TRICARE; Hospital Outpatient Prospective Payment System (OPPS), 74945-74966 [E8-29251]

Agencies

• Office of the Secretary
• DEPARTMENT OF DEFENSE

[Federal Register Volume 73, Number 238 (Wednesday, December 10, 2008)]
[Rules and Regulations]
[Pages 74945-74966]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29251]


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DEPARTMENT OF DEFENSE

Office of the Secretary

[DOD-2007-HA-0048; RIN 0720-AB19]

32 CFR Part 199


TRICARE; Hospital Outpatient Prospective Payment System (OPPS)

AGENCY: Office of the Secretary, DoD.

ACTION: Final rule.

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SUMMARY: This final rule implements a prospective payment system for 
hospital outpatient services similar to that furnished to Medicare 
beneficiaries, as set forth in Section 1833(t) of the Social Security 
Act. The rule also recognizes applicable statutory requirements and 
changes arising from Medicare's continuing experience with this system 
including certain related provisions of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003. The Department is 
publishing this rule to implement an existing statutory requirement for 
adoption of Medicare payment methods for institutional care which will 
ultimately provide incentives for hospitals to furnish outpatient 
services in an efficient and effective manner.

DATES: Effective Date: February 9, 2009.

FOR FURTHER INFORMATION CONTACT: David E. Bennett or Martha M. Maxey, 
TRICARE Management Activity, Medical Benefits and Reimbursement Branch, 
telephone (303) 676-3494 or (303) 676-3627.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

    The Medicare OPPS evolved out of Congressional mandates for 
replacement of Medicare's cost-based payment methodology with a 
prospective payment system (PPS). Medicare implemented OPPS for 
services furnished on or after August 1, 2000, with temporary 
transitional provisions to buffer the financial impact of the new 
prospective payment system (e.g.,

[[Page 74946]]

incorporating transitional pass-through adjustments and proportional 
reductions in beneficiary cost-sharing to lessen potential payment 
reductions experienced under the new OPPS).
    Congress likewise established enabling legislation under section 
707 of the National Defense Authorization Act of Fiscal Year 2002 
(NDAA-02), Public Law 107-107 (December 28, 2001) changing the 
statutory authorization [in 10 U.S.C. 1079(j)(2)] that TRICARE payment 
methods for institutional care shall be determined, to the extent 
practicable, in accordance with the same reimbursement rules used by 
Medicare. Similarly, under 10 U.S.C. 1079(h), the amount to be paid to 
healthcare professional and other non-institutional healthcare 
providers ``shall be equal to an amount determined to be appropriate, 
to the extent practicable, in accordance with the same reimbursement 
rules used by Medicare''. Based on these statutory mandates, TRICARE is 
adopting Medicare's prospective payment system for reimbursement of 
hospital outpatient services currently in effect for the Medicare 
program as required under the Balanced Budget Act of 1997 (BBA 1997), 
(Pub. L. 105-33) which added section 1833(t) of the Social Security Act 
providing comprehensive provisions for establishment of a Medicare 
hospital OPPS. The Act required development of a classification system 
for covered outpatient services that consisted of groups arranged so 
that the services within each group were comparable clinically and with 
respect to the use of resources. The Act also described the method for 
determining the Medicare payment amount and beneficiary coinsurance 
amount for services covered under the outpatient PPS. This included the 
formula for calculating the conversion factor and data requirements for 
establishing relative payment weights.
    Centers for Medicare & Medicaid Services (CMS) published a proposed 
rule in the Federal Register on September 8, 1998 (63 FR 47552) setting 
forth the proposed PPS for hospital outpatient services. On June 30, 
1999, a correction notice was published (64 FR 35258) to correct a 
number of technical and typographical errors contained in the September 
8, 1998 proposed rule.
    Subsequent to publication of the proposed rule, the Medicare, 
Medicaid, and State Child Health Insurance Program (SCHIP) Balanced 
Budget Refinement Act of 1999 (BBRA 1999) (Pub. L. 106-133) enacted on 
November 29, 1999, made major changes that affected the proposed 
Medicare OPPS. The following BBRA 1999 provisions were implemented in a 
final rule (65 FR 18434) published on April 7, 2000.
     Made adjustments for covered services whose costs exceed a 
given threshold (i.e., an outlier payment).
     Established transitional pass-through payments for certain 
medical devices, drugs, and biologicals.
     Placed limitations on judicial review for determining 
outlier payments and the determination of additional payments for 
certain medical devices, drugs, and biologicals.
     Included as covered outpatient services implantable 
prosthetics and durable medical equipment and diagnostic x-ray, 
laboratory, and other tests associated with those implantable items.
     Limited the variation of costs of services within each 
payment classification group.
     Required at least annual review of the groups, relative 
payment weights, and the wage and other adjustments to take into 
account changes in medical practice, the addition of new services, new 
cost data, and other relevant information or factors.
     Established transitional corridors that would limit 
payment reductions under the hospital outpatient PPS.
     Established hold harmless provisions for rural and cancer 
hospitals.
     Provided that the coinsurance amount for a procedure 
performed in a year could not exceed the hospital inpatient deductible 
for the year.
    Section 1833(t) of the Social Security Act was subsequently amended 
by the Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act (BIPA) of 2000 (Pub. L. 106-554) and the Medicare 
Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 
(Pub. L. 108-173) making additional changes in the OPPS.
    As a prelude to implementation of the Medicare OPPS, Congress 
enacted the Omnibus Budget Reconciliation Act of 1986 (OBRA) (Pub. L. 
99-509) which paved the way for development of a PPS for hospital 
outpatient services by prohibiting payment for non-physician services 
furnished to hospital patients (inpatients and outpatients), unless the 
services were furnished either directly or under arrangement with the 
hospital, except for services of physician assistants, nurse 
practitioners and clinical nurse specialists. Exceptions were also made 
for clinical diagnostic procedures, the payment of which may only be 
made to the person or entity that performed, or supervised the 
performance of, the test; and for exceptionally intensive hospital 
outpatient services provided to Skilled Nursing Facility (SNF) 
residents that lie well beyond the scope of the care that SNFs would 
ordinarily furnish, and thus beyond the ordinary scope of the SNF care 
plan. Consolidated billing facilitated the payment of services included 
within the scope of each ambulatory payment classification (APC). The 
OBRA also mandated hospitals to report claims for services under the 
Healthcare Common Procedure Coding System (HCPCS) which enabled the 
identification of specific procedures and services used in the 
development of outpatient PPS rates.
    Ongoing changes and refinement to the Medicare OPPS have been 
accomplished through annual proposed and final rulemaking, along with 
interim transmittals and program memoranda taking into consideration 
changes in medical practice, addition of new services, new cost data, 
and other relevant information and factors. TRICARE will recognize to 
the extent practicable all applicable statutory requirements and 
changes arising from Medicare's continuing experience with this 
prospective payment system, including changes to the amounts and 
factors used to determine the payment rates for hospital outpatient 
services paid under the prospective payment system [e.g., annual 
recalibration (updating) of group weights and conversion factors and 
adjustments for area wage differences (wage index updates)]. The 
Department of Defense (DoD), otherwise referred to as the agency for 
purposes of this rule, will adopt all of Medicare's CY 2008 OPPS 
changes published in the Federal Register on November 27, 2007, (72 FR 
66580); e.g., extending the current packaging to include guidance 
services, image processing services, intraoperative services, imaging 
supervision and interpretation services, diagnostic 
radiopharmaceuticals, contrast agents, and observation services; and 
reduction of payments in cases where a hospital receives a substantial 
partial credit from the manufacturer toward the cost of a replacement 
device implanted in a procedure.
    While TRICARE intends to remain as true as possible to Medicare's 
basic OPPS methodology (i.e., adoption and updating of the Medicare 
data elements used to calculate the prospective payment amounts), there 
will be some deviations required to accommodate the uniqueness of the 
TRICARE program. These deviations have been designed to accommodate 
existing TRICARE benefit structure and claims processing procedures/
systems implemented under

[[Page 74947]]

the TRICARE Next Generation Contracts (T-NEX), while at the same time 
eliminating any undue financial burden to TRICARE Prime, Extra, and 
Standard beneficiary populations. Following is a brief discussion of 
each of these deviations:
    [rtarr8] Outpatient Code Editor (OCE)--The Medicare Outpatient Code 
Editor with APC program edits data to help identify possible errors in 
coding and assigns Ambulatory Payment Classification numbers based on 
HCPCS codes for payment under the OPPS. The Medicare OPPS APC is an 
outpatient equivalent of the inpatient Diagnosis Related Group (DRG)-
based PPS. Like the inpatient system based on DRGs, each APC has a pre-
established prospective payment amount associated with it. However, 
unlike the inpatient system that assigns a patient to a single DRG, 
multiple APCs can be assigned to one outpatient claim. If a patient has 
multiple outpatient services during a single visit, the total payment 
for the visit is computed as the sum of the individual payments for 
each service. Medicare provides updated versions of the OCE, along with 
installation and user manuals, to its fiscal intermediaries on a 
quarterly basis. The updated OCE reflects all new coding and editing 
changes during that quarter.
    It was found upon initial testing of the OCE that it could not be 
used in its present form given the fact that the extensive editing 
embedded in its software program was specific to Medicare's benefit 
structure and internal claims processing requirements. As a result, the 
Agency has developed a TRICARE-specific OCE which will better 
accommodate the benefit structure and claims processing systems 
currently in place under the T-NEX contracts. This modified software 
package will edit claims data for errors and indicate actions to be 
taken and reasons why the actions are necessary. This expanded 
functionality will facilitate the linkage between the action being 
taken, the reasons for the action, and the information on the claim 
that caused the action. The edits will be specific for TRICARE, 
ensuring compliance with current claims processing criteria. The OCE 
will also assign an APC number for each service covered under the 
TRICARE OPPS and return information to be used as input to the TRICARE 
PRICER program.
    Like Medicare's OCE, the TRICARE-specific OCE will be updated on a 
quarterly basis incorporating, to the extent practicable, all Medicare 
changes/updates (i.e., those changes initiated through rulemaking and 
transmittals/program memoranda). Periodic updating of the TRICARE-
specific OCE will ensure consistency and accuracy of claims processing 
and payment under the TRICARE OPPS.
    [rtarr8] Deductible and Cost Sharing--Medicare's OPPS coinsurance 
was initially frozen at 20 percent of the national median charge for 
the services within each APC (wage adjusted for the provider's 
geographic area) or 20 percent of the APC payment rate, whichever was 
greater (i.e., the coinsurance for an APC could not fall below 20 
percent of the APC payment rate). This was designed so that, as the 
total payment to the provider increased each year based on market 
basket updates, the present or frozen coinsurance amount would become a 
smaller portion of the total payment until the coinsurance represented 
20 percent of the total. Once the coinsurance became 20 percent of the 
payment amount, annual updates would be applied to the coinsurance so 
that it would continue to account for 20 percent of the total charge. 
Wage adjusted coinsurance amounts were further limited by the Medicare 
inpatient deductible. Subsequent legislation has accelerated the 
reduction of beneficiary copayment amounts by imposing prescribed 
percentage limitations off of the APC payment rate. For example, for 
all services paid under the Medicare OPPS in CY 2005, the national 
unadjusted copayment amount cannot exceed 45 percent of the APC rate. 
Accelerated reductions were imposed specifically for those APC groups 
for which coinsurance represented a relatively high proportion of the 
total payment.
    A program payment percentage is calculated for each APC by 
subtracting the unadjusted national coinsurance amount for the APC from 
the unadjusted payment rate and dividing the result by the unadjusted 
payment rate. The payment rate for each APC group is the basis for 
determining the total payment (subject to wage-index adjustment) that a 
hospital will receive from the beneficiary and the Medicare program.
    Since imposition of Medicare's unadjusted national coinsurance 
amounts would have an adverse financial impact on TRICARE beneficiaries 
(i.e., imposition of significantly higher cost-sharing for Prime 
beneficiaries), the Agency has opted to use the following hospital 
outpatient deductible and cost-sharing/copayments currently being 
applied in Tables 1 and 2 below for Prime, Extra, and Standard TRICARE 
programs for hospital outpatient services:

                                    Table 1--Hospital Outpatient Deductibles
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                                         Active duty family members
        TRICARE programs        --------------------------------------------   Retirees, their family members &
                                         E1-E4              E5 & above                    survivors
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Prime..........................  None................  None................  None.
Extra..........................  $50 per Individual..  $150 per Individual.  $150 per Individual.
                                 $100 Maximum per      $300 Maximum per      $300 Maximum per family.
                                  family.               family.
Standard.......................  $50 per Individual..  $150 per Individual.  $150 per Individual.
                                 $100 Maximum per      $300 Maximum per      $300 Maximum per family.
                                  family.               family.
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                                                  Table 2--Hospital Outpatient Copayments/Cost-Sharing
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                                                             TRICARE prime program
                                    -----------------------------------------------------------------------
          Type of service                       Active duty family member               Retirees, their     TRICARE extra program     TRICARE standard
                                    ------------------------------------------------    family members &                                  program
                                              E1-E4                E5 & above              survivors
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Hospital Outpatient Departments      $0 copayment per visit  $0 copayment per visit  $12 copayment per      Active Duty Family     Active Duty Family
 clinic visits; therapy visits;                                                       visit.                 Members: Cost-share--  Members: Cost-share--
 treatment rooms, etc.                                                                                       15% of fee             20% of the allowable
                                                                                                             negotiated by          charge.
                                                                                                             contractor.

[[Page 74948]]

 
                                                                                                            Retirees, Their        Retirees, Their
                                                                                                             Family Members &       Family Members &
                                                                                                             Survivors: Cost-       Survivors: Cost-
                                                                                                             share--20% of the      share--25% of the
                                                                                                             fee negotiated by      allowable charge.
                                                                                                             the contractor.
Emergency Services Emergency and     $0 copayment per visit  $0 copayment per visit  $30 copayment per
 urgently needed care obtained in                                                     emergency room visit.
 hospital emergency room.
Ambulatory Surgery (same day)        $0 copayment per visit  $0 copayment per visit  $25 copayment........  ADFMs: Cost-share--    ADFMs: Cost-share--
 Hospital-based ambulatory surgical                                                                          $25.                   $25.
 center.
                                                                                     No separate copayment/ Retirees, Their        Retirees, Their
                                                                                      cost-share for         Family Members &       Family Members &
                                                                                      separately billed      Survivors: Cost-       Survivors: Lesser of
                                                                                      professional charges.  share--20% of the      25% of group rate or
                                                                                                             institutional fee      25% of billed
                                                                                                             negotiated by the      charge.
                                                                                                             contractor.
Birthing Centers Prenatal care,      $0 copayment per visit  $0 copayment per visit  $25 copayment........
 outpatient delivery, and postnatal
 care provided in hospital-based
 birthing center.
Partial Hospitalization Programs     $0 copayment per visit  $0 copayment per visit  $40 per diem charge..  ADFMs: $20 per diem    ADFMs: $20 per diem
 (PHPs) Mental health services                                                                               charge.                charge.
 provided in authorized hospital-
 based PHP.
                                                                                     No separate copayment/ Retirees, Their        Retirees, Their
                                                                                      cost-share for         Family Members &       Family Members &
                                                                                      separately billed      Survivors: Cost-       Survivors: Cost-
                                                                                      professional charges.  share--20% of the      share--25% of the
                                                                                                             TRICARE allowed        TRICARE allowed
                                                                                                             amount.                amount.
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    [rtarr8] Hold-Harmless Protection--At the inception of the Medicare 
OPPS, providers were eligible to receive additional transitional 
outpatient payments (TOPs) if the payments they received under the OPPS 
were less than the payments they could have received for the same 
services under the payment system in effect before the OPPS. Prior to 
January 1, 2004, most hospitals that realized lower payments under OPPS 
received transitional corridor payments based on a percent of the 
decreased payments, with the exception of cancer hospitals, children's 
hospitals and rural hospitals having 100 or fewer beds, which were held 
harmless under this provision and paid the full amount of the decrease 
in payment under the OPPS. Since transitional corridor payments were 
intended to be temporary payments to ease the provider's transition 
from a prior cost-based payment system to a prospective payments 
system, they were terminated as of January 1, 2004, with the exception 
of cancer and children's hospitals, which were held harmless 
permanently under transitional corridor provisions of the statute 
(section 1833(t)(7) of the Social Security Act). The authority for 
making transitional corridor payments under section 1833(t)(7)(D)(i) of 
the Act, as amended by section 411 Public Law 108-173, expired for 
rural hospitals having 100 or fewer beds, and sole community hospitals 
(SCHs) located in rural areas as of December 31, 2005. However, 
subsequent legislation (section 5105 of Pub. L. 109-171) reinstituted 
the hold-harmless transitional outpatient payments (TOPs) for covered 
OPD services furnished on or after January 1, 2006, and before January 
1, 2010, for rural hospitals having 100 or fewer beds and SCHs. This 
provision provided an increased payment for such hospitals for 
outpatient services if the Medicare OPPS payment they received was less 
than the pre-BBA payment amount (i.e., the amount that was received 
prior to implementation of OPPS) that they would have received for the 
same covered service. When the OPPS payment is less than the payment 
the provider would have received prior to OPPS implementation, the 
amount of payment is increased by 90 percent of the amount of that 
difference for CY 2007, and by 85 percent of the amount of the 
difference for CY 2008. The amount of payment under section 
1833(t)(13)(B) of the Act, as amended by section 411 of Pub. L. 108-73, 
also provided a payment increase for rural SCHs of 7.1 percent for all 
services and procedures paid under the OPPS, excluding drugs, 
biologicals, brachytherapy seeds and services paid under pass-through 
payments effective January 1, 2006, if justified by a study of the 
difference in costs for rural SCHs, which include Medicare essential 
access community hospitals or EACHs.
    While the Agency adopted the hold-harmless TOPs for rural hospitals 
having 100 or fewer beds and SCHs, it opted to totally exempt cancer 
and children's hospitals from the TRICARE OPPS in lieu of imposing the 
hold-harmless provision, given the administrative complexity of 
capturing the data required for payment of

[[Page 74949]]

monthly interim TOP amounts. TOPs would require a comparison of what 
would have been paid [i.e., billed charges and CHAMPUS Maximum 
Allowable Charge (CMAC) amounts] prior to implementation of the OPPS 
for hospital outpatient services to those amounts actually paid under 
the OPPS for the same services. A TOP would be allowed in addition to 
the OPPS amount if payment to a cancer or children's hospital was lower 
than the amount that would have been paid prior to implementation of 
the OPPS. Since transitional corridor payments were specifically 
designed to supplement the losses experienced under the OPPS (i.e., to 
pay for services at the full amount that would have been allowed prior 
to implementation of the OPPS), and most, if not all, outpatient 
services paid at billed charges or CMAC would exceed the OPPS amount, 
the program cannot justify the administrative burden/expense of 
maintaining the hold-harmless provisions for cancer and children's 
hospitals. As a result, TRICARE will continue to reimburse cancer and 
children's hospitals on a fee-for-services basis using billed charges 
and CMAC rates; i.e., they will be excluded altogether from the OPPS.
    Adoption of the Medicare OPPS has also highlighted other policy 
considerations which must be addressed in order to accommodate 
preexisting authorization criteria and reimbursement systems. Following 
are these identified policy considerations and prescribed resolutions:
    [rtarr8] Partial Hospitalization Programs (PHP)--The TRICARE 
criteria under which PHP services may be rendered are different than 
Medicare's--both with regard to the need for PHP services and facility 
requirements. Currently, Medicare OPPS partial hospitalization services 
may be provided to patients in lieu of inpatient psychiatric care in 
hospital outpatient departments or Medicare-certified community mental 
health centers (CMHCs). The Agency has opted to retain the existing 
mental health review criteria under 32 CFR 199.4(b)(10) in order to 
ensure the continued level and quality of mental healthcare afforded 
under the basic program. Following are the TRICARE review criteria for 
determining the medical necessity of psychiatric partial 
hospitalization services:
     The patient is suffering significant impairment from a 
mental disorder (as defined in Sec.  199.2) which interferes with age 
appropriate functioning.
     The patient is unable to maintain himself or herself in 
the community, with appropriate support, at a sufficient level of 
functioning to permit an adequate course of therapy exclusively on an 
outpatient basis (but is able, with appropriate support, to maintain a 
basic level of functioning to permit partial hospitalization services 
and presents no substantial imminent risk of harm to self or others).
     The patient is in need of crisis stabilization, treatment 
of partially stabilized mental health disorders, or services as a 
transition from an inpatient program.
     The admission into the partial hospitalization program is 
based on the development of an individualized diagnosis and treatment 
plan expected to be effective for the patient and permit treatment at a 
less intensive level.
    Based on existing mental health review criteria under 32 CFR 
199.4(b)(10) and certification requirements prescribed under 32 CFR 
199.6(b)(4)(xii)(A), including accreditation by the Joint Commission, 
under the current edition of the Standards for Behavioral Healthcare, 
not all hospital-based PHPs will be assured of receiving payment under 
the OPPS unless they meet the above prescribed certification 
requirements and enter into a participation agreement with TRICARE. 
CMHC PHPs have been excluded from payment under the TRICARE OPPS since 
CMHCs are not recognized as authorized providers under the TRICARE 
program.
    While the authorization standards under 32 CFR 199.6(b)(4)(xii)(A) 
through (D) will be retained/applied for both hospital-based and 
freestanding PHPs currently recognized under the Program, including the 
requirement for a written participation agreement with TRICARE, 
freestanding PHPs will be exempt from TRICARE OPPS and will continue to 
be reimbursed under the existing TRICARE PHP per diem system as 
prescribed under 32 CFR 199.14(a)(2)(ix), subject to their own unique 
mental health copayment/cost-sharing provisions.
    [rtarr8] Ambulatory Surgery Procedures--Currently, ambulatory 
surgery procedures provided in both freestanding ambulatory surgery 
centers (ASCs) and hospital outpatient departments or emergency rooms 
are paid using prospectively determined rates established on a cost 
basis and divided into eleven groups as prescribed under 32 CFR 
199.14(d). These payment groups are further adjusted for area labor 
costs based on Metropolitan Statistical Areas (MSAs). The payment rates 
established under this system apply only to facility charges for 
ambulatory surgery (e.g., standard overhead amounts that include, but 
are not limited to, nursing and technician services, use of the 
facility and supplies and equipment directly related to the surgical 
procedure) and do not include such items as physician's fees, 
laboratory, X-rays or diagnostic procedures (other than those directly 
related to the performance of the surgical procedure), prosthetics and 
durable medical equipment for use in the patient's home. Ambulatory 
surgery procedures (both provided in hospital-based and freestanding 
ambulatory surgery centers) are subject to their own unique copayment/
cost-sharing provisions under the current TRICARE ambulatory surgery 
benefit.
    With implementation of the TRICARE OPPS, hospital-based ambulatory 
surgery procedures will no longer be reimbursed under the original 
eleven tier payment system, but will instead be paid on a rate-per-
service basis that varies according to the APC group to which the 
surgical procedure is assigned. The relative weight of the APC group 
will represent the median hospital cost of the services included in the 
APC relative to the median cost of services included in APC 0606, Level 
3 Clinic Visit. The prospective payment rate for each APC will be 
calculated by multiplying the APC's relative weight by a nationally 
established conversion factor and adjusting it for geographic wage 
differences. The APC payment will be subject to the deductible and 
cost-sharing/copayment amounts currently being applied under Prime, 
Extra, and Standard TRICARE programs for hospital outpatient services. 
Denial of Medicare inpatient procedures will also be adhered to under 
the TRICARE OPPS (i.e., denial of inpatient surgical procedures 
performed in a hospital outpatient setting) except for those inpatient 
procedures, which upon medical review, could be safely and 
efficaciously rendered in an outpatient setting due to TRICARE's 
younger, healthier beneficiary population. Exceptions to Medicare's 
inpatient surgical procedure listing were based on major part to 
standardized utilization management review criteria, (i.e., Interqual 
and Milliman), used by TRICARE Managed Care Support Contractors' 
medical review staff. TRICARE-specific APCs will be developed for these 
designated inpatient procedures based on median costs from the most 
recent 12 months of claims history. TRICARE OPPS reimbursement will 
also be extended for an inpatient procedure performed to resuscitate or 
stabilize a patient with an emergent, life-threatening condition who 
dies before being admitted as a patient,

[[Page 74950]]

which in this case, will be paid under a new technology APC.
    Freestanding ASCs will be exempt from TRICARE OPPS and will 
continue to be paid under the existing eleven tier payment system. ASC 
procedures will be placed into one of ten groups by their median per 
procedure cost, starting with $0 to $299 for Group 1, and ending with 
$1,000 to $1,299 for Group 9 and $1,300 and above for Group 10, subject 
to their own unique copayment/cost-sharing provisions under the TRICARE 
freestanding ambulatory surgery benefit. The eleventh payment tier/
group was added to the ASC reimbursement system as of November 1, 1998, 
for extracorporeal shock wave lithotripsy, with a rate established off 
of the inpatient Diagnostic Related Group (DRG) 323 which is currently 
$3,289.
    [rtarr8] Birthing Centers--As described in 32 CFR 199.6(b)(4)(xi), 
a birthing center is a freestanding or institution-affiliated 
outpatient maternity care program which principally provides a planned 
course of outpatient prenatal care and outpatient childbirth services 
limited to low-risk pregnancies. These all-inclusive maternity and 
childbirth services are currently being reimbursed in accordance with 
32 CFR 199.14(e) at the lower of the TRICARE established all-inclusive 
rate or the billed charge. The all-inclusive rate includes laboratory 
studies, prenatal management, labor management, delivery, post-partum 
management, newborn care, birth assistant, certified nurse-midwife 
professional services, physician professional services, and the use of 
the facility to the extent that they are usually associated with a 
normal pregnancy and childbirth. Since institutional-affiliated 
maternity centers will continue to be reimbursed under the TRICARE 
maximum allowable birthing center all-inclusive rate methodology as 
prescribed under 32 CFR 199.14(e), payment will be equal to the sum of 
the Class 3 CMAC for total obstetrical care for a normal pregnancy and 
delivery (CPT code 59400) and the TMA supplied non-professional 
component amount, which includes both the technical and professional 
components of tests usually associated with a normal pregnancy and 
childbirth. As a result, hospital-based birthing centers will continue 
to be reimbursed the same as freestanding birthing centers except that 
updating of the hospital-based all inclusive rate, consisting of the 
CMAC for procedure code 59400 (Birthing Center, all-inclusive charge, 
complete) and the state specific non-professional component, will lag 
two months behind the freestanding birthing center all-inclusive 
update; i.e., the freestanding birthing center all-inclusive rate 
components will usually be updated on February 1 of each year to 
coincide with the annual CMAC file update, followed by the hospital-
based birthing center all-inclusive rate component updates on April 1 
of the same year.
    [rtarr8] Observation Stays--Observation Services are those services 
furnished on a hospital's premises, including the use of a bed and 
periodic monitoring by a hospital's staff, which are reasonable and 
necessary to evaluate an outpatient's condition or to determine the 
need for a possible admission to the hospital as an inpatient. While 
observation services reported with HCPCS code G0378 (hospital 
observation service, per hour) have been packaged into other 
independent separately payable hospital outpatient services since 
January 1, 2008, maternity observation claims that have a maternity 
diagnosis, a minimum of four hours per observation stay and not primary 
surgical procedure on the day of observation will still be identified 
using HCPCS code G0378 and reimbursed separately under APC T0002. Under 
the TRICARE OPPS, additional hospital services (e.g., separate 
emergency room visit or clinic visit) will not be required on a claim 
with a maternity diagnosis in order to receive separate payment for an 
observation stay.
    [rtarr8] End-Stage Renal Disease (ESRD) Dialysis Services--In 
accordance with sections 1881(b)(2) and (b)(7) of the Social Security 
Act, a facility that furnishes dialysis services to Medicare patients 
with ESRD is paid a prospectively determined rate for each dialysis 
treatment furnished. The rate is a composite that includes all costs 
associated with furnishing dialysis services except for the costs of 
physician services and certain laboratory tests and drugs that are 
billed separately. CMS has exercised the authority granted under 
section 1833(t)(1)(B)(i) to exclude from the outpatient PPS those 
services for patients with ESRD that are paid under the ESRD composite 
rate. Since TRICARE does not have a comparable composite rate in effect 
for payment of ESRD services, they will be reimbursed under TRICARE's 
OPPS.

II. Treatment Settings Subject to Outpatient Prospective Payment System

    The outpatient prospective payment system applies to any hospital 
participating in the Medicare program in the 50 United States, the 
District of Columbia, and Puerto Rico, except for Critical Access 
Hospitals (CAHs), Indian Health Service hospitals, certain hospitals in 
Maryland that qualify for payment under the state's cost containment 
waiver, and specialty care providers which include: (1) Cancer and 
children's hospitals; (2) freestanding ASCs; (3) freestanding Partial 
Hospitalization Programs (PHPs); (4) freestanding psychiatric and 
Substance Use Disorder Rehabilitation Facilities (SUDRFs); (5) Home 
Health Agencies (HHAs); (6) hospice programs; (7) other corporate 
services providers (e.g., comprehensive outpatient rehab facilities, 
freestanding cardiac catheterization centers, freestanding sleep 
diagnostic centers, and freestanding hyperbaric oxygen treatment 
centers); (8) freestanding birthing centers; (9) Veterans 
Administration (VA) hospitals; and (10) freestanding ESRD centers. Due 
to their inability to meet the more stringent requirements imposed for 
hospital-based and freestanding PHPs under the Program, CMHCs have also 
been excluded from payment under TRICARE's OPPS for partial 
hospitalization program (PHP) services since they are not recognized as 
authorized providers under the TRICARE program.
    An outpatient department, remote location hospital, satellite 
facility, or other provider-based entity must also be either created 
by, or acquired by, a main provider (hospital qualifying for payment 
under TRICARE OPPS) for the purpose of furnishing healthcare services 
of the same type as those furnished by the main provider under the 
name, ownership, and financial administrative control of the main 
provider, in accordance with the following requirements under 42 CFR 
413.65 (Medicare Regulation) in order to qualify for payment under the 
OPPS:
     Licensure--The outpatient department, remote location 
hospital, or the satellite facility and the main hospital are operated 
under the same license, except in areas where the State requires a 
separate license for the department of the provider.
     Clinical Integration--Professional staff of the outpatient 
department, remote location hospital or satellite facility are 
monitored by, and have clinical privileges at the main hospital. The 
medical director of the outpatient facility must also maintain a 
reporting relationship with the chief medical officer at the main 
hospital that has the same frequency, intensity and level of 
accountability that exists in the relationship between other 
departmental medical directors and the chief medical officer of the 
main hospital. Medical records for patients

[[Page 74951]]

treated in the facility or organization must be integrated into a 
unified retrieval system (or cross reference) of the main hospital and 
there must be full access to all services provided at the main hospital 
for patients treated in the outpatient facility requiring further care.
     Financial integration. The financial operation of the 
outpatient facility must be fully integrated within the financial 
system of the main hospital, as evidenced by shared income and expenses 
between the main hospital and outpatient facility.
     Public awareness. The outpatient department, remote 
location hospital, or a satellite facility is held out to the public 
and other payers as part of the main provider. When patients enter the 
outpatient facility they are aware that they are entering the main 
provider and are billed accordingly.
    Having clear criteria for provider-based status is important 
because this designation can result in additional TRICARE payments for 
services at the provider-based facility (i.e., the incorporation of 
additional facility costs for covered outpatient services/procedures). 
TRICARE will accept the providers' determination on whether they meet 
the regulatory criteria for provider-based status for purposes of 
seeking reimbursement under the TRICARE OPPS.

III. Application of Ambulatory Payment Classification (APC) Model

    Payment for services under the TRICARE OPPS is based on grouping 
outpatient services into APC groups in accordance with provisions 
outlined in section 1833(t) of the Social Security Act and its 
implementing regulation 42 CFR Part 419. This grouping is accommodated 
through the reporting of HCPCS codes and descriptors that are used to 
group homogenous services (both clinically and in terms of resource 
consumption) into their respective APC groups.
    During the development of the TRICARE hospital OPPS it was 
recognized that certain hospital outpatient services were being paid 
based on fee schedules or other prospectively determined rates that 
were being applied across other ambulatory care settings. As a result, 
the following services were excluded from the OPPS in order to achieve 
consistency of payment across different service delivery sites: (1) 
Physician services; (2) nurse practitioner and clinical nurse 
specialist services; (3) physician assistant services; (4) certified 
nurse-midwife services; (5) services of a qualified psychologist; (6) 
clinical social worker services, except under half- and full-day 
partial hospitalization programs in which the services are included 
within the per diem payment amount; (7) services of an anesthetist; (8) 
screening and diagnostic mammographies; (9) clinical diagnostic 
services; (10) non-implantable durable medical equipment (DME), 
orthotics, prosthetics, and prosthetic devices and supplies; (11) 
hospital outpatient services furnished to SNF inpatients as part of 
their comprehensive care plan; (12) physical therapy; (13) speech-
language pathology; (14) occupational therapy; (15) influenza and 
pneumococcal pneumonia vaccines; (16) take-home surgical dressings; 
(17) services and procedures designated as requiring inpatient care; 
and (18) ambulance services. These services will continue to be 
reimbursed under the current CMAC fee schedule or other TRICARE-
recognized allowable charge methodology (e.g., statewide prevailings).
    The remaining outpatient procedures which were not being paid under 
current fee schedules or other prospectively determined rates were 
grouped under an APC based on the following criteria:
     Resource Homogeneity--The amount and type of facility 
resources (for example, operating room, medical supplies, and 
equipment) that are used to furnish or perform the individual 
procedures or services within each APC group should be homogeneous. 
That is, the resources used are relatively constant across all 
procedures or services even though resources used may vary somewhat 
among individual patients.
     Clinical Homogeneity--The definition of each APC should be 
``clinically meaningful.'' That is, the procedures or services included 
within the APC group relate generally to a common organ system or 
etiology, have the same degree of extensiveness, and utilize the same 
method of treatment.
     Provider Concentration--The degree of provider 
concentration associated with the individual services that comprise the 
APC is considered. If a particular service is offered only in a limited 
number of hospitals, then the impact of payment for the services is 
concentrated in a subset of hospitals. Therefore, it is important to 
have an accurate payment level for services with a high degree of 
provider concentration. Conversely, the accuracy of payment levels for 
services that are routinely offered by most hospitals does not bias the 
payment system against any subset of hospitals.
     Frequency of Service--Unless there is a high degree of 
provider concentration, creating separate APC groups for services that 
are infrequently performed is avoided. Since it is difficult to 
establish reliable payment rates for low-volume groups, HCPCS codes are 
assigned to an APC that is most similar in terms of resource use and 
clinical coherence.
     Minimal Opportunities for Upcoding and Code 
Fragmentation--The APC system is intended to discourage using a code in 
a higher paying group to define the care. That is, putting two related 
codes such as the codes for excising a lesion for 1.1 cm and one of 1.0 
cm, in different APC groups may create an incentive to exaggerate the 
size of the lesions in order to justify the incrementally higher 
payment. APC groups based on subtle distinctions would be susceptible 
to this kind of coding. Therefore, APC groups were kept as broad and 
inclusive as possible without sacrificing resource or clinical 
homogeneity.
    These procedures, along with their specific HCPCS coding and 
descriptors, were used to identify and group services within each 
established APC group. They included: (1) Surgical procedures 
(including hospital-based ASC procedures currently being paid under the 
eleven tier ASC payment methodology); (2) radiology, including 
radiation therapy; (3) clinic visits; (4) emergency department visits; 
(5) diagnostic services and other diagnostic tests; 6) partial 
hospitalization for the mentally ill; (7) surgical pathology; (8) 
cancer therapy; (9) implantable medical items (e.g., prosthetic 
implants, implantable DME and implantable items used in performing 
diagnostic x-rays and laboratory tests); (10) specific hospital 
outpatient services furnished to a beneficiary who is admitted to a 
SNF, but in which case the services are beyond the scope of SNF 
comprehensive care plans; (11) certain preventive services, such as 
colorectal cancer screening; (12) acute dialysis (e.g., dialysis for 
poisoning); and (13) ESRD services. These hospital outpatient 
procedures will be paid on a rate-per-service basis that varies 
according to the APC group to which they are assigned.
    In accordance with section 1833(t)(2) of the Social Security Act, 
services and items within an APC group cannot be considered comparable 
with respect to the use of resources in the APC group if the highest 
median cost is more than 2 times the lowest median cost for an item or 
service within the same group (referred to a the ``2 times rule''). 
Exceptions may be granted in unusual cases, such as low-volume items 
and services.

[[Page 74952]]

IV. Public Comments

    The TRICARE OPPS proposed rule (72 FR 17271) was published on April 
1, 2008, providing a 60-day public comment period. Ten timely items of 
correspondence were received containing multiple comments on the 
proposed rule which resulted in a substantive change in hospital-based 
PHP reimbursement (i.e., reimbursement of a single per diem based on a 
minimum of three service units and payment of PHP professional services 
outside the per diem) and provided clarification regarding the 
temporary transitional payment adjustment (TTPA) and temporary military 
contingency payment adjustment (TMCPA) available under the TRICARE OPPS 
which will provide hospitals sufficient time to adjust and budget for 
potential revenue reductions and to ensure network adequacy deemed 
essential for military readiness and support during contingency 
operations. Following is a summary of the public comments and our 
responses:
    Comment: Several commentors expressed support for the first option 
outlined in the proposed rule to provide an implementation plan 
involving three-year transitional payment adjustments for TRICARE 
network hospitals, but took exception to the proposal that the 
transitional adjustments only apply to hospitals that are in close 
proximity to military bases and treat a disproportionate share of 
military family members and/or hospitals that provide essential network 
specialty care. The commentors further supported the three-year 
transition to set higher payment percentages for the ten APCs (five 
clinic visits and five emergency room (ER) visits) during the first 
year, with reductions in each of the transition years. Several 
commentors also recommended a stop-loss system such as the one used in 
the implementation of the Medicare OPPS.
    Response: We appreciate the commentor's concerns regarding the 
temporary transitional payment process and have modified it to include 
all hospitals, both network and non-network. For network hospitals, the 
temporary transitional payment adjustments (TTPAs) will cover a four-
year period. The four-year transition will set higher payment 
percentages for the ten Ambulatory Payment Classification (APC) codes 
604-609 and 613-616, with reductions in each of the transition years. 
For non-network hospitals, the adjustments will cover a three-year 
period, with reductions in each of the transition years.
    For network hospitals, under the TTPAs, the APC payment level for 
the five clinic visit APCs would be set at 175 percent of the Medicare 
APC level, while the five ER visit APCs would be increased by 200 
percent in the first year of TRICARE OPPS implementation. In the second 
year, the APC payment levels would be set at 150 percent of the 
Medicare APC level for clinic visits and 175 percent for ER APCs. In 
the third year, the APC visit amounts would be set at 130 percent of 
the Medicare APC level for clinic visits and 150 percent for ER APCs. 
In the fourth year, the APC visit amounts would be set at 115 percent 
of the Medicare APC level for clinic visits and 130 per cent for ER 
APCs. In the fifth year, the TRICARE and Medicare payment levels for 
the 10 APC visit codes would be identical.
    For non-network hospitals, under the TTPAs, the APC payment level 
for the five clinic and ER visit APCs would be set at 140 percent of 
the Medicare APC level in the first year of TRICARE OPPS 
implementation. In the second year, the APC payment levels would be set 
at 125 percent of the Medicare APC level for clinic and ER visits. In 
the third year, the APC visit amounts would be set at 110 percent of 
the Medicare APC level for clinic and ER visits. In the fourth year, 
the TRICARE and Medicare payment levels for the 10 APC visit codes 
would be identical.
    The transitional payment adjustments have been increased from those 
percentage amounts appearing in the proposed rule (73 FR 17271) to 
further buffer the decrease in revenues that hospitals will be 
experiencing during initial implementation of TRICARE OPPS. TTPA 
adjustments will also be extended to non-network providers, although 
they will be lower than for network hospitals to provide incentives for 
network participation. TRICARE will not utilize a stop-loss system such 
as the one used in the implementation of Medicare OPPS as it is not 
administratively feasible to adopt this type of transition under 
TRICARE. As stated in the proposed rule, these TTPAs will buffer the 
initial revenue reductions which will be experienced upon 
implementation of TRICARE's OPPS, providing hospitals with sufficient 
time to adjust and budget for potential revenue reductions for 
hospitals most vulnerable to implementation of OPPS.
    Based on our discussions with the TRICARE Regional Offices (TROs), 
in regard to the second option to adopt, modify, and/or extend 
temporary adjustments to TRICARE's OPPS payments for TRICARE network 
hospitals deemed essential for military readiness and support during 
contingency operations, it was decided the policy for determining 
network waivers under the CHAMPUS Maximum Allowable Charge (CMAC) 
methodology should be used as a model to determine whether a temporary 
military contingency payment adjustment (TMCPA) under OPPS is 
warranted. This does not mean that network hospitals will be exempt 
from OPPS or that the 115% locality based waiver ceiling applies. Under 
the TMCPAs, this final rule will allow the reimbursement of higher 
payment rates for hospital-based outpatient healthcare services, if it 
is determined necessary to ensure adequate Preferred Provider networks. 
It might be determined that the initial TTPA of 200% for ER visits in a 
particular network hospital is not sufficient to ensure network 
adequacy and as a result, an additional TMCPA of 25 percent, (i.e., 225 
percent of the OPPS rate for ER visits) would be necessary to support 
military contingency operations. The higher rate will be authorized 
only if all reasonable efforts have been exhausted in attempting to 
create an adequate network and that it is cost-effective and 
appropriate to pay the higher rate to ensure an appropriate mix of 
primary care and specialists in the network. For this purpose, such 
evidence may include consideration of the number of providers in the 
locality who provide the affected services, the mix of primary/
specialty providers needed to meet patient access standards, the number 
of TRICARE beneficiaries in the locality, and the availability of 
Military Treatment Facility providers and any other factors the TMA 
Director, or designee determines relevant. If it is determined that the 
availability of an adequate number and mix of qualified healthcare 
providers in a network is not found, the Director TRO (DTRO) shall 
conduct a thorough analysis and forward recommendations with a cost 
estimate for approval to the TMA Director or designee through the TMA 
Contracting Officer (CO) for coordination. Those who can apply for the 
TMCPAs are: The DTRO; providers through the DTRO; Managed Care Support 
Contractors (MCSCs) through the DTRO; and Military Treatment Facilities 
(MTFs) through the DTRO. The TMA Director or designee is the final 
approval authority for TMCPAs. The procedures that are to be followed 
when submitting a TMCPA request will be outlined in the TRICARE 
Reimbursement Manual.
    Comment: One commentor recommended the final rule include a

[[Page 74953]]

definition of the term ``close proximity'' and what constitutes a 
``disproportionate share of military family members'' and ``essential 
network specialty care'' for future reference.
    Response: Since these terms will not be used in determining whether 
TMCPAs will be authorized, there is no need to add a definition for 
``close proximity'' and explain what constitutes a ``disproportionate 
share of military family members'' and ``essential network specialty 
care.''
    Comment: Another commentor expressed concern that certain TRICARE 
dependent hospitals will be negatively impacted to the point that 
ongoing service capability to military personnel and their families 
will be severely limited. This commentor states a reasonable solution 
would be to create criteria for alternative reimbursement methodologies 
that would reflect an institution's dependence upon TRICARE. These 
provisions would include an exemption for network hospitals serving a 
disproportionate number of TRICARE patients and the continuation of 
TRICARE Maximum Allowable Charge rates for network hospitals entitled 
to an exemption.
    Response: Under the governing statutory provisions implementing 
TRICARE's OPPS, TMA cannot exempt hospitals from TRICARE's OPPS on a 
case-by-case basis; however, see above response on the establishment of 
higher rates under TRICARE's OPPS using the TTPAs and TMCPAs.
    Comment: Another commentor requested the requirement of ``military 
readiness or contingency operations'' be clarified or interpreted to 
allow exceptions at any time, to assure the military is prepared to 
perform its mission at any time and not only at times of ongoing 
operations. The commentor also believes the Director should be allowed 
to grant not just a ``temporary deviation'' but also be allowed to 
grant a more permanent exclusion from OPPS, if it is determined that a 
hospital's participation in TRICARE is required to support military 
readiness. The commentor further states that it is a major financial 
commitment for a hospital to participate in TRICARE and if the 
participation is only allowed on a temporary basis, this makes it 
problematic for the hospital to participate. They feel that allowing a 
more permanent exclusion from OPPS would be helpful in allowing a 
hospital to remain a part of the TRICARE network.
    Response: As stated above, the statutory provisions implementing 
TRICARE's OPPS, does not allow TMA to permanently exclude hospitals 
from TRICARE's OPPS; however, there is latitude under these statutory 
provisions for the adoption of temporary transitional payment 
adjustments (TTPAs). These TTPAs will buffer the initial revenue 
reductions which will be experienced upon implementation of TRICARE's 
OPPS, providing hospitals with sufficient time to adjust and budget for 
potential revenue reductions for hospitals most vulnerable to 
implementation of OPPS. In addition, OPPS will ensure consistency of 
hospital outpatient payments throughout the United States, thus 
reducing the denial and return of claims to providers for coding 
errors. Providers will have access to OCE/Pricer software that will 
facilitate the filing and payment of outpatient claims with their 
TRICARE claims processors. This will reduce overall administrative 
costs for both providers and TRICARE contractors. Also, there are 
additional transitional adjustments, (i.e., TMCPAs) that will ensure 
network adequacy during military contingency operations. A change in 
troop deployment, the mix of primary/specialty providers needed to meet 
patient access standards, and base realignment and/or closures could 
impact whether a military contingency payment adjustment is warranted. 
Therefore, it would not be fiscally responsible to make these 
adjustments permanent.
    Comment: Another commentor suggests that if DoD adopts a fully 
Medicare-based OPPS system for TRICARE, it will have a substantially 
negative effect upon the financial conditions of community hospitals 
closest to military installations that military personnel, retirees and 
their families depend upon for important medical services. The 
commentor further states that if DoD pegs outpatient hospital 
reimbursement rates to insufficient Medicare reimbursement, they 
believe that hospitals in California and elsewhere would consider not 
performing outpatient procedures on TRICARE members, or withdrawing 
from TRICARE contracts due to poor reimbursement. This could, in turn, 
harm access to enrollee outpatient care. This commentor recommends 
that: (1) DoD should, apart from the congressionally altered market 
basket update factor, separately calculate TRICARE OPPS rates based on 
the actual market basket update factor, which they believe more 
accurately reflects hospitals' costs. Doing so would ensure that more 
TRICARE network hospitals would retain their affiliation with the 
program and that hospitals closest to large military installations 
would not be adversely affected; (2) DoD should adopt a 15 percent 
``glide path'' methodology that is similar to its prior rate adjustment 
methodologies enshrined at 32 CFR 199.14. Under this methodology, 
TRICARE-participating hospitals may not have their TRICARE outpatient 
rate reduced by more than 15 percent per year. For example, under this 
proposal, for the first year of the TRICARE transition OPPS period, 
TRICARE-contracting facilities would receive the TRICARE outpatient 
contracted rate, reduced by the lesser of: (a) The amount the contract 
rate exceeds the TRICARE OPPS rate for the same service or procedure; 
or (b) 15 percent off the contract rate. This amount becomes the 
contract rate for each subsequent year's calculation, until the 
difference between the TRICARE outpatient contracted amount and the 
TRICARE OPPS amount have equilibrated.
    Response: In section 707 of NDAA-02, Congress changed the statutory 
authorization (in 10 U.S.C. 1079(j)(2)) that TRICARE payment methods 
for institutional care ``may be'' determined to the extent practicable 
in accordance with Medicare payment rules to a mandate that TRICARE 
payment methods ``shall be'' determined in accordance with Medicare 
payment rules. Based on this statutory mandate, TRICARE is adopting 
Medicare's prospective payment system for reimbursement of hospital 
outpatient services currently in effect for the Medicare program. As 
stated above, to minimize the potential negative impact OPPS may have 
on hospitals (both network and non-network), TRICARE has developed the 
TTPAs and TMCPAs.
    Comment: One commentor requested clarification on whether there 
were other hospital outpatient services that were excluded from the 
TRICARE OPPS other than the eighteen (18) listed in 63 FR Pages 17276 
and 27277.
    Response: There are no other hospital outpatient services that are 
excluded under TRICARE's OPPS other than those listed in the proposed 
rule.
    Comment: One commentor strongly recommended that the Final Rule 
establish an implementation date that is at least 90 days from the date 
of the publication of the Final Rule to allow adequate time for 
education and system changes to ensure a smooth transition to this new 
payment methodology.
    Response: The agency will attempt to provide as much time as 
possible to ensure a smooth transition to this new payment methodology.
    Comment: This same commentor urges TRICARE to release the updated

[[Page 74954]]

TRICARE specific OCE each quarter at the same time the updated Medicare 
OCE is released.
    Response: TRICARE will release its updated OCE each quarter to 
coincide with Medicare's release of its OCE.
    Comment: This same commentor seeks clarification of the statement 
``upon medical review'' for those inpatient procedures that the Agency 
believes can be safely and efficaciously rendered in an outpatient 
setting due to TRICARE's younger, healthier beneficiary population. The 
commenter also seeks clarification on how the medical review process 
will take place, specifically if the medical review process will be 
conducted for an individual beneficiary claim based upon the review 
criteria or on advantages to a methodology that applies criteria to an 
individual beneficiary claim because of the diversity of the population 
which TRICARE serves.
    Response: The current TRICARE exceptions to Medicare's inpatient 
surgical procedure listing was a result of a review of those inpatient 
procedures that the Agency determined could be safely and efficaciously 
rendered in an outpatient setting for TRICARE beneficiaries, based on 
standardized utilization management review criteria used by the TRICARE 
Managed Care Support Contractors' medical review staff. TRICARE's 
determination of whether a procedure is removed from Medicare's 
inpatient only list is not based on medical review of individual 
beneficiary claims but on generally accepted medical standards of 
practice as substantiated by standardized utilization management review 
criteria.
    Comment: This same commentor suggests clarifying the payment rate 
of ``TRICARE standard allowable charge methodology'' for nonpass-
through drugs, biologicals and radiopharmaceuticals with HCPCS codes, 
but without claims data, to be ``the same as the payment methodology 
under Medicare OPPS, i.e., separate payment based upon the payment rate 
for nonpass-through drugs and biologicals, in accordance with the ASP 
methodology.''
    Response: TRICARE is adopting the same payment methodology as the 
Medicare OPPS effective January 1, 2008, in that the updated payment 
rates for drugs and biologicals will be based on average sale prices.
    Comment: One commentor states the statement in the proposed rule 
appears vague on whether the Trauma Activation HCPCS G code will be 
paid in addition to the Critical Care CPT codes reported on the same 
date of service. The commentor is requesting that TRICARE clarify in 
the final rule that HCPCS code G0390 will be paid in addition to CPT 
critical care codes 99291 and 99292 when reported on the same date of 
service.
    Response: TRICARE confirms if trauma activation occurs, HCPCS code 
G0390 will be paid in addition to CPT critical care codes 99291 or 
99292 when reported on the same date of service.
    Comment: One commentor had concerns about the requirement that 
hospitals mu