[Federal Register Volume 67, Number 114 (Thursday, June 13, 2002)]
[Rules and Regulations]
[Pages 40597-40606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14707]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

RIN 0720-AA73


TRICARE; Sub-Acute Care Program; Uniform Skilled Nursing Facility 
Benefit; Home Health Care Benefit; Adopting Medicare Payment Methods 
for Skilled Nursing Facilities and Home Health Care Providers

AGENCY: Office of the Secretary, DoD

ACTION: Interim final rule.

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SUMMARY: This rule partially implements the TRICARE ``sub-acute and 
long-term care program reform'' enacted by Congress in the National 
Defense Authorization Act for Fiscal Year 2002, specifically: 
Establishment of ``an effective, efficient, and integrated sub-acute 
care benefits program,'' with skilled nursing facility and home health 
care benefits modeled after those of the Medicare program; adoption of 
Medicare payment methods for skilled nursing facility, home health 
care, and certain other institutional health care providers; adoption 
of Medicare rules on balance billing of beneficiaries, prohibiting it 
by institutional providers and limiting it by non-institutional 
providers; and change in the statutory exclusion of coverage for 
custodial and domiciliary care. The Department is publishing this rule 
as an interim final rule to implement the statutory requirements and 
effective dates. Public comments, however, are invited and will be 
considered for possible revisions to this rule.

DATES: Written comments will be accepted until August 12, 2002. This 
rule implements specific statutory requirements with specific statutory 
effective dates. This rule is effective August 12, 2002, or as soon 
thereafter as the Director, TRICARE Management Activity can effectively 
and efficiently implement through contract change. If the rule is not 
effective August 12, 2002, notice will be published in the Federal 
Register when the contract changes

[[Page 40598]]

have been completed to implement the rule.

ADDRESSES: Forward comments to Medical Benefits and Reimbursement 
Systems, TRICARE Management Activity, 16401 East Centretech Parkway, 
Aurora, Colorado 80011-9066.

FOR FURTHER INFORMATION CONTACT: For payments to Skilled Nursing 
Facilities and Skilled Nursing Facility (SNF) services, Tariq Shahid, 
Medical Benefits and Reimbursement Systems, TRICARE Management 
Activity, telephone (303) 676-3801. For Home Health Care (HHC) benefits 
and payment methods, David E. Bennett, TRICARE Management Activity, 
Medical Benefits and Reimbursement Systems, telephone (303) 676-3494. 
For payments for clinical laboratory and certain other services in 
hospital outpatient departments and emergency departments and balance 
billing limits, Stan Regensberg, Medical Benefits and Reimbursement 
Systems, TRICARE Management Activity, telephone, (303) 676-3742.

SUPPLEMENTARY INFORMATION:

I. Overview

    In the National Defense Authorization Act for Fiscal Year 2002 
(NDAA-02), Pub. L. 107-107 (December 28, 2001), Congress enacted 
several reforms relating to TRICARE coverage and payment methods for 
skilled nursing and home health care services. The statutory ``Sub-
Acute and Long-Term Care Program Reform'' under section 701 of this Act 
added a new 10 U.S.C. 1074j, which provides in pertinent part:

Sec. 1074j. Sub-Acute Care Program

    (a) Establishment.--The Secretary of Defense shall establish an 
effective, efficient, and integrated sub-acute care benefits program 
under this chapter * * *
    (b) Benefits.--(1) The program shall include a uniform skilled 
nursing facility benefit that shall be provided in the same manner 
and under the conditions described in Section 1861(h) and (i) of the 
Social Security Act (42 U.S.C. 1935x(h) and (i)), except that the 
limitation on the number of days of coverage under Section 1812(a) 
and (b) of such Act (42 U.S.C. 1395d(a) and (b)) shall not be 
applicable under the program. Skilled nursing facility care for each 
spell of illness shall continue to be provided for as long as 
medically necessary and appropriate.
* * * * *
    (3) The program shall include a comprehensive, part-time or 
intermittent home health care benefit that shall be provided in the 
manner and under the conditions described in Section 1861(m) of the 
Social Security Act (42 U.S.C. 1395x(m)).

    In addition to these requirements that TRICARE establish an 
integrated sub-acute care program consisting of skilled nursing 
facility and home health care services modeled after the Medicare 
program, Congress also, in section 707 of NDAA-02, changed the 
statutory authorization (in 10 U.S.C. 1079(j)(2)) that TRICARE payment 
methods for institutional care ``may be'' determined to the extent 
practicable in accordance with Medicare payment rules to a mandate that 
TRICARE payment methods ``shall be'' so determined. This command is 
effective 90 days after the date of enactment. A third Congressional 
action in NDAA-02, also in Section 707, is the statutory codification 
of existing TRICARE policy--modeled after Medicare--that institutional 
providers are not permitted to balance bill beneficiaries for charges 
above the TRICARE payment amount and that non-institutional providers 
may not balance bill in excess of 15 per cent over the TRICARE Maximum 
Allowable Cost.
    A fourth component of this reform program (in Section 701(c)) is 
the narrowing of the statutory exclusions of custodial and domiciliary 
care by the adoption of new definitions of ``custodial care'' and 
``domiciliary care'' that have the effect of eliminating current 
program restrictions on paying for certain medically necessary care.
    This interim final rule implements these statutory requirements. We 
are adopting for TRICARE a skilled nursing facility benefit similar to 
Medicare's, but as specified in the statute, without Medicare's day 
limits. We are also adopting Medicare's prospective payment method for 
skilled nursing facility care. Similarly, we are adopting the Medicare 
benefit structure and payment method for home health care services. We 
are applying to SNF and HHC providers the statutory prohibition against 
balance billing. In addition, we are incorporating the new statutory 
definitions of ``custodial care'' and ``domiciliary care.'' Finally, 
this rule also provides clarification of existing payment policies for 
clinical laboratory and rehabilitation therapy services, radiology 
services procedures, and routine venipuncture in hospital outpatient 
and emergency departments that were adopted under the allowable charge 
methodology under 32 CFR 199.14.
    We note that the series of sub-acute and long-term care program 
reforms adopted by Congress in NDAA-02 included several parts that are 
not being implemented in this interim final rule. Most significant are: 
repeal of the Case Management Program under 10 U.S.C. 1079(a)(17) 
(repealed--along with several other related enactments--by Section 
701(g)(2) of NDAA-02); continuation of the Case Management Program for 
certain beneficiaries currently covered by it (Section 701(d)); and 
establishment of a new program of extended benefits for disabled family 
members of active duty services members (Section 701(b)). These and 
several other related statutory changes will be implemented through 
regulatory changes in the very near future. In the meantime, the case 
management process of 32 CFR 199.4(i) will remain available to provide 
services to eligible beneficiaries of the new extended benefits 
program, consistent with the statutory specifications.
    Finally, we note that Congress included as Section 8101 of the DoD 
2002 Appropriations Act, a general provision identical to a provision 
included in the 2000 (Section 8118) and 2001 (Section 8100) 
Appropriations Acts concerning implementation of the case management 
program under 10 U.S.C. 1079(a)(17). Although Sections 8118 and 8100 of 
the 2000 and 2001 Appropriations Acts were repealed by Section 
701(g)(1)(B) and (C) of NDAA-02, the same provision was reenacted in 
the 2002 Appropriations Act. By its terms, Section 8101 of the DoD 2002 
Appropriations Act, exclusively addresses implementation of a program 
(the case management program under 10 U.S.C. 1079(a)(17)) that has now 
been repealed. Thus, we consider Section 8101 as not affecting 
implementation of the sub-acute and long-term care reform program 
adopted by Congress in NDAA-02.
    The program reforms adopted by Congress and implemented in this 
interim final rule take major steps toward achieving the Congressional 
objective of an effective, efficient, and integrated sub-acute care 
benefits program.

II. Skilled Nursing Facility Benefits

    As noted above, 10 U.S.C. 1074j requires TRICARE to include a 
skilled nursing facility benefit that shall for the most part be 
provided in the manner and under the conditions described under 
Medicare. As a result, TRICARE is adopting Medicare's three-day-prior-
hospitalization requirement for coverage of a SNF admission. 
Accordingly, for a SNF admission to be covered under TRICARE, the 
beneficiary must have a qualifying hospital stay (meaning an inpatient 
hospital stay), of not less than three consecutive days before the 
beneficiary is discharged from the hospital. The beneficiary must enter 
the SNF within 30 days after discharge from the hospital, or within 
such time as it would be medically appropriate to begin an active 
course of treatment, where the

[[Page 40599]]

individual's condition is such that SNF care would not be medically 
appropriate within 30 days after discharge from a hospital. The skilled 
services must be for a medical condition that was either treated during 
the qualifying three-day hospital stay, or started while the 
beneficiary was already receiving covered SNF care. Additionally, an 
individual shall be deemed not have been discharged from a SNF, if 
within 30 days after discharge from a SNF, the individual is again 
admitted to the same or a different SNF. These coverage requirements 
are the same as applied under Medicare. We are not, however, adopting 
Medicare's 100-day limit on SNF services. Consistent with the statute, 
SNF coverage for each spell of illness shall continue to be provided 
for as long as medically necessary and appropriate.

III. Payments for Skilled Nursing Facility Services

    TRICARE had not to date reformed payment methods applicable to SNFs 
due to the very small volume of SNF services paid for by TRICARE. The 
volume of such services is now expected to increase significantly 
because of the Congressional action in 2000 reinstating TRICARE 
coverage secondary to Medicare for Medicare-eligible DoD health care 
beneficiaries (Section 712 of the Floyd D. Spence National Defense 
Authorization Act for Fiscal Year 2001, Pub. L. 106-398). Coincident 
with Congressional action in directing adoption of Medicare payment 
methods for institutional providers, we have undertaken a review of the 
Medicare payment method and rates for SNF care under Section 1888(e) of 
the Social Security Act (42 U.S.C. 1395yy) and 42 CFR part 413, subpart 
J. That review and assessment have convinced us that adoption of 
Medicare SNF payment methods and rates is not only required by law, but 
also fair, feasible, practicable, and appropriate.
    Medicare implemented its per diem Prospective Payment System (PPS) 
for SNF care covering all costs (routine, ancillary and capital) of 
Medicare-covered SNF services as of July 1, 1998. The Medicare payment 
rates are based upon resident assessments. All Medicare-certified SNFs 
are required to conduct assessments on residents using a standardized 
assessment tool, called the Minimum Data Set (MDS). Medicare then uses 
information from this assessment to categorize SNF patients into seven 
major categories: (1) Rehabilitation; (2) Extensive Services; (3) 
Special Care; (4) Clinically Complex; (5) Impaired Cognition; (6) 
Behavior Problems; and (7) Reduced Physical Function. This is done 
using the Resource Utilization Group (RUG)-III grouper. The RUG-III 
grouper is a computer program that converts resident specific 
assessment data into a case-mix classification. In classifying patients 
into groups based upon their clinical and functional characteristics, 
the grouper further subdivides each of these seven categories resulting 
in 44 specific patient RUGs.
    For each of the 44 RUGs, the Medicare SNF per diem payment is 
calculated as the sum of three parts--the nursing component, the 
therapy component and the non-case-mix component. Under the nursing and 
therapy components of the payment rate, each of the 44 RUGs carries a 
uniquely assigned relative weight factor. This relative weight factor, 
or case mix index, represents a relative index or resource consumption. 
Resource-intensive patients are assigned to a RUG that carries a higher 
relative weight factor. This RUG-specific relative weight factor is 
multiplied by the applicable nursing and therapy base rates (which vary 
depending on whether the SNF is urban or rural) to develop the nursing 
and therapy components of the per diem payment rate. These two 
components are then added to the non-case-mix adjusted component 
resulting in the total PPS per diem payment rate.
    A key part of the Medicare SNF payment system is the use of the MDS 
to classify SNF residents into one of the 44 RUG groups. An important 
issue is whether the RUG-III classification system used by Medicare to 
classify patients into the 44 RUG groups would be practicable for the 
TRICARE SNF benefit. We think that it would be practicable. Much of the 
SNF care for which TRICARE will be paying is as second payer to 
Medicare for the same patient. Even for non-Medicare-eligible patients 
(e.g., most patients under age 65), the characteristics recognized by 
the RUG-III system would be equally applicable. In this regard, we note 
that more than ten states have decided to use the RUG-III system to 
classify Medicaid patients into RUGs and several other states are 
currently in the developmental stages of implementing the RUG-III 
system. This reflects a broad view that the MDS and RUGs are 
appropriate for non-Medicare SNF residents. In our review and 
discussions, we could not identify any significant barriers to the use 
of the RUG-III system to classify TRICARE patients.
    One implementation issue that we have identified related to 
classification concerns the timing of residents assessments. The 
Medicare SNF payment system requires periodic patient assessments. The 
Centers for Medicare and Medicaid Services (CMS) requires that SNF 
patients be assessed on days 5, 14, 30, 60, and 90, as well as be 
reassessed if there are status changes between these periodic 
assessments. We have considered the level of assessment required after 
100 days when TRICARE becomes primary payer for patients whose SNF care 
must continue beyond the Medicare benefit limit. We believe continuing 
to assess patients every 30 days would be consistent with Medicare's 
practice of skilled authorization.
    A second implementation issue concerns the use of MDS for neonates 
and very young children. The MDS was not designed for very young 
children. As a result, we believe that children under ten should not be 
assessed using the MDS. We will review the methods used by Medicaid 
programs and may adopt one of their assessment methods at a later time. 
Until then, the allowed charge for children under age ten in a SNF will 
continue to be the billed charge.
    We have also considered whether the Medicare SNF payment rates and 
weights are appropriate for TRICARE. We believe they are. For some of 
the payment methods TRICARE has adopted for non-SNF providers that are 
based on the Medicare's system, we have developed DoD-specific weights 
and rates. In some, such as for physician payments, we implemented our 
own phase-in process, but have not reached comparability with Medicare. 
In the case of SNF PPS, the Medicare weights and rates were developed 
to be used nationally--like TRICARE--thus, we have no special State 
considerations that some Medicaid programs would have. In addition, the 
TRICARE population group that will be the primary user of SNF services 
and the Medicare population group are quite similar. Thus, we believe 
that there is no reason why the Medicare weights and rates would not be 
appropriate to use. However, we will carefully monitor the TRICARE SNF 
patient characteristics to ensure that the weights and rates are 
appropriate. If necessary, the weights and rates could be modified 
after one or more years of experience.
    Based on all of these considerations and the statutory 
requirements, the Department is adopting for TRICARE the Medicare 
payment methods and rates, including MDS assessments, RUG-III 
classifications, and Medicare weights and per diem rates. For patient 
stays longer than 90 days, MDS assessment would be required every 30 
days.

[[Page 40600]]

    In adopting the Medicare's SNF payment methodology, we are also 
incorporating into our rule a provision that has been in the TRICARE 
Operations Manual requiring that TRICARE-eligible SNFs must be 
Medicare-certified institutions. We believe this policy facilitates 
assurance of quality of care and is consistent with the payment 
approach we are adopting.

IV. Home Health Care Benefits

    Home health agencies (HHAs) are currently recognized as authorized 
providers under TRICARE, but payment only extends to services rendered 
by otherwise authorized TRICARE individual professional providers, such 
as registered nurses, physical and occupational therapists, and speech 
pathologists. Coverage of services provided by home health aides and 
medical social workers are currently not allowed except under the 
hospice benefit. Payment is also extended under the TRICARE-allowable 
charge methodology for medical supplies that are essential in enabling 
HHA professional staff to effectively carry out physician ordered 
treatment of the beneficiary's illness or injury. Unlike Medicare, 
TRICARE currently requires HHAs to have either community Health 
Accreditation Program or Joint Commission on the Accreditation of 
Healthcare Organizations accreditation to quality as network providers. 
These certification requirements will be changed to make them 
consistent with those of Medicare in order to effectively accommodate 
adoption of the new HHA prospective payment system; i.e., to require 
Medicare certification/approval for provider authorization status under 
TRICARE.
    Medicare's home health benefit structure and conditions for 
coverage are being adopted coincident with implementation of the new 
prospective payment system including those provisions under Sections 
1861(m), 1861(o), and 1891 of the Social Security Act and 42 CFR part 
484. In general, coverage extends to part-time or intermittent skilled 
nursing care and home health aide services from qualified providers. 
The specific benefit structure and conditions for coverage are set 
forth in the new Section 199.4(e)(22) of the regulation.
    In adopting this new benefit structure for TRICARE, we note the 
potential need for some transition time or other accommodation for some 
patients currently receiving home health services under present program 
coverage rules. Our regulation (Section 199.1(n)) allows the 
recognition of special circumstance and authority of the Director to 
address them.

V. Payment Method for Home Health Care Services

    TRICARE is adopting Medicare's benefit structure and prospective 
payment system for reimbursement of HHAs that are currently in effect 
for the Medicare program under Section 4603 of the Balanced Budget Act 
of 1997, as amended by Section 5101 of the Omnibus Consolidated and 
Emergency Supplemental Appropriations Act for Fiscal Year 1999, and by 
Sections 302, 305, and 306 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999. This includes adoption of the 
comprehensive Outcome and Assessment Information Set (OASIS) and 
consolidating billing requirements.
    The adoption of the Medicare HHA prospective payment system 
replaces the retrospective physician-oriented fee-for-service model 
currently used for payment of home health services under TRICARE. Under 
the new prospective payment system, TRICARE will reimburse HHAs a fixed 
case-mix and wage-adjusted 60-day episode payment amount for 
professional home health services, along with routine and non-routine 
medical supplies provided under the beneficiary's plan of care. Durable 
medical equipment and osteoporosis drugs receive a separate payment 
amount in addition to the prospective payment system amount for home 
health care services.
    The variation in reimbursement among beneficiaries receiving home 
health care under this newly adopted prospective payment system will be 
dependent on the severity of the beneficiary's condition and expected 
resource consumption over a 60-day episode-of-care, with special 
reimbursement provisions for major intervening events, significant 
changes in conditions, and low or high resource utilization. The 
resource consumption of these beneficiaries will be assessed using 
OASIS selected data elements. The score values obtained from these 
selected data elements will be used to classify home health 
beneficiaries into one of 80 Home Health Resource Groups (HHRGs) based 
on their average expected resource costs relative to other home health 
care patients.
    The HHRG classification determines the cost weight; i.e., the 
appropriate case-mix weight adjustment factor that indicates the 
relative resources used and costliness of treating different patients. 
The cost weight for a particular HHRG is then multiplied by a standard 
average prospective payment amount for a 60-day episode of home health 
care. The case-mix adjusted standard prospective payment amount is then 
adjusted to reflect the geographic variation in wages to come up with 
the final HHA payment amount.
    As indicated above, the ordinary unit of payment is based on a 60-
day episode of care. Payment covers the entire episode of care 
regardless of the number of days of care actually provided during the 
60-day period. There are exceptions to this standard payment period 
under certain conditions that will result in reduced or additional 
amounts being paid. If the beneficiary is still in treatment at the end 
of the initial 60-day episode of care, a physician must re-certify that 
the beneficiary is correctly assigned to one of the HHRGs, and a new 
episode of care may begin. There is currently no limit on the number of 
medically necessary consecutive 60-day episodes that beneficiaries may 
receive under the HHA prospective payment system.
    As noted above, the variation in reimbursement among beneficiaries 
receiving HHC under this newly adopted prospective payment system will 
be dependent on the severity of the beneficiary's condition and 
expected resource consumption over a 60-day episode-of-care, with 
special reimbursement provisions for major intervening events, 
significant changes in condition, and low or high resource utilization. 
A case mix system has been developed to measure the severity and 
projected resource utilization of beneficiaries receiving home health 
services using selected data elements off of the OASIS assessment 
instrument (i.e., the assessment document submitted by HHAs for 
reimbursement) and an additional element measuring receipt of at least 
ten visits for therapy services. These key data elements are organized 
and assigned a score value in order to measure the impact of clinical, 
functional and services utilization dimensions on total resource use. 
The resulting summed scores are used to assign a beneficiary to a 
particular severity level within each of the following dimensions:
     Clinical Dimension--The clinical dimension has four 
severity levels (0-3) and takes into account the beneficiary's primary 
diagnosis and prevalent medical conditions.
     Functional Dimension--The functional dimension assesses 
the beneficiary's ability to perform various activities of daily living 
(e.g., the beneficiary's ability to dress and bathe) and consists of 
five severity levels (0-4).
     Services Utilization Dimension--The Services utilization 
dimension has

[[Page 40601]]

four severity levels (0-3) and indicates whether the beneficiary was 
discharged from a skilled nursing facility or rehabilitation hospital 
within the past 14 days and whether the patient is expected to receive 
ten or more occupational, physical and/or speech therapy visits.
    A case-mix grouper is used for assigning a severity level within 
each of the above dimensions and for classifying the beneficiary into 
one of 80 HHRGs. The HHRG indicates the extent and severity of the 
beneficiary's home health needs reflected in its relative case-mix 
weight (cost weight). The case-mix weight indicates the group's 
relative resource use and cost of treating different patients. The 
case-mix weights for Fiscal Year 2001 ranged from 0.5265 to 2.8113. The 
standardized prospective payment rate is multiplied by the 
beneficiary's assigned HHRG case-mix weight to come up with the 60-day 
episode payment.
    As with the SNF MDS classification system, we believe the HHRG 
should not be used for children under ten. They are thus exempt from 
the HHA prospective payment system.

VI. Balance Billing Limitations

    Consistent with the Congressional action discussed above, we are 
revising Section 199.6 of the regulation to specify that institutional 
providers, including SNFs and HHAs, are required, in order to be 
TRICARE-authorized providers, to be participating providers on all 
claims. They must accept as payment in full, except for any required 
beneficiary deductible and copayment amounts, the TRICARE payment as 
payment in full. Medicare and TRICARE payment rates are designed to 
fully reimburse the institutions and are required by Medicare and 
TRICARE to be accepted as full reimbursement. TRICARE eligible 
hospitals, SNFs, and HHAs must enter into a participation agreement.

VII. Definitions of ``Custodial Care'' and ``Domiciliary Care''

    As noted above, Congress adopted definitions of ``custodial care'' 
and ``domiciliary care'' that we are incorporating into the TRICARE 
regulation. Custodial and domiciliary care continue to be excluded by 
the statute and regulation. However, the new definitions narrow the 
exclusions, resulting in increasing coverage of medically necessary 
care. This is also consistent with the Congressional effort largely to 
standardize TRICARE and Medicare sub-acute care coverage and payment 
policies. As a corollary to these definitions, we are also adopting a 
definition of the term ``activities of daily living.''

VIII. Payment Methods for Hospital Outpatient Services

    Medicare implemented a new Outpatient Prospective Payment System 
(OPPS) on August 1, 2000, as a payment methodology for facility charges 
in hospital outpatient departments and emergency departments. This 
system replaced Medicare's prior payment methodology for such services, 
which was largely based on provider cost reports, but included some fee 
schedules. The Medicare OPPS is being phased in from 2000 to 2004, with 
a series of transitional payment adjustments that are based partly upon 
the prior Medicare cost reports and Medicare's prior cost-based 
methodology. Consistent with the TRICARE payment reform statutory 
authority and general policy, we plan to follow the Medicare approach. 
However, because of complexities of the Medicare transition process and 
the lack of TRICARE cost report data comparable to Medicare's, it is 
not practicable for the Department to adopt Medicare OPPS for hospital 
outpatient services at this time. A separate regulatory initiative in 
the future will address hospital outpatient services not covered by 
this regulation. We anticipate eventual adoption of the Medicare OPPS 
for most TRICARE hospital outpatient services covered by the Medicare 
OPPS.
    This rule addresses payments for four categories of hospital based 
outpatient services. The first three apply to hospital outpatient 
clinical laboratory services and rehabilitation therapy services and 
routine venipuncture. For these services, payments are based on the 
TRICARE-allowable cost method in effect for professional providers.
    The fourth category addresses hospital outpatient radiology 
services procedures for which CHAMPUS Maximum Allowable Charge (CMAC) 
technical component rates exist. For these procedures, we will use the 
CMAC technical component rate to reimburse hospital facility costs for 
radiology services.

IX. Regulatory Procedures

    This rule has been reviewed by the Office of Management and Budget 
as required under Executive Order 12866. This is a major rule under the 
Congressional Review Act. This rule is economically significant as it 
would result in reduced TRICARE payments to skilled nursing facilities 
(SNFs) in excess of $100 million per year. The projected volume of 
services is a function of the recent Congressional action restoring 
TRICARE eligibility to Medicare-eligible DoD beneficiaries. The 
estimates of reduction are based on historical TRICARE costs and an 
assessment of potential users times average benefit costs per person 
for each of the provisions addressed. The reduction will be at least 
partially offset by increases in Medicare payments. This rule will 
result in increased Medicare payments to SNFs, home health agencies, 
and other institutional providers of $4 million in FY03. Benefits of 
the rule include substantially standardizing sub-acute care benefits 
and payments between Medicare and TRICARE, particularly important 
because most TRICARE sub-acute care services are for beneficiaries also 
covered by Medicare. This regulation would affect small entities such 
as SNFs. Even though this is an economically significant rule, it does 
not require a regulatory flexibility analysis as the significant policy 
action was taken by Congress and the rule merely puts it into effect. 
The policy of the Regulatory Flexibility Act that agencies adequately 
evaluate all potential options for an action does not apply when 
Congress has already dictated the action.
    This rule will not impose significant additional information 
collection requirements on the public under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3511). Existing information collection 
requirements of the TRICARE and Medicare programs will be utilized. 
Comments on information collection requirements should be submitted to 
the Office of Information and Regulatory Affairs, OMB, 725 17th Street, 
NW., Washington, DC 20503, marked ``Attention Desk Officer for 
Department of Defense, Health Affairs.''
    This rule is being issued as an interim final rule, with comment 
period, as an exception to our standard practice of soliciting public 
comments prior to issuance. The Assistant Secretary of Defense (Health 
Affairs) has determined that following the standard practice in this 
case would be unnecessary, impractical, and contrary to the public 
interest.
    This rule implements specific statutory requirements with specific 
statutory effective dates. This rule is effective 60 days from the date 
of publication in the Federal Register, or as soon thereafter as the 
Director, TRICARE Management Activity can effectively and efficiently 
implement through contract change. If the rule is not implemented 60 
days from the date of publication in the Federal Register, notice will 
be published in the Federal Register when the contract changes

[[Page 40602]]

have been completed to implement the rule.
    Public comments are invited. All comments will be carefully 
considered. A discussion of the major issues received by public 
comments will be included with the issuance of the final rule.

List of Subjects in 32 CFR Part 199

    Claims, Dental health, Health care, Health insurance, Individuals 
with disabilities, Military personnel.

    Accordingly, 32 CFR Part 199 is amended as follows:

PART 199--[AMENDED]

    1. The authority citation for Part 199 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 10 U.S.C. Chapter 55.

    2. Section 199.2(b) is amended by revising the definitions of 
``custodial care'', ``domiciliary care'', ``skilled nursing facility'' 
and ``skilled nursing services'', by adding definitions of ``activities 
of daily living'', ``case-mix index'', ``homebound'', ``home health 
discipline'', ``home health market basket index'', ``intermittent home 
health aide and skilled nursing services'', and ``part-time home health 
aide and skilled nursing services'' in alphabetical order, and by 
removing the definitions of ``essentials of daily living'' and 
``private duty (special) nursing services'', to read as follows:


Sec. 199.2   Definitions.

* * * * *
    (b) * * *
    Activities of daily living. Care that consists of providing food 
(including special diets), clothing, and shelter; personal hygiene 
services; observation and general monitoring; bowel training or 
management (unless abnormalities in bowel function are of a severity to 
result in a need for medical or surgical intervention in the absence of 
skilled services); safety precautions; general preventive procedures 
(such as turning to prevent bedsores); passive exercise; companionship; 
recreation; transportation; and such other elements of personal care 
that reasonably can be performed by an untrained adult with minimal 
instruction or supervision. Activities of daily living may also be 
referred to as ``essentials of daily living''.
* * * * *
    Case-mix index. Case-mix index is a scale that measures the 
relative difference in resources intensity among different groups 
receiving home health services.
* * * * *
    Custodial care. The term ``custodial care'' means treatment or 
services, regardless of who recommends such treatment or services or 
where such treatment or services are provided, that:
    (1) Can be rendered safely and reasonably by a person who is not 
medically skilled; or
    (2) Is or are designed mainly to help the patient with the 
activities of daily living.
* * * * *
    Domiciliary care. The term ``domiciliary care'' means care provided 
to a patient in an institution or homelike environment because:
    (1) Providing support for the activities of daily living in the 
home is not available or is unsuitable; or
    (2) Members of the patient's family are unwilling to provide the 
care.
* * * * *
    Homebound. A beneficiary's condition is such that there exists a 
normal inability to leave home and, consequently, leaving home would 
require considerable and taxing effort. Any absence of an individual 
from the home attributable to the need to receive health care 
treatment--including regular absences for the purpose of participating 
in therapeutic, psychosocial, or medical treatment in an adult day-care 
program that is licensed or certified by a state, or accredited to 
furnish adult day-care services in the state shall not disqualify an 
individual from being considered to be confined to his home. Any other 
absence of an individual from the home shall not disqualify an 
individual if the absence is infrequent or of relatively short 
duration. For purposes of the preceding sentence, any absence for the 
purpose of attending a religious service shall be deemed to be an 
absence of infrequent or short duration. Also, absences from the home 
for non-medical purposes, such as an occasional trip to the barber, a 
walk around the block or a drive, would not necessarily negate the 
beneficiary's homebound status if the absences are undertaken on an 
infrequent basis and are of relatively short duration.
    Home health discipline. One of six home health disciplines covered 
under the home health benefit (skilled nursing services, physical 
therapy services, occupational therapy services, speech-language 
pathology services, and medical social services).
    Home health market basket index. An index that reflects changes 
over time in the prices of an appropriate mix of goods and services 
included in home health services.
* * * * *
    Intermittent home health aide and skilled nursing services. 
Intermittent means:
    (1) Up to and including 28 hours per week of skilled nursing and 
home health aide services combined, provided on a less-than-daily 
basis;
    (2) Up to 35 hours per week of skilled nursing and home health aide 
services combined that are provided on a less-than-daily basis, subject 
to review by managed care support contractors on a case-by-case basis, 
based upon documentation justifying the need for and reasonableness of 
such additional care; or
    (3) Up to and including full-time (i.e., eight hours per day) 
skilled nursing and home health aide services combined which are 
provided and needed seven days per week for temporary, but not 
indefinite, periods of time of up to 21 days with allowances for 
extensions in exceptional circumstances where the need for care in 
excess of 21 days is finite and predictable.
* * * * *
    Part-time home health aide and skilled nursing services. Part-time 
means:
    (1) Up to and including 28 hours per week of skilled nursing and 
home health aide services combined for less than eight hours per day; 
or
    (2) Up to 35 hours per week of skilled nursing and home health aide 
services combined for less than eight hours per day subject to review 
by managed care support contractors on a case-by-case basis, based upon 
documentation justifying the need for and reasonableness of such 
additional care.
* * * * *
    Skilled nursing facility. An institution (or a distinct part of an 
institution) that meets the criteria as set forth in 
Sec. 199.6(b)(4)(vi).
    Skilled nursing services. Skilled nursing services includes 
application of professional nursing services and skills by an RN, LPN, 
or LVN, that are required to be performed under the general 
supervision/direction of a TRICARE-authorized physician to ensure the 
safety of the patient and achieve the medically desired result in 
accordance with accepted standards of practice.
* * * * *

    3. Section 199.4 is amended by redesignating the current paragraph 
(b)(3)(xiv) as (b)(3)(xv), by adding new paragraphs (b)(3)(xiv) and 
(e)(21), and by removing and reserving paragraphs (c)(2)(xv) and 
(c)(3)(xii) to read as follows:


Sec. 199.4  Basic program benefits.

    (b) * * *

[[Page 40603]]

    (3) * * *
    (xiv) Skilled nursing facility (SNF) services. Covered services in 
SNFs are the same as provided under Medicare under section 1861(h) and 
(i) of the Social Security Act (42 U.S.C. 1395x(h) and (i)) and 42 CFR 
part 409, subparts C and D, except that the Medicare limitation on the 
number of days of coverage under section 1812(a) and (b) of the Social 
Security Act (42 U.S.C. 1395d(a) and (b)) and 42 CFR 409.61(b) shall 
not be applicable under TRICARE. Skilled nursing facility care for each 
spell of illness shall continue to be provided for as long as necessary 
and appropriate. For a SNF admission to be covered under TRICARE, the 
beneficiary must have a qualifying hospital stay meaning an inpatient 
hospital stay of three consecutive days or more, not including the 
hospital leave day. The beneficiary must enter the SNF within 30 days 
of leaving the hospital, or within such time as it would be medically 
appropriate to begin an active course of treatment, where the 
individual's condition is such that SNF care would not be medically 
appropriate within 30 days after discharge from a hospital. The skilled 
services must be for a medical condition that was either treated during 
the qualifying three-day hospital stay, or started while the 
beneficiary was already receiving covered SNF care. Additionally, an 
individual shall be deemed not to have been discharged from a SNF, if 
within 30 days after discharge from a SNF, the individual is again 
admitted to a SNF. Adoption by TRICARE of most Medicare coverage 
standards does not include Medicare coinsurance amounts. Extended care 
services furnished to an inpatient of a SNF by such SNF (except as 
provided in paragraphs (b)(3)(xiv)(C), (b)(3)(xiv)(F), and 
(b)(3)(xiv)(G) of this section) include:
    (A) Nursing care provided by or under the supervision of a 
registered professional nurse;
    (B) Bed and board in connection with the furnishing of such nursing 
care;
    (C) Physical or occupational therapy or speech-language pathology 
services furnished by the SNF or by others under arrangements with them 
by the facility;
    (D) Medical social services;
    (E) Such drugs, biological, supplies, appliances, and equipment, 
furnished for use in the SNF, as are ordinarily furnished for the care 
and treatment of inpatients;
    (F) Medical services provided by an intern or resident-in-training 
of a hospital with which the facility has such an agreement in effect; 
and
    (G) Such other services necessary to the health of the patients as 
are generally provided by SNFs, or by others under arrangements with 
them made by the facility.
* * * * *
    (e) * * *
    (21) Home health services. Home health services are covered when 
furnished by, or under arrangement with, a home health agency (HHA) 
that participates in the TRICARE program, and provides care on a 
visiting basis in the beneficiary's home. Covered HHA services are the 
same as those provided under Medicare under section 1861(m) of the 
Social Security Act (42 U.S.C. 1395x(m)) and 42 CFR part 409, subpart 
E.
    (i) Benefit coverage. Coverage will be extended for the following 
home health services subject to the conditions of coverage prescribed 
in paragraph (e)(21)(ii) of this section:
    (A) Part-time or intermittent skilled nursing care furnished by a 
registered nurse or a licensed practical (vocational) nurse under the 
supervision of a registered nurse;
    (B) Physical therapy, speech-language pathology, and occupational 
therapy;
    (C) Medical social services under the direction of a physician;
    (D) Part-time or intermittent services of a home health aide who 
has successfully completed a training program approved by the Director 
TMA;
    (E) Medical supplies, a covered osteoporosis drug (as defined in 
the Social Security Act 1861(kk), but excluding other drugs and 
biologicals) and durable medical equipment;
    (F) Medical services provided by an interim or resident-in-training 
of a hospital, under an approved teaching program of the hospital in 
the case of an HHA that is affiliated or under common control of a 
hospital; and
    (G) Services at hospitals, SNFs or rehabilitation centers when they 
involve equipment too cumbersome to bring to the home but not including 
transportation of the individual in connection with any such item or 
service.
    (ii) Conditions for Coverage. The following conditions/criteria 
must be met in order to be eligible for the HHA benefits and services 
referenced in paragraph (e)(21)(i) of this section:
    (A) The person for whom the services are provided is an eligible 
TRICARE beneficiary.
    (B) The HHA that is providing the services to the beneficiary has 
in effect a valid agreement to participate in the TRICARE program.
    (C) Physician certifies the need for home health services because 
the beneficiary is homebound.
    (D) The services are provided under a plan of care established and 
approved by a physician.
    (1) The plan of care must contain all pertinent diagnoses, 
including the patient's mental status, the types of services, supplies, 
and equipment required, the frequency of visits to be made, prognosis, 
rehabilitation potential, functional limitations, activities permitted, 
nutritional requirements, all medications and treatments, safety 
measures to protect against injury, instructions for timely discharge 
or referral, and any additional items the HHA or physician chooses to 
include.
    (2) The orders on the plan of care must specify the type of 
services to be provided to the beneficiary, both with respect to the 
professional who will provide them and the nature of the individual 
services, as well as the frequency of the services.
    (E) The beneficiary must need skilled nursing care on an 
intermittent basis or physical therapy or speech-language pathology 
services, or have continued need for occupational therapy after the 
need for skilled nursing care, physical therapy, or speech-language 
pathology services has ceased.
    (F) The beneficiary must receive, and an HHA must provide, a 
patient-specific, comprehensive assessment that:
    (1) Accurately reflects the patient's current health status and 
includes information that may be used to demonstrate the patient's 
progress toward achievement of desired outcomes;
    (2) Identifies the beneficiary's continuing need for home care and 
meets the beneficiary's medical, nursing, rehabilitative, social, and 
discharge planning needs.
    (3) Incorporates the use of the current version of the Outcome and 
Assessment Information Set (OASIS) items, using the language and 
groupings of the OASIS items, as specified by the Director, TRICARE 
Management Activity.
    (G) TRICARE is the appropriate payer.
    (H) The services for which payment is claimed are not otherwise 
excluded from payment.
    (I) Any other conditions of coverage/participation that may be 
required under Medicare's HHA benefit; i.e., coverage guidelines as 
prescribed under Sections 1861(o) and 1891 of the Social Security Act 
(42 U.S.C. 1395x(o) and 1395bbb) and 42 CFR Part 484.
* * * * *

    4. Section 199.6 is amended by revising paragraphs (a)(8)(i)(A),

[[Page 40604]]

(a)(8)(i)(B), (a)(11)(i) and (d)(5), and adding new paragraphs 
(a)(8)(iii), (b)(4)(vi)(K) and (b)(4)(xv), to read as follows:


Sec. 199.6  Authorized providers.

    (a) * * *
    (8) * * *
    (i) * * *
    (A) An institutional provider in Sec. 199.6(b), in order to be an 
authorized provider under TRICARE, must be a participating provider for 
all claims.
    (B) A SNR or a HHA, in order to be an authorized provider under 
TRICARE, must enter into a participation agreement with TRICARE for all 
claims.
* * * * *
    (iii) Claim-by-claim participation. Individual providers that are 
not participating providers pursuant to paragraph (a)(8)(ii) of this 
section may elect to participate on a claim-by-claim basis. They may do 
so by signing the appropriate space on the claims form and submitting 
it to the appropriate TRICARE contractor on behalf of the beneficiary.
* * * * *
    (11) * * *
    (i) In general. Individual providers including providers salaried 
or under contract by an institutional provider and other providers who 
are not participating providers may not balance bill a beneficiary an 
amount that exceeds the applicable balance billing limit. The balance 
billing limit shall be the same percentage as the Medicare limiting 
charge percentage for nonparticipating practitioners and suppliers.
* * * * *
    (b) * * *
    (4) * * *
    (vi) * * *
    (K) Is an authorized provider under the Medicare program, and meets 
the requirements of Title 18 of the social Security Act, sections 
1819(a), (b), (c), and (d) (42 U.S.C. 1395i-3(a)-(d)).
* * * * *
    (xv) Home health agencies (HHAs). HHAs must be Medicare approved 
and meet all Medicare conditions of participation under sections 
1861(o) and 1891 of the Social Security Act (42 U.S.C. 1395x(o) and 
1395bbb) and 42 CFR part 484 in relation to TRICARE beneficiaries in 
order to receive payment under the TRICARE program. An HHA may be found 
to be out of compliance with a particular Medicare condition of 
participation and still participate in the TRICARE program as long as 
the HHA is allowed continued participation in Medicare while the 
condition of noncompliance is being corrected. An HHA is a public or 
private organization, or a subdivision of such an agency or 
organization, that meets the following requirements:
    (A) Engaged in providing skilled nursing services and other 
therapeutic services, such as physical therapy, speech-language 
pathology services, or occupational therapy, medical services, and home 
health aide services.
    (1) Makes available part-time or intermittent skilled nursing 
services and at least one other therapeutic service on a visiting basis 
in place of residence used as a patient's home.
    (2) Furnishes at least one of the qualifying services directly 
through agency employees, but may furnish the second qualifying service 
and additional services under arrangement with another HHA or 
organization.
    (B) Policies established by a professional group associated with 
the agency or organization (including at least one physician and one 
registered nurse) to govern the services and provides for supervision 
of such services by a physician or a registered nurse.
    (C) Maintains clinical records for all patients.
    (D) Licensed in accordance with State and local law or is approved 
by the State or local licensing agency as meeting the licensing 
standards, where applicable.
    (E) Enters into an agreement with TRICARE in order to participate 
and to be eligible for payment under the program. In this agreement the 
HHA and TRICARE agree that the HHA will:
    (1) Not charge the beneficiary or any other person for items or 
services for which the beneficiary is entitled to have payment under 
the TRICARE HHA prospective payment system.
    (2) Be allowed to charge the beneficiary for items or services 
requested by the beneficiary in addition to those that are covered 
under the TRICARE HHA prospective payment system.
    (F) Abide by the following consolidated billing requirements:
    (1) The HHA must submit all TRICARE claims for all services, 
excluding durable medical equipment (DME), while the beneficiary is 
under the home health plan without regard to whether or not the item or 
service was furnished by the HHA, by others under arrangement with the 
HHA, or under any other contracting or consulting arrangement.
    (2) Separate payment will be made for DME items and services 
provided under the home health benefit which are under the DME fee 
schedule. DME is excluded from the consolidated billing requirements.
    (3) Home health services included in consolidated billing are:
    (i) Part-time or intermittent skilled nursing;
    (ii) Part-time or intermittent home health aide services;
    (iii) Physical therapy, occupational therapy and speech-language 
pathology;
    (iv) Medical social services;
    (v) Routine and non-routine medical supplies;
    (vi) A covered osteoporosis drug (not paid under PPS rate) but 
excluding other drugs and biologicals;
    (vii) Medical services provided by an intern or resident-in-
training of a hospital, under an approved teaching program of the 
hospital in the case of an HHA that is affiliated or under common 
control of a hospital;
    (viii) Services at hospitals, SNFs or rehabilitation centers when 
they involve equipment too cumbersome to bring home.
    (G) Meet such other requirements as the Secretary of Health and 
Human Services and/or Secretary of Defense may find necessary in the 
interest of the health and safety of the individuals who are provided 
care and services by such agency or organization.
* * * * *
    (d) * * *
    (5) Medical equipment firms, medical supply firms, and Durable 
Medical Equipment, Prosthetic, Orthotic, Supplies providers/suppliers. 
Any firm, supplier, or provider that is an authorized provider under 
Medicare or is otherwise designated an authorized provider by the 
Director, TRICARE Management Activity.
* * * * *

    5. Section 199.14 is amended by redesignating paragraphs (h), (i), 
(j), (k), and (l) as (j), (k), (l), (m) and (n), by adding new 
paragraphs (a)(5), (h), and (i), and by revising paragraph (b) to read 
as follows:


Sec. 199.14  Provider reimbursement methods.

    (a) * * *
    (5) Hospital outpatient services. This paragraph (a)(5) establishes 
payment methods for certain outpatient services, including emergency 
services, provided by hospitals.
    (i) Clinical laboratory services. Services provided on an 
outpatient basis by hospital-based clinical laboratories are paid on 
the same basis as services covered by the allowable charge method under 
paragraph (h)(1)(viii) of this section.
    (ii) Rehabilitation therapy services. Rehabilitation therapy 
services provided

[[Page 40605]]

on an outpatient basis by hospitals are paid on the same basis as 
rehabilitation therapy services covered by the allowable charge method 
under paragraph (h)(1) of this section.
    (iii) Venipuncture. Routine venipuncture services provided on an 
outpatient basis by hospitals are paid on the same basis as such 
services covered by the allowable charge method under paragraph (h)(1) 
of this section. Routine venipuncture services provided on an 
outpatient basis by institutional providers other than hospitals are 
also paid on this basis.
    (iv) Radiology services. TRICARE payments for hospital outpatient 
radiology services are based on the allowable charge method under 
paragraph (h)(1) of the section in the case of radiology services for 
which the CMAC rates establish under that paragraph provide a payment 
rate for the technical component of the radiology services provided. 
Hospital charges for an outpatient radiology service are reimbursed 
using the CMAC technical component rate.
    (b) Skilled nursing facilities (SNFs). (1) Use of Medicare 
prospective payment system and rates. TRICARE payments to SNFs are 
determined using the same methods and rates used under the Medicare 
prospective payment system for SNFs under 42 CFR part 413, subpart J, 
except for children under age ten. SNFs receive a per diem payment of a 
predetermined Federal payment rate appropriate for the case based on 
patient classification (using the RUG classification system), urban or 
rural location of the facility, and area wage index.
    (2) Payment in full. The SNF payment rates represent payment in 
full (subject to any applicable beneficiary cost shares) for all costs 
(routine, ancillary, and capital-related) associated with furnishing 
inpatient SNF services to TRICARE beneficiaries other than costs 
associated with operating approved educational activities.
    (3) Education costs. Costs for approved educational activities 
shall be subject to separate payment under procedures established by 
the Director, TRICARE Management Activity. Such procedures shall be 
similar to procedures for payments for direct medical education costs 
of hospitals under paragraph (a)(1)(iii)(G)(2) of this section.
    (4) Resident assessment data. SNFs are required to submit the same 
resident assessment data as is required under the Medicare program. 
(The residential assessment is addressed in the Medicare regulations at 
42 CFR 483.20.) SNFs must submit assessments according to an assessment 
schedule. This schedule must include performance of patient assessments 
on the 5th, 14th, and 30th days of SNF care and at each successive 30 
day interval of SNF admissions that are longer than 30 days. It must 
also include such other assessments that are necessary to account for 
changes in patient care needs. TRICARE pays a default rate for the days 
of a patient's care for which the SNF has failed to comply with the 
assessment schedule.
* * * * *
    (h) Reimbursement of Home Health Agencies (HHAs). HHAs will be 
reimbursed using the same methods and rates as used under the Medicare 
HHA prospective payment system under section 1895 of the Social 
Security Act (42 U.S.C. 1395fff) and 42 CFR part 484, subpart E, except 
for children under age ten and except as otherwise necessary to 
recognize distinct characteristics of TRICARE beneficiaries and as 
described in instructions issued by the Director, TMA. Under this 
methodology, an HHA will receive a fixed case-mix and wage-adjusted 
national 60-day episode payment amount as payment in full for all costs 
associated with furnishing home health services to TRICARE-eligible 
beneficiaries with the exception of osteoporosis drugs and DME. The 
full case-mix and wage-adjusted 60-day episode amount will be payment 
in full subject to the following adjustments and additional payments:
    (1) Split percentage payments. The initial percentage payment for 
initial episodes is paid to an HHA at 60 percent of the case-mix and 
wage adjusted 60-day episode rate. The residual final payment for 
initial episodes is paid at 40 percent of the case-mix and wage 
adjusted 60-day episode rate. The initial percentage payment for 
subsequent episodes is paid at 50 percent of the case-mix and wage-
adjusted 60-day episode rate. The residual final payment for subsequent 
episodes is paid at 50 percent of the case-mix and wage-adjusted 60-day 
episode rate.
    (2) Low-utilization payment. A low utilization payment is applied 
when a HHA furnishes four or fewer visits to a beneficiary during the 
60-day episode. The visits are paid at the national per-visit amount by 
discipline updated annually by the applicable market basket for each 
visit type.
    (3) Partial episode payment (PEP). A PEP adjustment is used for 
payment of an episode of less than 60 days resulting from a 
beneficiary's elected transfer prior to the end of the 60-day episode 
or discharge and readmission of a beneficiary to the same HHA before 
the end of the 60-day episode. The PEP payment is calculated by 
multiplying the proportion of the 60-day episode during which the 
beneficiary remained under the care of the original HHA by the 
beneficiary's assigned 60-day episode payment.
    (4) Significant change in condition (SCIC). The full-episode 
payment amount is adjusted if a beneficiary experiences a significant 
change in condition during the 60-day episode that was not envisioned 
in the initial treatment plan. The total significant change in 
condition payment adjustment is a proportional payment adjustment 
reflecting the time both prior to and after the patient experienced a 
significant change in condition during the 60-day episode. The initial 
percentage payment provided at the start of the 60-day episode will be 
adjusted at the end of the episode to reflect the first and second 
parts of the total SCIC adjustment determined at the end of the 60-day 
episode. The SCIC payment adjustment is calculated in two parts:
    (i) The first part of the SCIC payment adjustment reflects the 
adjustment to the level of payment prior to the significant change in 
the patient's condition during the 60-day episode.
    (ii) The second part of the SCIC payment adjustment reflects the 
adjustment to the level of payment after the significant change in the 
patient's condition occurs during the 60-day episode.
    (5) Outlier payment. Outlier payments are allowed in addition to 
regular 60-day episode payments for beneficiaries generating 
excessively high treatment costs. The outlier payment is a proportion 
of the imputed costs beyond the outlier threshold for each case-mix 
(HHRG) group.
    (6) Services paid outside the HHA prospective payment system. The 
following are services that receive a separate payment amount in 
addition to the prospective payment amount for home health services:
    (i) Durable medical equipment (DME). Reimbursement of DME is based 
on the same amounts established under the Medicare Durable Medical 
Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) fee schedule 
under 42 CFR part 414, subpart D.
    (ii) Osteoporosis drugs. Although osteoporosis drugs are subject to 
home health consolidated billing, they continue to be paid on a cost 
basis, in addition to episode payments.
    (7) Accelerated payments. Upon request, an accelerated payment may 
be made to an HHA that is receiving payment under the home health

[[Page 40606]]

prospective payment system if the HHA is experiencing financial 
difficulties because there is a delay by the contractor in making 
payment to the HHA. The following are criteria for making accelerated 
payments:
    (i) Approval of payment. An HHA's request for an accelerated 
payment must be approved by the contractor and TRICARE Management 
Activity (TMA).
    (ii) Amount of payment. The amount of the accelerated payment is 
computed as a percentage of the net payment for unbilled or unpaid 
covered services.
    (iii) Recovery of payment. Recovery of the accelerated payment is 
made by recoupment as HHA bills are processed or by direct payment by 
the HHA.
    (8) Assessment data. Beneficiary assessment data, incorporating the 
use of the current version of the OASIS items, must be submitted to the 
contractor for payment under the HHA prospective payment system.
    (9) Administrative review. An HHA is not entitled to judicial or 
administrative review with regard to:
    (i) Establishment of the payment unit, including the national 60-
day prospective episode payment rate, adjustments and outlier payment.
    (ii) Establishment of transition period, definition and application 
of the unit of payment.
    (iii) Computation of the initial standard prospective payment 
amounts.
    (iv) Establishment of case-mix and area wage adjustment factors.
    (i) Changes in Federal Law affecting Medicare. With regard to 
paragraph (b) and (h) of this section, the Department of Defense must, 
within the time frame specified in law and to the extent it is 
practicable, bring the TRICARE program into compliance with any changes 
in Federal Law affecting the Medicare program that occur after the 
effective date of the DoD rule to implement the prospective payment 
systems for skilled nursing facilities and home health agencies.
* * * * *

    Dated: June 5, 2002.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 02-14707 Filed 6-12-02; 8:45 am]
BILLING CODE 5001-08-M