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).