By Freda Oberholzer
Keywords: Free-Standing ER, FreeStanding Emergency Center, FEC, FSED, Satellite ER, Emergency Medicine, Emergency Department, IT, Wireless Interface, Site selection, Site planning, Financial planning, Site location, Ghant sheet, Construction, Architecture, Engineering, Contractor, Ground up, Renovation, Physician Ownership
The number of hospital EDs declined nearly 30 percent from 1990-2009, according to the Journal of the American Medical Association, but the prevalence of freestanding ERs is soaring. Why? The demand for emergency care remains strong and growing, as does the revenue potential.
A freestanding ER is more than just a healthcare delivery setting – it’s a business. While some freestanding ERs are owned and operated by hospital affiliates accustomed to navigating this complex business environment, others are developed by independent business owners. From this business perspective, building a freestanding ER poses many unique challenges that someone with a healthcare background may not be equipped to solve alone, including: site selection, construction project management, resource management, vendor contracting and financial planning.
That complex business model equals a longer implementation. Taking the above factors into account, freestanding ER business owners should prepare for an IT implementation time that spans a minimum of 25 weeks. In fact, implementations at a freestanding ER tend to take double the time generally estimated for a hospital ED. By anticipating the challenges and delays freestanding ERs experience prior to go-live, owners can save themselves significant time, money and frustration.
Choosing a location for a freestanding ER requires thorough analysis from day one. Any one factor could result in success, failure or starting over. Business owners have to take a number of factors into consideration:
- Local population: historical and forecasted growth projections, residential density, demographics (age, household income, household structure, etc.), local labor market (employment density) and payer mix.
- Competitor locations (both inpatient and emergency services)
- Industry dynamics, such as physician network and alignment
- Ease of access and visibility from the road
- Safety in the surrounding area
- Drive times for patients as well as proximity to suppliers and/or local hospitals
- Zoning regulations – is a business of this nature allowed in the area?
- Taxes (income and sales taxes)
- Traffic – how many cars pass the location each day?
- Cost – is the location affordable, or will the cost of rent or construction need to be passed onto patients or staff?
- Regulations – What are the licensure requirements for the state? For example, the State of Texas regulates freestanding ERs’ operating hours and facility attributes, and requires freestanding ERs to provide an appropriate medical screening regardless of an individual’s ability to pay.
Recommendations for Site Selection Process:
- Research, research, research. Many freestanding ERs have closed within months of opening due to a lack of patients presenting. The ER site should support an annual patient volume of at least 12,000.
- Develop a comprehensive business plan that outlines how the ER will market the availability of new services in the community.
- Ask yourself if the location fulfilling an unmet need and/or providing a new benefit in the community.
- Consider whether the location will be attractive to the kinds of patients and staff the facility wishes to serve and recruit.
Construction Project Management
Option 1: Building from Ground Zero
When starting from scratch, the challenges are elevated. Business owners must get permits for the land, secure contracts to purchase the land and finalize the purchase. There are also laws tied to the purchase and use of land, so one is not automatically guaranteed the ability to build a freestanding ER on his/her purchased land. Many new owners lose their designated land and search for a new place in a continuous cycle. These location changes tend to push the ER’s go-live date further.
Once an owner secures the land, the next challenge is to finalize the contract and actively manage a timeline – when can the groundbreaking occur, the final construction delivery date, move-in date, opening date, etc. The timeline includes hundreds of moving parts, and can be compromised at any time without careful attention to detail. Unforeseen issues with construction – rain days, delayed supply delivery – along with final inspection and occupancy certificates can alter a construction timeline significantly.
Option 2: Renovating an Existing Space
Renovations involve more than moving in furniture and opening the doors; a site must comply with a number of standards to be used as an ER space. Though new construction is not necessary, owners can run into many of the same construction-related issues to meet the specifications and requirements for healthcare providers in that city. Compliance with these requirements takes significant time and effort, which many new business owners don’t anticipate.
Recommendations for Renovation
- Work closely with a general contractor experienced in building healthcare facilities.
- Set realistic expectations for the construction timeline, and adjust the timeline accordingly as necessary.
- Consider whether the layout of the building optimized for patient flow in an ER environment.
The communication process between an individual owner and a vendor is radically different from a hospital’s interaction with a vendor. A hospital has a set infrastructure in place, so the vendor has access to an IT department/ director, a CIO, clinical analysts, systems analysts, etc. The hospital is able to offer resources and subject matter experts to address each component of a project. In a new business setup for freestanding ERs, none of these resources are in place, which can cause serious communication rifts between the business and its vendors.
Recommendations for Resource Management
- Hire a project manager – the new business needs someone to manage details and secure communication with all vendors and external resources.
- Hire a consultant to help plan the space in the ER for maximum patient flow efficiency.
- Designate a data center. Hire an IT expert to help guide and facilitate the data center and infrastructure for hardware and networking.
- Allow sufficient staffing and training time in advance of testing.
- Consider whether staffing/training will be complete with enough time to validate and test the system. Will staffing/training begin with reasonable time before the facility opens? In my experience, four months in advance may not be ideal and can result in unnecessary payroll.
- Decide whether your project manager has the expertise to address and manage each step of the process.
Freestanding ER owners must work with multiple vendors, including vendors for a radiology information system, a lab information system, medication dispensing, etc. Each of these vendor relationships requires a separate contract, and the contract signature is only one small part of the equation. The business owner also has to consider the delivery dates and integration of these systems.
Recommendations for Vendor Contracting
- Carefully consider all the needed vendors and contracts. Conduct in-depth discovery calls with each vendor.
- Most vendors have a work order lead time of 90-100 days. Plan for delivery dates accordingly, since all systems must be connected on the same day at the same time.
- Consider the features and interfaces included in a vendor’s product, and those that are not.
- Calculate the end-to-end cost of integration with all relevant vendors (i.e., the cost of integration necessary to “send” the data and the cost of integration necessary to “receive” the data).
Possibly the most important element of the overall business plan is a solid financial plan. A smart plan takes into consideration all costs related to the business, how revenue will be generated and used, and includes a contingency for unplanned expenses.
Recommendations for Financial Planning:
- Get multiple bids for every work order to ensure competitive pricing.
- Investigate each vendor’s reviews and/or request client referrals. Sometimes less expensive really means “cheaper” and winds up costing more in the long run.
- Consider payment due dates when building the financial plan and negotiate the dates as needed. An owner might secure all the funding needed for a project but may not have access to all the funding all at once.
- Keep your lender(s) apprised of the financial plan as it evolves to minimize surprises.
- Review industry standards to forecast revenue with as much accuracy as possible.
- Re-evaluate the budget at least once a month to ensure there are no changes.
Additional Questions to Ask:
- What is the actual total cost for an item, accounting for any costs related to shipping, taxes, installation, service fees, etc.?
- What parts of this project’s cost are negotiable?
- Are my revenue assumptions realistic?
- What are the financial goals for my business, and how will they change after year one, year two, etc.?
While an ER affiliated with a hospital has a lot of additional resources available to it, independent business owners can also achieve considerable success – by creating and actively managing detailed plans for site selection, construction, resource management, vendor contracting and finances.
Real-life Scenarios for Discussion: What Would You Do?
- The building is complete, but the city inspector has no appointments available for the next 20-30 days. When the inspector finally arrives, a problem is found. The fire alarms are placed inside patient rooms, but they must be placed on the outside. This issue requires significant changes to the walls and electrical system. Once those changes are made, the time to obtain approval is approximately 30 days. The owner decides to appeal the inspector’s decision. However, appeal meetings occur only once a month. If the appeal is denied, then the timeline for reconstruction is pushed even further.
- An information system is deployed and tested by the vendor two weeks prior to the opening of the facility. However, the ER staff is not yet fully trained or prepared to provide meaningful feedback to the vendor regarding workflow.
- A business owner purchases a lab information system from their vendor, without also taking into account the cost of integration from the lab information system to the EHR. The owner failed to plan for the full cost of integration with both vendors, adding tens of thousands of dollars unexpectedly to the budget.
Freda Oberholtzer is the Director of Implementation Services at T-System Inc.
We thank Freda Oberholzter for providing us with this very appropriate set of tips for the would be Free-Standing ER owner. Her welcomed advice is based on her experience with many Free-Standing ER implementations. The community of Free-Standing owners that comprise TAFEC (Texas Association of Free-Standing Emergency Centers) is also great resource for obtaining answers to questions regarding the specifics of Free-Standing ER development.
“Regarding Free-Standing ER development: Hope for the best but always plan for the worst while thoroughly engaging in due diligence every step of the way.”
JFSEM Editorial Staff