Bloomberg News

Aetna Opposes Investor-Owned ERs as $1,500 Fees Charged

April 01, 2013

Aetna Opposes Investor-Owned ERs Charging $1,500 Fees

A patient receives an ultrasound at a freestanding emergency room in Illinois. Photographer: M. Spencer Green/AP Photo

After developing a chest cold and breathing problems last year, Susan Alexander went to First Choice ER, an independent emergency room in League City, Texas, drawn by its motto: “Real ER. Real Fast.”

Treatment was indeed speedy, about 20 minutes. It was also real expensive, Alexander said. The bill was about $2,000, or as much as five times what the 56-year-old nurse might have paid for similar care at a doctor’s office. The charges included a $1,518 “facility fee,” typically assessed by hospitals and their ERs to support the space, services and equipment needed to keep dozens to hundreds of beds available.

Yet First Choice looks nothing like a hospital. It sits in a single-story commercial building that shares parking space with a hair salon and an energy company. Alexander was left with an out-of-pocket bill of about $700.

“I was astonished,” she said in a telephone interview. “It’s a rip off.”

Freestanding ERs are among the fastest-growing areas of medical care, often offering 24-hour service, minimal waits, board-certified emergency specialists and complex testing technology. Proponents say they provide a safety-valve for overcrowded and understaffed hospital ERs. Critics worry they’ll make care more expensive for those not seriously ill, adding to national medical costs expected to rise to $3 trillion in 2014 and undercutting efforts by the 2010 health-care law to reduce payments for individual medical services.

On Par

First Choice and other stand-alone ERs say consumers should expect charges on par with those in hospitals because the service it offers is similar.

“We’re an ER,” First Choice spokeswoman Heather Weimer said in a telephone interview. “That means it will cost more. We don’t try to hide it.”

Alexander’s case was “atypical,” according to Weimer. It required a chest X-ray, steroid and breathing treatment and took longer than 20 minutes, she said. First Choice had no control over her out-of-pocket costs since that was based on what her insurer covers, Weimer said.

Consumers and some health insurers have a different view. Led by Aetna Inc. (AET:US), they say the facility fees charged by many of the new ER aren’t justified and lack transparency. Hospitals contend the facilities drain away the privately insured, high- paying patients they need to survive. And many don’t treat the uninsured or patients on government health plans, people hospital emergency departments are required to serve.

State Legislation

That has prompted some states to require freestanding ERs that don’t take Medicare and Medicaid to provide critical treatment to anyone having a health emergency, regardless of the ability to pay. Medicare is the U.S. health program for the elderly and disabled. Medicaid is the joint U.S.-state plan for the poor.

Some stand-alone ERs are owned by doctors and investors, and others by hospitals, which do take Medicare and Medicaid and are bound by a U.S. law that they treat all emergencies. Critics say both often bill excessive fees even though they largely treat patients with non-critical ailments such as the flu or sore throats who could be seen in doctor’s offices or urgent care centers -- practices designed to treat illnesses that aren’t life-threatening.

“Physician and investor-owned ERs are skimming off the cream-of-the-crop patients,” said John Milne, chairman of emergency medicine at Swedish Medical Center, a nonprofit health-care system in Issaquah, Washington. “Many are glorified urgent-care centers, but they still bill ER charges.”

Price Differences

The differences in price are substantial, according to a 2011 report for the Urgent Care Association of America. Freestanding ERs charge as much as $500 per patient, versus $135 for urgent-care centers, the report found. At the same time, patients seen in freestanding facilities are much less likely than those going to hospital ERs to require complex care, according to the report.

Unattached ERs and urgent-care centers transfer patients needing critical care to hospitals, and freestanding ERs typically have agreements with hospitals to take their patients. Facility fees in hospitals are intended to help them survive as insurers cut back payments for individual procedures. The fees typically cover items such as safe food, clean rooms, nursing care and administration costs, said Caroline Steinberg, vice president of trends analysis at the American Hospital Association in Chicago.

“Hospitals couldn’t be open without being able to charge facility fees,” Steinberg said by phone. “It’s much more expensive to run a hospital than a physician’s office.”

Higher Expenses

Tim Seay, president of the Greater Houston Emergency Physicians PLLC, which staffs four freestanding ERs in Texas, counters that freestanding ERs also need to charge such fees. The expenses of a stand-alone ER are more than 10 times those of a doctor’s office or urgent-care center, with requirements for equipment such as CT scanners, Seay said in an e-mail.

Hospitals “massage any message to prevent competition that raises any health-care bar,” he said.

Aetna, the third-largest private Medicare insurer, has sued at least three freestanding ERs and a hospital. In a lawsuit filed in August and amended in December 2012 in Houston federal court, Aetna said the ERs have “wrongfully submitted facility fees.” The businesses have “masqueraded as hospital emergency rooms, without a license or any of the associated overhead,” Hartford, Connecticut-based Aetna said in the suit.

Sham Contract

The insurer contends that Rayford ER Management Co. LLC and two other freestanding ERs entered into a “sham” management contract with Cleveland Imaging and Surgical Hospital LLC in Cleveland, Texas. The ERs began seeking facility fees using the hospital’s tax identification number as a “front,” according to the lawsuit. Aetna has paid the three ERs almost $6 million, according to the complaint.

Larry Thompson, a lawyer at Lorance & Thompson, P.C. in Houston, represents the stand-alone emergency departments. They don’t need to be licensed by the state because of legitimate agreements with the hospital, he said.

“They are emergency departments, they bill as emergency departments, but because they’re not on a hospital campus, Aetna says they want their money back,” Thompson said by phone. “They’re picking on the little guys.”

Humana Inc. (HUM:US), the second-biggest private Medicare insurer, and not party to the Aetna lawsuit, said in a statement that it’s concerned patients don’t understand the cost differential between freestanding ERs and urgent care centers.

Dog Bite

That’s the situation of 52-year-old Diane MacQuoid, a retiree from a manufacturing distribution business. She said she was charged more than $1,300 -- including a $625 facility fee -- for treatment of a dog bite at a First Choice ER in Humble, Texas. She said she is paying $655 out-of-pocket.

“Nobody informed me there was a facility fee,” MacQuoid said. “There are clinics I could have gone to a mile away. It’s excessive. That could be someone’s grocery bill for months.”

First Choice’s website includes an explanation of its fees. It uses “a point system based on procedures performed, patient acuity, potential liability and the complexity of the physician/patient interaction.”

Weimer, the First Choice spokeswoman, said MacQuoid’s out- of-pocket expense was high because her insurance deductible wasn’t met for the year. MacQuoid’s and Susan Alexander’s cases reflect the need for consumers to be better educated about how emergency departments are different than urgent care, Weimer said.

Texas Law

Texas passed a law in 2009 requiring licensed stand-alone ERs to provide whatever treatment is needed to ensure patients are stabilized, which generally means they can be safely transferred to a hospital, regardless of their ability to pay. The state also has rules governing hours of operation and required equipment. As of Feb. 12, Texas had 56 licensed, stand- alone ERs, according to the state’s health services department.

At least 16 states have laws allowing freestanding ERs, with varying licensing and operational guidelines, according to the American College of Emergency Physicians, or ACEP, in Washington. Delaware doesn’t restrict who can own stand-alone ERs and requires that they provide service 24 hours a day, according to ACEP. Rhode Island doesn’t require they be open around the clock and Idaho says they must be owned by a hospital with a dedicated emergency department of its own.

Forty-five states now have freestanding ERs owned by hospitals, led by Ohio with 29, Texas with 26, and Mississippi with 20, according to the American Hospital Association.

Hospital-owned ERs shouldn’t be lumped in with other facilities, said Trevor Fetter, chief executive officer of Tenet Healthcare Corp., (THC:US) the third-biggest publicly traded U.S. hospital chain.

Freeing Capacity

ERs owned by hospitals, he said, are indistinguishable from those located inside the main facility and they help keep the medical centers on an even financial keel. Building a hospital may cost $130 million, he said, versus $5 million or $10 million for one of Tenet’s freestanding ERs. Tenet has four such facilities, all in Texas, that the Dallas-based company says charge the same fees as those located inside a hospital.

“Years ago, everything happened at the hospital,” he said in an interview Tenet’s Dallas headquarters. The trend toward stand-alone ERs “is freeing up capacity at the hospital.”

The case is Aetna Life Insurance Co. v. Cleveland Imaging and Surgical Hospital LLC 4:12-cv-02451, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Stephanie Armour in Washington at sarmour@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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Companies Mentioned

  • AET
    (Aetna Inc)
    • $69.87 USD
    • -1.76
    • -2.52%
  • HUM
    (Humana Inc)
    • $108.8 USD
    • -0.85
    • -0.78%
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