A legislatively mandated report on hospital-system facility fees that was released Tuesday appears likely to spark a new round of debate on whether the state should limit the fees that opponents call costly and unclear and that hospitals say are vital to offsite operations.
The Hospital Facility Fee Report concluded that the fees, added for services in nonacute-care settings, drive up health-care costs by more than $50 million annually, are opaque and confusing and incentivize independent physicians to affiliate with larger hospital systems. However, the report also notes that a reduction in fee revenue could drastically cut the federal matching money that’s been used to expand Medicaid eligibility, and it noted several times that the task force could not collect adequate data for some conclusions.
Its release immediately brought calls from more than a half-dozen patient-advocacy groups for legislators to limit the fees and to take further steps to make health-care costs more transparent. But a hospital-industry representative on the steering committee that issued the report cautioned legislators against taking action based on the findings, saying in a dissenting letter that the committee offered insufficient evaluation of critical issues related to such fees.
What comes next?
After a 2024 legislative session in which debates around health care were significantly muted as compared to past years, however, the new report — which came from a 2023 compromise bill — may push them again into the forefront in 2025.
“This report confirms what too many Coloradans have already experienced — paying astronomically high healthcare costs and getting hit with confusing hidden fees while the quality of care remains the same,” said Austin Blumenfeld, executive director of Centennial State Prosperity, an advocacy group for working-class Coloradans. “It’s time for our elected officials to stop hospital chains from lining their pockets at our expense and protect Coloradans by enacting common-sense regulations so that residents know what to expect when seeking care.”
Colorado state Reps. Emily Sirota and Andy Boesenecker answer questions during a House committee hearing in 2023 on their facility-fees limitation bill.
But hospital officials warned that the report oversimplifies a complex issue central to how health care is funded today and, with a lack of data and employer perspective, seems to rest on preconceived biases about the need for such fees.
“This report often fails to remain objective and repeatedly falls short of offering a comprehensive analysis of important questions like the impact of facility fees on access to care, quality and health equity,” the Colorado Hospital Association said in a statement. “CHA acknowledges (the Colorado Department of Health Care Policy and Financing’s) efforts to moderate the conflicting perspectives on the steering committee, but conclusions drawn from this report should be met with skepticism and not relied upon to inform critical health care policy.”
Fees part of an evolving hospital landscape
Facility fees are costs billed separately from physicians’ fees that are added onto bills of patients receiving primary- or specialty-care services outside the hospital setting from practices owned by hospital systems. Required to be billed separately from other costs under federal law, they are the product of two changes over the past 25 years — hospital systems’ efforts to shift care outside acute-care settings to places like offices and clinics, and the systems’ increasing ownership of those nonacute-care settings.
Hospitals argue that the fees are necessary to fund their nonacute-care infrastructure — from the buildings to information-technology to the security guards and janitors who staff clinics and offices. But more patients have begun expressing concerns about fees they are surprised to find on their bills and the impact on their ability to afford health care, and the issue came to a head in a 2023 bill that originally sought to ban facility fees.
After hospital leaders warned that such a ban could force them to shut down numerous clinics without the funding that they use to keep them running, House Bill 23-1215 was amended to ban fees assessed to patients in just one instance — preventative care. However, the bill also funded a study to investigate the impacts of the fees on patients, care quality and access of care, and that study was delivered Tuesday to the Senate and House health and humas services committees.
The hall of a hospital
Key findings from committee
A steering committee of seven appointed members found that consumers paid about $13.4 billion in facility fees between 2017 and 2022, with the raw increase in revenue averaging about 10% annually. The 10 largest hospital systems in the state accounted for 80% of the fees, and the most commonly assessed fees were on services like lab work, x-rays, physical therapy and mammograms that usually are done at standalone facilities owned by hospital systems.
The committee determined that hospital outpatient-department fees raised annual health-care costs between $50.8 million and $53.7 million as compared to reimbursement for affiliated or independent physicians who did not charge the fees. Commercial payers such as those covered by employer-based policies had reimbursement charges that were 90% higher for hospital-owned facilities than for independent facilities, it concluded.
While the report acknowledged the impact of such fees on access to health care is “not easily quantifiable,” it cited other studies in arguing that vertical integration of hospital systems and physician services via acquisitions can make care more expensive. That can negatively impact patients’ willingness to pay for medication or services and can make it harder for patients to seek lower-cost alternatives as nearly 80% of physicians are now employed by hospitals, health systems or corporations, it concluded.
Is more study needed?
Also, as payer reimbursements to independent physicians, including from Medicare, have stagnated, the ability to join with a hospital system and receive facility fees to offset operational costs has provided incentive to move away from independent operations, it said. Meanwhile, the fees add confusion to an already complex medical billing system.
While the committee did not make recommendations, it wrote that further analysis is needed to understand the financial impact of the fees and the effect of practice acquisition and health-care consolidation on quality and access to care. It also found that employers, who are among the largest purchasers of health-care services, are not very engaged on this issue and that efforts should be made to increase their involvement.
A doctor uses a digital tablet as part of patient care.
However, the committee acknowledged that some key data requested for analysis was not available because of its proprietary nature, claims structure and variations in provider business designs. The report also noted that declines in hospital revenue from limitations on facility fees could reduce the hospital-provider-fee revenue that funds Medicaid eligibility expansion by between $110 million and $1.1 billion a year when reductions in federal matching funds are factored into the formula.
Opposing views on what regulations are needed for hospitals
Watchdog groups pounced on the report, saying it gives proof to claims that fees are creating cost barriers to health access and encourages industry consolidation that further hurts affordability and availability. While not calling for outright bans on facility fees, groups from the Colorado Center on Law & Policy to The Leukemia & Lymphoma Society called for increased regulation by legislators on how and when providers can impose such fees.
“Facility fee charges concentrated in hospital systems with the most market power will only make consolidation trends worse, without increasing quality for patients,” said Priya Telang, Colorado Consumer Health Initiative communications manager, in a news release. “This report makes it clear: We need legislative action to regulate hospitals’ hidden fees and help consumers.”
In a dissenting letter attached to the report, though, UCHealth CFO Dan Rieber, who sat on the seven-person steering committee, said it “simply is not a reliable or comprehensive analysis of facility fees, as it does not provide a thorough, accurate or balanced picture.” Most of the committee’s time was spent collecting rather than analyzing data, too much important data was unavailable and the report draws conclusions that were not adequately supported on how fees impact access to care and quality of care, he wrote.
“Based on these factors, I believe additional analysis is vital before the Legislature considers any action,” he wrote.