Provider Based Billing (PBB) is a specific billing methodology used by large hospital systems for services delivered in hospital-owned clinics. This system allows the hospital to bill for services differently than an independent physician’s office. Understanding this structure is important because it directly affects the amount patients pay for routine medical care and frequently leads to unexpectedly higher medical expenses.
Defining Provider Based Billing
Provider Based Billing is a designation granted by the Centers for Medicare & Medicaid Services (CMS). This status allows a clinic or facility to be treated as a department of the main hospital for billing purposes. To qualify, the facility must meet specific federal regulations and operational criteria, such as integration into the hospital’s governance structure and quality oversight.
This designation permits the hospital to recover a greater portion of its overhead costs associated with the facility. These overhead costs include infrastructure, administrative expenses, and maintaining higher operational standards, such as those monitored by The Joint Commission. Utilizing the PBB model allows the hospital to bill for these higher costs, which are often significantly greater than those incurred by a typical independent physician’s office.
The Two Bill Components
The most noticeable difference under Provider Based Billing is the way a single visit is itemized on the patient’s statement. Instead of receiving one consolidated charge for a service, the patient receives a bill that is split into two distinct components. This two-part structure is a direct result of the facility operating as a Hospital Outpatient Department.
The first component is the Professional Fee, which covers the direct services provided by the healthcare practitioner, such as the physician or physician assistant. This fee compensates the provider for their time, expertise, and the specific procedure performed.
The second component is the Facility Fee, which is a separate charge from the hospital for the overhead of the clinic space itself. This fee covers the cost of the building, utilities, non-physician staff support, supplies, and medical equipment used during the visit. The facility is billed as if the patient received care in a hospital setting, even if the service was a routine office visit.
Where Provider Based Billing Occurs
PBB is implemented in clinics acquired by or established under the ownership of a larger hospital or health system. When a hospital purchases an existing, formerly independent physician practice, it often converts that clinic into a Hospital Outpatient Department (HOPD). This conversion triggers the shift to the PBB model.
These hospital-owned clinics can be located either on the main hospital campus or in off-campus locations. Examples include primary care offices, specialty practices, and urgent care centers. The physical location of the service is less relevant than the regulatory relationship to the parent hospital system.
Impact on Patient Costs
The two-component billing structure is the primary reason PBB often results in increased costs for patients. In a non-PBB setting, a patient pays a fixed copayment for a visit, with the entire service processed under physician benefits. Under PBB, the Professional Fee is subject to the standard copayment, while the new Facility Fee is processed under the patient’s hospital benefits.
Hospital benefits frequently involve a separate, higher deductible or a coinsurance payment. This means the patient is responsible for a percentage of the charge rather than a fixed copay. Patients without secondary or supplemental insurance are particularly exposed to these higher out-of-pocket expenses.
The cost difference is noticeable for preventative services, which are often covered at 100% in a traditional office setting. While the Professional Fee may be fully covered, the Facility Fee may not be, leaving the patient responsible for that portion of the bill. Patients can identify this model by looking for terms like “Hospital Outpatient Department,” “Hospital-Based Clinic,” or “Provider-Based Billing” on paperwork. Checking with the insurance provider beforehand is a practical step to anticipate potential costs.