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Calculating Charges for Out-of-Network Health Services

by admin on July 16, 2014 No comments

bonus calculationBy: Karina Gonzalez

A healthcare provider’s “billed charge” is usually the total charges billed before applying any contractual discounts.  Where there are no contractual relations, a provider’s charge may be considered the equivalent of fair market value for the service provided. But what is fair market value? If the provider is contracted the rate is confidential and not subject to disclosure.  If the provider is non-contracted, there is no standard billing rate for providers, making it difficult to get reliable rate data on what is fair market value for similar services or similar providers. One Florida court has found that “fair market value” is the price that a willing buyer will pay and a willing seller will accept in an arm’s length transaction. 

Unlike the uncertainty surrounding calculation of charges for out-of-network providers, emergency services are covered under Florida’s HMO statute and compensation is the lesser of: (a) the provider’s charge, or (b) the usual and customary provider’s charges for similar services in the community where the services are provided, or (c) the charge agreed on between the HMO and the provider. Fla. Stat. §641.513 (5) (b).

In reviewing meaning of “the usual and customary provider’s charges”, a Florida court found that what is called for is the fair market value of services provided.  In looking at the fair market value of services it is acceptable to include consideration of amounts billed as well as the amounts accepted by the provider.  The court would not consider reimbursement of Medicare and Medicaid as these rates are set by the government and do not indicate what a willing seller would accept and therefore are not considered an arm’s length transaction.  See Baker County Med. Servs. v. Aetna health Mgmt., 31 So. 3d 842 (Fla. 1st DCA 2010). This analysis is not exactly on point since it concerns emergency services and these services are specifically provided for in the HMO Act.  However, this analysis does provide a useful guidance on assessing charges in light of a fair market analysis.

Many commercial payers look to Medicare’s fee schedule as a base and apply a multiplier.  The theory being that the Medicare fee schedule is presumed to be a good starting off reference point from which to develop a reasonable rate.  In the absence of a bright line legal standard, courts are now faced with the responsibility of making determinations regarding what is a usual and customary or what is a reasonable rate for services.  Even with all their resources and good intentions, a court’s decision on a reasonable rate may not represent a provider’s actual costs; and may set a precedence that could end up being harmful to a provider’s bottom line.

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