Savanah McDaniel, Policy Fellow
The feeling of dread before opening a medical bill is familiar to many Coloradans. Despite more people having health insurance than ever before, consumers have all but come to anticipate high medical expenses, confusing billing practices and unexpected fees, but one fee in particular is garnering extra attention as of late: the facility fee.
Facility fees are expenses charged by hospitals to cover their overhead- the funding needed to keep the lights on, machines running, and doors open. People who receive outpatient care at hospital-owned buildings are charged a facility fee, in addition to treatment costs and fees charged, individually, by doctors. Since hospitals do not have to disclose the costs of facility fees beforehand, patients are often shocked when they receive a bill that is much higher than they expected. The two main ways patients face facility fees are through outpatient treatment at an emergency room and at a hospital-owned doctor’s office (the latter will be covered in our next post!)
Facility fees billed at an ER are organized into five different levels, which are determined by how serious the patient’s complaint is, the resources used to treat their symptoms, and the length of treatment. Typically, more serious complaints, which necessitate more resources and more of a health professional’s time, are assigned a higher level. So, in theory, a patient with chest pains will score a level 4 or 5 facility fee, while someone with a sprained ankle will score a level 1 or 2 facility fee.
Charging patients facility fees, based on the severity of their health issue makes financial sense for hospitals because they must be staffed 24/7 and ready to treat any injury that walks through the doors. Patients with a condition that requires urgent treatment, uses more of the facility, causing that patient to be billed a larger facility fee. That’s the rationale hospitals use to justify facility fees, but unfortunately, in practice this does not seem to be reality.
In 2017, Vox published stories of patients who were facing horrendously large medical bills after simple ER visits. One of these patients was Ismael Saifan, who went to the emergency room for a sharp muscle pain in his back. At a quick visit to an ER in Overland Park, Kansas, a doctor took his blood pressure and gave him a muscle relaxant. He later received a bill for over $2,000. He was charged $3.50 for the muscle relaxant and the rest in facility fees.
Exorbitant facility fees have also been charged in simple, non-emergency situations. This was the case for one family in Connecticut who received a $629 bill for a band-aid. Malcolm Bird took his one year-old daughter to the ER after she had cut her finger. The cut was minor, so the doctor ran some water over it, gave her a band-aid, and sent them on their way. $622 of the $629 bill was in facility fees.
Unaffordable facility fees are not just affecting consumers in Kansas and Connecticut; this is an issue for Colorado as well. Paul W., a consumer from Arvada, shared his story with CCHI. In 2016, his wife was charged over $6000 in facility fees after going to a UCHealth freestanding ER for abdominal pain. According to Paul, she received “a CT, an IV (with meds), and some other tests. For approximately four hours of care, the total bill from UCHealth was $14,258”.
These seemingly arbitrary facility fees are experienced nationwide. Across the country, the use of level 5 facility fees- the highest level- has increased 38% from 2009 to 2016, and Colorado is on par with the national trend, seeing the use of level 5 fees increase 39% in the same time frame, according to the Health Care Cost Institute. The price of level 5 fees have also risen in the last few years. Nationally, the fees have increased by 77%, and by 66% in Colorado. Since ER use has stayed relatively the same, this data shows that patients are more often being billed high-cost facility fees, like in the cases of these consumers.
To complicate matters further, ERs don’t have to disclose or post their facility fees anywhere on-site. While patients in an emergency situations should seek care regardless of cost, it only seems fair to let them know that facility fees could be applied to their bills. Colorado facilities do have to post their “common charges” on their websites, which sometimes include facility fees but not always, and patients might not see the information prior to seeking care.
The good news is that if you’re in Colorado and have a health insurance plan that’s regulated by the Division of Insurance (check your insurance card for “DOI”), there may be some protections for you in emergency situations. Colorado law says that regardless of where you seek care for emergency services (that is, the ER you went to isn’t in your network), you shouldn’t have to pay anything more than what you would at an in-network facility. This means that some plans will cover facility fees (always double check with your providers and your health insurance company!).
The bad news is that you can all but count on the rising costs of facility fees driving up your monthly premiums. Since there is very little regulation on hospital pricing, facility fees are likely to continue increasing, placing a heavier financial burden on insurers and consumers. So, even if you shop carefully for your health services when not in an emergency, you still end up being on the hook for high and sometimes unnecessary facility fees.
Facility fees may be necessary to keep hospitals and emergency departments running, however the trend of increasing and exorbitant fees are driving up the costs of care, continuing to make healthcare unaffordable for consumers. More price transparency and responsible billing practices may be able to lessen the burden of facility fees. Making facility fee prices available online and in-person, before receiving treatment, will help prepare consumers for their cost of care.
Price transparency could also include facility fee reporting. Other states, like Washington and Connecticut, have some regulations around reporting facility fees. In Washington, hospitals that charge facility fees at provider-based clinics (which we’ll cover in a later blog) must report their average facility fee, and range of facility fees charged, to the Department of Health each year. This could help policymakers understand how these fees are functioning, and create transparency around facility fee price increases.
Initiatives to help doctors and hospitals practice more accountable facility fee billing may also lessen the cost of care for consumers by reducing the amount of level 4 and 5 facility fees that are billed. In the event that level 4 and 5 facility fees are billed, providing justification for the levels used may also help consumers understand their bill, and hold hospitals and doctors more accountable for the charges their patients may face.
As facility fees continue to increase, creating a financial burden for consumers and insurance companies, price transparency and billing practice improvements are necessary to make care more accessible for Coloradans.