A. General

Prevailing charges are those charges which fall within the range of charges that are most frequently and widely used in a locality for a particular procedure or service. The top of this range establishes an overall limitation on the charges which the carrier accepts as reasonable for a given procedure or service, except where unusual circumstances or medical complications warrant an additional charge.

For any fiscal year, the prevailing charge limit in a locality for a service must be calculated as the 75th percentile of the customary charges determined for that service in accordance with HI 00401.315 B. (However, see D. below regarding the economic index limitation.) In this calculation, each customary charge for the service is arrayed in ascending order and weighted by how often the physician or other person rendered the service (as reflected by the charge data the carrier used to calculate the customary charge). The lowest customary charge which is high enough to include the customary charges of the physicians or supplier who rendered 75 percent of the cumulative services is determined to be the prevailing charge for the service (subject to the economic index limitation). The proper procedure for establishing revised prevailing charge screens based on the 75th percentile is illustrated by the following example:

Customary Charge Number of Routine Followup Office Visits Rendered by Physicians with Customary Charges as Indicates Cumulative Services $5 1402 1402 $6 1115 2517 $7 1680 4197 $8 803 5000 Total = 5000

In the above example, 75 percent of the total of 5,000 services equals 3,750 services. The prevailing charge is, therefore, $7. (A total of 2,517 services were rendered by the physicians with $5 and $6 customary charges, and an additional 1,680 services were rendered by the physicians with $7 customary charges. The 3,750th service was thus rendered by a physician with a $7 customary charge.)

Where it is necessary to establish customary charges through the use of price lists (see HI 00401.315 B. ), these customary charges are also used to establish the required prevailing charge limits. In this regard, if a carrier cannot derive precise data on the frequency of services from its records, it may use any information it has about the volume of business done by various suppliers in its area in order to weight the customary charges used to calculate the prevailing charges.

Carrier prevailing charge screens may not be rolled back below the level of the screens in effect on December 31, 1970, where the latter had been found acceptable by the Secretary.