Hospital "Facility Fees "- Why Hospital Ownership of Doctor Practices May Drive Up Costs

I am hesitant to accept the notion that hospital-doctor consolidation into accountable care organizations will reduce health costs. As you may be aware, the new health care law is vigorously pushing the idea of accountable care organizations, wherein hospitals and doctors will collaborate to save money by integrating and coordinating care and avoiding duplication. Presumably the money “saved”will then by shared by the hospital and doctors.

This sounds like a lovely scenario of saving money except for three things.

One, as a pointed out in a previous blog, “The Hospital-Doctor Hiring Wave,” hospitals are hiring physicians and acquiring physician practices in record numbers.

Two, hospitals fees are invariably higher than fees charged by independently owned physician practices in outpatient settings.

Three, because of something called the “Facility Fee,” a previously obscure Medicare arrangement, hospitals can tack on a fee of hundreds of dollars when the hospitals “owns” the facility, whether that facility is inside the hospital or outside the hospital.

When patients visit some doctors' offices and urgent-care clinics, they're increasingly running into something unexpected: billing as though they had gone to a hospital.

The fees, which sometimes amount to hundreds of dollars, occur when hospitals own physician practices, urgent-care centers and other operations. Patients visiting an urgent-care clinic, for example, may unexpectedly get billed as if they visited a hospital emergency room. This usually comes as an unpleasant surprise.

Doctors' offices in clinics owned by hospitals, besides billing for the physician's work, are now tacking on this "facility fee," an additional charge hospitals usually impose when procedures are done on their premises. Even for insured patients, such additional charges can drive up out-of-pocket costs.

Consumers around the country, and health plans, are complaining about separate, unexpected facility fees, based on hospital ownership of previously independent physician owned practices. Consumer advocates across the country say patients increasingly are being charged the fees, the result of an obscure change in Medicare rules that took place nearly a decade ago.

Called "provider-based billing," this Medicare rule allows hospitals that own physician practices and outpatient clinics that meet certain federal requirements to bill separately for the facility as well as for physician services. Because hospitals that bill Medicare beneficiaries this way must do so for all other patients, facility fees affect patients of all ages. Doctors' offices owned by physicians and freestanding clinics are not permitted to charge the fee.

The ability to charge a “facility fee” is causing hospitals and their lawyers to take some unusual and creative measures to justify charging the fee. As a cardiologist’s office, for example, a room was walled off with a separate entrance for doing diagnostic stress tests and nuclear scans so that patients could enter the “hospital owned facility” rather than the doctor’s office.

What will hospitals think of next to "facilitate the facility fee"? "Facilitating the Facility Fee." That has a nice cash register ring to it.