Consolidated hospitals leading to larger premiums and out-of-pocket spending, report finds

As hospitals acquire ambulatory care centers, consumers are more likely to be forced to pay outpatient facility fees for routine care traditionally covered by physician offices at lower costs.

These new costs, appearing seemingly out of nowhere to the average consumer through out-of-pocket spending and premium increases, can add up to hundreds or thousands of dollars in additional expenses for a patient, according to a report from Georgetown University’s Center on Health Insurance Reforms.

Outpatient facility fees cover a hospital’s operational expenses. But when hospitals acquire physician practices, that usually generates another outpatient facility bill, eventually passing on the cost to the patient. Consumers are often unaware that they are now responsible for an extra cost.

Between July 2012 and January 2018, hospital ownership of physician practices grew by 124% and hospital-employed physicians increased by 78%. In 2021, hospitals or corporations owned about three-quarters of all physicians in the U.S.

While hospitals argue these costs are essential to daily overhead operation for regulatory compliance, staffing, liability coverage, security and supplies, payer representatives said there is not enough transparency around how fees are calculated, and that it is difficult to see when care occurred.

“People like to blame insurance companies,” said a payer in the report, “but when you peel back the onion, you see that hospitals control the negotiation table. Historically those fees were $50–$75 and over time they have become much more significant.” Other payers said hospitals make up losses from Medicare and Medicaid by charging payers facility fees.

Studies have found that cost-sharing has increased by 200% for elective procedures performed in hospital outpatient departments versus physician offices. Commercial payers see up to a 14.1% price increase for services acquired in these scenarios.

“Public and private insurance have historically paid more for the same care delivered in hospital facilities than in independent physician offices or ambulatory surgical centers, creating incentives for hospitals to build and purchase outpatient practices,” the report said. In response, federal lawmakers and regulators have begun reducing Medicare payments for certain services provided in a hospital outpatient department to match how much Medicare pays for the same care provided by an independent physician practice, thus moving that system toward “site neutrality.”

Site neutrality is achieved when a patient pays the same amount for equal service provided, no matter the location.

CHIR discovered through one interview that some insurers push cancer patients to move from hospital outpatient departments to less expensive chemotherapy centers to limit costs, despite already beginning treatment at the hospital outpatient department. Some health plans do not cover facility fees at all, even in-network.

“We are very worried about the prices that facility fees impose on the consumer, the carrier and ultimately the premium,” said one state health insurance regulator. “So, you thought your cost-sharing was going to be $40, and all of a sudden it’s $150 ... we don’t have the authority to tell the plans they can’t bake that into their benefit design.”

Legislative action

Nearly a dozen states have passed legislation to protect patients from extra outpatient facility fees, including outright banning the fees for certain services, out-of-pocket protections and greater transparency requirements. Regulations vary greatly from state to state.

In New York, preventative services facility fees are prohibited, whereas telehealth fees are banned in Ohio. Two states, Colorado and Connecticut, protect against out-of-pocket costs. The 11 states offer a combination of consumer disclosure, hospital reporting and provider transparency requirements.

However, the hospital lobby makes it difficult for these regulations to gain steam, unless there is collaboration between business coalitions and state agencies, payers and consumer advocates said in interviews to CHIR.

One interviewee said the hospital industry reportedly threatened to remove nurses from public schools if Indiana tried regulating facility fee reforms, while another interviewee said the introduction of business coalitions advocating for more fair fees has awoken a “slumbering giant.”

Other states created new offices and agencies to look at controlling health care costs for payers and consumers.