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An ongoing issue among insurers is how to determine "usual and customary" (U&C) charges for medically necessary services that are provided by out-of-network providers. While some state laws require an insurer to pay U&C charges, there often is limited guidance as to how to calculate those charges. Case law from various jurisdictions, as well as several treatises, suggest that U&C may be based on the prevailing rates for similar services in the community and that actual charges billed by the provider are not determinative.
Because U&C charges are not usually defined by statute, a court will generally apply its plain and common meaning. Usual is defined as "accordant with usage, custom or habit," "commonly or ordinarily used" and "found in ordinary practice or in the ordinary course of events." Reasonable is "being in accordance with reason," "not extreme or excessive" and "moderate, fair." Customary is "based on or established by custom," which is "a practice common to many or to a particular place or class." Therefore, the plain meaning of U&C and one that a court would apply is an amount that is moderate, fair, and based on what is commonly charged by many providers.
Federal Medicare regulations also recognize that U&C charges are dependent on prevailing rates in the community. For instance, "reasonable charges" include the customary charge for similar services generally made by the provider furnishing such services and the prevailing charge in the locality for similar services. "Customary charge" is defined as the uniform amount that the provider charges in the majority of cases for a specific medical procedure or service.
RELEVANT CASE LAW
Most of the relevant case law predates the 1980s. A flurry of cases in the late '60s and early '70s established the general rule that an insured must prove that the charges for which he or she seeks reimbursement from the insurer are reasonable. This can be done by presenting testimony of a doctor or administrator of the hospital in which the expenses were incurred. Secondary sources continue to cite these older cases, suggesting that testimony of a qualified witness is still required to recover U&C charges.
Several treatises also define what is considered to be U&C as the amount commonly charged for healthcare services within a specific geographic region. These sources further propose methods of determining U&C.
When a provider disagrees with the insurer's determination of U&C, it often attempts to balance-bill the insured for the remaining charges. Under these circumstances, the question arises as to whether there is a limitation on the amount that the provider may charge for his or her services. Some states have provisions in their health and safety codes, which prohibit a provider from charging patients a fee that is unreasonable. This appears to be an issue discussed and debated in many forums across the country. Some experts have suggested that there are limits to what the provider may charge, and have even suggested that the U&C charges should be the limit.
This column is written for informational purposes only and should not be construed as legal advice.