Hidden fees cost Michigan patients millions. Lawmakers push reforms

Michiganders are paying millions of extra dollars in healthcare bills each year, often paying to help operate hospitals they’ve never even visited.

There’s no way to tell precisely how much they’re paying: “ Facility fees ” are usually buried deep in bills, and hospitals aren’t required to publicly disclose how much they collect from them.

The fees traditionally cover costs associated with healthcare like laundry, computer networks and security. Hospitals say they need the money to stay afloat and are increasingly adding the charges to outpatient services, such as labs and physicians’ offices.

But they don’t disclose many basic details about the fees, prompting a bipartisan push for reform. In Lansing, legislation would prohibit the fees when care is provided at sites outside of hospitals, telemedicine appointments and some in-hospital outpatient services.

The legislation came after state Rep. Curt VanderWall, R-Ludington, requested an itemized bill for a routine blood test. He said he had heard from constituents about their bills increasing after their doctors’ offices and labs were purchased by large healthcare systems.

A single draw yielded three vials of blood to be tested, VanderWall said.

“I was shocked to see that I was charged a facility fee for each vial of blood that was drawn — nearly an extra $75 just for that one case of the blood draw,” he told fellow lawmakers in August.

Facility fees added an average of $100 to primary care doctor bills in 2022, according to one estimate. While no reliable statewide estimate exists, the fees alone for Medicaid are easily tens of billions of dollars, according to a federal report.

States including Ohio and Indiana have begun limiting how hospitals can charge the fees, while others are debating legislation to cap them, increase transparency or require “ site-neutrality ” so charges remain the same across hospital facilities, according to the Center on Health Insurance Reforms at Georgetown University.

Since 2010, Rhode Island has limited annual increases of facility fees, which a Brown University study concluded slowed the growth of the state’s hospital charges by 9% compared with other states and slowed consolidation, but it cost hospitals $160 million.

Hospitals contend the charges are crucial to their survival. They typically operate at thin profit margins — 2.6% nationally last year — and 33 Michigan hospitals either lost money or operated at a 0% margin in 2024, the most recent year for which data was available, according to the National Academy for State Health Policy, a Washington DC nonprofit.

Since then, three of those facilities — hospitals in Sturgis, East China and Ontonagon — have closed.

Some lawmakers say that more could follow if facility fees are restricted.

“This could destabilize even more institutions within the Upper Peninsula that are standalone and are literally struggling to keep the doors open,” state Rep. David Prestin, R-Cedar River, said at a hearing in August.

“I worry that this could be a tipping point for even more.”

‘Black box’ of costs

It’s difficult to measure the extent to which facility fees drive individual medical bills and even overall healthcare costs.

Michigan’s largest hospital systems would not disclose how much they collect, despite repeated requests from Bridge Michigan.

The state does not track the fees, nor does the state’s hospital association, according to spokespersons of both.

But experts said there are some clues that the costs are significant.

Typical nonemergency visits to a doctor cost $43 extra in a hospital-based outpatient department compared with a non-hospital physician’s office in 2022, according to a review by the Health Care Cost Institute.

It found that hospital-based labs charged more than three times more for tests than independent labs or physicians offices in employer-sponsored healthcare plans.

The fees may go unnoticed by many patients because insurance picks up the costs.

If patients notice an increase in charges, it can be hard to break down a medical bill — let alone research fees ahead of time, said Bret Jackson, CEO of the Economic Alliance of Michigan, a Novi-based nonprofit focused on the state’s economy and healthcare.

He calls healthcare bills a “black box.”

“If you really dig your heels in, if you really fight back and are willing to go through phone call after phone call, and beat your head against the wall, maybe eventually — and it does happen — people can eventually get what they’re looking for,” he said.

All too often, information is “simply not available” to consumers, Jackson said.

Push for transparency

Price transparency has become an issue in the governor’s race, with both Democrat Jocelyn Benson and Republican John James saying they would require hospitals to disclose costs upfront to patients.

A current US representative, James sponsored the Patients Deserve Price Tags Act last year that would require hospitals to publish “ clear, upfront information ” about pricing.

Benson has said she wants to create an online portal to report hospitals that don’t disclose costs. She would empower the Michigan Department of Health and Human Services to handle complaints — and refer violators to the attorney general.

Even so, efforts to boost transparency have proven lackluster nationwide.

The U.S. Centers for Medicare & Medicaid Services requires hospitals to make public “machine-readable” prices.

They’re often listed through billing codes and jargon that make deciphering them difficult for consumers, said Shoshi Preuss, a state advocacy manager for United States of Care, a Washington DC-based nonprofit that tracks federal and state health policies.

Fewer than 1 in 5 hospitals owned by the nation’s largest health systems — and 10 of 46 in Michigan — make clear the costs for at least half of their posted items and services, according to a review last month by PatientRightsAdvocate.org.

This summer, the Trump administration warned more than 500 of the nation’s hospitals, including 13 in Michigan, that they were failing to provide the public with basic pricing information, according to an Associated Press news report.

This month, the Federal Trade Commission sent warning letters to 24 of the “nation’s largest healthcare services companies” reminding them of their obligations.

The letters did not explicitly state the recipients violated the rules, nor did the Trump administration name the 24 companies.

Part of the problem is that there is no simple way to be transparent, Josh Traylor, a former health policy expert at the US Center for Medicare & Medicaid Innovation and now executive director at the Center for Health and Research Transformation at the University of Michigan.

Costs for a service or procedure don’t just vary from facility to facility — but also from insurer to insurer and from plan to plan within the same insurer.

“Blue Cross might have 10 different prices for a knee replacement,” he said.

And insurers and hospitals carefully guard the details of their contracts, Traylor said.

With some exceptions, like this page by the University of Michigan Health, finding prices for care isn’t a simple click or two. Hospitals instead suggest consumers call for pricing or use their tools to input insurance policies.

That allows more precise and accurate pricing, because it incorporates a patient’s insurance coverage.

Healthcare is ‘wildly complex’

Facility fees have been charged for years — and limiting them now could threaten hospitals when they face multiple challenges, said Elizabeth Kutter, a vice president at the Michigan Health & Hospital Association.

“Healthcare is wildly complex,” she said. Likewise, “financing healthcare is wildly complex,” she added.

(Editor’s note: The Michigan Health & Hospital Association is a funder of Bridge Michigan. It was not involved in the reporting or editing of this story.)

The fees help cover costs that aren’t obvious in care: electronic medical records and cybersecurity, laundry and janitorial staff, and round-the-clock, doctors and nurses even when business is slow.

The charges offset rising costs of drugs and other healthcare costs, advocates say.

Limiting the fees could cost hospitals nationwide as much as $180 billion over 10 years, according to the American Hospital Association. Over that same period, the federal government anticipates some $655 billion in cuts to Medicaid.

Rural hospitals are some of the most at risk, because low volumes of patients and a shortage of providers add uncertainty to already-thin budget margins.

“People think hospitals make insane amounts of money because they see new equipment or new facilities, but that’s really what is required to continue to offer high-quality care to patients and what they expect,” said Ross Ramsey, CEO of Scheurer Health in Pigeon at the tip of the Thumb along Lake Huron.

The hospital expects to collect $125,000 in facility fees this year to stretch its $125 million budget.

The hospital is staffed during slow times and offers outpatient sites so patients don’t have to drive an hour or more for routine care like physical therapy.

The fees offset costs that aren’t obvious to many patients, such as free translation services to non-English speaking residents that are required by law, cleaning of janitorial supplies and maintaining backup generators to operate the hospital.

“We’re not adequately reimbursed for these types of things, so that’s why (we) need to make it up elsewhere,” Ramsey said.

Patients, he added, “don’t realize how tight of a tight walk we already walk on a good day.”

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This story was originally published by Bridge Michigan and distributed through a partnership with The Associated Press.