States crack down on hospital ‘facility fees’ for routine care, like colonoscopies

At a time when regulators are attempting to crack down on surprise medical billing, many hospitals are adding billions of dollars in facility fees to medical bills for routine care in outpatient centers they own. These fees raise patient prices by hundreds of dollars for widely used and standard medical care such as colonoscopies, mammograms and heart screenings, a Wall Street Journal investigation found.

Medicare likely overpaid for a sample of services by about $6 billion because of the fees in 2021, advisors add. The added cost is not justified, according to providers and economists.

“You’re not getting anything extra,” said Loren Adler, a health economist at the USC-Brookings Schaeffer Initiative for Health Policy, who studies hospital billing.

Hospitals counter that facility fees help offset extra costs they incur to meet federal regulations. “It’s not as simple as same services, across-the-board,” said Jason Kleinman, director of federal relations for the American Hospital Association. Fees on outpatient services also help cover costly hospital services such as neonatal intensive-care units, he said.

Fees have grown more pervasive as hospitals have gone on an acquisition binge in recent years.  Many hospital systems now receive at least half of their revenue from patients who aren’t admitted. More than half of doctors now work for hospitals, one estimate found.

This gives hospitals more opportunities to apply fees — and generate revenue. For chemotherapy given by infusion, more than half of bills now have facility fees for patients who are covered by traditional Medicare or some of the largest U.S. health insurers. This is up by roughly one-third to 45% from a decade ago, according to Medicare’s advisory commission and the Health Care Cost Institute.

The prevalence of fees varies by state:

• In Ohio and Maine, facility fees are tacked onto roughly four of every five bills sent to each state’s largest insurer for heart-disease screening, according to data compiled for the Journal by Elevance Health, the parent company of a major health insurer.
• By contrast, Indiana banned the fees at clinics located off hospital campuses for the largest nonprofit health systems, starting next year.
• Some states prohibit fees for telehealth or preventive care.
• Others require hospitals to notify patients of fees before Under a new state law, Colorado hospitals will have to disclose facility fees starting in July.

Related: Rising emergency room costs point to facility fees

Lawmakers have proposed limiting fees covered by Medicare, which advisors to the federal insurer have unanimously recommended. Under a bill passed by the House in December, Medicare no longer would pay hospital facility fees for chemotherapy and other drugs infused by doctors in clinics off a hospital campus, saving about $3.7 billion over 10 years. The American Hospital Association opposes limiting the fees, saying restrictions would cut revenue to hospitals already squeezed financially by high labor costs and inflation.