23326 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations

DEPARTMENT OF VETERANS

AFFAIRS

38 CFR Part 17

RIN 2900–AK73

Reasonable Charges for Medical Care

or Services

AGENCY: Department of Veterans Affairs.

ACTION: Interim final rule.

SUMMARY: This document amends the

Department of Veterans Affairs (VA)

medical regulations concerning

‘‘reasonable charges’’ for medical care or

services provided or furnished by VA to

a veteran:

—For a nonservice-connected disability

for which the veteran is entitled to

care (or the payment of expenses of

care) under a health plan contract;

—For a nonservice-connected disability

incurred incident to the veteran’s

employment and covered under a

worker’s compensation law or plan

that provides reimbursement or

indemnification for such care and

services; or

—For a nonservice-connected disability

incurred as a result of a motor vehicle

accident in a State that requires

automobile accident reparations

insurance.

This document amends the

regulations to update databases and

other provisions for the purpose of

providing more precise charges.

DATES: Effective Date: These

amendments are effective May 8, 2001.

Comments must be submitted by July 9,

2001.

ADDRESSES: Mail or hand-deliver

written comments to: Director, Office of

Regulations Management (02D),

Department of Veterans Affairs, 810

Vermont Ave., NW., Room 1154,

Washington, DC 20420; or fax comments

to (202) 273–9289; or e-mail comments

to OGCRegulations@mail.va.gov..

Comments should indicate that they are

submitted in response to ‘‘RIN 2900–

AK73’’. All comments received will be

available for public inspection in the

Office of Regulations Management,

Room 1158, between the hours of 8 a.m.

and 4:30 p.m., Monday through Friday

(except holidays).

FOR FURTHER INFORMATION CONTACT:

David Cleaver, VHA Revenue Office

(174), Veterans Health Administration,

Department of Veterans Affairs, 810

Vermont Avenue, NW., Washington, DC

20420, (202) 273–8210. (This is not a

toll free number.)

SUPPLEMENTARY INFORMATION: This

document amends VA’s medical

regulations that are set forth at 38 CFR

part 17. More specifically, we are

amending the regulations that establish

a methodology for determining

‘‘reasonable charges’’ for medical care or

services provided or furnished by VA to

a veteran:

(i) For a nonservice-connected

disability for which the veteran is

entitled to care (or the payment of

expenses of care) under a health plan

contract;

(ii) For a nonservice-connected

disability incurred incident to the

veteran’s employment and covered

under a worker’s compensation law or

plan that provides reimbursement or

indemnification for such care and

services; or

(iii) For a nonservice-connected

disability incurred as a result of a motor

vehicle accident in a State that requires

automobile accident reparations

insurance.

The methodology for establishing

such ‘‘reasonable charges’’ covers

inpatient facility charges, skilled

nursing facility/sub-acute inpatient

facility charges, outpatient facility

charges, physician charges, and other

provider charges.

Under the provisions of 38 U.S.C.

1729, VA has the right to recover or

collect reasonable charges for such

medical care and services from a third

party to the extent that the veteran or a

provider of the care or services would

be eligible to receive payment therefor

from that third party if the care or

services had not been furnished by a

department or agency of the United

States. However, consistent with that

statutory authority, a third-party payer

liable for such medical care and services

under a health plan contract would have

the option of paying, to the extent of its

coverage, either the billed charges or the

amount the third-party payer

demonstrates it would pay for care or

services furnished by providers other

than entities of the United States for the

same care or services in the same

geographic area.

This document changes the previous

regulations to provide charges for

updated 2001 Current Procedural

Terminology (CPT) codes, and to update

some of the databases to more recent

versions. These changes are described in

greater detail in the following

paragraphs. These changes will not have

a significant impact on any affected

party, but will make VA’s charge system

more current and more accurate.

The formulas for skilled nursing/subacute inpatient charges, outpatient

facility charges and physician charges

were designed to replicate, insofar as

possible, the 80th percentile charge for

a particular service in a specific

location. We have made changes to

ensure that the information used in the

methodology is as current and precise as

possible. As an example, the formula for

physician charges included factors

based on the 1999 Medicode database.

We now are able to use the 2000

Medicode database.

The formula for skilled nursing

facility/sub-acute inpatient facility

charges includes per diem charges that

are based on nationwide data

concerning skilled nursing facility

charges contained in the 2000 Milliman

& Robertson, Inc., Health Cost

Guidelines. We are amending the

formula to use the data, which has been

updated by Milliman & Robertson

through July 1, 2001. With this change,

the formula will use the latest available

data for calculating per diem charges.

The formula for outpatient facility

charges included 45 CPT code groups

from which the median charge was used

for calculating the charge factors. We are

amending the formula to use 50 CPT

code groups instead of the previous 45

to better group together those CPT codes

with similar characteristics. This will

help ensure more accurate results for

the charge factors.

For physician charges other than

anesthesia charges, in general, we have

established several methods for

determining charges depending on the

availability of information. Under the

existing regulations, we employ

methodology to provide the most

precise charges. If Relative Value Units

(RVUs) are established under Medicare,

we employ methodology utilizing these

factors. This enables us to use three

geographic area adjustment factors

(GAAFs) in calculating charges for each

of these CPT procedure codes: One for

the work expense RVUs, one for the

practice expense RVUs, and one for the

conversion factor. When work expense

and practice expense RVUs are not

available from Medicare, we use

methodology based on total RVUs

derived from Medicare’s Clinical

Diagnostic Laboratory Fee Schedule. For

each of these CPT procedure codes, we

are able to use two GAAFs in

calculating the charges: One for the total

RVUs and one for the conversion factor.

If neither of these sources for relative

values is available, we use methodology

based directly on billed charge data. We

have made changes to the relative order

in which each data source is used in

order to ensure that the most recent

charge data are utilized. Specifically,

the regulation utilizes 2000 Medicode

data first. If charges are lacking in

Medicode, 1998 Medicare charge data

are used. Finally, for codes not included

in these two sources, we use 1997

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations 23327

Health Insurance Association of

America (HIAA) charge data. For each of

these CPT procedure codes, we develop

total RVUs and a conversion factor,

using one GAAF for RVUs and one

GAAF for the conversion factor. As a

last resort, if none of the above are

available, we use methodology based on

work expense and practice expense

RVUs obtained from St. Anthony’s

RBRVS (Resource Based Relative Value

Scale). For each of these CPT procedure

codes, we develop total RVUs and a

conversion factor, using one GAAF for

RVUs and one GAAF for the conversion

factor. Consistent with these principles,

we have made changes to reflect that the

American Medical Association (AMA)

has established new CPT codes, and the

Health Care Financing Administration

(HCFA) has defined new work expense

and practice expense RVUs for these

codes.

Previously, the regulations

establishing reasonable charges used

information from the 2000 Medicare

Geographic Practice Cost Index, 2000

Medicare RBRVS Unit Values, and 2000

St. Anthony’s Complete RBRVS. We are

amending the regulations to use the

2001 Medicare Geographic Practice Cost

Index, 2001 Medicare RBRVS Unit

Values, and the 2001 St. Anthony’s

RBRVS. With these changes the

regulations will use the latest available

data for calculating physician charges.

In accordance with the methodology

in the regulations, inpatient facility

charges, skilled nursing facility/subacute inpatient facility charges,

outpatient facility charges, and

physician charges are updated based on

changes to the consumer price index.

Under this methodology, charges are

trended to the midpoint of the calendar

year in which the charges will be

effective.

All of the above changes made by this

document are for the purpose of adding

precision to charges.

In addition to the above changes,

dates have been added to various data

sources for purposes of clarification.

The charges methodology in the

regulations covers outpatient facility

charges for services not customarily

performed in a physician’s office. We

have added language to the introductory

paragraph (d) to clarify that these

services include many procedures and

tests, as well as evaluation and

management services rendered to

hospital outpatients.

The regulations contain provisions for

the calculation of RVUs for pathology.

In an Interim Final Rule published in

the Federal Register on November 2,

2000, we intended to move these

provisions from paragraph (e)(4)(ii) to

paragraph (e)(2)(ii). These provisions

were placed in paragraph (e)(2)(ii) as

intended, but we inadvertently failed to

delete paragraph (e)(4)(ii). Accordingly,

we are deleting paragraph (e)(4)(ii).

Administrative Procedure Act

This document amends the

regulations to update databases and

other provisions for the purpose of

providing more precise charges.

Although some charges might be

slightly different, overall these changes

would at most result in a very minor

change in VA charges. Under these

circumstances, we have concluded

under 5 U.S.C. 553 that there is good

cause for dispensing with prior notice

and comment and a delayed effective

date based on the conclusion that such

procedure is impracticable,

unnecessary, and contrary to the public

interest.

Unfunded Mandates

The Unfunded Mandates Reform Act

requires (in section 202) that agencies

prepare an assessment of anticipated

costs and benefits before developing any

rule that may result in an expenditure

by State, local, or tribal governments, in

the aggregate, or by the private sector of

$100 million or more in any given year.

This rule would have no consequential

effect on State, local, or tribal

governments.

Paperwork Reduction Act

This document contains no provisions

constituting a collection of information

under the Paperwork Reduction Act (44

U.S.C. 3501–3520).

OMB Review

The Office of Management and Budget

has reviewed this proposed rule under

Executive Order 12866.

Regulatory Flexibility Act

The Secretary hereby certifies that

this rule will not have a significant

economic impact on a substantial

number of small entities as they are

defined in the Regulatory Flexibility

Act, 5 U.S.C. 601–612. This rule would

affect mainly large insurance

companies, and where small entities are

involved, they would not be impacted

significantly since most of their

business is not with VA. Accordingly,

pursuant to 5 U.S.C. 605(b), this rule is

exempt from the initial and final

regulatory flexibility analysis

requirements of §§ 603 and 604.

Catalog of Federal Domestic Assistance

Numbers

The Catalog of Federal domestic

assistance numbers for the programs

affected by this rule are 64.005, 64.007,

64.008, 64,009, 64.010, 64.011, 64.012,

64.013, 64.014, 64.015, 64.016, 64.018,

64.019, 64.022, and 64.025.

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,

Grant programs—veterans, Health care,

Health facilities, Health professions,

Health records, Homeless, Medical and

dental schools, Medical devices,

Medical research, Mental health

programs, Nursing homes, Philippines,

Reporting and recordkeeping

requirements, Scholarships and

fellowships, Travel and transportation

expenses, Veterans.

Approved: April 3, 2001.

Anthony J. Principi,

Secretary of Veterans Affairs.

For the reasons set out in the

preamble, 38 CFR part 17 is amended as

set forth below:

PART 17—MEDICAL

1. The authority citation for part 17

continues to read as follows:

Authority: 38 U.S.C. 501, 1721, unless

otherwise noted.

2. Section 17.101 is revised to read as

follows:

§ 17.101 Collection or recovery by VA for

medical care or services provided or

furnished to a veteran for a nonserviceconnected disability.

(a)(1) General. This section covers

collection or recovery by VA, under 38

U.S.C. 1729, for medical care or services

provided or furnished to a veteran:

(i) For a nonservice-connected

disability for which the veteran is

entitled to care (or the payment of

expenses of care) under a health plan

contract;

(ii) For a nonservice-connected

disability incurred incident to the

veteran’s employment and covered

under a worker’s compensation law or

plan that provides reimbursement or

indemnification for such care and

services; or

(iii) For a nonservice-connected

disability incurred as a result of a motor

vehicle accident in a State that requires

automobile accident reparations

insurance.

(2) Methodology. Based on the

methodology set forth in this section,

the charges billed will include, as

appropriate, inpatient facility charges,

skilled nursing facility/sub-acute

inpatient facility charges, outpatient

23328 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations

facility charges, physician charges, and

non-physician provider charges. In

addition, the charges billed for

prosthetic devices and durable medical

equipment provided on an outpatient

basis will be VA’s actual cost, and the

charges billed for prescription drugs not

administered during treatment will be a

single nationwide average. Data for

calculating actual amounts for inpatient

facility charges, skilled nursing facility/

sub-acute inpatient facility charges,

outpatient facility charges, and

physician charges will be published

annually in the ‘‘Notices’’ section of the

Federal Register. In those cases in

which the effective period for published

charges has expired and new charges

have not yet become effective, VA will

continue to bill using the most recently

published charges until new charges are

published and become effective (for

example, if the most recently published

charges state that they are effective

through December and new charges are

not published and effective until

February 1, then the charges set forth for

the period through December will

continue to be used through January 31).

(3) Amount of recovery or collection—

third party liability. A third-party payer

liable under a health plan contract has

the option of paying either the billed

charges described in this section or the

amount the health plan demonstrates is

the amount it would pay for care or

services furnished by providers other

than entities of the United States for the

same care or services in the same

geographic area. If the amount

submitted by the health plan for

payment is less than the amount billed,

VA will accept the submission as

payment, subject to verification at VA’s

discretion in accordance with this

section. A VA employee having

responsibility for collection of such

charges may request that the third party

health plan submit evidence or

information to substantiate the

appropriateness of the payment amount

(e.g., health plan or insurance policies,

provider agreements, medical evidence,

proof of payment to other providers in

the same geographic area for the same

care and services VA provided).

(4) Definitions. For purposes of this

section:

Consolidated MSA means a

consolidated Metropolitan Statistical

Area.

CPI means Consumer Price Index.

CPI–U means Consumer Price Index—

All Urban Consumers.

CPI–W means Consumer Price

Index—Urban Wage Earners and

Clerical Workers.

CPT procedure code means a 5 digitidentifier for a specified physician

service or procedure.

DRG means diagnosis related group.

Geographic area, for purposes of

inpatient facility and skilled nursing

facility/sub-acute inpatient facility

charges, means Metropolitan Statistical

Area (MSA) or the local market, if the

VA facility is not located in an MSA;

and for outpatient facility charges and

physician charges, means a three-digit

ZIP Code locality.

RVU means relative value unit.

(b) Inpatient facility charges. When

VA provides or furnishes inpatient

services within the scope of care

referred to in paragraph (a)(1) of this

section, inpatient facility charges billed

for such services will be determined in

accordance with the provisions of this

paragraph. Inpatient facility charges

consist of per diem charges for room

and board and for ancillary services that

vary by VA facility and by DRG. These

charges are calculated as follows:

(1) Formula. For each inpatient stay,

or portion thereof, for which a particular

DRG assignment applies, multiply the

nationwide room and board per diem

charge as set forth in paragraph (b)(2) of

this section by the appropriate

geographic area adjustment factor as set

forth in paragraph (b)(3) of this section.

The result constitutes the facilityspecific room and board per diem

charge. Also, for each inpatient stay,

multiply the nationwide ancillary per

diem charge as set forth in paragraph

(b)(2) of this section by the appropriate

geographic area adjustment factor as set

forth in paragraph (b)(3) of this section.

The result constitutes the facilityspecific ancillary per diem charge. Then

add the facility-specific room and board

per diem charge to the facility-specific

ancillary per diem charge. This

constitutes the facility-specific

combined per diem facility charge.

Finally, multiply the facility-specific

combined per diem facility charge by

the number of days of inpatient care to

obtain the total inpatient facility charge.

Note to paragraph (b)(1): If there is a

change in a patient’s condition and/or

treatment during a single inpatient stay such

that the DRG assignment changes (for

example, a psychiatric patient who develops

a medical or surgical problem), then the

calculations will be made separately for each

DRG, according to the number of days of care

applicable for each DRG, and the total

inpatient facility charge will be the sum of

the total inpatient facility charges for the

different DRGs.

(2) Per diem charges. To establish a

baseline, two nationwide average per

diem charges for each DRG are

calculated for fiscal year 1998, one from

the 1998 Medicare MedPAR file and one

from the MedStat claim database, a

database of nationwide commercial

insurance claims. Because the MedStat

data is based on calendar year 1997, the

MedStat charges were trended forward

at an annual trend rate of 2.7%, based

on the Inpatient Hospital component of

the CPI–U. Results obtained from these

two databases are then combined into a

single weighted average per diem charge

for each DRG. The resulting weighted

average per diem charge for each DRG

is then separated into its two

components, a room and board

component and an ancillary component,

with the amount for each component

calculated to reflect the corresponding

percentage set forth in paragraph

(b)(2)(i) of this section. The resulting

amounts for room and board and

ancillary services for each DRG are then

each multiplied by the final ratio set

forth in paragraph (b)(2)(ii) of this

section to reflect the 80th percentile

charges. Finally, the resulting charges

are each trended forward from 1998 to

the effective time period for the charges,

as set forth in paragraph (b)(2)(iii) of this

section. The results constitute the room

and board per diem charge and the

ancillary per diem charge.

(i) Charge component percentages.

Using only those cases from the

MedPAR file for which a distinction

between room and board charges and

ancillary charges can be determined, the

percentage of the total charges for room

and board compared to the combined

total charges for room and board and

ancillary services, and the percentage of

the total charges for ancillary services

compared to the combined total charges

for room and board and ancillary

services, are calculated by DRG.

(ii) 80th percentile. Using the medical

and surgical admissions in the 1995

Medicare Standard Analytical File 5%

Sample, obtain for each consolidated

MSA the ratio of the day-weighted 80th

percentile semi-private room and board

per diem charge to the average semiprivate room and board per diem

charge. The consolidated MSA ratios are

averaged to obtain a final 80th

percentile ratio.

(iii) Trending forward. 80th percentile

charges for each DRG, representing

charge levels described in paragraph

(b)(2) of this section, are trended

forward based on changes to the

hospital inpatient component of the

CPI–U. Actual CPI–U changes are used

through the latest available month for

room/board and ancillary charges.

Trends from the latest available month

to the midpoint of the calendar year in

which charges become effective are

based on the latest three-month average

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations 23329

annual trend rate from the Inpatient

Hospital component of the CPI–U. The

projected total CPI trend is then applied

to the 1998 80th percentile charges.

(3) Geographic area adjustment

factors. For each VA facility location,

the average per diem room and board

charges and ancillary charges from the

1995 Medicare Standard Analytical File

5% Sample are calculated for each DRG.

The DRGs are separated into two

groups, surgical and non-surgical. For

each of these groups of DRGs, for each

geographic area, average room and

board per diem charges and ancillary

per diem charges are calculated for

1995, weighted by FY 1997 nationwide

VA discharges and by average lengths of

stay from the combined Medicare

Standard Analytical File 5% Sample

and the MedStat claim database. This

results in four average per diem charges

for each geographic area: room and

board for surgical DRGs, ancillary for

surgical DRGs, room and board for nonsurgical DRGs, and ancillary for nonsurgical DRGs. Four corresponding

national average per diem charges are

obtained from the 1995 Medicare

Standard Analytical File 5% Sample,

weighted by FY 1997 nationwide VA

discharges and by average lengths of

stay from the combined Medicare

Standard Analytical File 5% Sample

and the MedStat claim database. Four

geographic area adjustment factors are

then calculated for each geographic area

by dividing each geographic area

average per diem charge by the

corresponding national average per

diem charge.

(c) Skilled nursing facility/sub-acute

inpatient facility charges. When VA

provides or furnishes skilled nursing/

sub-acute inpatient services within the

scope of care referred to in paragraph

(a)(1) of this section, skilled nursing

facility/sub-acute inpatient facility

charges billed for such services will be

determined in accordance with the

provisions of this paragraph. The skilled

nursing facility/sub-acute inpatient

facility charges are per diem charges

that vary by VA facility. The facility

charges cover care, including skilled

rehabilitation services (e.g., physical

therapy, occupational therapy, and

speech therapy), that is provided in a

nursing home or hospital inpatient

setting, is provided under a physician’s

orders, and is performed by or under the

general supervision of professional

personnel such as registered nurses,

licensed practical nurses, physical

therapists, occupational therapists,

speech therapists, and audiologists. The

skilled nursing facility/sub-acute

inpatient facility charges also

incorporate charges for ancillary

services associated with care provided

in these settings. The charges are

calculated as follows:

(1) Formula. For each stay, multiply

the nationwide per diem charge as set

forth in paragraph (c)(2) of this section

by the appropriate geographic area

adjustment factor as set forth in

paragraph (c)(3) of this section. The

result constitutes the facility-specific

per diem charge. Finally, multiply the

facility-specific per diem charge by the

number of days of care to obtain the

total skilled nursing facility/sub-acute

inpatient facility charge.

(2) Per diem charge. To establish a

baseline, a nationwide average per diem

billed charge for July 1, 2001, was

obtained from the 2001 Milliman &

Robertson, Inc., Health Cost Guidelines,

a publication that includes nationwide

skilled nursing facility charges

(Milliman & Robertson, Inc., 1301 5th

Ave., Suite 3800, Seattle, WA 98101–

2605). That average per diem billed

charge is then multiplied by the 80th

percentile adjustment factor set forth in

paragraph (c)(2)(i) of this section to

obtain a nationwide 80th percentile

charge level. Finally, the resulting

charge is trended forward to the

effective time period for the charges, as

set forth in paragraph (c)(2)(ii) of this

section.

(i) 80th percentile. Using the 1995

Medicare Standard Analytical File 5%

Sample, the median per diem

accommodation charge is calculated for

each provider. For each State, the ratio

of the 80th percentile of provider

median charges to the average statewide

charges for accommodations is

calculated. The State ratios are averaged

to produce a nationwide 80th percentile

adjustment factor.

(ii) Trending forward. The 80th

percentile charge is trended forward to

the midpoint of the calendar year in

which the charges will be effective,

based on the projected change in

Medicare reimbursement from the

Annual Report of the Board of Trustees

of the Federal Hospital Insurance Trust

Fund (this report can be found on the

Health Care Financing Administration

Internet site at http://www.hcfa.gov/

under the headings ‘‘Publications and

Forms’’ and ‘‘Professional/Technical

Publications’’).

(3) Geographic area adjustment

factors. A ratio of the average per diem

charge for each State to the nationwide

average per diem charge is obtained

(these ratios are set forth in the 1998

Milliman & Robertson, Inc., Health Cost

Guidelines, a database of nationwide

commercial insurance charges and

relative costs) (Milliman & Robertson,

Inc., 1301 5th Ave., Suite 3800, Seattle,

WA 98101–2605). The geographic area

adjustment factor for charges for each

VA facility is the ratio for the State in

which the facility is located.

(d) Outpatient facility charges. When

VA provides or furnishes outpatient

services that are within the scope of care

referred to in paragraph (a)(1) of this

section and are not customarily

performed in an independent clinician’s

office, the outpatient facility charges

billed for such services will be

determined in accordance with the

provisions of this paragraph. This

consists of outpatient facility charges for

procedures, tests, and evaluation and

management services, including the

subset of evaluation and management

codes which are designated as ‘‘Office

or Other Outpatient Services’’ when

those evaluation and management

services are provided in the outpatient

department of a hospital. Except for

prosthetic devices and durable medical

equipment, whose charges will be made

separately at actual cost to VA, charges

for outpatient facility services will vary

by VA facility and by CPT procedure

code. These charges will be calculated

as follows:

(1) Formula. For each outpatient

facility charge CPT procedure code,

multiply the nationwide charge as set

forth in paragraph (d)(2) of this section

by the appropriate geographic area

adjustment factor as set forth in

paragraph (d)(4) of this section. The

result constitutes the facility-specific

outpatient facility charge. When

multiple surgical procedures are

performed during the same outpatient

encounter by a provider or provider

team, the outpatient facility charges for

such procedures will be reduced as set

forth in paragraph (d)(5) of this section.

(2) Nationwide 80th percentile

charges by CPT procedure code. For

each CPT procedure code for which

outpatient facility charges apply, the

1998 practice expense RVUs (these

RVU’s can be found in the 1998 St.

Anthony’s Complete RBRVS, Relative

Value Studies, Inc., St. Anthony

Publishing, 11410 Isaac Newton Square,

Reston, VA 20190) are used as the

outpatient facility RVUs. For each CPT

procedure code, the outpatient facility

RVU is multiplied by the charge amount

for each incremental RVU as set forth in

paragraph (d)(3) of this section. The

resulting charge is adjusted by a fixed

charge amount as also set forth in

paragraph (d)(3) of this section to obtain

the nationwide 80th percentile charge.

(3) Charge factors. Using the 1998

MedStat claims database of nationwide

commercial insurance, the median

billed facility charge is calculated for

each applicable CPT procedure code.

23330 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations

All outpatient facility CPT procedure

codes are then separated into one of the

45 outpatient facility CPT procedure

code groups as set forth in paragraph

(d)(3)(i) of this section. Then, for each

CPT procedure code in each such group,

the median charge is adjusted to the

80th percentile as set forth in paragraph

(d)(3)(ii) of this section. The resulting

80th percentile charge for each CPT

procedure code is trended forward to

the effective time period for the charges

as set forth in paragraph (d)(3)(iii) of

this section. Using the resulting charges

and the RVUs, mathematical

approximation methodology based on

least squares techniques are applied to

the data for each CPT procedure code

group to derive outpatient facility

charges. For each CPT procedure code,

the charge amount is calculated as an

amount per incremental RVU and a

fixed charge amount adjustment.

(i) Outpatient facility CPT procedure

code groups. (A) Surgery—

Integumentary System—Skin,

Subcutaneous and Accessory

Structures—Incision and Drainage,

Excision-Debridement, Paring or

Cutting, Biopsy, Removal of Skin Tags,

Shaving of Epidermal or Dermal

Lesions, and Surgery—Integumentary

System—Nails;

(B) Surgery—Integumentary System—

Skin, Subcutaneous & Accessory

Structures—Excision-Benign Lesions,

Excision-Malignant Lesions; and

Surgery—Integumentary System—

Nails—Introduction;

(C) Surgery—Integumentary System—

Repair—Simple, Intermediate, Complex,

Adjacent Tissue Transfer or

Rearrangement;

(D) Surgery—Integumentary System—

Repair—Free Skin Grafts, Flaps, Other

Flaps and Grafts, Other Procedures,

Pressure Ulcers;

(E) Surgery—Integumentary System—

Repair—Burns, Local Treatment;

(F) Surgery—Integumentary System—

Destruction;

(G) Surgery—Integumentary System—

Breast;

(H) Surgery—Musculoskeletal

System—All Body Regions—Incision,

Excision, Introduction or Removal;

(I) Surgery—Musculoskeletal

System—All Body Regions—Repair,

Revision and/or Reconstruction,

Arthrodesis, Manipulation, Amputation,

Wound Exploration, Replantation,

Grafts, Spinal Instrumentation;

(J) Surgery—Musculoskeletal

System—All Body Regions—Fracture

and/or Dislocation—Closed Treatments

(Except for Head, Neck [Soft Tissues]

and Thorax);

(K) Surgery—Musculoskeletal

System—All Body Regions—Fracture

and/or Dislocation—Open Treatments,

and Surgery—Musculoskeletal

System—Head, Neck (Soft Tissues)

and Thorax—Fracture and/or

Dislocation—Closed Treatments;

(L) Surgery—Musculoskeletal

System—Application of Casts and

Strapping;

(M) Surgery—Musculoskeletal

System—Endoscopy/Arthroscopy;

(N) Surgery—Respiratory System;

(O) Surgery—Cardiovascular System;

(P) Surgery—Digestive System—All

Body Regions—All procedures except

Endoscopy;

(Q) Surgery—Digestive System—All

Body Regions—Endoscopy;

(R) Surgery—Urinary System;

(S) Surgery—Male Genital System;

(T) Surgery—Female Genital System;

(U) Surgery—Maternity Care and

Delivery—Antepartum Services;

(V) Surgery—Maternity Care and

Delivery—Excision, Introduction,

Repair, Vaginal Delivery, Antepartum

and Postpartum Care, Cesarean

Delivery, Delivery After Previous

Cesarean Delivery, Abortion, Other

Procedures;

(W) Surgery—Endocrine System,

Nervous System;

(X) Surgery—Eye and Ocular Adnexa;

(Y) Surgery—Auditory System;

(Z) Radiology—Diagnostic—Head and

Neck, Chest, Spine and Pelvis—All

Except CAT Scans and Magnetic

Resonance Imaging (MRI);

(AA) Radiology—Diagnostic—Upper

Extremities, Lower Extremities,

Abdomen, Gastrointestinal Tract,

Urinary Tract, Gynecological and

Obstetrical, Heart—All Except CAT

Scans and Magnetic Resonance Imaging

(MRI);

(BB) Radiology—Diagnostic—Aorta

and Arteries, Veins and Lymphatics—

All Except CAT Scans and Magnetic

Resonance Imaging (MRI);

(CC) Radiology—Diagnostic

Ultrasound;

(DD) Radiology—Radiation Oncology,

Nuclear Medicine, Therapeutic;

(EE) Radiology—Diagnostic—CAT

Scans in All Categories;

(FF) Radiology—Diagnostic—

Magnetic Resonance Imaging (MRI) in

All Categories;

(GG) Medicine—Vaccines, Toxoids;

(HH) Medicine—Therapeutic or

Diagnostic Infusions (Excluding

Chemotherapy), Therapeutic,

Prophylactic, or Diagnostic Injections;

(II) Medicine—Psychiatry,

Biofeedback;

(JJ) Medicine—Dialysis;

(KK) Medicine—Gastroenterology;

(LL) Medicine—Ophthalmology—

Special Ophthalmological Services, and

Medicine—Special

Otorhinolaryngologic Services;

(MM) Medicine—Cardiovascular—

Other Vascular Studies;

(NN) Medicine—Cardiovascular—

Therapeutic Services,

Echocardiography, Cardiac

Catheterization, Intracardiac

Electrophysiological Procedures, and

Medicine—Non-Invasive Vascular

Diagnostic Studies;

(OO) Medicine—Pulmonary;

(PP) Medicine—Neurology and

Neuromuscular Procedures, Central

Nervous System Assessments and Tests;

(QQ) Medicine—Chemotherapy

Administration;

(RR) Medicine—Special

Dermatological Procedures;

(SS) Medicine—Physical Medicine

and Rehabilitation—Evaluation,

Modalities; and Medicine—

Photodynamic Therapy;

(TT) Medicine—Physical Medicine

and Rehabilitation—Therapeutic

Procedures, Tests and Measurements,

Other Procedures, Medicine—

Osteopathic Manipulative Treatment,

Medicine Chiropractic Manipulative

Treatment, Medicine—Special Services,

Procedures, and Reports, and

Medicine—Other Services and

Procedures;

(UU) Medicine—Evaluation &

Management—Consultations;

(VV) Medicine—Evaluation &

Management—Hospital Observation

Services;

(WW) Medicine—Evaluation &

Management—Emergency Department

Services, Critical Care Services; and

(XX) Medicine—Evaluation &

Management—Office or Other

Outpatient Services, Prolonged Services,

and Medicine—Ophthalmology—

General Ophthalmological Services.

(ii) 80th percentile. For each of the 45

outpatient facility CPT procedure code

groups set forth in paragraph (d)(3)((i) of

this section, the median charge is

increased by the ratio of the 80th

percentile charge to median charge

obtained from the 1998 MedStat

database of nationwide charges. To

mitigate the impact of the variation in

the intensity of services by CPT

procedure code, the percent increase

from the median to the 80th percentile

in outpatient charges is compared to the

percent increase from the median to the

80th percentile in inpatient semi-private

room and board charges. Any percent

increase in outpatient charges in excess

of the inpatient semi-private room and

board percent increase is multiplied by

a factor of 0.50. The 80th percentile

outpatient facility charge is reduced

accordingly.

(iii) Trending forward. The charges for

each CPT procedure code, representing

charge levels described in paragraph

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations 23331

(d)(3) of this section, are trended

forward to the midpoint of the calendar

year in which the charges will be

effective. The trend factors are based on

changes to the Outpatient Hospital

component of the CPI–U. Actual CPI–U

changes are used through the latest

available month. The three-month

average annual trend rate as of the latest

available month is held constant to the

midpoint of the effective charge period.

The projected total CPI–U change from

the source data period to the effective

period is then applied to the 80th

percentile charges, as described in

paragraph (d)(3) of this section.

(4) Geographic area adjustment

factors. For each VA outpatient facility

location, a single geographic area

adjustment factor is calculated as the

arithmetic average of the outpatient

geographic area adjustment factor (this

factor constitutes the ratio of the level

of charges for each geographic area to

the nationwide level of charges)

published in the 2001 Milliman &

Robertson, Inc., Health Cost Guidelines

(Milliman & Robertson, Inc., 1301 5th

Ave., Suite 3800, Seattle, WA 98101–

2605), and a geographic area adjustment

factor developed from the 2000

MediCode data. The MediCode-based

geographic area adjustment factors are

calculated as the ratio of the CPTweighted average charge level for each

VA outpatient facility location to the

nationwide CPT-weighted average

charge level.

(5) Multiple surgical procedures.

When multiple surgical procedures are

performed during the same outpatient

encounter by a provider or provider

team as indicated by multiple surgical

CPT procedure codes, then the CPT

procedure code with the highest facility

charge will be billed at 100% of the

charges established under this section;

the CPT procedure code with the second

highest facility charge will be billed at

25% of the charges established under

this section; the CPT procedure code

with the third highest facility charge

will be billed at 15% of the charges

established under this section; and no

outpatient facility charges will be billed

for any additional surgical procedures.

(e) Physician charges. When VA

provides or furnishes physician services

within the scope of care referred to in

paragraph (a)(1) of this section,

physician charges billed for such

services will be determined in

accordance with the provisions of this

paragraph. Physician charges consist of

charges for professional services that

vary by VA facility and by CPT

procedure code. These charges are

calculated as follows:

(1) Formula. For each CPT procedure

code except those for anesthesia,

multiply the total facility-adjusted RVU

as set forth in paragraph (e)(2) of this

section by the applicable facilityadjusted conversion factor (facilityadjusted conversion factors are

expressed in monetary amounts) set

forth in paragraph (e)(3) of this section

to obtain the physician charge for each

CPT procedure code at a particular VA

facility. For each anesthesia CPT

procedure code, multiply the

nationwide physician charge as set forth

in paragraph (e)(4) of this section by the

geographic area adjustment factor as set

forth in paragraph (e)(3)(iii) of this

section to obtain the physician charge

for each anesthesia CPT procedure code

at a particular VA facility.

(2)(i) Total facility-adjusted RVUs for

physician services other than anesthesia

and specified CPT procedure codes. The

work expense and practice expense

components of the RVUs for CPT

procedure codes (other than anesthesia

and those CPT procedure codes set forth

at paragraphs (e)(2)(ii) through (e)(2)(iv)

of this section) are compiled

(information concerning the RVUs and

their components can be obtained from

Veterans Health Administration, Office

of Finance, Department of Veterans

Affairs, 810 Vermont Ave., NW,

Washington, DC 20420). For radiology

CPT procedure codes, these

compilations do not include separately

identified technical component RVUs.

For CPT procedure codes that generate

an outpatient facility charge, the facility

practice expense RVU is substituted for

the non-facility practice expense RVU

(information concerning facility practice

expense RVUs can be obtained from

Veterans Health Administration, Office

of Finance, Department of Veterans

Affairs, 810 Vermont Ave., NW,

Washington, DC 20420). For medicine

and surgery CPT procedure codes with

separate professional and technical

components that also generate an

outpatient facility charge, only the

professional component is compiled.

The sum of the facility-adjusted work

expense RVU as set forth in paragraph

(e)(2)(i)(A) of this section and the

facility-adjusted practice expense RVU

as set forth in paragraph (e)(2)(i)(B) of

this section equals the total facilityadjusted RVUs.

(A) Facility-adjusted work expense

RVUs. For each CPT procedure code for

each geographic area, the 2001 work

expense RVU is multiplied by the work

expense 2001 Medicare Geographic

Practice Cost Index. The result

constitutes the facility-adjusted work

expense RVU.

(B) Facility-adjusted practice expense

RVUs. For each CPT procedure code for

each geographic area, the 2001 practice

expense RVU is multiplied by the

practice expense 2001 Medicare

Geographic Practice Cost Index. . The

result constitutes the facility-adjusted

practice expense RVU.

(ii) RVUs based on laboratory and

pathology CPT codes based on

Medicare’s Clinical Diagnostic

Laboratory Fee Schedule. For CPT

procedure codes without modifiers that

are not assigned separately identified

work and practice units (in (e)(2)(i) of

this section), total RVUs are developed

based on the 2001 edition of Medicare’s

Clinical Diagnostic Laboratory Fee

Schedule (found on the Health Care

Financing Administration public use

files Internet site at http://

www.hcfa.gov/stats/pufiles.htm under

the heading ‘‘Payment Rates/NonInstitutional Providers’’ and the title

‘‘Clinical Diagnostic Laboratory Fee

Schedule’’). Such Medicare payment

amounts are upwardly adjusted such

that the payment level is, on average,

equivalent to standard RBRVS payment

levels, using statistical comparisons to

the 80th percentile derived from the

2000 MediCode charge database. These

adjusted payment amounts are then

divided by the 2001 Medicare

conversion factor to derive RVUs

corresponding to each CPT code. The

total RVUs are added to the 2001

RBRVS work and practice expense

RVUs for the corresponding professional

component (if any) of a given CPT

procedure code to derive nationwide

total RVUs. The resulting nationwide

total RVUs are multiplied by the

geographic adjustment factors as set

forth in paragraph (e)(2)(v) of this

section to obtain the facility-specific

total RVUs.

(iii) RVUs for specified CPT procedure

codes. For CPT procedure codes without

modifiers that are not assigned RVUs in

(e)(2)(i) or (e)(2)(ii) of this section, total

RVUs are developed based on various

charge databases. For the following CPT

procedure codes, the nationwide 80th

percentile billed charges are obtained

from the 2000 MediCode data: 15824,

15825, 15826, 15828, 15829, 17380,

20930, 20936, 22841, 24940, 36415,

41820, 41821, 41850, 41870, 48160,

50300, 54440, 58974, 65760, 65765,

65767, 65771, 69090, 76092, 76350,

80050, 80055, 80103, 86485, 86586,

86850, 86860, 86870, 86890, 86891,

86901, 86910, 86911, 86915, 86920,

86921, 86922, 86927, 86930, 86931,

86932, 86945, 86950, 86965, 86970,

86971, 86972, 86975, 86976, 86977,

86978, 86985, 88000, 88005, 88007,

88012, 88014, 88016, 88020, 88025,

23332 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations

88027, 88028, 88029, 88036, 88037,

88040, 88045, 88142, 88143, 88144,

88145, 88147, 88148, 89250, 90371,

90375, 90376, 90389, 90471, 90472,

90585, 90586, 90632, 90633, 90634,

90645, 90646, 90647, 90648, 90657,

90658, 90659, 90665, 90675, 90680,

90690, 90691, 90882, 90889, 90989,

90993, 92531, 92532, 92533, 92534,

92590, 92591, 92592, 92593, 92594,

92595, 92992, 92993, 93760, 93762,

93784, 93790, 94642, 95120, 95125,

95130, 95131, 95132, 95133, 95134,

96110, 99000, 99001, 99002, 99025,

99050, 99052, 99054, 99056, 99058,

99185, 99186, 99190, 99191, 99192,

99358, 99359, 99360, 99361, 99362,

99371, 99372, and 99373. For the

following CPT procedure codes, the

nationwide 80th percentile billed

charges are obtained from the 1998

Medicare Standard Analytical File 5%

Sample: 21089, 23929, 26989, 29909,

76140, 78990, 79900, 86849, 90660,

90668, 90669, 90749, 92390, 92391,

96549, 97780, 97781, 99024, 99070,

99071, 99072, 99075, 99078, 99080,

99082, 99090, 99100, 99116, 99135,

99140, 99173, 99288, 99420, 99429,

99450, 99455, and 99456. For the

following CPT procedure codes, the

nationwide 80th percentile billed

charges are obtained from the 1997

nationwide commercial insurance

database compiled by the Health

Insurance Association of America

(Health Insurance Association of

America, 555 13th Street, NW., Suite

600E, Washington, DC 20004): 15876,

15877, 15878, 15879, 21088, 26587,

32850, 33940, 36468, 36469, 47133,

48550, 55970, and 69710. The

nationwide 80th percentile billed

charges so obtained are divided by the

untrended nationwide conversion factor

for the corresponding physician CPT

procedure code group as set forth in

paragraphs (e)(3) and (e)(3)(i) of this

section. The resulting nationwide total

RVUs are multiplied by the geographic

adjustment factors as set forth in

paragraph (e)(2)(v) of this section to

obtain the facility-specific total RVUs.

(iv) RVUs for specified CPT procedure

codes. For CPT procedure codes without

modifiers that are not assigned RVUs in

paragraphs (e)(2)(i), (e)(2)(ii), or

(e)(2)(iii) of this section, the nationwide

total RVU is calculated by summing the

work expense and practice expense

RVUs found in the 2001 St. Anthony’s

Complete RBRVS (available from

Relative Value Studies, Inc., St.

Anthony Publishing, 11410 Isaac

Newton Square, Reston, VA 20190):

36540, 43752, 63043, 63044, 86294,

90940, 91132, 91133, 93318, and 99172.

The resulting nationwide total RVUs are

multiplied by the geographic adjustment

factors as set forth in paragraph (e)(2)(v)

of this section to obtain the facilityspecific total RVUs.

(v) RVU geographic area adjustment

factors for specified CPT procedure

codes. The geographic area adjustment

factor for each facility location consists

of the weighted average of the 2001

work expense and practice expense

Medicare Geographic Practice Cost

Indices for each facility location using

charge data for representative CPT

procedure codes statistically selected

and weighted for work expense and

practice expense.

(3) Facility-adjusted 80th percentile

conversion factors. CPT procedure

codes are separated into the following

24 physician CPT procedure code

groups: allergy immunotherapy, allergy

testing, anesthesia, cardiovascular,

chiropractor, consults, emergency room

visits and observation care, hearing/

speech exams, immunizations, inpatient

visits, maternity/cesarean deliveries,

maternity/non-deliveries, maternity/

normal deliveries, miscellaneous

medical, office/home urgent care visits,

outpatient psychiatry/alcohol and drug

abuse, pathology, physical exams,

physical medicine, radiology, surgery,

therapeutic injections, vision exams,

and well baby exams. For each of the 24

physician CPT procedure code groups,

representative CPT procedure codes

were statistically selected and weighted

so as to give a weighted average RVU

comparable to the weighted average

RVU of the entire physician CPT

procedure code group (the selected CPT

procedure codes are set forth in the

2001 Milliman & Robertson, Inc., Health

Cost Guidelines fee survey) (Milliman &

Robertson, Inc., 1301 5th Ave., Suite

3800, Seattle, WA 98101–2605). The

80th percentile charge for each selected

CPT procedure code is obtained (this is

contained in the nationwide commercial

charge database compiled by 2000

MediCode, Inc., 5225 Wiley Post Way,

Suite 500, Salt Lake City, Utah 84116).

A nationwide conversion factor (a

monetary amount) is calculated for each

physician CPT procedure code group as

set forth in paragraph (e)(3)(i) of this

section. The nationwide conversion

factors for each of the 24 physician CPT

procedure code groups are trended

forward as set forth in paragraph

(e)(3)(ii) of this section. The resulting

amounts for each of the 24 groups are

multiplied by geographic area

adjustment factors as set forth in

paragraph (e)(3)(iii) of this section,

resulting in facility-adjusted 80th

percentile conversion factors for each

VA facility geographic area for the 24

physician CPT procedure code groups

for the effective charge period.

(i) Nationwide conversion factors.

Using the nationwide 80th percentile

charges for the selected CPT procedure

codes from paragraph (e)(3) of this

section, a nationwide conversion factor

is calculated for each of the 24

physician CPT procedure code groups

by dividing the weighted average charge

by the weighted average RVU. To

correspond with the charge data, for

medicine and surgery CPT procedure

codes, the total RVUs are used even

when separate professional and

technical components are specified.

(ii) Trending forward. The nationwide

conversion factor for each of the 24

physician CPT procedure code groups,

representing charge levels described in

paragraph (e)(3) of this section, are

trended forward based on changes to the

Physician component of the CPI–U.

Actual CPI–U changes are used through

the latest available month. The threemonth average annual trend rate as of

the latest available month is held

constant to the midpoint of the calendar

year in which charges will be effective.

The projected total CPI–U change from

the midpoint of the source data

collection period to the midpoint of the

effective charge period is then applied

to the 24 conversion factors.

(iii) Geographic area adjustment

factors. Using the 80th percentile

charges for the selected CPT procedure

codes from paragraph (e)(3) of this

section for each VA facility geographic

area, a geographic area-specific

conversion factor is calculated for each

of the 24 physician CPT procedure code

groups by dividing the weighted average

charge by the weighted average facilityadjusted RVU. The resulting geographic

area conversion factor for each facility

geographic area for each physician CPT

procedure code group is divided by the

corresponding nationwide conversion

factor as set forth in paragraph (e)(3)(i).

The resulting ratios are the geographic

area adjustment factors for each of the

24 physician CPT procedure code

groups for each facility geographic area.

(4) Nationwide 80th percentile

charges for anesthesia CPT procedure

codes. The nationwide charges are

calculated by multiplying the RVUs as

set forth in paragraph (e)(4)(i) of this

section by the appropriate nationwide

trended 80th percentile conversion

factors as set forth in paragraph (e)(3) of

this section.

(i) RVUs for anesthesia. The 2000

base unit value for each anesthesia CPT

procedure code is compiled (the base

unit values can be found in the 2000 St.

Anthony’s Complete RBRVS, Relative

Value Studies, Inc., St. Anthony

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Rules and Regulations 23333

Publishing, 11410 Isaac Newton Square,

Reston, VA 20190). The average time

unit value for each anesthesia CPT

procedure code is compiled from a

Health Care Financing Administration

study concerning average time unit

values for anesthesia CPT procedure

codes (these values can be obtained

from Veterans Health Administration,

Office of Finance, Department of

Veterans Affairs, 810 Vermont Ave.,

NW., Washington, DC 20420). For each

anesthesia CPT procedure code

introduced since the Health Care

Financing Administration study, the

time unit value is calculated as the

average time unit value for all other

anesthesia CPT procedure codes with

the same base unit value. The sum of

the anesthesia base unit value and the

anesthesia average time unit value

equals the total anesthesia RVUs.

(ii) [Reserved]

(f) Other provider charges. When the

following providers provide or furnish

VA care within the scope of care

referred to in paragraph (a)(1) of this

section, charges for that care covered by

a CPT procedure code will be

determined based on the following

indicated percentages of the amount

that would be charged if the care had

been provided by a physician under

paragraph (e) of this section:

(1) Nurse practitioner: 85%.

(2) Clinical nurse specialist: 85%.

(3) Physician Assistant: 85%.

(4) Certified registered nurse

anesthetist: 50% when physician

supervised; 100% when not physician

supervised.

(5) Clinical psychologist: 80%.

(6) Clinical social worker: 75%.

(7) Podiatrist: 100%.

(8) Chiropractor: 100%.

(9) Dietitian: 75%.

(10) Clinical pharmacist: 80%.

(11) Optometrist: 100%.

(g) Outpatient dental care and

prescription drugs not administered

during treatment. Notwithstanding

other provisions of this section, when

VA provides or furnishes outpatient

dental care or prescription drugs not

administered during treatment, within

the scope of care referred to in

paragraph (a)(1) of this section, charges

billed separately for such care will be

based on VA costs in accordance with

the methodology set forth in § 17.102 of

this part.

(The Office of Management and Budget has

approved the information collection

requirements in this section under control

number 2900–0606.)

(Authority: 38 U.S.C. 101, 501, 1701, 1705,

1710, 1721, 1722, 1729)

[FR Doc. 01–11026 Filed 5–7–01; 8:45 am]

BILLING CODE 8320–01–U