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The Department of Defense, Defense Health Agency, is revising its reimbursement of Long-Term Care Hospitals (LTCHs) and Inpatient Rehabilitation Facilities (IRFs). Revisions are in accordance with the statutory provision at title 10, United States Code, 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 deletes this definition and creates 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, to the Defense Health Agency is adopting both the Medicare LTCH and IRF Prospective Payment System (PPS) methods simultaneously to align with our statutory requirement to reimburse like Medicare. This rule sets forth the regulation modifications that are 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.