[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85613-85615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28762]


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DEPARTMENT OF DEFENSE


TRICARE; Proposed Rates for Reimbursing Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) and Parenteral 
and Enteral Nutrition (PEN) Items Not on the Medicare DMEPOS and PEN 
Fee Schedule

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

ACTION: Notice and request for comments.

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SUMMARY: This notice is to advise interested parties of a Military 
Health System reimbursement change to certain DMEPOS and PEN items not 
included in Medicare's fee schedule. For these items, the Defense 
Health Agency (DHA) will create a TRICARE-specific fee schedule based 
on similar payment rules, to the extent practicable, as Medicare's 
DMEPOS and PEN fee schedule. A TRICARE-specific fee schedule will allow 
DHA to control costs, reduce beneficiary out-of-pocket expenses, 
discourage potential fraud and abuse, and prevent excessive TRICARE 
reimbursement rates when compared to state Medicaid programs and 
private health insurance. Under this change, TRICARE will align its 
reimbursement of certain DMEPOS and PEN items with similar 
reimbursement rules established under Medicare's DEMPOS and PEN fee 
schedule to the extent practicable, without incorporating any 
reimbursement rules associated with Medicare's Competitive Bidding 
Program (CBP).
    DHA is soliciting comments on the proposed rates (located on the 
DHA website below) and other alternative payment options for 
reimbursing DMEPOS and PEN items without Medicare pricing. The comment 
period will end 30 days after the publication of this notice. DHA will 
receive and consider comments, but will not issue responses to comments 
unless such comments drive a substantive change to the methodology 
outlined in paragraphs A through C below, in which case a new notice 
will be published in the Federal Register.

DATES: The comment period will end on January 28, 2021. This change 
will be effective July 1, 2021.

ADDRESSES: Defense Health Agency, TRICARE, Medical Benefits and 
Reimbursement Section, 16401 East Centretech Parkway, Aurora, CO 80011-
9066.

FOR FURTHER INFORMATION CONTACT: Mr. Jahanbakhsh Badshah, Medical 
Benefits and Reimbursement Section, TRICARE, telephone (303) 676-3881. 
Questions regarding payment of specific claims should be addressed to 
the appropriate TRICARE Managed Care Support Contractor in whose 
jurisdiction a claim would be filed.

SUPPLEMENTARY INFORMATION: 

A. Background

    Currently under TRICARE, DMEPOS and PEN items without Medicare 
pricing are reimbursed at the lower of the state prevailing charge or 
the billed charge. The state prevailing charge is calculated annually 
by TRICARE contractors on a statewide basis, using the 80th percentile 
of all qualified billed

[[Page 85614]]

charges on actual claims paid for a given service or item, during the 
12-month period ending June 30th of the previous year. This method is 
problematic in that it can lead to the generation of very high-fee 
schedule amounts without validation that these amounts are realistic 
and equitable relative to the cost of furnishing the item. Recent 
Department of Defense Office of Inspector General (DoD OIG) reports, as 
well as internal DHA analysis, have identified patterns of excessive 
billed charges for DMEPOS and PEN items. If the billed charges are 
abusive and excessive, this rolls into the calculation for state 
prevailing amounts. Setting payment rates too high creates incentives 
for higher volume, financially burdens beneficiaries whose cost-sharing 
is based on a percentage of the allowable amount, and encourages fraud 
and abuse.

B. Description of the TRICARE DMEPOS and PEN Fee Schedule

    To control costs, reduce beneficiary out-of-pocket expenses, 
discourage potential fraud and abuse, and prevent excessive TRICARE 
reimbursement rates when compared to state Medicaid programs and 
private health insurance for equipment and supplies, DHA proposes to 
develop fee schedule amounts for certain DMEPOS and PEN items not 
identified on any Medicare fee schedules. This proposal falls under the 
authority of Title 32 Code of Federal Regulation (CFR) 199.14(j)(4), 
which allows the Director, DHA, subject to the approval of the 
Assistant Secretary of Defense for Health Affairs, to establish an 
alternative reimbursement method designed to produce reasonable control 
over health care costs. In response to recent DoD OIG audits of 
TRICARE's overpayment of services and items without established fee 
schedule amounts, DHA will develop a fee schedule for these DMEPOS and 
PEN items on a statewide basis and create national ceilings and floors, 
utilizing a methodology similar to Medicare's fee schedule 
reimbursement methodology. TRICARE's fee schedule will not include 
Medicare's CBP rules, which would require making adjustments based on 
bids submitted for certain items and localities. This would be 
impossible to incorporate, as TRICARE does not have a bidding program.
    Using Medicare's DMEPOS and PEN payment rules established under 42 
CFR part 414, subparts C and D, to the extent practicable, DHA will 
create a TRICARE fee schedule for certain DMEPOS and PEN items without 
Medicare pricing. Given the similar attributes of the two programs, the 
statutory requirement that TRICARE reimbursement follow Medicare's 
methodology when practicable, and the fact that non-CBP payment rules 
are still used by Medicare for certain DMEPOS and PEN items, the 
adoption of these rules is appropriate for TRICARE reimbursement of 
DMEPOS and PEN items. Using a fee schedule is also consistent with the 
DoD OIG support of payment accuracy through the establishment of fee 
schedules. The resulting payment rates will be high enough to ensure 
beneficiary access to needed products and low enough to ensure 
sufficient provision of those products. DHA will also retain the 
flexibility to modify the payment rate for any procedure code when 
necessary to ensure access to care.

C. Methodology

    TRICARE fee schedule rates will be established for services or 
items provided on or after July 1, 2021, and will be updated annually 
(January 1) by the same annual update factor Medicare uses to update 
its DMEPOS fee schedule. The update factor is based on the percentage 
increase in the Consumer Price Index for all Urban Consumers for the 
12-month period ending June 30 of the previous year adjusted by the 
change in the economy-wide productivity equal to the 10-year moving 
average of changes in annual economy-wide private non-farm business 
multi-factor productivity. Healthcare Common Procedure Coding System 
(HCPCS) codes classified as unlisted, miscellaneous, not otherwise 
classified (NOC), custom, deluxe, or currently on the TRICARE No 
Government Pay List or the Medicare DMEPOS and PEN fee schedule will 
not be included on the TRICARE fee schedule. Any code added to 
Medicare's fee schedule will also be removed from TRICARE's fee 
schedule. Quarterly updates will occur as necessary (April 1, July 1, 
and October 1) so codes may be added, removed, and have their rates 
modified mid-year. Unlisted, miscellaneous, and NOC codes will be 
defined using Medicare's HCPCS NOC Codes list published on the Centers 
for Medicare & Medicaid Services website at https://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/Alpha-Numeric-HCPCS.html.
    Codes will be assigned to a category (e.g., surgical dressings and 
certain durable medical equipment, prosthetics and orthotics, 
parenteral and enteral, etc.) based on long description and if the item 
meets TRICARE's definition of DMEPOS and PEN as defined in regulation 
and policy.
    TRICARE will establish national and statewide rates for existing 
and new HCPCS codes defined as a DMEPOS and PEN code. The rate in each 
state will be calculated by (1) Establishing base years and minimum 
data requirements, (2) calculating national floors and ceilings, and 
(3) calculating the average billed amount of claims TRICARE paid in 
that state during each base year, subject to minimum data requirements 
and national floors and ceilings. The base year will vary for each code 
and will be defined as the first year (no earlier than 1994) with at 
least enough charge data nationwide during a 12-month period beginning 
on July 1 and ending on June 30. Minimum data will be defined as any 
code for which there were at least 50 paid claims nationwide during the 
base year period; if there were fewer than 50 paid claims each year 
since 1994, then TRICARE's current reimbursement methodology will 
apply. Given the large number of codes and the lack of historical data, 
repricing based on 1986-87 levels (similar to Medicare) is not 
administratively feasible for TRICARE's fee schedule. Although claims 
from that year are stored in DHA archives (claims are more readily 
available from 1994 and later), it would be difficult to extract the 
data and obtain proper documentation. Once the base year for a code has 
been established, a national ceiling and floor will be calculated using 
Medicare's methodology. For example, for surgical dressings and certain 
Durable Medical Equipment, the national ceiling will be equal to the 
median of all paid claims nationwide during the base period, and the 
national floor will be equal to 85 percent of the national ceiling. The 
state-wide fee schedule for states outside the continental United 
States (i.e., Alaska and Hawaii), as well as for United States 
territories and commonwealths, will not be subject to the ceilings and 
floors, in accordance with Medicare rules. When establishing the 
initial fee schedule amounts, the national floor and ceiling rates for 
any code cannot exceed the amount that would have been calculated using 
data during the 12-month period of July 1, 2019 through June 30, 2020. 
It is believed this will result in fee schedule amounts more reflective 
of reasonable charges for DMEPOS items. Therefore, the DHA is capping 
national floors and ceiling rates based on the most current base year 
period which is July 1, 2019 through June 30, 2020.
    After establishing a national ceiling and floor for a given code, 
then the rate for the code can be calculated at the state level. To 
calculate a statewide rate using the average billed amount, there must 
be at least eight paid claims

[[Page 85615]]

(similar to state prevailing rates under the current TRICARE 
methodology) for a given code within that state during the base year. 
States without eight paid claims will be set at the national ceiling, 
unless stated otherwise in the TRICARE Reimbursement Manual or the 
TRICARE Policy Manual. The statewide rate must also fall within the 
national floor and ceiling. In states where the average billed amount 
of claims is lower than the national floor, then the statewide rate 
will be equivalent to the national floor. In states where the average 
billed amount of claims is higher than the national ceiling, then the 
statewide rate will be equivalent to the national ceiling. Rental items 
and equipment will be calculated based on 10 percent of the fee 
schedule amount for a purchased item and used items and equipment will 
be calculated based on 75 percent of the fee schedule amount for a new 
item.
    There will be several deviations to the above methodology. For PEN 
items and items involving splints, casts, and inter-ocular lenses, the 
fee schedule amounts will use a national rate (i.e. there will be no 
national floors or ceilings and no state-to-state variation), which 
will be equal to the mean, or average, charges of all paid claims 
nationwide during the base period (updated and trended forward by 
Medicare's DMEPOS update factor). The base period for PEN items will 
use 2002 (or later) claims data, and 2013 or later claims data for 
splints, casts, and inter-ocular lenses. DHA may also establish fee 
schedule amounts using a cross-walk method to establish statewide rates 
for items comparable to DMEPOS items with already established rates 
(this method is consistent with Medicare's regulation to not pay more 
than a comparable item as identified in 42 CFR 405.502). For items 
removed from Medicare's fee schedule, DHA will use the last known 
Medicare fee schedule rate and trend it forward to the present using 
Medicare's annual DMEPOS update factor.
    The following table provides a summary of methodologies for 
establishing rates in the TRICARE Fee Schedule:

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         Current methodology                   Category                            Methodology
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Use the 80th percentile of all         Surgical Dressings and   Set national ceiling at median of all paid
 qualified billed charges within the    Certain DME.             claims nationwide during base year.
 state as the state prevailing rate.                            Set national floor at 85% of national ceiling.
Pay the claim using the state                                   Calculate average billed charge for a state
 prevailing rate or billed charges,                              during base year.
 whichever is lower.                                            Trend forward the base year state average,
                                                                 floor, and ceiling using Medicare's update
                                                                 factor.
                                                                --If state average is within the national floor
                                                                 and ceiling, it becomes the state rate.
                                       Prosthetics and          Set national ceiling and floor at 90% and 120%
                                        Orthotics, including     respectively of the nationwide average of
                                        Therapeutic Shoes and    claims paid during base year.
                                        Inserts.                Calculate average billed charge for a state
                                                                 during base year.
                                                                Trend forward the base year state average,
                                                                 floor, and ceiling using Medicare's update
                                                                 factor.
                                                                --If state average is within the national floor
                                                                 and ceiling, it becomes the state rate.
                                       Parenteral and Enteral.  Calculate average billed charge nationwide
                                                                 during base year and trend forward using
                                                                 Medicare's update factor.
                                       Splints, Casts, and      The national average becomes the state rate for
                                        IOLs.                    every state (i.e., no variation between
                                                                 states).
                                       Codes that require use   Use the same rate as a comparable code with an
                                        of cross-walk method.    existing rate.
                                       Codes removed from       Use the last rate from on Medicare's fee
                                        Medicare's fee           schedule and trend it upwards using Medicare's
                                        schedule.                update factor.
                                       Codes with fewer than    There is an insufficient number of national
                                        50 paid claims           claims to establish a ceiling and floor. Use
                                        nationally each year     current methodology for reimbursement, and code
                                        since 1994.              will not be added to the fee schedule.
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    DHA will be responsible for establishing and updating and the 
accurate calculation of TRICARE's DMEPOS and PEN fee schedule prices. 
Proposed statewide rates are available for review on the DHA website at 
https://health.mil/Military-Health-Topics/Business-Support/Rates-and-Reimbursement/Durable-Medical-Equipment-Prosthetics-Orthotics-and-Supplies.

    Dated: December 22, 2020.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2020-28762 Filed 12-28-20; 8:45 am]
BILLING CODE 5001-06-P