Facility Fees: The New Surprise Medical Bill

The Wall Street Journal reports that facility fees are becoming increasingly prevalent in the U.S. health care system. In some cases, a facility fee for using a physician employed by a hospital nearly triples the cost of seeing a physician.

Tim Ebel’s visit with an ear, nose and throat specialist at an Ohio clinic last October came to $348. At the same time, he got a second bill for $645.

The hospital system that owns the Avon, Ohio, clinic had charged him separately for use of the office where he met his physician. It is what is known as a facility fee, which included overhead for the system’s hospitals though Ebel hadn’t set foot in one.

This is yet another example of why hospitals should not be allowed to buy physician practices and employ physicians. Hospitals are not competing on price and therefore, not competing at all. Buying physician practices gives hospitals not only the ability to control what doctors order on behalf of patients, but also to arbitrarily bill for services not rendered.

Hospitals are adding billions of dollars in facility fees to medical bills for routine care in outpatient centers they own. Once an annoyance, the fees are now pervasive, and in some places they are becoming nearly impossible to avoid, data compiled for The Wall Street Journal show. The fees are spreading as hospitals press on with acquisitions, snapping up medical groups and tacking on the additional charges.

The fees raise prices by hundreds of dollars for widely used and standard medical care, including colonoscopies, mammograms and heart screening.

Meet the new surprise medical bill: when hospitals tack on arbitrary fees, because they’ve bought your physician’s practice and now technically employ him or her.

The added cost isn’t justified, physicians and economists say. Medicare advisers said last year the federal insurer likely overpaid for a sample of services by about $6 billion because of the fees in 2021.

Funny thing: When small medical equipment firms perpetuate Medicare fraud, billing the federal health insurer for services not rendered, they often get indicted for fraud. Their executives and co-conspirators get sent to prison. When hospitals do it on a wider scale officials wring their hands and lament how unfair it is but do nothing about it.

The fees show up on patients’ bills after hospitals snap up clinics and doctors. Hospitals can designate the newly acquired clinics as an extension of their operations, forcing patients to pay the fees to cover costs for the entire hospital.

Fees have grown more pervasive as hospitals have gone on an acquisition tear in recent years, chasing after patients who have more options to get medical care somewhere else. Many hospital systems now get at least half their revenue from patients who aren’t admitted. By one estimate, more than half of doctors work for hospitals.

I first read about facility fees in the Wall Street Journal in 2009. A full 15 years later the problem has only gotten worse. As the Washington Post wrote, site-neutral payments would save Medicare billions. Site-neutral payments refers to paying the same fees whether a service is performed inside a hospital or in a free-standing clinic far from the hospital campus. Hospitals claim they need higher fees for hospital-owned clinics to cover overhead. Yet, it makes no sense to pay more for the same service when it can be performed elsewhere cheaper. However, Medicare site-neutral payment legislation would do nothing for younger Americans with employee health plans or those with high-deductible Obamacare plans.

The Wall Street Journal reports it is all but impossible for patients to know ahead of time whether a clinic is associated with a hospital that will charge facility fees. Perhaps if hospitals were required to provide price quotes in advance for services to be legally collectable there would be more transparency. Also, this illustrates why the corporate practice of medicine laws should be enforced. Physicians’ sole legal right to practice medicine should not be bought and used by hospitals to ambush patients.