[Federal Register Volume 85, Number 172 (Thursday, September 3, 2020)]
[Rules and Regulations]
[Pages 54914-54924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19594]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[Docket ID: DoD-2020-HA-0050]
RIN 0720-AB82


TRICARE Coverage of Certain Medical Benefits in Response to the 
COVID-19 Pandemic

AGENCY: Office of the Secretary, Department of Defense.

ACTION: Interim final rule with request for comments.

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SUMMARY: The Assistant Secretary of Defense for Health Affairs 
(ASD(HA)) issues this interim final rule (IFR) with comment to 
temporarily modify the TRICARE regulation by: Waiving the three-day 
prior hospital qualifying stay requirement for coverage of skilled 
nursing facility (SNF) care; adding coverage for treatment use of 
investigational drugs under expanded access authorized by the United 
States (U.S.) Food and Drug Administration (FDA) when for the treatment 
of coronavirus disease 2019 (COVID-19); temporarily waiving certain 
provisions for acute care hospitals that will permit authorization of 
temporary hospital facilities and freestanding ambulatory surgical 
centers (ASCs) providing inpatient and outpatient hospital services; 
and, consistent with similar changes under the Centers for Medicaid and 
Medicare Services (CMS), revising diagnosis related group (DRG) 
reimbursement by temporarily reimbursing DRGs at a 20 percent higher 
rate for COVID-19 patients and temporarily waiving certain requirements 
for long term care hospitals (LTCHs). Finally, this IFR will also adopt 
Medicare's New Technology Add-On Payments (NTAPs) adjustment to DRGs 
for new medical services and technologies and adopt Medicare's Hospital 
Value Based Purchasing (HVBP) Program.

DATES: 
    Effective date: This interim final rule with comment is effective 
on September 3, 2020 through either the end of the President's national 
emergency (Proclamation 9994, 85 Federal Register (FR) 15337 (Mar. 18, 
2020)) or the end of the declared public health emergency, including 
any extensions, (as determined by 42 United States Code (U.S.C.) 247d, 
except for NTAPs and HVBP, which will not expire). The ASD(HA) will 
publish a document announcing the expiration date. See the 
SUPPLEMENTARY INFORMATION section for more information.
    Applicability date: Some policies in this IFR are applicable prior 
to the effective date of this IFR. The temporary waiver of the SNF 
three-day prior stay rule is applicable beginning March 1, 2020. The 
temporary DRG and LTCH reimbursement adjustments are applicable 
beginning January 27, 2020, and the adoption of the NTAPs and HVBP are 
applicable beginning January 1, 2020. All other changes are applicable 
on the effective date of this IFR.
    Comment date: Comments are invited and must be submitted on or 
before November 2, 2020.

ADDRESSES: You may submit comments, identified by docket number and/or 
Regulation Identification Number (RIN) number and title, by any of the 
following methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: The Department of Defense (DoD) cannot receive 
written comments at this time due to the COVID-19 pandemic. Comments 
should be sent electronically to the docket listed above.
    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: Erica Ferron, Medical Benefits and 
Reimbursement Section, 303-676-3626, [email protected].

SUPPLEMENTARY INFORMATION: 
    Expiration date: Unless extended after consideration of submitted 
comments, the medical benefit provisions in this IFR will cease to be 
in effect upon termination of the President's declared national 
emergency, in accordance with applicable law and regulation (e.g., 50 
U.S.C. 1622(a)), except the temporary

[[Page 54915]]

waiver of certain acute care hospital requirements for temporary 
hospitals and freestanding ASCs, which will expire when Medicare's 
``Hospitals without Walls'' provision expires. The temporary 
reimbursement waivers under this IFR will cease to be effective upon 
termination of the Secretary of Health and Human Services' (HHS) Public 
Health Emergency (PHE), or upon other guidance, regulations, or 
modifications made by Medicare, in accordance with the statutory 
requirement that TRICARE reimburse like Medicare (10 U.S.C. 
1079(i)(2)). The adoption of NTAPs and HVBP are permanent and will not 
expire. Because TRICARE operates both in the United States and in 
overseas locations, the ASD(HA), or designee, may determine that it is 
appropriate to continue exemptions to permanent regulation provisions 
for some or all of TRICARE's overseas locations serviced by the TRICARE 
Overseas Program contractor under 32 CFR 199.1(b) beyond termination of 
the President's declared national emergency based on the status of 
COVID-19 community spread in those locations. Such continuation of 
these provisions for overseas locations will be published in TRICARE's 
implementing instructions (TRICARE manuals), available at http://manuals.health.mil.
    If the ASD(HA) determines it would be appropriate to make these 
changes permanent, the ASD(HA) will follow-up with final rulemaking. 
The ASD(HA) will publish a document in the Federal Register announcing 
the expiration date.

I. Executive Summary

A. Purpose of the Rule

    A novel coronavirus (SARS-CoV-2), which causes COVID-19, was first 
detected in December 2019 and has spread rapidly throughout the world. 
On January 31, 2020, the Secretary of the HHS determined that a PHE had 
existed since January 27, 2020.\1\ On March 13, 2020, the President 
declared a national emergency due to the COVID-19 outbreak, retroactive 
to March 1, 2020 (Proclamation 9994, 85 FR 15337). Following the 
declaration of the national emergency, the President signed into law 
multiple statutes to provide economic and health care relief for 
individuals and businesses, including health care providers. One such 
law was the Coronavirus Aid, Relief, and Economic Security (CARES) Act 
(Pub. L. 116-136), which in part provided for waivers of certain 
reimbursement provisions under Medicare.
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    \1\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
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    According to World Health Organization data on May 3, 2020, there 
were 3,349,786 confirmed cases of COVID-19 worldwide (238,628 confirmed 
deaths), with 1,093,880 confirmed cases in the U.S. (62,406 confirmed 
deaths), with the number of cases rapidly expanding each day. Medical 
experts from the National Institute of Allergy and Infectious Disease 
anticipate more cases in the U.S. and overseas in the coming months.\2\
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    \2\ https://www.niaid.nih.gov/news-events/covid-19-reminder-challenge-emerging-infectious-diseases.
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    In light of the rapid spread of COVID-19, the Centers for Disease 
Control and Prevention has urged Americans to work and engage in 
schooling from home whenever possible as well as to avoid congregating 
in groups. Many States (e.g., Washington, New York) and cities (e.g., 
Los Angeles) imposed stay-at-home orders during the early months of the 
pandemic, closing all but essential businesses such as medical care and 
grocery stores, all to prevent further spread of the disease.
    While stay-at-home orders and recommendations for social distancing 
have slowed the spread of COVID-19, there is currently no cure, nor are 
there any FDA approved vaccines indicated for the prevention of COVID-
19. It is likely that the health care system, in the U.S. and abroad, 
will need to contend with this threat for months, if not years. Many 
COVID-19 treatments are being tried, including convalescent plasma from 
patients recovered from COVID-19 and new potential antiviral drugs.
    A TRICARE COVID-19-related IFR published on May 12, 2020 (85 FR 
27921), provides a temporary exception to the regulatory exclusion 
prohibiting audio-only telehealth services, temporarily eliminates 
copayments and cost-shares for TRICARE Prime and Select beneficiaries 
utilizing authorized telehealth services provided by network providers 
as a necessary incentive to prevent further spread of COVID-19, and 
temporarily authorizes reimbursement of interstate practice by 
providers (both in-person and remotely) for care provided to TRICARE 
beneficiaries when such practice is permitted by federal or state law, 
even if the provider is not licensed in the state where practicing. 
That IFR was focused on temporary changes to the TRICARE program to aid 
in slowing community transmission of COVID-19. This second IFR 
continues efforts by the ASD(HA) to implement temporary regulation 
changes in response to COVID-19 by focusing on temporary benefit and 
reimbursement changes that will support treatment of TRICARE 
beneficiaries. It also implements two permanent regulation changes 
consistent with the statutory requirement that TRICARE reimburse like 
Medicare, to the extent practicable.
    Pursuant to the President's national emergency declaration and as a 
result of the worldwide COVID-19 pandemic, the ASD(HA) hereby modifies 
the following regulations, but in each case, only to the extent 
determined necessary to ensure that TRICARE beneficiaries have access 
to the most up-to-date care required for the diagnosis and treatment of 
COVID-19, and that TRICARE continues to reimburse like Medicare, to the 
extent practicable, as required by statute. The following regulations 
are temporarily modified (except NTAPs and HVBP, which are permanently 
modified):
    a. 32 CFR 199.4(b)(3)(xiv): As required by law, 10 U.S.C. 
1074j(b)(1), the TRICARE skilled nursing facility (SNF) benefit is 
provided in the manner and under the conditions established for the 
Medicare SNF benefit. Consistent with Medicare, then, TRICARE's 
regulation adopted Medicare's requirement that an individual was an 
inpatient of a hospital for not less than 3 consecutive calendar days 
before his discharge from the hospital (three-day prior hospital stay), 
for coverage of a SNF admission. Medicare, under its authority granted 
by Sections 1812(f) of the Social Security Act, has waived this 
requirement during the COVID-19 pandemic. As required by the TRICARE 
statute for the SNF benefit to mirror that of Medicare, this provision 
of the IFR temporarily waives the regulatory requirement for a three-
day prior hospital stay for TRICARE beneficiaries, providing temporary 
emergency coverage for those beneficiaries who need to be transferred 
during the period of the COVID-19 pandemic. This temporary waiver is in 
effect for the duration of the President's national emergency for the 
COVID-19 outbreak, retroactive to March 1, 2020.
    b. 32 CFR 199.4(g)(15): This change temporarily adds coverage for 
the use of investigational drugs for the treatment of COVID-19 under 
FDA's expanded access provision at 21 CFR 312, subpart I. Under this 
provision, TRICARE coverage of investigational drugs provided under 
expanded access will include both costs associated with administration 
of the investigational drug, as well as the cost of the investigational 
drug itself when the investigational drug is for the treatment

[[Page 54916]]

of COVID-19. This will include investigational drugs and associated 
costs provided for treatment of patients under expanded access INDs and 
protocols s authorized by the FDA, but will not include use of 
investigational drugs in clinical trials. The temporary modification 
under paragraph 199.4(g)(15)(i)(A) is effective for the period of the 
President's national emergency for the COVID-19 outbreak, and will only 
apply to treatments for COVID-19. However, we plan to re-evaluate our 
current exclusion preventing coverage of investigational drugs provided 
for treatment use under expanded access and may make permanent 
revisions to the regulation, if appropriate, after a thorough 
evaluation of the costs, benefits, risks, and other considerations. We 
invite comment on the temporary coverage of investigational drugs 
provided under expanded access for the treatment of COVID-19, as well 
as potential future coverage of investigational drugs for treatment use 
under expanded access for individuals with serious or life-threatening 
diseases (not including clinical trials not otherwise covered by 
TRICARE) for potential inclusion in a future final rule.
    c. 32 CFR 199.6(b)(4)(i): This change will temporarily exempt 
certain temporary hospital facilities and locations, and freestanding 
ASCs that enroll as hospitals with Medicare from the institutional 
provider requirements for acute care hospitals in 32 CFR 
199.6(b)(4)(i), but only to the extent that such exemptions are 
required to ensure adequate beneficiary access to acute care facilities 
during the COVID-19 national emergency. Under current regulatory 
requirements, temporary hospital facilities (to include hospitals that 
are already TRICARE-authorized providers operating in a temporary 
location, such as a parking lot, or at a temporary facility, such as a 
repurposed convention center or an erected tent) and freestanding ASCs 
which provide inpatient and outpatient hospital services are not 
TRICARE-authorized providers because they do not meet the institutional 
provider requirements for hospitals. This temporary waiver of 
institutional requirements is consistent with Medicare's ``Hospitals 
without Walls'' initiative. It also is consistent with the statutory 
requirement at 10 U.S.C. 1079(i)(2), which establishes that the amount 
paid to hospitals and other institutional providers is in accordance 
with the same reimbursement methodology as apply to payments to 
providers of services of the same type under Medicare, when 
practicable. This temporary change is in effect for the duration of 
Medicare's ``Hospitals without Walls'' initiative for COVID-19.
    d. 32 CFR 199.14(a)(1)(iii)(E): Adjustments to the DRG-based 
reimbursement amounts. TRICARE shall reimburse acute care hospitals a 
20 percent increase of the DRG for an individual diagnosed with COVID-
19, confirmed through documentation of a positive COVID-19 laboratory 
test in the patient's medical record, discharged during the COVID-19 
PHE period, retroactive to January 27, 2020. Further, TRICARE shall 
permanently adopt (1) Medicare's NTAP payment adjustment to DRGs, for 
new technologies approved by Medicare, and (2) Medicare's HVBP Program. 
These changes are in accordance with the statutory requirement that 
TRICARE inpatient care ``payments 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.'' 
The ASD(HA) has determined that it is practicable to adopt this 
Medicare adjustment to the TRICARE DRG-based reimbursement amounts.
    e. 32 CFR 199.14(a)(9): Reimbursement for inpatient services 
provided by a LTCH. By statute, 10 U.S.C. 1079(i)(2), TRICARE shall, to 
the extent practicable, reimburse institutional providers in accordance 
with Medicare reimbursement rules. As such, TRICARE has generally 
adopted the Medicare inpatient prospective payment system for LTCHs (32 
CFR 199.14(a)(9)), including Medicare's site neutral payment provisions 
(adopted December 29, 2017). Section 3711 of the CARES Act directs 
Medicare to waive the site neutral payment provisions for LTCHs during 
the COVID-19 PHE period. The ASD(HA) has determined that it is 
practicable to temporarily adopt this Medicare LTCH reimbursement 
waiver of the site neutral payment provisions for LTCHs for a discharge 
if the admission occurs during the COVID-19 PHE, retroactive to January 
27, 2020, and is in response to the COVID-19 PHE. The effective and 
expiration dates are consistent with Medicare's dates for their 
temporary waiver of LTCH site neutral payment provisions in response to 
COVID-19, as required by the statutory mandate that TRICARE reimburse 
like Medicare, where practicable.
    f. Dates. These modifications will become effective on September 3, 
2020, and will cease to be in effect upon termination of the 
President's declared national emergency, except as otherwise noted in 
this paragraph. The NTAPs and HVBP provisions are applicable beginning 
January 1, 2020, and will not expire. The SNF three-day prior stay 
waiver is applicable beginning March 1, 2020. The temporary hospital 
and freestanding ASC acute care hospital requirements waiver expires 
upon expiration of Medicare's ``Hospitals without Walls'' initiative. 
The temporary reimbursement changes (20 percent increased DRG for 
COVID-19 patients and LTCH changes) are applicable beginning January 
27, 2020, and will cease to be in effect upon termination of the HHS 
Secretary's PHE. The Secretary of HHS used his authority in the Public 
Health Service Act to declare a PHE in the entire United States on 
January 31, 2020, effective January 27, 2020. Since Medicare's 
applicable period for the PHE began on January 27, 2020, TRICARE will 
also begin the applicable period for the PHE on January 27, 2020, for 
the increase of the DRG by 20 percent for COVID-19 discharges and for 
waiver of site neutral payment provisions for LTCHs with admissions 
occurring during the COVID-19 PHE and in response to the PHE. With 
TRICARE beneficiaries located worldwide, the ASD(HA), or designee, may 
allow the provisions of this IFR to continue after termination of the 
President's national emergency for some or all of TRICARE's overseas 
locations based on the status of COVID-19 community transmission in 
those locations. Such continuation of these provisions for overseas 
locations will be published in TRICARE's implementing instructions 
(TRICARE manuals), available at http://manuals.health.mil.
    Certain provisions of this IFR may be made permanent while others 
are anticipated to be removed when the COVID-19 pandemic has concluded. 
The DoD may issue a final rule to make permanent changes.

B. Interim Final Rule Justification

    Agency rulemaking is governed by section 553 of the Administrative 
Procedure Act (APA), 5 U.S.C. 551 et seq. Section 553(b) requires that, 
unless the rule falls within one of the enumerated exemptions, the DoD 
must publish a notice of proposed rulemaking in the Federal Register 
that provides interested persons an opportunity to submit written data, 
views, or arguments, prior to finalization of regulatory requirements. 
Section 553(b)(B) of the APA authorizes a department or agency to 
dispense with the prior notice and opportunity for public comment 
requirement when the agency, for ``good cause,'' finds that notice and 
public comment thereon are impracticable, unnecessary, or contrary

[[Page 54917]]

to the public interest. Section 553(d)(3) requires that an agency must 
include an explanation of such good cause with the publication of the 
new rule.
    As noted in this preamble, the U.S., as well as numerous other 
countries, have taken unprecedented measures to try to contain or slow 
the spread of COVID-19. While studies of potential treatments of COVID-
19 are in progress, these studies are expected to take time. 
Unfortunately, TRICARE beneficiaries infected with COVID-19 may not 
have time to wait for these treatments, given the rapidity with which 
the disease overtakes infected individuals who develop the most severe 
responses to the illness. Additionally, hospital resources being flexed 
to respond to COVID-19 cannot wait for the reimbursement relief offered 
in this IFR.
    Given the national emergency caused by COVID-19, it would be 
impracticable and contrary to the public health--and, by extension, the 
public interest--to delay these implementing regulations until a full 
public notice-and-comment process is completed.
    Additional good cause exists to publish as an IFR the permanent 
amendments to the TRICARE regulation regarding adoption of the Medicare 
DRG adjustments for NTAP and the HVBP Program. As previously noted, 
TRICARE is mandated by law, 10 U.S.C. 1079(i)(2), to reimburse 
institutional providers using the Medicare reimbursement methodologies, 
to the extent practicable. Also, TRICARE is required by section 705(a) 
of the National Defense Authorization Act (NDAA) to implement a value-
based incentive program to encourage health care providers to improve 
the quality and delivery of services to TRICARE beneficiaries. The 
ASD(HA) is authorized by the Act to adopt value-based programs created 
by the CMS. As such, the ASD(HA) has determined that it is practicable 
to adopt as TRICARE DRG-based reimbursement adjustments, the Medicare 
NTAP and HVBP Program adjustments which Medicare has implemented 
through formal rule-making. In exercising his discretionary authority 
under statute, the ASD(HA) has determined that the purpose for prior 
notice and public comment has been satisfied by the Medicare rule-
making and that good cause exists to avoid delay as further notice and 
public comment would be impracticable, unnecessary, or contrary to the 
public interest. Nonetheless, public comments on this IFR are invited 
and DoD is committed to considering all comments and issuing a final 
rule as soon as practicable.
    Therefore, pursuant to 5 U.S.C. 553(b)(B), and for the reasons 
stated in this preamble, the ASD(HA), concludes that there is good 
cause to dispense with prior public notice and the opportunity to 
comment on this rule before finalizing this rule. For the same reasons, 
the ASD(HA) has determined, consistent with section 553(d) of the APA, 
that there is good cause to make this IFR effective immediately upon 
publication in the FR, with applicability of its provisions to coincide 
with the President's national emergency for the COVID-19 outbreak or 
the HHS Secretary's PHE, as stated in this rule.

C. Summary of Major Provisions

a. Changes to the TRICARE Benefit
SNF Three-Day Prior Hospital Waiver
    This provision, 32 CFR 199.4(b)(3)(xiv), temporarily waives the 
requirement that an individual was an inpatient of a hospital for not 
less than 3 consecutive calendar days before his discharge from the 
hospital (three-day prior hospital stay), for coverage of a SNF 
admission, for those beneficiaries who need to be transferred as a 
result of the effect of the COVID-19 pandemic. This will align 
TRICARE's benefit with Medicare's for SNF admission as required by 10 
U.S.C. 1074j(b), as Medicare has waived its three-day prior hospital 
stay requirement during the COVID-19 pandemic.
Investigational Drugs Provided Under Expanded Access for the Treatment 
of COVID-19
    This provision, 32 CFR 199.4(g)(15)(i)(A), temporarily modifies 
TRICARE regulations for coverage of investigational drugs provided for 
treatment use under expanded access authorized by the FDA in a patient 
who is seriously ill or has a life threatening condition. Title 10 
U.S.C. 1079(a)(12) mandates care provided to TRICARE beneficiaries to 
be medically or psychologically necessary, unless that care is provided 
by a Christian Science practitioner or in a National Institute of 
Health clinical trial when there is an agreement with HHS.
    The existing regulations on treatment use of investigational drugs 
were first implemented in 1996 (62 FR 625), in a final rule that 
codified TRICARE procedures for determining when care provided to 
TRICARE beneficiaries is medically necessary under the statute. The 
regulations, minus minor revisions to the definition of off-label drugs 
and devices and removal of a list of unproven treatments, are unchanged 
from their establishment almost twenty-five years ago. The regulations 
currently allow for coverage of care associated with treatment 
investigational new drugs (INDs), but do not permit coverage of the 
treatment IND itself because a treatment IND is not labeled for 
commercial marketing in the U.S. Treatment INDs are one type of 
treatment use of investigational drugs under expanded access and are 
the only type mentioned in the regulation.
    While we were considering potential temporary regulatory changes 
required in response to COVID-19, we found it appropriate to reconsider 
coverage of treatment INDs, and, in doing so, opted to expand our 
consideration to the larger universe of investigational drugs provided 
for treatment use under expanded access. FDA's regulations on expanded 
access of investigational drugs for treatment use are provided at 21 
CFR, subpart I. Generally, drugs provided for treatment use under 
expanded access have not yet been approved for commercial marketing by 
the FDA. In these cases, a drug being studied in clinical trials might 
be used for treatment outside of such trials for patients for which 
there is no alternative. The FDA permits treatment use of an 
investigational drug under expanded access when the drug would treat a 
serious or life-threatening illness when there is no comparable or 
satisfactory alternative, the potential patient benefit justifies the 
potential risks of the treatment use, and providing the investigational 
drug will not compromise the potential development or interfere with 
the clinical investigations that could support marketing approval of 
the investigational drug for the expanded access use. Treatment use 
with an investigational drug under expanded access is subject to the 
requirements for informed consent and institutional review board review 
and approval.
    Under this temporary provision, we will, for the first time, cover 
not just the care associated with administration of an investigational 
drug, but the investigational drug itself, when the investigational 
drug is for the treatment of COVID-19 or its associated sequelae. This 
use may be authorized in any setting for which the FDA allows treatment 
use of an investigational drug under expanded access to proceed. As an 
example, convalescent plasma, an investigational product, is the 
donated plasma from a person who has recovered from COVID-19, which is 
administered to a COVID-19 patient under the hypothesis that antibodies 
will aid the ill person in fighting the disease. Convalescent plasma 
has not yet been approved by the FDA for use in treating COVID-19, but 
is currently

[[Page 54918]]

available for administering or studying through clinical trials or 
expanded access. Expanded access allows for treatment of patients with 
serious or life-threatening symptoms of COVID-19 but who are unable to 
participate in clinical trials. Treatment use of an investigational 
drug under expanded access is being offered on a case-by-case basis as 
an emergency individual treatment, and on a larger scale in 
participating acute care facilities where authorization has already 
been given to the facility prior to need by the individual patient, 
essentially speeding access to the treatment. Allowing TRICARE 
beneficiaries access to investigational drugs for serious and life-
threatening COVID-19 conditions under expanded access is essential 
given the rapid progression of the disease and the lack of FDA-approved 
alternatives. We note, however, that if a manufacturer, provider, or 
supplier does not charge other payers, including other Federal payers, 
then billing TRICARE for an investigational drug may constitute 
inappropriate billing practices under Sec.  199.9 of this regulation. 
In other words, if a drug manufacturer makes an investigational drug 
available for treatment use under expanded access at reduced or no cost 
to non-TRICARE patients, they are expected to provide the 
investigational drug to TRICARE patients at the same reduced or no-
cost.
    For beneficiaries overseas, TRICARE has long had a policy exemption 
for non-FDA-approved drugs due to differences in the way prescription 
drugs are managed outside of the United States. When implementing this 
temporary regulation change, the DHA intends to permit coverage of 
similar investigational drugs for treatment use overseas when the 
criteria are substantially similar to the use of investigational drugs 
for treatment use under expanded access in the U.S. That is, the drug 
is intended to treat a serious or life-threatening case of COVID-19 or 
its sequelae when there is no satisfactory or comparable alternative, 
the potential patient benefit justifies the potential risks of the 
treatment use, and providing the investigational drug will not 
compromise the potential development or interfere with the clinical 
investigations that could support marketing approval of the 
investigational drug for the expanded access use.
    The change under this provision is temporary for the duration of 
the President's national emergency for the COVID-19 outbreak. An 
investigational drug provided for treatment use under expanded access 
under the requirements of this provision may continue to be covered 
beyond the national emergency if the course of treatment was started 
prior to the end of the national emergency. We intend to use this 
national emergency period to re-evaluate our current exclusion on 
coverage of treatment INDs and may revise the regulation to cover 
investigational drugs for treatment use under expanded access for all 
indications if appropriate after a thorough evaluation of the costs, 
benefits, risks, and other considerations. We invite public comment on 
this provision.
Temporary Hospital Facilities and Freestanding ASCs Temporarily 
Enrolling as Hospitals
    Due to the lack of hospital capacity and the strain on resources 
such as hospital beds as a result of the COVID-19 pandemic, state 
governments, existing hospitals, and other entities have begun 
constructing temporary hospital facilities (also known as temporary 
expansion sites and alternate care sites) to (1) treat patients 
recovering from COVID-19; and (2) treat patients with other conditions 
in order to mitigate their exposure to COVID-19. These temporary 
hospital facilities are typically operated by the U.S. Armed Forces, 
local or state governments, or existing hospital systems using HHS and 
the Army Corps of Engineers guidance on the establishment, 
operationalization, and management of alternate care sites. 
Additionally, ASCs have begun performing services typically provided in 
inpatient hospital settings to protect patients from exposure to COVID-
19 and to reduce the strain on hospital resources.
    As part of their IFR with Comment published April 6, 2020 (85 FR 
19230), CMS announced their ``Hospitals without Walls'' initiative, 
through which CMS will permit Medicare coverage for services and 
supplies provided in temporary hospital locations and facilities, and 
allow freestanding ASCs to enroll as hospitals and provide inpatient 
and outpatient hospital services. Specifically, CMS is waiving 
requirements under the Medicare conditions of participation related to 
physical environment (42 CFR 482.41) and physical plant and environment 
(42 CFR 485.623), and the provider-based department requirements at 42 
CFR 413.65. Under these waivers, Medicare is requiring that ASCs enroll 
as hospitals and that temporary hospital facilities meet the hospital 
conditions of participation in effect during the COVID-19 PHE. 
Temporary hospital facilities include (1) a hospital providing services 
at a location other than the hospital's physical structure (e.g., the 
hospital parking lot) and (2) when a hospital is handling the majority 
of the operations of an alternate care site (e.g., a hospital set up in 
a convention center).
    While there are no direct corollaries in TRICARE regulation to 
those requirements being waived under Medicare, there do exist in 
TRICARE regulation certain requirements that would prevent similarly 
authorizing temporary hospitals and allowing freestanding ASCs to be 
considered as hospitals for the purposes of payment. 32 CFR 
199.6(b)(4)(i) lists the requirements for providers to be considered 
TRICARE-authorized acute care hospital providers. It may not be 
possible for many temporary hospital facilities to meet all of these 
requirements, such as having Joint Commission (previously known as the 
Joint Commission on Accreditation of Hospitals) accreditation status or 
surveying of new facilities. Additionally, freestanding ASCs that are 
already TRICARE-authorized providers cannot register as hospitals 
because, at a minimum, they do not meet the requirement of primarily 
providing services to inpatients and they may not meet certain other 
requirements such as Joint Commission accreditation. While we assert 
that these institutional requirements continue to be necessary for 
acute care hospitals, we also recognize that during the national 
emergency for the COVID-19 outbreak, it may be necessary to relax some 
of these requirements so that beneficiaries can be assured of access to 
acute care settings. Unlike Medicare, TRICARE lacks the authority to 
waive individual regulatory requirements for any type of provider 
without rulemaking. Therefore, this provision will temporarily waive 
the acute care hospital institutional provider requirements in 32 CFR 
199.6(b)(4)(i) for temporary hospital facilities and freestanding ASCs 
that enroll as hospitals with Medicare, but only to the extent 
necessary to ensure that TRICARE beneficiaries receive adequate access 
to acute inpatient care during the COVID-19 pandemic. The Director of 
the Defense Health Agency (DHA), may establish further requirements for 
such facilities in the implementing instructions (as found in the 
TRICARE manuals).
    Our intent is to adopt certain requirements related to Medicare's 
``Hospitals without Walls'' waiver to allow hospital services to be 
provided in temporary hospital facilities for the duration of the 
President's national emergency for the COVID-19 outbreak.

[[Page 54919]]

Although there is no requirement to adopt Medicare's condition of 
participation requirements for hospitals, this provision does support 
the statutory directive in 10 U.S.C. 1079(i)(2) to pay like Medicare, 
when practicable. Title 10 U.S.C. 1079(i)(2) establishes that the 
amount paid to hospitals and other institutional providers is in 
accordance with the same reimbursement methodology, to the extent 
practicable, as apply to payments to providers of services of the same 
type under Medicare. Under this provision, hospitals that are already 
TRICARE-authorized providers and are operating in a manner consistent 
with their state's emergency plan in effect during the COVID-19 
Presidential national emergency, will be reimbursed for covered 
inpatient and outpatient services using the same methodologies as if 
those services were provided at their permanent locations. Freestanding 
ASCs that enroll with Medicare as a hospital can also change their ASC 
status to a hospital under TRICARE. This means that, depending on the 
type of service provided, TRICARE's DRG System or Outpatient 
Prospective Payment System will be used for reimbursement. If a 
freestanding ASC initially enrolls as a hospital, but later changes 
their enrollment status back to an ASC, or if Medicare terminates the 
ASC's hospital status, then TRICARE will no longer recognize that ASC 
as being a hospital, effective the date of the enrollment status 
changes. If Medicare alters its requirements for coverage of temporary 
hospitals or freestanding ASCs acting as hospitals, the Director of 
DHA, or designee, will evaluate those changes and adopt, when 
practicable, in the implementing instructions.
    These changes align with Medicare's ``Hospitals without Walls'' 
initiative. While we are waiving the institutional provider 
requirements under paragraph 199.6(b)(4)(i), we are still requiring 
that temporary hospital facilities and freestanding ASCs meet 
Medicare's conditions of participation established for this 
Presidential national emergency, which coincide with many of TRICARE's 
requirements for hospitals, such as operational, staffing, and 
supervisory requirements. This change will also improve the access of 
beneficiaries to medically necessary care provided in temporary 
hospital facilities and freestanding ASCs and may improve outcomes for 
beneficiaries by allowing them to receive treatment in facilities that 
are being used to prevent the spread of COVID-19 to COVID-19-negative 
patients and to mitigate hospitals' lack of capacity and shortages of 
resources. This change is temporary for the duration of Medicare's 
``Hospitals without Walls'' initiative.
b. Reimbursement Modifications Consistent With Medicare Requirements
Adjustments to DRG-Based Payment Amounts
    This IFR implements three changes to DRG-based payment amounts. By 
statute, 10 U.S.C. 1079(i)(2), TRICARE shall, to the extent 
practicable, reimburse institutional providers in accordance with 
Medicare reimbursement rules. As such, TRICARE has generally adopted 
the Medicare inpatient prospective payment system (DRG; e.g., see 32 
CFR 199.14(a)(1)). The first DRG-based payment modification is a result 
of Section 3710 of the CARES Act, which directed Medicare to increase 
the weighting factor of the assigned DRG by 20 percent for an 
individual diagnosed with COVID-19 discharged during the COVID-19 PHE 
period. The ASD(HA) has determined that it is practicable to adopt this 
Medicare DRG adjustment and issues this IFR to adopt Medicare's 
increase of the DRG by 20 percent for an individual diagnosed with 
COVID-19 discharged during the COVID-19 PHE period, retroactive to 
January 27, 2020.
    The second DRG-based payment modification in this IFR permanently 
adopts Medicare's NTAPs. The Benefits and Improvement Protection Act of 
2000 mandated CMS to establish a process of identifying and ensuring 
adequate payment for new medical services and technologies under 
Medicare. In CMS' September 7, 2001, final rule (66 FR 46902), Medicare 
established a methodology to provide hospitals with a new type of 
outlier payment for new medical services and technologies furnished to 
Medicare beneficiaries. CMS implemented the NTAPs in Fiscal Year (FY) 
2003.
    While it may have been practicable for TRICARE to adopt CMS' NTAPs 
when enacted, there was no means to allow coverage for these emerging 
technologies. Coverage of a particular new technology under Medicare 
does not guarantee coverage under TRICARE. The TRICARE benefit is 
covered by a separate set of statutes and while benefits under the two 
programs are similar, they are not identical. Initially, these emerging 
technologies would not have met the coverage criteria under TRICARE's 
hierarchy of reliable evidence, so the NTAP was not adopted. Over time, 
though, Medicare's NTAP provision has added items permitted by TRICARE 
(e.g., orphan drugs for rare diseases). Since all current NTAPs are 
permitted by TRICARE, and any future NTAPs are required to be a TRICARE 
benefit, we find it appropriate to adopt Medicare's NTAP provision now, 
in order to ensure this payment methodology is available for TRICARE 
beneficiaries.
    When TRICARE covers emerging technology as a benefit under existing 
statute and regulation, the DHA will adopt the new technologies DRG 
add-on payment. DHA further adopts CMS' NTAP methodology as specified 
in 42 CFR 412.87 and 412.88. DHA will follow CMS' effective date for 
NTAPs (i.e., currently the FY begin date), and will adopt any changes 
to the Medicare effective date in the future. Medicare typically 
provides NTAPs for two to three years (depending on when the technology 
receives FDA marketing authorization). This provision is effective from 
January 1, 2020, and we will issue a final rule to permanently allow 
NTAPs in the future.
    We invite public comment on all parts of this provision of the IFR, 
including permanent adoption of NTAPs. We feel that since Medicare has 
already published a final rule for the NTAP and collected public 
comment, it is appropriate for TRICARE to adopt under this IFR. The 
ASD(HA) has determined that it is practicable to adopt this Medicare 
DRG adjustment and issues this IFR to adopt Medicare's NTAP for 
otherwise authorized TRICARE services and supplies.
    The final DRG-based payment modification in this IFR permanently 
adopts Medicare's HVBP program. Section 705(a) of the NDAA for FY 2017 
authorizes the development and implementation of value-based incentive 
programs to encourage health care providers to improve the quality and 
delivery of services to Medicare beneficiaries. The statute further 
allows the Secretary to adopt value-based incentive programs conducted 
by CMS or any other federal government, state government, or commercial 
health care program in fulfillment of the statutory authority granted 
under this section.
    Congress authorized the Medicare Inpatient HVBP in Section 3001(a) 
of the Patient Protection and Affordable Care Act. The program uses the 
hospital quality data reporting infrastructure that was developed for 
the Hospital Inpatient Quality Reporting Program, authorized by Section 
501(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003. The Medicare HVBP program provides 
incentives to hospitals that show improvement in areas of health care 
delivery, process improvement, and increased patient satisfaction. The

[[Page 54920]]

program is budget-neutral with a two percent reduction in hospitals' 
base payments being redistributed by Medicare to hospitals in the form 
of incentive payments based on the hospital's Total Performance Score.
    Per 10 U.S.C. 1079(i)(2), the amount to be paid to hospitals, SNFs, 
and other institutional providers under TRICARE shall, by statute, be 
established ``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.'' This IFR adopts Medicare's HBVP program 
for TRICARE, in accordance with this statutory requirement and 
encouragement by Congress to adopt value-based payment mechanisms.
    TRICARE will continue to use its current method of calculating 
hospital DRG weights and rates. Medicare hospital payment adjustments 
would be obtained and applied from the CMS website by the Managed Care 
Support Contractors. The Medicare provider identification number will 
then be used to match the HVBP adjustments to the correct claim and 
apply the adjustment factor to each TRICARE discharge. Adopting 
Medicare's HVBP program approach would not require any additional 
reporting from TRICARE hospitals, as they are currently participating 
in the Medicare HVBP program. DHA will adopt the HVBP adjustment. DHA 
further adopts CMS' HVBP program and methodology. This provision is 
applicable from January 1, 2020, and we will issue a final rule to 
permanently allow Medicare's HVBP adjustments in the future.
    We invite public comment on all parts of this provision of the IFR, 
including permanent adoption of HVBP. We feel that since Medicare has 
already published a final rule for the HVBP and collected public 
comment, it is appropriate for TRICARE to adopt under this IFR. The 
ASD(HA) has determined that it is practicable to adopt this Medicare 
DRG adjustment and issues this IFR to adopt Medicare's HVBP Program.
Reimbursement for Inpatient Services Provided by LTCHs
    Title 32 CFR 199.14(a)(9) Reimbursement for inpatient services 
provided by an LTCH. TRICARE shall reimburse all LTCH cases with an 
admission date occurring on or after January 27, 2020, and admitted 
during the COVID-19 PHE period, the LTCH PPS standard Federal rate for 
claims. This is in accordance with the statutory requirement that 
TRICARE inpatient care ``payments 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.''

D. Legal Authority for This Program

    This rule is issued under 10 U.S.C. 1073(a)(2) giving authority and 
responsibility to the Secretary of Defense to administer the TRICARE 
program. The text of 10 U.S.C. chapter 55 can be found at https://manuals.health.mil/.

II. Regulatory History

    Each of the sections being modified by this rule are revised every 
few years to ensure requirements continue to align with the evolving 
health care field. Title 32 CFR 199.4 was most recently updated on 
September 29, 2017, with an IFR (82 FR 45438) that implemented the 
Congressionally-mandated TRICARE Select benefit plan. Its revision to 
32 CFR 199.4 included the addition of medically necessary foods as a 
benefit under the TRICARE Basic Program. Two paragraphs within Sec.  
199.4 are being modified by this IFR.
    Paragraph 199.4(b)(3)(xiv) was originally created on June 13, 2002 
(67 FR 40602), as part of an IFR partially implementing the TRICARE 
``sub-acute and long-term care program reform'' enacted by Congress in 
the National Defense Authorization Act for Fiscal Year 2002, which 
created 10 U.S.C. 1074j, Sub-Acute Care Program. TRICARE covered SNF 
care prior to this change, but the NDAA required TRICARE to model its 
SNF program on Medicare's, with the exception of Medicare's day limits. 
The regulation adopted Medicare's prospective payment method and most 
of its benefit structure for SNF care, including Medicare's three-day 
prior stay rule. Prior to this change, TRICARE did not have a three-day 
prior stay rule. Paragraph 199.4(b)(3)(xiv) has not been revised since 
its enactment.
    The provisions of paragraph 199.4(g)(15) were last revised on June 
27, 2012 (77 FR 38177), with a clarification of the definition of off-
label coverage of drugs and devices, and the removal a partial list of 
unproven drugs, devices, and medical treatments or procedures. The 
partial list of unproven treatments was eliminated due to rapid and 
extensive changes in medical technology that made it infeasible to 
maintain the list through updates to the regulation. The final rule 
stated unproven treatments would continue to be listed in the TRICARE 
manuals.
    Title 32 CFR 199.6 was last revised on March 17, 2020 (85 FR 
15061); the change added licensed or certified physical therapist 
assistants and occupational therapy assistants as TRICARE-authorized 
providers. Paragraph 199.6(b)(4)(i) with requirements for acute care 
hospitals is a long-standing component of the TRICARE program that has 
not been revised for over 20 years.
    Title 32 CFR 199.14 was last revised on February 15, 2019 (84 FR 
4333), as part of the final rule implementing the TRICARE Select 
benefit program. The revision to Sec.  199.14 delayed the effective 
date for updates to the Civilian Health and Medical Program of the 
Uniformed Services (CHAMPUS) DRG-based payment system based on 
Medicare's Prospective Payment System to January 1 of each year, the 
start date for the program year under TRICARE Select. Two paragraphs 
within Sec.  199.14 are modified by this IFR.
    The first, paragraph 199.14(a)(1)(iii)(E), was last substantially 
revised with a final rule published on September 10, 1998 (63 FR 
48446). Due to an error in the final rule, the changes were not 
formalized until a technical revision was published via a final rule 
correction issued on November 8, 1999 (64 FR 60671). This change 
updated numerous portions of Sec.  199.14 to more closely align TRICARE 
reimbursement with Medicare's. This rule revised paragraph 
199.14(a)(1)(iii)(E) regarding calculation of the indirect medical 
education adjustment factor, as well as the calculation of cost outlier 
payments for children's hospitals.
    The second, paragraph 199.14(a)(9), was most recently modified on 
December 29, 2017 (82 FR 61692), as part of a final rule establishing 
reimbursement rates for LTCHs in accordance with the requirement that 
TRICARE reimburse like Medicare for services of the same type. Prior to 
that, TRICARE covered care in LTCHs but did not follow Medicare's DRG, 
instead reimbursing billed charges or network discount.

III. Regulatory Analysis

A. Regulatory Planning and Review

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

[[Page 54921]]

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. Accordingly, the rule has been 
reviewed by the Office of Management and Budget under the requirements 
of these Executive Orders. This rule has been designated a 
``significant regulatory action'' although, not determined to be 
economically significant, under section 3(f) of Executive Order 12866.
b. Summary
    The modifications to paragraph 199.4(b)(3)(xiv) in this IFR will 
temporarily waive the requirement that an individual was an inpatient 
of a hospital for not less than 3 consecutive calendar days before his 
discharge from the hospital (three-day prior hospital stay), for 
coverage of a SNF admission for those beneficiaries who need to be 
transferred as a result of the effect of COVID-19.
    The modification to paragraph 199.4(g)(15)(i)(A) in this IFR will 
temporarily allow changes to the TRICARE benefit by authorizing cost-
sharing of investigational drugs for the treatment of COVID-19 and its 
sequelae under expanded access. This will expand existing coverage, 
which only permits coverage of care associated with administration of a 
treatment IND, but not the investigational drug itself. This coverage 
will be authorized for treatment use of an investigational drug under 
expanded access but not in clinical trials.
    The modifications to paragraph 199.6(b)(4)(i) in this IFR will 
temporarily exempt temporary hospital facilities and freestanding ASCs 
that enroll as hospitals with Medicare from the institutional provider 
requirements for acute care hospitals described in paragraph 
199.6(b)(4)(i). This will allow these facilities to provide inpatient 
and outpatient hospital services to improve the access of beneficiaries 
to medically necessary care. This change is also consistent with 10 
U.S.C. 1079(i)(2) to reimburse hospitals and other institutional 
providers in accordance with the same reimbursement methodology as 
Medicare, when practicable.
    The modifications to paragraph 199.14(a)(1)(iii)(E) in this IFR 
will temporarily adopt the Medicare Hospital Inpatient Prospective 
Payment Add-On Payment for COVID-19 patients during the COVID-19 PHE 
period, permanently adopt Medicare's NTAP payment and HVBP Program. The 
add-on payment for COVID-19 patients increases the weighting factor 
that would otherwise apply to the DRG to which the discharge is 
assigned, by 20 percent. The NTAP allows for an additional payment in 
addition to the DRG payment, for new and emerging technologies approved 
by Medicare. The HVBP Program provides incentives to hospitals that 
show improvement in areas of health care delivery, process improvement, 
and increased patient satisfaction.
    The modifications to paragraph 199.14(a)(9)(i) in this IFR will 
adopt the Medicare waiver of site neutral payment provisions for LTCHs 
during the COVID-19 PHE period. This modification waives the site 
neutral payment provisions, and reimburses all LTCH cases at the LTCH 
PPS standard Federal rate for claims within the COVID-19 PHE period.
c. Affected Population
    This change impacts all TRICARE beneficiaries who have a serious or 
life threatening case of COVID-19 and would benefit from treatment with 
an investigational drug under expanded access. TRICARE-authorized 
providers will be impacted by being able to treat those patients 
receiving an investigational drug for treatment use under expanded 
access. SNFs, LTCHs, and inpatient hospital care providers will be 
impacted by receiving reimbursement consistent with Medicare's 
reimbursement both for COVID-19 patients and under the NTAP and HVBP 
payment provisions. TRICARE's health care contractors will be impacted 
by being required to implement the provisions of this regulatory 
change. State, local, and tribal governments will not be impacted.
d. Costs
    The cost estimates related to the changes discussed in this IFR 
include incremental health care cost increases as well as 
administrative costs to the government. The duration of the COVID-19 
national emergency and HHS PHE are uncertain, resulting in a range of 
estimates for each provision in this IFR. Cost estimates are provided 
for an approximate nine-month (ending 12/31/2020) and eighteen-month 
scenario (ending 9/30/2021). The nine-month and 18-month periods would 
be longer for those provisions applicable beginning in January of this 
year, and shorter for those effective the date this IFR publishes. The 
terms nine-month and 18-month period are used throughout this estimate 
for the sake of simplicity.
    The cost estimates consider whether the outbreak will have more 
than one active stage. The first active stage is considered to be March 
through August 2020, based on the Institutes for Health Metrics and 
Evaluation data as of May 27, 2020.\3\ A two-wave scenario would have a 
second stage in winter/spring 2021, while a three-wave scenario would 
have additional waves from September 2020 to December 2020 and from 
January 2021 to June 2021.
---------------------------------------------------------------------------

    \3\ https://covid19.healthdata.org/united-states-of-america.
---------------------------------------------------------------------------

    Based on these factors, we estimate that the total cost estimate 
for this IFR will be between $43.6M and $59.4M for a nine-month period, 
and $66.3M to $82.1M for an 18-month period. This estimate includes 
just over $1M in administrative start-up costs and no ongoing 
administrative costs. The primary cost drivers in this analysis are the 
reimbursement changes being adopted under the statutory requirement 
that TRICARE reimburse like Medicare; that is, the 20 percent DRG 
increase for COVID-19 patients, the adoption of NTAPs and HVBP, and the 
waiver of LTCH site neutral payment reductions.
    A breakdown of costs, by provision, is provided in the below table. 
A discussion of assumptions follows.

------------------------------------------------------------------------
                                        Nine-month       Eighteen-month
             Provision                 scenario (M)       scenario (M)
------------------------------------------------------------------------
Paragraph 199.4(b)(3)(xiv)--SNF                  $0.3               $0.6
 Three-Day Prior Stay Waiver......
Paragraph 199.4(g)(15)(A)--                   0.7-2.2            2.7-4.2
 Investigational Drugs under
 Expanded Access for COVID-19.....
Paragraph 199.6(b)(4)(i)--                          0                  0
 Temporary Hospitals and
 Freestanding ASCs Registering as
 Hospitals........................
Paragraph 199.14(a)(1)(iii)(E)(2)--           27.7-42          37.1-51.4
 20 Percent DRG Increase for COVID-
 19 Patients......................
Paragraph 199.14(a)(1)(iii)(E)(5)--               5.7               11.6
 NTAPs............................

[[Page 54922]]

 
Paragraph 199.14(a)(1)(iii)(E)(6)--               2.5                2.5
 HVBP.............................
Paragraph 199.14(a)(9)--LTCH Site                 5.6               10.6
 Neutral Payments.................
Administrative Costs..............                1.1                1.2
                                   -------------------------------------
    Estimated Total Cost Impact...          43.6-59.4          66.3-82.1
------------------------------------------------------------------------

    Assumptions specific to the estimates for each individual provision 
are explained below.
     SNF Three Day Prior Stay. A three-percent increase in SNF 
admissions directly from the community was assumed.
     Treatment use of Investigational Drugs for COVID-19 or 
Associated Sequelae under Expanded Access. The Expanded Access cost 
estimate assumes that investigational drugs for the treatment of COVID-
19 under expanded access available during the period of the national 
emergency would include convalescent plasma (approximately $1,000 per 
patient), a new hospital-based infusion antiviral ($2,500 per patient), 
and two oral antivirals ($200 per 10-pack). The number of 
investigational drugs available to TRICARE beneficiaries, the extent to 
which the FDA authorizes expanded access to such investigational drugs 
for treatment use, and the length of time until marketing approval of 
the drug by FDA, or emergency use authorization, are highly uncertain.
     Temporary Hospitals and Freestanding ASCs Registering as 
Hospitals. This zero cost estimate assumes that inpatient care provided 
in these alternate sites is care that would have been reimbursed under 
TRICARE but for a lack of acute care hospital facility space (i.e., we 
do not estimate that there would be any induced demand because of an 
increase in facilities). Additionally, it assumes that while 
reimbursement for outpatient procedures in freestanding ASCs would be 
higher than had those procedures been reimbursed under the traditional 
reimbursement rates for freestanding ASCs, the number of facilities 
choosing to register as hospitals is likely to be small enough to have 
a negligible impact on the budget.
     DRG Increase for COVID-19 Patients. Under a three-wave 
scenario, we assumed a total of 34,300 TRICARE beneficiaries under the 
age of 65 would be hospitalized with diagnoses related to COVID-19 
during the 18-month period. Total cost for hospitalization of these 
patients would be $390M, with $51M as the incremental cost increase of 
implementing the 20 percent DRG increase. We did not include Medicare-
eligible patients in our estimate, as TRICARE's cost-share would not 
change for these patients.
     NTAPs. We assumed TRICARE NTAPs would be a similar 
percentage of inpatient spending to Medicare's NTAP usage and that 
TRICARE would adopt all of Medicare's NTAPs. This amount will vary 
depending on the number of new NTAPs adopted by Medicare each year, the 
extent to which Medicare-identified emerging technologies are covered 
under TRICARE's statutory and regulatory requirements, and the extent 
to which TRICARE's population utilizes these technologies. The costs 
for this provision may overestimate the incremental costs of this 
regulatory change, because many of these claims are being approved on a 
case-by-case basis by the Director, DHA, under waiver authority. In 
those cases, adopting NTAPs is likely to reflect a cost savings, as 
waivers are typically paid at billed charges.
     HVBP Program. Due to our retroactive implementation of the 
HVBP Program, we anticipate that those hospitals qualifying for a 
positive adjustment for prior claims would do so, while those with 
negative adjustments or adjustments close to zero dollars would not. 
This would result in a cost in the first year, with claims in following 
years assumed to be budget neutral.
     LTCH Site Neutral Payments. TRICARE is in the process of 
phasing in Medicare's site-neutral payment rates. This cost estimate 
assumes that phase-in is halted and all TRICARE LTCH claims are paid at 
the full LTCH PPS rate.
    Depending on the impact of certain provisions of this IFR, some 
cost savings could be achieved from a reduction in hospitalization 
rates (i.e., use of investigational drugs for treatment use under 
expanded access), estimated from no savings to $40M over 18 months. The 
amount of cost-savings achieved will be determined by the therapies 
developed, how widespread their usage is, the extent to which the 
therapies are authorized for treatment use under expanded access, the 
effectiveness of the therapies in reducing hospitalizations and/or the 
use of mechanical ventilators, and how long the therapies remain 
investigational before transitioning to FDA-approval or emergency use 
authorization.
    Any benefits achieved in reduced hospitalizations and/or mechanical 
ventilator use are also benefits to TRICARE beneficiaries, for whom 
avoidance of more serious COVID-19 illness is of paramount concern. 
While we cannot estimate the value of this avoidance in quantitative 
figures, the potential long-term consequences of a serious COVID-19 
illness, including permanent cardiac or lung damage, are not 
insignificant. If beneficiaries are able to access emerging therapies 
that prevent long-term consequences (including death), this will be a 
benefit to the beneficiary.
    The largest creators of costs under this IFR (reimbursement 
changes) are not anticipated or intended to create any cost savings. 
However, these changes will benefit TRICARE institutional providers and 
take stress off the entire health care system by ensuring adequate 
reimbursement during the PHE, at a time during which hospitals are 
losing revenue due to reduced elective procedures and patients who 
delay care due to fears of contracting COVID-19 during health care 
encounters. Ensuring a robust health care system is of benefit to our 
beneficiaries and the general public, particularly in rural or 
underserved areas, even though this benefit is not quantifiable.
e. Benefits
    The benefit changes in this IFR will positively impact TRICARE 
beneficiaries diagnosed with COVID-19 by ensuring that they have access 
to treatment with investigational drugs authorized by the FDA under 
expanded access (not in clinical trial settings). This change expands 
the therapies available to TRICARE beneficiaries while doing so in 
settings that ensure informed consent of the beneficiary, and that the 
benefits of treatment outweigh the potential risks. Providers will be 
positively impacted by being able to provide their patients with a 
broader range of treatment options. The expansion of providers who can 
provide

[[Page 54923]]

inpatient and outpatient hospital services positively benefits 
beneficiaries, who will have increased access to acute care facilities, 
and providers, who will have increased options for providing their 
beneficiaries with said care. SNFs and acute care hospitals will be 
positively impacted by the ability to more quickly transition patients 
from acute care to skilled nursing care. LTCH and inpatients hospitals 
will be positively impacted by increased reimbursement when caring for 
patients with COVID-19.
f. Alternatives
    The DoD considered several alternatives to this IFR. The first 
alternative involved taking no action. Although this alternative would 
be the most cost neutral for DHA, it was rejected as not addressing the 
urgent medical needs of the beneficiary population in response to the 
COVID-19 pandemic. Additionally, it would fail to fulfill the statutory 
mandate that TRICARE reimburse like Medicare.
    The second alternative the DoD considered was implementing a more 
limited benefit change for COVID-19 patients by not covering 
investigational drugs for treatment use under expanded access. While 
this would have the benefit of reimbursing only care that has more 
established evidence in its favor, this alternative is not preferred 
because early access to treatments is critical for TRICARE 
beneficiaries given the rapid progression of the disease and the lack 
of available approved treatments.

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

    The Secretary certifies that this IFR is not subject to the 
flexibility analysis requirements of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.) because it would not, if promulgated, have a 
significant economic impact on a substantial number of small entities. 
The great majority of hospitals and most other health care providers 
and suppliers are small entities, either by being nonprofit 
organizations or by meeting the SBA definition of a small business 
(having revenues of less than $8.0 million to $41.5 million in any one 
year). Individuals and states are not included in the definition of a 
small entity. The provisions of this IFR that are most likely to have 
an economic impact on hospitals and other health care providers are the 
reimbursement provisions adopted to meet the statutory requirement that 
we reimburse like Medicare. As its measure of significant economic 
impact on a substantial number of small entities, HHS uses an adverse 
change in revenue of more than 3 to 5 percent. While TRICARE is not 
required to follow this guidance in the issuance of our rules, we 
provide this metric for context, given that these temporary changes 
align with similar changes made by Medicare.
    Given that the temporary reimbursement provisions of this IFR 
increase reimbursement for hospitals and LTCHs, we find that these 
provisions would not have an adverse impact on revenue for hospitals 
and, therefore, would not have a significant impact on these hospitals 
and other providers meeting the definition of small business. We also 
find that NTAPs, given that they increase revenue under the DRG system, 
would not have an adverse impact on hospitals and providers. The HVBP 
program would not reduce revenue for a hospital being penalized under 
the system beyond the HHS threshold. Lastly, coverage of 
investigational drugs for treatment under expanded access and allowing 
temporary hospitals and freestanding ASCs to register as inpatient 
hospitals are not expected to result in any adverse economic impact on 
hospitals or other health care providers.
    Therefore, the Regulatory Flexibility Act, as amended, does not 
require us to prepare a regulatory flexibility analysis.

C. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

D. Sec. 202, Public Law 104-4, ``Unfunded Mandates Reform Act''

    Section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1532) requires agencies to 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. This IFR 
will not mandate any requirements for State, local, or tribal 
governments, nor will it affect private sector costs.

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

    It has been determined that 32 CFR part 199 does not impose 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act of 1995.

F. Executive Order 13132, ``Federalism''

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates an IFR (and subsequent final rule) 
that imposes substantial direct requirement costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications. This IFR does not preempt State law or impose substantial 
direct costs on State and local governments.

List of Subjects in 32 CFR Part 199

    Administrative practice and procedure, Claims, Dental, Fraud, 
Health care, Health insurance, Individuals with disabilities, Mental 
health programs, and Military personnel.

    Accordingly, 32 CFR part 199 is 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.  199.4 by:
0
a. Adding a parenthetical sentence after the third sentence of 
paragraph (b)(3)(xiv) introductory text; and
0
b. Adding a sentence at the end of the second paragraph of the NOTE to 
paragraph (g)(15)(i)(A) and redesignating the note as ``Note to 
paragraph (g)(15)(i)(A)''.

    The additions read as follows:


Sec.  199.4  Basic program benefits.

* * * * *
    (b) * * *
    (3) * * *
    (xiv) * * * (The three-day hospital stay requirement is waived for 
the duration of the President's national emergency for the coronavirus 
disease 2019 (COVID-19) outbreak.) * * *
* * * * *
    (g) * * *
    (15) * * *
    (i) * * *
    (A) * * *

    Note to paragraph (g)(15)(i)(A): * * *
    * * * For the duration of the President's national emergency in 
response to the COVID-19 outbreak, TRICARE will cost-share 
investigational drugs provided for the treatment of COVID-19 under 
expanded access.

* * * * *

0
3. Amend Sec.  199.6 by adding a note following paragraph (b)(4)(i)(I) 
to read as follows:


Sec.  199.6  TRICARE-authorized providers.

* * * * *
    (b) * * *
    (4) * * *
    (i) * * *
    (I) * * *

    Note to paragraph (b)(4)(i)(I): 
     For the duration of Medicare's ``Hospitals without Walls'' 
initiative for the coronavirus

[[Page 54924]]

disease 2019 (COVID-19) outbreak, certain temporary hospitals and 
freestanding ambulatory surgical centers (ASCs) that enroll with 
Medicare as hospitals may be temporarily exempt from certain 
institutional requirements for acute care hospitals in this 
paragraph 199.6(b)(4)(i), as determined by the Director, Defense 
Health Agency (DHA), or designee, to ensure access to acute 
inpatient care during the COVID-19 outbreak.

* * * * *

0
4. Amend Sec.  199.14 by:
0
a. Revising paragraph (a)(1)(iii)(E)(2);
0
b. Adding paragraphs (a)(1)(iii)(E)(5) and (6); and
0
c. Adding a note following paragraph (a)(9)(i).
    The revision and additions read as follows:


Sec.  199.14  Provider reimbursement methods.

    (a) * * *
    (1) * * *
    (iii) * * *
    (E) * * *
    (2) Wage adjustment. CHAMPUS will adjust the labor portion of the 
standardized amounts according to the hospital's area wage index. The 
wage adjusted DRG payment will also be multiplied by 1.2 for an 
individual diagnosed with COVID-19 and/or Coronavirus discharged during 
the Secretary of Health and Human Services' declared public health 
emergency (PHE).
* * * * *
    (5) Additional payment for new medical services and technologies. 
TRICARE will, for TRICARE authorized services/supplies, adopt the 
Medicare New Technology Add On Payments (NTAPs) adjustment to DRGs for 
new medical services and technologies as implemented under 42 CFR 
412.87, when determined by the Assistant Secretary of Defense for 
Health Affairs (ASD(HA)), as practicable. The Director, Defense Health 
Agency (DHA), shall provide notice of the issuance of policies and 
guidelines adopting such adjustments together with any variations 
deemed necessary to address unique issues involving the beneficiary 
population or program administration.
    (6) Hospital Value Based Purchasing. TRICARE will adopt the 
Medicare Hospital Value Based Purchasing (HVBP) Program adjustments to 
DRGs to incentivize hospitals as implemented under 42 CFR 412.160, when 
determined by the ASD(HA), as practicable. The Director, DHA, shall 
provide notice of the issuance of policies and guidelines adopting such 
adjustments together with any variations deemed necessary to address 
unique issues involving the beneficiary population or program 
administration.
* * * * *
    (9) * * *
    (i) * * *

    Note to paragraph (a)(9)(i): 
    LTCH admissions that are in response to the COVID-19 declared 
PHE and occur during the COVID-19 PHE period will be reimbursed the 
LTCH PPS standard Federal rate.

* * * * *

    Dated: August 31, 2020.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2020-19594 Filed 9-1-20; 1:00 pm]
BILLING CODE 5001-06-P