95-5375. Civilian Health and Medical Program of the Uniformed Services (CHAMPUS); Mental Health Services  

  • [Federal Register Volume 60, Number 44 (Tuesday, March 7, 1995)]
    [Rules and Regulations]
    [Pages 12419-12438]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-5375]
    
    
    
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    DEPARTMENT OF DEFENSE
    
    Office of the Secretary
    
    32 CFR Part 199
    
    RIN 0720-AA23
    
    
    Civilian Health and Medical Program of the Uniformed Services 
    (CHAMPUS); Mental Health Services
    
    agency: Office of the Secretary, DoD.
    
    action: Final rule.
    
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    summary: This final rule is to reform CHAMPUS quality of care standards 
    and reimbursement methods for inpatient mental health services. The 
    rule updates existing standards for residential treatment centers 
    (RTCs) and establishes new standards for approval as CHAMPUS-authorized 
    providers for substance use disorder rehabilitation facilities (SUDRFs) 
    and partial hospitalization programs (PHPs); implements recommendations 
    of the Comptroller General of the United States that DoD establish 
    cost-based reimbursement methods for psychiatric hospitals and 
    residential treatment facilities; adopts another Comptroller General 
    recommendation that DoD remove the current incentive for the use of 
    inpatient mental health care; and eliminates payments to residential 
    treatment centers for days in which the patient is on a leave of 
    absence.
    
    dates: This rule is effective April 6, 1995, except amendments to 
    Sec. 199.4 which are effective October 1, 1995.
    
    addresses: Office of the Civilian Health and Medical Program of the 
    Uniformed Services (OCHAMPUS), Office of Program Development; Aurora, 
    Colorado 80045-6900.
    
    for further information contact: CAPT Deborah Kamin, NC, USN, Office of 
    the Assistant Secretary of Defense (Health Affairs), (703) 697-8975.
        Questions regarding payment of specific claims should be addressed 
    to the appropriate CHAMPUS contractor.
    
    supplementary information: Provisions of this rule apply to the CHAMPVA 
    (Civilian Health and Medical Program of the Department of Veterans 
    Affairs) in the same manner as they apply to CHAMPUS.
    
    I. Introduction
    
        Quality assurance and cost effectiveness of mental health care 
    services under CHAMPUS continue to be major reform issues for the 
    Defense Department and Congress. In recent years, a series of DoD 
    initiatives, legislative and regulatory actions, and Congressional 
    hearings have spotlighted both progress made and the need for more 
    improvement.
        Two recent Comptroller General Reports are indicative of the 
    importance of these issues and the need for reform. The first of these, 
    ``Defense Health Care: Additional Improvements Needed in CHAMPUS's 
    Mental Health Program,'' GAO/HRD-93-34, May 1993, stated that, although 
    DoD has taken actions to improve the program ``several problems 
    persist.'' The Report (hereafter referred to as ``GAO Report #1'') 
    elaborated:
    
        For example, reviews of medical records have identified numerous 
    instances of poor medical record documentation, potentially 
    inappropriate admissions, excessive hospital stays, and poor-quality 
    care. Also, inspections of RTCs [Residential Treatment Centers] 
    continue to reveal significant health and safety problems, and 
    corrective actions often take many months.
        Moreover, DoD * * * pays considerably higher rates for 
    comparable services than do other public programs.
    
    GAO Report #1, p. 2. The Report referenced the General Accounting 
    Office's 1991 Congressional testimony regarding CHAMPUS mental health 
    care and inspections of residential treatment facilities conducted for 
    DoD since then:
    
        Inspections conducted since our 1991 testimony have identified 
    some of the same problems we described then: unlicensed and 
    unqualified staff, inappropriate use of seclusion and medication, 
    inadequate staff-to-patient ratios, and inadequate documentation of 
    treatment.
    
        The principal conclusions of this Report were: (1) ``Standards, 
    which include termination for noncompliance, should be specified and 
    termination proceedings, time frames, and reinspection provisions * * * 
    should be adopted;'' and (2) because ``DoD reimburses psychiatric 
    hospitals and RTCs at higher rates than do other government payers, it 
    should modify its payment system to more closely resemble other 
    programs such as Medicare.'' GAO Report #1, p. 9.
        A second recent Comptroller General Report, ``Psychiatric Fraud and 
    Abuse: Increased Scrutiny of Hospital Stays Is Needed to Lessen Federal 
    Health Program Vulnerability,'' GAO/HRD-93-92, September 1993, also 
    called for improvements in the CHAMPUS mental health program. The 
    Report (hereafter referred to as GAO Report #2) said:
    
        Investigations to date have revealed that federal health 
    programs have been subject to fraudulent and abusive psychiatric 
    hospital [[Page 12420]] practices, but apparently to a lesser extent 
    than private insurers * * *
        Some federal control weaknesses do exist which have resulted in 
    unnecessary hospital admissions, excessive stays, and sometimes 
    inadequate quality of care * * *
        DOD has also identified numerous instances of quality problems 
    and unnecessary hospital admissions.
    
    GAO Report #2, pp. 9-10.
    
        These two recent Comptroller General Reports, as well as a 
    substantial body of other documentation, highlight the need for a very 
    active quality assurance program. As discussed further below, two 
    primary issues are presented. First, there is a need for clear, 
    specific standards for psychiatric facilities on staff qualifications, 
    clinical practices, and all other aspects directly impacting the 
    quality of care. These standards are needed for residential treatment 
    facilities, substance use disorder rehabilitation facilities, and 
    partial hospitalization programs. These standards will help bring those 
    facilities, a minority in the industry, that have been unwilling or 
    unable to comply with necessary requirements, up to an appropriate 
    standard of care.
        The second key issue is reimbursement rates. As documented by the 
    Comptroller General, CHAMPUS needs to discontinue payment rates based 
    on historical billed charges and establish payment rates based on the 
    actual costs of providing the services.
        This final rule puts into place as part of the CHAMPUS regulation 
    comprehensive quality of care certification standards for residential 
    treatment facilities, substance abuse rehabilitation facilities, and 
    partial hospitalization programs. It also modifies current payment 
    methodologies, which will result in rates approximating the costs of 
    providing services in psychiatric hospitals and moving toward cost 
    levels for residential treatment facilities. In addition, the rule 
    addresses several other issues, addressed below.
    
    II. Provisions of Rule to Reform Certification Standards for Mental 
    Health Care Facilities
    
        The Comptroller General's call for stronger management by CHAMPUS 
    to assure quality of care in the mental health programs was based 
    partially on a review of serious abuses on the part of some providers. 
    The GAO presented audit findings identifying program weaknesses. Texas, 
    which is one of four states which account for more than half of CHAMPUS 
    mental health hospital costs, surfaced in recent audits as number one 
    in CHAMPUS mental health expenditures. Of particular concern are 
    practices described during 1991 hearings conducted before the Texas 
    state senate and summarized in GAO Report #2. In over 80 hours of 
    testimony, 175 witnesses--some beneficiaries of federal programs--
    brought forth allegations which included exorbitant charges for care 
    never rendered; kickbacks for patient referrals; restraint of voluntary 
    patients against their will; discharge of patients upon exhaustion of 
    benefits, regardless of their condition; and isolation of family from 
    patients, including withholding of visitation and mail/telephone 
    privileges. While privately insured patients are the most common target 
    of unethical practices, increasing benefit limits and payment controls 
    by private third party payers may place federal programs at increased 
    risk for fraudulent practices. GAO auditors point out that, because 
    CHAMPUS reimburses mental health at rates higher than other federal 
    programs, it may be particularly vulnerable to the minority of 
    unethical providers seeking additional revenue sources.
        In recent years, the Department has worked to strengthen oversight 
    and monitoring of mental health programs, particularly with respect to 
    treatment of children and adolescents. Through the contract with HMS, 
    and other efforts, CHAMPUS has paid much more attention to care in 
    RTCs. In [insert 30 days after date of publication] of 1992, Health 
    Management Strategies International (HMS) expressed specific concerns 
    about several of the CHAMPUS-authorized residential treatment centers. 
    Numerous quality of care issues surfaced during on-site facility visits 
    to residential treatment centers where CHAMPUS beneficiaries were 
    receiving care.
        Here are several examples:
    
    --Staff qualifications were deficient. In some cases, patient treatment 
    was not being directed by qualified psychiatrists. At one facility, 
    psychiatry residents were acting as facility medical directors. In some 
    facilities, one psychiatrist may be responsible for as many as 90 
    children and their families, seriously limiting professional time 
    available for individual attention. In some RTCs, group therapy was 
    being conducted by child care workers with high school diplomas.
    --Several facilities failed to individualize treatment plans. At one 
    facility all treatment plans were the same, regardless of history, 
    needs or problems. Similarly, some facilities were discovered to focus 
    on one type of treatment to the exclusion of all other approaches. This 
    was true regardless of whether or not patients responded to this type 
    of treatment.
    --In several facilities, registered nurses were not available on a 
    full-time basis. For example, at one facility children were ordering 
    their own medications ``as needed'' and medications were dispensed--
    without further evaluation--by untrained child care workers. In one 
    instance a child who developed tardive dyskinesia (a motion disorder 
    resulting from medication) was described by a child care worker as 
    having a ``nervous tic.''
    --There was evidence of excessive use of restraints and seclusion as 
    methods of behavioral management. Examples including placing children 
    as young as three or four in restraint and seclusion. In one facility, 
    seclusion was used 146 times in one month. The practice of zipping 
    children into so-called ``body bags'' was employed by several 
    facilities. Use of a body bag, which leaves an opening only for the 
    head, carries risk of overheating to the point of lethal hyperthermia. 
    One facility policy governing this practice did not require physician 
    evaluation of the patient for 72 to 96 hours after the event.
    --Certain RTCs employed unnecessary strip searches and other intrusive 
    acts. Searches involve adult authority figures for forcing children 
    between the ages of four and 18 to remove all clothing and submit to 
    cavity searches. Cavity searches involve finger probes to the mouth, 
    vagina, and rectum. Some facilities were requiring such searches 
    whenever the patient returned from a pass or having a visitor. In many 
    cases, children subjected to such searches were victims of abuse and, 
    for some, these methods of search re-enact the original trauma.
    
        These HMS case findings pointed out shortcomings in practices in 
    some RTCs that can be addressed through improved standards. Although 
    standards for residential treatment centers exist, they have evolved 
    over time from attempts to address individual issues with incremental 
    change. Further, existing CHAMPUS standards for residential treatment 
    centers were written as supplements to standards employed by the Joint 
    Commission on Accreditation of Hospital Organizations (JCAHO). In 
    recent years, the JCAHO has moved toward a more general set of facility 
    standards, with less specific reference to unique requirements of 
    medical specialties. The result has been that CHAMPUS standards--which 
    were not [[Page 12421]] intended to stand alone--do not address the 
    full spectrum of requirements and expectations for mental health 
    facilities and providers.
        Originally drafted in the late 1970s, CHAMPUS standards for RTCs 
    have undergone multiple revisions to ensure they reflect currently 
    accepted clinical practice. This rule incorporates revisions necessary 
    to update existing standards. With shorter lengths of stay in acute 
    care facilities, mental health patients are reaching residential 
    treatment centers at earlier--and less stable--stages of treatment. 
    Similar to trends in other medical specialties, the growing intensity 
    of illness among inpatients has dictated a need for higher standards of 
    care and increasing levels of professional supervision and treatment. 
    Current CHAMPUS standards for RTCs must be updated to reflect more 
    clearly professional skill levels and intervention strategies employed 
    in today's mental health environment. Based on a clear record of 
    problems among some institutional mental health providers and the 
    shortcomings of current standards, DoD has developed a comprehensive, 
    unified set of standards for residential treatment centers, partial 
    hospitalization programs and substance use disorder rehabilitation 
    facilities. This rule updates existing standards to reflect current 
    mental health practices, account for policy shifts in the JCAHO, and 
    communicate clearly CHAMPUS policy with regard to quality and scope of 
    care provided to its beneficiaries.
        The standards will work to prevent recurrence of abuses such as 
    those discussed by defining more completely and specifically quality 
    indicators which will be used to judge care rendered in these 
    facilities. Among areas addressed by the standards are:
        Qualifications and authority of clinical director. Standards 
    require the clinical director of any RTC to have completed appropriate 
    training and have at least five years' experience in treating children 
    and adolescents. In addition to oversight of all clinical care 
    provided, standards for RTCs, substance abuse rehabilitation facilities 
    and partial hospitalization programs outline specific requirements for 
    clinical director participation in program development, peer review, 
    quality monitoring and improvement and coordination with the governing 
    body.
        Adequate staffing with qualified professionals. Standards require 
    written staffing plans. Specific information is provided concerning 
    requirements for staffing levels and professional qualifications 24 
    hours per day, seven days per week (or, in the case of partial 
    hospitalization programs, during all hours of operation). Standards 
    require that all clinical care provided under clinical supervision is 
    the responsibility of a licensed or certified mental health 
    professional. Additionally, there must be evidence to show that 
    ultimate authority for management of the medical aspects of care is 
    vested in a physician.
        Patient rights and limitations on use of seclusion and restraint. 
    Standards require provisions for protection of all individual patient 
    rights, including civil rights, provided for under federal law and the 
    laws of the state where the residential treatment center is located. 
    Specific requirements address privacy, personal freedoms, contact with 
    families and environmental safety. Detailed guidelines for use, 
    supervision and medical monitoring of behavior management--including 
    use of seclusion and retraint--are also provided.
        Implementation of individualized treatment plans addressing each 
    patient's needs. Responsibility of development, supervision, 
    implementation and assessment of written, individualized and 
    interdisciplinary treatment plans is assigned to a qualified mental 
    health professional. Treatment goals must be communicated to the 
    family, must undergo regular review and must include specific, 
    measurable and observable criteria for discharge.
        Comprehensive evaluation system to guide an ongoing quality 
    improvement program. Standards provide detailed expectations with 
    respect to evaluation systems by which quality, efficiency, 
    appropriateness and effectiveness of care, treatments, and services are 
    provided. The evaluation system must involve all disciplines, services, 
    and programs of the facility, including administrative and support 
    activities. Responsibility for development and implementation of 
    quality assurance and quality improvement programs rests with the 
    clinical director and must support overall facility and philosophical 
    assumptions and values.
        The standards are designed to foster interdisciplinary 
    communication and patient protection through involvement and oversight 
    of the Governing Body, Chief Executive Officer, Clinical Director, and 
    Professional Staff with respect to administrative, utilization review, 
    and clinical activities. DoD has also strengthened standards for 
    substance abuse treatment programs in a manner similar to residential 
    treatment centers. For partial hospitalization, these standards occur 
    as part of implementation of this new benefit, which became effective 
    September 29, 1993.
        This rule incorporates basic requirements governing CHAMPUS 
    approval of facilities providing mental health services as residential 
    treatment centers, as partial hospitalization providers, and substance 
    use disorder rehabilitation facilities. More detailed definition of 
    these basic standards have been issued under the authority of this 
    regulation. It should be noted that only the requirements included in 
    this final regulation have, by themselves, the force and effect of law. 
    Additional detail in the more lengthy standards are extensions of the 
    regulation. They establish the agency's interpretations of the 
    regulation and will serve as guidelines for compliance with the 
    regulatory requirements. The complete standards are available to the 
    public from the Office of CHAMPUS. These more lengthy standards are 
    finalized coincident with issuance of this final regulation.
    
    III. Provisions of Rule to Reform Payment Methods for Mental Health 
    Care Facilities
    
        This rule implements payment reforms in keeping with the 
    Comptroller General's recommendations regarding payment reform for 
    mental health care facilities. The Comptroller General's findings 
    regarding current CHAMPUS payment rates are especially noteworthy. 
    According to the report: ``Our work indicates that DoD pays psychiatric 
    facilities considerably more than other government programs do for 
    comparable services.'' GAO Report #1, p.6. The Comptroller General very 
    accurately summarized the background of the current CHAMPUS payment 
    methods for psychiatric hospitals and RTCs:
    
        Although the current CHAMPUS system of per diem reimbursements 
    has helped limit program cost increases for inpatient mental health, 
    the per diem rates were based on providers' billed charges, not 
    their costs. The rates were based on billing data from a period when 
    providers' charges were not subject to controls and had just 
    increased significantly. Before 1989 when no upper limit on rates 
    existed, hospitals, and RTCs essentially set their own CHAMPUS 
    payment rates. Before the per diem calculations, hospitals and RTC 
    rates increased significantly. For example, average daily charges 
    per CHAMPUS inpatient day rose by 17 percent from fiscal years 1987 
    to 1988. One RTC boosted its daily charges from an average of $331 
    in fiscal year 1987 to $531 in June 1988--a 60% increase.
    
    GAO Report #1, pp 6-7.
    
        Because CHAMPUS payments are based on historical billed charges, 
    they substantially exceed the facilities' actual [[Page 12422]] costs 
    and Medicare reimbursement rates. Based on an analysis of payments to a 
    number of high CHAMPUS volume psychiatric hospitals, the Comptroller 
    General concluded ``The hospitals made large profits, on average, on 
    CHAMPUS patients.'' GAO Report #1, p. 7.
        A similar pattern emerges on payment rates for RTCs. Using fiscal 
    year 1991 data, the Comptroller General compared CHAMPUS payments to 
    state-authorized daily rates for a number of RTCs in Florida and 
    Virginia, and found that the average daily CHAMPUS rate was 36 percent 
    more than the average state rate. RTC cost data were available for 
    three RTCs in Texas, the state with the highest total CHAMPUS RTC 
    costs. These data showed ``an average profit margin of 27 percent.'' 
    Id., p. 8. The Comptroller General also stated that the index factor 
    used to annually update CHAMPUS RTC per diems, the consumer price index 
    for urban medical services (CPI-U), results in excessive increases. The 
    GAO Report says the hospital market basket index factor that CHAMPUS 
    and Medicare use for hospital payments ``would be more appropriate than 
    the CPI-U because it reflects increases in the amounts hospitals pay 
    for goods and services'' rather than ``increases in charges by health 
    practitioners and facilities.'' Id.
        The problem of excessive payments also involves substance use 
    disorder rehabilitation facilities, which continue to be paid by 
    CHAMPUS billed charges. According to the Comptroller General:
    
        These facilities set their own fees and can increase them 
    freely--without controls over their charges. Some of the facilities 
    are paid more on a daily basis than are psychiatric hospitals. Id.
        Based on these findings, the Comptroller General recommended 
    that the Secretary of Defense:
        Establish a system of reimbursing psychiatric facilities, RTCs, 
    and specialized treatment facilities based on a cost-based system 
    similar to Medicare, adjusted appropriately for differences in 
    beneficiary demographics, rather than the present per diem or billed 
    charges system.
    
    Id., p. 10.
    
        Under the proposed rule, CHAMPUS payments to specialty psychiatric 
    hospitals and units and residential treatment facilities would have 
    gradually transitioned from the present system of per diem rates based 
    on historical billed charges to a new system of per diem rates based on 
    detailed facility cost reports. Comments from providers and the 
    professional community pointed out the significant administrative 
    complexity and costs associated with payments based on cost reporting. 
    They proposed alternatives premised on adjustments to the current 
    system. We have been persuaded by these comments and have made 
    adjustments to current payment structures which, although not based on 
    detailed facility cost reports, move CHAMPUS reimbursement rates 
    significantly closer to the costs of delivering care in mental health 
    facilities. This rule is based on the legal authority of 10 USC 
    1079(j)(2) which authorizes CHAMPUS to adopt payment methods for 
    institutional providers similar to those applicable to Medicare. Under 
    the final rule, CHAMPUS payments to specialty psychiatric hospitals and 
    units will remain at FY95 rates for a two-year period beginning in 
    FY96. Additionally, effective [insert 30 days after date of 
    publication], the cap on per diem rates for these hospitals and units 
    will be reduced from the current 80th percentile to the 70th percentile 
    of all CHAMPUS base year charges in high volume hospitals. In FY98, 
    payments will again be updated using the Medicare update factor for 
    hospitals and units exempt from the Medicare Prospective Payment 
    System.
        With respect to RTCs, the rule makes similar adjustments to current 
    payment methodologies. Per diem rates will remain at FY95 rates during 
    fiscal years 1996 and 1997 and will be subject to a cap set at the 70th 
    percentile of all CHAMPUS RTC per diem rates. RTCs with FY95 payment 
    rates below the 30th percentile of all RTC CHAMPUS per diem rates will 
    be exempt from the two year freeze in rates, instead continuing the 
    current methodology for annual updates, up to the 30th percentile rate. 
    Beginning in FY 1998, payment updates for all RTCs will be based on the 
    Medicare update factor used for hospitals and units exempt from 
    Medicare's Prospective Payment System.
        We estimate that payment methodologies under this rule will lead to 
    aggregate expenditures which approximate average costs in psychiatric 
    hospitals and units. While cost data are not generally available for 
    RTCs, we estimate that under this rule, aggregate expenditures for RTC 
    care will move closer to the level of average facility costs. We expect 
    that over the next two years, we will obtain more data on actual RTC 
    costs that will facilitate an assessment of whether additional 
    regulatory changes should be considered.
        With respect to substance use disorder rehabilitation facilities, 
    this rule includes services provided by these facilities under the 
    CHAMPUS DRG-based payment system. Currently, most substance use 
    disorder rehabilitation services reimbursed by CHAMPUS are provided by 
    facilities covered by the CHAMPUS DRG system or mental health per diem 
    system. Only a small portion are provided by facilities that continue 
    to be paid on the basis of billed charges. Under Medicare, these 
    facilities are covered by the Medicare Prospective Payment System. 
    Based on these factors, we believe inclusion of services provided by 
    substance use disorder rehabilitation facilities should be included 
    with the similar services already covered by the CHAMPUS DRG-based 
    payment system. Partial hospitalization for substance use disorder 
    rehabilitation will be reimbursed in the same manner as psychiatric 
    partial hospitalization programs and the rates will be frozen at the 
    FY95 level for fiscal years 1996 and 1997.
        The payment system changes appear at the proposed revisions to 
    section 199.14.
    
    IV. Other Provisions of Rule
    
    A. Therapeutic Leave of Absence Days
    
        Currently, DoD pays RTCs for days a patient is away from the 
    facility on an approved therapeutic leave of absence. The payment 
    amount is 100% of the normal per diem for the first three days and 75% 
    for additional days. It is our view that current rates are not 
    justified by any costs to the facility. In addition, we are aware of no 
    other public payer that pays for leave days. Therefore, for care 
    provided on or after July 1, 1995, this rule eliminates payment for 
    days in which patients are on leave from the residential treatment 
    center. We received a number of comments objecting to this on the 
    grounds that therapeutic leave of absence are an important part of 
    therapy, and should be recognized in reimbursement for services. We 
    agree that therapeutic leaves are an important component in the 
    patient's overall treatment plan. However, because payment rates to 
    RTCs under this rule will probably remain above average costs, we 
    believe they will be sufficient to cover facility costs associated with 
    reserving space for the patient's return. This change applies only to 
    RTCs; in psychiatric hospitals, substance use disorder rehabilitation 
    facilities and partial hospitalization programs, leave days are not 
    reimbursed by CHAMPUS.
    
    B. Reversing Incentive for Inpatient Care
    
        Another of the recommendations of the Comptroller General was to 
    ``reverse the financial incentives to use inpatient care by introducing 
    larger copayments for CHAMPUS inpatient care.'' GAO 
    [[Page 12423]] Report #1, p. 10. This recommendation was based on the 
    Comptroller General's conclusion that there is a ``bias toward patients 
    receiving inpatient rather than outpatient care'' because inpatient 
    care is less expensive for dependents of active duty members than 
    outpatient care. Id., p. 8-9. These beneficiaries currently pay 
    approximately $10.00 per day or $25 per admission, whichever is 
    greater, for inpatient care. For outpatient care, dependents of active 
    duty members pay a $150 deductible (subject to a $300 family limit) and 
    20 percent of the allowable payment for individual professional 
    services. Consequently, as a general matter, there is a financial 
    incentive for beneficiaries to seek services on an inpatient, rather 
    than an outpatient basis. Under 10 U.S.C. section 1079(i)(2), DoD has 
    authority to establish mental health copayment requirements different 
    from those for other CHAMPUS services.
        This rule establishes a per day copayment of $20 for dependents of 
    active duty beneficiaries. This is based on the fact that an outpatient 
    mental health visit is generally approximately $100, meaning that the 
    copayment would be $20. Thus, an inpatient day would have a roughly 
    equal beneficiary copayment as an outpatient visit (excluding the 
    deductible). One commenter objected to this proposal. Based on DoD 
    experience in delivery of mental health services, information collected 
    during utilization management reviews, and reports from the GAO, our 
    observation is that inpatient mental health services remain vulnerable 
    to over utilization. We believe this modest increase in inpatient cost 
    share addresses the Comptroller General's recommendation, without 
    impairing access to care or imposing hardship on beneficiaries. (With 
    respect to avoidance of hardship, we note that the catastrophic cap for 
    active duty dependents is $1000 per family per year.) To ensure 
    adequate notice of providers and beneficiaries we have established an 
    effective date of October 1, 1995 for the copayment requirements as 
    stated above.
    
    C. Equalization of Alcoholism and Drug Abuse Benefit Provisions
    
        The frequent coexistence of alcohol and other chemical dependency 
    or abuse suggests existing differences in benefit structures for 
    treatment of alcohol and drug abuse should be eliminated. Effective for 
    admissions on or after October 1, 1995, this rule includes treatment 
    for both alcohol and drug dependency/abuse under a broad benefit 
    package designed to include treatment of all substance use disorders.
    
    IV. Additional Discussion of Public Comments
    
        The proposed rule was published in the Federal Register June 29, 
    1994 (59 FR Page 33465). We received 23 comment letters, all of which 
    were from providers and provider associations. Many of the comments 
    were quite similar in wording and content. Some were very detailed and 
    provided helpful insight and analysis. We thank those who provided 
    input on this important issue. Significant items raised by commenters 
    and our analysis of the comments are summarized below.
        1. GAO Recommendations are Based Upon Outdated Information. We 
    received a significant number of comments regarding our reliance on GAO 
    reports for developing components of the proposed rule. Findings and 
    recommendations provided in GAO reports relied to some extent on 
    information gathered prior to realization of impact from several DoD 
    quality, cost and utilization management initiatives.
        Response. Although substantial progress has been made as a result 
    of earlier DoD efforts, ongoing utilization reviews and facility 
    inspections continue to reveal departures from minimum CHAMPUS health 
    and safety standards. Additionally, in many areas CHAMPUS continues to 
    reimburse mental health services at significantly higher rates than 
    many other third party payers. While the GAO analysis does not reflect 
    the specific impact of recent initiatives, we believe the themes which 
    emerged from their two reports remain current.
        2. Specificity of Standards. Several commenters asserted that 
    standards in the proposed rule were stated too broadly, leaving 
    excessive room for interpretation and significant doubt as to the exact 
    CHAMPUS requirements. Examples included the absence of stated 
    requirements for specific staff-to-patient ratios and specific numbers 
    for professional staffing. A similar comment was that terms like 
    ``essentially stabilized'' and ``reasonable and observable'' treatment 
    goals should be better defined. Commenters pointed out that specific 
    standards which provide explicit requirements for all aspects of 
    facility certification should be published for public review and 
    comment prior to their application in the certification process.
        Response. A more detailed set of standards which provide the 
    agency's interpretation of standards contained in the rule are 
    available from OCHAMPUS. These were made available for public review 
    concurrent with publication of the proposed rule. The more detailed set 
    of standards does not include specific requirements with respect to 
    professional staff mix and staff-to-patient ratios because these will 
    vary depending upon the characteristics of each facility. Consistent 
    with regulatory standards in the rule and further described in the 
    supplemental set available from OCHAMPUS, facilities should develop 
    staffing patterns which reflect the characteristics and special needs 
    of the population served, the patient census, and acuity/intensity of 
    services required. With respect to specific definitions of terms, the 
    unique requirements brought by each patient to the treatment setting 
    necessarily require individual assessments, and professional judgment 
    as to required level of care for the presenting symptoms or dysfunction 
    and progress being made in addressing the patient's specific needs. As 
    such, we do not think it appropriate to establish a fixed list of 
    criteria which must be applied to all patients.
        3. Requirement for Physician Medical Directors. Physician 
    professional associations agreed with a requirement for physician 
    medical directors, but associations representing non-physician mental 
    health professionals objected to this. Several commenters recommended 
    that current non-physician medical directors who are serving 
    successfully should be exempt from this requirement.
        Response. We have reconsidered the provisions in the proposed rule 
    regarding physician oversight of all clinical services and agree that 
    some of the language may have had the effect of unduly restricting the 
    scope of practice for some providers, particularly doctoral level 
    psychologists. We are also aware that widely recognized accrediting 
    bodies, as well as several states, permit independent practice and 
    hospital admitting privileges for certain non-physician providers. We 
    have made revisions to language contained in the proposed rule to 
    assure our standards are consistent with those of the Joint Commission 
    on Accreditation of Hospital Organizations (JCAHO) and in keeping with 
    changing practice patterns in the mental health community. Because 
    treatment of mental health patients often includes pharmacologic 
    intervention and evaluation and treatment for related or co-existing 
    medical problems, physician management for these components of therapy 
    is still required. We require medical management of patients to be 
    under the supervision of a physician medical director. However, we also 
    agree that oversight of the spectrum of clinical services provided in a 
    program [[Page 12424]] may be accomplished by doctoral level 
    psychologists. We have added language which allows clinical directors 
    to be physicians or, where permitted by law and by the facility, 
    doctoral level psychologists who meet CHAMPUS requirements for 
    individual professional providers.
        4. Admitting Privileges for Non-physician Providers. A number of 
    commenters objected to proposed language which limited admitting 
    privileges to physicians. They argued that such limitations on certain 
    non-physician mental health professionals, for example, master's level 
    clinical social workers, were unnecessarily restrictive and counter to 
    legislative and industry trends toward an expanded scope of practice 
    for these providers.
        Response. We are aware of these changes and agree that, where 
    permitted by law and by the facility, individuals who meet the CHAMPUS 
    definition of individual professional mental health provider should be 
    allowed to refer patients for admission. We have included language in 
    the final rule which reflects this position.
        5. Qualifications for CEOs. We received a number of comments 
    suggesting that upgraded CEO requirements should not apply to 
    individuals who, although they do not meet these standards, are 
    currently serving in that capacity successfully.
        Response. We believe the proposed standards for CEOs are 
    appropriate, given the level and scope of responsibility attached to 
    this position. However, we have included language which makes CEO 
    qualification standards effective October 1, 1997. This should provide 
    sufficient time for CEOs currently serving to undertake appropriate 
    education and/or training to meet increased requirements.
        5. Upgraded Standards are Costly and May Limit Treatment Options 
    for CHAMPUS Beneficiaries. A number of commenters suggested that 
    standards in the proposed rule were costly to implement. They argued 
    that the increased cost of doing business, in addition to potential 
    reductions in reimbursement caused by the rule's payment reforms, may 
    cause some providers to drop participation in CHAMPUS programs. 
    Commenters viewed this as a particular problem for providers with 
    limited CHAMPUS volume and those in rural areas. Some commenters argued 
    that treatment methods not relying upon a medical model should be 
    expanded, rather than changed to conform.
        Response. Standards in this final rule are based upon accepted 
    standards of practice, requirements of the Joint Commission on 
    Accreditation of Healthcare Organizations, and input from Department 
    consultants and the provider community. Although we have made 
    significant progress in addressing quality issues raised by GAO's study 
    and highlighted in various forms, rapidly evolving practice patterns 
    and treatment settings require CHAMPUS standards which reflect the 
    character and pace of these changes. We believe these updated standards 
    are necessary minimums which ensure CHAMPUS beneficiaries receive high 
    quality care by appropriately trained professionals and staff. We 
    believe the cost of upgraded standards will be accommodated within 
    projected reimbursement rates. Facilities unable or unwilling to comply 
    with these standards are not in a position to provide a proper standard 
    of care.
        6. Implementation of Seclusion and Restraint. We received a large 
    number of comments objecting to standards which restricted 
    implementation of seclusion and restraint to qualified mental health 
    professionals. Additionally, the proposed rule excluded seclusion and 
    restraint as behavior management devices in substance use disorder 
    rehabilitation facilities. Commenters argued that these restrictions 
    were unworkable, that they may pose safety issues when professional 
    staff are not immediately available, and that facility staff are 
    trained to use these techniques for behavior management.
        Response. Seclusion and restraint imply a severity of dysfunction 
    and need for treatment beyond the scope of care settings addressed in 
    this rule. If seclusion and/or restraint is frequently required for 
    behavior management in RTCs, PHPs, or SUDRFs, this suggests patients 
    who require a more intense level of care. Facilities should evaluate 
    policies and practices to determine their effectiveness in identifying 
    patients who have not been assigned to the appropriate level of care. 
    All facility staff should be trained in temporary holds which provide 
    immediate intervention for safety of the patient and others. Also, 
    facilities should have clear emergency response procedures which define 
    appropriate intervention in crisis situations.
        With the exception of brief physical holds and time outs, use of 
    seclusion and restraint is excluded in SUDRFs, as patients who require 
    this level of intervention are not appropriate to this treatment 
    setting. The use of time out or physical holds should be infrequent, 
    since behavior routinely requiring this type of intervention suggests a 
    need for care at a higher level of intensity. We do agree that proposed 
    rule language may have restricted appropriate response to emergency 
    situations. We have added clarifying language which requires a 
    qualified mental health professional to be responsible for 
    implementation of seclusion and restraint, but allows actual 
    implementation by facility staff under supervision of the responsible 
    provider.
        7. Inclusion of Spiritual and Skills Assessments. A number of 
    commenters questioned inclusion of new requirements for spiritual and 
    skills assessments in the proposed standards and requested more 
    detailed description of this requirement.
        Response. Spiritual assessments are part of a comprehensive, 
    multidisciplinary assessment which should address the full range of a 
    patient's clinical needs, including the impact of religious, ethnic and 
    cultural influences upon the patient or family. Spiritual assessments, 
    which occur in the context of obtaining a social history, are not new 
    to the CHAMPUS standards and are included specifically in standards of 
    other widely recognized accrediting bodies. A skills assessment is an 
    important component of patient evaluation and includes activities of 
    daily living, perceptual-motor skills, sensory integration factors, 
    cognitive skills, communication skills, social interaction skills, 
    creative abilities, vocational skills, and the impact of physical 
    limitations. Activity services related to this assessment should be 
    part of the therapeutic plan and should be supervised by a qualified 
    mental health professional.
        8. Requirement for Clinical Formulation. Several commenters 
    questioned the need for clinical formulation in addition to development 
    of a treatment plan. Additionally, several comments pointed out the 
    standards allowed less time for completion of a treatment plan (10 
    days) than for development of the clinical formulation (14 days) which 
    forms the basis of the treatment plan.
        Response. The clinical formulation summarizes significant clinical 
    interpretations from each of the multidisciplinary assessments, forming 
    the basis for development of a master treatment plan. Interrelating 
    findings from all assessments, the clinical formulation should clearly 
    describe problems to be addressed in the treatment plan and indicate 
    appropriate focus for the treatment strategies. We view this as a 
    necessary, and not redundant, part of the process for developing a plan 
    of care responsive to the unique requirements of each patient. We agree 
    the proposed time requirements were not consistent with 
    [[Page 12425]] this logic and have modified language accordingly.
        Treatment plans must be completed within 10 days; clinical 
    formulations no longer have a specific deadline, but must be completed 
    prior to development of the interdisciplinary treatment plan.
        9. Family Therapy. A large number of commenters raised the issue of 
    logistical problems which present difficulty in accomplishing family 
    therapy for CHAMPUS beneficiaries. An example frequently used was the 
    deployment of military members which caused geographic separations. The 
    argument was made that CHAMPUS should be more flexible regarding this 
    requirement.
        Response. Family therapy is not a new requirement for CHAMPUS 
    beneficiaries. Geographical distance is not considered a reason to 
    exclude the family from a treatment plan. For patients separated from 
    their families by deployment or for other reasons, CHAMPUS allows 
    geographically distant family therapy. If one or both parents reside a 
    minimum of 250 miles from the RTC, the RTC has the flexibility to 
    arrange for therapy with parents at the distant locality. If family 
    therapy is clinically contraindicated, rationale for this conclusion 
    must be documented in the patient's record.
        10. Annual Facility Evaluation. We received several comments 
    arguing that a service specific annual evaluation was overly burdensome 
    to facilities and ``unheard of'' outside academic settings.
        Response. The proposed rule identified this requirement in the 
    context of facility development of a strategic plan which contains 
    specific goals and objectives for each program component or service and 
    patient population served. Sound business practices would suggest 
    regular organizational assessments to identify progress toward 
    established performance and fiscal goals and objectives. The 
    Department, as well as other accrediting agencies, expect governing 
    bodies, through their CEOs, to provide sufficient resources to achieve 
    the organization's missions, goals, philosophy and objectives. Without 
    a clear idea of resource allocation and performance across the range of 
    services provided, it is unclear how facilities would evaluate 
    outcomes, or the need for change. We do not agree that this is overly 
    burdensome and find it surprising that such reviews would be limited 
    only to academic settings.
        11. Education Hours in Partial Hospitalization Programs. The 
    proposed rule does not count educational hours towards total hours for 
    ``full day'' partial hospitalization programs. Several commenters 
    argued that, by not including time spent in school, those hours, 
    combined with the required six hours for a full day partial program, 
    result in an excessively long day for patients.
        Response. Patients who meet the criteria for admission to partial 
    hospitalization programs do not require a professionally managed milieu 
    twenty-four hours a day, as do individuals in residential treatment 
    programs. Therefore, we find it reasonable to expect that school hours 
    may be accommodated separately from the hours spent in therapy and 
    other treatment activities. Determinations as to school hours vs. time 
    spent in treatment or other activities should be considered as part of 
    an overall assessment of the patient's needs and addressed in an 
    individualized treatment plan.
        12. Benefit Limitations. One provider association objected to 
    CHAMPUS limits on treatment of substance use disorders, stating that 
    these limits do not consider the chronic nature of this problem.
        Response. Compared to many third party payers, CHAMPUS provides one 
    of the more generous benefits for treatment of substance use disorders. 
    We do recognize the chronic as well as individual nature of these 
    problems and, consistent with that, provide an allowance for waivers of 
    benefit limits when continued treatment is justified.
        13. Burden and Expense Associated With Cost Based Reimbursement. 
    The overwhelming majority of comments on the proposed cost based 
    reimbursement system argued that the cost and administrative burden 
    associated with these changes, for both the Department and providers, 
    far exceeded any benefit to the government. A number of commenters 
    pointed out that the GAO reports which provided impetus for payment 
    reform were based on outdated information which did not reflect the 
    results of earlier initiatives. Commenters suggested that, if DoD is 
    required to implement additional cost containment measures, these could 
    be accomplished more efficiently through adjustments to existing 
    payment mechanisms.
        Response. After full consideration of comments from the provider 
    community, as well as our continuing analysis of costs associated with 
    implementation of a cost based system for mental health, we agree that 
    implementation of the proposed system is not appropriate at this time. 
    Although cost containment and utilization management programs have 
    achieved program savings, we agree with GAO conclusion that additional 
    improvements are needed. While the GAO report may not reflect the full 
    measure of cost and quality improvements achieved by earlier efforts, 
    continuing program reviews and findings gathered through utilization 
    management programs suggest CHAMPUS mental health programs require 
    additional controls.
        In keeping with comments from the industry and our own analysis, 
    additional cost containment in CHAMPUS mental health programs will be 
    accomplished through adjustments to current reimbursement mechanisms. 
    For specialty psychiatric hospitals and units, payment will be held at 
    FY95 rates for two years, beginning in FY96 and extending through FY97. 
    Additionally, April 6, 1995, payment will be capped at a rate not to 
    exceed the 70th percentile of payment rates in all high volume CHAMPUS 
    psychiatric hospitals. We estimate that these adjustments will result 
    in CHAMPUS payments at the level of average aggregate costs for 
    psychiatric hospitals and units, thereby addressing concerns expressed 
    by the GAO.
        The general lack of availability with respect to RTC cost 
    information presented some difficulties in our attempt to analyze 
    impact of payment reforms for this community. In measures similar to 
    those for psychiatric hospitals, RTC payment rates for facilities at or 
    above the 30th percentile of all CHAMPUS RTC payment rates in FY95 will 
    be held constant, with no additional update through fiscal years FY96 
    and FY97. Additionally, effective April 6, 1995, payments will be 
    capped at level not to exceed the 70th percentile of all RTC rates 
    nationally. For those RTCs paid at levels below the 30th percentile of 
    national CHAMPUS RTC rates, payments will be updated by the lesser of 
    the CPI-U for medical care or the amount that brings the rate up to the 
    30th percentile level. The update factor for payments beginning in FY98 
    will be the Medicare update factor for hospitals and units exempt from 
    the Medicare prospective payment system. In order to determine the 
    effectiveness of RTC cost containment measures established in this 
    final rule, the Department will continue to explore avenues for 
    obtaining accurate cost data for RTC services.
    
    V. Rulemaking Procedures
    
        This rule is a significant regulatory action as determined by the 
    Office of Management and Budget. Also, we certify that this rule will 
    not significantly affect a large number of [[Page 12426]] small 
    entities within the meaning of the Regulatory Flexibility Act.
        This rule does not impose new information collection requirements.
    
    List of Subjects in 32 CFR Part 199
    
        Claims, handicapped, health insurance, and military personnel.
    
        Accordingly, 32 CFR part 199 is amended as follows:
    
    PART 199--[AMENDED]
    
        1. The authority citation for part 199 is revised to read as 
    follows:
    
        Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.
    
        2. Section 199.4 is amended by revising the heading of paragraph 
    (e)(4), paragraph (e)(4) introductory text, (e)(4)(i), (e)(4)(ii), 
    (e)(4)(iv), and the introductory text of paragraph (f)(2)(ii), and by 
    adding new paragraphs (e)(4)(v), and (f)(2)(ii)(D), as follows:
    
    
    Sec. 199.4  Basic program benefits.
    
    * * * * *
        (e) * * *
    * * * * *
        (4) Treatment of substance use disorders. Emergency and inpatient 
    hospital care for complications of alcohol and drug abuse or dependency 
    and detoxification are covered as for any other medical condition. 
    Specific coverage for the treatment of substance use disorders includes 
    detoxification, rehabilitation, and outpatient care provided in 
    authorized substance use disorder rehabilitation facilities.
        (i) Emergency and inpatient hospital services. Emergency and 
    inpatient hospital services are covered when medically necessary for 
    the active medical treatment of the acute phases of substance abuse 
    withdrawal (detoxification), for stabilization, and for treatment of 
    medical complications of substance use disorders. Emergency and 
    inpatient hospital services are considered medically necessary only 
    when the patient's condition is such that the personnel and facilities 
    of a hospital are required. Stays provided for substance use disorder 
    rehabilitation in a hospital-based rehabilitation facility are covered, 
    subject to the provisions of paragraph (e)(4)(ii) of this section. 
    Inpatient hospital services also are subject to the provisions 
    regarding the limit on inpatient mental health services.
        (ii) Authorized substance use disorder treatment. Only those 
    services provided by CHAMPUS-authorized institutional providers are 
    covered. Such a provider must be either an authorized hospital, or an 
    organized substance use disorder treatment program in an authorized 
    free-standing or hospital-based substance use disorder rehabilitation 
    facility. Covered services consist of any or all of the services listed 
    below. A qualified mental health provider (physicians, clinical 
    psychologists, clinical social workers, psychiatric nurse specialists) 
    (see paragraph (c)(3)(ix) of this section) shall prescribe the 
    particular level of treatment. Each CHAMPUS beneficiary is entitled to 
    three substance use disorder treatment benefit periods in his or her 
    lifetime, unless this limit is waived pursuant to paragraph (e)(4)(v) 
    of this section. (A benefit period begins with the first date of 
    covered treatment and ends 365 days later, regardless of the total 
    services actually used within the benefit period. Unused benefits 
    cannot be carried over to subsequent benefit periods. Emergency and 
    inpatient hospital services (as described in paragraph (e)(4)(i) of 
    this section) do not constitute substance abuse treatment for purposes 
    of establishing the beginning of a benefit period.)
        (A) Rehabilitative care. Rehabilitative care in a authorized 
    hospital or substance use disorder rehabilitative facility, whether 
    free-standing or hospital-based, is covered on either a residential or 
    partial care (day or night program) basis. Coverage during a single 
    benefit period is limited to no more than inpatient stay (exclusive of 
    stays classified in DRG 433) in hospitals subject to CHAMPUS DRG-based 
    payment system or 21 days in a DRG-exempt facility for rehabilitation 
    care, unless the limit is waived pursuant to paragraph (e)(4)(v) of 
    this section. If the patient is medically in need of chemical 
    detoxification, but does not require the personnel or facilities of a 
    general hospital setting, detoxification services are covered in 
    addition to the rehabilitative care, but in a DRG-exempt facility 
    detoxification services are limited to 7 days unless the limit is 
    waived pursuant to paragraph (e)(4)(v) of this section. The medical 
    necessity for the detoxification must be documented. Any detoxification 
    services provided by the substance use disorder rehabilitation facility 
    must be under general medical supervision.
        (B) Outpatient care. Outpatient treatment provided by an approved 
    substance use disorder rehabilitation facility, whether free-standing 
    or hospital-based, is covered for up to 60 visits in a benefit period, 
    unless the limit is waived pursuant to paragraph (e)(4)(v) of this 
    section.
        (C) Family therapy. Family therapy provided by an approved 
    substance use disorder rehabilitation facility, whether free-standing 
    or hospital-based, is covered for up to 15 visits in a benefit period, 
    unless the limit is waived pursuant to paragraph (e)(4)(v) of this 
    section.
    * * * * *
        (iv) Confidentialty. Release of any patient identifying 
    information, including that required to adjudicate a claim, must comply 
    with the provisions of section 544 of the Public Health Service Act, as 
    amended, (42 U.S.C. 290dd-3), which governs the release of medical and 
    other information from the records of patients undergoing treatment of 
    substance abuse. If the patient refuses to authorize the release of 
    medical records which are, in the opinion of the Director, OCHAMPUS, or 
    a designee, necessary to determine benefits on a claim for treatment of 
    substance abuse the claim will be denied.
        (v) Waiver of benefit limits. The specific benefit limits set forth 
    in paragraphs (e)(4)(ii) of this section may be waived by the Director, 
    OCHAMPUS in special cases based on a determination that all of the 
    following criteria are met:
        (A) Active treatment has taken place during the period of the 
    benefit limit and substantial progress has been made according to the 
    plan of treatment.
        (B) Further progress has been delayed due to the complexity of the 
    illness.
        (C) Specific evidence has been presented to explain the factors 
    that interfered with further treatment progress during the period of 
    the benefit limit.
        (D) The waiver request includes specific time frames and a specific 
    plan of treatment which will complete the course of treatment.
    * * * * *
        (f) * * *
        (2) * * *
        (ii) Inpatient cost-sharing. Except in the case of mental health 
    services (see paragraph (f)(2)(ii)(D) of this section), dependents of 
    active duty members of the Uniformed Services or their sponsors are 
    responsible for the payment of the first $25 of the allowable 
    institutional costs incurred with each covered inpatient admission to a 
    hospital or other authorized institutional provider (refer to 
    Sec. 199.6), or the amount the beneficiary or sponsor would have been 
    charged had the inpatient care been provided in a Uniformed Service 
    hospital, whichever is greater.
    * * * * *
        (D) Inpatient cost-sharing for mental health services. For care 
    provided on or after October 1, 1995, the inpatient cost-sharing for 
    mental health services is $20 per day for each day of the inpatient 
    admission. This $20 per day cost [[Page 12427]] sharing amount applies 
    to admissions to any hospital for mental health services, any 
    residential treatment facility, any substance abuse rehabilitation 
    facility, and any partial hospitalization program providing mental 
    health or substance use disorder rehabilitation services.
    * * * * *
        3. Section 199.6 is amended by revising paragraphs (b)(4)(vii) and 
    (b)(4)(xii), by removing paragraph (b)(4)(x)(B)(3), and by adding a new 
    paragraph (b)(4)(xiv) to read as follows:
    
    
    Sec. 199.6  Authorized providers.
    
    * * * * *
        (b) Institutional providers. * * *
    * * * * *
        (4) Categories of institutional providers. * * *
    * * * * *
        (vii) Residential treatment centers. This paragraph (b)(4)(vii) 
    establishes standards and requirements for residential treatment 
    centers (RTCs).
        (A) Organization and administration.
        (1) Definition. A Residential Treatment Center (RTC) is a facility 
    or a distinct part of a facility that provides to beneficiaries under 
    21 years of age a medically supervised, interdisciplinary program of 
    mental health treatment. An RTC is appropriate for patients whose 
    predominant symptom presentation is essentially stabilized, although 
    not resolved, and who have persistent dysfunction in major life areas. 
    The extent and pervasiveness of the patient's problems require a 
    protected and highly structured therapeutic environment. Residential 
    treatment is differentiated from:
        (i) Acute psychiatric care, which requires medical treatment and 
    24-hour availability of a full range of diagnostic and therapeutic 
    services to establish and implement an effective plan of care which 
    will reverse life-threatening and/or severely incapacitating symptoms;
        (ii) Partial hospitalization, which provides a less than 24-hour-
    per-day, seven-day-per-week treatment program for patients who continue 
    to exhibit psychiatric problems but can function with support in some 
    of the major life areas;
        (iii) A group home, which is a professionally directed living 
    arrangement with the availability of psychiatric consultation and 
    treatment for patients with significant family dysfunction and/or 
    chronic but stable psychiatric disturbances;
        (iv) Therapeutic school, which is an educational program 
    supplemented by psychological and psychiatric services;
        (v) Facilities that treat patients with a primary diagnosis of 
    chemical abuse or dependence; and
        (vi) Facilities providing care for patients with a primary 
    diagnosis of mental retardation or developmental disability.
        (2) Eligibility.
        (i) Every RTC must be certified pursuant to CHAMPUS certification 
    standards. Such standards shall incorporate the basic standards set 
    forth in paragraphs (b)(4)(vii) (A) through (D) of this section, and 
    shall include such additional elaborative criteria and standards as the 
    Director, OCHAMPUS determines are necessary to implement the basic 
    standards.
        (ii) To be eligible for CHAMPUS certification, the facility is 
    required to be licensed and fully operational for six months (with a 
    minimum average daily census of 30 percent of total bed capacity) and 
    operate in substantial compliance with state and federal regulations.
        (iii) The facility is currently accredited by the Joint Commission 
    on Accreditation of Healthcare Organizations (JCAHO) under the current 
    edition of the Manual for Mental Health, Chemical Dependency, and 
    Mental Retardation/Developmental Disabilities Services which is 
    available from JCAHO, P.O. Box 75751, Chicago, IL 60675.
        (iv) The facility has a written participation agreement with 
    OCHAMPUS. The RTC is not a CHAMPUS-authorized provider and CHAMPUS 
    benefits are not paid for services provided until the date upon which a 
    participation agreement is signed by the Director, OCHAMPUS.
        (3) Governing body.
        (i) The RTC shall have a governing body which is responsible for 
    the policies, bylaws, and activities of the facility. If the RTC is 
    owned by a partnership or single owner, the partners or single owner 
    are regarded as the governing body. The facility will provide an up-to-
    date list of names, addresses, telephone numbers and titles of the 
    members of the governing body.
        (ii) The governing body ensures appropriate and adequate services 
    for all patients and oversees continuing development and improvement of 
    care. Where business relationships exist between the governing body and 
    facility, appropriate conflict-of-interest policies are in place.
        (iii) Board members are fully informed about facility services and 
    the governing body conducts annual review of its performance in meeting 
    purposes, responsibilities, goals and objectives.
        (4) Chief executive officer. The chief executive officer, appointed 
    by and subject to the direction of the governing body, shall assume 
    overall administrative responsibility for the operation of the facility 
    according to governing body policies. The chief executive officer shall 
    have five years' administrative experience in the field of mental 
    health. On October 1, 1997, the CEO shall possess a degree in business 
    administration, public health, hospital administration, nursing, social 
    work, or psychology, or meeting similar educational requirements as 
    prescribed by the Director, OCHAMPUS.
        (5) Clinical Director. The clinical director, appointed by the 
    governing body, shall be a psychiatrist or doctoral level psychologist 
    who meets applicable CHAMPUS requirements for individual professional 
    providers and is licensed to practice in the state where the 
    residential treatment center is located. The clinical director shall 
    possess requisite education and experience, credentials applicable 
    under state practice and licensing laws appropriate to the professional 
    discipline, and a minimum of five years' clinical experience in the 
    treatment of children and adolescents. The clinical director shall be 
    responsible for planning, development, implementation, and monitoring 
    of all clinical activities.
        (6) Medical director. The medical director, appointed by the 
    governing body, shall be licensed to practice medicine in the state 
    where the residential treatment center is located and shall possess 
    requisite education and experience, including graduation from an 
    accredited school of medicine or osteopathy, an approved residency in 
    psychiatry and a minimum of five years clinical experience in the 
    treatment of children and adolescents. The Medical Director shall be 
    responsible for the planning, development, implementation, and 
    monitoring of all activities relating to medical treatment of patients. 
    If qualified, the Medical Director may also serve as Clinical Director.
        (7) Medical or professional staff organization. The governing body 
    shall establish a medical or professional staff organization to assure 
    effective implementation of clinical privileging, professional conduct 
    rules, and other activities directly affecting patient care.
        (8) Personnel policies and records. The RTC shall maintain written 
    personnel policies, updated job descriptions and personnel records to 
    assure the selection of qualified personnel and successful job 
    performance of those personnel.
        (9) Staff development.  The facility shall provide appropriate 
    training and development programs for administrative, professional 
    support, and direct care staff. [[Page 12428]] 
        (10) Fiscal accountability. The RTC shall assure fiscal 
    accountability to applicable government authorities and patients.
        (11) Designated teaching facilities. Students, residents, interns 
    or fellows providing direct clinical care are under the supervision of 
    a qualified staff member approved by an accredited university. The 
    teaching program is approved by the Director, OCHAMPUS.
        (12) Emergency reports and records. The facility notifies OCHAMPUS 
    of any serious occurrence involving CHAMPUS beneficiaries.
        (B) Treatment services.
        (1) Staff composition.
        (i) The RTC shall follow written plans which assure that medical 
    and clinical patient needs will be appropriately addressed 24 hours a 
    day, seven days a week by a sufficient number of fully qualified 
    (including license, registration or certification requirements, 
    educational attainment, and professional experience) health care 
    professionals and support staff in the respective disciplines. 
    Clinicians providing individual, group, and family therapy meet CHAMPUS 
    requirements as qualified mental health providers and operate within 
    the scope of their licenses. The ultimate authority for planning, 
    development, implementation, and monitoring of all clinical activities 
    is vested in a psychiatrist or doctoral level psychologist. The 
    management of medical care is vested in a physician.
        (ii) The RTC shall ensure adequate coverage by fully qualified 
    staff during all hours of operation, including physician availability, 
    other professional staff coverage, and support staff in the respective 
    disciplines.
        (2) Staff qualifications. The RTC will have a sufficient number of 
    qualified mental health providers, administrative, and support staff to 
    address patients' clinical needs and to coordinate the services 
    provided. RTCs which employ individuals with master's or doctoral level 
    degrees in a mental health discipline who do not meet the licensure, 
    certification and experience requirements for a qualified mental health 
    provider but are actively working toward licensure or certification, 
    may provide services within the all-inclusive per diem rate, provided 
    the individual works under the clinical supervision of a fully 
    qualified mental health provider employed by the RTC. All other program 
    services shall be provided by trained, licensed staff.
        (3) Patient rights.
        (i) The RTC shall provide adequate protection for all patient 
    rights, including rights provided by law, privacy, personnel rights, 
    safety, confidentiality, informed consent, grievances, and personal 
    dignity.
        (ii) The facility has a written policy regarding patient abuse and 
    neglect.
        (iii) Facility marketing and advertising meets professional 
    standards.
        (4) Behavioral management. The RTC shall adhere to a comprehensive, 
    written plan of behavioral management, developed by the clinical 
    director and the medical or professional staff and approved by the 
    governing body, including strictly limited procedures to assure that 
    the restraint or seclusion are used only in extraordinary 
    circumstances, are carefully monitored, and are fully documented. Only 
    trained and clinically privileged RNs or qualified mental health 
    professionals may be responsible for the implementation of seclusion 
    and restraint procedures in an emergency situation.
        (5) Admission process. The RTC shall maintain written policies and 
    procedures to ensure that, prior to an admission, a determination is 
    made, and approved pursuant to CHAMPUS preauthorization requirements, 
    that the admission is medically and/or psychologically necessary and 
    the program is appropriate to meet the patient's needs. Medical and/or 
    psychological necessity determinations shall be rendered by qualified 
    mental health professionals who meet CHAMPUS requirements for 
    individual professional providers and who are permitted by law and by 
    the facility to refer patients for admission.
        (6) Assessments. The professional staff of the RTC shall complete a 
    current multidisciplinary assessment which includes, but is not limited 
    to physical, psychological, developmental, family, educational, social, 
    spiritual and skills assessment of each patient admitted. Unless 
    otherwise specified, all required clinical assessments are completed 
    prior to development of the multidisciplinary treatment plan.
        (7) Clinical formulation. A qualified mental health professional of 
    the RTC will complete a clinical formulation on all patients. The 
    clinical formulation will be reviewed and approved by the responsible 
    individual professional provider and will incorporate significant 
    findings from each of the multidisciplinary assessments. It will 
    provide the basis for development of an interdisciplinary treatment 
    plan.
        (8) Treatment planning. A qualified mental health professional 
    shall be responsible for the development, supervision, implementation, 
    and assessment of a written, individualized, interdisciplinary plan of 
    treatment, which shall be completed within 10 days of admission and 
    shall include individual, measurable, and observable goals for 
    incremental progress and discharge. A preliminary treatment plan is 
    completed within 24 hours of admission and includes at least an 
    admission note and orders written by the admitting mental health 
    professional. The master treatment plan is reviewed and revised at 
    least every 30 days, or when major changes occur in treatment.
        (9) Discharge and transition planning. The RTC shall maintain a 
    transition planning process to address adequately the anticipated needs 
    of the patient prior to the time of discharge. The planning involves 
    determining necessary modifications in the treatment plan, facilitating 
    the termination of treatment, and identifying resources to maintain 
    therapeutic stability following discharge.
        (10) Clinical documentation. Clinical records shall be maintained 
    on each patient to plan care and treatment and provide ongoing 
    evaluation of the patient's progress. All care is documented and each 
    clinical record contains at least the following: demographic data, 
    consent forms, pertinent legal documents, all treatment plans and 
    patient assessments, consultation and laboratory reports, physician 
    orders, progress notes, and a discharge summary. All documentation will 
    adhere to applicable provisions of the JCAHO and requirements set forth 
    in Sec. 199.7(b)(3). An appropriately qualified records administrator 
    or technician will supervise and maintain the quality of the records. 
    These requirements are in addition to other records requirements of 
    this Part, and documentation requirements of the Joint Commission on 
    Accreditation of Healthcare Organizations.
        (11) Progress notes. RTC's shall document the course of treatment 
    for patients and families using progress notes which provide 
    information to review, analyze, and modify the treatment plans. 
    Progress notes are legible, contemporaneous, sequential, signed and 
    dated and adhere to applicable provisions of the Manual of Mental 
    Health, Chemical Dependency, and Mental Retardation/Development 
    Disabilities Services and requirements set forth in Sec. 199.7(b)(3).
        (12) Therapeutic services.
        (i) Individual, group, and family psychotherapy are provided to all 
    patients, consistent with each patient's treatment plan, by qualified 
    mental health providers.
        (ii) A range of therapeutic activities, directed and staffed by 
    qualified [[Page 12429]] personnel, are offered to help patients meet 
    the goals of the treatment plan.
        (iii) Therapeutic educational services are provided or arranged 
    that are appropriate to the patients educational and therapeutic needs.
        (13) Ancillary services. A full range of ancillary services is 
    provided. Emergency services include policies and procedures for 
    handling emergencies with qualified personnel and written agreements 
    with each facility providing the service. Other ancillary services 
    include physical health, pharmacy and dietary services.
        (C) Standards for physical plant and environment.
        (1) Physical environment. The buildings and grounds of the RTC 
    shall be maintained so as to avoid health and safety hazards, be 
    supportive of the services provided to patients, and promote patient 
    comfort, dignity, privacy, personal hygiene, and personal safety.
        (2) Physical plant safety. The RTC shall be of permanent 
    construction and maintained in a manner that protects the lives and 
    ensures the physical safety of patients, staff, and visitors, including 
    conformity with all applicable building, fire, health, and safety 
    codes.
        (3) Disaster planning. The RTC shall maintain and rehearse written 
    plan for taking care of casualities and handling other consequences 
    arising from internal and external disasters.
        (D) Standards for evaluation system.
        (1) Quality assessment and improvement. The RTC shall develop and 
    implement a comprehensive quality assurance and quality improvement 
    program that monitors the quality, efficiency, appropriateness, and 
    effectiveness of the care, treatments, and services it provides for 
    patients and their families, primarily utilizing explicit clinical 
    indicators to evaluate all functions of the RTC and contribute to an 
    ongoing process of program improvement. The clinical director is 
    responsible for developing and implementing quality assessment and 
    improvement activities throughout the facility.
        (2) Utilization review. The RTC shall implement a utilization 
    review process, pursuant to a written plan approved by the professional 
    staff, the administration, and the governing body, that assesses the 
    appropriateness of admission, continued stay, and timeliness of 
    discharge as part of an effort to provide quality patient care in a 
    cost-effective manner. Findings of the utilization review process are 
    used as a basis for revising the plan of operation, including a review 
    of staff qualifications and staff composition.
        (3) Patient records review. The RTC shall implement a process, 
    including monthly reviews of a representative sample of patient 
    records, to determine the completeness and accuracy of the patient 
    records and the timeliness and pertinence of record entries, 
    particularly with regard to regular recording of progress/non-progress 
    in treatment.
        (4) Drug utilization review. The RTC shall implement a 
    comprehensive process for the monitoring and evaluating of the 
    prophylactic, therapeutic, and empiric use of drugs to assure that 
    medications are provided appropriately, safely, and effectively.
        (5) Risk management. The RTC shall implement a comprehensive risk 
    management program, fully coordinated with other aspects of the quality 
    assurance and quality improvement program, to prevent and control risks 
    to patients and staff and costs associated with clinical aspects of 
    patient care and safety.
        (6) Infection control. The RTC shall implement a comprehensive 
    system for the surveillance, prevention, control, and reporting of 
    infections acquired or brought into the facility.
        (7) Safety. The RTC shall implement an effective program to assure 
    a safe environment for patients, staff, and visitors, including an 
    incident report system, a continuous safety surveillance system, and an 
    active multidisciplinary safety committee.
        (8) Facility evaluation. The RTC annually evaluates accomplishment 
    of the goals and objectives of each clinical program and service of the 
    RTC and reports findings and recommendations to the governing body.
        (E) Participation agreement requirements. In addition to other 
    requirements set forth in paragraph (b)(4)(vii), of this section in 
    order for the services of an RTC to be authorized, the RTC shall have 
    entered into a Participation Agreement with OCHAMPUS. The period of a 
    participation agreement shall be specified in the agreement, and will 
    generally be for not more than five years. Participation agreements 
    entered into prior April 6, 1995 must be renewed not later than October 
    1, 1995. In addition to review of a facility's application and 
    supporting documentation, an on-site inspection by OCHAMPUS authorized 
    personnel may be required prior to signing a Participation Agreement. 
    Retroactive approval is not given. In addition, the Participation 
    Agreement shall include provisions that the RTC shall, at a minimum:
        (1) Render residential treatment center impatient services to 
    eligible CHAMPUS beneficiaries in need of such services, in accordance 
    with the participation agreement and CHAMPUS regulation;
        (2) Accept payment for its services based upon the methodology 
    provided in Sec. 199.14(f) or such other method as determined by the 
    Director, OCHAMPUS;
        (3) Accept the CHAMPUS all-inclusive per diem rate as payment in 
    full and collect from the CHAMPUS beneficiary or the family of the 
    CHAMPUS beneficiary only those amounts that represent the beneficiary's 
    liability, as defined in section 199.4, and charges for services and 
    supplies that are not a benefit of CHAMPUS;
        (4) Make all reasonable efforts acceptable to the Director, 
    OCHAMPUS, to collect those amounts, which represents the beneficiary's 
    liability, as defined in Sec. 199.4;
        (5) Comply with the provisions of Sec. 199.8, and submit claims 
    first to all health insurance coverage to which the beneficiary is 
    entitled that is primary to CHAMPUS;
        (6) Submit claims for services provided to CHAMPUS beneficiaries at 
    least 30 days (except to the extent a delay is necessitated by efforts 
    to first collect from other health insurance). If claims are not 
    submitted at least every 30 days, the RTC agrees not to bill the 
    beneficiary or the beneficiary's family for any amounts disallowed by 
    CHAMPUS;
        (7) Certify that:
        (i) It is and will remain in compliance with the provisions of 
    paragraph (b)(4)(vii) of this section establishing standards for 
    Residential Treatment Centers;
        (ii) It has conducted a self assessment of the facility's 
    compliance with the CHAMPUS Standards for Residential Treatment Centers 
    Serving Children and Adolescents with Mental Disorders, as issued by 
    the Director, OCHAMPUS and notified the Director, OCHAMPUS of any 
    matter regarding which the facility is not in compliance with such 
    standards; and
        (iii) It will maintain compliance with the CHAMPUS Standards for 
    Residential Treatment Centers Serving Children and Adolescents with 
    Mental Disorders, as issued by the Director, OCHAMPUS, except for any 
    such standards regarding which the facility notifies the Director, 
    OCHAMPUS that it is not in compliance.
        (8) Designate an individual who will act as liaison for CHAMPUS 
    inquiries. The RTC shall inform OCHAMPUS in writing of the designated 
    individual;
        (9) Furnish OCHAMPUS, as requested by OCHAMPUS, with cost data 
    certified [[Page 12430]] by an independent accounting firm or other 
    agency as authorized by the Director, OCHAMPUS;
        (10) Comply with all requirements of this section applicable to 
    institutional providers generally concerning preauthorization, 
    concurrent care review, claims processing, beneficiary liability, 
    double coverage, utilization and quality review and other matters;
        (11) Grant the Director, OCHAMPUS, or designee, the right to 
    conduct quality assurance audits or accounting audits with full access 
    to patients and records (including records relating to patients who are 
    not CHAMPUS beneficiaries) to determine the quality and cost-
    effectiveness of care rendered. The audits may be conducted on a 
    scheduled or unscheduled (unannounced) basis. This right to audit/
    review includes, but is not limited to:
        (i) Examination of fiscal and all other records of the RTC which 
    would confirm compliance with the participation agreement and 
    designation as an authorized CHAMPUS RTC provider;
        (ii) Conducting such audits of RTC records including clinical, 
    financial, and census records, as may be necessary to determine the 
    nature of the services being provided, and the basis for charges and 
    claims against the United States for services provided CHAMPUS 
    beneficiaries;
        (iii) Examining reports of evaluations and inspections conducted by 
    federal, state and local government, and private agencies and 
    organizations;
        (iv) Conducting on-site inspections of the facilities of the RTC 
    and interviewing employees, members of the staff, contractors, board 
    members, volunteers, and patients, as required;
        (v) Audits conducted by the United States General Accounting 
    Office.
        (F) Other requirements applicable to RTCs.
        (1) Even though an RTC may qualify as a CHAMPUS-authorized provider 
    and may have entered into a participation agreement with CHAMPUS, 
    payment by CHAMPUS for particular services provided is contingent upon 
    the RTC also meeting all conditions set forth in section 199.4 
    especially all requirements of paragraph (b)(4) of that section.
        (2) The RTC shall provide inpatient services to CHAMPUS 
    beneficiaries in the same manner it provides inpatient services to all 
    other patients. The RTC may not discriminate against CHAMPUS 
    beneficiaries in any manner, including admission practices, placement 
    in special or separate wings or rooms, or provisions of special or 
    limited treatment.
        (3) The RTC shall assure that all certifications and information 
    provided to the Director, OCHAMPUS incident to the process of obtaining 
    and retaining authorized provider status is accurate and that it has no 
    material errors or omissions. In the case of any misrepresentations, 
    whether by inaccurate information being provided or material facts 
    withheld, authorized status will be denied or terminated, and the RTC 
    will be ineligible for consideration for authorized provider status for 
    a two year period.
    * * * * *
        (xii) Psychiatric partial hospitalization programs. Paragraph 
    (b)(4)(xii) of this section establishes standards and requirements for 
    psychiatric partial hospitalization programs.
        (A) Organization and administration.
        (1) Definition. Partial hospitalization is defined as a time-
    limited, ambulatory, active treatment program that offers 
    therapeutically intensive, coordinated, and structured clinical 
    services within a stable therapeutic milieu. Partial hospitalization 
    programs serve patients who exhibit psychiatric symptoms, disturbances 
    of conduct, and decompensating conditions affecting mental health.
        (2) Eligibility.
        (i) Every psychiatric partial hospitalization program must be 
    certified pursuant to CHAMPUS certification standards. Such standards 
    shall incorporate the basic standards set forth in paragraphs 
    (b)(4)(xii) (A) through (D) of this section, and shall include such 
    additional elaborative criteria and standards as the Director, OCHAMPUS 
    determines are necessary to implement the basic standards. Each 
    psychiatric partial hospitalization program must be either a distinct 
    part of an otherwise authorized institutional provider or a 
    freestanding program.
        (ii) To be eligible for CHAMPUS certification, the facility is 
    required to be licensed and fully operational for a period of at least 
    six months (with a minimum patient census of at least 30 percent of bed 
    capacity) and operate in substantial compliance with state and federal 
    regulations.
        (iii) The facility is currently accredited by the Joint Commission 
    on Accreditation of Healthcare Organizations under the current edition 
    of the Accreditation Manual for Mental Health, Chemical Dependency, and 
    Mental Retardation/Developmental Disabilities Services.
        (iv) The facility has a written participation agreement with 
    OCHAMPUS. On October 1, 1995, the PHP is not a CHAMPUS-authorized 
    provider and CHAMPUS benefits are not paid for services provided until 
    the date upon which a participation agreement is signed by the 
    Director, OCHAMPUS. Partial hospitalization is capable of providing an 
    interdisciplinary program of medical and therapeutic services a minimum 
    of three hours per day, five days per week, and may include full- or 
    half-day, evening, and weekend treatment programs.
        (3) Governing body.
        (i) The PHP shall have a governing body which is responsible for 
    the policies, bylaws, and activities of the facilities. If the PHP is 
    owned by a partnership or single owner, the partners or single owner 
    are regarded as the governing body. The facility will provide an up-to-
    date list of names, addresses, telephone numbers, and titles of the 
    members of the governing body.
        (ii) The governing body ensures appropriate and adequate services 
    for all patients and oversees continuing development and improvement of 
    care. Where business relationships exist between the governing body and 
    facility, appropriate conflict-of-interest policies are in place.
        (iii) Board members are fully informed about facility services and 
    the governing body conducts annual review of its performance in meeting 
    purposes, responsibilities, goals and objectives.
        (4) Chief executive officer. The Chief Executive Officer, appointed 
    by and subject to the direction of the governing body, shall assume 
    overall administrative responsibility for the operation of the facility 
    according to governing body policies. The chief executive officer shall 
    have five years' administrative experience in the field of mental 
    health. On October 1, 1997, the CEO shall possess a degree in business 
    administration, public health, hospital administration, nursing, social 
    work, or psychology, or meet similar educational requirements as 
    prescribed by the Director, OCHAMPUS.
        (5) Clinical Director. The clinical director, appointed by the 
    governing body, shall be a psychiatrist or doctoral level psychologist 
    who meets applicable CHAMPUS requirements for individual professional 
    providers and is licensed to practice in the state where the PHP is 
    located. The clinical director shall possess requisite education and 
    experience, credentials applicable under state practice and licensing 
    laws appropriate to the professional discipline, and a minimum of five 
    years' clinical experience in the treatment of mental disorders 
    specific to the ages and [[Page 12431]] disabilities of the patients 
    served. The clinical director shall be responsible for planning, 
    development, implementation, and monitoring of all clinical activities.
        (6) Medical director. The medical director, appointed by the 
    governing body, shall be licensed to practice medicine in the state 
    where the residential treatment center is located and shall possess 
    requisite education and experience, including graduation from an 
    accredited school of medicine or osteopathy, an approved residency in 
    psychiatry and a minimum of five years clinical experience in the 
    treatment of mental disorders specific to the ages and disabilities of 
    the patients served. The Medical Director shall be responsible for the 
    planning, development, implementation, and monitoring of all activities 
    relating to medical treatment of patients. If qualified, the Medical 
    Director may also serve as Clinical Director.
        (7) Medical or professional staff organization. The governing body 
    shall establish a medical or professional staff organization to assure 
    effective implementation of clinical privileging, professional conduct 
    rules, and other activities directly affecting patient care.
        (8) Personnel policies and records. The PHP shall maintain written 
    personnel policies, updated job descriptions, personnel records to 
    assure the selection of qualified personnel and successful job 
    performance of those personnel.
        (9) Staff development. The facility shall provide appropriate 
    training and development programs for administrative, professional 
    support, and direct care staff.
        (10) Fiscal accountability. The PHP shall assure fiscal 
    accountability to applicable government authorities and patients.
        (11) Designated teaching facilities. Students, residents, interns, 
    or fellows providing direct clinical care are under the supervision of 
    a qualified staff member approved by an accredited university. The 
    teaching program is approved by the Director, OCHAMPUS.
        (12) Emergency reports and records. The facility notifies OCHAMPUS 
    of any serious occurrence involving CHAMPUS beneficiaries.
        (B) Treatment services.
        (1) Staff composition.
        (i) The PHP shall ensure that patient care needs will be 
    appropriately addressed during all hours of operation by a sufficient 
    number of fully qualified (including license, registration or 
    certification requirements, educational attainment, and professional 
    experience) health care professionals. Clinicians providing individual, 
    group, and family therapy meet CHAMPUS requirements as qualified mental 
    health providers, and operate within the scope of their licenses. The 
    ultimate authority for managing care is vested in a psychiatrist or 
    licensed doctor level psychologist. The management of medical care is 
    vested in a physician.
        (ii) The PHP shall establish and follow written plans to assure 
    adequate staff coverage during all hours of operation, including 
    physician availability, other professional staff coverage, and support 
    staff in the respective disciplines.
        (2) Staff qualifications. The PHP will have a sufficient number of 
    qualified mental health providers, administrative, and support staff to 
    address patients' clinical needs and to coordinate the services 
    provided. PHPs which employ individuals with master's or doctoral level 
    degrees in a mental health discipline who do not meet the licensure, 
    certification and experience requirements for a qualified mental health 
    provider but are actively working toward licensure or certification, 
    may provide services within the all-inclusive per diem rate, provided 
    the individual works under the clinical supervision of a fully 
    qualified mental health provider employed by the PHP. All other program 
    services shall be provided by trained, licensed staff.
        (3) Patient rights.
        (i) The PHP shall provide adequate protection for all patient 
    rights, including rights provided by law, privacy, personal rights, 
    safety, confidentiality, informed consent, grievances, and personal 
    dignity.
        (ii) The facility has a written policy regarding patient abuse and 
    neglect.
        (iii) Facility marketing and advertising meets professional 
    standards.
        (4) Behavioral management. The PHP shall adhere to a comprehensive, 
    written plan of behavior management, developed by the clinical director 
    and the medical or professional staff and approved by the governing 
    body, including strictly limited procedures to assure that restraint or 
    seclusion are used only in extraordinary circumstances, are carefully 
    monitored, and are fully documented. Only trained and clinically 
    privileged RNs or qualified mental health professionals may be 
    responsible for implementation of seclusion and restraint procedures in 
    an emergency situation.
        (5) Admission process. The PHP shall maintain written policies and 
    procedures to ensure that prior to an admission, a determination is 
    made, and approved pursuant to CHAMPUS preauthorization requirements, 
    that the admission is medically and/or psychologically necessary and 
    the program is appropriate to meet the patient's needs. Medical and/or 
    psychological necessity determinations shall be rendered by qualified 
    mental health professionals who meet CHAMPUS requirements for 
    individual professional providers and who are permitted by law and by 
    the facility to refer patients for admission.
        (6) Assessments. The professional staff of the PHP shall complete a 
    multidisciplinary assessment which includes, but is not limited to 
    physical health, psychological health, physiological, developmental, 
    family, educational, spiritual, and skills assessment of each patient 
    admitted. Unless otherwise specified, all required clinical assessment 
    are completed prior to development of the interdisciplinary treatment 
    plan.
        (7) Clinical formulation. A qualified mental health provider of the 
    PHP will complete a clinical formulation on all patients. The clinical 
    formulation will be reviewed and approved by the responsible individual 
    professional provider and will incorporate significant findings from 
    each of the multidisciplinary assessments. It will provide the basis 
    for development of an interdisciplinary treatment plan.
        (8) Treatment planning. A qualified mental health professional with 
    admitting privileges shall be responsible for the development, 
    supervision, implementation, and assessment of a written, 
    individualized, interdisciplinary plan of treatment, which shall be 
    completed by the fifth day following admission to a full-day PHP, or by 
    the seventh day following admission to a half-day PHP, and shall 
    include measurable and observable goals for incremental progress and 
    discharge. The treatment plan shall undergo review at least every two 
    weeks, or when major changes occur in treatment.
        (9) Discharge and transition planning. The PHP shall develop an 
    individualized transition plan which addresses anticipated needs of the 
    patient at discharge. The transition plan involves determining 
    necessary modifications in the treatment plan, facilitating the 
    termination of treatment, and identifying resources for maintaining 
    therapeutic stability following discharge.
        (10) Clinical documentation. Clinical records shall be maintained 
    on each patient to plan care and treatment and provide ongoing 
    evaluation of the patient's progress. All care is documented and each 
    clinical record contains at least the following: demographic data, 
    consent forms, [[Page 12432]] pertinent legal documents, all treatment 
    plans and patient assessments, consultation and laboratory reports, 
    physician orders, progress notes, and a discharge summary. All 
    documentation will adhere to applicable provisions of the JCAHO and 
    requirements set forth in Sec. 199.7(b)(3). An appropriately qualified 
    records administrator or technician will supervise and maintain the 
    quality of the records. These requirements are in addition to other 
    records requirements of this Part, and documentation requirements of 
    the Joint Commission on Accreditation of Health Care Organization.
        (11) Progress notes. PHPs shall document the course of treatment 
    for patients and families using progress notes which provide 
    information to review, analyze, and modify the treatment plans. 
    Progress notes are legible, contemporaneous, sequential, signed and 
    dated and adhere to applicable provisions of the Manual for Mental 
    Health, Chemical Dependency, and Mental Retardation/Developmental 
    Disabilities Services and requirements set forth in section 
    199.7(b)(3).
        (12) Therapeutic services.
        (i) Individual, group, and family therapy are provided to all 
    patients, consistent with each patient's treatment plan by qualified 
    mental health providers.
        (ii) A range of therapeutic activities, directed and staffed by 
    qualified personnel, are offered to help patients meet the goals of the 
    treatment plan.
        (iii) Educational services are provided or arranged that are 
    appropriate to the patient's needs.
        (13) Ancillary services. A full range of ancillary services are 
    provided. Emergency services include policies and procedures for 
    handling emergencies with qualified personnel and written agreements 
    with each facility providing these services. Other ancillary services 
    include physical health, pharmacy and dietary services.
        (C) Standards for physical plant and environment.
        (1) Physical environment. The buildings and grounds of the PHP 
    shall be maintained so as to avoid health and safety hazards, be 
    supportive of the services provided to patients, and promote patient 
    comfort, dignity, privacy, personal hygiene, and personal safety.
        (2) Physical plant safety. The PHP shall be of permanent 
    construction and maintained in a manner that protects the lives and 
    ensures the physical safety of patients, staff, and visitors, including 
    conformity with all applicable building, fire, health, and safety 
    codes.
        (3) Disaster planning. The PHP shall maintain and rehearse written 
    plans for taking care of casualities and handling other consequences 
    arising from internal and external disasters.
        (D) Standards for evaluation system.
        (1) Quality assessment and improvement. The PHP shall develop and 
    implement a comprehensive quality assurance and quality improvement 
    program that monitors the quality, efficiency, appropriateness, and 
    effectiveness of care, treatments, and services the PHP provides for 
    patients and their families. Explicit clinical indicators shall be used 
    to be used to evaluate all functions of the PHP and contribute to an 
    ongoing process of program improvement. The clinical director is 
    responsible for developing and implementing quality assessment and 
    improvement activities throughout the facility.
        (2) Utilization review. The PHP shall implement a utilization 
    review process, pursuant to a written plan approved by the professional 
    staff, the administration and the governing body, that assesses 
    distribution of services, clinical necessity of treatment, 
    appropriateness of admission, continued stay, and timeliness of 
    discharge, as part of an overall effort to provide quality patient care 
    in a cost-effective manner. Findings of the utilization review process 
    are used as a basis for revising the plan of operation, including a 
    review of staff qualifications and staff composition.
        (3) Patient records. The PHP shall implement a process, including 
    regular monthly reviews of a representative sample of patient records, 
    to determine completeness, accuracy, timeliness of entries, appropriate 
    signatures, and pertinence of clinical entries. Conclusions, 
    recommendations, actions taken, and the results of actions are 
    monitored and reported.
        (4) Drug utilization review. The PHP shall implement a 
    comprehensive process for the monitoring and evaluating of the 
    prophylactic, therapeutic, and empiric use of drugs to assure that 
    medications are provided appropriately, safely, and effectively.
        (5) Risk management. The PHP shall implement a comprehensive risk 
    management program, fully coordinated with other aspects of the quality 
    assurance and quality improvement program, to prevent and control risks 
    to patients and staff, and to minimize costs associated with clinical 
    aspects of patient care and safety.
        (6) Infection control. The PHP shall implement a comprehensive 
    system for the surveillance, prevention, control, and reporting of 
    infections acquired or brought into the facility.
        (7) Safety. The PHP shall implement an effective program to assure 
    a safe environment for patients, staff, and visitors, including an 
    incident reporting system, disaster training and safety education, a 
    continuous safety surveillance system, and an active multidisciplinary 
    safety committee.
        (8) Facility evaluation. The PHP annually evaluates accomplishment 
    of the goals and objectives of each clinical program component or 
    facility service of the PHP and reports findings and recommendations to 
    the governing body.
        (E) Participation agreement requirements. In addition to other 
    requirements set forth in paragraph (b)(4)(xii) of this section, in 
    order for the services of a PHP to be authorized, the PHP shall have 
    entered into a Participation Agreement with OCHAMPUS. The period of a 
    Participation Agreement shall be specified in the agreement, and will 
    generally be for not more than five years. On October 1, 1995, the PHP 
    shall not be considered to be a CHAMPUS authorized provider and CHAMPUS 
    payments shall not be made for services provided by the PHP until the 
    date the participation agreement is signed by the Director, OCHAMPUS. 
    In addition to review of a facility's application and supporting 
    documentation, an on-site inspection by OCHAMPUS authorized personnel 
    may be required prior to signing a participation agreement. The 
    Participation Agreement shall include at least the following 
    requirements:
        (1) Render partial hospitalization program services to eligible 
    CHAMPUS beneficiaries in need of such services, in accordance with the 
    participation agreement and CHAMPUS regulation.
        (2) Accept payment for its services based upon the methodology 
    provided in section 199.14, or such other method as determined by the 
    Director, OCHAMPUS;
        (3) Accept the CHAMPUS all-inclusive per diem rate as payment in 
    full and collect from the CHAMPUS beneficiary or the family of the 
    CHAMPUS beneficiary only those amounts that represent the beneficiary's 
    liability, as defined in Sec. 199.4, and charges for services and 
    supplies that are not a benefit of CHAMPUS;
        (4) Make all reasonable efforts acceptable to the Director, 
    OCHAMPUS, to collect those amounts, which represent the beneficiary's 
    liability, as defined in Sec. 199.4;
        (5) Comply with the provisions of Sec. 199.8, and submit claims 
    first to all health insurance coverage to which the beneficiary is 
    entitled that is primary to CHAMPUS; [[Page 12433]] 
        (6) Submit claims for services provided to CHAMPUS beneficiaries at 
    least every 30 days (except to the extent a delay is necessitated by 
    efforts to first collect from other health insurance). If claims are 
    not submitted at least every 30 days, the PHP agrees not to bill the 
    beneficiary or the beneficiary's family for any amounts disallowed by 
    CHAMPUS;
        (7) Certify that:
        (i) It is and will remain in compliance with the provisions of 
    paragraph (b)(4)(xii) of this section establishing standards for 
    psychiatric partial hospitalization programs;
        (ii) It has conducted a self assessment of the facility's 
    compliance with the CHAMPUS Standards for Psychiatric Partial 
    Hospitalization Programs, as issued by the Director, OCHAMPUS, and 
    notified the Director, OCHAMPUS of any matter regarding which the 
    facility is not in compliance with such standards; and
        (iii) It will maintain compliance with the CHAMPUS Standards for 
    Psychiatric Partial Hospitalization Programs, as issued by the 
    Director, OCHAMPUS, except for any such standards regarding which the 
    facility notifies the Director, OCHAMPUS that it is not in compliance.
        (8) Designate an individual who will act as liaison for CHAMPUS 
    inquiries. The PHP shall inform OCHAMPUS in writing of the designated 
    individual;
        (9) Furnish OCHAMPUS with cost data, as requested by OCHAMPUS, 
    certified by an independent accounting firm or other agency as 
    authorized by the Director, OCHAMPUS;
        (10) Comply with all requirements of this section applicable to 
    institutional providers generally concerning preauthorization, 
    concurrent care review, claims processing, beneficiary liability, 
    double coverage, utilization and quality review and other matters;
        (11) Grant the Director, OCHAMPUS, or designee, the right to 
    conduct quality assurance audits or accounting audits with full access 
    to patients and records (including records relating to patients who are 
    not CHAMPUS beneficiaries) to determine the quality and cost-
    effectiveness of care rendered. The audits may be conducted on a 
    scheduled or unscheduled (unannounced) basis. This right to audit/
    review includes, but is not limited to:
        (i) Examination of fiscal and all other records of the PHP which 
    would confirm compliance with the participation agreement and 
    designation as an authorized CHAMPUS PHP provider;
        (ii) Conducting such audits of PHP records including clinical, 
    financial, and census records, as may be necessary to determine the 
    nature of the services being provided, and the basis for charges and 
    claims against the United States for services provided CHAMPUS 
    beneficiaries;
        (iii) Examining reports of evaluations and inspections conducted by 
    federal, state and local government, and private agencies and 
    organizations;
        (iv) Conducting on-site inspections of the facilities of the PHP 
    and interreviewing employees, members of the staff, contractors, board 
    members, volunteers, and patients, as required;
        (v) Audits conducted by the United States General Account Office.
        (F) Other requirements applicable to PHPs.
        (1) Even though a PHP may qualify as a CHAMPUS-authorized provider 
    and may have entered into a participation agreement with CHAMPUS, 
    payment by CHAMPUS for particular services provided is contingent upon 
    the PHP also meeting all conditions set forth in section 199.4 of this 
    part.
        (2) The PHP shall provide patient services to CHAMPUS beneficiaries 
    in the same manner it provides inpatient services to all other 
    patients. The PHP may not discriminate against CHAMPUS beneficiaries in 
    any manner, including admission practices, placement in special or 
    separate wings or rooms, or provisions of special or limited treatment.
        (3) The PHP shall assure that all certifications and information 
    provided to the Director, OCHAMPUS incident to the process of obtaining 
    and retaining authorized provider status is accurate and that is has no 
    material errors or omissions. In the case of any misrepresentations, 
    whether by inaccurate information being provided or material facts 
    withheld, authorized provider status will be denied or terminated, and 
    the PHP will be ineligible for consideration for authorized provider 
    status for a two year period.
    * * * * *
        (xiv) Substance use disorder rehabilitation facilities. Paragraph 
    (b)(4)(xiv) of this section establishes standards and requirements for 
    substance use order rehabilitation facilities (SUDRF). This includes 
    both inpatient rehabilitation centers for the treatment of substance 
    use disorders and partial hospitalization centers for the treatment of 
    substance use disorders.
        (A) Organization and administration.
        (1) Definition of inpatient rehabilitation center. An inpatient 
    rehabilitation center is a facility, or distinct part of a facility, 
    that provides medically monitored, interdisciplinary addiction-focused 
    treatment to beneficiaries who have psychoactive substance use 
    disorders. Qualified health care professionals provide 24-hour, seven-
    day-per-week, medically monitored assessment, treatment, and 
    evaluation. An inpatient rehabilitation center is appropriate for 
    patients whose addiction-related symptoms, or concomitant physical and 
    emotional/behavioral problems reflect persistent dysfunction in several 
    major life areas. Inpatient rehabilitation is differentiated from:
        (i) Acute psychoactive substance use treatment and from treatment 
    of acute biomedical/emotional/behavioral problems; which problems are 
    either life-threatening and/or severely incapacitating and often occur 
    within the context of a discrete episode of addiction-related 
    biomedical or psychiatric dysfunction;
        (ii) A partial hospitalization center, which serves patients who 
    exhibit emotional/behavioral dysfunction but who can function in the 
    community for defined periods of time with support in one or more of 
    the major life areas;
        (iii) A group home, sober-living environment, halfway house, or 
    three-quarter way house;
        (iv) Therapeutic schools, which are educational programs 
    supplemented by addiction-focused services;
        (v) Facilities that treat patients with primary psychiatric 
    diagnoses other than psychoactive substance use or dependence; and
        (vi) Facilities that care for patients with the primary diagnosis 
    of mental retardation or developmental disability.
        (2) Definition of partial hospitalization center for the treatment 
    of substance use disorders. A partial hospitalization center for the 
    treatment of substance use disorders is an addiction-focused service 
    that provides active treatment to adolescents between the ages of 13 
    and 18 or adults aged 18 and over. Partial hospitalization is a generic 
    term for day, evening, or weekend programs that treat patients with 
    psychoactive substance use disorders according to a comprehensive, 
    individualized, integrated schedule of care. A partial hospitalization 
    center is organized, interdisciplinary, and medically monitored. 
    Partial hospitalization is appropriate for those whose addiction-
    related symptoms or concomitant physical and emotional/behavioral 
    problems can be managed outside the hospital environment for defined 
    periods of time with support in one or more of the major life 
    areas. [[Page 12434]] 
        (3) Eligibility.
        (i) Every inpatient rehabilitation center and partial 
    hospitalization center for the treatment of substance use disorders 
    must be certified pursuant to CHAMPUS certification standards. Such 
    standards shall incorporate the basic standards set forth in paragraphs 
    (b)(4)(xiv) (A) through (D) of this section, and shall include such 
    additional elaborative criteria and standards as the Director, OCHAMPUS 
    determines are necessary to implement the basic standards.
        (ii) To be eligible for CHAMPUS certification, the SUDRF is 
    required to be licensed and fully operational (with a minimum patient 
    census of the lesser of: six patients or 30 percent of bed capacity) 
    for a period of at least six months and operate in substantial 
    compliance with state and federal regulations.
        (iii) The SUDRF is currently accredited by the Joint Commission on 
    Accreditation of Healthcare Organizations under the Accreditation 
    Manual for Mental Health, Chemical Dependency, and Mental Retardation/
    Developmental Disabilities Services, or by the Commission on 
    Accreditation of Rehabilitation Facilities as an alcoholism and other 
    drug dependency rehabilitation program under the Standards Manual for 
    Organizations Serving People with Disabilities, or other designated 
    standards approved by the Director, OCHAMPUS.
        (iv) The SUDRF has a written participation agreement with OCHAMPUS. 
    On October 1, 1995, the SUDRF is not considered a CHAMPUS-authorized 
    provider, and CHAMPUS benefits are not paid for services provided until 
    the date upon which a participation agreement is signed by the 
    Director, OCHAMPUS.
        (4) Governing body.
        (i) The SUDRF shall have a governing body which is responsible for 
    the policies, bylaws, and activities of the facility. If the SUDRF is 
    owned by a partnership or single owner, the partners or single owner 
    are regarded as the governing body. The facility will provide an up-to-
    date list of names, addresses, telephone numbers and titles of the 
    members of the governing body.
        (ii) The governing body ensures appropriate and adequate services 
    for all patients and oversees continuing development and improvement of 
    care. Where business relationships exist between the governing body and 
    facility, appropriate conflict-of-interest policies are in place.
        (iii) Board members are fully informed about facility services and 
    the governing body conducts annual reviews of its performance in 
    meeting purposes, responsibilities, goals and objectives.
        (5) Chief executive officer. The chief executive officer, appointed 
    by and subject to the direction of the governing body, shall assume 
    overall administrative responsibility for the operation of the facility 
    according to governing body policies. The chief executive officer shall 
    have five years' administrative experience in the field of mental 
    health or addictions. On October 1, 1997 the CEO shall possess a degree 
    in business administration, public health, hospital administration, 
    nursing, social work, or psychology, or meet similar educational 
    requirements as prescribed by the Director, OCHAMPUS.
        (6) Clinical Director. The clinical director, appointed by the 
    governing body, shall be a qualified psychiatrist or doctoral level 
    psychologist who meets applicable CHAMPUS requirements for individual 
    professional providers and is licensed to practice in the state where 
    the SUDRF is located. The clinical director shall possess requisite 
    education and experience, including credentials applicable under state 
    practice and licensing laws appropriate to the professional discipline. 
    The clinical director shall satisfy at least one of the following 
    requirements: certification by the American Society of Addiction 
    Medicine; one year or 1,000 hours of experience in the treatment of 
    psychoactive substance use disorders; or is a psychiatrist or doctoral 
    level psychologist with experience in the treatment of substance use 
    disorders. The clinical director shall be responsible for planning, 
    development, implementation, and monitoring of all clinical activities.
        (7) Medical director. The medical director, appointed by the 
    governing body, shall be licensed to practice medicine in the state 
    where the center is located and shall possess requisite education 
    including graduation from an accredited school of medicine or 
    osteopathy. The medical director shall satisfy at least one of the 
    following requirements: certification by the American Society of 
    Addiction Medicine; one year or 1,000 hours of experience in the 
    treatment of psychoactive substance use disorders; or is a psychiatrist 
    with experience in the treatment of substance use disorders. The 
    medical director shall be responsible for the planning, development, 
    implementation, and monitoring of all activities relating to medical 
    treatment of patients. If qualified, the Medical Director may also 
    serve as Clinical Director.
        (8) Medical or professional staff organization. The governing body 
    shall establish a medical or professional staff organization to assure 
    effective implementation of clinical privileging, professional conduct 
    rules, and other activities directly affecting patient care.
        (9) Personnel policies and records. The SUDRF shall maintain 
    written personnel policies, updated job descriptions, personnel records 
    to assure the selection of qualified personnel and successful job 
    performance of those personnel.
        (10) Staff development. The SUDRF shall provide appropriate 
    training and development programs for administrative, support, and 
    direct care staff.
        (11) Fiscal accountability. The SUDRF shall assure fiscal 
    accountability to applicable government authorities and patients.
        (12) Designated teaching facilities. Students, residents, interns, 
    or fellows providing direct clinical care are under the supervision of 
    a qualified staff member approved by an accredited university or 
    approved training program. The teaching program is approved by the 
    Director, OCHAMPUS.
        (13) Emergency reports and records. The facility notifies OCHAMPUS 
    of any serious occurrence involving CHAMPUS beneficiaries.
        (B) Treatment services.
        (1) Staff composition.
        (i) The SUDRF shall follow written plans which assure that medical 
    and clinical patient needs will be appropriately addressed during all 
    hours of operation by a sufficient number of fully qualified (including 
    license, registration or certification requirements, educational 
    attainment, and professional experience) health care professionals and 
    support staff in the respective disciplines. Clinicians providing 
    individual, group and family therapy meet CHAMPUS requirements as 
    qualified mental health providers and operate within the scope of their 
    licenses. The ultimate authority for planning, development, 
    implementation, and monitoring of all clinical activities is vested in 
    a psychiatrist or doctoral level clinical psychologist. The management 
    of medical care is vested in a physician.
        (ii) The SUDRF shall establish and follow written plans to assure 
    adequate staff coverage during all hours of operation of the center, 
    including physician availability and other professional staff coverage 
    24 hours per day, seven days per week for an inpatient rehabilitation 
    center and during all hours of operation for a partial hospitalization 
    center. [[Page 12435]] 
        (2) Staff qualifications. Within the scope of its programs and 
    services, the SUDRF has a sufficient number of professional, 
    administrative, and support staff to address the medical and clinical 
    needs of patients and to coordinate the services provided. SUDRFs that 
    employ individuals with master's or doctoral level degrees in a mental 
    health discipline who do not meet the licensure, certification and 
    experience requirements for a qualified mental health provider but are 
    actively working toward licensure or certification, may provide 
    services within the DRG, provided the individual works under the 
    clinical supervision of a fully qualified mental health provider 
    employed by the SUDRF.
        (3) Patient rights.
        (i) The SUDRF shall provide adequate protection for all patient 
    rights, safety, confidentiality, informed consent, grievances, and 
    personal dignity.
        (ii) The SUDRF has a written policy regarding patient abuse and 
    neglect.
        (iii) SUDRF marketing and advertising meets professional standards.
        (4) Behavioral management. When a SUDRF uses a behavioral 
    management program, the center shall adhere to a comprehensive, written 
    plan of behavioral management, developed by the clinical director and 
    the medical or professional staff and approved by the governing body. 
    It shall be based on positive reinforcement methods and, except for 
    infrequent use of temporary physical holds or time outs, does not 
    include the use of restraint or seclusion. Only trained and clinically 
    privileged RNs or qualified mental health professionals may be 
    responsible for the implementation of seclusion and restraint in an 
    emergency situation.
        (5) Admission process. The SUDRF shall maintain written policies 
    and procedures to ensure that, prior to an admission, a determination 
    is made, and approved pursuant to CHAMPUS preauthorization 
    requirements, that the admission is medically and/or psychologically 
    necessary and the program is appropriate to meet the patient's needs. 
    Medical and/or psychological necessity determinations shall be rendered 
    by qualified mental health professionals who meet CHAMPUS requirements 
    for individual professional providers and who are permitted by law and 
    by the facility to refer patients for admission.
        (6) Assessment. The professional staff of the SUDRF shall provide a 
    complete, multidisciplinary assessment of each patient which includes, 
    but is not limited to, medical history, physical health, nursing needs, 
    alcohol and drug history, emotional and behavioral factors, age-
    appropriate social circumstances, psychological condition, education 
    status, and skills. Unless otherwise specified, all required clinical 
    assessments are completed prior to development of the multidisciplinary 
    treatment plan.
        (7) Clinical formulation. A qualified mental health care 
    professional of the SUDRF will complete a clinical formulation on all 
    patients. The clinical formulation will be reviewed and approved by the 
    responsible individual professional provider and will incorporate 
    significant findings from each of the multidisciplinary assessments. It 
    will provide the basis for development of an interdisciplinary 
    treatment plan.
        (8) Treatment planning. A qualified health care professional with 
    admitting privileges shall be responsible for the development, 
    supervision, implementation, and assessment of a written, 
    individualized, and interdisciplinary plan of treatment, which shall be 
    completed within 10 days of admission to an inpatient rehabilitation 
    center or by the fifth day following admission to full day partial 
    hospitalization center, and by the seventh day of treatment for half 
    day partial hospitalization. The treatment plan shall include 
    individual, measurable, and observable goals for incremental progress 
    towards the treatment plan objectives and goals and discharge. A 
    preliminary treatment plan is completed within 24 hours of admission 
    and includes at least a physician's admission note and orders. The 
    master treatment plan is regularly reviewed for effectiveness and 
    revised when major changes occur in treatment.
        (9) Discharge and transition planning. The SUDRF shall maintain a 
    transition planning process to address adequately the anticipated needs 
    of the patient prior to the time of discharge.
        (10) Clinical documentation. Clinical records shall be maintained 
    on each patient to plan care and treatment and provide ongoing 
    evaluation of the patient's progress. All care is documented and each 
    clinical record contains at least the following: demographic data, 
    consent forms, pertinent legal documents, all treatment plans and 
    patient assessments, consultation and laboratory reports, physician 
    orders, progress notes, and a discharge summary. All documentation will 
    adhere to applicable provisions of the JCAHO and requirements set forth 
    in Sec. 199.7(b)(3). An appropriately qualified records administrator 
    or technician will supervise and maintain the quality of the records. 
    These requirements are in addition to other records requirements of 
    this Part, and provisions of the JCAHO Manual for Mental Health, 
    Chemical Dependency, and Mental Retardation/Developmental Disabilities 
    Services.
        (11) Progress notes. Timely and complete progress notes shall be 
    maintained to document the course of treatment for the patient and 
    family.
        (12) Therapeutic services.
        (i) Individual, group, and family psychotherapy and addiction 
    counseling services are provided to all patients, consistent with each 
    patient's treatment plan by qualified mental health providers.
        (ii) A range of therapeutic activities, directed and staffed by 
    qualified personnel, are offered to help patients meet the goals of the 
    treatment plan.
        (iii) Therapeutic educational services are provided or arranged 
    that are appropriate to the patient's educational and therapeutic 
    needs.
        (13) Ancillary services. A full range of ancillary services is 
    provided. Emergency services include policies and procedures for 
    handling emergencies with qualified personnel and written agreements 
    with each facility providing the service. Other ancillary services 
    include physical health, pharmacy and dietary services.
        (C) Standards for physical plant and environment.
        (1) Physical environment. The buildings and grounds of the SUDRF 
    shall be maintained so as to avoid health and safety hazards, be 
    supportive of the services provided to patients, and promote patient 
    comfort, dignity, privacy, personal hygiene, and personal safety.
        (2) Physical plant safety. The SUDRF shall be maintained in a 
    manner that protects the lives and ensures the physical safety of 
    patients, staff, and visitors, including conformity with all applicable 
    building, fire, health, and safety codes.
        (3) Disaster planning. The SUDRF shall maintain and rehearse 
    written plans for taking care of casualties and handling other 
    consequences arising from internal or external disasters.
        (D) Standards for evaluation system.
        (1) Quality assessment and improvement. The SUDRF develop and 
    implement a comprehensive quality assurance and quality improvement 
    program that monitors the quality, efficiency, appropriateness, and 
    effectiveness of the care, treatments, and services it provides for 
    patients and their families, utilizing clinical indicators of 
    effectiveness to contribute to an ongoing process of program 
    improvement. The clinical director is [[Page 12436]] responsible for 
    developing and implementing quality assessment and improvement 
    activities throughout the facility.
        (2) Utilization review. The SUDRF shall implement a utilization 
    review process, pursuant to a written plan approved by the professional 
    staff, the administration, and the governing body, that assesses the 
    appropriateness of admissions, continued stay, and timeliness of 
    discharge as part of an effort to provide quality patient care in a 
    cost-effective manner. Findings of the utilization review process are 
    used as a basis for revising the plan of operation, including a review 
    of staff qualifications and staff composition.
        (3) Patient records review. The center shall implement a process, 
    including monthly reviews of a representative sample of patient 
    records, to determine the completeness and accuracy of the patient 
    records and the timeliness and pertinence of record entries, 
    particularly with regard to regular recording of progress/non-progress 
    in treatment plan.
        (4) Drug utilization review. An inpatient rehabilitation center 
    and, when applicable, a partial hospitalization center, shall implement 
    a comprehensive process for the monitoring and evaluating of the 
    prophylactic, therapeutic, and empiric use of drugs to assure that 
    medications are provided appropriately, safely, and effectively.
        (5) Risk management. The SUDRF shall implement a comprehensive risk 
    management program, fully coordinated with other aspects of the quality 
    assurance and quality improvement program, to prevent and control risks 
    to patients and staff and costs associated with clinical aspects of 
    patient care and safety.
        (6) Infection control. The SUDRF shall implement a comprehensive 
    system for the surveillance, prevention, control, and reporting of 
    infections acquired or brought into the facility.
        (7) Safety. The SUDRF shall implement an effective program to 
    assure a safe environment for patients, staff, and visitors.
        (8) Facility evaluation. The SUDRF annually evaluates 
    accomplishment of the goals and objectives of each clinical program and 
    service of the SUDRF and reports findings and recommendations to the 
    governing body.
        (E) Participation agreement requirements. In addition to other 
    requirements set forth in paragraph (b)(4)(xiv) of this section, in 
    order for the services of an inpatient rehabilitation center or partial 
    hospitalization center for the treatment of substance abuse disorders 
    to be authorized, the center shall have entered into a Participation 
    Agreement with OCHAMPUS. The period of a Participation Agreement shall 
    be specified in the agreement, and will generally be for not more than 
    five years. On October 1, 1995, the SUDRF shall not be considered to be 
    a CHAMPUS authorized provider and CHAMPUS payments shall not be made 
    for services provided by the SUDRF until the date the participation 
    agreement is signed by the Director, OCHAMPUS. In addition to review of 
    the SUDRFS application and supporting documentation, an on-site visit 
    by OCHAMPUS representatives may be part of the authorization process. 
    In addition, such a Participation Agreement may not be signed until an 
    SUDRF has been licensed and operational for at least six months. The 
    Participation Agreement shall include at least the following 
    requirements:
        (1) Render applicable services to eligible CHAMPUS beneficiaries in 
    need of such services, in accordance with the participation agreement 
    and CHAMPUS regulation;
        (2) Accept payment for its services based upon the methodology 
    provided in Sec. 199.14, or such other method as determined by the 
    Director, OCHAMPUS;
        (3) Accept the CHAMPUS-determined rate as payment in full and 
    collect from the CHAMPUS beneficiary or the family of the CHAMPUS 
    beneficiary only those amounts that represent the beneficiary's 
    liability, as defined in Sec. 199.4, and charges for services and 
    supplies that are not a benefit of CHAMPUS;
        (4) Make all reasonable efforts acceptable to the Director, 
    OCHAMPUS, to collect those amounts which represent the beneficiary's 
    liability, as defined in Sec. 199.4;
        (5) Comply with the provisions of Sec. 199.8, and submit claims 
    first to all health insurance coverage to which the beneficiary is 
    entitled that is primary to CHAMPUS;
        (6) Furnish OCHAMPUS with cost data, as requested by OCHAMPUS, 
    certified to by an independent accounting firm or other agency as 
    authorized by the Director, OCHAMPUS;
        (7) Certify that:
        (i) It is and will remain in compliance with the provisions of 
    paragraph (b)(4)(xiv) of the section establishing standards for 
    substance use disorder rehabilitation facilities;
        (ii) It has conducted a self assessment of the SUDRF'S compliance 
    with the CHAMPUS Standards for Substance Use Disorder Rehabilitation 
    Facilities, as issued by the Director, OCHAMPUS, and notified the 
    Director, OCHAMPUS of any matter regarding which the facility is not in 
    compliance with such standards; and
        (iii) It will maintain compliance with the CHAMPUS Standards for 
    Substance Use Disorder Rehabilitation Facilities, as issued by the 
    Director, OCHAMPUS, except for any such standards regarding which the 
    facility notifies the Director, OCHAMPUS that it is not in compliance.
        (8) Grant the Director, OCHAMPUS, or designee, the right to conduct 
    quality assurance audits or accounting audits with full access to 
    patients and records (including records relating to patients who are 
    not CHAMPUS beneficiaries) to determine the quality and cost 
    effectiveness of care rendered. The audits may be conducted on a 
    scheduled or unscheduled (unannounced) basis. This right to audit/
    review included, but is not limited to:
        (i) Examination of fiscal and all other records of the center which 
    would confirm compliance with the participation agreement and 
    designation as an authorized CHAMPUS provider;
        (ii) Conducting such audits of center records including clinical, 
    financial, and census records, as may be necessary to determine the 
    nature of the services being provided, and the basis for charges and 
    claims against the United States for services provided CHAMPUS 
    beneficiaries;
        (iii) Examining reports of evaluations and inspection conducted by 
    federal, state and local government, and private agencies and 
    organizations;
        (iv) Conducting on-site inspections of the facilities of the SUDRF 
    and interviewing employees, members of the staff, contractors, board 
    members, volunteers, and patients, as required.
        (v) Audits conducted by the United States General Accounting 
    Office.
        (F) Other requirements applicable to substance use disorder 
    rehabilitation facilities.
        (1) Even though a SUDRF may qualify as a CHAMPUS-authorized 
    provider and may have entered into a participation agreement with 
    CHAMPUS, payment by CHAMPUS for particular services provided is 
    contingent upon the SUDRF also meeting all conditions set forth in 
    Sec. 199.4.
        (2) The center shall provide inpatient services to CHAMPUS 
    beneficiaries in the same manner it provides services to all other 
    patients. The center may not discriminate against CHAMPUS beneficiaries 
    in any manner, including admission practices, placement in special or 
    separate wings or rooms, or [[Page 12437]] provisions of special or 
    limited treatment.
        (3) The substance use disorder facility shall assure that all 
    certifications and information provided to the Director, OCHAMPUS 
    incident to the process of obtaining and retaining authorized provider 
    status is accurate and that it has no material errors or omissions. In 
    the case of any misrepresentations, whether by inaccurate information 
    being provided or material facts withheld, authorized provider status 
    will be denied or terminated, and the facility will be ineligible for 
    consideration for authorized provider status for a two year period.
    * * * * *
        4. Section 199.14 is amended by designating the current text of 
    paragraph (a)(2)(ii)(A) as paragraph (a)(2)(ii)(A)(1), revising 
    paragraphs (a)(2)(ii)(B) and (a)(2)(iv)(C), the heading of paragraph 
    (a)(2)(ix), paragraphs (a)(2)(ix)(A), (a)(2)(ix)(C), (f)(3), and 
    (f)(5), and by adding new paragraphs (a)(1)(ii)(F), (a)(2)(ii)(A)(2), 
    and (f)(6) as follows:
    
    
    Sec. 199.14   Provider reimbursement methods.
    
        (a) Hospitals. * * *
        (1) CHAMPUS Diagnosis Related Group (DRG)-based payment system. * * 
    *
        (ii) Applicability of the DRG system. * * *
        (F) Substance Use Disorder Rehabilitation facilities.
        With admissions on or after July 1, 1995, substance use disorder 
    rehabilitation facilities, authorized under Sec. 199.6(b)(4)(xiv), are 
    subject to the DRG-based payment system.
    * * * * *
        (2) CHAMPUS mental health per diem payment system.
    * * * * *
        (ii) Hospital-specific per diems for higher volume hospitals and 
    units. * * *
        (A) Per diem amount. * * *
        (2) In states that have implemented a payment system in connection 
    with which hospitals in that state have been exempted from the CHAMPUS 
    DRG-based payment system pursuant to paragraph (a)(1)(ii)(A) of this 
    section, psychiatric hospitals and units may have per diem amounts 
    established based on the payment system applicable to such hospitals 
    and units in the state. The per diem amount, however, may not exceed 
    the cap amount applicable to other higher volume hospitals.
        (B) Cap.
        (1) As it affects payment for care provided to patients prior to 
    April 6, 1995, the base period per diem amount may not exceed the 80th 
    percentile of the average daily charge weighted for all discharges 
    throughout the United States from all higher volume hospitals.
        (2) Applicable to payments for care provided to patients on or 
    after April 6, 1996, the base period per diem amount may not exceed the 
    70th percentile of the average daily charge weighted for all discharges 
    throughout the United States from all higher volume hospitals. For this 
    purpose, base year charges shall be deemed to be charges during the 
    period of July 1, 1991 to June 30, 1992, adjusted to correspond to base 
    year (FY 1988) charges by the percentage change in average daily 
    charges for all higher volume hospitals and units between the period of 
    July 1, 1991 to June 30, 1992 and the base year.
    * * * * *
        (iv) Base period and update factors.
    * * * * *
        (C) Update factors.
        (1) The hospital-specific per diems and the regional per diems 
    calculated for the base period pursuant to paragraphs (a)(2)(ii) of 
    this section shall remain in effect for federal fiscal year 1989; there 
    will be no additional update for fiscal year 1989.
        (2) Except as provided in paragraph (a)(2)(iv)(C)(3) of this 
    section, for subsequent federal fiscal years, each per diem shall be 
    updated by the Medicare update factor for hospitals and units exempt 
    from the Medicare prospective payment system.
        (3) As an exception to the update required by paragraph 
    (a)(2)(iv)(C)(2) of this section, all per diems in effect at the end of 
    fiscal year 1995 shall remain in effect, with no additional update, 
    throughout fiscal years 1996 and 1997. For fiscal year 1998 and 
    thereafter, the per diems in effect at the end of fiscal year 1997 will 
    be updated in accordance with paragraph (a)(2)(iv)(C)(2).
        (4) Hospitals and units with hospital-specific rates will be 
    notified of their respective rates prior to the beginning of each 
    Federal fiscal year. New hospitals shall be notified at such time as 
    the hospital rate is determined. The actual amounts of each regional 
    per diem that will apply in any Federal fiscal year shall be published 
    in the Federal Register at approximately the start of that fiscal year.
    * * * * *
        (ix) Per diem payment for psychiatric and substance use disorder 
    rehabilitation partial hospitalization services.
        (A) In general. Psychiatric and substance use disorder 
    rehabilitation partial hospitalization services authorized by 
    Sec. 199.4 (b)(10) and (e)(4) and provided by institutional providers 
    authorized under Sec. 199.6 (b)(4)(xii) and (b)(4)(xiv), are reimbursed 
    on the basis of prospectively determined, all-inclusive per diem rates. 
    The per diem payment amount must be accepted as payment in full for all 
    institutional services provided, including board, routine nursing 
    services, ancillary services (includes art, music, dance, occupational 
    and other such therapies), psychological testing and assessments, 
    overhead and any other services for which the customary practice among 
    similar providers is included as part of the institutional charges.
    * * * * *
        (C) Per diem rate. For any full day partial hospitalization program 
    (minimum of 6 hours), the maximum per diem payment amount is 40 percent 
    of the average inpatient per diem amount per case established under the 
    CHAMPUS mental health per diem reimbursement system for both high and 
    low volume psychiatric hospitals and units (as defined in 
    Sec. 199.14(a)(2)) for the fiscal year. A partial hospitalization 
    program of less than 6 hours (with a minimum of three hours) will be 
    paid a per diem rate of 75 percent of the rate for a full-day program.
    * * * * *
        (f) Reimbursement of Residential Treatment Centers.
    * * * * *
        (3) For care on or after April 6, 1995, the per diem amount may not 
    exceed a cap of the 70th percentile of all established Federal fiscal 
    year 1994 RTC rates nationally, weighted by total CHAMPUS days provided 
    at each rate during the first half of Federal fiscal year 1994, and 
    updated to FY95. For Federal fiscal years 1996 and 1997, the cap shall 
    remain unchanged. For Federal fiscal years after fiscal year 1997, the 
    cap shall be adjusted by the Medicare update factor for hospitals and 
    units exempt from the Medicare prospective payment system.
    * * * * *
        (5) Subject to the applicable RTC cap, adjustments to the RTC rates 
    may be made annually.
        (i) For Federal fiscal years through 1995, the adjustment shall be 
    based on the Consumer Price Index-Urban (CPI-U) for medical care as 
    determined applicable by the Director, OCHAMPUS.
        (ii) For purposes of rates for Federal fiscal years 1996 and 1997:
        (A) for any RTC whose 1995 rate was at or above the thirtieth 
    percentile of all established Federal fiscal year 1995 RTC rates 
    normally, weighted by total CHAMPUS days provided at each rate during 
    the first half of Federal fiscal [[Page 12438]] year 1994, that rate 
    shall remain in effect, with no additional update, throughout fiscal 
    years 1996 and 1997; and
        (B) For any RTC whose 1995 rate was below the 30th percentile level 
    determined under paragraph (f)(5)(ii)(A) of this section, the rate 
    shall be adjusted by the lesser of: the CPI-U for medical care, or the 
    amount that brings the rate up to that 30th percentile level.
        (iii) For subsequent Federal fiscal years after fiscal year 1997, 
    RTC rates shall be updated by the Medicare update factor for hospitals 
    and units exempt from the Medicare prospective payment system.
        (6) For care provided on or after July 1, 1995, CHAMPUS will not 
    pay for days in which the patient is absent on leave from the RTC. The 
    RTC must identify these days when claiming reimbursement.
    
        Dated: March 1, 1995.
    L.M. Bynum,
    Alternate OSD Federal Register Liaison Officer, Department of Defense.
    [FR Doc. 95-5375 Filed 3-6-95; 8:45 am]
    BILLING CODE 5000-04-M
    
    

Document Information

Effective Date:
4/6/1995
Published:
03/07/1995
Department:
Defense Department
Entry Type:
Rule
Action:
Final rule.
Document Number:
95-5375
Dates:
This rule is effective April 6, 1995, except amendments to Sec. 199.4 which are effective October 1, 1995.
Pages:
12419-12438 (20 pages)
RINs:
0720-AA23
PDF File:
95-5375.pdf
CFR: (5)
32 CFR 199.6)
32 CFR 199.14(a)(2))
32 CFR 199.4
32 CFR 199.6
32 CFR 199.14