Usual and Customary Charges with Medicare and Most Favored Nation Clauses

Episode Date: April 23, 2025

In this episode of Stark Integrity, Bob Wade (Captain Integrity) explores a nuanced but important concept in healthcare compliance:

“Usual and customary” charges—and how they intersect with Medicare and Medicaid reimbursement.

While the phrase may sound straightforward, the episode makes clear that:

How providers define and apply “usual and customary” charges can carry significant compliance implications.

What Are “Usual and Customary” Charges?

At a basic level, “usual and customary” charges refer to:

• The standard rates a provider charges for services
• The amounts typically billed to patients or payors
• The routine pricing structure used in practice

These charges often serve as a reference point for:

• Payor reimbursement
• Contract negotiations
• Patient billing expectations

The takeaway:

Consistency in pricing matters more than many realize.

Why This Matters for Government Programs

When dealing with Medicare and Medicaid, pricing takes on added importance.

Government programs may evaluate:

• What providers typically charge
• Whether discounts are routinely offered
• How charges compare across patient populations

If a provider:

• Routinely discounts services
• But bills government programs at higher rates

This can create potential issues related to:

Accuracy and representation of charges.

The Compliance Risk

The episode highlights a key concern:

Discrepancies between standard charges and actual practice.

For example:

• If providers advertise lower prices
• Or consistently bill patients at discounted rates

But report higher “usual and customary” charges to government programs:

That difference may raise compliance questions.

The key point:

What you say your charges are should reflect what you actually charge.

The Role of Consistency

A central theme of the episode is:

Consistency across billing practices.

Providers should ensure that:

• Pricing structures are applied uniformly
• Discounts are documented and justified
• Billing practices align with stated policies

Inconsistent approaches can lead to:

• Confusion
• Audit risk
• Potential enforcement concerns

Medicaid-Specific Considerations

The discussion also touches on the relationship between:

• Usual and customary charges
• Medicaid reimbursement methodologies

In some cases:

• Medicaid programs may look to provider charge data
• Pricing practices may influence payment levels

This reinforces that:

Billing practices can have broader financial and regulatory effects.

Medicare Considerations

While Medicare reimbursement is more standardized, “usual and customary” concepts can still arise in:

• Documentation
• Charge structures
• Certain payment contexts

The takeaway:

Even in structured systems, underlying charge practices remain relevant.

Common Pitfalls

The episode highlights several risks organizations should avoid:

Inconsistent Pricing Practices

Charging different rates without clear rationale or documentation.

Unsupported Discounts

Offering discounts that are not formally documented or consistently applied.

Misaligned Billing and Reporting

Reporting “usual” charges that do not match actual billing behavior.

Lack of Oversight

Failing to monitor how pricing practices evolve over time.

The key takeaway:

Most issues arise when practice does not match policy.

Practical Compliance Considerations

Organizations should:

• Define clear pricing and discounting policies
• Ensure “usual and customary” charges reflect actual practice
• Document all deviations and discounts
• Monitor billing consistency across payors
• Regularly review charge structures for alignment

Because:

Defensibility depends on being able to demonstrate consistency and accuracy.

The Broader Compliance Picture

This topic ties into larger compliance themes, including:

• False Claims Act exposure
• Billing integrity
• Audit readiness

If discrepancies in charges are identified:

They may lead to deeper review of billing and reimbursement practices.

Key Takeaways

• “Usual and customary” charges must reflect actual pricing practices
• Consistency in billing is critical for compliance
• Discounts and variations must be documented and justified
• Discrepancies between reported and actual charges create risk
• Medicare and Medicaid considerations differ but both are affected
• Pricing practices can influence reimbursement and enforcement exposure
• Strong oversight reduces risk of inconsistencies

Final Thoughts

This episode highlights a subtle but important principle:

What you charge—and how consistently you charge it—matters.

In healthcare compliance:

• Small inconsistencies in pricing can lead to larger concerns
• Documentation and transparency are essential
• Alignment between policy and practice is critical

Because ultimately:

“Usual and customary” is not just a phrase—it is a standard that must be supported by real, consistent behavior.

Click here to listen to this Stark Integrity Podcast Episode:
https://podcasts.apple.com/us/podcast/usual-and-customary-charges-with-medicare-and/id1588939373?i=1000705496156&l=fr-FR