Provider Impact: New Connecticut Laws Target Facility Fees
POLICY UPDATE: New laws prohibiting facility fees may significantly impact the operating budgets of hospitals and health systems. In this article, Cristine A. Vogel, MPH, details the key highlights of this legislation and what will be required of providers in order to comply.

The healthcare landscape continues to change as payers and providers strive to lower costs and deliver quality care for patients. Market consolidation of hospitals and physician practices is stirring concerns about price increases because of reduced competition, and in turn, state governments are imposing regulation to begin controlling such increases. One method to control healthcare costs being explored by state governments is price transparency. The premise being that by disclosing the fees and charges associated with delivering the care, consumers will be better informed and can make lower-cost decisions, thus igniting competition based on price. Connecticut legislators passed several transparency and disclosure laws in 2015 designed to provide consumers more information about their insurance coverage, the fees and charges associated with healthcare services, and improving access to such information. These policy decisions aim to empower patients to make informed cost-effective healthcare decisions. The 2015 Connecticut legislative session included several new laws that impact providers and health plans. This Policy Update focuses on the new laws pertaining to facility fees that are charged to patients using certain outpatient services provided by hospitals, health systems and hospital-based facilities.

Background: 2014 Legislation Passed

Because more and more physician practices and outpatient surgical facilities are becoming affiliated with hospitals and health systems, more patients are being impacted by the facility fee charge. Facility fees are not new. Hospitals are allowed to bill facility fees to cover their operating expenses and have been charging these fees for years. What is new, is the increase in the number of hospital-based facilities that appear to be a physician office to the patient - sometimes the same location they went previously. 

In 2014 the Connecticut legislature addressed facility fee charges for the first time. The facility fee notification law allowed patients to have a clearer understanding of physician practice ownership, an awareness of additional fees that may potentially have a greater financial burden on them, and an opportunity to decide whether or not to use a particular physician office if the patients did not want to pay the facility fee. 

That law, effective October 1, 2014, requires hospitals with hospital-based facilities to: 
  • formally notify patients in writing prior to their appointment about the potential of a facility fee being charged 
  • publicly post information at the facility about the potential of a facility fee charge 
  • clearly make consumers aware that the hospital-based facility (physician office) is part of a hospital system in its signage and marketing materials 
The definition of a facility fee is any fee charged or billed by a hospital or health system for outpatient hospital services provided in a hospital-based facility. The fee is intended to compensate the hospital for the operational expenses of that facility. The facility fee is a separate fee from the professional fee and is charged by the hospital or health system. In many cases, the facility fee is also billed separately so patients may receive two different bills for the single office visit. 

Connecticut's 2015 Facility Fee Legislation
To build on the facility fee requirements enacted in 2014, Connecticut lawmakers have added more consumer protections that directly impact hospital-based facilities. Although the new requirements mandate more patient notification and compliance processes, the most significant provision is the prohibition of certain facility fees beginning January 1, 2017. The key highlights of the new law include: 
  1. Notifying patients in advance about facility fees being charged 
  2. Notifying patients when a transfer of ownership creates a hospital-based facility 
  3. Charging no facility fee for certain outpatient services and limiting fees for the uninsured 
  4. Reporting facility fee data to OHCA Below is a more complete description and potential impact on providers. 

Below is a more complete description and potential impact on providers.

1. Notifying patients in advance about facility fees being charged 

The new law requires hospital-based facilities to better inform their patients regarding the purpose of the facility fee, the comparable Medicare fee rate, and certain patient rights. This new information required on the patient's billing statement will require facilities to adapt their billing systems to identify the appropriate patient bills, provide more information on the statements, and also to set up a process for patients to contact the hospital by telephone to request a reduction in the facility fee being charged. For those health systems that have centralized the billing systems for all of their off-site facilities, implementation may be streamlined, but for those hospitals that have disparate systems, it will be more difficult to coordinate this notification. 

Hospitals and health systems need to implement the billing statement requirements by January 1, 2016. Each billing statement that includes a facility fee must include the items listed in the color panel below.

For nonemergency care and patient appointments scheduled to occur ten days or more after the appointment is made, there needs to be a written notice (containing similar information as above) mailed to the patient or sent via an encrypted electronic mail or secure patient portal. For emergency care the notice must be provided to the patient as soon as practicable. This requirement does not apply for patients covered by Medicare or Medicaid.

  • Identify the fee as a facility fee that is billed in addition to, or separate from, any professional fee billed by the provider
  • Provide the Medicare facility fee reimbursement rate for the same service as a comparison
  • Include a statement that the facility fee is intended to cover the hospital's or health system's operational expenses  
  • Inform the patient that the patient's financial liability may have been less if the services had been provided at a facility not owned by the hospital or health system
  • Include written notice of the patient's right to request a reduction in the facility fee or any other portion of the bill and a telephone number that the patient may use to request such a reduction

2. Notifying patients when a transfer of ownership creates a hospital-based facility 

Beginning January 1, 2016 when ownership of an outpatient facility transfers to a new owner and creates a hospital-based facility that may bill patients a facility fee, the purchaser (likely a hospital or health system) needs to notify patients who previously used that physician practice or outpatient office location. The written notice must be sent to each patient that received a service at the facility or office within the past three years; and the written notice must be sent within 30 days of the change of ownership. 

The notice must include information about how the facility is now a hospital-based facility and is part of a hospital or health system and that facility fees may apply. The notice must also explain that the facility fee is in addition to, and separate from, any professional fee billed; that the patient may incur financial liability; an estimated amount of the facility fee; and a statement advising patients to contact their insurance plan for coverage information. 

For example, if a physician-owned surgery center is purchased by a hospital, then the hospital needs to send a notice to all of the patients that previously used the physician-owned outpatient surgery center for the past three years and provide the information that is outlined above. The volume of physician practices and other outpatient services the hospital or health system is pursuing will determine the level of work involved with the implementation of this requirement. 

This written notice also needs to be provided to the Office of Health Care Access ("OHCA"), and the agency will post it on the OHCA website. A hospital, health system or hospital-based facility cannot collect a facility fee for services at a hospital-based facility (subject to this subsection) until at least 30 days after the written notice is mailed to the patient or a copy is filed with OHCA, whichever is later. A violation of this subsection is considered an unfair trade practice. 

3. Charging no facility fee for certain outpatient services and limiting fees for the uninsured 

The most significant change created by this law is that beginning January 1, 2017, no hospital, health system or hospital-based facility can collect a facility fee for many outpatient office visits. Also, the law states that facility fees charges for uninsured individuals cannot be more than the Medicare rate. 

The new law does not allow any facility fee to be charged for outpatient services that use a CPT evaluation and management code when that service is provided at a hospital-based facility. This prohibits the facility fee to be charged for many of the services provided at physician practices that are owned and operated by a hospital or health system. For example, CPT codes 99201 to 99205 and 99211 to 99215; and other E&M codes as per the CPT. This requirement does not apply to services provided at remote emergency departments not located on the hospital campus. 

As patients are being required to pay out-of-pocket for more of their healthcare services because of health plan designs, this provision reduces the amount of money a patient incurs. On the other hand, hospitals and health systems use the revenue generated by these facilities fees to defray their expenses related to the high cost of providing the infrastructure necessary to coordinate patient care in response to federal health care reform initiatives. Many of the strategic decisions hospitals and health systems have made were based on receiving facility fees to operate the outpatient facilities so the long-term impact on access to these services will need to be examined. 

4. Reporting facility fee data to OHCA 

Because the common theme during the 2015 legislative session surrounded the issue of transparency, the Connecticut lawmakers went one step further to request from hospital-based facilities, detailed data related to the revenue generated and how many patients are impacted by the facility fees. Each hospital and health system will need to report several pieces of data related to the facility fee charged, billed and collected. These data items are listed in the color panel below.

  • The name and location of each facility owned or operated by the hospital or health system
  • The number of patient visits at each such facility
  • The number, total amount and range of allowable facility fees paid at each facility by Medicare, Medicaid or private insurance
  • For each facility, the total amount of revenue received by the hospital or health system derived from facility fees
  • The total amount of revenue received by the hospital or health system from all facilities derived from facility fees
  • A description of the ten procedures or services that generated the greatest amount of facility fee revenue and, for each such procedure or service, the total amount of revenue received by the hospital or health system derived from facility fees
  • The top ten procedures or services for which facility fees are charged based on patient volume 

The first report must be submitted to OHCA by July 1, 2016, and will be published on OHCA's website. Thereafter, the report will be an annual submission. 

The requirements for providers in response to the new facility fee laws will be challenging. Hospitals and health systems will need to make sure their billing statements include the required information, their advanced notifications are sent promptly after appointments are scheduled, and they need to ensure their billing systems are capable of providing the reports required by OHCA. A more strategic review will need to occur to examine the impact on the multiple outpatient hospital-based facilities they operate to measure the financial impact once facility fees are no longer being collected from the commercially insured patients.


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VantagePoint HealthCare Advisors is a Connecticut-based healthcare consulting firm that helps clients understand today's regulatory and competitive environment, how it impacts their business, and how they can adapt to the changes in the marketplace. We provide expertise in compliance audits, pre-affiliation analysis and post-integration practice alignment. Some of our services include:

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  • Formulating the CON strategy and preparing CON applications
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  • Medicare, Medicaid, and payer audit reviews
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