HI 00401.315 The Customary Charge

A. General

The customary charge is the amount which best represents the actual charges made for a given medical service by a physician to his patients in general, or by suppliers of other medical and health services to the general public. The carrier obtains information on the customary charges of physicians and suppliers not only from the Medicare program, but from other available sources, e.g., from its own programs, from other insurance programs, from the Federal Employee Health Benefit Program, from CHAMPUS, from any studies conducted by State or local medical societies, and from public agencies. It also may ask physicians or other persons for their charges for services rendered to the public in general.

In instances where physicians or suppliers feel that the carrier does not have sufficient current information about their charges, they may volunteer this information to the carrier.Further, carriers make known their willingness to receive currently valid information regarding customary charges from the medical community. However, any information on charges obtained from other sources is validated, to the extent possible, against the carrier’s claims experience under Medicare and its own programs.

B. Calculating the customary charge

To the extent possible, when customary charges are calculated for a fiscal year, the actual charges physicians or suppliers have made for services rendered during the calendar year immediately preceding the start of the fiscal year (i.e., derived from either claims processed, or from claims for services rendered during the preceding calendar year) are used.

In calculating the customary charge for a given service, each charge the physician or other person has made for a service is arrayed in ascending order. The lowest actual charge which is high enough to include the median of the arrayed charge data is selected as the physician’s or supplier’s customary charge for the service. However, where the charges generally made by a physician or supplier to other patients are lower than those made to Medicare beneficiaries, the lower charges are used as the basis for establishing the Medicare reasonable charge screen.

When a carrier does not have adequate statistics on charges for all of a calendar year, e.g., for suppliers of medical equipment, prothestics, ambulance services, or for new services, the fees charged and the price lists in effect as of June 30 of that calendar year only may be used. The intent is to use a price list which can reasonably be assumed not to exceed the median of the prices charged by the supplier for his items and services during that calendar year.

Where a carrier has permitted an increase in a customary charge under the unusual circumstances provision (see C. below), the increased amount is recognized as the customary charge for the next fiscal year if it exceeds the median of the charges made by the physician or supplier for the service during the calendar year immediately preceding the start of that fiscal year.

C. Equity adjustments in customary charge screens

Once a carrier has established the customary charge screens for a fiscal 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. Request for revisions in customary charge profiles are initiated only by physicians or suppliers furnishing covered services. Such requests are neither encouraged nor discouraged by the carrier, and each request is handled on its own merits. The following considerations are taken into account, as applicable, in determining whether unusual circumstances warrant a revision in a customary charge profile in a particular situation:

1. The time that has elapsed since the last change was made in the customary charge

This involves finding out how long it has been since the last change, and if the physician or supplier has had a change in his customary charge for the service 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 change.

Where the physician or supplier states he did not previously increase his fees because of the government’s request for restraint in this regard, and the carrier can verify this through its claims records and/or information furnished by the physician or other person, it may take this factor into account in determining whether unusual circumstances are present in a particular case.

2. The size of the requested increase and the relationship of the new and old charges to the charges made by others for the service

The carrier considers the amount of the requested increase and the relationship of the new and old charges to the customary charges of other physicians in the locality for the service.

3. Increases in the physician’s or other person’s operating expenses which are used to justify an increase in charges

Where the physician or supplier specifically makes the point and establishes that increases in his operating expenses are substantially above those resulting from general economic factors, and substantiates the uniqueness of his situation, the carrier may consider this factor in determining whether an adjustment in its customary charge profile is warranted.

4. The achievement of Board Certified specialty status

The fact that a physician has recently been “Board Certified” in a specialty does not by itself justify the recognition of higher “customary” charges. For example, a physician may have been board eligible and made charges in line with the fees of other specialists in his field for some time, and the carrier’s customary charge screen may reflect these charges. In such a situation, an increase in the customary charge screen to further recognize the physician’s specialty practice would not be warranted.

Except in situations in which the regulations or CMS instructions provide specific exceptions, the amount recorded as a customary charge limit for a service in a carrier’s screen must normally be the median of the charges made by the physician or other person for the service during the full one-year period. However, where a carrier makes an equity adjustment in its customary charge screen under this exception, the carrier records a new fee as a customary charge after the charge has been made by the physician or supplier to patients for at least three months.

Each carrier has the responsibility for determining whether an equity adjustment in a physician’s or supplier’s customary charge profile can be made. In each instance in which an adjustment is made, the carrier documents the situation and its determination, and has such documentation readily available for review by CMS. Normally, equity adjustments are made in customary charge profiles only in a relatively small number of situations.


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HI 00401.315 - The Customary Charge - 10/14/2003
Batch run: 04/06/2015
Rev:10/14/2003