Is it illegal to charge Medicare more?

Saturday, September 30, 2006

Q. A competitor is threatening to report my company to Medicare because we bill Medicare more than we charge walk-in retail customers for the same items. Is that illegal?
A. Not necessarily. The Medicare statute prohibits a provider from submitting claims to Medicare that are "substantially in excess of such individual's or entity's usual charges." The penalty for violation of this prohibition is exclusion from the Medicare and Medicaid programs. However, enforcement of this statute has always been limited because there has never been a clear definition of what the phrases "substantially in excess" and "usual charges" mean. Therefore, it has never been clear what the law does and does not prohibit. The OIG has tried several times to clarify the scope of this provision, but so far, there is no definitive answer. One thing is clear: The provision doesn't mean a supplier may never sell an item for less than it charges Medicare.
Until there is clear official guidance on the meaning of this statute, either through regulations or court decisions, one reasonably safe approach for providers is to look to the OIG's latest proposed regulations, which were published in 2003 but have never been finalized. Under those regulations, a supplier would not be in violation of the statute unless the payments it receives in a year from (1) cash purchasers (other than uninsured patients who receive free or discounted services), (2) contracted commercial indemnity and non-risk commercial managed care payers, (3) non-contracted commercial payers and (4) TriCare are discounted, on average, more than 17% below its charges to Medicare.
Like the OIG's earlier efforts, these proposed regulations have been heavily criticized. If and when they are issued in final form, they will probably have undergone major modifications. At present, though, they are the most current guidance available. Therefore, until the law is definitively clarified, a supplier is at little risk of being found in violation of the "substantially in excess" provision if its discounts to cash customers and commercial payers do not average more than 17% off DMEPOS fee schedule amounts.


Tim Webster is a healthcare attorney with the law firm Brown & Fortunato. Reach him at 806-345-6320 or