‘Facility fees’ not warmly received by patients

The Miami HeraldMarch 2, 2014 

When a rheumatologist told Linda Drake of Miami that she might have lung cancer, the former smoker did some research and discovered a study for early detection and treatment of the disease with researchers in South Florida.

Drake, 57, decided to participate in the study because there was a $350 flat fee, and she could enroll through UHealth — the University of Miami’s network of clinics and hospitals.

She could even go to a UHealth outpatient clinic close to work. That clinic, Sylvester at Deerfield Beach, Fla., is about a 40-mile drive north from UM’s Miami hospitals.

Drake’s visit last spring took about one hour, she said, including a CT scan. She saw a technician and a nurse practitioner. About a week later, she received an analysis of the images by a radiologist she never spoke with or met.

The results were negative. But a few days later, an unpleasant surprise arrived in the mail: a bill for $210 from UHealth for “hospital services” labeled as “Room and Board — All Inclusive,” even though she never set foot in a hospital or spent the night at the clinic.

Her health insurance would not cover the fee.

Drake is not alone. As hospitals consolidate into mega health systems, buying physician practices and building urgent care centers and outpatient clinics miles from their main campuses, patients are discovering that — just like baggage fees for air travel and convenience surcharges for concert tickets — some health care comes with hidden costs: facility fees.

These are charges that allow hospitals that own physician practices and outpatient clinics that meet certain federal requirements to bill separately for the facility as well as the medical service provided there. Drake was charged the fee because the Deerfield Beach center is owned by UM and considered a department of UHealth’s hospitals.

Consumers are seeing these fees more often as hospital systems build more outpatient centers to create the integrated health care delivery models envisioned by the Affordable Care Act.

UHealth officials declined to answer questions about Drake’s experience, but Lisa Worley, a spokeswoman, issued a statement acknowledging the practice of charging facility fees.

“The location of care and related charges follow the location and best and most appropriate care for the individual,” the statement read. “UHealth follows established national policies that apply to all office and hospital-based institutions.”

The fees, also referred to as “provider-based billing,” are the result of a change in the federal rules for Medicare that took place about a decade ago. That change allowed hospitals to bill Medicare, the federal health care program for the elderly, for physician services separately from building or facility overhead.

Independent, physician-owned offices and freestanding clinics are not permitted to charge the fees. But federal rules say hospitals that charge facility fees for Medicare patients must do the same for all others — even if their private insurance doesn’t cover the fee.

Hospital advocates and health care groups say the fees are necessary to help defray overhead, pay salaries, meet federal standards and ensure patients’ access to emergency services, said Erik Rasmussen, senior associate director for the American Hospital Association, a national membership organization representing thousands of hospitals and other providers.

“When a physician practice is owned by a hospital, it has to comply with all the hospital outpatient department regulatory requirements, which is a lot,” Rasmussen said.

“If the physician fee isn’t covering the cost of the overhead, and all that the hospital provides,” he added, “then the hospital is going to charge that facility fee because the emergency department doesn’t get magically paid for by fairies.”

Yet there’s evidence that consumer anger over facility fees is causing some large hospital systems to reconsider the practice.

In mid-January, the chief executive of Mercy, a Missouri-based conglomerate with 33 hospitals in four states, said the health care giant would no longer charge facility fees at acquired physician practices.

Lynn Britton, the Mercy CEO, said he expected the change to cost the hospital system about $40 million a year in revenues. He did not say when Mercy would discontinue the practice.

But Mercy issued a statement which read: “We know facility fees are confusing for patients, especially as they relate to the out-of-pocket costs that patients are asked to pay. Mercy is making plans to simplify our billing practices ... these changes will include phasing out facility-based fees for outpatient services provided in our clinics and other facilities.”

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