AHA: Tricare cuts to cost community hospitals $676M

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Changes to Tricare, the health insurance program for 3 million uniformed military members and their families, will cost sole community hospitals (SCH) an estimated $676 million through fiscal 2017, according to AHA News Now.

The American Hospital Association on Tuesday said the final payment rule from the Defense Department calls for transitioning SCH payments from 100 percent of billed charges to the greater of the Tricare diagnosis-related group amount, or an amount equal to billed charges times the hospital's most recent Medicare Cost-to-Charge Ratio (CCR).

The Medicare CCR is generally 30 percent to 50 percent, according to the final rule. The change goes into effect Jan. 1.

The transition will be gradual, with Tricare network hospitals seeing their payments reduced by up to 10 percentage points per year. The annual payment reductions for non-network hospitals could reach as high as 15 percentage points, the AHA said.

According to the rule, for a non-network hospital with a CCR of 40 percent, payment in the first year would be 85 percent of the base year amount; 70 percent in the second year, 55 percent in the third year, and 40 percent in the fourth and subsequent years.

A special provision calls for Tricare to pay 130 percent of the Medicare CCR for labor and delivery and nursery care after the transition period, according to the AHA. The Tricare director also has the discretion to adjust payments at the end of the year for sole community hospitals and critical access hospitals serving a "disproportionate share" of military patients.

Meanwhile, the Tricare Management Activity said last week it will reduce the number of Tricare Prime service areas beginning Oct. 1, a move that will affect 171,000 retirees and their families who live more than 40 miles from a military clinic or hospital. The Tricare office said the move is part of a Pentagon effort to control the rising cost of healthcare for its 9.6 million beneficiaries.

Under Tricare Prime, beneficiaries pay an annual enrollment fee but have low out-of-pocket costs in exchange for a primary care provider managing their healthcare. Those no longer in Tricare Prime service areas still have Tricare Standard, which includes no premiums or requirements for physician referrals, but comes with higher out-of-pocket costs.

For more information:
- read the AHA News Now brief
- here's the final rule (.pdf)
- here's the Tricare announcement

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