Facility Fees Can Change the Economic Equation

Article excerpt

Differing reimbursements for the same care present multiple challenges for healthcare system, practices

As more hospitals acquire physician practices, some doctors are moving into freestanding health centers that offer multiple clinical services. Many hospitals are creating such stateof-the-art facilities in off-campus locations and having them designated as outpatient departments, thus allowing them to send separate facility fee bills to patients. At times, existing facilities are being updated and reclassified as a hospital system acquires a practice, enabling a system to charge a new fee to returning patients.

Although national data appear not to have been gathered on how many hospitals are now charging facility fees, it is clearly an increasing trend. (See "Office to outpatient department visit shift" for more information.) For example, one major hospital system, the Cleveland Clinic, has changed 12 of its 16 regional family health centers into outpatient facilities.

The practice is so controversial that several institutions and organizations representing physicians declined to discuss it with Medical Economics.

Critics argue that the facility fee trend is counter to the nation's goal of reducing healthcare costs, whereas supporters say it is necessary to maintain the "standby" services that provide prompt and convenient access to diverse care in one location.

"We have a cost problem in the United States," says Robert Zirkelbach, spokesman for America's Health Insurance Plans. "Prices for services are driving the rise in healthcare costs at unsustainable rates. If we are going to bring down costs, we have to get hold of this."

Anders M. Gilberg, senior vice president of the Medical Group Management Association (MGMA), says that MGMA generally believes that if the quality of care is the same in a typical office as it is an outpatient center, then the payment should be equal.

"Facility fees are a way to allow hospitals to earn more for a simple office visit," he says. (See "Settingbased differences in payments and cost-sharing" for more information.)

Critics also say that the payment of higher fees in certain settings only encourages providers to move toward those more costly settings and is contrary to other trends in healthcare, such as forming accountable care organizations to bring efficiency to healthcare delivery.

Gregory A. Hood, MD, FACP, an internist in Lexington, Kentucky, governor ofthat state's chapter of the American College of Physicians, and a member of the Medical Economics editorial board, calls facility fees a clear abrogation of the system.

"They present a markup, which is unjustifiable in today's healthcare. They provide revenue through the hospitals that are able to lure physicians into employed agreements, with which private practices cannot compete to hire new talent This is a part of the dramatic decline in private practice ownership in recent years," he says.

"If [the Centers for Medicare and Medicaid Services] and the administration are serious about eliminating waste in healthcare, they will eliminate the facility fee as soon as possible," Hood adds.

In fact, the Medicare Payment Advisory Commission (MedPAC) estimates that facility fees for office visits will add $2 billion a year to Medicare spending by 2020, and Gilberg says MedPAC is looking into ways to achieve more equality in payments.

This effort could include basing payments on the most efficient use of clinically appropriate resources needed to treat patients. The U.S. House of Representatives passed a bill along these lines, but it stalled in the Senate.

Representatives of MedPAC did not respond to numerous requests by Medical Economics to discuss its position on the issue.


To be sure, not everyone is critical of facility fees. Erik Rasmussen, senior associate director of federal relations for the American Hospital Association, defended the creation of hospital outpatient facilities, saying they offer a level of coordinated care that many patients appreciate. …