The role of freestanding emergency facilities in the health care arena
Freestanding emergency facilities represent a major growth sector in health care today. These facilities, which are essentially emergency rooms not located within the four walls of a hospital, could do much to increase access while lowering costs. While the concept is not new, it has become increasingly popular in recent years as its many benefits have become apparent. Nevertheless, these facilities are not as widespread as one might expect. This may be, in large part, due to the complicated regulatory and reimbursement environment in which they operate. This article will explain the benefits of freestanding emergency facilities and address the rules affecting their viability.
The initial step when discussing freestanding emergency facilities (FEFs) must be to define the term. Here we shall use the term to mean any building that is physically separate from another provider and that primarily offers emergency medical services. The term “freestanding emergency department” (FED) is sometimes used interchangeably with FEF. This can lead to confusion, however, since the use of the word “department” suggests that the building is an organizational subunit of a larger entity, eg, a hospital emergency department. As this article explains, that is not always the case. Therefore, this article uses FEF because it encompasses all providers that offer emergency services in a freestanding building, whether or not those providers are part of a hospital organization.
BENEFITS OF THE FEF CONCEPT
FEFs originally came about to provide emergency services in rural areas, where access to hospitals was otherwise limited. Recently, however, they have increasingly been located in suburban or urban areas.
The growth of such facilities has been substantial. This should be no surprise considering that visits to hospital-based emergency departments are in a sustained upward trend, while the number of such departments has decreased.
Some say the establishment of FEFs in geographic areas where hospitals are already close by is more often than not an effort to gain market share rather than to increase patient access. This, however, misses an important point. Access is not about geographic proximity. It is about the ability to receive care, and increased demand for emergency services coupled with decreased supply means that patients arriving at hospital emergency departments often have to wait many hours to receive treatment. FEFs address this problem by increasing the supply of emergency care in a community.
The establishment of FEFs in urban and suburban areas has other benefits as well. Namely, it fills a gap in the continuum of care between urgent care centers and acute care hospitals. FEFs can treat more serious injuries than urgent care centers and usually have longer operating hours. FEFs also can generally give a patient the same level of care one would receive at a hospital-based emergency room, eg, medications, laboratory services, CT scans, and x-ray services. They are therefore ideal for patients who need emergency care, but do not require hospital admission. This makes the use of emergency services more efficient, thus benefiting both patients and providers.
Indeed, for many patients, FEFs are preferable to hospital-based emergency departments. They will be able to receive the same service, often closer to their home and almost always without the long waiting times normally associated with hospital-based emergency departments. Of course, going to a FEF is not the best option for all patients. Heart attack patients should be taken to a hospital-based ER and then straight to the catheterization lab. Patients with a sprained ankle or a broken arm could and, given the overcrowding at hospital ERs, should go to a FEF.
There will be great opportunities for FEFs in the coming years. This is due to two factors: (1) a favorable reimbursement structure, and (2) the opportunity for growth.
If the FEF is either physically located within a hospital or off-site as a provider-based facility, services will be reimbursed at the same level. Hospital rates of reimbursement are higher than those received by urgent care centers or doctor’s offices, even if the patient receives essentially the same treatment. These relatively high reimbursement rates may explain why some providers, including hospitals, are so eager to establish new FEFs. Furthermore, even though the FEF concept has been around for decades, the market is still relatively immature. It is difficult to say how many FEFs are in operation. These facilities tend to be concentrated in a few states, for reasons discussed below. However, there is clearly a huge opportunity for expansion.
THE REGULATORY FRAMEWORK FOR FEFS
Like any other type of health care provider, FEFs are greatly influenced by the regulatory framework in which they operate. Federal rules are written such that hospital affiliation may or may not be advantageous for a particular FEF. State rules are even more complicated as they vary by jurisdiction to such an extent that the FEF concept presents great opportunity in some places but is unviable in others.
It should be noted that FEFs are not recognized as a distinct provider type at the federal level as Ambulatory Surgery Centers or Skilled Nursing Facilities are. Therefore, Medicare reimburses FEF services just as it would services provided in an ER located in a hospital, if the FEF is indeed a department of a hospital. If the FEF is not part of a hospital, services are reimbursed as they would be at an outpatient clinic, meaning there is no facility fee. Although non-hospital-affiliated FEFs receive lower reimbursement from Medicare, they are free of some significant regulatory constraints, including the Emergency Medical Treatment and Active Labor Act (EMTALA) and the 72 hour rule, both of which can have significant compliance costs.
At the state level it becomes far more complicated. Each state has its own rules for obtaining certificates of need and for licensing. For obvious reasons, providers looking to establish a FEF tend to favor jurisdictions that do not require them to obtain a certificate of need (CON). However, just because a state has no CON requirement does not mean that a FEF can be established. This is because jurisdictions understand and approach the FEF concept in many different ways.
Some states recognize and license FEFs that are unaffiliated with a hospital. Other states allow FEFs but only if they are affiliated with a hospital, ie, they are a department of the hospital. In other jurisdictions, emergency services can be offered only at a hospital, and so a separate, freestanding building providing only emergency services is not an option. Further complicating matters is the fact that some states simply do not have clear rules. They decide whether a facility offering emergency services can operate without a license (as an outpatient clinic) or must be licensed as a hospital, based on the scope of emergency services offered, with no clear guidelines as to what will trigger the need for hospital licensure.
The regulatory differences from state to state also affect reimbursement. Given the overhead costs, it would be difficult to operate a FEF without receiving a facility fee. Furthermore, most FEF patients tend to have private insurance. Therefore, the key is to work with third-party private payors to ensure there is recognition and reimbursement for the FEF, including both facility and professional fees.
Such recognition by third-party payors often depends on several factors. Medicare will pay a facility fee to a FEF if it is hospital-affiliated, and most private insurers are likely to follow suit. It becomes a bit more difficult when the FEF is not part of a hospital. To get private payors to pay the higher reimbursement that includes overhead, it helps to have the nonaffiliated FEF recognized and licensed as something other than an outpatient clinic by the state. Unfortunately, most states do not do so. This may affect reimbursement and cause FEFs to be restricted to a handful of states where conditions are favorable.
OPERATING WITH A HOSPITAL: ISSUES IN ORGANIZATIONAL STRUCTURE
Some providers wishing to establish a FEF have found it best to operate the facility in conjunction with a hospital, rather than on their own. While this has distinct advantages, it also raises several issues. First, the parties have to decide on the form of the relationship. There are a number of available models, including a joint venture or a management contract. The structure of the relationship will be greatly influenced by whether the hospital is nonprofit, especially in the case of a joint venture. Second, the parties must decide whether the FEF will be provider based. If it is, this entails certain requirements regarding location and integration.
Despite the complexities, restrictions, and ambiguities, the future of freestanding emergency facilities looks bright. As states become more familiar with the concept, more and more will come to recognize the benefits and choose to license FEFs in their own right. Indeed, as the popularity of FEFs grows, many states are already in the process of deciding how to regulate and license such facilities. FEFs are an innovative and decisive way to lower costs, increase access, and generally improve the quality of care. They are, therefore, very much in keeping with the goals of health care reform. Since they increase patient access and are judicious in the use and appropriation of emergency health resources, more states are increasingly open to changing their regulations to accommodate these types of facilities. For this reason, we are likely to see many more FEFs in the coming years.
Cherilyn G. Murer, JD, CRA, is CEO and founder of the Murer Group, a legal-based health care management consulting firm in Joliet, Ill, specializing in strategic analysis and business development. She also serves on the editorial advisory board of Rehab Management. Murer may be reached at (815) 727-3355, or on her Web site at www.murer.com. For more information, contact .