Hospitals are trying to quash an attempt by HHS' inspector general's office to insert enforcement parameters in a 17-year-old law against overcharging Medicare, saying it would create an administrative nightmare and might impede their efforts to offer discounts to uninsured patients.
The inspector general's office says its proposed regulations would provide a tool to crack down on pervasive overcharges for such things as clinical laboratory services, durable medical equipment, medical supplies and drugs-items for which Medicare pays prices that are based on a provider's charges or reported costs. The proposed regulations would define what constitutes usual and excessive charges under the Social Security Act.
But hospitals argue the proposal would add to the regulatory burden that they say makes it difficult to offer discounts to uninsured patients because it's unclear whether slight discounts would be included in a calculation to determine a hospital's "usual" charges. The regulations, which were published Sept. 15, 2003, drew 323 comment letters, more than half of them from hospitals. The comment period ended Nov. 14, 2003.
Last month HHS Secretary Tommy Thompson wrote a letter to the American Hospital Association denying that federal rules prohibit hospitals from giving price breaks to individual patients. Thompson's agency, along with the inspector general's office, issued guidance summarizing federal law pertaining to billing for the uninsured (Feb. 23, p. 6).
Asked about the issue during a speech at a public policy forum held by the Federation of American Hospitals this month, acting Principal Deputy Inspector General Dara Corrigan said she was taking hospitals' concerns seriously. Corrigan said until her office decides whether to issue final regulations, its policy will be not to exclude any provider from the Medicare program for giving discounts to uninsured or underinsured patients.
Her comments echoed an unusual written statement issued by the inspector general's office in February, which assured hospitals that they would not be penalized for offering discounts to uninsured and underinsured patients.
Nevertheless, the AHA's Washington counsel, Melinda Hatton, said the regulations would create "some ambiguity and possibly some reluctance on the part of hospitals to do graduated discounts" because of uncertainty over how they would be enforced and the large penalty for violation-exclusion from the Medicare program.
The regulations would define a hospital's "usual" charge by either the average or the median of its charges for a particular service in a one-year period. Free or discounted care provided to uninsured patients would be excluded from the calculation. Excessive charges would be defined as more than 120% of a provider's usual charges.
The regulations also would broaden the scope of "good cause" exceptions that allow the government to excuse overcharges if a provider can show that there were extra costs associated with a case.
Hospitals say the proposed regulations would be difficult if not impossible to implement and wouldn't reduce Medicare payments to hospitals. They also say the regulations shouldn't be applied because most hospital services are reimbursed through a prospective payment system in which rates are set by Medicare and not determined by the hospital. Physicians, who are paid according to a fee schedule, are excluded from the regulations.
The inspector general's office made two previous attempts to define how it would interpret the terms under the 1987 law, in 1990 and 1997, but after reviewing comments it decided to continue evaluating bills on a case-by-case basis.
In its proposed regulations, the inspector general's office noted that a number of government studies have shown that Medicare pays considerably more than other payers for some services.