TRICARE Manuals - Display Chap 6 Sect 8 (Change 70, Jun 12, 2023)

3.2.1 Capital Costs

The TRICARE Program will reimburse hospitals for their capital costs as reported annually to the contractor (see below). Payment for capital costs are made annually. See Chapter 3, Section 2 for the procedures for paying capital costs.

3.2.1.1 The TRICARE Program will reimburse 100% of capital-related costs.

3.2.1.2 Allowable capital costs are those specified in Medicare Regulation Section 413.130 of Title 42 Code of Federal Regulations (CFR).

3.2.1.3 To obtain the total allowable capital costs from the Medicare cost reports for initial and amended requests, the contractor shall add the figures from Worksheet D, Part I, Column 3, lines 30-33, lines 34 and 35 if the cost report reflects intensive care unit costs, and line 43, to the figures from Worksheet D, Part II, Column 1, lines 50-76 and 88-93.

3.2.1.4 Services, facilities, or supplies provided by supplying organizations. If services, facilities, or supplies are provided to the hospital by a supplying organization related to the hospital within the meaning of Medicare Regulation Section 413.17, then the hospital shall include in its capital-related costs, the capital-related costs of the supplying organization. However, if the supplying organization is not related to the provider within the meaning of 413.17, no part of the charge to the provider is considered a capital-related cost unless the services, facilities, or supplies are capital-related in nature and:

3.2.1.4.1 The capital-related equipment is leased or rented by the provider;

3.2.1.4.2 The capital-related equipment is located on the provider’s premises; and

3.2.1.4.3 The capital-related portion of the charge is separately specified in the charge to the provider.

3.2.2 Direct Medical Education Costs

The TRICARE Program will reimburse hospitals their actual direct medical education costs as reported annually to the contractor (see below). Such direct medical education costs are for a teaching program approved under Medicare Regulation Section 413.85. Payment for direct medical education costs are made annually and are calculated using the same steps required for calculating capital payments below. Allowable direct medical education costs are those specified in Medicare Regulation Section 413.85. See Chapter 3, Section 2 for the procedures for paying direct medical education costs.

3.2.2.1 Direct medical education costs generally include:

3.2.2.1.1 Formally organized or planned programs of study usually engaged in by providers to enhance the quality of care in an institution.

3.2.2.1.2 Nursing schools.

3.2.2.1.3 Medical education of paraprofessionals (e.g., radiological technicians).

3.2.2.2 Direct medical education costs do not include:

3.2.2.2.1 On-the-job training or other activities which do not involve the actual operation or support, except through tuition or similar payments, of an approved education program.

3.2.2.2.2 Patient education or general health awareness programs offered as a service to the community at large.

3.2.2.3 To obtain the total allowable direct medical education costs from the Medicare cost reports on all initial and amended requests the contractor shall add the figures from Worksheet B, Part I, Columns 20-23, lines 30-33, lines 34 and 35 if the cost report reflects intensive care unit costs, 43; and 50-76; and 88-93.

3.2.3 Determining Amount Of Capital And Direct Medical Education (CAP/DME) Payment

To account for payments by Other Health Insurance (OHI), TRICARE’ payment amounts for CAP/DME are determined according to the following steps. Throughout these calculations claims on which the TRICARE Program made no payment because OHI paid the full TRICARE-allowable amount are not counted.

Step 1: Determine the ratio of TRICARE inpatient days to total inpatient days using the data described below. In determining total TRICARE inpatient days the following are not to be included:

• Any days determined to be not medically necessary, and

• Days included on claims for which the TRICARE Program made no payment because OHI paid the full TRICARE-allowable amount.

Step 2: Multiply the ratio from Step 1 by total allowable capital costs.

Step 3: Reduce the amount from Step 2 by the appropriate capital reduction percentage(s). This is the total allowable TRICARE capital payment for DRG discharges.

Step 4: Multiply the ratio from Step 1 by total allowable direct medical education costs. This is the total allowable TRICARE direct medical education payment for DRG discharges.

Step 5: Combine the amounts from Steps 3 and 4. This is the amount of TRICARE payment due the hospital for CAP/DME.

3.2.4 Payment Of CAP/DME Costs

3.2.4.1 General

All hospitals subject to the TRICARE DRG-based payment system, except for children’s hospitals (see below), are reimbursed for allowed CAP/DME costs by submitting a request and the applicable pages from the Medicare cost-report to the TRICARE contractor.

3.2.4.1.1 Initial requests for payment of CAP/DME are filed with the TRICARE contractor on or before the last day of the 12th month following the close of the hospitals’ cost-reporting period. The request covers the one year period corresponding to the hospital’s Medicare cost-reporting period. Thus, for cost-reporting periods, requests for payment of CAP/DME are filed no later than 12 months following the close of the cost-reporting period. For example, if a hospital’s cost-reporting period ends on June 30, 2016, the request for payment is filed on or before June 30, 2017. Those hospitals that are not Medicare participating providers are to use an October 1 through September 30 Fiscal Year (FY) for reporting CAP/DME costs.

3.2.4.1.1.1 An extension of the due date for filing the initial request is granted when an extension has been granted by the Centers for Medicare and Medicaid Services (CMS) due to a provider’s operations being significantly adversely affected due to extraordinary circumstances over which the provider has no control, such as flood or fire, as described in Section 413.24 of Title 42 CFR.

3.2.4.1.1.2 All costs reported to the TRICARE contractor shall correspond to the costs reported on the hospital’s Medicare cost report. If the costs change as a result of a subsequent Medicare desk review, audit or appeal, the revised costs along with the applicable pages from the amended Medicare cost report are provided to the TRICARE contractor within 30 days of the date the hospital is notified of the change. The request is signed by the hospital official responsible for verifying the amounts. The Medicare Notice of Program Reimbursement (NPR) letter is submitted with the amended cost report.

3.2.4.1.1.3 The 30 day period is a means of encouraging hospitals to report changes in its CAP/DME costs in a timely manner. If the contractor receives an amended request beyond the 30 days, it shall process the adjustment and inform the provider of the importance of submitting timely amendments.

3.2.4.1.1.4 The hospital official is certifying in the initial submission of the cost report that any changes resulting from a subsequent Medicare audit shall be promptly reported. Failure to promptly report the changes resulting from a Medicare audit is considered a misrepresentation of the cost report information. Such a practice may be considered fraudulent, and may result in criminal civil penalties or administrative sanctions of suspension or exclusion as an authorized provider.

3.2.4.2 Information Necessary For Payment Of CAP/DME Costs

The following information is reported to the contractor:

3.2.4.2.1 The hospital’s name.

3.2.4.2.2 The hospital’s address.

3.2.4.2.3 The hospital’s TRICARE provider number.

3.2.4.2.4 The hospital’s Medicare provider number.

3.2.4.2.5 The period covered--this shall correspond to the hospital’s Medicare cost-reporting period.

3.2.4.2.6 Total inpatient days provided to all patients in units subject to DRG-based payment.

3.2.4.2.7 Total TRICARE inpatient days provided in units subject to DRG-based payment. (This is only days which were “allowed” for payment. Therefore, days which were determined not medically necessary are not to be included.) Total inpatient days provided to active duty members in units subject to DRG-based payment.

3.2.4.2.8 Total allowable capital costs. This shall correspond with the applicable pages from the Medicare cost-report.

3.2.4.2.9 Total allowable direct medical education costs. This shall correspond with the applicable pages from the Medicare cost-report.

3.2.4.2.10 Total full-time equivalents for:

• Residents.

• Interns (see below).

3.2.4.2.11 Total inpatient beds (see below).

3.2.4.2.12 Title of official signing the report.

3.2.4.2.13 Reporting date.

3.2.4.2.14 The report shall contain a certification statement that any changes to items in paragraphs 3.2.4.2.6, 3.2.4.2.7, 3.2.4.2.8, 3.2.4.2.9, and 3.2.4.2.10, which are a result of a review, audit, or appeal of the provider’s Medicare cost-report, is reported to the contractor within 30 days of the date the hospital is notified of the change.

3.2.4.2.15 All cost reports shall be certified by an officer or administrator of the provider. The general concept is to notify the certifying official that misrepresentation or falsification of any of the information in the cost report is punishable by fine and/or imprisonment. The signing official shall acknowledge this as well as certify that the cost report filed, together with any supporting documentation, is true, correct and complete based upon the books and records of the provider.

3.2.4.3 Contractor Actions

3.2.4.3.1 Initial requests for CAP/DME payment.

3.2.4.3.1.1 The contractor may, but is not required, to provide inpatient day verification reports to hospitals prior to an initial request being submitted.

3.2.4.3.1.2 The contractor shall verify the number of TRICARE and active duty inpatient days with its data. If the contractor’s data represents a greater number of days than submitted on the hospital’s request, payment is based upon the contractor’s data. If the hospital’s request represents a greater number of days than the contractor’s data, the contractor shall notify the hospital of the discrepancy and inform them payment is based upon the number of days it has on file unless the hospital can provide documentation substantiating the additional days. The notification to the hospital is made within 10 business days of identification of the discrepancy and include the inpatient day verification report.

3.2.4.3.1.3 The contractor shall wait until the end of the following month to hear from the hospital. If the hospital does not respond, the contractor shall make payment based upon its totals.

3.2.4.3.1.4 The contractor shall verify the accuracy of the financial amounts listed for CAP/DME with the applicable pages of the Medicare cost report. If the financial amounts do not match, the contractor shall reimburse the hospital based upon the figures in the cost-report and notify the hospital of the same.

3.2.4.3.1.5 The contractor shall make the CAP/DME payment to the hospital within 30 days of the initial request unless notification has been sent to the hospital regarding a discrepancy in the number of days as outlined in paragraph 3.2.4.3.1.2.

3.2.4.3.2 Amended Requests for CAP/DME.

3.2.4.3.2.1 The contractor may, but is not required, to provide inpatient day verification reports to hospitals prior to an amended request being submitted.

3.2.4.3.2.2 The contractor shall process amended payment requests based upon changes in the Medicare cost-report as a result of desk reviews, audits and appeals. An adjustment is not processed unless there are changes to items 6 through 10 on the initial CAP/DME reimbursement request. The contractor shall not process amended requests for days only.

3.2.4.3.2.3 The contractor shall verify the number of TRICARE and active duty inpatient days with its data. If the contractor’s data represents a greater number of days than submitted on the hospital’s request, payment is based upon the contractor’s data. If the hospital’s request represents a greater number of days than the contractor’s data, the contractor shall notify the hospital of the discrepancy and inform them payment is based upon the number of days it has on file unless the hospital provides documentation substantiating the additional days. The notification to the hospital shall be made within 10 business days of identification of the discrepancy and include the inpatient day verification report.

3.2.4.3.2.4 The contractor shall wait until the end of the following month to hear from the hospital. If the hospital does not respond, the contractor shall make payment based upon its totals.

3.2.4.3.2.5 The contractor shall verify the accuracy of the financial amounts listed for CAP/DME with the applicable pages of the amended Medicare cost report. If the financial amounts do not match, the contractor shall reimburse the hospital based upon the figures in the cost-report and notify the hospital of the same.

3.2.4.3.2.6 The contractor shall make the CAP/DME payment to the hospital within 30 days of the amended request unless notification has been sent to the hospital regarding a discrepancy in the number of days as outlined in paragraph 3.2.4.3.2.2.

3.2.4.3.2.7 The contractor shall proactively research the Medicare web site (https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/index.html) to identify hospitals in its region that submitted amended Medicare cost reports, obtain copies of the amended cost reports from hospitals that failed to submit them to the TRICARE contractor as required, recalculate the CAP/DME costs based upon the revised cost report data, and initiate a collection action or notifying the hospital if an underpayment was identified based upon the results of recalculation. The CMS post the Hospital Cost Report files 30 days after the end of each quarter.

3.2.4.3.2.8 The contractor shall complete the “Annual Capital and Direct Medical Education Report” and submit the information to the Contracting Officer (CO) and the Contracting Officer’s Representative (COR). Details for reporting are identified in DD Form 1423, Contract Data Requirements List (CDRL), located in Section J of the applicable contract.

3.2.4.3.2.9 For a period of one year following the report period, the “Quarterly Capital and Direct Medical Education Over and Under Payment Report”, is updated on a calendar quarterly basis to reflect collections that are received, or underpayments refunded at the hospital’s request, after the end of the previous Calendar Year (CY) report. The quarterly reports shall pertain only to cases initiated in the CY being reported. Details for reporting are identified in DD Form 1423, CDRL located in Section J of the applicable contract.

3.2.4.4 Negotiated Rates. If a contract between the TRICARE Prime contractor and a subcontractor or institutional network provider does not specifically state the negotiated rate including all costs that are otherwise eligible for additional payment, such as CAP/DME, the TRICARE Prime contractor shall reimburse these costs to the subcontractors and institutional network providers if a request for reimbursement is made.

3.2.4.5 CAP/DME costs for children’s hospitals. Amounts for CAP/DME are included in both the hospital-specific and the national children’s hospital differentials (see below). The amounts are based upon national average costs. No separate or additional payment is allowed.

3.2.4.6 CAP/DME costs under TRICARE for Life (TFL). The TRICARE Program will make no payments for CAP/DME costs for any claims on which Medicare makes payment. These costs are included in the Medicare payment. TRICARE CAP/DME cost payments are made only on claims on which the TRICARE Program is the primary payer (e.g., claims for stays beyond 150 days), and in those cases payment is made following the procedures described above.

3.2.5 Children’s Hospital Differential

3.2.5.1 General

All DRG-based payments to children’s hospitals are increased by adding the applicable children’s hospital differential to the appropriate ASA prior to multiplying by the DRG weight.

3.2.5.2 Qualifying for the Children’s Hospital Differential

To qualify for a children’s hospital differential adjustment, the hospital shall be exempt from the Medicare Prospective Payment System (PPS) as a children’s hospital. If the hospital is not Medicare-participating, it shall meet the criteria in 32 CFR 199.6(b)(4)(i). In addition, more than half of its inpatients shall be individuals under the age of 18.

3.2.5.3 Calculation of the Children’s Hospital Differentials

Differentials are calculated so that they are “revenue neutral” for children’s hospitals. When calculating ASAs, DHA subtracts the appropriate ASA from the children’s hospital ASAs, and these amounts are the children’s hospital differentials. The differentials are not subject to annual inflation updates nor are they recalculated except as provided below.

3.2.5.4 Differential Amounts

3.2.5.4.1 Calculation of the national children’s hospital differentials. These differentials are calculated using the procedures described in paragraph 3.2.5.3, but based upon a database of only low-volume children’s hospitals.

3.2.5.4.2 Claims are reimbursed using a single set of differentials which do not distinguish high-volume and low-volume children’s hospitals. The differentials are:

Large Urban Areas
	Labor portion	$1,945.99
	Non-labor portion	+ 689.42
		$2,635.41

3.2.6 Outliers

3.2.6.1 General

The TRICARE Program will adjust the DRG-based payment to a hospital for atypical cases. These outliers are those cases that have either an unusually short Length-Of-Stay (LOS) or involve extraordinarily high costs when compared to most discharges classified in the same DRG. Recognition of these outliers is particularly important, since the number of TRICARE cases in many hospitals is relatively small, and there may not be an opportunity to “average out” DRG-based payments over a number of claims. The contractor shall not document or verify the medical necessity of outliers prior to payment, since outlier review is part of the admission and quality review system. However, in determining additional cost outlier payments on all claims qualifying as a cost outlier, the contractor must identify and reduce the billed charge for any non-covered items such as comfort and convenience items (line N), as well as any duplicate charges (line X) and services which may be separately billed (line 7) such as professional fees, outpatient services, and solid organ transplant acquisition costs. Comfort and convenience items are defined as those optional items which the patient elects at an additional charge (e.g., television, guest trays, beautician services), but are not medically necessary in the treatment of a patient’s condition.

3.2.6.2 Provider Reporting of Outliers

The provider shall identify outliers on the CMS 1450 UB-04, Form Locator (FL) 24 - 30. Code 60 is used to report LOS outliers, and code 66 is used to signify that a cost outlier is not being requested. If a claim qualifies as a cost outlier and code 66 is not entered in the appropriate FL (i.e., it is blank or code 61), the contractor shall accept this as a request for cost outlier payment by the hospital.

3.2.6.3 Short-Stay Outliers

The TRICARE DRG-based payment system uses short-stay outliers and are reimbursed using a per diem amount. All short-stay outliers are identified by the contractor when the claims are processed, and necessary adjustments to the payment amounts are made automatically.

• Any discharge which has a LOS less than or equal to the greater of 1 or 1.94 standard deviations below the arithmetic mean LOS for that DRG shall be classified as a short-stay outlier. In determining the actual short-stay threshold, the calculation will be rounded down to the nearest whole number, and any stay equal to or less than the short-stay threshold will be considered a short-stay outlier.

• Short-stay outliers are reimbursed at 200% of the per diem rate for the DRG for each covered day of the hospital stay, not to exceed the DRG amount. The per diem rate shall equal the wage-adjusted DRG amount divided by the arithmetic mean LOS for the DRG. The per diem rate is calculated before the DRG-based amount is adjusted for IDME. Cost outlier payments shall be paid on short stay outlier cases that qualify as a cost outlier.

• Any stay which qualifies as a short-stay outlier (a transfer cannot qualify as a short-stay outlier), even if payment is limited to the normal DRG amount, is to be considered and reported on the payment records as a short-stay outlier. This will ensure that outlier data is accurate and will prevent the beneficiary from paying an excessive cost-share in certain circumstances.

3.2.6.4 Cost Outliers

3.2.6.4.1 The following steps are followed when calculating cost outlier payments for all cases other than neonates and children’s hospitals:

Standard Cost = (Billed Charges x CCR)

Outlier Payment = 80% of (Standard Cost - Threshold)

Total Payments = Outlier Payments + (DRG Base Rate x (1 + (IDME))

Note: Noncovered charges continue to be subtracted from the billed charges prior to multiplying the billed charges by the CCR.

3.2.6.4.1.1 The CCR for admissions occurring on or after January 1, 2020, is 0.2567. The CCR for admissions occurring on or after January 1, 2021, is 0.2495. The CCR for admissions occurring on or after January 1, 2022, is 0.2495.

3.2.6.4.1.2 The National Operating Standard Cost as a Share of Total Costs (NOSCASTC) for calculating the cost-outlier threshold for CY 2020 is 0.939, for CY 2021 is 0.926, and for CY 2022 is 0.926.

3.2.6.4.2 For CY 2020, a TRICARE fixed loss cost-outlier threshold is set at $24,932. Effective January 1, 2020, the cost-outlier threshold shall be the DRG-based amount (wage-adjusted) plus the IDME payment, plus the flat rate of $24,932 (also wage-adjusted).

3.2.6.4.3 For CY 2021, a TRICARE fixed loss cost-outlier threshold is set at $26,913. Effective January 1, 2021, the cost-outlier threshold shall be the DRG-based amount (wage-adjusted) plus the IDME payment, plus the flat rate of $26,913 (also wage-adjusted).

3.2.6.4.4 For CY 2022, a TRICARE fixed loss cost-outlier threshold is set at $26,675. Effective January 1, 2022, the cost-outlier threshold shall be the DRG-based amount (wage-adjusted) plus the IDME payment, plus the flat rate of $26,675 (also wage-adjusted).

3.2.6.4.5 The cost-outlier threshold is calculated as follows:

{[Fixed Loss Threshold x ((Labor-Related Share x Applicable wage index) + Non-labor-related share) x NOSCASTC] + (DRG Base Payment (wage-adjusted) x (1 + IDME))}

Example: Using FY 1999 figures {[10,129 x ((0.7110 x Applicable wage index) + 0.2890) x 0.913] + (DRG Based Payment (wage-adjusted) x (1 + IDME))}

3.2.6.5 Burn Outliers

3.2.6.5.1 For admissions on or after October 1, 2008, the DRGs related to burn cases are found at http://www.health.mil/rates.

3.2.6.5.2 Burn cases which qualify as short-stay outliers, regardless of the date of admission, shall reimbursed according to the procedures for short-stay outliers.

3.2.6.5.3 Burn cases which qualify as cost outliers are reimbursed using a marginal cost factor of 90%.

3.2.6.5.4 For a burn outlier in a children’s hospital, the appropriate children’s hospital outlier threshold is used (see below), but the marginal cost factor is either 60% or 90% according to the criteria above.

3.2.6.6 Children’s Hospital Outliers

The following special provisions apply to cost outliers.

3.2.6.6.1 The threshold is the same as that applied to other hospitals.

3.2.6.6.2 Effective January 1, 2020, the standardized costs are calculated using a CCR of 0.2774. Effective January 1, 2021, the standardized costs are calculated using a CCR of 0.2694. Effective January 1, 2022, the standardized costs are calculated using a CCR of 0.2694. (This is equivalent to the Medicare CCR increased to account for CAP/DME costs.)

3.2.6.6.3 The marginal cost factor is 80%.

3.2.6.6.4 For admissions occurring during FY 2015, the marginal cost factor are adjusted by 1.18. The marginal cost factor for FY 2016 and beyond is posted to the DHA web site at http://health.mil/Military-Health-Topics/Business-Support/Rates-and-Reimbursement.

3.2.6.6.5 The NOSCASTC for calculating the cost-outlier threshold for CY 2020 is 0.939. The NOSCASTC for calculating the cost-outlier threshold for CY 2021 is 0.926. The NOCASTC for calculating the cost-outlier threshold for CY 2022 is 0.926.

3.2.6.6.6 The following calculation is used in determining cost outlier payments for children’s hospitals and neonates:

Step 1: Computation of Standardized Costs:

Billed Charges x CCR

(Non-covered charges are subtracted from the billed charges prior to multiplying the charges by the CCR.)

Step 2: Determination of Cost-Outlier Threshold:

{[Fixed Loss Threshold x ((Labor-Related Share x Applicable wage index) + Non-labor-related share) x NOSCASTC] + [DRG Based Payment (wage-adjusted) x (1 + IDME)]}

Step 3: Determination of Cost Outlier Payment

[{(Standardized costs - Cost-Outlier Threshold) x Marginal Cost Factor} x Adjustment Factor]

Step 4: Total Payments = Outlier Payments + [DRG Base Rate x (1 + IDME)]

3.2.6.7 Neonatal Outliers

Neonatal outliers in hospitals subject to the TRICARE DRG-based payment system (other than children’s hospitals) are determined under the same rules applicable to children’s hospitals, except that the standardized costs for cost outliers are calculated using the CCR of 0.64. The CCR used to calculate cost outliers for neonates in acute care hospitals is reduced to the same CCR used for all other acute care hospitals.

3.2.7 IDME adjustment

3.2.7.1 General

The DRG-based payments for any hospital which has a teaching program approved under Medicare Regulation Section 413.85, Title 42 CFR are adjusted to account for IDME costs. The adjustment factor used is the one in effect on the date of discharge (see below). The adjustment is made by multiplying the total DRG-based amount by 1.0 plus a hospital-specific factor equal to:

Formula: Number of interns plus residents divided by number of beds plus one. This value then taken to the exponent .5795 then minus one. This value then multiplied by 1.04.

• For admissions occurring during FYs 2008 and subsequent years, the same formula shall be used except the first number shall be 1.02.

3.2.7.2 Number of Interns and Residents

The TRICARE Program will use the number of interns and residents from CMS most recently available Provider Specific File.

3.2.7.3 Number of Beds

The TRICARE Program will use the number of beds from CMS’ most recently available Provider Specific File.

3.2.7.4 Updates of IDME Factors

3.2.7.4.1 The TRICARE Program will use the ratio of interns and residents to beds from CMS’ most recently available Provider Specific File to update the IDME adjustment factors. The ratio is provided to the contractor to update each hospital’s IDME adjustment factor at the same time as the annual DRG update. The updated factors provided with the annual DRG update are applied to claims with a date of discharge on or after January 1 of each year.

3.2.7.4.2 Other updates of IDME factors. The contractor shall update the IDME factor if a hospital provides information (for the same base periods) which indicates that the IDME factor provided by the TRICARE Program with the DRG update is incorrect or needs updating. An IDME factor is updated based upon the hospital submitting CMS Worksheet showing the number of interns, residents, and beds. The effective date of these other updates is the date payment is made to the hospital (check issued) for its CAP/DME costs, but in no case later than 30 days after the hospital submits the appropriate worksheet or information. The contractor shall notify DHA of such IDME updates.

3.2.7.4.3 This alternative updating method only applies to those hospitals subject to the Medicare Inpatient Prospective Payment System (IPPS) as they are the only ones included in the Provider Specific File.

3.2.7.5 Adjustment for Children’s Hospitals

An IDME adjustment factor is applied to each payment to qualifying children’s hospitals. The factors for children’s hospitals are calculated using the same formula as for other hospitals. The initial factor is based upon the number of interns and residents and hospital bed size as reported by the hospital to the contractor. If the hospital provides the data to the contractor after payments have been made, the contractor shall not make any retroactive adjustments to previously paid claims, but the amounts are reconciled during the “hold harmless” process. At the end of its FY, a children’s hospital may request that its adjustment factor be updated by providing the contractor with the necessary information regarding its number of interns and residents and beds. The number of interns, residents, and beds shall conform to the requirements above. The contractor shall update the factor within 30 days of receipt of the request from the hospital, and the effective date shall conform to the policy contained above.

3.2.7.5.1 Each year, the contractor shall send a notice, to each children’s hospital in its Region, requesting updated information on its number of interns, residents and beds, from the most recent cost report submitted to CMS for July 1 through June 30, and advise them by July 1 of that same year to provide the updated information to the contractor so the requirement in paragraph 3.2.7.5.2 is met. Details for reporting are identified in DD Form 1423, Contract Data Requirements List (CDRL), located in Section J of the applicable contract.

3.2.7.5.2 The contractor shall report the number of interns, residents, and beds and the updated ratios for children’s hospitals, to DHA, Medical Benefits and Reimbursement Section (MB&RS), or designee, by September 1 of each year for use in DHA’s annual DRG update calculations. Details for reporting are identified in DD Form 1423, CDRL, located in Section J of the applicable contract. These updated amounts are included in the files for the CY DRG update.

3.2.7.6 TRICARE for Life (TFL)

No adjustment for IDME costs is made on any TFL claim on which Medicare has made any payment. If the TRICARE Program is the primary payer (e.g., claims for stays beyond 150 days) payments are adjusted for IDME in accordance with the provisions of this section.

3.2.8 Present On Admission (POA) Indicators and Hospital Acquired Conditions (HACs)

3.2.8.1 For services provided on or after ICD-10 implementation:

3.2.8.1.1 Those inpatient acute care hospitals that are paid under the TRICARE/CHAMPUS DRG-based payment system shall report a POA indicator for both primary and secondary diagnoses on inpatient acute care hospital claims. Providers shall report POA indicators to the TRICARE Program in the same manner they report to the CMS, and in accordance with the UB-04 Data Specifications Manual, and ICD-10-CM Official Guidelines for Coding and Reporting. See the complete instructions in the UB-04 Data Specifications Manual for specific instructions and examples. Specific instructions on how to select the correct POA indicator for each diagnosis code are included in the ICD-10-CM Official Guidelines for Coding and Reporting.

3.2.8.1.2 There are five POA indicator reporting options, as defined by the ICD-10-CM Official Coding Guidelines for Coding and Reporting:

Y	=	Indicates that the condition was present on admission.
W	=	Affirms that the provider has determined based upon data and clinical judgment that it is not possible to document when the onset of the condition occurred.
N	=	Indicates that the condition was not present on admission.
U	=	Indicates that the documentation is insufficient to determine if the condition was present at the time of admission.
1	=	(Definition prior to FY 2011.) Signifies exemption from POA reporting. CMS established this code as a workaround to blank reporting on the electronic 4010A1. A list of exempt ICD-10-CM diagnosis codes is available in the ICD-10-CM Official Coding Guidelines.
1	=	(Definition for FY 2011 and subsequent years.) Unreported/not used. Exempt from POA reporting. (This code is equivalent to a blank on the CMS 1450 UB-04; however, it was determined that blanks are undesirable when submitting this data via 4010A.)

3.2.8.2 HACs. The TRICARE Program will adopt those HACs adopted by CMS. The HACs, and their respective diagnosis codes, are posted at http://www.health.mil/rates.

3.2.8.3 Provider responsibilities and reporting requirements. For non-exempt providers, issues related to inconsistent, missing, conflicting, or unclear documentation are resolved by the provider. POA is defined as present at the time the order for inpatient admission occurs. Conditions that develop during an outpatient encounter, including emergency department, observation, or outpatient surgery, are considered as present on admission.

3.2.8.4 The contractor shall accept, validate, retain, pass, and store the POA indicator.

3.2.8.5 Exempt providers.

3.2.8.5.1 The following hospitals are exempt from POA reports for the TRICARE Program:

• Critical Access Hospitals (CAHs)

• Long-Term Care (LTC) Hospitals

• State Waiver Hospitals, e.g., Maryland

• Cancer Hospitals

• Children’s Inpatient Hospitals

• Inpatient Rehabilitation Hospitals

• Psychiatric Hospitals and Psychiatric Units

• Department of Veterans Affairs (DVA)/Veterans Health Administration (VHA) Hospitals

3.2.8.5.2 The contractor shall identify claims from those hospitals that are exempt from POA reporting, and shall take the actions necessary to be sure that the TRICARE grouper software does not apply HAC logic to the claim.

3.2.8.6 The DRG payment is considered payment in full, and the hospital shall not bill the beneficiary for any charges associated with the hospital-acquired complications or charges because the DRG was demoted to a lesser-severity level.

3.2.8.7 Claims are denied if a non-exempt hospital does not report a valid POA indicator for each diagnosis on the claim.

3.2.8.8 Replacement Devices

3.2.8.8.1 The TRICARE Program is not responsible for the full cost of a replaced device if a hospital receives a partial or full credit, either due to a recall or service during the warranty period. Reimbursement in cases in which an implanted device is replaced is made:

• At reduced or no cost to the hospital; or

• With partial or full credit for the removed device.

3.2.8.8.2 The following condition codes 49 and 50 allow the TRICARE Program to identify and track claims billed for replacement devices:

• Condition Code 49. Product replacement within product lifecycle. Condition code 49 is used to describe replacement of a product earlier than the anticipated lifecycle due to an indication that the product is not functioning properly - warranty.

• Condition Code 50. Replacement of a product earlier than the anticipated lifecycle due to an indication that the product is not functioning properly. Condition code 50 is used to describe that the manufacturer or the United States (U.S.) Food and Drug Administration (FDA) has identified the product for recall and, therefore, replacement.

3.2.8.8.3 When a hospital receives a credit for a replaced device that is 50% or greater than the cost of the device, hospitals are required to bill the amount of the credit in the amount portion for value code FD.

3.2.8.8.4 The contractor shall reduce hospital reimbursement for those DRGs subject to the replacement device policy, by the full or partial credit a provider received for a replaced device. The specific DRGs subject to the replacement device policy are posted on TRICARE’s DRG web page at http://www.health.mil/rates. As necessary, the DRGs subject to the replacement device policy are updated as part of the annual DRG update.

3.2.8.8.5 Hospitals shall use the combination of condition code 49 or 50, along with value code FD to correctly bill for a replacement device that was provided with a credit or no cost. The condition code 49 or 50 identifies a replacement device while value code FD communicates to the TRICARE Program the amount of the credit, or cost reduction, received by the hospital for the replaced device.

3.2.8.8.6 The contractor shall deduct the partial/full credit amount, reported in the amount for value code FD from the final DRG reimbursement when the assigned DRG is one of the DRGs subject to the replacement device policy.

3.2.8.8.7 Once a DRG rate is determined, any full/partial credit amount is deducted from the DRG reimbursement rate. The beneficiary copayment/cost-share is then determined based upon the reduced rate.