Little-Known Fees: Key to Health Care's High Cost?

Next time you get blood drawn, visit a physical therapist or even get an MRI, stop for a moment and look around.

Are you visiting an independent practice or lab – or one owned by a hospital?

That difference matters, especially for people without insurance or with high deductible plans.

Here’s why: when you go to a hospital-owned practice, your bill includes the cost of the hospital’s overhead – what’s called a “facility fee.”

That fee is one reason why hospital outpatient services usually cost more than the same services offered by their independent competitors.

Cilley6.wav: An independent health care facility charges $65 for that x-ray. When the hospital gets done putting their billing fee on it, and I have the bill right here, it was $264.23.

EG: That’s State Senator Jackie Cilley.

Get an MRI from an independent provider, Cilley says, and it will cost you three to eight hundred dollars.

Get that MRI at a hospital or a hospital outpatient facility?

Cilley: That could cost you $3500 to $4000.

EG: Cilley says the average person has no idea that these fees exist.

That’s why she’s sponsoring legislation that would make the fees more transparent.

Insurance companies like Anthem and Harvard Pilgrim back the bill.

Hospital industry executives admit that their charges are usually higher, but they won’t say how much.

Loring: If you’re asking me if there’s a difference in charges, yes, I would say there is a difference in charges.

That’s Joe Loring, an executive at St. Joseph Hospital in Nashua, testifying recently to the Senate committee on consumer protection.

Cilley: My understanding is those charges are two to five times what is typically charged by an independent, would you agree that that range is somewhere….Loring: I-I-I-I don’t know what the range is.

EG: Loring is hesitant in part because there is no standard fee.

The charges differ from hospital to hospital, practice to practice and procedure to procedure.

In a few cases, they are itemized on a patient’s bill.

Visit an urgent care clinic such as Concord Hospital’s Horsheshoe Pond center, and you’ll get an invoice for facility fees.

But in many cases, the fee is simply included in the total cost of the visit, making it impossible to see.

Furthermore, patients may not know that the practice they’re visiting is owned by or affiliated with a hospital.

And Jackie Cilley says that if they do, most have no idea that hospital outpatient services cost more.

Cilley: Even when the hospital says, this is a Frisbie Memorial or this is a Wentworth Douglas provided service, I don’t think a consumer would say oh, can I get this down the street at Hector’s MRI for less?

EG: Facility fees made national headlines in 2006 when patients brought two class action lawsuits against Seattle hospitals.

One of those suits alleged that a patient had a five-minute office visit during which her doctor removed some cysts.

The clinic, owned by the University of Washington Medical Center, charged her more than $8000.

Nearly $7000 of it was the facility fee.

The University of Washington Medical Center settled its case – and agreed to disclose its prices.

And once those high prices were public, they could no longer justify them.

Unland: Once they realized that there was transparency, they decided that they had to discount their fees by 40% at least for 1,400 outpatient procedures.

That’s James Unland with Health Capital Group, a health care consulting firm in Chicago.

At the time, Unland thought these cases would spur a wave of similar court cases across the country.

But little has happened.

Unland says that’s because consumers are in the dark when it comes to health care pricing.

Unland: I basically think that in most cases hospitals count on the ignorance of the public and to some extent, maybe the laziness of people in not exploring alternatives.

EG: Hospital industry executives resent the accusation that their outpatient prices are unjustified.

They say profits on outpatient services make up for large losses elsewhere – a practice called cost shifting.

Again, St. Joseph Hospital’s Joe Loring:

Loring: We have to treat any person that appears at our
doors, regardless of whether they have insurance coverage or whether they’re on a Medicare program or a state Medicaid program, whereas I think some of the private practices have the benefit of not necessarily having to take all comers.

EG: Hospital representatives say they want to shine more light on prices.

Paula Minahan is with the New Hampshire Hospital Association.

Minahan: We absolutely agree that there needs to be more awareness on the part of the consumer as to what they’re purchasing and where they’re receiving services and how they will be expected to cover their costs.

But hospital executives also say critics of high hospital outpatient costs are blaming the wrong party.

To understand their argument, you have to understand this:

Most insurance plans have high deductibles for hospital visits…..in other words, the patient can pay several hundred dollars out of pocket before insurance kicks in.

And insurance companies treat visits to clinics owned by hospitals as hospital visits.

On the other hand, visit an independent and you’ll likely pay only the typical doctor’s office co-pay….which can be as low as $15.

Scott Sloane is vice president of finance at Concord Hospital.

Sloane: If we bill for physical therapy and we’ve agreed to the same rate as the guy next door, the plan still can’t pay it right. They’re going to pass more cost onto the patient than they’re going to pay. That’s not right.

For now, providers and insurers remain at loggerheads over the issue.

Legislation working its way through the Senate would force the hospitals to itemize their facilities fees on patient’s bills.

In the meantime, one message is clear: patients may be able to save money by asking providers what a procedure will cost – beforehand.

For NHPR News, I’m Elaine Grant.