Methodology for Reimbursing Medical Services, Extended Care Services, Pharmaceuticals, and Durable Medical Equipment Not on Medicare Fee Schedules, 21420-21423 [2024-06431]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 89, Number 60 (Wednesday, March 27, 2024)]
[Notices]
[Pages 21420-21423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06431]


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DEPARTMENT OF VETERANS AFFAIRS


Methodology for Reimbursing Medical Services, Extended Care 
Services, Pharmaceuticals, and Durable Medical Equipment Not on 
Medicare Fee Schedules

AGENCY: Department of Veterans Affairs.

ACTION: Notice.

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SUMMARY: This notice is to inform the public about changes to rates 
contained within the Department of Veterans Affairs (VA) Fee Schedule. 
This fee schedule is currently used as part of the rate structure for 
certain agreements that VA uses to purchase community care under the 
Veterans Community Care Program (VCCP). Additionally, in this notice, 
VA will explain its use of non-reimbursable codes and industry standard 
business practices to ensure consistent adjudication of claims for 
services deemed non-billable or non-reimbursable.

DATES: The change will be effective March 27, 2024.

FOR FURTHER INFORMATION CONTACT: Joseph Duran, Policy Directorate, 
16IVCEO3, Veterans Health Administration, Department of Veterans 
Affairs, 810 Vermont Avenue NW, Washington, DC 20420; 303-370-1637 
(This is not a toll-free number).

SUPPLEMENTARY INFORMATION:

A. Background

    Prior to implementing VCCP, as required by section 101 of the VA 
Maintaining Internal Systems and Strengthening Integrated Outside 
Networks Act of 2018, VA would pay for community care pursuant to 
regulations found at 38 CFR 17.55 and 17.56. These regulations created 
a VA 75th Percentile Fee Schedule that was used to determine payment 
rates when there was no negotiated rate and no Medicare Rate. While the 
VA 75th Percentile Fee Schedule still exists and is used for paying for 
care provided under certain authorities (for example, 38 U.S.C. 1728), 
it is not used for making payments under VCCP, and is not the subject 
of this notice. Under VCCP, there are not specific payment rates 
assigned through statute, and the amount that VA pays for health care 
provided under this program is determined by the terms of the agreement 
the care was purchased under. While the statute does not set rates, 38 
U.S.C. 1703(i) does indicate that VA must, when practicable, limit the 
amounts it pays to the amounts that would be paid under Medicare for 
the same services. Specifically, 38 U.S.C. 1703(i) states that, ``. . . 
to the extent practicable, the rate paid for hospital care, medical 
services, or extended care services under any provision in this title 
may not exceed the rate paid by the United States to a provider of 
services . . . or a supplier . . . under the Medicare program under 
title XI or title XVIII of the Social Security Act (42

[[Page 21421]]

U.S.C. 1301 et seq.), including section 1834 of such Act (42 U.S.C. 
1395m), for the same care or services.'' While this section does not 
require VA to pay the same rates as Medicare, VA has determined that 
paying the Medicare rate when possible is the best policy. However, 
there are a number of services that VA provides to its beneficiaries 
through VCCP for which there is no Medicare rate. Therefore, VA 
developed the VA Fee Schedule (VAFS) to assign rates for codes that VA 
covers for which there is no Medicare rate.

B. Purpose

    This notice is to inform the public about VA's methodology for 
calculating VAFS rates. The methodology used relies on a combination of 
VA claims data, Medicare policies and fee schedules, Medicaid fee 
schedules, TRICARE fee schedules, and benchmarking data to support fee 
schedule development. This notice will also explain VA's use of non-
reimbursable codes and industry standard business practices to ensure 
consistent adjudication of claims for services deemed non-billable or 
non-reimbursable.

C. Description of VA Fee Schedule

    In most of VA's contracts and agreements for the purchase of 
community care, the default payment rate is the Medicare Fee Schedule 
amount (outpatient) and the Medicare Prospective Payment System amount 
(inpatient and outpatient care in hospital settings). These rates are 
collectively referred to throughout this notice as the ``Medicare 
rate.'' VA analyzed its payments made under 38 U.S.C. 1703 and 1703A 
and found that the Medicare rate was paid for approximately 80% of line 
item claims. Pursuant to the terms of agreements VA uses to purchase 
community care, when there is no Medicare rate available, VA pays the 
lesser of the VAFS amount or billed charges. To determine the VAFS 
rates, VA gathers data from several different sources for each 
procedure code. These sources include Medicare's relative value unit 
(RVU) data, Medicare Administrative Contractor (MAC) rates, geographic 
location data, and geographic index adjustments. VAFS rates are 
determined using benchmark data from trusted sources in the health care 
payment analytics space and validated by either another benchmarking 
source or using other sources of supplemental data to support rate 
setting decisions. VA may deviate from this methodology when access to 
critical care services could be impacted by sudden, significant changes 
in payment rates. All VAFS releases are published at the link below: 
https://www.va.gov/COMMUNITYCARE/revenue-ops/Fee-Schedule.asp.

D. Methodology

    Medicare fee schedules are reviewed to identify which procedure 
codes do not have associated rates. When sufficient rate setting data 
exists, most codes are placed onto the VAFS, unless they are considered 
Unlisted, Not Otherwise Classified (NOC), or other notation used for 
miscellaneous services. Codes deemed Unlisted, NOC, and other 
miscellaneous services do not have rates calculated due to their broad 
range of application and high variance in resources necessary to render 
services. This process occurs prior to each new VAFS release. VA's 
process includes setting a national base rate via benchmark or Medicare 
data sources, and, when applicable, applying an adjustment to account 
for geographical cost differences. Inclusion or exclusion of a 
procedure code from the VAFS is not an indication of coverage or lack 
of coverage.
    VA analyzes Medicaid rates for the respective services to ensure 
rates are never priced lower than currently published Medicaid rates 
for the same or comparable procedure code. Additionally, VA analyzes 12 
months of provider billing data to establish maximum rate values at the 
national 75th percentile of billed charges for each procedure code. 
This value is established by ranking billed charge amounts by providers 
and calculating the 75th percentile of the national billed charge 
amount. If the methods described below for assigning VAFS rates lead to 
a rate that is lower than the minimum amount set for a code, the VAFS 
rate will instead be that minimum amount. Similarly, if the 
methodologies below lead to a rate that would be higher than the 
maximum rate for that code, the VAFS rate for that code will be the 
maximum amount. By reviewing Medicaid rates, as well as historical VA 
claims data, to establish minimum and maximum rates for each code, VA 
is ensuring that its VAFS rates will be reasonably in line with 
industry standard pricing. Once the minimum and maximum rates have been 
determined, VA applies its methodology, based on the type of code and 
service, to determine the base VAFS rate.
    When dealing with procedure codes designated by Medicare Status 
Indicators as Status I (Medicare uses another procedure code to report 
service), R (restricted coverage), or N (non-covered service), the rate 
calculation involves leveraging RVU included in the quarterly file 
published by the Centers for Medicare & Medicaid Services (CMS). RVUs 
are used to calculate rates for medical services and is the basis for 
Medicare's rate setting methodology. VA uses the same rate calculation 
based on the RVUs as Medicare to establish rates where RVU data exists 
for procedure codes not covered by Medicare. Since these codes are 
absent from Medicare fee schedules, rates for these procedure codes are 
set using CMS RVU calculation when available. This methodology is not 
applicable to each Status I, R, or N procedure code, and is only used 
when the applicable data is available from CMS. Medicare determines 
some procedure codes as ``Carrier Priced'' (Status C), meaning the MACs 
are responsible for setting rates based on their own methodologies. For 
many Status C codes (the term Carrier is synonymous with MAC), VA 
relies on rates from available MAC fee schedules to fill gaps for 
locations where the carriers have not established rates. VA analyzes 
the fee schedules from each MAC, and if rates are set in at least 28 
localities, VA calculates the median rates among these MAC fee 
schedules. This median amount is used as the base rate which is then 
adjusted based on geographic locality to set rates where the procedure 
code is not included in MAC fee schedules. Not all Status C codes are 
assigned MAC rates due to limited data. When a code does not have 
enough assigned MAC rates available to make a median rate calculation, 
VA is unable to use this methodology to assign a rate for that code on 
the VAFS.
    In many cases, VA relies on a benchmarking method to set rates, 
incorporating industry-proven and respected data comprised of Medicare, 
Medicaid, and commercial health insurance claims. VA has partnerships 
with multiple entities which supply provider payment data that VA uses 
in developing fee schedules. To improve the accuracy of benchmarking 
practices, VA employs multiple sources of benchmarking data to validate 
and confirm each value used in rate setting. VA analyzes the multiple 
years of benchmark data to build a robust dataset for analysis and 
application. FAIR Health, Truven MarketScan, and 5% Medicare Standard 
Analytical data are used as primary sources of benchmark data. As an 
additional benchmark source, VA considers the most recent TRICARE, 
Medicare Outpatient Prospective Payment System (OPPS), and Medicare 
Ambulatory Surgical Center (ASC) rates when available for

[[Page 21422]]

comparable VAFS procedure codes. VA sets rates up to 6 months in 
advance, requiring any data element used in rate setting methodology to 
be adjusted based on historical Medicare Economic Index values for each 
year the data lags the implementation date.
    For many home health and community-based services, VA uses a method 
derived from the Medicare Home Health Prospective Payment System (PPS). 
These rates are calculated by converting Medicare Low Utilization 
Payment Adjustment (LUPA) rates into 15-minute rates based on national 
Medicare averages for the duration of visits. The labor-related share 
of rates is then adjusted by wage indices by geographic locality. VA 
also uses Medicaid fee schedules to develop rates for some community-
based services, such as adult daycare, when application of the Medicare 
Home Health PPS and/or LUPA rates are not practicable.
    VA also analyzes codes to determine if similar services exist. In 
some cases, the codes for these similar services provide a comparable 
rate that VA can use to set the base VAFS rate. Procedure codes are 
assessed based on their clinical similarity, resource utilization, and 
patient needs by medical coding subject matter experts to determine if 
the codes can be used interchangeably. If codes on the VAFS can be 
cross walked to comparable codes from either Medicare fee schedules or 
other benchmarking data sources, the similar procedure codes' rates may 
be set comparable to another for consistency in payment. Once VA 
establishes an association between comparable procedure codes or group 
of codes, it ensures the time, complexity, provider-type, wage-index 
adjustments, and other resources are factored into the rate for the 
procedure code. For instance, when a code has a rate for a procedure 
code with a description of ``per 15 minutes'' code, VA prices the ``per 
hour'' procedure code in alignment with the respective ``per 15 
minutes'' code's rate.
    Rates set with Medicare published RVUs have geographic adjustments 
built into the calculations based on geographic practice cost index 
(GPCI) for their locations. To ensure parity of geographic adjustments 
for codes without RVU data, the base rates for all other VAFS procedure 
codes are adjusted with an index to account for practice cost 
differences in each geographic locality. A geographic cost index is 
calculated for each locality using the Medicare fee schedule and 
applied to base rates to finalize each locality specific VAFS rate. 
This is done by taking the sum of all base rates from the Medicare 
Physician Fee Schedule (MPFS) as the denominator while using the sum of 
each locality's MPFS rates as the numerator to calculate the index. 
This index is then multiplied by the base rate for each procedure code 
to develop a locality-dependent rate. Consistent with Medicare, drugs 
and laboratory rates do not have geographic adjustments applied. 
Procedure codes representing these medications and pathology services 
have the same rate for each geographic locality.

E. Business Rules

    VA is also developing guidance for non-reimbursable codes and 
industry standard business practices to institute additional cost 
controls, including but not limited to those associated with VA benefit 
exclusions, non-reimbursable codes (for reporting purposes only), 
bundled services or supplies, procedure codes representing experimental 
& investigational services providing no medical benefit, services 
outside of VA approved treatment plan guidance, or services considered 
not-medically necessary. VA reviews policies from CMS, private health 
insurance, and TRICARE to assess each code and decide if reimbursement 
is appropriate according to VA standards. This is a collaborative 
process incorporating payment policy, medical policy, and standard 
episode of care (SEOC) guidance to provide recommendations on which 
codes fall outside of proper reimbursement criteria. VA referrals will 
never include authorization for VA payment of certain non-reimbursable 
codes. Once codes are identified as potential additions, they are 
reviewed to assess the impact to both internal VA and provider 
operations. Codes identified as non-reimbursable will be denied. 
Decision dates will be included for each code to address potential 
changes over time if payment or medical policy changes in the future. 
It should be noted that this process of determining which codes can be 
paid, and under what circumstances, is distinct from VA's 
determinations of what services are clinically available as part of the 
VA Medical Benefits Package.
    Future releases of VAFS will occur annually, with an option for 
more frequent updates to ensure provider payment is aligned with 
industry standards. As new procedure codes are added or discontinued 
quarterly, VA evaluates the need for the associated rates based on the 
absence of an available Medicare rate or Medicare payment mechanism and 
adds them as appropriate to VAFS to ensure cost controls are 
maintained.

                         Table of Methodologies
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         Category                Methodology            Data sources
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Status R, N, and I Codes    Calculate rate based   CMS/Medicare
 with RVUs *.                on RVUs and GPCI       Physician Fee
                             available through      Schedule Relative
                             publicly available     Value with
                             CMS resources.         Conversion Factor
                                                    File (GPCI file used
                                                    in calculations
                                                    included in .zip).
Status C Codes............  When data is           MAC Part B Fee
                             sufficient (over 28    Schedules (CGS
                             localities) and the    Administrators,
                             variance coefficient   Noridian Healthcare
                             of rates are low       Solutions, Novitas
                             (less than 1.0)        Solutions, Palmetto,
                             among localities,      First Coast Service
                             the base rate is set   Options, National
                             equal to median        Government Services,
                             amounts from           Wisconsin Physician
                             available MAC C-       Service Government
                             Status Fee Schedules   Health
                             and applied to         Administrators).
                             localities where the
                             rate is absent.
Benchmarked Codes.........  Set base rate to       FAIR Health, Truven
                             benchmark national     MarketScan, Medicare
                             value of allowed       Standard Analytical
                             amount.                Files (5% Sample),
                                                    Medicare OPPS rates,
                                                    Medicare ASC rates,
                                                    and TRICARE Fee
                                                    Schedules.
Cross Walked Services.....  Set rate equal to      All current Medicare
                             comparable procedure   Fee Schedules,
                             code or group of       Average Sales Price
                             procedure codes with   Drug Pricing file,
                             available rate or      Geriatric and
                             data, and if           Extended Care Fee
                             required, adjusted     Schedule, FAIR
                             for time,              Health Medical
                             complexity, or other   Allowed Amount
                             payment adjusting      Benchmarks, Truven
                             factors.               MarketScan Data,
                                                    Medicare Standard
                                                    Analytical Files (5%
                                                    Sample), and TRICARE
                                                    Fee Schedules.

[[Page 21423]]

 
75th Percentile of Billed   Used only as a last    12 months of VA
 Charge.                     effort to set rate     provider payment
                             when other methods     data from VA Veteran
                             are unapplicable.      claims processing
                             Base rate is set at    systems.
                             the national 75th
                             percentile of billed
                             charges computed
                             from the 12 prior
                             months provider
                             billing data.
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Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved and signed 
this document on March 15, 2024, and authorized the undersigned to sign 
and submit the document to the Office of the Federal Register for 
publication electronically as an official document of the Department of 
Veterans Affairs.

Luvenia Potts,
Regulation Development Coordinator, Office of Regulation Policy & 
Management, Office of General Counsel, Department of Veterans Affairs.
[FR Doc. 2024-06431 Filed 3-26-24; 8:45 am]
BILLING CODE 8320-01-P