[Federal Register Volume 71, Number 197 (Thursday, October 12, 2006)]
[Notices]
[Pages 60112-60114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8624]


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DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE; Civilian Health and Medical Program of the Uniformed 
Services (CHAMPUS); Fiscal Year 2007 Diagnosis Related Group (DRF) 
Updates

AGENCY: Office of the Secretary, DoD.

ACTION: Notice of DRG revised rates.

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SUMMARY: This notice describes the changes made to the TRICARE DRG-
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 outliner threshold, 
cost-to-charge ratios and the Internet address for accessing the 
updated adjusted standardized amount and DRG relative weights to be 
used for FY 2007 under the TRICARE DRG-based payment system.

DATES: Effective 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, 2006.

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

FOR FURTHER INFORMATION CONTACT: Ann N. Fazzini, Medical Benefits and 
Reimbursement Systems, 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 32993) 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.

[[Page 60113]]

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

    Following is a discussion of the changes CMS had 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 is 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 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 FY 2007, CMS will implement 
classification changes, including surgical hierarchy changes. The 
TRICARE Grouper will incorporate all changes made to the Medicare 
Grouper, with the exception of the pre-surgical hierarchy changes, 
which will remain the same as FY 2006.

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 ASA shall equal 69.7 percent. 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' August 18, 2006, final rule.

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 FY 
2007, the fixed loss cost outlier threshold is based on the sum of the 
applicable DRG-based payment rate plus any amounts payable for IDME 
plus a fixed dollar amount. Thus, for FY 2007, in order for a case to 
qualify for cost outlier payments, the costs must exceed the TRICARE 
DRG base payment rate (wage adjusted) for the DRG plus the IDME payment 
plus $22,639 (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 FY 2007 TRICARE National Operating Standard Cost as a Share of 
Total Costs (NOSCASTC) used in calculating the cost outlier threshold 
is 0.925. 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 MMA 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 FY 2007 is 1.00.

H. Expansion of the Post Acute Care Transfer Policy

    For FY 2007 TRICARE is adopting CMS' expanded post acute care 
transfer policy according to CMS' final rule published August 18, 2006.

I. Blood Clotting Factor

    For FY 2007, TRICARE is adopting CMS' payment methodology for blood 
clotting factor according to CMS' final rule published August 18, 2006.

II. Cost to Charge Ratio

    While CMS uses hospital-specific cost to charge ratios, TRICARE 
uses a national cost to charge ratio. For FY 2007, the cost-to-charge 
ratio used for the TRICARE DRG-based payment system for acute care 
hospitals and neonates will be 0.3897 which is increased to 0.3967 to 
account for bad debts. 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 0.4282.

III. 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 FY 2007 and 
which is a result of the changes described above. The implementing 
regulations for the

[[Page 60114]]

TRICARE/CHAMPUS DRG-based payment system are in 32 CFR part 199.

    Dated: October 5, 2006.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 06-8624 Filed 10-11-06; 8:45 am]
BILLING CODE 5001-06-M