Investing in Freestanding ERs

[goodoldalky]

Do you have any insight as to what is driving this change, and whether its consequence will be restricted to reducing ROI on investing in freestandings, or also actually negatively impact the demand for EPs by shuttering a large number of facilities?

There are a lot of factors driving this change. A few main reasons why the luster has worn off the FSED:

1. Shifting of insurance plans to consumer driven / high deductible plans: nowadays, if you are in the FSED business, you are in the collections business. Health insurance plans have a high deductible, counsurance, copay, etc. you are unlikely to see a check from the insurance provider, you are increasingly likely to have to collect a large portion or all of the bill direct from the patient.

2. Balance billing profit model: this won't work anymore. Four reasons: 1. The reason above. You have to collect from your customer. This is bad. 2. Legislation is targeting balance billing profit models - now, in Texas, if you get a balance bill for over $500, you ship it off to the board of insurance and they mediate some other arbitrary value. Bill for 4K for sutures? Mediate that down to 1k, rinse and repeat. 3. State legislations generally mandating or equating to an emtala "see it if it walks in the door" standard. 4. Loss of leverage negotiating with insurers due to the above plus disadvantages of economies of scale.

3. Bad press and more consumer awareness. Look at the NYT article on emcare regarding balance billing. There have been 10 o'clock news stories and newspaper articles shedding light on the FSED billing which right or wrong fault of insurers or not results in somewhat unexpected out of pocket expense for consumers.

Legislation is a problem but the real axe is the court of public opinion.

There is an EP shortage even without FSEDs. There will be demand but the changes in practice conditions for EPs is still likely to be affected negatively in the coming years, mainly due to reimbursement limitations in MACRA, and further consolidation of employers. (Hopefully this effect is relatively mild and I think will be counteracted to an extent by the shortage of EPs).

---

Members don't see this ad.

 

[deleted206819]

Don't take this the wrong way, but from reading your post you should not be investing in FSEDs.

Texas has no requirement for certificate of Need which is why there are so many.

Adeptus (stock symbol ADPT) was the largest privately owned FSED chain, whose stock went from about $160 to $1 in the last year.

Generally speaking, the floor is falling out of the FSED market. Barring unique circumstance, it is a good way to lose money if you are entering the space right now.

The floor is falling out of the FSED market only if you are Adeptus, gouging your patients for non-emergency conditions, and balancing billing everyone. Those that are doing the opposite are doing well.

 

[deleted206819]

There are a lot of factors driving this change. A few main reasons why the luster has worn off the FSED:

1. Shifting of insurance plans to consumer driven / high deductible plans: nowadays, if you are in the FSED business, you are in the collections business. Health insurance plans have a high deductible, counsurance, copay, etc. you are unlikely to see a check from the insurance provider, you are increasingly likely to have to collect a large portion or all of the bill direct from the patient.

2. Balance billing profit model: this won't work anymore. Four reasons: 1. The reason above. You have to collect from your customer. This is bad. 2. Legislation is targeting balance billing profit models - now, in Texas, if you get a balance bill for over $500, you ship it off to the board of insurance and they mediate some other arbitrary value. Bill for 4K for sutures? Mediate that down to 1k, rinse and repeat. 3. State legislations generally mandating or equating to an emtala "see it if it walks in the door" standard. 4. Loss of leverage negotiating with insurers due to the above plus disadvantages of economies of scale.

3. Bad press and more consumer awareness. Look at the NYT article on emcare regarding balance billing. There have been 10 o'clock news stories and newspaper articles shedding light on the FSED billing which right or wrong fault of insurers or not results in somewhat unexpected out of pocket expense for consumers.

Legislation is a problem but the real axe is the court of public opinion.

There is an EP shortage even without FSEDs. There will be demand but the changes in practice conditions for EPs is still likely to be affected negatively in the coming years, mainly due to reimbursement limitations in MACRA, and further consolidation of employers. (Hopefully this effect is relatively mild and I think will be counteracted to an extent by the shortage of EPs).

If your FSED business is built on over-charging everyone and anyone coming into your facility then you as an owner will be having problems. Don't build your business on balance billing, appropriately charge everyone, and engender yourself to your local community by doing the right thing even if it means losing money on the visit.

We are not seeing these problems at our facility and have already put plans in place if the market forces or legislation turns for the worse. This is a business after all and you should be prepared for whatever comes down the pike.

 

[deleted109597]

The only issue I see is if you've got a narrow margin, it doesn't take much for yet another "competitor" to open up and possibly make you run in the red. Like Amazon, if Neighbors or THR comes in, their plan is to own the market. They'll take a short term loss if they need to. They know the private groups have a much harder time of it.
And like that, the FSED game is getting closer and closer to the CMG/SDG game.