As hospitals across the United States increasingly acquire physician practices, patients are encountering substantially higher bills for routine medical care, often being charged hospital rates—including additional facility fees—even when services take place outside the hospital. This growing trend has raised concerns among insurers, lawmakers, and patients about healthcare affordability and transparency.
Research indicates that hospital systems routinely bill procedures performed in outpatient clinics or doctors’ offices at rates typically reserved for hospital care. These elevated charges, which can be up to 10 times greater, stem from "facility fees" that hospitals apply to services regardless of whether patients enter a hospital building. According to Kim Keck, CEO of the Blue Cross Blue Shield Association, hospitals could potentially bill $500 billion less over the next decade if rules prohibiting such differential pricing were enforced.
Experts attribute much of the issue to the consolidation of healthcare providers. Nearly half of U.S. physicians are now employed by hospital systems, up from less than 30 percent in 2012. This shift has blurred the lines between independent doctor’s offices and hospital outpatient departments, making it difficult for insurers to ascertain the precise location of care. Kim Keck noted that insurers often cannot detect when care billed at hospital rates actually occurred in a doctor’s office, leading to higher payments without disputes.
Hospital systems defend higher charges by pointing to the complex infrastructure and around-the-clock services they provide, which require subsidization. A University of California at Irvine Health spokeswoman stated that facility charges apply to their outpatient clinics owing to regulatory requirements and to cover the physical space, administrative support, equipment, and access to the broader health network.
The nonprofit Health Care Cost Institute analyzed 57 procedures commonly performed in both settings and found substantial cost disparities. For example, nerve block injections averaged $282 in doctors’ offices but $1,530 when billed as hospital outpatient procedures. Similarly, putting on a cast cost $83 in an office versus $405 as an outpatient hospital procedure.
Insurers and lawmakers have made some attempts to address these practices. Elevance Health, which operates Anthem commercial plans, announced it will require hospitals to specify service locations to avoid unnecessary hospital fees beginning soon. Additionally, a federal law effective in 2028 will mandate more detailed billing codes to improve transparency about off-site care.
Several states have enacted legislation limiting hospital facility fees in specific situations, such as Connecticut and Maryland banning the fees for telehealth visits, and New York prohibiting them for preventive care. However, given the fragmented regulatory landscape, many patients still face burdensome charges with limited recourse.
Patients like retired lawyer Craig Barbarosh and cancer survivor Michelle Fishman-Cross have reported switching providers to avoid inflated bills. Barbarosh moved from a hospital-affiliated cardiology practice to an independent physician, reducing his co-pay from over $600 to $60 for comparable services. Fishman-Cross faced surprise bills exceeding $400 for a routine follow-up visit at New York University Langone’s cancer center, which led her to seek care elsewhere.
The American Hospital Association asserts that higher outpatient charges reflect the increased complexity and safety standards at hospital-affiliated sites, particularly for specialized treatments. Jason Kleinman, the association’s director of federal relations, warned that restricting facility fees could jeopardize financially vulnerable services such as burn units and behavioral health.
Despite longstanding debate, research has generally found that hospital consolidation has not improved patient care quality while driving up costs. Advocates continue to call for broader application of Medicare’s payment policies, which prohibit differential rates for certain procedures, to commercial insurers—a reform estimated to save hundreds of billions of dollars over the next decade. However, legislative efforts to expand such rules have yet to gain traction. Meanwhile, patients continue to navigate escalating healthcare bills amid evolving provider networks and billing practices.