Medicare and State Health Care Programs: Fraud and Abuse; Clarification of Terms and Application of Program Exclusion Authority for Submitting Claims Containing Excessive Charges, 33430-33432 [E7-11663]
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33430
Federal Register / Vol. 72, No. 116 / Monday, June 18, 2007 / Proposed Rules
TABLE 12a.—NRS CASE-MIX ADJUSTMENT VARIABLES AND SCORES—Continued
Description
jlentini on PROD1PC65 with PROPOSALS
28 .................................
29 .................................
30 .................................
31 .................................
Other Clinical Factors:
32 .................................
33 .................................
34 .................................
35 .................................
36 .................................
37 .................................
38 .................................
39 .................................
M0476
M0476
M0488
M0488
=
=
=
=
2
3
3
2
(status
(status
(status
(status
stasis ulcer: early/partial granulation) .........................................
stasis ulcer: not healing) .............................................................
surgical wound: not healing) .......................................................
surgical wound: early/partial granulation) ...................................
18
28
18
5
M0550 = 1 (ostomy not related to inpt stay/no regimen change) ..............................................................
M0550 = 2 (ostomy related to inpt stay/regimen change) .........................................................................
Any ‘‘Selected Skin Conditions’’ AND M0550 = 1 (ostomy not related to inpt stay/no regimen change)
Any ‘‘Selected Skin Conditions’’ AND M0550 = 2 (ostomy related to inpt stay/regimen change) ............
M0250 (Therapy at home) = 1 (IV/Infusion) ..............................................................................................
M0470 = 2 or 3 (2 or 3 stasis ulcers) ........................................................................................................
M0470 = 4 (4 stasis ulcers) .......................................................................................................................
M0520 = 2 (patient requires urinary catheter) ...........................................................................................
21
35
22
7
11
17
34
17
10. On page 25444, after Table 23b
entitled ‘‘Proposed National 60–Day
Episode Amounts Updated by the
Estimated Home Health Market Basket
Update for CY 2008, Before Case-Mix
Adjustment, Wage Index Adjustment
Based on the Site of Service for the
Beneficiary or Applicable Payment
Adjustment for Episodes Beginning and
Ending in CY 2008,’’ in the first column,
in the first full paragraph, in lines 14
through 43, the sentence ‘‘Therefore, to
calculate an episode’s prospective
payment amount * * *’’ and ending
with the sentence ‘‘The resulting
amount is the national case-mix and
wage adjusted national standardized 60day episode payment rate for that
particular episode’’ is corrected to read
as follows: ‘‘To calculate an episode’s
prospective payment amount, take the
non-adjusted national standardized 60day episode payment rate and multiply
it by the appropriate case-mix weight
from Table 5 of this rule. Next, multiply
the case-mix adjusted national
standardized 60-day episode payment
by the labor portion (77.082 percent);
multiply this result by the appropriate
wage index factor listed in Addendum
A or B to wage-adjust the 60-day
episode payment. Next multiply the
case-mix adjusted national standardized
60-day episode payment by 22.918
percent to compute the non-labor
portion. Add this result to the wageadjusted labor portion to get the casemix and wage adjusted national 60-day
episode payment without NRS.
Calculate the NRS amount by
multiplying the episode’s NRS weight
(taken from Table 11 of this proposed
rule) by the NRS conversion factor. This
adjusted NRS payment is added to the
case-mix and wage-adjusted national
standardized 60-day episode payment.
The resulting amount is the case-mix
and wage-adjusted national
standardized 60-day episode payment
VerDate Aug<31>2005
16:04 Jun 15, 2007
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of
of
of
of
most
most
most
most
problematic
problematic
problematic
problematic
Score
rate including NRS for that particular
episode.’’
11. On page 25447, in the 12th line,
the figure ‘‘0.22198’’ is corrected to read
‘‘0.22918’’.
12. On page 25459, in Addendum A,
a. In the first column, in line 29, the
Wage Index for ‘‘Massachusetts’’ the
figure ‘‘1.0661’’ is corrected to read
‘‘1.1662’’.
b. In the second column, in line 15,
the superscript ‘‘1’’ which appears after
‘‘New Jersey’’ is deleted.
c. In the third column, in lines 17
through 22, the footnote ‘‘1’’ at the end
of Addendum A, the sentence ‘‘All
counties within the State are classified
as rural. No short-term acute care
hospitals are located in the area(s)’’ is
corrected to read as follows: ‘‘There are
no short-term, acute care hospitals
located in rural area(s) in Massachusetts
from which to calculate a wage index
for CY 2008.’’
(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital
Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: June 12, 2007.
Ann C. Agnew,
Executive Secretary to the Department.
[FR Doc. 07–2987 Filed 6–13–07; 11:55 am]
BILLING CODE 4120–01–P
PO 00000
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Office of Inspector General
42 CFR Part 1001
RIN 0991–AB23
Medicare and State Health Care
Programs: Fraud and Abuse;
Clarification of Terms and Application
of Program Exclusion Authority for
Submitting Claims Containing
Excessive Charges
Office of Inspector General
(OIG), HHS.
ACTION: Notice of withdrawal of
proposed rulemaking.
AGENCY:
SUMMARY: On September 15, 2003, we
published a notice of proposed
rulemaking (68 FR 53939) soliciting
public comments regarding further
guidance on OIG’s exclusion authority
under section 1128(b)(6)(A) of the Social
Security Act and 42 CFR 1001.701 of
our regulations. Having considered the
public comments and for the reasons
explained below, we are not
promulgating a final rule.
DATES: The notice of proposed
rulemaking published on September 15,
2003 at 68 FR 53939 is withdrawn as of
June 18, 2007.
FOR FURTHER INFORMATION CONTACT: Joel
Schaer, Office of External Affairs, (202)
619–0089.
SUPPLEMENTARY INFORMATION:
I. Background
A. Current Legal Framework
Section 1128(b)(6)(A) of the Social
Security Act (the Act) provides that the
Secretary may exclude any individual or
entity from participation in any Federal
health care program if the Secretary
determines that the individual or entity:
‘‘has submitted or caused to be submitted
bills or requests for payment (where such
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18JNP1
Federal Register / Vol. 72, No. 116 / Monday, June 18, 2007 / Proposed Rules
bills or requests are based on charges or cost)
under title XVIII [of the Act] or a State health
care program containing charges (or, in
applicable cases, requests for payment of
costs) for items or services furnished
substantially in excess of such individual’s or
entity’s usual charges (or, in applicable cases,
substantially in excess of such individual’s or
entity’s costs) for such items or services,
unless the Secretary finds there is good cause
for such bills or requests containing such
charges or costs.’’
jlentini on PROD1PC65 with PROPOSALS
The Secretary has specifically delegated
the authority under section 1128 of the
Act to the Department’s Office of
Inspector General (OIG) (53 FR 12993,
April 20, 1988).
The regulations interpreting section
1128(b)(6)(A) of the Act are set forth at
42 CFR 1001.701. Under
§ 1001.701(a)(1), OIG may exclude an
individual or entity that has
‘‘[s]ubmitted, or caused to be submitted,
bills or requests for payments under
Medicare or any of the State health care
programs containing charges or costs for
items or services furnished that are
substantially in excess of such
individual’s or entity’s usual charges or
costs for such items or services.’’ In
addition, § 1001.701(c)(1) provides that
an individual or entity will not be
excluded for ‘‘[s]ubmitting, or causing to
be submitted, bills or requests for
payment that contain charges or costs
substantially in excess of usual charges
or costs when such charges or costs are
due to unusual circumstances or
medical complications requiring
additional time, effort, expense or other
good cause.’’ The regulations at
§ 1001.701(d)(1) further provide that an
exclusion imposed under section
1128(b)(6)(A) of the Act will be for a
period of 3 years, unless certain
aggravating or mitigating circumstances
exist.
B. The Proposed Rule
OIG published a notice of proposed
rulemaking on September 15, 2003 to
provide further guidance on OIG’s
exclusion authority under section
1128(b)(6)(A) of the Act and 42 CFR
1001.701 (68 FR 53939).1 We noted in
the preamble to the proposed rule that,
notwithstanding the increasing use of
fee schedules by Federal health care
programs, many payment provisions of
the Act continue to be charge-based in
that programs are only obligated to pay
the lower of the actual charge or the fee
schedule amount. Therefore, section
1128(b)(6)(A) of the Act could still
apply to bills and requests for payment
submitted for items or services for
which payment is based directly or
1 For
prior OIG rulemaking history, see 68 FR
53939, 53940.
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indirectly on the provider’s charges or
costs, especially in Medicare Part B,
including, but not limited, to clinical
laboratory services, durable medical
equipment, medical supplies, and drugs
(65 FR 53939, 53940).2
In the notice of proposed rulemaking,
we proposed to define the term ‘‘usual
charges’’ by using one of two alternative
approaches that we described in the
proposed rule—either the provider’s
average charge or the provider’s median
charge (the ‘‘fiftieth percentile’’
method). We proposed that a provider’s
‘‘usual charges’’ would include: (1)
Charges billed directly to cash paying
patients; (2) the amounts billed to
patients covered by indemnity insurers
with which the provider has no
contractual arrangement; (3) any fee-forservice rate that a provider contractually
agrees to accept from any payor,
including any discounted fee-for-service
rates negotiated with managed care
plans; (4) rates offered to the
Department of Defense for its various
health care plans, including TriCare;
and (5) charges of the provider’s
affiliated entities. This approach
recognized the increasing prevalence of
contractually negotiated rates with
private customers. We also specifically
proposed that certain charges would not
be included when determining the usual
charge, such as (1) charges for services
provided to uninsured patients free of
charge or at a substantially reduced rate;
(2) capitated payments; (3) rates offered
under hybrid fee-for-service
arrangements whereby more than 10
percent of the individual’s or entity’s
maximum potential compensation could
be paid in the form of a bonus and/or
withhold payment; and (4) fees set by
Medicare, State health care programs,
and other Federal health care programs,
subject to certain limitations.
In addition, we proposed to defined
the term ‘‘substantially in excess’’ for
the purposes of section 1128(b)(6)(A) of
the Act to mean only those charges or
costs that are more than 120 percent of
an individual’s or entity’s usual charges
or costs. In other words, providers
submitting charges or costs that were
equal to or less than 120 percent of their
usual charges or costs would not be
subject to OIG’s permissive exclusion
authority under section 1128(b)(6)(A) of
the Act. Notwithstanding the 120
percent benchmark, exclusion would
remain within the discretion of OIG for
those providers submitting charges or
costs to Medicare or State health care
programs more than 120 percent of the
2 For convenience, the term ‘‘provider’’ in this
notice of withdrawal of proposed rulemaking
includes both suppliers and providers.
PO 00000
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33431
provider’s usual charges or costs. We
specifically sought public comment on
the proposed definition of
‘‘substantially in excess’’ and the 120
percent benchmark. We also solicited
comments on whether the benchmark
should vary based on certain factors
(e.g., whether the benchmark should be
lower for some providers than others
based on the type or location of a
provider or the reimbursement
methodology applicable to the provider
or whether the benchmark should take
into account certain market
considerations) and, if so, how and why
(68 FR 53939, 53942).
We also proposed to clarify the
statutory ‘‘good cause’’ exception by
amending § 1001.701(c)(1) to provide
that an individual or entity would not
be excluded for submitting, or causing
to be submitted, bills or requests for
payment that contain charges or costs
substantially in excess of usual charges
or costs when such charges or costs are
due to (1) unusual circumstances or
medical complications requiring
additional time, effort, or expense; (2)
increased costs associated with serving
Medicare or Medicaid beneficiaries; or
(3) other good cause.
We received 323 timely comments to
the proposed rule from a cross-section
of interested parties. Some commenters
supported the proposed rule, noting that
certain providers were continuing to
charge Medicare substantially in excess
of their usual charges or costs and that,
in some cases, these practices resulted
in unfair competition. Other
commenters considered the proposed
rule unnecessary given Medicare’s
increasing reliance on prospective
payment and fee schedules for
reimbursement of providers, while other
commenters thought that our proposed
definitions of ‘‘usual charges’’ and
‘‘substantially in excess’’ were flawed or
unworkable. In particular, some
commenters argued that the 120 percent
benchmark was too low or arbitrary, and
that a single, fixed benchmark was not
appropriate across all types of providers
or across all items and services.
In addition, several commenters
expressed concern that finalizing the
rule might have the unintended
consequence of increasing health care
costs generally. These commenters
explained that, to comply with the rule,
providers that were charging Medicare
and State health care programs in excess
of the 120 percent benchmark could
either lower charges to Medicare and
State health care programs or increase
charges to other payors. The
commenters were concerned that some
providers would opt to raise their prices
to other payors rather than lower their
E:\FR\FM\18JNP1.SGM
18JNP1
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Federal Register / Vol. 72, No. 116 / Monday, June 18, 2007 / Proposed Rules
charges to Medicare and State health
care programs. This behavior, the
commenters noted, could result in
increased health care costs across the
health care industry.
jlentini on PROD1PC65 with PROPOSALS
C. Determination Not To Promulgate a
Final Rule
We have carefully reviewed the
public comments and considered the
issues raised by promulgating a final
rule that would define the terms
‘‘substantially in excess’’ and ‘‘usual
charges,’’ and clarify the ‘‘good cause’’
exception in the manner proposed in
the notice of proposed rulemaking. For
the reasons set forth below, we decline
to promulgate a final rule.
First, we have concluded that we do
not have sufficient information at this
time to establish a single, fixed
numerical benchmark for ‘‘substantially
in excess’’ that could be applied
equitably across health care sectors and
across items and services, as we
originally proposed. Our intent in
proposing the 120 percent benchmark
was to create a bright line standard by
which all providers could evaluate their
usual charges. Upon reviewing the
comments, we believe that a single
benchmark for ‘‘substantially in excess’’
is unadvisable at this time. We believe
it is more appropriate to continue to
evaluate billing patterns of individuals
and entities on a case-by-case basis.
Second, based on our review of the
comments, we have determined that
there is insufficient information at this
time to assure ourselves that a final rule
would not have the unintended effect of
increasing health care costs across the
industry.
OIG remains concerned about
disparities in the amounts charged to
Medicare and Medicaid when compared
to private payers. While Medicare pays
for many items and services using fee
schedules that serve as payment
ceilings, many of these fee schedules are
infrequently updated or may be updated
using methods that do not adequately
capture prevailing market rates for the
same items and services. We recognize
that, in most cases, these fee schedules
are intended to approximate a
reasonable payment amount. However,
fee schedules are administered prices
that, in some situations, may quickly
become out-dated. As we noted in the
preamble to the September 15, 2003
proposed rule:
‘‘When market forces cause a provider’s
usual charge to most of its customers to drop
substantially below the Medicare fee
schedule allowance, some providers continue
to charge Medicare at least the fee schedule
amount. In this situation, the provider creates
a two-tier pricing structure with Medicare
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Jkt 211001
paying more than other customers. Unless
the price differential can be justified by costs
that are uniquely associated with the
Medicare program, the provider is simply
overcharging Medicare. In such
circumstances, section 1128(b)(6)(A) of the
Act obligates providers to either charge
Medicare and Medicaid approximately the
same amount as they usually charge their
other purchasers for the same items or
services or risk exclusion from all Federal
health care programs.’’ (68 FR 53939, 53940).
While the principal protection against
overpaying for items and services
furnished to Medicare and Medicaid
beneficiaries is timely and accurate
updating of the fee schedules, OIG
continues to believe that section
1128(b)(6)(A) of the Act provides useful
backstop protection for the public fisc
from providers that routinely charge
Medicare or Medicaid substantially
more than their other customers (68 FR
53939, 53941). We will continue to
evaluate billing patterns of individuals
and entities on a case-by-case basis and
to use all tools available to OIG to
address instances where Medicare or
Medicaid are charged substantially more
than other payors, without good cause.
D. Application of Section 1128(b)(6)(A)
of the Act to Discounts to the Uninsured
In the past, some providers have
expressed concern that offering
discounts to uninsured patients or other
patients who cannot afford their care
might skew the provider’s ‘‘usual
charges’’ for purposes of section
1128(b)(6)(A) of the Act and possibly
subject them to exclusion. OIG has
never excluded or contemplated
excluding any provider for offering bona
fide discounts to uninsured patients or
to other patients who cannot afford the
provider’s care. OIG believes that
section 1128(b)(6)(A) of the Act can be
reasonably interpreted to allow
providers to carve out discounts to these
patients when calculating their ‘‘usual
charges’’ to other customers. To this
end, the September 15, 2003 proposed
rule made clear that free or substantially
reduced prices offered to such patients
would not be factored into a provider’s
usual charges for purposes of the
exclusion authority (68 FR 53939,
53941). To further assure the industry,
we issued guidance on our Web site on
February 19, 2004 specifically providing
that, pending a decision with respect to
the September 15, 2003 proposed rule,
it would continue to be OIG’s
enforcement policy ‘‘that, when
calculating their ‘usual charges’ for
purposes of section 1128(b)(6)(A),
individuals and entities do not need to
consider free or substantially reduced
charges to (i) uninsured patients or (ii)
underinsured patients who are self-
PO 00000
Frm 00024
Fmt 4702
Sfmt 4702
paying patients for the items or services
furnished.’’ (https://oig.hhs.gov/fraud/
docs/alertsandbulletins/2004/
FA021904hospitaldiscounts.pdf)
Nothing in this withdrawal notice
affects OIG’s long-standing
interpretation of the statute in this
regard, and it continues to be OIG’s
position that, when calculating their
‘‘usual charges’’ for purposes of section
1128(b)(6)(A) of the Act, individuals
and entities do not need to consider free
or substantially reduced charges to (i)
uninsured patients or (ii) underinsured
patients who are self-pay patients for
the items or services furnished.
II. Withdrawal of Notice of Proposed
Rulemaking
Accordingly, the notice of proposed
rulemaking that was published in the
Federal Register on September 15, 2003
(68 FR 53939) is withdrawn.
III. Regulatory Impact Analysis
Since this action only withdraws a
notice of proposed rulemaking, it is
neither a proposed nor a final rule, and
therefore, is not covered under
Executive Order 12866 or the Regulatory
Flexibility Act (5 U.S.C. 601–612).
List of Subjects in 42 CFR Part 1001
Administrative practice and
procedure, Fraud, Health facilities,
Health professions, Medicaid, Medicare.
Dated: May 10, 2007.
Daniel R. Levinson,
Inspector General.
Approved: May 25, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. E7–11663 Filed 6–15–07; 8:45 am]
BILLING CODE 4150–01–P
DEPARTMENT OF HOMELAND
SECURITY
Federal Emergency Management
Agency
44 CFR Part 67
[Docket No. FEMA–D–7802]
Proposed Flood Elevation
Determinations
Federal Emergency
Management Agency, DHS.
ACTION: Proposed rule.
AGENCY:
SUMMARY: Technical information or
comments are requested on the
proposed Base (1% annual chance)
Flood Elevations (BFEs) and proposed
BFEs modifications for the communities
listed below. The BFEs are the basis for
E:\FR\FM\18JNP1.SGM
18JNP1
]]>Agencies
[Federal Register Volume 72, Number 116 (Monday, June 18, 2007)]
[Proposed Rules]
[Pages 33430-33432]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-11663]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
42 CFR Part 1001
RIN 0991-AB23
Medicare and State Health Care Programs: Fraud and Abuse;
Clarification of Terms and Application of Program Exclusion Authority
for Submitting Claims Containing Excessive Charges
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Notice of withdrawal of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: On September 15, 2003, we published a notice of proposed
rulemaking (68 FR 53939) soliciting public comments regarding further
guidance on OIG's exclusion authority under section 1128(b)(6)(A) of
the Social Security Act and 42 CFR 1001.701 of our regulations. Having
considered the public comments and for the reasons explained below, we
are not promulgating a final rule.
DATES: The notice of proposed rulemaking published on September 15,
2003 at 68 FR 53939 is withdrawn as of June 18, 2007.
FOR FURTHER INFORMATION CONTACT: Joel Schaer, Office of External
Affairs, (202) 619-0089.
SUPPLEMENTARY INFORMATION:
I. Background
A. Current Legal Framework
Section 1128(b)(6)(A) of the Social Security Act (the Act) provides
that the Secretary may exclude any individual or entity from
participation in any Federal health care program if the Secretary
determines that the individual or entity:
``has submitted or caused to be submitted bills or requests for
payment (where such
[[Page 33431]]
bills or requests are based on charges or cost) under title XVIII
[of the Act] or a State health care program containing charges (or,
in applicable cases, requests for payment of costs) for items or
services furnished substantially in excess of such individual's or
entity's usual charges (or, in applicable cases, substantially in
excess of such individual's or entity's costs) for such items or
services, unless the Secretary finds there is good cause for such
bills or requests containing such charges or costs.''
The Secretary has specifically delegated the authority under section
1128 of the Act to the Department's Office of Inspector General (OIG)
(53 FR 12993, April 20, 1988).
The regulations interpreting section 1128(b)(6)(A) of the Act are
set forth at 42 CFR 1001.701. Under Sec. 1001.701(a)(1), OIG may
exclude an individual or entity that has ``[s]ubmitted, or caused to be
submitted, bills or requests for payments under Medicare or any of the
State health care programs containing charges or costs for items or
services furnished that are substantially in excess of such
individual's or entity's usual charges or costs for such items or
services.'' In addition, Sec. 1001.701(c)(1) provides that an
individual or entity will not be excluded for ``[s]ubmitting, or
causing to be submitted, bills or requests for payment that contain
charges or costs substantially in excess of usual charges or costs when
such charges or costs are due to unusual circumstances or medical
complications requiring additional time, effort, expense or other good
cause.'' The regulations at Sec. 1001.701(d)(1) further provide that
an exclusion imposed under section 1128(b)(6)(A) of the Act will be for
a period of 3 years, unless certain aggravating or mitigating
circumstances exist.
B. The Proposed Rule
OIG published a notice of proposed rulemaking on September 15, 2003
to provide further guidance on OIG's exclusion authority under section
1128(b)(6)(A) of the Act and 42 CFR 1001.701 (68 FR 53939).\1\ We noted
in the preamble to the proposed rule that, notwithstanding the
increasing use of fee schedules by Federal health care programs, many
payment provisions of the Act continue to be charge-based in that
programs are only obligated to pay the lower of the actual charge or
the fee schedule amount. Therefore, section 1128(b)(6)(A) of the Act
could still apply to bills and requests for payment submitted for items
or services for which payment is based directly or indirectly on the
provider's charges or costs, especially in Medicare Part B, including,
but not limited, to clinical laboratory services, durable medical
equipment, medical supplies, and drugs (65 FR 53939, 53940).\2\
---------------------------------------------------------------------------
\1\ For prior OIG rulemaking history, see 68 FR 53939, 53940.
\2\ For convenience, the term ``provider'' in this notice of
withdrawal of proposed rulemaking includes both suppliers and
providers.
---------------------------------------------------------------------------
In the notice of proposed rulemaking, we proposed to define the
term ``usual charges'' by using one of two alternative approaches that
we described in the proposed rule--either the provider's average charge
or the provider's median charge (the ``fiftieth percentile'' method).
We proposed that a provider's ``usual charges'' would include: (1)
Charges billed directly to cash paying patients; (2) the amounts billed
to patients covered by indemnity insurers with which the provider has
no contractual arrangement; (3) any fee-for-service rate that a
provider contractually agrees to accept from any payor, including any
discounted fee-for-service rates negotiated with managed care plans;
(4) rates offered to the Department of Defense for its various health
care plans, including TriCare; and (5) charges of the provider's
affiliated entities. This approach recognized the increasing prevalence
of contractually negotiated rates with private customers. We also
specifically proposed that certain charges would not be included when
determining the usual charge, such as (1) charges for services provided
to uninsured patients free of charge or at a substantially reduced
rate; (2) capitated payments; (3) rates offered under hybrid fee-for-
service arrangements whereby more than 10 percent of the individual's
or entity's maximum potential compensation could be paid in the form of
a bonus and/or withhold payment; and (4) fees set by Medicare, State
health care programs, and other Federal health care programs, subject
to certain limitations.
In addition, we proposed to defined the term ``substantially in
excess'' for the purposes of section 1128(b)(6)(A) of the Act to mean
only those charges or costs that are more than 120 percent of an
individual's or entity's usual charges or costs. In other words,
providers submitting charges or costs that were equal to or less than
120 percent of their usual charges or costs would not be subject to
OIG's permissive exclusion authority under section 1128(b)(6)(A) of the
Act. Notwithstanding the 120 percent benchmark, exclusion would remain
within the discretion of OIG for those providers submitting charges or
costs to Medicare or State health care programs more than 120 percent
of the provider's usual charges or costs. We specifically sought public
comment on the proposed definition of ``substantially in excess'' and
the 120 percent benchmark. We also solicited comments on whether the
benchmark should vary based on certain factors (e.g., whether the
benchmark should be lower for some providers than others based on the
type or location of a provider or the reimbursement methodology
applicable to the provider or whether the benchmark should take into
account certain market considerations) and, if so, how and why (68 FR
53939, 53942).
We also proposed to clarify the statutory ``good cause'' exception
by amending Sec. 1001.701(c)(1) to provide that an individual or
entity would not be excluded for submitting, or causing to be
submitted, bills or requests for payment that contain charges or costs
substantially in excess of usual charges or costs when such charges or
costs are due to (1) unusual circumstances or medical complications
requiring additional time, effort, or expense; (2) increased costs
associated with serving Medicare or Medicaid beneficiaries; or (3)
other good cause.
We received 323 timely comments to the proposed rule from a cross-
section of interested parties. Some commenters supported the proposed
rule, noting that certain providers were continuing to charge Medicare
substantially in excess of their usual charges or costs and that, in
some cases, these practices resulted in unfair competition. Other
commenters considered the proposed rule unnecessary given Medicare's
increasing reliance on prospective payment and fee schedules for
reimbursement of providers, while other commenters thought that our
proposed definitions of ``usual charges'' and ``substantially in
excess'' were flawed or unworkable. In particular, some commenters
argued that the 120 percent benchmark was too low or arbitrary, and
that a single, fixed benchmark was not appropriate across all types of
providers or across all items and services.
In addition, several commenters expressed concern that finalizing
the rule might have the unintended consequence of increasing health
care costs generally. These commenters explained that, to comply with
the rule, providers that were charging Medicare and State health care
programs in excess of the 120 percent benchmark could either lower
charges to Medicare and State health care programs or increase charges
to other payors. The commenters were concerned that some providers
would opt to raise their prices to other payors rather than lower their
[[Page 33432]]
charges to Medicare and State health care programs. This behavior, the
commenters noted, could result in increased health care costs across
the health care industry.
C. Determination Not To Promulgate a Final Rule
We have carefully reviewed the public comments and considered the
issues raised by promulgating a final rule that would define the terms
``substantially in excess'' and ``usual charges,'' and clarify the
``good cause'' exception in the manner proposed in the notice of
proposed rulemaking. For the reasons set forth below, we decline to
promulgate a final rule.
First, we have concluded that we do not have sufficient information
at this time to establish a single, fixed numerical benchmark for
``substantially in excess'' that could be applied equitably across
health care sectors and across items and services, as we originally
proposed. Our intent in proposing the 120 percent benchmark was to
create a bright line standard by which all providers could evaluate
their usual charges. Upon reviewing the comments, we believe that a
single benchmark for ``substantially in excess'' is unadvisable at this
time. We believe it is more appropriate to continue to evaluate billing
patterns of individuals and entities on a case-by-case basis.
Second, based on our review of the comments, we have determined
that there is insufficient information at this time to assure ourselves
that a final rule would not have the unintended effect of increasing
health care costs across the industry.
OIG remains concerned about disparities in the amounts charged to
Medicare and Medicaid when compared to private payers. While Medicare
pays for many items and services using fee schedules that serve as
payment ceilings, many of these fee schedules are infrequently updated
or may be updated using methods that do not adequately capture
prevailing market rates for the same items and services. We recognize
that, in most cases, these fee schedules are intended to approximate a
reasonable payment amount. However, fee schedules are administered
prices that, in some situations, may quickly become out-dated. As we
noted in the preamble to the September 15, 2003 proposed rule:
``When market forces cause a provider's usual charge to most of
its customers to drop substantially below the Medicare fee schedule
allowance, some providers continue to charge Medicare at least the
fee schedule amount. In this situation, the provider creates a two-
tier pricing structure with Medicare paying more than other
customers. Unless the price differential can be justified by costs
that are uniquely associated with the Medicare program, the provider
is simply overcharging Medicare. In such circumstances, section
1128(b)(6)(A) of the Act obligates providers to either charge
Medicare and Medicaid approximately the same amount as they usually
charge their other purchasers for the same items or services or risk
exclusion from all Federal health care programs.'' (68 FR 53939,
53940).
While the principal protection against overpaying for items and
services furnished to Medicare and Medicaid beneficiaries is timely and
accurate updating of the fee schedules, OIG continues to believe that
section 1128(b)(6)(A) of the Act provides useful backstop protection
for the public fisc from providers that routinely charge Medicare or
Medicaid substantially more than their other customers (68 FR 53939,
53941). We will continue to evaluate billing patterns of individuals
and entities on a case-by-case basis and to use all tools available to
OIG to address instances where Medicare or Medicaid are charged
substantially more than other payors, without good cause.
D. Application of Section 1128(b)(6)(A) of the Act to Discounts to the
Uninsured
In the past, some providers have expressed concern that offering
discounts to uninsured patients or other patients who cannot afford
their care might skew the provider's ``usual charges'' for purposes of
section 1128(b)(6)(A) of the Act and possibly subject them to
exclusion. OIG has never excluded or contemplated excluding any
provider for offering bona fide discounts to uninsured patients or to
other patients who cannot afford the provider's care. OIG believes that
section 1128(b)(6)(A) of the Act can be reasonably interpreted to allow
providers to carve out discounts to these patients when calculating
their ``usual charges'' to other customers. To this end, the September
15, 2003 proposed rule made clear that free or substantially reduced
prices offered to such patients would not be factored into a provider's
usual charges for purposes of the exclusion authority (68 FR 53939,
53941). To further assure the industry, we issued guidance on our Web
site on February 19, 2004 specifically providing that, pending a
decision with respect to the September 15, 2003 proposed rule, it would
continue to be OIG's enforcement policy ``that, when calculating their
`usual charges' for purposes of section 1128(b)(6)(A), individuals and
entities do not need to consider free or substantially reduced charges
to (i) uninsured patients or (ii) underinsured patients who are self-
paying patients for the items or services furnished.'' (https://
oig.hhs.gov/fraud/docs/alertsandbulletins/2004/
FA021904hospitaldiscounts.pdf)
Nothing in this withdrawal notice affects OIG's long-standing
interpretation of the statute in this regard, and it continues to be
OIG's position that, when calculating their ``usual charges'' for
purposes of section 1128(b)(6)(A) of the Act, individuals and entities
do not need to consider free or substantially reduced charges to (i)
uninsured patients or (ii) underinsured patients who are self-pay
patients for the items or services furnished.
II. Withdrawal of Notice of Proposed Rulemaking
Accordingly, the notice of proposed rulemaking that was published
in the Federal Register on September 15, 2003 (68 FR 53939) is
withdrawn.
III. Regulatory Impact Analysis
Since this action only withdraws a notice of proposed rulemaking,
it is neither a proposed nor a final rule, and therefore, is not
covered under Executive Order 12866 or the Regulatory Flexibility Act
(5 U.S.C. 601-612).
List of Subjects in 42 CFR Part 1001
Administrative practice and procedure, Fraud, Health facilities,
Health professions, Medicaid, Medicare.
Dated: May 10, 2007.
Daniel R. Levinson,
Inspector General.
Approved: May 25, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. E7-11663 Filed 6-15-07; 8:45 am]
BILLING CODE 4150-01-P
