Simplifying The ‘Why’ Behind Healthcare Facility Fees

You may have experienced the surprise of receiving another bill for a healthcare service after receiving a bill from your doctor. This second bill is often much higher than the first, stating it’s the facility fee. If this has happened to you, you are not alone. Many patients are noticing these additional fees and the financial impact they have. This article provides more information on facility fees and how to prepare for this cost.

What is a facility fee?

Facility fees are generally what a patient is charged to use a building to receive services from a healthcare provider. However, it can be more complicated. Facility fees are the result of hospitals being required to be operational 24/7. With the fluctuation of patients in the hospital facility daily, the cost of keeping the facility running was often challenging to determine.

Hospitals started charging facility fees to help cover these overhead costs, such as administrative tasks and staffing. Over time, hospitals began growing and purchasing facilities and offices outside the hospital that may be on different campuses.

Hospitals saw this as an opportunity to grow and thrive by buying physician practices, offices, and other facilities. This resulted in health systems being allowed to charge a facility fee for a patient to see a doctor at their office or off-campus facility, even though the patient wasn't treated at the hospital. It's also the law that hospitals can charge this fee since they are expected to be open and running 24/7. With the exponential growth of hospitals and the rising costs of facility fees, there were no regulations in place regarding how to determine the costs of facility fees or when they could be charged to a patient.

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Facility fees vs professional fees

Professional fees differ from facility fees; the patient will often receive two separate bills for each. Professional fees are for obtaining the service provided, the test, or for seeing the healthcare provider, while facility fees are strictly for the use of the office, facility, or hospital. The costs of facility fees have grown exponentially since the early 2000s and at a much higher rate than the costs of professional fees.

As stated above, there has not been much attention or regulation regarding these fees. As such, there are no national standards to how hospitals determine their facility fees as there are with professional fees, thus resulting in these fees varying greatly across providers, hospitals, and services as well as from state to state.

Difference between facility and non-facility

Insurers determine if it’s a facility versus non-facility based on the Place of Service (POS) code that the provider uses to code the bill. In general, a facility fee will be charged if the POS is within an inpatient setting, a hospital, or an office or place affiliated with or considered to be under a hospital. If the patient received service in an outpatient setting, office, home, nursing facility, or clinic that is not considered a part of a hospital, in most cases, it's supposed to be a non-facility.

Here's a list of the most common POS from the Centers for Medicaid and Medicare Services (CMS) manual where a procedure or service may be paid at the facility rate versus the non-facility rate:

How to calculate facility fees?

Facility fees vary greatly, even within the same health system, and can be disproportionately high compared to the fee for the actual service being provided. It’s difficult to determine the facility fee as no standards or price transparency are in place. The best way to determine if you will have a facility fee and what you will be charged is to ask your provider before your visit. If you are a Medicare beneficiary, you can look up the facility fee rate that Medicare has agreed upon on any procedure or test on the Medicare website on their procedure price lookup site. It will include the Professional or doctor fee and the facility fee.

Policy and lawmakers have been investigating and are aware of the issues surrounding facility fees. They are applying rules and regulations in some states that will help limit fees or at least make patients aware of the charges they can incur. Medicare is looking more deeply into these costs and fighting to implement ways to control them by recommending what services can be safely provided in an outpatient setting, as opposed to a hospital setting, and advising price limits that would restrict facility fees in the outpatient setting.

This site-neutral proposal would require hospitals to have standard prices for services provided in outpatient settings regardless of whether they are hospital-affiliated. State and federal lawmakers are also using these Medicare site-of-care guidelines to put measures in place to control facility billing in the commercial insurance domain.

Does insurance cover facility fees?

Each insurance plan is different, and it is best to contact your insurer to determine if they cover facility fees and at what rate. In some cases, they may cover it the same as professional fees, but some insurance plans have been known not to cover them. For Original Medicare, facility fees are covered at 80%, with the patient responsible for the other 20%.

How to avoid facility fees?

Since facility fees are legal, you may not be able to fight them, but there are steps you can take to prepare for or avoid them. Some things you can do to prevent or reduce facility fees:

• Find out your health insurance companies’ policy on facility fees. If you are a Medicare Advantage beneficiary or recipient of a private insurer through your employment or other means, you can call the insurer that supplies your plan and find out if facility fees are covered and at what percentage they are covered.
• Ask your provider's office. When you call a practice or office to schedule a visit or procedure, make sure to ask if they are hospital-owned or an independent practice and if they charge facility fees.

If you've already been charged a facility fee, you may want to try calling your provider or practice where the fee originated and see if you can dispute the cost or work out a deal to waive or reduce the price. You can also appeal to your insurance company to see if they will bear more charges.

Generally, facility fees can be charged for any office, practice, or place you receive care affiliated with or owned by a hospital. Places considered non-facilities are those independent of a hospital or health system. It's best to be aware of these charges and research to determine if your healthcare service will incur them.