Jaime King et al. on Freestanding Emergency Departments and the Healthcare Game

Published on: Author: Emily Murphy

The fragmented nature of the U.S. healthcare system creates many targets for criticism. Innovations such as freestanding emergency departments (EDs) have recently drawn fire from payers, policy makers, and professional organizations. In a new article in the Annals of Emergency Medicine titled “Don’t Hate the Player; Hate the Game,” Professor Jaime King (writing with physician coauthors Renee Hsia and Brendan Carr) make the case that the focus of the critique should be expanded from any individual component—such as freestanding EDs—to the systemic market-based incentives that shape the actions of “players” in the healthcare “game.”

Freestanding EDs are several steps up from your neighborhood urgent-care center. They can handle diagnosis and treatment of serious and acute conditions, and they tend to be open around the clock. Some are affiliated with hospitals, but some are truly independent. In recent years, freestanding EDs have grown in popularity with patients as “convenient and reliable sources of emergency care,” notwithstanding that in recent years the average price to the patient has increased to nearly the same level as an average visit to a traditional, hospital-based ED.

Professor King and her coauthors focus their commentary not on cost-based critiques (which are the subject of companion articles in the journal issue), but on another pillar of healthcare policy: meeting patient needs and demands. The original intent of freestanding EDs was to provide emergency services in rural, underserved areas without hospital access for acute needs. Recently, however, freestanding EDs have proliferated in areas with higher affluence and higher proportions of insured patients. Professor King and her coauthors identify this as a result of business-driven incentives, with foreseeable access consequences:

[C]hoosing to locate new freestanding EDs in areas in which an insured population with acute care needs lives was, and is, a sound business decision. Freestanding ED growth in these areas may not solve the access crisis among lower-income or uninured populations, nor does it reflect the safety-net component of emergency care’s mission, but in a dispassionate manner, the proliferation of freestanding EDs and other acute care innovations is simply expected market behavior.

Currently, freestanding EDs are positioned to relieve pressure on hospital-based EDs, which are overburdened by payer-driven limitations on access to primary care and expansion of outpatient models for healthcare delivery.

In responding to these purely cost-driven incentives, freestanding EDs cannot simultaneously respond to healthcare-policy priorities of expanding access in underserved and at-risk communities. For this reason, Professor King and her coauthors offer specific approaches for policymakers to redesign the rules of the game to address these conflicting priorities. First, to expand access to underserved areas, states may use their regulatory powers to require pre-approval for new freestanding ED centers through certificate-of-need programs or other licensing requirements. Second, states and Congress could structure payment incentives to promote freestanding EDs to locate in underserved rural communities, such as permitting such facilities to collect hospital-facility fees or relaxing strict geographical limits on certain types of Medicare reimbursement. Third, regulators and states could act to promote meaningful competition between freestanding and hospital-based EDs in order to help control costs. Closer regulation of insurers, minimum required benefits, and rate regulation for emergency-care services can put freestanding and hospital-based EDs on similar economic playing fields.

This new article contributes substantially to the policy debate about freestanding EDs by situating a complicated discussion about acute-care cost and value in its larger context: because players in the game will respond to market incentives, policy work must invariably target incentive design. Left to profit-driven forces, freestanding EDs may cluster in high-paying areas, increasing healthcare disparities and potentially saturating overserved markets. To increase healthcare access and promote meaningful competition, Professor King and her coauthors call upon stakeholders to “identify our priorities and . . . create incentives that drive innovation to meet the population’s need.” The systemic failings of the U.S. healthcare markets to function as free markets require thoughtful regulation to incentivize innovations that fulfill these policy priorities.