Freestanding emergency departments (FSEDs) are a hot topic as providers search for new ways to expand their ambulatory footprint, and the Bipartisan Budget Act of 2015 is likely to have a substantial impact on the movement by changing the incentives for investing in off-campus facilities.
Why would such a large piece of legislation affect something as specific as FSEDs?
FSEDs improve access… sometimes
Proponents rave that FSEDs bring much-needed services to medically isolated communities in convenient and luxurious settings. The reality, however, is that although services may be convenient and sometimes luxurious, they are reserved for the wealthy in areas with more than sufficient access to care, and come with hefty price tags. By some accounts, an FSED bill for an asthma attack can total upwards of $3,000, compared to an urgent care center bill that will typically total less than $150.
So, considering both sides of the debate, should you invest in a FSED?
The pros and cons of investing in a FSED
With health care’s growing retail revolution, providers are faced with a variety of possible facility investments, including FSEDs, urgent care centers, and retail clinics. Let’s break down the value of FSEDs:
|• Location convenience for patients
• Provider footprint expansion
• Fully equipped to deal with emergent cases
• May be profitable with the right payer mix
|• Expensive for patients, often out-of-network
• Expensive for payers, increasing payer steerage towards alternative care sites
• Rarely reimbursed by Medicare and Medicaid
• May require acquiring certificate of need, an arduous process
• Weak referral driver
As patients are increasingly shopping around for low-cost care and health systems are transitioning to value-based payments, the once fierce FSED trend has recently taken a turn—it seems like the cons now win by a landslide. However, hospitals shouldn’t reject FSEDs outright, as the Budget Act could make FSEDs increasingly attractive.
The budget act that’s changing the playing field
The Bipartisan Budget Act of 2015 states that effective January 1, 2017, Medicare and Medicaid payments for hospital services at new off-campus hospital outpatient departments will no longer be eligible for Outpatient Prospective Payment System (PPS) reimbursements. This legislation may dissuade hospitals from investing in offsite clinics and services if they were hoping to collect HOPD reimbursements. However, since the new legislation does not apply to emergency department services, the jury is out on whether the enacted legislation will result in hospitals turning away from urgent care and retail and toward FSEDs to continue billing at higher rates.
In other words, FSEDs are not a great investment right now. However, FSEDs could offer a unique value proposition as a profitable ambulatory investment in the future.