[Federal Register Volume 63, Number 197 (Tuesday, October 13, 1998)]
[Proposed Rules]
[Pages 54756-54765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26341]



[[Page 54755]]

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Part II





Department of Veterans Affairs





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38 CFR Part 17



Medical Care Collection or Recovery; Proposed Rule and Notice

  Federal Register / Vol. 63, No. 197 / Tuesday, October 13, 1998 / 
Proposed Rules  

[[Page 54756]]



DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AJ30


Medical Care Collection or Recovery

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend VA's medical regulations 
concerning collection or recovery by VA for medical care or services 
provided or furnished to a veteran:
    For a non-service connected disability for which the veteran is 
entitled to care (or the payment of expenses of care) under a health-
plan contract;
    For a non-service connected disability incurred incident to the 
veteran's employment and covered under a worker's compensation law or 
plan that provides reimbursement or indemnification for such care and 
services; or
    For a non-service connected disability incurred as a result of a 
motor vehicle accident in a State that requires automobile accident 
reparations insurance.
    Previously, by statute VA was authorized to charge ``reasonable 
costs'' for such care or services. However, amended statutory 
provisions now authorize VA to charge ``reasonable charges.'' 
Accordingly, this document proposes to establish methodology for 
charging ``reasonable charges'' consistent with the statutory 
amendment. Under the proposal, the charges billed using this 
methodology, as appropriate, would consist of inpatient facility 
charges, skilled nursing facility/sub-acute inpatient facility charges, 
outpatient facility charges, physician charges, and non-physician 
provider charges. Reasonable charges for outpatient dental care and 
prescription drugs not administered during treatment would continue to 
be billed using the existing cost-based methodology.
    Pursuant to statutory authority, VA has the right to recover or 
collect the charges from a third party to the extent that a provider of 
the care or services would be eligible to receive payment therefor from 
that third party if the care or services had not been furnished by a 
department or agency of the United States. With respect to a third-
party payer liable under a health plan contract, consistent with the 
statutory authority, the third-party payer would have the option of 
paying to the extent of its coverage, either the billed charges or the 
amount the third-party payer demonstrates it would pay for care or 
services furnished by providers other than entities of the United 
States for the same care or services in the same geographic area.
    Using the methodology in this proposed rule, the data for 
calculating actual amounts for the various inpatient facility charges, 
skilled nursing facility/sub-acute inpatient facility charges, 
outpatient facility charges, and physician charges at individual VA 
facilities for the period August 1998 through September 1999 are set 
forth in a companion document published in the ``Notices'' section of 
this issue of the Federal Register.
    Also, under the proposal, the regulations would be clarified to 
state specifically that billing methodology based on costs will 
continue to be applied to establish charges for medical care furnished 
in error or on tentative eligibility, furnished in a medical emergency, 
furnished to certain beneficiaries of the Department of Defense or 
other Federal agencies, furnished to pensioners of allied nations, and 
furnished to military retirees with chronic disability.

DATES: Comments must be received on or before December 14, 1998.

ADDRESSES: Mail or hand-deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Ave., NW, Room 1154, Washington, DC 20420. Comments should 
indicate that they are submitted in response to ``RIN: 2900-AJ30.'' All 
written comments received will be available for public inspection at 
the above address in the Office of Regulations Management, Room 1158, 
between the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday 
(except holidays).

FOR FURTHER INFORMATION CONTACT: David Cleaver, VHA Office of Finance 
(174), Veterans Health Administration, Department of Veterans Affairs, 
810 Vermont Avenue, NW, Washington, DC 20420, (202) 273-8210. (This is 
not a toll free number.)

SUPPLEMENTARY INFORMATION:

Background

    This document proposes to amend VA's medical regulations which are 
set forth at 38 CFR part 17. More specifically, it is proposed to amend 
the regulations concerning collection or recovery by VA for medical 
care or services provided or furnished to a veteran:
    (i) For a non-service connected disability for which the veteran is 
entitled to care (or the payment of expenses of care) under a health-
plan contract;
    (ii) For a non-service connected disability incurred incident to 
the veteran's employment and covered under a worker's compensation law 
or plan that provides reimbursement or indemnification for such care 
and services; or
    (iii) For a non-service connected disability incurred as a result 
of a motor vehicle accident in a State that requires automobile 
accident reparations insurance.
    Pub. L. 105-33 amended the statutory provisions (38 U.S.C. 1729) to 
authorize VA to bill ``reasonable charges'' instead of ``reasonable 
cost.'' In this regard, the legislative history for these amendments 
includes the following statement from the House Conference Report (H. 
Rep. No. 105-217, July 30, 1997, at pp. 974-975):

    These amendments would allow VA to move away from a cost-based 
medical care recovery system to one that more appropriately 
resembles market pricing for health care services; the Committee 
envisions VA would establish health care charges that would allow it 
to recover amounts needed to help preserve the viability of the 
health care system for all veterans and that also reflect the 
substantial advantages to VA patients both in having the quality 
services provided by that system available and in using them. The 
amendments reflect the expectation that VA would establish 
reasonable charges that are responsive to market prices--charges 
that are not constrained to recovery of costs, but which may yield 
net revenues. (The concept of ``market price'' here refers to the 
price for a service that is based on competition in open markets. 
When a substantial competitive demand exists for a service, its 
market price normally is determined using commercial practices, such 
as by reference to prevailing prices and payments in competitive 
markets for services the same or similar to those provided by the 
Government.)

    Accordingly, this document proposes to establish methodology for 
charging ``reasonable charges'' consistent with the statutory 
amendment. Under the proposal, as appropriate, the amount billed using 
this methodology would consist of inpatient facility charges, skilled 
nursing facility/sub-acute inpatient facility charges, outpatient 
facility charges, physician charges, and non-physician provider 
charges.

Amount of Recovery or Collection--Third Party Liability

    Under the provisions of 38 U.S.C. 1729, VA has the right to recover 
or collect its reasonable charges from a third party to the extent that 
the veteran or a provider of the care or services would be eligible to 
receive payment therefor from that third party if the care

[[Page 54757]]

or services had not been furnished by a department or agency of the 
United States. With respect to a third-party payer liable under a 
health plan contract, consistent with the statutory authority, the 
third-party payer would have the option of paying, to the extent of its 
coverage, either the billed charges or the amount the third-party payer 
demonstrates it would pay for care or services furnished by providers 
other than entities of the United States for the same care or services 
in the same geographic area.

General

    One way to establish ``reasonable'' inpatient facility charges, 
skilled nursing facility/sub-acute inpatient facility charges, 
outpatient facility charges, physician charges, and non-physician 
provider charges would be to use available data to determine prevailing 
charges for services in the locality of each VA facility, and bill 
those prevailing charges. However, this is impractical because there is 
insufficient data for some services at a number of localities. 
Therefore, we are proposing formulas designed to establish baseline 
reasonable charges for each provided service, commensurate with charges 
in each local market, and to enable VA to project from the baseline the 
charges applicable to medical care and services provided during 
subsequent relevant periods.
    We are proposing separate formulas for inpatient facility charges, 
skilled nursing facility/sub-acute inpatient facility charges, 
outpatient facility charges, physician charges, and non-physician 
provider charges. These formulas, developed for VA by Milliman & 
Robertson, Inc., Actuaries and Consultants, reflect inherent 
differences in the structure and available information for each of 
these categories of charges.

Inpatient Facility Charges

    The proposed inpatient facility charges consist of per diem charges 
for room and board and for ancillary services that vary by VA facility 
and by diagnosis related group (DRG). These charges are calculated 
based on the following formula.
    To establish a baseline, two nationwide average per diem charges 
for each DRG were calculated for Calendar Year 1995 (the latest 
available data), one from the Medicare Standard Analytical File 5% 
Sample and one from the MedStat claim database, a claim database of 
nationwide commercial insurance (two widely used data bases that, among 
other things, are used for analyzing industry charges). Results 
obtained from these two databases were then combined into a single 
weighted average per diem charge for each DRG. Using both databases in 
this way strengthens the statistical basis for the resulting nationwide 
average per diem charges by providing additional data for all DRGs, 
especially those that occur infrequently in one or the other database.
    The resulting weighted average per diem charge for each DRG was 
then separated into its two components, a room and board component and 
an ancillary component. This was done to make subsequent calculations 
more accurate and to conform with standard industry billing practices. 
Consistent with billing practices of many providers, the resulting 
amounts for room and board and ancillary services for each DRG were 
then adjusted to reflect 80th percentile charges. Since the resulting 
nationwide 80th percentile charges represent amounts applicable for 
calendar year 1995, the formula includes trending provisions to update 
the charges to reflect appropriate economic changes for future periods. 
Finally, to account for locality variations, the formula provides for 
the trended nationwide 80th percentile charges for room and board and 
ancillary services to be multiplied by geographic area adjustment 
factors to set charges commensurate with the local market for each VA 
facility.

Skilled Nursing Facility/Sub-Acute Inpatient Facility Charges

    Under the proposal, skilled nursing facility/sub-acute inpatient 
facility charges would be per diem charges that vary by VA facility. 
The proposed charges would cover care, including skilled rehabilitation 
services (e.g., physical therapy, occupational therapy, and speech 
therapy), that is provided in a nursing home or hospital inpatient 
setting, is provided under a physician's orders, and is performed by or 
under the general supervision of professional personnel such as 
registered nurses, licensed practical nurses, physical therapists, 
occupational therapists, speech therapists, and audiologists. The 
skilled nursing facility/sub-acute inpatient facility charges would 
incorporate charges for ancillary services associated with care 
provided in these settings. The proposed charges would be calculated 
based on the following formula.
    To establish a baseline, a nationwide average per diem billed 
charge for skilled nursing facility care for July 1, 1998, was obtained 
from the 1998 Milliman & Robertson, Inc. Health Cost Guidelines, a 
publication that includes nationwide skilled nursing facility charges 
(skilled nursing facility charges are also representative of sub-acute 
inpatient facility charges). Consistent with billing practices of many 
providers, the nationwide average per diem billed charge then was 
adjusted to reflect the nationwide 80th percentile charge level. The 
resulting nationwide 80th percentile charges represent amounts 
applicable for calendar year 1998. Accordingly, the formula includes 
trending provisions to update the charges to reflect appropriate 
economic changes for future periods. The formula provides for the 
trended nationwide charges to be multiplied by geographic area 
adjustment factors to set charges commensurate with the local market 
for each VA facility.

Outpatient Facility Charges

    Under the proposal, outpatient facility charges, as appropriate, 
will include separate charges for prosthetic devices and durable 
medical equipment that reflect actual costs to VA. It is industry 
practice to purchase the devices and provide them at actual cost. 
Accordingly, ``actual costs'' and ``reasonable charges'' are the same 
for prosthetic devices and durable medical equipment. Otherwise, the 
proposed outpatient facility charges consist of charges for outpatient 
facility services that vary by VA facility and by CPT procedure code. 
These charges are calculated based on the following formula.
    Using the 1995 MedStat claims database of nationwide commercial 
insurance, the median billed facility charge was calculated for each 
CPT procedure code for which outpatient facility charges apply. All 
outpatient facility CPT procedure codes were then separated into 
outpatient facility CPT procedure code groups that were both subject-
matter-related and statistically-related, resulting in 37 such groups. 
This step was designed to ensure that there were sufficient relevant 
data for each CPT procedure code, using the smallest number of groups 
necessary to obtain this information. Then, for each CPT procedure code 
in each of the 37 groups, consistent with billing practices of many 
providers, the median charge was adjusted to the 80th percentile. The 
formula includes trending provisions to update the 80th percentile 
charges to reflect appropriate economic changes for future periods. 
Using the resulting charges and 1998 practice expense relative value 
units (RVUs), the mathematical approximation methodology of least 
squares then was applied to the data for each outpatient facility CPT 
procedure code group to

[[Page 54758]]

derive two charge factors. The first factor represents the charge for 
each incremental RVU in the CPT procedure code group and the second 
factor represents a fixed amount adjustment for the CPT procedure code 
group. Then for each CPT procedure code, the outpatient facility RVU 
was multiplied by the incremental charge factor and the resulting 
charge was adjusted by the fixed amount.
    The results constitute nationwide trended 80th percentile 
outpatient facility charges. The resulting charges then were multiplied 
by geographic area adjustment factors to set charges commensurate with 
the local market for each VA facility.
    Also, the proposed rule contains special provisions for multiple 
surgical procedures performed during the same outpatient encounter by a 
provider or provider team. Charges for the second and subsequent 
surgical procedures during the same outpatient encounter are reduced 
consistent with industry practice.
    Further, the proposed rule clarifies that outpatient facility 
charges would not be made for services customarily performed in an 
independent clinician's office since such services would not usually 
create significant outpatient facility expenses.

Physician Charges

    The proposed physician charges consist of charges for the services 
of physicians which vary by VA facility and by CPT procedure code. 
These charges are calculated based on the following formula.
    For each CPT procedure code except those for anesthesia and 
pathology, the total facility-adjusted RVU (sum of RVU components, with 
each component adjusted by the facility's geographic area adjustment 
factors) was multiplied by the facility-adjusted conversion factor 
(nationwide conversion factor multiplied by the facility's geographic 
area adjustment factor). This provides a charge for each CPT procedure 
code that reflects the local market for each VA facility. For CPT 
procedure codes other than those specifically addressed below in this 
paragraph, the calculations by which the total facility-adjusted RVUs 
were derived consist of separate calculations for physician work 
expense and physician practice expense to obtain more accurate charge 
components. The RVU calculations for radiology, pathology, and 
anesthesia differ from other physician charges to reflect industry 
practice. For radiology CPT procedure codes, the calculation of 
physician charges does not include separately identified technical 
component RVUs. For each anesthesia and pathology CPT procedure code, 
RVUs were multiplied by a nationwide conversion factor to obtain the 
nationwide charge. The nationwide charge was multiplied by a geographic 
area adjustment factor to obtain the physician charge for each 
anesthesia and pathology CPT procedure code at a particular VA 
facility. Separate calculations of RVUs also were required for CPT 
procedure codes which had only total RVUs (these CPT procedure codes do 
not have separate information for physician work expense and physician 
practice expense).
    To obtain the conversion factors referred to in the preceding 
paragraph, CPT procedure codes were separated into physician CPT 
procedure code groups that were both subject-matter-related and 
statistically-related, resulting in 24 such groups. This step was 
designed to ensure that there were sufficient relevant data for each 
CPT procedure code, using the smallest number of groups necessary to 
obtain this information. Separate conversion factors were calculated 
for each of the 24 different physician CPT procedure code groups. 
Consistent with billing practices of many providers, the conversion 
factors, reflecting nationwide median physician charges, were then 
adjusted to reflect nationwide 80th percentile charges. The formula 
then provides for multiplying the resulting conversion factors by the 
appropriate geographic area adjustment factors to establish conversion 
factors commensurate with the local market for each VA facility.
    The charges resulting from these calculations represent amounts 
applicable for 1996-1997, the latest available data (see paragraph 
(e)(3) of proposed Sec. 17.101). Accordingly, the formula includes 
trending provisions to update the charges to reflect appropriate 
economic changes for future periods.

Certain Non-Physician Provider Charges

    The proposal at Sec. 17.101(f) includes non-physician provider 
charges for certain non-physician services covered by CPT procedure 
codes. The charges consist of percentages of physician charges. The 
percentages for a nurse practitioner, clinical nurse specialist, 
physician assistant, certified registered nurse anesthetist, clinical 
psychologist, and clinical social worker are based on Medicare 
percentages. The percentages for a podiatrist, chiropractor, dietitian, 
clinical pharmacist, and optometrist are based on the MedStat 
nationwide insurance database. We used the Medicare percentages when 
available because of their extensive use for billing and payment of 
claims. However, all of the percentages are consistent with industry 
practice.

Publication of Data for Calculating Actual Amounts for Inpatient 
Facility Charges, Skilled Nursing Facility/Sub-Acute Inpatient 
Facility Charges, Outpatient Facility Charges, and Physician 
Charges

    We have set forth in a companion document published in the 
``Notices'' section of this issue of the Federal Register, data 
(derived from the methodology explained above) for calculating 
inpatient facility charges, skilled nursing facility/sub-acute 
inpatient facility charges, outpatient facility charges, and physician 
charges at individual VA facilities. Should the methodology set forth 
in this proposal be adopted, the data in the companion document would 
be used for inpatient facility charges, skilled nursing facility/sub-
acute inpatient facility charges, outpatient facility charges, and 
physician charges from the effective date of the final rule through 
September 1999. Accordingly, interested parties may wish to retain the 
``Notices'' document for future reference. Under the proposal, VA would 
update annually in the ``Notices'' section of the Federal Register the 
data for calculating the charges at individual VA facilities.

Billing Reasonable Costs for Various Hospital Care or Medical 
Services not Covered Under Proposed Sec. 17.101

    The regulations at current Sec. 17.101 (proposed Sec. 17.102) 
contain provisions for billing reasonable costs for hospital care or 
medical services. Paragraph (h) includes the following methodology for 
billing for hospital care or medical services furnished veterans for 
non-service connected disabilities:

    The method for computing the charges for medical care and 
services is based on the Cost Distribution Report, which sets forth 
the actual basic costs and per diem rates by type of inpatient care 
and outpatient visit. Factors for depreciation of buildings and 
equipment and Central Office overhead are added, based on accounting 
manual instructions. Additional factors are added for interest on 
capital investment and for standard fringe benefit costs covering 
government employee retirement and disability costs. The current 
year billing rates are projected on prior year actual rates by 
applying the budgeted percentage increase. In addition, based on the 
detail available in the Cost Distribution Report, VA intends to, on 
each bill break down the all-inclusive rate into its three principal 
components; namely, physician cost, ancillary services cost, and 
nursing, room and board cost. The rates generated by the foregoing 
methodology are the same rates prescribed by the Office of 
Management and

[[Page 54759]]

Budget and published in the Federal Register for use under the 
Federal Medical Care Recovery Act, 42 U.S.C. 2651-2653.

    The adoption of this proposed rule would supersede these quoted 
provisions insofar as they relate to charges to third parties liable 
under health plan contracts, liable under worker's compensation laws or 
plans, or liable as a result of a motor vehicle accident when VA 
provides or furnishes hospital care or medical services to veterans for 
non-service connected disabilities. However, the proposal would amend 
the regulations to provide specifically that this billing methodology 
based on costs would continue to apply to charging for medical care 
furnished in error or on tentative eligibility, furnished in a medical 
emergency, furnished to beneficiaries of the Department of Defense or 
other Federal agencies, furnished to pensioners of allied nations, and 
furnished to military retirees with chronic disability.

Outpatient Dental Charges and Prescription Drugs not Administered 
During Treatment

    The proposal at Sec. 17.101(g) includes charges for outpatient 
dental care and prescription drugs not administered during treatment. 
Under the proposal, these charges would continue to be billed based on 
VA costs as set forth in proposed Sec. 17.102. However, in the future, 
we intend to consider whether, based on information to be acquired, we 
should amend the regulations to reflect a different ``reasonable 
charge'' methodology for these charges.

Technical Changes

    The proposed rule also proposes to make a number of technical 
amendments to the medical regulations for purposes of consistency.

Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), a 
collection of information is set forth in proposed 38 CFR 17.101(a)(2). 
Accordingly, under section 3507(d) of the Act, VA has submitted a copy 
of this rulemaking action to the Office of Management and Budget (OMB) 
for its review of the proposed collection of information.
    OMB assigns a control number for each collection of information it 
approves. VA may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number.
    Comments on the proposed collection of information should be 
submitted to the Office of Management and Budget, Attention: Desk 
Officer for the Department of Veterans Affairs, Office of Information 
and Regulatory Affairs, Washington, DC 20503, with copies mailed or 
hand-delivered to: Director, Office of Regulations Management (02D), 
Department of Veterans Affairs, 810 Vermont Ave., NW, Room 1154, 
Washington, DC 20420. Comments should indicate that they are submitted 
in response to ``RIN 2900-AJ30.''
    Title: Submission of Evidence.
    Summary of collection of information: Under the provisions of 
proposed Sec. 17.101(a)(2), a third-party payer that is liable for 
reimbursing VA for health care VA provided to veterans with non-
service-connected conditions continues to have the option of paying 
either the billed charges as described in proposed Sec. 17.101 or the 
amount the health plan demonstrates it would pay to providers other 
than entities of the United States for the same care or services in the 
same geographic area. If the amount submitted for payment is less than 
the amount billed, VA will accept the submission as payment, subject to 
verification at VA's discretion. A VA employee having responsibility 
for collection of such charges may request that the third party payer 
submit evidence or information to substantiate the appropriateness of 
the payment amount (e.g., health plan policies, provider agreements, 
medical evidence, proof of payment to other providers demonstrating the 
amount paid for the same care and services VA provided).
    Description of need for information and proposed use of 
information: This information would be needed to determine whether the 
third-party payer has met the test of properly demonstrating its 
equivalent private sector provider payment amount for the same care or 
services and within the same geographic area as provided by VA.
    Description of likely respondents: Third-party payers who are 
liable under health plan contracts for reimbursing VA for healthcare it 
provides to veterans with non-service-connected conditions.
    Estimated number of respondents: 400 per year.
    Estimated frequency of responses: Once per year.
    Estimated average burden per collection: 2 hours.
    Estimated total annual reporting and recordkeeping burden: 800 
hours.
    The Department considers comments by the public on proposed 
collections of information in--
     Evaluating whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Department, including whether the information will have practical 
utility;
     Evaluating the accuracy of the Department's estimate of 
the burden of the proposed collections of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of the collections of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in this proposed rule between 30 and 60 days 
after publication of this document in the Federal Register. Therefore, 
a comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment on the proposed regulations.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would 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. 601-612. This rulemaking proceeding mostly would affect large 
insurance companies. Further, the provisions of the proposed rule would 
not impose a significant economic impact on any entities since VA 
billing would not constitute a significant portion of an insurance 
company's business. Accordingly, pursuant to 5 U.S.C. 605(b), this 
proposed rule is exempt from the initial and final regulatory 
flexibility analyses requirements of sections 603 and 604.

OMB Review

    This document has been reviewed by OMB pursuant to Executive Order 
12866.
    The Catalog of Federal Domestic Assistance numbers for the programs 
affected by this document are 64.005, 64.007, 64.008, 64,009, 64.010, 
64.011, 64.012, 64.013, 64.014, 64.015, 64.016, 64.018, 64.019, 64.022, 
and 64.025.

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

[[Page 54760]]

programs--veterans, Health care, Health facilities, Health professions, 
Health records, Homeless, Medical and dental schools, Medical devices, 
Medical research, Mental health programs, Nursing homes, Philippines, 
Reporting and recordkeeping requirements, Scholarships and fellowships, 
Travel and transportation expenses, Veterans.

    Approved: September 21, 1998.
Togo D. West, Jr.,
Secretary of Veterans Affairs.

    For the reasons set out in the preamble, 38 CFR part 17 is proposed 
to be amended as set forth below:

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.


Secs. 17.101 and 17.102  [Redesignated as Secs. 17.102 and 17.101, 
respectively]

    2. Sections 17.101 and 17.102 are redesignated as Secs. 17.102 and 
17.101, respectively.
    3. Newly redesignated Sec. 17.101 is revised to read as follows:


Sec. 17.101  Collection or recovery by VA for medical care or services 
provided or furnished to a veteran for a non-service connected 
disability.

    (a)(1) General. This section covers collection or recovery by VA, 
under 38 U.S.C. 1729, for medical care or services provided or 
furnished to a veteran:
    (i) For a non-service connected disability for which the veteran is 
entitled to care (or the payment of expenses of care) under a health-
plan contract;
    (ii) For a non-service connected disability incurred incident to 
the veteran's employment and covered under a worker's compensation law 
or plan that provides reimbursement or indemnification for such care 
and services; or
    (iii) For a non-service connected disability incurred as a result 
of a motor vehicle accident in a State that requires automobile 
accident reparations insurance.
    (2) Amount of recovery or collection--third party liability. A 
third-party payer liable under a health-plan contract has the option of 
paying either the billed charges described in this section or the 
amount the health-plan demonstrates is the amount it would pay for care 
or services furnished by providers other than entities of the United 
States for the same care or services in the same geographic area. If 
the amount submitted by the health plan for payment is less than the 
amount billed, VA will accept the submission as payment, subject to 
verification at VA's discretion in accordance with this section. A VA 
employee having responsibility for collection of such charges may 
request that the third party health plan submit evidence or information 
to substantiate the appropriateness of the payment amount (e.g., health 
plan or insurance policies, provider agreements, medical evidence, 
proof of payment to other providers in the same geographic area for the 
same care and services VA provided).
    (3) Methodology. Based on the methodology set forth in this 
section, the charges billed will include, as appropriate, inpatient 
facility charges, skilled nursing facility/sub-acute inpatient facility 
charges, outpatient facility charges, physician charges, and non-
physician provider charges. In addition, the charges billed for 
prosthetic devices and durable medical equipment provided on an 
outpatient basis will be VA's actual cost and the charges billed for 
prescription drugs not administered during treatment will bill a single 
nationwide average. Data for calculating actual amounts for inpatient 
facility charges, skilled nursing facility/sub-acute inpatient facility 
charges, outpatient facility charges, and physician charges will be 
published annually in the ``Notices'' section of the Federal Register.
    (4) Definitions. For purposes of this section:
    Consolidated MSA means a consolidated Metropolitan Statistical 
Area.
    CPI means Consumer Price Index.
    CPI-U means Consumer Price Index--All Urban Consumers.
    CPI-W means Consumer Price Index--Urban Wage Earners and Clerical 
Workers.
    CPT procedure code means a 5 digit-identifier for a specified 
physician service or procedure.
    DRG means diagnosis related group.
    Geographic area means Metropolitan Statistical Area (MSA) or the 
local market, if the VA facility is not located in an MSA.
    RVU means relative value unit.
    (b) Inpatient facility charges. When VA provides or furnishes 
inpatient services within the scope of care referred to in paragraph 
(a)(1) of this section, inpatient facility charges billed for such 
services will be determined in accordance with the provisions of this 
paragraph. Inpatient facility charges consist of per diem charges for 
room and board and for ancillary services that vary by VA facility and 
by DRG. These charges are calculated as follows:
    (1) Formula. For each inpatient stay or portion thereof for which a 
particular DRG assignment applies, multiply the nationwide room and 
board per diem charge as set forth in paragraph (b)(2) of this section 
by the appropriate geographic area adjustment factor as set forth in 
paragraph (b)(3) of this section. The result constitutes the facility-
specific room and board per diem charge. Also, for each inpatient stay, 
multiply the nationwide ancillary per diem charge as set forth in 
paragraph (b)(2) of this section by the appropriate geographic area 
adjustment factor as set forth in paragraph (b)(3) of this section. The 
result constitutes the facility-specific ancillary per diem charge. 
Then add the facility-specific room and board per diem charge to the 
facility-specific ancillary per diem charge. This constitutes the 
facility-specific combined per diem facility charge. Finally, multiply 
the facility-specific combined per diem facility charge by the number 
of days of inpatient care to obtain the total inpatient facility 
charge.

    Note to paragraph (b)(1): If there is a change in a patient's 
condition and/or treatment during a single inpatient stay such that 
the DRG assignment changes (for example, a psychiatric patient who 
develops a medical or surgical problem), then the calculations will 
be made separately for each DRG, according to the number of days of 
care applicable for each DRG, and the total inpatient facility 
charge will be the sum of the total inpatient facility charges for 
the different DRGs.

    (2) Per diem charges. To establish a baseline, two nationwide 
average per diem charges for each DRG are calculated for Calendar Year 
1995, one from the Medicare Standard Analytical File 5% Sample and one 
from the MedStat claim database, a claim database of nationwide 
commercial insurance. Results obtained from these two databases are 
then combined into a single weighted average per diem charge for each 
DRG. The resulting weighted average per diem charge for each DRG is 
then separated into its two components, a room and board component and 
an ancillary component, with the amount for each component calculated 
to reflect the corresponding percentage set forth in paragraph 
(b)(2)(i) of this section. The resulting amounts for room and board and 
ancillary services for each DRG are then each multiplied by the final 
ratio set forth in paragraph (b)(2)(ii) of this section to reflect the 
80th percentile charges. Finally, the resulting charges are each 
trended forward from their 1995 base to the effective time period for 
the charges, as set forth in paragraph (b)(2)(iii) of this section. The 
results

[[Page 54761]]

constitute the room and board per diem charge and the ancillary per 
diem charge.
    (i) Charge component percentages. Using only those cases from the 
Medicare Standard Analytical File 5% Sample for which a distinction 
between room and board charges and ancillary charges can be determined, 
the percentage of the total charges for room and board compared to the 
combined total charges for room and board and ancillary services, and 
the percentage of the total charges for ancillary services compared to 
the combined total charges for room and board and ancillary services, 
are calculated by DRG.
    (ii) 80th percentile. Using the medical and surgical admissions in 
the Medicare Standard Analytical File 5% Sample, obtain for each 
consolidated MSA the ratio of the day-weighted 80th percentile semi-
private room and board per diem charge to the average semi-private room 
and board per diem charge. The consolidated MSA ratios are averaged to 
obtain a final 80th percentile ratio.
    (iii) Trending forward. For each DRG, the 80th percentile charges, 
representing calculations for calendar year 1995, are trended forward 
for the period August 1998 through September 1999, and for each 12-
month period thereafter, beginning October 1, 1999, based on changes to 
the CPI. The projected total CPI trend from 1995 to the midpoint of the 
effective charge period is calculated as the composite of three 
components. The first component trends from 1995 to January 1997, using 
the Hospital Room component of the CPI-W for room and board charges and 
using the Other Hospital component of the CPI-W for ancillary charges. 
The second component trends from January 1997 to the latest available 
month, based on the Inpatient Hospital component of the CPI-U for room 
and board and ancillary charges. The third component trends from the 
latest available month to the midpoint of the effective charge period, 
based on the latest three-month average annual trend rate from the 
Inpatient Hospital component of the CPI-U. The projected total CPI 
trends are then applied to the 1995-base 80th percentile charges.
    (3) Geographic area adjustment factors. For each VA facility 
location, the average per diem room and board charges and ancillary 
charges from the 1995 Medicare Standard Analytical File 5% Sample are 
calculated for each DRG. The DRGs are separated into two groups, 
surgical and non-surgical. For each of these groups of DRGs, for each 
geographic area, average room and board per diem charges and ancillary 
per diem charges are calculated for 1995, weighted by FY 1997 
nationwide VA discharges and by average lengths of stay from the 
combined Medicare Standard Analytical File 5% Sample and the MedStat 
claim data base. This results in four average per diem charges for each 
geographic area: room and board for surgical DRGs, ancillary for 
surgical DRGs, room and board for non-surgical DRGs, and ancillary for 
non-surgical DRGs. Four corresponding national average per diem charges 
are obtained from the 1995 Medicare Standard Analytical File 5% Sample, 
weighted by FY 1997 nationwide VA discharges and by average lengths of 
stay from the combined Medicare Standard Analytical File 5% Sample and 
the MedStat claim data base. Four geographic area adjustment factors 
are then calculated for each geographic area by dividing each 
geographic area average per diem charge by the corresponding national 
average per diem charge.
    (c) Skilled nursing facility/sub-acute inpatient facility charges. 
When VA provides or furnishes skilled nursing/sub-acute inpatient 
services within the scope of care referred to in paragraph (a)(1) of 
this section, skilled nursing facility/sub-acute inpatient facility 
charges billed for such services will be determined in accordance with 
the provisions of this paragraph. The skilled nursing facility/sub-
acute inpatient facility charges are per diem charges that vary by VA 
facility. The facility charges cover care, including skilled 
rehabilitation services (e.g., physical therapy, occupational therapy, 
and speech therapy), that is provided in a nursing home or hospital 
inpatient setting, is provided under a physician's orders, and is 
performed by or under the general supervision of professional personnel 
such as registered nurses, licensed practical nurses, physical 
therapists, occupational therapists, speech therapists, and 
audiologists. The skilled nursing facility/sub-acute inpatient facility 
charges also incorporate charges for ancillary services associated with 
care provided in these settings. The charges are calculated as follows:
    (1) Formula. For each stay, multiply the nationwide per diem charge 
as set forth in paragraph (c)(2) of this section by the appropriate 
geographic area adjustment factor as set forth in paragraph (c)(3) of 
this section. The result constitutes the facility-specific per diem 
charge. Finally, multiply the facility-specific per diem charge by the 
number of days of care to obtain the total skilled nursing facility/
sub-acute inpatient facility charge.
    (2) Per diem charge. To establish a baseline, a nationwide average 
per diem billed charge for July 1, 1998, was obtained from the 1998 
Milliman & Robertson, Inc. Health Cost Guidelines, a publication that 
includes nationwide skilled nursing facility charges (Milliman & 
Robertson, Inc, 1305 5th Ave., Suite 3800, Seattle, WA 98101-2605). 
That average per diem billed charge is then multiplied by the 80th 
percentile adjustment factor set forth in paragraph (c)(2)(i) of this 
section to obtain a nationwide 80th percentile charge level. Finally, 
the resulting charge is trended forward to the effective time period 
for the charges, as set forth in paragraph (c)(2)(ii) of this section.
    (i) 80th percentile. Using the 1995 Medicare Standard Analytical 
File 5% Sample, the median per diem accommodation charge is calculated 
for each provider. For each State, the ratio of the 80th percentile of 
provider median charges to the average statewide charges for 
accommodations is calculated. The State ratios are averaged to produce 
a nationwide 80th percentile adjustment factor.
    (ii) Trending forward. The 80th percentile charge, representing 
charge levels for July 1, 1998, is trended forward to the midpoint of 
the period August 1998 through September 1999, and to the midpoint of 
each 12-month period thereafter, beginning October 1, 1999, based on 
the projected change in Medicare reimbursement from the Annual Report 
of the Board of Trustees of the Federal Hospital Insurance Trust Fund 
(this report can be found on the Health Care Financing Administration 
Internet site at http://www.hcfa.gov under the headings ``Publications 
and Forms'' and ``Professional/ Technical Publications'').
    (3) Geographic area adjustment factors. A ratio of the average per 
diem charge for each State to the nationwide average per diem charge is 
obtained (these ratios are set forth in the 1998 Milliman & Robertson, 
Inc. Health Cost Guidelines, a data base of nationwide commercial 
insurance charges and relative costs) (Milliman & Robertson, Inc., 1301 
5th Ave., Suite 3800, Seattle, WA 98101-2605). The geographic area 
adjustment factor for charges for each VA facility is the ratio for the 
State in which the facility is located.
    (d) Outpatient facility charges. When VA provides or furnishes 
outpatient services that are within the scope of care referred to in 
paragraph (a)(1) of this section and are not customarily performed in 
an independent clinician's office, the outpatient facility charges 
billed for such services will be

[[Page 54762]]

determined in accordance with the provisions of this paragraph. Except 
for prosthetic devices and durable medical equipment, whose charges 
will be made separately at actual cost to VA, charges for outpatient 
facility services will vary by VA facility and by CPT procedure code. 
These charges will be calculated as follows:
    (1) Formula. For each outpatient facility charge CPT procedure 
code, multiply the nationwide charge as set forth in paragraph (d)(2) 
of this section by the appropriate geographic area adjustment factor as 
set forth in paragraph (d)(4) of this section. The result constitutes 
the facility-specific outpatient facility charge. When multiple 
surgical procedures are performed during the same outpatient encounter 
by a provider or provider team, the outpatient facility charges for 
such procedures will be reduced as set forth in paragraph (d)(5) of 
this section.
    (2) Nationwide 80th percentile charges by CPT procedure code. For 
each CPT procedure code for which outpatient facility charges apply, 
the 1998 practice expense RVUs (these RVUs can be found in the 1998 St. 
Anthony's Complete RBRVS, Relative Value Studies, Inc., St. Anthony 
Publishing, 11410 Isaac Newton Square, Reston, VA 20190) are used as 
the outpatient facility RVUs. For each CPT procedure code, the 
outpatient facility RVU is multiplied by the charge amount for each 
incremental RVU as set forth in paragraph (d)(3) of this section. The 
resulting charge is adjusted by a fixed charge amount as also set forth 
in paragraph (d)(3) of this section to obtain the nationwide 80th 
percentile charge.
    (3) Charge factor. Using the 1995 MedStat claims database of 
nationwide commercial insurance, the median billed facility charge is 
calculated for each applicable CPT procedure code. All outpatient 
facility CPT procedure codes are then separated into one of the 37 
outpatient facility CPT procedure code groups as set forth in paragraph 
(d)(3)(i) of this section. Then, for each CPT procedure code in each 
such group, the median charge is adjusted to the 80th percentile as set 
forth in paragraph (d)(3)(ii) of this section. The resulting 80th 
percentile charge for each CPT procedure code is trended forward to the 
effective time period for the charges as set forth in paragraph 
(d)(3)(iii) of this section. Using the resulting charges and the RVUs, 
the mathematical approximation methodology of least squares is applied 
to the data for each CPT procedure code group to derive two charge 
factors. The first factor represents the charge amount for each 
incremental RVU in the CPT procedure code group and the second factor 
represents a fixed charge amount adjustment for the CPT procedure code 
group.
    (i) Outpatient facility CPT procedure code groups.
    (A) Surgery--Integumentery System--Skin, Subcutaneous & Accessory 
Structures/Nails;
    (B) Surgery--Integumentery System--Repair--Simple, Intermediate, 
Complex, Adjacent Tissue Transfer or Rearrangement;
    (C) Surgery--Integumentery System--Not Otherwise Classified;
    (D) Surgery--Musculoskeletal System--Not Otherwise Classified;
    (E) Surgery--Musculoskeletal System--Limbs--Incisions/Excisions/
    Insertion/Removal;
    (F) Surgery--Musculoskeletal System--Limbs--Shoulders/Humerus & 
Elbow/Pelvis & Hip Joint/Femur & Knee Joint--Other than Incisions/
Excisions/ Insertion/Removal;
    (G) Surgery--Musculoskeletal System--Limbs--Forearm & Wrist--Other 
than Incisions/Excisions/Insertion/Removal;
    (H) Surgery--Musculoskeletal System--Limbs--Tibia/Fibula & Ankle 
Joint'' Other than Incisions/Excisions/Insertion/Removal;
    (I) Surgery--Musculoskeletal System--Limbs--Hand & Fingers/Foot & 
Toes--Other than Incisions/Excisions/Insertion/Removal;
    (J) Surgery--Musculoskeletal System--Arthroscopy;
    (K) Surgery--Respiratory System;
    (L) Surgery--Cardiovascular System;
    (M) Surgery--Hemic & Lymphatic Systems;
    (N) Surgery--Digestive System--Not Otherwise Classified;
    (O) Surgery--Digestive System--Endoscopy;
    (P) Surgery--Urinary System;
    (Q) Surgery--Male Genital System;
    (R) Surgery--Laparoscopy/Hysteroscopy;
    (S) Surgery--Maternity Care & Delivery;
    (T) Surgery--Endocrine System;
    (U) Surgery--Eye/Ocular Adnexa;
    (V) Surgery--Auditory System;
    (W) Radiology--Diagnostic--Head & Neck/Chest/Spine & Pelvis;
    (X) Radiology--Diagnostic--Extremities/Abdomen/Gastrointestinal 
Tract/Urinary Tract/Gynecological & Obstetrical/Heart;
    (Y) Radiology--Diagnostic--Aorta & Arteries/Veins & Lymphatics;
    (Z) Radiology--Diagnostic Ultrasound;
    (AA) Radiology--Radiation Oncology/Nuclear Medicine/Therapeutic;
    (BB) Radiology--Diagnostic--CAT Scans;
    (CC) Radiology--Diagnostic--Magnetic Resonance Imaging (MRI);
    (DD) Medicine--Global--Not Otherwise Classified;
    (EE) Medicine--Global--Dialysis;
    (FF) Medicine--Technical Component--Gastroenterology;
    (GG) Medicine--Technical Component--Cardiovascular;
    (HH) Medicine--Technical Component--Pulmonary;
    (II) Medicine--Technical Component--Neurology & Neuromuscular 
Procedures;
    (JJ) Medicine--Observation Care; and
    (KK) Medicine--Emergency.
    (ii) 80th percentile. For each of the 37 outpatient facility CPT 
procedure code groups set forth in paragraph (d)(3)(i) of this section, 
the median charge is increased by the ratio of the 80th percentile 
charge to median charge (the data for CPT procedure code groups listed 
at paragraphs (d)(3)(i)(DD), (EE), (JJ), and (KK) of this section are 
obtained from the MedStat database of nationwide charges; the data for 
the other groups are obtained from the Outpatient Facility UCR module 
of the Comprehensive Healthcare Payment System from MediCode, Inc., a 
1997 release from a nationwide database of outpatient facility charges) 
(MediCode, Inc., 5225 Wiley Post Way, Suite 500, Salt Lake, UT 84116). 
To mitigate the impact of the variation in the intensity of services by 
CPT procedure code, the percent increase from the median to the 80th 
percentile in outpatient charges is compared to the percent increase 
from the median to the 80th percentile in inpatient semi-private room 
and board charges. Any percent increase in outpatient charges in excess 
of the inpatient semi-private room and board percent increase is 
multiplied by a factor of 0.50. The 80th percentile outpatient facility 
charge is reduced accordingly.
    (iii) Trending forward. The charges for each CPT procedure code, 
representing calculations for calendar year 1995, are trended forward 
for the period August 1998 through September 1999, and for each 12-
month period thereafter, beginning October 1, 1999, based on changes to 
the Outpatient Hospital component of the CPI-U. Actual CPI-U changes 
are used through the latest available month. The three-month average 
annual trend rate as of the latest available month is held constant to 
the midpoint of the effective charge period. The projected total CPI-U 
change from 1995 to this midpoint of the effective charge period is 
then applied to the 1995 80th percentile charges.
    (4) Geographic area adjustment factors. For each VA outpatient 
facility

[[Page 54763]]

location, a single geographic area adjustment factor is calculated as 
the arithmetic average of the outpatient geographic area adjustment 
factor (this factor constitutes the ratio of the level of charges for 
each geographic area to the nationwide level of charges) published in 
the Milliman & Robertson, Inc. Health Cost Guidelines (Milliman & 
Robertson, Inc., 1301 5th Ave., Suite 3800, Seattle, WA 98101-2605), 
and a geographic area adjustment factor developed from the MediCode 
data. The MediCode-based geographic area adjustment factors are 
calculated as the ratio of the CPT-weighted average charge level for 
each VA outpatient facility location to the nationwide CPT-weighted 
average charge level.
    (5) Multiple surgical procedures. When multiple surgical procedures 
are performed during the same outpatient encounter by a provider or 
provider team as indicated by multiple surgical CPT procedure codes, 
then the highest charge will be billed at 100% of the charges 
established under this section; the second highest charge will be 
billed at 25% of the charges established under this section; the third 
highest charge will be billed at 15% of the charges established under 
this section; and no outpatient facility charges will be billed for any 
additional surgical procedures.
    (e) Physician charges. When VA provides or furnishes physician 
services within the scope of care referred to in paragraph (a)(1) of 
this section, physician charges billed for such services will be 
determined in accordance with the provisions of this paragraph. 
Physician charges consist of charges for professional services that 
vary by VA facility and by CPT procedure code. These charges are 
calculated as follows:
    (1) Formula. For each CPT procedure code except those for 
anesthesia and pathology, multiply the total facility-adjusted RVU as 
set forth in paragraph (e)(2) of this section by the applicable 
facility-adjusted conversion factor (facility-adjusted conversion 
factors are expressed in monetary amounts) set forth in paragraph 
(e)(3) of this section to obtain the physician charge for each CPT 
procedure code at a particular VA facility. For each anesthesia and 
pathology CPT procedure code, multiply the nationwide physician charge 
as set forth in paragraph (e)(4) of this section by the geographic area 
adjustment factor as set forth in paragraph (e)(3)(iii) of this section 
to obtain the physician charge for each anesthesia and pathology CPT 
procedure code at a particular VA facility.
    (2)(i) Total facility-adjusted RVUs for physician services other 
than anesthesia, pathology, and specified CPT procedure codes. The work 
expense and practice expense components of the RVUs for CPT procedure 
codes (other than anesthesia, pathology, and those CPT procedure codes 
set forth at paragraphs (e)(2)(ii) and (e)(2)(iii) of this section) are 
compiled (information concerning the RVUs and their components can be 
obtained from Veterans Health Administration, Office of Finance, 
Department of Veterans Affairs, 810 Vermont Ave., NW, Washington, DC 
20420). For radiology CPT procedure codes, these compilations do not 
include separately identified technical component RVUs. For CPT 
procedure codes that generate an outpatient facility charge, the 
facility practice expense RVU is substitute for the non-facility 
practice expense RVU (information concerning facility practice expense 
RVUs can be obtained from Veterans Health Administration, Office of 
Finance, Department of Veterans Affairs, 810 Vermont Ave., NW, 
Washington, DC 20420). For Medicine and Surgery CPT procedure codes 
with separate professional and technical components that also generate 
an outpatient facility charge, only the professional component is 
compiled. The sum of the facility-adjusted work expense RVU as set 
forth in paragraph (e)(2)(i)(A) of this section and the facility-
adjusted practice expense RVU as set forth in paragraph (e)(2)(i)(B) of 
this section equals the total facility-adjusted RVUs.
    (A) Facility-adjusted work expense RVUs. For each CPT procedure 
code for each geographic area, the 1998 work expense RVU is multiplied 
by the 1998 Medicare work adjuster (0.917) and the results are further 
multiplied by the work expense 1998 Medicare Geographic Practice Cost 
Index. The result constitutes the facility-adjusted work expense RVU.
    (B) Facility-adjusted practice expense RVUs. For each CPT procedure 
code for each geographic area, the 1998 practice expense RVU is 
multiplied by the practice expense 1998 Medicare Geographic Practice 
Cost Index. The result constitutes the facility-adjusted practice 
expense RVU.
    (ii) RVUs for specified CPT procedure codes. For the following CPT 
procedure codes, obtain the nationwide 80th percentile billed charges 
from the nationwide commercial insurance data base compiled by the 
Health Insurance Association of America (Health Insurance Association 
of America, 555 13th Street, NW, Suite 600E, Washington, DC 20004): 
20930, 20936, 22841, 48160, 48550, 54440, 79900, 80050, 80055, 80103, 
80500, 80502, 85060, 85095, 85097, 85102, 86077, 86078, 86079, 86485, 
86490, 86510, 86580, 86585, 86586, 86850, 86860, 86870, 86890, 86891, 
86901, 86910, 86911, 86915, 86920, 86921, 86922, 86927, 86930, 86931, 
86932, 86945, 86950, 86965, 86970, 86971, 86972, 86975, 86977, 86978, 
86985, 88000, 88005, 88012, 88014, 88016, 88036, 88037, 88104, 88106, 
88107, 88108, 88125, 88160, 88161, 88162, 88170, 88171, 88172, 88173, 
88180, 88182, 88300, 88302, 88304, 88305, 88307, 88309, 88311, 88312, 
88313, 88314, 88318, 88319, 88321, 88323, 88325, 88329, 88331, 88332, 
88342, 88346, 88347, 88348, 88349, 88355, 88356, 88358, 88362, 88365, 
89100, 89105, 89130, 89132, 89135, 89140, 89141, 89250, 89350, 89360, 
92390, 92391, 94642, 94772, 99024, 99071, 99078, 99080, 99082, 99100, 
99116, 99135, 99140, 99420, 99450, 99455, 99456. For the following CPT 
procedure codes, obtain the nationwide 80th percentile billed charges 
from the Medicare Standard Analytical File 5% Sample: 99070, M0076, 
M0300. Then divide the nationwide 80th percentile billed charges by the 
untrended nationwide conversion factor for the corresponding physician 
CPT procedure code group as set forth in paragraphs (e)(3) and 
(e)(3)(i). The resulting nationwide total RVUs are multiplied by the 
geographic adjustment factors as set forth in paragraph (e)(2)(iv) of 
this section to obtain the facility-specific total RVUs.
    (iii) RVUs for specified CPT procedure codes. For the following 
list of CPT procedure codes, the nationwide total RVU is calculated by 
multiplying the 1998 Medicare work adjuster (0.917) by the work expense 
RVU and adding the practice expense RVU (the work expense RVU and the 
practice expense RVU for these CPT procedure codes can be found in the 
1998 St. Anthony's Complete RBRVS, Relative Value Studies, Inc., St. 
Anthony Publishing, 11410 Isaac Newton Square, Reston, VA 20190): 
15824, 15825, 15826, 15828, 15829, 15876, 15877, 15878, 15879, 17380, 
21088, 24940, 26587, 32850, 33930, 33940, 36415, 36468, 36469, 41820, 
41821, 41850, 41870, 47133, 48554, 50300, 58974, 65760, 65765, 65767, 
65771, 69090, 69710, 75556, 76092, 76140, 76350, 78608, 78609, 90700, 
90701, 90702, 90703, 90704, 90705, 90706, 90707, 90708, 90709, 90710, 
90711, 90712, 90713, 90714, 90716, 90717, 90718, 90179, 90720, 90721, 
90724, 90725, 90726, 90727, 90728, 90730, 90732, 90733, 90735,

[[Page 54764]]

90737, 90741, 90742, 90744, 90745, 90746, 90747, 90882, 90889, 90989, 
90993, 92531, 92532, 92533, 92534, 92551, 92559, 92560, 92590, 92591, 
92592, 92593, 92594, 92595, 92992, 92993, 93760, 93762, 93784, 93786, 
93788, 93790, 95120, 95125, 95130, 95131, 95132, 95133, 95134, 96110, 
96545, 97545, 97546, 99000, 99001, 99002, 99025, 99050, 99052, 99054, 
99056, 99058, 99075, 99090, 99190, 99191, 99192, 99288, 99358, 99359, 
99360, 99361, 99362, 99371, 99372, 99373. The resulting nationwide 
total RVUs are multiplied by the geographic adjustment factors as set 
forth in paragraph (e)(2)(iv) of this section to obtain the facility-
specific total RVUs.
    (iv) RVU geographic area adjustment factors for specified CPT 
procedure codes. The geographic area adjustment factor for each 
facility location consists of the weighted average of the 1998 work 
expense and practice expense Medicare Geographic Practice Cost Indices 
for each facility location using charge data for representative CPT 
procedure codes statistically selected and weighted for work expense 
and practice expense.
    (3) Facility-adjusted 80th percentile conversion factors. CPT 
procedure codes are separated into the following 24 physician CPT 
procedure code groups: allergy immunotherapy, allergy testing, 
anesthesia, cardiovascular, chiropractor, consults, emergency room 
visits and observation care, hearing/speech exams, immunizations, 
inpatient visits, maternity/cesarean deliveries, maternity/non-
deliveries, maternity/normal deliveries, miscellaneous medical, office/
home urgent care visits, outpatient psychiatry/alcohol and drug abuse, 
pathology, physical exams, physical medicine, radiology, surgery, 
therapeutic injections, vision exams, and well baby exams. For each of 
the 24 physician CPT procedure code groups, representative CPT 
procedure codes were statistically selected and weighted so as to give 
a weighted average RVU comparable to the weighted average RVU of the 
entire physician CPT procedure code group (the selected CPT procedure 
codes are set forth in the 1998 Milliman & Robertson, Inc., Health Cost 
Guidelines fee survey) (Milliman &n Robertson, Inc., 1301 5th Ave., 
Suite 3800, Seattle, WA 98101-2605). The 80th percentile charge for 
each selected CPT procedure code is obtained (this is contained in the 
nationwide commercial insurance data base compiled by the Health 
Insurance Association of America, 555 13th Street, NW, Suite 600E, 
Washington, DC 20004 (medical data for 5/1/96-4/30/97, including 
radiology and pathology; surgical data for 3/1/96-2/28/97; anesthesia 
data for 3/1/96-2/28/97)). A nationwide conversion factor (a monetary 
amount) is calculated for each physician CPT procedure code group as 
set forth in paragraph (e)(3)(i) of this section. The nationwide 
conversion factors for each of the 24 physician CPT procedure code 
groups are trended forward as set forth in paragraph (e)(3)(ii) of this 
section. The resulting amounts for each of the 24 groups are multiplied 
by geographic area adjustment factors as set forth in paragraph 
(3)(3)(iii) of this section, resulting in facility-adjusted 80th 
percentile conversion factors for each VA facility geographic area for 
the 24 physician CPT procedure code groups for the effective charge 
period.
    (i) Nationwide conversion factors. Using the nationwide 80th 
percentile charges for the selected CPT procedure codes from paragraph 
(e)(3) of this section, a nationwide conversion factor is calculated 
for each of the 24 physician CPT procedure code groups by dividing the 
weighted average charge by the weighted average RVU. To correspond with 
the charge data, for medicine and surgery CPT procedure codes, the 
total RVUs are used even when separate professional and technical 
components are specified.
    (ii) Trending forward. The nationwide conversion factor for each of 
the 24 physician CPT procedure code groups, representing charges for 
time periods detailed in paragraph (e)(3) of this section, are trended 
forward for the period August 1998 through September 1999, and for each 
12-month period thereafter, beginning October 1, 1999, based on changes 
to the Physician component of the CPI-U. Actual CPI-U changes are used 
through the latest available month. The three-month average annual 
trend rate as of the latest available month is held constant to the 
midpoint of the effective charge period. The projected total CPI-U 
change from the midpoint of the source data collection period to the 
midpoint of the effective charge period is then applied to the 24 
conversion factors.
    (iii) Geographic area adjustment factors. Using the 80th percentile 
charges for the selected CPT procedure codes from paragraph (e)(3) of 
this section for each VA facility geographic area, a geographic area-
specific conversion factor is calculated for each of the 24 physician 
CPT procedure code groups by dividing the weighted average charge by 
the weighted average facility-adjusted RVU. The resulting geographic 
area conversion factor for each facility geographic area for each 
physician CPT procedure code group is divided by the corresponding 
nationwide conversion factor as set forth in paragraph (e)(3)(i). The 
resulting ratios are the geographic area adjustment factors for each of 
the 24 physician CPT procedure code groups for each facility geographic 
area.
    (4) Nationwide 80th percentile charges for anesthesia and pathology 
CPT procedure codes. The nationwide charges are calculated by 
multiplying the RVUs as set forth in paragraph (e)(4)(i) of this 
section for anesthesia CPT procedure codes and as set forth in 
paragraph (e)(4)(ii) of this section for pathology CPT procedure codes 
by the appropriate nationwide trended 80th percentile conversion 
factors as set forth in paragraph (e)(3) of this section.
    (i) RVUs for anesthesia. The 1998 base unit value for each 
anesthesia CPT procedure code is compiled (the base unit values can be 
found in the 1998 St. Anthony's Complete RBRVS, Relative Value Studies, 
Inc., St. Anthony Publishing, 11410 Isaac Newton Square, Reston, VA 
20190). The average time unit value for each anesthesia CPT procedure 
code is compiled from a Health Care Financing Administration study 
concerning average time unit values for anesthesia CPT procedure codes 
(these values can be obtained from Veterans Health Administration, 
Office of Finance, Department of Veterans Affairs, 810 Vermont Ave., 
NW, Washington, DC 20420). For each anesthesia CPT procedure code 
introduced since the HCFA study, the time unit value is calculated as 
the average time unit value for all other anesthesia CPT procedure 
codes with the same base unit value. The sum of the anesthesia base 
unit value and the anesthesia time unit value equals the total 
anesthesia RVUs.
    (ii) RVUs for pathology. For each pathology CPT procedure code, the 
1998 Medicare payment amount is used as the RVU for the corresponding 
CPT procedure code (the payment amounts can be found on the Health Care 
Financing Administration public use files Internet site at http://
www.hcfa.gov/stats/pufiles.htm under the heading ``Payment Rates/ Non-
Institutional Providers'' and the title ``Clinical Diagnostic 
Laboratory Fee Schedule.''
    (f) Non-physician provider charges. When the following non-
physician providers provide or furnish VA care within the scope of care 
referred to in paragraph (a)(1) of this section, charges for that care 
covered by a CPT procedure code will be determined based on the 
following indicated percentages of the amount that would be charged if 
the care had been provided by a physician:
    (1) Nurse practitioner: 85%.

[[Page 54765]]

    (2) Clinical nurse specialist: 85%.
    (3) Physician Assistant: 65% for assistance at surgery; 75% for 
other hospital care and 85% for other non-hospital care.
    (4) Certified registered nurse anesthetist: 50% when physician 
supervised; 100% when not physician supervised.
    (5) Clinical psychologist: 80%.
    (6) Clinical social worker: 75%.
    (7) Podiatrist: 95%.
    (8) Chiropractor: 100%.
    (9) Dietitian: 75%.
    (10) Clinical pharmacist: 80%.
    (11) Optometrist: 90%.
    (g) Outpatient dental care and prescription drugs not administered 
during treatment. Notwithstanding other provisions of this section, 
when VA provides or furnishes outpatient dental care or prescription 
drugs not administered during treatment, within the scope of care 
referred to in paragraph (a)(1) of this section, charges billed 
separately for such care will be based on VA costs in accordance with 
the methodology set forth in Sec. 17.102 of this part.

(Authority: 38 U.S.C. 101, 501, 1701, 1705, 1710, 1721, 1722, 1729)


Sec. 17.102  [Amended]

    4. In newly redesignated Sec. 17.102, the first sentence of the 
introductory text is amended by removing ``Charges'' and adding in its 
place ``Except as provided in Sec. 17.101, charges'', paragraph (h) is 
amended by removing the heading and adding, in its place, ``Computation 
of charges.''; by removing paragraphs (h)(1), (2), and (4) through (6); 
and by removing ``(3) The method of computing the charges for medical 
care and services'' and by adding, in its place, ``The method for 
computing the charges under paragraphs (a), (b), (d), (f), and (g), and 
the last sentence of paragraph (c) of this section''.

[FR Doc. 98-26341 Filed 10-9-98; 8:45 am]
BILLING CODE 8320-01-U