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TRICARE Reimbursement Manual 6010.61-M, April 1, 2015
Diagnosis Related Groups (DRGs)
Chapter 6
Section 11
Hospital Reimbursement - TRICARE Diagnosis Related Group (DRG)-Based Payment System (New Technology Add-On Payments (NTAPs))
Issue Date:  January 8, 2021
Revision:  C-74, September 8, 2023
1.0  Applicability
This policy is mandatory for reimbursement of services provided by either network or non-network providers. However, alternative network reimbursement methodologies are permitted when approved by the Defense Health Agency (DHA) and specifically included in the network provider agreement.
2.0  Issue
What are NTAPs, and how are they reimbursed?
3.0  NTAP Overview
3.1  NTAPs are special payments that are offered because new medical services and new technologies are not yet included in the calculation of standardized DRG rates. By law and regulation, Medicare has established a reimbursement methodology to more appropriately pay for the costs of new medical services and technologies under the hospital Inpatient Prospective Payment System (IPPS). As a part of this methodology, Centers for Medicare and Medicaid Services (CMS) clinical experts evaluate applications for new technologies that may raise the cost of care to the extent that it merits additional payment beyond the base DRG payment.
3.2  CMS uses criteria set forth in regulation regarding the newness, clinical benefit, and cost of a new technology to determine which treatments will receive an NTAP. That is, CMS determines the newness based upon the delay in projected market entry; clinical benefits considerations require that the technology substantially improve the diagnosis or treatment of patients; and cost considerations require the applicant to provide data showing that the technology is expensive relative to the cost of the entire case based upon set statistical cost deviations.
3.3  To qualify for the NTAPs, a specific technology will be “new” according to CMS regulations, specifically §412.87(b)(2). The statutory provision allows for special payment treatment for new technologies until they are incorporated into the DRG, which takes between two and three years. Once new technologies are incorporated into the DRG, they are no longer considered NTAPs.
4.0  POLICY
In accordance with Title 10, United States Code (USC), Section 1079(i)(2), the amount to be paid to hospitals, Skilled Nursing Facilities (SNFs), and other institutional providers under the TRICARE Program, “shall be determined to the extent practicable in accordance with the same reimbursement rules as apply to payments to providers of services of the same type under Medicare.” This statutory authority has been implemented through an Interim Final Rule (IFR) with Request for Comment, published in the Federal Register on September 3, 2020, amending the TRICARE regulation by adding 32 Code of Federal Regulations (CFR) 32 CFR 199.14(a)(1)(iv)(A) to allow adoption of Medicare NTAP payment adjustments to TRICARE DRG reimbursements. Under the amended TRICARE regulation, any Medicare approved NTAP reimbursement of hospitals subject to the Medicare program as required under 42 CFR 412.88 is adopted or adopted as modified, for the TRICARE Program unless the Assistant Secretary of Defense for Health Affairs (ASD(HA)) determines that it is not practicable for the TRICARE Program to adopt the Medicare NTAP. The Director, DHA will issue necessary guidance regarding any Medicare NTAP not adopted by the ASD(HA) or any modification of a Medicare NTAP deemed necessary for adoption by the TRICARE Program.
4.1  Payment Method
4.1.1  NTAP payment adjustments apply for discharges on or after January 1, 2020.
4.1.2  The contractor shall reimburse hospitals subject to NTAPs using the list of NTAPs and reimbursement rules in the current Fiscal Year (FY) IPPS Final Rule (FR) Home Page found on the CMS website. The reimbursement amounts in the current FY IPPS FR represent the maximum add on payment provided for each NTAP.
4.1.3  The contractor shall determine each procedure code eligible for an NTAP payment according to 42 CFR 412.87, which provides the reference to the most recent Federal Register with a list of approved NTAPs and the procedure codes used to identify use of the technology. Each year in the IPPS Final Rule, the list of NTAPs is updated by CMS.
4.1.3.1  The contractor shall maintain a list of procedure codes eligible for NTAP payments.
4.1.3.2  The contractor shall update the list of procedure codes eligible for NTAPs within ten business days of publication by CMS.
4.1.4  The contractor shall also determine the maximum NTAP payment amount for each technology according to 42 CFR 412.87, which provides the reference to the most recent Federal Register with the maximum payment for each approved NTAP. Each year the maximum NTAP payment amounts are updated by CMS.
4.1.4.1  The contractor shall maintain a list of the maximum NTAP payment amounts for each technology.
4.1.4.2  The contractor shall update the list of the maximum NTAP payment amounts for each technology within ten business days of publication by CMS.
4.1.5  The contractor shall apply the separate NTAP payment using the appropriate formula from the IPPS FR and as documented in 42 CFR 412.88. For non-pediatric beneficiaries, the contractor shall calculate for each eligible NTAP case on a claim, the appropriate NTAP payment, where the payment rate is equal to the lesser of:
•  The designated percentage of the amount by which the total covered costs of the case exceed the Medicare Severity (MS)-DRG payment, as determined by CMS, as published in the current FY IPPS FR, or
•  The maximum NTAP payment amount for the specific technology, as determined by CMS.
The resulting NTAP amount is then reimbursed in addition to the MS-TRICARE DRG payment amount.
4.2  The contractor shall monitor the CMS FY IPPS website and adopt other updates (e.g., Medicare issues a correction or mid-year update) to the list of NTAPs, the designated percentage of the amount by which the total covered costs of the case exceed the MS-DRG payment, and maximum payment amounts within ten business days of publication by CMS.
4.3  Pediatric NTAPs
4.3.1  Pediatric, as used in this paragraph, is defined as pertaining to patients under the age of 18, on date of admission, or any individual who is treated in a children’s hospital or in a pediatric ward paid under the DRG reimbursement system.
4.3.2  Medicare Approved NTAPs Applied to Claims for Pediatric Beneficiaries
The contractor shall calculate, for each eligible NTAP on the claim, the appropriate NTAP payment, where the payment rate is equal to the lesser of 100% of the average cost of the technology or 100% of the total covered costs in excess of the MS-DRG payment.
4.4  Pediatric NTAP Example
The cost for the NTAP technology (according to CMS) is $500,000.
The case qualifies for a pediatric NTAP adjustment since the patient is under the age of 18.
The TRICARE percentage for pediatric NTAPs is equal to 100%.
($500,000 x 100%).
The maximum TRICARE pediatric NTAP add-on payment for the technology is $500,000:
The MS-DRG payment for the case is $100,000.
The cost for the case is equal to $700,000.
($700,000 (cost of case) - $100,000 (DRG payment)) x (100%)
The TRICARE designated percentage of the amount the costs exceeding the standard DRG payment is $600,000.
The pediatric NTAP add-on payment in this case is the lesser of the maximum TRICARE pediatric NTAP add-on payment for the technology ($500,000), or the TRICARE designated percentage of the amount the costs exceeding the standard DRG payment ($600,000). In this case, the add-on payment would be equal to $500,000.
4.5  TRICARE-Designated NTAPs
4.5.1  For categories of TRICARE covered services and supplies for which Medicare has not established an NTAP adjustment for DRGs, the Director, DHA may designate a TRICARE NTAP adjustment through the process established in this paragraph.
4.5.2  Requirements. All criteria in this paragraph must be met for a new technology to be considered for a TRICARE NTAP. The technology must:
4.5.2.1  Be eligible for coverage under current TRICARE policy;
4.5.2.2  Represent an advance that substantially improves, relative to technologies previously available, the diagnosis or treatment of a particular condition, or be the only available, covered treatment for a particular condition. In determining if this requirement is met, the totality of the circumstances will be considered. This requirement may be defined as one or more of the following:
4.5.2.2.1  The technology offers a treatment option for a patient population unresponsive to, or ineligible for, currently available treatments.
4.5.2.2.2  The technology offers the ability to diagnose a medical condition in a patient population where that medical condition is currently undetectable or offers the ability to diagnose a medical condition earlier in a patient population than allowed by currently available methods, and there must also be evidence that use of the new medical service or technology to make a diagnosis affects the management of the patient.
4.5.2.2.3  The use of the technology significantly improves clinical outcomes relative to services or technologies previously available as demonstrated by one or more of the following outcomes:
•  A reduction in at least one clinically significant adverse event, including a reduction in mortality or a clinically significant complication;
•  A decreased rate of at least one subsequent diagnostic or therapeutic intervention;
•  A decreased number of future hospitalizations or physician visits;
•  A more rapid beneficial resolution of the disease process treatment including, but not limited to, a reduced length of stay or recovery time;
•  An improvement in one or more activities of daily living;
•  An improved quality of life; or
•  A demonstrated greater medication adherence or compliance.
4.5.2.2.4  The totality of the information otherwise demonstrates that the technology substantially improves, relative to technologies previously available, the diagnosis or treatment of TRICARE beneficiaries.
4.5.2.2.5  The technology may represent an advance that substantially improves the diagnosis or treatment of a subpopulation of patients (e.g., pediatrics) with the medical condition that is diagnosed or treated by the new technology (i.e., any of the above definitions may apply to a sub-population of patients with the condition that the technology treats).
4.5.2.3  Treat a severe, disabling, or fatal condition.
4.5.2.4  Be sufficiently new, which is defined as, upon submission to the TRICARE Program, the technology must be within three years after the point at which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology (depending on when a new code is assigned and data on the new service or technology becomes available for DRG recalibration). After TRICARE re-calibrates the DRGs, based on available data, to reflect the costs of an otherwise new medical service or technology, the medical service or technology will no longer be considered a TRICARE-Specific NTAP because they will no longer meet the criteria of being “new”.
4.5.2.5  Have a DRG prospective payment rate otherwise applicable to discharges involving the technology that is inadequate, based on application of a threshold amount to estimated charges incurred with respect to such discharges.
4.5.2.6  Be typically provided to patients aged 64 and younger, or for the treatment of a condition that primarily affects patients aged 64 and younger.
4.5.2.7  Not been previously reviewed by CMS for an NTAP, nor been rejected solely on the basis of the technology not being used to treat the Medicare beneficiary population.
4.6  TRICARE-Designated NTAPs Approval Process
4.6.1  Contractor Responsibilities
4.6.1.1  The contractor shall receive and process TRICARE NTAP applications submitted by the technology manufacturer within 21 calendar days of receipt. While the contractor must create their own application, a sample NTAP application can be found at https://www.health.mil/ntap which contains all necessary elements required for NTAP applications and should be used as a guide.
4.6.1.2  The contractor shall ensure through review that the TRICARE NTAP application is completed accurately, and the following requirements are met:
4.6.1.2.1  The contractor receives the application no later than July 8 of the preceding fiscal year for which the TRICARE-Specific NTAP is to be considered. In other words, to be considered for FY 2024, the application must be received by the contractor by July 8, 2023.
4.6.1.2.2  The technology is eligible for coverage under current TRICARE Program policy;
4.6.1.2.3  The technology has not either been previously reviewed by CMS for an NTAP, or been rejected solely on the basis of the technology not being used to treat the Medicare beneficiary population;
4.6.1.2.4  The technology is sufficiently new;
4.6.1.2.5  The DRG payment rate is inadequate.
4.6.1.2.5.1  In order to determine reimbursement adequacy or inadequacy, the contractor shall; determine whether the charges of the cases involving the technology exceed a threshold amount that is the lesser of:
•  Seventy-five percent (75%) of the standardized amount (increased to reflect the difference between cost and charges) or
•  Seventy-five percent (75%) of one standard deviation beyond the geometric mean standardized charge for all cases in the DRG to which the new medical service or technology is assigned (or the case-weighted average of all relevant DRGs if the new medical service or technology occurs in many different DRGs).
4.6.1.2.5.2  Standardized charges reflect the actual charges of a case adjusted by the prospective payment system payment factors applicable to an individual hospital, such as the wage index, the indirect medical education adjustment factor, and the disproportionate share adjustment factor.
4.6.1.3  The contractor shall forward the NTAP application to DHA through their contracting officer no later than August 1 of every year to be considered for TRICARE NTAP status for the next fiscal year, if the conditions stated in paragraph 4.5 are satisfied. Detail for reporting are identified in DD Form 1423, Contract Data Requirements List (CDRL), located in Section J of the applicable contract.
4.6.1.4  The contractor shall notify the manufacturer and DHA of the reason(s) for rejection if the conditions in paragraph 4.5 are not satisfied. A decision to designate a TRICARE category of services/supplies for an NTAP adjustment to DRGs and the amount of such an adjustment are not subject to the appeal and hearing procedures. Detail for reporting are identified in DD Form 1423, CDRL, located in Section J of the applicable contract.
4.6.2  DHA Responsibilities
4.6.2.1  DHA will examine the manufacturer-submitted NTAP applications processed by the contractor and, if necessary, correct discrepancies in the contractor’s reviews.
4.6.2.2  DHA will determine if the technology represents a substantial clinical improvement, relative to technologies previously available, the diagnosis or treatment of a particular condition, or be the only available, covered treatment for a particular condition, using the criteria specified in paragraph 4.5. In determining if this requirement is met, DHA may cite published or unpublished evidence using information from, but not limited to, the following:
•  Clinical trials;
•  Peer-reviewed journal articles;
•  Study results;
•  Meta-analyses;
•  Consensus statements;
•  White papers;
•  Patient surveys;
•  Case studies;
•  Reports;
•  Systematic literature reviews;
•  Letters from major healthcare associations;
•  Editorials;
•  Public comments.
4.6.2.3  DHA will determine if the technology treats a severe, disabling, or fatal condition.
4.6.2.4  DHA will determine if the technology is typically provided to patients age 64 and younger, or if the technology is used for the treatment of a condition that primarily affects patients age 64 and younger.
4.6.2.5  By September 15, DHA will publish the list of TRICARE-designated NTAPs and any corrections or updates, on at least an annual basis online at https://www.health.mil/ntap.
4.6.3  Reimbursement Methodology
The contractor shall, for TRICARE-designated NTAPs, calculate for each eligible NTAP case on a claim the appropriate NTAP payment, where the payment rate is equal to the lesser of:
•  The CMS designated NTAP percentage of the estimated costs of the technology or service; or
•  The CMS designated NTAP percentage of the amount by which the costs of the case exceed the standard DRG payment.
4.7  TRICARE-Designated NTAP Application United States Food And Drug Administration (FDA) Authorization
The contractor shall only consider applications, for each fiscal year, for which the new medical device or product has received:
•  FDA marketing authorization on or before July 1 of the preceding fiscal year; or
•  An alternative pathway for FDA marketing authorization is granted before July 1 of the preceding fiscal year.
4.8  TRICARE-Designated NTAP Example
The CMS designated percentage for this example is 65%.
The cost for the technology is $500,000.
($500,000 x 65%).
The maximum TRICARE payment for the Technology is $325,000.
The standard DRG payment in this case is $45,000.
($500,000 - $45,000) x (65%).
The provider should be reimbursed the lesser of the two which is $295,750.
The CMS designated percentage of the amount the costs exceed the standard DRG payment is $295,750.
The TRICARE-designated NTAP add-on payment in this case is the lesser of the CMS designated NTAP percentage of the amount by which the costs of the case exceed the standard DRG payment ($325,000), or the CMS designated NTAP percentage of the amount by which the costs of the case exceed the standard DRG payment ($295,750). In this case, the add-on payment would be equal to $295,750.
Note:  The CMS designated percentage is currently 65% of the estimated cost of the technology or 75% for certain drugs designated by the FDA as a Qualified Infectious Disease Product (QIDP). When CMS updates the percentage, TRICARE will use the updated CMS percentage.
5.0  NTAP Expiration
5.1  The contractor shall provide a three month grace period (October 1 - December 31st) until the effective date of the new TRICARE MS-DRG (January 1st) and continue to pay the additional add-on amount during the grace period for the expired NTAP, if CMS creates a new MS-DRG effective for the following year. In other words, any NTAP that CMS expires at the end of the fiscal year, which has a DRG created for that NTAP, shall not expire until the TRICARE DRG update.
5.2  The contractor shall discontinue additional NTAP payments, effective January 1, for that expired treatment, regardless of what MS-DRG is provided on the claim.
5.3  The contractor shall apply paragraph 5.0 only if a new MS-DRG is created for a specific high-cost NTAP treatment. In the case there is not a new MS-DRG established by CMS, the TRICARE NTAP add-on payment will expire on the original date of expiration (September 30). In other words, if a new MS-DRG is not established for an NTAP, there will be no grace period for the NTAP.
6.0  Exclusions
6.1  Hospitals excluded from IPPS.
6.2  Hospitals that are located in the state of Maryland participate in the CMS Maryland All-Payer Model, and thus do not receive NTAPs.
6.3  Other hospitals excluded from the CMS IPPS, see Section 4, paragraph 3.3.
7.0  Effective Dates
7.1  January 1, 2020.
7.2  Pediatric NTAPs and TRICARE-specific NTAPs are effective July 1, 2022.
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