I have often told the story about the time my wife unknowingly tried to schedule a CT scan at a nearby hospital outpatient department. As luck would have it, prior authorization is all that saved us from a huge bill, of which her share was going to be $2,700. I quickly found a free-standing radiology clinic that had a contract with Blue Cross Blue Shield (BCBS) of Texas for $403. Oddly enough, BCBS was willing to approve a scan at either facility. Nobody called her to explain the huge mistake she was about to make by getting a diagnostic scan at a hospital-owned facility. Here is the thing: Health insurers, Medicare and Medicaid pay hospitals higher prices for the same services that are available elsewhere for a fraction of the cost. Neither do payers alert patients that cheaper alternatives exist.
Everything is more expensive at a hospital because hospitalized patients are in no position to shop around. From $12 Tylenol capsules to CT scans that cost $5,445.83 (current gross charge for CPT code 17477, CT scan abdomen and pelvis). Hospital prices have become something of a scam. Nowadays even buildings not attached to the hospital are considered part of the hospital and charge hospital prices.
Hospitals are buying physician practices, while more than half of doctors are now employees. The doctor you saw last year in the medical office building a block from the hospital became part of the hospital with the stroke of a pen. Nothing appears to have changed about your visit except the hospital sends you a separate facilities fee that may double what you owe. The Washington Post ran an article about a Denver couple who got a 1-hour telemedicine consult for their son.
When Brittany Tesso’s then-3-year-old son, Roman, needed an evaluation for speech therapy in 2021, his pediatrician referred him to Children’s Hospital Colorado in Aurora. With in-person visits on hold due to the covid-19 pandemic, the Tessos met with a panel of specialists via video chat.
The specialists, some of whom appeared to be calling from their homes, observed Roman speaking, playing with toys, and eating chicken nuggets. They asked about his diet.
Tesso thought the $676.86 bill she received for the one-hour session was pretty steep. When she got a second bill for $847.35, she assumed it was a mistake. Then she learned the second bill was for the costs of being seen in a hospital — the equipment, the medical records, and the support staff.
Ms. Tesso probably didn’t realize the people on the call worked for the hospital, and charged hospital facilities fees in addition to the standard therapy fees. (I guess she should have considered herself luck they didn’t charge her for a virtual hospital stay at $20,000 a day.) Although the hospital wouldn’t comment on her case specifically, the hospital issued the following statement to reporters when asked about facilities fees:
“Those payments for outpatient care are how we pay our nurses, our child life specialists, or social workers,” Zach Zaslow, senior director of government affairs for Children’s Hospital said in a February call with reporters. “It’s how we buy and maintain our imaging equipment, our labs, our diagnostic tests, really all of the care that you expect when you come to a hospital for kids.”
As an aside, I do not really want to pay for nurses, child life specialists or social workers who were not directly involved in my child’s care. Then I only want to pay a reasonable charge, not $676.86 for several people to join a call from home and listen over a staticky phone line watching my kid eat chicken nuggets. Apparently, I’m not the only one who finds this absurd.
Millions of Americans are similarly blindsided by hospital bills for doctor appointments that didn’t require setting foot inside a hospital. Hospitals argue that facility fees are needed to pay for staff and overhead expenses, particularly when hospitals don’t employ their own physicians. But consumer advocates say there’s no reason hospitals should charge more than independent clinics for the same services.
At least eight states think so too. Across the country there are legislative actions to rein in abusive facilities fees.
They have implemented limits on facility fees or are moving to clamp down on the charges. Among them are Connecticut, which already limits facility fees, and Colorado, where lawmakers are considering a similar measure. Together, the initiatives could signal a wave of restrictions similar to the movement that led to a federal law to ban surprise bills, which took effect last year.
“Facility fees are simply another way that hospital CEOs are lining their pockets at the expense of patients,” said Rep. Emily Sirota, the Denver Democrat who sponsored the Colorado bill.
According to the Washington Post, the states that are considering limits on hospital facility fees are Connecticut, Colorado, Indian, Minnesota, New Hampshire, Ohio, Texas and Washington. Some of the proposals merely require data collection, while others would prohibit facility fees for telemedicine or require site-neutral payments in Medicaid. Rep. Spartz of Indiana introduced a bill in Congress, the Transparency of Hospital Billing Act, in 2022 but nothing came of it. There are periodic calls to broaden site neutral payments in Medicare. According to Fierce Healthcare:
So-called site-neutral policies would bring payments for outpatient services delivered at hospital outpatient departments to those of doctors’ offices and similar settings.
In 2015 the Obama Administration began to require site neutral payments at outpatient and offsite hospital facilities but grandfathered existing facilities from the new rule. Broadening the rule to include grandfathered facilities would save Medicare $471 billion over 10 years.
These efforts by states to protect patients from hidden surprise bills, like facility fees, are important but it’s not clear what good they will do. What is needed is transparency in pricing, where patients are not responsible for fees they were not made aware of prior to care. If hospitals can bill for a service, they then have the capacity to provide a quote for a service. That way patients could object and look elsewhere. The Colorado bill is a good starting point.
The Colorado bill would prohibit facility fees for primary care visits, preventive care services that are exempted from cost sharing, and telehealth appointments. Hospitals would also be required to notify patients if a facility fee would apply.
The bottom line is hospitals are the problem. They consume nearly one-third of health care expenditures and once in the hospital patients have no discretion about what they pay or the services they receive. Hospitals are trying to expand that market power to include when patients visit the doctor or call one on the phone.