Freestanding ERs: Convenient Care or Surprise Bill Factories? The Explosive Growth of Off-Campus Emergency Departments

The freestanding emergency department is one of the most successful healthcare business innovations of the past two decades — and one of the most contested. Its proponents argue that it extends emergency care to communities that lack convenient access to hospital-based ERs, reduces crowding at main campuses, and provides a high-quality care environment. Its critics argue that it is primarily a vehicle for billing patients at hospital rates for conditions that could be treated at urgent care prices, that it is disproportionately located in affluent, well-insured communities rather than the underserved areas that need emergency care most, and that it has been a major driver of surprise medical bills.

What a Freestanding ER Is — and Is Not

A freestanding emergency department (FSED) is a facility that provides emergency medical care but is not physically attached to a hospital. It is staffed by emergency physicians and nurses, equipped to handle a wide range of emergencies, and licensed as an emergency department — which means it is subject to EMTALA and must provide a medical screening examination to anyone who presents, regardless of ability to pay.

FSEDs come in two main varieties. Hospital-affiliated FSEDs are owned and operated by hospital systems as satellite facilities — they are legally part of the hospital and bill under the hospital's Medicare and Medicaid provider number. Independent FSEDs are freestanding businesses, not affiliated with a hospital, that operate under their own licenses. The distinction matters enormously for billing: hospital-affiliated FSEDs can bill Medicare and Medicaid; independent FSEDs generally cannot, which means they are primarily dependent on commercial insurance and self-pay patients.

FSEDs are distinct from urgent care centers, though patients frequently confuse the two. Urgent care centers are not licensed as emergency departments, are not subject to EMTALA, and bill at urgent care rates — typically a fraction of what an ER charges. An FSED that looks like an urgent care center but is licensed as an emergency department will bill at emergency department rates, including facility fees that can add hundreds or thousands of dollars to a visit.

The Growth Story: 2005–2026

The first freestanding emergency departments in the United States opened in Texas in the early 2000s, taking advantage of a state regulatory environment that was unusually permissive toward independent FSEDs. Texas allowed independent FSEDs to operate and bill commercial insurers at emergency department rates — a business model that proved highly profitable in the affluent suburban markets where most Texas FSEDs were located.

The Texas model spread rapidly. By 2010, FSEDs were operating in more than a dozen states. By 2015, the number had grown to approximately 400 facilities. By 2026, the ACEP estimates that more than 700 FSEDs are operating nationwide, with the largest concentrations in Texas, Ohio, Colorado, and Florida. Hospital systems — including major academic medical centers — have embraced the FSED model as a way to extend their geographic reach and capture patients in suburban markets before they can be seen by competitors.

The growth has been driven by several factors. FSEDs are profitable: they have lower overhead than hospital-based ERs (no inpatient units, no operating rooms, no ICUs), they can be selective about the patients they serve (by locating in affluent, well-insured communities), and they bill at hospital ER rates. They also offer a genuine patient experience advantage: wait times at FSEDs are typically much shorter than at hospital-based ERs, and the facilities are newer and more comfortable.

The Cream-Skimming Critique

The most serious criticism of the FSED model is that it is designed to serve profitable patients — commercially insured, relatively healthy, presenting with lower-acuity conditions — while avoiding the high-cost, high-complexity patients who make up a disproportionate share of hospital-based ER volume. This practice, known as "cream-skimming" or "cherry-picking," is not unique to FSEDs, but the FSED model is particularly well-suited to it.

The geographic distribution of FSEDs supports the cream-skimming critique. A 2022 analysis published in JAMA found that FSEDs were significantly more likely to be located in high-income, predominantly white ZIP codes than in low-income or minority communities — even controlling for population density and distance from hospital-based ERs. The analysis found that FSEDs were 3.4 times more likely to be located in ZIP codes with median household incomes above $75,000 than in ZIP codes with median incomes below $40,000.

The clinical implications of cream-skimming are significant. When FSEDs capture the lower-acuity, commercially insured patients who would otherwise go to hospital-based ERs, they reduce the revenue that hospital-based ERs use to cross-subsidize the care of uninsured and Medicaid patients. Hospital-based ERs are left with a higher proportion of complex, high-cost patients and a lower proportion of the commercially insured patients whose payments support the system. The result is increased financial pressure on safety-net hospitals and the communities they serve.

The Regulatory Patchwork

The regulation of FSEDs varies dramatically by state. Some states — including Texas, Colorado, and Ohio — have relatively permissive regulatory environments that allow independent FSEDs to operate and bill commercial insurers at emergency department rates. Other states — including New York and California — have effectively prohibited independent FSEDs by requiring that emergency departments be affiliated with licensed hospitals. Most states fall somewhere in between, with varying requirements for staffing, equipment, transfer agreements, and billing practices.

The federal regulatory framework for FSEDs is similarly fragmented. Medicare covers hospital-affiliated FSEDs that meet certain criteria (including being within 35 miles of the main hospital campus, or in a rural area). Independent FSEDs are generally not covered by Medicare or Medicaid, which limits their patient population to commercially insured and self-pay patients. The No Surprises Act provides some billing protections for patients at FSEDs, but its implementation has been contested and its protections are incomplete.

Several states have moved to require FSEDs to post clear signage informing patients that they are entering an emergency department and will be billed at emergency department rates. Texas, which has the largest FSED market in the country, enacted such a requirement in 2019 after a series of high-profile surprise billing cases. The effectiveness of disclosure requirements is uncertain — patients in acute distress are not well-positioned to comparison-shop for emergency care.

The Patient Perspective

For patients who understand what they are entering and have good commercial insurance, FSEDs offer a genuine value proposition: shorter wait times, more comfortable facilities, and convenient locations. For patients who mistake an FSED for an urgent care center — or who are in too much distress to read the fine print — the experience can be financially devastating.

The confusion between FSEDs and urgent care centers is not accidental. Many FSEDs are designed to look like urgent care centers — they use similar signage, similar color schemes, and similar marketing language. Some are located in the same strip malls as urgent care centers. The distinction between "emergency department" and "urgent care" is not intuitive to most patients, and the billing consequences of the distinction are not apparent until weeks after the visit, when the explanation of benefits arrives.

Consumer advocates have called for clearer disclosure requirements, mandatory price posting, and restrictions on the use of "urgent care" language by facilities that bill at emergency department rates. The healthcare industry has resisted these proposals, arguing that they would reduce patient access to emergency care and that patients are capable of making informed choices if given adequate information.