On June 27, 2023, Connecticut Governor Ned Lamont signed into law Public Act 23-171 entitled “An Act Protecting Patients and Prohibiting Unnecessary Health Care Costs” (“the Act”), which includes changes to Connecticut’s facility fees law. The Act implements previously-announced legislative initiatives that are the product of collaboration between Governor Lamont and the Connecticut Hospital Association, as well as other health care stakeholders.

In general, existing Connecticut law places numerous obligations on hospitals, health systems, and hospital-based facilities that charge patients a “facility fee,” including the placement of limits on the ability of such entities to charge facility fees for outpatient services provided off-site from a hospital campus. Existing law defines a facility fee as any fee a hospital or health system charges or bills for outpatient hospital services provided in a hospital-based facility that is (1) intended to compensate the hospital or health system for its operational expenses and (2) separate from a health care provider’s professional fee.

Among other things, the Act (i) revises the facility fees law to prohibit charging facility fees in certain circumstances when services are provided on a hospital campus, (ii) gives the Office of Health Strategy (OHS) authority to enforce the law though civil monetary penalties, and (iii) creates new reporting requirements for hospitals and health systems. These changes are summarized below.

Pursuant to the Act, beginning on July 1, 2024, hospitals and health systems are prohibited from charging a facility fee for outpatient services provided on a hospital campus that use a current procedural terminology evaluation and management (CPT E/M) code or assessment and management (CPT A/M) code. A hospital campus is defined as the physical area immediately adjacent to a hospital’s main buildings and other structures not contiguous to the main buildings but located within 250 yards of the main buildings, or any area determined to be a part of a hospital’s campus by the Centers for Medicare and Medicaid Services. However, this prohibition does not apply to (A) an emergency department located on a hospital campus, or (B) observation stays on a hospital campus and CPT E/M and CPT A/M codes billed for: (i) wound care, (ii) orthopedics, (iii) anticoagulation, (iv) oncology, (v) obstetrics, and (vi) solid organ transplant services. Notably, for purposes of the above exception to the prohibition, “observation” is newly defined to mean services provided by a hospital, on its campus, including use of a bed and requiring periodic monitoring to evaluate an outpatient’s condition or determine the need for admission to the hospital as an inpatient, regardless of length of stay. Despite this new prohibition, if a hospital or health system has in effect an insurance contract on July 1, 2024, that provides reimbursement for the newly-prohibited facility fees, a hospital or health system may continue to collect such reimbursement until the date of expiration, renewal or amendment of such contract, whichever occurs first.

To enforce the new and existing facility fee prohibitions, the Act grants OHS the ability to impose civil monetary penalties of up to $1,000 when it has a reasonable belief that a hospital, health system, or hospital-based facility has charged a facility fee in violation of Connecticut law. OHS may not impose these penalties until July 1, 2024. OHS must provide notice of the violation and civil monetary penalty and the hospital, health system, or hospital-based facility will have 10 business days from receipt of such notice to request a hearing to demonstrate the violation did not occur. Following a hearing, if OHS finds that such violation did occur it will issue a cease and desist order in addition to any civil monetary penalty.

Finally, the Act revises existing law that requires each hospital and health system to report to OHS certain information concerning facility fees. The Act moves the initial reporting deadline from July 1 to October 1, 2023. Such report will then be due on July 1 annually thereafter, e.g., the next reporting deadline will be July 1, 2024. The Act also updates the content of the report required to be submitted by hospitals and health systems as follows: (i) for each facility that the applicable hospital or health system owns or operates and that charges a facility fee, the hospital or health system must indicate whether such facility is located on or off of the hospital or health system campus, (ii) a description of the 10 services generating the most facility fee gross revenue separated by CPT code and by on-campus or off-campus, and (iii) information regarding the top 10 procedures or services for which facility fees are charged by patient volume and the gross revenue for such, separated by on-campus and off-campus.

In addition to the above changes, the Act includes changes affecting the certificate of need process (see our summary here) and provider-payor contracts (see our summary here).