[Federal Register Volume 88, Number 8 (Thursday, January 12, 2023)]
[Rules and Regulations]
[Pages 1992-2002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00381]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[Docket ID: DoD-2021-HA-0015]
RIN 0720-AB85


Expanding TRICARE Access to Care in Response to the COVID-19 
Pandemic

AGENCY: Department of Defense.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Assistant Secretary of Defense for Health Affairs 
(ASD(HA)) issues this interim final rule (IFR) with comment to modify 
the TRICARE regulation by adding freestanding End Stage Renal Disease 
(ESRD) facilities as a category of TRICARE-authorized institutional 
provider and establishing reimbursement for such facilities and by 
temporarily adopting Medicare's New Coronavirus Disease 2019 (COVID-19) 
Treatments Add-on Payments (NCTAPs).

DATES: 

[[Page 1993]]

    Effective date: This IFR with comment is effective on January 12, 
2023 through the end of the declared public health emergency (PHE), 
including any extensions, (as determined by 42 United States Code 
(U.S.C.) 247d), except the changes to ESRD facility provider status and 
reimbursement are permanent and will not expire. The ASD(HA) will 
publish a document announcing the expiration date for the temporarily 
adopted Medicare NCTAPs consistent with information in the 
SUPPLEMENTARY INFORMATION section.
    Applicability date: Changes to ESRD provider status and facility 
reimbursement and the NCTAP provisions are applicable for TRICARE 
covered services received on or after the effective date of this IFR.
    Comment date: Comments are invited and must be submitted on or 
before March 13, 2023.

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: Department of Defense, Office of the Assistant to 
the Secretary of Defense for Privacy, Civil Liberties, and 
Transparency, Regulatory Directorate, 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.
     Jahanbakhsh Badshah, Defense Health Agency, Medical 
Benefits and Reimbursement Section, 303-676-3881, 
[email protected], or Jennifer Stankovic, Defense 
Health Agency, Medical Benefits and Reimbursement Section, 303-676-
3742, [email protected], for issues related to 
freestanding End Stage Renal Disease facilities.
     Sharon Seelmeyer, Defense Health Agency, Medical Benefits 
and Reimbursement Section, 303-676-3690, 
[email protected], for issues related to NCTAPs.

SUPPLEMENTARY INFORMATION: Expiration date: Unless extended after 
consideration of submitted comments, the provision adopting Medicare 
NCTAPs will expire the last day of the fiscal year (FY) in which the 
Secretary of the Department of Health and Human Services (HHS) 
terminates the COVID-19 PHE. The adoption of ESRD facilities as a type 
of TRICARE-authorized institutional provider and the changes to the 
reimbursement of such facilities are permanent and will not expire.
    The ASD(HA) will publish a document in the Federal Register 
announcing the expiration date, as appropriate, and will publish a 
Final Rule with any modifications made after consideration of public 
comments, the impact of the provisions in this IFR, and changes in the 
state of the COVID-19 pandemic.

I. Executive Summary

A. Purpose of the Rule

    There is currently an outbreak of respiratory disease caused by a 
novel coronavirus. The virus has been named ``SARS-CoV-2,'' and the 
disease it causes is referred to as COVID-19. On January 31, 2020, the 
Secretary of HHS determined that a PHE had existed since January 27, 
2020. 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). The current administration has 
continued the national emergency declaration, via a notice issued 
February 18, 2022, which was published in the Federal Register on 
February 23, 2022 (87 FR 10289). 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.
    While the substantial access to COVID-19 vaccinations in the United 
States initially resulted in State and local governments relaxing 
restrictions for individuals and in improved conditions for health care 
providers due to the decreasing rate of new COVID-19 cases, the 
emergence of the Delta variant of the virus, which proved to be more 
infectious and more resistant to vaccination, resulted in a surge of 
COVID-19 infections in the United States, as well as an increase in the 
rate of hospitalizations, deaths, and health care providers at 
capacity. In July 2021, the Centers for Disease Control and Prevention 
(CDC) released guidance recommending that both vaccinated and 
unvaccinated individuals wear face masks in public indoor settings in 
areas of substantial or high transmission. Likewise, the Federal 
Government and many State, local, and tribal governments resumed or 
increased various restrictions. In December 2021, the Omicron variant 
replaced the Delta variant as the predominant COVID-19 variant in the 
United States. Although the Omicron variant is reportedly less severe 
than previous variants, it also results in a much higher level of 
transmission than previous variants and is still responsible for high 
levels of severe illness, hospitalization, and death, primarily in the 
unvaccinated and immunocompromised populations. Additionally, COVID-19 
vaccines available in the United States are currently less effective at 
preventing COVID-19 caused by the Omicron variant. The CDC also states 
that new variants of COVID-19 are expected to occur, and that even if a 
variant is less severe in general, ``an increase in the overall number 
of cases could cause an increase in hospitalizations, put more strain 
on healthcare resources and potentially lead to more deaths.'' \1\ 
Thus, the pandemic continues to threaten to strain the health care 
system. Although most States have again relaxed restrictions, due to 
the continuation of pandemic conditions--namely the continuing rates of 
new cases; hospitalizations; deaths; providers rationing health care 
resources; and intensive care units at or beyond capacity--the 
President has continued the national emergency declaration.
---------------------------------------------------------------------------

    \1\ https://www.cdc.gov/coronavirus/2019-ncov/variants/about-variants.html?s_cid=11723:covid%2019%20variants%20of%20concern:sem.ga:p:RG:GM:gen:PTN:FY22.
---------------------------------------------------------------------------

    Consistent with the President's national emergency declaration and 
as a result of the 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 expanded access to 
care required for the treatment of COVID-19 and for other medically 
necessary care, and that TRICARE continues to reimburse like Medicare, 
to the extent practicable, as required by 10 U.S.C. 1079(i).
    Freestanding ESRD Facilities 32 CFR 199.6(b)(4)(xxi) and 199.14(c): 
These provisions establish freestanding ESRD facilities as 
institutional providers within the TRICARE program and establish a 
TRICARE reimbursement methodology for freestanding ESRD facilities. 
Currently these facilities are classified as Corporate Service 
Providers (CSPs) and are reimbursed using a fee-for-service (FFS) 
methodology for covered professional services, and may not be paid 
institutional charges (e.g., reimbursement for general nursing services 
or the use of treatment rooms).

[[Page 1994]]

The inclusion of freestanding ESRD facilities as institutional 
providers is required first in order to permit TRICARE reimbursement of 
institutional charges. Both changes (making these providers authorized 
institutional providers and adding a reimbursement methodology) will 
make TRICARE reimbursement of freestanding ESRD facilities, as well as 
dialysis services and supplies, more consistent with the Medicare 
reimbursement methodology for freestanding ESRD facilities, in 
accordance with the statutory requirement in 10 U.S.C. 1079(i) to 
reimburse like Medicare for like services and supplies provided by an 
authorized TRICARE institutional provider when determined to be 
practicable as required. These permanent changes are included in this 
IFR because existing restrictions on ESRD facilities (i.e., provider 
status and professional services only-based reimbursement) reduce 
access to medically necessary, often lifesaving services for 
immunocompromised ESRD patients. This is of even greater concern during 
the COVID-19 pandemic, especially with the emergence of the Delta 
variant, which is more severe and more resistant to vaccination in 
immunocompromised individuals (i.e., those with ESRD), and the Omicron 
variant, which is much more resistant to vaccination and much more 
transmissible than previous variants.
    DRG Add-on for NCTAP 32 CFR 199.14(a)(1)(iv)(C): This change 
temporarily adopts Medicare's NCTAP under the Inpatient Prospective 
Payment System (IPPS) for COVID-19 cases that meet Medicare's criteria. 
By statute, 10 U.S.C. 1079(i), TRICARE shall, to the extent 
practicable, reimburse institutional providers in accordance with 
Medicare reimbursement rules. As such, TRICARE has generally adopted 
the Medicare IPPS using the Diagnosis-Related Group (DRG) system (32 
CFR 199.14(a)(1)). Based on Section 3710 of the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136), 
Medicare increased the weighting factor of the assigned DRG by 20 
percent for an individual diagnosed with COVID-19 discharged during the 
COVID-19 PHE period. On November 6, 2020 (effective November 2, 2020), 
the Centers for Medicare and Medicaid Services (CMS) issued an IFR (85 
FR 71142), further increasing the current IPPS payment amounts as drugs 
and biological products become available and are authorized or approved 
by the Food and Drug Administration for the treatment of COVID-19 in 
the inpatient setting for the duration of the PHE. In a final rule (86 
FR 44774), CMS subsequently extended the NCTAP expiration date to the 
end of the FY in which the PHE ends for all eligible products, with any 
new technology add-on payment reducing the NCTAP amount. CMS stated 
that they pursued this change because they ``anticipate that there 
might be inpatient cases of COVID-19, beyond the end of the PHE, for 
which payment based on the assigned Medicare Severity-DRG may not 
adequately reflect the additional cost of new COVID-19 treatments'' and 
they wish to ``continue to mitigate potential financial disincentives 
for hospitals to provide these new treatments, and to minimize any 
potential payment disruption immediately following the end of the 
PHE.'' In issuing a final rule, the DoD may make modifications based on 
public comments received, the impact of the provisions in this IFR, and 
any changes in the conditions surrounding the pandemic.

B. Interim Final Rule Justification

    Agency rulemaking is governed by 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, 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) 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 to the public interest. For 
both the NCTAP and ESRD provisions, the ASD(HA) has determined notice 
and public comment before promulgation of this rule would be contrary 
to the public interest and therefore finds good cause to enact the 
changes described in this rule through an IFR, effective the date of 
publication in the Federal Register. The ASD(HA)'s justification is as 
follows:
    First, as of this rule's writing, both the PHE and the President's 
declared national emergency are still in effect; therefore, the 
Administration still finds COVID-19 to be an emergency situation and 
unnecessary delays should be avoided to the greatest extent possible. 
While DoD acknowledges that the pandemic has been ongoing for many 
months, DoD maintains that, given the ongoing uncertainty as to what 
dangers future COVID-19 variants may pose, it is impracticable and 
contrary to the public interest to delay these regulations until a full 
public notice-and-comment process is completed. Second, patients and 
providers alike continue to struggle due to burdens imposed by the 
COVID-19 pandemic. The emergence of the Delta and Omicron variants have 
resulted in increased COVID-19 cases, hospitalizations, and deaths, 
which have worsened resource constraints on providers, limited access 
to medically necessary health care services and supplies for TRICARE 
beneficiaries, and cost many beneficiaries their health and their 
lives. Meanwhile, the trajectory of COVID-19, including number of 
future variants and severity of each variant, remains an unknown 
variable. In such a precarious and uncertain healthcare landscape, it 
is imperative that TRICARE ensure continued access to care for TRICARE 
beneficiaries while simultaneously following its statutory mandate to 
pay for like services and supplies using Medicare reimbursement 
methodologies, when practicable. In promulgating this IFR, the Defense 
Health Agency (DHA) has evaluated and re-evaluated each provision to 
ensure the IFR remains up to date with current developments during the 
COVID-19 pandemic and to publish only such requirements and authorities 
that DHA deems necessary to respond to the declared national emergency 
and PHE in order to best provide for the health of TRICARE 
beneficiaries. It is likewise crucial that TRICARE authorize ESRD 
facilities as institutional providers as expeditiously as possible to 
ameliorate the resource constraints current TRICARE-authorized 
providers are facing and increase the access of beneficiaries with a 
life-threatening disease to proven, medically necessary care in the 
most appropriate setting. Considerations specific to the two provisions 
contained in this IFR are discussed in greater depth below. Finally, 
this rule imposes no restrictions, financial penalties, or regulatory 
burdens on the public that would make a notice and comment period 
necessary or prudent; in fact, this IFR would ensure better access to 
medically necessary care for TRICARE beneficiaries by providing 
appropriate reimbursement to TRICARE providers. We anticipate no 
negative feedback from the general public on the provisions within this 
IFR; advance notice and comment would only delay increased payment to 
providers and improved access to care for beneficiaries. Moreover, an 
earlier DHA COVID-19 IFR (85 FR 54914-54924) that relaxed

[[Page 1995]]

certain regulatory restrictions for providers and increased 
reimbursement to providers in order to follow Medicare reimbursement 
methodologies received no negative comments. A delay to wait for a 
notice and comment period is therefore impracticable and is contrary to 
public interest and public health. Further, the public is still 
encouraged to comment on this IFR and DHA is committed to responding to 
any comments in a future final rule.
    Specifically regarding the adoption of Medicare's NCTAPs, it is 
crucial that providers be reimbursed adequately for COVID-19 treatments 
involving new, high-cost services and supplies to which Medicare has 
deemed appropriate to apply an add-on payment. Adopting this change 
will ensure that TRICARE beneficiaries continue to receive maximized 
access to new, high-cost COVID-19 treatments such as remdesivir and 
convalescent plasma as well as any qualifying treatments that may 
follow. CMS established the NCTAP ``to increase the current IPPS 
payment amounts to mitigate any potential financial disincentives for 
hospitals to provide new COVID-19 treatments during the PHE'' in an IFR 
(85 FR 71142) published November 6, 2020. Due to the statutory 
requirement that TRICARE reimburse providers using Medicare 
reimbursement methodologies for like services and supplies, when 
practicable, DHA adopted these changes, as well as the changes made in 
this IFR, because the ASD(HA) determined that such changes were 
practicable and necessary due to the COVID-19 pandemic. Although DHA is 
not required to adopt all Medicare reimbursement methodologies--only 
those that are practicable--the ASD(HA) does find it practicable to 
adopt Medicare's NCTAP and likewise finds it necessary to promulgate 
this change in an IFR, effective the publication date of this IFR (i.e. 
dispensing with prior notice and opportunity for public comment due to 
good cause), for the reasons discussed in this section and throughout 
this preamble. By not matching Medicare reimbursement as anticipated 
under statutory requirements and after DHA has previously adopted 
Medicare reimbursement changes specific to the PHE, providers may be 
hesitant to take on TRICARE beneficiaries as patients, especially while 
they continue to struggle financially. Such a scenario could occur 
during the remainder of the COVID-19 PHE if provider resource 
constraints continue or worsen or another variant surges. DoD wishes to 
avoid any such scenario which could impede TRICARE beneficiary future 
access to care and which may also decrease beneficiary satisfaction, 
decrease beneficiary outcomes, and negatively impact active duty 
service member readiness.
    Additional good cause exists to publish as an IFR the permanent 
amendments to the TRICARE regulation regarding adoption of freestanding 
ESRD facilities as authorized institutional providers and modifications 
to the reimbursement of freestanding ESRD facilities. 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. Medicare recognizes freestanding and 
hospital-based ESRD facilities as institutional providers and 
reimburses ESRD facilities using a specific ESRD Prospective Payment 
System (PPS). Due to historically low volume, TRICARE has neither 
classified freestanding ESRD facilities as institutional providers nor 
adopted the Medicare ESRD PPS. However, in recent years, there has been 
increasing volume of TRICARE beneficiaries requiring ESRD services and 
DHA has determined that because the TRICARE payment methodology for 
freestanding ESRD facilities designated as CSPs does not reimburse 
these facilities for their institutional charges, this could result in 
freestanding ESRD providers declining to accept TRICARE patients who 
need dialysis and other ESRD services and supplies. As such, the 
ASD(HA) has determined that, while it would be impracticable to adopt 
the Medicare ESRD PPS, it is practicable to adopt a TRICARE-specific 
ESRD rate that approximates the Medicare ESRD rate. The national 
emergency caused by the COVID-19 pandemic and extended by the Delta, 
Omicron, and potentially other future variants has resulted in a severe 
shortage of health care providers and supplies, and it is imperative 
that (1) TRICARE beneficiaries have maximized access to care for ESRD 
services and (2) ESRD services are available, where appropriate, 
outside hospital settings to ensure that hospitals are more efficiently 
able to maximize resources to treat COVID-19 and other conditions 
requiring the acuity of inpatient or outpatient hospital settings. Due 
to these resource constraints for providers and the lack of 
reimbursement for institutional charges under the TRICARE program's 
existing reimbursement methodology based on restricted TRICARE provider 
status, ESRD facilities have notified DHA that they may be forced to 
leave the TRICARE private sector network if payment rates do not 
include reimbursement for institutional charges. A reduction in network 
ESRD facilities would severely restrict the access of TRICARE 
beneficiaries to life-saving ESRD services and supplies during the 
remainder of the COVID-19 pandemic and could impose additional, 
unnecessary costs on TRICARE beneficiaries who consequently have to 
choose care from a provider who is out of network or is not a 
participating provider within the TRICARE program. Barriers to access 
and increased costs could prevent TRICARE beneficiaries from seeking or 
receiving medically necessary treatment for ESRD. Furthermore, ESRD is 
a life-threatening condition and patients with ESRD are 
immunocompromised--and therefore more susceptible to COVID-19-so it is 
especially imperative during the COVID-19 pandemic that these 
beneficiaries receive prompt, accessible, high-quality ESRD services in 
the most appropriate setting. Having patients with ESRD receive 
treatment in an ESRD facility rather than in another setting may also 
improve capacity or other resource constraints that other institutional 
providers are facing during the COVID-19 pandemic; by not treating ESRD 
patients, these providers will be able to focus their resources on 
treating other patients, such as those with COVID-19 during times of 
surging infection rates or new variants. For example, should hospitals 
continue to experience periodic patient admission surges, TRICARE 
beneficiaries who are ESRD patients would neither be occupying valuable 
emergency department and inpatient beds nor would they be turned away 
from treatment due to hospitals being over capacity, as they could be 
treated in freestanding ESRD facilities instead of in a hospital 
setting (as appropriate for their specific medical needs). Lastly, DoD 
intends to make this change in ESRD provider status and reimbursement 
methodology permanent, in conformance with statutory mandates to 
reimburse providers of services of the same type (i.e., institutional 
providers) to the extent practicable in accordance with Medicare 
reimbursement methodologies. While ensuring adequate access to ESRD 
providers by immunocompromised TRICARE ESRD patients during the COVID-
19 national emergency, it would not be practicable or efficient to 
revoke the new provider status and fail to continue reimbursing ESRD 
providers to the extent practicable in accordance with Medicare

[[Page 1996]]

reimbursement upon the expiration of the President's national emergency 
declaration.
    In exercising the authority under statute 5 U.S.C. 553(b)(B), the 
ASD(HA) has determined that good cause exists to avoid delay as further 
notice and public comment would be impracticable and contrary to the 
public interest. Nonetheless, public comments on this IFR are still 
invited and DoD is committed to considering all comments in enacting 
any final regulations. 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 and due to the fact that no harm could occur in 
implementing this rule effective upon publication, as it does not 
impose any burdens upon the public but rather increases their 
reimbursement, 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 Federal Register.

C. Summary of Major Provisions

Freestanding ESRD Facilities
    These provisions, 32 CFR 199.6 and 199.14, establish freestanding 
ESRD facilities as institutional providers under the TRICARE Program 
and modify TRICARE reimbursement of ESRD facilities.
ESRD Background and Coverage
    ESRD is the fifth and final stage of Chronic Kidney Disease and 
necessitates long-term dialysis or a kidney transplant; without 
treatment, death is imminent. There are three treatment options for 
ESRD, including two types of dialysis. First, patients may receive a 
kidney transplant; however, there are approximately 100,000 individuals 
on the national kidney transplant list at any given point in time, but 
only 20,000 kidneys available each year in the United States. 
Consequently, most ESRD patients receive dialysis until they can 
receive a kidney transplant from a suitable donor. A patient may 
receive hemodialysis, in which the patient's blood is filtered 
externally before being returned to the body. Most patients (86%) begin 
ESRD treatment receiving this type of dialysis, which can be performed 
at home or in an inpatient or outpatient medical facility. 
Alternatively, a patient may receive peritoneal dialysis, in which 
fluid is injected into the patient's abdomen, blood is filtered, and 
waste is filtered out through a semi-permanent tube. Although this type 
of dialysis can be performed in a patient's home, fewer than 11% of 
patients begin ESRD receiving this type of dialysis. The remaining 3% 
of patients beginning ESRD treatment receive a preemptive kidney 
transplant.
    In 1972, Congress passed an amendment to the Social Security Act 
(Pub. L. 92-603), which added ESRD to the list of qualifying conditions 
for which a person is entitled to enroll in Medicare. ESRD patients 
under the age of 65 must undergo a waiting period before being able to 
enroll in Medicare. Currently, TRICARE beneficiaries are eligible for 
Medicare coverage on the basis of an ESRD diagnosis on the first day of 
the fourth month of dialysis treatment, after which the beneficiary, if 
enrolled in Medicare, becomes dual eligible (i.e., both a beneficiary 
of TRICARE and Medicare). Therefore, for those beneficiaries enrolled 
in Medicare, TRICARE is first payer during the first three months of 
dialysis treatment for beneficiaries under age 65 and is second payer 
starting with the fourth month of treatment. Approximately 500 to 600 
TRICARE beneficiaries who are not already enrolled to Medicare receive 
dialysis each year. Most claims for dialysis received by TRICARE 
(approximately 90%) are for individuals with both TRICARE and Medicare 
eligibility.
Freestanding ESRD Facilities
    The term ``freestanding ESRD facilities'' refers to non-hospital, 
freestanding providers that render services and supplies related to 
ESRD, including outpatient dialysis treatments, home dialysis training 
and equipment, drugs and biologicals, laboratory tests, and nursing 
services. Freestanding ESRD facilities may also provide dialysis 
services for acute kidney injury (AKI), and will be reimbursed for AKI 
services under the provisions established in this IFR. ESRD facilities 
may also be known as Dialysis Facilities and Dialysis Centers, and they 
include both freestanding and hospital-based providers. Hospital-based 
ESRD facilities are already reimbursed for their institutional charges 
by TRICARE, generally under the Outpatient Prospective Payment System 
(OPPS) or other rules that apply to special hospitals, such as Critical 
Access Hospitals; this IFR concerns freestanding ESRD facilities only. 
TRICARE utilizes Medicare's classification for determining if a 
facility is hospital-based (42 CFR 413.174). If Medicare considers a 
dialysis treatment facility to be hospital-based or part of a hospital 
outpatient department, TRICARE accepts that determination without 
exception. No changes will be made to hospital-based ESRD facilities as 
a result of this IFR. They will continue to be reimbursed on the basis 
of OPPS, or in the case of Sole Community Hospitals, Critical Access 
Hospitals, or other special providers (e.g., Cancer and Children's 
hospitals), on the basis of existing reimbursement methodologies.
    Currently, freestanding ESRD facilities are considered non-
institutional CSPs under the TRICARE Program and are not considered 
institutional providers, as described in 32 CFR 199.6(b). As a result, 
these providers can only be reimbursed for professional services and 
for covered supplies and pharmaceuticals on a FFS basis. CSPs may not 
be reimbursed for institutional services outlined in 32 CFR 199.4(b), 
such as the use of special treatment rooms, general staff nursing 
services, and room and board. In order to modify TRICARE reimbursement 
of ESRD facilities to better reflect Medicare's ESRD PPS (e.g., to 
include payment for institutional services), freestanding ESRD 
facilities must first be classified as authorized institutional 
providers under the TRICARE Program in Sec.  199.6.
    Title 42 CFR part 494 provides Medicare's Conditions for Coverage 
for both hospital-based and freestanding ESRD Facilities. As ESRD is a 
Medicare-qualifying condition, we find it appropriate to adopt Medicare 
approval of freestanding ESRD facilities, including all Medicare 
conditions for coverage required for Medicare approval of freestanding 
ESRD facilities, in order to be an authorized TRICARE ESRD facility and 
receive payment under the TRICARE program. Those ESRD facilities that 
qualify to be an authorized TRICARE ESRD institutional provider on the 
effective date of this IFR may apply for TRICARE authorized provider 
status and be reimbursed under the new TRICARE reimbursement 
methodology for ESRD facilities for covered services furnished to an 
eligible TRICARE beneficiary on or after the IFR effective date. No new 
TRICARE CSP participation agreements will be accepted for coverage of 
ESRD services on or after the effective date of this IFR, and all 
current TRICARE CSP participation agreements will be terminated from 
freestanding ESRD facilities on the effective date of this IFR. Only 
ESRD services furnished by hospital-based ESRD facilities and TRICARE 
authorized freestanding ESRD facilities will qualify as TRICARE

[[Page 1997]]

covered services. We encourage comments on whether TRICARE should 
consider any additional criteria for freestanding ESRD facilities to be 
considered TRICARE-authorized institutional providers.
Reimbursement
    In 2011, CMS established the ESRD PPS, which is the methodology 
used to reimburse ESRD facilities. The ESRD PPS pays facilities a case-
mix adjusted rate for dialysis services, per dialysis treatment, 
including drugs, laboratory tests, and supplies. The specific rate 
varies by patient characteristics (e.g., age, body surface area, body 
mass index, co-morbidities, date of onset of dialysis) and facility 
characteristics (e.g., area wage-index, treatment volume, and rural 
location). The base rate and methodology are updated annually in the 
Medicare ESRD PPS Final Rule, published in the Federal Register; in 
Calendar Year (CY) 2021, the base rate was $253.13 and in CY22, the 
base rate was $257.90 (86 FR 61874).
    Additionally, facilities may receive separately-paid outlier 
payments if a patient's treatment costs exceed a specified threshold 
for certain items. Facilities may also be paid separately for certain 
drugs and supplies, using add-on payments known as Transitional Drug 
Add-on Payment Adjustment and Transitional Add-on Payment Adjustment 
for New and Innovative Equipment and Supplies. Once approved for a 
specific drug or supply, the add-on payment is applied for two years, 
after which the reimbursement for these products is bundled into the 
base payment amount. CMS has also established a Quality Incentive 
Program (QIP) for reimbursement of ESRD facilities.
    As discussed above, DHA reimburses dialysis services on a FFS basis 
for the covered professional services and supplies only, as 
freestanding ESRD facilities are not classified as institutional 
providers in 32 CFR 199.6. Currently, most freestanding ESRD facilities 
are only eligible to be considered CSPs, as defined in 32 CFR 199.6(f). 
The CSP class of providers consists of freestanding corporations and 
providers that render principally professional, ambulatory, or in-home 
care and technical diagnostic procedures. The intent behind CSPs is not 
to create additional benefits that ordinarily would not be covered 
under TRICARE if provided by a more traditional health care delivery 
system, but rather to allow cost-sharing for services which would 
otherwise be allowed except for an authorized individual professional 
provider's affiliation with a freestanding corporate entity, such as a 
medical doctor or physical therapist employed directly with a 
freestanding corporate entity or foundation. This limits reimbursement 
for freestanding ESRD facilities qualifying as CSPs to only 
professional services, along with supplies and drugs, and excludes 
reimbursement of facility charges, such as general nursing services and 
reimbursement for the use of treatment rooms.
    This rule will establish a TRICARE reimbursement methodology for 
freestanding ESRD facilities to better reflect the Medicare 
reimbursement rate under the Medicare ESRD PPS by recognizing 
freestanding ESRD facilities as authorized institutional providers and 
permitting reimbursement of facility charges. In 2021, freestanding 
ESRD providers were paid, via the CHAMPUS Maximum Allowable Charge 
Method (CMAC), approximately $119 per session, on average, for 
professional services, plus an additional average of $125 for 
supplementary drugs, tests, and supplies, leading to an average per-
session reimbursement of approximately $244. While this rate was 
roughly comparable to the Medicare base rate, it does not account for 
other adjustments and modifications made by Medicare to the base rate 
as part of the Medicare ESRD PPS.
    Medicare adjusts the base rate for patient-level characteristics, 
including age, body mass index, specific conditions, and date of onset, 
as well as facility-level characteristics such as wage-index, low-
volume factors, rural locations, and outlier payments. Medicare also 
provides a separate payment for certain exceptional drugs or equipment 
and supply items during a transitional status. Finally, Medicare 
continues to refine the system through the QIP.
    Our analysis has shown that the two most important factors in 
Medicare's adjustment of the base rate that would apply to TRICARE's 
population are age and date of onset. The age adjustment factor is 
approximately 7% for patients ages 44-69. We found that over 70% of 
TRICARE ESRD patients where TRICARE is the primary payer are between 
the ages of 44-69, and thus we think that a 7% adjustment would be 
practicable. A more important factor is the 32.7% adjustment used by 
Medicare for patients in the first four months since the onset of 
dialysis.
    In lieu of the current method of reimbursement utilizing the CMAC 
for the professional charges plus additional allowed amounts for 
laboratory, pharmaceuticals, and supplies (with no reimbursement for 
facility charges), under the provisions of this rule, TRICARE will 
reimburse a single, flat, per-session fee which will include all 
charges for the facility use, general nursing services, laboratory 
services related to ESRD care, pharmaceuticals (excepting those allowed 
for separate payment by Medicare), and supplies. The TRICARE ESRD rate 
will have a higher reimbursement for the first 120 days of dialysis, 
and a different, lower rate for days 121 and later where TRICARE is the 
primary payer. This reflects Medicare's adjustment of 32.7% for the 
first four months of ESRD treatment. We also propose to add a 7% 
adjustment to each rate (i.e. both for 0-120 days and 121 days and 
later) to account for the fact that approximately 70% of the 
beneficiaries receiving ESRD care for which TRICARE is the primary 
payer are between ages 44 and 69. Additionally, to account for training 
services and supplies, dialysis training sessions will receive a home 
dialysis training add-on payment for day treatment days 121 and after. 
The training add-on payment will not apply to treatment days 1-120, as 
the onset adjustment factor of 32.7% is applied to the per-session rate 
for treatment days 1-120. The rates below use CY 2021 rates as an 
example.

----------------------------------------------------------------------------------------------------------------
                                    CY 2021 TRICARE                        Proposed TRICARE    Proposed TRICARE
                                    FFS methodology    CY 2021 Medicare    2021 rate-- first    2021 rate-- 121
                                        average            base rate           120 days         days and later
----------------------------------------------------------------------------------------------------------------
Per Session Reimbursement, CY 21  $244..............  $253.13...........  $359.42...........  $270.85.
Reimbursement Components........  $119 for the        Medicare Published  Medicare Base Rate  Medicare Base Rate
                                   Professional        Base Rate.          multiplied by: 7%   multiplied by: 7%
                                   Charge plus $125                        Age Adjustment;     Age Adjustment.
                                   for Lab, Drugs,                         32.7% Onset
                                   and Supplies.                           Adjustment.
----------------------------------------------------------------------------------------------------------------


[[Page 1998]]

    As stated above, this fee will incorporate all ESRD-related 
laboratory services, pharmaceuticals, and supplies required in the 
course of the dialysis treatment. The flat rates above also apply to 
renal dialysis services furnished to TRICARE beneficiaries for home 
dialysis services, which include: home dialysis support services 
identified at 42 CFR 494.100; the purchase and delivery of all 
necessary home dialysis supplies; and dialysis training for days 1-120. 
The authorized TRICARE ESRD institutional provider will receive the 
same reimbursement rate for home dialysis services as it would receive 
for in-facility dialysis services. All renal dialysis items and 
services furnished in the ESRD facility or in a patient's home are 
included in the rates above and must be furnished by the ESRD facility, 
either directly or under an arrangement. Only the following services 
will be allowed separate reimbursement:
     Evaluation and management services rendered by authorized 
individual professional providers (e.g., a nephrologist evaluating the 
patient). These services will continue to be reimbursed via the CMAC 
system.
     Drugs, supplies, and devices listed by Medicare as 
eligible for Transitional Drug Add-on Payment Adjustment and 
Transitional Add-on Payment Adjustment for New and Innovative Equipment 
and Supplies. These services may be reimbursed via the CMAC and/or 
Durable Medical Equipment Prosthetics Orthotics and Supplies (DMEPOS) 
reimbursement system (e.g., reimbursement for drugs may be made using 
existing policy on the reimbursement of medical claims that include 
drugs), and in cases where no CMAC, DMEPOS, or other rate exists, 
TRICARE will reimburse on the basis of billed charges, subject to the 
provisions of 32 CFR 199.9, administrative remedies for fraud and 
abuse. Information on these items can be found in the Medicare website 
sections outlining the ESRD PPS. [https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/ESRD-Transitional-Drug and 
https://www.cms.gov/medicare/esrd-pps/esrd-pps-transitional-add-payment-adjustment-new-and-innovative-equipment-and-supplies-tpnies].
     Services unrelated to ESRD care (e.g., if a flu shot is 
administered at the same time as dialysis treatment). These services 
will continue to be reimbursed using existing reimbursement systems 
(e.g., CMAC).
    The flat rate shall be updated each year by utilizing the Medicare 
base rate, promulgated in their annual ESRD PPS final rule, and by 
adjusting it using the age adjustment factor for individuals aged 44-69 
(currently 7%, however, if Medicare modifies this adjustment factor in 
subsequent years DHA will utilize the updated factor) and the Medicare 
adjustment factor for date of onset (currently 32.7%, however, if 
Medicare modifies this adjustment factor in subsequent years DHA will 
utilize the updated factor).
    The flat rate also will be wage adjusted to provide adequate 
locality adjustments, using the wage indices published by Medicare for 
the ESRD PPS. This adjustment serves to more appropriately reimburse 
freestanding ESRD facilities based on their locality (e.g., higher cost 
areas receive higher reimbursement than lower-cost areas). Both 
Medicare and TRICARE reimbursement methodologies for other provider 
types use a similar methodology to appropriately reimburse providers 
based on locality; the Medicare ESRD PPS likewise uses an area wage-
index adjustment to the base rate for this purpose. TRICARE's ESRD 
reimbursement methodology will apply the wage adjustment factor to the 
same percentage of the base rate as specified by CMS in the ESRD PPS, 
including any future updates by CMS in the ESRD final rule. Therefore, 
the TRICARE ESRD reimbursement methodology will approximate the 
Medicare methodology in the ESRD PPS. DHA will issue policy regarding 
the precise reimbursement methodology for freestanding ESRD facilities 
in its implementing instructions, and will provide an annual listing of 
rates on its website at www.health.mil/rates within 90 days of issuance 
of the Medicare Final Rule containing the updated base rate.
    This reimbursement approach approximates, but does not duplicate, 
Medicare's ESRD PPS. It is not practicable for DHA to implement 
Medicare's ESRD PPS because of the small number of beneficiaries for 
which TRICARE is the primary payer. The administrative start-up and 
ongoing maintenance costs of implementing such a complex system would 
outweigh benefits of adoption. We believe that this flat payment, one 
for the first 120 days, and another for 121 days and later, 
sufficiently retains the intent to reimburse like Medicare to the 
extent practicable, while also ensuring adequate reimbursement for ESRD 
services delivered at freestanding ESRD facilities.
    We invite comments on this methodology and may make further 
refinements through the issuance of a Final Rule.
Copayments and Cost-Sharing
    Treatment in freestanding ESRD facilities (including home dialysis 
services) shall be considered specialty outpatient visits for the 
purposes of cost-sharing and copayments under the program. Applicable 
copayments and cost-shares as described in 32 CFR 199.4 and 
199.17(k)(2)(iii) will apply upon publication of this rule.
DRG Add-On Payment for NCTAP
    This provision, 32 CFR 199.14(a)(1)(iv)(C), temporarily adopts 
Medicare's NCTAP for services and supplies otherwise covered under the 
TRICARE Program, including adopting Medicare's termination date for 
NCTAPs, which CMS extended for discharges that occur through the end of 
the FY in which the PHE terminates. TRICARE shall reimburse acute care 
hospitals an NCTAP amount which is the lesser of (1) 65 percent of the 
operating outlier threshold for the claim or (2) 65 percent of the 
amount by which the costs of the case exceed the standard DRG payment, 
including the adjustment to the relative weight under section 3710 of 
the CARES Act, for certain cases that include the use of a drug or 
biological product currently authorized or approved for treating COVID-
19. The NCTAP will not be included as part of the calculation of the 
operating outlier payments. Providers must submit claims in accordance 
with the TRICARE claims filing deadline requirements, which are located 
in the TRICARE implementing instructions (i.e., the TRICARE manuals).

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 statutory requirements to reimburse individual and 
institutional providers for like services and supplies using the same 
methodologies as Medicare are located in 10 U.S.C. 1079(h) and (i), 
respectively. 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 199.6 was last modified November 17, 2020 (85 FR 
73196). This change added Doctors of Podiatric Medicine and Podiatrists 
as allied health professionals under the TRICARE Program, added 
referral and supervision requirements for physical therapists and 
occupational therapists, and added

[[Page 1999]]

speech pathologists as paramedical providers under the TRICARE Program.
    Title 32 CFR 199.14 was last modified September 3, 2020 (85 FR 
54924). This change added multiple provisions related to the COVID-19 
pandemic (i.e., adjusting DRG and long-term care facility payments), 
adopted Medicare New Technology Add-On Payments, and adopted Medicare 
Hospital Value Based Program adjustments.

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, 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 determined to be not economically significant, under section 
3(f) of Executive Order 12866.
b. Summary
    The modifications to paragraphs 199.6(b)(4)(xxi) and 199.14(c) in 
this IFR will establish freestanding ESRD facilities as a category of 
institutional provider within the TRICARE program and will create a 
TRICARE reimbursement system for those facilities. These changes will 
make TRICARE reimbursement of freestanding ESRD facilities, as well as 
dialysis services and supplies provided by these facilities, more 
consistent with the Medicare PPS rates for ESRD facilities, in 
accordance with the statutory requirement to reimburse like Medicare 
for like services and supplies to providers of services of the same 
type (i.e., institutional providers) except when impracticable. These 
changes will also allow for TRICARE payment of institutional services 
rendered by freestanding ESRD facilities. The modification to paragraph 
199.14(c) will require the deletion of a now-defunct provision, that 
the Director, DHA, shall establish reimbursement for institutions other 
than hospitals and Skilled Nursing Facilities. Since the new ESRD 
reimbursement provisions will be moved to paragraph 199.14(c), and 
since 10 U.S.C 1079(i)(2) requires amounts to be paid to institutions 
to be prescribed in regulation, the existing requirement in 199.14(c) 
is unnecessary and will be deleted from regulation.
    The modifications to paragraph 199.14(a)(1)(iv)(C) in this IFR will 
temporarily adopt the Medicare NCTAP for COVID-19 patients through the 
end of the FY in which the PHE terminates. The NCTAP provides 
additional reimbursement in addition to the 20 percent add-on payment 
under section 3710 of the CARES Act equal to the lesser of (1) 65 
percent of the operating outlier threshold for the claim or (2) 65 
percent of the amount by which the costs of the case exceed the 
standard DRG payment, including the adjustment to the relative weight 
under section 3710 of the CARES Act, for certain cases that include the 
use of a drug or biological product currently authorized or approved 
for treating COVID-19. NCTAP claims are those that are eligible for the 
20 percent add-on payment indicated by the presence of COVID diagnosis 
codes, plus the presence of certain procedure codes for certain COVID-
19 treatments including remdesivir, or convalescent plasma.
c. Affected Population
    This change impacts all TRICARE beneficiaries who require dialysis, 
who are receiving COVID-19 treatments eligible for NCTAPs, or who 
require medically necessary services during the COVID-19 pandemic. 
Providers who render treatments eligible for NCTAPs will be impacted by 
being able to receive higher, more appropriate reimbursement from 
TRICARE than they would have in the absence of this rule. Providers may 
also experience decreased patient volume burden if their patients with 
ESRD are able to be treated in a freestanding ESRD facility instead. 
Freestanding ESRD facilities will be impacted by receiving higher 
reimbursement for care provided to TRICARE beneficiaries who have not 
enrolled in Medicare. 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 (also known as transfer 
costs) as well as administrative costs to the government. Only the ESRD 
provisions will result in recurring incremental health care costs, 
while the NCTAP provision will result in cost increases from the 
effective date of the IFR though the FY in which the PHE terminates. 
The cost estimate assumes that the PHE continues into, but not beyond, 
FY 2023; however, the COVID-19 pandemic contains substantial 
uncertainty including the possibility of additional COVID-19 variants 
resistant to current vaccines and treatments, as well as the actual 
date the PHE terminates. As such, we find it appropriate to make these 
regulatory changes despite the potential short effective period, as the 
end of the pandemic is by no means a certainty.
    Based on these factors, as well as the assumptions for each 
provision detailed below, we estimate that the total cost estimate for 
this IFR through FY 2023 will be approximately $8.08M. This estimate 
includes approximately $0.75M in administrative costs and $7.33M in 
direct health care costs. The NCTAP provision is expected to have costs 
through FY 2023, while the permanent ESRD provisions are expected to 
result in $5.23M in incremental annual costs, with a 4.5% increase each 
subsequent year due to inflation and an increase in cases.
    A breakdown of costs, by provision, is provided in the below table. 
A discussion of assumptions follows.

------------------------------------------------------------------------
                        Provision                           FY23 costs
------------------------------------------------------------------------
ESRD....................................................          $5.23M
DRG Add-on for NCTAP....................................             2.1
Administrative costs....................................            0.75
Estimated Total Cost Impact.............................           8.08M
------------------------------------------------------------------------

    Assumptions specific to the estimates for each individual provision 
are explained below.
     Freestanding ESRD Facilities. We assumed that the number 
of TRICARE beneficiaries requiring ESRD services, the proportion of 
beneficiaries receiving acute versus chronic dialysis, and the number 
of each type of ESRD service (e.g., dialysis, lab services, medical 
supplies, pharmaceuticals) for which TRICARE was the primary payer will 
remain constant. This estimate assumes paying freestanding ESRDs a 
facility charge for the first 120 days of dialysis equal to the base 
payment rate under the Medicare ESRD PPS multiplied by the 7 percent 
factor (for age) and the 32.7 percent factor (for the first 120 days of 
dialysis). This base rate would be further adjusted for locality using 
a wage index adjustment factor, using the same or similar adjustments 
as

[[Page 2000]]

Medicare, as appropriate. For ESRD services past 120 days of dialysis, 
the cost estimate assumed only the seven percent adjustment factor for 
age and the wage index adjustment factor locality would be applied. Any 
services or supplies not included in Medicare's ESRD PPS bundle would 
continue to be reimbursed separately by TRICARE using the applicable 
existing reimbursement methodology. The cost estimate of $5.23M 
annually was calculated by multiplying the base amount plus applicable 
adjustments by the number of ESRD claims for which TRICARE would be the 
primary payer, although this amount will increase by a small 4.5% 
adjustment factor annually. Additionally, we expect this provision to 
result in approximately $340,000 in one-time administrative costs.
     DRG Add-on for NCTAP. This estimate assumes an effective 
date for this provision of October 1, 2022 and that the PHE will end 
during FY23. In creating this estimate, we first analyzed TRICARE 
inpatient claims at private sector hospitals and identified that almost 
half of inpatient admissions also had a procedure code treatment with 
at least one of the selected therapies eligible for NCTAP add-on 
payments. We identified from TRICARE actual data that there were 6,600 
total TRICARE COVID-19 admissions during the November 2020-June 2021 
period; 3,000 of these admissions included a treatment eligible for an 
NCTAP and 1,400 of those treatments had a cost that exceeded the DRG 
payment. Therefore, we assumed 21 percent (i.e., 1,400 divided by 
6,000) of total TRICARE COVID-19 treatments would qualify for an NCTAP. 
Towards the end of the PHE, we expect fewer admissions due to 
decreasing hospitalization rates, and thus we assumed approximately 100 
admissions per month in FY23. To estimate direct health care costs, we 
assumed that 21 percent of the projected TRICARE COVID-19 admissions 
would be paid the NCTAP of 65 percent of the amount by which the costs 
of the case exceed the standard DRG payment. We calculated an average 
NCTAP of $8,450 per case by identifying the TRICARE COVID-19 private 
sector cases in which the COVID-19 treatment exceeded the DRG payment, 
calculating the average excess cost per case, and multiplying this 
average excess cost by 65 percent. We multiplied the average expected 
NCTAP of $8,450 by the expected number of monthly TRICARE private 
sector hospitalizations projected to be affected by this provision and 
estimated $2.1M in incremental direct health care costs in FY23. We 
also estimated administrative start-up costs of $410,000 for the 
Managed Care Support Contractors to maintain a list of approved NCTAPs, 
identify which claims are eligible for a NCTAP, and to calculate the 
estimated NCTAP amount for each claim.
e. Benefits
    Freestanding ESRD facilities will be positively impacted by 
increased reimbursement and may improve both the access to and quality 
of care patients receive, which will in turn benefit TRICARE 
beneficiaries with ESRD, a chronic, life-threatening condition. 
Providers rendering treatments to patients with COVID-19 will benefit 
by receiving higher, more adequate reimbursement for services and 
supplies eligible for an NCTAP. Both providers and patients requiring 
emergency or inpatient treatment will benefit if TRICARE beneficiaries 
with ESRD are treated in a freestanding ESRD facility rather than in an 
emergency department or inpatient hospital during any future COVID-19 
surges.
f. Alternatives
    DoD considered several alternatives to this IFR. The first 
alternative involved taking no action. Although this alternative would 
be cost neutral, it was rejected as not addressing the 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, when deemed practicable.
    The second alternative, related to the provisions regarding 
freestanding ESRD facilities, was to adopt Medicare's reimbursement 
system (the ESRD PPS) in total. The advantages of this option were:
     It is completely consistent with the statutory provision 
to pay institutional providers using the same methodology as Medicare;
     It would provide the nuanced payment differences made by 
Medicare on the basis of age, comorbidities, body measurements, and 
facility-specific adjustments for low-volume facilities and rural 
facilities;
     It would accommodate outlier payments and cases; and
     It contains provisions for a QIP.
    However, this option was not pursued because of the very low volume 
of TRICARE beneficiaries who receive dialysis services from 
freestanding ESRDs and who are not enrolled to Medicare. Most dialysis 
services that are paid by TRICARE are for individuals who are both 
Medicare and TRICARE eligible (approximately 90% of claims for dialysis 
services in FY 2019 were for patients where Medicare was the primary 
payer). In these cases, where Medicare pays as primary, TRICARE 
generally provides reimbursement for the remaining patient liability, 
which was approximately $44 per treatment in FY 2019. Thus, for 90% of 
dialysis claims received by TRICARE, TRICARE is already following 
Medicare reimbursement methods, as the remaining patient liability is 
less than what would have otherwise been paid had TRICARE been the 
primary payer, in accordance with TRICARE regulations regarding other 
health insurance and dual eligibility. The cost of implementing the 
full ESRD PPS system is estimated to be at least $600,000 in start-up 
costs, plus ongoing administrative costs, to ensure all adjustments 
were made for each claim, plus additional special pricing software or 
algorithms. Additional administrative funds may be required to 
implement the QIP and other programs, as implemented by Medicare now or 
in the future. Further, implementation of the ESRD PPS would be time-
consuming, taking up to a year to accomplish. In contrast, we estimate 
that the option provided in this IFR can be implemented relatively 
quickly, and for approximately $340,000 in start-up costs with lower 
ongoing administrative costs. Further, the flat rate will provide the 
ESRD facilities with predictability with regard to TRICARE payments and 
will reduce uncertainty and specialized coding or case-mix 
documentation requirements that may be required by the ESRD PPS, 
reducing the administrative burden on the provider. To summarize, 
adopting the ESRD PPS was considered, but was deemed impracticable and 
overly burdensome to both the Government and providers.

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

    The ASD(HA) certified 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, freestanding ESRDs, pharmacies, 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.

[[Page 2001]]

    All of the provisions of this IFR are likely to have an economic 
impact on health care providers and suppliers. 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 all provisions within this rule are likely to increase 
reimbursement to providers and suppliers, we find that these provisions 
would not have an adverse impact on revenue and, therefore, would not 
have a significant impact on these providers meeting the definition of 
small business.
    Therefore, the Regulatory Flexibility Act, as amended, does not 
require us to prepare a regulatory flexibility analysis.

C. Congressional Review Act

    Pursuant to Subtitle E of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (also known as 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.

G. Executive Order 13175, ``Consultation and Coordination With Indian 
Tribal Governments''

    Executive Order 13175 establishes certain requirements that an 
agency must meet when it promulgates a rule that imposes substantial 
direct compliance costs on one or more Indian tribes, preempts tribal 
law, or effects the distribution of power and responsibilities between 
the Federal Government and Indian tribes. This rule will not have a 
substantial effect on Indian tribal governments.

List of Subjects in 32 CFR Part 199

    Administrative practice and procedure, Claims, Fraud, Health care, 
Health insurance, Individuals with disabilities, 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.  199.6 by adding paragraph (b)(4)(xxi) and revising 
paragraph (f)(1)(i) to read as follows:


Sec.  199.6   TRICARE-authorized providers.

* * * * *
    (b) * * *
    (4) * * *
    (xxi) Freestanding End Stage Renal Disease (ESRD) facilities. 
Freestanding ESRD facilities must be Medicare certified and meet all 
Medicare conditions for coverage as provided in 42 CFR part 494, and be 
classified as freestanding ESRD facilities by Medicare, in order to be 
approved as TRICARE-authorized institutional providers and receive 
payment under the TRICARE program. State licensing are not required in 
cases of a freestanding ESRD facility located in a State that does not 
license such facilities. Freestanding ESRD facilities are not hospital-
affiliated nor hospital-based and are reimbursed based on the payment 
methodology established in Sec.  199.14(c). Freestanding ESRD 
facilities render outpatient hemodialysis or peritoneal dialysis 
services in the ESRD facility or in a patient's home for the treatment 
of ESRD and acute kidney injury (AKI).
* * * * *
    (f) * * *
    (1) * * *
    (i) This corporate services provider class is established to 
accommodate individuals who would meet the criteria for status as a 
CHAMPUS authorized individual professional provider as established by 
paragraph (c) of this section but for the fact that they are employed 
directly or contractually by a corporation or foundation that provides 
principally professional services which are within the scope of the 
CHAMPUS benefit. With authorization of freestanding end stage renal 
disease (ESRD) facilities as TRICARE institutional providers under 
paragraph (b)(4)(xxi) of this section, corporate service provider 
status will not be authorized for the provision of ESRD services.
* * * * *

0
3. Amend Sec.  199.14 by adding paragraph (a)(1)(iv)(C) and revising 
paragraph (c) to read as follows:


Sec.  199.14   Provider reimbursement methods.

    (a) * * *
    (1) * * *
    (iv) * * *
    (C) Additional payment for new COVID-19 Treatments. TRICARE will 
adopt the Medicare New COVID-19 Treatments Add-On Payments (NCTAP) 
adjustment to DRGs. New COVID-19 treatments shall be reimbursed the 
lesser of (1) 65 percent of the operating outlier threshold for the 
claim or (2) 65 percent of the amount by which the costs of the case 
exceed the standard DRG payment for an individual treated using new 
COVID-19 treatments discharged during the Secretary of Health and Human 
Services' declared public health emergency (PHE) through the end of the 
FY in which the PHE terminates.
* * * * *
    (c) Reimbursement of Freestanding End Stage Renal Disease (ESRD) 
facilities. (1) This paragraph (c)(1) establishes payment methods for 
dialysis provided by TRICARE authorized freestanding ESRD facilities. 
TRICARE shall reimburse a single, flat, per-session fee to TRICARE 
authorized freestanding ESRD facilities rendering hemodialysis or 
peritoneal dialysis for treatment of ESRD or AKI. The flat, per-session 
fee will apply to renal dialysis services furnished in the ESRD 
facility or in a patient's home. All renal dialysis items and services 
furnished in the ESRD facility or in a patient's home are included in 
the flat per-session rate, except for those items and services listed 
in paragraph (c)(1)(ii) of this section.
    (i) Services included in the flat per-session rate must be 
furnished by an authorized TRICARE ESRD institutional provider:

[[Page 2002]]

    (A) Institutional charges (e.g., charges for facility use, use or 
treatment rooms, and general nursing services);
    (B) Routine laboratory services related to the dialysis session;
    (C) Pharmaceuticals and supplies related to the dialysis;
    (D) Home dialysis support services identified at 42 CFR 494.100;
    (E) Purchase and delivery of all necessary home dialysis supplies; 
and
    (F) Dialysis training for days 1-120.
    (ii) Services which may be billed separately:
    (A) Evaluation and management services provided by authorized 
individual professional providers. These services will continue to be 
reimbursed using existing reimbursement systems (e.g., CMAC).
    (B) Drugs, supplies, and devices listed by Medicare as eligible for 
Transitional Drug Add-on Payment Adjustment and Transitional Add-on 
Payment Adjustment for New and Innovative Equipment and Supplies under 
the Medicare ESRD PPS. These services will continue to be reimbursed 
using existing reimbursement systems (e.g., CMAC).
    (C) Professional services, supplies, and pharmaceuticals unrelated 
to dialysis care (e.g., if a flu shot is administered at the same time 
as dialysis treatment). These services will continue to be reimbursed 
using existing reimbursement systems (e.g., CMAC).
    (iii) Establishment of the flat rate:
    (A) Per session rate for treatment days 1-120. The flat, per-
session rate shall be equal to the current Medicare base rate, 
multiplied by the current Medicare adjustment factor applied to 
individuals aged 44-69 (7% for CY 22), and further multiplied by the 
current Medicare adjustment factor for the date of onset (32.7% for CY 
2022). The Medicare factors utilized in subsequent years will be based 
on modifications made under 42 CFR part 413, subpart H, Medicare ESRD 
PPS.
    (B) Per session rate for treatment day 121 and beyond. The flat, 
per-session rate shall be equal to the Medicare base rate, multiplied 
by the Medicare adjustment factor applied to individuals aged 44-69. 
The Medicare factors utilized in subsequent years will be based on 
modifications made under 42 CFR part 413, subpart H, Medicare ESRD PPS.
    (C) Wage adjustment. The per-session rates in paragraphs 
(c)(1)(iii)(A) and (B) of this section shall be wage adjusted using the 
wage adjustment factors and labor-related shares published in the most 
recent Medicare ESRD Final Rule at the time the annual per-session 
rates are posted.
    (D) Annual updates. The per session rates will be updated within 90 
days of publication of new Medicare base rates, and published to the 
TRICARE website at www.health.mil.
    (E) Dialysis training. To account for training services and 
supplies, dialysis training sessions will receive a home dialysis 
training add-on payment for day treatment days 121 and after. The 
training add-on payment will not apply to treatment days 1-120, as the 
onset adjustment factor of 32.7% is applied to the per-session rate for 
treatment days 1-120.
    (2) The reimbursement methods established in paragraph (c)(1) of 
this section applies to freestanding ESRD facilities meeting the 
requirements established for TRICARE authorized freestanding ESRD 
facilities in Sec.  199.6. For purposes of cost-sharing and copayments, 
treatment provided by freestanding ESRD facilities are considered 
outpatient specialty visits. The applicable copayments and cost-shares 
described in Sec. Sec.  199.4 and 199.17(k)(2)(iii) shall apply. 
Hospital-based ESRD facilities are not subject to the provisions of 
this paragraph, and will continue to be reimbursed utilizing other 
applicable reimbursement systems (e.g., the Outpatient Prospective 
Payment System).
* * * * *

    Dated: January 6, 2023.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2023-00381 Filed 1-11-23; 8:45 am]
BILLING CODE 5001-06-P