room brand, the company has nearly 100 locations in Texas alone, with 52 in metro Dallas (20 of which are in partnership with Dallas health system powerhouse Texas Health Resources), 30 in Houston, seven in San Antonio and five in Austin, according to its website. Parent company Adeptus indicates in its latest 10-Q filing with the Securities and Exchange Commission that it also has active partnerships with HCA, Concentra, Dignity Health, University of Colorado Health and Trinity Health in addition to its joint venture with Texas Health Resources. The 10-Q filing also reveals that over 90 percent of its revenue comes from commercial patients, with Medicare and Medicaid providing a tiny sliver of revenues.
These data seem to support the critique that Ghurabi and many other ED professionals make of the freestanding ED phenomenon: While it is obviously a business that satisfies consumers (particularly commercially insured consumers) and seems to be profitable for investors and physicians, it is clearly an example of cherry-picking through location.
A question of mission
This fact raises some fundamental questions about the future of American health care delivery. On one hand, we want to encourage innovation in health care payment and delivery that serves consumers and patients more conveniently and makes the health care system better, faster and cheaper overall. And we should encourage and celebrate that.
But if we are developing only consumer-friendly solutions targeted at affluent consumers with good health insurance, what are the consequences for those institutions serving less affluent areas or for those institutions with complex, quaternary care, or for research and teaching missions, or for those essential community providers that deliver trauma care, burn units, transplantation, and complex chronic disease and behavioral health services?
I think we should be careful that freestanding emergency departments do not become a metaphor for the health system more broadly. Namely, if the best way to survive and flourish economically and to serve most consumers with convenience and high quality is to avoid the poor, the sick, the vulnerable and the infirm, such practices challenge the mission of many health systems across the country and will heighten in stark relief the tension between market forces and mission-oriented health care.
Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN Daily and a member of Speakers Express.
The opinions expressed by the author do not necessarily reflect the policy of the American Hospital Association.