[Code of Federal Regulations]
[Title 42, Volume 2]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR405.503]

[Page 92-93]
 
                         TITLE 42--PUBLIC HEALTH
 
                             HUMAN SERVICES
 
PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED--Table of Contents
 
         Subpart E--Criteria for Determining Reasonable Charges
 
Sec. 405.503  Determining customary charges.

    (a) Customary charge defined. The term ``customary charges'' will 
refer to the uniform amount which the individual physician or other 
person charges in the majority of cases for a specific medical procedure 
or service. In determining such uniform amount, token charges for 
charity patients and substandard charges for welfare and other low 
income patients are to be excluded. The reasonable charge cannot, except 
as provided in Sec. 405.506, be higher than the individual physician's 
or other person's customary charge. The customary charge for different 
physicians or other persons may, of course, vary. Payment for covered 
services would be based on the actual charge for the service when, in a 
given instance, that charge is less than the amount which the carrier 
would otherwise have found to be within the limits of acceptable charges 
for the particular service. Moreover, the income of the individual 
beneficiary is not to be taken into account by the carrier in 
determining the amount which is considered to be a reasonable charge for 
a service rendered to him. There is no provision in the law for a 
carrier to evaluate the reasonableness of charges in light of an 
individual beneficiary's economic status.
    (b) Variation of charges. If the individual physician or other 
person varies his charges for a specific medical procedure or service, 
so that no one amount is charged in the majority of cases, it will be 
necessary for the carrier to exercise judgment in the establishment of a 
``customary charge'' for such physician or other person. In making this 
judgment, an important guide, to be utilized when a sufficient volume of 
data on the physician's or other person's charges is available, would be 
the median or midpoint of his charges, excluding token and substandard 
charges as well as exceptional charges on the high side. A significant 
clustering of charges in the vicinity of the median amount might 
indicate that a point of such clustering should be taken as the 
physician's or other person's ``customary'' charge. Use of

[[Page 93]]

relative value scales will help in arriving at a decision in such 
instances.
    (c) Use of relative value scales. If, for a particular medical 
procedure or service, the carrier is unable to determine the customary 
charge on the basis of reliable statistical data (for example, because 
the carrier does not yet have sufficient data or because the performance 
of the particular medical procedure or service by the physician or other 
person is infrequent), the carrier may use appropriate relative value 
scales to determine the customary charge for such procedure or service 
in relation to customary charges of the same physician or person for 
other medical procedures and services.
    (d) Revision of customary charge. A physician's or other person's 
customary charge is not necessarily a static amount. Where a physician 
or other person alters his charges, a revised pattern of charges for his 
services may develop. Where on the basis of adequate evidence, the 
carrier finds that the physician or other person furnishing services has 
changed his charge for a service to the public in general, the customary 
charge resulting from the revised charge for the service should be 
recognized as the customary charge in making determinations of 
reasonable charges for such service when rendered thereafter to 
supplementary insurance beneficiaries. If the new customary charge is 
not above the top of the range of prevailing charges (see 
Sec. 405.504(a)), it should be deemed to be reasonable by the carrier, 
subject to the provisions of Sec. 405.508.