Colorado hospitals collected $13 billion in facility fees over 6 years, new state report finds

Colorado hospitals collected an estimated $13.4 billion in facility fees over a recent six-year period, doubling the average cost of care for patients with certain types of insurance, according to a new state report released this week.

When patients receive care at a facility owned by a hospital system, whether on the hospital’s campus or elsewhere, their bills typically have at least two parts: professional fees, for the doctors and other providers performing the service, and facility fees, for overhead costs.

While they’ve existed since the early 2000s, the fees have become controversial in recent years as health systems have bought up outpatient providers, meaning that patients may have to pay new fees for the same care they’d received before.

The 200-page report, compiled by a committee and staff from the Colorado Department of Health Care Policy and Financing, came up with its cost estimate by using data from 2017 to 2022 on Medicare and commercial insurance payments, which the authors obtained through Colorado’s All-Payer Claims Database.

The report estimated total spending on facility fees rose about 10% annually during that time, due to some combination of population growth, hospitals charging higher amounts and more locations charging the fees, among other factors.

The authors didn’t quantify how much of that $13.4 billion patients paid out-of-pocket, though they noted the proliferation of high-deductible insurance plans has left people receiving care responsible for an increasing share of costs.

On average, facility fees were higher than fees paid to the doctor or other provider who provided the service, nearly doubling costs for care covered by commercial insurance or traditional Medicare, according to the report. The increase in cost was smaller for people covered by Medicare Advantage plans, which are run by private companies.

The authors didn’t take a position on what, if anything, Colorado lawmakers should do with that information, but said patients would inevitably pay for additional fees, whether out-of-pocket or through their monthly insurance premiums. They estimated that about 6% of the cost of premiums could result from facility fees.

A bill introduced in 2023 would have banned facility fees for care provided via telemedicine or in-person, but not on a hospital’s campus. Proponents said at the time that facility fees may serve a purpose in sustaining around-the-clock care at hospitals, but aren’t necessary for care in other settings.

A scaled-back version that ultimately passed required hospitals to disclose their fees upfront and set up a committee to compile a report.

One member of the committee responsible for the report, UCHealth Chief Financial Officer Dan Rieber, wrote a letter included at the end of the document stating that he thought lawmakers shouldn’t make decisions based on it, because he considered it incomplete.

An appendix included a variety of perspectives and suggestions on how the state could respond, none of which it attributed to a specific person:

• A private practice physician wrote that they thought the most important thing the state could do would be to increase support for independent doctors, so they wouldn’t feel forced to join health systems
• Someone in the insurance industry recommended pursuing “site-neutral payments,” meaning that payment for a service would be the same regardless of where the patient receives it
• Someone in the hospital industry argued that banning facility fees would reduce access to outpatient care, and that a better way to save patients money would be to limit high-deductible insurance plans
• A person writing from the consumer perspective didn’t make a specific recommendation, but said facility fees were driving up costs for patients

The authors noted they couldn’t draw conclusions about how facility fees affected access to care and the stability of the health care workforce. The committee in charge of the report included four people working in different parts of the health care industry, a patient, a consumer advocate and one person employed by the Colorado Department of Health Care Policy and Financing.

The Colorado Hospital Association said in a statement that facility fees support the shift in recent years to provide more care in outpatient settings. While the authors and others worked hard, the report isn’t a good basis for policy, the association said.

“Significant data limitations leave this report incomplete and insufficient. This is complicated by the fact that the term ‘facility fees’ is a drastic oversimplification of the wide range of essential services, supplies and personnel these charges support,” the statement said.

The Colorado Consumer Health Initiative countered that the report displayed a clear pattern of hospitals buying up independent practices and then increasing costs via facility fees. Priya Telang, spokeswoman for the initiative, said the group is still working on specific policy proposals around fees to protect the public from unnecessary costs.

“We want more patient protections,” she said.

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