Why A Physician Visit is Sometimes Billed at Inflated Hospital Prices

Have you ever noticed that a lot of doctor’s offices are next to a hospital? The are numerous reasons for this. Investors developing a medical campus build medical office buildings with doctors in mind. Hospitals want doctors to refer patients and medical office buildings next to the hospital are a way to attract physicians and patients who become familiar with the location. There is another convenient reason doctor’s offices are next to hospitals: hospitals often own the physician practice and bill as hospital services.

Hospitals are the worst place to receive care if there are any other choices. Hospital prices are far higher than the same services available elsewhere. I often tell the story of my wife unknowingly checking on getting a CT scan at a hospital outpatient facility. She discovered that her share of the cost was going to be $2,700. That wasn’t the price; that was just her share of the cost. The price was higher. I quickly found a free-standing radiology clinic willing to do the same procedure for $403. Why was it lower? It wasn’t that one CT scanner was better than the other. It was that one was at the hospital where prices are always higher.

A visit to a hospital-employed physician is often billed at hospital prices. There have been reports about patients who went to their regular doctor only to make an appointment and later discover a facilities fee tacked onto their bill. A facilities fees is a unnecessary charge for hundreds of dollars when you have an outpatient visit billed by a hospital (WSJ gated). For example:

After David Hubbard underwent a routine echocardiogram at his cardiologist’s office last year, he was surprised to learn that the heart scan cost his insurer $1,605. That was more than four times the $373 it paid when the 61-year-old optometrist from Reno, Nev., had the same procedure at the same office just six months earlier.

“Nothing had changed, it was the same equipment, the same room,” said Dr. Hubbard, who has a high-deductible health plan and had to pay about $1,000 of the larger bill out of his own pocket. “I was very upset.”

Yes, something had changed. His doctor’s practice had been bought by a hospital and the same service that used to cost $373 was jacked up to $1,605 when hospital facilities fees were added. That’s why I always say hospitals are one of the few big box stores you should avoid.

Big Box retailers provide the convenience of one-stop-shopping, at prices that are lower than specialty stores. By contrast, the Big Box store in the health care world is the hospital; but it’s the last place you want to visit if you’re hoping for a good deal on medical care.

Writing in the Wall Street Journal (gated), former Louisiana governor Bobby Jindal (also former HHS Secretary) and his coauthor Charlie Katebi propose putting a stop to the “dishonest billing that costs patients and taxpayers billions,” saying:

Each year millions of patients visit their doctors’ offices for a variety of routine services. But in recent years more Americans are being charged as if they had visited a hospital. This is because the doctor’s office billing them is pretending to be a hospital.

In Ohio, one retiree was charged a $1,262 hospital facility fee for receiving arthritis treatments in an outpatient clinic. The patient’s share of the bill increased tenfold compared with what she had previously paid for the same procedure provided by the same doctor in the same building. In Colorado a patient was charged an $847 facility fee for a telehealth consultation.

Keep in mind that when a hospital acquires physician practices the goal isn’t just to ambush unsuspecting patients with needless hospital facilities fees. It’s also to capture referrals for all the medical services ordered by their physician employees. In other words, when your physician works for the hospital, he or she looks out for the hospital’s best interest, not yours.

As a result, hospitals’ exorbitant facility fees have driven up the cost of outpatient care. An analysis by the Committee for a Responsible Federal Budget found that after a hospital buys a physician’s practice, the price of numerous healthcare services—including MRI scans, drug infusions and chemotherapy—doubles or triples.

If your hospital-employed physician orders a complete blood count, it will probably be sent to Quest Diagnostics or LabCorp. Yet, you won’t be billed at the low Walk-In Lab discount price of $44 to $46 that I pay. If you need a CT scan, it won’t be the $403 price I found years ago. It will be hospital prices.

Large hospital systems have exploited our nation’s outdated billing systems to foist gigantic bills on Americans. Bringing much-needed transparency in hospital billing will deliver more affordable care and put patients back in control.

Bobby Jindal is right. We need to put a stop to the outrageous billing that allows patients to be ambushed by hospitals that are supposedly nonprofit organizations for the good of the community.