The military's TRICARE program is aligning its reimbursement formula for sole community hospitals with Medicare, a policy that'll save an estimated $676 million through 2017.
TRICARE, the health plan for uniformed military members and their families, is transitioning reimbursements for sole community hospitals, or SCHs, from coverage of 100 percent of billed charges to a new methodology the Defense Department is likening to Medicare inpatient payments.
With a transition starting in 2014, SCHs will be reimbursed based on TRICARE's diagnosis-related group amount, or an amount equal to the billed charges multiplied by the hospital's Medicare cost-to-cost ratio -- whichever is greater, the Defense Department said in the Federal Register.
Through the transition, annual payment reductions will be limited to 10 percent for network hospitals and 15 percent for non-network hospitals. In "extraordinary economic circumstances," the rule also gives the TRICARE director flexibility to apply a year-end payment adjustment for network hospitals that treat a disproportionate share of active duty service members and their dependents.
TRICARE is also going to start paying 130 percent of the Medicare cost coverage ratio for labor, delivery and nursery care, after concluding in an assessment "that the Medicare CCR does not accurately reflect the cost to charge ratio for these services."
The new payment system for SCHs is expected to reduce TRICARE and Defense Department spending by $36 million in its first year, then increasing to $243 million annually by 2017, for a total of $676 million over five fiscal years.
As for the timing of the changes, the Defense Department said it is following a legal directive to transition to pay hospitals, skilled nursing facilities and other institutional providers through the same or similar reimbursement rules as Medicare.
Of the largest 20 sole community hospitals, Onslow Memorial Hospital in Jacksonville, Florida, stands to see the largest reduction from TRICARE in the 2013 fiscal year -- about $2 million -- followed by Beaufort County Memorial Hospital in South Carolina, which will see an estimated $1.8 million reduction.
In other military health news, the DOD also announced that TRICARE and basic housing allowance benefits will be made available to the same-sex spouses of uniformed service members and civilian employees starting in September, following the recent U.S. Supreme Court ruling that found the Defense of Marriage Act unconstitutional.