Hospital Fees for Work Done in Physician Offices Owned by Hospitals

Old hospital administrators never die, they just charge hospital fees elsewhere.

Anonymous

January 28, 2013 -  I once took a course on health care management at the Harvard Business School.  As part of the course,  the instructor would pose a situation and ask the class to respond to it.  The instructor might have said, for example,  the federal government  had passed a law slashing hospital fees. Hospital administrators in the class always had ingenious responses circumventing or mitigating the intent of the law.  I thought of the class when I read in the BostonGlobe.com,  the following story in an article entitled “Hospital Fees Minus Just One Thing: A Hospital.” 

“Robert Reed’s visit to a suburban dermatologist’s office last year seemed ordinary: He was led into a small exam room with a scratchy paper-covered table, where the doctor inspected his skin and squirted liquid nitrogen onto three pre-cancerous spots

The statement he received a month later appeared anything but ordinary: It included $1,525 in “operating room’’ and hospital “facility’’ charges. Surely, Reed thought, it must be a mistake. There had been no hospital, no anesthesia, no surgical nurse

And these charges were far more than what the doctor billed for her services — just $354. “I feel like I’ve been taken advantage of,” said Reed, a 57-year-old financial analyst. “They need a reality check on what they are charging.’’

The realities , Mr. Reed, are these:

·         Obamacare is slashing hospital and doctor fees over the next decade.

·         Doctors are responding by going to work for hospitals in such record numbers that hospitals now own more than half of physician practices.

·         Hospitals are responding by charging hospital “facility fees” for work done in doctor employees’ offices, even if those offices are physically located away from the hospital.

The Lahey Clinic, who owns the dermatologist’s practice, defends the facility fee.  Lahey’s general counsel, says Medicare permits hospitals to bill facility charges for care in a physician’s office as long as they inform patients in advance. At the Wall Street dermatology office in Burlington where Reed had his procedure last January, signs posted in the lobby tell patients, “The offices at this location are operated as part of the main hospital facility. Because of this, the care you receive may have a hospital facility charge in addition to a provider charge.’’

The American Hospital Association and the Massachusetts Hospital Association also rationalize  the facility fee.

A senior associate director at the American Hospital Association, says 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.

Many doctors’ practices are losing money and would be forced to close if a hospital did not step in to support them, said the, general counsel for the Massachusetts Hospital Association. “One of the greatest challenges for hospitals is to find the resources to subsidize physician practices so they stay in their communities,’’ he said, explaining that facility fees help pay for technology and staff and meeting regulatory requirements in these offices.

I predict hospital facility fees will soon be outlawed, but hospitals will find another way to make up for their losses under Obamacare and from losses incurred from buying physicians’ practices.

I’m reminded of this metaphor:  when government pushes the cost balloon down from the top,   costs pop out below.

Tweet  :Hospitals are charging an extra “facility fee” for work done in physician practices the hospitals own. The fees may be 4-5 times the doctor's fee.