TRICARE; Reimbursement of Ambulatory Surgery Centers and Outpatient Services Provided in Cancer and Children's Hospitals, 19844-19856 [2023-06452]

Agencies

• DEPARTMENT OF DEFENSE
• Office of the Secretary

[Federal Register Volume 88, Number 64 (Tuesday, April 4, 2023)]
[Rules and Regulations]
[Pages 19844-19856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06452]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 199

[Docket ID: DOD-2019-HA-0056]
RIN 0720-AB73


TRICARE; Reimbursement of Ambulatory Surgery Centers and 
Outpatient Services Provided in Cancer and Children's Hospitals

AGENCY: Office of the Secretary, Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: The DoD is amending TRICARE reimbursement of ambulatory 
surgery centers (ASCs) and outpatient services provided in Cancer and 
Children's Hospitals (CCHs). These amendments are in accordance with 
the TRICARE statute that requires TRICARE's payment methodologies for 
institutional care be determined, to the extent practicable, in 
accordance with the same reimbursement rules as apply to payments to 
providers of services of the same type under Medicare. In accordance 
with this requirement, TRICARE finalizes the adoption of Medicare's 
payment methodology for ASCs, and adoption of Medicare's payment 
methodology for outpatient services provided in CCHs as set forth in 
this final rule.

DATES: This rule is effective 180 October 1, 2023.

FOR FURTHER INFORMATION CONTACT: Jahanbakhsh Badshah, Defense Health 
Agency, 303-676-3881.

SUPPLEMENTARY INFORMATION: 

I. Discussion of Public Comments and Changes

    On Friday, November 29, 2019 (84 FR 65718-65727), the Department of 
Defense published a proposed rule titled ``TRICARE; Reimbursement of 
Ambulatory Surgery Centers and Outpatient Services Provided in Cancer 
and Children's Hospitals'' for a 60-day public comment period. Eleven 
public comments were received. This section responds to those public 
comments.

1. General Comments on Reimbursement, Access to Care, and Difference in 
Beneficiary Population for Ambulatory Surgery Centers (ASCs)

    Comment: Several commenters expressed concern that this change in 
reimbursement methods and rates might lead to access to care issues 
because providers might opt out of providing services because the 
Medicare rate is lower than the previously paid TRICARE rates. One 
commenter urged the Defense Health Agency (DHA) to ``take a more 
granular examination of changes in reimbursement that will occur as the 
result of the proposed alignment and take steps to ensure that any 
procedures that are being performed in significant volume in ASCs do 
not experience a reduction in reimbursement.'' Another commenter 
recommended that DHA should not adopt the Medicare ASC fee schedule 
(FS) because Medicare patients have different needs from those seen 
under TRICARE. The commenter requested DHA to consider differences in

[[Page 19845]]

procedure types performed on TRICARE patients, in part because this 
commenter found that their TRICARE patients ``tend to undergo 
Orthopedic and ENT surgeries at a much higher rate than our Medicare 
patients do.''
    Response: We appreciate the commenters' concerns regarding the 
potential impact of adopting Medicare's ASC FS in the TRICARE program. 
As discussed in the notice of proposed rulemaking, we are adopting the 
Medicare ASC system because, first, TRICARE is statutorily obligated to 
reimburse like Medicare where practicable, second, the current TRICARE 
ASC system is based primarily on Medicare's retired ASC reimbursement 
system, and finally, the TRICARE rates are difficult to update and in 
some cases anomalous. The Medicare ASC rates, which TRICARE is 
adopting, are based on assessments made each year by the Centers for 
Medicare and Medicaid Services (CMS) of the appropriate level of 
reimbursement for ASCs. In contrast to adopting a system that CMS will 
update each year for the appropriate level of reimbursement for each 
ASC surgery, over one-half of the procedures under the current TRICARE 
ASC system have rates and groups based on assignments made prior to 
2001. DHA has found that TRICARE's current patchwork system can produce 
reimbursement anomalies, particularly in comparison to Medicare's ASC 
rates and Outpatient Prospective Payment System (OPPS) rates. For 
example, we compared the January 2020 TRICARE ASC rates with Medicare 
ASC rates for 40 high-volume, higher-cost procedures and found that for 
one-fifth of the cases, the Medicare ASC rate is more than 40 percent 
higher than the current TRICARE ASC rate and that in only one quarter 
of the cases are the Medicare ASC rates within 10 percent of the 
TRICARE rates. In two cases, the TRICARE ASC rate is even greater than 
the OPPS rate, which is anomalous. These anomalies would be corrected 
using the Medicare ASC rates.
    We agree with the commenter that it is important to look at the 
impact of proposed reimbursement changes for high-volume codes. DHA did 
this type of analysis prior to publishing the notice of proposed 
rulemaking and we have now used data from 2019 to examine the impact of 
reimbursement changes on high-volume ASC procedures as suggested by the 
commenter. We selected all TRICARE ASC procedures with 660 or more 
claims in the January-June 2019 period plus any other procedures that 
were among the highest 10 in terms of TRICARE ASC allowed amounts in 
2019. The combined group of 40 high-volume, high-cost surgical 
procedures accounted for over 71 percent of all TRICARE ASC surgery 
claims and 63 percent of all TRICARE ASC allowed amounts in the 
January-June 2019 period.
    We found that the maximum allowable Medicare ASC rates in January 
2020 were higher than the current TRICARE ASC rates for almost half (43 
percent) of the 40 high-volume, high cost procedures, including 3 of 
the 6 highest-volume TRICARE ASC surgeries. We also found that the 
Medicare rates for an additional one-eighth of the 40 procedures had 
Medicare ASC rates that were only slightly less (0 to 9 percent) than 
the current TRICARE ASC rates. On average, the Medicare rates for the 
40 high-volume, high-cost procedures were 14 percent lower than the 
January 2020 TRICARE ASC rates. Thus, we were re-assured that for over 
half of the high-volume, high-cost procedures, the Medicare rates will 
represent either an increase or a small decrease compared with the 
TRICARE ASC rates.
    We disagree with the commenter that DHA should ensure that none of 
the high-volume procedures experience a reduction in reimbursement 
rates. Even though there will be an overall reduction in TRICARE 
reimbursement rates, many codes will have higher rates and the benefits 
of adopting an updated, internally-consistent reimbursement system 
outweigh the disadvantages of reduced rates for some ASC surgeries. In 
addition, it is not practical for DHA to have TRICARE pay different 
amounts for procedures in ASCs compared to Medicare solely because a 
procedure is common.
    We also disagree with the comment that Medicare ASC rates are not 
appropriate for TRICARE patients because the patients have different 
needs. First, the TRICARE population is generally younger and healthier 
on average than Medicare patients. Second, DHA has already adopted the 
use of the Medicare OPPS and the Medicare Physician Fee Schedule, with 
Medicare rates, and Medicare's ASC FS rates are simply a hybrid of 
those two systems' rates. Furthermore, many of the procedures that DHA 
has added to the TRICARE ASC FS in the last few years were priced based 
on the Medicare ASC FS rate. Fourth, there is nothing unique about 
freestanding ASCs that make Medicare rates inappropriate due to 
beneficiary characteristics compared to those payment systems. Fifth, 
we have no evidence that the Medicare ASC rates are too low because 
TRICARE beneficiaries generally do not require more costly care than 
Medicare beneficiaries. Sixth, the fact that a procedure is more common 
in one population than another does not, in itself, argue for different 
payment rates because procedures are billed by specific Common 
Procedural Terminology (CPT) code. As the commenter suggested, we did 
examine the change in maximum reimbursement rates for ear nose and 
throat (audiology and respiratory) surgeries and orthopedic 
(musculoskeletal) surgeries. We found that almost one-quarter of the 40 
high-volume, high-cost TRICARE surgical procedures are ENT or 
orthopedic and that the maximum TRICARE reimbursement rate would 
decrease by 6 percent for ENT surgeries and by 4 percent for orthopedic 
surgeries. In comparison, the rates would decrease by an average of 14 
percent for all 40 surgeries. Thus, our analysis of the high-volume, 
high-cost procedures for TRICARE ASC patients indicates that although 
the mix of TRICARE and Medicare ASC surgeries is different, the types 
of surgeries identified by the commenter as being more common among the 
non-Medicare population will have modest reductions and smaller 
reductions than for other procedures. For all these reasons, DHA 
concludes that adopting the Medicare ASC rates is appropriate for 
TRICARE patients.

2. Non-Opioid Pain Management in ASCs

    Comment: One commenter requested that DHA evaluate including non-
opioid pain management medications in the list of covered ancillary 
services for ASC reimbursement, as Medicare did in 2019.
    Response: DHA intends to adopt Medicare's ASC FS rules, payment 
rates, and addenda, including their list of ancillary procedures 
allowed to be paid outside the packaged procedure rate (Addendum BB, 
ASC Covered Ancillary Services). Currently, as finalized in the CY 2021 
OPPS/ASC final rule (86 FR 63484), Medicare has approved four such 
substances including Exparel (C9290; Injection, bupivacaine liposome, 1 
mg), Omidria (J1097; Phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml 
ophthalmic irrigation solution, 1 ml), Zynrelef (C9088; Instillation, 
bupivacaine and meloxicam, 1 mg/0.03 mg), and Xaracoll (C9089; 
Bupivacaine, collagen-matrix implant, 1 mg). These codes can be found 
in Addendum BB of the Medicare ASC FS rule files, with a payment rate 
given.

[[Page 19846]]

3. Annual Update Factor Used for ASCs

    Comment: One commenter suggested that DHA should update the 
Medicare ASC rates for inflation using the hospital market basket 
update factor for CY 2023, not the CPI-U.
    Response: We agree with the commenter that DHA should use the 
hospital market basket adjusted for productivity update factor for CY 
2023, which aligns with Medicare and is practicable to adopt under the 
TRICARE program. The TRICARE updates will match the method that CMS 
uses each year to update the Medicare ASC rates. Therefore, we have 
revised the rule accordingly.

4. Beneficiary Copayment and Cost-Share Amounts for ASCs

    Comment: One commenter indicated that the proposed rule did not 
describe cost-sharing for ASC care under the new reimbursement 
methodology.
    Response: TRICARE's cost sharing structure varies by type of 
service (IP vs OP), type of beneficiary (active duty dependent versus 
retiree), and by type of enrollment (Prime vs. Select). The cost 
sharing for ASC care has been established by regulation and the cost 
sharing structure for ASC care will not be affected by TRICARE's 
adoption of the Medicare ASC rates. Most active duty family members in 
Prime pay no cost sharing for ASC care and those enrolled to Select 
generally pay $25 per surgery. Most retirees and their family members 
in Prime pay $67 per surgery (in 2022) and most Select enrollees pay 20 
percent of the allowed amount for in-network ASC care and 25 percent of 
the allowed amount for out-of-network ASC care. Given that there will 
be a reduction in TRICARE allowed amounts under the Medicare ASC rates, 
most TRICARE retirees enrolled in Select will see reduced cost sharing, 
another benefit of adopting the new ASC system.

5. Maintain Current Exclusion of CCHs From OPPS

    Comment: One commenter stated that the adoption of OPPS 
reimbursement for CCHs will have an undesirable financial impact on 
their Children's hospital and other Children's Hospitals that serve 
large TRICARE populations. Their concerns include that Medicare 
payments have been historically below cost, and that changes to the 
TRICARE fee structure, when combined with Medicare's rates, pose a 
significant threat to their ability to service military families. The 
suggestions ranged from continuing to reimburse Children's Hospitals at 
billed charges or ``grandfathering'' certain facilities that are in 
close proximity to military bases that treat a disproportionate share 
of TRICARE beneficiaries.
    Response: DHA agrees that some children's hospitals will have 
reduced TRICARE payments due to the rule's provisions although DHA's 
analysis also indicates that some children's hospitals will see large 
increases in their TRICARE payments.
    The proposed rule contained a provision for a General Temporary 
Military Contingency Payment Adjustment (GTMCPA) which will allow 
children's hospitals and cancer hospitals that meet certain criteria to 
receive additional payments for services which will be paid under OPPS. 
The criteria will not be based on criteria similar to those specified 
under TRICARE's OPPS for GTMCPAs. These criteria, which have been 
tailored for CCHs, will include: (1) 10 percent or more of the 
hospital's revenue is from TRICARE for care of ADSMs/ADDs; (2) the 
hospital having 10,000 or more TRICARE visits that would fall under the 
OPPS payment system for ADSMs/ADDs annually; and (3) the hospital being 
deemed as essential for TRICARE operations. Hospitals that meet these 
criteria will be eligible to receive up to 115 percent of the 
hospital's costs for OPPS services. These provisions can be implemented 
for children's hospitals without jeopardizing access for TRICARE 
beneficiaries, because of the ability of children's hospitals to apply 
for a GTMCPA.

6. Transition Period for ASCs

    Comment: Several commenters remarked that the lack of a transition 
period between the current TRICARE ASC reimbursement and the adoption 
of the Medicare rates may mean that there would be an immediate access 
to care effect, exacerbated by the abrupt change in fees. One commenter 
suggested a three year transition period, to allow ASCs time to adjust 
to the new rates. Another commenter suggested that without a 
transition, some beneficiaries would be forced to use higher-cost 
options, such as hospital outpatient departments, which would reduce 
DHA's expected savings from adopting the new ASC rates.
    Response: DHA is adopting the new ASC reimbursement system to be 
consistent with Medicare's, as required by statute, which states that 
TRICARE institutional service payments shall be determined to the 
extent practicable in accordance with the same reimbursement rules as 
apply under Medicare. DHA has concluded that it is practicable for 
TRICARE to adopt Medicare's ASC rates. DHA is not adopting the Medicare 
ASC rates in order to reduce TRICARE costs. DHA recognizes that there 
will be both increases and decreases in TRICARE maximum allowed amounts 
using the Medicare ASC rates. Although DHA expects a decrease in total 
TRICARE payments for ASCs, DHA also expects that these savings would be 
reduced if TRICARE beneficiaries increase their use of hospital 
outpatient departments (HOPDs).
    As noted in the proposed rule, DHA considered a transition period 
but decided against one because the overall impact of the new system is 
small (for the 40 high-volume, high-cost procedures a reduction of 14 
percent) and because there are many ASC procedures that will have rate 
increases under the new Medicare ASC system (over 40 percent of the 
high-volume surgeries). In addition, DHA has reviewed carefully 
Medicare Payment Advisory Committee (MedPAC's) most recent assessment 
of Medicare's ASC rates. The March 2022 MedPAC report to Congress found 
that there has been growth in the number of ASCs and that the number of 
Medicare beneficiaries using ASCs had increased from 2015 to 2019, 
which MedPAC states are both indicators of adequate access to ASCs. 
MedPAC also found in its March 2022 report that ASCs had adequate 
access to capital. As a result, MedPAC concluded that access to ASCs 
was adequate and that indicators of payment adequacy for ASCs were 
positive. Given that TRICARE will be adopting the Medicare ASC rates, 
DHA finds MedPAC's conclusions to be particularly relevant to issues of 
access and payment adequacy.
    DHA also notes that even if some ASCs denied access to TRICARE 
beneficiaries for some surgeries, TRICARE beneficiaries would be 
largely protected from access problems because these patients could 
have their surgeries performed in HOPDs.
    One commenter argued that a transition period would allow ASCs a 
chance to budget for the rate decreases and potential revenue loss. 
However, since rates will be decreased by a modest amount (14 percent 
for the 40 high-volume, high-cost surgeries) and because TRICARE 
beneficiaries are typically a small percentage of ASCs total revenue, 
as evidenced by the fact that 2019 TRICARE payments to ASCs 
(approximately $250 M) were less than 5 percent of the 2019 Medicare 
payments to ASCs ($5.2B), we have determined that a transition is not 
warranted. The TRICARE updates will match the method that CMS uses each 
year to update the Medicare ASC rates.

[[Page 19847]]

In addition, as noted above, the rates for almost half the high-volume 
ASC surgeries will increase under the Medicare ASC rates. A transition 
would mean that the full rate increases would not go into effect for a 
number of years.

7. Exemption of Common Procedural Terminology (CPT) Code 41899 for ASCs

    Comment: Several commenters suggested that DHA should maintain CPT 
code 41899 (unlisted dentoalveolar structures) in the TRICARE ASC fee 
schedule, even though it is not payable under Medicare's ASC fee 
schedule. Commenters added that dental procedures are commonly 
performed on TRICARE beneficiaries and are needed for TRICARE's 
pediatric population with special needs, who may require anesthesia 
when undergoing dental procedures. One commenter expressed concerns 
that removing CPT code 41899 from the TRICARE ASC fee schedule will 
result in TRICARE beneficiaries losing access to this code, without 
providing any explanation.
    Response: While DHA intends to adopt Medicare's ASC payment rules, 
to the extent practicable, we do recognize that in the case of dental 
care, an exception may be required, as Section 702 of the John Warner 
National Defense Authorization Act (NDAA) for Fiscal Year 2007 provides 
that, institutional and anesthesia services may be covered for both 
hospital and in-out surgery settings related to dental care for 
pediatric and certain other patients. Generally, Medicare does not pay 
for unlisted procedure codes in a freestanding ASC according to 42 CFR 
416.166(c), because CMS must ensure that procedures allowed in an ASC 
are not a safety risk and that a patient would not typically be 
required to stay overnight or have active medical monitoring. However, 
we recognize that CPT 41899 is commonly utilized to bill for the 
facility fees associated with dental care for pediatric and certain 
other patients, who may require anesthesia during dental procedures. We 
agree that CPT 41899 is appropriate in an ASC setting and we have added 
this exception to the ASC list of covered surgical procedures, in 
accordance with Section 702 of NDAA for Fiscal Year 2007. For covered 
dental services as defined in Sec.  199.4 of this part, this rule will 
permit reimbursement for the ASC facility fee for dental procedures 
that are excluded from Medicare's ASC list, such as CPT 41899 
(including subsequent codes, if renumbered or renamed). The TRICARE 
payment for such covered dental procedures without an ASC rate would be 
based on the same rate under the TRICARE OPPS. DHA will not maintain a 
separate ASC list to accommodate this exception; instead the TRICARE 
contractors will be instructed to reimburse the procedure code at the 
OPPS rate. This approach ensures access in freestanding facilities 
while implementing a practicable solution to accommodate the needs of 
our younger population.

II. Summary of Changes From Proposed Rule

    In this final rule, after consideration of public comments, we are 
revising our proposed rule and adopting the method that CMS uses each 
year to update the Medicare ASC reimbursement rates to update the 
TRICARE ASC payment system, instead of specifying a specific method, 
such as consumer price index for all urban consumers (CPI-U). We are 
also revising the criteria for CCHs to apply for the GTMCPA. 
Clarifications have been made regarding DHA's intention to reimburse 
like Medicare, where practicable.
    We are making changes to the ASC provider participation agreement, 
adding a new ``hold harmless'' provision under Sec.  
199.6(b)(4)(x)(B)(1)(ii) and (iii) that will prohibit ASC facilities 
from billing TRICARE beneficiaries for non-covered procedures, unless 
the beneficiary agreed in advance in writing to pay for the services. 
The advanced notice would inform TRICARE beneficiaries about potential 
costs prior to receiving services, which will protect beneficiaries 
from unintended liability. Incorporating the ``hold harmless'' 
provision is appropriate because providers have a responsibility of 
knowing whether specific services or items are covered, as required by 
Sec.  199.6(a). Providers seeking authorized provider status and 
payment from the Federal Government through programs such as TRICARE 
have a responsibility to familiarize themselves with, and comply with 
program requirements. Therefore, the provider should be held 
financially responsible for failing to properly inform TRICARE 
beneficiaries about patient costs before services are rendered. While 
the ASC facility charges would be denied, the professional charges for 
the non-ASC procedure or service could potentially be reimbursed.
    Corrections have been made to the regulations text at Sec.  
199.14(a)(6)(ii) to reflect the current version of the regulation, 
because the proposed rule used an older version. Therefore, we are only 
revising the current version of Sec.  199.14(a)(6)(ii)(A) to 
specifically include CCHs as being added to the OPPS controlled 
reimbursements, as they have been excluded to date; we are revising 
Sec.  199.14(a)(6)(ii)(E) to specifically exclude CCHs from the any 
Temporary Transitional Payment Adjustments (TTPAs) under Sec.  
199.14(a)(6)(ii)(E)(1) and (2); we are revising Sec.  
199.14(a)(6)(ii)(E)(3) to specifically name the additional available 
military contingency payment adjustment as a ``general temporary 
military contingency payment adjustment (GTMCPA)'' to further 
distinguish it from the TTPAs, and have added specific criteria for 
CCHs to qualify for GTMCPA; and, we are inserting a new Sec.  
199.14(a)(6)(ii))(E)(4) which provides CCHs with annual hold-harmless 
adjustments to OPPS payments. Finally, we have permitted a limited 
exception to allow payment for covered dental care by revising Sec.  
199.14(d) to address how covered dental procedures will be reimbursed 
in the absence of a Medicare ASC payment rate. All other aspects of the 
proposed rule remained the same.

III. Executive Summary

A. Purpose of the Final Rule

    The purpose of this rule is to finalize TRICARE regulation 
modifications necessary to implement for Ambulatory Surgery Centers 
(ASC) and Cancer and Children's Hospitals (CCHs) the statutory 
requirement that payments for TRICARE institutional services ``shall be 
determined to the extent practicable in accordance with the same 
reimbursement rules as apply to payments to providers of services of 
the same type under [Medicare].'' Although Medicare's reimbursement 
methods for ASC and CCHs are different, it is prudent to finalize 
adopting both the Medicare ASC system and the Outpatient Prospective 
Payment System (OPPS) with hold-harmless adjustments (meaning the 
provider is not reimbursed less than their costs) for CCHs 
simultaneously to align with our statutory requirement to reimburse 
like Medicare at the same time. This rule sets forth the regulatory 
modifications necessary to implement TRICARE reimbursement 
methodologies similar to those applicable to Medicare beneficiaries for 
outpatient services rendered in ASCs and cancer and children's 
hospitals.
    1. TRICARE is adopting the Medicare reimbursement methodology for 
ASCs. Currently, TRICARE reimburses surgical services performed in 
TRICARE authorized ambulatory surgery settings (i.e., freestanding ASCs 
and other TRICARE providers exempt from the TRICARE OPPS reimbursement 
methodology including cancer and children's hospitals) institutional

[[Page 19848]]

facility costs on the basis of prospectively determined amounts, in 
accordance with 32 Code of Federal Regulations (CFR) 199.14(d). The 
current system was modeled after Medicare's previous ASC reimbursement 
system. TRICARE's current reimbursement system for services provided in 
these ambulatory surgery settings is based on Medicare's retired 
system, and is difficult to update. Adoption of Medicare's ASC 
reimbursement system will bring TRICARE reimbursement for ambulatory 
surgery care into alignment with the statutory requirement that payment 
methods for institutional care be, to the extent practicable, in 
accordance with the same reimbursement rules used by Medicare.
    2. TRICARE is adopting the Medicare payment methodology for 
outpatient services provided in CCHs. In a final rule, published 
December 10, 2008, (73 FR 74945-74966), TRICARE adopted Medicare's 
payment methodology for outpatient hospital services-the Outpatient 
Prospective Payment System (OPPS). Under Medicare, CCHs were held 
harmless and were paid the full amount of the decrease they experienced 
(as prior to OPPS the hospital had been paid 100 percent of their 
costs) after the implementation of OPPS, under section 1833(t) (7) of 
the Social Security Act. These payments are transitional outpatient 
payments (TOPs). Because of the complexity and because of the 
administrative burden/expense of calculating and maintaining the TOPs, 
TRICARE opted to totally exempt CCHs from OPPS initially. The agency is 
now revisiting the exemption of CCHs from OPPS. In this final rule, 
TRICARE is adopting the Medicare methodology for reimbursement of 
outpatient facility services (including ambulatory surgery) rendered in 
a cancer or children's hospital, with modifications to address the 
administrative burden and complexity. The DHA now has the capability, 
and it is feasible, to adopt these reimbursement provisions with a 
modification that the hold-harmless provisions will be calculated and 
paid annually, rather than in monthly interim payments.

B. Summary of the Major Provisions of the Final Rule

    1. Adopting Medicare's Ambulatory Surgical Center Reimbursement 
System for TRICARE Authorized Ambulatory Surgery Centers. Per Title 10 
United States Code (U.S.C.), section 1079(i) (2), TRICARE's payment 
methods for institutional care shall be determined, to the extent 
practicable, in accordance with the same reimbursement rules used by 
Medicare. Under this final rule, TRICARE will reimburse ASCs for 
ambulatory surgical services using a method similar to Medicare's ASC 
reimbursement methodology. Under the TRICARE ASC reimbursement method, 
payment for a TRICARE patient will be made at the lower of the billed 
charge or the Medicare-determined ASC payment rate with applicable 
TRICARE cost-sharing provisions. The TRICARE ASC reimbursement method 
would include payment for all facility services associated with the 
surgical procedure that are included in the payment methodology by 
Medicare, but would exclude certain services also excluded by Medicare 
under the ASC reimbursement methodology (e.g., certain ancillary 
services and implantable devices with pass-through status).
    2. Adopting Medicare's Outpatient Prospective Payment System (OPPS) 
for Cancer and Children's Hospitals. In a final rule, dated December 
10, 2008 (73 FR 74945-74966), TRICARE adopted Medicare's payment 
methodology for outpatient hospital services--the outpatient 
prospective payment system (OPPS). Under Medicare, CCHs were held 
harmless and were paid the full amount of the decrease they experienced 
after the implementation of OPPS, under section 1833(t) (7) of the 
Social Security Act. These payments are transitional outpatient 
payments (TOPs). Because of the complexity and because of the 
administrative burden/expense of calculating and maintaining the TOPs, 
TRICARE opted to totally exempt CCHs from the TRICARE OPPS 
reimbursement methodology initially.
    Ten years after the implementation of OPPS, the agency is now 
revisiting the exemption of cancer and children's hospitals from OPPS. 
This final rule with comment period finalizes the adoption of the 
Medicare methodology for reimbursement of outpatient facility services 
rendered in a cancer or children's hospital, with modifications to 
address the administrative burden and complexity that initially led the 
agency to exclude these facilities from OPPS. DHA now has the 
capability, and it is feasible, to adopt Medicare's reimbursement 
provisions with two modifications: (1) that the hold-harmless 
provisions will be calculated annually, rather than in monthly interim 
payments; and (2) that the agency will use the hospital's cost-to-
charge ratio (CCR) rather than the payment-to-cost ratio. With adoption 
of OPPS for cancer and children's hospitals, these institutions will no 
longer be considered TRICARE ambulatory surgery sites for application 
of the TRICARE ASC reimbursement methodology.
    3. Transition Period. When implementing the ASC fee schedule, 
Medicare included a four-year transition which blended the payment 
rates of the old methodology with the new for those procedures that 
were paid under both methods. We evaluated the feasibility of including 
a similar transition, where, the TRICARE-allowed amount would be 75 
percent of the old rate and 25 percent of the new rate in year one; 50 
percent of the old rate and 50 percent of the new rate in year two; and 
25 percent of the old rate and 75 percent of the new rate in year 
three. In the fourth year the rate would be 100 percent of the new 
rate. However, many of the services reimbursed under TRICARE's current 
ASC reimbursement methodology have lower rates under Medicare, so 
providers would have to wait for higher reimbursements under the new 
system.
    Therefore, we are finalizing a no transition period for the 
implementation of the ASC reimbursement system. Some providers may see 
substantialincreases in reimbursement, and a transition period would 
not be beneficial for these providers. Additionally, because 
alternative locations are available for these services (e.g., Hospital 
Outpatient Departments), concerns regarding access to care are 
unfounded.
    Similarly, we are finalizing no transition period for cancer and 
children's hospitals, with the rationale that providers will be held 
harmless under this reimbursement system. CCHs will receive, at a 
minimum, one hundred percent of their costs, or the OPPS payment, 
whichever is higher. Because many CCH providers will receive payment 
increases, a transition period would not be beneficial for them.

C. Costs and Benefits

    Although this rule will be effective near fiscal year 2024, the 
overall economic impact of the rule is estimated based on an analysis 
of expected outcomes had the rule been implemented during calendar year 
(CY) 2021. Such analysis may be used to provide a reasonable estimate 
of future economic impact.
    The economic impact of adopting Medicare's payment methodology for 
ASCs is anticipated to result in total cost-savings to the DoD of 
approximately $10 million for CY 2021.
    The economic impact of the proposal to adopt OPPS for CCHs, 
including the hold harmless provisions will be reduced payments to 
these providers of

[[Page 19849]]

approximately $35 million per year if implemented in 2021.
    We estimate that the effects of the provisions that would be 
implemented by this final rule would have an impact of increased cost-
savings to the DoD of approximately $45 million, offset by an estimate 
$1.5 million in administrative costs to implement these changes.

II. Introduction and Background

1. TRICARE ASC PPS Reimbursement

A. Reimbursement
    Medicare replaced their previous ASC system on January 1, 2008. 
Medicare's reimbursement system for ASCs uses OPPS relative payment 
rates as a guide. OPPS rates are reduced by a factor to account for the 
fact that ASCs have lower overhead costs than hospitals. In 2012, 
Medicare's ASC rates averaged 61 percent of the OPPS rates paid to 
acute care hospitals for surgical procedures. Under Medicare, ASCs are 
paid the lesser of the billed charge or the standard ASC reimbursement 
rate, a method which we are finalizing under the TRICARE program.
    Under Medicare, the standard payment rate for ASC covered surgical 
procedures is calculated as the product of the ASC conversion factor 
and the ASC relative payment weight for each separately payable 
procedure or service. Payments are then geographically adjusted using 
wage-index values. Payments may also be adjusted for multiple surgical 
procedures or when surgical procedures are started and then 
discontinued.
    Like Medicare, we are finalizing our approach to make a single 
payment to ASCs for covered procedures, which includes the facility 
services furnished in connection with the covered procedure (e.g., 
nursing services, certain drugs, surgical dressings, and administrative 
services). We are also finalizing our approach to separately reimburse 
for ancillary services that are integral to a covered service (e.g., 
drugs and biologicals that are separately paid under OPPS; radiology 
services that are separately paid under OPPS; brachytherapy services; 
implantable devices with OPPS pass-through status; and corneal tissue 
acquisition), similar to Medicare. The TRICARE ASC payment system will 
not reimburse for services of individual professional providers, 
Durable Medical Equipment (DME), non-implantable prosthetics, ambulance 
services, or independent laboratory services. These services will be 
reimbursed using other payment systems, which include the CMAC, Durable 
Medical Equipment Prosthetics Orthotics and Supplies (DMEPOS) Fee 
Schedule and the Ambulance Fee Schedule. If there is no payment rate 
under the ASC reimbursement system for services that are medical in 
nature (such as office visits and diagnostic tests), the ASC will be 
reimbursed as though services were furnished in a physician's office 
utilizing the TRICARE CMAC methodology, with no additional payment for 
facility charges.
B. Definition and Requirements for Ambulatory Surgery Centers
    This regulatory action finalizes a definition for ASCs, which will 
mirror Medicare's, with exceptions made for TRICARE's pediatric 
patients. Medicare defines an ASC as, ``a distinct entity that operates 
exclusively for the purpose of furnishing outpatient surgical services 
to patients''; in this action we are finalizing our proposal to adopt a 
definition at 32 CFR 199.2 that defines ASCs as those that meet the 
definition of an ASC under 42 CFR 416.2, including the requirement that 
they must participate in Medicare as ASCs per 42 CFR 416.25, with 
exceptions for ASCs that do not have an agreement with Medicare due to 
the specialty populations they serve. Medicare also requires the 
provider to have an agreement with CMS; we are finalizing as proposed 
that in lieu of separate certification by TRICARE, the ASC will simply 
provide evidence of a valid agreement with Medicare. While the terms of 
the agreement with Medicare will not apply to TRICARE, only those 
providers with an agreement with Medicare (or those providers that meet 
certain exceptions as noted below), are eligible for reimbursement for 
ambulatory surgery services provided in ASCs. We are finalizing our 
approach to accept Medicare's determination of a facility as an ASC. If 
the facility meets the definition of an ASC at 42 CFR 416.2 and has an 
agreement with Medicare as an ASC, they will be considered a TRICARE 
authorized ASC and subject to all requirements for authorized 
institutional provider status under 32 CFR 199.6. ASCs must also enter 
into a participation agreement with TRICARE, to ensure that the ASC 
accepts the TRICARE reimbursement rate, and meets all other conditions 
of coverage. Additionally, due to the differences between the TRICARE 
and Medicare populations, there may be ASCs that specifically serve 
pediatric populations. As such, these ASCs may not routinely enter into 
agreements with Medicare. Therefore, we are finalizing the proposal to 
allow certain pediatric ASCs without a valid Medicare participation 
agreement to be eligible for reimbursement under TRICARE's ASC system, 
when such facilities are accredited by the Joint Commission, the 
Accreditation Association for Ambulatory Health Care, Inc. (AAAHC), or 
other accrediting body as authorized by the Director, DHA and published 
in the implementing instructions. Additionally, the ASC must enter into 
a participation agreement with TRICARE to receive reimbursement for 
covered services provided to TRICARE beneficiaries. This provision will 
not negatively affect access to care, as ambulatory surgery services 
are also available in hospital outpatient departments. The flexibility 
offered to pediatric specialty ASCs is sufficient to serve the unique 
needs of our patient population, while still ensuring the program 
complies with the requirements of 10 U.S.C. 1079(i). TRICARE-authorized 
pediatric ASCs will be subject to the same reimbursement system as 
finalized in this regulatory action.
    Section 32 CFR 199.6(b)(4)(x)(B)(1) currently includes specific 
requirements for ambulatory surgery centers. With this regulatory 
action, we are changing the regulations text at Sec.  
199.6(b)(4)(x)(B)(1) to state that ASCs participating in Medicare meet 
all program requirements to be an authorized TRICARE provider. However, 
for ASCs that do not participate in Medicare (due to the specialized 
nature of the patients they treat, i.e., pediatric patients) but are 
otherwise accredited by an accrediting body as approved by the 
Director, DHA, must continue to meet all the requirements stated. All 
ASCs must also enter into participation agreements with TRICARE.
C. Ambulatory Surgical Center Services List
    Medicare identifies and maintains a list of surgical procedures 
that may be performed in an ASC. This list is updated at least annually 
by Medicare. The ASC list of covered procedures indicates those 
procedures which are covered and paid for if performed in the ASC 
setting. The ASC list is comprised of those surgical procedures that 
CMS has determined do not pose a significant safety risk and are not 
expected to require an overnight stay following the surgical procedure. 
Procedures on the Medicare Hospital Outpatient Prospective Payment 
System (HOPPS) inpatient-only list (42 CFR 419.22(n)) are not eligible 
for designation and coverage as ASC surgical procedures. Procedures 
that are reported utilizing unlisted category I Current Procedural 
Technology[supreg] codes are also excluded from the ASC list. TRICARE 
is adopting

[[Page 19850]]

the Medicare ASC List, in its entirety, including any updates made by 
Medicare to the list in the future, without any deviations (except for 
certain covered dental procedures) from the ASC List, as maintained and 
updated by CMS. No separate TRICARE ASC list would be maintained; the 
TRICARE program would rely upon CMS's determinations regarding those 
procedures determined to be appropriate in an ASC setting. The 
maintenance of a separate ASC List for TRICARE is unnecessary as 
adoption of Medicare's list is practicable, and maintenance of a 
separate list would be extremely complex for the agency and providers 
to review, maintain, and update. We invited comments on this approach, 
especially from facilities that specialize in care for young adult, 
pediatric, and other specialized populations not routinely covered by 
Medicare. We reviewed procedures that would commonly be performed on 
pediatric patients and found that these were generally included on the 
Medicare ASC list. These procedures included: adenoidectomy; 
myringotomy; nasal endoscopy; tonsillectomy; circumcision; inguinal and 
umbilical hernia repair; eye muscle repair; syndactyly repair; and 
hypospadias repair. Fowler-Stephens Orchiopexy is not listed on 
Medicare's ASC list, but is priced in OPPS.
    If an ASC provides a surgical service not listed as covered on 
Medicare's ASC list, except for certain dental procedures, we are 
finalizing our proposal to deny the ASC facility charges, similar to 
Medicare. However, related professional services may be reimbursed 
utilizing TRICARE's allowable charge methodology. TRICARE finalizes the 
adoption of the Medicare requirement that facility charges may be 
reimbursed for only those services on the ``ASC List.'' We are 
confident that there will be no access to care concerns with this 
approach, as surgical care continues to be available in hospital 
outpatient departments, and in inpatient settings, as appropriate. 
However, we are allowing an exception to this list for dental 
procedures covered under Sec.  199.4 of this part, as Section 702 of 
the NDAA for Fiscal Year 2007 provides that, institutional and 
anesthesia services may be covered for both hospital and in-out surgery 
settings related to dental care for pediatric and certain other 
patients. In the case that a dental procedure is performed and the 
procedure is not listed as covered on Medicare's ASC list (e.g., CPT 
Code 41899), the TRICARE contractors may make payment for that 
procedure at the OPPS rate. For example, CPT 41899 under OPPS is 
currently assigned to ambulatory payment classification (APC) 5161, 
which has a CY 2022 base-rate of $216; therefore, TRICARE's payment in 
an ASC setting would also be $216.
D. Services Included in the ASC Payment
    We are finalizing as proposed that, like Medicare, the following 
items currently fall within the scope of ASC facility services. Future 
modifications made by Medicare to the services included in the ASC 
payment will be adopted by TRICARE in the implementing instructions. 
ASCs must incorporate charges for packaged services into the charges 
reported for the separately payable services with which they are 
provided to ensure appropriate payment.
    Covered ASC facility services include:
    (1) Nursing, technician, and related services;
    (2) Use of the facility where the surgical procedures are 
performed;
    (3) Any laboratory testing performed under a Clinical Laboratory 
Improvement Amendments of 1988 (CLIA) certificate of waiver;
    (4) Drugs and biologicals for which separate payment is not allowed 
under the hospital outpatient prospective payment system (OPPS);
    (5) Medical and surgical supplies not on pass-through status under 
subpart G of 42 CFR part 419;
    (6) Equipment;
    (7) Surgical dressings;
    (8) Implanted prosthetic devices, including intraocular lenses 
(IOLs), and related accessories and supplies not on pass-through status 
under subpart G of 42 CFR part 419;
    (9) Implanted DME and related accessories and supplies not on pass-
through status under subpart G of 42 CFR part 419;
    (10) Splints and casts and related devices;
    (11) Radiology services for which separate payment is not allowed 
under the OPPS, and other diagnostic tests or interpretive services 
that are integral to a surgical procedure;
    (12) Administrative, recordkeeping and housekeeping items and 
services;
    (13) Materials, including supplies and equipment for the 
administration and monitoring of anesthesia; and
    (14) Supervision of the services of an anesthetist by the operating 
surgeon.
    CMS may make further changes and refinements to the items included 
within the ASC reimbursement system. TRICARE will adopt all future 
modifications and refinements to this system made by CMS, unless found 
to be impracticable, as approved by the Director, DHA.
E. Covered Ancillary Items and Services
    We are finalizing our approach to allow separate payment for 
covered ancillary items and services that are integral to a covered 
surgical procedure, consistent with Medicare. CMS defines these 
services at 42 CFR 416.61.
    CMS may make further changes and refinements to the ancillary 
services that are paid separately within this reimbursement system. 
TRICARE will adopt all future modifications and refinements to this 
system made by CMS, unless found to be impracticable, as approved by 
the Director, DHA.
F. Surgical Dressings, Supplies, Splints, Casts, Appliances, and 
Equipment
    We are finalizing our approach that the TRICARE payment for 
surgical dressings, supplies, splints, casts, appliances, and equipment 
(e.g., gowns, masks) will mirror Medicare's payment. Currently, these 
items are included in the payment for the surgical procedure. TRICARE 
will adopt all future modifications and refinements to the payment for 
these supplies and equipment provided in ASCs, as made by CMS, unless 
found to be impracticable, as approved by the Director, DHA.
G. Drugs and Biologicals
    ASC facility payment for a surgical procedure includes payment for 
drugs and biologicals that are usually not self-administered and that 
are considered to be packaged into the payment for the surgical 
procedure under OPPS. Similar to Medicare, we are finalizing our 
approach to allow separate payment to ASCs for drugs and biologicals 
that are furnished integral to an ASC covered surgical procedure and 
that are separately payable under OPPS, as defined by Medicare. TRICARE 
will adopt all future modifications and refinements to the payment for 
drugs and biologicals provided in ASCs, as made by CMS, unless found to 
be impracticable, as approved by the Director, DHA.
H. Diagnostic and Therapeutic Items
    Simple diagnostic tests that are generally included in facility 
charges may be considered facility services (e.g., urinalysis, 
hematocrit levels). Diagnostic tests performed by the ASC other than 
those generally included in the facility's charge are not covered by 
this reimbursement system. ASCs with laboratories certified as 
independent

[[Page 19851]]

laboratories under Medicare may bill for tests, or alternatively, the 
ASC may make arrangements with an independent laboratory or other 
laboratory to perform the diagnostic tests it requires prior to 
surgery. Payment for these diagnostic and therapeutic items will be 
made under the existing provisions of 32 CFR 199.14. TRICARE will adopt 
all future modifications and refinements to the payment for diagnostic 
and therapeutic items provided in ASCs, as made by CMS, unless found to 
be impracticable, as approved by the Director, DHA.
I. Blood and Blood Products
    We are finalizing our approach that these items will be considered 
a facility service and no separate reimbursement will be made, similar 
to Medicare. TRICARE will adopt all future modifications and 
refinements to the payment for these blood and blood products provided 
in ASCs, as made by CMS, unless found to be impracticable, as approved 
by the Director, DHA.
J. Anesthesia
    We are finalizing as proposed that anesthetic agents that are not 
paid separately under OPPS, as well as materials necessary for 
administration will be included in the facility payment. TRICARE will 
adopt all future modifications and refinements to the payment for 
anesthesia provided in ASCs, as made by CMS, unless found to be 
impracticable, as approved by the Director, DHA.
K. Implantable Durable Medical Equipment
    We are finalizing our approach that the payment for implantable DME 
will be included in the payment for the covered surgical procedure, 
with the exception of OPPS pass-through devices which are paid 
separately. TRICARE will adopt all future modifications and refinements 
to the payment for implanted DME provided in ASCs, as made by CMS, 
unless found to be impracticable, as approved by the Director, DHA.
L. Intraocular Lenses (IOL) and New Technology IOLs (NTIOL)
    This final rule finalizes the adoption of Medicare's payment 
provisions for IOLs and NTIOLs provided during or subsequent to 
cataract surgery in ASCs. As such, the payment for IOLs will be 
included in the ASC payment for the associated surgical procedure, 
except for NTIOLs designated by Medicare, and covered by TRICARE. 
NTIOLs may be subject to a payment adjustment, as determined by 
Medicare, and adopted by TRICARE. TRICARE will adopt all future 
modifications and refinements to the payment for IOLs and NTIOLs 
provided in ASCs, as made by CMS, unless found to be impracticable, as 
approved by the Director, DHA.
M. Payment for ASC Facility Services
    We are finalizing our approach to make a single payment to ASCs for 
covered procedures, which will include the facility services furnished 
in connection with the covered procedure (e.g., nursing services, 
certain drugs, surgical dressings, and administrative services), when 
the services are rendered by a provider described in the finalized 
definition of an ASC in 32 CFR 199.2. This payment will be the lower of 
the ASC payment rate or the billed charge. We are finalizing our 
approach to adopt the Medicare ASC payment rates, without making any 
TRICARE-specific adjustments or modifications to Medicare rates.
    We are finalizing our approach to allow separate payment for 
ancillary services that are integral to a covered service (e.g., drugs 
and biologicals that are separately paid under OPPS; radiology services 
that are separately paid under OPPS; brachytherapy services; 
implantable devices with OPPS pass-through status; and corneal tissue 
acquisition). Like OPPS, payment under this system will not include 
reimbursement for services of individual professional providers, DME, 
non-implantable prosthetics, ambulance services, or independent 
laboratory services. These services will be reimbursed using other 
payment systems like the Medicare Physician Fee Schedule (similar to 
CHAMPUS Maximum Allowable Charges, or CMAC), DMEPOS Fee Schedule, and 
the Ambulance Fee Schedule.
    We are also finalizing our proposal that covered ancillary services 
(including OPPS pass-through devices) that are contractor-priced under 
Medicare's ASC reimbursement system will be priced under TRICARE 
utilizing the allowable charge methodology for procedures paid outside 
of the OPPS under 32 CFR 199.14(j)(1).
    Some items are paid the same amount in ASCs as they are paid under 
OPPS. These items include drugs and biologicals paid separately under 
OPPS when they are integral to covered surgical procedures and 
brachytherapy sources where prospective rates are available. Corneal 
tissue acquisition payment is based on acquisition cost or invoice.
    The actual payment to ASCs requires a comparison between billed 
charges and the ASC payment rate for each separately payable procedure 
and service. Reimbursement is based on the lower of the ASC payment 
rate or the billed charge. Ancillary services should be billed on the 
same claim as the related ASC procedure. Should Medicare modify this 
process in the future, TRICARE will adopt all modifications, unless 
deemed to be impracticable, as approved by the Director, DHA.
N. Wage Adjustments and Labor Share
    We are finalizing as proposed that the labor related adjustments to 
the ASC payment rates will be based on Medicare's methodology, 
currently the Core-Based Statistical Area methodology. The adjustment 
for geographic wage variation will be made based on a 50 percent labor 
share, subject to change by CMS. There is no adjustment for geographic 
wage differences for: corneal tissue acquisition; drugs and devices 
with pass-through status under OPPS; brachytherapy sources; payment 
adjustment for NTIOLs; and separately payable drugs and biologicals. We 
are adopting this methodology, as well as any future refinements or 
adjustments made by Medicare to the labor-related share, the items and 
services subject to wage adjustments, and the methodology by which wage 
adjustments are made, unless determined to be impracticable by the 
Director, DHA.
O. Annual Adjustments
    Since CY 2012, Medicare has applied an annual update to ASC 
payments based on the CPI-U reduced by the productivity adjustment. The 
proposed rule planned to adopt these annual updates. However, effective 
for CY 2019 through CY 2023, Medicare adopted the hospital market 
basket update reduced by the productivity adjustment to update ASC 
payments. DHA will adopt the update factors used in the Medicare ASC 
rates each year.
P. Payment for Terminated Procedures
    This final rule with comment period finalizes the adoption of 
Medicare's payment provisions for terminated procedures, as well as the 
adoption of all future refinements and adjustments. Currently, this 
process is as follows:
    1. Payment will be denied when an ASC submits a claim for a 
procedure that is terminated before the patient is taken into the 
treatment or operating room.
    2. Payment will be made at 50 percent of the rate if a surgical 
procedure is terminated due to the onset of medical complications after 
the patient has been prepared for surgery and taken to the

[[Page 19852]]

operating room but before anesthesia has been induced or the procedure 
initiated.
    3. Full payment will be made for a surgical procedure if a medical 
complication arises which causes the procedure to be terminated after 
anesthesia has been induced or the procedure initiated.
Q. Payment for Multiple Procedures
    We are finalizing the adoption of Medicare's payment provisions for 
multiple procedures, as well as the adoption of all future refinements 
and adjustments. When multiple procedures are performed in the same 
operative session that are subject to the multiple procedure discount, 
100 percent of the highest paying surgical procedure on the claim is 
paid, plus 50 percent of the applicable payment rates for the other ASC 
covered surgical services. In determining the ranking of the procedures 
for the discounting, the lower of the billed charge or the ASC payment 
amount will be used.
R. Offset for Payment for Pass-Through Devices
    The ASC payment may be reduced for certain procedures when provided 
in conjunction with a specific pass-through device. We are finalizing 
our proposal to adopt this methodology, and accept the code pairs as 
assigned and updated by CMS, as well as any other future refinements or 
adjustments to this methodology.
S. Payment for Devices Furnished With No Cost or Full or Partial Credit
    Reduced payments are made for certain procedures when a specified 
device is furnished without cost or for which either a partial or full 
credit is received (e.g., device recall). We are finalizing as proposed 
to adopt this methodology as well as any other future refinements or 
adjustments to this methodology.
T. Payment for Non-ASC Services
    ASCs may furnish and be paid under alternate established 
reimbursement methodologies for services not considered ASC facility 
services. For example, ASCs may be reimbursed the CMAC rate for a 
physician office visit; facility charges are not allowed. If there is 
no ASC payment for services that are medical in nature (such as office 
visits and diagnostic tests), the ASC is reimbursed as though the 
service was performed in a physician's office, with no additional 
payment for facility charges. Surgical services that do not have an 
established reimbursement rate under this system may not be reimbursed 
in an ASC setting.
U. Transitions
    We are finalizing as proposed, no transition period, since many 
providers will see increases in payments under this reimbursement 
methodology.
V. ASC Quality Report Program and Value Based Purchasing
    Medicare utilizes the ASC Quality Reporting program (ASCQR), under 
which ASCs must submit data on quality measures to receive the full 
payment update each year. ASCs that do not submit the required data 
have their payment update reduced by 2 percent. Performance on these 
measures does not impact ASC payments. For 2016, the measures included:

 ASC-1 Patient Burn
 ASC-2 Patient Fall
 ASC-3 Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, 
Wrong Implant
 ASC-4 Hospital Transfer/Admission
 ASC-5 Prophylactic Intravenous (IV) Antibiotic Timing
 ASC-6 Safe Surgery Checklist Use
 ASC-7 ASC Facility Volume Data on Selected ASC Surgical 
Procedures
 ASC-8 Influenza Vaccination Coverage among Healthcare 
Personnel

    Medicare contracts with outside entities to collect this quality 
data. Because the TRICARE program represents a small fraction of the 
ASC services rendered as a whole, we are finalizing our proposal to 
provide the full ASC update to all ASCs, regardless of whether they 
report quality data. Collecting information regarding which ASCs report 
quality data and which do not, and building that information into the 
reimbursement system in a timely manner will be impracticable for the 
program. However, TRICARE may utilize this data, which is publicly 
reported at data.medicare.gov, for future initiatives related to 
reimbursement for ASCs. The ASCQR may lead to a value based purchasing 
(VBP) program for ASCs in the future; however, there were no specific 
proposals in Medicare's most recent ASC final rule (2016). TRICARE will 
adopt reimbursement modifications to the ASC reimbursement system 
related to VBP, if determined to be practicable by the Director, DHA. 
Such changes will be incorporated into the implementing instructions, 
as appropriate.

2. Adopt Medicare's Payment Methodology for Outpatient Services 
Provided in Cancer and Children's Hospitals

A. Reimbursement
    This final rule implements the adoption of Medicare's reimbursement 
methodology for outpatient services rendered in cancer and children's 
hospitals, with modifications made due to the administrative complexity 
of the Medicare system, as well as finalizes a combined OPPS and cost-
reimbursement system. We are finalizing as proposed to pay these 
hospitals under TRICARE's existing OPPS, and then reimburse the 
hospitals the higher of the OPPS payment or one hundred percent of the 
hospital-specific costs for those same services, based on the hospital-
specific outpatient cost to charge ratio (CCR), through an annual 
adjustment. We are also finalizing as proposed to change the 
regulations text at Sec.  32 CFR 199.14(a)(6) to include cancer and 
children's hospitals as providers subject to OPPS, and will further 
describe how these providers will be held harmless under the finalized 
methodology.
B. Hospitals Subject to This Proposed Reimbursement System
    We are finalizing our proposal that cancer and children's hospitals 
that were specifically excluded in TRICARE's OPPS final rule at 73 FR 
74945, and are currently held harmless from OPPS under Medicare, will 
be subject to the provisions of this final rule.
C. Transitional Outpatient Payments
    While Medicare provides reimbursement through TOPs for the 
difference between OPPS and hospital-specific costs on a monthly basis, 
we are finalizing our approach to make these payments on an annual 
basis. This approach reduces the administrative complexity of the 
system and makes the system practicable to adopt for TRICARE's 
comparatively smaller beneficiary population. A precedent can be found 
in TRICARE's implementation of the reimbursement system for SCHs; the 
TRICARE contractors perform a year-end comparison of the primary 
methodology with the Diagnosis Related Group (DRG)-based payment 
methodology, and provide reimbursement where the DRG-based payment 
amount would have been higher than the primary methodology.
    Additionally, Medicare holds CCHs harmless by calculating their 
pre-Balanced Budget Act (BBA) amount. The pre-BBA amount is an estimate 
of

[[Page 19853]]

what the provider would have been paid during the CY for the same 
services under the Medicare system that was in effect prior to OPPS. 
This amount is calculated by multiplying the provider's payment-to-cost 
ratio (PCR), based on the provider's base year cost report (generally 
CY 1996), times the reasonable costs the provider incurred during a 
calendar year to furnish the services that were paid under the OPPS. 
However, we are finalizing as proposed to simply hold the hospital 
harmless based on their costs; with costs defined as the product of 
multiplying the hospital's total charges for covered OPPS services for 
a twelve-month period by the hospital-specific outpatient CCR. This 
modification still holds the hospital harmless and ensures payment at 
costs, and is also practicable to adopt for TRICARE's comparatively 
smaller beneficiary population, and addresses issues of administrative 
complexity which led the agency to exempt CCHs in the original 
implementation of OPPS. Additionally, for cancer hospitals, Medicare 
has adopted an additional adjustment, mandated by the Patient 
Protection and Affordable Care Act (PPACA), which applied an additional 
payment adjustment to account for higher costs incurred by cancer 
hospitals. Because TRICARE is not subject to the PPACA and due to the 
administrative complexity of the calculation, we are not adopting this 
additional adjustment to adjust for the average payment-to-cost ratio 
for cancer hospitals.
    For cancer and children's hospitals, we are finalizing the annual 
process as follows:
    Step One: Identify the costs of the hospital by multiplying the 
total billed charges for OPPS services on claims paid during the 12-
month period by the most-recent hospital-specific outpatient CCR.
    Step Two: Add together total TRICARE payments, cost-shares, and 
deductibles applied for all Ambulatory Payment Classifications (APCs), 
as well as outlier payments and transitional pass-through payments for 
drugs, biologicals and/or devices for those same claims paid during the 
year as those in Step One. If the result of Step 2 is greater than Step 
1, no payment is warranted because the hospital was reimbursed more 
from OPPS than their costs. If the result of Step 2 (OPPS payments) is 
less than Step 1 (hospital's costs), the hospital will be issued a 
payment equal to 100% of the difference between the hospital's costs 
and actual payments.
    Adjustments may be made in subsequent years for claims not 
processed to completion. The implementing instructions will contain the 
full instructions for calculation and payment of hold-harmless 
payments.
D. Transitions
    We are finalizing as proposed, no transition period, as providers 
will be held harmless. Generally transitions are performed when 
providers may be exposed to payments that are below their costs; 
however, through the annual adjustments, providers are assured that 
they will receive reimbursements for their costs.
E. General Temporary Military Contingency Payment Adjustments (GTMCPA)
    Under this system, at the discretion of the Director, DHA, CCHs may 
be eligible for GTMCPAs that will ensure network adequacy during 
military contingency operations, in accordance with the implementing 
instructions issued by the Director, DHA. These GTMCPAs will be issued 
in the same manner as those that are made currently under TRICARE's 
OPPS.
    The criteria for applying for the GTMCPA, which have been tailored 
for CCHs, will include: (1) 10 percent or more of the hospital's 
revenue is from TRICARE for care of ADSMs/ADDs; (2) having 10,000 or 
more TRICARE visits that would fall under the OPPS payment system for 
ADSMs/ADDs annually; and (3) being deemed as essential for TRICARE 
operations. Hospitals that meet these criteria will be eligible to 
receive up to 115 percent of the hospital's costs for OPPS services.

III. Regulatory Analyses for ASCs, Cancer, and Children's Hospitals

Executive Order 12866 and Executive Order 13563

A. Overall Impact

    DoD has examined the impacts of this final rule as required by 
Executive Orders 12866 (September 1993, Regulatory Planning and 
Review), 13563 (January 18, 2011, Improving Regulation and Regulatory 
Review); the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354); the 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
    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated as a ``not significant'' 
regulatory action, and not economically significant, under section 3(f) 
of Executive Order 12866. Accordingly, the rule has not been reviewed 
by the Office of Management and Budget (OMB) under the requirements of 
these Executive Orders.
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. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. For purposes of the RFA, hospitals are 
considered to be small entities, either by being nonprofit 
organizations or by meeting the Small Business Administration (SBA) 
identification of a small business (having revenues of $41.5 million or 
less in any one year). Likewise, the vast majority of ASCs are 
considered small businesses according to the SBA's size standards of 
having total revenues of $16.5 million or less in any one year. For 
purposes of the RFA, we have determined that 70 percent of ASCs would 
be considered small entities according to the SBA size standards. We 
have also determined that 100 percent of CCHs would be considered small 
entities under the RFA definition because they qualify as a nonprofit 
organization or governmental jurisdiction, even though almost all have 
revenues above the $41.5 million SBA size standard. Therefore, the 
Assistant Secretary of Defense for Health Affairs certifies this final 
rule would have a significant impact on a substantial number of small 
entities. The Regulatory Flexibility Analysis is included in the 
preamble of this rule.

[[Page 19854]]

4. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any one year of 
$100 million in 1995 dollars, updated annually for inflation. 
Currently, that threshold level is approximately $140 million. This 
final rule will not mandate any requirements for State, local, or 
tribal governments or the private sector.
5. Paperwork Reduction Act
    This rule will not impose significant additional information 
collection requirements on the public under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3502-3511). Existing information collection 
requirements of the TRICARE and Medicare programs will be utilized. We 
do not anticipate any increased costs to hospitals because of 
paperwork, billing, or software requirements since we are adopting 
Medicare's methodologies with which the ASCs and hospitals are already 
familiar.
6. Executive Order 13132, ``Federalism''
    This rule has been examined for its impact under Executive Order 
13132, and it does not contain policies that have 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. Therefore, consultation with State and local 
officials is not required.
7. Executive Order 13175, ``Consultation and Coordination With Indian 
Tribal Governments''
    It has been determined that this rule does not have a substantial 
effect on Indian tribal governments. This rule does not impose 
substantial direct compliance costs on one or more Indian tribes, 
preempt tribal law, or effect the distribution of power and 
responsibilities between the federal government and Indian tribes.

B. Entities Included in and Excluded From the Proposed Reimbursement 
Methodologies

    The TRICARE ASC reimbursement system encompasses all ASCs that meet 
Medicare's definition of an ASC with a Medicare agreement, and those 
ASCs that due to the nature of the population they serve (i.e., 
pediatric patients) do not have a Medicare agreement but are otherwise 
accredited by an accrediting body as approved by the Director, DHA. The 
TRICARE OPPS reimbursement system encompasses all Medicare-classified 
cancer and children's hospitals that are also authorized for TRICARE 
except for hospitals in States that are paid by Medicare and TRICARE 
under a waiver that exempts them from Medicare's or TRICARE's OPPS, 
respectively. Currently, only Maryland hospitals operate under such a 
waiver.

C. Analysis of the Impact of Policy Changes on Payment for ASCs and 
CCHS, and Alternatives Considered

    The alternatives that were considered, the changes that we are 
proposing, and the reasons that we have chosen these options are 
discussed below:
1. Alternatives Considered for the Reimbursement of ASCs
    This final rule with comment period finalizes paying ASCs on the 
basis of the Medicare ASC fee schedule, with no exceptions to the list 
of procedures considered appropriate by Medicare to be performed in an 
ASC. This approach was adopted because TRICARE is statutorily obligated 
to pay like Medicare where practicable. Medicare covers approximately 
3,400 procedures under the ASC payment system. The ASC list is 
comprised of those surgical procedures that CMS has determined do not 
pose a significant safety risk and are not expected to require an 
overnight stay following the surgical procedure. We anticipate no 
impact to access to care by adopting Medicare's approach.
    We have also determined that no transition period is necessary. 
First, as we have noted earlier, historically transitions are done to 
protect providers from payments below their costs. However, in this 
case, while revenues would decrease for some providers, some providers 
may see increases in reimbursement, and a transition period would not 
be beneficial for these providers. Second, because alternative 
locations are available for these services (Hospital Outpatient 
Departments), concerns regarding access to care are unfounded. Third, 
TRICARE payments to ASCs will be equal to Medicare's. The Medicare 
Payment Advisory Committee (MedPAC) is an independent congressional 
agency which advises the U.S. Congress on issues affecting the Medicare 
program. MedPAC's ``March 2022 Report To Congress: Medicare Payment 
Policy'', indicates that available indicators of payment adequacy for 
ASC services are generally positive. Fourth, the number of outpatient 
surgeries performed in ASCs under TRICARE is very small in comparison 
to Medicare and the industry. If TRICARE had the Medicare reimbursement 
system in place during CY 2019, TRICARE would have spent approximately 
$250 million on ASC services. In contrast, ASCs received over $5.2 
billion in Medicare payments and beneficiaries' cost sharing in 2019. 
In aggregate, the TRICARE ASC claims are a very small percentage of the 
industry's claims, so the change to reimbursement in the aggregate, is 
small. Finally, the 2022 MedPAC report determined that there was 
sufficient access to ASCs by Medicare beneficiaries, as evidenced by 
the continued growth and expansion of ASCs. Given that TRICARE ASC 
rates will be equal to Medicare ASC rates, we do not anticipate access 
problems for TRICARE beneficiaries.
2. Alternatives Considered for the Reimbursement of Cancer and 
Children's Hospitals
    Under the method discussed in this final rule, TRICARE's payments 
to CCHs would decrease by approximately $35 million. Our analysis has 
shown that the expected impact on specific hospitals vary widely. Of 
the 35 CCHs with the highest allowed amounts in 2021, 14 hospitals 
would have their payments reduced by more than 15 percent, and six 
hospitals would have their payments increased by more than 15 percent. 
The median hospital in this group of 35 CCHs would have had its TRICARE 
reimbursement for the services covered by this rule reduced by two 
percent had the rule been implemented in 2021.
    It is practicable to adopt OPPS for these institutional providers, 
with annual hold harmless provisions.
    We are also finalizing as proposed, no transition period. CCHs will 
receive, at a minimum, one hundred percent of their costs, or the OPPS 
payment, whichever is higher. Historically, transitions are done to 
protect providers from payments below their costs. However, in this 
case, the providers will be held-harmless, so no transition is 
necessary.

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--CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED 
SERVICES (CHAMPUS)

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

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


0
2. Amend Sec.  199.2 in paragraph (b) by adding in alphabetical order 
definitions

[[Page 19855]]

for ``Ambulatory Surgery Center (ASC)'', ``Cancer hospital'', and 
``Children's hospital'' to read as follows:


Sec.  199.2  Definitions.

* * * * *
    (b) * * *
    Ambulatory Surgery Center (ASC). Any distinct entity that is 
classified by the Centers for Medicare and Medicaid Services (CMS) as 
an Ambulatory Surgical Center (ASC) under 42 CFR part 416 and meets the 
applicable requirements established by Sec.  199.6(b)(4)(x). Any ASC 
that would otherwise meet the CMS classification as an ASC but does not 
have a participation agreement with Medicare due to the nature of the 
patients they treat (e.g., pediatric) must meet the applicable 
requirements established by Sec.  199.6(b)(4)(x) in order to be a 
TRICARE authorized ASC. All ASCs must also enter into participation 
agreements with TRICARE as required by Sec.  199.6(b)(4)(x) in order to 
be an authorized TRICARE provider of ASC services. Additionally, ASCs 
are prohibited from billing TRICARE beneficiaries for procedures that 
are not included in Medicare's ASC list of procedures allowable for 
facility fee payment in an ASC setting, unless the beneficiary agreed 
in advance in writing to pay for the non-covered services, in 
accordance with the ``hold harmless'' provision under Sec.  
199.6(b)(4)(x)(B)(1)(ii) and (iii).
* * * * *
    Cancer hospital. A specialty hospital that is classified by CMS as 
a Cancer Hospital as specified in 42 CFR 412.23 and meets the 
applicable requirements established by Sec.  199.6(b)(4)(i).
* * * * *
    Children's hospital. A specialty hospital that is classified by CMS 
as a Children's Hospital as specified in 42 CFR 412.23 and meets the 
applicable requirements established by Sec.  199.6(b)(4)(i).
* * * * *

0
3. Amend Sec.  199.6 by revising paragraph (b)(4)(x)(B)(1) to read as 
follows:


Sec.  199.6  TRICARE-authorized providers.

* * * * *
    (b) * * *
    (4) * * *
    (x) * * *
    (B) * * *
    (1) Ambulatory surgical centers (ASC). ASCs must meet all criteria 
for classification as an Ambulatory Surgical Center under 42 CFR part 
416, as well as all of the requirements of this part, in order to be 
considered an authorized ASC under the TRICARE program. Care provided 
by an authorized TRICARE ASC may be cost-shared under the following 
circumstances:
    (i) A childbirth procedure provided by a CHAMPUS-approved ASC shall 
not be cost-shared by CHAMPUS unless the surgical center is also a 
CHAMPUS-approved birthing center institutional provider as established 
by the birthing center provider certification requirement of this part, 
and then reimbursement of covered maternity care and childbirth 
services shall be subject to Sec.  199.14(e).
    (ii) ASCs must demonstrate they have a valid participation 
agreement with Medicare, except as provided under paragraph 
(b)(4)(x)(B)(1)(i) of this section. In addition, in order to be 
considered an authorized TRICARE provider, ASCs must accept the 
requirements for a participating provider under paragraph (a)(13) of 
this section and must also enter into a participation agreement with 
TRICARE which includes a specific ``hold harmless'' provision under 
which the facility will agree not to bill the patient for services not 
on the Medicare ASC procedures list unless, the patient is advised in 
writing that the non-listed procedure is not covered by TRICARE and the 
patient agrees, in advance in writing, to be financially liable for the 
non-covered procedure.
    (iii) ASCs that do not have an agreement with Medicare due to the 
nature of the patients they treat (e.g., pediatric patients) shall be 
accredited by the Joint Commission, the Accreditation Association for 
Ambulatory Health Care, Inc. (AAAHC), or such other accreditation as 
authorized by the Director, DHA and published in the implementing 
instructions. Additionally, these facilities must enter into 
participation agreements with TRICARE, including the hold harmless 
provisions under paragraph (b)(4)(x)(B)(1)(ii) of this section, and 
accept the requirements for a participating provider under paragraph 
(a)(13) of this section in order to be an authorized TRICARE provider.
* * * * *

0
4. Section 199.14 is amended by revising paragraphs (a)(6)(ii)(A), 
(a)(6)(ii)(E) introductory text, and (a)(6)(ii)(E)(3), adding paragraph 
(a)(6)(ii)(E)(4), and revising paragraph (d) to read as follows:


Sec.  199.14  Provider reimbursement methods.

    (a) * * *
    (6) * * *
    (ii) * * *
    (A) General. Outpatient services provided in hospitals subject to 
Medicare OPPS as specified in 42 CFR 413.65 and 42 CFR 419.20, to 
include cancer and children's hospitals, will be paid in accordance 
with the provisions outlined in sections 1833t of the Social Security 
Act and its implementing Medicare regulation (42 CFR part 419) subject 
to exceptions as authorized by this paragraph (a)(6)(ii).
* * * * *
    (E) Temporary transitional payment adjustments (TTPAs). Temporary 
transitional payment adjustments will be in place for all hospitals, 
both network and non-network, except for cancer and children's 
hospitals, in order to buffer the initial decline in payments upon 
implementation of TRICARE's OPPS.
* * * * *
    (3) An additional general temporary military contingency payment 
adjustment (GTMCPA) will also be available at the discretion of the 
Director, or a designee, at any time after implementation to adopt, 
modify and/or extend temporary adjustments to OPPS payments for TRICARE 
network hospitals deemed essential for military readiness and 
deployment in time of contingency operations. Any GTMCPAs to OPPS 
payments shall be made only on the basis of a determination that it is 
impracticable to support military readiness or contingency operations 
by making OPPS payments in accordance with the same reimbursement rules 
implemented by Medicare. For cancer and children's hospitals to qualify 
for the GTMCPA, they must meet the criteria in paragraphs 
(a)(6)(ii)(E)(3)(i) through (iii) of this section. Cancer and 
children's hospitals that meet these criteria will be eligible to 
receive up to 115 percent of the hospital's costs for OPPS services. 
The criteria for adopting, modifying, and/or extending deviations and/
or adjustments to OPPS payments shall be issued through CHAMPUS 
policies, instructions, procedures and guidelines as deemed appropriate 
by the Director, or a designee. GTMCPAs may also be extended to non-
network hospitals on a case-by-case basis for specific procedures where 
it is determined that the procedures cannot be obtained timely enough 
from a network hospital. For such case-by-case extensions, 
``Temporary'' might be less than three years at the discretion of the 
Director, or designee. The GTMCPA qualification criteria for cancer and 
children's hospitals follow:
    (i) Have 10 percent or more of its revenue come from TRICARE for 
care of ADSMs and ADDs;

[[Page 19856]]

    (ii) Have 10,000 or more of its TRICARE visits paid under the OPPS 
for ADSMs and ADDs annually; and
    (iii) Be deemed as essential for TRICARE operations.
    (4) For cancer and children's hospitals. There are no temporary 
transitional payment adjustments in place. Reimbursement will be on the 
basis of OPPS, however, payments shall be adjusted so that these 
providers receive 100 percent of their costs. Adjustments shall be made 
on an annual basis, and within 180 days of the end of the OPPS year 
(OPPS Year is defined as April 1 through March 30) DHA will calculate 
the hospital's costs, utilizing the hospital-specific outpatient cost-
to-charge ratio (CCR). The costs shall be calculated by multiplying the 
hospital's billed charges for OPPS services by the CCR. If the 
hospital's costs, as calculated by DHA, exceeded the payment that had 
been made under OPPS, the hospital shall receive an annual payment 
adjustment so that the hospital receives 100% of their costs.
* * * * *
    (d) Payment of institutional facility costs for ambulatory surgery. 
In general, TRICARE pays for institutional facility costs for 
ambulatory surgery on the basis of prospectively determined amounts, as 
provided in this paragraph, with the exception of ambulatory surgery 
procedures performed in hospital outpatient departments or CAHs, which 
are to be reimbursed in accordance with the provisions of paragraph 
(a)(6)(ii) or (iii) of this section. Surgical services provided in 
Ambulatory Surgery Centers (ASCs) as defined in Sec.  199.2(b) will be 
paid in accordance with the provisions outlined in section 1833(t) of 
the Social Security Act and its implementing Medicare regulation (42 
CFR part 416). TRICARE will recognize, to the extent practicable, in 
accordance with 10 U.S.C. 1079(i)(2), Medicare's ASC reimbursement 
methodology to include specific coding requirements, prospectively 
determined rates, discounts for multiple surgical procedures, the scope 
of ASC services, covered surgical procedures, and the basis of payment 
as described in 42 CFR part 416 with the exception that TRICARE will 
implement no transitional payments. Payments to ASCs for covered 
procedures and services will be based on the lesser of the billed 
charge or the ASC payment rate. Payment for ambulatory surgery 
procedures is limited to those procedures that are reimbursed by 
Medicare in ASCs, with the exception of dental procedures that are 
covered by the TRICARE program, as described in Sec.  199.4. In the 
absence of a Medicare ASC fee schedule rate, the payment for a covered 
dental procedure in ASCs will be based on the same rate under TRICARE's 
OPPS.
* * * * *

    Dated: March 23, 2023.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2023-06452 Filed 4-3-23; 8:45 am]
BILLING CODE 5001-06-P