[Federal Register Volume 82, Number 21 (Thursday, February 2, 2017)]
[Notices]
[Pages 9061-9063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02202]


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DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE; Civilian Health and Medical Program of the Uniformed 
Services (CHAMPUS); Fiscal Year 2017 Diagnosis Related Group (DRG) 
Updates and Notice of Termination of Future Federal Register Notices 
Regarding the DRG Update

AGENCY: Office of the Secretary, Department of Defense.

ACTION: Notice of DRG revised rates and notice to terminate future 
Federal Register publication of the DRG Updates.

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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 Fiscal Year (FY) 2017 rates. This notice also 
announces there will be no future Federal Register notices published 
for the annual DRG updates, as all information included in this notice 
will now be published on the Defense Health Agency's official Web site 
found at http://www.health.mil. As a result, FY 2017 is the last year 
for publication of the DRG notice.

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, 2016.

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

FOR FURTHER INFORMATION CONTACT: Sharon L. Seelmeyer, Medical Benefits 
and Reimbursement Section, TRICARE, telephone (303) 676-3690. 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 & 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 in this notice. While the initial intent of this 
notice was to provide notification of the revised DRG weights and rates 
affecting the DRG based payment system, its relevance has been 
subsequently overshadowed by the public's online accessibility to the 
TRICARE manuals and reimbursement rates on the official Web site of the 
Military Health System (MHS) and the DHA (http://www.health.mil). As a 
result, the public has ready online access to all information published 
in this notice (e.g., DRG weights and rates, to include adjusted 
standardized amounts, wage indexes and Indirect Medical Education 
(IDME) factors, and changes to rate variables, etc.) in either the 
TRICARE

[[Page 9062]]

Reimbursement Manual or on the official Web site of the MHS and the DHA 
(http://www.health.mil). Because of the readily available online access 
to updated DRG rates and the ongoing administrative burden of 
publishing annual notices to the Federal Register, the publication of 
the annual notice is terminated and no further notices will be 
published. Again, updates to the DRG weights and rates, and all 
information in this notice, will be maintained on the Agency's official 
Web site. FY 2017 will be the last year of publishing the annual notice 
to the Federal Register.

I. Medicare PPS Changes Which Affected 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 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 & 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 49880) with the exception of endovascular cardiac valve replacement 
for which CMS added DRGs 266/267 and TRICARE added DRGs 317/318 because 
the TRICARE Grouper already has DRGs 266/267 assigned to a pediatric 
procedure.
    For FY2016 the added, deleted, and revised DRGs are the same as 
those included in the CMS' final rule published on August 17, 2015 (80 
FR 49326) with the exception of the cardiovascular procedure for which 
CMS added DRGs 268-272 and TRICARE added DRGs 275-279, because the 
TRICARE Grouper already has DRGs 268-272 assigned to a pediatric 
procedure. Effective October 1, 2015 (FY 2016), the ICD-10 coding 
system was implemented, replacing the ICD9 coding system.
    For FY17 the added, deleted, and revised DRGs are the same as those 
included in the CMS' final rule published on August 22, 2016 (81 FR 
56761). That is, DRG 230 is deleted; DRGs 229, 884, and 208 have been 
renamed.

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

[[Page 9063]]

CMS' August 22, 2016 final rule. For FY17, the market basket is 2.7 
percent. Note: Medicare's FY17 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 FY17, 
the TRICARE 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 FY17, 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 $21,710 (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 FY17 TRICARE National Operating Standard Cost as a Share of 
Total Costs (NOSCASTC) used in calculating the cost outlier threshold 
is 0.921. 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. 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, 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 FY17 is 1.02.

H. Cost to Charge Ratio

    TRICARE uses a national Medicare cost-to-charge ratio (CCR). For 
FY17, the Medicare CCR used for the TRICARE DRG-based payment system 
for acute care hospitals and neonates will be 0.2541. 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 
0.2760.

I. Pricing of Claims

    The final rule published on May 21, 2014 (79 FR 29085) 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.health.mil/rates. The implementing regulations for the 
TRICARE/CHAMPUS DRG-based payment system are in 32 CFR part 199.

    Dated: January 30, 2017.
Aaron Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2017-02202 Filed 2-1-17; 8:45 am]
 BILLING CODE 5001-06-P