Will OIG Reconsider Policy on Discriminatory Pricing?

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HEIGHTENED COMPETITION in recent months for exclusive managed care contracts between the two blood brothers may trigger the law of unintended consequences. One such consequence could be renewed interest by Medicare regulators in what they call “discriminatory billing.”

“In 2003, the federal Office of the Inspector General (OIG) issued a draft statement on discriminatory billing,” said Lâle White, Founder and Executive Chairman of XIFIN, Inc., in San Diego, California. “The draft was never finalized, but now that the large national labs are signing national contracts with major health insurers at lower price points, it could be that the OIG will decide it’s time to finalize the statement on discriminatory billing.

Draft Language By The OIG

“The basis of that draft language is that federal regulators don’t want Medicare to be charged by a provider an amount “substantially in excess” (or 120% above) of its usual charges to the general public,” explained White. “As written and published for comment, the draft version of the discriminatory billing policy would include any fee-for-service rates a provider agrees to accept from any third party in the definition of such charges. Sanctions for charging in excess of the usual charge would include exclusion from federal and state healthcare programs. This regulation is not final and third party contract rates were not included in the past.

“But it means that if a laboratory were to contract with a third party provider, such as Aetna, Cigna, or United Healthcare, for a fee-for-service price that is significantly lower than the Medicare fee schedule, then it would be expected that this reduction to the provider’s average pricing or “usual charges” would be extended to Medicare,” White said. “Now that the two national laboratories have rebid these major exclusive contracts at what are likely to be significantly low fee-for-service rates relative to the Medicare fee schedule, it might motivate Medicare regulators to finalize the draft language that was published in 2003.

Discriminatory Billing Policy

“The larger labs have systems and legal advisers that allow them to stay on top of the discriminatory billing policies, as defined by Medicare guidelines and statutes,” continued White. “It is likely that they have negotiated language into their managed care contracts that would allow them to respond to any federal or state changes that would significantly alter how they would bill government or state programs. In other words, they have made sure that their contract language covers them if the draft is finalized. They want to make sure that they’re not caught in a problem of this nature.”

“Further, given the publicity generated by the managed care contract awards that affect both of the national laboratory companies, it would not be a surprise if OIG officials decided to revisit the subject of discriminatory pricing and evaluate if implementation of the draft language would be financially beneficial to the Medicare program”

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