Blue Promise: Emergency Care Part 2

One of the country’s leading health care economists says freestanding emergency rooms are hurting Texas’ rural hospitals. Dr. Vivian Ho, a health economist at Rice University's Baker Institute, Dr. Paul Hain, BCBSTX North Texas Market President, and co-host Ross Blackstone, BCBSTX Director of Strategic Influence, and Dr. McCoy discuss the issues in this Blue Promise. You can listen to the complete discussion in podcast form on Apple Podcasts and SoundCloud.

Additional links in the Emergency Care Series:

  • Blue Promise: Emergency Care Part 1: Our data shows emergency room costs have gone up by 182 percent in the last four years in Texas. What is going on in the market and what can we do to slow runaway health care costs?
  • Blue Promise: Emergency Care Part 3: Laws put in place to protect consumers from high costs associated with freestanding emergency rooms may not be working as intended.

Blue Promise is an online video blog that aims to address complicated health issues with candid conversations from subject matter experts. New editions are published regularly and are hosted by Dr. Dan McCoy, President of Blue Cross and Blue Shield of Texas.

Show Transcript




Supporters say free-standing emergency rooms will increase access to medical care in rural areas but data suggests many freestanding ERs operate in cities with high incomes and plenty of hospital choices, in fact in Dallas you can stand in the parking lot of one freestanding ER and with a good arm you can actually hit a hospital ER. We have one of the leading healthcare researchers in Texas here to talk about the effects of these facilities on health cost.  

Thanks for joining us I'm Dr. Dan McCoy and welcome to Blue Promise. I'm here with Ross Blackstone

who's our co-host today



Thank you Dr. McCoy we have two guests here, Dr. Vivian Howe is a health economist at Rice University's Baker Institute and Dr. Paul Hain is the North Texas Market President for Blue Cross

and Blue Shield of Texas.  So, thank you both for being here.

Dr. McCoy kind of set this up, this is a growing problem in Texas, the cost of healthcare is

rising and a portion of that is attributed to the rising use in the rising prices that emergency room specifically freestanding emergency rooms in the State of Texas.

Dr. Ho you've done a lot of research into this to figure out you know unbiased perspective, what's

happening in our marketplace, what have you found?



Well I started getting involved in this research as these emergency departments were popping up all over and around in my neighborhood, so we found substantial growth between 2012 and 2015 in these freestanding emergency departments.   The number that have opened up in Texas, others have found this as well and along with that substantial increases in spending on emergency care from these facilities.   It seems pretty clear that they are not a substitute for hospital based, emergency departments.  They are actually building on top of increases in spending a lot of this is because

consumers are confused, they see these new nice facilities that are opening up in their suburban strip mall where they go and buy groceries or other items and they think oh well this is so much easier

than driving 3 or 4 miles to a hospital emergency room or oh it looks just like a retail clinic

so I'm gonna go and use this even if it's not an emergency and and so this is what is leading

substantial increases in cost.



So Doctor let me ask you a question so some people claim that one of the reasons that this model perpetuated is it's a Texas problem and in general the majority the epicenter of the growth of

these facilities is in Texas.  What happened?



So it was an unfortunate sort of set of laws introduced by the legislature so essentially there was a license that was given to free-standing emergency departments they can get a license from the state but along with that license the state legislature said that you had to keep a fair amount of equipment

to deal with emergencies and along with the requirement that all that equipment be put in stock and I'm sure Dr. Haines can talk about the types of equipment and services came the ability to charge a

facility fee and a facility fee is a substantial portion sometimes over a thousand dollars that a hospital emergency department is allowed to charge and so it led to these financial incentives of a lot of

entrepreneurs realizing I can make a lot of money charging that facility fee.



So let's walk …walk  through that so that the law allowed a facility to be built without the cost of building a hospital so you could just put in an emergency room it required it to have expensive ancillary equipment available which can also lead to increased cost as well and if I'm not mistaken and correct me here because I certainly don't want to mislead people but a lot of the legislative reasoning that was given to the legislature to make this decision was to increase access in the 254 counties in Texas many of which struggle with access



Absolutely So the notion was that that this would help patients living in rural counties who don't have who don't have access to a hospital emergency department but we've published papers that show that these freestanding emergency departments are more likely to locate in high-income parts of the state where there are high numbers of insured people with good health insurance private health insurance and so they are not being directed towards those patients who don't have access to that type of care.



I was in the Park Cities during a panel yesterday and before I went, I drew a circle from where the panel was and took a three mile radius on Google and searched for emergency room and in that three mile radius there were five hospital emergency rooms and seven freestanding emergency room

so nowhere on that map could you stand more than two miles from a free-standing emergency room and still be standing two miles from a hospital room so the access problem really isn't being solved

there they're just littering the high-income areas.



Yeah Absolutely they're there they are aiming to get so first they are aiming to try and get some of the patients that would go to a hospital emergency department but we're also conducting some work finding that when where are these freestandings ERs overall spending actually increases so they're pulling patients into the system who wouldn't have been there otherwise…



So I'm no economist but would you call that inducing demand



It probably is in a way



and then in your studies are you also seeing I've heard of an overlap that freestanding ERs are seeing

a lot of folks that have the same complaints as folks going to Urgent Care is that what you're finding also



Well yes so the problem is the patient doesn't understand because the patient walks through the door and says I have Blue Cross Blue Shield you take that and they say sure we'll take that you know

we take all insurance and I did this myself I walked in and asked they said we take all insurance

what they don't tell you though is that they are not in network for your insurance provider and so you are gonna get hit with a bill because it's not an in-network provider. A large bill.



Let me add a little context around that bill that you referenced just so people have some perspective

the price of a free-standing emergency room visit averages about two thousand one hundred and ninety nine dollars, this was in 2015, two thousand one hundred ninety nine dollars compared to one hundred and sixty eight dollars at an urgent care clinic for the same treatment, for the same condition and what usually happens is that the patient ends up getting charged roughly one third of

the price up out of their pocket.



So I'm gonna update your information with a little caveat, so the latest data here at Blue Cross

shows that the average cost is $2,800 which is more than a tertiary care emergency center visit

now what would explain that?



Well to me it means that there the market is not working there is something in the system that is not allowing the prices to be based on a reasonable amount of marginal cost and and in this case Medicare doesn't work as a way to sort of hold that cost and so that they hold back the charges so they don't reflect the cost of providing the care so I don't know if that you know it's an it's unfortunate that that is an average price so that is showing that there's I like to think there's a little bit of misbehavior in the market but in this case my concern is there's a lot of misbehavior



So let me ask you a question here is this more of a business model than a health care access model

from what I've heard from patients complaining



I think you're right it is it is the former, it's a business model, it's a chance for some entrepreneurs to be making a lot of money for health care provided that is not is not the value is not as high not even as close to high as the amount of money.



So lets make sure you're saying that because I think that's really important to hear is that it's not that they're not providing care it's not that they're not necessarily providing good care I mean patients probably get a good experience if they go in and have the care done but that the value doesn't match what its gonna cost you for the care but I think the example Paul gave earlier you could go see your primary care physician and maybe get charged $100 right



Right and you know



And not $2800



I was … exactly I was talking to a hospital CEO the other day and he was little bit incensed about this

as well saying you know I have to maintain a level one trauma center in my ER which means I'm paying a neurosurgeon on call, I'm paying an orthopedic surgeon on call, I'm paying an entire trauma team, I'm running an ICU upstairs and the freestanding ERs that have none of that are demanding to

be paid the same price that we're being paid to take care of you.



Okay so doctor you’re one of the most noted health economist in the country so I'm gonna…

I'm gonna check you with kind of a live economic experiment here so when you over a period of really a few years you take and add 400 or so freestanding ERs all of which require emergency physicians

emergency nurses and lots of infrastructure which I know we're a big state and we are really good at training doctors and training nurses but has that raised the cost for traditional hospitals now for labor and trying to recruit and retain emergency physicians and nurses in traditional hospitals that say serve car wrecks and things like that.



Oh sure you know this is what economists often refer to as an unintended consequence and so you have physicians who have had gone undergone very expensive training for ER and one of the young physicians he just moved here from Boston he said look you know I didn't take one of these jobs

but one of my colleagues decided to take one of these jobs at one of these freestanding ERs to make supplemental income because it's such good income and he says yeah most nights he's bored you know because he doesn't really have patients to look after and then the worst thing though is that they are pulling these physicians away who want to earn some extra income who used to take the time to drive out to rural areas to staff their hospital ERs or they fly to places on the weekends and the problem I've heard that those hospitals in rural areas are having to pay hundreds of thousands and sometimes millions more to make sure that their ERs are staffed with the right people.



So this is kind of the direction I'm going so I always like this the law of unintended consequences

that we set out to solve a problem and the problem was to increase access in rural Texas but in effect what's happened is because of the brain drain of needing these resources in the higher economic levels it's actually made it more difficult and challenging to provide this kind of access in rural Texas.



Absolutely So in a way we haven't helped rural Texas, we've made things harder for them.



and we've made things more expensive in places like the higher economic levels that Paul was just talking about.



Yeah and the inducement for the docs is quite understandable.  Right if you can choose to make the

same amount of money seeing 30 patients a shift at a busy hospital ER or you can see two patients

a shift in a free-standing year and you get paid the same because in the free-standing ER the charges are so exorbitant and you really don't have any overhead you know you can understand why people would walk across the street and staff the free-standing ER.



So Dr. Ho what else have you found in your research?  and we've been talking about a lot but I know that your research covers a lot of other topics as well what else can you add?



Well we got we got really down into the claims data and looked at prices for particular diagnosis and we found that the most common reason for a visit at freestanding emergency departments and urgent care centers was upper respiratory infections but the amount reimbursed at a free-standing ER was $1,350 and the amount for the same visit and an urgent care center is $165 and then so some people like to respond to the person showing up at their free-standing ER is sicker so that justifies the difference in price but we also looked at differences in procedures and if you look for something that

you know there's another there's another category for routine urinary test and the price of that at a free-standing ER is $51 the price at an urgent care center is $3 so I don't see how disease severity figures into that particular price differential.



It's fascinating all right Dr. McCoy you talked about some of the intent behind Texas's policies and how we started going down this road in the first place coming up in our next segment let's talk

about what we can do moving forward.



And thanks for being here and thanks for joining us for this edition of Blue Promise.




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