Consumer Protections Meet Political Pushback: Lessons from States Studying Facility Fees

As facility fees continue to garner the attention of local and national journalists, more and more states are taking action on facility fees. Hospitals charge these fees — which are billed separately from clinicians’ professional fees — ostensibly to cover the institution’s costs of providing outpatient care. Often tied to care in non-hospital settings such as doctors’ offices and clinics, facility fees are a key component of outpatient spending, which is a significant driver of escalating health care costs. Consumers are increasingly likely to encounter these fees as hospital systems acquire independent physician offices and clinics, and as their health plans impose separate cost-sharing for facility charges and professional fees.

Despite the growing interest in and support for reining in facility fee practices, efforts to enact these reforms can often be stalled by intense stakeholder opposition. In response to pushback from the hospital industry, many policymakers are shying away from meaningful facility fee reforms, instead authorizing state agencies or newly created task forces to study the issue and produce a report or policy recommendations. While reform advocates rightly view a study as a setback, the insights they generate can help create a platform for stronger consumer protections in the future. Maine and Colorado mandated facility fee reports in legislation last year, while Maryland enacted a similar law earlier this spring. This blog examines the experiences in these states and outlines best practices for facility fee studies to ensure that the resulting reports serve as building blocks for future reforms.

Maine, Maryland, and Colorado Propose Facility Fee Reforms but Settle for Studies

Colorado and Maine considered facility fee reforms in their 2023 legislative sessions, including prohibiting facility fees in certain settings and requiring reporting by hospitals and health systems. These proposals were met with intense opposition from hospital associations. Following the subsequent failure of a more far-reaching facility fee bill, the Maine legislature authorized the creation of the Task Force to Evaluate the Impact of Facility Fees on Patients and required them to produce a publicly available report by late 2023.

Colorado’s legislature debated a bill that prohibited facility fees in a wide array of settings, before ultimately removing these provisions from the legislation. The final legislation requires providers to notify patients when their ownership or system affiliation changes and creates the Hospital Facility Fee Steering Committee, which must produce a report on facility fees by the fall of 2024.

Similarly, in its 2024 session Maryland’s legislature considered a bill that would have expanded the scope of their existing facility fee protections and pre-treatment notice and disclosure requirements, but ultimately required the Maryland Health Services Cost Review Commission to study this issue. In all three states, legislators watered down more robust reforms, instead authorizing studies on hospitals’ use of facility fees.

Maine Report Leads to New Notice Requirements

In their report, Maine’s task force recommended that the legislature consider several policy reforms, including new consumer disclosure requirements, new reporting requirements to improve the data available to state agencies, and prohibitions on facility fees in telehealth settings. In April 2024, the Maine legislature enacted new requirements that facilities post notices on their website and inside the facility. These notices must advise patients whether or not the facility is associated with or owned by a larger health system (and identify the system if applicable), if the facility charges facility fees, and direct consumers to a state agency website with more information about the circumstances in which facility fee charges are not permitted.

Studying Hospital Facility Fees: Best Practices for State Policymakers

Legislative requirements and study design can determine the efficacy of a facility fee study in the context of enacting broader reforms. States interested in reforming or studying facility fee billing practices can look to the experiences in states with recently mandated studies. Findings from Maine’s task force and the Colorado steering committee’s meeting materials highlight lessons for other states considering facility fee reforms.

• Clarity on the scope of the policy problem provides useful direction for both the inquiry and policy recommendations. Language authorizing a facility fee study should clearly define the problem the report is to address — and ideally signal which policy options are most important to consider. For example, a study focusing on rising outpatient costs would likely identify different policy recommendations than one that examines consumers’ experiences with unexpected facility charges. This “cheat sheet” outlines some potential policy goals and strategies to consider when making these decisions.
• Good studies take time, but also need to be timely. Those charged with producing the report or study will need to gather and analyze data from relevant state agencies and stakeholders, assess their findings, consider policy responses, and comply with public meeting requirements. One of the biggest challenges for the Maine task force was a lack of time, as the July-enacted law required that the task force deliver a report by the end of the year. This quick turnaround meant that although the task force narrowed the scope of the policies they evaluated, their recommendations were provided with the caveat that the lack of time to conduct a thorough analysis of the policy options hindered their ability to fully investigate the consequences and impacts of those policies. while there is a very legitimate need for study authors to have sufficient time to gather and analyze data, policymakers must also consider the urgent and time-sensitive need to curb egregious billing practices and protect consumers. Therefore, facility fee studies should not be allowed to drag on indefinitely, and the task force or commission charged with conducting the study should be mandated to produce a set of recommendations within a limited time period.
• Committee and task force membership should include a variety of stakeholder representatives as well as policy and data experts. The group authoring thereport should have the expertise necessary to understand the complexities of hospital billing practices and the unique characteristics of the state’s health care delivery system. Furthermore, committee membership should balance representation of stakeholders_, especially providers, consumer representatives, insurers, and employer health plan purchasers. Institutional knowledge of state regulatory authority can also improve the usefulness of a facility fee study.
• Consider the data: Where and how will the authors of the study get their data? The state agency or task force mandated to produce a study or report on the impact of facility fee billing practices will need access to data. Lawmakers should consider what, if any, barriers they might face in accessing that data, and what authority or resources might be needed to obtain the data and conduct the necessary analysis. For example, the enacting legislation could require health systems licensed in the state to furnish study data in a timely fashion. Colorado’s law authorizes the state’s insurance commissioner to collect data from health plans and encourages the steering committee to collect additional information necessary to inform the report, such as surveys of hospitals, independent providers, and insurers.
• Consumer stories provide additional depth to the data and policy analysis and can help guide task force information-gathering. After hearing consumers’ stories about facility charges, the Maine task force recommended that the legislature revisit and potentially revise current statutory definitions of facility fees. Further, since health systems control or have sole understanding of key information, such as the actual costs to a facility for providing care, policymakers may need alternate ways to build a case for reform. Consumers’ experiences with these fees can create momentum for reform efforts.

Looking Ahead

Recent legislative efforts to curb abusive facility fee charges have encountered fierce opposition from hospital stakeholders seeking to protect a lucrative revenue stream. In the face of political pushback, legislators often turn to mandating a study or report as the most politically feasible course of action. A close examination of the scope and impact of facility fees within a state’s health care market can be an important step in the policymaking process, as long as this effort is set up for success. To ensure that these reports spark meaningful facility fee reforms rather than gathering dust on a bookshelf, legislators and task force members must ensure that these studies balance comprehensiveness and timeliness. Policymakers and study participants can improve the likelihood of producing a policy-relevant report by ensuring the effort has sufficient (although not excessive) time and resources, outlining the scope and goal of the report, providing authors with the authority and resources to fill in data gaps wherever possible, and documenting consumer stories.

Author’s note: Policymakers interested in exploring options for facility fee reforms and/or developing studies like those mentioned in this blog are encouraged to reach out to experts from the Georgetown University Center on Health Insurance Reforms. Requests for technical assistance can be sent to [email protected].