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61368 Federal Register / Vol. 70, No.

204 / Monday, October 24, 2005 / Rules and Regulations

DEPARTMENT OF DEFENSE Reimbursement Systems, TRICARE A fourth component of this reform

Management Activity, telephone (303) program (in Section 701(c)) is the
Office of the Secretary 676–3520. narrowing of the regulatory definition of
SUPPLEMENTARY INFORMATION: custodial care, which previously was
32 CFR Part 199 statutorily excluded but not defined, by
I. Overview the adoption of the new statutory
RIN 0720–AA73
In the National Defense Authorization definition of ‘‘custodial care’’ that has
TRICARE; Sub-Acute Care Program; Act for Fiscal Year 2002 (NDAA–02), the effect of eliminating current program
Uniform Skilled Nursing Facility Pub. L. 107–107 (December 28, 2001), restrictions on paying for certain
Benefit; Home Health Care Benefit; Congress enacted several reforms medically necessary custodial care. The
Adopting Medicare Payment Methods relating to TRICARE coverage and new statutory definition of domiciliary
for Skilled Nursing Facilities and Home payment methods for skilled nursing care is consistent with the previous
Health Care Providers and home health care services. The regulatory definition, and no changes
statutory ‘‘Sub-Acute and Long-Term are required.
AGENCY: Office of the Secretary, DoD. Care Program Reform’’ under section This final rule implements these
ACTION: Final rule. 701 of this Act added a new 10 U.S.C. statutory requirements. We are adopting
1074j, which provides in pertinent part: for TRICARE a skilled nursing facility
SUMMARY: This rule partially
§ 1074j Sub-acute care program. (SNF) benefit similar to Medicare’s, but
implements the TRICARE ‘‘sub-acute
as specified in the statute, without
and long-term care program reform’’ (a) Establishment.—The Secretary of
Defense shall establish an effective, efficient, Medicare’s day limits. We are also
enacted by Congress in the National
and integrated sub-acute care benefits adopting Medicare’s prospective
Defense Authorization Act for Fiscal
program under this chapter. * * * payment method for SNF care.
Year 2002, specifically: Establishment of
(b) Benefits.—(1) The program shall Similarly, we are adopting the Medicare
‘‘an effective, efficient, and integrated include a uniform skilled nursing facility benefit structure and payment method
sub-acute care benefits program,’’ with benefit that shall be provided in the same for home health care (HHC) services. We
skilled nursing facility (SNF) and home manner and under the conditions described are applying to SNF and HHC providers
health care benefits modeled after those in Section 1861(h) and (i) of the Social
Security Act (42 U.S.C. 1395x(h) and (i)), the statutory prohibition against balance
of the Medicare program; adoption of
except that the limitation on the number of billing. In addition, we are
Medicare payment methods for skilled
days of coverage under Section 1812(a) and incorporating the new statutory
nursing facility, home health care, and
(b) of such Act (42 U.S.C. 1395d(a) and (b)) definitions of ‘‘custodial care’’ and
certain other institutional health care shall not be applicable under the program. ‘‘domiciliary care.’’ Finally, this rule
providers; adoption of Medicare rules Skilled nursing facility care for each spell of also provides clarification of existing
on balance billing of beneficiaries, illness shall continue to be provided for as payment policies for laboratory services
prohibiting it by institutional providers long as medically necessary and appropriate.
including clinical laboratory;
and limiting it by non-institutional * * * * * rehabilitation therapy services;
providers; and change in the statutory (3) The program shall include a radiology services; diagnostic services;
exclusion of coverage for custodial and comprehensive, part-time or intermittent
home health care benefit that shall be ambulance services; durable medical
domiciliary care.
provided in the manner and under the equipment (DME) and supplies; oxygen
DATES: Effective Dates: This rule is and related supplies; drugs
conditions described in Section 1861(m) of
effective August 1, 2003, except the the Social Security Act (42 U.S.C. 1395x(m)). administered other than oral method; all
amendments to § 199.14(h), which are professional provider services that are
effective June 1, 2004. In addition to these requirements that
TRICARE establish an integrated sub- provided in an emergency room, clinic,
ADDRESSES: Medical Benefits and hospital outpatient departments, etc.;
acute care program consisting of skilled
Reimbursement Systems, TRICARE nursing facility and home health care and routine venipuncture in hospital
Management Activity, 16401 East services modeled after the Medicare outpatient and emergency departments
Centretech Parkway, Aurora, Colorado program, Congress also, in section 707 that were adopted under the allowable
80011–9066. of NDAA–02, changed the statutory charge methodology under 32 CFR
FOR FURTHER INFORMATION CONTACT: For authorization (in 10 U.S.C. 1079(j)(2)) 199.14.
payments to Skilled Nursing Facilities that TRICARE payment methods for We note that the series of sub-acute
and Skilled Nursing Facility (SNF) institutional care ‘‘may be’’ determined and long-term care program reforms
services, Tariq Shahid, Medical Benefits to the extent practicable in accordance adopted by Congress in NDAA–02
and Reimbursement Systems, TRICARE with Medicare payment rules to a included several parts that are not a part
Management Activity, telephone (303) mandate that TRICARE payment of implementation in this final rule.
676–3801. For Home Health Care (HHC) methods ‘‘shall be’’ so determined. This Most significant are: repeal of the Case
benefits and payment methods, David E. amendment is effective 90 days after the Management Program under 10 U.S.C.
Bennett, TRICARE Management date of enactment. 1079(a)(17) (repealed—along with
Activity, Medical Benefits and A third Congressional action in several other related enactments—by
Reimbursement Systems, telephone NDAA–02, also in Section 707, is the Section 701(g)(2) of NDAA–02);
(303) 676–3494. For payments for statutory codification of existing continuation of the Case Management
clinical laboratory and certain other TRICARE policy—modeled after Program for certain beneficiaries
services in hospital outpatient Medicare—that institutional providers currently covered by it (Section 701(d));
departments and emergency are not permitted to balance bill and establishment of a new program of
departments and balance billing limits, beneficiaries for charges above the extended benefits for disabled family
Stan Regensberg, Medical Benefits and TRICARE payment amount and that members of active duty service members
Reimbursement Systems, TRICARE non-institutional providers may not (Section 701(b)). These and several
Management Activity, telephone (303) balance bill in excess of 15 percent over other related statutory changes are being
676–3742. For custodial care issues, the TRICARE Maximum Allowable implemented through separate
Mike Kottyan, Medical Benefits and Charge. regulatory changes.

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Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61369

Finally, we note that Congress SNF services. Consistent with the rate, each of RUG carries a uniquely
included as Section 8101 of the DoD statute, SNF coverage for each spell of assigned relative weight factor. This
2002 Appropriations Act, a general illness shall continue to be provided for relative weight factor, or case mix index,
provision identical to a provision as long as medically necessary and represents a relative index or resource
included in the 2000 (Section 8118) and appropriate. consumption. Resource-intensive
2001 (Section 8100) Appropriations patients are assigned to a RUG that
III. Payments for Skilled Nursing
Acts concerning implementation of the carries a higher relative weight factor.
Facility Services
case management program under 10 This RUG-specific relative weight factor
U.S.C. 1079(a)(17). Although Sections TRICARE had not reformed payment is multiplied by the applicable nursing
8118 and 8100 of the 2000 and 2001 methods applicable to SNFs due to the and therapy base rates (which vary
Appropriations Acts were repealed by very small volume of SNF services paid depending on whether the SNF is urban
Section 701(g)(1)(B) and (C) of NDAA– for by TRICARE. The volume of such or rural) to develop the nursing and
02, the same provision was reenacted in services is now expected to increase therapy components of the per diem
the 2002 Appropriations Act. By its significantly because of the payment rate. These two components
terms, Section 8101 of the DoD 2002 Congressional action in 2000 reinstating are then added to the non-case-mix
Appropriations Act, exclusively TRICARE coverage secondary to adjusted component resulting in the
addresses implementation of a program Medicare for Medicare-eligible DoD PPS per diem payment rate.
(the case management program under 10 health care beneficiaries (Section 712 of A key part of the Medicare SNF
U.S.C. 1079(a)(17)) that has now been the Floyd D. Spence National Defense payment system is the use of the MDS
repealed. Thus, we consider Section Authorization Act for Fiscal Year 2001, to classify SNF residents into one of the
8101 as not affecting implementation of Pub. L. 106–398). Coincident with RUG groups. An important issue is
the sub-acute and long-term care reform Congressional action in directing whether the RUG–III classification
program adopted by Congress in adoption of Medicare payment methods system used by Medicare to classify
NDAA–02. for institutional providers, we have patients into the RUG groups would be
The program reforms adopted by undertaken a review of the Medicare practicable for the TRICARE SNF
Congress and implemented in this final payment method and rates for SNF care benefit. We think that it would be
rule take major steps toward achieving under Section 1888(e) of the Social practicable. Much of the SNF care for
the Congressional objective of an Security Act (42 U.S.C. 1395yy) and 42 which TRICARE will be paying is as
effective, efficient, and integrated sub- CFR Part 413, subpart J. That review and second payer to Medicare for the same
acute care benefits program. assessment have convinced us that patient. Even for non-Medicare-eligible
adoption of Medicare SNF payment patients (e.g., most patients under age
II. Skilled Nursing Facility Benefits methods and rates is not only required 65), the characteristics recognized by
As noted above, 10 U.S.C. 1074j by law, but also fair, feasible, the RUG–III system would be equally
requires TRICARE to include a skilled practicable, and appropriate. applicable. In this regard, we note that
nursing facility benefit that shall for the Medicare implemented its per diem more than ten states have decided to use
most part be provided in the manner Prospective Payment System (PPS) for the RUG–III system to classify Medicaid
and under the conditions described SNF care covering all costs (routine, patients into RUGs and several other
under Medicare. As a result, TRICARE ancillary and capital) of Medicare- states are currently in the
is adopting Medicare’s three-day prior- covered SNF services as of July 1, 1998. developmental stages of implementing
hospitalization requirement for coverage The Medicare payment rates are based the RUG–III system. This reflects a
of a SNF admission. Accordingly, for a upon resident assessments. All broad view that the MDS and RUGs are
SNF admission to be covered under Medicare-certified SNFs are required to appropriate for non-Medicare SNF
TRICARE, the beneficiary must have a conduct assessments on residents using residents. In our review and
qualifying hospital stay (meaning an a standardized assessment tool, called discussions, we could not identify any
inpatient hospital stay), of not less than the Minimum Data Set (MDS). Medicare significant barriers to the use of the
three consecutive days before the then uses information from this RUG–III system to classify TRICARE
beneficiary is discharged from the assessment to categorize SNF patients patients.
hospital. The beneficiary must enter the into major categories, such as: (1) One implementation issue that we
SNF within 30 days after discharge from Rehabilitation; (2) Extensive Services; have identified related to classification
the hospital or within such time as it (3) Special Care; (4) Clinically Complex; concerns the timing of resident
would be medically appropriate to begin (5) Impaired Cognition; (6) Behavior assessments. The Medicare SNF
an active course of treatment where the Problems; and (7) Reduced Physical payment system requires periodic
individual’s condition is such that SNF Function. This is done using the patient assessments. The Centers for
care would not be medically appropriate Resource Utilization Group (RUG)–III Medicare and Medicaid Services (CMS)
within 30 days after discharge from a grouper. The RUG–III grouper is a requires that SNF patients be assessed
hospital. The skilled services must be computer program that converts on days 5, 14, 30, 60, and 90, as well
for a medical condition that was either resident specific assessment data into a as to be reassessed if there are status
treated during the qualifying three-day case-mix classification. In classifying changes between these periodic
hospital stay, or started while the patients into groups based upon their assessments. We have considered the
beneficiary was already receiving clinical and functional characteristics, level of assessment required after 100
covered SNF care. Additionally, an the grouper further subdivides each of days when TRICARE becomes primary
individual shall be deemed not to have these major categories resulting in payer for patients whose SNF care must
been discharged from a SNF, if within specific patient RUGs. continue beyond the Medicare benefit
30 days after discharge from a SNF, the For each RUG, the Medicare SNF per limit. We believe continuing to assess
individual is again admitted to the same diem payment is calculated as the sum patients every 30 days would be
or a different SNF. These coverage of three parts—the nursing component, consistent with Medicare’s practice of
requirements are the same as applied the therapy component and the non- skilled authorization.
under Medicare. We are not, however, case-mix component. Under the nursing A second implementation issue
adopting Medicare’s 100-day limit on and therapy components of the payment concerns the use of MDS for neonates

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61370 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations

and very young children. The MDS was quite similar to the Medicare Our regulation (Section 199.1(n)) allows
not designed for very young children. certification standards. the recognition of special circumstance
As a result, we believe that children For overseas, the SNF PPS will be and authority of the Director to address
under ten should not be assessed using applicable to those areas as it applies them.
the MDS. We will review the methods under Medicare.
On July 7, 2003, DoD published a V. Payment Method for Home Health
used by Medicaid programs and may Care Services
adopt one of their assessment methods notice (68 FR 40251) to announce the
at a later time. Until then, the allowed effective and implementation date for TRICARE is adopting Medicare’s
charge for children under age ten in a the new SNF benefit provisions and benefit structure and prospective
SNF will continue to be the billed SNF PPS. The notice established that payment system for reimbursement of
charge or negotiated rates. the new SNF benefit provisions and HHAs that are currently in effect for the
We have also considered whether the SNF PPS is effective for SNF admissions Medicare program under Section 4603
Medicare SNF payment rates and on or after August 1, 2003. of the Balanced Budget Act of 1997, as
weights are appropriate for TRICARE. amended by Section 5101 of the
IV. Home Health Care Benefits
We believe they are. For some of the Omnibus Consolidated and Emergency
Home health agencies (HHAs) are Supplemental Appropriations Act for
payment methods TRICARE has
recognized as authorized providers Fiscal Year 1999, and by Sections 302,
adopted for non-SNF providers that are under TRICARE, but payment only
based on the Medicare’s system, we 305, and 306 of the Medicare, Medicaid,
extended to services rendered by and SCHIP Balanced Budget Refinement
have developed DoD-specific weights otherwise authorized TRICARE
and rates. In some, such as for physician Act of 1999. This includes adoption of
individual professional providers, such the comprehensive Outcome and
payments, we implemented our own as registered nurses, physical and Assessment Information Set (OASIS)
phase-in process, but have now reached occupational therapists, and speech and consolidated billing requirements.
comparability with Medicare. In the pathologists. Coverage of services The adoption of the Medicare HHA
case of SNF PPS, the Medicare weights provided by home health aides and prospective payment system replaces
and rates were developed to be used medical social workers were not the retrospective physician-oriented fee-
nationally—like TRICARE—thus, we allowed except under case management for-service model used for payment of
have no special State considerations and the hospice benefit. Payment is also home health services under TRICARE.
that some Medicaid programs would extended under the TRICARE-allowable Under the new prospective payment
have. In addition, the TRICARE charge methodology for medical system, TRICARE will reimburse HHAs
population group that will be the supplies that are essential in enabling a fixed case-mix and wage-adjusted 60-
primary user of SNF services and the HHA professional staff to effectively day episode payment amount for
Medicare population group are quite carry out physician ordered treatment of professional home health services, along
similar. Thus, we believe that there is the beneficiary’s illness or injury. with routine and non-routine medical
no reason why the Medicare weights Unlike Medicare, TRICARE required supplies provided under the
and rates would not be appropriate to HHAs to have either Community Health beneficiary’s plan of care. Durable
use. However, we will carefully monitor Accreditation Program or Joint medical equipment and osteoporosis
the TRICARE SNF patient Commission on the Accreditation of drugs receive a separate payment
characteristics to ensure that the Healthcare Organizations accreditation amount in addition to the prospective
weights and rates are appropriate. If to qualify as network providers. These payment system amount for home
necessary, the weights and rates could certification requirements have been health care services.
be modified after one or more years of changed to make them consistent with The variation in reimbursement
experience. those of Medicare in order to effectively among beneficiaries receiving home
Based on all of these considerations accommodate adoption of the new HHA health care under this newly adopted
and the statutory requirements, the prospective payment system, i.e., to prospective payment system will be
Department is adopting for TRICARE require Medicare certification/approval dependent on the severity of the
the Medicare payment methods and for provider authorization status under beneficiary’s condition and expected
rates, including MDS assessments, TRICARE. resource consumption over a 60-day
RUG–III classifications, and Medicare Medicare’s home health benefit episode-of-care, with special
weights and per diem rates. For patient structure and conditions for coverage reimbursement provisions for major
stays longer than 90 days, MDS are being adopted coincident with intervening events, significant changes
assessments would be required every 30 implementation of the new prospective in condition, and low or high resource
days. payment system including those utilization. The resource consumption
In adopting the Medicare’s SNF provisions under Sections 1861(m), of these beneficiaries will be assessed
payment methodology, we are also 1861(o), and 1891 of the Social Security using OASIS selected data elements.
incorporating into our rule a provision Act and 42 CFR part 484. In general, The score values obtained from these
that has been in the TRICARE coverage extends to part-time or selected data elements will be used to
Operations Manual requiring that intermittent skilled nursing care and classify home health beneficiaries into
TRICARE-eligible SNFs are required to home health aide services from one of 80 Home Health Resource Groups
be Medicare-certified institutions. We qualified providers. The specific benefit (HHRGs) based on their average
believe this policy facilitates assurance structure and conditions for coverage expected resource costs relative to other
of quality of care and is consistent with are set forth in the new Section home health care patients.
the payment approach we are adopting. 199.4(e)(21) of the regulation. The HHRG classification determines
For pediatric SNFs, TRICARE will In adopting this new benefit structure the cost weight, i.e., the appropriate
accept Medicaid certification in lieu of for TRICARE, we note the potential case-mix weight adjustment factor that
the Medicare certification as the need for some transition time or other indicates the relative resources used and
pediatric SNFs might choose not to accommodation for some patients costliness of treating different patients.
apply for Medicare certification and the currently receiving home health services The cost weight for a particular HHRG
Medicaid certification standards are under present program coverage rules. is then multiplied by a standard average

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Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61371

prospective payment amount for a 60- • Services Utilization Dimension— statute and regulation. However, the
day episode of home health care. The The services utilization dimension has new definition for custodial care
case-mix adjusted standard prospective four severity levels (0–3) and indicates narrows the exclusion, resulting in
payment amount is then adjusted to whether the beneficiary was discharged increasing coverage of medically
reflect the geographic variation in wages from a skilled nursing facility or necessary custodial care. This is also
to come up with the final HHA payment rehabilitation hospital within the past consistent with the Congressional effort
amount. As indicated above, the 14 days and whether the patient is largely to standardize TRICARE and
ordinary unit of payment is based on a expected to receive ten or more Medicare sub-acute care coverage and
60-day episode of care. Payment covers occupational, physical and/or speech payment policies. As a corollary to these
the entire episode of care regardless of therapy visits. definitions, we are also adopting a
the number of days of care actually A case-mix grouper is used for definition of the term ‘‘activities of daily
provided during the 60-day period. assigning a severity level within each of living.’’
There are exceptions to this standard the above dimensions and for
classifying the beneficiary into one of 80 VIII. Payment Methods for Hospital
payment period under certain
HHRGs. The HHRG indicates the extent Outpatient Services
conditions that will result in reduced or
additional amounts being paid. If the and severity of the beneficiary’s home Medicare implemented a new
beneficiary is still in treatment at the health needs reflected in its relative Outpatient Prospective Payment System
end of the initial 60-day episode of care, case-mix weight (cost weight). The case- (OPPS) on August 1, 2000, as a payment
a physician must re-certify the mix weight indicates the group’s methodology for facility charges in
beneficiary’s continuing need for home relative resource use and cost of treating hospital outpatient departments and
health services and the homebound different patients. The case-mix weights emergency departments. This system
status of the patient, and a new episode for Fiscal Year 2001 ranged from 0.5265 replaced Medicare’s prior payment
of care may begin. There is currently no to 2.8113. The standardized prospective methodology for such services, which
limit on the number of medically payment rate is multiplied by the was largely based on provider cost
necessary consecutive 60-day episodes beneficiary’s assigned HHRG case-mix reports, but included some fee
that beneficiaries may receive under the weight to come up with the 60-day schedules. The Medicare OPPS is in
HHA prospective payment system. episode payment. process of being phased in, with a series
As noted above, the variation in On March 30, 2004, DoD published a of transitional payment adjustments that
reimbursement among beneficiaries notice (69 FR 16531) to announce the were based partly upon the prior
receiving HHC under this newly phased-in implementation of the HHA Medicare cost reports and Medicare’s
adopted prospective payment system prospective payment system with the prior cost-based methodology.
will be dependent on the severity of the start health care delivery date under Consistent with the TRICARE payment
beneficiary’s condition and expected each of the TRICARE Next Generation of reform statutory authority and general
resource consumption over a 60-day Contracts (T–Nex). The implementation policy, we plan to follow the Medicare
episode-of-care, with special date for the regional groupings of states approach. However, because of
reimbursement provisions for major under each of the T–Nex contracts is complexities of the Medicare transition
intervening events, significant changes provided in that notice. This process and the lack of TRICARE cost
in condition, and low or high resource implementation began on June 1, 2004, report data comparable to Medicare’s, it
utilization. A case mix system has been and was fully phased-in on November 1, is not practicable for the Department to
developed to measure the severity and 2004. adopt Medicare OPPS for hospital
projected resource utilization of outpatient services at this time. A
beneficiaries receiving home health VI. Balance Billing Limitations separate regulatory initiative will
services using selected data elements off Consistent with the Congressional address hospital outpatient services not
of the OASIS assessment instrument action discussed above, we are revising covered by this regulation. We
(i.e., the assessment document Section 199.6 of the regulation to anticipate eventual adoption of the
submitted by HHAs for reimbursement) specify that institutional providers, Medicare OPPS for most TRICARE
and an additional element measuring including SNFs and HHAs, are required, hospital outpatient services covered by
receipt of at least ten visits for therapy in order to be TRICARE-authorized the Medicare OPPS.
services. These key data elements are providers, to be participating providers This rule clarifies payments for
organized and assigned a score value in on all claims. They must accept, except hospital based outpatient services that
order to measure the impact of clinical, for any required beneficiary deductible have established allowable TRICARE
functional and services utilization and co-payment amounts, the TRICARE charges. These services would include
dimensions on total resource use. The payment as payment in full. Medicare laboratory services including clinical
resulting summed scores are used to and TRICARE payment rates are laboratory; rehabilitation therapy
assign a beneficiary to a particular designed to fully reimburse the services; radiology services; diagnostic
severity level within each of the institutions and are required by services; ambulance services; durable
following dimensions: Medicare and TRICARE to be accepted medical equipment (DME) and supplies;
• Clinical Dimension—The clinical as full reimbursement. TRICARE eligible oxygen and related supplies; drugs
dimension has four severity levels (0–3) hospitals, SNFs, and HHAs must enter administered other than oral method; all
and takes into account the beneficiary’s into a participation agreement. professional provider services that are
primary diagnosis and prevalent provided in an emergency room, clinic,
medical conditions. VII. Definitions of ‘‘Custodial Care’’ and or hospital outpatient department, etc.;
• Functional Dimension—The ‘‘Domiciliary Care’’ and routine venipuncture. For these
functional dimension assesses the As noted above, Congress adopted services, payments are based on the
beneficiary’s ability to perform various definitions of ‘‘custodial care’’ and TRICARE-allowable cost method in
activities of daily living (e.g., the ‘‘domiciliary care’’ that we are effect for professional providers or the
beneficiary’s ability to dress and bathe) incorporating into the TRICARE CHAMPUS Maximum Allowable Charge
and consists of five severity levels (0– regulation. Custodial and domiciliary (CMAC). Some services have a
4). care continue to be excluded by the professional and a technical component

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61372 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations

such as laboratory, radiology, and interim final rule are sufficient to Medicare’s Outcome and Assessment
diagnostic services. If only the technical maintain uniformity in benefit structure Information Set (OASIS) instrument as a
component is billed by the hospital, the and reimbursement between the payment setting mechanism for
technical component of the TRICARE programs (i.e., consistency in benefit maternity patients and individuals
allowable charge will be applied to the coverage and reimbursement between under the age of 18. The commentors
TRICARE payment. If the professional the Medicare and TRICARE programs). felt that, while an abbreviated OASIS
outpatient hospital services are billed by The cross referenced regulatory format (i.e., a core of 23 elements used
a professional provider group, not by provisions implement key sections of to determine the reimbursement
the hospital, no payment shall be made the Social Security Act relating to amount) might be workable, it would
to the hospital for these services. All covered services, conditions of not accurately reflect the needs of a
other outpatient hospital services, participation and the prospective younger TRICARE population, or
except for ambulatory surgery services, payment of home health services. generate an appropriate payment for
shall be paid as billed such as facility Comment. One commentor felt that home health services.
charges. Ambulatory surgery services the Department had exceeded the Response. A fixed case-mix and wage
shall be paid in accordance with Section statutory authority granted it under the adjusted 60-day episode payment will
199.14(d) of the regulation. National Defense Authorization Act for be paid to Medicare-certified home
Fiscal Year 2002 (NDAA–02), Pub. L. health agencies providing home health
IX. Public Comments 107–107 for home health services services to beneficiaries who are under
We published the interim final rule through the adoption of conditions of the age of 18 and/or receiving maternity
on June 13, 2002, and provided a 60-day coverage and participation prescribed care. However, this prospective
comment period. We received public under Sections 1861(o) and 1891 of the payment amount will be determined
comments from several commentors. Social Security Act and 42 CFR Part through the manual completion and
These comments and the Department’s 484. The commentor also expressed the scoring of an abbreviated assessment
responses are summarized below. view that restricting eligibility to home form (Home Health Resource Group
Comment. One commentor felt that it care based on a ‘‘qualifying service,’’ Worksheet). The 23 items in this
would be preferable to adopt Medicare would limit an effective way to decrease assessment will provide the minimal
standards for coverage and payment aide visits, while at the same time amount of data necessary for generating
through references to applicable provide compensatory strategies needed a Health Insurance Prospective Payment
Medicare statutory and regulatory to increase beneficiary safety and System (HIPPS) code for reimbursement
provisions rather than incorporating the independence. under the HHA PPS. While an
actual regulatory language itself. The Response. The Department does not abbreviated assessment may facilitate
commentor felt that inclusion of believe it has exceeded the statutory payment under the HHA PPS, it does
language beyond these references could authority granted to it under the NDAA– not adequately reflect the management
result in the loss of uniformity; i.e., that 02, Pub. L. 107–107, given the fact that oversight required to ensure quality of
the Department may not be able to keep the conditions of coverage and care for beneficiaries under the age of
current with changes in Medicare participation prescribed under 1861(o) 18, and obstetrical patients. As a result,
standards. and 1891 of the Social Security Act and TRICARE contractors will have to
Response. The Department believes 42 CFR Part 484 are an integral part of continue to case manage these
that incorporation of actual regulatory the Medicare home health benefit from beneficiary categories through the use of
language, in addition to applicable cross which HHA PPS rates were appropriate evaluation criteria as
references to Medicare statutes and extrapolated; i.e., the national mean required under the specific terms of
regulations, will only tend to strengthen utilization for each of the six home their contract to ensure the quality and
the uniformity between the programs. health disciplines was used in appropriateness of home health services
The conditions for participation, along calculating the initial unadjusted (e.g., the use of Interqual criteria for
with a general overview of the national 60-day episode payment. Since managing the appropriateness of home
prospective payment methodology, will the conditions of coverage/participation health services).
ensure a basic understanding of the determine the mix and level of services The program intends to conduct a
benefit coverage and payments among (e.g., the beneficiary must need skilled follow-up analysis after at least a year’s
managed care support contractors, nursing care on an intermittent basis, or worth of accumulated data to evaluate
providers and eligible beneficiary physical therapy or speech-language the appropriateness of Medicare weights
groups. As with other adopted Medicare pathology services, or have continued and rates in reimbursement of these
reimbursement systems (e.g., those need for occupational therapy after the specialty provider categories.
Medicare reimbursement systems for need for skilled nursing care, physical If a Medicare-certified HHA is not
hospice and acute inpatient therapy, or speech-language pathology available within the service area, the
hospitalization), uniformity is services have ceased, on which the TRICARE contractor may authorize care
maintained through annual policy prospective payment rates were based), in a non-Medicare certified HHA (e.g., a
manual updates. These routine changes it is illogical to believe that it was HHA which has not sought Medicare
ensure compliance with existing Congress’ intent to exclude their certification/approval due to the
Medicare regulations and internal adoption under the TRICARE program. specialized beneficiary categories it
Program Memoranda (i.e., Medicare A shift in the mix and level of services services—patients receiving maternity
internal procedural guidelines for the (e.g., the substitution of occupational care and/or patients under the age of 18)
processing and payment of home health services for home health aide services) that qualifies for corporate services
services). The updating process also resulting from elimination of the provider status under TRICARE. The
ensures that the most current rates and Medicare conditions of coverage/ freestanding corporate entity will be
wage indexes are being used in participation would deviate from the reimbursed for otherwise covered
reimbursement of home health services. resource allocation used in establishing professional services under the
We also believe that the Medicare cross the prospective payment rates. TRICARE Maximum Allowable Charge
references (i.e., the statutory and Comments. Two commentors (TMAC) reimbursement system, subject
regulatory provisions) cited in the expressed concern over the weakness of to any restrictions and limitations as

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may be prescribed under existing status of the patient through the individual contractors. The commentor
TRICARE policy. Payment will also be development and maintenance of a felt that variations in contractor policies
allowed for supplies used by a TRICARE formal Plan of Care (POC). The POC could lead to lingering confusion
authorized individual provider must specify the medical treatments/ between patients, providers and
employed by or under contract with a services to be furnished, the type of regulatory officials regarding actual
corporate services provider in the direct home health disciplines that will policy interpretation.
treatment of a TRICARE eligible furnish the ordered services, and the Response. TRICARE Management
beneficiary. Allowable supplies will be frequency of the services furnished. Activity will be responsible for issuing
reimbursed in accordance with Comment. One commentor felt that all policy decisions and/or changes
TRICARE allowable charge the absence of a definitive effective date pertaining to the coverage and
methodology. There are also regulatory would cause confusion for TRICARE reimbursement of home health services.
and contractual provisions currently in beneficiaries and providers of home Comment. Another commentor
place that grant contractors the health services. It was recommended requested further clarification regarding
authority to establish alternative that a Federal Register notice be issued the circumstances in which TRICARE
network reimbursement systems as long at least 60 days prior to the actual would consider care ‘‘custodial.’’
as they do not exceed what would have implementation date in order to give Response. ‘‘Custodial Care’’ is
otherwise been allowed under Standard both patients and providers the treatment or services that can be
TRICARE payment methologies. opportunity to take appropriate steps to rendered safely and reasonably by a
Comment. One commentor wanted to transition into the new benefit. person who is not medically skilled,
know how children under the age of ten Response. On March 30, 2004, DoD and is designed mainly to help the
would be reimbursed given the fact that published a notice (69 FR 16531) to patient with the activities of daily
they are exempt from the HHA PPS. announce the phased-in implementation
living. The activities of daily care
Response. The exemption has been of the HHA prospective payment system
consist of providing food (including
removed for children under the age of with the start health care delivery date
special diets), clothing, and shelter;
ten. A fixed case-mix and wage adjusted under each of the TRICARE Next
personal hygiene services, observation
60-day episode payment will be paid to Generation of Contracts (T-Nex). The
and general monitoring; bowel training
Medicare-certified home health agencies implementation date for the regional
or management (unless abnormalities in
providing home health services to groupings of states under each of the T-
bowel function are of a severity to result
beneficiaries who are under the age of Nex contracts was provided in that
in a need for medical or surgical
18. This prospective payment amount notice. This implementation began on
intervention in the absence of skilled
will be determined through the manual June 1, 2004, and was fully phased-in
completion and scoring of an services); safety precautions; general
on November 1, 2004. There were also
abbreviated assessment form (Home preventive procedures (such as turning
provisions within the implementing
Health Resource Group Worksheet). The to prevent bedsores); passive exercise;
guidelines which gave both patients and
23 items in this assessment will provide companionship; recreation;
providers the necessary time to
the minimal amount of data necessary transportation; and such other elements
transition into the new benefit. Under
for generating a Health Insurance of personal care that reasonably can be
those provisions, TRICARE contractors
Prospective Payment System (HIPPS) performed by an untrained adult with
were responsible for identifying all
code for reimbursement under the HHA minimal instruction or supervision.
beneficiaries receiving home health care
PPS. Comment. Another commentor felt
services 60 days prior to
Comment. Another commentor that the reference to ‘‘all services’’ in
implementation of the HHA PPS, and
requested that the requirement for paragraph 199.6(b)(4)(xv)(F)(1) might be
for notifying them and the HHA of any
physician certification of the correctness confusing, as it is intended to apply to
change in their benefit.
of the Home Health Resource Group Comment. Another commentor all home health services. The
(HHRG) referenced in the suggested that ‘‘Activities of Daily commentor recommended that ‘‘home
SUPPLEMENTARY INFORMATION section of Living’’ as defined in 32 CFR 199.2(b) be health’’ be added prior to ‘‘services.’’
the interim final rule be removed and modified to include the phrase ‘‘that Response. The commentor’s
implementation monitored to ensure reasonably can be performed by an recommendation has been adopted. ‘‘All
that the requirement is not enforced. untrained adult with minimum services’’ in paragraph
The commentor felt that a physician structure or supervision,’’ since many of 199.6(b)(4)(xv)(F)(1) has been further
was in no position to oversee the the listed activities can rise to the level clarified in this final rule by adding
reimbursement methodology or to of skilled nursing or therapy services in ‘‘home health’’ prior to ‘‘services.’’
maintain the expertise necessary to offer complicated or abnormal circumstances. Comment. A commentor
such certification. Response. Similar language already recommended that ‘‘Custodial Care’’ as
Response. The Department agrees that appears in the definition. defined in 32 CFR 199.2(b) be modified
a physician does not have the necessary Comment. One commentor to indicate that its application in the
expertise to certify the correctness of the recommended that ‘‘Home Health context of the home health benefit be
Home Health Resource Group (HHRG). Discipline’’ as defined in 32 CFR limited to circumstances where the
As a result, the requirement has been 199.2(b) be modified to include ‘‘home overall plan of care does not include
removed from the SUPPLEMENTARY health aide services’’ since only 5 of the any skilled nursing or therapy services.
INFORMATION section of the final rule. 6 disciplines appeared in the original It was felt that additional guidance was
Contractor enforcement of the deleted rule. necessary to avoid misapplication of the
requirement is not anticipated since it Response. The definition of ‘‘Home custodial care exclusion given the fact
does not appear in any of the Health Discipline’’ has been modified to that home health aide services by their
implementing instructions (i.e., include ‘‘home health aide services’’. very nature are: (1) Services that can be
TRICARE Policy Manual issuances). The Comment. One commentor rendered safely and reasonably by a
physician’s fundamental role is to recommended that decisions on policy person who is not medically skilled, or
certify the continuing need for home changes remain solely with TRICARE (2) designed to help a patient with the
health services and the homebound Management Activity and not with activities of daily living.

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Response. The definition contained in raised concerns about the education for allowed charges will be the ‘‘billed
the interim final rule is statutory, that is, providers treating non-Medicare eligible charges’’ or ‘‘negotiated rates’’ for
the language was contained in the beneficiaries and wanted to know how children under age 10. As stated in the
National Defense Authorization Act for providers will know that the three-day rule, the MDS will not be used for
Fiscal Year 2002 (NDAA–02), Public Medicare rule will also apply to these assessment of these children until
Law 107–107, Section 701(c). Custodial TRICARE beneficiaries. further review by the Department is
care remains excluded. Response. The three-day qualifying completed. Currently, the applicability
Comment. A beneficiary advocacy hospital stay and the SNF prospective of MDS will be determined based on the
organization expressed concern that (1) payment system (PPS) requirements child’s age (10 years) on the date of his/
not all NDAA–02 reforms are addressed apply to those cases that have an SNF her SNF admission. We believe the
in the interim final rule; (2) family admission date of August 1, 2003, or medical necessity and medical
members may experience breaks in after. This implementation date allowed appropriateness should determine the
coverage for services allowed pre- for the education of providers. Under most cost effective level and setting of
NDAA–02 until all NDAA–02 reforms the new requirements, SNFs are care. In certain cases, home health care
are implemented; and (3) a desire that required to enter into a participation may be the most cost effective and
active-duty family members are agreement with TRICARE. Along with appropriate care based upon the
provided all services authorized by this participation agreement, the medical necessity and medical need of
NDAA–02. Managed Care Support (MCS) a child’s condition.
Response. (1) Because of the contractors are required to send a letter Comment. The same commentor was
complexity of developing the proposed to SNFs explaining the new also concerned that the definition of
programs, including significant agency requirements. This letter specifically ‘‘homebound’’ may be too restrictive for
decisions regarding the discretionary states that the new requirements also families with children. The commentor
elements of NDAA–02, and the apply to those TRICARE beneficiaries believed this definition needed to be
requirement to follow the prescribed who are not Medicare-eligible. Prior to modified to reflect the characteristics of
rule-making process, the Agency has the implementation of SNF PPS, MCS the entire TRICARE beneficiary
determined it is more timely and contractors spent considerable effort in population, and not just the Medicare-
fiscally prudent to implement certain educating the providers regarding the eligible segment.
NDAA–02 authorized programs separate new SNF benefit and PPS requirements Response. An exception is being made
from those covered by this rule; (2) there and entered into a participation to the definitional homebound criteria
are no pre- NDAA–02 benefits which agreement with SNFs. for beneficiaries under the age of 18 and
require implementation of NDAA–02 Comment. The same organization
those receiving maternity care. The only
benefits in order to be allowed; and (3) suggested that guidelines regarding
homebound requirement for these
those services required by NDAA–02 to benefits available to active-duty family
special beneficiary categories is written
be provided to active-duty family members versus non-active-duty family
members are available through existing members be incorporated into this rule. certification from a physician attesting
programs; discretionary NDAA–02 Response. As mentioned above, the to the fact that leaving the home would
elements will be implemented following benefits authorized by NDAA–02 for place the beneficiary at medical risk.
the rule-making process and active-duty family members are either Comment. Two commentors
incorporation into the managed care currently available or will be so as a recommended elimination of the
support contracts. result of separate rule-making and significant change in condition (SCIC)
Comment. The same organization implementation in the T-Nex contracts, adjustment in 32 CFR 199.14(h)(4), as it
wanted to know how the new home therefore, suggested guidelines are not creates an unnecessary administrative
health benefit and reimbursement necessary in this rule. burden and unfairly reimburses
methodology was going to be Comment. That organization providers when patients’ conditions
transitioned into the program since the commented that the Resource deteriorate.
existing coverage is more robust than Utilization Groups (RUG–III) used to Response. Section 707 of National
that being implemented through statute. calculate SNF payments and the Defense Authorization Act for Fiscal
Response. The new home health Minimum Data Set (MDS) assessments Year 2002 (NDAA–02) was quite
benefit and reimbursement system has may not be designed to reflect coverage specific in its intent that TRICARE
been transitioned into the program as of conditions affecting children and home health payment amounts be
part of the next generation of TRICARE supported the Department’s proposal determined to the extent practicable in
contracts. There were provisions within not to use the MDS for children under accordance with the same
the implementing guidelines which age ten. They believed it appropriate reimbursement rates as apply to
gave both patients and providers the that the ‘‘billed charge’’ for the care of payments to providers of services of the
necessary time to transition into the these children will be deemed the same type under title XVIII of the Social
new benefit. Under these provisions, ‘‘allowed charge.’’ The organization also Security Act (42 U.S.C. 1295).
TRICARE contractors were responsible commented that it is concerned about Elimination of the significant change in
for identifying all beneficiaries receiving the transition for care of children as condition (SCIC) adjustment would
home health care services 60 days prior they get older and that there may be a represent a major deviation from the
to implementation of the HHA PPS, and period where coverage for slightly more Medicare HHA PPS methodology, and
for notifying them and the HHA of any home care will allow the family to have as such, would be contrary to the
change in their benefit. the child with them at home before statutorily mandated reimbursement
Comment. The same organization also having to place the child in an provisions under Section 707 of NDAA–
wanted to know how the cases of institutional setting. It suggested that 02.
beneficiaries who are already getting a the procedures allow for some flexibility Comment. Another commentor
benefit and who did not have a three- to meet the needs and wishes of the wanted to know if TRICARE would be
day qualifying hospital stay (required family where cost effective. adopting changes to the OASIS data
for a skilled nursing facility (SNF) Response. For the benefits authorized collection instrument as a result of
benefit) be handled. The commentor by section 701(b) of NDAA–02, the upcoming Center for Medicare and

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Medicaid Services (CMS) Technical Comment. Several commentors felt Response. The definitions of
Expert Panel (TEP) assessments. that the OASIS was an unsuitable data intermittent or part-time skilled nursing
Response. TRICARE will be adopting collection tool for active duty and home health aide services have
all upcoming Center for Medicare and dependents since it was developed been consolidated and revised to reflect
Medicaid Services (CMS) changes to the primarily for the elderly with very the statutory definition under § 1861 of
OASIS data collection instrument. different health care needs. The the Social Security Act (42 U.S.C.
Comment. Two commentors felt that commentor recommended development 1395x(m)).
the requirement for TMA Director of an assessment tool which would Comment. One commentor felt that
approval of home health aide training more closely correlate with a younger, the new definitions of custodial care,
programs, as specified in 32 CFR healthier TRICARE population. domiciliary care and activities of daily
199.4(e)(21)(i)(D), would impose an Response. The program intends to living combined with the anticipated
additional standard beyond that set out conduct a follow-up analysis after at ‘‘significant increase’’ in patient volume
in the Medicare conditions of least a year’s worth of accumulated data and the elimination of Medicare day
participation for home health agencies. to evaluate the appropriateness of limits require careful administration
It was recommended that the Medicare weights and rates in and oversight that can best be provided
requirement for home health aide reimbursement of TRICARE through case management and suggested
training programs be modified to reflect beneficiaries. to include operational guidelines for the
the current Conditions of Participation Comment. Another commentor Managed Care Support Contractors.
under the Medicare Program. recommended adding the phrase ‘‘to Response. The Department will
Response. The requirement for home administer the provisions consistent
another home health agency’’ following
health aide training programs has been with the statutory requirements.
‘‘transfer’’ in subparagraph 32 CFR
modified to reflect the current condition
199.14(h)(3), since transfer is limited to Detailed operational guidelines have
of participation under the Medicare
a transfer to another home health agency been developed for the Managed Care
program; i.e., the home health aide must
for continuation of receiving the home Support contractors.
have successfully completed a state-
health benefit. Comment. The same commenter
established or other training program
Response. The commentor’s stated that the Medicare payment
that meets the requirements of 42 CFR
recommendation has been adopted by system was not designed for an active
484.36 Condition of participation: Home
adding the phrase ‘‘to another home duty population and misses the mark
health aide services.
Comment. One commentor wanted to health agency’’ following ‘‘transfer’’ in completely with respect to children.
know if the concept of ‘‘TRICARE- subparagraph 32 CFR 199.14(h)(3) of the Response. These issues have been
authorized physician’’ was more final rule. addressed above and the Department
restrictive than that of Medicare’s—as it Comment. One commentor plans to carefully monitor and evaluate
relates to general supervision/direction recommended modification of the the issues pertaining to children.
of ‘‘skilled nursing services’’ as defined citation references in 32 CFR Comment. The commenter stated that
in 32 CFR 199.2(b). The commentor 199.4(e)(21)(ii)(I). The commentor felt there is some concern as to how well the
recommended that ‘‘TRICARE- that the existing citations were related rule will serve the needs of those living
authorized physician’’ either be defined, solely to Medicare conditions of outside the continental United States.
or the reference eliminated from the participation for home health agencies Response. The SNF PPS will be
definition of ‘‘skilled nursing services.’’ rather than conditions of coverage for applicable to those areas outside the
Response. Physician as defined in 32 home health services. continental United States as it is
CFR 199.2(b) is a person with a degree Response. The citation reference 42 applicable under Medicare.
of Doctor of Medicine (M.D.) or Doctor CFR 409, Subpart E, has been added to Comment. The commentor felt that
of Osteopathy (D.O.) who is licensed to subparagraph 32 CFR 199.4(e)(21)(ii)(I). there was a gap in the level of nursing
practice medicine by an appropriate This subpart implements Sections care afforded under the new home
authority. Based on this definition, it 1814(a)(2)(C), 1835(a)(2)(A), and health benefit.
appears that the concept of ‘‘TRICARE- 1861(m) of the Social Security Act with Response. 32 CFR 199.4(e)(21) ‘‘Home
authorized physician’’ is comparable to respect to the requirements that must be health services,’’ provides the broad
that of Medicare’s—as it relates to met for Medicare payment to be made range of services available under the
general supervision/direction of ‘‘skilled for home health services furnished to new home health benefit structure.
nursing services.’’ eligible beneficiaries. Comment. The commentor pointed
Comment. One commentor Comment. Another commentor felt out that home health aide and medical
recommended adding the phrase that a description of the outlier payment social worker services were currently
‘‘subject to appropriate adjustments’’ at methodology was warranted in the being covered under case management
the end of the second and fourth regulatory text. as well as under the hospice benefit.
sentences of subparagraph 32 CFR Response. A description of the outlier Response. Section IV of the
199.14(h)(1), since residual final payment methodology has been SUPPLEMENTARY INFORMATION portion of
payment depends upon the actual incorporated into the final rule. the rule has been modified to reflect this
HHRG and the impact of other payment Comment. Another commentor felt additional coverage.
adjustments that cannot be made prior that the Medicare qualifying condition Comment. The same commentor
to final claim submission. for payment definition of ‘‘intermittent suggested that the rule specify what, if
Response. The phrase ‘‘subject to skilled nursing services’’ be included in any, benefit exclusions remain
appropriate adjustments’’ is being added 32 CFR 199.2(b), since it is distinct from following the change in the definitions
to the recommended sentences in the scope of coverage standards of ‘‘custodial care’’ and ‘‘domiciliary
subparagraph 32 CFR 199.14(h)(1), since available under the home health benefit care.’’
it is agreed that residual final payments (i.e., the definitions of ‘‘intermittent Response. The existing regulatory
are impacted by other payment home health aide and skilled nursing language provides the benefit
adjustments that cannot be made prior services’’ and ‘‘part time home health exclusions; relevant TRICARE policies
to final claim submission. aide and skilled nursing services’’). have been or will be modified as

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necessary to reflect the revised originally projected that the skilled both the impact of the SNF benefit
definitions. nursing facility (SNF) benefit change changes and reimbursement changes.
Comment. The commentor also and the reduced TRICARE payments to We examined SNF payments for
suggested adding a regulatory definition SNFs would reduce SNF payments by beneficiaries under age 65 and age 65
for ‘‘medically necessary care.’’ more than $100 million per year. and over separately. Table 1 shows that
Response. That term is consistent However, analysis of actual SNF the level of government payments for
with the existing regulatory definitions payments that have been made since the SNF services for beneficiaries under age
of ‘‘appropriate medical care’’ and benefit changes and payment system 65 declined by about 48 percent from
‘‘medically or psychologically were implemented in August 2003 the quarter immediately prior to
necessary’’; a separate definition is not indicate that the impact has been much implementation of the new rules to the
necessary. less than expected. Based on the quarter immediately after their
Comment. The same commentor analysis of actual SNF payments and implementation (we did not use data
recommended that the case manager’s other benefit changes, we have from August 2003 because some persons
involvement in the plan of care be determined that this rule is not were in SNFs under the old rules and
recognized in the final rule. economically significant under some were there under the new rules).
Response. The regulatory provisions Executive Order 12866. We believe that most of this impact is
for establishment of a plan of care are due to TRICARE’s shift from paying
consistent with those provided under SNF Changes billed charges for SNF services to using
the Medicare program. the SNF PPS method. The percentage
The objective of the SNF benefit
reduction in government SNF payments
X. Regulatory Procedures change and the revised SNF payment
was less for persons age 65 and over: we
system is to make TRICARE’s SNF
We have examined the impacts of the found an 11 percent decline in SNF
benefit consistent with Medicare, which
Final Rule under Executive Order payments for these beneficiaries. We
12866. Executive Order 12866 directs satisfies a Congressional goal. A second believe that the impact is less for
agencies to assess all costs and benefits objective is to increase the quality of beneficiaries age 65 and over because
of available regulatory alternatives and, care by requiring a more detailed review TRICARE is second payer to Medicare.
if regulation is necessary, to select of SNF cases and more appropriate Because Medicare’s payments for these
regulatory approaches that maximize placement of SNF patients. There will beneficiaries have been based on
net benefits. A regulatory impact also be an increase in payment Medicare’s SNF–PPS payment system
analysis (RIA) must be prepared for efficiency because SNF payments will for a number of years, TRICARE’s
major rules with economically cease when SNF care is no longer introduction of the new payment system
significant effects ($100 million or more necessary. had a very small impact. In aggregate,
in any one year). We assessed the quantitative impact the benefit changes and the new SNF
We originally thought that this final of the SNF change by comparing payment system reduced TRICARE
rule was a major one because it had an TRICARE’s payments for SNF care prior government payments to SNFs by 18
impact of more than $100 million per to the changes with payments after the percent, which is equal to about $4.2
year. However, we now believe that the changes were implemented in August million per quarter or about $17 million
impact will be significantly less. We had 2003. These payment trends capture per year.

[In thousands]

Under age Age 65 and Total

65 above

May–July 2003 ......................................................................................................................................... $4,790 $18,051 $22,841

Sep–Nov 2003 ......................................................................................................................................... $2,571 $16,048 $18,619
% Change ................................................................................................................................................ ¥48 ¥11 ¥18

Home Health retrospective method of analysis we the HH PPS method to pay HH services
used for SNF services is not possible for for a number of years.
The objective of the home health (HH)
home health claims. We analyzed recent Change in Definition of Custodial Care
benefit change and the revised HH
payment system is to make TRICARE’s HH payments under TRICARE and
found that TRICARE paid about $21 The narrowing of the definition of
HH benefit consistent with Medicare, custodial care expanded the benefits
which satisfies a Congressional goal. A million per year in home health allowed
available to certain TRICARE
second objective is to increase the amounts in the 2002–2003 period. We
beneficiaries. This satisfied the
quality of care by requiring a more estimate that the new HH system will
Congressional goal of revising
detailed review of HH cases and more decrease HH payments by TRICARE’s definition of custodial care
appropriate placement of HH patients. approximately 20 percent. Thus, we and expanding TRICARE’s benefits.
The HH payment system also increases estimate that TRICARE payments for HH We assessed the quantitative impact
efficiency because its per-episode care will be reduced by approximately of the change by examining the level of
method of payment discourages $4 million per year. We estimate an additional benefits that TRICARE paid
unnecessary utilization. impact of less than $1 million per year for persons who received benefits under
For home health claims, the benefit for beneficiaries age 65 and over the expanded program. We were able to
and reimbursement changes have just because TRICARE is secondary payer to identify the TRICARE beneficiaries who
gone into effect and the data have not Medicare and Medicare has been using received services due to the expanded
developed as of yet. Therefore, the TRICARE benefits. We found that

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TRICARE payments were approximately PART 199—[AMENDED] beneficiaries under the age of 18 and
$6.9 million in FY 2003 for these those receiving maternity care. The only
beneficiaries. All of these benefit ■ 1. The authority citation for Part 199 homebound criteria for these special
payments represented additional continues to read as follows: beneficiary categories is written
government payments due to the change Authority: 5 U.S.C. 301; 10 U.S.C. Chapter certification from a physician attesting
in the definition of custodial care. The 55. to the fact that leaving the home would
payments were $6.2 million in the first ■ 2. Section 199.2(b) is amended by place the beneficiary at medical risk.
six months of FY 2004. Reliable data are Home health discipline. One of six
adding the definitions of ‘‘facility
not available beyond the first six home health disciplines covered under
charge’’ and ‘‘part-time or intermittent
months of FY04. We believe that the the home health benefit (skilled nursing
home health aide and skilled nursing
FY04 impact is more appropriate and services, home health aide services,
services’’ in alphabetical order, by
believe that the annual impact of the physical therapy services, occupational
revising the definitions of
change in the definition of custodial therapy services, speech-language
‘‘homebound’’ and ‘‘home health
care is about $12.4 million. pathology services, and medical social
discipline’’, by removing the definitions
Summary of ‘‘intermittent home health aide and
skilled nursing services’’ and ‘‘part-time * * * * *
The quantitative impact of the three home health aide and skilled nursing Part-time or intermittent home health
changes consists of $17 million in services’’, to read as follows: aide and skilled nursing services. Part-
savings for the SNF change, $4 million time or intermittent means skilled
in savings for the HH change, and $12 § 199.2 Definitions. nursing and home health aide services
million in costs for the change in the * * * * * furnished any number of days per week
definition of custodial care. (b) * * * as long as they are furnished (combined)
Facility charge. The term ‘‘facility less than 8 hours each day and 28 or
Paperwork Reduction Act charge’’ means the charge, either fewer hours each week (or, subject to
This rule will not impose additional inpatient or outpatient, made by a review on a case-bay-case basis as to the
information collection requirements on hospital or other institutional provider need for care, less than 8 hours each day
the public under the Paperwork to cover the overhead costs of providing and 35 or fewer hours per week).
Reduction Act of 1995 (44 U.S.C. 3501– the service. These costs would include * * * * *
3511). Existing information collection building costs, i.e. depreciation and ■ 3. Section 199.4 is amended by
requirements of the TRICARE and interest; staffing costs; drugs and revising the second sentence in
Medicare programs will be utilized. supplies; and overhead costs, i.e., paragraph (b)(3)(xiv), by removing and
Comments on information collection utilities, housekeeping, maintenance, reserving paragraph (e)(12), by revising
requirements should be submitted to etc. paragraphs (e)(21)(i)(D), (e)(21)(ii)(I), by
Kim Frazier, 5111 Leesburg Pike, Suite * * * * * revising ‘‘§ 199.14(i)’’ to read
810, Falls Church, VA 22041–3206, Homebound. A beneficiary’s ‘‘§ 199.14(e)’’ in paragraphs (f)(8)(i) and
telephone 703–681–3636. condition is such that there exists a (f)(8)(ii)(A), and by revising paragraphs
normal inability to leave home and, (g)(7) and (g)(8) to read as follows:
Implementation consequently, leaving home would
require considerable and taxing effort. § 199.4 Basic program benefits.
This rule implements specific
statutory requirements with specific Any absence of an individual from the (b) * * *
statutory effective dates. The home attributable to the need to receive (3) * * *
implementation of new SNF benefit health care treatment—including regular (xiv) * * * Skilled nursing facility
requirements and SNF prospective absences for the purpose of participating care for each spell of illness shall
payment system is effective for in therapeutic, psychosocial, or medical continue to be provided for as long as
admissions on or after August 1, 2003. treatment in an adult day-care program medically necessary and appropriate.
The implementation of the other benefit that is licensed or certified by a state, or * * *
requirements and the home health care accredited to furnish adult day-care * * * * *
prospective payment system is effective services in the—state shall not (e) * * *
with the start health care delivery date disqualify an individual from being (21) * * *
under each of the TRICARE Next considered to be confined to his home. (i) * * *
Generation of Contracts (T-Nex). The Any other absence of an individual from (D) Part-time or intermittent services
implementation of T-Nex contracts was the home shall not disqualify an of a home health aide who has
fully phased-in on November 1, 2004. individual if the absence is infrequent successfully completed a state-
These other benefit requirements and or of relatively short duration. For established or other training program
the home health care prospective purposes of the preceding sentence, any that meets the requirements of 42 CFR
payment system are part of the absence for the purpose of attending a Part 484;
contractual requirements of the T-Nex religious service shall be deemed to be * * * * *
contracts, and were not negotiated or an absence of infrequent or short (ii) * * *
directed as a change to the previous duration. Also, absences from the home (I) Any other conditions of coverage/
contracts. for non-medical purposes, such as an participation that may be required
occasional trip to the barber, a walk under Medicare’s HHA benefit; i.e.,
List of Subjects in 32 CFR Part 199 around the block or a drive, would not coverage guidelines as prescribed under
necessarily negate the beneficiary’s Sections 1861(o) and 1891 of the Social
Claims, Dental health, Health care,
homebound status if the absences are Security Act (42 U.S.C. 1395x(o) and
Health insurance, Individuals with
undertaken on an infrequent basis and 1395bbb), 42 CFR Part 409, Subpart E
disabilities, Military personnel.
are of relatively short duration. An and 42 CFR Part 484.
■Accordingly, 32 CFR part 199 is exception is made to the above * * * * *
amended as follows: homebound definitional criteria for (g) * * *

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61378 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations

(7) Custodial care. Custodial care as ■ j. Amend paragraph (j)(1)(ii)(C) by ‘‘paragraph (g)(1)(v)’’ to read ‘‘paragraph
defined in § 199.2. revising ‘‘paragraph (g)(1)(ii)(B)’’ to read (j)(1)(v)’’;
(8) Domiciliary care. Domiciliary care ‘‘paragraph (j)(1)(ii)(B)’’; ■ aa. Amend paragraph (j)(1)(vi)(B)
as defined in § 199.2. ■ k. Amend paragraph (j)(1)(iii) introductory text by revising ‘‘paragraph
* * * * * introductory text by revising (g)(1)(vi)(A)’’ to read ‘‘paragraph
■ 4. Section 199.6 is amended by
‘‘paragraphs (g)(1)(iii)(A) and (B)’’ to (j)(1)(vi)(A)’’;
read ‘‘paragraphs (j)(1)(iii)(A) and (B)’’; ■ bb. Amend paragraph (j)(1)(vi)(B)(1)
revising paragraph (a)(8)(i)(B), by adding
■ l. Amend paragraph (j)(1)(iii)(D) by by revising ‘‘paragraph (g)(1)(vi)(B)(2)’’
a note in paragraph (b)(4)(vi)(K), and by
revising paragraph (b)(4)(xv)(F)(1), to revising ‘‘paragraphs (h)(1)(i) through to read ‘‘paragraph (j)(1)(vi)(B)(2)’’, and
read as follows: (iii)’’ to read ‘‘paragraphs (j)(1)(i) by revising ‘‘paragraph (g)(1)(v)’’ to read
through (iii)’’ and by revising ‘‘paragraph (j)(1)(v)’’;
§ 199.6 TRICARE authorized providers. ‘‘paragraph (h)(1)(iii)(B)’’ to read ■ cc. Amend paragraph (j)(1)(vi)(B)(2)
(a) * * * ‘‘(j)(1)(iii)(B)’’; by revising ‘‘paragraph (g)(1)(v)’’ to read
(8) * * * ■ m. Amend paragraph (j)(1)(iv)(B)(2) by ‘‘paragraph (j)(1)(v)’’ and by revising
(i) * * * revising ‘‘paragraph (g)(1)(iv)(B)(1)’’ to ‘‘paragraph (g)(1)(v)(B)(2)’’ to read
(B) A SNF or a HHA, in order to be read ‘‘paragraph (j)(1)(iv)(B)(1)’’; ‘‘(j)(1)(v)(B)(2)’’;
an authorized provider under TRICARE, ■ n. Amend paragraph (j)(1)(iv)(C) by ■ dd. Amend paragraph (j)(1)(vii)(A) by
must enter into a participation revising ‘‘paragraph (g)(1)(iii)(A)(1)’’ to revising ‘‘paragraphs (g)(1)(iii) and
agreement with TRICARE for all claims. read ‘‘paragraph (j)(1)(iii)(A)(1)’’, by (g)(1)(v)’’ to read ‘‘paragraphs (j)(1)(iii)
* * * * * revising ‘‘paragraphs (g)(1)(iii) and and (j)(1)(v)’’;
(g)(1)(iv)’’ to read ‘‘paragraphs (j)(1)(iii) ■ ee. Amend paragraph (j)(1)(viii)
(b) * * *
(4) * * * and (j)(1)(iv)’’, and by revising introductory text by revising
(vi) * * * ‘‘paragraph (g)(1)(iii)(C)’’ to read ‘‘paragraphs (g)(1)(i) through (g)(1)(iv)’’
(K) * * * ‘‘paragraph (j)(1)(iii)(C)’’; to read ‘‘paragraphs (j)(1)(i) through
■ o. Amend paragraph (j)(1)(iv)(C)(1) by (j)(1)(iv)’’;
Note: If a pediatric SNF is certified by revising ‘‘paragraph (g)(1)(iv)(C)(2)’’ to ■ ff. Amend paragraph (j)(1)(viii)(A) by
Medicaid, it will be considered to meet the read ‘‘paragraph (j)(1)(iv)(C)(2)’’; revising ‘‘paragraph (g)(1)(viii)’’ to read
Medicare certification requirement in order ■ p. Amend paragraph (j)(1)(ii)(C)(2) by ‘‘paragraph (j)(1)(viii)’’;
to be an authorized provider under TRICARE. revising ‘‘paragraph (g)(1)(iv)(C)(1)’’ to ■ gg. Amend paragraph (j)(1)(viii)(B) by
read ‘‘paragraph (j)(1)(iv)(C)(1)’’, and by revising ‘‘paragraph (g)(1)(iii)’’ to read
* * * * *
(xv) * * * revising ‘‘paragraph (g)(1)(iv)(C)(3)’’ to ‘‘paragraph (j)(1)(iii)’’;
read ‘‘paragraph (j)(1)(iv)(C)(3)’’; ■ hh. Amend paragraph (j)(1)(viii)(C) by
(F) * * *
(1) The HHA must submit all ■ q. Amend paragraph (j)(1)(iv)(D) revising ‘‘paragraph (g)(1)(iv)’’ to read
TRICARE claims for all home health introductory text by revising ‘‘paragraph ‘‘paragraph (j)(1)(iv)’’;
(h)(1)(iv)(C)’’ to read ‘‘paragraph ■ ii. Amend paragraph (j)(1)(viii)(D) by
services, excluding durable medical
(j)(1)(iv)(C)’’, and by revising ‘‘paragraph revising ‘‘paragraph (g)(1)(iv)(B)’’ to read
equipment (DME), while the beneficiary
(h)(1)’’ to read ‘‘paragraph (j)(1)’’; ‘‘paragraph (j)(1)(iv)(B)’’;
is under the home health plan without
■ r. Amend paragraph (j)(1)(iv)(D)(2)(i) ■ jj. Amend paragraph (l)(2)
regard to whether or not the item or
by revising ‘‘paragraph (h)(1)’’ to read introductory text by revising ‘‘paragraph
service was furnished by the HHA, by
‘‘paragraph (j)(1)’’; (g)’’ to read ‘‘paragraph (j)’’; and
others under arrangement with the
■ s. Amend paragraph (j)(1)(iv)(D)(2)(ii) ■ kk. Amend paragraph (l)(2) by
HHA, or under any other contracting or
by revising ‘‘paragraph (h)(1)(ii)’’ to read revising ‘‘paragraph (g)’’ to read
consulting arrangement.
‘‘paragraph (j)(1)(ii)’’ and by revising ‘‘paragraph (j)’’.
* * * * * ‘‘paragraph (h)(1)(iv)(A)’’ to read
■ 5. Section 199.14 is amended as § 199.14 Provider reimbursement
‘‘paragraph (j)(1)(iv)(A)’’; methods.
follows: ■ t. Amend paragraph (j)(1)(iv)(D)(3) by
■ a. Amend paragraph (a)(4) by revising revising ‘‘paragraph (h)(1)(iv)(D)’’ to (a) * * *
‘‘paragraph (i)’’ to read ‘‘paragraph (l)’’; read ‘‘paragraph (j)(1)(iv)(D)’’; (5) Hospital outpatient services. This
■ b. Revise paragraphs (a)(5) ■ u. Amend paragraph (j)(1)(iv)(E)
paragraph (a)(5) identifies and clarifies
introductory text and (a)(5)(i); introductory text by revising ‘‘paragraph payment methods for certain outpatient
■ c. Amend paragraphs (a)(5)(ii) and (h)(1)’’ to read ‘‘paragraph (j)(1)’’, and by services, including emergency services,
(a)(5)(iii) by revising ‘‘paragraph (h)(1)’’ revising ‘‘paragraph (h)(1)(iv)(E)’’ to provided by hospitals.
to read ‘‘paragraph (j)(1)’’ in both places; read ‘‘paragraph (j)(1)(iv)(E)’’; (i) Laboratory services. TRICARE
■ d. Revise paragraph (a)(5)(iv); ■ v. Amend paragraph (j)(1)(iv)(E)(2) by
payments for hospital outpatient
■ e. Add paragraphs (a)(5)(v) through revising ‘‘paragraph (h)(1)’’ to read laboratory services including clinical
(a)(5)(xii); ‘‘paragraph (j)(1)’’; laboratory services are based on the
■ f. Revise paragraphs (h) introductory ■ w. Amend paragraph (j)(1)(v)(A) by allowable charge method under
text; (h)(1), (h)(3), and (h)(5); revising ‘‘paragraph (g)(1)(v)’’ to read paragraph (j)(1) of the section. In the
■ g. Amend paragraph (j)(1)(i)(B) by ‘‘paragraph (j)(1)(v)’’; case of laboratory services for which the
revising ‘‘paragraph (g)(1)(iv)’’ to read ■ x. Amend paragraph (j)(1)(v)(B) by CMAC rates are established under that
‘‘paragraph (j)(1)(iv)’’; revising ‘‘(g)(1)(v)(B)(1) through (3)’’ to paragraph, a payment rate for the
■ h. Amend paragraph (j)(1)(i)(D) by read ‘‘paragraphs (j)(1)(v)(B)(1) through technical component of the laboratory
revising ‘‘paragraph (h)(1)(i)(B)’’ to read (3)’’; services is provided. Hospital charges
‘‘paragraph (j)(1)(i)(B)’’ and by revising ■ y. Amend paragraph (j)(1)(v)(C) for an outpatient laboratory service are
‘‘paragraph (h)(1)(i)(C)’’ to read introductory text by revising ‘‘paragraph reimbursed using the CMAC technical
‘‘paragraph (j)(1)(i)(C)’’; (g)(i)(v)’’ to read ‘‘paragraph (j)(1)(v)’’; component rate.
■ i. Amend paragraph (j)(1)(ii)(B) by ■ z. Amend paragraph (j)(1)(vi)(A) by * * * * *
revising ‘‘paragraph (g)(1)(ii)(A)’’ to read revising ‘‘paragraph (g)(1)(ii)(B)’’ to read (iv) Radiology services. TRICARE
‘‘paragraph (j)(1)(ii)(A)’’ ‘‘paragraph (j)(1)(ii)(B)’’ and by revising payments for hospital outpatient

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Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61379

radiology services are based on the professional component of the services another HHA prior to the end of the 60-
allowable charge method under is provided. Hospital charges for an day episode or discharge and
paragraph (j)(1) of the section. In the outpatient professional service are readmission of a beneficiary to the same
case of radiology services for which the reimbursed using the CMAC HHA before the end of the 60-day
CMAC rates are established under that professional component rate. If the episode. The PEP payment is calculated
paragraph, a payment rate for the professional outpatient hospital services by multiplying the proportion of the 60-
technical component of the radiology are billed by a professional provider day episode during which the
services is provided. Hospital charges group, not by the hospital, no payment beneficiary remained under the care of
for an outpatient radiology service are shall be made to the hospital for these the original HHA by the beneficiary’s
reimbursed using the CMAC technical services. assigned 60-day episode payment.
component rate. (xi) Facility charges. TRICARE
(v) Diagnostic services. TRICARE payments for hospital outpatient facility * * * * *
payments for hospital outpatient charges that would include the (5) Outlier payment. Outlier payments
diagnostic services are based on the overhead costs of providing the are allowed in addition to regular 60-
allowable charge method under outpatient service would be paid as day episode payments for beneficiaries
paragraph (j)(1) of the section. In the billed. For the definition of facility generating excessively high treatment
case of diagnostic services for which the charge, see § 199.2(b). costs. The following methodology is
CMAC rates are established under that (xii) Ambulatory surgery services. used for calculation of the outlier
paragraph, a payment rate for the Hospital outpatient ambulatory surgery payment:
technical component of the diagnostic services shall be paid in accordance
services is provided. Hospital charges with § 199.14(d). (i) TRICARE makes an outlier
for an outpatient diagnostic service are payment for an episode whose
* * * * *
reimbursed using the CMAC technical estimated cost exceeds a threshold
(h) Reimbursement of Home Health
component rate. Agencies (HHAs). HHAs will be amount for each case-mix group.
(vi) Ambulance services. Ambulance (ii) The outlier threshold for each
reimbursed using the same methods and
services provided on an outpatient basis case-mix group is the episode payment
rates as used under the Medicare HHA
by hospitals are paid on the same basis amount for that group, the PEP
prospective payment system under
as ambulance services covered by the
Section 1895 of the Social Security Act adjustment amount for the episode or
allowable charge method under
(42 U.S.C. 1395fff) and 42 CFR Part 484, the total significant change in condition
paragraph (j)(1) of this section.
(vii) Durable medical equipment Subpart E except as otherwise necessary adjustment amount for the episode plus
(DME) and supplies. Durable medical to recognize distinct characteristics of a fixed dollar loss amount that is the
equipment and supplies provided on an TRICARE beneficiaries and as described same for all case-mix groups.
outpatient basis by hospitals are paid on in instructions issued by the Director,
(iii) The outlier payment is a
the same basis as durable medical TMA. Under this methodology, an HHA
proportion of the amount of estimated
equipment and supplies covered by the will receive a fixed case-mix and wage-
adjusted national 60-day episode cost beyond the threshold.
allowable charge method under
payment amount as payment in full for (iv) TRICARE imputes the cost for
paragraph (j)(1) of this section.
(viii) Oxygen and related supplies. all costs associated with furnishing each episode by multiplying the
Oxygen and related supplies provided home health services to TRICARE- national per-visit amount of each
on an outpatient basis by hospitals are eligible beneficiaries with the exception discipline by the number of visits in the
paid on the same basis as oxygen and of osteoporosis drugs and DME. The full discipline and computing the total
related supplies covered by the case-mix and wage-adjusted 60-day imputed cost for all disciplines.
allowable charge method under episode amount will be payment in full (v) The fixed dollar loss amount and
paragraph (j)(1) of this section. subject to the following adjustments and the loss sharing proportion are chosen
(ix) Drugs administered other than additional payments:
so that the estimated total outlier
oral method. Drugs administered other (1) Split percentage payments. The
initial percentage payment for initial payment is no more than the
than oral method provided on an predetermined percentage of total
outpatient basis by hospitals are paid on episodes is paid to an HHA at 60
percent of the case-mix and wage payment under the home health PPS as
the same basis as drugs administered set by the Centers for Medicare &
other than oral method covered by the adjusted 60-day episode rate. The
residual final payment for initial Medicaid Services (CMS).
allowable charge method under
paragraph (j)(1) of this section. The episodes is paid at 40 percent of the * * * * *
allowable charge for drugs administered case-mix and wage adjusted 60-day Dated: October 5, 2005.
other than oral method is established episode rate subject to appropriate
L.M. Bynum,
from a schedule of allowable charges adjustments. The initial percentage
payment for subsequent episodes is paid Alternate OSD Federal Register Liaison
based on a formulary of the average Officer, Department of Defense.
wholesale price. at 50 percent of the case-mix and wage-
(x) Professional provider services. adjusted 60-day episode rate. The [FR Doc. 05–20415 Filed 10–21–05; 8:45 am]
TRICARE payments for hospital residual final payment for subsequent BILLING CODE 5001–06–P
outpatient professional provider episodes is paid at 50 percent of the
services rendered in an emergency case-mix and wage-adjusted 60-day
room, clinic, or hospital outpatient episode rate subject to appropriate
department, etc., are based on the adjustments.
allowable charge method under * * * * *
paragraph (j)(1) of the section. In the (3) Partial episode payment (PEP). A
case of professional services for which PEP adjustment is used for payment of
the CMAC rates are established under an episode of less than 60 days resulting
that paragraph, a payment rate for the from a beneficiary’s elected transfer to

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