[Federal Register Volume 63, Number 141 (Thursday, July 23, 1998)]
[Rules and Regulations]
[Pages 39514-39515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19682]


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DEPARTMENT OF VETERANS

38 CFR Part 17

RIN 2900-AH66


Payment for Non-VA Physician Services Associated with Either 
Outpatient or Inpatient Care Provided at Non-VA Facilities

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This document amends Department of Veterans Affairs (VA) 
medical regulations concerning payment for non-VA physician services 
that are associated with either outpatient or inpatient care provided 
to eligible VA beneficiaries at non-VA facilities. Generally, when a 
service-specific reimbursement amount has been calculated under 
Medicare's Participating Physician Fee Schedule, VA would pay the 
lesser of the actual billed charge or the calculated amount. Also, when 
an amount has not been calculated or when the services constitute 
anesthesia services, VA would pay the amount calculated under a 75th 
percentile formula or, in certain limited circumstances, VA would pay 
the usual and customary rate. Adoption of this final rule is intended 
to establish reimbursement consistency among federal health benefits 
programs to ensure that amounts paid to physicians better represent the 
relative resource inputs used to furnish a service, and to achieve 
program cost reductions. Further, consistent with statutory 
requirements, the regulations continue to specify that VA payment 
constitutes payment in full.

DATES: Effective Date: August 24, 1998.

FOR FURTHER INFORMATION CONTACT: Abby O'Donnell, Health Administration 
Service (10C3), Department of Veterans Affairs, 810 Vermont Avenue, NW, 
Washington, DC 20420, (202) 273-8307. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: In a document published in the Federal 
Register on July 22, 1997 (62 FR 39197), we proposed to amend the 
medical regulations concerning payment (regardless of whether or not 
authorized in advance) for non-VA physician services associated with 
either outpatient or inpatient care provided to eligible VA 
beneficiaries at non-VA facilities. We provided a 60-day comment 
period, which ended September 22, 1997. We received comments from seven 
sources.
    For reasons explained below, the final rule contains only one 
conversion factor for calculations under Medicare's Participating 
Physicians Fee Schedule and the proposed provisions are not made 
applicable for anesthesia services. Otherwise, no changes are made in 
response to comments and, based on the rationale set forth in the 
proposed rule and this document, the provisions of the proposed rule 
are adopted as a final rule.

Comments

    All of the comments opposed the proposal based on the assertion 
that VA should not lessen physician fees.
     Three commenters asserted that VA should not use 
Medicare's Participating Physicians Fee Schedule because it was 
designed for Medicare patient populations and not for VA populations.
     One commenter opposed the use Medicare's Participating 
Physicians Fee Schedule by asserting that VA should not use the 
geographic adjustment factors unless necessary ``to achieve explicit 
policy goals (e.g., targeted adjustments for demonstrated shortfalls in 
access to care).''
     Two commenters opposed the use of Medicare's Participating 
Physicians Fee Schedule by asserting that VA should not use Medicare's 
conversion factors. They recommended that VA establish a conversion 
factor that would not lessen physician payments. One of the commenters 
stated that the Medicare conversion factors should not be used because 
they are ``constrained by budget-neutrality and other considerations, 
such as the Medicare Volume Performance Standard system, that are not 
applicable to VA.''
     One commenter who practices psychiatry in a semi-rural 
area asserted that his expenses are high and that if VA adopted 
Medicare's Participating Physicians Fee Schedule some procedures would 
be billed at rates ``at or below'' his overhead expense.
     Three commenters questioned whether the availability and 
quality of care would be lessened by the adoption of Medicare's 
Participating Physicians Fee Schedule.
     One commenter asserted that before VA adopt payment 
methodology based on Medicare principles, VA should sponsor an 
independent study and consult with physician groups.
     Two commenters opposed the adoption of the Medicare fee 
schedule for anesthesia services.

Response to Comments

    As stated in the proposed rule, one of the basic reasons for 
conducting this rulemaking proceeding was to achieve cost reductions. 
We believe, particularly in this budget-sensitive era, that it is sound 
policy to seek to achieve this objective. Also, we note that the 
Medicare formula does not merely relate to individuals eligible for 
Medicare. It is based on principles applicable to all individuals, 
including veterans. Moreover, even though we could establish different 
conversion factors and even though VA is not ``constrained by budget-
neutrality and other considerations, such as the Medicare Volume 
Performance Standard system,'' we believe that we should not have to 
pay more than the Department of Health and Human Services pays for 
physician services.
    Further, regardless of whether some physicians' ``overhead 
payments'' might be out of proportion to the amount of payment received 
from VA, we do not believe that this final rule would cause this to be 
a common occurrence. In addition, we do not expect that the adoption of 
this final rule would lessen significantly the availability and quality 
of physician care for veterans, and we believe that even without 
additional studies, the rationale in the proposed rule and this 
document provide an adequate basis for this final rule.
    The proposed rule was intended to provide for reimbursement based 
on the lesser of the actual billed charge or the amount calculated 
under Medicare's Participating Physician Fee Schedule. The formula for 
Medicare's Participating Physician Fee Schedule has been changed (see 
62 FR 59048, 59261). For services other than anesthesia, the Medicare 
formula was changed to have one conversion factor instead of three 
(previously, the Medicare formula contained a separate conversion 
factor for surgical services, nonsurgical services, and primary care 
services). Accordingly, the final rule also makes this adjustment in 
the Medicare formula.

Anesthesia Services

    The Medicare formula includes separate provisions for anesthesia 
services. These separate anesthesia provisions were not included in the 
proposed rule. We intend to publish a new proposal concerning this 
issue in

[[Page 39515]]

the near future. Accordingly, this final rule does not make changes 
regarding anesthesia services. They remain subject to the payment 
provisions for those cases not covered by the Medicare formula (i.e., 
lesser of the actual amount billed or the amount calculated using the 
75th percentile methodology; or the usual and customary rate if there 
are fewer than 8 treatment occurrences for a procedure during the 
previous fiscal year).

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601 
through 612. The rule would not cause a significant economic impact on 
health care providers, suppliers, or entities since only a small 
portion of the business of such entities concerns VA beneficiaries. 
Therefore, pursuant to 5 U.S.C. 605(b), the rule is exempt from the 
initial and final regulatory flexibility analysis requirements of 
sections 603 and 604.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance Numbers are 64.009, 
64.010 and 64.011.

List of Subjects in 38 CFR Part 17

    Administrative practice and procedure, Alcohol abuse, Alcoholism, 
Claims, Day care, Dental health, Drug abuse, Foreign relations, 
Government contracts, Grant programs--health, Grant programs--veterans, 
Health care, Health facilities, Health professions, Health records, 
Homeless, Medical and dental schools, Medical devices, Medical 
research, Mental health programs, Nursing home care, Philippines, 
Reporting and recordkeeping requirements, Scholarships and fellowships, 
Travel and transportation expenses, Veterans.

    Approved: May 8, 1998.
Togo D. West, Jr.,
Acting Secretary.
    For the reasons set forth in the preamble, 38 CFR part 17 is 
amended as follows:

PART 17--MEDICAL

    1. The authority citation for part 17 continues to read as follows:

    Authority: 38 U.S.C. 501, 1721, unless otherwise noted.


Sec. 17.55  [Amended]

    2. In Sec. 17.55, in the introductory text remove ``38 U.S.C. 1703 
or 38 CFR 17.52'' and add, in its place ``38 U.S.C. 1703 and 38 CFR 
17.52 of this part or under 38 U.S.C. 1728 and 38 CFR 17.120''; 
paragraph (h) is removed; and paragraphs (i), (j) and (k) are 
redesigned as paragraphs (h), (i) and (j), respectively.
    3. Section 17.56 is redesignated as Sec. 17.57 and a new Sec. 17.56 
is added to read as follows:


Sec. 17.56  Payment for non-VA physician services associated with 
outpatient and inpatient care provided at non-VA facilities.

    (a) Except for anesthesia services, payment for non-VA physician 
services associated with outpatient and inpatient care provided at non-
VA facilities authorized under Sec. 17.52, or made under Sec. 17.120 of 
this part, shall be the lesser of the amount billed or the amount 
calculated using the formula developed by the Department of Health & 
Human Services, Health Care Financing Administration (HCFA) under 
Medicare's participating physician fee schedule for the period in which 
the service is provided (see 42 CFR Parts 414 and 415). This payment 
methodology is set forth in paragraph (b) of this section. If no amount 
has been calculated under Medicare's participating physician fee 
schedule or if the services constitute anesthesia services, payment for 
such non-VA physician services associated with outpatient and inpatient 
care provided at non-VA facilities authorized under Sec. 17.52, or made 
under Sec. 17.120 of this part, shall be the lesser of the actual 
amount billed or the amount calculated using the 75th percentile 
methodology set forth in paragraph (c) of this section; or the usual 
and customary rate if there are fewer than 8 treatment occurrences for 
a procedure during the previous fiscal year.
    (b) The payment amount for each service paid under Medicare's 
participating physician fee schedule is the product of three factors: a 
nationally uniform relative value for the service; a geographic 
adjustment factor for each physician fee schedule area; and a 
nationally uniform conversion factor for the service. The conversion 
factor converts the relative values into payment amounts. For each 
physician fee schedule service, there are three relative values: An RVU 
for physician work; an RVU for practice expense; and an RVU for 
malpractice expense. For each of these components of the fee schedule, 
there is a geographic practice cost index (GPCI) for each fee schedule 
area. The GPCIs reflect the relative costs of practice expenses, 
malpractice insurance, and physician work in an area compared to the 
national average. The GPCIs reflect the full variation from the 
national average in the costs of practice expenses and malpractice 
insurance, but only one-quarter of the difference in area costs for 
physician work. The general formula calculating the Medicare fee 
schedule amount for a given service in a given fee schedule area can be 
expressed as: Payment = [(RVUwork  x  GPCIwork) + (RVUpractice expense 
x  GPCIpractice expense) + (RVUmalpractice  x  GPCImalpractice)]  x  
CF.
    (c) Payment under the 75th percentile methodology is determined for 
each VA medical facility by ranking all occurrences (with a minimum of 
eight) under the corresponding code during the previous fiscal year 
with charges ranked from the highest rate billed to the lowest rate 
billed and the charge falling at the 75th percentile as the maximum 
amount to be paid.
    (d) Payments made in accordance with this section shall constitute 
payment in full. Accordingly, the provider or agent for the provider 
may not impose any additional charge for any services for which payment 
is made by VA.
    4. Section 17.128 is revised to read as follows:


Sec. 17.128  Allowable rates and fees.

    When it has been determined that a veteran has received public or 
private hospital care or outpatient medical services, the expenses of 
which may be paid under Sec. 17.120 of this part, the payment of such 
expenses shall be paid in accordance with Secs. 17.55 and 17.56 of this 
part.

(Authority: Section 233, Pub. L. 99-576)

[FR Doc. 98-19682 Filed 7-22-98; 8:45 am]
BILLING CODE 8320-01-U