Payment for Non-VA Physician Services Associated with Either Outpatient or Inpatient Care Provided at Non-VA Facilities

DEPARTMENT OF VETERANS

38 CFR Part 17

RIN 2900-AH66

Payment for Non-VA Physician Services Associated with Either

Outpatient or Inpatient Care Provided at Non-VA Facilities

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This document amends Department of Veterans Affairs (VA)

medical regulations concerning payment for non-VA physician services

that are associated with either outpatient or inpatient care provided

to eligible VA beneficiaries at non-VA facilities. Generally, when a

service-specific reimbursement amount has been calculated under

Medicare's Participating Physician Fee Schedule, VA would pay the

lesser of the actual billed charge or the calculated amount. Also, when

an amount has not been calculated or when the services constitute

anesthesia services, VA would pay the amount calculated under a 75th

percentile formula or, in certain limited circumstances, VA would pay

the usual and customary rate. Adoption of this final rule is intended

to establish reimbursement consistency among federal health benefits

programs to ensure that amounts paid to physicians better represent the

relative resource inputs used to furnish a service, and to achieve

program cost reductions. Further, consistent with statutory

requirements, the regulations continue to specify that VA payment

constitutes payment in full.

DATES: Effective Date: August 24, 1998.

FOR FURTHER INFORMATION CONTACT: Abby O'Donnell, Health Administration

Service (10C3), Department of Veterans Affairs, 810 Vermont Avenue, NW,

Washington, DC 20420, (202) 273-8307. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: In a document published in the Federal

Register on July 22, 1997 (62 FR 39197), we proposed to amend the

medical regulations concerning payment (regardless of whether or not

authorized in advance) for non-VA physician services associated with

either outpatient or inpatient care provided to eligible VA

beneficiaries at non-VA facilities. We provided a 60-day comment

period, which ended September 22, 1997. We received comments from seven

sources.

For reasons explained below, the final rule contains only one

conversion factor for calculations under Medicare's Participating

Physicians Fee Schedule and the proposed provisions are not made

applicable for anesthesia services. Otherwise, no changes are made in

response to comments and, based on the rationale set forth in the

proposed rule and this document, the provisions of the proposed rule

are adopted as a final rule.

Comments

All of the comments opposed the proposal based on the assertion

that VA should not lessen physician fees.

Three commenters asserted that VA should not use

Medicare's Participating Physicians Fee Schedule because it was

designed for Medicare patient populations and not for VA populations.

One commenter opposed the use Medicare's Participating

Physicians Fee Schedule by asserting that VA should not use the

geographic adjustment factors unless necessary ``to achieve explicit

policy goals (e.g., targeted adjustments for demonstrated shortfalls in

access to care).''

Two commenters opposed the use of Medicare's Participating

Physicians Fee Schedule by asserting that VA should not use Medicare's

conversion factors. They recommended that VA establish a conversion

factor that would not lessen physician payments. One of the commenters

stated that the Medicare conversion factors should not be used because

they are ``constrained by budget-neutrality and other considerations,

such as the Medicare Volume Performance Standard system, that are not

applicable to VA.''

One commenter who practices psychiatry in a semi-rural

area asserted that his expenses are high and that if VA adopted

Medicare's Participating Physicians Fee Schedule some procedures would

be billed at rates ``at or below'' his overhead expense.

Three commenters questioned whether the availability and

quality of care would be lessened by the adoption of Medicare's

Participating Physicians Fee Schedule.

One commenter asserted that before VA adopt payment

methodology based on Medicare principles, VA should sponsor an

independent study and consult with physician groups.

Two commenters opposed the adoption of the Medicare fee

schedule for anesthesia services.

Response to Comments

As stated in the proposed rule, one of the basic reasons for

conducting this rulemaking proceeding was to achieve cost reductions.

We believe, particularly in this budget-sensitive era, that it is sound

policy to seek to achieve this objective. Also, we note that the

Medicare formula does not merely relate to individuals eligible for

Medicare. It is based on principles applicable to all individuals,

including veterans. Moreover, even though we could establish different

conversion factors and even though VA is not ``constrained by budget-

neutrality and other considerations, such as the Medicare Volume

Performance Standard system,'' we believe that we should not have to

pay more than the Department of Health and Human Services pays for

physician services.

Further, regardless of whether some physicians' ``overhead

payments'' might be out of proportion to the amount of payment received

from VA, we do not believe that this final rule would cause this to be

a common occurrence. In addition, we do not expect that the adoption of

this final rule would lessen significantly the availability and quality

of physician care for veterans, and we believe that even without

additional studies, the rationale in the proposed rule and this

document provide an adequate basis for this final rule.

The proposed rule was intended to provide for reimbursement based

on the lesser of the actual billed charge or the amount calculated

under Medicare's Participating Physician Fee Schedule. The formula for

Medicare's Participating Physician Fee Schedule has been changed (see

62 FR 59048, 59261). For services other than anesthesia, the Medicare

formula was changed to have one conversion factor instead of three

(previously, the Medicare formula contained a separate conversion

factor for surgical services, nonsurgical services, and primary care

services). Accordingly, the final rule also makes this adjustment in

the Medicare formula.

Anesthesia Services

The Medicare formula includes separate provisions for anesthesia

services. These separate anesthesia provisions were not included in the

proposed rule. We intend to publish a new proposal concerning this

issue in

[[Page 39515]]

the near future. Accordingly, this final rule does not make changes

regarding anesthesia services. They remain subject to the payment

provisions for those cases not covered by the Medicare formula (i.e.,

lesser of the actual amount billed or the amount calculated using the

75th percentile methodology; or the usual and customary rate if there

are fewer than 8 treatment occurrences for a procedure during the

previous fiscal year).

Regulatory Flexibility Act

The Secretary hereby certifies that this final rule will not have a

significant economic impact on a substantial number of small entities

as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601

through 612. The rule would not cause a significant economic impact on

health care providers, suppliers, or entities since only a small

portion of the business of such entities concerns VA beneficiaries.

Therefore, pursuant to 5 U.S.C. 605(b), the rule is exempt from the

initial and final regulatory flexibility analysis requirements of

sections 603 and 604.

Catalog of Federal Domestic Assistance Numbers

The Catalog of Federal Domestic Assistance Numbers are 64.009,

64.010 and 64.011.

List of Subjects in 38 CFR Part 17

Administrative practice and procedure, Alcohol abuse, Alcoholism,

Claims, Day care, Dental health, Drug abuse, Foreign relations,

Government contracts, Grant programs--health, Grant programs--veterans,

Health care, Health facilities, Health professions, Health records,

Homeless, Medical and dental schools, Medical devices, Medical

research, Mental health programs, Nursing home care, Philippines,

Reporting and recordkeeping requirements, Scholarships and fellowships,

Travel and transportation expenses, Veterans.

Approved: May 8, 1998.

Togo D. West, Jr.,

Acting Secretary.

For the reasons set forth in the preamble, 38 CFR part 17 is

amended as follows:

PART 17--MEDICAL

1. The authority citation for part 17 continues to read as follows:

Authority: 38 U.S.C. 501, 1721, unless otherwise noted.

Sec. 17.55 [Amended]

2. In Sec. 17.55, in the introductory text remove ``38 U.S.C. 1703

or 38 CFR 17.52'' and add, in its place ``38 U.S.C. 1703 and 38 CFR

17.52 of this part or under 38 U.S.C. 1728 and 38 CFR 17.120'';

paragraph (h) is removed; and paragraphs (i), (j) and (k) are

redesigned as paragraphs (h), (i) and (j), respectively.

3. Section 17.56 is redesignated as Sec. 17.57 and a new Sec. 17.56

is added to read as follows:

Sec. 17.56 Payment for non-VA physician services associated with

outpatient and inpatient care provided at non-VA facilities.

(a) Except for anesthesia services, payment for non-VA physician

services associated with outpatient and inpatient care provided at non-

VA facilities authorized under Sec. 17.52, or made under Sec. 17.120 of

this part, shall be the lesser of the amount billed or the amount

calculated using the formula developed by the Department of Health &

Human Services, Health Care Financing Administration (HCFA) under

Medicare's participating physician fee schedule for the period in which

the service is provided (see 42 CFR Parts 414 and 415). This payment

methodology is set forth in paragraph (b) of this section. If no amount

has been calculated under Medicare's participating physician fee

schedule or if the services constitute anesthesia services, payment for

such non-VA physician services associated with outpatient and inpatient

care provided at non-VA facilities authorized under Sec. 17.52, or made

under Sec. 17.120 of this part, shall be the lesser of the actual

amount billed or the amount calculated using the 75th percentile

methodology set forth in paragraph (c) of this section; or the usual

and customary rate if there are fewer than 8 treatment occurrences for

a procedure during the previous fiscal year.

(b) The payment amount for each service paid under Medicare's

participating physician fee schedule is the product of three factors: a

nationally uniform relative value for the service; a geographic

adjustment factor for each physician fee schedule area; and a

nationally uniform conversion factor for the service. The conversion

factor converts the relative values into payment amounts. For each

physician fee schedule service, there are three relative values: An RVU

for physician work; an RVU for practice expense; and an RVU for

malpractice expense. For each of these components of the fee schedule,

there is a geographic practice cost index (GPCI) for each fee schedule

area. The GPCIs reflect the relative costs of practice expenses,

malpractice insurance, and physician work in an area compared to the

national average. The GPCIs reflect the full variation from the

national average in the costs of practice expenses and malpractice

insurance, but only one-quarter of the difference in area costs for

physician work. The general formula calculating the Medicare fee

schedule amount for a given service in a given fee schedule area can be

expressed as: Payment = [(RVUwork x GPCIwork) + (RVUpractice expense

x GPCIpractice expense) + (RVUmalpractice x GPCImalpractice)] x

CF.

(c) Payment under the 75th percentile methodology is determined for

each VA medical facility by ranking all occurrences (with a minimum of

eight) under the corresponding code during the previous fiscal year

with charges ranked from the highest rate billed to the lowest rate

billed and the charge falling at the 75th percentile as the maximum

amount to be paid.

(d) Payments made in accordance with this section shall constitute

payment in full. Accordingly, the provider or agent for the provider

may not impose any additional charge for any services for which payment

is made by VA.

4. Section 17.128 is revised to read as follows:

Sec. 17.128 Allowable rates and fees.

When it has been determined that a veteran has received public or

private hospital care or outpatient medical services, the expenses of

which may be paid under Sec. 17.120 of this part, the payment of such

expenses shall be paid in accordance with Secs. 17.55 and 17.56 of this

part.

(Authority: Section 233, Pub. L. 99-576)

[FR Doc. 98-19682 Filed 7-22-98; 8:45 am]

BILLING CODE 8320-01-U