Understanding hospital facility fees and their impact on your medical claims reviews
Picture this: your health plan member walks into a clinic for an appointment, and upon leaving, they’re handed a bill with an additional “facility fee,” increasing the cost by hundreds of dollars.
But what exactly does this fee entail? What’s the justification for the cost?
Healthcare system consolidations and acquisitions of smaller facilities and doctor’s offices allow these fees to be legally charged after a doctor becomes affiliated with a large hospital system.
Legislators' and consumer rights groups' challenges to these fees have resulted in a patchwork of passed and in-progress legislation in various states that can add layers of complexity to medical claims processing.
So, what should a healthcare payer do? This article aims to help you understand facility fees to help you ensure payment integrity and accurate claim payouts. Let’s take a closer look.
Key Takeaways
- Healthcare consolidation: Healthcare system consolidation allows larger hospital networks to charge facility fees at smaller, affiliated clinics.
- Legislative challenges: Ongoing efforts by lawmakers and consumer rights groups have led to various state regulations, complicating medical claims processing.
- Hidden costs: Many patients are unaware that freestanding medical offices affiliated with hospitals can charge facility fees, leading to unexpectedly higher costs.
- Rising facility fees: Facility fees are increasing rapidly, adding unpredictability to healthcare billing.
- State regulations: Some states have banned facility fees for certain services to enhance transparency and reduce costs.
- AI solutions: AI-powered payment integrity solutions can help healthcare payers navigate complex facility fee regulations and prevent improper payments.
What Are Hospital Facility Fees?
Hospital facility fees cover the operational costs of using hospital facilities, such as equipment and staff. They are separate from the professional fees charged for medical services delivered by healthcare providers.
Fee Surges Cause Unpredictable Healthcare Billing
Facility fees have surged over the years, overshadowing the relatively stable professional fee and adding a layer of variability and unpredictability to healthcare billing.
To put it into perspective, in an analysis published by the Kaiser Family Foundation (KFF), facility fees for emergency department services increased four times that of professional fees from 2004 to 2021—531 percent compared to the 132 percent growth rate of professional fees.
Hidden Hospital Fees in Freestanding Medical Offices
To the unwary patient, a freestanding medical office or clinic in a shopping center might not seem like part of a hospital.
Still, due to the rise in healthcare-system consolidations, many of these offices are now considered part of a hospital’s campus, giving hospital systems the legal right to charge facility fees in states where the law allows.
Patient Dissatisfaction Fueling Legislative Pushback
Even with health insurance, patients often face unexpected facility fees added to routine care bills, like office exams.
The increased application of hospital facility fees to services at off-campus clinics has led to patient dissatisfaction, prompting legislative action in at least 15 states.
Despite this, hospitals argue that these fees are necessary to cover costs, though efforts to curb these fees have seen bipartisan support.
State and Federal Efforts to Regulate Hospital Facility Fees
Several states are pursuing laws restricting facility fees, with Maine, Maryland, and Connecticut successfully passing legislation.
For example, Maine lawmakers passed LD 2271 last April, requiring hospitals and healthcare facilities to inform patients about facility fees. It mandates facilities to post notices about fees but does not require disclosing specific amounts, which can vary based on insurance.
Additionally, federal lawmakers are developing the Lower Costs, More Transparency Act, which would encompass facility fees charged outside of traditional hospitals.
Equalizing Rates with Site-Neutral Payment Reform
In May 2024, the House Budget Committee examined how consolidation in the healthcare industry affects spending and patient access. Chair Jodey Arrington emphasized that consolidation is the primary driver of increased healthcare spending and proposed site-neutral payment reform to address this issue.
Furthermore, the Medicare Payment Advisory Commission (MedPAC) has recommended that Congress implement site-neutral payment policies to manage spending concerns.
What is a Site-Neutral Payment?
A site-neutral payment links reimbursement to a specific procedure or service rather than the location where a patient received care.
BHI Study Highlights Potential Savings with Site-Neutral Payments
A 2023 study by Blue Health Intelligence (BHI) found that if insurance companies paid the same rates for medical services regardless of location, members could save money through lower premiums and out-of-pocket costs.
BHI’s analysis of a Blue Cross Blue Shield data set of 133 million insured individuals shows that outpatient services cost more in hospital outpatient departments (HOPDs) than ambulatory surgery centers (ASCs) or office settings. Costs grew faster in HOPDs due primarily to market forces from physician and hospital consolidation.
Johns Hopkins Study Exposes More Evidence Supporting Site-Neutral Payment Policies
In a study published in late 2023 by the Johns Hopkins Bloomberg School of Public Health, researchers found evidence suggesting that site-neutral payment policies could help alleviate patients' financial burdens for colonoscopies, a common procedure.
The research, which is available in the JAMA Health Forum, revealed that hospitals charged an average of $1,530 for standard colonoscopies covered by private insurance, which is over 50 percent higher than the $989 charged by ASCs.
Ensure Facility Fee Billing Precision with Next-Gen AI
Healthcare payers might wonder how to accurately review medical bills in light of current and proposed legislation and law changes.
Government agencies and health plans can benefit tremendously from implementing an AI-powered payment integrity solution to navigate the minefield of facility fee charges and prevent improper payments—especially one that can account for state-by-state variations in the law.
Here's How Alaffia Health Can Help
Partner with us to revolutionize how you monitor facility fee billing and rapidly changing state laws. Our next-generation AI solutions, including Ask Autodor, will supercharge your operation’s detection and correction of errors in your simplest to most complex claims, reducing your healthcare and administrative costs.
In addition, our team of payment integrity specialists adds the human touch to our technology solutions by delivering comprehensive education to your providers on best billing practices to prevent facility fee billing errors and inconsistencies at the source.
Join us in creating a more efficient, cost-effective healthcare system. Let our AI technology work for you, reducing errors, saving money, and enhancing the quality of care.
Summary
In the evolving landscape of healthcare billing, understanding hospital facility fees is crucial for patients, providers, and payers alike. The consolidation of healthcare systems has led to the proliferation of these fees, often surprising patients with unexpected charges that can significantly inflate their medical bills.
While some states have taken legislative action to curb or regulate facility fees, the issue's complexity persists, adding layers of variability to medical claims processing.
Accurately reviewing and managing these fees amidst changing regulations is paramount for healthcare payers. AI-powered payment integrity solutions offer a promising approach to navigating this complex terrain, ensuring that facility fees are correctly reviewed and reimbursed according to the latest state laws.
Partnering with innovative solution experts like Alaffia Health can empower organizations to stay ahead of legislative changes, reduce errors, and ultimately lower healthcare costs. Combining advanced AI technology with expert guidance can create a more transparent, efficient, and patient-friendly healthcare system.
Join us in this mission and let our technology and expertise drive the future of healthcare billing by scheduling a free assessment today.