Facility fees for office visits: What is the role of health plans?
March 12th, 2013 by 
David E. Williams of the Health business blog
Yesterday’s Boston Globe article (Hospital charges bring a backlash) was spot on. Reporter Liz Kowalczyk nailed the topic:
- Hospitals are adding facility fees in the hundreds of dollars for many visits to hospital-owned physician practices, even when those practices are nowhere near the hospital
- Facility fees are becoming more common as hospitals purchase formerly independent physician practices and tack on the fees
- Patients are pushing back. One reason is that more of them have high deductible plans that force the patient to bear more of the cost
- Insurance companies are aware of the issue but have generally been allowing the fees
I’ve been following this topic for some time, and for me the last two bullet points are the intriguing ones. In December (Facility fees for hospital-owned physician offices: A nasty surprise for patients) I wrote:
In general health plans and self-insured employers have just put up with the high charges or haven’t made it a priority. The biggest difference now is that patients are being exposed to the facility fees and finding that they owe much more after a test than they used to. So while hospitals used to shrug their shoulders at the issue in the past, they find it a little harder now.
This situation presents health plans with an opportunity to demonstrate what value they can add. Health plans should have identified this issue earlier and taken more vigorous steps to oppose it than they have, but many lack the data and analytic tools to pinpoint the shift, some may be in a weak negotiating position relative to the major hospital systems, or may have accepted the facility fees in exchange for other concessions.
Now that consumers have identified the issue and the Globe has focused attention on it, I’ll be interested to see what health plans do. If they don’t take steps it will call into question the value they bring to their customers and will invite intervention from the state.
Posted in Health plans, Hospitals, Patients | 
4 Comments »
March 12th, 2013 at 2:23 pm
I have a question about the point ■”Insurance companies are aware of the issue but have generally been allowing the fees”
Is it not true that medical insurance companies have some financial benefit from this practice? They basically, after all, cost plus vendors. They determine what the likely costs will be and set their premium rates so that they earn X percent above cost. If the contracted costs go up, they still set premiums to make X percent, only now its on a higher cost base.
If this is true, then insurance companies have not just been putting up with this billing practice….they are willing partners with providers in these shenanigans.
I look forward to your feedback!
March 12th, 2013 at 10:00 pm
Saildog, there is some basis for your argument but overall health plans are interested in controlling costs. Historically there has not been that much resistance from health plans or employers to price increases, but that is changing now that affordability has become a bigger issue.
And health plans have to stay competitive with one another so what you’re describing only works if no one pays attention to costs.
The Affordable Care Act requires plans to have a minimum medical loss ratio, i.e., to pay out at least 80 to 85 percent of premiums in medical costs. Ironically this provision could lead plans to be less interested in cost control, because they have to spend administrative dollars (which are limited by the law) to control medical costs.
March 15th, 2013 at 3:55 pm
[...] Facility fees for office visits: What is the role of health plans? [...]
March 15th, 2013 at 4:03 pm
[...] As I have written recently, fees sometimes rise when hospitals buy physician practices and tack on facility fees. And in my prediction for 2013 published by InformationWeek I predicted that physicians will [...]