View Rule

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 title 10 of the U.S.C., section 1079(i)(2) 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 (OPPS) 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.

Statement of Need:

The rule finalizes modifications to TRICARE regulation necessary to implement Medicare-similar reimbursement methods for Ambulatory Surgery Centers (ASCs) and Cancer and Children’s Hospitals (CCHs). This is outlined in 10 USC 1079(i)(2) which 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.

Summary of the Legal Basis:

This rule is issued under 10 U.S.C. 1073 (a)(2) giving authority and responsibility to the Secretary of Defense to administer the TRICARE program.

Alternatives:

(1) No action.

(2)  Permitting a transition period for Ambulatory Surgery Centers (ASCs). DHA explored the use of a transition period that blended the current reimbursement method with the proposed method. This would slowly shift the rates to be fully aligned with Medicare at the end of the transition and would protect providers from lower payments.  After comparing the differences in rates, DHA found that many providers are likely to see an increase in reimbursement, which would not be effective until the end of the transition period.  Some providers may see a decrease in payments, but on the whole, Medicare’s payments have been found to be adequate based upon a Medicare Payment Advisory Committee (MedPAC) review.  As a result, DHA will not adopt a transition period.

(3) Permitting a transition period for Cancer and Children’s Hospitals (CCHs). DHA explored the use of a transition period that blended the current reimbursement method with the proposed, and slowly shifted the rates to be fully aligned with Medicare at the end of the transition. This would be done to protect providers from payments below their cost, in the event that the rates are significantly affected. To protect CCHs, DHA will ensure that CCHs are reimbursed the greater of 100% of their costs or the OPPS payment.  Because many CCH providers will receive payment increases, a transition period would not be beneficial for them. Historically, transitions are done to protect providers from payments below their costs.  However, in this case, providers will be held-harmless, so no transition is necessary.

Anticipated Costs and Benefits:

Economic impact of this rule is based on analysis of expected outcomes had the rule been implemented in 2021.  The overall impact to the DoD, for ASC reimbursement, would be $10 million in reduced payments for ASCs.  The overall impact to the DoD, for adopting OPPS for CCHs, would be $35 million in reduced payments to these providers.  The combined impact is a cost-saving of approximately $45 million, which would be offset by $1.5 million in administrative costs to implement the changes.  This estimated reduction in costs of $45 million is a transfer from providers to DoD.

Risks:

None.  DHA is adopting the new Ambulatory Surgery Center (ASC) and Cancer and Children’s Hospital (CCH) reimbursement systems to be consistent with Medicare’s, as required by statute.  Although DHA expects a decrease in total TRICARE payments for ASCs; however, rates for almost half the high-volume ASC surgeries will increase under the new ASC payment system.  DHA also notes that even if some ASCs deny access to some surgeries, TRICARE beneficiaries would be largely protected from access problems as these patients could have their surgeries performed in hospital outpatient departments (HOPDs).  Additionally, CCHs will be held harmless, as they will receive, at a minimum, one-hundred percent of its costs, or the higher payment under Outpatient Prospective Payment System (OPPS).  Under the new method, CCHs may be eligible for the General Temporary Military Contingency Payment Adjustments (GTMCPA) that will ensure network adequacy during military contingency operations.  These GTMCPAs will be issued in the same manner as those made currently under TRICARE’s OPPS.