12 / 20 / 2016

Legal Considerations for Freestanding ERs and Urgent Care Clinics

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Freestanding emergency rooms and urgent care facilities, like any medical facility, are highly regulated. Anyone who seeks to operate one needs to thoroughly understand how statutes and laws impact patient care policies and financial procedures. Penalties can be severe, so you need to know what you are getting into.

Before going further, which type of facility do you have in mind? Freestanding ERs and urgent care clinics are two different things.

Freestanding ER vs. Urgent Care Facility

A freestanding emergency room is a structurally separate facility from a hospital but is, in all other ways, an emergency department. It receives and treats patients requiring medical attention for acute, severe, and sudden-onset of conditions that threaten life and limb.

Freestanding ERs have labs, radiology equipment, a pharmacy and other capabilities typically found in a hospital-based emergency room, including a physician specializing in emergency medicine onsite at all times.

Some examples of what should be treated in a freestanding emergency room include:

  • Severe bleeding
  • Open fractures
  • Psychotic episodes
  • Heart attacks or strokes
  • Major injuries

You know. Emergencies.

The Urgent Care Association of America defines the activities of an urgent care facility as the “Delivery of ambulatory or medical care outside of a hospital emergency department on a walk-in basis, without a scheduled appointment.”  This definition is really too vague.

In general, patients go to an urgent care facility for:

  • Earaches
  • Sore throats
  • Sprains and strains
  • Fever
  • Stomach flu

Some urgent care clinics have branched out into primary care, weight loss assistance, allergy care, and other areas.

The biggest difference between a freestanding ER and an urgent care clinic is this:

  • A freestanding emergency room is required to remain open 24/7
  • It is required to assess and treat or stabilize any patient who comes to the facility, regardless of insurance or ability to pay.
  • It is governed by the Emergency Medical Treatment and Labor Act, or EMTALA, which is the federal law that regulates all emergency rooms and departments.

An urgent care facility has no such requirements. It is not subject to EMTALA, although if you are operating an urgent care facility, you should have policies and procedures prepared for emergency patients anyway.

The following four sections talk about regulations common to both types of facilities.

The Corporate Practice of Medicine

Before you even think of opening a facility, you need to know whether your state prohibits the corporate practice of medicine.

These prohibitions are meant to protect the integrity of the medical profession by keeping it separate from corporate interests. Simply put, a physician may not be employed by a corporate entity within the state.

For example:

In New York, it is a felony for an individual to practice medicine without a license, and it is impossible for a corporation to hold a license. Therefore a corporation cannot hire physicians to work at any facility offering medical treatment.

If the owner is a physician-entrepreneur, the prohibition does not apply. There are other ways a non-physician can own and operate a freelance ER or urgent care clinic; physician(s) can form a professional corporation under the state’s incorporation laws and still have the ability to hire staff.

A non-physician owned company can then negotiate a contract with the physician-formed professional corporation to provide managed services such as physician payment, bill handling and collections, and employing non-physician personnel.

The Stark Law

The Stark Law is a ban on physician self-referral. A physician may not refer patients to a specific entity for a designated health service if the physician or a family member holds a financial interest in that entity.

There are a few exceptions to the law, but most physicians are subject to it. Physicians working in your facility must be very careful not to run afoul of this law when providing referrals for further treatment.

The Stark Law also prohibits an entity from presenting a claim to for designated health services provided under a prohibited referral, such as:

  • Clinical lab services
  • Radiology
  • Hospitalization services

Penalties for violation of the Stark Law include denial and refund of payment plus $15,000 per service as well as the potential imposition of civil monetary penalties.

The Anti-Kickback Statute

The Anti-Kickback Statute is a federal criminal statute that prohibits any hint of an exchange of anything of value in return for a referral of federal healthcare program business.

If you want your facility to be welcomed into these federal programs, do not create any appearance, whatsoever, of exchanging favors or paying for the privilege. The penalties are steep; conviction for a single violation may result in a fine of up to $25,000 and imprisonment for five years.

You would also forever be excluded from any future participation in a federal healthcare program, even if there is no conviction. The Secretary of Health and Human Services has the discretion to ban you whether a kickback scheme was proved or not.

Insurance and Payor Contracts

Get your facility onto insurance and government payor lists as soon as possible, the minute you break ground if not before.

Practitioners whose services will be billed by your facility must be credentialed and contracted by each private or government insurer in order for you to receive reimbursement for those services. Credentialing and contracting can take a long time, especially for Medicare, Medicaid, and TRICARE.

Government payors only cover services retroactively to the requested date. If your application was not approved before you opened, you might have a cash flow problem.

It is up to you which payors you wish to deal with, but much of your choice may depend on the population your facility serves.

Negotiating the legalities of operating a freestanding ER or urgent care is part of doing business in the medical industry.

  • Check your state for corporate practice of medicine prohibitions
  • Do not allow self-referrals from within your facility
  • Do not engage in kickbacks
  • Contract with payors as soon as possible

If you run a freestanding ER, comply with EMTALA.

If you have any questions, contact an experienced business attorney for help.

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