(Medicare Claims Processing Manual)

 Price the service based on the date of service on the claim using pricing files in effect for the same year as the date of service.   80.2 - Updating Customary and Prevailing Charges  (Rev. 1, 10- 01-03) B3-5003  A/B MACs (B)/DME MACs update customary and prevailing charge limits at the beginning of each fee screen year (the 12 -month period beginning January), using available statistics on charges for services from claims processed or services rendered during the 12-month period ending June 30 immediately preceding the start of the fee screen year.  For example, the limits used during fee screen year 2003 (January 1, 2003, through December 31, 2003) were based on the charges made from July 1, 2001, through June 30, 2002.  Customary and prevailing charge screens for a fee screen year are not changed except for the following reasons:    In individually identified and highly unusual situations where equity clearly indicates that the increases are warranted and requested by the entity furnishing the service;   To correct erroneous calculations; or   To establish screens for new services.   A/B MACs (B)/DME MACs must ensure that all data on the frequency of services, all data files and customary and prevailing charge files used to establish reasonable charge screens are retained and are available for use.   80.3 - The Customary Charge  (Rev. 1, 10- 01-03) B3-5010, B3- 5205  The customary charge is the amount that best represents the actual charges made for a given medical service or by other persons who supply other medical and health services to the general public.  Therefore, obtain information on the customary charges from the following sources:    Physicians and other persons not only from the Medicare program;   Any other available sources;   Other contractor programs;   Other insurance programs;   Federal Employee Health Benefit Program;   TriCare;   Any studies conducted by State or local medical societies;   From public agencies;   Any data volunteered from other sources.   Where circumstances warrant, MACs may also ask physicians or other persons for their charges for services rendered to the public in general.  MACs should validate any information on charges obtained from sources against claims.  A. Charges for Rare or Unusual Procedures   A/B MACs (B) may incur situations where a new or rare procedure is performed and information on customary and prevailing charges is difficult to obtain.  In such situations, in order to make the reasonable charge determination:   a. Obtain data, if possible, on the charges made for the unusual or rare procedure in other areas similar to the locality in which the service was rendered; or   b. Consult with the local medical society regarding the appropriate charge to be made for this procedure.   A relative value scale may be used together with available information about the physicians customary charges and about the prevailing charges for more frequently performed services in the locality in order to fill gaps in the data available.  Where there  is insufficient information, consult with any medical authority that would be helpful, such as the medical personnel within the A/B MAC (B), the local or State medical society, or hospital medical personnel.  In assessing the value of the procedure, the m edical personnel should take into consideration:   a. Its complexity;  b. The time needed to perform the procedure; and  c. The prevailing charges in the locality for other procedures of comparable complexity.  A/B MACs (B) then determine reasonable charge for a given service on the best available medical opinion and information on customary and prevailing charges.   80.3.1 - Calculating Customary Charge  (Rev. 1, 10- 01-03) B3-5010.1, B3- 5213  A/B MACs (B) and DME MACs use to the extent possible, the actual charges for services rendered during the year ending June 30 immediately preceding the start of the fee screen year.  Use data either from claims processed or from claims for services rendered during that 12- month period.  The A/B MAC (B) or DME MAC arrays each charge the physician, supplier, or another entity made for a service in ascending order.  The lowest actual charge which is high enough to include the median of the arrayed charge data is then selected as the physicia ns or other persons customary charge for the service.  Include charges made to a class of patients (such as members of a Preferred Provider Organization) in the array of charges used to compute the customary charge.   Customary charges may be established using price lists when there is inadequate charge data.  In this case, use only the fees charged and the price lists in effect as of December  31 of the data base year.  The intent is to use a price list which reasonably  replicates the median of the prices charged by the supplier for his items and services during the data base year.   Where the MAC permitted an increase in a customary charge under the equity provision (see 80.3.1.1 below), the increased amount is recognized as the customary charge for the next fee screen year if it exceeds the median of charges made by the physician or other person for the service during the 12 months ending June 30 immediately preceding the start of that fee screen year.  The increased amount is the correct customary charge for use in the appropriate prevailing charge calculation(s).   A. Inclusion of Sales Taxes in Reasonable Charges   Sales taxes where appropriate were included in the calculation of reasonable charges computed.  They were also accounted for in the calculation of the base fee schedules for DME and orthotic/prosthetic devices.  The Consumer Price Index used to update fee schedules also accounts for sales tax.  Therefore, MACs do not make any additional payment for sales taxes and do not make adjustments in fees to reflect local changes in tax rates.   80.3.1.1 - Equity Adjustments in Customary Charge Screens  (Rev. 1, 10- 01-03) B3-5010.2  Once the MAC establishes the customary charge screens for a fee screen year, further increases (other than to correct errors) are permitted only in individually identified and highly unusual situations where equity clearly indicates that the increases are warranted.  Requests for revisions in customary charge profiles are initiated only by physicians or other persons furnishing covered services.  Such requests are neither encouraged nor discouraged, and each request is handled on the basis of its own merits.  All of the following considerations are taken into account, as applicable, in determining whether unusual circumstances warrant a revision in a customary profile in a particular situation.    Time elapsed since last change was made in customary charge   o Identify if the last change made in a customary charge for the service was in the past two or three years.  Generally, the more time that has elapsed since the last change the stronger the case is for recognizing the current charge.   o Take into consideration that a physician or other entity did not increase fees charged for a service because of the governments request for restraint and this can be verified.  This should be taken into account in determining whether unusual circumstances  are present in a particular case.    Consider the amount of the requested increase and the relationship of the new and old charges to the customary charges of other physicians or other persons in the locality for the service.    Increases in Operating Expenses Used to Justify an Increase in Charges   o The entity must specifically prove that increases in operating expenses are substantially above those resulting from general economic factors and the situation is unique.   80.3.2 - Customary Charge Profile  (Rev. 1, 10- 01-03) B3-5010.3  A/B MACs (B)/DME MACs establish and maintain adequate data on the customary charges for specific services and procedures made by individual physicians and other persons and organizations which render covered services.  This data must be readily available.  The customary charge record for each entity rendering covered services must include a minimum of the following data:    Entity name, address, identification code, locality and specialty status;    A continuing history of the entitys charges for specific services, supplies, etc;    A customary charge for each specific service or item derived from the entitys history of charges for that service or item (and which is to be used as the basis for the determination of reasonable charges in conjunction with the prevailing charge criterion ); and    For a charge made under unusual circumstances, include a description of the circumstances.   A/B MACs (B)/DME MACs develop and include in the entitys profile a customary charge conversion factor for use with a relative value scale when there is insufficient data to establish the actual customary charge or when an infrequently performed service or item is involved.  80.4 - Prevailing Charge  (Rev. 1, 10- 01-03) B3-5020  Prevailing charges are those charges that fall within the range of charges most frequently and widely used in a locality for a particular procedure or service.  The top of this range establishes an overall limitation on the charges that the A/B MAC (B) acc epts as reasonable for a given procedure or service, except where unusual circumstances or medical complications warrant an additional charge.   For any fee screen year, the prevailing charge limit in a locality for a service must be calculated as the 75th percentile of the customary charges determined for that service.  Array each customary charge for the service in ascending order and weight by how often the physician or other person rendered the service (as reflected by the charge data used to calculate the customary charge.  The lowest customary charge which is high enough to include the customary charges of the physicians or other persons who r endered 75 percent of the cumulative services is then determined as the prevailing charge for the service.  The proper procedure for establishing revised prevailing charge screens based on the 75th percentile is illustrated by the following example:   Customary Charge  Number of the item/ service  rendered  Cumulative Services  $5 1402  1402  $6 1115  2517  $7 1680  4197  $8 803 5000   Total 5000    In the above example, 75 percent of the total of 5,000 services equals 3,750 services.  The prevailing charge is, therefore, $7.  (A total of 2,517 services were rendered with $5 and $6 customary charges, and an additional 1,680 services were rendered with $7 customary charges.  T he 3,750th service was thus rendered with a $7 customary charge.)   A/B MACs (B)/DME MACs establish four customary charges as the minimum number of customary charges for the same service needed to calculate the prevailing charge for a particular service in a locality or in an A/B MAC (B) service area.   If it is necessary to establish customary charges using price lists, A/B MACs (B)/DME MACs use these customary charges to also establish the required prevailing charges.  (See 80.3.1.)  If the A/B MAC (B)/DME MAC cannot derive precise data on the frequency of services from their records, they may use any information they have about the volume of business done by various suppliers in their area in order to weight the customary charges used to calculate the prevailing charges.   If the A/B MAC (B)/DME MAC has not established a locality prevailing charge for the service by specialty or group of specialties, they select the locality prevailing charge from the remaining sources of data (items 2 through 5 below inclusive).  That seque nce must be followed in strict order except as otherwise permitted by item 6.  The first charge available in the sequence of sources of data is selected as the locality prevailing charge.  Payments must be based on the fully adjusted locality prevailing charges.   Approved Sources of Data in the Required Sequence   1 Prevailing charge by locality and by specialty or group of specialties;   2 Prevailing charge by A/B MAC (B) service area and by specialty or group of specialties;   3 Prevailing charge by locality without regard to specialty;   4 Prevailing charge by A/B MAC (B) service area without regard to specialty; and   5 Array of actual charges -  Where items 1 through 4 have not produced an acceptable prevailing charge and where at least four physicians or other persons in your service area (without regard to locality or specialty) have submitted charges for a service (but four qualified customary charges are not available), array all the available actual charges for that service.  Set the prevailing charge for that service at the 75th percentile of that array.   6 Item 4 may be omitted with RO approval from the sources of data listed above, e.g., because this simplifies claims processes and reduces the related expenses.  Also, when there is insufficient charge data to establish valid prevailing charges for substantial numbers of services or items, request RO assistance in working out mergers of charge data with that from other A/B MACs (B).  Use another A/B MAC (B)s data that has a similar service area with regards to medical prices, and other economic and demogra phic characteristics.  Such data mergers must receive prior approval from CMS.  The steps described above may not always achieve a perfect result.  However, beneficiaries, physicians, and suppliers have the right to question the determination in a given case.  In such instances, A/B MACs (B) should use their best judgment based on the  available data to resolve the issue.