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OIG takes back excessive charges rule

Device Regulation Alert: Safety, Compliance and Reimbursement News, July 2, 2007

With a 2003 proposed rule, the OIG had hoped to make it easier to apply an existing prohibition against excessive Medicare charges. But after nearly four years and more that 300 public comments on the matter, the agency backed down from its attempt to more clearly define "substantially in excess" charges.

If an entity submits a claim to Medicare or a state program "substantially in excess" of usual charges for the same items and services, the Social Security Act authorizes the OIG to exclude that entity from participating in federal healthcare programs.

The proposed rule described how to calculate "usual charges" and also proposed that charges more than 120% of the usual charges be considered "substantially in excess." However, after receiving 323 public comments, the OIG concluded it didn't have enough information to set such a definitive benchmark. Many public comments said the 120% benchmark was too low or arbitrary.

However, the OIG remains committed to reviewing billing patterns and promised to take action to counter charges substantially in excess of usual charges absent "good cause" for the disparity.

Despite the fact that the OIG backed down from a final rule on the matter, the prohibition against charging Medicare substantially in excess of usual charges still exists. If a device is separately reimbursable under Medicare or other federal healthcare programs-that is, payment is made for the device separate from any payment to the physician or hospital or outpatient facility-the exclusion authority would be relevant, explains Michael R. Manthei, a partner in the Boston office of Holland & Knight LLP.

"Additionally, if a device manufacturer 'caused' someone else to submit a claim that was substantially in excess of the submitting individual's or entity's usual charges, for example, by substantially discounting the price and then 'marketing the spread,' the exclusion authority might be triggered," he adds.

Finally, if manufacturers and suppliers report information that later may be taken into account by CMS in setting fee schedule or prospective payment rates that include the cost of devices, the "excessive charges" exclusion authority is implicated, says Manthei.

Let's say, a manufacturer or supplier provides false or misleading information regarding discounts offered to GPOs. Then, Medicare uses those figures to calculate fee schedules rates or prospective payment rates. If those figures cause the fee schedule or prospective payment rates to rise to a level substantially in excess of the usual rates, the OIG possibly could act to exclude the manufacturer or supplier, he says.

To read the notice, click here and scroll to "Inspector General Office."

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