TRICARE Manuals - Display Chap 18 Sect 2 (Change 4, Jun 20, 2024) (2024)

TRICARE Reimbursem*nt Manual 6010.64-M, April 2021

Alternate Payment Models (APMs)

Chapter 18

Section 2

Low-ValueCare (LVC) Medical Interventions

Issue Date:April 6, 2021

Authority: Title 10, United States Code(USC), Sections 1079, 1086, and 1097; 10 USC 1079 (h) and (i); 32 CFR 199.14(j)(4) and (m)


Note:32 CFR 199.14(j) and (m) permitting network discounts and alternativemethods of reimbursem*nt. 10 USC 1079(a)(12) requires care providedto be medically or psychologically necessary.


1.1The contractorshall efficiently and effectively manage low-value medical interventionsand shall be at-risk for the appropriate provision of specifiedlow-value medical interventions.

1.2The goalsof this requirement are:

Reduce care that provides littleor no benefit to patients

Reduce or eliminate care thathas the potential to cause patient harm.

Reduce care that can incurunnecessary costs to patients or wastes limited healthcare resources.

Reduce wasteful spending inhealthcare.

Improved quality of care.

Improved patient outcomes.

Improved beneficiary satisfaction.

Empower beneficiaries to makehealthy choices.


LVC is defined as servicesthat are medically unnecessary and provide no health benefits topatients. In some cases, LVC can even be harmful to the patientand/or lead to further unnecessary testing or treatment. To managelow-value medical interventions; two forms of alternative paymentmodels will be used: capitation and risk-sharing.

2.1Annually,beginning with Option year 1, the contractor shall identify thetop five low value services within their beneficiary populationusing the prior year’s claims data and submit this information toDHA for approval. The contractor shall establish an annual capitationamount or risk-sharing methodology for these services with DHA’s coordinationand approval. Low-value services that were capitated or risk-sharingin the previous year may be subject to continued capitation or risk-sharingin subsequent years.

2.2The contractor shall ensurethat care is provided only when medically necessary and appropriatein accordance with established statute, regulation, and policy,while identifying opportunities to reduce the utilization of LVCservices that are not medically necessary, harmful to the patient,or lead to further unnecessary testing or treatment.

2.3The contractorshall manage the utilization of LVC services as follows:

Implement policies, proceduresand systems for tracking the utilization of the LVC services andassociated interventions;

Purchase or develop an LVCgrouper software package that identifies LVC services. Develop aprogram to scrub claims and identify where LVC is occurring.

Incorporate industry standardresources (e.g., Medicare’s 31 evidence based measures, ChoosingWisely, Hayes, etc.) to develop a tiered list of services;

The top five LVC services willbe determined as those LVC services with the highest frequency ofutilization;

For every low-value serviceprovided, the contractor shall have a mechanism to determine andtrack whether that service was medically necessary and appropriate;and

The contractor shall analyzethis information on a quarterly basis to determine whether the LVCinterventions are effective at reducing non-medically necessaryutilization of the LVC services.

2.4DHA will review and approvethe contractor’s policies, procedures, groupers and systems relatedto LVC and for determining the medical necessity and appropriatenessof low-value services provided to prior to contract implementation.DHA will require the contractor to submit an analysis of the effectivenessof the LVC interventions and outcomes on an annual basis. The annualreport should include a synopsis of the contractor’s quarterly analysis andinterventions.

2.5DHA will develop a population-basedutilization target (e.g., utilization per 1,000 beneficiaries) foreach LVC service. If contractors meet the set target for the specificLVC service; the contractor will be entitled to gain-sharing. Ifcontractors do not meet the target, contractors are subject to loss-sharing.


3.1DHA willestablish a population-based utilization-target and over the courseof the three option years, will capitate the contractor in decreasingamounts for those LVC services until such time that the target isachieved.

3.2DHA willutilize the contractor’s historical data (baseline year paid claims)to determine the benchmarks to utilize when establishing targetutilization rates for selected services in the option years. Targetutilization will be based upon reliable clinical evidence. Contractorswill receive the capitated payments on a [semi-annually/quarterly]basis. The contractors shall submit all TRICARE Encounter Data (TED)claims for these capitated services in accordance with standardclaims submission time frames. Each TED claim must include amountbilled, amount allowed and the amount paid to the provider. Note:If the contractor has capitation agreements with the network providersfor these same services, the allowed amount should reflect the shadowprice for that service and the paid amount should be $0.

3.3The contractorshall have multiple opportunities to suggest interventions and utilizationtargets, and to comment on Government-approved interventions andutilization targets for the upcoming year as outlined in the LVCReview Process outlined in paragraph 3.2.

3.4The capitatedamount will be negotiated between DHA and the contractor in advanceof the start of the plan year, once the population-based utilizationtargets and interventions have been approved by the DHA. DHA willinclude in the negotiations:

The population-based utilizationtarget.

The current TRICARE fee-for-servicerate for the selected service (either the national rate or an averagerate based on the contractor’s region when there is compelling informationthat the acuity of the population in the contractor’s region differsin a statistically significant way from national benchmarks).

Figure 18.2-1Low-ValueCare (LVC) Review Process




January 1

Provide the Government withtop five LVC services, proposed interventions and suggested utilizationtargets to be targeted in the next plan year based on LVC grouper, utilizationreviews, reliable evidence, and best business practices.

April 1

DHA will provide an initialdisposition, questions, and comments for consideration by contractor.

July 1

Final top five LVC servicesand proposed interventions shall be submitted each year for approvalfor the next plan year. For LVC services that were capitated inthe prior year, the contractor should provide updated interventionsand recommended utilization targets.

October 1

DHA will notify the contractorof the approved list of LVC services, interventions and utilizationtargets. DHA will provide proposed capitation or risk-sharing ratesfor negotiation.

December 1

Finalize capitation/risk-sharingrates.

Finalize capitation/risk-sharingrates.

January 1: Plan Year Start

Provides first cycle of capitationpayments to contractor for identified services and utilization targetsfor upcoming plan year.

Begins submitting TED claimsfor identified services as outlined in paragraph 3.0.

Note:DHA recognizes that someutilization of these services are medically necessary and appropriate; thus,targets will never be set to zero. The objective for capitatingthese LVC services is to spur conversation between the providerand the beneficiary about what is appropriate and necessary treatment.DHA recognizes that each beneficiary situation is unique and thatproviders and beneficiaries should use the recommendations as guidelinesto determine an appropriate treatment plan together. LVC servicesfor which reliable evidence exists that these interventions areof minimal value in many patients, that alternative approaches (includingmore conservative therapies or enhanced focus on high-value care)are more appropriate and effective, and that reliable evidence existsto establish utilization targets.

3.5The contractorshall receive the capitation payments for the LVC services approvedby DHA, and will not be subject to shared savings adjustments ifthe contractor’s utilization is lower than the target utilizationrate in that option year. Conversely, if the contractor pays morethan the capitated rate for the identified care, they are entirelyat-risk for the costs associated with these services. Thus, it isincumbent upon the contractor to actively participate in the developmentof annual interventions and utilization targets utilizing theirutilization management criteria, their independent reviews of reliableevidence, and their best business practices.

3.6The contractorshall reimburse for medically necessary and appropriate care inaccordance with timeliness and quality standards; they may not arbitrarilydeny care, nor may they place a blanket denial on all care in thesecategories. The contractor may, and are encouraged, to use all otherresources at their disposal to better manage care, to include prior-authorizationfor non-emergency care; pre- and post-pay review; patient and providereducation; and enhanced use of alternative payment methodologieswith providers to encourage high-value care.

3.7Once apopulation-based utilization target is established, if reliableevidence shows that the standard of care has changed (e.g., if,for example, the United State Preventive Services Task Force (USPSTF)in option year 5 of the contract recommends that all adults receiveVitamin D testing), the contractor may submit a request to DHA for recalculationof the utilization target. DHA may elect to renegotiate any utilizationtarget prospectively, or may elect to terminate the capitated arrangementand defer to standardized claims payment procedures.

3.8Examplesof targeted low-value interventions that may be considered include(list is not binding, nor is it all-inclusive):

Diagnostic testing and imagingfor low-risk patients prior to low-risk surgery.

Vitamin D testing.

Use of more expensive brandeddrugs when generics with identical active ingredients are availablefor high cost physician-administered drugs (e.g., immunosuppressivetherapies).

Stents for stable coronaryartery disease or stable angina.

Cesarean deliveries in low-riskmaternity patients.

Emergency room (ER) visitsfor chronic and/or non-emergent conditions such as: upper respiratoryinfections, asthma, diabetes, behavioral or substance use disorder(SUD) care, Chronic Obstructive Pulmonary Disease (COPD), heartfailure, or hypertension.

Figure 18.2-2ExampleCalculation of Capitated RateThe contractor identifies VitaminD testing as an LVC intervention with overuse in the TRICARE population.Reliable evidence (e.g., clinical practice guidelines, peer-reviewedstudies) show that, based on analysis of calendar year (CY) 2018data, only 24.88 tests per 1,000 beneficiaries were ordered foran indication potentially supported by the reliable evidence. Inthe year prior to the start of health care delivery (SHCD), acrossTRICARE, 44.6 tests were ordered per 1,000 beneficiaries. For purposesof this example, the Fee-For-Service (FFS) rate for Vitamin D testingwill be nationally considered as $26 per test.The contractor in this examplehas 3.0 million TRICARE beneficiaries enrolled to either a TRICAREPrime or TRICARE Select plan. DHA recognizes that it will take timeand effort to reduce utilization of this test, and thus does notcapitate at the start of the health care delivery contract. Instead,the contractor shall be capitated as follows:





Capitated Rate*

Note:Numbers,unless cited, are examples and should not be considered to be validatedor accurate of current data, rates, or figures.

* Less any claimsprocessing or other adjustments.

** FFS rate shallbe established by DHA, and shall reflect an estimate of contractor’s/region’sprior-years CMAC rate or allowed amount. If the contractor disagreeswith the weighted allowed amount based on actual claims data, andno solution is found by December 1, the national rate in place onOctober 1 shall be used.

*** The utilizationtarget shall be held steady for the duration of the contract oncethe overall target utilization rate is reached.

SHCD (Baseline Year - Actual Utilization)

3.0 million

35 tests per 1,000 beneficiaries(determined by actual utilization during base year)


Not applicable

Option 1

3.2 million

30 tests per 1,000 beneficiaries



Option 2

3.1 million

28 tests per 1,000 beneficiaries



Option 3

3.0 million

24.88 tests per 1,000 beneficiaries



Option 4***

3.2 million

24.88 tests per 1,000 beneficiaries



3.9The contractorshall:

3.9.1Report annually: Utilizationof specific LVC services, the interventions to decrease utilization,along with the total reimbursem*nt. This comprehensive report shoulddetail the procedures used to reduce use of LVC (e.g., providereducation, prior-authorization requirements) and their efficacy.

3.9.2Terminationof capitated arrangement: If at any time the Government determinesthat it is not in the best interest of beneficiaries or the Departmentto continue a capitated arrangement, the capitation arrangement willbe ended with at least 30 calendar days of notice, and the contractorshall reimburse the Government a prorated amount of the full capitatedamount calculated on the basis of the number of days covered bythe capitation arrangement. If the capitated arrangement is terminated,payment shall defer to standard claims payment/TED record processingprocedures. Once the capitated amount is negotiated, the contractormay not exit the capitated arrangement without Government approval.


4.1Theremay be some types of LVC services for which DHA determines thatcapitation of the contractor as described herein is not the mostappropriate method for incentivizing the reduction of LVC. For suchcases, DHA may instead develop incentive provisions specific tothe circ*mstances for that type of care. Possible examples of suchalternatives include, but are not limited to, a target cost withrisk-sharing or a positive or negative incentive based on specifiedmetrics relevant to the type of care in question.

4.2Further,risk-sharing may be used in cases where one procedure may be capitated,but the contractor and/or provider substitutes the service withanother procedure that is not capitated; hence resulting in DHA’s overallcosts for these services being higher than projected.

- END -

TRICARE Manuals - Display Chap 18 Sect  2 (Change 4, Jun 20, 2024) (2024)


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