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Mayo Clinic patients see facility fees appear where they weren't before

Mayo Clinic and other hospitals say “facility fees” help with building overhead costs, but consumer advocates say that the fees are a tactic to boost revenue and squeeze money out of patients.

Gonda Building
Mayo Clinic patients said they normally see their dermatologist in the Northwest clinic but were referred to the Gonda building for their most recent check-up. For virtually the same appointment, they incurred hundreds of dollars in extra fees --- because of the building they were in.
Post Bulletin file photo

ROCHESTER — Ian Jarman visits his Mayo Clinic dermatologist every few years for the same appointment, but his most recent visit resulted in a very different bill.

Jarman, an IBM employee and longtime Rochester resident , has been visiting dermatology at the Mayo Northwest Clinic for more than a decade to address a recurring skin growth. It’s a simple appointment — the doctor examines it and then freezes it off. It usually costs him about $500 before his health insurance deductible is met.

However, in 2020, Jarman said Mayo asked him to see his doctor at the Gonda Building in downtown Rochester. For virtually the same appointment, he was charged $899, almost twice as much. Surprised, Jarman called Mayo for an explanation and learned he had been charged a $356 facility fee because of the building his appointment was in.

Hospitals can tack facility fees onto appointments in hospital buildings, like Saint Marys or Methodist, to help cover the overhead costs of running a hospital, including expensive equipment. But many patients don’t know that hospitals can also charge facility fees for non-surgery appointments and appointments that are in buildings outside the main hospital campus.

“There is generally no justification for the higher price in terms of better quality being provided,” said Gerard Anderson, a Johns Hopkins University professor who researches facility fees. “I'm going to a physician to have a particular service done well, and I should only be paying for the physician service, not where it's being done.”


Anderson was one of six hospital billing experts interviewed by the Post Bulletin who said that hospital facility fees can be unwarranted, especially for simple appointments, like Jarman’s, that could have just as easily been done in an independent doctor’s office, and are just another tactic hospitals are taking to boost their revenues and squeeze money out of patients.

Anderson said this issue is not specific to Mayo, and that hospitals across the country are in an “acceleration phase,” charging more facility fees and at more locations than ever before for the same level of care.

Hospitals have just found another way to make money and it's coming at the expense of patients and purchasers,” Thompson said. “And I just don't think it's right.
Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions

Some hospitals even charge facility fees for telemedicine appointments. Mayo Clinic did not respond when asked by the Post Bulletin if Mayo charged for telemedicine appointments.

Mayo Clinic told the Post Bulletin in an email that these fees help support hospital operations.

“The facility fee includes increased costs related to equipment, enhancements to the space and support staff that are necessary for operating and maintaining a hospital-based location,” said Kristyn Jacobson, a Mayo Clinic spokeswoman. “Hospital-based settings permit a facility fee as a result of meeting certain criteria and environmental standards.”

Ian Jarman on Friday, March 10, 2023, at his home in Rochester.
Traci Westcott / Post Bulletin

Jarman said Mayo eventually refunded his facility fees after acknowledging that he wasn’t given proper warning that the Gonda referral would come with added costs.

“There was nothing different about the care I received or the medical room I was in,” Jarman said. “Maybe there was an additional window, I don’t know. If they had told me there would be additional fees at this building, I would have said no.”

Simple appointments, substantial fees

When patients visit hospital-based settings that charge facility fees, the Minnesota Hospital Association said that payment is split between the physician provider and the facility fee. For example, Jarman was charged $543 for physician services and $356 in facility fees.


Anderson said if a patient goes to an independent doctor’s office, the physician fee will probably be a bit higher than it would be in a hospital-owned building, but not as high as the cost of the physician and facility fees together.

According to a study Anderson co-authored in 2022, patients with commercial health insurance, on average, pay 45% more for services in hospital outpatient departments due to facility fees relative to the same services provided in physician offices.

In January, another patient, who, like Jarman, was referred to Gonda for a routine dermatology appointment, was billed $275 for the physician services and $421 in facility fees — $696 in total, a heftier bill than he had ever been charged before for this checkup in the Northwest Clinic building.

Hospital Facility Fee Bill.png
Mayo Clinic patient's bill for dermatology check up in the Gonda building in January. Some personal information has been removed per the patient's request due to their affiliation with Mayo.

A third patient went into Mayo for a cortisone shot in August 2022 and was charged $263 for her physician services. Her facility fee, $1,095, was more than four times as much.

Both patients shared their bills with the Post Bulletin, but asked to stay anonymous because of their affiliations with Mayo.

“If the appointment involves a lot of nurse time or a piece of expensive technology, a $1,000 facility fee could be reasonable,” Anderson said. “But for just a cortisone shot, that’s outrageous. That’s just outrageous.”

Hospital Facility Fee Bill 2.png
Mayo Clinic patient's bill for cortisone shot in August 2022. Some personal information has been removed per the patient's request due to their affiliation with Mayo.

Industry experts have begun to question why hospitals are charging facility fees for simple office visits and checkups that don’t need to happen in a hospital. In fact, since 2021, the Centers for Medicare and Medicaid Services no longer compensate hospitals for facility fees tacked on to these low-level appointments, coded as Evaluation & Management visits.

Both Jarman and the other dermatology patient were charged facility fees for E&M services, fees that they never would have been charged if their private health insurance companies had protected the patients in the same way as Medicare and Medicaid.


Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, echoed these sentiments and said that he’s especially frustrated that hospitals are charging these fees, in his mind, just because they can. He said facility fees are one of his greatest concerns in his work, referring to them as ‘abusive pricing practices.”

“Hospitals have just found another way to make money and it's coming at the expense of patients and purchasers,” Thompson said. “And I just don't think it's right.”

Mayo patients: We didn’t know

Anderson said most of the patients he works with don’t know what facility fees are, and, even when they do, they don’t know which buildings to avoid.

“It’s not always clear which appointments include facility fees,” Anderson said. “Every hospital handles it differently and it’s evolving quickly. You could see one doctor and not get a facility fee, and a different doctor and receive a facility fee. There’s no set rule.”

Gerard Anderson, a Johns Hopkins University professor, co-authored a study on facility fees in 2022.
Contributed / Gerard Anderson

Mayo told the Post Bulletin that it charges facility fees for appointments involving physician interaction at its two main hospitals — Saint Marys and Methodist — but it also charges fees at the Gonda Building and off campus hospital based-clinics spanning rural areas of the Midwest from Cannon Falls to Ellsworth, Wisconsin, that it operates as part of the Mayo Clinic Health System.

Mayo Clinic said this is “industry standard in health care” and that it met criteria as permitted by the Centers for Medicare and Medicaid Services to bill hospital facility fees for applicable outpatient services. A CMS spokesperson said that Mayo Clinic has received approval for 34 provider-based locations since 2016.

Mayo does not list this information on its website, but it said that it notifies patients of facility fees.

“Mayo Clinic patients are notified they will be receiving care in a hospital location through a variety of ways including verbal communication at the time of scheduling the appointment, signage at the check-in stations and a handout provided directly to the patient at the time of service,” Jacobson said.


However, all three patients interviewed by the Post Bulletin said that they didn’t receive any verbal communication and weren’t aware of the fees until they received their bills. They all said when they called the billing office, concerned that they weren’t giving proper warning, Mayo’s billing office responded by saying that there are signs posted in the building.

Ge Bai, a Johns Hopkins professor who researches hospital billing, said that this is the standard retort that she hears from hospitals — that there’s a sign somewhere in the facility.

“It’s totally legal, but hospitals know that patients are often under stress in these situations and might not be paying attention,” Bai said. “They could have been more straightforward and that could have made a difference for patients who are seeking elective care.”

Ge Bai, an accounting and health policy professor at Johns Hopkins University.
Contributed / Ge Bai

‘A runaway train’

What can make it even more confusing, Bai said, is that hospitals across the country are rapidly taking over physician-owned practices and consolidating, so patients might be dealt a facility fee for an appointment in a building dozens of miles from the main hospital campus that they didn’t even know was affiliated with a hospital.

Bai said that a key motivator in hospital mergers and physician practice takeovers is facility fees. Hospitals are incentivized to buy up independent clinics partly because it allows them to charge facilities fees.

Anderson said this didn’t used to be an issue. Twenty years ago, he said, it wasn’t as common for hospitals to take over other physicians' offices and operate them as a component of the hospitals, so patients didn’t have to worry about hospital outpatient facility fees.

Now, Anderson said a large proportion of physicians across the country are employees of hospital health systems or own buildings that have been taken over by a hospital health system. Anderson said five years ago approximately 10% of all physicians were employed by a hospital system; now it's closer to 50%.


“If your doctor is in a building that looks like an institution, it is probably part of the hospital health system, even if it's not connected directly,” Anderson said. “Unless you know your doctor isn’t affiliated with a hospital system and you see them in their individual office, expect there to be a facility fee.”

Thompson said he’s concerned that as hospital health systems continue to gobble up physician-owned practices with little regulation, patients and payers will keep bearing the brunt of the financial impact.

“We're being taken advantage of by a runaway train,” Thompson said.

Michael Thompson National Alliance 2022.jpg
Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions
Contributed / Michael Thompson

Possible remedies

Some states have already taken steps to tamp down on the practice of charging facility fees.

Connecticut has passed legislation that prohibits hospitals from charging facility fees. The National Academy for State Health Policy said that it’s currently tracking bills that restrict or regulate facility fees in four other states — Texas, Colorado, Massachusetts and Indiana.

Gloria Sachdev, president and CEO of the Employer’s Forum of Indiana, a nonprofit that focuses on health care, has been championing her state’s bill. She said that state-level legislation is an important means to address this issue, but emphasized that the U.S. government also needs to address this at the federal level.

“I would encourage both state legislators and U.S. legislators to prohibit facility fees,” Sachdev said. “This is how they can really immediately help reduce health care costs.”


In fact, Anderson’s study found that if hospitals had site-neutral payments, the idea that patients would not be billed extra based on location, health care spending could be 48% lower for outpatient services.

Gloria Sachdev, president and CEO of the Employer’s Forum of Indiana, a nonprofit that focuses on healthcare.<br/>
Contributed / Gloria Sachdev

Bai said that in addition to a legislative approach, health insurance companies could play a role to address facility fees. She suggested instituting facility fee policies or negotiating better contracts with hospitals that would remove the incentive to charge the fees in the first place.

For example, a contract could stipulate that the insurance company won’t pay facility fees for non-surgery appointments.

“Hospitals are under financial pressure, so they are trying to squeeze money,” Bai said. “Patients and health insurance companies need to be proactive and vigilant.”

Different choices

Jarman said that since his Gonda Building appointment, he’s become more cautious.

“The summary to me is that you should be very careful where you are going,” Jarman said. “There is a significant cost difference to the patient depending on the building’s designation. Everybody should be aware of that.”

Jarman has seen his Mayo doctors for more than 10 years, but he said that he decided to go to Olmsted Medical Center for his routine dermatology appointment in 2022 due to his experience with Mayo’s facility fees in 2020.

If the appointment involves a lot of nurse time or a piece of expensive technology, a $1,000 facility fee could be reasonable. But for just a cortisone shot, that’s outrageous. That’s just outrageous.
Gerard Anderson, Johns Hopkins University professor

He had the same skin procedure and was charged $477, nearly half what he was charged for his Gonda Building appointment. He did not incur any facility fees.

“I've got great respect for Mayo Clinic, the institution and all the doctors that treated me,” Jarman said. “I just think they should be more transparent about hospital facility charging. And apparently I'm not alone.”

Molly Castle Work is an award-winning investigative journalist. She has investigated a range of topics such as OSHA and worker safety during COVID-19, racially-disproportionate juries and white-owned newspapers' role in promoting lynchings. Readers can reach Molly at 507-285-7771 or mwork@postbulletin.com.
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