3.2 The allowable
charge is the lowest of:
• The actual billed
charge;
• The
prevailing charge (or amount derived from a conversion factor) made
for a given procedure, adjusted to reflect local economic conditions;
or
• The
maximum allowable charge.
Maximum
allowable charges are developed on a nationwide, non-specialty basis
and are set at the 80th percentile of charges made for a given procedure
during the base period. Non-specialty means that there is to be
no distinction between types of physicians, although separate profiles
are to be developed for different classes of providers, e.g., physicians
and non-physicians. Maximum allowable charges will be adjusted to
reflect local economic conditions through the application of Medicare
Geographic Adjustment Factors.
When
no maximum allowable charge is available, a prevailing charge is
to be developed for the state where a service or procedure is provided.
Prevailing charges are those charges which fall within the range
of charges that are most frequently used in a state for a particular
procedure or service. The top of this range establishes an overall
limitation on the charges which the contractor shall accept as allowable
for a given procedure or service, except when unusual circumstances
or medical complications warrant an additional charge.
3.2.1 Unless
a specific exception has been made, prevailing profiles must be
developed on a statewide basis. Localities within states are not
to be used, nor are prevailing profiles to be developed for any
area larger than individual states.
3.2.2 Prevailing profiles also are
to be developed on a non-specialty basis. Of course, types of service
are to be differentiated. For example, for a given surgical procedure
the surgeon, assistant surgeon, and the anesthesiologist would all
be reimbursed based on different profiles. However, reimbursement
for the actual surgery would be based on only one profile, regardless
of whether the surgery was performed by a specialist or a general
surgeon. An exception to this rule is that when services are performed
by different classes of providers; e.g., a physician vis-a-vis a
nonphysician, separate profiles are to be developed for each class
of provider. For example, there are three distinct classes of providers
who render similar psychiatric services; psychiatrists, psychologists
and others (medical social workers (MSWs), marriage and family counselors,
pastoral counselors, mental health counselors, etc.). Moreover,
two distinct classes of providers render obstetrical services; physicians
and nurse midwives. Separate profiles are to be developed for each
of the classes. Since a physician can render more comprehensive
services than nonphysicians (and likewise for psychologists as opposed
to MSWs) the profile for the lesser-qualified class of provider
should never be higher than that for a higher-qualified class of
provider. For example, in cases in which psychologists’ profiles
are higher than psychiatrists’, the psychologists’ profiles should
be lowered to that of the psychiatrists’ profiles.
3.2.3 When there
are two or more procedures which are identical except for the amount
of time involved (e.g., CPT procedures codes 90843 and 90844), the
contractor is to ensure that the profile for the shorter procedure
does not exceed the profile for the longer procedure. In those cases
in which it does, the contractor is to reduce the profile for the
shorter procedure to that of the longer procedure.
3.2.4 Calculating
the Prevailing Charge. For any profile period, the prevailing profile
in a state for a particular service or procedure must be calculated
as the 80th percentile of all the actual charges made for that service
or procedure. In this calculation, all actual charges for the service
or procedure shall be arrayed in ascending order and the lowest
charge which is high enough to include 80% of the cumulative charges
is determined to be the prevailing charge.
3.2.4.1 The proper
procedure for establishing prevailing charges based on the 80th
percentile is illustrated by the following example:
|
Provider
|
Charge
|
Number Of Services
|
|
A
|
$12.00
13.00
15.00
|
21
16
35
|
|
B
|
12.00
13.50
|
17
65
|
|
C
|
11.00
13.00
15.00
|
3
54
11
|
|
D
|
12.00
|
32
|
|
E
|
12.50
13.50
|
18
22
|
|
Charge
|
Number Of Services
|
Number Of Services
|
|
$11.00
|
3
|
3
|
|
12.00
|
70
|
73
|
|
12.50
|
18
|
91
|
|
13.00
|
70
|
161
|
|
13.50
|
87
|
248
|
|
15.00
|
46
|
294
|
3.2.4.2 In the
above example, 80% of the total of 294 services equals 235.2 services.
The prevailing charge is, therefore, the 236th charge or $13.50.
Calculations of the 80th percentile are to be rounded to the next
higher number of accumulative services.
3.2.4.3 To more
accurately reflect prevailing charges in a state, a minimum of eight
(8) charges must be used to establish a prevailing charge.
3.2.4.4 When it
is necessary to establish charges through the use of price lists,
these charges shall also be used to establish the required prevailing
charge limits. In this regard, if a contractor cannot derive precise
data on the frequency of services from its records, it may use any
information it has about the volume of business done by various
suppliers in its area in order to weight the charges used to calculate
the prevailing charges. This information must be documented and
retained for review.
3.2.4.5 A sales
tax on any service or item covered is part of a beneficiary’s medical
expense for which he or she is responsible and for which he or she
may receive reimbursement of the allowable charge after the cost-share
and deductible is met. Therefore, the total charge for a service
or item, including the sales tax, is the correct amount to use in
the determination of the prevailing charge. For example, if a supplier
charges $7 for a covered medical supply and 28 cents sales tax,
the total charge of $7.28 is the amount to use in the determination
of the prevailing charge for that supply.
Note: When a provider has agreed to discount his or
her normal billed charges, for the purpose of calculating the allowable
charge the discounted fee shall be considered the provider’s actual
billed charge when the discounted amount is below the billed charge.
3.3 The allowable
profiles (CHAMPUS Maximum Allowable Charge (CMAC) files) will be
updated at least once per year, and this will usually occur on February
1.
Note: Prevailing charges were frozen at 1990 level during
the period of January through October 6, 1991, consistent with Public
Law 101-511, Section 8012. With the implementation of CMACs on May 1,
1992 (see
Section 2), allowable professional charges
other than CMACs were frozen for services on or after May 1, 1992.
Frozen allowable charges include all TRICARE established prevailings
and conversion factors for: ambulance services, anesthesia services
,
DME, and supplies, oxygen and related supplies, etc. This means
that contractors shall limit payment for these services to May 1,
1992, levels. For new services or procedure codes since May 1, 1992,
the contractors shall establish an allowable charge or conversion
factor using the TRICARE allowable methodology, freezing the new
allowable charge or conversion factor from the date it is established.
Effective October 1, 1997, Level II (HCPCS) shall have allowable
charges established by cross-walking from existing allowable charges
of DHA assigned codes. Effective with the 2012 CMAC update and subsequent
CMAC updates, the provisions in
Section 3, paragraph 3.7.5 regarding the annual
update of state prevailing rates shall apply. For ambulance services
provided on or after October 1, 2013, TRICARE adopts Medicare’s
Ambulance Fee Schedule (AFS) as the TRICARE CMAC for ambulance services
(see
Chapter 1, Section 14).