Medical Care Collection or Recovery

SUMMARY: This document amends VA's medical regulations concerning

collection or recovery by VA for medical care or services provided or

furnished to a veteran:

--For a non-service connected disability for which the veteran is

entitled to care (or the payment of expenses of care) under a health-

plan contract;

--For a non-service connected disability incurred incident to the

veteran's employment and covered under a worker's compensation law or

plan that provides reimbursement or indemnification for such care and

services; or

--For a non-service connected disability incurred as a result of a

motor vehicle accident in a State that requires automobile accident

reparations insurance.

Previously, by statute VA was authorized to charge ``reasonable

costs'' for such care or services. However, amended statutory

provisions now authorize VA to charge ``reasonable charges.''

Accordingly, this document establishes methodology for charging

``reasonable charges'' consistent with the statutory amendment. The

charges billed using this methodology, as appropriate, consist of

inpatient facility charges, skilled nursing facility/sub-acute

inpatient facility charges, outpatient facility charges, physician

charges, and non-physician provider charges. Reasonable charges for

outpatient dental care and prescription drugs not administered during

treatment will continue to be billed using the existing cost-based

methodology.

Pursuant to statutory authority, VA has the right to recover or

collect the charges from a third party to the extent that a provider of

the care or services would be eligible to receive payment therefore

from that third party if the care or services had not been furnished by

a department or agency of the United States. With respect to a third-

party payer liable under a health plan contract, consistent with the

statutory authority, the third-party payer continues to have the option

of paying, to the extent of its coverage, either the billed charges or

the amount the third-party payer demonstrates it would pay for care or

services furnished by providers other than entities of the United

States for the same care or services in the same geographic area.

Also, the regulations are clarified to state specifically that

billing methodology based on costs will continue to be applied to

establish charges for medical care furnished in error or on tentative

eligibility, furnished in a medical emergency, furnished to certain

beneficiaries of the Department of Defense or other Federal agencies,

furnished to pensioners of allied nations, and furnished to military

retirees with chronic disability.

DATES: Effective Date: September 1, 1999.

FOR FURTHER INFORMATION CONTACT: David Cleaver, VHA Office of Finance

(174), Veterans Health Administration, Department of Veterans Affairs,

810 Vermont Avenue, NW, Washington, DC 20420, (202) 273-8210. (This is

not a toll free number.)

SUPPLEMENTARY INFORMATION: In a document published in the Federal

Register on October 13, 1998 (63 FR 54756), we proposed to amend VA's

medical regulations as set forth in the SUMMARY portion on this

document. We provided a 60-day comment period that ended December 14,

1998. We received comments from six commenters in response to the

proposal. These comments are discussed below. Based on the rationale

set forth in the proposed rule and in this document, the provisions of

the proposed rule are adopted as a final rule with changes explained

below.

Podiatrists, Optometrists, and Physician Assistants

Three of the comments concerned the proposal at Sec. 17.101(f) to

charge for services of podiatrists and optometrists at 95% and 90%,

respectively, of the amount that would be charged if the care had been

provided by a physician. One of the comments concerned the proposal at

Sec. 17.101(f) to charge for services of physician assistants at 65%

for assistance at surgery, 75% for other hospital care, and 85% for

other non-hospital care. The commenters provided information

establishing that under the Medicare program optometrists and

podiatrists are paid the same as physicians for services provided and

physician assistants are paid for all services at 85% of the amount

that would be charged if the care had been provided by a physician. In

this regard, the commenters asserted that we should adopt the Medicare

payment percentages for VA charges. In the proposed rule we indicated

that we intended to use ``the Medicare percentages when available

because of their extensive use for billing and payment of claims'' (63

FR 54758). Accordingly, since we now understand that the Medicare

regulations provide for payment for optometrists and podiatrists at the

physician rate and provide for payment for physician assistants at 85%

of the physician rate for all billable services, we changed the final

rule to be consistent with Medicare.

Effective Date

We considered whether to make the final rule effective thirty days

after publication in the Federal Register or whether to make the final

rule effective after a longer period. After considering the comments,

we have decided to make the final rule effective September 1, 1999 to

allow more time for industry to prepare for the changes.

One commenter, a representative of an association of insurance

companies, asserted that the effective date should be delayed for

twelve months. The commenter asserted that additional time is needed

for them to establish computer software to process the new VA charges.

The commenter also asserted that now is a difficult time for such

changes since available resources should be devoted as a priority to

``year two thousand compliance'' issues. The commenter also asserted

that their 1999 premiums did not take into account increased payments

and administrative costs that would occur under the new system. The

commenter also asserted that the comment period should be extended to

allow time for engaging outside actuarial or reimbursement consultants

in order to provide substantive comments on the billing methodology.

The comments were supplemented by the inclusion of examples of cost

comparisons between current charges and charges implemented by the

final rule.

Initially, we note that the comments, at least in part, are based

on an incorrect premise. Under the final rule an affected entity is not

necessarily required to pay the full charges. The final rule provides

that an affected entity would continue to have the option of paying to

the extent of its coverage either the billed charges or the amount it

would pay for care or services furnished by providers other than

entities of the United States for the same care or services in the same

geographic area.

Further, we believe insurers have had ample opportunity to adjust

premiums for 1999. Ever since the enactment of Public Law 105-33 on

August 5, 1997, it has been general knowledge in the

[[Page 22677]]

insurance industry that VA would bill based on market pricing as soon

as regulations could be established. Moreover, the legislative history

from the House Conference Report (H. Rep. No. 105-217, July 30, 1997,

at pp. 974-975) for Public Law No. 105-33 states that ``the Committee

envisions VA would establish health care charges that would allow it to

recover amounts needed to help preserve the viability of the health

care system for all veterans and that also reflect the substantial

advantages to VA patients both in having the quality services provided

by that system available and in using them.'' We believe that any

further delay in implementing this remedial legislation beyond the

September 1, 1999, effective date of these final regulations would be

unreasonable.

Also, we believe that it is reasonable for affected entities to

establish an appropriate mechanism to process VA's billed charges under

this final rule by the time payments to VA become due. In this regard,

we note that VA billing under this final rule more closely accords with

industry practice. Therefore, this should facilitate development of

computer software necessary to process VA charges. In addition, we

believe that the methodology for determining our new charges is based

on sound actuarial principles.

Local Markets

In the proposed rule, we acknowledged that we have insufficient

data for direct determination of prevailing charges for all services in

all local markets (63 FR 54757). One commenter questioned how VA could

determine local reasonable charges under such circumstances for charges

other than those based on DRGs. No changes are made based on this

comment. We believe that our methodology provides an appropriate

remedy. For outpatient facility charges and physician charges, we

grouped CPT codes for each local market, then compiled averages for the

CPT code groups for each locality, and then used these averages to

obtain estimated charges for those CPT codes for which we had

insufficient data. Further, for skilled nursing facility/sub-acute

inpatient facility charges, we used state-wide averages to establish

geographic area adjustment factors.

Co-payments for Non-service Connected Outpatient Care

One commenter appeared to assume that this rulemaking proceeding

would affect co-payments for non-service connected outpatient care.

This rulemaking proceeding does not address this issue. The co-payment

for non-service connected outpatient care continues to be based on the

VA-wide estimated average cost of an outpatient visit (see 38 U.S.C.

1710(g)(2)).

Effective Periods

With respect to inpatient facility charges, skilled nursing

facility/sub-acute inpatient facility charges, outpatient facility

charges, and physician charges, the proposed rule provided in the

trending provisions of the charges methodology, that the effective

period for charges after September 1999 would be from October 1 through

September 30 of each year. We changed these effective periods to

coincide with calendar years (January 1 through December 31) to be

consistent with standard industry practice.

Also, we have added provisions stating that in those cases in which

the effective period for published charges has expired and new charges

have not yet become effective, VA will continue to bill using the most

recently published charges until new charges are published and become

effective. For example, if the most recently published charges state

that they are effective through December and new charges are not

published and effective until February 1, then the charges set forth

for the period through December will continue to be used through

January 31. Although this normally would result in lower charges than

the methodology would allow, this is necessary to ensure that VA will

not have to suspend charging in those cases in which the effective

period for published charges has expired and new charges have not yet

become effective.

The data for determining charges, published in the October 13

Federal Register and in a companion document published in this issue of

the Federal Register, was designed for the period August 1998 through

September 1999. Consistent with the principles explained above, we

intend to use these data for the period September 1, 1999 through

December 31, 1999. This will result in lower charges than we could

otherwise charge. Even so, we do not believe it would be cost effective

to recalculate these data and republish them since they will be used

for such a short period of time.

Nonsubstantive Changes

Nonsubstantive changes are made for purposes of clarity.

Publication of Data for Calculating Actual Amounts for Inpatient

Facility Charges, Skilled Nursing Facility/Sub-acute Inpatient

Facility Charges, Outpatient Facility Charges, and Physician

Charges

In a document published in the Federal Register on October 13, 1998

(63 FR 54766), we set forth data (derived from the methodology of the

final rule) for calculating inpatient facility charges, skilled nursing

facility/sub-acute inpatient facility charges, outpatient facility

charges, and physician charges at individual VA facilities. These data

will be used for such charges from the effective date of this final

rule through December 1999, except for those changes (consistent with

the methodology of the final rule) set forth in a companion document

published in the ``Notices'' section of this issue of the Federal

Register. As stated in the proposal, VA will update annually in the

``Notices'' section of the Federal Register the data for calculating

the charges at individual VA facilities.

Paperwork Reduction Act

The collection of information contained in the notice of the

proposed rulemaking was submitted to the Office of Management and

Budget (OMB) for review in accordance with the Paperwork Reduction Act

(44 U.S.C. 3504(h)).

The information collection subject to this rulemaking concerns

submission of evidence. Under the provisions of Sec. 17.101(a)(2), a

third-party payer that is liable for reimbursing VA for health care VA

provided to veterans with non-service-connected conditions continues to

have the option of paying either the billed charges as described in

Sec. 17.101 or the amount the health plan demonstrates it would pay to

providers other than entities of the United States for the same care or

services in the same geographic area. If the amount submitted for

payment is less than the amount billed, VA will accept the submission

as payment, subject to verification at VA's discretion. A VA employee

having responsibility for collection of such charges may request that

the third party payer submit evidence or information to substantiate

the appropriateness of the payment amount (e.g., health plan policies,

provider agreements, medical evidence, proof of payment to other

providers demonstrating the amount paid for the same care and services

VA provided). This information is needed to determine whether the

third-party payer has met the test of properly demonstrating its

equivalent private sector provider

[[Page 22678]]

payment amount for the same care or services and within the same

geographic area as provided by VA.

Interested parties were invited to submit comments on the

collection of information. However, no comments were received. OMB has

approved this information collection under control number 2900-0606.

VA is not authorized to impose a penalty on persons for failure to

comply with information collection requirements which do not display a

current OMB control number, if required.

Regulatory Flexibility Act

The Secretary hereby certifies that this final rule would 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-

612. This rulemaking proceeding mostly would affect large insurance

companies. Further, the provisions of the final rule would not impose a

significant economic impact on any entities since VA billing would not

constitute a significant portion of an insurance company's business.

Accordingly, pursuant to 5 U.S.C. 605(b), this final rule is exempt

from the initial and final regulatory flexibility analyses requirements

of Secs. 603 and 604.

OMB Review

This document has been reviewed by OMB pursuant to Executive Order

12866.

Catalog of Federal Domestic Assistance Numbers

The Catalog of Federal Domestic Assistance Numbers for the programs

affected by this document are 64.005, 64.007.64.008, 64,009, 64.010,

64.011, 64.012, 64.013, 64.014, 64.015, 64.016, 64.018, 64.019, 64.022,

and 64.025.

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 homes, Philippines, Reporting

and record-keeping requirements, Scholarships and fellowships, Travel

and transportation expenses, Veterans.

Approved: March 25, 1999.

Togo D. West, Jr.,

Secretary of Veterans Affairs.

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

as set forth below:

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.

Secs. 17.101 and 17.102 [Redesignated as Secs. 17.102 and 17.101,

respectively]

2. Sections 17.101 and 17.102 are redesignated as Secs. 17.102 and

17.101, respectively.

3. Newly redesignated Sec. 17.101 is revised and a parenthetical at

the end of the section is added to read as follows:

Sec. 17.101 Collection or recovery by VA for medical care or services

provided or furnished to a veteran for a non-service connected

disability.

(a)(1) General. This section covers collection or recovery by VA,

under 38 U.S.C. 1729, for medical care or services provided or

furnished to a veteran:

(i) For a non-service connected disability for which the veteran is

entitled to care (or the payment of expenses of care) under a health-

plan contract;

(ii) For a non-service connected disability incurred incident to

the veteran's employment and covered under a worker's compensation law

or plan that provides reimbursement or indemnification for such care

and services; or

(iii) For a non-service connected disability incurred as a result

of a motor vehicle accident in a State that requires automobile

accident reparations insurance.

(2) Methodology. Based on the methodology set forth in this

section, the charges billed will include, as appropriate, inpatient

facility charges, skilled nursing facility/sub-acute inpatient facility

charges, outpatient facility charges, physician charges, and non-

physician provider charges. In addition, the charges billed for

prosthetic devices and durable medical equipment provided on an

outpatient basis will be VA's actual cost and the charges billed for

prescription drugs not administered during treatment will be a single

nationwide average. Data for calculating actual amounts for inpatient

facility charges, skilled nursing facility/sub-acute inpatient facility

charges, outpatient facility charges, and physician charges will be

published annually in the ``Notices'' section of the Federal Register.

In those cases in which the effective period for published charges has

expired and new charges have not yet become effective, VA will continue

to bill using the most recently published charges until new charges are

published and become effective (for example, if the most recently

published charges state that they are effective through December and

new charges are not published and effective until February 1, then the

charges set forth for the period through December will continue to be

used through January 31).

(3) Amount of recovery or collection--third party liability. A

third-party payer liable under a health-plan contract has the option of

paying either the billed charges described in this section or the

amount the health-plan demonstrates is the amount it would pay for care

or services furnished by providers other than entities of the United

States for the same care or services in the same geographic area. If

the amount submitted by the health plan for payment is less than the

amount billed, VA will accept the submission as payment, subject to

verification at VA's discretion in accordance with this section. A VA

employee having responsibility for collection of such charges may

request that the third party health plan submit evidence or information

to substantiate the appropriateness of the payment amount (e.g., health

plan or insurance policies, provider agreements, medical evidence,

proof of payment to other providers in the same geographic area for the

same care and services VA provided).

(4) Definitions. For purposes of this section:

Consolidated MSA means a consolidated Metropolitan Statistical

Area.

CPI means Consumer Price Index.

CPI-U means Consumer Price Index--All Urban Consumers.

CPI-W means Consumer Price Index--Urban Wage Earners and Clerical

Workers .

CPT procedure code means a 5 digit-identifier for a specified

physician service or procedure.

DRG means diagnosis related group.

Geographic area means Metropolitan Statistical Area (MSA) or the

local market, if the VA facility is not located in an MSA.

RVU means relative value unit.

(b) Inpatient facility charges. When VA provides or furnishes

inpatient services within the scope of care referred to in paragraph

(a)(1) of this section, inpatient facility charges billed for such

services will be determined in accordance with the provisions of this

paragraph. Inpatient facility charges

[[Page 22679]]

consist of per diem charges for room and board and for ancillary

services that vary by VA facility and by DRG. These charges are

calculated as follows:

(1) Formula. For each inpatient stay or portion thereof for which a

particular DRG assignment applies, multiply the nationwide room and

board per diem charge as set forth in paragraph (b)(2) of this section

by the appropriate geographic area adjustment factor as set forth in

paragraph (b)(3) of this section. The result constitutes the facility-

specific room and board per diem charge. Also, for each inpatient stay,

multiply the nationwide ancillary per diem charge as set forth in

paragraph (b)(2) of this section by the appropriate geographic area

adjustment factor as set forth in paragraph (b)(3) of this section. The

result constitutes the facility-specific ancillary per diem charge.

Then add the facility-specific room and board per diem charge to the

facility-specific ancillary per diem charge. This constitutes the

facility-specific combined per diem facility charge. Finally, multiply

the facility-specific combined per diem facility charge by the number

of days of inpatient care to obtain the total inpatient facility

charge.

Note to paragraph (b)(1): If there is a change in a patient's

condition and/or treatment during a single inpatient stay such that

the DRG assignment changes (for example, a psychiatric patient who

develops a medical or surgical problem), then the calculations will

be made separately for each DRG, according to the number of days of

care applicable for each DRG, and the total inpatient facility

charge will be the sum of the total inpatient facility charges for

the different DRGs.

(2) Per diem charges. To establish a baseline, two nationwide

average per diem charges for each DRG are calculated for Calendar Year

1995, one from the Medicare Standard Analytical File 5% Sample and one

from the MedStat claim database, a claim database of nationwide

commercial insurance. Results obtained from these two databases are

then combined into a single weighted average per diem charge for each

DRG. The resulting weighted average per diem charge for each DRG is

then separated into its two components, a room and board component and

an ancillary component, with the amount for each component calculated

to reflect the corresponding percentage set forth in paragraph

(b)(2)(i) of this section. The resulting amounts for room and board and

ancillary services for each DRG are then each multiplied by the final

ratio set forth in paragraph (b)(2)(ii) of this section to reflect the

80th percentile charges. Finally, the resulting charges are each

trended forward from their 1995 base to the effective time period for

the charges, as set forth in paragraph (b)(2)(iii) of this section. The

results constitute the room and board per diem charge and the ancillary

per diem charge.

(i) Charge component percentages. Using only those cases from the

Medicare Standard Analytical File 5% Sample for which a distinction

between room and board charges and ancillary charges can be determined,

the percentage of the total charges for room and board compared to the

combined total charges for room and board and ancillary services, and

the percentage of the total charges for ancillary services compared to

the combined total charges for room and board and ancillary services,

are calculated by DRG.

(ii) 80th percentile. Using the medical and surgical admissions in

the Medicare Standard Analytical File 5% Sample, obtain for each

consolidated MSA the ratio of the day-weighted 80th percentile semi-

private room and board per diem charge to the average semi-private room

and board per diem charge. The consolidated MSA ratios are averaged to

obtain a final 80th percentile ratio.

(iii) Trending forward. For each DRG, the 80th percentile charges,

representing calculations for calendar year 1995, are trended forward

for the period August 1998 through September 1999, and for each 12-

month calendar year period thereafter, beginning January 1, 2000, based

on changes to the CPI. The projected total CPI trend from 1995 to the

midpoint of the effective charge period is calculated as the composite

of three components. The first component trends from 1995 to January

1997, using the Hospital Room component of the CPI-W for room and board

charges and using the Other Hospital component of the CPI-W for

ancillary charges. The second component trends from January 1997 to the

latest available month, based on the Inpatient Hospital component of

the CPI-U for room and board and ancillary charges. The third component

trends from the latest available month to the midpoint of the effective

charge period, based on the latest three-month average annual trend

rate from the Inpatient Hospital component of the CPI-U. The projected

total CPI trends are then applied to the 1995-base 80th percentile

charges.

(3) Geographic area adjustment factors. For each VA facility

location, the average per diem room and board charges and ancillary

charges from the 1995 Medicare Standard Analytical File 5% Sample are

calculated for each DRG. The DRGs are separated into two groups,

surgical and non-surgical. For each of these groups of DRGs, for each

geographic area, average room and board per diem charges and ancillary

per diem charges are calculated for 1995, weighted by FY 1997

nationwide VA discharges and by average lengths of stay from the

combined Medicare Standard Analytical File 5% Sample and the MedStat

claim data base. This results in four average per diem charges for each

geographic area: room and board for surgical DRGs, ancillary for

surgical DRGs, room and board for non-surgical DRGs, and ancillary for

non-surgical DRGs. Four corresponding national average per diem charges

are obtained from the 1995 Medicare Standard Analytical File 5% Sample,

weighted by FY 1997 nationwide VA discharges and by average lengths of

stay from the combined Medicare Standard Analytical File 5% Sample and

the MedStat claim data base. Four geographic area adjustment factors

are then calculated for each geographic area by dividing each

geographic area average per diem charge by the corresponding national

average per diem charge.

(c) Skilled nursing facility/sub-acute inpatient facility charges.

When VA provides or furnishes skilled nursing/sub-acute inpatient

services within the scope of care referred to in paragraph (a)(1) of

this section, skilled nursing facility/sub-acute inpatient facility

charges billed for such services will be determined in accordance with

the provisions of this paragraph. The skilled nursing facility/sub-

acute inpatient facility charges are per diem charges that vary by VA

facility. The facility charges cover care, including skilled

rehabilitation services (e.g., physical therapy, occupational therapy,

and speech therapy), that is provided in a nursing home or hospital

inpatient setting, is provided under a physician's orders, and is

performed by or under the general supervision of professional personnel

such as registered nurses, licensed practical nurses, physical

therapists, occupational therapists, speech therapists, and

audiologists. The skilled nursing facility/sub-acute inpatient facility

charges also incorporate charges for ancillary services associated with

care provided in these settings. The charges are calculated as follows:

(1) Formula. For each stay, multiply the nationwide per diem charge

as set forth in paragraph (c)(2) of this section by the appropriate

geographic area adjustment factor as set forth in paragraph (c)(3) of

this section. The result constitutes the facility-specific per diem

charge. Finally, multiply the

[[Page 22680]]

facility-specific per diem charge by the number of days of care to

obtain the total skilled nursing facility/sub-acute inpatient facility

charge.

(2) Per diem charge. To establish a baseline, a nationwide average

per diem billed charge for July 1, 1998, was obtained from the 1998

Milliman & Robertson, Inc. Health Cost Guidelines, a publication that

includes nationwide skilled nursing facility charges (Milliman &

Robertson, Inc., 1301 5th Ave., Suite 3800, Seattle, WA 98101-2605).

That average per diem billed charge is then multiplied by the 80th

percentile adjustment factor set forth in paragraph (c)(2)(i) of this

section to obtain a nationwide 80th percentile charge level. Finally,

the resulting charge is trended forward to the effective time period

for the charges, as set forth in paragraph (c)(2)(ii) of this section.

(i) 80th percentile. Using the 1995 Medicare Standard Analytical

File 5% Sample, the median per diem accommodation charge is calculated

for each provider. For each State, the ratio of the 80th percentile of

provider median charges to the average statewide charges for

accommodations is calculated. The State ratios are averaged to produce

a nationwide 80th percentile adjustment factor.

(ii) Trending forward. The 80th percentile charge, representing

charge levels for July 1, 1998, is trended forward to the midpoint of

the period August 1998 through September 1999, and to the midpoint of

each 12-month calendar year period thereafter, beginning January 1,

2000, based on the projected change in Medicare reimbursement from the

Annual Report of the Board of Trustees of the Federal Hospital

Insurance Trust Fund (this report can be found on the Health Care

Financing Administration Internet site at http://www.hcfa.gov under the

headings ``Publications and Forms'' and ``Professional/ Technical

Publications'').

(3) Geographic area adjustment factors. A ratio of the average per

diem charge for each State to the nationwide average per diem charge is

obtained (these ratios are set forth in the 1998 Milliman & Robertson,

Inc. Health Cost Guidelines, a data base of nationwide commercial

insurance charges and relative costs) (Milliman & Robertson, Inc., 1301

5th Ave., Suite 3800, Seattle, WA 98101-2605). The geographic area

adjustment factor for charges for each VA facility is the ratio for the

State in which the facility is located.

(d) Outpatient facility charges. When VA provides or furnishes

outpatient services that are within the scope of care referred to in

paragraph (a)(1) of this section and are not customarily performed in

an independent clinician's office, the outpatient facility charges

billed for such services will be determined in accordance with the

provisions of this paragraph. Except for prosthetic devices and durable

medical equipment, whose charges will be made separately at actual cost

to VA, charges for outpatient facility services will vary by VA

facility and by CPT procedure code. These charges will be calculated as

follows:

(1) Formula. For each outpatient facility charge CPT procedure

code, multiply the nationwide charge as set forth in paragraph (d)(2)

of this section by the appropriate geographic area adjustment factor as

set forth in paragraph (d)(4) of this section. The result constitutes

the facility-specific outpatient facility charge. When multiple

surgical procedures are performed during the same outpatient encounter

by a provider or provider team, the outpatient facility charges for

such procedures will be reduced as set forth in paragraph (d)(5) of

this section.

(2) Nationwide 80th percentile charges by CPT procedure code. For

each CPT procedure code for which outpatient facility charges apply,

the 1998 practice expense RVUs (these RVU's can be found in the 1998

St. Anthony's Complete RBRVS, Relative Value Studies, Inc., St. Anthony

Publishing, 11410 Isaac Newton Square, Reston, VA 20190) are used as

the outpatient facility RVUs. For each CPT procedure code, the

outpatient facility RVU is multiplied by the charge amount for each

incremental RVU as set forth in paragraph (d)(3) of this section. The

resulting charge is adjusted by a fixed charge amount as also set forth

in paragraph (d)(3) of this section to obtain the nationwide 80th

percentile charge.

(3) Charge factor. Using the 1995 MedStat claims database of

nationwide commercial insurance, the median billed facility charge is

calculated for each applicable CPT procedure code. All outpatient

facility CPT procedure codes are then separated into one of the 37

outpatient facility CPT procedure code groups as set forth in paragraph

(d)(3)(i) of this section. Then, for each CPT procedure code in each

such group, the median charge is adjusted to the 80th percentile as set

forth in paragraph (d)(3)(ii) of this section. The resulting 80th

percentile charge for each CPT procedure code is trended forward to the

effective time period for the charges as set forth in paragraph

(d)(3)(iii) of this section. Using the resulting charges and the RVUs,

the mathematical approximation methodology of least squares is applied

to the data for each CPT procedure code group to derive two charge

factors. The first factor represents the charge amount for each

incremental RVU in the CPT procedure code group and the second factor

represents a fixed charge amount adjustment for the CPT procedure code

group.

(i) Outpatient facility CPT procedure code groups.

(A) Surgery--Integumentery System--Skin, Subcutaneous & Accessory

Structures/Nails;

(B) Surgery--Integumentery System--Repair--Simple, Intermediate,

Complex, Adjacent Tissue Transfer or Rearrangement;

(C) Surgery--Integumentery System--Not Otherwise Classified;

(D) Surgery--Musculoskeletal System--Not Otherwise Classified;

(E) Surgery--Musculoskeletal System--Limbs--Incisions/Excisions/

Insertion/Removal;

(F) Surgery--Musculoskeletal System--Limbs--Shoulders/Humerus &

Elbow/Pelvis & Hip Joint/Femur & Knee Joint--Other than Incisions/

Excisions/ Insertion/Removal;

(G) Surgery--Musculoskeletal System--Limbs--Forearm & Wrist--Other

than Incisions/Excisions/Insertion/Removal;

(H) Surgery--Musculoskeletal System--Limbs--Tibia/Fibula & Ankle

Joint--Other than Incisions/Excisions/Insertion/Removal;

(I) Surgery--Musculoskeletal System--Limbs--Hand & Fingers/Foot &

Toes--Other than Incisions/Excisions/Insertion/Removal;

(J) Surgery--Musculoskeletal System Arthroscopy;

(K) Surgery--Respiratory System;

(L) Surgery--Cardiovascular System;

(M) Surgery--Hemic & Lymphatic Systems;

(N) Surgery--Digestive System--Not Otherwise Classified;

(O) Surgery--Digestive System--Endoscopy;

(P) Surgery--Urinary System;

(Q) Surgery--Male Genital System;

(R) Surgery--Laparoscopy/Hysteroscopy;

(S) Surgery--Maternity Care & Delivery;

(T) Surgery--Endocrine System;

(U) Surgery--Eye/Ocular Adnexa;

(V) Surgery--Auditory System;

(W) Radiology--Diagnostic--Head & Neck/Chest/Spine & Pelvis;

(X) Radiology--Diagnostic--Extremities/Abdomen/Gastrointestinal

Tract/Urinary Tract/Gynecological & Obstetrical/Heart;

(Y) Radiology--Diagnostic--Aorta & Arteries/Veins & Lymphatics;

(Z) Radiology--Diagnostic Ultrasound;

[[Page 22681]]

(AA) Radiology--Radiation Oncology/Nuclear Medicine/Therapeutic;

(BB) Radiology--Diagnostic--CAT Scans;

(CC) Radiology--Diagnostic--Magnetic Resonance Imaging (MRI);

(DD) Medicine--Global--Not Otherwise Classified;

(EE) Medicine--Global--Dialysis;

(FF) Medicine--Technical Component--Gastroenterology;

(GG) Medicine--Technical Component--Cardiovascular;

(HH) Medicine--Technical Component--Pulmonary;

(II) Medicine--Technical Component--Neurology & Neuromuscular

Procedures;

(JJ) Medicine--Observation Care; and

(KK) Medicine--Emergency.

(ii) 80th percentile. For each of the 37 outpatient facility CPT

procedure code groups set forth in paragraph (d)(3)(i) of this section,

the median charge is increased by the ratio of the 80th percentile

charge to median charge (the data for CPT procedure code groups listed

at paragraphs (d)(3)(i)(DD), (EE), (JJ), and (KK) of this section are

obtained from the MedStat database of nationwide charges; the data for

the other groups are obtained from the Outpatient Facility UCR module

of the Comprehensive Healthcare Payment System from MediCode, Inc., a

1997 release from a nationwide database of outpatient facility charges)

(MediCode, Inc., 5225 Wiley Post Way, Suite 500, Salt Lake, UT 84116).

To mitigate the impact of the variation in the intensity of services by

CPT procedure code, the percent increase from the median to the 80th

percentile in outpatient charges is compared to the percent increase

from the median to the 80th percentile in inpatient semi-private room

and board charges. Any percent increase in outpatient charges in excess

of the inpatient semi-private room and board percent increase is

multiplied by a factor of 0.50. The 80th percentile outpatient facility

charge is reduced accordingly.

(iii) Trending forward. The charges for each CPT procedure code,

representing calculations for calendar year 1995, are trended forward

for the period August 1998 through September 1999, and for each 12-

month calendar year period thereafter, beginning January 1, 2000, based

on changes to the Outpatient Hospital component of the CPI-U. Actual

CPI-U changes are used through the latest available month. The three-

month average annual trend rate as of the latest available month is

held constant to the midpoint of the effective charge period. The

projected total CPI-U change from 1995 to this midpoint of the

effective charge period is then applied to the 1995 80th percentile

charges.

(4) Geographic area adjustment factors. For each VA outpatient

facility location, a single geographic area adjustment factor is

calculated as the arithmetic average of the outpatient geographic area

adjustment factor (this factor constitutes the ratio of the level of

charges for each geographic area to the nationwide level of charges)

published in the Milliman & Robertson, Inc. Health Cost Guidelines

(Milliman & Robertson, Inc., 1301 5th Ave., Suite 3800, Seattle, WA

98101-2605), and a geographic area adjustment factor developed from the

MediCode data. The MediCode-based geographic area adjustment factors

are calculated as the ratio of the CPT-weighted average charge level

for each VA outpatient facility location to the nationwide CPT-weighted

average charge level.

(5) Multiple surgical procedures. When multiple surgical procedures

are performed during the same outpatient encounter by a provider or

provider team as indicated by multiple surgical CPT procedure codes,

then the CPT procedure code with the highest facility charge will be

billed at 100% of the charges established under this section; the CPT

procedure code with the second highest facility charge will be billed

at 25% of the charges established under this section; the CPT procedure

code with the third highest facility charge will be billed at 15% of

the charges established under this section; and no outpatient facility

charges will be billed for any additional surgical procedures.

(e) Physician charges. When VA provides or furnishes physician

services within the scope of care referred to in paragraph (a)(1) of

this section, physician charges billed for such services will be

determined in accordance with the provisions of this paragraph.

Physician charges consist of charges for professional services that

vary by VA facility and by CPT procedure code. These charges are

calculated as follows:

(1) Formula. For each CPT procedure code except those for

anesthesia and pathology, multiply the total facility-adjusted RVU as

set forth in paragraph (e)(2) of this section by the applicable

facility-adjusted conversion factor (facility-adjusted conversion

factors are expressed in monetary amounts) set forth in paragraph

(e)(3) of this section to obtain the physician charge for each CPT

procedure code at a particular VA facility. For each anesthesia and

pathology CPT procedure code, multiply the nationwide physician charge

as set forth in paragraph (e)(4) of this section by the geographic area

adjustment factor as set forth in paragraph (e)(3)(iii) of this section

to obtain the physician charge for each anesthesia and pathology CPT

procedure code at a particular VA facility.

(2)(i) Total facility-adjusted RVUs for physician services other

than anesthesia, pathology, and specified CPT procedure codes. The work

expense and practice expense components of the RVUs for CPT procedure

codes (other than anesthesia, pathology, and those CPT procedure codes

set forth at paragraphs (e)(2)(ii) and (e)(2)(iii) of this section) are

compiled (information concerning the RVUs and their components can be

obtained from Veterans Health Administration, Office of Finance,

Department of Veterans Affairs, 810 Vermont Ave., NW, Washington, DC

20420). For radiology CPT procedure codes, these compilations do not

include separately identified technical component RVUs. For CPT

procedure codes that generate an outpatient facility charge, the

facility practice expense RVU is substituted for the non-facility

practice expense RVU (information concerning facility practice expense

RVUs can be obtained from Veterans Health Administration, Office of

Finance, Department of Veterans Affairs, 810 Vermont Ave., NW,

Washington, DC 20420). For Medicine and Surgery CPT procedure codes

with separate professional and technical components that also generate

an outpatient facility charge, only the professional component is

compiled. The sum of the facility-adjusted work expense RVU as set

forth in paragraph (e)(2)(i)(A) of this section and the facility-

adjusted practice expense RVU as set forth in paragraph (e)(2)(i)(B) of

this section equals the total facility-adjusted RVUs.

(A) Facility-adjusted work expense RVUs. For each CPT procedure

code for each geographic area, the 1998 work expense RVU is multiplied

by the 1998 Medicare work adjuster (0.917) and the results are further

multiplied by the work expense 1998 Medicare Geographic Practice Cost

Index. The result constitutes the facility-adjusted work expense RVU.

(B) Facility-adjusted practice expense RVUs. For each CPT procedure

code for each geographic area, the 1998 practice expense RVU is

multiplied by the practice expense 1998 Medicare Geographic Practice

Cost Index. The result constitutes the facility-adjusted practice

expense RVU.

(ii) RVUs for specified CPT procedure codes. For the following CPT

procedure

[[Page 22682]]

codes, obtain the nationwide 80th percentile billed charges from the

nationwide commercial insurance data base compiled by the Health

Insurance Association of America (Health Insurance Association of

America, 555 13th Street, NW, suite 600E, Washington, DC 20004): 20930,

20936, 22841, 48160, 48550, 54440, 79900, 80050, 80055, 80103, 80500,

80502, 85060, 85095, 85097, 85102, 86077, 86078, 86079, 86485, 86490,

86510, 86580, 86585, 86586, 86850, 86860, 86870, 86890, 86891, 86901,

86910, 86911, 86915, 86920, 86921, 86922, 86927, 86930, 86931, 86932,

86945, 86950, 86965, 86970, 86971, 86972, 86975, 86977, 86978, 86985,

88000, 88005, 88012, 88014, 88016, 88036, 88037, 88104, 88106, 88107,

88108, 88125, 88160, 88161, 88162, 88170, 88171, 88172, 88173, 88180,

88182, 88300, 88302, 88304, 88305, 88307, 88309, 88311, 88312, 88313,

88314, 88318, 88319, 88321, 88323, 88325, 88329, 88331, 88332, 88342,

88346, 88347, 88348, 88349, 88355, 88356, 88358, 88362, 88365, 89100,

89105, 89130, 89132, 89135, 89140, 89141, 89250, 89350, 89360, 92390,

92391, 94642, 94772, 99024, 99071, 99078, 99080, 99082, 99100, 99116,

99135, 99140, 99420, 99450, 99455, 99456. For the following CPT

procedure codes, obtain the nationwide 80th percentile billed charges

from the Medicare Standard Analytical File 5% Sample: 99070, M0076,

M0300. Then divide the nationwide 80th percentile billed charges by the

untrended nationwide conversion factor for the corresponding physician

CPT procedure code group as set forth in paragraphs (e)(3) and

(e)(3)(i). The resulting nationwide total RVUs are multiplied by the

geographic adjustment factors as set forth in paragraph (e)(2)(iv) of

this section to obtain the facility-specific total RVUs.

(iii) RVUs for specified CPT procedure codes. For the following

list of CPT procedure codes, the nationwide total RVU is calculated by

multiplying the 1998 Medicare work adjuster (0.917) by the work expense

RVU and adding the practice expense RVU (the work expense RVU and the

practice expense RVU for these CPT procedure codes can be found in the

1998 St. Anthony's Complete RBRVS, Relative Value Studies, Inc., St.

Anthony Publishing, 11410 Isaac Newton Square, Reston, VA 20190):

15824, 15825, 15826, 15828, 15829, 15876, 15877, 15878, 15879, 17380,

21088, 24940, 26587, 32850, 33930, 33940, 36415, 36468, 36469, 41820,

41821, 41850, 41870, 47133, 48554, 50300, 58974, 65760, 65765, 65767,

65771, 69090, 69710, 75556, 76092, 76140, 76350, 78608, 78609, 90700,

90701, 90702, 90703, 90704, 90705, 90706, 90707, 90708, 90709, 90710,

90711, 90712, 90713, 90714, 90716, 90717, 90718, 90179, 90720, 90721,

90724, 90725, 90726, 90727, 90728, 90730, 90732, 90733, 90735, 90737,

90741, 90742, 90744, 90745, 90746, 90747, 90882, 90889, 90989, 90993,

92531, 92532, 92533, 92534, 92551, 92559, 92560, 92590, 92591, 92592,

92593, 92594, 92595, 92992, 92993, 93760, 93762, 93784, 93786, 93788,

93790, 95120, 95125, 95130, 95131, 95132, 95133, 95134, 96110, 96545,

97545, 97546, 99000, 99001, 99002, 99025, 99050, 99052, 99054, 99056,

99058, 99075, 99090, 99190, 99191, 99192, 99288, 99358, 99359, 99360,

99361, 99362, 99371, 99372, 99373. The resulting nationwide total RVUs

are multiplied by the geographic adjustment factors as set forth in

paragraph (e)(2)(iv) of this section to obtain the facility-specific

total RVUs.

(iv) RVU geographic area adjustment factors for specified CPT

procedure codes. The geographic area adjustment factor for each

facility location consists of the weighted average of the 1998 work

expense and practice expense Medicare Geographic Practice Cost Indices

for each facility location using charge data for representative CPT

procedure codes statistically selected and weighted for work expense

and practice expense.

(3) Facility-adjusted 80th percentile conversion factors. CPT

procedure codes are separated into the following 24 physician CPT

procedure code groups: allergy immunotherapy, allergy testing,

anesthesia, cardiovascular, chiropractor, consults, emergency room

visits and observation care, hearing/speech exams, immunizations,

inpatient visits, maternity/cesarean deliveries, maternity/non-

deliveries, maternity/normal deliveries, miscellaneous medical, office/

home urgent care visits, outpatient psychiatry/alcohol and drug abuse,

pathology, physical exams, physical medicine, radiology, surgery,

therapeutic injections, vision exams, and well baby exams. For each of

the 24 physician CPT procedure code groups, representative CPT

procedure codes were statistically selected and weighted so as to give

a weighted average RVU comparable to the weighted average RVU of the

entire physician CPT procedure code group (the selected CPT procedure

codes are set forth in the 1998 Milliman & Robertson, Inc., Health Cost

Guidelines fee survey) (Milliman & Robertson, Inc., 1301 5th Ave.,

suite 3800, Seattle, WA 98101-2605). The 80th percentile charge for

each selected CPT procedure code is obtained (this is contained in the

nationwide commercial insurance data base compiled by the Health

Insurance Association of America, 555 13th Street NW., Suite 600E,

Washington, DC 20004 (medical data for 5/1/96-4/30/97, including

radiology and pathology; surgical data for 3/1/96-2/28/97; anesthesia

data for 3/1/96-2/28/97)). A nationwide conversion factor (a monetary

amount) is calculated for each physician CPT procedure code group as

set forth in paragraph (e)(3)(i) of this section. The nationwide

conversion factors for each of the 24 physician CPT procedure code

groups are trended forward as set forth in paragraph (e)(3)(ii) of this

section. The resulting amounts for each of the 24 groups are multiplied

by geographic area adjustment factors as set forth in paragraph

(e)(3)(iii) of this section, resulting in facility-adjusted 80th

percentile conversion factors for each VA facility geographic area for

the 24 physician CPT procedure code groups for the effective charge

period.

(i) Nationwide conversion factors. Using the nationwide 80th

percentile charges for the selected CPT procedure codes from paragraph

(e)(3) of this section, a nationwide conversion factor is calculated

for each of the 24 physician CPT procedure code groups by dividing the

weighted average charge by the weighted average RVU. To correspond with

the charge data, for medicine and surgery CPT procedure codes, the

total RVUs are used even when separate professional and technical

components are specified.

(ii) Trending forward. The nationwide conversion factor for each of

the 24 physician CPT procedure code groups, representing charges for

time periods detailed in paragraph (e)(3) of this section, are trended

forward for the period August 1998 through September 1999, and for each

12-month calendar year period thereafter, beginning January 1, 2000,

based on changes to the Physician component of the CPI-U. Actual CPI-U

changes are used through the latest available month. The three-month

average annual trend rate as of the latest available month is held

constant to the midpoint of the effective charge period. The projected

total CPI-U change from the midpoint of the source data collection

period to the midpoint of the effective charge period is then applied

to the 24 conversion factors.

(iii) Geographic area adjustment factors. Using the 80th percentile

charges for the selected CPT procedure codes from paragraph (e)(3) of

this section for each VA facility geographic area, a geographic area-

specific conversion factor is calculated for each

[[Page 22683]]

of the 24 physician CPT procedure code groups by dividing the weighted

average charge by the weighted average facility-adjusted RVU. The

resulting geographic area conversion factor for each facility

geographic area for each physician CPT procedure code group is divided

by the corresponding nationwide conversion factor as set forth in

paragraph (e)(3)(i). The resulting ratios are the geographic area

adjustment factors for each of the 24 physician CPT procedure code

groups for each facility geographic area.

(4) Nationwide 80th percentile charges for anesthesia and pathology

CPT procedure codes. The nationwide charges are calculated by

multiplying the RVUs as set forth in paragraph (e)(4)(i) of this

section for anesthesia CPT procedure codes and as set forth in

paragraph (e)(4)(ii) of this section for pathology CPT procedure codes

by the appropriate nationwide trended 80th percentile conversion

factors as set forth in paragraph (e)(3) of this section.

(i) RVUs for anesthesia. The 1998 base unit value for each

anesthesia CPT procedure code is compiled (the base unit values can be

found in the 1998 St. Anthony's Complete RBRVS, Relative Value Studies,

Inc., St. Anthony Publishing, 11410 Isaac Newton Square, Reston, VA

20190). The average time unit value for each anesthesia CPT procedure

code is compiled from a Health Care Financing Administration study

concerning average time unit values for anesthesia CPT procedure codes

(these values can be obtained from Veterans Health Administration,

Office of Finance, Department of Veterans Affairs, 810 Vermont Ave.,

NW., Washington, DC 20420). For each anesthesia CPT procedure code

introduced since the Health Care Financing Administration study, the

time unit value is calculated as the average time unit value for all

other anesthesia CPT procedure codes with the same base unit value. The

sum of the anesthesia base unit value and the anesthesia time unit

value equals the total anesthesia RVUs.

(ii) RVUs for pathology. For each pathology CPT procedure code, the

1998 Medicare payment amount is used as the RVU for the corresponding

CPT procedure code (the payment amounts can be found on the Health Care

Financing Administration public use files Internet site at http://

www.hcfa.gov/stats/pufiles.htm under the heading ``Payment Rates/ Non-

Institutional Providers'' and the title ``Clinical Diagnostic

Laboratory Fee Schedule.''

(f) Other provider charges. When the following providers provide or

furnish VA care within the scope of care referred to in paragraph

(a)(1) of this section, charges for that care covered by a CPT

procedure code will be determined based on the following indicated

percentages of the amount that would be charged if the care had been

provided by a physician under paragraph (e) of this section:

(1) Nurse practitioner: 85%.

(2) Clinical nurse specialist: 85%.

(3) Physician Assistant: 85%.

(4) Certified registered nurse anesthetist: 50% when physician

supervised; 100% when not physician supervised.

(5) Clinical psychologist: 80%.

(6) Clinical social worker: 75%.

(7) Podiatrist: 100%.

(8) Chiropractor: 100%.

(9) Dietitian: 75%.

(10) Clinical pharmacist: 80%.

(11) Optometrist: 100%.

(g) Outpatient dental care and prescription drugs not administered

during treatment. Notwithstanding other provisions of this section,

when VA provides or furnishes outpatient dental care or prescription

drugs not administered during treatment, within the scope of care

referred to in paragraph (a)(1) of this section, charges billed

separately for such care will be based on VA costs in accordance with

the methodology set forth in Sec. 17.102 of this part.

(The Office of Management and Budget has approved the information

collection requirements in this section under control number 2900-

0606.)

(Authority: 38 U.S.C. 101, 501, 1701, 1705, 1710, 1721, 1722, 1729)

Sec. 17.102 [Amended]

4. In newly redesignated Sec. 17.102, the first sentence of the

introductory text is amended by removing ``Charges'' and adding, in its

place, ``Except as provided in Sec. 17.101, charges''; paragraph (h) is

amended by removing the heading and adding, in its place, ``Computation

of charges.''; by removing paragraphs (h)(1), (h)(2), and (h)(4)

through (h)(6); and by removing ``(3) The method of computing the

charges for medical care and services'' and by adding, in its place,

``The method for computing the charges under paragraphs (a), (b), (d),

(f), and (g), and the last sentence of paragraph (c) of this section.

[FR Doc. 99-10373 Filed 4-26-99; 8:45 am]

BILLING CODE 8320-01-P