Civilian Health and Medical Program of the Uniformed Services (CHAMPUS); TRICARE Program; Reimbursement

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA37

Civilian Health and Medical Program of the Uniformed Services

(CHAMPUS); TRICARE Program; Reimbursement

AGENCY: Office of the Secretary, DoD.

ACTION: Final rule.

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SUMMARY: This final rule revises certain requirements and procedures

for reimbursement under the CHAMPUS program, the purpose of which is to

implement a comprehensive managed health care delivery system composed

of military medical treatment facilities and CHAMPUS. Issues addressed

in this rule include: implementation of changes made to the Medicare

Prospective Payment System (PPS) upon which the CHAMPUS DRG-based

payment system is modeled and required by law to follow wherever

practicable, along with changes to make our DRG-based payment system

operate better; clarification of payment reduction for noncompliance

with required utilization review procedures; clarification of

publication of list of ambulatory surgery procedures; limitation on

ambulatory surgery group payment rates; extension of the balance

billing limitations currently in place for individual and professional

providers to non-institutional, non-professional providers; adjustment

of the CHAMPUS maximum allowable charge (CMAC) rate in the small number

of cases where the CMAC rate is less than the Medicare rate;

implementation of the government-wide debarment rule where any provider

excluded or suspended from CHAMPUS shall be excluded from all other

programs and activities involving Federal financial assistance, such as

Medicare or Medicaid; elimination of the requirement for non-

participating providers to file claims; and revision of the ambulatory

surgery cost-share information to enable the cost-share to be assessed

against the facility claim instead of the primary surgeon's claim.

DATES: This rule is effective October 13, 1998, except amendments to:

1. Sec. 199.6, is effective October 1, 1997;

2. Sec. 199.14(h) introductory text, effective January 1, 1999;

3. Sec. 199.15, Paragraph (c)(2), effective July 11, 1995;

4. Sec. 199.15, Paragraph (b)(4)(iii)(B), effective October 1,

1996.

ADDRESSES: Tricare Management Activity, (TMA), Program Development

Branch, Aurora, CO 80045-6900.

FOR FURTHER INFORMATION CONTACT:

Kathleen Larkin, Office of the Assistant Secretary of Defense (Health

Affairs)/TRICARE Management Activity, telephone (703) 681-1745.

Questions regarding payment of specific claims under the CHAMPUS

allowable charge method should be addressed to the appropriate TRICARE/

CHAMPUS contractor.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

A. Congressional Action

The National Defense Authorization Act for 1984 provided CHAMPUS

with a statutory linkage to the Medicare Prospective Payment System,

upon which the CHAMPUS diagnosis-related group (DRG) based payment

system is modeled and required by law to follow whenever practicable.

In response to the rapid escalation of CHAMPUS costs in the 1980s,

the Congress urged DoD, beginning with the Appropriations Act for

Fiscal Year 1991 that physician payments under CHAMPUS be brought in

line with payments under Medicare.

The National Defense Authorization Act for 1996, section 731,

extended the balance billing limit authority to non-institutional, non-

professional providers.

Section 2455 of the Federal Acquisition Streamlining Act of 1994,

and Executive Order 12549, ``Debarment and Suspension from Federal

Financial and Nonfinancial Assistance Programs,'' February 18, 1986,

require that any entity debarred, suspended or otherwise excluded under

any program or activity involving Federal financial assistance shall

also be debarred, suspended or otherwise excluded from all other

programs and activities involving Federal financial assistance.

B. Public Comments

The proposed rule was published in the Federal Register on November

14, 1997. We received three comment letters. We thank those who

provided comments; specific matters raised by commenters are summarized

below in the appropriate sections of the preamble.

II. Provisions of the Rule

A. Proposed Changes to the CHAMPUS DRG-Based Payment System

1. Heart and Liver Transplants (revisions to

Sec. 199.14(a)(1)(ii)(C)(2),(3) and (4))

Provisions of the Proposed Rule. This paragraph explains that when

we first implemented the CHAMPUS DRG-based payment system in 1987, we

exempted all services related to heart and liver transplantation.

Although both of these types of transplants are subject to the Medicare

PPS, we initially exempted them because at that time we had limited

experience and claims data for them. We believed these limitations

could significantly skew the relative weights we would calculate for

such transplants.

Since 1987 we have continued to collect data on these services.

From the beginning, heart transplants were grouped to DRG 103 and

exempted. For Fiscal Year 1991 the Health Care Financing Administration

(HCFA) created DRG 480 for liver transplants, but we continued to

exempt them.

In our notice of updated rates and weights for Fiscal Year 1991,

which was published on November 5, 1990 (55 FR 46545), we noted that we

intended to consider including both heart and liver transplants in our

DRG system in the future, and we invited any comments in that regard.

We received none.

Since we have enough claims data to calculate accurate weights for

these transplants, we proposed to end the DRG exemption for all CHAMPUS

covered solid organ transplants for which there is an assigned DRG and

enough data to calculate the DRG weight. Just as Medicare does, we will

continue to exempt acquisition costs for all CHAMPUS covered solid

organ transplants.

Analysis of Major Public Comments. One commenter objected to the

provisions of the proposed rule in the belief that DRG weights for the

CHAMPUS program would be inappropriate for pediatric transplant

services.

Response. Our analysis of recent data indicates that both the

average lengths of stay and average billed charges are higher for

pediatric liver transplants, but both measures are lower for pediatric

heart transplants. Thus, given that the number of cases is sufficiently

large and that differences between pediatric and non-pediatric cases

are not significant, it seems reasonable to calculate combined

pediatric and non-pediatric DRG weights for heart and liver

transplants.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

2. Payment Requests for Capital and Direct Medical Education Costs

(Revisions to Sec. 199.14(a)(1)(iii)(G)(3))

Provisions of the Proposed Rule. Initially we required that

hospitals submit their request for payment of capital and direct

medical education

[[Page 48440]]

costs within three months of the end of the hospital's Medicare cost-

reporting period. However, some hospitals encountered difficulties in

meeting this deadline, because HCFA implemented changes which resulted

in extensions to the filing deadline. Therefore, we often did not

enforce our deadline, and as of October 1988 we eliminated the

requirement entirely.

We eliminated the requirement because we believed hospitals would

submit their requests at the earliest possible time anyway. Also, we

believed there would be no adverse impact on CHAMPUS. Neither of these

has proven to be correct. We continually receive these requests well

after the end of the Medicare cost-reporting period--in some cases

several years later. As a result, it is necessary for our contractors

to retain claims data in their systems indefinitely, so that they can

verify the reported amounts when the requests are submitted. This is

proving to be a very burdensome and costly requirement for our

contractors.

On June 27, 1995, HCFA published a final rule (60 FR 33137)

extending the time frame providers have to file cost reports from no

later than 3 months after the close of the period covered by the report

to no later than 5 months after the close of that period. The rule also

changed the regulations for granting extensions to providers. Under the

new regulation, an extension may be granted by the intermediary only

when a provider's operations were significantly adversely affected due

to extraordinary circumstances over which the provider had no control,

such as flood or fire. We proposed to adopt these same requirements for

submitting requests for payment of capital and direct medical education

costs with CHAMPUS.

Currently, CHAMPUS has no deadline, other than the six year statute

of limitations, for submitting payment requests for Medicare cost-

reporting periods. In order to allow us to close out our data for these

periods, we proposed that any capital and direct medical education

payment requests that fall within the six year statute of limitations

and October 1, 1998, must be submitted to the appropriate CHAMPUS

contractor no later than 5 months after October 1, 1998.

In addition, since capital and direct medical education costs are

included in the national children's hospital differential, we proposed

to eliminate the clause allowing children's hospitals to request

reimbursement of capital and direct medical education costs as an

alternative to being paid the national differential.

Analysis of Major Public Comments. We received two comments with

respect to the time frame prescribed for requesting payment of capital

and direct medical education. One commenter suggested we adopt a one

year deadline from the end of the cost reporting period to file

information necessary to the initial payment of capital and direct

medical education costs. Another commenter suggested we allow a six

month period after the close of the fiscal year to submit cost reports,

and, since capital and direct medical education costs are included in

the national children's hospital differential, requested the

differential factor be updated annually with cost report information.

The commenter also suggested that the payments come directly to

hospitals and not be passed through the TRICARE Managed Care Support

contractors.

Response. With respect to the timeframe to submit capital and

direct medical education costs, we agree that a one year deadline is

appropriate. We disagree with an annual update to the national

children's hospital differential since it is designed to reflect the

historical relationship of children's hospitals to DRG reimbursed

institutional facilities. We also disagree with the suggestion that

payments not be passed through our TRICARE managed care support

contractors. It is in the Government's interest to continue to use our

regional managed care support contractors to process these payments

because they provide economies of scale for claims processing and are

acting as the government's fiscal agents in these cases.

Provisions of the Final Rule. The final rule includes a one year

timeframe to submit capital and direct medical education costs.

3. Indirect Medical Education Adjustment Factor (Revisions to

Sec. 199.14(a)(1)(iii)(A)(3), (a)(1)(iii)(D)(2), and

(a)(1)(iii)(E)(3)(i), (ii), (iii), (iv), and (v))

Provisions of the Proposed Rule. An indirect medical education

(IDME) adjustment factor is calculated for all hospitals which have

teaching programs approved under the Medicare regulation. This factor

is calculated using a formula developed by HCFA (see our previous final

rules for a discussion of the application of this formula to CHAMPUS),

and is based on the number of interns and residents and the number of

beds in the hospital. Each DRG-based payment is increased by this

factor for that hospital.

Initially, the number of residents and interns for each hospital

was derived from the most recently available audited HCFA cost report,

and the number of beds was derived from the American Hospital

Association Annual Survey of Hospitals. The factors have been updated

annually based on data submitted by hospitals on the annual request for

payment of capital and direct medical education costs.

While this updating procedure ensures that hospitals' factors are

as current as possible, it is dependent upon the hospitals' submission

of requests for payment of capital and direct medical education costs.

Since the crucial components (number of interns, residents and beds)

can change from year to year, and since many hospitals do not submit

requests for payment of capital and direct medical education costs, we

believe it is necessary to establish an alternative updating method.

We proposed to use the Medicare adjustment factor for any hospital

for which a CHAMPUS-specific factor has not been calculated based on

the hospital's request for payment of capital and direct medical

education costs. We will update the factors using the Medicare amounts

as of October 1 of each year when we routinely update the DRG rates and

weights. Any hospital which has not submitted a capital and direct

medical education payment request to CHAMPUS since the previous October

1, will be assigned the most recent Medicare adjustment factor.

HCFA uses a slightly different formula than that used by CHAMPUS,

and we are aware that this will result in a different adjustment factor

than would otherwise be used. Nevertheless, we believe this is

justified. When the Medicare factor is used, the difference is likely

to be small. In addition, CHAMPUS accounts for a very small portion of

most hospitals' claims, and those hospitals which do not request

payment of capital and direct medical education costs probably have

few, if any, CHAMPUS admissions. Therefore, the financial impact of

using the Medicare factor will be negligible. Yet it will ensure that

the factors are kept current, so that factors which are no longer

representative of a hospital's teaching program are not used

indefinitely. And, of course, hospitals can ensure that a CHAMPUS-

specific factor is used simply by submitting a request for payment of

capital and direct medical education costs.

For hospitals which have indirect medical education factors for

CHAMPUS but are not subject to the Medicare PPS, we will eliminate the

factor if a CHAMPUS-specific factor cannot be calculated based on a

current

[[Page 48441]]

request from the hospital for payment of capital and direct medical

education costs. The factor will be eliminated as of October 1 if no

capital and direct medical education payment request has been received

since the previous October 1.

In any case where a hospital submits a capital and direct medical

education payment request after the Medicare factor has been

implemented (or the factor has been eliminated for hospitals not

subject to the Medicare PPS, including children's hospitals), the

CHAMPUS-specific factor will become effective in accordance with

existing requirements. In no case will the CHAMPUS-specific factor be

effective retroactively.

For children's hospitals which have indirect medical education

factors for CHAMPUS, the factor will be eliminated as of October 1 of

each year if during the past year, the hospital did not provide the

contractor with updated information on the number of its interns,

residents and beds. Since amounts for capital and direct medical

education are included in the national children's hospital

differential, children's hospitals are not required to submit capital

and direct medical education payment requests. Because of this, the

contractor is not able to update the CHAMPUS-specific factor unless

requested by the children's hospital.

For Fiscal Year 1998, HCFA revised its indirect medical education

adjustment formula to gradually reduce the current level of IDME

adjustment over the next several years. Since the IDME formula used by

CHAMPUS does not include disproportionate share hospitals (DSHs), the

variables in the formula are different from Medicare's, however, the

percentage reductions that will be applied to Medicare's formula are

being adopted by CHAMPUS.

Analysis of Major Public Comments. One commenter suggested that

supplemental payments for indirect medical education be continued under

CHAMPUS since current Medicare proposed reductions are appropriate for

adult populations but children's hospitals would be harmed, therefore

they suggested that the percentage reductions implied by the Medicare

formula be removed in application to children's hospitals.

Response. We disagree. We believe the incentives associated with

the existing IME adjustments are contrary to the Administration's

policy of decreasing the number of residents trained in the United

States, increasing the relative number of residents trained in primary

care, and encouraging more training in nonhospital-based sites thus it

is appropriate for CHAMPUS to adopt the Medicare formula.

Provisions of the Final Rule. In our November 14, 1997, proposed

rule, we proposed an alternative updating method for the indirect

medical education (IDME) adjustment factor. For those hospitals for

which a CHAMPUS-specific factor has not been calculated based on the

hospital's request for payment of capital and direct medical education

costs, we proposed to use the Medicare adjustment factor, if said

hospital was subject to the Medicare Prospective Payment System (PPS).

We stated HCFA uses a slightly different formula than that used by

CHAMPUS, and we were aware this would result in a different adjustment

factor than would otherwise be used, however, we believed the

difference was likely to be small.

In reassessing the proposed alternative method, we felt it would be

more equitable to use the ratio of interns and residents to beds, which

is a component of the IDME formula, from HCFA's Provider Specific File

(PSF), rather than use Medicare's IDME adjustment factor. The ratio of

interns and residents to beds will be provided to the contractors to

update each hospital's IDME adjustment factor at the same time we

routinely update the DRG rates and weights. The Provider Specific File

is sent to us by HCFA each year for use in calculating the updated DRG

rates and weights.

This method will be used beginning with the Fiscal Year 1999 DRG

update. If after October 1, 1998, the contractor receives a request for

payment of capital and direct medical education costs, they shall only

change the ratio of interns and residents to beds if the request for

payment is for a hospital's cost reporting period ending prior to

October 1, 1998. The only other time a hospital's IDME adjustment

factor should be changed is if the ratio of interns and residents to

beds changes as a result of a Medicare audit. This alternative method

shall only apply to those hospitals subject to the Medicare PPS.

For hospitals which have indirect medical education factors for

CHAMPUS but are not subject to the Medicare PPS, including children's

hospitals, the contractor shall send a notice each August to those

hospitals who have not provided the contractor with updated information

on the number of its interns, residents and beds, since the previous

October 1, and advise them the IDME factor will be eliminated if they

fail to provide the contractor with updated information by October 1 of

that same year. We anticipate the first notices to be sent in August of

1998.

Based on the above, we are removing the information contained in

the proposed rule regarding the alternative updating method for the

IDME adjustment factor. Since 32 CFR 199.14 already specifies the DRG

payment is to be adjusted for IDME costs, any additional information

regarding updating the IDME factor can be obtained from the contractor.

This change does not affect the adoption of the percentage reductions

being applied to the CHAMPUS IDME formula to gradually reduce the

current level of IDME adjustment over the next several years.

4. Length of Stay Outliers (Revisions to 32 CFR

199.14((a)(1)(iii)(E)(1)(i)(A) and (B))

Provisions of the Proposed Rule. For Fiscal Year 1998, HCFA

eliminated payment for day outliers, referred to as long stay outliers

under CHAMPUS. CHAMPUS also eliminated long stay outliers for all cases

except children's hospitals and neonates for Fiscal Year 1998. We

proposed to eliminate the long stay outliers for children's hospitals

and neonates for Fiscal Year 1999. For Fiscal Year 1993, HCFA changed

the payment procedures for day outlier per diems under the PPS. Prior

to this change, the day outlier per diem was calculated using the DRGs

geometric mean length of stay and a marginal payment factor of 60

percent. For discharge occurring on or after October 1, 1992, HCFA

revised the day outlier payment policy to reflect that the per diem

payment would be calculated using the arithmetic mean and a marginal

payment factor of 55 percent. This meant that the per diem day outlier

payment under the PPS for operating costs would be determined by

dividing the standard DRG payment by the arithmetic mean length of stay

for that DRG, and multiplying the result by 55 percent. The change in

the payment policy for day outliers provided better protection against

costly cases for hospitals, while maintaining a more appropriate level

of payment for cases with extraordinary long lengths of stay that were

not also extraordinarily costly.

CHAMPUS did not adopt the PPS per diem day outlier changes at that

time because it required a regulatory change and there was a moratorium

on publication of rules. Over the years, HCFA has reduced the marginal

payment factor for day outliers from 55 percent to 47 percent to 44

percent, to 33 percent, to the point of eliminating payment of day

outliers, effective with discharges occurring after September 30, 1997.

CHAMPUS adopted the day

[[Page 48442]]

outlier marginal payment factor of 47 percent for Fiscal Year 1995, 44

percent for Fiscal Year 1996, and 33 percent for Fiscal Year 1997, but

has not adopted the arithmetic mean to calculate the per diem payment.

As a result, CHAMPUS has been paying more than Medicare on claims

qualifying for long-stay day outliers. Although we eliminate the long

stay outliers for all cases except children's hospitals and neonates

for Fiscal Year 1998, and proposed to eliminate the long stay outliers

for them in Fiscal Year 1999, we still proposed to adopt the arithmetic

mean to calculate the per diem, in order to be consistent with the

Medicare PPS in calculating payments of outlier cases.

Analysis of Major Public Comments. One commenter recommended that

children's hospitals' outlier cases be exempt from the 100-day Medicare

cap because children, unlike elderly adults in long stay cases are

almost never discharged to nursing home care from the hospital.

Response. CHAMPUS does not apply the 100 day Medicare cap to any

cases, therefore the comment is not applicable.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

5. Cost Outliers (Revisions to 32 CFR 199.14(a)(1)(iii)(E)(1)(ii) (A)

and (B))

Provisions of the Proposed Rule. Beginning in Fiscal Year 1998,

HCFA adopted a requirement that in determining the additional payment

for IME (referred to as IDME under CHAMPUS), the IME adjustment factor

will only be applied to the base DRG payment. In addition, the fixed

loss cost outlier threshold is based on the sum of the DRG payment plus

IME plus a fixed dollar amount. CHAMPUS adopted this requirement in

Fiscal Year 1998 for all cases except children's hospitals and

neonates. We proposed to adopt this same requirement for children's

hospitals and neonates in Fiscal Year 1999.

Analysis of Major Public Comments. One commenter was concerned that

this policy is not budget neutral, there is no special per diem for

neonates, and that Children's hospitals are not exempt from the 100-day

Medicare cap. The commenter suggested that the 1998 HCFA-adopted

requirement be implemented in a budget neutral fashion. We agree and we

plan to establish an outlier ratio designed to be budget neutral.

Provisions of the Final Rule. Effective October 1, 1998, Children's

hospitals will have their cost outlier payments adjusted so that these

payments are budget neutral with the FY94 outlier policies for

children's hospitals. The Department will calculate an adjustment

factor which will be applied to all cost outlier payments in FY99 and

thereafter. This adjustment factor will be applied equally to the cost

outlier payments for all Children's hospitals. The adjustment factor

will be equal to the ratio of CHAMPUS outlier payments using the FY94

CHAMPUS long stay and cost outlier payment methods to the CHAMPUS

outlier payment methods using the FY99 cost outlier payment methods. We

will calculate this ratio in late FY98 once the CHAMPUS FY99 cost

outlier payment policy has been determined. The ratio will be

calculated using CHAMPUS claims data from the Children's hospitals in

FY95 and FY96. In order to ensure that budget neutrality is achieved

with this ratio, the Department will monitor outlier payments and

recalculate the ratio of payments under the FY94 outlier policies to

actual outlier payments in FY99 using actual cost outlier cases at

Children's hospitals in FY99. This calculation will be done in FY 2000.

If the ratio has changed significantly, a new ratio will be used to pay

Children's hospital outlier cases in FY 2001 and thereafter. The final

rule has been modified to reflect these adjustment procedures.

6. Payment for Transfer Cases (Revisions to 32 CFR

199.14(a)(1)(i)(C)(6)(iv))

Provisions of the Proposed Rule. Beginning in Fiscal Year 1996,

HCFA adopted a graduated per diem payment methodology for transfer

cases. As of October 1, 1996, CHAMPUS adopted this payment methodology;

however, we elected not to offset these additional payments with

reductions in outlier payments. Using this payment methodology, CHAMPUS

proposed to pay transferring hospitals twice the per diem amount for

the first day of any transfer stay plus the per diem amount for each of

the remaining days before transfer, up to the full DRG amount. For

neonatal cases, other than normal newborns, we proposed paying the

transferring hospital twice the per diem amount for the first day of

any transfer stay plus 125 percent of the per diem rate for all

remaining days before transfer, up to the full DRG amount. This change

allows hospitals to be compensated more appropriately for the treatment

they furnish to patients before transfer. We proposed continuing to pay

transferring hospitals in full for discharges classified into DRG 456

(burns, transferred to another acute care facility or DRG 601 (neonate,

transferred less or equal to 4 days old).

Analysis of Major Public Comments. One commenter suggested a higher

reimbursement rate of 150 percent for days after the first day for

Children's hospitals suggesting that their costs were higher.

Response. We were unable to determine any differences between

Children's hospitals and other hospitals in this regard. Thus we have

not changed the reimbursement rate.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

7. Elimination of Separate Adjusted Standardized Amounts for Rural

Areas (Revision to 32 CFR 199.14(a)(1)(iii)(D) (1) and (5))

Provisions of the Proposed Rule. Beginning in Fiscal Year 1995,

HCFA's average standardized amounts for hospitals located in ``rural''

areas were required to be equal to the average standardized amount for

hospitals located in ``other urban'' areas. Based on this, separate

national average standardized amounts for ``other urban'' and ``rural''

areas no longer existed. As of Fiscal Year 1995, CHAMPUS no longer

differentiated between ``other urban'' and ``rural'' areas. We proposed

that the adjusted standardized amounts for ``other urban'' and

``rural'' areas be listed as ``other'' areas.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

8. Payment for Blood Clotting Factor (Revisions to 32 CFR Section

199.14(a)(1)(ii)(C)(10))

Provisions of the Proposed Rule. For Fiscal Year 1994, HCFA

reinstated payments for the cost of administering blood clotting factor

to beneficiaries who have hemophilia through discharges occurring

before October 1, 1994. CHAMPUS also reinstated payments for the cost

of administering blood clotting factor through discharges occurring

before October 1, 1994. For Fiscal Year 1998, HCFA again reinstated

payments for the cost of administering blood clotting factor. CHAMPUS

also proposed to reinstate payments for discharges occurring on or

after October 1, 1997.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

[[Page 48443]]

9. Effect of Change of Ownership on Exclusion of Long-Term Care

Hospitals (Revisions to 32 CFR 199.14(a)(1)(ii)(D)(4))

Provisions of the Proposed Rule. Beginning in Fiscal Year 1996,

HCFA adopted new requirements for certain long-term care hospitals

excluded from the PPS. The requirements specify that if a hospital

undergoes a change of ownership at the start of a cost reporting period

or at any time within the preceding 6 months, the hospital may be

excluded from the prospective payment system as a long-term care

hospital for a cost reporting period if, for the 6 months immediately

preceding the start of the period (including time before the change of

ownership), the hospital has the required average length of stay,

continuously operated as a hospital, and continuously participated as a

hospital in Medicare. CHAMPUS proposed to adopt these new requirements

beginning in Fiscal Year 1996.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

10. Empty and Low-Volume DRGs (Revision to 32 CFR 199.14(a)(1)(iii)(B))

Provisions of the Proposed Rule. Currently, 32 CFR

199.14(a)(1)(iii)(B) specifies that the Medicare weight shall be used

for any DRG with less then 10 occurrences in the CHAMPUS database.

Since the CHAMPUS weights are used by military treatment facilities and

by an increasingly large number of state Medicaid programs, the direct

substitution of the Medicare weight for the CHAMPUS weight, causes

inconsistencies. These inconsistencies may pose more of a problem for

other payors than it does for CHAMPUS, particularly if they have more

cases in the DRG categories where the substitutions have occurred.

Because of these inconsistencies, we proposed that the Director,

TRICARE Management Activity, or designee, has the authority to consider

alternative methods for estimating CHAMPUS weights in these low-volume

DRG categories.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

11. Hospitals Within Hospitals (Revisions to 32 CFR 199.14(a)(1)(ii)(D)

(5))

Provisions of the Proposed Rule. For Fiscal Year 1998, HCFA

established additional criteria for excluding from the PPS, long-term

care hospitals that occupy space in the same building or on the same

campus as another hospital, sometimes called ``hospitals within

hospitals''. The additional criteria extends the hospital within

hospital criteria to excluded hospitals other than long-term care

hospitals. CHAMPUS proposed to adopt these requirements beginning in

Fiscal Year 1998.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

B. Proposed Changes Regarding Elimination of Physician Attestation

Requirement (Revision to 32 CFR 199.15(c)(2))

Provisions of the Proposed Rule. On September 1, 1995, Medicare

eliminated the requirement for the physician attestation form that

requires doctors to certify the accuracy of all diagnoses and

procedures before submitting claims for payment. In addition, instead

of requiring a physician to sign an acknowledge statement every year,

Medicare changed its regulations to require a physician need only sign

the acknowledgment statement upon receiving admitting privileges at a

hospital. CHAMPUS proposed to adopt these requirements effective the

same date.

Analysis of Major Public Comments. One commenter appreciated DoD's

elimination of the annual physician attestation policy.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

C. Proposed Changes Regarding Clarification of Payment Reduction for

Noncompliance With Required Utilization Review Procedures (revision to

32 CFR 199.15(b)(4)(iii)(B))

Provisions of the Proposed Rule. To cover those situations where

network providers have agreements with the managed care contractors for

denial of payments of the provider's failure to obtain the required

preauthorization, we are proposing to add the words ``at least'' before

the words ``ten percent''. By adding the words ``at least'', the

managed care support contractor is authorized to apply reductions in

payments in accordance with the network provider's contract.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

D. Clarification Regarding List of Ambulatory Surgery Procedures

Provisions of the Proposed Rule. On October 1, 1993, we published a

final rule (58 FR 51227) which included prospective payment procedures

for ambulatory surgery. These procedures were modeled on the Medicare

methodology. In that final rule, we stated that ``A list of ambulatory

surgery procedures will appear as Attachment 2 (to be published later)

to this preamble.'' We subsequently published the list of procedures on

October 15, 1993, (58 FR 53411).

The list of procedures published on October 15, 1993, was not made

part of the Code of Federal Regulations (CFR) at that time, and it was

not, and continues not to be, our intention that it be part of the CFR.

However, the final rule did not make this clear. We proposed that the

list of procedures to be ``published periodically by the Director,

OCHAMPUS,'' as cited in section 199.14 paragraph (d)(1), is contained

in the TRICARE/CHAMPUS Policy Manual.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

E. Proposed Changes Regarding Limits on Ambulatory Surgery Group

Payment Rates (Revisions to 32 CFR 199.14(d)(3)(iv))

Provisions of the Proposed Rule. Effective November 1, 1994,

CHAMPUS identified a number of procedures which can be performed safely

and effectively as ambulatory surgery and established prospective

payment procedures for reimbursing these services. Ambulatory surgery

often is less disruptive to the patient's life than an inpatient stay.

It also provides a less expensive alternative to an inpatient stay,

since the patient does not require a hospital room and all the costs

associated with it. As a result, the OCHAMPUS wants to encourage the

use of ambulatory surgery whenever it is reasonable, but we do not

believe it ever should be more expensive than an inpatient stay.

Therefore, we proposed to add a provision that gives discretion to the

Director, TMA, to limit the ambulatory surgery group payment rate to

the amount that would be allowed if the services were provided on an

inpatient basis. To calculate the allowable inpatient amount we

proposed multiplying the applicable DRG relative weight times the

national large urban adjusted standardized amount (ASA). We proposed to

use the large urban ASA rather than the ``other

[[Page 48444]]

area'' ASA because it is higher and will not economically disadvantage

any provider, and we expect that most ambulatory surgery centers are

located in large urban areas.

Analysis of Major Public Comments. No comments were received.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule. We want to clarify, however, that the CHAMPUS-determined

inpatient allowable amount that serves as a limit on the ambulatory

surgery group payment amounts includes adjustments for hospital wage

indexes.

F. Proposed Changes Regarding Balance Billing (Revisions to 32 CFR

199.14(h))

Provisions of the Proposed Rule. Section 731 of the National

Defense Authorization Act for Fiscal Year 1996, revised 10 U.S.C.

1079(h) which provides the statutory basis for limits on balance

billing of CHAMPUS beneficiaries established in section

199.14(h)(1)(i)(D). Section 731 extends the balance billing limit

authority to non-institutional, non-professional providers, such as

clinical laboratories and ambulance companies.

We proposed that non-institutional, non-professional providers will

be limited in the amount they may bill a TRICARE/CHAMPUS-eligible

beneficiary an actual charge in excess of the allowable amount. This

provides financial protection for our beneficiaries by preventing

excessively high billing by providers by establishing the balance

billing limit to these new categories of providers as the same

percentage as that used for TRICARE/CHAMPUS professional providers: 115

percent of the allowable charge. In order to provide flexibility to

continue CHAMPUS benefits in special circumstances in which a

beneficiary may feel strongly about using a particular provider,

notwithstanding high fees, we proposed that the limitation may be

waived on a case-by-case basis.

Analysis of Major Public Comments. While noting that the proposed

rule applied to non-institutional, non-professional providers, one

commenter was opposed to across-the-board balance billing limits for

physicians and called on the Department to articulate and publish

criteria for allowing a waiver of the balance billing limits on a case-

by-case basis.

Response. As we have stated in the past, we believe it is

appropriate to protect beneficiaries against excessive balance billing.

We have committed ourselves to monitoring carefully balance billing

trends with an objective of assuring that a majority of claims in all

localities for all procedures of appreciable volume have zero balance

billing. Where this is not maintained, we are willing to maintain

CHAMPUS payment rates a level higher than Medicare's. Based on our

willingness to do this, we do not believe providers need to also

maintain balance billing levels higher than Medicare, absent some

special circumstance. As we have noted, in a special circumstance, the

limitation can be waived if requested by the beneficiary. We do not

have set criteria we use when evaluating and granting a waiver to our

balance billing protections, rather each request is evaluated by the

Director, TMA, based on the specific facts provided by a beneficiary.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

G. Proposed Changes Regarding CMAC Rates (Revisions to 32 CFR

199.14(h)(1)(iii)(D))

Provisions of the Proposed Rule. CHAMPUS policy, based on

Congressional enactment, is to set CHAMPUS Maximum Allowable Charge

(CMAC) rates comparable to Medicare rates. For almost all procedure

codes, the CMAC rate has been reduced to equal the Medicare rate or is

in the process of being phased down to that level. For a very small

number of procedures, for unusual reasons or idiosyncrasies of the data

used for calculations, however, the CMAC rate is less than the Medicare

rate. We proposed to establish a special rule for these cases to permit

an increase in the CMAC up to the Medicare rate. This is based on the

authority of 10 U.S.C. 1079(h)(4), which allows for exceptions to the

normal statutory payment limitation if DoD determines it necessary to

assure that beneficiaries have adequate access to health care services.

Because the Medicare rates are products of a system that reflects

careful governmental judgments of factors suggesting fair payment

rates, we proposed to adopt these rates as indicators of payment levels

associated with adequate access. In addition, under the applicable

Appropriations Act general provision, DoD may increase CMAC rates that

are lower than Medicare rates by reference to appropriate economic

index data similar to that used by Medicare. We have heretofore

utilized only the Medicare Economic Index in this connection, but we

proposed to adopt an additional Medicare indicator of economic factors,

namely the data used for the Medicare fee determination, to adjust the

rates in these special cases. This is set forth in the proposed new

section 199.14(h)(1)(iii)(D).

Analysis of Major Public Comments. One commenter was pleased by the

proposed change and suggested that we publish the list of procedures

that will be increased to the Medicare rates. We agree and we have

included the list at the end of the preamble.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

H. Proposed Changes Regarding Government-Wide Effect of Exclusion or

Suspension From CHAMPUS (Revisions to 32 CFR 199.9(m))

Provisions of the Proposed Rule. Section 2455 of the Federal

Acquisition Streamlining Act of 1994, Pub. L. 103-355, October 13,

1994, and Executive Order 12549, ``Debarment and Suspension from

Federal Financial and Nonfinancial Assistance Programs,'' February 18,

1986, required that any entity debarred, suspended, or otherwise

excluded under any program or activity involving Federal financial

assistance shall also be debarred, suspended, or otherwise excluded

from all other programs and activities involving Federal financial

assistance. We are restating this requirement in the context specific

to CHAMPUS through a proposed addition to section 199.9. The proposed

addition provides that any health care provider excluded or suspended

from CHAMPUS shall, as a general rule, also be debarred, suspended, or

otherwise excluded from all other programs and activities involving the

Federal financial assistance. Among these other such programs are

Medicare and Medicaid. Other regulations related to this authority are

32 CFR Part 24 (DoD rules) and 45 CFR Part 76 (HHS rules).

In conjunction with implementation of this government-wide

debarment rule, we are strengthening the linkage between CHAMPUS and

these other programs on the important issue of balance billing by

providers. Current regulations generally require providers to limit

balancing billing to 15% greater than the CHAMPUS Maximum Allowable

Charge (CMAC). These regulations also provide that violations are

grounds for exclusion or suspension from CHAMPUS. We are proposing to

reinforce these compliance provisions by adding a violation of this

requirement to the list of provider actions that are considered abuse

of the program for purposes of termination, suspension and other

administrative remedies.

A principal effect of this proposed revision is that any provider

who

[[Page 48445]]

exceeds the balance billing limits risks not only exclusion or

suspension from CHAMPUS, but also exclusion or suspension from

Medicare, Medicaid, and other Federal programs.

Analysis of Major Public Comments. One commenter suggested that

CHAMPUS should require the same level of intent as is currently

required for exclusion or suspension in the Medicare and Medicaid

programs. They recommended that there be evidence that the physician

``knowingly and willfully'' failed to comply with CHAMPUS requirements.

Response. The comment is not pertinent to the proposed rule because

the proposed rule does not make changes to our requirements in 32 CFR

199.6 which sets forth general policies and program requirements for

authorized providers.

Provisions of the Final Rule. The final rule is consistent with the

proposed rule.

I. Elimination of Mandatory Claims Filing Requirement (Revision to 32

CFR 199.6(a)(11))

This final rule conforms the CHAMPUS regulation to title 10, as

revised by a provision of the National Defense Authorization Act for

Fiscal Year 1998 that eliminated the requirement that all providers

file claims on behalf of CHAMPUS beneficiaries.

J. Revision of Ambulatory Surgery Cost-Share Information (Revision to

32 CFR 199.18(d)(3)(v))

When a dependent of an active-duty member receives approved

ambulatory surgery services, the cost-share is $25. This single cost-

sharing amount covers the facility claim as well as any claims for

professional (surgeon, anesthesia, etc.) services. In order to ensure

consistency and for administrative ease, we have required that the $25

cost-share be assessed against the facility claim. When the regulation

for the TRICARE uniform HMO benefit was published (32 CFR 199.18), that

part inadvertently stated that the ambulatory surgery cost-share is to

be assessed against the claim for the primary surgeon's services. Since

this does not conform to established practices, we are revising this

paragraph to enable the cost-share to be assessed against the facility

claim. This will have no effect on either the collection or the amount

of the cost-share.

III. Regulatory Procedures

Executive Order 12866 requires certain regulatory assessments for

any ``significant regulatory action,'' defined as one which would

result in an annual effect on the economy of $100 million or more, or

have other substantial impacts.

The Regulatory Flexibility Act (RFA) requires that each Federal

agency prepare, and make available for public comment, a regulatory

flexibility analysis when the agency issues a regulation which would

have a significant impact on a substantial number of small entities.

This is not a significant regulatory action under the provisions of

Executive Order 12866, and it would not have a significant impact on a

substantial number of small entities.

Pursuant to the Paperwork Reduction Act of 1995, the reporting

provisions of this rule have been submitted to OMB for review under

3507(d) of the Act.

In compliance with Section 3506(c)(2)(A) of the Paperwork Reduction

Act of 1995, the Office of the Assistant Secretary of Defense (Health

Affairs) announces the collection of information to allow TRICARE to

properly reimburse institutional providers based on diagnosis-related

groups (DRGs) for their share of these costs. The collection of this

information is authorized by 32 CFR 199.14(a)(1)(iii)(G)(1) and (2).

The CHAMPUS DRG-based payment system is modeled on the Medicare

Prospective Payment System (PPS) and was implemented on October 1,

1987.

Affected Public: Individuals; business or other for profit.

Annual Burden Hours: 5,532.

Number of Respondents: 5,400.

Responses per Respondent: 1.

Average Burden per Response: 5 minutes for physicians.

Frequency: On occasion.

Respondents are institutional providers and admitting physicians.

Institutional providers are requesting reimbursement for allowed

capital and direct medical education costs from the TRICARE/CHAMPUS

contractor. The information can be submtited in any form, most likely

in the form of a letter. The contractor will calculate the TRICARE/

CHAMPUS share of capital and direct medical education costs and make a

lump-sum payment to the hospital.

Physicians sign a physician acknowledgement, maintained by the

institution, at the time the physician is granted admitting privileges.

This acknowledgement indicates the physician understands the importance

of a correct medical record, and misrepresentation may be subject to

penalties.

List of Subjects in 32 CFR Part 199

Claims, Health insurance, Individuals with disability, Military

personnel, Reporting and recordkeeping requirements.

Accordingly, 32 CFR Part 199 is amended as follows:

PART 199--[AMENDED]

1. The authority citation for Part 199 continues to read as

follows:

Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.

Sec. 199.6 [Amended]

2. Section 199.6 is amended by removing paragraph (a)(11) and

redesignating paragraph (a)(12) as (a)(11).

3. Section 199.9 is amended by adding new paragraph (m) to read as

follows:

Sec. 199.9 Administrative remedies for fraud, abuse, and conflict of

interest.

* * * * *

(m) Government-wide effect of exclusion or suspension from CHAMPUS.

As provided by section 2455 of the Federal Acquisition Streamlining Act

of 1994, Pub. L. 103-355, October 13 1994, and Executive Order 12549,

``Debarment and Suspension from Federal Financial and Nonfinancial

Assistance Programs,'' February 18, 1986, any health care provider

excluded or suspended from CHAMPUS under this section shall, as a

general rule, also be debarred, suspended, or otherwise excluded from

all other programs and activities involving Federal financial

assistance. Among the other programs for which this debarment,

suspension, or exclusion shall operate are the Medicare and Medicaid

programs. This debarment, suspension, or termination requirement is

subject to limited exceptions in the regulations governing the

respective Federal programs affected. (Note: Other regulations related

to this government-wide exclusion or suspension authority are 32 CFR

Part 25 and 45 CFR Part 76.)

4. Section 199.14 is amended by revising first sentences of (a)(1)

introductory text and (a)(1)(i)(C)(6)(iv), and by revising paragraphs

(a)(1)(ii)(C)(2), (3), (4) and (10) first sentence, (a)(1)(ii)(D)(4),

redesignating paragraphs (a)(1)(ii)(D)(5) through (a)(1)(ii)(D)(8) as

(a)(1)(ii)(D)(6) through (a)(1)(ii)(D)(9), (a)(1)(iii)(B),

(a)(1)(iii)(D)(1) first sentence and (5), (a)(1)(iii)(E)(1)(i)(A) and

(B), (a)(1)(iii)(E)(1)(ii)(A) and (B), (a)(1)(iii)(G)(3) introductory

text, (d)(3)(iv), and (h) introductory text, and

[[Page 48446]]

by adding a new sentence after the first sentence of paragraph

(a)(1)(i)(C)(6)(iv), and by adding new paragraphs (a)(1)(ii)(D)(5), and

(h)(1)(iii)(D), to read as follows:

Sec. 199.14 Provider reimbursement methods.

* * * * *

(a) * * *

(1) CHAMPUS Diagnosis Related Group (DRG)-based payment system.

Under the CHAMPUS DRG-based payment system, payment for the operating

costs of inpatient hospital services furnished by hospitals subject to

the system is made on the basis of prospectively-determined rates and

applied on a per discharge basis using DRGs. * * *

(i) * * *

(C) * * *

(6) * * *

(iv) Payment to a hospital transferring an inpatient to another

hospital. If a hospital subject to the CHAMPUS DRG-based payment system

transfers an inpatient to another such hospital, the transferring

hospital shall be paid a per diem rate (except that in neonatal cases,

other than normal newborns, the hospital will be paid at 125 percent of

that per diem rate), as determined under instructions issued by TSO,

for each day of the patient's stay in that hospital, not to exceed the

DRG-based payment that would have been paid if the patient had been

discharged to another setting. For admissions occurring on or after

October 1, 1995, the transferring hospital shall be paid twice the per

diem rate for the first day of any transfer stay, and the per diem

amount for each subsequent day, up to the limit described in this

paragraph.

* * * * *

(ii) * * *

(C) * * *

(2) All services related to solid organ acquisition for CHAMPUS

covered transplants by CHAMPUS-authorized transplantation centers.

(3) All services related to heart and liver transplantation for

admissions prior to October 1, 1998, which would otherwise be paid

under DRG 103 and 480, respectively.

(4) All services related to CHAMPUS covered solid organ

transplantations for which there is no DRG assignment.

* * * * *

(10) For admissions occurring on or after October 1, 1990, and

before October 1, 1994, and for discharges occurring on or after

October 1, 1997, the costs of blood clotting factor for hemophilia

inpatients. * * *

(D) * * *

(4) Long-term hospitals. A long-term hospital which is exempt from

the Medicare prospective payment system is also exempt from the CHAMPUS

DRG-based payment system. In order for a long-term hospital which does

not participate in Medicare to be exempt from the CHAMPUS DRG-based

payment system, it must meet the same criteria (as determined by the

Director, TSO, or a designee) as required for exemption from the

Medicare Prospective Payment System as contained in Sec. 412.23 of

Title 42 CFR.

(5) Hospitals within hospitals. A hospital within a hospital which

is exempt from the Medicare prospective payment system is also exempt

from the CHAMPUS DRG-based payment system. In order for a hospital

within a hospital which does not participate in Medicare to be exempt

from the CHAMPUS DRG-based payment system, it must meet the same

criteria (as determined by the Director, TSO, or a designee) as

required for exemption from the Medicare Prospective Payment System as

contained in 42 CFR 412.22 and the criteria for one or more of the

excluded hospital classifications described in Sec. 412.23 of Title 42

CFR.

* * * * *

(iii) * * *

(B) Empty and low-volume DRGs. For any DRG with less than ten (10)

occurrences in the CHAMPUS database, the Director, TSO, or designee,

has the authority to consider alternative methods for estimating

CHAMPUS weights in these low-volume DRG categories.

* * * * *

(D) * * *

(1) Differentiate large urban and other area charges. All charges

in the database shall be sorted into large urban and other area groups

(using the same definitions for these categories used in the Medicare

program.* * *

* * * * *

(5) Preliminary base year standardized amount. A preliminary base

year standardized amount shall be calculated by summing all costs in

the database applicable to the large urban or other area group and

dividing by the total number of discharges in the respective group.

* * * * *

(E) * * *

(1) * * *

(i) * * *

(A) Short-stay outliers. Any discharge with a length-of-stay (LOS)

less than 1.94 standard deviations from the DRG's arithmetic LOS shall

be classified as a short-stay outlier. Short-stay outliers shall be

reimbursed at 200 percent of the per diem rate for the DRG for each

covered day of the hospital stay, not to exceed the DRG amount. The per

diem rate shall equal the DRG amount divided by the arithmetic mean

length-of-stay for the DRG.

(B) Long-stay outliers. Any discharge (except for neonatal services

and services in children's hospitals) which has a length-of-stay (LOS)

exceeding a threshold established in accordance with the criteria used

for the Medicare Prospective Payment System as contained in 42 CFR

412.82 shall be classified as a long-stay outliner. Any discharge for

neonatal services or for services in a children's hospital which has a

LOS exceeding the lesser of 1.94 standard deviations or 17 days from

the DRG's arithmetic mean LOS also shall be classified as a long-stay

outlier. Long-stay outliers shall be reimbursed the DRG-based amount

plus a percentage (as established for the Medicare Prospective Payment

System) of the per diem rate for the DRG for each covered day of care

beyond the long-stay outlier threshold. The per diem rate shall equal

the DRG amount divided by the arithmetic mean LOS for the DRG. For

admissions on or after October 1, 1997, the long stay outlier has been

eliminated for all cases except children's hospitals and neonates. For

admissions on or after October 1, 1998, the long stay outlier has been

eliminated for children's hospitals and neonates.

(ii) * * *

(A) Cost outliers except those in children's hospitals or for

neonatal services. Any discharge which has standardized costs that

exceed a threshold established in accordance with the criteria used for

the Medicare Prospective Payment System as contained in 42 CFR 412.84

shall qualify as a cost outlier. The standardized costs shall be

calculated by multiplying the total charges by the factor described in

Sec. 199.14(a)(1)(iii)(D)(4) and adjusting this amount for indirect

medical education costs. Cost outliers shall be reimbursed the DRG-

based amount plus a percentage (as established for the Medicare

Prospective Payment System) of all costs exceeding the threshold.

Effective with admissions occurring on or after October 1, 1997, the

standardized costs are no longer adjusted for indirect medical

education costs.

(B) Cost outliers in children's hospitals and for neonatal

services. Any discharge for services in a children's hospital or for

neonatal services which has standardized costs that exceed a threshold

of the greater of two times the DRG-based amount or $13,500 shall

[[Page 48447]]

qualify as a cost outlier. The standardized costs shall be calculated

by multiplying the total charges by the factor described in

Sec. 199.14(a)(1)(iii)(D)(4) (adjusted to include average capital and

direct medical education costs) and adjusting this amount for indirect

medical education costs. Cost outliers for services in children's

hospitals and for neonatal services shall be reimbursed the DRG-based

amount plus a percentage (as established for the Medicare Prospective

Payment System) of all costs exceeding the threshold. Effective with

admissions occurring on or after October 1, 1998, standardized costs

are no longer adjusted for indirect medical education costs. In

addition, CHAMPUS will calculate the outlier payments that would have

occurred at each of the 59 Children's hospitals under the FY99 outlier

policy for all cases that would have been outliers under the FY94

policies using the most accurate data available in September 1998. A

ratio will be calculated which equals the level of outlier payments

that would have been made under the FY94 outlier policies and the

outlier payments that would be made if the FY99 outlier policies had

applied to each of these potential outlier cases for these hospitals.

The ratio will be calculated across all outlier claims for the 59

hospitals and will not be hospital specific. The ratio will be used to

increase cost outlier payments in FY 1999 and FY 2000, unless the

hospital has a negotiated agreement with a managed care support

contractor which would affect this payment. For hospitals with managed

care support agreements which affect these payments, CHAMPUS will apply

these payments if the increased payments would be consistent with the

agreements. In FY 2000 the ratio of outlier payments (long stay and

cost) that would have occurred under the FY 94 policy and actual cost

outlier payments made under the FY 99 policy will be recalculated. If

the ratio has changed significantly, the ratio will be revised for use

in FY 2001 and thereafter. In FY 2002, the actual cost outlier cases in

FY 2000 and 2001 will be reexamined. The ratio of outlier payments that

would have occurred under the FY94 policy and the actual cost outlier

payments made under the FY 2000 and FY 2001 policies. If the ratio has

changed significantly, the ratio will be revised for use in FY 2003.

* * * * *

(G) * * *

(3) Information necessary for payment of capital and direct medical

education costs. All hospitals subject to the CHAMPUS DRG-based payment

system, except for children's hospitals, may be reimbursed for allowed

capital and direct medical education costs by submitting a request to

the CHAMPUS contractor. Beginning October 1, 1998, such request shall

be filed with CHAMPUS on or before the last day of the twelfth month

following the close of the hospitals' cost reporting period, and shall

cover the one-year period corresponding to the hospital's Medicare

cost-reporting period. The first such request may cover a period of

less than a full year--from the effective date of the CHAMPUS DRG-based

payment system to the end of the hospital's Medicare cost-reporting

period. All costs reported to the CHAMPUS contractor must correspond to

the costs reported on the hospital's Medicare cost report. An extension

of the due date for filing the request may only be granted if an

extension has been granted by HCFA due to a provider's operations being

significantly adversely affected due to extraordinary circumstances

over which the provider has no control, such as flood or fire. (If

these costs change as a result of a subsequent audit by Medicare, the

revised costs are to be reported to the hospital's CHAMPUS contractor

within 30 days of the date the hospital is notified of the change.) The

request must be signed by the hospital official responsible for

verifying the amounts and shall contain the following information.

* * * * *

(d) * * *

(3) * * *

(iv) Step 4: standard payment amount per group. The standard

payment amount per group will be the volume weighted median per

procedure cost for the procedures in that group. For cases in which the

standard payment amount per group exceeds the CHAMPUS-determined

inpatient allowable amount, the Director, TSO or his designee, may make

adjustments.

* * * * *

(h) Reimbursement of individual health care professionals and other

non-institutional, non-professional providers. The CHAMPUS-determined

reasonable charge (the amount allowed by CHAMPUS) for the service of an

individual health care professional or other non-institutional, non-

professional provider (even if employed by or under contract to an

institutional provider) shall be determined by one of the following

methodologies, that is, whichever is in effect in the specific

geographic location at the time covered services and supplies are

provided to a CHAMPUS beneficiary.

(1) * * *

(iii) * * *

(D) Special rule for cases in which the national CMAC is less than

the Medicare rate.

Note: This paragraph will be implemented when CMAC rates are

published.

In any case in which the national CMAC calculated in accordance

with paragraphs (h)(1)(i) through (iii) of this section is less than

the Medicare rate, the Director, TSO, may determine that the use of the

Medicare Economic Index under paragraph (h)(1)(iii)(B) of this section

will result in a CMAC rate below the level necessary to assure that

beneficiaries will retain adequate access to health care services. Upon

making such a determination, the Director, TSO, may increase the

national CMAC to a level not greater than the Medicare rate.

5. Section 199.15 is amended by revising paragraphs (b)(4)(iii)(B),

(c)(2), (d)(2)(iii) and (e)(3)(i) and (ii), to read as follows:

Sec. 199.15 Quality and utilization review peer review organization

program.

* * * * *

(b) * * *

(4) * * *

(iii) * * *

(B) In a case described in paragraph (b)(4)(iii)(A) of this

section, reimbursement will be reduced, unless such reduction is waived

based on special circumstances. The amount of this reduction shall be

at least ten percent of the amount otherwise allowable for services for

which preauthorization (including preauthorization for continued stays

in connection with concurrent review requirements) approval should have

been obtained, but was not obtained.

* * * * *

(c) * * *

(2) The physician acknowledgment required for Medicare under 42 CFR

412.46 is also required for CHAMPUS as a condition for payment and may

be satisfied by the same statement as required for Medicare, with

substitution or addition of ``CHAMPUS'' when the word ``Medicare'' is

used.

* * * * *

(d) * * *

(2) * * *

(iii) Review for physician's acknowledgement of annual receipt of

the penalty statement as contained in the Medicare regulation at 42 CFR

412.46.

* * * * *

(e) * * *

(3) * * *

(i) If the diagnostic and procedural information in the patient's

medical

[[Page 48448]]

record is found to be inconsistent with the hospital's coding or DRG

assignment, the hospital's coding on the CHAMPUS claim will be

appropriately changed and payments recalculated on the basis of the

appropriate DRG assignment.

(ii) If the information stipulated under paragraph (d)(2) of this

section is found not to be correct, the PRO will change the coding and

assign the appropriate DRG on the basis of the changed coding.

* * * * *

6. Section 199.18 is amended by revising paragraph (d)(3)(v)

introductory text to read as follows:

Sec. 199.18 Uniform HMO Benefit.

* * * * *

(d) * * *

(3) * * *

(v) For ambulatory surgery services, the per service fee is as

follows:

* * * * *

Dated: August 31, 1998.

L.M. Bynum,

Alternate OSD Federal Register Liaison Officer, Department of Defense.

[FR Doc. 98-23842 Filed 9-9-98; 8:45 am]

BILLING CODE 5000-04-M