[Federal Register Volume 59, Number 185 (Monday, September 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23465]
[[Page Unknown]]
[Federal Register: September 26, 1994]
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DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 220
RIN 0790-AF63
Collection From Third Party Payers of Reasonable Costs of
Healthcare Services
AGENCY: Office of the Secretary, DoD.
ACTION: Final rule.
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SUMMARY: This final rule replaces the current method of per diem
billings to one based on diagnostic related groups, expands the single
outpatient billing category to as many as sixty, and expands the
billing for outpatient services to include land ambulance service, air
ambulance service and hyperbaric services. This final rule improves
billing methods for both inpatient and outpatient care. This expansion
creates a greater level of specificity which more accurately reflects
the cost of the care provided. In addition, this final rule identifies
additional outpatient services for which recovery of costs will be
sought.
EFFECTIVE DATE: This final rule is effective on October 26, 1994.
FOR FURTHER INFORMATION CONTACT:
LCDR Patrick Kelly, (703) 756-8910.
SUPPLEMENTARY INFORMATION:
I. Background
Congress enacted 10 U.S.C. 1095 as part of the Consolidated Omnibus
Budget Reconciliation Act of 1985, Pub. L. 99-272, Sec. 2001(a)(1), to
permit the Department of Defense to collect from third party payers
reasonable inpatient hospital care costs incurred on behalf of most DoD
health care beneficiaries. To implement this statute, the Department of
Defense issued a proposed rule October 8, 1986, and a final rule
September 25, 1987. The final rule has been amended several times since
1987, most recently on September 9, 1992, (57 CFR 41096). That rule
changed the unified per diem rate for inpatient care to a set of 12
clinical group per diem rates. It also implemented authority to bill
for outpatient services by establishing a single per visit rate for
most outpatient services.
II. Provisions of the Final Rule
A. Inpatient Services
In October 1992, the Department of Defense began a transition from
the traditional single rate for reimbursement for various healthcare
services to multiple rates reflective of the clinical care provided.
The multiple rates result in charges that more closely approximate the
actual costs of delivering specific categories of medical services,
such as surgical care, obstetrical care, pediatric care, etc. The rates
are based on the actual costs of rendering healthcare services as
reflected in the Medical Expense and Performance Reporting System
(MEPRS).
This rule changes paragraph 220.8(c) by replacing the current
twelve billing categories with a billing method based on diagnostic
related groups (DRGs), as specifically authorized by 10 U.S.C.
1095(f)(3). The DRG-based method for determining reasonable costs of
inpatient care will produce more accurate and equitable billings.
Billings will more accurately reflect the costs associated with the
actual services provided. This rule models the DRG-based cost
methodology, the basis for the DRG-based payment system for hospital
care under the Civilian Health and Medical Program of the Uniformed
Services (CHAMPUS). However, in some respects, this rule simplifies
CHAMPUS methods, with authority to introduce the additional refinements
at a later date.
For example, initially this rule uses a single national
standardized amount, rather than the three standardized amounts (large
urban, other urban, and rural) used by CHAMPUS. The three amounts do
not differ significantly and are probably not as relevant in connection
with a unified federal hospital system, such as DoD's. However, the
rule allows us to adopt the multiple standardized amounts at a later
date.
The standardized amount is the result of dividing total system-wide
costs of inpatient care by the total number of discharges system-wide.
With respect to DRG relative weights, this rule uses the same weights
as are used for the CHAMPUS DRG-based payment method. The CHAMPUS
weights were calculated from a data base of actual CHAMPUS claims filed
by civilian hospitals. Because the patient population under military
treatment facilities and CHAMPUS are quite similar, we believe it is
appropriate to use the same weights.
The CHAMPUS DRG-based payment method uses a number of adjustments
to the product of standardized amount multiplied by the relative weight
of the appropriate DRG. The adjustments relate to outlier cases, area
wage differences and indirect medical education. Initially, this rule
does not use these adjustments, but allows all related costs to be
reflected in the standardized amount. This approach has the advantage
of simplicity and predictability for payers. However, the final rule
allows these adjustments to be introduced at a later date.
In accordance with current practice, the standard DRG-based rate is
divided into two categories: Hospital charges, which includes ancillary
charges, and Professional charges.
The effective date for implementation of a multiple rate schedule
will be the effective date of this rule, barring unforeseen
difficulties in automation support. The specific rates will be
published in the Federal Register.
B. Outpatient Services
As with the inpatient rates, the outpatient rates are based on the
actual costs of rendering healthcare services as reflected in the
Medical Expense and Performance Reporting System (MEPRS). MEPRS is the
standard expense reporting system for all fixed medical treatment
facilities (MTFs) within the Department of Defense (DoD) and is the
accepted source of healthcare information for Congress and offices and
agencies of the Executive Branch. The reimbursement categories are
selected based on board certified specialties/subspecialties widely
accepted by graduate medical accrediting organizations such as the
Accreditation Council for Graduate Medical Education (ACGME) or the
American Board of Medical Specialties (ABMS).
Rates are established but need not be limited to each of the
following clinical reimbursement categories: Internal Medicine,
Allergy, Cardiology, Diabetic, Endocrinology, Gastroenterology,
Hematology, Hypertension, Nephrology, Neurology, Nutrition, Oncology,
Pulmonary Disease, Rheumatology, Dermatology, Infectious Disease,
Physical Medicine, General Surgery, Cardiovascular and Thoracic
Surgery, Neurosurgery, Ophthalmology, Organ Transplant, Otolaryngology,
Plastic Surgery, Proctology, Urology, Pediatric Surgery, Family
Planning, Obstetrics, Gynecology, Pediatrics, Adolescent Pediatrics,
Well Baby, Orthopaedics, Cast, Orthotic Laboratory, Hand Surgery,
Podiatry, Psychiatry, Psychology, Child Guidance, Mental Health, Social
Work, Substance Abuse Rehabilitation, Family Practice, and Occupational
and Physical Therapy. This rule does not necessarily establish a
separate rate for each of these clinical reimbursement categories.
Similar categories may be combined for purposes of billing.
Another revision to section 220.8 involves the expansion of a
single outpatient rate to multiple reimbursement category rates similar
to that for inpatient care. The Department of Defense adopts a
methodology for computing rates for outpatient care similar to that
used for computing multiple rates for inpatient care. Thus, collections
for most outpatient services will be based on a standard per visit fee
to a specialty/subspecialty which is representative of the average cost
in facilities of the Uniformed Services of an outpatient visit to that
specialty clinic. Multiple outpatient visits on the same day to
different clinics will result in one charge for each clinic visit.
Multiple visits on the same day to the same clinic will result in only
one charge. As a general rule, each standard per visit amount to the
specialty/subspecialty clinic will be all-inclusive. No additional
charge will be made for routine laboratory, radiology, pharmacy or
other ancillary or overhead services provided in conjunction with an
outpatient visit.
Although most outpatient services will be billed based on the
standard per visit fee for a specialty/subspecialty, there are several
special rules for particular types of care. One special rule is that a
separate charge for same day/ambulatory surgery will be published
annually.
The effective date of the expanded number of billing categories is
targeted for October 1, 1994. The specific rates will be published in
the Federal Register.
C. Miscellaneous Healthcare Services
Initial implementation of the Third Party Collection Program was
somewhat limited in scope and concentrated on inpatient and ambulatory
care areas. This final rule expands the program to include outpatient
services which may not traditionally be provided in hospitals or which
are not traditional clinical specialties or subspecialties. This
includes, but is not limited to, ambulance service, hyperbaric
treatments, dental care services and immunizations. We intend to
recover the cost of these services to the extent they are generally
applicable coverage provisions of a third party payer.
We intend to recover the cost of ambulance service which includes
the cost of providing emergency aid and then transportation of
beneficiaries to a medical treatment facility. It would also include
the transport of patients to other medical facilities or to specialized
clinics for diagnostic or therapeutic services which is frequently
necessary. We intend to recover costs on the basis of the length of
time the ambulance is in service with one hour to be the minimum amount
billed. The reimbursement rates for ambulance care will only cover the
costs of operating the vehicle, including labor costs (driver and
attendant), supplies, fuel, and overhead.
We intend to recover the cost of hyperbaric treatments provided to
beneficiaries as part of a course of treatment. For example, high
pressure oxygenation treatments, burn treatments and decompression
treatments in response to diving incidents are frequently provided. We
only intend to recover the cost of providing these treatments which
includes the operating cost of the chamber, i.e., labor costs,
(operators and attending medical personnel), supplies, and overhead. We
do not intend to include amortization of either the actual or
replacement cost of the hyperbaric chamber or the building.
Dental services are provided to beneficiaries on a space available
basis and in remote locations. Dental services may include oral
diagnosis and prevention, periodontics, prosthodontics (fixed and
removable), implantology, oral surgery, orthodontics, pediatric
dentistry and endodontics.
The Department also provides a wide range of immunizations to
Military Health Service beneficiaries, including immunizations against
common childhood diseases such as measles, smallpox and diphtheria and
regional endemic diseases such as yellow fever, plague and cholera. We
also administer a variety of medications and test beneficiaries for
allergic conditions. Immunizations costs are not included as part of
the reimbursement rates for either inpatient or ambulatory care. We
intend to seek reimbursement for immunizations against childhood
diseases and diseases characteristic of the United States and its
Territories. We will also seek reimbursement for the administration of
all medications or allergy extracts, when the medication or extract is
purchased by the medical treatment facility, and for the testing for
allergic conditions. We do not intend to seek recovery for
immunizations administered incident to overseas travel or transfer, or
for those medications purchased by the beneficiary and simply
administered at the medical treatment facility. The reimbursement rate
shall be based on the average fully burdened cost of an immunization
and a separate charge shall be applied for each immunization which is
administered.
D. Other Revisions
We received one public comment on the proposed rule. It was from a
group of organizations who objected to the provision in the proposed
rule concerning PRIMUS and NAVCARE clinics. In the proposed rule, we
proposed to eliminate from the Third Party Collection Program
regulation the special rule regarding PRIMUS and NAVCARE clinics, which
are contractor owned, contractor operated freestanding clinics under
contract with DoD. Under special demonstration program authority, these
clinics have functioned under rules applicable to military medical
treatment facilities, including Third Party Collection program rules.
With the conclusion of the demonstration project, these clinics are no
longer authorized to bill third party payers under the authority of 10
U.S.C. 1095 (but will continue to bill under other authority).
Therefore, the change set forth in the proposed rule is necessary, and
has been included in the final rule.
The organizations who objected to this proposed change did so on
the belief that this would terminate features of PRIMUS and NAVCARE
clinics that they strongly support, including access to primary care
visits without deductible or copayment requirements, and eligibility
for military beneficiaries who are not CHAMPUS eligible (such as active
duty members and Medicare-eligible beneficiaries). These organizations
can be assured that the adoption of this final rule has no impact on
those aspects of the PRIMUS/NAVCARE program.
We have added one other revision to the regulation, a technical
correction to section 220.8(d), which had incorrectly referred to
paragraph (j) concerning a matter for which paragraph (k) is the
appropriate reference.
III. Regulatory Procedures
This final rule is not a significant regulatory action under
Executive Order 12866. It will not have an impact of $100 million or
other significant economic impacts. Similarly, the rule does not
significantly affect a substantial number of small entities within the
meaning of the Regulatory Flexibility Act. As stated above, for the
most part, this final rule simply incorporates into the third party
collection program regulation more precise cost calculation methods. In
addition, this rule does not impose new information collection
requirements for purposes of the Paperwork Reduction Act.
List of Subjects in 32 CFR Part 220
Claims, Health care, Health insurance.
For the reasons stated in the preamble, 32 CFR Part 220 is amended
as follows:
PART 220--COLLECTION FROM THIRD PARTY PAYERS OF REASONABLE COSTS OF
HEALTHCARE SERVICES
1. The authority citation for part 220 continues to read as
follows:
Authority: 5 U.S.C. 301; 10 U.S.C. 1095.
2. Section 220.8 is amended by revising paragraph (a), the heading
and first sentence of paragraph (c), and paragraphs (d), (e), (g), (h),
(i), (k) and (l) as follows:
Sec. 220.8 Reasonable costs.
(a) Diagnosis related group (DRG)-based method for calculating
reasonable costs for inpatient services.
(1) In general. As authorized by 10 U.S.C. 1095(f)(3), the
calculation of reasonable costs for purposes of collections for
inpatient hospital care under 10 U.S.C. 1095 and this part shall be
based on diagnosis related groups (DRGs). Costs shall be based on the
inpatient full reimbursement rate per hospital discharge, weighted to
reflect the intensity of the principal diagnosis involved. The average
cost per case shall be published annually as an inpatient standardized
amount. A relative weight for each DRG shall be the same as the DRG
weights published annually for hospital reimbursement rates under the
Civilian Health and Medicare Program of the Uniformed Services
(CHAMPUS) pursuant to 32 CFR 199.14(a)(1).
(2) Standardized amount. The standardized amount shall be
determined by dividing the total costs of all inpatient care in all
military medical treatment facilities by the total number of
discharges. This will produce a single national standardized amount.
The Department of Defense is authorized, but not required by this part
to calculate three standardized amounts, one each for large urban
areas, other urban areas, and rural areas, utilizing the same
distinctions in identifying those areas as is used for CHAMPUS under 32
CFR 199.14(a)(1).
(3) DRG relative weights. Costs for each DRG will be determined by
multiplying the standardized amount per discharge by the DRG relative
weight. For this purpose, the DRG relative weights used for CHAMPUS
pursuant to 32 CFR 199.14(a)(1) shall be used.
(4) Adjustments for outliers, area wages, and indirect medical
education. The Department of Defense may, but is not required by this
part, to adjust cost determinations in particular cases for length-of-
stay outliers (long stay and short stay), cost outliers, area wage
rates, and indirect medical education. If any such adjustments are
used, the method shall be comparable to that used for CHAMPUS hospital
reimbursements pursuant to 32 CFR 199.14(a)(1)(iii)(E), and the
calculation of the standardized amount under paragraph (a)(2) of this
section will reflect that such adjustments will be used.
(5) Identification of professional and hospital costs. For purposes
of billing third party payers other that automobile liability and no-
fault insurance carriers, inpatient billings will be subdivided into
two categories:
(1) Hospital charges (which refers to routine service charges
associated with the hospital stay and ancillary charges).
(ii) Professional charges (which refers to professional services
provided by physicians and certain other providers).
(6) Outpatient billings will continue to be subdivided into three
categories:
(i) Hospital charges (which refers to routine service charges
associated with the outpatient visit).
(ii) Professional charges (which refers to professional services
provided by physicians and certain other providers).
(iii) Ancillary charges (which refers to diagnostic and treatment
services, other than professional services, provided by components of
the hospital in connection with the outpatient visit).
* * * * *
(c) Clinical groups per diem rates for care provided on or after
October 1, 1992, and prior to October 1, 1994. For inpatient hospital
care provided on or after October 1, 1992, and prior to October 1,
1994, the computation of reasonable costs shall be based on the per
diem full reimbursement rate applicable to the clinical category of
services involved. * * *
* * * * *
(d) Medical services and subsistence charges included. Medical
services charges pursuant to 10 U.S.C. 1078 or subsistence charges
pursuant to 10 U.S.C. 1075 are included in the claim filed with the
third party payer pursuant to 10 U.S.C. 1095. For any patient of a
facility of the Uniformed Services who indicates that he or she is a
beneficiary of a third party payer plan, the usual medical services or
subsistence charge will not be collected from the patient to the extent
that payment received from the payer exceeds the medical services or
subsistence charge. Thus, except in cases covered by section 220.8(k),
payment of the claim made pursuant to 10 U.S.C. 1095 which exceeds the
medical services or subsistence charge, will satisfy all of the third
party payer's obligation arising from the inpatient hospital care
provided by the facility of the Uniformed Services on that occasion.
(e) Per visit rates.
(1) As authorized by 10 U.S.C. 1095(f)(2), the computation of
reasonable costs for purposes of collections for most outpatient
services shall be based on a per visit rate for a clinical specialty or
subspecialty. The per visit charge shall be equal to the outpatient
full reimbursement rate for that clinical specialty or subspecialty and
includes all routine ancillary services. A separate charge will be
calculated for cases that are considered same day/ambulatory surgeries.
These rates shall be updated and published annually. As with inpatient
billing categories, clinical groups representing selected board
certified specialties/subspecialties widely accepted by graduate
medical accrediting organizations such as the Accreditation Council for
Graduate Medical Education (ACGME) or the American Board of Medical
Specialties will be used for ambulatory billing categories. Related
clinical groups may be combined for purposes of billing categories.
(2) The following clinical reimbursement categories are
representative, but not all-inclusive of the billing category clinical
groups referred to in paragraph (e)(1) of this section: Internal
Medicine, Allergy, Cardiology, Diabetic, Endocrinology,
Gastroenterology, Hematology, Hypertension, Nephrology, Neurology,
Nutrition, Oncology, Pulmonary Disease, Rheumatology, Dermatology,
Infectious Disease, Physical Medicine, General Surgery, Cardiovascular
and Thoracic Surgery, Neurosurgery, Ophthalmology, Organ Transplant,
Otolaryngology, Plastic Surgery, Proctology, Urology, Pediatric
Surgery, Family Planning, Obstetrics, Gynecology, Pediatrics,
Adolescent Pediatrics, Well Baby, Orthopaedics, Cast, Orthotic
Laboratory, Hand Surgery, Podiatry, Psychiatry, Psychology, Child
Guidance, Mental Health, Social Work, Substance Abuse Rehabilitation,
Family Practice, and Occupational and Physical Therapy.
* * * * *
(g) Special rule for services ordered and paid for by a facility of
the Uniformed Services but provided by another provider. In cases where
a facility of the Uniformed Services purchases ancillary services or
procedures, from a source other than a Uniformed Services facility, the
cost of the purchased services will be added to the standard rate.
Examples of ancillary services and other procedures covered by this
special rule include (but are not limited to): laboratory, radiology,
pharmacy, pulmonary function, cardiac catheterization, hemodialysis,
hyperbaric medicine, electrocardiography, electroencephalography,
electroneuromyography, pulmonary function, inhalation and respiratory
therapy and physical therapy services.
(h) Special rule for certain ancillary services ordered by outside
providers and provided by a facility of the Uniformed Services. If a
Uniformed Services facility provides certain ancillary services,
prescription drugs or other procedures based on a request from a source
other than a Uniformed Services facility and are not incident to any
outpatient visit or inpatient services, the reasonable cost will not be
based on the usual per diem or per visit rate. Rather, a separate
standard rate shall be established based on the cost of the particular
high-cost service, drug, or procedure provided. This special rule
applies only to services, drugs or procedures having a cost of at least
$60. The reasonable cost for the services, drugs or procedures to which
this special rule applies shall be calculated and published annually.
(i) Miscellaneous health care services. Some outpatient services
are provided which may not traditionally be provided in hospitals or
which are not traditional clinical specialties or subspecialties. This
includes, but is not limited to, land ambulance service, air ambulance
service, hyperbaric treatments, dental care services and immunizations.
(1) The charge for ambulance services shall be based on the full
costs of operating the ambulance service.
(2) For hyperbaric treatments (such as high pressure oxygenation
treatments, burn treatments and decompression treatments in response to
diving incidents), charges will be based on the full operating costs of
the hyperbaric treatment services.
(3) Charges for dental services (including oral diagnosis and
prevention, periodontics, prosthodontics (fixed and removable),
implantology, oral surgery, orthodontics, pediatric dentistry and
endodontics) will be based on a full cost of the dental services.
(4) The charge for immunizations, allergin extracts, allergic
condition tests, and the administration of certain medications when
these services are provided in a separate immunizations or shot clinic,
will be based on the average full cost of these services, exclusive of
any costs considered for purposes of any outpatient visit. A separate
charge shall be made for each immunization, injection or medication
administered.
* * * * *
(k) Special rule for partnership program providers. In cases in
which the professional provider services are provided under the
Partnership Program (or similar program operated under the authority of
10 U.S.C. 1096), the professional charges component of the total
standard rate will be deleted, as applicable, from the claim for the
facility of the Uniformed Services. The third party payer will receive
a claim for professional services directly from the individual
healthcare provider, who is not an employee or agent of the Department
of Defense. Such claims are not covered by 10 U.S.C. 1095 or this part,
but are governed by statutory and regulatory requirements of the
CHAMPUS program (see 32 CFR part 199). The same is true for the
professional services provided on an outpatient basis under the
Partnership Program.
(l) Alternative determination of reasonable costs. Any third party
payer that can satisfactorily demonstrate a prevailing rate of payment
in the same geographic area for the same or similar aggregate groups of
services that is less than the standard rate (or other amount as
determined under paragraphs (f) through (k) of this section) of the
facility of the Uniformed Services may, with the agreement of the
facility of the Uniformed Services (or other authorized representatives
of the United States), limit payments under 10 U.S.C. 1095 to that
prevailing rate for that aggregate category of services. The
determination of the third party payer's prevailing rate shall be based
on a review of valid contractual arrangements with other facilities or
providers constituting a majority of the services for which payment is
made under the third party payer's plan. This paragraph does not apply
to cases covered by Sec. 220.11.
* * * * *
3. Section 220.10 is amended by revising paragraph (c)(1)(ii), as
follows:
Sec. 220.10 Special rules for Medicare supplement plans.
* * * * *
(c) * * *
(1) * * *
(ii) Include adjustments, as appropriate, to identify major
components of the all inclusive per diem or per visit rates for which
Medicare has special rules.
* * * * *
[FR Doc. 94-23465 Filed 9-23-94; 8:45 am]
BILLING CODE 5000-04-M
