Image by Kevin Schneider from PixabayAs legislative scrutiny of facility fees intensifies in North Carolina and elsewhere, ambulatory surgery center (ASC) leaders are working overtime to protect what some say is the bedrock of funding for outpatient care.
Facility fees, often misunderstood and frequently politicized, are now at the center of proposed legislation in multiple states, including model language introduced in North Carolina’s budget bill.
While lawmakers aim to crack down on billing practices that raise patient costs, ASC operators say a one-size-fits-all approach could threaten their survival.
“In the simplest terms, facility fees pay for all facility services and supplies that are involved in a procedure,” Stephen Abresch, director of government affairs for the Ambulatory Surgery Center Association (ASCA), told ASC News. “That includes the services of nurses and technicians as well as facility overhead, including administrative, recordkeeping and housekeeping services, and supplies, such as the drugs used during a procedure, implantable devices, blood and blood plasma, surgical dressings, surgical supplies, splints, casts and anesthesia materials.”
The facility fee is not an add-on, he explained. Rather, it is the payment for the facility itself.
“If the facility isn’t paid, it won’t exist,” Abresch said. “Facility fees are the facility payment, and if lawmakers enact legislation prohibiting ASCs from being paid, it’s difficult to imagine how adjustments to payer contracts could avoid the prohibition.”
In North Carolina, a version of facility fee prohibition language was included in a proposed state budget bill earlier this year.
But after intervention from advocates, including the North Carolina Ambulatory Surgical Center Association, the language was amended to exempt ASCs from the ban.
“It’s given with the intent of warding off the ability of hospitals to acquire medical office practices, which previously didn’t charge a facility fee,” Peter Lohrengel, executive director of the North Carolina ASC Association, told ASC News. “All of a sudden, patients’ bills jump $300 or $400. … ‘What is this? Oh, that’s the facility fee the hospital is charging.’”
That dynamic has fueled a wave of model legislation across the country aimed at eliminating such fees, Lohrengel said. But many lawmakers aren’t aware that ASCs operate under a different model altogether, he noted.
“Ambulatory surgery centers don’t acquire medical practices and begin billing a facility fee,” he said. “We have always had a thing that we call the facility fee. But it’s really just our reimbursement. It would be better if we refer to [the fee] as a global fee instead of a facility fee.”
After educating legislators, lawmakers were willing to amend the bill, Lohrengel said.
“An exemption from the prohibition is given to ambulatory surgery centers, so we feel like that’ll work out,” he said.
Still, the process shows how quickly policy can outpace understanding, Lohrengel said.
“This is just kind of the modern legislative milieu,” he said. “Every sponsor, there are so many bills, so much information coming in from so many sources. We just get caught up in it.”
Existential risk for ASCs
The stakes are high. If facility fees were eliminated across the board, it would force the closure of ASCs across the country and have a devastating impact on the nation’s outpatient surgical capacity, Abresch said.
ASCA projected a 21% increase in ASC procedure volume will occur between 2024 and 2034, rising to 44 million procedures annually. Without ASCs, those cases would shift to higher-cost settings like hospitals, straining patient access and inflating health care costs, Abresch said.
And an analysis from KNG Health Consulting found that ASCs are expected to save Medicare $73.4 billion between 2019 and 2028.
“Those savings would disappear along with ASCs if broad facility fee prohibitions were enacted,” Abresch said.
Facility fees have been a standard component of Medicare payments to ASCs since the early 1980s. And even with those payments, ASCs are still reimbursed at about half the rate of hospital outpatient departments for the same services, Abresch said.
ASCA supports transparency around costs, but eliminating facility fees would increase costs in the long run, he said.
“ASCs are typically the lower-cost option already,” Abresch said. “Facility fees reimburse ASCs for the facility’s costs in providing surgical services. Such reimbursements are an absolute necessity for the continuing operations of any ASC.”
Financial implications for growth and staffing
For ASC operators like Pinnacle GI Partners, which runs the largest gastrointestinal surgery platform in Michigan, the issue ties directly into recruitment and expansion.
“Basically, in an ASC, you’ve got your facility fee, which is covering your ancillary support services, … your CRNA, the techs, the nursing, and literally the equipment and the facilities to perform,” Michael Davis, the company’s chief financial officer, told ASC News.
Davis likened it to Medicare’s Part A and B payment model.
“Part A is theoretically the hospital’s facility fee, and Part B is the physician component,” he said.
If site-neutral payment policies reduce or eliminate facility fees, hospitals may back off from competing for certain cases or paying high salaries to physicians, Davis said.
“We go head to head when we’re recruiting physicians,” he said. “It’s very difficult for us to compete for GI doctors when a hospital is almost doubling their salary.”
If hospitals become more conservative in hiring, independent ASCs may gain an edge in both recruitment and procedure volume, Davis said.
“It’s twofold,” he said. “We’d probably see an uplift in some of the procedures hospitals refer to our centers, and we might see more coverage opportunities from them.”
Looking ahead
With the facility fee exemption language moving through the North Carolina legislature, Lohrengel said he feels cautiously optimistic.
“We don’t look at this as a crisis,” he said. “We feel we have it taken care of.”
Even so, operators across the country are watching closely, Abresch said
“A broad prohibition on the ability to charge a facility fee is, in effect, a prohibition on ASCs,” he said.
