Facility fee disclosure: what hospital-owned practices must tell patients

When a hospital buys a physician practice and runs it as a department of the hospital, the same office visit can produce two charges: the professional charge for the clinician’s work and a hospital charge for the outpatient visit, called a facility fee. Patients who were seen at the practice before the sale may first learn this from the bill, and a surprise on the bill can turn into complaints, bad reviews and lost trust. Federal Medicare rules already require hospitals to warn Medicare patients in writing at off-campus locations, and they require the location to be presented to the public as part of the hospital. This guide walks through those rules and what they mean for the website, ads, booking messages and front desk scripts of a hospital-owned practice.

Two related topics have their own guides and are not repeated here. Estimates for uninsured and self-pay patients, including what an estimate must list and the dispute process, are in our guide to good faith estimates for self-pay patients. How to advertise a price without bait offers or misleading starting-at claims is in our guide to advertising cash prices. This guide covers what is particular to facility fees at hospital-owned locations. Nonprofit hospitals also have 501(r) duties for their websites and bills; see hospital financial assistance policy.

What provider-based status means for a practice

Medicare calls a location that a hospital owns and runs as part of itself a department of a provider. Under the definitions in 42 CFR 413.65(a)(2), a department of a provider is a facility created or acquired by a main provider to furnish services of the same type as the main provider, under the main provider’s name, ownership, and financial and administrative control. A department cannot take part in Medicare as a provider on its own. It bills through the hospital.

Provider-based status is not a label a hospital can simply adopt. Under 413.65(b)(1), a facility is not entitled to be treated as provider-based just because it or the hospital believes it is. Section 413.65(d) lists requirements every such location must meet, and 413.65(g) lists obligations of hospital outpatient departments that are conditions of keeping the status. Two of those obligations shape what patients experience. Under 413.65(g)(2), physician services furnished in a hospital outpatient department must be billed with the correct site of service. Under 413.65(g)(5), the department must treat all Medicare patients, for billing purposes, as hospital outpatients, and must not treat some as hospital outpatients and others as physician office patients.

For marketing, that second rule matters. A hospital-owned practice cannot quietly keep some Medicare patients on the old office billing and move others to hospital billing. Once the location is a hospital outpatient department, its Medicare patients are hospital outpatients for billing, and the message to them has to match.

Why a Medicare patient can see two charges

Section 413.65(g)(7) describes the situation directly: when a Medicare beneficiary is treated in a hospital outpatient department that is not located on the main provider’s campus, and the treatment is not required by the antidumping rules in 42 CFR 489.24, the beneficiary will incur a coinsurance liability for an outpatient visit to the hospital as well as for the physician service. In plain words, the patient can owe cost sharing on two claims for one visit.

Location decides whether this rule applies. Under 413.65(a)(2), the campus is the area immediately next to the hospital’s main buildings, other areas and structures within 250 yards of the main buildings, and any other areas the CMS regional office decides case by case are part of the campus. A practice in a medical office building across town is off campus. A practice in a building attached to the hospital is likely on campus, where the written notice rule in (g)(7) does not apply, though on-campus departments must follow the antidumping rules under 413.65(g)(1).

The written notice for off-campus departments

For off-campus departments, 413.65(g)(7)(i) requires the hospital to give the Medicare beneficiary written notice before services are delivered. The notice must state one of two things:

• The amount of the beneficiary’s potential financial liability; or
• If the exact type and extent of care needed are not known, an explanation that the beneficiary will incur a coinsurance liability to the hospital that they would not incur if the facility were not provider-based, an estimate based on charges for visits to the facility (the rule allows an estimate drawn from average charges), and a statement that the patient’s actual liability will depend on the services the hospital actually furnishes.

Three further conditions apply. Under (g)(7)(ii), the notice must be one the beneficiary can read and understand. Under (g)(7)(iii), if the beneficiary is unconscious, under great duress, or for any other reason unable to read and act on a written notice, it must go to their authorized representative before services are delivered. Under (g)(7)(iv), where the department provides an examination or treatment required by the antidumping rules, the notice is given as soon as possible after an emergency has been ruled out or the emergency condition has been stabilized.

The rule asks for a written notice to the individual patient before care. A paragraph on the website does not replace it. What the website, booking confirmation and phone script can do is prepare the patient for the notice, so the form at check-in confirms something they already heard instead of springing it on them. Plain language helps on both counts: the notice must be readable and understandable, and a website page that uses the same words as the notice makes the two consistent.

Holding the practice out as part of the hospital

One of the requirements in 413.65(d) is about public presentation. Under 413.65(d)(4), a location seeking status as a department of a provider must be held out to the public and other payers as part of the main provider, and when patients enter it, they must be aware that they are entering the main provider and are billed accordingly.

This is a marketing requirement written into a payment rule. A practice that keeps its old independent name on the sign, website and listings after joining a hospital, with no visible tie to the hospital, works against it. The fix is not a rebrand for its own sake but a clear statement of the relationship: the hospital name next to the practice name, an about page that says the practice is a department of the hospital, and location pages that say patients are seen in a hospital outpatient department and are billed as hospital outpatients. How the names are combined is a design choice; making the relationship visible is the point of (d)(4).

Site-neutral payment does not remove the notice

Medicare pays some off-campus hospital departments differently from others. Under 42 U.S.C. 1395l(t)(21), an off-campus outpatient department of a provider is a department that is not on the hospital’s campus or within the campus distance of a remote location of the hospital, with exceptions that include departments that were billing under the outpatient payment system for covered services furnished before November 2, 2015. CMS defines the excepted items and services in 42 CFR 419.48: those furnished by a dedicated emergency department, or by an excepted off-campus provider-based department that has not impermissibly relocated or changed ownership. Under 419.48(c), payment for items and services that do not meet that definition will generally be made under the Medicare Physician Fee Schedule.

That change is about the payment rate. It does not change the conditions in 413.65(g), which a location must meet to keep provider-based status in the first place. Two cautions follow for marketing. First, do not tell patients there is no facility fee because of site-neutral payment; what a given location bills, and what a given patient owes, is a question for the hospital’s billing team, not something to infer from the payment rules. Second, a location that relocates or changes ownership may lose excepted status under 419.48(a)(2), so a message that was accurate before a move may not be accurate after it.

Patients outside Medicare and state facility fee laws

The written notice in 413.65(g)(7) is a Medicare rule and speaks to Medicare beneficiaries. For commercially insured and self-pay patients, facility fee disclosure rules are set state by state. Where a state has such a rule, it may set where the notice must appear, what it must say, and which services and locations are covered. Check the law in each state where the hospital runs a location with counsel before writing a single statewide message.

Uninsured and self-pay patients also have a federal right to a good faith estimate of expected charges, covered in the guide linked above. When a facility fee applies, the estimate, the website and the phone script should all describe the same charges. A hospital that also posts standard charges under the federal price transparency rule should make sure its patient-facing pages do not contradict them; our guide to hospital price transparency covers that rule.

Price claims that leave the fee out

Section 5 of the FTC Act, 15 U.S.C. 45, bars deceptive acts or practices, and 15 U.S.C. 52 bars false advertisements for services. The FTC Policy Statement on Deception lists misleading price claims among the practices found deceptive, and it explains that a misleading omission occurs when qualifying information necessary to prevent a claim from being misleading is not disclosed. It also names cost as information that has been found material, and it warns that written disclosures or fine print may be insufficient to correct a misleading representation.

For a hospital-owned practice, that points at a few specific risks:

• An ad or page that quotes a visit price and leaves out a hospital facility charge that patients will also owe.
• An acquisition announcement that tells patients “nothing changes for you” when billing changes.
• A comparison with independent offices or urgent care centers on cost that ignores the facility fee.
• A billing explanation placed in a footnote or a linked document while the headline promises a simple price.

Federal fee disclosure rules for other industries do not settle the question either way. The FTC rule on unfair or deceptive fees, 16 CFR part 464, defines a covered good or service in 464.1 as live-event tickets or short-term lodging, so it does not reach medical visits. Medical price claims are judged under section 5 and the Deception Statement instead.

What to change on the website after an acquisition

The work is largely editing, and it is easier to do at the moment of acquisition than after the first wave of billing complaints. Start with the location pages: name the hospital, say the location is a hospital outpatient department, and say in one or two sentences that patients may receive a bill from the hospital as well as a bill for the clinician’s services. Add a billing page in plain language that explains the two charges, who sends each bill, and who to call with questions. Link it from the booking flow and the appointment confirmation.

Then align the rest. Remove or rewrite old pages, ads and directory listings that quote office visit prices from before the change. Update the about page so it reflects the relationship with the hospital. Give the front desk and call center the same wording, so a patient who asks on the phone hears what the website says and what the written notice will say. Keep a record of what changed and when, so the hospital can show what patients were told on a given date.

Illustration: two ways to announce an acquisition

Illustration: a practice joins [hospital] and sends its patients an email titled “Same doctors, same care”. The email says nothing changes for patients and does not mention billing. Weeks later, Medicare patients at the off-campus office receive a written notice at check-in about a hospital coinsurance charge, and some then receive two bills. The email was not false about the doctors, but it left out the change in cost, and the notice at check-in reads as a reversal.

Illustration: the same practice sends an email titled “[Practice name] is now part of [hospital]”. It says the clinicians are the same, that the office is now a hospital outpatient department, that patients may receive a bill from the hospital as well as one for the clinician’s services, and that Medicare patients will receive a written notice before their visit explaining their potential cost sharing. It links a billing page and gives a phone number. The notice at check-in then confirms what the email said.

Checklist

• Confirm with the hospital’s compliance team which locations are provider-based, which are off campus, and which are excepted under 42 CFR 419.48.
• For each off-campus department, confirm the written notice under 413.65(g)(7) is given before services, in readable language, with the amount or the required explanation and estimate.
• Show the hospital relationship on the sign, website, location pages and listings, as 413.65(d)(4) expects patients to know they are entering the hospital.
• Add a plain-language billing page that explains the two charges and link it from booking and confirmations.
• Remove or rewrite price claims and acquisition messages that leave out the facility charge.
• Check state facility fee notice rules for each state where the hospital runs a location.
• Make sure good faith estimates, posted standard charges and website wording describe the same charges.
• Give front desk and call center staff the same wording as the website and the notice.

For self-pay prices outside hospital billing, see our guide to state all-in pricing laws for practices, which covers mandatory fees in advertised prices.

How we help

We build websites, local search, Google Ads and AI front desk tools for independent practices and health businesses. For a practice joining a hospital, that means a website with location and billing pages that state the hospital relationship clearly, ads reviewed for price claims that leave out the facility charge, and booking flows and confirmations that prepare patients for the written notice without replacing it. We do not decide whether a location is provider-based or what it bills; the hospital and its counsel do. Our tools are built with HIPAA in mind. We confirm in writing what a BAA covers before any patient information flows through a tool, and if it is not covered, we do not route patient information through it. We are not a healthcare provider and we do not give legal or medical advice. We do not sell lead lists and we do not pay for referrals. For the wider rules, see our healthcare marketing rules hub.

Sources

• 42 CFR 413.65: Requirements for a determination that a facility or an organization has provider-based status
• 42 CFR 419.48: Definition of excepted items and services
• 42 U.S.C. 1395l: Payment of benefits (see subsection (t)(21))
• 42 CFR 489.24: Special responsibilities of Medicare hospitals in emergency cases
• 16 CFR 464.1: Definitions (Rule on Unfair or Deceptive Fees)
• 15 U.S.C. 45: Unfair methods of competition and unfair or deceptive acts or practices
• 15 U.S.C. 52: Dissemination of false advertisements
• FTC Policy Statement on Deception

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