Rebecca Smith had been seeing the same cancer doctor in the same office in Mooresville, North Carolina, since 2017. After her breast cancer treatment, she came back for monitoring checkups. The office was the same. The doctor was the same. The blood draw was the same. The bill was not.
In 2018, Novant Health bought Lake Norman Oncology, the practice where Smith received care. She did not change doctors. She did not change offices. She did not go to a hospital. But when her next bill arrived, the charge for her office visit and blood draw had jumped from $75 to roughly $400. Smith was certain it was a mistake. She called to get it corrected. She was told the charge was a hospital facility fee, and that she owed it because the practice was now a hospital outpatient department. When she refused to pay, Novant sent debt collectors after her.
“It was like a bait-and-switch,” Smith told NC Health News. “I’m going to the same office. I’m seeing the same doctor. I’m having the same follow-up appointment I always have.”
She was right. Everything about her care was identical. The only thing that changed was who owned the building.
The Fee Nobody Explained
A hospital facility fee is a charge a hospital adds to your bill when you receive care at one of its outpatient locations. Hospitals have always charged facility fees for care delivered inside an actual hospital. That has a logic to it: hospitals operate emergency rooms, maintain 24-hour staffing, run trauma centers, and bear regulatory costs that a doctor’s office does not. The fee originally existed to cover those operational expenses.
The problem is what happened next. As hospitals began acquiring independent physician practices and outpatient clinics across the country, they converted those offices into designated “hospital outpatient departments” and began billing them at hospital rates. The acquisition is a billing event. Nothing about the clinical environment changes. The office looks the same. The staff is the same. The equipment is the same. But the moment the practice is reclassified, every visit now generates two bills: one from the physician, and one facility fee from the hospital that now owns the practice.
US PIRG’s Outpatient Outrage 2026 report documents exactly what this means in practice: patients are being charged hospital prices for care that takes place outside hospitals, at offices they have been visiting for years, with no meaningful change in the care they receive. The fees range from a few hundred dollars to several hundred dollars per visit, depending on the procedure and the hospital system. They apply to annual physicals. They apply to routine follow-ups. They apply to strep throat tests, cholesterol management appointments, and cancer monitoring checkups that have nothing to do with the hospital that is now collecting a fee for them.
How It Became Legal
The federal billing framework that makes facility fees possible was not designed for this situation. Medicare has long paid hospitals at higher rates than independent physician practices for the same services, based on the reasoning that hospitals carry fixed operational costs that practices do not. That differential created a financial incentive for hospitals to reclassify acquired practices as outpatient departments.
The incentive is significant. Studies have documented that the same service costs substantially more when billed by a hospital outpatient department than by an independent physician practice. A colonoscopy that costs a few hundred dollars at an independent gastroenterologist can cost several times more at a hospital outpatient department. An echocardiogram, a blood draw, a routine office visit: each one generates a higher reimbursement under hospital billing codes than under physician billing codes, regardless of where the care is actually delivered or who delivers it.
The Centers for Medicare and Medicaid Services has documented this dynamic for years without eliminating it. CMS’s 2026 physician fee schedule confirms that facility fees apply even to telehealth visits, with the Medicare originating site facility fee set at $31.85 per telehealth call in 2026. A patient who connects to their doctor’s screen from home can receive a facility fee for a hospital location they never entered, charged by a billing department they have never interacted with, for services they received through a phone.
As hospitals have consolidated at an accelerating pace, the practice has scaled proportionally. When a hospital system acquires a medical group with dozens of physician practices across a region, every one of those practices potentially becomes a facility-fee-generating outpatient department overnight. The same private equity and corporate hospital consolidation wave that bought physician practices, veterinary clinics, and dental offices created the acquisition infrastructure. Facility fees are one of the billing mechanisms that make those acquisitions financially compelling.
What the Patient Does Not Know
The PIRG 2026 report documented one of the most consistent features of facility fee billing: patients rarely know about it before it happens. The fee is not listed on the appointment confirmation. It is not disclosed at check-in. The physician does not mention it. The first time most patients learn about a facility fee is when the second bill arrives in the mail several weeks after the visit.
At that point, the patient faces a choice that is not really a choice. They can pay. They can dispute the charge, which in many cases leads to a lengthy appeals process with the hospital billing department and their insurer, with no guarantee of resolution. Or they can find a different provider, if one exists. In many markets where hospital consolidation has proceeded far enough, every physician practice within a radius of practical travel distance is now owned by one or two hospital systems and billing facility fees. The option to find a practice that does not charge them is no longer available.
Rebecca Smith wrote to her doctor and said so directly. “I do not want to leave,” she wrote, “but Novant has made it clear to me that there is no alternative since they turned your practice into a hospital facility.”
That sentence describes millions of patients across the country. They did not choose to have their doctor’s practice acquired. They did not choose to have the billing classification changed. They did not choose to pay hospital rates for an office they have been visiting for years. The choice was made for them by a transaction in which they had no role and received no notice.
The States That Have Moved and the States That Have Not
Twenty-one states had enacted some level of protection against facility fees as of the PIRG 2026 report, up from 15 states two years earlier. The protections vary significantly. Some states require disclosure before the visit so that patients know a facility fee will be charged. Some states cap the fees. Some states ban them entirely for certain types of services or settings. Connecticut has the most comprehensive data collection requirements of any state.
North Carolina’s situation illustrates how hard it is to change the policy even when the problem is documented and named. State Representative Jeff Burgin pushed for a facility fee ban in the 2024 legislative session. The North Carolina Healthcare Association, which represents the state’s hospitals, opposed it. “I got a lot of pushback,” Burgin told NC Health News. He planned to try again in 2025.
The hospitals’ argument is that facility fees reflect real operational costs, that hospital outpatient departments face regulatory requirements that independent physician practices do not, and that the higher reimbursement rates support the clinical infrastructure that makes emergency care possible. Patricia Kelmar, a co-author of the PIRG 2026 report, put the counterargument plainly: “It’s absurd to be charged hospital prices for routine care simply because a hospital now owns the doctor’s practice.”
The Steelman: What Hospitals Say the Fee Pays For
The honest version of the hospital industry’s defense is worth understanding before dismissing it.
Hospital outpatient departments do face regulatory requirements that independent physician practices do not. They must maintain infection control protocols, emergency preparedness plans, and staffing standards that exceed what an independent practice is required to maintain. A hospital that acquires a physician practice takes on compliance obligations that the practice did not carry before the acquisition. The facility fee is intended, at least in part, to recover those costs.
There is also a legitimate clinical argument in some cases. Novant cited a study when NC Health News asked about the fees, suggesting that hospital-affiliated oncology clinics are less likely to prescribe low-value cancer treatments than independent clinics. If that finding holds and hospital affiliation improves care quality, the cost differential may reflect something real.
The defense weakens in several directions. There is no evidence, as the PIRG report documents, that facility fees improve patient outcomes. The correlation between hospital ownership and care quality, where it exists, does not require a facility fee as a mechanism. And the fundamental complaint patients express, including Smith, is not that hospital care costs more. It is that the care did not change, and the bill did. That is not a cost-recovery issue. It is a billing structure that generates revenue from a reclassification that the patient had no say in and no warning of.
The practice also affects the broader cost structure that insurance systems and workers are already navigating across every corner of American healthcare. Every facility fee that a patient pays above their normal copay contributes to the healthcare cost inflation that drives premium increases across employer-sponsored plans. The cost does not stay with the individual patient. It is distributed across the entire insurance pool, raising premiums for people who never saw the facility that charged the fee.
The Bill That Should Not Exist
The logic of a facility fee made sense in the context it was designed for: a hospital providing care inside a hospital, with all the overhead that entails. It does not make sense when applied to a strip-mall oncology office where a breast cancer survivor has been coming for blood draws and monitoring appointments since 2017.
The office did not change. The doctor did not change. The care did not change. An acquisition changed the billing category, and the billing category generated a fee, and the fee arrived in the mail, and when Smith refused to pay, the hospital sent debt collectors after a self-employed single mother who was already paying $1,200 a month for health insurance for herself and her daughter.
The same economic pressure that builds across household budgets through wage stagnation, non-compete clauses, and algorithmic management arrives in healthcare through facility fees applied to care that patients neither chose nor changed. The acquisition happened. The reclassification happened. The fee appeared. Nobody asked Smith whether she agreed to the terms of a transaction she was not a party to.
Twenty-one states have decided that it is a problem worth addressing. Twenty-nine have not. The federal framework that makes it legal has not changed. And the hospital systems that are collecting the fees have the lobbyists and the legal infrastructure to ensure the policy environment stays favorable. The next time you go to a doctor’s office that your hospital system now owns, the bill will come from an institution you never entered. That is not an error. It was designed to work exactly that way.
