United States: The Opportunities And Challenges Of Freestanding Emergency Departments

Following our blog post regarding the retail clinic movement, "Patient Check-Ups Before Checking Out: Partnering to Bring Health Care into the 'One-Stop Shopping' Sector" (April 19, 2017), we continue our examination of alternative healthcare providers by examining the regulatory landscape that shapes the opportunities and challenges of freestanding emergency departments ("FSEDs").

FSEDs – A Definition

In simple terms, an FSED is:

  1. An emergency department that is a freestanding provider operated independent of an acute care hospital; although it may be owned and operated by an entity that also owns hospitals and/or other healthcare providers;
  2. A healthcare provider-type that is not required to comply with those state and federal laws that exclusively apply to hospitals and other inpatient facilities; as a result, an FSED is often more flexible in its ownership, governance, operations, and scope-of-services than a hospital-based emergency department;
  3. A healthcare facility that, like a traditional hospital-based emergency department and unlike an urgent care center, generally provides 24/7 access to an emergency physician, an emergency nurse, laboratory and radiology technicians, moderate-complexity blood testing (more than blood pressure, blood sugar, and strep testing), and advanced imaging such as computed tomography and ultrasound (in addition to X-ray);
  4. Because of its staffing levels and access to advanced healthcare technology, a healthcare facility that can care for most emergent illnesses, including heart attack, stroke, and minor trauma; and
  5. A source of emergency medical treatment that may be located closer to a patient than a traditional on-campus hospital emergency department. In some areas, an FSED can be the fastest way for a patient to get emergency medical care.

The Inconsistent State of State FSED Laws

State-based FSED regulatory frameworks vary in both form and substance. While many states do not have FSED-specific rules or regulations, there are states like Tennessee, Florida, Alabama, and Illinois that do have such laws. States that do not have FSED-specific state laws, like Tennessee and Florida, may have rules and regulations of general applicability that apply to all off-campus facilities and, in turn, apply to FSEDs. In addition, there are states (e.g., Florida and Tennessee) that have certificate-of­-need laws that apply to all outpatient facilities and, in turn, apply to FSEDs that seek to be hospital department status.

Variation in State Laws regarding FSED Ownership

Subject to state law variations, an FSED can come in a variety of ownership and operational forms that may be unavailable to hospitals, urgent care centers, or other provider categories. For example, although FSEDs are often owned and operated by healthcare systems that include hospitals and/or other healthcare providers, in many states, FSEDs can also be owned by investment funds, venture capital firms, or other non-healthcare entities that are interested in the healthcare marketplace as an investment opportunity rather than a strategic opportunity to operate a healthcare provider.

Texas, Colorado, and Delaware are examples of states that do not place provider-based ownership restrictions on FSEDs, whereas, Florida, Tennessee, Alabama, Connecticut, Idaho, Illinois, New Hampshire, and South Carolina require provider affiliation.

Variation in State Laws regarding FSED Scope of Services and FSED Operations

In addition to encompassing a variety of ownership structures as permitted by applicable state laws, FSEDs often vary in the scope of services they provide. Although emergency care is the common denominator for all FSEDs, FSEDs can provide a host of other services subject to whatever limitations, if any, are imposed by state law. In Georgia, for example, an FSED must provide non-elective emergency treatment and procedures, but may also provide elective, out-patient surgical treatment, as well as basic obstetrical and gynecological treatments and procedures.

In some states, FSEDs are subject to minimum service and clinical capability standards. Texas' especially robust licensing laws require: (i) that emergency laboratory services, including assays for cardiac markers, hematology, and chemistry, be available on the premises during hours of operation, (ii) radiological services, (iii) respiratory care services appropriate to the scope and complexity of the services offered, and (iv) pharmaceutical services.

Further, state laws can place specific operational requirements on FSEDs, which requirements may address standards such as hours of operation, staffing requirements, transfer agreements, location (e.g., proximity to a hospital), and patient financial protections (including screening and treatment for emergency care needs regardless of a patient's ability to pay). Illinois' approach to hours and staffing is fairly typical of states that require licensure: (i) an FSED must have at least one physician on-site at all times, (ii) specialists representing the major specialties and sub-specialties must be available immediately for consultation and onsite, if necessary, within 30 minutes, (iii) a sufficient and appropriate number of nurses must be on duty at all times, and (iv) ancillary services (including laboratory, x-ray, and pharmacy services) must be staffed at all times.

The Proliferation of FSEDs – Where FSEDs find Fertile Soil for Growth

As FSEDs have proliferated across the Country, it has been noted by many that state laws, as well as federal laws, have had, and continue to have, a profound effect on where FSEDs have experienced the greatest growth – urban or rural, affluent, or low-income, Texas or Colorado (as examples).

In states with fewer and/or less restrictive FSED-applicable laws, an FSED may be an excellent strategic option for a hospital system either (1) considering a cost-effective way to expand into a new geographic market outside the system's traditional service area, (2) developing a new point of entry in the system's service area for patients who would otherwise overcrowd a hospital-based emergency department designed for higher acuity patients who require hospital-level intervention like a surgical procedure and/or inpatient admission; or (3) evaluating how it can make inroads into a competitor's service area by establishing a presence through a facility that is less costly to develop and operate than an inpatient facility.

The Impact of Federal Law on the Growth of FSEDs – Struggles with Medicare Participation Limitations

Despite interest from providers over the years, the Medicare program does not recognize freestanding facilities that specialize in emergency services as a separate category of participating provider. Although, an off-campus provider-based FSED – a FSED that is certified by the Medicare program as a hospital outpatient department and, in turn, covered by the hospital's Medicare Provider Agreement – can bill the Medicare program under the outpatient prospective payment system ("OPPS"), a FSED that is not certified as a hospital outpatient department cannot bill the Medicare program.1

Because of the foregoing, FSEDs face significant challenges in the treatment of Medicare beneficiaries. Studies have shown that the inability of FSEDs to participate in the Medicare program has had a negative impact on their proliferation. For example, by excluding FSEDs from Medicare participation, FSEDs are more likely to open in areas where a lower percentage of Medicare beneficiaries/higher percentage of privately insured patients in the case mix can be projected. In other words, and as confirmed by the Medicare Payment Advisory Commission ("MedPAC") in its June 2016 report to Congress, FSEDs are often found in more affluent neighborhoods than in low-income neighborhoods that are more likely to have limited local access to quality healthcare.2

As a counter-balance to the detriments of being excluded from the Medicare program, FSEDs that are not Medicare certified may be able to enjoy certain benefits that are not available to their Medicare-certified counterparts/competitors. For example:

  1. While off-campus provider-based emergency departments must be subject to common ownership and governance with its affiliated hospital, FSEDs, subject to state law requirements, can be owned and operated free from a hospital entity. As a result, the range of entities that can own and operate FSEDs is broad enough to include venture capital and other investment funds, non-profit/for-profit/private/public entities that may have no interest in owning and operating a hospital, and entities that want to "try their hands" on a more niche healthcare provider type before venturing into the larger healthcare marketplace;
  2. To comply with the Medicare provider-based rules, Medicare-participating off-site hospital emergency departments cannot be located more than 35 miles from its hospital's main campus. Subject to state law, FSEDs that are not Medicare certified can provide healthcare systems with an opportunity to extend the system's reach beyond the system's traditional service area and beyond the 35-mile limitation applicable to Medicare-certified off-campus emergency departments; and
  3. Whereas Medicare-certified off-campus provider-based emergency departments must comply with those federal and state legal requirements that are applicable to hospital outpatient departments, including hospital emergency departments, FSEDs that are precluded from Medicare certification, are not so burdened except in those cases where state law says otherwise. Consider, for example, the federal Emergency Medical Treatment and Labor Act ("EMTALA"), which requires that a "dedicated emergency facility" provide individuals who present at the emergency department with a healthcare exam, stabilizing treatment (regardless of the patient's ability to pay) and, if needed, an appropriate transfer to a hospital with the appropriate healthcare capabilities to treat the patient. Unless otherwise mandated by state law,3 FSEDs do not have to comply with EMTALA's requirements – a fact that has created significant concerns within the healthcare policy community.

To date, the proliferation of FSEDs, particularly independent ones, have been concentrated in certain states. per the MedPAC report, Texas was home to 156 of 172 independent facilities identified nationwide. However, as hospitals and health systems across the country continue to face financial challenges and runaway operational costs, we will likely see such hospitals and health systems turn to alternative sites of care – like FSEDs – to expand their reach without incurring the high costs of establishing a more traditional provider type. As a result, it is likely that the proliferation of FSEDs (both provider-based and otherwise) will continue to grow and spread across the country, even in those areas where FSEDs have not yet taken hold. In addition, the growth in FSEDs may create additional pressure on the Medicare program to recognize FSEDs as freestanding providers that are not shackled by the 35-mile rule or other Medicare provider-based certification rules and regulations. Also, states that have not yet regulated FSEDs may adopt and implement FSED rules and regulations to ensure that FSEDs are subject to the same kind of governmental oversight that currently applies to similar healthcare providers in their states.

Our Conclusion

Our conclusion? We strongly recommend that individuals and entities that are either considering FSEDs or have previously dismissed FSEDs as undesirable keep their eyes on the changing FSED legal landscape (and this blog site). Such changes, which are inevitable, may warrant consideration or reconsideration of FSEDs as a viable business strategy or investment opportunity.

Footnotes

1. Regardless of a FSED's Medicare certification status, physicians who provide Medicare-covered professional services within a FSED can bill Medicare for his or her professional services under the Medicare physician fee schedule.

2. MedPAC, Report to the Congress: Medicare and the Health Care Delivery System (June 2016), available at http://www.medpac.gov/docs/default-source/reports/june-2016-report-to-the-congress-medicare-and-the-health-care-delivery-system.pdf?sfvrsn=0.

3. According to Modern Healthcare, 18 states, including Texas, have rules comparable to EMTALA that require FSEDs to accept all patients for treatment and stabilization regardless of insurance status. Modern Healthcare, "Boom in Free-Standing Emergency Centers Raises Questions about Regulation, by Harris Meyer (October 4, 2016), http://www.modernhealthcare.com/article/20161004/NEWS/161009975.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
18 Oct 2017, Seminar, San Francisco, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series. 2017 presents significant developments in California labor and employment laws that will affect the way you run your day-to-day business operations. We will provide analysis and insight on these new laws, as well as offer practical advice and helpful tools for employers to protect their organizations from liability in the workplace.

18 Oct 2017, Seminar, California, United States

Come learn the latest about Labor Law Updates, Healthcare Reform Updates, Federal and State Tax-related issues/credits, Unemployment and Disability Insurance-related issues. Meet face-to-face with Sheppard, Mullin, Richter & Hampton LLP attorneys, government representatives, and other experts in workshops that will educate you on critical and timely issues.

18 Oct 2017, Seminar, San Diego, United States

Data breaches have a devastating impact on business and personal privacy. The Equifax breach is the most recent example of hackers taking advantage of corporate vulnerability. Shows like Mr. Robot have surged in popularity as our curiosity with hacking and cybersecurity continues to grow.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.