Banning Healthcare Facility Fees Is Bad News For Colorado

Colorado lawmakers are considering HB 23-1215, a measure that would ban certain types of “facility fees.” These are charges patients receive from a hospital or clinic in addition to their share of the cost of a procedure, sometimes without advance notice.

Nobody likes being surprised by a medical bill. But scrapping facility fees won’t save patients money. Instead, it will decimate the finances of clinics across the state—and force many, particularly in rural and underserved areas, to close. That will jeopardize patients’ ability to access care.

Colorado patients can’t afford this kind of government overreach.

It’s common for hospitals and clinics to charge two fees: a “professional” or “provider” fee to cover the cost of a doctor’s services, and a “facility fee” that pays to keep the lights on, the machines humming, and the rest of the care team on call.

The separate line items offer a bit of transparency into where a patient’s healthcare dollar is going.

In many cases, the doctors delivering care don’t actually work for the facility where they’re seeing a patient. That’s the case at Children’s Hospital Colorado, one of the top 10 pediatric institutions in the nation. Around 98% of its physicians come from its parent hospital, CU Medicine, which charges the provider fee and handles paying the doctors. The children’s hospital relies on facility fees to pay its support staff and cover operating costs.

At facilities called hospital-based clinics, the law stipulates that providers’ bills be separate from those for the rest of the care team. So a charge that’s called a facility fee may cover wages for nurses, social workers, care managers, pharmacists, and front-desk staff, among other critical personnel.

Banning facility fees would deprive many clinics of revenue they depend on to stay in business. According to one estimate, the state hospital system could lose a combined $9 billion under HB 23-1215. That’s 25% of current reimbursement.

Their costs have surged over the last few years, as inflation has made everything from medical supplies to labor more expensive.

More than half of Centennial State hospitals have patient margins below the 4% threshold that’s considered necessary to maintain high-quality care. Nearly half have negative margins. They’re in no position to sustain a financial blow of that magnitude. Children’s Hospital Colorado and UCHealth have already warned of sharp cutbacks should the facility fee ban come into effect.

Clinics that serve low-income patients and those covered by Medicare and Medicaid are at particular risk of scaling back their services if they’re barred from charging facility fees. Their margins are already thin. An additional hit to their revenue could prevent them from employing the case managers and outpatient caregivers that many of the vulnerable people they serve rely on.

If these community-based clinics close, then their patients will need to travel to emergency departments or bigger hospitals for care. Some may not be able to make the trip—and will see their health suffer. The upshot could be more expensive visits to the ER and more inpatient stays. That’s a recipe for higher costs, including for taxpayers, who ultimately pay the bill for Medicare and Medicaid.

Colorado’s legislature has no business micro-managing the operations of hospitals and clinics within the state. Banning facility fees may seem like a straightforward way to reduce patients’ medical bills. But it will do so by killing off clinics—and thereby curtailing patient access to care. That’s not a worthwhile trade-off.