Economics of an Urgent Care Center in a Market of Emergency Departments

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  • Topic: Urgent care, Hospital, Emergency department
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  • Published : October 1, 2012
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Economics of an Urgent Care Center in a Market of Emergency Departments

One of the contributors to the rising cost of Healthcare can be attributed to the over use of emergency departments (EDs) for non-emergency needs. In the greater Capitol/First/Beacon Hill area there are three major hospitals (Virginia Mason, Harborview, and Swedish) with emergency rooms and no urgent care centers with the exception of Group Health which is restricted to Group Health insurance members. The question I asked myself is, “Why does Group Health have urgent care for their insurance plan members and the major hospitals in Seattle do not.”

Urgent vs. Emergency Care
A study by the CDC showed that approximately 70 % of emergency department visits can be treated in a typical primary care or urgent care setting and another study by National Center for Policy Analysis demonstrated that only 13% of patients that sought treatment in the emergency department were clinically appropriate. Reasons for non-emergency visits to the ED range from access issues to primary care providers (wait times, no primary care provider assigned, or no insurance) to a lack of knowledge that they could have been treated at an urgent care or primary care setting.

There are good reasons to visit the emergency department:
* Trauma due to an accident or assault | * A wound that will not stop bleeding| * Shortness of breath| * Vomiting blood|
* Chest pain| * Sudden loss of consciousness|

For true emergencies the market is very inelastic, patients will spend whatever it takes to receive treatment. They do not shop around to find the best price but typically visit the closest emergency department.

Urgent care centers provide a wide range of services from simple sports physicals and flu shots to fractures and minor lacerations that need sutures. Patients who typically visit the urgent care center have immediate needs and are not able to see their primary care provider or do not have one.

Most urgent care settings are staffed with family medicine physicians or emergency room physicians. They are typically supported by physician assistants and/or ARNPs with emergency room experience and can provide a high level of care for urgent cases.

The emergency department provides emergency services to the community which includes indigent care. There is a significant cost to payers when a patient visits the emergency department. While there are justification for these higher fees, may people will visit the emergency department for ailments that can be treated in the doctor’s office. Patients do not see the full impact of the higher cost since their insurance company only charges a slight increased co-pay when seen in the emergency department compared to a physician’s office visit ($20-25 physician office co-pay to $50-100 emergency room co-pay). The typical reimbursement for a physician office or urgent care visit is $156 for a first time visit and $112 if the patient has been seen before compared to $1,539 for an emergency room visit. As you can imagine, healthcare insurance companies would prefer patients to be seen in an urgent care center over an emergency department if appropriate.

Emergency Department Economics
A large portion of the difference cost between the urgent care center and the ED is associated to the “Facility Fee”. This is a fee that hospital’s charge for the use of the facility (exam, emergency, and procedure rooms, etc.) of any hospital space, not just a hospital room. Medicare slightly reduces the reimbursement for sites that use facilities fees but these fees are not regulated and are not transparent to most patients.

Hospitals use the Facility fee to offset their cost to provide care for those who are not able to afford it or do not have healthcare insurance. A great deal of this care is written off as uncompensated care and to help offset this loss, patients and insurance companies pay more for services...
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