[Federal Register Volume 68, Number 244 (Friday, December 19, 2003)]
[Rules and Regulations]
[Pages 70714-70726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31176]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AL06


Reasonable Charges for Medical Care or Services; 2003 Methodology 
Changes

AGENCY: Department of Veterans Affairs.

ACTION: 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:
    [sbull] 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;
    [sbull] 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
    [sbull] For a nonservice-connected disability incurred as a result 
of a motor vehicle accident in a State that requires automobile 
accident reparations insurance.
    The regulations contain methodologies designed to establish VA 
charges that replicate, insofar as possible, the 80th percentile of 
community charges, adjusted to the market areas in which VA facilities 
are located, and trended forward to the time period during which the 
charges will be used. This document amends the regulations regarding 
VA's reasonable charges methodologies for the following purposes: To 
establish charges for medical care, procedures, services, durable 
medical equipment (DME), drugs, injectables, medical items, and 
supplies for which we previously did not have charges; to replace 
certain charges previously based on VA costs with charges based on 
community charges; to establish separate charges for medical care, 
procedures, services, DME, drugs, injectables, medical items, and 
supplies whose charges were previously combined with other charges; to 
bring our charge structures and associated billing practices closer to 
industry standard charge structures and billing practices; and to 
provide certain clarifications.

DATES: This final rule is effective December 19, 2003.

FOR FURTHER INFORMATION CONTACT: Stephanie Mardon, Chief Business 
Office (168), Veterans Health Administration, Department of Veterans 
Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, (202) 254-0362. 
(This is not a toll free number.)

SUPPLEMENTARY INFORMATION: In a proposed rule published in the Federal 
Register on October 2, 2003 (68 FR 56876), we proposed to amend VA's 
medical regulations as summarized in this document and discussed in 
full in the proposed rule. We provided a comment period that ended on 
November 3, 2003. We received one comment to the proposed rule, which 
we are now adopting as a final rule with minor revisions based on the 
public comment, plus clarifications and minor technical changes.
    The comment focused on the use of the term ``medically directed'' 
as it applies to VA charges for anesthesia services. The commenter 
pointed out that under the Medicare program, the term ``medically 
directed'' has specific meaning having to do with Medicare payments to 
anesthesiologists for providing certain services. The commenter also 
pointed out that Medicare does not require that Certified Registered 
Nurse Anesthetists (CRNAs) be medically directed by anesthesiologists 
while providing anesthesia services. The commenter stated that Medicare 
and other primary insurers recognize the terms ``personally performed'' 
and ``non-medically directed,'' and recommended that these terms be 
used in the VA regulation. We appreciate this information, and we have 
revised paragraph (g) of the regulation to incorporate the recommended 
language.
    The commenter also recommended that VA establish an ``Anesthesia 
Reimbursement Working Group'' to advise VA regarding methodology for 
determining professional charges and values for anesthesia services. 
Our response to this recommendation is that we believe our current 
methodology for determining professional charges and values for 
anesthesia services is appropriate, and that establishing the indicated 
working group is not necessary at this time.
    In the proposed rule, we identified the Internet site of the 
Veterans Health Administration Chief Business Office as http://www.va.gov/revenue. In connection with ongoing improvements to this 
Internet site, the address has been changed to http://www.va.gov/cbo. 
We have made this change in the two places in the regulation in which 
it occurs, in paragraphs (a)(2) and (a)(3), indicating that this is the 
current address of this Internet site.

[[Page 70715]]

    In the proposed rule, we defined ``geographic area'' to mean ``a 
three-digit ZIP Code area.'' We are now adding a clarification to that 
definition to indicate that the three-digit ZIP Codes referred to are 
the first three digits of standard U.S. Postal Service ZIP Codes.
    Based on the rationale set forth in the proposed rule and in this 
document, we now adopt the proposed rule as a final rule with the minor 
revisions, clarifications, and minor technical changes indicated.

Previous Interim Final Rule

    This document supercedes our previous interim final rule with 
comment period, ``Reasonable Charges for Medical Care or Services; 2003 
Update,'' published in the Federal Register on April 29, 2003 (68 FR 
22966, RIN 2900-AL57). The comment period ended on June 30, 2003. We 
did not receive any comments in response to the April 29, 2003, interim 
final rule.

Unfunded Mandates

    The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, 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 will have no such 
effect on State, local, or tribal governments, or the private sector.

Paperwork Reduction Act

    This document contains provisions at 38 CFR 17.101(a)(4) 
constituting a collection of information under the Paperwork Reduction 
Act (44 U.S.C. 3501-3521). The Office of Management and Budget (OMB) 
has approved the information collection requirements for Sec.  
17.101(a)(4) under OMB control number 2900-0606.

Regulatory Flexibility Act

    The Secretary hereby certifies that this rule does 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 affects mainly large insurance companies, and where 
small entities are involved, they are not 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 sections 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: December 10, 2003.
Anthony J. Principi,
Secretary of Veterans Affairs.

0
For the reasons set out in the preamble, 38 CFR part 17 is amended as 
set forth below:

PART 17--MEDICAL

0
1. The authority citation for part 17 continues to read as follows:

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


0
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) Methodologies. Based on the methodologies set forth in this 
section, the charges billed will include the following types of 
charges, as appropriate: Acute inpatient facility charges; skilled 
nursing facility/sub-acute inpatient facility charges; partial 
hospitalization facility charges; outpatient facility charges; 
physician and other professional charges, including professional 
charges for anesthesia services and dental services; pathology and 
laboratory charges; observation care facility charges; ambulance and 
other emergency transportation charges; and charges for durable medical 
equipment, drugs, injectables, and other medical services, items, and 
supplies identified by HCPCS Level II codes. In addition, the charges 
billed for prescription drugs not administered during treatment will be 
based on VA costs in accordance with the methodology set forth in Sec.  
17.102. Data for calculating actual charge amounts based on the 
methodologies set forth in this section will either be published in a 
notice in the Federal Register or will be posted on the Internet site 
of the Veterans Health Administration Chief Business Office, currently 
at http://www.va.gov/cbo, under ``Charge Data.'' For care for which VA 
has established a charge, VA will bill using its most recent published 
or posted charge. For care for which VA has not established a charge, 
VA will bill according to the methodology set forth in paragraph (a)(8) 
of this section.
    (3) Data sources. In this section, data sources are identified by 
name. The specific editions of these data sources used to calculate 
actual charge amounts, and information on where these data sources may 
be obtained, will be presented along with the data for calculating 
actual charge amounts, either in notices in the Federal Register or on 
the Internet site of the Veterans Health Administration Chief Business 
Office, currently at http://www.va.gov/cbo, under ``Charge Data.''
    (4) 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

[[Page 70716]]

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).
    (5) Definitions. For purposes of this section:
    APC means Medicare Ambulatory Payment Classification.
    CMS means the Centers for Medicare and Medicaid Services.
    CPI-U means Consumer Price Index--All Urban Consumers.
    CPT code and CPT procedure code mean Current Procedural Terminology 
code, a five-digit identifier defined by the American Medical 
Association for a specified physician service or procedure.
    DME means Durable Medical Equipment.
    DRG means Diagnosis Related Group.
    Geographic area means a three-digit ZIP Code area, where three-
digit ZIP Codes are the first three digits of standard U.S. Postal 
Service ZIP Codes.
    HCPCS code means a Healthcare Common Procedure Coding System Level 
II identifier, consisting of a letter followed by four digits, defined 
by CMS for a specified physician service, procedure, test, supply, or 
other medical service.
    ICU means Intensive Care Unit, including coronary care units.
    MDR means Medical Data Research, a medical charge database 
published by Ingenix, Inc.
    MedPAR means the Medicare Provider Analysis and Review file.
    Non-provider-based means a VA health care entity (such as a small 
VA community-based outpatient clinic) that functions as the equivalent 
of a doctor's office or for other reasons does not meet CMS provider-
based criteria, and, therefore, is not entitled to bill outpatient 
facility charges.
    Provider-based means the outpatient department of a VA hospital or 
any other VA health care entity that meets CMS provider-based criteria. 
Provider-based entities are entitled to bill outpatient facility 
charges.
    RBRVS means Resource-Based Relative Value Scale.
    RVU means Relative Value Unit.
    Unlisted procedures mean procedures, services, items, and supplies 
that have not been defined or specified by the American Medical 
Association or CMS, and the CPT and HCPCS codes used to report such 
procedures, services, items, and supplies.
    (6) Provider-based and non-provider-based entities and charges. 
Each VA health care entity (medical center, hospital, community-based 
outpatient clinic, independent outpatient clinic, etc.) is designated 
as either provider-based or non-provider-based. Provider-based entities 
are entitled to bill outpatient facility charges; non-provider-based 
entities are not. The charges for physician and other professional 
services provided at non-provider-based entities will be billed as 
professional charges only. Professional charges for both provider-based 
entities and non-provider-based entities are produced by the 
methodologies set forth in this section, with professional charges for 
provider-based entities based on facility practice expense RVUs, and 
professional charges for non-provider-based entities based on non-
facility practice expense RVUs.
    (7) Charges for medical care or services provided by non-VA 
providers at VA expense. When medical care or services are furnished at 
the expense of the VA by non-VA providers, the charges billed for such 
care or services will be the higher of the charges determined according 
to this section, or the amount VA paid to the non-VA provider.
    (8) Charges for medical care or services for which VA does not have 
an established charge. When medical care or services are provided or 
furnished at VA expense by either VA or non-VA providers, and VA does 
not have an established charge for such care or services, then the 
charges billed for such care or services will be according to the first 
of the following subparagraphs that applies:
    (i) In the event that a new identifier (DRG, CPT code, or HCPCS 
code) is assigned to a particular type or item of medical care or 
service, then until such time as VA establishes a charge for the new 
identifier, VA's charge for such care or service will be VA's most 
recent established charge for the identifier previously assigned to 
that type or item of medical care or service; otherwise,
    (ii) In the event that the medical care or service is provided or 
furnished at VA expense by a non-VA provider, then VA's charge for such 
care or service will be the amount VA paid to the non-VA provider; 
otherwise,
    (iii) VA's charges for prosthetic devices and durable medical 
equipment will be VA's actual cost; otherwise,
    (iv) If a Medicare allowed charge amount can be determined for the 
care or service, then VA's charge will be the Medicare participating 
provider allowed charge amount geographically adjusted using the 
applicable geographic area adjustment factors determined pursuant to 
this section; otherwise,
    (v) If a charge cannot be established under paragraphs (a)(8)(i) 
through (iv) of this section, then VA will not charge for the care or 
service under this section.
    (b) Acute inpatient facility charges. When VA provides or furnishes 
acute inpatient services within the scope of care referred to in 
paragraph (a)(1) of this section, acute inpatient facility charges 
billed for such services will be determined in accordance with the 
provisions of this paragraph. Acute inpatient facility charges consist 
of per diem charges for room and board and for ancillary services that 
vary by geographic area and by DRG. These charges are calculated as 
follows:
    (1) Formula. For each acute inpatient stay, or portion thereof, for 
which a particular DRG assignment applies, the total acute inpatient 
facility charge is the sum of the applicable charges determined 
pursuant to paragraphs (b)(1)(i), (ii), and (iii) of this section. For 
purposes of this section, standard room and board days and ICU room and 
board days are mutually exclusive: VA will bill either a standard room 
and board per diem charge or an ICU room and board per diem charge, as 
applicable, for each day of a given acute inpatient stay.
    (i) Standard room and board charges. Multiply the nationwide 
standard room and board per diem charge determined pursuant to 
paragraph (b)(2) of this section by the appropriate geographic area 
adjustment factor determined pursuant to paragraph (b)(3) of this 
section. The result constitutes the area-specific standard room and 
board per diem charge. Multiply this amount by the number of days for 
which standard room and board charges apply to obtain the total acute 
inpatient facility standard room and board charge.
    (ii) ICU room and board charges. Multiply the nationwide ICU room 
and board per diem charge determined pursuant to paragraph (b)(2) of 
this section by the appropriate geographic area adjustment factor 
determined pursuant to paragraph (b)(3) of this section. The result 
constitutes the area-specific ICU room and board per diem charge. 
Multiply this amount by the number of days for which ICU room and board 
per diem charges apply to obtain the total acute inpatient facility ICU 
room and board charge.
    (iii) Ancillary charges. Multiply the nationwide ancillary per diem 
charge determined pursuant to paragraph (b)(2) of this section by the 
appropriate geographic area adjustment factor determined pursuant to 
paragraph (b)(3) of this section. The result constitutes the area-
specific ancillary per diem charge. Multiply this amount by the number 
of days of acute inpatient care to obtain the

[[Page 70717]]

total acute inpatient facility ancillary charge.
    Note to paragraph (b)(1): If there is a change in a patient's 
condition and/or treatment during a single acute inpatient stay such 
that the DRG assignment changes (for example, a psychiatric patient who 
develops a medical or surgical problem), then calculations of acute 
inpatient facility charges will be made separately for each DRG, 
according to the number of days of care applicable for each DRG, and 
the total acute inpatient facility charge will be the sum of the total 
acute inpatient facility charges for the different DRGs.
    (2) Per diem charges. To establish a baseline, two nationwide 
average per diem amounts for each DRG are calculated, one from the 
MedPAR file and one from the MedStat claims database, a database of 
nationwide commercial insurance claims. Average per diem charges are 
calculated based on all available charges, except for care reported for 
emergency room, ambulance, professional, and observation care. These 
two data sources may report charges for two differing periods of time; 
when this occurs, the data source charges with the earlier center date 
are trended forward to the center date of the other data source, based 
on changes to the inpatient hospital services component of the CPI-U. 
Results obtained from these two data sources are then combined into a 
single weighted average per diem charge for each DRG. The resulting 
charge for each DRG is then separated into its two components, a room 
and board component and an ancillary component, with the per diem 
charge for each component calculated by multiplying the weighted 
average per diem charge by the corresponding percentage determined 
pursuant to paragraph (b)(2)(i) of this section. The room and board per 
diem charge is further differentiated into a standard room and board 
per diem charge and an ICU room and board per diem charge by 
multiplying the average room and board charge by the corresponding DRG-
specific ratios determined pursuant to paragraph (b)(2)(ii) of this 
section. The resulting per diem charges for standard room and board, 
ICU room and board, and ancillary services for each DRG are then each 
multiplied by the final ratio determined pursuant to paragraph 
(b)(2)(iii) of this section to reflect the nationwide 80th percentile 
charges. Finally, the resulting amounts are each trended forward from 
the center date of the trended data sources to the effective time 
period for the charges, as set forth in paragraph (b)(2)(iv) of this 
section. The results constitute the nationwide 80th percentile standard 
room and board, ICU room and board, and ancillary per diem charges.
    (i) Room and board charge and ancillary 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) Standard room and board per diem charge and ICU room and board 
per diem charge ratios. Using only those cases from the MedPAR file for 
which a distinction between room and board and ancillary charges can be 
determined, overall average per diem room and board charges are 
calculated by DRG. Then, using the same cases, an average standard room 
and board per diem charge is calculated by dividing total non-ICU room 
and board charges by total non-ICU room and board days. Similarly, an 
average ICU room and board per diem charge is calculated by dividing 
total ICU room and board charges by total ICU room and board days. 
Finally, ratios of standard room and board per diem charges to average 
overall room and board per diem charges are calculated by DRG, as are 
ratios of ICU room and board per diem charges to average overall room 
and board per diem charges.
    (iii) 80th percentile. Using cases from the MedPAR file with 
separately identifiable semi-private room rates, 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 is obtained for 
each geographic area. The geographic area-based ratios are averaged to 
obtain a final 80th percentile ratio.
    (iv) Trending forward. 80th percentile charges for each DRG, 
obtained as described in paragraph (b)(2) of this section, are trended 
forward based on changes to the inpatient hospital services component 
of the CPI-U. Actual CPI-U changes are used from the center date of the 
trended data sources through the latest available month as of the time 
the calculations are performed. The three-month average annual trend 
rate as of the latest available month is then held constant to the 
midpoint of the calendar year in which the charges are primarily 
expected to be used. The projected total CPI-U change so obtained is 
then applied to the 80th percentile charges.
    (3) Geographic area adjustment factors. For each geographic area, 
the average per diem room and board charges and ancillary charges from 
the MedPAR file 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, weighted by nationwide 
VA discharges and by average lengths of stay from the combined MedPAR 
file and MedStat claims 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 MedPAR file, weighted by 
nationwide VA discharges and by average lengths of stay from the 
combined MedPAR file and MedStat claims 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 
geographic area. The facility charges cover care, including room and 
board, nursing care, pharmaceuticals, supplies, and skilled 
rehabilitation services (e.g., physical therapy, inhalation therapy, 
occupational therapy, and speech-language pathology), 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-language pathologists, and audiologists. These 
charges are calculated as follows:
    (1) Formula. For each stay, multiply the nationwide per diem charge 
determined pursuant to paragraph (c)(2) of this section by the 
appropriate geographic area adjustment factor

[[Page 70718]]

determined pursuant to paragraph (c)(3) of this section. The result 
constitutes the area-specific per diem charge. Finally, multiply the 
area-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 is calculated based on charges reported in the 
MedPAR skilled nursing facility file. For this purpose, the following 
MedPAR charge categories are included: room and board (private, semi-
private, and ward), physical therapy, occupational therapy, inhalation 
therapy, speech-language pathology, pharmacy, medical/surgical 
supplies, and ``other'' services. The following MedPAR charge 
categories are excluded from the calculation of the per diem charge and 
will be billed separately, using the charges determined as set forth in 
other applicable paragraphs of this section, when these services are 
provided to skilled nursing patients or sub-acute inpatients: ICU and 
CCU room and board, laboratory, radiology, cardiology, dialysis, 
operating room, blood and blood administration, ambulance, MRI, 
anesthesia, durable medical equipment, emergency room, clinic, 
outpatient, professional, lithotripsy, and organ acquisition services. 
The resulting average per diem billed charge is then multiplied by the 
80th percentile adjustment factor determined pursuant to paragraph 
(c)(2)(i) of this section to obtain a nationwide 80th percentile charge 
level. Finally, the resulting amount 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 adjustment factor. Using the MedPAR skilled 
nursing facility file, the ratio of the day-weighted 80th percentile 
room and board per diem charge to the day-weighted average room and 
board per diem charge is obtained for each geographic area. The 
geographic area-based ratios are averaged to obtain the 80th percentile 
adjustment factor.
    (ii) Trending forward. The 80th percentile charge is trended 
forward based on changes to the inpatient hospital services component 
of the CPI-U. Actual CPI-U changes are used from the time period of the 
source data through the latest available month as of the time the 
calculations are performed. The three-month average annual trend rate 
as of the latest available month is then held constant to the midpoint 
of the calendar year in which the charges are primarily expected to be 
used. The projected total CPI-U change so obtained is then applied to 
the 80th percentile charge.
    (3) Geographic area adjustment factors. The average billed per diem 
charge for each geographic area is calculated from the MedPAR skilled 
nursing facility file. This amount is divided by the nationwide average 
billed charge calculated in paragraph (c)(2) of this section. The 
geographic area adjustment factor for charges for each VA facility is 
the ratio for the geographic area in which the facility is located.
    (d) Partial hospitalization facility charges. When VA provides or 
furnishes partial hospitalization services that are within the scope of 
care referred to in paragraph (a)(1) of this section, the facility 
charges billed for such services will be determined in accordance with 
the provisions of this paragraph. Partial hospitalization facility 
charges are per diem charges that vary by geographic area. These 
charges are calculated as follows:
    (1) Formula. For each partial hospitalization stay, multiply the 
nationwide per diem charge determined pursuant to paragraph (d)(2) of 
this section by the appropriate geographic area adjustment factor 
determined pursuant to paragraph (d)(3) of this section. The result 
constitutes the area-specific per diem charge. Finally, multiply the 
area-specific per diem charge by the number of days of care to obtain 
the total partial hospitalization facility charge.
    (2) Per diem charge. To establish a baseline, a nationwide median 
per diem billed charge is calculated based on charges associated with 
partial hospitalization from the outpatient facility component of the 
Medicare Standard Analytical File 5 percent Sample. That median per 
diem billed charge is then multiplied by the 80th percentile adjustment 
factor determined pursuant to paragraph (d)(2)(i) of this section to 
obtain a nationwide 80th percentile charge level. Finally, the 
resulting amount is trended forward to the effective time period for 
the charges, as set forth in paragraph (d)(2)(ii) of this section.
    (i) 80th percentile adjustment factor. The 80th percentile 
adjustment factor for partial hospitalization facility charges is the 
same as that computed for skilled nursing facility/sub-acute inpatient 
facility charges under paragraph (c)(2)(i) of this section.
    (ii) Trending forward. The 80th percentile charge is trended 
forward based on changes to the outpatient hospital services component 
of the CPI-U. Actual CPI-U changes are used from the time period of the 
source data through the latest available month as of the time the 
calculations are performed. The three-month average annual trend rate 
as of the latest available month is then held constant to the midpoint 
of the calendar year in which the charges are primarily expected to be 
used. The projected total CPI-U change so obtained is then applied to 
the 80th percentile charges, as described in paragraph (d)(2) of this 
section.
    (3) Geographic area adjustment factors. The geographic area 
adjustment factors for partial hospitalization facility charges are the 
same as those computed for outpatient facility charges under paragraph 
(e)(4) of this section.
    (e) Outpatient facility charges. When VA provides or furnishes 
outpatient facility services that are within the scope of care referred 
to in paragraph (a)(1) of this section, the charges billed for such 
services will be determined in accordance with the provisions of this 
paragraph. Charges for outpatient facility services vary by geographic 
area and by CPT/HCPCS code. These charges apply in the situations set 
forth in paragraph (e)(1) of this section and are calculated as set 
forth in paragraph (e)(2) of this section.
    (1) Settings and circumstances in which outpatient facility charges 
apply. Outpatient facility charges consist of facility charges for 
procedures, diagnostic tests, evaluation and management services, and 
other medical services, items, and supplies provided in the following 
settings and circumstances:
    (i) Outpatient departments and clinics at VA medical centers;
    (ii) Other VA provider-based entities; and
    (iii) VA non-provider-based entities, for procedures and tests for 
which no corresponding professional charge is established under the 
provisions of paragraph (f) of this section.
    (2) Formula. For each outpatient facility charge CPT/HCPCS code, 
multiply the nationwide 80th percentile charge determined pursuant to 
paragraph (e)(3) of this section by the appropriate geographic area 
adjustment factor determined pursuant to paragraph (e)(4) of this 
section. The result constitutes the area-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 (e)(5) of this section.
    (3) Nationwide 80th percentile charges by CPT/HCPCS code. For each 
CPT/HCPCS code for which outpatient facility charges apply, the 
nationwide

[[Page 70719]]

80th percentile charge is calculated as set forth in either paragraph 
(e)(3)(i) or (e)(3)(ii) of this section. The resulting amount is 
trended forward to the effective time period for the charges, as set 
forth in paragraph (e)(3)(iii) of this section. The results constitute 
the nationwide 80th percentile outpatient facility charges by CPT/HCPCS 
code.
    (i) Nationwide 80th percentile charges for CPT/HCPCS codes which 
have APC assignments. Using the outpatient facility charges reported in 
the outpatient facility component of the Medicare Standard Analytical 
File 5 percent Sample, claim records are selected for which all charges 
can be assigned to an APC. Using this subset of the 5 percent Sample 
data, nationwide median charge to Medicare APC payment amount ratios, 
by APC, and nationwide 80th percentile to median charge ratios, by APC, 
are computed according to the methodology set forth in paragraphs 
(e)(3)(i)(A) and (e)(3)(i)(B) of this section, respectively. The 
product of these two ratios by APC is then computed, resulting in a 
composite nationwide 80th percentile charge to Medicare APC payment 
amount ratio. This ratio is then compared to the alternate nationwide 
80th percentile charge to Medicare APC payment amount ratio computed in 
paragraph (e)(3)(i)(C) of this section, and the lesser amount is 
selected and multiplied by the current Medicare APC payment amount. The 
resulting product is the APC-specific nationwide 80th percentile charge 
amount for each applicable CPT/HCPCS code.
    (A) Nationwide median charge to Medicare APC payment amount ratios. 
For each CPT/HCPCS code, the ratio of median billed charge to Medicare 
APC payment amount is determined. The weighted average of these ratios 
for each APC is then obtained, using the reported 5 percent Sample 
frequencies as weights. In addition, corresponding ratios are 
calculated for each of the APC categories set forth in paragraph 
(e)(3)(i)(D) of this section, again using the reported 5 percent Sample 
frequencies as weights. For APCs where the 5 percent Sample frequencies 
provide a statistically credible result, the APC-specific weighted 
average nationwide median charge to Medicare APC payment amount ratio 
so obtained is accepted without further adjustment. However, if the 5 
percent Sample data do not produce statistically credible results for 
any specific APC, then the APC category-specific ratio is applied for 
that APC.
    (B) Nationwide 80th percentile to median charge ratios. For each 
CPT/HCPCS code, a geographically normalized nationwide 80th percentile 
billed charge amount is divided by a similarly normalized nationwide 
median billed charge amount. The weighted average of these ratios for 
each APC is then obtained, using the reported 5 percent Sample 
frequencies as weights. In addition, corresponding ratios are 
calculated for each of the APC categories set forth in paragraph 
(e)(3)(i)(D) of this section, again using the reported 5 percent Sample 
frequencies as weights. For APCs where the 5 percent Sample frequencies 
provide a statistically credible result, the APC-specific weighted 
average nationwide 80th percentile to median charge ratio so obtained 
is accepted without further adjustment. However, if the 5 percent 
Sample data do not produce statistically credible results for any 
specific APC, then the APC category-specific ratio is applied for that 
APC.
    (C) Alternate nationwide 80th percentile charge to Medicare APC 
payment amount ratios. A minimum 80th percentile charge to Medicare APC 
payment amount ratio is set at 2.0 for APCs with Medicare APC payment 
amounts of $25 or less. A maximum 80th percentile charge to Medicare 
APC payment amount ratio is set at 6.5 for APCs with Medicare APC 
payment amounts of $10,000 or more. Using linear interpolation with 
these endpoints, the alternate APC-specific nationwide 80th percentile 
charge to Medicare APC payment amount ratio is then computed, based on 
the Medicare APC payment amount.
    (D) APC categories for the purpose of establishing 80th percentile 
to median factors. For the purpose of the statistical methodology set 
forth in paragraph (e)(3)(i) of this section, APCs are assigned to the 
following APC categories:
    (1) Radiology.
    (2) Drugs.
    (3) Office, Home, and Urgent Care Visits.
    (4) Cardiovascular.
    (5) Emergency Room Visits.
    (6) Outpatient Psychiatry, Alcohol and Drug Abuse.
    (7) Pathology.
    (8) Surgery.
    (9) Allergy Immunotherapy, Allergy Testing, Immunizations, and 
Therapeutic Injections.
    (10) All APCs not assigned to any of the above groups.
    (ii) Nationwide 80th percentile charges for CPT/HCPCS codes which 
do not have APC assignments. Nationwide 80th percentile billed charge 
levels by CPT/HCPCS code are computed from the outpatient facility 
component of the MDR database, from the MedStat claims database, and 
from the outpatient facility component of the Medicare Standard 
Analytical File 5 percent Sample. If the MDR database contains 
sufficient data to provide a statistically credible 80th percentile 
charge, then that result is retained for this purpose. If the MDR 
database does not provide a statistically credible 80th percentile 
charge, then the result from the MedStat database is retained for this 
purpose, provided it is statistically credible. If neither the MDR nor 
the MedStat databases provide statistically credible results, then the 
nationwide 80th percentile billed charge computed from the 5 percent 
Sample data is retained for this purpose. The nationwide 80th 
percentile charges retained from each of these data sources are trended 
forward to the effective time period for the charges, as set forth in 
paragraph (e)(3)(iii) of this section.
    (iii) Trending forward. The charges for each CPT/HCPCS code, 
obtained as described in paragraph (e)(3) of this section, are trended 
forward based on changes to the outpatient hospital services component 
of the CPI-U. Actual CPI-U changes are used from the time period of the 
source data through the latest available month as of the time the 
calculations are performed. The three-month average annual trend rate 
as of the latest available month is then held constant to the midpoint 
of the calendar year in which the charges are primarily expected to be 
used. The projected total CPI-U change so obtained is then applied to 
the 80th percentile charges, as described in paragraph (e)(3) of this 
section.
    (4) Geographic area adjustment factors. For each geographic area, a 
single adjustment factor is calculated as the arithmetic average of the 
outpatient geographic area adjustment factor published in the Milliman 
USA, Inc., Health Cost Guidelines (this factor constitutes the ratio of 
the level of charges for each geographic area to the nationwide level 
of charges), and a geographic area adjustment factor developed from the 
MDR database (see paragraph (a)(3) of this section for Data Sources). 
The MDR-based geographic area adjustment factors are calculated as the 
ratio of the CPT/HCPCS code weighted average charge level for each 
geographic area to the nationwide CPT/HCPCS code 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/HCPCS procedure 
codes, then the

[[Page 70720]]

CPT/HCPCS procedure code with the highest facility charge will be 
billed at 100 percent of the charges established under this section; 
the CPT/HCPCS procedure code with the second highest facility charge 
will be billed at 25 percent of the charges established under this 
section; the CPT/HCPCS procedure code with the third highest facility 
charge will be billed at 15 percent of the charges established under 
this section; and no outpatient facility charges will be billed for any 
additional surgical procedures.
    (f) Physician and other professional charges except for anesthesia 
services and certain dental services. When VA provides or furnishes 
physician and other professional services, other than professional 
anesthesia services and certain professional dental services, within 
the scope of care referred to in paragraph (a)(1) of this section, 
physician and other professional charges billed for such services will 
be determined in accordance with the provisions of this paragraph. 
Charges for professional dental services identified by CPT code are 
determined in accordance with the provisions of this paragraph; charges 
for professional dental services identified by HCPCS Level II code are 
determined in accordance with the provisions of paragraph (h) of this 
section. Physician and other professional charges consist of charges 
for professional services that vary by geographic area, by CPT/HCPCS 
code, by site of service, and by modifier, where applicable. These 
charges are calculated as follows:
    (1) Formula. For each CPT/HCPCS code or, where applicable, each 
CPT/HCPCS code and modifier combination, multiply the total 
geographically-adjusted RVUs determined pursuant to paragraph (f)(2) of 
this section by the applicable geographically-adjusted conversion 
factor (a monetary amount) determined pursuant to paragraph (f)(3) of 
this section to obtain the physician charge for each CPT/HCPCS code in 
a particular geographic area. Then, multiply this charge by the 
appropriate factors for any charge-significant modifiers, determined 
pursuant to paragraph (f)(4) of this section.
    (2)(i) Total geographically-adjusted RVUs for physician services 
that have Medicare RVUs. The work expense and practice expense RVUs for 
CPT/HCPCS codes, other than the codes described in paragraphs 
(f)(2)(ii) and (f)(2)(iii) of this section, are compiled using Medicare 
Physician Fee Schedule RVUs. The sum of the geographically-adjusted 
work expense RVUs determined pursuant to paragraph (f)(2)(i)(A) of this 
section and the geographically-adjusted practice expense RVUs 
determined pursuant to paragraph (f)(2)(i)(B) of this section equals 
the total geographically-adjusted RVUs.
    (A) Geographically-adjusted work expense RVUs. For each CPT/HCPCS 
code for each geographic area, the Medicare Physician Fee Schedule work 
expense RVUs are multiplied by the work expense Medicare Geographic 
Practice Cost Index. The result constitutes the geographically-adjusted 
work expense RVUs.
    (B) Geographically-adjusted practice expense RVUs. For each CPT/
HCPCS code for each geographic area, the Medicare Physician Fee 
Schedule practice expense RVUs are multiplied by the practice expense 
Medicare Geographic Practice Cost Index. The result constitutes the 
geographically-adjusted practice expense RVUs. In these calculations, 
facility practice expense RVUs are used to obtain geographically-
adjusted practice expense RVUs for use by provider-based entities, and 
non-facility practice expense RVUs are used to obtain geographically-
adjusted practice expense RVUs for use by non-provider-based entities.
    (ii) RVUs for CPT/HCPCS codes that do not have Medicare RVUs and 
are not designated as unlisted procedures. For CPT/HCPCS codes that are 
not assigned RVUs in paragraphs (f)(2)(i) or (f)(2)(iii) of this 
section, total RVUs are developed based on various charge data sources. 
For these CPT/HCPCS codes, the nationwide 80th percentile billed 
charges are obtained, where statistically credible, from the MDR 
database. For any remaining CPT/HCPCS codes, the nationwide 80th 
percentile billed charges are obtained, where statistically credible, 
from the Part B component of the Medicare Standard Analytical File 5 
percent Sample. For any remaining CPT/HCPCS codes, the nationwide 80th 
percentile billed charges are obtained, where statistically credible, 
from the Prevailing Healthcare Charges System nationwide commercial 
insurance database. For each of these CPT/HCPCS codes, nationwide total 
RVUs are obtained by taking the nationwide 80th percentile billed 
charges obtained using the preceding three databases and dividing by 
the untrended nationwide conversion factor for the corresponding CPT/
HCPCS code group determined pursuant to paragraphs (f)(3) and (f)(3)(i) 
of this section. For any remaining CPT/HCPCS codes that have not been 
assigned RVUs using the preceding data sources, the nationwide total 
RVUs are calculated by summing the work expense and non-facility 
practice expense RVUs found in Ingenix/St. Anthony's RBRVS. The 
resulting nationwide total RVUs obtained using these four data sources 
are multiplied by the geographic area adjustment factors determined 
pursuant to paragraph (f)(2)(iv) of this section to obtain the area-
specific total RVUs.
    (iii) RVUs for CPT/HCPCS codes designated as unlisted procedures. 
For CPT/HCPCS codes designated as unlisted procedures, total RVUs are 
developed based on the weighted median of the total RVUs of CPT/HCPCS 
codes within the series in which the unlisted procedure code occurs. A 
nationwide VA distribution of procedures and services is used for the 
purpose of computing the weighted median. The resulting nationwide 
total RVUs are multiplied by the geographic area adjustment factors 
determined pursuant to paragraph (f)(2)(iv) of this section to obtain 
the area-specific total RVUs.
    (iv) RVU geographic area adjustment factors for CPT/HCPCS codes 
that do not have Medicare RVUs, including codes that are designated as 
unlisted procedures. The adjustment factor for each geographic area 
consists of the weighted average of the work expense and practice 
expense Medicare Geographic Practice Cost Indices for each geographic 
area using charge data for representative CPT/HCPCS codes statistically 
selected and weighted for work expense and practice expense.
    (3) Geographically-adjusted 80th percentile conversion factors. 
CPT/HCPCS codes are separated into the following 23 CPT/HCPCS code 
groups: allergy immunotherapy, allergy testing, 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 23 CPT/HCPCS code 
groups, representative CPT/HCPCS codes are statistically selected and 
weighted so as to give a weighted average RVU comparable to the 
weighted average RVU of the entire CPT/HCPCS code group (the selected 
CPT/HCPCS codes are set forth in the Milliman USA, Inc., Health Cost 
Guidelines fee survey); see paragraph (a)(3) of this section for Data 
Sources. The 80th percentile charge for each selected CPT/HCPCS code is 
obtained from the MDR database. A nationwide conversion factor (a 
monetary amount)

[[Page 70721]]

is calculated for each CPT/HCPCS code group as set forth in paragraph 
(f)(3)(i) of this section. The nationwide conversion factors for each 
of the 23 CPT/HCPCS code groups are trended forward to the effective 
time period for the charges, as set forth in paragraph (f)(3)(ii) of 
this section. The resulting amounts for each of the 23 groups are 
multiplied by geographic area adjustment factors determined pursuant to 
paragraph (f)(3)(iii) of this section, resulting in geographically-
adjusted 80th percentile conversion factors for each geographic area 
for the 23 CPT/HCPCS code groups for the effective charge period.
    (i) Nationwide conversion factors. Using the nationwide 80th 
percentile charges for the selected CPT/HCPCS codes from paragraph 
(f)(3) of this section, a nationwide conversion factor is calculated 
for each of the 23 CPT/HCPCS code groups by dividing the weighted 
average charge by the weighted average RVU.
    (ii) Trending forward. The nationwide conversion factors for each 
of the 23 CPT/HCPCS code groups, obtained as described in paragraph 
(f)(3)(i) of this section, are trended forward based on changes to the 
physicians' services component of the CPI-U. Actual CPI-U changes are 
used from the time period of the source data through the latest 
available month as of the time the calculations are performed. The 
three-month average annual trend rate as of the latest available month 
is then held constant to the midpoint of the calendar year in which the 
charges are primarily expected to be used. The projected total CPI-U 
change so obtained is then applied to the 23 conversion factors.
    (iii) Geographic area adjustment factors. Using the 80th percentile 
charges for the selected CPT/HCPCS codes from paragraph (f)(3) of this 
section for each geographic area, a geographic area-specific conversion 
factor is calculated for each of the 23 CPT/HCPCS code groups by 
dividing the weighted average charge by the weighted average 
geographically-adjusted RVU. The resulting conversion factor for each 
geographic area for each of the 23 CPT/HCPCS code groups is divided by 
the corresponding nationwide conversion factor determined pursuant to 
paragraph (f)(3)(i) of this section. The resulting ratios are the 
geographic area adjustment factors for the conversion factors for each 
of the 23 CPT/HCPCS code groups for each geographic area.
    (4) Charge adjustment factors for specified CPT/HCPCS code 
modifiers. Surcharges or charge discounts are calculated in the 
following manner: from the Part B component of the Medicare Standard 
Analytical File 5 percent Sample, the ratio of weighted average billed 
charges for CPT/HCPCS codes with the specified modifier to the weighted 
average billed charge for CPT/HCPCS codes with no charge modifier is 
calculated, using the frequency of procedure codes with the modifier as 
weights in both weighted average calculations. The resulting ratios 
constitute the surcharge or discount factors for specified charge-
significant CPT/HCPCS code modifiers.
    (5) Certain charges for providers other than physicians. When 
services for which charges are established according to the preceding 
provisions of this paragraph (f) are performed by providers other than 
physicians, the charges for those services will be as determined by the 
preceding provisions of this paragraph, except as follows:
    (i) Outpatient facility charges. When the services of providers 
other than physicians are furnished in outpatient facility settings or 
in other facilities designated as provider-based, and outpatient 
facility charges for those services have been established under 
paragraph (e) of this section, then the outpatient facility charges 
established under paragraph (e) will apply instead of the charges 
established under this paragraph (f).
    (ii) Discounted charges. Charges for the professional services of 
the following providers will be the indicated percentages of the amount 
that would be charged if the care had been provided by a physician:
    (A) Nurse practitioner: 85 percent.
    (B) Clinical nurse specialist: 85 percent.
    (C) Physician Assistant: 85 percent.
    (D) Clinical psychologist: 80 percent.
    (E) Clinical social worker: 75 percent.
    (F) Dietitian: 75 percent.
    (G) Clinical pharmacist: 80 percent.
    (g) Professional charges for anesthesia services. When VA provides 
or furnishes professional anesthesia services within the scope of care 
referred to in paragraph (a)(1) of this section, professional 
anesthesia charges billed for such services will be determined in 
accordance with the provisions of this paragraph. Charges for 
professional anesthesia services personally performed by 
anesthesiologists will be 100 percent of the charges determined as set 
forth in this paragraph. Charges for professional anesthesia services 
provided by non-medically directed certified registered nurse 
anesthetists will also be 100 percent of the charges determined as set 
forth in this paragraph. Charges for professional anesthesia services 
provided by medically directed certified registered nurse anesthetists 
will be 50 percent of the charges otherwise determined as set forth in 
this paragraph. Professional anesthesia charges consist of charges for 
professional services that vary by geographic area, by CPT/HCPCS code 
base units, and by number of time units. These charges are calculated 
as follows:
    (1) Formula. For each anesthesia CPT/HCPCS code, multiply the total 
anesthesia RVUs determined pursuant to paragraph (g)(2) of this section 
by the applicable geographically-adjusted conversion factor (a monetary 
amount) determined pursuant to paragraph (g)(3) of this section to 
obtain the professional anesthesia charge for each CPT/HCPCS code in a 
particular geographic area.
    (2) Total RVUs for professional anesthesia services. The total 
anesthesia RVUs for each anesthesia CPT/HCPCS code are the sum of the 
base units (as compiled by CMS) for that CPT/HCPCS code and the number 
of time units reported for the anesthesia service, where one time unit 
equals 15 minutes. For anesthesia CPT/HCPCS codes designated as 
unlisted procedures, base units are developed based on the weighted 
median base units for anesthesia CPT/HCPCS codes within the series in 
which the unlisted procedure code occurs. A nationwide VA distribution 
of procedures and services is used for the purpose of computing the 
weighted median base units.
    (3) Geographically-adjusted 80th percentile conversion factors. A 
nationwide 80th percentile conversion factor is calculated according to 
the methodology set forth in paragraph (g)(3)(i) of this section. The 
nationwide conversion factor is then trended forward to the effective 
time period for the charges, as set forth in paragraph (g)(3)(ii) of 
this section. The resulting amount is multiplied by geographic area 
adjustment factors determined pursuant to paragraph (g)(3)(iii) of this 
section, resulting in geographically-adjusted 80th percentile 
conversion factors for each geographic area for the effective charge 
period.
    (i) Nationwide conversion factor. Preliminary 80th percentile 
conversion factors for each area are compiled from the MDR database. 
Then, a preliminary nationwide weighted-average 80th percentile 
conversion factor is calculated, using as weights the population 
(census) frequencies for each geographic area as presented in the 
Milliman USA, Inc., Health Cost Guidelines (see paragraph (a)(3) of 
this section for Data Sources). A nationwide 80th percentile fee by 
CPT/HCPCS code is then computed by multiplying this

[[Page 70722]]

conversion factor by the MDR base units for each CPT/HCPCS code. An 
adjusted 80th percentile conversion factor by CPT/HCPCS code is then 
calculated by dividing the nationwide 80th percentile fee for each 
procedure code by the anesthesia base units (as compiled by CMS) for 
that CPT/HCPCS code. Finally, a nationwide weighted average 80th 
percentile conversion factor is calculated using combined frequencies 
for billed base units and time units from the part B component of the 
Medicare Standard Analytical File 5 percent Sample as weights.
    (ii) Trending forward. The nationwide conversion factor, obtained 
as described in paragraph (g)(3)(i) of this section, is trended forward 
based on changes to the physicians' services component of the CPI-U. 
Actual CPI-U changes are used from the time period of the source data 
through the latest available month as of the time the calculations are 
performed. The three-month average annual trend rate as of the latest 
available month is then held constant to the midpoint of the calendar 
year in which the charges are primarily expected to be used. The 
projected total CPI-U change so obtained is then applied to the 
conversion factor.
    (iii) Geographic area adjustment factors. The preliminary 80th 
percentile conversion factors for each geographic area described in 
paragraph (g)(3)(i) of this section are divided by the corresponding 
preliminary nationwide 80th percentile conversion factor also described 
in paragraph (g)(3)(i). The resulting ratios are the adjustment factors 
for each geographic area.
    (h) Professional charges for dental services identified by HCPCS 
Level II codes. When VA provides or furnishes outpatient dental 
professional services within the scope of care referred to in paragraph 
(a)(1) of this section, and such services are identified by HCPCS code 
rather than CPT code, the charges billed for such services will be 
determined in accordance with the provisions of this paragraph. The 
charges for dental services vary by geographic area and by HCPCS code. 
These charges are calculated as follows:
    (1) Formula. For each HCPCS dental code, multiply the nationwide 
80th percentile charge determined pursuant to paragraph (h)(2) of this 
section by the appropriate geographic area adjustment factor determined 
pursuant to paragraph (h)(3) of this section. The result constitutes 
the area-specific dental charge.
    (2) Nationwide 80th percentile charges by HCPCS code. For each 
HCPCS dental code, 80th percentile charges are extracted from three 
independent data sources: Prevailing Healthcare Charges System 
database; National Dental Advisory Service nationwide pricing index; 
and the Dental UCR Module of the Comprehensive Healthcare Payment 
System, a release from Ingenix from a nationwide database of dental 
charges (see paragraph (a)(3) of this section for Data Sources). 
Charges for each database are then trended forward to a common date, 
based on actual changes to the dental services component of the CPI-U. 
Charges for each HCPCS dental code from each data source are combined 
into an average 80th percentile charge by means of the methodology set 
forth in paragraph (h)(2)(i) of this section. HCPCS dental codes 
designated as unlisted are assigned 80th percentile charges by means of 
the methodology set forth in paragraph (h)(2)(ii) of this section. 
Finally, the resulting amounts are each trended forward to the 
effective time period for the charges, as set forth in paragraph 
(h)(2)(iii) of this section. The results constitute the nationwide 80th 
percentile charge for each HCPCS dental code.
    (i) Averaging methodology. The average charge for any particular 
HCPCS dental code is calculated by first computing a preliminary mean 
average of the three charges for each code. Statistical outliers are 
identified and removed by testing whether any charge differs from the 
preliminary mean charge by more than 50 percent of the preliminary mean 
charge. In such cases, the charge most distant from the preliminary 
mean is removed as an outlier, and the average charge is calculated as 
a mean of the two remaining charges. In cases where none of the charges 
differ from the preliminary mean charge by more than 50 percent of the 
preliminary mean charge, the average charge is calculated as a mean of 
all three reported charges.
    (ii) Nationwide 80th percentile charges for HCPCS dental codes 
designated as unlisted procedures. For HCPCS dental codes designated as 
unlisted procedures, 80th percentile charges are developed based on the 
weighted median 80th percentile charge of HCPCS dental codes within the 
series in which the unlisted procedure code occurs. The distribution of 
procedures and services from the Prevailing Healthcare Charges System 
nationwide commercial insurance database is used for the purpose of 
computing the weighted median.
    (iii) Trending forward. 80th percentile charges for each dental 
procedure code, obtained as described in paragraph (h)(2) of this 
section, are trended forward based on the dental services component of 
the CPI-U. Actual CPI-U changes are used from the time period of the 
source data through the latest available month as of the time the 
calculations are performed. The three-month average annual trend rate 
as of the latest available month is then held constant to the midpoint 
of the calendar year in which the charges are primarily expected to be 
used. The projected total CPI-U change so obtained is then applied to 
the 80th percentile charges.
    (3) Geographic area adjustment factors. A geographic adjustment 
factor (consisting of the ratio of the level of charges in a given 
geographic area to the nationwide level of charges) for each geographic 
area and dental class of service is obtained from Milliman USA, Inc., 
Dental Health Cost Guidelines, a database of nationwide commercial 
insurance charges and relative costs; and a normalized geographic 
adjustment factor computed from the Dental UCR Module of the 
Comprehensive Healthcare Payment System compiled by Ingenix, as 
follows: Using local and nationwide average charges reported in the 
Ingenix data, a local weighted average charge for each dental class of 
procedure codes is calculated using utilization frequencies from the 
Milliman USA, Inc., Dental Health Cost Guidelines as weights (see 
paragraph (a)(3) of this section for Data Sources). Similarly, using 
nationwide average charge levels, a nationwide average charge by dental 
class of procedure codes is calculated. The normalized geographic 
adjustment factor for each dental class of procedure codes and for each 
geographic area is the ratio of the local average charge divided by the 
corresponding nationwide average charge. Finally, the geographic area 
adjustment factor is the arithmetic average of the corresponding 
factors from the data sources mentioned in the first sentence of this 
paragraph (h)(3).
    (i) Pathology and laboratory charges. When VA provides or furnishes 
pathology and laboratory services within the scope of care referred to 
in paragraph (a)(1) of this section, charges billed for such services 
will be determined in accordance with the provisions of this paragraph. 
Pathology and laboratory charges consist of charges for services that 
vary by geographic area and by CPT/HCPCS code. These charges are 
calculated as follows:
    (1) Formula. For each CPT/HCPCS code, multiply the total 
geographically-adjusted RVUs determined pursuant to paragraph (i)(2) of 
this section by the applicable geographically-adjusted conversion 
factor (a monetary amount) determined pursuant to paragraph (i)(3)

[[Page 70723]]

of this section to obtain the pathology/laboratory charge for each CPT/
HCPCS code in a particular geographic area.
    (2)(i) Total geographically-adjusted RVUs for pathology and 
laboratory services that have Medicare-based RVUs. Total RVUs are 
developed based on the Medicare Clinical Diagnostic Laboratory Fee 
Schedule (CLAB). The CLAB payment amounts are upwardly adjusted such 
that the adjusted payment amounts are, on average, equivalent to 
Medicare Physician Fee Schedule payment levels, using statistical 
comparisons to the 80th percentile derived from the MDR database. These 
adjusted payment amounts are then divided by the corresponding Medicare 
conversion factor to derive RVUs for each CPT/HCPCS code. The resulting 
nationwide total RVUs are multiplied by the geographic adjustment 
factors determined pursuant to paragraph (i)(2)(iv) of this section to 
obtain the area-specific total RVUs.
    (ii) RVUs for CPT/HCPCS codes that do not have Medicare-based RVUs 
and are not designated as unlisted procedures. For CPT/HCPCS codes that 
are not assigned RVUs in paragraphs (i)(2)(i) or (i)(2)(iii) of this 
section, total RVUs are developed based on various charge data sources. 
For these CPT/HCPCS codes, the nationwide 80th percentile billed 
charges are obtained, where statistically credible, from the MDR 
database. For any remaining CPT/HCPCS codes, the nationwide 80th 
percentile billed charges are obtained, where statistically credible, 
from the Part B component of the Medicare Standard Analytical File 5 
percent Sample. For any remaining CPT/HCPCS codes, the nationwide 80th 
percentile billed charges are obtained, where statistically credible, 
from the Prevailing Healthcare Charges System nationwide commercial 
insurance database. For each of these CPT/HCPCS codes, nationwide total 
RVUs are obtained by taking the nationwide 80th percentile billed 
charges obtained using the preceding three databases and dividing by 
the untrended nationwide conversion factor determined pursuant to 
paragraphs (i)(3) and (i)(3)(i) of this section. For any remaining CPT/
HCPCS codes that have not been assigned RVUs using the preceding data 
sources, the nationwide total RVUs are calculated by summing the work 
expense and non-facility practice expense RVUs found in Ingenix/St. 
Anthony's RBRVS. The resulting nationwide total RVUs obtained using 
these four data sources are multiplied by the geographic area 
adjustment factors determined pursuant to paragraph (i)(2)(iv) of this 
section to obtain the area-specific total RVUs.
    (iii) RVUs for CPT/HCPCS codes designated as unlisted procedures. 
For CPT/HCPCS codes designated as unlisted procedures, total RVUs are 
developed based on the weighted median of the total RVUs of CPT/HCPCS 
codes within the series in which the unlisted procedure code occurs. A 
nationwide VA distribution of procedures and services is used for the 
purpose of computing the weighted median. The resulting nationwide 
total RVUs are multiplied by the geographic area adjustment factors 
determined pursuant to paragraph (i)(2)(iv) of this section to obtain 
the area-specific total RVUs.
    (iv) RVU geographic area adjustment factors for CPT/HCPCS codes 
that do not have Medicare RVUs, including codes that are designated as 
unlisted procedures. The adjustment factor for each geographic area 
consists of the weighted average of the work expense and practice 
expense Medicare Geographic Practice Cost Indices for each geographic 
area using charge data for representative CPT/HCPCS codes statistically 
selected and weighted for work expense and practice expense.
    (3) Geographically-adjusted 80th percentile conversion factors. 
Representative CPT/HCPCS codes are statistically selected and weighted 
so as to give a weighted average RVU comparable to the weighted average 
RVU of the entire pathology/laboratory CPT/HCPCS code group (the 
selected CPT/HCPCS codes are set forth in the Milliman USA, Inc., 
Health Cost Guidelines fee survey). The 80th percentile charge for each 
selected CPT/HCPCS code is obtained from the MDR database. A nationwide 
conversion factor (a monetary amount) is calculated as set forth in 
paragraph (i)(3)(i) of this section. The nationwide conversion factor 
is trended forward to the effective time period for the charges, as set 
forth in paragraph (i)(3)(ii) of this section. The resulting amount is 
multiplied by a geographic area adjustment factor determined pursuant 
to paragraph (i)(3)(iv) of this section, resulting in the 
geographically-adjusted 80th percentile conversion factor for the 
effective charge period.
    (i) Nationwide conversion factors. Using the nationwide 80th 
percentile charges for the selected CPT/HCPCS codes from paragraph 
(i)(3) of this section, a nationwide conversion factor is calculated by 
dividing the weighted average charge by the weighted average RVU.
    (ii) Trending forward. The nationwide conversion factor, obtained 
as described in paragraph (i)(3) of this section, is trended forward 
based on changes to the physicians' services component of the CPI-U. 
Actual CPI-U changes are used from the time period of the source data 
through the latest available month as of the time the calculations are 
performed. The three-month average annual trend rate as of the latest 
available month is then held constant to the midpoint of the calendar 
year in which the charges are primarily expected to be used. The 
projected total CPI-U change so obtained is then applied to the 
pathology/laboratory conversion factor.
    (iii) Geographic area adjustment factor. Using the 80th percentile 
charges for the selected CPT/HCPCS codes from paragraph (i)(3) of this 
section for each geographic area, a geographic area-specific conversion 
factor is calculated by dividing the weighted average charge by the 
weighted average geographically-adjusted RVU. The resulting geographic 
area conversion factor is divided by the corresponding nationwide 
conversion factor determined pursuant to paragraph (i)(3)(i) of this 
section. The resulting ratios are the geographic area adjustment 
factors for pathology and laboratory services for each geographic area.
    (j) Observation care facility charges. When VA provides observation 
care within the scope of care referred to in paragraph (a)(1) of this 
section, the facility charges billed for such care will be determined 
in accordance with the provisions of this paragraph. The charges for 
this care vary by geographic area and number of hours of care. These 
charges are calculated as follows:
    (1) Formula. For each occurrence of observation care, add the 
nationwide base charge determined pursuant to paragraph (j)(2) of this 
section to the product of the number of hours in observation care and 
the hourly charge also determined pursuant to paragraph (j)(2) of this 
section. Then multiply this amount by the appropriate geographic area 
adjustment factor determined pursuant to paragraph (j)(3) of this 
section. The result constitutes the area-specific observation care 
facility charge.
    (2)(i) Nationwide 80th percentile observation care facility 
charges. To calculate nationwide base and hourly facility charges, all 
claims with observation care line items are selected from the 
outpatient facility component of the Medicare Standard Analytical File 
5 percent Sample. Then, using the 80th percentile observation line item 
charges for each unique hourly length of stay, a standard linear 
regression technique is used to calculate the nationwide 80th 
percentile base charge and 80th percentile hourly charge. Finally, the 
resulting amounts are each trended forward to the effective time

[[Page 70724]]

period for the charges, as set forth in paragraph (j)(2)(ii) of this 
section. The results constitute the nationwide 80th percentile base and 
hourly facility charges for observation care.
    (ii) Trending forward. The nationwide 80th percentile base and 
hourly facility charges for observation care, obtained as described in 
paragraph (j)(2)(i) of this section, are trended forward based on 
changes to the outpatient hospital services component of the CPI-U. 
Actual CPI-U changes are used from the time period of the source data 
through the latest available month as of the time the calculations are 
performed. The three-month average annual trend rate as of the latest 
available month is then held constant to the midpoint of the calendar 
year in which the charges are primarily expected to be used. The 
projected total CPI-U change so obtained is then applied to the 80th 
percentile charges.
    (3) Geographic area adjustment factors. The geographic area 
adjustment factors for observation care facility charges are the same 
as those computed for outpatient facility charges under paragraph 
(e)(4) of this section.
    (k) Ambulance and other emergency transportation charges. When VA 
provides ambulance and other emergency transportation services that are 
within the scope of care referred to in paragraph (a)(1) of this 
section, the charges billed for such services will be determined in 
accordance with the provisions of this paragraph. The charges for these 
services vary by HCPCS code, length of trip, and geographic area. These 
charges are calculated as follows:
    (1) Formula. For each occasion of ambulance or other emergency 
transportation service, add the nationwide base charge for the 
appropriate HCPCS code determined pursuant to paragraph (k)(2)(i) of 
this section to the product of the number of miles traveled and the 
appropriate HCPCS code mileage charge determined pursuant to paragraph 
(k)(2)(ii) of this section. Then multiply this amount by the 
appropriate geographic area adjustment factor determined pursuant to 
paragraph (k)(3) of this section. The result constitutes the area-
specific ambulance or other emergency transportation service charge.
    (2)(i) Nationwide 80th percentile all-inclusive base charge. To 
calculate a nationwide all-inclusive base charge, all ambulance and 
other emergency transportation claims are selected from the outpatient 
facility component of the Medicare Standard Analytical File 5 percent 
Sample. Excluding professional and mileage charges, as well as all-
inclusive charges which are reported on such claims, the total charge 
per claim, including incidental supplies, is computed. Then, the 80th 
percentile amount for each HCPCS code is computed. Finally, the 
resulting amounts are each trended forward to the effective time period 
for the charges, as set forth in paragraph (k)(2)(iii) of this section. 
The results constitute the nationwide 80th percentile all-inclusive 
base charge for each HCPCS base charge code.
    (ii) Nationwide 80th percentile mileage charge. To calculate a 
nationwide mileage charge, all ambulance and other emergency 
transportation claims are selected from the outpatient facility 
component of the Medicare Standard Analytical File 5 percent Sample. 
Excluding professional, incidental, and base charges, as well as claims 
with all-inclusive charges, the total mileage charge per claim is 
computed. This amount is divided by the number of miles reported on the 
claim. Then, the 80th percentile amount for each HCPCS code, using 
miles as weights, is computed. Finally, the resulting amounts are each 
trended forward to the effective time period for the charges, as set 
forth in paragraph (k)(2)(iii) of this section. The results constitute 
the nationwide 80th percentile mileage charge for each HCPCS mileage 
code.
    (iii) Trending forward. The nationwide 80th percentile charge for 
each HCPCS code, obtained as described in paragraphs (k)(2)(i) and 
(k)(2)(ii) of this section, is trended forward based on changes to the 
outpatient hospital services component of the CPI-U. Actual CPI-U 
changes are used from the time period of the source data through the 
latest available month as of the time the calculations are performed. 
The three-month average annual trend rate as of the latest available 
month is then held constant to the midpoint of the calendar year in 
which the charges are primarily expected to be used. The projected 
total CPI-U change so obtained is then applied to the 80th percentile 
charges.
    (3) Geographic area adjustment factors. The geographic area 
adjustment factors for ambulance and other emergency transportation 
charges are the same as those computed for outpatient facility charges 
under paragraph (e)(4) of this section.
    (l) Charges for durable medical equipment, drugs, injectables, and 
other medical services, items, and supplies identified by HCPCS Level 
II codes. When VA provides DME, drugs, injectables, or other medical 
services, items, or supplies that are identified by HCPCS Level II 
codes and that are within the scope of care referred to in paragraph 
(a)(1) of this section, the charges billed for such services, items, 
and supplies will be determined in accordance with the provisions of 
this paragraph. The charges for these services, items, and supplies 
vary by geographic area, by HCPCS code, and by modifier, when 
applicable. These charges are calculated as follows:
    (1) Formula. For each HCPCS code, multiply the nationwide charge 
determined pursuant to paragraphs (l)(2), (l)(3), and (l)(4) of this 
section by the appropriate geographic area adjustment factor determined 
pursuant to paragraph (l)(5) of this section. The result constitutes 
the area-specific charge.
    (2) Nationwide 80th percentile charges for HCPCS codes with RVUs. 
For each applicable HCPCS code, RVUs are compiled from the data sources 
set forth in paragraph (l)(2)(i) of this section. The RVUs are 
multiplied by the charge amount for each incremental RVU determined 
pursuant to paragraph (l)(2)(ii) of this section, and this amount is 
added to the fixed charge amount also determined pursuant to paragraph 
(l)(2)(ii) of this section. Then, for each HCPCS code, this charge is 
multiplied by the appropriate 80th percentile to median charge ratio 
determined pursuant to paragraph (l)(2)(iii) of this section. Finally, 
the resulting amount is trended forward to the effective time period 
for the charges, as set forth in paragraph (l)(2)(iv) of this section 
to obtain the nationwide 80th percentile charge.
    (i) RVUs for DME, drugs, injectables, and other medical services, 
items, and supplies. For the purpose of the statistical methodology set 
forth in paragraph (l)(2)(ii) of this section, HCPCS codes are assigned 
to the following HCPCS code groups. For the HCPCS codes in each group, 
the RVUs or amounts indicated constitute the RVUs:
    (A) Chemotherapy Drugs: Ingenix/St. Anthony's RBRVS Practice 
Expense RVUs.
    (B) Other Drugs: Ingenix/St. Anthony's RBRVS Practice Expense RVUs.
    (C) DME--Hospital Beds: Medicare DME Fee Schedule amounts.
    (D) DME--Medical/Surgical Supplies: Medicare DME Fee Schedule 
amounts.
    (E) DME--Orthotic Devices: Medicare DME Fee Schedule amounts.
    (F) DME--Oxygen and Supplies: Medicare DME Fee Schedule amounts.
    (G) DME--Wheelchairs: Medicare DME Fee Schedule amounts.

[[Page 70725]]

    (H) Other DME: Medicare DME Fee Schedule amounts.
    (I) Enteral/Parenteral Supplies: Medicare Parenteral and Enteral 
Nutrition Fee Schedule amounts.
    (J) Surgical Dressings and Supplies: Medicare DME Fee Schedule 
amounts.
    (K) Vision Items--Other Than Lenses: Medicare DME Fee Schedule 
amounts.
    (L) Vision Items--Lenses: Medicare DME Fee Schedule amounts.
    (M) Hearing Items: Ingenix/St. Anthony's RBRVS Practice Expense 
RVUs.
    (ii) Charge amounts. Using combined Part B and DME components of 
the Medicare Standard Analytical File 5% Sample, the median billed 
charge is calculated for each HCPCS code. A mathematical approximation 
methodology based on least squares techniques is applied to the RVUs 
specified for each of the groups set forth in paragraph (l)(2)(i) of 
this section, yielding two charge amounts for each HCPCS code group: a 
charge amount per incremental RVU, and a fixed charge amount.
    (iii) 80th Percentile to median charge ratios. Two ratios are 
obtained for each HCPCS code group set forth in paragraph (l)(2)(i) of 
this section by dividing the weighted average 80th percentile charge by 
the weighted average median charge derived from two data sources: 
Medicare data, as represented by the combined Part B and DME components 
of the Medicare Standard Analytical File 5% Sample; and the MDR 
database. Charge frequencies from the Medicare data are used as weights 
when calculating all weighted averages. For each HCPCS code group, the 
smaller of the two ratios is selected as the adjustment from median to 
80th percentile charges.
    (iv) Trending forward. The charges for each HCPCS code, obtained as 
described in paragraph (l)(2)(iii) of this section, are trended forward 
based on changes to the medical care commodities component of the CPI-
U. Actual CPI-U changes are used from the time period of the source 
data through the latest available month as of the time the calculations 
are performed. The three-month average annual trend rate as of the 
latest available month is then held constant to the midpoint of the 
calendar year in which the charges are primarily expected to be used. 
The projected total CPI-U change so obtained is then applied to the 
80th percentile charges, as described in paragraph (l)(2)(iii) of this 
section.
    (3) Nationwide 80th percentile charges for HCPCS codes without 
RVUs. For each applicable HCPCS code, 80th percentile charges are 
extracted from three independent data sources: the MDR database; 
Medicare, as represented by the combined Part B and DME components of 
the Medicare Standard Analytical File 5 percent Sample; and Milliman 
USA, Inc., Optimized HMO (Health Maintenance Organization) Data Sets 
(see paragraph (a)(3) of this section for Data Sources). Charges from 
each database are then trended forward to the effective time period for 
the charges, as set forth in paragraph (l)(3)(i) of this section. 
Charges for each HCPCS code from each data source are combined into an 
average 80th percentile charge by means of the methodology set forth in 
paragraph (l)(3)(ii) of this section. The results constitute the 
nationwide 80th percentile charge for each applicable HCPCS code.
    (i) Trending forward. The charges from each database for each HCPCS 
code, obtained as described in paragraph (l)(3) of this section, are 
trended forward based on changes to the medical care commodities 
component of the CPI-U. Actual CPI-U changes are used from the time 
period of each source database through the latest available month as of 
the time the calculations are performed. The three-month average annual 
trend rate as of the latest available month is then held constant to 
the midpoint of the calendar year in which the charges are primarily 
expected to be used. The projected total CPI-U change so obtained is 
then applied to the 80th percentile charges, as described in paragraph 
(l)(3) of this section.
    (ii) Averaging methodology. The average 80th percentile trended 
charge for any particular HCPCS code is calculated by first computing a 
preliminary mean average of the three charges for each HCPCS code. 
Statistical outliers are identified and removed by testing whether any 
charge differs from the preliminary mean charge by more than 5 times 
the preliminary mean charge, or by less than 0.2 times the preliminary 
mean charge. In such cases, the charge most distant from the 
preliminary mean is removed as an outlier, and the average charge is 
calculated as a mean of the two remaining charges. In cases where none 
of the charges differ from the preliminary mean charge by more than 5 
times the preliminary mean charge, or less than 0.2 times the 
preliminary mean charge, the average charge is calculated as a mean of 
all three reported charges.
    (4) Nationwide 80th percentile charges for HCPCS codes designated 
as unlisted or unspecified. For HCPCS codes designated as unlisted or 
unspecified procedures, services, items, or supplies, 80th percentile 
charges are developed based on the weighted median 80th percentile 
charges of HCPCS codes within the series in which the unlisted or 
unspecified code occurs. A nationwide VA distribution of procedures, 
services, items, and supplies is used for the purpose of computing the 
weighted median.
    (5) Geographic area adjustment factors. For the purpose of 
geographic adjustment, HCPCS codes are combined into two groups: drugs 
and DME/supplies, as set forth in paragraph (l)(5)(i) of this section. 
The geographic area adjustment factor for each of these groups is 
calculated as the ratio of the area-specific weighted average charge 
determined pursuant to paragraph (l)(5)(ii) of this section divided by 
the nationwide weighted average charge determined pursuant to paragraph 
(l)(5)(iii) of this section.
    (i) Combined HCPCS code groups for geographic area adjustment 
factors for DME, drugs, injectables, and other medical services, items, 
and supplies. For the purpose of the statistical methodology set forth 
in paragraph (l)(5) of this section, each of the HCPCS code groups set 
forth in paragraph (l)(2)(i) of this section is assigned to one of two 
combined HCPCS code groups, as follows:
    (A) Chemotherapy Drugs: Drugs.
    (B) Other Drugs: Drugs.
    (C) DME--Hospital Beds: DME/supplies.
    (D) DME--Medical/Surgical Supplies: DME/supplies.
    (E) DME--Orthotic Devices: DME/supplies.
    (F) DME--Oxygen and Supplies: DME/supplies.
    (G) DME--Wheelchairs: DME/supplies.
    (H) Other DME: DME/supplies.
    (I) Enteral/Parenteral Supplies: DME/supplies.
    (J) Surgical Dressings and Supplies: DME/supplies.
    (K) Vision Items--Other Than Lenses: DME/supplies.
    (L) Vision Items--Lenses: DME/supplies.
    (M) Hearing Items: DME/supplies.
    (ii) Area-specific weighted average charges. Using the median 
charges by HCPCS code from the MDR database for each geographic area 
and utilization frequencies by HCPCS code from the combined Part B and 
DME components of the Medicare Standard Analytical File 5 percent 
Sample, an area-specific weighted average charge is calculated for each 
combined HCPCS code group.
    (iii) Nationwide weighted average charges. Using the area-specific 
weighted average charges determined

[[Page 70726]]

pursuant to paragraph (l)(5)(ii) of this section, a nationwide weighted 
average charge is calculated for each combined HCPCS code group, using 
as weights the population (census) frequencies for each geographic area 
as presented in the Milliman USA, Inc., Health Cost Guidelines (see 
paragraph (a)(3) of this section for Data Sources).
    (m) Charges for prescription drugs not administered during 
treatment. Notwithstanding other provisions of this section, when VA 
provides or furnishes 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 prescription drugs 
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. 03-31176 Filed 12-18-03; 8:45 am]
BILLING CODE 8320-01-P