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 upon different
profiles. However, reimbursement for the actual surgery would be
based upon 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
non-physician, 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 non-physicians
(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
upon 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 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 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 for:
ambulance services, anesthesia services
,
DME, and supplies, oxygen and related supplies, etc. This means
that
the contractor shall limit payment
for these services to May 1, 1992, levels. For new services or procedure
codes since May 1, 1992, the
contractor 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).