Savanah McDaniel, Policy Fellow
In our last facility fee blog, we addressed the issue of high-cost facility fees being billed at ERs. Unfortunately, an ER is not the only place where you can run into these fees. If your doctor’s office is owned by a hospital, you might start seeing them on your medical bills as well.
Provider-based, or hospital outpatient, billing is the practice of billing a patient twice; for the cost of the service the patient received, and for the facility fee (the amount charged for using that clinic). Wisconsin Representative Chuck Benedict, a former neurologist, described this practice pretty well in a Kaiser Health Network article– “It’s like a barber saying, ‘That’ll be $20 for a haircut and $10 for sitting in my chair”.
The justification for facility fees may hold water for ERs, but even if a doctor’s office is not located within a hospital, provider-based billing is still allowed. As explained in our first blog, facility fees are charged at ERs and hospitals to compensate for the costs of having the facility staffed and stocked 24/7, for any medical emergency. Obviously, a doctor’s office is not open 24 hours, 7 days a week, and it is not equipped to handle many medical emergencies. However, because a doctor’s office owned by a hospital is technically a hospital facility, it is allowed to charge facility fees- even though the overhead for a clinic is much less than that of an ER.
Currently, there are no regulations on facility fee pricing, and the amount billed to a patient can seem arbitrary. According to consumer experiences gathered by the Kaiser Health Network, facility fees at physicians’ offices may be anywhere from a few dollars to a few thousand dollars. For example, one woman in New Orleans was charged $1,434 in facility fees for an x-ray and a cortisone shot at an off-campus, Tulane clinic. Though her insurance covered $1,297 of the fees, the amount she was charged did not represent her use of the facility. Even if a patient’s insurance company covers some or all of the facility fees, the charge itself is not usually justifiable.
Without regulations, there are no pricing standards for hospitals, making it difficult to shop for the best price or even anticipate what the charges will be. In Washington state, the fees themselves are not regulated, however, hospitals with off-campus clinics must report their facility fees annually to the Department of Health. In 2017, the facility fee range at Washington hospital-owned physicians’ offices was $0- $7,000. Kadlec Regional Medical Center charged the highest facility fees (about $7,000), which created over $39 million in revenue from the facility fees alone.
Unfortunately, provider-based billing is likely to become a pressing issue for consumers, as more hospitals acquire physicians’ offices. Between 2012 and 2016, the number of physician’s offices owned by hospitals increased 100%. Now, less than 50% of doctor’s offices are owned by physicians, and with fewer clinics owned by physicians, facility fees are becoming more common, even for routine doctor’s appointments.
Though facility fees do not have to be reported in most states, there is some research on the impact of these billing practices. A working paper at Northwestern’s Institute for Policy Research found that clinics see a 14% increase in cost of services after they’re acquired by a hospital, a quarter of which is through billing practices. The billing practices studied in this paper include more than facility fee billing, however, looking at the revenue facility fees can generate ($39 million for the Kadlec Regional Medical Center, for example), it’s easy to understand the financial incentive for hospitals to acquire more provider clinics.
In order to protect consumers, we should take a hard look at facility fee billing practices. One useful step that policymakers could take is requiring that hospitals report facility fees charged at ERs and off-campus clinics. Reporting these fees would allow policymakers to track facility fee pricing trends, and better analyze if facility fees are necessary to cover hospital overhead. Though transparency is helpful, it does not solve the problem.
Another way to keep patients from being over-billed for facility fees, could be a limit on how much hospitals are allowed to charge in these fees. Facility fee charges should be representative of a patient’s use of the clinic. ERs have facility fee level coding, which determines how much a person is billed for facility fees- in theory (see our last facility fee blog for more information). Though ER use has remained the same in recent years, the use of higher cost facility fee codes has gone up, and the use of lower cost codes has gone down. This means that in ERs, patients are more frequently coded higher than their actual use of the facility.
Patients should not have to worry about unnecessary facility fees jacking up their medical bills for routine doctor’s appointments or emergency services. However, until policy changes are made to help make these fees more affordable (and justified), you can always call your insurance company to check their policy around facility fee coverage. You can also contact your doctor’s office and ask if they charge a facility fee, and how much it is.
If you find yourself stuck with a facility fee that you believe may have been inappropriately billed, or that you are finding difficult to pay, our Consumer Assistance Program may be able to help. We offer support negotiating medical bills, filing insurance appeals, and understanding your health insurance benefits. You can call us at (303) 839-1261, or email us at firstname.lastname@example.org.