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).