Select Page

Here is the question that must be asked. Where is all this new money coming from?

The Answer: The money is coming from all the employed physicians FACILITY FEES charged by their employers!

And the docs are oblivious to it happy they are making more money.

The hospital systems perpetrating this power play are capitalizing on a longstanding crevice in the system, but this one is actually the size of Grand Canyon that is wildly increasing their profit. And this loophole is costing all of us except for the beloved non-profit hospital systems. In fact, they are making out like never before, but they don’t want you to know about it.

Non profit has the ring of “we are on your side”, and we protect the little people who can’t take care of themselves. In most cases this non-profit concept might actually be true, but not in the case of the non-profit hospital employers. Everyone, especially you, gets screwed except for these longstanding institutions. Even the docs are getting screwed, they just don’t know it.

Forget the ACO (Accountable Care Organization) implemented by Obamacare as the source of all these shenanigans. What we are talking about is across the board, blatant greed.

I want everyone of you to ponder this as long as it takes for the truth to settle in, because it needs to settle in loud and clear for all our sake. Once you get it, you need to get mad as hell.


So here is a simplified example of how it works. Today I see you in my private practice and I charge you for a simple visit ($150) and a set of xrays($50). The insurance company will pay me, after adjustments, etc., $100 for the visit and $35 for the xrays. That is the entire charge, no additional “facility fees” or other random charges. Please keep in mind the numbers I use here are very rough and for demonstration purposes, but close enough. 

Next week I become a hospital employee – smarter, happier, richer – and now I work out of the exact same office where I just saw you, but now it is a facility because I am employed, right? Magic! Now my salary has doubled because my loving, caring, big brother hospital will pay me more because I am important to them and their benevolent cause. But how can they pay me double, build all these new buildings, and do all this advertising? Get ready because here it comes. The increased revenue is not because there is more business or more effective billing practices as they would have you believe. Nope!  It’s because of facility fees charged for employed doctor office visits.

Now, as a hospital employee I see you in my facility office (again, same digs) and I charge you for the same visit ($150). However, the X-ray charge and other things I can charge for can be as much as 2 to 5 fold increase. In addition, you are likely to get stuck with an additional “facility” usage fee amounting to hundreds of dollars to pay for the overhead. In other words you have to pay a lot extra now for breathing the air and walking on the floor of the “facility”. And believe me, we all pay for it.

“The root of these increases are controversial charges known as “facility fees,” …. routinely tacked on to patients’ bills….because they’ve [physicians practices] been purchased by hospital-based health care systems.”

Fred Schulte of The Center for Public Integrity wrote it brilliantly, “One family accustomed to paying about $120 in out-of-pocket costs for doctor visits and other medical services was outraged when they ended up forking over more than $1,000 for similar visits, Mullin [Senator Kevin Mullin, VT] said, mostly for seeing doctors whose practices had been bought out by a local hospital.”

Furthermore he wrote “The panel noted that hospitals buying up medical practices in recent years have been tacking on facility fees that increase the patient’s bill even when the doctor is working from the very same office.” 

By one estimate, under its current reimbursement system, Medicare is paying in excess of a billion dollars a year more for the same services because hospitals, citing higher overall costs, can charge more when the doctors work for them. 

With the rapid migration of doctors from private practice to hospital employment, the percentage of outpatient visits eligible for facility fees is soaring. More employed docs, more facility fees, more money. Here is the thing: the facility fees charged for these doctor visits have been possible since 2000, but they are NEW because the more recent implementation of the ACO and hospitals luring these docs in like a dog chasing the rabbit at the dog races. Just to make sure this point is clear, this is a completely new and extra source of revenue for these hospital systems.

To be fair I must look at the other side of the argument. What is the hospitals excuse for all these new charges? Schulte wrote “The American Hospital Association argues that phasing out the payments “threatens patient access to care.” The group said that hospitals tend to treat “sicker, more complex patients” and are better equipped than doctors’ offices and should be paid more.” These same hospitals were doing quite well before they discovered the facility fee Holy Grail; they are just making a lot more now. All the while their expenses really never changed.

How do you feel about paying for luggage when you fly? Facility fees for doctor office visits are no different. 

Currently the battle to help control these facility fees is waged in the form of “transparency”. What great political wordsmith; transparency. The ACO’s are increasingly being forced to inform the patient/consumer up front about the facility fee for an office visit that has never existed before . Connecticut HB 5337 was passed this past spring with pressure brought by CT Attorney General George Jepsen. It will be implemented into law October 1, 2014.  At least this is a start. 

Alas!  In the end there may be justice. The US Office of the Inspector General (OIG) is on to this facility charge shell game and when the off-campus facility fees are stopped, Katy bar the door, because the exodus of these employed physicians will be like yelling fire in a theater. In the words of Jeff Foxworthy, it will be pandelerium. Doctors will patted on the back and told to move on to life’s work just as end-of-career professional athletes are told to do when their usefulness has ended. They might be wandering around the streets pondering what just happened with no place to go. Everybody looses except for the hospital systems!

Dr. Scott Gottlieb painted a very grime future for my colleagues, and ultimately you, in Forbes over a year ago, “If these new doctor-hospital marriages fail again, then this time around the doctors may not been able to go back to what they were doing. They will be financially stuck in these relationships. They will be unable to even raise the capital to re-start their own offices. They may have trouble getting bank loans…………The doctors will get squeezed but the real misfortunate will befall patients. We will increasingly be getting our medical care out of busy, hospital-run clinics. Our doctors will be salaried employees, more beholden to the rules that hospitals erect to manage their activities than the medical practices that they once owned.”‘Facility-fees’-add-billions-to-medical-bills.html

Gottlieb Forbes