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References 

See Footnote at end of article.

Sharing Federal Tax IDs
If your occupational program has a separate federal tax ID from your hospital, then your organization does not need to be concerned about the information contained in this article. If you do share a federal tax ID with your hospital, then this article is essential to your fiscal operations and reporting and should be shared with your finance department, corporate compliance officer, and senior administration for your program.

Many occupational health programs do share federal tax IDs with their affiliated hospital. This federal tax ID is used for billing and payment, as well as for IRS, Medicare, and other required reporting. Since most occupational health programs do not provide services to patients covered by Medicare, program administrators and billing supervisors may easily forget about Medicare rules, since they do not bill Medicare in the course of everyday activities. However, since the hospital is billing Medicare and shares a federal tax ID number with the occupational health program, the occupational program by default must comply with Medicare rules.

Fee Structure
One of the fundamental Medicare regulations requires that Medicare providers charge the same amount to Medicare patients as they charge to any other patient (whether insured or uninsured). For example, if the occupational program provides physical exams at a discount for a preferred customer at $25, then that price cannot be lower than the price of physicals offered to Medicare patients of your hospital. The same is true for any other service "sold and billed" by the occupational health program to any customer. Whether a standard or discounted price, under Medicare rules your prices and negotiated fees cannot be lower than those offered to Medicare patients of the hospital.

However, another Medicare regulation does exist that more narrowly addresses the fee structure issue. It appears to permit a different charge structure for patient services in different settings within a hospital, which would allow occupational health programs to levy different charges as long as their hospital’s Medicare Cost Reports are filled out correctly. This regulation reads as follows:

"So that its charges may be allowable for use in apportioning costs under the [Medicare] Program, each facility should have an established charge structure which is applied uniformly to each patient as services are furnished to the patient.…While the Medicare program cannot dictate to a provider what its charges or charge structure may be, the Program may determine whether or not the charges are allowable for use in apportioning costs under the Program. Hospitals which have sub-providers and hospital-based SNF’s [Skilled Nursing Facilities] must also maintain uniform charges for like services, across each Provider setting, in order to properly apportion costs. If like charges for like services are not maintained across Provider settings, the cost report must not combine charges when calculating cost-to-charge ratios, but must report separately, by department, costs and charges for the Hospital, sub-provider, and skilled nursing facility [emphasis supplied]. An exception to this requirement is if the Provider has the ability to gross-up charges.…"¹ 

Medicare's Explanation
Upon inquiry with the Audit and Analysis Office of Medicare Part A, a representative has verified that reconciliation of the apparent conflict between these two Medicare rules is as follows:

• Hospitals may not charge Medicare patients more than any other patient within the hospital proper. Moreover, any discounts that are obtained must be passed on to Medicare in the hospital’s cost report.

• Patient charges assessed in a clinic or SNF operated by the hospital may differ from charges assessed in the hospital itself, as long as all charges within each setting are uniform. That is, all clinic patients must be charged the same for X-ray services whether or not they are on Medicare, and all SNF patients must be charged the same as all other SNF patients, regardless of insurance.

• As indicated by the italicized portion of the regulations cited above, when a charge for an x-ray, for example, differs in the occupational health clinic from charges in the hospital proper, the hospital must report all such charges separately by department. That is, the hospital has to sub-script the charges. By treating each provider setting as a separate cost center, the hospital will be able to calculate its cost-to-charge ratios properly.

• Put another way, it is important that a hospital not mix apples and oranges—the hospital cannot blend different provider settings (with different costs and charges) on one cost report.

• Discounts received from suppliers must either be netted out in the first place in a hospital’s cost report or reported on an appropriate line on the cost report, as a deduction from gross costs.

Summary
The repricing of charges from the hospital to the occupational health clinic setting will not pose a problem for the hospital as long as it is properly preparing its cost reports to reflect the separate costs and charges by department.

Because the actual cost structure for doing business in the occupational health setting is probably different from other departments in the hospital, and because you know competitive but appropriate market pricing is needed to retain and keep customers, your program administrators and financial managers must gain a clear understanding of Medicare rules and cost report filing. With correct filing of cost reports, occupational health programs can retain the price structure they need to remain competitive, while remaining in compliance with all applicable Medicare regulations.

1 Medicare Provider Reimbursement Manual, Part I, §2203 (as amended through June, 1996).

Editor's Note: This article does not represent legal advice. Readers should consult their own healthcare law attorney regarding the specific facts of their situations. - KS