Regulation for Submission of Evidence - Title 38 CFR 17.101(a)(4)

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warrant the preparation of a Federalism
Assessment. Title VIII of ANILCA
precludes the State from exercising
subsistence management authority over
fish and wildlife resources on Federal
lands.
In accordance with the President’s
memorandum of April 29, 1994,
‘‘Government-to-Government Relations
with Native American Tribal
Governments’’ (59 FR 22951), Executive
Order 13175, and 512 DM 2, we have
evaluated possible effects on Federally
recognized Indian tribes and have
determined that there are no effects. The
Bureau of Indian Affairs is a
participating agency in this rulemaking.
On May 18, 2001, the President issued
Executive Order 13211 on regulations
that significantly affect energy supply,
distribution, or use. This Executive
Order requires agencies to prepare
Statements of Energy Effects when
undertaking certain actions. As these
actions are not expected to significantly
affect energy supply, distribution, or
use, they are not significant energy
actions and no Statement of Energy
Effects is required.
Drafting Information
William Knauer drafted this
document under the guidance of
Thomas H. Boyd, of the Office of
Subsistence Management, Alaska
Regional Office, U.S. Fish and Wildlife
Service, Anchorage, Alaska. Taylor
Brelsford, Alaska State Office, Bureau of
Land Management; Greg Bos, Alaska
Regional Office, U.S. Fish and Wildlife
Service; Sandy Rabinowitch, Alaska
Regional Office, National Park Service;
Warren Eastland, Alaska Regional
Office, Bureau of Indian Affairs; and
Steve Kessler, USDA-Forest Service,
provided additional guidance.
Authority: 16 U.S.C. 3, 472, 551, 668dd,
3101–3126; 18 U.S.C. 3551–3586; 43 U.S.C.
1733.
Dated: December 3, 2003.
Thomas H. Boyd,
Acting Chair, Federal Subsistence Board.
Dated: December 3, 2003.
Steve Kessler,
Subsistence Program Leader, USDA-Forest
Service.
[FR Doc. 03–31290 Filed 12–18–03; 8:45 am]
BILLING CODE 3410–11–P; 4310–55–P

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DEPARTMENT OF VETERANS
AFFAIRS
38 CFR Part 17
RIN 2900–AL06

Reasonable Charges for Medical Care
or Services; 2003 Methodology
Changes
Department of Veterans Affairs.
Final rule.

AGENCY:
ACTION:

SUMMARY: This document amends the
Department of Veterans Affairs (VA)
medical regulations concerning
‘‘reasonable charges’’ for medical care or
services provided or furnished by VA to
a veteran:
• For a nonservice-connected
disability for which the veteran is
entitled to care (or the payment of
expenses of care) under a health plan
contract;
• For a nonservice-connected
disability incurred incident to the
veteran’s employment and covered
under a worker’s compensation law or
plan that provides reimbursement or
indemnification for such care and
services; or
• For a nonservice-connected
disability incurred as a result of a motor
vehicle accident in a State that requires
automobile accident reparations
insurance.
The regulations contain
methodologies designed to establish VA
charges that replicate, insofar as
possible, the 80th percentile of
community charges, adjusted to the
market areas in which VA facilities are
located, and trended forward to the time
period during which the charges will be
used. This document amends the
regulations regarding VA’s reasonable
charges methodologies for the following
purposes: To establish charges for
medical care, procedures, services,
durable medical equipment (DME),
drugs, injectables, medical items, and
supplies for which we previously did
not have charges; to replace certain
charges previously based on VA costs
with charges based on community
charges; to establish separate charges for
medical care, procedures, services,
DME, drugs, injectables, medical items,
and supplies whose charges were
previously combined with other
charges; to bring our charge structures
and associated billing practices closer to
industry standard charge structures and
billing practices; and to provide certain
clarifications.
DATES: This final rule is effective
December 19, 2003.
FOR FURTHER INFORMATION CONTACT:
Stephanie Mardon, Chief Business

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Office (168), Veterans Health
Administration, Department of Veterans
Affairs, 810 Vermont Avenue, NW.,
Washington, DC 20420, (202) 254–0362.
(This is not a toll free number.)
SUPPLEMENTARY INFORMATION: In a
proposed rule published in the Federal
Register on October 2, 2003 (68 FR
56876), we proposed to amend VA’s
medical regulations as summarized in
this document and discussed in full in
the proposed rule. We provided a
comment period that ended on
November 3, 2003. We received one
comment to the proposed rule, which
we are now adopting as a final rule with
minor revisions based on the public
comment, plus clarifications and minor
technical changes.
The comment focused on the use of
the term ‘‘medically directed’’ as it
applies to VA charges for anesthesia
services. The commenter pointed out
that under the Medicare program, the
term ‘‘medically directed’’ has specific
meaning having to do with Medicare
payments to anesthesiologists for
providing certain services. The
commenter also pointed out that
Medicare does not require that Certified
Registered Nurse Anesthetists (CRNAs)
be medically directed by
anesthesiologists while providing
anesthesia services. The commenter
stated that Medicare and other primary
insurers recognize the terms ‘‘personally
performed’’ and ‘‘non-medically
directed,’’ and recommended that these
terms be used in the VA regulation. We
appreciate this information, and we
have revised paragraph (g) of the
regulation to incorporate the
recommended language.
The commenter also recommended
that VA establish an ‘‘Anesthesia
Reimbursement Working Group’’ to
advise VA regarding methodology for
determining professional charges and
values for anesthesia services. Our
response to this recommendation is that
we believe our current methodology for
determining professional charges and
values for anesthesia services is
appropriate, and that establishing the
indicated working group is not
necessary at this time.
In the proposed rule, we identified
the Internet site of the Veterans Health
Administration Chief Business Office as
http://www.va.gov/revenue. In
connection with ongoing improvements
to this Internet site, the address has
been changed to http://www.va.gov/cbo.
We have made this change in the two
places in the regulation in which it
occurs, in paragraphs (a)(2) and (a)(3),
indicating that this is the current
address of this Internet site.

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In the proposed rule, we defined
‘‘geographic area’’ to mean ‘‘a three-digit
ZIP Code area.’’ We are now adding a
clarification to that definition to
indicate that the three-digit ZIP Codes
referred to are the first three digits of
standard U.S. Postal Service ZIP Codes.
Based on the rationale set forth in the
proposed rule and in this document, we
now adopt the proposed rule as a final
rule with the minor revisions,
clarifications, and minor technical
changes indicated.
Previous Interim Final Rule
This document supercedes our
previous interim final rule with
comment period, ‘‘Reasonable Charges
for Medical Care or Services; 2003
Update,’’ published in the Federal
Register on April 29, 2003 (68 FR
22966, RIN 2900–AL57). The comment
period ended on June 30, 2003. We did
not receive any comments in response
to the April 29, 2003, interim final rule.
Unfunded Mandates
The Unfunded Mandates Reform Act
requires, at 2 U.S.C. 1532, that agencies
prepare an assessment of anticipated
costs and benefits before developing any
rule that may result in an expenditure
by State, local, or tribal governments, in
the aggregate, or by the private sector, of
$100 million or more in any given year.
This rule will have no such effect on
State, local, or tribal governments, or the
private sector.
Paperwork Reduction Act
This document contains provisions at
38 CFR 17.101(a)(4) constituting a
collection of information under the
Paperwork Reduction Act (44 U.S.C.
3501–3521). The Office of Management
and Budget (OMB) has approved the
information collection requirements for
§ 17.101(a)(4) under OMB control
number 2900–0606.
Regulatory Flexibility Act
The Secretary hereby certifies that
this rule does not have a significant
economic impact on a substantial
number of small entities as they are
defined in the Regulatory Flexibility
Act, 5 U.S.C. 601–612. This rule affects
mainly large insurance companies, and
where small entities are involved, they
are not impacted significantly since
most of their business is not with VA.
Accordingly, pursuant to 5 U.S.C.
605(b), this rule is exempt from the
initial and final regulatory flexibility
analysis requirements of sections 603
and 604.

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Catalog of Federal Domestic Assistance
Numbers
The Catalog of Federal Domestic
Assistance numbers for the programs
affected by this rule are 64.005, 64.007,
64.008, 64.009, 64.010, 64.011, 64.012,
64.013, 64.014, 64.015, 64.016, 64.018,
64.019, 64.022, and 64.025.
List of Subjects in 38 CFR Part 17
Administrative practice and
procedure, Alcohol abuse, Alcoholism,
Claims, Day care, Dental health, Drug
abuse, Foreign relations, Government
contracts, Grant programs-health, Grant
programs-veterans, Health care, Health
facilities, Health professions, Health
records, Homeless, Medical and dental
schools, Medical devices, Medical
research, Mental health programs,
Nursing homes, Philippines, Reporting
and recordkeeping requirements,
Scholarships and fellowships, Travel
and transportation expenses, Veterans.
Approved: December 10, 2003.
Anthony J. Principi,
Secretary of Veterans Affairs.

For the reasons set out in the preamble,
38 CFR part 17 is amended as set forth
below:

■

PART 17—MEDICAL
1. The authority citation for part 17
continues to read as follows:

■

Authority: 38 U.S.C. 501, 1721, unless
otherwise noted.

2. Section 17.101 is revised to read as
follows:

■

§ 17.101 Collection or recovery by VA for
medical care or services provided or
furnished to a veteran for a nonserviceconnected disability.

(a)(1) General. This section covers
collection or recovery by VA, under 38
U.S.C. 1729, for medical care or services
provided or furnished to a veteran:
(i) For a nonservice-connected
disability for which the veteran is
entitled to care (or the payment of
expenses of care) under a health plan
contract;
(ii) For a nonservice-connected
disability incurred incident to the
veteran’s employment and covered
under a worker’s compensation law or
plan that provides reimbursement or
indemnification for such care and
services; or
(iii) For a nonservice-connected
disability incurred as a result of a motor
vehicle accident in a State that requires
automobile accident reparations
insurance.
(2) Methodologies. Based on the
methodologies set forth in this section,
the charges billed will include the

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following types of charges, as
appropriate: Acute inpatient facility
charges; skilled nursing facility/subacute inpatient facility charges; partial
hospitalization facility charges;
outpatient facility charges; physician
and other professional charges,
including professional charges for
anesthesia services and dental services;
pathology and laboratory charges;
observation care facility charges;
ambulance and other emergency
transportation charges; and charges for
durable medical equipment, drugs,
injectables, and other medical services,
items, and supplies identified by
HCPCS Level II codes. In addition, the
charges billed for prescription drugs not
administered during treatment will be
based on VA costs in accordance with
the methodology set forth in § 17.102.
Data for calculating actual charge
amounts based on the methodologies set
forth in this section will either be
published in a notice in the Federal
Register or will be posted on the
Internet site of the Veterans Health
Administration Chief Business Office,
currently at http://www.va.gov/cbo,
under ‘‘Charge Data.’’ For care for which
VA has established a charge, VA will
bill using its most recent published or
posted charge. For care for which VA
has not established a charge, VA will
bill according to the methodology set
forth in paragraph (a)(8) of this section.
(3) Data sources. In this section, data
sources are identified by name. The
specific editions of these data sources
used to calculate actual charge amounts,
and information on where these data
sources may be obtained, will be
presented along with the data for
calculating actual charge amounts,
either in notices in the Federal Register
or on the Internet site of the Veterans
Health Administration Chief Business
Office, currently at http://www.va.gov/
cbo, under ‘‘Charge Data.’’
(4) Amount of recovery or collection—
third party liability. A third-party payer
liable under a health plan contract has
the option of paying either the billed
charges described in this section or the
amount the health plan demonstrates is
the amount it would pay for care or
services furnished by providers other
than entities of the United States for the
same care or services in the same
geographic area. If the amount
submitted by the health plan for
payment is less than the amount billed,
VA will accept the submission as
payment, subject to verification at VA’s
discretion in accordance with this
section. A VA employee having
responsibility for collection of such
charges may request that the third party
health plan submit evidence or

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information to substantiate the
appropriateness of the payment amount
(e.g., health plan or insurance policies,
provider agreements, medical evidence,
proof of payment to other providers in
the same geographic area for the same
care and services VA provided).
(5) Definitions. For purposes of this
section:
APC means Medicare Ambulatory
Payment Classification.
CMS means the Centers for Medicare
and Medicaid Services.
CPI–U means Consumer Price Index—
All Urban Consumers.
CPT code and CPT procedure code
mean Current Procedural Terminology
code, a five-digit identifier defined by
the American Medical Association for a
specified physician service or
procedure.
DME means Durable Medical
Equipment.
DRG means Diagnosis Related Group.
Geographic area means a three-digit
ZIP Code area, where three-digit ZIP
Codes are the first three digits of
standard U.S. Postal Service ZIP Codes.
HCPCS code means a Healthcare
Common Procedure Coding System
Level II identifier, consisting of a letter
followed by four digits, defined by CMS
for a specified physician service,
procedure, test, supply, or other medical
service.
ICU means Intensive Care Unit,
including coronary care units.
MDR means Medical Data Research, a
medical charge database published by
Ingenix, Inc.
MedPAR means the Medicare
Provider Analysis and Review file.
Non-provider-based means a VA
health care entity (such as a small VA
community-based outpatient clinic) that
functions as the equivalent of a doctor’s
office or for other reasons does not meet
CMS provider-based criteria, and,
therefore, is not entitled to bill
outpatient facility charges.
Provider-based means the outpatient
department of a VA hospital or any
other VA health care entity that meets
CMS provider-based criteria. Providerbased entities are entitled to bill
outpatient facility charges.
RBRVS means Resource-Based
Relative Value Scale.
RVU means Relative Value Unit.
Unlisted procedures mean
procedures, services, items, and
supplies that have not been defined or
specified by the American Medical
Association or CMS, and the CPT and
HCPCS codes used to report such
procedures, services, items, and
supplies.
(6) Provider-based and non-providerbased entities and charges. Each VA

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health care entity (medical center,
hospital, community-based outpatient
clinic, independent outpatient clinic,
etc.) is designated as either providerbased or non-provider-based. Providerbased entities are entitled to bill
outpatient facility charges; nonprovider-based entities are not. The
charges for physician and other
professional services provided at nonprovider-based entities will be billed as
professional charges only. Professional
charges for both provider-based entities
and non-provider-based entities are
produced by the methodologies set forth
in this section, with professional
charges for provider-based entities
based on facility practice expense RVUs,
and professional charges for nonprovider-based entities based on nonfacility practice expense RVUs.
(7) Charges for medical care or
services provided by non-VA providers
at VA expense. When medical care or
services are furnished at the expense of
the VA by non-VA providers, the
charges billed for such care or services
will be the higher of the charges
determined according to this section, or
the amount VA paid to the non-VA
provider.
(8) Charges for medical care or
services for which VA does not have an
established charge. When medical care
or services are provided or furnished at
VA expense by either VA or non-VA
providers, and VA does not have an
established charge for such care or
services, then the charges billed for such
care or services will be according to the
first of the following subparagraphs that
applies:
(i) In the event that a new identifier
(DRG, CPT code, or HCPCS code) is
assigned to a particular type or item of
medical care or service, then until such
time as VA establishes a charge for the
new identifier, VA’s charge for such
care or service will be VA’s most recent
established charge for the identifier
previously assigned to that type or item
of medical care or service; otherwise,
(ii) In the event that the medical care
or service is provided or furnished at
VA expense by a non-VA provider, then
VA’s charge for such care or service will
be the amount VA paid to the non-VA
provider; otherwise,
(iii) VA’s charges for prosthetic
devices and durable medical equipment
will be VA’s actual cost; otherwise,
(iv) If a Medicare allowed charge
amount can be determined for the care
or service, then VA’s charge will be the
Medicare participating provider allowed
charge amount geographically adjusted
using the applicable geographic area
adjustment factors determined pursuant
to this section; otherwise,

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(v) If a charge cannot be established
under paragraphs (a)(8)(i) through (iv) of
this section, then VA will not charge for
the care or service under this section.
(b) Acute inpatient facility charges.
When VA provides or furnishes acute
inpatient services within the scope of
care referred to in paragraph (a)(1) of
this section, acute inpatient facility
charges billed for such services will be
determined in accordance with the
provisions of this paragraph. Acute
inpatient facility charges consist of per
diem charges for room and board and
for ancillary services that vary by
geographic area and by DRG. These
charges are calculated as follows:
(1) Formula. For each acute inpatient
stay, or portion thereof, for which a
particular DRG assignment applies, the
total acute inpatient facility charge is
the sum of the applicable charges
determined pursuant to paragraphs
(b)(1)(i), (ii), and (iii) of this section. For
purposes of this section, standard room
and board days and ICU room and board
days are mutually exclusive: VA will
bill either a standard room and board
per diem charge or an ICU room and
board per diem charge, as applicable, for
each day of a given acute inpatient stay.
(i) Standard room and board charges.
Multiply the nationwide standard room
and board per diem charge determined
pursuant to paragraph (b)(2) of this
section by the appropriate geographic
area adjustment factor determined
pursuant to paragraph (b)(3) of this
section. The result constitutes the areaspecific standard room and board per
diem charge. Multiply this amount by
the number of days for which standard
room and board charges apply to obtain
the total acute inpatient facility
standard room and board charge.
(ii) ICU room and board charges.
Multiply the nationwide ICU room and
board per diem charge determined
pursuant to paragraph (b)(2) of this
section by the appropriate geographic
area adjustment factor determined
pursuant to paragraph (b)(3) of this
section. The result constitutes the areaspecific ICU room and board per diem
charge. Multiply this amount by the
number of days for which ICU room and
board per diem charges apply to obtain
the total acute inpatient facility ICU
room and board charge.
(iii) Ancillary charges. Multiply the
nationwide ancillary per diem charge
determined pursuant to paragraph (b)(2)
of this section by the appropriate
geographic area adjustment factor
determined pursuant to paragraph (b)(3)
of this section. The result constitutes the
area-specific ancillary per diem charge.
Multiply this amount by the number of
days of acute inpatient care to obtain the

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total acute inpatient facility ancillary
charge.
Note to paragraph (b)(1): If there is a
change in a patient’s condition and/or
treatment during a single acute inpatient
stay such that the DRG assignment
changes (for example, a psychiatric
patient who develops a medical or
surgical problem), then calculations of
acute inpatient facility charges will be
made separately for each DRG,
according to the number of days of care
applicable for each DRG, and the total
acute inpatient facility charge will be
the sum of the total acute inpatient
facility charges for the different DRGs.
(2) Per diem charges. To establish a
baseline, two nationwide average per
diem amounts for each DRG are
calculated, one from the MedPAR file
and one from the MedStat claims
database, a database of nationwide
commercial insurance claims. Average
per diem charges are calculated based
on all available charges, except for care
reported for emergency room,
ambulance, professional, and
observation care. These two data
sources may report charges for two
differing periods of time; when this
occurs, the data source charges with the
earlier center date are trended forward
to the center date of the other data
source, based on changes to the
inpatient hospital services component
of the CPI–U. Results obtained from
these two data sources are then
combined into a single weighted average
per diem charge for each DRG. The
resulting charge for each DRG is then
separated into its two components, a
room and board component and an
ancillary component, with the per diem
charge for each component calculated
by multiplying the weighted average per
diem charge by the corresponding
percentage determined pursuant to
paragraph (b)(2)(i) of this section. The
room and board per diem charge is
further differentiated into a standard
room and board per diem charge and an
ICU room and board per diem charge by
multiplying the average room and board
charge by the corresponding DRGspecific ratios determined pursuant to
paragraph (b)(2)(ii) of this section. The
resulting per diem charges for standard
room and board, ICU room and board,
and ancillary services for each DRG are
then each multiplied by the final ratio
determined pursuant to paragraph
(b)(2)(iii) of this section to reflect the
nationwide 80th percentile charges.
Finally, the resulting amounts are each
trended forward from the center date of
the trended data sources to the effective
time period for the charges, as set forth
in paragraph (b)(2)(iv) of this section.
The results constitute the nationwide

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80th percentile standard room and
board, ICU room and board, and
ancillary per diem charges.
(i) Room and board charge and
ancillary charge component
percentages. Using only those cases
from the MedPAR file for which a
distinction between room and board
charges and ancillary charges can be
determined, the percentage of the total
charges for room and board compared to
the combined total charges for room and
board and ancillary services, and the
percentage of the total charges for
ancillary services compared to the
combined total charges for room and
board and ancillary services, are
calculated by DRG.
(ii) Standard room and board per
diem charge and ICU room and board
per diem charge ratios. Using only those
cases from the MedPAR file for which
a distinction between room and board
and ancillary charges can be
determined, overall average per diem
room and board charges are calculated
by DRG. Then, using the same cases, an
average standard room and board per
diem charge is calculated by dividing
total non-ICU room and board charges
by total non-ICU room and board days.
Similarly, an average ICU room and
board per diem charge is calculated by
dividing total ICU room and board
charges by total ICU room and board
days. Finally, ratios of standard room
and board per diem charges to average
overall room and board per diem
charges are calculated by DRG, as are
ratios of ICU room and board per diem
charges to average overall room and
board per diem charges.
(iii) 80th percentile. Using cases from
the MedPAR file with separately
identifiable semi-private room rates, the
ratio of the day-weighted 80th
percentile semi-private room and board
per diem charge to the average semiprivate room and board per diem charge
is obtained for each geographic area.
The geographic area-based ratios are
averaged to obtain a final 80th
percentile ratio.
(iv) Trending forward. 80th percentile
charges for each DRG, obtained as
described in paragraph (b)(2) of this
section, are trended forward based on
changes to the inpatient hospital
services component of the CPI–U.
Actual CPI–U changes are used from the
center date of the trended data sources
through the latest available month as of
the time the calculations are performed.
The three-month average annual trend
rate as of the latest available month is
then held constant to the midpoint of
the calendar year in which the charges
are primarily expected to be used. The
projected total CPI–U change so

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obtained is then applied to the 80th
percentile charges.
(3) Geographic area adjustment
factors. For each geographic area, the
average per diem room and board
charges and ancillary charges from the
MedPAR file are calculated for each
DRG. The DRGs are separated into two
groups, surgical and non-surgical. For
each of these groups of DRGs, for each
geographic area, average room and
board per diem charges and ancillary
per diem charges are calculated,
weighted by nationwide VA discharges
and by average lengths of stay from the
combined MedPAR file and MedStat
claims database. This results in four
average per diem charges for each
geographic area: room and board for
surgical DRGs, ancillary for surgical
DRGs, room and board for non-surgical
DRGs, and ancillary for non-surgical
DRGs. Four corresponding national
average per diem charges are obtained
from the MedPAR file, weighted by
nationwide VA discharges and by
average lengths of stay from the
combined MedPAR file and MedStat
claims database. Four geographic area
adjustment factors are then calculated
for each geographic area by dividing
each geographic area average per diem
charge by the corresponding national
average per diem charge.
(c) Skilled nursing facility/sub-acute
inpatient facility charges. When VA
provides or furnishes skilled nursing/
sub-acute inpatient services within the
scope of care referred to in paragraph
(a)(1) of this section, skilled nursing
facility/sub-acute inpatient facility
charges billed for such services will be
determined in accordance with the
provisions of this paragraph. The skilled
nursing facility/sub-acute inpatient
facility charges are per diem charges
that vary by geographic area. The
facility charges cover care, including
room and board, nursing care,
pharmaceuticals, supplies, and skilled
rehabilitation services (e.g., physical
therapy, inhalation therapy,
occupational therapy, and speechlanguage pathology), that is provided in
a nursing home or hospital inpatient
setting, is provided under a physician’s
orders, and is performed by or under the
general supervision of professional
personnel such as registered nurses,
licensed practical nurses, physical
therapists, occupational therapists,
speech-language pathologists, and
audiologists. These charges are
calculated as follows:
(1) Formula. For each stay, multiply
the nationwide per diem charge
determined pursuant to paragraph (c)(2)
of this section by the appropriate
geographic area adjustment factor

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determined pursuant to paragraph (c)(3)
of this section. The result constitutes the
area-specific per diem charge. Finally,
multiply the area-specific per diem
charge by the number of days of care to
obtain the total skilled nursing facility/
sub-acute inpatient facility charge.
(2) Per diem charge. To establish a
baseline, a nationwide average per diem
billed charge is calculated based on
charges reported in the MedPAR skilled
nursing facility file. For this purpose,
the following MedPAR charge categories
are included: room and board (private,
semi-private, and ward), physical
therapy, occupational therapy,
inhalation therapy, speech-language
pathology, pharmacy, medical/surgical
supplies, and ‘‘other’’ services. The
following MedPAR charge categories are
excluded from the calculation of the per
diem charge and will be billed
separately, using the charges
determined as set forth in other
applicable paragraphs of this section,
when these services are provided to
skilled nursing patients or sub-acute
inpatients: ICU and CCU room and
board, laboratory, radiology, cardiology,
dialysis, operating room, blood and
blood administration, ambulance, MRI,
anesthesia, durable medical equipment,
emergency room, clinic, outpatient,
professional, lithotripsy, and organ
acquisition services. The resulting
average per diem billed charge is then
multiplied by the 80th percentile
adjustment factor determined pursuant
to paragraph (c)(2)(i) of this section to
obtain a nationwide 80th percentile
charge level. Finally, the resulting
amount is trended forward to the
effective time period for the charges, as
set forth in paragraph (c)(2)(ii) of this
section.
(i) 80th percentile adjustment factor.
Using the MedPAR skilled nursing
facility file, the ratio of the dayweighted 80th percentile room and
board per diem charge to the dayweighted average room and board per
diem charge is obtained for each
geographic area. The geographic areabased ratios are averaged to obtain the
80th percentile adjustment factor.
(ii) Trending forward. The 80th
percentile charge is trended forward
based on changes to the inpatient
hospital services component of the CPI–
U. Actual CPI–U changes are used from
the time period of the source data
through the latest available month as of
the time the calculations are performed.
The three-month average annual trend
rate as of the latest available month is
then held constant to the midpoint of
the calendar year in which the charges
are primarily expected to be used. The
projected total CPI–U change so

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obtained is then applied to the 80th
percentile charge.
(3) Geographic area adjustment
factors. The average billed per diem
charge for each geographic area is
calculated from the MedPAR skilled
nursing facility file. This amount is
divided by the nationwide average
billed charge calculated in paragraph
(c)(2) of this section. The geographic
area adjustment factor for charges for
each VA facility is the ratio for the
geographic area in which the facility is
located.
(d) Partial hospitalization facility
charges. When VA provides or furnishes
partial hospitalization services that are
within the scope of care referred to in
paragraph (a)(1) of this section, the
facility charges billed for such services
will be determined in accordance with
the provisions of this paragraph. Partial
hospitalization facility charges are per
diem charges that vary by geographic
area. These charges are calculated as
follows:
(1) Formula. For each partial
hospitalization stay, multiply the
nationwide per diem charge determined
pursuant to paragraph (d)(2) of this
section by the appropriate geographic
area adjustment factor determined
pursuant to paragraph (d)(3) of this
section. The result constitutes the areaspecific per diem charge. Finally,
multiply the area-specific per diem
charge by the number of days of care to
obtain the total partial hospitalization
facility charge.
(2) Per diem charge. To establish a
baseline, a nationwide median per diem
billed charge is calculated based on
charges associated with partial
hospitalization from the outpatient
facility component of the Medicare
Standard Analytical File 5 percent
Sample. That median per diem billed
charge is then multiplied by the 80th
percentile adjustment factor determined
pursuant to paragraph (d)(2)(i) of this
section to obtain a nationwide 80th
percentile charge level. Finally, the
resulting amount is trended forward to
the effective time period for the charges,
as set forth in paragraph (d)(2)(ii) of this
section.
(i) 80th percentile adjustment factor.
The 80th percentile adjustment factor
for partial hospitalization facility
charges is the same as that computed for
skilled nursing facility/sub-acute
inpatient facility charges under
paragraph (c)(2)(i) of this section.
(ii) Trending forward. The 80th
percentile charge is trended forward
based on changes to the outpatient
hospital services component of the CPI–
U. Actual CPI–U changes are used from
the time period of the source data

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through the latest available month as of
the time the calculations are performed.
The three-month average annual trend
rate as of the latest available month is
then held constant to the midpoint of
the calendar year in which the charges
are primarily expected to be used. The
projected total CPI–U change so
obtained is then applied to the 80th
percentile charges, as described in
paragraph (d)(2) of this section.
(3) Geographic area adjustment
factors. The geographic area adjustment
factors for partial hospitalization facility
charges are the same as those computed
for outpatient facility charges under
paragraph (e)(4) of this section.
(e) Outpatient facility charges. When
VA provides or furnishes outpatient
facility services that are within the
scope of care referred to in paragraph
(a)(1) of this section, the charges billed
for such services will be determined in
accordance with the provisions of this
paragraph. Charges for outpatient
facility services vary by geographic area
and by CPT/HCPCS code. These charges
apply in the situations set forth in
paragraph (e)(1) of this section and are
calculated as set forth in paragraph
(e)(2) of this section.
(1) Settings and circumstances in
which outpatient facility charges apply.
Outpatient facility charges consist of
facility charges for procedures,
diagnostic tests, evaluation and
management services, and other medical
services, items, and supplies provided
in the following settings and
circumstances:
(i) Outpatient departments and clinics
at VA medical centers;
(ii) Other VA provider-based entities;
and
(iii) VA non-provider-based entities,
for procedures and tests for which no
corresponding professional charge is
established under the provisions of
paragraph (f) of this section.
(2) Formula. For each outpatient
facility charge CPT/HCPCS code,
multiply the nationwide 80th percentile
charge determined pursuant to
paragraph (e)(3) of this section by the
appropriate geographic area adjustment
factor determined pursuant to paragraph
(e)(4) of this section. The result
constitutes the area-specific outpatient
facility charge. When multiple surgical
procedures are performed during the
same outpatient encounter by a provider
or provider team, the outpatient facility
charges for such procedures will be
reduced as set forth in paragraph (e)(5)
of this section.
(3) Nationwide 80th percentile
charges by CPT/HCPCS code. For each
CPT/HCPCS code for which outpatient
facility charges apply, the nationwide

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80th percentile charge is calculated as
set forth in either paragraph (e)(3)(i) or
(e)(3)(ii) of this section. The resulting
amount is trended forward to the
effective time period for the charges, as
set forth in paragraph (e)(3)(iii) of this
section. The results constitute the
nationwide 80th percentile outpatient
facility charges by CPT/HCPCS code.
(i) Nationwide 80th percentile charges
for CPT/HCPCS codes which have APC
assignments. Using the outpatient
facility charges reported in the
outpatient facility component of the
Medicare Standard Analytical File 5
percent Sample, claim records are
selected for which all charges can be
assigned to an APC. Using this subset of
the 5 percent Sample data, nationwide
median charge to Medicare APC
payment amount ratios, by APC, and
nationwide 80th percentile to median
charge ratios, by APC, are computed
according to the methodology set forth
in paragraphs (e)(3)(i)(A) and (e)(3)(i)(B)
of this section, respectively. The
product of these two ratios by APC is
then computed, resulting in a composite
nationwide 80th percentile charge to
Medicare APC payment amount ratio.
This ratio is then compared to the
alternate nationwide 80th percentile
charge to Medicare APC payment
amount ratio computed in paragraph
(e)(3)(i)(C) of this section, and the lesser
amount is selected and multiplied by
the current Medicare APC payment
amount. The resulting product is the
APC-specific nationwide 80th percentile
charge amount for each applicable CPT/
HCPCS code.
(A) Nationwide median charge to
Medicare APC payment amount ratios.
For each CPT/HCPCS code, the ratio of
median billed charge to Medicare APC
payment amount is determined. The
weighted average of these ratios for each
APC is then obtained, using the reported
5 percent Sample frequencies as
weights. In addition, corresponding
ratios are calculated for each of the APC
categories set forth in paragraph
(e)(3)(i)(D) of this section, again using
the reported 5 percent Sample
frequencies as weights. For APCs where
the 5 percent Sample frequencies
provide a statistically credible result,
the APC-specific weighted average
nationwide median charge to Medicare
APC payment amount ratio so obtained
is accepted without further adjustment.
However, if the 5 percent Sample data
do not produce statistically credible
results for any specific APC, then the
APC category-specific ratio is applied
for that APC.
(B) Nationwide 80th percentile to
median charge ratios. For each CPT/
HCPCS code, a geographically

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normalized nationwide 80th percentile
billed charge amount is divided by a
similarly normalized nationwide
median billed charge amount. The
weighted average of these ratios for each
APC is then obtained, using the reported
5 percent Sample frequencies as
weights. In addition, corresponding
ratios are calculated for each of the APC
categories set forth in paragraph
(e)(3)(i)(D) of this section, again using
the reported 5 percent Sample
frequencies as weights. For APCs where
the 5 percent Sample frequencies
provide a statistically credible result,
the APC-specific weighted average
nationwide 80th percentile to median
charge ratio so obtained is accepted
without further adjustment. However, if
the 5 percent Sample data do not
produce statistically credible results for
any specific APC, then the APC
category-specific ratio is applied for that
APC.
(C) Alternate nationwide 80th
percentile charge to Medicare APC
payment amount ratios. A minimum
80th percentile charge to Medicare APC
payment amount ratio is set at 2.0 for
APCs with Medicare APC payment
amounts of $25 or less. A maximum
80th percentile charge to Medicare APC
payment amount ratio is set at 6.5 for
APCs with Medicare APC payment
amounts of $10,000 or more. Using
linear interpolation with these
endpoints, the alternate APC-specific
nationwide 80th percentile charge to
Medicare APC payment amount ratio is
then computed, based on the Medicare
APC payment amount.
(D) APC categories for the purpose of
establishing 80th percentile to median
factors. For the purpose of the statistical
methodology set forth in paragraph
(e)(3)(i) of this section, APCs are
assigned to the following APC
categories:
(1) Radiology.
(2) Drugs.
(3) Office, Home, and Urgent Care
Visits.
(4) Cardiovascular.
(5) Emergency Room Visits.
(6) Outpatient Psychiatry, Alcohol
and Drug Abuse.
(7) Pathology.
(8) Surgery.
(9) Allergy Immunotherapy, Allergy
Testing, Immunizations, and
Therapeutic Injections.
(10) All APCs not assigned to any of
the above groups.
(ii) Nationwide 80th percentile
charges for CPT/HCPCS codes which do
not have APC assignments. Nationwide
80th percentile billed charge levels by
CPT/HCPCS code are computed from
the outpatient facility component of the

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70719

MDR database, from the MedStat claims
database, and from the outpatient
facility component of the Medicare
Standard Analytical File 5 percent
Sample. If the MDR database contains
sufficient data to provide a statistically
credible 80th percentile charge, then
that result is retained for this purpose.
If the MDR database does not provide a
statistically credible 80th percentile
charge, then the result from the MedStat
database is retained for this purpose,
provided it is statistically credible. If
neither the MDR nor the MedStat
databases provide statistically credible
results, then the nationwide 80th
percentile billed charge computed from
the 5 percent Sample data is retained for
this purpose. The nationwide 80th
percentile charges retained from each of
these data sources are trended forward
to the effective time period for the
charges, as set forth in paragraph
(e)(3)(iii) of this section.
(iii) Trending forward. The charges for
each CPT/HCPCS code, obtained as
described in paragraph (e)(3) of this
section, are trended forward based on
changes to the outpatient hospital
services component of the CPI–U.
Actual CPI–U changes are used from the
time period of the source data through
the latest available month as of the time
the calculations are performed. The
three-month average annual trend rate
as of the latest available month is then
held constant to the midpoint of the
calendar year in which the charges are
primarily expected to be used. The
projected total CPI–U change so
obtained is then applied to the 80th
percentile charges, as described in
paragraph (e)(3) of this section.
(4) Geographic area adjustment
factors. For each geographic area, a
single adjustment factor is calculated as
the arithmetic average of the outpatient
geographic area adjustment factor
published in the Milliman USA, Inc.,
Health Cost Guidelines (this factor
constitutes the ratio of the level of
charges for each geographic area to the
nationwide level of charges), and a
geographic area adjustment factor
developed from the MDR database (see
paragraph (a)(3) of this section for Data
Sources). The MDR-based geographic
area adjustment factors are calculated as
the ratio of the CPT/HCPCS code
weighted average charge level for each
geographic area to the nationwide CPT/
HCPCS code weighted average charge
level.
(5) Multiple surgical procedures.
When multiple surgical procedures are
performed during the same outpatient
encounter by a provider or provider
team as indicated by multiple surgical
CPT/HCPCS procedure codes, then the

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CPT/HCPCS procedure code with the
highest facility charge will be billed at
100 percent of the charges established
under this section; the CPT/HCPCS
procedure code with the second highest
facility charge will be billed at 25
percent of the charges established under
this section; the CPT/HCPCS procedure
code with the third highest facility
charge will be billed at 15 percent of the
charges established under this section;
and no outpatient facility charges will
be billed for any additional surgical
procedures.
(f) Physician and other professional
charges except for anesthesia services
and certain dental services. When VA
provides or furnishes physician and
other professional services, other than
professional anesthesia services and
certain professional dental services,
within the scope of care referred to in
paragraph (a)(1) of this section,
physician and other professional
charges billed for such services will be
determined in accordance with the
provisions of this paragraph. Charges for
professional dental services identified
by CPT code are determined in
accordance with the provisions of this
paragraph; charges for professional
dental services identified by HCPCS
Level II code are determined in
accordance with the provisions of
paragraph (h) of this section. Physician
and other professional charges consist of
charges for professional services that
vary by geographic area, by CPT/HCPCS
code, by site of service, and by modifier,
where applicable. These charges are
calculated as follows:
(1) Formula. For each CPT/HCPCS
code or, where applicable, each CPT/
HCPCS code and modifier combination,
multiply the total geographicallyadjusted RVUs determined pursuant to
paragraph (f)(2) of this section by the
applicable geographically-adjusted
conversion factor (a monetary amount)
determined pursuant to paragraph (f)(3)
of this section to obtain the physician
charge for each CPT/HCPCS code in a
particular geographic area. Then,
multiply this charge by the appropriate
factors for any charge-significant
modifiers, determined pursuant to
paragraph (f)(4) of this section.
(2)(i) Total geographically-adjusted
RVUs for physician services that have
Medicare RVUs. The work expense and
practice expense RVUs for CPT/HCPCS
codes, other than the codes described in
paragraphs (f)(2)(ii) and (f)(2)(iii) of this
section, are compiled using Medicare
Physician Fee Schedule RVUs. The sum
of the geographically-adjusted work
expense RVUs determined pursuant to
paragraph (f)(2)(i)(A) of this section and
the geographically-adjusted practice

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expense RVUs determined pursuant to
paragraph (f)(2)(i)(B) of this section
equals the total geographically-adjusted
RVUs.
(A) Geographically-adjusted work
expense RVUs. For each CPT/HCPCS
code for each geographic area, the
Medicare Physician Fee Schedule work
expense RVUs are multiplied by the
work expense Medicare Geographic
Practice Cost Index. The result
constitutes the geographically-adjusted
work expense RVUs.
(B) Geographically-adjusted practice
expense RVUs. For each CPT/HCPCS
code for each geographic area, the
Medicare Physician Fee Schedule
practice expense RVUs are multiplied
by the practice expense Medicare
Geographic Practice Cost Index. The
result constitutes the geographicallyadjusted practice expense RVUs. In
these calculations, facility practice
expense RVUs are used to obtain
geographically-adjusted practice
expense RVUs for use by provider-based
entities, and non-facility practice
expense RVUs are used to obtain
geographically-adjusted practice
expense RVUs for use by non-providerbased entities.
(ii) RVUs for CPT/HCPCS codes that
do not have Medicare RVUs and are not
designated as unlisted procedures. For
CPT/HCPCS codes that are not assigned
RVUs in paragraphs (f)(2)(i) or (f)(2)(iii)
of this section, total RVUs are developed
based on various charge data sources.
For these CPT/HCPCS codes, the
nationwide 80th percentile billed
charges are obtained, where statistically
credible, from the MDR database. For
any remaining CPT/HCPCS codes, the
nationwide 80th percentile billed
charges are obtained, where statistically
credible, from the Part B component of
the Medicare Standard Analytical File 5
percent Sample. For any remaining
CPT/HCPCS codes, the nationwide 80th
percentile billed charges are obtained,
where statistically credible, from the
Prevailing Healthcare Charges System
nationwide commercial insurance
database. For each of these CPT/HCPCS
codes, nationwide total RVUs are
obtained by taking the nationwide 80th
percentile billed charges obtained using
the preceding three databases and
dividing by the untrended nationwide
conversion factor for the corresponding
CPT/HCPCS code group determined
pursuant to paragraphs (f)(3) and (f)(3)(i)
of this section. For any remaining CPT/
HCPCS codes that have not been
assigned RVUs using the preceding data
sources, the nationwide total RVUs are
calculated by summing the work
expense and non-facility practice
expense RVUs found in Ingenix/St.

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Anthony’s RBRVS. The resulting
nationwide total RVUs obtained using
these four data sources are multiplied
by the geographic area adjustment
factors determined pursuant to
paragraph (f)(2)(iv) of this section to
obtain the area-specific total RVUs.
(iii) RVUs for CPT/HCPCS codes
designated as unlisted procedures. For
CPT/HCPCS codes designated as
unlisted procedures, total RVUs are
developed based on the weighted
median of the total RVUs of CPT/HCPCS
codes within the series in which the
unlisted procedure code occurs. A
nationwide VA distribution of
procedures and services is used for the
purpose of computing the weighted
median. The resulting nationwide total
RVUs are multiplied by the geographic
area adjustment factors determined
pursuant to paragraph (f)(2)(iv) of this
section to obtain the area-specific total
RVUs.
(iv) RVU geographic area adjustment
factors for CPT/HCPCS codes that do
not have Medicare RVUs, including
codes that are designated as unlisted
procedures. The adjustment factor for
each geographic area consists of the
weighted average of the work expense
and practice expense Medicare
Geographic Practice Cost Indices for
each geographic area using charge data
for representative CPT/HCPCS codes
statistically selected and weighted for
work expense and practice expense.
(3) Geographically-adjusted 80th
percentile conversion factors. CPT/
HCPCS codes are separated into the
following 23 CPT/HCPCS code groups:
allergy immunotherapy, allergy testing,
cardiovascular, chiropractor, consults,
emergency room visits and observation
care, hearing/speech exams,
immunizations, inpatient visits,
maternity/cesarean deliveries,
maternity/non-deliveries, maternity/
normal deliveries, miscellaneous
medical, office/home/urgent care visits,
outpatient psychiatry/alcohol and drug
abuse, pathology, physical exams,
physical medicine, radiology, surgery,
therapeutic injections, vision exams,
and well baby exams. For each of the 23
CPT/HCPCS code groups, representative
CPT/HCPCS codes are statistically
selected and weighted so as to give a
weighted average RVU comparable to
the weighted average RVU of the entire
CPT/HCPCS code group (the selected
CPT/HCPCS codes are set forth in the
Milliman USA, Inc., Health Cost
Guidelines fee survey); see paragraph
(a)(3) of this section for Data Sources.
The 80th percentile charge for each
selected CPT/HCPCS code is obtained
from the MDR database. A nationwide
conversion factor (a monetary amount)

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is calculated for each CPT/HCPCS code
group as set forth in paragraph (f)(3)(i)
of this section. The nationwide
conversion factors for each of the 23
CPT/HCPCS code groups are trended
forward to the effective time period for
the charges, as set forth in paragraph
(f)(3)(ii) of this section. The resulting
amounts for each of the 23 groups are
multiplied by geographic area
adjustment factors determined pursuant
to paragraph (f)(3)(iii) of this section,
resulting in geographically-adjusted
80th percentile conversion factors for
each geographic area for the 23 CPT/
HCPCS code groups for the effective
charge period.
(i) Nationwide conversion factors.
Using the nationwide 80th percentile
charges for the selected CPT/HCPCS
codes from paragraph (f)(3) of this
section, a nationwide conversion factor
is calculated for each of the 23 CPT/
HCPCS code groups by dividing the
weighted average charge by the
weighted average RVU.
(ii) Trending forward. The nationwide
conversion factors for each of the 23
CPT/HCPCS code groups, obtained as
described in paragraph (f)(3)(i) of this
section, are trended forward based on
changes to the physicians’ services
component of the CPI–U. Actual CPI–U
changes are used from the time period
of the source data through the latest
available month as of the time the
calculations are performed. The threemonth average annual trend rate as of
the latest available month is then held
constant to the midpoint of the calendar
year in which the charges are primarily
expected to be used. The projected total
CPI–U change so obtained is then
applied to the 23 conversion factors.
(iii) Geographic area adjustment
factors. Using the 80th percentile
charges for the selected CPT/HCPCS
codes from paragraph (f)(3) of this
section for each geographic area, a
geographic area-specific conversion
factor is calculated for each of the 23
CPT/HCPCS code groups by dividing
the weighted average charge by the
weighted average geographicallyadjusted RVU. The resulting conversion
factor for each geographic area for each
of the 23 CPT/HCPCS code groups is
divided by the corresponding
nationwide conversion factor
determined pursuant to paragraph
(f)(3)(i) of this section. The resulting
ratios are the geographic area
adjustment factors for the conversion
factors for each of the 23 CPT/HCPCS
code groups for each geographic area.
(4) Charge adjustment factors for
specified CPT/HCPCS code modifiers.
Surcharges or charge discounts are
calculated in the following manner:

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from the Part B component of the
Medicare Standard Analytical File 5
percent Sample, the ratio of weighted
average billed charges for CPT/HCPCS
codes with the specified modifier to the
weighted average billed charge for CPT/
HCPCS codes with no charge modifier is
calculated, using the frequency of
procedure codes with the modifier as
weights in both weighted average
calculations. The resulting ratios
constitute the surcharge or discount
factors for specified charge-significant
CPT/HCPCS code modifiers.
(5) Certain charges for providers other
than physicians. When services for
which charges are established according
to the preceding provisions of this
paragraph (f) are performed by providers
other than physicians, the charges for
those services will be as determined by
the preceding provisions of this
paragraph, except as follows:
(i) Outpatient facility charges. When
the services of providers other than
physicians are furnished in outpatient
facility settings or in other facilities
designated as provider-based, and
outpatient facility charges for those
services have been established under
paragraph (e) of this section, then the
outpatient facility charges established
under paragraph (e) will apply instead
of the charges established under this
paragraph (f).
(ii) Discounted charges. Charges for
the professional services of the
following providers will be the
indicated percentages of the amount
that would be charged if the care had
been provided by a physician:
(A) Nurse practitioner: 85 percent.
(B) Clinical nurse specialist: 85
percent.
(C) Physician Assistant: 85 percent.
(D) Clinical psychologist: 80 percent.
(E) Clinical social worker: 75 percent.
(F) Dietitian: 75 percent.
(G) Clinical pharmacist: 80 percent.
(g) Professional charges for anesthesia
services. When VA provides or
furnishes professional anesthesia
services within the scope of care
referred to in paragraph (a)(1) of this
section, professional anesthesia charges
billed for such services will be
determined in accordance with the
provisions of this paragraph. Charges for
professional anesthesia services
personally performed by
anesthesiologists will be 100 percent of
the charges determined as set forth in
this paragraph. Charges for professional
anesthesia services provided by nonmedically directed certified registered
nurse anesthetists will also be 100
percent of the charges determined as set
forth in this paragraph. Charges for
professional anesthesia services

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70721

provided by medically directed certified
registered nurse anesthetists will be 50
percent of the charges otherwise
determined as set forth in this
paragraph. Professional anesthesia
charges consist of charges for
professional services that vary by
geographic area, by CPT/HCPCS code
base units, and by number of time units.
These charges are calculated as follows:
(1) Formula. For each anesthesia CPT/
HCPCS code, multiply the total
anesthesia RVUs determined pursuant
to paragraph (g)(2) of this section by the
applicable geographically-adjusted
conversion factor (a monetary amount)
determined pursuant to paragraph (g)(3)
of this section to obtain the professional
anesthesia charge for each CPT/HCPCS
code in a particular geographic area.
(2) Total RVUs for professional
anesthesia services. The total anesthesia
RVUs for each anesthesia CPT/HCPCS
code are the sum of the base units (as
compiled by CMS) for that CPT/HCPCS
code and the number of time units
reported for the anesthesia service,
where one time unit equals 15 minutes.
For anesthesia CPT/HCPCS codes
designated as unlisted procedures, base
units are developed based on the
weighted median base units for
anesthesia CPT/HCPCS codes within the
series in which the unlisted procedure
code occurs. A nationwide VA
distribution of procedures and services
is used for the purpose of computing the
weighted median base units.
(3) Geographically-adjusted 80th
percentile conversion factors. A
nationwide 80th percentile conversion
factor is calculated according to the
methodology set forth in paragraph
(g)(3)(i) of this section. The nationwide
conversion factor is then trended
forward to the effective time period for
the charges, as set forth in paragraph
(g)(3)(ii) of this section. The resulting
amount is multiplied by geographic area
adjustment factors determined pursuant
to paragraph (g)(3)(iii) of this section,
resulting in geographically-adjusted
80th percentile conversion factors for
each geographic area for the effective
charge period.
(i) Nationwide conversion factor.
Preliminary 80th percentile conversion
factors for each area are compiled from
the MDR database. Then, a preliminary
nationwide weighted-average 80th
percentile conversion factor is
calculated, using as weights the
population (census) frequencies for each
geographic area as presented in the
Milliman USA, Inc., Health Cost
Guidelines (see paragraph (a)(3) of this
section for Data Sources). A nationwide
80th percentile fee by CPT/HCPCS code
is then computed by multiplying this

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conversion factor by the MDR base units
for each CPT/HCPCS code. An adjusted
80th percentile conversion factor by
CPT/HCPCS code is then calculated by
dividing the nationwide 80th percentile
fee for each procedure code by the
anesthesia base units (as compiled by
CMS) for that CPT/HCPCS code. Finally,
a nationwide weighted average 80th
percentile conversion factor is
calculated using combined frequencies
for billed base units and time units from
the part B component of the Medicare
Standard Analytical File 5 percent
Sample as weights.
(ii) Trending forward. The nationwide
conversion factor, obtained as described
in paragraph (g)(3)(i) of this section, is
trended forward based on changes to the
physicians’ services component of the
CPI–U. Actual CPI–U changes are used
from the time period of the source data
through the latest available month as of
the time the calculations are performed.
The three-month average annual trend
rate as of the latest available month is
then held constant to the midpoint of
the calendar year in which the charges
are primarily expected to be used. The
projected total CPI–U change so
obtained is then applied to the
conversion factor.
(iii) Geographic area adjustment
factors. The preliminary 80th percentile
conversion factors for each geographic
area described in paragraph (g)(3)(i) of
this section are divided by the
corresponding preliminary nationwide
80th percentile conversion factor also
described in paragraph (g)(3)(i). The
resulting ratios are the adjustment
factors for each geographic area.
(h) Professional charges for dental
services identified by HCPCS Level II
codes. When VA provides or furnishes
outpatient dental professional services
within the scope of care referred to in
paragraph (a)(1) of this section, and
such services are identified by HCPCS
code rather than CPT code, the charges
billed for such services will be
determined in accordance with the
provisions of this paragraph. The
charges for dental services vary by
geographic area and by HCPCS code.
These charges are calculated as follows:
(1) Formula. For each HCPCS dental
code, multiply the nationwide 80th
percentile charge determined pursuant
to paragraph (h)(2) of this section by the
appropriate geographic area adjustment
factor determined pursuant to paragraph
(h)(3) of this section. The result
constitutes the area-specific dental
charge.
(2) Nationwide 80th percentile
charges by HCPCS code. For each
HCPCS dental code, 80th percentile
charges are extracted from three

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independent data sources: Prevailing
Healthcare Charges System database;
National Dental Advisory Service
nationwide pricing index; and the
Dental UCR Module of the
Comprehensive Healthcare Payment
System, a release from Ingenix from a
nationwide database of dental charges
(see paragraph (a)(3) of this section for
Data Sources). Charges for each database
are then trended forward to a common
date, based on actual changes to the
dental services component of the CPI–
U. Charges for each HCPCS dental code
from each data source are combined into
an average 80th percentile charge by
means of the methodology set forth in
paragraph (h)(2)(i) of this section.
HCPCS dental codes designated as
unlisted are assigned 80th percentile
charges by means of the methodology
set forth in paragraph (h)(2)(ii) of this
section. Finally, the resulting amounts
are each trended forward to the effective
time period for the charges, as set forth
in paragraph (h)(2)(iii) of this section.
The results constitute the nationwide
80th percentile charge for each HCPCS
dental code.
(i) Averaging methodology. The
average charge for any particular HCPCS
dental code is calculated by first
computing a preliminary mean average
of the three charges for each code.
Statistical outliers are identified and
removed by testing whether any charge
differs from the preliminary mean
charge by more than 50 percent of the
preliminary mean charge. In such cases,
the charge most distant from the
preliminary mean is removed as an
outlier, and the average charge is
calculated as a mean of the two
remaining charges. In cases where none
of the charges differ from the
preliminary mean charge by more than
50 percent of the preliminary mean
charge, the average charge is calculated
as a mean of all three reported charges.
(ii) Nationwide 80th percentile
charges for HCPCS dental codes
designated as unlisted procedures. For
HCPCS dental codes designated as
unlisted procedures, 80th percentile
charges are developed based on the
weighted median 80th percentile charge
of HCPCS dental codes within the series
in which the unlisted procedure code
occurs. The distribution of procedures
and services from the Prevailing
Healthcare Charges System nationwide
commercial insurance database is used
for the purpose of computing the
weighted median.
(iii) Trending forward. 80th percentile
charges for each dental procedure code,
obtained as described in paragraph
(h)(2) of this section, are trended
forward based on the dental services

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component of the CPI–U. Actual CPI–U
changes are used from the time period
of the source data through the latest
available month as of the time the
calculations are performed. The threemonth average annual trend rate as of
the latest available month is then held
constant to the midpoint of the calendar
year in which the charges are primarily
expected to be used. The projected total
CPI–U change so obtained is then
applied to the 80th percentile charges.
(3) Geographic area adjustment
factors. A geographic adjustment factor
(consisting of the ratio of the level of
charges in a given geographic area to the
nationwide level of charges) for each
geographic area and dental class of
service is obtained from Milliman USA,
Inc., Dental Health Cost Guidelines, a
database of nationwide commercial
insurance charges and relative costs;
and a normalized geographic adjustment
factor computed from the Dental UCR
Module of the Comprehensive
Healthcare Payment System compiled
by Ingenix, as follows: Using local and
nationwide average charges reported in
the Ingenix data, a local weighted
average charge for each dental class of
procedure codes is calculated using
utilization frequencies from the
Milliman USA, Inc., Dental Health Cost
Guidelines as weights (see paragraph
(a)(3) of this section for Data Sources).
Similarly, using nationwide average
charge levels, a nationwide average
charge by dental class of procedure
codes is calculated. The normalized
geographic adjustment factor for each
dental class of procedure codes and for
each geographic area is the ratio of the
local average charge divided by the
corresponding nationwide average
charge. Finally, the geographic area
adjustment factor is the arithmetic
average of the corresponding factors
from the data sources mentioned in the
first sentence of this paragraph (h)(3).
(i) Pathology and laboratory charges.
When VA provides or furnishes
pathology and laboratory services
within the scope of care referred to in
paragraph (a)(1) of this section, charges
billed for such services will be
determined in accordance with the
provisions of this paragraph. Pathology
and laboratory charges consist of
charges for services that vary by
geographic area and by CPT/HCPCS
code. These charges are calculated as
follows:
(1) Formula. For each CPT/HCPCS
code, multiply the total geographicallyadjusted RVUs determined pursuant to
paragraph (i)(2) of this section by the
applicable geographically-adjusted
conversion factor (a monetary amount)
determined pursuant to paragraph (i)(3)

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Federal Register / Vol. 68, No. 244 / Friday, December 19, 2003 / Rules and Regulations
of this section to obtain the pathology/
laboratory charge for each CPT/HCPCS
code in a particular geographic area.
(2)(i) Total geographically-adjusted
RVUs for pathology and laboratory
services that have Medicare-based
RVUs. Total RVUs are developed based
on the Medicare Clinical Diagnostic
Laboratory Fee Schedule (CLAB). The
CLAB payment amounts are upwardly
adjusted such that the adjusted payment
amounts are, on average, equivalent to
Medicare Physician Fee Schedule
payment levels, using statistical
comparisons to the 80th percentile
derived from the MDR database. These
adjusted payment amounts are then
divided by the corresponding Medicare
conversion factor to derive RVUs for
each CPT/HCPCS code. The resulting
nationwide total RVUs are multiplied by
the geographic adjustment factors
determined pursuant to paragraph
(i)(2)(iv) of this section to obtain the
area-specific total RVUs.
(ii) RVUs for CPT/HCPCS codes that
do not have Medicare-based RVUs and
are not designated as unlisted
procedures. For CPT/HCPCS codes that
are not assigned RVUs in paragraphs
(i)(2)(i) or (i)(2)(iii) of this section, total
RVUs are developed based on various
charge data sources. For these CPT/
HCPCS codes, the nationwide 80th
percentile billed charges are obtained,
where statistically credible, from the
MDR database. For any remaining CPT/
HCPCS codes, the nationwide 80th
percentile billed charges are obtained,
where statistically credible, from the
Part B component of the Medicare
Standard Analytical File 5 percent
Sample. For any remaining CPT/HCPCS
codes, the nationwide 80th percentile
billed charges are obtained, where
statistically credible, from the Prevailing
Healthcare Charges System nationwide
commercial insurance database. For
each of these CPT/HCPCS codes,
nationwide total RVUs are obtained by
taking the nationwide 80th percentile
billed charges obtained using the
preceding three databases and dividing
by the untrended nationwide
conversion factor determined pursuant
to paragraphs (i)(3) and (i)(3)(i) of this
section. For any remaining CPT/HCPCS
codes that have not been assigned RVUs
using the preceding data sources, the
nationwide total RVUs are calculated by
summing the work expense and nonfacility practice expense RVUs found in
Ingenix/St. Anthony’s RBRVS. The
resulting nationwide total RVUs
obtained using these four data sources
are multiplied by the geographic area
adjustment factors determined pursuant
to paragraph (i)(2)(iv) of this section to
obtain the area-specific total RVUs.

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(iii) RVUs for CPT/HCPCS codes
designated as unlisted procedures. For
CPT/HCPCS codes designated as
unlisted procedures, total RVUs are
developed based on the weighted
median of the total RVUs of CPT/HCPCS
codes within the series in which the
unlisted procedure code occurs. A
nationwide VA distribution of
procedures and services is used for the
purpose of computing the weighted
median. The resulting nationwide total
RVUs are multiplied by the geographic
area adjustment factors determined
pursuant to paragraph (i)(2)(iv) of this
section to obtain the area-specific total
RVUs.
(iv) RVU geographic area adjustment
factors for CPT/HCPCS codes that do
not have Medicare RVUs, including
codes that are designated as unlisted
procedures. The adjustment factor for
each geographic area consists of the
weighted average of the work expense
and practice expense Medicare
Geographic Practice Cost Indices for
each geographic area using charge data
for representative CPT/HCPCS codes
statistically selected and weighted for
work expense and practice expense.
(3) Geographically-adjusted 80th
percentile conversion factors.
Representative CPT/HCPCS codes are
statistically selected and weighted so as
to give a weighted average RVU
comparable to the weighted average
RVU of the entire pathology/laboratory
CPT/HCPCS code group (the selected
CPT/HCPCS codes are set forth in the
Milliman USA, Inc., Health Cost
Guidelines fee survey). The 80th
percentile charge for each selected CPT/
HCPCS code is obtained from the MDR
database. A nationwide conversion
factor (a monetary amount) is calculated
as set forth in paragraph (i)(3)(i) of this
section. The nationwide conversion
factor is trended forward to the effective
time period for the charges, as set forth
in paragraph (i)(3)(ii) of this section.
The resulting amount is multiplied by a
geographic area adjustment factor
determined pursuant to paragraph
(i)(3)(iv) of this section, resulting in the
geographically-adjusted 80th percentile
conversion factor for the effective charge
period.
(i) Nationwide conversion factors.
Using the nationwide 80th percentile
charges for the selected CPT/HCPCS
codes from paragraph (i)(3) of this
section, a nationwide conversion factor
is calculated by dividing the weighted
average charge by the weighted average
RVU.
(ii) Trending forward. The nationwide
conversion factor, obtained as described
in paragraph (i)(3) of this section, is
trended forward based on changes to the

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70723

physicians’ services component of the
CPI–U. Actual CPI–U changes are used
from the time period of the source data
through the latest available month as of
the time the calculations are performed.
The three-month average annual trend
rate as of the latest available month is
then held constant to the midpoint of
the calendar year in which the charges
are primarily expected to be used. The
projected total CPI–U change so
obtained is then applied to the
pathology/laboratory conversion factor.
(iii) Geographic area adjustment
factor. Using the 80th percentile charges
for the selected CPT/HCPCS codes from
paragraph (i)(3) of this section for each
geographic area, a geographic areaspecific conversion factor is calculated
by dividing the weighted average charge
by the weighted average geographicallyadjusted RVU. The resulting geographic
area conversion factor is divided by the
corresponding nationwide conversion
factor determined pursuant to paragraph
(i)(3)(i) of this section. The resulting
ratios are the geographic area
adjustment factors for pathology and
laboratory services for each geographic
area.
(j) Observation care facility charges.
When VA provides observation care
within the scope of care referred to in
paragraph (a)(1) of this section, the
facility charges billed for such care will
be determined in accordance with the
provisions of this paragraph. The
charges for this care vary by geographic
area and number of hours of care. These
charges are calculated as follows:
(1) Formula. For each occurrence of
observation care, add the nationwide
base charge determined pursuant to
paragraph (j)(2) of this section to the
product of the number of hours in
observation care and the hourly charge
also determined pursuant to paragraph
(j)(2) of this section. Then multiply this
amount by the appropriate geographic
area adjustment factor determined
pursuant to paragraph (j)(3) of this
section. The result constitutes the areaspecific observation care facility charge.
(2)(i) Nationwide 80th percentile
observation care facility charges. To
calculate nationwide base and hourly
facility charges, all claims with
observation care line items are selected
from the outpatient facility component
of the Medicare Standard Analytical
File 5 percent Sample. Then, using the
80th percentile observation line item
charges for each unique hourly length of
stay, a standard linear regression
technique is used to calculate the
nationwide 80th percentile base charge
and 80th percentile hourly charge.
Finally, the resulting amounts are each
trended forward to the effective time

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period for the charges, as set forth in
paragraph (j)(2)(ii) of this section. The
results constitute the nationwide 80th
percentile base and hourly facility
charges for observation care.
(ii) Trending forward. The nationwide
80th percentile base and hourly facility
charges for observation care, obtained as
described in paragraph (j)(2)(i) of this
section, are trended forward based on
changes to the outpatient hospital
services component of the CPI–U.
Actual CPI–U changes are used from the
time period of the source data through
the latest available month as of the time
the calculations are performed. The
three-month average annual trend rate
as of the latest available month is then
held constant to the midpoint of the
calendar year in which the charges are
primarily expected to be used. The
projected total CPI–U change so
obtained is then applied to the 80th
percentile charges.
(3) Geographic area adjustment
factors. The geographic area adjustment
factors for observation care facility
charges are the same as those computed
for outpatient facility charges under
paragraph (e)(4) of this section.
(k) Ambulance and other emergency
transportation charges. When VA
provides ambulance and other
emergency transportation services that
are within the scope of care referred to
in paragraph (a)(1) of this section, the
charges billed for such services will be
determined in accordance with the
provisions of this paragraph. The
charges for these services vary by
HCPCS code, length of trip, and
geographic area. These charges are
calculated as follows:
(1) Formula. For each occasion of
ambulance or other emergency
transportation service, add the
nationwide base charge for the
appropriate HCPCS code determined
pursuant to paragraph (k)(2)(i) of this
section to the product of the number of
miles traveled and the appropriate
HCPCS code mileage charge determined
pursuant to paragraph (k)(2)(ii) of this
section. Then multiply this amount by
the appropriate geographic area
adjustment factor determined pursuant
to paragraph (k)(3) of this section. The
result constitutes the area-specific
ambulance or other emergency
transportation service charge.
(2)(i) Nationwide 80th percentile allinclusive base charge. To calculate a
nationwide all-inclusive base charge, all
ambulance and other emergency
transportation claims are selected from
the outpatient facility component of the
Medicare Standard Analytical File 5
percent Sample. Excluding professional
and mileage charges, as well as all-

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inclusive charges which are reported on
such claims, the total charge per claim,
including incidental supplies, is
computed. Then, the 80th percentile
amount for each HCPCS code is
computed. Finally, the resulting
amounts are each trended forward to the
effective time period for the charges, as
set forth in paragraph (k)(2)(iii) of this
section. The results constitute the
nationwide 80th percentile all-inclusive
base charge for each HCPCS base charge
code.
(ii) Nationwide 80th percentile
mileage charge. To calculate a
nationwide mileage charge, all
ambulance and other emergency
transportation claims are selected from
the outpatient facility component of the
Medicare Standard Analytical File 5
percent Sample. Excluding professional,
incidental, and base charges, as well as
claims with all-inclusive charges, the
total mileage charge per claim is
computed. This amount is divided by
the number of miles reported on the
claim. Then, the 80th percentile amount
for each HCPCS code, using miles as
weights, is computed. Finally, the
resulting amounts are each trended
forward to the effective time period for
the charges, as set forth in paragraph
(k)(2)(iii) of this section. The results
constitute the nationwide 80th
percentile mileage charge for each
HCPCS mileage code.
(iii) Trending forward. The
nationwide 80th percentile charge for
each HCPCS code, obtained as described
in paragraphs (k)(2)(i) and (k)(2)(ii) of
this section, is trended forward based on
changes to the outpatient hospital
services component of the CPI–U.
Actual CPI–U changes are used from the
time period of the source data through
the latest available month as of the time
the calculations are performed. The
three-month average annual trend rate
as of the latest available month is then
held constant to the midpoint of the
calendar year in which the charges are
primarily expected to be used. The
projected total CPI–U change so
obtained is then applied to the 80th
percentile charges.
(3) Geographic area adjustment
factors. The geographic area adjustment
factors for ambulance and other
emergency transportation charges are
the same as those computed for
outpatient facility charges under
paragraph (e)(4) of this section.
(l) Charges for durable medical
equipment, drugs, injectables, and other
medical services, items, and supplies
identified by HCPCS Level II codes.
When VA provides DME, drugs,
injectables, or other medical services,
items, or supplies that are identified by

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HCPCS Level II codes and that are
within the scope of care referred to in
paragraph (a)(1) of this section, the
charges billed for such services, items,
and supplies will be determined in
accordance with the provisions of this
paragraph. The charges for these
services, items, and supplies vary by
geographic area, by HCPCS code, and by
modifier, when applicable. These
charges are calculated as follows:
(1) Formula. For each HCPCS code,
multiply the nationwide charge
determined pursuant to paragraphs
(l)(2), (l)(3), and (l)(4) of this section by
the appropriate geographic area
adjustment factor determined pursuant
to paragraph (l)(5) of this section. The
result constitutes the area-specific
charge.
(2) Nationwide 80th percentile
charges for HCPCS codes with RVUs.
For each applicable HCPCS code, RVUs
are compiled from the data sources set
forth in paragraph (l)(2)(i) of this
section. The RVUs are multiplied by the
charge amount for each incremental
RVU determined pursuant to paragraph
(l)(2)(ii) of this section, and this amount
is added to the fixed charge amount also
determined pursuant to paragraph
(l)(2)(ii) of this section. Then, for each
HCPCS code, this charge is multiplied
by the appropriate 80th percentile to
median charge ratio determined
pursuant to paragraph (l)(2)(iii) of this
section. Finally, the resulting amount is
trended forward to the effective time
period for the charges, as set forth in
paragraph (l)(2)(iv) of this section to
obtain the nationwide 80th percentile
charge.
(i) RVUs for DME, drugs, injectables,
and other medical services, items, and
supplies. For the purpose of the
statistical methodology set forth in
paragraph (l)(2)(ii) of this section,
HCPCS codes are assigned to the
following HCPCS code groups. For the
HCPCS codes in each group, the RVUs
or amounts indicated constitute the
RVUs:
(A) Chemotherapy Drugs: Ingenix/St.
Anthony’s RBRVS Practice Expense
RVUs.
(B) Other Drugs: Ingenix/St.
Anthony’s RBRVS Practice Expense
RVUs.
(C) DME—Hospital Beds: Medicare
DME Fee Schedule amounts.
(D) DME—Medical/Surgical Supplies:
Medicare DME Fee Schedule amounts.
(E) DME—Orthotic Devices: Medicare
DME Fee Schedule amounts.
(F) DME—Oxygen and Supplies:
Medicare DME Fee Schedule amounts.
(G) DME—Wheelchairs: Medicare
DME Fee Schedule amounts.

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(H) Other DME: Medicare DME Fee
Schedule amounts.
(I) Enteral/Parenteral Supplies:
Medicare Parenteral and Enteral
Nutrition Fee Schedule amounts.
(J) Surgical Dressings and Supplies:
Medicare DME Fee Schedule amounts.
(K) Vision Items—Other Than Lenses:
Medicare DME Fee Schedule amounts.
(L) Vision Items—Lenses: Medicare
DME Fee Schedule amounts.
(M) Hearing Items: Ingenix/St.
Anthony’s RBRVS Practice Expense
RVUs.
(ii) Charge amounts. Using combined
Part B and DME components of the
Medicare Standard Analytical File 5%
Sample, the median billed charge is
calculated for each HCPCS code. A
mathematical approximation
methodology based on least squares
techniques is applied to the RVUs
specified for each of the groups set forth
in paragraph (l)(2)(i) of this section,
yielding two charge amounts for each
HCPCS code group: a charge amount per
incremental RVU, and a fixed charge
amount.
(iii) 80th Percentile to median charge
ratios. Two ratios are obtained for each
HCPCS code group set forth in
paragraph (l)(2)(i) of this section by
dividing the weighted average 80th
percentile charge by the weighted
average median charge derived from two
data sources: Medicare data, as
represented by the combined Part B and
DME components of the Medicare
Standard Analytical File 5% Sample;
and the MDR database. Charge
frequencies from the Medicare data are
used as weights when calculating all
weighted averages. For each HCPCS
code group, the smaller of the two ratios
is selected as the adjustment from
median to 80th percentile charges.
(iv) Trending forward. The charges for
each HCPCS code, obtained as described
in paragraph (l)(2)(iii) of this section, are
trended forward based on changes to the
medical care commodities component of
the CPI–U. Actual CPI–U changes are
used from the time period of the source
data through the latest available month
as of the time the calculations are
performed. The three-month average
annual trend rate as of the latest
available month is then held constant to
the midpoint of the calendar year in
which the charges are primarily
expected to be used. The projected total
CPI–U change so obtained is then
applied to the 80th percentile charges,
as described in paragraph (l)(2)(iii) of
this section.
(3) Nationwide 80th percentile
charges for HCPCS codes without RVUs.
For each applicable HCPCS code, 80th
percentile charges are extracted from

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three independent data sources: the
MDR database; Medicare, as represented
by the combined Part B and DME
components of the Medicare Standard
Analytical File 5 percent Sample; and
Milliman USA, Inc., Optimized HMO
(Health Maintenance Organization) Data
Sets (see paragraph (a)(3) of this section
for Data Sources). Charges from each
database are then trended forward to the
effective time period for the charges, as
set forth in paragraph (l)(3)(i) of this
section. Charges for each HCPCS code
from each data source are combined into
an average 80th percentile charge by
means of the methodology set forth in
paragraph (l)(3)(ii) of this section. The
results constitute the nationwide 80th
percentile charge for each applicable
HCPCS code.
(i) Trending forward. The charges
from each database for each HCPCS
code, obtained as described in
paragraph (l)(3) of this section, are
trended forward based on changes to the
medical care commodities component of
the CPI–U. Actual CPI–U changes are
used from the time period of each
source database through the latest
available month as of the time the
calculations are performed. The threemonth average annual trend rate as of
the latest available month is then held
constant to the midpoint of the calendar
year in which the charges are primarily
expected to be used. The projected total
CPI–U change so obtained is then
applied to the 80th percentile charges,
as described in paragraph (l)(3) of this
section.
(ii) Averaging methodology. The
average 80th percentile trended charge
for any particular HCPCS code is
calculated by first computing a
preliminary mean average of the three
charges for each HCPCS code. Statistical
outliers are identified and removed by
testing whether any charge differs from
the preliminary mean charge by more
than 5 times the preliminary mean
charge, or by less than 0.2 times the
preliminary mean charge. In such cases,
the charge most distant from the
preliminary mean is removed as an
outlier, and the average charge is
calculated as a mean of the two
remaining charges. In cases where none
of the charges differ from the
preliminary mean charge by more than
5 times the preliminary mean charge, or
less than 0.2 times the preliminary
mean charge, the average charge is
calculated as a mean of all three
reported charges.
(4) Nationwide 80th percentile
charges for HCPCS codes designated as
unlisted or unspecified. For HCPCS
codes designated as unlisted or
unspecified procedures, services, items,

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or supplies, 80th percentile charges are
developed based on the weighted
median 80th percentile charges of
HCPCS codes within the series in which
the unlisted or unspecified code occurs.
A nationwide VA distribution of
procedures, services, items, and
supplies is used for the purpose of
computing the weighted median.
(5) Geographic area adjustment
factors. For the purpose of geographic
adjustment, HCPCS codes are combined
into two groups: drugs and DME/
supplies, as set forth in paragraph
(l)(5)(i) of this section. The geographic
area adjustment factor for each of these
groups is calculated as the ratio of the
area-specific weighted average charge
determined pursuant to paragraph
(l)(5)(ii) of this section divided by the
nationwide weighted average charge
determined pursuant to paragraph
(l)(5)(iii) of this section.
(i) Combined HCPCS code groups for
geographic area adjustment factors for
DME, drugs, injectables, and other
medical services, items, and supplies.
For the purpose of the statistical
methodology set forth in paragraph (l)(5)
of this section, each of the HCPCS code
groups set forth in paragraph (l)(2)(i) of
this section is assigned to one of two
combined HCPCS code groups, as
follows:
(A) Chemotherapy Drugs: Drugs.
(B) Other Drugs: Drugs.
(C) DME—Hospital Beds: DME/
supplies.
(D) DME—Medical/Surgical Supplies:
DME/supplies.
(E) DME—Orthotic Devices: DME/
supplies.
(F) DME—Oxygen and Supplies:
DME/supplies.
(G) DME—Wheelchairs: DME/
supplies.
(H) Other DME: DME/supplies.
(I) Enteral/Parenteral Supplies: DME/
supplies.
(J) Surgical Dressings and Supplies:
DME/supplies.
(K) Vision Items—Other Than Lenses:
DME/supplies.
(L) Vision Items—Lenses: DME/
supplies.
(M) Hearing Items: DME/supplies.
(ii) Area-specific weighted average
charges. Using the median charges by
HCPCS code from the MDR database for
each geographic area and utilization
frequencies by HCPCS code from the
combined Part B and DME components
of the Medicare Standard Analytical
File 5 percent Sample, an area-specific
weighted average charge is calculated
for each combined HCPCS code group.
(iii) Nationwide weighted average
charges. Using the area-specific
weighted average charges determined

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Federal Register / Vol. 68, No. 244 / Friday, December 19, 2003 / Rules and Regulations

pursuant to paragraph (l)(5)(ii) of this
section, a nationwide weighted average
charge is calculated for each combined
HCPCS code group, using as weights the
population (census) frequencies for each
geographic area as presented in the
Milliman USA, Inc., Health Cost
Guidelines (see paragraph (a)(3) of this
section for Data Sources).
(m) Charges for prescription drugs not
administered during treatment.
Notwithstanding other provisions of this
section, when VA provides or furnishes
prescription drugs not administered
during treatment, within the scope of
care referred to in paragraph (a)(1) of
this section, charges billed separately
for such prescription drugs will be
based on VA costs in accordance with
the methodology set forth in § 17.102 of
this part.
(The Office of Management and Budget has
approved the information collection
requirements in this section under control
number 2900–0606.)
(Authority: 38 U.S.C. 101, 501, 1701, 1705,
1710, 1721, 1722, 1729.)
[FR Doc. 03–31176 Filed 12–18–03; 8:45 am]
BILLING CODE 8320–01–P

ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 63
[CARB–106–DELa; FRL–7600–5]

Delegation of National Emission
Standards for Hazardous Air Pollutants
for Source Categories; State of
California
AGENCY: Environmental Protection
Agency (EPA).
ACTION: Direct final rule.
SUMMARY: EPA is amending certain
regulations to reflect the current
delegation status of national emission
standards for hazardous air pollutants in
California. Several local air pollution
control agencies in California have
requested delegation of these Federal
standards as they apply to non-major
sources. The purpose of this action is to
approve those delegation requests and
update the listing in the Code of Federal
Regulations.
DATES: This rule is effective on February
17, 2004, without further notice, unless
EPA receives relevant adverse
comments by January 20, 2004. If EPA
receives such comments, then it will
publish a timely withdrawal in the
Federal Register informing the public
that this rule will not take effect.
ADDRESSES: Send comments to Andrew
Steckel, Rulemaking Office Chief (AIR–

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4), U.S. Environmental Protection
Agency, Region IX, 75 Hawthorne
Street, San Francisco, CA 94105–3901,
or e-mail to steckel.andrew@epa.gov, or
submit comments at http://
www.regulations.gov. Copies of the
requests for delegation and other
supporting documentation are available
for public inspection (docket number
A–96–25) at the Region IX office during
normal business hours by appointment.
Copies are also available at: Air and
Radiation Docket and Information
Center (6102), U.S. Environmental
Protection Agency, Ariel Rios Building,
1200 Pennsylvania Ave, NW.,
Washington, DC 20460.
FOR FURTHER INFORMATION CONTACT: Mae
Wang, Rulemaking Office (AIR–4), Air
Division, U.S. Environmental Protection
Agency, Region IX, 75 Hawthorne
Street, San Francisco, California 94105–
3901, (415) 947–4124,
wang.mae@epa.gov.
SUPPLEMENTARY INFORMATION:

California has adequate authorities and
resources to implement and enforce
Clean Air Act section 112 programs and
rules. This demonstration was approved
on May 21, 1996 (61 FR 25397).

I. Background

B. California Delegations
While each local air pollution control
agency in California (district) has an
approved program for receiving
delegation of any CAA section 112
standards as promulgated, California
districts currently have delegation only
for standards that apply to major
sources. As part of EPA’s approval of
each district’s Title V operating permits
program, districts received delegation of
unchanged federal section 112
standards for Title V sources. This
delegation did not extend to sources not
covered by the California Title V
program submittals. Therefore,
California needed to make a separate
voluntary request for delegation of any
section 112 standards that apply to
sources not covered by district Title V
programs (area sources).

A. Delegation of NESHAPs
Section 112(l) of the Clean Air Act, as
amended in 1990 (CAA), authorizes
EPA to delegate to State or local air
pollution control agencies the authority
to implement and enforce the standards
set out in title 40 of the Code of Federal
Regulations (40 CFR), part 63, National
Emission Standards for Hazardous Air
Pollutants for Source Categories. On
November 26, 1993, EPA promulgated
regulations, codified at 40 CFR part 63,
subpart E (hereinafter referred to as
‘‘subpart E’’), establishing procedures
for EPA’s approval of State rules or
programs under section 112(l) (see 58
FR 62262). Subpart E was later amended
on September 14, 2000 (see 65 FR
55810).
Any request for approval under CAA
section 112(l) must meet the approval
criteria in 112(l)(5) and subpart E. To
streamline the approval process for
future applications, a State or local
agency may submit a one-time
demonstration that it has adequate
authorities and resources to implement
and enforce any CAA section 112
standards. If such demonstration is
approved, then the State or local agency
would no longer need to resubmit a
demonstration of these same authorities
and resources for every subsequent
request for delegation of CAA section
112 standards. However, EPA maintains
the authority to withdraw its approval if
the State does not adequately
implement or enforce an approved rule
or program. On July 6, 1995, the
California Air Resources Board (CARB)
submitted a demonstration that

C. Area Source Delegation Requests
On October 6, 2003, CARB submitted
on behalf of nine California districts a
request for delegation of all Federal
section 112 standards that apply to area
sources, with the exception of the dry
cleaning and chromium electroplating
standards for which State or local rules
have already been approved (see 61 FR
25397 and 64 FR 12762). Upon the
effective date of this delegation, these
districts will have authority to
implement and enforce existing area
source standards unchanged as
promulgated by EPA. Additionally, each
of these nine districts will receive
delegation of any future area source
standards or revisions 90 days after
promulgation of these standards or
revisions, unless the district chooses to
decline delegation of a particular future
standard by notifying the EPA Region IX
office in writing. If no such notification
is received, the delegation will go into
effect 90 days after promulgation of the
standard or revision, without any
additional action from the district or
EPA.
CARB’s October 6, 2003, request was
submitted on behalf of the following
nine districts in California: Antelope
Valley Air Quality Management District,
Butte County Air Quality Management
District, Kern County Air Pollution
Control District, Mendocino County Air
Quality Management District, Mojave
Desert Air Quality Management District,
Monterey Bay Unified Air Pollution
Control District, San Luis Obispo
County Air Pollution Control District,
Ventura County Air Pollution Control

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