[Federal Register Volume 75, Number 32 (Thursday, February 18, 2010)]
[Proposed Rules]
[Pages 7218-7227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3042]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AN37


Payment for Inpatient and Outpatient Health Care Professional 
Services at Non-Departmental Facilities and Other Medical Charges 
Associated With Non-VA Outpatient Care

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: This document proposes to update the Department of Veterans 
Affairs (VA) medical regulations concerning the payment methodology 
used to calculate VA payments for inpatient and outpatient health care 
professional services and other medical services associated with non-VA 
outpatient care.

DATES: Comments must be received on or before April 19, 2010.

ADDRESSES: Written comments may be submitted by email through http://www.regulations.gov; by mail or hand-delivery to Director, Regulations 
Management (00REG1), Department of Veterans Affairs, 810 Vermont Ave., 
NW., Room 1068, Washington, DC 20420; or by fax to (202) 273-9026. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AN37--Payment for Inpatient and Outpatient Health Care 
Professional Services at Non-Departmental Facilities and Other Medical 
Charges Associated with Non-VA Outpatient Care.'' Copies of comments 
received will be available for public inspection in the Office of 
Regulation Policy and Management, Room 1063B, between the hours of 8 
a.m. and 4:30 p.m. Monday through Friday (except holidays). Please call 
(202) 461-4902 for an appointment. In addition, during the comment 
period, comments may be viewed online through the Federal Docket 
Management System (FDMS) at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Joseph C. Enderle, Jr., National Fee 
Program Manager, Department of Veterans Affairs, P.O. Box 469066, 
Denver, CO 80246-9066, telephone (303) 370-5088. (This is not a toll-
free number.)

SUPPLEMENTARY INFORMATION: Under 38 U.S.C. 1703(a), ``[w]hen [VA] 
facilities are not capable of furnishing economical hospital care or 
medical services because of geographical inaccessibility or are not 
capable of furnishing the care or services required, the Secretary, as 
authorized in [38

[[Page 7219]]

U.S.C. 1710], may contract with non-[VA] facilities in order to 
furnish'' certain hospital care and medical services to veterans who 
qualify under 38 U.S.C. 1703. VA implemented this authority in 38 CFR 
17.52.
    Also, under 38 U.S.C. 1728, VA shall authorize payment for 
emergency care in a non-VA facility in limited situations primarily 
where the care is needed for the treatment of a service-connected 
disability or related conditions aggravating a service connected 
disability. Under that authority, as implemented in 38 CFR 17.120, VA 
reimburses either the veteran who made payments for hospital care or 
medical services, the person or organization making such expenditure on 
behalf of such veteran, or the hospital or other health facility 
furnishing the care or services if such care or services were provided 
in a medical emergency and VA or other Federal facilities were not 
feasibly available, and an attempt to use them beforehand would not be 
reasonable.
    Payment methodology for health care professional services 
associated with outpatient and inpatient care that are payable under 
either 38 U.S.C. 1703 or 1728 is currently set forth in 38 CFR 17.56.
    Current Sec.  17.56(a) adopted the Medicare Participating Physician 
Fee Schedule for the payment of non-VA physician and other health care 
professional services. For services not covered by the Medicare 
Participating Physician Fee Schedule, VA pays the lesser of the actual 
amount billed or the amount calculated using the 75th percentile 
methodology set forth in current Sec.  17.56(c) (or the usual and 
customary rate if there are fewer than 8 treatment occurrences for a 
procedure during the previous fiscal year). We cannot predict whether 
there will be 8 treatment occurrences during an upcoming fiscal year, 
or the precise charges of such treatment occurrences, because these 
depend upon the billing practices of the non-VA facilities involved. In 
the vast majority of these cases, the non-VA facilities' charges are 
far greater than the allowable Medicare charges for the same treatment. 
As a result, VA's expenditures can be unpredictable and, in some cases, 
can greatly exceed the costs VA would incur using the Medicare 
schedules. We propose to broaden Sec.  17.56 to apply a new payment 
methodology to all non-VA inpatient and outpatient health care 
professional services and other outpatient services. Such charges would 
include ancillary and facility costs such as those that are reimbursed 
using the following Medicare schedules: Ambulatory Surgical Center 
Payment, Clinical Laboratory Fee Schedule, Home Health Prospective 
Payment System (``PPS''), Hospice, Hospital Outpatient PPS, and End 
Stage Renal Disease composite rate payment method. In the absence of an 
amount negotiated between VA and the provider under the Federal 
Acquisition Regulation (``FAR''), this new methodology will allow VA to 
pay the lesser of an amount negotiated under the VA Acquisition 
Regulation (``VAAR''), the applicable Medicare or VA Fee schedule rate, 
and the billed charge.
    VA OIG Report 05-03037-107 (2006) concluded that clarification of 
VA's regulatory authority for payment of outpatient facility charges is 
necessary to ensure consistent, predictable medical costs and control 
expenditures. This audit recommended that VA adopt Medicare fee 
schedules via specific regulatory action. VA subsequently determined 
that in the absence of a contract it had authority to pay facility 
charges and similar costs utilizing Medicare rates as its payment 
methodology without regulatory change. As a result, in early 2009, VA 
utilized Medicare schedules for a brief period of time to pay for 
certain institutional services. In response to an expressed concern 
received from a health care organization, VA determined that regulatory 
action was the preferred method of implementing Medicare schedules. We 
believe that using the Medicare schedules will clearly help VA contain 
costs, as explained in greater detail later in this notice. It is in 
the interest of the American public that these methodologies be adopted 
in order to help contain costs. We recognize that potential cost-
savings realized by VA as a result of this proposed rule will 
economically impact the health care community. Historically, other 
Federal payers have utilized a phased-in approach for implementation of 
changes resulting in an economic transfer action upon the health care 
community. We solicit comments from the health care industry as to how 
VA may best implement such a transition.
    The current Sec.  17.56 states that ``[n]otwithstanding other 
provisions of this section, VA, for physician services covered by this 
section, will pay the lesser of the amount determined under paragraphs 
(a) through (e) of this section or the amount negotiated with the 
physician or the physician's agent.'' There are three basic types of 
negotiated contracts VA uses to pay for purchased health care: (1) 
Contracting under 48 CFR, (2) negotiated contracts under 48 CFR Chapter 
8, and (3) negotiated contracts using a repricing agent. We propose to 
revise the regulation to clarify how payments will be computed for 
inpatient and outpatient health care professional services at non-VA 
facilities and other medical charges associated with non-VA outpatient 
care. Proposed paragraph (a) would require that the costs of the listed 
services be paid in accordance with a preferential hierarchy set forth 
in paragraphs (a)(1) and (a)(2). The proposed rule would give 
preference to ``[t]he amount negotiated by VA and the provider under 
Federal Acquisition Regulation (FAR), 48 CFR Chapter 1.''
    However, proposed Sec.  17.56(a)(1) does not fully reflect VA's 
existing statutory and regulatory authority to negotiate rates through 
the contracting authority in 38 U.S.C. 1703 and the regulatory 
procedures set forth in 48 CFR Chapter 8, or to apply rates negotiated 
by a repricing agent. Accordingly, in proposed paragraph (a)(2)(i) and 
(a)(2)(ii), we added a clarifying amendment to specify that negotiating 
such agreements is the preferred method for determining payment amounts 
for all non-VA physician and other health care professional services 
only if such amount is lesser than would be payable under the 
applicable Medicare or VA Fee Schedule rate and billed charge.
    Accordingly, proposed paragraph (a)(2) would provide the second 
payment methodology, which would be the lesser of the amounts described 
in paragraphs (a)(2)(i), (ii), (iii), or (iv). Proposed paragraph 
(a)(2)(i) is based upon the authority to enter into negotiated 
contracts under 48 CFR 801.670-3. Proposed paragraph (a)(2)(ii) is 
based on current Sec.  17.56(f), which in part currently permits VA to 
pay physicians the amount that they have negotiated with an agent. The 
proposed paragraph would clarify the current rule. We would use the 
word ``provider'' where current paragraph (f) uses ``physician'' 
because we propose to broaden this regulation to reach ``other medical 
charges associated with non-VA outpatient care.'' We would also use the 
term ``repricing agent'' instead of ``physician's agent'' for the same 
reason.
    Paragraph (a)(2)(iii)(A) and (B) would describe the payment 
methodology that applies where there has been no negotiated amount. In 
paragraph (a)(2)(iii)(A), we would adopt Medicare's ``applicable fee 
schedule or prospective payment system payment amount.'' As explained 
above regarding proposed Sec.  17.56(a), this regulation would apply 
the Medicare rates to more than simply physician professional services, 
as is done in the current rule.
    Under current law, the Federal Government may waive Medicare

[[Page 7220]]

payment rules and allow alternative payment methods. At this time, such 
a waiver has been granted only to hospitals in the state of Maryland. 
In our view, the Medicare methodology implemented in current Sec.  
17.56 and that we propose to expand in this rulemaking includes 
alternative payment methods authorized under a Medicare waiver. We 
propose to clarify in proposed paragraph (a)(2)(iii)(A) that absent a 
lesser charge under proposed paragraphs (a)(2)(i), (ii) or (iv), 
payment will be made in accordance with the terms of any alternative 
methodology authorized by a Medicare waiver or as otherwise prescribed 
in paragraph (a)(2)(iii)(A).
    Paragraph (a)(2)(iii)(A) would not include the exception in current 
Sec.  17.56(a) for payments for ``anesthesia services.'' This exception 
is no longer required because Medicare includes payment for anesthesia 
in its fee schedules and prospective payment systems. The current 
regulation also describes in detail the payment formula for physician 
and non-physician professional services, which is already included in 
the Medicare fee schedule that VA would adopt under this rule. There is 
no reason to repeat it in the proposed regulation.
    We also note that this rule would not authorize additional payments 
or any payment adjustments greater than the amount specified in the 
published Medicare fee schedule and prospective payment system, such as 
end-of-year settlements or other periodic adjustments made by Medicare 
as a result of cost reporting. Such adjustments allow for additional 
payments or recovery of payment on the basis of actual cost as reported 
by Medicare participating providers. The payments determined by cost 
reporting for hospital outpatient services include transitional pass-
through payments, bad debts, and costs of direct medical education. 
Unlike Medicare, VA is a direct supporter of medical education through 
its residency, internship, and research affiliations with educational 
institutions. Furthermore, a treating facility incurs no risk of bad 
debt accumulation as a result of referral of veterans for treatment, as 
VA pays 100 percent of the determined allowable amount. VA does not 
have systems in place to obtain the data necessary to make such 
adjustments, and we believe it would not be cost-effective for us to 
develop such systems because of the relatively small numbers of 
veterans affected. In contrast, Medicare has a larger program that 
reaches a significantly larger group of people than the number of 
veterans whose non-VA care is paid for under Sec. Sec.  17.52 and 
17.120. For these reasons VA proposes not to make settlement or 
adjustment payments.
    Proposed paragraph (a)(2)(iii)(B) would apply ``[i]n the absence of 
a Medicare rate.'' In such cases, we would apply the formula in current 
Sec.  17.56(c), which we would restate in paragraph (a)(2)(iii)(B).
    Under paragraph (a)(2)(iv), we would pay ``[t]he amount the 
provider bills the general public for the same service.'' If the 
provider is willing to accept payment from the general public of an 
amount that is less than the other amounts set forth in paragraphs 
(a)(2)(i), (ii), or (iii), there would be no reasonable justification 
in our view for charging the government a greater amount for the same 
services.
    Proposed paragraph (b) would repeat the exception in the current 
Sec.  17.56(d) for services provided in the state of Alaska, without 
substantive change.
    Paragraph (c) would bar providers or their agents from imposing any 
additional charges to those authorized for payment under this section. 
This is based on current Sec.  17.56(e) and is substantively identical.
    Proposed paragraph (d) would implement recent revisions to 38 
U.S.C. 1728(a) that require VA to ``reimburse [certain] veterans 
eligible for hospital care or medical services under [38 U.S.C. chapter 
17] for the customary and usual charges of emergency treatment 
(including travel and incidental expenses under the terms and 
conditions set forth in [38 U.S.C. 111]) for which such veterans have 
made payment, from sources other than [VA].'' We interpret this 
provision to authorize VA to reimburse the veteran for all of his or 
her out-of-pocket payments relating to the emergency treatment; 
however, we do not interpret this provision to bar the application of 
the sound, cost-savings principles used to reimburse providers in 
paragraphs (a) and (b). Therefore, under this rule, we would reimburse 
the veteran for out-of-pocket payments and, if there is any remaining 
balance due to the provider, VA would reimburse the provider using the 
principles set forth in proposed paragraphs (a) and (b).
    Finally, as a result of this proposed rule making, it came to our 
attention that 38 CFR 17.52(a) contains a typographical error. Prior 
versions of this regulation (codified at 38 CFR 17.50b(a)) included 
cross-references to 38 CFR 17.50c through f. Sections 17.50c, 17.50d 
and 17.50f have subsequently been recodified as 38 CFR 17.53, 17.54 and 
17.55, respectively. 61 FR 21964 (1996). Additionally, since the most 
recent revision to this regulation, Sec.  17.56, was added to the 
regulatory sequence. Therefore, we propose that the reference in Sec.  
17.52(a) to the ``provisions of Sec.  17.53 through f'' should be 
amended to the ``provisions of Sec. Sec.  17.53, 17.54,17.55 and 
17.56.''

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a regulatory action as a ``significant regulatory 
action,'' requiring review by the Office of Management and Budget (OMB) 
unless OMB waives such review, if it is a regulatory action that is 
likely to result in a rule that may: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    VA has examined the economic, interagency, budgetary, legal, and 
policy implications of this proposed rule and has concluded that it is 
a significant regulatory action under Executive Order 12866 because it 
is likely to result in a rule that may have an annual effect on the 
economy of $100 million or more.

Regulatory Impact Analysis

    VA followed OMB circular A-4 to the extent feasible in this 
analysis. The circular first calls for a discussion of the need for the 
regulation. The preamble above discusses the need for the regulation in 
more detail.

Need

    Under 38 U.S.C. 1703(a), ``[w]hen [VA] facilities are not capable 
of furnishing economical hospital care or medical services because of 
geographical inaccessibility or are not capable of furnishing the care 
or services required, the Secretary, as authorized in [38 U.S.C. 1710], 
may

[[Page 7221]]

contract with non-[VA] facilities in order to furnish'' certain 
hospital care and medical services to veterans who qualify under 38 
U.S.C. 1703. Medicare is the largest U.S. Federal health care payer and 
is recognized as the Federal health care industry standard for 
reimbursement rates. Providers, particularly the medical facilities 
affected by this rule, are familiar with Medicare payment 
methodologies. Indeed, VA currently uses Medicare methodologies in 
connection with hospital care and inpatient and outpatient physician 
services. Moreover, two separate audits by VA's Office of Inspector 
General concluded that clarification of VA's regulatory authority for 
payment of outpatient facility charges is necessary. See VA OIG Reports 
08-02901-185 (2009) and 05-03037-107 (2006). As such, we believe the 
adoption of Medicare rates will help ensure consistent, predictable 
medical costs and will help control expenditures. Thus, we believe that 
adoption of this rate is important to both VA and the general public.

Impact

    An estimate of the number of small entities potentially affected by 
this rule may be found in the Regulatory Flexibility Act section below. 
The following ``Benefit-Cost Analysis'' discussion provides a high 
level overview concerning the economic impact of this proposed rule. We 
seek any information or comment on these and other issues.

Benefits-Cost Analysis

End Stage Renal Disease (ESRD)
    To estimate the potential savings to be realized with the adoption 
of Medicare pricing, we first identified outpatient dialysis services 
provided to veterans in non-VA facilities in the first six months of 
calendar year 2008. We focused on a subset of dialysis procedure and 
injectable drug codes that together accounted for the vast bulk of 
outpatient dialysis facility charges for care purchased by VA. We 
edited the data to remove outliers (claims with very high or low paid 
amounts per unit of service). We eliminated the small number of 
dialysis procedure claims that had more than one unit of service. For 
dialysis drug claims, on the other hand, we eliminated claims that had 
only one unit of service because these injectable drugs are normally 
administered as multiple units of service. We also excluded claims that 
VA reimbursed through purchased care contracts.
    We then calculated the impact of paying these non-VA dialysis 
claims using Medicare's dialysis facility pricing methods to set the 
maximum allowable charge (based on Medicare's composite rate for 
dialysis procedures and Medicare prices for separately payable 
injectable drugs). Medicare's national average composite rate 
(approximately $157 per dialysis session) was used in this analysis. 
This rate was adjusted using Medicare's geographic wage index 
adjustment for ESRD dialysis facility charges. For the injectable drug 
claims Medicare prices were used. We then compared the original amount 
paid by VA to the price Medicare would pay, and from this comparison we 
kept the lesser amount as the final amount VA would pay for a given 
claim (the Medicare price would set the maximum charge for that claim, 
but in some cases the local VA facility might already have negotiated a 
lower rate than the Medicare rate).
    Cost reductions for the dialysis procedures ranged from 21-35 
percent for the three most common dialysis codes and the savings on 
injectable drugs ranged from 48-69 percent for the three most common 
codes. By utilizing Medicare pricing we estimate that VA's outpatient 
dialysis facility expenditures will decrease by 39 percent.
Clinical Lab Services
    Similarly, we first identified all clinical lab services provided 
through VA purchased care to veterans in the first six months of 
calendar year 2008. We then edited the data to remove outliers (claims 
paid under $1 or over $500). We also eliminated a very small number of 
claims that we were unable to map to zip codes or that had more than 
one unit of service on a line item. We also excluded claims that were 
paid under contracts with clinical labs or with certain managed care 
providers.
    To estimate the impact of using Medicare's clinical lab fee 
schedule, we focused on the 100 clinical lab services (by CPT code) 
with the highest aggregate non-VA (purchased care) allowed amounts. 
These 100 codes accounted for about 86.5 percent of all non-VA clinical 
lab service costs. We calculated the impact of paying these non-VA 
clinical lab claims using Medicare's fee schedule as the maximum 
allowable charge. In calculating the impact of Medicare pricing, we 
excluded a small number of the top 100 CPT codes that are not on 
Medicare's lab fee schedule because Medicare pays these services using 
the Medicare physician fee schedule. We also excluded physician claims, 
clinical labs at Maryland hospitals, and critical access hospitals 
because they are not subject to the Medicare lab fee schedule. Our 
estimates accounted for Medicare's higher payments for clinical lab 
services at sole community hospitals. We also used the unique Medicare 
carrier rates for lab services where appropriate in individual 
locations.
    We found that VA paid an average of almost $49 per line item for 
clinical lab services for the top 100 VA purchased care clinical lab 
services. Under Medicare pricing, the VA would pay an average of $11.47 
for these claims. This represents a cost reduction of approximately 75 
percent.
    We performed further analysis of the 15 clinical lab codes with the 
highest VA purchased care volumes. We found that these 15 clinical lab 
codes accounted for about one-half of the VA's payments for clinical 
lab services in the first six months of CY08. The cost reductions for 
these 15 codes ranged from 63 percent to 85 percent which indicates 
that the allowed amounts under Medicare's pricing would be equal to 15-
37 percent of the current VA allowed amounts. This indicates that the 
impact of using the Medicare clinical lab schedule will lead to a 
relatively homogeneous reduction in clinical lab payments.
Home Health Care/Hospice
    The estimated impact of using Medicare's home health care and 
hospice payment methodologies is zero. We estimate no impact because VA 
currently utilizes these payment methodologies for reimbursement of 
such non-VA care.
Percent of Veterans Utilizing VA Health Care System
    Approximately 1.6 percent of the total U.S. population are veterans 
who utilize the VA Health Care System. Of the total number of veterans 
who utilized the VHA Health Care System in fiscal year 2008, VHA 
preauthorized non-VA outpatient hospital services for approximately 5.4 
percent of veterans, 2.5 percent used community hospital emergency 
rooms, 0.8 percent used freestanding ambulatory surgery centers, 0.7 
percent used independent laboratories, and 0.1 percent were authorized 
care at end stage renal disease treatment centers at VA expense. We 
believe that the impact of veterans authorized non-VA health care 
services at VA expense in the local health care market is minimal, as 
illustrated in Table 1.

[[Page 7222]]



                          Table 1--Percent of Veterans Utilizing VA Health Care System
----------------------------------------------------------------------------------------------------------------
                                                                                                Percent of total
                                                           FY 2008 total      FY 2008 total      veteran users/
                         State                               population       veteran users        total U.S.
                                                                                                   population
----------------------------------------------------------------------------------------------------------------
Alabama................................................          4,692,977             94,426                2.0
Alaska.................................................            689,791             13,826                2.0
Arizona................................................          6,630,722            114,126                1.7
Arkansas...............................................          2,910,777             80,831                2.8
California.............................................         37,873,407            369,346                1.0
Colorado...............................................          4,962,478             68,628                1.4
Connecticut............................................          3,550,231             50,373                1.4
Delaware...............................................            885,956             13,099                1.5
District of Columbia...................................            589,366              8,894                1.5
Florida................................................         19,119,225            420,202                2.2
Georgia................................................          9,863,250            139,428                1.4
Hawaii.................................................          1,312,372             18,706                1.4
Idaho..................................................          1,549,062             32,886                2.1
Illinois...............................................         13,177,638            168,982                1.3
Indiana................................................          6,468,433            111,562                1.7
Iowa...................................................          3,042,015             66,833                2.2
Kansas.................................................          2,828,255             56,131                2.0
Kentucky...............................................          4,295,044             90,718                2.1
Louisiana..............................................          4,500,627             79,472                1.8
Maine..................................................          1,349,506             37,359                2.8
Maryland...............................................          5,743,662             70,754                1.2
Massachusetts..........................................          6,518,184             77,112                1.2
Michigan...............................................         10,314,853            119,290                1.2
Minnesota..............................................          5,357,700             95,409                1.8
Mississippi............................................          2,986,953             65,369                2.2
Missouri...............................................          5,977,318            122,411                2.0
Montana................................................            965,024             29,279                3.0
Nebraska...............................................          1,814,105             42,322                2.3
Nevada.................................................          2,730,425             53,423                2.0
New Hampshire..........................................          1,343,347             25,220                1.9
New Jersey.............................................          8,890,186             75,882                0.9
New Mexico.............................................          2,029,633             44,824                2.2
New York...............................................         19,554,879            225,452                1.2
North Carolina.........................................          9,231,191            166,138                1.8
North Dakota...........................................            652,934             16,954                2.6
Ohio...................................................         11,633,295            190,646                1.6
Oklahoma...............................................          3,672,886             79,735                2.2
Oregon.................................................          3,814,725             79,168                2.1
Pennsylvania...........................................         12,631,267            266,529                2.1
Rhode Island...........................................          1,078,084             19,174                1.8
South Carolina.........................................          4,479,461             98,624                2.2
South Dakota...........................................            809,862             28,291                3.5
Tennessee..............................................          6,244,163            114,393                1.8
Texas..................................................         24,627,546            371,259                1.5
Utah...................................................          2,677,229             29,042                1.1
Vermont................................................            636,472             14,163                2.2
Virginia...............................................          7,899,205            114,076                1.4
Washington.............................................          6,628,203             91,233                1.4
West Virginia..........................................          1,836,864             56,541                3.1
Wisconsin..............................................          5,701,620            104,787                1.8
Wyoming................................................            526,857             16,884                3.2
                                                        --------------------------------------------------------
    Totals.............................................        309,299,265          4,940,212                1.6
----------------------------------------------------------------------------------------------------------------

Accounting Statement

    It is anticipated that adoption of Medicare pricing standards for 
outpatient care would result in significant cost savings; however, the 
amount of savings will vary depending on current VA payment methodology 
and utilization rates. Under current Sec.  17.56, VA utilizes 
Medicare's participating physician fee schedule for the payment of 
physician and professional services for both inpatient and outpatient 
care; therefore no savings would be realized for the portion of non-VA 
outpatient expenditures for services paid under that pricing standard.
    The following assumptions were used to arrive at a projected 
savings estimate:

<bullet> Outpatient disbursements for future years are based on total 
expenditures for non-VA outpatient services during 2006, 2007 and 2008, 
the number of veteran users, and an anticipated inflation rate.
<bullet> The number of veteran users for outpatient purchased care 
services was estimated at 8 percent of the number of enrolled veterans 
for future years.
<bullet> The anticipated inflation rate used in the estimate is 3.5 
percent for 2008-2011, 3.7 percent for 2012, and 3.8 percent for all 
subsequent years.

[[Page 7223]]

<bullet> Outpatient disbursements made in FY 2008 were used to identify 
disbursements for specific categories of outpatient services, such as: 
clinical laboratory, dialysis, ambulatory surgical center, home health, 
hospice, etc.
<bullet> Savings were estimated by comparing current VA payment 
methodology for sample codes within each category with the Medicare's 
pricing standards for the same codes to determine an estimated 
percentage of savings.
<bullet> The percentage of savings for each category was then used to 
calculate the estimated savings if Medicare pricing standards were 
adopted.
    [cir] Savings for dialysis services using Medicare pricing 
standards are estimated at 39 percent.
    [cir] Savings for laboratory services using Medicare pricing 
standards are estimated at 75 percent.
    [cir] Savings for Ambulatory Surgery Center services using Medicare 
pricing standards are estimated at 11 percent.
<bullet> No savings were anticipated for either home health care or 
hospice services, as these services are paid by VA utilizing Medicare 
LUPA rates.
<bullet> Facility charges were estimated for all other outpatient 
service expenditures. It is anticipated that a cost savings of 25 
percent will be realized in this category.

------------------------------------------------------------------------
                                                Estimated annual savings
                                                resulting from adoption
                 Fiscal year                      of medicare pricing
                                                standards for payment of
                                                  outpatient services
------------------------------------------------------------------------
2011.........................................               $251,800,000
2012.........................................                280,400,000
2013.........................................                314,200,000
2014.........................................                344,100,000
2015.........................................                375,600,000
                                              --------------------------
  Estimated Total Savings....................              1,566,100,000
------------------------------------------------------------------------

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance numbers and titles are 
64.009, Veterans Medical Care Benefits; 64.010, Veterans Nursing Home 
Care; and 64.011, Veterans Dental Care.

Congressional Review Act

    Under the Congressional Review Act, a major rule may not take 
effect until at least 60 days after submission to Congress of a report 
regarding the rule. A major rule is one that would have an annual 
effect on the economy of $100 million or more or have certain other 
impacts. This proposed rule is a major rule under the Congressional 
Review Act.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires agencies to analyze 
options for regulatory relief of small businesses if a rule has a 
significant impact on a substantial number of small entities. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and small governmental jurisdictions. Most hospitals, 
Ambulatory Surgery Centers, and other providers subject to this rule 
are considered to be small entities, either by being nonprofit 
organizations or by meeting Small Business Administration (SBA) 
definition of a small business, as codified in 13 CFR 121.201. 
Therefore, the Secretary has determined that this proposed rule would 
have a significant impact on a substantial number of small entities.
    An Initial Regulatory Flexibility Analysis (IRFA) has been prepared 
and submitted to the Chief Counsel for Advocacy of the Small Business 
Administration in accordance with 5 U.S.C. 603. Interested parties are 
invited to submit comments on VA's regulatory flexibility analysis. The 
analysis is as follows:

Description of the Reasons Why Action by the Agency Is Being Considered

    This document proposes to update the Department of Veterans Affairs 
(VA) medical regulations concerning the payment methodology used to 
calculate VA payments for inpatient and outpatient health care 
professional services and other medical services associated with non-VA 
outpatient care. Moreover, two separate audits by VA's Office of 
Inspector General concluded that clarification of VA's regulatory 
authority for payment of outpatient facility charges is necessary. See 
VA OIG Reports 08-02901-185 (2009) and 05-03037-107 (2006). As such, we 
believe the adoption of Medicare rates will help ensure consistent, 
predictable medical costs and will help control costs. Thus, we believe 
that adoption of this rate is important to both VA and the general 
public.

Succinct Statement of the Objectives of, and Legal Basis for, the 
Proposed Rule

    Under 38 U.S.C. 1703(a), ``[w]hen [VA] facilities are not capable 
of furnishing economical hospital care or medical services because of 
geographical inaccessibility or are not capable of furnishing the care 
or services required, the Secretary, as authorized in [38 U.S.C. 1710], 
may contract with non-[VA] facilities in order to furnish'' certain 
hospital care and medical services to veterans who qualify under 38 
U.S.C. 1703. Payment methodology for health care professional services 
associated with outpatient and inpatient care that are payable under 
either 38 U.S.C. 1703 or 1728 is currently set forth in 38 CFR 17.56. 
Current Sec.  17.56(a) adopted the Medicare Participating Physician Fee 
Schedule for the payment of professional services.

Description of, and, Where Feasible, Estimate of the Number of Small 
Entities To Which the Proposed Rule Will Apply

Kidney Dialysis Centers (North American Industry Classification System 
(NAICIS) 621492)
    Payments excluded from this analysis include services purchased by 
competitive contracting, services purchased in foreign countries, and 
emergency care ESRD services authorized under 38 U.S.C. 1725. Lesser 
payment rates negotiated between VA and the non-VA provider are 
included, as VA is unable to identify such payments in its centralized 
payment files. VA has authority under 38 CFR 17.56 to negotiate a 
lesser payment amount with non-VA providers for services purchased on 
an individual basis. We acknowledge that inclusion of negotiated 
payment rate data overstates the financial impact upon small 
businesses.
    VA payment information is primarily maintained by the payee's 
federal tax identification number (TIN). VA assigns a two character 
suffix to the base nine-digit TIN to distinguish multiple components of 
an entity; however, the payment files are indexed by the vendor remit-
to-addresses rather than the place of service. For this reason we 
conducted a comprehensive geographical analysis of payments based upon 
the address of the payee.
    Medicare utilizes their ESRD prospective payment pricer for the 
payment for ESRD treatment. Dialysis treatments are performed mostly at 
dialysis centers and paid by Medicare under the method 1 of the ESRD 
pricer. Medicare may pay home dialysis treatments using a second method 
of determining pricing, which is known as method 2. When VA authorizes 
dialysis treatment and negotiates a payment rate based upon Medicare 
methodology it pays for such dialysis treatments under method 1. The 
percentage of vendors receiving VA payments for all ESRD related 
treatment totaling less than $50,000 was 82 percent; the percentage of 
vendors receiving payments totaling

[[Page 7224]]

less than $150,000 annually was 95 percent.
    A total of 1,888 health care providers furnished care in an end 
stage renal disease treatment facility at VA expense. Approximately 90 
percent of the total annual payments received by these providers was 
less than $100,000. All of the providers with earnings equal to or 
greater than $100,000 were dialysis treatment centers, representing 9.5 
percent of the total providers paid. There were approximately 484 
dialysis centers in 2002 and approximately 85 percent of these dialysis 
centers (NAICS 621492) were classified as small businesses earning less 
than $10 million per year (http://www.sba.gov/advo/research/us_rec02.txt). VA currently pays ESRD treatment for veterans at 
approximately one-third of available dialysis centers.
    The following table illustrates the location and amount of annual 
VA payments in increments of $50,000 to these 180 dialysis treatment 
centers.

                                       Amount of VA Payments to Vendors for Dialysis Treatment in ESRD Facilities
                                                       [Sorted by state in increments of $50,000]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                $450,000
                  VA payment range                     $100,000     $150,000     $200,000     $250,000     $300,000     $350,000     $400,000
                                                       $150,000     $200,000     $250,000     $300,000     $350,000     $400,000     $450,000   $500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
State:
    AL.............................................          1    ...........  ...........  ...........  ...........  ...........  ...........  ........
    AR.............................................  ...........  ...........  ...........  ...........  ...........          1    ...........  ........
    AZ.............................................          1            1            2            1            1    ...........          1    ........
    CA.............................................          5            1            1    ...........  ...........  ...........  ...........  ........
    CO.............................................  ...........  ...........          1    ...........  ...........  ...........  ...........  ........
    FL.............................................          1            3    ...........  ...........  ...........  ...........  ...........  ........
    GA.............................................          6            5            3            4            1            1            1       1
    HI.............................................  ...........  ...........  ...........  ...........  ...........  ...........  ...........  ........
    IL.............................................          3            2            2    ...........          1    ...........          2    ........
    IN.............................................  ...........          1    ...........  ...........  ...........  ...........  ...........  ........
    KS.............................................          1    ...........          1    ...........  ...........  ...........          1    ........
    KY.............................................          2    ...........  ...........          1    ...........  ...........  ...........  ........
    LA.............................................  ...........  ...........          1    ...........  ...........  ...........  ...........  ........
    MA.............................................          1            1            2    ...........          1    ...........  ...........  ........
    MD.............................................  ...........          3    ...........  ...........          1    ...........  ...........  ........
    MI.............................................          3    ...........  ...........          1    ...........  ...........  ...........  ........
    MO.............................................          1    ...........  ...........  ...........  ...........  ...........  ...........  ........
    NC.............................................          5            1            1            1    ...........  ...........  ...........  ........
    NH.............................................  ...........          1    ...........  ...........  ...........  ...........  ...........  ........
    NM.............................................  ...........  ...........  ...........  ...........          1    ...........  ...........  ........
    NY.............................................          3    ...........  ...........  ...........  ...........  ...........  ...........  ........
    OH.............................................  ...........          3    ...........          1    ...........  ...........  ...........  ........
    PA.............................................          5            5            1    ...........  ...........  ...........          1       1
    SC.............................................          1    ...........  ...........  ...........  ...........  ...........  ...........  ........
    TN.............................................          4            1            2            1            1            1            1    ........
    TX.............................................          3            2    ...........  ...........          2            1    ...........  ........
    WA.............................................          3    ...........  ...........  ...........  ...........  ...........  ...........  ........
    WI.............................................          1    ...........  ...........          2    ...........  ...........  ...........  ........
    WV.............................................  ...........  ...........  ...........          1    ...........  ...........  ...........  ........
                                                    ----------------------------------------------------------------------------------------------------
        Total......................................         50           30           17           13            9            4            7       2
                                                    ----------------------------------------------------------------------------------------------------
        Percent of Total...........................          2.6          1.6          0.9          0.7          0.5          0.2          0.4   0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                       Amount of VA Payments to Vendors for Dialysis Treatment in ESRD Facilities
                                                       [Sorted by state in increments of $50,000]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  $500,000    $550,000    $600,000    $650,000    $700,000    $750,000    $800,000    $850,000    $900,000
        VA payment range          $550,000    $600,000    $650,000    $700,000    $750,000    $800,000    $850,000    $900,000    $950,000    $950,000+
--------------------------------------------------------------------------------------------------------------------------------------------------------
State:
    AL.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    AR.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    AZ.........................  ..........         1    ..........  ..........  ..........  ..........  ..........  ..........         2    ...........
    CA.........................  ..........  ..........         1    ..........  ..........  ..........         1    ..........  ..........  ...........
    CO.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    FL.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........          1
    GA.........................         1    ..........  ..........         1    ..........         1           1    ..........  ..........          9
    HI.........................  ..........  ..........  ..........         1    ..........  ..........  ..........  ..........  ..........  ...........
    IL.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........          1
    IN.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    KS.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    KY.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    LA.........................         1    ..........  ..........  ..........         1    ..........  ..........  ..........  ..........          1
    MA.........................  ..........  ..........  ..........  ..........         2    ..........  ..........  ..........  ..........  ...........
    MD.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........          1
    MI.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    MO.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    NC.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    NH.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........

[[Page 7225]]

 
    NM.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    NY.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    OH.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    PA.........................         1           1    ..........         2           1    ..........  ..........  ..........         1            4
    SC.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    TN.........................         1           2    ..........  ..........  ..........         1    ..........  ..........         1            2
    TX.........................  ..........         1    ..........  ..........  ..........  ..........  ..........  ..........  ..........          1
    WA.........................         1    ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    WI.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
    WV.........................  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ..........  ...........
                                ------------------------------------------------------------------------------------------------------------------------
        Total..................         5           5           1           4           4           2           2           0           4           20
                                ------------------------------------------------------------------------------------------------------------------------
        Percent of Total.......         0.3         0.3         0.1         0.2         0.2         0.1         0.1         0.0         0.2          1.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    During fiscal year 2008, approximately 10,500 veterans received 
dialysis treatment at non-VA facilities at VA expense, which represents 
2.8 percent of all persons receiving dialysis in the United States. One 
major dialysis provider characterized government programs, other than 
Medicare and Medicaid programs, as comprising 2 percent of their annual 
revenues for calendar year ending December 31, 2008, as stated on their 
annual Securities Exchange Commission form 10-K submission. We consider 
these reported numbers as reflective of VA workload throughout the 
dialysis treatment industry and conclude that VA patient workload in 
dialysis centers does not represent a substantial source of income for 
these businesses.
Clinical Diagnostic Laboratory (Medical Laboratories NAICS 621511)
    Medicare utilizes the Clinical Diagnostic Laboratory fee schedule 
to determine the payment amount for laboratory tests. Both VA and 
Medicare use the Physician Fee Schedule to pay professional 
interpretation and reporting fees associated with laboratory tests. 
Under this proposal, VA would use the Medicare Clinical Diagnostic 
Laboratory fee schedule to pay for laboratory tests purchased from non-
VA providers. In FY 2008, VA paid 8,283 unique vendors for laboratory 
services purchased from health care facilities and providers. VA annual 
payments for these services totaled less than $50,000 for 98 percent of 
the vendors paid, 99.2 percent of vendors received less than $100,000, 
and 99.5 percent of vendors were paid less than $150,000 per year. A 
total of 13 vendors were paid an annual sum greater than $300,000. VA 
estimates that payment for laboratory services utilizing the Medicare 
Clinical Laboratory Diagnostic fee schedule will reduce the amount of 
payments by approximately 75 percent. Due to the current level of 
workload and VA expenditures per non-VA facility we do not consider 
adoption of Medicare reimbursement rates for laboratory services to 
have a major financial impact upon individual entities.
Home Health Care Services (NAICS 621610)
    VA purchases home health care and hospice care in accordance with 
38 U.S.C. 7120(c). These services are paid for via contracts, basic 
coordinated agreements, provider agreements and/or other negotiated 
agreements. Currently, Medicare Low Utilization Payment Adjustment 
(LUPA) rates are used by VA to determine acceptable rates upon which to 
base contracts and agreements for such non-VA care purchases. In 
addition to the LUPA rates, VA takes into consideration the need for 
and provision of services not otherwise included in the Medicare PPS. 
Such additional services will continue to be paid for by VA under the 
proposed regulatory changes. This proposed rule will simply codify the 
practices currently in place, and no significant financial impact on 
non-VA providers is anticipated.
General Medical & Surgical Hospitals/Freestanding Ambulatory Surgical & 
Emergency Centers (NAICS 622110/621493)
    We propose to adopt the Medicare ASC and Hospital OPPS payment 
methodology for payment of invasive and non-invasive procedures and 
treatment in an outpatient hospital setting or freestanding surgical 
center that VA authorizes under 38 U.S.C. 1703 and 1728. VA currently 
pays for such facility charges utilizing its 75th percentile 
methodology. VA is unable to accurately project potential cost savings 
realized from utilizing Medicare Hospital OPPS payment methodology. 
During Fiscal Year 2008, less than one-half of one percent of all 
facilities paid that furnished non-VA care in emergency departments 
received payments greater than $100,000 per year. Additionally, the 
majority of payments for care rendered in ambulatory surgical centers 
during FY 2008 was below $50,000 per facility (95.4 percent; 99.2 
percent were paid less than $150,000 per year). We project that 
adopting Medicare ASC methodology will result in a reduction of 
approximately 11 percent and we estimate a reduction of 25 percent for 
hospital outpatient expenditures.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements of the Proposed Rule, Including an Estimate of the Classes 
of Small Entities Which Will Be Subject to the Requirement and the Type 
of Professional Skills Necessary for Preparation of the Report or 
Record

    This rulemaking will impose no new reporting or recordkeeping 
requirements on large or small entities.

Identification, to the Extent Practicable, of All Relevant Federal 
Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule

    There are no duplicative, overlapping, or conflicting Federal rules 
identified with this proposed rule.

Description of Any Significant Alternatives to the Proposed Rule Which 
Would Accomplish the Stated Objectives of Applicable Statutes and Which 
Would Minimize Any Significant Economic Impact of the Proposed Rule on 
Small Entities

    We believe adoption of Medicare payment schedules would standardize 
VA reimbursement for the purchase of non-VA health care services as 
suggested by previous OIG audits. For reasons discussed above in the 
cost-benefits-analysis section of the

[[Page 7226]]

Regulatory Impact Analysis, we do not believe there are any reasonable 
alternatives to our adoption of all current and future Medicare payment 
schedules and prospective payment systems. Historically, other Federal 
payers have transitioned changes to payment methodology over a period 
of time to lessen the potential financial impact upon the health care 
community. We believe an immediate adoption of Medicare rates is 
reasonable because most health care providers are accustomed to 
Medicare rates, and there is low VA market penetration in the non-VA 
health care community. Furthermore, we believe the cost-savings 
realized as a result of adopting Medicare rates would be beneficial to 
the veteran population. However, we are sensitive to the needs of the 
health care community and we welcome any comments regarding plausible 
alternatives for implementation, including a phased-in approach.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in an expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This proposed rule would have no such 
effect on State, local, and tribal governments, or on the private 
sector.

Paperwork Reduction Act

    Non-VA health care providers currently bill VA using uniform 
billing forms CMS-1450, OMB <greek-i> 0938-0997, and CMS-1500, OMB 
<greek-i> 0938-0999. This practice will not be altered or amended. As 
such, this document contains no new provisions constituting a 
collection or reporting of information under the Paperwork Reduction 
Act (44 U.S.C. 3501-3521).

List of Subjects in 38 CFR Part 17

    Administrative practice and procedure, Alcohol abuse, Alcoholism, 
Claims, Day care, Dental health, Drug abuse, Foreign relations, 
Government contracts, Grant programs--health, Government programs--
veterans, Health care, Health facilities, Health professions, Health 
records, Homeless, Medical and dental schools, Medical devices, Medical 
research, Mental health programs, Nursing home care, Philippines, 
Reporting and recordkeeping requirements, Scholarships and fellowships, 
Travel and transportation expenses, Veterans.

    Approved: September 15, 2009.
John R. Gingrich,
Chief of Staff, Department of Veterans Affairs.

    For the reasons set forth in the preamble, VA proposes to amend 38 
CFR part 17 as follows:

PART 17--MEDICAL

    1. The authority citation for part 17 continues to read as follows:

    Authority: 38 U.S.C. 501, 1721, and as noted in specific 
sections.

    2. Revise paragraph (a) introductory text of Sec.  17.52 to read as 
follows:


Sec.  17.52  Hospital care and medical services in non-VA facilities.

    (a) When VA facilities or other government facilities are not 
capable of furnishing economical hospital care or medical services 
because of geographic inaccessibility or are not capable of furnishing 
care ore services required, VA may contract with non-VA facilities for 
care in accordance with the provisions of this section. When demand is 
only for infrequent use, individual authorizations may be used. Care in 
public or private facilities, however, subject to the provisions of 
Sec. Sec.  17.53, 17.54, 17.55, and 17.56, will only be authorized, 
whether under a contract or an individual authorization, for--
* * * * *
    3. Revise Sec.  17.56 to read as follows:
    Sec.  17.56 VA payment for inpatient and outpatient health care 
professional services at non-departmental facilities and other medical 
charges associated with non-VA outpatient care.
    (a) Except for health care professional services provided in the 
state of Alaska (see paragraph (b) of this section), VA will determine 
the amounts paid under Sec. Sec.  17.52 or 17.120 for inpatient and 
outpatient health care professional services, and all other medical 
services associated with non-VA outpatient care, using the applicable 
method in this section:
    (1) The amount negotiated by VA and the provider under Federal 
Acquisition Regulation (FAR), 48 CFR Chapter 1.
    (2) If an amount has not been negotiated under paragraph (a)(1), VA 
will use the lesser of the following:
    (i) The amount negotiated by VA and the provider under Department 
of Veterans Affairs Acquisition Regulation (VAAR), 48 CFR Chapter 8;
    (ii) The amount negotiated by a repricing agent if the provider is 
participating within the repricing agent's network and VA has a 
contract with that repricing agent; or
    (iii) Either:
    (A) The applicable Medicare fee schedule or prospective payment 
system payment amount (``Medicare rate'') for the period in which the 
service was provided (without any changes based on the subsequent 
development of information under Medicare authorities). In the event of 
a Medicare waiver, payment will be made in accordance with such waiver; 
or
    (B) In the absence of a Medicare rate or Medicare waiver, payment 
will be the VA Fee Schedule amount for the period in which the service 
was provided. The VA Fee Schedule amount is determined by the 
authorizing VA medical facility, which ranks all billings (if the 
facility has had at least eight billings) from non-VA facilities under 
the corresponding procedure code during the previous fiscal year, with 
billings ranked from the highest to the lowest. The VA Fee Schedule 
amount is the charge falling at the 75th percentile. If the authorizing 
facility has not had at least eight such billings, then this paragraph 
does not apply; or
    (iv) The amount the provider bills the general public for the same 
service.
    (b) For physician and non-physician professional services rendered 
in Alaska, VA will pay for services in accordance with a fee schedule 
that uses the Health Insurance Portability and Accountability Act 
mandated national standard coding sets. VA will pay a specific amount 
for each service for which there is a corresponding code. Under the VA 
Alaska Fee Schedule the amount paid in Alaska for each code will be 90 
percent of the average amount VA actually paid in Alaska for the same 
services in Fiscal Year (FY) 2003. For services that VA provided less 
than eight times in Alaska in FY 2003, for services represented by 
codes established after FY 2003, and for unit-based codes prior to FY 
2004, VA will take the Centers for Medicare and Medicaid Services' rate 
for each code and multiply it times the average percentage paid by VA 
in Alaska for Centers for Medicare and Medicaid Services-like codes. VA 
will increase the amounts on the VA Alaska Fee Schedule annually in 
accordance with the published national Medicare Economic Index (MEI). 
For those years where the annual average is a negative percentage, the 
fee schedule will remain the same as the previous year. Payment for 
non-VA health care professional services in Alaska shall be the lesser 
of the amount billed, or the amount calculated under this subpart.
    (c) Payments made by VA to a non-VA facility or provider under this 
section shall be considered payment in full. Accordingly, the facility 
or

[[Page 7227]]

provider or agent for the provider or facility may not impose any 
additional charge for any services for which payment is made by VA.
    (d) In a case where a veteran has paid for emergency treatment for 
which VA may reimburse the veteran under Sec.  17.120, VA will 
reimburse the amount that the veteran actually paid. Any amounts due to 
the provider but unpaid by the veteran will be reimbursed to the 
provider under paragraphs (a) and (b) of this section.

(Authority: 38 U.S.C. 1703, 1728)

[FR Doc. 2010-3042 Filed 2-17-10; 8:45 am]
BILLING CODE 8320-01-P