Custom Federal Regulations Service™

**This is supplemental material**

**for Book I of your set of**

**Federal Regulations**

Title 38, Parts 17, 46, 47, 51, and 58--61

*Medical*

**Veterans Benefits Administration**

Supplement No. 22

Covering period of *Federal Register* issues

through January 21, 2004

Copyright © 2004 Jonathan Publishing

**Need Assistance?**

Printing for all supplements is performed by the United States
Government

Printing Office. Distribution is the responsibility of the

VA Forms and Publications Depot. Accordingly:

Questions concerning **[missing supplements]{.smallcaps}**, need for
**[additional books]{.smallcaps}**, and other **[distribution
list]{.smallcaps}** issues for this loose-leaf service should be
directed to:

Department of Veterans Affairs

Veterans Benefits Administration

Directives, Forms and Records Staff

Mail Code: 20S5

810 Vermont Avenue, N.W.

Washington DC 20420

Telephone: 202/273-7080

Fax: 202/275-5947

Questions concerning the **[filing instructions]{.smallcaps}** for this
loose-leaf service,

or the reporting of **[substantive errors]{.smallcaps}** in the text,

may be directed to:

Jonathan Publishing

855 Yorks Crossing

Driftwood TX 78619

Telephone: 512/858-1225

Fax: 512/858-1230

E-mail: garyknight@ev1.net

**Internet: http://www.jonpub.com**

Copyright © 2004 Jonathan Publishing

> **GENERAL INSTRUCTIONS**

Custom Federal Regulations Service™

**Supplemental Materials for *Book I***

**Code of Federal Regulations**

**Title 38, Parts 17, 46, 47, 51, and 58--61**

***Medical***

**Veterans Benefits Administration**

**Supplement No. 22**

25 January 2004

Covering the period of Federal Register issues

through January 21, 2004

When **Book I** was originally prepared, it was current through final
regulations published in the *Federal Register* of 15 January 2000.
These supple­mental materials are designed to keep your regulations up to
date. You should file the attached pages immediately, and record the
fact that you did so on the *Supplement Filing Record* which is at page
I-8 of Book I, *Medical*.

> **To ensure accuracy and timeliness of your materials,**
>
> **it is important that you follow these simple procedures:**
>
> 1\. Always file your supplemental materials immediately upon receipt.
>
> 2\. Before filing, always check the Supplement Filing Record (page
> I-8) to be sure that all prior supplements have been filed. If you are
> missing any supple­ments, contact the Veterans Benefits Administration
> at the address listed on page I-2.
>
> 3\. After filing, enter the relevant information on the Supplement
> Filing Record sheet (page I-8)---the date filed, name/initials of
> filer, and date through which the *Federal Register* is covered.
>
> 4\. If as a result of a failure to file, or an undelivered supplement,
> you have more than one supplement to file at a time, be certain to
> file them in chronological order, lower number first.
>
> 5\. Always retain the filing instructions (simply insert them at the
> back of the book) as a backup record of filing and for reference in
> case of a filing error.
>
> 6\. Be certain that you *permanently discard* any pages indicated for
> removal in the filing instructions in order to avoid confusion later.

To execute the filing instructions, simply remove *and throw away* the
pages listed under *Remove These Old Pages,* and replace them in each
case with the corres­pond­ing pages from this supplement listed under *Add
These New Pages*. Occasionally new pages will be added without removal
of any old material (reflecting new regulations), and occasionally old
pages will be removed with­out addition of any new material (reflecting
rescinded regulations)---in these cases the word *None* will appear in
the appropriate column.

> **FILING INSTRUCTIONS**

**Book I, Supplement No. 22**

**January 25, 2004**

*Remove these Add these Section(s)*

*[old pages]{.underline} [new pages]{.underline} [Affected]{.underline}*

**Do not file this supplement until you confirm that**

**all prior supplements have been filed**

17.101-1 to 17.102-2 17.101-1 to 17.102-2 §§17.101--17.102

**Be sure to complete the**

***Supplement Filing Record* (page I-8)**

**when you have finished filing this material.**

> **HIGHLIGHTS**

**Book I, Supplement No. 22**

**January 25, 2004**

***Supplement* Highlights *references***: Where substantive changes are
made in the text of regulations, the paragraphs of *Highlights* sections
are cited at the end of the relevant section of text. Thus, if you are
reading §17.100, you will see a note at the end of that section which
reads: "Supplement *Highlights* references---37(1)." This means that
paragraph 1 of the *Highlights* section in Supplement No. 37 contains
information about the changes made in §17.100. By keeping and filing the
*Highlights* sections, you will have a reference source explaining all
substantive changes in the text of the regulations.

***Supplement frequency***: Beginning 1 January 2000, supplements for
this Book I will be issued *every month* during which a final rule
addition or modification is made to the parts of Title 38 covered by
this book. Supplements will be numbered consecutively as issued.

**Modifications in this supplement include the following:**

1\. On 19 December 2003, the VA published a final rule, effective that
same date, to amend VA medical regulations concerning "reasonable
charges" for medical care or services provided or furnished by VA to a
veteran:

For a nonservice-connected disability for which the veteran is entitled
to care (or the payment of expenses of care) under a health plan
contract;

For a nonservice-connected disability incurred incident to the veteran's
employment and covered under a worker's compensation law or plan that
provides reimbursement or indemnification for such care and services; or

For a nonservice-connected disability incurred as a result of a motor
vehicle accident in a State that requires automobile accident
reparations insurance.

The regulations contain methodologies designed to establish VA charges
that replicate, insofar as possible, the 80th percentile of community
charges, adjusted to the market areas in which VA facilities are
located, and trended forward to the time period during which the charges
will be used. This rule amends the regulations regarding VA's reasonable
charges methodologies for the following purposes: To establish charges
for medical care, procedures, services, durable medical equipment (DME),
drugs, injectables, medical items, and supplies for which we previously
did not have charges; to replace certain charges previously based on VA
costs with charges based on community charges; to establish separate
charges for medical care, procedures, services, DME, drugs, injectables,
medical items, and supplies whose charges were previously combined with
other charges; to bring our charge structures and associated billing
practices closer to industry standard charge structures and billing
practices; and to provide certain clarifications. Changes:

• Revised §17.101.

2\. On 7 January 2004, the VA published a final rule, effective that
same date, to amend VA medical regulations with respect to charges used
for the purpose of recovering from tortiously liable third parties the
reasonable value of medical care and services provided by VA. Changes:

• In §17.101, added a note preceding the information collection
parenthetical; and

• In §17.102, revised paragraph (h).

Charges, Waivers, And Collections

**§17.101 Collection or recovery by VA for medical care or services
provided or furnished to a veteran for a nonservice-connected
disability.**

\(a\) (1) *General*. This section covers collection or recovery by VA,
under 38 U.S.C. 1729, for medical care or services provided or furnished
to a veteran:

\(i\) For a nonservice-connected disability for which the veteran is
entitled to care (or the payment of expenses of care) under a health
plan contract;

\(ii\) For a nonservice-connected disability incurred incident to the
veteran's employment and covered under a worker's compensation law or
plan that provides reimbursement or indemnification for such care and
services; or

\(iii\) For a nonservice-connected disability incurred as a result of a
motor vehicle accident in a State that requires automobile accident
reparations insurance.

\(2\) *Methodologies*. Based on the methodologies set forth in this
section, the charges billed will include the following types of charges,
as appropriate: Acute inpatient facility charges; skilled nursing
facility/sub-acute inpatient facility charges; partial hospitalization
facility charges; outpatient facility charges; physician and other
professional charges, including professional charges for anesthesia
services and dental services; pathology and laboratory charges;
observation care facility charges; ambulance and other emergency
transportation charges; and charges for durable medical equipment,
drugs, injectables, and other medical services, items, and supplies
identified by HCPCS Level II codes. In addition, the charges billed for
prescription drugs not administered during treatment will be based on VA
costs in accordance with the methodology set forth in §17.102. Data for
calculating actual charge amounts based on the methodologies set forth
in this section will either be published in a notice in the *Federal
Register* or will be posted on the Internet site of the Veterans Health
Administration Chief Business Office, currently at
http://www.va.gov/cbo, under "Charge Data." For care for which VA has
established a charge, VA will bill using its most recent published or
posted charge. For care for which VA has not established a charge, VA
will bill according to the methodology set forth in paragraph (a)(8) of
this section.

\(3\) *Data sources*. In this section, data sources are identified by
name. The specific editions of these data sources used to calculate
actual charge amounts, and information on where these data sources may
be obtained, will be presented along with the data for calculating
actual charge amounts, either in notices in the *Federal Register* or on
the Internet site of the Veterans Health Administration Chief Business
Office, currently at http://www.va.gov/cbo, under "Charge Data."

\(4\) *Amount of recovery or collection---third party liability*. A
third-party payer liable under a health plan contract has the option of
paying either the billed charges described in this section or the amount
the health plan demonstrates is the amount it would pay for care or
services furnished by providers other than entities of the United States
for the same care or services in the same geographic area. If the amount
submitted by the health plan for payment is less than the amount billed,
VA will accept the submission as payment, subject to verification at
VA's discretion in accordance with this section. A VA employee having
responsibility for collection of such charges may request that the third
party health plan submit evidence or information to substantiate the
appropriateness of the payment amount (e.g., health plan or insurance
policies, provider agreements, medical evidence, proof of payment to
other providers in the same geographic area for the same care and
services VA provided).

\(5\) *Definitions*. For purposes of this section:

*APC* means Medicare Ambulatory Payment Classification.

*CMS* means the Centers for Medicare and Medicaid Services.

*CPI-U* means Consumer Price Index---All Urban Consumers.

*CPT code* and *CPT procedure code* mean Current Procedural Terminology
code, a five-digit identifier defined by the American Medical
Association for a specified physician service or procedure.

*DME* means Durable Medical Equipment.

*DRG* means Diagnosis Related Group.

*Geographic area* means a three-digit ZIP Code area, where three-digit
ZIP Codes are the first three digits of standard U.S. Postal Service ZIP
Codes.

*HCPCS code* means a Healthcare Common Procedure Coding System Level II
identifier, consisting of a letter followed by four digits, defined by
CMS for a specified physician service, procedure, test, supply, or other
medical service.

*ICU* means Intensive Care Unit, including coronary care units.

*MDR* means Medical Data Research, a medical charge database published
by Ingenix, Inc.

*MedPAR* means the Medicare Provider Analysis and Review file.

*Non-provider-based* means a VA health care entity (such as a small VA
community-based outpatient clinic) that functions as the equivalent of a
doctor's office or for other reasons does not meet CMS provider-based
criteria, and, therefore, is not entitled to bill outpatient facility
charges.

*Provider-based* means the outpatient department of a VA hospital or any
other VA health care entity that meets CMS provider-based criteria.
Provider-based entities are entitled to bill outpatient facility
charges.

*RBRVS* means Resource-Based Relative Value Scale.

*RVU* means Relative Value Unit.

*Unlisted procedures* mean procedures, services, items, and supplies
that have not been defined or specified by the American Medical
Association or CMS, and the CPT and HCPCS codes used to report such
procedures, services, items, and supplies.

\(6\) *Provider-based and non-provider-based entities and charges*. Each
VA health care entity (medical center, hospital, community-based
outpatient clinic, independent outpatient clinic, etc.) is designated as
either provider-based or non-provider-based. Provider-based entities are
entitled to bill outpatient facility charges; non-provider-based
entities are not. The charges for physician and other professional
services provided at non-provider-based entities will be billed as
professional charges only. Professional charges for both provider-based
entities and non-provider-based entities are produced by the
methodologies set forth in this section, with professional charges for
provider-based entities based on facility practice expense RVUs, and
professional charges for non-provider-based entities based on
non-facility practice expense RVUs.

(7*) Charges for medical care or services provided by non-VA providers
at VA expense*. When medical care or services are furnished at the
expense of the VA by non-VA providers, the charges billed for such care
or services will be the higher of the charges determined according to
this section, or the amount VA paid to the non-VA provider.

\(8\) *Charges for medical care or services for which VA does not have
an established charge*. When medical care or services are provided or
furnished at VA expense by either VA or non-VA providers, and VA does
not have an established charge for such care or services, then the
charges billed for such care or services will be according to the first
of the following subparagraphs that applies:

\(i\) In the event that a new identifier (DRG, CPT code, or HCPCS code)
is assigned to a particular type or item of medical care or service,
then until such time as VA establishes a charge for the new identifier,
VA's charge for such care or service will be VA's most recent
established charge for the identifier previously assigned to that type
or item of medical care or service; otherwise,

\(ii\) In the event that the medical care or service is provided or
furnished at VA expense by a non-VA provider, then VA's charge for such
care or service will be the amount VA paid to the non-VA provider;
otherwise,

\(iii\) VA's charges for prosthetic devices and durable medical
equipment will be VA's actual cost; otherwise,

\(iv\) If a Medicare allowed charge amount can be determined for the
care or service, then VA's charge will be the Medicare participating
provider allowed charge amount geographically adjusted using the
applicable geographic area adjustment factors determined pursuant to
this section; otherwise,

\(v\) If a charge cannot be established under paragraphs (a)(8)(i)
through (iv) of this section, then VA will not charge for the care or
service under this section.

\(b\) *Acute inpatient facility charges*. When VA provides or furnishes
acute inpatient services within the scope of care referred to in
paragraph (a)(1) of this section, acute inpatient facility charges
billed for such services will be determined in accordance with the
provisions of this paragraph. Acute inpatient facility charges consist
of per diem charges for room and board and for ancillary services that
vary by geographic area and by DRG. These charges are calculated as
follows:

\(1\) *Formula*. For each acute inpatient stay, or portion thereof, for
which a particular DRG assignment applies, the total acute inpatient
facility charge is the sum of the applicable charges determined pursuant
to paragraphs (b)(1)(i), (ii), and (iii) of this section. For purposes
of this section, standard room and board days and ICU room and board
days are mutually exclusive: VA will bill either a standard room and
board per diem charge or an ICU room and board per diem charge, as
applicable, for each day of a given acute inpatient stay.

\(i\) *Standard room and board charges*. Multiply the nationwide
standard room and board per diem charge determined pursuant to paragraph
(b)(2) of this section by the appropriate geographic area adjustment
factor determined pursuant to paragraph (b)(3) of this section. The
result constitutes the area-specific standard room and board per diem
charge. Multiply this amount by the number of days for which standard
room and board charges apply to obtain the total acute inpatient
facility standard room and board charge.

\(ii\) *ICU room and board charges*. Multiply the nationwide ICU room
and board per diem charge determined pursuant to paragraph (b)(2) of
this section by the appropriate geographic area adjustment factor
determined pursuant to paragraph (b)(3) of this section. The result
constitutes the area-specific ICU room and board per diem charge.
Multiply this amount by the number of days for which ICU room and board
per diem charges apply to obtain the total acute inpatient facility ICU
room and board charge.

\(iii\) *Ancillary charges*. Multiply the nationwide ancillary per diem
charge determined pursuant to paragraph (b)(2) of this section by the
appropriate geographic area adjustment factor determined pursuant to
paragraph (b)(3) of this section. The result constitutes the
area-specific ancillary per diem charge. Multiply this amount by the
number of days of acute inpatient care to obtain the total acute
inpatient facility ancillary charge.

*Note to paragraph (b)(1)*: If there is a change in a patient's
condition and/or treatment during a single acute inpatient stay such
that the DRG assignment changes (for example, a psychiatric patient who
develops a medical or surgical problem), then calculations of acute
inpatient facility charges will be made separately for each DRG,
according to the number of days of care applicable for each DRG, and the
total acute inpatient facility charge will be the sum of the total acute
inpatient facility charges for the different DRGs.

\(2\) *Per diem charges*. To establish a baseline, two nationwide
average per diem amounts for each DRG are calculated, one from the
MedPAR file and one from the MedStat claims database, a database of
nationwide commercial insurance claims. Average per diem charges are
calculated based on all available charges, except for care reported for
emergency room, ambulance, professional, and observation care. These two
data sources may report charges for two differing periods of time; when
this occurs, the data source charges with the earlier center date are
trended forward to the center date of the other data source, based on
changes to the inpatient hospital services component of the CPI-U.
Results obtained from these two data sources are then combined into a
single weighted average per diem charge for each DRG. The resulting
charge for each DRG is then separated into its two components, a room
and board component and an ancillary component, with the per diem charge
for each component calculated by multiplying the weighted average per
diem charge by the corresponding percentage determined pursuant to
paragraph (b)(2)(i) of this section. The room and board per diem charge
is further differentiated into a standard room and board per diem charge
and an ICU room and board per diem charge by multiplying the average
room and board charge by the corresponding DRG-specific ratios
determined pursuant to paragraph (b)(2)(ii) of this section. The
resulting per diem charges for standard room and board, ICU room and
board, and ancillary services for each DRG are then each multiplied by
the final ratio determined pursuant to paragraph (b)(2)(iii) of this
section to reflect the nationwide 80th percentile charges. Finally, the
resulting amounts are each trended forward from the center date of the
trended data sources to the effective time period for the charges, as
set forth in paragraph (b)(2)(iv) of this section. The results
constitute the nationwide 80th percentile standard room and board, ICU
room and board, and ancillary per diem charges.

\(i\) *Room and board charge and ancillary charge component
percentages*. Using only those cases from the MedPAR file for which a
distinction between room and board charges and ancillary charges can be
determined, the percentage of the total charges for room and board
compared to the combined total charges for room and board and ancillary
services, and the percentage of the total charges for ancillary services
compared to the combined total charges for room and board and ancillary
services, are calculated by DRG.

(ii*) Standard room and board per diem charge and ICU room and board per
diem charge ratios*. Using only those cases from the MedPAR file for
which a distinction between room and board and ancillary charges can be
determined, overall average per diem room and board charges are
calculated by DRG. Then, using the same cases, an average standard room
and board per diem charge is calculated by dividing total non-ICU room
and board charges by total non-ICU room and board days. Similarly, an
average ICU room and board per diem charge is calculated by dividing
total ICU room and board charges by total ICU room and board days.
Finally, ratios of standard room and board per diem charges to average
overall room and board per diem charges are calculated by DRG, as are
ratios of ICU room and board per diem charges to average overall room
and board per diem charges.

\(iii\) *80th percentile*. Using cases from the MedPAR file with
separately identifiable semi-private room rates, the ratio of the
day-weighted 80th percentile semi-private room and board per diem charge
to the average semi-private room and board per diem charge is obtained
for each geographic area. The geographic area-based ratios are averaged
to obtain a final 80th percentile ratio.

\(iv\) *Trending forward*. 80th percentile charges for each DRG,
obtained as described in paragraph (b)(2) of this section, are trended
forward based on changes to the inpatient hospital services component of
the CPI-U. Actual CPI-U changes are used from the center date of the
trended data sources through the latest available month as of the time
the calculations are performed. The three-month average annual trend
rate as of the latest available month is then held constant to the
midpoint of the calendar year in which the charges are primarily
expected to be used. The projected total CPI-U change so obtained is
then applied to the 80th percentile charges.

\(3\) *Geographic area adjustment factors*. For each geographic area,
the average per diem room and board charges and ancillary charges from
the MedPAR file are calculated for each DRG. The DRGs are separated into
two groups, surgical and non-surgical. For each of these groups of DRGs,
for each geographic area, average room and board per diem charges and
ancillary per diem charges are calculated, weighted by nationwide VA
discharges and by average lengths of stay from the combined MedPAR file
and MedStat claims database. This results in four average per diem
charges for each geographic area: room and board for surgical DRGs,
ancillary for surgical DRGs, room and board for non-surgical DRGs, and
ancillary for non-surgical DRGs. Four corresponding national average per
diem charges are obtained from the MedPAR file, weighted by nationwide
VA discharges and by average lengths of stay from the combined MedPAR
file and MedStat claims database. Four geographic area adjustment
factors are then calculated for each geographic area by dividing each
geographic area average per diem charge by the corresponding national
average per diem charge.

\(c\) *Skilled nursing facility/sub-acute inpatient facility charges*.
When VA provides or furnishes skilled nursing/sub-acute inpatient
services within the scope of care referred to in paragraph (a)(1) of
this section, skilled nursing facility/sub-acute inpatient facility
charges billed for such services will be determined in accordance with
the provisions of this paragraph. The skilled nursing facility/sub-acute
inpatient facility charges are per diem charges that vary by geographic
area. The facility charges cover care, including room and board, nursing
care, pharmaceuticals, supplies, and skilled rehabilitation services
(e.g., physical therapy, inhalation therapy, occupational therapy, and
speech-language pathology), that is provided in a nursing home or
hospital inpatient setting, is provided under a physician's orders, and
is performed by or under the general supervision of professional
personnel such as registered nurses, licensed practical nurses, physical
therapists, occupational therapists, speech-language pathologists, and
audiologists. These charges are calculated as follows:

\(1\) *Formula*. For each stay, multiply the nationwide per diem charge
determined pursuant to paragraph (c)(2) of this section by the
appropriate geographic area adjustment factor determined pursuant to
paragraph (c)(3) of this section. The result constitutes the
area-specific per diem charge. Finally, multiply the area-specific per
diem charge by the number of days of care to obtain the total skilled
nursing facility/sub-acute inpatient facility charge.

\(2\) *Per diem charge*. To establish a baseline, a nationwide average
per diem billed charge is calculated based on charges reported in the
MedPAR skilled nursing facility file. For this purpose, the following
MedPAR charge categories are included: room and board (private,
semi-private, and ward), physical therapy, occupational therapy,
inhalation therapy, speech-language pathology, pharmacy,
medical/surgical supplies, and "other" services. The following MedPAR
charge categories are excluded from the calculation of the per diem
charge and will be billed separately, using the charges determined as
set forth in other applicable paragraphs of this section, when these
services are provided to skilled nursing patients or sub-acute
inpatients: ICU and CCU room and board, laboratory, radiology,
cardiology, dialysis, operating room, blood and blood administration,
ambulance, MRI, anesthesia, durable medical equipment, emergency room,
clinic, outpatient, professional, lithotripsy, and organ acquisition
services. The resulting average per diem billed charge is then
multiplied by the 80th percentile adjustment factor determined pursuant
to paragraph (c)(2)(i) of this section to obtain a nationwide 80th
percentile charge level. Finally, the resulting amount is trended
forward to the effective time period for the charges, as set forth in
paragraph (c)(2)(ii) of this section.

\(i\) *80th percentile adjustment factor*. Using the MedPAR skilled
nursing facility file, the ratio of the day-weighted 80th percentile
room and board per diem charge to the day-weighted average room and
board per diem charge is obtained for each geographic area. The
geographic area-based ratios are averaged to obtain the 80th percentile
adjustment factor.

\(ii\) *Trending forward*. The 80th percentile charge is trended forward
based on changes to the inpatient hospital services component of the
CPI-U. Actual CPI-U changes are used from the time period of the source
data through the latest available month as of the time the calculations
are performed. The three-month average annual trend rate as of the
latest available month is then held constant to the midpoint of the
calendar year in which the charges are primarily expected to be used.
The projected total CPI-U change so obtained is then applied to the 80th
percentile charge.

\(3\) *Geographic area adjustment factors*. The average billed per diem
charge for each geographic area is calculated from the MedPAR skilled
nursing facility file. This amount is divided by the nationwide average
billed charge calculated in paragraph (c)(2) of this section. The
geographic area adjustment factor for charges for each VA facility is
the ratio for the geographic area in which the facility is located.

\(d\) *Partial hospitalization facility charges*. When VA provides or
furnishes partial hospitalization services that are within the scope of
care referred to in paragraph (a)(1) of this section, the facility
charges billed for such services will be determined in accordance with
the provisions of this paragraph. Partial hospitalization facility
charges are per diem charges that vary by geographic area. These charges
are calculated as follows:

\(1\) *Formula*. For each partial hospitalization stay, multiply the
nationwide per diem charge determined pursuant to paragraph (d)(2) of
this section by the appropriate geographic area adjustment factor
determined pursuant to paragraph (d)(3) of this section. The result
constitutes the area-specific per diem charge. Finally, multiply the
area-specific per diem charge by the number of days of care to obtain
the total partial hospitalization facility charge.

\(2\) *Per diem charge*. To establish a baseline, a nationwide median
per diem billed charge is calculated based on charges associated with
partial hospitalization from the outpatient facility component of the
Medicare Standard Analytical File 5 percent Sample. That median per diem
billed charge is then multiplied by the 80th percentile adjustment
factor determined pursuant to paragraph (d)(2)(i) of this section to
obtain a nationwide 80th percentile charge level. Finally, the resulting
amount is trended forward to the effective time period for the charges,
as set forth in paragraph (d)(2)(ii) of this section.

\(i\) *80th percentile adjustment factor*. The 80th percentile
adjustment factor for partial hospitalization facility charges is the
same as that computed for skilled nursing facility/sub-acute inpatient
facility charges under paragraph (c)(2)(i) of this section.

\(ii\) *Trending forward*. The 80th percentile charge is trended forward
based on changes to the outpatient hospital services component of the
CPI-U. Actual CPI-U changes are used from the time period of the source
data through the latest available month as of the time the calculations
are performed. The three-month average annual trend rate as of the
latest available month is then held constant to the midpoint of the
calendar year in which the charges are primarily expected to be used.
The projected total CPI-U change so obtained is then applied to the 80th
percentile charges, as described in paragraph (d)(2) of this section.

\(3\) *Geographic area adjustment factors*. The geographic area
adjustment factors for partial hospitalization facility charges are the
same as those computed for outpatient facility charges under paragraph
(e)(4) of this section.

\(e\) *Outpatient facility charges*. When VA provides or furnishes
outpatient facility services that are within the scope of care referred
to in paragraph (a)(1) of this section, the charges billed for such
services will be determined in accordance with the provisions of this
paragraph. Charges for outpatient facility services vary by geographic
area and by CPT/HCPCS code. These charges apply in the situations set
forth in paragraph (e)(1) of this section and are calculated as set
forth in paragraph (e)(2) of this section.

\(1\) *Settings and circumstances in which outpatient facility charges
apply*. Outpatient facility charges consist of facility charges for
procedures, diagnostic tests, evaluation and management services, and
other medical services, items, and supplies provided in the following
settings and circumstances:

\(i\) Outpatient departments and clinics at VA medical centers;

\(ii\) Other VA provider-based entities; and

\(iii\) VA non-provider-based entities, for procedures and tests for
which no corresponding professional charge is established under the
provisions of paragraph (f) of this section.

\(2\) *Formula*. For each outpatient facility charge CPT/HCPCS code,
multiply the nationwide 80th percentile charge determined pursuant to
paragraph (e)(3) of this section by the appropriate geographic area
adjustment factor determined pursuant to paragraph (e)(4) of this
section. The result constitutes the area-specific outpatient facility
charge. When multiple surgical procedures are performed during the same
outpatient encounter by a provider or provider team, the outpatient
facility charges for such procedures will be reduced as set forth in
paragraph (e)(5) of this section.

\(3\) *Nationwide 80th percentile charges by CPT/HCPCS code*. For each
CPT/HCPCS code for which outpatient facility charges apply, the
nationwide 80th percentile charge is calculated as set forth in either
paragraph (e)(3)(i) or (e)(3)(ii) of this section. The resulting amount
is trended forward to the effective time period for the charges, as set
forth in paragraph (e)(3)(iii) of this section. The results constitute
the nationwide 80th percentile outpatient facility charges by CPT/HCPCS
code.

(i*) Nationwide 80th percentile charges for CPT/HCPCS codes which have
APC assignments*. Using the outpatient facility charges reported in the
outpatient facility component of the Medicare Standard Analytical File 5
percent Sample, claim records are selected for which all charges can be
assigned to an APC. Using this subset of the 5 percent Sample data,
nationwide median charge to Medicare APC payment amount ratios, by APC,
and nationwide 80th percentile to median charge ratios, by APC, are
computed according to the methodology set forth in paragraphs
(e)(3)(i)(A) and (e)(3)(i)(B) of this section, respectively. The product
of these two ratios by APC is then computed, resulting in a composite
nationwide 80th percentile charge to Medicare APC payment amount ratio.
This ratio is then compared to the alternate nationwide 80th percentile
charge to Medicare APC payment amount ratio computed in paragraph
(e)(3)(i)(C) of this section, and the lesser amount is selected and
multiplied by the current Medicare APC payment amount. The resulting
product is the APC-specific nationwide 80th percentile charge amount for
each applicable CPT/HCPCS code.

(A*) Nationwide median charge to Medicare APC payment amount ratios*.
For each CPT/HCPCS code, the ratio of median billed charge to Medicare
APC payment amount is determined. The weighted average of these ratios
for each APC is then obtained, using the reported 5 percent Sample
frequencies as weights. In addition, corresponding ratios are calculated
for each of the APC categories set forth in paragraph (e)(3)(i)(D) of
this section, again using the reported 5 percent Sample frequencies as
weights. For APCs where the 5 percent Sample frequencies provide a
statistically credible result, the APC-specific weighted average
nationwide median charge to Medicare APC payment amount ratio so
obtained is accepted without further adjustment. However, if the 5
percent Sample data do not produce statistically credible results for
any specific APC, then the APC category-specific ratio is applied for
that APC.

\(B\) *Nationwide 80th percentile to median charge ratios*. For each
CPT/HCPCS code, a geographically normalized nationwide 80th percentile
billed charge amount is divided by a similarly normalized nationwide
median billed charge amount. The weighted average of these ratios for
each APC is then obtained, using the reported 5 percent Sample
frequencies as weights. In addition, corresponding ratios are calculated
for each of the APC categories set forth in paragraph (e)(3)(i)(D) of
this section, again using the reported 5 percent Sample frequencies as
weights. For APCs where the 5 percent Sample frequencies provide a
statistically credible result, the APC-specific weighted average
nationwide 80th percentile to median charge ratio so obtained is
accepted without further adjustment. However, if the 5 percent Sample
data do not produce statistically credible results for any specific APC,
then the APC category-specific ratio is applied for that APC.

\(C\) *Alternate nationwide 80th percentile charge to Medicare APC
payment amount ratios*. A minimum 80th percentile charge to Medicare APC
payment amount ratio is set at 2.0 for APCs with Medicare APC payment
amounts of \$25 or less. A maximum 80th percentile charge to Medicare
APC payment amount ratio is set at 6.5 for APCs with Medicare APC
payment amounts of \$10,000 or more. Using linear interpolation with
these endpoints, the alternate APC-specific nationwide 80th percentile
charge to Medicare APC payment amount ratio is then computed, based on
the Medicare APC payment amount.

\(D\) *APC categories for the purpose of establishing 80th percentile to
median factors*. For the purpose of the statistical methodology set
forth in paragraph (e)(3)(i) of this section, APCs are assigned to the
following APC categories:

> (*1*) Radiology.
>
> (*2*) Drugs.
>
> (*3*) Office, Home, and Urgent Care Visits.
>
> (*4*) Cardiovascular.
>
> (*5*) Emergency Room Visits.
>
> (*6*) Outpatient Psychiatry, Alcohol and Drug Abuse.
>
> (*7*) Pathology.
>
> (*8*) Surgery.
>
> (*9*) Allergy Immunotherapy, Allergy Testing, Immunizations, and
> Therapeutic Injections.
>
> (*10*) All APCs not assigned to any of the above groups.

\(ii\) *Nationwide 80th percentile charges for CPT/HCPCS codes which do
not have APC assignments*. Nationwide 80th percentile billed charge
levels by CPT/HCPCS code are computed from the outpatient facility
component of the MDR database, from the MedStat claims database, and
from the outpatient facility component of the Medicare Standard
Analytical File 5 percent Sample. If the MDR database contains
sufficient data to provide a statistically credible 80th percentile
charge, then that result is retained for this purpose. If the MDR
database does not provide a statistically credible 80th percentile
charge, then the result from the MedStat database is retained for this
purpose, provided it is statistically credible. If neither the MDR nor
the MedStat databases provide statistically credible results, then the
nationwide 80th percentile billed charge computed from the 5 percent
Sample data is retained for this purpose. The nationwide 80th percentile
charges retained from each of these data sources are trended forward to
the effective time period for the charges, as set forth in paragraph
(e)(3)(iii) of this section.

\(iii\) *Trending forward*. The charges for each CPT/HCPCS code,
obtained as described in paragraph (e)(3) of this section, are trended
forward based on changes to the outpatient hospital services component
of the CPI-U. Actual CPI-U changes are used from the time period of the
source data through the latest available month as of the time the
calculations are performed. The three-month average annual trend rate as
of the latest available month is then held constant to the midpoint of
the calendar year in which the charges are primarily expected to be
used. The projected total CPI-U change so obtained is then applied to
the 80th percentile charges, as described in paragraph (e)(3) of this
section.

\(4\) *Geographic area adjustment factors*. For each geographic area, a
single adjustment factor is calculated as the arithmetic average of the
outpatient geographic area adjustment factor published in the Milliman
USA, Inc., Health Cost Guidelines (this factor constitutes the ratio of
the level of charges for each geographic area to the nationwide level of
charges), and a geographic area adjustment factor developed from the MDR
database (see paragraph (a)(3) of this section for Data Sources). The
MDR-based geographic area adjustment factors are calculated as the ratio
of the CPT/HCPCS code weighted average charge level for each geographic
area to the nationwide CPT/HCPCS code weighted average charge level.

\(5\) *Multiple surgical procedures*. When multiple surgical procedures
are performed during the same outpatient encounter by a provider or
provider team as indicated by multiple surgical CPT/HCPCS procedure
codes, then the CPT/HCPCS procedure code with the highest facility
charge will be billed at 100 percent of the charges established under
this section; the CPT/HCPCS procedure code with the second highest
facility charge will be billed at 25 percent of the charges established
under this section; the CPT/HCPCS procedure code with the third highest
facility charge will be billed at 15 percent of the charges established
under this section; and no outpatient facility charges will be billed
for any additional surgical procedures.

\(f\) *Physician and other professional charges except for anesthesia
services and certain dental services*. When VA provides or furnishes
physician and other professional services, other than professional
anesthesia services and certain professional dental services, within the
scope of care referred to in paragraph (a)(1) of this section, physician
and other professional charges billed for such services will be
determined in accordance with the provisions of this paragraph. Charges
for professional dental services identified by CPT code are determined
in accordance with the provisions of this paragraph; charges for
professional dental services identified by HCPCS Level II code are
determined in accordance with the provisions of paragraph (h) of this
section. Physician and other professional charges consist of charges for
professional services that vary by geographic area, by CPT/HCPCS code,
by site of service, and by modifier, where applicable. These charges are
calculated as follows:

\(1\) *Formula*. For each CPT/HCPCS code or, where applicable, each
CPT/HCPCS code and modifier combination, multiply the total
geographically-adjusted RVUs determined pursuant to paragraph (f)(2) of
this section by the applicable geographically-adjusted conversion factor
(a monetary amount) determined pursuant to paragraph (f)(3) of this
section to obtain the physician charge for each CPT/HCPCS code in a
particular geographic area. Then, multiply this charge by the
appropriate factors for any charge-significant modifiers, determined
pursuant to paragraph (f)(4) of this section.

\(2\) (i) *Total geographically-adjusted RVUs for physician services
that have Medicare RVUs*. The work expense and practice expense RVUs for
CPT/HCPCS codes, other than the codes described in paragraphs (f)(2)(ii)
and (f)(2)(iii) of this section, are compiled using Medicare Physician
Fee Schedule RVUs. The sum of the geographically-adjusted work expense
RVUs determined pursuant to paragraph (f)(2)(i)(A) of this section and
the geographically-adjusted practice expense RVUs determined pursuant to
paragraph (f)(2)(i)(B) of this section equals the total
geographically-adjusted RVUs.

\(A\) *Geographically-adjusted work expense RVUs*. For each CPT/HCPCS
code for each geographic area, the Medicare Physician Fee Schedule work
expense RVUs are multiplied by the work expense Medicare Geographic
Practice Cost Index. The result constitutes the geographically-adjusted
work expense RVUs.

\(B\) *Geographically-adjusted practice expense RVUs*. For each
CPT/HCPCS code for each geographic area, the Medicare Physician Fee
Schedule practice expense RVUs are multiplied by the practice expense
Medicare Geographic Practice Cost Index. The result constitutes the
geographically-adjusted practice expense RVUs. In these calculations,
facility practice expense RVUs are used to obtain
geographically-adjusted practice expense RVUs for use by provider-based
entities, and non-facility practice expense RVUs are used to obtain
geographically-adjusted practice expense RVUs for use by
non-provider-based entities.

\(ii\) *RVUs for CPT/HCPCS codes that do not have Medicare RVUs and are
not designated as unlisted procedures*. For CPT/HCPCS codes that are not
assigned RVUs in paragraphs (f)(2)(i) or (f)(2)(iii) of this section,
total RVUs are developed based on various charge data sources. For these
CPT/HCPCS codes, the nationwide 80th percentile billed charges are
obtained, where statistically credible, from the MDR database. For any
remaining CPT/HCPCS codes, the nationwide 80th percentile billed charges
are obtained, where statistically credible, from the Part B component of
the Medicare Standard Analytical File 5 percent Sample. For any
remaining CPT/HCPCS codes, the nationwide 80th percentile billed charges
are obtained, where statistically credible, from the Prevailing
Healthcare Charges System nationwide commercial insurance database. For
each of these CPT/HCPCS codes, nationwide total RVUs are obtained by
taking the nationwide 80th percentile billed charges obtained using the
preceding three databases and dividing by the untrended nationwide
conversion factor for the corresponding CPT/HCPCS code group determined
pursuant to paragraphs (f)(3) and (f)(3)(i) of this section. For any
remaining CPT/HCPCS codes that have not been assigned RVUs using the
preceding data sources, the nationwide total RVUs are calculated by
summing the work expense and non-facility practice expense RVUs found in
Ingenix/St. Anthony's RBRVS. The resulting nationwide total RVUs
obtained using these four data sources are multiplied by the geographic
area adjustment factors determined pursuant to paragraph (f)(2)(iv) of
this section to obtain the area-specific total RVUs.

\(iii\) *RVUs for CPT/HCPCS codes designated as unlisted procedures*.
For CPT/HCPCS codes designated as unlisted procedures, total RVUs are
developed based on the weighted median of the total RVUs of CPT/HCPCS
codes within the series in which the unlisted procedure code occurs. A
nationwide VA distribution of procedures and services is used for the
purpose of computing the weighted median. The resulting nationwide total
RVUs are multiplied by the geographic area adjustment factors determined
pursuant to paragraph (f)(2)(iv) of this section to obtain the
area-specific total RVUs.

\(iv\) *RVU geographic area adjustment factors for CPT/HCPCS codes that
do not have Medicare RVUs, including codes that are designated as
unlisted procedures*. The adjustment factor for each geographic area
consists of the weighted average of the work expense and practice
expense Medicare Geographic Practice Cost Indices for each geographic
area using charge data for representative CPT/HCPCS codes statistically
selected and weighted for work expense and practice expense.

\(3\) *Geographically-adjusted 80th percentile conversion factors*.
CPT/HCPCS codes are separated into the following 23 CPT/HCPCS code
groups: allergy immunotherapy, allergy testing, cardiovascular,
chiropractor, consults, emergency room visits and observation care,
hearing/speech exams, immunizations, inpatient visits,
maternity/cesarean deliveries, maternity/non-deliveries,
maternity/normal deliveries, miscellaneous medical, office/home/urgent
care visits, outpatient psychiatry/alcohol and drug abuse, pathology,
physical exams, physical medicine, radiology, surgery, therapeutic
injections, vision exams, and well baby exams. For each of the 23
CPT/HCPCS code groups, representative CPT/HCPCS codes are statistically
selected and weighted so as to give a weighted average RVU comparable to
the weighted average RVU of the entire CPT/HCPCS code group (the
selected CPT/HCPCS codes are set forth in the Milliman USA, Inc., Health
Cost Guidelines fee survey); see paragraph (a)(3) of this section for
Data Sources. The 80th percentile charge for each selected CPT/HCPCS
code is obtained from the MDR database. A nationwide conversion factor
(a monetary amount) is calculated for each CPT/HCPCS code group as set
forth in paragraph (f)(3)(i) of this section. The nationwide conversion
factors for each of the 23 CPT/HCPCS code groups are trended forward to
the effective time period for the charges, as set forth in paragraph
(f)(3)(ii) of this section. The resulting amounts for each of the 23
groups are multiplied by geographic area adjustment factors determined
pursuant to paragraph (f)(3)(iii) of this section, resulting in
geographically-adjusted 80th percentile conversion factors for each
geographic area for the 23 CPT/HCPCS code groups for the effective
charge period.

\(i\) *Nationwide conversion factors*. Using the nationwide 80th
percentile charges for the selected CPT/HCPCS codes from paragraph
(f)(3) of this section, a nationwide conversion factor is calculated for
each of the 23 CPT/HCPCS code groups by dividing the weighted average
charge by the weighted average RVU.

\(ii\) *Trending forward*. The nationwide conversion factors for each of
the 23 CPT/HCPCS code groups, obtained as described in paragraph
(f)(3)(i) of this section, are trended forward based on changes to the
physicians' services component of the CPI-U. Actual CPI-U changes are
used from the time period of the source data through the latest
available month as of the time the calculations are performed. The
three-month average annual trend rate as of the latest available month
is then held constant to the midpoint of the calendar year in which the
charges are primarily expected to be used. The projected total CPI-U
change so obtained is then applied to the 23 conversion factors.

\(iii\) *Geographic area adjustment factors*. Using the 80th percentile
charges for the selected CPT/HCPCS codes from paragraph (f)(3) of this
section for each geographic area, a geographic area-specific conversion
factor is calculated for each of the 23 CPT/HCPCS code groups by
dividing the weighted average charge by the weighted average
geographically-adjusted RVU. The resulting conversion factor for each
geographic area for each of the 23 CPT/HCPCS code groups is divided by
the corresponding nationwide conversion factor determined pursuant to
paragraph (f)(3)(i) of this section. The resulting ratios are the
geographic area adjustment factors for the conversion factors for each
of the 23 CPT/HCPCS code groups for each geographic area.

\(4\) *Charge adjustment factors for specified CPT/HCPCS code
modifiers*. Surcharges or charge discounts are calculated in the
following manner: from the Part B component of the Medicare Standard
Analytical File 5 percent Sample, the ratio of weighted average billed
charges for CPT/HCPCS codes with the specified modifier to the weighted
average billed charge for CPT/HCPCS codes with no charge modifier is
calculated, using the frequency of procedure codes with the modifier as
weights in both weighted average calculations. The resulting ratios
constitute the surcharge or discount factors for specified
charge-significant CPT/HCPCS code modifiers.

\(5\) *Certain charges for providers other than physicians*. When
services for which charges are established according to the preceding
provisions of this paragraph (f) are performed by providers other than
physicians, the charges for those services will be as determined by the
preceding provisions of this paragraph, except as follows:

\(i\) *Outpatient facility charges*. When the services of providers
other than physicians are furnished in outpatient facility settings or
in other facilities designated as provider-based, and outpatient
facility charges for those services have been established under
paragraph (e) of this section, then the outpatient facility charges
established under paragraph (e) will apply instead of the charges
established under this paragraph (f).

\(ii\) *Discounted charges*. Charges for the professional services of
the following providers will be the indicated percentages of the amount
that would be charged if the care had been provided by a physician:

\(A\) Nurse practitioner: 85 percent.

\(B\) Clinical nurse specialist: 85 percent.

\(C\) Physician Assistant: 85 percent.

\(D\) Clinical psychologist: 80 percent.

\(E\) Clinical social worker: 75 percent.

\(F\) Dietitian: 75 percent.

\(G\) Clinical pharmacist: 80 percent.

\(g\) *Professional charges for anesthesia services*. When VA provides
or furnishes professional anesthesia services within the scope of care
referred to in paragraph (a)(1) of this section, professional anesthesia
charges billed for such services will be determined in accordance with
the provisions of this paragraph. Charges for professional anesthesia
services personally performed by anesthesiologists will be 100 percent
of the charges determined as set forth in this paragraph. Charges for
professional anesthesia services provided by non-medically directed
certified registered nurse anesthetists will also be 100 percent of the
charges determined as set forth in this paragraph. Charges for
professional anesthesia services provided by medically directed
certified registered nurse anesthetists will be 50 percent of the
charges otherwise determined as set forth in this paragraph.
Professional anesthesia charges consist of charges for professional
services that vary by geographic area, by CPT/HCPCS code base units, and
by number of time units. These charges are calculated as follows:

\(1\) *Formula*. For each anesthesia CPT/HCPCS code, multiply the total
anesthesia RVUs determined pursuant to paragraph (g)(2) of this section
by the applicable geographically-adjusted conversion factor (a monetary
amount) determined pursuant to paragraph (g)(3) of this section to
obtain the professional anesthesia charge for each CPT/HCPCS code in a
particular geographic area.

\(2\) *Total RVUs for professional anesthesia services*. The total
anesthesia RVUs for each anesthesia CPT/HCPCS code are the sum of the
base units (as compiled by CMS) for that CPT/HCPCS code and the number
of time units reported for the anesthesia service, where one time unit
equals 15 minutes. For anesthesia CPT/HCPCS codes designated as unlisted
procedures, base units are developed based on the weighted median base
units for anesthesia CPT/HCPCS codes within the series in which the
unlisted procedure code occurs. A nationwide VA distribution of
procedures and services is used for the purpose of computing the
weighted median base units.

\(3\) *Geographically-adjusted 80th percentile conversion factors*. A
nationwide 80th percentile conversion factor is calculated according to
the methodology set forth in paragraph (g)(3)(i) of this section. The
nationwide conversion factor is then trended forward to the effective
time period for the charges, as set forth in paragraph (g)(3)(ii) of
this section. The resulting amount is multiplied by geographic area
adjustment factors determined pursuant to paragraph (g)(3)(iii) of this
section, resulting in geographically-adjusted 80th percentile conversion
factors for each geographic area for the effective charge period.

\(i\) *Nationwide conversion factor*. Preliminary 80th percentile
conversion factors for each area are compiled from the MDR database.
Then, a preliminary nationwide weighted-average 80th percentile
conversion factor is calculated, using as weights the population
(census) frequencies for each geographic area as presented in the
Milliman USA, Inc., Health Cost Guidelines (see paragraph (a)(3) of this
section for Data Sources). A nationwide 80th percentile fee by CPT/HCPCS
code is then computed by multiplying this conversion factor by the MDR
base units for each CPT/HCPCS code. An adjusted 80th percentile
conversion factor by CPT/HCPCS code is then calculated by dividing the
nationwide 80th percentile fee for each procedure code by the anesthesia
base units (as compiled by CMS) for that CPT/HCPCS code. Finally, a
nationwide weighted average 80th percentile conversion factor is
calculated using combined frequencies for billed base units and time
units from the part B component of the Medicare Standard Analytical File
5 percent Sample as weights.

\(ii\) *Trending forward*. The nationwide conversion factor, obtained as
described in paragraph (g)(3)(i) of this section, is trended forward
based on changes to the physicians' services component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the
conversion factor.

\(iii\) *Geographic area adjustment factors*. The preliminary 80th
percentile conversion factors for each geographic area described in
paragraph (g)(3)(i) of this section are divided by the corresponding
preliminary nationwide 80th percentile conversion factor also described
in paragraph (g)(3)(i). The resulting ratios are the adjustment factors
for each geographic area.

\(h\) *Professional charges for dental services identified by HCPCS
Level II codes*. When VA provides or furnishes outpatient dental
professional services within the scope of care referred to in paragraph
(a)(1) of this section, and such services are identified by HCPCS code
rather than CPT code, the charges billed for such services will be
determined in accordance with the provisions of this paragraph. The
charges for dental services vary by geographic area and by HCPCS code.
These charges are calculated as follows:

\(1\) *Formula*. For each HCPCS dental code, multiply the nationwide
80th percentile charge determined pursuant to paragraph (h)(2) of this
section by the appropriate geographic area adjustment factor determined
pursuant to paragraph (h)(3) of this section. The result constitutes the
area-specific dental charge.

\(2\) *Nationwide 80th percentile charges by HCPCS code*. For each HCPCS
dental code, 80th percentile charges are extracted from three
independent data sources: Prevailing Healthcare Charges System database;
National Dental Advisory Service nationwide pricing index; and the
Dental UCR Module of the Comprehensive Healthcare Payment System, a
release from Ingenix from a nationwide database of dental charges (see
paragraph (a)(3) of this section for Data Sources). Charges for each
database are then trended forward to a common date, based on actual
changes to the dental services component of the CPI-U. Charges for each
HCPCS dental code from each data source are combined into an average
80th percentile charge by means of the methodology set forth in
paragraph (h)(2)(i) of this section. HCPCS dental codes designated as
unlisted are assigned 80th percentile charges by means of the
methodology set forth in paragraph (h)(2)(ii) of this section. Finally,
the resulting amounts are each trended forward to the effective time
period for the charges, as set forth in paragraph (h)(2)(iii) of this
section. The results constitute the nationwide 80th percentile charge
for each HCPCS dental code.

\(i\) *Averaging methodology*. The average charge for any particular
HCPCS dental code is calculated by first computing a preliminary mean
average of the three charges for each code. Statistical outliers are
identified and removed by testing whether any charge differs from the
preliminary mean charge by more than 50 percent of the preliminary mean
charge. In such cases, the charge most distant from the preliminary mean
is removed as an outlier, and the average charge is calculated as a mean
of the two remaining charges. In cases where none of the charges differ
from the preliminary mean charge by more than 50 percent of the
preliminary mean charge, the average charge is calculated as a mean of
all three reported charges.

\(ii\) *Nationwide 80th percentile charges for HCPCS dental codes
designated as unlisted procedures*. For HCPCS dental codes designated as
unlisted procedures, 80th percentile charges are developed based on the
weighted median 80th percentile charge of HCPCS dental codes within the
series in which the unlisted procedure code occurs. The distribution of
procedures and services from the Prevailing Healthcare Charges System
nationwide commercial insurance database is used for the purpose of
computing the weighted median.

\(iii\) *Trending forward*. 80th percentile charges for each dental
procedure code, obtained as described in paragraph (h)(2) of this
section, are trended forward based on the dental services component of
the CPI-U. Actual CPI-U changes are used from the time period of the
source data through the latest available month as of the time the
calculations are performed. The three-month average annual trend rate as
of the latest available month is then held constant to the midpoint of
the calendar year in which the charges are primarily expected to be
used. The projected total CPI-U change so obtained is then applied to
the 80th percentile charges.

\(3\) *Geographic area adjustment factors*. A geographic adjustment
factor (consisting of the ratio of the level of charges in a given
geographic area to the nationwide level of charges) for each geographic
area and dental class of service is obtained from Milliman USA, Inc.,
Dental Health Cost Guidelines, a database of nationwide commercial
insurance charges and relative costs; and a normalized geographic
adjustment factor computed from the Dental UCR Module of the
Comprehensive Healthcare Payment System compiled by Ingenix, as follows:
Using local and nationwide average charges reported in the Ingenix data,
a local weighted average charge for each dental class of procedure codes
is calculated using utilization frequencies from the Milliman USA, Inc.,
Dental Health Cost Guidelines as weights (see paragraph (a)(3) of this
section for Data Sources). Similarly, using nationwide average charge
levels, a nationwide average charge by dental class of procedure codes
is calculated. The normalized geographic adjustment factor for each
dental class of procedure codes and for each geographic area is the
ratio of the local average charge divided by the corresponding
nationwide average charge. Finally, the geographic area adjustment
factor is the arithmetic average of the corresponding factors from the
data sources mentioned in the first sentence of this paragraph (h)(3).

\(i\) *Pathology and laboratory charges*. When VA provides or furnishes
pathology and laboratory services within the scope of care referred to
in paragraph (a)(1) of this section, charges billed for such services
will be determined in accordance with the provisions of this paragraph.
Pathology and laboratory charges consist of charges for services that
vary by geographic area and by CPT/HCPCS code. These charges are
calculated as follows:

\(1\) *Formula*. For each CPT/HCPCS code, multiply the total
geographically-adjusted RVUs determined pursuant to paragraph (i)(2) of
this section by the applicable geographically-adjusted conversion factor
(a monetary amount) determined pursuant to paragraph (i)(3) of this
section to obtain the pathology/laboratory charge for each CPT/HCPCS
code in a particular geographic area.

\(2\) (i) *Total geographically-adjusted RVUs for pathology and
laboratory services that have Medicare-based RVUs*. Total RVUs are
developed based on the Medicare Clinical Diagnostic Laboratory Fee
Schedule (CLAB). The CLAB payment amounts are upwardly adjusted such
that the adjusted payment amounts are, on average, equivalent to
Medicare Physician Fee Schedule payment levels, using statistical
comparisons to the 80th percentile derived from the MDR database. These
adjusted payment amounts are then divided by the corresponding Medicare
conversion factor to derive RVUs for each CPT/HCPCS code. The resulting
nationwide total RVUs are multiplied by the geographic adjustment
factors determined pursuant to paragraph (i)(2)(iv) of this section to
obtain the area-specific total RVUs.

\(ii\) *RVUs for CPT/HCPCS codes that do not have Medicare-based RVUs
and are not designated as unlisted procedures*. For CPT/HCPCS codes that
are not assigned RVUs in paragraphs (i)(2)(i) or (i)(2)(iii) of this
section, total RVUs are developed based on various charge data sources.
For these CPT/HCPCS codes, the nationwide 80th percentile billed charges
are obtained, where statistically credible, from the MDR database. For
any remaining CPT/HCPCS codes, the nationwide 80th percentile billed
charges are obtained, where statistically credible, from the Part B
component of the Medicare Standard Analytical File 5 percent Sample. For
any remaining CPT/HCPCS codes, the nationwide 80th percentile billed
charges are obtained, where statistically credible, from the Prevailing
Healthcare Charges System nationwide commercial insurance database. For
each of these CPT/HCPCS codes, nationwide total RVUs are obtained by
taking the nationwide 80th percentile billed charges obtained using the
preceding three databases and dividing by the untrended nationwide
conversion factor determined pursuant to paragraphs (i)(3) and (i)(3)(i)
of this section. For any remaining CPT/HCPCS codes that have not been
assigned RVUs using the preceding data sources, the nationwide total
RVUs are calculated by summing the work expense and non-facility
practice expense RVUs found in Ingenix/St. Anthony's RBRVS. The
resulting nationwide total RVUs obtained using these four data sources
are multiplied by the geographic area adjustment factors determined
pursuant to paragraph (i)(2)(iv) of this section to obtain the
area-specific total RVUs.

\(iii\) *RVUs for CPT/HCPCS codes designated as unlisted procedures*.
For CPT/HCPCS codes designated as unlisted procedures, total RVUs are
developed based on the weighted median of the total RVUs of CPT/HCPCS
codes within the series in which the unlisted procedure code occurs. A
nationwide VA distribution of procedures and services is used for the
purpose of computing the weighted median. The resulting nationwide total
RVUs are multiplied by the geographic area adjustment factors determined
pursuant to paragraph (i)(2)(iv) of this section to obtain the
area-specific total RVUs.

\(iv\) *RVU geographic area adjustment factors for CPT/HCPCS codes that
do not have Medicare RVUs, including codes that are designated as
unlisted procedures*. The adjustment factor for each geographic area
consists of the weighted average of the work expense and practice
expense Medicare Geographic Practice Cost Indices for each geographic
area using charge data for representative CPT/HCPCS codes statistically
selected and weighted for work expense and practice expense.

\(3\) *Geographically-adjusted 80th percentile conversion factors*.
Representative CPT/HCPCS codes are statistically selected and weighted
so as to give a weighted average RVU comparable to the weighted average
RVU of the entire pathology/laboratory CPT/HCPCS code group (the
selected CPT/HCPCS codes are set forth in the Milliman USA, Inc., Health
Cost Guidelines fee survey). The 80th percentile charge for each
selected CPT/HCPCS code is obtained from the MDR database. A nationwide
conversion factor (a monetary amount) is calculated as set forth in
paragraph (i)(3)(i) of this section. The nationwide conversion factor is
trended forward to the effective time period for the charges, as set
forth in paragraph (i)(3)(ii) of this section. The resulting amount is
multiplied by a geographic area adjustment factor determined pursuant to
paragraph (i)(3)(iv) of this section, resulting in the
geographically-adjusted 80th percentile conversion factor for the
effective charge period.

\(i\) *Nationwide conversion factors*. Using the nationwide 80th
percentile charges for the selected CPT/HCPCS codes from paragraph
(i)(3) of this section, a nationwide conversion factor is calculated by
dividing the weighted average charge by the weighted average RVU.

\(ii\) *Trending forward*. The nationwide conversion factor, obtained as
described in paragraph (i)(3) of this section, is trended forward based
on changes to the physicians' services component of the CPI-U. Actual
CPI-U changes are used from the time period of the source data through
the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the
pathology/laboratory conversion factor.

\(iii\) *Geographic area adjustment factor*. Using the 80th percentile
charges for the selected CPT/HCPCS codes from paragraph (i)(3) of this
section for each geographic area, a geographic area-specific conversion
factor is calculated by dividing the weighted average charge by the
weighted average geographically-adjusted RVU. The resulting geographic
area conversion factor is divided by the corresponding nationwide
conversion factor determined pursuant to paragraph (i)(3)(i) of this
section. The resulting ratios are the geographic area adjustment factors
for pathology and laboratory services for each geographic area.

\(j\) *Observation care facility charges*. When VA provides observation
care within the scope of care referred to in paragraph (a)(1) of this
section, the facility charges billed for such care will be determined in
accordance with the provisions of this paragraph. The charges for this
care vary by geographic area and number of hours of care. These charges
are calculated as follows:

\(1\) *Formula*. For each occurrence of observation care, add the
nationwide base charge determined pursuant to paragraph (j)(2) of this
section to the product of the number of hours in observation care and
the hourly charge also determined pursuant to paragraph (j)(2) of this
section. Then multiply this amount by the appropriate geographic area
adjustment factor determined pursuant to paragraph (j)(3) of this
section. The result constitutes the area-specific observation care
facility charge.

\(2\) (i) *Nationwide 80th percentile observation care facility
charges*. To calculate nationwide base and hourly facility charges, all
claims with observation care line items are selected from the outpatient
facility component of the Medicare Standard Analytical File 5 percent
Sample. Then, using the 80th percentile observation line item charges
for each unique hourly length of stay, a standard linear regression
technique is used to calculate the nationwide 80th percentile base
charge and 80th percentile hourly charge. Finally, the resulting amounts
are each trended forward to the effective time period for the charges,
as set forth in paragraph (j)(2)(ii) of this section. The results
constitute the nationwide 80th percentile base and hourly facility
charges for observation care.

\(ii\) *Trending forward*. The nationwide 80th percentile base and
hourly facility charges for observation care, obtained as described in
paragraph (j)(2)(i) of this section, are trended forward based on
changes to the outpatient hospital services component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the 80th
percentile charges.

\(3\) *Geographic area adjustment factors*. The geographic area
adjustment factors for observation care facility charges are the same as
those computed for outpatient facility charges under paragraph (e)(4) of
this section.

\(k\) *Ambulance and other emergency transportation charges*. When VA
provides ambulance and other emergency transportation services that are
within the scope of care referred to in paragraph (a)(1) of this
section, the charges billed for such services will be determined in
accordance with the provisions of this paragraph. The charges for these
services vary by HCPCS code, length of trip, and geographic area. These
charges are calculated as follows:

\(1\) *Formula*. For each occasion of ambulance or other emergency
transportation service, add the nationwide base charge for the
appropriate HCPCS code determined pursuant to paragraph (k)(2)(i) of
this section to the product of the number of miles traveled and the
appropriate HCPCS code mileage charge determined pursuant to paragraph
(k)(2)(ii) of this section. Then multiply this amount by the appropriate
geographic area adjustment factor determined pursuant to paragraph
(k)(3) of this section. The result constitutes the area-specific
ambulance or other emergency transportation service charge.

\(2\) (i) *Nationwide 80th percentile all-inclusive base charge*. To
calculate a nationwide all-inclusive base charge, all ambulance and
other emergency transportation claims are selected from the outpatient
facility component of the Medicare Standard Analytical File 5 percent
Sample. Excluding professional and mileage charges, as well as
all-inclusive charges which are reported on such claims, the total
charge per claim, including incidental supplies, is computed. Then, the
80th percentile amount for each HCPCS code is computed. Finally, the
resulting amounts are each trended forward to the effective time period
for the charges, as set forth in paragraph (k)(2)(iii) of this section.
The results constitute the nationwide 80th percentile all-inclusive base
charge for each HCPCS base charge code.

\(ii\) *Nationwide 80th percentile mileage charge*. To calculate a
nationwide mileage charge, all ambulance and other emergency
transportation claims are selected from the outpatient facility
component of the Medicare Standard Analytical File 5 percent Sample.
Excluding professional, incidental, and base charges, as well as claims
with all-inclusive charges, the total mileage charge per claim is
computed. This amount is divided by the number of miles reported on the
claim. Then, the 80th percentile amount for each HCPCS code, using miles
as weights, is computed. Finally, the resulting amounts are each trended
forward to the effective time period for the charges, as set forth in
paragraph (k)(2)(iii) of this section. The results constitute the
nationwide 80th percentile mileage charge for each HCPCS mileage code.

\(iii\) *Trending forward*. The nationwide 80th percentile charge for
each HCPCS code, obtained as described in paragraphs (k)(2)(i) and
(k)(2)(ii) of this section, is trended forward based on changes to the
outpatient hospital services component of the CPI-U. Actual CPI-U
changes are used from the time period of the source data through the
latest available month as of the time the calculations are performed.
The three-month average annual trend rate as of the latest available
month is then held constant to the midpoint of the calendar year in
which the charges are primarily expected to be used. The projected total
CPI-U change so obtained is then applied to the 80th percentile charges.

\(3\) *Geographic area adjustment factors*. The geographic area
adjustment factors for ambulance and other emergency transportation
charges are the same as those computed for outpatient facility charges
under paragraph (e)(4) of this section.

\(l\) *Charges for durable medical equipment, drugs, injectables, and
other medical services, items, and supplies identified by HCPCS Level II
codes*. When VA provides DME, drugs, injectables, or other medical
services, items, or supplies that are identified by HCPCS Level II codes
and that are within the scope of care referred to in paragraph (a)(1) of
this section, the charges billed for such services, items, and supplies
will be determined in accordance with the provisions of this paragraph.
The charges for these services, items, and supplies vary by geographic
area, by HCPCS code, and by modifier, when applicable. These charges are
calculated as follows:

\(1\) *Formula*. For each HCPCS code, multiply the nationwide charge
determined pursuant to paragraphs (l)(2), (l)(3), and (l)(4) of this
section by the appropriate geographic area adjustment factor determined
pursuant to paragraph (l)(5) of this section. The result constitutes the
area-specific charge.

\(2\) *Nationwide 80th percentile charges for HCPCS codes with RVUs*.
For each applicable HCPCS code, RVUs are compiled from the data sources
set forth in paragraph (l)(2)(i) of this section. The RVUs are
multiplied by the charge amount for each incremental RVU determined
pursuant to paragraph (l)(2)(ii) of this section, and this amount is
added to the fixed charge amount also determined pursuant to paragraph
(l)(2)(ii) of this section. Then, for each HCPCS code, this charge is
multiplied by the appropriate 80th percentile to median charge ratio
determined pursuant to paragraph (l)(2)(iii) of this section. Finally,
the resulting amount is trended forward to the effective time period for
the charges, as set forth in paragraph (l)(2)(iv) of this section to
obtain the nationwide 80th percentile charge.

\(i\) *RVUs for DME, drugs, injectables, and other medical services,
items, and supplies*. For the purpose of the statistical methodology set
forth in paragraph (l)(2)(ii) of this section, HCPCS codes are assigned
to the following HCPCS code groups. For the HCPCS codes in each group,
the RVUs or amounts indicated constitute the RVUs:

> \(A\) Chemotherapy Drugs: Ingenix/St. Anthony's RBRVS Practice Expense
> RVUs.
>
> \(B\) Other Drugs: Ingenix/St. Anthony's RBRVS Practice Expense RVUs.
>
> \(C\) DME---Hospital Beds: Medicare DME Fee Schedule amounts.
>
> \(D\) DME---Medical/Surgical Supplies: Medicare DME Fee Schedule
> amounts.
>
> \(E\) DME---Orthotic Devices: Medicare DME Fee Schedule amounts.
>
> \(F\) DME---Oxygen and Supplies: Medicare DME Fee Schedule amounts.
>
> \(G\) DME---Wheelchairs: Medicare DME Fee Schedule amounts.
>
> \(H\) Other DME: Medicare DME Fee Schedule amounts.
>
> \(I\) Enteral/Parenteral Supplies: Medicare Parenteral and Enteral
> Nutrition Fee Schedule amounts.
>
> \(J\) Surgical Dressings and Supplies: Medicare DME Fee Schedule
> amounts.
>
> \(K\) Vision Items---Other Than Lenses: Medicare DME Fee Schedule
> amounts.
>
> \(L\) Vision Items---Lenses: Medicare DME Fee Schedule amounts.
>
> \(M\) Hearing Items: Ingenix/St. Anthony's RBRVS Practice Expense
> RVUs.

\(ii\) *Charge amounts*. Using combined Part B and DME components of the
Medicare Standard Analytical File 5% Sample, the median billed charge is
calculated for each HCPCS code. A mathematical approximation methodology
based on least squares techniques is applied to the RVUs specified for
each of the groups set forth in paragraph (l)(2)(i) of this section,
yielding two charge amounts for each HCPCS code group: a charge amount
per incremental RVU, and a fixed charge amount.

\(iii\) *80th Percentile to median charge ratios*. Two ratios are
obtained for each HCPCS code group set forth in paragraph (l)(2)(i) of
this section by dividing the weighted average 80th percentile charge by
the weighted average median charge derived from two data sources:
Medicare data, as represented by the combined Part B and DME components
of the Medicare Standard Analytical File 5% Sample; and the MDR
database. Charge frequencies from the Medicare data are used as weights
when calculating all weighted averages. For each HCPCS code group, the
smaller of the two ratios is selected as the adjustment from median to
80th percentile charges.

\(iv\) *Trending forward*. The charges for each HCPCS code, obtained as
described in paragraph (l)(2)(iii) of this section, are trended forward
based on changes to the medical care commodities component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the 80th
percentile charges, as described in paragraph (l)(2)(iii) of this
section.

\(3\) *Nationwide 80th percentile charges for HCPCS codes without RVUs*.
For each applicable HCPCS code, 80th percentile charges are extracted
from three independent data sources: the MDR database; Medicare, as
represented by the combined Part B and DME components of the Medicare
Standard Analytical File 5 percent Sample; and Milliman USA, Inc.,
Optimized HMO (Health Maintenance Organization) Data Sets (see paragraph
(a)(3) of this section for Data Sources). Charges from each database are
then trended forward to the effective time period for the charges, as
set forth in paragraph (l)(3)(i) of this section. Charges for each HCPCS
code from each data source are combined into an average 80th percentile
charge by means of the methodology set forth in paragraph (l)(3)(ii) of
this section. The results constitute the nationwide 80th percentile
charge for each applicable HCPCS code.

\(i\) *Trending forward*. The charges from each database for each HCPCS
code, obtained as described in paragraph (l)(3) of this section, are
trended forward based on changes to the medical care commodities
component of the CPI-U. Actual CPI-U changes are used from the time
period of each source database through the latest available month as of
the time the calculations are performed. The three-month average annual
trend rate as of the latest available month is then held constant to the
midpoint of the calendar year in which the charges are primarily
expected to be used. The projected total CPI-U change so obtained is
then applied to the 80th percentile charges, as described in paragraph
(l)(3) of this section.

\(ii\) *Averaging methodology*. The average 80th percentile trended
charge for any particular HCPCS code is calculated by first computing a
preliminary mean average of the three charges for each HCPCS code.
Statistical outliers are identified and removed by testing whether any
charge differs from the preliminary mean charge by more than 5 times the
preliminary mean charge, or by less than 0.2 times the preliminary mean
charge. In such cases, the charge most distant from the preliminary mean
is removed as an outlier, and the average charge is calculated as a mean
of the two remaining charges. In cases where none of the charges differ
from the preliminary mean charge by more than 5 times the preliminary
mean charge, or less than 0.2 times the preliminary mean charge, the
average charge is calculated as a mean of all three reported charges.

\(4\) *Nationwide 80th percentile charges for HCPCS codes designated as
unlisted or unspecified*. For HCPCS codes designated as unlisted or
unspecified procedures, services, items, or supplies, 80th percentile
charges are developed based on the weighted median 80th percentile
charges of HCPCS codes within the series in which the unlisted or
unspecified code occurs. A nationwide VA distribution of procedures,
services, items, and supplies is used for the purpose of computing the
weighted median.

\(5\) *Geographic area adjustment factors*. For the purpose of
geographic adjustment, HCPCS codes are combined into two groups: drugs
and DME/supplies, as set forth in paragraph (l)(5)(i) of this section.
The geographic area adjustment factor for each of these groups is
calculated as the ratio of the area-specific weighted average charge
determined pursuant to paragraph (l)(5)(ii) of this section divided by
the nationwide weighted average charge determined pursuant to paragraph
(l)(5)(iii) of this section.

\(i\) *Combined HCPCS code groups for geographic area adjustment factors
for DME, drugs, injectables, and other medical services, items, and
supplies*. For the purpose of the statistical methodology set forth in
paragraph (l)(5) of this section, each of the HCPCS code groups set
forth in paragraph (l)(2)(i) of this section is assigned to one of two
combined HCPCS code groups, as follows:

\(A\) Chemotherapy Drugs: Drugs.

\(B\) Other Drugs: Drugs.

\(C\) DME---Hospital Beds: DME/supplies.

\(D\) DME---Medical/Surgical Supplies: DME/supplies.

\(E\) DME---Orthotic Devices: DME/supplies.

\(F\) DME---Oxygen and Supplies: DME/supplies.

\(G\) DME---Wheelchairs: DME/supplies.

\(H\) Other DME: DME/supplies.

\(I\) Enteral/Parenteral Supplies: DME/supplies.

\(J\) Surgical Dressings and Supplies: DME/supplies.

\(K\) Vision Items---Other Than Lenses: DME/supplies.

\(L\) Vision Items---Lenses: DME/supplies.

\(M\) Hearing Items: DME/supplies.

\(ii\) *Area-specific weighted average charges*. Using the median
charges by HCPCS code from the MDR database for each geographic area and
utilization frequencies by HCPCS code from the combined Part B and DME
components of the Medicare Standard Analytical File 5 percent Sample, an
area-specific weighted average charge is calculated for each combined
HCPCS code group.

\(iii\) *Nationwide weighted average charges*. Using the area-specific
weighted average charges determined pursuant to paragraph (l)(5)(ii) of
this section, a nationwide weighted average charge is calculated for
each combined HCPCS code group, using as weights the population (census)
frequencies for each geographic area as presented in the Milliman USA,
Inc., Health Cost Guidelines (see paragraph (a)(3) of this section for
Data Sources).

\(m\) *Charges for prescription drugs not administered during
treatment*. Notwithstanding other provisions of this section, when VA
provides or furnishes prescription drugs not administered during
treatment, within the scope of care referred to in paragraph (a)(1) of
this section, charges billed separately for such prescription drugs will
be based on VA costs in accordance with the methodology set forth in
§17.102 of this part.

**Note to §17.101:** The charges generated by the methodology set forth
in this section are the same charges prescribed by the Office of
Management and Budget for use under the Federal Medical Care Recovery
Act, 42 U.S.C. 2651-2653.

(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-0606.)

(Authority: 38 U.S.C. 101, 501, 1701, 1705, 1710, 1721, 1722, 1729.)

\[32 FR 11382, Aug. 5, 1967. Redesignated and amended at 61 FR 21966,
21967, May 13, 1996. Redesignated and amended at 64 FR 22678, April 17,
1999; 65 FR 65908, Nov. 2, 2000; 66 FR 23327, May 8, 2001; 68 FR 22968,
Apr. 29, 2003; 68 FR 70715, Dec. 19, 2003; 69 FR 1061, Jan. 7, 2004\]

**Supplement *Highlights* references**: Book A--34(1). Book I--2(1),
3(1), 17(1), 22(1, 2).

Reserved

**§17.102 Charges for care or services.**

Except as provided in §17.101, charges at the indicated rates shall be
made for Department of Veterans Affairs hospital care or medical
services (including, but not limited to, dental services, supplies,
medicines, orthopedic and prosthetic appliances, and domiciliary or
nursing home care) as follows:

\(a\) *Furnished in error or on tentative eligibility*. Charges at rates
prescribed by the Under Secretary for Health shall be made for inpatient
or outpatient care or services (including domiciliary care) authorized
for any person on the basis of eligibility as a veteran or a tentative
eligibility determination under §17.34 but he or she was subsequently
found to have been ineligible for such care or services as a veteran
because the military service or any other eligibility requirement was
not met, or

\(b\) *Furnished in a medical emergency*. Charges at rates prescribed by
the Under Secretary for Health shall be made for any inpatient or
outpatient care or services rendered any person in a medical emergency
who was not eligible for such care or services as a veteran, if:

\(1\) The care or services were rendered as a humanitarian service,
under §17.43(c)(1) or §17.95 to a person neither claiming eligibility as
a veteran nor for whom the establishment of eligibility as a veteran was
expected, or

\(2\) The person for whom care or services were rendered was a
Department of Veterans Affairs employee or a member of a Department of
Veterans Affairs employee's family; or

\(c\) *Furnished beneficiaries of the Department of Defense or other
Federal agencies*. Except as provided for in paragraph (f) of this
section and the second sentence of this paragraph, charges at rates
prescribed by the Office of Management and Budget shall be made for any
inpatient or outpatient care or services authorized for a member of the
Armed Forces on active duty or for any beneficiary or designee of any
other Federal agency. Charges for services provided a member or former
member of a uniformed service who is entitled to retired or retainer
pay, or equivalent pay, will be at rates prescribed by the Secretary
(E.O. 11609, dated July 22, 1971, 36 FR 13747), or

\(d\) *Furnished pensioners of allied nations*. Charges at rates
prescribed by the Under Secretary for Health shall be made for any
inpatient or outpatient care or services rendered a pensioner of a
nation allied with the United States in World War I and World War II; or

\(e\) *Furnished under sharing agreements*. Charges at rates agreed upon
in an agreement for sharing specialized medical resources shall be made
for all medical care or services, either on an inpatient or outpatient
basis, rendered to a person designated by the other party to the
agreement as a patient to be benefited under the agreement; or

\(f\) *Furnished military retirees with chronic disability*. Charges for
subsistence at rates prescribed by the Under Secretary for Health shall
be made for the period during which hospital care is rendered when such
care is rendered to a member or former member of the Armed Forces
required to pay the subsistence rate under §17.47 (b)(2) and (c)(2).

\(g\) *Furnished for research purposes*. Charges will not be made for
medical services, including transportation, furnished as part of an
approved Department of Veterans Affairs research project, except that if
the services are furnished to a person who is not eligible for the
services as a veteran, the medical care appropriation shall be
reimbursed from the research appropriation at the same rates used for
billings under paragraph (b) of this section.

\(h\) *Computation of charges*. The method for computing the charges
under paragraphs (a), (b), (d), (f), and (g), and the last sentence of
paragraph (c) of this section is based on the Cost Distribution Report,
which sets forth the actual basic costs and per diem rates by type of
inpatient care and outpatient visit. Factors for depreciation of
buildings and equipment and Central Office overhead are added, based on
accounting manual instructions. Additional factors are added for
interest on capital investment and for standard fringe benefit costs
covering government employee retirement and disability costs. The
current year billing rates are projected on prior year actual rates by
applying the budgeted percentage increase. In addition, based on the
detail available in the Cost Distribution Report, VA intends to, on each
bill break down the all-inclusive rate into its three principal
components; namely, physician cost, ancillary services cost, and
nursing, room and board cost. The rates generated by the foregoing
methodology will be published by either VA or OMB in the 'Notices'
section of the *Federal Register*. (Authority: 38 U.S.C. 1729; sec.
19013, Pub. L. 99-272)

\(i\) *Furnished at national conventions*. Charges specified in
contractual agreements with Department of Veteran Affairs recognized
service organizations shall be made for emergency medical services
furnished at national conventions of such organizations to individuals
not eligible for such services under other provisions of this part.
(Authority: 38 U.S.C. 1711(c))

\[32 FR 11382, Aug. 5, 1967, as amended at 34 FR 7807, May 16, 1969; 35
FR 11470, July 17, 1970; 36 FR 18794, Sept. 22, 1971; 47 FR 50861, Nov.
10, 1982; 47 FR 58249, Dec. 1982; 52 FR 3010, Jan. 30, 1987.
Redesignated and amended at 61 FR 21965, 21967, May 13, 1996; 62 FR
17072, Apr. 9, 1997. Redesignated and amended at 64 FR 22678, 22683,
April 27, 1999; 69 FR 1061, Jan. 7, 2004\]

**Supplement *Highlights* references**: 34(1), 22(2).