Q&A with Code 3 ER on free standing ERs, the legislature and payer relations

Code 3 Emergency Room and Urgent Care is a chain of free-standing emergency rooms and urgent care facilities operating in  North Texas. This interview was conducted with Code 3’s CEO Carrie de Moor, MD and Paul Kivela, Chief Strategy Officer in response to coverage of free standing ERs over the weekend and a busy legislative session on topics related to free standing emergency rooms.


DJ: The Dallas ABC affiliated WFAA aired a story this weekend on free standing ERs citing a study which said that “prices for patients with the same diagnosis were on average almost 10 times higher at freestanding and hospital-based EDs relative to urgent care centers.”  What was accurate, and what was perhaps not accurate, in your view about that coverage?

Carrie: My general take was that it used the same mantra and data, which has been reported over and over again, and which only has one source. That is the insurance giants. There is no fact checking, there is no calling their data into question. They come in, they throw down these big numbers, and nobody is really paying attention to what is  actually occurring and why it occurs.  The number one issue in that, which I think is a major take away, and I am glad that they admitted, that Blue Cross Blue Shield does not have an adequate network for the ever growing emergency care needs of North Texas. So, aren’t they creating this situation for their members?


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DJ:  What about this point from the story, which they cite from a study in the Annals of Emergency Medicine, that free standing ERs are as much as ten times more expensive than hospital-based emergency rooms?

Carrie: We know for a fact that we are 30-40 percent less expensive than the hospitals that they negotiate with, but yet they won’t negotiate with the smaller players like us. They control the messaging because they have all the money.

We did a study in 2017 that was presented at the Texas Medical Association Annual Meeting, and it showed that the majority of the free-standing emergency rooms wanted to be in network, but were denied access. So, I think that was a huge take away.

Paul: I think there are several issues going on here. We can speculate as to the reasons, but I think it is important to bring this back to the facts. And the reason that a lot of free-standing emergency rooms came up in the first place was that the population grew very quickly here in North Texas, and the wait times in 2008-2009, even as long ago as 2012, the wait times were 4 hours, 8 hours.

Now that there is free standing ER, those wait times are 20 minutes, nobody is over 40 minutes. It has taken a monopoly of the hospitals where people are going to hospitals, waiting 4 hours and then leaving.

This has given people access to care, given them an alternative, given them competition. Our motto here at Code 3 is to provide better, faster, less expensive care with a higher satisfaction level. And it hurts me that the insurance companies find that to be a problem. That is the thing that I think is really disappointing to me.


DJ: Let me ask you this, do you think that if you were contracted with health plans you would, that your organization would keep seeing those 30-40 percent savings? Rates for billed charges aren’t the same as rates for negotiated reimbursement.

Carrie: It would absolutely continue. We know the mega hospital systems of the world and they are driving up costs via consolidation and market power for negotiation. In network price gouging occurs in these big systems, they have the negotiating power, and they go negotiate these mega contracts, and then what is left for the rest of us is that the insurers with the largest market power will not contract with us, even though that would be the best thing for their members.


DJ: How would you characterize this tension between health plans and some of these free-standing emergency rooms, and how that has played out in the legislative session this year. We are seeing more legislation trying to regulate you guys. How would you characterize how this session went, and what from your view still needs to be done?

Carrie: I think that the new new requirements for  transparency from hospitals and proposed transparency of relationships between hospitals and payers needs to be out there. Network adequacy was something that everybody was talking about this session as well, and so that was a glaring problem that we will still need to work to fix. The statements that freestanding ERs are driving up costs is really untrue. And one thing that I will say from the legislative session that was good, is that HB 2041 will require us to post our charges and report to the State, just like hospitals. So now we are going to be out there, and everybody is going to see the reality because we are going to be reporting it. I think that was necessary, and even though it looks like the law is cracking down on us, the majority of free-standing emergency rooms are not bad actors. There are some, but the majority are not. There have been a number that have closed, and generally that is because of the predatory underpayment of insurers that throw their weight around. The law is very clear how they have to pay their bills, and how they have to cover their members. They should not be saying they cover you when they do not.


DJ:  Can you tell me a bit about the hybrid model that Code 3 has developed?

Paul: There has been some miscommunication, some misunderstanding between patients, clearly and that is why we offer something that is a hybrid model. That if they need an emergency department and an emergency room, we are the best option. So many times, you go to an urgent care, and a percent of people end up going to an emergency room. We offer a solution that I think is what people are looking for right now.

Negotiations have never been fair. And that is what people deserve, a clear understanding of what is happening in health care so that they can make informed decisions and get access to the care that they pay good money for. They should have quality care, and they should have a choice.


DJ: What do you make of the distinction that is made between hospital emergency rooms and independent emergency rooms? I often hear the logic that independent ERs, which may be funded by venture capital, are not as connected to the community as hospital-based ERs. 

Carrie: So, the funny thing is that they are saying all this about venture capital. There are very few, those that are independent are generally physician owned practices, they are not venture capital backed. That is just not the case. We are physicians trying to create our own practices and avoid burnout, it is not about venture capital. If it was venture capital, everyone would convert into a micro hospital and then would not have to play by the same rules. So, it is does not make sense to say that. It has not been our experience that they want to work with local physicians and local practices.


This story has been updated with a quote from the original study clarifying the relative costs by location of care delivery.