Subject: Long-Standing OIG Pronouncements Mandating That Medicare Be The “Lowest Payer” Resurface; 2016 OIG Work plan Includes a Review of the Reasonableness of Medicare Payments for Orthoses Compared to Those of Other Payers
In its 2016 fiscal year work plan, the Department of Health and Human Services Office of Inspector General (OIG) indicated that they will compare Medicare payments for orthoses to payments of non-Medicare payers in an effort to reduce potentially wasteful spending. The description in the 2016 OIG work plan states the following:
“We will determine the reasonableness of Medicare fee schedule amounts for orthotic braces. We will compare Medicare payments made for orthotic braces to amounts paid by non-Medicare payers, such as private insurance companies, to identify potentially wasteful spending. We will estimate the financial impact on Medicare and on beneficiaries of aligning the fee schedule for orthotic braces with those of non-Medicare payers.”
The inclusion of this project in its 2016 work plan clearly indicates that the OIG is concerned that Medicare may no longer be the “lowest” payer when it comes to the provision of orthoses. This is not a new matter as OIG has maintained for almost twenty years that Medicare must be the lowest payer. OIG clearly did not intend this totally literally, i.e., it has not asserted that it is an actionable violation of the law if the fee a provider receives from Medicare ended up being a few dollars higher than that paid to the provider, for instance, by a private commercial insurer. OIG issued regulations in 42 CFR 1001.701, and in 1998 proposed (never finalized) a safe harbor whereby deviations in the range of 20% below the amount paid by Medicare would not be deemed actionable. OIG then suggested that it could exclude providers who violated these provisions from participation in the Medicare program. Referring back to the above excerpt from the 2016 OIG work plan, it appears that if there were a significant discrepancy a fee schedule adjustment, perhaps using inherent reasonableness authority, could be a potential solution. While CMS has been hesitant to utilize its inherent reasonableness authority to reduce fee schedule amounts due to the complicated and restrictive provisions that govern its use, its use is not unprecedented. Finally, while not explicitly mentioned by OIG, some have suggested that Medicare might attempt to recoup some or all of the discrepancy in instances where Medicare is not the lowest payer, more likely if by a significant difference.
At AOPA’s request, the firm McGuireWoods, LLP developed an advisory memorandum that discussed the matter of whether a health care provider may charge Medicare an amount for items and services that is greater than the amount charged by the health care provider to any other payor for the same services.
This is a delicate matter. Clearly, anti-trust regulations must be considered, and neither AOPA, nor anyone else can make any suggestion whatsoever about the pricing, discounts or other terms as relates to negotiating private contract rates. That said, given the recent announcement in the OIG 2016 Work Plan, AOPA does believe it is obligated to remind members that the OIG appears to believe that there may be some limitations as to how significantly lower than the prevailing Medicare fee schedule reimbursements can go without risk of ramifications on Medicare fees or eligibility for program participation. It is important to ensure that our membership is aware of potential consequences and potential OIG enforcement options. AOPA believes that the advisory memorandum provided by McGuireWoods, LLP, provides an excellent resource regarding issues that should be considered vis-à-vis prevailing Medicare reimbursements by those contracting with non-Medicare payers. However, that Memorandum must essentially speak for itself. Any company interested by its contents will probably want to ponder the issues within its own management staff and secure input from its own legal counsel, while meticulously refraining from discussion with any other companies or non-affiliated entities in the O&P field. Unfortunately, because of the proximity of this topic with very sensitive matter of avoiding even any appearance of interfering with contracting provisions negotiated between individual O&P companies and private sector payers, AOPA is constrained from offering any more specific advice to members beyond this alert of potential OIG interest and past safe harbor notations by OIG. If an AOPA member company has difficulty identifying a source for legal guidance, AOPA can provide a list of possible sources for such counsel and assistance.