Last month, some UNC Health patients received a letter informing them that three outpatient dermatology clinics would be converted into “hospital-based clinics.”
Almost everything about the health care at those clinics would stay the same, the letter assured patients. The location of the clinics, the doctors working there and the care they provided would not change.
What will change, the letter pointed out, is how patients are charged for that care.
Beginning on March 6, patients of the clinics have been charged an additional “facility fee” from UNC Hospitals.
This fee, which one health policy expert researcher called a “revenue-generating gimmick,” will almost always result in a more expensive bill for the patient and their insurance provider, said several experts interviewed by the N&O.
READ MORE: Do you have questions or stories about medical billing? We want to hear from you.
Health policy experts say this is an increasingly popular way for hospitals to get more money for providing the same care. By declaring free-standing clinics to be part of the hospital, they are able to tack on a facility fee, boosting their revenue.
“It squeezes dollars from the pockets of patients and payers and channels them to the hospital’s bank account,” said Ge Bai, a health policy researcher at the Johns Hopkins Bloomberg School of Public Health.
A national trend
In North Carolina, hospital-based clinics are common.
UNC Health operates 75, Duke Health 35 and WakeMed 24, according to spokespeople from the health systems. All charge facility fees.
Hospitals argue that facility fees are necessary to afford running large medical facilities at all hours of the day and night.
But critics question whether that facility fee is necessary for some of these clinics, like UNC’s dermatology offices, that keep regular hours and are miles away from a hospital. They point out that the health systems have many clinics that are not “hospital-based” and are able to operate without an added facility fee.
Hospitals have been purchasing and re-labeling independent physician clinics to boost revenues for the last decade or so, said Matthew Fielder, a health policy researcher at the USC-Brookings Schaeffer Initiative for Health Policy.
There is no statewide or national data on how many clinics have been “converted” into hospital departments in recent years.
However, a recent report to Congress found that people are increasingly seen by their doctors at places billed as hospital outpatient departments. The percentage of appointments at that type of facility rose from 9.6% in 2012 to 13.1% in 2019, the analysis found. That’s a 27% increase.
For patients, the change can result in hundreds or thousands of dollars added to their bills. One Ohio woman saw her portion of the bill for her arthritis injections increase from $30 to $354 after the clinic providing the injections was converted into a hospital department, Kaiser Health News reported.
Facility fees create a strong incentive for hospitals to buy up independent clinics and flip them into hospital clinics, said Barak Richman, a researcher at the Duke-Margolis Center for Health Policy.
This is particularly problematic in North Carolina, which has one of the most consolidated health care markets in the country.
“It’s a widespread phenomenon,” Richman said. “It has fueled consolidation for nothing but bad reasons.”
Alan Wolf, a spokesperson for UNC Health, said the billing changes were necessary to keep up with wage and pharmaceutical inflation, which he said has “far exceeded reimbursement for dermatology services.”
He said the change will allow the clinics to hire more staff and cut appointment wait times.
Fielder said he’s unaware of any evidence that shows this type of reclassification meaningfully improves access to care.
“There is, on the other hand, abundant evidence showing that changes like these increase providers’ revenues,” he said. “UNC has delivered these services in a physician office setting until now, and many other providers are continuing to do so.”
On the federal level, insurance companies have pushed for “site-neutral” Medicare billing, which would make clinic reimbursement rates the same regardless of whether they are independent or hospital-affiliated.
A report published last month by the Blue Cross Blue Shield Association found that adopting these policies could save the federal government, private health insurance companies and consumers a combined $471 billion over 10 years.
Bai said the best way to avoid facility fees at outpatient clinics is to call ahead and ask the billing department whether there will be a facility fee. If there is, she said patients could potentially find another provider.
However, she said this advice comes with an important caveat:
“The billing department might not be able to give a clear answer and patients might not have the time and energy to check when under stress.”
Teddy Rosenbluth covers science and health care for The News & Observer in a position funded by Duke Health and the Burroughs Wellcome Fund. The N&O maintains full editorial control of the work.
This story was initially published March 13, 2023, 7:45 AM.