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Freestanding ERs: Convenient Care Option or Costly Burden?

March 6, 2014

Do freestanding for-profit emergency rooms fill a consumer demand for quick, convenient emergency care? Or are they driving up health care costs by charging exorbitant fees while encouraging the inappropriate use of the emergency room? Or is it a bit of both?

These questions are at the heart of the debate surrounding Senate Bill 14-016, which proposes new licensing standards for freestanding emergency rooms. Sponsored by Senator Irene Aguilar (D-Denver), chair of the Senate Health Committee, the measure passed the Senate Health and Human Services Committee last week on a 4-3 Democratic-led party line vote.

The proposed legislation would create new regulations for freestanding emergency rooms that are not affiliated with a hospital. Unlike traditional emergency rooms that are owned and operated by hospitals, these freestanding emergency rooms are typically run by for-profit companies. Colorado has around a half dozen freestanding ERs. Nationally, the number has doubled in the past four years to more than 400, according to the Kaiser Family Foundation.

Aguilar’s bill would require freestanding ERs to see all patients, regardless of their ability to pay – a law already in place for hospital-affiliated emergency departments. It also prohibits freestanding ERs from charging a “facility fee,” a charge that hospital-affiliated ERs typically use to cover the cost of necessary hospital infrastructure to support their ER departments.

Bill proponents say it’s unfair for freestanding ERs to charge facility fees, since they are not connected to a hospital and don’t have to support that infrastructure. The bill exempts community clinics from the new licensing standards.

At the bill’s hearing last week, several organizations supported the legislation. The Colorado Consumer Health Initiative testified that freestanding ERs are essentially operating as urgent care centers while charging the facility fees of a hospital-operated ER. The bill would level the playing field, they said.

The Colorado Association of Health Plans testified that insurers often cover $2,000-plus ER bills from freestanding facilities, even for minor ailments. Other proponents included the Colorado Competitive Council, Anthem Blue Cross, the Colorado Center on Law and Policy and an emergency room doctor who said that the freestanding ERs are cutting corners, exploiting consumers and encouraging overuse.

But First Choice Emergency Room, a Texas-based company that owns and operates two of Colorado’s freestanding ERs, said the company is filling a consumer demand for convenient, high-quality care at lower wait times than many of the state’s over-burdened emergency rooms.

Lauren Rowley, vice president of government affairs, said the proposed bill creates a “double standard” by requiring freestanding ERs to meet the same requirements as their hospital-affiliated counterparts, yet at the same time denying them the ability to charge the same fees. She also touted the economic benefits of freestanding ERs, testifying that the company has generated nearly 100 jobs in Colorado. Two First Choice ER physicians testified about the company’s strong record of patient satisfaction and low wait times. They said that they don’t turn patients away, even if they are unable to pay.

Republicans on the Senate health committee were united in opposing the bill. They criticized what they saw as overly-burdensome regulations and said that freestanding ERs could improve patient care by enhancing free-market competition. Senator Kevin Lundberg (R-Berthoud) speculated that the law could put First Choice’s Colorado emergency rooms out of business. 

Despite opposition, the bill passed its first committee hearing and is now heads to the Senate floor for its second reading, which is scheduled for March 10.