As hospitals buy medical practices, patients face thousands of dollars in new charges

At first, the $4,000 medical bill didn’t worry Susan Ferro. She was certain it was a mistake.

Two years ago, when she’d gone to the same radiology office for the same procedure — a needle aspiration biopsy of a lump in her breast — Ferro’s insurance paid.

But when Ferro called the doctor’s office, she learned it wasn’t a mistake. Since her 2010 biopsy, the radiology practice had been bought by Norwalk Hospital.

And now, the same procedure, performed in the same place, was being treated differently: For billing purposes, it was considered an outpatient procedure, as if she’d been in a hospital. Instead of being covered by her insurance, the bill went to Ferro’s deductible, leaving her with the cost.

“It was really the most frustrating, horrible thing,” said Ferro, who lives in Wilton and was laid off earlier this year. She’d already been planning to pay for a surgery this year, and the unexpected $4,000 bill pushed her expenses over $10,000. She and her husband are now on a payment plan to cover their medical bills.

Ferro’s situation is the result of something known as a facility fee, a charge that’s likely to become increasingly common as hospitals acquire physician practices or take ownership of the equipment doctors use.

Patients or their insurance typically get one bill from a physician who performs an in-office procedure. But if a hospital owns the practice or the equipment used, it can charge a fee in addition to the bill for the doctor’s services.

Hospital officials say the second fee reflects the overhead costs of the practice and hospital, as well as higher standards that hospital-owned practices meet.

That second charge can amount to thousands of dollars. And because patients now commonly have health plans that leave them with a larger share of the bills, they’re often stuck with large charges they didn’t anticipate.

State Healthcare Advocate Victoria Veltri, whose office has helped patients shocked by large bills, said she’s concerned about the lack of transparency in the fees and has talked to the state’s congressional delegation about reining them in.

“When you think about excess costs in health care, this to me is a shining example of a problem that needs to be fixed,” Veltri said.

The financial consequences can be significant. Medicare could face an additional $2 billion a year in charges by 2020 if the move toward hospitals acquiring physician practices and billing routine appointments as hospital outpatient visits continues, the panel that advises Congress on Medicare reported last year.

Ferro said she was particularly frustrated because the fee caught her by surprise. Had she known, she’d have gone to a different radiology office. And Veltri said it points to a larger problem in health care.

“We’re the only area where you don’t know the price for what you’re buying,” she said. “It’s got to change, or the costs will never come down.”

“What are people going to do?”

Marsha Norwood figured she was being budget-conscious when she called her doctor’s office to get an estimate of what an elective dermatology procedure would cost. Her health plan had a $10,000 deductible, and she saved up for care.

The original quote was about $2,100, she said. Later she learned she’d need two visits, so she figured it might cost $3,000 or $3,500. She also got a letter about a facility fee, but said it wasn’t specific. “It didn’t say, ‘If we give you one idea of the price, it will be some crazy hospital amount later on,’” she said.

Norwood had the procedure. The bill from the doctor’s office was $1,100, and she paid it.

Then she got another bill, from UConn’s John Dempsey Hospital, for more than $8,000.

“Of course I panicked,” Norwood, of West Hartford, said. “And I’m someone who pays our bills and we keep up and everything else. I couldn’t even recreate the feeling. It was shocking. It was upsetting. It was freaky.”

Norwood’s procedure was elective, so she could have chosen not to get it if she had known the full cost.

“Then I was also so worried … what about people who had cancers and things that had to be removed?” she said. “What are people going to do?”

Norwood’s insurance company helped cut some of the cost. She sought help from the healthcare advocate’s office, and the hospital agreed to reduce the bill. In the end, she paid about $2,500, in addition to the $1,100 doctor bill.

“You feel so helpless,” Norwood said.

Although she didn’t have a problem with the medical care, Norwood doesn’t want to deal with that kind of billing again. But she wonders how to be sure that another practice won’t do the same thing.

Higher standards, access

A routine appointment billed as a physician office visit cost Medicare $68.97 in 2011, according to the Medicare Payment Advisory Commission, which advises Congress on policy for the program.

But if the same office were considered a hospital outpatient department, Medicare would pay $124.40 — 80 percent more. And Medicare beneficiaries would face higher out-of-pocket costs.

The commission recommended phasing out the higher rate.

Most of the time, facility fees are higher than the charges for going to an independent practice, and Michele Sharp, a spokeswoman for the Connecticut Hospital Association, said that’s because by becoming part of a hospital system, “access, standards and services increase.”

“Hospital-owned physician offices are better equipped, staffed, and technologically advanced, and they frequently provide more complex services than stand-alone practices. The hospital provides full backup for these office practices and procedures,” Sharp said. “Because the practice is under the umbrella of the hospital, the cost of the hospital is factored into the higher funding for facility services versus physician office expense.”

At UConn’s John Dempsey Hospital, the cancer center and psychiatry, cardiology, pulmonary and dermatology practices are considered hospital-based clinics. That means they must meet the standards the rest of the hospital does to receive accreditation, said John Biancamano, the UConn Health Center’s chief financial officer. There could be different standards for sterilization or what professionals need to be in the room for a procedure, he said.

“And that requires much more policy, procedure and protocols than what I would call a standard office setting,” he said.

Biancamano said patients are notified up-front that they’ll get two bills. But he said it’s difficult to let them know the total charge because it’s often not clear ahead of time, particularly if they have a deductible that leaves them to pay some of the cost.

“We do try and allow them time to pay it,” he said.

Consumers confused

But Demian Fontanella, general counsel for the healthcare advocate’s office, said the notices patients get generally don’t make clear the sort of charges they could face.

Some notices tell patients that instead of getting one charge, they’ll now get two. But Fontanella said the way it’s presented, patients might conclude that a $100 charge that used to come in one bill would now arrive as one bill for $60 and another for $40.

They don’t inform patients that, “if it was $100, it’s now $90 plus $2,700,” he said.

“It’s extremely hard for the consumer to really even understand when these types of rules go into effect and these charges are triggered,” Fontanella said.

Generally, facility fee-type charges can occur when a patient gets a procedure done in a medical practice that’s either owned by a hospital or uses equipment that the hospital owns.

A $5,000 burger

Michael Lipkin says money isn’t the reason he’s upset over the $5,000 bill he got for his daughter’s cardiology tests. It’s feeling like he was entrapped.

Lipkin’s 17-year-old daughter got an electrocardiogram and sonogram to check what a pediatrician identified as an elevated heart rate. The tests were done in a doctor’s office in a residential area, Lipkin said. He’d had the same tests done at another office not long before, and paid about $500.

His daughter was fine, and the doctor’s bill, once adjusted by his insurance company, came to a little over $400.

Then came the bill from Stamford Hospital: $5,000.

Like Susan Ferro, he thought it was a mistake. He hadn’t been to the hospital. But when he called, he was told the hospital owned the equipment the doctor used.

He likens it to going to a restaurant, ordering a burger and then, after eating, getting a bill for $5,000.

“They put totally unsuspecting customers in this very strange situation where all of a sudden, you just owe them a lot of money for nothing,” Lipkin said.

Melissa LoParco, a spokeswoman for Stamford Hospital, said the hospital doesn’t charge a separate facility fee. But she said a person who visits a physician practice and receives services on equipment the hospital owns would get one bill from the practice and a separate one for testing, “which is not a facility fee.”

“The rates for those services are the same throughout any location owned by the hospital,” she said. “What is actually paid is dependent upon the patient’s insurance company and the rates that are negotiated with the insurance company.”

Dr. Douglas Gerard, a primary care doctor, started hearing from his patients last fall about higher charges for seeing specialists whose practices were hospital-owned.

Gerard, who practices in New Hartford, said facility fees will influence his referrals. He’s part of an accountable care organization, a network of health care providers responsible for containing the cost of patients’ care. How is he supposed to refer a patient to a hospital-based surgeon, he said, when it will cost four or five times more than having the same procedure done by a surgeon in private practice?

“I think it’s a quirk in the system that’s going to fall apart,” he said.