[Federal Register Volume 84, Number 230 (Friday, November 29, 2019)]
[Proposed Rules]
[Pages 65718-65727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25213]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[Docket ID: DOD-2019-HA-0056]
RIN 0720-AB73


TRICARE; Reimbursement of Ambulatory Surgery Centers and 
Outpatient Services Provided in Cancer and Children's Hospitals

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

ACTION: Proposed rule.

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SUMMARY: The Department of Defense, Defense Health Agency, is proposing 
to amend its reimbursement of ambulatory surgery centers (ASC) and 
outpatient services provided in Cancer and Children's Hospitals (CCHs). 
Proposed revisions are in accordance with the TRICARE Statute that 
requires TRICARE's payment methods for institutional care 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. In accordance with this requirement, 
TRICARE proposes to adopt Medicare's payment methodology for ASC, and 
adopt Medicare's payment methodology for outpatient services provided 
in CCHs.

DATES: Written comments received at the address indicated below by 
January 28, 2020 will be accepted.

ADDRESSES: 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: www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Department of Defense, Office of the Chief 
Management Officer, Directorate for Oversight and Compliance, 4800 Mark 
Center Drive, Mailbox #24, Suite 08D09, 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 received without 
change, including any personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: Elan Green, Defense Health Agency, 
303-676-3907.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of the Proposed Rule

    The purpose of this rule is to propose TRICARE regulation 
modifications necessary to implement for Ambulatory Surgery Centers 
(ASC) and Cancer and Children's Hospitals (CCHs) the statutory 
requirement that payments for TRICARE institutional services ``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].'' Although Medicare's reimbursement 
methods for ASC and CCHs are different, it is prudent to propose 
adopting both the Medicare ASC system and to adopt the Outpatient 
Prospective Payment System (OPPS) with hold-harmless adjustments 
(meaning the provider is not reimbursed less than their costs) for CCHs 
simultaneously to align with our statutory requirement to reimburse 
like Medicare at the same time. This rule sets forth the proposed 
regulatory modifications necessary to implement TRICARE reimbursement 
methodologies similar to those applicable to Medicare beneficiaries for 
outpatient services rendered in ASCs and cancer and children's 
hospitals.
    1. TRICARE proposes adopting the Medicare reimbursement methodology 
for ASCs. Currently, TRICARE reimburses surgical services performed in 
TRICARE authorized ambulatory surgery settings (i.e., freestanding ASCs 
and other TRICARE providers exempt from the TRICARE OPPS reimbursement 
methodology including cancer and children's hospitals) institutional 
facility costs on the basis of prospectively determined amounts, in 
accordance with Title 32 Code of Federal Regulations (CFR) 199.14(d). 
The current system was modeled after Medicare's previous ASC 
reimbursement system. TRICARE's current reimbursement system for 
services provided in these ambulatory surgery settings is based on 
Medicare's retired system, and is difficult to update. Adoption of 
Medicare's ASC reimbursement system will bring TRICARE reimbursement 
for ambulatory surgery care into alignment with the statutory 
requirement that payment methods for institutional care be, to the 
extent practicable, in accordance with the same reimbursement rules 
used by Medicare.
    2. TRICARE proposes to adopt the Medicare payment methodology for 
outpatient services provided in CCHs. In a final rule, published 
December 10, 2008 (73 FR 74945-74966), TRICARE adopted Medicare's 
payment methodology for outpatient hospital services--the Outpatient 
Prospective Payment System (OPPS). Under Medicare, CCHs were held 
harmless and were paid the full amount of the decrease they experienced 
(as prior to OPPS the hospital had been paid 100% of their costs) after 
the implementation of OPPS, under section 1833(t)(7) of the Social 
Security Act. These payments are transitional outpatient payments 
(TOPs). Because of the complexity and because of the administrative 
burden/expense of calculating and maintaining the TOPs, TRICARE opted 
to totally exempt CCHs from OPPS initially. The agency is now 
revisiting the exemption of CCHs from OPPS. In this proposed rule, we 
propose that TRICARE adopt the Medicare methodology for reimbursement 
of outpatient facility services (including ambulatory surgery) rendered 
in a cancer or children's hospital, with modifications to address the 
administrative burden and complexity. The Defense Health Agency (DHA) 
now has the capability, and it is feasible, to adopt these 
reimbursement provisions with a modification that the hold-harmless 
provisions will be calculated annually, rather than in monthly interim 
payments.

B. Summary of the Major Provisions of the Proposed Rule

    1. Adopting Medicare's Ambulatory Surgical Center Reimbursement 
System for TRICARE Authorized Ambulatory Surgery Centers. Per Title 10 
United States Code (U.S.C.), 1079(i)(2), TRICARE's payment methods for 
institutional care shall be determined, to the extent practicable, in 
accordance with the same reimbursement rules used by Medicare. Under 
this proposed rule, TRICARE will reimburse ASCs for ambulatory surgical 
services using a method similar to Medicare's ASC reimbursement 
methodology. Under the proposed TRICARE ASC reimbursement method, 
payment for a TRICARE patient will be made at the lower of the billed 
charge or the Medicare-determined ASC payment rate with applicable 
TRICARE

[[Page 65719]]

cost-sharing provisions. The TRICARE ASC reimbursement method would 
include payment for all facility services associated with the surgical 
procedure that are included in the payment methodology by Medicare, but 
would exclude certain services also excluded by Medicare under the ASC 
reimbursement methodology (e.g., certain ancillary services and 
implantable devices with pass-through status).
    2. Adopting Medicare's Outpatient Prospective Payment System (OPPS) 
for Cancer and Children's Hospitals. In a final rule, dated December 
10, 2008 (73 FR 74945-74966), TRICARE adopted Medicare's payment 
methodology for outpatient hospital services--the outpatient 
prospective payment system (OPPS). Under Medicare, CCHs were held 
harmless and were paid the full amount of the decrease they experienced 
after the implementation of OPPS, under section 1833(t)(7) of the 
Social Security Act. These payments are transitional outpatient 
payments (TOPs). Because of the complexity and because of the 
administrative burden/expense of calculating and maintaining the TOPs, 
TRICARE opted to totally exempt CCHs from the TRICARE OPPS 
reimbursement methodology initially.
    Ten years after the implementation of OPPS, the agency is now 
revisiting the exemption of cancer and children's hospitals from OPPS. 
This rule proposes TRICARE adopt the Medicare methodology for 
reimbursement of outpatient facility services rendered in a cancer or 
children's hospital, with modifications to address the administrative 
burden and complexity that initially led the agency to exclude these 
facilities from OPPS. The agency now has the capability, and it is 
feasible, to adopt Medicare's reimbursement provisions with two 
modifications: (1) That the hold-harmless provisions will be calculated 
annually, rather than in monthly interim payments; and (2) that the 
agency will use the hospital's cost-to-charge ratio (CCR) rather than 
the payment-to-cost ratio. With adoption of OPPS for cancer and 
children's hospitals, these institutions will no longer be considered 
TRICARE ambulatory surgery sites for application of the TRICARE ASC 
reimbursement methodology.
    3. Transition Period. When implementing the ASC fee schedule, 
Medicare included a four-year transition which blended the payment 
rates of the old methodology with the new for those procedures that 
were paid under both methods. We evaluated the feasibility of including 
a similar transition, where, the TRICARE-allowed amount would be 75 
percent of the old rate and 25 percent of the new rate in year one; 50 
percent of the old rate and 50 percent of the new rate in year two; and 
25 percent of the old rate and 75 percent of the new rate in year 
three. In the fourth year the rate would be 100 percent of the new 
rate. However, many of the services reimbursed under TRICARE's current 
ASC reimbursement methodology have lower rates under Medicare, so 
providers would have to wait for higher reimbursements under the new 
system.
    Therefore, we propose no transition period for the implementation 
of the ASC reimbursement system. Historically transitions are done to 
protect providers from payments below their costs. However, in this 
case, while revenues would decrease for some providers, payment would 
not be made below the provider's costs. Some providers may see dramatic 
increases in reimbursement, and a transition period would not be 
beneficial for these providers. Additionally, because alternative 
locations are available for these services (e.g., Hospital Outpatient 
Departments), concerns regarding access to care are unfounded.
    Similarly, we propose no transition for cancer and children's 
hospitals, with the rationale that providers will be held harmless 
under this proposed reimbursement system. CCHs will receive, at a 
minimum, one hundred percent of their costs, or the OPPS payment, 
whichever is higher. Historically, transitions are done to protect 
providers from payments below their costs. However, in this case, the 
providers will be held-harmless, so no transition is necessary.

C. Costs and Benefits

    Although it is unlikely that this rule will be effective before 
calendar year 2020, the overall economic impact of the rule is 
estimated based on an analysis of expected outcomes had the rule been 
implemented during calendar year 2018. Such analysis may be used to 
provide a reasonable estimate of future economic impact.
    The overall economic impact of this rule is a net increase of 
approximately $14 million in allowed amounts to providers for those 
surgical services currently listed in the TRICARE ASC list if the rule 
had been implemented during calendar year 2018.
    The economic impact of the proposal to adopt Medicare's payment 
methodology for ASCs is anticipated to result in total cost-savings to 
the DoD of approximately $ 40 million for Calendar Year (CY) 2018. This 
increase in savings is made up of decreased payments of approximately 
$54 million in CY 2018 for bundled and device codes that are not being 
reimbursed separately under Medicare's ASC reimbursement system. 
However, the cost-savings are partially offset by increased payments to 
ASCs of approximately $14 million in CY 2018 for surgical services that 
are currently reimbursed using TRICARE's existing ASC reimbursement 
system.
    The economic impact of the proposal to adopt OPPS for CCHs, 
including the hold harmless provisions will be reduced payments to 
these providers of approximately $12 million per year if implemented in 
2018.
    We estimate that the effects of the provisions that would be 
implemented by this proposed rule would have an impact of increased 
cost-savings to the DoD of approximately $52 million, including $1.5 
million in administrative costs to implement these changes.

II. Introduction and Background

1. TRICARE ASC PPS Reimbursement

A. Reimbursement
    Medicare replaced their previous ASC system on January 1, 2008. 
Medicare's reimbursement system for ASCs uses OPPS relative payment 
rates as a guide. OPPS rates are reduced by a factor to account for the 
fact that ASCs have lower overhead costs than hospitals. In 2012, 
Medicare's ASC rates averaged 61 percent of the OPPS rates paid to 
acute care hospitals for surgical procedures. Under Medicare, ASCs are 
paid the lesser of the billed charge or the standard ASC reimbursement 
rate, a method which TRICARE proposes to adopt.
    Under Medicare, the standard payment rate for ASC covered surgical 
procedures is calculated as the product of the ASC conversion factor 
and the ASC relative payment weight for each separately payable 
procedure or service. Payments are then geographically adjusted using 
wage-index values. Payments may also be adjusted for multiple surgical 
procedures or when surgical procedures are started and then 
discontinued.
    Like Medicare, TRICARE proposes to make a single payment to ASCs 
for covered procedures, which includes the facility services furnished 
in connection with the covered procedure (e.g., nursing services, 
certain drugs, surgical dressings, and administrative services). We 
also propose to separately reimburse for ancillary services that are 
integral to a covered service (e.g., drugs and biologicals that are 
separately paid under OPPS; radiology services that are separately paid 
under OPPS; brachytherapy services; implantable

[[Page 65720]]

devices with OPPS pass-through status; and corneal tissue acquisition), 
similar to Medicare. Like Medicare, we propose the ASC system will not 
reimburse for the services of individual professional providers, 
Durable Medical Equipment (DME), non-implantable prosthetics, ambulance 
services, or independent laboratory services. These services will be 
reimbursed using other reimbursement systems, including the CHAMPUS 
Maximum Allowable Charge (CMAC), Durable Medical Equipment Prosthetics 
Orthotics and Supplies (DMEPOS) Fee Schedule and the Ambulance Fee 
Schedule. We propose that surgical procedures that are also offered in 
physicians' offices, and that the Centers for Medicare and Medicaid 
Services (CMS) classifies as ``office-based,'' will be reimbursed the 
lower of the ASC rate or the non-facility practice expense relative 
value unit (RVU) amount of the CMAC. If there is no payment rate under 
the ASC reimbursement system for services that are medical in nature 
(such as office visits and diagnostic tests), we propose the ASC will 
be reimbursed as though the service was performed in a physician's 
office utilizing TRICARE's CMAC methodology, with no additional payment 
for facility charges.
B. Definition and Requirements for Ambulatory Surgery Centers
    This regulatory action proposes a definition for ASCs, which will 
mirror Medicare's, with exceptions made for TRICARE's pediatric 
patients. Medicare defines an ASC as, ``a distinct entity that operates 
exclusively for the purpose of furnishing outpatient surgical services 
to patients''; in this action we propose to adopt a definition at 32 
CFR 199.2 that defines ASCs as those that meet the definition of an ASC 
under 42 CFR 416.2, including the requirement that they must 
participate in by Medicare as ASCs per 42 CFR 416.25, with exceptions 
for ASCs that do not have an agreement with Medicare due to the 
specialty populations they serve. Medicare also requires the provider 
to have an agreement with CMS; we propose that in lieu of separate 
certification by TRICARE, the ASC simply provide evidence that there is 
a valid agreement with Medicare. While the terms of the agreement with 
Medicare will not apply to TRICARE, only those providers with an 
agreement with Medicare (or those providers that meet certain 
exceptions as noted below), are eligible for reimbursement for 
ambulatory surgery services provided in ASCs. We propose to accept 
Medicare's determination of a facility as an ASC. If the facility meets 
the definition of an ASC at 42 CFR 416.2 and has an agreement with 
Medicare as an ASC, we propose that they will be considered an 
authorized ASC under TRICARE and subject to all requirements for 
authorized institutional provider status under 32 CFR 199.6. ASCs must 
also enter into a participation agreement with TRICARE, to ensure that 
the ASC accepts the TRICARE reimbursement rate, and meets all other 
conditions of coverage. Additionally, due to the differences between 
the TRICARE and Medicare populations, there may be ASCs that 
specifically serve pediatric populations. These ASCs may not routinely 
enter into agreements with Medicare. We propose that these facilities 
may also be reimbursed under this proposed system, but they must be 
accredited by the Joint Commission, the Accreditation Association for 
Ambulatory Health Care, Inc. (AAAHC), or have other accreditation as 
authorized by the Director, DHA and published in the implementing 
instructions. Additionally, these facilities must also enter into 
participation agreements with TRICARE in order to receive reimbursement 
under the program. Facilities that do not participate under Medicare, 
or are otherwise accredited, and do not have participation agreements 
with TRICARE as noted above, shall not be TRICARE authorized providers 
and will not receive reimbursement for ambulatory surgery services. We 
do not believe that this requirement will have any impact on access to 
care, as ambulatory surgery services are also available in hospital 
outpatient departments. We believe that the flexibility offered to 
pediatric specialty ASCs is sufficient to serve the unique needs of our 
patient population, while still ensuring the program complies with the 
requirements of 10 U.S.C. 1079(i). These TRICARE-certified pediatric 
ASCs will be subject to the same reimbursement system as proposed in 
this regulatory action.
    Title 32 CFR 199.6(b)(4)(x)(B)(1) currently includes specific 
requirements for ambulatory surgery centers. With this regulatory 
action, we propose to modify those requirements to state that ASCs that 
participate in Medicare meet all program requirements to be an 
authorized TRICARE provider; and, that those (due to the specialized 
nature of the patients they treat, i.e., pediatric patients) ASCs that 
do not participate in Medicare but are otherwise accredited by an 
accrediting body as approved by the Director, DHA, must continue to 
meet all the requirements stated. All ASCs must also enter into 
participation agreements with TRICARE.
C. Ambulatory Surgical Center Services List
    Medicare identifies and maintains a list of surgical procedures 
that may be performed in an ASC. This list is updated at least annually 
by Medicare. The ASC list of covered procedures indicates those 
procedures which are covered and paid for if performed in the ASC 
setting. The ASC list is comprised of those surgical procedures that 
CMS has determined do not pose a significant safety risk and are not 
expected to require an overnight stay following the surgical procedure. 
Procedures on the Medicare Hospital Outpatient Prospective Payment 
System (HOPPS) inpatient list (42 CFR 419.22(n)) are not eligible for 
designation and coverage as ASC surgical procedures. Procedures that 
are reported utilizing unlisted category I Current Procedural 
Technology[supreg] codes are also excluded from the ASC list. TRICARE 
proposes to adopt the Medicare ASC List, in its entirety, including any 
updates made by Medicare to the list in the future. We also propose no 
deviations or exceptions from the ASC List, as maintained and updated 
by CMS. No separate TRICARE ASC list would be maintained; the TRICARE 
program would rely upon CMS's determinations regarding those procedures 
determined to be appropriate in an ASC setting. We believe the 
maintenance of a separate ASC List for TRICARE is unnecessary as 
adoption of Medicare's list is practicable, and maintenance of a 
separate list would be extremely complex for the agency and providers 
to review, maintain, and update. We invite comments on this approach, 
especially from facilities that specialize in care for young adult, 
pediatric, and other specialized populations not routinely covered by 
Medicare. We reviewed procedures that would commonly be performed on 
pediatric patients and found that these were generally included on the 
Medicare ASC list. These procedures included: Adenoidectomy; 
myringotomy; nasal endoscopy; tonsillectomy; circumcision; inguinal and 
umbilical hernia repair; eye muscle repair; syndactyly repair; and 
hypospadias repair. Fowler-Stephens Orchiopexy is not listed on 
Medicare's ASC list, but is priced in hospital outpatient settings 
(OPPS).
    If an ASC provides a surgical service that is not on this list, 
TRICARE proposes that the facility charges will be denied, similar to 
Medicare. However, related professional services may be reimbursed 
utilizing TRICARE's allowable charge methodology. TRICARE proposes to 
adopt the

[[Page 65721]]

Medicare requirement that facility charges may be reimbursed for only 
those services on the ``ASC List.'' We believe there will be no access 
to care concerns with this approach, as surgical care continues to be 
available in hospital outpatient departments, and in inpatient 
settings, as appropriate.
D. Services Included in the ASC Payment
    This regulatory action proposes that, like Medicare, the following 
items currently fall within the scope of ASC facility services. Future 
modifications made by Medicare to the services included in the ASC 
payment will be adopted by TRICARE in the implementing instructions. 
ASCs must incorporate charges for packaged services into the charges 
reported for the separately payable services with which they are 
provided to ensure appropriate payment.
    Covered ASC facility services include:
    (1) Nursing, technician, and related services;
    (2) Use of the facility where the surgical procedures are 
performed;
    (3) Any laboratory testing performed under a Clinical Laboratory 
Improvement Amendments of 1988 (CLIA) certificate of waiver;
    (4) Drugs and biologicals for which separate payment is not allowed 
under the hospital outpatient prospective payment system (OPPS);
    (5) Medical and surgical supplies not on pass-through status under 
subpart G of 42 CFR part 419;
    (6) Equipment;
    (7) Surgical dressings;
    (8) Implanted prosthetic devices, including intraocular lenses 
(IOLs), and related accessories and supplies not on pass-through status 
under subpart G of 42 CFR part 419;
    (9) Implanted DME and related accessories and supplies not on pass-
through status under subpart G of 42 CFR part 419;
    (10) Splints and casts and related devices;
    (11) Radiology services for which separate payment is not allowed 
under the OPPS, and other diagnostic tests or interpretive services 
that are integral to a surgical procedure;
    (12) Administrative, recordkeeping and housekeeping items and 
services;
    (13) Materials, including supplies and equipment for the 
administration and monitoring of anesthesia; and
    (14) Supervision of the services of an anesthetist by the operating 
surgeon.
    CMS may make further changes and refinements to the items included 
within the ASC reimbursement system. TRICARE will adopt all future 
modifications and refinements to this system made by CMS, unless found 
to be impracticable, as approved by the Director, DHA.
E. Covered Ancillary Items and Services
    We propose that separate payment will be allowed for covered 
ancillary items and services that are integral to a covered surgical 
procedure, similar to Medicare. CMS defines these services at 42 CFR 
416.61.
    CMS may make further changes and refinements to the ancillary 
services that are paid separately within this reimbursement system. 
TRICARE will adopt all future modifications and refinements to this 
system made by CMS, unless found to be impracticable, as approved by 
the Director, DHA.
F. Surgical Dressings, Supplies, Splints, Casts, Appliances, and 
Equipment
    We propose that TRICARE's payment for surgical dressings, supplies, 
splints, casts, appliances, and equipment (e.g., gowns, masks) will 
mirror Medicare's payment. Currently, these items are included in the 
payment for the surgical procedure. TRICARE will adopt all future 
modifications and refinements to the payment for these supplies and 
equipment provided in ASCs, as made by CMS, unless found to be 
impracticable, as approved by the Director, DHA.
G. Drugs and Biologicals
    ASC facility payment for a surgical procedure includes payment for 
drugs and biologicals that are usually not self-administered and that 
are considered to be packaged into the payment for the surgical 
procedure under OPPS. TRICARE proposes, similar to Medicare, to make 
separate payment to ASCs for drugs and biologicals that are furnished 
integral to an ASC covered surgical procedure and that are separately 
payable under OPPS, as defined by Medicare. TRICARE will adopt all 
future modifications and refinements to the payment for drugs and 
biologicals provided in ASCs, as made by CMS, unless found to be 
impracticable, as approved by the Director, DHA.
H. Diagnostic and Therapeutic Items
    Simple diagnostic tests that are generally included in facility 
charges may be considered facility services (e.g., urinalysis, 
hematocrit levels). Diagnostic tests performed by the ASC other than 
those generally included in the facility's charge are not covered by 
this reimbursement system. ASCs with laboratories certified as 
independent laboratories under Medicare may bill for tests, or 
alternatively, the ASC may make arrangements with an independent 
laboratory or other laboratory to perform the diagnostic tests it 
requires prior to surgery. Payment for these diagnostic and therapeutic 
items will be made under the existing provisions of 32 CFR 199.14. 
TRICARE will adopt all future modifications and refinements to the 
payment for diagnostic and therapeutic items provided in ASCs, as made 
by CMS, unless found to be impracticable, as approved by the Director, 
DHA.
I. Blood and Blood Products
    We propose these items are considered a facility service and no 
separate reimbursement will be made, similar to Medicare. TRICARE will 
adopt all future modifications and refinements to the payment for these 
blood and blood products provided in ASCs, as made by CMS, unless found 
to be impracticable, as approved by the Director, DHA.
J. Anesthesia
    We propose anesthetic agents that are not paid separately under 
OPPS, as well as materials necessary for administration will be 
included in the facility payment. TRICARE will adopt all future 
modifications and refinements to the payment for anesthesia provided in 
ASCs, as made by CMS, unless found to be impracticable, as approved by 
the Director, DHA.
K. Implantable Durable Medical Equipment
    We propose payment for implantable DME will be included in the 
payment of the covered surgical procedure, with the exception of OPPS 
pass-through devices which are paid separately. TRICARE will adopt all 
future modifications and refinements to the payment for implanted DME 
provided in ASCs, as made by CMS, unless found to be impracticable, as 
approved by the Director, DHA.
L. Intraocular Lenses (IOL) and New Technology IOLs (NTIOL)
    TRICARE proposes to adopt Medicare's provisions for payments of 
IOLs and NTIOLs provided during or subsequent to cataract surgery in 
ASCs. We propose that payment for the IOL is included in the ASC 
payment for the associated surgical procedure, except for NTIOLs 
designated by Medicare, and covered by TRICARE. NTIOLs may be subject 
to a payment adjustment, as determined by Medicare, and adopted by 
TRICARE. TRICARE will adopt all future modifications and refinements to 
the payment for IOLs and NTIOLs provided in ASCs, as made by CMS,

[[Page 65722]]

unless found to be impracticable, as approved by the Director, DHA.
M. Payment for ASC Facility Services
    We propose to make a single payment to ASCs for covered procedures, 
which will include the facility services furnished in connection with 
the covered procedure (e.g., nursing services, certain drugs, surgical 
dressings, and administrative services), when the services are rendered 
by a provider described in the proposed definition of an ASC in 32 CFR 
199.2. This payment will be the lower of the ASC payment rate or the 
billed charge. TRICARE proposes to adopt the Medicare ASC payment 
rates. We propose no TRICARE-specific adjustments or modifications to 
the Medicare rates.
    We propose to pay separately for ancillary services that are 
integral to a covered service (e.g., drugs and biologicals that are 
separately paid under OPPS; radiology services that are separately paid 
under OPPS; brachytherapy services; implantable devices with OPPS pass-
through status; and corneal tissue acquisition). Like OPPS, we propose 
that payments under this system do not include reimbursement for the 
services of individual professional providers, DME, non-implantable 
prosthetics, ambulance services, or independent laboratory services. 
These services will be reimbursed using other reimbursement systems 
like the Medicare Physician Fee Schedule (similar to CHAMPUS Maximum 
Allowable Charges, or CMAC), DMEPOS Fee Schedule, and the Ambulance Fee 
Schedule.
    We propose that the small number of covered ancillary services 
(including OPPS pass-through devices) that are contractor-priced under 
Medicare's ASC reimbursement system will be priced under TRICARE 
utilizing the allowable charge methodology for procedures paid outside 
of the OPPS under 32 CFR 199.14(j)(1).
    Some items are paid the same amount in ASCs as they are paid under 
OPPS. These items include drugs and biologicals paid separately under 
OPPS when they are integral to covered surgical procedures and 
brachytherapy sources where prospective rates are available. Corneal 
tissue acquisition payment is based on acquisition cost or invoice.
    The actual payment to ASCs requires a comparison between actual 
charges and the ASC payment rate for each separately payable procedure 
and service. Reimbursement is based on the lower of the ASC payment 
rate or the actual charge. Ancillary services should be billed on the 
same claim as the related ASC procedure. Should Medicare modify this 
process in the future, TRICARE will adopt all modifications, unless 
deemed to be impracticable, as approved by the Director, DHA.
N. Wage Adjustments and Labor Share
    We propose that labor related adjustments to the ASC payment rates 
will be based on Medicare's methodology, currently the Core-Based 
Statistical Area methodology. The adjustment for geographic wage 
variation will be made based on a 50 percent labor share, subject to 
change by CMS. There is no adjustment for geographic wage differences 
for: Corneal tissue acquisition; drugs and devices with pass-through 
status under OPPS; brachytherapy sources; payment adjustment for 
NTIOLs; and separately payable drugs and biologicals. We propose to 
adopt this methodology, as well as any future refinements or 
adjustments made by Medicare to the labor-related share, the items and 
services subject to wage adjustments, and the methodology by which wage 
adjustments are made, unless determined to be impracticable by the 
Director, DHA.
O. Annual Adjustments
    Medicare makes an annual adjustment of the payment rates for 
inflation based on CPI-U. We propose to adopt the annual adjustments, 
as well as any interim adjustments to the ASC payment rates, as made by 
Medicare. TRICARE will publish the annual rates and related files to 
the TRICARE website, and may refer contractors to the appropriate 
Medicare files, when available.
P. Payment for Terminated Procedures
    TRICARE proposes adopting the same methodology for payment of 
terminated procedures as Medicare, as well as adopting all future 
refinements and adjustments. Currently, this process is as follows:
    1. Payment will be denied when an ASC submits a claim for a 
procedure that is terminated before the patient is taken into the 
treatment or operating room.
    2. Payment will be made at 50 percent of the rate if a surgical 
procedure is terminated due to the onset of medical complications after 
the patient has been prepared for surgery and taken to the operating 
room but before anesthesia has been induced or the procedure initiated.
    3. Full payment will be made for a surgical procedure if a medical 
complication arises which causes the procedure to be terminated after 
anesthesia has been induced or the procedure initiated.
Q. Payment for Multiple Procedures
    TRICARE proposes adopting the same methodology for payment of 
multiple procedures as Medicare, as well as adopting all future 
refinements and adjustments. When multiple procedures are performed in 
the same operative session that are subject to the multiple procedure 
discount, 100% of the highest paying surgical procedure on the claim is 
paid, plus 50% of the applicable payment rates for the other ASC 
covered surgical services. The CMS OPPS/ASC annual final rules specify 
the surgical procedures subject to multiple discounting, which TRICARE 
proposes to adopt. In determining the ranking of the procedures for the 
discounting, the lower of the billed charge or the ASC payment amount 
will be used.
R. Offset for Payment for Pass-Through Devices
    The ASC payment may be reduced for certain procedures when provided 
in conjunction with a specific pass-through device. TRICARE proposes to 
adopt this methodology, and accept the code pairs as assigned and 
updated by CMS, as well as any other future refinements or adjustments 
to this methodology.
S. Payment for Devices Furnished With No Cost or Full or Partial Credit
    Reduced payments are made for certain procedures when a specified 
device is furnished without cost or for which either a partial or full 
credit is received (e.g., device recall). TRICARE proposes to adopt 
this methodology as well as any other future refinements or adjustments 
to this methodology.
T. Payment for Non-ASC Services
    ASCs may furnish and be paid under alternate established 
reimbursement methodologies for services not considered ASC facility 
services. For example, ASCs may be reimbursed the CMAC rate for a 
physician office visit; facility charges are not allowed. Surgical 
procedures that are offered in physicians' offices, and that CMS 
classifies as ``office-based'' are reimbursed the lower of the ASC rate 
or the non-facility practice expense RVU amount of the CMAC. If there 
is no ASC payment for services that are medical in nature (such as 
office visits and diagnostic tests), the ASC is reimbursed as though 
the service was performed in a physician's office, with no additional 
payment for facility charges. Surgical

[[Page 65723]]

services that do not have an established reimbursement rate under this 
system may not be reimbursed in an ASC setting.
U. Transitions
    TRICARE proposes no transition, since many providers will see 
increases in payments from adoption of this proposed reimbursement 
methodology.
V. ASC Quality Report Program and Value Based Purchasing
    Medicare utilizes the ASC Quality Reporting program (ASCQR), under 
which ASCs must submit data on quality measures to receive the full 
payment update each year. ASCs that do not submit the required data 
have their payment update reduced by 2%. Performance on these measures 
does not impact ASC payments. For 2016, the measures included:

     ASC-1 Patient Burn
     ASC-2 Patient Fall
     ASC-3 Wrong Site, Wrong Side, Wrong Patient, Wrong 
Procedure, Wrong Implant
     ASC-4 Hospital Transfer/Admission
     ASC-5 Prophylactic Intravenous (IV) Antibiotic Timing
     ASC-6 Safe Surgery Checklist Use
     ASC-7 ASC Facility Volume Data on Selected ASC Surgical 
Procedures
     ASC-8 Influenza Vaccination Coverage among Healthcare 
Personnel

    Medicare contracts with outside entities to collect this quality 
data. Because the TRICARE program represents a small fraction of the 
ASC services rendered as a whole, we propose to provide the full ASC 
update to all ASCs, regardless of whether they report quality data. 
Collecting information regarding which ASCs report quality data and 
which do not, and building that information into the reimbursement 
system in a timely manner will be impracticable for the program. 
However, TRICARE may utilize this data, which is publicly reported at 
data.medicare.gov, for future initiatives related to reimbursement for 
ASCs. The ASCQR may lead to a value based purchasing (VBP) program for 
ASCs in the future; however, there were no specific proposals in 
Medicare's most recent ASC final rule (2016). TRICARE will adopt 
reimbursement modifications to the ASC reimbursement system related to 
VBP, if determined to be practicable by the Director, DHA. Such changes 
will be incorporated into the implementing instructions, as 
appropriate.

2. Adopt Medicare's Payment Methodology for Outpatient Services 
Provided in Cancer and Children's Hospitals

A. Reimbursement
    We propose to adopt Medicare's reimbursement methodology for 
outpatient services rendered in cancer and children's hospitals, with 
modifications made due to the administrative complexity of the Medicare 
system. We propose a combined OPPS and cost-reimbursement system. We 
propose to pay these hospitals under TRICARE's existing OPPS, and then 
reimburse the hospitals the higher of the OPPS payment or one hundred 
percent of the hospital-specific costs for those same services, based 
on the hospital-specific outpatient cost to charge ratio (CCR), through 
an annual adjustment. We propose to modify 32 CFR 199.14(a)(6) to 
include cancer and children's hospitals as providers subject to OPPS, 
and will further describe how these providers will be held harmless 
under the proposed methodology.
B. Hospitals Subject to This Proposed Reimbursement System
    We propose that those cancer and children's hospitals that were 
specifically excluded in TRICARE's OPPS final rule at 73 FR 74945, and 
are those cancer and children's hospitals currently held harmless from 
OPPS by Medicare, will be subject to the provisions of this proposed 
rule.
C. Transitional Outpatient Payments
    While Medicare provides reimbursement through TOPs for the 
difference between OPPS and hospital-specific costs on a monthly basis, 
we propose to make these payments on an annual basis. This approach 
reduces the administrative complexity of the system and makes the 
system practicable to adopt for TRICARE's comparatively smaller 
beneficiary population. A precedent can be found in TRICARE's 
implementation of the reimbursement system for SCHs; the TRICARE 
contractors perform a year-end comparison of the primary methodology 
with the Diagnosis Related Group (DRG)-based payment methodology, and 
provide reimbursement where the DRG-based payment amount would have 
been higher than the primary methodology.
    Additionally, Medicare holds CCHs harmless by calculating their 
pre-Balanced Budget Act (BBA) amount. The pre-BBA amount is an estimate 
of what the provider would have been paid during the CY for the same 
services under the Medicare system that was in effect prior to OPPS. 
This amount is calculated by multiplying the provider's payment-to-cost 
ratio (PCR), based on the provider's base year cost report (generally 
CY 1996), times the reasonable costs the provider incurred during a 
calendar year to furnish the services that were paid under the OPPS. 
TRICARE, however, proposes to simply hold the hospital harmless based 
on their costs; with costs defined as the product of multiplying the 
hospital's total charges for covered OPPS services for a twelve-month 
period by the hospital-specific outpatient CCR. This modification still 
holds the hospital harmless and ensures payment at costs, and is also 
practicable to adopt for TRICARE's comparatively smaller beneficiary 
population, and addresses issues of administrative complexity which led 
the agency to exempt CCHs in the original implementation of OPPS. 
Additionally, for cancer hospitals, Medicare has adopted an additional 
adjustment, mandated by the Patient Protection and Affordable Care Act 
(PPACA), which applied an additional payment adjustment to account for 
higher costs incurred by cancer hospitals. TRICARE is not subject to 
the PPACA, and proposes to not adopt this additional adjustment to 
adjust for the average payment-to-cost ratio for cancer hospitals, due 
to the administrative complexity of the calculation.
    For cancer and children's hospitals, the annual process is proposed 
to be as follows:
    Step One: Identify the costs of the hospital by multiplying the 
total billed charges for OPPS services on claims paid during the 12-
month period by the most-recent hospital-specific outpatient CCR.
    Step Two: Add together total TRICARE payments, cost-shares, and 
deductibles applied for all Ambulatory Payment Classifications (APCs), 
as well as outlier payments and transitional pass-through payments for 
drugs, biologicals and/or devices for those same claims paid during the 
year as those in Step One. If the result of Step 2 is greater than Step 
1, no payment is warranted because the hospital was reimbursed more 
from OPPS than their costs. If the result of Step 2 (OPPS payments) is 
less than Step 1 (hospital's costs), the hospital will be issued a 
payment equal to 100% of the difference between the hospital's costs 
and actual payments.
    Adjustments may be made in subsequent years for claims not 
processed to completion. The implementing instructions will contain

[[Page 65724]]

the full instructions for calculation and payment of hold-harmless 
payments.
D. Transitions
    TRICARE proposes no transition, since providers will be held 
harmless. Generally transitions are performed when providers may be 
exposed to payments that are below their costs; however, through the 
annual adjustments, providers are assured that they will receive 
reimbursements for their costs.
E. General Temporary Military Contingency Payment Adjustments (GTMCPA)
    Under this system, at the discretion of the Director, DHA, CCHs may 
be eligible for GTMCPAs that will ensure network adequacy during 
military contingency operations, in accordance with the implementing 
instructions issued by the Director, DHA. These GTMCPAs will be 
calculated and issued in the same manner as those that are made 
currently under TRICARE's OPPS.

III. Regulatory Analyses for ASCs, Cancer, and Children's Hospitals

Executive Order 12866, Executive Order 13563, and Executive Order 13771

A. Overall Impact

    DoD has examined the impacts of this proposed rule as required by 
Executive Orders (E.O.s) 12866 (September 1993, Regulatory Planning and 
Review), 13563 (January 18, 2011, Improving Regulation and Regulatory 
Review), and 13771 (January 30, 2017, Reducing Regulation and 
Controlling Regulatory Costs); the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354); the Unfunded Mandates Reform Act 
of 1995 (Pub. L. 104-4); and the Congressional Review Act (5 U.S.C. 
804(2)).
1. Executive Order 12866, Executive Order 13563, and Executive Order 
13771
    Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review) direct agencies to assess 
the 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, distributive 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. This rule has been designated as a ``not significant'' 
regulatory action, and not economically significant, under section 3(f) 
of Executive Order 12866. Accordingly, the rule has not been reviewed 
by the Office of Management and Budget (OMB) under the requirements of 
these Executive Orders.
    Executive Order 13771 (Reducing Regulation and Controlling 
Regulatory Costs) directs agencies to reduce regulation and control 
regulatory costs and provides that ``for every one new regulation 
issued, at least two prior regulations be identified for elimination, 
and that the cost of planned regulations be prudently managed and 
controlled through a budgeting process.'' This proposed rule is not 
expected to be subject to the requirements of this Executive Order 
because it is not significant under Executive Order 12866.
2. Congressional Review Act, 5 U.S.C. 801
    Under the Congressional Review Act, a major rule may not take 
effect until at least 60 days after submission to Congress of a report 
regarding the rule. A major rule is one that would have an annual 
effect on the economy of $100 million or more or have certain other 
impacts. This Notice of Proposed Rule Making is not a major rule under 
the Congressional Review Act.
3. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals are considered to be small 
entities, either by being nonprofit organizations or by meeting the 
Small Business Administration (SBA) identification of a small business 
(having revenues of $34.5 million or less in any one year). For 
purposes of the RFA, we have determined that the majority of ASCs and 
CCHs would be considered small entities according to the SBA size 
standards. Individuals and States are not included in the definition of 
a small entity. Therefore, this proposed rule would have a significant 
impact on a substantial number of small entities. The Regulatory 
Flexibility Analysis is included in the preamble of this rule.
4. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any one year of 
$100 million in 1995 dollars, updated annually for inflation. 
Currently, that threshold level is approximately $140 million. This 
proposed rule will not mandate any requirements for State, local, or 
tribal governments or the private sector.
5. Paperwork Reduction Act
    This rule will not impose significant additional information 
collection requirements on the public under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3502-3511). Existing information collection 
requirements of the TRICARE and Medicare programs will be utilized. We 
do not anticipate any increased costs to hospitals because of 
paperwork, billing, or software requirements since we are adopting 
Medicare's methodologies with which the ASCs and hospitals are already 
familiar.
6. Executive Order 13132, ``Federalism''
    This rule has been examined for its impact under E.O. 13132, and 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.

B. Entities Included in and Excluded From the Proposed Reimbursement 
Methodologies

    The TRICARE ASC reimbursement system encompasses all ASCs that meet 
Medicare's definition of an ASC with a Medicare agreement, and those 
ASCs that due to the nature of the population they serve (i.e., 
pediatric patients) do not have a Medicare agreement but are otherwise 
accredited by an accrediting body as approved by the Director, DHA. The 
TRICARE OPPS reimbursement system encompasses all Medicare-classified 
cancer and children's hospitals that are also authorized for TRICARE 
except for hospitals in States that are paid by Medicare and TRICARE 
under a waiver that exempts them from Medicare's or TRICARE's OPPS, 
respectively. Currently, only Maryland hospitals operate under such a 
waiver.

C. Analysis of the Impact of Policy Changes on Payment for ASC and 
CCHS, and Alternatives Considered

    The alternatives that were considered, the changes that we are 
proposing, and the reasons that we have chosen these options are 
discussed below:

[[Page 65725]]

1. Alternatives Considered for the Reimbursement of ASCs
    Under the method discussed in this proposed rule, TRICARE's ASC 
payments would increase to certain providers by approximately $14 
million. This is due to an increase in payments for surgical services 
that are paid under TRICARE's current ASC reimbursement methodology of 
approximately $23 million, with a decrease in payments for surgical 
services that are currently reimbursed outside TRICARE's current ASC 
reimbursement system of approximately $9 million. The overall impact 
represents an approximate 25-percent increase to ASCs for surgical 
services. For many procedures, the reimbursement amounts will increase 
by more than 25 percent. However, these increases will be offset by the 
fact that some procedures and devices that are currently paid 
separately will be bundled under this proposed reimbursement system.
    This rule proposes paying ASCs on the basis of the Medicare ASC fee 
schedule, with no exceptions to the list of procedures considered 
appropriate by Medicare to be performed in an ASC. This approach was 
adopted because TRICARE is statutorily obligated to pay like Medicare 
where practicable. Medicare covers approximately 3,400 procedures under 
the ASC payment system. The ASC list is comprised of those surgical 
procedures that CMS has determined do not pose a significant safety 
risk and are not expected to require an overnight stay following the 
surgical procedure. Alternatively, we considered permitting exceptions 
to the Medicare ASC list, however, such a process would require the 
creation and maintenance of an entirely separate list by TRICARE. This 
approach was not adopted because, first, this approach would be 
impracticable and complex; and second, covered services continue to be 
available in either hospital outpatient settings, or inpatient 
settings. We anticipate no impact to access to care by adopting 
Medicare's approach.
    We have also determined that no transition period is necessary. 
First, as we have noted earlier, historically transitions are done to 
protect providers from payments below their costs. However, in this 
case, while revenues would decrease for some providers, some providers 
may see increases in reimbursement, and a transition period would not 
be beneficial for these providers. Second, because alternative 
locations are available for these services (Hospital Outpatient 
Departments), concerns regarding access to care are unfounded. Third, 
TRICARE payments to ASCs will be equal to Medicare's. The Medicare 
Payment Advisory Committee (MedPAC) is an independent congressional 
agency which advises the U.S. Congress on issues affecting the Medicare 
program. MedPAC's ``March 2016 Report To Congress: Medicare Payment 
Policy'', indicates that Medicare payments to ASCs are adequate. 
Fourth, the number of outpatient surgeries performed in ASCs under 
TRICARE is very small in comparison to Medicare and the industry. If 
TRICARE had the Medicare reimbursement system in place during CY 2015, 
TRICARE would have spent approximately $250 million on ASC services. In 
contrast, ASCs received over $3.8 billion in Medicare payments and 
beneficaries' cost sharing in 2014 (2015 data unavailable in the 2016 
MedPAC report). In aggregate, the TRICARE ASC claims are a very small 
percentage of the industry's claims, so the change to reimbursement in 
the aggregate, is small. Finally, the 2016 MedPAC report determined 
that there was sufficient access to ASCs by Medicare beneficiaries, as 
evidenced by the continued growth and expansion of ASCs. Given that 
TRICARE ASC rates will be equal to Medicare ASC rates, we do not 
anticipate access problems for TRICARE beneficiaries.
2. Alternatives Considered for the Reimbursement of Cancer and 
Children's Hospitals
    Under the method discussed in this proposed rule, TRICARE's 
payments to CCHs would decrease by approximately $12 million. The 
estimated costs savings are relatively low, because the current 
allowed-to-billed ratio is so similar to the proposed system that major 
savings are unlikely. Our analysis has shown that the impact on 
specific hospitals varied widely, although the aggregate impact was 
small. Of the 25 CCHs with the highest allowed amounts in 2015, seven 
hospitals would have their payments reduced by more than 15 percent, 
and 11 hospitals would have their payments increased by more than 15 
percent.
    An alternative to this payment approach would be to reimburse CCHs 
on the basis of their costs, rather than pay utilizing OPPS and 
comparing utilizing OPPS, and making annual adjustments. In other 
words, we evaluated using a process in reverse to the one described in 
this proposed rule. Under the alternative approach, TRICARE would have 
paid the hospital at its costs (billed charges multiplied by the CCR), 
and then performing a comparison to what would have been paid under 
OPPS annually, and making annual adjustments if needed. Although this 
would result in fewer end-year adjustments, it would be 
administratively complex to adjust all claims utilizing OPPS at the end 
of the year. Additionally, this approach is inconsistent with the 
statutory obligation to pay like Medicare. Therefore, this approach was 
not adopted because TRICARE is statutorily obligated to pay like 
Medicare where practicable. It is practicable to adopt OPPS for these 
institutional providers, with annual hold harmless provisions.
    We also propose no transition. CCHs will receive, at a minimum, one 
hundred percent of their costs, or the OPPS payment, whichever is 
higher. Historically, transitions are done to protect providers from 
payments below their costs. However, in this case, the providers will 
be held-harmless, so no transition is necessary.

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--CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED 
SERVICES (CHAMPUS)

0
1. The authority citation for part 199 continues to read as follows:

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

0
 2. Amend Sec.  199.2(b) by adding, in alphabetical order, the 
definitions of ``Ambulatory Surgery Center'', ``Cancer hospital'', and 
``Children's hospital'' to read as follows:


Sec.  199.2  Definitions.

* * * * *
    (b) * * *
    Ambulatory Surgery Center (ASC). Any distinct entity that is 
classified by the Centers for Medicare and Medicaid Services (CMS) as 
an Ambulatory Surgical Center (ASC) under 42 CFR part 416 and meets the 
applicable requirements established by Sec.  199.6(b)(4)(x). Any ASC 
that would otherwise meet the CMS classification as an ASC but does not 
have a participation agreement with Medicare due to the nature of the 
patients they treat (e.g., pediatric) must meet the applicable 
requirements established by Sec.  199.6(b)(4)(x) in order to be a 
TRICARE authorized ASC. All ASCs must also enter into participation 
agreements with TRICARE.
* * * * *
    Cancer hospital. A specialty hospital that is classified by CMS as 
a Cancer

[[Page 65726]]

Hospital and meets the applicable requirements established by Sec.  
199.6(b)(4)(i).
* * * * *
    Children's hospital. A specialty hospital that is classified by CMS 
as a Children's Hospital and meets the applicable requirements 
established by Sec.  199.6(b)(4)(i).
* * * * *
0
3. Amend Sec.  199.6 by revising paragraph (b)(4)(x)(B)(1) to read as 
follows:


Sec.  199.6  TRICARE-authorized providers.

* * * * *
    (b) * * *
    (4) * * *
    (x) * * *
    (B) * * *
    (1) ASC. ASCs must meet all criteria for classification as an 
Ambulatory Surgical Center under 42 CFR part 416, as well as all of the 
requirements of this part, in order to be considered an authorized ASC 
under the TRICARE program. Care provided by an authorized TRICARE ASC 
may be cost-shared under the following circumstances:
    (i) A childbirth procedure provided by a CHAMPUS-approved ASC shall 
not be cost-shared by CHAMPUS unless the surgical center is also a 
CHAMPUS-approved birthing center institutional provider as established 
by the birthing center provider certification requirement of this part, 
and then reimbursement of covered maternity care and childbirth 
services shall be subject to Sec.  199.16(e).
    (ii) ASCs must demonstrate they have a valid participation 
agreement with Medicare, except as provided under paragraph 
(b)(4)(x)(B)(1)(v) of this section. ASCs must also enter into a 
participation agreement with TRICARE in order to be considered an 
authorized TRICARE provider.
    (iii) ASCs that do not have an agreement with Medicare due to the 
nature of the patients they treat (e.g., pediatric patients) shall be 
accredited by the Joint Commission, the Accreditation Association for 
Ambulatory Health Care, Inc. (AAAHC), or such other accreditation as 
authorized by the Director, DHA and published in the implementing 
instructions. Additionally, these facilities must enter into 
participation agreements with TRICARE under Sec.  199.6(a)(8)(i)(A) in 
order to be an authorized TRICARE provider.
* * * * *
0
4. Section 199.14 is amended by revising paragraphs (a)(6)(ii)(A) and 
(B); and (d) to read as follows:


Sec.  199.14  Provider reimbursement methods.

    (a) * * *
    (6) * * *
    (ii) Outpatient services subject to OPPS. Outpatient services 
provided in hospitals subject to Medicare OPPS as specified in 42 CFR 
413.65 and 42 CFR 419.20, to include cancer and children's hospitals, 
will be paid in accordance with the provisions outlined in sections 
1833(t) of the Social Security Act and its implementing Medicare 
regulation (42 CFR part 419) subject to exceptions as authorized by 
Sec.  199.14(a)(5)(ii). Under the provisions of this section, CHAMPUS 
will recognize to the extent practicable, in accordance with 10 U.S.C. 
1079(i)(2), Medicare's OPPS reimbursement methodology to include 
specific coding requirements, ambulatory payment classifications 
(APCs), nationally established APC amounts and associated adjustments 
(e.g., discounting for multiple surgery procedures, wage adjustments 
for variations in labor-related costs across geographical regions and 
outlier calculations). While CHAMPUS intends to remain as true as 
possible to Medicare's basic OPPS methodology, there will be some 
deviations required to accommodate CHAMPUS' unique benefit structure 
and beneficiary population as authorized under the provisions of 10 
U.S.C. 1079(i)(2). Cancer and children's hospitals will be paid on the 
basis of OPPS, but consistent with Medicare, payments shall be adjusted 
so that these providers receive 100 percent of their costs. Adjustments 
shall be made on an annual basis. Within 180 days of the end of the 
OPPS year (OPPS Year is defined as April 1 through March 30), DHA shall 
calculate the hospital's costs, utilizing the hospital-specific 
outpatient cost-to-charge ratio (CCR). The costs shall be calculated by 
multiplying the hospital's billed charges for OPPS services by the CCR. 
If the hospital's costs, as calculated by DHA, exceeded the payment 
that had been made under OPPS, the hospital shall receive an annual 
payment adjustment so that the hospital receives 100% of their costs.
    (A) Temporary transitional payment adjustments (TTPAs) will be in 
place for all hospitals, both network and non-network in order to 
buffer the initial decline in payments upon implementation of TRICARE's 
OPPS. For network hospitals, the temporary transitional payment 
adjustments (TTPAs) will cover a four-year period. The four-year 
transition will set higher payment percentages for the ten Ambulatory 
Payment Classification (APC) codes 604-609 and 613-616, with reductions 
in each of the transition years. For non-network hospitals, the 
adjustments will cover a three year period, with reductions in each of 
the transition years. For network hospitals, under the TTPAs, the APC 
payment level for the five clinic visit APCs would be set at 175 
percent of the Medicare APC level, while the five ER visit APCs would 
be increased by 200 percent in the first year of OPPS implementation. 
In the second year, the APC payment levels would be set at 150 percent 
of the Medicare APC level for clinic visits and 175 percent for ER 
APCs. In the third year, the APC visit amounts would be set at 130 
percent of the Medicare APC level for clinic visits and 150 percent for 
ER APCs. In the fourth year, the APC visit amounts would be set at 115 
percent of the Medicare APC level for clinic visits and 130 per cent 
for ER APCs. In the fifth year, the TRICARE and Medicare payment levels 
for the 10 APC visit codes would be identical. For non-network 
hospitals, under the TTPAs, the APC payment level for the five clinic 
and ER visit APCs would be set at 140 percent of the Medicare APC level 
in the first year of OPPS implementation. In the second year, the APC 
payment levels would be set at 125 percent of the Medicare APC level 
for clinic and ER visits. In the third year, the APC visit amounts 
would be set at 110 percent of the Medicare APC level for clinic and ER 
visits. In the fourth year, the TRICARE and Medicare payment levels for 
the 10 APC visit codes would be identical.
    (B) An additional temporary military contingency payment adjustment 
(TMCPA) will also be available at the discretion of the Director, or a 
designee, at any time after implementation to adopt, modify and/or 
extend temporary adjustments to OPPS payments for TRICARE network 
hospitals deemed essential for military readiness and deployment in 
time of contingency operations. Any TMCPAs to OPPS payments shall be 
made only on the basis of a determination that it is impracticable to 
support military readiness or contingency operations by making OPPS 
payments in accordance with the same reimbursement rules implemented by 
Medicare. The criteria for adopting, modifying, and/or extending 
deviations and/or adjustments to OPPS payments shall be issued through 
CHAMPUS policies, instructions, procedures and guidelines as deemed 
appropriate by the Director, or a designee. TMCPAs may also be extended 
to non-network hospitals on a case-by-case basis for specific 
procedures where it is determined that

[[Page 65727]]

the procedures cannot be obtained timely enough from a network 
hospital. For such case-by-case extensions, ``Temporary'' might be less 
than three years at the discretion of the Director, or designee.
* * * * *
    (d) Payment of institutional facility costs for ambulatory surgery. 
Surgical services provided in Ambulatory Surgery Centers (ASCs) as 
defined in Sec.  199.2 will be paid in accordance with the provisions 
outlined in section 1833(t) of the Social Security Act and its 
implementing Medicare regulation (42 CFR part 416). TRICARE will 
recognize, to the extent practicable, in accordance with 10 U.S.C. 
1079(i)(2), Medicare's ASC reimbursement methodology to include 
specific coding requirements, prospectively determined rates, discounts 
for multiple surgical procedures, the scope of ASC services, covered 
surgical procedures, and the basis of payment as, as described in 42 
CFR part 416 with the exception that TRICARE will implement no 
transitional payments. Payment for ambulatory surgery procedures is 
limited to those procedures that are reimbursed by Medicare in ASCs.
* * * * *

    Dated: November 15, 2019.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2019-25213 Filed 11-27-19; 8:45 am]
BILLING CODE 5001-06-P