CMS Finalizes Inherent Reasonableness Rule

Baltimore

In an effort to eliminate excessive profits, CMS announced last month that it would continue to reduce reimbursements for some Medicare Part B services and equipment when payments are extraordinarily high.

The agency finalized its “inherent reasonableness” rule, published in the Dec. 13 Federal Register, without substantial changes to its interim policy, which was published in December 2002. The rule applies to Medicare Part B services other than physician services or those paid under a prospective payment system. It also applies to orthotics and prosthetics but not Part B drugs, although CMS retained the authority to apply IR to these drug payments in the future.

According to the rule, when the payments for a particular item or service are found to be “grossly excessive or deficient” by 15 percent — and, therefore, not inherently reasonable — the agency has the authority to make payment adjustments.

In the rule, CMS said that such an adjustment to reduce reimbursement “will merely serve as a vehicle for eliminating excessive profits. An adjustment would benefit the Medicare program by reducing costs and benefit beneficiaries by reducing coinsurance payments.”

The agency also said it will monitor complaints about adjusted payments from beneficiaries, suppliers, providers and others regarding patient access, and does not believe that using its authority will limit beneficiaries’ choice of equipment or services.

“A more generous payment amount may result in greater availability of items and services to Medicare and beneficiaries,” CMS stated.

If the payment is adjusted downward, the agency said, “the lower payment amount should not necessarily result in a lack of availability of items and services because the revised payment amount would be realistic and equitable.”