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Freestanding Emergency Centers: Regulation and Reimbursement

Published online by Cambridge University Press:  24 February 2021

Mitchell Katzman
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Abstract

The freestanding emergency center, which combines the functions of a doctor's office and a hospital emergency room, has emerged as a new provider of health care. These centers have generated considerable controversy over their role in the health care market. Proponents argue that freestanding emergency centers reduce costs by providing care in a more efficient manner and cause other health care providers such as hospital emergency rooms to reduce costs and improve service. Opponents argue that the centers create an additional layer of health care which duplicates existing services and increases total health care costs. This Note examines the controversial issues of licensure, regulation and reimbursement. The Note concludes that freestanding emergency centers can help to reduce health care costs and discusses the steps that should be taken to aid centers in achieving this goal.

Type
Notes and Comments
Information
American Journal of Law & Medicine , Volume 11 , Issue 1 , 1985 , pp. 105 - 129
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 2020

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References

1 Other names for FECs include, but are not limited to, emergicenters, minor emergency centers, urgent care clinics and immediate care centers.

2 Retail “Emergkenters” Take Off, Business Week, Mar. 8, 1982 at 40N Col. 1.

3 Plant, , The Urgent Care Craze, 57 Hospitals, June 1983, at 35.Google Scholar

4 Tanner, , Doc In the Box: Medical Care, Fast-Food Style, 4 Venture, Oct. 1982 at 54.Google Scholar

5 See generally Michaels, Emergkenters: Emerging Legal Issues, (paper prepared for the National Health Lawyers Association, 1982 Health Law Update, Houston, Texas) [hereinafter cited as Health Law Update]. Michaels surveys the issues currently being debated. They include licensure and regulation, the applicability of certificate of need laws to FECs, the status of FECs for purposes of third party reimbursement, and the potential liability of FECs. This paper serves as the basis for a later article by Michaels Crouter. See infra note 7.

6 See generally Zaremski, Fohrman, , The Emergicenter: Has Its Time Arrived?, 11 Law, Med. Health Care 4 (1983).Google Scholar

7 See generally Michaels, Crouter, , Emergicenters and the Need for a Competitive Regulatory Approach, 10 Law, Med. Health Care 108 (1982)Google Scholar (discussing the lack of uniformity, definitions and standards among FECs).

8 Rhode Island Department of Health, Rules and Regulations for the Licensing of Freestanding Emergency Care Facilities (R23-17-FECF) (December, 1981) [hereinafter cited as Rhode Island Regulations]. “Emergency Medical Care” is defined as the initial and interim medical and/or surgical services provided by or under the supervision of a licensed physician to patients whose condition requires a critical or urgent response.

9 National Association of Freestanding Emergency Centers, The FEC Commitment: Part of the Cure, Perspectives on Health Care Costs and Freestanding Emergency Center Industry Issues (1983) [hereinafter cited as FEC Commitment].

10 Michaels Crouter, supra note 7, at 108.

11 There are conflicting sources as to where the first FEC actually opened, Delaware or Rhode Island. See Luther, , Freestanding Emergency Centers, 11 Emergency Medical Services, Sept.-Oct. 1982, at 31;Google Scholar Burns, Ferber, , Freestanding Emergency Care Centers Create Public Policy Issues, 55 Hospitals, May 1981, at 73.Google Scholar

12 Stevenson, , Comprehensive Industry Study—FEC Acceptance, Growth, Costs, Benefits Confirmed, 3 Emergence 6Google Scholar (Special Issue June, 1983) (Exhibit III at S-2) [hereinafter cited as Comprehensive Industry Study]. The study was sponsored by NAFEC and conducted by the Orkand Corp., a Washington D.C. based management consulting and research firm. The study is officially titled, The FEC Factor: A Rapid Growth Health Care Alternative, and is based on an analysis of detailed data collected from 155 FECs across the United States. See also Wall Street Journal, July 19, 1983 at 12, col. 3 (showing a greater than 100% increase in the number of FECs from 1982-1983); The Big Business of Medicine—Docs-in-a box medicine, Newsweek, Oct. 31, 1983 at 64 [hereinafter cited as Docs-in-a-box Medicine].

13 Plant, supra note 3, at 25.

14 Comprehensive Industry Study, Exhibit III, supra note 12.

15 Eisenberg, , Special Report: If You're Not Ready, Walk-In Clinics Are, Medical Economics, May 30, 1983, at 77.Google Scholar (Patient Attitude Survey: one patient in three gave this as his reason for trying a FEC.)

16 See Freudenheimer, Shopping-Mall Medicine, New York Times Magazine, Dec 5, 1982, at 146; Luther, supra note 11.

17 Corpron, , The Emergicenter and Family Practice in the 1980's, 15 J. Family Practice 194 (1982).Google Scholar

18 Dietz, , Cost rules, competition will close some Massachusetts hospitals, group told, The Boston Globe, Dec. 13, 1983, at 22Google Scholar (quoting Dr. Joseph Maloney, Vice President of Health Stop Inc., which has opened a chain of walk-in medical centers in the Greater Boston area).

19 A. Sadler, B. Sadler S. Webb, Emergency Medical Care, The Neglected Public Service (1977) (quoting Skudder, McCarroll, and Wade, , Hospital Emergency Facilities and Services: A Survey, 46Google Scholar Bulletin of the American College of Surgeons 44 (1961)).

20 Zaremski, Fohrman, , supra note 6, at 5;Google Scholar see also Comprehensive Industry Study, supra note 12, at S-3. Only 1.4% of visits to FECs were considered to be life or limb threatening. Most of these came from a limited number of hospital satellite centers equipped to accept ambulance traffic. In 94.4% of the cases FEC patients are treated by the facility and released.

21 Kaplan, Larson, Fitzsimmons, Robinson Lessler, Freestanding Emergency Clinics: Community Development Guidelines, 10 Ann. Emerg. Med. 318 (1981) [hereinafter cited as Development Guidelines],

22 Florida Hospital Refers Patients to FECs, 3 Emergence, Oct. 1983, at 8 (quoting the Ocala Star Banner, Florida). The Munroe Regional Medical Center, Ocala, Florida, is reported to be the third busiest in the state. Id.

23 Friedman, , Slicing the Pie Thinner, 56 HOSPITALS, Oct. 1982, at 62, 74.Google Scholar

24 Koncel, , Experts Examine Major Issues Facing Emergicenters, 55 Hospitals, May 1981, at 83Google Scholar (quoting Dr. Bruce Flashner, M.D., owner of the facilities called the Doctors Emergency Officenters).

25 Burns, Ferber, , supra note 11, at 77Google Scholar (quoting Drennan D. Stringer, M.D. owner of the Emergency Medical Clinic of Pepper Square, Dallas, Texas).

26 Koncel, , supra note 24, at 84.Google Scholar

27 National Association of Freestanding Emergency Centers, The Doctor's in, (1982) [herein after cited as The Doctor's in]. See also Comprehensive Industry Study, supra note 12, at S-4. The study found that 94% of FECs reported that they are open seven days per week, on the average of 94 hours per week; 94.7% of FEC patients arrived without an appointment; 74.2% of FECs reported their facilities were located in suburban areas.

28 The Doctor's in, supra note 27.

29 Wall Street Journal, July 19, 1983, at 12, col. 3.

30 See generally Martin, , The Emergency Care Controversy—Can the New Clinics Pass the Physical, 7 Memphis 81, at 82 (1982).Google Scholar W. Allen Schaffer, founder and medical director of four FECs (called Minor Emergency Clinics) stated:

Only ten percent of patients coming through hospital ERs are ever admitted…. The other 90 percent—patients with twisted ankles, sore throats, minor burns, that type of thing—in most cases don't receive the prompt, attentive treatment they expect. It's not really the hospital's fault since it has to serve the needs of critically injured patient…. It means a lot of others are forced to wait…. We've tried to gear our service to those 90 percent of minor emergency patients who want quick competent care.

31 See generally Michaels Crouter, supra note 7, at 108.

32 See generally Zaremski Fohrman, supra note 6, at 4.

33 Id. There are also entities known as satellite centers. The satellite centers are often highly integrated with the hospital emergency room and may have the staffing, equipment, and capacity to handle life threatening situations. These centers more closely resemble hospital emergency rooms than FECs.

34 Retail “Emergicenters” Take Off, supra note 2, at 40N.

35 See Health Law Update, supra note 5, at 2.

36 Comprehensive Industry Study, supra note 12. O f t h e FECs surveyed, 72.9% were owned by physicians and 11% were owned by hospitals. The remainder listed other non-physician and non-hospital corporate forms of ownership. Additionally, 29.7% of the FECs stated they are part of a chain or network. This figure for FECs affiliated with chains is understated. Medfirst facilities which is owned by Humana Corp. and which operates approximately 60 of what it calls “extended-hours doctor's offices” declined to participate because it viewed their facilities as primary care providers not FECs. Letter from Gregory A. Culley M.D., Director of Operations, Primary Medical Management, Louisville, Kentucky (November 29, 1983).

37 Burns, Ferber, , supra note 11, at 73.Google Scholar

38 Id.

39 Zaremski, Fohrman, , supra note 6, at 6.Google Scholar

40 Report of The American Medical Association Board of Trustees', Freestanding Emergency Medical Care Centers Commission on Emergency Medical Services. Adopted by the House Delegates of the American Medical Association, June, 1983, Chicago, Illinois p.2 [hereinafter cited as Am. Guidelines].

41 See Michaels, Crouter, , supra note 7, at 109;Google Scholar Health Law Update, supra note 5.

42 N.Y. Health Codi. tit. X. Medical Facilities. § 405. 1033 (Emergency Service Department) (1977).

43 Id. at §§ 405.1033 (a)-(d).

44 Burns, Ferber, , supra note 11, at 75.Google Scholar

45 See Rhode Island Regulations, supra note 8.

46 See FEC Commitment, supra note 9.

47 Massachusetts regulations governing practice of Medicine, Mass. CODE tit. 2 4 3, § 2.00- 2.01 (1985).

48 42 U.S.C. §§ 300K-300n (1982).

49 See Payton, Powsner, , Regulation Through The Looking Glass: Hospitals, Blue Cross, and Certificate of Need, 79 Mich. Law Rev. 203 (1980)Google Scholar and N. Chayet Sunnenreich, Certificate of Need: An Expanding Regulatory Concept (1978) for more information on the CON process. Whether these goals have been achieved is a subject of much debate and is beyond the scope of this Note. See infra text accompanying notes 147-48 for a more detailed discussion of CON as applied to FECs.

50 Burns, Ferber, , supra note 11, at 76.Google Scholar

51 See generally Health Law Update supra note 5, at 5.

52 Doctor Surplus Breeds New Practice Forms, Washington Report on Medicine and Health Perspectives, (April 25, 1983) (McGraw-Hill) (supplement to Medicine Health).

53 In fact, an advantage of affiliation with a hospital can be the immediate goodwill the newly created FEC will enjoy. Letter from Rod Aries, Vice-President of operations, Medac, Fairlawn, Ohio (November 28, 1983).

54 See FEC Commitment, supra note 9.

55 Rhode Island Regulations, supra note 8.

58 Id.

57 Id. at § 7.0 (governing body and management).

58 Id. at § 11.0; see also Michaels Crouter, supra note 7, at 112-13.

59 Rhode Island Regulations, supra note 8, at §§ 8.0, 9.0.

60 Id. at § 9.0.

61 Id. at § 10.0.

62 Id. at § 18.0.

63 Id. at §§ 6.0-6.3.

64 Regulation and CON Imposed on all New Tennessee FECs, 3 Emergence, Oct. 1983, at 10. See also Tennessee Task Force on FECs Recommends Standards, 3 Emergence, June 1983, at 6. The recommendations included: a registered nurse on duty during all hours of operation, the facility must be open 365 days a year, it must be integrated into the EMS system and adequate medical records for each patient must be maintained.

65 Telephone interview with Louis Pomerantz, Chief of Office of Resources Development of Ohio (runs CON program) (January 5, 1984). See also Governor imposes CON on new FECs in Ohio, 3 Emergence Sept. 1983, at 9; NAFEC works to defeat Ohio CON, 4 Emergence, Feb. 1984, at 2; Quick Care Centers Moment of Truth, 24 Medical Tribune Aug. 31, 1983, at 1, col. 2.

66 NAFEC Files Policy and Legal Memoranda on Stringent Proposed Georgia Regulations, 3 Emergence, May, 1983, at 5 [hereinafter cited as NAFEC Files Policy]; Roberts, Choices, 3 Emergence, May, 1983, at 9.

67 Roberts, supra note 66, at 12.

68 Letter from Ralph W. Schaffarzick M.D., Senior Vice-President and Medical Director of Blue Shield of California, November 28, 1983.

69 Roberts, , supra note 66.Google Scholar

70 Am. guidelines, supra note 40.

71 Id. at 3.

72 Id. at 2.

73 Comprehensive Industry Study, supra note 12.

74 Am. Guidelines, supra note 40.

75 National Association of Freestanding Emergency Centers, Membership Standards and Industry Guidelines.

76 See Am. guidelines, supra note 40.

77 Id.

78 Id. at 2.

79 NAFEC Files Complaint against AMA, 3 Emergence, August 1983, a t 8.

80 Board Actions Taken in June: Accreditation Program Begun, 3 Emergence, August 1983, a t 8.

81 Id. at 7 (statement by Jim Roberts, NAFEC Managing Director). A group of FECs in the Massachusetts area also encourages regulations, advocating a “pro-active, walk right in the front door approach.” They feel that a reasonable set of regulations would not hurt their operation. They do not want to use a buyer-beware approach and feel that regulations will eliminate those FECs that are not doing a good job. Telephone interview with Dr. Joseph G. Maloney, M.D., Chief Medical Director of Health Stop Medical Centers, 26 Church Street, Cambridge, MA (December 21, 1983).

82 FEC Commitment, supra note 9.

83 NAFEC Files Policy, supra note 6 6.

84 NAFEC Files Complaint supra note 79, a t 8; see also NAFEC meets with FTC: Cost of Am. Guidelines Revealed, 3 Emergence, NOV. 1983, at 11, (“[T]he staff requirements and hours of operation specified in the AMA's guidelines would cost the typical FEC $203,576.25 on an annual basis. The equipment … [required] would increase FECs annual operating costs an additional $8,053.32 per year…. FECs patient load would have to increase by 4,500 patients per year to provide the revenues necessary to pay for the cost of implementing the AMA's criterion.“).

85 See Emergency Center Group Hits Am. Guidelines, American Medical News, July 22-29, 1983, at 1; Cost of Am. Guidelines Revealed, 3 Emergence, November 1983, at 11; NAFEC Files Policy, supra note 66.

86 Telephone interview with Tom Rossi, Executive Director of the Warwick Emergency Room (Nov. 29, 1983).

87 Telephone interview with Joyce Burns, administrator of the North Kingstown Medical Treatment Center, (Jan. 5, 1984).

88 Supra notes 86 87.

89 W. Reed, Freestanding Surgical Facilities (1981).

90 Health Law Update, supra note 5.

91 Nelson, , New “Walk-Away” Surgery Trims Medical Costs, Chicago Tribune, Nov. 11, 1981 at 35.Google Scholar

92 Letter from Thomas Skradski, Senior Research Associate of Health Care Analysis at BC/BS of Minnesota (March 13, 1984). In Massachusetts, a broad state policy is now under development to deal with a variety of health care issues pertaining to FASCs including rate setting, licensure, Con and quality of care. Dietz, , Profit Surgi-Centers Proposed, Boston Globe, Dec. 11, 1983 at 40, col. 3.Google Scholar

93 Brandstrader, , As More Women Have Babies in Birth Centers, Doctors, Hospitals Rethink Obstetric Procedures, Wall Street Journal, Nov. 29, 1983 at 6.Google Scholar

94 See generally supra notes 91, 92 93.

95 FEC Commitment, supra note 9, at Exhibit VIII. Sources of payment for FEC patient visits 1983—breakdown of Insurance:

Id.

96 See generally Health Law Update, supra note 5, at 5.

97 42 U.S.C. § 1395(d) (1980).

98 42 U.S.C. § 1395 (k) (1980). For a more detailed information on Medicare see Reider Kaple, An Overview of Medicare and Medicaid (1982); see also W. Cleverly, Handbook of Health Care Accounting and Finance (1982).

99 42 U.S.C. § 1395(x), (u) (1980).

100 See generally Michaels, Crouter, , supra note 7.Google Scholar See also Health Law Update, supra note 5 (for a more detailed discussion of the reimbursement issue).

101 Id. See also Physician Reimbursement under Medicare: Comment, Trends and Issues, 96th Cong. 2d Sess., Subcommittee on Health of the Committee on Ways and Means.

102 The Omnibus Reconciliation Act, 47 Fed. Reg. 34082 (1980) [hereinafter cited as Reconciliation Act].

103 Id.

104 Id.

105 These separate corporate entities share a single staff organization located in Chicago, Illinois. W., Cleverly, supra note 98,Google Scholar at 615.

106 Id. at 623, 630.

107 The Blue Cross and Blue Shield Associations, Statement of Policy on Relationships Between Blue Cross and Blue Shield Plans and Free Standing Ambulatory Care Facilities (Jan. 1982) [hereinafter cited as Blue Cross and Blue Shield Statement of Policy].

108 Letter from David Ehrenfried, Manager, Cost Containment Program Development, Blue Cross and Blue Shield Association, Chicago, Illinois (Dec. 29, 1983).

109 Id.

110 Id.

111 Letter from Rude Difazio, Media Relations Director, Blue Cross and Blue Shield of Michigan (Dec. 16, 1983).

112 Letter from Robert D. Pearcy, Senior Director, Professional and Institutional Affairs, Blue Cross and Blue Shield of Kansas (Dec. 14, 1983). See also Development Guidelines, supra note 21, at 322.

113 Id.

114 Telephone interview with John Gorman, Manager, Alternative Delivery Systems, Blue Cross and Blue Shield of Rhode Island (Jan. 18, 1984).

115 Letter from Thomas Skradski, Senior Research Associate, Health Care Analysis, Blue Cross and Blue Shield of Minnesota (Mar. 13, 1984).

116 Health Law Update, supra note 5.

117 Nelson, , supra note 91.Google Scholar

118 Ehrenfried, , supra note 108.Google Scholar

119 Id.

120 Letter from Robert E. Tremain, Vice-President, Health Care Services, Blue Cross and Blue Shield of Delaware (Feb. 1, 1984).

121 Standards for Ambulatory Urgent Care Facilities, Blue Cross and Blue Shield of Arizona, Inc., (Aug. 15, 1982). A sample of the standards established for FECs by BC/BS of Arizona include: the facility must be open at least 16 hours a day, 7 days a week; provide the services of at least one licensed RN; maintain adequate records; provide for periodic review of the facility; and maintain written agreements with one o r more BC/BS member hospitals in the area for immediate acceptance of patients who develop complications or require coinsurance. See also Dietz, , Profit Surgi-Centers Proposed, Boston Globe, Dec. 11, 1983 at 40.Google Scholar

122 Letter from Joe Villegas, Administrator, Community Education, BC/BS of Arizona (Feb. 3, 1984).

123 Letter from John M. Vallance, Senior Claim Consultant, Group Insurance Department, GFSO, The Prudential Insurance Company of America (Nov. 16, 1983).

124 Id.

125 Id.

126 Id.

127 Aetna Life Casualty, Prototype Cost Containment Plan (July 15, 1983).

128 Id.

129 Telephone interview with Ilene Ford, John Hancock Insurance Company (Oct. 20, 1983).

130 See Emergency Centers on Rise in U.S., Los Angeles Times, May 22, 1982, at 29 (see p. 30 for a study conducted by Blue Cross of Southern California showing FECs’ lower rates for common charges compared to hospital ERs); Docs-in-a-box Medicine, supra note 12, at 65.

131 FEC Commitment, supra note 9.

132 Comprehensive Industry Study, supra note 12, at S-3. The average charge per patient visit during 1982 among 137 reporting FECs was $42.39. In a survey conducted among 50 hospitals (as part of the Industry Study) the average charge for the emergency room visit was reported to be $115.00.

133 Id.

134 Milne, Ohio ED's Cutting Costs To Vie With Competing Free-Standers, Emergency Department News, Apr., 1983 at 1. Hospitals lowered their fees for emergency rates of $80 to $125 to the new rates averaging $25 to $50 per visit.

135 Friedman, , supra note 23, at 74.Google Scholar

136 Blue Cross and Blue Shield Statement of Policy, supra note 107.

137 Difazio, , supra note 111.Google Scholar

138 See generally C. Havighurst, Deregulating the Health Care Industry 369 (for a more in-depth economic analysis).

139 Id.

140 Id.

141 Friedman, , supra note 23, at 68.Google Scholar

142 Emergency Centers on Rise in U.S., supra note 130, at 3 2.

143 Friedman, , supra note 23, at 64.Google Scholar

144 Id. at 68.

145 C., Havighurst, supra note 138.Google Scholar

146 Id. at 371.

147 See supra notes 58 73 and accompanying text.

148 Payton Powsner, supra note 49. The authors discuss the failure of CON to reduce hospital costs. They attack the theory that controlling hospital construction will control costs and point out that CON has resulted in larger hospitals although smaller hospitals are less expensive.

149 Letter from Rod Aries, Vice-President, Med/Access, Inc., Fairlavvn, Ohio (Nov. 28, 1983). He suggests that to make the consumer more aware of the financial implications of health care, it would be beneficial to create a higher co-payment or higher deductible when using higher cost alternatives (example: a patient going to a hospital emergency room for a minor accident would be liable for a 20% co-payment, while the patient utilizing lower cost alternatives, such as a KEC would receive 100% reimbursement.

150 NAFEC Explores Medicare Integration In July Discussion With HCFA Officials, 3 Emergence, Aug., 1983, at 3.

151 Board Actions Taken in June Accreditation Program Begun, 3 Emergence, Aug., 1983, at 7.

152 Reconciliation Act, supra note 102.

153 Id. at 34091.

154 Michaels Crouter, supra note 7, at 111.