Hospitals cry wolf – banning facility fees won’t bankrupt them

It’s no secret that medical bills can be shockingly high. PIRG is leading campaigns to help bring down the high cost of health care, because people deserve to pay reasonable prices for the care they receive. No one should have to pay for added fees that do nothing to improve a patient’s quality of care. That’s why we’re advocating for states to ban hospital facility fees. 

Hospitals have added facility fees to inpatient bills for years – ostensibly to cover the overhead costs of running a hospital, like 24/7 staffing. But today, hospitals are also adding those fees to bills for outpatient and regular doctor visits, simply because they now own that physician practice. 

It’s blatantly wrong to charge patients more for an appointment by pretending that the doctor’s office is now a hospital. It’s deceptive and dishonest. So why do hospitals do it?

Hospitals insist that if they can’t charge facility fees, they’ll go bankrupt. But a new report suggests they’re crying wolf.

A recent study, “Reining In Hospital Prices”, found that prohibiting hospitals from charging facility fees for most regular doctor appointments would have a very modest impact on hospital profits – a decrease of less than 1% for each of the three states studied. 

The report, issued by Brown University Center for Advancing Health Policy through Research (CAHPR) and United States of Care, examined the potential impact of three proposed reforms to lower health care prices, including a ban on facility fees. 

Focusing on Indiana, Massachusetts, and North Carolina, the researchers looked at outpatient claims data to see what would happen if hospitals stopped charging facility fees for services routinely performed outside of hospital settings. The results? 

Patients would save millions, while hospital profits are barely impacted. 

The study showed a facility fee ban in the three states examined would save money for patients and their employers. Out of pocket expenses for the patient and lower premium costs could be realized, as demonstrated in the chart below. 

For example, across Indiana, a ban would result in total savings of $323 million. Significant savings were also calculated in Massachusetts ($237 million) and North Carolina ($121 million). And that translates to savings directly for the patient. The evidence shows that if Indiana hospitals were prohibited from adding facility fees for telehealth, preventive services and evaluation appointments, savings per patient would total $93 in out-of-pocket payments and insurance premium reductions.

Plenty of patients visit doctors and specialists several times a year. Repeated facility fees can add up quickly and burden patients with additional bills for no good reason other than that the hospital that owns these physician practices can add these charges. The care remains the same – only the bill total changes. In addition to the financial strain, we know that high out of pocket costs and unexpected fees can deter patients from seeking care, so it’s essential to minimize unnecessary charges.

Compare that patient burden to the minimal loss of profit for hospitals.

In the graph above, the red bars represent the current average hospital operating margin – the percentage of their income left after expenses like payroll or purchasing equipment – in each state. The dark blue bars represent an estimate of what their operating margin would be after implementing a facility fee ban. As you can see, there’s not a large difference between the red and blue bars, meaning hospital profits take only a very small hit from a facility fee ban. This confirms what we already knew: 

Facility fees are needlessly increasing the cost of care and hospitals won’t close if they can’t charge them in our doctor offices. 

 Hospitals keep buying up independent doctors’ offices that had been successfully operating for years without facility fees. They change nothing but the sign on the building and who sends out the bills. Then, they claim they need to begin charging additional fees to continue operating, despite the location’s history of profitability. The argument never had much logic behind it, and now the data backs up common sense.  And yet hospitals use financial need as their justification to charge patients hospital fees for doctor’s office care.

No more excuses.

It’s time for state legislators to put an end to facility fees that unfairly drive up health care costs for patients. Knowingly billing patients more for outpatient appointments by acting as if they are receiving hospital care is wrong. A number of states have already taken action, but pressure from hospitals means only a few have gone as far as a ban. With this recent report, everyone can be assured that a ban fully protecting patients from these unjustified fees won’t cause the financial ruin claimed by hospitals. 

That’s why we’ll continue to fight for state bans on facility fees in Texas, Pennsylvania and elsewhere. Join with others who have shared their facility fee medical bill situation with us.