By Christine H. Monahan, Amy Killelea, and Caroline Picher
Affordability is at the forefront of health care policy in 2026. One pain point for consumers and focus area for policy makers is the relatively higher prices for services provided in hospital outpatient settings compared to those same services when provided in physician office settings. This pricing difference is, in part, driven by use of facility fees that hospitals charge in addition to professional service fees.
Hospitals justify facility fees as necessary to staff 24/7 emergency departments and pay for the complex equipment and infrastructure needed for intensive hospital care. However, when those facility fees are applied to hospital outpatient department (HOPD) settings far away from a hospital campus or outpatient services that do not require the expertise and equipment of a hospital to be provided safely, facility fees become harder to defend.
A growing body of evidence suggests that facility fee reform could provide meaningful out-of-pocket relief to consumers without jeopardizing hospital fiscal health.
How Do Outpatient Facility Fees Harm Consumers?
Financial exposure to facility fees occurs against a backdrop of growing consumer health care affordability issues. According to recent polling by KFF, two-thirds of respondents reported that they worry about being able to afford health care, and more than half of respondents said that they expect health care costs to become less affordable over the next year. Strained household budgets make responding to an unexpected hospital bill a major challenge. A 2024 Federal Reserve Board survey underscored the difficult choices surprise medical bills can present, finding that almost 40 percent of Americans could not afford an unexpected $400 expense without selling assets or borrowing money. West Health-Gallup Center on Healthcare found that 90 percent of survey respondents believe Americans are paying too much for the quality of care they receive.
Facility fees are a particular sore point for consumers already struggling with health care affordability. These fees can really pack a punch, adding hundreds and sometimes thousands of dollars to a patient’s bill. Insurance plan designs that use coinsurance and high deductibles—which a growing number of insurance plans are embracing to control costs—expose consumers to a greater portion of health care costs, including facility fees. According to a 2025 KFF survey, more than a third of consumers are in an employer plan with an annual deductible of $2,000 or more. Some insurance plans also will not cover certain outpatient facility fee charges, leaving consumers responsible for the full charge.
Facility fees can also often come as a surprise to consumers, particularly when they are attached to routine services that do not require the staffing, equipment, or infrastructure of a hospital. The differences in costs depending on site of service—for example, between an independent provider practice and an off-campus HOPD owned by a hospital system—can be perplexing bordering on nonsensical, especially for consumers who find themselves in a practice that has been newly acquired by a hospital system. In that instance, a consumer whose longstanding provider practice was recently acquired by a hospital system and now operates as an HOPD might receive the same exact service from the same exact provider in the same exact location but face wildly different financial exposure for that visit pre- and post-hospital acquisition.
How Are States Limiting Outpatient Facility Fees?
As of March 2026, nine states prohibit providers from charging outpatient facility fees for specified procedures or care settings. Each of the nine states has taken different approaches to facility fee reform, with states generally opting to tailor their legislation in two ways. First, states may focus on specific settings where facility fees are especially difficult to justify—for example, banning or limiting facility fees in off-campus HOPD settings that are far away from a hospital main campus. Second, states may tailor facility fee bans to specific services that can be safely provided in non-hospital settings, including preventive, evaluation and management, and telehealth services. States may also combine these two reforms, limiting the prohibition on facility fees to both specific settings and specific services.
While some states are going bigger in hospital pricing reform—enacting global payment caps or reference pricing in either a subset of the state-regulated market or for a subset of hospitals—many are eyeing outpatient facility fee reforms as a smaller first step to tackle a complex policy problem and provide immediate financial protection to patients.
Will Reforming Facility Fees Bankrupt Hospitals?
Hospitals have raised concerns that facility fees are necessary for safe and sustainable hospital operation and that banning or limiting facility fees would lead to hospital closures and patient harm as a result of the lost revenue associated with the fees. Facility fees, they argue, support the entire care team and health care infrastructure when they are attached to either inpatient or outpatient services. However, evidence tends to rebut these claims.
A recent study assessing Connecticut’s 2017 narrowly targeted ban on outpatient facility fees for evaluation and management visits at off-campus HOPDs found relatively little impact on hospital operating margins. The study authors noted that “while the law changed what hospitals could bill, it did not change their relative bargaining power,” leading to the conclusion that hospitals were able to make up any lost revenue from the facility fee ban in other areas.
Other studies have come to similar conclusions. The United States of Care, for example, partnered with West Health and Brown University Center for Advancing Health Policy through Research to model the impact of different hospital pricing reforms on hospital operating margins. That analysis found that in three study states (Indiana, Massachusetts, and North Carolina) prohibiting use of facility fees for a subset of routine services would have a minimal impact on both total and commercial hospital operating margins. Analysis of Oregon’s more expansive 2019 hospital pricing reform for its state employee plan came to a similar conclusion. That law prohibits payers from paying in-network hospitals more than 200 percent of Medicare rates. While it does not ban facility fees, it does limit them because they are included under the payment cap. The study assessing the impact of the law found no statistically significant change in operating margins at Oregon hospitals subject to the payment cap.
An important caveat to these findings—and one stated clearly by the authors of the Connecticut study—is that it is very likely that one reason hospital operating margins have not been impacted by facility fee bans and other targeted payment caps is because hospitals have been able to make up lost revenue in other areas. For example, hospitals may shift services away from regulated areas to other lines. In the case of facility fee bans, they may use their outsized bargaining power from heavily consolidated markets to boost negotiated prices for other hospital care or fees for hospital-affiliated professionals with commercial payers. States may need to consider pairing broader reforms that take a global approach to hospital payment reform (for example, site-neutral policies and broader payment caps) to ensure that consumer premiums and total spending go down.
Despite these limitations, facility fee bans offer out-of-pocket relief to consumers. Even if hospitals are able to find other ways to make up lost revenue, a facility fee ban blunts the acute financial pain point of unexpected and expensive bills for consumers.
What’s Next?
It is clear that consumers have reached a breaking point as health care affordability continues to rank as a top household budget challenge. Facility fee reform is one policy option states can take to eliminate what many see as an unfair billing practice that results in both a surprise hospital bill and sticker shock for many consumers. Despite hospital claims to the contrary, facility fee reform may in fact be a scalpel approach to one health care affordability concern, as states tailor facility fee bans to settings and services that are unrelated to the infrastructure and staffing attached to a hospital campus.
Hospitals are quick to point out that the current policy and health care financing landscape presents new and unprecedented challenges to hospital fiscal health, and that any payment reforms will have a destabilizing economic impact in this environment, leading to hospital closures and disruptions in patient care. To be sure, hospitals are facing significant financial threats as a result of the reconciliation law passed last year, which included more than $800 billion in cuts from Medicaid over the next decade. However, consumers are also facing these same coverage and affordability threats, and reforms that mitigate affordability challenges are needed now more than ever. The evidence discussed above suggests that there is reason to believe that hospitals are able to absorb the costs of facility fees without major impacts to their bottom lines and that this can provide patients relief from paying excess fees.
Authors’ Note
Christine Monahan is a faculty member of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy. Her time and research related to this article was supported by a grant from West Health. Monahan works on projects financially supported by Arnold Ventures and Blood Cancer United, in addition to West Health. Amy Killelea is a faculty member of the Center on Health Insurance Reforms at Georgetown University’s McCourt School of Public Policy. Their time and research related to this article was supported by a grant from West Health. Killelea works on projects financially supported by Blood Cancer United, in addition to West Health. Caroline Picher is an employee of the West Health Policy Center, a nonpartisan, nonprofit organization based in Washington, DC, focused on lowering health care costs to enable successful aging funded by the Gary and Mary West Foundation.
Christine H. Monahan, Amy Killelea, and Caroline Picher “Facility Fee Reform: States Can Protect Household Budgets Without Upending Hospital Budgets” April 15, 2026, https://www.healthaffairs.org/content/forefront/facility-fee-reform-states-can-protect-household-budgets-without-upending-hospital. Copyright © 2026 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.