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

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 1999

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, correction.

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SUMMARY: This final rule makes an administrative correction to the

final rule published in the Federal Register on Thursday, September 10,

1998 (63 FR 48439). The second set of amendatory instructions for

Sec. 199.14 did not include the word ``revised''. Therefore, the

Department of Defense is republishing amendments to Sec. 199.14 which

were unable to be incorporated into the CFR because of the missing

word. All other amendments remain unchanged.

EFFECTIVE DATE: This rule is effective October 13, 1998, except

amendments to Sec. 199.14(h) introductory text, which are effective

January 1, 1999.

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) 681-3628.

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 was submitted to OMB for review under 3507(d)

of the Act.

List of Subjects in 32 CFR Part 199

Claims, Health insurance, Individuals with disability, Military

personnel, Reporting and recordkeeping requirements.

Accordingly, 32 Part 199 is amended as follows:

PART 199--[AMENDED]

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

follows:

2. Section 199.14 is amended by revising paragraph (a)(1)(iii)(B),

paragraph (a)(1)(iii)(D)(1) first sentence and paragraph

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

(a)(1)(iii)(E)(1)(i)(B), paragraph (a)(1)(iii)(E)(1)(ii)(A) and

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

text, paragraph (d)(3)(iv), and paragraph (h) introductory text to read

as follows:

Sec. 199.14 Provider reimbursement methods.

(a) * * *

(1) * * *

(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 outlier. 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

[[Page 60672]]

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

paragraph (a)(1)(iii)(D)(4) of this section 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 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 qualify as a

cost outlier. The standardized costs shall be calculated by multiplying

the total charges by the factor described in paragraph (a)(1) (iii) (D)

(4) of this section (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 provers. 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.

* * * * *

Dated: October 9, 1999.

L.M. Bynum,

Alternate OSD Federal Register Liaison Officer, Department of Defense.

[FR Doc. 99-29093 Filed 11-5-99; 8:45 am]

BILLING CODE 5001-10-M