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More than two years ago, the Medicare Payment Advisory Commission reported that hospitals often charge much more than their cost for certain services. The Centers for Medicare and Medicaid Services (CMS) confirmed these findings, and last year shifted to cost-based diagnosis-related group (DRG) weights from charge-based DRG weights.
Given the facts that this shift constitutes one of Medicare's most significant changes in 25 years, and that there is an increasing emphasis on healthcare price transparency in this country, it is important to dispel some myths about Medicare that have contributed to hospitals' confusion regarding charging, particularly for goods and services provided in ancillary departments.
Myth: Restrictions on Charging (or Routine Services Have Necessitated Restrictions on Charging for Routinely Used Items
Some hospital ancillary departments are under the impression that, because routine services cannot be charged separately, routinely used equipment and supplies may not be charged separately, either. As defined in section 2202.6 of the Medicare Provider Reimbursement Manual (PRM), "routine services" are "sometimes referred to as the 'room and board' charge." Items that are routinely included in a hospital's room-and-board charge may not be charged separately because they are already being paid for as part of routine services.
Reality: Ancillary departments do not have these charging restrictions. As a letter from Michael Taylor of the Atlanta Regional Office of the Centers for Medicare and Medicaid Services (CMS) stated, "It is within the purview of the provider to establish its own charge structure ... CMS does not dictate or regulate what is included on the hospital's itemized statement." Ancillary departments are free to establish charges at a very detailed level, or bundle a few or many items into a larger charge.
Myth: Routine Supplies and Equipment May Not Be Charged Separately in Ancillary Departments
Adding to the confusion is the fact that some Medicare fiscal intermediaries themselves also believe that routine supplies and equipment may not be charged separately in ancillary departments.
Reality: On the contrary, CMS has said hospitals can charge separately for various items, such as monitors, instruments, supplies, anesthesia machines, laparoscopes, video systems, surgery packs, colonoscopes, and other equipment. It is important to...