HOUSE BILL REPORT

HB 2582

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Summary of Substitute Bill

Requires health care facilities that charge a facility fee to notify patients of the items included in the fee and an estimate of the cost to the patient.
Prohibits health care facilities from charging a facility fee that is greater than the fee that Medicare allows for the same service.

Background:

Under the Medicare program, charges for hospital outpatient department visits may be comprised of two components: a professional fee and a facility fee. The facility fee may be charged if the location of the service is considered a provider-based department. Many factors affect the determination of provider-based status, including whether or not the hospital and the outpatient facility operate under the same license, the integration of clinical services of the hospital and the outpatient facility, the financial integration of the outpatient facility and the hospital, and the public's awareness of the relationship of the facility with the hospital.

To maintain provider-based status under the Medicare program, a hospital outpatient department must meet several obligations. One of these requirements is that, if the Medicare patient will be responsible for a coinsurance requirement for the facility fee, the hospital-based entity must provide the Medicare patient with:

notice of the amount of the potential cost to the patient, prior to the delivery of services; and
an explanation to the patient that he or she will be responsible for coinsurance costs to the hospital because of the facility's provider-based status.

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Summary of Substitute Bill:

A "health care facility" is defined as the site of a clinic or provider office that is either on the campus of a hospital or that is not on a hospital campus, but is owned by a hospital or health system that operates hospitals. A "facility fee" is defined as any charge by a health care facility, other than a fee for physician services, that is intended to cover building, electronic medical record, billing, and other administrative and operational expenses.

Health care facilities must notify patients of items included in any facility fee that it charges and an estimate of the potential cost to the patient. Facilities must post a statement that the health care facility must provide patients with the notification of items in the fee and an estimate of the cost to the patient.

Health care facilities are prohibited from charging a facility fee that is greater than the fee that Medicare allows for the same service when charged by a provider-based organization.

Substitute Bill Compared to Original Bill:

The substitute bill eliminates the requirement that health care facilities report their facility fees to the Department of Health (DOH) and that the DOH issue a report on them. Health care facilities are prohibited from charging a facility fee that is greater than the fee that Medicare allows for the same service.

Staff Summary of Public Testimony:

(In support) This bill is about transparency. Some hospital clinics notify patients about facility fees, while others do not. These fees could be better used to lower the cost of health care. If a facility is going to charge a facility fee, it is only fair that it report this to the DOH and notify the patient. The Medicare Payment Advisory Commission recently approved a recommendation to reduce Medicare hospital patients' costs primarily by setting outpatient payment rates equal to those paid by stand-alone physicians. In 2006 there was a class action suit requiring some facilities to post their facility fees. Small businesses end up paying for these additional costs. These fees should either be eliminated or made transparent. This bill should go further and include a service charge, rather than a separate charge.

(In support with amendments) The definitions in the bill should be made consistent with what is already required for Medicare patients. These provisions should be reconciled with the reporting provisions in RCW 70.01.030. The reporting mechanism creates cost to the state and administrative burdens on hospitals. The costs and services for an entity that meets hospital standards are different than for a freestanding entity. Facility-based clinics get less reimbursement for provider services from Medicare than freestanding facilities. Provider-based clinics are more prevalent in places where freestanding physician offices are not able to sustain their practices due to low reimbursements and the hospitals help to keep these services available in the community.

(Opposed) None.

Persons Testifying: (In support) Representative Johnson, prime sponsor; Sue Taylor, Group Health Cooperative; and Sydney Smith Zvarra, Association of Washington Healthcare Plans.

(In support with amendments) Andrew Busz and Lisa Thatcher, Washington State Hospital Association.