Does Where Freestanding EDs Operate Change Hospital Payer Mix?

October 05, 2017 - Freestanding emergency departments (EDs) may be altering the payer mix at the equivalent hospital-based facility because the freestanding EDs tend to be located in areas with greater household incomes and insured rates, stated a recent Health Affairs study.

Researchers from Rice University and Baylor College of Medicine examined data from the Department of State Health Services in Texas, a state with a booming freestanding ED market and one of the first states to develop regulatory guidance for the facilities.

They found that Public Use Microdata Areas (PUMAs) with freestanding EDs had an average household income of $91,563, whereas areas without the independent healthcare organizations had an average income of $66,825.

PUMAs in the second and third tertiles for income were also more likely to have freestanding EDs. The independent emergency departments were more likely to be located in regions that had average household income between $66,092 and $178,769.

Researchers stated that they used PUMAs to measure healthcare markets because the regions are larger than a ZIP code, yet smaller than counties. The areas also capture wealth distribution in dense urban areas unlike ZIP code and county-level information.

The study showed that hospital-based EDs located outside of the main organization did not follow this trend.

Additionally, researchers observed that PUMAs with freestanding EDs had significantly different payer mixes than regions without the healthcare organizations. The number of insured residents was 5.6 percentage points greater in PUMAs with freestanding EDs.

The areas with the independent emergency departments also had a higher proportion of residents enrolled in private healthcare coverage.

Conversely, PUMAs without freestanding EDs had significantly higher numbers of residents covered by Medicaid.

The study’s findings show that the location strategies are quite different for independent freestanding EDs, which responded strongly to household income levels and high insured rates, and satellite hospital-based emergency centers, which did not respond to those factors.

“Perhaps because the latter can receive reimbursement from public payers such as Medicare and Medicaid, they have less need to locate in areas with higher household incomes,” researchers stated. “An additional thought is that hospitals might rely on satellite emergency centers to function as ‘feeders’ for their hospitals. Thus, owners of the centers may place them far from their main hospital campus to attract a distinct share of patients.”

While the location strategies differ, where freestanding EDs reside may impact hospital payer mix. Privately insured individuals and those with insurance, in general, may be opting to go to their local freestanding ED, rather than their hospital emergency room.

A 2016 study of hospital-based EDs in Ohio showed that the organization lost privately insured patients to its affiliated freestanding centers over time.

The recent analysis in Health Affairs supports the view that hospital payer mixes may change as freestanding EDs enter the market.

However, researchers noted that the independent emergency organizations probably do not reduce patient volume in hospital-based EDs. They argued that if freestanding EDs lowered patient volumes at hospital-based centers, the hospital would experience shorter wait times in their ED.

But the analysis revealed that hospital-based emergency centers in PUMAs with freestanding EDs did not report decreased wait times. Freestanding EDs actually tended to open in healthcare markets that contained hospital-based emergency centers with already short wait times.

Researchers concluded that freestanding ED owners make business decisions on location like the leaders of retail clinics and urgent care centers. All three of the organizations tend to concentrate in urban regions that have higher household incomes and less uninsured patients.

Healthcare stakeholders and policymakers should further study the location choices for the independent facilities to prevent health disparities from worsening for medically underserved populations, researchers stated.