Freestanding ERs Find A Home in Wealthy Areas

Five years after Texas became the first state to permit freestanding emergency rooms, more than 160 of the facilities have set up shop around the state — a presence that suburban commuters and health insurers alike are finding impossible to ignore.

Health care experts say the financial success of the freestanding facilities — and the growing bargaining power that comes with it — is leading health insurers to arrange for more of the emergency rooms to be in a patient’s network. That could mean better deals for the Texans who rely on the facilities for quick access to emergency care, mostly in wealthier, suburban neighborhoods.

But it remains to be seen whether freestanding emergency rooms — 24-hour facilities that operate independently of hospitals — will thrive in other markets. Texans in the neighborhoods where freestanding ERs have opened earn 49 percent more income than the state average, according to an analysis of Census ZIP code data by The Texas Tribune.

Many freestanding ERs are part of for-profit chains, owned by doctors and investors, which employ their own staffs and offer walk-in emergency care at free-market prices. Supporters of the business model say that with more of the facilities joining health plans’ networks, and with the growing number of Texans who got insurance under the Affordable Care Act, the businesses are likely to show up in smaller towns and poorer neighborhoods where they can expand needed access to emergency care.

“I think it satisfies a certain need, and as the industry matures, you’re going to see it broaden into more and more communities,” said Daniel Sternthal, a Houston attorney who represents freestanding ERs at the law firm Seyfarth Shaw.

But not everyone is convinced. Freestanding emergency rooms aren’t recognized by the federal government, which means they cannot accept public insurance like Medicare or Medicaid. Unlike public hospitals, freestanding facilities are largely spared the flow of uninsured, poor patients who strain traditional emergency rooms — though representatives for the companies say they are bound by law to treat all patients, regardless of their ability to pay. Some critics say the facilities target wealthier neighborhoods where people are more likely to have private insurance and fewer serious medical complications.

“I think a lot would have to happen for them to go into those lower-income neighborhoods,” said Vivian Ho, a health economist at Rice University’s Baker Institute for Public Policy. “First of all, those patients have to get insurance, and insurance where the freestanding location is in the network.”

The growing clout of freestanding ERs, once considered a disruptive nuisance in the health care arena by hospitals and insurers, has transformed them into an established market force. Experts say that means the industries are increasingly playing ball with each other.

Texas lawmakers this year struck a compromise between freestanding facilities and health insurers with a measure that requires freestanding ERs to prominently display information about their services and how much they cost. That, insurance companies say, will help keep patients out of the emergency room unless they really need it.

“When consumers are empowered with information, they are better able to care for themselves and their families without breaking their bank accounts,” Jamie Dudensing, chief executive of the Texas Association of Health Plans, said in a statement. 

Others see the willingness of health insurers to contract with the freestanding facilities as testament to their popularity. Owners of freestanding emergency rooms boast of shorter wait times compared to their traditional hospital counterparts, and an upscale, “concierge” service model.

“We’re excited about seeing health plans accept freestanding emergency rooms as an actual source and facility for emergency care,” said Brad Shields, executive director of the Texas Association of Freestanding Emergency Centers. “That to me means that you’ve got both sides of the table recognizing the level of care and the quality of care that’s being provided." 

The industry has experienced almost breathless growth in recent years. Adeptus Health, which owns more than 50 freestanding facilities in Texas, reported doubling its revenue, to $211 million, from 2013 to 2014. In July, the company said it had opened 15 more facilities around the country so far this year.

Often marked along suburban thoroughfares by a red lit cross, the emergency rooms can be difficult to miss on the outskirts of big cities. But some consumers face confusion about the services provided — and how much they cost.

Earlier this year, when Nancy Nicolas was woken by the cries of her 3-month-old baby Dori, she drove the child to the nearby Neighbors Emergency Center in Austin.

There, a doctor performed a brief exam on the child and told Nicolas her daughter had a cold. No medicine was prescribed. Weeks later, she got a bill for $522.

Nicolas did not attempt to challenge the expense. But she said she wouldn’t have gone to Neighbors if she had known it was an emergency room — and charged at an emergency room's rate.

“I assumed it was an urgent care [clinic] because I didn’t even realize that freestanding ERs existed,” she said.

Nicolas said that in an actual emergency situation, she would likely choose to go to the emergency room at the nearby children’s hospital.

Still, policymakers say the popularity of freestanding ERs points to a larger change in the 21st century health care market. John Hawkins, senior vice president for advocacy and public policy at the Texas Hospital Association, said hospitals are increasingly opening their own freestanding locations.

"The reality is, certain hospitals are using the same facilities," he said. "It is difficult when certain groups come in and try to niche off certain services."

For many consumers, the appeal of the freestanding ER is the prospect of a short wait at a convenient location.

“It’s a natural outgrowth of this phenomenon with retail health,” said Tom Banning, chief executive of the Texas Academy of Family Physicians. “It’s more about consumers’ desire to access health care on their own terms, and when someone else is paying the bill, they don’t really care.”

Disclosure: Rice University and the Texas Association of Health Plans are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.