5220. EFFECT OF WAIVER OF COINSURANCE OR DEDUCTIBLE ON CARRIER DETERMINATIONS OF ACTUAL CHARGES AND CUSTOMARY CHARGES

The criteria you must take into account in determining the reasonable charge for a service or item include (in addition to the prevailing charge) the customary charge of the physician or supplier who furnished it, and the actual charge made in a given case (i.e., the amount the physician or supplier actually expects to receive from the patient and/or third-party payer). In this regard, a billed amount that is not reasonably related to an expectation of payment is not considered the "actual" charge for the purpose of processing a current claim or for the purpose of determining customary charges. In addition, such billing practices may constitute a violation of the law pertaining to false claims and kickbacks. Therefore, when you become aware that a physician/supplier routinely and consistently waives the collection of coinsurance or deductible amounts from or on behalf of Medicare beneficiaries generally, you must review the circumstances to determine whether this constitutes a reduction of the physician's/supplier's actual charges.

Where a physician/supplier makes a reasonable collection effort for the payment of coinsurance/deductibles, failure to collect payment is not considered a reduction in the physician's/supplier's charge. To be considered a reasonable collection effort, the effort to collect Medicare coinsurance/deductible amounts must be similar to the effort made to collect comparable amounts from non-Medicare patients. It must also involve the issuance of a bill to the beneficiary or to the party responsible for the patient's personal financial obligations. In addition, it may include, as appropriate, other actions, such as subsequent billings, collection letters and telephone calls or personal contacts which constitute a genuine, rather than token, collection effort.

A physician/supplier's collection effort may include the use of a collection agency in addition to or in lieu of subsequent billings, follow-up letters, telephone and personal contacts. When a collection agency is used, Medicare expects that all uncollected patient charges of like amount and for patients in like circumstances to be referred to the agency without regard to class of patient. The "like amount" requirement may include uncollected charges above a specified minimum amount. Therefore, if a provider refers to a collection agency its uncollected non-Medicare patient charges but does not refer like amounts due the physician/supplier from its Medicare patient, the reduced amount is considered the actual charge.

A. Unallowable Waivers.--The following are examples of circumstances that ordinarily are evidence that a physician/supplier has reduced his actual charges:

1. Advertisement of an intention generally to waive collection of Medicare coinsurance/deductible amounts;

2. Unsolicited advice given by physicians/suppliers to non-indigent beneficiaries that they do not have to pay coinsurance/deductible;

3. Charges to Medicare beneficiaries higher than those made to other persons for similar services and items (e.g., to offset the "waiver" of coinsurance);

4. Failure generally to collect coinsurance/deductibles for an identifiable group of Medicare patients for reasons unrelated to indigency or disproportionate costs of billing (e.g., a supplier waives coinsurance or deductible for all referrals from a particular hospital);

5. Waivers are made for the majority, i.e., over 50 percent, of Medicare patients for any reason other than disproportionate billing costs, unless reasonable collection efforts were made.

B. Allowable Waivers.--The following are examples of circumstances where failure to bill for or to collect coinsurance/deductibles do not constitute a reduction of the actual charges made by the physician/supplier for that service:

1. The physician/supplier accepts a lesser amount than his usual charge in discharge of a patient’s liability based on his determination of a particular patient’s indigency. Where a physician/supplier has previously made such a determination, he may notify the beneficiary that he/she does not have to pay coinsurance/deductibles. However, failure to collect coinsurance/deductibles from the majority of patients on the grounds of indigency constitutes a reduction of the physician’s/supplier’s actual charge, unless reasonable collection efforts are made.

The patient’s indigence must be determined by the physician/supplier, not by the patient. The physician/supplier must ask if any source other than the patient is legally responsible for the patient’s medical bill, (e.g., title XIX, local welfare agency, guardian, other insurance).

2. The physician/supplier satisfies you that the cost of billing for and/or collecting the coinsurance/deductibles for a particular service exceeds or is disproportionate to the amounts to be collected.

C. Procedures Where Evidence of Unallowable Waivers is Found.--Where you find the routine and consistent waivers of coinsurance/deductibles from or on behalf of Medicare beneficiaries by a physician/supplier, notify the physician/supplier in writing regarding the determination you have made, the basis for that determination, and that the billing practice may be a violation of §§1128A and 1128B of the Social Security Act pertaining to false claims and kickbacks. Give the physician/supplier 30 days to dispute the determination and/or to offer an explanation.

Where the physician/supplier does not provide a satisfactory explanation, you must:

1. Process the current claims received on the basis of the actual charges made, i.e., the amounts the physician/supplier actually expects to receive, if waivers are occurring currently.

2. Reduce the current customary charge screens by 20 percent, applicable to all claims received for services rendered after the date of such reduction, whether assigned or non-assigned, if the physician/supplier followed a similar policy in the year from which the customary charge data were derived.

3. Adjust the current calendar year charges used for development of the customary and prevailing fees for the next reasonable charge update to take into account the lower actual charge.

4. Refer cases where a pattern of waivers is found to the Regional Office of Inspector General for appropriate action, which may include suspension or exclusion from the program, and/or referrals to the Department of Justice for prosecution.

D. Appeal Procedures.--When you determine that there has been a waiver, the physician/supplier may appeal per the procedures in §§12100-12100.15.