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TRICARE Reimbursement Manual 6010.64-M, April 2021
Alternate Payment Models (APMs)
Chapter 18
Section 2
Low-Value Care (LVC) Medical Interventions
Issue Date:  April 6, 2021
Authority:   Title 10, United States Code (USC), Sections 1079, 1086, and 1097; 10 USC 1079 (h) and (i); 32 CFR 199.14(j)(4) and (m)
Note:  32 CFR 199.14(j) and (m) permitting network discounts and alternative methods of reimbursement. 10 USC 1079(a)(12) requires care provided to be medically or psychologically necessary.
1.1  The contractor shall efficiently and effectively manage low-value medical interventions and shall be at-risk for the appropriate provision of specified low-value medical interventions.
1.2  The goals of this requirement are:
•  Reduce care that provides little or no benefit to patients
•  Reduce or eliminate care that has the potential to cause patient harm.
•  Reduce care that can incur unnecessary costs to patients or wastes limited healthcare resources.
•  Reduce wasteful spending in healthcare.
•  Improved quality of care.
•  Improved patient outcomes.
•  Improved beneficiary satisfaction.
•  Empower beneficiaries to make healthy choices.
LVC is defined as services that are medically unnecessary and provide no health benefits to patients. In some cases, LVC can even be harmful to the patient and/or lead to further unnecessary testing or treatment. To manage low-value medical interventions; two forms of alternative payment models will be used: capitation and risk-sharing.
2.1  Annually, beginning with Option year 1, the contractor shall identify the top five low value services within their beneficiary population using the prior year’s claims data and submit this information to DHA for approval. The contractor shall establish an annual capitation amount or risk-sharing methodology for these services with DHA’s coordination and approval. Low-value services that were capitated or risk-sharing in the previous year may be subject to continued capitation or risk-sharing in subsequent years.
2.2  The contractor shall ensure that care is provided only when medically necessary and appropriate in accordance with established statute, regulation, and policy, while identifying opportunities to reduce the utilization of LVC services that are not medically necessary, harmful to the patient, or lead to further unnecessary testing or treatment.
2.3  The contractor shall manage the utilization of LVC services as follows:
•  Implement policies, procedures and systems for tracking the utilization of the LVC services and associated interventions;
•  Purchase or develop an LVC grouper software package that identifies LVC services. Develop a program to scrub claims and identify where LVC is occurring.
•  Incorporate industry standard resources (e.g., Medicare’s 31 evidence based measures, Choosing Wisely, Hayes, etc.) to develop a tiered list of services;
•  The top five LVC services will be determined as those LVC services with the highest frequency of utilization;
•  For every low-value service provided, the contractor shall have a mechanism to determine and track whether that service was medically necessary and appropriate; and
•  The contractor shall analyze this information on a quarterly basis to determine whether the LVC interventions are effective at reducing non-medically necessary utilization of the LVC services.
2.4  DHA will review and approve the contractor’s policies, procedures, groupers and systems related to LVC and for determining the medical necessity and appropriateness of low-value services provided to prior to contract implementation. DHA will require the contractor to submit an analysis of the effectiveness of the LVC interventions and outcomes on an annual basis. The annual report should include a synopsis of the contractor’s quarterly analysis and interventions.
2.5  DHA will develop a population-based utilization target (e.g., utilization per 1,000 beneficiaries) for each LVC service. If contractors meet the set target for the specific LVC service; the contractor will be entitled to gain-sharing. If contractors do not meet the target, contractors are subject to loss-sharing.
3.1  DHA will establish a population-based utilization-target and over the course of the three option years, will capitate the contractor in decreasing amounts for those LVC services until such time that the target is achieved.
3.2  DHA will utilize the contractor’s historical data (baseline year paid claims) to determine the benchmarks to utilize when establishing target utilization rates for selected services in the option years. Target utilization will be based upon reliable clinical evidence. Contractors will receive the capitated payments on a [semi-annually/quarterly] basis. The contractors shall submit all TRICARE Encounter Data (TED) claims for these capitated services in accordance with standard claims submission time frames. Each TED claim must include amount billed, amount allowed and the amount paid to the provider. Note: If the contractor has capitation agreements with the network providers for these same services, the allowed amount should reflect the shadow price for that service and the paid amount should be $0.
3.3  The contractor shall have multiple opportunities to suggest interventions and utilization targets, and to comment on Government-approved interventions and utilization targets for the upcoming year as outlined in the LVC Review Process outlined in paragraph 3.2.
3.4  The capitated amount will be negotiated between DHA and the contractor in advance of the start of the plan year, once the population-based utilization targets and interventions have been approved by the DHA. DHA will include in the negotiations:
•  The population-based utilization target.
•  The current TRICARE fee-for-service rate for the selected service (either the national rate or an average rate based on the contractor’s region when there is compelling information that the acuity of the population in the contractor’s region differs in a statistically significant way from national benchmarks).
Figure 18.2-1  Low-Value Care (LVC) Review Process
January 1
Provide the Government with top five LVC services, proposed interventions and suggested utilization targets to be targeted in the next plan year based on LVC grouper, utilization reviews, reliable evidence, and best business practices.
April 1
DHA will provide an initial disposition, questions, and comments for consideration by contractor.
July 1
Final top five LVC services and proposed interventions shall be submitted each year for approval for the next plan year. For LVC services that were capitated in the prior year, the contractor should provide updated interventions and recommended utilization targets.
October 1
DHA will notify the contractor of the approved list of LVC services, interventions and utilization targets. DHA will provide proposed capitation or risk-sharing rates for negotiation.
December 1
Finalize capitation/risk-sharing rates.
Finalize capitation/risk-sharing rates.
January 1: Plan Year Start
Provides first cycle of capitation payments to contractor for identified services and utilization targets for upcoming plan year.
Begins submitting TED claims for identified services as outlined in paragraph 3.0.
Note:  DHA recognizes that some utilization of these services are medically necessary and appropriate; thus, targets will never be set to zero. The objective for capitating these LVC services is to spur conversation between the provider and the beneficiary about what is appropriate and necessary treatment. DHA recognizes that each beneficiary situation is unique and that providers and beneficiaries should use the recommendations as guidelines to determine an appropriate treatment plan together. LVC services for which reliable evidence exists that these interventions are of minimal value in many patients, that alternative approaches (including more conservative therapies or enhanced focus on high-value care) are more appropriate and effective, and that reliable evidence exists to establish utilization targets.
3.5  The contractor shall receive the capitation payments for the LVC services approved by DHA, and will not be subject to shared savings adjustments if the contractor’s utilization is lower than the target utilization rate in that option year. Conversely, if the contractor pays more than the capitated rate for the identified care, they are entirely at-risk for the costs associated with these services. Thus, it is incumbent upon the contractor to actively participate in the development of annual interventions and utilization targets utilizing their utilization management criteria, their independent reviews of reliable evidence, and their best business practices.
3.6  The contractor shall reimburse for medically necessary and appropriate care in accordance with timeliness and quality standards; they may not arbitrarily deny care, nor may they place a blanket denial on all care in these categories. The contractor may, and are encouraged, to use all other resources at their disposal to better manage care, to include prior-authorization for non-emergency care; pre- and post-pay review; patient and provider education; and enhanced use of alternative payment methodologies with providers to encourage high-value care.
3.7  Once a population-based utilization target is established, if reliable evidence shows that the standard of care has changed (e.g., if, for example, the United State Preventive Services Task Force (USPSTF) in option year 5 of the contract recommends that all adults receive Vitamin D testing), the contractor may submit a request to DHA for recalculation of the utilization target. DHA may elect to renegotiate any utilization target prospectively, or may elect to terminate the capitated arrangement and defer to standardized claims payment procedures.
3.8  Examples of targeted low-value interventions that may be considered include (list is not binding, nor is it all-inclusive):
•  Diagnostic testing and imaging for low-risk patients prior to low-risk surgery.
•  Vitamin D testing.
•  Use of more expensive branded drugs when generics with identical active ingredients are available for high cost physician-administered drugs (e.g., immunosuppressive therapies).
•  Stents for stable coronary artery disease or stable angina.
•  Cesarean deliveries in low-risk maternity patients.
•  Emergency room (ER) visits for chronic and/or non-emergent conditions such as: upper respiratory infections, asthma, diabetes, behavioral or substance use disorder (SUD) care, Chronic Obstructive Pulmonary Disease (COPD), heart failure, or hypertension.
Figure 18.2-2  Example Calculation of Capitated RateThe contractor identifies Vitamin D testing as an LVC intervention with overuse in the TRICARE population. Reliable evidence (e.g., clinical practice guidelines, peer-reviewed studies) show that, based on analysis of calendar year (CY) 2018 data, only 24.88 tests per 1,000 beneficiaries were ordered for an indication potentially supported by the reliable evidence. In the year prior to the start of health care delivery (SHCD), across TRICARE, 44.6 tests were ordered per 1,000 beneficiaries. For purposes of this example, the Fee-For-Service (FFS) rate for Vitamin D testing will be nationally considered as $26 per test.The contractor in this example has 3.0 million TRICARE beneficiaries enrolled to either a TRICARE Prime or TRICARE Select plan. DHA recognizes that it will take time and effort to reduce utilization of this test, and thus does not capitate at the start of the health care delivery contract. Instead, the contractor shall be capitated as follows:
Capitated Rate*
Note:  Numbers, unless cited, are examples and should not be considered to be validated or accurate of current data, rates, or figures.
* Less any claims processing or other adjustments.
** FFS rate shall be established by DHA, and shall reflect an estimate of contractor’s/region’s prior-years CMAC rate or allowed amount. If the contractor disagrees with the weighted allowed amount based on actual claims data, and no solution is found by December 1, the national rate in place on October 1 shall be used.
*** The utilization target shall be held steady for the duration of the contract once the overall target utilization rate is reached.
SHCD (Baseline Year - Actual Utilization)
3.0 million
35 tests per 1,000 beneficiaries (determined by actual utilization during base year)
Not applicable
Option 1
3.2 million
30 tests per 1,000 beneficiaries
Option 2
3.1 million
28 tests per 1,000 beneficiaries
Option 3
3.0 million
24.88 tests per 1,000 beneficiaries
Option 4***
3.2 million
24.88 tests per 1,000 beneficiaries
3.9  The contractor shall:
3.9.1  Report annually: Utilization of specific LVC services, the interventions to decrease utilization, along with the total reimbursement. This comprehensive report should detail the procedures used to reduce use of LVC (e.g., provider education, prior-authorization requirements) and their efficacy.
3.9.2  Termination of capitated arrangement: If at any time the Government determines that it is not in the best interest of beneficiaries or the Department to continue a capitated arrangement, the capitation arrangement will be ended with at least 30 calendar days of notice, and the contractor shall reimburse the Government a prorated amount of the full capitated amount calculated on the basis of the number of days covered by the capitation arrangement. If the capitated arrangement is terminated, payment shall defer to standard claims payment/TED record processing procedures. Once the capitated amount is negotiated, the contractor may not exit the capitated arrangement without Government approval.
4.1  There may be some types of LVC services for which DHA determines that capitation of the contractor as described herein is not the most appropriate method for incentivizing the reduction of LVC. For such cases, DHA may instead develop incentive provisions specific to the circumstances for that type of care. Possible examples of such alternatives include, but are not limited to, a target cost with risk-sharing or a positive or negative incentive based on specified metrics relevant to the type of care in question.
4.2  Further, risk-sharing may be used in cases where one procedure may be capitated, but the contractor and/or provider substitutes the service with another procedure that is not capitated; hence resulting in DHA’s overall costs for these services being higher than projected.
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