`[Federal Register Volume 75, Number 243 (Monday, December 20, 2010)]
[Notices]
[Pages 79348-79350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31792]


-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE; Formerly Known as the Civilian Health and Medical 
Program of the Uniformed Services (CHAMPUS); Fiscal Year 2011 
Diagnosis-Related Group (DRG) Updates

AGENCY: Office of the Secretary, DoD.

ACTION: Notice of DRG revised rates.

-----------------------------------------------------------------------

SUMMARY: This notice describes the changes made to the TRICARE DRG-

[[Page 79349]]

based payment system in order to conform to changes made to the 
Medicare Prospective Payment System (PPS). It also provides the updated 
fixed loss cost outlier threshold, cost-to-charge ratios and the data 
necessary to update the Fiscal Year 2011 rates.

DATES: The rates, weights, and Medicare PPS changes which affect the 
TRICARE DRG-based payment system contained in this notice are effective 
for admissions occurring on or after October 1, 2010.

ADDRESSES: TRICARE Management Activity (TMA), Medical Benefits and 
Reimbursement Branch, 16401 East Centretech Parkway, Aurora, CO 80011-
9066.

FOR FURTHER INFORMATION CONTACT: Ann N. Fazzini, Medical Benefits and 
Reimbursement Branch, TMA, telephone (303) 676-3803.
    Questions regarding payment of specific claims under the TRICARE 
DRG-based payment system should be addressed to the appropriate 
contractor.

SUPPLEMENTARY INFORMATION: The final rule published on September 1, 
1987 (52 FR 32992) set forth the basic procedures used under the 
CHAMPUS DRG-based payment system. This was subsequently amended by 
final rules published August 31, 1988 (53 FR 33461), October 21, 1988 
(53 FR 41331), December 16, 1988 (53 FR 50515), May 30, 1990 (55 FR 
21863), October 22, 1990 (55 FR 42560), and September 10, 1998 (63 FR 
48439).
    An explicit tenet of these final rules, and one based on the 
statute authorizing the use of DRGs by TRICARE, is that the TRICARE 
DRG-based payment system is modeled on the Medicare PPS, and that, 
whenever practicable, the TRICARE system will follow the same rules 
that apply to the Medicare PPS. The Centers for Medicare and Medicaid 
Services (CMS) publishes these changes annually in the Federal Register 
and discusses in detail the impact of the changes.
    In addition, this notice updates the rates and weights in 
accordance with our previous final rules. The actual changes we are 
making, along with a description of their relationship to the Medicare 
PPS, are detailed below.

I. Medicare PPS Changes Which Affect the TRICARE DRG-Based Payment 
System

    Following is a discussion of the changes CMS has made to the 
Medicare PPS that affect the TRICARE DRG-based payment system.

A. DRG Classifications

    Under both the Medicare PPS and the TRICARE DRG-based payment 
system, cases are classified into the appropriate DRG by a Grouper 
program. The Grouper classifies each case into a DRG on the basis of 
the diagnosis and procedure codes and demographic information (that is, 
sex, age, and discharge status). The Grouper used for the TRICARE DRG-
based payment system is the same as the current Medicare Grouper with 
two modifications. The TRICARE system has replaced Medicare DRG 435 
with two age-based DRGs (900 and 901), and has implemented thirty-four 
(34) neonatal DRGs in place of Medicare DRGs 385 through 390. For 
admissions occurring on or after October 1, 2001, DRG 435 has been 
replaced by DRG 523. The TRICARE system has replaced DRG 523 with the 
two age-based DRGs (900 and 901). For admissions occurring on or after 
October 1, 1995, the CHAMPUS grouper hierarchy logic was changed so the 
age split (age < 29 days) and assignments to Major Diagnostic Category 
(MDC) 15 occur before assignment of the PreMDC DRGs. This resulted in 
all neonate tracheostomies and organ transplants to be grouped to MDC 
15 and not to DRGs 480-483 or 495. For admissions occurring on or after 
October 1, 1998, the CHAMPUS grouper hierarchy logic was changed to 
move DRG 103 to the PreMDC DRGs and to assign patients to PreMDC DRGs 
480, 103, and 495 before assignment to MDC 15 DRGs and the neonatal 
DRGs. For admissions occurring on or after October 1, 2001, DRGs 512 
and 513 were added to the PreMDC DRGs, between DRGs 480 and 103 in the 
TRICARE grouper hierarchy logic. For admissions occurring on or after 
October 1, 2004, DRG 483 was deleted and replaced with DRGs 541 and 
542, splitting the assignment of cases on the basis of the performance 
of a major operating room procedure. The description for DRG 480 was 
changed to ``Liver Transplant and/or Intestinal Transplant'', and the 
description for DRG 103 was changed to ``Heart/Heart Lung Transplant or 
Implant of Heart Assist System''. For Fiscal Year 2007, CMS implemented 
classification changes, including surgical hierarchy changes. The 
TRICARE Grouper incorporated all changes made to the Medicare Grouper, 
with the exception of the pre-surgical hierarchy changes, which will 
remain the same as Fiscal Year 2006. For Fiscal Year 2008, Medicare 
implemented their Medicare-Severity DRG (MS-DRG) based payment system. 
TRICARE, however, continued with the Centers for Medicare and Medicaid 
Services DRG-based (CMS DRG) payment system for Fiscal Year 2008. For 
Fiscal Year 2009, the TRICARE/CHAMPUS DRG-based payment system shall be 
modeled on the MS-DRG system, with the following modifications.
    The MS-DRG system consolidated the 43 pediatric CMS DRGs that were 
defined based on age less than or equal to 17 into the most clinically 
similar MS-DRGs. In their Inpatient Prospective Payment System final 
rule for MS-DRGs, Medicare stated for their population these pediatric 
CMS DRGs contained a very low volume of Medicare patients. At the same 
time, Medicare encouraged private insurers and other non-Medicare 
payers to make refinements to MS-DRGs to better suit the needs of the 
patients they serve. Consequently, TRICARE finds it appropriate to 
retain the pediatric CMS DRGs for our population. TRICARE is also 
retaining the TRICARE-specific DRGs for neonates and substance use.
    TRICARE has retained the MS-DRG numbering system for Fiscal Year 
2009 and those TRICARE-specific DRGs have been assigned available, 
blank DRG numbers unused in the MS-DRG system. We refer the reader to 
http://www.tricare.mil/drgrates for a complete crosswalk containing the 
TRICARE DRG numbers for Fiscal Year 2009.
    For Fiscal Year 2009, TRICARE will use the MS-DRG v26.0 pre-MDC 
hierarchy, with the exception that MDC 15 is applied after DRG 011-012 
and before MDC 24.
    For Fiscal Year 2010, there are no additional or deleted DRGs.
    For Fiscal Year 2011, the added DRGs and deleted DRGs are the same 
as those included in CMS' final rule published on August 16, 2010. That 
is, DRG 009 is deleted; DRGs 014 and 015 are being added.

B. Wage Index and Medicare Geographic Classification Review Board 
Guidelines

    TRICARE will continue to use the same wage index amounts used for 
the Medicare PPS. TRICARE will also duplicate all changes with regard 
to the wage index for specific hospitals that are redesignated by the 
Medicare Geographic Classification Review Board. In addition, TRICARE 
will continue to utilize the out commuting wage index adjustment.

C. Revision of the Labor-Related Share of the Wage Index

    TRICARE is adopting CMS' percentage of labor related share of the 
standardized amount. For wage index values greater than 1.0, the labor 
related portion of the Adjusted Standardized Amount (ASA) shall equal 
68.8 percent.

[[Page 79350]]

For wage index values less than or equal to 1.0 the labor related 
portion of the ASA shall continue to equal 62 percent.

D. Hospital Market Basket

    TRICARE will update the adjusted standardized amounts according to 
the final updated hospital market basket used for the Medicare PPS for 
all hospitals subject to the TRICARE DRG-based payment system according 
to CMS's August 16, 2010, final rule. For Fiscal Year 2011, the market 
basket is 2.6 percent. This year, Medicare applied two reductions to 
their market basket amount: (1) A 0.25 percent reduction due to 
provisions found in the Patient Protection and Affordable Care Act, and 
(2) a 2.9 percent reduction for documentation and coding adjustments 
found in Public Law 110-90. These two reductions do not apply to 
TRICARE.

E. Outlier Payments

    Since TRICARE does not include capital payments in our DRG-based 
payments (TRICARE reimburses hospitals for their capital costs as 
reported annually to the contractor on a pass-through basis), we will 
use the fixed loss cost outlier threshold calculated by CMS for paying 
cost outliers in the absence of capital prospective payments. For 
Fiscal Year 2011, the TRICARE fixed loss cost outlier threshold is 
based on the sum of the applicable DRG-based payment rate plus any 
amounts payable for Indirect Medical Education (IDME) plus a fixed 
dollar amount. Thus, for Fiscal Year 2011, in order for a case to 
qualify for cost outlier payments, the costs must exceed the TRICARE 
DRG-based payment rate (wage adjusted) for the DRG plus the IDME 
payment plus $21,229 (wage adjusted). The marginal cost factor for cost 
outliers continues to be 80 percent.

F. National Operating Standard Cost as a Share of Total Costs

    The Fiscal Year 2011 TRICARE National Operating Standard Cost as a 
Share of Total Costs (NOSCASTC) used in calculating the cost outlier 
threshold is 0.92. TRICARE uses the same methodology as CMS for 
calculating the NOSCASTC; however, the variables are different because 
TRICARE uses national cost-to-charge ratios while CMS uses hospital-
specific cost-to-charge ratios.

G. Indirect Medical Education (IDME) Adjustment

    Passage of the Medicare Modernization Act of 2003 modified the 
formula multipliers to be used in the calculation of the indirect 
medical education (IDME) adjustment factor. Since the IDME formula used 
by TRICARE does not include disproportionate share hospitals (DSHs), 
the variables in the formula are different than Medicare's; however, 
the percentage reductions that will be applied to Medicare's formula 
will also be applied to the TRICARE IDME formula. The new multiplier 
for the IDME adjustment factor for TRICARE for Fiscal Year 2011 is 
1.02.

H. Expansion of the Post Acute Care Transfer Policy

    For Fiscal Year 2011 TRICARE is adopting CMS' expanded post acute 
care transfer policy according to CMS' final rule published August 16, 
2010.

I. Cost-to-Charge Ratio

    While CMS uses hospital-specific cost-to-charge ratios, TRICARE 
uses a national cost-to-charge ratio. For Fiscal Year 2011, the cost-
to-charge ratio used for the TRICARE DRG-based payment system for acute 
care hospitals and neonates will be 0.3664. This shall be used to 
calculate the adjusted standardized amounts and to calculate cost 
outlier payments, except for children's hospitals. For children's 
hospital cost outliers, the cost-to-charge ratio used is 0.3974.

J. Updated Rates and Weights

    The updated rates and weights are accessible through the Internet 
at http://www.tricare.osd.mil under the sequential headings TRICARE 
Provider Information, Rates and Reimbursements, and DRG Information. 
Table 1 provides the ASA rates and Table 2 provides the DRG weights to 
be used under the TRICARE DRG-based payment system during Fiscal Year 
2011. The implementing regulations for the TRICARE/CHAMPUS DRG-based 
payment system are in 32 CFR Part 199.

    Dated: December 14, 2010.
Morgan F. Park,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2010-31792 Filed 12-17-10; 8:45 am]
BILLING CODE 5001-06-P`