Business decisions — not demand — drive freestanding emergency department locations

Freestanding emergency departments (EDs) have proliferated over the last decade, and in Texas, “the epicenter of this movement,” they tend to be located in areas with higher profit potential rather than in areas with a higher demand for emergency care. This was the finding of a study conducted by researchers at Rice University and Baylor College of Medicine. The results appear in the October edition of Health Affairs.

Credit: Shutterstock.com/Rice University

“The primary question we were hoping to answer was whether the increased number of freestanding EDs in certain areas was linked to high demand for emergency care or high profit potential,” said Dr. Cedric Dark, assistant professor of emergency medicine at Baylor and first author on the paper. “We don’t know much about the decisions behind building these EDs and why we’ve seen such in an increase in relatively recent years.”

Where previous research had examined the prevalence of freestanding EDs by ZIP code, Dark and colleagues used Public Use Microdata Areas (PUMAs) constructed by the U.S. Census Bureau. PUMAs were designed to reflect areas larger than ZIP codes with homogeneous population characteristics, which more accurately represent local markets for health care.

The research team identified 684 facilities that provided acute, unscheduled care in Texas, including 418 hospital-based EDs, 204 independent freestanding EDs and 62 satellite emergency centers. For evaluation in the study, Dark and co-author Vivian Ho were interested specifically in freestanding ED locations, as these facilities are not necessarily tied to a hospital system and are often run as businesses by physician-entrepreneurs. Ho is chair in health economics and director of the Center for Health and Biosciences at Rice’s Baker Institute for Public Policy and a professor of medicine at Baylor.

The study results revealed that PUMAs with freestanding EDs had significantly higher income levels than those without freestanding EDs — $91,563 versus $66,825 — and the proportion of insured residents was 5.6 percentage points higher in PUMAs with freestanding EDs compared with those without. Furthermore, freestanding EDs tended to be established in PUMAs where hospitals had shorter emergency-room wait times. However, declines in hospital emergency-room wait times for PUMAs where freestanding EDs entered between 2012 and 2015 were not significantly different from PUMAs where no entry occurred.

Dark said these findings show that freestanding EDs tend to locate in urban markets where the environment is likely to be financially favorable, and that the business interests of those operating independent freestanding EDs are different from freestanding EDs tied to hospitals.

The business decisions involved in determining where to locate freestanding EDs warrant further scrutiny by policymakers, Ho said. “Freestanding EDs were less likely to enter in markets where the wait times for hospital ED care were the worst. And when entry did occur, it didn’t appear to alleviate delays in receiving care at hospital EDs.”

“This research fills one more piece of the freestanding ED puzzle,” Dark said. “We’ve looked at cost of care at freestanding EDs compared with other care centers. Now we’ve examined location, and we hope to explore quality of care in the future to better understand the value component of these freestanding EDs.”

Other contributors to the research included Yingying Xu, an economics graduate student at Rice. The study was funded by the Texas Medical Center’s Health Policy Institute.