Facility Fees Push Doctor Visit Bills Up to 10 Times Higher

Same doctor, same visit, hospital price

Hospitals now own a growing share of America's physician practices, and patients are paying more for routine care as a result. In many cases an office visit, injection or lab draw is billed at hospital outpatient rates instead of the lower doctor's-office rate. Sometimes a separate hospital "facility fee" is added as well, even though the patient never entered a hospital.1 Research on patients' bills shows that the higher rates and the added fees together can make a bill ten times larger or more.2

The Blue Cross Blue Shield Association has put a number on it. It estimates hospitals would bill $500 billion less over ten years if federal law barred them from charging more for a service provided through a hospital system than for the same service at an independent physician's office. CEO Kim Keck called the figures "staggeringly large."2 The practice is not new. Insurers and lawmakers have been trying to limit it for years with little success, and it keeps spreading as hospitals buy practices. Close to half of U.S. physicians now work within hospital systems, compared with under 30 percent in 2012.3

The consolidation numbers differ depending on who is counting. One estimate cited on PBS NewsHour says the share of doctors employed by hospitals or health systems more than doubled between 2012 and 2024 and now stands at 55 percent.9 Both figures point the same way: the independent physician office, which has historically been the cheaper place to get care, is shrinking quickly.

How a building's label sets the bill

The pricing depends on how a site is classified, not on the care it delivers. When a hospital buys a practice, the practice's services often get reclassified for billing as an off-campus hospital outpatient department. The site can then bill for the clinician's time and also for hospital overhead, even though the visit feels like any other office appointment.8 The extra charge may not say "facility fee" on the bill. It can show up as "clinic services," "room charges" or "administrative fees."8

The best-known example comes from a 2021 case. A 72-year-old Ohio Medicare Advantage patient had paid about $30 for her usual arthritis injections. After her rheumatologist's office moved up one floor in the same medical building and the hospital system reclassified it as hospital-based, her share rose to $354.68. The total bill was $1,394, which included a $1,262 facility fee listed as "operating room services."7 She saw the same doctor and got the same shots in the same building, and her cost went up more than tenfold.7

Michigan offers a more recent case. State Rep. Curt VanderWall asked for an itemized bill after a routine blood draw and found a facility fee for each of the three vials taken, adding nearly $75 in total.26 A Health Care Cost Institute review found that in 2022, a typical nonemergency doctor visit cost $43 more in a hospital outpatient department than in an independent office. Hospital-based labs charged more than three times what independent labs did for tests in employer plans.26

The Medicare side: drug administration and the site-neutral fight

The biggest single pricing gap is in Medicare. On average, Medicare pays two to four times more for many identical outpatient procedures done in a hospital outpatient department than in a physician's office.11 Medicare also sets the pattern for the rest of the market, because commercial prices still use its rates as a benchmark.20

Drug administration shows the gap clearly. For CPT 96413, the most common outpatient chemotherapy infusion code, Medicare pays a freestanding office an all-in rate of $133 in 2026. A main-campus hospital department bills a $337 facility fee plus about $26 for the physician, roughly $363 in total. The drug costs the same in both places.14 The gap is even larger for simpler services. Hydration pays $33 in an office and $217 in a hospital.14 The incentives have changed where care is delivered: between 2015 and 2021, chemotherapy administration in freestanding offices fell more than 14 percent while hospital outpatient volume grew more than 21 percent.14

Regulators have been closing the gap one service at a time. A 2015 law moved newly built off-campus hospital departments to the lower rate but exempted existing sites. CMS later applied site-neutral pay to clinic visits at those exempted sites in 2019.1120 For 2026, CMS extended the policy to drug administration at exempted off-campus departments, paying 40 percent of the outpatient rate, with rural sole community hospitals exempt. The agency estimates this cuts $290 million, including $70 million in lower patient copayments.1316 In July, CMS proposed applying the same approach to imaging without contrast in 2027, which it projects would cut $260 million.12

The drug-pricing fight goes further than infusion fees. The same 2027 proposal would cut Medicare payment for drugs bought through the 340B discount program from ASP plus 6 percent to ASP minus 33.4 percent, a $4.85 billion reduction. That money would be shifted back to hospitals through higher payments for non-drug services.12 The American Hospital Association responded that HHS "has chosen to make healthcare more expensive" for rural and underserved patients.12

The dollar amounts so far are small. A policy analysis published in September points out that the 2026 change saves about $290 million in an outpatient system that spends about $101 billion a year. CMS's authority also does not reach on-campus departments, where most outpatient spending occurs.20 My reading is that regulators are making real progress, but at a pace that cannot keep up with hospitals buying practices. A broad fix will require Congress.

Employers and workers absorb the commercial premium

Facility fees probably do the most damage in the commercial market, where they are harder to see. Commercial payers reimburse at about 196 percent of Medicare fee-for-service rates on average, and facility fees are a main reason for that in outpatient care. Dominant hospital systems can also lock in those premiums through multi-year contracts.14 One study found commercial prices rose 14.1 percent more for all services delivered by practices after hospitals acquired them.8

Those costs show up in workplace premiums. KFF's 2026 Employer Health Benefits Survey found that average family coverage now costs $28,303, up 5 percent from last year and 55 percent since 2016.31 Workers' share of family premiums rose 9 percent to $7,471, and the average single-coverage deductible is $1,955.3134 Among firms with 5,000 or more employees, 66 percent said they raised workers' share of premiums because they expected costs to rise.31 Forecasts for 2027 point to increases approaching double digits.31 Marsh projects an 8.2 percent rise in per-employee costs, which would be the largest since 2003.24

Survey respondents name higher hospital prices as one of the main reasons for the increases.38 Many employers also cannot see the problem. Only 14 percent strongly agree they know what their plans pay providers.36 Higher deductibles make the effect worse. A Georgetown researcher told PBS that as deductibles grow, more patients pay facility fees directly instead of having insurance absorb them.9

Hospitals' defense, and the Medicaid backdrop

Hospitals argue the fees pay for real costs, including 24/7 staffing, cybersecurity, backup generators and legally required interpreter services. They also say outpatient departments treat sicker and more complex patients.1626 The AHA estimates that limiting the fees could cost hospitals up to $180 billion over ten years. Some Michigan lawmakers warn that struggling rural hospitals could close if the fees are restricted.26

The Medicaid situation strengthens that argument. Hospitals are facing a projected $655 billion in federal Medicaid cuts over the same ten years.26 New Medicaid community-engagement rules and six-month renewal requirements also take effect heading into 2027.25 Hospitals say they make up for low Medicare and Medicaid payments elsewhere, and facility fees are one of the ways they do that.5

The hospital estimate and the insurer estimate are far apart: $180 billion in hospital losses versus $500 billion in billing reductions. The difference mostly reflects how broadly each side defines the reform.226 Even so, the fact that rural hospitals need help does not explain why an urban health system should charge facility fees for a blood draw. That is the reason most reform proposals exempt rural sole community hospitals, or pair site-neutral cuts with direct funding for safety-net hospitals.1310

Where reform goes next

The states are moving faster than Washington. As of August 2026, 23 states had adopted at least one facility-fee reform. In 2026 alone, sixteen states introduced more than two dozen bills.19 Connecticut, Indiana and Maine have the broadest bans.8 Rhode Island has capped facility-fee growth since 2010, which a Brown University study found slowed growth in hospital charges by 9 percent compared with other states.27 At the federal level, the 2026 appropriations law will require a separate billing identifier for each off-campus hospital department by 2028. That would finally let payers see where care actually happened.1519

The main conclusion from the evidence is that facility-fee bans protect patients' wallets, while site-neutral payment is what controls overall spending. Bans by themselves are unlikely to reduce total health spending much.19 Unless Congress removes the payment gap that makes buying physician practices profitable, hospitals will keep buying them, and patients, employers and Medicare will keep paying hospital prices for office visits.