61368 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

32 CFR Part 199 

RIN 0720–AA73 

TRICARE; Sub-Acute Care Program; 

Uniform Skilled Nursing Facility 

Benefit; Home Health Care Benefit; 

Adopting Medicare Payment Methods 

for Skilled Nursing Facilities and Home 

Health Care Providers 

AGENCY: Office of the Secretary, DoD. 

ACTION: Final rule. 

SUMMARY: This rule partially 

implements the TRICARE ‘‘sub-acute 

and long-term care program reform’’

enacted by Congress in the National 

Defense Authorization Act for Fiscal 

Year 2002, specifically: Establishment of 

‘‘an effective, efficient, and integrated 

sub-acute care benefits program,’’ with 

skilled nursing facility (SNF) and home 

health care benefits modeled after those 

of the Medicare program; adoption of 

Medicare payment methods for skilled 

nursing facility, home health care, and 

certain other institutional health care 

providers; adoption of Medicare rules 

on balance billing of beneficiaries, 

prohibiting it by institutional providers 

and limiting it by non-institutional 

providers; and change in the statutory 

exclusion of coverage for custodial and 

domiciliary care. 

DATES: Effective Dates: This rule is 

effective August 1, 2003, except the 

amendments to § 199.14(h), which are 

effective June 1, 2004. 

ADDRESSES: Medical Benefits and 

Reimbursement Systems, TRICARE 

Management Activity, 16401 East 

Centretech Parkway, Aurora, Colorado 

80011–9066. 

FOR FURTHER INFORMATION CONTACT: For 

payments to Skilled Nursing Facilities 

and Skilled Nursing Facility (SNF) 

services, Tariq Shahid, Medical Benefits 

and Reimbursement Systems, TRICARE 

Management Activity, telephone (303) 

676–3801. For Home Health Care (HHC) 

benefits and payment methods, David E. 

Bennett, TRICARE Management 

Activity, Medical Benefits and 

Reimbursement Systems, telephone 

(303) 676–3494. For payments for 

clinical laboratory and certain other 

services in hospital outpatient 

departments and emergency 

departments and balance billing limits, 

Stan Regensberg, Medical Benefits and 

Reimbursement Systems, TRICARE 

Management Activity, telephone (303) 

676–3742. For custodial care issues, 

Mike Kottyan, Medical Benefits and 

Reimbursement Systems, TRICARE 

Management Activity, telephone (303) 

676–3520. 

SUPPLEMENTARY INFORMATION: 

I. Overview 

In the National Defense Authorization 

Act for Fiscal Year 2002 (NDAA–02), 

Pub. L. 107–107 (December 28, 2001), 

Congress enacted several reforms 

relating to TRICARE coverage and 

payment methods for skilled nursing 

and home health care services. The 

statutory ‘‘Sub-Acute and Long-Term 

Care Program Reform’’ under section 

701 of this Act added a new 10 U.S.C. 

1074j, which provides in pertinent part: 

§ 1074j Sub-acute care program. 

(a) Establishment.—The Secretary of 

Defense shall establish an effective, efficient, 

and integrated sub-acute care benefits 

program under this chapter. * * * 

(b) Benefits.—(1) The program shall 

include a uniform skilled nursing facility 

benefit that shall be provided in the same 

manner and under the conditions described 

in Section 1861(h) and (i) of the Social 

Security Act (42 U.S.C. 1395x(h) and (i)), 

except that the limitation on the number of 

days of coverage under Section 1812(a) and 

(b) of such Act (42 U.S.C. 1395d(a) and (b)) 

shall not be applicable under the program. 

Skilled nursing facility care for each spell of 

illness shall continue to be provided for as 

long as medically necessary and appropriate. 

* * * * * 

(3) The program shall include a 

comprehensive, part-time or intermittent 

home health care benefit that shall be 

provided in the manner and under the 

conditions described in Section 1861(m) of 

the Social Security Act (42 U.S.C. 1395x(m)). 

In addition to these requirements that 

TRICARE establish an integrated subacute care program consisting of skilled 

nursing facility and home health care 

services modeled after the Medicare 

program, Congress also, in section 707 

of NDAA–02, changed the statutory 

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

that TRICARE payment methods for 

institutional care ‘‘may be’’ determined 

to the extent practicable in accordance 

with Medicare payment rules to a 

mandate that TRICARE payment 

methods ‘‘shall be’’ so determined. This 

amendment is effective 90 days after the 

date of enactment. 

A third Congressional action in 

NDAA–02, also in Section 707, is the 

statutory codification of existing 

TRICARE policy—modeled after 

Medicare—that institutional providers 

are not permitted to balance bill 

beneficiaries for charges above the 

TRICARE payment amount and that 

non-institutional providers may not 

balance bill in excess of 15 percent over 

the TRICARE Maximum Allowable 

Charge. 

A fourth component of this reform 

program (in Section 701(c)) is the 

narrowing of the regulatory definition of 

custodial care, which previously was 

statutorily excluded but not defined, by 

the adoption of the new statutory 

definition of ‘‘custodial care’’ that has 

the effect of eliminating current program 

restrictions on paying for certain 

medically necessary custodial care. The 

new statutory definition of domiciliary 

care is consistent with the previous 

regulatory definition, and no changes 

are required. 

This final rule implements these 

statutory requirements. We are adopting 

for TRICARE a skilled nursing facility 

(SNF) benefit similar to Medicare’s, but 

as specified in the statute, without 

Medicare’s day limits. We are also 

adopting Medicare’s prospective 

payment method for SNF care. 

Similarly, we are adopting the Medicare 

benefit structure and payment method 

for home health care (HHC) services. We 

are applying to SNF and HHC providers 

the statutory prohibition against balance 

billing. In addition, we are 

incorporating the new statutory 

definitions of ‘‘custodial care’’ and 

‘‘domiciliary care.’’ Finally, this rule 

also provides clarification of existing 

payment policies for laboratory services 

including clinical laboratory; 

rehabilitation therapy services; 

radiology services; diagnostic services; 

ambulance services; durable medical 

equipment (DME) and supplies; oxygen 

and related supplies; drugs 

administered other than oral method; all 

professional provider services that are 

provided in an emergency room, clinic, 

hospital outpatient departments, etc.; 

and routine venipuncture in hospital 

outpatient and emergency departments 

that were adopted under the allowable 

charge methodology under 32 CFR 

199.14. 

We note that the series of sub-acute 

and long-term care program reforms 

adopted by Congress in NDAA–02 

included several parts that are not a part 

of implementation in this final rule. 

Most significant are: repeal of the Case 

Management Program under 10 U.S.C. 

1079(a)(17) (repealed—along with 

several other related enactments—by 

Section 701(g)(2) of NDAA–02); 

continuation of the Case Management 

Program for certain beneficiaries 

currently covered by it (Section 701(d)); 

and establishment of a new program of 

extended benefits for disabled family 

members of active duty service members 

(Section 701(b)). These and several 

other related statutory changes are being 

implemented through separate 

regulatory changes. 

Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61369 

Finally, we note that Congress 

included as Section 8101 of the DoD 

2002 Appropriations Act, a general 

provision identical to a provision 

included in the 2000 (Section 8118) and 

2001 (Section 8100) Appropriations 

Acts concerning implementation of the 

case management program under 10 

U.S.C. 1079(a)(17). Although Sections 

8118 and 8100 of the 2000 and 2001 

Appropriations Acts were repealed by 

Section 701(g)(1)(B) and (C) of NDAA–

02, the same provision was reenacted in 

the 2002 Appropriations Act. By its 

terms, Section 8101 of the DoD 2002 

Appropriations Act, exclusively 

addresses implementation of a program 

(the case management program under 10 

U.S.C. 1079(a)(17)) that has now been 

repealed. Thus, we consider Section 

8101 as not affecting implementation of 

the sub-acute and long-term care reform 

program adopted by Congress in 

NDAA–02. 

The program reforms adopted by 

Congress and implemented in this final 

rule take major steps toward achieving 

the Congressional objective of an 

effective, efficient, and integrated subacute care benefits program. 

II. Skilled Nursing Facility Benefits 

As noted above, 10 U.S.C. 1074j 

requires TRICARE to include a skilled 

nursing facility benefit that shall for the 

most part be provided in the manner 

and under the conditions described 

under Medicare. As a result, TRICARE 

is adopting Medicare’s three-day priorhospitalization requirement for coverage 

of a SNF admission. Accordingly, for a 

SNF admission to be covered under 

TRICARE, the beneficiary must have a 

qualifying hospital stay (meaning an 

inpatient hospital stay), of not less than 

three consecutive days before the 

beneficiary is discharged from the 

hospital. The beneficiary must enter the 

SNF within 30 days after discharge from 

the hospital or within such time as it 

would be medically appropriate to begin 

an active course of treatment where the 

individual’s condition is such that SNF 

care would not be medically appropriate 

within 30 days after discharge from a 

hospital. The skilled services must be 

for a medical condition that was either 

treated during the qualifying three-day 

hospital stay, or started while the 

beneficiary was already receiving 

covered SNF care. Additionally, an 

individual shall be deemed not to have 

been discharged from a SNF, if within 

30 days after discharge from a SNF, the 

individual is again admitted to the same 

or a different SNF. These coverage 

requirements are the same as applied 

under Medicare. We are not, however, 

adopting Medicare’s 100-day limit on 

SNF services. Consistent with the 

statute, SNF coverage for each spell of 

illness shall continue to be provided for 

as long as medically necessary and 

appropriate. 

III. Payments for Skilled Nursing 

Facility Services 

TRICARE had not reformed payment 

methods applicable to SNFs due to the 

very small volume of SNF services paid 

for by TRICARE. The volume of such 

services is now expected to increase 

significantly because of the 

Congressional action in 2000 reinstating 

TRICARE coverage secondary to 

Medicare for Medicare-eligible DoD 

health care beneficiaries (Section 712 of 

the Floyd D. Spence National Defense 

Authorization Act for Fiscal Year 2001, 

Pub. L. 106–398). Coincident with 

Congressional action in directing 

adoption of Medicare payment methods 

for institutional providers, we have 

undertaken a review of the Medicare 

payment method and rates for SNF care 

under Section 1888(e) of the Social 

Security Act (42 U.S.C. 1395yy) and 42 

CFR Part 413, subpart J. That review and 

assessment have convinced us that 

adoption of Medicare SNF payment 

methods and rates is not only required 

by law, but also fair, feasible, 

practicable, and appropriate. 

Medicare implemented its per diem 

Prospective Payment System (PPS) for 

SNF care covering all costs (routine, 

ancillary and capital) of Medicarecovered SNF services as of July 1, 1998. 

The Medicare payment rates are based 

upon resident assessments. All 

Medicare-certified SNFs are required to 

conduct assessments on residents using 

a standardized assessment tool, called 

the Minimum Data Set (MDS). Medicare 

then uses information from this 

assessment to categorize SNF patients 

into major categories, such as: (1) 

Rehabilitation; (2) Extensive Services; 

(3) Special Care; (4) Clinically Complex; 

(5) Impaired Cognition; (6) Behavior 

Problems; and (7) Reduced Physical 

Function. This is done using the 

Resource Utilization Group (RUG)–III 

grouper. The RUG–III grouper is a 

computer program that converts 

resident specific assessment data into a 

case-mix classification. In classifying 

patients into groups based upon their 

clinical and functional characteristics, 

the grouper further subdivides each of 

these major categories resulting in 

specific patient RUGs. 

For each RUG, the Medicare SNF per 

diem payment is calculated as the sum 

of three parts—the nursing component, 

the therapy component and the noncase-mix component. Under the nursing 

and therapy components of the payment 

rate, each of RUG carries a uniquely 

assigned relative weight factor. This 

relative weight factor, or case mix index, 

represents a relative index or resource 

consumption. Resource-intensive 

patients are assigned to a RUG that 

carries a higher relative weight factor. 

This RUG-specific relative weight factor 

is multiplied by the applicable nursing 

and therapy base rates (which vary 

depending on whether the SNF is urban 

or rural) to develop the nursing and 

therapy components of the per diem 

payment rate. These two components 

are then added to the non-case-mix 

adjusted component resulting in the 

PPS per diem payment rate. 

A key part of the Medicare SNF 

payment system is the use of the MDS 

to classify SNF residents into one of the 

RUG groups. An important issue is 

whether the RUG–III classification 

system used by Medicare to classify 

patients into the RUG groups would be 

practicable for the TRICARE SNF 

benefit. We think that it would be 

practicable. Much of the SNF care for 

which TRICARE will be paying is as 

second payer to Medicare for the same 

patient. Even for non-Medicare-eligible 

patients (e.g., most patients under age 

65), the characteristics recognized by 

the RUG–III system would be equally 

applicable. In this regard, we note that 

more than ten states have decided to use 

the RUG–III system to classify Medicaid 

patients into RUGs and several other 

states are currently in the 

developmental stages of implementing 

the RUG–III system. This reflects a 

broad view that the MDS and RUGs are 

appropriate for non-Medicare SNF 

residents. In our review and 

discussions, we could not identify any 

significant barriers to the use of the 

RUG–III system to classify TRICARE 

patients. 

One implementation issue that we 

have identified related to classification 

concerns the timing of resident 

assessments. The Medicare SNF 

payment system requires periodic 

patient assessments. The Centers for 

Medicare and Medicaid Services (CMS) 

requires that SNF patients be assessed 

on days 5, 14, 30, 60, and 90, as well 

as to be reassessed if there are status 

changes between these periodic 

assessments. We have considered the 

level of assessment required after 100 

days when TRICARE becomes primary 

payer for patients whose SNF care must 

continue beyond the Medicare benefit 

limit. We believe continuing to assess 

patients every 30 days would be 

consistent with Medicare’s practice of 

skilled authorization. 

A second implementation issue 

concerns the use of MDS for neonates 

61370 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 

and very young children. The MDS was 

not designed for very young children. 

As a result, we believe that children 

under ten should not be assessed using 

the MDS. We will review the methods 

used by Medicaid programs and may 

adopt one of their assessment methods 

at a later time. Until then, the allowed 

charge for children under age ten in a 

SNF will continue to be the billed 

charge or negotiated rates. 

We have also considered whether the 

Medicare SNF payment rates and 

weights are appropriate for TRICARE. 

We believe they are. For some of the 

payment methods TRICARE has 

adopted for non-SNF providers that are 

based on the Medicare’s system, we 

have developed DoD-specific weights 

and rates. In some, such as for physician 

payments, we implemented our own 

phase-in process, but have now reached 

comparability with Medicare. In the 

case of SNF PPS, the Medicare weights 

and rates were developed to be used 

nationally—like TRICARE—thus, we 

have no special State considerations 

that some Medicaid programs would 

have. In addition, the TRICARE 

population group that will be the 

primary user of SNF services and the 

Medicare population group are quite 

similar. Thus, we believe that there is 

no reason why the Medicare weights 

and rates would not be appropriate to 

use. However, we will carefully monitor 

the TRICARE SNF patient 

characteristics to ensure that the 

weights and rates are appropriate. If 

necessary, the weights and rates could 

be modified after one or more years of 

experience. 

Based on all of these considerations 

and the statutory requirements, the 

Department is adopting for TRICARE 

the Medicare payment methods and 

rates, including MDS assessments, 

RUG–III classifications, and Medicare 

weights and per diem rates. For patient 

stays longer than 90 days, MDS 

assessments would be required every 30 

days. 

In adopting the Medicare’s SNF 

payment methodology, we are also 

incorporating into our rule a provision 

that has been in the TRICARE 

Operations Manual requiring that 

TRICARE-eligible SNFs are required to 

be Medicare-certified institutions. We 

believe this policy facilitates assurance 

of quality of care and is consistent with 

the payment approach we are adopting. 

For pediatric SNFs, TRICARE will 

accept Medicaid certification in lieu of 

the Medicare certification as the 

pediatric SNFs might choose not to 

apply for Medicare certification and the 

Medicaid certification standards are 

quite similar to the Medicare 

certification standards. 

For overseas, the SNF PPS will be 

applicable to those areas as it applies 

under Medicare. 

On July 7, 2003, DoD published a 

notice (68 FR 40251) to announce the 

effective and implementation date for 

the new SNF benefit provisions and 

SNF PPS. The notice established that 

the new SNF benefit provisions and 

SNF PPS is effective for SNF admissions 

on or after August 1, 2003. 

IV. Home Health Care Benefits 

Home health agencies (HHAs) are 

recognized as authorized providers 

under TRICARE, but payment only 

extended to services rendered by 

otherwise authorized TRICARE 

individual professional providers, such 

as registered nurses, physical and 

occupational therapists, and speech 

pathologists. Coverage of services 

provided by home health aides and 

medical social workers were not 

allowed except under case management 

and the hospice benefit. Payment is also 

extended under the TRICARE-allowable 

charge methodology for medical 

supplies that are essential in enabling 

HHA professional staff to effectively 

carry out physician ordered treatment of 

the beneficiary’s illness or injury. 

Unlike Medicare, TRICARE required 

HHAs to have either Community Health 

Accreditation Program or Joint 

Commission on the Accreditation of 

Healthcare Organizations accreditation 

to qualify as network providers. These 

certification requirements have been 

changed to make them consistent with 

those of Medicare in order to effectively 

accommodate adoption of the new HHA 

prospective payment system, i.e., to 

require Medicare certification/approval 

for provider authorization status under 

TRICARE. 

Medicare’s home health benefit 

structure and conditions for coverage 

are being adopted coincident with 

implementation of the new prospective 

payment system including those 

provisions under Sections 1861(m), 

1861(o), and 1891 of the Social Security 

Act and 42 CFR part 484. In general, 

coverage extends to part-time or 

intermittent skilled nursing care and 

home health aide services from 

qualified providers. The specific benefit 

structure and conditions for coverage 

are set forth in the new Section 

199.4(e)(21) of the regulation. 

In adopting this new benefit structure 

for TRICARE, we note the potential 

need for some transition time or other 

accommodation for some patients 

currently receiving home health services 

under present program coverage rules. 

Our regulation (Section 199.1(n)) allows 

the recognition of special circumstance 

and authority of the Director to address 

them. 

V. Payment Method for Home Health 

Care Services 

TRICARE is adopting Medicare’s 

benefit structure and prospective 

payment system for reimbursement of 

HHAs that are currently in effect for the 

Medicare program under Section 4603 

of the Balanced Budget Act of 1997, as 

amended by Section 5101 of the 

Omnibus Consolidated and Emergency 

Supplemental Appropriations Act for 

Fiscal Year 1999, and by Sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

Act of 1999. This includes adoption of 

the comprehensive Outcome and 

Assessment Information Set (OASIS) 

and consolidated billing requirements. 

The adoption of the Medicare HHA 

prospective payment system replaces 

the retrospective physician-oriented feefor-service model used for payment of 

home health services under TRICARE. 

Under the new prospective payment 

system, TRICARE will reimburse HHAs 

a fixed case-mix and wage-adjusted 60- 

day episode payment amount for 

professional home health services, along 

with routine and non-routine medical 

supplies provided under the 

beneficiary’s plan of care. Durable 

medical equipment and osteoporosis 

drugs receive a separate payment 

amount in addition to the prospective 

payment system amount for home 

health care services. 

The variation in reimbursement 

among beneficiaries receiving home 

health care under this newly adopted 

prospective payment system will be 

dependent on the severity of the 

beneficiary’s condition and expected 

resource consumption over a 60-day 

episode-of-care, with special 

reimbursement provisions for major 

intervening events, significant changes 

in condition, and low or high resource 

utilization. The resource consumption 

of these beneficiaries will be assessed 

using OASIS selected data elements. 

The score values obtained from these 

selected data elements will be used to 

classify home health beneficiaries into 

one of 80 Home Health Resource Groups 

(HHRGs) based on their average 

expected resource costs relative to other 

home health care patients. 

The HHRG classification determines 

the cost weight, i.e., the appropriate 

case-mix weight adjustment factor that 

indicates the relative resources used and 

costliness of treating different patients. 

The cost weight for a particular HHRG 

is then multiplied by a standard average 

Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61371 

prospective payment amount for a 60- 

day episode of home health care. The 

case-mix adjusted standard prospective 

payment amount is then adjusted to 

reflect the geographic variation in wages 

to come up with the final HHA payment 

amount. As indicated above, the 

ordinary unit of payment is based on a 

60-day episode of care. Payment covers 

the entire episode of care regardless of 

the number of days of care actually 

provided during the 60-day period. 

There are exceptions to this standard 

payment period under certain 

conditions that will result in reduced or 

additional amounts being paid. If the 

beneficiary is still in treatment at the 

end of the initial 60-day episode of care, 

a physician must re-certify the 

beneficiary’s continuing need for home 

health services and the homebound 

status of the patient, and a new episode 

of care may begin. There is currently no 

limit on the number of medically 

necessary consecutive 60-day episodes 

that beneficiaries may receive under the 

HHA prospective payment system. 

As noted above, the variation in 

reimbursement among beneficiaries 

receiving HHC under this newly 

adopted prospective payment system 

will be dependent on the severity of the 

beneficiary’s condition and expected 

resource consumption over a 60-day 

episode-of-care, with special 

reimbursement provisions for major 

intervening events, significant changes 

in condition, and low or high resource 

utilization. A case mix system has been 

developed to measure the severity and 

projected resource utilization of 

beneficiaries receiving home health 

services using selected data elements off 

of the OASIS assessment instrument 

(i.e., the assessment document 

submitted by HHAs for reimbursement) 

and an additional element measuring 

receipt of at least ten visits for therapy 

services. These key data elements are 

organized and assigned a score value in 

order to measure the impact of clinical, 

functional and services utilization 

dimensions on total resource use. The 

resulting summed scores are used to 

assign a beneficiary to a particular 

severity level within each of the 

following dimensions: 

• Clinical Dimension—The clinical 

dimension has four severity levels (0–3) 

and takes into account the beneficiary’s 

primary diagnosis and prevalent 

medical conditions. 

• Functional Dimension—The 

functional dimension assesses the 

beneficiary’s ability to perform various 

activities of daily living (e.g., the 

beneficiary’s ability to dress and bathe) 

and consists of five severity levels (0–

4). 

• Services Utilization Dimension—

The services utilization dimension has 

four severity levels (0–3) and indicates 

whether the beneficiary was discharged 

from a skilled nursing facility or 

rehabilitation hospital within the past 

14 days and whether the patient is 

expected to receive ten or more 

occupational, physical and/or speech 

therapy visits. 

A case-mix grouper is used for 

assigning a severity level within each of 

the above dimensions and for 

classifying the beneficiary into one of 80 

HHRGs. The HHRG indicates the extent 

and severity of the beneficiary’s home 

health needs reflected in its relative 

case-mix weight (cost weight). The casemix weight indicates the group’s 

relative resource use and cost of treating 

different patients. The case-mix weights 

for Fiscal Year 2001 ranged from 0.5265 

to 2.8113. The standardized prospective 

payment rate is multiplied by the 

beneficiary’s assigned HHRG case-mix 

weight to come up with the 60-day 

episode payment. 

On March 30, 2004, DoD published a 

notice (69 FR 16531) to announce the 

phased-in implementation of the HHA 

prospective payment system with the 

start health care delivery date under 

each of the TRICARE Next Generation of 

Contracts (T–Nex). The implementation 

date for the regional groupings of states 

under each of the T–Nex contracts is 

provided in that notice. This 

implementation began on June 1, 2004, 

and was fully phased-in on November 1, 

2004. 

VI. Balance Billing Limitations 

Consistent with the Congressional 

action discussed above, we are revising 

Section 199.6 of the regulation to 

specify that institutional providers, 

including SNFs and HHAs, are required, 

in order to be TRICARE-authorized 

providers, to be participating providers 

on all claims. They must accept, except 

for any required beneficiary deductible 

and co-payment amounts, the TRICARE 

payment as payment in full. Medicare 

and TRICARE payment rates are 

designed to fully reimburse the 

institutions and are required by 

Medicare and TRICARE to be accepted 

as full reimbursement. TRICARE eligible 

hospitals, SNFs, and HHAs must enter 

into a participation agreement. 

VII. Definitions of ‘‘Custodial Care’’ and 

‘‘Domiciliary Care’’

As noted above, Congress adopted 

definitions of ‘‘custodial care’’ and 

‘‘domiciliary care’’ that we are 

incorporating into the TRICARE 

regulation. Custodial and domiciliary 

care continue to be excluded by the 

statute and regulation. However, the 

new definition for custodial care 

narrows the exclusion, resulting in 

increasing coverage of medically 

necessary custodial care. This is also 

consistent with the Congressional effort 

largely to standardize TRICARE and 

Medicare sub-acute care coverage and 

payment policies. As a corollary to these 

definitions, we are also adopting a 

definition of the term ‘‘activities of daily 

living.’’

VIII. Payment Methods for Hospital 

Outpatient Services 

Medicare implemented a new 

Outpatient Prospective Payment System 

(OPPS) on August 1, 2000, as a payment 

methodology for facility charges in 

hospital outpatient departments and 

emergency departments. This system 

replaced Medicare’s prior payment 

methodology for such services, which 

was largely based on provider cost 

reports, but included some fee 

schedules. The Medicare OPPS is in 

process of being phased in, with a series 

of transitional payment adjustments that 

were based partly upon the prior 

Medicare cost reports and Medicare’s 

prior cost-based methodology. 

Consistent with the TRICARE payment 

reform statutory authority and general 

policy, we plan to follow the Medicare 

approach. However, because of 

complexities of the Medicare transition 

process and the lack of TRICARE cost 

report data comparable to Medicare’s, it 

is not practicable for the Department to 

adopt Medicare OPPS for hospital 

outpatient services at this time. A 

separate regulatory initiative will 

address hospital outpatient services not 

covered by this regulation. We 

anticipate eventual adoption of the 

Medicare OPPS for most TRICARE 

hospital outpatient services covered by 

the Medicare OPPS. 

This rule clarifies payments for 

hospital based outpatient services that 

have established allowable TRICARE 

charges. These services would include 

laboratory services including clinical 

laboratory; rehabilitation therapy 

services; radiology services; diagnostic 

services; ambulance services; durable 

medical equipment (DME) and supplies; 

oxygen and related supplies; drugs 

administered other than oral method; all 

professional provider services that are 

provided in an emergency room, clinic, 

or hospital outpatient department, etc.; 

and routine venipuncture. For these 

services, payments are based on the 

TRICARE-allowable cost method in 

effect for professional providers or the 

CHAMPUS Maximum Allowable Charge 

(CMAC). Some services have a 

professional and a technical component 

61372 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 

such as laboratory, radiology, and 

diagnostic services. If only the technical 

component is billed by the hospital, the 

technical component of the TRICARE 

allowable charge will be applied to the 

TRICARE payment. If the professional 

outpatient hospital services are billed by 

a professional provider group, not by 

the hospital, no payment shall be made 

to the hospital for these services. All 

other outpatient hospital services, 

except for ambulatory surgery services, 

shall be paid as billed such as facility 

charges. Ambulatory surgery services 

shall be paid in accordance with Section 

199.14(d) of the regulation. 

IX. Public Comments 

We published the interim final rule 

on June 13, 2002, and provided a 60-day 

comment period. We received public 

comments from several commentors. 

These comments and the Department’s 

responses are summarized below. 

Comment. One commentor felt that it 

would be preferable to adopt Medicare 

standards for coverage and payment 

through references to applicable 

Medicare statutory and regulatory 

provisions rather than incorporating the 

actual regulatory language itself. The 

commentor felt that inclusion of 

language beyond these references could 

result in the loss of uniformity; i.e., that 

the Department may not be able to keep 

current with changes in Medicare 

standards. 

Response. The Department believes 

that incorporation of actual regulatory 

language, in addition to applicable cross 

references to Medicare statutes and 

regulations, will only tend to strengthen 

the uniformity between the programs. 

The conditions for participation, along 

with a general overview of the 

prospective payment methodology, will 

ensure a basic understanding of the 

benefit coverage and payments among 

managed care support contractors, 

providers and eligible beneficiary 

groups. As with other adopted Medicare 

reimbursement systems (e.g., those 

Medicare reimbursement systems for 

hospice and acute inpatient 

hospitalization), uniformity is 

maintained through annual policy 

manual updates. These routine changes 

ensure compliance with existing 

Medicare regulations and internal 

Program Memoranda (i.e., Medicare 

internal procedural guidelines for the 

processing and payment of home health 

services). The updating process also 

ensures that the most current rates and 

wage indexes are being used in 

reimbursement of home health services. 

We also believe that the Medicare cross 

references (i.e., the statutory and 

regulatory provisions) cited in the 

interim final rule are sufficient to 

maintain uniformity in benefit structure 

and reimbursement between the 

programs (i.e., consistency in benefit 

coverage and reimbursement between 

the Medicare and TRICARE programs). 

The cross referenced regulatory 

provisions implement key sections of 

the Social Security Act relating to 

covered services, conditions of 

participation and the prospective 

payment of home health services. 

Comment. One commentor felt that 

the Department had exceeded the 

statutory authority granted it under the 

National Defense Authorization Act for 

Fiscal Year 2002 (NDAA–02), Pub. L. 

107–107 for home health services 

through the adoption of conditions of 

coverage and participation prescribed 

under Sections 1861(o) and 1891 of the 

Social Security Act and 42 CFR Part 

484. The commentor also expressed the 

view that restricting eligibility to home 

care based on a ‘‘qualifying service,’’

would limit an effective way to decrease 

aide visits, while at the same time 

provide compensatory strategies needed 

to increase beneficiary safety and 

independence. 

Response. The Department does not 

believe it has exceeded the statutory 

authority granted to it under the NDAA–

02, Pub. L. 107–107, given the fact that 

the conditions of coverage and 

participation prescribed under 1861(o) 

and 1891 of the Social Security Act and 

42 CFR Part 484 are an integral part of 

the Medicare home health benefit from 

which HHA PPS rates were 

extrapolated; i.e., the national mean 

utilization for each of the six home 

health disciplines was used in 

calculating the initial unadjusted 

national 60-day episode payment. Since 

the conditions of coverage/participation 

determine the mix and level of services 

(e.g., the beneficiary must need skilled 

nursing care on an intermittent basis, or 

physical therapy or speech-language 

pathology services, or have continued 

need for occupational therapy after the 

need for skilled nursing care, physical 

therapy, or speech-language pathology 

services have ceased, on which the 

prospective payment rates were based), 

it is illogical to believe that it was 

Congress’ intent to exclude their 

adoption under the TRICARE program. 

A shift in the mix and level of services 

(e.g., the substitution of occupational 

services for home health aide services) 

resulting from elimination of the 

Medicare conditions of coverage/ 

participation would deviate from the 

resource allocation used in establishing 

the prospective payment rates. 

Comments. Two commentors 

expressed concern over the weakness of 

Medicare’s Outcome and Assessment 

Information Set (OASIS) instrument as a 

payment setting mechanism for 

maternity patients and individuals 

under the age of 18. The commentors 

felt that, while an abbreviated OASIS 

format (i.e., a core of 23 elements used 

to determine the reimbursement 

amount) might be workable, it would 

not accurately reflect the needs of a 

younger TRICARE population, or 

generate an appropriate payment for 

home health services. 

Response. A fixed case-mix and wage 

adjusted 60-day episode payment will 

be paid to Medicare-certified home 

health agencies providing home health 

services to beneficiaries who are under 

the age of 18 and/or receiving maternity 

care. However, this prospective 

payment amount will be determined 

through the manual completion and 

scoring of an abbreviated assessment 

form (Home Health Resource Group 

Worksheet). The 23 items in this 

assessment will provide the minimal 

amount of data necessary for generating 

a Health Insurance Prospective Payment 

System (HIPPS) code for reimbursement 

under the HHA PPS. While an 

abbreviated assessment may facilitate 

payment under the HHA PPS, it does 

not adequately reflect the management 

oversight required to ensure quality of 

care for beneficiaries under the age of 

18, and obstetrical patients. As a result, 

TRICARE contractors will have to 

continue to case manage these 

beneficiary categories through the use of 

appropriate evaluation criteria as 

required under the specific terms of 

their contract to ensure the quality and 

appropriateness of home health services 

(e.g., the use of Interqual criteria for 

managing the appropriateness of home 

health services). 

The program intends to conduct a 

follow-up analysis after at least a year’s 

worth of accumulated data to evaluate 

the appropriateness of Medicare weights 

and rates in reimbursement of these 

specialty provider categories. 

If a Medicare-certified HHA is not 

available within the service area, the 

TRICARE contractor may authorize care 

in a non-Medicare certified HHA (e.g., a 

HHA which has not sought Medicare 

certification/approval due to the 

specialized beneficiary categories it 

services—patients receiving maternity 

care and/or patients under the age of 18) 

that qualifies for corporate services 

provider status under TRICARE. The 

freestanding corporate entity will be 

reimbursed for otherwise covered 

professional services under the 

TRICARE Maximum Allowable Charge 

(TMAC) reimbursement system, subject 

to any restrictions and limitations as 

Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61373 

may be prescribed under existing 

TRICARE policy. Payment will also be 

allowed for supplies used by a TRICARE 

authorized individual provider 

employed by or under contract with a 

corporate services provider in the direct 

treatment of a TRICARE eligible 

beneficiary. Allowable supplies will be 

reimbursed in accordance with 

TRICARE allowable charge 

methodology. There are also regulatory 

and contractual provisions currently in 

place that grant contractors the 

authority to establish alternative 

network reimbursement systems as long 

as they do not exceed what would have 

otherwise been allowed under Standard 

TRICARE payment methologies. 

Comment. One commentor wanted to 

know how children under the age of ten 

would be reimbursed given the fact that 

they are exempt from the HHA PPS. 

Response. The exemption has been 

removed for children under the age of 

ten. A fixed case-mix and wage adjusted 

60-day episode payment will be paid to 

Medicare-certified home health agencies 

providing home health services to 

beneficiaries who are under the age of 

18. This prospective payment amount 

will be determined through the manual 

completion and scoring of an 

abbreviated assessment form (Home 

Health Resource Group Worksheet). The 

23 items in this assessment will provide 

the minimal amount of data necessary 

for generating a Health Insurance 

Prospective Payment System (HIPPS) 

code for reimbursement under the HHA 

PPS. 

Comment. Another commentor 

requested that the requirement for 

physician certification of the correctness 

of the Home Health Resource Group 

(HHRG) referenced in the 

SUPPLEMENTARY INFORMATION section of 

the interim final rule be removed and 

implementation monitored to ensure 

that the requirement is not enforced. 

The commentor felt that a physician 

was in no position to oversee the 

reimbursement methodology or to 

maintain the expertise necessary to offer 

such certification. 

Response. The Department agrees that 

a physician does not have the necessary 

expertise to certify the correctness of the 

Home Health Resource Group (HHRG). 

As a result, the requirement has been 

removed from the SUPPLEMENTARY

INFORMATION section of the final rule. 

Contractor enforcement of the deleted 

requirement is not anticipated since it 

does not appear in any of the 

implementing instructions (i.e., 

TRICARE Policy Manual issuances). The 

physician’s fundamental role is to 

certify the continuing need for home 

health services and the homebound 

status of the patient through the 

development and maintenance of a 

formal Plan of Care (POC). The POC 

must specify the medical treatments/ 

services to be furnished, the type of 

home health disciplines that will 

furnish the ordered services, and the 

frequency of the services furnished. 

Comment. One commentor felt that 

the absence of a definitive effective date 

would cause confusion for TRICARE 

beneficiaries and providers of home 

health services. It was recommended 

that a Federal Register notice be issued 

at least 60 days prior to the actual 

implementation date in order to give 

both patients and providers the 

opportunity to take appropriate steps to 

transition into the new benefit. 

Response. On March 30, 2004, DoD 

published a notice (69 FR 16531) to 

announce the phased-in implementation 

of the HHA prospective payment system 

with the start health care delivery date 

under each of the TRICARE Next 

Generation of Contracts (T-Nex). The 

implementation date for the regional 

groupings of states under each of the TNex contracts was provided in that 

notice. This implementation began on 

June 1, 2004, and was fully phased-in 

on November 1, 2004. There were also 

provisions within the implementing 

guidelines which gave both patients and 

providers the necessary time to 

transition into the new benefit. Under 

those provisions, TRICARE contractors 

were responsible for identifying all 

beneficiaries receiving home health care 

services 60 days prior to 

implementation of the HHA PPS, and 

for notifying them and the HHA of any 

change in their benefit. 

Comment. Another commentor 

suggested that ‘‘Activities of Daily 

Living’’ as defined in 32 CFR 199.2(b) be 

modified to include the phrase ‘‘that 

reasonably can be performed by an 

untrained adult with minimum 

structure or supervision,’’ since many of 

the listed activities can rise to the level 

of skilled nursing or therapy services in 

complicated or abnormal circumstances. 

Response. Similar language already 

appears in the definition. 

Comment. One commentor 

recommended that ‘‘Home Health 

Discipline’’ as defined in 32 CFR 

199.2(b) be modified to include ‘‘home 

health aide services’’ since only 5 of the 

6 disciplines appeared in the original 

rule. 

Response. The definition of ‘‘Home 

Health Discipline’’ has been modified to 

include ‘‘home health aide services’’. 

Comment. One commentor 

recommended that decisions on policy 

changes remain solely with TRICARE 

Management Activity and not with 

individual contractors. The commentor 

felt that variations in contractor policies 

could lead to lingering confusion 

between patients, providers and 

regulatory officials regarding actual 

policy interpretation. 

Response. TRICARE Management 

Activity will be responsible for issuing 

all policy decisions and/or changes 

pertaining to the coverage and 

reimbursement of home health services. 

Comment. Another commentor 

requested further clarification regarding 

the circumstances in which TRICARE 

would consider care ‘‘custodial.’’

Response. ‘‘Custodial Care’’ is 

treatment or services that can be 

rendered safely and reasonably by a 

person who is not medically skilled, 

and is designed mainly to help the 

patient with the activities of daily 

living. The activities of daily care 

consist of providing food (including 

special diets), clothing, and shelter; 

personal hygiene services, observation 

and general monitoring; bowel training 

or management (unless abnormalities in 

bowel function are of a severity to result 

in a need for medical or surgical 

intervention in the absence of skilled 

services); safety precautions; general 

preventive procedures (such as turning 

to prevent bedsores); passive exercise; 

companionship; recreation; 

transportation; and such other elements 

of personal care that reasonably can be 

performed by an untrained adult with 

minimal instruction or supervision. 

Comment. Another commentor felt 

that the reference to ‘‘all services’’ in 

paragraph 199.6(b)(4)(xv)(F)(1) might be 

confusing, as it is intended to apply to 

all home health services. The 

commentor recommended that ‘‘home 

health’’ be added prior to ‘‘services.’’

Response. The commentor’s 

recommendation has been adopted. ‘‘All 

services’’ in paragraph 

199.6(b)(4)(xv)(F)(1) has been further 

clarified in this final rule by adding 

‘‘home health’’ prior to ‘‘services.’’

Comment. A commentor 

recommended that ‘‘Custodial Care’’ as 

defined in 32 CFR 199.2(b) be modified 

to indicate that its application in the 

context of the home health benefit be 

limited to circumstances where the 

overall plan of care does not include 

any skilled nursing or therapy services. 

It was felt that additional guidance was 

necessary to avoid misapplication of the 

custodial care exclusion given the fact 

that home health aide services by their 

very nature are: (1) Services that can be 

rendered safely and reasonably by a 

person who is not medically skilled, or 

(2) designed to help a patient with the 

activities of daily living. 

61374 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 

Response. The definition contained in 

the interim final rule is statutory, that is, 

the language was contained in the 

National Defense Authorization Act for 

Fiscal Year 2002 (NDAA–02), Public 

Law 107–107, Section 701(c). Custodial 

care remains excluded. 

Comment. A beneficiary advocacy 

organization expressed concern that (1) 

not all NDAA–02 reforms are addressed 

in the interim final rule; (2) family 

members may experience breaks in 

coverage for services allowed preNDAA–02 until all NDAA–02 reforms 

are implemented; and (3) a desire that 

active-duty family members are 

provided all services authorized by 

NDAA–02. 

Response. (1) Because of the 

complexity of developing the proposed 

programs, including significant agency 

decisions regarding the discretionary 

elements of NDAA–02, and the 

requirement to follow the prescribed 

rule-making process, the Agency has 

determined it is more timely and 

fiscally prudent to implement certain 

NDAA–02 authorized programs separate 

from those covered by this rule; (2) there 

are no pre- NDAA–02 benefits which 

require implementation of NDAA–02 

benefits in order to be allowed; and (3) 

those services required by NDAA–02 to 

be provided to active-duty family 

members are available through existing 

programs; discretionary NDAA–02 

elements will be implemented following 

the rule-making process and 

incorporation into the managed care 

support contracts. 

Comment. The same organization 

wanted to know how the new home 

health benefit and reimbursement 

methodology was going to be 

transitioned into the program since the 

existing coverage is more robust than 

that being implemented through statute. 

Response. The new home health 

benefit and reimbursement system has 

been transitioned into the program as 

part of the next generation of TRICARE 

contracts. There were provisions within 

the implementing guidelines which 

gave both patients and providers the 

necessary time to transition into the 

new benefit. Under these provisions, 

TRICARE contractors were responsible 

for identifying all beneficiaries receiving 

home health care services 60 days prior 

to implementation of the HHA PPS, and 

for notifying them and the HHA of any 

change in their benefit. 

Comment. The same organization also 

wanted to know how the cases of 

beneficiaries who are already getting a 

benefit and who did not have a threeday qualifying hospital stay (required 

for a skilled nursing facility (SNF) 

benefit) be handled. The commentor 

raised concerns about the education for 

providers treating non-Medicare eligible 

beneficiaries and wanted to know how 

providers will know that the three-day 

Medicare rule will also apply to these 

TRICARE beneficiaries. 

Response. The three-day qualifying 

hospital stay and the SNF prospective 

payment system (PPS) requirements 

apply to those cases that have an SNF 

admission date of August 1, 2003, or 

after. This implementation date allowed 

for the education of providers. Under 

the new requirements, SNFs are 

required to enter into a participation 

agreement with TRICARE. Along with 

this participation agreement, the 

Managed Care Support (MCS) 

contractors are required to send a letter 

to SNFs explaining the new 

requirements. This letter specifically 

states that the new requirements also 

apply to those TRICARE beneficiaries 

who are not Medicare-eligible. Prior to 

the implementation of SNF PPS, MCS 

contractors spent considerable effort in 

educating the providers regarding the 

new SNF benefit and PPS requirements 

and entered into a participation 

agreement with SNFs. 

Comment. The same organization 

suggested that guidelines regarding 

benefits available to active-duty family 

members versus non-active-duty family 

members be incorporated into this rule. 

Response. As mentioned above, the 

benefits authorized by NDAA–02 for 

active-duty family members are either 

currently available or will be so as a 

result of separate rule-making and 

implementation in the T-Nex contracts, 

therefore, suggested guidelines are not 

necessary in this rule. 

Comment. That organization 

commented that the Resource 

Utilization Groups (RUG–III) used to 

calculate SNF payments and the 

Minimum Data Set (MDS) assessments 

may not be designed to reflect coverage 

of conditions affecting children and 

supported the Department’s proposal 

not to use the MDS for children under 

age ten. They believed it appropriate 

that the ‘‘billed charge’’ for the care of 

these children will be deemed the 

‘‘allowed charge.’’ The organization also 

commented that it is concerned about 

the transition for care of children as 

they get older and that there may be a 

period where coverage for slightly more 

home care will allow the family to have 

the child with them at home before 

having to place the child in an 

institutional setting. It suggested that 

the procedures allow for some flexibility 

to meet the needs and wishes of the 

family where cost effective. 

Response. For the benefits authorized 

by section 701(b) of NDAA–02, the 

allowed charges will be the ‘‘billed 

charges’’ or ‘‘negotiated rates’’ for 

children under age 10. As stated in the 

rule, the MDS will not be used for 

assessment of these children until 

further review by the Department is 

completed. Currently, the applicability 

of MDS will be determined based on the 

child’s age (10 years) on the date of his/ 

her SNF admission. We believe the 

medical necessity and medical 

appropriateness should determine the 

most cost effective level and setting of 

care. In certain cases, home health care 

may be the most cost effective and 

appropriate care based upon the 

medical necessity and medical need of 

a child’s condition. 

Comment. The same commentor was 

also concerned that the definition of 

‘‘homebound’’ may be too restrictive for 

families with children. The commentor 

believed this definition needed to be 

modified to reflect the characteristics of 

the entire TRICARE beneficiary 

population, and not just the Medicareeligible segment. 

Response. An exception is being made 

to the definitional homebound criteria 

for beneficiaries under the age of 18 and 

those receiving maternity care. The only 

homebound requirement for these 

special beneficiary categories is written 

certification from a physician attesting 

to the fact that leaving the home would 

place the beneficiary at medical risk. 

Comment. Two commentors 

recommended elimination of the 

significant change in condition (SCIC) 

adjustment in 32 CFR 199.14(h)(4), as it 

creates an unnecessary administrative 

burden and unfairly reimburses 

providers when patients’ conditions 

deteriorate. 

Response. Section 707 of National 

Defense Authorization Act for Fiscal 

Year 2002 (NDAA–02) was quite 

specific in its intent that TRICARE 

home health payment amounts be 

determined to the extent practicable in 

accordance with the same 

reimbursement rates as apply to 

payments to providers of services of the 

same type under title XVIII of the Social 

Security Act (42 U.S.C. 1295). 

Elimination of the significant change in 

condition (SCIC) adjustment would 

represent a major deviation from the 

Medicare HHA PPS methodology, and 

as such, would be contrary to the 

statutorily mandated reimbursement 

provisions under Section 707 of NDAA–

02. 

Comment. Another commentor 

wanted to know if TRICARE would be 

adopting changes to the OASIS data 

collection instrument as a result of 

upcoming Center for Medicare and 

Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61375 

Medicaid Services (CMS) Technical 

Expert Panel (TEP) assessments. 

Response. TRICARE will be adopting 

all upcoming Center for Medicare and 

Medicaid Services (CMS) changes to the 

OASIS data collection instrument. 

Comment. Two commentors felt that 

the requirement for TMA Director 

approval of home health aide training 

programs, as specified in 32 CFR 

199.4(e)(21)(i)(D), would impose an 

additional standard beyond that set out 

in the Medicare conditions of 

participation for home health agencies. 

It was recommended that the 

requirement for home health aide 

training programs be modified to reflect 

the current Conditions of Participation 

under the Medicare Program. 

Response. The requirement for home 

health aide training programs has been 

modified to reflect the current condition 

of participation under the Medicare 

program; i.e., the home health aide must 

have successfully completed a stateestablished or other training program 

that meets the requirements of 42 CFR 

484.36 Condition of participation: Home 

health aide services. 

Comment. One commentor wanted to 

know if the concept of ‘‘TRICAREauthorized physician’’ was more 

restrictive than that of Medicare’s—as it 

relates to general supervision/direction 

of ‘‘skilled nursing services’’ as defined 

in 32 CFR 199.2(b). The commentor 

recommended that ‘‘TRICAREauthorized physician’’ either be defined, 

or the reference eliminated from the 

definition of ‘‘skilled nursing services.’’

Response. Physician as defined in 32 

CFR 199.2(b) is a person with a degree 

of Doctor of Medicine (M.D.) or Doctor 

of Osteopathy (D.O.) who is licensed to 

practice medicine by an appropriate 

authority. Based on this definition, it 

appears that the concept of ‘‘TRICAREauthorized physician’’ is comparable to 

that of Medicare’s—as it relates to 

general supervision/direction of ‘‘skilled 

nursing services.’’

Comment. One commentor 

recommended adding the phrase 

‘‘subject to appropriate adjustments’’ at 

the end of the second and fourth 

sentences of subparagraph 32 CFR 

199.14(h)(1), since residual final 

payment depends upon the actual 

HHRG and the impact of other payment 

adjustments that cannot be made prior 

to final claim submission. 

Response. The phrase ‘‘subject to 

appropriate adjustments’’ is being added 

to the recommended sentences in 

subparagraph 32 CFR 199.14(h)(1), since 

it is agreed that residual final payments 

are impacted by other payment 

adjustments that cannot be made prior 

to final claim submission. 

Comment. Several commentors felt 

that the OASIS was an unsuitable data 

collection tool for active duty 

dependents since it was developed 

primarily for the elderly with very 

different health care needs. The 

commentor recommended development 

of an assessment tool which would 

more closely correlate with a younger, 

healthier TRICARE population. 

Response. The program intends to 

conduct a follow-up analysis after at 

least a year’s worth of accumulated data 

to evaluate the appropriateness of 

Medicare weights and rates in 

reimbursement of TRICARE 

beneficiaries. 

Comment. Another commentor 

recommended adding the phrase ‘‘to 

another home health agency’’ following 

‘‘transfer’’ in subparagraph 32 CFR 

199.14(h)(3), since transfer is limited to 

a transfer to another home health agency 

for continuation of receiving the home 

health benefit. 

Response. The commentor’s 

recommendation has been adopted by 

adding the phrase ‘‘to another home 

health agency’’ following ‘‘transfer’’ in 

subparagraph 32 CFR 199.14(h)(3) of the 

final rule. 

Comment. One commentor 

recommended modification of the 

citation references in 32 CFR 

199.4(e)(21)(ii)(I). The commentor felt 

that the existing citations were related 

solely to Medicare conditions of 

participation for home health agencies 

rather than conditions of coverage for 

home health services. 

Response. The citation reference 42 

CFR 409, Subpart E, has been added to 

subparagraph 32 CFR 199.4(e)(21)(ii)(I). 

This subpart implements Sections 

1814(a)(2)(C), 1835(a)(2)(A), and 

1861(m) of the Social Security Act with 

respect to the requirements that must be 

met for Medicare payment to be made 

for home health services furnished to 

eligible beneficiaries. 

Comment. Another commentor felt 

that a description of the outlier payment 

methodology was warranted in the 

regulatory text. 

Response. A description of the outlier 

payment methodology has been 

incorporated into the final rule. 

Comment. Another commentor felt 

that the Medicare qualifying condition 

for payment definition of ‘‘intermittent 

skilled nursing services’’ be included in 

32 CFR 199.2(b), since it is distinct from 

the scope of coverage standards 

available under the home health benefit 

(i.e., the definitions of ‘‘intermittent 

home health aide and skilled nursing 

services’’ and ‘‘part time home health 

aide and skilled nursing services’’). 

Response. The definitions of 

intermittent or part-time skilled nursing 

and home health aide services have 

been consolidated and revised to reflect 

the statutory definition under § 1861 of 

the Social Security Act (42 U.S.C. 

1395x(m)). 

Comment. One commentor felt that 

the new definitions of custodial care, 

domiciliary care and activities of daily 

living combined with the anticipated 

‘‘significant increase’’ in patient volume 

and the elimination of Medicare day 

limits require careful administration 

and oversight that can best be provided 

through case management and suggested 

to include operational guidelines for the 

Managed Care Support Contractors. 

Response. The Department will 

administer the provisions consistent 

with the statutory requirements. 

Detailed operational guidelines have 

been developed for the Managed Care 

Support contractors. 

Comment. The same commenter 

stated that the Medicare payment 

system was not designed for an active 

duty population and misses the mark 

completely with respect to children. 

Response. These issues have been 

addressed above and the Department 

plans to carefully monitor and evaluate 

the issues pertaining to children. 

Comment. The commenter stated that 

there is some concern as to how well the 

rule will serve the needs of those living 

outside the continental United States. 

Response. The SNF PPS will be 

applicable to those areas outside the 

continental United States as it is 

applicable under Medicare. 

Comment. The commentor felt that 

there was a gap in the level of nursing 

care afforded under the new home 

health benefit. 

Response. 32 CFR 199.4(e)(21) ‘‘Home 

health services,’’ provides the broad 

range of services available under the 

new home health benefit structure. 

Comment. The commentor pointed 

out that home health aide and medical 

social worker services were currently 

being covered under case management 

as well as under the hospice benefit. 

Response. Section IV of the 

SUPPLEMENTARY INFORMATION portion of 

the rule has been modified to reflect this 

additional coverage. 

Comment. The same commentor 

suggested that the rule specify what, if 

any, benefit exclusions remain 

following the change in the definitions 

of ‘‘custodial care’’ and ‘‘domiciliary 

care.’’

Response. The existing regulatory 

language provides the benefit 

exclusions; relevant TRICARE policies 

have been or will be modified as 

61376 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 

necessary to reflect the revised 

definitions. 

Comment. The commentor also 

suggested adding a regulatory definition 

for ‘‘medically necessary care.’’

Response. That term is consistent 

with the existing regulatory definitions 

of ‘‘appropriate medical care’’ and 

‘‘medically or psychologically 

necessary’’; a separate definition is not 

necessary. 

Comment. The same commentor 

recommended that the case manager’s 

involvement in the plan of care be 

recognized in the final rule. 

Response. The regulatory provisions 

for establishment of a plan of care are 

consistent with those provided under 

the Medicare program. 

X. Regulatory Procedures 

We have examined the impacts of the 

Final Rule under Executive Order 

12866. Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits. A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any one year). 

We originally thought that this final 

rule was a major one because it had an 

impact of more than $100 million per 

year. However, we now believe that the 

impact will be significantly less. We had 

originally projected that the skilled 

nursing facility (SNF) benefit change 

and the reduced TRICARE payments to 

SNFs would reduce SNF payments by 

more than $100 million per year. 

However, analysis of actual SNF 

payments that have been made since the 

benefit changes and payment system 

were implemented in August 2003 

indicate that the impact has been much 

less than expected. Based on the 

analysis of actual SNF payments and 

other benefit changes, we have 

determined that this rule is not 

economically significant under 

Executive Order 12866. 

SNF Changes 

The objective of the SNF benefit 

change and the revised SNF payment 

system is to make TRICARE’s SNF 

benefit consistent with Medicare, which 

satisfies a Congressional goal. A second 

objective is to increase the quality of 

care by requiring a more detailed review 

of SNF cases and more appropriate 

placement of SNF patients. There will 

also be an increase in payment 

efficiency because SNF payments will 

cease when SNF care is no longer 

necessary. 

We assessed the quantitative impact 

of the SNF change by comparing 

TRICARE’s payments for SNF care prior 

to the changes with payments after the 

changes were implemented in August 

2003. These payment trends capture 

both the impact of the SNF benefit 

changes and reimbursement changes. 

We examined SNF payments for 

beneficiaries under age 65 and age 65 

and over separately. Table 1 shows that 

the level of government payments for 

SNF services for beneficiaries under age 

65 declined by about 48 percent from 

the quarter immediately prior to 

implementation of the new rules to the 

quarter immediately after their 

implementation (we did not use data 

from August 2003 because some persons 

were in SNFs under the old rules and 

some were there under the new rules). 

We believe that most of this impact is 

due to TRICARE’s shift from paying 

billed charges for SNF services to using 

the SNF PPS method. The percentage 

reduction in government SNF payments 

was less for persons age 65 and over: we 

found an 11 percent decline in SNF 

payments for these beneficiaries. We 

believe that the impact is less for 

beneficiaries age 65 and over because 

TRICARE is second payer to Medicare. 

Because Medicare’s payments for these 

beneficiaries have been based on 

Medicare’s SNF–PPS payment system 

for a number of years, TRICARE’s 

introduction of the new payment system 

had a very small impact. In aggregate, 

the benefit changes and the new SNF 

payment system reduced TRICARE 

government payments to SNFs by 18 

percent, which is equal to about $4.2 

million per quarter or about $17 million 

per year. 

TABLE 1.—CHANGE IN GOVERNMENT PAYMENTS FOR SNF CARE FOR TRICARE BENEFICIARIES

[In thousands] 

Under age 

65 

Age 65 and 

above Total 

May–July 2003 ......................................................................................................................................... $4,790 $18,051 $22,841 

Sep–Nov 2003 ......................................................................................................................................... $2,571 $16,048 $18,619 

% Change ................................................................................................................................................ ¥48 ¥11 ¥18 

Home Health 

The objective of the home health (HH) 

benefit change and the revised HH 

payment system is to make TRICARE’s 

HH benefit consistent with Medicare, 

which satisfies a Congressional goal. A 

second objective is to increase the 

quality of care by requiring a more 

detailed review of HH cases and more 

appropriate placement of HH patients. 

The HH payment system also increases 

efficiency because its per-episode 

method of payment discourages 

unnecessary utilization. 

For home health claims, the benefit 

and reimbursement changes have just 

gone into effect and the data have not 

developed as of yet. Therefore, the 

retrospective method of analysis we 

used for SNF services is not possible for 

home health claims. We analyzed recent 

HH payments under TRICARE and 

found that TRICARE paid about $21 

million per year in home health allowed 

amounts in the 2002–2003 period. We 

estimate that the new HH system will 

decrease HH payments by 

approximately 20 percent. Thus, we 

estimate that TRICARE payments for HH 

care will be reduced by approximately 

$4 million per year. We estimate an 

impact of less than $1 million per year 

for beneficiaries age 65 and over 

because TRICARE is secondary payer to 

Medicare and Medicare has been using 

the HH PPS method to pay HH services 

for a number of years. 

Change in Definition of Custodial Care 

The narrowing of the definition of 

custodial care expanded the benefits 

available to certain TRICARE 

beneficiaries. This satisfied the 

Congressional goal of revising 

TRICARE’s definition of custodial care 

and expanding TRICARE’s benefits. 

We assessed the quantitative impact 

of the change by examining the level of 

additional benefits that TRICARE paid 

for persons who received benefits under 

the expanded program. We were able to 

identify the TRICARE beneficiaries who 

received services due to the expanded 

TRICARE benefits. We found that 

Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61377 

TRICARE payments were approximately 

$6.9 million in FY 2003 for these 

beneficiaries. All of these benefit 

payments represented additional 

government payments due to the change 

in the definition of custodial care. The 

payments were $6.2 million in the first 

six months of FY 2004. Reliable data are 

not available beyond the first six 

months of FY04. We believe that the 

FY04 impact is more appropriate and 

believe that the annual impact of the 

change in the definition of custodial 

care is about $12.4 million. 

Summary 

The quantitative impact of the three 

changes consists of $17 million in 

savings for the SNF change, $4 million 

in savings for the HH change, and $12 

million in costs for the change in the 

definition of custodial care. 

Paperwork Reduction Act 

This rule will not impose additional 

information collection requirements on 

the public under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501–

3511). Existing information collection 

requirements of the TRICARE and 

Medicare programs will be utilized. 

Comments on information collection 

requirements should be submitted to 

Kim Frazier, 5111 Leesburg Pike, Suite 

810, Falls Church, VA 22041–3206, 

telephone 703–681–3636. 

Implementation 

This rule implements specific 

statutory requirements with specific 

statutory effective dates. The 

implementation of new SNF benefit 

requirements and SNF prospective 

payment system is effective for 

admissions on or after August 1, 2003. 

The implementation of the other benefit 

requirements and the home health care 

prospective payment system is effective 

with the start health care delivery date 

under each of the TRICARE Next 

Generation of Contracts (T-Nex). The 

implementation of T-Nex contracts was 

fully phased-in on November 1, 2004. 

These other benefit requirements and 

the home health care prospective 

payment system are part of the 

contractual requirements of the T-Nex 

contracts, and were not negotiated or 

directed as a change to the previous 

contracts. 

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 

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. Section 199.2(b) is amended by 

adding the definitions of ‘‘facility 

charge’’ and ‘‘part-time or intermittent 

home health aide and skilled nursing 

services’’ in alphabetical order, by 

revising the definitions of 

‘‘homebound’’ and ‘‘home health 

discipline’’, by removing the definitions 

of ‘‘intermittent home health aide and 

skilled nursing services’’ and ‘‘part-time 

home health aide and skilled nursing 

services’’, to read as follows: 

§ 199.2 Definitions. 

* * * * * 

(b) * * * 

Facility charge. The term ‘‘facility 

charge’’ means the charge, either 

inpatient or outpatient, made by a 

hospital or other institutional provider 

to cover the overhead costs of providing 

the service. These costs would include 

building costs, i.e. depreciation and 

interest; staffing costs; drugs and 

supplies; and overhead costs, i.e., 

utilities, housekeeping, maintenance, 

etc. 

* * * * * 

Homebound. A beneficiary’s 

condition is such that there exists a 

normal inability to leave home and, 

consequently, leaving home would 

require considerable and taxing effort. 

Any absence of an individual from the 

home attributable to the need to receive 

health care treatment—including regular 

absences for the purpose of participating 

in therapeutic, psychosocial, or medical 

treatment in an adult day-care program 

that is licensed or certified by a state, or 

accredited to furnish adult day-care 

services in the—state shall not 

disqualify an individual from being 

considered to be confined to his home. 

Any other absence of an individual from 

the home shall not disqualify an 

individual if the absence is infrequent 

or of relatively short duration. For 

purposes of the preceding sentence, any 

absence for the purpose of attending a 

religious service shall be deemed to be 

an absence of infrequent or short 

duration. Also, absences from the home 

for non-medical purposes, such as an 

occasional trip to the barber, a walk 

around the block or a drive, would not 

necessarily negate the beneficiary’s 

homebound status if the absences are 

undertaken on an infrequent basis and 

are of relatively short duration. An 

exception is made to the above 

homebound definitional criteria for 

beneficiaries under the age of 18 and 

those receiving maternity care. The only 

homebound criteria for these special 

beneficiary categories is written 

certification from a physician attesting 

to the fact that leaving the home would 

place the beneficiary at medical risk. 

Home health discipline. One of six 

home health disciplines covered under 

the home health benefit (skilled nursing 

services, home health aide services, 

physical therapy services, occupational 

therapy services, speech-language 

pathology services, and medical social 

services). 

* * * * * 

Part-time or intermittent home health 

aide and skilled nursing services. Parttime or intermittent means skilled 

nursing and home health aide services 

furnished any number of days per week 

as long as they are furnished (combined) 

less than 8 hours each day and 28 or 

fewer hours each week (or, subject to 

review on a case-bay-case basis as to the 

need for care, less than 8 hours each day 

and 35 or fewer hours per week). 

* * * * * 

■ 3. Section 199.4 is amended by 

revising the second sentence in 

paragraph (b)(3)(xiv), by removing and 

reserving paragraph (e)(12), by revising 

paragraphs (e)(21)(i)(D), (e)(21)(ii)(I), by 

revising ‘‘§ 199.14(i)’’ to read 

‘‘§ 199.14(e)’’ in paragraphs (f)(8)(i) and 

(f)(8)(ii)(A), and by revising paragraphs 

(g)(7) and (g)(8) to read as follows: 

§ 199.4 Basic program benefits. 

(b) * * * 

(3) * * * 

(xiv) * * * Skilled nursing facility 

care for each spell of illness shall 

continue to be provided for as long as 

medically necessary and appropriate. 

* * * 

* * * * * 

(e) * * * 

(21) * * * 

(i) * * * 

(D) Part-time or intermittent services 

of a home health aide who has 

successfully completed a stateestablished or other training program 

that meets the requirements of 42 CFR 

Part 484; 

* * * * * 

(ii) * * * 

(I) Any other conditions of coverage/ 

participation that may be required 

under Medicare’s HHA benefit; i.e., 

coverage guidelines as prescribed under 

Sections 1861(o) and 1891 of the Social 

Security Act (42 U.S.C. 1395x(o) and 

1395bbb), 42 CFR Part 409, Subpart E 

and 42 CFR Part 484. 

* * * * * 

(g) * * * 

61378 Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 

(7) Custodial care. Custodial care as 

defined in § 199.2. 

(8) Domiciliary care. Domiciliary care 

as defined in § 199.2. 

* * * * * 

■ 4. Section 199.6 is amended by 

revising paragraph (a)(8)(i)(B), by adding 

a note in paragraph (b)(4)(vi)(K), and by 

revising paragraph (b)(4)(xv)(F)(1), to 

read as follows: 

§ 199.6 TRICARE authorized providers. 

(a) * * * 

(8) * * * 

(i) * * * 

(B) A SNF or a HHA, in order to be 

an authorized provider under TRICARE, 

must enter into a participation 

agreement with TRICARE for all claims. 

* * * * * 

(b) * * * 

(4) * * * 

(vi) * * * 

(K) * * * 

Note: If a pediatric SNF is certified by 

Medicaid, it will be considered to meet the 

Medicare certification requirement in order 

to be an authorized provider under TRICARE. 

* * * * * 

(xv) * * * 

(F) * * * 

(1) The HHA must submit all 

TRICARE claims for all home health 

services, excluding durable medical 

equipment (DME), while the beneficiary 

is under the home health plan without 

regard to whether or not the item or 

service was furnished by the HHA, by 

others under arrangement with the 

HHA, or under any other contracting or 

consulting arrangement. 

* * * * * 

■ 5. Section 199.14 is amended as 

follows: 

■ a. Amend paragraph (a)(4) by revising 

‘‘paragraph (i)’’ to read ‘‘paragraph (l)’’; 

■ b. Revise paragraphs (a)(5) 

introductory text and (a)(5)(i); 

■ c. Amend paragraphs (a)(5)(ii) and 

(a)(5)(iii) by revising ‘‘paragraph (h)(1)’’

to read ‘‘paragraph (j)(1)’’ in both places; 

■ d. Revise paragraph (a)(5)(iv); 

■ e. Add paragraphs (a)(5)(v) through 

(a)(5)(xii); 

■ f. Revise paragraphs (h) introductory 

text; (h)(1), (h)(3), and (h)(5); 

■ g. Amend paragraph (j)(1)(i)(B) by 

revising ‘‘paragraph (g)(1)(iv)’’ to read 

‘‘paragraph (j)(1)(iv)’’; 

■ h. Amend paragraph (j)(1)(i)(D) by 

revising ‘‘paragraph (h)(1)(i)(B)’’ to read 

‘‘paragraph (j)(1)(i)(B)’’ and by revising 

‘‘paragraph (h)(1)(i)(C)’’ to read 

‘‘paragraph (j)(1)(i)(C)’’; 

■ i. Amend paragraph (j)(1)(ii)(B) by 

revising ‘‘paragraph (g)(1)(ii)(A)’’ to read 

‘‘paragraph (j)(1)(ii)(A)’’

■ j. Amend paragraph (j)(1)(ii)(C) by 

revising ‘‘paragraph (g)(1)(ii)(B)’’ to read 

‘‘paragraph (j)(1)(ii)(B)’’; 

■ k. Amend paragraph (j)(1)(iii) 

introductory text by revising 

‘‘paragraphs (g)(1)(iii)(A) and (B)’’ to 

read ‘‘paragraphs (j)(1)(iii)(A) and (B)’’; 

■ l. Amend paragraph (j)(1)(iii)(D) by 

revising ‘‘paragraphs (h)(1)(i) through 

(iii)’’ to read ‘‘paragraphs (j)(1)(i) 

through (iii)’’ and by revising 

‘‘paragraph (h)(1)(iii)(B)’’ to read 

‘‘(j)(1)(iii)(B)’’; 

■ m. Amend paragraph (j)(1)(iv)(B)(2) by 

revising ‘‘paragraph (g)(1)(iv)(B)(1)’’ to 

read ‘‘paragraph (j)(1)(iv)(B)(1)’’; 

■ n. Amend paragraph (j)(1)(iv)(C) by 

revising ‘‘paragraph (g)(1)(iii)(A)(1)’’ to 

read ‘‘paragraph (j)(1)(iii)(A)(1)’’, by 

revising ‘‘paragraphs (g)(1)(iii) and 

(g)(1)(iv)’’ to read ‘‘paragraphs (j)(1)(iii) 

and (j)(1)(iv)’’, and by revising 

‘‘paragraph (g)(1)(iii)(C)’’ to read 

‘‘paragraph (j)(1)(iii)(C)’’; 

■ o. Amend paragraph (j)(1)(iv)(C)(1) by 

revising ‘‘paragraph (g)(1)(iv)(C)(2)’’ to 

read ‘‘paragraph (j)(1)(iv)(C)(2)’’; 

■ p. Amend paragraph (j)(1)(ii)(C)(2) by 

revising ‘‘paragraph (g)(1)(iv)(C)(1)’’ to 

read ‘‘paragraph (j)(1)(iv)(C)(1)’’, and by 

revising ‘‘paragraph (g)(1)(iv)(C)(3)’’ to 

read ‘‘paragraph (j)(1)(iv)(C)(3)’’; 

■ q. Amend paragraph (j)(1)(iv)(D) 

introductory text by revising ‘‘paragraph 

(h)(1)(iv)(C)’’ to read ‘‘paragraph 

(j)(1)(iv)(C)’’, and by revising ‘‘paragraph 

(h)(1)’’ to read ‘‘paragraph (j)(1)’’; 

■ r. Amend paragraph (j)(1)(iv)(D)(2)(i) 

by revising ‘‘paragraph (h)(1)’’ to read 

‘‘paragraph (j)(1)’’; 

■ s. Amend paragraph (j)(1)(iv)(D)(2)(ii) 

by revising ‘‘paragraph (h)(1)(ii)’’ to read 

‘‘paragraph (j)(1)(ii)’’ and by revising 

‘‘paragraph (h)(1)(iv)(A)’’ to read 

‘‘paragraph (j)(1)(iv)(A)’’; 

■ t. Amend paragraph (j)(1)(iv)(D)(3) by 

revising ‘‘paragraph (h)(1)(iv)(D)’’ to 

read ‘‘paragraph (j)(1)(iv)(D)’’; 

■ u. Amend paragraph (j)(1)(iv)(E) 

introductory text by revising ‘‘paragraph 

(h)(1)’’ to read ‘‘paragraph (j)(1)’’, and by 

revising ‘‘paragraph (h)(1)(iv)(E)’’ to 

read ‘‘paragraph (j)(1)(iv)(E)’’; 

■ v. Amend paragraph (j)(1)(iv)(E)(2) by 

revising ‘‘paragraph (h)(1)’’ to read 

‘‘paragraph (j)(1)’’; 

■ w. Amend paragraph (j)(1)(v)(A) by 

revising ‘‘paragraph (g)(1)(v)’’ to read 

‘‘paragraph (j)(1)(v)’’; 

■ x. Amend paragraph (j)(1)(v)(B) by 

revising ‘‘(g)(1)(v)(B)(1) through (3)’’ to 

read ‘‘paragraphs (j)(1)(v)(B)(1) through 

(3)’’; 

■ y. Amend paragraph (j)(1)(v)(C) 

introductory text by revising ‘‘paragraph 

(g)(i)(v)’’ to read ‘‘paragraph (j)(1)(v)’’; 

■ z. Amend paragraph (j)(1)(vi)(A) by 

revising ‘‘paragraph (g)(1)(ii)(B)’’ to read 

‘‘paragraph (j)(1)(ii)(B)’’ and by revising 

‘‘paragraph (g)(1)(v)’’ to read ‘‘paragraph 

(j)(1)(v)’’; 

■ aa. Amend paragraph (j)(1)(vi)(B) 

introductory text by revising ‘‘paragraph 

(g)(1)(vi)(A)’’ to read ‘‘paragraph 

(j)(1)(vi)(A)’’; 

■ bb. Amend paragraph (j)(1)(vi)(B)(1) 

by revising ‘‘paragraph (g)(1)(vi)(B)(2)’’

to read ‘‘paragraph (j)(1)(vi)(B)(2)’’, and 

by revising ‘‘paragraph (g)(1)(v)’’ to read 

‘‘paragraph (j)(1)(v)’’; 

■ cc. Amend paragraph (j)(1)(vi)(B)(2) 

by revising ‘‘paragraph (g)(1)(v)’’ to read 

‘‘paragraph (j)(1)(v)’’ and by revising 

‘‘paragraph (g)(1)(v)(B)(2)’’ to read 

‘‘(j)(1)(v)(B)(2)’’; 

■ dd. Amend paragraph (j)(1)(vii)(A) by 

revising ‘‘paragraphs (g)(1)(iii) and 

(g)(1)(v)’’ to read ‘‘paragraphs (j)(1)(iii) 

and (j)(1)(v)’’; 

■ ee. Amend paragraph (j)(1)(viii) 

introductory text by revising 

‘‘paragraphs (g)(1)(i) through (g)(1)(iv)’’

to read ‘‘paragraphs (j)(1)(i) through 

(j)(1)(iv)’’; 

■ ff. Amend paragraph (j)(1)(viii)(A) by 

revising ‘‘paragraph (g)(1)(viii)’’ to read 

‘‘paragraph (j)(1)(viii)’’; 

■ gg. Amend paragraph (j)(1)(viii)(B) by 

revising ‘‘paragraph (g)(1)(iii)’’ to read 

‘‘paragraph (j)(1)(iii)’’; 

■ hh. Amend paragraph (j)(1)(viii)(C) by 

revising ‘‘paragraph (g)(1)(iv)’’ to read 

‘‘paragraph (j)(1)(iv)’’; 

■ ii. Amend paragraph (j)(1)(viii)(D) by 

revising ‘‘paragraph (g)(1)(iv)(B)’’ to read 

‘‘paragraph (j)(1)(iv)(B)’’; 

■ jj. Amend paragraph (l)(2) 

introductory text by revising ‘‘paragraph 

(g)’’ to read ‘‘paragraph (j)’’; and 

■ kk. Amend paragraph (l)(2) by 

revising ‘‘paragraph (g)’’ to read 

‘‘paragraph (j)’’. 

§ 199.14 Provider reimbursement 

methods. 

(a) * * * 

(5) Hospital outpatient services. This 

paragraph (a)(5) identifies and clarifies 

payment methods for certain outpatient 

services, including emergency services, 

provided by hospitals. 

(i) Laboratory services. TRICARE 

payments for hospital outpatient 

laboratory services including clinical 

laboratory services are based on the 

allowable charge method under 

paragraph (j)(1) of the section. In the 

case of laboratory services for which the 

CMAC rates are established under that 

paragraph, a payment rate for the 

technical component of the laboratory 

services is provided. Hospital charges 

for an outpatient laboratory service are 

reimbursed using the CMAC technical 

component rate. 

* * * * * 

(iv) Radiology services. TRICARE 

payments for hospital outpatient 

Federal Register / Vol. 70, No. 204 / Monday, October 24, 2005 / Rules and Regulations 61379 

radiology services are based on the 

allowable charge method under 

paragraph (j)(1) of the section. In the 

case of radiology services for which the 

CMAC rates are established under that 

paragraph, a payment rate for the 

technical component of the radiology 

services is provided. Hospital charges 

for an outpatient radiology service are 

reimbursed using the CMAC technical 

component rate. 

(v) Diagnostic services. TRICARE 

payments for hospital outpatient 

diagnostic services are based on the 

allowable charge method under 

paragraph (j)(1) of the section. In the 

case of diagnostic services for which the 

CMAC rates are established under that 

paragraph, a payment rate for the 

technical component of the diagnostic 

services is provided. Hospital charges 

for an outpatient diagnostic service are 

reimbursed using the CMAC technical 

component rate. 

(vi) Ambulance services. Ambulance 

services provided on an outpatient basis 

by hospitals are paid on the same basis 

as ambulance services covered by the 

allowable charge method under 

paragraph (j)(1) of this section. 

(vii) Durable medical equipment 

(DME) and supplies. Durable medical 

equipment and supplies provided on an 

outpatient basis by hospitals are paid on 

the same basis as durable medical 

equipment and supplies covered by the 

allowable charge method under 

paragraph (j)(1) of this section. 

(viii) Oxygen and related supplies. 

Oxygen and related supplies provided 

on an outpatient basis by hospitals are 

paid on the same basis as oxygen and 

related supplies covered by the 

allowable charge method under 

paragraph (j)(1) of this section. 

(ix) Drugs administered other than 

oral method. Drugs administered other 

than oral method provided on an 

outpatient basis by hospitals are paid on 

the same basis as drugs administered 

other than oral method covered by the 

allowable charge method under 

paragraph (j)(1) of this section. The 

allowable charge for drugs administered 

other than oral method is established 

from a schedule of allowable charges 

based on a formulary of the average 

wholesale price. 

(x) Professional provider services. 

TRICARE payments for hospital 

outpatient professional provider 

services rendered in an emergency 

room, clinic, or hospital outpatient 

department, etc., are based on the 

allowable charge method under 

paragraph (j)(1) of the section. In the 

case of professional services for which 

the CMAC rates are established under 

that paragraph, a payment rate for the 

professional component of the services 

is provided. Hospital charges for an 

outpatient professional service are 

reimbursed using the CMAC 

professional component rate. If the 

professional outpatient hospital services 

are billed by a professional provider 

group, not by the hospital, no payment 

shall be made to the hospital for these 

services. 

(xi) Facility charges. TRICARE 

payments for hospital outpatient facility 

charges that would include the 

overhead costs of providing the 

outpatient service would be paid as 

billed. For the definition of facility 

charge, see § 199.2(b). 

(xii) Ambulatory surgery services. 

Hospital outpatient ambulatory surgery 

services shall be paid in accordance 

with § 199.14(d). 

* * * * * 

(h) Reimbursement of Home Health 

Agencies (HHAs). HHAs will be 

reimbursed using the same methods and 

rates as used under the Medicare HHA 

prospective payment system under 

Section 1895 of the Social Security Act 

(42 U.S.C. 1395fff) and 42 CFR Part 484, 

Subpart E except as otherwise necessary 

to recognize distinct characteristics of 

TRICARE beneficiaries and as described 

in instructions issued by the Director, 

TMA. Under this methodology, an HHA 

will receive a fixed case-mix and wageadjusted national 60-day episode 

payment amount as payment in full for 

all costs associated with furnishing 

home health services to TRICAREeligible beneficiaries with the exception 

of osteoporosis drugs and DME. The full 

case-mix and wage-adjusted 60-day 

episode amount will be payment in full 

subject to the following adjustments and 

additional payments: 

(1) Split percentage payments. The 

initial percentage payment for initial 

episodes is paid to an HHA at 60 

percent of the case-mix and wage 

adjusted 60-day episode rate. The 

residual final payment for initial 

episodes is paid at 40 percent of the 

case-mix and wage adjusted 60-day 

episode rate subject to appropriate 

adjustments. The initial percentage 

payment for subsequent episodes is paid 

at 50 percent of the case-mix and wageadjusted 60-day episode rate. The 

residual final payment for subsequent 

episodes is paid at 50 percent of the 

case-mix and wage-adjusted 60-day 

episode rate subject to appropriate 

adjustments. 

* * * * * 

(3) Partial episode payment (PEP). A 

PEP adjustment is used for payment of 

an episode of less than 60 days resulting 

from a beneficiary’s elected transfer to 

another HHA prior to the end of the 60- 

day episode or discharge and 

readmission of a beneficiary to the same 

HHA before the end of the 60-day 

episode. The PEP payment is calculated 

by multiplying the proportion of the 60- 

day episode during which the 

beneficiary remained under the care of 

the original HHA by the beneficiary’s 

assigned 60-day episode payment. 

* * * * * 

(5) Outlier payment. Outlier payments 

are allowed in addition to regular 60- 

day episode payments for beneficiaries 

generating excessively high treatment 

costs. The following methodology is 

used for calculation of the outlier 

payment: 

(i) TRICARE makes an outlier 

payment for an episode whose 

estimated cost exceeds a threshold 

amount for each case-mix group. 

(ii) The outlier threshold for each 

case-mix group is the episode payment 

amount for that group, the PEP 

adjustment amount for the episode or 

the total significant change in condition 

adjustment amount for the episode plus 

a fixed dollar loss amount that is the 

same for all case-mix groups. 

(iii) The outlier payment is a 

proportion of the amount of estimated 

cost beyond the threshold. 

(iv) TRICARE imputes the cost for 

each episode by multiplying the 

national per-visit amount of each 

discipline by the number of visits in the 

discipline and computing the total 

imputed cost for all disciplines. 

(v) The fixed dollar loss amount and 

the loss sharing proportion are chosen 

so that the estimated total outlier 

payment is no more than the 

predetermined percentage of total 

payment under the home health PPS as 

set by the Centers for Medicare & 

Medicaid Services (CMS). 

* * * * * 

Dated: October 5, 2005. 

L.M. Bynum, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

[FR Doc. 05–20415 Filed 10–21–05; 8:45 am] 

BILLING CODE 5001–06–P