Policy Implications of Freestanding Emergency Departments

Abstract

Policymakers have a responsibility to look at both the short- and long-term implications of their decisions. The state’s current fiscal situation, coupled with rising health-care costs makes “budget neutrality” highly desirable in decision-making. In spite of efforts to bend the cost curve, health expenditures have grown inexorably in Alaska. As of 2009 our health expenditures per capita were the second highest in the nation. This means that the state spends a larger portion of its budget on health costs, employers allocate more of employees’ compensation to health premiums, and households spend more of their disposable income on out-of- pocket costs, premiums, and co-pays. The evidence we provide in this analysis consistently shows that freestanding emergency departments charge higher prices for services that are available for considerably less in traditional settings. Allowing freestanding emergency departments to enter the Alaska market goes against the many efforts being undertaken to contain health-care costs. Markets forces explain a significant portion of the high health-care prices charged in Alaska, but in this case the state has an opportunity to use its regulatory authority to help prevent even higher prices in the future. Putting costs aside, in considering emergency services one needs to rationalize the hospital and clinical capacity across a region and the needs of the population. In the Alaska health-care system there are problems with coordinating the delivery of care. Freestanding emergency departments pose the risk of exacerbating that lack of coordination, if people use them in lieu of seeing their primary physicians—which can disrupt the continuum of care and potentially hurt outcomes for patients.