American Association for Clinical Chemistry
Better health through laboratory medicine
11/04/97

Office of the Inspector General
Department of Health and Human Services
Attention: OIG-20-P
Room 5246, Cohen Building
330 Independence Avenue, SW
Washington, DC 20201:

Subject Code: OIG-20-P

Dear Sir/Madam:

The American Association for Clinical Chemistry (AACC) welcomes the opportunity to comment on the Office of the Inspector General’s (OIG’s) September 8, 1997 proposed rule, which implements provisions of the Health Insurance Portability and Accountability Act of 1996 and revises existing fraud and abuse regulations. Although AACC’s supports the OIG’s objective—to eliminate health care fraud—we do have a number of questions and concerns regarding this proposal. Our specific comments follow.

AACC’s comments focus exclusively on Section 1001.701 of the proposed rule.

Section 1001.701, Excessive claims or furnishing of unnecessary or substandard items or services.

This provision states, in part, that:

"the revised language would indicate that the OIG may exclude an individual or entity that has submitted, or caused to be submitted, bills or requests for Medicare or State health care program payments that contain charges or costs that are substantially in excess of their usual charges or costs for items or services furnished to any of their customers, clients patients."

Volume Discounts
If adopted, section 1001.701 would require every laboratory to give the Medicare program its "best" price for each laboratory test. The OIG assumes that clinical laboratories are charging the federal health program a higher price for laboratory services than other clients, thereby needlessly profiting from the federal government. Although we agree that the government should rigorously root out fraud, we do not believe the differing pricing structures and agreements between clinical laboratories and their clients falls into this category.

Many, if not most, private sector companies enter into exclusive contracts that result in special pricing arrangements or volume discounts with their suppliers. For example, many companies have exclusive contracts with telecommunications companies for phone, teleconferencing and other related services, their exclusive agreements garner them lower prices than the usual charge for such services. Thus, it does not seem unreasonable for clinical laboratories and other health care providers and plans to enter into like agreements.

 

Differing Provider/Plan Needs
Clinical laboratories operate in a competitive market, where there are many different types of health care providers/plans—each with its own testing and administrative requirements. Some providers/plans, such as managed care plans, emphasize cost. To get a lower price, managed care plans are able to ensure laboratories a certain volume of testing, as well as monitor test order utilization—thereby lowering the laboratory’s costs. The Medicare program, however, cannot ensure a laboratory a certain level of testing. In addition, the federal health program often requires more detailed and costly billing information as part of its efforts to prevent fraudulent billing. There are, therefore, legitimate reasons for the price differential between what Medicare is billed for some laboratory tests versus what other customers are charged for those same tests.

It is important to note, too, that not all health plans or providers receive price differentials. In fact, many plans and providers are charged the same amount as Medicare. However, Medicare only pays the fee schedule amount (which is often lower than the charge), while other plans and providers reimburse the full amount.

 

Recommendations
AACC recommends that you define the term "substantially" as described in section 1001.701. Reasonable people could interpret this term quite differently. In addition, we request that you make a more thorough examination of this issue before implementing section 1001.701. We believe that laboratories should be able to discounts to their best customers, as long as such discounts follow accepted, ethical business practices.

By way of background, AACC is the principal association of clinical chemists--professional laboratory scientists--including MDs, PhDs and medical technologists. Clinical chemists develop and use chemical concepts, procedures, techniques and instrumentation in health-related investigations. The AACC represents clinical chemists working in hospitals, independent laboratories and industries nationwide. The AACC's objectives are to further the public interest and educational activities and help maintain high professional standards.

If we may be of any assistance, or if you have any questions about our comments, please call me at (717) 531-8316 or Vince Stine, Manager, Government Affairs at (202) 835-8721.

 

Sincerely,

 

Laurence M. Demers, PhD, DABCC
President