By Karen Davenport and Kennah Watts
Imagine after a telehealth appointment you receive a $60 charge, supposedly for a “specialty room.” Imagine you visit your primary care doctor for a routine checkup and are billed a $1,000 “room fee.” Imagine your “uneventful” outpatient biopsy results in a $2,170 hospital fee. Imagine after your doctor’s office moves up one floor in a medical office building, supposedly to a “hospital-based setting,” your bill increases 10-fold.
These examples illustrate a daily reality for patients across the United States. Recent trends in cost-sharing and insurance benefit design mean that consumers are increasingly exposed to facility fees. Not only are these high and unexpected charges disastrous for people’s pocketbooks, but fear of these fees have driven some patients away from care. In this blog, we explore how consumers’ exposure to facility fees is related to recent trends in health delivery and health insurance, and profile policy reforms that some states have implemented to protect consumers from these charges.
Background
When a patient receives ambulatory medical services in a hospital or hospital-affiliated setting, such as a hospital outpatient department (HOPD) or a hospital-owned practice, the patient and their insurer receive two types of bills: the professional bill, which includes charges for the treating clinician’s time and expenses, and the institutional bill, which ostensibly covers the operational costs the facility incurs to provide care. These institutional charges are often called a “facility fee,” although they may appear on patient bills as “clinic services,” “room charges,” or “administrative fees,” among other terms. In nearly all states, providers can bill these fees whether they deliver care at an on- or off-campus location.
As hospitals and health systems increasingly acquire physician offices and outpatient departments, a practice known as vertical integration, facility fees have become commonplace. When hospitals acquire physician practices, the ambulatory services once provided by an independent practice often become, for billing purposes, outpatient services delivered in an off-campus HOPD. These practices can then bill for both the clinician’s time and for the hospital’s overhead, even though the patient’s experience more closely resembles a physician’s office than a hospital clinic.
Despite facility fees’ growing prevalence, data and transparency limitations make it challenging to quantify the volume, frequency, and total charges associated with facility fee billing. As of the 2025 legislative session, only seven states require hospitals and other facilities to regularly report data related to facility fees, and only four states require facilities to identify the physical location where care was provided on claims forms.
Factors Driving Consumer Exposure to Facility Fees
Current trends in commercial health insurance design and pricing amplify consumers’ exposure to facility fees, such as increased consumer out-of-pocket liability, underlying insurance benefit designs that expose consumers to facility fee charges, and the growth of gross commercial insurance premiums.
Cost-Sharing and Benefit Design
Cost-sharing and benefit designs in commercial health insurance leave consumers with significant exposure to facility fee charges. Considering only single coverage for illustrative purposes, 34 percent of covered workers hold employer-sponsored insurance with a deductible of $2,000 or more in 2025, and general annual deductibles for in-network care in employer-sponsored health insurance currently average $1,663. This is 54 percent higher than the average deductible for single coverage in 2015. For workers in small firms (establishments with between 10 and 199 workers), the single general deductible is much higher, averaging $2,631. Deductibles for family coverage are more complex, but also show significant growth over time, with higher deductible amounts for workers in small firms. Deductibles for Marketplace plans vary significantly, but can exceed $7,000 for some single coverage plans.
While many insurance designs apply only copayments to physician care before the enrollee satisfies their deductible, patients often must first meet their deductible and then pay applicable cost-sharing for hospital charges, including facility fees related to care they receive at HOPDs. For example, 67 percent of covered workers also have post-deductible coinsurance, which averages 20 percent of allowed charges for outpatient procedures; 13 percent face post-deductible copayments for hospital charges, which average $186 per visit. These charges are separate from cost-sharing requirements for health professionals’ services. As a result, consumers may face both a copayment and a substantial hospital bill for an outpatient visit. Finally, in some cases consumers’ insurance plans do not cover facility fees for some hospital outpatient services, leaving them entirely responsible for these charges.
Other research indicates that actual out-of-pocket spending has also grown as consumers’ out-of-pocket financial exposure has increased, with much of this growth concentrated in the outpatient environment. For example, consumers’ expenditures for outpatient services grew 34 percent between 2013 and 2019, compared to approximately 2 percent growth in out-of-pocket spending for inpatient care in the same period.
Prices and Premiums
Facility fees—and the vertical integration they incentivize—are also related to rising spending for outpatient care and related increases in health insurance premiums. This is partly because hospitals and health systems can demand higher payments from commercial payers than independent physician offices are able to command for the same services. In addition, vertical integration means that more clinicians charge these higher amounts, with commercial prices increasing by 14.1 percent more for all services provided by acquired physician practices in one study. Other experts estimate that facility fees represent 45 percent or more of post-integration changes in prices.
These price increases, in turn, drive increases in health insurance premiums. For example, an examination of Covered California, the state’s health insurance marketplace, found that vertical integration in concentrated California markets was associated with a 12 percent increase in marketplace premiums. While these findings are specific to the California marketplace, vertical integration is likely to influence premiums in other insurance markets as well, and when health insurance premiums increase, enrollee spending on health insurance also grows. For example, while the proportion of premiums workers must cover out of wages has remained relatively steady over the last decade, significant premium increases for employer-sponsored insurance over this period mean that the amount workers pay, on average, has grown by nearly 32 percent for single coverage and 37 percent for family coverage since 2015. Consumers are thus paying more for health coverage that reflects, in part, increases in facility-fee-related payments for outpatient care.
Targeted Reforms Can Systematically Safeguard Consumers and Contain Costs
Given the confusion around facility fees and the unpredictable out-of-pocket costs consumers can encounter, many patients have turned to media for support. Unfortunately, the sheer number of questionable or unexpected facility fees swamps the capacity of dogged reporters and consumer advocates who collect and bring these charges to light—which means many consumers end up paying an expensive facility fee out-of-pocket or on a credit card, or even get sent to collections. Instead, consumers need systemic policy reforms that protect them from costly and unpredictable facility fees.
First, targeted facility fee prohibitions can eliminate these bills in some scenarios. Bans on facility fees for routine office, clinic, and telehealth visits, as well as preventive services, have broad appeal. As of the 2025 legislative session, nine states prohibit facility fees for some services or settings. Connecticut, Indiana, and Maine have the most comprehensive facility fee prohibitions and therefore provide patients with the strongest protections from facility fee charges. Connecticut prohibits hospitals from charging facility fees for on- and off-campus visits for evaluation and management services. In Maine, hospitals cannot bill facility fees for services provided in an office setting, regardless of whether the office is on- or off-campus, while in Indiana, the largest, non-profit hospitals in the state may not charge facility fees for office-based care provided off-campus. Facility fee prohibitions in the other six states—Maryland, Mississippi, New York, Ohio, Texas, and Washington—apply to telehealth, preventative services, or drive-through testing and vaccination services.
Second, out-of-pocket protections can limit consumers’ financial exposure to facility fees. These protections can regulate providers, such as by prohibiting providers from balance billing consumers for facility fees, and payers, for example by prohibiting cost-sharing designs that include separate coinsurance for facility fees. Currently only two states, Colorado and Connecticut, have enacted laws with cost-sharing protections for facility fees. Colorado prohibits providers from balance billing patients for facility fees on preventive services in outpatient settings. Connecticut’s protections target both providers and payers. Insurers cannot require separate facility fee cost-sharing for outpatient services provided at an off-campus location, while providers cannot bill a consumer who has not met their deductible an outpatient facility fee that exceeds the plan’s negotiated rate nor balance bill a consumer for more than their cost-sharing obligation. Providers also may not report a consumer’s failure to pay a facility fee bill to a credit reporting agency when their insurer has “primary responsibility” for payment.
While facility fee prohibitions and cost-sharing protections are the most effective approaches to reduce consumers’ out-of-pocket exposure to facility fees, several states have implemented other facility fee-related reforms, including billing transparency, public reporting, and consumer notification requirements.
Takeaways
With the increasing rise of vertical integration and the growth in consumers’ out-of-pocket responsibilities, patients are more exposed to facility fees than ever. In response, some states have enacted targeted facility fee prohibitions and out-of-pocket protections that shield consumers from at least some of these fees, while a larger number of states have created consumer notification requirements that at least ensure that patients know when to expect facility fee bills. As they seek to improve health care affordability and access for their consumers, state policymakers may consider these reforms, or investigate site-neutral payment—another approach that also targets the site-dependent differences in payment rates that drive vertical integration and the proliferation of facility fee charges.
