State lawmakers target rising healthcare costs via legislation on hospital facility fees

Editor's Note

An increasing trend in healthcare billing has seen patients facing unexpected "hospital facility fees," even for routine services at clinics not physically connected to a hospital, Stateline April 25 reports. These fees, which can range significantly, are tacked on by hospitals to cover operational costs and have been growing as health systems expand by acquiring smaller clinics, practices, and outpatient centers. This practice has prompted bipartisan legislative actions across various states aiming to curb or regulate these fees to reduce the financial burden on patients.

States like Colorado, Connecticut, and New York have enacted laws banning or limiting facility fees for certain services, especially those provided out-of-hospital or via telehealth. Other states require prior notification to patients about these fees. Recent legislative sessions have seen at least 16 bills introduced across 10 states addressing facility fee issues.

The increase in facility fees is reportedly linked to the growing consolidation in the healthcare industry, with large hospital systems acquiring independent clinics and outpatient centers. Stateline cited a Massachusetts Health Policy Commission report that found “the greatest increase in medical spending in Massachusetts’ commercial health care market was for hospital outpatient departments.” Another cited study, this time from Annals of Surgery, indicated “facility fees for common outpatient procedures in the [US] rose by 53% from 2011 to 2017, while physicians’ professional fees remained steady. The increases were primarily driven by facility fees and out-of-pocket expenses.”

This consolidation allows hospitals to charge higher facility fees, which were originally meant to support the operational costs of full-service hospitals. Some argue that banning these fees could jeopardize financially vulnerable hospitals, especially in rural or low-income areas. Critics of facility fee legislation believe that simply removing these fees won't solve the underlying issues of rising healthcare costs and may lead to hospitals incorporating these costs in other areas.