The Department of Defense, Defense Health Agency, is revising its regulation on the reimbursement of ambulatory surgery centers (ASC) and outpatient services provided in Cancer and Children’s Hospitals (CCHs). Revisions are in accordance with the statutory provision at section 1079(i)(2) of title 10 of the United States Code, that requires TRICARE’s payment methods for institutional care be determined, to the extent practicable, in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under Medicare. In accordance with this requirement, TRICARE will: (1) adopt Medicare’s payment methodology for Ambulatory Surgery Centers (ASC) and (2) adopt Medicare’s payment methodology for outpatient services provided in Cancer and Children’s Hospitals (CCHs). Although Medicare’s reimbursement methods for ASC and CCHs are different, it is prudent to adopt both the Medicare ASC system and to adopt the Outpatient Prospective Payment System with hold-harmless adjustments (meaning the provider is not reimbursed less than their costs) for CCHs simultaneously to align with our statutory requirement to reimburse like Medicare at the same time. This rule makes the modifications necessary to implement TRICARE reimbursement methodologies similar to those applicable to Medicare beneficiaries for outpatient services rendered in ASCs and CCHs.