Resources: Articles

Making sure patients aren't surprised by hidden hospital fees Date: 05/01/14

Daniel Chang
Daniel Chang

Daniel Chang wrote a piece for The Miami Herald this winter on some of the hidden hospital fees that can take patients by surprise – and which insurers don’t necessarily cover. Here’s how he did it. 

Hospital executives have been busy preparing their institutions for payment reforms that they see coming as a result of the Affordable Care Act – particularly the way the law shifts financial risk away from patients, private insurers and government payers, and to the caregivers themselves, namely hospitals, physicians and other providers.

The ACA does this by beginning to change the way hospitals are reimbursed – moving away from a fee-for-service model that rewards volume, and towards a new system that rewards operational efficiency and healthy patient outcomes.

One of the most visible ways that hospitals have been preparing for this shift is that they are buying physician practices and building new outpatient clinics and urgent care centers in order to assemble teams that can practice integrated medicine and deliver care across a continuum owned and controlled by the hospital.

This helps to ensure that physicians provide care in more efficient settings than a hospital, and that they can keep track of patients, reducing redundancies and improving their ability to report outcomes.

These physician practices and outpatient clinics also help to create a referral pipeline to the “mother ship” or main hospital – reaching a broader geographical area than a stand-alone hospital can do on its own.

But as hospitals build these integrated systems and extend their geographic reach, consumers are increasingly encountering fees that are intended to support these new facilities.

I first heard about these facility fees, or “provider-based billing,” from a reader who alerted us to her experience last summer after visiting an outpatient clinic owned by a local hospital system.

This reader contacted us by email and I followed up with a phone call to hear her story. She explained that she visited the outpatient clinic to participate in an early lung cancer detection program.

She said that two weeks after her visit to that outpatient clinic, which lasted about one hour, she received a separate bill for “hospital services” that were labeled as “room and board – all inclusive.’’

Yet she did not recall ever setting foot in a hospital, or spending the night at the clinic. The reader said she even asked the administrative nurse at the clinic beforehand if she would be charged a facility fee, and that the nurse assured the reader that she would not be charged the fee.

After speaking with the reader, I called the hospital system and asked them for an explanation.

To my surprise, the hospital system declined to address their policy on facility fees, to reveal the amount of the charges or even to explain the conditions under which these charges are assessed.

The hospital system’s spokeswoman gave me only a written statement that the fees followed established national policies and applied to all “hospital-based” institutions.

Being unfamiliar with the national policies referenced, I called the Federation of American Hospitals, and a spokesman there explained it to me.

He said the fees help pay for the hospital infrastructure, including the emergency room and all of the services the main hospital provides.

These physician offices and urgent care centers, he said, are licensed through the main hospital and act as departments of that hospital – even if they are miles from the actual hospital campus.

He also explained that these physician offices and urgent care centers, when licensed through the main hospital, must meet more stringent federal standards than independent physician offices or urgent care centers.

The standards include complying with anti-dumping rules for patients, reporting requirements and other regulations.

I also interviewed a former hospital executive who now teaches health care management at a local university, and the director of a local hospital and health care provider association, and spoke with executives of other local hospital systems.

Not all of these interviews made it into my story, but they did help inform my understanding of what was happening.

I also had the good luck to attend a business of health care conference at a local university, where I heard a hospital system CEO, Lynn Britton of Missouri-based Mercy, pledge publicly that his hospital system would no longer charge facility fees to consumers for off-campus visits.

He also said this move could cost Mercy upwards of $40 million a year.

Britton did not accept my interview request afterwards, but his spokeswoman did provide a written statement acknowledging that Mercy is going to phase out the fees, in large part because it is confusing to consumers.

Britton’s public pledge helped me realize that facility fees were affecting many consumers, and that hospitals also were struggling with what appeared to be a negative public reaction to these fees.

I then followed up with some questions to the Centers for Medicare and Medicaid Services (CMS) to get clarification on the federal rules that governed billing for services provided in off-campus, provider-based departments such as physician practices and outpatient clinics.

CMS explained that when a medical service is provided in an independent, free-standing clinic or physician’s office, only one payment is made to the physician.

But when a service is provided in a physician office or outpatient clinic owned by the hospital and licensed as a department of that hospital, then Medicare pays the hospital a “facility fee” and then pays the physician separately for the physician’s portion of the service.

If a hospital bills Medicare patients this way, then it also must bill all other patients this way.

The trouble is that not all private insurers cover facility fees for their members, which is where the reader who first contacted me found herself.

Once I realized that many patients are probably experiencing the same unpleasant surprise, I knew the story would resonate with readers.

Daniel Chang (@dchangmiami) covers health care for The Miami Herald. He joined the newspaper in 2000 and his previous beats include arts news, nonprofits, Spanish-language TV and general assignment news. He previously worked for The Orange County Register in California.