Determining UCR
In personal injury, malpractice and sometimes in billing fraud cases, Usual, Customary, Reasonable charges are important. When there is a collateral source rule, medical charges are generally admissible when insurance payments are not. UCR charges analysis can help establish the value of care for an injured plaintiff. The plaintiff may lack health insurance. Or, the healthcare providers may not file claims with the plaintiff’s health plan. In these circumstances, coding medical claims to standardize them may be useful.
According to the Healthcare Financial Management Association, the definition of the charged amount is, “The dollar amount a provider sets for services rendered before negotiating any discounts. The charge can be different from the amount paid. A common mistake is to assume that medical care should be based on what Medicare pays. Medicare only pays its rates for the care of those that it insures.
§ 405.503 Determining customary charges provides:
(a) Customary charge defined. The term “customary charges” will refer to the uniform amount which the physician or other person charges in the majority of cases for a specific medical procedure or service. …”
Usual, Customary and Reasonable Charges are not the “Allowed Amount” and is NOT based on Insurance
According to some, the “Usual, customary and reasonable” refers to the maximum usual and customary charge a payor considers reasonable, but this is NOT correct. Providers set UCR charges and may not always apply those charges uniformly. In fact, in personal injury and medical malpractice cases, the collateral source rule may prohibit the introduction of any evidence of insurance.
Both public insurance such as Medicare and Medicaid and private insurers use a term called “allowed amount”. The allowed amount is as NOT necessarily the total amount a health plan determines the provider should be paid for a service. The allowed amount is often used to calculate patient responsibility. For example, if a provider charges $1,000 for a service and the allowed amount is $300, but the health plan pays $250, the patient’s responsibility may be $50.00 Again this only applies if evidence of insurance in valuing medical care is admissible. Another exception may be in a case where the insured is covered by Medicaid and there is no co-pay responsibility to the insured.
UCR is often misunderstood by the layperson (fee vs. charge)
Take this erroneous example in Investopedia:
What are ‘Usual, Customary and Reasonable Fees’ (Note: “fees” are different from ‘charges’ which is the first error in this explanation).
1. WRONG: Usual, customary, and reasonable (UCR) fees are out-of-pocket fees that a health insurance policyholder must pay for services.
2. WRONG: UCR fees are based on the services provided to the policyholders, as well as the area of the country where the services are being provided.
3. WRONG: A fee is considered usual, customary and reasonable if:
4. INCOMPLETE HYPOTHETICAL: it is a fee usually charged for a doctor for a service, and (reason: this explanation does not include what hospitals, laboratories, diagnostic imaging, surgical centers and others may charge).
5. PARTIALLY CORRECT, POSSIBLY. it falls within a price range that other doctors in the area charge, and
6. WRONG: “it is for a service deemed necessary under the current conditions.” (reason: Medically necessary care is a separate issue from the amount that is charged
7. WRONG: Usual, customary and reasonable (UCR) fees are out-of-pocket fees that a health insurance policyholder must pay for services. UCR fees are based on the services provided to the policyholders, as well as the area of the country where the services are being provided.