[Federal Register: October 2, 2003 (Volume 68, Number 191)]
[Proposed Rules]
[Page 56875-56891]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02oc03-20]
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Part II
Department of Veterans Affairs
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38 CFR Part 17
Reasonable Charges for Medical Care or Services; 2003 Methodology
Changes; Proposed Rule and Notice
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 17
RIN 2900-AL06
Reasonable Charges for Medical Care or Services; 2003 Methodology
Changes
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
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SUMMARY: This document proposes to amend 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.
The regulations contain methodologies designed to establish VA
charges that replicate, insofar as possible, the 80th percentile of
community charges, adjusted to the market areas in which VA facilities
are located, and trended forward to the time period during which the
charges will be used. This document proposes to amend the regulations
regarding VA's reasonable charges methodologies for the following
purposes: to establish charges for medical care, procedures, services,
durable medical equipment (DME), drugs, injectables, medical items, and
supplies for which we currently do not have charges; to replace certain
charges currently based on VA costs with charges based on community
charges; to establish separate charges for medical care, procedures,
services, DME, drugs, injectables, medical items, and supplies whose
charges are presently combined with other charges; to bring our charge
structures and associated billing practices closer to industry standard
charge structures and billing practices; and to provide certain
clarifications.
DATES: Comments must be received on or before November 3, 2003.
ADDRESSES: Mail or hand-deliver written comments to: Director,
Regulations Management (00REG1), Department of Veterans Affairs, 810
Vermont Avenue, NW, Room 1068, Washington, DC 20420; or fax comments to (202) 273-9026; or e-mail comments to OGCRegulations@mail.va.gov.
Comments should indicate that they are submitted in response to ``RIN
2900-AL06.'' All written comments received will be available for public
inspection in the Office of Regulations Policy and Management, Room
1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday
(except holidays). Please call (202) 273-9515 for an appointment.
FOR FURTHER INFORMATION CONTACT: David Cleaver, Chief Business Office
(168), Veterans Health Administration, Department of Veterans Affairs,
810 Vermont Avenue, NW, Washington, DC 20420, (202) 254-0361. (This is
not a toll free number.)
SUPPLEMENTARY INFORMATION: This document proposes to amend VA's medical
regulations that are set forth in 38 CFR part 17. More specifically, we
are proposing to amend the regulations that establish methodologies 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.
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 been furnished by a provider other
than 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 has 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.
The methodologies for establishing reasonable charges are designed
to replicate, insofar as possible, the 80th percentile of community
charges, adjusted to the market areas in which VA facilities are
located, and trended forward to the time period during which the
charges will be used. An exception is that charges for prescription
drugs are based on VA costs in accordance with the methodology set
forth in Sec. 17.102.
This document proposes to amend VA's reasonable charges regulations
to make significant changes to our charge development methodologies and
charge structures, to provide charges for 2003 Current Procedural
Terminology (CPT) codes, and to provide certain clarifications. These
proposed changes are described in more detail in the following
paragraphs.
Data for Calculating Actual Charge Amounts
As we have done in the past, we are publishing data for calculating
actual charge amounts based on the methodologies set forth in this
proposed rule in an accompanying notice in this same edition of the
Federal Register. However, this document proposes that in the future
this information will either be published in a notice in the Federal
Register or will be posted on the Internet site of the Veterans Health
Administration Chief Business Office at http://www.va.gov/revenue,
under ``Charge Data.'' We are proposing this change because we believe
posting this information on the Internet will make it more readily
available to the public, while at the same time greatly reducing the
volume of information and associated taxpayer expense of publishing it
in the Federal Register.
Data Sources
Presently, the regulations identify data sources used to calculate
charges by name and edition (for example, 2001 Medicare MedPAR file).
In addition, the regulations give specific information on where various
databases can be obtained (for example, the Internet site where the
Medicare Clinical Diagnostic Laboratory Fee Schedule can be found).
This document proposes that data sources will hereafter be identified
in these regulations only by name, and that the editions used and
information on where these data sources may be obtained will be
presented along with the data for calculating actual charge amounts,
either in notices in the Federal Register or on the Internet site of
the Veterans Health Administration Chief Business Office at http://www.va.gov/revenue
,
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under ``Charge Data.'' We are proposing this change so that a change in
the edition of a data source or in the information on where a database
may be obtained will not, by itself, require any change to the
regulations.
Definitions--Additions, Changes, and Deletions
This document proposes to add definitions for APC (Ambulatory
Payment Classification), CMS (Centers for Medicare and Medicaid
Services), DME, HCPCS (Healthcare Common Procedure Coding System) code,
ICU (Intensive Care Unit), non-provider-based, provider-based, and
RBRVS (Resource-Based Relative Value Scale). We are proposing to amend
the definition of the term ``CPT procedure code'' to indicate that the
same definition applies equally to the term ``CPT code.''
Presently, geographic area is defined, for acute inpatient facility
charges and skilled nursing facility/sub-acute inpatient facility
charges, as Metropolitan Statistical Area (MSA) or the local market, if
the VA facility is not located in an MSA; and is defined, for
outpatient facility charges and physician charges, as three-digit ZIP
Code locality. We are proposing to amend the definition of geographic
area to mean simply a three-digit ZIP Code area. This change reflects
the fact that we are proposing to use three-digit ZIP Code areas as the
geographic areas for all of our charge types. We are proposing this
change for acute inpatient facility charges and skilled nursing
facility/sub-acute inpatient facility charges because, due to the
variability of charges within MSA and non-MSA areas, changing to three-
digit ZIP Code areas will produce charges that are more accurate for
the location in which the care was provided.
We are proposing to delete the definition for CPI-W (Consumer Price
Index--Urban Wage Earners and Clerical Workers) because we have not
used CPI-W information anywhere in the regulations, and have no plans
to do so. We are also proposing to delete the separate definition for
CPI (Consumer Price Index), because that term appears in the
regulations only as part of the defined term CPI-U (Consumer Price
Index--All Urban Consumers).
Provider-Based and Non-Provider-Based Entities and Charges
For a specific item of medical care or service provided on an
outpatient basis, we may have a professional charge, or an outpatient
facility charge, or both. Presently, for all outpatient services for
which we have both a professional charge and an outpatient facility
charge, these charges are developed so as to be mutually exclusive,
with the expectation that both charges will be billed for the same
occasion of service. In addition, most of our outpatient facility
charges are expected to be billed by all VA facilities that perform the
applicable service, regardless of the type of facility. In other words,
these charges are equally available to be billed by the outpatient
departments of VA medical centers (VAMCs), by VA community-based
outpatient clinics (CBOCs) operating similar to private-sector
ambulatory surgery centers, by VA CBOCs operating like private-sector
doctors' offices, etc. Presently, the only outpatient facility charges
not available to be billed by all VA facilities are those for office or
other outpatient evaluation and management (E&M) services CPT codes
99201 through 99215. Billing of the outpatient facility charges for the
ten services covered by these codes is presently restricted to the
outpatient departments of 169 VAMCs.
This document proposes to amend the regulations to provide that
each VA healthcare entity will be designated as either provider-based
(entitled to bill outpatient facility charges) or non-provider-based
(not entitled to bill outpatient facility charges), based on CMS
criteria for provider-based and non-provider-based entities. Further,
application of the proposed methodologies presented in this document
will provide two sets of charges for outpatient care, one set for use
by provider-based entities and one for use by non-provider-based
entities. For those outpatient services that have both a professional
charge and an outpatient facility charge, the professional charge for
use by provider-based entities will be lower, based on Medicare's lower
facility practice expense Relative Value Units (RVUs), in consideration
of the fact that both the professional charge and the outpatient
facility charge will be billed. For the same services, the professional
charge for use by non-provider-based entities will be higher, based on
Medicare's higher non-facility practice expense RVUs, in consideration
of the fact that only the professional charge will be billed. We are
proposing these changes because they will result in VA charge
structures and billing practices that more closely approximate industry
standard charge structures and billing practices.
Charges for Medical Care or Services Provided by Non-VA Providers at VA
Expense
Presently, the phrase in the regulations, ``medical care or
services provided or furnished by VA,'' is understood to include
medical care or services provided by non-VA providers at VA expense,
and the charges billed for such care are those determined according to
this section. This document proposes to amend the regulations by adding
language to confirm this understanding.
Charges for Medical Care or Services for Which VA Does Not Have an
Established Charge
Presently, the regulations do not address the issue of charges for
medical care or services for which VA does not have an established
charge or does not specifically make other provision for charges. The
result has been that VA has not been charging for such care or
services. This document proposes to amend the regulations by adding
language to provide for charges, under specified circumstances, when we
do not have established charges.
Under the proposed change, when VA provides or furnishes medical
care or services and VA does not have an established charge for such
care or services, then the charges billed for such care or services
will be determined according to the provisions of the proposed new
paragraph (a)(8) of the regulations, which sets forth four criteria for
establishing a charge and provides that, if none apply, then no charge
will be made. We believe that these proposed changes provide a fair and
reasonable basis for such charges. We are proposing these changes to
provide appropriate charges, under these specified circumstances, where
presently we have no charges.
Unlisted and Unspecified Procedures, Services, and Supplies
Both the American Medical Association and CMS, in compiling CPT and
HCPCS Level II, respectively, recognize that there may be procedures,
services, or supplies provided by physicians and other healthcare
professionals which have not yet been defined. Accordingly, both CPT
and HCPCS Level II provide specific codes for reporting unlisted and
unspecified procedures, services, and supplies. Presently, the
regulations do not provide charges for unlisted CPT codes or for any
HCPCS Level II codes. This document proposes methodologies that will
enable us to provide charges for unlisted and unspecified procedures,
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services, and supplies. We are proposing this change so that we will be
able to bill for these procedures, services, and supplies when we
provide or furnish them to our patients, and so that our charge
structures and billing practices will more closely approximate industry
standard charge structures and billing practices.
Charge Types
Presently, the reasonable charges regulations set forth
methodologies for four basic types of charges, as follows:
--Acute inpatient facility charges;
--Skilled nursing facility/sub-acute inpatient facility charges;
--Outpatient facility charges; and
--Physician charges.
Under the above organization of charge types, facility charges for
observation care are included under outpatient facility charges, and
charges for pathology/laboratory and anesthesia services are included
under physician charges. This document proposes to amend the
regulations to describe separate charge types for observation care,
pathology/laboratory, and anesthesia.
Presently, we do not have partial hospitalization facility charges.
This document proposes to amend the regulations to establish partial
hospitalization facility charges.
Presently, we do not have separate charges for HCPCS Level II
codes. This document proposes to amend the regulations to establish
charges for HCPCS Level II codes.
Presently, our charges for prosthetic devices and DME provided on
an outpatient basis are VA's actual cost, and our charges for
outpatient dental care are based on VA costs in accordance with the
methodology set forth in Sec. 17.102. In place of these cost-related
charges, this document proposes to amend the regulations to establish
reasonable charges for prosthetic devices, DME, and outpatient dental
care by establishing charges for the associated HCPCS Level II codes.
Presently, we do not have charges for ambulance or other emergency
transportation services. This document proposes to amend the
regulations to establish reasonable charges for ambulance and other
emergency transportation services by establishing charges for the
associated HCPCS Level II codes.
Associated with these changes, we are proposing to amend the
regulations to organize reasonable charges into the following eleven
charge types:
--Acute inpatient facility charges;
--Skilled nursing facility/sub-acute inpatient facility charges;
--Partial hospitalization facility charges;
--Outpatient facility charges;
--Physician and other professional charges except for anesthesia
services and certain dental services;
--Professional charges for anesthesia services;
--Professional charges for dental services identified by HCPCS Level II
codes;
--Pathology and laboratory charges;
--Observation care facility charges;
--Ambulance and other emergency transportation charges; and
--Charges for durable medical equipment, drugs, injectables, and other
medical services, items, and supplies identified by HCPCS Level II
codes.
The reasons we are proposing these changes are (1) to enable us to
bill for medical care, procedures, services, DME, drugs, injectables,
medical items, and supplies for which we currently do not have charges;
(2) to replace certain charges currently based on VA costs with charges
based on community charges; (3) to enable us to bill separately for
medical care, procedures, services, DME, drugs, injectables, medical
items, and supplies whose charges are presently combined with other
charges; and (4) to bring our charge structures and billing practices
closer to industry standard charge structures and billing practices.
Additional information regarding each of the above charge types is
provided in the following paragraphs.
Acute Inpatient Facility Charges
Presently, the regulations provide methodologies for calculating
two per diem charges for each diagnosis related group (DRG), one for
room and board and one for ancillary services. These same per diem
charges are used for both ICU days and non-ICU days. This document
proposes to amend the regulations by providing methodologies for
calculating different room and board per diem charges for ICU days and
non-ICU days. With these changes, each DRG will have three per diem
charges: a room and board per diem charge for ICU days, a different
room and board per diem charge for non-ICU days, and an ancillary
services per diem charge that applies to both ICU and non-ICU days. We
are proposing these changes because they will result in charges for
each patient that will be more specific to the care and services the
patient received, and will result in VA charge structures and billing
practices that more closely approximate industry standard charge
structures and billing practices.
As noted earlier, we are proposing to change from MSAs to three-
digit ZIP Codes for geographic areas for acute inpatient facility
charges. Presently, we calculate 80th percentile factors and geographic
area adjustment factors for acute inpatient facility charges by MSA,
based on charge data from the Medicare Standard Analytical File 5%
Sample. Associated with the change to three-digit ZIP Codes, we are
proposing to amend the regulations to base the calculation of these
factors on the MedPAR file, which provides a complete record of all
Medicare hospital admissions. This change from 5% to 100% of Medicare
hospital admissions will produce more accurate 80th percentile factors
and geographic area adjustment factors for the smaller three-digit ZIP
Code areas.
Skilled Nursing Facility/Sub-Acute Inpatient Facility Charges
Presently, we calculate skilled nursing facility/sub-acute
inpatient facility all-inclusive per diem charges based on the
nationwide average per diem charge presented in annual releases of the
Milliman USA, Inc., Health Cost Guidelines. We are proposing to change
the regulations to base these charges on the actual average per diem
billed charge derived from the MedPAR skilled nursing facility file.
This will more directly and accurately measure the nationwide baseline
charge, and enable calculation of a more accurate nationwide 80th
percentile charge. We are also proposing to change the trending
methodology from one based on trends in Medicare reimbursement rates,
as presented in the Annual Report of the Boards of Trustees of the
Federal Supplementary Medical Insurance Trust Funds, to trends based on
the inpatient hospital services component of the CPI-U. This change
will result in trending that more accurately reflects changes in billed
charge levels.
Presently, we calculate 80th percentile adjustment factors and
geographic area adjustment factors based on the Medicare Standard
Analytical File 5% Sample and the Milliman USA, Inc., Health Cost
Guidelines, respectively. We are proposing to amend the regulations to
base calculation of these factors on the MedPAR skilled nursing
facility file. These changes will produce more accurate 80th percentile
adjustment factors and geographic area adjustment factors.
Partial Hospitalization Facility Charges
Presently, we do not have a per diem facility charge that is
specific to partial hospitalization, nor do we have charges for any of
the HCPCS Level II codes,
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including those associated with partial hospitalization. We are
proposing to amend the regulations to provide a methodology for
establishing partial hospitalization facility charges. We are proposing
this change so that we will be able to bill for these services when we
provide or furnish them to our patients.
Outpatient Facility Charges
Presently, we calculate outpatient facility charges utilizing a
statistical method based on 1998 Medicare practice expense RVUs, which
we adopted as a proxy weighting system for the calculation of
outpatient facility charges. We are proposing to amend the methodology
to base nationwide average outpatient facility charges on Medicare
Ambulatory Payment Classification (APC) groups, using data from the
Medicare Standard Analytical File 5% Sample. This will provide the
basis for a more accurate calculation, because APC payment groups are
based on actual outpatient facility charge data, whereas the 1998
Medicare practice expense RVUs were based on physician charge data for
overhead expenses.
One consequence of adopting APC groups for this purpose is that the
statistical methodology we presently use to bundle CPT codes into CPT
code groups will no longer be needed, because APCs provide appropriate
groupings of codes. We are also proposing to amend the regulations to
adjust APC charges, which represent Medicare average reimbursement
levels, to nationwide 80th percentile billed charge levels. This
adjustment will result in charges that more accurately reflect market-
level charges.
For outpatient facility services which do not have APC assignments,
we propose to calculate outpatient facility charges using data from the
MDR database, the MedStat claims database, and the Medicare Standard
Analytical File 5% Sample.
These changes to the regulations will result in VA charge
structures and billing practices that more closely approximate industry
standard charge structures and billing practices.
Physician and Other Professional Charges Except for Anesthesia Services
and Certain Dental Services
Presently, the regulations incorporate the methodologies for
charges for pathology/laboratory and anesthesia services in the
methodology for physician charges. We are proposing to restructure the
regulations so that pathology/laboratory charges and professional
charges for anesthesia services are identified as separate charge
types. We are also proposing to specify in the regulations that charges
for professional dental services identified by CPT code are determined
in accordance with the same methodology as for physician charges, while
professional dental services identified by HCPCS Level II code are
treated as a separate charge type, with charges determined using a
different methodology as discussed below. We are proposing these
changes so that different charge types and different charge development
methodologies will be separately identified and described in the
regulations.
Presently, our charges are not influenced by the presence or
absence of CPT code modifiers. This document proposes to amend the
regulations to add methodology for developing charge adjustment factors
for specified CPT/HCPCS code modifiers, using data from the Medicare
Standard Analytical File 5% Sample. Some charge adjustment factors will
act to increase the charge (for example, modifier 22, Unusual
Procedural Services). Other charge adjustment factors will act to
decrease the charge (for example, modifier 52, Reduced Services). This
change will result in VA charge structures and billing practices that
more closely approximate industry standard charge structures and
billing practices.
Presently, language in the regulations is interpreted to mean that
we do not have professional charges for categories of providers other
than physicians unless the provider category is specifically named in
the regulations. This document proposes to amend the regulations to set
forth charge methodologies for physicians and other professionals that
apply to all professional provider categories. This change will result
in VA charge structures and billing practices that more closely
approximate industry standard charge structures and billing practices.
Professional Charges for Anesthesia Services
Presently, professional charges for anesthesia services are based
in part on average time units compiled from a Health Care Financing
Administration study. Applying this methodology, the professional
charge for a given anesthesia procedure is the same, regardless of the
length of time the patient received anesthesia. This document proposes
to amend the methodology so that professional charges for anesthesia
services will vary according to the length of time the patient received
anesthesia. This change will result in VA charge structures and billing
practices that more closely approximate industry standard charge
structures and billing practices.
Professional Charges for Dental Services Identified by HCPCS Level II
Codes
Presently, charges for outpatient dental care are based on VA costs
in accordance with the methodology set forth in Sec. 17.102. This
document proposes to amend the methodology to establish reasonable
charges for dental services identified by HCPCS Level II codes, using
data from the Prevailing Healthcare Charges System, the National Dental
Advisory Service nationwide pricing index, the Dental UCR (Usual,
Customary, or Reasonable) Module of the Ingenix Comprehensive
Healthcare Payment System, the Milliman USA, Inc., Dental Health Cost
Guidelines, and the dental services component of the CPI-U. This change
will result in VA charge structures and billing practices that more
closely approximate industry standard charge structures and billing
practices.
Pathology and Laboratory Charges
Presently, the regulations provide that for each pathology and
laboratory CPT code, the technical component RVUs are added to the
professional component RVUs, if any, resulting in only one charge for
each pathology and laboratory CPT code. This document proposes to amend
the methodology so that those pathology and laboratory procedures which
require a professional interpretation will have two separate charges: a
professional component charge determined according to the methodology
set forth in the Physician and Other Professional Charges paragraph in
the regulations, and a technical component charge determined according
to the methodology set forth in the Pathology and Laboratory Charges
paragraph in the regulations. This change will result in VA charge
structures and billing practices that more closely approximate industry
standard charge structures and billing practices.
Observation Care Facility Charges
Presently, our facility charges for observation care consist of
outpatient facility charges for three observation care CPT codes,
99218, 99219, and 99220. These charges are per occurrence, regardless
of the number of hours the patient received observation care. This
document proposes to amend the regulations to provide a methodology for
establishing observation care facility charges that will vary according
to the number of hours the patient receives observation
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care. For this purpose, we propose to use data from the outpatient
facility component of the Medicare Standard Analytical File 5% Sample,
trend the charges forward using the outpatient hospital services
component of the CPI-U, and use the geographic area adjustment factors
computed for outpatient facility charges. This change will result in VA
charge structures and billing practices that more closely approximate
industry standard charge structures and billing practices.
Ambulance and Other Emergency Transportation Charges
Ambulance and other emergency transportation services are
identified by HCPCS Level II codes. Presently, we do not have charges
for any HCPCS Level II codes. This document proposes to amend the
regulations to provide a methodology for establishing charges for
ambulance and other emergency transportation services by HCPCS Level II
code. For this purpose, we propose to use data from the outpatient
facility component of the Medicare Standard Analytical File 5% Sample,
trend the charges forward using the outpatient hospital services
component of the CPI-U, and use the geographic area adjustment factors
computed for outpatient facility charges. We are proposing this change
so that we will be able to bill and be reimbursed for these services
when we provide or furnish them to our patients.
Charges for Durable Medical Equipment, Drugs, Injectables, and Other
Medical Services, Items, and Supplies Identified By HCPCS Level II
Codes
Presently, we do not have charges for any HCPCS Level II codes.
This document proposes to amend the regulations to provide a
methodology for establishing charges for DME, drugs, injectables, and
other medical services, items, and supplies identified by HCPCS Level
II code. For this purpose, we propose to use the following data
sources: Ingenix/St. Anthony's RBRVS; Medicare DME Fee Schedule;
Medicare Parenteral and Enteral Nutrition Fee Schedule; Part B and DME
components of the Medicare Standard Analytical File 5% Sample; MDR
database; Milliman USA, Inc., Optimized HMO (Health Maintenance
Organization) Data Sets; Milliman USA, Inc., Health Cost Guidelines;
and a VA nationwide distribution of procedures, services, items, and
supplies. We propose to trend these charges forward using the medical
care commodities component of the CPI-U. We are proposing this change
so that we will be able to bill and be reimbursed for these services,
items, and supplies when we provide or furnish them to our patients.
Responses to Comments
In response to our interim final rule published in the Federal
Register on May 8, 2001 (66 FR 23326, RIN 2900-AK73), we received two
comments, both from the same commenter, that we have not previously
resolved.
The commenter stated that we should add charges for codes G0193
through G0201 (HCPCS Level II codes). In this document, we are
proposing to add charges for nearly all HCPCS Level II codes, including
codes G0193 through G0201.
The same commenter also stated that we have identified audiology
services furnished in conjunction with a hearing aid, CPT codes 92590
through 92595, as physician services, when in fact these services are
performed solely by audiologists and should not be designated as
physician services.
With respect to our charge development methodology, our charge for
a given service reflects the actual amounts billed by the providers of
that service. Therefore, our charge for a service performed solely by
audiologists will reflect the actual amounts billed by audiologists,
not by physicians. However, we agree that including these and other
services not performed by physicians under the general category of
``physician charges'' may be confusing. Therefore, in this document, we
are proposing to change from the term ``physician services'' to the
term ``physician and other professional services'' so as to allow for
the fact that many professional medical services are performed by
audiologists and other healthcare professionals instead of, or in
addition to, physicians.
Unfunded Mandates
The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, 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 proposed rule would have
no such effect on State, local, or tribal governments, or the private
sector.
Paperwork Reduction Act
This document contains provisions at 38 CFR 17.101(a)(4)
constituting a collection of information under the Paperwork Reduction
Act (44 U.S.C. 3501-3521). The Office of Management and Budget (OMB)
has approved the information collection requirements for Sec.
17.101(a)(4) under OMB control number 2900-0606.
Executive Order 12866
This document has been reviewed by the Office of Management and
Budget under Executive Order 12866.
Regulatory Flexibility Act
The Secretary hereby certifies that this proposed 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 proposed 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 proposed rule is exempt
from the initial and final regulatory flexibility analysis requirements
of sections 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: August 8, 2003.
Anthony J. Principi,
Secretary of Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 17 is proposed
to be 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:
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Sec. 17.101 Collection or recovery by VA for medical care or services
provided or furnished to a veteran for a nonservice-connected
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) Methodologies. Based on the methodologies set forth in this
section, the charges billed will include the following types of
charges, as appropriate: acute inpatient facility charges; skilled
nursing facility/sub-acute inpatient facility charges; partial
hospitalization facility charges; outpatient facility charges;
physician and other professional charges, including professional
charges for anesthesia services and dental services; pathology and
laboratory charges; observation care facility charges; ambulance and
other emergency transportation charges; and charges for durable medical
equipment, drugs, injectables, and other medical services, items, and
supplies identified by HCPCS Level II codes. In addition, the charges
billed for prescription drugs not administered during treatment will be
based on VA costs in accordance with the methodology set forth in Sec.
17.102. Data for calculating actual charge amounts based on the
methodologies set forth in this section will either be published in a
notice in the Federal Register or will be posted on the Internet site
of the Veterans Health Administration Chief Business Office at http://www.va.gov/revenue
, under ``Charge Data.'' For care for which VA has
established a charge, VA will bill using its most recent published or
posted charge. For care for which VA has not established a charge, VA
will bill according to the methodology set forth in paragraph (a)(8) of
this section.
(3) Data sources. In this section, data sources are identified by
name. The specific editions of these data sources used to calculate
actual charge amounts, and information on where these data sources may
be obtained, will be presented along with the data for calculating
actual charge amounts, either in notices in the Federal Register or on
the Internet site of the Veterans Health Administration Chief Business
Office at http://www.va.gov/revenue, under ``Charge Data.''
(4) 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).
(5) Definitions. For purposes of this section:
APC means Medicare Ambulatory Payment Classification.
CMS means the Centers for Medicare and Medicaid Services.
CPI-U means Consumer Price Index--All Urban Consumers.
CPT code and CPT procedure code mean Current Procedural Terminology
code, a five-digit identifier defined by the American Medical
Association for a specified physician service or procedure.
DME means Durable Medical Equipment.
DRG means Diagnosis Related Group.
Geographic area means a three-digit ZIP Code area.
HCPCS code means a Healthcare Common Procedure Coding System Level
II identifier, consisting of a letter followed by four digits, defined
by CMS for a specified physician service, procedure, test, supply, or
other medical service.
ICU means Intensive Care Unit, including coronary care units.
MDR means Medical Data Research, a medical charge database
published by Ingenix, Inc.
MedPAR means the Medicare Provider Analysis and Review file.
Non-provider-based means a VA healthcare entity (such as a small VA
community-based outpatient clinic) that functions as the equivalent of
a doctor's office or for other reasons does not meet CMS provider-based
criteria, and, therefore, is not entitled to bill outpatient facility
charges.
Provider-based means the outpatient department of a VA hospital or
any other VA healthcare entity that meets CMS provider-based criteria.
Provider-based entities are entitled to bill outpatient facility
charges.
RBRVS means Resource-Based Relative Value Scale.
RVU means Relative Value Unit.
Unlisted procedures mean procedures, services, items, and supplies
that have not been defined or specified by the American Medical
Association or CMS, and the CPT and HCPCS codes used to report such
procedures, services, items, and supplies.
(6) Provider-based and non-provider-based entities and charges.
Each VA healthcare entity (medical center, hospital, community-based
outpatient clinic, independent outpatient clinic, etc) is designated as
either provider-based or non-provider-based. Provider-based entities
are entitled to bill outpatient facility charges; non-provider-based
entities are not. The charges for physician and other professional
services provided at non-provider-based entities will be billed as
professional charges only. Professional charges for both provider-based
entities and non-provider-based entities are produced by the
methodologies set forth in this section, with professional charges for
provider-based entities based on facility practice expense RVUs, and
professional charges for non-provider-based entities based on non-
facility practice expense RVUs.
(7) Charges for medical care or services provided by non-VA
providers at VA expense. When medical care or services are furnished at
the expense of the VA by non-VA providers, the charges billed for such
care or services will be the higher of the charges determined according
to this section, or the amount VA paid to the non-VA provider.
(8) Charges for medical care or services for which VA does not have
an established charge. When medical care or services are provided or
furnished at VA expense by either VA or non-VA providers, and VA does
not have an established charge for such care or services, then the
charges billed for such care or services will be according to the first
of the following subparagraphs that applies:
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(i) In the event that a new identifier (DRG, CPT code, or HCPCS
code) is assigned to a particular type or item of medical care or
service, then until such time as VA establishes a charge for the new
identifier, VA's charge for such care or service will be VA's most
recent established charge for the identifier previously assigned to
that type or item of medical care or service; otherwise,
(ii) In the event that the medical care or service is provided or
furnished at VA expense by a non-VA provider, then VA's charge for such
care or service will be the amount VA paid to the non-VA provider;
otherwise,
(iii) VA's charges for prosthetic devices and durable medical
equipment will be VA's actual cost; otherwise,
(iv) If a Medicare allowed charge amount can be determined for the
care or service, then VA's charge will be the Medicare participating
provider allowed charge amount geographically adjusted using the
applicable geographic area adjustment factors determined pursuant to
this section; otherwise,
(v) If a charge cannot be established under paragraphs (a)(8)(i)
through (iv) of this section, then VA will not charge for the care or
service under this section.
(b) Acute inpatient facility charges. When VA provides or furnishes
acute inpatient services within the scope of care referred to in
paragraph (a)(1) of this section, acute inpatient facility charges
billed for such services will be determined in accordance with the
provisions of this paragraph. Acute inpatient facility charges consist
of per diem charges for room and board and for ancillary services that
vary by geographic area and by DRG. These charges are calculated as
follows:
(1) Formula. For each acute inpatient stay, or portion thereof, for
which a particular DRG assignment applies, the total acute inpatient
facility charge is the sum of the applicable charges determined
pursuant to paragraphs (b)(1)(i), (ii), and (iii) of this section. For
purposes of this section, standard room and board days and ICU room and
board days are mutually exclusive: VA will bill either a standard room
and board per diem charge or an ICU room and board per diem charge, as
applicable, for each day of a given acute inpatient stay.
(i) Standard room and board charges. Multiply the nationwide
standard room and board per diem charge determined pursuant to
paragraph (b)(2) of this section by the appropriate geographic area
adjustment factor determined pursuant to paragraph (b)(3) of this
section. The result constitutes the area-specific standard room and
board per diem charge. Multiply this amount by the number of days for
which standard room and board charges apply to obtain the total acute
inpatient facility standard room and board charge.
(ii) ICU room and board charges. Multiply the nationwide ICU room
and board per diem charge determined pursuant to paragraph (b)(2) of
this section by the appropriate geographic area adjustment factor
determined pursuant to paragraph (b)(3) of this section. The result
constitutes the area-specific ICU room and board per diem charge.
Multiply this amount by the number of days for which ICU room and board
per diem charges apply to obtain the total acute inpatient facility ICU
room and board charge.
(iii) Ancillary charges. Multiply the nationwide ancillary per diem
charge determined pursuant to paragraph (b)(2) of this section by the
appropriate geographic area adjustment factor determined pursuant to
paragraph (b)(3) of this section. The result constitutes the area-
specific ancillary per diem charge. Multiply this amount by the number
of days of acute inpatient care to obtain the total acute inpatient
facility ancillary charge.
Note to paragraph (b)(1): If there is a change in a patient's
condition and/or treatment during a single acute inpatient stay such
that the DRG assignment changes (for example, a psychiatric patient
who develops a medical or surgical problem), then calculations of
acute inpatient facility charges will be made separately for each
DRG, according to the number of days of care applicable for each
DRG, and the total acute inpatient facility charge will be the sum
of the total acute inpatient facility charges for the different
DRGs.
(2) Per diem charges. To establish a baseline, two nationwide
average per diem amounts for each DRG are calculated, one from the
MedPAR file and one from the MedStat claims database, a database of
nationwide commercial insurance claims. Average per diem charges are
calculated based on all available charges, except for care reported for
emergency room, ambulance, professional, and observation care. These
two data sources may report charges for two differing periods of time;
when this occurs, the data source charges with the earlier center date
are trended forward to the center date of the other data source, based
on changes to the inpatient hospital services component of the CPI-U.
Results obtained from these two data sources are then combined into a
single weighted average per diem charge for each DRG. The resulting
charge for each DRG is then separated into its two components, a room
and board component and an ancillary component, with the per diem
charge for each component calculated by multiplying the weighted
average per diem charge by the corresponding percentage determined
pursuant to paragraph (b)(2)(i) of this section. The room and board per
diem charge is further differentiated into a standard room and board
per diem charge and an ICU room and board per diem charge by
multiplying the average room and board charge by the corresponding DRG-
specific ratios determined pursuant to paragraph (b)(2)(ii) of this
section. The resulting per diem charges for standard room and board,
ICU room and board, and ancillary services for each DRG are then each
multiplied by the final ratio determined pursuant to paragraph
(b)(2)(iii) of this section to reflect the nationwide 80th percentile
charges. Finally, the resulting amounts are each trended forward from
the center date of the trended data sources to the effective time
period for the charges, as set forth in paragraph (b)(2)(iv) of this
section. The results constitute the nationwide 80th percentile standard
room and board, ICU room and board, and ancillary per diem charges.
(i) Room and board charge and ancillary 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) Standard room and board per diem charge and ICU room and board
per diem charge ratios. Using only those cases from the MedPAR file for
which a distinction between room and board and ancillary charges can be
determined, overall average per diem room and board charges are
calculated by DRG. Then, using the same cases, an average standard room
and board per diem charge is calculated by dividing total non-ICU room
and board charges by total non-ICU room and board days. Similarly, an
average ICU room and board per diem charge is calculated by dividing
total ICU room and board charges by total ICU room and board days.
Finally, ratios of standard room and board per diem charges to average
overall room and board per diem charges are calculated by DRG, as are
ratios of ICU room and board per diem charges to average overall room
and board per diem charges.
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(iii) 80th percentile. Using cases from the MedPAR file with
separately identifiable semi-private room rates, the ratio of the day-
weighted 80th percentile semi-private room and board per diem charge to
the average semi-private room and board per diem charge is obtained for
each geographic area. The geographic area-based ratios are averaged to
obtain a final 80th percentile ratio.
(iv) Trending forward. 80th percentile charges for each DRG,
obtained as described in paragraph (b)(2) of this section, are trended
forward based on changes to the inpatient hospital services component
of the CPI-U. Actual CPI-U changes are used from the center date of the
trended data sources through the latest available month as of the time
the calculations are performed. The three-month average annual trend
rate as of the latest available month is then held constant to the
midpoint of the calendar year in which the charges are primarily
expected to be used. The projected total CPI-U change so obtained is
then applied to the 80th percentile charges.
(3) Geographic area adjustment factors. For each geographic area,
the average per diem room and board charges and ancillary charges from
the MedPAR file 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, weighted by nationwide
VA discharges and by average lengths of stay from the combined MedPAR
file and MedStat claims 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 non-surgical DRGs, and
ancillary for non-surgical DRGs. Four corresponding national average
per diem charges are obtained from the MedPAR file, weighted by
nationwide VA discharges and by average lengths of stay from the
combined MedPAR file and MedStat claims 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
geographic area. The facility charges cover care, including room and
board, nursing care, pharmaceuticals, supplies, and skilled
rehabilitation services (e.g., physical therapy, inhalation therapy,
occupational therapy, and speech-language pathology), 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-language pathologists, and audiologists. These
charges are calculated as follows:
(1) Formula. For each stay, multiply the nationwide per diem charge
determined pursuant to paragraph (c)(2) of this section by the
appropriate geographic area adjustment factor determined pursuant to
paragraph (c)(3) of this section. The result constitutes the area-
specific per diem charge. Finally, multiply the area-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 is calculated based on charges reported in the
MedPAR skilled nursing facility file. For this purpose, the following
MedPAR charge categories are included: room and board (private, semi-
private, and ward), physical therapy, occupational therapy, inhalation
therapy, speech-language pathology, pharmacy, medical/surgical
supplies, and ``other'' services. The following MedPAR charge
categories are excluded from the calculation of the per diem charge and
will be billed separately, using the charges determined as set forth in
other applicable paragraphs of this section, when these services are
provided to skilled nursing patients or sub-acute inpatients: ICU and
CCU room and board, laboratory, radiology, cardiology, dialysis,
operating room, blood and blood administration, ambulance, MRI,
anesthesia, durable medical equipment, emergency room, clinic,
outpatient, professional, lithotripsy, and organ acquisition services.
The resulting average per diem billed charge is then multiplied by the
80th percentile adjustment factor determined pursuant to paragraph
(c)(2)(i) of this section to obtain a nationwide 80th percentile charge
level. Finally, the resulting amount 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 adjustment factor. Using the MedPAR skilled
nursing facility file, the ratio of the day-weighted 80th percentile
room and board per diem charge to the day-weighted average room and
board per diem charge is obtained for each geographic area. The
geographic area-based ratios are averaged to obtain the 80th percentile
adjustment factor.
(ii) Trending forward. The 80th percentile charge is trended
forward based on changes to the inpatient hospital services component
of the CPI-U. Actual CPI-U changes are used from the time period of the
source data through the latest available month as of the time the
calculations are performed. The three-month average annual trend rate
as of the latest available month is then held constant to the midpoint
of the calendar year in which the charges are primarily expected to be
used. The projected total CPI-U change so obtained is then applied to
the 80th percentile charge.
(3) Geographic area adjustment factors. The average billed per diem
charge for each geographic area is calculated from the MedPAR skilled
nursing facility file. This amount is divided by the nationwide average
billed charge calculated in paragraph (c)(2) of this section. The
geographic area adjustment factor for charges for each VA facility is
the ratio for the geographic area in which the facility is located.
(d) Partial hospitalization facility charges. When VA provides or
furnishes partial hospitalization services that are within the scope of
care referred to in paragraph (a)(1) of this section, the facility
charges billed for such services will be determined in accordance with
the provisions of this paragraph. Partial hospitalization facility
charges are per diem charges that vary by geographic area. These
charges are calculated as follows:
(1) Formula. For each partial hospitalization stay, multiply the
nationwide per diem charge determined pursuant to paragraph (d)(2) of
this section by the appropriate geographic area adjustment factor
determined pursuant to paragraph (d)(3) of this section. The result
constitutes the area-specific per diem charge. Finally, multiply the
area-specific per diem charge by the number of days of care to obtain
the total partial hospitalization facility charge.
(2) Per diem charge. To establish a baseline, a nationwide median
per diem billed charge is calculated based on
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charges associated with partial hospitalization from the outpatient
facility component of the Medicare Standard Analytical File 5% Sample.
That median per diem billed charge is then multiplied by the 80th
percentile adjustment factor determined pursuant to paragraph (d)(2)(i)
of this section to obtain a nationwide 80th percentile charge level.
Finally, the resulting amount is trended forward to the effective time
period for the charges, as set forth in paragraph (d)(2)(ii) of this
section.
(i) 80th percentile adjustment factor. The 80th percentile
adjustment factor for partial hospitalization facility charges is the
same as that computed for skilled nursing facility/sub-acute inpatient
facility charges under paragraph (c)(2)(i) of this section.
(ii) Trending forward. The 80th percentile charge is trended
forward based on changes to the outpatient hospital services component
of the CPI-U. Actual CPI-U changes are used from the time period of the
source data through the latest available month as of the time the
calculations are performed. The three-month average annual trend rate
as of the latest available month is then held constant to the midpoint
of the calendar year in which the charges are primarily expected to be
used. The projected total CPI-U change so obtained is then applied to
the 80th percentile charges, as described in paragraph (d)(2) of this
section.
(3) Geographic area adjustment factors. The geographic area
adjustment factors for partial hospitalization facility charges are the
same as those computed for outpatient facility charges under paragraph
(e)(4) of this section.
(e) Outpatient facility charges. When VA provides or furnishes
outpatient facility services that are within the scope of care referred
to in paragraph (a)(1) of this section, the charges billed for such
services will be determined in accordance with the provisions of this
paragraph. Charges for outpatient facility services vary by geographic
area and by CPT/HCPCS code. These charges apply in the situations set
forth in paragraph (e)(1) of this section and are calculated as set
forth in paragraph (e)(2) of this section.
(1) Settings and circumstances in which outpatient facility charges
apply. Outpatient facility charges consist of facility charges for
procedures, diagnostic tests, evaluation and management services, and
other medical services, items, and supplies provided in the following
settings and circumstances:
(i) Outpatient departments and clinics at VA medical centers;
(ii) Other VA provider-based entities; and
(iii) VA non-provider-based entities, for procedures and tests for
which no corresponding professional charge is established under the
provisions of paragraph (f) of this section.
(2) Formula. For each outpatient facility charge CPT/HCPCS code,
multiply the nationwide 80th percentile charge determined pursuant to
paragraph (e)(3) of this section by the appropriate geographic area
adjustment factor determined pursuant to paragraph (e)(4) of this
section. The result constitutes the area-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 (e)(5) of this section.
(3) Nationwide 80th percentile charges by CPT/HCPCS code. For each
CPT/HCPCS code for which outpatient facility charges apply, the
nationwide 80th percentile charge is calculated as set forth in either
paragraph (e)(3)(i) or (e)(3)(ii) of this section. The resulting amount
is trended forward to the effective time period for the charges, as set
forth in paragraph (e)(3)(iii) of this section. The results constitute
the nationwide 80th percentile outpatient facility charges by CPT/HCPCS
code.
(i) Nationwide 80th percentile charges for CPT/HCPCS codes which
have APC assignments. Using the outpatient facility charges reported in
the outpatient facility component of the Medicare Standard Analytical
File 5% Sample, claim records are selected for which all charges can be
assigned to an APC. Using this subset of the 5% Sample data, nationwide
median charge to Medicare APC payment amount ratios, by APC, and
nationwide 80th percentile to median charge ratios, by APC, are
computed according to the methodology set forth in paragraphs
(e)(3)(i)(A) and (e)(3)(i)(B) of this section, respectively. The
product of these two ratios by APC is then computed, resulting in a
composite nationwide 80th percentile charge to Medicare APC payment
amount ratio. This ratio is then compared to the alternate nationwide
80th percentile charge to Medicare APC payment amount ratio computed in
paragraph (e)(3)(i)(C) of this section, and the lesser amount is
selected and multiplied by the current Medicare APC payment amount. The
resulting product is the APC-specific nationwide 80th percentile charge
amount for each applicable CPT/HCPCS code.
(A) Nationwide median charge to Medicare APC payment amount ratios.
For each CPT/HCPCS code, the ratio of median billed charge to Medicare
APC payment amount is determined. The weighted average of these ratios
for each APC is then obtained, using the reported 5% Sample frequencies
as weights. In addition, corresponding ratios are calculated for each
of the APC categories set forth in paragraph (e)(3)(i)(D) of this
section, again using the reported 5% Sample frequencies as weights. For
APCs where the 5% Sample frequencies provide a statistically credible
result, the APC-specific weighted average nationwide median charge to
Medicare APC payment amount ratio so obtained is accepted without
further adjustment. However, if the 5% Sample data do not produce
statistically credible results for any specific APC, then the APC
category-specific ratio is applied for that APC.
(B) Nationwide 80th percentile to median charge ratios. For each
CPT/HCPCS code, a geographically normalized nationwide 80th percentile
billed charge amount is divided by a similarly normalized nationwide
median billed charge amount. The weighted average of these ratios for
each APC is then obtained, using the reported 5% Sample frequencies as
weights. In addition, corresponding ratios are calculated for each of
the APC categories set forth in paragraph (e)(3)(i)(D) of this section,
again using the reported 5% Sample frequencies as weights. For APCs
where the 5% Sample frequencies provide a statistically credible
result, the APC-specific weighted average nationwide 80th percentile to
median charge ratio so obtained is accepted without further adjustment.
However, if the 5% Sample data do not produce statistically credible
results for any specific APC, then the APC category-specific ratio is
applied for that APC.
(C) Alternate nationwide 80th percentile charge to Medicare APC
payment amount ratios. A minimum 80th percentile charge to Medicare APC
payment amount ratio is set at 2.0 for APCs with Medicare APC payment
amounts of $25 or less. A maximum 80th percentile charge to Medicare
APC payment amount ratio is set at 6.5 for APCs with Medicare APC
payment amounts of $10,000 or more. Using linear interpolation with
these endpoints, the alternate APC-specific nationwide 80th percentile
charge to Medicare APC payment amount ratio is then computed, based on
the Medicare APC payment amount.
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(D) APC categories for the purpose of establishing 80th percentile
to median factors. For the purpose of the statistical methodology set
forth in paragraph (e)(3)(i) of this section, APCs are assigned to the
following APC categories:
(1) Radiology.
(2) Drugs.
(3) Office, Home, and Urgent Care Visits.
(4) Cardiovascular.
(5) Emergency Room Visits.
(6) Outpatient Psychiatry, Alcohol and Drug Abuse.
(7) Pathology.
(8) Surgery.
(9) Allergy Immunotherapy, Allergy Testing, Immunizations, and
Therapeutic Injections.
(10) All APCs not assigned to any of the above groups.
(ii) Nationwide 80th percentile charges for CPT/HCPCS codes which
do not have APC assignments. Nationwide 80th percentile billed charge
levels by CPT/HCPCS code are computed from the outpatient facility
component of the MDR database, from the MedStat claims database, and
from the outpatient facility component of the Medicare Standard
Analytical File 5% Sample. If the MDR database contains sufficient data
to provide a statistically credible 80th percentile charge, then that
result is retained for this purpose. If the MDR database does not
provide a statistically credible 80th percentile charge, then the
result from the MedStat database is retained for this purpose, provided
it is statistically credible. If neither the MDR nor the MedStat
databases provide statistically credible results, then the nationwide
80th percentile billed charge computed from the 5% Sample data is
retained for this purpose. The nationwide 80th percentile charges
retained from each of these data sources are trended forward to the
effective time period for the charges, as set forth in paragraph
(e)(3)(iii) of this section.
(iii) Trending forward. The charges for each CPT/HCPCS code,
obtained as described in paragraph (e)(3) of this section, are trended
forward based on changes to the outpatient hospital services component
of the CPI-U. Actual CPI-U changes are used from the time period of the
source data through the latest available month as of the time the
calculations are performed. The three-month average annual trend rate
as of the latest available month is then held constant to the midpoint
of the calendar year in which the charges are primarily expected to be
used. The projected total CPI-U change so obtained is then applied to
the 80th percentile charges, as described in paragraph (e)(3) of this
section.
(4) Geographic area adjustment factors. For each geographic area, a
single adjustment factor is calculated as the arithmetic average of the
outpatient geographic area adjustment factor published in the Milliman
USA, Inc., Health Cost Guidelines (this factor constitutes the ratio of
the level of charges for each geographic area to the nationwide level
of charges), and a geographic area adjustment factor developed from the
MDR database. See paragraph (a)(3) of this section for data sources.
The MDR-based geographic area adjustment factors are calculated as the
ratio of the CPT/HCPCS code weighted average charge level for each
geographic area to the nationwide CPT/HCPCS code 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/HCPCS procedure
codes, then the CPT/HCPCS procedure code with the highest facility
charge will be billed at 100% of the charges established under this
section; the CPT/HCPCS procedure code with the second highest facility
charge will be billed at 25% of the charges established under this
section; the CPT/HCPCS 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.
(f) Physician and other professional charges except for anesthesia
services and certain dental services. When VA provides or furnishes
physician and other professional services, other than professional
anesthesia services and certain professional dental services, within
the scope of care referred to in paragraph (a)(1) of this section,
physician and other professional charges billed for such services will
be determined in accordance with the provisions of this paragraph.
Charges for professional dental services identified by CPT code are
determined in accordance with the provisions of this paragraph; charges
for professional dental services identified by HCPCS Level II code are
determined in accordance with the provisions of paragraph (h) of this
section. Physician and other professional charges consist of charges
for professional services that vary by geographic area, by CPT/HCPCS
code, by site of service, and by modifier, where applicable. These
charges are calculated as follows:
(1) Formula. For each CPT/HCPCS code or, where applicable, each
CPT/HCPCS code and modifier combination, multiply the total
geographically-adjusted RVUs determined pursuant to paragraph (f)(2) of
this section by the applicable geographically-adjusted conversion
factor (a monetary amount) determined pursuant to paragraph (f)(3) of
this section to obtain the physician charge for each CPT/HCPCS code in
a particular geographic area. Then, multiply this charge by the
appropriate factors for any charge-significant modifiers, determined
pursuant to paragraph (f)(4) of this section.
(2)(i) Total geographically-adjusted RVUs for physician services
that have Medicare RVUs. The work expense and practice expense RVUs for
CPT/HCPCS codes, other than the codes described in paragraphs
(f)(2)(ii) and (f)(2)(iii) of this section, are compiled using Medicare
Physician Fee Schedule RVUs. The sum of the geographically-adjusted
work expense RVUs determined pursuant to paragraph (f)(2)(i)(A) of this
section and the geographically-adjusted practice expense RVUs
determined pursuant to paragraph (f)(2)(i)(B) of this section equals
the total geographically-adjusted RVUs.
(A) Geographically-adjusted work expense RVUs. For each CPT/HCPCS
code for each geographic area, the Medicare Physician Fee Schedule work
expense RVUs are multiplied by the work expense Medicare Geographic
Practice Cost Index. The result constitutes the geographically-adjusted
work expense RVUs.
(B) Geographically-adjusted practice expense RVUs. For each CPT/
HCPCS code for each geographic area, the Medicare Physician Fee
Schedule practice expense RVUs are multiplied by the practice expense
Medicare Geographic Practice Cost Index. The result constitutes the
geographically-adjusted practice expense RVUs. In these calculations,
facility practice expense RVUs are used to obtain geographically-
adjusted practice expense RVUs for use by provider-based entities, and
non-facility practice expense RVUs are used to obtain geographically-
adjusted practice expense RVUs for use by non-provider-based entities.
(ii) RVUs for CPT/HCPCS codes that do not have Medicare RVUs and
are not designated as unlisted procedures. For CPT/HCPCS codes that are
not assigned RVUs in paragraphs (f)(2)(i) or (f)(2)(iii) of this
section, total RVUs are developed based on various charge data sources.
For these CPT/HCPCS codes, the nationwide 80th percentile billed
charges are obtained, where statistically
[[Page 56886]]
credible, from the MDR database. For any remaining CPT/HCPCS codes, the
nationwide 80th percentile billed charges are obtained, where
statistically credible, from the Part B component of the Medicare
Standard Analytical File 5% Sample. For any remaining CPT/HCPCS codes,
the nationwide 80th percentile billed charges are obtained, where
statistically credible, from the Prevailing Healthcare Charges System
nationwide commercial insurance database. For each of these CPT/HCPCS
codes, nationwide total RVUs are obtained by taking the nationwide 80th
percentile billed charges obtained using the preceding three databases
and dividing by the untrended nationwide conversion factor for the
corresponding CPT/HCPCS code group determined pursuant to paragraphs
(f)(3) and (f)(3)(i) of this section. For any remaining CPT/HCPCS codes
that have not been assigned RVUs using the preceding data sources, the
nationwide total RVUs are calculated by summing the work expense and
non-facility practice expense RVUs found in Ingenix/St. Anthony's
RBRVS. The resulting nationwide total RVUs obtained using these four
data sources are multiplied by the geographic area adjustment factors
determined pursuant to paragraph (f)(2)(iv) of this section to obtain
the area-specific total RVUs.
(iii) RVUs for CPT/HCPCS codes designated as unlisted procedures.
For CPT/HCPCS codes designated as unlisted procedures, total RVUs are
developed based on the weighted median of the total RVUs of CPT/HCPCS
codes within the series in which the unlisted procedure code occurs. A
nationwide VA distribution of procedures and services is used for the
purpose of computing the weighted median. The resulting nationwide
total RVUs are multiplied by the geographic area adjustment factors
determined pursuant to paragraph (f)(2)(iv) of this section to obtain
the area-specific total RVUs.
(iv) RVU geographic area adjustment factors for CPT/HCPCS codes
that do not have Medicare RVUs, including codes that are designated as
unlisted procedures. The adjustment factor for each geographic area
consists of the weighted average of the work expense and practice
expense Medicare Geographic Practice Cost Indices for each geographic
area using charge data for representative CPT/HCPCS codes statistically
selected and weighted for work expense and practice expense.
(3) Geographically-adjusted 80th percentile conversion factors.
CPT/HCPCS codes are separated into the following 23 CPT/HCPCS code
groups: allergy immunotherapy, allergy testing, 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 23 CPT/HCPCS code
groups, representative CPT/HCPCS codes are statistically selected and
weighted so as to give a weighted average RVU comparable to the
weighted average RVU of the entire CPT/HCPCS code group (the selected
CPT/HCPCS codes are set forth in the Milliman USA, Inc., Health Cost
Guidelines fee survey; see paragraph (a)(3) of this section for data
sources). The 80th percentile charge for each selected CPT/HCPCS code
is obtained from the MDR database. A nationwide conversion factor (a
monetary amount) is calculated for each CPT/HCPCS code group as set
forth in paragraph (f)(3)(i) of this section. The nationwide conversion
factors for each of the 23 CPT/HCPCS code groups are trended forward to
the effective time period for the charges, as set forth in paragraph
(f)(3)(ii) of this section. The resulting amounts for each of the 23
groups are multiplied by geographic area adjustment factors determined
pursuant to paragraph (f)(3)(iii) of this section, resulting in
geographically-adjusted 80th percentile conversion factors for each
geographic area for the 23 CPT/HCPCS code groups for the effective
charge period.
(i) Nationwide conversion factors. Using the nationwide 80th
percentile charges for the selected CPT/HCPCS codes from paragraph
(f)(3) of this section, a nationwide conversion factor is calculated
for each of the 23 CPT/HCPCS code groups by dividing the weighted
average charge by the weighted average RVU.
(ii) Trending forward. The nationwide conversion factors for each
of the 23 CPT/HCPCS code groups, obtained as described in paragraph
(f)(3)(i) of this section, are trended forward based on changes to the
physicians' services component of the CPI-U. Actual CPI-U changes are
used from the time period of the source data through the latest
available month as of the time the calculations are performed. The
three-month average annual trend rate as of the latest available month
is then held constant to the midpoint of the calendar year in which the
charges are primarily expected to be used. The projected total CPI-U
change so obtained is then applied to the 23 conversion factors.
(iii) Geographic area adjustment factors. Using the 80th percentile
charges for the selected CPT/HCPCS codes from paragraph (f)(3) of this
section for each geographic area, a geographic area-specific conversion
factor is calculated for each of the 23 CPT/HCPCS code groups by
dividing the weighted average charge by the weighted average
geographically-adjusted RVU. The resulting conversion factor for each
geographic area for each of the 23 CPT/HCPCS code groups is divided by
the corresponding nationwide conversion factor determined pursuant to
paragraph (f)(3)(i) of this section. The resulting ratios are the
geographic area adjustment factors for the conversion factors for each
of the 23 CPT/HCPCS code groups for each geographic area.
(4) Charge adjustment factors for specified CPT/HCPCS code
modifiers. Surcharges or charge discounts are calculated in the
following manner: from the Part B component of the Medicare Standard
Analytical File 5% Sample, the ratio of weighted average billed charges
for CPT/HCPCS codes with the specified modifier to the weighted average
billed charge for CPT/HCPCS codes with no charge modifier is
calculated, using the frequency of procedure codes with the modifier as
weights in both weighted average calculations. The resulting ratios
constitute the surcharge or discount factors for specified charge-
significant CPT/HCPCS code modifiers.
(5) Certain charges for providers other than physicians. When
services for which charges are established according to the preceding
provisions of this paragraph (f) are performed by providers other than
physicians, the charges for those services will be as determined by the
preceding provisions of this paragraph, except as follows:
(i) Outpatient facility charges. When the services of providers
other than physicians are furnished in outpatient facility settings or
in other facilities designated as provider-based, and outpatient
facility charges for those services have been established under
paragraph (e) of this section, then the outpatient facility charges
established under paragraph (e) will apply instead of the charges
established under this paragraph (f).
(ii) Discounted charges. Charges for the professional services of
the following providers will be the indicated percentages of the amount
that would be charged if the care had been provided by a physician:
[[Page 56887]]
(A) Nurse practitioner: 85%.
(B) Clinical nurse specialist: 85%.
(C) Physician assistant: 85%.
(D) Clinical psychologist: 80%.
(E) Clinical social worker: 75%.
(F) Dietitian: 75%.
(G) Clinical pharmacist: 80%.
(g) Professional charges for anesthesia services. When VA provides
or furnishes professional anesthesia services within the scope of care
referred to in paragraph (a)(1) of this section, professional
anesthesia charges billed for such services will be determined in
accordance with the provisions of this paragraph. Charges for
professional anesthesia services provided by physicians or by certified
registered nurse anesthetists when not medically directed by an
anesthesiologist will be 100% of the charges determined as set forth in
this paragraph. Charges for professional anesthesia services provided
by a certified registered nurse anesthetist when medically directed by
an anesthesiologist will be 50% of the charges otherwise determined as
set forth in this paragraph, and shall be in addition to the charges
for the anesthesiologist. Professional anesthesia charges consist of
charges for professional services that vary by geographic area, by CPT/
HCPCS code base units, and by number of time units. These charges are
calculated as follows:
(1) Formula. For each anesthesia CPT/HCPCS code, multiply the total
anesthesia RVUs determined pursuant to paragraph (g)(2) of this section
by the applicable geographically-adjusted conversion factor (a monetary
amount) determined pursuant to paragraph (g)(3) of this section to
obtain the professional anesthesia charge for each CPT/HCPCS code in a
particular geographic area.
(2) Total RVUs for professional anesthesia services. The total
anesthesia RVUs for each anesthesia CPT/HCPCS code are the sum of the
base units (as compiled by CMS) for that CPT/HCPCS code and the number
of time units reported for the anesthesia service, where one time unit
equals 15 minutes. For anesthesia CPT/HCPCS codes designated as
unlisted procedures, base units are developed based on the weighted
median base units for anesthesia CPT/HCPCS codes within the series in
which the unlisted procedure code occurs. A nationwide VA distribution
of procedures and services is used for the purpose of computing the
weighted median base units.
(3) Geographically-adjusted 80th percentile conversion factors. A
nationwide 80th percentile conversion factor is calculated according to
the methodology set forth in paragraph (g)(3)(i) of this section. The
nationwide conversion factor is then trended forward to the effective
time period for the charges, as set forth in paragraph (g)(3)(ii) of
this section. The resulting amount is multiplied by geographic area
adjustment factors determined pursuant to paragraph (g)(3)(iii) of this
section, resulting in geographically-adjusted 80th percentile
conversion factors for each geographic area for the effective charge
period.
(i) Nationwide conversion factor. Preliminary 80th percentile
conversion factors for each area are compiled from the MDR database.
Then, a preliminary nationwide weighted-average 80th percentile
conversion factor is calculated, using as weights the population
(census) frequencies for each geographic area as presented in the
Milliman USA, Inc., Health Cost Guidelines (see paragraph (a)(3) of
this section for data sources). A nationwide 80th percentile fee by
CPT/HCPCS code is then computed by multiplying this conversion factor
by the MDR base units for each CPT/HCPCS code. An adjusted 80th
percentile conversion factor by CPT/HCPCS code is then calculated by
dividing the nationwide 80th percentile fee for each procedure code by
the anesthesia base units (as compiled by CMS) for that CPT/HCPCS code.
Finally, a nationwide weighted average 80th percentile conversion
factor is calculated using combined frequencies for billed base units
and time units from the Part B component of the Medicare Standard
Analytical File 5% Sample as weights.
(ii) Trending forward. The nationwide conversion factor, obtained
as described in paragraph (g)(3)(i) of this section, is trended forward
based on changes to the physicians' services component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the
conversion factor.
(iii) Geographic area adjustment factors. The preliminary 80th
percentile conversion factors for each geographic area described in
paragraph (g)(3)(i) of this section are divided by the corresponding
preliminary nationwide 80th percentile conversion factor also described
in paragraph (g)(3)(i). The resulting ratios are the adjustment factors
for each geographic area.
(h) Professional charges for dental services identified by HCPCS
Level II codes. When VA provides or furnishes outpatient dental
professional services within the scope of care referred to in paragraph
(a)(1) of this section, and such services are identified by HCPCS code
rather than CPT code, the charges billed for such services will be
determined in accordance with the provisions of this paragraph. The
charges for dental services vary by geographic area and by HCPCS code.
These charges are calculated as follows:
(1) Formula. For each HCPCS dental code, multiply the nationwide
80th percentile charge determined pursuant to paragraph (h)(2) of this
section by the appropriate geographic area adjustment factor determined
pursuant to paragraph (h)(3) of this section. The result constitutes
the area-specific dental charge.
(2) Nationwide 80th percentile charges by HCPCS code. For each
HCPCS dental code, 80th percentile charges are extracted from three
independent data sources: Prevailing Healthcare Charges System
database; National Dental Advisory Service nationwide pricing index;
and the Dental UCR Module of the Comprehensive Healthcare Payment
System, a release from Ingenix from a nationwide database of dental
charges (see paragraph (a)(3) of this section for data sources).
Charges for each database are then trended forward to a common date,
based on actual changes to the dental services component of the CPI-U.
Charges for each HCPCS dental code from each data source are combined
into an average 80th percentile charge by means of the methodology set
forth in paragraph (h)(2)(i) of this section. HCPCS dental codes
designated as unlisted are assigned 80th percentile charges by means of
the methodology set forth in paragraph (h)(2)(ii) of this section.
Finally, the resulting amounts are each trended forward to the
effective time period for the charges, as set forth in paragraph
(h)(2)(iii) of this section. The results constitute the nationwide 80th
percentile charge for each HCPCS dental code.
(i) Averaging methodology. The average charge for any particular
HCPCS dental code is calculated by first computing a preliminary mean
average of the three charges for each code. Statistical outliers are
identified and removed by testing whether any charge differs from the
preliminary mean charge by more than 50% of the preliminary mean
charge. In such cases, the charge most distant from the preliminary
mean is removed as an outlier, and the average charge is
[[Page 56888]]
calculated as a mean of the two remaining charges. In cases where none
of the charges differ from the preliminary mean charge by more than 50%
of the preliminary mean charge, the average charge is calculated as a
mean of all three reported charges.
(ii) Nationwide 80th percentile charges for HCPCS dental codes
designated as unlisted procedures. For HCPCS dental codes designated as
unlisted procedures, 80th percentile charges are developed based on the
weighted median 80th percentile charge of HCPCS dental codes within the
series in which the unlisted procedure code occurs. The distribution of
procedures and services from the Prevailing Healthcare Charges System
nationwide commercial insurance database is used for the purpose of
computing the weighted median.
(iii) Trending forward. 80th percentile charges for each dental
procedure code, obtained as described in paragraph (h)(2) of this
section, are trended forward based on the dental services component of
the CPI-U. Actual CPI-U changes are used from the time period of the
source data through the latest available month as of the time the
calculations are performed. The three-month average annual trend rate
as of the latest available month is then held constant to the midpoint
of the calendar year in which the charges are primarily expected to be
used. The projected total CPI-U change so obtained is then applied to
the 80th percentile charges.
(3) Geographic area adjustment factors. A geographic adjustment
factor (consisting of the ratio of the level of charges in a given
geographic area to the nationwide level of charges) for each geographic
area and dental class of service is obtained from Milliman USA, Inc.,
Dental Health Cost Guidelines, a database of nationwide commercial
insurance charges and relative costs; and a normalized geographic
adjustment factor computed from the Dental UCR Module of the
Comprehensive Healthcare Payment System compiled by Ingenix, as
follows: Using local and nationwide average charges reported in the
Ingenix data, a local weighted average charge for each dental class of
procedure codes is calculated using utilization frequencies from the
Milliman USA, Inc., Dental Health Cost Guidelines as weights (see
paragraph (a)(3) of this section for data sources). Similarly, using
nationwide average charge levels, a nationwide average charge by dental
class of procedure codes is calculated. The normalized geographic
adjustment factor for each dental class of procedure codes and for each
geographic area is the ratio of the local average charge divided by the
corresponding nationwide average charge. Finally, the geographic area
adjustment factor is the arithmetic average of the corresponding
factors from the data sources mentioned in the first sentence of this
paragraph (h)(3).
(i) Pathology and laboratory charges. When VA provides or furnishes
pathology and laboratory services within the scope of care referred to
in paragraph (a)(1) of this section, charges billed for such services
will be determined in accordance with the provisions of this paragraph.
Pathology and laboratory charges consist of charges for services that
vary by geographic area and by CPT/HCPCS code. These charges are
calculated as follows:
(1) Formula. For each CPT/HCPCS code, multiply the total
geographically-adjusted RVUs determined pursuant to paragraph (i)(2) of
this section by the applicable geographically-adjusted conversion
factor (a monetary amount) determined pursuant to paragraph (i)(3) of
this section to obtain the pathology/laboratory charge for each CPT/
HCPCS code in a particular geographic area.
(2)(i) Total geographically-adjusted RVUs for pathology and
laboratory services that have Medicare-based RVUs. Total RVUs are
developed based on the Medicare Clinical Diagnostic Laboratory Fee
Schedule (CLAB). The CLAB payment amounts are upwardly adjusted such
that the adjusted payment amounts are, on average, equivalent to
Medicare Physician Fee Schedule payment levels, using statistical
comparisons to the 80th percentile derived from the MDR database. These
adjusted payment amounts are then divided by the corresponding Medicare
conversion factor to derive RVUs for each CPT/HCPCS code. The resulting
nationwide total RVUs are multiplied by the geographic adjustment
factors determined pursuant to paragraph (i)(2)(iv) of this section to
obtain the area-specific total RVUs.
(ii) RVUs for CPT/HCPCS codes that do not have Medicare-based RVUs
and are not designated as unlisted procedures. For CPT/HCPCS codes that
are not assigned RVUs in paragraphs (i)(2)(i) or (i)(2)(iii) of this
section, total RVUs are developed based on various charge data sources.
For these CPT/HCPCS codes, the nationwide 80th percentile billed
charges are obtained, where statistically credible, from the MDR
database. For any remaining CPT/HCPCS codes, the nationwide 80th
percentile billed charges are obtained, where statistically credible,
from the Part B component of the Medicare Standard Analytical File 5%
Sample. For any remaining CPT/HCPCS codes, the nationwide 80th
percentile billed charges are obtained, where statistically credible,
from the Prevailing Healthcare Charges System nationwide commercial
insurance database. For each of these CPT/HCPCS codes, nationwide total
RVUs are obtained by taking the nationwide 80th percentile billed
charges obtained using the preceding three databases and dividing by
the untrended nationwide conversion factor determined pursuant to
paragraphs (i)(3) and (i)(3)(i) of this section. For any remaining CPT/
HCPCS codes that have not been assigned RVUs using the preceding data
sources, the nationwide total RVUs are calculated by summing the work
expense and non-facility practice expense RVUs found in Ingenix/St.
Anthony's RBRVS. The resulting nationwide total RVUs obtained using
these four data sources are multiplied by the geographic area
adjustment factors determined pursuant to paragraph (i)(2)(iv) of this
section to obtain the area-specific total RVUs.
(iii) RVUs for CPT/HCPCS codes designated as unlisted procedures.
For CPT/HCPCS codes designated as unlisted procedures, total RVUs are
developed based on the weighted median of the total RVUs of CPT/HCPCS
codes within the series in which the unlisted procedure code occurs. A
nationwide VA distribution of procedures and services is used for the
purpose of computing the weighted median. The resulting nationwide
total RVUs are multiplied by the geographic area adjustment factors
determined pursuant to paragraph (i)(2)(iv) of this section to obtain
the area-specific total RVUs.
(iv) RVU geographic area adjustment factors for CPT/HCPCS codes
that do not have Medicare RVUs, including codes that are designated as
unlisted procedures. The adjustment factor for each geographic area
consists of the weighted average of the work expense and practice
expense Medicare Geographic Practice Cost Indices for each geographic
area using charge data for representative CPT/HCPCS codes statistically
selected and weighted for work expense and practice expense.
(3) Geographically-adjusted 80th percentile conversion factors.
Representative CPT/HCPCS codes are statistically selected and weighted
so as to give a weighted average RVU comparable to the weighted average
RVU of the entire pathology/laboratory CPT/HCPCS code group (the
selected CPT/HCPCS codes are set forth in the Milliman USA, Inc.,
Health Cost Guidelines fee survey). The 80th percentile charge for each
selected CPT/
[[Page 56889]]
HCPCS code is obtained from the MDR database. A nationwide conversion
factor (a monetary amount) is calculated as set forth in paragraph
(i)(3)(i) of this section. The nationwide conversion factor is trended
forward to the effective time period for the charges, as set forth in
paragraph (i)(3)(ii) of this section. The resulting amount is
multiplied by a geographic area adjustment factor determined pursuant
to paragraph (i)(3)(iv) of this section, resulting in the
geographically-adjusted 80th percentile conversion factor for the
effective charge period.
(i) Nationwide conversion factors. Using the nationwide 80th
percentile charges for the selected CPT/HCPCS codes from paragraph
(i)(3) of this section, a nationwide conversion factor is calculated by
dividing the weighted average charge by the weighted average RVU.
(ii) Trending forward. The nationwide conversion factor, obtained
as described in paragraph (i)(3) of this section, is trended forward
based on changes to the physicians' services component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the
pathology/laboratory conversion factor.
(iii) Geographic area adjustment factor. Using the 80th percentile
charges for the selected CPT/HCPCS codes from paragraph (i)(3) of this
section for each geographic area, a geographic area-specific conversion
factor is calculated by dividing the weighted average charge by the
weighted average geographically-adjusted RVU. The resulting geographic
area conversion factor is divided by the corresponding nationwide
conversion factor determined pursuant to paragraph (i)(3)(i) of this
section. The resulting ratios are the geographic area adjustment
factors for pathology and laboratory services for each geographic area.
(j) Observation care facility charges. When VA provides observation
care within the scope of care referred to in paragraph (a)(1) of this
section, the facility charges billed for such care will be determined
in accordance with the provisions of this paragraph. The charges for
this care vary by geographic area and number of hours of care. These
charges are calculated as follows:
(1) Formula. For each occurrence of observation care, add the
nationwide base charge determined pursuant to paragraph (j)(2) of this
section to the product of the number of hours in observation care and
the hourly charge also determined pursuant to paragraph (j)(2) of this
section. Then multiply this amount by the appropriate geographic area
adjustment factor determined pursuant to paragraph (j)(3) of this
section. The result constitutes the area-specific observation care
facility charge.
(2)(i) Nationwide 80th percentile observation care facility
charges. To calculate nationwide base and hourly facility charges, all
claims with observation care line items are selected from the
outpatient facility component of the Medicare Standard Analytical File
5% Sample. Then, using the 80th percentile observation line item
charges for each unique hourly length of stay, a standard linear
regression technique is used to calculate the nationwide 80th
percentile base charge and 80th percentile hourly charge. Finally, the
resulting amounts are each trended forward to the effective time period
for the charges, as set forth in paragraph (j)(2)(ii) of this section.
The results constitute the nationwide 80th percentile base and hourly
facility charges for observation care.
(ii) Trending forward. The nationwide 80th percentile base and
hourly facility charges for observation care, obtained as described in
paragraph (j)(2)(i) of this section, are trended forward based on
changes to the outpatient hospital services component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the 80th
percentile charges.
(3) Geographic area adjustment factors. The geographic area
adjustment factors for observation care facility charges are the same
as those computed for outpatient facility charges under paragraph
(e)(4) of this section.
(k) Ambulance and other emergency transportation charges. When VA
provides ambulance and other emergency transportation services that are
within the scope of care referred to in paragraph (a)(1) of this
section, the charges billed for such services will be determined in
accordance with the provisions of this paragraph. The charges for these
services vary by HCPCS code, length of trip, and geographic area. These
charges are calculated as follows:
(1) Formula. For each occasion of ambulance or other emergency
transportation service, add the nationwide base charge for the
appropriate HCPCS code determined pursuant to paragraph (k)(2)(i) of
this section to the product of the number of miles traveled and the
appropriate HCPCS code mileage charge determined pursuant to paragraph
(k)(2)(ii) of this section. Then multiply this amount by the
appropriate geographic area adjustment factor determined pursuant to
paragraph (k)(3) of this section. The result constitutes the area-
specific ambulance or other emergency transportation service charge.
(2)(i) Nationwide 80th percentile all-inclusive base charge. To
calculate a nationwide all-inclusive base charge, all ambulance and
other emergency transportation claims are selected from the outpatient
facility component of the Medicare Standard Analytical File 5% Sample.
Excluding professional and mileage charges, as well as all-inclusive
charges which are reported on such claims, the total charge per claim,
including incidental supplies, is computed. Then, the 80th percentile
amount for each HCPCS code is computed. Finally, the resulting amounts
are each trended forward to the effective time period for the charges,
as set forth in paragraph (k)(2)(iii) of this section. The results
constitute the nationwide 80th percentile all-inclusive base charge for
each HCPCS base charge code.
(ii) Nationwide 80th percentile mileage charge. To calculate a
nationwide mileage charge, all ambulance and other emergency
transportation claims are selected from the outpatient facility
component of the Medicare Standard Analytical File 5% Sample. Excluding
professional, incidental, and base charges, as well as claims with all-
inclusive charges, the total mileage charge per claim is computed. This
amount is divided by the number of miles reported on the claim. Then,
the 80th percentile amount for each HCPCS code, using miles as weights,
is computed. Finally, the resulting amounts are each trended forward to
the effective time period for the charges, as set forth in paragraph
(k)(2)(iii) of this section. The results constitute the nationwide 80th
percentile mileage charge for each HCPCS mileage code.
(iii) Trending forward. The nationwide 80th percentile charge for
each HCPCS code, obtained as described in paragraphs (k)(2)(i) and
(k)(2)(ii) of this section, is trended forward based on
[[Page 56890]]
changes to the outpatient hospital services component of the CPI-U.
Actual CPI-U changes are used from the time period of the source data
through the latest available month as of the time the calculations are
performed. The three-month average annual trend rate as of the latest
available month is then held constant to the midpoint of the calendar
year in which the charges are primarily expected to be used. The
projected total CPI-U change so obtained is then applied to the 80th
percentile charges.
(3) Geographic area adjustment factors. The geographic area
adjustment factors for ambulance and other emergency transportation
charges are the same as those computed for outpatient facility charges
under paragraph (e)(4) of this section.
(l) Charges for durable medical equipment, drugs, injectables, and
other medical services, items, and supplies identified by HCPCS Level
II codes. When VA provides DME, drugs, injectables, or other medical
services, items, or supplies that are identified by HCPCS Level II
codes and that are within the scope of care referred to in paragraph
(a)(1) of this section, the charges billed for such services, items,
and supplies will be determined in accordance with the provisions of
this paragraph. The charges for these services, items, and supplies
vary by geographic area, by HCPCS code, and by modifier, when
applicable. These charges are calculated as follows:
(1) Formula. For each HCPCS code, multiply the nationwide charge
determined pursuant to paragraphs (l)(2), (l)(3), and (l)(4) of this
section by the appropriate geographic area adjustment factor determined
pursuant to paragraph (l)(5) of this section. The result constitutes
the area-specific charge.
(2) Nationwide 80th percentile charges for HCPCS codes with RVUs.
For each applicable HCPCS code, RVUs are compiled from the data sources
set forth in paragraph (l)(2)(i) of this section. The RVUs are
multiplied by the charge amount for each incremental RVU determined
pursuant to paragraph (l)(2)(ii) of this section, and this amount is
added to the fixed charge amount also determined pursuant to paragraph
(l)(2)(ii) of this section. Then, for each HCPCS code, this charge is
multiplied by the appropriate 80th percentile to median charge ratio
determined pursuant to paragraph (l)(2)(iii) of this section. Finally,
the resulting amount is trended forward to the effective time period
for the charges, as set forth in paragraph (l)(2)(iv) of this section
to obtain the nationwide 80th percentile charge.
(i) RVUs for DME, drugs, injectables, and other medical services,
items, and supplies. For the purpose of the statistical methodology set
forth in paragraph (l)(2)(ii) of this section, HCPCS codes are assigned
to the following HCPCS code groups. For the HCPCS codes in each group,
the RVUs or amounts indicated constitute the RVUs:
(A) Chemotherapy Drugs: Ingenix/St. Anthony's RBRVS Practice
Expense RVUs.
(B) Other Drugs: Ingenix/St. Anthony's RBRVS Practice Expense RVUs.
(C) DME--Hospital Beds: Medicare DME Fee Schedule amounts.
(D) DME--Medical/Surgical Supplies: Medicare DME Fee Schedule
amounts.
(E) DME--Orthotic Devices: Medicare DME Fee Schedule amounts.
(F) DME--Oxygen and Supplies: Medicare DME Fee Schedule amounts.
(G) DME--Wheelchairs: Medicare DME Fee Schedule amounts.
(H) Other DME: Medicare DME Fee Schedule amounts.
(I) Enteral/Parenteral Supplies: Medicare Parenteral and Enteral
Nutrition Fee Schedule amounts.
(J) Surgical Dressings and Supplies: Medicare DME Fee Schedule
amounts.
(K) Vision Items--Other Than Lenses: Medicare DME Fee Schedule
amounts.
(L) Vision Items--Lenses: Medicare DME Fee Schedule amounts.
(M) Hearing Items: Ingenix/St. Anthony's RBRVS Practice Expense
RVUs.
(ii) Charge amounts. Using combined Part B and DME components of
the Medicare Standard Analytical File 5% Sample, the median billed
charge is calculated for each HCPCS code. A mathematical approximation
methodology based on least squares techniques is applied to the RVUs
specified for each of the groups set forth in paragraph (l)(2)(i) of
this section, yielding two charge amounts for each HCPCS code group: a
charge amount per incremental RVU, and a fixed charge amount.
(iii) 80th Percentile to median charge ratios. Two ratios are
obtained for each HCPCS code group set forth in paragraph (l)(2)(i) of
this section by dividing the weighted average 80th percentile charge by
the weighted average median charge derived from two data sources:
Medicare data, as represented by the combined Part B and DME components
of the Medicare Standard Analytical File 5% Sample; and the MDR
database. Charge frequencies from the Medicare data are used as weights
when calculating all weighted averages. For each HCPCS code group, the
smaller of the two ratios is selected as the adjustment from median to
80th percentile charges.
(iv) Trending forward. The charges for each HCPCS code, obtained as
described in paragraph (l)(2)(iii) of this section, are trended forward
based on changes to the medical care commodities component of the CPI-
U. Actual CPI-U changes are used from the time period of the source
data through the latest available month as of the time the calculations
are performed. The three-month average annual trend rate as of the
latest available month is then held constant to the midpoint of the
calendar year in which the charges are primarily expected to be used.
The projected total CPI-U change so obtained is then applied to the
80th percentile charges, as described in paragraph (l)(2)(iii) of this
section.
(3) Nationwide 80th percentile charges for HCPCS codes without
RVUs. For each applicable HCPCS code, 80th percentile charges are
extracted from three independent data sources: the MDR database;
Medicare, as represented by the combined Part B and DME components of
the Medicare Standard Analytical File 5% Sample; and Milliman USA,
Inc., Optimized HMO (Health Maintenance Organization) Data Sets (see
paragraph (a)(3) of this section for data sources). Charges from each
database are then trended forward to the effective time period for the
charges, as set forth in paragraph (l)(3)(i) of this section. Charges
for each HCPCS code from each data source are combined into an average
80th percentile charge by means of the methodology set forth in
paragraph (l)(3)(ii) of this section. The results constitute the
nationwide 80th percentile charge for each applicable HCPCS code.
(i) Trending forward. The charges from each database for each HCPCS
code, obtained as described in paragraph (l)(3) of this section, are
trended forward based on changes to the medical care commodities
component of the CPI-U. Actual CPI-U changes are used from the time
period of each source database through the latest available month as of
the time the calculations are performed. The three-month average annual
trend rate as of the latest available month is then held constant to
the midpoint of the calendar year in which the charges are primarily
expected to be used. The projected total CPI-U change so obtained is
then applied to the 80th percentile charges, as described in paragraph
(l)(3) of this section.
[[Page 56891]]
(ii) Averaging methodology. The average 80th percentile trended
charge for any particular HCPCS code is calculated by first computing a
preliminary mean average of the three charges for each HCPCS code.
Statistical outliers are identified and removed by testing whether any
charge differs from the preliminary mean charge by more than 5 times
the preliminary mean charge, or by less than 0.2 times the preliminary
mean charge. In such cases, the charge most distant from the
preliminary mean is removed as an outlier, and the average charge is
calculated as a mean of the two remaining charges. In cases where none
of the charges differ from the preliminary mean charge by more than 5
times the preliminary mean charge, or less than 0.2 times the
preliminary mean charge, the average charge is calculated as a mean of
all three reported charges.
(4) Nationwide 80th percentile charges for HCPCS codes designated
as unlisted or unspecified. For HCPCS codes designated as unlisted or
unspecified procedures, services, items, or supplies, 80th percentile
charges are developed based on the weighted median 80th percentile
charges of HCPCS codes within the series in which the unlisted or
unspecified code occurs. A nationwide VA distribution of procedures,
services, items, and supplies is used for the purpose of computing the
weighted median.
(5) Geographic area adjustment factors. For the purpose of
geographic adjustment, HCPCS codes are combined into two groups: drugs
and DME/supplies, as set forth in paragraph (l)(5)(i) of this section.
The geographic area adjustment factor for each of these groups is
calculated as the ratio of the area-specific weighted average charge
determined pursuant to paragraph (l)(5)(ii) of this section divided by
the nationwide weighted average charge determined pursuant to paragraph
(l)(5)(iii) of this section.
(i) Combined HCPCS code groups for geographic area adjustment
factors for DME, drugs, injectables, and other medical services, items,
and supplies. For the purpose of the statistical methodology set forth
in paragraph (l)(5) of this section, each of the HCPCS code groups set
forth in paragraph (l)(2)(i) of this section is assigned to one of two
combined HCPCS code groups, as follows:
(A) Chemotherapy Drugs: Drugs.
(B) Other Drugs: Drugs.
(C) DME--Hospital Beds: DME/supplies.
(D) DME--Medical/Surgical Supplies: DME/supplies.
(E) DME--Orthotic Devices: DME/supplies.
(F) DME--Oxygen and Supplies: DME/supplies.
(G) DME--Wheelchairs: DME/supplies.
(H) Other DME: DME/supplies.
(I) Enteral/Parenteral Supplies: DME/supplies.
(J) Surgical Dressings and Supplies: DME/supplies.
(K) Vision Items--Other Than Lenses: DME/supplies.
(L) Vision Items--Lenses: DME/supplies.
(M) Hearing Items: DME/supplies.
(ii) Area-specific weighted average charges. Using the median
charges by HCPCS code from the MDR database for each geographic area
and utilization frequencies by HCPCS code from the combined Part B and
DME components of the Medicare Standard Analytical File 5% Sample, an
area-specific weighted average charge is calculated for each combined
HCPCS code group.
(iii) Nationwide weighted average charges. Using the area-specific
weighted average charges determined pursuant to paragraph (l)(5)(ii) of
this section, a nationwide weighted average charge is calculated for
each combined HCPCS code group, using as weights the population
(census) frequencies for each geographic area as presented in the
Milliman USA, Inc., Health Cost Guidelines (see paragraph (a)(3) of
this section for data sources).
(m) Charges for prescription drugs not administered during
treatment. Notwithstanding other provisions of this section, when VA
provides or furnishes 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 prescription drugs
will be based on VA costs in accordance with the methodology set forth
in Sec. 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. 03-24102 Filed 10-1-03; 8:45 am]
BILLING CODE 8320-01-P