Colorado and the rest of the country have seen a growing number of freestanding emergency rooms. Freestanding emergency rooms are standalone facilities physically separate from a hospital that provide emergency services. Some freestanding emergency rooms are part of a hospital system — an offsite location of a hospital. Independent freestanding emergency rooms are not affiliated with a hospital; they are independent facilities that provide emergency services. It is the independent freestanding emergency rooms that have been the target of much of the recent concerns and criticisms.

One important distinction between independent freestanding emergency rooms and freestanding emergency rooms affiliated with a hospital system involves Medicare reimbursement and regulatory compliance issues. Medicare does not certify freestanding emergency rooms or recognize them as departments. Therefore, independent freestanding emergency rooms cannot receive the Medicare facility fee. However, emergency departments that are affiliated with a hospital can operate as a provider-based hospital department and receive Medicare reimbursement. 42 C.F.R. §§ 482.1 through 482.57. Finally, the Emergency Medical Treatment and Labor Act (EMTALA) — setting out requirements regarding the treatment and transfer of emergency patients — only applies to hospitals participating in federal health care programs. 42 C.F.R. § 489.24.

In 2008, the Centers for Medicare and Medicaid Services (CMS) recognized the emerging trend of freestanding emergency departments and issued a memorandum on this issue to state survey agency directors. CMS Directive S&C-08-08, “Requirements for Provider-Based Off-Campus Emergency Departments and Hospitals That Specialize in the Provision of Emergency Services,” Jan. 11, 2008. CMS noted that it had occasionally encountered interest from providers that want to participate in Medicare as a hospital that specializes in emergency services (distinct from a dedicated emergency department that might be located off the main hospital campus as described at 42 C.F.R. § 489.24(b)).

The CMS memorandum indicated that an emergency services hospital must demonstrate that it satisfies the statutory definition of a hospital found in section 1861(e) of the Social Security Act, including the requirement that the provider is primarily engaged in the provision of services to inpatients. If an applicant specializes in emergency services, CMS stated that it would pay particular attention to the size of the applicant’s emergency department compared to its inpatient capacity. CMS interpreted the statutory requirement that a hospital be primarily engaged in the provision of inpatient services to mean that the provider devotes 51 percent or more of its beds to inpatient care. CMS stated that it would examine other factors in addition to the bed ratio, but the burden is on the applicant to show that inpatient care is the primary health care service. Based on this memorandum, it is unlikely that an independent freestanding emergency room will succeed in being recognized under Medicare as a hospital that specializes in emergency services.

While the number of hospital emergency rooms has declined, emergency room visits have increased. According to a study in the Journal of the American Medical Association, the total number of hospital-based emergency rooms declined 3.3 percent from 1998 to 2008, while emergency department visits increased by 30 percent. Emergency department visits by publicly insured and uninsured patients increased at an even faster pace. The study identified several risk factors for emergency department closure, including safety-net status. This finding is concerning, the study points out, as the number of individuals covered by Medicaid and other forms of public insurance is likely to increase with health care reform. Therefore, the closure of safety net emergency rooms is of grave concern. As a Kaiser Health News article explains, these emergency rooms are not being replaced. The independent freestanding emergency rooms that have recently opened tend to be located in suburban areas, often near high-end shopping centers, and target patients with private insurance.

Denver Post article describes how freestanding emergency rooms are drawing legislation and critics. A bill proposing new licensing standards for emergency rooms that are not affiliated with a hospital was introduced in the Colorado Senate in 2014.  The original bill would have required an independent freestanding emergency room to be located more than 25 miles from a hospital or, if less than 25 miles from a hospital, the bill would have required the independent freestanding emergency room to become affiliated with a hospital within two years of the bill’s effective date. Although the legislation was amended to allow independent freestanding emergency rooms, but included requirements such as serving all patients regardless of ability to pay, the bill did not pass.

The Colorado legislation appears rooted in ongoing criticism of independent freestanding emergency rooms. Much of the concern has centered on cost-related issues. Potential patients often choose to visit a freestanding emergency room with its longer hours and shorter waiting times, even though their problems are non-urgent or semi-urgent, because they cannot get an appointment with their primary care doctor or a nearby urgent care center is closed. Thus, insurers must pay higher fees for services that could have been treated more cost-effectively. While patients have a higher co-payment for emergency services, it is likely that it is not significantly higher to offset the convenience of a freestanding emergency center.

As health care reform evolves, it is likely that independent freestanding emergency rooms will be the target of regulators in Colorado and elsewhere.