Hospital Facility Fee Legislation Gains Momentum Across 11 States

The term facility fees typically refers to charges by hospitals to cover costs beyond what is billed by providers. In recent years, facility fees have been increasingly used to cover outpatient services delivered in settings owned or controlled by hospital systems. While providers have argued that the fees are necessary to support overhead costs and ensure appropriate reimbursement for the total cost of care, insurers have contended that facility fees in non-hospital settings are unfair and mark-up costs for consumers. As hospital ownership of outpatient settings and physician practices has increased, more states are looking into the billing practices and taking action. 

2025 State Legislative Activity on Facility Fees

During the 2025 legislative session, 11 states considered facility fee legislation. Key trends from introduced legislation include:

• Requiring health systems to report facility fee data to state agencies.

• Prohibiting or limiting certain facility fees.

• Establishing facility fee notice requirements for consumers.

Of note, Indiana, Illinois, and Minnesota all enacted facility legislation in 2025.

Indiana's Site Neutrality Provisions Removed

In Indiana, HB 1003 included facility fee/site neutrality provisions. As introduced, the bill required payers to reimburse a service provided in an outpatient setting at the same reimbursement rate that is provided at a physician’s office for the equivalent outpatient service. The bill was amended throughout the process and eventually only applied to state employee health plans before it was ultimately removed entirely from the bill. Of note, the enacted bill did incorporate provisions relating to services provided in office settings, including modifying the definition of “office setting,” prohibiting a provider in an office setting from billing with hospital place or service codes, and establishing remedies for payers concerning location of service errors in payment. 

Illinois and Minnesota Focus on Transparency

Illinois also enacted facility fee legislation with HB 1431. The bill originally included facility fee notice requirements, prohibitions, and billing requirements, but amendments pared the bill down significantly to only require a hospital that charges a facility fee for outpatient services that is separate and distinct from a professional fee to develop a policy to inform patients that they may be subject to a facility fee. Additionally, Minnesota’s Health and Human Services Omnibus policy and appropriations bill (HF 2) established facility fee reporting requirements for hospitals.

Model Legislation Development Signals Future Action

There is growing interest in facility fees, with stakeholder groups considering model legislation on facility fees and site neutrality. The National Academy of State Health Policy (NASHP) published the first influential model legislation in 2020. The model legislation seeks to prohibit certain site-specific and service-specific facility fees. More recently, in April 2025, the National Council of Insurance Legislators (NCOIL) approved the Improving Affordability for Patients Model Act, which would prohibit certain facility fees and establish facility fee transparency, reporting, and billing requirements. In addition, the American Legislative Exchange Council (ALEC) finalized similar model legislation, the Site Neutral Payment Act, this year. This increased focus by stakeholder groups suggests a high potential of more legislative action on facility fees in 2026.

Track Health Care Policy

The ever-evolving state health policy landscape will continue to influence how health care organizations make business decisions. MultiState's team pulls from decades of expertise to help you effectively navigate and engage. MultiState's team understands the issues, knows the key players and organizations, and we harness that expertise to help our clients effectively navigate and engage on their policy priorities. We offer customized strategic solutions to help you develop and execute a proactive multistate agenda focused on your company's goals. Learn more about our Health Care Policy Practice.