[Federal Register: December 10, 2008 (Volume 73, Number 238)]
[Rules and Regulations]
[Page 74945-74966]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10de08-6]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Office of the Secretary
[DOD-2007-HA-0048; RIN 0720-AB19]
32 CFR Part 199
TRICARE; Hospital Outpatient Prospective Payment System (OPPS)
AGENCY: Office of the Secretary, DoD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule implements a prospective payment system for
hospital outpatient services similar to that furnished to Medicare
beneficiaries, as set forth in Section 1833(t) of the Social Security
Act. The rule also recognizes applicable statutory requirements and
changes arising from Medicare's continuing experience with this system
including certain related provisions of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003. The Department is
publishing this rule to implement an existing statutory requirement for
adoption of Medicare payment methods for institutional care which will
ultimately provide incentives for hospitals to furnish outpatient
services in an efficient and effective manner.
DATES: Effective Date: February 9, 2009.
FOR FURTHER INFORMATION CONTACT: David E. Bennett or Martha M. Maxey,
TRICARE Management Activity, Medical Benefits and Reimbursement Branch,
telephone (303) 676-3494 or (303) 676-3627.
SUPPLEMENTARY INFORMATION:
I. Introduction and Background
The Medicare OPPS evolved out of Congressional mandates for
replacement of Medicare's cost-based payment methodology with a
prospective payment system (PPS). Medicare implemented OPPS for
services furnished on or after August 1, 2000, with temporary
transitional provisions to buffer the financial impact of the new
prospective payment system (e.g.,
[[Page 74946]]
incorporating transitional pass-through adjustments and proportional
reductions in beneficiary cost-sharing to lessen potential payment
reductions experienced under the new OPPS).
Congress likewise established enabling legislation under section
707 of the National Defense Authorization Act of Fiscal Year 2002
(NDAA-02), Public Law 107-107 (December 28, 2001) changing the
statutory authorization [in 10 U.S.C. 1079(j)(2)] that TRICARE payment
methods for institutional care shall be determined, to the extent
practicable, in accordance with the same reimbursement rules used by
Medicare. Similarly, under 10 U.S.C. 1079(h), the amount to be paid to
healthcare professional and other non-institutional healthcare
providers ``shall be equal to an amount determined to be appropriate,
to the extent practicable, in accordance with the same reimbursement
rules used by Medicare''. Based on these statutory mandates, TRICARE is
adopting Medicare's prospective payment system for reimbursement of
hospital outpatient services currently in effect for the Medicare
program as required under the Balanced Budget Act of 1997 (BBA 1997),
(Pub. L. 105-33) which added section 1833(t) of the Social Security Act
providing comprehensive provisions for establishment of a Medicare
hospital OPPS. The Act required development of a classification system
for covered outpatient services that consisted of groups arranged so
that the services within each group were comparable clinically and with
respect to the use of resources. The Act also described the method for
determining the Medicare payment amount and beneficiary coinsurance
amount for services covered under the outpatient PPS. This included the
formula for calculating the conversion factor and data requirements for
establishing relative payment weights.
Centers for Medicare & Medicaid Services (CMS) published a proposed
rule in the Federal Register on September 8, 1998 (63 FR 47552) setting
forth the proposed PPS for hospital outpatient services. On June 30,
1999, a correction notice was published (64 FR 35258) to correct a
number of technical and typographical errors contained in the September
8, 1998 proposed rule.
Subsequent to publication of the proposed rule, the Medicare,
Medicaid, and State Child Health Insurance Program (SCHIP) Balanced
Budget Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-133) enacted on
November 29, 1999, made major changes that affected the proposed
Medicare OPPS. The following BBRA 1999 provisions were implemented in a
final rule (65 FR 18434) published on April 7, 2000.
Made adjustments for covered services whose costs exceed a
given threshold (i.e., an outlier payment).
Established transitional pass-through payments for certain
medical devices, drugs, and biologicals.
Placed limitations on judicial review for determining
outlier payments and the determination of additional payments for
certain medical devices, drugs, and biologicals.
Included as covered outpatient services implantable
prosthetics and durable medical equipment and diagnostic x-ray,
laboratory, and other tests associated with those implantable items.
Limited the variation of costs of services within each
payment classification group.
Required at least annual review of the groups, relative
payment weights, and the wage and other adjustments to take into
account changes in medical practice, the addition of new services, new
cost data, and other relevant information or factors.
Established transitional corridors that would limit
payment reductions under the hospital outpatient PPS.
Established hold harmless provisions for rural and cancer
hospitals.
Provided that the coinsurance amount for a procedure
performed in a year could not exceed the hospital inpatient deductible
for the year.
Section 1833(t) of the Social Security Act was subsequently amended
by the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act (BIPA) of 2000 (Pub. L. 106-554) and the Medicare
Prescription Drug, Improvement, and Modernization Act (MMA) of 2003
(Pub. L. 108-173) making additional changes in the OPPS.
As a prelude to implementation of the Medicare OPPS, Congress
enacted the Omnibus Budget Reconciliation Act of 1986 (OBRA) (Pub. L.
99-509) which paved the way for development of a PPS for hospital
outpatient services by prohibiting payment for non-physician services
furnished to hospital patients (inpatients and outpatients), unless the
services were furnished either directly or under arrangement with the
hospital, except for services of physician assistants, nurse
practitioners and clinical nurse specialists. Exceptions were also made
for clinical diagnostic procedures, the payment of which may only be
made to the person or entity that performed, or supervised the
performance of, the test; and for exceptionally intensive hospital
outpatient services provided to Skilled Nursing Facility (SNF)
residents that lie well beyond the scope of the care that SNFs would
ordinarily furnish, and thus beyond the ordinary scope of the SNF care
plan. Consolidated billing facilitated the payment of services included
within the scope of each ambulatory payment classification (APC). The
OBRA also mandated hospitals to report claims for services under the
Healthcare Common Procedure Coding System (HCPCS) which enabled the
identification of specific procedures and services used in the
development of outpatient PPS rates.
Ongoing changes and refinement to the Medicare OPPS have been
accomplished through annual proposed and final rulemaking, along with
interim transmittals and program memoranda taking into consideration
changes in medical practice, addition of new services, new cost data,
and other relevant information and factors. TRICARE will recognize to
the extent practicable all applicable statutory requirements and
changes arising from Medicare's continuing experience with this
prospective payment system, including changes to the amounts and
factors used to determine the payment rates for hospital outpatient
services paid under the prospective payment system [e.g., annual
recalibration (updating) of group weights and conversion factors and
adjustments for area wage differences (wage index updates)]. The
Department of Defense (DoD), otherwise referred to as the agency for
purposes of this rule, will adopt all of Medicare's CY 2008 OPPS
changes published in the Federal Register on November 27, 2007, (72 FR
66580); e.g., extending the current packaging to include guidance
services, image processing services, intraoperative services, imaging
supervision and interpretation services, diagnostic
radiopharmaceuticals, contrast agents, and observation services; and
reduction of payments in cases where a hospital receives a substantial
partial credit from the manufacturer toward the cost of a replacement
device implanted in a procedure.
While TRICARE intends to remain as true as possible to Medicare's
basic OPPS methodology (i.e., adoption and updating of the Medicare
data elements used to calculate the prospective payment amounts), there
will be some deviations required to accommodate the uniqueness of the
TRICARE program. These deviations have been designed to accommodate
existing TRICARE benefit structure and claims processing procedures/
systems implemented under
[[Page 74947]]
the TRICARE Next Generation Contracts (T-NEX), while at the same time
eliminating any undue financial burden to TRICARE Prime, Extra, and
Standard beneficiary populations. Following is a brief discussion of
each of these deviations:
[rtarr8] Outpatient Code Editor (OCE)--The Medicare Outpatient Code
Editor with APC program edits data to help identify possible errors in
coding and assigns Ambulatory Payment Classification numbers based on
HCPCS codes for payment under the OPPS. The Medicare OPPS APC is an
outpatient equivalent of the inpatient Diagnosis Related Group (DRG)-
based PPS. Like the inpatient system based on DRGs, each APC has a pre-
established prospective payment amount associated with it. However,
unlike the inpatient system that assigns a patient to a single DRG,
multiple APCs can be assigned to one outpatient claim. If a patient has
multiple outpatient services during a single visit, the total payment
for the visit is computed as the sum of the individual payments for
each service. Medicare provides updated versions of the OCE, along with
installation and user manuals, to its fiscal intermediaries on a
quarterly basis. The updated OCE reflects all new coding and editing
changes during that quarter.
It was found upon initial testing of the OCE that it could not be
used in its present form given the fact that the extensive editing
embedded in its software program was specific to Medicare's benefit
structure and internal claims processing requirements. As a result, the
Agency has developed a TRICARE-specific OCE which will better
accommodate the benefit structure and claims processing systems
currently in place under the T-NEX contracts. This modified software
package will edit claims data for errors and indicate actions to be
taken and reasons why the actions are necessary. This expanded
functionality will facilitate the linkage between the action being
taken, the reasons for the action, and the information on the claim
that caused the action. The edits will be specific for TRICARE,
ensuring compliance with current claims processing criteria. The OCE
will also assign an APC number for each service covered under the
TRICARE OPPS and return information to be used as input to the TRICARE
PRICER program.
Like Medicare's OCE, the TRICARE-specific OCE will be updated on a
quarterly basis incorporating, to the extent practicable, all Medicare
changes/updates (i.e., those changes initiated through rulemaking and
transmittals/program memoranda). Periodic updating of the TRICARE-
specific OCE will ensure consistency and accuracy of claims processing
and payment under the TRICARE OPPS.
[rtarr8] Deductible and Cost Sharing--Medicare's OPPS coinsurance
was initially frozen at 20 percent of the national median charge for
the services within each APC (wage adjusted for the provider's
geographic area) or 20 percent of the APC payment rate, whichever was
greater (i.e., the coinsurance for an APC could not fall below 20
percent of the APC payment rate). This was designed so that, as the
total payment to the provider increased each year based on market
basket updates, the present or frozen coinsurance amount would become a
smaller portion of the total payment until the coinsurance represented
20 percent of the total. Once the coinsurance became 20 percent of the
payment amount, annual updates would be applied to the coinsurance so
that it would continue to account for 20 percent of the total charge.
Wage adjusted coinsurance amounts were further limited by the Medicare
inpatient deductible. Subsequent legislation has accelerated the
reduction of beneficiary copayment amounts by imposing prescribed
percentage limitations off of the APC payment rate. For example, for
all services paid under the Medicare OPPS in CY 2005, the national
unadjusted copayment amount cannot exceed 45 percent of the APC rate.
Accelerated reductions were imposed specifically for those APC groups
for which coinsurance represented a relatively high proportion of the
total payment.
A program payment percentage is calculated for each APC by
subtracting the unadjusted national coinsurance amount for the APC from
the unadjusted payment rate and dividing the result by the unadjusted
payment rate. The payment rate for each APC group is the basis for
determining the total payment (subject to wage-index adjustment) that a
hospital will receive from the beneficiary and the Medicare program.
Since imposition of Medicare's unadjusted national coinsurance
amounts would have an adverse financial impact on TRICARE beneficiaries
(i.e., imposition of significantly higher cost-sharing for Prime
beneficiaries), the Agency has opted to use the following hospital
outpatient deductible and cost-sharing/copayments currently being
applied in Tables 1 and 2 below for Prime, Extra, and Standard TRICARE
programs for hospital outpatient services:
Table 1--Hospital Outpatient Deductibles
----------------------------------------------------------------------------------------------------------------
Active duty family members
TRICARE programs -------------------------------------------- Retirees, their family members &
E1-E4 E5 & above survivors
----------------------------------------------------------------------------------------------------------------
Prime.......................... None................ None................ None.
Extra.......................... $50 per Individual.. $150 per Individual. $150 per Individual.
$100 Maximum per $300 Maximum per $300 Maximum per family.
family. family.
Standard....................... $50 per Individual.. $150 per Individual. $150 per Individual.
$100 Maximum per $300 Maximum per $300 Maximum per family.
family. family.
----------------------------------------------------------------------------------------------------------------
Table 2--Hospital Outpatient Copayments/Cost-Sharing
--------------------------------------------------------------------------------------------------------------------------------------------------------
TRICARE prime program
-----------------------------------------------------------------------
Type of service Active duty family member Retirees, their TRICARE extra program TRICARE standard
------------------------------------------------ family members & program
E1-E4 E5 & above survivors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital Outpatient Departments $0 copayment per visit $0 copayment per visit $12 copayment per Active Duty Family Active Duty Family
clinic visits; therapy visits; visit. Members: Cost-share-- Members: Cost-share--
treatment rooms, etc. 15% of fee 20% of the allowable
negotiated by charge.
contractor.
[[Page 74948]]
Retirees, Their Retirees, Their
Family Members & Family Members &
Survivors: Cost- Survivors: Cost-
share--20% of the share--25% of the
fee negotiated by allowable charge.
the contractor.
Emergency Services Emergency and $0 copayment per visit $0 copayment per visit $30 copayment per
urgently needed care obtained in emergency room visit.
hospital emergency room.
Ambulatory Surgery (same day) $0 copayment per visit $0 copayment per visit $25 copayment........ ADFMs: Cost-share-- ADFMs: Cost-share--
Hospital-based ambulatory surgical $25. $25.
center.
No separate copayment/ Retirees, Their Retirees, Their
cost-share for Family Members & Family Members &
separately billed Survivors: Cost- Survivors: Lesser of
professional charges. share--20% of the 25% of group rate or
institutional fee 25% of billed
negotiated by the charge.
contractor.
Birthing Centers Prenatal care, $0 copayment per visit $0 copayment per visit $25 copayment........
outpatient delivery, and postnatal
care provided in hospital-based
birthing center.
Partial Hospitalization Programs $0 copayment per visit $0 copayment per visit $40 per diem charge.. ADFMs: $20 per diem ADFMs: $20 per diem
(PHPs) Mental health services charge. charge.
provided in authorized hospital-
based PHP.
No separate copayment/ Retirees, Their Retirees, Their
cost-share for Family Members & Family Members &
separately billed Survivors: Cost- Survivors: Cost-
professional charges. share--20% of the share--25% of the
TRICARE allowed TRICARE allowed
amount. amount.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[rtarr8] Hold-Harmless Protection--At the inception of the Medicare
OPPS, providers were eligible to receive additional transitional
outpatient payments (TOPs) if the payments they received under the OPPS
were less than the payments they could have received for the same
services under the payment system in effect before the OPPS. Prior to
January 1, 2004, most hospitals that realized lower payments under OPPS
received transitional corridor payments based on a percent of the
decreased payments, with the exception of cancer hospitals, children's
hospitals and rural hospitals having 100 or fewer beds, which were held
harmless under this provision and paid the full amount of the decrease
in payment under the OPPS. Since transitional corridor payments were
intended to be temporary payments to ease the provider's transition
from a prior cost-based payment system to a prospective payments
system, they were terminated as of January 1, 2004, with the exception
of cancer and children's hospitals, which were held harmless
permanently under transitional corridor provisions of the statute
(section 1833(t)(7) of the Social Security Act). The authority for
making transitional corridor payments under section 1833(t)(7)(D)(i) of
the Act, as amended by section 411 Public Law 108-173, expired for
rural hospitals having 100 or fewer beds, and sole community hospitals
(SCHs) located in rural areas as of December 31, 2005. However,
subsequent legislation (section 5105 of Pub. L. 109-171) reinstituted
the hold-harmless transitional outpatient payments (TOPs) for covered
OPD services furnished on or after January 1, 2006, and before January
1, 2010, for rural hospitals having 100 or fewer beds and SCHs. This
provision provided an increased payment for such hospitals for
outpatient services if the Medicare OPPS payment they received was less
than the pre-BBA payment amount (i.e., the amount that was received
prior to implementation of OPPS) that they would have received for the
same covered service. When the OPPS payment is less than the payment
the provider would have received prior to OPPS implementation, the
amount of payment is increased by 90 percent of the amount of that
difference for CY 2007, and by 85 percent of the amount of the
difference for CY 2008. The amount of payment under section
1833(t)(13)(B) of the Act, as amended by section 411 of Pub. L. 108-73,
also provided a payment increase for rural SCHs of 7.1 percent for all
services and procedures paid under the OPPS, excluding drugs,
biologicals, brachytherapy seeds and services paid under pass-through
payments effective January 1, 2006, if justified by a study of the
difference in costs for rural SCHs, which include Medicare essential
access community hospitals or EACHs.
While the Agency adopted the hold-harmless TOPs for rural hospitals
having 100 or fewer beds and SCHs, it opted to totally exempt cancer
and children's hospitals from the TRICARE OPPS in lieu of imposing the
hold-harmless provision, given the administrative complexity of
capturing the data required for payment of
[[Page 74949]]
monthly interim TOP amounts. TOPs would require a comparison of what
would have been paid [i.e., billed charges and CHAMPUS Maximum
Allowable Charge (CMAC) amounts] prior to implementation of the OPPS
for hospital outpatient services to those amounts actually paid under
the OPPS for the same services. A TOP would be allowed in addition to
the OPPS amount if payment to a cancer or children's hospital was lower
than the amount that would have been paid prior to implementation of
the OPPS. Since transitional corridor payments were specifically
designed to supplement the losses experienced under the OPPS (i.e., to
pay for services at the full amount that would have been allowed prior
to implementation of the OPPS), and most, if not all, outpatient
services paid at billed charges or CMAC would exceed the OPPS amount,
the program cannot justify the administrative burden/expense of
maintaining the hold-harmless provisions for cancer and children's
hospitals. As a result, TRICARE will continue to reimburse cancer and
children's hospitals on a fee-for-services basis using billed charges
and CMAC rates; i.e., they will be excluded altogether from the OPPS.
Adoption of the Medicare OPPS has also highlighted other policy
considerations which must be addressed in order to accommodate
preexisting authorization criteria and reimbursement systems. Following
are these identified policy considerations and prescribed resolutions:
[rtarr8] Partial Hospitalization Programs (PHP)--The TRICARE
criteria under which PHP services may be rendered are different than
Medicare's--both with regard to the need for PHP services and facility
requirements. Currently, Medicare OPPS partial hospitalization services
may be provided to patients in lieu of inpatient psychiatric care in
hospital outpatient departments or Medicare-certified community mental
health centers (CMHCs). The Agency has opted to retain the existing
mental health review criteria under 32 CFR 199.4(b)(10) in order to
ensure the continued level and quality of mental healthcare afforded
under the basic program. Following are the TRICARE review criteria for
determining the medical necessity of psychiatric partial
hospitalization services:
The patient is suffering significant impairment from a
mental disorder (as defined in Sec. 199.2) which interferes with age
appropriate functioning.
The patient is unable to maintain himself or herself in
the community, with appropriate support, at a sufficient level of
functioning to permit an adequate course of therapy exclusively on an
outpatient basis (but is able, with appropriate support, to maintain a
basic level of functioning to permit partial hospitalization services
and presents no substantial imminent risk of harm to self or others).
The patient is in need of crisis stabilization, treatment
of partially stabilized mental health disorders, or services as a
transition from an inpatient program.
The admission into the partial hospitalization program is
based on the development of an individualized diagnosis and treatment
plan expected to be effective for the patient and permit treatment at a
less intensive level.
Based on existing mental health review criteria under 32 CFR
199.4(b)(10) and certification requirements prescribed under 32 CFR
199.6(b)(4)(xii)(A), including accreditation by the Joint Commission,
under the current edition of the Standards for Behavioral Healthcare,
not all hospital-based PHPs will be assured of receiving payment under
the OPPS unless they meet the above prescribed certification
requirements and enter into a participation agreement with TRICARE.
CMHC PHPs have been excluded from payment under the TRICARE OPPS since
CMHCs are not recognized as authorized providers under the TRICARE
program.
While the authorization standards under 32 CFR 199.6(b)(4)(xii)(A)
through (D) will be retained/applied for both hospital-based and
freestanding PHPs currently recognized under the Program, including the
requirement for a written participation agreement with TRICARE,
freestanding PHPs will be exempt from TRICARE OPPS and will continue to
be reimbursed under the existing TRICARE PHP per diem system as
prescribed under 32 CFR 199.14(a)(2)(ix), subject to their own unique
mental health copayment/cost-sharing provisions.
[rtarr8] Ambulatory Surgery Procedures--Currently, ambulatory
surgery procedures provided in both freestanding ambulatory surgery
centers (ASCs) and hospital outpatient departments or emergency rooms
are paid using prospectively determined rates established on a cost
basis and divided into eleven groups as prescribed under 32 CFR
199.14(d). These payment groups are further adjusted for area labor
costs based on Metropolitan Statistical Areas (MSAs). The payment rates
established under this system apply only to facility charges for
ambulatory surgery (e.g., standard overhead amounts that include, but
are not limited to, nursing and technician services, use of the
facility and supplies and equipment directly related to the surgical
procedure) and do not include such items as physician's fees,
laboratory, X-rays or diagnostic procedures (other than those directly
related to the performance of the surgical procedure), prosthetics and
durable medical equipment for use in the patient's home. Ambulatory
surgery procedures (both provided in hospital-based and freestanding
ambulatory surgery centers) are subject to their own unique copayment/
cost-sharing provisions under the current TRICARE ambulatory surgery
benefit.
With implementation of the TRICARE OPPS, hospital-based ambulatory
surgery procedures will no longer be reimbursed under the original
eleven tier payment system, but will instead be paid on a rate-per-
service basis that varies according to the APC group to which the
surgical procedure is assigned. The relative weight of the APC group
will represent the median hospital cost of the services included in the
APC relative to the median cost of services included in APC 0606, Level
3 Clinic Visit. The prospective payment rate for each APC will be
calculated by multiplying the APC's relative weight by a nationally
established conversion factor and adjusting it for geographic wage
differences. The APC payment will be subject to the deductible and
cost-sharing/copayment amounts currently being applied under Prime,
Extra, and Standard TRICARE programs for hospital outpatient services.
Denial of Medicare inpatient procedures will also be adhered to under
the TRICARE OPPS (i.e., denial of inpatient surgical procedures
performed in a hospital outpatient setting) except for those inpatient
procedures, which upon medical review, could be safely and
efficaciously rendered in an outpatient setting due to TRICARE's
younger, healthier beneficiary population. Exceptions to Medicare's
inpatient surgical procedure listing were based on major part to
standardized utilization management review criteria, (i.e., Interqual
and Milliman), used by TRICARE Managed Care Support Contractors'
medical review staff. TRICARE-specific APCs will be developed for these
designated inpatient procedures based on median costs from the most
recent 12 months of claims history. TRICARE OPPS reimbursement will
also be extended for an inpatient procedure performed to resuscitate or
stabilize a patient with an emergent, life-threatening condition who
dies before being admitted as a patient,
[[Page 74950]]
which in this case, will be paid under a new technology APC.
Freestanding ASCs will be exempt from TRICARE OPPS and will
continue to be paid under the existing eleven tier payment system. ASC
procedures will be placed into one of ten groups by their median per
procedure cost, starting with $0 to $299 for Group 1, and ending with
$1,000 to $1,299 for Group 9 and $1,300 and above for Group 10, subject
to their own unique copayment/cost-sharing provisions under the TRICARE
freestanding ambulatory surgery benefit. The eleventh payment tier/
group was added to the ASC reimbursement system as of November 1, 1998,
for extracorporeal shock wave lithotripsy, with a rate established off
of the inpatient Diagnostic Related Group (DRG) 323 which is currently
$3,289.
[rtarr8] Birthing Centers--As described in 32 CFR 199.6(b)(4)(xi),
a birthing center is a freestanding or institution-affiliated
outpatient maternity care program which principally provides a planned
course of outpatient prenatal care and outpatient childbirth services
limited to low-risk pregnancies. These all-inclusive maternity and
childbirth services are currently being reimbursed in accordance with
32 CFR 199.14(e) at the lower of the TRICARE established all-inclusive
rate or the billed charge. The all-inclusive rate includes laboratory
studies, prenatal management, labor management, delivery, post-partum
management, newborn care, birth assistant, certified nurse-midwife
professional services, physician professional services, and the use of
the facility to the extent that they are usually associated with a
normal pregnancy and childbirth. Since institutional-affiliated
maternity centers will continue to be reimbursed under the TRICARE
maximum allowable birthing center all-inclusive rate methodology as
prescribed under 32 CFR 199.14(e), payment will be equal to the sum of
the Class 3 CMAC for total obstetrical care for a normal pregnancy and
delivery (CPT code 59400) and the TMA supplied non-professional
component amount, which includes both the technical and professional
components of tests usually associated with a normal pregnancy and
childbirth. As a result, hospital-based birthing centers will continue
to be reimbursed the same as freestanding birthing centers except that
updating of the hospital-based all inclusive rate, consisting of the
CMAC for procedure code 59400 (Birthing Center, all-inclusive charge,
complete) and the state specific non-professional component, will lag
two months behind the freestanding birthing center all-inclusive
update; i.e., the freestanding birthing center all-inclusive rate
components will usually be updated on February 1 of each year to
coincide with the annual CMAC file update, followed by the hospital-
based birthing center all-inclusive rate component updates on April 1
of the same year.
[rtarr8] Observation Stays--Observation Services are those services
furnished on a hospital's premises, including the use of a bed and
periodic monitoring by a hospital's staff, which are reasonable and
necessary to evaluate an outpatient's condition or to determine the
need for a possible admission to the hospital as an inpatient. While
observation services reported with HCPCS code G0378 (hospital
observation service, per hour) have been packaged into other
independent separately payable hospital outpatient services since
January 1, 2008, maternity observation claims that have a maternity
diagnosis, a minimum of four hours per observation stay and not primary
surgical procedure on the day of observation will still be identified
using HCPCS code G0378 and reimbursed separately under APC T0002. Under
the TRICARE OPPS, additional hospital services (e.g., separate
emergency room visit or clinic visit) will not be required on a claim
with a maternity diagnosis in order to receive separate payment for an
observation stay.
[rtarr8] End-Stage Renal Disease (ESRD) Dialysis Services--In
accordance with sections 1881(b)(2) and (b)(7) of the Social Security
Act, a facility that furnishes dialysis services to Medicare patients
with ESRD is paid a prospectively determined rate for each dialysis
treatment furnished. The rate is a composite that includes all costs
associated with furnishing dialysis services except for the costs of
physician services and certain laboratory tests and drugs that are
billed separately. CMS has exercised the authority granted under
section 1833(t)(1)(B)(i) to exclude from the outpatient PPS those
services for patients with ESRD that are paid under the ESRD composite
rate. Since TRICARE does not have a comparable composite rate in effect
for payment of ESRD services, they will be reimbursed under TRICARE's
OPPS.
II. Treatment Settings Subject to Outpatient Prospective Payment System
The outpatient prospective payment system applies to any hospital
participating in the Medicare program in the 50 United States, the
District of Columbia, and Puerto Rico, except for Critical Access
Hospitals (CAHs), Indian Health Service hospitals, certain hospitals in
Maryland that qualify for payment under the state's cost containment
waiver, and specialty care providers which include: (1) Cancer and
children's hospitals; (2) freestanding ASCs; (3) freestanding Partial
Hospitalization Programs (PHPs); (4) freestanding psychiatric and
Substance Use Disorder Rehabilitation Facilities (SUDRFs); (5) Home
Health Agencies (HHAs); (6) hospice programs; (7) other corporate
services providers (e.g., comprehensive outpatient rehab facilities,
freestanding cardiac catheterization centers, freestanding sleep
diagnostic centers, and freestanding hyperbaric oxygen treatment
centers); (8) freestanding birthing centers; (9) Veterans
Administration (VA) hospitals; and (10) freestanding ESRD centers. Due
to their inability to meet the more stringent requirements imposed for
hospital-based and freestanding PHPs under the Program, CMHCs have also
been excluded from payment under TRICARE's OPPS for partial
hospitalization program (PHP) services since they are not recognized as
authorized providers under the TRICARE program.
An outpatient department, remote location hospital, satellite
facility, or other provider-based entity must also be either created
by, or acquired by, a main provider (hospital qualifying for payment
under TRICARE OPPS) for the purpose of furnishing healthcare services
of the same type as those furnished by the main provider under the
name, ownership, and financial administrative control of the main
provider, in accordance with the following requirements under 42 CFR
413.65 (Medicare Regulation) in order to qualify for payment under the
OPPS:
Licensure--The outpatient department, remote location
hospital, or the satellite facility and the main hospital are operated
under the same license, except in areas where the State requires a
separate license for the department of the provider.
Clinical Integration--Professional staff of the outpatient
department, remote location hospital or satellite facility are
monitored by, and have clinical privileges at the main hospital. The
medical director of the outpatient facility must also maintain a
reporting relationship with the chief medical officer at the main
hospital that has the same frequency, intensity and level of
accountability that exists in the relationship between other
departmental medical directors and the chief medical officer of the
main hospital. Medical records for patients
[[Page 74951]]
treated in the facility or organization must be integrated into a
unified retrieval system (or cross reference) of the main hospital and
there must be full access to all services provided at the main hospital
for patients treated in the outpatient facility requiring further care.
Financial integration. The financial operation of the
outpatient facility must be fully integrated within the financial
system of the main hospital, as evidenced by shared income and expenses
between the main hospital and outpatient facility.
Public awareness. The outpatient department, remote
location hospital, or a satellite facility is held out to the public
and other payers as part of the main provider. When patients enter the
outpatient facility they are aware that they are entering the main
provider and are billed accordingly.
Having clear criteria for provider-based status is important
because this designation can result in additional TRICARE payments for
services at the provider-based facility (i.e., the incorporation of
additional facility costs for covered outpatient services/procedures).
TRICARE will accept the providers' determination on whether they meet
the regulatory criteria for provider-based status for purposes of
seeking reimbursement under the TRICARE OPPS.
III. Application of Ambulatory Payment Classification (APC) Model
Payment for services under the TRICARE OPPS is based on grouping
outpatient services into APC groups in accordance with provisions
outlined in section 1833(t) of the Social Security Act and its
implementing regulation 42 CFR Part 419. This grouping is accommodated
through the reporting of HCPCS codes and descriptors that are used to
group homogenous services (both clinically and in terms of resource
consumption) into their respective APC groups.
During the development of the TRICARE hospital OPPS it was
recognized that certain hospital outpatient services were being paid
based on fee schedules or other prospectively determined rates that
were being applied across other ambulatory care settings. As a result,
the following services were excluded from the OPPS in order to achieve
consistency of payment across different service delivery sites: (1)
Physician services; (2) nurse practitioner and clinical nurse
specialist services; (3) physician assistant services; (4) certified
nurse-midwife services; (5) services of a qualified psychologist; (6)
clinical social worker services, except under half- and full-day
partial hospitalization programs in which the services are included
within the per diem payment amount; (7) services of an anesthetist; (8)
screening and diagnostic mammographies; (9) clinical diagnostic
services; (10) non-implantable durable medical equipment (DME),
orthotics, prosthetics, and prosthetic devices and supplies; (11)
hospital outpatient services furnished to SNF inpatients as part of
their comprehensive care plan; (12) physical therapy; (13) speech-
language pathology; (14) occupational therapy; (15) influenza and
pneumococcal pneumonia vaccines; (16) take-home surgical dressings;
(17) services and procedures designated as requiring inpatient care;
and (18) ambulance services. These services will continue to be
reimbursed under the current CMAC fee schedule or other TRICARE-
recognized allowable charge methodology (e.g., statewide prevailings).
The remaining outpatient procedures which were not being paid under
current fee schedules or other prospectively determined rates were
grouped under an APC based on the following criteria:
Resource Homogeneity--The amount and type of facility
resources (for example, operating room, medical supplies, and
equipment) that are used to furnish or perform the individual
procedures or services within each APC group should be homogeneous.
That is, the resources used are relatively constant across all
procedures or services even though resources used may vary somewhat
among individual patients.
Clinical Homogeneity--The definition of each APC should be
``clinically meaningful.'' That is, the procedures or services included
within the APC group relate generally to a common organ system or
etiology, have the same degree of extensiveness, and utilize the same
method of treatment.
Provider Concentration--The degree of provider
concentration associated with the individual services that comprise the
APC is considered. If a particular service is offered only in a limited
number of hospitals, then the impact of payment for the services is
concentrated in a subset of hospitals. Therefore, it is important to
have an accurate payment level for services with a high degree of
provider concentration. Conversely, the accuracy of payment levels for
services that are routinely offered by most hospitals does not bias the
payment system against any subset of hospitals.
Frequency of Service--Unless there is a high degree of
provider concentration, creating separate APC groups for services that
are infrequently performed is avoided. Since it is difficult to
establish reliable payment rates for low-volume groups, HCPCS codes are
assigned to an APC that is most similar in terms of resource use and
clinical coherence.
Minimal Opportunities for Upcoding and Code
Fragmentation--The APC system is intended to discourage using a code in
a higher paying group to define the care. That is, putting two related
codes such as the codes for excising a lesion for 1.1 cm and one of 1.0
cm, in different APC groups may create an incentive to exaggerate the
size of the lesions in order to justify the incrementally higher
payment. APC groups based on subtle distinctions would be susceptible
to this kind of coding. Therefore, APC groups were kept as broad and
inclusive as possible without sacrificing resource or clinical
homogeneity.
These procedures, along with their specific HCPCS coding and
descriptors, were used to identify and group services within each
established APC group. They included: (1) Surgical procedures
(including hospital-based ASC procedures currently being paid under the
eleven tier ASC payment methodology); (2) radiology, including
radiation therapy; (3) clinic visits; (4) emergency department visits;
(5) diagnostic services and other diagnostic tests; 6) partial
hospitalization for the mentally ill; (7) surgical pathology; (8)
cancer therapy; (9) implantable medical items (e.g., prosthetic
implants, implantable DME and implantable items used in performing
diagnostic x-rays and laboratory tests); (10) specific hospital
outpatient services furnished to a beneficiary who is admitted to a
SNF, but in which case the services are beyond the scope of SNF
comprehensive care plans; (11) certain preventive services, such as
colorectal cancer screening; (12) acute dialysis (e.g., dialysis for
poisoning); and (13) ESRD services. These hospital outpatient
procedures will be paid on a rate-per-service basis that varies
according to the APC group to which they are assigned.
In accordance with section 1833(t)(2) of the Social Security Act,
services and items within an APC group cannot be considered comparable
with respect to the use of resources in the APC group if the highest
median cost is more than 2 times the lowest median cost for an item or
service within the same group (referred to a the ``2 times rule'').
Exceptions may be granted in unusual cases, such as low-volume items
and services.
[[Page 74952]]
IV. Public Comments
The TRICARE OPPS proposed rule (72 FR 17271) was published on April
1, 2008, providing a 60-day public comment period. Ten timely items of
correspondence were received containing multiple comments on the
proposed rule which resulted in a substantive change in hospital-based
PHP reimbursement (i.e., reimbursement of a single per diem based on a
minimum of three service units and payment of PHP professional services
outside the per diem) and provided clarification regarding the
temporary transitional payment adjustment (TTPA) and temporary military
contingency payment adjustment (TMCPA) available under the TRICARE OPPS
which will provide hospitals sufficient time to adjust and budget for
potential revenue reductions and to ensure network adequacy deemed
essential for military readiness and support during contingency
operations. Following is a summary of the public comments and our
responses:
Comment: Several commentors expressed support for the first option
outlined in the proposed rule to provide an implementation plan
involving three-year transitional payment adjustments for TRICARE
network hospitals, but took exception to the proposal that the
transitional adjustments only apply to hospitals that are in close
proximity to military bases and treat a disproportionate share of
military family members and/or hospitals that provide essential network
specialty care. The commentors further supported the three-year
transition to set higher payment percentages for the ten APCs (five
clinic visits and five emergency room (ER) visits) during the first
year, with reductions in each of the transition years. Several
commentors also recommended a stop-loss system such as the one used in
the implementation of the Medicare OPPS.
Response: We appreciate the commentor's concerns regarding the
temporary transitional payment process and have modified it to include
all hospitals, both network and non-network. For network hospitals, the
temporary transitional payment adjustments (TTPAs) will cover a four-
year period. The four-year transition will set higher payment
percentages for the ten Ambulatory Payment Classification (APC) codes
604-609 and 613-616, with reductions in each of the transition years.
For non-network hospitals, the adjustments will cover a three-year
period, with reductions in each of the transition years.
For network hospitals, under the TTPAs, the APC payment level for
the five clinic visit APCs would be set at 175 percent of the Medicare
APC level, while the five ER visit APCs would be increased by 200
percent in the first year of TRICARE OPPS implementation. In the second
year, the APC payment levels would be set at 150 percent of the
Medicare APC level for clinic visits and 175 percent for ER APCs. In
the third year, the APC visit amounts would be set at 130 percent of
the Medicare APC level for clinic visits and 150 percent for ER APCs.
In the fourth year, the APC visit amounts would be set at 115 percent
of the Medicare APC level for clinic visits and 130 per cent for ER
APCs. In the fifth year, the TRICARE and Medicare payment levels for
the 10 APC visit codes would be identical.
For non-network hospitals, under the TTPAs, the APC payment level
for the five clinic and ER visit APCs would be set at 140 percent of
the Medicare APC level in the first year of TRICARE OPPS
implementation. In the second year, the APC payment levels would be set
at 125 percent of the Medicare APC level for clinic and ER visits. In
the third year, the APC visit amounts would be set at 110 percent of
the Medicare APC level for clinic and ER visits. In the fourth year,
the TRICARE and Medicare payment levels for the 10 APC visit codes
would be identical.
The transitional payment adjustments have been increased from those
percentage amounts appearing in the proposed rule (73 FR 17271) to
further buffer the decrease in revenues that hospitals will be
experiencing during initial implementation of TRICARE OPPS. TTPA
adjustments will also be extended to non-network providers, although
they will be lower than for network hospitals to provide incentives for
network participation. TRICARE will not utilize a stop-loss system such
as the one used in the implementation of Medicare OPPS as it is not
administratively feasible to adopt this type of transition under
TRICARE. As stated in the proposed rule, these TTPAs will buffer the
initial revenue reductions which will be experienced upon
implementation of TRICARE's OPPS, providing hospitals with sufficient
time to adjust and budget for potential revenue reductions for
hospitals most vulnerable to implementation of OPPS.
Based on our discussions with the TRICARE Regional Offices (TROs),
in regard to the second option to adopt, modify, and/or extend
temporary adjustments to TRICARE's OPPS payments for TRICARE network
hospitals deemed essential for military readiness and support during
contingency operations, it was decided the policy for determining
network waivers under the CHAMPUS Maximum Allowable Charge (CMAC)
methodology should be used as a model to determine whether a temporary
military contingency payment adjustment (TMCPA) under OPPS is
warranted. This does not mean that network hospitals will be exempt
from OPPS or that the 115% locality based waiver ceiling applies. Under
the TMCPAs, this final rule will allow the reimbursement of higher
payment rates for hospital-based outpatient healthcare services, if it
is determined necessary to ensure adequate Preferred Provider networks.
It might be determined that the initial TTPA of 200% for ER visits in a
particular network hospital is not sufficient to ensure network
adequacy and as a result, an additional TMCPA of 25 percent, (i.e., 225
percent of the OPPS rate for ER visits) would be necessary to support
military contingency operations. The higher rate will be authorized
only if all reasonable efforts have been exhausted in attempting to
create an adequate network and that it is cost-effective and
appropriate to pay the higher rate to ensure an appropriate mix of
primary care and specialists in the network. For this purpose, such
evidence may include consideration of the number of providers in the
locality who provide the affected services, the mix of primary/
specialty providers needed to meet patient access standards, the number
of TRICARE beneficiaries in the locality, and the availability of
Military Treatment Facility providers and any other factors the TMA
Director, or designee determines relevant. If it is determined that the
availability of an adequate number and mix of qualified healthcare
providers in a network is not found, the Director TRO (DTRO) shall
conduct a thorough analysis and forward recommendations with a cost
estimate for approval to the TMA Director or designee through the TMA
Contracting Officer (CO) for coordination. Those who can apply for the
TMCPAs are: The DTRO; providers through the DTRO; Managed Care Support
Contractors (MCSCs) through the DTRO; and Military Treatment Facilities
(MTFs) through the DTRO. The TMA Director or designee is the final
approval authority for TMCPAs. The procedures that are to be followed
when submitting a TMCPA request will be outlined in the TRICARE
Reimbursement Manual.
Comment: One commentor recommended the final rule include a
[[Page 74953]]
definition of the term ``close proximity'' and what constitutes a
``disproportionate share of military family members'' and ``essential
network specialty care'' for future reference.
Response: Since these terms will not be used in determining whether
TMCPAs will be authorized, there is no need to add a definition for
``close proximity'' and explain what constitutes a ``disproportionate
share of military family members'' and ``essential network specialty
care.''
Comment: Another commentor expressed concern that certain TRICARE
dependent hospitals will be negatively impacted to the point that
ongoing service capability to military personnel and their families
will be severely limited. This commentor states a reasonable solution
would be to create criteria for alternative reimbursement methodologies
that would reflect an institution's dependence upon TRICARE. These
provisions would include an exemption for network hospitals serving a
disproportionate number of TRICARE patients and the continuation of
TRICARE Maximum Allowable Charge rates for network hospitals entitled
to an exemption.
Response: Under the governing statutory provisions implementing
TRICARE's OPPS, TMA cannot exempt hospitals from TRICARE's OPPS on a
case-by-case basis; however, see above response on the establishment of
higher rates under TRICARE's OPPS using the TTPAs and TMCPAs.
Comment: Another commentor requested the requirement of ``military
readiness or contingency operations'' be clarified or interpreted to
allow exceptions at any time, to assure the military is prepared to
perform its mission at any time and not only at times of ongoing
operations. The commentor also believes the Director should be allowed
to grant not just a ``temporary deviation'' but also be allowed to
grant a more permanent exclusion from OPPS, if it is determined that a
hospital's participation in TRICARE is required to support military
readiness. The commentor further states that it is a major financial
commitment for a hospital to participate in TRICARE and if the
participation is only allowed on a temporary basis, this makes it
problematic for the hospital to participate. They feel that allowing a
more permanent exclusion from OPPS would be helpful in allowing a
hospital to remain a part of the TRICARE network.
Response: As stated above, the statutory provisions implementing
TRICARE's OPPS, does not allow TMA to permanently exclude hospitals
from TRICARE's OPPS; however, there is latitude under these statutory
provisions for the adoption of temporary transitional payment
adjustments (TTPAs). These TTPAs will buffer the initial revenue
reductions which will be experienced upon implementation of TRICARE's
OPPS, providing hospitals with sufficient time to adjust and budget for
potential revenue reductions for hospitals most vulnerable to
implementation of OPPS. In addition, OPPS will ensure consistency of
hospital outpatient payments throughout the United States, thus
reducing the denial and return of claims to providers for coding
errors. Providers will have access to OCE/Pricer software that will
facilitate the filing and payment of outpatient claims with their
TRICARE claims processors. This will reduce overall administrative
costs for both providers and TRICARE contractors. Also, there are
additional transitional adjustments, (i.e., TMCPAs) that will ensure
network adequacy during military contingency operations. A change in
troop deployment, the mix of primary/specialty providers needed to meet
patient access standards, and base realignment and/or closures could
impact whether a military contingency payment adjustment is warranted.
Therefore, it would not be fiscally responsible to make these
adjustments permanent.
Comment: Another commentor suggests that if DoD adopts a fully
Medicare-based OPPS system for TRICARE, it will have a substantially
negative effect upon the financial conditions of community hospitals
closest to military installations that military personnel, retirees and
their families depend upon for important medical services. The
commentor further states that if DoD pegs outpatient hospital
reimbursement rates to insufficient Medicare reimbursement, they
believe that hospitals in California and elsewhere would consider not
performing outpatient procedures on TRICARE members, or withdrawing
from TRICARE contracts due to poor reimbursement. This could, in turn,
harm access to enrollee outpatient care. This commentor recommends
that: (1) DoD should, apart from the congressionally altered market
basket update factor, separately calculate TRICARE OPPS rates based on
the actual market basket update factor, which they believe more
accurately reflects hospitals' costs. Doing so would ensure that more
TRICARE network hospitals would retain their affiliation with the
program and that hospitals closest to large military installations
would not be adversely affected; (2) DoD should adopt a 15 percent
``glide path'' methodology that is similar to its prior rate adjustment
methodologies enshrined at 32 CFR 199.14. Under this methodology,
TRICARE-participating hospitals may not have their TRICARE outpatient
rate reduced by more than 15 percent per year. For example, under this
proposal, for the first year of the TRICARE transition OPPS period,
TRICARE-contracting facilities would receive the TRICARE outpatient
contracted rate, reduced by the lesser of: (a) The amount the contract
rate exceeds the TRICARE OPPS rate for the same service or procedure;
or (b) 15 percent off the contract rate. This amount becomes the
contract rate for each subsequent year's calculation, until the
difference between the TRICARE outpatient contracted amount and the
TRICARE OPPS amount have equilibrated.
Response: In section 707 of NDAA-02, Congress changed the statutory
authorization (in 10 U.S.C. 1079(j)(2)) that TRICARE payment methods
for institutional care ``may be'' determined to the extent practicable
in accordance with Medicare payment rules to a mandate that TRICARE
payment methods ``shall be'' determined in accordance with Medicare
payment rules. Based on this statutory mandate, TRICARE is adopting
Medicare's prospective payment system for reimbursement of hospital
outpatient services currently in effect for the Medicare program. As
stated above, to minimize the potential negative impact OPPS may have
on hospitals (both network and non-network), TRICARE has developed the
TTPAs and TMCPAs.
Comment: One commentor requested clarification on whether there
were other hospital outpatient services that were excluded from the
TRICARE OPPS other than the eighteen (18) listed in 63 FR Pages 17276
and 27277.
Response: There are no other hospital outpatient services that are
excluded under TRICARE's OPPS other than those listed in the proposed
rule.
Comment: One commentor strongly recommended that the Final Rule
establish an implementation date that is at least 90 days from the date
of the publication of the Final Rule to allow adequate time for
education and system changes to ensure a smooth transition to this new
payment methodology.
Response: The agency will attempt to provide as much time as
possible to ensure a smooth transition to this new payment methodology.
Comment: This same commentor urges TRICARE to release the updated
[[Page 74954]]
TRICARE specific OCE each quarter at the same time the updated Medicare
OCE is released.
Response: TRICARE will release its updated OCE each quarter to
coincide with Medicare's release of its OCE.
Comment: This same commentor seeks clarification of the statement
``upon medical review'' for those inpatient procedures that the Agency
believes can be safely and efficaciously rendered in an outpatient
setting due to TRICARE's younger, healthier beneficiary population. The
commenter also seeks clarification on how the medical review process
will take place, specifically if the medical review process will be
conducted for an individual beneficiary claim based upon the review
criteria or on advantages to a methodology that applies criteria to an
individual beneficiary claim because of the diversity of the population
which TRICARE serves.
Response: The current TRICARE exceptions to Medicare's inpatient
surgical procedure listing was a result of a review of those inpatient
procedures that the Agency determined could be safely and efficaciously
rendered in an outpatient setting for TRICARE beneficiaries, based on
standardized utilization management review criteria used by the TRICARE
Managed Care Support Contractors' medical review staff. TRICARE's
determination of whether a procedure is removed from Medicare's
inpatient only list is not based on medical review of individual
beneficiary claims but on generally accepted medical standards of
practice as substantiated by standardized utilization management review
criteria.
Comment: This same commentor suggests clarifying the payment rate
of ``TRICARE standard allowable charge methodology'' for nonpass-
through drugs, biologicals and radiopharmaceuticals with HCPCS codes,
but without claims data, to be ``the same as the payment methodology
under Medicare OPPS, i.e., separate payment based upon the payment rate
for nonpass-through drugs and biologicals, in accordance with the ASP
methodology.''
Response: TRICARE is adopting the same payment methodology as the
Medicare OPPS effective January 1, 2008, in that the updated payment
rates for drugs and biologicals will be based on average sale prices.
Comment: One commentor states the statement in the proposed rule
appears vague on whether the Trauma Activation HCPCS G code will be
paid in addition to the Critical Care CPT codes reported on the same
date of service. The commentor is requesting that TRICARE clarify in
the final rule that HCPCS code G0390 will be paid in addition to CPT
critical care codes 99291 and 99292 when reported on the same date of
service.
Response: TRICARE confirms if trauma activation occurs, HCPCS code
G0390 will be paid in addition to CPT critical care codes 99291 or
99292 when reported on the same date of service.
Comment: One commentor had concerns about the requirement that
hospitals must use procedure code 58260, which will be assigned to APC
0202, when billing for vaginal hysterectomies. The commentor states
that while CPT code 58260 is appropriate for vaginal hysterectomies for
uterus 250g or less, it would be inappropriate if performed in
conjunction with other procedures such as with removal of tube(s) and
or ovarie(s) and other combinations of vaginal hysterectomies because a
more specific CPT code (58262) describes these services. The commentor
states that proposing to submit a specific code for all vaginal
hysterectomies when another CPT code is more appropriate conflicts with
the standard set forth by the Department of Health and Human Services
and HIPAA. The commentor recommends that TRICARE instruct providers to
report the appropriate CPT code representative of the procedure being
performed from the CPT code range of 58260-58294, rather than to report
CPT code 58260 for all vaginal hysterectomies.
Response: TRICARE will instruct providers to report the appropriate
CPT code for vaginal hysterectomies rather than to report CPT code
58260 for all vaginal hysterectomies.
Comment: We received multiple comments expressing concern over the
differences in Medicare's PHP reimbursement under OPPS and TRICARE's
proposed PHP reimbursement.
Response: Upon further review, TRICARE has decided to adopt
Medicare's PHP reimbursement methodology for hospital-based PHPs. For
CY 2009, we are adopting CMS' two separate APC payment rates for PHP:
One for days with three services (APC 0172) and one for days with four
or more services (APC 0173). In addition, TRICARE will allow services
of physicians, clinical psychologists, Clinical Nurse Specialists
(CNS's), Nurse Practitioners (NPs) and Physician Assistants (PAs) to
bill separately for their professional services delivered in a PHP. The
only professional services which will be included in the per diem are
those furnished by Clinical Social Workers (CSWs), Occupational
Therapists (OTs), and alcohol and addiction counselors.
Comment: This commentor also states the Medicare PHP reimbursement
methodology does not have a provision for recognizing the costs for
proving such specialized partial hospitalization services to children.
They believe the use of a Medicare methodology, without accounting for
the additional costs of providing care for children in these programs
is not reasonable and will further weaken already limited access to
community services for TRICARE beneficiaries.
Response: We appreciate the comment. TMA currently is reviewing all
aspects of its PHPs and will take this under consideration. In the
interim, the Medicare PHP reimbursement methodology will be applied to
all hospital-based PHP services.
Comment: One commentor requested a full financial impact analysis
be done to determine the impact a move to Medicare reimbursement rates
will have on the ability of certified providers to stay in the TRICARE
program and provide adequate access to PHP services for TRICARE
beneficiaries.
Response: With our adoption of the Medicare full day rate for
partial hospitalization and allowing payment of professional services
outside the per diem rate, except for CSWs, OTs, and alcohol and
addiction counselors, we feel the overall PHP payment (i.e., the
TRICARE OPPS per diem plus payment for those professional services
identified above) is comparable to the per diem rates currently in
effect under TRICARE policy. In addition, the TMCPAs would also apply
to ensure adequate access to PHP services.
Comment: Another commentor requested a thorough, detailed impact
analysis be made available so that providers could better assess and
anticipate the economic ramifications of this major change in TRICARE
policy. They state that while the net reported impact of this rule does
not exceed the $100 million threshold that would require ``certain
regulatory assessments and procedures (73 FR 17287),'' the gross impact
is more than twice the $100 million threshold and it is obvious from
the reconciliation provided that this rule has some component parts
with large impacts. The commentor states it would be helpful and
informative if the Agency could share information that would illuminate
the redistributive and/or economic impact of this proposed rule.
Response: Based on revised claims data (i.e., charge and payment
data from January 2007-June 2007) it has been estimated that this
rulemaking is
[[Page 74955]]
``economically significant'' as measured by the $100 million threshold,
and hence also a major rule under the Congressional Review Act.
Accordingly, a Regulatory Impact Analysis has been incorporated into
the final rule presenting the costs and benefits associated with
implementation of the TRICARE OPPS. Refer to the Regulatory Impact
Analysis below for a detailed overview of the economic effects of this
final rulemaking.
Comment: One commentor stated the Medicare PHP rate is established
based on inclusion of Community Mental Health Centers. TRICARE does not
permit CMHCs to be certified providers. The commentor goes on to state
that because of this, the Medicare rate calculation is not a good proxy
for TRICARE partial hospitalization programs because TRICARE does not
include CMHCs as providers, but Medicare median costs rely very heavily
on the cost structure of CMHCs.
Response: We agree with the commentor that historically the median
per diem cost for CMHCs greatly exceeded the median per diem cost for
hospital-based PHPs and fluctuated significantly from year to year
while the median per diem cost for hospital-based PHPs remained
relatively constant. However, CMS noted that for CY 2006 the hospital-
based PHPs per diem median cost was $177 and for CMHCs, the per diem
median cost was $172. CMS reports it has observed a stabilizing trend
in CMHCs data and similar per diem costs between hospital-based and
CMHC PHPs.
Comment: One commentor stated that TRICARE requires compliance with
a set of standards (including potential on-site surveys) intended to
assure the Department of Defense that the quality of care of certified
programs exceeds minimal standards. Medicare does not have a like set
of standards. The commentor states that additional resources are
required to assure compliance with these standards both in the initial
certification process and in the ongoing monitoring of compliance.
These additional requirements should be taken into consideration in any
rate-setting methodology. The commentor states compliance with these
standards imposes additional duties on certified providers.
Response: The Agency will take these comments into consideration as
we continue to monitor the applicability of OPPS reimbursement rates to
PHP programs that are subject to TRICARE's more stringent certification
standards.
Comment: One commentor states that in the event a TRICARE network
hospital qualifies for deviations and/or temporary adjustment to OPPS
payments for a period of two (2) years or greater (i.e., a ``TRICARE
Adjusted Network Hospital''), then in order to support such TRICARE
Adjusted Network Hospital's effort to recruit and maintain an adequate
physician active medical staff, the Director, TMA or a designee can
provide reimbursement to TRICARE participating active medical staff
physicians of a TRICARE Adjusted Network Hospital reimbursement equal
to the prevailing TRICARE maximum Allowable Charge schedule (TMAC) plus
an additional fifteen percent (15%) of such TMAC.
Response: The professional reimbursement is subject to its own
waiver process as outlined in 32 CFR Part 199.14(j)(1)(iv)(D) and (E).
The two waivers recognized under the TRICARE Program for increased
professional provider payments are as follows:
Locality Waivers: If it is determined that access to
specific health care services is severely impaired, higher payment
rates could be applied to all similar services performed in a locality.
Payment rates could be established through the addition of a percentage
factor to an otherwise applicable payment amount, or by calculating a
prevailing charge, or by using another government payment rate.
Network Waiver: If it is determined that higher rates are
necessary to ensure availability of an adequate number and mix of
qualified network providers then the amount of reimbursement would be
limited to the lesser of (a) an amount equal to the local fee for
service charge; or (b) up to 115 percent of the CMAC.
Comment: The same commentor provided recommendations relating to
OPPS coding guidelines and updates.
Response: Providers will have access to commercial OCE/Pricer
software that will facilitate the filing and payment of outpatient
claims with their TRICARE claims processors. In addition, the following
data elements are available on TMA's OPPS Web site at http://
www.tricare.mil/opps/ and are updated quarterly and/or annually to
coincide with the quarterly OPPS updates: (1) Ambulatory Payment
Classifications (APCs) with Status Indicators (SIs) and Payment Rates;
(2) Payment Status by HCPCS Code; (3) Payment Status Indicator
Descriptions; (4) Statewide Cost-to-Charge Ratios; and (5) OPPS
Provider File.
The following data elements are also available under TRICARE's
Rates and Reimbursement Web site at http://tricare.mil/tma/Rates.aspx
and are updated quarterly to coincide with Medicare's quarterly OPPS
updates: (1) Age and Gender Restrictions Lists; (2) Inpatient
Procedures List; (3) No Government Pay Procedure Code List; and (4)
Questionable Covered Services List.
Comment: The same commentor provided recommendations relating to
authorization of healthcare services.
Response: We appreciate the comments; however, the healthcare
authorization process is outside the scope of the TRICARE OPPS
implementing guidelines.
Comment: This same commentor expressed concern about TRICARE's
departure from the requirement that ``TRICARE payment methods for
institutional care be determined, to the extent practicable, in
accordance with the same reimbursement rules used by Medicare,'' by
replacing Medicare specific coding and claims payment guidelines with
TRICARE specific coding and claims payment guidelines. The commentor
further states that TRICARE contractors be required to follow Medicare
specific coding and claims payment guidelines as required under the
Balanced Budget Act of 1997 and as adopted by Medicare's prospective
payment system for reimbursement of hospital inpatient and outpatient
services. Only in the event that Medicare does not have guidelines
shall guidelines specific to TRICARE be developed and utilized.
Response: While TRICARE intends to remain as true as possible to
Medicare's coding guidelines, there will be some deviations required to
accommodate the uniqueness of the TRICARE program. These deviations
have been designed to accommodate existing TRICARE benefit structure
and claims processing procedures/systems and the unique characteristics
of the TRICARE beneficiary population.
V. TRICARE OPPS Reimbursement Methodology
[rtarr8] General Overview. Under the TRICARE OPPS, hospital
outpatient services are paid on a rate-per-services basis that varies
according to the APC group to which the service is assigned. The APC
classification system is composed of groups of services that are
comparable clinically and with respect to the use of resources. Level 1
(CPT) and Level II HCPCS codes and descriptors are used to identify and
group the services within each APC. Costs associated with items or
services that are directly related and integral to performing a
procedure or furnishing a service have been packaged into each
procedure or service within an APC group with the exception of: (1) New
temporary technology APCs for certain approved services that are
structured
[[Page 74956]]
based on cost rather than clinical homogeneity; and (2) separate APCs
for certain medical devices, drugs, biologicals, radiopharmaceuticals
and devices of brachytherapy under transitional pass-through
provisions. TRICARE is adopting Medicare's classification system, along
with its nationally established APC payment amounts as prescribed in
section 1833(t) of the Social Security Act and in its accompanying
Medicare regulation (42 CFR Part 419) for reimbursement of hospital
outpatient services, to the extent practicable, in accordance with 10
U.S.C. 1079(j)(2), with the realization that there will be subtle
differences occurring between the TRICARE and Medicare OPPS
methodologies based on differences in the age and general health of the
populations they serve (i.e., it can be assumed that the TRICARE
population is younger and healthier than the population being served by
Medicare). For example, TRICARE has already found it necessary to
develop a new TRICARE specific APC for maternity observation stays
(T0002) to accommodate its unique benefit structure and beneficiary
population. There may also be subtle differences in the inpatient only
procedure listings being maintained by the two programs since some of
the Medicare inpatient only procedures may be determined by TRICARE,
upon medical review, to be safe for administration in an outpatient
setting due to its younger, healthier population. This may require the
development of additional APC groups, along with nationally established
payment amounts based on their median costs from the previous year's
claims history.
The payment rate for each APC is calculated by multiplying the
APC's relative weight by the conversions factor. Weights are derived
based on median hospital costs for services/procedures assigned to the
hospital outpatient APC groups. Billed charges for items integral to
performing the major procedure or visit, which include packaged HCPCS
codes (i.e., codes with SI = ``N'') and revenue codes appearing on the
same claim, are converted to costs by multiplying each revenue center
charge by the appropriate hospital-specific CCR. Centers for Medicare
and Medicaid Services (CMS) currently use a four-tiered hierarchy of
cost center CCRs to match a cost center to every possible revenue code
appearing in the outpatient claims, with the top tier being the most
common cost center and the lowest tier being the default CCR. If a
hospital's cost center CCR was deleted by trimming, another cost center
CCR in the revenue hierarchy can be applied. If no other department CCR
can be applied to the revenue code on the claim, CMS uses the
hospital's overall CCR for the revenue code.
The costs of the above services/procedures are then standardized
for geographic wage variations by dividing the labor-related portion of
the operating and capital costs (currently estimated at 60 percent on
the average for each billed item) by the hospital inpatient prospective
payment system (IPPS) wage index. The standardized labor-related cost
and the nonlabor-related cost component for each billed item are summed
to derive the total standardized cost for each separately payable HCPCS
code. Extreme costs outside three standard deviations from the
geometric mean will be eliminated prior to calculating the median cost
for each separately payable HCPCS code. The median costs of these
procedures will then be mapped to their assigned APCs, and the median
costs of those assigned procedures will be used in establishing the
overall APC median cost.
The relative payment weights are calculated for each APC by
dividing the median cost of each APC by the median cost for APC 0606
(Level 3 Clinic Visit), which is $83.21 for CY 2008, as a
reconfiguration of the visit APCs. APC 0606 was chosen in order to
maintain consistency in using a median for calculating unscaled weights
representing the median cost of some of the most frequently provided
services. The relative payment weights were further adjusted by 1.3226
for budget neutrality, based on a comparison of aggregate payments
using CY 2007 relative weights to aggregate payments using the CY 2008
final relative weights.
The other component used in establishing national APC payment
amounts is the conversion factor, updated on an annual basis in
accordance with section 1833(t)(3)(C)(iv) of the Social Security Act,
which provides for CY 2008 an updated amount equal to the hospital
inpatient market basket percentage increase applicable to hospital
discharges under section 1886(b)(3)(B)(iii) of the Act. The market
basket increase update factor of 3.3 percent for CY 2008, along with
the required wage index budget neutrality adjustment of approximately
1.0019, the adjustment of 0.12 percent for the difference in the pass-
through set-aside resulted in a final standard conversion factor for CY
2008 of $63.694.
The national unadjusted APC payment rates that were calculated by
multiplying the CY 2008 scaled weight for each APC by the final CY 2008
conversion factor apply to all the services that are classified within
the APC group. These national rates (i.e., the unadjusted national
rates for both APCs and the HCPCS to which TRICARE OPPS payment was
assigned) are listed on TMA's OPPS Web site at http://www.tricare.mil/
opps.
[rtarr8] Determination of Payment. A payment status indicator (SI)
is provided for every code in the HCPCS to identify how the service or
procedure described by the code would be paid under TRICARE's hospital
outpatient prospective payment system (OPPS); i.e., it indicates if a
service represented by a HCPCS code is payable under the OPPS or
another payment system, and also which particular OPPS payment policies
apply. One, and only one, SI is assigned to each APC and to each HCPCS
code. Following are the CY 2008 payment status indicators, along with a
description of the particular services each indicator identifies.
Table 8--CY 2008 Payment Status Indicators for TRICARE's Outpatient
Hospital OPPS
------------------------------------------------------------------------
Indicator Description OPPS payment status
------------------------------------------------------------------------
A................... Services paid under some Not paid under OPPS.
payment method other Paid by contractors
than OPPS (e.g., under a fee schedule or
payment for non- payment system other
implantable prosthetic than OPPS.
and orthotic devices,
DME, ambulance
services, and
individual professional
services).
B................... More appropriate code Not paid under OPPS.
required for TRICARE
OPPS.
C................... Inpatient procedures.... Not paid under OPPS.
Admit patient. Bill as
inpatient.
E................... Items or services not Not paid under OPPS.
covered by TRICARE.
F................... Acquisition of corneal Not paid under OPPS.
tissue, certain CRNA Paid on allowable
services, and Hepatitis charge basis.
B vaccines.
G................... Pass-through drugs and Paid separate APCs under
biologicals. OPPS.
[[Page 74957]]
H................... Pass-through device Separate cost-based pass-
categories allowed on a through payment; not
cost basis. subject to cost-share/
co-payment.
K................... Non-pass-through drugs Paid separate APCs under
and biologicals, OPPS.
therapeutic
radiopharmaceuticals,
brachytherapy sources,
blood and blood
products.
N................... Packaged incidental Packaged into the
items and services. primary procedure APC
payment amount to which
the incidental item or
service is normally
associated.
P................... Partial hospitalization. Per diem APC payments
for partial
hospitalization
programs.
Q................... Services either Paid under OPPS;
separately payable or services either
packaged. packaged or separately
payable depending on
the specific
circumstances of the
HCPCS billing. OCE
logic will be applied
in determining if the
services will be
packaged or separately
payable.
S................... Significant procedures Paid under OPPS;
allowed under the OPPS separate APC payment.
for which multiple
procedure reduction
does not apply.
T................... Surgical services Paid under OPPS;
allowed under OPPS with separate APC payment.
multiple procedure
payment reduction.
V................... Medical visits Paid under OPPS;
(including clinic or separate APC payment.
emergency department
visits).
W................... Invalid HCPCS or invalid Not paid under OPPS.
revenue code with blank
HCPCS.
X................... Ancillary services...... Paid under OPPS;
separate APC payment.
Z................... Valid revenue code with Not paid under OPPS.
blank HCPCS and no
other SI assigned.
TB.................. Reimbursement not Not paid under OPPS.
allowed for CPT/HCPCS
code submitted.
------------------------------------------------------------------------
[rtarr8] Adjustments for Specific Hospital Payment. The hospital
DRG wage adjustment factor will be used to adjust the portion of the
payment rate that is attributable to labor-related costs for relative
differences in labor and labor-related costs across geographic regions,
with the exception of APCs with SIs ``K'' and ``G'' because of the
inseparable, subordinate status of the outpatient department within the
overall hospital setting. The TRICARE OPPS will also adhere to the same
wage index changes as the TRICARE-DRG based payment system, except the
effective date for changes will be January 1 of each year instead of
October 1. This way only one wage index file will have to be maintained
for both the OPPS and DRG-based payment systems. Following are the
steps taken in achieving this adjustment for APCs in which multiple
procedure discounting is not applied:
Step 1. Calculate 60 percent (labor-related portion) of the
national unadjusted payment rate.
Step 2. Determine the wage index area in which the hospital is
located and identify the wage index that applies to the specified
hospital. The wage index values assigned to each hospital area reflect
the new geographic statistical areas as a result of revised OMB
standards (urban and rural) to which hospitals are assigned for FY 2008
under the IPPS.
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of hospital
employees who reside in the county, but who work in a different county
with a higher wage index.
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined in Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
Step 5. Calculate 40 percent (the nonlabor-related portion) of the
national unadjusted payment rate and add the amount to the resulting
product in step 4. The result is the wage index adjusted payment rate
for the relevant wage index area in which the hospital is located.
Step 6. If the provider is a Sole Community Hospital (SCH),
multiply the wage adjusted payment rate by 1.071 to calculate the total
payment. This adjustment will apply to all services and procedures paid
under the TRICARE OPPS (i.e., SIs ``P,'' ``S,'' ``T,'' ``V,'' and
``X''), excluding drugs, biologicals and services paid subject to pass-
through payment (i.e., SIs ``G,'' ``H,'' and ``K'').
Applicable deductibles and/or cost-sharing/copayment amounts will
be subtracted from the wage adjusted APC payment rate based on the
eligibility status of the beneficiary at the time outpatient services
were rendered (i.e., those deductibles and cost-sharing/copayment
amounts applicable to Prime, Extra, and Standard beneficiary
categories). TRICARE will retain its current hospital outpatient
deductibles, cost-sharing/copayment amounts (refer to Tables 1 and 2
above) and catastrophic loss protection under the TRICARE OPPS. The ASC
cost-sharing provision (i.e., assessment of a single copayment for both
the professional and facility charge for a Prime beneficiary) will be
adopted as long as it is administratively feasible. This will not apply
to Extra and Standard beneficiaries since their cost-sharing is based
on a percentage of the total allowed amount.
[rtarr8] Additional APC Payment Adjustments. TRICARE OPPS payment
amounts are discounted when more than one surgical procedure (SI = T)
is performed during a single operative session. Under these
circumstances, TRICARE will reimburse the full payment and the
beneficiary will pay the full cost-share/copayment for the procedure
having the highest payment rate, while the remaining surgical procedure
payments will be reduced by 50 percent, along with the beneficiary
associated cost-share/copayment to reflect the savings associated with
having to prepare the patient only once and the incremental costs
associated with anesthesia, operating and recovery room use, and other
services required for the second and subsequent procedures. A 50
percent discount will also be applied to the OPPS payment amounts and
beneficiary copayments/cost-shares for procedures terminated before
anesthesia is induced, as identified by modifiers -73 (Discounted
Outpatient Procedure Prior to Anesthesia Administration) and -52
(Reduced Services). Full payment will be received for a procedure that
is started but discontinued after the induction of anesthesia as
reported by modifier -74 (Discounted Procedure). In this case, payment
would recognize the costs incurred by the hospital to
[[Page 74958]]
prepare the patient for surgery and the resources expended in the
operating room and recovery room of the hospital. Discounting will also
be applied to conditional, inherent, and independent bilateral
procedures.
An additional payment is provided for outpatient services for which
a hospital's charges, adjusted to cost, exceed the sum of the wage
adjusted APC rate plus a fixed dollar threshold and a fixed multiple of
the wage adjusted APC rate. Only line item services with SIs ``P,''
``S,'' ``T'', ``V,'' or ``X'' will be eligible for outlier payment
under TRICARE's OPPS. No outlier payments will be calculated for line
item services with SIs ``G,'' ``H,'' ``K,'' and ``N,'' with the
exception of blood and blood products.
For CY 2008, the outlier threshold is met when the cost of
furnishing a service or procedure exceeds 1.75 times the APC payment
amount and exceeds the APC payment rate plus the $1,575 fixed-dollar
threshold. The fixed-dollar threshold was added to better target
outliers to those high cost and complex procedures where a very costly
service could present a hospital with significant financial loss. If a
provider meets both of these conditions (i.e., the multiple threshold
and the fixed-dollar threshold), the outlier payment is calculated at
50 percent of the amount by which the cost of furnishing the service
exceeds 1.75 times the APC payment rate. The hospital would receive the
normal APC payment rate along with the additional outlier amount. For
example, suppose a hospital charges $26,000 for a procedure for which
the APC adjusted amount is $3,000 and the overall facility CCR is 0.30.
The estimated cost to the hospital is $7,800 (0.30 x $26,000). In order
to determine whether the procedure is eligible for outlier payment, it
first must be determined whether the cost for the service exceeds both
the APC multiple outlier cost threshold of $5,250 (1.75 x $3,000) and
the fixed-dollar threshold of $4,575 ($3,000 + $1,575). Since the
estimated cost to the hospital ($7,800) exceeds both threshold amounts,
the hospital would be eligible for 50 percent of the difference, which
in this case would be $1,275 ($7,800 - $5,250/2).
[rtarr8] TRICARE's Payment Hierarchy for Non-OPPS Procedures. If
the outpatient procedure is not assigned an APC payment amount (i.e.,
is not assigned SI ``G,'' ``H,'' ``K,'' ``P,'' ``S,'' ``T,'' ``V,'' or
``X''), but may be reimbursed under an existing TRICARE fee schedule or
other prospectively determined rate (i.e., procedures assigned to SI
``A''), the following hierarchy will be used in pricing the procedure.
The PRICER will first look to see if there is an appropriate CMAC
available for pricing. If a CMAC cannot be found, it will then look to
the Durable Medical Equipment Claims: Prosthetics, Orthotics, and
Supplies (DMEPOS) fee schedule for pricing. If a DMEPOS fee schedule
rate is not available for pricing, it will turn to statewide
prevailings. If a statewide prevailing cannot be found, the PRICER will
reimburse the procedure at the billed charge.
VI. TRICARE's OPPS Transitional Adjustments
Temporary transitional payment adjustments (TTPAs) will be in place
for all hospitals, both network and non-network in order to buffer the
initial decline in payments upon implementation of TRICARE's OPPS. This
is consistent with the stop loss transitional period over which CMS
fully implemented its OPPS rate structure, providing hospitals with
sufficient time to adjust and budget for potential revenue reductions.
It will also provide additional incentives for TRICARE network
participation.
For network hospitals, the temporary transitional payment
adjustments (TTPAs) will cover a four-year period. The four-year
transition will set higher payment percentages for the ten Ambulatory
Payment Classification (APC) codes 604-609 and 613-616, with reductions
in each of the transition years. For non-network hospitals, the
adjustments will cover a three year period, with reductions in each of
the transition years. For network hospitals, under the TTPAs, the APC
payment level for the five clinic visit APCs would be set at 175
percent of the Medicare APC level, while the five ER visit APCs would
be increased by 200 percent in the first year of OPPS implementation.
In the second year, the APC payment levels would be set at 150 percent
of the Medicare APC level for clinic visits and 175 percent for ER
APCs. In the third year, the APC visit amounts would be set at 130
percent of the Medicare APC level for clinic visits and 150 percent for
ER APCs. In the fourth year, the APC visit amounts would be set at 115
percent of the Medicare APC level for clinic visits and 130 percent for
ER APCs. In the fifth year, the TRICARE and Medicare payment levels for
the 10 APC visit codes would be identical.
For non-network hospitals, under the TTPAs, the APC payment level
for the five clinic and ER visit APCs would be set at 140 percent of
the Medicare APC level in the first year of OPPS implementation. In the
second year, the APC payment levels would be set at 125 percent of the
Medicare APC level for clinic and ER visits. In the third year, the APC
visit amounts would be set at 110 percent of the Medicare APC level for
clinic and ER visits. In the fourth year, the TRICARE and Medicare
payment levels for the 10 APC visit codes would be identical.
Two sets of adjustment factors (i.e., one for clinic visits and the
other for ER visits) are being used since revenue cuts for ER visits
are generally greater than those associated with clinic visits.
Transitional payment adjustments for these 10 visit codes will buffer
the initial revenue reductions which will be experienced upon
implementation of TRICARE's OPPS, providing hospitals with sufficient
time to adjust and budget for potential revenue reductions for
hospitals most vulnerable to implementation of OPPS.
An additional temporary military contingency payment adjustment
(TMCPA) will also be available at the discretion of the Director,
TRICARE Management Activity, or a designee, under provisions of this
rule to adopt, modify, and/or extend temporary adjustments to OPPS
payments for TRICARE network hospitals deemed essential for military
readiness and support during contingency operations. If at any time
following implementation it is determined by the TMA Director, or
designee, that it is impracticable to support military readiness or
contingency operations by making TRICARE's OPPS payments in accordance
with the same reimbursement rules implemented by Medicare, a temporary
deviation may be granted. This will ensure the availability of adequate
civilian healthcare resources necessary to meet all ongoing military
readiness and contingencies. The locality-based reimbursement rate
waiver process under the CHAMPUS Maximum Allowable Charge (CMAC)
methodology will be used as a model for considering TMCPA. This will
allow for reimbursement of higher payment rates for healthcare services
that would otherwise be allowable, if it is determined necessary to
ensure adequate provider networks essential for military readiness and
contingency operations. For example, it might be determined that the
initial TTPA of 200 percent for ER visits in a particular hospital is
not sufficient to ensure network adequacy and as a result, an
additional TMCPA of 25 percent, (i.e., 225 percent of the OPPS rate for
ER visits) would be necessary to support military contingency
operations. The higher rate will be authorized only if all reasonable
efforts have been exhausted in attempting to create an adequate
network, and it is cost-effective and
[[Page 74959]]
appropriate to pay the higher rate to ensure an appropriate mix of
primary care and specialists in the network. For this purpose, such
evidence may include consideration of the number of providers in the
locality who provide the affected services, the mix of primary/
specialty providers needed to meet patient access standards, the number
of TRICARE beneficiaries in the locality, and the availability of
Military Treatment Facility providers and any other factors the TMA
Director, or designee determines relevant. If it is determined that the
availability of an adequate number and mix of qualified healthcare
providers in a network is not found, the Director TRO (DTRO) shall
conduct a thorough analysis and forward recommendations with a cost
estimate for approval to the TMA Director, or designee, through the TMA
Contracting Officer (CO) for coordination. Those who can apply for the
TMCPAs are: The DTRO; providers through the DTRO; Managed Care Support
Contractors (MCSCs) through the DTRO; and Military Treatment Facilities
(MTFs) through the DTRO. The TMA Director or designee is the final
approval authority for TMCPAs. TMCPAs will generally be granted for up
to 3 years, after which time hospitals may reapply for subsequent 3-
year periods based on current utilization and access data. It is
anticipated that the duration between publication of the final rule and
TRICARE OPPS implementation will provide sufficient time for hospital's
to apply and receive a final approval determination by the Director,
TMA or designee. The procedures that are to be followed when submitting
a TMCPA request will be outlined in the TRICARE Reimbursement Manual.
TMCPAs may also be extended to non-network hospitals on a case-by-
case basis for specific procedures where it is determined that the
procedures cannot be obtained timely enough from a network hospital.
For such case-by-case extensions, ``Temporary'' might be less than
three years at the discretion of the TMA Director, or designee.
VII. Regulatory Impact Analysis
A. Overall Impact
The Department of Defense has examined the impacts of this final
rule as required by Executive Order 12866 (September 1993, Regulatory
Planning and Review), the Regulatory Flexibility Act (RFA) (September
19, 1980, Pub. L. 96-354), the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4), and the Congressional Review Act (5 U.S.C. 804(2)).
1. Executive Order 12866
Executive Order 12866 (as amended by Executive Order 13258) directs
agencies to assess all costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). A regulatory impact analysis (RIA) must be prepared for
major rules with economically significant effects ($100 million or more
in any 1 year).
We estimate that the effects of the TRICARE OPPS provisions that
would be implemented by this rule would result in hospital revenue
reductions exceeding $100 million in any 1 year. We estimate the total
reduction (from the proposed changes in this rule) in hospital revenue
under the OPPS for its first year of implementation (assumed for
purposes of this RIA to be April 1, 2009-March 31, 2010) from revenue
in the same period without the proposed OPPS changes to be
approximately $460 million.
We estimate that this rulemaking is ``economically significant'' as
measured by the $100 million threshold, and hence also a major rule
under the Congressional Review Act. Accordingly, we have prepared a
Regulatory Impact Analysis that, to the best of our ability, presents
the costs and benefits of the rulemaking.
2. Congressional Review Act, 5 U.S.C. 801
Under the Congressional Review Act, a major rule may not take
effect until at least 60 days after submission to Congress of a report
regarding the rule. A major rule is one that would have an annual
effect on the economy of $100 million or more or have certain other
impacts. This final rule is a major rule under the Congressional Review
Act. As noted above, the estimated total reduction in hospital revenue
under the OPPS for its first year of implementation from revenue in the
same period without the proposed OPPS changes is approximately $460
million.
3. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze options for regulatory relief
of small businesses if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most hospitals, other providers, ASCs, and
other suppliers are considered to be small entities, either by being
nonprofit organizations or by meeting the Small Business Administration
(SBA) definition of a small business (having revenues of $31.5 million
or less in any 1 year). For purposes of the RFA, we have determined
that all hospitals would be considered small entities according to the
SBA size standards. Individuals and States are not included in the
definition of a small entity. Therefore, the Secretary has determined
that this final rule would have a significant impact on a substantial
number of small entities. We generally prepare a final regulatory
flexibility analysis that is consistent with the RFA (5 U.S.C. section
604), unless we certify that the final rule would not have a
significant impact on a substantial number of small entities. The
Regulatory Impact Analysis as well as the contents contained in the
preamble is meant to serve as the Final Regulatory Flexibility
Analysis.
Public comments were received during the proposed rule (73 FR
17271) comment period which resulted in substantive changes in
hospital-based PHP reimbursement (i.e., reimbursement of a single per
diem based on a minimum of three service units and payment of PHP
professional services outside the per diem) and provided clarification
regarding the Agency's revised transitional plan. Under this revised
plan, temporary transitional payment adjustments will now apply to both
network and non-network hospitals even though the transitional
percentage adjustments for non-network hospitals will be less than
those for network hospitals thereby continuing to ensure incentives for
network participation. The duration of the temporary transitional
payment adjustments (TTPAs) has also been extended for an additional
year (four years for network hospitals and 3 years for non-network
hospitals). The TTPA process will be administratively practicable while
at the same time ensuring the stop-loss protection to allow hospitals
the necessary time to adjust and budget for potential revenue
reductions. Clarification was also provided regarding temporary
contingency payment adjustments (TMPCAs) available under the TRICARE
OPPS which will ensure network adequacy deemed essential for military
readiness and support during contingency operations. Since all
hospitals were considered small entities as part of the Regulatory
Impact Analysis the above revisions and clarifications will have a
significant
[[Page 74960]]
impact on a substantial number of small entities.
4. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $130 million. This final rule will not
mandate any requirements for State, local, or tribal governments.
5. Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter
35)
This rule will not impose significant additional information
collection requirements on the public under the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501-3511). Existing information collection
requirements of the TRICARE and Medicare programs will be utilized. We
don't anticipate any increased costs to hospitals because of paperwork,
billing or software requirements since we are adopting Medicare's
billing/coding requirements; i.e., hospitals will be coding and filing
claims in the same manner as they currently are with Medicare.
6. Executive Order 13132, ``Federalism''
This rule has been examined for its impact under E.O. 13132 and it
does not contain policies that have federalism implications that would
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government;
therefore, consultation with State and local officials is not required.
B. Hospitals Included In and Excluded From TRICARE's OPPS
The outpatient prospective payment system encompasses nearly all
hospitals that participate in the TRICARE program. However, Maryland
hospitals that are paid under a cost containment waiver are excluded
from the OPPS. In addition, Critical Access Hospitals (CAHs),
Children's hospitals, Inpatient Rehabilitation Facilities (IRFs), Long
Term Care hospitals (LTCHs), and Cancer hospitals are excluded from the
OPPS.
C. Analysis of the Impact of Policy Changes on Payment Under TRICARE's
OPPS
1. Alternatives Considered
Alternatives that we considered, the proposed changes that we will
make, and the reasons that we have chosen each option are discussed
below.
(a) Alternatives Considered for Addressing Reduction in Payments for ER
Visits
Analysis of the effects of the proposed OPPS policies indicate that
by type of service, the greatest reductions in hospital payments would
occur for the facility charges associated with ER visits and other
visits. Table 1 provides our projection of the effect of OPPS on
hospital payments by type of service without any transition payments.
It shows that of the projected $598 million reduction in hospital
payments (before transition payments), over one-half of that reduction
would come from reduced payments for the facility charges associated
with ER visits and other hospital clinic visits. This reduction far
exceeds the reductions for all other services. In reviewing the other
types of services affected by OPPS, with four exceptions there are
either increases in payments under OPPS (surgeries) or very small
decreases in aggregate payments (defined as less than 1 percent of
projected current policy allowed amounts--equal to $18 million--which
is the case for J-codes and other HCPCS codes). The four exceptions
are: (1) Radiology/pathology services, for which the OPPS payments are
projected to equal over 80 percent of current policy allowed amounts;
(2) other medical services (non-visits, including cardiology tests) for
which the OPPS payments are projected to equal two-thirds of current
policy allowed amounts; (3) supplies, which under OPPS will be bundled
into other APCs or be coded for payment; and (4) ``facility dump
codes'', which are services that TRICARE has reimbursed under TRICARE
code 99088 (this code is used by claims processors to represent
services that are either billed without a CPT code or have revenue
codes that the claims processor has coded as 99088). We project that 87
percent of current policy allowed amounts for these facility ``dump
codes'' will be reimbursed under OPPS.
Because the majority of the impact of OPPS on hospital payments
will occur for facility charges for visits (ER and hospital clinic
visits), we examined options to phase in the impact of OPPS for these
services. Primary care and emergency room visits to hospital outpatient
departments are categorized into 10 main codes (APC codes 604-609 and
613-616). For most hospitals, the largest reductions under OPPS occur
for these 10 codes, especially the ER visit codes. We considered a
number of alternatives to address this impact as part of the transition
to the Medicare APC level. One alternative was to set the TRICARE APC
levels at a higher level than the Medicare APCs during a three-year
transition period (in the fourth year all TRICARE APC payments would be
at the Medicare APC level). Because of TRICARE's interest in
establishing and preserving a network of hospitals, this option would
apply to only hospitals in the TRICARE network. Under this option, we
set the first-year TRICARE APC levels at 150 percent of the Medicare
APC levels for the ER codes (APCs 609, 613, 614, 615, and 616) and at
130 percent of the Medicare APC levels for the hospital clinic visit
codes (APCs 604-608). These percentages would apply to the first year
of implementation and lower percentages would apply to the second and
third years of implementation. By year four, the TRICARE APC levels
would be equal to the Medicare APC levels. Even though this option
increased the level of hospital payments, we did not choose this option
because it would still result in a reduction in hospital payments for
ER and hospital clinic visits of over 50 percent.
A second option we considered was identical to the first with two
exceptions. First, it would increase the year-one level of the TRICARE
APC payments for the 10 ER visits and clinic visits codes identified
above (APCs 604-609 and 613-616) to 200 percent of the Medicare APC
values for the five ER visit codes and to 175 percent of the Medicare
APC values for the five hospital clinic visit codes. A second
difference is that the transition would be lengthened from three years
to four years (i.e., the Medicare APC levels would not be reached for
these 10 codes until the start of the fifth year of implementation).
Although this option would result in higher hospital payments than the
first option, we did not choose this option because it would still
represent over a 40 percent reduction in ER and clinic visit payments
in the first year of implementation.
A third option we considered and the one we are proposing in this
OPPS rule is identical to the second option except that it would extend
transition payments for the 10 ER and hospital clinic visit codes to
non-network hospitals. Thus, all hospitals would receive higher
payments for the 10 visit
[[Page 74961]]
codes. As shown in Table 2, this option would set the TRICARE APC
levels in the first year of implementation at 140 percent of the
Medicare APC level for non-network hospitals for all 10 codes. Even
though the transition payments are lower for non-network hospitals than
network hospitals, this option provides increased payments for all
hospitals with ER and/or hospital clinic visits. We selected this
option because we found that it reduced the overall impact of OPPS to
about 25 percent of current-policy allowed amounts, because it led to a
reduction in hospital payments for ER and clinic visit in the first
year of less than 40 percent, and because it would relieve the impact
on all hospitals with ER and/or hospital clinic visits. We refer to
these payments as temporary transitional payment adjustments (TTPAs).
The impact is shown in Table 3.
(b) Alternatives Considered for Addressing Hospitals With a High
Concentration of TRICARE Patients
We were concerned there might be access problems at some hospitals
with a high concentration of TRICARE patients if their HOPD payments
were decreased significantly. In particular, we were concerned that
some hospitals might leave the TRICARE network if HOPD payments were
reduced too quickly. Under this option, network hospitals which rely on
TRICARE for 20 percent or more of their HOPD revenues would be paid APC
amounts that are above the Medicare APC levels. We focussed on network
hospitals because many of the hospitals with a high level of TRICARE
patients are network hospitals. Under this option, each network
hospital would provide documentation to TRICARE that they were reliant
on TRICARE for 20 percent or more of their HOPD revenues and the
TRICARE fiscal intermediaries would then increase their APC payment by
a percentage amount (we assumed by 7 percent).
This option would potentially affect the roughly 1,700 TRICARE
network hospitals. We estimate that about one-third of the largest 200
TRICARE network hospitals would meet the criteria that the TRICARE
allowed amounts under current policy be greater than or equal to 20
percent or more of their total HOPD revenues. If OPPS payments were
increased by 7 percent for these hospitals, it would increase TRICARE
payments by about $20 million per year. There would also be
administrative costs associated with verifying that hospitals relied on
TRICARE for more than 20 percent of their revenue. We did not choose
this option because we did not think it was sufficiently targeted to
access problems. In addition, many of these TRICARE-reliant hospitals
may be benefited significantly by the increase in ER payments under the
TTPAs.
A second option we considered and the one we are proposing in this
OPPS rule is to provide three-year transitional payments adjustments
for TRICARE network hospitals if they are deemed essential for military
readiness and support during contingency operations. Under this option,
temporary military contingency payment adjustments (TMCPAs) would be
granted if TRICARE determines that it is necessary to ensure adequate
Preferred Provider networks. It might be determined that the initial
TTPA of 200 percent for ER visits in a particular hospital is not
sufficient to ensure network adequacy and as a result, an additional
TMCPA of 25 percent, (i.e., 225 percent of the OPPS rate for ER visits)
would be necessary to support military contingency operations. The
higher rate will be authorized only if all reasonable efforts have been
exhausted in attempting to create an adequate network and TRICARE
determines that it is cost-effective and appropriate to pay the higher
rate to ensure an appropriate mix of primary care and specialists in
the network. For this purpose, such evidence many include consideration
of the number of providers in the locality who provide the affected
services, the mix of primary/specialty providers needed to meet patient
access standards, the number of TRICARE beneficiaries in the locality,
and the availability of Military Treatment Facility providers and any
other factors the TMA Director, or designee determines relevant.
(c) Alternatives Considered for Addressing All Services
We also considered options for increasing all APC payments above
the Medicare APC levels. Under this option, TMA would have a four-year
phase-in of OPPS. In the first year, hospitals would have their HOPD
payments based on 25 percent of the OPPS amount and 75 percent of the
amount that they would have been reimbursed under current policy. In
the second, third, and fourth years, the percentage paid according to
OPPS would increase to 50 percent, 75 percent, and 100 percent,
respectively.
We did not select this option for two reasons. First, we think that
for many services, this option would provide little benefit to hospital
providers. For example, for surgeries, which would be paid more under
OPPS than under current policy, this option would be administratively
complex and not provide relief to hospitals (in fact, it would lower
their payments). In addition, this option would be administratively
cumbersome and costly, because it would require the FIs to process each
claim twice. We think it would increase administrative claims
processing costs by over $15 million per year.
2. Methodology
We analyzed the impact of OPPS on hospital outpatient payments. Our
analysis compares the payment impact of OPPS compared to current law.
Current law reflects pre-OPPS payment methodologies in effect in
October 2008 and assumed to continue prior to April 1, 2009 (the
assumed date of implementation of OPPS for purposes of this RIA).
The data used in developing the quantitative analyses presented
below are taken from charge and payment data from January 2007-June
2007 and the current TRICARE hospital provider file (prepared in
September 2008). Our analysis has several qualifications. First, we
draw upon various sources for the data used to categorize hospitals in
Table 4, below. In some cases, there is a degree of variation in the
data from the different sources. We have attempted to construct these
variables with the best available source overall having information
from TMA's provider file, as well as Medicare's POS and PSF provider
files. For individual hospitals, however, some miscategorizations are
possible. In addition, we were unable to match some hospital claims
data to the provider file.
Using charge data from 2007, we simulated payments using the pre-
OPPS and OPPS payment methodologies. Both pre-OPPS and OPPS payment
estimates include operating and capital costs. The excluded Maryland
hospitals and the other excluded hospital types (CAHs, IRFs, LTCHs, and
Cancer hospitals) were not included in the simulations.
We also trimmed extremely low charges per unit (under $10) from the
impact analysis because we believe the data to be unreliable. Inclusion
of claims with billed and allowed charges under $10 would not allow us
to assess the impacts among the various classes of hospitals
accurately, as they likely have errors in dollar amounts or units.
After we removed the excluded Maryland hospitals, the claims with
low payments, and hospitals for which we could not assign payment and
hospital classification variables, we used the remaining hospitals as
the basis for our analysis.
[[Page 74962]]
3. Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the proposed policy changes on various hospital groups. We present
results only for hospitals whose claims were used for modeling the
impacts shown in Table 4 below. We do not show proposed hospital-
specific impacts for hospitals whose claims we were unable to use or
hospital claims that could not be matched to the provider file. As
discussed in this rule, LTCHs, IRFs, CAHs, Children's hospitals, Cancer
hospitals and hospitals in Maryland are exempt from this rule and are
excluded from Table 4.
We estimate the effects of the proposed policy changes by
estimating the effects on payments per service, while holding all other
payment policies constant. We use the best data available but do not
attempt to predict behavioral responses to our proposed policy changes,
with one exception: We assumed that 25 percent of supply services would
not be bundled into other APC payments and that hospitals would likely
recode these supplies into CPT codes that would be reimbursed
separately. Although we make projections of the change in payments per
service (to reflect inflation in billed charges and APC amounts) we do
not make adjustments for future changes in variables such as service
volume, service-mix, or number of encounters.
One behavioral change that we did not model is the change in
hospital discounts. We know that many network hospitals currently
provide discounts for both inpatient and outpatient services. For this
RIA, we assumed that all the outpatient discounts would be eliminated.
We also know that many of the inpatient discounts will also be
eliminated, although we did not include that impact in the RIA. Thus,
the RIA overstates the impact on hospital payments, especially for
these network hospitals that will reduce or eliminate their inpatient
discounts in order to reduce the impact of the OPPS change on their
revenues.
A second impact that is not included in this RIA is the impact of
the TMCPA payments. We did not attempt to estimate which hospitals
would receive these payments or the level of the payments. Thus, the
RIA overstates the impact on hospital payments, particularly for
hospitals that would receive TMCPA payments.
4. Effects on Hospitals
Table 4, Impact of TRICARE Hospital Outpatient Prospective Payment
System (OPPS), below, demonstrates the results of our analysis. The
table categorizes hospitals by various geographic and special payment
consideration groups to illustrate the varying impacts on different
types of hospitals. The first column represents the number of hospitals
in each category. The second column shows the impact of the OPPS
excluding the transition payments. It shows the percentage of the
projected current policy allowed amounts for HOPD facility charges that
would be paid under OPPS without transition payments. The third column
shows the impact of the OPPS including the transition payments.
The first row of Table 4 shows the overall impact on the 3,754
hospitals included in the analysis. We included as much data as
possible to the extent that we were able to capture all the provider
information necessary to determine payment. Our estimates include the
same set of services for both pre-OPPS (current policy) and OPPS
payments so that we could determine the impact of the OPPS as
accurately as possible. Because payment under OPPS can only be
determined if bills are accurately coded, the data upon which the
impacts were developed do not reflect all hospital outpatient services
from January 2007 to June 2007, but only those that were coded using
valid HCPCS codes.
The next three rows of the table contain hospitals categorized
according to their geographic location (urban and rural). We include
2,469 hospitals located in urban areas (MSAs) in our analysis. In
addition, we include 1,285 hospitals located in rural areas in our
analysis. The next two groupings are by bed-size categories, shown
separately for urban and rural hospitals.
We then show the distribution by the TRICARE-network status of
hospitals, as of the date of the service (January-June 2007). We then
show the distribution of urban and rural hospitals by regional census
divisions. The final category groups hospitals according to whether or
not they have residency programs (teaching hospitals that receive an
indirect medical education (IME) adjustment).
Column 2 of Table 4 compares our estimate of OPPS payments without
application of the transition payments, but incorporating policy
changes, to our estimate of payments under the current system. It shows
the percentage of allowed amounts for HOPD services paid under OPPS as
a percentage of the allowed amounts for HOPD services paid under
current policy. The impact is shown for the period from April 1, 2009-
March 31, 2010.
Column 3 presents the percentage of allowed amounts paid under OPPS
after application of the transition payments to our estimate of allowed
amounts under the pre-OPPS system (current policy). The differences
between the pre-OPPS and the OPPS payment reflect the combined impact
of the transition payment adjustments and distributional differences
attributable to variation in charge structures among hospitals. It also
presents our assumption about the growth in payments prior to OPPS
(billed charges for services subject to the OPPS are assumed to
increase by 7 percent per year) and in APC payments (assumed to
increase by 3.3 percent per year).
We estimate that in the April 2009-March 2010 period, payments to
hospitals for their HOPD facility charges will decrease by 25 percent
under the OPPS compared to the pre-OPPS payments. This includes the
impact of the transition payments. The values in Table 4 differ
slightly from those in Table 3 because not all hospital payments are
included in Table 4 due to the issues discussed above.
For all groups of hospitals, payments under the OPPS without the
transition payments are below current policy payments for HOPD facility
charges. For all of these hospital groups, the transition payments
mitigate this impact. The following discussion highlights some of the
changes in payments among hospital classifications.
Payment to urban and rural hospitals would decrease substantially
without the transition payments (24 percent for rural and 35 percent
for urban hospitals). These hospitals experience a decline in payments
even with the transition payments (11 percent and 24 percent for rural
and urban hospitals, respectively).
Teaching hospitals, whose payments would decrease by 33 percent
without the transition payments, have much of these losses offset by
the transition payments.
The transition payments have a major impact on TRICARE networks
hospitals. It increases the percentage of current policy allowed
amounts paid for HOPD facility charges from 67 percent without the
transition payments to 80 percent with the transition payments. The
transition payments also increase the percentage of current policy
allowed amounts paid under OPPS to small and rural hospitals. Under
OPPS with the transition payments sole community hospitals will receive
over 90 percent of the current policy amounts. Small rural hospitals
will also receive over 90 percent of current policy amounts.
[[Page 74963]]
If the effect of the transition payments were removed, differences
between pre-OPPS payments and OPPS payments among hospitals would still
exist. These distributional differences are the result of many factors.
First, charge structure variations result in differences between pre-
OPPS payments and OPPS payments. Hospitals whose charges are low
relative to payment would gain under the OPPS even without the
transition payments.
Table 1--Estimated Impact of TRICARE OPPS on Hospitals During the April 1, 2009-March 31, 2010 Period
(Assuming no transition payments (In $ millions))
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Category of hospital outpatient service Estimated OPPS allowed OPPS allowed Reduction in
allowed amounts as a amounts allowed amounts
amounts under percent of (1)-(3)
current policy current policy
allowed
amounts
----------------------------------------------------------------------------------------------------------------
Surgeries...................................... $406 102% $413 ($7)
Radiology/Pathology............................ 298 82% 245 53
Visits (ER and Other).......................... 516 35% 180 336
Other Medical (non-visits)..................... 192 66% 127 65
J-codes........................................ 34 81% 27 7
Other HCPCS codes.............................. 20 43% 8 12
Supplies....................................... 146 25% 37 109
Facility ``Dump Codes''........................ 177 87% 154 23
----------------------------------------------------------------
Total...................................... 1,789 67% 1,191 598
----------------------------------------------------------------------------------------------------------------
Note: (1) This table does not include any transition payments to hospitals.
(2) This table does not include the impact of reduced hospital discounts for inpatient services.
(3) 75 percent of supplies are assumed to be bundled into other APC payments. We assume that providers will
recode the other 25 percent of supply costs (such as J-codes, A-codes, etc.) and will be paid.
(4) Excluded hospitals such as Maryland hospitals, Children's, LTCH, IRFs, and CAHs are excluded from this
table. Services not affected by OPPS (like clinical laboratory and rehab therapy) are not included.
(5) Facility ``dump codes'' are services that have been reimbursed by TRICARE under CPT 99088.
Table 2--Transition Schedule for 10 Visit Codes, by Type of Visit Code and Network Status of Hospital
(TRICARE APC as a percent of Medicare APC)
----------------------------------------------------------------------------------------------------------------
Network Non-network
---------------------------------------------------------------
Hospital Hospital
ER clinic ER clinic
----------------------------------------------------------------------------------------------------------------
Yr 1............................................ 200% 175% 140% 140%
Yr 2............................................ 175% 150% 125% 125%
Yr 3............................................ 150% 130% 110% 110%
Yr 4............................................ 130% 115% 100% 100%
Yr 5............................................ 100% 100% 100% 100%
----------------------------------------------------------------------------------------------------------------
Note: 10 codes are APC codes 604-609 and 613-616.
Table 3--Estimated Impact of TRICARE OPPS on Hospitals During the April 1, 2009-March 31, 2010 Period
(With transition payments (in $ millions))
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Category of hospital outpatient Estimated OPPS allowed OPPS allowed OPPS allowed Reduction in
service allowed amounts as a amounts amounts with allowed amounts
amounts under percent of transition (1)-(4)
current policy current policy payment
allowed
amounts
----------------------------------------------------------------------------------------------------------------
Surgeries...................... $406 102% $413 $413 ($7)
Radiology/Pathology............ 298 82% 245 245 53
Visits (ER and Other).......... 516 35% 180 320 196
Other Medical (non-visits)..... 192 66% 127 127 65
J-codes........................ 34 81% 27 27 7
Other HCPCS codes.............. 20 43% 8 8 12
Supplies....................... 146 25% 37 37 109
Facility ``Dump Codes''........ 177 87% 154 154 23
--------------------------------------------------------------------------------
Total...................... 1,789 67% 1,191 1,331 458
----------------------------------------------------------------------------------------------------------------
Note: (1) This table includes the impact of the TTPA payments to hospitals.
(2) This table does not include the impact of reduced hospital discounts for inpatient services.
(3) 75 percent of supplies are assumed to be bundled into other APC payments. We assume that providers will
recode the other 25 percent of supply costs (such as J-codes, A-codes, etc.) and will be paid.
[[Page 74964]]
(4) Excluded hospitals such as Maryland hospitals, Children's, LTCH's, IRFs, and CAHs are excluded from this
table. Services not affected by OPPS (like clinical laboratory and rehab therapy) are not included.
(5) Facility ``dump codes'' are services that have been reimbursed by TRICARE under CPT 99088.
(6) First-year transition for network hospitals is equal to 200% of Medicare APC for 5 ER visit codes and 175%
of Medicare APC amounts for 5 hospital clinic visit codes. For non-network hospitals, the first-year
transition is 140% of Medicare amounts for both the 5 ER and the 5 hospital clinic visit codes.
Table 4--First-Year Impact of TRICARE Hospital Outpatient Prospective Payment System (OPPS)
[Percentage of current policy allowed amounts paid under OPPS]
----------------------------------------------------------------------------------------------------------------
(1) (2) (3)
Number of OPPS Effect on OPPS Effect on
hospitals OP payments OP payments
(Without (with
transition transition
payments) payments)
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS................................................... 3,754 66.2 77.2
URBAN HOSPITALS................................................. 2,469 64.7 75.5
RURAL HOSPITALS
Sole Community.............................................. 646 79.3 91.5
Other Rural................................................. 639 72.7 86.6
BEDS (URBAN)
0-99 Beds................................................... 630 71.5 83.1
100-199 Beds................................................ 804 63.0 77.1
200-299 Beds................................................ 458 63.8 74.0
300-499 Beds................................................ 395 65.5 74.7
500+ Beds................................................... 182 64.2 71.3
BEDS (RURAL)
0-49 Beds................................................... 595 76.6 91.3
50-100 Beds................................................. 438 75.6 87.6
101+ Beds................................................... 252 75.9 89.1
NETWORK STATUS
Network..................................................... 1,671 66.6 79.9
Non-Network................................................. 2,083 64.7 67.7
REGION (URBAN)
New England................................................. 116 76.7 101.0
Middle Atlantic............................................. 341 63.1 75.9
South Atlantic.............................................. 359 59.4 73.6
East North Cent............................................. 409 70.0 83.8
East South Cent............................................. 160 63.4 75.1
West North Cent............................................. 159 76.3 78.5
West South Cent............................................. 360 60.4 74.0
Mountain.................................................... 153 72.8 74.1
Pacific..................................................... 363 70.8 71.9
Puerto Rico................................................. 49 71.8 74.7
REGION (RURAL)
New England................................................. 41 81.9 97.1
Middle Atlantic............................................. 75 80.3 105.3
South Atlantic.............................................. 185 73.5 89.9
East North Cent............................................. 181 78.3 89.1
East South Cent............................................. 200 69.8 87.7
West North Cent............................................. 207 87.0 92.5
West South Cent............................................. 219 69.5 86.8
Mountain.................................................... 116 75.1 76.5
Pacific..................................................... 61 78.6 83.1
TEACHING STATUS
Non-Teaching................................................ 2,719 65.6 77.5
Teaching.................................................... 1,035 66.9 76.7
----------------------------------------------------------------------------------------------------------------
List of Subjects in 32 CFR Part 199
Claims, Dental health, Healthcare, Health insurance, Individuals
with disabilities, Military personnel.
0
Accordingly, 32 CFR Part 199 is amended as follows:
PART 199--[AMENDED]
0
1. The authority citation for Part 199 continues to read as follows:
Authority: 5 U.S.C. 301; 10 U.S.C. Chapter 55.
0
2. Paragraph 199.2(b) is amended by adding definitions for ``Ambulatory
Payment Classifications (APCs)'' and ``TRICARE Hospital Outpatient
Prospective Payment System (OPPS)'' and placing them in alphabetical
order to read as follows:
Sec. 199.2 Definitions.
* * * * *
(b) * * *
Ambulatory Payment Classifications (APCs). Payment of services
under the TRICARE OPPS is based on grouping outpatient procedures and
services into ambulatory payment classification groups based on
clinical and resource homogeneity, provider concentration, frequency of
service and minimal
[[Page 74965]]
opportunities for upcoding and code fragmentation. Nationally
established rates for each APC are calculated by multiplying the APC's
relative weight derived from median costs for procedures assigned to
the APC group, scaled to the median cost of the APC group representing
the most frequently provided services, by the conversion factor.
* * * * *
TRICARE Hospital Outpatient Prospective Payment System (OPPS). OPPS
is a hospital outpatient prospective payment system, based on
nationally established APC payment amounts and standardized for
geographic wage differences that includes operating and capital-related
costs that are directly related and integral to performing a procedure
or furnishing a service in a hospital outpatient department.
* * * * *
Sec. 199.4 [Amended]
0
3. Section 199.4 is amended by removing paragraph (c)(3)(i)(C)(1) and
redesignating paragraphs (c)(3)(i)(C)(2) and (c)(3)(i)(C)(3) as
(c)(3)(i)(C)(1) and (c)(3)(i)(C)(2).
0
4. Section 199.14 is amended by revising paragraphs (a)(2)(ix)(A);
redesignating paragraphs (a)(5)(i) through (a)(5)(xii) as (a)(5)(i)(A)
through (a)(5)(i)(L); adding the following new paragraphs (a)(5)(i) and
(a)(5)(ii); and revising paragraph (d)(1) to read as follows:
Sec. 199.14 Provider reimbursement methods.
(a) * * *
(2) * * *
(ix) * * *
(A) In general. Psychiatric and substance use disorder
rehabilitation partial hospitalization services authorized by Sec.
199.4(b)(10) and (e)(4) and provided by institutional providers
authorized under Sec. 199.6 (b)(4)(xii) and (b)(4)(xiv) are reimbursed
on the basis of prospectively determined, all-inclusive per diem rates
pursuant to the provisions of paragraph (a)(2)(ix)(C) of this section,
with the exception of hospital-based psychiatric and substance use
disorder rehabilitation partial hospitalization services which are
reimbursed in accordance with provisions of paragraph (a)(5)(ii) of
this section. The per diem payment amount must be accepted as payment
in full for all institutional services provided, including board,
routine nursing service, ancillary services (includes music, dance,
occupational and other such therapies), psychological testing and
assessment, overhead and any other services for which the customary
practice among similar providers is included as part of the
institutional charges.
* * * * *
(5) * * *
(i) Outpatient Services Not Subject to Hospital Outpatient
Prospective Payment System (OPPS). The following are payment methods
for outpatient services that are either provided in an OPPS exempt
hospital or paid outside the OPPS payment methodology under existing
fee schedules or other prospectively determined rates in a hospital
subject to OPPS reimbursement.
* * * * *
(ii) Outpatient Services Subject to OPPS. Outpatient services
provided in hospitals subject to Medicare OPPS as specified in 42 CFR
413.65 and 42 CFR Sec. 419.20 will be paid in accordance with the
provisions outlined in sections 1833(t) of the Social Security Act and
its implementing Medicare regulation (42 CFR Part 419) subject to
exceptions as authorized by Sec. 199.14(a)(5)(ii). Under the above
governing provisions, CHAMPUS will recognize to the extent practicable,
in accordance with 10 U.S.C. 1079(j)(2), Medicare's OPPS reimbursement
methodology to include specific coding requirements, ambulatory payment
classifications (APCs), nationally established APC amounts and
associated adjustments (e.g., discounting for multiple surgery
procedures, wage adjustments for variations in labor-related costs
across geographical regions and outlier calculations). While CHAMPUS
intends to remain as true as possible to Medicare's basic OPPS
methodology, there will be some deviations required to accommodate
CHAMPUS' unique benefit structure and beneficiary population as
authorized under the provisions of 10 U.S.C. 1079(j)(2). Temporary
transitional payment adjustments (TTPAs) will be in place for all
hospitals, both network and non-network in order to buffer the initial
decline in payments upon implementation of TRICARE's OPPS. For network
hospitals, the temporary transitional payment adjustments (TTPAs) will
cover a four-year period. The four-year transition will set higher
payment percentages for the ten Ambulatory Payment Classification (APC)
codes 604-609 and 613-616, with reductions in each of the transition
years. For non-network hospitals, the adjustments will cover a three
year period, with reductions in each of the transition years. For
network hospitals, under the TTPAs, the APC payment level for the five
clinic visit APCs would be set at 175 percent of the Medicare APC
level, while the five ER visit APCs would be increased by 200 percent
in the first year of OPPS implementation. In the second year, the APC
payment levels would be set at 150 percent of the Medicare APC level
for clinic visits and 175 percent for ER APCs. In the third year, the
APC visit amounts would be set at 130 percent of the Medicare APC level
for clinic visits and 150 percent for ER APCs. In the fourth year, the
APC visit amounts would be set at 115 percent of the Medicare APC level
for clinic visits and 130 per cent for ER APCs. In the fifth year, the
TRICARE and Medicare payment levels for the 10 APC visit codes would be
identical.
For non-network hospitals, under the TTPAs, the APC payment level
for the five clinic and ER visit APCs would be set at 140 percent of
the Medicare APC level in the first year of OPPS implementation. In the
second year, the APC payment levels would be set at 125 percent of the
Medicare APC level for clinic and ER visits. In the third year, the APC
visit amounts would be set at 110 percent of the Medicare APC level for
clinic and ER visits. In the fourth year, the TRICARE and Medicare
payment levels for the 10 APC visit codes would be identical.
An additional temporary military contingency payment adjustment
(TMCPA) will also be available at the discretion of the Director, TMA,
or a designee, at any time after implementation to adopt, modify and/or
extend temporary adjustments to OPPS payments for TRICARE network
hospitals deemed essential for military readiness and deployment in
time of contingency operations. Any TMCPAs to OPPS payments shall be
made only on the basis of a determination that it is impracticable to
support military readiness or contingency operations by making OPPS
payments in accordance with the same reimbursement rules implemented by
Medicare. The criteria for adopting, modifying, and/or extending
deviations and/or adjustments to OPPS payments shall be issued through
CHAMPUS policies, instructions, procedures and guidelines as deemed
appropriate by the Director, TMA, or a designee. TMCPAs may also be
extended to non-network hospitals on a case-by-case basis for specific
procedures where it is determined that the procedures cannot be
obtained timely enough from a network hospital. For such case-by-case
extensions, ``Temporary'' might be less than three
[[Page 74966]]
years at the discretion of the TMA Director, or designee.
* * * * *
(d) * * *
(1) In general. CHAMPUS pays institutional facility costs for
ambulatory surgery on the basis of prospectively determined amounts, as
provided in this paragraph, with the exception of ambulatory surgery
procedures performed in hospital outpatient departments, which are to
be reimbursed in accordance with the provisions of paragraph (a)(5)(ii)
of this section. This payment method is similar to that used by the
Medicare program for ambulatory surgery. This paragraph applies to
payment for freestanding ambulatory surgical centers. It does not apply
to professional services. A list of ambulatory surgery procedures
subject to the payment method set forth in the paragraph shall be
published periodically by the Director, TRICARE Management Activity
(TMA). Payment to freestanding ambulatory surgery centers is limited to
these procedures.
* * * * *
Dated: December 5, 2008.
Patricia Toppings,
OSD Federal Register, Liaison Officer, Department of Defense.
[FR Doc. E8-29251 Filed 12-5-08; 4:15 pm]
BILLING CODE 5001-06-P