April 16, 2014

Attorney General George Jepsen today released a report concerning so-called hospital "facility fees" and hospital acquisitions of independent physician practices. The Attorney General urged state lawmakers to approve pending legislation he proposed on these subjects to require improved notification and transparency.

"From the beginning, my office has sought to bring all stakeholders to the table – including hospitals and their patients – in order to gain a greater understanding of the evolving health care landscape, the application of facility fees and the overall impact on patients," Attorney General Jepsen said. "That process was invaluable, and I've detailed my office's findings in this report. Overall, legislation that guarantees across-the-board transparency is greatly needed given the rapidly changing nature of the health care system in Connecticut."

A facility fee is a charge levied by a hospital-acquired physician practice or a hospital that is purportedly intended to cover the overhead costs of the hospital. Such fees are in addition to the professional charges billed by the provider. Facility fees can be expensive, surprising and confusing for patients. That is particularly so when patients are charged the fees by previously independent physician practices from whom they received care in the past, but which had subsequently acquired by a hospital.

Last year, Attorney General Jepsen announced his intention to seek legislation to improve consumer protections related to facility fees and asked for information from patients and the state’s hospitals, including how the fees were applied and any disclosures of them already in place.

The Attorney General also examined the related subject of the increasing vertical integration of physician groups and freestanding clinics and surgical centers by hospitals in recent years and its potential impact on competition.

The report notes that independent physician groups often charged patients according to a much lower fee schedule for services. Those charges increased notably once the practices were acquired by hospitals, which are able to charge higher fees under their insurer-negotiated schedules.

The Attorney General is responsible for enforcing Connecticut antitrust laws to protect consumers and businesses from anticompetitive conduct. However, current Connecticut law does not require notice to the Attorney General when a hospital acquires an independent physician practice or when two large practices merge, making antitrust enforcement in this area difficult.

"Although Connecticut is a relatively densely populated state with adequate hospital choice, the trend toward consolidation and acquisition may pose risks to competition," said Attorney General Jepsen. "Acquisitions and mergers often make business sense, and may lead to some efficiencies and more integrated care, but they also may result in higher prices, fewer consumer options and lack of competition. Legislation requiring notice to my office of these acquisitions will allow us to better monitor the market and enforce antitrust laws designed to protect Connecticut consumers."

The Attorney General's review found common threads running though Connecticut residents’ complaints about hospital facility fees. Patients are often surprised by facility fees, and some report that the fees resulted in financial hardship. Many do not believe they were adequately notified that they would be charged such fees and, indeed, had no idea that they were receiving hospital services.

Conversely, disclosures from Connecticut hospitals demonstrated wide variation in the charging of facility fees and their individual notice practices. Many provide no notice to patients or provide notice only to Medicare or uninsured, "self-pay" patients. Of those that do provide notice, the hospitals reported significant differences in the content and timing of their facility fee notices.

"Several hospitals acknowledged the need for greater patient information and expressed their willingness to examine their facility fee policies, to their credit," said Attorney General Jepsen. "However, I strongly believe that this year's legislation is important to ensure that all patients receive adequate notice, prior to treatment, so they can make informed choices about their health care and about whether or not to visit a practice that charges facility fees. I urge both chambers of the General Assembly to approve both this bill and the acquisition bill this year."

The legislation concerning facility fees – House Bill 5337, An Act Concerning Fees Charged for Services Provided at Hospital-based Facilities – has been approved unanimously by both the General Law and Public Health Committees. The legislation concerning physician acquisitions – Senate Bill 35, An Act Concerning Notice of Acquisitions, Joint Ventures and Affiliation of Group Medical Practices – was approved in a near-unanimous vote in the Public Health Committee.

The 2014 legislative session adjourns on Wednesday, May 7.

The Attorney General’s Healthcare Competition Working Group – Assistant Attorneys General Charles Hulin, Thomas Ryan, Rachel Davis, Gary Becker and Richard Porter – under the direction of Assistant Attorney General Michael Cole, chief of the Antitrust and Government Program Fraud department, and Special Counsel Robert Clark are assisting the Attorney General with this matter.

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