[Code of Federal Regulations]

[Title 42, Volume 2]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 42CFR405.503]



[Page 113]

 

                         TITLE 42--PUBLIC HEALTH

 

                    CHAPTER IV--CENTERS FOR MEDICARE

                          & MEDICAID SERVICES,

                        DEPARTMENT OF HEALTH AND

                             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 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.