By Kennah Watts and Julia Burleson
In recent years, outpatient facility fee billing has become increasingly common for a growing number of health care services. These charges, ostensibly intended to cover the operational costs for hospital-based facilities, can leave patients who receive routine outpatient care with thousands of dollars in unexpected costs.
To better understand facility fees, CHIR has created a new Outpatient Facility Fee Reform Resource Library. This library brings together resources published over the past decade on outpatient facility fee billing practices, site-of-service payment differentials, and related policy reforms, such as site-neutral payment policies and facility fee bans. In this blog, we provide highlights from this literature, and describe recent action by state and federal policymakers to translate this research into evidence-based policy reforms.
What We Know About Hospital Outpatient Billing and Facility Fee Reform
Across specialties and geographic areas, hospitals receive substantially higher payments than physician offices for the same outpatient services. Clinicians who treat patients in physician offices charge a professional fee. But when patients get care in hospital outpatient departments (HOPDs), they often receive a professional fee from the clinician as well as a facility fee from the hospital, which increases the total amount they or their insurers pay. For example, a Health Care Cost Institute (HCCI) analysis of commercial claims from 2018 to 2022 found that prices for care at HOPDs exceeded physician office prices for an array of services that a 2023 Medicare Payment Advisory Commission (MedPAC) report suggests can be safely and appropriately provided in physician offices. The HCCI analysis estimated that HOPD prices ranged from 1.27 to 13.5 times the prices in physician offices in 2022. Additionally, facility fees have been shown to grow faster than professional fees, meaning the difference between prices for the same care in HOPDs versus physician offices is also growing.
These site-of-service payment differentials have encouraged hospitals to acquire physician practices and shift care to HOPDs. As a result, more patients receive care in HOPDs and face facility fees. Despite these higher payments, research has found little evidence that HOPDs deliver higher quality care for the same services compared to physician offices. Hospital advocates argue that the higher payments they receive reflect the costs associated with treating more medically complex patients. However, a 2022 MedPAC analysis found minimal evidence that patients who received services routinely provided in physician offices were systematically sicker or more complex when they received those services in HOPDs.
Facility Fee Reforms Can Increase Transparency and Protect Consumers
To protect consumers from the high costs associated with facility fees, policymakers, researchers, and consumer advocates have explored policy reforms including facility fee bans and site-neutral reforms. In addition, researchers have often emphasized billing transparency, including the use of unique National Provider Identifiers (NPIs), as a critical first step toward implementing and enforcing facility fee and site-neutral payment policies.
Facility fee bans can protect consumers from unexpected and significant medical bills, but are unlikely to substantially reduce overall health care spending without accompanying reforms. Yet many consumer advocates, health plan purchasers, and policymakers support bans because they directly lower patients’ out-of-pocket costs. Site-neutral payment policies have the potential to generate much larger savings by reducing payment differences across provider settings. Researchers estimate that capping commercial payments for routine outpatient services at 150% of Medicare non-hospital rates could save employers and consumers a total of $10.8 billion annually across 48 states and Washington D.C.
States Introduce and Enact Facility Fee Reforms
In the 2026 legislative session, sixteen states introduced more than two dozen bills to reform facility fee billing. These bills took various approaches, including facility fee prohibitions, public reporting, consumer disclosures and protections, and billing transparency, as well as site-neutral payment reforms.
Of these introduced bills, lawmakers in two states successfully enacted reforms. New Mexico will prohibit providers and health systems from charging patients (but not insurers or health plans) facility fees for preventive health care services, vaccination services, and telehealth services. This prohibition becomes effective January 1, 2027, and has some exceptions for certain rural hospitals. The law also includes consumer disclosure and reporting requirements. In Virginia, legislators enacted a law requiring the Department of Health to assess and propose additional uses for the state’s all-payer claims database (APCD), including site-neutral policies. With these two new laws, as of August 2026, 23 states have enacted at least one strategy to reform outpatient facility fee billing.
Several other states made tangible progress, though proposals were not ultimately signed into law. Vermont legislators passed a bill with a provision that would have required unique NPIs. The governor vetoed it for reasons unrelated to the NPI provision. In New York, a site-neutral bill was approved by both the Assembly Health Committee and the Senate Health Committee, but did not pass out of either chamber. In Illinois, a facility fee prohibition bill gained three dozen co-sponsors and two committee hearings. Facility fee prohibition bills in California and North Carolina also advanced through at least one chamber.
Outside of the legislative process, Rhode Island’s governor issued an executive order to direct the Office of the Health Insurance Commissioner and the Executive Office of Health and Human Services to evaluate opportunities to promote or implement site-neutral reimbursement in the commercial market, as well as reforms to prohibit or limit the use of facility fees1. The reports for both agencies are due reports due by the end of the year.
The developing state interest in site-neutral payment policies is noteworthy. In addition to the action described above, policymakers in Vermont and Pennsylvania introduced site-neutral bills. The site-neutral bills to date have varied in their scope, payment level, operation, and administration. However, they all intend that outpatient payment rates for certain services reflect the rates an efficient provider would charge, regardless of the care delivery setting. The varied approaches of these bills demonstrate how policymakers can tailor site-neutral reforms to local market conditions while also serving as models for other states. CHIR’s recently published site-neutral policy framework can help guide policymakers through the primary decision domains to craft effective site-neutral reforms. For legislators looking for a template, the National Academy for State Health Policy’s commercial site-neutral model law may serve as a helpful starting point. While none have yet made it over the finish line, these bills—and newly authorized site-neutral studies—illustrate the growing trend in commercial site-neutral payment.
Federal Action Can Bolster Further State Action
Congress and federal agencies have also advanced facility fee and site-neutral payment reform in 2026. In February, Congress passed the Consolidated Appropriations Act (CAA) of 2026, which requires most hospitals to obtain and submit claims with a unique NPI for each off-campus HOPD in order to receive Medicare payment starting in 2028. It is unclear whether this requirement will benefit the commercial market without further congressional or agency action. It lowers the barrier for states interested in adopting similar policies, however, as hospitals that bill Medicare will already have unique NPIs for their off-campus HOPDs. Congress has also introduced several bills that would extend the unique NPI requirement to claims submitted to other payers, including group health plans and issuers, the Department of Veterans Affairs, and TRICARE.
More recently, the Senate Health, Education, Labor, and Pensions Committee advanced the Patients Deserve Price Tags Act, which aims to strengthen hospital and insurer price transparency. As currently drafted, the bill would require hospitals to publicly disclose their standard charges, including facility fees, for each item and service. Hospitals would also need to provide information explaining when facility fees apply and how patients can avoid them. Additionally, the bill seeks to ensure that insurers send consumers comprehensive advance estimates of the cost of care, including any facility fees.
The Centers for Medicare & Medicaid Services has also continued to pursue site-neutral billing reforms within Medicare. This year, the agency is proposing to pay all off-campus HOPDs the physician fee schedule rate for imaging without contrast services beginning in 2027. Currently, Medicare only pays off-campus HOPDs the physician rate for these services if they began providing care on or after November 2, 2015. Although the proposal applies to Medicare only, it reflects growing federal support for site-neutral payment reform and may influence commercial reimbursement.
Looking Ahead
Site-of-service payment differentials encourage vertical integration, drive up costs, and ultimately leave consumers vulnerable to unexpected facility fee bills. To protect consumers and ensure fair billing, state and federal policymakers have taken action to reform facility fee billing and require site-neutral payments. As legislators continue to consider such policies, the literature on facility fees, enacted state laws, and CHIR’s site-neutral framework may serve as useful starting points.
