[Federal Register Volume 72, Number 206 (Thursday, October 25, 2007)]
[Notices]
[Pages 60659-60660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-21014]


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DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE; Civilian Health and Medical Program of the Uniformed 
Services (CHAMPUS); Fiscal Year (FY) 2008 Diagnosis-Related Group (DRG) 
Updates

AGENCY: Office of the Secretary, Department of Defense (DoD).

ACTION: Notice.

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SUMMARY: This notice describes the changes made to the TRICARE DRG-
based payment system. It also provides the updated fixed loss cost 
outlier threshold, cost-to-charge ratios, and the Internet address for 
accessing the updated adjusted standardized amount and DRG relative 
weights to be used for FY 2008 under the TRICARE DRG-based payment 
system.

DATES: Effective Dates: This FY 2008 DRG update is effective for 
admissions occurring on or after October 1.

ADDRESSES: TRICARE Management Activity (TMA), Medical Benefits and 
Reimbursement Systems, 16401 East Centretech Parkway, Aurora, CO 80011-
9066.

FOR FURTHER INFORMATION CONTACT: Ann N. Fazzini, Medical Benefits and 
Reimbursement Systems, TMA, telephone (303) 676-3803.
    Questions regarding payment of specific claims under the TRICARE 
DRG-based payment system should be addressed to the appropriate 
contractor.

SUPPLEMENTARY INFORMATION: The final rule published on September 1, 
1987 (52 FR 32992), set forth the basic procedures used under the 
CHAMPUS DRG-based payment system. This was subsequently amended by 
final rules published August 31, 1988 (53 FR 33461), October 21, 1988 
(53 FR 41331), December 16, 1988 (53 FR 50515), May 30, 1990 (55 FR 
21863), October 22, 1990 (55 FR 42560), and September 10, 1998 (63 FR 
48439).
    This notice updates the TRICARE rates and weights in accordance 
with our previous final rules. The actual changes we are making are 
detailed below.

I. Changes Which Affect the TRICARE DRG-Based Payment System

    A. Under the TRICARE DRG-based payment system, cases are classified 
into the appropriate DRG by a Grouper program. The Grouper classifies 
each case into a DRG on the basis of the diagnosis, procedure codes, 
and demographic information (that is, sex, age, and discharge status). 
The Grouper used for the TRICARE DRG-based payment system is the same 
as the FY 2007 Medicare Grouper with two modifications. The TRICARE 
system has replaced Medicare DRG 435 with two age-based DRGs (900 and 
901), and has implemented thirty-four (34) neonatal DRGs in place of 
Medicare DRGs 385 through 390. For admissions occurring on or after 
October 1, 2001, DRG 435 has been replaced by DRG 523. The TRICARE 
system has replaced DRG 523 with the two age-based DRGs (900 and 901). 
For admissions occurring on or after October 1, 1995, the CHAMPUS 
grouper hierarchy logic was changed so the age split (age <29 days) and 
assignments to Major Diagnostic Category (MDC) 15 occur before 
assignment of the Pre-MDC DRGs. This resulted in all neonate 
tracheotomies and organ transplants to be grouped to MDC 15 and not to 
DRGs 480-483 or 495. For admissions occurring on or after October 1, 
1998, the CHAMPUS grouper hierarchy logic was changed to move DRG 103 
to the PreMDC DRGs and

[[Page 60660]]

to assign patients to PreMDC DRGs 480, 103 and 495 before assignment to 
MDC 15 DRGs and the neonatal DRGs. For admissions occurring on or after 
October 1, 2001, DRGs 512 and 513 were added to the PreMDC DRGs, 
between DRGs 480 and 103 in the TRICARE grouper hierarchy logic. For 
admissions occurring on or after October 1, 2004, DRG 483 was deleted 
and replaced with DRGs 541 and 542, splitting the assignment of cases 
on the basis of the performance of a major operating room procedure. 
The description for DRG 480 was changed to ``Liver Transplant and/or 
Intestinal Transplant,'' and the description for DRG 103 was changed to 
``Heart/Heart Lung Transplant or Implant of Heart Assist System.''

B. Wage Index and Medicare Geographic Classification Review Board 
Guidelines

    TRICARE will continue to use the same wage index amounts used for 
the Medicare Prospective Payment System (PPS). TRICARE will also 
duplicate all changes with regard to the wage index for specific 
hospitals that are re-designated by the Medicare Geographic 
Classification Review Board. In addition, TRICARE will continue to 
utilize the out commuting wage index adjustment.

C. Revision of the Labor-Related Share of the Wage Index

    TRICARE is adopting the Centers for Medicare and Medicaid Services' 
(CMS) percentage of labor related share of the standardized amount. For 
wage index values greater than 1.0, the labor related portion of the 
Adjusted Standardized Amount (ASA) shall equal 69.7 percent. For wage 
index values less than or equal to 1.0 the labor related portion of the 
ASA shall continue to equal 62 percent.

D. Hospital Market Basket

    TRICARE will update the adjusted standardized amounts according to 
the final updated hospital market basket used for the Medicare PPS for 
all hospitals subject to the TRICARE DRG-based payment system according 
to CMS's August 22, 2007, final rule.

E. Outlier Payments

    Since TRICARE does not include capital payments in our DRG-based 
payments (TRICARE reimburses hospitals for their capital costs as 
reported annually to the contractor on a passthrough basis), we will 
use the FY 2007 (published in CMS' August 18, 2006) fixed loss cost 
outlier threshold calculated by CMS for paying cost outliers in the 
absence of capital prospective payments. For TRICARE's FY 2008 update, 
the fixed loss cost outlier threshold is based on the sum of the 
applicable DRG-based payment rate plus any amounts payable for IDME 
plus a fixed dollar amount. Thus, for FY 2008, in order for a case to 
qualify for cost outlier payments, the costs must exceed the TRICARE 
DRG base payment rate (wage adjusted) for the DRG plus the IDME payment 
plus $22,649 (wage adjusted). The marginal cost factor for cost 
outliers continues to be 80 percent.

F. National Operating Standard Cost as a Share of Total Costs

    The FY 2008 TRICARE National Operating Standard Cost as a Share of 
Total Costs (NOSCASTC) used in calculating the cost outlier threshold 
is 0.925. TRICARE uses the same methodology as CMS for calculating the 
NOSCASTC; however, the variables are different because TRICARE uses 
national cost-to-charge ratios while CMS uses hospital specific cost-
to-charge ratios.

G. Indirect Medical Education (IDME) Adjustment

    Passage of the MMA of 2003 modified the formula multipliers to be 
used in the calculation of the indirect medical education IDME 
adjustment factor. Since the IDME formula used by TRICARE does not 
include disproportionate share hospitals (DSHs), the variables in the 
formula are different than Medicare's, however; the percentage 
reductions that will be applied to Medicare's formula will also be 
applied to the TRICARE IDME formula. The new multiplier for the IDME 
adjustment factor for TRICARE for FY 2008 is 1.02.

H. Expansion of the Post-Acute Care Transfer Policy

    For FY 2008, TRICARE continues to use the post-acute care transfer 
policy that was published in CMS' final rule on August 18, 2006.

I. Blood Clotting Factor

    For FY 2008, TRICARE is adopting CMS' payment methodology for blood 
clotting factor according to CMS' final rule published August 18, 2006.

II. Cost-to-Charge Ratio

    While CMS uses hospital-specific cost-to-charge ratios, TRICARE 
uses a national cost-to-charge ratio. For FY 2008, the cost-to-charge 
ratio used for the TRICARE DRG-based payment system for acute care 
hospitals and neonates will be 0.3818 which is increased to 0.3888 to 
account for bad debts. This shall be used to calculate the adjusted 
standardized amounts and to calculate cost outlier payments, except for 
children's hospitals. For children's hospital cost outliers, the cost-
to-charge ratio used is 0.4198.

III. Updated Rates and Weights

    The updated rates and weights are accessible through the Internet 
at http://www.tricare.osd.mil under the sequential headings TRICARE 
Provider Information, Rates and Reimbursements, and DRG Information. 
Table 1 provides the ASA rates and Table 2 provides the DRG weights to 
be used under the TRICARE DRG-based payment system during FY 2008 and 
which is a result of the changes described above. The implementing 
regulations for the TRICARE/CHAMPUS DRG-based payment system are in 32 
CFR Part 199.

    Dated: October 19, 2007.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
 [FR Doc. E7-21014 Filed 10-24-07; 8:45 am]
BILLING CODE 5001-06-P