Driving in and around the cities that make up the Dallas–Fort Worth (DFW) metroplex, I get the sense that something is in process that could have dire consequences for our specialty. Freestanding “emergency rooms,” both hospital- and physician/investor-owned, are multiplying at an alarming rate, and this is happening all over the state. Texas is, of course, the first state to legitimize and regulate physician/investor-owned freestanding emergency facilities, and there is a good chance this phenomenon will spread nationally. Certainly, the number of hospital-owned freestandings is increasing in other states, but thus far, physician/investor development has dominated the market only in Texas. Is the proliferation of physician/investor-owned freestanding emergency facilities good or bad for emergency medicine?
Explore This IssueACEP Now: Vol 34 – No 02 – February 2015
There is a certain irony in my sense of alarm about this because I was, at one time, considered a pioneer in the development of freestanding “minor emergency centers” in DFW in the late 1970s and throughout the 1980s. Though I sold these facilities long ago, those same 17 practices, now referred to as “convenience care clinics,” are still in business and have since been joined by dozens of others, mostly physician/investor owned. While operating these clinics, I simultaneously staffed several hospital-based emergency departments in the same catchment areas and was able to conclusively prove that the presence of convenience clinics has no impact on either ED volume or payer mix—but I suspect not so for these freestanding emergency rooms. These facilities take paying emergency patients out of the hospital-based ED, and this logically has to have a negative impact on volume and payer mix. This, in turn, has to make it harder for both the hospital-based facility and its emergency physician staff to meet their unfunded EMTALA mandate. In addition, these aren’t the only potential negative impacts on the EMTALA-bound hospital-based ED safety net.
Physician/investor-owned freestanding emergency facilities typically involve an investment of $1.5 million to $3 million. The facilities’ ability to charge and collect a hospital-level facility fee as well as use the 992_ _ CPT emergency department professional service codes enables them to break even at about a dozen patients per day. They are required to see all comers, but they are disproportionately located in areas of the metroplex unlikely to have significant numbers of underinsured or uninsured people. To use the word “emergency” in their name, these facilities must operate 24-7 to comply with Texas law. Twelve patients a day is one every two hours. Given the sheer number of these facilities being built, I suspect that many of them may not reach or far exceed this number of visits. From a health care system perspective, this seems an extremely inefficient use of capital, expensive and rapidly obsolescent equipment, and emergency physician manpower. In addition, these facilities can’t but worsen the already near-critical emergency physician shortage.
What alarms me is that, at a time when the health care system is crying out for less duplication of services and greater efficiency in the use of expensive resources, the boom in physician/investor-owned freestandings appears to be moving the needle the other way.
There is a kind of “tragedy of the commons” at work here, where everyone is acting logically and according to their own self-interest but the end result is likely to be detrimental to all. Hospitals do only that which is in their strategic interest, but physicians/investors are free to plunk one of these down at every major intersection in the nicer parts of town. What alarms me is that, at a time when the health care system is crying out for less duplication of services and greater efficiency in the use of expensive resources, the boom in physician/investor-owned freestandings appears to be moving the needle the other way. So it would be helpful to know what factors are driving this phenomenon.
Angel investors learn early on that you can’t make a market for goods or services; you can only discern it and meet its needs. The two markets in play here would seem to be paying hospital-based ED emergency patients and hospital-based emergency physicians. My theory about why the number of physician/investor-owned freestanding facilities is exploding in Texas is that hospital-based EDs have done a poor job of serving their paying patients and their emergency physicians. By any parameter you can name—physical plant, ambience, convenience, parking, rapidity of care, speed of ancillary services, availability of specialty backup, etc.—the hospital-based ED is trumped by the freestanding. All too often, the hospital treats its emergency physicians as commodities and gives them no say in issues like nurse/tech staffing levels, which electronic health record (EHR) will be used, and most other aspects of the operation of their practice. The tensions and pathos of hospital-based emergency medicine practice are psychologically draining, and constantly having to beg for specialty backup is exhausting and degrading in the extreme. What emergency physician of an age wouldn’t prefer the kind of white-glove practice that goes on in the typical freestanding? The stress and workload are a fraction of that of hospital-based practice; the pay is equivalent; you get to choose how you will equip and staff your ED, which EHR best suits your practice, and everything else; and the specialists come running when you call. So while the proliferation of these facilities may not be good for the safety net, they are clearly good for ACEP members. This creates a significant dilemma for the ACEP leadership.
On the one hand, ACEP would like to avoid taking a position on the issue of physician/investor-owned freestandings because it has members on both sides of the question, but on the other hand, ACEP has a duty to adopt health care system policies that support the preservation of the safety net within the context of the current dysfunctional payment system. ACEP’s current position sidesteps the issue, but if this phenomenon goes national, it will be forced to address it.
As to the economic consequences of the physician/investor-owned facilities, the libertarian in me says let the invisible hand of the market separate the winners from the losers, and this would all be fine except that our government-designed health care “system” pays for indigent and much of entitlement emergency care (when it pays for these at all) through cost shifting. Obamacare, for however long it lasts, is of no help in the ED because it leaves many uninsured out of the program, and its deductibles are so high that its beneficiaries are effectively uninsured for all but a medical catastrophe. In most states, Medicaid pays less than the cost of the care of its beneficiaries, so Medicaid expansion will only further compromise the hospital-based ED. Underinsured and uninsured hospital-based ED volume will continue to grow, and losing paying patients to freestandings must inevitably erode the hospital-based ED’s payer mix.
At some point, our society will be forced to face the true cost of caring for the underinsured and indigent patient population, and the explosion of physician/investor-owned freestanding emergency facilities almost guarantees that this time will come sooner rather than later. When that time arrives, I see no alternative but a complete redesign of the system, but so far, no one has produced a single “reform” that’s done anything but make things worse.
Dr. Hellstern is principal and president of Medical Practice Productivity Consultants, PA and a partner in Hospital Practice Consultants, LLC in Dallas.