Usual Customary and Reasonable Charges in the Community

Data used to value medical care, durable medical equipment and pharmaceuticals that includes the granularity to determine the type of care, place of service (i.e. physician office, ambulatory surgery center, emergency room, hospital, lab, radiological imaging, etc. has a bearing on how care is billed and how it is valued.  It is important to use a reliable source that comprehends payer mix, place of service, modifiers, surgeon vs. assistant surgeon,etc.  A robust, sizable and reliable data set can be critical in determining UCR.

Usual, Customary Reasonable Costs of Care – Coders vs. Regulatory and Economic Factors

Coders, actuaries, and UM professionals are important in healthcare because they interpret physicians’ progress notes in the patient chart, enter a diagnosis code or procedure code, or render opinions on insurance risk and medical coverage for reimbursement.  However, these disciplines do not span all of the factors that must be evaluated when determining usual customary reasonable or UCR.  If a collateral source rule prevents admission of the net value that insurance pays, a national and regionally adjusted UCR charge analysis may be performed using appropriate knowledge training education and experience as well as national and regional provider data.

Critical Factors Outside of Medical Coding Expertise

When providing expert testimony regarding UCR, other factors which come into play include the distribution of medical costs in a geographic area; frequency of patient use, or abuse, of the health system in the context of plaintiff’s duty to mitigate damages; case management; utilization management; whether the patient used insurance, in-network, out of network; and other factors.  Expert testimony must include not only the coder’s perspective, but also must include a view of clinical documentation, regulatory framework, and an economic perspective, factors which coders are not trained to provide.

Inpatient, Ambulatory Costs and Codes, Medicare Base Rates

When coding inpatient and outpatient diagnosis, ICD-9 diagnosis codes are used (after October 1, 2015 ICD-10 CM will be used). For inpatient procedures, ICD-9 is used (after October 1, 2015 ICD-10 PCS will be used) and for ambulatory procedures, CPT codes are used. Diagnosis and procedure codes are a standardized method to both describe the patient condition and medical procedures, and establish a foundation for reimbursement.  Whatever the methods used to determine the codes, the care setting, contracted provider, payer, and other factors must be evaluated in making a determination about UCR.  Medicare base rates established by Centers for Medicare and Medicaid (CMS) may be considered.  Even if usual customary reasonable analysis must exclude insurance as a collateral source, charges are still often developed using base rates as a foundation.

Value Chain – Different Paths for Inpatient and Ambulatory

There exists a ‘value chain’ which extends from clinical documentation to coding to reimbursement, that may need explanation for the benefit of the court, plaintiff, or defendant’s counsel. Along this path, step–wise transformations, of patient condition and treatment into money, occur as care is delivered. The value chain that establishes UCR starts with the patient condition, as documented by a licensed clinician, spans to coding and reimbursement and / or out of pocket costs and other factors. Medical specialties, Diagnosis Related Groupings (DRGs) for episodic inpatient care, FFS, and newer ‘population health’ (aka ‘value based care’) models deliver varied results when calculating UCR. Whether FFS or value based care service is provided may depend on the contractual arrangement between payer and provider.

Fee for Service vs. Value Based Care and the Affordable Care Act

The selection of value based business model, whether Accountable Care Organization (ACO), or Medicare Advantage (Medicare Part C), also determines the value of care delivered, even the methods chosen to document the condition of the patient.  In population health models, Risk Adjustment Factors (RAFs), HEDIS scores, and HCC severity codes, indicating the relative cost of providing care for a population with certain condition(s) and diseases, may be factors.  A pattern of abuse of these factors, to manipulate records, coding, and reimbursement on value of care may need to be considered as an ‘upcoding’ which could trigger a fraud investigation.  Medical coverage for pre-existing conditions, depending on the date of service, may be a factor.

Along this value chain, patient records and codes are transformed into money. It is expected and intended by patients, and codified by various local, state and federal regulations, that their medical information and personal identifiers are kept secure and only transformed into money by HIPAA Covered Entities, including health care providers, clearinghouses and health plans.  Breaching the security of this data and breaking the trust of the participants may lead to unscrupulous use of patient data by identity thieves. A medical claim with expected reimbursement and out of pocket costs as adjudicated by Medicare, Medicaid or private insurers (including health plans and accident insurance such as automobile insurance) is the usual process for reimbursement.

Medically Necessary Care

In personal injury cases, a licensed clinician might opine as to whether the medical bills incurred are associated with the injuries at the accident that gave rise to litigation.  An experienced expert witness in usual customary and reasonable charges may consider these opinions, developing a range of values based on whether the injuries and medical care are associated with the prior medical conditions of the patient / plaintiff or are associated with the accident.  By considering all possible outcomes and bracketing the values, both scenarios may be accounted for.

In Medicare fraud cases, medically necessary care assessments may include consideration of Medicare Local Coverage determinations, also known as Medicare LCDs.  The geographic jurisdiction of the Medicare Administrative Contractor (MAC), the active date range of the Medicare LCD, and the specific service codes may all be factors that could be considered depending on the facts in the case.  The patient diagnosis rendered by a licensed clinician and diagnosis codes in ICD-9 or ICD-10 may be factors to consider.  Clinical documentation that supports the diagnosis may be considered.

In cases where medically necessary care is not being contested, the amount that the physician or other provider accepts as payment in full may be an issue, depending on the jurisdiction and whether the provider is in-network our out of network.

Retrospective or Prospective Views

The potential need to evaluate economic value of care provided from a retrospective or present view in litigation discovery requires that the regulations in effect, at the time (date of service) for the care provided, are also considered.  Similarly, regulations such as Meaningful Use have different provisions during Stage 1 in 2011 versus Stage 2 in 2013 or 2014.  For prospective usual customary reasonable, HHS, under the Obama administration, has announced a goal to increase the use of value based care models over FFS models in coming years.  This also impacts calculations for UCR.


In determining usual customary reasonable or UCR, one must consider an aggregated set of silos of data, privacy and security safeguards for the data, the processes used and decisions made by the people involved, which include clinicians, coders.


Expert Witness

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Usual Customary and Reasonable Charges expert witness

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