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09/29/2003 |
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Robert E. Mazer The Medicare and Medicaid discriminatory billing prohibition, enacted originally in 1972, provides for the potential exclusion from any federal health care program of an individual or entity which "has submitted or caused to be submitted bills or requests for payments . . . [under Medicare or Medicaid] containing charges . . . for items or services furnished substantially in excess of such individual's or entity's usual charges . . ., unless the Secretary finds there is good cause . . . ." Application of this prohibition has always been uncertain. The level of uncertainty increased dramatically after the marketplace required hospitals and other health care providers to accept payments from insurers and managed care organizations that were substantially less than Medicare and Medicaid payment amounts. Additionally, "charges" — the principal focus of the statutory prohibition — became far less relevant in the determination of third-party payments, which were limited increasingly by fee schedules. The OIG has issued a notice of proposed rulemaking that attempts to reconcile these changes with the long-standing Medicare/Medicaid discriminatory billing prohibition and provides for federal programs to share benefits from negotiated discount arrangements. 68 Fed. Reg. 53,939 (Sept. 15, 2003). Discriminatory Billing Prohibition According to the OIG, generally, when a provider's usual charge to most of its customers for a service drops substantially below a Medicare fee schedule, but Medicare continues to be billed an amount which is equal to or more than the fee schedule amount, the provider has an unlawful two-tiered pricing structure. Unless costs "uniquely associated with the Medicare program" justify the charge differential, a provider would either have to reduce its charges to Medicare and Medicaid or risk exclusion from federal health care programs. Under the proposed rule, the OIG would not require that Medicare and Medicaid receive a provider's best price. However, the OIG would not permit Medicare and Medicaid to become among the few payors that do not benefit from health care competition and resulting discount arrangements. The proposed rule includes several new policies, most of which are intended to provide Medicare and Medicaid with financial benefits from arrangements that have been negotiated by managed care organizations and other health care payors. These policies could present a serious dilemma for health care providers who are frequently required to accept discounted payment rates under managed care contracts. They could be forced to reduce their charges to Medicare and Medicaid or refuse managed care contracts that provide for deeply discounted payments. Charges Included in "Usual Charge" Calculation In computing a health care provider's usual charge, the OIG would consider charges of affiliated entities subject to common control if they provide substantially the same items and services in the same or substantially the same markets. This could require consideration of a hospital's charges in determining whether a related clinical laboratory or diagnostic imaging center has violated the discriminatory billing prohibition, for example. It is uncertain whether the OIG would permit different charge structures in different geographic markets only, or whether it might recognize other markets, for example, for services to hospital inpatients, hospital outpatients, and non-hospital patients. Usual Charge Calculation The provider's usual charge would be the mean or median of these charges — the charge at which 50 percent of the charges are below and 50 percent of the charges are above (the OIG is considering both approaches). Therefore, close attention would be required by any provider which expected to receive less than the Medicare/Medicaid fee schedule nearly one-half of the time it furnished services under arrangements that are relevant to the usual charge calculation, including under managed care contracts. Substantially in Excess Standard Where payments will be limited by a fee schedule, the lower of the fee schedule amount and the submitted charge would be compared with the calculated usual charge in determining whether the discriminatory billing prohibition has been violated. For example, where Medicare pays the lower of the submitted charge of $100 or fee schedule amount of $50, the lower fee schedule amount of $50 would be compared to the provider's usual charge. OIG Discretion The burden of proving good cause will be on the provider furnishing the services, and the OIG's determination will not be subject to review. The OIG also states that it is not required to exclude a provider that has violated the statutory prohibition. According to the OIG, it would not exclude providers for isolated or unintentional mistakes. The OIG's substantial discretion is likely to provide little comfort to health care providers which have been required to offer items and services under deeply discounted payment arrangements. Conclusion If the proposed policies are adopted as a final rule, health care providers with substantial managed care or other discount arrangements could be required to reevaluate their current business model. A provider may be required to limit the managed care arrangements in which it participates or the discounts it provides to those plans, or offer those same discounts to Medicare and Medicaid. A proposed rule does not have any legal authority. However, the OIG could assert that certain aspects of the proposed rule reflect policies that are currently in effect under the existing statute and regulations. It is unknown if and when a final rule will be adopted. Additionally, the final rule could be significantly different from the proposed rule. Until publication of a final rule, providers will be required to make important business decisions based on limited information currently available. |
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Ober, Kaler, Grimes & Shriver Maryland
Washington, D.C. Virginia |
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