On June 17, 2025, Georgetown University’s Center on Health Insurance Reforms hosted an event titled, Facility Fee Reforms: How States Are Tackling Excessive Hospital Outpatient Charges. The discussion addressed the growing prevalence of facility fees and their financial burden on patients nationwide, with an emphasis on state-level policy interventions.
A full recording of the event is available here.
The event was moderated by Dan Weissman, a healthcare journalist and host of the An Arm and a Leg podcast. Weissman became interested in this subject after hearing several stories of patients who were faced with particularly large out-of-pocket costs, largely driven by facility fees.
Panelists
- Claire Brockbank, Director, Policy, and Strategy at 32BJ Health Fund
32BJ Health Fund is a third-party administrator that manages and negotiates coverage agreements for approximately 200,000 property service workers, primarily in the New York Metro Area. Brockbank previously served as CEO of a Colorado health care purchasing cooperative.
- Charles Miller, Director of Health and Economic Mobility Policy for Texas 2036
Prior to his role at Texas 2036, Miller served as a Budget and Policy Advisor for Texas Governor Greg Abbott.
- Meghan Garratt-Reed, Executive Director of the Maine Office of Affordable Health Care
Garratt-Reed previously worked at Maine’s Department of Health and Human Services, United States of Care, the Centers for Medicare and Medicaid Services (CMS), and in the office of Congresswoman Chellie Pingree.
Background: Healthcare Billing and Reimbursement Practices
The panel discussion opened with an overview of facility fees by Georgetown Professor Christine Monahan. She explained that billing practices in healthcare differ significantly depending on the site of service, which classifies payers as operating in a facility or non-facility setting. A facility setting typically refers to services delivered in a hospital, hospital outpatient department, or other institutional provider owned by a health system. A non-facility setting refers to independent physician offices or free-standing clinics not owned by a hospital.
These designations have important implications for reimbursement, particularly in how claims are submitted. In facility settings, billing is often split between two separate components:
- The professional component, billed by the physician using the CMS 1500 claim form
- The facility component, billed by the hospital or institution using the UB-04 claim form.
This dual-claim approach allows hospitals to collect a facility fee to reimburse infrastructure costs like staffing, equipment, and overhead associated with operating the site of care.
In contrast, non-facility settings use unified billing, where the physician practice submits a single CMS-1500 claim form that bundles both professional services and practice expenses (such as rent and administrative staff). To account for these overhead costs, non-facility rates are typically higher than the professional-only rate used in split billing.
Monahan noted that despite medical advances allowing more services to safely shift from inpatient to outpatient care, the use of facility fees has actually expanded, especially in hospital outpatient departments and physician offices acquired by hospital systems.
This shift has placed additional pressure on independent practice groups that receive lower reimbursement. At the same time, it has created incentives for hospital systems to vertically integrate and bill under the more lucrative facility (or split-billing) model. Monahan cited research from MedPAC’s June 2023 report (pages 363-372), which examined these trends and recommended that Medicare limit reimbursement for certain services based on the most common site of service; helping neutralize incentives that distort care delivery decisions.
Panel Discussion: Policy Responses to Facility Fees and Implications for Site Neutrality
Following Monahan’s presentation, panelists shifted the conversation to the broader national debate over facility fees, viewed primarily through the lens of site neutrality. However, given their respective experiences, remarks focused largely on state-level policy responses and the practical challenges of implementation.
All panelists emphasized the need for a clear, standardized definition of what constitutes a facility fee and noted persistent issues with transparency. Patients are frequently unaware that a portion of their bill stems from a facility fee—charges that may appear in locations where they were previously not collected, often with little or no notification to the patient. (e.g. a physician practice being acquired by a hospital system). Miller highlighted that a commercial insurer in Texas had included contractual language to enforce site differential payments but lacked sufficient detail on claims submissions to effectively enforce it.
Garratt-Reed described efforts in Maine, where the 2023 Task Force to Evaluate the Impact of Facility Fees on Patients explored a range of reforms, including consumer notification requirements. She spotlighted the successful passage of LD1533, enacted in March of 2024, which mandates that all facility claims identify the physical location where services were delivered. Garratt-Reed emphasized the importance of state-level infrastructure to track billing trends and offered a limited defense of facility fees, particularly when used to support low-volume rural services like Emergency Departments.
Miller praised Maine’s ability to implement this sweeping reform and shared a parallel effort in Texas led by his organization, Texas 2036. The group supported House Bill 2556/Senate Bill 1232, a compromise proposal developed with broad stakeholder support, which would have required enhanced consumer notices and the assignment of distinct National Provider Identifier (NPI) to each site of service. This provision aimed to remove ambiguity regarding the actual location where a service was delivered. However, Miller noted that Texas’ political climate differs significantly from Maine’s, requiring reform efforts to be framed around public transparency and consumer protection, rather than governmental regulation of private enterprises. He added that one caveat did exist, with Texas lawmakers nearly universally opposed to telehealth facility fees.
Brockbank brought a payer and labor perspective to the discussion, drawn from her experience negotiating insurance coverage for union members. Brockbank and her team analyzed their member’s claims data alongside MedPAC’s site neutral payment recommendations and found the same service could cost twice as much or more, depending on the site of care. They estimated that hospital systems could break even at approximately 140% of Medicare rates and successfully negotiated payment caps of 150% of Medicare rates for certain services. When one large health system refused these terms, the union removed it from their preferred provider network, saving approximately $30 million dollars annually.
Miller added to this by citing legislative research from Texas, where they estimated the commercial break-even point at 115% of Medicare rates, while average commercial rates Texans were paying averaged 256%. He pointed to the National Academy for State Health Policy (NASHP) Hospital Cost Tool (HCT) as a key resource for assessing hospital financial performance and pricing benchmarks.
Conclusion: The Argument for Site Neutrality
The discussion closed with the panel voicing their disagreement over commonly cited arguments against site neutrality. Panelists noted that hospitals often defend facility fees by claiming that this money is essential to subsidize lower reimbursement for Medicaid patients. They pointed out that Medicaid often represents a small share of a hospital’s overall payer mix, while the revenue generated from facility fees far exceeds any losses associated with low Medicaid reimbursement.