[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Notices]
[Pages 7844-7846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02898]


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DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE; Civilian Health and Medical Program of the Uniformed 
Services (CHAMPUS); Fiscal Year 2015 Diagnosis Related Group (DRG) 
Updates

AGENCY: Office of the Secretary, DoD.

ACTION: Notice of DRG revised rates.

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SUMMARY: This notice describes the changes made to the TRICARE DRG-
based payment system in order to conform to changes made to the 
Medicare Prospective Payment System (PPS). It also provides the updated 
fixed loss cost outlier threshold, cost-to-charge ratios, and the data 
necessary to update the FY 2015 rates.

DATES: Effective Dates: The rates, weights, and Medicare PPS changes 
which affect the TRICARE DRG-based payment system contained in this 
notice are effective for discharges occurring on or after October 1, 
2014.

ADDRESSES: Defense Health Agency, TRICARE, Medical Benefits and 
Reimbursement Office, 16401 East Centretech Parkway, Aurora, CO 80011-
9066.

FOR FURTHER INFORMATION CONTACT: Amber L. Butterfield, Medical Benefits 
and Reimbursement Office, TRICARE, telephone (303) 676-3565.
    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).
    An explicit tenet of these final rules, and one based on the 
statute authorizing the use of DRGs by TRICARE, is that the TRICARE 
DRG-based payment system is modeled on the Medicare PPS, and that, 
whenever practicable, the TRICARE system will follow the same rules 
that apply to the Medicare PPS. The Centers for Medicare and Medicaid 
Services (CMS) publishes these changes annually in the Federal Register 
and discusses in detail the impact of the changes.
    In addition, this notice updates the rates and weights in 
accordance with our previous final rules. The actual changes we are 
making, along with a description of their relationship to the Medicare 
PPS, are detailed below.

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

    Following is a discussion of the changes CMS has made to the 
Medicare PPS that affect the TRICARE DRG-based payment system.

A. DRG Classifications

    Under both the Medicare PPS and 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 and procedure codes and demographic

[[Page 7845]]

information (that is, sex, age, and discharge status). The Grouper used 
for the TRICARE DRG-based payment system is the same as the current 
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 
tracheostomies 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 pre-MDC DRGs and to assign patients to pre-MDC 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 pre-MDC 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''. For FY 2007, CMS implemented 
classification changes, including surgical hierarchy changes. The 
TRICARE Grouper incorporated all changes made to the Medicare Grouper, 
with the exception of the pre-surgical hierarchy changes, which will 
remain the same as FY 2006. For FY 2008, Medicare implemented their 
Medicare-Severity DRG (MS-DRG) based payment system. TRICARE, however, 
continued with the Centers for Medicare and Medicaid Services DRG-based 
(CMS-DRG) payment system for FY 2008. For FY 2009, the TRICARE/CHAMPUS 
DRG-based payment system shall be modeled on the MS-DRG system, with 
the following modifications.
    The MS-DRG system consolidated the 43 pediatric CMS DRGs that were 
defined based on age less than or equal to 17 into the most clinically 
similar MS-DRGs. In their Inpatient Prospective Payment System final 
rule for MS-DRGs, Medicare stated for their population these pediatric 
CMS DRGs contained a very low volume of Medicare patients. At the same 
time, Medicare encouraged private insurers and other non-Medicare 
payers to make refinements to MS-DRGs to better suit the needs of the 
patients they serve. Consequently, TRICARE finds it appropriate to 
retain the pediatric CMS-DRGs for our population. TRICARE is also 
retaining the TRICARE-specific DRGs for neonates and substance use.
    For FY09, TRICARE will use the MS-DRG v26.0 pre-MDC hierarchy, with 
the exception that MDC 15 is applied after DRG 011-012 and before MDC 
24.
    For FY10, there are no additional or deleted DRGs.
    For FY 11, the added DRGs and deleted DRGs are the same as those 
included in CMS' final rule published on August 16, 2010 (75 FR 50041-
50677). That is, DRG 009 is deleted; DRGs 014 and 015 are being added.
    For FY 12, the added DRGs and deleted DRGs are the same as those 
included in CMS' final rule published on August 18, 2011 (76 FR 51476-
51846). That is, DRG 015 is deleted; DRGs 016 and 017 are being added.
    For FY 2013 there are no new, revised, or deleted DRGs.
    For FY 2014 there are no new, revised, or deleted DRGs.
    For FY 2015 the added, deleted and revised DRGs are the same as 
those included in the CMS' final rule published on August 22, 2014, (79 
FR 49853-50536), with the exception of endovascular cardiac valve 
replacement for which CMS added DRGs 266/267. The TRICARE Grouper 
already has DRGs 266/267 assigned to a pediatric procedure therefore 
TRICARE added DRGs 317/318, respectively, for endovascular cardiac 
valve replacement.

B. Wage Index and Medicare Geographic Classification Review Board 
Guidelines

    TRICARE will continue to use the same wage index amounts used for 
the Medicare PPS. TRICARE will also duplicate all changes with regard 
to the wage index for specific hospitals that are redesignated 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 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 
continue to equal 69.6 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' August 22, 2014, final rule. For FY 2015, the market basket is 
2.9 percent. Note: Medicare's FY 2015 market basket index adjusts 
according to hospitals' compliance with quality data and electronic 
health record meaningful use submissions. These adjustments do not 
apply to the TRICARE Program.

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 pass through basis), we will 
use the fixed loss cost outlier threshold calculated by CMS for paying 
cost outliers in the absence of capital prospective payments. For FY 
2015, the TRICARE fixed loss cost outlier threshold is based on the sum 
of the applicable DRG-based payment rate plus any amounts payable for 
Indirect Medical Education (IDME) plus a fixed dollar amount. Thus, for 
FY 2015, 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 (if applicable) plus $22,705 (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 2015 TRICARE National Operating Standard Cost as a Share of 
Total Costs (NOSCASTC) used in calculating the cost outlier threshold 
is 0.922. 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.

[[Page 7846]]

G. Indirect Medical Education (IDME) Adjustment

    Passage of the Medical Modernization Act of 2003 modified the 
formula multipliers to be used in the calculation of 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 multiplier for the IDME adjustment factor for 
TRICARE for FY 2015 is 1.02.

H. Cost to Charge Ratio

    TRICARE uses a national Medicare cost-to-charge ratio (CCR). For FY 
2015, the Medicare CCR used for the TRICARE DRG-based payment system 
for acute care hospitals and neonates will be 0.2726. This is based on 
a weighted average of the hospital-specific Medicare CCRs (weighted by 
the number of Medicare discharges) after excluding hospitals not 
subject to the TRICARE DRG system (Sole Community Hospitals, Indian 
Health Service hospitals, and hospitals in Maryland). The Medicare CCR 
is used to calculate cost outlier payments, except for children's 
hospitals. The Medicare CCR has been increased by a factor of 1.0065 to 
include an additional allowance for bad debt. The 1.0065 factor 
reflects the provisions of the Middle Class Tax Relief and Job Creation 
Act of 2012. For children's hospital cost outliers, the CCR used is 
0.2939.

I. Pricing of Claims

    The final rule published on May 21, 2014, (79 FR 29085-29088) set 
forth all final claims with discharge dates of October 1, 2014, or 
later and reimbursed under the TRICARE DRG-Based payment system, are to 
be priced using the rules, weights and rates in effect on as of the 
date of discharge. Prior to this, all final claims were priced using 
the rules, weights and rates in effective as of the date of admission.

J. Updated Rates and Weights

    The updated rates and weights are accessible through the Internet 
at http://www.tricare.mil/drgrates. The implementing regulations for 
the TRICARE/CHAMPUS DRG-based payment system are in 32 CFR part 199.

    Dated: February 6, 2015.
Aaron Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2015-02898 Filed 2-11-15; 8:45 am]
BILLING CODE 5001-06-P