Health Policy, Health Policy Journal Club

If You Build It, They Will Check In

Like many other cases in health care, supplier-induced demand hits emergency care.

As freestanding emergency departments (FSEDs) grow in number, so grows their financial impact on U.S. health care spending. A recent study analyzed the effect of FSEDs on Medicare expenditures while considering confounding economic variables present in the healthcare marketplace. Ultimately, the authors’ conclusions reveal the chronic conundrums of market behavior.

The authors hypothesized that increased utilization of FSEDs by patients with lower acuity medical complaints coupled with higher reimbursement (physician fee plus facility fee) would lead to higher average Medicare expenditure per Medicare beneficiary. The study considered each county and its FSEDs as a discrete market. Furthermore, the methods controlled for economically relevant variables including market competition between hospitals within counties, per capita income, unemployment rates, and number of primary care physicians.

The results confirm their hypothesis. Medicare expenditures did increase as a function of increased number of FSEDs within a county, albeit by a modest 0.7% relative to the average cost (more than $9,000 per patient). Interestingly, there were no expenditure differences between those counties with increased market competition (ie, greater number of emergency facilities) compared to those deemed less competitive.

Such a result nods towards the Jevons paradox borrowed from the field of economics. FSED proponents assert that these facilities provide care more abundantly and efficiently as evidenced by improved access with shorter wait times. However, as stated by Stanley Jevons, those increases in abundance and efficiency paradoxically increase consumption. Increased utilization of this kind suggests it may be time to shift reimbursement models toward a dynamic system, more closely mimicking prices in higher-functioning markets. As the supply of FSEDs increases perhaps reimbursements rates for such services should fall commensurately. This kind of change may reduce the absolute monetary cost to Medicare, thereby saving tax-payer dollars.

These results reaffirm the complexities of health market behavior, showing that increased supply leads to increased utilization. What is the upper limit of that effect? And will supply ever outpace demand?

ARTICLE: Patidar N, Weech-Maldonado R, O'Connor ST, Sen B, Trimm JM, Camargo Jr CA. Freestanding Emergency Departments Are Associated with Higher Medicare Costs: A Longitudinal Panel Data Analysis. Inquiry. 2017; 54.

ABSTRACT: The number of freestanding emergency departments (FSEDs) is growing rapidly in the United States. Proponents of FSEDs cite potential benefits of FSEDs including lower waiting time and reduced travel distance for needed emergency care. Others have suggested that increased access to emergency care may lead to an increase in the use of emergency departments for lower acuity patients, resulting in higher overall health care expenditures. We examined the relationship between the number of FSEDs in each county and total Medicare expenditures between 2003 and 2009. Our results show that each additional FSED in a county is associated with an expenditure increase of $55 per Medicare beneficiary. This finding suggests that even if FSEDs may increase access to emergency care, it may result in higher overall Medicare expenditures.

PMID: 28853305


EMRA + PolicyRx Health Policy Journal Club: A collaboration between Policy Prescriptions and EMRA


As emergency physicians, we care for all members of society, and as such have a unique vantage point on the state of health care. What we find frustrating in our EDs - such as inadequate social services, the dearth of primary care providers, and the lack of mental health services - are universal problems.

As EM residents and fellows,  we learn the management of myocardial infarctions and traumas, and how to intubate, but we are not taught how health policy affects all aspects of our experience in the ED. Furthermore, given our unique position in the health care system, we have an incredible opportunity to advocate for our patients, for society, and for physicians. Yet, with so many competing interests vying for our conference education time, advocacy is often not included in the curricula.

This is the gap this initiative aims to fill.  Each month, you will see a review of a new health policy article and how it is applicable to emergency physicians.

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