3926 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 

Issued in Renton, Washington, on January 

15, 2015. 

John P. Piccola, Jr., 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2015–01217 Filed 1–23–15; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–151416–06] 

RIN 1545–BG21 

Certain Distributions Treated as Sales 

or Exchanges; Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to notice of proposed 

rulemaking. 

SUMMARY: This document contains 

corrections to a notice of proposed 

rulemaking (REG–151416–06) that was 

published in the Federal Register on 

Monday, November 3, 2014 (79 FR 

65151), that prescribe how a partner 

should measure its interest in a 

partnership’s unrealized receivables and 

inventory items, and that provide 

guidance regarding the tax 

consequences of a distribution that 

causes a reduction in that interest. 

DATES: Written or electronic comments 

and request for a public hearing for the 

notice of proposed rulemaking at 79 FR 

65151, November 3, 2014, are still being 

accepted and must be received by 

February 2, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Allison R. Carmody, at (202) 317–5279 

or Frank J. Fisher, at (202) 317–6850 

(not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The notice of proposed rulemaking 

published Monday, November 3, 2014 

(79 FR 65151), is under section 751(b) 

of the Internal Revenue Code. 

Need for Correction 

As published, the notice of proposed 

rulemaking (REG–151416–06) contains 

errors that are misleading and are in 

need of clarification. 

Correction to Publication 

Accordingly, the notice of proposed 

rulemaking, FR Doc. 2014–25487, 

beginning on page 65151 in the issue of 

November 3, 2014, is corrected as 

follows: 

■ 1. On page 65152, in the preamble, 

second column, twenty-fifth line from 

the top of the column, the language 

‘‘example, Rev. Rul. 84–102 (84–102 

CB’’ is corrected to read ‘‘example, Rev. 

Rul. 84–102 (1984–2 CB’’. 

■ 2. On page 65154, in the preamble, 

second column, sixth line from the 

bottom of the second full paragraph, the 

language ‘‘751(b) in situations in which 

751(b)’’ is corrected to read ‘‘751(b) in 

situations in which section 751(b)’’. 

■ 3. On page 65155, in the preamble, 

third column, first and second lines 

from the bottom of the first full 

paragraph, the language ‘‘must disclose 

its position on Form 8275, Disclosure 

Statement.’’ is corrected to read ‘‘must 

disclose its position on Form 8275–R, 

Regulation Disclosure Statement.’’. 

§ 1.751–1 [Corrected] 

■ 4. On page 65160, second column, 

sixteenth line of paragraph (b)(2)(ii), the 

language ‘‘takes into account any 

section 743 basis’’ is corrected to read 

‘‘takes into account any section 743(b) 

basis’’. 

■ 5. On page 65160, third column, ninth 

line of paragraph (b)(2)(iii)(A), the 

language ‘‘taking into account any 

section 743’’ is corrected to read ‘‘taking 

into account any section 743(b)’’. 

■ 6. On page 65163, second column, the 

twenty-fourth through the twenty-sixth 

lines of paragraph (f), the language ‘‘this 

section consistently for all partnership 

sales, exchanges, and distributions, 

including for any’’ is corrected to read 

‘‘this section, and proposed § 1.704– 

1(b)(2)(iv)(f), consistently for all 

partnership sales, exchanges, and 

distributions occurring on or after 

November 3, 2014, including for any’’. 

■ 7. On page 65165, second column, 

paragraph (g) Example 4. (ii)(B), the 

eleventh line, the language 

‘‘immediately before the distribution are 

$25’’ is corrected to read ‘‘immediately 

before the distribution is $25’’. 

§ 1.755–1 [Corrected] 

■ 8. On page 65172, second column, 

paragraph (c)(2)(vi), the twentieth line, 

the language ‘‘and (v), would have 

applied if no’’ is corrected to read ‘‘or 

(v), would have applied if no’’. 

■ 9. On page 65173, first column, 

paragraph (c)(6) Example 2. (vi)(D), the 

second line, the language ‘‘$9 remaining 

section 743(b) adjustments is’’ is 

corrected to ‘‘$9 remaining section 

743(b) adjustment is’’. 

■ 10. On page 65173, first column, 

paragraph (c)(6) Example 2. (vi)(D), the 

eighth line from the bottom of the 

paragraph, the language ‘‘section 743(b) 

adjustments is not taken into’’ is 

corrected to ‘‘section 743(b) adjustment 

is not taken into’’. 

Martin V. Franks, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. 2015–01258 Filed 1–23–15; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 199 

[DOD–2012–HA–0146] 

RIN 0720–AB47 

TRICARE; Reimbursement of Long 

Term Care Hospitals 

AGENCY: Office of the Secretary, 

Department of Defense (DoD). 

ACTION: Proposed rule. 

SUMMARY: This proposed rule requests 

public comment on proposed 

implementation for Long Term Care 

Hospitals (LTCHs) the statutory 

provision at title 10, United States Code 

(U.S.C.), section 1079(j)(2) that 

TRICARE payment methods for 

institutional care be determined, to the 

extent practicable, in accordance with 

the same reimbursement rules as those 

that apply to payments to providers of 

services of the same type under 

Medicare. This proposed rule sets forth 

the proposed regulation modifications 

necessary to implement a TRICARE 

reimbursement methodology similar to 

that applicable to Medicare beneficiaries 

for inpatient services provided by 

LTCHs. 

DATES: Written comments received at 

the address indicated below by March 

27, 2015 will be accepted. 

ADDRESSES: You may submit comments, 

identified by docket number or 

Regulatory Information Number (RIN) 

and title, by either of the following 

methods: 

The Web site: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

Mail: Federal Docket Management 

System Office, Room 3C843, 1160 

Defense Pentagon, Washington, DC 

20301–1160. 

Instructions: All submissions received 

must include the agency name and 

docket number or RIN for this Federal 

Register document. The general policy 

for comments and other submissions 

from members of the public is to make 

these submissions available for public 

viewing on the Internet at http://


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 3927 

www.regulations.gov as they are 

received without change, including any 

personal identifiers or contact 

information. 

FOR FURTHER INFORMATION CONTACT: Ann 

Fazzini, TRICARE Management Activity 

(TMA), Medical Benefits and 

Reimbursement Branch, telephone (303) 

676–3803. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

A. Purpose of the Proposed Rule 

The purpose of this proposed rule is 

to publish proposed TRICARE 

regulation modifications necessary to 

implement for LTCHs the statutory 

requirement that for TRICARE 

institutional services ‘‘payments shall 

be determined to the extent practicable 

in accordance with the same 

reimbursement rules as apply to 

payments to providers of services of the 

same type under [Medicare].’’ Medicare 

pays LTCHs using a LTCH Prospective 

Payment System (PPS) which classifies 

Long Term Care (LTC) patients into 

distinct Diagnosis-Related Groups 

(DRG). The patient classification system 

groupings are called Medicare Severity 

Long Term Care Diagnosis Related 

Groups (MS–LTC–DRGs), which are the 

same DRGs used under the hospital 

inpatient PPS, but that have been 

weighted to reflect the resources 

required to treat the medically complex 

patients treated at LTCHs. 

TRICARE pays for most hospital care 

under the CHAMPUS DRG-based 

payment system, which is similar to 

Medicare’s, but some hospitals are 

exempt from the CHAMPUS DRG-based 

payment system. LTCHs are currently 

exempt from the CHAMPUS DRG-based 

payment system; they are paid their 

billed charges or a discount from their 

billed charges. Paying billed charges is 

fiscally imprudent and inconsistent 

with TRICARE’s governing statute. 

Paying LTCHs under a method similar 

to Medicare’s is prudent, practicable, 

and harmonious with the statute. Our 

legal authority for this proposed rule is 

10 U.S.C. 1079(j)(2). 

B. Summary of the Major Provisions of 

the Proposed Rule 

1. Implementation of a Prospective 

Payment System Methodology for 

LTCHs. TRICARE proposes to reimburse 

LTCHs for inpatient care using a method 

similar to Medicare’s LTCH PPS using 

MS–LTC–DRGs. Under the proposed 

TRICARE LTCH reimbursement method, 

payment for a TRICARE patient will be 

made at a predetermined, per-discharge 

amount for each MS–LTC–DRG. The 

TRICARE LTCH reimbursement method 

would include payment for all inpatient 

operating and capital costs of furnishing 

covered services (including routine and 

ancillary services), but not certain passthrough costs (e.g.—bad debts, direct 

medical education, and blood clotting 

factors). 

2. Transition period. In the past when 

implementing new reimbursement 

systems, TRICARE has offered a 

transition or phase-in period to buffer 

revenue reductions experienced by 

hospitals. For additional information, 

we refer the reader to the final rule on 

Sole Community Hospital (SCH) 

reimbursement (78 FR 48303). The 

phase-in period for SCHs was provided, 

in part, to allow hospitals sufficient 

time to adjust and budget for these 

reductions. It also provided an incentive 

for hospitals to remain in the network 

by allowing a 5 percent difference in 

payment reductions per year. More 

importantly, the transition was allowed 

by TRICARE because, by their nature, 

SCHs were the only hospitals in specific 

vicinities, so TRICARE patients were 

dependent on them. In addition, some 

SCHs rely heavily on TRICARE patients. 

Neither of these situations is true for 

LTCHs. 

In analyzing TRICARE data for LTCH 

admissions, we found reasons to forego 

a transition or phase-in period. First, 

LTCHs are not financially dependent on 

TRICARE beneficiaries. Our data show 

the average LTCH serving TRICARE 

beneficiaries had less than four 

admissions in Fiscal Year (FY) 12. 

Seventeen LTCHs scattered across eight 

states had 10 or more TRICARE 

admissions in FY12 and the vast 

majority of LTCHs had zero or one 

TRICARE admission in that same fiscal 

year. Second, out of the 227 LTCHs that 

had TRICARE admissions in FY12, 

about 75 percent of these hospitals 

admitted four or fewer TRICARE 

beneficiaries. In reviewing the allowed 

amount paid by TRICARE to LTCHs, 

allowed charges for non-TRICARE For 

Life (TFL) beneficiaries were 

approximately $71 million in FY12. 

These allowed amounts were equal to 

73 percent of billed charges, indicating 

that there are significant discounts off of 

the billed charge that are currently being 

accepted by LTCHs. Considering the 

low utilization of LTCHs by TRICARE 

beneficiaries and the discounts LTCHs 

are offering, we have concluded that 

implementation of TRICARE LTCH 

reimbursement methods similar to 

Medicare will have little financial 

impact on LTCHs. As a result, we are 

foregoing a transition period, but invite 

comments on this approach. 

C. Costs and Benefits 

The economic impact of the proposed 

rule is anticipated to reduce DoD 

payments to LTCHs, for all TRICARE 

beneficiaries by approximately $57 

million during the first year of 

implementation. 

II. Introduction and Background 

A. TRICARE LTCH Reimbursement 

Per 32 Code of Federal Regulations 

(CFR) 199.14(a)(1)(ii)(D)(4), LTCHs are 

currently exempt from the TRICARE 

DRG-based payment system, just as they 

were exempt from Medicare’s Inpatient 

Prospective Payment System (IPPS) 

when the Centers for Medicare and 

Medicaid Services (CMS) initially 

implemented its DRG-based payment 

system. Because LTCHs are exempt from 

the TRICARE DRG-based payment 

system, and because there is no 

alternate TRICARE reimbursement 

mechanism in 32 CFR Part 199 at this 

time, LTCH inpatient care provided to 

TRICARE beneficiaries is currently paid 

on the lower of a negotiated rate (if a 

network hospital) or billed charges (if a 

non-network hospital). 

Medicare also created a PPS for 

LTCHs effective with the cost reporting 

period beginning on or after October 1, 

2002. TRICARE often adopts Medicare’s 

reimbursement methods but delays 

implementation generally until any 

transition phase is complete for the 

Medicare program. CMS included a 5- 

year transition period when it adopted 

LTCH PPS for Medicare, under which 

LTCHs could elect to be paid a blended 

rate for a set period of time. This 

transition period ended in 2006. 

Following the transition phase, 

Medicare adopted an LTCH-specific 

DRG system, the MS–LTC–DRG, in 

2008. The MS–LTC–DRG is still used as 

the patient classification system for 

LTCHs. Given TRICARE’s statutory 

requirement to adopt Medicare’s 

reimbursement methods when 

practicable, TRICARE is proposing to 

adopt a reimbursement method similar 

to Medicare’s LTCH PPS for our 

beneficiaries. 

Under 10 U.S.C. 1079(j)(2), the 

amount to be paid to hospitals, skilled 

nursing facilities, and other institutional 

providers under TRICARE, ‘‘shall be 

determined to the extent practicable in 

accordance with the same 

reimbursement rules as apply to 

payments to providers of services of the 

same type under Medicare.’’ 

Patients with clinically complex 

problems, such as multiple acute or 

chronic conditions, may need hospital 

care for an extended period of time. 

LTCHs represent a relatively small 


tkelley on DSK3SPTVN1PROD with PROPOSALS
3928 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 

number of hospitals (approximately 425 

under Medicare), which treat a critically 

ill population with complex needs. 

The MS–LTC–DRG system under 

Medicare’s LTCH PPS classifies patients 

into distinct diagnostic groups based on 

clinical characteristics and expected 

resource needs. The patient 

classification groupings, which are the 

same groupings used under the 

inpatient acute care hospital groupings 

(i.e., MS–DRGs) are weighted to reflect 

the resources required to treat the 

medically complex patients who are 

treated in LTCHs. By their nature, 

LTCHs treat patients with comorbidities 

requiring long-stay, hospital-level care. 

For TRICARE, there were 

approximately 700 non-TFL and 100 

TFL LTCH admissions in FY 12 for 

which TRICARE was the primary payer. 

The average LTCH serving non-TFL 

TRICARE beneficiaries had less than 

four admissions in FY 12. TRICARE 

non-TFL LTCH-allowed charges were 

approximately $71 million in FY 12. 

These allowed amounts are equal to 73 

percent of billed charges, indicating that 

there are significant discounts at LTCHs. 

We found that the average allowed 

amount for non-TFL beneficiaries was 

almost $101,000 during FY 12, which is 

significantly more than the estimated 

amount that Medicare would have paid 

for these discharges (the average 

Medicare LTCH PPS payment would 

have been less than $50,000). Thus, 

using the Medicare LTCH–PPS system 

would reduce TRICARE-allowed 

amounts significantly, reducing 

TRICARE payments by $40 million per 

year for non-TFL beneficiaries. 

For TFL beneficiaries for whom 

TRICARE was the primary payer, 

TRICARE paid approximately $23 

million in FY 12. In cases where 

TRICARE is the primary payer, such as 

when a Medicare beneficiary exhausts 

his/her day limits, TRICARE is paying 

billed charges. Reimbursing using 

methods similar to Medicare LTCH 

reimbursement would reduce TRICARE 

payments for TFL beneficiaries by 

approximately $17 million per year. 

Shifting to methods similar to 

Medicare LTCH reimbursement would 

reduce TRICARE payments to LTCHs for 

non-TFL and TFL beneficiaries by $57 

million during the first year of 

implementation. 

TRICARE currently pays LTCHs for 

inpatient care in one of two ways: 

(1) Network hospitals: Payment is an 

amount equal to billed charges less a 

negotiated discount. The discounted 

reimbursement is usually substantially 

greater than what would be paid using 

the TRICARE DRG method, which 

TRICARE generally uses to reimburse 

hospitals for inpatient care; or 

(2) Non-network hospitals: Payment is 

equal to billed charges. 

As discussed above TRICARE’s 

current payment method results in 

TRICARE reimbursing LTCHs 

substantially more than Medicare does 

for equivalent inpatient care. A change 

is needed to conform to the statute. 

Under 32 CFR 199.14(a)(l)(ii)(D)(4), 

LTCHs are currently exempt from the 

TRICARE DRG-based payment system. 

Based on 10 U.S.C. 1079(j)(2), TRICARE 

is proposing to adopt a reimbursement 

method similar to Medicare’s LTCH PPS 

as the methodology to reimburse 

TRICARE LTCHs. 

Establishing a TRICARE LTCH 

inpatient reimbursement method similar 

to Medicare is practicable. Even though 

the beneficiary populations differ 

between Medicare and TRICARE, we 

have found that the distribution of 

LTCH cases by diagnosis groups is 

similar between TRICARE and 

Medicare. Additionally, TRICARE has a 

low volume of admissions to LTCHs, so 

calculating weights and rates for 

TRICARE admissions to LTCHs is 

impracticable. We are able to calculate 

our own weights for admissions to 

general hospitals on an annual basis 

because of the volume of TRICARE 

admissions to general hospitals, 

however, it would be difficult to 

determine a new set of weights based on 

a small admission population. For 

example, only five MS–LTC–DRGs had 

25 or more TRICARE admissions in FY 

12 and only 17 had ten or more 

TRICARE admissions in that year. 

Consequently, we are proposing to 

adopt the methods used currently in 

Medicare’s MS–LTC–DRG 

reimbursement system except for slight 

differences in calculating short stay 

outlier payments; and not adopting the 

25 percent threshold payment 

adjustment policy. TRICARE’s proposed 

adoption of Medicare’s MS–LTC–DRG 

reimbursement system includes 

adoption of Medicare’s interrupted stay 

policy and high-cost outlier payments. 

Short Stay Outlier (SSO). For cases 

with a very short length of stay, 

Medicare uses an alternate method of 

payment. For an SSO discharge, the 

Medicare payment is based on the least 

of the following: 

• 100 percent of the estimated cost of 

the case. 

• 120 percent of the MS–LTC–DRG 

specific per diem amount multiplied by 

the covered length of stay of the 

particular case. 

• The full MS–LTC–DRG amount. 

• A blend of the IPPS amount for the 

same type of case and 120 percent of the 

MS–LTC–DRG per diem amount (for 

certain cases with relatively short 

lengths of stay, the blend percentage for 

the MS–LTC–DRG per diem portion is 

zero percent and as such the blended 

payment under this option is 100 

percent of the IPPS amount). 

To simplify, and because it is not 

practicable for TRICARE to adopt 

Medicare’s complex four step process 

considering our low volume of LTCH 

claims, we are proposing to adopt the 

methodology of paying short stay 

outliers at the lesser of: 1) Their cost 

(i.e., 100 percent of the estimated cost of 

the case) or 2) the full MS–LTC–DRG 

amount. This approach is fair and 

ensures that LTCH costs will be covered 

for short stay outlier cases. 

25 Percent Threshold Payment 

Adjustment. In the FY 2005 Inpatient 

Prospective Payment System (IPPS) 

Final Rule, the Centers for Medicare & 

Medicaid Services (CMS) established a 

special payment adjustment policy for 

LTCHs as defined by section 

1886(d)(1)(B)(iv)(I) of the Social 

Security Act. This includes LTCHs that 

are Hospitals-within-Hospitals (HwHs) 

or satellites of an LTCH that is colocated with a host hospital or on the 

campus (any facility within 250 yards of 

the hospital). 

This payment adjustment policy is 

commonly called the ‘‘25 percent rule.’’ 

The 25 percent transfer rule provides a 

financial penalty to LTCHs that receive 

more than 25 percent of their patients 

from any one acute care hospital. Given 

the low number of TRICARE 

admissions, this provision is not 

practicable, and is unnecessary under 

TRICARE. 

We are also aware the Department of 

Health and Human Services intends to 

address implementation of Section 

1206(a) of the Pathway for SGR Reform 

Act of 2013 (Public Law 113–67) in the 

FY 2016 rulemaking process. Section 

1206(a) provides for the establishment 

of patient criteria for ‘‘site neutral’’ 

payment rates under the LTCH PPS. The 

Department of Defense proposes to defer 

action on this issue pending review of 

the final Medicare policy. 

B. Pediatric Cases 

Our analysis found that the TRICARE 

and Medicare populations have similar 

diagnoses and that the estimated 

TRICARE costs in each MS–LTC–DRG 

group are similar to those in Medicare. 

There are very few TRICARE LTCH 

cases for patients under age 17; 

however, these pediatric cases have 

similar diagnoses as other TRICARE 

LTCH admissions. Therefore, we 

propose to adopt the same MS–LTC– 

DRG reimbursement for pediatric 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 3929 

patients as we are for all other TRICARE 

beneficiaries. 

We are inviting comments on this 

proposal and welcome feedback on 

whether the MS–LTC–DRG weights are 

appropriate for pediatric cases. We also 

welcome options and alternative 

approaches for LTCH reimbursement for 

pediatric beneficiaries. 

III. Regulatory Impact Analysis 

A. Overall Impact 

DoD has examined the impacts of this 

proposed rule as required by Executive 

Orders (E.O.s) 12866 (September 1993, 

Regulatory Planning and Review) and 

13563 (January 18, 2011, Improving 

Regulation and Regulatory Review), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

the Unfunded Mandates Reform Act of 

1995 (Pub. L. 104–4), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

1. Executive Order 12866 and Executive 

Order 13563 

E.O.s 12866 and 13563 direct agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). E.O. 13563 emphasizes the 

importance of quantifying both costs 

and benefits, of reducing costs, of 

harmonizing rules, and of promoting 

flexibility. A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any one year). 

We estimate that the effects of the 

LTCH provisions that would be 

implemented by this rule would not 

result in LTCH revenue reductions 

exceeding $100 million in any one year. 

We estimate that this rulemaking is not 

‘‘economically significant’’ as measured 

by the $100 million threshold. However, 

we have prepared a Regulatory Impact 

Analysis that, to the best of our ability, 

presents the costs and benefits of the 

rulemaking. 

2. Congressional Review Act. 5 U.S.C. 

801 

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 Notice of Proposed Rule 

Making (NPRM) is not a major rule 

under the Congressional Review Act. 

3. Regulatory Flexibility Act (RFA) 

The 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 are considered to be small 

entities, either by being nonprofit 

organizations or by meeting the Small 

Business Administration (SBA) 

identification of a small business 

(having revenues of $34.5 million or less 

in any one year). For purposes of the 

RFA, we have determined that all 

LTCHs would be considered small 

entities according to the SBA size 

standards. Individuals and States are 

not included in the definition of a small 

entity. Therefore, this Rule would have 

a significant impact on a substantial 

number of small entities. The 

Regulatory Impact Analysis, as well as 

the contents contained in the preamble, 

also serves as the Regulatory Flexibility 

Analysis. 

4. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any one year of $100 million in 1995 

dollars, updated annually for inflation. 

That threshold level is currently 

approximately $140 million. This 

Proposed Rule will not mandate any 

requirements for State, local, or tribal 

governments or the private sector. 

5. Paperwork Reduction Act 

This rule will not impose significant 

additional information collection 

requirements on the public under the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3502–3511). Existing information 

collection requirements of the TRICARE 

and Medicare programs will be utilized. 

We do not anticipate any increased 

costs to hospitals because of paperwork, 

billing, or software requirements since 

we are keeping TRICARE’s billing/

coding requirements (i.e., hospitals will 

be coding and filing claims in the same 

manner as they currently are with 

TRICARE). 

6. Executive Order 13132, ‘‘Federalism’’ 

This rule has been examined for its 

impact under E.O. 13132, and it does 

not contain policies that have 

federalism implications that would have 

substantial direct effects on the States, 

on the relationship between the national 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of Government. Therefore, 

consultation with State and local 

officials is not required. 

B. Hospitals Included In and Excluded 

From the Proposed TRICARE LTCH 

Reimbursement Methodology 

The TRICARE LTCH reimbursement 

system encompasses all TRICARE 

authorized LTCHs that have inpatient 

stays for TRICARE beneficiaries except 

for hospitals in States that are paid by 

Medicare and TRICARE under a waiver 

that exempts them from Medicare’s 

inpatient prospective payment system 

or the CHAMPUS DRG-based payment 

system, respectively. Currently, only 

Maryland hospitals operate under such 

a waiver. 

C. Analysis of the Impact of TRICARE 

LTCH Payment Reform on LTCHs 

1. Methodology 

We analyzed the impact of TRICARE 

implementing a new method of payment 

for LTCHs. The proposed method is 

very similar to Medicare’s LTCH 

payment method, which uses the 

Medicare MS–LTC–DRG system. Our 

analysis compares the payment impact 

of the new methodology compared to 

current TRICARE methodology (where 

TRICARE pays billed charges or 

discounts off of these billed charges for 

all LTCH claims). 

The data used in developing the 

quantitative analyses presented below 

are taken from TRICARE charge and 

payment data from October 2011– 

September 2012. Our analysis has 

several qualifications. First, we drew 

upon various sources for the data used 

to categorize hospitals in Table 1, 

below. We attempted to construct these 

variables using information from 

Medicare’s FY12 Impact file to verify 

that each provider was in fact a 

Medicare LTCH. For individual 

hospitals, however, some 

miscategorizations are possible. We 

were unable to match 18 hospital claims 

from 7 LTCHs to the FY12 Impact file, 

and therefore excluded them from the 

analysis. After we removed the 

excluded claims which we could not 

assign payment and hospital 

classification variables for, we used the 

remaining hospitals and claims as the 

basis for our analysis. All Maryland 

LTCHs were also excluded from the 

analysis. 

Using charge data from 2012, the 

FY12 Medicare MS–LTC–DRG weights, 

the FY12 Medicare national base 

payment rate, the FY12 Medicare high 

cost outlier fixed threshold, and the 

FY12 wage index adjustment factors, we 


tkelley on DSK3SPTVN1PROD with PROPOSALS
3930 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 

simulated TRICARE payments using the 

proposed LTCH payment method. We 

focused the analysis on TRICARE claims 

where TRICARE was the primary payer 

because only these TRICARE payments 

will be affected by the proposed 

reforms. 

2. Effect on Hospitals 

Table 1, First Year Impact of 

TRICARE LTCH proposed rule, below, 

demonstrates the results of our analysis. 

This table categorizes LTCHs which had 

TRICARE inpatient stays in FY12 by 

various geographic and special payment 

consideration groups to illustrate the 

varying impacts on different types of 

LTCHs. The first column represents the 

number of LTCHs in FY12 in each 

category which had inpatient stays in 

which TRICARE was the primary payer. 

The second column shows the number 

of TRICARE discharges in each category. 

The third and fourth columns show the 

average allowed amount per discharge 

paid by TRICARE in FY12, and under 

the proposed LTCH payment method. 

The fifth column shows the percentage 

impact of the policy change by showing 

the percentage reduction in the 

proposed allowed amounts relative to 

the current allowed amounts. 

The first row in Table 1 shows the 

overall impact of the 227 LTCHs 

included in the analysis. The next three 

rows of the table contain hospitals 

categorized according to their 

geographic location (large urban, other 

urban, and rural). The second major 

grouping is by bed-size category, 

followed by a grouping for TRICARE 

network status. The fourth grouping 

shows the LTCHs by regional Census 

divisions while the final grouping is by 

LTCH ownership status. 

We estimate that in the first year of 

implementation, TRICARE payments to 

LTCHs will decrease by 61 percent 

under the proposed LTCH payment 

methodology in comparison to the 

current TRICARE payment methodology 

for LTCH claims. For all groups of 

hospitals, payments under the proposed 

payment methodology would be 

reduced. 

The following discussion highlights 

some of the changes in payments among 

LTCH classifications. 

Ninety-eight percent of all TRICARE 

LTCH admissions were to urban LTCHs. 

Payments would decrease by 61 percent 

for large urban, 63 percent for other 

urban, and 58 percent for rural LTCHs. 

Very small LTCHs (1–24 beds) would 

have the least impact; payments would 

be reduced by 49 percent. The change 

in payment methodology would have a 

slightly greater impact on medium-sized 

LTCHs (50–124 beds), where payments 

would be reduced by about 64 percent. 

The change in LTCH payment 

methodology would have a larger 

impact on TRICARE non-network 

LTCHs than network LTCHs. Payments 

to non-network LTCHs would decline 

by 71 percent, in comparison to 56 

percent for in-network hospitals. There 

is a smaller decline in TRICARE 

payments for network hospitals because 

these LTCHs provide discounts to 

TRICARE, which means that their 

allowed amounts are already lower. We 

found that network hospitals on average 

provide a 29 percent discount off billed 

charges and that almost 77 percent of all 

TRICARE LTCH discharges are innetwork. 

LTCHs in various geographic areas 

will be affected differently due to this 

change in payment methodology. The 

two regions with the largest number of 

TRICARE claims, the South Atlantic and 

West South Central region, would have 

an average decrease of 62 and 61 

percent respectively, which are very 

similar to the overall average of 61 

percent. LTCHs in the East North 

Central and New England regions would 

have the lowest reductions: 52 and 50 

percent. Seventy-eight percent of all 

TRICARE LTCH discharges in FY12 

were in proprietary (for-profit) LTCHs, 

and these facilities would have their 

allowed amounts reduced by 

approximately 63 percent. The decline 

in allowed amounts for voluntary (notfor-profit) LTCHs would be less than 

for-profit hospitals (57 percent). 


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Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 3931 

3. Review for a Transition Period 

We considered whether a transition 

would be necessary to implement the 

change in LTCH payment methodology 

for TRICARE claims. For the following 

reasons, we have determined, that a 

transition period is unnecessary. 

First, the TRICARE payments to 

LTCHs will be equal to or, for short stay 

outlier cases, TRICARE payments may 

be greater than Medicare’s LTCH 


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First Year Impact ofTRICARE LTCH Rule 

Percent 

Allowed per Allowed per Reduction 

Discharge Discharge in Allowed 

Number of Number of (Current (Medicare Amounts 

Hospitals Discharges Policy) Method) (Medicare) 

All LTCHs 227 799 $118,313 $45,818 61% 

Large Urban 119 452 $130,245 $51,305 61% 

Other Urban 99 331 $104,693 $39,254 63% 

Rural 9 16 $62,960 $26,583 58% 

Beds 227 799 $118,313 $45,818 61% 

1-24 8 15 $70,322 $36,020 49% 

25-34 53 133 $110,915 $42,644 62% 

35-49 52 158 $102,939 $44,645 57% 

50-74 58 241 $122,152 $43,093 65% 

75-124 29 129 $128,611 $47,691 63% 

125+ 27 123 $133,590 $55,324 59% 

Network Status 227 799 $118,313 $45,818 61% 

Network 167 615 $98,171 $43,417 56% 

Non-Network 60 184 $185,633 $53,841 71% 

Region 227 799 $118,313 $45,818 61% 

New England 9 16 $84,165 $42,352 50% 

Mid Atlantic 12 17 $174,619 $39,285 78% 

South Atlantic 43 225 $143,208 $53,810 62% 

East North Central 31 80 $85,300 $40,781 52% 

East South Central 19 50 $92,855 $32,717 65% 

West North Central 11 26 $120,767 $40,459 66% 

West South Central 68 262 $86,930 $34,044 61% 

Mountain 22 87 $123,410 $55,947 55% 

Pacific 12 36 $274,333 $94,955 65% 

Ownership 227 799 $118,313 $45,818 61% 

Proprietary 180 625 $111,926 $41,377 63% 

Government Owned 5 12 $60,539 $32,068 47% 

Voluntary 42 162 $147,233 $63,968 57% 

Note: Excludes 18 L TCH claims from 7 L TCHs where we were unable to match L TCH claims to the 

FY12 Medicare Impact File 

Source: TRICARE FY12 LTCH Claims and the FY12 Medicare Impact File. 
3932 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 

payments. TRICARE’s short-stay outlier 

payments will be based on costs, which 

is at least as generous as Medicare’s 

short-stay outlier payments. The 

Medicare Payment Advisory Committee 

(MedPAC) is an independent 

congressional agency to advise the U.S. 

Congress on issues affecting the 

Medicare program. MedPAC’s most 

recent research indicates that Medicare 

LTCHs have a positive margin. Thus, we 

believe that paying LTCHs amounts that 

are at least as generous as Medicare do 

not require a transition. 

Second, the number of TRICARE 

discharges from LTCHs is very small in 

comparison to the number of Medicare 

discharges in LTCHs each year. In FY12, 

there were 799 discharges to LTCHs in 

which TRICARE was the primary payer. 

Medicare, in comparison, had 

approximately 134,700 discharges to 

LTCHs in 2010. Thus, in aggregate, the 

TRICARE LTCH claims are a very small 

percentage of the industry’s claims 

(about one-half of a percent). 

Third, we also found that in FY12 

there were only 17 LTCHs with 10 or 

more TRICARE admissions. For these 17 

LTCHs, we found that TRICARE 

admissions accounted for less than 4 

percent of the Medicare discharges at 

those LTCHs. More importantly, at none 

of the 17 LTCHs did the TRICARE LTCH 

discharges (where TRICARE was the 

primary payer) exceed 5 percent of the 

LTCH’s discharges. Because the number 

of TRICARE discharges at any one LTCH 

is so small and such a small portion of 

their LTCH business, a transition period 

is not required. 

Fourth, for the reasons cited above, 

we do not think that there will be access 

problems for TRICARE beneficiaries. In 

addition, we note that MedPAC has 

concluded that Medicare beneficiaries 

have continued access to LTCHs as 

evidenced by an increasing supply of 

providers and an increasing number of 

LTCH stays. Given that the TRICARE 

LTCH rates will equal or exceed 

Medicare LTCH rates, we do not 

anticipate access problems for TRICARE 

beneficiaries. Further, by statute, 

hospitals that participate under 

Medicare are required to agree to accept 

TRICARE reimbursement. 

List of Subjects in 32 CFR Part 199 

Claims, Dental health, Health care, 

Health insurance, Individuals with 

disabilities, Military personnel. 

Accordingly, 32 CFR part 199 is 

proposed to be amended as follows: 

PART 199—[AMENDED] 

■ 1. The authority citation for Part 199 

continues to read as follows: 

Authority: 5 U.S.C. 301; 10 U.S.C. chapter 

55. 

■ 2. In § 199.2, amend paragraph (b) by 

adding a definition of ‘‘Long Term Care 

Hospital’’ in alphabetical order to read 

as follows: 

§ 199.2 Definitions. 

* * * * * 

(b) * * * 

Long Term Care Hospital (LTCH). A 

hospital that is designated by the 

Centers for Medicare and Medicaid 

Services (CMS) as a LTCH and meets the 

applicable requirements established by 

§ 199.6(b)(4)(xviii). 

* * * * * 

■ 3. In § 199.6, add paragraph 

(b)(4)(xviii) to read as follows: 

§ 199.6 TRICARE—authorized providers. 

* * * * * 

(b) * * * 

(4) * * * 

(xviii) Long Term Care Hospital 

(LTCH). LTCHs must meet all the 

criteria for classification as an LTCH 

under 42 CFR part 412, subpart O, as 

well as all of the requirements of this 

part in order to be considered an 

authorized LTCH under the TRICARE 

program. 

* * * * * 

■ 4. Section 199.14 is amended by 

revising paragraph (a)(1)(ii)(D)(4) and 

adding paragraph (a)(9) to read as 

follows: 

The revisions and addition read as 

follows: 

§ 199.14 Provider reimbursement 

methods. 

(a) * * * 

(1) * * * 

(ii) * * * 

(D) * * * 

(4) Long Term Care Hospitals. Prior to 

implementation of the CHAMPUS 

reimbursement method described in 

paragraph (a)(9) of this section, a long 

term care hospital which is exempt from 

the Medicare prospective payment 

system is also exempt from the 

CHAMPUS DRG-based payment system. 

In order for a long term hospital which 

does not participate in Medicare to be 

exempt from the CHAMPUS DRG-based 

payment system, it must meet the same 

criteria (as determined by the Director, 

DHA, or a designee) as required for 

exemption from the Medicare 

Prospective Payment System as 

contained in 42 CFR 412.23. 

* * * * * 

(9) Reimbursement for inpatient 

services provided by an LTCH. (i) In 

accordance with 10 U.S.C. 1079(j)(2), 

TRICARE payment methods for 

institutional care shall be determined, to 

the extent practicable, in accordance 

with the same reimbursement rules as 

those that apply to payments to 

providers of services of the same type 

under Medicare. The CHAMPUS–LTC– 

DRG reimbursement methodology shall 

be in accordance with Medicare’s 

Medicare Severity Long Term Care 

Diagnosis Related Groups (MS–LTC– 

DRGs) as found in regulation at 42 CFR 

part 412, subpart O. Inpatient services 

provided in hospitals subject to the 

Medicare LTCH reimbursement 

methodology as specified in 42 CFR 

parts 412 and 413 will be paid in 

accordance with the provisions outlined 

in sections 1886(d)(1)(B)(IV) of the 

Social Security Act and its 

implementing Medicare regulation (42 

CFR parts 412 and 413) to the extent 

practicable. Under the above governing 

provisions, CHAMPUS will recognize, 

to the extent practicable, in accordance 

with 10 U.S.C. 1079(j)(2), Medicare’s 

MS–LTC–DRG methodology to include, 

the relative weights, inpatient operating 

and capital costs of furnishing covered 

services (including routine and ancillary 

services), interrupted stay policy, high 

cost outlier payments, wage adjustments 

for variations in labor-related costs 

across geographical regions, cost-ofliving adjustments, and updates to the 

system. 

(ii) While CHAMPUS intends to 

remain as true as possible to Medicare’s 

MS–LTC–DRG methodology, there will 

be some deviations required to 

accommodate CHAMPUS’ unique 

benefit structure and beneficiary 

population as authorized under the 

provisions of 10 U.S.C.1079(j)(2). 

(A) Due to TRICARE’s low claim 

volume admissions to LTCHs, TRICARE 

will not adopt the 25 percent threshold 

rule. 

(B) Rather than adopting Medicare’s 

four-step process for short-stay outliers, 

TRICARE shall pay short-stay outliers at 

the lesser of: 

(1) One hundred (100) percent of 

costs; or 

(2) The full LTCH DRG amount. The 

100 percent of costs will be based on the 

LTCH’s billed charge multiplied by the 

LTCH’s most recent cost-to-charge ratio 

as determined by the Centers for 

Medicare and Medicaid Services. 

(C) The criteria for adopting, 

modifying, and/or extending deviations 

and/or adjustments to the MS–LTC– 

DRG payments shall be issued through 

CHAMPUS policies, instructions, 

procedures and guidelines as deemed 

appropriate by the Director, DHA, or a 

designee. 

(iii) Exemption. The TRICARE LTCH 

reimbursement methodology under this 

paragraph does not apply to hospitals 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Proposed Rules 3933 

paid in States that are paid by Medicare 

and TRICARE under a waiver that 

exempts them from Medicare’s inpatient 

prospective payment system or the 

CHAMPUS DRG-based payment system, 

respectively. 

* * * * * 

Dated: January 20, 2015. 

Aaron Siegel, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

[FR Doc. 2015–01242 Filed 1–23–15; 8:45 am] 

BILLING CODE 5001–06–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2014–0483] 

RIN 1625–AA09 

Drawbridge Operation Regulation; 

Chincoteague Channel, Chincoteague, 

VA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

change the operating schedule that 

governs the SR 175 Bridge across Lewis 

Channel and Black Narrows, mile 3.5 at 

Chincoteague, VA. The proposed change 

would eliminate the need for the current 

special operating schedule and return 

the bridge to open on demand. The 

proposed change does not include the 

last consecutive Wednesday and 

Thursday in July for the annual Pony 

swim. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

March 12, 2015. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2014–0483 using any one of the 

following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. 

(2) Fax: 202–493–2251. 

(3) Mail or Delivery: Docket 

Management Facility (M–30), U.S. 

Department of Transportation, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue SE., 

Washington, DC 20590–0001. Deliveries 

accepted between 9 a.m. and 5 p.m., 

Monday through Friday, except federal 

holidays. The telephone number is 202– 

366–9329. 

See the ‘‘Public Participation and 

Request for Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section 

below for instructions on submitting 

comments. To avoid duplication, please 

use only one of these methods. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call or email Ms. Kashanda Booker, 

Bridge Specialist; telephone 757–398– 

6227; email Kashanda.l.booker@

uscg.mil. If you have questions on 

viewing or submitting material to the 

docket, call Cheryl Collins, Program 

Manager, Docket Operations, telephone 

202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Table of Acronyms 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of Proposed Rulemaking 

§ Section Symbol 

U.S.C. United States Code 

A. Public Participation and Request for 

Comments 

We encourage you to participate in 

this proposed rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change to http://

www.regulations.gov and will include 

any personal information you have 

provided. 

1. Submitting Comments 

If you submit a comment, please 

include the docket number for this 

proposed rulemaking (USCG–2014– 

0483), indicate the specific section of 

this document to which each comment 

applies, and provide a reason for each 

suggestion or recommendation. You 

may submit your comments and 

material online (http://

www.regulations.gov), or by fax, mail or 

hand delivery, but please use only one 

of these means. If you submit a 

comment online via http://

www.regulations.gov, it will be 

considered received by the Coast Guard 

when you successfully transmit the 

comment. If you fax, hand deliver, or 

mail your comment, it will be 

considered as having been received by 

the Coast Guard when it is received at 

the Docket Management Facility. We 

recommend that you include your name 

and a mailing address, an email address, 

or a phone number in the body of your 

document so that we can contact you if 

we have questions regarding your 

submission. 

To submit your comment online, go to 

http://www.regulations.gov, type the 

docket number [USCG–2014–0483] in 

the ‘‘SEARCH’’ box and click 

‘‘SEARCH.’’ Click on ‘‘Submit a 

Comment’’ on the line associated with 

this rulemaking. If you submit your 

comments by mail or hand delivery, 

submit them in an unbound format, no 

larger than 81⁄2 by 11 inches, suitable for 

copying and electronic filing. If you 

submit them by mail and would like to 

know that they reached the Facility, 

please enclose a stamped, self-addressed 

postcard or envelope. We will consider 

all comments and material received 

during the comment period and may 

change the rule based on your 

comments. 

2. Viewing Comments and Documents 

To view comments, as well as 

documents mentioned in this preamble 

as being available in the docket, go to 

http://www.regulations.gov, type the 

docket number (USCG–2014–0483) in 

the ‘‘SEARCH’’ box and click 

‘‘SEARCH.’’ Click on Open Docket 

Folder on the line associated with this 

rulemaking. You may also visit the 

Docket Management Facility in Room 

W12–140 on the ground floor of the 

Department of Transportation West 

Building, 1200 New Jersey Avenue SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. 

3. Privacy Act 

Anyone can search the electronic 

form of comments received into any of 

our dockets by the name of the 

individual submitting the comment (or 

signing the comment, if submitted on 

behalf of an association, business, labor 

union, etc.). You may review a Privacy 

Act notice regarding our public dockets 

in the January 17, 2008, issue of the 

Federal Register (73 FR 3316). 

4. Public Meeting 

We do not now plan to hold a public 

meeting. You may submit a request for 

one using one of the methods specified 

under ADDRESSES. Please explain why 

one would be beneficial. If we 

determine that one would aid this 

rulemaking, we will hold one at a time 

and place announced by a later notice 

in the Federal Register . 

B. Regulatory History and Information 

On July 14, 2014 the Coast Guard 

published a test deviation with request 

for comments, entitled ‘‘Drawbridge 

Elizabeth River, Eastern Branch, VA’’. 

79 FR 40638. The bridge operated under 

this NPRM’s proposed schedule from 

August 4, 2014 to November 3, 2014. No 

comments were received. 

C. Basis and Purpose 

Virginia Department of Transportation 

(VDOT), who owns and operates SR 175 

Bridge across Lewis Channel and Black 

Narrows, mile 3.5, at Chincoteague, VA 

has requested to change the existing 


tkelley on DSK3SPTVN1PROD with PROPOSALS