[Federal Register Volume 61, Number 35 (Wednesday, February 21, 1996)]
[Rules and Regulations]
[Pages 6540-6542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3518]



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[[Page 6541]]


DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 220


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 establishes a new rule under the Third Party 
Collection program for determining the reasonable costs of health care 
services provided by facilities of the uniformed services in cases in 
which care is provided under TRICARE Resource Sharing Agreements. For 
purposes of the Third Party Collection program such services will be 
treated the same as other services provided by facilities of the 
uniformed services. The final rule also lowers the high cost ancillary 
threshold value from $60 to $25 per 24-hour day for patients that come 
to the uniformed services facility for ancillary services requested by 
a source other than a uniformed services facility. The reasonable costs 
of such services will be accumulated on a daily basis. The Department 
of Defense is now implementing TRICARE, a major structural reform of 
the military health care system, featuring adoption of managed care 
practices in military hospitals and by special civilian contract 
provider networks. Consistent with TRICARE, as part of the Third Party 
Collection Program, DoD is transitioning to a billing and collection 
system in which all costs borne by DoD Medical Treatment Facilities 
(MTFs) will be billed by the MTF providing the care. Thus, all care 
performed within the facility, plus an added amount for supplemental 
care purchased by the facility, will be billed by the MTF. Conversely, 
care provided outside the MTF under other arrangements will be billed 
by the provider of that care.

DATES: The amendment to Sec. 220.8(h) is effective March 15, 1996, and 
the amendment to Sec. 220.8(k) is effective June 1, 1996.

FOR FURTHER INFORMATION CONTACT:
LCDR Patrick Kelly, (703) 681-8910.

SUPPLEMENTARY INFORMATION: DoD published the proposed rule on August 2, 
1995 (60 FR 39285-39287). We received two responses from the public 
during the 60 day public comment period. Both responses concerned 
resource sharing fee-for-service arrangements these organizations had 
negotiated prior to these proposed changes to 32 CFR part 220. Both 
comments recommended that existing resource sharing fee-for-service 
agreements continue to be treated as fee-for-service partnership 
agreements on the grounds that the proposed changes would require 
significant changes to their existing agreements. It is our view that 
the advantages of the rule overcome the temporary difficulties for 
TRICARE contractors. However, in response to these comments, we have 
decided to defer until June 1, 1996, the effective date of this change. 
This will give the affected contractors time to make appropriate 
arrangements under the new procedure.
    Currently, the Third Party Collection program regulation includes a 
special rule for Partnership Program providers. The Partnership Program 
allows civilian health care providers authorized to provide care under 
the CHAMPUS program to provide services to CHAMPUS beneficiaries in 
military hospitals and to receive payment from the CHAMPUS program. 
Pursuant to CHAMPUS payment rules, CHAMPUS is always the secondary 
payer to other health insurance plans; thus, CHAMPUS may not make 
payment to the Partnership Program provider in cases in which the 
beneficiary has other health insurance. To accommodate this CHAMPUS 
requirement, the Third Party Collection program currently excludes 
Partnership Program provider services from the military hospital 
claims. Thus, for example, for inpatient hospital care, the Third Party 
Payer now receives two claims, one from the military facility for the 
hospital and ancillary costs, and a separate claim from the provider 
for the professional services.
    The current practice has produced some confusion in that it is a 
departure from the normal procedure for claims arising from care 
provided by military hospitals. In addition, because the Partnership 
Program providers function independently from the military hospital's 
management system, there are no DoD standards that govern the amounts 
claimed by various Partnership Program providers.
    DoD is now proceeding with implementation of a major managed care 
program, called TRICARE, in its military medical treatment facilities 
and CHAMPUS. Under TRICARE, regional managed care support contractors 
will work with military treatment facilities on a wide range of managed 
care activities. Among the activities of the managed care contractors 
is the Resource Sharing Program. Under this program, the contractor 
makes agreements with military hospitals in the region under which the 
contractor will supply personnel and other resources in order to allow 
the facility to increase the services it can make available to DoD 
health care beneficiaries. The TRICARE program is the subject of a 
final rule published October 5, 1995 (60 Federal Register 52078-52103), 
with comprehensive regulations codified at 32 CFR 199.17. TRICARE 
Resource Sharing Agreements are similar to Partnership Program payment 
arrangements in that both result in civilian providers coming into the 
military facility and providing care in that facility. However, a 
significant difference exists in the method of payment. Under the 
Partnership Program, payment is on a fee-for-service basis under the 
normal operation of the CHAMPUS program. Under Resource Sharing, the 
method of payment may be on a salary basis or other arrangement made by 
the managed care support contractor. Under the Partnership Program, the 
CHAMPUS second payer requirement applies. Under Resource Sharing 
Agreements, the overall managed care contract separates the financing 
from the normal CHAMPUS payment rules and allows for special payment 
rules.
    Based on this, we are establishing a special rule for Resource 
Sharing Agreements. Or, more accurately, we are establishing the normal 
rule for Resource Sharing Agreements. That is to say that care provided 
in whole or in part through TRICARE Resource Sharing Agreements will be 
handled for purposes of third party billings just like all other 
services provided in the military facility, and will be billed at the 
same rates. The special rule applicable to the Partnership Program 
providers, under which two claims are made to the third party payer, 
will not apply under TRICARE Resource Sharing Agreements. As a result, 
care provided in military facilities will be billed to third party 
payers in the same manner and same amount, regardless of whether the 
professional services were provided by a military physician or Resource 
Sharing Agreement provider.
    The TRICARE program is being phased in region-by-region throughout 
the United States. As it takes hold, the Partnership Program is being 
phased out and replaced by TRICARE Resource Sharing Agreements. Thus, 
possibly before the end of 1997, the special Partnership Program rule 
will no longer be needed, and the simpler, single-claim rule for 
TRICARE Resource Sharing Agreements will apply. We view this as both a 
simplification and an improvement in the Third Party Collection 
program.
    DoD published the proposed rule on August 2, 1995, (60 Federal 
Register 

[[Page 6542]]
39285-39287). We received two responses from the public during the 60 
day public comment period. Both responses concerned resource sharing 
fee-for-service arrangements these organizations had negotiated prior 
to these proposed changes to 32 CFR part 220. Both comments recommended 
that existing resource sharing fee-for-service agreements continue to 
be treated as fee-for-service partnership agreements on the grounds 
that the proposed changes would require significant changes to their 
existing agreements. It is our view that the advantages of the rule 
overcome the temporary difficulties for TRICARE contractors. However, 
in response to these comments, we have decided to defer until June 1, 
1996, the effective date of this change. This will give the affected 
contractors time to make appropriate arrangements under the new 
procedure. With respect to regulatory procedures, this final rule is 
not a significant regulatory action under Executive Order 12866, nor 
does it significantly affect a substantial number of small entities 
under the Regulatory Flexibility Act, nor impose new information 
collection requirements under 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 32 CFR 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 paragraphs (h) and (k) to 
read as follows:


Sec. 220.8  Reasonable costs.

* * * * *
    (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 requested by 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 Diagnostic Related Group (DRG) or per visit rate. Rather, a 
separate standard rate shall be established based on the accumulated 
cost of the particular service, drugs, or procedures provided during a 
twenty-four hour period ending at midnight. Effective March 15, 1996, 
this special rule applies only to services, drugs or procedures having 
a cost of at least $25. The reasonable cost for the services, drugs or 
procedures to which this special rule applies shall be calculated and 
made available to the public annually.
* * * * *
    (k) Special rules for TRICARE Resource Sharing Agreements and 
Partnership Program providers.
    (1) In general. Paragraph (k) establishes special Third Party 
Collection program rules for TRICARE Resource Sharing Agreements and 
Partnership Program providers.
    (i) TRICARE Resource Sharing Agreements are agreements under the 
authority of 10 U.S.C. 1096 and 1097 between uniformed services 
treatment facilities and TRICARE managed care support contractors under 
which the TRICARE managed care support contractor provides personnel 
and other resources to the uniformed services treatment facility 
concerned in order to help the facility increase the availability of 
health care services for beneficiaries. TRICARE is the managed care 
program authorized by 10 U.S.C. 1097 (and several other statutory 
provisions) and established by regulation at 32 CFR 199.17.
    (ii) Partnership Program providers provide services in facilities 
of the uniformed services under the authority of 10 U.S.C. 1096 and the 
CHAMPUS program. They are similar to providers providing services under 
TRICARE Resource Sharing Agreements, except that payment arrangements 
are different. Those functioning under TRICARE Resource Sharing 
Agreements are under special payment arrangements with the TRICARE 
managed care contractor; those under the Partnership Program file 
claims under the standard CHAMPUS program on a fee-for-service basis.
    (2) Special rule for TRICARE Resource Sharing Agreements. Services 
provided in facilities of the uniformed services in whole or in part 
through personnel or other resources supplied under a TRICARE Resource 
Sharing Agreement are considered for purposes of this part as services 
provided by the facility of the uniformed services. Thus, third party 
payers will receive a claim for such services in the same manner and 
for the same costs as any similar services provided by a facility of 
the uniformed services. This paragraph (k)(2) becomes effective June 1, 
1996.
    (3) Special rule for Partnership Program providers. For inpatient 
services for which the professional provider services were provided by 
a Partnership Program participant, the professional charges component 
of the bill will be deleted from the claim from the facility of the 
uniformed services. In these cases, the uniformed service facility's 
claim shall not be considered solely a ``facility charge.'' As an all-
inclusive bill, room and board, nursing services and all ancillary 
services (radiology, pharmaceuticals, respiratory therapy, etc.) are 
factored into the bill. The third party payer will receive a separate 
claim for professional services directly from the individual health 
care provider. The same is true for the professional services provided 
on an outpatient basis under the Partnership Program. Claims from 
Partnership Program providers are not covered by 10 U.S.C. 1095 or this 
part, but are governed by statutory and regulatory requirements of the 
CHAMPUS program.
* * * * *
    Dated: February 12, 1996.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 96-3518 Filed 2-20-96; 8:45 am]
BILLING CODE 5000-04-M