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Costs Rise When Freestanding ERs Come to Town

Freestanding emergency rooms — a more expensive way to deliver routine care — may be making inroads in Oklahoma, despite strong opposition from hospitals, insurers and consumer advocates.

Rapid growth in these facilities has been fueled by private equity and venture capital firms, according to a recent article in the Harvard Business Review. The companies advertise improved access to care closer to where people need it, but research shows they tend to pop up in ZIP codes with higher incomes — not in rural communities or other areas with limited access to care. 

The business model also focuses on patients with private insurance, which typically has higher reimbursement rates than Medicare and Medicaid.

“When people visit freestanding ERs for needs that could be addressed in an urgent care center, the difference in costs may be catastrophic for patients and families,” said Joseph R. Cunningham, M.D., president of Blue Cross and Blue Shield of Oklahoma.

Bills that would allow freestanding ERs to be licensed as standalone facilities failed to advance in the Oklahoma Legislature in 2018 and 2019. They were backed by a lobbying group that helped make Texas home to more freestanding ERs than any other state — by far.

“The insurer pays more, and you pay more."

Overall spending on emergency care and out-of-pocket costs for patients go up after a freestanding emergency room opens in an area, according to a new study in the journal Academic Emergency Medicine

“The insurer pays more, and you pay more,” Vivian Ho of Rice University, the study’s lead researcher, told the Houston Business Journal.

The study found that people used freestanding ERs instead of urgent care centers.  

Prices for Texas patients with the same diagnosis is often many times higher at freestanding ERs than at urgent care centers, according to a previous study by Ho.

For example, the average cost to treat strep throat was $2,732 at freestanding ERs, compared with $159 at urgent care centers.

A similar facility in Oklahoma recently billed a patient’s insurance plan $104,000 for treating a cat bite — about $13,600 for administering sutures and IV antibiotics and more than $90,000 for a day and a half of outpatient observation. Similar care at an in-network hospital ER would have cost less than $2,000.

More than 400 freestanding ERs were doing business in 32 states by the end of 2015, according to a study published in the journal Health Affairs. Freestanding ERs, according to the study, are clustered in states that license them as independent facilities and have few regulations on restricting where they can operate. In Texas, most of them are in high-income urban areas that also have hospital-based ERs and doctor’s offices.

There may be as many as 2,000 freestanding ERs in the U.S. by 2023, the Harvard study concluded, if other states adopt rules more like the ones in Texas.

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