[Federal Register Volume 72, Number 116 (Monday, June 18, 2007)]
[Proposed Rules]
[Pages 33430-33432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-11663]
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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.
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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2003 at 68 FR 53939 is withdrawn as of June 18, 2007.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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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\
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\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.
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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
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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.'' (http://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