Rule: Civilian Health and Medical Program of The Uniformed Services (CHAMPUS) : TRICARE Program&#8212 Outpatient Hospital Prospective Payment System

Federal Register / Vol. 72, No.
156 / Tuesday, August 14, 2007 / Rules and Regulations 45359
action allows commenters sufficient • Mail: Federal Docket Management public was informed of the Agency’s
time to fully review the posted System Office, 1160 Defense Pentagon, intent to adopt and implement the
documents and submit comments. Washington, DC 20301–1160. Medicare Prospective Payment System
MSHA will accept written comments Instructions: All submissions received to the extent practicable. However,
and other appropriate data from any must include the agency name and because of complexities of the Medicare
interested party up to the close of the docket number or Regulatory transition process and the lack of
comment period on September 17, 2007. Information Number (RIN) for this TRICARE cost report data comparable to
Dated: August 9, 2007. Federal Register document. The general Medicare’s, it was not practicable for the
policy for comments and other Department to adopt Medicare OPPS for
John P. Pallasch,
submissions from members of the public hospital outpatient services at that time.
Deputy Assistant Secretary for Mine Safety It was recognized that adoption of the
is to make these submissions available
and Health.
for public viewing on the Internet at Medicare OPPS would require full
[FR Doc. 07–3977 Filed 8–9–07; 4:19 pm] commitment by the Agency to ensure
http://regulations.gov as they are
BILLING CODE 4510–43–P
received without change, including any expeditious implementation of the
personal identifiers or contact OPPS given the fact that Medicare’s
information. outpatient reimbursement system had
DEPARTMENT OF DEFENSE been in effect since August 1, 2000. A
FOR FURTHER INFORMATION CONTACT:
formal OPPS work group was formed
Office of the Secretary David E. Bennett, TRICARE over 21⁄2 years ago to finalize
Management Activity, Medical Benefits operational requirements and develop
32 CFR Part 199 and Reimbursement Systems, telephone sophisticated software for processing
(303) 676–3494. and payment of hospital outpatient
[DOD–2007–HA–0048]
SUPPLEMENTARY INFORMATION: claims. Although the agency was
RIN 0720–AB16 committed to mirroring the basic
I. Justification for Interim Final Rule
(IFR) Making Medicare reimbursement methodology
TRICARE; Outpatient Hospital as closely as possible (i.e., Medicare
Prospective Payment System (OPPS) In accordance with Title 5, Part I, Ambulatory Payment Classification
Chapter 5, Subchapter II, § 553(b)(3)(B) (APC) system, national APC payment
AGENCY: Office of the Secretary, DoD. of the Administrative Procedures Act,
ACTION: Interim final rule. rates, geographical wage adjustments,
the following rationale is being discounting, coding requirements, etc.),
provided for implementing TRICARE’s there were modifications that had to be
SUMMARY: This interim final rule
OPPS under the IFR process. done to the software grouping and
implements a prospective payment
In the National Defense Authorization pricing components to accommodate
system for hospital outpatient services
Act for Fiscal Year 2002 (NDAA–02), TRICARE’s unique beneficiary and
similar to that furnished to Medicare
Public Law 107–107 (December 28, benefit structure. The continual
beneficiaries, as set forth in section
2001), several reforms were enacted updating of grouping and pricing
1833(t) of the Social Security Act. The
relating to TRICARE coverage and software based on ongoing Medicare
rule also recognizes applicable statutory
payment methods for skilled nursing quarterly updates, along with TRICARE
requirements and changes arising from
and home health services which were specific requirements, have been a
Medicare’s continuing experience with
all implemented through interim final challenge to both TRICARE and its
this system including certain related
rule (IFR) making to ensure expeditious Managed Care Support Contractors.
provisions of the Medicare Prescription
implementation of Congressionally Based on the agency’s requirement to
Drug, Improvement, and Modernization
mandated reimbursement systems. In implement OPPS as mandated under
Act of 2003. The Department is
addition to the requirement that section 707 of NDAA–02 (i.e., the
publishing this rule as an interim final
TRICARE establish an integrated sub- statutory change to 10 U.S.C. 1079(j)(2))
rule to implement existing statutory
acute care program consisting of skilled that TRICARE payment methods for
requirements for adoption of Medicare
nursing facility and home health care institutional care shall be determined to
payment methods for institutional care.
services modeled after the Medicare the extent practicable in accordance
Interim final rule publication will
program, Congress also—in section 707 with Medicare payment rules), and to
ensure the expeditious implementation
of NDAA–02—changed the statutory maximize the administrative efficiencies
of a proven hospital OPPS, providing
authorization (in 10 U.S.C. 1079(j)(2)) and cost-savings of this new
incentives for hospitals to furnish
that TRICARE payment methods for reimbursement system, TRICARE opted
outpatient services in an efficient and
institutional care ‘‘may be’’ determined to go with the same interim final rule
effective manner. However, public
to the extent practicable in accordance making process that it used in
comments are invited and will be
with Medicare payment rules to a implementing the two previously
considered for possible revisions to the
mandate that TRICARE payment mandated Medicare reimbursement
final rule.
methods ‘‘shall be’’ determined to the systems (i.e., the TRICARE Home Health
DATES: Effective Dates: September 13, extent practicable in accordance with Agency and the Skilled Nursing Facility
2007. Medicare payment rules. Section 707(c) Prospective Payment System, which
Comments: Written comments required that the amendments made by also statutorily mandated under the
received at the address indicated below this section shall take effect on the date same NDAA as OPPS—which was
by October 15, 2007 will be accepted. that is 90 days after the date of the section 707 of NDAA–02).
ADDRESSES: You may submit comments, enactment of the Act. The fact that TRICARE will be
identified by docket number and or RIN In the supplementary sections of both following Medicare changes to the
sroberts on PROD1PC70 with RULES
number and title, by any of the the Sub-Acute Care Program interim and extent practicable (i.e., outpatient
following methods: final rules (67 FR 40597, June 13, 2002, services provided in hospitals subject to
• Federal eRulemaking Portal: http:// and 70 FR 61377—Supplementary Medicare OPPS as specified in 42 CFR
www.regulations.gov. Follow the Information, VIII. Payment Methods for § 413.65 and 42 CFR § 419.20 will be
instructions for submitting comments. Hospital Outpatient Services), the paid in accordance with the provisions
VerDate Aug<31>2005 15:59 Aug 13, 2007 Jkt 211001 PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 E:\FR\FM\14AUR1.SGM 14AUR1
45360 Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations
outlined in section 1833(t) of the Social administrative cost savings for both health care providers ‘‘shall be equal to
Security Act and its implementing providers and TRICARE contractors. an amount determined to be
Medicare regulation (42 CFR 419)) These administrative efficiencies/cost- appropriate, to the extent practicable, in
would make it difficult to conform to savings will not be lost through IFR accordance with the same
the traditional proposed and final rule making. reimbursement rules used by
making process since changes would be The general public and other Medicare’’. Based on these statutory
continual and ongoing based on interested parties (e.g., consulting provisions, TRICARE is adopting
Medicare rules and policy transmittals. groups and medical associations) are Medicare’s prospective payment system
The IFR process would most accurately also anticipating implementation of for reimbursement of hospital outpatient
reflect the provisions of the payment OPPS in the near future. A significant services currently in effect for the
methodology at the time of delay in implementation will cause Medicare program as required under the
implementation, while at the same time frustration and confusion. The Balanced Budget Act of 1997 (BBA
affording public review and comment education efforts will have to be 1997), (Pub. L 105–33) which added
which will be addressed in the Final doubled to accommodate a significant section 1833(t) of the Social Security
Rule. delay in implementation of OPPS. Act providing comprehensive
It is estimated that going with There is urgency for TRICARE provisions for establishment of a
proposed and final rulemaking instead implementation of the Medicare OPPS hospital OPPS. The Act required
of interim final and final rule making given the fact that the Medicare OPPS development of a classification system
would result in at least a 12-month has been in place since August 1, 2000. for covered outpatient services that
delay in implementation of the The initial delay, which was reflected in consisted of groups arranged so that the
TRICARE Outpatient Prospective the previous Sub-Acute Care Program services within each group were
Payment System, which in turn would interim and final rules (67 FR 40597, comparable clinically and with respect
result in the program foregoing June 13, 2002, and 70 FR 61377), was to the use of resources. The Act also
projected cost-savings in the amount of due in part to the Agency’s desire to described the method for determining
$50 to $70 million. avoid the transitioning provisions that the Medicare payment amount and
TRICARE’s Managed Care Support were in effect under the Medicare beneficiary coinsurance amount for
Contractors (MCSCs) have fully program from its implementation services covered under the outpatient
integrated the OPPS Outpatient Code though CY 2005. The remaining time PPS. This included the formula for
Editor and Pricer into their claims was necessary to accommodate the calculating the conversion factor and
processing systems (i.e., the software revised programming necessary to data requirements for establishing
modules that were developed to process accommodate TRICARE’s unique relative payment weights.
and accurately price hospital outpatient population and benefit structure. The Centers for Medicare and Medicaid
claims). A 12-month delay in OPPS workgroup (both TMA and Services (CMS) published a proposed
implementation of OPPS would result contractor staff) has worked over the rule in the Federal Register on
in an additional $8–12 million in past three years to ensure expeditious September 8, 1998 (63 FR 47552) setting
administrative costs for the government. implementation of this Congressionally forth the proposed PPS for hospital
Even though the system would remain mandated outpatient reimbursement outpatient services. On June 30, 1999, a
in test mode it would have to be system. correction notice was published (64 FR
maintained and updated during the 35258) to correct a number of technical
II. Overview
delay (4–6 updates), which would and typographical errors contained in
require staff support and programming. The OPPS evolved out of the September 8, 1998 proposed rule.
Maintaining multiple outpatient Congressional mandates for replacement Subsequent to publication of the
reimbursement systems would impose of Medicare’s cost-based payment proposed rule, the Medicare, Medicaid,
an administrative burden on TRICARE methodology with a prospective and State Child Health Insurance
and its MCSCs. payment system (PPS). Medicare Program (SCHIP) Balanced Budget
A delay would also be extremely implemented OPPS for services Refinement Act of 1999 (BBRA 1999)
challenging from a public relations furnished on or after August 1, 2000, (Pub. L. 106–133) enacted on November
standpoint, since the MCSCs have with temporary transitional provisions 29, 1999, made major changes that
already gone out to their network to buffer the financial impact of the new affected the proposed outpatient PPS.
hospitals and renegotiated contracts. prospective payment system (e.g., The following BBRA 1999 provisions
Approximately 97 percent of all incorporating transitional pass-through were implemented in a final rule (65 FR
network agreements have been adjustments and proportional 18434) published on April 7, 2000.
renegotiated to accommodate reductions in beneficiary cost-sharing to • Made adjustments for covered
implementation of the TRICARE OPPS. lessen potential payment reductions services whose costs exceed a given
As a result, providers are anticipating experienced under the new OPPS). threshold (i.e., an outlier payment).
conversion to OPPS within the near Congress likewise established • Established transitional pass-
future (i.e., they are reconfiguring their enabling legislation under section 707 of through payments for certain medical
charge masters to accommodate the National Defense Authorization Act devices, drugs, and biologicals.
TRICARE OPPS billing). of Fiscal Year 2002 (NDAA–02), Pub. L. • Placed limitations on judicial
OPPS will ensure consistency of 107–107 (December 28, 2001) changing review for determining outlier payments
hospital outpatient payments the statutory authorization [in 10 U.S.C. and the determination of additional
throughout the United States, thus 1079(j)(2)] that TRICARE payment payments for certain medical devices,
reducing the denial and return of claims methods for institutional care be drugs, and biologicals.
to providers for coding errors. Providers determined, to the extent practicable, in • Included as covered outpatient
will have access to OCE/Pricer software accordance with the same services implantable prosthetics and
that will facilitate the filing and reimbursement rules used by Medicare. durable medical equipment and
payment of outpatient claims with their Similarly, under 10 U.S.C. 1079(h), the diagnostic x-ray, laboratory, and other
TRICARE claims processors. A 12- amount to be paid to health care tests associated with those implantable
month delay would reduce overall professional and other non-institutional items.
Federal Register / Vol. 72, No. 156 / Tuesday, August 14, 2007 / Rules and Regulations 45361
• Limited the variation of costs of rulemaking, along with interim extensive editing embedded in its
services within each payment transmittals and program memoranda software program was specific to
classification group. taking into consideration changes in Medicare’s benefit structure and
• Required at least annual review of medical practice, addition of new internal claims processing requirements.
the groups, relative payment weights, services, new cost data, and other As a result, the Agency has developed
and the wage and other adjustments to relevant information and factors. a TRICARE-specific OCE which will
take into account changes in medical TRICARE will recognize to the extent better accommodate the benefit
practice, the addition of new services, practicable all applicable statutory structure and claims processing systems
new cost data, and other relevant requirements and changes arising from currently in place under the T–NEX
information or factors. Medicare’s continuing experience with contracts. This modified software
• Established transitional corridors this prospective payment system, package will edit claims data for errors
that would limit payment reductions including changes to the amounts and and indicate actions to be taken and
under the hospital outpatient PPS. factors used to determine the payment reasons why the actions are necessary.
• Established hold harmless rates for hospital outpatient services This expanded functionality will
provisions for rural and cancer paid under the prospective payment facilitate the linkage between the action
hospitals. system [e.g., annual recalibration being taken, the reasons for the action,
• Provided that the coinsurance (updating) of group weights and and the information on the claim that
amount for a procedure performed in a conversion factors and adjustments for caused the action. The edits will be
year could not exceed the hospital area wage differences (wage index specific for TRICARE, ensuring
inpatient deductible for the year. updates)]. compliance with current claims
Section 1833(t) of the Social Security While TRICARE intends to remain as processing criteria. The OCE will also
Act was subsequently amended by the true as possible to Medicare’s basic assign an APC number for each service
Medicare, Medicaid, and SCHIP OPPS methodology (i.e., adoption and covered under the OPPS and return
Benefits Improvement and Protection updating of the Medicare data elements information to be used as input to the
Act (BIPA) of 2000 (Pub. L. 106–554) used to calculate the prospective TRICARE PRICER program.
and the Medicare Prescription Drug, payment amounts), there will be some Like Medicare’s OCE, the TRICARE-
Improvement, and Modernization Act deviations required to accommodate the specific OCE will be updated on a
(MMA) of 2003 (Pub. L. 108–173), uniqueness of the TRICARE program. quarterly basis incorporating, to the
making additional changes in the OPPS. These deviations have been designed to extent practicable, all Medicare
As a prelude to implementation of the accommodate existing TRICARE benefit changes/updates (i.e., those changes
OPPS, Congress enacted the Omnibus structure and claims processing initiated through rulemaking and
Budget Reconciliation Act of 1986 procedures/systems implemented under transmittals/program memoranda).
(OBRA) (Pub. L. 99–509) which paved the TRICARE Next Generation Contracts Periodic updating of the TRICARE-
the way for development of a PPS for (T–NEX), while at the same time specific OCE will ensure consistency
hospital outpatient services by eliminating any undue financial burden and accuracy of claims processing and
prohibiting payment for nonphysician to TRICARE Prime, Extra, and Standard payment under the OPPS.
services furnished to hospital patients beneficiary populations. Following is a • Deductible and Cost-Sharing—
(inpatients and outpatients), unless the brief discussion of each of these Medicare’s OPPS coinsurance was
services were furnished either directly deviations: initially frozen at 20 percent of the
or under arrangement with the hospital, • Outpatient Code Editor (OCE)—The national median charge for the services
except for services of physician Medicare Outpatient Code Editor with within each APC (wage adjusted for the
assistants, nurse practitioners and APC program edits data to help identify provider’s geographic area) or 20
clinical nurse specialists. Exceptions possible errors in coding and assigns percent of the APC payment rate,
were also made for clinical diagnostic Ambulatory Payment Classification whichever was greater (i.e., the
procedures, the payment of which may numbers based on HCPCS codes for coinsurance for an APC could not fall
only be made to the person or entity that payment under the OPPS. The OPPS is below 20 percent of the APC payment
performed, or supervised the an outpatient equivalent of the rate). This was designed so that, as the
performance of, the test; and for inpatient, Diagnosis Related Group total payment to the provider increased
exceptionally intensive hospital (DRG)-based PPS. Like the inpatient each year based on market basket
outpatient services provided to skilled system based on DRGs, each APC has a updates, the present or frozen
nursing facility (SNF) residents that lie pre-established prospective payment coinsurance amount would become a
well beyond the scope of the care that amount associated with it. However, smaller portion of the total payment
SNFs would ordinarily furnish, and unlike the inpatient system that assigns until the coinsurance represented 20
thus beyond the ordinary scope of the a patient to a single DRG, multiple APCs percent of the total. Once the
SNF care plan. Consolidated billing can be assigned to one outpatient claim. coinsurance became 20 percent of the
facilitated the payment of services If a patient has multiple outpatient payment amount, annual updates would
included within the scope of each services during a single visit, the total be applied to the coinsurance so that it
ambulatory payment classification payment for the visit is computed as the would continue to account for 20
(APC). The OBRA also mandated sum of the individual payments for each percent of the total charge. Wage
hospitals to report claims for services service. Medicare provides updated adjusted coinsurance amounts were
under the Healthcare Common versions of the OCE, along with further limited by the Medicare
Procedure Coding System (HCPCS) installation and user manuals, to its inpatient deductible. Subsequent
which enabled the identification of fiscal intermediaries on a quarterly legislation has accelerated the reduction
specific procedures and services used in basis. The updated OCE reflects all new of beneficiary copayment amounts by
the development of outpatient PPS coding and editing changes during that imposing prescribed percentage
rates. quarter. limitations off of the APC payment rate.
Ongoing changes and refinement to It was found upon initial testing of the For example, for all services paid under
the OPPS have been accomplished OCE that it could not be used in its the OPPS in CY 2005, the national
through annual proposed and final present form given the fact that the unadjusted copayment amount cannot
exceed 45 percent of the APC rate. payment rate and dividing the result by financial impact on TRICARE
Accelerated reductions were imposed the unadjusted payment rate. The beneficiaries (i.e., imposition of
specifically for those APC groups for payment rate for each APC group is the significantly higher cost-sharing for
which coinsurance represented a basis for determining the total payment Primary beneficiaries), the Agency has
relatively high proportion of the total (subject to wage-index adjustment) that opted to use the following hospital
payment. a hospital will receive from the outpatient deductible and cost-sharing/
A program payment percentage is beneficiary and the Medicare program. copayments currently being applied in
calculated for each APC by subtracting Since imposition of Medicare’s Tables 1 and 2 below for Prime, Extra,
the unadjusted national coinsurance unadjusted national coinsurance and Standard TRICARE programs for
amount for the APC from the unadjusted amounts would have an adverse hospital outpatient services:
TABLE 1.—HOSPITAL OUTPATIENT DEDUCTIBLES

Active duty family members
TRICARE Retirees, their family members
programs and survivors
E1–E4 E5 and above
Prime ................. None ....................................................... None ....................................................... None.

Extra .................. $50 per Individual ................................... $150 per Individual ................................. $150 per Individual.
$100 Maximum per family ...................... $300 Maximum per family ...................... $300 Maximum per family.
Standard ........... $50 per Individual ................................... $150 per Individual ................................. $150 per Individual.
$100 Maximum per family ...................... $300 Maximum per family ...................... $300 Maximum per family.
TABLE 2.—HOSPITAL OUTPATIENT COPAYMENTS/COST-SHARING

TRICARE prime program
Active duty family members Retirees, their TRICARE extra program TRICARE standard program
family members
E1–E4 E5 and above and survivors
$0 copayment per $0 copayment per $12 copayment per Active Duty Family Members: Cost- Active Duty Family Members: Cost-
visit. visit. visit. share—15% of fee negotiated by share—20% of the allowable
contractor. charge.
Retirees, Their Family Members and Retirees, Their Family Members &
Survivors: Cost-share—20% of the Survivors: Cost-share—25% of the
fee negotiated by the contractor. allowable charge.
• Hold-Harmless Protection—Since transitional corridor payments under 1833(t)(13)(B) of the Act, as amended by
the inception of the Medicare OPPS, section 1833(t)(7)(D)(i) of the Act, as section 411 of Pub. L. 108–73, also
providers have been eligible to receive amended by section 411 Pub. L. 108– provided a payment increase for rural
additional transitional outpatient 173, expired for rural hospitals having SCHs of 7.1 percent for all services and
payments (TOPs) if the payments they 100 or fewer beds, and sole community procedures paid under the OPPS,
received under the OPPS were less than hospitals (SCHs) located in rural areas excluding drugs, biologicals,
the payments they could have received as of December 31, 2005. However, brachytherapy seeds and services paid
for the same services under the payment subsequent legislation (Section 5105 of under pass-through payments effective
system in effect before the OPPS. Prior Pub. L. 109–171) reinstituted the hold- January 1, 2006, if justified by a study
to January 1, 2004, most hospitals that harmless transitional outpatient of the difference in costs for rural SCHs.
realized lower payments under OPPS payments (TOPs) for covered OPD While the Agency adopted the hold-
received transitional corridor payments services furnished on or after January 1, harmless TOPs for rural hospitals
based on a percent of the decreased 2006, and before January 1, 2009, for having 100 or fewer beds and SCHs, it
payments, with the exception of cancer rural hospitals having 100 or fewer beds opted to totally exempt cancer and
hospitals, children’s hospitals and rural that are not SCHs. This provision children’s hospitals from the OPPS in
hospitals having 100 or fewer beds provided an increased payment for such lieu of imposing the hold-harmless
which were held harmless under this hospitals for outpatient services if the provision, given the administrative
provision and paid the full amount of OPPS payment they received was less complexity of capturing the data
the decrease in payment under the than the pre-BBA payment amount (i.e., required for payment of monthly
OPPS. Since transitional corridor the amount that was received prior to interim TOP amounts. TOPs would
payments were intended to be implementation of OPPS) that they require a comparison of what would
temporary payments to ease the would have received for the same have been paid [i.e., billed charges and
provider’s transition from a prior cost- covered service. When the OPPS CHAMPUS Maximum Allowable Charge
based payment system to a prospective payment is less than the payment the (CMAC) amounts] prior to
payments system, they were terminated provider would have received prior to implementation of the OPPS for hospital
as of January 1, 2004, with the exception OPPS implementation, the amount of outpatient services to those amounts
of cancer and children’s hospitals who payment is increased by 90 percent of actually paid under the OPPS for the
were held harmless permanently under the amount of that difference for CY same services. A TOP would be allowed
transitional corridor provisions of the 2007, and by 85 percent of the amount in addition to the OPPS amount if
statute (section 1833(t)(7) of the Social of the difference for CY 2008. The payment to a cancer or children’s
Security Act). The authority for making amount of payment under Section hospital was lower than the amount that
would have been paid prior to similar to that currently being used (i.e., defined in § 199.2) which interferes
implementation of the OPPS. Since payment under a per diem recognizing with age appropriate functioning.
transitional corridor payments were the provider’s overhead costs and • The patient is unable to maintain
specifically designed to supplement the support staff), there are subtle himself or herself in the community,
losses experienced under the OPPS (i.e., differences in that OPPS’ all-inclusive with appropriate support, at a sufficient
to pay for services at the full amount per diems represent actual median costs level of functioning to permit an
that would have been allowed prior to of furnishing a day of partial adequate course of therapy exclusively
implementation of the OPPS), and most, hospitalization while per diems under on an outpatient basis (but is able, with
if not all, outpatient services paid at a the existing TRICARE system as appropriate support, to maintain a basic
billed or CMAC would exceed the OPPS prescribed under 32 CFR level of functioning to permit partial
amount, the program cannot justify the 199.14(a)(2)(ix) are extrapolated from hospitalization services and presents no
administrative burden/expense of inpatient costs based on the intensity of substantial imminent risk of harm to self
maintaining the hold-harmless the program (i.e., dependent on whether or others).
provisions for cancer and children’s it is classified as a full- or half-day • The patient is in need of crisis
hospitals. As a result, TRICARE will program). Another notable difference stabilization, treatment of partially
continue to reimburse cancer and between the two programs is the stabilized mental health disorders, or
children’s hospitals on a fee-for-services continuation of reimbursement of half- services as a transition from an inpatient
basis using billed charges and CMAC day PHPs (≥ to 3 hrs. but < 6 hrs.) under program.
rates; i.e., they will be excluded TRICARE which are currently not • The admission into the partial
altogether from the OPPS. recognized for payment under the hospitalization program is based on the
Adoption of the Medicare OPPS has Medicare OPPS (i.e., Medicare has not development of an individualized
also highlighted other policy established a separate APC for half-day diagnosis and treatment plan expected
considerations which must be addressed PHPs which can be used for to be effective for the patient and permit
in order to accommodate preexisting reimbursement under the TRICARE treatment at a less intensive level.
authorization criteria and Based on existing mental health
OPPS). This deviation from the
reimbursement systems. Following are review criteria under 32 CFR
Medicare PHP required the
these identified policy considerations 199.4(b)(10) and certification
establishment of an additional APC, the requirements prescribed under 32 CFR
and prescribed resolutions: per diem of which was set at 75 percent
• Partial Hospitalization Programs of the unadjusted full-day PHP APC
1996(b)(4)(xii)(A), including
(PHP)—Currently, TRICARE coverage accreditation by the JCAHO, under the
amount (i.e., 75 percent of the APC 0033 current edition of the Accreditation
extends to both full- and half-day amount of $234.73, equaling $176.05 for
psychiatric partial hospitalization Manual for Mental Health, Chemical
CY 2007). This will ensure continued Dependency, and Mental Retardation/
services furnished by TRICARE-
coverage of a well established mental Developmental Disabilities Services, not
authorized partial psychiatric
health treatment modality (half-day all hospital-based PHPs will be assured
hospitalization programs and authorized
PHP) which has been in place under of receiving payment under the OPPS
mental health providers for the active
TRICARE for over a decade. The above- unless they meet the above prescribed
treatment of a mental disorder. Each
established per diems reflect the certification requirements and enter into
psychiatric partial hospitalization
structure and scheduling of PHPs, and a participation agreement with
program must be either a distinct part of
the composition of the PHP APC TRICARE. CMHC PHPs have been
an otherwise authorized institutional
consists of the cost of all services excluded from payment under the
provider or a freestanding program
provided each day. Although there is a TRICARE OPPS since CMHCs are not
certified pursuant to TRICARE
certification standards; i.e., the facility requirement that each PHP day include recognized as authorized providers
must be accredited by the Joint a psychotherapy service, there is no under the TRICARE program.
Commission on Accreditation of specification regarding the specific mix While the authorization standards
Healthcare Organizations (JCAHO) of other services furnished within the under 32 CFR 199.6(b)(4)(xii)(A)
under the current edition of the day. through (D) will be retained/applied for
Accreditation Manual for Mental The TRICARE criteria under which both hospital-based and freestanding
Health, Chemical Dependency, and PHP services may be rendered are PHPs currently recognized under the
Mental Retardation/Developmental different than Medicare’s—both with Program, including the requirement for
Disabilities Services and meet all other regard to the need for PHP services and a written participation agreement with
requirements as prescribed under 32 facility requirements. Currently, TRICARE, freestanding PHPs will be
CFR 199.6(b)(4)(xii)(A) through (D). Medicare OPPS partial hospitalization exempt from OPPS and will continue to
These authorized and participating services may be provided to patients in be reimbursed under the old TRICARE
partial hospitalization programs are lieu of inpatient psychiatric care in PHP per diem system as prescribed
paid a percentage off of the average hospital outpatient departments or under 32 CFR 199.14(a)(2)(ix), subject to
inpatient per diem amount per case to Medicare-certified community mental their own unique mental health
both high- and low-volume psychiatric health centers (CMHCs). The Agency copayment/cost-sharing provisions.
hospitals. Full-day partial has opted to retain the existing mental • Ambulatory Surgery Procedures—
hospitalization programs (minimum of 6 health review criteria under 32 CFR Currently, ambulatory surgery
hours) receive 40 percent of the average 199.4(b)(10) in order to ensure the procedures provided in both
inpatient per diem, while partial continued level and quality of mental freestanding ambulatory surgery centers
hospitalization programs with less than health care afforded under the basic (ASCs) and hospital outpatient
6 hours (with a minimum of three program. Following are the TRICARE departments or emergency rooms are
hours) will be paid a per diem of 75 review criteria for determining the paid using prospectively determined
percent of the rate for full-day partial medical necessity of psychiatric partial rates established on a cost basis and
hospitalization programs. hospitalization services: divided into eleven groups as prescribed
Although the prescribed payment • The patient is suffering significant under 32 CFR 199.14(d). These payment
methodology for PHP under OPPS is impairment from a mental disorder (as groups are further adjusted for area
labor costs based on Metropolitan this case, will be paid under a new inclusive update; i.e., the freestanding
Statistical Areas (MSAs). The payment technology APC. birthing center all-inclusive rate
rates established under this system Freestanding ASCs will be exempt components will usually be updated on
apply only to facility charges for from OPPS and will continue to be paid February 1 of each year to coincide with
ambulatory surgery (e.g., standard under the existing eleven tier payment the annual CMAC file update, followed
overhead amounts that include, but are system. ASC procedures will be placed by the hospital-based birthing center all-
not limited to, nursing and technician into one of ten groups by their median inclusive rate component updates on
services, use of the facility and supplies per procedure cost, starting with $0 to April 1 of the same year. There will also
and equipment directly related to the $299 for Group 1, and ending with be differences in cost-sharing based on
surgical procedure) and do not include $1,000 to $1,299 for Group 9 and $1,300 the particular outpatient setting, since
such items as physician’s fees, and above for Group 10, subject to their the cost-share amount for freestanding
laboratory, X-rays or diagnostic own unique copayment/cost-sharing birthing center claims will continue to
procedures (other than those directly provisions under the TRICARE be calculated using the ambulatory
freestanding ambulatory surgery benefit. surgery formula while cost-share for
related to the performance of the
The eleventh payment tier/group was hospital-based claims will be calculated
surgical procedure), prosthetics and
added to the ASC reimbursement under the regular outpatient cost-
durable medical equipment for use in
system as of November 1, 1998, for sharing provisions.
the patient’s home. Ambulatory surgery extracorporeal shock wave lithotripsy, • Observation Stays—Observation
procedures (both provided in hospital- with a rate established off of the Services are those services furnished on
based and freestanding ambulatory inpatient Diagnostic Related Group a hospital’s premises, including the use
surgery centers) are subject to their own (DRG) 323 which is currently $3,289. of a bed and periodic monitoring by a
unique copayment/cost-sharing • Birthing Centers—As described in hospital’s staff, which are reasonable
provisions under the current TRICARE 32 CFR 199.6(b)(4)(xi)(3), a birthing and necessary to evaluate an
ambulatory surgery benefit. center is a freestanding or institution- outpatient’s condition or to determine
With implementation of the OPPS, affiliated outpatient maternity care the need for a possible admission to the
hospital-based ambulatory surgery program which principally provides a hospital as an inpatient. Under
procedures will no longer be reimbursed planned course of outpatient prenatal Medicare, a hospital may receive
under the original eleven tier payment care and outpatient childbirth services separate APC payments for observation
system, but will instead be paid on a limited to low-risk pregnancies. These services for patients having diagnoses of
rate-per-service basis that varies all-inclusive maternity and childbirth chest pain, asthma, or congestive heart
according to the APC group to which services are currently being reimbursed failure, when billed in conjunction with
the surgical procedure is assigned. The in accordance with 32 CFR 199.14(e) at an evaluation and management visit for
relative weight of the APC group will the lower of the TRICARE established a minimum of 8 hours. Since these
represent the median hospital cost of all-inclusive rate or the billed charge. qualifying diagnoses would greatly
the services included in the APC The all-inclusive rate includes restrict separate payment of observation
relative to the median cost of services laboratory studies, prenatal stays currently being reimbursed based
included in APC 0606, Level 3 Clinic management, labor management, solely on medical necessity, they are
Visit. The prospective payment rate for delivery, post-partum management, being expanded to accommodate the
each APC will be calculated by newborn care, birth assistant, certified special needs of unique TRICARE
nurse-midwife professional services, beneficiary populations (e.g., separate
multiplying the APC’s relative weight
physician professional services, and the payment for maternity observations
by a nationally established conversion
use of the facility to the extent that they stays). Separate payment of maternity
factor and adjusting it for geographic
are usually associated with a normal observation stays required the
wage differences. The APC payment
pregnancy and childbirth. Since modification of the existing conditional
will be subject to the deductible and
institutional-affiliated maternity centers criteria for separate payment of
cost-sharing/copayment amounts will continue to be reimbursed under observation stays associated with pain,
currently being applied under Prime, the TRICARE maximum allowable asthma or congestive heart failure.
Extra, and Standard TRICARE programs birthing center all-inclusive rate Under the TRICARE OPPS, additional
for hospital outpatient services. Denial methodology as prescribed under 32 hospital services (e.g., separate
of Medicare inpatient procedures will CFR 199.14(e), payment will be equal to emergency room visit or clinic visit)
also be adhered to under the OPPS (i.e., the sum of the Class 3 CMAC for total will not be required on a claim with a
denial of inpatient surgical procedures obstetrical care for a normal pregnancy maternity diagnosis in order to receive
performed in a hospital outpatient and delivery (CPT code 59400) and the separate payment for an observation
setting) except for those inpatient TMA supplied non-professional stay. The minimum time requirements
procedures, which upon medical component amount, which includes have also been reduced from 8 to 4
review, could be safely and efficaciously both the technical and professional hours to ensure maximum coverage of
rendered in an outpatient setting due to components of tests usually associated medically necessary maternity
TRICARE’s younger, healthier with a normal pregnancy and childbirth. observation stays.
beneficiary population. TRICARE- As a result, hospital-based birthing • End-State Renal Disease (ESRD)
specific APCs will be developed for centers will continue to be reimbursed Dialysis Services—In accordance with
these designated inpatient procedures the same as freestanding birthing sections 1881(b) (2) and (b)(7) of the
based on median costs off of the most centers except that updating of the Social Security Act, a facility that
recent 12 months of claims history. hospital-based all inclusive rate, furnishes dialysis services to Medicare
OPPS reimbursement will also be consisting of the CMAC for procedure patients with ESRD is paid a
extended for an inpatient procedure code 59400 (Birthing Center, all- prospectively determined rate for each
performed to resuscitate or stabilize a inclusive charge, complete) and the dialysis treatment furnished. The rate is
patient with an emergent, life- state specific non-professional a composite that includes all costs
threatening condition who dies before component, will lag two months behind associated with furnishing dialysis
being admitted as a patient, which in the freestanding birthing center all- services except for the costs of
physician services and certain the satellite facility and the main and in terms of resource consumption)
laboratory tests and drugs that are billed hospital are operated under the same into their respective APC groups.
separately. CMS has exercised the license, except in areas where the State During the development of the
authority granted under section requires a separate license for the hospital OPPS it was recognized that
1833(t)(1)(B)(i) to exclude from the department of the provider. certain hospital outpatient services were
outpatient PPS those services for • Clinical Integration—Professional being paid based on fee schedules or
patients with ESRD that are paid under staff of the outpatient department, other prospectively determined rates
the ESRD composite rate. Since remote location hospital or satellite that were being applied across other
TRICARE does not have a comparable facility are monitored by, and have ambulatory care settings. As a result, the
composite rate in effect for payment of clinical privileges at the main hospital. following services were excluded from
ESRD services, they will be reimbursed The medical director of the outpatient the OPPS in order to achieve
under TRICARE’s OPPS. facility must also maintain a reporting consistency of payment across different
relationship with the chief medical service delivery sites: (1) Physician
III. Treatment Settings Subject to services; (2) nurse practitioner and
Outpatient Prospective Payment System officer at the main hospital that has the
same frequency, intensity and level of clinical nurse specialist services; (3)
The outpatient prospective payment accountability that exists in the physician assistant services; (4) certified
system is applicable to any hospital relationship between other nurse-midwife services; (5) services of a
participating in the Medicare program departmental medical directors and the qualified psychologist; (6) clinical social
except for Critical Access Hospitals chief medical officer of the main worker services, except under half- and
(CAHs), Indian Health Service hospitals, hospital. Medical records for patients full-day partial hospitalization programs
certain hospitals in Maryland that treated in the facility or organization in which the services are included
qualify for payment under the state’s must be integrated into a unified within the per diem payment amount;
cost containment waiver, and hospitals retrieval system (or cross reference) of (7) services of an anesthetist; (8)
located outside one of the 50 states, the the main hospital and there must be full screening and diagnostic
District of Columbia and Puerto Rico access to all services provided at the mammographies; (9) clinical diagnostic
and specialty care providers which main hospital for patients treated in the services; (10) non-implantable DME,
include: (1) Cancer and children’s outpatient facility requiring further care. orthotics, prosthetics, and prosthetic
hospitals; (2) freestanding ASCs; (3) devices and supplies; (11) hospital
• Financial integration. The financial
freestanding partial hospitalization outpatient services furnished to SNF
operation of the outpatient facility must
programs (PHPs); (4) freestanding inpatients as part of their
be fully integrated within the financial
psychiatric and substance use disorder comprehensive care plan; (12)
system of the main hospital, as
rehabilitation facilities (SUDRFs); (5) ambulance services; (13) physical
evidenced by shared income and
comprehensive outpatient rehabilitation therapy; (14) speech-language
expenses between the main hospital and
facilities (CORFs); (6) home health pathology; (15) occupational therapy;
outpatient facility.
agencies (HHAs); (7) hospice programs; (16) influenza and pneumococcal
(8) other corporate services providers • Public awareness. The outpatient
pneumonia vaccines; (17) take-home
(e.g., freestanding cardiac department, remote location hospital, or
surgical dressings; (18) services and
catheterization centers, freestanding a satellite facility is held out to the
procedures designated as requiring
sleep diagnostic centers, and public and other payers as part of the
inpatient care; and (19) ambulance
freestanding hyperbaric oxygen main provider. When patients enter the
services. These services will continue to
treatment centers); (9) freestanding outpatient facility they are aware that
be reimbursed under the current CMAC
birthing centers; (10) VA hospitals; and they are entering the main provider and
fee schedule or other TRICARE-
(11) freestanding ESRD centers. Due to are billed accordingly. recognized allowable charge
their inability to meet the more stringent Having clear criteria for provider-based methodology (e.g., statewide
requirements imposed for hospital- status is important because this prevailings).
based and freestanding PHPs under the designation can result in additional The remaining outpatient procedures
Program. CMHCs have also been TRICARE payments for services at the which were not being paid under
excluded from payment under OPPS for provider-based facility (i.e., the current fee schedules or other
partial hospitalization program (PHP) incorporation of additional facility costs prospectively determined rates were
services since they are not recognized as for covered outpatient services/ grouped under an APC as set forth in
authorized providers under the procedures). TRICARE will accept CMS’ section 1833(t)(2)(B) of the Social
TRICARE program. provider-based status evaluations/ Security Act and under 42 CFR § 419.31
An outpatient department, remote determinations for all hospital based on the following criteria:
location hospital, satellite facility, or outpatient facilities seeking • Resource Homogeneity—The
other provider-based entity must also be reimbursement under the TRICARE amount and type of facility resources
either created by, or acquired by, a main OPPS. (for example, operating room, medical
provider (hospital qualifying for supplies, and equipment) that are used
IV. Application of Ambulatory Payment
payment under OPPS) for the purpose of to furnish or perform the individual
Classification (APC) Model
furnishing health care services of the procedures or services within each APC
same type as those furnished by the Payment for services under the OPPS group should be homogeneous. That is,
main provider under the name, is based on grouping outpatient services the resources used are relatively
ownership, and financial administrative into APC groups in accordance with constant across all procedures or
control of the main provider, in provisions outlined in section 1833(t) of services even though resources used
accordance with the following the Social Security Act and its may vary somewhat among individual
requirements under 42 CFR § 413.65 implementing regulation 42 CFR part patients.

(Medicare Regulation) in order to 419. This grouping is accommodated • Clinical Homogeneity—The
qualify for payment under the OPPS: through the reporting of HCPCS codes definition of each APC should be
• Licensure—The outpatient and descriptors that are used to group ‘‘clinically meaningful.’’ That is, the
department, remote location hospital, or homogenous services (both clinically procedures or services included within
the APC group relate generally to a but in which case the services are and supplies directly related to
common organ system or etiology, have beyond the scope of SNF colostomy care), including replacement
the same degree of extensiveness, and comprehensive care plans; (11) certain of these devices.
utilize the same method of treatment. preventive services, such as colorectal Payments for packaged services under
• Provider Concentration—The cancer screening; (12) acute dialysis the OPPS are bundled into the payment
degree of provider concentration (e.g., dialysis for poisoning); and (13) providers receive for separately payable
associated with the individual services ESRD services. These hospital services provided on the same day and
that comprise the APC is considered. If outpatient procedures will be paid on a are identified by the status indicator (SI)
a particular service is offered only in a rate-per-service basis that varies ‘‘N’’. Hospitals include charges for
limited number of hospitals, then the according to the APC group to which packaged services on their claims, and
impact of payment for the services is they are assigned. the costs associated with these packaged
concentrated in a subset of hospitals. In accordance with section 1833(t)(2) services are bundled into the costs for
Therefore, it is important to have an of the Social Security Act, services and separately payable procedures in
accurate payment level for services with items within an APC group cannot be calculating their payment rates. The
a high degree of provider concentration. considered comparable with respect to following criteria are used in
Conversely, the accuracy of payment the use of resources in the APC group determining whether procedures should
levels for services that are routinely if the highest median cost is more than be packaged: (1) Whether the service is
offered by most hospitals does not bias 2 times the lowest median cost for an normally provided separately or in
the payment system against any subset item or service within the same group conjunction with other services; (2) how
of hospitals. (referred to a the ‘‘2 times rule’’). likely it is for the costs of the packaged
• Frequency of Service—Unless there Exceptions may be granted in unusual code to be appropriately mapped to the
is a high degree of provider cases, such as low-volume items and separately payable codes with which it
concentration, creating separate APC services, but cannot be extended in was performed; (3) whether the APC
groups for services that are infrequently cases of a drug or biological that has payment to which the services were
performed is avoided. Since it is been designated as an orphan drug packaged will offset the hospital’s actual
difficult to establish reliable payment under section 526 of the Federal Food, costs; and (4) whether the expected cost
rates for low-volume groups, HCPCS Drug and Cosmetic Act. of the service is relatively low.
codes are assigned to an APC that is Special logic has also been
V. Packaging and Special Payment programmed into the OCE which will
most similar in terms of resource use Provisions Under OPPS
and clinical coherence. have the OPPS PRICER automatically
The prospective payment system assign payment for a special packaged
• Minimal Opportunities for establishes a national payment rate, service reported on a claim if there were
Upcoding and Code Fragmentation— standardized for geographic wage no other services separately payable
The APC system is intended to differences, that includes operating and under the OPPS claim for the same date.
discourage using a code in a higher capital-related costs that are directly A new status indicator ‘‘Q’’ will be
paying group to define the care. That is, related and integral to performing a assigned to these special packaged
putting two related codes such as the procedure or furnishing a service on an codes to indicate that they are usually
codes, for excising a lesion for 1.1 cm outpatient basis, which has ultimately packaged, except for special
and one of 1.0 cm, in different APC resulted in the establishment of distinct circumstances when they are separately
groups may create an incentive to groups of surgical, diagnostic, and payable.
exaggerate the size of the lesions in partial hospitalization services, as well Based on the above packaging criteria,
order to justify the incrementally higher as medical visits. No separate payment is was felt that certain other expensive
payment. APC groups based on subtle is made for packaged services, because items and services which were
distinctions would be susceptible to this the cost of these items is included in the otherwise considered an integral part of
kind of coding. Therefore, APC groups APC payment for the service of which another procedure should not be
were kept as broad and inclusive as they are an integral part. These costs packaged within that procedure’s APC
possible without sacrificing resource or include, but are not limited to: (1) Use payment rate, since the resulting
clinical homogeneity. of operating suite; (2) use of procedure payment would not offset the costs of
These procedures, along with their room or treatment room; (3) use of those items and services. This could
specific HCPCS coding and descriptors, recovery room or area; (4) use of an have a potentially negative impact,
were used to identify and group services observation bed; (5) anesthesia, along thereby jeopardizing access to these
within each established APC group. with supplies and equipment for items and services in a hospital
They included: (1) Surgical procedures administering and monitoring outpatient setting. As a result, the costs
(including hospital-based ASC anesthesia or sedation; (6) certain drugs, associated with these items and services
procedures currently being paid under biologicals, and other pharmaceuticals; were not packaged within the APC of
the eleven tier ASC payment (7) medical and surgical supplies; (8) the primary procedure with which they
methodology); (2) radiology, including surgical dressings; (9) devices used for were normally associated. Instead,
radiation therapy; (3) clinic visits; (4) external reduction of fractures and separate APCs were developed for
emergency department visits; (5) dislocations; (10) intraocular lenses payment of these items and services
diagnostic services and other diagnostic (IOLs); (11) capital related costs; (12) under the following payment
tests; (6) partial hospitalization for the costs incurred to procure donor tissue provisions:
mentally ill; (7) surgical pathology; (8) other than corneal tissue; (13) incidental • Transitional Pass-Through for
cancer therapy; (9) implantable medical services such as venipuncture; (14) Additional Costs of Drugs, Biologicals,
items (e.g., prosthetic implants, implantable items used in connection and Radiopharmaceuticals. Although
implantable DME and implantable items with diagnostic laboratory tests, and the costs of drugs, biologicals and
used in performing diagnostic x-rays other diagnostics; and (15) implantable pharmaceuticals are generally packaged
and laboratory tests); (10) specific prosthetic devices (other than dental) into the APC payment rate for the
hospital outpatient services furnished to which replace all or part of an internal primary procedure or treatment with
a beneficiary who is admitted to a SNF, body organ (including colostomy bags which the drugs are usually furnished,
there are special temporary additional cost is equal to or more than $55 for CY hospital claims data that have been
payments or ‘‘transitional pass-through 2007 or equal to or more than the classified as separately payable in CY
payments’’ available under section updated threshold (i.e., the packaging 2007 will be paid per the ASP-based
1833(t)(6) of the Social Security Act for threshold inflated annually by the methodology at a rate of ASP+ 6
at least two years, but not more than Producer Price Index (PPI) for percent.
three years for the following drugs and prescription drugs), with the exception New drugs, biologicals and devices
biologicals: (1) Current orphan drugs, as of 5HT3 antiemetics which will which qualify for separate payment
designated under section 526 of the continue to be paid separately under OPPS, but have not yet been
Federal Food, Drugs, and Cosmetic Act; regardless of their calculated per-day assigned to a transitional APC (i.e.,
(2) current drugs and biological agents cost. assigned to a temporary APC for
used for treatment of cancer; (3) current Section 1833(t)(14) of the Act requires separate payment of an expensive drug
radiopharmaceutical drugs and special classification of certain or device) will be reimbursed under the
biological products; and (4) new drugs separately payable drugs, biologicals TRICARE standard allowable charge
and biologic agents in instances where and radiopharmaceuticals and mandates methodology. This allowable charge
the item was not being paid as a payment under section payment will continue until a
hospital outpatient service as of 1833(t)(14)(A)(iii) of the Act for transitional APC has been assigned (i.e.,
December 31, 1996, and where the cost specified covered outpatient drugs in until CMS has had the opportunity to
of the item is ‘‘not insignificant’’ in CY 2006 and subsequent years to be assign the new drug, biological or
relation to the hospital OPPS payment equal to the average acquisition cost for device to a temporary APC for separate
amount. the drug subject to any adjustment for payment).
Section 1833(t)(6)(D)(i) of Social overhead costs, which for CY 2007 is a • Drug Administration Coding and
Security Act sets the payment rate for combined rate of ASP + 6 percent. Payment. For CY 2007, hospitals will be
pass-through eligible drugs as amounts Separately payable drugs and expected to report the full set of CPT
determined under section 1842(o) of the biologicals without ASP-based data will drug administration codes in a manner
Act. Section 1847A of the Act be paid at their mean cost calculated consistent with their descriptors, CPT
establishes the use of average sales price from Medicare CY 2005 hospital claims instructions and correct coding
(ASP) methodology (i.e., the rate data. The preadmission-related services principles. They will no longer be able
equivalent to the payment that would be associated with intravenous immune to report the alphanumeric HCPCS
received in a physician office setting) as globulin (IVIG) will continue to be paid codes (C8950, C8951, C8952, C8954,
the basis for payment for drugs and under a New Technology APC with a and C8955) that were recognized prior
biologicals described in section rate of $75. Also, payment for blood to January 1, 2007. These newly
1842(o)(1)(C) of the Act. Section clotting factors in the outpatient setting recognized CPT codes will be assigned
1883(t)(6)(D)(i) also states if a drug or will be set at ASP + 6 percent, plus the to six new drug administration APCs,
biological is covered under a updated furnishing fee of $0.15. The with payment rates based on median
competitive acquisition contract under temporary policy of paying costs for the APCs as calculated from
section 1847B of the Act, the payment radiopharmaceuticals at charges Medicare’s CY 2005 claims data.
rate is equal to the average price for the reduced to costs is also being extended • Payment for Blood and Blood
drug or biologicals for all competitive for one additional year since it is still Products. Since Medicare’s
acquisition areas. Thus, drugs and considered the best proxy for implementation of the OPPS in August
biologicals with pass-through status in radiopharmaceutical acquisition and 1, 2000, separate payments have been
CY 2007 will receive payment overhead costs. However, separate made for blood and blood products
consistent with the provision of section payment will only apply to those through APCs rather than packaging
1842(o) of the Act, at a rate that is radiopharmaceuticals with per-day costs them into the procedures with which
equivalent to the payment they would greater than $55. they were administered. Hospital
receive in a physician office setting • Payment for Nonpass-Through payment for the costs of blood and
(ASP) or the rate that would be paid Drugs, Biologicals, and blood products, as well as the costs of
under the competitive acquisitions Radiopharmaceuticals With HCPC collecting, processing, and storing blood
program, while pass-through Codes, But Without OPPS Claims Data. products, are made through the OPPS
radiopharmaceuticals will be paid the For CY 2007, hospitals will receive payments for specific blood product
hospital’s charge for the payment for nonpass-through APCs. For CY 2007, these blood
radiopharmaceutical adjusted to the cost radiopharmaceuticals without hospital products payments will be based on the
using the hospital’s overall cost-to- claims data that have been assigned unadjusted, simulated median costs for
charge ratio (CCR). HCPCS codes as of January 1, 2007, at blood and blood products that are
• Packaging and Payment for Drugs, the hospital’s charge for the derived from CY 2005 Medicare claims
Biologicals and Radiopharmaceuticals radiopharmaceutical adjusted to cost data, with the exception of the seven
Without Pass-Through Status. Drugs, using the hospital’s overall cost-to- products for which there will be a
biologicals and radiopharmaceuticals charge ratio, which will be the same payment adjustment to smooth their
that do not have pass-through status are methodology used in the payment for transition to full claims-based payment
paid in one of two ways: Either pass-through radiopharmaceuticals. For in the future.
packaged into the APC payment rate for new drugs without pass-through status • Other Procedures or Services Costs
the procedure or treatment with which or hospitals claims data, payment will Not Packaged in APC Payment. Costs
the products are usually furnished, or be made at the lesser of the ASP or for casting, splinting and strapping
separately based on a packaging competitive acquisition contract price services, immunosuppressive drugs for
threshold which has been set at $55 for (Part B CAP). In rare instances where a patients following organ transplant, and
CY 2007. Therefore, for CY 2007 and drug does not have a Part B drug CAP certain other high-cost drugs that are
beyond, drugs, biologicals and rate or data available for use for ASP infrequently administered are not
radiopharmaceuticals that are not new methodology, payment will be made at packaged into the costs of the primary
and do not have pass-through status will 95 percent of the product’s most recent procedures with which they are
be packaged if their calculated per-day AWP. Established drugs without normally associated. Instead, new APC
groups have been created for these items least two, but not more than three years. for a Replacement Device Is Furnished
and services, which will allow separate This period begins with the first date on to the Hospital. Payments will be
payment. which a transitional pass-through reduced for selected APCs in cases in
• Corneal Tissue Acquisition Costs. payment is made for any medical device which an implanted device is replaced
Corneal tissue acquisition costs will not that is described by the new medical without cost to the hospital or with full
be packaged with the APC payment for category. The costs of the devices will credit for the removed device in
corneal transplant surgical procedures. be packaged into the costs of the accordance with 42 CFR 419.45. The
Instead, separate payment will be made procedures with which they are amount of the reduction to the APC rate
based on the hospital’s reasonable costs normally billed once they are no longer will be calculated in the same manner
incurred to acquire corneal tissue. eligible for pass-through payment. as the offset amount that would be
Corneal acquisition costs must be Device pass-through payments (those applied if the implanted device assigned
submitted using HCPCS code V2785 procedures designated with a SI ‘‘H’’) to the APC had pass-through status as
(Processing, Preserving and are calculated by applying the statewide defined under 42 CFR 419.66. The
Transporting Corneal Tissue), indicating cost-to-charge ratio (CCR), which is adjustment would be made under the
the actual cost of the acquisition rather based on the geographical CBSA (2 digit authority of section 1833(t)(2)(E) of the
than the hospital’s charge on the bill. = rural, 5 digit = urban), to the hospital’s Social Security Act, which permits
• Transitional Pass-Through Payment charges on the claims and subtracting equitable adjustments to the OPPS
for Devices. Transitional payments will any appropriate pass-through offset. The payments contingent on meeting all of
only apply to new and innovative offset adjustment only applies when a the following criteria: (1) All procedures
medical devices meeting the following pass-through device is billed in addition assigned to the selected APCs must
criteria: (1) Were not recognized for to the primary procedure with which it require implantable devices that would
payment as a hospital outpatient service is normally associated. be reported if device replacement
prior to 1997 (i.e., payment was not Provisions are also in place in procedures were performed; (2) the
being made as of December 31, 1996) or accordance with 1833(t)(6)(D)(ii) of the required devices must be surgically
treated as meeting the time constraints Social Security Act for reducing inserted or implanted devices that
under special prescribed conditions; (2) transitional pass-through payments by remain in the patient’s body after the
have been approved/cleared for use by the estimated portion of each APC conclusion of the procedures, at least
the Food and Drug Administration payment rate that could reasonably be temporarily; and (3) the offset percent
(FDA); (3) are determined to be attributed to the cost of the associated for the APC (i.e., the median cost of the
reasonable and necessary for the devices that are eligible for pass-through APC without device costs divided by
diagnosis or treatment of an illness or payments. Offsets are calculated by the median cost of the APC with device
injury or to improve the functioning of comparing the median APC cost without costs) must be significant—significant
a malformed body part; (4) are an device packaging to the Median APC offset percent is defined as exceeding 40
integral and subordinated part of the cost (including device packaging), percent.
procedure performed, are used for one developed from claims with device The presence of the modifier ‘‘FB’’
patient only (except for reprocessed codes, to determine the percentage of [‘‘Item Provided Without Cost to
single-use devices meeting FDA’s most median APC costs attributable to the Provider, Supplier, or Practitioner or
recent regulatory criteria on single-use associated pass-through device. These Credit Received for Replacement
devices), are surgically implanted or percentages are then applied to the APC (examples include, but are not limited
inserted via a natural or surgically payment amounts in order to determine to: covered under warranty, replaced
created orifice or incision and remain the applicable amounts to be deducted due to defect, free sample)’’] would
with the patient after the patient is from the pass-through payments, known trigger the adjustment in payment if the
released from the hospital outpatient as the ‘‘offset’’ amounts. Offset amounts procedure code to which modifier ‘‘FB’’
department; (5) are not equipment, are only applied when it can be was amended appeared in Table 3 and
instruments, apparatus, implements, or determined that an APC contained cost was also assigned to one of the APCs
such items for which depreciation and is actually associated with the device. listed in Table 4 below.
financing expenses are recovered as Currently, there is only one transitional
depreciable assets; (6) are not materials pass-through payment offset in effect for TABLE 3.—DEVICES FOR WHICH THE
and supplies such as sutures, clips or device category C1820 (generator, FB MODIFIER MUST BE REPORTED
customized surgical kits furnished neurostimulator (implantable), with
WITH THE PROCEDURE WHEN FUR-
incidental to a service or procedure; (7) rechargeable battery and charging
NISHED WITHOUT COST OR AT FULL
are not material such as biologicals or system) with an amount of $8,668.94,
synthetics that are used to replace which represents 77.65 percent of the CREDIT FOR A REPLACEMENT DE-
human skin; (8) no existing or CY 2007 payment rate for APC 0222. VICE
previously existing device category is Two new device categories have been
appropriated for the device; (9) established for pass-through payment Device Description
associated cost is not insignificant in starting in 2007: (1) L8690—auditory C1721 ... AICD, dual chamber.
relation to the APC payment for the osseointegrated device, external sound C1722 ... AICD, single chamber.
service in which the innovative medical processor, replacement; and (2) C1821— C1764 ... Event recorder, cardiac.
equipment is packaged; and (10) must interspinous process distraction device C1767 ... Generator, neurostim, imp.
demonstrate that utilization of the (implantable). The offset amounts for C1771 ... Rep dev, urinary, w/sling.
device provides substantial clinical both of these new device categories C1772 ... Infusion pump, programmable.
improvement for beneficiaries compared were set to $0 for CY 2007, since there C1776 ... Joint device (implantable).
with currently available treatments, were not identifiable device-related C1777 ... Lead, AICD, endo single coil.
C1778 ... Lead, neurostimulator.
including procedures utilizing devices costs associated with their procedure C1779 ... Lead, pmkr, transvenous VDD.
in existing or previously existing device APCs (i.e., APC 0256 for L8690 and APC C1785 ... Pmkr, dual, rate-resp.
categories. 0050 for C1821). C1786 ... Pmkr, single, rate-resp.
The duration of transitional pass- • Payment When Devices Are C1813 ... Prostheses, penile, inflatab.
through payments for devices is for at Replaced Without Cost or Where Credit C1815 ... Pros, urinary sph, imp.
TABLE 3.—DEVICES FOR WHICH THE TABLE 3.—DEVICES FOR WHICH THE TABLE 3.—DEVICES FOR WHICH THE
FB MODIFIER MUST BE REPORTED FB MODIFIER MUST BE REPORTED FB MODIFIER MUST BE REPORTED
WITH THE PROCEDURE WHEN FUR- WITH THE PROCEDURE WHEN FUR- WITH THE PROCEDURE WHEN FUR-
NISHED WITHOUT COST OR AT FULL NISHED WITHOUT COST OR AT FULL NISHED WITHOUT COST OR AT FULL
CREDIT FOR A REPLACEMENT DE- CREDIT FOR A REPLACEMENT DE- CREDIT FOR A REPLACEMENT DE-
VICE—Continued VICE—Continued VICE—Continued
Device Description Device Description Device Description
C1820 ... Generator, neuro, rechg bat sys. C1898 ... Lead, pmkr, other than trans. C2622 ... Prosthesis, penile, non-inf.
C1882 ... AICD, other than sing/dual. C1899 ... Lead, pmkr/ACID combination. C2626 ... Infusion pump, non-prog, temp.
C1891 ... Infusion pump, non-prog, perm. C1900 ... Lead coronary venous. C2631 ... Rep dev, urinary, w/o sling
C1895 ... Lead, AICD, endo dual coil. C2619 ... Pmkr, dual, non rate-resp. L8614 .... Cochlear device/system.
C1896 ... Lead, AICD, non sing/dual. C2620 ... Pmkr, single, non rate-resp.
C1897 ... Lead, neurostim, test kit. C2621 ... Pmkr, other than sing/dual.
TABLE 4.—ADJUSTMENTS TO APCS IN CASES OF DEVICES REPORTED WITHOUT COST OR FOR WHICH FULL CREDIT IS
RECEIVED
CY 2007 offset
APC SI APC group title amt.
(percent)
0039 ....................... S Level I Implantation of Neurostimulator ........................................................................................... 78.85

0040 ....................... S Percutaneous Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve ..................... 54.06
0061 ....................... S Laminectomy or Incision for Implantation of Neurostimulator Electrodes, Excluded ...................... 60.06
0089 ....................... T Insertion/Replacement of Permanent Pacemaker and Electrodes .................................................. 77.11
0090 ....................... T Insertion/Replacement of Pacemaker Pulse Generator .................................................................. 74.74
0106 ....................... T Insertion/Replacement/Repair of Pacemaker and/or Electrodes ..................................................... 41.88
0107 ....................... T Insertion of Cardioverter-Defibrillator ............................................................................................... 90.44
0108 ....................... T Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads ................................................... 77.75
0222 ....................... T Implantation of Neurological Device ................................................................................................ 77.65
0225 ....................... S Implantation of Neurostimulator Electrodes, Cranial ....................................................................... 79.04
0227 ....................... T Implantation of Drug Infusion Devices ............................................................................................. 80.27
0229 ....................... T Transcatheter Placement of Intravascular Shunts ........................................................................... 46.17
0259 ....................... T Level IV ENT Procedures ................................................................................................................ 84.61
0315 ....................... T Level II Implantation of Neurostimulator .......................................................................................... 76.03
0385 ....................... S Level I Prosthetic Urological Procedures ......................................................................................... 83.19
0386 ....................... S Level II Prosthetic Urological Procedures ........................................................................................ 61.16
0418 ....................... T Insertion of Left Ventricular Pacing Elect. ........................................................................................ 87.32
0654 ....................... T Insertion/Replacement of a Permanent Dual Chamber Pacemaker ............................................... 77.35
0655 ....................... T Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker ............................ 76.59
0680 ....................... S Insertion of Patient Activated Event Recorders ............................................................................... 76.40
0681 ....................... T Knee Arthroplasty ............................................................................................................................. 73.37
If the APC to which the device code the device being replaced and the credit reduction would be taken from the
(i.e., one of the codes in Table 3 above) for the replacement device. Multiple adjusted amount.
is assigned is on the APCs listed in procedure reductions would also • Coding and Payment of Emergency
Table 4 above, the unadjusted payment continue to apply even after the APC Department Visits. The following five
rate for the procedure APC will be payment adjustment to remove payment Type B emergency department G-codes
reduced by an amount equal to the for the device cost, because there would have been established for emergency
percent in Table 4 times the unadjusted still be the expected efficiencies in departments meeting the definition of a
payment rate. The actual adjustments performing the procedure if it was dedicated emergency department (DED)
can be viewed on the CMS Web site. provided in the same operative session under the Emergency Medical
In cases in which the device is being as another surgical procedure. Similarly, Treatment and Labor Act (EMTALA)
replaced without cost, the hospital will if the procedure was interrupted before regulations in 42 CFR § 489.24, but
report a token device charge. However, administration of anesthesia (i.e., there which are not Type A emergency
if the device is being inserted as an departments (i.e., they may meet the
was a modifier 52 or 73 on the same line
upgrade, the hospital will report the DED definition but are not available 24
as the procedure), a 50 percent
difference between its usual charge for hours a day, 7 days a week).
TABLE 5.—CY 2007 FINAL HCPCS CODES TO BE USED TO REPORT EMERGENCY DEPARTMENT VISITS PROVIDED IN
TYPE B EMERGENCY DEPARTMENTS
HCPCS Short descriptor Long descriptor
code
G0380 ........ Level 1 hosp type B visit .......... Level 1 hospital emergency department visit provided in a Type B emergency department. (The
ED must meet at least one of the following requirements: (1) It is licensed by the State in
which it is located under applicable State law as an emergency room or emergency depart-
ment; (2) It is held out to the public (by name, posted signs, advertising, or other means) as
a place that provides care for emergency medical conditions on an urgent basis without re-
quiring a previously scheduled appointment; or (3) During the calendar year immediately pre-
ceding the calendar year in which a determination under this section is being made, based
on a representative sample of patient visits that occurred during that calendar year, it pro-
vides at least one-third of all of its outpatient visits for the treatment of emergency medical
conditions on an urgent basis without requiring a previously scheduled appointment.).
The use of these G-codes, along with difference between critical care when continue to bill CPT codes for both
the following redefinition of a Type A billed with and without trauma clinic and Type A Emergency
emergency department, will serve as a activation. If critical care is provided department visits until national
vehicle to capture median cost and without trauma activation, the hospital guidelines have been established.
resource differences among visits to will bill with either CPT 99291 or
The above CPT E/M codes and other
Type A emergency departments, Type B 99292, receiving payment for APC 0617
HCPCS codes currently assigned to the
emergency departments and clinics. A with a median cost of $402.67.
new G-code (G0390—Trauma response However, if trauma activation occurs, clinic visit APCs have been mapped in
team activation associated with hospital the hospital would be allowed to bill Table 6 to eleven new APCs; five for
critical care services) was also created one unit of G-code (G0390), reported clinic visits; five for emergency
department visits; and one for critical
(effective January 1, 2007) to be used in with revenue code 68x on the same date
addition to CPT codes 99291 and 99292 of service, thereby receiving $491.66 care services, based on median costs
to address the meaningful cost under APC 0618. Hospitals will and clinical consideration.
TABLE 6.—ASSIGNMENT OF CPT E/M CODES AND OTHER HCPCS CODES TO NEW VISIT APCS FOR CY 2007
CY 2007
CY 2007 APC title HCPCS Short descriptor
APC
Level 1 Hospital Clinic Visits ................................. 0604 92012 Eye exam, established pat.
99201 Office/outpatient visit, new (Level 1).
99211 Office/outpatient visit, est (Level 1).
G0101 CA screen; pelvic/breast exam.
G0245 Initial foot exam pt lops.
.............. G0241 Office consultation (Level 1).
.............. G0271 Confirmatory consultation (Level 1).
.............. G0264 Assmt otr CHF, CP, asthma.
Level 2 Hospital Clinic Visits ................................. 0605 92002 Eye exam, new patient.
92014 Eye exam and treatment.
.............. 99243 Office consultation (Level 3).
.............. 99242 Office consultation (Level 2).
.............. 99273 Confirmatory consultation (Level 3).
.............. 99272 Confirmatory consultation (Level 2).
.............. 99431 Initial care, normal newborn.
.............. G0246 Follow-up eval of foot pt lop.
.............. G0344 Initial preventive exam.
Level 3 Hospital Clinic Visits ................................. 0606 92004 Eye exam, new patient.
99274 Confirmatory consultation (Level 4).
99244 Office consultation (Level 4).
Level 4 Hospital Clinic Visits ................................. 0607 99204 Confirmatory consultation (Level 1).
99245 Office consultation (Level 5).
99275 Confirmatory consultation (Level 5).
Level 5 Hospital Clinic Visits ................................. 0608 99205 Office/outpatient visit, new (Level 5).
G0175 OPPS service, sched team conf.
Level 1 Type A Emergency Visits ......................... 0609 99281 Emergency department visit.
Critical Care ........................................................... 0617 99291 Critical care, first hour.
• Inpatient Only Procedures. The anticipated that TRICARE will be status indicator ‘‘C’’, furnished on the
inpatient list on TMA’s OPPS Web site following the Medicare inpatient listing same date, would be bundled into a
at http://www.tricare.mil/opps specifies fairly closely, there may be occasions single payment under APC 0375
those services that are only paid when where, upon medical review, it is found (Ancillary Outpatient Services the
provided in an inpatient setting because that a particular inpatient procedure can Patient Expires) whose CY 2007 median
of the nature of the procedure, the need be provided safely in an outpatient cost is $3,539.
for at least 20 hours of postoperative setting due to TRICARE’s younger, • Partial Hospitalization Services.
recovery time or monitoring before the healthier beneficiary population. These Partial hospitalization services are those
patient can be safely discharged, or the procedures will be removed from the services furnished by TRICARE-
underlying physical condition of the TRICARE inpatient listing and will be authorized partial hospitalization
patient. The following criteria will be assigned to either an existing or new programs and authorized mental health
used when reviewing procedures to APC group based on their median costs. providers for the active treatment of a
determine whether or not they should If a patient was not admitted as an mental disorder. All services must
be moved from the inpatient list and inpatient, and the procedure designated follow a medical model and patient care
assigned to an APC group for payment as an inpatient-only procedure (by must be under the general direction of
under OPPS: (1) Most outpatient OPPS payment status indicator ‘‘C’’) a licensed psychiatrist employed by the
departments are equipped to provide was performed to resuscitate or stabilize partial hospitalization program to
the services to the TRICARE population; a patient with an emergency, life- ensure medication and physical needs
(2) the simplest procedure described by threatening condition and the patient of all the patients are considered. The
the code may be performed in most dies before being admitted as an OPPS established per diem payment for
outpatient departments; (3) the inpatient, the hospital would bill for both half- and full-day partial
procedure is related to codes that have payment under the OPPS for the hospitalization represents the hospital’s
already been removed from the services that were furnished on that date costs for overhead, support staff and the
inpatient list; (4) the procedure is being and included modifier—‘‘CA’’ on the services of clinical social workers
performed in numerous hospitals on an line with the HCPCS code for the (CSWs) and occupational therapists
outpatient basis; and (5) the procedure inpatient procedures. Payment for all (OTs). For SUDRFs, the cost of alcohol
can be appropriately and safely services other than the inpatient and additional counselor services would
performed in an ASC. While it is procedure designated under OPPS by also be included in the PHP per diem.
However, the OPPS does not include the treatment, assessment and reassessment directly admitted into a hospital
cost of services for physicians, clinical before a decision can be made regarding outpatient department for observation
psychologists, and psychiatric nurse whether patients will require further care that does not qualify for separate
practitioners (NPs), which will continue treatment as hospital inpatients, or if payment under APC 0039, or under
to be billed separately for covered they are able to be discharged from the T00020. In order to receive separate
mental health services. In order to hospital. The determination of whether payment for a direct admission into
receive payment under OPPS, the or not observation services are observation (APC 0604), the claim must
hospital must use specific HCPCS and separately payable under APC 0339 show: (1) Both HCPCS codes G0378
revenue codes and report partial (observation) has been shifted from the (Hourly Observation) and G0379 (Direct
hospitalization services under bill type hospital billing department to the OPPS Admit to Observation) with the same
13X, along with condition code 41 on claims processing logic using two date of service; (2) that there are no
the UB–04 (HCFA 1450 claim form). HCPCS codes (i.e., G0378—Hospital services with status indictor ‘‘T’’ or ‘‘V’’
The claim must also include a mental observation services per hour, and (clinic or emergency department visit)
health diagnosis and an authorization G0379—Direct admission of patient for or critical care (APC 0620) provided on
on file for each day of service, along hospital observation care). These the same day of service as HCPCS code
with a designated H-code (i.e., either HCPCS codes will be assigned status G0379; and (3) that the observation care
H0035 for half-day PHP or H0037 for indicator ‘‘Q’’ (package service subject does not qualify for separate payment
full-day PHP) and its accompanying to separate payment based on criteria) under APC 0339.
revenue code, prior to assigning a half- that will trigger the OCE logic during
If the period of observation spans
or full-day partial hospitalization APC. the processing of the claim to determine
more than one calendar day, hospitals
Specific therapy codes (e.g., coding for if the observation service or direct
should include all of the hours for the
family, group and individual admission service is packaged with the
psychotherapy) will be reported in other separately payable hospital entire period of observation on a single
addition to the designated partial services provided, or if a separate APC line and enter as the date of service for
hospitalization codes H0035 and H0037 payment for observation services or that line the date the patient is admitted
and will be packaged into a single PHP direct admission to observation is to observation. Also, if there are
code for the same date of service, with appropriate. Following are the criteria multiple maternity observation stays on
the exception of electroconvulsive that must be met in order to receive the same day without condition code G0
therapy (ECT). Claims that do not meet separate payment under APC 0039: (1) or 27 to indicate that the visits were
the above criteria (e.g., claims filed The beneficiary must have one of four distinct and independent of each other,
without condition code 41, appropriate medical conditions—congestive heart the first listed observation stay will be
H-coding—H0035 or H0037, and/or failure, chest pain, asthma, or paid and the rest will be denied.
revenue code) will undergo further maternity—as documented by specific • Payment for Brachytherapy
payment review to ensure that ICD–9–CM diagnosis codes; (2) the Sources. In accordance with section
outpatient mental health procedures do number of units reported with HCPCS 1833(t)(2)(H) of the Social Security Act,
not exceed the full-day partial code G0378 must be equal to or exceed brachytherapy sources are being paid
hospitalization per diem amount; i.e., 8 hours for observation stays with separately under their own service
the sum of the individual mental health diagnoses of chest pain, asthma or groups (APCs) reflecting the number,
APC amounts on any particular day congestive heart failure and a minimum isotope, and radioactive intensity of the
does not exceed the full-day partial of 4 hours for maternity observation devices of brachytherapy furnished,
hospitalization per diem amount. The services; (3) an emergency department including separate groups for
half-day PHP per diem (APC T0001) visit, clinic visit, critical care visit, or palladium-103 and iodine-125 devices.
will be priced at 75 percent of the full- direct admission to observation services The payment for devices of
day APC (0033) amount of $233.37 for using HCPCS code G037 must be brachytherapy based on hospitals’
CY 2007. Free-standing psychiatric provided on the same day as, or the day charges, adjusted to costs as prescribed
partial hospitalization services will before the observation except for under section 1833(t)(16)(C) of the
continue to be reimbursed the all- maternity observation stays; (4) ongoing Social Security Act, has been extended
inclusive PHP per diem rates as physician evaluation must be provided. under the Tax Relief and Health Care
established under 32 CFR The FY 2007 median cost for the Act of 2006 to January 1, 2008. As a
199.14(a)(2)(ix), subject to their own observation APC 0339 is $442.81. result, brachytherapy sources will
unique mental health copayment/cost- Direct admissions to observation will continue to be assigned to status
sharing provisions. continue to be paid at a rate equal to indicator ‘‘H’’ and will not be eligible
• Separate Payment for Observation that of a Level 1 Clinic Visit (APC 0604) for outlier payments in CY 2007. The
Stays. Observation care is a well-defined with a CY 2007 median cost of $50.37 codes for the CY 2007 separately paid
set of specific, clinically appropriate when a beneficiary is seen by a sources, long descriptors and APCs are
services that include short-term physician in the community and then is listed in Table 7 below:
TABLE 7.—SEPARATELY PAID BRACHYTHERAPY SOURCES WITH LONG DESCRIPTORS AND ASSIGNED APCS
CPT/ Long descriptor SI APC
HCPCS
A9527 ............... Iodine 1–125, sodium iodide solution, therapeutic, per millicurie .................................................................. H 2632
C1716 ............... Brachytherapy source, Gold 198, per source ................................................................................................ H 1716
C1717 ............... Brachytherapy source, High Dose Rate Iridium 192, per source .................................................................. H 1717
C1718 ............... Brachytherapy source, Iodine 125, per source .............................................................................................. H 1718
C1719 ............... Brachytherapy source, Non-High Dose Rate Iridium 192, per source .......................................................... H 1719
C1720 ............... Brachytherapy source, Palladium 103, per source ........................................................................................ H 1720
C2616 ............... Brachytherapy source, Yttrium-90, per source .............................................................................................. H 2616
C2632 ............... (See note below) ............................................................................................................................................ D
TABLE 7.—SEPARATELY PAID BRACHYTHERAPY SOURCES WITH LONG DESCRIPTORS AND ASSIGNED APCS—Continued
CPT/ Long descriptor SI APC
HCPCS
C2633 ............... Brachytherapy source, Cesium-131, per source ........................................................................................... H 2633

C2634 ............... Brachytherapy source, High Activity, Iodine-125, greater than 1.01 mCi (NIST), per source ...................... H 2634
C2635 ............... Brachytherapy source, High Activity, Palladium-103, greater than 2.2 mCi (NIST), per source .................. H 2635
C2636 ............... Brachytherapy linear source, Palladium-103, per 1MM ................................................................................. H 2636
C2637 ............... Brachytherapy source, Ytterbium-169, per source ........................................................................................ H 2637
Note.—C2632 has been deleted and replaced by A9527, effective January 1, 2007.
• APC for Vaginal Hysterectomy. beneficiary population (e.g., those hospitalization program (T001) to
When billing for vaginal hysterectomies, TRICARE specific APCs for half-day accommodate its unique benefit
hospitals must use procedure 58260, partial hospitalization program (PHP) structure and beneficiary population.
which will be assigned to APC 0202. services and maternity observation There may also be subtle differences in
• New Technology APCs. A process stays). the inpatient only procedure listings
has also been developed that will being maintained by the two programs
recognize new technologies that do not VI. OPPS Reimbursement Methodology
since some of the Medicare inpatient
otherwise meet the definition of current • General Overview. Under the only procedures may be determined by
orphan drugs, or current cancer therapy TRICARE OPPS, hospital outpatient TRICARE, upon medical review, to be
drugs and biologicals and services are paid on a rate-per-services safe for administration in an outpatient
brachytherapy, or current basis that varies according to the APC setting due to its younger, healthier
radiopharmaceutical drugs and group to which the service is assigned. population. This may require the
biological products, and which are The APC classification system is development of additional APC groups,
considered a covered benefit under composed of groups of services that are along with nationally established
TRICARE. In contrast to the other APC comparable clinically and with respect payment amounts based on their
groups, the new technology APC groups to the use of resources. Level 1 (CPT) median costs from the previous year’s
do not take into account clinical aspects and Level II HCPCS codes and claims history.
of the services they are to contain, but descriptors are used to identify and The payment rate for each APC is
only their costs. This process, along group the services within each APC. calculated by multiplying the APC’s
with transitional pass-throughs, will Costs associated with items or services relative weight by the conversions
provide additional payment for a that are directly related and integral to factor. Weights are derived based on
significant share of new technologies. performing a procedure or furnishing a median hospital costs for services/
New items and services will be assigned service have been packaged into each procedures assigned to the hospital
to new technology APCs when it is procedure or service within an APC outpatient APC groups. Billed charges
determined that they cannot group with the exception of: (1) New for items integral to performing the
appropriately be placed into existing temporary technology APCs for certain major procedure or visit; which include
APC groups. The new technology APC approved services that are structured packaged HCPCS codes (i.e., codes with
groups have established payment rates based on cost rather than clinical SI = ‘‘N’’) and revenue codes appearing
based on the midpoint of ranges of homogeneity; and (2) separate APCs for on the same claim, are converted to
possible costs providing a mechanism certain medical devices, drugs, costs by multiplying each revenue
for initiating payment at an appropriate biologicals, radiopharmaceuticals and center charge by the appropriate
level within a relatively short devices of brachytherapy under hospital-specific CCR. Centers for
timeframe. The cost bands for New transitional pass-through provisions. Medicare and Medicaid Services (CMS)
Technology APCs range from: $0 to $50, TRICARE is adopting Medicare’s currently use a four-tiered hierarchy of
in increments of $10; $50 to $100, in classification system, along with its cost center CCRs to match a cost center
increments of $50; $100 to $2,000, in nationally established APC payment to every possible revenue code
increments of $100; and $2,000 to amounts as prescribed in section 1833(t) appearing in the outpatient claims, with
$6,000, in increments of $500. These of the Social Security Act and in its the top tier being the most common cost
increments which are in two parallel accompanying Medicare regulation (42 center and the lowest tier being the
sets of New Technology APCs—one CFR part 419) for reimbursement of default CCR. If a hospital’s cost CCR was
with status indictor ‘‘S’’ and the other hospital outpatient services, to the deleted by trimming, another cost center
with ‘‘T,’’—allow assignment to the extent practicable, in accordance with CCR in the revenue hierarchy can be
same APC group procedures that are 10 U.S.C. 1079(j)(2), with the realization applied. If no other department CCR can
appropriately subject to a multiple that there will be subtle differences be applied to the revenue code on the
procedure payment reduction (T) with occurring between the TRICARE and claim, CMS uses the hospital’s overall
those that should not be discounted (S). Medicare OPPS methodologies based on CCR for the revenue code.
• Coding Requirement for differences in the age and general health The costs of the above services/
Reimbursement Under TRICARE OPPS. of the populations they serve (i.e., it can procedures are then standardized for
To receive TRICARE reimbursement be assumed that the TRICARE geographic wage variations by dividing
under OPPS, providers must follow, and population is younger and healthier the labor-related portion of the
contractors shall enforce, all Medicare than the population being served by operating and capital costs (currently
specific coding requirements. TRICARE Medicare). For example, TRICARE has estimated at 60 percent on the average
Management Activity (TMA) will already found it necessary to develop for each billed item) by the hospital
develop specific APCs (those APCs two new TRICARE specific APCs, one inpatient prospective payment system
beginning with a ‘‘T’’) for those services for maternity observation stays (T0002) (IPPS) wage index. The standardized
that are unique to the TRICARE and the other for a half-day partial labor-related cost and the nonlabor-
related cost component for each billed CY 2006 relative weights to aggregate multiplying the CY 2007 scaled weight
item are summed to derive the total payments using the CY 2007 final for each APC by the final CY 2007
standardized cost for each separately relative weights. conversion factor apply to all the
payable HCPCS code. Extreme costs The other component used in services that are classified within the
outside three standard deviations from establishing national APC payment APC group. These national rates (i.e.,
the geometric mean will be eliminated amounts is the conversion factor, the unadjusted national rates for both
prior to calculating the median cost for updated on an annual basis in APCs and the HCPCS to which OPPS
each separately payable HCPCS code. accordance with section payment was assigned) are listed on
The median costs of these procedures 1833(t)(3)(C)(iv) of the Social Security TMA’s OPPS Web site at http://
will then be mapped to their assigned Act, which provides for CY 2007 an www.tricare.mil/opps.
APCs, and the median costs of those updated amount equal to the hospital • Determination of Payment. A
assigned procedures will be used in inpatient market basket percentage payment SI is provided for every code
establishing the overall APC median increase applicable to hospital in the HCPCS to identify how the
cost. discharges under section service or procedure described by the
The relative payment weights are 1886(b)(3)(B)(iii) of the Act. The market code would be paid under the hospital
calculated for each APC by dividing the basket increase updated factor of 3.4 outpatient prospective payment system
median cost of each APC by the median percent for CY 2007, along with the (OPPS); i.e., it indicates if a service
cost for APC 0606 (Level 3 Clinic Visit), required wage index budget neutrality represented by a HCPCS code is payable
which is $83.88 for CY 2007, as a adjustment of approximately under the OPPS or another payment
reconfiguration of the visit APCs. APC 0.999331979, the adjustment of 0.04 system, and also which particular OPPS
0606 was chosen in order to maintain percent for the difference in the pass- payment policies apply. One, and only
consistency in using a median for through set-aside, and the adjustment one, SI is assigned to each APC and to
calculating unscaled weights for the rural payment adjustment for each HCPCS code. Each HCPCS code
representing the median cost of some of rural SCHs (including EACHs) of that is assigned to an APC has the same
the most frequently provided services. 0.999975941, resulted in a standard SI as the APC to which it is assigned.
The relative payment weights were conversion factor for CY 2007 of Following are the CY 2007 payment
further adjusted by 1.364598352 for $61.468. status indicators, along with a
budget neutrality, based on a The national unadjusted APC description of the particular services
comparison of aggregate payments using payment rates that were calculated by each indicator identifies.
TABLE 8.—CY 2007 PAYMENT STATUS INDICATORS FOR HOSPITAL OPPS

Indicator Description OPPS payment status
A .................................. Services paid under some payment method other than Not paid under OPPS. Paid by contractors under a fee
OPPS (e.g., payment for non-implantable prosthetic and schedule or payment system other than OPPS.
orthotic devices, DME, ambulance services, and indi-
vidual professional services).
B .................................. More appropriate code required for TRICARE OPPS ........ Not paid under OPPS.
C .................................. Inpatient procedures ............................................................ Not paid under OPPS. Admit patient. Bill as inpatient.
E .................................. Items or services not covered by TRICARE ....................... Not paid under OPPS.
F .................................. Acquisition of corneal tissue, certain CRNA services and Not paid under OPPS. Paid on allowable charge basis.
Hepatitis B vaccines.
G ................................. Pass-through drugs and biologicals .................................... Paid separate APCs under OPPS.
H .................................. (1) Pass-through device categories ..................................... (1) Separate cost-based pass-through payment; not sub-
ject to cost-share/co-payment.
(2) Brachytherapy sources .................................................. (2) Separate cost-based non-pass-through payment.
(3) Radiopharmaceutical agents .......................................... (3) Separate cost-based non-pass-through payment.
K .................................. Non-pass-through drugs and biologicals and blood and Paid separate APCs under OPPS.
blood products.
N .................................. Packaged incidental items and services ............................. Packaged into the primary procedure APC payment
amount to which the incidental item or service is nor-
mally associated.
P .................................. Partial hospitalization ........................................................... Per diem APC payments for both half-day and full-day
partial hospitalization programs.
Q ................................. Services either separately payable or packaged ................ Paid under OPPS; services either packaged or separately
payable depending on the specific circumstances of the
HCPCS billing. OCE logic will be applied in determining
if the services will be packaged or separately payable.
S .................................. Significant procedures allowed under the OPPS for which Paid under OPPS; separate APC payment.
multiple procedure reduction does not apply.
T .................................. Surgical services allowed under OPPS with multiple pro- Paid under OPPS; separate APC payment.
cedure payment reduction.
V .................................. Medical visits (including clinic or emergency department Paid under OPPS; separate APC payment.
visits).
W ................................. Invalid HCPCS or invalid revenue code with blank HCPCS Not paid under OPPS.
X .................................. Ancillary services ................................................................. Paid under OPPS; separate APC payment.
Z .................................. Valid revenue code with blank HCPCS and no other SI Not paid under OPPS.
assigned.
• Adjustments for Specific Hospital status of the beneficiary at the time be calculated for line item services with
Payment. The hospital DRG wage outpatient services were rendered (i.e., SIs ‘‘G,’’ ‘‘H,’’ ‘‘K,’’ and ‘‘N,’’ with the
adjustment factor will be used to adjust those deductibles and cost-sharing/ exception of blood and blood products.
the portion of the payment rate that is copayment amounts applicable to For CY 2007, the outlier threshold is
attributable to labor-related costs for Prime, Extra, and Standard beneficiary met when the cost of furnishing a
relative differences in labor and labor- categories). TRICARE will retain its service or procedure exceeds 1.75 times
related costs across geographic regions, current hospital outpatient deductibles, the APC payment amount and exceeds
with the exception of APCs with SIs cost-sharing/copayment amounts (refer the APC payment rate plus the $1,825
‘‘K’’ and ‘‘G’’ because of the inseparable, to Tables 1 and 2 above) and fixed-dollar threshold. The fixed-dollar
subordinate status of the outpatient catastrophic loss protection under the threshold was added to better target
department within the overall hospital OPPS. The ASC cost-sharing provision outliers to those high cost and complex
setting. The OPPS will also adhere to (i.e., assessment of a single copayment procedures where a very costly service
the same wage index changes as the for both the professional and facility could present a hospital with significant
TRICARE–DRG based payment system, charge for a Prime beneficiary) will be financial loss. If a provider meets both
except the effective date for changes adopted as long as it is administratively of these conditions (i.e., the multiple
will be January 1 of each year instead feasible. This will not apply to Extra threshold and the fixed-dollar
of October 1. This way only one wage and Standard beneficiaries since their threshold), the outlier payment is
index file will have to be maintained for cost-sharing is based on a percentage of calculated at 50 percent of the amount
both the OPPS and DRG-based payment the total allowed amount. by which the cost of furnishing the
systems. Following are the steps taken • Additional APC Payment service exceeds 1.75 times the APC
in achieving this adjustment for APCs in Adjustments. OPPS payment amounts payment rate. The hospital would
which multiple procedure discounting are discounted when more than one receive the normal APC payment rate
is not applied: surgical procedure (SI = T) is performed along with the additional outlier
Step 1. Calculate 60 percent (labor- during a single operative session. Under amount. For example, suppose a
related portion) of the national these circumstances, TRICARE will hospital charges $26,000 for a procedure
unadjusted payment rate. reimburse the full payment and the for which the APC adjusted amount is
Step 2. Determine the wage index area beneficiary will pay the full cost-share/ $3,000 and the overall facility CCR is
in which the hospital is located and copayment for the procedure having the 0.30. The estimated cost to the hospital
identify the wage index that applies to highest payment rate, while the is $7,800 (0.30 × $26,000). In order to
the specified hospital. The wage index remaining surgical procedure payments determine whether the procedure is
values assigned to each hospital reflect will be reduced by 50 percent along eligible for outlier payment, it first must
the new geographic statistical areas as a with the beneficiary associated cost- be determined whether the cost for the
result of revised OMB standards (urban share/copayment to reflect the savings service exceeds both the APC multiple
and rural) to which hospitals are associated with having to prepare the outlier cost threshold of $5,250 (1.75 ×
assigned for FY 2007 under the IPPS. patient only once and the incremental $3,000) and the fixed-dollar threshold of
Step 3. Adjust the wage index of costs associated with anesthesia, $4,825 ($3,000 + $1,825). Since the
hospitals located in certain qualifying operating and recovery room use, and estimated cost to the hospital ($7,800)
counties that have a relatively high other services required for the second exceeds both threshold amounts, the
percentage of hospital employees who and subsequent procedures. A 50 hospital would be eligible for 50 percent
reside in the county, but who work in percent discount will also be applied to of the difference, which in this case
a different county with a higher wage the OPPS payment amounts and would be $1,275 ($7,800¥$5,250/2).
index. beneficiary copayments/cost-shares for • Payment Hierarchy for Non-OPPS
Step 4. Multiply the applicable wage procedures terminated before anesthesia Procedures. If the outpatient procedure
index determined under Steps 2 and 3 is induced, as identified by modifiers is not assigned an APC payment amount
by the amount determined in Step 1 that ¥73 (Discounted Outpatient Procedure (i.e., is not assigned SI ‘‘G,’’ ‘‘H,’’ ‘‘K,’’
represents the labor-related portion of Prior to Anesthesia Administration) and ‘‘P,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’), but may be
the national unadjusted payment rate. ¥52 (Reduced Services). Full payment reimbursed under an existing TRICARE
Step 5. Calculate 40 percent (the will be received for a procedure that is fee schedule or other prospectively
nonlabor-related portion) of the national started but discontinued after the determined rate (i.e., procedures
unadjusted payment rate and add the induction of anesthesia as reported by assigned to SI ‘‘A’’), the following
amount to the resulting product in step modifier ¥74 (Discounted Procedure). hierarchy will be used in pricing the
4. The result is the wage index adjusted In this case, payment would recognize procedure. The PRICER will first look to
payment rate for the relevant wage the costs incurred by the hospital to see if there is an appropriate CMAC
index area in which the hospital is prepare the patient for surgery and the available for pricing. If a CMAC cannot
located. resources expended in the operating be found, it will then look to the
Step 6. If the provider is a Sole room and recovery room of the hospital. Durable Medical Equipment Claims:
Community Hospital (SCH), multiply Discounting will also be applied to Prosthetics, Orthotics, and Supplies
the wage adjusted payment rate by 1.071 conditional, inherent and independent (DMEPOS) fee schedule for pricing. If a
to calculate the total payment. This bilateral procedures. DMEPOS fee schedule rate is not
adjustment will apply to all services and An additional payment is provided available for pricing, it will turn to
procedures paid under the OPPS (i.e., for outpatient services for which a statewide prevailings. If a statewide
SIs ‘‘P,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ and ‘‘X’’), hospital’s charges, adjusted to cost, prevailing cannot be found, the PRICER
excluding drugs, biologicals and exceed the sum of the wage adjusted will reimburse the procedure at the
services paid subject to pass-through APC rate plus a fixed dollar threshold billed charge.
payment (i.e., SIs ‘‘G,’’ ‘‘H,’’ and ‘‘K’’). and a fixed multiple of the wage
Applicable deductibles and/or cost- adjusted APC rate. Only line item VII. Limitations on Administrative and
sharing/copayment amounts will be services with SIs ‘‘P,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or Judicial Review
subtracted from the wage adjusted APC ‘‘X’’ will be eligible for outlier payment There can be no administrative or
payment rate based on the eligibility under OPPS. No outlier payments will judicial review under sections 1869 and
1878 of the Social Security Act for any APC payment levels for network implications that would have
of the following data elements used in hospitals for the 5 clinical visit APCs substantial direct effects on the States,
the development of the APC system: (1) would be set at 130 percent of the on the relationship between the national
Establishment of the groups and relative Medicare APC level, while the 5 government and the States, or on the
payment weights; (2) wage adjustment emergency room (ER) visit APCs would distribution of power and
factors and other adjustments; (3) be increased by 150 percent in the first responsibilities among the various
calculation of base amounts described year of OPPS implementation. In the levels of government; therefore,
in section 1833(t)(3) of the Social second year, the APC payment levels consultation with State and local
Security Act; (4) periodic adjustments would be set at 120 percent of the officials is not required.
described in section 1833(t)(9) of the Medicare APC level for clinic visits and Section 801 of title 5, United States
Social Act, (5) the establishment of a at 130 percent for ER APCs. In the third Code, and Executive Order 12866
separate conversion factor for hospitals year, the APC visit amounts would be requires certain regulatory assessments
described in section 1886(d)(1)(B)(v) of set at 110 and 120 percent, respectively, and procedures for any major rule or
the Social Security Act; (6) the and in the fourth year, the TRICARE and significant regulatory action, defined as
determination of the fixed multiple, or Medicare payment levels for the 10 APC one that would result in an annual effect
a fixed dollar cutoff amount; (7) the visit codes would be identical. Two sets of $100 million or more on the national
marginal cost of care, or applicable of adjustment factors (i.e., one for clinic economy or which would have other
percentage under 42 CFR 419.43(d) or visits and the other for ER visits) are substantial impacts.
the determination of insignificance of being used since revenue cuts for ER
cost; (8) the duration of the additional visits are generally greater than those The Regulatory Flexibility Act (RFA)
payment; (9) the determination of initial associated with clinic visits. requires that each Federal agency
and new categories under 42 CFR Transitional payment adjustments for prepare, and make available for public
419.66; (10) the portion of the hospital these 10 visit codes would buffer the comment, a regulatory flexibility
outpatient fee schedule amount initial revenue reductions which will be analysis when the agency issues a
associated with particular devices, experienced upon implementation of regulation which would have a
drugs, or biologicals; and (11) the TRICARE’s OPPS, providing hospitals significant impact on a substantial
application of any pro rata reduction with sufficient time to adjust and budget number of small entities. This is not a
under 42 CFR 419.62(c). for potential revenue reductions for major rule under 5 U.S.C. 801 since the
hospitals most vulnerable to projected reduction in TRICARE
VIII. Military Readiness/Contingency payments to affected hospitals would be
implementation of OPPS.
Options for Payment Under OPPS The second option involves authority below the $100 million threshold. The
In recognition of the Department’s for the Director, TRICARE Management estimates of reduction are based on
requirement to support military Activity, or a designee, under provisions historical TRICARE costs and an
readiness and contingency operations, of this rule to adopt, modify and/or assessment of potential users times
and in response to recent congressional extend temporary adjustments to OPPS average benefit costs per person for
concerns regarding the same, the agency payments for TRICARE network implementation of the new prospective
has developed two options for hospitals deemed essential for military payment system. However, it is a
implementation of OPPS. The first readiness and support during significant regulatory action which has
option involves a three-year transitional contingency operations. Upon a been reviewed by the Office of
implementation of payment adjustments determination by the TMA Director, or Management and Budget as required
that may be utilized to limit the decline designee, at any time following under the provisions of EO 12866. In
in payments under OPPS for TRICARE implementation that it is impracticable addition, it has been certified that this
network hospitals that are in close to support military readiness or interim final rule will not significantly
proximity to military bases and treat a contingency operations by making OPPS affect a substantial number of small
disproportionate share of military payments in accordance with the same entities.
family members and/or hospitals that reimbursement rules implemented by The rule also does not require a
provide essential network specialty Medicare, a temporary deviation may be regulatory flexibility analysis as the
care. These temporary payment granted. This will ensure the availability significant policy action was taken by
adjustments would target TRICARE of adequate civilian healthcare Congress and the rule merely puts it
network hospitals that are most resources necessary to meet all ongoing into effect. The policy of the Regulatory
vulnerable to OPPS revenue reductions military readiness and contingencies. Flexibility Act that agencies adequately
and that are essential for continued The criteria for adopting, modifying evaluate all potential options for an
military readiness and support of and/or extending temporary action does not apply when Congress
contingency operations. adjustments to OPPS payments under has already dictated the action.
This adjustment would increase this authority shall be issued through This rule will not impose significant
payment for primary care and TRICARE policies, instructions, additional information collection
emergency room visits to hospital procedures and guidelines as deemed requirements on the public under the
outpatient departments (HOPDs) over a appropriate by the Director, TRICARE Paperwork Reduction Act of 1995 (44
3-year transitional period. Primary care Management Activity, or a designee, for U.S.C. 3501–3511). Existing information
and emergency room visits to HOPDs those network hospitals essential for collection requirements of the TRICARE
are categorized into 10 APC categories continued military readiness and and Medicare programs will be utilized.
(APC codes 604–609 and 613–616) deployment in a time of contingency
which represent over 600,000 hospital operations. List of Subjects in 32 CFR part 199
visits annually. On average, about one
IX. Regulatory Procedures Claims, Dental health, Health care,
quarter of the revenues from TRICARE

for HOPD services are for these 10 This interim final rule has been Health insurance, Individuals with
codes, representing the biggest payment examined for its impact under Executive disabilities, Military personnel.
reduction under OPPS. Under this Order (EO) 13132 and its does not have ■Accordingly, 32 CFR part 199 is
transitional payment adjustment, the policies that have federalism amended as follows:
PART 199—[AMENDED] (A) In general. Psychiatric and from its continuing experience with
substance use disorder rehabilitation OPPS may be granted for any TRICARE
■ 1. The authority citation for part 199 partial hospitalization services network hospital by the Director,
continues to read as follows: authorized by § 199.4(b)(10) and (e)(4) TRICARE Management Activity, or a
Authority: 5 U.S.C. 301; 10 U.S.C. Chapter and provided by institutional providers designee, to accommodate CHAMPUS’
55. authorized under § 199.6 (b)(4)(xii) and unique benefit structure and beneficiary
(b)(4)(xiv) are reimbursed on the basis of population. In addition, the Director,
■ 2. Paragraph 199.2(b) is amended by prospectively determined, all-inclusive
adding definitions for ‘‘Ambulatory TMA, or a designee, may at any time
per diem rates pursuant to the after implementation adopt, modify
Payment Classifications (APCs)’’ and provisions of paragraph (a)(2)(ix)(C) of
‘‘TRICARE Outpatient Prospective and/or extend temporary adjustments to
this section, with the exception of OPPS payments for TRICARE network
Payment System (OPPS)’’ and placing hospital-based psychiatric and
them in alphabetical order to read as hospitals deemed essential for military
substance use disorder rehabilitation
follows: readiness and deployment in time of
partial hospitalization services which
contingency operations. Any temporary
§ 199.2 Definitions. are reimbursed in accordance with
provisions of paragraph (a)(5)(ii) of this adjustment to OPPS payments shall be
* * * * * made only on the basis of a
(b) * * * section. The per diem payment amount
must be accepted as payment in full for determination that it is impracticable to
Ambulatory Payment Classifications support military readiness or
all institutional services provided,
(APCs). Payment of services under the contingency operations by making OPPS
including board, routine nursing
TRICARE OPPS is based on grouping payments in accordance with the same
service, ancillary services (includes
outpatient procedures and services into reimbursement rules implemented by
music, dance, occupational and other
ambulatory payment classification Medicare. The criteria for adopting,
such therapies), psychological testing
groups based on clinical and resource modifying, and/or extending deviations
and assessment, overhead and any other
homogeneity, provider concentration,
services for which the customary and/or adjustments to OPPS payments
frequency of service and minimal
practice among similar providers is shall be issued through TRICARE
opportunities for upcoding and code
included as part of the institutional policies, instructions, procedures and
fragmentation. Nationally established
charges. guidelines as deemed appropriate by the
rates for each APC are calculated by
multiplying the APC’s relative weight * * * * * Director, TMA, or a designee.
derived from median costs for (5) * * * * * * * *
procedures assigned to the APC group, (i) Outpatient Services Not Subject to
Hospital Outpatient Prospective (d) * * *
scaled to the median cost of the APC
Payment System (OPPS). The following (1) In general. CHAMPUS pays
group representing the most frequently
provided services, by the conversion are payment methods for outpatient institutional facility costs for
factor. services that are either provided in an ambulatory surgery on the basis of
OPPS exempt hospital or paid outside prospectively determined amounts, as
* * * * * the OPPS payment methodology under provided in this paragraph, with the
TRICARE Outpatient Prospective an existing fee schedule or other exception of ambulatory surgery
Payment System (OPPS). OPPS is a prospectively determined rates in a procedures performed in hospital
hospital outpatient prospective payment hospital subject to OPPS
system, based on nationally established outpatient departments, which are to be
reimbursement. reimbursed in accordance with the
APC payment amounts and
standardized for geographic wage * * * * * provisions of paragraph (a)(5)(ii) of this
(ii) Outpatient Services Subject to section. This payment method is similar
differences that includes operating and
OPPS. Outpatient services provided in to that used by the Medicare program
capital-related costs that are directly
hospitals subject to Medicare OPPS as for ambulatory surgery. This paragraph
related and integral to performing a
specified in 42 CFR 413.65 and 42 CFR applies to payment for freestanding
procedure or furnishing a service in a
419.20 will be paid in accordance with ambulatory surgical centers. It does not
hospital outpatient department.
the provisions outlined in sections apply to professional services. A list of
* * * * * 1833(t) of the Social Security Act and its ambulatory surgery procedures subject
■ 3. Section 199.4 is amended by implementing Medicare regulation (42
to the payment method set forth in the
removing paragraph (c)(3)(i)(C)(1) and CFR part 419). Under the above
redesignating paragraphs (c)(3)(i)(C)(2) paragraph shall be published
governing provisions, CHAMPUS will
and (c)(3)(i)(C)(3) as (c)(3)(i)(C)(1) and recognize to the extent practicable, in periodically by the Director, TMA.
(c)(3)(i)(C)(2). accordance with 10 U.S.C. 1079(j)(2), Payment to freestanding ambulatory
Medicare’s OPPS reimbursement surgery centers is limited to these
■ 4. Section 199.14 is amended by
methodology to include specific coding procedures.
revising paragraphs (a)(2)(ix)(A);
redesignating paragraphs (a)(5)(i) requirements, ambulatory payment * * * * *
through (a)(5)(xii) as (a)(5)(i)(A) through classifications (APCs), nationally Dated: August 8, 2007.
(a)(5)(i)(L); adding followed by new established APC amounts and
L.M. Bynum,
paragraphs (a)(5)(i) introductory text associated adjustments (e.g.,
discounting for multiple surgery Alternate OSD Federal Register Liaison
and (a)(5)(ii); and revising paragraph
procedures, wage adjustments for Officer, Department of Defense.
(d)(1) to read as follows:
variations in labor-related costs across [FR Doc. E7–15924 Filed 8–13–07; 8:45 am]
§ 199.14 Provider reimbursement geographical regions and outlier BILLING CODE 5001–06–P
methods. calculations). During the transition to
(a) * * * OPPS, temporary deviations from
(2) * * * Medicare’s statutory and/or regulatory
(ix) * * * requirements and future changes arising

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Federal Register / Vol. 72, No.

156 / Tuesday, August 14, 2007 / Rules and Regulations 45359

TABLE 1.—HOSPITAL OUTPATIENT DEDUCTIBLES

Prime ................. None ....................................................... None ....................................................... None.

TABLE 2.—HOSPITAL OUTPATIENT COPAYMENTS/COST-SHARING

requirements under 42 CFR § 413.65 implementing regulation 42 CFR part patients.

Device Description Device Description Device Description

0039 ....................... S Level I Implantation of Neurostimulator ........................................................................................... 78.85

C2633 ............... Brachytherapy source, Cesium-131, per source ........................................................................................... H 2633

TABLE 8.—CY 2007 PAYMENT STATUS INDICATORS FOR HOSPITAL OPPS

quarter of the revenues from TRICARE

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