The Setting Fee
Why the same procedure costs more at a hospital than a doctor's office.
Walk into your doctor's independent office for a routine visit and pay $100. Walk into a hospital-owned clinic — same doctor, same stethoscope, same 15 minutes — and pay $250. The difference? A "facility fee" that hospitals charge simply for being a hospital.
This isn't hypothetical. As hospitals have aggressively acquired physician practices, they've converted independent offices into "hospital outpatient departments," allowing them to bill facility fees for services that previously cost a fraction of the price. The MedPAC commission estimates this adds billions annually to healthcare spending with no improvement in quality.
Research from Health Affairs shows that hospital outpatient departments charge 1.5x to 2x more than independent offices for the same evaluation and management codes. Below, we illustrate this premium using Medicare data for common procedures.