Comment on DOD-2007-HA-0048-0003

June 2, 2008 VIA ELECTRONIC SUBMISSION Federal Docket Management System Office 1160 Defense Pentagon Washington, DC 20301-1160 Re: Agency: Office of the Secretary, Department of Defense (RIN # 0720-AB19); TRICARE; Outpatient Hospital Prospective Payment System (“OPPS”). To Mr. David Bennett: On behalf of the Sharp HealthCare in San Diego, employing over 14,000 people, 4 acute care hospitals, three specialty hospitals, medical groups and multiple urgent care centers, clinics and a health plan, we appreciate the opportunity to comment on the Department of Defense’s (the DOD) proposed rule entitled TRICARE; Outpatient Hospital Prospective Payment System (OPPS), 63 Fed. Reg. 17271 (April 1, 2008). Currently, hospital outpatient services provided to TRICARE beneficiaries are reimbursed based on the lower of the billed charge or the local CHAMPUS Maximum Allowable Charge (CMAC). Generally, other hospital outpatient services that are not reimbursed by TRICARE on a CMAC rate basis, except for ambulatory surgery services, are reimbursed based on the hospital’s actual billed charges. In the Proposed Rule, the DOD states that it will adopt the prospective payment system for hospital outpatient services previously adopted by Medicare. Although, the rule notes that DOD has proposed minor changes to accommodate the differences between TRICARE benefits and population and Medicare benefit and population, such as the inclusion of maternity benefits and preventative coverage in the TRICARE OPPS. While we understand that federal law mandates generally that TRICARE payments equal Medicare payments, Sharp HealthCare is very concerned about the dramatic financial impact the adoption of the Medicare OPPS will have on TRICARE rates and thus hospitals. The Medicare Payment Advisory Commission that advises Congress on the Medicare program estimates that the Medicare OPPS will pay hospitals only 89 cents for every dollar spent treating Medicare beneficiaries in calendar year 2008. It is expected that, upon implementation of the TRICARE OPPS, overall reimbursement rates for hospital outpatient services may fall by as much as 40 percent. Using a severely under funded system as a model would present a financial hardship to hospitals that serve a high proportion of TRICARE beneficiaries. In order to ease the impact of the potential financial losses hospitals will face as a result of the new payment methodology, Sharp HealthCare advocates that the DOD gradually phase in any reductions in payments resulting from the implementation by: (1) limiting the reduction in reimbursement rates by a certain amount each year; and/or (2) implementing a transition period during which the hospitals receiving lower reimbursement rates under TRICARE OPPS will be entitled to additional payments. Both TRICARE and Medicare have historically aided providers by incorporating a “phase-in period” during the transition from one reimbursement methodology to another. Doing so will ensure that more TRICARE network hospitals will retain their affiliation with the program, and that both hospitals closest to large military installations and TRICARE beneficiaries will not be adversely affected. Sharp HealthCare appreciates the opportunity to comment on the TRICARE OPPS proposed rule. Sincerely, Susan Maddox Vice President, Government Relations