On the creation of free-standing emergency departments by hospitals—Some insights

Emergency departments (EDs) are an integral part of many acute care hospitals. Recently, however, hospitals have been increasingly experimenting with a new type of ED, for example, freestanding emergency departments (FSEDs). These are EDs that are physically separate from acute care hospitals but provide many of the same services provided by traditional EDs. Because of this geographic decoupling between the parent hospital and the FSED, hospitals can potentially reach out and provide services to user groups that may otherwise have been located too far away to serve. While this sounds good in theory, some have argued that FSEDs often get located in geographically proximate markets, rather than truly underserved areas, thereby exacerbating health care inequities. The current study investigates hospitals setting up FSEDs and examines their accrued business impacts to the parent hospital. By gathering a panel dataset covering several years of FSED openings and hospital performance, we examine how market share and operating margins of parent hospitals are impacted when they set up FSEDs. Results indicate that while there are some positive performance implications for hospitals who create FSEDs, a majority of these benefits are seen only for the first FSED created. We contend that this finding is driven by the fact that FSEDs are unlikely to be able to truly reach out to untapped populations, on account of their inherent nature. In conclusion, we question whether FSEDs are indeed a scalable approach to increasing health care access and reach.