[Federal Register Volume 62, Number 210 (Thursday, October 30, 1997)]
[Notices]
[Pages 58711-58724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-28686]


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DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE/CHAMPUS; FY98 DRG Updates

AGENCY: Office of the Secretary, DoD.

ACTION: Notice of DRG revised rates.

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SUMMARY: This notice provides the updated adjusted standardized 
amounts, DRG relative weights, outlier thresholds, and beneficiary 
cost-share per diem rates to be used for FY98 under the TRICARE/CHAMPUS 
DRG-based payment system. It also describes the changes made to the 
TRICARE/CHAMPUS DRG-based payment system in order to conform to changes 
made to the Medicare Prospective Payment System (PPS).

EFFECTIVE DATES: The rates and weights and Medicare PPS changes which 
affect the TRICARE/CHAMPUS DRG-based payment system contained in this 
notice are effective for admissions occurring on or after October 1, 
1997.

ADDRESSES: TRICARE Support Office (TSO), Program Development Branch, 
Aurora, CO 80045-6900.

FOR FURTHER INFORMATION CONTACT:
Marty Maxey, Program Development Branch, TSO, telephone (303) 361-1227.
    To obtain copies of this document, see the ADDRESSES section above. 
Questions regarding payment of specific claims under the TRICARE/
CHAMPUS DRG-Based payment system should be addressed to the appropriate 
TRICARE/CHAMPUS contractor.

SUPPLEMENTARY INFORMATION: The final rule published on September 1, 
1987 (52 FR 32992) set forth the basic procedures used under the 
TRICARE/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), and October 22, 1990 (55 FR 42560).
    An explicit tenet of these final rules, and one based on the 
statute authorizing the use of DRGs by TRICARE/CHAMPUS, is that the 
TRICARE/CHAMPUS DRG-based payment system is modeled on the Medicare 
PPS, and that, whenever practicable, the TRICARE/CHAMPUS system will 
follow the same rules that apply to the Medicare PPS. The Health Care 
Financing Administration (HCFA) 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/CHAMPUS DRG-Based 
Payment System

    Following is a discussion of the changes HCFA has made to the 
Medicare PPS which affect the TRICARE/CHAMPUS DRG-based payment system

A. DRG Classifications

    Under both the Medicare PPS and the TRICARE/CHAMPUS 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/CHAMPUS DRG-based payment system is the same as the current 
Medicare Grouper with two modifications. The TRICARE/CHAMPUS system has 
replaced Medicare DRG 435 with two age-based DRGs (900 and 901), and we 
have implemented thirty-four (34) neonatal DRGs in place of Medicare 
DRGs 385 through 390. Grouping for all other DRGs under the TRICARE/
CHAMPUS system is identical to the Medicare PPS.
    For FY98, HCFA will implement a number of classification changes, 
including surgical hierarchy changes, revisions to the Major Problem 
Diagnosis List, and refinements to the Complications and Comorbidities 
(CC) List. In addition, DRGs 214 and 215 (Back and Neck Procedures) 
will be replaced with five new DRGs (DRGs 496-500) and DRGs 221 and 222 
will be replaced with three new DRGs (DRGs 501-503). The TRICARE/
CHAMPUS Grouper will incorporate all changes made to the Medicare 
Grouper.

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B. Wage Index and Medicare Geographic Classification Review Board 
Guidelines

    TRICARE/CHAMPUS will continue to use the same wage index amounts 
used for the Medicare PPS, including the floor on area wage index. 
Beginning with FY98, the wage index for an urban hospital may not be 
lower than the Statewide area rural wage index. In addition, TRICARE/
CHAMPUS will duplicate all changes with regard to the wage index for 
specific hospitals which are redesignated by the Medicare Geographic 
Classification Review Board.

C. Hospital Market Basket

    As outlined in HCFA's August 29, 1997, final rule, the applicable 
percentage change in the standardized amounts have been frozen at the 
FY97 levels resulting in a 0 percent increase for FY98.
    In connection with the revisions to the hospital market basket, 
HCFA reestimated the labor-related share of the standardized amounts. 
Accordingly, effective with TRICARE/CHAMPUS discharges occurring on or 
after October 1, 1997, the labor-related share of the standardized 
amount will be 71.1 percent and the nonlabor-related portion will be 
28.9 percent.

D. Changes to Outlier Payments

    In accordance with HCFA's August 29, 1997, final rule, we will 
eliminate payment for day outliers, referred to as long stay outliers 
under TRICARE/CHAMPUS, for all cases except neonates and children's 
hospitals.
    Since TRICARE/CHAMPUS does not include capital payments in our DRG-
based payments, we will use the thresholds calculated by HCFA for 
paying cost outliers in the absence of capital prospective payments.
    In addition, effective with discharges occurring on or after 
October 1, 1997, in determining the additional payment for IDME, the 
IDME adjustment factor will only be applied to the base DRG payment, 
not the sum of the base DRG payment and any cost outlier payments. The 
fixed loss cost outlier threshold will be based on the sum of DRG 
payments and IDME payments for purposes of comparing costs to payment. 
In determining whether a case meets the cost outlier threshold, we will 
not standardize the costs of the case to account for IDME.
    For FY98, 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 FY98, in order for a case to 
qualify for cost outlier payments, the costs must exceed the TRICARE/
CHAMPUS DRG base payment rate for the DRG plus the IDME payment plus 
$10,180. The marginal cost factor for cost outliers continues to be 80 
percent. The above changes to the cost outlier payments will not be 
adopted for children's hospitals or neonates at this time.

E. Changes to Indirect Medical Education (IDME) Adjustment

    We will adopt Medicare's PPS changes to revise the IDME formula to 
gradually reduce the current level of IDME adjustment over the next 
several years. Since the IDME formula used by TRICARE/CHAMPUS 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/CHAMPUS IDME formula. We will also adopt 
Medicare's PPS changes as they pertain to the counting and reporting of 
residents and beds on the Medicare cost reports for purposes of 
reimbursing hospitals for the TRICARE/CHAMPUS share of IDME costs.

F. Graduate Medical Education

    We will adopt Medicare's PPS changes as they pertain to the 
counting and reporting of residents on the Medicare cost reports for 
purposes of reimbursing hospitals for the TRICARE/CHAMPUS share of 
graduate medical education costs.

G. Capital-Related Costs

    TRICARE/CHAMPUS reimburses hospitals for our share of hospitals' 
capital costs on a pass through basis. As provided for in our previous 
final rules, these annual payments are subject to any reductions which 
are required for the Medicare PPS. Accordingly, for days of care 
occurring on or after October 1, 1997, through September 30, 2003, a 
reduction of 17.68 percent will be applied to all capital payments.

H. Blood Clotting Factor

    We will reinstate the add-on payment for the costs of administering 
blood clotting factor provided to beneficiaries who have hemophilia and 
who are hospital inpatients for discharges occurring on or after 
October 1, 1997.
    The new payment levels which TRICARE/CHAMPUS will use are:


Factor VIII (antihemophilic factor-      $0.76 per unit.                
 human).                                                                
Factor VIII (antihemophilic factor-      1.00 per unit.                 
 recombinant).                                                          
Factor IX (complex)....................  0.32 per unit                  
Other hemophilia clotting factors        1.10 per unit.                 
 (e.g., anti-inhibitors).                                               
                                                                        

I. Hospitals Excluded From the Prospective Payment System

    TRICARE/CHAMPUS will adopt the changes outlined in HCFA's August 
29, 1997, final rule as they apply to hospitals and units excluded from 
the Medicare PPS.

II. Cost-to-Charge Ratio

    For FY98, the cost-to-charge ratio used for the TRICARE/CHAMPUS 
DRG-based payment system will be 0.5436 which is increased to 0.5536 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 0.6027.

III. Updated Rates and Weights

    Tables 1 and 2 provide the rates and weights to be used under the 
TRICARE/CHAMPUS DRG-based payment system during FY98 and which are a 
result of the change described above. The implementing regulations for 
the TRICARE/CHAMPUS DRG-based payment system are in 32 CFR Part 199. 
The rates and weights are also available on the Internet at htt://
www.ochampus.mil under the heading of Reports.
    As a courtesy, we will provide a separate list of the updated DRG 
weights that includes the long-stay thresholds for use by MTFs and 
other non-DoD users of the TRICARE/CHAMPUS DRG weights and rates 
through TSO's home page. The list will also be found under the Heading 
of Reports but will specifically indicate the list is for MTFs and non 
DoD users. Beginning next year, the updated rates and weights will no 
longer be published in the Federal Register and will only be available 
on-line.

    Dated: October 23, 1997.
L.M. Bynum,
Alternate Federal Register Liaison Officer, Department of Defense.

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[FR Doc. 97-28686 Filed 10-29-97; 8:45 am]
BILLING CODE 5000-04-C