Even if you have health insurance, you may have to pay a copayment for some routine procedures, such as exams and in-office consultations. But you probably don’t expect to receive a bill a few weeks later charging you an extra $100 or more.
This is a situation that a growing number of state lawmakers are trying to change. In most states, a “hospital fee” can legally appear on your bill if your doctor is part of a gigantic hospital system – even if you never set foot on hospital grounds.
Traditionally, hospitals and health systems have charged facility fees to cover the higher costs of operating a full-service, 24-hour hospital—which include expenses for equipment, support staff, utilities, maintenance and security. They argue that the fees aid them provide vital services to everyone, regardless of their ability to pay.
But increasingly, hospitals are charging facility fees for routine services in their smaller clinics and outpatient centers, even when those facilities are not located near the hospital grounds. These fees can add $15 to $100 or more to a medical bill. Patients have reported being charged $100 or more in out-of-hospital facility fees. 503 $ for a pediatrician visit, $488 for an appointment to take ADHD medication and $355 for steroid injections for arthritis.
It’s not just patients who are irate. In states like Indiana and Texas, employers have joined forces to urge lawmakers to take action. They are appalled by the rising cost of their employees’ health insurance.
“Everything else looks and feels the same in the provider’s office,” said Maureen Hensley-Quinn, senior director of the coverage, cost and value team at the nonprofit National Academy for State Health Policy.
“But [patients] They end up getting a higher bill for a service they previously received for a lower amount because the hospital is now treating the provider’s office like a hospital outpatient clinic,” she said.
Hensley-Quinn said state lawmakers began forwarding their constituents’ complaints to her organization about five years ago, and since then at least 15 states have taken action to reduce facility fees. Some, including Colorado, Connecticut and New York, have banned facility fees for certain outpatient services at non-hospital locations or for telehealth visits. These states, as well as others, including Florida, Louisiana, Minnesota and Texas, now require hospitals to inform patients in advance about facility fees.
In recent legislative sessions, at least 16 bills have been introduced in 10 states addressing these fees, Hensley-Quinn said.
“It’s big states, it’s small states, it’s very red states, very blue states,” she said. “Lawmakers across the country are raising these issues and asking questions about what increased consolidation means.”
More chains, fewer independent stores
According to researchers and politicians, an escalate in fees and other costs for patients is due to the increasing consolidation of the American health care system. Large hospital systems are swallowing up clinics, doctor’s offices, and emergency and imaging centers. These facilities can then become outpatient departments of the hospitals.
A study The study, published last year, illustrates why hospitals are motivated to take these measures: In the early 2000s, the federal government began cutting Medicare payments to doctors for noninvasive cardiac tests performed in a cardiologist’s office. But it left payments unchanged or even increased them for the same tests performed in an outpatient hospital setting.
This financial gap provided an incentive for hospitals to acquire cardiology practices in order to shift cardiac testing to outpatient facilities that could charge higher fees, the researchers found.
More than a dozen states have passed laws on facility fees This is according to a recent report by the US Public Interest Research Group, a nonprofit advocacy group that focuses on consumer protection issues.
The effort has been largely bipartisan. Indiana’s 2023 health care reform package, which included increased reporting requirements for hospitals that charge facility fees, was written by Republicans but passed with bipartisan support. That same year, Democratic lawmakers in Colorado, with partial Republican support, passed a measure that would prevent larger hospital systems from charging facility fees for preventive outpatient services.
Fees are rising
Connecticut has the strictest fee laws in the country. Last year, lawmakers existing law extended to prohibit fees for some routine outpatient services, even when performed on a hospital campus. The fresh law also tightened government oversight and created fresh reporting requirements for hospital systems.
“These fees are part of the increased costs of health care,” said Democratic Senator Saud Anwar of Connecticut, who as a practicing physician supported the fresh requirements. “Facility fees are a very rapidly growing part of those health care costs, depending on the location. We are looking for ways to get that under control.”
Hospital leaders say the fees will aid them cover overhead costs, allowing them to “maintain all of the essential services they provide to their patients and communities, particularly as Medicare and Medicaid continue to chronically underpay hospitals for the cost of that care,” the American Hospital Association, an industry trade group, wrote in a statement to Stateline.
But the prices for standard outpatient services are significantly higher when performed in a hospital outpatient clinic rather than a doctor’s office or outpatient surgery center, according to a 2023 analysis by Blue Health Intelligence, a division of the Blue Cross Blue Shield Association. For example, a mammogram performed in an office might cost the insurer $232, but in a hospital outpatient clinic, facility fees are $357.50, the report said.
These fees are part of the increased cost of healthcare. Facility fees… are a very rapidly growing part of those healthcare costs. We are looking for ways to get that under control.
– Connecticut State Senator Saud Anwar, a Democrat and practicing physician
And setup fees seem to be rising.
Last year, the Massachusetts Health Policy Commission found that the largest escalate in medical spending in the commercial healthcare market in Massachusetts were hospital outpatient departments. Facility fees increased more than four times faster than physician/specialist fees from 2019 to 2021. The commission recommended that lawmakers ban facility fees for common services such as laboratory tests, basic imaging and diagnostic services, and office visits.
In a 2020 study published in the journal Annals of Surgery, researchers found that facility fees for common outpatient procedures in the United States rose by 53% from 2011 to 2017, while physician fees remained stable. The increases were mainly due to facility fees and co-payments.
Back and forth
Not everyone is convinced that the rise in healthcare costs can be curbed by banning or restricting facility fees.
Last year, Maine state lawmakers considered a bill that would have banned facility fees for services not provided on hospital premises. They ultimately decided instead to create a Task force to investigate the setup fees.
“The hospital association and other hospitals in the state opposed the bill pretty strongly. They essentially said that facility fees were a billing mechanism to cover their costs — that all of their costs were essentially rolled into their facility fees and they would go broke if they couldn’t bill for those,” said Lisa Nolan, director of legislative affairs at the Healthcare Purchaser Alliance of Maine, one of the advocacy organizations involved in the task force.
Many rural hospitals and those serving low-income communities are struggling financially, partly because of insufficient payments by insurers, according to the Center for Healthcare Quality and Payment Reform, a national policy organization.
Over the past decade, more than 100 rural hospitals have closed across the country. almost 700 rural hospitals are at risk of closure in the near future. Some hospital leaders argue that eliminating the ability to charge facility fees could drive struggling hospitals into bankruptcy.
Maine’s task force recommended that lawmakers limit fees for certain services, including telemedicine. But many members of the committee considering a fresh bill this year were not convinced. After some political wrangling, they passed a bill last month – now awaiting the governor’s signature – that would requires health systems to notify patients about setup fees.
Nolan is skeptical that laws banning setup fees would result in any significant cost reduction for consumers or insurance companies.
“Providers would find other ways to include them in their bills,” she said. “There needs to be a discussion about what rates are appropriate, how providers can become more efficient and how we can reduce administrative costs for carriers and providers.”
“Are some of these costs higher than they should be? That’s a different discussion than simply eliminating facility fees.”
