Facility fees

Reader David States sent me two articles on facility fees, a topic I’ve not given much attention (yet).

Liz Kowalczyk reported in January 2013:

[T]he Burlington hospital to charge patients an overhead fee when they are treated by doctors it employs — even when their offices are not located in the hospital but in a medical building 1½ miles away.

This practice is common and has become more widespread in the past several years as hospitals across the United States buy up physician practices in the community. […]

The federal Medicare program, which covers 47 million people and is under pressure to cut costs, is taking a look at the practice. An independent agency that advises Congress concluded last year that the charging of facility fees at hospital-owned medical practices is costing Medicare millions of dollars a year. For a 15-minute office visit, for example, the federal health insurance program paid $44 more at a hospital-owned office in 2011 than at an independent office. Medicare patients pay more too: Their share of the bill for this standard visit was $11 more when they went to a hospital-owned office. […]

Erik Rasmussen, a senior associate director at the American Hospital Association, said the extra fees are a way to have patients served at all of a hospital’s locations cover overhead costs unique to hospitals, such as having emergency room staff available 24 hours a day.

Fred Schulte reported in December 2012:

The root of these increases are controversial charges known as “facility fees,” and they are routinely tacked on to patients’ bills not just for services actually provided in hospitals, but also by outpatient care centers and doctors’ offices simply because they’ve been purchased by hospital-based health care systems. Hospitals argue they can’t afford to keep the doors open without facility fees.

Hospitals have billed them at least since 2000 when Medicare set billing standards for doctors employed by hospitals, and private insurers went along. Since then, the fees have grown increasingly common, costly and controversial. […]

The fees date back to April 2000, when Medicare clarified its policy for billing by health groups that hired physicians. […]

The issue popped up last year when the House passed legislation that extended the payroll tax holiday and unemployment compensation benefits. Tucked into the “Middle Class Tax Relief and Job Creation Act” was a provision to cut about $6.8 billion in Medicare costs by targeting doctor services in hospital-owned offices.

The hospital industry fought back hard — and ultimately successfully. The cuts never passed the Senate and were not in the final conference committee bill signed by President Obama in February. […]

The Medicare Payment Advisory Commission, or MedPAC, which advises Congress, stirred up the debate in January when it recommended that the health plan for seniors pay for visits with doctors at the same rate, no matter where they occurred, and regardless  of whether the doctor practices independently or is employed by a hospital.

MedPAC also made this recommendation in subsequent reports, according to the article. I have not chased down the MedPAC reports yet. The article also discusses efforts to force hospitals to disclose facility fees in advance and challenges to removing facility fees from provider organizations.

Facility fees also arise in this New York Times article by Elizabeth Rosenthal.


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