OIG Withdraws Proposed Rule on Charges Substantially in Excess of Usual Charges

On June 18, 2007, the Department of Health and Human Services' Office of Inspector General (OIG) published a Notice in the Federal Register announcing that it will not promulgate a final rule clarifying the OIG's permissive exclusion authority under Section 1128(b)(6)(A) of the Social Security Act.

Section 1128(b)(6)(A) and its implementing regulations allow the OIG to exclude a provider from the Medicare and Medicaid programs for submitting payment requests based on charges that are "substantially in excess" of the provider's "usual charges."  On September 15, 2003, the OIG published a Proposed Rule in the Federal Register attempting to clarify its exclusion authority by defining "substantially in excess" and "usual charges," and further clarifying the "good cause" exception. 

In the Notice, the OIG indicates that it will not be promulgating a final rule at this time because it does not have sufficient information to establish a single, fixed numerical benchmark for "substantially in excess" that can be applied equitably across health care sectors and items and services.  The OIG also indicates that it has insufficient information to assure that a final rule would not have the unintended effect of increasing health care costs across the industry.  Instead, the Notice suggests that the OIG will continue to evaluate billing patterns on a case-by-case basis to address instances where the Medicare and Medicaid programs are charged substantially more than other payers, without good cause.

The Notice also addresses concerns regarding whether discounts to uninsured and underinsured patients might skew a provider's "usual charges" and expose the provider to the OIG's exclusion authority under Section 1128(b)(6)(A).  Specifically, the Notice indicates that it will continue to be the OIG's position that, when calculating "usual charges," a provider does not need to consider free or substantially reduced charges to:

• Uninsured patients; or
• Underinsured patients who are self-pay patients for the items or services furnished.

In conjunction with the Notice, the OIG has also released an Addendum to a February 2, 2004 guidance document, entitled "Hospital Discounts to Patients Who Cannot Afford to Pay Their Hospital Bills."