Robert Reed’s visit to a suburban dermatologist’s office last year seemed ordinary: He was led into a small exam room with a scratchy paper-covered table, where the doctor inspected his skin and squirted liquid nitrogen onto three pre-cancerous spots.
The statement he received a month later appeared anything but ordinary: It included $1,525 in “operating room’’ and hospital “facility’’ charges. Surely, Reed thought, it must be a mistake. There had been no hospital, no anesthesia, no surgical nurse.
And these charges were far more than what the doctor billed for her services — just $354. “I feel like I’ve been taken advantage of,” said Reed, a 57-year-old financial analyst. “They need a reality check on what they are charging.’’
To many people this may be the equivalent of billing for oral surgery after a teeth cleaning. But Lahey Hospital and Medical Center, which owns the dermatology practice, said Reed’s insurer allows the Burlington hospital to charge patients an overhead fee when they are treated by doctors it employs — even when their offices are not located in the hospital but in a medical building 1½ miles away.
This practice is common and has become more widespread in the past several years as hospitals across the United States buy up physician practices in the community. Now, facility fees for off-site care are drawing scrutiny from Medicare, some insurers, and consumers, who say that they are unfair and that hospitals are collecting more revenue and driving up health care costs.
“We’re trying to save money in our system and now we’re generating additional costs to the consumer,’’ said Dr. Paul Hattis, a member of the Health Policy Commission that oversees implementation of Massachusetts’ new health cost-control law. He said the panel should examine the issue.
The federal Medicare program, which covers 47 million people and is under pressure to cut costs, is taking a look at the practice. An independent agency that advises Congress concluded last year that the charging of facility fees at hospital-owned medical practices is costing Medicare millions of dollars a year. For a 15-minute office visit, for example, the federal health insurance program paid $44 more at a hospital-owned office in 2011 than at an independent office. Medicare patients pay more too: Their share of the bill for this standard visit was $11 more when they went to a hospital-owned office.
The facility fee can cause an even larger difference for some procedures, the Medicare Payment Advisory Commission found. Laser eye surgery, for instance, costs Medicare 90 percent more — $738 — in a hospital-owned facility than in an independent doctor’s office.
The advisory panel is recommending changes that would require Medicare to pay a single rate for a variety of medical procedures performed by doctors and for basic office visits, regardless of the site.
David Spackman, Lahey’s general counsel, pointed out that Medicare permits hospitals to bill facility charges for care in a physician’s office as long as they inform patients in advance. At the Wall Street dermatology office in Burlington where Reed had his procedure last January, signs posted in the lobby tell patients, “The offices at this location are operated as part of the main hospital facility. Because of this, the care you receive may have a hospital facility charge in addition to a provider charge.’’
Reed said he did not notice the warning — which, he pointed out, gave no indication of the size of the fee.
His share of the Lahey fee is $678.91, which he has appealed repeatedly to his insurer, Cigna. Patients such as Reed, who is covered under a new high-deductible health insurance plan at work, are increasingly responsible for at least a portion, if not all, of these facility fees.
“Of course he’s upset,’’ said Spackman, a former state assistant attorney general.
Erik Rasmussen, a senior associate director at the American Hospital Association, said the extra fees are a way to have patients served at all of a hospital’s locations cover overhead costs unique to hospitals, such as having emergency room staff available 24 hours a day.
Many doctors’ practices are losing money and would be forced to close if a hospital did not step in to support them, said Timothy Gens, general counsel for the Massachusetts Hospital Association. “One of the greatest challenges for hospitals is to find the resources to subsidize physician practices so they stay in their communities,’’ he said, explaining that facility fees help pay for technology and staff and meeting regulatory requirements in these offices.Continued...