How are emergency rooms funded in America?

I have realized a certain trend in the emergency rooms which has been bothering me for a long time now. I came to realize recently that the number of people receiving medical care from emergency rooms without insurance are more than those who are under insurance cover. This made me wonder how emergency rooms are able to sustain their services in America!

How are emergency rooms funded in America? This is a common question that I have come across in various medical platforms and social media pages. People are curious to know how the emergency rooms are funded considering that they sometimes give urgent care to the uninsured who can’t afford the services. In an effort to explain this, I want to take a look at the different types of emergency rooms available in America and how they conduct their business.

There are two main types of emergency rooms in America; freestanding emergency rooms and hospital emergency departments. Freestanding emergency rooms are facilities staffed by emergency services, are open 24 hours a day and are physically separated from the hospital. They may be owned by hospitals or be privately owned by individuals. Freestanding emergency rooms can further be broken down into either hospital outpatient department emergency center or independently owned freestanding emergency room. The main difference between the two subcategories is the fact that the former accepts Medicaid/Medicare payments while the latter does not. The latter are not bound by the federal legislation and regulations regarding operations such as EMTALA. This is not the case in all states though. Some states like Texas for example have passed legislations that impose rules and regulations similar to EMTALA on all the independently owned freestanding emergency departments.

The traditional hospital based emergency rooms on the other hand, operate normally and accept payment from Medicaid and Medicare. They are governed by federal rules and regulations such as EMTALA.

Financial implications for patients visiting the emergency rooms

There is no big difference between the cost of services offered in the freestanding emergency rooms and the hospital based emergency departments. The biggest difference as we have seen comes in when it comes to paying for the services that have been provided. The hospital based emergency rooms will readily treat Medicaid and Medicare as in network while their freestanding independently owned emergency rooms will not accept payment from such forms of payment.

Who funds the emergency rooms?

So, now that we have seen the main differences between the freestanding emergency rooms and hospital-based emergency rooms, it is time to go back to the main issue of who really funds these emergency rooms? How are they able to bridge the gap and financial void left behind when they offer services to the uninsured? This is what it is that normally happens especially in the hospital based emergency rooms;

Hospitals and physicians are normally forced to shoulder the financial burden for the uninsured by incurring billions of dollars in debt each year. This is a very common scenario in America. Actually of all the 140+ million reported emergency room visits, only about 40 million visits were made by insured people and the remaining 55% of the emergency care goes uncompensated. According to the Centers for Medicare & Medicaid Services Health, the accumulative bad debt or amount of money accrued by uninsured people receiving urgent medical care is in the neighborhood of $200 billion every single year. A study recently conducted by the American Medical Association showed that more than one-third of emergency physicians lose an average of $140,300 each year from EMTALA-related bad debt. So, how are emergency rooms still able to make profit with such figures? How do they make up for the lost funds?

In an effort to offset the bad debt, hospitals in the recent past shifted uncompensated care costs to insured patients to make up the difference. This basically meant that the insured patients were forced to help carry the burden of uninsured patients. This is however not applicable today. Owing to numerous complaints and lawsuits by insurance companies and individuals, cost shifting was done away with. It therefore is no longer is a viable option because managed care and other health plans have instituted strict price controls to their insurance plans. This means that there is very little leeway and margin for the emergency rooms to try and squeeze in some of the bad debt through cist shifting.


Things are not looking any good though. With projections that health care costs will double in the coming few years and the number of uninsured Americans not showing signs of reducing, emergency rooms and other medical service providers will have to keep bearing with the burden. The nation will have to keep providing for not just the disadvantaged in the society but for the uninsured as well.