THE HIDDEN TAX ON HEALTHCARE: HOW FACILITY FEES ARE BANKRUPTING PATIENTS

You walk into the same doctor's office you've visited for ten years. Same building, same receptionist, same examination room. You pay your usual $15 copay and leave, thinking nothing has changed.

Then the bill arrives.

Suddenly, your routine visit that used to cost $60 now costs $563. Welcome to the world of facility fees – healthcare's most insidious form of surprise billing that's quietly devastating American families.

THE SCOPE OF THE CRISIS

Facility fees have exploded across the United States as hospital systems aggressively acquire physician practices. Between 2012 and 2024, the percentage of doctors employed by hospitals or health systems more than doubled to 55 percent, creating a perfect storm for surprise billing.

Patients have reported being charged out-of-hospital facility fees of $503 for a pediatric visit, $488 for an appointment to get ADHD medication, and $355 for steroid injections for arthritis. These aren't isolated incidents – they're the new normal.

The numbers are staggering:

• Colorado's data showed facility fees for just 25 services generated over $50 million more than charges by providers not owned by hospitals
• In a 2020 study published in the journal Annals of Surgery, researchers found that facility fees for common outpatient procedures in the United States rose by 53% from 2011-2017
• Typically, facility fees range from $15 to over thousands for outpatient services like MRIs

TEXAS: GROUND ZERO FOR FACILITY FEE ABUSE

Texas has become a particular battleground for facility fee reform. Texans are facing unexpected and unfair hospital facility fees for basic health care like preventive check-ups or virtual doctor visits—adding hundreds or even thousands of dollars to medical bills with little warning.

The situation has become so egregious that 64% of Texans skipped or delayed care in 2023 because of cost concerns—unexpected fees only worsen this. When preventive care becomes financially punitive, we've broken the healthcare system.

Recent Texas legislation (SB 1232 and HB 2556) aims to address this crisis by:

• Prohibiting facility fees for preventive care and telehealth services
• Requiring 10-day patient notice before any facility fee
• Mandating location-specific billing identifiers

However, neither SB 1232 nor HB 2556 were actually passed into law in 2025. According to post-session legislative recaps and Texas Hospital Association reports, both bills ultimately died late in the session. Hospitals stalled the legislation after sustained lobbying, so no new restrictions on facility fees were enacted this year.

THE SURPRISE ELEMENT: WHY PATIENTS ARE BLINDSIDED

The most insidious aspect of facility fees is their complete lack of transparency. These added fees are unrelated to the cost of the care we receive, and can be merely based on changing ownership of the provider's office.

Consider this real-world example from a patient comment: "When I was seen in July 2024 They billed my insurance over $2300.00 for the same service (a shot!!!) and my out of pocket expense is now over $500.00. Another big issue is the patients were not informed."

"Everything else at the provider's office looks and feels the same," said Maureen Hensley-Quinn, senior director of the coverage, cost and value team at the nonprofit National Academy for State Health Policy. Patients have no way of knowing they're about to be hit with additional charges until the bill arrives weeks later.

THE UPBILLING SCHEME EXPOSED

Facility fees represent a sophisticated form of upbilling that exploits regulatory differences between hospital-owned and independent practices. Here's how the scheme works:

1. The Acquisition Strategy

Hospitals systematically acquire independent physician practices, then convert them to "hospital outpatient departments" on paper while keeping them in the same physical locations.

2. The Billing Switch

If you receive care at an independent provider practice, the provider who treated you will submit a professional bill to your insurer. This bill, in theory, covers their time and labor as well as any practice overhead costs, like nursing staff, rent, and equipment and supplies. On the other hand, if you receive care at a hospital outpatient department, generally speaking any professional who treated you, as well as the hospital, will each submit separate bills.

3. The Revenue Multiplication

One study found that prices for the services provided by physicians increase by an average of 14% after a hospital acquisition. Another found that billing for laboratory tests and imaging, such as MRIs or CT scans, rise sharply after a practice is acquired.

4. The Justification Game

Hospitals justify these fees by claiming they cover "everything except physician services." Nurse pay, compensation for other medical and allied health professionals, lab technicians, hospital infrastructure, security, even the janitorial staff – all of it is covered by the facility fee.

Yet this justification crumbles under scrutiny.

Facility fees might help fund things like hospital emergency services, or 24/7 staffing and security at the hospital, even though the patient was at the facility during normal business hours and didn't need any emergency care or they went to a totally separate, off-campus facility ten miles from the hospital campus and emergency room.

THE REGULATORY ARBITRAGE

The facility fee scheme exploits a fundamental asymmetry in healthcare billing regulations. Hospital outpatient departments and affiliated physician offices are not the same as independent physician offices and other ambulatory sites of care, according to hospital lobbyists.

But this distinction has become meaningless when applied to routine outpatient care. A patient walks into a doctor's office for routine care and they're not using any of those hospital resources.

So you can kind of understand why they would say, why am I paying for them? I'm not getting anything.

The result is pure regulatory arbitrage – hospitals can charge significantly more for identical services simply by changing the ownership structure and billing classification.

THE HUMAN COST

Beyond the financial impact, facility fees are changing healthcare behavior:

Nationwide, insurance deductibles have increased by nearly 50 percent in the last decade, meaning patients are increasingly responsible for these surprise charges out of pocket.

Patients are making impossible choices:

• A Medicare patient faced with a $105.00 facility fee to see the cardiologist – on top of Medicare premiums
• A parent whose child's allergy test generated a $24,000 bill because of facility fees
• Families driving 40 minutes away to a different clinic to avoid facility fees

THE STATE RESPONSE: TOO LITTLE, TOO LATE?

At least 15 states have taken action to address facility fees, but their approaches vary widely:

Strong Action States:

• Colorado: Banned facility fees for outpatient locations, telehealth, and preventive services
• Connecticut: Prohibited facility fees for basic doctor visits off-campus and telehealth

Weak Response States:

• Many states only require "notification" – essentially legalizing the practice while forcing patients to be warned about it

THE HOSPITAL INDUSTRY'S DEFENSE

The hospital industry's defense of facility fees reveals the scheme's true nature.

The Texas Hospital Association has tried to communicate to lawmakers both before and during the current session: if an issue exists with facility fees appearing on a patient's bill, it's not a hospital issue.

Hospitals need to recoup that revenue to survive. In fact, it's an insurance issue.

This is what I call a bullshit.

This argument is breathtakingly cynical.

Hospitals are essentially claiming they have the right to surprise patients with hidden fees because they "need the revenue."

"The insurance companies have full power to control this", they argue, shifting blame to insurers while continuing to exploit patients.

The industry's threats are equally revealing: In a 2022 survey on the impact of prohibiting hospital outpatient payments, almost 70% of respondents said they would have to close outpatient clinics without facility fees.

This is classic economic hostage-taking – threatening to reduce services unless allowed to continue overcharging.

THE CONSOLIDATION CONNECTION

Facility fees are inextricably linked to healthcare consolidation. Because increases in outpatient facility fee billing are largely driven by hospital acquisitions of outpatient practices, ownership information can provide important insights for state policymakers interested in facility fee reforms.

By 2021, nearly 75% of US physicians were employed by hospitals and other corporate entities, and the consolidation trend continues. Each acquisition creates new opportunities for facility fee revenue.

The consolidation-facility fee cycle works like this:

1. Hospital acquires independent practice
2. Converts practice to "hospital outpatient department" designation
3. Begins charging facility fees on top of professional fees
4. Uses additional revenue to fund more acquisitions
5. Repeat

THE INSURANCE COMPLICITY

While hospitals blame insurers, the reality is more complex. Many insurance plans actually enable facility fee abuse by:

• Negotiating higher reimbursement rates for hospital-owned practices
• Passing facility fee costs to patients through higher deductibles and copays
• Failing to adequately inform patients about facility fee risks

And since insurance deductibles have increased by nearly 50 percent in the last decade, this has shifted more facility fee costs directly to patients.

THE TELEHEALTH SCANDAL

Perhaps nowhere is the facility fee abuse more obvious than in telehealth services. Charging a facility fee for a video call conducted from a patient's home stretches the concept beyond any reasonable interpretation.

Yet hospitals routinely charge facility fees for telehealth visits, claiming patients are somehow using "hospital facilities" when they're literally in their own homes.

The telehealth facility fee represents the purest form of the upbilling scheme – charging hospital-level fees for services that require no physical hospital infrastructure whatsoever.

THE POLICY SOLUTIONS

Effective facility fee reform requires understanding that this is an upbilling scheme, not a legitimate cost recovery mechanism. Solutions must address:

Immediate Patient Protection

• Ban facility fees for all services not requiring hospital-level resources
• Mandate meaningful advance notice (not just legal disclaimers)
• Require clear, separate billing for facility vs. professional services

Transparency Requirements

• Force hospitals to use location-specific billing identifiers
• Require public disclosure of all facility fee locations and amounts
• Create searchable databases of facility fee charges

Market-Based Solutions

• Enable patients to opt out of hospital-owned practices
• Require insurance plans to offer facility fee-free provider networks
• Support independent physician practices to resist hospital acquisition

Regulatory Reform

• Eliminate the regulatory arbitrage that enables facility fees
• Apply site-neutral payment policies across all outpatient settings
• Strengthen antitrust enforcement on healthcare consolidation

THE BOTTOM LINE

Facility fees represent one of healthcare's most pernicious billing practices – a hidden tax on medical care that exploits patients at their most vulnerable moments.

There is no evidence that shows these fees improve the value or outcome of health care services; facility fees simply improve the profit line for health care companies that own the different care locations.

The scheme works by:

1. Surprise: Patients have no advance warning
2. Complexity: Billing is deliberately obscured
3. Inevitability: Patients can't opt out once care is needed
4. Scale: Every visit generates additional revenue

This isn't cost recovery – it's revenue enhancement through regulatory arbitrage.

And it's happening in examination rooms across America, one surprise bill at a time.

The question isn't whether facility fees should be regulated – it's whether we'll allow hospitals to continue exploiting sick patients through deceptive billing practices. In a recent poll, nearly 3 in 4 voters (74%) want policymakers to ban facility fees everywhere for outpatient, same-day services, regardless of the service or where care is being provided.

The patients have spoken. Now it's time for policymakers to act.