[Federal Register Volume 79, Number 98 (Wednesday, May 21, 2014)]
[Rules and Regulations]
[Pages 29085-29088]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11194]


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DEPARTMENT OF DEFENSE

Office of the Secretary

[DOD-2012-OS-0105]
RIN 0720-AB58

32 CFR Part 199


TRICARE Revision to CHAMPUS DRG-Based Payment System, Pricing of 
Hospital Claims

AGENCY: Office of the Secretary, Department of Defense.

ACTION: Final rule.

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SUMMARY: This Final rule changes TRICARE's current regulatory provision 
for inpatient hospital claims priced under the DRG-based payment 
system. Claims are currently priced by using the rates and weights that 
are in effect on a beneficiary's date of admission. This Final rule 
changes that provision to price such claims by using the rates and 
weights that are in effect on a beneficiary's date of discharge.

DATES: 
    Effective Date: This Final rule is effective June 20, 2014.
    Applicability Date: This rule applies to claims with a discharge 
date of October 1, 2014, or later from hospitals paid by TRICARE under 
the Inpatient Prospective Payment System/Diagnosis-Related Groups-based 
payment system.

FOR FURTHER INFORMATION CONTACT: Ms. Amber Butterfield, TRICARE 
Management Activity, Medical Benefits and Reimbursement Office, 
telephone (303) 676-3565.

SUPPLEMENTARY INFORMATION:

I. Dates

    The effective date above is the date that the policies herein take 
effect and are considered to be officially adopted. The applicability 
date, which is different than the effective date, is the date on which 
the policies adopted in this rule shall apply to claims from hospitals 
paid by TRICARE under the Inpatient Prospective Payment System/
Diagnosis-Related Groups-based payment system, and must be implemented.

II. Executive Summary and Overview

A. Purpose of the Final Rule

1. Need for the Regulatory Action
    This Final rule amends the TRICARE/CHAMPUS regulatory provision (32 
CFR 199.14(a)(1)(i)(C)(3)) of pricing inpatient hospital claims that 
are reimbursed under the DRG-based payment system from the 
beneficiary's date of admission, to pricing such

[[Page 29086]]

claims based on the beneficiary's date of discharge.
    The TRICARE/CHAMPUS DRG-based payment system applies to acute care 
hospitals, unless such hospital is exempt by regulation from the 
payment system. Under the TRICARE DRG-based payment system, payment for 
the operating costs of inpatient hospital services subject to the 
payment system is made on the basis of prospectively determined rates.
    The TRICARE DRG-based payment system is modeled on the Medicare 
Inpatient Prospective Payment System (IPPS). Although many of the 
procedures in the TRICARE DRG-based payment system are similar or 
identical to the procedures in the Medicare IPPS, the actual payment 
amounts, DRG weights, and certain procedures are different. This is 
necessary because of the differences in the two programs, especially in 
the beneficiary population.
    Since the inception of the TRICARE DRG-based payment system in 
1987, claims have been priced after the beneficiary's discharge by the 
hospital, but using the weights and rates that were in effect on the 
beneficiary's date of admission. That is, claims submitted for the 
beneficiary's inpatient stay have been grouped to a specific DRG, and 
the pricing (e.g., payment rate) has been determined by using the 
weights and rates that were in effect on the date of the beneficiary's 
admission to the hospital.

B. Summary of the Major Provisions of the Final Rule

    The major provision of this rule is to revise TRICARE's regulation 
on the pricing of claims paid under the DRG-based payment system. 
Claims are currently priced by using the rates and weights that are in 
effect on a beneficiary's date of admission. This rule changes that 
provision to price such claims by using the rates and weights that are 
in effect on a beneficiary's date of discharge. The change shall apply 
to claims with a discharge date of October 1, 2014, or later from 
hospitals paid by TRICARE under the Inpatient Prospective Payment 
System/Diagnosis-Related Groups-based payment system.

C. Costs and Benefits

    The benefits of this change include aligning TRICARE pricing of 
hospital claims practices with industry standards utilized by Medicare 
and other payers and thereby increasing standardization of claims 
administration and other claims related processes for contractors who 
adjudicate claims.
    There are known costs associated with this change. On May 27, 2011, 
Kennell and Associates completed an Independent Government Cost 
Estimate (``May 27, 2011, IGCE'') analyzing the costs associated with 
the shift of pricing DRG claims from the date of admission to the date 
of discharge. The May 27, 2011, IGCE, identified three known costs.
    1. One time information technology costs associated with changes to 
Managed Care Support Contractors' claims processing systems and one 
time administrative costs associated with the review change order and 
the assessment of the impact on Claims Operations, Customer Service, 
Provider Administration, and Contracts Maintenance. The total one time 
information technology and administrative costs for North, South, West 
and TDEFIC Managed Care Support Contractors' combined is estimated at 
$88,208.
    2. An annual cost of reprocessing interim claims of $2,500.
    3. An increase in health care costs to account for using the 
weights and rates in place on the date of discharge. The May 27, 2011, 
IGCE, using 2009 claims data, estimated about 1,200 inpatient claims 
will span fiscal years. Consequently, reimbursing using the updated 
weights and rates in place for the discharges in future fiscal years is 
expected to increase the payment for approximately 1,200 claims with an 
estimated additional cost of $500,000 annually.
    4. Total costs for this change for Fiscal Year 2015 equal 
approximately $600,000.

III. Background

A. Statutory and Regulatory Overview

    Sections 1073 and 1079 of title 10, United States Code (U.S.C.), 
authorize the Secretary of Defense to administer the medical and dental 
benefits provided under chapter 55 of title 10, and contract for 
medical care for specified persons. These sections and other provisions 
of 10 U.S.C. chapter 55 authorize promulgation of this Final rule.
    The August 31, 1988, Final rule [53 FR 33461] (the ``August 1988 
Final rule'') published in the Federal Register explains TRICARE's 
current practice of utilizing the date of admission to price claims. 
Using the date of admission to price claims allowed hospitals to be 
reimbursed for inpatient services under the same payment methodology 
they expected to be used when the patient was admitted. Prior to 
implementation of the DRG-based payment system, the hospital could 
expect to be reimbursed at the billed charge rate, since that was the 
method TRICARE used to reimburse hospitals at that time. For patients 
admitted after implementation of the DRG-based payment system, the 
hospital could expect to be reimbursed using the DRG-based payment 
system.
    The August 1988 Final rule continues by stating that since certain 
services were previously excluded from the DRG-based system, but may 
have already involved an interim bill prior to the effective date of 
the August 1988 Final rule, it would be administratively difficult and 
fiscally unfair to hospitals to attempt to reconcile the total payments 
with the DRG-based allowed amounts. As a result of the analysis at the 
time, the provision stated, ``except for interim claims submitted for 
qualifying outlier cases, all claims reimbursed under the CHAMPUS DRG-
based payment system are to be priced as of the date of admission, 
regardless of when the claim is submitted.'' While there may have been 
a need to reference interim claims when the August 1988 Final rule was 
written and as we transition from ``billed'' charges to the DRG-based 
payment method, that is no longer the case. Consequently, the interim 
claims reference has been deleted.

B. Updating the Pricing Approach

    In the early stages of the DRG-based payment system, the approach 
of pricing claims based on the date of the beneficiary's admission to 
the hospital was an effective operational policy for TRICARE. At the 
time TRICARE adopted the DRG-based payment system, it was the first 
prospective payment system of its kind. TRICARE decided to use the date 
of admission to price claims, allowing hospitals to be reimbursed for 
inpatient services under the same payment methodology they expected to 
be used when the patient was admitted. However, this is no longer the 
industry standard. Consequently, in order to be consistent with 
industry standards utilized by Medicare and other payers, TRICARE 
policy shall require all final claims to be priced based on the rates 
and weights that are in effect on a beneficiary's date of discharge.
    While pricing using the date of discharge applies to all final 
claims, the change in approach will result in different pricing only 
for those relatively few claims that span fiscal years (FYs). That is, 
currently if an admission occurs on September 29 of a fiscal year 
(e.g., FY 2013) and the discharge occurs for example on October 2 of 
the subsequent fiscal year

[[Page 29087]]

(e.g., FY2014) the payment rate is based upon the DRG rates and weights 
in effect on September 29, 2013, or the prior fiscal year (FY2013), 
rather than on October 2, 2013, (FY2014). On and after this rule's 
applicability date, if an admission occurs for instance on September 29 
of a fiscal year (e.g., FY2014) and the discharge occurs on October 1, 
2014, or later (i.e., FY2015) the claim will be priced using the rates 
and weights in place on the date of discharge (e.g., FY2015). Please 
note that the rates and weights for the DRG-based payment system are 
updated every fiscal year and are based on the previous fiscal year's 
TRICARE claims data. As a result, the applicability date of October 1, 
2014, is established to coincide with the next annual payment system 
update.
    To improve consistency with other payers for health care services 
and reduce any administrative burden on providers, we are therefore 
changing our regulations to provide that all claims reimbursed on the 
DRG-based payment system will be priced as of the date of discharge 
starting with discharges dated October 1, 2014, or later.

IV. Public Comments

    The proposed rule was published in the Federal Register (78 FR 
10579-10581) on February 14, 2013, for a 60-day public comment period. 
We received one comment from one respondent.
    Comment: Billing and adjustments for a hospital stay are completed 
on the last day.
    Response: We interpret the commenter's statement as acknowledging 
that billing and adjustments for a patient's hospital stay are 
typically performed after the patient has been discharged. Consequently 
pricing an inpatient stay according to the weights and rates on the 
date of discharge is appropriate and desirable. We agree with the 
commenter's statement. Beginning with discharges that occur on or after 
October 1, 2014, the pricing of TRICARE inpatient claims reimbursed 
under the DRG methodology will be based on the weights and rates that 
are in effect on the date of discharge.
    We will monitor discharge patterns and lengths of stay following 
this revision and may take additional regulatory action if we observe 
any unintended adverse consequences due to calculating payments for 
claims based on the rates and weights on the date of discharge as 
opposed to admission.

V. Regulatory Procedures

A. Overall Impact

    DoD has examined the impacts of this Final rule as required by 
Executive Orders (E.O.s) 12866 (September 1993, Regulatory Planning and 
Review) and 13563 (January 18, 2011, Improving Regulation and 
Regulatory Review), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), and the Congressional Review Act (5 U.S.C. 804(2)).
1. Executive Order 12866 and Executive Order 13563
    Section 801 of title 5, United States Code, and Executive Order 
(E.O.) 12866 require certain regulatory assessments and procedures for 
any major rule or significant regulatory action, defined as one that 
would result in an annual effect of $100 million or more on the 
national economy or which would have other substantial impacts. E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. It has 
been certified that this rule is not economically significant, and has 
been reviewed by the Office of Management and Budget as required under 
the provisions of E.O. 12866 and E.O. 13563.
2. Congressional Review Act. 5 U.S.C. 801
    Under the Congressional Review Act, a major rule may not take 
effect until at least 60 days after submission to Congress of a report 
regarding the rule. A major rule is one that would have an annual 
effect on the economy of $100 million or more or have certain other 
impacts. This Final rule is not a major rule under the Congressional 
Review Act.
3. Public Law 96-354, ``Regulatory Flexibility Act'' (RFA) (5 U.S.C. 
601)
    Public Law 96-354, ``Regulatory Flexibility Act'' (RFA) (5 U.S.C. 
601), requires that each Federal agency prepare a regulatory 
flexibility analysis when the agency issues a regulation which would 
have a significant impact on a substantial number of small entities. 
This Final rule is not an economically significant regulatory action, 
and it has been certified that it will not have a significant impact on 
a substantial number of small entities. Therefore, this Final rule is 
not subject to the requirements of the RFA.
4. Public Law 104-4, Section 202, ``Unfunded Mandates Reform Act''
    Section 202 of Public Law 104-4, ``Unfunded Mandates Reform Act,'' 
requires that an analysis be performed to determine whether any federal 
mandate may result in the expenditure by State, local and tribal 
governments, in the aggregate, or by the private sector of $100 million 
in any one year. It has been certified that this Final rule does not 
contain a Federal mandate that may result in the expenditure by State, 
local and tribal governments, in aggregate, or by the private sector, 
of $100 million or more in any one year, and thus this Final rule is 
not subject to this requirement.
5. Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 
35)
    This rule does not contain a ``collection of information'' 
requirement, and will not impose additional information collection 
requirements on the public under Public Law 96-511, ``Paperwork 
Reduction Act'' (44 U.S.C. Chapter 35).
6. Executive Order 13132, ``Federalism''
    E.O. 13132, ``Federalism,'' requires that an impact analysis be 
performed to determine whether the rule has federalism implications 
that would have substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. It has been certified that this Final rule does not have 
federalism implications, as set forth in E.O. 13132.

List of Subjects in 32 CFR Part 199

    Claims, Dental health, Health care, Health insurance, Individuals 
with disabilities, Military personnel.

    Accordingly, 32 CFR part 199 is amended as follows:

PART 199--[AMENDED]

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

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


0
2. Section 199.14 is amended by revising paragraph (a)(1)(i)(C)(3) to 
read as follows:


Sec.  199.14  Provider reimbursement methods.

    (a) * * *
    (1) * * *
    (i) * * *
    (C) * * *
    (3) Pricing of claims. All final claims with discharge dates of 
September 30,

[[Page 29088]]

2014, or earlier that are reimbursed under the CHAMPUS DRG-based 
payment system are to be priced as of the date of admission, regardless 
of when the claim is submitted. All final claims with discharge dates 
of October 1, 2014, or later that are reimbursed under the CHAMPUS DRG-
based payment system are to be priced as of the date of discharge.
* * * * *

    Dated: May 12, 2014.
Aaron Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2014-11194 Filed 5-20-14; 8:45 am]
BILLING CODE 5001-06-P