7218 Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 

1This does not mean that an employer must 

adopt an employment practice that has the least 

severe impact on members of the protected age 

group. ‘‘Unlike the business necessity test, which 

asks whether there are other ways for the employer 

to achieve its goals that do not result in a disparate 

impact on a protected class, the reasonableness 

inquiry includes no such requirement.’’ Smith v. 

City of Jackson, 544 U.S. 228, 243 (2005). Instead, 

this simply means that the availability of other 

options is one of the factors relevant to whether the 

practice was a reasonable one. ‘‘If the actor can 

advance or protect his interest as adequately by 

other conduct which involves less risk of harm to 

others, the risk contained in his conduct is clearly 

unreasonable.’’ Restatement (Second) of Torts 292, 

cmt. c (1965). 

amend 29 CFR chapter XIV part 1625 as 

follows: 

PART 1625—AGE DISCRIMINATION IN 

EMPLOYMENT ACT 

1. The authority citation for part 1625 

continues to read as follows: 

Authority: 81 Stat. 602; 29 U.S.C. 621; 5 

U.S.C. 301; Secretary’s Order No. 10–68; 

Secretary’s Order No. 11–68; Sec. 9, 81 Stat. 

605; 29 U.S.C. 628; sec. 12, 29 U.S.C. 631, 

Pub. L. 99–592, 100 Stat. 3342; sec. 2, Reorg. 

Plan No. 1 of 1978, 43 FR 19807. 

Subpart A—Interpretations 

2. Revise paragraph (b) of § 1625.7 to 

read as follows: 

§ 1625.7 Differentiations based on 

reasonable factors other than age. 

* * * * * 

(b) Whether a differentiation is based 

on reasonable factors other than age 

(‘‘RFOA’’) must be decided on the basis 

of all the particular facts and 

circumstances surrounding each 

individual situation. 

(1) Reasonable. A reasonable factor is 

one that is objectively reasonable when 

viewed from the position of a reasonable 

employer (i.e., a prudent employer 

mindful of its responsibilities under the 

ADEA) under like circumstances. To 

establish the RFOA defense, an 

employer must show that the 

employment practice was both 

reasonably designed to further or 

achieve a legitimate business purpose 

and administered in a way that 

reasonably achieves that purpose in 

light of the particular facts and 

circumstances that were known, or 

should have been known, to the 

employer. Factors relevant to 

determining whether an employment 

practice is reasonable include but are 

not limited to, the following: 

(i) Whether the employment practice 

and the manner of its implementation 

are common business practices; 

(ii) The extent to which the factor is 

related to the employer’s stated business 

goal; 

(iii) The extent to which the employer 

took steps to define the factor accurately 

and to apply the factor fairly and 

accurately (e.g., training, guidance, 

instruction of managers); 

(iv) The extent to which the employer 

took steps to assess the adverse impact 

of its employment practice on older 

workers; 

(v) The severity of the harm to 

individuals within the protected age 

group, in terms of both the degree of 

injury and the numbers of persons 

adversely affected, and the extent to 

which the employer took preventive or 

corrective steps to minimize the severity 

of the harm, in light of the burden of 

undertaking such steps; and 

(vi) Whether other options were 

available and the reasons the employer 

selected the option it did.1

(2) Factors Other Than Age. When an 

employment practice has a significant 

disparate impact on older individuals, 

the RFOA defense applies only if the 

practice is not based on age. In the 

typical disparate impact case, the 

practice is based on an objective nonage factor and the only question is 

whether the practice is reasonable. 

When disparate impact results from 

giving supervisors unchecked discretion 

to engage in subjective decision making, 

however, the impact may, in fact, be 

based on age because the supervisors to 

whom decision making was delegated 

may have acted on the bases of 

conscious or unconscious age-based 

stereotypes. Factors relevant to 

determining whether a factor is ‘‘other 

than age’’ include, but are not limited to, 

the following: 

(i) The extent to which the employer 

gave supervisors unchecked discretion 

to assess employees subjectively; 

(ii) The extent to which supervisors 

were asked to evaluate employees based 

on factors known to be subject to agebased stereotypes; and 

(iii) The extent to which supervisors 

were given guidance or training about 

how to apply the factors and avoid 

discrimination. 

* * * * * 

[FR Doc. 2010–3126 Filed 2–17–10; 8:45 am] 

BILLING CODE 6570–01–P 

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 NonVA Outpatient Care 

AGENCY: Department of Veterans Affairs. 

ACTION: Proposed rule. 

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 handdelivery 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 

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Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 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 serviceconnected 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 § 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 § 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 § 17.56 to apply a 

new payment methodology to all nonVA 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 § 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 § 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 § 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 § 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 

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7220 Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 

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 § 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 

§ 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 §§ 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 § 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 § 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 § 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-ofpocket 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, 

§ 17.56, was added to the regulatory 

sequence. Therefore, we propose that 

the reference in § 17.52(a) to the 

‘‘provisions of § 17.53 through f’’ should 

be amended to the ‘‘provisions of 

§§ 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 

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Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 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. 

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7222 Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 

TABLE 1—PERCENT OF VETERANS UTILIZING VA HEALTH CARE SYSTEM

State FY 2008 total 

population 

FY 2008 total 

veteran users 

Percent of 

total 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 

§ 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: 

• 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. 

• The number of veteran users for 

outpatient purchased care services 

was estimated at 8 percent of the 

number of enrolled veterans for future 

years. 

• 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. 

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• 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. 

• 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. 

• The percentage of savings for each 

category was then used to calculate 

the estimated savings if Medicare 

pricing standards were adopted. 

Æ Savings for dialysis services using 

Medicare pricing standards are 

estimated at 39 percent. 

Æ Savings for laboratory services 

using Medicare pricing standards 

are estimated at 75 percent. 

Æ Savings for Ambulatory Surgery 

Center services using Medicare 

pricing standards are estimated at 

11 percent. 

• No savings were anticipated for either 

home health care or hospice services, 

as these services are paid by VA 

utilizing Medicare LUPA rates. 

• 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. 

Fiscal year 

Estimated annual savings 

resulting from adoption 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 § 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 ninedigit 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 

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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] 

VA payment range $100,000 

$150,000 

$150,000 

$200,000 

$200,000 

$250,000 

$250,000 

$300,000 

$300,000 

$350,000 

$350,000 

$400,000 

$400,000 

$450,000 

$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] 

VA payment range $500,000 

$550,000 

$550,000 

$600,000 

$600,000 

$650,000 

$650,000 

$700,000 

$700,000 

$750,000 

$750,000 

$800,000 

$800,000 

$850,000 

$850,000 

$900,000 

$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 ................................ .................. .................. .................. .................. .................. .................. .................. .................. .................. ....................

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AMOUNT OF VA PAYMENTS TO VENDORS FOR DIALYSIS TREATMENT IN ESRD FACILITIES—Continued 

[Sorted by state in increments of $50,000] 

VA payment range $500,000 

$550,000 

$550,000 

$600,000 

$600,000 

$650,000 

$650,000 

$700,000 

$700,000 

$750,000 

$750,000 

$800,000 

$800,000 

$850,000 

$850,000 

$900,000 

$900,000 

$950,000 $950,000+ 

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 onehalf 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 costbenefits-analysis section of the 

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7226 Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 

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 costsavings 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 # 0938–0997, 

and CMS–1500, OMB # 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 § 17.52 to read as follows: 

§ 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 

§§ 17.53, 17.54, 17.55, and 17.56, will 

only be authorized, whether under a 

contract or an individual authorization, 

for— 

* * * * * 

3. Revise § 17.56 to read as follows: 

§ 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 

§§ 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 nonVA 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 unitbased 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 nonVA facility or provider under this 

section shall be considered payment in 

full. Accordingly, the facility or 

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Federal Register / Vol. 75, No. 32 / Thursday, February 18, 2010 / Proposed Rules 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 

§ 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 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 600 and 697 

RIN 0648–XT83 

Atlantic Coastal Fisheries Cooperative 

Management Act Provisions; 

Application for Exempted Fishing 

Permits (EFPs) 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Notification of a request for an 

EFP; request for comments. 

SUMMARY: This EFP application, 

submitted by the Pemaquid Fishermen’s 

Cooperative Association (PFC), is 

intended to assist NMFS and the 

Atlantic Large Whale Take Reduction 

Team (ALWTRT) in their efforts to 

address the identified entanglement 

threat of vertical lines in fixed gear 

fisheries to Atlantic large whale 

populations. The EFP application is for 

testing of fixed fishing gear with no 

vertical lines on the northern edge of 

Jeffrey’s Ledge in the Gulf of Maine. 

The Assistant Regional Administrator 

for Sustainable Fisheries, Northeast 

Region, NMFS (Assistant Regional 

Administrator), has made a preliminary 

determination that the subject EFP 

application contains all the required 

information and warrants further 

consideration and that the activities 

authorized under the EFP would be 

consistent with the goals and objectives 

of federal management of the American 

lobster (lobster) resource. However, 

further review and consultation may be 

necessary before a final determination is 

made to issue an EFP. NMFS announces 

that the Assistant Regional 

Administrator proposes to issue an EFP 

and, therefore, invites comments on the 

issuance of this EFP. 

DATES: Comments must be received on 

or before March 5, 2010. 

ADDRESSES: Written comments should 

be sent to Patricia A. Kurkul, Regional 

Administrator, NMFS, Northeast 

Regional Office, 55 Great Republic 

Drive, Gloucester, MA 01930–2298. 

Mark the outside of the envelope 

‘‘Comments - Lobster EFP Proposal.’’ 

Comments also may be sent via 

facsimile (fax) to 978–281–9117. 

Comments may also be submitted by email to Alobster@noaa.gov. Include in 

the subject line of the e-mail the 

following document identifier: 

‘‘Comments - Lobster EFP Proposal.’’ 

FOR FURTHER INFORMATION CONTACT: 

Sarah Towne, Research Associate, (978) 

675–2162, fax (978) 281–9117. 

SUPPLEMENTARY INFORMATION: 

Background 

The regulations that govern exempted 

fishing, at § 600.745(b) and § 697.22, 

allow the Regional Administrator to 

authorize for limited testing, public 

display, data collection, exploration, 

health and safety, environmental cleanup, and/or hazardous removal purposes, 

and the targeting or incidental harvest of 

managed species that would otherwise 

be prohibited. An EFP to authorize such 

activity may be issued, provided there is 

adequate opportunity for the public to 

comment on the EFP application, the 

conservation goals and objectives of 

federal management of the lobster 

resource are not compromised, and 

issuance of the EFP is beneficial to the 

management of the species. 

The lobster fishery is one of the most 

valuable fisheries in the northeastern 

United States. In 2008, approximately 

82 million lbs (37,120 mt) of lobster 

were landed, with an ex-vessel value of 

approximately $306 million. Under the 

Atlantic States Marine Fisheries 

Commission’s interstate management 

process, lobsters are managed in state 

waters under Amendment 3 to the 

American Lobster Interstate Fishery 

Management Plan (Amendment 3). In 

federal waters of the Exclusive 

Economic Zone (EEZ), lobsters are 

managed under federal regulations at 50 

CFR part 697. 

The ALWTRP is a program to reduce 

the risk of serious injury or death of 

large whales due to incidental 

entanglement in U.S. commercial 

fishing gear. The plan is required by the 

Marine Mammal Protection Act 

(MMPA), and has been implemented by 

NMFS. The ALWTRP evolves as NMFS 

and the ALWTRT learn more about why 

whales become entangled and how 

fishing practices might be modified to 

reduce the risk of entanglement. 

Proposed EFP 

The EFP application requests 

exemptions from regulations in order to 

conduct gear research on the northern 

edge of Jeffrey’s Ledge in the Gulf of 

Maine to study fixed lobster fishing gear 

without vertical lines that could reduce 

or diminish whale entanglement. One 

contracted commercial fisherman would 

fish 140 traditional wire lobster traps 

with no vertical lines (experimental) 

and 140 traditional wire lobster traps 

with vertical lines (control), each set in 

multiple trawl configurations, rigging no 

fewer then 7 trawls with 20 traps each. 

Both the experimental and control 

group trawls would be hauled 30 times 

each during the fishing season, totaling 

no fewer than 420 hauls. The EFP 

application proposes the collection of 

statistical and scientific information as 

part of the project. Investigators would 

complete a NMFS-approved data sheet 

on each trip, collecting data on weather 

and sea conditions, position of gear, 

bottom type, water depth and 

temperature, duration of hauling time, 

set time, trap loss, configuration 

changes, hauling procedure 

modifications, catch, price per pound, 

and gear conflicts. 

Trawls would be tested on different 

bottom types, and the grappling hook 

gear used to retrieve the lineless trawls 

would be specific to that bottom type. 

Although the grappling hooks might 

adversely impact benthic habitats, their 

limited use for the proposed activity 

would not constitute a threat that is 

significantly greater than the one 

associated with the impact of the traps 

themselves, or of the other lobster traps 

that are already being fished in the 

proposed project location. Therefore 

there would be no anticipated adverse 

effects on protected resources or habitat 

as a result of this work. 

This project would not involve the 

authorization of any additional lobster 

trap gear. To allow for experimentation 

with traps without vertical lines, the 

EFP would provide exemptions from the 

vertical line and buoy regulations at § 

697.21(b)(2). All traps fished by the 

participating vessel would comply with 

all other applicable lobster regulations 

specified at 50 CFR part 697. There 

would not be observers or researchers 

onboard the participating vessel. 

Authority: 16 U.S.C. 1801 et seq. 

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