[Federal Register Volume 66, Number 89 (Tuesday, May 8, 2001)]
[Rules and Regulations]
[Pages 23326-23333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11026]



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Part II





Department of Veterans Affairs





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38 CFR Part 17



Reasonable Charges for Medical Care or Services; Interim Final Rule and 
Notice

  Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and 
Regulations  

[[Page 23326]]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AK73


Reasonable Charges for Medical Care or Services

AGENCY: Department of Veterans Affairs.

ACTION: Interim final rule.

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SUMMARY: This document amends the Department of Veterans Affairs (VA) 
medical regulations concerning ``reasonable charges'' for medical care 
or services provided or furnished by VA to a veteran:

--For a nonservice-connected disability for which the veteran is 
entitled to care (or the payment of expenses of care) under a health 
plan contract;
--For a nonservice-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 nonservice-connected disability incurred as a result of a motor 
vehicle accident in a State that requires automobile accident 
reparations insurance.

    This document amends the regulations to update databases and other 
provisions for the purpose of providing more precise charges.

DATES: Effective Date: These amendments are effective May 8, 2001. 
Comments must be submitted by July 9, 2001.

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; or fax comments to 
(202) 273-9289; or e-mail comments to [email protected].. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AK73''. All comments received will be available for public 
inspection in the Office of Regulations Management, Room 1158, between 
the hours of 8 a.m. and 4:30 p.m., Monday through Friday (except 
holidays).

FOR FURTHER INFORMATION CONTACT: David Cleaver, VHA Revenue Office 
(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: This document amends VA's medical 
regulations that are set forth at 38 CFR part 17. More specifically, we 
are amending the regulations that establish a methodology for 
determining ``reasonable charges'' for medical care or services 
provided or furnished by VA to a veteran:
    (i) For a nonservice-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 nonservice-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 nonservice-connected disability incurred as a result of 
a motor vehicle accident in a State that requires automobile accident 
reparations insurance.
    The methodology for establishing such ``reasonable charges'' covers 
inpatient facility charges, skilled nursing facility/sub-acute 
inpatient facility charges, outpatient facility charges, physician 
charges, and other provider charges.
    Under the provisions of 38 U.S.C. 1729, VA has the right to recover 
or collect reasonable charges for such medical care and services 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 or services had not been furnished by a department or 
agency of the United States. However, consistent with that statutory 
authority, a third-party payer liable for such medical care and 
services under a health plan contract 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.
    This document changes the previous regulations to provide charges 
for updated 2001 Current Procedural Terminology (CPT) codes, and to 
update some of the databases to more recent versions. These changes are 
described in greater detail in the following paragraphs. These changes 
will not have a significant impact on any affected party, but will make 
VA's charge system more current and more accurate.
    The formulas for skilled nursing/sub-acute inpatient charges, 
outpatient facility charges and physician charges were designed to 
replicate, insofar as possible, the 80th percentile charge for a 
particular service in a specific location. We have made changes to 
ensure that the information used in the methodology is as current and 
precise as possible. As an example, the formula for physician charges 
included factors based on the 1999 Medicode database. We now are able 
to use the 2000 Medicode database.
    The formula for skilled nursing facility/sub-acute inpatient 
facility charges includes per diem charges that are based on nationwide 
data concerning skilled nursing facility charges contained in the 2000 
Milliman & Robertson, Inc., Health Cost Guidelines. We are amending the 
formula to use the data, which has been updated by Milliman & Robertson 
through July 1, 2001. With this change, the formula will use the latest 
available data for calculating per diem charges.
    The formula for outpatient facility charges included 45 CPT code 
groups from which the median charge was used for calculating the charge 
factors. We are amending the formula to use 50 CPT code groups instead 
of the previous 45 to better group together those CPT codes with 
similar characteristics. This will help ensure more accurate results 
for the charge factors.
    For physician charges other than anesthesia charges, in general, we 
have established several methods for determining charges depending on 
the availability of information. Under the existing regulations, we 
employ methodology to provide the most precise charges. If Relative 
Value Units (RVUs) are established under Medicare, we employ 
methodology utilizing these factors. This enables us to use three 
geographic area adjustment factors (GAAFs) in calculating charges for 
each of these CPT procedure codes: One for the work expense RVUs, one 
for the practice expense RVUs, and one for the conversion factor. When 
work expense and practice expense RVUs are not available from Medicare, 
we use methodology based on total RVUs derived from Medicare's Clinical 
Diagnostic Laboratory Fee Schedule. For each of these CPT procedure 
codes, we are able to use two GAAFs in calculating the charges: One for 
the total RVUs and one for the conversion factor. If neither of these 
sources for relative values is available, we use methodology based 
directly on billed charge data. We have made changes to the relative 
order in which each data source is used in order to ensure that the 
most recent charge data are utilized. Specifically, the regulation 
utilizes 2000 Medicode data first. If charges are lacking in Medicode, 
1998 Medicare charge data are used. Finally, for codes not included in 
these two sources, we use 1997

[[Page 23327]]

Health Insurance Association of America (HIAA) charge data. For each of 
these CPT procedure codes, we develop total RVUs and a conversion 
factor, using one GAAF for RVUs and one GAAF for the conversion factor. 
As a last resort, if none of the above are available, we use 
methodology based on work expense and practice expense RVUs obtained 
from St. Anthony's RBRVS (Resource Based Relative Value Scale). For 
each of these CPT procedure codes, we develop total RVUs and a 
conversion factor, using one GAAF for RVUs and one GAAF for the 
conversion factor. Consistent with these principles, we have made 
changes to reflect that the American Medical Association (AMA) has 
established new CPT codes, and the Health Care Financing Administration 
(HCFA) has defined new work expense and practice expense RVUs for these 
codes.
    Previously, the regulations establishing reasonable charges used 
information from the 2000 Medicare Geographic Practice Cost Index, 2000 
Medicare RBRVS Unit Values, and 2000 St. Anthony's Complete RBRVS. We 
are amending the regulations to use the 2001 Medicare Geographic 
Practice Cost Index, 2001 Medicare RBRVS Unit Values, and the 2001 St. 
Anthony's RBRVS. With these changes the regulations will use the latest 
available data for calculating physician charges.
    In accordance with the methodology in the regulations, inpatient 
facility charges, skilled nursing facility/sub-acute inpatient facility 
charges, outpatient facility charges, and physician charges are updated 
based on changes to the consumer price index. Under this methodology, 
charges are trended to the midpoint of the calendar year in which the 
charges will be effective.
    All of the above changes made by this document are for the purpose 
of adding precision to charges.
    In addition to the above changes, dates have been added to various 
data sources for purposes of clarification.
    The charges methodology in the regulations covers outpatient 
facility charges for services not customarily performed in a 
physician's office. We have added language to the introductory 
paragraph (d) to clarify that these services include many procedures 
and tests, as well as evaluation and management services rendered to 
hospital outpatients.
    The regulations contain provisions for the calculation of RVUs for 
pathology. In an Interim Final Rule published in the Federal Register 
on November 2, 2000, we intended to move these provisions from 
paragraph (e)(4)(ii) to paragraph (e)(2)(ii). These provisions were 
placed in paragraph (e)(2)(ii) as intended, but we inadvertently failed 
to delete paragraph (e)(4)(ii). Accordingly, we are deleting paragraph 
(e)(4)(ii).

Administrative Procedure Act

    This document amends the regulations to update databases and other 
provisions for the purpose of providing more precise charges. Although 
some charges might be slightly different, overall these changes would 
at most result in a very minor change in VA charges. Under these 
circumstances, we have concluded under 5 U.S.C. 553 that there is good 
cause for dispensing with prior notice and comment and a delayed 
effective date based on the conclusion that such procedure is 
impracticable, unnecessary, and contrary to the public interest.

Unfunded Mandates

    The Unfunded Mandates Reform Act requires (in section 202) that 
agencies prepare an assessment of anticipated costs and benefits before 
developing any rule that may result in an expenditure by State, local, 
or tribal governments, in the aggregate, or by the private sector of 
$100 million or more in any given year. This rule would have no 
consequential effect on State, local, or tribal governments.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

OMB Review

    The Office of Management and Budget has reviewed this proposed rule 
under Executive Order 12866.

Regulatory Flexibility Act

    The Secretary hereby certifies that this 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-
612. This rule would affect mainly large insurance companies, and where 
small entities are involved, they would not be impacted significantly 
since most of their business is not with VA. Accordingly, pursuant to 5 
U.S.C. 605(b), this rule is exempt from the initial and final 
regulatory flexibility analysis requirements of Secs. 603 and 604.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal domestic assistance numbers for the programs 
affected by this rule 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 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: April 3, 2001.
Anthony J. Principi,
Secretary of Veterans Affairs.

    For the reasons set out in the preamble, 38 CFR part 17 is 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.


    2. Section 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 nonservice-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 nonservice-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 nonservice-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 nonservice-connected disability incurred as a result of 
a motor vehicle accident in a State that requires automobile accident 
reparations insurance.
    (2) 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

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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 be 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. In those cases in 
which the effective period for published charges has expired and new 
charges have not yet become effective, VA will continue to bill using 
the most recently published charges until new charges are published and 
become effective (for example, if the most recently published charges 
state that they are effective through December and new charges are not 
published and effective until February 1, then the charges set forth 
for the period through December will continue to be used through 
January 31).
    (3) 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).
    (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, for purposes of inpatient facility and skilled 
nursing facility/sub-acute inpatient facility charges, means 
Metropolitan Statistical Area (MSA) or the local market, if the VA 
facility is not located in an MSA; and for outpatient facility charges 
and physician charges, means a three-digit ZIP Code locality.
    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 fiscal year 
1998, one from the 1998 Medicare MedPAR file and one from the MedStat 
claim database, a database of nationwide commercial insurance claims. 
Because the MedStat data is based on calendar year 1997, the MedStat 
charges were trended forward at an annual trend rate of 2.7%, based on 
the Inpatient Hospital component of the CPI-U. 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 1998 to the effective time period 
for the charges, as set forth in paragraph (b)(2)(iii) of this section. 
The results constitute the room and board per diem charge and the 
ancillary per diem charge.
    (i) Charge component percentages. Using only those cases from the 
MedPAR file 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 1995 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. 80th percentile charges for each DRG, 
representing charge levels described in paragraph (b)(2) of this 
section, are trended forward based on changes to the hospital inpatient 
component of the CPI-U. Actual CPI-U changes are used through the 
latest available month for room/board and ancillary charges. Trends 
from the latest available month to the midpoint of the calendar year in 
which charges become effective are based on the latest three-month 
average

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annual trend rate from the Inpatient Hospital component of the CPI-U. 
The projected total CPI trend is then applied to the 1998 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 database. 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 database. 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, 2001, was obtained from the 2001 
Milliman & Robertson, Inc., Health Cost Guidelines, a publication that 
includes nationwide skilled nursing facility charges (Milliman & 
Robertson, Inc., 1301 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 is trended 
forward to the midpoint of the calendar year in which the charges will 
be effective, 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 database 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 determined in accordance with the 
provisions of this paragraph. This consists of outpatient facility 
charges for procedures, tests, and evaluation and management services, 
including the subset of evaluation and management codes which are 
designated as ``Office or Other Outpatient Services'' when those 
evaluation and management services are provided in the outpatient 
department of a hospital. 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 RVU's 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 factors. Using the 1998 MedStat claims database of 
nationwide commercial insurance, the median billed facility charge is 
calculated for each applicable CPT procedure code.

[[Page 23330]]

All outpatient facility CPT procedure codes are then separated into one 
of the 45 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, mathematical approximation methodology based on least squares 
techniques are applied to the data for each CPT procedure code group to 
derive outpatient facility charges. For each CPT procedure code, the 
charge amount is calculated as an amount per incremental RVU and a 
fixed charge amount adjustment.
    (i) Outpatient facility CPT procedure code groups. (A) Surgery--
Integumentary System--Skin, Subcutaneous and Accessory Structures--
Incision and Drainage, Excision-Debridement, Paring or Cutting, Biopsy, 
Removal of Skin Tags, Shaving of Epidermal or Dermal Lesions, and 
Surgery--Integumentary System--Nails;
    (B) Surgery--Integumentary System--Skin, Subcutaneous & Accessory 
Structures--Excision-Benign Lesions, Excision-Malignant Lesions; and 
Surgery--Integumentary System--Nails--Introduction;
    (C) Surgery--Integumentary System--Repair--Simple, Intermediate, 
Complex, Adjacent Tissue Transfer or Rearrangement;
    (D) Surgery--Integumentary System--Repair--Free Skin Grafts, Flaps, 
Other Flaps and Grafts, Other Procedures, Pressure Ulcers;
    (E) Surgery--Integumentary System--Repair--Burns, Local Treatment;
    (F) Surgery--Integumentary System--Destruction;
    (G) Surgery--Integumentary System--Breast;
    (H) Surgery--Musculoskeletal System--All Body Regions--Incision, 
Excision, Introduction or Removal;
    (I) Surgery--Musculoskeletal System--All Body Regions--Repair, 
Revision and/or Reconstruction, Arthrodesis, Manipulation, Amputation, 
Wound Exploration, Replantation, Grafts, Spinal Instrumentation;
    (J) Surgery--Musculoskeletal System--All Body Regions--Fracture 
and/or Dislocation--Closed Treatments (Except for Head, Neck [Soft 
Tissues] and Thorax);
    (K) Surgery--Musculoskeletal System--All Body Regions--Fracture 
and/or Dislocation--Open Treatments, and Surgery--Musculoskeletal
    System--Head, Neck (Soft Tissues) and Thorax--Fracture and/or 
Dislocation--Closed Treatments;
    (L) Surgery--Musculoskeletal System--Application of Casts and 
Strapping;
    (M) Surgery--Musculoskeletal System--Endoscopy/Arthroscopy;
    (N) Surgery--Respiratory System;
    (O) Surgery--Cardiovascular System;
    (P) Surgery--Digestive System--All Body Regions--All procedures 
except Endoscopy;
    (Q) Surgery--Digestive System--All Body Regions--Endoscopy;
    (R) Surgery--Urinary System;
    (S) Surgery--Male Genital System;
    (T) Surgery--Female Genital System;
    (U) Surgery--Maternity Care and Delivery--Antepartum Services;
    (V) Surgery--Maternity Care and Delivery--Excision, Introduction, 
Repair, Vaginal Delivery, Antepartum and Postpartum Care, Cesarean 
Delivery, Delivery After Previous Cesarean Delivery, Abortion, Other 
Procedures;
    (W) Surgery--Endocrine System, Nervous System;
    (X) Surgery--Eye and Ocular Adnexa;
    (Y) Surgery--Auditory System;
    (Z) Radiology--Diagnostic--Head and Neck, Chest, Spine and Pelvis--
All Except CAT Scans and Magnetic Resonance Imaging (MRI);
    (AA) Radiology--Diagnostic--Upper Extremities, Lower Extremities, 
Abdomen, Gastrointestinal Tract, Urinary Tract, Gynecological and 
Obstetrical, Heart--All Except CAT Scans and Magnetic Resonance Imaging 
(MRI);
    (BB) Radiology--Diagnostic--Aorta and Arteries, Veins and 
Lymphatics--All Except CAT Scans and Magnetic Resonance Imaging (MRI);
    (CC) Radiology--Diagnostic Ultrasound;
    (DD) Radiology--Radiation Oncology, Nuclear Medicine, Therapeutic;
    (EE) Radiology--Diagnostic--CAT Scans in All Categories;
    (FF) Radiology--Diagnostic--Magnetic Resonance Imaging (MRI) in All 
Categories;
    (GG) Medicine--Vaccines, Toxoids;
    (HH) Medicine--Therapeutic or Diagnostic Infusions (Excluding 
Chemotherapy), Therapeutic, Prophylactic, or Diagnostic Injections;
    (II) Medicine--Psychiatry, Biofeedback;
    (JJ) Medicine--Dialysis;
    (KK) Medicine--Gastroenterology;
    (LL) Medicine--Ophthalmology--Special Ophthalmological Services, 
and Medicine--Special Otorhinolaryngologic Services;
    (MM) Medicine--Cardiovascular--Other Vascular Studies;
    (NN) Medicine--Cardiovascular--Therapeutic Services, 
Echocardiography, Cardiac Catheterization, Intracardiac 
Electrophysiological Procedures, and Medicine--Non-Invasive Vascular 
Diagnostic Studies;
    (OO) Medicine--Pulmonary;
    (PP) Medicine--Neurology and Neuromuscular Procedures, Central 
Nervous System Assessments and Tests;
    (QQ) Medicine--Chemotherapy Administration;
    (RR) Medicine--Special Dermatological Procedures;
    (SS) Medicine--Physical Medicine and Rehabilitation--Evaluation, 
Modalities; and Medicine--Photodynamic Therapy;
    (TT) Medicine--Physical Medicine and Rehabilitation--Therapeutic 
Procedures, Tests and Measurements, Other Procedures, Medicine--
Osteopathic Manipulative Treatment, Medicine Chiropractic Manipulative 
Treatment, Medicine--Special Services, Procedures, and Reports, and 
Medicine--Other Services and Procedures;
    (UU) Medicine--Evaluation & Management--Consultations;
    (VV) Medicine--Evaluation & Management--Hospital Observation 
Services;
    (WW) Medicine--Evaluation & Management--Emergency Department 
Services, Critical Care Services; and
    (XX) Medicine--Evaluation & Management--Office or Other Outpatient 
Services, Prolonged Services, and Medicine--Ophthalmology--General 
Ophthalmological Services.
    (ii) 80th percentile. For each of the 45 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 obtained from the 1998 MedStat 
database of nationwide charges. 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 charge levels described in paragraph

[[Page 23331]]

(d)(3) of this section, are trended forward to the midpoint of the 
calendar year in which the charges will be effective. The trend factors 
are 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 the source data period to the 
effective period is then applied to the 80th percentile charges, as 
described in paragraph (d)(3) of this section.
    (4) Geographic area adjustment factors. For each VA outpatient 
facility 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 2001 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 2000 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 CPT procedure code with the highest facility charge will be 
billed at 100% of the charges established under this section; the CPT 
procedure code with the second highest facility charge will be billed 
at 25% of the charges established under this section; the CPT procedure 
code with the third highest facility 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, 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 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 CPT procedure code at a particular VA facility.
    (2)(i) Total facility-adjusted RVUs for physician services other 
than anesthesia and specified CPT procedure codes. The work expense and 
practice expense components of the RVUs for CPT procedure codes (other 
than anesthesia and those CPT procedure codes set forth at paragraphs 
(e)(2)(ii) through (e)(2)(iv) 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 substituted 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 2001 work expense RVU is multiplied 
by the work expense 2001 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 2001 practice expense RVU is 
multiplied by the practice expense 2001 Medicare Geographic Practice 
Cost Index. . The result constitutes the facility-adjusted practice 
expense RVU.
    (ii) RVUs based on laboratory and pathology CPT codes based on 
Medicare's Clinical Diagnostic Laboratory Fee Schedule. For CPT 
procedure codes without modifiers that are not assigned separately 
identified work and practice units (in (e)(2)(i) of this section), 
total RVUs are developed based on the 2001 edition of Medicare's 
Clinical Diagnostic Laboratory Fee Schedule (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''). Such Medicare payment amounts are upwardly 
adjusted such that the payment level is, on average, equivalent to 
standard RBRVS payment levels, using statistical comparisons to the 
80th percentile derived from the 2000 MediCode charge database. These 
adjusted payment amounts are then divided by the 2001 Medicare 
conversion factor to derive RVUs corresponding to each CPT code. The 
total RVUs are added to the 2001 RBRVS work and practice expense RVUs 
for the corresponding professional component (if any) of a given CPT 
procedure code to derive nationwide total RVUs. The resulting 
nationwide total RVUs are multiplied by the geographic adjustment 
factors as set forth in paragraph (e)(2)(v) of this section to obtain 
the facility-specific total RVUs.
    (iii) RVUs for specified CPT procedure codes. For CPT procedure 
codes without modifiers that are not assigned RVUs in (e)(2)(i) or 
(e)(2)(ii) of this section, total RVUs are developed based on various 
charge databases. For the following CPT procedure codes, the nationwide 
80th percentile billed charges are obtained from the 2000 MediCode 
data: 15824, 15825, 15826, 15828, 15829, 17380, 20930, 20936, 22841, 
24940, 36415, 41820, 41821, 41850, 41870, 48160, 50300, 54440, 58974, 
65760, 65765, 65767, 65771, 69090, 76092, 76350, 80050, 80055, 80103, 
86485, 86586, 86850, 86860, 86870, 86890, 86891, 86901, 86910, 86911, 
86915, 86920, 86921, 86922, 86927, 86930, 86931, 86932, 86945, 86950, 
86965, 86970, 86971, 86972, 86975, 86976, 86977, 86978, 86985, 88000, 
88005, 88007, 88012, 88014, 88016, 88020, 88025,

[[Page 23332]]

88027, 88028, 88029, 88036, 88037, 88040, 88045, 88142, 88143, 88144, 
88145, 88147, 88148, 89250, 90371, 90375, 90376, 90389, 90471, 90472, 
90585, 90586, 90632, 90633, 90634, 90645, 90646, 90647, 90648, 90657, 
90658, 90659, 90665, 90675, 90680, 90690, 90691, 90882, 90889, 90989, 
90993, 92531, 92532, 92533, 92534, 92590, 92591, 92592, 92593, 92594, 
92595, 92992, 92993, 93760, 93762, 93784, 93790, 94642, 95120, 95125, 
95130, 95131, 95132, 95133, 95134, 96110, 99000, 99001, 99002, 99025, 
99050, 99052, 99054, 99056, 99058, 99185, 99186, 99190, 99191, 99192, 
99358, 99359, 99360, 99361, 99362, 99371, 99372, and 99373. For the 
following CPT procedure codes, the nationwide 80th percentile billed 
charges are obtained from the 1998 Medicare Standard Analytical File 5% 
Sample: 21089, 23929, 26989, 29909, 76140, 78990, 79900, 86849, 90660, 
90668, 90669, 90749, 92390, 92391, 96549, 97780, 97781, 99024, 99070, 
99071, 99072, 99075, 99078, 99080, 99082, 99090, 99100, 99116, 99135, 
99140, 99173, 99288, 99420, 99429, 99450, 99455, and 99456. For the 
following CPT procedure codes, the nationwide 80th percentile billed 
charges are obtained from the 1997 nationwide commercial insurance 
database compiled by the Health Insurance Association of America 
(Health Insurance Association of America, 555 13th Street, NW., Suite 
600E, Washington, DC 20004): 15876, 15877, 15878, 15879, 21088, 26587, 
32850, 33940, 36468, 36469, 47133, 48550, 55970, and 69710. The 
nationwide 80th percentile billed charges so obtained are divided 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) of this section. The resulting nationwide total RVUs are 
multiplied by the geographic adjustment factors as set forth in 
paragraph (e)(2)(v) of this section to obtain the facility-specific 
total RVUs.
    (iv) RVUs for specified CPT procedure codes. For CPT procedure 
codes without modifiers that are not assigned RVUs in paragraphs 
(e)(2)(i), (e)(2)(ii), or (e)(2)(iii) of this section, the nationwide 
total RVU is calculated by summing the work expense and practice 
expense RVUs found in the 2001 St. Anthony's Complete RBRVS (available 
from Relative Value Studies, Inc., St. Anthony Publishing, 11410 Isaac 
Newton Square, Reston, VA 20190): 36540, 43752, 63043, 63044, 86294, 
90940, 91132, 91133, 93318, and 99172. The resulting nationwide total 
RVUs are multiplied by the geographic adjustment factors as set forth 
in paragraph (e)(2)(v) of this section to obtain the facility-specific 
total RVUs.
    (v) 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 2001 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 2001 Milliman & Robertson, Inc., Health Cost 
Guidelines fee survey) (Milliman & 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 charge database compiled by 2000 MediCode, Inc., 
5225 Wiley Post Way, Suite 500, Salt Lake City, Utah 84116). 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 (e)(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 charge levels 
described in paragraph (e)(3) of this section, are trended forward 
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 calendar year in which charges will be 
effective. 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 CPT procedure 
codes. The nationwide charges are calculated by multiplying the RVUs as 
set forth in paragraph (e)(4)(i) of this section by the appropriate 
nationwide trended 80th percentile conversion factors as set forth in 
paragraph (e)(3) of this section.
    (i) RVUs for anesthesia. The 2000 base unit value for each 
anesthesia CPT procedure code is compiled (the base unit values can be 
found in the 2000 St. Anthony's Complete RBRVS, Relative Value Studies, 
Inc., St. Anthony

[[Page 23333]]

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 
Health Care Financing Administration 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 average time unit value 
equals the total anesthesia RVUs.
    (ii) [Reserved]
    (f) Other provider charges. When the following 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 under paragraph (e) of this section:
    (1) Nurse practitioner: 85%.
    (2) Clinical nurse specialist: 85%.
    (3) Physician Assistant: 85%.
    (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: 100%.
    (8) Chiropractor: 100%.
    (9) Dietitian: 75%.
    (10) Clinical pharmacist: 80%.
    (11) Optometrist: 100%.
    (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.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0606.)

(Authority: 38 U.S.C. 101, 501, 1701, 1705, 1710, 1721, 1722, 1729)
[FR Doc. 01-11026 Filed 5-7-01; 8:45 am]
BILLING CODE 8320-01-U