1. From Registration to Accounts Receivable – The Whole Can of Worms 2007 UBO/UBU Conference 1 Briefing:Building the Rate Structure of the Future Date:21 March 2007 Time:0800 - 0850

2. 2007 UBO/UBU Conference From Registration to Accounts Receivable 2 Objectives Overview of Rates in Military Health System (MHS) – Inpatient Rates – Outpatient Rates – Pharmacy Rates Current Rate structure/development – Reasons why we are unique Future Rate structure/development – What it will look like (in a couple of years…?) Summary Quiz Questions

3. 2007 UBO/UBU Conference From Registration to Accounts Receivable 3 Rate Packages Inpatient Adjusted Standardized Amounts (ASAs) – Updated 1 October, Fiscal Year (FY) Outpatient Itemized Billing (OIB) Rates – Updated early summer, Calendar Year (CY) Pharmacy Rates – Updated twice a year (typically Feb & Aug) Medical Affirmative Rates (MAC) – Must use 2003 CMAC rates until update is approved through OMB and published in the Federal Register

4. 2007 UBO/UBU Conference From Registration to Accounts Receivable 4 Overview of Current ASAs ASAs are the basis for reimbursement for all direct care inpatient medical care including Third Party Collections (TPC) ASAs are part of a DRG-based prospective payment system modeled after CMS and CHAMPUS Unlike CMS/CHAMPUS, direct care ASAs include both institutional and professional services costs (one charge = one bill) ASAs have been used for direct care billing rates since FY95 (previously used per diem)

5. 2007 UBO/UBU Conference From Registration to Accounts Receivable 5 Current ASA Rates (cont) Example of inpatient rate: Reynolds Army Community Hospital, Fort Sill, OK – DRG 020 – Nervous system infection except viral meningitis. The RWP for a non-outlier case is the CHAMPUS DRG weight of 2.2876 – FY07 military-applied ASA rate is $8,747.39 Amount to be billed on UB-92/UB-04: (RWP factor X ASA) = Cost to be recovered 2.2876 X $8,747.39 = $20,010.53

6. 2007 UBO/UBU Conference From Registration to Accounts Receivable 6 Future of Inpatient ASA Rates Future inpatient institutional rates will continue to use a DRG-based Relative Weighted Product (RWP) for institutional charge development (UB-04) However, inpatient professional services will be billed separately (CMS 1500 bill form) – What needs to happen? Continue inpatient professional coding efforts Modify existing MHS billing system, purchase and implement new MHS billing systems, outsource? Other? VA/DoD Inpatient billing guidance will serve as first test

7. 2007 UBO/UBU Conference From Registration to Accounts Receivable 7 Future Inpatient Billing Inpatient institutional charge – DRG-based RWP – Billed on UB-92*/UB-04 (as of May 2007) One bill representing all of the costs from the hospital Inpatient professional charges – CMAC professional fee schedule, anesthesia rate file, other professional rate files – Billed on CMS 1500 Multiple bills, one for each professional service provided to the patient during the length of stay (e.g., radiology, anesthesiology, other) * Only the UB-04 will be accepted after 23 May 2007

8. 2007 UBO/UBU Conference From Registration to Accounts Receivable 8 Outpatient Rates – CMAC TRICARE West develops: CHAMPUS Maximum Allowable Charges (CMAC) – Based on Medicare Physician Fee Schedule – Payment for individual professional services and procedures identified by CPT * & HCPCS codes CMAC Component – Based on rates comprising professional, technical and global rates (professional + technical = global) Injectible Drug Rate File – Based on Medicare data or TRICARE claims history CMAC locality adjustment – 91 distinct localities – Locality 300 is National Average (used for OCONUS and CSET rates) * CPT codes, descriptions and other data only are copyright 2000 American Medical Association. All Rights Reserved (or such other date of publication of CPT). CPT is a trademark of the American Medical Association (AMA).

9. 2007 UBO/UBU Conference From Registration to Accounts Receivable 9 Outpatient Rates – TMA UBO TMA UBO develops rates for: Ambulance, Anesthesia, APV (99199), Dental, Immunization, IMET/IAR, and Pharmacy Dispensing Fee Medical Expense Program Reporting System (MEPRS) data is used to calculate the average MTF operation expenses for: – Ambulance: patient transportation (FEA) – Ambulatory Procedure Visit – Institutional (Average Variable Cost per Encounter) – Anesthesia (DFA) – Dental (CA) – Immunization (FBI) – Pharmacy Dispensing Fee (DAA)

10. 2007 UBO/UBU Conference From Registration to Accounts Receivable 10 Outpatient Rates – Ambulance Today, ambulance charges are based on hours of service, in 15-minute increments – MTFs calculate the charges based on the number of hours (and/or fractions of an hour) that the ambulance is logged out on a patient run. Fractions of an hour are rounded to the next 15-minute increment (e.g., 31 minutes is charged as 45 mins) – The rates for IMET, IOR, and full are for 60 minutes Ambulance charges are calculated as follows: (MEPRS full rate X time) = Cost to be recovered ($154.00 X.75 (45 min)) = $ 115.50

11. 2007 UBO/UBU Conference From Registration to Accounts Receivable 11 Outpatient Rates – Ambulance Ambulance charging in the future: Will be based on miles driven, a location of pick-up and drop-off, and requirement for medical services during transport Charges will be developed based on the procedures performed by the EMS personnel, the DME supplies used from the ambulance, and the miles driven. Ambulance services will continue to be billed using a separate UB-92/UB-04

12. 2007 UBO/UBU Conference From Registration to Accounts Receivable 12 Outpatient Rates – APV Today, the Ambulatory Procedure Visit (APV) is billed using an institutional flat rate, and is assigned for all APV procedures/services using CPT code 99199 The flat rate is based on the institutional cost of all Military Health System APVs performed in a designated Ambulatory Procedure Unit (APU), divided by the total number of APVs The APVs are grouped into one of 12 Ambulatory Surgery Center (ASC) categories, based on the level of care provided to the patient. Each ASC category has a corresponding rate, which allows us to calculate a weighted average CY2006 APV flat rate is $1,299.00

13. 2007 UBO/UBU Conference From Registration to Accounts Receivable 13 Outpatient Rates – APV In the future, the APV institutional charge will be based on APCs (bedded MTFs in OR) and ASCs (clinic not bedded), and in particular must ensure the professional bill only includes practice expense and no facility costs The methodology will change slightly (using APCs for bedded MTFs), but the big change here is there will be different charges (instead of the flat rate), based on the APC or ASC assigned – this will allow the MHS to more accurately reflect the resources used to perform the surgery, and charge more or less as appropriate

14. 2007 UBO/UBU Conference From Registration to Accounts Receivable 14 Outpatient Rates – Anesthesia Today, anesthesia charges are based on hours of service, in 15-minute increments – MTFs calculate the charges based on the number of hours (and/or fractions of an hour) the anesthesiologist records in the patient record. Fractions of an hour are rounded to the next 15- minute increment (e.g., 31 minutes is charged as 45 mins) – The rates for IMET, IOR and full are for 60 minutes Anesthesia charges are calculated as follows: (MEPRS full rate X time) = cost to be recovered ($100.00 X.75 (45 min) = $ 75.00

15. 2007 UBO/UBU Conference From Registration to Accounts Receivable 15 Outpatient Rates – Anesthesia Anesthesia charging in the future: Based on medical supervision, medical direction, anesthesia time, minutes of service and other procedures, such as the “swan-gan catheter” procedure TRICARE provides an Anesthesia Rate File, but because of insufficient documentation and coding, a MEPRS-based flat rate continues to be used Anesthesia billing will be continue to be billed on a CMS 1500

16. 2007 UBO/UBU Conference From Registration to Accounts Receivable 16 Outpatient Rates – Dental Today, dental charges are based on a MEPRS flat rate multiplied by a DoD-established weight for the American Dental Association (ADA) code representing the dental service/procedure performed Dental billing will not change moving into the future Dental charges are calculated as follows: (MEPRS rate X ADA code weight) = cost to be recovered ($100.00 X ADA code D0270, weight is 0.39) ($100.00 X 0.39) = $ 39.00

17. 2007 UBO/UBU Conference From Registration to Accounts Receivable 17 Outpatient Rates – Immunization Today, the immunization flat rate is developed using MEPRS cost data A separate charge is made for each immunization, injection, or medication administered Immunization charges are based on: – CMAC rates, if there are rates available – If there is no CMAC rate, the National Average Payment (NAP) is used – If there is no CMAC and no NAP rate, then a flat rate is billed In the future, we will continue to use the CMAC Injectible Rate File as the baseline, as well as continue to develop rates for codes CMAC does not provide

18. 2007 UBO/UBU Conference From Registration to Accounts Receivable 18 Outpatient Rates – ED Today, Emergency Department (ED) evaluation & management codes (99281-99285) have CMAC rates that are built using both the professional charge and an institutional charge – Professional charge is CMAC – Institutional charge is TRICARE APC

19. 2007 UBO/UBU Conference From Registration to Accounts Receivable 19 Outpatient Rates – ED In the future, for ED charges will include: – Professional services (e.g., 99281-99285) are coded with CPT, and charges will be based on professional services (CMAC – facility physician rate), using a CMS 1500 bill form – Institutional coding is based on institutional services, and charges will be based APCs, using UB-04 bill form – ED procedures will be slightly different, because the physician charge will be a non-facility physician rate, while the institutional rate will continue to be an APC rate

20. 2007 UBO/UBU Conference From Registration to Accounts Receivable 20 Pharmacy Rates Today, because the source system cannot validate that the drug being sent to the billing modules is the actual drug that was dispensed to the patient, we use the following approach to arrive at a rate: – Using the Managed Care Pricing File from DSCP First, calculate the median Prime Vendor Program (PVP) Price within a Generic Sequence Number (GSN) Second, calculate the median Average Wholesale Price (AWP) within a GSN Third, select the lower of the two prices Fourth, apply the selected price to all drugs that fall into the same GSN Finally, add an $8.00 Pharmacy Dispensing fee

21. 2007 UBO/UBU Conference From Registration to Accounts Receivable 21 Pharmacy Rates In the future, Pharmacy Rate Setting will be based on the National Drug Code (NDC – the NDC is a 10-digit unique identifier assigned to each pharmaceutical that distinguishes the manufacture/wholesaler, drug strength, drug size, dose form, etc.) There was a new pharmacy system purchased, and it is a couple of years away from achieving Milestone C (limited deployment) When the new Rx system is implemented, each NDC dispensed to a patient will generate an electronic message that will be sent to the billing module

22. 2007 UBO/UBU Conference From Registration to Accounts Receivable 22 Cosmetic Surgery Today, cosmetic surgery uses the following sources to develop its charges: – CMAC (Professional) – APC (Institutional – bedded MTF) – ASC (Institutional – non-bedded MTF)

23. 2007 UBO/UBU Conference From Registration to Accounts Receivable 23 Cosmetic Surgery In the future, cosmetic surgery will develop its charges based on: – NDCs for Botox, Restalyne, other – APC (bedded MTF) – ASC (non-bedded MTF) – However, when there is a significant difference in the ASC and APC charges (based on site of service: bedded MTF vs. clinic), to avoid influencing patient traffic to the lower cost facility, an average charge will be assigned ((ASC + APC) / 2 = charge). This will allow the patient and the facility to schedule the surgery regardless of the location, as each MTF would reflect the same charges

24. 2007 UBO/UBU Conference From Registration to Accounts Receivable 24 Summary Today, the MHS has some system limitations In the future, the MHS will have the tools to perform compliant billing, distinguishing between professional (CMS 1500) and institutional (UB-04) services The overall direction moving forward is to incorporate as much “civilian best practice” billing as possible, realizing the uniqueness of the Military Health System Charges will continue to be developed using a blend of rates and prices including: ASAs, CMAC, APC/ASC, Pharmacy PVP/AWP and MEPRS The goal of TMA UBO is to create a “reasonable charge”