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Health care’s hidden costs can take patients by surprise

By Daniel Chang

The Miami Herald (MCT)

Published: Monday, Feb. 24 2014 8:57 a.m. MST

When a rheumatologist told Linda Drake of Miami that she might have lung cancer, the former smoker did some research and discovered a study for early detection and treatment of the disease with researchers in South Florida.

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When a rheumatologist told Linda Drake of Miami that she might have lung cancer, the former smoker did some research and discovered a study for early detection and treatment of the disease with researchers in South Florida.

Drake, 57, decided to participate in the study because there was a $350 flat fee, and she could enroll through UHealth — the University of Miami’s network of clinics and hospitals.

She could even go to a UHealth outpatient clinic close to work. That clinic, Sylvester at Deerfield Beach, Fla., is about a 40-mile drive north from UM’s Miami hospitals.

Drake’s visit last spring took about one hour, she said, including a CT scan. She saw a technician and a nurse practitioner. About a week later, she received an analysis of the images by a radiologist she never spoke with or met.

The results were negative. Drake breathed a sigh of relief. But a few days later, an unpleasant surprise arrived in the mail: a bill for $210 from UHealth for “hospital services” labeled as “Room and Board — All Inclusive,” even though she never set foot in a hospital or spent the night at the clinic.

Her health insurance would not cover the fee. Drake was furious.

“It’s not just the fee,” she said. “It’s the way they’ve gone about implementing it that’s offensive.”

Drake is not alone. As hospitals consolidate into mega health systems, buying physician practices and building urgent care centers and outpatient clinics miles from their main campuses, patients are discovering that — just like baggage fees for air travel and convenience surcharges for concert tickets — some health care comes with hidden costs: facility fees.

These are charges that allow hospitals that own physician practices and outpatient clinics that meet certain federal requirements to bill separately for the facility as well as the medical service provided there. Drake was charged the fee because the Deerfield Beach center is owned by UM and considered a department of UHealth’s hospitals.

Consumers are seeing these fees more often as hospital systems build more outpatient centers to create the integrated health care delivery models envisioned by the Affordable Care Act.

UHealth officials declined to answer questions about Drake’s experience, but Lisa Worley, a spokeswoman, issued a statement acknowledging the practice of charging facility fees.

“The location of care and related charges follow the location and best and most appropriate care for the individual,” the statement read. “UHealth follows established national policies that apply to all office and hospital-based institutions.”

The fees, also referred to as “provider-based billing,” are the result of a change in the federal rules for Medicare that took place about a decade ago. That change allowed hospitals to bill Medicare, the federal health care program for the elderly, for physician services separately from building or facility overhead.

Independent, physician-owned offices and freestanding clinics are not permitted to charge the fees. But federal rules say hospitals that charge facility fees for Medicare patients must do the same for all others — even if their private insurance doesn’t cover the fee.

Hospital advocates and health care groups say the fees are necessary to help defray overhead, pay salaries, meet federal standards and ensure patients’ access to emergency services, said Erik Rasmussen, senior associate director for the American Hospital Association, a national membership organization representing thousands of hospitals and other providers.

“When a physician practice is owned by a hospital, it has to comply with all the hospital outpatient department regulatory requirements, which is a lot,” Rasmussen said.

“If the physician fee isn’t covering the cost of the overhead, and all that the hospital provides,” he added, “then the hospital is going to charge that facility fee because the emergency department doesn’t get magically paid for by fairies.”

Yet there’s evidence that consumer anger over facility fees is causing some large hospital systems to reconsider the practice.

In mid-January, during a health care industry conference hosted by the University of Miami’s School of Business, the chief executive of Mercy, a Missouri-based conglomerate with 33 hospitals in four states, said the health care giant would no longer charge facility fees at acquired physician practices.

Lynn Britton, the Mercy CEO, said he expected the change to cost the hospital system about $40 million a year in revenues. He did not say when Mercy would discontinue the practice, and he declined an interview request.

But Mercy issued a statement which read: “We know facility fees are confusing for patients, especially as they relate to the out-of-pocket costs that patients are asked to pay. Mercy is making plans to simplify our billing practices … these changes will include phasing out facility-based fees for outpatient services provided in our clinics and other facilities.”

South Florida’s largest hospital system — Miami-Dade-based Baptist Health South Florida — charges a facility fee at its 17 urgent care centers.

The fee is based on the severity of the case and the treatment provided, Karen Godfrey, vice president of revenue management, said in a written statement. Uninsured patients pay a fixed facility fee, Godfrey said, and they are notified of the fee by signs posted at the centers.

Baptist Health’s urgent care centers are licensed under the system’s six hospitals, Godfrey said.

“The facility fees covers a number of costs, including the nursing care provided to the patient, basic supplies, the operation of the facility and clerical support,” Godfrey said.

But Baptist Health does not charge facility fees at its physician practices, or at its more than one dozen diagnostic imaging and outpatient surgery centers in South Florida.

Memorial Healthcare System, the public hospital network for south Broward County, Fla., that operates six hospitals and more than a dozen outpatient and urgent care centers and community clinics in the county, declined comment on their policy on facility fees.

Jackson Health System, Miami-Dade’s public hospital network, charges facility fees at primary care centers throughout the county but not at physician offices, said Ed O’Dell, a spokesman. O’Dell said he did not know the amount of the fee, and that Jackson does not have a written policy for them. He said the fee may differ based on the medical services provided to the patient.

“So blood work is going to be different from nuclear medicine,” he said.

O’Dell said the majority of patients treated at Jackson’s primary care centers do not pay the fees because they are uninsured or receiving Medicaid, the state-federal health program for the poor.

Some patients, such as Drake, find out about facility fees only after receiving a bill.

Drake said UHealth never told her she would be charged a separate room and board fee for the visit, and that she even asked the study coordinator, a UHealth nurse practitioner, when they requested her health insurance identification card.

“We had discussed it in depth,” Drake said. “When I paid the $350, nothing was said about outpatient facility fee.”

She called UHealth’s billing department and wrote numerous complaint emails.

At first, she said, they told her “Everybody pays that fee.”

But after about a month of email exchanges with UHealth, the health care system dropped the charge. She’s now is looking for an independent hospital in South Florida collaborating on the study so she can continue to participate — without having to pay a facility fee.

Had she known about the facility fee in advance, Drake said, she would have shopped around.

“I think if people know they’re going to be charged a facility fee their insurance won’t cover,” she said, “they’re going to go somewhere else.”

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©2014 The Miami Herald

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