On Your Side: Thousands refunded after government was billed $400 for can of baby formula

On Your Side: Thousands refunded after government was billed $400 for can of baby formula

JACKSONVILLE, Fla. - Thousands of dollars are expected to be refunded to a military family and the government after a First Coast News investigation exposing overpriced baby formula.

The company provider of the formula agreed Wednesday to refund a Jacksonville family just over $2,000 in payments, during inquiries from the Department of Defense and lawmakers into overbilling. 

In May, First Coast News first reported shocking numbers discovered in TRICARE health care paperwork by a military mom, who did not want to be identified for fear of losing her job.

Her son, like thousands of babies and toddlers across the country, had been prescribed a hypoallergenic formula due to digestive issues with regular formula.

Her TRICARE insurance paid the majority of the bill, but it came at a high price. A 14 oz. can of baby formula, priced $46 on the manufacturer's website, was costing her military health care $426 per can. Her complaints in 2016 to TRICARE managers and the formula company representatives were dismissed. 

"They told me I was confused, and that these charges were fine," she said.

   Initial Story: Military healthcare paying more than $400 for a $46 can of baby formula

Every month 15 cans were delivered to her door step, and every billing statement said TRICARE had been charged $6,412. 

Frustrated, she reached out to First Coast News, worried other parents of special needs children were dealing with similar issues. The high charges for cases of formula delivered to her house resulted in a proportionately high cost share co-pay. The first month, the family's 20 percent patient responsibility for 15 cans was $1,247.

Company Explanations for Billing

The bill came from company, BioScrip, a home health and infusion services provider. Company representatives initially told First Coast News they were under strict guidelines to charge this way due to rates set by TRICARE. 

TRICARE officials explained the meal replacement formula, along with other similar products, are the few items that do not have a set nationwide price. As a result, a rate for each state using claims data, and for this item it is broken down into a price per unit or calorie.

Instead of being priced by the can, the formula is allowed to be priced by the calorie. The nutrient-heavy meal replacement formulas contain thousands of calories (often 1,600 calories to 2,000 calories). Florida's prevailing 'state rate' of 27 cents per calorie transforms the cost of a $46 can into a $432 can.

However, First Coast News found other companies billing TRICARE the more reasonable rate of $45 per can for the same product.

BioScrip later explained their company charges more than other companies because their nutritional items require oversight from a medical professional to assist the patient with the feeding. 

But this military family said they were offered no such help with their formula shipments. In fact, they provided First Coast News with a call transcript of the only time they talked to a clinician in November. The interview included a 26 question survey and was handled completely over the phone.

BioScrip said due to privacy issues, it could not answer whether this single phone call constituted the clinical oversight that increased the prices to TRICARE by 1000 percent. 

Tara Hayes, deputy director of healthcare policy at the American Action Forum in Washington D.C., said TRICARE usually pays for charges at a lower rate than private insurance companies.

"No one is forcing [a company] to bill an extraordinary amount," said Hayes, who analyzes current federal legislation. "It may be that there is a formula that is allowing them to bill at such a rate, but it is certainly not required."

Hayes said upcharges are allowed for products that require clinical administration versus products picked up in a pharmacy. She added, TRICARE rates are tied to Medicare rates and Medicare Part B allows a provider to charge the average cost plus a six percent add-on. However, she said a 1000 percent add-on was unheard of as an administrative fee. 

A Closer Look

After First Coast News' story in May, a TRICARE official with the Department of Defense said they would be "working to determine if any abuses [had] occurred regarding billing the government in excess of standard and reasonable charges."

On June 20, TRICARE notified the patient "upon review, it has been determined that an overpayment was made to [BioScrip]." The total overpayment? Over $16,000 in the one case. 

BioScrip's vice president, Kathryn Stalmack said overpayment notices are common in their company and the healthcare industry. Stalmack said BioScrip will conduct an internal review to determine if they will refund the amount demanded by TRICARE. 

The company contacted the patient Wednesday to confirm they would be refunding the approximately $2,000 cost share copay the family paid out of pocket for the formula. 

TRICARE has not released details on how the overpayment occurred or how widespread it is. 

© 2017 WTLV-TV


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