Adding to the M&A movement in the free-standing emergency room market, ER Holdings has acquired ER Centers of America, the companies jointly announced on Monday.
ER Holdings is an entity controlled by the same investment group as Family ER + Urgent Care, a privately held operator of emergency and urgent-care centers in the Dallas area. ERCA is a privately held operator of emergency and urgent-care centers in both North Dallas and Lubbock, Texas.
Upon closing, which is scheduled for October, ERCA would be held as a wholly owned subsidiary of ER Holdings and continue to be operated on a day-to-day basis by its current management.
The deal gives ERCA a bigger footprint within the industry, said John McGee, the company's chief operating officer.
ER Holdings can expand opportunities for ERCA employees in an emerging industry, he added.
Growth in the free-standing ER sector will continue, whether the ERs are owned by private companies or hospitals themselves, McGee said. The old paradigm of patients driving for hours in search of a hospital ER is over, he said. In the past, patients had to find a hospital to undergo procedures like a CT, or to receive dialysis, and McGee said hospital ERs didn't do a very good job serving those patients.
“I think the hospital emergency room is a dinosaur,” he said.
Independent free-standing ERs rely on reimbursement from private insurance. Some experts say free-standing ERs could help solve the growing problem of healthcare access as hospitals in rural and underserved areas close. Critics say free-standing ER operators' business strategy is to cherry-pick privately insured patients in more affluent suburban communities who want access to care closer to homes.
Free-standing ERs have been sprouting up mostly in the southern and western parts of the country, McGee said.
Adeptus Health is one of those companies experiencing growth. The Lewisville, Texas-based free-standing ER operator, which is a public company, opened six facilities in the second quarter of 2015 and 15 facilities this year, including 12 free-standing emergency facilities in Colorado and Texas.
The company also partnered with Dignity Health to open Adeptus' first hospital and two free-standing emergency facilities in Arizona. Its net operating revenue increased to $89.6 million in the second quarter, a 103% increase over the previous year.
And earlier this month, Adeptus announced it entered into a joint venture with New Orleans-based Ochsner Health System to improve access to emergency medical care in Louisiana.
Interest for free-standing ERs is building beyond the south and west, experts say. Brad Shields, executive director at the Texas Association of Freestanding Emergency Centers, said physicians have approached him at trade shows around the country inquiring what legislative changes need to be made in their states to allow free-standing ER growth. One obstacle is the certificate-of need, Shields said. A CON, which requires providers to prove a community need for a service before getting a permit, is a highly political process and can be more challenging in some states than others, he said.