Freestanding ER billing: codes, POS and NSA rules

What is a freestanding ER, and what types are there?

A freestanding ER is an emergency department that sits in its own building, away from a hospital's main campus. For billing, it falls into one of three groups, and the group decides the claim form, the place of service, Medicare status and how the No Surprises Act applies: hospital-affiliated, independent and licensed, or a facility that is not licensed to provide emergency services at all.

The federal definition matters most. Under 45 CFR 149.30, an independent freestanding emergency department (IFED) is a health care facility that is geographically separate and distinct and licensed separately from a hospital under applicable State law, and that provides any emergency services. The same section says an emergency department of a hospital includes a hospital outpatient department that provides emergency services. The first is an IFED. The second is a hospital department, even when it sits across town.

The rest of this guide goes through each row. For the mechanics of two claims from one visit, the facility vs professional billing guide does the walk-through, and this guide does not repeat it.

What is the difference between a licensed and an unlicensed freestanding ER?

A licensed freestanding ER holds a state license to operate as an emergency facility. An unlicensed one has no such license, and in a state that licenses these facilities it may not operate or call itself an emergency facility. For billing, the license decides which rules the facility falls under.

Texas is the clearest example. Health and Safety Code section 254.051 says a person may not establish or operate a freestanding emergency medical care facility in Texas without a license, may not hold itself out to the public as one without a license, and needs a separate license for each facility location. A license covers only a facility in continuous operation 24 hours a day, 7 days a week. Under section 254.204, operating without the license is a Class C misdemeanor.

Federal law reaches the same question from the other side. CMS's No Surprises Act key protections document says urgent care counts as an IFED only if it is licensed to provide emergency services and is geographically separate and distinct and licensed separately from a hospital. The Departments' July 2021 interim final rule goes further: the IFED definition is intended to cover any facility that is geographically separate from a hospital and licensed by a state to provide emergency services, even if the license does not use the words independent freestanding emergency department. The preamble also notes that where state law lets urgent care centers provide emergency services, those centers are included.

The practical test is therefore the license, not the sign on the door. Three questions sort a facility:

1. Does the state license it to provide emergency services, under any licensing category?
2. Is it geographically separate and distinct from a hospital?
3. Is it licensed separately from a hospital, rather than operating under a hospital's license or approvals?

If the answer to all three is yes, the facility is an IFED for No Surprises Act purposes. If it is an urgent care center that is not licensed to provide emergency services, it is not an IFED, it is billed as urgent care with POS 20, and the emergency protections for the patient do not attach. A facility that advertises emergency services without the license is a licensing problem before it is a billing problem.

What changes in billing when a freestanding ER is hospital-affiliated rather than independent?

A hospital-affiliated freestanding ED bills as a department of the hospital, under the hospital's enrollment, on the hospital's institutional claim. An independent one is not recognized by Medicare as a provider, so its billing runs through commercial payer contracts and, in some states, state Medicaid programs.

The hospital-affiliated model rests on federal rules that predate the NSA. EMTALA regulations in 42 CFR 489.24 define a dedicated emergency department as any department or facility of the hospital, regardless of whether it is located on or off the main hospital campus, that meets at least one of three tests: it is licensed by the State as an emergency room or ED, it is held out to the public as providing emergency care, or at least one-third of its outpatient visits in the prior calendar year were for emergency conditions treated on an urgent basis without an appointment. The EMTALA and billing rule page covers the duty that comes with that status.

The billing rule for that department follows from provider-based status. Under 42 CFR 413.65, a facility is not entitled to be treated as provider-based simply because it or the main provider believes it is, and a provider-based department must treat all Medicare patients, for billing purposes, as hospital outpatients. The provider-based billing rule page lists the tests. Claims Processing Manual Chapter 4 then adds modifier ER, which has been required since January 1, 2019 on lines from an off-campus provider-based dedicated ED, and which CMS says does not affect payment. Critical access hospitals are not required to report it.

Texas draws the same line in its licensing law. Section 254.052 exempts from the freestanding ER license a licensed hospital, a facility located within or connected to one, and a facility owned or operated by a hospital that is either surveyed as a service of the hospital by a CMS-recognized hospital accreditation program or granted provider-based status by CMS. Independent ERs get the license. Hospital-affiliated ones are covered by the hospital's own status.

Which claim form and place of service code does a freestanding ER use?

A hospital-affiliated freestanding ED uses the UB-04 for the facility and POS 23 for the physician. For an independent freestanding ER, no CMS manual sets either choice. The CMS place of service list has no separate code for a freestanding emergency department, so the payer's manual or contract decides.

The CMS Place of Service Code Set says its codes should be used on professional claims, and tells users to check with individual payers about reimbursement. POS 23 is the hospital emergency room code, defined as a portion of a hospital where emergency diagnosis and treatment of illness or injury is provided. POS 20 is the urgent care code, defined as a location distinct from a hospital emergency room. Claims Processing Manual Chapter 26 adds that practitioners may use POS 23 for services furnished to a patient registered in the emergency room. None of the three describes an independent freestanding ER. See the place of service codes rule page and the CMS-1500 vs UB-04 page.

Because the CMS sources are silent, the decision has to come from the payer. We use this order:

Medicaid programs publish their own rules. Delaware's Medicaid Freestanding Emergency Room provider policy, as summarized on our Delaware state page, says FSERs must bill electronically and that reimbursement is a global encounter fee per visit. That is a Medicaid fee-for-service rule, not a commercial one, and it shows how far state programs can differ from the hospital model.

What does Medicare say about freestanding ERs?

Medicare does not recognize an independent freestanding ER as a certified provider. In an April 2020 press release, CMS said current law does not recognize IFEDs as a certified Medicare provider, meaning they cannot bill Medicare and Medicaid for services. The statement is dated, so confirm the current CMS position before relying on it.

What CMS did next shows the structure. In memo QSO-20-27 during the COVID-19 public health emergency, CMS described three temporary ways for licensed IFEDs to take part in Medicare and Medicaid: become a hospital-affiliated ED as an outpatient department of a certified hospital, enroll in Medicaid as a clinic if the state allowed it, or enroll temporarily as a hospital under an emergency waiver. The memo is marked expired as of May 1, 2023. It also says that once the emergency ended, the MAC would deactivate temporary hospital billing privileges, and an ED that wanted to stay certified would have to submit Form CMS-855A and go through initial certification as a hospital, including an initial survey.

The memo lists the four states that licensed IFEDs to operate without hospital affiliation when it was written: Colorado, Delaware, Rhode Island and Texas. It is a 2020 snapshot, so treat the list as history. For current Medicare billing, an affiliated department bills as hospital outpatient care and an independent facility does not bill Medicare as a freestanding ER. State Medicaid rules differ and are covered on each state page.

What do state laws say about freestanding ER billing?

State rules fall into three groups: licensing, patient notice and out-of-network payment. Texas has all three and is the best documented, with a dedicated licensing chapter in Health and Safety Code Chapter 254 and an out-of-network law in Insurance Code Chapter 1467.

The disclosure statement has to state, as applicable, that the facility charges a facility fee for medical treatment and give its median facility fee, a range of possible fees, and the fees for each level of care, with the same for an observation fee. For billing teams the practical rule is that the numbers on the patient disclosure and the numbers on the claim must be explainable against each other.

On payment, CMS's January 2022 letter to Texas treats Insurance Code Chapter 1467 and 28 TAC Chapter 21, Subchapter PP as a specified state law for emergency care in a hospital or licensed freestanding ER. Mediation under Subchapter B applies to an out-of-network facility, and arbitration under Subchapter B-1 applies to an out-of-network provider who is not a facility. The Texas state page carries the deadlines and the plan types the law reaches.

Other states regulate differently. Maryland's rate-setting commission has jurisdiction over freestanding medical facility rates under Health-General section 19-211(c), and Delaware's Medicaid program pays freestanding ERs a global encounter fee per visit. Check the state page and the state licensing agency before assuming the Texas model applies elsewhere.

How does the No Surprises Act treat freestanding emergency departments?

The No Surprises Act treats an independent freestanding ER like a hospital emergency department for emergency services. A nonparticipating IFED cannot bill the patient more than in-network cost sharing (the ban on balance billing), and it can use open negotiation and federal IDR to resolve payment. The protections apply to commercial plans, not to Medicare or Medicaid.

• Definition: 45 CFR 149.30 defines an independent freestanding emergency department and, separately, a nonparticipating emergency facility as an emergency department of a hospital, or an IFED, without a contract with the plan.
• Emergency services: 45 CFR 149.110(c)(2)(i) includes an appropriate medical screening examination, as required by EMTALA or as would be required if EMTALA applied to an independent freestanding emergency department, plus further examination and treatment to stabilize the patient.
• Balance billing: 45 CFR 149.410(a) says a nonparticipating emergency facility and a nonparticipating provider must not bill or hold the patient liable above the in-network cost-sharing requirement for emergency services at a hospital emergency department or an IFED.
• Disclosure: 45 CFR 149.430 requires each facility, including an emergency department of a hospital and an IFED, to publish and give patients a statement of balance billing protections.
• Payment disputes: 45 CFR 149.510(a)(1) lets a nonparticipating emergency facility use the federal IDR process after open negotiation. The notice that starts open negotiation is due within 30 business days of the initial payment or denial, the negotiation period is 30 business days, and either party then has 4 business days to start IDR.
• Coverage limit: CMS says the NSA does not cover Medicare, Medicare Advantage, Medicaid, CHIP, IHS, VA or TRICARE.

Post-stabilization care is the exception to watch. Services after the patient is stabilized, as part of observation or an inpatient or outpatient stay, are treated as emergency services unless the conditions in 45 CFR 149.410(b) are all met. Those conditions include a determination by the attending emergency physician or treating provider that the patient can travel to an available participating facility within a reasonable distance, and written notice and consent that, for a nonparticipating emergency facility, includes a good faith estimate of the amount the patient may be charged. Our No Surprises Act section explains the notice and consent form requirements.

Hospital-affiliated freestanding EDs fall under the hospital-department wording. The interim final rule assumes the disclosure for those departments is developed by the parent hospital. Our No Surprises Act section covers open negotiation and the federal IDR process in detail, and our out-of-network billing and IDR service runs them for facility clients.

How does EMTALA apply to freestanding ERs?

EMTALA's duty in 42 CFR 489.24 runs to hospitals, and its definition of a dedicated emergency department reaches an off-campus department of a hospital. An independent freestanding ER is not a hospital department, so the NSA regulation borrows the EMTALA standard by saying it applies as would be required if EMTALA applied to an IFED.

Texas fills that gap in state law: section 254.153(a) requires a licensed freestanding ER to provide appropriate screening, examination and stabilization within its capability, regardless of ability to pay. The rule on what a facility may and may not ask about payment before screening, 42 CFR 489.24(d)(4), is covered on the EMTALA and billing rule page, which also answers whether an urgent care meets the dedicated ED tests.

What facility fee components can a freestanding ER bill?

A hospital-affiliated freestanding ED can bill the ED visit under revenue code 0450 with the Type A visit codes 99281 to 99285, plus separate lines for procedures done in the ER and for ancillary services. An independent ER's components come from its payer contracts, with Texas requiring that the facility fee and observation fee be disclosed to the patient by level of care.

Claims Processing Manual Chapter 4 supplies the hospital model. ER services are reported under the 045x revenue code, the line date is the date the patient entered the ER, and a procedure performed in the ER is billed with the ER revenue code on its own line, separate from the visit line. Hospitals level ED visits using their own internal guidelines, covered on the ED facility level coding page and the revenue code 0450 page.

For an independent ER, the components to define in the contract are the visit level or levels, whether observation is billed separately, how ancillary services such as imaging and laboratory are billed, and whether any services are bundled into the facility fee. Contract language matters because the facility's posted and written fee disclosures in Texas must match what it bills.

How should freestanding ERs handle out-of-network patients?

Collect only the in-network cost share, post the required notices, and pursue the rest from the plan. A nonparticipating freestanding ER cannot hold an insured patient liable above in-network cost sharing for emergency services under 45 CFR 149.410(a), and balance billing disputes go to the plan, then to open negotiation or the state process.

Why do payers underpay freestanding ER claims, and what should you check?

Underpayment usually traces to how the payer classifies the facility, what it uses as the reference rate, or an edit tied to place of service or revenue code. We do not publish payer rates, so these are the checks we run before treating a payment as final.

1. Match the remittance to the contract: is the allowed amount the contracted or default rate for the facility's category?
2. Compare the place of service and revenue code the payer processed against what you submitted, and read the remark codes.
3. For out-of-network payments, request the plan's qualifying payment amount (QPA) information and compare it to the payment.
4. Check for bundling of ancillary lines into the visit line.
5. Diary the 30-business-day window to send the open negotiation notice, counted from the initial payment or denial date.

Document each check in the account notes. Those notes become the file you hand to open negotiation or IDR if the payment stands.

How do freestanding ERs get credentialed with payers?

Each payer sets its own enrollment process for a facility, and an independent freestanding ER usually starts with its state license, facility NPI and tax ID. Whether the facility is in network or out of network also changes what it can say publicly, because Texas bars holding out as a network provider unless the facility is one.

Section 254.155 requires the posted notice to list the health benefit plans in which the facility is in network, or to state that it is out of network for all plans, and section 254.157 bars advertising that the facility takes or accepts an insurer, or posting an issuer's logo, if it is out of network for all of that issuer's plans. Credentialing status therefore feeds directly into signage, the website and patient disclosures, and those documents need an owner who updates them when contracts change. Our payer contracting and credentialing services handle both sides.

How do we handle freestanding ER billing?

We serve hospitals, emergency departments and freestanding ERs, and we handle the facility claim and the out-of-network recovery as one workflow. For facilities, our scope is institutional (UB-04) claim preparation, revenue-code validation, submission, payment reconciliation and denial management for inpatient, outpatient and emergency care, with claims sent within 24 hours of charge entry and denials worked within 48 hours.

For out-of-network emergency care, we handle reimbursement end to end: eligibility assessment, open negotiation, dispute submissions, deadline management, documentation validation and outcome tracking, under federal IDR and applicable state pathways, including Texas TDI. Controls include eligibility verification, deadline tracking, accurate documentation, required fees paid on time and jurisdiction-specific compliance checks. We recover the revenue insurers underpaid you under the No Surprises Act.

See our ED and freestanding ER page and hospital and facility billing service, or book a call. This guide is general information and not legal advice; have counsel review licensing, contract and state-law questions.