AMARILLO, TX – Under Medicare policy, DME suppliers must issue an ABN when they reasonably expect Medicare to deny payment for items or services that would otherwise be covered. Chapter 30, Section 50.2 of the Medicare Claims Processing Manual establishes that ABNs serve dual purposes: (i) providing beneficiaries advance notice before receiving items for which Medicare will likely deny payment, and (ii) establishing a mechanism for suppliers to shift financial liability to beneficiaries who elect to receive non-covered items or services. The Claims Processing Manual indicates that issuance of an ABN is required to hold a beneficiary financially liable when equipment or supplies will be denied as “not reasonable and necessary.”
For example, the Local Coverage Determination for Oxygen and Oxygen Equipment (the “LCD”) states “Emergency or stand-by oxygen systems for beneficiaries who are not regularly using oxygen will be denied as not reasonable and necessary since they are precautionary and not therapeutic in nature.” Therefore, when a DME supplier expects that a second oxygen concentrator will be denied as not reasonable and necessary under the LCD, Medicare policy allows the supplier to hold the beneficiary financially responsible for the equipment if, and only if, an ABN was properly issued to the beneficiary and the beneficiary agreed to pay for the equipment.
The Claims Processing Manual (“Manual”) confirms in Section 50.9 that when a valid ABN has been delivered and the beneficiary agrees to pay, suppliers may bill and collect their usual and customary fees and are not limited to the Medicare fee schedule amounts. However, if Medicare ultimately pays the claim, suppliers must refund any excess amounts collected from the beneficiary.
This advance notice process allows beneficiaries to make an informed decision about accepting financial responsibility while preserving their right to request Medicare adjudication through submission of a claim with the GA modifier. When properly executed according to the Manual’s requirements, this process appropriately protects both beneficiary rights and the DME supplier’s ability to charge its usual rates for non-covered equipment, provided the beneficiary has made an informed choice to accept financial responsibility. The Manual provides additional safeguards by requiring that ABNs be delivered far enough in advance of furnishing items or services to allow beneficiaries sufficient time for consideration of their options and by prohibiting routine delivery of ABNs to all beneficiaries.
The Medicare Exclusion Statute
Federal law, 42 U.S.C. § 1320a-7(b)(6), allows the Health and Human Services (“HHS”) to exclude any individual or entity from participation in any Federal health care program if the individual or entity:
(A) has submitted or caused to be submitted bills or requests for payment (where such bills or requests are based on charges or cost) under subchapter XVIII or a State health care program containing charges (or, in applicable cases, requests for payment of costs) for items or services furnished substantially in excess of such individual’s or entity’s usual charges (or, in applicable cases, substantially in excess of such individual’s or entity’s costs) for such items or services, unless the Secretary finds there is good cause for such bills or requests containing such charges or costs;
(B) has furnished or caused to be furnished items or services to patients (whether or not eligible for benefits under subchapter XVIII or under a State health care program) substantially in excess of the needs of such patients or of a quality which fails to meet professionally recognized standards of health care …
The Department of Health & Human Services Office of Inspector General (“OIG”) has promulgated regulations implementing the statute at 42 C.F.R. § 1001.701:
(A) Circumstance for exclusion. The OIG may exclude an individual or entity that has—
(1) Submitted, or caused to be submitted, bills or requests for payments under Medicare or any of the State health care programs containing charges or costs for items or services furnished that are substantially in excess of such individual’s or entity’s usual charges or costs for such items or services; or
(2) Furnished, or caused to be furnished, to patients (whether or not covered by Medicare or any of the State health care programs) any items or services substantially in excess of the patient’s needs, or of a quality that fails to meet professionally recognized standards of health care.
The OIG has issued several Advisory Opinions discussing “substantially in excess” in the context of a supplier’s “usual charges.” In OIG Advisory Opinion No. 98-8, a DME supplier (not enrolled in Medicare) with several “superstores” selling DME items to only cash-pay customers proposed to open a subsidiary DME supplier entity that would enroll in Medicare and sell Medicare reimbursable items.
The “parent” DME supplier would continue to sell the same items at a discount compared to the Medicare fee schedule. The Medicare-enrolled supplier proposed to charge Medicare the fee schedule amounts due to the increased costs of serving Medicare beneficiaries. The OIG indicated that, “[b]ecause the … charge [to] Medicare is generally 21-32% higher …, … [the] charges … would be substantially in excess of its usual charges and potentially subject … to exclusion absent ‘good cause.’” This and other advisory opinions imply that the price charged to Medicare should not be more than 120% of the price charged customarily to non-Medicare customers absent good cause supporting a higher charge.
In a 2003 proposed rule, the OIG considered defining “usual charge” to be the average charge or the median charge, proposing various methods to factor in all of a supplier’s charges, to various payors, for a particular item. In considering a definition for “substantially in excess,” HHS stated, “[b]ased on anecdotal evidence and our review of particular factual situations … a 20 percent differential is high enough that most people would agree that the charges to Medicare are substantially in excess.” The proposed 20% guideline is consistent with the advisory opinions. Ultimately, the OIG decided to refrain from promulgating a final rule. Although this proposed rule was withdrawn, it shows that the OIG has consistently viewed charges to Medicare exceeding 20% of a supplier’s usual charges as violating the substantially in excess provisions.
The OIG has discussed “substantially in excess of a patient’s needs” in its commentary to the regulations. In its comments, the OIG stated, “it is unnecessary to define the phrase ‘substantially in excess of the patient’s needs’” and that it will determine liability under the regulation on a case-by-case basis “made on the basis of expert medical opinion.”
In referring to the use of expert medical opinions, the OIG appears to imply that it will look to whether a particular instance is not consistent with the standard of care. In response to concerns that the regulation would impose liability for providing “increased level of services to a patient,” the OIG stated that the regulation “is not intended to subject to liability those who furnish an increased level of care to a patient who has been informed that such care is not medically necessary and that neither Medicare nor a State health care program will reimburse such services, but who chooses to purchase such services at his or her own expense.” It is important that the DME supplier inform patients, by way of the ABN, that a product does not meet medical necessity (under Medicare’s payment rules) and is not reimbursable by Medicare.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].
