What’s the future of freestanding emergency departments?

As the number of freestanding emergency departments (FSEDs) continues to rise, urgent care operators are right to be concerned about their presence on the market.

The number of freestanding emergency departments is approaching 500 across the country.  While hospitals have been opening FSEDs for years in rural or underserved areas, over the past several years a number of private operators have opened centers targeting the affluent suburbs of high density communities like Dallas/Ft. Worth and Denver.  Patients can be confused by FSEDs and think they are the same type of facility as an urgent care. In fact, these centers charge much higher rates and oftentimes are not affiliated with major insurers.

The future for FSEDs is unclear, as stock prices for some operators fall and media reports detail unhappy customers who received bills for thousands more than they anticipated for treatment.

The biggest operator is Adeptus Health, based in Lewisville, Texas, with more than 60 FEDs in four states (Texas, Colorado, Arizona and Louisiana). Most of its centers are in Texas, where freestanding emergency departments have operated since 2010 without a hospital affiliation.

“They’re sprouting up like Texas wildflowers,” Vivian Ho, a health economist at Rice University in Houston, told Modern Healthcare in July. “Everywhere you drive in upper-middle-income Houston, you’re seeing emergency rooms on every block.”

In Colorado, concerns are mounting over 20 new standalone emergency departments that have opened since 2014. In their quest to deliver expensive services to insured patients, ER operators have mostly steered clear of lower-income neighborhoods in Denver and Aurora while saturating areas such as the southeast and northwest suburbs, the Denver Post reported earlier this fall.

Questions swirl around whether these facilities are serving their stated purpose: To increase patient volumes and expand coverage, improving population health. They position themselves as an alternative to congested emergency rooms – charging parallel prices – but offering a more personalized experience.

Adeptus stock has fallen to around $65 in recent days from a 52-week high of around $124.

Reports in the Denver Post this fall detailed the rapid proliferation of stand-alone emergency departments in suburban shopping malls – which have contributed to rising ER claims. In Colorado, 21 new FSEDs have opened since 2014. And more are being built despite the availability of more than 100 urgent care and walk-in clinics statewide offering alternatives to people who don’t have regular doctors or can’t get immediate appointments.

An Oct. 31 article showed how a Denver mother is facing a $5,000 bill after taking her twin, teenage daughters with chest congestion to one of the new FEDs.

“It’s a big point of confusion, and it’s kind of misleading,” said Aniela Johnson, general manager of Zip Clinic Urgent Care in Denver. “It really comes down to us educating the public about what the difference is between a standalone emergency department and an urgent care center.”

A new study done by the Center for Improving Value in Health Care found the potential for more than $800 million in annual savings if residents stopped going to emergency departments for non-emergent care. Residents there could save an average of $1,150 per visit if patients used a clinic or doctor’s office instead of going to the ED.

“From a consumer standpoint, it’s a bad value,” said Alan Ayers, vice president of strategic initiatives at Practice Velocity®, LLC. “From an insurance perspective, it adds cost because people are not using these for real medical emergencies.”

“If it were a true emergency, you’re not going to the emergency center next to Starbucks when there’s a nationally recognized hospital just around the corner,” Ayers added.

Elite Care, which operates nine FSEDs in Dallas, Houston, and San Antonio, is opening its newest center in a 7,000-square-foot former convenience store along the Dallas North Tollway in West Plano. The center is locating at a busy intersection handling over 69,000 cars per day, is across from an upscale mall featuring Neiman Marcus and the Apple Store, adjacent to Target (which houses its own retail clinic), and less than 30 yards from an OPTUM Urgent Care which opened in January 2015. (Picture taken November 2015)