[Federal Register Volume 83, Number 242 (Tuesday, December 18, 2018)]
[Proposed Rules]
[Pages 64768-64771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27186]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 220

[Docket ID: DOD-2016-HA-0107]
RIN 0720-AB68


Collection From Third Party Payers of Reasonable Charges for 
Healthcare Services

AGENCY: Office of the Assistant Secretary of Defense (Health Affairs), 
DoD.

ACTION: Proposed rule.

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SUMMARY: This rule exercises the Department of Defense's (DoD's) 
authority to update current regulations to compute reasonable charges 
for inpatient and ambulatory (outpatient) institutional resources and 
also for pharmaceuticals, durable medical equipment (DME), supplies, 
immunizations, injections or other medications administered or 
furnished by DoD military treatment facilities (MTFs) under their three 
existing healthcare cost recovery programs--Third Party Collections, 
Medical Services Account, and Medical Affirmative Claims. Specifically, 
the rule updates the reasonable charges methodologies for inpatient and 
ambulatory institutional billing to allow for the use of Itemized 
Resource Utilization (IRU) based rates--developed from the cost to 
provide inpatient and ambulatory institutional healthcare resources--in 
addition to current bundled prospective reimbursement approaches of 
diagnostic related group (DRG), ambulatory payment classification 
(APC), ambulatory surgery center (ASC) and ambulatory procedure visit 
(APV) based rates. It also revises the reasonable charges methodology 
for pharmaceuticals, DME, supplies, immunizations, injections or 
medication administered to allow for their calculation using either 
Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) 
prevailing rates or IRU based rates--developed from the cost to provide 
these healthcare items and resources- regardless of whether CHAMPUS 
prevailing rates are available. The additional IRU methodology 
implements an itemized rate and reasonable charges structure that 
improves collections and operation of DoD's healthcare cost recovery 
programs by ensuring MTFs receive appropriate reimbursement for 
institutional healthcare resources as well as for pharmaceuticals, DME, 
supplies, immunizations, injections or medication provided or 
administered and is more consistent with civilian health insurance 
industry practice. The proposed rule also replaces ``hospital'' with 
``institutional'' throughout most of the regulation to align it with 
civilian health insurance industry terminology and better promote 
identification and separate billing of institutional and professional 
services.

DATES: Comments must be received by February 19, 2019.

ADDRESSES: You may submit comments, identified by docket number and/or 
Regulatory Information Number (RIN) and title, by any of the following 
methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Department of Defense, Office of the Deputy Chief 
Management Officer, Directorate for Oversight and Compliance, 4800 Mark 
Center Drive, Mailbox #24, Alexandria, VA 22350-1700.
    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

[[Page 64769]]

received without change, including any personal identifiers or contact 
information.

FOR FURTHER INFORMATION CONTACT: Ms. DeLisa E. Prater, Program Manager, 
Defense Health Agency Uniform Business Office, (703) 275-6380.

SUPPLEMENTARY INFORMATION:

A. Executive Summary

1. Purpose of the Proposed Rule

    The purpose of this proposed rule is to incorporate new additional 
statutory authority for calculating reasonable institutional facility 
charges for: (a) Inpatient services and resources provided at DoD (MTFs 
in addition to the current authorized methodology which uses all-
inclusive prospective Civilian Health and Medical Program of the 
Uniformed Services (CHAMPUS) diagnostic related group (DRG) based 
payment rates (including professional charges), and (b) ambulatory 
services provided at DoD MTFs in addition to the current authorized 
methodologies which use all-inclusive CHAMPUS ambulatory procedure 
classification (APC) and ambulatory surgery center (ASC) based payment 
rates and MHS ambulatory procedure visit (APV) based payment rates. As 
defined in 32 CFR 199.2, the term ``facility charges'' means the 
charges, either inpatient or outpatient, made by a MTF to cover the 
overhead costs of providing the service (e.g., building costs such as 
depreciation and interest, staffing costs, drugs and supplies; overhead 
costs such as utilities, housekeeping, maintenance). It also revises 
the reasonable charges methodology for pharmaceuticals, DME, supplies, 
immunizations, injections or medication administered or provided to 
allow for their reasonable charges calculation using either CHAMPUS 
prevailing or cost based rates regardless of whether CHAMPUS prevailing 
rates are available. The legal authority for this proposed rule is 10 
U.S.C. 1095(f), 1097b(b) and 1079b.

2. Summary of the Major Provisions of the Proposed Rule

    a. It would create an additional exception to the general rule that 
reasonable charges under 32 CFR 220.8(a), 220.8(b), 220.8(f)(5) and 
220.8(f)(6) for inpatient and ambulatory institutional resources as 
well as for pharmaceuticals, DME, supplies, immunizations, injections 
or medication administered are based on the rates used by CHAMPUS under 
32 CFR 199.14 to reimburse authorized providers. Specifically, it 
authorizes DoD MTFs to use an alternative reasonable charges 
methodology based on Itemized Resource Utilization (IRU) rates--
developed from the cost to provide these resources and items--in 
addition to the use of aggregated and prospective DRG, APC, ASC and APV 
and prevailing CHAMPUS based encounter rates.
    b. As a ``housekeeping'' change, it would replace ``hospital'' with 
``institutional'' throughout most of the regulation to align it with 
civilian health insurance industry terminology and better promote 
identification and separate billing of institutional and professional 
services as required by 32 CFR 220.8(b).

B. Background

    DoD is authorized to collect ``reasonable charges'' from third 
party payers for the cost of inpatient and ambulatory (outpatient) 
institutional services and also for pharmaceuticals, DME, supplies, 
immunizations, injections or medication administered or provided at DoD 
MTFs to military retirees, all dependents, and other eligible 
beneficiaries who have private health insurance. See 10 U.S.C. 1095 and 
32 CFR 220.2. Also, DoD must collect from nonbeneficiaries (or their 
insurers) the cost of trauma or other medical care provided to them and 
from other federal agencies, the average cost of healthcare provided to 
their beneficiaries at DoD MTFs (10 U.S.C. 1079b(a) and 1085). 
Currently, DoD uses all-inclusive prospective CHAMPUS DRG based payment 
rates (including professional charges) as the reasonable charges for 
inpatient care and all-inclusive CHAMPUS APC and ASC based and MHS APV 
charges for miscellaneous institutional ambulatory care in its 
healthcare cost recovery programs--Third Party Collection, Medical 
Services Account and Medical Affirmative Claims. The MHS APV rate is 
authorized by the Assistant Secretary of Defense (Health Affairs) 
(ASD(HA)) Policy Memorandum, ``Use of CPT Code 99199'' (September 14, 
2004) because MTFs currently do not have the appropriate software to 
group encounters into APCs and ASCs. Also, DoD uses the average cost 
for pharmaceutical rates because CHAMPUS prevailing rates are not 
available. However, DoD uses CHAMPUS based rates for DME, supplies, 
immunizations, injections or medication administered.

C. Expected Costs

    IRU based rates are more representative of actual costs specific to 
the institutional resources and also to pharmaceuticals, DME, supplies, 
immunizations, injections or medication administered or consumed in the 
provision of care to a patient. Also, IRU based rates provide DoD the 
ability it does not currently have to bill third party payers in an 
itemized manner that they are accustomed to. With the availability of 
this alternative reasonable charges methodology, DoD MTFs can bill for 
institutional resources and also for pharmaceuticals, DME, supplies, 
immunizations, injections or medication administered using charge 
descriptions (i.e., an MTF's comprehensive list of items and services 
for which it can charge) and individual cost-based rates associated 
with those descriptions. As a result, institutional bills are much more 
consistent with the actual resources and services provided to the 
patient, third party payers who receive MTF claims will have the 
detailed data needed for reimbursement, and the potential for MTFs to 
receive appropriate reimbursement improves. MTF claims are frequently 
returned for additional information or denied because they are not in 
an itemized format consistent with standard industry health insurance 
practice. The format of resulting line-item inpatient charges based on 
IRU rates will more closely resemble the format currently used in the 
health insurance industry and promote more efficient claim 
adjudication. This rule will not affect any payments by TRICARE as this 
rule does not pertain to purchased care. It specifically applies to 
rate development for cost recovery in the direct care setting.
    In addition, using only the current methodologies for reasonable 
charges based on bundled prospective DRG/APC/ASC/APV based rates 
methods and CHAMPUS prevailing rates methods for pharmaceuticals, DME, 
supplies, immunizations, injections or medication administered limits 
MTFs' flexibility and ability to effectively accommodate current and 
new provider reimbursement methodologies and is likely reducing and 
resulting in missed reimbursement opportunities from third party 
payers. Third party payers do not uniformly have nor apply payment 
methods and rates to claims received. Rather, they each have their own 
distinct set of rules for and levels of payment that are not 
necessarily DRG/APC/ASC/APV/CHAMPUS rate based. For example, there are 
multiple versions of groupers, and a payer's reimbursement policy may 
use a different grouper than DoD or not involve a grouper at all. 
Moreover, third party payers are increasingly replacing 
fee[hyphen]for[hyphen]service with value-based performance payment 
portfolios (e.g., pay for performance, bundled payments, shared 
savings/accountable care

[[Page 64770]]

organizations) for providers, including DoD MTFs. Itemized billing 
using IRU based rates provides payers with the detailed data needed for 
whatever reimbursement process they use yielding fewer requests for 
additional information and re-processing of claims and increased 
potential reimbursement.
    Additional benefits from allowing for IRU based charges include:
    (1) Providing greater transparency of DoD MTFs' financial 
efficiency and performance through more detailed purchasing, 
dispensing, and financial billing functions. IRU based charges provide 
information necessary to complete detailed analyses into what and how a 
MTF is purchasing, dispensing, and billing, which will lead to more 
informed decisions on how to save money, time, and effort at each of 
those three stages.
    (2) Enabling different MTF departments and decision makers to come 
together to discuss common practices, terminology, and reporting, 
allowing for the development and analysis of benchmarks evaluating 
clinical performance, and identifying and implementing the most cost-
effective delivery modes available.
    (3) Providing the ability to track and monitor resources used to 
treat patients, thereby allowing MTF staff, management, and leadership 
to better control and manage costs, and optimize the efficiency of 
operations to deliver efficient care or prevent unnecessary care.
    This IRU based charges approach is consistent with 10 U.S.C. 
1095(f) and 1097b(b) that authorize the ASD(HA) to calculate all third 
party payment collections and rates charged to civilians and 
interagency payers based on any appropriate method. It is the Assistant 
Secretary's determination that itemized IRU based rates for inpatient 
and ambulatory resources and also for pharmaceuticals, DME, supplies, 
immunizations, injections or medication administered or provided better 
represents the reasonable charges and costs of providing care to all 
patients in MTFs.
    The rule also replaces ``hospital'' with ``institutional'' 
throughout most of the regulation to align it with civilian healthcare 
insurance industry terminology. The current regulation uses 
``hospital'' interchangeably to mean both: (1) A facility that provides 
emergency, inpatient, and in some cases outpatient medical care for 
sick or injured people; and (2) the institutional component of a 
hospital stay (i.e., overhead and ancillary, diagnostic and treatment 
services, other than professional services provided by the facility 
during the inpatient stay such as room and board, laboratory tests and 
the technical component of radiology services). It is the general rule 
under CHAMPUS, 32 CFR 220.8(b) and also industry best practice to 
identify and charge separately for institutional and inpatient 
professional services. This nomenclature change helps DoD MTFs 
reinforce the distinction and better promotes identification and 
separate billing of institutional and professional services as required 
by 32 CFR 220.8(b) and in accordance with health insurance industry 
best practice.

D. Regulatory Procedures

Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review''

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. It has been determined that this rule is not a significant 
regulatory action. The rule does not: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy; a section of the economy; productivity; competition; jobs; 
the environment; public health or safety; or State, local, or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another Agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs, or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
these Executive Orders.

Executive Order 13771, ``Reducing Regulation and Controlling Regulatory 
Costs''

    There are no cost savings to the public anticipated by amending the 
current 32 CFR part 220. Consistent with the analysis of transfer 
payments under OMB Circular A-4, this proposed rule does not involve 
regulatory costs subject to Executive Order 13771, ``Reducing 
Regulation and Controlling Regulatory Costs.''

Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)

    Section 202 of Public Law 104-4, ``Unfunded Mandates Reform Act,'' 
(2 U.S.C. 1532) requires that an analysis be performed to determine 
whether any federal mandate may result in the expenditure by State, 
local and tribal governments, in the aggregate, or by the private 
sector of $100 million in any one year. It has been certified that this 
proposed rule does not contain a Federal mandate that may result in the 
expenditure by State, local and tribal governments, in aggregate, or by 
the private sector, of $100 million or more in any one year, and thus 
this proposed rule is not subject to this requirement.

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

    Public Law 96-354, ``Regulatory Flexibility Act'' (RFA) (5 U.S.C. 
601), requires that each Federal agency prepare a regulatory 
flexibility analysis when the agency issues a regulation which would 
have a significant impact on a substantial number of small entities. 
This proposed rule is not an economically significant regulatory 
action, and it has been certified that it will not have a significant 
impact on a substantial number of small entities. Therefore, this 
proposed rule is not subject to the requirements of the RFA.

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

    This rule does not contain a ``collection of information'' 
requirement and will not impose additional information collection 
requirements on the public under Public Law 96-511, ``Paperwork 
Reduction Act'' (44 U.S.C. Chapter 35).

Executive Order 13132, ``Federalism''

    E.O. 13132, ``Federalism,'' requires that an impact analysis be 
performed to determine whether the rule has 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. It has been certified that this proposed rule does not have 
federalism implications, as set forth in E.O. 13132.

List of Subjects in 32 CFR Part 220

    Claims, Health care, Health insurance, and Military personnel.

    Accordingly, 32 CFR part 220 is proposed to be amended as follows:

[[Page 64771]]

PART 220--[AMENDED]

0
1. The authority citation for part 220 is revised to read as follows:

    Authority:  5 U.S.C. 301; 10 U.S.C. 1095(f), 1097b(b) and 1079b.

0
2. Amend Sec.  220.8 by:
0
a. Revising paragraphs (b), (c)(1), (5), (f)(2), (5) and (6),
0
b. Adding new paragraph (f)(8); and
0
c. Removing in paragraph (d) the wording ``inpatient hospital care'' 
and adding in its place ``care.''
    The revisions and additions read as follows:


Sec.  220.8   Reasonable charges.

* * * * *
    (b) Inpatient institutional and professional services on or after 
October 1, 2017. Reasonable charges for inpatient institutional 
services provided on or after October 1, 2017, are based on either of 
two methods as determined by the ASD(HA). The first uses the CHAMPUS 
Diagnosis Related Group (DRG) payment system rates under 32 CFR 
199.14(a)(1). Certain adjustments are made to reflect differences 
between the CHAMPUS payment system and MHS billing solutions. Among 
these are to include in the inpatient hospital service charges 
adjustments related to direct medical education and capital costs 
(which in the CHAMPUS system are handled as annual pass through 
payments). Additional adjustments are made for long stay outlier cases. 
The second method uses Itemized Resource Utilization (IRU) rates based 
on the cost to provide inpatient institutional resources. Like the 
CHAMPUS system, inpatient professional services are not included in the 
inpatient institutional services charges calculated under either 
methodology, but are billed separately in accordance with paragraph (e) 
of this section. In lieu of either method described in this paragraph 
(b), the method in effect prior to April 1, 2003 (described in 
paragraph (c) of this section), may continue to be used for a period of 
time after April 1, 2003, if the ASD(HA) determines that effective 
implementation requires a temporary deferral.
    (c) Inpatient institutional and inpatient professional services 
before April 1, 2003. (1) In general. Prior to April 1, 2003, the 
computation of reasonable charges for inpatient institutional and 
professional services is reasonable costs based on diagnosis related 
groups (DRGs). Costs shall be based on the inpatient full reimbursement 
rate per hospital discharge, weighted to reflect the intensity of the 
principal diagnosis involved. The average charge per case shall be 
published annually as an inpatient standardized amount. A relative 
weight for each DRG shall be the same as the DRG weights published 
annually for hospital reimbursement rates under CHAMPUS pursuant to 32 
CFR 199.14(a)(1). The method in effect prior to April 1, 2003 (as 
described in this paragraph (c)), may continue to be used for a period 
of time after April 1, 2003, if the ASD(HA) determines that effective 
implementation requires a temporary deferral of the method described in 
paragraph (b) of this section.
* * * * *
    (5) Identification of professional and institutional charges. For 
purposes of billing third party payers other than automobile liability 
and no-fault insurance carriers, inpatient billings are subdivided into 
two categories:
    (i) Institutional charges (which refer to routine service charges 
associated with the facility encounter or hospital stay and ancillary 
charges).
* * * * *
    (f) * * *
* * * * *
    (2) With respect to inpatient institutional charges in the Burn 
Center at Brooke Army Medical Center, the ASD(HA) may establish an 
adjustment to the rate otherwise applicable under the payment 
methodologies under this section to reflect unique attributes of the 
Burn Center.
* * * * *
    (5) The charge for immunizations, allergin extracts, allergic 
condition tests, and the administration of certain medications when 
these services are provided by or through a facility of the Uniformed 
Services or a separate immunizations or shot clinic, are based either 
on CHAMPUS prevailing rates or on IRU rates based on the cost to 
provide these items, exclusive of any costs considered for purposes of 
any outpatient visit. A separate charge shall be made for each 
immunization, injection or medication administered.
    (6) The charges for pharmacy, durable medical equipment and supply 
resources are based either on CHAMPUS prevailing rates or on IRU rates 
based on the cost to provide these items, exclusive of any costs 
considered for purposes of any outpatient visit. A separate charge 
shall be made for each item provided.
* * * * *
    (8) Ambulatory (outpatient) institutional services on or after 
October 1, 2017. Reasonable charges for institutional facility charges 
for ambulatory services provided on or after October 1, 2017, are based 
on any of three methods as determined by the ASD(HA). The first uses 
the CHAMPUS Ambulatory Payment Classification (APC) and Ambulatory 
Surgery Center (ASC) payment system rates under 32 CFR 199.14(a)(1)(ii) 
and (iii) and 32 CFR 199.14(d) respectively. The second uses a bundled 
MHS Ambulatory Procedure Visit (APV) payment system rate charge 
reflected by the average cost of providing an APV exclusive of 
professional services. The third method uses IRU rates based on the 
cost to provide ambulatory institutional resources. Like the CHAMPUS 
system, ambulatory professional services are not included in the 
ambulatory institutional facility charges calculated under any of the 
three methodologies, but are billed separately in accordance with 
paragraph (e) of this section.
* * * * *

    Dated: December 11, 2018.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2018-27186 Filed 12-17-18; 8:45 am]
 BILLING CODE 5001-06-P