Strategies
Facility fees are additional fees that hospitals and health systems charge for outpatient services at institution-owned sites of care, such as hospital outpatient departments and clinics. They are ostensibly intended to cover the operational costs of maintaining the facility. As hospitals acquire physician practices and shift services into hospital outpatient departments and other hospital-owned settings, hospitals often impose added facility fees for services that were previously billed at lower, office-based rates. Commercial prices and patient cost-sharing are generally higher (often twice as high or more) at hospital outpatient sites than in non-hospital settings, in part due to the addition of hospital facility fees.
To limit higher prices resulting from facility fees, states can seek to ban outpatient facility fees, which entails prohibiting providers from charging or accepting payments for a facility fee for a professional service. Several states have banned facility fee charges in certain circumstances, although the scope of these laws varies significantly. States may also impose other facility fee regulations, such as requiring disclosures to consumers regarding facility fees, limiting consumers’ financial exposure to outpatient facility fees, requiring hospitals to report on facility fees, and implementing provider transparency requirements to monitor where care is provided and by whom. For information on a broader approach to addressing site-based price differentials, see the Hub page on Site-Neutral Payments.
| Question | Answers |
|---|---|
| How should the state apply facility fee bans? | Facility fee bans typically apply directly to hospital and provider billing and charges, which impacts both the fully insured and self-insured commercial markets. |
| What authority is needed to establish facility fee bans? | States seeking to prohibit outpatient facility fees will need statutory authority to implement the ban via provider regulation. |
| Which services should be subject to facility fee bans? | Facility fee bans target services delivered in outpatient settings, such as hospital outpatient departments and hospital-owned physician practices. States may select the specific services and care settings to which facility fee bans apply. While common services subject to bans include evaluation and management services, preventive services, and telehealth, states could also include more expansive services such as lab tests, physician-administered drug treatment, and outpatient procedures. While some state laws limit facility fee bans to services delivered offsite from a hospital’s main campus, a significant amount of hospital outpatient spending occurs at on-campus locations. Therefore, a more comprehensive approach would ban facility fees for all outpatient settings. |
| Which hospitals and providers should be accountable? | States must decide whether to apply facility fee bans universally or exempt certain hospital or provider categories based on designation (e.g., rural, critical access, sole community), financial metrics (e.g., operating margin and days cash on hand below certain thresholds), or service mission (e.g., safety-net facilities serving a high proportion of Medicaid-enrolled or uninsured individuals). States could also exempt non-hospital entities such as rural health clinics, federally qualified health centers, and community mental health centers, which may be hospital-owned or affiliated. Additional considerations for any exemptions or variations include the precedent it creates for hospitals and providers to lobby for special treatment, the associated complexity involved with evaluating exemption requests, and the overall complexity with administering a policy with multiple accommodations. |
| How can the state mitigate potential risks? | States can mitigate risks with comprehensive monitoring and reporting to ensure the policy is being implemented effectively and to detect any potential unintended consequences, such as cost-shifting to other services. States can also prevent hospitals from quickly increasing their prices for other services by combining this policy with a price growth cap, which restricts how much providers can increase prices in any given year. |
Facility Fee Bans
Effective 2023, Connecticut began to ban hospital-owned or -operated facilities located offsite from a hospital’s main campus from charging facility fees for outpatient evaluation and management (E&M) or assessment and management (A&M) services. In 2024, this prohibition was extended to on-campus services, excluding emergency departments and certain observation stays. Connecticut also prohibits facility fee charges for any telehealth services. The State additionally requires detailed hospital and health system reporting on facility fees, limits consumers’ exposure to facility fee-related out-of-pocket costs, and requires various consumer disclosures regarding facility fee charges.
Facility Fee Bans
Indiana implemented a law effective July 2025 that prohibits facility fees for care provided in an off-campus office setting (i.e., a location where a health care practitioner routinely provides health examinations, diagnosis, or non-invasive treatment of illness or injury on an ambulatory basis) owned in whole or part by a nonprofit hospital system with annual patient service revenue of at least two billion dollars. The law expressly exempts critical access hospitals, rural health clinics, federally qualified health centers, oncology treatment facilities, community mental health facilities, private mental health facilities, among other specific facility types.
Facility Fee Bans
In 2005, Maine enacted a facility fee prohibition for care provided in an office setting (i.e., a location where the health care practitioner routinely provides health examinations, diagnosis and treatment of illness or injury on an ambulatory basis), whether or not the office is located within a hospital facility. Some providers have narrowly interpreted the scope of services to include evaluation and management services, but not more complex procedures or services where a physician is not directly involved at the point of care, like infusion therapy to treat cancer and other illnesses.
In 2023, the state passed a facility fee transparency law requiring the state’s all-payer claims data base (APCD) to publish annual reports on commercial outpatient facility fee payments. The initial report, released in 2024, identified ongoing facility fee charges for office visits despite the statutory prohibition. The APCD released the second annual report in 2025, which showed improved compliance, likely due in part to the enhanced transparency and public spotlight required by the 2023 law.
Projected Savings for Facility Fee Bans in Indiana, Massachusetts, and North Carolina
A 2025 analysis modeled the impact of banning facility fees in Indiana, Massachusetts, and North Carolina for three types of routine services – 1) evaluation and management services, 2) telehealth services, and 3) preventive services. This analysis estimated that in 2022, the policy would have resulted in $323M, $237M, and $121M in savings in each state respectively through out-of-pocket savings and premium reductions, while having only a minimal impact on hospital operating margins.