CMS Pub. 100-04, ch. 23, § 80.1

B3-5002, B-03-007

There are two criteria in §1842 of the Act that must be considered in determining the

reasonable charge for a service. They are:

• The customary charges for similar services generally made by the physician or

other person furnishing such services; and

• The prevailing charges in the locality for similar services.

Therefore, the reasonable charge for a specific service in the absence of unusual medical

complications or circumstances, may not exceed the lowest of:

• The customary charge for that service;

• The prevailing charge made for similar services in the locality; or

• The actual charge for the service. (See §80.8.)

The law also provides that the reasonable charge for a service not exceed the charge

applicable for a comparable service under comparable circumstances to the contractor’s

policyholders or subscribers. (See §80.7.) The A/B MAC (B) or DME MAC also

determines if the charge for the specific item or service is inherently reasonable.

The income of an individual patient may not be considered in determining the amount of

the reasonable charge.

Public Law 96-499 requires that reasonable charge payments be based on customary and

prevailing charge screens in effect on the date the service is rendered. However, if the

service was rendered at any time prior to the current fee year, payment is based on the

screens in effect during the preceding fee screen year.

To implement this provision, the A/B MAC (B) must complete the following activities:

• Retain the prior year’s pricing files in the system so that reasonable charge pricing

data is available for two years. As of July 1, 2003, all A/B MACs (B) operating the

MCS system must retain at least five pricing files (current period plus four prior

periods); and

• Price the service based on the date of service on the claim using pricing files in

effect for the same year as the date of service.