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The Department of Defense, Defense Health Agency, is proposing to revise its reimbursement of Long Term Care Hospitals (LTCHs) and Inpatient Rehabilitation Facilities (IRFs). Proposed revisions are in accordance with the statutory provision at title 10, United States Code (U.S.C.), section 1079(i)(2) that requires TRICARE 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. 32 CFR 199.2 includes a definition for "Hospital, long-term (tuberculosis, chronic care, or rehabilitation)." This rule proposes to delete this definition and create separate definitions for "Long Term Care Hospital" and "Inpatient Rehabilitation Facility" in accordance with Centers for Medicare and Medicaid Services (CMS) classification criteria. Under TRICARE, LTCHs and IRFs (both freestanding rehabilitation hospitals and rehabilitation hospital units) are currently paid the lower of a negotiated rate (if they are a network provider) or billed charges (if they are a non-network provider). Although Medicare’s reimbursement methods for LTCHs and IRFs are different, it is prudent to propose adopting both the Medicare LTCH and IRF Prospective Payment System (PPS) methods simultaneously to align with our statutory requirement to reimburse like Medicare.This proposed rule sets forth the proposed regulation modifications necessary for TRICARE to adopt Medicare’s LTCH and IRF Prospective Payment Systems and rates applicable for inpatient services provided by LTCHs and IRFs to TRICARE beneficiaries.  The revisions to this rule will be reported in future status updates as part of DoD's retrospective plan under Executive Order 13563, completed in August 2011. DoD's full plan can be accessed at: http://www.regulations.gov/#!docketDetail;D=DOD-2011-OS-0036.

Statement of Need:

The rule is necessary to meet the statutory provision to use Medicare reimbursement rules to the extent practicable.

Summary of the Legal Basis:

Congress established enabling legislation under section 707 of the National Defense Authorization Act of Fiscal Year 2002 (NDAA-02), Public Law 107-107 (Dec. 28, 2001) changing the statutory authorization in 10 U.S.C. 1079 (j)(2) that TRICARE payment methods for institutional care shall be determined to the extent practicable, in accordance with the same reimbursement rules used by Medicare

Alternatives:

This rule implements statutorily required provisions for adoption and implementation of Medicare institutional reimbursement rules which are consistent with well established congressional objectives. No other alternative is applicable.

Anticipated Costs and Benefits:

It is projected that implementation of this rule in Fiscal Year (FY) 17 will result in a health care savings of $77 million for LTCHs and $53 million for IRFs.

Risks:

The rule implements statutorily required provisions for adoption and implementation of Medicare institutional reimbursement systems which are consistent with well established Congressional objectives. No risk to the public is applicable.