Beyond the Byline: Hospitals facility fees spur ethical debate

Modern Healthcare Senior Hospital Operations Reporter Alex Kacik and Senior Finance Reporter Tara Bannow talk about hospital billing practices.

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Alex Kacik: You walk into an emergency department and leave with a bill that charges you for the doctors time and expertise, for your charge an extra fee to help keep the hospital’s lights on and equipment running. Should hospitals notify patients who come into the emergency department that they’ll be charged a facility fee? Should telehealth or hospital-at-home patients be charged a facility fee? 

Welcome to Modern Healthcare’s Beyond the Byline where we offer behind the scenes look into our reporting. I’m Alex Kacik, senior operations reporter, our senior finance reporter Tara Bannow is joining me to talk about hospital billing practices. Thanks for joining me, Tara.

Tara Bannow: Thanks for having me, Alex.

Alex Kacik: So Tara, you and I both came out with stories over the past couple of weeks looking at hospital facility fees. These are flat rates of up to your research saying that $6,700 that are meant to offset hospitals costs associated with providing around the clock care, stricter licensing and regulations and specialized equipment. That means that unbeknownst to the patient, they could be charged significantly more for the same care at an outpatient facility, for instance, if it’s owned by a health system, rather than an independent clinic. So what did you find out Tara about hospital facility fees in their disclosure policies?

Tara Bannow: Well, it’s more common to talk about facility fees in the context of outpatient clinics that got bought by hospitals, which is kind of how this concept of the facility fee came into the public consciousness. So you know, you went to your physician clinic before, there wasn’t a facility fee. Now you go there, and there’s another silly fee on your bill. And you’re saying, ‘Wait a second, I didn’t go to a hospital, why am I being charged this fee? 

So I’ve seen a lot of different disputes regarding outpatient facility fees. But then there’s, you know, my usual healthcare billing sources, who I contacted for this story, hadn’t really heard of people disputing their emergency room facility fees. And I guess it’s really because that is the most expensive part of the hospital to run to keep staffed and supplied. And if you’re going to charge a facility fee anywhere, that would probably be the place to do it. But nonetheless, there has been a flurry of lawsuits from patients who argue that they should have at least been notified about the hospital’s practice of charging facility fees in the emergency room. You know, they’re saying either verbally through signage, maybe on their intake form. So these are patients who obviously came in and were conscious, one of them came in after a bike accident, for example, and these patients are arguing had they known they would have gone elsewhere. But obviously, not everyone going into an emergency room can do that. But I would note, some of these facility fees are very significant. I used a report that used 2021 data, it was from a firm called hospital pricing specialists. But they found that facility fees for the most expensive hospitals, for the most severe patients can can go up to $15,000 in Alaska, and up to $13,000 in Colorado.

So obviously, those are extreme outliers. I mean, it might have to do with the fact that these might be more rural areas where it’s more difficult, expensive to get, you know, really specific providers in there. But the most severe patients in Florida, where some of these cases are being litigated, were charged between $2,400 and $6,700. So it’s really, it can get out a lot onto your bill before any tests or procedures are added on there. And then as far as disclosure, it’s by and large, not happening. Many hospitals point to their machine readable chargemaster rates that they have to disclose, they have to post on their websites. But even in a lot of these Excel documents, it would be impossible to find ER facility fees.

And I want to ask Alex, I know you spoke with health systems who are investing in hospital-at-home programs. So are they charging facility fees for bringing more acute services like infusions and imaging into people’s homes?

Read more: Providers push for payment parity for hospital-at-home programs

Alex Kacik: So the question is, I don’t know from a lot of folks who are still figuring out the billing procedures when it comes to commercial insurers. So I talked with six health system executives, and most of them were participating in this waiver that lasts through the emergency declaration of the pandemic levels the pay for hospital-at-home care and traditional inpatient care. And they’re lobbying a bunch of big health systems and other types of stakeholders are lobbying to extend that waiver that levels the pay between traditional inpatient stays and hospital-at-home care. And so I asked them, you know, outside of this waiver, what’s your strategy with commercial insurers? Do you think a facility fee is merited in this case? Because there is overhead associated with getting this technology up and running. But national studies have shown that it cost health systems about 20% to 40%, less to deliver services in the home. And and so should that be reflected in what they charge payers?

And the philosophy is different here. Intermountain, for instance, was very straightforward, saying that if you’re not charging insurers less than you’re diluting the effectiveness of this new treatment modality. Others were saying that the cost savings will manifest in other ways, like reduce readmissions, and, you know, avoiding more expensive types of follow-ups. And so they’ll think the overall cost to the healthcare system will lower in those ways rather than their billing practices.

So it’s interesting, because you have patient advocates who were saying that, you know, look, the, if you’re still charging payers, the same rate, then, you know, your cost you’re still gonna have the potential to increase premiums and cost sharing for patients. And so it’s interesting to see this split now, because a lot of these programs are just getting started up in pilot programs, and they’re not at national level yet. So I think it’ll be telling in terms of how reimbursement changes and whether they’ll ultimately charge facility fees.

But I know you mentioned Tara. Cost sharing, you know, being you know, such a focus right now, particularly when it comes to, you know, transparency, we’ve seen the price transparency mandates rollout to various effects where not all are complying with the new rule that went into place last year. But cost sharing and high deductible health plans has been a trend in terms of the current healthcare system, the rationale is that consumers will be more discerning since most of us have high deductible health plans. We’ll be on the hook for more of the costs. But those in crisis don’t have time to “shop around.” 

Did patients arguments that hospitals should tell those who get care in the ED, that they’ll be charged a facility fee have any traction in the courts?

Tara Bannow: Mostly no. It seems like the majority of these cases are getting dismissed. Judges are determining that hospitals are not legally required to disclose their ER facility fees to patients. Community Health Systems, which is one of the defendants in these cases, called it a copycat case in their rebuttal. And they said they noted they’ve been a number of identical cases that were also dismissed in Texas, Mississippi, Virginia, Florida. So it’s, I don’t know that that weakens the legal argument or not. But it is worth mentioning that some of these cases have been filed by the same attorneys. So and they do have very similar language. So I’m not sure if you know, they’re working together what the deal is there? But it is worth mentioning that the these are very similar cases.

CHS also argued that, in that case, this is the bike accident patient either already stopped pursuing the balance on her bill. So one of their legal arguments was she no longer has standing to bring a case. But I guess even if the legal question is, is moot. Then the question becomes, should they disclose their ER facility fees? I mean, these are huge sums. So is there more of an ethical obligation to disclose the facility fees? And some of my sources said, they think there is. They think, you know, patients who come to emergency rooms are the most vulnerable patients. They have the the least ability to make a choice, and so there should be more protection for them. Not everyone agrees with that. But that was one argument.

So I’m curious, what do patients say what a patient advocates say about charging facility fees to these hospital-at-home patients?

Alex Kacik: So it’s a similar kind of ethical discussion here. Where should a hospital try to pass on the savings of lower overhead associated with hospital-at-home care to patients via charging ensures less? So you know, the patient advocates say it’s immoral unethical to still charge facility fees when the overhead is significantly cheaper compared to traditional inpatient stays. And so, I know as your reporting show, you know, the facility fee can vary based on you know, the type of treatment and the facility. But, you know, these advocates point to hospital care when you go through our national expenditures, you know, we have about a $4.1 trillion annual healthcare bill here in the U.S. About a third of that is associated with hospital care. And there’s been so much talk, it seems, you know, about trying to, “reduce the cost curve and lower costs,” and, you know, that seemingly take back that’s rightfully probably taken a backseat somewhat during the COVID pandemic. But, you know, charging facility fees could perpetuate this status quo of of rising, overall healthcare costs. And year over year, we’re still seeing that number tick up. I think it was $3.8 trillion in 2020. And now $4.1 trillion in 2021. So, yeah, I mean, outside of the legal obligation, it’ll be interesting to see if some hospitals are more progressive and tried to do a more patient serving thing outside of whatever the courts say.

But one thing I noticed in your reporting Tara, is that states have been acted different policies, you know, outside of the federal realm, to try to regulate facility fees.

Tara Bannow: Yeah, and I just want to mention, because it’s interesting when you talk about facility fees, potentially driving up the overall spending on healthcare. Connecticut, which has, you know, far and away the most extensive regulation of facility fees, they actually require hospitals to report to the state how much they’ve charged in facility fees, or collected in facility fees each year. And the state releases annual reports on this in 2020, Connecticut hospitals collected $358 million in facility fees. And that was actually down from 2016, when it was $418 million. So clearly, the disclosure is actually in itself seems to be putting a dent in the volume of facility fees.

But anyway, as far as the regulation of facility fees and disclosure in Connecticut, hospitals can’t charge facility fees for evaluation and management codes off of hospital campuses. So that’s a big deal. It’s actually banning them in a lot of cases in which most hospitals would report them. Hospitals also in Connecticut have to report how much they’ve charged, or sorry, they have to report to patients in emergency rooms, actually how you know that they disclose, they have to disclose that they charge facility fees. Sorry, there’s a roundabout way of saying that. But that I couldn’t find that in any other state. I could not find regulation of facility fee disclosure in emergency rooms. Of course, other states have regulation of facility fees. But I thought that was really interesting. So some hospitals in Connecticut told me that they post the notification of their practice of charging facility fees on signs. But even there, the language was very vague. It wasn’t, you know, you could pay up to $5,000. It’s just like, ‘you might incur a high charge because you’re in the emergency room.’

Alex Kacik: And it’s worth noting, you know, like you mentioned off the top, you know, what this means in the outpatient sector and how site neutral payments play into this. You know, we had the facility fees at the core of the discussion here where you had hospital owned outpatient departments that were charging a facility fee for the same type of emergency and management evaluation and management services, as they were being as they were delivered in inpatient facilities.

So the question was, should you pay a differential for the same service, which amounted to these facility fees just because the entity was owned by a hospital? And the court, you know, justified that reasoning, and on appeal, you know, the American Hospital Association lost saying that they were owed, you know, more, given the cost of maintaining these broader health systems and, you know, didn’t hold weight.

So, you know, I’m just wondering what you think, Tara, on the broader question about price transparency here, as we look at these new laws that went into effect and you know, these site neutral payments, how, you know, this disclosure policy weighs into this broader conversation?

Tara Bannow: I just think it takes not only regulation, but very specific regulation. It to make hospitals disclose their facility fees, especially in emergency room settings. So they’re not going to do it out of the goodness of their hearts. You have to tell them, how to disclose it and what kind of language to use because obviously, telling a patient, ‘You might incur a higher charge in an emergency room’ is not the same thing as saying, ‘We charge facility fees for this emergency room and they range between, you know, $400 and $6,000.’ 

But yeah, I don’t know, what’s your take on that?

Alex Kacik: It’s been pretty jarring how many are at least notable, I wouldn’t say jarring. But it’s notable how many health systems aren’t complying with these price transparency mandates. You have, in some studies have noted like two thirds, and this is earlier on during, you know, early last year when this price went when these laws went into effect. But you know, that they weren’t complying with the closing, disclosing their payer negotiated rates, and which was the main sticking point. You know, saying that they had trade secrets to protect, and that would have given their competitors an undue advantage. But you know, they’re looking at the fines, there’s up to $2 million per year for some of these large hospitals, they would rather pay that fine and disclose these rates.

So when you’re talking about these ethical dilemmas, it they don’t seem to hold a lot of water, to at least some health systems. And, you know, they’ll opt to, you know, go different routes, rather than try to say this is comply to, you know, the needs of or comply to the requests of patients. And, you know, what these lawsuits are asking. So it just gives me a little pause there in terms of the behavior that we’ve seen thus far from some of that health systems. I tried a word that is as diplomatically as I could, but and I think the reporting shows that it just it’s a varied response based on the type of hospital.

So what’s your outlook, Tara, when it comes to, you know, these disclosure policies? Do you expect more related lawsuits? Do you expect any of these policies to change?

Tara Bannow: I don’t know how many more of these lawsuits we’ll see. I mean, they don’t really seem to be going anywhere. So I think at some point, maybe the attorneys involved will kind of give up and try something else. But I honestly don’t think that we’ll see a lot more regulation of facility fees or facility fee, just, ER facility fees, or disclosure. You know, potentially more regulation of facility fees more broadly. But I don’t think there’s a lot of momentum or interest to regulate ER facility fees, as much as some of these patients would like to see that.

So I guess that just means we have to keep writing about it. Cuz I yeah, I don’t know that I see a lot of appetite for that even among, you know, healthcare, consumer advocates and billing advocates. There’s just so many issues to tackle, you know, in the ER facility fees seems to be a little bit low on the totem pole.

But I guess I’m curious, I know, you mentioned that there’s kind of a lot of testing out there of these hospital-at-home programs. So what do you think is the chance that those will actually take off at a national level?

Alex Kacik: So some of the more advanced systems like Mayo and Kaiser. They’re testing out more advanced use cases for hospital-at-home, and certain types of like transplant rehabilitation, some more severe rather than, you know, typical kind of infusion and low relatively lower acuity and stable patients. So, you know, they’re seeing how effective this is for, you know, the more complicated surgeries, which is telling, but I, the one theme I got was a lot of reticence from health systems to invest in this type of care and infrastructure if insurers weren’t going to pay them “appropriately.” And I don’t know what it’ll take to get at that, “appropriate” level of pay? But there’s so much uncertainty around that now that that in itself dissuades some investment. So ultimately, a will hinge I think, on, you know, a bold move for Medicare and depending on where this waiver goes, or more indication for some of the larger insurers on if they’ll be willing to pay a premium for some of this hospital-at-home care. But it remains to be seen.

But Tara, thank you so much for taking the time. I appreciate it so much. It’s been a pleasure as always, and thank you for your reporting.

Tara Bannow: Thanks, Alex. It was good to talk to you.

Alex Kacik: And thank you all for listening. If you’d like to subscribe and support our work. There’s a link in the show notes. You can subscribe to Beyond the Byline on Spotify, Apple podcasts or wherever you listen to your pods. You can stay connected with our work by following Tara and I in Modern Healthcare on Twitter and LinkedIn. We appreciate your support.