[Federal Register Volume 73, Number 87 (Monday, May 5, 2008)]
[Proposed Rules]
[Pages 24509-24510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9800]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 73, No. 87 / Monday, May 5, 2008 / Proposed 
Rules  

[[Page 24509]]



DEPARTMENT OF DEFENSE

Office of the Secretary

[DoD-2008-HA-0007; 0720-AB21]

32 CFR Part 199


TRICARE; Reimbursement of Critical Access Hospitals (CAHs)

AGENCY: Office of the Secretary, Department of Defense.

ACTION: Proposed rule.

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SUMMARY: This rule is being published to implement the statutory 
provision in 10 United States Code (U.S.C.) 1079(j)(2) that TRICARE 
payment methods for institutional care be determined to the extent 
practicable in accordance with the same reimbursement rules as those 
that apply to payments to providers of services of the same type under 
Medicare. This proposed rule implements a reimbursement methodology 
similar to that furnished to Medicare beneficiaries for services 
provided by critical access hospitals (CAHs).

DATES: Written comments received at the address indicated below by June 
4, 2008 will be accepted.

ADDRESS: You may submit comments, identified by docket number and/or 
Regulatory Information Number (RIN) number and title, by either of the 
following methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Federal Docket Management System Office, 1160 
Defense Pentagon, Washington, DC 20301-1160.
    Instructions: All submissions received must include the agency name 
and docket number or RIN for this Federal Register document. The 
general policy for comments and other submissions from members of the 
public is to make these submissions available for public viewing on the 
Internet at http://www.regulations.gov as they are received without 
change, including any personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: Ms. Martha M. Maxey, TRICARE 
Management Activity, Medical Benefits and Reimbursement Systems, 
telephone (303) 676-3627.

SUPPLEMENTARY INFORMATION: 

I. Introduction and Background

    Hospitals are authorized TRICARE institutional providers under 10 
U.S. Code 1079(j)(2) and (4). Under 10 U.S.C. 1079(j)(2), the amount to 
be paid to hospitals, skilled nursing facilities (SNFs), and other 
institutional providers under TRICARE, ``shall be determined to the 
extent practicable in accordance with the same reimbursement rules as 
apply to payments to providers of services of the same type under 
Medicare.'' Under 32 CFR 199.14(a)(1)(ii)(D)(1) through (9) it 
specifically lists those hospitals that are exempt from the DRG-based 
payment system. CAHs are not listed as exempt, thereby making them 
subject to the DRG-based payment system. CAHs are not listed as 
excluded, because at the time this regulatory provision was written, 
CAHs were not a recognized entity.
    Legislation enacted as part of the Balanced Budget Act (BBA) of 
1997 authorized states to establish State Medicare Rural Hospital 
Flexibility Programs, under which certain facilities participating in 
Medicare could become CAHs. CAHs represent a separate provider type 
with their own Medicare conditions of participation as well as a 
separate payment method of 101 percent of reasonable costs. Since that 
time, a number of hospitals have taken the necessary steps to be 
designated as CAHs by the Centers for Medicare & Medicaid Services 
(CMS). The statutory authority requires TRICARE to apply the same 
reimbursement rules as apply to payments to providers of services of 
the same type under Medicare to the extent practicable. Therefore, if 
practicable, TRICARE has the requirement through the publication of a 
proposed and final rule to exempt critical access hospitals from the 
DRG-based payment system and adopt a reimbursement method similar to 
Medicare principles for these hospitals. Until now, we have not amended 
32 CFR 199.14(a)(1)(ii)(D) to exempt CAHs from the DRG-based payment 
system as it was deemed impracticable to replicate CMS' reimbursement 
methodology for CAHs because of a lack of access to facility-specific 
cost data. CMS has data on the costs at each of the CAHs and has 
indicated that it would provide whatever data TMA needed on these costs 
reports.
    Currently under TRICARE, with the exception of Alaska, CAHs are 
subject to the TRICARE DRG-based payment system for inpatient care. For 
outpatient care, CAHs are reimbursed based on billed charges for 
facility charges. In Alaska, under a demonstration project, CAHs are 
reimbursed under a method similar to Medicare principles. They are 
reimbursed the lesser of the billed charge or 101 percent of reasonable 
costs for inpatient and outpatient care. The 101 percent of reasonable 
costs is calculated by multiplying the billed charge of each claim by 
the hospital's cost-to-charge ratio, and then adding 1 percent to that 
amount. The demonstration project in Alaska is working well. There have 
been no complaints since the new reimbursement methodology was 
implemented and it has resolved access to care issues in that State. 
Based on the above statutory mandate, TRICARE is proposing to adopt 
this same reimbursement methodology for all CAHs.

II. Regulatory Procedures

Executive Order 12866, ``Regulatory Planning and Review''

    Section 801 of Title 5, U.S.C., and Executive Order (E.O.) 12866 
requires certain regulatory assessments and procedures for any major 
rule or significant regulatory action, defined as one that would result 
in an annual effect of $100 million or more on the national economy or 
which would have other substantial impacts. It has been certified that 
this rule is not an economically significant rule; however, it is a 
regulatory action which has been reviewed by the Office of Management 
and Budget as required under the provisions of E.O. 12866.

Section 202, Public Law 104-4, ``Unfunded Mandates Reform Act''

    It has been certified that this rule does not contain a Federal 
mandate that may result in the expenditure by State, local and tribal 
governments, in aggregate, or

[[Page 24510]]

by the private sector, of $100 million or more in any one year.

Public Law 96-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)

    The Regulatory Flexibility Act (RFA) requires each Federal agency 
prepare, and make available for public comment, a regulatory 
flexibility analysis when the agency issues a regulation which would 
have a significant impact on a substantial number of small entities. 
This rule will not significantly affect a substantial number of small 
entities.

Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)

    This rule will not impose any additional information collection 
requirements on the public under the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501-3511). Existing information collection requirements of 
the TRICARE and Medicare programs will be utilized.

Executive Order 13132, ``Federalism''

    This proposed rule has been examined for its impact under E.O. 
13132. It does not contain policies that have federalism implications 
that would have substantial direct effects on the States, on the 
relationship between the national Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government; therefore, consultation with State and local officials is 
not required.

List of Subjects in 32 CFR Part 199

    Claims, dental health, health care, health insurance, individuals 
with disabilities, Military personnel.
    Accordingly, 32 CFR part 199 is proposed to be amended as follows:

PART 199--[AMENDED]

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

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

    2. Paragraph 199.2(b) is amended by adding a definition for CAHs 
and placing it in alphabetical order to read as follows:


Sec.  199.2  Definitions.

* * * * *
    (b) * * *
    CAHs. A small facility that provides limited inpatient and 
outpatient hospital services primarily in rural areas and meets the 
applicable requirements established by Sec.  199.6(b)(4)(xvi).
* * * * *
    3. Section 199.6 is amended by adding new paragraph (b)(4)(xvi).


Sec.  199.6  TRICARE-authorized providers.

* * * * *
    (b) * * *
    (4) * * *
    (xvi) CAHs. CAHs must meet all conditions of participation under 42 
CFR part 485.601-485.645 in relation to TRICARE beneficiaries in order 
to receive payment under the TRICARE program. If CAH provides inpatient 
psychiatric services or inpatient rehabilitation services in a distinct 
part unit, these distinct part units must meet the conditions of 
participation in 42 CFR part 485.647, with the exception of being paid 
under the inpatient prospective payment system for psychiatric 
facilities as specified in 42 CFR part 412.1(a)(2) or the inpatient 
prospective payment system for rehabilitation hospitals or 
rehabilitation units as specified in 42 CFR part section 412(a)(3).
* * * * *
    4. Section 199.14 is amended by redesignating paragraphs (a)(3) 
through (a)(5) as (a)(4) through (a)(6); revising newly redesignated 
paragraph (a)(4) introductory text, paragraphs (a)(6)(xi) and (xii), 
and the first sentence of paragraph (d)(1); and adding new paragraphs 
(a)(1)(ii)(D)(10), (a)(3), and (a)(6)(xiii) to read as follows:


Sec.  199.14  Provider reimbursement methods.

    (a) * * *
    (1) * * *
    (ii) * * *
    (D) * * *
    (10) CAHs. Any facility which has been designated and certified as 
CAH as contained in 42 CFR part 485.606.
* * * * *
    (3) Reimbursement for inpatient services provided by CAH. Inpatient 
services provided by CAH, other than services provided in psychiatric 
and rehabilitation distinct part units, shall be reimbursed at the 
lesser of the billed charge or 101 percent of reasonable costs. This 
does not include any costs of physician services or other professional 
services provided to CAH inpatients. Inpatient services provided in 
psychiatric distinct part units would be subject to the CHAMPUS mental 
health per diem payment system. Inpatient services provided in 
rehabilitation distinct part units would be subject to billed charges 
or set rates.
    (4) Billed charges and set rates. The allowable costs for 
authorized care in all hospitals not subject to the CHAMPUS Diagnosis 
Related Group-based payment system, the CHAMPUS mental health per diem 
system, or the reasonable cost method for critical access hospitals, 
shall be determined on the basis of billed charges or set rates. Under 
this procedure the allowable costs may not exceed the lower of:
* * * * *
    (6) * * *
    (xi) Facility charges. TRICARE payments for hospital outpatient 
facility charges that would include the overhead costs of providing the 
outpatient service, with the exception of critical access hospitals, 
would be paid as billed. For the definition of facility charge, see 
Sec.  199.2(b).
    (xii) Ambulatory surgery services. Hospital outpatient ambulatory 
surgery services, with the exception of CAHs, shall be paid in 
accordance with Sec.  199.14(d).
    (xiii) Outpatient services provided by CAH. Outpatient services 
provided by CAH, to include ambulatory surgery services, shall be 
reimbursed at the lesser of the billed charge or 101 percent of 
reasonable costs. This does not include any costs of physician services 
or other professional services provided to CAH outpatients.
* * * * *
    (d) * * *
    (1) In general. CHAMPUS pays institutional facility costs for 
ambulatory surgery on the basis of prospectively determined amounts, as 
provided in this paragraph, with the exception of ambulatory surgery 
procedures performed in CAHs, which are to be reimbursed in accordance 
with the provisions of paragraph (a)(6)(xiii) of this section. * * *
* * * * *

    Dated: April 28, 2008.
Patricia L. Toppings,
OSD Federal Register Liaison Officer, Department of Defense.
 [FR Doc. E8-9800 Filed 5-2-08; 8:45 am]
BILLING CODE 5001-06-P