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Home | Usual and Customary Reductions



Usual and Customary Reductions

Usual and Customary Reductions Cost an Arm and a Leg

The Problem:  Medical pricing has never been under as much scrutiny as it currently is. Medicare, HMO's, worker's comp carriers and repricing companies all seem to have come up with a different rate to pay for the same procedure -- all without stepping foot into your office or facility. Most of these rates are arrived at by some mathematical calculation which factors in wholesale price quotations or rates charged by other medical providers. Unfortunately, this often amounts to an apples-to-oranges comparison.

The Solution:
  Medical providers are under no obligation to agree to price reductions not associated with a contractual agreement. Therefore, medical providers need to educate their staff on what charges are subject to write-offs and which ones should be pursued for full payment. You may be able to successfully appeal for additional payment if the paid amount is not a contractually-agreed upon rate.

If a bill is reduced because it is over the "usual and customary charge," instruct patient account representatives to first contact the insurance carrier and request a list of the specific items which were denied and why. Some repricing companies routinely reject any ambiguous charges. "Surgical tray" might be rejected because the tray items are unknown. "IV solution" may be denied because the carrier does not know what particular solution was used and the concentration. The simplest resolution may be to supply additional product information. If such information is not available, the provider should request, at a minimum, payment of the average price the company has approved for these items with other providers. Providers may also demand an on-site audit in order to resolve such billing issues.

Also, deal directly with the insurance company rather than a third party repricing company. The insurance company has a contractual obligation to the insured to pay the claim.

You can appeal the usual and customary denial based on the verification of benefits.

If the insurance carrier verified that benefits are 80%, however, the usual and customary reduction reduces the payment to 50%, the carrier may not be honoring the verification of benefits. There are many state and federal cases that indicate the carrier has an obligation to pay at that rate verified at the time of admission.

If the reductions are large, you may want to discuss the potential for compromise in quality that such reductions may lead to. The bottom line is that nobody, insurance carrier or patient, really wants to affect the quality of health care.

If the insurance carrier is complaining that your services cost an arm and a leg, remind them that quality health care just costs dollars and cents; it saves an arm and a leg.


AppealLettersOnline.com can assist providers implement an effective denial management program.

AppealLettersOnline.com is an interactive resource provided to level the playing field between Insurance Companies and Medical Providers. You will find appeal letters, case studies, articles, other resources and the latest intelligence necessary to help healthcare providers make vital decisions and take strategic actions to address payer denial issues. AppealLettersOnline.com will help health care providers actively develop the processes, analytical tracking information, educational programs and procedures needed for implementing an effective denial management program.

Some of the topics covered at AppealLettersOnline.com include addressing payment reductions such as usual and customary and out-of-network care reductions, lack of timely filing denials, pre-existing conditions and medical necessity appeals and improving verification of benefits procedures. Treatment exclusions, maximum benefits denials and subrogation/coordination denials are also discussed. Tips are also provided on appealing for interest and penalty payment on late payments and appealing a request for a refund of previously paid claims. AppealLettersOnline.com discusses all types of claims including Managed Care, Indemnity, Government, Self-Funded, ERISA claim issues and managed care contractual payment discrepancies.




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