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.
Note: 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.
Note: 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 (e.g., medical social workers (MSWs), marriage and family
counselors, pastoral counselors, mental health counselors). 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 The contractor
is to ensure that the profile for the shorter procedure does not
exceed the profile for the longer procedure when there are two or
more procedures which are identical except for the amount of time involved
(e.g., Current Procedural Terminology (CPT) codes 90843 and 90844).
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.
3.2.5 Annual update of state prevailing
amounts, reference
Section 3.
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 3), 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 (e.g., ambulance
services, anesthesia services
,
DME, and supplies, oxygen and related supplies). 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 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).