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 ...view middle of the document...
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 provided at not-for-profit hospitals.
With the addition of an urgent care center in this market there will be a reduction in the non-emergency care in the emergency department. This will reduce the demand for ED visits and the ratio of patients with insurance to offset the cost of uncompensated care. With a decrease in demand we should see a decrease in the cost of emergency room visits as more patients get their non-emergency care at urgent care centers. The new healthcare reform will eventually reduce the burden on hospitals and insurance companies by providing the means for everyone to have healthcare and increase the ratio of insured patients seeking treatment.
Urgent Care Economics
Unlike an emergency department, urgent care centers do not charge facility fees. Insurance companies and patients are only charged for services rendered. Urgent care centers provide a high level of non-emergency care at a similar cost as it would to visit a doctor’s office which is about 1/10th of the cost of...