4. Ambulatory Surgical Centers - FLU

Vol. 77

Thursday,

No. 221

November 15, 2012

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services
42 CFR Parts 416, 419, 476, et al.
Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment
and Ambulatory Surgical Center Payment Systems and Quality Reporting
Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities
Quality Reporting Program; Revision to Quality Improvement Organization
Regulations; Final Rule

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 416, 419, 476, 478, 480,
and 495
[CMS–1589–FC]
RIN 0938–AR10

Medicare and Medicaid Programs:
Hospital Outpatient Prospective
Payment and Ambulatory Surgical
Center Payment Systems and Quality
Reporting Programs; Electronic
Reporting Pilot; Inpatient
Rehabilitation Facilities Quality
Reporting Program; Revision to
Quality Improvement Organization
Regulations
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
AGENCY:

This final rule with comment
period revises the Medicare hospital
outpatient prospective payment system
(OPPS) and the Medicare ambulatory
surgical center (ASC) payment system
for CY 2013 to implement applicable
statutory requirements and changes
arising from our continuing experience
with these systems. In this final rule
with comment period, we describe the
changes to the amounts and factors used
to determine the payment rates for
Medicare services paid under the OPPS
and those paid under the ASC payment
system. In addition, this final rule with
comment period updates and refines the
requirements for the Hospital
Outpatient Quality Reporting (OQR)
Program, the ASC Quality Reporting
(ASCQR) Program, and the Inpatient
Rehabilitation Facility (IRF) Quality
Reporting Program. We are continuing
the electronic reporting pilot for the
Electronic Health Record (EHR)
Incentive Program, and revising the
various regulations governing Quality
Improvement Organizations (QIOs),
including the secure transmittal of
electronic medical information,
beneficiary complaint resolution and
notification processes, and technical
changes. The technical changes to the
QIO regulations reflect CMS’
commitment to the general principles of
the President’s Executive Order on
Regulatory Reform, Executive Order
13563 (January 18, 2011).
DATES: Effective Date: This final rule
with comment period is effective on
January 1, 2013.
Comment Period: To be assured
consideration, comments on the

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SUMMARY:

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payment classifications assigned to
HCPCS codes identified in Addenda B,
AA, and BB of this final rule with
comment period with the ‘‘NI’’
comment indicator and on other areas
specified throughout this final rule with
comment period must be received at one
of the addresses provided in the
ADDRESSES section no later than 5 p.m.
EST on December 31, 2012.
Application Deadline—New Class of
New Technology Intraocular Lenses:
Requests for review of applications for
a new class of new technology
intraocular lenses must be received by
5 p.m. EST on March 1, 2013, at the
following address: ASC/NTOL, Division
of Outpatient Care, Mailstop C4–05–17,
Centers for Medicare and Medicaid
Services, 7500 Security Boulevard,
Baltimore, MD 21244–1850.
ADDRESSES: In commenting, please refer
to file code CMS–1589–FC. Because of
staff and resource limitations, we cannot
accept comments by facsimile (FAX)
transmission.
You may submit comments in one of
four ways (no duplicates, please):
1. Electronically. You may (and we
encourage you to) submit electronic
comments on this regulation to http://
www.regulations.gov. Follow the
instructions under the ‘‘submit a
comment’’ tab.
2. By regular mail. You may mail
written comments to the following
address ONLY: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
CMS–1589–FC, P.O. Box 8013,
Baltimore, MD 21244–1850.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
3. By express or overnight mail. You
may send written comments via express
or overnight mail to the following
address ONLY: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
CMS–1589–FC, Mail Stop C4–26–05,
7500 Security Boulevard, Baltimore, MD
21244–1850.
4. By hand or courier. If you prefer,
you may deliver (by hand or courier)
your written comments before the close
of the comment period to either of the
following addresses:
a. For delivery in Washington, DC—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, Room 445–G, Hubert
H. Humphrey Building, 200
Independence Avenue SW.,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not
readily available to persons without

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Federal Government identification,
commenters are encouraged to leave
their comments in the CMS drop slots
located in the main lobby of the
building. A stamp-in clock is available
for persons wishing to retain a proof of
filing by stamping in and retaining an
extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call the telephone number (410)
786–7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
For information on viewing public
comments, we refer readers to the
beginning of the SUPPLEMENTARY
INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Marjorie Baldo, (401) 786–4617, for
issues related to new CPT and Level II
HCPCS codes, exceptions to the 2 times
rule, and new technology APCs.
Anita Bhatia, (410) 786–7236,
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program—Program
Administration and Reconsideration
Issues.
Douglas Brown, (410) 786–0028, for
issues related to Electronic Health
Record (EHR) Incentive Program
Electronic Reporting Pilot.
Carrie Bullock, (401) 786–0378, for
issues related to blood products.
Erick Chuang, (410) 786–1816, for
issues related to OPPS APC weights,
mean calculation, copayments, wage
index, outlier payments, and rural
hospital payments.
Caroline Gallaher, (410) 786–8705, for
issues related to Inpatient Rehabilitation
Facility (IRF) Quality Reporting
Program.
Shaheen Halim (410) 786–0641,
Hospital Outpatient Quality Reporting
Program (OQR)—Measures Issues and
Publication of Hospital OQR Program
Data, and Ambulatory Surgical Center
Quality Reporting (ASCQR) Program—
Measures Issues and Publication of
ASCQR Program Data.
Twi Jackson, (410) 786–1159, for
issues related to device-dependent
APCs, no cost/full credit and partial
credit devices, hospital outpatient visits,
extended assessment and management
composite APCs, and inpatient-only
procedures.
Thomas Kessler, (401) 786–1991, for
issues related to QIO regulations.

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
Marina Kushnirova, (410) 786–2682,
for issues related to OPPS status
indicators and comment indicators.
Barry Levi, (410) 786–4529, for issues
related to OPPS pass-through devices,
brachytherapy sources, intraoperative
radiation therapy (IORT), brachytherapy
composite APC, multiple imaging
composite APCs, cardiac
resynchronization therapy composite
APC, and cardiac electrophysiologic
evaluation and ablation composite APC.
Jana Lindquist, (410) 786–4533, for
issues related to partial hospitalization
and community mental health center
(CMHC) issues.
Ann Marshall, (410) 786–3059, for
issues related to hospital outpatient
supervision, outpatient status, proton
beam therapy, and the Hospital
Outpatient Payment (HOP) Panel.
John McInnes, (410) 786–0378, for
issues related to new technology
intraocular lenses (NTIOLs) and
packaged items/services.
James Poyer, (410) 786–2261, Hospital
Outpatient Quality Reporting—Program
Administration, Validation, and
Reconsideration Issues.
Char Thompson, (410) 786–2300, for
issues related to OPPS drugs,
radiopharmaceuticals, biologicals, blood
clotting factors, cost-to-charge ratios
(CCRs), and ambulatory surgical center
(ASC) payments.
Marjorie Baldo, (410) 786–4617, for
all other issues related to hospital
outpatient and ambulatory surgical
center payments not previously
identified.

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SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All
comments received before the close of
the comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments
received before the close of the
comment period on the following Web
site as soon as possible after they have
been received: http://
www.regulations.gov. Follow the search
instructions on that Web site to view
public comments.
Comments received timely will also
be available for public inspection,
generally beginning approximately 3
weeks after publication of the rule, at
the headquarters of the Centers for
Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, MD
21244, on Monday through Friday of
each week from 8:30 a.m. to 4:00 p.m.
EST. To schedule an appointment to
view public comments, phone 1–800–
743–3951.

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Electronic Access
This Federal Register document is
also available from the Federal Register
online database through Federal Digital
System (FDsys), a service of the U.S.
Government Printing Office. This
database can be accessed via the
internet at http://www.gpo.gov/fdsys/.
Addenda Available Only Through the
Internet on the CMS Web Site
In the past, a majority of the Addenda
referred to in our OPPS/ASC proposed
and final rules were published in the
Federal Register as part of the annual
rulemakings. However, beginning with
the CY 2012 OPPS/ASC proposed rule,
all of the Addenda no longer appear in
the Federal Register as part of the
annual OPPS/ASC proposed and final
rules to decrease administrative burden
and reduce costs associated with
publishing lengthy tables. Instead, these
Addenda will be published and
available only on the CMS Web site. The
Addenda relating to the OPPS are
available at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html. The Addenda relating to the
ASC payment system are available at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
ASCPayment/index.html. Readers who
experience any problems accessing any
of the Addenda that are posted on the
CMS Web site identified above should
contact Charles Braver at (410) 786–
0378.
Alphabetical List of Acronyms
Appearing in This Federal Register
Document
AHA American Hospital Association
AMA American Medical Association
APC Ambulatory Payment Classification
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center
Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public
Law 105–33
BBRA Medicare, Medicaid, and SCHIP
[State Children’s Health Insurance
Program] Balanced Budget Refinement Act
of 1999, Public Law 106–113
BIPA Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act
of 2000, Public Law 106–554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAP Competitive Acquisition Program
CASPER Certification and Survey Provider
Enhanced Reporting
CAUTI Catheter associated urinary tract
infection
CBSA Core-Based Statistical Area
CCI Correct Coding Initiative
CCN CMS Certification Number
CCR Cost-to-charge ratio

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CDC Centers for Disease Control and
Prevention
CEO Chief executive officer
CERT Comprehensive Error Rate Testing
CFR Code of Federal Regulations
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid
Services
CoP [Medicare] Condition of participation
CPI–U Consumer Price Index for All Urban
Consumers
CPT Current Procedural Terminology
(copyrighted by the American Medical
Association)
CQM Clinical quality measure
CR Change request
CSAC Consensus Standards Approval
Committee
CY Calendar year
DFO Designated Federal Official
DRA Deficit Reduction Act of 2005, Public
Law 109–171
DRG Diagnosis-Related Group
DSH Disproportionate share hospital
EACH Essential access community hospital
eCQM Electronically specified clinical
quality measure
ECT Electroconvulsive therapy
ED Emergency department
E/M Evaluation and management
EHR Electronic health record
ESRD End-stage renal disease
FACA Federal Advisory Committee Act,
Public Law 92–463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education
Reconciliation Act of 2010, Public Law
111–152
HCPCS Healthcare Common Procedure
Coding System
HCRIS Hospital Cost Report Information
System
HEU Highly enriched uranium
HIPAA Health Insurance Portability and
Accountability Act of 1996, Public Law
104–191
HITECH Health Information Technology for
Economic and Clinical Health [Act] (found
in the American Recovery and
Reinvestment Act of 2009, Public Law
111–5)
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
ICD–9–CM International Classification of
Diseases, Ninth Revision, Clinical
Modification
ICD Implantable cardioverter defibrillator
ICU Intensive care unit
IHS Indian Health Service
IMRT Intensity Modulated Radiation
Therapy
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IOM Institute of Medicine
IORT Intraoperative radiation treatment
IPF Inpatient Psychiatric Facility
IPPS [Hospital] Inpatient Prospective
Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF–PAI Inpatient Rehabilitation FacilityPatient Assessment Instrument

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IRF QRP Inpatient Rehabilitation Facility
Quality Reporting Program
LDR Low dose rate
LOS Length of Stay
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MedPAC Medicare Payment Advisory
Commission
MEI Medicare Economic Index
MFP Multifactor productivity
MGCRB Medicare Geographic Classification
Review Board
MIEA–TRHCA Medicare Improvements and
Extension Act under Division B, Title I of
the Tax Relief Health Care Act of 2006,
Public Law 109–432
MIPPA Medicare Improvements for Patients
and Providers Act of 2008, Public Law
110–275
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003, Public Law 108–173
MMEA Medicare and Medicaid Extenders
Act of 2010, Public Law. 111–309
MMSEA Medicare, Medicaid, and SCHIP
Extension Act of 2007, Public Law 110–173
MPFS Medicare Physician Fee Schedule
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NQF National Quality Forum
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
of 1996, Public Law 99–509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPPS [Hospital] Outpatient Prospective
Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality
Reporting
OT Occupational therapy
PCR Payment-to-cost ratio
PE Practice expense
PEPPER Program for Evaluating Payment
Patterns Electronic Report
PHP Partial hospitalization program
PHS Public Health Service [Act], Public
Law 96–88
PPI Producer Price Index
PPS Prospective payment system
PQRS Physician Quality Reporting System
PT Physical therapy
QDC Quality data code
QIO Quality Improvement Organization
RAC Recovery Audit Contractor
RFA Regulatory Flexibility Act
RTI Research Triangle Institute,
International
RVU Relative value unit
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SI Status indicator
SIR Standardized infection ratio
SLP Speech-language pathology
SNF Skilled Nursing Facility
SRS Stereotactic Radiosurgery
TEP Technical Expert Panel
TMS Transcranial Magnetic Stimulation
Therapy

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TOPs Transitional Outpatient Payments
UR Utilization review
USPSTF United States Preventive Services
Task Force
UTI Urinary tract infection
VBP Value-based purchasing
WAC Wholesale acquisition cost
Table of Contents
I. Summary and Background
A. Executive Summary of This Final Rule
With Comment Period
1. Purpose
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Legislative and Regulatory Authority for
the Hospital OPPS
C. Excluded OPPS Services and Hospitals
D. Prior Rulemaking
E. Advisory Panel on Hospital Outpatient
Payment (the HOP Panel or the Panel),
Formerly Named the Advisory Panel on
Ambulatory Payment Classification
Groups (APC Panel)
1. Authority of the Panel
2. Establishment of the Panel
3. Panel Meetings and Organizational
Structure
F. Public Comments Received in Response
to the CY 2013 OPPS/ASC Proposed
Rule
G. Public Comments Received on the CY
2012 OPPS/ASC Final Rule With
Comment Period
II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative Payment
Weights
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure
Claims
c. Calculation and Use of Cost-to-Charge
Ratios (CCRs)
2. Data Development Process and
Calculation of Costs Used for Ratesetting
a. Claims Preparation
b. Splitting Claims and Creation of
‘‘Pseudo’’ Single Procedure Claims
(1) Splitting Claims
(2) Creation of ‘‘Pseudo’’ Single Procedure
Claims
c. Completion of Claim Records and
Geometric Mean Cost Calculations
(1) General Process
(2) Recommendations of the Advisory
Panel on Hospital Outpatient Payment
Regarding Data Development
d. Calculation of Single Procedure APC
Criteria-Based Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Brachytherapy Sources
e. Calculation of Composite APC CriteriaBased Costs
(1) Extended Assessment and Management
Composite APCs (APCs 8002 and 8003)
(2) Low Dose Rate (LDR) Prostate
Brachytherapy Composite APC (APC
8001)
(3) Cardiac Electrophysiologic Evaluation
and Ablation Composite APC (APC 8000)
(4) Mental Health Services Composite APC
(APC 0034)
(5) Multiple Imaging Composite APCs
(APCs 8004, 8005, 8006, 8007, and 8008)
(6) Cardiac Resynchronization Therapy
Composite APC (APC 0108)

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f. Geometric Mean-Based Relative Payment
Weights
3. Changes to Packaged Services
a. Background
b. Clarification of Regulations at 42 CFR
419.2(b)
c. Packaging Recommendations of the HOP
Panel (‘‘The Panel’’) at its February 2012
Meeting
d. Packaging Recommendations of the HOP
Panel (‘‘The Panel’’) at its August 2012
Meeting
e. Other Packaging Proposals and Policies
for CY 2013
f. Packaging of Drugs, Biologicals, and
Radiopharmaceuticals
(1) Existing Packaging Policies
(2) Clarification of Packaging Policy for
Anesthesia Drugs
g. Packaging of Payment for Diagnostic
Radiopharmaceuticals, Contrast Agents,
and Implantable Biologicals (‘‘PolicyPackaged’’ Drugs and Devices)
h. Summary of Proposals
4. Calculation of OPPS Scaled Payment
Weights
B. Conversion Factor Update
C. Wage Index Changes
D. Statewide Average Default CCRs
E. OPPS Payments to Certain Rural and
Other Hospitals
1. Hold Harmless Transitional Payment
Changes
2. Adjustment for Rural SCHs and EACHs
Under Section 1833(t)(13)(B) of the Act
F. OPPS Payment to Certain Cancer
Hospitals Described by Section
1886(d)(1)(B)(v) of the Act
1. Background
2. Payment Adjustment for Certain Cancer
Hospitals for CY 2013
G. Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Final Outlier Calculation
4. Outlier Reconciliation
H. Calculation of an Adjusted Medicare
Payment From the National Unadjusted
Medicare Payment
I. Beneficiary Copayments
1. Background
2. OPPS Copayment Policy
3. Calculation of an Adjusted Copayment
Amount for an APC Group
III. OPPS Ambulatory Payment Classification
(APC) Group Policies
A. OPPS Treatment of New CPT and Level
II HCPCS Codes
1. Treatment of New CY 2012 Level II
HCPCS and CPT Codes Effective April 1,
2012 and July 1, 2012 for Which We
Solicited Public Comments in the CY
2013 OPPS/ASC Proposed Rule
2. Process for New Level II HCPCS Codes
That Will Be Effective October 1, 2012
and New CPT and Level II HCPCS Codes
That Will Be Effective January 1, 2013
for Which We Are Soliciting Public
Comments in this CY 2013 OPPS/ASC
Final Rule with Comment Period
B. OPPS Changes—Variations within APCs
1. Background
2. Application of the 2 Times Rule
3. Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background

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2. Movement of Procedures From New
Technology APCs to Clinical APCs
3. Payment Adjustment Policy for
Radioisotopes Derived From Non-Highly
Enriched Uranium (HEU) Sources
a. Background
b. Payment Policy
D. OPPS APC-Specific Policies
1. Cardiovascular and Vascular Services
a. Cardiac Telemetry (APC 0213)
b. Mechanical Thrombectomy (APC 0653)
c. Non-Congenital Cardiac Catheterization
(APC 0080)
d. Endovascular Revascularization of the
Lower Extremity (APCs 0083, 0229, and
0319)
e. External Electrocardiographic
Monitoring (APC 0097)
f. Echocardiography (APCs 0177, 0178,
0269, 0270, and 0697)
2. Gastrointestinal Services
a. Laparoscopic Adjustable Gastric Band
(APC 0132)
b. Transoral Incisionless Fundoplication
(APC 0422)
c. Gastrointestinal Transit and Pressure
Measurement (APC 0361)
3. Integumentary System Services
a. Extracorporeal Shock Wave Wound
Treatment (APC 0340)
b. Application of Skin Substitute (APCs
0133 and 0134)
c. Low Frequency, Non-Contact, NonThermal Ultrasound (APC 0015)
4. Nervous System Services
a. Scrambler Therapy (APC 0275)
b. Transcranial Magnetic Stimulation
Therapy (TMS) (APC 0216)
c. Paravertebral Neurolytic Agent (APC
0207)
d. Programmable Implantable Pump (APC
0691)
e. Revision/Removal of Neurostimulator
Electrodes (APC 0687)
5. Ocular Services: Placement of Amniotic
Membrane (APC 0233)
6. Radiology Oncology
a. Proton Beam Therapy (APCs 0664 and
0667)
b. Device Construction for Intensity
Modulated Radiation Therapy (IMRT)
(APC 0305)
c. Other Radiation Oncology Services
(APCs 0310 and 0412)
d. Stereotactic Radiosurgery (SRS)
Treatment Delivery Services (APCs 0065,
0066, 0067 and 0127)
e. Intraoperative Radiation Therapy (IORT)
(APC 0412)
(1) Background
(2) CY 2013 Proposals and Final Policies
for CPT Codes 77424, 77425, and 77469
7. Imaging
a. Non-Ophthalmic Fluorescent Vascular
Angiography (APC 0397)
b. Level II Nervous System Imaging (APC
0402)
c. Computed Tomography of Abdomen/
Pelvis (APCs 0331 and 0334)
8. Respiratory Services
a. Bronchoscopy (APC 0415)
b. Upper Airway Endoscopy (APC 0075)
9. Other Services
a. Payment for Molecular Pathology
Services
b. Bone Marrow (APC 0112)

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IV. OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through
Payments for Certain Devices
a. Background
b. CY 2013 Policy
2. Provisions for Reducing Transitional
Pass-Through Payments to Offset Costs
Packaged into APC Groups
a. Background
b. CY 2013 Policy
3. Clarification of Existing Device Category
Criterion
a. Background
b. Clarification of CY 2013 Policy
B. Adjustment to OPPS Payment for No
Cost/Full Credit and Partial Credit
Devices
1. Background
2. APCs and Devices Subject to the
Adjustment Policy
V. OPPS Payment Changes for Drugs,
Biologicals, and Radiopharmaceuticals
A. OPPS Transitional Pass-Through
Payment for Additional Costs of Drugs,
Biologicals, and Radiopharmaceuticals
1. Background
2. Drugs and Biologicals With Expiring
Pass-Through Status in CY 2012
3. Drugs, Biologicals, and
Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY
2013
4. Provisions for Reducing Transitional
Pass-Through Payments for Diagnostic
Radiopharmaceuticals and Contrast
Agents to Offset Costs Packaged Into
APC Groups
a. Background
b. Payment Offset Policy for Diagnostic
Radiopharmaceuticals
c. Payment Offset Policy for Contrast
Agents
B. OPPS Payment for Drugs, Biologicals,
and Radiopharmaceuticals Without PassThrough Status
1. Background
2. Criteria for Packaging Payment for
Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
b. Cost Threshold for Packaging of Payment
for HCPCS Codes That Describe Certain
Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals
(‘‘Threshold-Packaged Drugs’’)
c. Packaging Determination for HCPCS
Codes That Describe the Same Drug or
Biological but Different Dosages
3. Payment for Drugs and Biologicals
Without Pass-Through Status That Are
Not Packaged
a. Payment for Specified Covered
Outpatient Drugs (SCODs) and Other
Separately Payable and Packaged Drugs
and Biologicals
b. CY 2013 Payment Policy
4. Payment Policy for Therapeutic
Radiopharmaceuticals
5. Payment for Blood Clotting Factors
6. Payment for Nonpass-Through Drugs,
Biologicals, and Radiopharmaceuticals
With HCPCS Codes, but Without OPPS
Hospital Claims Data
VI. Estimate of OPPS Transitional PassThrough Spending for Drugs, Biologicals,
Radiopharmaceuticals, and Devices

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A. Background
B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient
Visits
A. Background
B. Policies for Hospital Outpatient Visits
C. Transitional Care Management
VIII. Payment for Partial Hospitalization
Services
A. Background
B. PHP APC Update for CY 2013
C. Coding Changes
D. Separate Threshold for Outlier
Payments to CMHCs
IX. Procedures That Would Be Paid Only as
Inpatient Procedures
A. Background
B. Changes to the Inpatient List
X. Policies for the Supervision of Outpatient
Services in Hospitals and CAHs
A. Conditions of Payment for Physical
Therapy, Speech-Language Pathology,
and Occupational Therapy Services in
Hospitals and CAHs
B. Enforcement Instruction for the
Supervision of Outpatient Therapeutic
Services in CAHs and Certain Small
Rural Hospitals
XI. Outpatient Status: Solicitation of Public
Comments in the CY 2013 OPPS/ASC
Proposed Rule
A. Background
B. Summary of Public Comments Received
1. Part A to Part B Rebilling
2. Clarifying Current Admission
Instructions or Establishing Specified
Clinical Criteria
3. Hospital Utilization Review
4. Prior Authorization
5. Time-Based Criteria for Inpatient
Admission
6. Payment Alignment
7. Public Comments on Other Topics
a. Rules for the External Review of
Inpatient Claims
b. Improving Beneficiary Protections
c. Revising the Qualifying Criteria for
Skilled Nursing Facility (SNF) Coverage
C. Summary
XII. CY 2013 OPPS Payment Status and
Comment Indicators
A. CY 2013 OPPS Payment Status Indicator
Definitions
B. CY 2013 Comment Indicator Definitions
XIII. OPPS Policy and Payment
Recommendations
A. MedPAC Recommendations
B. GAO Recommendations
C. OIG Recommendations
XIV. Updates to the Ambulatory Surgical
Center (ASC) Payment System
A. Background
1. Legislative History, Statutory Authority,
and Prior Rulemaking for the ASC
Payment System
2. Policies Governing Changes to the Lists
of Codes and Payment Rates for ASC
Covered Surgical Procedures and
Covered Ancillary Services
B. Treatment of New Codes
1. Process for Recognizing New Category I
and Category III CPT Codes and Level II
HCPCS Codes
2. Treatment of New Level II HCPCS Codes
and Category III CPT Codes Implemented
in April and July 2012 for Which We

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Solicited Public Comments in the CY
2013 OPPS/ASC Proposed Rule
3. Process for New Level II HCPCS Codes
and Category I and Category III CPT
Codes for Which We Are Soliciting
Public Comments in This CY 2013
OPPS/ASC Final Rule With Comment
Period
C. Update to the Lists of ASC Covered
Surgical Procedures and Covered
Ancillary Services
1. Covered Surgical Procedures
a. Additions to the List of ASC Covered
Surgical Procedures
b. Covered Surgical Procedures Designated
as Office-Based
(1) Background
(2) Changes for CY 2013 to Covered
Surgical Procedures Designated as
Office-Based
c. ASC Covered Surgical Procedures
Designated as Device-Intensive
(1) Background
(2) Changes to List of Covered Surgical
Procedures Designated as DeviceIntensive for CY 2013
d. Adjustment to ASC Payments for No
Cost/Full Credit and Partial Credit
Devices
e. ASC Treatment of Surgical Procedures
Removed From the OPPS Inpatient List
for CY 2013
2. Covered Ancillary Services
D. ASC Payment for Covered Surgical
Procedures and Covered Ancillary
Services
1. Payment for Covered Surgical
Procedures
a. Background
b. Update to ASC Covered Surgical
Procedure Payment Rates for CY 2013
c. Waiver of Coinsurance and Deductible
for Certain Preventive Services
d. Payment for the Cardiac
Resynchronization Therapy Composite
e. Payment for Low Dose Rate (LDR)
Prostate Brachytherapy Composite
2. Payment for Covered Ancillary Services
a. Background
b. Payment for Covered Ancillary Services
for CY 2013
E. New Technology Intraocular Lenses
(NTIOLs)
1. NTIOL Cycle and Evaluation Criteria
2. NTIOL Application Process for Payment
Adjustment
3. Requests to Establish New NTIOL
Classes for CY 2013 and Deadline for
Public Comments
4. Payment Adjustment
5. Revisions to the Major NTIOL Criteria
Described in 42 CFR 416.195
6. Request for Public Comment on the
‘‘Other Comparable Clinical Advantages’’
Improved Outcome
7. Announcement of CY 2013 Deadline for
Submitting Requests for CMS Review of
Appropriateness of ASC Payment for
Insertion of an NTIOL Following
Cataract Surgery
F. ASC Payment and Comment Indicators
1. Background
2. ASC Payment and Comment Indicators
G. ASC Policy and Payment
Recommendations
H. Calculation of the ASC Conversion
Factor and the ASC Payment Rates

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1. Background
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment
Weights for CY 2013 and Future Years
b. Updating the ASC Conversion Factor
3. Display of CY 2013 ASC Payment Rates
XV. Hospital Outpatient Quality Reporting
Program Updates
A. Background
1. Overview
2. Statutory History of the Hospital
Outpatient Quality Reporting (Hospital
OQR) Program
3. Measure Updates and Data Publication
a. Process for Updating Quality Measures
b. Publication of Hospital OQR Program
Data
B. Process for Retention of Hospital OQR
Program Measures Adopted in Previous
Payment Determinations
C. Removal or Suspension of Quality
Measures From the Hospital OQR
Program Measure Set
1. Considerations in Removing Quality
Measures From the Hospital OQR
Program
2. Removal of One Chart-Abstracted
Measure for the CY 2013 and Subsequent
Years Payment Determinations
3. Suspension of One Chart-Abstracted
Measure for the CY 2014 and Subsequent
Years Payment Determinations
4. Deferred Data Collection of OP–24:
Cardiac Rehabilitation Measure: Patient
Referral From an Outpatient Setting for
the CY 2014 Payment Determination
D. Quality Measures for CY 2015 Payment
Determination
E. Possible Quality Measures Under
Consideration for Future Inclusion in the
Hospital OQR Program
F. Payment Reduction for Hospitals That
Fail To Meet the Hospital OQR Program
Requirements for the CY 2013 Payment
Update
1. Background
2. Reporting Ratio Application and
Associated Adjustment Policy for CY
2013
G. Requirements for Reporting of Hospital
OQR Data for the CY 2014 Payment
Determination and Subsequent Years
1. Administrative Requirements for the CY
2014 Payment Determination and
Subsequent Years
2. Form, Manner, and Timing of Data
Submitted for the Hospital OQR Program
for the CY 2014 Payment Determination
and Subsequent Years
a. Background
b. General Requirements
c. Chart-Abstracted Measure Requirements
for CY 2014 and Subsequent Payment
Determination Years
d. Claims-Based Measure Data
Requirements for the CY 2014 and CY
2015 Payment Determinations
e. Structural Measure Data Requirements
for the CY 2014 Payment Determination
and Subsequent Years
f. Data Submission Requirements for OP–
22: ED-Patient Left Without Being Seen
for the CY 2015 Payment Determination
g. Population and Sampling Data
Requirements for the CY 2014 Payment
Determination and Subsequent Years

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3. Hospital OQR Program Validation
Requirements for Chart-Abstracted
Measure Data Submitted Directly to CMS
for the CY 2014 Payment Determination
and Subsequent Years
a. Random Selection of Hospitals for Data
Validation of Chart-Abstracted Measures
for the CY 2014 Payment Determination
and Subsequent Years
b. Targeting and Targeting Criteria for Data
Validation Selection for CY 2014
Payment Determination and for
Subsequent Years
c. Methodology for Encounter Selection for
the CY 2014 Payment Determination and
Subsequent Years
d. Validation Score Calculation for the CY
2014 Payment Determination and
Subsequent Years
H. Hospital OQR Reconsideration and
Appeals Procedures for the CY 2014
Payment Determination and Subsequent
Years
I. Extraordinary Circumstances Extension
or Waiver for the CY 2013 Payment
Determination and Subsequent Years
J. Electronic Health Records (EHRs)
K. 2013 Medicare EHR Incentive Program
Electronic Reporting Pilot for Eligible
Hospitals and CAHs
XVI. Requirements for the Ambulatory
Surgical Centers Quality Reporting
(ASCQR) Program
A. Background
1. Overview
2. Statutory History of the ASC Quality
Reporting (ASCQR) Program
3. History of the ASCQR Program
B. ASCQR Program Quality Measures
1. Considerations in the Selection of
ASCQR Program Quality Measures
2. ASCQR Program Quality Measures
3. ASC Measure Topics for Future
Consideration
4. Clarification Regarding the Process for
Updating ASCQR Program Quality
Measures
C. Requirements for Reporting of ASC
Quality Data
1. Form, Manner, and Timing for ClaimsBased Measures for the CY 2014
Payment Determination and Subsequent
Payment Determination Years
a. Background
b. Form, Manner, and Timing for ClaimsBased Measures for the CY 2015
Payment Determination and Subsequent
Payment Determination Years
2. Data Completeness and Minimum
Threshold for Claims-Based Measures
Using QDCs
a. Background
b. Data Completeness Requirements for the
CY 2015 Payment Determination and
Subsequent Payment Determination
Years
3. Other Comments on the ASCQR Program
D. Payment Reduction for ASCs That Fail
To Meet the ASCQR Program
Requirements
1. Statutory Background
2. Reduction to the ASC Payment Rates for
ASCs That Fail To Meet the ASCQR
Program Requirements for the CY 2014
Payment Determination and Subsequent
Payment Determination Years

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XVII. Inpatient Rehabilitation Facility (IRF)
Quality Reporting Program Updates
A. Overview
B. Updates to IRF QRP Measures Which
Are Made as a Result of Review by the
National Quality Forum (NQF) Process
C. Process for Retention of IRF Quality
Measures Adopted in Previous Fiscal
Year Rulemaking Cycles
D. Measures for the FY 2014 Payment
Determination
1. Clarification Regarding Existing IRF
Quality Measures That Have Undergone
Changes During the NQF Measure
Maintenance Processes
2. Updates to the ‘‘Percent of Residents
Who Have Pressure Ulcers That Are New
or Worsened’’ Measure
XVIII. Revisions to the Quality Improvement
Organization (QIO) Regulations (42 CFR
Parts 476, 478, and 480)
A. Summary of Changes
B. Quality of Care Reviews
1. Beneficiary Complaint Reviews
2. Completion of General Quality of Care
Reviews
C. Use of Confidential Information That
Explicitly or Implicitly Identifies
Patients
D. Secure Transmissions of Electronic
Versions of Medical Information
E. Active Staff Privileges
F. Technical Corrections
XIX. Files Available to the Public Via the
Internet
XX. Collection of Information Requirements
A. Legislative Requirements for
Solicitation of Comments
B. Requirements in Regulation Text
1. 2013 Medicare EHR Incentive Program
Electronic Reporting Pilot for Hospitals
and CAHs (§ 495.8)
C. Associated Information Collections Not
Specified in Regulatory Text
1. Hospital OQR Program
2. Hospital OQR Program Measures for the
CY 2012, CY 2013, CY 2014 and CY 2015
Payment Determinations
a. Previously Adopted Hospital OQR
Program Measures for the CY 2012, CY
2013, and CY 2014 Payment
Determinations
b. Hospital OQR Program Measures for the
CY 2014 Payment Determination
c. Hospital OQR Program Measures for CY
2015
3. Hospital OQR Program Validation
Requirements for CY 2014
4. Hospital OQR Program Reconsideration
and Appeals Procedures
5. ASCQR Program Requirements
a. Claims-Based Outcome Measures for the
CY 2014 Payment Determination
b. Claims-Based Process, Structural, and
Volume Measures for the CY 2015 and
CY 2016 Payment Determinations
c. Program Administrative Requirements
and QualityNet Accounts; Extraordinary
Circumstance and Extension Requests;
Reconsideration Requests
6. IRF QRP
a. Pressure Ulcer Measure
b. CAUTI Measure
XXI. Waiver of Proposed Rulemaking and
Response to Comments
A. Waiver of Proposed Rulemaking

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B. Response to Comments
XXII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impacts for OPPS and ASC
Payment Provisions
4. Detailed Economic Analyses
a. Estimated Effects of OPPS Changes in
This Final Rule With Comment Period
(1) Limitations of Our Analysis
(2) Estimated Effects of OPPS Changes on
Hospitals
(3) Estimated Effects of OPPS Changes on
CMHCs
(4) Estimated Effect of OPPS Changes on
Beneficiaries
(5) Estimated Effects of OPPS Changes on
Other Providers
(6) Estimated Effects of OPPS Changes on
the Medicare and Medicaid Programs
(7) Alternative OPPS Policies Considered
b. Estimated Effects of ASC Payment
System Final Policies
(1) Limitations of Our Analysis
(2) Estimated Effects of ASC Payment
System Final Policies on ASCs
(3) Estimated Effects of ASC Payment
System Final Policies on Beneficiaries
(4) Alternative ASC Payment Policies
Considered
c. Effects of the Revisions to the QIO
Regulations
d. Accounting Statements and Tables
e. Effects of Requirements for the Hospital
OQR Program
f. Effects of the EHR Electronic Reporting
Pilot
g. Effects of Proposals for the ASCQR
Program
h. Effects of Updates to the IRF QRP
B. Regulatory Flexibility Act (RFA)
Analysis
C. Unfunded Mandates Reform Act
Analysis
D. Conclusion
XXIII. Federalism Analysis
Regulation Text

I. Summary and Background
A. Executive Summary of This Final
Rule With Comment Period
1. Purpose
In this final rule with comment
period, we are updating the payment
policies and payment rates for services
furnished to Medicare beneficiaries in
hospital outpatient departments and
Ambulatory Surgical Centers (ASCs)
beginning January 1, 2013. Section
1833(t) of the Social Security Act (the
Act) requires us to annually review and
update the relative payment weights
and the conversion factor for services
payable under the Outpatient
Prospective Payment System (OPPS).
Under section 1833(i) of the Act, we
annually review and update the ASC
payment rates. We describe these and
various other statutory authorities in the
relevant sections of this final rule.
In addition to establishing payment
rates for CY 2013, we are updating and

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implementing new requirements under
the Hospital Outpatient Quality
Reporting (OQR) Program, the
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program, and the
Inpatient Rehabilitation Facility (IRF)
Quality Reporting Program. We are
continuing the electronic reporting pilot
for the Electronic Health Record (EHR)
Incentive Program and making revisions
to the regulations governing the Quality
Improvement Organizations (QIOs),
including the secure transmittal of
electronic medical information,
beneficiary complaint resolution and
notification processes, and technical
corrections. The technical changes to
the QIO regulations that we are making
to improve the regulations reflect CMS’
commitment to the principles of the
President’s Executive Order on
Regulatory Reform, Executive Order
13563 (January 18, 2011).
2. Summary of the Major Provisions
• OPPS Update: For CY 2013, we are
increasing the payment rates under the
OPPS by an Outpatient Department
(OPD) fee schedule increase factor of 1.8
percent. This increase is based on the
final hospital inpatient market basket
percentage increase of 2.6 percent for
inpatient services paid under the
hospital inpatient prospective payment
system (IPPS), minus the multifactor
productivity (MFP) adjustment of 0.7
percentage points, and minus a 0.1
percentage point adjustment required by
the Affordable Care Act. Under this final
rule with comment period, we estimate
that total payments for CY 2013,
including beneficiary cost-sharing, to
the more than 4,000 facilities paid
under the OPPS (including general
acute care hospitals, children’s
hospitals, cancer hospitals, and
community mental health centers
(CMHCs)), will be approximately $48.1
billion, an increase of approximately
$4.6 billion compared to CY 2012
payments, or $600 million excluding
our estimated changes in enrollment,
utilization, and case-mix.
We are continuing to implement the
statutory 2.0 percentage point reduction
in payments for hospitals failing to meet
the hospital outpatient quality reporting
requirements, by applying a reporting
factor of 0.980 to the OPPS payments
and copayments for all applicable
services.
• Geometric Mean-Based Relative
Payment Weights: CMS has discretion
under the statute to set OPPS payments
based upon either the estimated mean or
median costs of services within an
Ambulatory Payment Classification
(APC) group, the unit of payment. To
improve our cost estimation process, for

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CY 2013 we are using the geometric
mean costs of services within an APC to
determine the relative payment weights
of services, rather than the median costs
that we have used since the inception of
the OPPS. Our analysis shows that the
change to means will have a limited
payment impact on most providers,
with a small number experiencing
payment gain or loss based on their
service-mix.
• Rural Adjustment: We are
continuing the adjustment of 7.1 percent
to the OPPS payments to certain rural
sole community hospitals (SCHs),
including essential access community
hospitals (EACHs). This adjustment will
apply to all services paid under the
OPPS, excluding separately payable
drugs and biologicals, devices paid
under the pass-through payment policy,
and items paid at charges reduced to
cost.
• Cancer Hospital Payment
Adjustment: For CY 2013, we are
continuing our policy to provide
additional payments to cancer hospitals
so that the hospital’s payment-to-cost
ratio (PCR) with the payment
adjustment is equal to the weighted
average PCR for the other OPPS
hospitals using the most recent
submitted or settled cost report data.
Based on those data, a target PCR of 0.91
will be used to determine the CY 2013
cancer hospital payment adjustment to
be paid at cost report settlement. That
is, the payment amount associated with
the cancer hospital payment adjustment
will be the additional payment needed
to result in a PCR equal to 0.91 for each
cancer hospital.
• Payment Adjustment Policy for
Radio-Isotopes Derived from NonHighly Enriched Uranium Sources: We
are exercising our statutory authority to
make payment adjustments necessary to
ensure equitable payments in order to
provide an adjustment for CY 2013 to
cover the marginal cost of hospital
conversion to the use of non-HEU
sources of radio-isotopes used in
medical imaging. The adjustment will
cover the marginal cost of radio-isotopes
produced from non-HEU sources over
the costs of radio-isotopes produced by
HEU sources.
• Payment of Drugs, Biologicals, and
Radiopharmaceuticals: For CY 2013,
payment for the acquisition and
pharmacy overhead costs of separately
payable drugs and biologicals that do
not have pass-through status will be set
at the statutory default of average sales
price (ASP) plus 6 percent.
• Supervision of Hospital Outpatient
Therapeutic Services: We are clarifying
the application of the supervision
regulations to physical therapy, speech-

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language pathology, and occupational
therapy services that are furnished in
OPPS hospitals and critical access
hospitals (CAHs). In addition, in this
final rule we note that we will extend
the enforcement instruction one final
year through CY 2013. This additional
year, which we expect will be the final
year of the extension, will provide
additional opportunities for
stakeholders to bring their issues to the
Hospital Outpatient Payment Panel.
• Outpatient Status: We are
concerned about recent increases in the
length of time that Medicare
beneficiaries spend as outpatients
receiving observation services. In
addition, hospitals continue to express
concern about Medicare Part A to Part
B rebilling policies when a hospital
inpatient claim is denied because the
inpatient admission was not medically
necessary. In the CY 2013 OPPS/ASC
proposed rule (77 FR 45155 through
45157), we provided an update on the
Part A to Part B Rebilling Demonstration
that is in effect for CY 2012 through CY
2014, which was designed to assist us
in evaluating these issues. We also
solicited public comments on potential
clarifications or changes to our policies
regarding patient status that may be
appropriate, which we discuss in this
final rule with comment period.
• Ambulatory Surgical Center
Payment Update: For CY 2013, we are
increasing payment rates under the ASC
payment system by 0.6 percent. This
increase is based on a projected CPI–U
update of 1.4 percent minus a
multifactor productivity adjustment
required by the Affordable Care Act that
is projected to be 0.8 percent. Based on
this update, we estimate that total
payments to ASCs (including
beneficiary cost-sharing and estimated
changes in enrollment, utilization, and
case-mix), for CY 2013 will be
approximately $4.074 billion, an
increase of approximately $310 million
compared to estimated CY 2012
payments.
• New Technology Intraocular
Lenses: We are revising the regulations
governing payments for new technology
intraocular lenses (NTIOLs) to require
that the IOL’s labeling, which must be
approved by the FDA, contain a claim
of a specific clinical benefit based on a
new lens characteristic in comparison to
currently available IOLs. We also are
revising the regulations to require that
any specific clinical benefit referred to
in § 416.195(a)(2) must be supported by
evidence that demonstrates that the IOL
results in a measurable, clinically
meaningful, improved outcome.
• Ambulatory Surgical Center Quality
Reporting (ASCQR) Program: For the

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ASCQR Program, we address the public
comments received as a result of our
solicitation in the proposed rule on our
approach for future measure selection
and development as well as certain
measures for future potential inclusion
in the ASCQR Program measure set. We
are finalizing our approach to future
measure selection and development for
the ASCQR Program. For the CY 2015
payment determination and subsequent
years’ payment determinations, we are
adopting requirements for claims-based
measures regarding the dates for
submission and payment of claims and
data completeness. We also are
finalizing our policy regarding how the
payment rates will be reduced in CY
2014 and in subsequent calendar years
for ASCs that fail to meet program
requirements, and we are clarifying our
policy on updating measures.
• Hospital Outpatient Quality
Reporting (OQR) Program: For the
Hospital OQR Program, we are not
establishing any new measures for CY
2013. We also are not specifying any
new targeting criteria to select hospitals
for validation of medical records. We
are confirming the removal or
suspension of data collection for
specific measures. We are specifying
that the criteria we will consider when
determining whether to remove
measures for the Hospital Inpatient
Quality Reporting (IQR) Program will
also apply to the Hospital OQR Program.
We are providing that measures adopted
in future rulemaking are automatically
adopted for all subsequent year payment
determinations unless we remove,
suspend, or replace them. We are
making changes to administrative forms
used in the program. We are extending
the deadline for submitting a notice of
participation form and to enter
structural measures data.
• Electronic Health Record (EHR)
Incentive Program: For the EHR
Incentive Program, we are extending the
2012 Medicare EHR Incentive Program
Electronic Reporting Pilot for Eligible
Hospitals and CAHs through 2013,
exactly as finalized for 2012. We
recently issued a final rule (77 FR
53968) for Stage 2 of the Medicare and
Medicaid EHR Incentive Programs.
• Inpatient Rehabilitation Facility
Quality Reporting Program (IRF QRP):
We are: (1) Adopting updates on one
(out of two) previously adopted measure
for the IRF QRP that will affect annual
prospective payment amounts for FY
2014; (2) adopting a nonrisk-adjusted
version of an NQF-endorsed pressure
ulcer measure for the IRF QRP, and we
will not publicly report any pressure
ulcer measure data until we begin risk
adjustment of these data; (3) adopting a

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policy that will provide that any
measure that has been adopted for use
in the IRF QRP will remain in effect
until the measure is actively removed,
suspended, or replaced; and (4)
adopting policies regarding when
notice-and-comment rulemaking will be
used to update existing IRF QRP
measures.
• Revisions to the Quality
Improvement Organization (QIO)
Regulations: We are revising the QIO
program regulations to: (1) Give QIOs
the authority to send and receive secure
transmissions of electronic versions of
medical information; (2) provide more
detailed and improved procedures for
QIOs when completing Medicare
beneficiary complaint reviews and
general quality of care reviews,
including procedures related to a new
alternative dispute resolution process
called ‘‘immediate advocacy’’; (3)
increase the information beneficiaries
receive in response to QIO review
activities; (4) convey to Medicare
beneficiaries the right to authorize the
release of confidential information by
QIOs; and (5) make other technical
changes that are designed to improve
the regulations. The technical changes
to the QIO regulations that we are
making to improve the regulations
reflect CMS’ commitment to the
principles of the President’s Executive
Order on Regulatory Reform, Executive
Order 13563 (January 18, 2011).
3. Summary of Costs and Benefits
In sections XXII. and XXIII. of this
final rule with comment period, we set
forth a detailed analysis of the
regulatory and federalism impacts that
the changes will have on affected
entities and beneficiaries. Key estimated
impacts include the following:
a. Impacts of the OPPS Update

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(1) Impacts of All OPPS Changes
Table 57 in section XXII. of this final
rule with comment period displays the
distributional impact all the OPPS
changes on various groups of hospitals
and CMHCs for CY 2013 compared to all
estimated OPPS payments in CY 2012.
We estimate that the policies in this
final rule will result in a 1.9 percent
overall increase in OPPS payments to
providers. We estimate that the increase
in OPPS expenditures, including
beneficiary cost-sharing, will be
approximately $600 million, not taking
into account potential changes in
enrollment, utilization, and case-mix.
Taking into account estimated spending
changes that are attributable to these
factors, we estimate an increase of
approximately $4.571 billion in OPPS

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expenditures, including beneficiary
cost-sharing, for CY 2013 compared to
CY 2012 OPPS expenditures. We
estimate that total OPPS payments,
including beneficiary cost-sharing, will
be $48.1 billion for CY 2013.
We estimated the isolated impact of
our OPPS policies on CMHCs because
CMHCs are only paid for partial
hospitalization services under the
OPPS. Continuing the provider-specific
structure that we adopted for CY 2011
and basing payment fully on the type of
provider furnishing the service, we
estimate a 4.4 percent decrease in CY
2013 payments to CMHCs relative to
their CY 2012 payments.
(2) Impacts of Basing APC Relative
Payment Weights on Geometric Mean
Costs
We estimate that our final policy to
base the APC relative payment weights
on the geometric mean costs rather than
the median costs of services within an
APC will not significantly impact most
providers. Payments to very low volume
urban hospitals and to hospitals for
which disproportionate share hospital
(DSH) data are not available will
increase by an estimated 2.5 and 4.3
percent, respectively. The hospitals for
which DSH data are not available are
largely non-IPPS psychiatric hospitals.
In contrast, payments to CMHCs will
decrease by an estimated 3.9 percent
due to basing the relative payment
weights on the geometric mean costs of
services rather than the median costs of
services.
(3) Impacts of the Updated Wage Indices
We estimate no significant impacts
related to updating the wage indices and
applying the frontier State wage index.
Adjustments to the wage indices other
than the frontier State wage adjustment
will not significantly affect most
hospitals. The updated wage indices
will most affect urban hospitals in the
Pacific and East South Central regions
and rural hospitals in the Mountain and
Pacific regions.
(4) Impacts of the Rural Adjustment and
the Cancer Hospital Payment
Adjustment
There are no significant impacts of
our CY 2013 payment policies for
hospitals that are eligible for the rural
adjustment or for the cancer hospital
payment adjustment. We are not making
any change in policies for determining
the rural and cancer hospital payment
adjustments, and the adjustment
amounts do not significantly impact the
budget neutrality adjustments for these
policies.

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(5) Impacts of the OPD Fee Schedule
Increase Factor
We estimate that, for most hospitals,
the application of the OPD fee schedule
increase factor of 1.8 percent to the
conversion factor for CY 2013 will
mitigate the small negative impacts of
the budget neutrality adjustments.
Certain low volume hospitals and
hospitals for which DSH data are not
available will experience larger
increases ranging from 4.5 percent to 8.2
percent. As a result of the OPD fee
schedule increase factor and other
budget neutrality adjustments, we
estimate that rural and urban hospitals
will experience similar increases of
approximately 1.8 percent for urban
hospitals and 2.1 percent for rural
hospitals. Classifying hospitals by
teaching status or type of ownership
suggests that these hospitals will receive
similar increases.
b. Impacts of the ASC Payment Update
For impact purposes, the surgical
procedures on the ASC list of covered
procedures are aggregated into surgical
specialty groups using CPT and HCPCS
code range definitions. The percentage
change in estimated total payments by
specialty groups under the CY 2013
payment rates compared to estimated
CY 2012 payment rates ranges between
¥3 percent for respiratory system
procedures, integumentary system
procedures, and cardiovascular system
procedures and 3 percent for nervous
system procedures.
c. Impacts of the Hospital OQR Program
We do not expect our CY 2013
policies to significantly affect the
number of hospitals that do not receive
a full annual payment update.
d. Impacts of the EHR Incentive Program
Proposal
There are no changes from the 2012
OPPS/ASC final rule to the costs or
impact for the 2013 Medicare EHR
Incentive Program Electronic Reporting
Pilot for Hospitals and CAHs.
e. Impacts of the ASCQR Program
We do not expect our CY 2013 final
policies to significantly affect the
number of ASCs that do not receive a
full annual payment update beginning
in CY 2014.
B. Legislative and Regulatory Authority
for the Hospital OPPS
When Title XVIII of the Social
Security Act was enacted, Medicare
payment for hospital outpatient services
was based on hospital-specific costs. In
an effort to ensure that Medicare and its
beneficiaries pay appropriately for

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services and to encourage more efficient
delivery of care, the Congress mandated
replacement of the reasonable costbased payment methodology with a
prospective payment system (PPS). The
Balanced Budget Act of 1997 (BBA)
(Pub. L. 105–33) added section 1833(t)
to the Act authorizing implementation
of a PPS for hospital outpatient services.
The OPPS was first implemented for
services furnished on or after August 1,
2000. Implementing regulations for the
OPPS are located at 42 CFR parts 410
and 419.
The Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106–113) made
major changes in the hospital OPPS.
The following Acts made additional
changes to the OPPS: the Medicare,
Medicaid, and SCHIP Benefits
Improvement and Protection Act of
2000 (BIPA) (Pub. L. 106–554); the
Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA) (Pub. L. 108–173); the
Deficit Reduction Act of 2005 (DRA)
(Pub. L. 109–171), enacted on February
8, 2006; the Medicare Improvements
and Extension Act under Division B of
Title I of the Tax Relief and Health Care
Act of 2006 (MIEA–TRHCA) (Pub. L.
109–432), enacted on December 20,
2006; the Medicare, Medicaid, and
SCHIP Extension Act of 2007 (MMSEA)
(Pub. L. 110–173), enacted on December
29, 2007; the Medicare Improvements
for Patients and Providers Act of 2008
(MIPPA) (Pub. L. 110–275), enacted on
July 15, 2008; the Patient Protection and
Affordable Care Act (Pub. L. 111–148),
enacted on March 23, 2010, as amended
by the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152), enacted on March 30, 2010 (These
two public laws are collectively known
as the Affordable Care Act); the
Medicare and Medicaid Extenders Act
of 2010 (MMEA, Pub. L. 111–309); the
Temporary Payroll Tax Cut
Continuation Act of 2011 (TPTCCA,
Pub. L. 112–78), enacted on December
23, 2011; and most recently the Middle
Class Tax Relief and Job Creation Act of
2012 (MCTRJCA, Pub. L. 112–96),
enacted on February 22, 2012.
Under the OPPS, we pay for hospital
outpatient services on a rate-per-service
basis that varies according to the APC
group to which the service is assigned.
We use the Healthcare Common
Procedure Coding System (HCPCS)
(which includes certain Current
Procedural Terminology (CPT) codes) to
identify and group the services within
each APC. The OPPS includes payment
for most hospital outpatient services,
except those identified in section I.C. of
this final rule with comment period.

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Section 1833(t)(1)(B) of the Act provides
for payment under the OPPS for
hospital outpatient services designated
by the Secretary (which includes partial
hospitalization services furnished by
CMHCs), and certain inpatient hospital
services designated by the Secretary that
are furnished to inpatients who are
entitled to Part A and have exhausted
their Part A benefits, or who are not so
entitled.
The OPPS rate is an unadjusted
national payment amount that includes
the Medicare payment and the
beneficiary copayment. This rate is
divided into a labor-related amount and
a nonlabor-related amount. The laborrelated amount is adjusted for area wage
differences using the hospital inpatient
wage index value for the locality in
which the hospital or CMHC is located.
All services and items within an APC
group are comparable clinically and
with respect to resource use (section
1833(t)(2)(B) of the Act). In accordance
with section 1833(t)(2) of the Act,
subject to certain exceptions, items and
services within an APC group cannot be
considered comparable with respect to
the use of resources if the highest
median cost (or mean cost, if elected by
the Secretary) for an item or service in
the APC group is more than 2 times
greater than the lowest median cost (or
mean cost, if elected by the Secretary)
for an item or service within the same
APC group (referred to as the ‘‘2 times
rule’’). In implementing this provision,
we generally use the cost of the item or
service assigned to an APC group.
For new technology items and
services, special payments under the
OPPS may be made in one of two ways.
Section 1833(t)(6) of the Act provides
for temporary additional payments,
which we refer to as ‘‘transitional passthrough payments,’’ for at least 2 but not
more than 3 years for certain drugs,
biological agents, brachytherapy devices
used for the treatment of cancer, and
categories of other medical devices. For
new technology services that are not
eligible for transitional pass-through
payments, and for which we lack
sufficient clinical information and cost
data to appropriately assign them to a
clinical APC group, we have established
special APC groups based on costs,
which we refer to as New Technology
APCs. These New Technology APCs are
designated by cost bands which allow
us to provide appropriate and consistent
payment for designated new procedures
that are not yet reflected in our claims
data. Similar to pass-through payments,
an assignment to a New Technology
APC is temporary; that is, we retain a
service within a New Technology APC

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until we acquire sufficient data to assign
it to a clinically appropriate APC group.
C. Excluded OPPS Services and
Hospitals
Section 1833(t)(1)(B)(i) of the Act
authorizes the Secretary to designate the
hospital outpatient services that are
paid under the OPPS. While most
hospital outpatient services are payable
under the OPPS, section
1833(t)(1)(B)(iv) of the Act excludes
payment for ambulance, physical and
occupational therapy, and speechlanguage pathology services, for which
payment is made under a fee schedule.
It also excludes screening
mammography, diagnostic
mammography, and effective January 1,
2011, an annual wellness visit providing
personalized prevention plan services.
The Secretary exercised the authority
granted under the statute to also exclude
from the OPPS those services that are
paid under fee schedules or other
payment systems. Such excluded
services include, for example, the
professional services of physicians and
nonphysician practitioners paid under
the MPFS; laboratory services paid
under the Clinical Laboratory Fee
Schedule (CLFS); services for
beneficiaries with end-stage renal
disease (ESRD) that are paid under the
ESRD composite rate; and services and
procedures that require an inpatient stay
that are paid under the hospital IPPS.
We set forth the services that are
excluded from payment under the OPPS
in regulations at 42 CFR 419.22.
Under § 419.20(b) of the regulations,
we specify the types of hospitals and
entities that are excluded from payment
under the OPPS. These excluded
entities include: Maryland hospitals, but
only for services that are paid under a
cost containment waiver in accordance
with section 1814(b)(3) of the Act;
CAHs; hospitals located outside of the
50 States, the District of Columbia, and
Puerto Rico; and Indian Health Service
(IHS) hospitals.
D. Prior Rulemaking
On April 7, 2000, we published in the
Federal Register a final rule with
comment period (65 FR 18434) to
implement a prospective payment
system for hospital outpatient services.
The hospital OPPS was first
implemented for services furnished on
or after August 1, 2000. Section
1833(t)(9) of the Act requires the
Secretary to review certain components
of the OPPS, not less often than
annually, and to revise the groups,
relative payment weights, and other
adjustments that take into account
changes in medical practices, changes in

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technologies, and the addition of new
services, new cost data, and other
relevant information and factors.
Since initially implementing the
OPPS, we have published final rules in
the Federal Register annually to
implement statutory requirements and
changes arising from our continuing
experience with this system. These rules
can be viewed on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
E. Advisory Panel on Hospital
Outpatient Payment (the HOP Panel or
the Panel), Formerly Named the
Advisory Panel on Ambulatory Payment
Classification Groups (APC Panel)
1. Authority of the Panel
Section 1833(t)(9)(A) of the Act, as
amended by section 201(h) of Public
Law 106–113, and redesignated by
section 202(a)(2) of Public Law 106–113,
requires that we consult with an
external advisory panel of experts to
annually review the clinical integrity of
the payment groups and their weights
under the OPPS. In CY 2000, based on
section 1833(t)(9)(A) of the Act and
section 222 of the Public Health Service
(PHS) Act, the Secretary established the
Advisory Panel on Ambulatory Payment
Classification Groups (APC Panel) to
fulfill this requirement. In CY 2011,
based on section 222 of the PHS Act
which gives discretionary authority to
the Secretary to convene advisory
councils and committees, the Secretary
expanded the panel’s scope to include
the supervision of hospital outpatient
therapeutic services in addition to the
APC groups and weights. To reflect this
new role of the panel, the Secretary
changed the panel’s name to the
Advisory Panel on Hospital Outpatient
Payment (the HOP Panel, or the Panel).
The Panel is not restricted to using data
compiled by CMS, and in conducting its
review it may use data collected or
developed by organizations outside the
Department.

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2. Establishment of the Panel
On November 21, 2000, the Secretary
signed the initial charter establishing
the HOP Panel, at that time named the
APC Panel. This expert panel, which
may be composed of up to 19
appropriate representatives of providers
(currently employed full-time, not as
consultants, in their respective areas of
expertise), reviews clinical data and
advises CMS about the clinical integrity
of the APC groups and their payment
weights. Since CY 2012, the Panel also
is charged with advising the Secretary
on the appropriate level of supervision

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for individual hospital outpatient
therapeutic services. The Panel is
technical in nature, and it is governed
by the provisions of the Federal
Advisory Committee Act (FACA). Since
its initial chartering, the Secretary has
renewed the Panel’s charter five times:
On November 1, 2002; on November 1,
2004; on November 21, 2006; on
November 2, 2008 and November 12,
2010. The current charter specifies,
among other requirements, that: The
Panel continues to be technical in
nature; is governed by the provisions of
the FACA; may convene up to three
meetings per year; has a Designated
Federal Official (DFO); and is chaired by
a Federal Official designated by the
Secretary. The current charter was
amended on November 15, 2011 and the
Panel was renamed to reflect expanding
the Panel’s authority to include
supervision of hospital outpatient
therapeutic services and therefore to
add CAHs to its membership.
The current Panel membership and
other information pertaining to the
Panel, including its charter, Federal
Register notices, membership, meeting
dates, agenda topics, and meeting
reports, can be viewed on the CMS Web
site at: http://www.cms.gov/FACA/05_
AdvisoryPanelonAmbulatoryPayment
ClassificationGroups.asp#TopOfPage.
3. Panel Meetings and Organizational
Structure
The Panel has held multiple meetings,
with the last meeting taking place on
August 27–28, 2012. Prior to each
meeting, we publish a notice in the
Federal Register to announce the
meeting and, when necessary, to solicit
nominations for Panel membership and
to announce new members.
The Panel has established an
operational structure that, in part,
currently includes the use of three
subcommittees to facilitate its required
review process. The three current
subcommittees are the Data
Subcommittee, the Visits and
Observation Subcommittee, and the
Subcommittee for APC Groups and
Status Indicator (SI) Assignments
(previously known as the Packaging
Subcommittee).
The Data Subcommittee is responsible
for studying the data issues confronting
the Panel and for recommending
options for resolving them. The Visits
and Observation Subcommittee reviews
and makes recommendations to the
Panel on all technical issues pertaining
to observation services and hospital
outpatient visits paid under the OPPS
(for example, APC configurations and
APC relative payment weights). The
Subcommittee for APC Groups and SI

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Assignments advises the Panel on the
following issues: The appropriate SIs to
be assigned to HCPCS codes, including
but not limited to whether a HCPCS
code or a category of codes should be
packaged or separately paid; and the
appropriate APC placement of HCPCS
codes regarding services for which
separate payment is made.
Each of these subcommittees was
established by a majority vote from the
full Panel during a scheduled Panel
meeting, and the Panel recommended
that the subcommittees continue at the
August 2012 Panel meeting. We
accepted this recommendation.
Discussions of the other
recommendations made by the Panel at
the February 2012 and August 2012
Panel meetings are included in the
sections of this final rule that are
specific to each recommendation. For
discussions of earlier Panel meetings
and recommendations, we refer readers
to previously published OPPS/ASC
proposed and final rules, the CMS Web
site mentioned earlier in this section,
and the FACA database at: http://
fido.gov/facadatabase/public.asp.
F. Public Comments Received in
Response to the CY 2013 OPPS/ASC
Proposed Rule
We received approximately 668
timely pieces of correspondence on the
CY 2013 PPS/ASC proposed rule that
appeared in the Federal Register on July
30, 2012 (77 FR 45061). We note that we
received some public comments that
were outside the scope of the proposed
rule and that are not addressed in this
final rule with comment period.
Summaries of the public comments that
are within the scope of the proposed
rule and our responses are set forth in
the various sections of this final rule
with comment period under the
appropriate subject-matter headings.
G. Public Comments Received on the CY
2012 OPPS/ASC Final Rule With
Comment Period
We received approximately 61 timely
pieces of correspondence on the CY
2012 OPPS/ASC final rule with
comment period that appeared in the
Federal Register on November 30, 2011
(76 FR 74122), some of which contained
comments on the interim APC
assignments and/or status indicators of
HCPCS codes identified with comment
indicator ‘‘NI’’ in Addendum B to that
final rule. Summaries of these public
comments on topics that were open to
comment and our responses to them are
set forth in various sections of this final
rule with comment period under the
appropriate subject-matter headings.

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II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative
Payment Weights

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1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act
requires that the Secretary review not
less often than annually and revise the
relative payment weights for APCs. In
the April 7, 2000 OPPS final rule with
comment period (65 FR 18482), we
explained in detail how we calculated
the relative payment weights that were
implemented on August 1, 2000 for each
APC group.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45071), for the CY 2013
OPPS, we proposed to recalibrate the
APC relative payment weights for
services furnished on or after January 1,
2013, and before January 1, 2014 (CY
2013), using the same basic
methodology that we described in the
CY 2012 OPPS/ASC final rule with
comment period. That is, we proposed
to recalibrate the relative payment
weights for each APC based on claims
and cost report data for hospital
outpatient department (HOPD) services,
using the most recent available data to
construct a database for calculating APC
group weights. Therefore, for the
purpose of recalibrating the proposed
APC relative payment weights for CY
2013, we used approximately 141
million final action claims (claims for
which all disputes and adjustments
have been resolved and payment has
been made) for hospital outpatient
department services furnished on or
after January 1, 2011, and before January
1, 2012. For this final rule with
comment period, for the purpose of
recalibrating the final APC relative
payment weights for CY 2013, we used
approximately 153 million final action
claims (claims for which all disputes
and adjustments have been resolved and
payment has been made) for HOPD
services furnished on or after January 1,
2011, and before January 1, 2012. For
exact counts of claims used, we refer
readers to the claims accounting
narrative under supporting
documentation for the proposed rule
and this final rule with comment period
on the CMS Web site at: http://www.
cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatient
PPS/index.html.
Of the approximately 153 million
final action claims for services provided
in hospital outpatient settings used to
calculate the final CY 2013 OPPS
payment rates for this final rule with
comment period, approximately 121
million claims were the type of bill

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potentially appropriate for use in setting
rates for OPPS services (but did not
necessarily contain services payable
under the OPPS). Of the approximately
121 million claims, approximately 5
million claims were not for services
paid under the OPPS or were excluded
as not appropriate for use (for example,
erroneous cost-to-charge ratios (CCRs) or
no HCPCS codes reported on the claim).
From the remaining approximately 116
million claims, we created
approximately 120 million single
records, of which approximately 81
million were ‘‘pseudo’’ single or ‘‘single
session’’ claims (created from
approximately 39 million multiple
procedure claims using the process we
discuss later in this section).
Approximately 1 million claims were
trimmed out on cost or units in excess
of ±3 standard deviations from the
geometric mean, yielding approximately
120 million single bills for ratesetting.
As described in section II.A.2. of this
final rule with comment period, our
data development process is designed
with the goal of using appropriate cost
information in setting the APC relative
payment weights. The bypass process is
described in section II.A.1.b. of this
final rule with comment period. This
section discusses how we develop
‘‘pseudo’’ single procedure claims (as
defined below), with the intention of
using more appropriate data from the
available claims. In some cases, the
bypass process allows us to use some
portion of the submitted claim for cost
estimation purposes, while the
remaining information on the claim
continues to be unusable. Consistent
with the goal of using appropriate
information in our data development
process, we only use claims (or portions
of each claim) that are appropriate for
ratesetting purposes. Ultimately, we
were able to use for CY 2013 ratesetting
some portion of approximately 95
percent of the CY 2011 claims
containing services payable under the
OPPS.
The final APC relative weights and
payments for CY 2013 in Addenda A
and B to this final rule with comment
period (which are available via the
Internet on the CMS Web site) were
calculated using claims from CY 2011
that were processed through June 30,
2012. While we have historically based
the payments on median hospital costs
for services in the APC groups, we
proposed in the CY 2013 OPPS/ASC
proposed rule (77 FR 45071) to establish
the cost-based relative payment weights
of the CY 2013 OPPS using geometric
mean costs, as discussed in section
II.A.2.f. of this final rule with comment

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period. Therefore, on the CMS Web site,
along with Addenda A and B, we
provided a file that presented payment
information for the proposed CY 2013
OPPS payments based on geometric
mean costs compared to those based on
median costs. Under this methodology,
we select claims for services paid under
the OPPS and match these claims to the
most recent cost report filed by the
individual hospitals represented in our
claims data. We continue to believe that
it is appropriate to use the most current
full calendar year claims data and the
most recently submitted cost reports to
calculate the relative costs
underpinning the APC relative payment
weights and the CY 2013 payment rates.
b. Use of Single and Multiple Procedure
Claims
For CY 2013, in general, we proposed
to continue to use single procedure
claims to set the costs on which the APC
relative payment weights are based. We
generally use single procedure claims to
set the estimated costs for APCs because
we believe that the OPPS relative
weights on which payment rates are
based should be derived from the costs
of furnishing one unit of one procedure
and because, in many circumstances, we
are unable to ensure that packaged costs
can be appropriately allocated across
multiple procedures performed on the
same date of service.
It is generally desirable to use the data
from as many claims as possible to
recalibrate the APC relative payment
weights, including those claims for
multiple procedures. As we have for
several years, we proposed to continue
to use date of service stratification and
a list of codes to be bypassed to convert
multiple procedure claims to ‘‘pseudo’’
single procedure claims. Through
bypassing specified codes that we
believe do not have significant packaged
costs, we are able to use more data from
multiple procedure claims. In many
cases, this enables us to create multiple
‘‘pseudo’’ single procedure claims from
claims that were submitted as multiple
procedure claims spanning multiple
dates of service, or claims that
contained numerous separately paid
procedures reported on the same date
on one claim. We refer to these newly
created single procedure claims as
‘‘pseudo’’ single procedure claims. The
history of our use of a bypass list to
generate ‘‘pseudo’’ single procedure
claims is well documented, most
recently in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74132
through 74134). In addition, for CY 2008
(72 FR 66614 through 66664), we
increased packaging and created the
first composite APCs, and continued

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those policies through CY 2012.
Increased packaging and creation of
composite APCs also increased the
number of bills that we were able to use
for ratesetting by enabling us to use
claims that contained multiple major
procedures that previously would not
have been usable. Further, for CY 2009,
we expanded the composite APC model
to one additional clinical area, multiple
imaging services (73 FR 68559 through
68569), which also increased the
number of bills we were able to use in
developing the OPPS relative weights
on which payments are based. We have
continued the composite APCs for
multiple imaging services through CY
2012. We did not receive any public
comments on this policy, and therefore,
we are finalizing our proposal to
continue this policy for CY 2013. We
refer readers to section II.A.2.e. of this
final rule with comment period for a
discussion of the use of claims in
modeling the costs for composite APCs.
We proposed to continue to apply
these processes to enable us to use as
much claims data as possible for
ratesetting for the CY 2013 OPPS. This
methodology enabled us to create, for
this final rule with comment period,
approximately 81 million ‘‘pseudo’’
single procedure claims, including
multiple imaging composite ‘‘single
session’’ bills (we refer readers to
section II.A.2.e.(5) of this final rule with
comment period for further discussion),
to add to the approximately 39 million
‘‘natural’’ single procedure claims. For
this final rule with comment period,
‘‘pseudo’’ single procedure and ‘‘single
session’’ procedure bills represented
approximately 67 percent of all single
procedure bills used for ratesetting
purposes.
For CY 2013, we proposed to bypass
480 HCPCS codes that were identified
in Addendum N to the CY 2013 OPPS/
ASC proposed rule (which was available
via the Internet on the CMS Web site).
Since the inception of the bypass list,
which is the list of codes to be bypassed
to convert multiple procedure claims to
‘‘pseudo’’ single procedure claims, we
have calculated the percent of ‘‘natural’’
single bills that contained packaging for
each HCPCS code and the amount of
packaging on each ‘‘natural’’ single bill
for each code. Each year, we generally
retain the codes on the previous year’s
bypass list and use the updated year’s
data (for CY 2013, data available for the
February 27, 2012 meeting of the
Advisory Panel on Hospital Outpatient
Payment (the Panel) from CY 2011
claims processed through September 30,
2011, and CY 2010 claims data
processed through June 30, 2011, used
to model the payment rates for CY 2012)

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to determine whether it would be
appropriate to add additional codes to
the previous year’s bypass list. For CY
2013, we proposed to continue to
bypass all of the HCPCS codes on the
CY 2012 OPPS bypass list, with the
exception of HCPCS codes that we
proposed to delete for CY 2013, which
are listed in Table 1 of the proposed
rule. We also proposed to remove
HCPCS codes that are not separately
paid under the OPPS because the
purpose of the bypass list is to obtain
more data for those codes relevant to
ratesetting. In addition, we proposed to
add to the bypass list for CY 2013
HCPCS codes not on the CY 2012
bypass list that, using either the CY
2012 final rule data (CY 2010 claims) or
the February 27, 2012 Panel data (first
9 months of CY 2011 claims), met the
empirical criteria for the bypass list that
are summarized below. Finally, to
remain consistent with the CY 2013
final policy to develop OPPS relative
payment weights based on geometric
mean costs, we proposed that the
median cost of packaging criterion
instead be based on the geometric mean
cost of packaging. The entire list
proposed for CY 2013 (including the
codes that remain on the bypass list
from prior years) was open to public
comment in the CY 2013 OPPS/ASC
proposed rule. Because we must make
some assumptions about packaging in
the multiple procedure claims in order
to assess a HCPCS code for addition to
the bypass list, we assumed that the
representation of packaging on
‘‘natural’’ single procedure claims for
any given code is comparable to
packaging for that code in the multiple
procedure claims. As we proposed, the
criteria for the bypass list are:
• There are 100 or more ‘‘natural’’
single procedure claims for the code.
This number of single procedure claims
ensures that observed outcomes are
sufficiently representative of packaging
that might occur in the multiple claims.
• Five percent or fewer of the
‘‘natural’’ single procedure claims for
the code have packaged costs on that
single procedure claim for the code.
This criterion results in limiting the
amount of packaging being redistributed
to the separately payable procedures
remaining on the claim after the bypass
code is removed and ensures that the
costs associated with the bypass code
represent the cost of the bypassed
service.
• The geometric mean cost of
packaging observed in the ‘‘natural’’
single procedure claims is equal to or
less than $55. This criterion also limits
the amount of error in redistributed
costs. During the assessment of claims

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against the bypass criteria, we do not
know the dollar value of the packaged
cost that should be appropriately
attributed to the other procedures on the
claim. Therefore, ensuring that
redistributed costs associated with a
bypass code are small in amount and
volume protects the validity of cost
estimates for low cost services billed
with the bypassed service.
We note that, in the CY 2013 OPPS/
ASC proposed rule (77 FR 45072), we
proposed to establish the CY 2013 OPPS
relative payment weights based on
geometric mean costs. To remain
consistent in the metric used for
identifying cost patterns, we proposed
to use the geometric mean cost of
packaging to identify potential codes to
add to the bypass list. The development
of the CY 2013 OPPS relative payment
weights based on geometric mean costs
is discussed in greater detail in section
II.A.2.f. of this final rule with comment
period.
In response to public comments on
the CY 2010 OPPS/ASC proposed rule
requesting that the packaged cost
threshold be updated, we considered
whether it would be appropriate to
update the $50 packaged cost threshold
for inflation when examining potential
bypass list additions. As discussed in
the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60328), the real
value of this packaged cost threshold
criterion has declined due to inflation,
making the packaged cost threshold
more restrictive over time when
considering additions to the bypass list.
Therefore, adjusting the threshold by
the market basket increase would
prevent continuing decline in the
threshold’s real value. Based on the
same rationale described for the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74133), we
proposed for CY 2013 to continue to
update the packaged cost threshold by
the market basket increase. By applying
the final CY 2012 market basket increase
of 1.9 percent to the prior non-rounded
dollar threshold of $52.76 (76 FR
74133), we determined that the
threshold remains for CY 2013 at $55
($53.76 rounded to $55, the nearest $5
increment). Therefore, we proposed to
set the geometric mean packaged cost
threshold on the CY 2011 claims at $55
for a code to be considered for addition
to the CY 2013 OPPS bypass list.
• The code is not a code for an
unlisted service. Unlisted codes do not
describe a specific service, and thus
their costs would not be appropriate for
bypass list purposes.
In addition, we proposed to continue
to include on the bypass list HCPCS
codes that CMS medical advisors

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believe have minimal associated
packaging based on their clinical
assessment of the complete CY 2013
OPPS proposal. Some of these codes
were identified by CMS medical
advisors and some were identified in
prior years by commenters with
specialized knowledge of the packaging
associated with specific services. We
also proposed to continue to include
certain HCPCS codes on the bypass list
in order to purposefully direct the
assignment of packaged costs to a
companion code where services always
appear together and where there would
otherwise be few single procedure
claims available for ratesetting. For
example, we have previously discussed
our reasoning for adding HCPCS code
G0390 (Trauma response team
associated with hospital critical care
service) and the CPT codes for
additional hours of drug administration
to the bypass list (73 FR 68513 and 71
FR 68117 through 68118).
As a result of the multiple imaging
composite APCs that we established in
CY 2009, the program logic for creating
‘‘pseudo’’ single procedure claims from
bypassed codes that are also members of
multiple imaging composite APCs
changed. When creating the set of
‘‘pseudo’’ single procedure claims,
claims that contain ‘‘overlap bypass
codes’’ (those HCPCS codes that are
both on the bypass list and are members
of the multiple imaging composite
APCs) were identified first. These
HCPCS codes were then processed to
create multiple imaging composite
‘‘single session’’ bills, that is, claims
containing HCPCS codes from only one
imaging family, thus suppressing the
initial use of these codes as bypass
codes. However, these ‘‘overlap bypass
codes’’ were retained on the bypass list
because, at the end of the ‘‘pseudo’’
single processing logic, we reassessed
the claims without suppression of the
‘‘overlap bypass codes’’ under our
longstanding ‘‘pseudo’’ single process to
determine whether we could convert
additional claims to ‘‘pseudo’’ single
procedure claims. (We refer readers to
section II.A.2.b. of this final rule with

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comment period for further discussion
of the treatment of ‘‘overlap bypass
codes.’’) This process also created
multiple imaging composite ‘‘single
session’’ bills that could be used for
calculating composite APC costs.
‘‘Overlap bypass codes’’ that are
members of the multiple imaging
composite APCs are identified by
asterisks (*) in Addendum N to this
final rule with comment period (which
is available via the Internet on the CMS
Web site).
Addendum N to this final rule with
comment period includes the list of
bypass codes for CY 2013. The list of
bypass codes contains codes that were
reported on claims for services in CY
2011 and, therefore, includes codes that
were in effect in 2011 and used for
billing but were deleted for CY 2012.
We retained these deleted bypass codes
on the CY 2013 bypass list because
these codes existed in CY 2011 and
were covered OPD services in that
period, and CY 2011 claims data are
used to calculate CY 2013 payment
rates. Keeping these deleted bypass
codes on the bypass list potentially
allows us to create more ‘‘pseudo’’
single procedure claims for ratesetting
purposes. ‘‘Overlap bypass codes’’ that
were members of the proposed multiple
imaging composite APCs are identified
by asterisks (*) in the third column of
Addendum N to this final rule with
comment period. HCPCS codes that we
are adding for CY 2013 are identified by
asterisks (*) in the fourth column of
Addendum N. Table 1 of the proposed
rule contained the list of codes that we
proposed to remove from the CY 2013
bypass list for CY 2013 (77 FR 45073).
Comment: One commenter supported
the proposal to include CPT codes
76881 (Ultrasound, extremity,
nonvascular, real-time with image
documentation; complete) and 76882
(Ultrasound, extremity, nonvascular,
real-time with image documentation;
limited, anatomic specific) on the CY
2013 OPPS bypass list.
Response: We appreciate the
commenter’s support.
Comment: Several commenters
expressed appreciation for our efforts to

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include multiple procedure claims in
the ratesetting process through
processes such as the bypass list and
date of service stratification, which are
used to create ‘‘pseudo’’ single claims.
However, the commenters remained
concerned about the limited number of
claims used to model brachytherapy
APCs 0312 (Radioelement
Applications), 0651 (Complex
Interstitial Radiation Source
Application), and 8001 (LDR Prostate
Brachytherapy Composite) and
encouraged CMS to continue exploring
potential methodologies through which
more claims data could be used in OPPS
ratesetting.
Response: We appreciate the
commenters’ support of our efforts to
include more appropriate claims data
for ratesetting purposes. As discussed
above, one of the challenges in
modeling the APC costs on which the
OPPS/ASC relative payment weights are
based is appropriately allocating the
packaged cost associated with a service,
when multiple separately payable
procedures appear on the claim.
However, recognizing the challenges
associated with obtaining additional
information, we will continue to explore
potential methodologies through which
we would be able to derive accurate cost
data from the multiple major procedure
claims made available to us.
After consideration of the public
comments we received, we are adopting
as final the proposed ‘‘pseudo’’ single
claims process and the final CY 2013
bypass list of 480 HCPCS codes, as
displayed in Addendum N of this final
rule with comment period (available via
the Internet on the CMS Web site). Table
1 below contains the list of codes that
we are removing from the CY 2013
bypass list because these codes were
either deleted from the HCPCS before
CY 2011 (and therefore were not
covered OPD services in CY 2011) or
were not separately payable codes under
the CY 2013 OPPS because these codes
are not used for ratesetting (and
therefore would not need to be
bypassed). None of these deleted codes
are ‘‘overlap bypass’’ codes.

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c. Calculation and Use of Cost-to-Charge
Ratios (CCRs)
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45073), for CY 2013, we
proposed to continue to use the
hospital-specific overall ancillary and
departmental cost-to-charge ratios
(CCRs) to convert charges to estimated
costs through application of a revenue
code-to-cost center crosswalk. To
calculate the APC costs on which the
proposed CY 2013 APC payment rates
were based, we calculated hospitalspecific overall ancillary CCRs and
hospital-specific departmental CCRs for
each hospital for which we had CY 2011
claims data from the most recent
available hospital cost reports, in most
cases, cost reports beginning in CY
2010. For the CY 2013 OPPS proposed
rates, we used the set of claims
processed during CY 2011. We applied
the hospital-specific CCR to the
hospital’s charges at the most detailed
level possible, based on a revenue codeto-cost center crosswalk that contains a
hierarchy of CCRs used to estimate costs
from charges for each revenue code.
That crosswalk is available for review
and continuous comment on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html.
To ensure the completeness of the
revenue code-to-cost center crosswalk,
we reviewed changes to the list of
revenue codes for CY 2011 (the year of
the claims data we used to calculate the
proposed CY 2013 OPPS payment rates)
and found that the National Uniform
Billing Committee (NUBC) did not add
any new revenue codes to the NUBC
2011 Data Specifications Manual.
In accordance with our longstanding
policy, we calculated CCRs for the
standard and nonstandard cost centers
accepted by the electronic cost report
database. In general, the most detailed
level at which we calculated CCRs was
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For a discussion of the hospital-specific
overall ancillary CCR calculation, we
refer readers to the CY 2007 OPPS/ASC
final rule with comment period (71 FR
67983 through 67985). One
longstanding exception to this general
methodology for calculation of CCRs
used for converting charges to costs on
each claim, as detailed in the CY 2007
OPPS/ASC final rule with comment
period, is the calculation of blood costs,
as discussed in section II.A.2.d.(2) of
this final rule with comment period and
which has been our standard policy
since the CY 2005 OPPS.
For the CCR calculation process, we
used the same general approach that we
used in developing the final APC rates
for CY 2007 and thereafter, using the
revised CCR calculation that excluded
the costs of paramedical education
programs and weighted the outpatient
charges by the volume of outpatient
services furnished by the hospital. We
refer readers to the CY 2007 OPPS/ASC
final rule with comment period for more
information (71 FR 67983 through
67985). We first limited the population
of cost reports to only those hospitals
that filed outpatient claims in CY 2011
before determining whether the CCRs
for such hospitals were valid.
We then calculated the CCRs for each
cost center and the overall ancillary
CCR for each hospital for which we had
claims data. We did this using hospitalspecific data from the Hospital Cost
Report Information System (HCRIS). We
used the most recent available cost
report data, in most cases, cost reports
with cost reporting periods beginning in
CY 2010. For the proposed rule, we
used the most recently submitted cost
reports to calculate the CCRs to be used
to calculate costs for the proposed CY
2013 OPPS payment rates. If the most
recently available cost report was
submitted but not settled, we looked at
the last settled cost report to determine
the ratio of submitted to settled cost
using the overall ancillary CCR, and we

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then adjusted the most recent available
submitted, but not settled, cost report
using that ratio. We then calculated both
an overall ancillary CCR and cost
center-specific CCRs for each hospital.
We used the overall ancillary CCR
referenced above for all purposes that
require use of an overall ancillary CCR.
We proposed to continue this
longstanding methodology for the
calculation of costs for CY 2013.
Since the implementation of the
OPPS, some commenters have raised
concerns about potential bias in the
OPPS cost-based weights due to ‘‘charge
compression,’’ which is the practice of
applying a lower charge markup to
higher cost services and a higher charge
markup to lower cost services. As a
result, the cost-based weights may
reflect some aggregation bias,
undervaluing high-cost items and
overvaluing low-cost items when an
estimate of average markup, embodied
in a single CCR, is applied to items of
widely varying costs in the same cost
center. This issue was evaluated in a
report by Research Triangle Institute,
International (RTI). The RTI final report
can be found on RTI’s Web site at:
http://www.rti.org/reports/cms/HHSM–
500–2005–0029I/PDF/Refining_Cost_to_
Charge_Ratios_200807_Final.pdf. For a
complete discussion of the RTI
recommendations, public comments,
and our responses, we refer readers to
the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68519 through
68527).
We addressed the RTI finding that
there was aggregation bias in both the
IPPS and the OPPS cost estimation of
expensive and inexpensive medical
supplies in the FY 2009 IPPS final rule
(73 FR 48458 through 45467).
Specifically, we created one cost center
for ‘‘Medical Supplies Charged to
Patients’’ and one cost center for
‘‘Implantable Devices Charged to
Patients,’’ essentially splitting the then
current cost center for ‘‘Medical

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Supplies Charged to Patients’’ into one
cost center for low-cost medical
supplies and another cost center for
high-cost implantable devices in order
to mitigate some of the effects of charge
compression. In determining the items
that should be reported in these
respective cost centers, we adopted
commenters’ recommendations that
hospitals should use revenue codes
established by the AHA’s NUBC to
determine the items that should be
reported in the ‘‘Medical Supplies
Charged to Patients’’ and the
‘‘Implantable Devices Charged to
Patients’’ cost centers. For a complete
discussion of the rationale for the
creation of the new cost center for
‘‘Implantable Devices Charged to
Patients,’’ public comments, and our
responses, we refer readers to the FY
2009 IPPS final rule.
The cost center for ‘‘Implantable
Devices Charged to Patients’’ has been
available for use for cost reporting
periods beginning on or after May 1,
2009. As discussed in the CY 2013
OPPS/ASC proposed rule (77 FR 45074),
in order to develop a robust analysis
regarding the use of cost data from the
‘‘Implantable Devices Charged to
Patients’’ cost center, we believe that it
is necessary to have a critical mass of
cost reports filed with data in this cost
center. In preparation for the CY 2013
proposed rule, we assessed the
availability of data in the ‘‘Implantable
Devices Charged to Patients’’ cost center
using cost reports in the December 31,
2011 quarter ending update of HCRIS,
which was the latest upload of the cost
report data that we could use for the CY
2013 proposed rule. We determined that
2,063 hospitals, out of approximately
3,800 hospitals, utilized the
‘‘Implantable Devices Charged to
Patients’’ cost center. Because we
believe that this is a sufficient amount
of data from which to generate a
meaningful analysis, we proposed to use
data from the ‘‘Implantable Devices
Charged to Patients’’ cost center to
create a distinct CCR for use in
calculating the OPPS relative payment
weights for CY 2013.
In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we
finalized our proposal to create new
standard cost centers for ‘‘Computed
Tomography (CT),’’ ‘‘Magnetic
Resonance Imaging (MRI),’’ and
‘‘Cardiac Catheterization,’’ and to
require that hospitals report the costs
and charges for these services under
new cost centers on the revised
Medicare cost report Form CMS 2552–
10. As we discussed in the FY 2009
IPPS and CY 2009 OPPS/ASC proposed
and final rules, RTI also found that the

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costs and charges of CT scans, MRIs,
and cardiac catheterization differ
significantly from the costs and charges
of other services included in the
standard associated cost center. RTI
concluded that both the IPPS and the
OPPS relative payment weights would
better estimate the costs of those
services if CMS were to add standard
costs centers for CT scans, MRIs, and
cardiac catheterization in order for
hospitals to report separately the costs
and charges for those services and in
order for CMS to calculate unique CCRs
to estimate the cost from charges on
claims data. We refer readers to the FY
2011 IPPS/LTCH PPS final rule (75 FR
50075 through 50080) for a more
detailed discussion on the reasons for
the creation of standard cost centers for
CT scans, MRIs, and cardiac
catheterization. The new standard cost
centers for CT scans, MRIs, and cardiac
catheterization are effective for cost
report periods beginning on or after May
1, 2010, on the revised cost report Form
CMS–2552–10. However, because cost
reports that were filed on the revised
cost report Form CMS–2552–10 are not
currently accessible in the HCRIS, we
were unable to calculate distinct CCRs
for CT scans, MRIs, and cardiac
catheterization using the new standard
cost centers for these services. We
believe that we will have cost report
data available for an analysis of creating
distinct CCRs for CT scans, MRIs, and
cardiac catheterization for the CY 2014
OPPS rulemaking.
Comment: Many commenters
supported CMS’ proposal to use data
from the ‘‘Implantable Devices Charged
to Patients’’ cost center to create a
distinct CCR for use in calculating the
OPPS relative payment weights for CY
2013. The commenters also encouraged
CMS to continue to engage in
educational efforts related to the use of
the new cost center so that hospitals
understand how to accurately report
data in the new cost center. In addition,
the commenters suggested that the
Medicare administrative contractors
(MACs) develop an audit program that
would identify hospitals that have not
reported data for the new cost center.
Response: We appreciate the
commenters’ support of our proposal to
use data from the ‘‘Implantable Devices
Charged to Patients’’ cost center to
create a distinct CCR. We agree with
commenters that it is important that
hospitals understand how to accurately
report data in the ‘‘Implantable Devices
Charged to Patients’’ cost center, and we
have worked to add more clarity to the
cost report instructions under the new
Medicare cost report form CMS–2552–
10. The new cost report form also

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facilitates greater audit scrutiny from
the MACs. Line 121 of Worksheet S–2,
Part I, of cost report form CMS–2552–10
asks ‘‘Did this facility incur and report
costs for implantable devices charged to
a patient? Enter in column 1 ‘Y’ for yes
and ‘N’ for no.’’
Comment: Two commenters
recommended that CMS wait until CY
2014 OPPS rulemaking to determine if
the ‘‘Implantable Devices Charged to
Patients’’ cost center should be used to
create a distinct CCR. The commenters
did not believe that data from 2,063
hospitals provide a meaningful
representation of all of the hospitals
subject to the OPPS from which to base
the proposal to use the new cost center
for CY 2013.
Response: We disagree with the
commenters and believe that data from
the 2,063 hospitals that utilized the
‘‘Implantable Devices Charged to
Patients’’ cost center, out of
approximately 3,800 hospitals, are
sufficient and appropriate for creating a
distinct CCR to use in the calculation of
the CY 2013 OPPS relative payment
weights.
Comment: Commenters expressed
disappointment that, because the
revised cost report Form CMS–2552–10
was not accessible in the HCRIS at the
time of the proposed rule, CMS was not
able to create distinct CCRs for CT
scans, MRIs, and cardiac catheterization
services for use in the calculation of the
CY 2013 OPPS relative payment
weights. The commenters urged CMS to
analyze the data in the new CT scan,
MRI, and cardiac catheterization cost
centers when the data are available and
utilize the new cost centers in the
development of the OPPS relative
payment weights as soon as possible.
Response: We expect that we will
have sufficient and appropriate cost
report data available for an analysis of
creating distinct CCRs for CT scans,
MRIs, and cardiac catheterization for the
CY 2014 rulemaking. If so, as was done
for the ‘‘Implantable Devices Charged to
Patients’’ cost center for the CY 2013
OPPS/ASC proposed rule, we expect to
provide an impact analysis in the CY
2014 OPPS/ASC proposed rule that will
enable the public to assess the full
impact of the use of the new CCRs
specific to CT scans, MRIs, and cardiac
catheterization on payments for all
services.
Comment: One commenter
recommended that CMS require the use
of the new nonstandard cost center for
cardiac rehabilitation instead of making
its use optional.
Response: We created the new
nonstandard cost center for cardiac
rehabilitation because we believed that

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this would facilitate more accurate cost
reporting for these services. The
nonstandard cost centers are additional
common cost centers available to
hospitals for reporting when preparing
their Medicare hospital cost report. To
the extent hospitals provide services
captured by nonstandard cost centers,
they should report the relevant
nonstandard cost centers as well.
However, we do not specify a revenue
code-to-cost center crosswalk that
hospitals must adopt to prepare the cost
report and, therefore, we do not believe
that we should require hospitals to use
the nonstandard cost center for cardiac
rehabilitation.
After consideration of the public
comments we received, we are
finalizing our proposal to use data from
the ‘‘Implantable Devices Charged to
Patients’’ cost center to create a distinct
CCR for use in calculating the OPPS
relative payment weights for CY 2013.
2. Data Development Process and
Calculation of Costs Used for Ratesetting
In this section of this final rule with
comment period, we discuss the use of
claims to calculate OPPS payment rates
for CY 2013. The Hospital OPPS page on
the CMS Web site on which this final
rule with comment period is posted
(http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html)
provides an accounting of claims used
in the development of the final payment
rates. That accounting provides
additional detail regarding the number
of claims derived at each stage of the
process. In addition, below in this
section we discuss the file of claims that
comprises the data set that is available
for purchase under a CMS data use
agreement. The CMS Web site, http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/index.html, includes information
about purchasing the ‘‘OPPS Limited
Data Set,’’ which now includes the
additional variables previously available
only in the OPPS Identifiable Data Set,
including ICD–9–CM diagnosis codes
and revenue code payment amounts.
This file is derived from the CY 2011
claims that were used to calculate the
final payment rates for the CY 2013
OPPS.
In the history of the OPPS, we have
traditionally established the scaled
relative weights on which payments are
based using APC median costs, which is
a process most recently described in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74188).
However, as discussed in more detail in
section II.A.2.f. of this final rule with
comment period, we proposed to use

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geometric mean costs to calculate the
relative weights on which the CY 2013
OPPS payment rates are based. While
this policy changes the cost metric on
which the relative payments are based,
the data process in general remains the
same, under the methodologies that we
use to obtain appropriate claims data
and accurate cost information in
determining estimated service cost.
We used the methodology described
in sections II.A.2.a. through II.A.2.e. of
this final rule with comment period to
calculate the costs we used to establish
the relative weights used in calculating
the OPPS payment rates for CY 2013
shown in Addenda A and B to this final
rule with comment period (which are
available via the Internet on the CMS
Web site). For the proposed rule, we
provided a comparison file so that the
public could provide meaningful
comment on our proposal to base the CY
2013 OPPS relative payment weights on
geometric mean costs. We refer readers
to section II.A.4. of this final rule with
comment period for a discussion of the
conversion of APC costs to scaled
payment weights.
Comment: Commenters expressed
concern with respect to the volatility of
the OPPS payment rates from year to
year. The commenters suggested a
‘‘stability policy’’ and suggested that the
costs from claims be adjusted to limit
changes from year to year and asked that
CMS limit any decreases in payment
compared to the prior year to no more
than a 5-percent decline.
Response: As previously discussed in
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74139), there
are a number of factors that contribute
to cost fluctuations from one year to the
next, including (but not limited to)
hospital behavior in adjusting mix of
services, hospital costs and charges
changes each year resulting in changes
to the CCRs, reassignments of HCPCS
codes, changes to OPPS payment policy
(for example, changes to packaging), and
implementation of composite APCs. We
cannot stabilize hospital-driven
fundamental inputs to the calculation of
OPPS payment rates. However, we have
strived to resolve some of the other
potential reasons for instability from
year to year. Specifically, we continue
to seek ways to use more claims data so
that we have fewer APCs for which
there are small numbers of single bills
used to set the APC costs. Moreover, we
have tried to eliminate APCs with very
small numbers of single bills where we
could do so. We recognize that changes
to payment policies, such as the
packaging of payment for ancillary and
supportive services and the
implementation of composite APCs,

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may contribute to volatility in payment
rates in the short term. However, we
believe that larger payment packages
and bundles should help to stabilize
payments in the long term by enabling
us to use more claims data and by
establishing payments for larger groups
of services. Further, in seeking to
mitigate fluctuations in the OPPS, we
believe that implementing the policy
suggested by the commenters would
make payments less reflective of the
true service costs, which would be
contrary to a purpose of our proposed
CY 2013 policy of establishing relative
payment weights based on geometric
mean costs. Limiting decreases to
payments across all APCs in a budget
neutral payment system could unfairly
reduce the payments for other services
due to the effects of the scaling that is
necessary to maintain budget neutrality
and would distort the relativity of
payment that is based on the cost of all
services.
a. Claims Preparation
For this final rule with comment
period, we used the CY 2011 hospital
outpatient claims processed through
June 30, 2012, to calculate the geometric
mean costs of APCs that underpin the
relative payment weights for CY 2013.
To begin the calculation of the relative
payment weights for CY 2013, we
pulled all claims for outpatient services
furnished in CY 2011 from the national
claims history file. This is not the
population of claims paid under the
OPPS, but all outpatient claims
(including, for example, critical access
hospital (CAH) claims and hospital
claims for clinical laboratory services
for persons who are neither inpatients
nor outpatients of the hospital).
We then excluded claims with
condition codes 04, 20, 21, and 77
because these are claims that providers
submitted to Medicare knowing that no
payment would be made. For example,
providers submit claims with a
condition code 21 to elicit an official
denial notice from Medicare and
document that a service is not covered.
We then excluded claims for services
furnished in Maryland, Guam, the U.S.
Virgin Islands, American Samoa, and
the Northern Mariana Islands because
hospitals in those geographic areas are
not paid under the OPPS, and, therefore,
we do not use claims for services
furnished in these areas in ratesetting.
We divided the remaining claims into
the three groups shown below. Groups
2 and 3 comprise the 121 million claims
that contain hospital bill types paid
under the OPPS.
1. Claims that were not bill types 12X
(Hospital Inpatient (Medicare Part B

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only)), 13X (Hospital Outpatient), 14X
(Hospital—Laboratory Services
Provided to Nonpatients), or 76X
(Clinic—Community Mental Health
Center). Other bill types are not paid
under the OPPS; therefore, these claims
were not used to set OPPS payment.
2. Claims that were bill types 12X,
13X or 14X. Claims with bill types 12X
and 13X are hospital outpatient claims.
Claims with bill type 14X are laboratory
specimen claims, of which we use a
subset for the limited number of
services in these claims that are paid
under the OPPS.
3. Claims that were bill type 76X
(CMHC).
To convert charges on the claims to
estimated cost, we multiplied the
charges on each claim by the
appropriate hospital-specific CCR
associated with the revenue code for the
charge as discussed in section II.A.1.c.
of this final rule with comment period.
We then flagged and excluded CAH
claims (which are not paid under the
OPPS) and claims from hospitals with
invalid CCRs. The latter included claims
from hospitals without a CCR; those
from hospitals paid an all-inclusive rate;
those from hospitals with obviously
erroneous CCRs (greater than 90 or less
than 0.0001); and those from hospitals
with overall ancillary CCRs that were
identified as outliers (that exceeded ±3
standard deviations from the geometric
mean after removing error CCRs). In
addition, we trimmed the CCRs at the
cost center (that is, departmental) level
by removing the CCRs for each cost
center as outliers if they exceeded ±3
standard deviations from the geometric
mean. We used a four-tiered hierarchy
of cost center CCRs, which is the
revenue code-to-cost center crosswalk,
to match a cost center to every possible
revenue code appearing in the
outpatient claims that is relevant to
OPPS services, with the top tier being
the most common cost center and the
last tier being the default CCR. If a
hospital’s cost center CCR was deleted
by trimming, we set the CCR for that
cost center to ‘‘missing’’ so that another
cost center CCR in the revenue center
hierarchy could apply. If no other cost
center CCR could apply to the revenue
code on the claim, we used the
hospital’s overall ancillary CCR for the
revenue code in question as the default
CCR. For example, if a visit was
reported under the clinic revenue code
but the hospital did not have a clinic
cost center, we mapped the hospitalspecific overall ancillary CCR to the
clinic revenue code. The revenue codeto-cost center crosswalk is available for
inspection on the CMS Web site at:
http://www.cms.gov/Medicare/

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Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
Revenue codes that we do not use in
establishing relative costs or to model
impacts are identified with an ‘‘N’’ in
the revenue code-to-cost center
crosswalk.
We applied the CCRs as described
above to claims with bill type 12X, 13X,
or 14X, excluding all claims from CAHs
and hospitals in Maryland, Guam, the
U.S. Virgin Islands, American Samoa,
and the Northern Mariana Islands and
claims from all hospitals for which
CCRs were flagged as invalid.
We identified claims with condition
code 41 as partial hospitalization
services of hospitals and moved them to
another file. We note that the separate
file containing partial hospitalization
claims is included in the files that are
available for purchase as discussed
above.
We then excluded claims without a
HCPCS code. We moved to another file
claims that contained only influenza
and pneumococcal pneumonia (PPV)
vaccines. Influenza and PPV vaccines
are paid at reasonable cost; therefore,
these claims are not used to set OPPS
rates.
We next copied line-item costs for
drugs, blood, and brachytherapy sources
to a separate file (the lines stay on the
claim, but are copied onto another file).
No claims were deleted when we copied
these lines onto another file. These lineitems are used to calculate a per unit
arithmetic and geometric mean and
median cost and a per day arithmetic
and geometric mean and median cost for
drugs and nonimplantable biologicals,
therapeutic radiopharmaceutical agents,
and brachytherapy sources, as well as
other information used to set payment
rates, such as a unit-to-day ratio for
drugs.
In the past several years, we have
developed payment policy for nonpassthrough separately paid drugs and
biologicals based on a redistribution
methodology that accounts for
pharmacy overhead by allocating cost
from packaged drugs to separately paid
drugs. This typically would have
required us to reduce the cost associated
with packaged coded and uncoded
drugs in order to allocate that cost.
However, for CY 2013, as we proposed,
we are paying for separately payable
drugs and biologicals under the OPPS at
ASP + 6 percent, based upon the
statutory default described in section
1833(t)(14)(A)(iii)(II) of the Act.
Therefore, under this policy, we do not
redistribute the packaged cost. We refer
readers to section V.B.3. of this final
rule with comment period for a
complete discussion of our policy to pay

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for separately paid drugs and biologicals
in CY 2013.
We then removed line-items that were
not paid during claim processing,
presumably for a line-item rejection or
denial. The number of edits for valid
OPPS payment in the Integrated
Outpatient Code Editor (I/OCE) and
elsewhere has grown significantly in the
past few years, especially with the
implementation of the full spectrum of
National Correct Coding Initiative
(NCCI) edits. To ensure that we are
using valid claims that represent the
cost of payable services to set payment
rates, we removed line-items with an
OPPS status indicator that were not paid
during claims processing in the claim
year, but have a status indicator of ‘‘S,’’
‘‘T,’’ ‘‘V,’’ or ‘‘X’’ in the prospective
year’s payment system. This logic
preserves charges for services that
would not have been paid in the claim
year but for which some estimate of cost
is needed for the prospective year, such
as services newly removed from the
inpatient list for CY 2012 that were
assigned status indicator ‘‘C’’ in the
claim year. It also preserves charges for
packaged services so that the costs can
be included in the cost of the services
with which they are reported, even if
the CPT codes for the packaged services
were not paid because the service is part
of another service that was reported on
the same claim or the code otherwise
violates claims processing edits.
For CY 2013, as we proposed, we are
continuing the policy we implemented
for CY 2012 to exclude line-item data
for pass-through drugs and biologicals
(status indicator ‘‘G’’ for CY 2011) and
nonpass-through drugs and biologicals
(status indicator ‘‘K’’ for CY 2011)
where the charges reported on the claim
for the line were either denied or
rejected during claims processing.
Removing lines that were eligible for
payment but were not paid ensures that
we are using appropriate data. The trim
avoids using cost data on lines that we
believe were defective or invalid
because those rejected or denied lines
did not meet the Medicare requirements
for payment. For example, edits may
reject a line for a separately paid drug
because the number of units billed
exceeded the number of units that
would be reasonable and, therefore, is
likely a billing error (for example, a line
reporting 55 units of a drug for which
5 units is known to be a fatal dose). As
with our trimming in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74141) of line-items with
a status indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or
‘‘X,’’ we believe that unpaid line-items
represent services that are invalidly
reported and, therefore, should not be

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used for ratesetting. We believe that
removing lines with valid status
indicators that were edited and not paid
during claims processing increases the
accuracy of the data used for ratesetting
purposes.

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b. Splitting Claims and Creation of
‘‘Pseudo’’ Single Procedure Claims
(1) Splitting Claims
For the CY 2013 OPPS, we then split
the remaining claims into five groups:
single majors; multiple majors; single
minors; multiple minors; and other
claims. (Specific definitions of these
groups are presented below.) For CY
2013, as we proposed, we are
continuing our current policy of
defining major procedures as any
HCPCS code having a status indicator of
‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’; defining minor
procedures as any code having a status
indicator of ‘‘F,’’ ‘‘G,’’ ‘‘H,’’ ‘‘K,’’ ‘‘L,’’
‘‘R,’’ ‘‘U,’’ or ‘‘N’’:and classifying
‘‘other’’ procedures as any code having
a status indicator other than one that we
have classified as major or minor. For
CY 2013, as we proposed, we are
continuing to assign status indicator
‘‘R’’ to blood and blood products; status
indicator ‘‘U’’ to brachytherapy sources;
status indicator ‘‘Q1’’ to all ‘‘STVXpackaged codes’’; status indicator ‘‘Q2’’
to all ‘‘T-packaged codes’’; and status
indicator ‘‘Q3’’ to all codes that may be
paid through a composite APC based on
composite-specific criteria or paid
separately through single code APCs
when the criteria are not met.
As discussed in the CY 2009 OPPS/
ASC final rule with comment period (73
FR 68709), we established status
indicators ‘‘Q1,’’ ‘‘Q2,’’ and ‘‘Q3’’ to
facilitate identification of the different
categories of codes. As we proposed, we
are treating these codes in the same
manner for data purposes for CY 2013
as we have treated them since CY 2008.
Specifically, we are continuing to
evaluate whether the criteria for
separate payment of codes with status
indicator ‘‘Q1’’ or ‘‘Q2’’ are met in
determining whether they are treated as
major or minor codes. Codes with status
indicator ‘‘Q1’’ or ‘‘Q2’’ are carried
through the data either with status
indicator ‘‘N’’ as packaged or, if they
meet the criteria for separate payment,
they are given the status indicator of the
APC to which they are assigned and are
considered as ‘‘pseudo’’ single
procedure claims for major codes. Codes
assigned status indicator ‘‘Q3’’ are paid
under individual APCs unless they
occur in the combinations that qualify
for payment as composite APCs and,
therefore, they carry the status indicator
of the individual APC to which they are

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assigned through the data process and
are treated as major codes during both
the split and ‘‘pseudo’’ single creation
process. The calculation of the
geometric mean costs for composite
APCs from multiple procedure major
claims is discussed in section II.A.2.e. of
this final rule with comment period.
Specifically, as we proposed, we
divided the remaining claims into the
following five groups:
1. Single Procedure Major Claims:
Claims with a single separately payable
procedure (that is, status indicator ‘‘S,’’
‘‘T,’’ ‘‘V,’’ or ‘‘X,’’ which includes codes
with status indicator ‘‘Q3’’); claims with
one unit of a status indicator ‘‘Q1’’ code
(‘‘STVX-packaged’’) where there was no
code with status indicator ‘‘S,’’ ‘‘T,’’
‘‘V,’’ or ‘‘X’’ on the same claim on the
same date; or claims with one unit of a
status indicator ‘‘Q2’’ code (‘‘Tpackaged’’) where there was no code
with a status indicator ‘‘T’’ on the same
claim on the same date.
2. Multiple Procedure Major Claims:
Claims with more than one separately
payable procedure (that is, status
indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X,’’ which
includes codes with status indicator
‘‘Q3’’), or multiple units of one payable
procedure. These claims include those
codes with a status indicator ‘‘Q2’’ code
(‘‘T-packaged’’) where there was no
procedure with a status indicator ‘‘T’’
on the same claim on the same date of
service but where there was another
separately paid procedure on the same
claim with the same date of service (that
is, another code with status indicator
‘‘S,’’ ‘‘V,’’ or ‘‘X’’). We also include in
this set claims that contained one unit
of one code when the bilateral modifier
was appended to the code and the code
was conditionally or independently
bilateral. In these cases, the claims
represented more than one unit of the
service described by the code,
notwithstanding that only one unit was
billed.
3. Single Procedure Minor Claims:
Claims with a single HCPCS code that
was assigned status indicator ‘‘F,’’ ‘‘G,’’
‘‘H,’’ ‘‘K,’’ ‘‘L,’’ ‘‘R,’’ ‘‘U,’’ or ‘‘N’’ and
not status indicator ‘‘Q1’’ (‘‘STVXpackaged’’) or status indicator ‘‘Q2’’ (‘‘Tpackaged’’) code.
4. Multiple Procedure Minor Claims:
Claims with multiple HCPCS codes that
are assigned status indicator ‘‘F,’’ ‘‘G,’’
‘‘H,’’ ‘‘K,’’ ‘‘L,’’ ‘‘R,’’ ‘‘U,’’ or ‘‘N’’; claims
that contain more than one code with
status indicator ‘‘Q1’’ (‘‘STVXpackaged’’) or more than one unit of a
code with status indicator ‘‘Q1’’ but no
codes with status indicator ‘‘S,’’ ‘‘T,’’
‘‘V,’’ or ‘‘X’’ on the same date of service;
or claims that contain more than one
code with status indicator ‘‘Q2’’ (T-

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68227

packaged), or ‘‘Q2’’ and ‘‘Q1,’’ or more
than one unit of a code with status
indicator ‘‘Q2’’ but no code with status
indicator ‘‘T’’ on the same date of
service.
5. Non-OPPS Claims: Claims that
contain no services payable under the
OPPS (that is, all status indicators other
than those listed for major or minor
status). These claims were excluded
from the files used for the OPPS. NonOPPS claims have codes paid under
other fee schedules, for example,
durable medical equipment or clinical
laboratory tests, and do not contain a
code for a separately payable or
packaged OPPS service. Non-OPPS
claims include claims for therapy
services paid sometimes under the
OPPS but billed, in these non-OPPS
cases, with revenue codes indicating
that the therapy services would be paid
under the Medicare Physician Fee
Schedule (MPFS).
The claims listed in numbers 1, 2, 3,
and 4 above are included in the data file
that can be purchased as described
above. Claims that contain codes to
which we have assigned status
indicators ‘‘Q1’’ (‘‘STVX-packaged’’)
and ‘‘Q2’’ (‘‘T-packaged’’) appear in the
data for the single major file, the
multiple major file, and the multiple
minor file used for ratesetting. Claims
that contain codes to which we have
assigned status indicator ‘‘Q3’’
(composite APC members) appear in
both the data of the single and multiple
major files used in this final rule with
comment period, depending on the
specific composite calculation.
(2) Creation of ‘‘Pseudo’’ Single
Procedure Claims
To develop ‘‘pseudo’’ single
procedure claims for this final rule with
comment period, we examined both the
multiple procedure major claims and
the multiple procedure minor claims.
We first examined the multiple major
procedure claims for dates of service to
determine if we could break them into
‘‘pseudo’’ single procedure claims using
the dates of service for all lines on the
claim. If we could create claims with
single major procedures by using dates
of service, we created a single procedure
claim record for each separately payable
procedure on a different date of service
(that is, a ‘‘pseudo’’ single procedure
claim).
We also use the bypass codes listed in
Addendum N to this final rule with
comment period (which is available via
the Internet on our Web site) and
discussed in section II.A.1.b. of this
final rule with comment period to
remove separately payable procedures
which we determined contained limited

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or no packaged costs or that were
otherwise suitable for inclusion on the
bypass list from a multiple procedure
bill. As discussed above, we ignore the
‘‘overlap bypass codes,’’ that is, those
HCPCS codes that are both on the
bypass list and are members of the
multiple imaging composite APCs, in
this initial assessment for ‘‘pseudo’’
single procedure claims. The final CY
2013 ‘‘overlap bypass codes’’ are listed
in Addendum N to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
When one of the two separately payable
procedures on a multiple procedure
claim was on the bypass list, we split
the claim into two ‘‘pseudo’’ single
procedure claim records. The single
procedure claim record that contained
the bypass code did not retain packaged
services. The single procedure claim
record that contained the other
separately payable procedure (but no
bypass code) retained the packaged
revenue code charges and the packaged
HCPCS code charges. We also removed
lines that contained multiple units of
codes on the bypass list and treated
them as ‘‘pseudo’’ single procedure
claims by dividing the cost for the
multiple units by the number of units
on the line. If one unit of a single,
separately payable procedure code
remained on the claim after removal of
the multiple units of the bypass code,
we created a ‘‘pseudo’’ single procedure
claim from that residual claim record,
which retained the costs of packaged
revenue codes and packaged HCPCS
codes. This enabled us to use claims
that would otherwise be multiple
procedure claims and could not be used.
We then assessed the claims to
determine if the criteria for the multiple
imaging composite APCs, discussed in
section II.A.2.e.(5) of this final rule with
comment period, were met. If the
criteria for the imaging composite APCs
were met, we created a ‘‘single session’’
claim for the applicable imaging
composite service and determined
whether we could use the claim in
ratesetting. For HCPCS codes that are
both conditionally packaged and are
members of a multiple imaging
composite APC, we first assessed
whether the code would be packaged
and, if so, the code ceased to be
available for further assessment as part
of the composite APC. Because the
packaged code would not be a
separately payable procedure, we
considered it to be unavailable for use
in setting the composite APC costs on
which the CY 2013 OPPS payments are
based. Having identified ‘‘single
session’’ claims for the imaging

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composite APCs, we reassessed the
claim to determine if, after removal of
all lines for bypass codes, including the
‘‘overlap bypass codes,’’ a single unit of
a single separately payable code
remained on the claim. If so, we
attributed the packaged costs on the
claim to the single unit of the single
remaining separately payable code other
than the bypass code to create a
‘‘pseudo’’ single procedure claim. We
also identified line-items of overlap
bypass codes as a ‘‘pseudo’’ single
procedure claim. This allowed us to use
more claims data for ratesetting
purposes.
As we proposed, we also examine the
multiple procedure minor claims to
determine whether we could create
‘‘pseudo’’ single procedure claims.
Specifically, where the claim contained
multiple codes with status indicator
‘‘Q1’’ (‘‘STVX-packaged’’) on the same
date of service or contained multiple
units of a single code with status
indicator ‘‘Q1,’’ we selected the status
indicator ‘‘Q1’’ HCPCS code that had
the highest CY 2012 relative payment
weight, set the units to one on that
HCPCS code to reflect our policy of
paying only one unit of a code with a
status indicator of ‘‘Q1.’’ We then
packaged all costs for the following into
a single cost for the ‘‘Q1’’ HCPCS code
that had the highest CY 2012 relative
payment weight to create a ‘‘pseudo’’
single procedure claim for that code:
Additional units of the status indicator
‘‘Q1’’ HCPCS code with the highest CY
2012 relative payment weight; other
codes with status indicator ‘‘Q1’’; and
all other packaged HCPCS codes and
packaged revenue code costs. We
changed the status indicator for the
selected code from the data status
indicator of ‘‘N’’ to the status indicator
of the APC to which the selected
procedure was assigned for further data
processing and considered this claim as
a major procedure claim. We used this
claim in the calculation of the APC
geometric mean cost for the status
indicator ‘‘Q1’’ HCPCS code.
Similarly, if a multiple procedure
minor claim contained multiple codes
with status indicator ‘‘Q2’’ (‘‘Tpackaged’’) or multiple units of a single
code with status indicator ‘‘Q2,’’ we
selected the status indicator ‘‘Q2’’
HCPCS code that had the highest CY
2012 relative payment weight and set
the units to one on that HCPCS code to
reflect our policy of paying only one
unit of a code with a status indicator of
‘‘Q2.’’ We then packaged all costs for the
following into a single cost for the ‘‘Q2’’
HCPCS code that had the highest CY
2012 relative payment weight to create
a ‘‘pseudo’’ single procedure claim for

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that code: Additional units of the status
indicator ‘‘Q2’’ HCPCS code with the
highest CY 2012 relative payment
weight; other codes with status
indicator ‘‘Q2’’; and other packaged
HCPCS codes and packaged revenue
code costs. We changed the status
indicator for the selected code from a
data status indicator of ‘‘N’’ to the status
indicator of the APC to which the
selected code was assigned, and we
considered this claim as a major
procedure claim.
If a multiple procedure minor claim
contained multiple codes with status
indicator ‘‘Q2’’ (‘‘T-packaged’’) and
status indicator ‘‘Q1’’ (‘‘STVXpackaged’’), we selected the T-packaged
status indicator ‘‘Q2’’ HCPCS code that
had the highest relative payment weight
for CY 2012 and set the units to one on
that HCPCS code to reflect our policy of
paying only one unit of a code with a
status indicator of ‘‘Q2.’’ We then
packaged all costs for the following into
a single cost for the selected (‘‘T
packaged’’) HCPCS code to create a
‘‘pseudo’’ single procedure claim for
that code: Additional units of the status
indicator ‘‘Q2’’ HCPCS code with the
highest CY 2012 relative payment
weight; other codes with status
indicator ‘‘Q2’’; codes with status
indicator ‘‘Q1’’ (‘‘STVX-packaged’’); and
other packaged HCPCS codes and
packaged revenue code costs. We
selected status indicator ‘‘Q2’’ HCPCS
codes instead of ‘‘Q1’’ HCPCS codes
because ‘‘Q2’’ HCPCS codes have higher
CY 2012 relative payment weights. If a
status indicator ‘‘Q1’’ HCPCS code had
a higher CY 2011 relative payment
weight, it became the primary code for
the simulated single bill process. We
changed the status indicator for the
selected status indicator ‘‘Q2’’ (‘‘Tpackaged’’) code from a data status
indicator of ‘‘N’’ to the status indicator
of the APC to which the selected code
was assigned and we considered this
claim as a major procedure claim.
We then applied our process for
creating ‘‘pseudo’’ single procedure
claims to the conditionally packaged
codes that do not meet the criteria for
packaging, which enabled us to create
single procedure claims from them, if
they met the criteria for single
procedure claims. Conditionally
packaged codes are identified using
status indicators ‘‘Q1’’ and ‘‘Q2,’’ and
are described in section XII.A. of this
final rule with comment period.
Lastly, we excluded those claims that
we were not able to convert to single
procedure claims even after applying all
of the techniques for creation of
‘‘pseudo’’ single procedure claims to
multiple procedure major claims and to

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multiple procedure minor claims. As
has been our practice in recent years, we
also excluded claims that contained
codes that were viewed as
independently or conditionally bilateral
and that contained the bilateral modifier
(Modifier 50 (Bilateral procedure))
because the line-item cost for the code
represented the cost of two units of the
procedure, notwithstanding that
hospitals billed the code with a unit of
one.
Comment: Commenters supported the
proposed process for creating ‘‘pseudo’’
single procedure claims.
Response: We appreciate the
commenters’ support and will continue
to look for ways to refine the process to
secure more claims data for use in
calculating costs.
After consideration of the public
comments we received, we are
finalizing our proposals to continue to
apply the methodology described above
for the purpose of creating ‘‘pseudo’’
single procedure claims for the CY 2013
OPPS.
c. Completion of Claim Records and
Geometric Mean Cost Calculations
(1) General Process

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We then packaged the costs of
packaged HCPCS codes (codes with
status indicator ‘‘N’’ listed in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site) and
the costs of those lines for codes with

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status indicator ‘‘Q1’’ or ‘‘Q2’’ when
they are not separately paid), and the
costs of the services reported under
packaged revenue codes in Table 2
below that appeared on the claim
without a HCPCS code into the cost of
the single major procedure remaining on
the claim.
As noted in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66606), for the CY 2008 OPPS, we
adopted an APC Panel recommendation
that CMS should review the final list of
packaged revenue codes for consistency
with OPPS policy and ensure that future
versions of the I/OCE edit accordingly.
As we have in the past, and as we
proposed, we are continuing to compare
the final list of packaged revenue codes
that we are adopting for CY 2013 to the
revenue codes that the I/OCE will
package for CY 2013 to ensure
consistency.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68531), we
replaced the NUBC standard
abbreviations for the revenue codes
listed in Table 2 of the CY 2009 OPPS/
ASC proposed rule with the most
current NUBC descriptions of the
revenue code categories and
subcategories to better articulate the
meanings of the revenue codes without
changing the list of revenue codes. In
the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60362 through
60363), we finalized changes to the
packaged revenue code list based on our
examination of the updated NUBC

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codes and public comment on the CY
2010 proposed list of packaged revenue
codes.
For CY 2013, as we did for CY 2012,
we reviewed the changes to revenue
codes that were effective during CY
2011 for purposes of determining the
charges reported with revenue codes but
without HCPCS codes that we are
packaging for CY 2013. We believe that
the charges reported under the revenue
codes listed in Table 2 below continue
to reflect ancillary and supportive
services for which hospitals report
charges without HCPCS codes.
Therefore, for CY 2013, we proposed to
continue to package the costs that we
derive from the charges reported
without HCPCS code under the revenue
codes displayed in Table 2 below for
purposes of calculating the geometric
mean costs on which the final CY 2013
OPPS/ASC payment rates are based.
We did not receive any public
comments on our proposed list of
packaged revenue codes. Therefore, for
the reasons set forth in the proposed
rule (77 FR 45079 through 45081), we
are finalizing the proposed packaged
revenue codes for CY 2013, without
modification, which are identified in
Table 2 below. We note that these
revenue codes include only revenue
codes that were in effect in CY 2011, the
year of the claims data on which the
final CY 2013 OPPS payment rates are
based.
BILLING CODE 4120–01–P

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TABLE 2.-CY 2013 PACKAGED REVENUE CODES
Revenue
Code

0390
0392

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Pharmacy; General Classification
Pharmacy; Generic Drugs
Pharmacy; Non-Generic Drugs
Pharmacy; Drugs Incident to Other Diagnostic Services
Pharmacy; Drugs Incident to Radiology
Pharmacy; Non-Prescription
Pharmacy; IV Solutions
Pharmacy; Other Pharmacy
IV Therapy; General Classification
IV Therapy; Infusion Pump
IV Therapy; IV Therapy/Pharmacy Svcs
IV Therapy; IV Therapy/Drug/Supply Delivery
IV Therapy; IV Therapy/Supplies
IV Therapy; Other IV Therapy
Medical/Surgical Supplies and Devices; General Classification
Medical/Surgical Supplies and Devices; Non-sterile Supply
Medical/Surgical Supplies and Devices; Sterile Supply
Medical/Surgical Supplies and Devices; Pacemaker
Medical/Surgical Supplies and Devices; Intraocular Lens
Medical/Surgical Supplies and Devices; Other Implants
Medical/Surgical Supplies and Devices; Other Supplies/Devices
Oncology; General Classification
Oncology; Other Oncology
Nuclear Medicine; Diagnostic Radiopharmaceuticals
Nuclear Medicine; Therapeutic Radiopharmaceuticals
Anesthesia; General Classification
Anesthesia; Anesthesia Incident to Radiology
Anesthesia; Anesthesia Incident to Other DX Services
Anesthesia; Other Anesthesia
Administration, Processing and Storage for Blood and Blood Components;
General Classification
Administration, Processing and Storage for Blood and Blood Components;
Processing and Storage
Administration, Processing and Storage for Blood and Blood Components;
Other Blood Handling

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Description
Medical Surgical Supplies - Extension of 027X; Supplies Incident to
Radiology
Medical Surgical Supplies - Extension of 027X; Supplies Incident to Other
DX Services
Medical Supplies - Extension of027X, Surgical Dressings
Medical Surgical Supplies - Extension of 027X; FDA Investigational Devices
Pharmacy - Extension of 025X; Reserved
Pharmacy - Extension of 025X; Single Source Drug
Pharmacy - Extension of 025X; Multiple Source Drug
Pharmacy - Extension of 025X; Restrictive Prescription
Trauma Response; Level I Trauma
Trauma Response; Level II Trauma
Trauma Response; Level III Trauma
Trauma Response; Level IV Trauma
Trauma Response; Other
Cast Room; General Classification
Recovery Room; General Classification
Labor Room/Delivery; General Classification
Labor Room/Delivery; Labor
EKGIECG (Electrocardiogram); Telemetry
Specialty services; Observation Hours
Inpatient Renal Dialysis; Inpatient Hemodialysis
Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD)
Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal
Dialysis (CAPD)
Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis
(CCPD)
Inpatient Renal Dialysis; Other Inpatient Dialysis
Acquisition of Body Components; General Classification
Inpatient Renal Dialysis; Other Donor
Hemodialysis-Outpatient or Home; Hemodialysis Composite or Other Rate
Hemodialysis-Outpatient or Home; Maintenance - 100%
Hemodialysis-Outpatient or Home; Support Services

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BILLING CODE 4120–01–C

In accordance with our longstanding
policy, we proposed to continue to
exclude: (1) claims that had zero costs
after summing all costs on the claim;
and (2) claims containing packaging flag
number 3. Effective for services
furnished on or after July 1, 2004, the
I/OCE assigned packaging flag number 3
to claims on which hospitals submitted
token charges less than $1.01 for a
service with status indicator ‘‘S’’ or ‘‘T’’
(a major separately payable service
under the OPPS) for which the fiscal
intermediary or MAC was required to
allocate the sum of charges for services
with a status indicator equaling ‘‘S’’ or
‘‘T’’ based on the relative payment
weight of the APC to which each code
was assigned. We do not believe that
these charges, which were token charges
as submitted by the hospital, are valid
reflections of hospital resources.
Therefore, we deleted these claims. We
also deleted claims for which the
charges equaled the revenue center
payment (that is, the Medicare payment)
on the assumption that, where the
charge equaled the payment, to apply a
CCR to the charge would not yield a
valid estimate of relative provider cost.
We proposed to continue these
processes for the CY 2013 OPPS.
For the remaining claims, we then
standardized 60 percent of the costs of
the claim (which we have previously
determined to be the labor-related
portion) for geographic differences in
labor input costs. We made this
adjustment by determining the wage
index that applied to the hospital that
furnished the service and dividing the
cost for the separately paid HCPCS code
furnished by the hospital by that wage
index. The claims accounting that we
provide for the proposed and final rule
contains the formula we use to
standardize the total cost for the effects
of the wage index. As has been our
policy since the inception of the OPPS,
we use the pre-reclassified wage indices
for standardization because we believe

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that they better reflect the true costs of
items and services in the area in which
the hospital is located than the postreclassification wage indices and,
therefore, would result in the most
accurate unadjusted geometric mean
costs.
In accordance with our longstanding
practice, we also proposed to exclude
single and ‘‘pseudo’’ single procedure
claims for which the total cost on the
claim was outside 3 standard deviations
from the geometric mean of units for
each HCPCS code on the bypass list
(because, as discussed above, we used
claims that contain multiple units of the
bypass codes).
After removing claims for hospitals
with error CCRs, claims without HCPCS
codes, claims for immunizations not
covered under the OPPS, and claims for
services not paid under the OPPS,
approximately 116 million claims were
left. Using these approximately 116
million claims, we created
approximately 120 million single and
‘‘pseudo’’ single procedure claims, of
which we used slightly more than 120
million single bills (after trimming out
approximately 1 million claims as
discussed in section II.A.1.a. of this
final rule with comment period) in the
CY 2013 geometric mean cost
development and ratesetting.
As discussed above, the OPPS has
historically developed the relative
weights on which APC payments are
based using APC median costs. For the
CY 2013 OPPS, we proposed to
calculate the APC relative payment
weights using geometric mean costs;
therefore, the following discussion of
the 2 times rule violation and the
development of the relative payment
weight refers to geometric means. For
more detail about the CY 2013 OPPS/
ASC policy to calculate relative
payment weights based on geometric
means, we refer readers to section
II.A.2.f. of this final rule with comment
period.

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We proposed to use these claims to
calculate the CY 2013 geometric mean
costs for each separately payable HCPCS
code and each APC. The comparison of
HCPCS code-specific and APC
geometric mean costs determines the
applicability of the 2 times rule. Section
1833(t)(2) of the Act provides that,
subject to certain exceptions, the items
and services within an APC group shall
not be treated as comparable with
respect to the use of resources if the
highest median cost (or mean cost, if
elected by the Secretary) for an item or
service within the group is more than 2
times greater than the lowest median
cost (or mean cost, if so elected) for an
item or service within the same group
(the 2 times rule). While we have
historically applied the 2 times rule
based on median costs, as part of the CY
2013 policy to develop the OPPS
relative payment weights based on
geometric mean costs, we also are
applying the 2 times rule based on
geometric mean costs. For a detailed
discussion of the CY 2013 policy to
develop the APC relative payment
weights based on geometric mean costs,
we refer readers to section II.A.2.f. of
this final rule with comment period.
We note that, for purposes of
identifying significant HCPCS for
examination in the 2 times rule, we
consider codes that have more than
1,000 single major claims or codes that
have both greater than 99 single major
claims and contribute at least 2 percent
of the single major claims used to
establish the APC geometric mean cost
to be significant. This longstanding
definition of when a HCPCS code is
significant for purposes of the 2 times
rule was selected because we believe
that a subset of 1,000 claims is
negligible within the set of
approximately 120 million single
procedure or single session claims we
use for establishing geometric mean
costs. Similarly, a HCPCS code for
which there are fewer than 99 single
bills and which comprises less than 2

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percent of the single major claims
within an APC will have a negligible
impact on the APC geometric mean. We
note that this method of identifying
significant HCPCS codes within an APC
for purposes of the 2 times rule was
used in prior years under the medianbased cost methodology. Under our CY
2013 policy to base the relative payment
weights on geometric mean costs, we
believe that this same consideration for
identifying significant HCPCS codes
should apply because the principles are
consistent with their use in the medianbased cost methodology. Unlisted codes
are not used in establishing the percent
of claims contributing to the APC, nor
are their costs used in the calculation of
the APC geometric mean. Finally, we
reviewed the geometric mean costs for
the services for which we pay separately
under this final rule with comment
period, and we reassigned HCPCS codes
to different APCs where it was
necessary to ensure clinical and
resource homogeneity within the APCs.
Section III. of this final rule with
comment period includes a discussion
of many of the HCPCS code assignment
changes that resulted from examination
of the geometric mean costs and for
other reasons. The APC geometric
means were recalculated after we
reassigned the affected HCPCS codes.
Both the HCPCS code-specific geometric
means and the APC geometric means
were weighted to account for the
inclusion of multiple units of the bypass
codes in the creation of ‘‘pseudo’’ single
procedure claims.
Comment: Some commenters asked
that CMS provide an adjustment for
medical education costs under the
OPPS. These commenters stated that
CMS indicated that it would study the
costs and payment differential among
different classes of providers in the
April 7, 2000 OPPS final rule but has
not done so. The commenters requested
that CMS conduct its own analysis and
that, if that analysis showed a difference
in their payment to cost ratios (similar
to the comparison study performed to
calibrate the cancer hospital payment
adjustment) due to the unique missions
of teaching hospitals, CMS should add
a teaching payment adjustment under
the OPPS.
Response: Unlike payment under the
IPPS, the law does not specifically
provide for payment for direct or
indirect graduate medical education
costs to be made under the OPPS.
Section 1833(t)(2)(E) of the Act states
that the Secretary shall establish, in a
budget neutral manner ‘‘* * * other
adjustments as determined to be
necessary to ensure equitable payments,
such as adjustments for certain classes

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of hospitals.’’ We have not found such
an adjustment to be necessary to ensure
equitable payments to teaching
hospitals and, therefore, have not
developed such an adjustment. As the
commenters recognized, the cancer
hospital payment adjustment discussed
in section II.F. of this final rule with
comment period was established based
on section 1833(t)(18) of the Act.
Similarly, those hospitals were
permanently held harmless and
continued to receive TOPs under
section 1833(t)(7)(d)(ii) of the Act.
Furthermore, in this final rule with
comment period, we have developed
OPPS relative payment weights that we
believe provide appropriate and
adequate payment for the complex
medical services, such as new
technology services and devicedependent procedures, which we
understand are furnished largely by
teaching hospitals. The impacts of the
final CY 2013 policies, by class of
hospital, are displayed in Table 57 in
section XXII. of this final rule with
comment period.
After consideration of the public
comments we received, we are
finalizing our proposed CY 2013
methodology for calculating the costs
upon which the CY 2013 OPPS payment
rates are based.
As we discuss in sections II.A.2.d.
and II.A.2.e. and in section VIII.B. of
this final rule with comment period, in
some cases, APC geometric mean costs
are calculated using variations of the
process outlined above. Specifically,
section II.A.2.d. of this final rule with
comment period addresses the
calculation of single APC criteria-based
geometric mean costs. Section II.A.2.e.
of this final rule with comment period
discusses the calculation of composite
APC criteria-based geometric mean
costs. Section VIII.B. of this final rule
with comment period addresses the
methodology for calculating the
geometric mean costs for partial
hospitalization services.
(2) Recommendations of the Advisory
Panel on Hospital Outpatient Payment
Regarding Data Development
At the August 27–28, 2012 meeting of
the Advisory Panel on Hospital
Outpatient Payment (the Panel), we
provided the Data Subcommittee with a
list of all APCs fluctuating by greater
than 10 percent when comparing the CY
2013 OPPS/ASC proposed rule costs
based on CY 2011 claims processed
through June 30, 2012, to those based on
CY 2012 OPPS/ASC final rule data (CY
2010 claims processed through June 30,
2011). The Data Subcommittee reviewed

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the fluctuations in the APC costs and
their respective weights.
At the August 27–28, 2012 Panel
meeting, the Panel made a number of
recommendations related to the data
process. The Panel’s recommendations
and our responses follow.
Recommendation: The Panel
recommends that the work of the Data
Subcommittee continue.
CMS Response: We are accepting this
recommendation.
Recommendation: The Panel
recommends that Traci Rabine serve as
the acting chair of the Data
Subcommittee for the August 2012 HOP
Panel meeting.
CMS Response: We are accepting this
recommendation.
Recommendation: The Panel
recommends that CMS continue to
provide a list of APCs fluctuating by
more than 10 percent in costs.
CMS Response: We are accepting this
recommendation.
d. Calculation of Single Procedure APC
Criteria-Based Costs
(1) Device-Dependent APCs
Device-dependent APCs are
populated by HCPCS codes that usually,
but not always, require that a device be
implanted or used to perform the
procedure. For a full history of how we
have calculated payment rates for
device-dependent APCs in previous
years and a detailed discussion of how
we developed the standard devicedependent APC ratesetting
methodology, we refer readers to the CY
2008 OPPS/ASC final rule with
comment period (72 FR 66739 through
66742). Overviews of the procedure-todevice edits and device-to-procedure
edits used in ratesetting for devicedependent APCs are available in the CY
2005 OPPS final rule with comment
period (69 FR 65761 through 65763) and
the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68070 through
68071).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45081 through 45082), we
proposed for CY 2013 to use the
standard methodology for calculating
costs for device-dependent APCs that
was finalized in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74148 through 74151). This
methodology utilizes claims data that
generally represent the full cost of the
required device and the most recent cost
report data. Specifically, we proposed to
calculate the costs for device-dependent
APCs for CY 2013 using only the subset
of single procedure claims from CY
2011 claims data that pass the
procedure-to-device and device-to-

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procedure edits; do not contain token
charges (less than $1.01) for devices; do
not contain the ‘‘FB’’ modifier signifying
that the device was furnished without
cost to the provider, or where a full
credit was received; and do not contain
the ‘‘FC’’ modifier signifying that the
hospital received partial credit for the
device. The procedure-to-device edits
require that when a particular
procedural HCPCS code is billed, the
claim must also contain an appropriate
device code, while the device-toprocedure edits require that a claim that
contains one of a specified set of device
codes also contain an appropriate
procedure code. We stated in the
proposed rule that we continue to
believe the standard methodology for
calculating costs for device-dependent
APCs gives us the most appropriate
costs for device-dependent APCs in
which the hospital incurs the full cost
of the device. In Table 4A of the
proposed rule, we listed the APCs for
which we proposed to use our standard
device-dependent APC ratesetting
methodology for CY 2012.
Subsequent to the publication of the
CY 2013 OPPS/ASC proposed rule, the
AMA’s CPT Editorial Panel created
several new CPT codes describing
services related to device-dependent
APCs, to be effective beginning January
1, 2013. Our standard process for
dealing with new CPT codes effective
on January 1 for the upcoming calendar
year is to assign each code to the APC
that we believe contains services that
are comparable with respect to clinical
characteristics and resources required to
furnish the service. The new CPT code
is given a comment indicator of ‘‘NI’’ in
Addendum B to the final rule with
comment period to identify it as a new
interim APC assignment for the new
year and the APC assignment for the
new codes is then open to public
comment for 60 days following the
publication of the final rule with
comment period. As with all new CPT
codes, we encourage interested
stakeholders to review those codes
identified with the ‘‘NI’’ in Addendum
B and assigned to device-dependent
APCs and submit public comments on
those assignments.
Our interim assignment of some of the
new CPT codes for CY 2013 to devicedependent APCs prompted us to change
the titles of two APCs to reflect more
accurately the clinical configurations of
those APCs for CY 2013. Specifically,
we assigned, on an interim basis, the
following codes to device-dependent
APC 0107, currently titled ‘‘Insertion of
Cardioverter-Defibrillator’’: CPT code
0319T (Insertion or replacement of
subcutaneous implantable defibrillator

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system with subcutaneous electrode),
0321T (Insertion of subcutaneous
implantable defibrillator pulse generator
only with existing subcutaneous
electrode), and 0323T (Removal of
subcutaneous implantable defibrillator
pulse generator with replacement of
subcutaneous implantable defibrillator
pulse generator only). We note that the
title of APC 0108 is currently
‘‘Insertion/Replacement/Repair of AICD
Leads, Generator and Pacing Electrode.’’
In order to streamline and simplify the
titles of APCs 0107 and 0108, which
both contain procedures for the
implantation of cardioverterdefibrillator pulse generators, leads, and
electrodes, we are revising their titles to
reflect the insertion of cardioverterdefibrillators without specifying the
component pieces involved.
Specifically, we are revising the title of
APC 0107 to read ‘‘Level I Implantation
of Cardioverter-Defibrillator’’ and the
title of APC 0108 to read ‘‘Level II
Implantation of CardioverterDefibrillator.’’
The creation of new CPT codes
involving intracoronary stent placement
procedures for CY 2013 also requires us
to create nine new HCPCS C-codes and
to delete two existing HCPCS G-codes in
order to maintain the correct
implementation of existing OPPS policy
for CY 2013. Specifically, since CY
2003, under the OPPS, we assign
coronary stent placement procedures to
separate APCs based on the use of
nondrug-eluting or drug-eluting stents
(APC 0104 (Transcatheter Placement of
Intracoronary Stents) or APC 0656
(Transcatheter Placement of
Intracoronary Drug-Eluting Stents),
respectively). In order to effectuate this
policy, we created HCPCS G-codes
G0290 (Transcatheter placement of a
drug eluting intracoronary stent(s),
percutaneous, with or without other
therapeutic intervention, any method;
single vessel) and G0291 (Transcatheter
placement of a drug eluting
intracoronary stent(s), percutaneous,
with or without other therapeutic
intervention, any method; each
additional vessel) for drug-eluting
intracoronary stent placement
procedures that parallel existing CPT
codes 92980 (Transcatheter placement
of an intracoronary stent(s),
percutaneous, with or without other
therapeutic intervention, any method;
single vessel) and 92981 (Transcatheter
placement of an intracoronary stent(s),
percutaneous, with or without other
therapeutic intervention, any method;
each additional vessel), which are used
to describe nondrug-eluting
intracoronary stent placement

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procedures. CPT codes 92980 and 92981
are assigned to APC 0104, while HCPCS
codes G0290 and G0291 are assigned to
APC 0656. We refer readers to the CY
2003 OPPS final rule with comment
period (67 FR 66732 through 66734) for
more information regarding the initial
implementation of this policy.
Effective January 1, 2013, the AMA’s
CPT Editorial Panel is deleting CPT
codes 92980 and 92981 and replacing
them with the following new CPT
codes:
• CPT code 92928 (Percutaneous
transcatheter placement of intracoronary
stent(s), with coronary angioplasty
when performed; single major coronary
artery or branch), 92929 (Percutaneous
transcatheter placement of intracoronary
stent(s), with coronary angioplasty
when performed; each additional
branch of a major coronary artery (List
separately in addition to code for
primary procedure));
• CPT code 92933 (Percutaneous
transluminal coronary atherectomy,
with intracoronary stent, with coronary
angioplasty when performed; single
major coronary artery or branch);
• CPT code 92934 (Percutaneous
transluminal coronary atherectomy,
with intracoronary stent, with coronary
angioplasty when performed; each
additional branch of a major coronary
artery (List separately in addition to
code for primary procedure));
• CPT code 92937 (Percutaneous
transluminal revascularization of or
through coronary artery bypass graft
(internal mammary, free arterial,
venous), any combination of
intracoronary stent, atherectomy and
angioplasty, including distal protection
when performed; single vessel);
• CPT code 92938 (Percutaneous
transluminal revascularization of or
through coronary artery bypass graft
(internal mammary, free arterial,
venous), any combination of
intracoronary stent, atherectomy and
angioplasty, including distal protection
when performed; each additional
branch subtended by the bypass graft
(List separately in addition to code for
primary procedure));
• CPT code 92941 (Percutaneous
transluminal revascularization of acute
total/subtotal occlusion during acute
myocardial infarction, coronary artery
or coronary artery bypass graft, any
combination of intracoronary stent,
atherectomy and angioplasty, including
aspiration thrombectomy when
performed, single vessel);
• CPT code 92943 (Percutaneous
transluminal revascularization of
chronic total occlusion, coronary artery,
coronary artery branch, or coronary
artery bypass graft, any combination of

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intracoronary stent, atherectomy and
angioplasty; single vessel); and
• CPT code 92944 (Percutaneous
transluminal revascularization of
chronic total occlusion, coronary artery,
coronary artery branch, or coronary
artery bypass graft, any combination of
intracoronary stent, atherectomy and
angioplasty; each additional coronary
artery, coronary artery branch, or bypass
graft (List separately in addition to code
for primary procedure)).
In order to maintain the existing
policy of differentiating payment for
intracoronary stent placement
procedures involving nondrug-eluting
and drug-eluting stents, we are deleting
HCPCS codes G0290 and G0291 and
replacing them with the following new
HCPCS C-codes to parallel the new CPT
codes:
• HCPCS code C9600 (Percutaneous
transcatheter placement of drug eluting
intracoronary stent(s), with coronary
angioplasty when performed; single
major coronary artery or branch);
• HCPCS code C9601 (Percutaneous
transcatheter placement of drug-eluting
intracoronary stent(s), with coronary
angioplasty when performed; each
additional branch of a major coronary
artery (List separately in addition to
code for primary procedure));
• HCPCS code C9602 (Percutaneous
transluminal coronary atherectomy,
with drug eluting intracoronary stent,
with coronary angioplasty when
performed; single major coronary artery
or branch);
• HCPCS code C9603 (Percutaneous
transluminal coronary atherectomy,
with drug-eluting intracoronary stent,
with coronary angioplasty when
performed; each additional branch of a
major coronary artery (List separately in
addition to code for primary
procedure));
• HCPCS code C9604 (Percutaneous
transluminal revascularization of or
through coronary artery bypass graft
(internal mammary, free arterial,
venous), any combination of drugeluting intracoronary stent, atherectomy
and angioplasty, including distal
protection when performed; single
vessel);
• HCPCS code C9605 (Percutaneous
transluminal revascularization of or
through coronary artery bypass graft
(internal mammary, free arterial,
venous), any combination of drugeluting intracoronary stent, atherectomy
and angioplasty, including distal
protection when performed; each
additional branch subtended by the
bypass graft (List separately in addition
to code for primary procedure));
• HCPCS code C9606 (Percutaneous
transluminal revascularization of acute

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total/subtotal occlusion during acute
myocardial infarction, coronary artery
or coronary artery bypass graft, any
combination of drug-eluting
intracoronary stent, atherectomy and
angioplasty, including aspiration
thrombectomy when performed, single
vessel);
• HCPCS code C9607 (Percutaneous
transluminal revascularization of
chronic total occlusion, coronary artery,
coronary artery branch, or coronary
artery bypass graft, any combination of
drug-eluting intracoronary stent,
atherectomy and angioplasty; single
vessel); and
• HCPCS code C9608 (Percutaneous
transluminal revascularization of
chronic total occlusion, coronary artery,
coronary artery branch, or coronary
artery bypass graft, any combination of
drug-eluting intracoronary stent,
atherectomy and angioplasty; each
additional coronary artery, coronary
artery branch, or bypass graft (List
separately in addition to code for
primary procedure)).
The interim APC assignment for CPT
codes 92928, 92933, 92929, 92934,
92937, 92938, 92941, 92943, and 92944
is APC 0104, and the interim APC
assignment for HCPCS codes C9600,
C9601, C9602, C9603, C9604, C9605,
C9606, C9607, and C9608 is APC 0656
for CY 2013.
Comment: One commenter requested
that CPT code 0304T (Insertion or
removal and replacement of intracardiac
ischemia monitoring system including
imaging supervision and interpretation
when performed and intra-operative
interrogation and programming when
performed; device only) be placed in
APC 0107 (Level I Implantation of
Cardioverter-Defibrillators (ICDs)),
rather than APC 0090 (Insertion/
Replacement of Pacemaker Pulse
Generator), because CPT code 0304T
describes the insertion or removal and
replacement of a device, which is
similar to other CPT codes assigned to
APC 0107, such as CPT code 33262
(Removal of pacing cardioverterdefibrillator pulse generator with
replacement of pacing cardioverterdefibrillator pulse generator; single lead
system). The commenter also stated that
CPT code 33224 (Insertion of pacing
electrode, cardiac venous system, for
left ventricular pacing, with attachment
to previously placed pacemaker or
pacing cardioverter-defibrillator pulse
generator (including revision of pocket,
removal, insertion, and/or replacement
of existing generator) is better aligned
with APC 0107 than with its current
APC assignment of APC 0655 (Insertion/
Replacement/Conversion of a

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Permanent Dual Chamber Pacemaker or
Pacing Electrode).
Response: We disagree with the
commenter’s assertion that CPT codes
0304T and 33224 should be placed in
APC 0107. APC 0107 includes
procedures involving the insertion of a
cardioverter-defibrillator, and CPT
codes 0304T and 33224 do not describe
such procedures.
Comment: One commenter suggested
that CMS consider the assignment of
different APCs for upgrades to a
pacemaker or cardioverter-defibrillator
based on the number of leads inserted,
which can result in cost differences
among procedures.
Response: The commenter did not
provide specific CPT codes for
pacemaker or cardioverter-defibrillator
insertion procedures for us to consider.
Generally speaking, however, we
believe that our standard ratesetting
methodology for device-dependent
APCs would appropriately capture
hospitals’ varying costs based on the
number of leads inserted during these
procedures because we use data from
hospital claims and cost reports that
would reflect any such differences in
costs.
Comment: Commenters expressed
appreciation for the proposed increase
in payment for the cochlear implant
procedure, described by CPT code
69930 (Cochlear device implantation,
with or without mastoidectomy) which
is assigned to APC 0259 (Level VII ENT
Procedures). However, the commenters
also expressed concern that the increase
does not reflect the actual cost of the
procedure and device. The commenters
indicated potential coding errors by
major hospital facilities where claims
for less expensive osseointegrated
auditory device implant procedures
(such as those assigned to APC 0425
(Level II Arthroplasty or Implantation
with Prosthesis)) were included in the
dataset used for calculation of cochlear
implants, and requested that CMS
review the APC 0259 source data and
remove the claims that were
inadvertently included as part of the
original dataset to ensure the
appropriate payment.
Response: We employ procedure-todevice and device-to-procedure edits to
ensure that the appropriate procedures
and devices are correctly billed together
and those same edits are again used in
modeling the OPPS payment rates for
the respective device-dependent APCs.
Only claims containing the appropriate
procedure and device code pairings are
used to model the estimated APC cost
for device-dependent APCs. We also
note that the cochlear implant
procedure and the osseointegrated

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auditory device implant procedures are
in different APCs; therefore, only single
claims containing one of these
procedures would be used to model the
estimated APC cost for their respective
APCs. Further, claims with multiple
major procedures generally are not
entered into the dataset used for
calculating estimated APC costs.
Therefore, we do not believe that the
inclusion of claims containing both
cochlear implant procedures and
osseointegrated auditory device implant
procedures would result in inaccurate
procedure or APC cost estimations.
Comment: Some commenters pointed
out an apparent discrepancy between
the listed proposed payment rate for
APC 0425 in Addendum B to the CY
2013 OPPS/ASC proposed rule when
compared to the listed proposed
payment rate for APC 0425 in the data
file entitled ‘‘CY 2013 OPPS
Comparison Between Proposed
Geometric Mean and Median-Based
Payments.’’ Commenters requested that
CMS review its proposed payment rates
and determine which proposed payment
rate reflects the correct geometric mean
cost for APC 0425 for use in CY 2013
OPPS ratesetting.
Some commenters also requested that
CMS reconfigure APC 0425 to ensure
the procedures in the APC are similar
from both a cost and clinical cohesion
perspective and thereby facilitate
Medicare hospital outpatient payment
rates that are more in line with
hospitals’ actual costs for orthopedic
arthroplasty procedures. Specifically,
the commenters argued that the
osseointegrated auditory device implant
procedures assigned to APC 0425, such
as the procedure described by CPT code
69714 (Implantation, osseointegrated
implant, temporal bone, with
percutaneous attachment to external
speech processor/cochlear stimulator;
without mastoidectomy), are not related
to the orthopaedic joint replacement
procedures also assigned to APC 0425.
The commenters also stated the
proposed composition of APC 0425
violated the 2 times rule because CPT
code 69717 (Replacement (including
removal of existing device),
osseointegrated implant, temporal bone,
with percutaneous attachment to
external speech processor/cochlear
stimulator; without mastoidectomy) has
a proposed mean cost of $5,382 and CPT
code 25446 (Arthroplasty with
prosthetic replacement; distal radius
and partial or entire carpus (total wrist))
has a proposed mean cost of $15,020.
Response: We recognize the
discrepancy between the proposed
payment rate for APC 0425 in
Addendum B to the CY 2013 OPPS/ASC

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proposed rule and the proposed
payment rate for APC 0425 listed in the
‘‘CY 2013 OPPS Comparison Between
Proposed Geometric Mean and MedianBased Payments’’ data file. The cost
statistics used in the generation of the
‘‘CY 2013 OPPS Comparison Between
Proposed Geometric Mean and MedianBased Payments’’ data file did not
reflect the final configuration of the
proposed CY 2013 OPPS relative
payment weights; thus, the proposed
payment rate reflected in that data file
was inaccurate.
We believe that the current
configuration of APC 0425 is
appropriate as all procedures within the
APC share clinical and resource
similarity. Specifically, we disagree
with the commenters who asserted that
the osseointegrated auditory device
implant procedures assigned to APC
0425 are not related to the orthopaedic
joint replacement procedures also
assigned to APC 0425. As we have
stated in the past (73 FR 68539), all
procedures assigned to APC 0425,
including the osseointegrated auditory
device implant procedures, involve the
implantation of a prosthetic device into
bone. We also note the assignments of
CPT codes 69717 and 25446 to APC
0425 do not violate the 2 times rule as
the commenters claimed. As discussed
in section III.B.2. of the proposed rule
and this final rule with comment
period, we consider only those HCPCS
codes that are significant, based on the
number of claims, in making this
determination. For purposes of
identifying significant HCPCS codes for
examination in the 2 times rule, we
consider codes that have more than
1,000 single major claims or codes that
have both greater than 99 single major
claims and contribute at least 2 percent
of the single major claims used to
establish the APC cost to be significant.
CPT codes 69717 and 25446 do not meet
this criteria and their inclusion in the
same APC, therefore, does not violate
the 2 times rule because they are not
considered significant.
Comment: One commenter stated that
CMS should study further the claims for
any device-dependent APC for which
the calculated proposed payment
reduction would be greater than 10
percent and take action to correct issues
that may artificially reduce these
payments.
Response: We routinely examine all
APCs with a greater than 10 percent
fluctuation in costs as part of our annual
rulemaking process.
Comment: Commenters supported
CMS’ determination that urology
procedures in APCs 0385 (Level I
Prosthetic Urological Procedures), 0386

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(Level II Prosthetic Urological
Procedures), and 0674 (Prostate
Cryoablation) should be categorized as
device-dependent APCs. The
commenters also requested the
mandatory reporting of all HCPCS
device C-codes on hospital claims for
services involving devices and asserted
that CMS should require complete and
correct coding for packaged services.
The commenters urged CMS to continue
to promote device coding edits, while
encouraging hospitals to remain vigilant
in reporting the costs of performing
device related services, and educating
hospitals on the importance of accurate
coding for devices, supplies, and other
technologies.
Response: We appreciate the
commenters’ support and will continue
to promote device coding edits, as well
as encourage hospitals to report all costs
in performing device related services.
As we have stated in the past (73
FR68535 through 68536 and 74 FR
60367), we agree that accurate reporting
of device, supply, and technology
charges will help to ensure that these
items are appropriately accounted for in
future years’ OPPS payment rates. As
we stated in the CY 2009 OPPS/ASC
final rule with comment period (73 FR
68575), we strongly encourage hospitals
to report a charge for each packaged
service they furnish, either by billing
the packaged HCPCS code and a charge
for that service if separate reporting is
consistent with CPT and CMS
instructions, by increasing the charge
for the separately paid associated
service to include the charge for the
packaged service, or by reporting the
charge for the packaged service with an
appropriate revenue code but without a
HCPCS code. Any of these means of
charging for the packaged service will
result in the cost of the packaged service
being incorporated into the cost we
estimate for the separately paid service.
If a HCPCS code is not reported when
a packaged service is provided, we
acknowledge that it can be challenging
to specifically track the utilization
patterns and resource cost of the
packaged service itself. However, we
have no reason to believe that hospitals
have not considered the cost of the
packaged service in reporting charges
for the independent, separately paid
service.
After consideration of the public
comments we received, we are
finalizing our proposed policy to use the
standard methodology for calculating
costs for device-dependent APCs for CY
2013 that was finalized in the CY 2012
OPPS/ASC final rule with comment
period.

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Table 3 below lists the APCs for
which we used our standard devicedependent APC ratesetting methodology
for CY 2013. We refer readers to

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Addendum A to this final rule with
comment period (which is available via
the Internet on the CMS Web site) for

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the payment rates for these devicedependent APCs for CY 2013.
BILLING CODE 4120–01–P

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TABLE 3.-CY 2013 DEVICE-DEPENDENT APCs

0040

S

0061
0082

S
T

0083
0084
0085
0086

T
S
T
T

0089
0090
0104

T
T
T

0106
0107
0108
0115
0202
0227

T
T
T
T
T
T

0229
0259
0293
0315

T
T
T
S

0318

S

0319
0384
0385
0386
0425

T
T
S
S
T

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CY 2013 APC Title
Level I Implantation ofNeurostimulator Generator
Level I Implantation/Revision/Replacement of
N eurostimulator Electrodes
Level II Implantation/Revision/Replacement of
N eurostimulator Electrodes
Coronary or Non-Coronary Atherectomy
Coronary Angioplasty, Valvuloplasty, and Level I
Endovascular Revascularization of the Lower Extremity
Level I Electrophysiologic Procedures
Level II Electrophysiologic Procedures
Level III Electrophysiologic Procedures
Insertion/Replacement of Permanent Pacemaker and
Electrodes
Insertion/Replacement of Pacemaker Pulse Generator
Transcatheter Placement of Intracoronary Stents
Insertion/Replacement of Pacemaker Leads and/or
Electrodes
Level I Implantation of Cardioverter-Defibrillator
Level II Implantation of Cardioverter-Defibrillator
Cannula!Access Device Procedures
Level VII Female Reproductive Procedures
Implantation of Drug Infusion Device
Level II Endovascular Revascularization of the Lower
Extremity
Level VII ENT Procedures
Level V Anterior Segment Eye Procedures
Level II Implantation ofNeurostimulator Generator
Implantation of Cranial N eurostimulator Pulse Generator
and Electrode
Level III Endovascular Revascularization of the Lower
Extremity
GI Procedures with Stents
Level I Prosthetic Urological Procedures
Level II Prosthetic Urological Procedures
Level II Arthroplasty or Implantation with Prosthesis

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0039

CY 2013
Status
Indicator
S

CY2013
APC

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(2) Blood and Blood Products
Since the implementation of the OPPS
in August 2000, we have made separate
payments for blood and blood products
through APCs rather than packaging
payment for them into payments for the
procedures with which they are
administered. Hospital payments for the
costs of blood and blood products, as
well as for the costs of collecting,
processing, and storing blood and blood
products, are made through the OPPS
payments for specific blood product
APCs.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45082 through 45083), we
proposed to continue for CY 2013 to
establish payment rates for blood and
blood products using our blood-specific
CCR methodology, which utilizes actual
or simulated CCRs from the most
recently available hospital cost reports
to convert hospital charges for blood
and blood products to costs. This
methodology has been our standard
ratesetting methodology for blood and
blood products since CY 2005. It was
developed in response to data analysis
indicating that there was a significant
difference in CCRs for those hospitals
with and without blood-specific cost
centers, and past public comments
indicating that the former OPPS policy
of defaulting to the overall hospital CCR
for hospitals not reporting a bloodspecific cost center often resulted in an
underestimation of the true hospital
costs for blood and blood products.

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Specifically, in order to address the
differences in CCRs and to better reflect
hospitals’ costs, we proposed to
continue to simulate blood CCRs for
each hospital that does not report a
blood cost center by calculating the ratio
of the blood-specific CCRs to hospitals’
overall CCRs for those hospitals that do
report costs and charges for blood cost
centers. We would then apply this mean
ratio to the overall CCRs of hospitals not
reporting costs and charges for blood
cost centers on their cost reports in
order to simulate blood-specific CCRs
for those hospitals. We calculated the
costs upon which the proposed CY 2013
payment rates for blood and blood
products were based using the actual
blood-specific CCR for hospitals that
reported costs and charges for a blood
cost center and a hospital-specific
simulated blood-specific CCR for
hospitals that did not report costs and
charges for a blood cost center. We
noted that we used geometric mean unit
costs for each blood and blood product
to calculate the proposed payment rates,
consistent with the methodology we
proposed for other items and services,
discussed in section II.A.2.f. of the
proposed rule and this final rule with
comment period.
We stated in the proposed rule that
we continue to believe the hospitalspecific, blood-specific CCR
methodology best responds to the
absence of a blood-specific CCR for a
hospital than alternative methodologies,
such as defaulting to the overall hospital

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68239

CCR or applying an average bloodspecific CCR across hospitals. Because
this methodology takes into account the
unique charging and cost accounting
structure of each hospital, we stated in
the proposed rule that we believe that
it yields more accurate estimated costs
for these products.
Comment: Some commenters
expressed concern that the proposed
APC payment rates for some blood
products are less than the acquisition
costs of those products, citing a
published study of a national survey of
blood acquisition and overhead costs.
According to the commenters, the safety
and availability of blood may be
jeopardized without adequate payment.
The commenters asked that CMS
formally consider and evaluate potential
alternative methodologies for setting
APC payment rates for blood products,
preferably by seeking input from
affected stakeholders. The commenters
also stated that the use of the geometric
mean methodology to calculate blood
costs would result in lower payment
rates compared to the use of median
costs to calculate the payment rates for
blood and blood products and urged
CMS to use the median cost instead.
Response: As we have stated in the
past (75 FR 71838 through 71839 and 76
FR 74152), we continue to believe that
using blood-specific CCRs applied to
hospital claims data results in payment
that appropriately reflect hospitals’
relative costs of providing blood and
blood products as reported to us by

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hospitals. We will consider any
information presented to us from
affected stakeholders regarding
alternative ratesetting methodologies.
We address the use of geometric mean
costs to calculate blood payment rates in
section II.A.2.c. of this final rule with
comment period.
Comment: One commenter expressed
concern regarding coding and payment
for pre-storage pooled, leukocyte
reduced platelets. According to the
commenter, hospitals currently bill for
pre-storage pooled, leukocyte reduced
platelets using HCPCS code P9031
(Platelets, leukocytes reduced, each
unit) based on the number of platelet
concentrates (PCs) that are combined to
create one unit of the blood product.
The commenter stated that because the
number of PC units used to make a
therapeutic dose of pre-storage pooled,
leukocyte reduced platelets is variable,
blood centers must notify hospitals of
the number of PCs in each therapeutic
dose for the hospital’s billing purposes,
even though it does not affect the cost
of the product to the hospital.
According to the commenter, a new
technology exists that can make a unit
of pre-storage pooled, leukocyte reduced
platelets out of fewer PCs. However, the
commenter expressed concern that the
current coding and payment based on
the use of HCPCS code P9031 unfairly
and inappropriately disadvantages the
use of this technology. The commenter
indicated that where a greater number of
PCs are needed to make a unit of prestorage pooled, leukocyte reduced
platelets, the hospital may end up being
paid at a rate that significantly exceeds
the cost of the product. However,
according to the commenter, where the
blood center can make the pre-storage
pooled, leukocyte reduced platelets
using fewer PCs, the hospital may end
up receiving payment that is not
sufficient to cover the cost of the
product.
The commenter stated that a separate
code will be necessary to differentiate
pre-storage pooled, leukocyte reduced
platelets from other platelet products,
and that an application for a unique
HCPCS code is currently pending. The
commenter urged CMS, for OPPS
purposes, to take action to ensure
appropriate payment for pre-storage
pooled, leukocyte reduced platelets,
regardless of whether a new HCPCS
code is created.
Response: The outcome of the
commenter’s application for a unique
HCPCS code for pre-storage pooled,
leukocyte reduced platelets is beyond
the scope of OPPS rulemaking. We note
that it is an expected and appropriate
outcome of a prospective payment

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system that hospitals would receive
payments that are less than their costs
in some cases and exceed their costs in
other cases, as the commenter described
is occurring in the case of pre-storage
pooled, leukocyte reduced platelets.
Therefore, we do not believe that it is
necessary for us to take action to ensure
appropriate payment for pre-storage
pooled, leukocyte reduced platelets at
this time. However, we are interested in
hearing from other stakeholders
regarding the current incentives and
disincentives that exist in the
marketplace for pre-storage pooled,
leukocyte reduced platelets and invite
public comment on payment for the
blood product described by HCPCS code
P9031 in this final rule with comment
period.
After consideration of the public
comments we received, we are
finalizing our proposed policy, without
modification, to continue to establish
payment rates for blood and blood
products using our blood-specific CCR
methodology, which utilizes actual or
simulated CCRs from the most recently
available hospital cost reports to convert
hospital charges for blood and blood
products to costs, for CY 2013. We
continue to believe that this
methodology in CY 2013 will result in
costs for blood and blood products that
appropriately reflect the relative
estimated costs of these products for
hospitals without blood cost centers
and, therefore, for these blood products
in general.
We refer readers to Addendum B to
this final rule with comment period
(which is available via the Internet on
the CMS Web site) for the final CY 2013
payment rates for blood and blood
products (which are identified with
status indicator ‘‘R’’). For a more
detailed discussion of the blood-specific
CCR methodology, we refer readers to
the CY 2005 OPPS proposed rule (69 FR
50524 through 50525). For a full history
of OPPS payment for blood and blood
products, we refer readers to the CY
2008 OPPS/ASC final rule with
comment period (72 FR 66807 through
66810).
(3) Brachytherapy Sources
Section 1833(t)(2)(H) of the Act, as
added by section 621(b)(2)(C) of Public
Law 108–173 (MMA), mandated the
creation of additional groups of covered
OPD services that classify devices of
brachytherapy consisting of a seed or
seeds (or radioactive source)
(‘‘brachytherapy sources’’) separately
from other services or groups of
services. The additional groups must
reflect the number, isotope, and
radioactive intensity of the

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brachytherapy sources furnished and
must include separate groups for
palladium-103 and iodine-125 sources.
For the history of OPPS payment for
brachytherapy sources, we refer readers
to prior OPPS proposed and final rules.
As we have stated previously (72 FR
66780, 73 FR 41502, 74 FR 60533
through 60534, 75 FR 71978, and 76 FR
74160), we believe that adopting the
general OPPS prospective payment
methodology for brachytherapy sources
is appropriate for a number of reasons.
The general OPPS payment
methodology uses costs based on claims
data to set the relative payment weights
for hospital outpatient services. This
payment methodology results in more
consistent, predictable, and equitable
payment amounts per source across
hospitals by averaging the extremely
high and low values, in contrast to
payment based on hospitals’ charges
adjusted to cost. We believe that the
OPPS prospective payment
methodology, as opposed to payment
based on hospitals’ charges adjusted to
cost, has provided hospitals with
incentives for efficiency in the provision
of brachytherapy services to Medicare
beneficiaries. Moreover, this approach is
consistent with our payment
methodology for the vast majority of
items and services paid under the OPPS.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45087), we
proposed to use the costs from CY 2011
claims data for setting the proposed CY
2013 payment rates for brachytherapy
sources, as we proposed for most other
items and services that will be paid
under the CY 2013 OPPS. We based the
proposed rates for brachytherapy
sources using geometric mean unit costs
for each source, consistent with the
methodology proposed for other items
and services, discussed in section
II.A.2.f. of the proposed rule. We
proposed to continue the other payment
policies for brachytherapy sources we
finalized and first implemented in the
CY 2010 OPPS/ASC final rule with
comment period (74 FR 60537). We
proposed to pay for the stranded and
non-stranded NOS codes, HCPCS codes
C2698 and C2699, at a rate equal to the
lowest stranded or non-stranded
prospective payment rate for such
sources, respectively, on a per source
basis (as opposed, for example, to a per
mCi), which is based on the policy we
established in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66785). We also proposed to continue
the policy we first implemented in the
CY 2010 OPPS/ASC final rule with
comment period (74 FR 60537)
regarding payment for new

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brachytherapy sources for which we
have no claims data, based on the same
reasons we discussed in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66786; which was
superseded for a period of time by
section 142 of Pub. L. 110–275). That
policy is intended to enable us to assign
new HCPCS codes for new
brachytherapy sources to their own
APCs, with prospective payment rates
set based on our consideration of
external data and other relevant
information regarding the expected
costs of the sources to hospitals.
Consistent with our policy regarding
APC payments made on a prospective
basis, as we did for CY 2011 and CY
2012, we proposed to subject
brachytherapy sources to outlier
payments under section 1833(t)(5) of the
Act, and also to subject brachytherapy
source payment weights to scaling for
purposes of budget neutrality. Hospitals
can receive outlier payments for
brachytherapy sources if the costs of
furnishing brachytherapy sources meet
the criteria for outlier payment specified
at 42 CFR 419.43(d). In addition,
implementation of prospective payment
for brachytherapy sources provides
opportunities for eligible hospitals to
receive additional payments in CY 2013
under certain circumstances through the
7.1 percent rural adjustment, as
described in section II.E. of the
proposed rule and this final rule with
comment period.
We referred readers to Addendum B
to the proposed rule (which was
available via the Internet on the CMS
Web site) for the proposed CY 2013
payment rates for brachytherapy
sources, identified with status indicator
‘‘U.’’ We invited public comment on
this proposed policy and also requested
recommendations for new HCPCS codes
to describe new brachytherapy sources
consisting of a radioactive isotope,
including a detailed rationale to support
recommended new sources. In the
proposed rule, we provided an
appropriate address for receipt of these
recommendations; the address is
repeated at the end of this section. We
indicated that we will continue to add
new brachytherapy source codes and
descriptors to our systems for payment
on a quarterly basis.
Comment: A number of commenters
opposed our proposal to base the
payment for brachytherapy sources on
geometric mean costs, while other
commenters supported the proposal.
Commenters also addressed other
payment issues related to
brachytherapy:
First, some commenters claimed that
there are longstanding problems with

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OPPS claims data for brachytherapy
source payment. For example,
commenters stated that high dose rate
(HDR) sources can be used to treat
multiple patients because they decay
over a 90-day period. The commenters
stated that, as a result, the per source
cost depends on the number of patients
treated as well as the number of
treatments and the intensity of the
treatments within the 90-day period,
making adequate payment for all
hospitals difficult. Commenters
asserted, as further examples of
problems with our claims data, that our
claims data continue to show a huge
variation in unit costs on claims across
hospitals; that more than half of the
brachytherapy APCs have proposed
payment rates based on 50 or fewer
hospitals; and that our claims data
contain rank order anomalies between
high-activity palladium-103 (HCPCS
code C2635) and low-activity
palladium-103 sources (HCPCS codes
2640 and C2641), claiming that highactivity palladium-103 always costs
more than low-activity palladium-103.
Second, commenters stated that
brachytherapy source payments
proposed for CY 2013 are unstable and
fluctuate significantly from CY 2012
levels. They expressed concern about
unpredictable changes in payment rates
for brachytherapy sources from year to
year, stating that proposed rates for
some sources would change
significantly, ranging from a decrease of
14.2 percent for HCPCS code C2643
(Brachytherapy source, non-stranded,
cesium-131, per source) to an increase
of 216 percent for HCPCS code C1716
(Brachytherapy source, non-stranded,
gold-198, per source).
Response: In response to the
commenters’ concerns regarding the
proposal to base payment for
brachytherapy sources on geometric
mean cost, we refer readers to section
II.A.2.f. of this final rule with comment
period, where we address the use of the
geometric means methodology for
determining OPPS payments for
brachytherapy sources for CY 2013.
We disagree with the commenters
who stated that the CY 2013 proposed
payment rates for brachytherapy sources
based on geometric mean cost would
change payment levels significantly
from the CY 2012 payment rates. While
the commenters are correct that the
proposed CY 2013 payment rate changes
range from ¥14.2 to 216 percent, when
we compare the CY 2013 proposed
payment rates to the CY 2012 final
payment rates, we find that 10 of the 16
brachytherapy source codes will receive
increases or decreases of less than 10
percent, indicating stability for the

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majority of the brachytherapy sources.
Moreover, when we compare the CY
2013 proposed payment rates to the CY
2012 final payment rates, we find that
10 of the 16 brachytherapy source codes
will receive increased payment amounts
per source, while 6 of the 16 codes will
receive decreased payments per source.
With regard to the commenters who
articulated concerns about perceived
longstanding problems such as
variability of brachytherapy source
payment rates (which they have
repeatedly opined in prior years), we are
pleased that, unlike in past years, the
commenters did not express objection to
prospective payment for brachytherapy
sources. As we stated previously (72 FR
66782, 74 FR 60534, 75 FR 71979, and
76 FR 74161), we believe that our persource payment methodology specific to
each source’s radioisotope, radioactive
intensity, and stranded or non-stranded
configuration, supplemented by
payment based on the number of
sources used in a specific clinical case,
adequately accounts for the major
expected sources of variability across
treatments. As we also explained
previously (72 FR 66782, 74 FR 60535,
and 75 FR 71979), a prospective
payment system such as the OPPS relies
on the concept of averaging, where the
payment may be more or less than the
estimated cost of providing a service for
a particular patient, but with the
exception of outlier cases, it is adequate
to ensure access to appropriate care. In
the case of brachytherapy sources for
which the law requires separate
payment groups, without packaging, the
costs of these individual items could be
expected to show greater variation than
some other APCs under the OPPS
because higher variability in costs for
some component items and services is
not balanced with lower variability in
costs for other component items and
services and because relative weights
are typically estimated using a smaller
set of claims.
As we have stated previously (75 FR
71979 and 76 FR 74161), under the
budget neutral provision for the OPPS,
it is the relativity of costs of services,
not their absolute costs, that is
important, and we believe that
brachytherapy sources are appropriately
paid according to the standard OPPS
payment approach. Furthermore, some
sources may have costs and payment
rates based on 50 or fewer hospitals
because it is not uncommon for OPPS
prospective payment rates to be based
on claims from a relatively small
number of hospitals that furnished the
service in the year of claims data
available for the OPPS update year. Fifty
hospitals may report hundreds of

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brachytherapy source claims for many
cases and comprise the universe of
hospitals using particular low-volume
sources, for which we are required to
pay separately by statute. Further, our
methodology for estimating costs for
brachytherapy sources utilizes all lineitem charges for those sources, which
allows us to use all hospital reported
charge and estimated cost information
to set payment rates for these items.
Therefore, no brachytherapy source
claims are lost. We believe that
prospective payment rates based on
claims from those hospitals furnishing a
particular source appropriately reflect
the cost of that source for hospitals.
In the case of high and low activity
iodine-125 sources, our claims data
show that the hospitals’ relative costs
for the high activity source as reported
on hospital claims and in cost report
data are greater than the low activity
sources, as we have noticed in the past.
However, this relationship is reversed
for palladium-103 sources, as a few
commenters pointed out. As we have
stated in the past (75 FR 71979 and 76
FR 74162), we do not have any
information about the expected cost
differential between high and low
activity sources of various isotopes
other than what is available in our
claims and hospital cost report data. For
high activity palladium-103, only 8
hospitals reported this service in CY
2010, compared to 139 and 203
hospitals for low-activity palladium-103
sources described by HCPCS codes
C2640 and C2641, respectively. As we
stated regarding this issue in the CYs
2010, 2011, and 2012 OPPS/ASC final
rules with comment period (74 FR
60535, 75 FR 71979, and 76 FR 74162,
respectively), it is clear that fewer
hospitals furnished high-activity
palladium-103 sources than low-activity
palladium-103 sources, and we expect
that the hospital cost distribution for
those hospitals could be different than
the cost distribution of the large number
of hospitals reporting the low-activity
sources. These varied cost distributions
clearly contribute to the observed
relationship in costs between the
different types of sources. However, we
see no reason why our standard
ratesetting methodology for
brachytherapy sources that relies on all
claims from all hospitals furnishing
brachytherapy sources will not yield
valid costs for those hospitals furnishing
the different brachytherapy sources
upon which CY 2013 prospective
payments rates are based.
As we indicated in the CYs 2011 and
2012 OPPS/ASC final rules with
comment period (75 FR 71980 and 76
FR 74162, respectively), we agree that

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high dose rate (HDR) brachytherapy
sources such as HDR iridium-192 have
a fixed active life and must be replaced
every 90 days; as a result, hospitals’ pertreatment cost for the source would be
dependent on the number of treatments
furnished per source. The source cost
must be amortized over the life of the
source. Therefore, in establishing their
charges for HDR iridium-192, we expect
hospitals to project the number of
treatments that would be provided over
the life of the source and establish their
charges for the source accordingly, as
we have stated previously (72 FR 66783,
74 FR 60535, 75 FR 71980, and 76 FR
74162). For most of these OPPS services,
our practice is to establish prospective
payment rates based on the costs from
hospitals’ claims data to provide
incentives for efficient and cost effective
delivery of these services.
Comment: One commenter requested
that CMS establish appropriate payment
for HCPCS code A9527 (Iodine, I-125,
sodium iodide solution, therapeutic, per
millicurie (mCi)), claiming that the
source has not been available for
patients from June 2010 to July 2012,
when it became available for purchase
by providers. The commenter stated that
the claims from two hospitals that
reported HCPCS code A9527 are
erroneous. The commenter requested
that CMS use external data based upon
actual hospital invoices to assign
payment for HCPCS code A9527, which,
according to the commenter, cost
hospitals in CY 2012 $28.00 per
millicurie (mCi), which is above the
proposed payment rate of $20.86.
Response: We have been paying for I125 brachytherapy solution since 2003,
both as HCPCS code A9527 and its
predecessor code in the OPPS, C2632
(Brachytherapy solution, iodine-125, per
mCi). Our claims data over the period of
2004 through 2011 show a consistent
range of costs of $16.83 to $29.42 per
mCi, with several thousand units of
claims in most of those years. The
claims data for HCPCS code A9527
reflect claims for 8 providers, rather
than 2 as indicated by the commenter.
Therefore, we believe that we are
obtaining adequate and consistent data
on HCPCS code A9527. We will
maintain our use of claims data for
HCPCS code A9527 in our OPPS
ratesetting for CY 2013.
Comment: One commenter requested
that CMS add a new C-code and APC for
a high-activity cesium-131
brachytherapy source, which is
designed to generate isotropic emission
of therapeutic radiation and to be used
primarily for the treatment of head and
neck and eye cancer.

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Response: We appreciate the
commenter informing us of a new highactivity cesium-131 source. However,
our evaluation process of new sources
for addition to our set of codes is
beyond the scope of this rulemaking. As
we state elsewhere in this final rule
with comment period, and in previous
rules, such as the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74163), we ask parties to submit
recommendations to us for new HCPCS
codes to describe new brachytherapy
sources consisting of a radioactive
isotope, including a detailed rationale to
support recommended new sources. We
suggest to the commenter to send its
recommendation for this new
brachytherapy source, along with the
detailed rationale to support the new
source, to the address provided at the
end of this section. We will continue to
add new brachytherapy source codes
and descriptors to our systems on a
quarterly basis.
Comment: One commenter supported
CMS’ proposal to continue the policy of
paying for new sources for which we
have no claims data, with prospective
payment rates based on the
consideration of external data as well as
other relevant information. The
commenter expressed appreciation for
CMS’ efforts to establish appropriate
payment rates for brachytherapy sources
in a timely manner, and recommended
that CMS finalize this proposal.
Response: We appreciate the support
and recognition of our efforts to provide
appropriate and timely payment. We are
finalizing our proposal to pay for new
sources using external data and other
relevant information.
After consideration of the public
comments we received, we are
finalizing our proposal to pay for
brachytherapy sources at prospective
payment rates based on their sourcespecific geometric mean costs for CY
2013. We refer readers to Addendum B
to this final rule with comment period
(which is available via the Internet on
the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/index.html) for the final CY 2013
payment rates for brachytherapy
sources, identified with status indicator
‘‘U.’’ We also are finalizing our
proposals to continue our policies
regarding payment for NOS codes for
stranded and non-stranded sources and
new brachytherapy sources for which
we have no claims data. Specifically, we
are finalizing our proposals to continue
payment for stranded and non-stranded
NOS codes, HCPCS codes C2698 and
C2699, at a rate equal to the lowest
stranded or non-stranded prospective

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payment for such sources, respectively,
as discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66786); and our proposal to assign
HCPCS codes for new brachytherapy
sources to their own APCs, with
payment rates based on consideration of
external data and other relevant
information, in the absence of claims
data. Once claims data are available, our
standard ratemaking process will be
applied to the calculation of the cost for
the new brachytherapy source.
Consistent with our policy regarding
APC payments made on a prospective
basis, we are finalizing our proposal to
subject the cost of brachytherapy
sources to the outlier provision of
section 1833(t)(5) of the Act, and also to
subject brachytherapy source payment
relative weights to scaling for purposes
of budget neutrality.
As stated in the proposed rule (77 FR
45087), we continue to invite hospitals
and other parties to submit
recommendations to us for new HCPCS
codes to describe new brachytherapy
sources consisting of a radioactive
isotope, including a detailed rationale to
support recommended new sources.
Such recommendations should be
directed to the Division of Outpatient
Care, Mail Stop C4–05–17, Centers for
Medicare and Medicaid Services, 7500
Security Boulevard, Baltimore, MD
21244. We will continue to add new
brachytherapy source codes and
descriptors to our systems for payment
on a quarterly basis.
e. Calculation of Composite APC
Criteria-Based Costs
As discussed in the CY 2008 OPPS/
ASC final rule with comment period (72
FR 66613), we believe it is important
that the OPPS enhance incentives for
hospitals to provide necessary, high
quality care and as efficiently as
possible. For CY 2008, we developed
composite APCs to provide a single
payment for groups of services that are
typically performed together during a
single clinical encounter and that result
in the provision of a complete service.
Combining payment for multiple,
independent services into a single OPPS
payment in this way enables hospitals
to manage their resources with
maximum flexibility by monitoring and
adjusting the volume and efficiency of
services themselves. An additional
advantage to the composite APC model
is that we can use data from correctly
coded multiple procedure claims to
calculate payment rates for the specified
combinations of services, rather than
relying upon single procedure claims
which may be low in volume and/or
incorrectly coded. Under the OPPS, we

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currently have composite policies for
extended assessment and management
services, low dose rate (LDR) prostate
brachytherapy, cardiac
electrophysiologic evaluation and
ablation services, mental health
services, multiple imaging services, and
cardiac resynchronization therapy
services. We refer readers to the CY
2008 OPPS/ASC final rule with
comment period for a full discussion of
the development of the composite APC
methodology (72 FR 66611 through
66614 and 66650 through 66652) and
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74163) for more
recent background.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45087 through 45094), we
proposed for CY 2013 to continue our
composite policies for extended
assessment and management services,
LDR prostate brachytherapy, cardiac
electrophysiologic evaluation and
ablation services, mental health
services, multiple imaging services, and
cardiac resynchronization therapy
services, as discussed in sections
II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3),
II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6),
respectively, of the proposed rule.
Comment: One commenter
encouraged CMS to create payments
that drive hospitals to develop low cost
deliveries of care instead of rewarding
them for excess deliveries of care, such
as beneficiaries receiving up to three CT
scans in a single emergency department
visit.
Response: We agree with the
commenter that it is important to create
payment methodologies that encourage
efficiency. As we have stated in the
past, we believe that composite APCs
enable hospitals to manage their
resources with maximum flexibility by
monitoring and adjusting the volume
and efficiency of services themselves.
With respect to CT scans in particular,
as we discuss in section II.A.2.e.(5) of
this final rule with comment period, we
provide a single payment each time a
hospital bills more than one CT on the
same date of service.
The final composite policies for
extended assessment and management
services, LDR prostate brachytherapy,
cardiac electrophysiologic evaluation
and ablation services, mental health
services, multiple imaging services, and
cardiac resynchronization therapy
services are discussed in the following
sections (II.A.2.e.(1), II.A.2.e.(2),
II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and
II.A.2.e.(6), respectively) of this final
rule with comment period.

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(1) Extended Assessment and
Management Composite APCs (APCs
8002 and 8003)
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45088), we proposed to
continue to include composite APC
8002 (Level I Extended Assessment and
Management Composite) and composite
APC 8003 (Level II Extended
Assessment and Management
Composite) in the OPPS for CY 2013.
Beginning in CY 2008, we created these
two composite APCs to provide
payment to hospitals in certain
circumstances when extended
assessment and management of a patient
occur (an extended visit). In most
circumstances, observation services are
supportive and ancillary to the other
services provided to a patient. In the
circumstances when observation care is
provided in conjunction with a high
level visit or direct referral and is an
integral part of a patient’s extended
encounter of care, payment is made for
the entire care encounter through one of
the two composite APCs as appropriate.
We refer readers to the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74163 through 74165) for a full
discussion of this longstanding policy.
For CY 2013, we proposed to continue
the extended assessment and
management composite APC payment
methodology and criteria for APCs 8002
and 8003 that we finalized for CYs 2009
through 2012. We continue to believe
that the composite APCs 8002 and 8003
and related policies provide the most
appropriate means of paying for these
services. We also proposed to calculate
the costs for APCs 8002 and 8003 using
the same methodology that we used to
calculate the costs for composite APCs
8002 and 8003 for the CY 2008 OPPS
(72 FR 66649). That is, we proposed to
use all single and ‘‘pseudo’’ single
procedure claims from CY 2011 that met
the criteria for payment of each
composite APC and apply the standard
packaging and trimming rules to the
claims before calculating the CY 2013
costs. The proposed CY 2013 cost
resulting from this methodology for
composite APC 8002 was approximately
$446, which was calculated from 17,072
single and ‘‘pseudo’’ single claims that
met the required criteria. The proposed
CY 2013 cost for composite APC 8003
was approximately $813, which was
calculated from 255,231 single and
‘‘pseudo’’ single claims that met the
required criteria.
We did not receive any public
comments on this proposal. We are
finalizing our proposed policy, without
modification, to calculate the costs for
APCs 8002 and 8003 using the same

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methodology that we used to calculate
the costs for composite APCs 8002 and
8003 for the CY 2008 OPPS (72 FR
66649). The final CY 2013 cost resulting
from this methodology for composite
APC 8002 is approximately $453, which
was calculated from 19,028 single and
‘‘pseudo’’ single claims that met the
required criteria. The final CY 2013 cost
for composite APC 8003 is
approximately $821, which was
calculated from 284,861 single and
‘‘pseudo’’ single claims that met the
required criteria.
At its August 2012 meeting, the
Advisory Panel on Hospital Outpatient
Payment (the Panel) recommended that
CMS continue to report clinic/
emergency department visit and
observation claims data and, if CMS
identifies changes in patterns of
utilization or cost, that CMS bring those
issues to the Visits and Observation
Subcommittee. Additionally, the Panel
recommended that CMS examine the
costs and frequency for Level I and
Level II Extended Assessment and
Management Composite APCs
associated with greater than 24 hours of
observation, if available, and report the
findings to the Visits and Observation
Subcommittee. The Panel recommended
that Scott Manaker, M.D., Ph.D., be
named the chair of the Visits and
Observation Subcommittee. The Panel
recommended that the work of the
Visits and Observation Subcommittee
continue. We are accepting these
recommendations and will provide the
requested data to the Panel at a future
meeting.
(2) Low Dose Rate (LDR) Prostate
Brachytherapy Composite APC (APC
8001)
LDR prostate brachytherapy is a
treatment for prostate cancer in which
hollow needles or catheters are inserted
into the prostate, followed by
permanent implantation of radioactive
sources into the prostate through the
needles/catheters. At least two CPT
codes are used to report the composite
treatment service because there are
separate codes that describe placement
of the needles/catheters and the
application of the brachytherapy
sources: CPT code 55875 (Transperineal
placement of needles or catheters into
prostate for interstitial radioelement
application, with or without cystoscopy)
and CPT code 77778 (Interstitial
radiation source application; complex),
which are generally present together on
claims for the same date of service in
the same operative session. In order to
base payment on claims for the most
common clinical scenario, and to
further our goal of providing payment

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under the OPPS for a larger bundle of
component services provided in a single
hospital encounter, beginning in CY
2008, we began providing a single
payment for LDR prostate brachytherapy
when the composite service, reported as
CPT codes 55875 and 77778, is
furnished in a single hospital encounter.
We based the payment for composite
APC 8001 (LDR Prostate Brachytherapy
Composite) on the cost derived from
claims for the same date of service that
contain both CPT codes 55875 and
77778 and that do not contain other
separately paid codes that are not on the
bypass list. We refer readers to the CY
2008 OPPS/ASC final rule with
comment period (72 FR 66652 through
66655) for a full history of OPPS
payment for LDR prostate brachytherapy
and a detailed description of how we
developed the LDR prostate
brachytherapy composite APC.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45088 through 45089), we
proposed for CY 2013 to continue to pay
for LDR prostate brachytherapy services
using the composite APC methodology
proposed and implemented for CY 2008
through CY 2012. That is, we proposed
to use CY 2011 claims on which both
CPT codes 55875 and 77778 were billed
on the same date of service with no
other separately paid procedure codes
(other than those on the bypass list) to
calculate the payment rate for composite
APC 8001. Consistent with our CY 2008
through CY 2012 practice, we proposed
not to use the claims that met these
criteria in the calculation of the costs for
APC 0163 (Level IV Cystourethroscopy
and Other Genitourinary Procedures)
and APC 0651 (Complex Interstitial
Radiation Source Application), the
APCs to which CPT codes 55875 and
77778 are assigned, respectively. We
proposed to continue to calculate the
costs for APCs 0163 and 0651 using
single and ‘‘pseudo’’ single procedure
claims. We stated that we believe that
this composite APC contributes to our
goal of creating hospital incentives for
efficiency and cost containment, while
providing hospitals with the most
flexibility to manage their resources. We
also stated that we continue to believe
that data from claims reporting both
services required for LDR prostate
brachytherapy provide the most
accurate cost upon which to base the
composite APC payment rate.
Using a partial year of CY 2011 claims
data available for the CY 2013 proposed
rule, we were able to use 650 claims that
contained both CPT codes 55875 and
77778 to calculate the cost upon which
the proposed CY 2013 payment for
composite APC 8001 was based. The

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proposed cost for composite APC 8001
for CY 2013 was approximately $3,362.
Comment: A few commenters
supported the proposed payment
methodology and policy for APC 8001.
The commenters also supported the
continued use of the LDR prostate
brachytherapy composite APC
methodology and the proposed increase
in payment for CY 2013.
Response: We appreciate the
commenters’ support.
We are finalizing, without
modification, our proposed policy for
composite APC 8001. Using a full year
of CY 2011 claims data available for this
CY 2013 final rule with comment
period, we were able to use 677 claims
that contained both CPT codes 55875
and 77778 to calculate the cost upon
which the final CY 2013 payment for
composite APC 8001 is based. The final
cost for composite APC 8001 for CY
2013 is approximately $3,348.
(3) Cardiac Electrophysiologic
Evaluation and Ablation Composite
APC (APC 8000)
Effective January 1, 2008, we
established APC 8000 (Cardiac
Electrophysiologic Evaluation and
Ablation Composite) to pay for a
composite service made up of at least
one specified electrophysiologic
evaluation service and one specified
electrophysiologic ablation service.
Correctly coded claims for these
services often include multiple codes
for component services that are reported
with different CPT codes and that, prior
to CY 2008, were always paid separately
through different APCs (specifically,
APC 0085 (Level II Electrophysiologic
Evaluation), APC 0086 (Ablate Heart
Dysrhythm Focus), and APC 0087
(Cardiac Electrophysiologic Recording/
Mapping)). Calculating a composite APC
for these services allowed us to utilize
many more claims than were available
to establish the individual APC costs for
these services, and advanced our stated
goal of promoting hospital efficiency
through larger payment bundles. In
order to calculate the cost upon which
the payment rate for composite APC
8000 is based, we used multiple
procedure claims that contained at least
one CPT code from Group A for
evaluation services and at least one CPT
code from Group B for ablation services
reported on the same date of service on
an individual claim. Table 9 in the CY
2008 OPPS/ASC final rule with
comment period (72 FR 66656)
identified the CPT codes that are
assigned to Groups A and B. For a full
discussion of how we identified the
Group A and Group B procedures and
established the payment rate for the

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cardiac electrophysiologic evaluation
and ablation composite APC, we refer
readers to the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66655
through 66659). Where a service in
Group A is furnished on a date of
service that is different from the date of
service for a CPT code in Group B for
the same beneficiary, payments are
made under the appropriate single
procedure APCs and the composite APC
does not apply.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45089), we proposed for CY
2013 to continue to pay for cardiac
electrophysiologic evaluation and
ablation services using the composite
APC methodology proposed and
implemented for CY 2008 through CY
2012. We stated that we continue to
believe that the cost for these services
calculated from a high volume of
correctly coded multiple procedure
claims would result in an accurate and
appropriate proposed payment for
cardiac electrophysiologic evaluation
and ablation services when at least one
evaluation service is furnished during
the same clinical encounter as at least
one ablation service. Consistent with
our practice since CY 2008, we
proposed not to use the claims that met
the composite payment criteria in the
calculation of the costs for APCs 0085
and 0086, to which the CPT codes in
both Groups A and B for composite APC
8000 are otherwise assigned. We
proposed that the costs for APCs 0085
and 0086 would continue to be
calculated using single procedure
claims. For CY 2013, using a partial year
of CY 2011 claims data available for the
proposed rule we were able to use
11,358 claims containing a combination
of Group A and Group B CPT codes to
calculate a proposed cost of
approximately $11,458 for composite
APC 8000.
Subsequent to the publication of the
CY 2013 OPPS/ASC proposed rule, the
AMA’s CPT Editorial Panel created five
new CPT codes describing cardiac
electrophysiologic evaluation and
ablation services, to be effective January
1, 2013. These five new codes are:
• CPT code 93653 (Comprehensive
electrophysiologic evaluation including
insertion and repositioning of multiple
electrode catheters with induction or
attempted induction of an arrhythmia
with right atrial pacing and recording,
right ventricular pacing and recording,
His recording with intracardiac catheter
ablation of arrhythmogenic focus; with
treatment of supraventricular
tachycardia by ablation of fast or slow
atrioventricular pathway, accessory
atrioventricular connection, cavo-

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tricuspid isthmus or other single atrial
focus or source of atrial re-entry);
• CPT code 93654 (Comprehensive
electrophysiologic evaluation including
insertion and repositioning of multiple
electrode catheters with induction or
attempted induction of an arrhythmia
with right atrial pacing and recording,
right ventricular pacing and recording,
His recording with intracardiac catheter
ablation of arrhythmogenic focus; with
treatment of ventricular tachycardia or
focus of ventricular ectopy including
intracardiac electrophysiologic 3D
mapping, when performed, and left
ventricular pacing and recording, when
performed);
• CPT code 93655 (Intracardiac
catheter ablation of a discrete
mechanism of arrhythmia which is
distinct from the primary ablated
mechanism, including repeat diagnostic
maneuvers, to treat a spontaneous or
induced arrhythmia (List separately in
addition to code for primary
procedure));
• CPT code 93656 (Comprehensive
electrophysiologic evaluation including
transseptal catheterizations, insertion
and repositioning of multiple electrode
catheters with induction or attempted
induction of an arrhythmia with atrial
recording and pacing, when possible,
right ventricular pacing and recording,
His bundle recording with intracardiac
catheter ablation of arrhythmogenic
focus, with treatment of atrial
fibrillation by ablation by pulmonary
vein isolation); and
• CPT code 93657 (Additional linear
or focal intracardiac catheter ablation of
the left or right atrium for treatment of
atrial fibrillation remaining after
completion of pulmonary vein isolation
(List separately in addition to code for
primary procedure)).
The CPT Editorial Panel also deleted
two electrophysiologic ablation codes,
CPT code 93651 (Intracardiac catheter
ablation of arrhythmogenic focus; for
treatment of supraventricular
tachycardia by ablation of fast or slow
atrioventricular pathways, accessory
atrioventricular connections or other
atrial foci, singly or in combination) and
CPT code 93652 (Intracardiac catheter
ablation of arrhythmogenic focus; for
treatment of ventricular tachycardia),
effective January 1, 2013.
Our standard process for dealing with
new CPT codes effective on January 1
for the upcoming calendar year is to
assign each code to the APC that we
believe contains services that are
comparable with respect to clinical
characteristics and resources required to
furnish the service. The new CPT code
is given a comment indicator of ‘‘NI’’ in
Addendum B to the final rule with

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comment period to identify it as a new
interim APC assignment for the new
year and the APC assignment for the
new CPT codes is then open to public
comment for 60 days following the
publication of the final rule with
comment period.
New CPT codes 93653, 93654, and
93656 are primary electrophysiologic
services that encompass evaluation as
well as ablation, while new CPT codes
93655 and 93657 are add-on codes.
Because CPT codes 93653, 93654, and
93656 already encompass both
evaluation and ablation services, we are
assigning them to composite APC 8000
with no further requirement to have
another electrophysiologic service from
either Group A or Group B furnished on
the same date of service, and we are
assigning them interim status indicator
‘‘Q3’’ (Codes that may be paid through
a composite APC) in Addendum B to
this final rule with comment period. To
facilitate implementing this policy, we
are assigning CPT codes 93653, 93654,
and 93656 to a new Group C, which will
be paid at the composite APC 8000
payment rate. (We note that we will use
single and ‘‘pseudo’’ single claims for
CPT codes 93653, 93654, and 93656
when they become available for
calculating the costs upon which the
payment rate for APC 8000 will be
based in future ratesetting.) Because
CPT codes 93655 and 93657 are
dependent services that may only be
performed as ancillary services to the
primary CPT codes 93653, 93654, and
93656, we believe that packaging CPT
codes 93655 and 93657 with the
primary procedures is appropriate, and
we are assigning them interim status
indicator ‘‘N.’’ Because the CPT
Editorial Panel deleted CPT codes 93651
and 93652, effective January 1, 2013, we
are deleting them from the Group B
code list, leaving only CPT 93650
(Intracardiac catheter ablation of
atrioventricular node function,
atrioventricular conduction for creation
of complete heart block, with or without
temporary pacemaker placement) in
Group B at this time.
As is our usual practice for new CPT
codes that were not available at the time
of the proposed rule, our treatment of
new CPT codes 93653, 93654, 93655,
93656, and 93657 is open to public
comment for a period of 60 days
following the publication of this final
rule with comment period.
We did not receive any public
comments on our proposal to continue
to pay for cardiac electrophysiologic
evaluation and ablation services using
the composite APC methodology. We
are finalizing our proposed policy for
CY 2013 to continue to pay for cardiac

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electrophysiologic evaluation and
ablation services using the composite
APC methodology proposed and
implemented for CY 2008 through CY
2012. We note that we are modifying
our proposal for CY 2013 to reflect the
CPT coding changes as discussed above.

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For CY 2013, using a full year of CY
2011 claims data available for this final
rule with comment period, we were able
to use 12,235 claims containing a
combination of Group A and Group B
CPT codes to calculate a final cost of

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approximately $11,466 for composite
APC 8000.
Table 4 below lists the groups of
procedures upon which we will base
composite APC 8000 for CY 2013.
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TABLE 4.-GROUPS OF CARDIAC ELECTROPHYSIOLOGIC EVALUATION
AND ABLATION PROCEDURES UPON WHICH COMPOSITE APC 8000
IS BASED
Codes Used in Combinations: At Least
One in Group A and One in Group B, or
At Least One in Group C

CY2013
CPT Code

Single Code
CY 2013
APC

CY 2013 SI
(Composite)

93619

0085

Q3

93620

0085

Q3

93650

0085

Q3

93653

8000

Q3

Comprehensive electrophysiologic
evaluation with right atrial pacing and
recording, right ventricular pacing and
recording, His bundle recording, including
insertion and repositioning of multiple
electrode catheters, without induction or
attempted induction of arrhythmia
Comprehensive electrophysiologic
evaluation including insertion and
repositioning of multiple electrode catheters
with induction or attempted induction of
arrhythmia; with right atrial pacing and
recording, right ventricular pacing and
recording, His bundle recording
GroupB
Intracardiac catheter ablation of
atrioventricular node function,
atrioventricular conduction for creation of
complete heart block, with or without
temporary pacemaker placement
Group C
Comprehensive electrophysiologic
evaluation including insertion and
repositioning of multiple electrode catheters
with induction or attempted induction of an
arrhythmia with right atrial pacing and
recording, right ventricular pacing and
recording, His recording with intracardiac
catheter ablation of arrhythmogenic focus;
with treatment of supraventricular
tachycardia by ablation of fast or slow
atrioventricular pathway, accessory
atrioventricular connection, cavo-tricuspid
isthmus or other single atrial focus or source
of atrial re-entry

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(4) Mental Health Services Composite
APC (APC 0034)
(a) Mental Health Services Composite
Policy
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45090), we proposed for CY
2013 to continue our longstanding
policy of limiting the aggregate payment
for specified less resource-intensive
mental health services furnished on the
same date to the payment for a day of
partial hospitalization provided by a
hospital, which we consider to be the
most resource-intensive of all outpatient
mental health treatments for CY 2013.
We refer readers to the April 7, 2000
OPPS final rule with comment period
(65 FR 18452 to 18455) for the initial
discussion of this longstanding policy
and the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74168) for
more recent background.
Specifically, we proposed that when
the aggregate payment for specified
mental health services provided by one
hospital to a single beneficiary on one
date of service based on the payment
rates associated with the APCs for the
individual services exceeds the
maximum per diem partial
hospitalization payment for a hospital,

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those specified mental health services
would be assigned to APC 0034 (Mental
Health Services Composite). We
proposed to continue to set the payment
rate for APC 0034 at the same rate as we
pay for APC 0176 (Level II Partial
Hospitalization (4 or more services) for
Hospital-Based PHPs), which is the
maximum partial hospitalization per
diem payment for a hospital, and that
the hospital would continue to be paid
one unit of APC 0034. Under this
policy, the I/OCE would continue to
determine whether to pay for these
specified mental health services
individually or make a single payment
at the same rate as the APC 0176 per
diem rate for partial hospitalization for
all of the specified mental health
services furnished by the hospital on
that single date of service.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our CY 2013 proposal,
without modification, to continue our
longstanding policy of limiting the
aggregate payment for specified less
resource-intensive mental health
services furnished on the same date by
a hospital to the payment for APC 0176,
which is the maximum partial

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hospitalization per diem payment for a
hospital for CY 2013.
(b) Coding Changes
Subsequent to the publication of the
CY 2013 OPPS/ASC proposed rule, the
AMA’s CPT Editorial Panel deleted 16
psychotherapy and psychiatric
diagnostic evaluation CPT codes to
which the mental health services
composite APC methodology applies,
and replaced them with 12 new CPT
codes, to be effective January 1, 2013.
The new and deleted CPT codes are
included in Table 5 below. Our standard
process for addressing new CPT codes
effective on January 1 for the upcoming
calendar year is to assign each code to
the APC that we believe contains
services that are comparable with
respect to clinical characteristics and
resources required to furnish the
service. The new CPT code is given a
comment indicator of ‘‘NI’’ in
Addendum B to the final rule with
comment period to identify it as a new
interim APC assignment for the new
year and the APC assignment for the
new codes is then open to public
comment for 60 days following the
publication of the final rule with
comment period.

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Because the new mental health CPT
codes in Table 5 replace CPT codes that
are subject to the mental health
composite APC, and because all of the
HCPCS codes in the respective APCs to
which these codes are assigned for CY
2013 are subject to the mental health
composite APC, the new separately
payable mental health CPT codes also
will be assigned to composite APC 0034
with an interim status indicator of ‘‘Q3’’
(Codes that may be paid through a
composite APC) in Addendum B to this

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final rule with comment period. The
single code APC assignment, the
composite APC assignment, and the
interim status indicator assignment for
each of these new CPT codes are
included in Table 5 below. As discussed
above for new CPT codes that were not
available at the time of the proposed
rule, our treatment of these new mental
health CPT codes is open to public
comment for a period of 60 days
following the publication of this final
rule with comment period. The current

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single code APC assignments for all of
the HCPCS codes to which the mental
health composite APC policy applies,
along with their composite APC
assignment and their APC assignments
when the composite methodology does
not apply, can be found in Addendum
M to this final rule with comment
period (which is available via the
Internet on the CMS Web site).
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TABLE S.--NEW AND DELETED PSYCHOTHERAPY AND
PSYCHIATRIC DIAGNOSTIC EVALUATION CPT CODES FOR CY 2013

Deleted CY 2012 Psychotherapy and Psychiatric Diagnostic Evaluation CPT Codes

HCPCS
Code

90801
90802
90804
90805
90806
90807
90808
90809
90810
90811
90812
90813
90814
90815
90857
90862

CY 2012 Short Descriptor

CY
2012
CI

Psy dx interview
Intac psy dx interview
Psytx office 20-30 min
Psytx off20-30 min w/e&m
Psytx off 45-50 min
Psytx off 45-50 min w/e&m
Psytx office 75-80 min
Psytx off 75-80 w/e&m
Intac psytx off 20-30 min
Intac psytx 20-30 w/e&m
Intac psytx off 45-50 min
Intac psytx 45-50 min
w/e&m
Intac psytx off 75-80 min
Intac psytx 75-80 w/e&m
Intac group psytx
Medication management

CY
2012
SI
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3

CY 2012
Single
CodeAPC
Assignment
0323
0323
0322
0322
0323
0323
0323
0323
0322
0322
0323

CY 2012
Composite
APC
Assignment
0034
0034
0034
0034
0034
0034
0034
0034
0034
0034
0034

Q3

0323

0034

Q3
Q3
Q3
Q3

0323
0323
0325
0605

0034
0034
0034
0034

HCPCS
Code

CY 2013 Short Descriptor

90785
90791
90792
90832

Psytx complex interactive
Psych diagnostic evaluation
Psych diag eval w/med srvcs
Psytx pt&/family 30 minutes
Psytx pt&/fam w/e&m 30
mm

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90833

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CY
2013
CI
NI
NI
NI
NI

CY
2013
SI
N
Q3
Q3
Q3

CY 2013
Single
CodeAPC
Assignment
N
0323
0323
0322

CY 2013
Composite
APC
Assignment
n/a
0034
0034
0034

NI

N

n/a

n/a

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(5) Multiple Imaging Composite APCs
(APCs 8004, 8005, 8006, 8007, and
8008)
Effective January 1, 2009, we provide
a single payment each time a hospital
bills more than one imaging procedure
within an imaging family on the same
date of service, in order to reflect and
promote the efficiencies hospitals can
achieve when performing multiple
imaging procedures during a single
session (73 FR 41448 through 41450).
We utilize three imaging families based
on imaging modality for purposes of this
methodology: (1) Ultrasound; (2)
computed tomography (CT) and
computed tomographic angiography
(CTA); and (3) magnetic resonance
imaging (MRI) and magnetic resonance
angiography (MRA). The HCPCS codes
subject to the multiple imaging
composite policy and their respective
families are listed in Table 8 of the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74171 through
74175).
While there are three imaging
families, there are five multiple imaging
composite APCs due to the statutory
requirement under section 1833(t)(2)(G)
of the Act that we differentiate payment
for OPPS imaging services provided
with and without contrast. While the
ultrasound procedures included in the
policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be
provided either with or without
contrast. The five multiple imaging
composite APCs established in CY 2009
are:
• APC 8004 (Ultrasound Composite);
• APC 8005 (CT and CTA without
Contrast Composite);
• APC 8006 (CT and CTA with
Contrast Composite);
• APC 8007 (MRI and MRA without
Contrast Composite); and
• APC 8008 (MRI and MRA with
Contrast Composite).
We define the single imaging session
for the ‘‘with contrast’’ composite APCs

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as having at least one or more imaging
procedures from the same family
performed with contrast on the same
date of service. For example, if the
hospital performs an MRI without
contrast during the same session as at
least one other MRI with contrast, the
hospital will receive payment for APC
8008, the ‘‘with contrast’’ composite
APC.
We make a single payment for those
imaging procedures that qualify for
composite APC payment, as well as any
packaged services furnished on the
same date of service. The standard
(noncomposite) APC assignments
continue to apply for single imaging
procedures and multiple imaging
procedures performed across families.
For a full discussion of the development
of the multiple imaging composite APC
methodology, we refer readers to the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68559 through
68569).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45090), we proposed to
continue for CY 2013 to pay for all
multiple imaging procedures within an
imaging family performed on the same
date of service using the multiple
imaging composite APC payment
methodology. We stated that we
continue to believe that this policy
would reflect and promote the
efficiencies hospitals can achieve when
performing multiple imaging procedures
during a single session. The proposed
CY 2013 payment rates for the five
multiple imaging composite APCs (APC
8004, APC 8005, APC 8006, APC 8007,
and APC 8008) were based on costs
calculated from a year of CY 2011
claims available for the CY 2013 OPPS/
ASC proposed rule that qualified for
composite payment under the current
policy (that is, those claims with more
than one procedure within the same
family on a single date of service). To
calculate the proposed costs, we used
the same methodology that we used to
calculate the final CY 2012 costs for

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68251

these composite APCs, as described in
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74169). The
imaging HCPCS codes that we removed
from the bypass list for purposes of
calculating the proposed multiple
imaging composite APC costs, pursuant
to our established methodology (76 FR
74169), appeared in Table 11 of the
proposed rule.
We were able to identify
approximately 1.0 million ‘‘single
session’’ claims out of an estimated 1.5
million potential composite cases from
our ratesetting claims data, more than
half of all eligible claims, to calculate
the proposed CY 2013 costs for the
multiple imaging composite APCs.
Comment: One commenter supported
the proposed payment rate for APC
8004, while acknowledging the
increased proposed payment rate for the
ultrasound composite and for other
standard (non-composite) ultrasound
procedures.
Response: We appreciate the
commenter’s support.
Comment: Several commenters
supported CMS’ decision not to propose
any new multiple imaging composite
APCs, and requested that CMS analyze
the potential impact on utilization and
access for any newly proposed multiple
imaging composite APCs, and to
provide notice and seek comment for
any new proposals.
Response: We appreciate the feedback
regarding the multiple imaging
composite APCs. As is our usual
practice, we will analyze our claims
data and provide public notice and seek
comment for any new proposals through
our annual rulemaking process.
After consideration of the public
comments we received, we are
finalizing our proposed policy, without
modification, to calculate multiple
imaging composite APC costs for CY
2013 pursuant to our established
methodology. For this final rule with
comment period, we were able to
identify approximately 1.0 million
‘‘single session’’ claims out of an

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estimated 1.6 million potential
composite cases from our ratesetting
claims data, more than half of all
eligible claims, to calculate the final CY
2013 costs for the multiple imaging
composite APCs.
Table 6 below lists the HCPCS codes
that will be subject to the multiple

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imaging composite policy and their
respective families and approximate
composite APC costs for CY 2013. Table
7 below lists the OPPS imaging family
services that overlap with HCPCS codes
on the CY 2013 bypass list. We note that
we mistakenly did not include CPT
code 70547 (Magnetic resonance

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angiography, neck; without contrast
material(s)) on this list in the proposed
rule. We are adding it to this list for the
final rule with comment period because
it is part of the MRI and MRA with and
without contrast imaging family and is
also on the CY 2013 bypass list.
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TABLE 6.-0PPS IMAGING FAMILIES AND MULTIPLE IMAGING
PROCEDURE COMPOSITE APCs
Family 1 - Ultrasound
CY 2013 Approximate APC Cost =
$202
76604
Us exam, chest
Us exam, abdom, complete
76700
76705
Echo exam of abdomen
76770
Us exam abdo back wall, comp
76775
Us exam abdo back wall, lim
Us exam k transpl w/Doppler
76776
76831
Echo exam, uterus
76856
Us exam, pelvic, complete
76870
Us exam, scrotum
76857
Us exam, pelvic, limited
Family 2 - CT and CTA with and without Contrast

CY 2013 APC 8004 (Ultrasound Composite)

70450
70480
70486
70490
71250
72125
72128
72131
72192
73200
73700
74150
74261
74176
CY 2013 APC 8006 (CT and CTA with
Contrast Composite)

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70487

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CY 2013 Approximate APC Cost =
$412
Ct headlbrain w/0 dye
Ct orbit/ear/fossa w/o dye
Ct maxillofacial w/o dye
Ct soft tissue neck w/o dye
Ct thorax w/o dye
Ct neck spine w/o dye
Ct chest spine w/o dye
Ct lumbar spine w/o dye
Ct pelvis w/o dye
Ct upper extremity w/o dye
Ct lower extremity w/o dye
Ct abdomen w/o dye
Ct colonography, w/o dye
Ct angio abd & pelvis
CY 2013 Approximate APC Cost =
$702
Ct maxillofacial w/dye

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CY 2013 APC 8005 (CT and CTA without
Contrast Composite)*

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70460
70470
70481
70482
70488
70491
70492
70496
70498
71260
71270
71275
72126
72127
72129
72130
72132
72133
72191
72193
72194
73201
73202
73206
73701
73702
73706
74160
74170
74175
74262
75635
74177
74178

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Ct headlbrain w/ dye
Ct headlbrain w/o & w/dye
Ct orbit/ear/fossa w/dye
Ct orbit/ear/fossa w/o&w/dye
Ct maxillofacial w/o & w/dye
Ct soft tissue neck w/dye
Ct sft tsue nck w/o & w/dye
Ct angiography, head
Ct angiography, neck
Ct thorax w/dye
Ct thorax w/o & w/dye
Ct angiography, chest
Ct neck spine w/dye
Ct neck spine w/o & w/dye
Ct chest spine w/dye
Ct chest spine w/o & w/dye
Ct lumbar spine w/dye
Ct lumbar spine w/o & w/dye
Ct angiograph pelv w/o&w/dye
Ct pelvis w/dye
Ct pelvis w/o & w/dye
Ct upper extremity w/dye
Ct uppr extremity w/o&w/dye
Ct angio upr extrm w/o&w/dye
Ct lower extremity w/dye
Ct lwr extremity w/o&w/dye
Ct angio lwr extr w/o&w/dye
Ct abdomen w/dye
Ct abdomen w/o & w/dye
Ct angio abdom w/o & w/dye
Ct colonography, w/dye
Ct angio abdominal arteries
Ct angio abd&pelv w/contrast
Ct angio abd & pelv 1+ regns
* If a "without contrast" CT or CTA procedure is performed during the same session as a
"with contrast" CT or CTA procedure, the I10CE will assign APC 8006 rather than
APC 8005.

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Family 3 - MRI and MRA with and without Contrast

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CY 2013 Approximate
APC Cost = $727
Magnetic image, jaw joint
Mri orbit/face/neck w/o dye
Mr angiography head w/o dye
Mr angiography neck w/o dye
Mri brain w/o dye
Fmri brain by tech
Mri chest w/o dye
Mri neck spine w/o dye
Mri chest spine w/o dye
Mri lumbar spine w/o dye
Mri pelvis w/o dye
Mri upper extremity w/o dye
Mri joint upr extrem w/o dye
Mri lower extremity w/o dye
Mrijnt oflwr extre w/o dye
Mri abdomen w/o dye
Cardiac mri for morph
Cardiac mri w/stress img
MRA w/o cont, abd
MRI w/o cont, breast, uni
MRI w/o cont, breast, bi
MRA w/o cont, chest
MRA w/o cont, lwr ext
MRA w/o cont, pelvis
MRA, w/o dye, spinal canal
MRA, w/o dye, upper extr
CY 2013 Approximate
APC Cost = $1,069
Mr angiograph neck w/o&w/dye
Mri orbit/face/neck w/dye
Mri orbt/faclnck w/o & w/dye
Mr angiography head w/dye
Mr angiograph head w/o&w/dye

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CY 2013 APC 8007 (MRI and MRA without
Contrast Composite)*
70336
70540
70544
70547
70551
70554
71550
72141
72146
72148
72195
73218
73221
73718
73721
74181
75557
75559
C8901
C8904
C8907
C8910
C8913
C8919
C8932
C8935
CY 2013 APC 8008 (MRI and MRA with
Contrast Composite)
70549
70542
70543
70545
70546

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Mr angiography neck w/o dye
Mr angiography neck w/dye
Mri brain w/dye
Mri brain w/o & w/dye
Mri chest w/dye
Mri chest w/o & w/dye
Mri neck spine w/dye
Mri chest spine w/dye
Mri lumbar spine w/dye
Mri neck spine w/o & w/dye
Mri chest spine w/o & w/dye
Mri lumbar spine w/o & w/dye
Mri pelvis w/dye
Mri pelvis w/o & w/dye
Mri upper extremity w/dye
Mri uppr extremity w/o&w/dye
Mri joint upr extrem w/dye
Mri joint upr extr w/o&w/dye
Mri lower extremity w/dye
Mri lwr extremity w/o&w/dye
Mrijoint oflwr extr w/dye
Mri joint lwr extr w/o&w/dye
Mri abdomen w/dye
Mri abdomen w/o & w/dye
Cardiac mri for morph w/dye
Card mri w/stress img & dye
MRA w/cont, abd
MRA w/o fol w/cont, abd
MRI w/cont, breast, uni
MRI w/o fol w/cont, brst, un
MRI w/cont, breast, bi
MRI w/o fol w/cont, breast,
MRA w/cont, chest
MRA w/o fol w/cont, chest
MRA w/cont, lwr ext
MRA w/o fol w/cont, lwr ext
MRA w/cont, pelvis

sroberts on DSK5SPTVN1PROD with

70547
70548
70552
70553
71551
71552
72142
72147
72149
72156
72157
72158
72196
72197
73219
73220
73222
73223
73719
73720
73722
73723
74182
74183
75561
75563
C8900
C8902
C8903
C8905
C8906
C8908
C8909
C8911
C8912
C8914
C8918

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68257

MRA wlo fol wlcont, pelvis
C8931
MRA, wldye, spinal canal
C8933
MRA, w/o&w/dye, spinal canal
C8934
MRA, wldye, upper extremity
C8936
MRA, w/o&w/dye, upper extr
* If a "without contrast" MRI or MRA procedure is performed during the same session as a
"with contrast" MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC
8007.
C8920

TABLE 7.-0PPS IMAGING FAMILY SERVICES OVERLAPPING WITH
HCPCS CODES ON THE CY 2013 BYPASS LIST

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Family 1 - Ultrasound
76700
Us exam, abdom, complete
Echo exam of abdomen
76705
Us exam abdo back wall, comp
76770
76775
Us exam abdo back wall, lim
76776
Us exam k transpl wlDoppler
Us exam, pelvic, complete
76856
76870
Us exam, scrotum
Us exam, pelvic, limited
76857
Family 2 - CT and CT A with and without Contrast
70450
Ct headlbrain wlo dye
70480
Ct orbitlearlfossa wlo dye
70486
Ct maxillofacial wlo dye
70490
Ct soft tissue neck wlo dye
71250
Ct thorax wlo dye
72125
Ct neck spine wi 0 dye
72128
Ct chest spine wlo dye
72131
Ct lumbar spine wi 0 dye
72192
Ct pelvis wlo dye
73200
Ct upper extremity wlo dye
73700
Ct lower extremity wlo dye
74150
Ct abdomen wlo dye
Family 3 - MRI and MRA with and without Contrast
70336
Magnetic image, jaw joint
70544
Mr angiography head wlo dye

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BILLING CODE 4120–01–C

sroberts on DSK5SPTVN1PROD with

(6) Cardiac Resynchronization Therapy
Composite APC (APC 0108)
Cardiac resynchronization therapy
(CRT) uses electronic devices to
sequentially pace both sides of the heart
to improve its output. CRT utilizing a
pacing electrode implanted in
combination with an implantable
cardioverter defibrillator (ICD) is known
as CRT–D. Hospitals commonly report
the implantation of a CRT–D system
using CPT code 33225 (Insertion of
pacing electrode, cardiac venous
system, for left ventricular pacing, at
time of insertion of pacing cardioverterdefibrillator or pacemaker pulse
generator (including upgrade to dual
chamber system) (List separately in
addition to code for primary procedure))
and CPT code 33249 (Insertion or
repositioning of electrode lead(s) for
single or dual chamber pacing
cardioverter-defibrillator and insertion
of pulse generator). As described in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74176), over the
past several years, stakeholders have
pointed out significant fluctuations in
the payment rate for CPT code 33225
and that, because the definition of CPT
code 33225 specifies that the pacing
electrode is inserted at the same time as
an ICD or pacemaker, CMS would not
have many valid claims upon which to
calculate an accurate cost. In response
to these concerns, we established a
policy beginning in CY 2012 to
recognize CPT codes 33225 and 33249
as a single, composite service when the
procedures are performed on the same
day and to assign them to APC 0108
(Insertion/Replacement/Repair of AICD
Leads, Generator, and Pacing
Electrodes) when they appear together
on a claim with the same date of service.
We refer readers to the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74176 through 74182) for a full

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description of how we developed this
policy.
As described in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74182), hospitals continue to use the
same CPT codes to report CRT–D
implantation services, and the I/OCE
will identify when the combination of
CPT codes 33225 and 33249 on the
same day qualify for composite service
payment. We make a single composite
payment for such cases. When not
performed on the same day as the
service described by CPT code 33225,
the service described by CPT code
33249 is also assigned to APC 0108.
When not performed on the same day as
the service described by CPT code
33249, the service described by CPT
code 33225 is assigned to APC 0655.
In order to ensure that hospitals
correctly code for CRT services in the
future, we also finalized a policy in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74182) to
implement claims processing edits that
will return to providers incorrectly
coded claims on which a pacing
electrode insertion (the procedure
described by CPT code 33225) is billed
without one of the following procedures
to insert an ICD or pacemaker, as
specified by the AMA in the CPT
codebook:
• 33206 (Insertion or replacement of
permanent pacemaker with transvenous
electrode(s); atrial);
• 33207 (Insertion or replacement of
permanent pacemaker with transvenous
electrode(s); ventricular);
• 33208 (Insertion or replacement of
permanent pacemaker with transvenous
electrode(s); atrial and ventricular);
• 33212 (Insertion or replacement of
pacemaker pulse generator only; single
chamber, atrial or ventricular);
• 33213 (Insertion or replacement of
pacemaker pulse generator only; dual
chamber, atrial or ventricular);

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• 33214 (Upgrade of implanted
pacemaker system, conversion of single
chamber system to dual chamber system
(includes removal of previously placed
pulse generator, testing of existing lead,
insertion of new lead, insertion of new
pulse generator));
• 33216 (Insertion of a single
transvenous electrode, permanent
pacemaker or cardioverter-defibrillator);
• 33217 (Insertion of 2 transvenous
electrodes, permanent pacemaker or
cardioverter-defibrillator);
• 33222 (Revision or relocation of
skin pocket for pacemaker);
• 33233 (Removal of permanent
pacemaker pulse generator);
• 33234 (Removal of transvenous
pacemaker electrode(s); single lead
system, atrial or ventricular);
• 33235 (Removal of transvenous
pacemaker electrode(s); dual lead
system, atrial or ventricular);
• 33240 (Insertion of single or dual
chamber pacing cardioverterdefibrillator pulse generator); or
• 33249 (Insertion or repositioning of
electrode lead(s) for single or dual
chamber pacing cardioverterdefibrillator and insertion of pulse
generator).
In the CY 2013 OPPS/ASC proposed
rule (77 FR45094), we proposed to
continue for CY 2013 to recognize CRT–
D as a single, composite service as
described above and finalized in the CY
2012 OPPS/ASC final rule with
comment period. By continuing to
recognize these procedures as a single,
composite service, we are able to use a
higher volume of correctly coded claims
for CPT code 33225, which, because of
its add-on code status, is always
performed in conjunction with another
procedure and, therefore, to address the
inherent ratesetting challenges
associated with CPT code 33225. We
also noted that this policy is consistent
with the principles of a prospective
payment system, specifically to place

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similar services that utilize technologies
with varying costs in the same APC in
order to promote efficiency and decision
making based on individual patient’s
clinical needs rather than financial
considerations. In calculating the costs
upon which the proposed payment rate
for APC 0108 was based for CY 2013, for
the proposed rule, we included single
procedure claims for the individual
services assigned to APC 0108, as well
as single procedure claims that contain
the composite CRT–D service, defined
as the combination of CPT codes 33225
and 33249 with the same date of service.
We were able to use 9,790 single claims
from the CY 2013 proposed rule claims
data to calculate a proposed cost of
approximately $31,491 for APC 0108.
Because CPT codes 33225 and 33249
may be treated as a composite service
for payment purposes, we proposed to
continue to assign them status indicator
‘‘Q3’’ (Codes that may be paid through
a composite APC) in Addendum B to
the proposed rule. The assignment of
CPT codes 33225 and 33249 to APC
0108 when treated as a composite
service was also reflected in Addendum
M to the proposed rule (which is
available via the Internet on the CMS
Web site).
As we noted in the proposed rule (77
FR 45094), we revised the claims
processing edits in place for CPT code
33225 due to revised guidance from the
AMA in the CPT code book specifying
the codes that should be used in
conjunction with CPT code 33225.
Specifically, on February 27, 2012, the
AMA posted a correction as errata to the
CY 2012 CPT code book on the AMA
Web site at http://www.ama-assn.org/
resources/doc/cpt/cpt-corrections.pdf.
This correction removed CPT code
33222 (Revision or relocation of skin
pocket for pacemaker) as a service that
should be provided in conjunction with
CPT code 33225, and added CPT codes
33228 (Removal of permanent
pacemaker pulse generator with
replacement of pacemaker pulse
generator; dual lead system), 33229
(Removal of permanent pacemaker
pulse generator with replacement of
pacemaker pulse generator; multiple
lead system), 33263 (Removal of pacing
cardioverter-defibrillator pulse
generator with replacement of pacing
cardioverter-defibrillator pulse
generator; dual lead system), and 33264
(Removal of pacing cardioverterdefibrillator pulse generator with
replacement of pacing cardioverterdefibrillator pulse generator; multiple
lead system). In accordance with this
revised guidance, we deleted CPT code
33222 as a code that can satisfy the

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claims processing edit for CPT code
33225, and added CPT codes 33228,
33229, 33263, and 33264 as codes that
can satisfy this edit beginning in CY
2012.
Comment: One commenter requested
that CMS delay the status indicator
change from ‘‘T’’ to ‘‘Q3’’ for CPT code
33225, stating that CMS does not have
sufficient cost data to allow a composite
payment for this procedure. The
commenter also asked that CPT code
33225 be assigned to APC 0655 while
CMS carries out further analysis.
Response: We disagree with the
commenter that we do not have
sufficient cost data to allow a composite
payment for the procedure described by
CPT code 33225. For this final rule with
comment period, we were able to use
3,413 single claims containing the CRT–
D composite service, defined as the
combination of CPT codes 33225 and
33249 with the same date of service, to
calculate the cost of APC 0108. We note
that we did not propose to change the
status indicator for CPT code 33225
from ‘‘T’’ to ‘‘Q3’’ for CY 2013 as the
commenter indicated; rather, we
proposed to continue to apply the ‘‘Q3’’
status indicator to CPT code 33225 in
accordance with the status indicator and
policy for this code finalized in the CY
2012 OPPS/ASC final rule with
comment period. We also note that,
when not performed on the same day as
the service described by CPT code
33249, the service described by CPT
code 33225 is assigned to APC 0655 and
not paid as a composite service.
After consideration of the public
comment we received, we are finalizing
our proposed policy, without
modification, to continue to recognize
CRT–D as a single, composite service as
described above and finalized in the CY
2012 OPPS/ASC final rule with
comment period. In calculating the costs
upon which the final payment rate for
APC 0108 is based for CY 2013, for this
final rule with comment period, we
included single procedure claims for the
individual services assigned to APC
0108, as well as single procedure claims
that contain the composite CRT–D
service, defined as the combination of
CPT codes 33225 and 33249 with the
same date of service. We were able to
use 11,251 single claims from the CY
2013 final rule claims data to calculate
a final cost of approximately $31,561 for
APC 0108. Because CPT codes 33225
and 33249 may be treated as a
composite service for payment
purposes, we are continuing to assign
them status indicator ‘‘Q3’’ (Codes that
may be paid through a composite APC)
in Addendum B to this final rule with
comment period.

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68259

f. Geometric Mean-Based Relative
Payment Weights
As we discussed in the CY 2013
OPPS/ASC proposed rule (77 FR 45094
through 45098), when the Medicare
program was first implemented,
payment for hospital services (inpatient
and outpatient) was based on hospitalspecific reasonable costs attributable to
furnishing services to Medicare
beneficiaries. Although payment for
most Medicare hospital inpatient
services became subject to a PPS under
section 1886(d) of the Act in 1983,
Medicare hospital outpatient services
continued to be paid based on hospitalspecific costs. This methodology for
payment provided little incentive for
hospitals to furnish such outpatient
services efficiently and in a cost
effective manner. At the same time,
advances in medical technology and
changes in practice patterns were
bringing about a shift in the site of
medical care from the inpatient setting
to the outpatient setting.
In the Omnibus Budget Reconciliation
Act of 1986 (OBRA 1986) (Pub. L. 99–
509), the Congress paved the way for
development of a PPS for hospital
outpatient services. Section 9343(g) of
OBRA 1986 mandated that fiscal
intermediaries require hospitals to
report claims for services under the
Healthcare Common Procedure Coding
System (HCPCS). Section 9343(c) of
OBRA 1986 extended the prohibition
against unbundling of hospital services
under section 1862(a)(14) of the Act to
include outpatient services as well as
inpatient services. The codes under the
HCPCS enabled us to determine which
specific procedures and services were
billed, while the extension of the
prohibition against unbundling ensured
that all nonphysician services provided
to hospital outpatients were reported on
hospital bills and captured in the
hospital outpatient data that were used
to develop an outpatient PPS.
The brisk increase in hospital
outpatient services further led to an
interest in creating payment incentives
to promote more efficient delivery of
hospital outpatient services through a
Medicare outpatient PPS. Section
9343(f) of OBRA 1986 and section
4151(b)(2) of the Omnibus Budget
Reconciliation Act of 1990 (OBRA 1990)
(Pub. L. 101–508) required that we
develop a proposal to replace the
hospital outpatient payment system
with a PPS and submit a report to the
Congress on the proposed system. The
statutory framework for the OPPS was
established by the Balanced Budget Act
(BBA) of 1997 (Pub. L. 105–33) with
section 4523 amending section 1833 of

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the Act by adding subsection (t), which
provides for a PPS for hospital
outpatient department services and the
BBRA of 1999 (Pub. L. 106–113), with
section 201 further amending section
1833(t) of the Act. The implementing
regulations for these statutory
authorities were codified at 42 CFR part
419, effective for services furnished on
or after August 1, 2000.
Section 1833 of the Act sets forth the
methodological requirements for
developing the PPS for hospital
outpatient services (the OPPS). At the
onset of the OPPS, there was significant
concern over observed increases in the
volume of outpatient services and
corresponding rapidly growing
beneficiary coinsurance. Accordingly,
much of the focus was on finding ways
to address those issues. Section
1833(t)(2)(C) of the Act initially
provided that relative payment weights
for covered outpatient department
services be established based on median
costs under section 4523(a) of the BBA
of 1997. Later, section 201(f) of the
BBRA of 1999 amended section
1833(t)(2)(C) of the Act to allow the
Secretary the discretion to base the
establishment of relative payment
weights on either median or mean
hospital costs. Since the OPPS was
initially implemented, we have
established relative payment weights
based on the median hospital costs for
both statistical reasons and timely
implementation concerns. The proposed
rule for the OPPS was published prior
to the passage of the BBRA of 1999,
which amended the Act to permit the
use of mean costs. At that time, we
noted that making payment for hospital
outpatient services based on the median
cost of each APC was a way of
discouraging upcoding that occurs when
individual services that are similar have
disparate median costs, as well as
associating services for which there are
low claims volume into the appropriate
classifications based on clinical patterns
and their resource consumption (63 FR
47562).
As discussed in the CY 2000 OPPS
final rule with comment period (65 FR
18482 through 18483), initial
implementation of the payment system
for hospital outpatient services was
delayed due to multiple extensions of
the proposed rule comment period, Year
2000 (Y2K) system concerns, and other
systems challenges in developing the
OPPS. Even though the BBRA of 1999
passed during that period of time, and
provided the Secretary with the
discretion to establish relative payment
weights under the OPPS based on mean
hospital costs, we determined that
reconstructing the database to evaluate

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the impact of using mean costs would
have postponed implementation of the
OPPS further. There were important
challenges at the time, including being
responsive to stakeholder comments
regarding the initial OPPS and
addressing implementation issues so
that the payment and claims processing
systems would work correctly. To do so
in a timely manner was critical;
therefore, median costs were selected as
an appropriate metric on which to base
payment relativity, both based on the
statistical reasons noted above and
practical implementation concerns.
In addition to the reasons discussed
above, developing relative payment
weights based on median costs was a
way of attenuating the impact of cost
outlier cases. In an environment where
facility coding practices were still in
their infancy, median costs served to
minimize the impact of any coding
errors. Using median costs to establish
service cost relativity served the same
function as any measure of central
tendency (including means), ensuring
that the relative payment weights used
in the OPPS would, in general, account
for the variety of costs associated with
providing a service.
Since the beginning of the OPPS and
throughout its development, we have
striven to find ways to improve our
methods for estimating the costs
associated with providing services. The
dialogue with the public regarding these
issues, the meaningful information and
recommendations that the Panel
(previously the APC Panel) has
provided, and the policies we have
established to better derive the costs on
which OPPS payment is calculated have
contributed to improving cost
estimation. However, challenges remain
in our continuing effort to better
estimate the costs associated with
providing services. These challenges
include our limited ability to obtain
more meaningful information from the
claims and cost report data available
and ensuring that the approach used to
calculate the payments for services
accurately captures the relative costs
associated with providing the services.
Over the years, we have implemented
many changes to the OPPS cost
modeling process to help address these
challenges.
To obtain more information from the
claims data we have available, we first
began bypassing codes from the
standard process to develop ‘‘pseudo’’
single claims in CY 2003 (67 FR 66746).
In CY 2006, this concept later evolved
into the bypass list (and its
corresponding criteria for addition)
which allows us to extract more cost
information from claims that would

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otherwise be unusable for modeling
service cost (70 FR 68525). In CY 2008,
we examined clinical areas where
packaging of services was appropriate,
which allows us to use more claims in
modeling the payments for primary
procedures and encourage providers to
make cost efficient choices where
possible (72 FR 66610 through 66649).
In the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66590), we
noted that this packaging approach
increased the number of ‘‘natural’’
single bills, while simultaneously
reducing the universe of codes requiring
single bills for ratesetting. Beginning in
CY 2008, we also established composite
APCs for services that are typically
provided together in the same
encounter, allowing us to use even more
previously unusable claims (due to
containing multiple separately payable
major codes) for modeling service cost,
as well as develop APCs that reflect the
combined encounter (72 FR 66650
through 66658). We have implemented
many steps to obtain more information
from the claims and cost report data
available to us, and continue to examine
ways in which we can derive more
meaningful information on service costs
for use in ratesetting.
In our experience in working with the
OPPS, we also have implemented many
processes to ensure that the cost
information we derive from cost reports
and claims data is accurate. In the
beginning of the OPPS, we implemented
a cost trim of three standard deviations
outside the geometric mean cost, similar
to the cost data trim in the IPPS,
because it would ensure that the most
aberrant data were removed from
ratesetting (65 FR 18484). We also have
implemented similar trims to the
hospital departmental CCR and claims
based unit data related to the services
(71 FR 67985 through 67987).
During the CY 2008 rulemaking cycle,
we contracted with Research Triangle
Institute, International (RTI) to examine
possible improvements to the OPPS cost
estimation process after RTI had
investigated similar issues in the IPPS
setting (72 FR 66659 through 66602).
There was significant concern that
charge compression, which results from
the hospital practice of attaching a
higher mark-up to charges for low cost
supplies and a lower mark-up to charges
for higher cost supplies, was influencing
the cost estimates on which the OPPS
relative payment weights are based.
Based on RTI’s recommendations in its
July 2008 report, available on the Web
site at: http://www.rti.org/reports/cms/
HHSM-500-2005-0029I/PDF/Refining_
Cost_to_Charge_Ratios_200807_
Final.pdf, in CY 2009, we finalized

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modifications to the Medicare cost
report form to create an ‘‘Implantable
Medical Devices Charged to Patients’’
cost center to address public
commenters’ concerns related to charge
compression in the ‘‘Medical Supplies
Charged to Patients’’ cost center (73 FR
48458 through 48467). These
modifications helped to address
potential issues related to hospital
mark-up practices and how they are
reflected in the CCRs on the Medicare
hospital cost reporting form.
In CY 2010, we incorporated a line
item trim into our data process that
removed lines that were eligible for
OPPS payment in the claim year but
received no payment, presumably
because of a line item rejection or denial
due to claims processing edits (74 FR
60359). This line item trim was
developed with the goal of using
additional lines to model prospective
payment.
In addition to these process changes
that were designed to include more
accurate cost data in ratesetting, we
have developed a number of
nonstandard modeling processes to
support service or APC specific changes.
For example, in the device-dependent
APCs, we have incorporated edits into
the cost estimation process to ensure
that the full cost of the device is
incorporated into the primary
procedure.
While we have already implemented
numerous changes to the data process in
order to obtain accurate resource cost
estimates associated with providing a
procedure, we continue to examine
possible areas of improvement. In the
past, commenters have expressed
concern over the degree to which
payment rates reflect the costs
associated with providing a service,
believing that, in some cases, high cost
items or services that might be packaged
are not accordingly reflected in the
payment weights (72 FR 66629 through
66630 and 66767). As mentioned above,
in the CY 2008 OPPS/ASC final rule
with comment period, we developed a
packaging policy that identified a
number of clinical areas where services
would be commonly performed in a
manner that was typically ancillary and
supportive to other primary procedures.
Packaging for appropriate clinical areas
provides an incentive for efficient and
cost-effective delivery of services. In
that final rule with comment period, we
recognized that there were strengths and
weaknesses associated with using
median costs as the metric for
developing the OPPS relative payment
weights (72 FR 66615). Medians are
generally more stable than means
because they are less sensitive to

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extreme observations, but they also do
not reflect subtle changes in cost
distributions. As a result, the use of
medians rather than means under the
OPPS usually results in relative
payment weight estimates being less
sensitive to packaging decisions, as well
as changes in the cost model due to
factors such as the additional claims
processed between the proposed rule
and the final rule.
The OPPS, like other prospective
payment systems, relies on the concept
of averaging, where the payment may be
more or less than the estimated costs of
providing a service or package of
services for a particular patient (73 FR
68570). Establishing the cost-based
relative payment weights based on a
measure of central tendency, such as
means or medians, ensures that the
payments for the package of services
should generally account for the variety
of costs associated with providing those
services. Prospective payments are
ultimately adjusted for budget neutrality
and updated by an OPD update factor,
which affects the calculated payments,
but the accuracy of the cost-based
weights is critical in ensuring that the
relative payment weights are adjusted
appropriately.
We recognize that median costs have
historically served and may continue to
serve as an appropriate measure on
which to establish relative payment
weights. However, as discussed above,
the metric’s resistance to outlier
observations is balanced by its limited
ability to be reflective of changes to the
dataset used to model cost or changes
beyond the center of the dataset. While
there was significant concern in the
initial years of the OPPS regarding
outlier cost values and the possible
introduction of potentially aberrant
values in the cost modeling, hospital
experience in coding under the system,
the data modeling improvements we
have made to obtain more accurate cost
information while removing erroneous
data, and other changes in our
experience with the system have all
lessened the potential impact of error
values (rather than actual, accurate cost
outliers). As noted above, over the
history of the OPPS, we have made
multiple refinements to the data process
to better capture service costs, respond
to commenter concerns regarding the
degree to which OPPS relative payment
weights accurately reflect service cost
and APC payment volatility from year to
year, and better capture the variety of
resource cost associated with providing
a service as provided under section
1833(t)(2)(C) of the Act. In the CY 2013
OPPS/ASC proposed rule (77 FR 45098),
we proposed for CY 2013 to shift the

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basis for the CY 2013 APC relative
payment weights that underpin the
OPPS from median costs to geometric
mean-based costs.
Geometric means better encompass
the variation in costs that occur when
providing a service because, in addition
to the individual cost values that are
reflected by medians, geometric means
reflect the magnitude of the cost
measurements, and are thus more
sensitive to changes in the data. We
believe developing the OPPS relative
payment weights based on geometric
mean costs would better capture the
range of costs associated with providing
services, including those cases
involving high-cost packaged services,
and those cases where very efficient
hospitals have provided services at
much lower costs. The use of geometric
mean-based costs also would allow us to
detect changes in the cost of services
earlier, because changes in cost often
diffuse into the industry over time as
opposed to impacting all hospitals
equally at the same time. Medians and
geometric means both capture the
impact of uniform changes, that is, those
changes that influence all providers, but
only geometric means capture cost
changes that are introduced slowly into
the system on a case-by-case or hospitalby-hospital basis.
We stated that an additional benefit of
this proposed policy relates to the 2
times rule, described in section III.B. of
the proposed rule, which is our primary
tool for identifying clinically similar
services that have begun to deviate in
terms of their financial resource
requirements. We stated that basing
HCPCS projections on geometric mean
costs would increase the sensitivity of
this tool as we configure the APC
mappings because it would allow us to
detect differences when higher costs
occur in a subset of services even if the
number of services does not change.
This information would allow us to
better ensure that the practice patterns
associated with all the component codes
appropriately belong in the same APC.
In addition to better incorporating
those cost values that surround the
median and, therefore, describing a
broader range of clinical practice
patterns, we stated in the proposed rule
that basing the relative payment weights
on geometric mean costs may also
promote better stability in the payment
system. In the short term, geometric
mean-based relative payment weights
would make the relative payment
weights more reflective of the service
costs. Making this change also may
promote more payment stability in the
long term by including a broader range
of observations in the relative payment

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weights, making them less susceptible
to gaps in estimated cost near the
median observation and also making
changes in the relative payment weight
a better function of changes in estimated
service costs.
We noted that this proposed change
would bring the OPPS in line with the
IPPS, which utilizes hospital costs
derived from claims and cost report data
to calculate prospective payments, and
specifically, mean costs rather than
median costs to form the basis of the
relative payment weights associated
with each of the payment classification
groups. We stated in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74181) our intent to explore methods
to ensure our payment systems do not
provide inappropriate payment
incentives to provide services in one
setting of care as opposed to another
setting of care based on financial
considerations rather than clinical
needs. By adopting a means cost-based
approach to calculating relative
payment weights under the OPPS, we
stated that we expect to achieve greater
consistency between the methodologies
used to calculate payment rates under
the IPPS and the OPPS, which would
put us in a better position from an
analytic perspective to make crosssystem comparisons and examine issues
of payment parity.
For the reasons described above, in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45098), we proposed to establish
the CY 2013 OPPS relative payment
weights based on geometric mean costs.
While this would involve a change to
the metric used to develop the relative
payment weights, the use of claims
would not be affected. We proposed to
continue to subset claims using the data
processes for modeling the standard
APCs and the criteria-based APCs
described in section II.A.2. of the
proposed rule, where appropriate. The
reasoning behind implementing
modeling edits or changes in the
criteria-based APCs would not be
affected because the process of
developing the relative payment weights
based on a measure of central tendency
is the last step of the modeling process,
and occurs only once the set of claims
used in ratesetting has been established.
One important step that occurs after
the development of relative payment
weights is the assignment of individual
HCPCS codes (services) to APCs. In our
analysis of the impacts of a process
conversion to geometric means, we
determined that the change to means
would not significantly influence the
application of the 2 times rule. Very few
services would need to be shifted to
new APCs because of 2 times rule

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violations because the use of geometric
means would resolve some violations
that would exist under the use of
medians, even as it creates other
violations due to new cost projections.
The net impact of the proposed change
results in seven more violations of the
2 times rule created by the entire
rebasing process than would exist if
median-based values were used.
During the development of this
proposed policy, we also determined
that the cumulative effect of data shifts
over the 12 years of OPPS introduced a
number of inconsistencies in the APC
groupings based on clinical and
resource homogeneity. We believe that a
shift to payments derived from
geometric means would improve our
ability to identify resource distinctions
between previously homogenous
services, and we intend to use this
information over the next year to
reexamine our APC structure and
assignments to consider further ways of
increasing the stability of payments for
individual services over time.
We noted that this proposed policy to
establish all OPPS relative payment
weights using geometric mean costs
would apply to all APCs that would
have previously been paid based on
median costs. In addition, we proposed
to calculate the relative payment
weights for line item based payments
such as brachytherapy sources, which
were discussed in section II.A.2.d.(6) of
the proposed rule, as well as blood and
blood products, which were discussed
in section II.A.2.d.(2) of the proposed
rule, based on their proposed geometric
mean costs for the CY 2013 OPPS.
We indicated that the CY 2013
proposed policy to base relative
payment weights on geometric mean
costs would specifically include the
CMHC and hospital-based partial
hospitalization program APCs, which
were previously based on median per
diem costs. Their estimated payments
would continue to be included in the
budget neutral weight scaling process,
and their treatment is similar to other
nonstandard APCs discussed in section
II.A. of the proposed rule. The process
for developing a set of claims that is
appropriate for modeling these APCs
would continue to be the same as in
recent years, with the only proposed
difference being that a geometric mean
per diem cost would be calculated
rather than a median per diem cost. The
proposed CY 2013 partial
hospitalization payment policies were
described in section VIII. of the
proposed rule.
In the proposed rule, we stated that
we believe it is important to make the
transition from medians to means across

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all APCs in order to capture the
complete range of costs associated with
all services, and to ensure that the
relative payment weights of the various
APCs are properly aligned. If some
OPPS payments calculated using
relative payment weights are based on
means while others are based on
medians, the ratio of the two payments
will not accurately reflect the ratio of
the relative costs reported by the
hospitals. This is of particular
significance in the process of
establishing the budget neutral weight
scaler, discussed in section II.A.4. of the
proposed rule.
We noted that the few exceptions to
the applications of the geometric meanbased relative payment weights would
be the same exceptions that exist when
median-based weights are applied,
including codes paid under different
payment systems or not paid under the
OPPS, items and services not paid by
Medicare, items or services paid at
reasonable cost or charges reduced to
cost, among others. For more
information about the various proposed
payment status indicators for CY 2013,
we referred readers to Addendum D1 to
the proposed rule (which was available
via the Internet on the CMS Web site).
We proposed for CY 2013 that
payment for nonpass-through separately
payable drugs and biologicals will
continue to be developed through its
own separate process. Payments for
drugs and biologicals are included in
the budget neutrality adjustments,
under the requirements in section
1833(t)(9)(B) of the Act, but the budget
neutral weight scaler is not applied to
their payments because they are
developed through a separate
methodology, outside the relative
payment weight based process. We
noted that, for CY 2013, we proposed to
pay for nonpass-through separately
payable drugs and biologicals under the
OPPS at ASP+6 percent, based upon the
statutory default described in section
1833(t)(14)(A)(iii)(II) of the Act. Also, as
is our standard methodology, for CY
2013, we proposed to use payment rates
based on the ASP data from the fourth
quarter of CY 2011 for budget neutrality
estimates, packaging determinations,
and the impact analyses. For items that
did not have an ASP-based payment
rate, such as some therapeutic
radiopharmaceuticals, we proposed to
use their mean unit cost derived from
the CY 2011 hospital claims data to
determine their per day cost. The
nonpass-through separately payable
drug and biological payment policy for
CY 2013 is described in greater detail in
section V.B. of the proposed rule and
this final rule with comment period.

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Comment: Many commenters
expressed cautious support for the
proposal to calculate the relative
payment weights based on geometric
mean costs. The commenters believed
that the inclusion of additional cost data
in developing the APC relative payment
weights would represent an
improvement to the ratesetting process,
while the generally limited provider
impacts and enhanced sensitivity to cost
changes in calibrating the 2 times rule
would be appropriate. While the
commenters supported improvements in
the accuracy of the OPPS relative
payment weights and the goals of the
proposed policy, they requested that
CMS proceed with caution and
transparency in this process to avoid
unintended consequences on
beneficiaries and hospitals. The
commenters also suggested that CMS
monitor changes in frequency and cost
distributions for services for several
years to ensure that no access to care
issues develop as a result of the
geometric means-based payment policy.
Several commenters requested a
transitional approach to relative
payment weights based on geometric
mean costs to mitigate any potentially
negative payment effects.
Response: We appreciate the
commenters’ support. As discussed in
the CY 2013 OPPS/ASC proposed rule,
we believe that using geometric mean
costs to calculate the APC relative
payment weights will make them more
reflective of the range of service costs,
introduce greater sensitivity to the 2
times rule, as well as potentially allow
for cross-system payment comparisons
(77 FR 45094). We believe that the
numerous changes we have made to the
data process to obtain additional
information from the available cost
report and claims data and ensure the
accuracy of the cost estimation, in
addition to hospital experience with the
OPPS, have prepared us to make this
incremental change. We agree that the
change to base the relative payment
weights on geometric mean costs is
appropriate.
We recognize the concerns that
commenters have regarding a
transitional process towards geometric
mean-based APC payment and the
possibility that payment fluctuations
based on both the naturally occurring
variation from year to year and those
variations associated with basing the
relative payment weights on geometric
mean costs may occur. However, we do
not believe that an approach to
geometric mean-based OPPS relative
payment weights beyond the changes
we have proposed for the CY 2013 OPPS
is necessary or appropriate. Prior to

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proposing this change, we evaluated the
last 4 years of OPPS claims data to
model the fluctuations that would have
resulted from geometric or arithmetic
means in comparison to our traditional
medians. We determined that there was
no significant difference in the degree of
fluctuation with geometric means or
with medians, and we also believe that
the one-time differences created by the
switch are typically small; therefore, we
do not believe that a transition period is
necessary. In the CY 2013 OPPS/ASC
proposed rule, we noted that we made
limited changes in APC assignments
except where necessary as a result of the
proposal to base the relative payment
weights on geometric mean costs and
stated our intention to further examine
appropriate OPPS reconfigurations in
the future to resolve potential clinical or
resource homogeneity inconsistencies in
the future to promote stability (77 FR
45097). Geometric mean costs more
fully encompass the range of costs,
including packaged costs, associated
with providing a service and, therefore,
may result in payments that are more
reflective of actual cost. Transitioning
into a geometric mean-based system
would not be practical, as one of the
overarching goals of using geometric
mean costs is better relativity across the
OPPS. Applying a phased-in approach
would potentially distort the relativity
of the OPPS payment weights. As we
discuss in section II.A.2 of this final rule
with comment period, there are various
reasons that contribute to cost
fluctuation from year to year. We
believe that artificially introducing
stability into the payment system could
potentially distort the relativity of the
payment system, especially when doing
so could potentially dampen both
decreases and increases.
We agree that continued monitoring
of changes in cost distributions and the
frequency of services is important in
understanding the impact of basing the
APC relative payment weights on
geometric mean costs. However, we note
that the frequency of services may
change from year to year based on a
variety of factors, issues unrelated to
OPPS payment, and situations where
APC overpayment may have potentially
led to inappropriate incentives to
provide care. Despite the consideration
of the many reasons that may cause
service frequency and cost structures to
change over time, we will continue to
monitor these data, as well as make that
information available online through the
cost statistics files associated with each
rulemaking cycle.
Comment: A number of commenters
disagreed with the proposal to base the
CY 2013 OPPS/ASC relative payment

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weights on geometric mean costs. Many
of these commenters preferred
continued use of median costs in the
ratesetting process. Several commenters
believed that the geometric mean costs
were inappropriate for OPPS ratesetting
for statistical reasons, including their
heightened sensitivity to lower cost
inliers and lowered sensitivity for highcost outliers relative to arithmetic
means. Other commenters were
concerned about the range between
minimum and maximum cost values for
each APC, and believed them to be
implausible. A few commenters stated
that while there have been advances in
coding practice over the past decade,
the same problems of upcoding and
outliers will continue to exist, and that
the original selection of median costs
would continue to be appropriate. One
commenter suggested that, beyond the
initial years of the OPPS, there have
been no cost reporting and coding
practice improvements over the years.
Response: We noted in the CY 2013
OPPS/ASC proposed rule that median
costs have historically served and may
continue to serve as an appropriate
measure on which to base the relative
payment weights (77 FR 45096).
However, we believe that a policy of
developing the relative payment weights
based on geometric mean costs would
represent an improvement beyond our
current use of the cost information
available to us.
In our discussion in the CY 2013
OPPS/ASC proposed rule relating to
basing the relative payment weights on
geometric mean costs, we stated that
there are a variety of reasons that one
metric might be more appropriate than
the other. However, the reasoning for
selecting one metric relative to any
others must be considered in the context
of the issues at that time. In our
discussion of our proposal to develop
the relative payment weights based on
geometric mean costs, we described the
issues at the initial development of the
OPPS and our original reasons for
selecting median costs as the preferred
metric. We also described in the
proposed rule the many data process
changes that we made over the history
of the OPPS, including various
trimming methodologies, processes to
generate more information from the
claims and cost report data available to
us, steps to address charge compression,
modeling and payment edits, modeling
configurations to make payment more
reflective of the service or services
provided, and others (77 FR 45095
through 45096). In addition, we
discussed our belief that CMS and
hospital experience with the OPPS as
well as the coding methodologies for

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payment would have improved over the
past decade. Finally, we discussed
various aspects of the geometric means
proposal that would affect other policy
areas, such as ASC payment, application
of the 2 times rule, and other payment
methodologies under the OPPS. For
these reasons, we established the CY
2013 OPPS/ASC proposal to base the
relative payment weights using
geometric mean costs (77 FR 45094
through 45098).
We recognize that there are different
aspects of each statistical metric that
may make any of them preferable to the
others. Means-based methodologies,
whether arithmetic means or geometric
means, incorporate a broader range of
estimated cost values into the relative
payment weights, whereas medians are
less sensitive to that range of costs as
well as any changes in them. Depending
on whether sensitivity towards changes
in service costs is viewed as a relevant
objective or not may guide whether
selecting means or medians is a
preferable alternative. As described
above, several commenters have
suggested that the lack of sensitivity
towards cost changes is precisely why
medians remain the preferable option.
However, in the CY 2013 OPPS/ASC
proposed rule, we noted comments in
the past expressing concern regarding
the degree to which payment rates failed
to reflect the costs associated with
providing a service (77 FR 45096). In
light of those concerns, we believe that
geometric means and their ability to
better reflect packaging patterns and
ranges in cost represent an improvement
in our cost estimation process.
With regards to the varying level of
sensitivity towards cost outliers that
geometric means represent, as described
above, there are various benefits and
drawbacks to each selected metric.
Accordingly, the relative payment
weights associated with any service may
rise or fall, depending on the specific
distribution of reported costs, and
where the geometric mean appears not
only relative to the median but also that
of APC 606 (Level 3 Hospital Clinic
Visits). While commenters have
suggested that there is a systemic risk
for ‘‘implausible’’ values, we believe
that many of the outlier values present
in the data represent actual cost outliers
rather than errors, with different
accounting assumptions creating
different populations of values. At the
low-cost and high-cost ends of the cost
spectrum for each APC, there is thus the
potential for both ‘‘spurious’’ (atypical
and/or incorrect) data as well as
accurate data to appear. Furthermore,
while the minimum and maximum
values identify the most extreme outlier

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values, they do not necessarily reflect
the distribution of costs within the
model; the minimum and maximum
values may not accurately represent the
range of costs describing the codes with
greatest representation within an APC.
While commenters suggested that
there has not been much of an
improvement we believe the possibility
exists that conditions and circumstances
have stabilized to a certain degree over
the past decade. Part of the argument for
medians at the inception of the OPPS
was that the coding system was still
new, as was our use of claims data to
calculate prospective payments. Given
the many improvements we have made
to our internal process of modeling and
using data, we would expect that coding
and cost reporting practices have
improved over that time period as both
CMS and hospitals have had the
opportunity to develop more experience
with the system.
Comment: Some commenters believed
that aligning the OPPS relative payment
weights on geometric mean costs would
hamper hospitals’ ability to plan
budgets for each year, given the degree
to which payments might fluctuate. The
commenters also believed that
geometric mean costs would lead to
greater instability of OPPS payment.
Some commenters were concerned
about the negative impacts of APC
payments declining due to use of
geometric mean costs, believing that
those changes hindered hospitals’
ability to provide high quality health
care.
Response: We do not believe that the
policy of calculating relative payment
weights based on geometric mean costs
will inevitably lead to greater payment
instability. There are a variety of factors
that may contribute to payment
volatility from year to year, as we have
previously described in section II.A.2. of
this final rule with comment period.
While there may be some interim
fluctuation in the short term as we
realign the OPPS to be based on
geometric mean costs, we expect many
of those issues to stabilize over time.
When discussing payment stability, the
natural inclination is to view stability as
a fixed numerical value that stays the
same over time. We evaluated this
numerical definition of stability and
determined that it was not significantly
greater when geometric means were
used. However, another view of
payment stability is through the
relationship between costs and the
degree to which they are reflected in
payments. We believe that a policy of
using geometric mean costs to develop
the APC relative payment weights will
make them more reflective of the costs

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associated with providing services.
Further, using geometric mean costs
helps ensure that the relative payment
weights accurately reflect the
distribution of costs associated with
providing services, and mitigates the
possibility that any fluctuation occurs
due to gaps in the distribution of the
model, rather than any material changes
to the service costs.
We also disagree with the
commenter’s belief that use of geometric
mean costs in calculating the relative
payment weights will lead to hospitals
being unable to provide access to highquality health care. Geometric mean
costs encompass a broader range of
costs, and will result in payments that
more fully reflect the range of costs both
on the low and high ends, than medianbased costs. We believe that this will
ultimately be an improvement in the
data process as well as OPPS payment
policy. Although, as commenters have
noted, there are many APC payment
rates that decline as a result of the
alignment of relative payments weights
based on geometric mean costs, we note
that a number of APC payment rates
also increase as a result of this policy.
We believe that, for most provider
classes that furnish a mixed array of
services to meet the various needs of
their patients, the financial impacts
from the changes in APC payment rates
will be relatively limited. In
consideration of all of those factors, we
believe that the use of geometric mean
costs will result in APC payments that
are more reflective of the range of
service costs.
Comment: One commenter believed
that median costs and the fact that they
do not reflect subtle changes in cost
distributions was appropriate to use to
determine the OPPS payment rates,
given aberrant coding, billing, and
charging practices by hospitals. The
commenter also believed that OPPS
outlier payments would address issues
where high-cost services did not have
those costs reflected in their APC
payments. Several commenters
suggested that lack of sensitivity
towards packaging patterns when using
median cost was why median costs
would be a more appropriate metric.
Other commenters believed that the
hospital claims do not provide reliable
data and that the Medicare cost report
data at the departmental level are not
accurate because there is no financial
incentive to report accurate data.
Commenters also stated that RTI
identified flawed cost data and pointed
out that charges on hospital claims do
not match those on the cost reports. One
commenter requested that CMS delay
the proposal to use geometric mean

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costs in ratesetting until it can verify
that the data are not flawed.
Response: We appreciate the need for
accurate and reliable cost information
for use in the OPPS ratesetting process.
Many of the changes we have made to
our data process over the past decade
have arisen with consideration of the
need for accurate and reliable cost
information. To a certain extent, we can
mitigate the issues raised by those
concerns through data process changes
like trimming methodologies, such as
those for the line items as well as cost
and unit outliers, and modeling
changes, such as those for composite
and device-dependent methodologies, to
more accurately estimate cost. However,
more broadly, we rely on OPPS
providers to submit accurate cost and
charge information to establish the
relativity in the OPPS on which APC
payments are based.
We value the comments that
stakeholders provide with regards to
potential data improvements as well as
methods by which we can obtain more
accurate data. In situations such as the
proton beam APCs for the CY 2013
OPPS/ASC proposed rule and
subsequent information about cost
report revisions and inaccurate coding,
we must balance our reliance on
information from OPPS providers with
the complementing goal of obtaining
accurate cost information. As we
described in the CY 2013 OPPS/ASC
proposed rule, we have taken steps to
address issues such as charge
compression in areas such as the former
‘‘Medical Supplies Charged to Patients’’
cost center by establishing a new
standard cost center for ‘‘Implantable
Medical Devices Charged to Patients.’’
In the case of calculating relative
payment weights based on geometric
mean costs, we believe that such a
change, while affecting the OPPS very
broadly, would not involve much
manipulation of the data. Although
several commenters have suggested that
the lack of sensitivity towards cost
outliers is appropriate, we also have
received comments and HOP Panel
presentations in the past regarding the
degree to which APC relative payments
fail to reflect high-cost packaged
services. Calculating relative payment
weights based on geometric mean cost is
one way of being responsive to those
concerns regarding the degree to which
correctly reported claims with
unusually high costs are incorporated
into the relative payment weights.
While we agree that OPPS outliers do
help mitigate the financial risk
associated with performing certain
services that require additional
complexity or resources, we also believe

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that developing the relative payment
weights based on geometric mean-based
costs will help ensure that payments are
more reflective of the range of service
cost.
In the CY 2013 OPPS/ASC proposed
rule, in our proposal to base the CY
2013 relative payments weights on
geometric mean costs, we described the
many changes we have made since the
inception of the OPPS to improve upon
our data process. These improvements
have helped us obtain more information
from the claims and cost report data we
have available to us, in addition to
ensuring the accuracy of the resource
cost estimates we use to model the APC
relative payment weights. While we
continue to look for ways in which we
can improve the OPPS and our
modeling of the estimated costs used to
develop the relative payment weights,
we do not believe that the cost
information and methods through
which we establish the relative payment
weights are inherently flawed. Aligning
the relative payment weights based on
geometric mean costs may be a
significant change in how the relative
payment weights are calculated;
however, the change can be viewed as
incremental based on the other data
improvements throughout the history of
the OPPS, as described earlier in this
section.
We believe that incentives exist for
accurate cost reporting beyond direct
financial incentives. We believe that
external perceptions of incorrect
reporting are based primarily on the
failure to consider limitations of the
data collection methodology when
making assumptions and conclusions.
The Medicare cost report form allows
hospitals to report in a manner that is
consistent with their own financial
accounting systems and, therefore,
should be accurate for each individual
hospital.
The regulations at 42 CFR
413.24(f)(4)(iv) specify the certification
statement on the first page of the
Medicare cost report (Hospital and
Hospital Heath Care Complex Cost
Report, Form CMS–2552–10) that must
be signed by the hospital’s administrator
or chief financial officer certifying that
the data contained in the cost report are
true and accurate. Also included on the
certification page is a ‘‘penalty
statement’’ which conveys to the
hospital official signing the cost report
that misrepresentation or falsification of
any information contained in the cost
report is punishable by criminal, civil,
and administrative action, fine, and/or
imprisonment under Federal law.
Further, the ‘‘penalty statement’’ also
states that if services identified in the

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cost report were provided or procured
through the payment directly or
indirectly of a kickback or were
otherwise illegal, then criminal, civil,
and administrative action, fine, and/or
imprisonment may result. We believe
that the possibility of mandatory cost
report adjustments by fiscal
intermediaries or MACs where
erroneous amounts are found to exist
and the possibility of Federal
prosecution where potentially false
claims and/or fraudulent conduct are
found to exist act as reasonable
incentives to complete the cost report
accurately. Further, the cost report data
and their use in the OPPS cost
estimation and payment rate
development process, combined with
potential penalties for inaccurate
reporting, provide financial incentive
for reporting costs accurately.
We recognize that hospitals are
complex entities, each having their own
accounting systems and reporting
methodology. As such, the cost and
charge data that they provide through
the Medicare cost report forms are
structured in a way that reflects their
own internal accounting systems.
Although we would obtain the most
accurate information by using a highly
structured reporting format across
hospitals, in using these data for OPPS
ratesetting, we must balance between
our use of these data for the cost
estimation process and the burden
associated with forcing hospitals to
convert to a government-mandated
standardized financial management
system. The current mechanism allows
us to collect information that is accurate
in the aggregate and that further, at a
granular level, reflects the relative
allocation of costs to departments and
services by the industry as a whole
without creating additional burden.
We note that while the RTI
investigation into charge compression
and the calculation of the relative
payment weights yielded areas where
the cost estimation process could be
improved, there was no suggestion that
the process or data itself were
fundamentally flawed. We also note that
we have tried to be responsive to the
concerns raised in the RTI report
regarding charge compression and the
accuracy of the relative payment
weights, for example, through the
creation of the new ‘‘Implantable
Medical Devices Charged to Patients’’
standard cost center or through the
packaged cost redistribution to account
for pharmacy overhead in the past
several years. Regarding the concern
about the matching process between the
data used to calculate the CCRs on the
Medicare cost report and the claims-

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based charges, we note that we use the
most updated accurate information
made available to us and match them to
the degree possible to accurately
calculate estimated costs. In the revenue
code-to-cost center modeling crosswalk
that we use to estimate cost, the
hierarchy of cost center CCRs is based
on our best assumption of where those
revenue code charges would be placed
even though it may not necessarily
reflect every hospitals’ individual cost
report structure.
As discussed earlier in this section,
we have made many improvements to
the OPPS data process over the course
of the past decade. Many of those
changes were intended to either derive
more information from the claims and
cost report data we have available to us,
while others were intended to estimate
cost in a way that more accurately
represented the provision of the service
and associated resources. We believe
that basing the relative payment weights
on geometric mean costs will improve
the degree to which our APC payments
reflect the range of resource costs
associated with providing services, and
represents an incremental data
improvement. Therefore, we do not
believe it is appropriate to postpone the
use of geometric mean costs in
establishing the CY 2013 OPPS/ASC
relative payment weights.
Comment: Several commenters
requested clarification regarding why
CMS selected geometric mean costs as
the metric for our proposed policy for
calculating the CY 2013 OPPS/ASC
relative payment weights rather than
arithmetic mean costs. Other
commenters noted that using arithmetic
means would bring the OPPS even
further in line with the IPPS ratesetting
methodology.
Response: While developing the
proposal to establish the CY 2013 OPPS/
ASC relative payment weights using
geometric mean costs, we also reviewed
the volatility associated and impact of
an OPPS based on arithmetic mean
costs. We also considered many of the
same issues that commenters described
with respect to the use of arithmetic
means, including whether their ability
to more sensitively consider the variety
of cost patterns, provide a better
reflection of total costs, and to
synchronize the OPPS system with the
IPPS methodology, would be a
preferable option among the three
metrics.
We noted that because only natural
and ‘‘pseudo’’ single major claims
would be used to model the relativity of
the OPPS, arithmetic means would not
truly reflect total cost in the system.
Although arithmetic mean costs would

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be more sensitive towards outlier values
than both geometric mean costs and
median costs, there would also be
greater volatility associated with the use
of them due to their sensitivity towards
outlier values. Similarly, the short-term
transition from medians to arithmetic
means would also include a greater
range of both positive and negative
provider payment impacts and would
result in the need for more
reconfiguration of the APCs to resolve 2
times rule violations than geometric
mean costs. While we have discussed
our intention to perform a thorough
review of the OPPS in the future that
may involve more significant
reconfiguration, that review would be
performed with the goal of developing
more accurate and stable payment rates,
to the extent that they reflect the range
of service costs. Although we stated the
possibility of using these geometric
mean based payments for exploring
cross-system payment comparisons, we
recognize that there may be aspects of
each payment system data methodology
that may be unique. While using
arithmetic mean costs would potentially
capture the full range of costs better
than both geometric means and
medians, that benefit has limited value
in a relative system such as the OPPS,
where all total costs are reduced to
relative rates. Conversely, it also would
potentially allow an inappropriate
impact due to aberrant values because
there would be no mitigation of the
influence of outlier costs, which could
be accurate or aberrant values.
Therefore, we viewed the use of
geometric mean costs as a balanced
approach between both the strengths
and weaknesses of using medians and
arithmetic means.
Comment: Several commenters
expressed concern with regard to the
decline in APC payment to CMHCs due
to use of the geometric mean cost for
calculating the OPPS relative payment
weights, and recommended that CMS
continue to monitor the impact of its
payment policies on CMHCs.
Response: Over the past several years,
we have made changes to the
calculation of PHP relative payment
weights to more accurately align their
PHP APC payments to their specific
costs. These changes to PHP relative
payment weights have included
establishing a separate cost estimation
process based on provider type as well
as a two-tiered APC payment system
under which we pay one amount for
days with 3 services and a higher
amount for days with 4 or more services
for both CMHC and hospital-based
PHPs. As discussed in the CY 2013
OPPS/ASC proposed rule, we believe

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that the use of geometric mean costs
rather than median costs in the
ratesetting process is one such
improvement because it allows the
payment metric to consider a broader
range of service costs (77 FR 45097). We
will continue to monitor the impact of
our payment policies on OPPS
providers, including CMHCs.
Comment: One commenter was
concerned with the minimum and
maximum values associated with APCs
0690 (Level I Electronic Analysis of
Devices) and 0105 (Repair/Revision/
Removal of Pacemakers, AICDs, or
Vascular Devices). In the case of APC
0690, the commenter suggested that the
APC payment rate be set to the median
cost and not allowed to drop below the
payment that CMS would have
calculated using medians. For CPT
0307T (Removal of intracardiac
ischemia monitoring device), the
commenter also believed that its
placement in APC 0105 was
appropriate. However, the commenter
requested that CMS perform an analysis
to determine whether some of the
procedures might be more appropriately
placed in a different APC.
Response: In the case of both of these
APCs, the presence of high-cost, lowvolume services in the claims used to
model each APC creates outliers that
foster the perception that the services
spread more evenly across the range
between the minimum and maximum
values than actually is the case. Those
minimum and maximum values
represent individual points at the most
extreme ends of the model, and include
service cost estimations that do not
contribute significantly enough to the
APC weight to be considered in the
application of the 2 times rule. In that
sense, those values can be misleading
because the minimum and maximum
should be considered as the most
extreme outlier cases; we evaluate the
range through the application of the 2
times rule, which only considers
services that have sufficient volume to
demonstrate stability and reliability and
which significantly contribute to the
relative payment weight of the APC.
Both medians and means are measures
of central tendency and have strengths
and weaknesses when considering the
degree to which they accurately
represent the dataset. Similarly, the
minimum and maximum values are
informative in identifying the most
extreme outliers of a dataset but do not
necessarily reflect the bulk of the
distribution.
For CPT codes 0305T and 0306T
which are assigned to APC 0690, we
note that the geometric mean cost
($34.78) was slightly higher than the

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median cost ($33.71) for the APC in the
data used for the CY 2013 OPPS/ASC
proposed rule. In addition, after
calculation of budget neutrality and
other adjustments, the national
unadjusted payment rate for a geometric
mean cost-based APC payment was
proposed to be higher than a median
cost-based one for CY 2013. Finally, for
prospective APC payment rates which
are calculated through the standard
process, we would not pay using the
cost as a rate but we would use the
estimated costs to establish the relative
payment weights on which OPPS
payments are based. Therefore, we are
not setting the payment rate for APC
0690 at the median cost.
We appreciate the commenters’
support regarding the placement of CPT
code 0307T in APC 0105. We do not
agree that having a wide distribution of
costs in an APC necessarily implies that
a problem in the construction of the
APC exists, particularly in cases where
we believe the clinical placement and
resource use is appropriate. As
described above, the minimum and
maximum values identified within each
CPT or APC are the most extreme
outliers, and may not necessarily reflect
where the majority of the cost estimates
are within each code. For application of
the 2 times rule discussed in section
III.B. of this final rule with comment
period, we only consider codes that are
‘‘significant’’ in their contribution
towards the cost estimates in the APC as
being useful in the identification of how
similar the services within an APC are
to each other, from a cost perspective.
However, this does not eliminate the
need to consider clinical factors when
constructing the APC assignments. We
do not believe that differences in the
distribution of costs for a service
automatically creates the need for
further study, especially because the
purpose of geometric mean costs is to
more fully include those cost
observations. Similarly, the APC
configurations are intended to group
together services with clinical and
resource homogeneity. However, in the
CY 2013 OPPS/ASC proposed rule, we
stated our intention of using the
information we have available to us to
reexamine the APC structure and
assignments to consider further ways of
increasing the stability of payments over
time, and will consider these issues as
we do so in the future.
Comment: Commenters expressed
concern with regard to the impact of the
use of geometric mean-based costs for
other specific APCs as well as certain
clinical areas. APCs that commenters
requested specific detail about included
APCs 0690 (Level I Electronic Analysis

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of Devices); 0105 (Repair/Revision/
Removal of Pacemakers, AICDs, or
Vascular Devices); 0331 (Combined
Abdomen and Pelvis CT without
Contrast); 0334 (Combined Abdomen
and Pelvis CT with Contrast); 0383
(Cardiac Computed Tomographic
Imaging); 0336 (Magnetic Resonance
Imaging and Magnetic Resonance
Angiography without Contrast); 0337
(Magnetic Resonance Imaging and
Magnetic Resonance Angiography
without Contrast followed by Contrast);
0308 (Positron Emission Tomography
(PET) imaging); 0402 (Level II Nervous
System Imaging); 0408 (Level III Tumor/
Infection Imaging); 0169 (Lithotripsy);
0385 (Level I Prosthetic Urological
Procedures); 0386 (Level II Prosthetic
Urological Procedures); and 0674
(Prostate Cryoablation). Other clinical
areas that commenters expressed
concern about included
otolaryngological and orthopaedic
procedures. One commenter requested
that CMS ensure that there was no
disproportionate impact to any given
medical specialty.
Response: In the case of these APCs,
generally the issue is that the geometric
mean costs reflect lower cost values
than otherwise indicated by the median
value. We have identified numerous
other data issues or policies beyond the
use of geometric mean costs that may
attribute to potential declines in the
relative payment weight.
For APCs 0331 and 0334, this is the
first year where actual data are available
for ratesetting based on the new CY
2011 computed tomography of
abdomen/pelvis codes: CPT codes
74176 (Computed tomography,
abdomen and pelvis; without contrast
material); 74177 (Computed
tomography, abdomen and pelvis; with
contrast material(s)); and 74178
(Computed tomography, abdomen and
pelvis, without contrast material in one
or both body regions, followed by
contrast material(s) and further sections
in one or both body regions). For more
discussion on the Computed
Tomography of Abdomen/Pelvis APCs,
we refer readers to section II.A.7.c. of
this final rule with comment period.
Another influencing factor may be the
use of the new standard cost center for
‘‘Implantable Devices Charged to
Patient’’. For device-dependent APCs
0385, 0386, and 0674, there may be
effects based on use of the new standard
cost center CCR being mapped to
revenues codes where appropriate. For
a discussion of the cost report CCRs
used to estimate service cost, we refer
readers to section II.A.1.c. of this final
rule with comment period.

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For APC 0169, the estimated costs of
the APC may have changed based on
corrections to the revenue code-to-cost
center crosswalk described in the
second correction notice to the CY 2012
OPPS/ASC final rule with comment
period (77 FR 24409). Further, because
CPT code 50590 (Lithotripsy,
extracorporeal shock wave) is the only
code used to model the APC, any
variation with the estimated costs for
the CPT code will directly affect the
APC relative payment weight.
For all the APCs referenced by
commenters, the relative payment
weights based on using geometric mean
costs now include a greater range of
resource costs associated with
furnishing the services. Declines in their
APC relative payment weights can
partially be attributable to these changes
in the degree to which the relative
payment are reflective of costs. As we
have noted, there also may be additional
influencing factors that have led to
those changes, including use of actual
rather than simulated claims data, the
use of the new ‘‘Implantable Medical
Devices Charged to Patients’’ standard
cost center, the corrections we made to
our revenue code-to-cost center
modeling crosswalk in our data process,
and others. We also note that, because
of budget neutrality, for each APC that
commenters identified as having
decreased payments, there are other
APCs that have increased payments. As
a general matter, we believe that, in
their totality, the newly based APC
payment rates better reflect the
underlying costs in both cases.
We have typically analyzed the
impacts of any proposals at the CPT
code, APC, and provider levels of
granularity, as most hospitals furnish a
variety of services to Medicare
beneficiaries. We do not believe that
observed declines or increases in the
payments for codes are typically
associated with any individual specialty
because, as we have noted, there are
both increases and decreases in relative
payment weight associated with this
proposal. Additionally, changes
generally are due to the degree to which
medians were insensitive to the range of
service costs.
Comment: One commenter expressed
concern regarding the impact of
geometric means-based payment on
blood products because many of the
blood product APCs would experience
declines in payment. The commenter
recommended that blood products
continue to be separately paid based on
simulated median costs or that a CY
2013 payment floor be set at the CY
2012 APC payment rates.

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Response: While we appreciate the
concerns expressed by the commenter,
we do not believe that it is appropriate
to establish the relative payment
weights using different cost metrics for
various APC categories. Doing so would
potentially distort the cost relativity and
APC payments of services paid through
the OPPS. We note that, to ensure that
the cost estimation process for blood
products is as accurate as possible, we
have continued to use simulated CCRs
where appropriate, as discussed under
section II.A.d.2. of this final rule with
comment period. Similarly, we do not
believe that setting a payment floor for
a specific set of services is appropriate.
The estimated resource costs associated
with providing a service change from
year to year and establishing arbitrary
payment floors would decrease the
degree to which APC payments reflect
the range of costs associated with
providing a service.
Comment: Commenters also
expressed concern regarding the use of
geometric mean costs as the basis for
APC relative payment weights for
brachytherapy sources and
recommended that they not be used in
establishing the relative payment
weights. The commenters believed that
geometric mean costs would be
inappropriate for use in ratesetting, in
particular for the case of brachytherapy
sources.
One commenter stated that the
geometric mean is inappropriate for use
in determining payment levels under
the OPPS because it will overemphasize
the weight of low and potentially
spurious values in the data. The
commenter had other statistical
concerns regarding the extent to which
there were high-cost and low-cost
outliers that they believed were not
plausible values as well as variation in
estimated costs for brachytherapy
relative to other OPPS services. The
commenter attributed that variation as
being due to hospital reporting
practices, and contrasted that variation
in the OPPS to the IPPS, where the
commenter believed the main concern
was high-cost outliers and high-cost
values. Under the commenter’s belief
that geometric means would pay
inadequately for brachytherapy, the
commenter also believed it would create
a disincentive to use brachytherapy in
the treatment of cancer and create
access to care issues. The commenter
stated that CMS would be acting
contrary to the intent of the cost-based
payment extensions for brachytherapy
payment from CY 2004 through CY
2009. Further, the commenter stated
that CMS did not provide sufficient
warning to other policymakers in CYs

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2010 and 2011 regarding the likelihood
that it might potentially change the cost
metric used to establish relative
payment weights. The commenter
believed that geometric mean costs
should not be used to develop the
relative payment weights of
brachytherapy sources.
Response: As with all other OPPS
services that would be affected by the
proposed policy, we do not believe that
the use of geometric mean costs in
establishing the APC relative payment
weights for brachytherapy sources is
inappropriate. While the use of
geometric mean costs will include the
weight of low values in the data, we
note that it also better incorporates cost
observations from the higher values in
the data. This can be seen in the
increases in the relative payment weight
for certain brachytherapy sources based
on using geometric mean costs. As
discussed earlier in this section, the
values now being included could
potentially include spurious values on
both ends of the dataset, as well as
legitimate and accurate data. We believe
that encompassing a broader range of
service costs in establishing the relative
payment weights is a technical
improvement and may increase the
degree to which payments reflect the
range of costs associated with providing
a service.
Both the IPPS and OPPS contain
reporting variations due to the different
charging practices among hospitals.
While we agree that some of the
variations in cost outlier values may be
due to the fact that brachytherapy
sources rely on charges and costs
associated with a CCR, that does not
imply that they are necessarily
inappropriate, as all OPPS payments
rely on charges and CCRs. As we have
noted earlier in this section, as long as
providers are using generally acceptable
accounting practices (GAAP), and the
cost report structure reflects their
charging practices, we believe that this
results in accurate calculations. While
the commenter has suggested that the
variation in the costs of brachytherapy
sources is inappropriate, this can be
attributed to both accounting and real
cost differences among the various
providers that furnish the service in
addition to low frequency of line items
which may be used to model cost.
Although medians may be less sensitive
to cost outliers, or even the range of
costs, we believe that is both a strength
and a weakness of that metric, but is not
a reflection of greater or lesser accuracy.
While commenters have provided
examples with a sample size of three
values to illustrate their point regarding
sensitivity to low cost values, we note

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that cases with this order of extreme
observations used to model the relative
payment weights would be
exceptionally rare. For example, the
commenter posited a reported charge of
$0.01 which is not only extremely
unlikely but also is not supported by
institutional claims processing. In
situations where there are few claims
available to model the service costs, the
basic issue is the claims volume and
their use in establishing the relative
payment weights, and not necessarily
the fact that medians or geometric
means are used. We can address small
claim volumes in some cases through
assigning similar services based on
resource costs or clinical similarity to
the same APCs. However, this method
of addressing variability based on low
claims volume is unavailable as a tool
for line item cost-based APCs.
We do not believe that changes in
payment based on the use of geometric
mean costs will create a disincentive
towards using brachytherapy as a viable
option in the treatment of cancer. As we
noted earlier in this section, there is
variation even among the brachytherapy
APCs, which suggests that some of those
APC payment rates may now better
reflect the range of costs associated with
them. There also is extreme variation in
the costs reported by individual
hospitals for each service within the
APC. In considering whether a median
cost-based system or a geometric meanbased system is more appropriate at this
juncture, the inclination is to view
declines in payments as aberrant,
without consideration of increases in
payment. However, it is equally possible
that medians and their lack of
sensitivity towards outliers may have
led to more payments based on
overstated costs than would have been
appropriate when considering the
broader range of service costs. As
discussed in an earlier response, we will
continue to monitor the impact of this
proposal to base the relative payment
weights on geometric mean costs.
With respect to the comments
regarding the process through which we
establish payment policy for each
prospective payment year, we note that
the OPPS rulemaking process occurs
annually, and is intended to give
providers notice as well as the
opportunity to inform rulemaking and
express their stances regarding various
policy proposals. While being able to
prepare for each rulemaking cycle so
that each prospective payment policy
proposal is known years in advance may
be preferred by commenters, it is not
operationally feasible. As we have
discussed in this section, as well as in
the CY 2013 OPPS/ASC proposed rule,

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the situations that were pressing during
the inception of the initial OPPS, and
the changes we have made since then,
have allowed us to consider different
issues as well as areas for improvement.
We believe that basing the relative
payment weights on geometric mean
costs is one such improvement.
Although Congress did extend the prior
cost-based methodology for
brachytherapy sources from CYs 2004
through 2009, we note that no such
additional extension has been enacted.
Further, the discretion to use a medianbased or mean-based system in
establishing the OPPS relative payment
weights predates those extensions, as
authorized by section 201(f) of the
BBRA of 1999.
While we recognize the concerns
regarding the payments for
brachytherapy sources based on
geometric mean costs, we continue to
believe that this change will result in
more accuracy in the cost estimation.
We do not believe that paying for some
services based on median costs while
using geometric mean costs for other
services is appropriate, equitable, or
consistent with statute. Further, using
different cost metrics for different
services could distort the relativity of
services within the system and increase
the inaccuracy and instability of service
payment.
Comment: Several commenters noted
that they had difficulty modeling the
budget neutrality and impact
calculations, and suggested that CMS
provide a more thorough explanation
before proceeding with the proposal to
establish OPPS relative payment
weights based on geometric mean costs.
The commenters stated that lack of a
study, in particular one that studies the
effect of using geometric mean costs as
the basis for the relative payment
weights over time, made it difficult for
them to make an informed decision. The
commenters also stated that an
explanation regarding the impacts was
necessary before proceeding, with
several commenters noting that the
effect of basing the relative payment
weights on geometric mean costs was
not evenly distributed by provider
types. One commenter disagreed that
there would generally be limited
financial impact to hospitals, due to the
fluctuations in certain APCs. Some
commenters claimed that the proposal
to base the relative payment weights on
geometric mean costs disproportionately
affected teaching hospitals. Other
commenters asked CMS to provide a list
of APCs whose costs fluctuated above a
certain threshold each year, so that
those APCs could be identified through
rulemaking for public comment and to

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allow for presentations before the HOP
Panel. A few commenters expressed
concern in using geometric mean costs
for small sample sizes, as was the case
with those associated with proton beam
therapy.
Response: For the past several years,
each OPPS/ASC rule has included a
discussion summarizing both our data
process, as well as the calculations
associated with budget neutrality and
hospital impacts. However, we also
make available online a claims
accounting document that summarizes
in great detail the claims manipulation
that goes into modeling the costs used
to develop the relative payment weights,
as well as the calculations and data
processes used to model budget
neutrality and the hospital impacts each
cycle. The budget neutrality and
hospital impacts portions of this
document were developed beginning
with the CY 2007 OPPS proposed rule,
and have been available for every OPPS
rulemaking cycle thereafter.
While we appreciate the concerns that
commenters have with regard to
studying the effects over time, we
believe that any increased fluctuations
due to geometric mean-based payments
are generally not significant enough to
create cause for concern. This data
process change applied to the cost
metric used to develop the relative
payment weights more fully captures
the range of costs associated with
providing a service. However, service
costs and APC payments fluctuate over
time for a variety of reasons, as we have
previously discussed in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74139). As we have
discussed earlier in this section, we will
continue to monitor the impact of using
geometric mean costs to establish the
APC relative payment weights and any
changes in service frequency or
beneficiary access. Our investigation
into the impact of using geometric mean
costs to establish the relative payment
weights also suggest that there should
be limited volatility in the payment
rates after this initial change. We note
that some services do have payment
decreases associated with using
geometric mean-based relative weights.
However, many services also experience
payment increases as a result of the
geometric mean-based calculation,
presumably because the relative
payment weights more accurately reflect
higher costs associated with provisions
of those services. Finally, we note that
the one-time effect of converting from
medians to means this year is not to be
confused with the much less significant
effect of year-to-year variation
associated with means.

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We agree with the commenters’
concern regarding the issue of APCs
with small sample sizes. However, our
concern has less to do with the use of
geometric mean costs being used to
model the relative payment weights
where they are appropriate, but more
with the degree to which a substantive
cost baseline can be established. In
general, APCs with relatively low
service costs or those where there is low
claims volume tend to be more
vulnerable to cost and payment
volatility. We continue to examine
methods and APC configurations, such
as larger bundles, to mitigate any
concerns related to those issues. As the
commenter discussed regarding the case
of proton beam therapy, there are
situations where the costs of the service
reflect only provision from a small
number of providers and, therefore, may
not establish a broad baseline as is the
case for most APCs. However, in the
case of the proton beam APCs, a
sufficiently large volume of claims had
been provided and the geometric means
helped carry out our intention of
capturing the full range of costs. As
discussed in the APC-specific policy
section of this final rule with comment
period, section II.D., the issues relayed
by the commenter primarily were due to
presumed idiosyncrasies and errors in
the submission of the cost reports,
which, in turn, affected the estimation
of costs, and was further impacted by
the coding practices at an individual
provider. We note that the potential of
these issues to affect the relative
payment weights would occur both
under a median-based system, provided
there was enough significant volume, as
well as under geometric mean costs.
In both the CY 2013 OPPS/ASC
proposed rule and in this CY 2013
OPPS/ASC final rule with comment
period, we have included a column in
the impact tables that separately shows
the effects of the use of geometric mean
costs on the APC relative payment
weights. At a very basic level, provider
categories that experienced more
significant negative or positive payment
impacts did so because of the mix of
services furnished by those providers
based on our claims data. We note that
the OPPS provider payment impacts
identified in section XXIII. of this CY
2013 OPPS/ASC final rule are relatively
limited. Some commenters have stated
that the policy of developing relative
payment weights using geometric mean
costs disproportionately affects teaching
hospitals; other commenters have noted
that the impacts are not identical based
on the provider categories. That
differential in the impacts is to be

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expected based on this policy, just as
any estimated payment impact based on
the mix of services that a hospital
provides will vary from year to year.
Because this policy affects the
calculation of the relative payment
weights and does not affect the relative
payment weights uniformly, it is natural
for the changes in those weights to have
corresponding variation reflected in the
provider impacts based on the mix of
services furnished by providers. In the
provider impact table in this CY 2013
OPPS/ASC final rule with comment
period, we note that, even among major
and minor teaching hospitals, there are
different estimated impacts based on
this policy. We further note that, while
the payment category may reflect an
increase or decrease in total estimated
payment, even among the hospitals in
that category, there may be differential
impacts that may not necessarily be in
the same direction. As discussed earlier
in this section, we will continue to
monitor any changes that may be
associated with the policy of calculating
the relative payment weights using
geometric mean costs.
We make available with each
proposed rule and final rule cost
statistics files that include information
about costs by CPT code and APC, as
well as modeling and total frequency
information for each code. Addenda A
and B which show the payment rates
associated with each rule, also are made
available on the CMS Web site.
Therefore, the information to continue
monitoring changes in APC payment,
code frequency, and cost are made
available to the public.
Comment: One commenter supported
the goal of making cross-system
payment comparison of payment parity.
Two commenters cautioned against
using OPPS payments based on
geometric mean costs as a basis for
examining payment parity across the
prospective payment systems. They
noted that other factors may be involved
that would cause those comparisons to
potentially be inappropriate, including
the acuity of the patients, case-mix,
ratesetting methodologies, and resource
use in different care settings, as well as
different payment adjustments in each
system.
Response: While we believe that each
of the payment systems has an
internally consistent methodology, we
recognize the value of including useful
information in making potential
payment comparisons. We note that we
already implement cross-system
payment and utilization comparisons in
cases such as the MPFS DRA imaging
cap, the ASC cap on separately payable
radiology services, the cap on ASC

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office-based covered surgical
procedures, and the comparison of
service provision across settings for
purposes of the inpatient list. The goal
in making any potential payment
comparisons is to analyze the
differences and similarities in as
appropriate a manner as possible.
As we discussed in the CY 2012
OPPS/ASC final rule with comment
period, in the context of the proposed
Cardiac Resynchronization Therapy
composite APC, there are various goals
associated with making cross-system
payment comparisons, including
ensuring that we do not create an
inappropriate payment incentive to
provide services in one setting of care as
opposed to another, using more accurate
information where it is available, and
constructing the payment groups to be
more clinically and resource similar to
each other where appropriate, among
others (76 FR 74179 through 74182). We
specifically noted that there could be
many payment approaches that could be
chosen for comparison purposes for any
given item or service (76 FR 74181).
After consideration of the public
comments we received, we are
finalizing our proposal to develop the
APC relative payment weights using
geometric mean costs in the manner
described above.
As we also discussed in the CY 2013
OPPS/ASC proposed rule (77 FR 45097),
under the revised ASC payment system
that was effective January 1, 2008, we
established a standard ASC ratesetting
methodology that bases payment for
most ASC covered surgical procedures
and some covered ancillary services on
the OPPS relative payment weights (72
FR 42491 through 42493). Therefore,
because we proposed to calculate CY
2013 OPPS relative payment weights
using geometric mean costs, we also
proposed that CY 2013 ASC payment
rates under the standard ASC ratesetting
methodology would be calculated using
the OPPS relative payment weights that
are based on geometric mean costs. We
noted that basing the relative payment
weights on geometric mean costs rather
than median costs affects the proposed
CY 2013 payment rates. We stated that
differences in the proposed payment
rates, as with any changes from year to
year, affect other parts of the OPPS,
including the copayments described in
section II.I. of the proposed rule as well
as the fixed-dollar outlier threshold
described in section II.G. of the
proposed rule.
We did not receive any public
comments on the adoption of OPPS
relative payment weights based on
geometric means in the ASC system. For
a more detailed discussion of the ASC

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ratesetting methodology, we refer
readers to section XIV. of this final rule
with comment period.
Under the CY 2013 proposed policy to
base the relative payment weights on
geometric mean costs, we also proposed
to revise the related regulations that
currently reflect a median cost-based
OPPS to instead reflect a geometric
mean cost-based OPPS. Specifically, we
proposed to revise 42 CFR 419.31,
which describes the 2 times rule
discussed in section III.B. of the
proposed rule and this final rule with
comment period and the development
of relative payment weights based on
the cost metrics discussed in section
II.A.4 of the proposed rule and this final
rule with comment period.
Comment: One commenter stated that
CMS did not address why it did not
apply the 2 times rule based on
geometric means while continuing to
use medians for calculating the relative
weights because the commenter
believed that it would improve the
detection of changes in service cost
while basing relative payment weights
on the less volatile median.
Response: In the CY 2013 OPPS/ASC
proposed rule, we discussed the impact
of evaluating the 2 times rule based on
geometric mean costs rather than
median costs, noting that while doing so
did not significantly affect the
application of the rule, it created several
additional 2 times rule violations in the
rebasing process (77 FR 45097). Similar
to the IPPS and since the inception of
the OPPS, we have used a statistical
outlier trim of three standard deviations
beyond the geometric mean cost, even
though we have historically used
median costs as the metric on which to
base the relative payment weights. The
application of the 2 times rule is
inherently tied to the configuration of
the APCs and, therefore, how individual
codes are paid. To apply the 2 times
rule based on geometric mean cost and
reconfigure the APCs based on that
metric, while calculating relative
payment weights based on medians,
would be an inconsistency in the data
process in the same way that using
geometric mean costs for some services
and median costs for others would be.
Further, section 1833(t)(2) of the Act
states that the application of the 2 times
rule should be based on the metric
selected in section 1833(t)(2)(C) of the
Act.
After consideration of the public
comments we received, we are
finalizing our proposal to apply the 2
times rule based on geometric mean
costs and the corresponding changes in
42 CFR 419.31.

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In section XXII. of this final rule with
comment period, which discusses the
regulatory impact analysis, we are
providing an additional column in the
impact tables for the OPPS that
identifies the estimated impact due to
APC recalibration of a geometric meansbased OPPS as well as a column that
estimates the impact of recalibration
based on CY 2011 claims and historical
cost report data. As depicted in the
impact tables, many provider categories
will experience limited impacts under
the final policy to base the OPPS
relative payment weights on geometric
means. We note that the impact tables
only estimate the OPPS payment impact
based on the most current available
claims and cost report data, and that
providers’ actual payments may vary,
depending on the mix of services
provided in the actual claims year. Also,
the budget neutral payment adjustments
ensure that, under a geometric meanbased system or a median cost-based
system, aggregate OPPS payments will
remain the same.
Section XXII. of this final rule with
comment period contains an OPPS
provider impact table that estimates the
effect of policy changes and budget
neutrality adjustments on provider
payment under the CY 2013 OPPS.
Column 3 of the impact table shows the
estimated impact by provider category
of calculating the CY 2013 OPPS
payments based on geometric mean
costs rather than median costs. While
the policy to shift the basis for relative
payment weights to geometric mean
costs may involve some changes to the
relative weights on which OPPS
payments are based, providers will
generally experience limited impacts to
payment as a result of the CY 2013 final
policy. Those provider categories that
are estimated to experience increased
payments as a result of the policy to
base the CY 2013 relative payment
weights on geometric mean costs
generally included non-IPPS hospitals
that provided psychiatric, hospitalbased PHPs, and other services whose
relative payment weights increased
based on geometric mean costs. As
noted above, we recognize that there
may be fluctuations in the relative
payment weights based on this CY 2013
final policy, but we believe that this
policy represents an improvement that
more accurately estimates the costs
associated with providing services.
In our experience developing the
OPPS, we have implemented many
changes to obtain more cost information
from the claims and cost report data
available to us, in an effort to arrive at
more accurate estimates of service cost.
Many of those changes are described

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above and in prior OPPS final rules.
Despite the challenges created by the
complexity of the data and the diversity
of facility accounting systems, we
continue to examine possible process
and data changes that may further
improve precision, validity, and utility.
Commenters have historically expressed
concerns about the degree to which
OPPS relative payment weights are
reflective of the service costs associated
with providing them, APC payment rate
volatility from year to year, and other
cost modeling related issues. We
recognize that some of those issues will
remain because they are related to
naturally occurring changes in the
economic environment, clinical
practice, and the nature of payment
systems, among other reasons. However,
we believe that basing the OPPS relative
payment weights on geometric means
better captures the range of costs
associated with providing services,
improves payment accuracy while
limiting year-to-year volatility, and
allows reconfigurations in the APC
environment using a metric that
provides greater computational depth.
For these reasons, and those discussed
above, we are basing the CY 2013 OPPS/
ASC final relative payment weights on
geometric mean costs.
3. Changes to Packaged Services
a. Background
Like other prospective payment
systems, the OPPS relies on the concept
of averaging, where the payment may be
more or less than the estimated cost of
providing a specific service or bundle of
specific services for a particular patient.
However, with the exception of outlier
cases, overall payment is adequate to
ensure access to appropriate care. The
OPPS packages payment for multiple
interrelated services into a single
payment to create incentives for
providers to furnish services in the most
efficient way by enabling hospitals to
manage their resources with maximum
flexibility, thereby encouraging longterm cost containment. For example,
where there are a variety of supplies
that could be used to furnish a service,
some which are more expensive than
others, packaging encourages hospitals
to use the most cost-efficient item that
meets the patient’s needs, rather than to
routinely use a more expensive item,
which could result if separate payment
is provided for the items. Packaging also
encourages hospitals to negotiate with
manufacturers and suppliers to reduce
the purchase price of items and services
or to explore alternative group
purchasing arrangements, thereby
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care. Similarly, packaging encourages
hospitals to establish protocols that
ensure that necessary services are
furnished, while scrutinizing the
services ordered by practitioners to
maximize the efficient use of hospital
resources. Packaging payments into
larger payment bundles promotes the
predictability and accuracy of payment
for services over time. Finally,
packaging may reduce the importance of
refining service-specific payment
because packaged payments include
costs associated with higher cost cases
requiring many ancillary services and
lower cost cases requiring fewer
ancillary services. For these reasons,
packaging payment for items and
services that are typically ancillary and
supportive to a primary service has been
a fundamental part of the OPPS since its
implementation in August 2000.
We use the term ‘‘dependent service’’
to refer to the HCPCS codes that
represent services that are typically
ancillary and supportive to a primary
diagnostic or therapeutic modality. We
use the term ‘‘independent service’’ to
refer to the HCPCS codes that represent
the primary therapeutic or diagnostic
modality into which we package
payment for the dependent service. In
future years, as we consider the
development of larger payment groups
that more broadly reflect services
provided in an encounter or episode of
care, it is possible that we might
propose to bundle payment for a service
that we now refer to as ‘‘independent.’’
We assign status indicator ‘‘N’’ to
those HCPCS codes of dependent
services that we believe are always
integral to the performance of the
primary modality; therefore, we always
package their costs into the costs of the
separately paid primary services with
which they are billed. Services assigned
to status indicator ‘‘N’’ are
unconditionally packaged.
We assign status indicator ‘‘Q1’’
(STVX-Packaged Codes), ‘‘Q2’’ (TPackaged Codes), or ‘‘Q3’’ (Codes that
may be paid through a composite APC)
to each conditionally packaged HCPCS
code. An STVX-packaged code
describes a HCPCS code whose payment
is packaged with one or more separately
paid primary services with the status
indicator of ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X’’
furnished in the hospital outpatient
encounter. A T-packaged code describes
a code whose payment is only packaged
with one or more separately paid
surgical procedures with the status
indicator of ‘‘T’’ are provided during the
hospital outpatient encounter. STVXpackaged codes and T-packaged codes
are paid separately in those uncommon
cases when they do not meet their

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respective criteria for packaged
payment. STVX-packaged codes and Tpackaged codes are conditionally
packaged. We refer readers to section
XII.A.1. of this final rule with comment
period and Addendum D1, which is
available via the Internet on the CMS
Web site with other Addenda, for a
complete listing of status indicators and
the meaning of each status indicator.
Hospitals include HCPCS codes and
charges for packaged services on their
claims, and the estimated costs
associated with those packaged services
are then added to the costs of separately
payable procedures on the same claims
to establish prospective payment rates.
We encourage hospitals to report all
HCPCS codes that describe packaged
services provided, unless the CPT
Editorial Panel or CMS provides other
guidance. The appropriateness of the
OPPS payment rates depends on the
quality and completeness of the claims
data that hospitals submit for the
services they furnish to Medicare
beneficiaries.
In addition to the packaged items and
services listed in 42 CFR 419.2(b), in the
CY 2008 OPPS/ASC final rule with
comment period (72 FR 66610 through
66659), we adopted the packaging of
payment for items and services in seven
categories with the primary diagnostic
or therapeutic modality to which we
believe these items and services are
typically ancillary and supportive. The
seven categories are: (1) Guidance
services; (2) image processing services;
(3) intraoperative services; (4) imaging
supervision and interpretation services;
(5) diagnostic radiopharmaceuticals; (6)
contrast media; and (7) observation
services. We specifically chose these
categories of HCPCS codes for packaging
because we believe that the items and
services described by the codes in these
categories are typically ancillary and
supportive to a primary diagnostic or
therapeutic modality and, in those
cases, are an integral part of the primary
service they support. Packaging under
the OPPS also includes composite
APCs, which are described in section
II.A.2.e. of this final rule with comment
period.
We recognize that decisions about
packaging and bundling payment
involve a balance between ensuring that
payment is adequate to enable the
hospital to provide quality care and
establishing incentives for efficiency
through larger units of payment.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45098 through
45101), we invited public comments
regarding our packaging proposal for the
CY 2013 OPPS.

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b. Clarification of the Regulations at 42
CFR 419.2(b)
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45099), we proposed to
clarify the regulatory language at 42 CFR
419.2(b) to make explicit that the OPPS
payments for the included costs of the
nonexclusive list of items and services
covered under the OPPS referred to in
this paragraph are packaged into the
payments for the related procedures or
services with which such items and
services are provided. We stated that
this proposed clarification is consistent
with our interpretation and application
of 42 CFR 419.2(b) since the inception
of the OPPS. We invited public
comments on this clarification.
Comment: One commenter objected to
the proposed clarification of the
regulatory language at 42 CFR 419.2(b).
The commenter expressed concern that
the proposed changes to the regulatory
language are ambiguous and may result
in confusion for hospitals and
contractors. The commenter believed
that Medicare audit contractors will try
to assert that all services furnished
during a particular encounter, such as
E/M visits, drug administration, X-rays,
or other ancillary tests, are all related to
the main procedure or service received.
The commenter further stated that this
may lead to payment denials or monies
taken during audits and/or postpayment reviews based on the proposed
clarification. Therefore, the commenter
recommended that CMS abandon this
proposal because the current regulatory
language is clear and instructs all
entities about CMS’ packaging
principles.
Another commenter did not object to
the proposed wording change from
‘‘included costs’’ to ‘‘packaged costs’’
because, the commenter stated, CMS did
not propose to add or alter any of the
examples of packaged items and
services, and the language used already
notes that the list provided is not an
inclusive one. However, the commenter
was concerned that the proposed
addition of the phrase ‘‘the payments for
which are packaged into the payment
for the related procedures or services’’
introduces a new concept that may lead
to a broad interpretation of the
regulatory text. The commenter
expressed concern that when audits of
OPPS accounts occur, the proposed
regulatory text may be used to broaden
the packaging concept beyond accurate
CPT coding by using a subjective
interpretation of the term ‘‘related’’.
Therefore, the commenter requested that
CMS not add the phrase ‘‘the payments
for which are packaged into the

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payment for the related procedures or
services’’.
Response: We disagree with the
commenters’ assertion that the proposed
clarification of the regulatory text at 42
CFR 419.2(b) is ambiguous or confusing.
We note our proposal simply clarifies
our longstanding policy of packaging,
which is a fundamental concept of the
OPPS. Specifying that included costs
are packaged under the OPPS and that
the payment for these packaged costs is
packaged into the payment of the
related procedures or services is
consistent with our longstanding
policies related to packaging. In
addition, we disagree with the
commenter’s statement that the
proposed addition to 42 CFR 419.2(b) of
the phrase ‘‘the payment for which are
packaged into the payment for the
related procedures or services’’
introduces a new concept into the
current regulation text.
As we have repeatedly stated, since
the inception of the OPPS, packaging
payment for items and services that are
typically ancillary and supportive to a
primary service has been a fundamental
part of the OPPS. The concept of
packaging entails that the costs for
packaged services that are billed with a
status indicator of ‘‘N’’ are packaged
into the costs of the separately paid
primary service with which they are
billed. This then means that no separate
APC payment is made for the packaged
service alone but payment is instead
included in the payment for the service
or procedure with which the packaged
service has been billed.
We believe that our clarification of the
regulations at 42 CFR 419.2(b) is
consistent with the concept of
packaging under the OPPS and does not
deviate in any way from our current and
longstanding policies regarding
packaging under the OPPS.
After consideration of the public
comments we received, we are
finalizing our proposed policy, without
modification, to clarify 42 CFR 419.2(b)
to make explicit that the OPPS
payments for the included costs of the
nonexclusive list of items and services
covered under the OPPS referred to in
this paragraph are packaged into the
payments for the related procedures or
services with which such items and
services are provided.
c. Packaging Recommendations of the
HOP Panel (‘‘The Panel’’) at Its February
2012 Meeting
During its February 2012 meeting, the
Panel made five recommendations
related to packaging and to the function
of the subcommittee. One additional
recommendation that originated from

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the APC Groups and Status Indicator
(SI) Assignment Subcommittee about
observation services is discussed in
section II.A.2.e. of this final rule with
comment period. The report of the
February 2012 meeting of the Panel may
be found on the CMS Web site at:
http://www.cms.gov/FACA/05_
AdvisoryPanelonAmbulatoryPayment
ClassificationGroups.asp.
Below we present each of the Panel’s
five packaging recommendations and
our responses to those
recommendations.
Panel Recommendation: CMS should
delete HCPCS code G0259 (Injection
procedure for sacroiliac joint;
arthrography) and HCPCS code G0260
(Injection procedure for sacroiliac joint;
provision of anesthetic, steroid and/or
other therapeutic agent, with or without
arthrography), and instead use CPT code
27096 (Injection procedure for sacroiliac
joint, anesthetic/steroid, with image
guidance (fluoroscopy or CT) including
arthrography, when performed) with a
status indicator of ‘‘T,’’ and assign CPT
code 27096 to APC 0207 (Level III Nerve
Injections).
Response: In the CY 2013 OPPS/ASC
proposed rule, we did not accept the
Panel’s recommendation to delete
HCPCS code G0259 and G0260 and
instead use CPT code 27096 with a
status indicator of ‘‘T’’ and assign CPT
code 27096 to APC 0207. For CY 2012,
we assigned CPT code 27096 to status
indicator ‘‘B,’’ meaning that this code is
not payable under the OPPS. In order to
receive payment for procedures
performed on the sacroiliac joint with or
without arthrography or with image
guidance under the OPPS, hospitals
must use either HCPCS code G0259,
which is assigned to status indicator
‘‘N’’ for CY 2012, or HCPCS code G0260,
which is assigned to status indicator
‘‘T’’ for CY 2012, as appropriate. CMS
created HCPCS codes G0259 and G0260
to separate and distinguish the image
guidance procedure from the
therapeutic injection procedure for the
sacroiliac joint. As stated above,
guidance procedures are packaged
under the OPPS because we believe that
they are typically ancillary and
supportive to a primary diagnostic or
therapeutic modality and are an integral
part of the primary service they support.
We believe that the existence of
HCPCS codes G0259 and G0260 is
necessary to assign appropriate
packaged payment for the image
guidance procedure, according to our
established packaging policy, and
separate payment for the therapeutic
injection procedure. Therefore, we did
not accept the Panel’s recommendation
and followed the previously established

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policy to continue to assign HCPCS
code G0259 to status indicator ‘‘N,’’
HCPCS code G0260 to status indicator
‘‘T,’’ and CPT code 27096 to status
indicator ‘‘B’’ for CY 2013.
Comment: Several commenters
disagreed with CMS’ proposal to not
accept the Panel’s recommendation on
HCPCS codes G0259 and G0260 and to
continue to assign a status indicator of
‘‘B’’ for CPT code 27096. One
commenter expressed concern that the
continued use of HCPCS codes G0259
and G0260 instead of the CPT code
27096 is administratively burdensome
to hospitals because it does not allow
standardized code reporting among all
payers.
Another commenter stated that there
is no CPT code that would describe the
radiological portion of the procedure to
be reported in addition to HCPCS code
G0259 because the AMA deleted CPT
code 73054. As of January 1, 2012, the
commenter stated that CPT code 27096
is always a complete procedure that
includes the injection of a diagnostic or
therapeutic agent and the associated
imaging. The commenter recommended
that CMS recognize CPT code 27096 and
assign the appropriate APC code to this
CPT code based on the CY 2011 claims
data for HCPCS code G0259 with CPT
code 73542 and HCPCS code G0260 or
modify the descriptor of HCPCS code
G0259 to include the radiological
portion of the procedure and assign the
appropriate status indicator and APC for
the complete procedure.
One commenter stated that CPT codes
77003 (Fluoroscopic guidance and
localization of needle or catheter tip for
spine or paraspinous diagnostic or
therapeutic injection procedures
(epidural or subarachnoid)) and 77012
(Computed tomography guidance for
needle placement (eg, biopsy,
aspiration, injection, localization
device), radiological supervision and
interpretation) that are billed with
HCPCS code G0260 have a NCCI edit
with an indicator of ‘‘1.’’ Therefore, the
commenter stated that CPT codes 77003
and 77012 cannot be reported with
modifier ‘‘59’’ because the imaging
guidance is not separate and distinct
and it is instead part of the procedure.
The commenter stated that providers
cannot accurately report the cost of the
imaging guidance (either fluoroscopy or
CT) due to the CCI edits and the fact that
the HCPCS code G0260 descriptor does
not indicate if either fluoroscopy or CT
imaging is bundled into the procedure
code. Therefore, the commenter asked
that CMS establish a new HCPCS code
to describe the sacroiliac injection
procedure performed with imaging
(fluoroscopy or CT) or allow the

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reporting of CPT code 27096 and revise
the status indicator from ‘‘B’’ to ‘‘T.’’
Response: We continue to believe that
assigning HCPCS codes G0259 to status
indicator ‘‘N’’ is necessary in order to
designate appropriate packaged
payment for the image guidance
procedure, according to our established
packaging policy, and separate payment
for the therapeutic injection procedure.
However, we will reevaluate the
descriptors for HCPCS code G0259 and
G0260 for CY 2014 in light of the
commenter’s concerns on the AMA’s
modification of the descriptor for CPT
code 27096 in CY 2012 to include the
arthrography services described by CPT
code 73542.
After consideration of the public
comments we received, for CY 2013, we
are continuing to assign a status
indicator of ‘‘N’’ to HCPCS code G0259,
a status indicator of ‘‘T’’ to HCPCS code
G0260, which is assigned to APC 0207
with a final CY 2013 geometric mean
cost of approximately $582, and a status
indicator of ‘‘B’’ to CPT code 27096.
Panel Recommendation: CMS provide
data to the APC Groups and SI
Subcommittee on the following
arthrography services, so that the
Subcommittee can consider whether the
SI for these services should be changed
from ‘‘N’’ to ‘‘S’’:
• HCPCS code 21116 (Injection
procedure for temporomandibular joint
arthrography);
• HCPCS code 23350 (Injection
procedure for shoulder arthrography or
enhanced CT/MRI shoulder
arthrography);
• HCPCS code 24220 (Injection
procedure for elbow arthrography);
• HCPCS code 25246 (Injection
procedure for wrist arthrography);
• HCPCS code 27093 (Injection
procedure for hip arthrography; without
anesthesia);
• HCPCS code 27095 (Injection
procedure for hip arthrography; with
anesthesia);
• HCPSC code 27096 (Injection
procedure for sacroiliac joint,
anesthetic/steroid with image guidance
(fluoroscopy or CT) including
arthrography when performed);
• HCPCS code 27370 (Injection
procedure for knee arthrography); and
• HCPCS code 27648 (Injection
procedure for ankle arthrography).
CMS Response: In the CY 2013 OPPS/
ASC proposed rule, we accepted the
Panel’s recommendation that CMS
provide data to the APC Groups and SI
Assignment Subcommittee on CPT
codes 21116, 23350, 24220, 25246,
27093, 27095, 27096, 27370, and 27648
at a future Panel meeting.

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We did not receive any public
comments on this recommendation.
Panel Recommendation: CMS change
the status indicator for HCPCS code
19290 (Preoperative placement of
needle localization wire, breast) from
‘‘N’’ to ‘‘Q1’’ and continue to monitor
the frequency of the code when used in
isolation.
CMS Response: In the CY 2013 OPPS/
ASC proposed rule, we agreed with the
Panel that a status indicator of ‘‘Q1’’ is
appropriate for CPT code 19290. This
status indicator will allow for separate
payment when this procedure is
performed alone or packaged payment
when this procedure is performed with
an associated surgical procedure.
Therefore, as we proposed, we are
accepting the Panel’s recommendation
and assigning CPT code 19290 to APC
0340 (Minor Ancillary Procedures) and
status indicator ‘‘Q1’’ for the CY 2013
OPPS. APC 0340 has a final geometric
mean cost of approximately $51 (as
compared to approximately $50
calculated for the proposed rule) for CY
2013.
Comment: Several commenters
supported CMS’ proposal to reassign
HCPCS code 19290 from ‘‘N’’ to ‘‘Q1’’.
However, one commenter recommended
that CMS review the APC assignments
for HCPCS codes 19290 and 19295
(Image guided placement, metallic
localization clip, percutaneous, during
breast biopsy/aspiration (list separately
in addition to code for primary
procedure) during the CY 2014
rulemaking cycle and propose a more
appropriate and higher paying APC for
these services.
Response: We appreciate the
commenters’ support. For CY 2013, we
are accepting the Panel’s
recommendation and finalizing our
proposal to assign a status indicator of
‘‘Q1’’ to HCPCS code 19290, which is
assigned to APC 0340 with a CY 2013
final payment rate of approximately
$51. As has been our practice since the
implementation of the OPPS in 2000,
we review, on an annual basis, the APC
assignments for the procedures and
services paid under the OPPS. We will
continue to review, on an annual basis,
the APC assignments for CPT codes
19290 and 19295.
Panel Recommendation: Judith Kelly,
R.H.I.T., R.H.I.A., C.C.S., remain the
chair of the APC Groups and SI
Subcommittee.
CMS Response: In the CY 2013 OPPS/
ASC proposed rule, we indicated that
we accepted the Panel’s
recommendation that Judith Kelly,
R.H.I.T., R.H.I.A., C.C.S., continue to
chair the APC Groups and SI
Assignment Subcommittee.

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We did not receive any public
comments on this recommendation. We
appreciate the services of Ms. Kelly as
chair of the Subcommittee for CY 2012.
Panel Recommendation: The work of
the APC Groups and SI Assignment
Subcommittee continue.
CMS Response: In the CY 2013 OPPS/
ASC proposed rule, we indicated that
we accepted the Panel’s
recommendation that the work of the
APC Groups and SI Assignment
Subcommittee continue.
We did not receive any public
comments on this recommendation.
d. Packaging Recommendations of the
HOP Panel (‘‘The Panel’’) at Its August
2012 Meeting
During its August 2012 meeting, the
Panel accepted the report of the
Subcommittee for APC Groups and
Status Indicator (SI) Assignments, heard
several public presentations related to
packaged services and APC grouping
and status indicator assignments, and
made two recommendations related to
the function of the subcommittee. The
subcommittee also made
recommendations with regard to APC
assignment of specific services that are
discussed in section III.D. of this final
rule with comment period. The report
for the August 2012 meeting of the
Panel may be found on the CMS Web
site at: http://www.cms.gov/FACA/
05_AdvisoryPanelon
AmbulatoryPayment
ClassificationGroups.asp.
Below we present the two
recommendations related to the
function of the subcommittee.
Recommendations that evolved from the
discussions of the Subcommittee on
APC Groups and SI Assignments that
are specific to the APC assignment of
HCPCS codes and the removal of
HCPCS codes from the inpatient list are
discussed in section III. and IX.,
respectively, of this final rule with
comment period.
Panel Recommendation: The Panel
recommends that Jacqueline Phillips be
named chair of the APC Groups and SI
Assignments Subcommittee.
CMS Response: We accept the Panel’s
recommendation that Jacqueline
Phillips be named chair of the APC
Groups and SI Assignments
Subcommittee. We thank Ms. Judith
Kelly for her service as chair of the APC
Groups and SI Assignments
Subcommittee, and we welcome Ms.
Phillips as chair of the APC Groups and
SI Assignments Subcommittee.
Panel Recommendation: The Panel
recommends that the work of the APC
Groups and SI Assignments
Subcommittee continue.

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CMS Response: We are accepting the
APC Panel’s recommendation that the
work of the APC Groups and SI
Assignments Subcommittee continue.
e. Other Packaging Proposals and
Policies for CY 2013
The HCPCS codes that we proposed to
be packaged either unconditionally (for
which we continue to assign status
indicator ‘‘N’’), or conditionally (for
which we continue to assign status
indicator ‘‘Q1’’, ‘‘Q2’’, or ‘‘Q3’’), were
displayed in Addendum B of the CY
2013 OPPS/ASC proposed rule. The
supporting documents for the CY 2013
OPPS/ASC proposed rule, including but
not limited to Addendum B, are
available at the CMS Webs site at:
http://www.cms.hhs.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. To
view the status indicators by HCPCS
code in Addendum B, select ‘‘CMS
1589’’ and then select the folder labeled
‘‘2013 OPPS Proposed Rule Addenda’’
or ‘‘2013 OPPS Final Rule with
Comment Period Addenda’’ from the list
of supporting files. Open the zipped file
and select Addendum B, which is
available as both an Excel file and a text
file.
Comment: Commenters stated that
CMS’ packaging policies would likely
lead to less efficient use of resources,
limited access to innovative treatment
options, and greater instability in
payment because the policies are based
on several flawed assumptions. The
commenters believed that, to the extent
that hospitals control the array of
services they provide, CMS’ packaging
policies assume that the same incentives
apply to services furnished in HOPDs as
to inpatient services. One commenter
stated that, under the IPPS, hospitals
have an incentive to provide care in an
efficient manner to ensure the lowest
cost for the patient’s diagnosis. In
contrast, in HOPDs, because Medicare
payment is based on procedures rather
than diagnoses, the commenter believed
that hospitals have an incentive to
provide the lowest cost item or service
included in an APC. The commenter
further believed that if that service does
not fully address the patient’s needs, the
hospital would receive better payment
by bringing the patient back for a second
visit or admitting the patient for
inpatient care than by providing a more
costly option within the same APC.
Moreover, the commenters believed
that when an APC’s payment rate is
significantly less than the cost of a
technology, hospitals have a strong
disincentive to use that technology,
even if it could reduce the costs of care
at a later date. The commenters believed

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that CMS’ use of expanded packaging
has the risk of encouraging hospitals to
forego performing needed services and
using new technologies that may be
more resource intensive during one
visit, but could save the patient future
outpatient department visits or inpatient
care.
Response: As we stated in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74186),
packaging payment for items and
services that are ancillary to and
dependent on the major procedure for
which a payment rate is established is
a fundamental concept of the OPPS,
based in regulation in the definition of
costs that are included in the national
payment rate for a service (42 CFR
419.2(b)) and in place since the
inception of the OPPS (65 FR 18447).
We continue to believe that packaging
creates incentives for hospitals and their
practitioner partners to work together to
establish appropriate protocols that
eliminate unnecessary services where
they exist and institutionalize
approaches to providing necessary
services more efficiently. With respect
to new services or new applications of
existing technology, we believe that
packaging payment for ancillary and
dependent services creates appropriate
incentives for hospitals to consider
whether a new service or a new
technology offers a benefit that is
sufficient to justify the cost of the new
service or new technology. Whether this
review results in reductions in services
that are only marginally beneficial or
influences hospitals’ choices to not
utilize certain technologies, we believe
that these changes could improve, rather
than harm, the quality of care for
Medicare beneficiaries because every
service furnished in a hospital carries
some level of risk to the patient and the
beneficiary would be spared the risk
associated with the additional service or
different technology. Moreover, we
believe that hospitals strive to provide
the best care they can to the patients
they service so that when new
technologies are proven to improve the
quality of care, their utilization will
increase appropriately, whether the
payment for them is packaged or not.
While we believe hospitals are
committed to provide optimal care to
their patients, we are aware that there
are financial pressures on hospitals that
might motivate some hospitals to split
services among different hospital
encounters in such a way as to
maximize payments. While we do not
expect that hospitals would routinely
change the way they furnish services or
the way they bill for services in order

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to maximize payment, we recognize that
it would be possible and we consider
that possibility as we annually review
hospital claims data. We will continue
to examine claims data for patterns of
fragmented care, and if we find a pattern
in which a hospital appears to be
dividing care across multiple days, we
will refer it for investigation to the QIO
or to the Program Safeguard Contractor,
as appropriate to the circumstances we
find.
Comment: One commenter stated that
continued reporting by CMS on
utilization of all packaged services and
access to care will be essential to ensure
that Medicare’s payment policies do not
restrict beneficiaries’ access to necessary
care. The commenter asked that CMS
make annual reports to the HOP Panel
on reporting of services subject to CMS’
expanded packaging services.
Response: Each year, we make
available an extensive amount of OPPS
data that can be used for any data
analysis an interested party would care
to perform. Specifically, we make
available a considerable amount of data
for public analysis each year through
the supporting data files that are posted
on the CMS Web site in association with
the proposed and final rules. In
addition, as we discuss in detail in
section II.A.2. of this final rule with
comment period, we make available the
public use files of claims, including, for
CY 2008 and later, supplemental line
item cost data for every HCPCS code
under the OPPS, and a detailed
narrative description of our data process
for the annual OPPS/ASC proposed and
final rules that the public can use to
perform any desired analyses.
Therefore, stakeholders are able to
examine and analyze these data to
develop specific information to assess
the impact and effect of packaging for
the services of interest to them. This
information is available to support
public requests for changes to payments
under the OPPS, whether with regard to
separate payment for a packaged service
or other issues. We understand that the
OPPS is a complex payment system and
that it may be difficult to determine the
quantitative amount of packaged cost
included in the cost for every
independent service. However,
stakeholders routinely provide us with
meaningful analyses at a very detailed
and service-specific level based on the
claims data we make available. We
routinely receive complex and detailed
public comments, including extensive
code-specific data analysis on packaged
and separately paid codes, using the
data from current and prior proposed
and final rules.

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Furthermore, we are not required, nor
do we intend, to make annual reports to
the Panel regarding services that are
subject to CMS’ packaging policies. We
note that the Panel did not recommend
at either the February 2012 meeting or
the August 2012 meeting that CMS
present annual reports on services
subject to CMS’ packaging services.
Comment: Commenters stated that
CMS assumes that its packaging policies
will allow it to continue to collect the
data it needs to set appropriate, stable
payment rates in the future. The
commenters stated that CMS’ past
experience with packaging payment for
ancillary items indicates that hospitals
do not submit codes for services that do
not directly affect calculations of future
payment rates for that Medicare
Severity-Diagnosis Related Group (MS–
DRG). The commenters further stated
that, under the IPPS, hospitals report
only the data required to assign a case
to the highest paying appropriate MS–
DRG, even though other data might
affect payment in the long term. The
commenters stated that they saw no
reason to believe that the current
approach would have a different
outcome unless CMS gives clear
instruction to continue coding for all
items and services provided and
provides some incentive to do so. The
commenters asked that CMS require
complete and correct coding for
packaged services.
Response: We do not believe that
there has been or will be a significant
change in what hospitals report and
charge for the outpatient service they
furnish to Medicare beneficiaries and
other patients as a result of our current
packaging methodology. Medicare cost
reporting standards specify that
hospitals must impose the same charges
for Medicare patients as for other
patients. We are often told by hospitals
that many private payers pay based on
a percentage of charges and that, in
accordance with Medicare cost
reporting rules and generally accepted
accounting principles, hospital
chargemasters do not differentiate
between the charges to Medicare
patients and other patients. Therefore,
we have no reason to believe that
hospitals will stop reporting HCPCS
codes and charges for packaged services
they provide to Medicare beneficiaries.
As we stated in the CY 2009 OPPS/ASC
final rule with comment period (73 FR
68575), we strongly encourage hospitals
to report a charge for each packaged
service they furnish, either by billing
the packaged HCPCS code and a charge
for that service if separate reporting is
consistent with CPT and CMS
instructions, by increasing the charge

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for the separately paid associated
service to include the charge for the
packaged service, or by reporting the
charge for the packaged service with an
appropriate revenue code but without a
HCPCS code. Any of these means of
charging for the packaged service will
result in the cost of the packaged service
being incorporated into the cost we
estimate for the separately paid service.
If a HCPCS code is not reported when
a packaged service is provided, we
acknowledge that it can be challenging
to specifically track the utilization
patterns and resource cost of the
packaged service itself. However, we
have no reason to believe that hospitals
have not considered the cost of the
packaged service in reporting charges
for the independent, separately paid
service. We expect that hospitals, as
other prudent businesses, have a quality
review process that ensures that they
accurately and completely report the
services they furnish, with appropriate
charges for that service to Medicare and
all other payers. We encourage hospitals
to report on their claim for payment all
HCPCS codes that describe packaged
service that were furnished, unless the
CPT Editorial Panel or CMS provides
other guidance. To the extent that
hospitals include separate charges for
packaged services on their claims, the
estimated costs of those packaged
services are then added to the costs of
separately paid procedures on the same
claims and used in establishing
payment rates for the separately paid
services. It is impossible to know with
certainty whether hospitals are failing to
report HCPCS codes and charges for
service for which the payment is
packaged into payment for the
independent service with which the
packaged service is furnished.
Moreover, if a hospital fails to report the
HCPCS codes and charges for packaged
services, the reason may be that the
hospital has chosen to package the
charge for the ancillary and dependent
service into the charge for the service
with which it is furnished. Although we
prefer that hospitals report HCPCS
codes and charges for all service they
furnish, if the hospital’s charge for the
independent services also reflects the
charge for all ancillary and supportive
service it typically provides, the absence
of HCPCS codes and separate charges
would not result in inappropriately low
cost for the independent service,
although CMS would not know which
specific ancillary and supportive
services were being furnished. If a
hospital is no longer providing a
service, there may be many reasons that
a hospital chooses not to provide a

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particular service or chooses to cease
providing a particular service,
including, but not limited to, because
the hospital has determined that it is no
longer cost effective for the hospital to
furnish the service and that there may
be other hospitals in the community
that can furnish the service more
efficiently.
Comment: One commenter asked that
CMS reinstate separate payment for
radiation oncology guidance procedures
because these services are vital to the
safe provision of radiation therapy and
unconditionally packaging payment for
them may discourage hospitals from
providing them.
Response: As we stated in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74188), we
recognize that radiation oncology
guidance services, like most packaged
services, are important to providing safe
and high quality care to patients.
However, we continue to believe that
hospitals will invest in services that
represent genuinely increased value to
patient care. We will continue to pay
separately for innovative technologies if
a device meets the conditions for
separate payment as a pass-through
device or if a new procedure meets the
criteria for payment as a new technology
APC.
Comment: One commenter expressed
concern over a statement made in the
proposed rule that indicated that CMS
might propose to bundle payment for
[services] that [it] now refers to as
‘‘independent [services’’]. The
commenter stated that CMS did not
provide any statutory authority that
would allow it to move away from a
fundamental OPPS policy, that only
‘‘dependent services’’ are potentially
considered as part of a bundled
reimbursement methodology. The
commenter further stated that packaging
payment for multiple services that are
not interrelated presents no efficiency or
resource management incentives,
because, by definition, these services are
not related, meaning there are no
efficiencies to be gained and no overlap
in resources expended.
Response: In the CY 2013 OPPS/ASC
proposed rule (77 FR 45089), we noted
that we use the term ‘‘independent
service’’ to refer to the HCPCS codes
that represent the primary therapeutic
or diagnostic modality into which we
package payment for the dependent
service. We also noted that, in future
years, as we consider the development
of larger payment groups that more
broadly reflect services provided in an
encounter or episode of care, it is
possible that we might propose to
bundle payment for a service that we

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now refer to as ‘‘independent.’’ We
disagree with the commenter that we do
not have the statutory authority to
consider larger payment bundles that
more broadly reflect services provided
in an encounter or episode of care. Our
statutory authority is defined in section
1833(t)(2)(B) of the Act, which allows
the OPPS to establish groups of covered
HOPD services, namely APC groups,
and use them as the basic unit of
payment.
Furthermore, for CY 2008, we
expanded packaging to services that
were once considered independent
services and items, such as nonpassthrough contrast agents and observation
services. We now consider these
services to be ancillary and supportive
to a primary diagnostic or therapeutic
modality and have assigned these
services an unconditionally packaged
status indicator of ‘‘N.’’ It follows then
that items or services that are currently
considered to be ‘‘independent’’
services within this final rule with
comment period may be packaged
where appropriate in future years, after
taking into consideration the clinical
nature of the item or service and then
determining whether or not that item or
service is considered ancillary and
supportive to a primary diagnostic or
therapeutic modality.
We note that we did not make any
new proposals to develop additional
payment bundles for CY 2013, but that
we will likely do so in future
rulemaking. For CY 2013, we proposed
to continue to package the payment for
items and services in seven categories
with the primary diagnostic or
therapeutic modality to which we
believe that these items and services are
typically ancillary and supportive.
Because the commenter does not
question the appropriateness of these
seven categories of packaged payment
given in the proposed rule nor does the
commenter question the
appropriateness of a specific APC
assignment for a packaged HCPCS or
CPT code, we cannot fully address the
commenter’s concerns about bundling
multiple services that are not
interrelated and that may or may not
present efficiency or resource
management incentives. We continue to
believe that the seven categories of
packaged services and items are
appropriate to encourage hospital
efficiency, flexibility, and ultimately
cost containment.
Comment: One commenter requested
that CMS change the status indicator for
HCPCS code L8604 (Injectable bulking
agent, dextranomer/hyaluronic acid
copolymer implant, urinary tract, 1 ml,
includes shipping and necessary

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supplies) from ‘‘N’’ to ‘‘A.’’ The
commenter argued that this would allow
HCPCS code L8604 to be paid under a
different fee schedule and would allow
for access to the product SOLESTA® in
the HOPD. The commenter also asked
that CMS cover and pay for SOLESTA®
in the same manner as other hyaluronic
acid products and assign SOLESTA® a
separate and unique HCPCS code.
Response: HCPCS code L8604
describes several products that are
implantable prosthetic devices.
According to 42 CFR 419.2(b)(11),
implantable prosthetic devices are
packaged under the OPPS. Therefore,
status indicator ‘‘N’’ is the correct status
indicator for HCPCS code L8604. We
also note that any coverage,
reclassification, or HCPCS code change
requests for SOLESTA® are outside the
scope of this final rule with comment
period. Such issues are addressed by
processes outside the OPPS/ASC rule by
either CMS’ HCPCS Workgroup or CMS’
Coverage and Analysis Group.
Comment: One commenter requested
that CMS assign HCPCS code J7665
(Mannitol, administered through an
inhaler, 5 mg) to a status indicator of
‘‘K’’ for CY 2013. The commenter stated
that the product that is described by
HCPCS code J7665 is a drug indicated
for the assessment of bronchial
hyperresponsiveness in individuals at
least six years of age without clinically
apparent asthma and that, consistent
with its FDA labeling, the product that
is described by HCPCS code J7665 can
only be used in an institutional setting
or a physician’s office. The commenter
argued that HCPCS code J7665 was
incorrectly assigned a status indicator of
‘‘N’’ because this product is approved as
a drug through the NDA process and
should be paid under the OPPS as a
separately paid drug as opposed to a
supply under the OPPS.
Response: We agree with the
commenter that HCPCS code J7665 can
be administered in the HOPD. However,
we do not believe that the product
described by HCPCS code J7665 is a
separately payable drug as we have
described here within this final rule
with comment period, and is instead a
supply with costs included in the
payment under the OPPS as described
in 42 CFR 419.2(b). Mannitol (HCPCS
code J7665), when administered through
an inhaler, is always used as a supply
in bronchial challenge testing.
Therefore, for CY 2013, we are assigning
a status indicator of ‘‘N’’ to HCPCS code
J7665.
After consideration of the public
comments we received, for CY 2013, we
are finalizing our proposed policy to
continue to package payment for the

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services for which we proposed
unconditional or conditional packaged
payment in the proposed rule for the
reasons set forth above.
f. Packaging of Drugs, Biologicals, and
Radiopharmaceuticals
(1) Existing Packaging Policies
In the OPPS, we currently package
five categories of drugs, biologicals, and
radiopharmaceuticals (unless temporary
pass-through status applies): (1) Those
with per day costs at or below the
packaging threshold; (2) diagnostic
radiopharmaceuticals; (3) contrast
agents; (4) anesthesia drugs; and (5)
drugs treated as surgical supplies.
Anesthesia drugs are discussed further
in section II.A.3.c.(2) of this final rule
with comment period. For detailed
discussions of the established packaging
policies for diagnostic
radiopharmaceuticals and contrast
agents, we refer readers to the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66765 through 66768).
For further details on drugs treated as
surgical supplies, we refer readers to the
CY 2003 OPPS final rule (67 FR 66767)
and Chapter 15, Section 50.2 of the
Medicare Benefit Policy Manual.
(2) Clarification of Packaging Policy for
Anesthesia Drugs
It has been longstanding OPPS policy
to package ‘‘anesthesia’’ and ‘‘supplies
and equipment for administering and
monitoring anesthesia or sedation,’’ as
described in 42 CFR 419.2(b)(4) and
(b)(5). As described above, items and
services paid under the OPPS that are
typically ancillary and supportive to a
primary diagnostic or therapeutic
modality and, in those cases, are
considered dependent items and
services are packaged into the payment
of their accompanying independent
primary service. In accordance with our
current policy on packaging items and
services, drugs that are used to produce
anesthesia in all forms are ancillary and
supportive to a primary diagnostic or
therapeutic modality, and are included
in our definition of ‘‘anesthesia’’ as
described in § 419.2(b)(4) and (b)(5).
However, we recognize that some
anesthesia drugs may qualify for
transitional pass-through status under
section 1833(t)(6) of the Act. Therefore,
in the CY 2013 OPPS/ASC proposed
rule (77 FR45100), we proposed to
clarify that our general policy is to
package drugs used to produce
anesthesia, and that those anesthesia
drugs with pass-through status will be
packaged upon the expiration of passthrough status. We invited public
comment on our clarification of the

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existing packaging policies for
anesthesia drugs under § 419.2(b)(4) and
(b)(5).
Comment: Commenters objected to
the proposed clarification of the OPPS
policy on anesthesia and all future
policies that expand the packaging of
drugs, through the increase of the drug
packaging threshold or otherwise. The
commenters expressed their concern
over the increase in packaging for drugs
in general and urged CMS not to finalize
this policy. The commenters also stated
their concern that the CMS drug
packaging polices used in the HOPD
could encourage hospitals to under
utilize critically important drugs and
ultimately compromise beneficiary’s
access to care and undercut CMS’ work
to improve the quality of care. The
commenters urged CMS not to finalize
this proposal, to conduct a careful
review to assess the effect of packaging
on quality of care, and to forego any
new packaging policies as a whole.
One commenter expressed support for
the clarification of this policy. The
commenter further encouraged CMS to
continue to monitor packaged drugs and
biologicals to ensure they are
appropriately paid.
Response: For the CY 2013 OPPS/ASC
proposed rule (77 FR 45100), we
proposed to clarify the existing policies
related to nonpass-through and passthrough anesthesia drugs. It has been
our longstanding policy to package
anesthesia drugs, which are drugs that
are used to produce anesthesia in all
forms and are ancillary and supportive
to a primary diagnostic or therapeutic
modality, that are not on pass-through
status as included costs under the
OPPS, as described in 42 CFR
419.2(b)(4) and (b)(5). However, we also
clarified in the proposed rule that
anesthesia drugs are eligible for
transitional pass-through status as a
drug, as provided in section 1833(t)(6)
of the Act. Therefore, we noted that we
were not finalizing a new policy to
package nonpass-through anesthesia
drugs but were clarifying in our
preamble language our currently
existing policies.
In addition, as we stated above, we
continue to believe that packaging
payment for items and services that are
ancillary to and dependent on the major
procedure for which a payment rate is
established is a fundamental concept of
the OPPS. We address additional
comments on packaging for drugs,
biologicals, diagnostic
radiopharmaceuticals, and contrast
agents below in section II.A.3.f. and
section V.A. of this final rule with
comment period.

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After consideration of the public
comments we received, we are
finalizing this proposed clarification for
CY 2013. Anesthesia drugs that are used
to produce anesthesia in all forms are
ancillary and supportive to a primary
diagnostic or therapeutic modality
under 42 CFR 419.2(b)(4) and (b)(5).
Therefore, nonpass-through anesthesia
drugs are packaged under the OPPS.
New anesthesia drugs that were not
being paid for as an HOPD service as of
December 31, 1996, and whose cost is
‘‘not insignificant’’ in relation to the
OPPS payment for the procedures or
services associated with the new
anesthesia drug are eligible for
transitional pass-through status as a
drug or biological, as described in
section 1833(t)(6) of the Act. We discuss
OPPS transitional pass-through payment
for additional costs of drugs, biologicals,
and radiopharmaceuticals in section
V.A. of this final rule with comment
period.
g. Packaging of Payment for Diagnostic
Radiopharmaceuticals, Contrast Agents,
and Implantable Biologicals (‘‘PolicyPackaged’’ Drugs and Devices)
Prior to CY 2008, the methodology of
calculating a product’s estimated per
day cost and comparing it to the annual
OPPS drug packaging threshold was
used to determine the packaging status
of drugs, biologicals, and
radiopharmaceuticals under the OPPS
(except for the CYs 2005 through 2009
exemption for 5–HT3 antiemetics).
However, as established in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66766 through 66768), we
began packaging payment for all
diagnostic radiopharmaceuticals and
contrast agents into the payment for the
associated procedure, regardless of their
per day costs. In addition, in CY 2009,
we adopted a policy that packaged the
payment for nonpass-through
implantable biologicals into payment for
the associated surgical procedure on the
claim, regardless of their per day cost
(73 FR 68633 through 68636). We refer
to diagnostic radiopharmaceuticals and
contrast agents collectively as ‘‘policypackaged’’ drugs. We refer to
implantable biologicals as ‘‘devices’’
because, in CY 2010, we finalized a
policy to treat implantable biologicals as
devices for OPPS payment purposes (74
FR 60471 through 60477).
As set forth at § 419.2(b), as a
prospective payment system, the OPPS
establishes a national payment rate,
standardized for geographical wage
differences, that includes operating and
capital-related costs that are directly
related and integral to performing a
procedure or furnishing a service on an

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outpatient basis, and in general, these
costs include, but are not limited to,
implantable prosthetics, implantable
durable medical equipment, and
medical and surgical supplies.
Packaging costs into a single aggregate
payment for a service, encounter, or
episode-of-care is a fundamental
principle that distinguishes a
prospective payment system from a fee
schedule. In general, packaging the costs
of items and services into the payment
for the primary procedure or service
with which they are associated
encourages hospital efficiency and also
enables hospitals to manage their
resources with maximum flexibility.
Prior to CY 2008, we noted that the
proportion of drugs, biologicals, and
radiopharmaceuticals that were
separately paid under the OPPS had
increased in recent years, a pattern that
we also observed for procedural services
under the OPPS. Our final CY 2008
policy that packaged payment for all
nonpass-through diagnostic
radiopharmaceuticals and contrast
agents, regardless of their per day costs,
contributed significantly to expanding
the size of the OPPS payment bundles
and is consistent with the principles of
a prospective payment system.
As discussed in more detail in the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68645 through
68649), we presented several reasons
supporting our initial policy to package
payment of diagnostic
radiopharmaceuticals and contrast
agents into their associated procedures
on a claim. Specifically, we stated that
we believed packaging was appropriate
because: (1) The statutorily required
OPPS drug packaging threshold had
expired; (2) diagnostic
radiopharmaceuticals and contrast
agents function effectively as supplies
that enable the provision of an
independent service, rather than serving
themselves as a therapeutic modality;
and (3) section 1833(t)(14)(A)(iii) of the
Act required that payment for specified
covered outpatient drugs (SCODs) be set
prospectively based on a measure of
average hospital acquisition cost (76 FR
74307).
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45100), we stated
that we believe it is appropriate to
continue to treat diagnostic
radiopharmaceuticals and contrast
agents differently from specified
covered outpatient drugs (SCODs) for
CY 2013. Therefore, we proposed to
continue packaging payment for all
contrast agents and diagnostic
radiopharmaceuticals, collectively
referred to as ‘‘policy-packaged’’ drugs,
regardless of their per day costs, for CY

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2013. We also proposed to continue to
package the payment for diagnostic
radiopharmaceuticals into the payment
for the associated nuclear medicine
procedure and to package the payment
for contrast agents into the payment for
the associated echocardiography
imaging procedure, regardless of
whether the agent met the OPPS drug
packaging threshold. We refer readers to
the CY 2010 OPPS/ASC final rule with
comment period for a detailed
discussion of nuclear medicine and
echocardiography services (74 FR 35269
through 35277).
Comment: Commenters objected to
CMS’ proposal to package payment of
all nonpass-through diagnostic
radiopharmaceuticals and contrast
agents in CY 2013. A number of
commenters stated that diagnostic
radiopharmaceuticals and contrast
agents with per day costs over the
proposed OPPS drug packaging
threshold are defined as SCODs and,
therefore, should be assigned separate
APC payments. In particular, the
commenters questioned CMS’ authority
to classify groups of drugs, such as
diagnostic radiopharmaceuticals and
contrast agents, and implement
packaging and payment policies that do
not reflect their status as SCODs.
Several commenters disagreed with
CMS’ labeling of radiopharmaceuticals
as supplies and stated instead that they
should be treated as other SCODs. The
commenters recommended that
diagnostic radiopharmaceuticals should
be subject to the same per day cost drug
packaging threshold that applies to
other drugs, in order to determine
whether their payment would be
packaged or made separately.
One commenter supported CMS’
continued packaging policy for
diagnostic radiopharmaceuticals and
contrast agents that do not have passthrough status. The commenter noted
that diagnostic radiopharmaceuticals are
supplies that are necessary to the
provision of the service in which they
are used and, like other supplies,
payment for them should be part of the
payment for the service.
Response: As discussed in the CY
2008 OPPS/ASC final rule with
comment period (72 FR 66766), the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68645), the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60497), the CY
2011 OPPS/ASC final rule with
comment period (75 FR 71949), and the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74307), we
continue to believe that diagnostic
radiopharmaceuticals and contrast
agents are different from other drugs

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and biologicals for several reasons. We
note that the statutorily required OPPS
drug packaging threshold, as described
in section 1833(t)(16)(B) of the Act, has
expired, and we continue to believe that
diagnostic radiopharmaceuticals and
contrast agents function effectively as
supplies that enable the provision of an
independent service and are always
ancillary and supportive to an
independent service, rather than
themselves serving as the therapeutic
modality. We packaged their payment in
CYs 2008, 2009, 2010, 2011, and 2012
as ancillary and supportive services in
order to provide incentives for greater
efficiency and to provide hospitals with
additional flexibility in managing their
resources. In order for payment to be
packaged, it is not necessary that all
products be interchangeable in every
case, and we recognized that, in some
cases, hospitals may utilize higher cost
products and, in some cases, lower cost
products, taking into consideration the
clinical needs of the patient and the
efficient use of hospital resources.
While we recognize this variability from
case to case, on average under a
prospective payment system, we expect
payment to cover the costs for the
services furnished. In the past, we have
classified different groups of drugs for
specific payment purposes, as
evidenced by our CY 2005 through CY
2009 policy regarding 5–HT3 antiemetics and their exemption from the
drug packaging threshold. We note that
we treat diagnostic
radiopharmaceuticals and contrast
agents as ‘‘policy-packaged’’ drugs
because our policy is to package
payment for all of the products in this
category.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68634), we
also began packaging the payment for all
nonpass-through implantable
biologicals into payment for the
associated surgical procedure because
we consider these products to always be
ancillary and supportive to an
independent service, similar to
implantable non-biological devices that
are always packaged. Therefore, we
currently package payment of nonpassthrough implantable biologicals, also
known as devices that are surgically
inserted or implanted (through a
surgical incision or a natural orifice)
into the body. As we stated in the CY
2013 OPPS/ASC proposed (77 FR
45101), we continue to believe that
payment should be packaged for
nonpass-through implantable
biologicals for CY 2013.
We are continuing our CY 2009 policy
for CY 2013 as discussed below, which
packages payment for all nonpass-

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through diagnostic
radiopharmaceuticals, contrast agents,
and implantable biologicals into the
payment for their associated procedures.
We also continue to believe that the
line-item estimated cost for nonpassthrough diagnostic
radiopharmaceuticals, contrast agents,
or implantable biologicals in our claims
data is a reasonable approximation of
average acquisition and preparation and
handling costs for nonpass-through
diagnostic radiopharmaceuticals,
contrast agents, and implantable
biologicals, respectively. As we
discussed in the CY 2009 OPPS/ASC
final rule with comment period (73 FR
68645), we believe that hospitals have
adapted to the CY 2006 coding changes
for nonpass-through diagnostic
radiopharmaceuticals and responded to
our instructions to include charges for
diagnostic radiopharmaceutical
handling in their charges for the
diagnostic radiopharmaceutical
products. Further, because the standard
OPPS packaging methodology packages
the total estimated cost of each nonpassthrough diagnostic radiopharmaceutical,
contrast agent, or nonimplantable
biological on each claim (including the
full range of costs observed on the
claims) with the cost of associated
procedures for ratesetting, this
packaging approach is consistent with
considering the average cost for
nonpass-through diagnostic
radiopharmaceuticals, contrast agents,
or implantable biologicals, rather than
the cost. In addition, as we noted in the
CY 2009 OPPS/ASC final rule with
comment period (73 FR 68646), these
drugs, biologicals, or diagnostic
radiopharmaceuticals for which we
have not established a separate APC
and, therefore, for which payment
would be packaged rather than
separately provided under the OPPS are
not considered to be SCODs. Similarly,
drugs and biologicals with per day costs
of less than the drug packaging
threshold for CY 2013, which is
discussed in section V.B. of this final
rule with comment period, that are
packaged and for which a separate APC
has not been established also are not
SCODs. This reading is consistent with
our final packaging payment policy, as
discussed in this section, whereby we
package payment for nonpass-through
diagnostic radiopharmaceuticals,
contrast agents, and implantable
biologicals and provide payment for
these products through payment for
their associated procedures.
Comment: Several commenters
disagreed with the proposal to
distinguish between diagnostic and

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therapeutic radiopharmaceuticals for
payment purposes under the OPPS.
Some commenters noted that CMS’
identification of HCPCS code A0544
(Iodine I–131 tositumomab, diagnostic,
per study dose) as a diagnostic
radiopharmaceutical is inappropriate
because this radiopharmaceutical
functions as a dosimetric
radiopharmaceutical and not as a
diagnostic radiopharmaceutical. A few
commenters explained that this
particular radiopharmaceutical product
is used as part of a therapeutic regimen
and, therefore, should be considered
therapeutic for OPPS payment purposes.
Furthermore, many commenters urged
CMS to classify dosimetric doses used
in radiopharmaceutical procedures as
therapeutic in nature, and allow for
separate payment for that dosimetric
dose.
Response: As discussed above and in
the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66641), the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68645), the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60498), the CY
2011 OPPS/ASC final rule with
comment period (75 FR 71949), and the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74308), we
classified each radiopharmaceutical into
one of the two groups according to
whether its long descriptor contained
the term ‘‘diagnostic’’ or ‘‘therapeutic.’’
HCPCS code A9544 contains the term
‘‘diagnostic’’ in its long code descriptor.
Therefore, according to our established
methodology, we continued to classify it
as diagnostic for the purposes of CY
2012 OPPS payment. While we
understand that this item is provided in
conjunction with additional supplies,
imaging tests, and therapeutic
radiopharmaceuticals for patients
already diagnosed with cancer, we
continue to believe that the purpose of
administering the product described by
HCPCS code A9544 is diagnostic in
nature. As we first stated in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66641), we continue to
believe that the product described by
HCPSC code A9544 is a diagnostic
radiopharmaceutical. While it is not
used to necessarily diagnose a general
disease state, we understand that it is
used to determine whether future
therapeutic services would be beneficial
to the patient and to determine how to
proceed with therapy. We note that this
is not different than the use of a
laboratory test to guide therapy; the fact
that the diagnostic test, a service which
provides information, is used to guide
therapy does not make it a therapeutic

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service, on which its intent is to
improve a patient’s clinical condition.
While a group of associated services
may be considered a therapeutic
regimen by some commenters, HCPCS
code A9544 is provided in conjunction
with a series of nuclear medicine
imaging scans. Many nuclear medicine
studies using diagnostic
radiopharmaceuticals are provided to
patients who already have an
established diagnosis. We continue to
consider HCPCS code A9544 to be
diagnostic because this item is provided
for the purpose of conducting a
diagnostic imaging procedure and is
used to identify the proposed dose of
the therapeutic agent to be provided at
a later time.
Comment: Commenters recommended
using the ASP methodology and the
proposed statutory default rate of
ASP+6 percent to make payment for
nonpass-through diagnostic
radiopharmaceuticals and contrast
agents. The commenters noted that it
would be inconsistent for CMS to treat
diagnostic radiopharmaceuticals and
contrast agents as ‘‘drugs’’ for passthrough payment purposes and provide
payment for diagnostic
radiopharmaceuticals and contrast
agents that have pass-through status
based on the ASP methodology, and,
then, after the diagnostic
radiopharmaceutical’s or contrast
agent’s pass-through payment status
expires, package the costs included in
historical hospital claims data, rather
than use the ASP methodology to pay
for the product and treat the drug as a
supply. A few commenters suggested
that diagnostic radiopharmaceuticals
could be paid separately as therapeutic
radiopharmaceuticals are paid, which
would allow manufacturer to
voluntarily submit ASP data, and then
default to the mean unit cost when ASP
data are unavailable. Some commenters
recommended that CMS use ASP data as
a benchmark for determining costs for
diagnostic radiopharmaceuticals that are
packaged.
One commenter stated that payment
for diagnostic radiopharmaceuticals
should not be paid at ASP+6 percent for
the reasons commenters provided when
CMS proposed to make payment at
ASP+6 percent in prior years.
Specifically, the commenter noted that
the ASP statute excludes reporting of
the ASP for diagnostic
radiopharmaceuticals and, therefore,
such reporting would need to be
voluntary. However, in terms of
voluntary reporting of diagnostic
radiopharmaceuticals, the commenter
further noted that CMS could never be
confident that it would receive reports

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from all manufacturers of any particular
diagnostic radiopharmaceutical.
Moreover, the commenter stated, high
volume diagnostic radiopharmaceuticals
are furnished using generators that
hospitals use for up to 28 days to
provide doses of diagnostic
radiopharmaceuticals as needed and
therefore the manufacturer, who would
report the ASP under penalty of perjury,
would never be able to certify the actual
number of doses furnished with
confidence. The commenter finally
noted that packaging is consistent with
the general principles of a prospective
payment system, one goal of which is to
encourage hospital cost containment.
Response: As we stated above, the
statutorily required OPPS drug
packaging threshold has expired, and
we continue to believe that nonpassthrough diagnostic
radiopharmaceuticals and contrast
agents are always ancillary and
supportive to an independent service,
rather than services themselves as the
therapeutic modality. We disagree with
commenters who suggest that nonpassthrough diagnostic
radiopharmaceuticals and contrast
agents should be paid under the ASP
methodology, that nonpass-through
diagnostic radiopharmaceuticals and
contrast agents should be paid as passthrough drugs and biologicals, or that
nonpass-through diagnostic
radiopharmaceuticals should be paid
similarly to therapeutic
radiopharmaceuticals. We continue to
believe that nonpass-through diagnostic
radiopharmaceuticals, contrast agents,
and implantable biologicals function
effectively as supplies that enable the
provision of an independent service. As
we noted in the CY 2009 OPPS/ASC
final rule with comment period (73 FR
68646) and restate above, drugs,
biologicals, or radiopharmaceuticals for
which we have not established a
separate APC will receive packaged
payment under the OPPS, and are
considered not to be SCODs. We
continue to believe that the line-item
estimated cost for nonpass-through
diagnostic radiopharmaceuticals,
contrast agents, and implantable
biologicals in our claims data is a
reasonable approximation of average
acquisition and preparation and
handling costs for diagnostic
radiopharmaceuticals, contrast agents,
and implantable biologicals,
respectively.
Further, as we have stated above, we
believe that packaging costs into a single
aggregate payment for a service,
encounter, or episode-of-care is a
fundamental principle that
distinguishes a prospective payment

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system from a fee schedule. Our policy
of packaging payment for nonpassthrough diagnostic
radiopharmaceuticals, contrast agents,
and implantable biologicals into the
payment for the primary procedure or
service with which they are associated
encourages hospital efficiencies and
also enables hospitals to manage their
resources with maximum flexibility.
Paying separately for nonpass-through
diagnostic radiopharmaceuticals,
contrast agents, and implantable
biologicals, when each of these items is
ancillary or supportive to an
independent service, is contrary to this
principle of a prospective payment
system.
Finally, we do not agree with the
commenter’s assertion that separate
payment for diagnostic
radiopharmaceuticals would result in
more accurate payment for these
products. When CMS discussed possible
ASP-based payment for diagnostic
radiopharmaceuticals in the CY 2006
OPPS final rule with comment period
(70 FR 68653 through 68657), numerous
commenters advised CMS that
diagnostic radiopharmaceuticals are
formulated, distributed, compounded,
and administered in unique distribution
channels that preclude the
determination of ASP relevant to a
diagnostic radiopharmaceutical HCPCS
codes. Further, commenters advised
CMS that the manufacturer has no way
to calculate the ASP of the end product
patient dose and, consequently, could
not supply CMS with accurate ASP
data. In the intervening period between
the CY 2006 final rule with comment
period and the present, diagnostic
radiopharmaceutical use has become
more widespread and its formulation
more complex. Moreover, we believe
that the phenomena described by
commenters (including
radiopharmaceutical manufacturers) in
the comment period preceding the CY
2006 OPPS final rule with comment
period, including the many preparatory
and compounding steps between
manufacturer and the patient’s bedside,
remain an impediment to
manufacturers’ calculations of accurate
ASP and thus accurate payment for
these products. Therefore, we do not
believe that diagnostic
radiopharmaceuticals (or contrast agents
or implantable biologicals) should be
paid separately under the OPPS such
that manufactures voluntarily can
submit ASP data and then default to
mean unit cost when ASP data are
unavailable. We believe they are
appropriately packaged into a single

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aggregate payment for the
accompanying services.
Comment: Commenters recommended
that CMS modify the way that it applies
the ‘‘2 times’’ rule for nuclear medicine
APCs by including the cost of the
packaged diagnostic
radiopharmaceutical drugs in its
analysis and not just the cost of services.
The commenters argued that this is
mandated by the statute, which
provides that an APC group cannot be
considered comparable with respect to
the use of resources if the highest cost
for an item or service in the APC group
is more than two times greater than the
lowest cost for an item or service within
the same APC group. Therefore, the
commenters believed that it is logical
that as long as CMS views the packaged
nuclear medicine service and the
radiopharmaceutical as one unit for
APC payment purposes, it should
consider both components together in
applying the 2 times rule and analysis
to APC payment.
Response: While the language in
section 1833(t)(2) of the Act regarding
the 2 times rule describes consideration
of both items and services for purposes
of identifying exceptions to the rule, it
does so within the context of services
that belong to an APC group.
Unconditionally packaged items and
services, being associated with the
particular item or service being modeled
for separate payment, would not
individually belong to any APC group.
However, these unconditionally
packaged costs would be incorporated
into the system through the separately
paid items or services with which they
appear on the claim, and would thus be
factored into the ultimate consideration
of the 2 times rule. Therefore,
consideration of items and services
within each APC only applies to the
separately paid HCPCS and CPT codes
assigned to each APC and would thus
not include any discrete calculation for
packaged costs with regards to the two
times rule.
Comment: One commenter
recommended that CMS establish a
threshold for radiopharmaceutical drugs
that would trigger separate payment
when the cost of the
radiopharmaceutical is greater than the
total APC payment or over another
threshold value.
Response: Consistent with the CY
2013 OPPS/ASC proposed rule, for this
final rule with comment period, we
continue to believe that diagnostic
radiopharmaceuticals are ancillary and
supportive to the nuclear medicine
procedures in which they are used and
that their costs should be packaged into
the primary procedures with which they

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are associated. We do not believe it
would be appropriate to set a cost
threshold for packaging diagnostic
radiopharmaceuticals because,
regardless of their per day cost, they are
always supportive of an independent
procedure that is the basis for
administration of the diagnostic
radiopharmaceutical. We also do not
believe that it is appropriate to consider
alternate packaging criteria for nonpassthrough diagnostic
radiopharmaceuticals because we
continue to believe that, regardless of
their per-day cost, these items are
always supportive of an independent
procedure that is the basis for
administration of the diagnostic
radiopharmaceutical. Therefore, our
policy of packaging costs for these
products into an associated APC
continues to be the approach best suited
for use in this prospective payment
system.
Further, we note that the OPPS, as a
prospective payment system, already
includes the costs associated with
diagnostic radiopharmaceuticals into
the APCs for which the product is
ancillary and supportive. We believe
that the cost associated with a given
product at a given point in time is
immaterial because the OPPS, as a
prospective payment system with
payments based on average costs
associated with a covered procedure,
already takes into account both higher
and lower input costs associated with
that procedure. We also note that the
OPPS, like many of Medicare’s
prospective payment systems, has
polices in place to provide hospitals
with additional outlier payments for
certain high-cost cases whose costs
exceed certain thresholds. This system
of outliers already provides hospitals
(or, in the case of partial hospitalization
services, community mental health
centers) with additional reimbursement
to offset costs that are high relative to
the prospective payment amount,
regardless of whether the costs are
associated with diagnostic
radiopharmaceuticals or another
relatively high cost element in the
patient’s course of care.
Comment: One commenter requested
that CMS present additional, detailed
information regarding how the agency
ensures that the full cost of diagnostic
radiopharmaceuticals are captured in
the associated packaged APC procedural
payments, including the validation
methods used by the agency.
Response: The data that CMS used to
calculate, propose, and finalize APC
assignments and rates, including costs
associated with diagnostic
radiopharmaceuticals, for the CY 2013

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OPPS, are available for purchase under
a CMS data use agreement through the
CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatinetPPS/
index.html. This Web site includes
information about purchasing the
‘‘OPPS Limited Data Set,’’ which now
includes the additional variable
previously available only in the OPPS
Identifiable Data set, including ICD–9–
CMS diagnosis codes and revenue code
payment amounts.
As we state above, we discuss in
detail in section II.A.2. of this final rule
with comment period the availability to
the public of the use of files of claims,
including, for CY 2008 and later,
supplemental line item cost data for
every HCPCS code under the OPPS, and
a detailed narrative description of our
data process for the annual OPPS/ASC
proposed and final rules that the public
can use to perform any desired analyses.
We continue to believe that the cost
of a diagnostic radiopharmaceutical is
captured into the associated packaged
APC procedural payment. We see no
need at this time to provide further data
analyses.
For CY 2013, we proposed to make an
additional payment of $10 for diagnostic
radiopharmaceuticals that utilize the
Tc-99m radioisotope produced by nonHEU methods (77 FR 45121). We
proposed to base this payment on the
best available estimations of the
marginal costs associated with non-HEU
radioisotope production, pursuant to
our authority described in section
1833(t)(2)(E) of the Act which allows us
to establish ‘‘other adjustments as
determined to be necessary to ensure
equitable payments’’ under the OPPS.
We described this policy in further
detail in section III.C.3. of the proposed
rule.
We received numerous comments on
this proposal, including comments that
suggested that separate payment for
diagnostic radiopharmaceuticals is the
most effective way to encourage hospital
conversion from HEU to non-HEU
sources that utilize Tc-99m. We have
addressed these comments on the
proposed payment for non-HEU sources
that recommended separate payment for
diagnostic radiopharmaceuticals above
and in section III.C.3. of this final rule
with comment period.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68634), we
began packaging the payment for all
nonpass-through implantable
biologicals into payment for the
associated surgical procedure because
we consider these products to always be
ancillary and supportive to independent
services, similar to implantable

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nonbiological devices that are always
packaged. We continued to follow this
policy in CY 2012 (76 FR 74306 through
74310). Specifically, we continue to
package payment for nonpass-through
implantable biologicals, also known as
devices that are surgically inserted or
implanted (through a surgical incision
or a natural orifice) into the body. In the
CY 2013 OPPS/ASC proposed rule (77
FR45101), for CY 2013, we proposed to
continue to apply the policies finalized
in CY 2012, to package payment for
nonpass-through implantable
biologicals (‘‘devices’’) that are
surgically inserted or implanted
(through a surgical incision or a natural
orifice) into the body.
Comment: One commenter requested
that HCPCS code Q4130 (Strattice tm,
per square centimeter) be assigned
status indicator ‘‘K’’ for CY 2013
because, the commenter argued, HCPCS
code Q4130 is a skin substitute graft for
chronic wounds and a surgical
biological implant for breast
reconstruction and hernia repair
procedures. The commenter stated that
assigning HCPCS code Q4130 to a status
indicator of ‘‘K’’ would signify its use as
a biological skin substitute graft for
which separate payment is available.
The commenter further noted that
Transmittal 2418 of the Medicare
Claims Processing Manual lists HCPCS
code Q4130 in table 5 of the transmittal,
along with other biologicals with ‘‘dual’’
use.
Response: HCPCS code Q4130 was
assigned a status indicator of ‘‘N’’ in the
CY 2013 OPPS/ASC proposed rule,
signifying that the product that is
represented by this code is an
implantable biological device. We
continue to believe that the product
described by HCPCS code Q4130 is an
implantable biological device, as
evidenced by language within the 510(k)
FDA clearance which lists the product
described by HCPCS code Q4130 as a
surgical mesh intended for the
reinforcement of soft tissue repaired by
sutures or suture anchors during tendon
repair surgery including reinforcement
of rotator cuff, patella, Achilles, biceps,
quadriceps, or other tendons. Further
indications of use include the repair of
body wall defects which require the use
of reinforcing or bridging material to
obtain the desired surgical outcome. As
we stated above, the payment for
nonpass-through implantable
biologicals, or implanted devices, is
packaged into the payment for the
primary procedure. Therefore, we are
continuing to assign a status indicator of
‘‘N’’ to HCPCS code Q4130 for CY 2013.
Additionally, we are correcting the table

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within Transmittal 2418 which contains
a list of skin substitutes only.
Comment: One commenter who
responded to the CY 2012 OPPS/ASC
final rule with comment period
expressed concern that Medicare
contractors had been inadvertently
making separate payment for nonpassthrough biological implants as they
process OPPS claims for breast
reconstruction and hernia repair
procedures. The commenter stated that
these procedure claims included claims
for biological implants, including
HCPCS codes Q4100 through Q4130.
The commenter noted that HCPCS code
Q4116 (Alloderm, per square
centimeter) in particular was paid
separately on several occasions.
Therefore, the commenter
recommended that CMS take several
steps to prevent further billing errors
with respect to the OPPS payment
policy for implantable biologicals.
Response: For the April 2012
quarterly update, we installed logic
changes in the I/OCE to allow for
separate payment for separately payable
skin substitute HCPCS codes that are
coded with skin substitute procedure
CPT codes only. We reminded hospitals
that HCPCS codes describing skin
substitutes should only be separately
reported when used with one of the CPT
codes describing the application of a
skin substitute (CPT codes 15271
through 15278). Therefore, we have
previously addressed the commenters’
concerns.
Under the OPPS, HCPCS codes that
describe skin substitute products, with
a separately payable status indicator of
‘‘K’’ or ‘‘G’’ that are billed with a skin
substitute application procedure, will
receive separate payment for both the
skin substitute product and the
procedure. Payment for skin substitute
HCPCS codes that are billed with other
procedures will be packaged into the
payment for the corresponding
procedure.
After consideration of the public
comments we received, we are
finalizing our proposals, without
modification, to continue to package
payment for all nonpass-through
diagnostic radiopharmaceuticals and
contrast agents, and implantable
biologicals that are surgically inserted or
implanted into the body through a
surgical incision or a natural orifice,
regardless of their per day costs. Given
the inherent function of diagnostic
radiopharmaceuticals and contrast
agents as ancillary and supportive to the
performance of an independent
procedure and the similar functions of
implantable biologicals and
nonbiological devices as integral to and

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supportive of the separately paid
surgical procedures in which either may
be used, we continue to view the
packaging of payment for diagnostic
radiopharmaceuticals, contrast agents,
and implantable biologicals as a logical
expansion of packaging payment for
drugs and biologicals. In addition, as we
initially established in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66768), we will continue
to identify diagnostic
radiopharmaceuticals specifically as
those Level II HCPCS codes that include
the term ‘‘diagnostic’’ alone with a
radiopharmaceutical in their long code
descriptors, and therapeutic
radiopharmaceuticals as those Level II
HCPCS codes that include the term
‘‘therapeutic’’ along with a
radiopharmaceuticals in their long code
descriptors. We believe that the current
descriptors accurately discriminate
between those radiopharmaceuticals
that are used to gather information and
those which are intended to improve the
patient’s medical condition.
In addition, any new biological
lacking pass-through status that is
surgically inserted or implanted through
a surgical incision or natural orifice will
be packaged in CY 2013.
We refer reader to section III.D.1.f. of
this final rule with comment period for
a discussion of comments related to
echocardiography services furnished
with and without contrast. For more
information on how we set CY 2013
payment rates for nuclear medicine
procedures in which diagnostic
radiopharmaceuticals are used an
echocardiography services provided
with and without contrast agents, we
refer readers to the CY 2010 OPPS/ASC
final rule with comment period for a
detailed discussion of nuclear medicine
and echocardiography services (74 FR
35269 through 35277).
h. Summary of Proposals
As we proposed, we are finalizing, for
this final rule with comment period, the
HCPCS codes that we unconditionally
packaged (for which we continue to
assign status indicator ‘‘N’’), or
conditionally packaged (for which we
continue to assign status indicators
‘‘Q1,’’ ‘‘Q2,’’ or ‘‘Q3’’), and those codes
are displayed in Addendum B of this
final rule with comment period (which
is available via the Internet on the CMS
Web site). The supporting documents
for this CY 2013 OPPS/ASC final rule
with comment period, including, but
not limited to, Addendum B, are
available on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. To

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view the status indicators by HCPCS
code in Addendum B, select ‘‘CMS
1589–FC’’ and then select the folder
labeled ‘‘2013 OPPS Final Rule
Addenda’’ from the list of supporting
files. Open the zipped file and select
Addendum B, which is available as both
an Excel file and a text file.
4. Calculation of OPPS Scaled Payment
Weights
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45101), we proposed for CY
2013 to calculate the relative payment
weights for each APC for CY 2013
shown in Addenda A and B to the
proposed rule (which were available via
the Internet on the CMS Web site) using
the APC costs discussed in sections
II.A.1. and II.A.2. of the proposed rule.
In years prior to CY 2007, we
standardized all the relative payment
weights to APC 0601 (Mid-Level Clinic
Visit) because mid-level clinic visits
were among the most frequently
performed services in the hospital
outpatient setting. We assigned APC
0601 a relative payment weight of 1.00
and divided the median cost for each
APC by the median cost for APC 0601
to derive the relative payment weight
for each APC.
Beginning with the CY 2007 OPPS (71
FR 67990), we standardized all of the
relative payment weights for APC 0606
(Level 3 Clinic Visits) because we
deleted APC 0601 as part of the
reconfiguration of the clinic visit APCs.
We selected APC 0606 as the base
because APC 0606 was the mid-level
clinic visit APC (that is, Level 3 of five
levels). For CY 2013, we proposed to
base the relative payment weights on
which OPPS payments will be made by
using geometric mean costs, as
described in section II.A.2.f. of the
proposed rule. However, in an effort to
maintain consistency in calculating
unscaled weights that represent the cost
of some of the most frequently provided
services, we proposed to continue to use
the cost of the mid-level clinic visit APC
(APC 0606) in calculating unscaled
weights. Following our general
methodology for establishing relative
payment weights derived from APC
costs, but using the proposed CY 2013
geometric mean cost for APC 0606, for
CY 2013, we proposed to assign APC
0606 a relative payment weight of 1.00
and to divide the geometric mean cost
of each APC by the proposed geometric
mean cost for APC 0606 to derive the
proposed unscaled relative payment
weight for each APC. We stated that the
choice of the APC on which to base the
proposed relative payment weights for
all other APCs does not affect the
payments made under the OPPS

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because we scale the weights for budget
neutrality.
Section 1833(t)(9)(B) of the Act
requires that APC reclassification and
recalibration changes, wage index
changes, and other adjustments be made
in a budget neutral manner. Budget
neutrality ensures that the estimated
aggregate weight under the OPPS for CY
2013 is neither greater than nor less
than the estimated aggregate weight that
would have been made without the
changes. To comply with this
requirement concerning the APC
changes, we proposed to compare the
estimated aggregate weight using the CY
2012 scaled relative payment weights to
the estimated aggregate weight using the
CY 2013 unscaled relative payment
weights. For CY 2012, we multiplied the
CY 2012 scaled APC relative weight
applicable to a service paid under the
OPPS by the volume of that service from
CY 2011 claims to calculate the total
weight for each service. We then added
together the total weight for each of
these services in order to calculate an
estimated aggregate weight for the year.
For CY 2013, as we proposed, we
performed the same process using the
CY 2013 unscaled relative payment
weights rather than scaled relative
payment weights. We then calculated
the weight scaler by dividing the CY
2012 estimated aggregate weight by the
CY 2013 estimated aggregate weight.
The service-mix is the same in the
current and prospective years because
we use the same set of claims for service
volume in calculating the aggregate
weight for each year. For a detailed
discussion of the weight scaler
calculation, we refer readers to the
OPPS claims accounting document
available on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
As we proposed, in this final rule
with comment period, we include
estimated payments to CMHCs in our
comparison of estimated unscaled
weights in CY 2013 to estimated total
weights in CY 2012 using CY 2011
claims data, holding all other
components of the payment system
constant to isolate changes in total
weight. Based on this comparison, we
adjusted the unscaled relative payment
weights for purposes of budget
neutrality. The CY 2013 unscaled
relative payment weights were adjusted
by multiplying them by a weight scaler
of 1.3596 to ensure that the CY 2013
relative payment weights are budget
neutral.
Section 1833(t)(14) of the Act
provides the payment rates for certain
SCODs. Section 1833(t)(14)(H) of the

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Act states that ‘‘Additional expenditures
resulting from this paragraph shall not
be taken into account in establishing the
conversion factor, weighting, and other
adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken
into account for subsequent years.’’
Therefore, the cost of those SCODs (as
discussed in section V.B.3. of this final
rule) was included in the budget
neutrality calculations for the CY 2013
OPPS.
We did not receive any public
comments on the proposed
methodology for calculating scaled
weights based on the geometric mean
costs for the CY 2013 OPPS. Therefore,
for the reasons set forth in the proposed
rule (77 FR 45101), we are finalizing our
proposed methodology without
modification, including updating of the
budget neutrality scaler for this final
rule with comment period as we
proposed. Under this methodology, the
final unscaled relative payment weights
were adjusted by a weight scaler of
1.3596 for this final rule with comment
period. The final scaled relative
payment weights listed in Addenda A
and B to this final rule with comment
period (which are available via the
Internet on the CMS Web site)
incorporate the final recalibration
adjustments discussed in sections II.A.1.
and II.A.2. of this final rule with
comment period.
We noted in the proposed rule that we
were providing additional information,
in association with the proposed rule, so
that the public could provide
meaningful comment on our proposed
policy to base the CY 2013 OPPS
relative payment weights on geometric
mean costs. The scaled relative payment
weights listed in Addenda A and B to
this final rule with comment period
(which are available via the Internet on
the CMS Web site) incorporate the
recalibration adjustments discussed in
sections II.A.1. and II.A.2. of this final
rule with comment period.
B. Conversion Factor Update
Section 1833(t)(3)(C)(ii) of the Act
requires the Secretary to update the
conversion factor used to determine the
payment rates under the OPPS on an
annual basis by applying the OPD fee
schedule increase factor. For purposes
of section 1833(t)(3)(C)(iv) of the Act,
subject to sections 1833(t)(17) and
1833(t)(3)(F) of the Act, the OPD fee
schedule increase factor is equal to the
hospital inpatient market basket
percentage increase applicable to
hospital discharges under section
1886(b)(3)(B)(iii) of the Act. In the FY
2013 IPPS/LTCH PPS final rule (77 FR
53414), consistent with current law,

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based on IHS Global Insight, Inc.’s
second quarter 2012 forecast of the FY
2013 market basket increase, the FY
2013 IPPS market basket update is 2.6
percent. However, sections 1833(t)(3)(F)
and 1833(t)(3)(G)(ii) of the Act, as added
by section 3401(i) of Pub. L. 111–148
and as amended by section 10319(g) of
that law and further amended by section
1105(e) of Public Law 111–152, provide
adjustments to the OPD fee schedule
increase factor for CY 2013.
Specifically, section 1833(t)(3)(F)(i) of
the Act requires that, for 2012 and
subsequent years, the OPD fee schedule
increase factor under subparagraph
(C)(iv) be reduced by the productivity
adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act. Section
1886(b)(3)(B)(xi)(II) of the Act defines
the productivity adjustment as equal to
the 10-year moving average of changes
in annual economy-wide, private
nonfarm business multifactor
productivity (MFP) (as projected by the
Secretary for the 10-year period ending
with the applicable fiscal year, year,
cost reporting period, or other annual
period) (the ‘‘MFP adjustment’’). In the
FY 2012 IPPS/LTCH PPS final rule (76
FR 51689 through 51692), we finalized
our methodology for calculating and
applying the MFP adjustment. In the FY
2013 IPPS/LTCH PPS proposed rule (77
FR 27975 through 27976), we discussed
the calculation of the proposed MFP
adjustment for FY 2013, which was 0.8
percentage point.
We proposed that if more recent data
became subsequently available after the
publication of the proposed rule (for
example, a more recent estimate of the
market basket increase and the MFP
adjustment), we would use such data, if
appropriate, to determine the CY 2013
market basket update and the MFP
adjustment, components in calculating
the OPD fee schedule increase factor
under sections 1833(t)(3)(C)(iv) and (F)
of the Act, in this CY 2013 OPPS/ASC
final rule with comment period. In the
FY 2013 IPPS/LTCH PPS final rule (77
FR 53414), we discussed the calculation
of the final MFP adjustment for FY
2013, which is 0.7 percentage point.
In addition, section 1833(t)(3)(F)(ii) of
the Act requires that for each of year
2010 through 2019, the OPD fee
schedule increase factor under section
1833(t)(3)(C)(iv) of the Act be reduced
by the adjustment described in section
1833(t)(3)(G) of the Act. For CY 2013,
section 1833(t)(3)(G)(ii) of the Act
provides a 0.1 percentage point
reduction to the OPD fee schedule
increase factor under section
1833(t)(3)(C)(iv) of the Act. Therefore, in
accordance with sections
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of

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the Act, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45102), we
proposed to apply a 0.1 percentage
point reduction to the OPD fee schedule
increase factor for CY 2013.
We note that section 1833(t)(3)(F) of
the Act provides that application of this
subparagraph may result in the OPD fee
schedule increase factor under section
1833(t)(3)(C)(iv) of the Act being less
than 0.0 for a year, and may result in
payment rates under the OPPS for a year
being less than such payment rates for
the preceding year. As described in
further detail below, using the final
methodology and more recent data
would result in an OPD fee schedule
increase factor of 1.8 percent for the CY
2013 OPPS (2.6 percent, which is the
final estimate of the hospital inpatient
market basket percentage increase, less
the final 0.7 percentage point MFP
adjustment, less the 0.1 percentage
point additional adjustment).
We note that hospitals that fail to
meet the Hospital OQR Program
reporting requirements are subject to an
additional reduction of 2.0 percentage
points from the OPD fee schedule
increase factor adjustment to the
conversion factor that would be used to
calculate the OPPS payment rates for
their services, as required by section
1833(t)(17) of the Act. As a result, using
the final methodology and more recent
data, those hospitals failing to meet the
Hospital OQR Program reporting
requirements will receive an OPD fee
schedule increase factor of ¥0.2 (2.6
percent, which is the final estimate of
the hospital inpatient market basket
percentage increase, less the final 0.7
percentage point MFP adjustment, less
the 0.1 percentage point additional
adjustment, less 2.0 percentage points
for the Hospital OQR Program
reduction). For further discussion of the
Hospital OQR Program, we refer readers
to section XV.F. of this final rule with
comment period.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45103), we proposed to
amend 42 CFR 419.32(b)(1)(iv)(B) by
adding a new paragraph (4) to reflect the
requirement in section 1833(t)(3)(F)(i) of
the Act that, for CY 2013, we reduce the
OPD fee schedule increase factor by the
MFP adjustment as determined by CMS,
and to reflect the requirement in section
1833(t)(3)(G)(ii) of the Act, as required
by section 1833(t)(3)(F)(ii) of the Act,
that we reduce the OPD fee schedule
increase factor by an additional 0.1
percentage point for CY 2013.
Comment: Several commenters
expressed support for the OPD fee
schedule increase factor because they
believed it would better align payment
with hospital costs.

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Response: We appreciate the
commenters’ support.
We did not receive any public
comments on the proposed amendment
to 42 CFR 419.32(b)(1)(iv)(B) to add a
new paragraph (4) to reflect the
requirements in section 1833(t)(3)(F) of
the Act. For the reasons discussed
above, we are adjusting the OPD fee
schedule increase factor and adopting as
final the amendment to 42 CFR
419.32(b)(1)(iv)(B), as proposed.
We did not receive any public
comments on our proposed
methodology for calculating the CY
2013 conversion factor. Therefore, we
are finalizing our proposed
methodology for calculating the budget
neutrality adjustment factors, as
described in the following discussion.
As we proposed, to set the OPPS
conversion factor for CY 2013, we are
increasing the CY 2012 conversion
factor of $70.016 by 1.8 percent. In
accordance with section 1833(t)(9)(B) of
the Act, we are further adjusting the
conversion factor for CY 2013 to ensure
that any revisions made to the updates
for a revised wage index and rural
adjustment are made on a budget
neutral basis (77 FR 45103). We are
calculating an overall budget neutrality
factor of 0.9998 for wage index changes
by comparing total estimated payments
from our simulation model using the
final FY 2013 IPPS wage indices to
those payments using the current (FY
2012) IPPS wage indices, as adopted on
a calendar year basis for the OPPS.
For CY 2013, we did not propose to
make a change to our rural adjustment
policy, and as discussed in section II.E.
of this final rule with comment period,
we are not making any changes to the
rural adjustment policy. Therefore, the
budget neutrality factor for the rural
adjustment is 1.0000.
For CY 2013, we are finalizing our
proposal to continue previously
established policies for implementing
the cancer hospital payment adjustment
described in section 1833(t)(18) of the
Act, as discussed in section II.F. of this
final rule with comment period. We are
calculating a CY 2013 budget neutrality
adjustment factor for the cancer hospital
payment adjustment by comparing the
estimated total CY 2013 payments under
section 1833(t) of the Act including the
CY 2013 cancer hospital payment
adjustment to the estimated CY 2013
total payments using the CY 2012 final
cancer hospital payment adjustment
under sections 1833(t)(18)(B) and
1833(t)(2)(E) of the Act. The difference
in the CY 2013 estimated payments as
a result of applying the CY 2013 cancer
hospital payment adjustment relative to
the CY 2012 final cancer hospital

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payment adjustment does not have a
significant impact on the budget
neutrality calculation. Therefore, we are
applying a budget neutrality adjustment
factor of 1.0000 to the conversion factor
to ensure that the cancer hospital
payment adjustment is budget neutral.
For this final rule with comment
period, we estimate that pass-through
spending for both drugs and biologicals
and devices for CY 2013 would equal
approximately $74 million, which
represents 0.15 percent of total
projected CY 2013 OPPS spending.
Therefore, the conversion factor is also
adjusted by the difference between the
0.22 percent estimate of pass-through
spending for CY 2012 and the 0.15
percent estimate of CY 2013 passthrough spending, resulting in an
adjustment for CY 2013 of ¥0.07
percent. Finally, estimated payments for
outliers remain at 1.0 percent of total
OPPS payments for CY 2013.
The OPD fee schedule increase factor
of 1.8 percent for CY 2013 (that is, the
estimate of the hospital inpatient market
basket percentage increase of 2.6
percent less the 0.7 percentage point
MFP adjustment and less the 0.1
percentage point required under section
1833(t)(3)(F) of the Act), the required
wage index budget neutrality
adjustment of approximately 0.9998, the
cancer hospital payment adjustment of
1.0000, and the adjustment of –0.07
percent of projected OPPS spending for
the difference in the pass-through
spending result in a conversion factor
for CY 2013 of $71.313.
As we stated in the proposed rule,
hospitals that fail to meet the reporting
requirements of the Hospital OQR
Program will continue to be subject to
a further reduction of 2.0 percentage
points to the OPD fee schedule increase
factor adjustment to the conversion
factor that would be used to calculate
the OPPS payment rates made for their
services as required by section
1833(t)(17) of the Act. For a complete
discussion of the Hospital OQR Program
requirements and the payment
reduction for hospitals that fail to meet
those requirements, we refer readers to
section XV.F. of this final rule with
comment period. To calculate the CY
2013 reduced market basket conversion
factor for those hospitals that fail to
meet the requirements of the Hospital
OQR Program for the full CY 2013
payment update, we are making all
other adjustments discussed above, but
using a reduced OPD fee schedule
update factor of ¥0.2 percent (that is,
the OPD fee schedule increase factor of
1.8 percent further reduced by 2.0
percentage points as required by section
1833(t)(17)(A)(i) of the Act for failure to

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comply with the Hospital OQR
requirements). This results in a reduced
conversion factor for CY 2013 of
$69.887 for those hospitals that fail to
meet the Hospital OQR requirements (a
difference of ¥$1.426 in the conversion
factor relative to those hospitals that
met the Hospital OQR requirements).
In summary, for CY 2013, we are
using a final conversion factor of
$71.313 in the calculation of the
national unadjusted payment rates for
those items and services for which
payment rates are calculated using
geometric mean costs. For further
discussion regarding our final policy to
base the CY 2013 OPPS relative
payment weights on geometric mean
costs, we refer readers to section II.A.2.f.
of this final rule with comment period.
We are finalizing our proposed
amendment to § 419.32(b)(1)(iv)(B) by
adding a new paragraph (4) to reflect the
reductions to the OPD fee schedule
increase factor that are required for CY
2013 in order to satisfy the statutory
requirements of sections 1833(t)(3)(F)
and (t)(3)(G)(ii) of the Act. We also are
using a reduced conversion factor of
$69.887 in the calculation of payments
for hospitals that fail to comply with the
Hospital OQR Program requirements to
reflect the reduction to the OPD fee
schedule increase factor that is required
by section 1833(t)(17) of the Act.
C. Wage Index Changes
Section 1833(t)(2)(D) of the Act
requires the Secretary to determine a
wage adjustment factor to account for
geographic wage differences in a portion
of the OPPS payment rate, which
includes the copayment standardized
amount and is attributable to labor and
labor-related costs. This portion of the
OPPS payment rate is called the OPPS
labor-related share. This adjustment
must be made in a budget neutral
manner and budget neutrality is
discussed in section II.B. of this final
rule with comment period.
The OPPS labor-related share is 60
percent of the national OPPS payment.
This labor-related share is based on a
regression analysis that determined that,
for all hospitals, approximately 60
percent of the costs of services paid
under the OPPS were attributable to
wage costs. We confirmed that this
labor-related share for outpatient
services is appropriate during our
regression analysis for the payment
adjustment for rural hospitals in the CY
2006 OPPS final rule with comment
period (70 FR 68553). Therefore, as we
proposed, we are not revising this
policy for the CY 2013 OPPS. We refer
readers to section II.H. of this final rule
with comment period for a description

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and example of how the wage index for
a particular hospital is used to
determine the payment for the hospital.
As discussed in section II.A.2.c. of
this final rule with comment period, for
estimating APC costs, we standardize 60
percent of estimated claims costs for
geographic area wage variation using the
same FY 2013 pre-reclassified wage
index that the IPPS uses to standardize
costs. This standardization process
removes the effects of differences in area
wage levels from the determination of a
national unadjusted OPPS payment rate
and the copayment amount
As published in the original OPPS
April 7, 2000 final rule with comment
period (65 FR 18545), the OPPS has
consistently adopted the final fiscal year
IPPS wage index as the calendar year
wage index for adjusting the OPPS
standard payment amounts for labor
market differences. Thus, the wage
index that applies to a particular acute
care short-stay hospital under the IPPS
also applies to that hospital under the
OPPS. As initially explained in the
September 8, 1998 OPPS proposed rule
(63 FR 47576), we believed that using
the IPPS wage index as the source of an
adjustment factor for the OPPS is
reasonable and logical, given the
inseparable, subordinate status of the
HOPD within the hospital overall. In
accordance with section 1886(d)(3)(E) of
the Act, the IPPS wage index is updated
annually.
The Affordable Care Act contained
provisions affecting the wage index.
These provisions were discussed in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74191). As
discussed in that final rule with
comment period, section 10324 of the
Affordable Care Act requires a ‘‘frontier
State’’ wage index floor of 1.00 in
certain cases. For the CY 2013 OPPS, as
we proposed, we are implementing this
provision in the same manner as we did
for CY 2012. That is, frontier State
hospitals will receive a wage index of
1.00 if the otherwise applicable wage
index (including reclassification, rural
floor, and rural floor budget neutrality)
is less than 1.00. Similar to our current
policy for HOPDs that are affiliated with
multicampus hospital systems, the
HOPD will receive a wage index based
on the geographic location of the
specific inpatient hospital with which it
is associated. Therefore, if the
associated hospital is located in a
frontier State, the wage index
adjustment applicable for the hospital
will also apply for the affiliated HOPD.
We refer readers to the FY 2011 and FY
2012 IPPS/LTCH PPS final rules (75 FR
50160 through 50161 and 76 FR 51586,
respectively) and the FY 2013 IPPS/

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LTCH PPS final rule (77 FR 53369
through 53370) for a detailed discussion
regarding this provision, including our
methodology for identifying which areas
meet the definition of frontier States as
provided for in section
1886(d)(3)(E)(iii)(II) of the Act.
In addition to the changes required by
the Affordable Care Act, we note that
the final FY 2013 IPPS wage indices
continue to reflect a number of
adjustments implemented over the past
few years, including, but not limited to,
reclassification of hospitals to different
geographic areas, the rural floor
provisions, an adjustment for
occupational mix, and an adjustment to
the wage index based on commuting
patterns of employees (the out-migration
adjustment). We refer readers to the FY
2013 IPPS/LTCH PPS final rule (77 FR
53365 through 53374) for a detailed
discussion of all changes to the FY 2013
IPPS wage indices. In addition, we refer
readers to the CY 2005 OPPS final rule
with comment period (69 FR 65842
through 65844) and subsequent OPPS
rules for a detailed discussion of the
history of these wage index adjustments
as applied under the OPPS.
Section 102 of the Medicare and
Medicaid Extender Act extended,
through FY 2011, section 508
reclassifications as well as certain
special exceptions. The most recent
extension of these special wage indices
was included in section 302 of the
Temporary Payroll Tax Cut
Continuation Act of 2011 (Pub. L. 112–
78), as amended by section 3001 of the
Middle Class Tax Relief and Job
Creation Act of 2012 (Pub. L. 112–96).
These legislative provisions extended
certain section 508 reclassifications and
special exception wage indices for a 6month period during FY 2012, from
October 1, 2011 through March 31,
2012. We implemented this extension in
a notice (CMS–1442–N) published in
the Federal Register on April 20, 2012
(77 FR 23722). As we did for CY 2010,
we revised wage index values for certain
special exception hospitals from January
1, 2012 through June 30, 2012, under
the OPPS, in order to give these
hospitals the special exception wage
indices under the OPPS for the same
time period as under the IPPS. In
addition, because the OPPS pays on a
calendar year basis, the end date under
the OPPS for certain nonsection 508 and
nonspecial exception providers to
receive special wage indices was June
30, 2012, instead of March 31, 2012, so
that these providers also received a full
6 months of payment under the revised
wage index comparable to the IPPS.
However, section 508 reclassifications
and special exceptions have not been

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reauthorized since their expiration
under Pub. L. 112–96 and, therefore, are
no longer applicable.
For purposes of the OPPS, as we
proposed, we are continuing our policy
in CY 2013 of allowing non-IPPS
hospitals paid under the OPPS to
qualify for the out-migration adjustment
if they are located in a section 505 outmigration county (section 505 of the
Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA)). We note that, because
non-IPPS hospitals cannot reclassify,
they are eligible for the out-migration
wage adjustment. Table 4J listed in the
FY 2013 IPPS/LTCH PPS final rule
(available via the Internet on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/
index.html) identifies counties eligible
for the out-migration adjustment and
hospitals that will receive the
adjustment for FY 2013. We note that,
beginning with FY 2012, under the
IPPS, an eligible hospital that waives its
Lugar status in order to receive the outmigration adjustment has effectively
waived its deemed urban status and,
thus, is rural for all purposes under the
IPPS, including being considered rural
for the disproportionate share hospital
(DSH) payment adjustment, effective for
the fiscal year in which the hospital
receives the out-migration adjustment.
We refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53371) for
a more detailed discussion on the Lugar
redesignation waiver for the outmigration adjustment). As we have done
in prior years, we are including Table 4J
from the FY 2013 IPPS/LTCH PPS final
rule as Addendum L to this final rule
with comment period with the addition
of non-IPPS hospitals that will receive
the section 505 out-migration
adjustment under the CY 2013 OPPS.
Addendum L is available via the
Internet on the CMS Web site.
In response to concerns frequently
expressed by providers and other
relevant parties that the current wage
index system does not effectively reflect
the true variation in labor costs for a
large cross-section of hospitals, two
studies were undertaken by the
Department. First, section 3137(b) of the
Affordable Care Act required the
Secretary to submit to Congress a report
that includes a plan to comprehensively
reform the Medicare wage index applied
under section 1886(d) of the Act. In
developing the plan, the Secretary was
directed to take into consideration the
goals for reforming the wage index that
were set forth by the Medicare Payment
Advisory Commission (MedPAC) in its
June 2007 report entitled ‘‘Report to

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Congress: Promoting Greater Efficiency
in Medicare’’ and to ‘‘consult with
relevant affected parties.’’ Second, the
Secretary commissioned the Institute of
Medicine (IOM) to ‘‘evaluate hospital
and physician geographic payment
adjustments, the validity of the
adjustment factors, measures and
methodologies used in those factors,
and sources of data used in those
factors.’’ Reports on both of these
studies for geographic adjustment to
hospital payments recently have been
released. For summaries of the studies,
their findings, and recommendations on
reforming the wage index system, we
refer readers to section IX.B. of the
preamble of the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53660 through
53664).
Comment: Several commenters
expressed disappointment that CMS did
not set forth a proposal in the CY 2013
OPPS/ASC proposed rule to begin
reform of the wage index process and
simply proposed to continue adopting
the IPPS fiscal year wage indexes.
Several commenters encouraged CMS to
expedite wage index reform to create a
more equitable system that adequately
pays hospitals for care provided to
Medicare beneficiaries. A few
commenters supported the continuation
of the current wage index system; one
commenter suggested that, as more
comprehensive reforms continue to be
developed, they encompass the goals of
minimizing volatility, discouraging
manipulation of the system, and
limiting adverse effects on high wage
area markets.
Response: In the CY 2012 OPPS/ASC
proposed rule, we solicited comment on
possible alternative wage index systems
under the OPPS (76 FR 42212 through
42213). However, in the CY 2012 OPPS/
ASC final rule with comment period, we
stated our belief that maintaining the
current policy of adopting the fiscal year
IPPS wage index and adopting it in the
OPPS on a calendar year basis would
continue to be appropriate, given our
longstanding use of the fiscal year IPPS
wage index in the OPPS on a calendar
year basis (76 FR 74192) and the broader
wage index reform currently under
development and consideration (76 FR
74193). In the CY 2013 OPPS/ASC
proposed rule, we proposed that
continuing to use the IPPS wage index
as the source of an adjustment factor for
the OPPS is reasonable and logical,
given the inseparable, subordinate
status of the HOPD within the hospital
overall (77 FR 45105). As discussed
above, the FY 2013 IPPS/LTCH PPS
final rule contains a discussion of a
MedPAC report and an IOM study
focused on potential models for wage

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index reform (77 FR 53660 through
53664).
After consideration of the public
comments we received, we are
finalizing our policy to adopt the FY
2013 IPPS wage index for the CY 2013
OPPS in its entirety, including the rural
floor, geographic reclassifications, and
all other wage index adjustments. As
stated earlier in this section, we
continue to believe that using the IPPS
wage index as the source of an
adjustment factor for the OPPS is
reasonable and logical, given the
inseparable, subordinate status of the
HOPD within the hospital overall.
Therefore, we are using the final FY
2013 IPPS wage indices for calculating
OPPS payments in CY 2013. With the
exception of the out-migration wage
adjustment table (Addendum L to this
final rule with comment period, which
is available via the Internet on the CMS
Web site), which includes non-IPPS
hospitals paid under the OPPS, we are
not reprinting the final FY 2013 IPPS
wage indices referenced in this
discussion of the wage index. We refer
readers to the CMS Web site for the
OPPS at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. At
this link, readers will find a link to the
final FY 2013 IPPS wage index tables.

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D. Statewide Average Default CCRs
In addition to using CCRs to estimate
costs from charges on claims for
ratesetting, CMS uses overall hospitalspecific CCRs calculated from the
hospital’s most recent cost report to
determine outlier payments, payments
for pass-through devices, and monthly
interim transitional corridor payments
under the OPPS during the PPS year.
Medicare contractors cannot calculate a
CCR for some hospitals because there is
no cost report available. For these
hospitals, CMS uses the statewide
average default CCRs to determine the
payments mentioned above until a
hospital’s Medicare contractor is able to
calculate the hospital’s actual CCR from
its most recently submitted Medicare
cost report. These hospitals include, but
are not limited to, hospitals that are
new, have not accepted assignment of
an existing hospital’s provider
agreement, and have not yet submitted
a cost report. CMS also uses the
statewide average default CCRs to
determine payments for hospitals that
appear to have a biased CCR (that is, the
CCR falls outside the predetermined
ceiling threshold for a valid CCR) or for
hospitals in which the most recent cost

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report reflects an all-inclusive rate
status (Medicare Claims Processing
Manual (Pub. 100–04), Chapter 4,
Section 10.11). We discuss our policy
for using default CCRs, including setting
the ceiling threshold for a valid CCR, in
the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68594 through
68599) in the context of our adoption of
an outlier reconciliation policy for cost
reports beginning on or after January 1,
2009.
For CY 2013, we proposed to continue
to use our standard methodology of
calculating the statewide average default
CCRs using the same hospital overall
CCRs that we use to adjust charges to
costs on claims data for setting the
proposed CY 2013 OPPS relative
payment weights. Table 12 published in
the proposed rule (77 FR 45106) listed
the proposed CY 2013 default urban and
rural CCRs by State and compared them
to last year’s default CCRs. These
proposed CCRs represented the ratio of
total costs to total charges for those cost
centers relevant to outpatient services
from each hospital’s most recently
submitted cost report, weighted by
Medicare Part B charges. We also
proposed to adjust ratios from submitted
cost reports to reflect the final settled
status by applying the differential
between settled to submitted overall
CCRs for the cost centers relevant to
outpatient services from the most recent
pair of final settled and submitted cost
reports. We then proposed to weight
each hospital’s CCR by the volume of
separately paid line-items on hospital
claims corresponding to the year of the
majority of cost reports used to calculate
the overall CCRs. We refer readers to the
CY 2008 OPPS/ASC final rule with
comment period (72 FR 66680 through
66682) and prior OPPS rules for a more
detailed discussion of our established
methodology for calculating the
statewide average default CCRs,
including the hospitals used in our
calculations and our trimming criteria.
Comment: One commenter expressed
concern that Florida has the lowest CCR
in the United States for both rural and
urban areas. The commenter suggested
that the statewide average default CCRs
for Florida are ‘‘significantly skewed’’
due to cost report information submitted
by hospitals in the Miami area and
recommended that CMS evaluate the
data used to calculate the CCRs in order
to validate this assumption.
Response: As detailed in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66680 through 66682), we
use only valid CCRs to calculate the

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68287

default ratios. That is, we remove the
CCRs for all-inclusive hospitals and
CAHs, we identify and remove any
obvious error CCRs, and we trim any
outliers. The Florida statewide average
default CCRs have been very stable over
the last several years. Contrary to the
commenter’s belief that we use
statewide average default CCRs to
estimate the costs (from charges on
claims) that are used to calculate the
OPPS relative weights, Medicare
contractors use statewide average
default CCRs to determine outlier
payments, payments for pass-through
devices, and monthly interim
transitional corridor payments for
hospitals with no available cost report.
After consideration of the public
comment we received on our CY 2013
proposal, we are finalizing our proposal
to apply our standard methodology of
calculating the statewide average default
CCRs using the same hospital overall
CCRs that we used to adjust charges to
costs on claims data for setting the CY
2013 OPPS relative weights. We used
this methodology to calculate the
statewide average default CCRs listed in
Table 8 below.
For this CY 2013 OPPS/ASC final rule
with comment period, approximately 62
percent of the submitted cost reports
utilized in the default ratio calculations
represented data for cost reporting
periods ending in CY 2010, and
approximately 38 percent were for cost
reporting periods ending in CY 2009.
For Maryland, we used an overall
weighted average CCR for all hospitals
in the Nation as a substitute for
Maryland CCRs. Few hospitals in
Maryland are eligible to receive
payment under the OPPS, which limits
the data available to calculate an
accurate and representative CCR. The
weighted CCR is used for Maryland
because it takes into account each
hospital’s volume, rather than treating
each hospital equally. We refer readers
to the CY 2005 OPPS final rule with
comment period (69 FR 65822) for
further discussion and the rationale for
our longstanding policy of using the
national average CCR for Maryland. In
general, observed changes in the
statewide average default CCRs between
CY 2012 and CY 2013 are modest and
the few significant changes are
associated with areas that have a small
number of hospitals.
Table 8 below lists the finalized
statewide average default CCRs for
OPPS services furnished on or after
January 1, 2013.
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TABLE 8.-CY 2013 STATEWIDE AVERAGE CCRs

UrbanlRural
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN

ALASKA
ALASKA
ALABAMA
ALABAMA
ARKANSAS
ARKANSAS
ARIZONA
ARIZONA
CALIFORNIA
CALIFORNIA
COLORADO
COLORADO
CONNECTICUT
CONNECTICUT
DISTRICT OF
COLUMBIA
DELAWARE
DELAWARE
FLORIDA
FLORIDA
GEORGIA
GEORGIA
HAWAII
HAWAII
IOWA
IOWA
IDAHO
IDAHO
ILLINOIS
ILLINOIS
INDIANA
INDIANA
KANSAS
KANSAS
KENTUCKY

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URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL

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0.302
0.282
0.353
0.182
0.167
0.237
0.214
0.323
0.306
0.296
0.269
0.417
0.357
0.240
0.230
0.285
0.256
0.290
0.210
0.217

Sfmt 4725

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0.302
0.280
0.347
0.182
0.164
0.238
0.214
0.321
0.306
0.296
0.269
0.417
0.353
0.238
0.230
0.292
0.262
0.279
0.208
0.217

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ER15NO12.016

sroberts on DSK5SPTVN1PROD with

State

Previous Default
CY 2013 Default
CCR(CY2012
CCR
OPPS Final Rule)
0.489
0.487
0.307
0.305
0.209
0.210
0.193
0.194
0.219
0.221
0.234
0.245
0.238
0.237
0.190
0.190
0.192
0.193
0.202
0.201
0.331
0.342
0.226
0.226
0.364
0.365
0.287
0.288

State
KENTUCKY
LOUISIANA
LOUISIANA
MARYLAND
MARYLAND
MASSACHUSETTS
MASSACHUSETTS
MAINE
MAINE
MICHIGAN
MICHIGAN
MINNESOTA
MINNESOTA
MISSOURI
MISSOURI
MISSISSIPPI
MISSISSIPPI
MONTANA
MONTANA
NORTH CAROLINA
NORTH CAROLINA
NORTH DAKOTA
NORTH DAKOTA
NEBRASKA
NEBRASKA
NEW HAMPSHIRE
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW MEXICO
NEVADA
NEVADA
NEW YORK
NEW YORK
OHIO
OHIO

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UrbanIRural
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN

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CY 2013 Default
CCR
0.241
0.242
0.225
0.275
0.246
0.427
0.323
0.445
0.449
0.303
0.303
0.469
0.321
0.241
0.262
0.226
0.182
0.431
0.384
0.253
0.254
0.322
0.414
0.318
0.254
0.317
0.292
0.207
0.256
0.279
0.234
0.162
0.420
0.369
0.321
0.237

Sfmt 4725

68289

Previous Default
CCR (CY 2012
OPPS Final Rule)
0.239
0.247
0.224
0.276
0.246
0.427
0.322
0.438
0.453
0.305
0.305
0.482
0.320
0.243
0.260
0.224
0.189
0.434
0.386
0.251
0.257
0.322
0.421
0.318
0.252
0.323
0.291
0.212
0.264
0.288
0.233
0.167
0.419
0.356
0.320
0.234

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BILLING CODE 4120–01–C

E. OPPS Payments to Certain Rural and
Other Hospitals

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1. Hold Harmless Transitional Payment
Changes
The OPPS was implemented in CY
2000 under the Balanced Budget Act of
1997 (BBA) (Pub. L. 105–33). The
Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of

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1999 (BBRA) (Pub. L. 106–113) made
major changes in the hospital OPPS,
including adding a new paragraph (7) to
section 1833(t) of the Act, effective as if
included in the enactment of the BBA.
Section 1833(t)(7) of the Act sets forth
that every provider was eligible to
receive an additional payment
adjustment (called either transitional
corridor payments or transitional
outpatient payments (TOPs)) if the

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payments it received for covered OPD
services under the OPPS were less than
the payments it would have received for
the same services under the prior
reasonable cost-based system (referred
to as the pre-BBA amount), and that the
TOPs were temporary payments for
most providers and intended to ease
their transition from the prior
reasonable cost-based payment system
to the OPPS system. There are two types

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
of hospitals excepted from the policy
described above, cancer hospitals and
children’s hospitals. Specifically, such a
hospital could receive TOPs to the
extent its PPS amount was less than its
pre-BBA amount in the applicable year.
Section 1833(t)(7)(D)(i) of the Act
originally provided for TOPs to all
hospitals for covered OPD services
furnished before January 1, 2004.
However, section 411 of Public Law
108–173 (the Medicare Prescription
Drug, Improvement, and Modernization
Act of 2003) amended section
1833(t)(7)(D)(i) of the Act to extend
these payments through December 31,
2005, for rural hospitals with 100 or
fewer beds. Section 411 also extended
the TOPs to sole community hospitals
(SCHs) located in rural areas for services
furnished during the period that began
with the provider’s first cost reporting
period beginning on or after January 1,
2004, and ending on December 31, 2005.
Accordingly, the authority for making
TOPs under section 1833(t)(7)(D)(i) of
the Act, as amended by section 411 of
Public Law 108–173, for rural hospitals
having 100 or fewer beds and SCHs
located in rural areas expired on
December 31, 2005.
Section 5105 of Public Law 109–171
(the Deficit Reduction Act of 2005)
extended the TOPs for covered OPD
services furnished on or after January 1,
2006, and before January 1, 2009, for
rural hospitals having 100 or fewer beds
that are not SCHs. Section 5105 of
Public Law 109–171 also reduced the
TOPs to rural hospitals from 100
percent of the difference between the
provider’s OPPS payments and the preBBA amount. This provision provided
that, in cases in which the OPPS
payment was less than the provider’s
pre-BBA amount, the amount of
payment would be increased by 95
percent of the amount of the difference
between the two amounts for CY 2006,
by 90 percent of the amount of that
difference for CY 2007, and by 85
percent of the amount of that difference
for CY 2008.
For CY 2006, we implemented section
5105 of Public Law 109–171 through
Transmittal 877, issued on February 24,
2006. In Transmittal 877, we did not
specifically address whether TOPs
applied to essential access community
hospitals (EACHs), which are
considered to be SCHs under section
1886(d)(5)(D)(iii)(III) of the Act.
Accordingly, by law, EACHs are treated
as SCHs. In the CY 2007 OPPS/ASC
final rule with comment period (71 FR
68010), we stated that EACHs were not
eligible for TOPs under Public Law 109–
171. However, we stated they were
eligible for the adjustment for rural

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SCHs authorized under section 411 of
Public Law 108–173. In the CY 2007
OPPS/ASC final rule with comment
period (71 FR 68010 and 68228), we
updated § 419.70(d) of our regulations to
reflect the requirements of Public Law
109–171.
In the CY 2009 OPPS/ASC proposed
rule (73 FR 41461), we stated that,
effective for services provided on or
after January 1, 2009, rural hospitals
with 100 or fewer beds that are not
SCHs would no longer be eligible for
TOPs, in accordance with section 5105
of Public Law 109–171. However,
subsequent to issuance of the CY 2009
OPPS/ASC proposed rule, section 147 of
Public Law 110–275 (the Medicare
Improvements for Patients and
Providers Act of 2008) amended section
1833(t)(7)(D)(i) of the Act by extending
the period of TOPs to rural hospitals
with 100 beds or fewer for 1 year, for
services provided before January 1,
2010. Section 147 of Public Law 110–
275 also extended TOPs to SCHs
(including EACHs) with 100 or fewer
beds for covered OPD services provided
on or after January 1, 2009, and before
January 1, 2010. In accordance with
section 147 of Public Law 110–275,
when the OPPS payment is less than the
provider’s pre-BBA amount, the amount
of payment is increased by 85 percent
of the amount of the difference between
the two payment amounts for CY 2009.
For CY 2009, we revised our
regulations at §§ 419.70(d)(2) and (d)(4)
and added paragraph (d)(5) to
incorporate the provisions of section
147 of Public Law 110–275. In addition,
we made other technical changes to
§ 419.70(d)(2) to more precisely capture
our existing policy and to correct an
inaccurate cross-reference. We also
made technical corrections to the crossreferences in paragraphs (e), (g), and (i)
of § 419.70.
For CY 2010, we made a technical
correction to the heading of
§ 419.70(d)(5) to correctly identify the
policy as described in the subsequent
regulation text. The paragraph heading
now indicates that the adjustment
applies to small SCHs, rather than to
rural SCHs.
In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60425), we
stated that, effective for services
provided on or after January 1, 2010,
rural hospitals and SCHs (including
EACHs) having 100 or fewer beds would
no longer be eligible for TOPs, in
accordance with section 147 of Public
Law 110–275. However, subsequent to
the issuance of the CY 2010 OPPS/ASC
final rule with comment period, section
3121(a) of the Affordable Care Act (Pub.
L. 111–148) amended section

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1833(t)(7)(D)(i)(III) of the Act by
extending the period of TOPs to rural
hospitals that are not SCHs with 100
beds or fewer for 1 year, for services
provided before January 1, 2011. Section
3121(a) of the Affordable Care Act
amended section 1833(t)(7)(D)(i)(III) of
the Act and extended the period of
TOPs to SCHs (including EACHs) for 1
year, for services provided before
January 1, 2011, and section 3121(b) of
the Affordable Care Act removed the
100-bed limitation applicable to such
SCHs for covered OPD services
furnished on or after January 1, 2010,
and before January 1, 2011. In
accordance with section 3121 of the
Affordable Care Act, when the OPPS
payment is less than the provider’s preBBA amount, the amount of payment is
increased by 85 percent of the amount
of the difference between the two
payment amounts for CY 2010.
Accordingly, in the CY 2011 OPPS/ASC
final rule with comment period (75 FR
71882), we updated § 419.70(d) of the
regulations to reflect the selfimplementing TOPs extensions and
amendments described in section 3121
of the Affordable Care Act.
Section 108 of the Medicare and
Medicaid Extenders Act of 2010
(MMEA) (Pub. L. 111–309) extended for
1 year the hold harmless provision for
a rural hospital with 100 or fewer beds
that is not an SCH (as defined in section
1886(d)(5)(D)(iii) of the Act). Therefore,
for such a hospital, for services
furnished before January 1, 2012, when
the PPS amount is less than the
provider’s pre-BBA amount, the amount
of payment to the hospital is increased
by 85 percent of the amount of the
difference between the two payments. In
addition, section 108 of the MMEA also
extended for 1 year the hold harmless
provision for an SCH (as defined in
section 1886(d)(5)(D)(iii) of the Act
(including EACHs) and the removal of
the 100-bed limit applicable to such
SCHs for covered OPD services
furnished on or after January 1, 2010,
and before January 1, 2012. Therefore,
for such hospitals, for services furnished
before January 1, 2012, when the PPS
amount is less than the provider’s preBBA amount, the amount of payment to
the hospital is increased by 85 percent
of the amount of the difference between
the two payments. Effective for services
provided on or after January 1, 2012, a
rural hospital with 100 or fewer beds
that is not an SCH and an SCH
(including EACHs) are no longer eligible
for TOPs, in accordance with section
108 of the MMEA. In the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74199), we revised our

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regulations § 419.70(d) to conform the
regulation text to the self-implementing
provisions of section 108 of the MMEA
described above.
Subsequent to the issuance of the CY
2012 OPPS/ASC final rule with
comment period, section 308 of the
Temporary Payroll Tax Cut
Continuation Act of CY 2011 (Pub. L.
112–78), as amended by section 3002 of
the Middle Class Tax Relief and Jobs
Creation Act (Pub. L. 112–96), extended
through December 31, 2012, the hold
harmless provision for a rural hospital
with 100 or fewer beds that is not an
SCH (as defined in section
1886(d)(5)(D)(iii) of the Act). Therefore,
for such a hospital, for services
furnished before January 1, 2013, when
the PPS amount is less than the
provider’s pre-BBA amount, the amount
of payment is increased by 85 percent
of the amount of the difference between
the two payments.
Section 308 of Public Law 112–78
also extended through February 29,
2012, the hold harmless provision for an
SCH (as defined in section
1886(d)(5)(D)(iii) of the Act), including
an EACH, without the bed size
limitation. Therefore, for such hospitals,
for services furnished before March 1,
2012, when the PPS amount is less than
the provider’s pre-BBA amount, the
amount of payment is increased by 85
percent of the amount of the difference
between the two payments. However,
section 3002 of Public Law 112–96
extended through December 31, 2012,
the hold harmless provision for an SCH
(as defined in section 1886(d)(5)(D)(iii)
of the Act), including an EACH, that has
no more than 100 beds. Therefore, for
such hospitals, for services furnished
before January 1, 2013, when the PPS
amount is less than the provider’s preBBA amount, the amount of payment is
increased by 85 percent of the amount
of the difference between the two
payments. Accordingly, as we proposed
in the CY 2013 OPPS/ASC proposed
rule (77 FR 45108), we are revising
§ 419.70(d) of the regulations to reflect
the TOPs extensions and amendments
described in section 308 of Public Law
112–78 and section 3002 of Public Law
112–96.
Effective for services provided on or
after March 1, 2012, SCHs (including
EACHs) with greater than 100 beds are
no longer eligible for TOPs, in
accordance with section 308 of Public
Law 112–78. Effective for services
provided on or after January 1, 2013, a
rural hospital with 100 or fewer beds
that is not an SCH and an SCH
(including an EACH) are no longer
eligible for TOPs, in accordance with
section 3002 of Public Law 112–96.

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2. Adjustment for Rural SCHs and
EACHs Under Section 1833(t)(13)(B) of
the Act
In the CY 2006 OPPS final rule with
comment period (70 FR 68556), we
finalized a payment increase for rural
SCHs of 7.1 percent for all services and
procedures paid under the OPPS,
excluding drugs, biologicals,
brachytherapy sources, and devices paid
under the pass-through payment policy
in accordance with section
1833(t)(13)(B) of the Act, as added by
section 411 of Public Law 108–173.
Section 411 gave the Secretary the
authority to make an adjustment to
OPPS payments for rural hospitals,
effective January 1, 2006, if justified by
a study of the difference in costs by APC
between hospitals in rural areas and
hospitals in urban areas. Our analysis
showed a difference in costs for rural
SCHs. Therefore, for the CY 2006 OPPS,
we finalized a payment adjustment for
rural SCHs of 7.1 percent for all services
and procedures paid under the OPPS,
excluding separately payable drugs and
biologicals, brachytherapy sources, and
devices paid under the pass-through
payment policy, in accordance with
section 1833(t)(13)(B) of the Act.
In CY 2007, we became aware that we
did not specifically address whether the
adjustment applies to EACHs, which are
considered to be SCHs under section
1886(d)(5)(D)(iii)(III) of the Act. Thus,
under the statute, EACHs are treated as
SCHs. Therefore, in the CY 2007 OPPS/
ASC final rule with comment period (71
FR 68010 and 68227), for purposes of
receiving this rural adjustment, we
revised § 419.43(g) to clarify that EACHs
are also eligible to receive the rural SCH
adjustment, assuming these entities
otherwise meet the rural adjustment
criteria. Currently, three hospitals are
classified as EACHs, and as of CY 1998,
under section 4201(c) of Public Law
105–33, a hospital can no longer become
newly classified as an EACH.
This adjustment for rural SCHs is
budget neutral and applied before
calculating outlier payments and
copayments. We stated in the CY 2006
OPPS final rule with comment period
(70 FR 68560) that we would not
reestablish the adjustment amount on an
annual basis, but we may review the
adjustment in the future and, if
appropriate, would revise the
adjustment. We provided the same 7.1
percent adjustment to rural SCHs,
including EACHs, again in CYs 2008
through 2012. Further, in the CY 2009
OPPS/ASC final rule with comment
period (73 FR 68590), we updated the
regulations at § 419.43(g)(4) to specify,
in general terms, that items paid at

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charges adjusted to costs by application
of a hospital-specific CCR are excluded
from the 7.1 percent payment
adjustment.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45109), we proposed to
continue for CY 2013 our policy of a
budget neutral 7.1 percent payment
adjustment for rural SCHs, including
EACHs, for all services and procedures
paid under the OPPS, excluding
separately payable drugs and
biologicals, devices paid under the passthrough payment policy, and items paid
at charges reduced to costs. We
indicated in the proposed rule that we
intend to reassess the 7.1 percent
adjustment in the future by examining
differences between urban hospitals’
costs and rural hospitals’ costs using
updated claims data, cost reports, and
provider information.
Comment: Several commenters
expressed support for the proposed
continuation of the 7.1 percent rural
SCH adjustment. A few commenters
also suggested that the rural SCH
adjustment also apply to urban SCHs.
One commenter suggested that the 7.1
percent payment adjustment also be
applied to MDHs, given that their
inpatient classification was set to expire
in October 2012.
Response: We agree that it is
appropriate to continue the 7.1 percent
adjustment for rural SCHs (including
EACHs) as we proposed for CY 2013.
We note that the rural SCH adjustment
was developed under the authority
described in section 1833(t)(13) of the
Act, which applies specifically to rural
hospitals. Although commenters have
suggested that the rural SCH adjustment
also apply to urban SCHs, the study
authorized under section 1833(t)(13)(A)
of the Act specifically focuses on APC
costs incurred by rural hospitals, as they
exceed those costs incurred by hospitals
in urban areas. Moreover, the
Secretary’s authority to make an
adjustment based on that study was
with respect to a determination that
costs incurred by rural hospitals exceed
those costs incurred by urban hospitals
and to reflect those higher costs.
Therefore, the authority to make any
such adjustment was limited to reflect
the higher costs incurred by such
applicable rural hospitals. Although the
MDH classification is currently set to
expire, we note that the definition of a
MDH at 1886(d)(5)(G)(iv)(III) of the Act
specifically excludes sole community
hospitals, to which the rural adjustment
applies. Further, as we discussed in the
CY 2006 OPPS final rule, our analysis
of urban SCHs as well as rural MDHs
did not support the application of a

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rural adjustment (70 FR 68560 through
68561).
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal,
without modification, to apply the 7.1
percent payment adjustment to rural
SCHs, including EACHs, for all services
and procedures paid under the OPPS in
CY 2013, excluding separately payable
drugs and biologicals, devices paid
under the pass-through payment policy,
and items paid at charges reduced to
costs. We continue to believe that the
adjustment is appropriate for
application in CY 2013.

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F. OPPS Payment to Certain Cancer
Hospitals Described by Section
1886(d)(1)(B)(v) of the Act
1. Background
Since the inception of the OPPS,
which was authorized by the Balanced
Budget Act of 1997 (BBA), Medicare has
paid cancer hospitals identified in
section 1886(d)(1)(B)(v) of the Act
(cancer hospitals) under the OPPS for
covered outpatient hospital services.
There are 11 cancer hospitals that meet
the classification criteria in section
1886(d)(1)(B)(v) of the Act. These 11
cancer hospitals are exempted from
payment under the IPPS. With the
Medicare, Medicaid and SCHIP
Balanced Budget Refinement Act of
1999, Congress created section
1833(t)(7) of the Act, ‘‘Transitional
Adjustment to Limit Decline in
Payment,’’ to serve as a permanent
payment floor by limiting cancer
hospitals’ potential losses under the
OPPS. Through section 1833(t)(7)(D)(ii)
of the Act, a cancer hospital receives the
full amount of the difference between
payments for covered outpatient
services under the OPPS and a ‘‘preBBA’’ amount. That is, cancer hospitals
are permanently held harmless to their
‘‘pre-BBA’’ amount, and they receive
TOPs to ensure that they do not receive
a payment that is lower under the OPPS
than the payment they would have
received before implementation of the
OPPS, as set forth in section
1833(t)(7)(F) of the Act. The ‘‘pre-BBA’’
payment amount is an amount equal to
the product of the reasonable cost of the
hospital for covered outpatient services
for the portions of the hospital’s cost
reporting period (or periods) occurring
in the current year and the base
payment-to-cost ratio (PCR) for the
hospital. The ‘‘pre-BBA’’ amount,
including the determination of the base
PCR, are defined at 42 CFR 419.70(f).
TOPs are calculated on Worksheet E,
Part B, of the Hospital and Hospital
Health Care Complex Cost Report (Form

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CMS–2552–96 or Form CMS–2552–10,
as applicable) each year. Section
1833(t)(7)(I) of the Act exempts TOPs
from budget neutrality calculations.
Section 3138 of the Affordable Care
Act amended section 1833(t) of the Act
by adding a new paragraph (18), which
instructs the Secretary to conduct a
study to determine if, under the OPPS,
outpatient costs incurred by cancer
hospitals described in section
1886(d)(1)(B)(v) of the Act with respect
to APC groups exceed the costs incurred
by other hospitals furnishing services
under section 1833(t) of the Act, as
determined appropriate by the
Secretary. In addition, section 3138 of
the Affordable Care Act requires the
Secretary to take into consideration the
cost of drugs and biologicals incurred by
such hospitals when studying cancer
hospital costliness. Further, section
3138 of the Affordable Care Act
provides that if the Secretary determines
that cancer hospitals’ costs with respect
to APC groups are determined to be
greater than the costs of other hospitals
furnishing services under section
1833(t) of the Act, the Secretary shall
provide an appropriate adjustment
under section 1833(t)(2)(E) of the Act to
reflect these higher costs. After
conducting the study required by
section 3138, we determined in 2012
that outpatient costs incurred by the 11
specified cancer hospitals were greater
than the costs incurred by other OPPS
hospitals. For a complete discussion
regarding the cancer hospital cost study,
we refer readers to the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74200 through 74201).
Based on our findings that costs
incurred by cancer hospitals were
greater than the costs incurred by other
OPPS hospitals, we finalized a policy to
provide a payment adjustment to the 11
specified cancer hospitals that reflects
the higher outpatient costs as discussed
in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74202
through 74206). Specifically, we
adopted a policy to provide additional
payments to each of the 11 cancer
hospitals so that each cancer hospital’s
final PCR for services provided in a
given calendar year is equal to the
weighted average PCR (which we refer
to as the ‘‘target PCR’’) for other
hospitals paid under the OPPS. The
target PCR is set in advance of the
calendar year and is calculated using
the most recent submitted or settled cost
report data that are available at the time
of final rulemaking for the calendar
year. The amount of the payment
adjustment is made on an aggregate
basis at cost report settlement. We note
that the changes made by section

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68293

1833(t)(18) of the Act do not affect the
existing statutory provisions that
provide for TOPs for cancer hospitals.
The TOPs are assessed as usual after all
payments, including the cancer hospital
payment adjustment, have been made
for a cost reporting period. For CY 2012,
the target PCR for purposes of the cancer
hospital payment adjustment is 0.91.
2. Payment Adjustment for Certain
Cancer Hospitals for CY 2013
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45110), we proposed to
continue our policy to provide
additional payments to cancer hospitals
so that each cancer hospital’s final PCR
is equal to the weighted average PCR (or
‘‘target PCR’’) for the other OPPS
hospitals using the most recent
submitted or settled cost report data that
were available at the time of the
proposed rule. To calculate the
proposed CY 2013 target PCR, we used
the same extract of cost report data from
HCRIS, as discussed in section II.A. of
the proposed rule, used to estimate costs
for the CY 2013 OPPS. Using these cost
report data, we included data from
Worksheet E, Part B, for each hospital,
using data from each hospital’s most
recent cost report, whether as submitted
or settled. We estimated that, on
average, the OPPS payments to other
hospitals furnishing services under the
OPPS were approximately 91 percent of
reasonable cost (weighted average PCR
of 0.91). Based on these data, we
proposed a target PCR of 0.91 that
would be used to determine the CY
2013 cancer hospital payment
adjustment that would be paid at cost
report settlement. Therefore, we
proposed that the payment amount
associated with the cancer hospital
payment adjustment to be determined at
cost report settlement would be the
additional payment needed to result in
a proposed target PCR equal to 0.91 for
each cancer hospital.
Comment: Some commenters
suggested that the PCR is only one
component of the adjustment needed to
account for the differences in providing
cancer care. The commenters suggested
that CMS utilize a methodology that
they stated would ensure that the 11
cancer hospitals’ losses (on a per unit
PCR basis) equal the losses (on a per
unit PCR basis) of the other PPS
hospitals. The commenters provided
details of this ‘‘equivalent loss per unit’’
methodology which they indicate would
result in a target PCR equal to 0.94 for
CY 2013.
Response: Section 3138 of the
Affordable Care Act provides that if the
Secretary determines under section
1833(t)(18)(A) of the Act that costs

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incurred by cancer hospitals exceed
those costs of other hospitals furnishing
services under section 1833(t), the
Secretary shall provide for an
appropriate adjustment under section
1833(t)(2)(E) of the Act, to reflect the
higher costs. Because the statute
requires that we provide a cancer
hospital payment adjustment to reflect
the higher costs, not losses, incurred at
cancer hospitals, we believe that it
would be inappropriate to revise our
cancer hospital payment adjustment
policy so that the target PCR is
calculated based on the cancer
hospitals’ losses per unit PCR compared
to the other OPPS hospitals’ losses per
unit PCR.
Comment: Commenters stated that
CMS should not recalculate the target
PCR annually because the cancer
hospitals require payment stability and
predictability in order to provide
services to Medicare beneficiaries.
Response: We believe that annual
recalculation of the target PCR will
provide a timely assessment of the
changes in OPPS payments relative to
costs and, therefore, will enable us to
provide payment adjustments to cancer
hospitals that are accurate and
equitable. In addition, it is unlikely that
the target PCR (the weighted average
PCR for the other OPPS hospitals)
would fluctuate significantly from year
to year. The target PCR is 0.91 for
purposes of the CY 2012 cancer hospital
payment adjustment and remained at
0.91 when recalculated for the CY 2013
OPPS/ASC proposed rule and this final
rule with comment period. In addition
to the apparent stability of the target
PCR, because the target PCR is set in
advance of each calendar year, cancer
hospitals can easily predict the amount
of their hospital-specific payment
adjustment associated with the target
PCR for the following year and budget
accordingly.
Comment: Commenters stated that
CMS must make the cancer hospital
payment adjustment effective for
services furnished on or after January 1,
2011, in order to comply with section
3138 of the Affordable Care Act.
Response: As explained in the CY
2011 OPPS/ASC final rule with
comment period (75 FR 71886 through
71887), we did not finalize the proposed
cancer hospital adjustment for CY 2011
for a variety of reasons, including,
ultimately, a determination that further
study and deliberation of the issues
were necessary. The obligation to
provide a cancer hospital payment
adjustment is triggered only insofar as
the Secretary determines under section
1833(t)(18)(A) of the Act that costs

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incurred by hospitals described in
section 1886(d)(1)(B)(v) of the Act
exceed those costs incurred by other
hospitals furnishing services under that
subsection. Several commenters on the
CY 2011 OPPS/ASC proposed rule
raised concerns about the agency’s
study of costliness conducted under
section 1833(t)(18)(A) of the Act; for
example, one commenter suggested that
the CMS analysis was inadequate to
conclude that costs are higher in cancer
hospitals and that an adjustment was
warranted. Given the uncertainty
surrounding these issues, public
comments arguing against implementing
a cancer hospital payment adjustment
for CY 2011, and our determination that
further study and deliberation were
necessary, we decided to not finalize a
cancer hospital payment adjustment for
CY 2011. We note that, because the
cancer hospital payment adjustment is
budget neutral, the lack of a cancer
hospital payment adjustment for CY
2011 also meant that other payments
were not reduced for CY 2011 to offset
the increased payments from the
adjustment.
Comment: One commenter noted that,
although CMS indicated the estimated
percent by which each cancer hospital’s
OPPS payments would be increased
under the cancer hospital payment
adjustment policy in the CY 2012 OPPS/
ASC proposed and final rules, CMS did
not include this information in the CY
2013 OPPS/ASC proposed rule. The
commenter requested that CMS include
this information in the CY 2013 OPPS/
ASC final rule with comment period.
Response: We agree with the
commenter that it would be informative
to provide the estimated percentage
increase in CY 2013 OPPS payments to
each cancer hospital due to the cancer
hospital payment adjustment policy.
Therefore, we are including that
information in the last column of Table
9 below.
After consideration of the public
comments we received, we are
finalizing our proposal to continue our
policy to provide additional payments
to cancer hospitals so that each cancer
hospital’s final PCR is equal to the
weighted average PCR for the other
OPPS hospitals using the most recent
submitted or settled cost report data that
were available at the time of this final
rule with comment period. To calculate
the final CY 2013 target PCR, we used
the same extract of cost report data from
HCRIS, as discussed in section II.A. of
this final rule with comment period,
used to estimate costs for the CY 2013
OPPS. Using these cost report data, we
included data from Worksheet E, Part B,

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for each hospital, using data from each
hospital’s most recent cost report,
whether as submitted or settled. We
then limited the dataset to the hospitals
with CY 2011 claims data that we used
to model the impact of the final CY 2013
APC relative weights (4,026 hospitals)
because it is appropriate to use the same
set of hospitals that we are using to
calibrate the modeled CY 2013 OPPS.
The cost report data for the hospitals in
this dataset were from cost report
periods with fiscal year ends ranging
from 2010 to 2011. We then removed
the cost report data of the 48 hospitals
located in Puerto Rico from our dataset
because we do not believe that their cost
structure reflects the costs of most
hospitals paid under the OPPS and,
therefore, their inclusion may bias the
calculation of hospital-weighted
statistics. We also removed the cost
report data of 182 hospitals because the
cost report data that were not complete
(missing aggregate OPPS payments,
missing aggregate cost data, or missing
both), so that all cost reports in the
study would have both the payment and
cost data necessary to calculate a PCR
for each hospital, leading to an analytic
file of 3,796 hospitals with cost report
data.
Using this smaller dataset of cost
report data, we estimated that, on
average, the OPPS payments to other
hospitals furnishing services under the
OPPS are approximately 91 percent of
reasonable cost (weighted average PCR
of 0.91). Based on these data, we will
use a target PCR of 0.91 to determine the
CY 2013 cancer hospital payment
adjustment to be paid at cost report
settlement. Therefore, the payment
amount associated with the cancer
hospital payment adjustment to be
determined at cost report settlement
will be the additional payment needed
to result in a PCR equal to 0.91 for each
cancer hospital.
Table 9 below indicates the estimated
percentage increase in OPPS payments
to each cancer hospital for CY 2013 due
to the cancer hospital payment
adjustment policy. The actual amount of
the CY 2013 cancer hospital payment
adjustment for each cancer hospital will
be determined at cost report settlement
and will depend on each hospital’s CY
2013 payments and costs. We note that
the changes made by section 1833(t)(18)
of the Act do not affect the existing
statutory provisions that provide for
TOPs for cancer hospitals. The TOPs
will be assessed as usual after all
payments, including the cancer hospital
payment adjustment, have been made
for a cost reporting period.

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1. Background
Currently, the OPPS provides outlier
payments on a service-by-service basis.
In CY 2011, the outlier threshold was
determined to be met when the cost of
furnishing a service or procedure by a
hospital exceeds 1.75 times the APC
payment amount and exceeds the APC
payment rate plus a $2,025 fixed-dollar
threshold. We introduced a fixed-dollar
threshold in CY 2005, in addition to the
traditional multiple threshold, in order
to better target outlier payments to those
high-cost and complex procedures
where a very costly service could
present a hospital with significant
financial loss. If the cost of a service
meets both of these conditions, the
multiple threshold and the fixed-dollar
threshold, the outlier payment is
calculated as 50 percent of the amount
by which the cost of furnishing the
service exceeds 1.75 times the APC
payment rate. Before CY 2009, this
outlier payment had historically been
considered a final payment by
longstanding OPPS policy. However, we
implemented a reconciliation process
similar to the IPPS outlier reconciliation
process for cost reports with cost

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reporting periods beginning on or after
January 1, 2009, in our CY 2009 OPPS/
ASC final rule with comment period (73
FR 68594 through 68599).
It has been our policy for the past
several years to report the actual amount
of outlier payments as a percent of total
spending in the claims being used to
model the proposed OPPS. Our current
estimate of total outlier payments as a
percent of total CY 2011 OPPS payment,
using available CY 2011 claims and the
revised OPPS expenditure estimate for
the 2012 Trustee’s Report, is
approximately 1.2 percent of the total
aggregated OPPS payments. Therefore,
for CY 2011, we estimate that we paid
0.2 percent above the CY 2011 outlier
target of 1.0 percent of total aggregated
OPPS payments.
As explained in the CY 2012 OPPS/
ASC final rule with comment period (77
FR 74207 through 74209), we set our
projected target for aggregate outlier
payments at 1.0 percent of the estimated
aggregate total payments under the
OPPS for CY 2012. The outlier
thresholds were set so that estimated CY
2012 aggregate outlier payments would
equal 1.0 percent of the total estimated
aggregate payments under the OPPS.
Using CY 2011 claims data and CY 2012
payment rates, we currently estimate

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that the aggregate outlier payments for
CY 2012 will be approximately 0.9
percent of the total CY 2012 OPPS
payments. The difference between 1.0
percent and 0.9 percent is reflected in
the regulatory impact analysis in section
XXII. of this final rule with comment
period. We note that we provide
estimated CY 2013 outlier payments for
hospitals and CMHCs with claims
included in the claims data that we used
to model impacts in the HospitalSpecific Impacts—Provider-Specific
Data file on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
2. Proposed Outlier Calculation
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45110), we proposed to
continue for CY 2013 our policy of
estimating outlier payments to be 1.0
percent of the estimated aggregate total
payments under the OPPS for outlier
payments. We proposed that a portion
of that 1.0 percent, an amount equal to
0.12 percent of outlier payments (or
0.0012 percent of total OPPS payments)
would be allocated to CMHCs for PHP
outlier payments. This is the amount of
estimated outlier payments that would
result from the proposed CMHC outlier

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threshold as a proportion of total
estimated OPPS outlier payments. As
discussed in section VIII.C. of the CY
2013 OPPS/ASC proposed rule, for
CMHCs, we proposed to continue our
longstanding policy that if a CMHC’s
cost for partial hospitalization services,
paid under either APC 0172 (Level I
Partial Hospitalization (3 services) for
CMHCs) or APC 0173 (Level II Partial
Hospitalization (4 or more services) for
CMHCs), exceeds 3.40 times the
payment rate for APC 0173, the outlier
payment would be calculated as 50
percent of the amount by which the cost
exceeds 3.40 times the APC 0173
payment rate. For further discussion of
CMHC outlier payments, we refer
readers to section VIII.C. of this final
rule with comment period.
To ensure that the estimated CY 2013
aggregate outlier payments would equal
1.0 percent of estimated aggregate total
payments under the OPPS, we proposed
that the hospital outlier threshold be set
so that outlier payments would be
triggered when the cost of furnishing a
service or procedure by a hospital
exceeds 1.75 times the APC payment
amount and exceeds the APC payment
rate plus a $2,400 fixed-dollar
threshold.
We proposed to calculate the fixeddollar threshold using largely the same
methodology as we did in CYs 2011 and
2012 (75 FR 71887 through 71889 and
76 FR 74207 through 74209). For
purposes of estimating outlier payments
for the proposed rule, we used the
hospital-specific overall ancillary CCRs
available in the April 2012 update to the
Outpatient Provider-Specific File
(OPSF). The OPSF contains providerspecific data, such as the most current
CCR, which are maintained by the
Medicare contractors and used by the
OPPS Pricer to pay claims. The claims
that we use to model each OPPS update
lag by 2 years.
In order to estimate the CY 2013
hospital outlier payments for the
proposed rule, we inflated the charges
on the CY 2011 claims using the same
inflation factor of 1.1406 that we used
to estimate the IPPS fixed-dollar outlier
threshold for the FY 2013 IPPS/LTCH
PPS proposed rule (77 FR 28142). We
used an inflation factor of 1.0680 to
estimate CY 2012 charges from the CY
2011 charges reported on CY 2011
claims. The methodology for
determining this charge inflation factor
is discussed in the FY 2013 IPPS/LTCH
PPS proposed rule (77 FR 28142). As we
stated in the CY 2005 OPPS final rule
with comment period (69 FR 65845), we
believe that the use of these charge
inflation factors are appropriate for the
OPPS because, with the exception of the

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inpatient routine service cost centers,
hospitals use the same ancillary and
outpatient cost centers to capture costs
and charges for inpatient and outpatient
services.
As noted in the CY 2007 OPPS/ASC
final rule with comment period (71 FR
68011), we are concerned that we could
systematically overestimate the OPPS
hospital outlier threshold if we did not
apply a CCR inflation adjustment factor.
Therefore, we proposed in the CY 2013
OPPS/ASC proposed rule to apply the
same CCR inflation adjustment factor
that we applied for the FY 2013 IPPS
outlier calculation to the CCRs used to
simulate the CY 2013 OPPS outlier
payments to determine the fixed-dollar
threshold. Specifically, for CY 2013, we
proposed to apply an adjustment factor
of 0.9790 to the CCRs that were in the
April 2012 OPSF to trend them forward
from CY 2012 to CY 2013. The
methodology for calculating this
proposed adjustment was discussed in
the FY 2013 IPPS/LTCH PPS proposed
rule (77 FR 28142 through 28144). We
note that, due to the issue described in
the IPPS proposed rule correction notice
published on June 11, 2012, the
operating and capital CCR inflation
factors were reversed (77 FR 34326). In
estimating the proposed CY 2013 OPPS
fixed-dollar outlier threshold, we
applied the corrected CCR inflation
factor.
Therefore, to model hospital outlier
payments for the proposed rule, we
applied the overall CCRs from the April
2012 OPSF file after adjustment (using
the proposed CCR inflation adjustment
factor of 0.9790 to approximate CY 2013
CCRs) to charges on CY 2011 claims that
were adjusted (using the charge
inflation factor of 1.1406 to approximate
CY 2013 charges). We simulated
aggregated CY 2013 hospital outlier
payments using these costs for several
different fixed-dollar thresholds,
holding the 1.75 multiple threshold
constant and assuming that outlier
payments would continue to be made at
50 percent of the amount by which the
cost of furnishing the service would
exceed 1.75 times the APC payment
amount, until the total outlier payments
equaled 1.0 percent of aggregated
estimated total CY 2013 OPPS
payments. We estimated that a proposed
fixed-dollar threshold of $2,400,
combined with the multiple threshold
of 1.75 times the APC payment rate,
would allocate 1.0 percent of aggregated
total OPPS payments to outlier
payments. We proposed to continue to
make an outlier payment that equals 50
percent of the amount by which the cost
of furnishing the service exceeds 1.75
times the APC payment amount when

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both the 1.75 multiple threshold and the
proposed fixed-dollar threshold of
$2,400 were met. For CMHCs, we
proposed that, if a CMHC’s cost for
partial hospitalization services, paid
under either APC 0172 or APC 0173,
exceeds 3.40 times the payment rate for
APC 0173, the outlier payment would
be calculated as 50 percent of the
amount by which the cost exceeds 3.40
times the APC 0173 payment rate.
Section 1833(t)(17)(A) of the Act,
which applies to hospitals as defined
under section 1886(d)(1)(B) of the Act,
requires that hospitals that fail to report
data required for the quality measures
selected by the Secretary, in the form
and manner required by the Secretary
under 1833(t)(17)(B) of the Act, incur a
2.0 percentage point reduction to their
OPD fee schedule increase factor, that
is, the annual payment update factor.
The application of a reduced OPD fee
schedule increase factor results in
reduced national unadjusted payment
rates that will apply to certain
outpatient items and services furnished
by hospitals that are required to report
outpatient quality data and that fail to
meet the Hospital OQR Program
requirements. For hospitals that fail to
meet the Hospital OQR Program
requirements, we proposed to continue
the policy that we implemented in CY
2010 that the hospitals’ costs will be
compared to the reduced payments for
purposes of outlier eligibility and
payment calculation. For more
information on the Hospital OQR
Program, we refer readers to section XV.
of this final rule with comment period.
Comment: Several commenters
expressed concern with respect to the
relative increase in the proposed CY
2013 OPPS fixed-dollar outlier
threshold of $2,400. The commenters
believed that the increase in the fixeddollar threshold would bring about a
drastic reduction in outlier payments as
well as the ability to furnish services to
beneficiaries. Commenters also
suggested CMS to reconsider the fixeddollar threshold value, confirm that the
data used to develop the threshold were
accurate, and provide data to support
the increase in the threshold.
Commenters also suggested alternative
fixed-dollar threshold setting
methodologies such as a 3-year
transition to the threshold or a
calculation based on prior year
estimated percent OPPS outlier
spending.
Response: As indicated above, we
introduced a fixed-dollar threshold in
order to better target outlier payments to
those high-cost and complex procedures
where a very costly service could
present a hospital with significant

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financial loss. We maintain the target
outlier percentage of 1.0 percent of
estimated aggregate total payment under
the OPPS and have a fixed-dollar
threshold so that OPPS outlier payments
are made only when the hospital would
experience a significant loss for
supplying a particular service. While
commenters have expressed concern
based on the assumption that OPPS
outlier payments made under an
increased fixed-dollar threshold would
decrease, we note that the threshold
may increase or decrease from year to
year, to maintain the 1.0 percent outlier
spending target. While we described
issues related to the charge and CCR
inflation factors in the CY 2013 OPPS/
ASC proposed rule, there were no other
errors in the methodology (77 FR
45111). The methodology for
determining the OPPS fixed-dollar
threshold is described in this section,
the LDS files used to model the
threshold that are available for public
purchase, and a detailed claims
accounting document that is available
online, which all support the
determination of the fixed-dollar
threshold. We do not believe that a
transitional methodology to determine
the outlier threshold or a methodology
that takes into account prior spending is
appropriate because the relationship
between a hospital’s costs and the APC
payment rates changes each year.
3. Final Outlier Calculation
Consistent with historical practice, we
use updated data for this final rule with
comment period for our outlier
calculation. For CY 2013, we are
applying the overall CCRs from the July
2012 OPSF with a CCR adjustment
factor of 0.9880 to approximate CY 2013
CCRs to charges on the final CY 2011
claims that were adjusted to
approximate CY 2013 charges (using the
final 2-year charge inflation factor of
1.0894). These are the same CCR
adjustment and charge inflation factors
that were used to set the IPPS fixeddollar threshold for the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53695
through 53696). We simulated
aggregated CY 2013 hospital outlier
payments using these costs for several
different fixed-dollar thresholds,
holding the 1.75 multiple threshold
constant and assuming that outlier
payment would continue to be made at
50 percent of the amount by which the
cost of furnishing the service would
exceed 1.75 times the APC payment
amount, until the total outlier payments
equaled 1.0 percent of aggregated
estimated total CY 2013 OPPS
payments. We estimate that a fixeddollar threshold of $2,025, combined

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with the multiple threshold of 1.75
times the APC payment rate, will
allocate 1.0 percent of estimated
aggregated total OPPS payments to
outlier payments.
In summary, for CY 2013, we will
continue to make an outlier payment
that equals 50 percent of the amount by
which the cost of furnishing the service
exceeds 1.75 times the APC payment
amount when both the 1.75 multiple
threshold and the final fixed-dollar
threshold of $2,025 are met. For
CMHCs, if a CMHC’s cost for partial
hospitalization services, paid under
either APC 0172 or APC 0173, exceeds
3.40 times the payment rate for APC
0173, the outlier payment is calculated
as 50 percent of the amount by which
the cost exceeds 3.40 times the APC
0173 payment rate. We estimate that
this threshold will allocate 0.12 percent
of outlier payments to CMHCs for PHP
outlier payments.
4. Outlier Reconciliation
In the CY 2009 OPPS/ASC final rule
with comment period (73 CFR 68599),
we adopted as final policy a process to
reconcile hospital or CMHC outlier
payments at cost report settlement for
services furnished during cost reporting
periods beginning in CY 2009. OPPS
outlier reconciliation more fully ensures
accurate outlier payments for those
facilities that have CCRs that fluctuate
significantly relative to the CCRs of
other facilities, and that receive a
significant amount of outlier payments
(73 FR 68598). As under the IPPS, we
do not adjust the fixed-dollar threshold
or the amount of total OPPS payments
set aside for outlier payments for
reconciliation activity because such
action would be contrary to the
prospective nature of the system. Our
outlier threshold calculation assumes
that overall ancillary CCRs accurately
estimate hospital costs based on the
information available to us at the time
we set the prospective fixed-dollar
outlier threshold. For these reasons, and
as we have previously discussed in the
CY 2009 OPPS/ASC final rule with
comment period (73 FR 68596), and as
we proposed for CY 2013, we are not
incorporating any assumptions about
the effects of reconciliation into our
calculation of the OPPS fixed-dollar
outlier threshold in this final rule with
comment period.
H. Calculation of an Adjusted Medicare
Payment From the National Unadjusted
Medicare Payment
The basic methodology for
determining prospective payment rates
for HOPD services under the OPPS is set
forth in existing regulations at 42 CFR

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68297

part 419, subparts C and D. For this final
rule with comment period, the payment
rate for most services and procedures for
which payment is made under the OPPS
is the product of the conversion factor
calculated in accordance with section
II.B. of this final rule with comment
period and the relative payment weight
determined under section II.A. of this
final rule with comment period.
Therefore, the national unadjusted
payment rate for most APCs contained
in Addendum A to this final rule with
comment period (which is available via
the Internet on the CMS Web site) and
for most HCPCS codes to which separate
payment under the OPPS has been
assigned in Addendum B to this final
rule with comment period (which is
available via the Internet on the CMS
Web site) was calculated by multiplying
the CY 2013 scaled weight for the APC
by the CY 2013 conversion factor.
We note that section 1833(t)(17) of the
Act, which applies to hospitals as
defined under section 1886(d)(1)(B) of
the Act, requires that hospitals that fail
to submit data required to be submitted
on quality measures selected by the
Secretary, in the form and manner and
at a time specified by the Secretary,
incur a reduction of 2.0 percentage
points to their OPD fee schedule
increase factor, that is, the annual
payment update factor. The application
of a reduced OPD fee schedule increase
factor results in reduced national
unadjusted payment rates that apply to
certain outpatient items and services
provided by hospitals that are required
to report outpatient quality data and
that fail to meet the Hospital OQR
Program (formerly referred to as the
Hospital Outpatient Quality Data
Reporting Program (HOP QDRP))
requirements. For further discussion of
the payment reduction for hospitals that
fail to meet the requirements of the
Hospital OQR Program, we refer readers
to section XV. of this final rule with
comment period.
We demonstrate in the steps below
how to determine the APC payments
that will be made in a calendar year
under the OPPS to a hospital that fulfills
the Hospital OQR Program requirements
and to a hospital that fails to meet the
Hospital OQR Program requirements for
a service that has any of the following
status indicator assignments: ‘‘P,’’ ‘‘Q1,’’
‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘U,’’ ‘‘V,’’
or ‘‘X’’ (as defined in Addendum D1 to
this final rule with comment period), in
a circumstance in which the multiple
procedure discount does not apply, the
procedure is not bilateral, and
conditionally packaged services (status
indicator of ‘‘Q1’’ and ‘‘Q2’’) qualify for
separate payment. We note that,

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although blood and blood products with
status indicator ‘‘R’’ and brachytherapy
sources with status indicator ‘‘U’’ are
not subject to wage adjustment, they are
subject to reduced payments when a
hospital fails to meet the Hospital OQR
Program requirements.
We did not receive any public
comments on the proposed calculation
of an adjusted Medicare payment.
Therefore, we are finalizing the
calculation of an adjusted Medicare
payment, where appropriate, in the
manner described as follows. Individual
providers interested in calculating the
payment amount that they will receive
for a specific service from the national
unadjusted payment rates presented in
Addenda A and B to this final rule with
comment period (which are available
via the Internet on the CMS Web site)
should follow the formulas presented in
the following steps. For purposes of the
payment calculations below, we refer to
the national unadjusted payment rate
for hospitals that meet the requirements
of the Hospital OQR Program as the
‘‘full’’ national unadjusted payment
rate. We refer to the national unadjusted
payment rate for hospitals that fail to
meet the requirements of the Hospital
OQR Program as the ‘‘reduced’’ national
unadjusted payment rate. The reduced
national unadjusted payment rate is
calculated by multiplying the reporting
ratio of 0.980 times the ‘‘full’’ national
unadjusted payment rate. The national
unadjusted payment rate used in the
calculations below is either the full
national unadjusted payment rate or the
reduced national unadjusted payment
rate, depending on whether the hospital
met its Hospital OQR Program
requirements in order to receive the full
CY 2013 OPPS fee schedule increase
factor of 1.8 percent.
Step 1. Calculate 60 percent (the
labor-related portion) of the national
unadjusted payment rate. Since the
initial implementation of the OPPS, we
have used 60 percent to represent our
estimate of that portion of costs
attributable, on average, to labor. We
refer readers to the April 7, 2000 OPPS
final rule with comment period (65 FR
18496 through 18497) for a detailed
discussion of how we derived this
percentage. We confirmed that this
labor-related share for hospital
outpatient services is appropriate during
our regression analysis for the payment
adjustment for rural hospitals in the CY
2006 OPPS final rule with comment
period (70 FR 68553).
The formula below is a mathematical
representation of Step 1 and identifies
the labor-related portion of a specific
payment rate for a specific service.

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X is the labor-related portion of the
national unadjusted payment rate.
X = .60 * (national unadjusted payment
rate)
Step 2. Determine the wage index area
in which the hospital is located and
identify the wage index level that
applies to the specific hospital. The
wage index values assigned to each area
reflect the geographic statistical areas
(which are based upon OMB standards)
to which hospitals are assigned for FY
2013 under the IPPS, reclassifications
through the MGCRB, section
1886(d)(8)(B) ‘‘Lugar’’ hospitals,
reclassifications under section
1886(d)(8)(E) of the Act, as defined in
§ 412.103 of the regulations, and
hospitals designated as urban under
section 601(g) of Public Law 98–21. We
note that the reclassifications of
hospitals under section 508 of Public
Law 108–173, as extended by sections
3137 and 10317 of the Affordable Care
Act, expired on September 30, 2010.
Section 102 of the Medicare and
Medicaid Extenders Act of 2010
extended section 508 and certain
additional special exception hospital
reclassifications from October 1, 2010
through September 30, 2011. Section
302 of the Temporary Payroll Tax Cut
Continuation Act of 2011 (Pub. L. 112–
78) as amended by section 3001 of the
Middle Class Tax Relief and Job
Creation Act of 2012 (Pub. L. 112–96)
extended section 508 and certain
additional special exception hospital
reclassifications from October 1, 2011
through March 31, 2012. Therefore,
these reclassifications will not apply to
the CY 2013 OPPS. (For further
discussion of the changes to the FY
2013 IPPS wage indices, as applied to
the CY 2013 OPPS, we refer readers to
section II.C. of this final rule with
comment period). We proposed to
continue to apply a wage index floor of
1.00 to frontier States, in accordance
with section 10324 of the Affordable
Care Act.
Step 3. Adjust the wage index of
hospitals located in certain qualifying
counties that have a relatively high
percentage of hospital employees who
reside in the county, but who work in
a different county with a higher wage
index, in accordance with section 505 of
Public Law 108–173. Addendum L to
this final rule with comment period
(which is available via the Internet on
the CMS Web site) contains the
qualifying counties and the associated
wage index increase developed for the
FY 2013 IPPS and listed as Table 4J in
the FY 2013 IPPS/LTCH PPS final rule
and available via the Internet on the
CMS Web site at: http://www.cms.gov/

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Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/
index.html. This step is to be followed
only if the hospital is not reclassified or
redesignated under section 1886(d)(8) or
section 1886(d)(10) of the Act.
Step 4. Multiply the applicable wage
index determined under Steps 2 and 3
by the amount determined under Step 1
that represents the labor-related portion
of the national unadjusted payment rate.
The formula below is a mathematical
representation of Step 4 and adjusts the
labor-related portion of the national
unadjusted payment rate for the specific
service by the wage index.
Xa is the labor-related portion of the
national unadjusted payment rate (wage
adjusted).
X a = .60 * (national unadjusted
payment rate) * applicable wage index.
Step 5. Calculate 40 percent (the
nonlabor-related portion) of the national
unadjusted payment rate and add that
amount to the resulting product of Step
4. The result is the wage index adjusted
payment rate for the relevant wage
index area.
The formula below is a mathematical
representation of Step 5 and calculates
the remaining portion of the national
payment rate, the amount not
attributable to labor, and the adjusted
payment for the specific service.
Y is the nonlabor-related portion of
the national unadjusted payment rate.
Y = .40 * (national unadjusted payment
rate)
Adjusted Medicare Payment = Y + X a
Step 6. If a provider is an SCH, set
forth in the regulations at § 412.92, or an
EACH, which is considered to be an
SCH under section 1886(d)(5)(D)(iii)(III)
of the Act, and located in a rural area,
as defined in § 412.64(b), or is treated as
being located in a rural area under
§ 412.103, multiply the wage index
adjusted payment rate by 1.071 to
calculate the total payment.
The formula below is a mathematical
representation of Step 6 and applies the
rural adjustment for rural SCHs.
Adjusted Medicare Payment (SCH or
EACH) = Adjusted Medicare
Payment * 1.071
We have provided examples below of
the calculation of both the full and
reduced national unadjusted payment
rates that will apply to certain
outpatient items and services performed
by hospitals that meet and that fail to
meet the Hospital OQR Program
requirements, using the steps outlined
above. For purposes of this example, we
used a provider that is located in
Brooklyn, New York that is assigned to
CBSA 35644. This provider bills one
service that is assigned to APC 0019

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(Level I Excision/Biopsy). The CY 2013
full national unadjusted payment rate
for APC 0019 is $336.38. The reduced
national unadjusted payment rate for a
hospital that fails to meet the Hospital
OQR Program requirements is $329.65.
This reduced rate is calculated by
multiplying the reporting ratio of 0.980
by the full unadjusted payment rate for
APC 0019.
The FY 2013 wage index for a
provider located in CBSA 35644 in New
York is 1.2971. The labor-related
portion of the full national unadjusted
payment is $261.79 (.60 * $336.38 *
1.2971). The labor-related portion of the
reduced national unadjusted payment is
$256.55 (.60 * $329.65 * 1.2971). The
nonlabor-related portion of the full
national unadjusted payment is $134.55
(.40 * $336.38). The nonlabor-related
portion of the reduced national
unadjusted payment is $131.86 (.40 *
$329.65). The sum of the labor-related
and nonlabor-related portions of the full
national adjusted payment is $396.34
($261.79 + $134.55). The sum of the
reduced national adjusted payment is
$388.41 ($256.55 + $131.86).

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I. Beneficiary Copayments
1. Background
Section 1833(t)(3)(B) of the Act
requires the Secretary to set rules for
determining the unadjusted copayment
amounts to be paid by beneficiaries for
covered OPD services. Section
1833(t)(8)(C)(ii) of the Act specifies that
the Secretary must reduce the national
unadjusted copayment amount for a
covered OPD service (or group of such
services) furnished in a year in a
manner so that the effective copayment
rate (determined on a national
unadjusted basis) for that service in the
year does not exceed a specified
percentage. As specified in section
1833(t)(8)(C)(ii)(V) of the Act, the
effective copayment rate for a covered
OPD service paid under the OPPS in CY
2006, and in calendar years thereafter,
shall not exceed 40 percent of the APC
payment rate.
Section 1833(t)(3)(B)(ii) of the Act
provides that, for a covered OPD service
(or group of such services) furnished in
a year, the national unadjusted
copayment amount cannot be less than
20 percent of the OPD fee schedule
amount. However, section
1833(t)(8)(C)(i) of the Act limits the
amount of beneficiary copayment that
may be collected to the amount of the
inpatient deductible.
Section 4104 of the Affordable Care
Act eliminated the Part B coinsurance
for preventive services furnished on and
after January 1, 2011, that meet certain

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requirements, including flexible
sigmoidoscopies and screening
colonscopies, and waived the Part B
deductible for screening colonoscopies
that become diagnostic during the
procedure. Our discussion of the
changes made by the Affordable Care
Act with regard to copayments for
preventive services furnished on and
after January 1, 2011, may be found in
section XII.B. of the CY 2011 OPPS/ASC
final rule with comment period (75 FR
72013).
2. OPPS Copayment Policy
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45113), we proposed to
determine copayment amounts for new
and revised APCs using the same
methodology that we implemented
beginning in CY 2004. (We refer readers
to the November 7, 2003 OPPS final rule
with comment period (68 FR 63458).) In
addition, we proposed to use the same
standard rounding principles that we
have historically used in instances
where the application of our standard
copayment methodology would result in
a copayment amount that is less than 20
percent and cannot be rounded, under
standard rounding principles, to 20
percent. (We refer readers to the CY
2008 OPPS/ASC final rule with
comment period (72 FR 66687) in which
we discuss our rationale for applying
these rounding principles.) The national
unadjusted copayment amounts for
services payable under the OPPS that
will be effective January 1, 2013, are
shown in Addenda A and B to this final
rule with comment period (which are
available via the Internet on the CMS
Web site). As discussed in section XV.
of this final rule with comment period,
for CY 2013, the Medicare beneficiary’s
minimum unadjusted copayment and
national unadjusted copayment for a
service to which a reduced national
unadjusted payment rate applies equals
the product of the reporting ratio and
the national unadjusted copayment, or
the product of the reporting ratio and
the minimum unadjusted copayment,
respectively, for the service.
We note that APC copayments may
increase or decrease each year based on
changes in the calculated APC payment
rates due to updated cost report and
claims data, and any changes to the
OPPS cost modeling process. The CY
2013 proposed policy to base APC
relative weights on geometric mean
costs would also affect the APC
payment rates and, through them, the
corresponding beneficiary copayments.
However, as described in the CY 2004
OPPS/ASC final rule with comment
period, the development of the
copayment methodology generally

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68299

moves beneficiary copayments closer to
20 percent of OPPS APC payments (68
FR 63458 through 63459). For a more
detailed discussion of the final policy to
base the APC relative payment weights
on geometric mean costs, we refer
readers to section II.A.2.f. of this final
rule with comment period.
We did not receive any public
comments regarding the proposed
methodology for calculating copayments
for CY 2013. Therefore, for the reasons
set forth in the proposed rule (77 FR
45113), we are finalizing our CY 2013
copayment methodology without
modification.
3. Calculation of an Adjusted
Copayment Amount for an APC Group
Individuals interested in calculating
the national copayment liability for a
Medicare beneficiary for a given service
provided by a hospital that met or failed
to meet its Hospital OQR Program
requirements should follow the
formulas presented in the following
steps.
Step 1. Calculate the beneficiary
payment percentage for the APC by
dividing the APC’s national unadjusted
copayment by its payment rate. For
example, using APC 0019, $67.28 is 20
percent of the full national unadjusted
payment rate of $336.38. For APCs with
only a minimum unadjusted copayment
in Addenda A and B of this final rule
with comment period (which are
available via the Internet on the CMS
Web site), the beneficiary payment
percentage is 20 percent.
The formula below is a mathematical
representation of Step 1 and calculates
national copayment as a percentage of
national payment for a given service.
B is the beneficiary payment
percentage.
B = National unadjusted copayment for
APC/national unadjusted payment
rate for APC
Step 2. Calculate the appropriate
wage-adjusted payment rate for the APC
for the provider in question, as
indicated in Steps 2 through 4 under
section II.H. of this final rule with
comment period. Calculate the rural
adjustment for eligible providers as
indicated in Step 6 under section II.H.
of this final rule with comment period.
Step 3. Multiply the percentage
calculated in Step 1 by the payment rate
calculated in Step 2. The result is the
wage-adjusted copayment amount for
the APC.
The formula below is a mathematical
representation of Step 3 and applies the
beneficiary payment percentage to the
adjusted payment rate for a service
calculated under section II.H. of this
final rule with comment period, with

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and without the rural adjustment, to
calculate the adjusted beneficiary
copayment for a given service.

III. OPPS Ambulatory Payment
Classification (APC) Group Policies

Wage-adjusted copayment amount for
the APC = Adjusted Medicare
Payment * B

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Wage-adjusted copayment amount for
the APC (SCH or EACH) =
(Adjusted Medicare Payment *
1.071) * B
Step 4. For a hospital that failed to
meet its Hospital OQR Program
requirements, multiply the copayment
calculated in Step 3 by the reporting
ratio of 0.980.
The unadjusted copayments for
services payable under the OPPS that
will be effective January 1, 2013, are
shown in Addenda A and B to this final
rule with comment period (which are
available via the Internet on the CMS
Web site). We note that the national
unadjusted payment rates and
copayment rates shown in Addenda A
and B to this final rule with comment
period reflect the full CY 2013 OPD fee
schedule increase factor discussed in
section II.B. of this final rule with
comment period.
Also, as noted above, section
1833(t)(8)(C)(i) of the Act limits the
amount of beneficiary copayment that
may be collected to the amount of the
inpatient deductible.

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A. OPPS Treatment of New CPT and
Level II HCPCS Codes
CPT and Level II HCPCS codes are
used to report procedures, services,
items, and supplies under the hospital
OPPS. Specifically, CMS recognizes the
following codes on OPPS claims:
• Category I CPT codes, which
describe surgical procedures and
medical services;
• Category III CPT codes, which
describe new and emerging
technologies, services, and procedures;
and
• Level II HCPCS codes, which are
used primarily to identify products,
supplies, temporary procedures, and
services not described by CPT codes.
CPT codes are established by the
American Medical Association (AMA)
and the Level II HCPCS codes are
established by the CMS HCPCS
Workgroup. These codes are updated
and changed throughout the year. CPT
and HCPCS code changes that affect the
OPPS are published both through the
annual rulemaking cycle and through
the OPPS quarterly update Change
Requests (CRs). CMS releases new Level
II HCPCS codes to the public or
recognizes the release of new CPT codes
by the AMA and makes these codes
effective (that is, the codes can be
reported on Medicare claims) outside of
the formal rulemaking process via OPPS
quarterly update CRs. This quarterly

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process offers hospitals access to codes
that may more accurately describe items
or services furnished and/or provides
payment or more accurate payment for
these items or services in a timelier
manner than if CMS waited for the
annual rulemaking process. We solicit
public comments on these new codes
and finalize our proposals related to
these codes through our annual
rulemaking process. As we proposed in
the CY 2013 OPPS/ASC proposed (77
FR 45114), in Table 10 below (Table 13
of the proposed rule), we summarize our
process for updating codes through our
OPPS quarterly update CRs, seeking
public comments, and finalizing their
treatment under the OPPS. We note that
because the payment rates associated
with codes effective July 1 were not
available to us in time for incorporation
into the Addenda of the proposed rule,
the Level II HCPCS codes and the
Category III CPT codes implemented
through the July 2012 OPPS quarterly
update CR were not included in
Addendum B of the proposed rule
(which is available via the Internet on
the CMS Web site), while those codes
based upon the April 2012 OPPS
quarterly update were included in
Addendum B. Nevertheless, we
requested public comments on the
codes included in the July 2012 OPPS
quarterly update and included these
codes in the preamble of the proposed
rule.
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This process is discussed in detail
below. We have separated our
discussion into two sections based on
whether we solicited public comments
in the CY 2013 OPPS/ASC proposed
rule or whether we are soliciting public
comments in this CY 2013 OPPS/ASC
final rule with comment period. We
note that we sought public comments in
the CY 2012 OPPS/ASC final rule with
comment period on the new CPT and
Level II HCPCS codes that were effective
January 1, 2012. We also sought public
comments in the CY 2012 OPPS/ASC
final rule with comment period on the
new Level II HCPCS codes effective
October 1, 2011. These new codes, with

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an effective date of October 1, 2011, or
January 1, 2012, were flagged with
comment indicator ‘‘NI’’ (New code,
interim APC assignment; comments will
be accepted on the interim APC
assignment for the new code) in
Addendum B to the CY 2012 OPPS/ASC
final rule with comment period to
indicate that we were assigning them an
interim payment status and an APC and
payment rate, if applicable, which were
subject to public comment following
publication of the CY 2012 OPPS/ASC
final rule with comment period. We are
responding to public comments and
finalizing our interim OPPS treatment of

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these codes in this CY 2013 OPPS/ASC
final rule with comment period.
We received comments on several
new codes that were assigned to
comment indicator ‘‘NI’’ in Addendum
B of the CY 2012 OPPS/ASC final rule
with comment period. We respond to
those comments in sections II.A., III.D.,
V.B., and IX of this final rule with
comment period. Table 11 below lists
the long descriptors for the CPT codes
that were assigned to comment indicator
‘‘NI’’ for which we received public
comments to the CY 2012 OPPS/ASC
final rule with comment period and the
specific sections where the comments
are addressed.

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TABLE H.-COMMENTS TO THE CY 2012 OPPS/ASC FINAL RULE
WITH COMMENT PERIOD ON NEW HCPCS CODES ASSIGNED TO
COMMENT INDICATOR "NI"

0278T

0293T

0294T

0296T

0297T

0299T

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0300T

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CY 2012 Long Descriptor

Transcutaneous electrical modulation pain
reprocessing (eg, scrambler therapy), each treatment
session (includes placement of electrodes)
Insertion of left atrial hemodynamic monitor;
complete system, includes implanted
communication module and pressure sensor lead in
left atrium including trans septal access, radiological
supervision and interpretation, and associated
injection procedures, when performed
Insertion of left atrial hemodynamic monitor;
pressure sensor lead at time of insertion of pacing
cardioverter-defibrillator pulse generator including
radiological supervision and interpretation and
associated injection procedures, when performed
(list separately in addition to primary procedure)
External electrocardiographic recording for more
than 48 hours up to 21 days by continuous rhythm
recording and storage; recording (includes
connection and initial recording)
External electrocardiographic recording for more
than 48 hours up to 21 days by continuous rhythm
recording and storage; scanning analysis with report
Extracorporeal shock wave for integumentary
wound healing, high energy, including topical
application and dressing care; initial wound
Extracorporeal shock wave for integumentary
wound healing, high energy, including topical
application and dressing care; each additional
wound (list separately in addition to code for
primary procedure)

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III.D.4.a.
(Scrambler Therapy)

IX.
(Inpatient Procedures)

III.D.1.e.
(External
Electrocardiographic
Monitoring)

III.D.3.a.
(Extracorporeal Shock
Wave Wound Treatment)

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CY2012
CPT Code

Section In This CY 2013
OPPSIASC Final Rule
With Comment Period
Where Comments Are
Addressed

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15274

15276

15278

15777

64633

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62369

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III.D.3.b.
(Application of Skin
Substitute)

II.A.3.
(Changes to Packaged
Services)
III.D.4.c.
(Paravertebral Neurolytic
Agent)

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III.D.4.d.
(Programmable
Implantable Pump)

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15272

Application of skin substitute graft to trunk, arms,
legs, total wound surface area up to 100 sq cm; each
additional 25 sq cm wound surface area, or part
thereof (list separately in addition to code for
primary procedure)
Application of skin substitute graft to trunk, arms,
legs, total wound surface area greater than or equal
to 100 sq cm; each additional 100 sq cm wound
surface area, or part thereof, or each additional 1%
of body area of infants and children, or part thereof
(list separately in addition to code for primary
procedure)
Application of skin substitute graft to face, scalp,
eyelids, mouth, neck, ears, orbits, genitalia, hands,
feet, andlor multiple digits, total wound surface area
up to 100 sq cm; each additional 25 sq cm wound
surface area, or part thereof (list separately in
addition to code for primary procedure)
Application of skin substitute graft to face, scalp,
eyelids, mouth, neck, ears, orbits, genitalia, hands,
feet, andlor multiple digits, total wound surface area
greater than or equal to 100 sq cm; each additional
100 sq cm wound surface area, or part thereof, or
each additional 1% of body area of infants and
children, or part thereof (list separately in addition
to code for primary procedure)
Implantation of biologic implant (eg, acellular
dermal matrix) for soft tissue reinforcement (eg,
breast, trunk) (list separately in addition to code for
primary procedure)
Destruction by neurolytic agent, paravertebral facet
joint nerve(s), with imaging guidance (fluoroscopy
or ct); cervical or thoracic, single facet joint
Electronic analysis of programmable, implanted
pump for intrathecal or epidural drug infusion
(includes evaluation of reservoir status, alarm
status, drug prescription status); with
reprogramming and refill

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BILLING CODE 4120–01–C

1. Treatment of New CY 2012 Level II
HCPCS and CPT Codes Effective April
1, 2012 and July 1, 2012 for Which We
Solicited Public Comments in the CY
2013 OPPS/ASC Proposed Rule

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Through the April 2012 OPPS
quarterly update CR (Transmittal 2418,
Change Request 7748, dated March 2,
2012) and the July 2012 OPPS quarterly
update CR (Transmittal 2483, Change
Request 7847, dated June 8, 2012), we
recognized several new HCPCS codes

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for separate payment under the OPPS.
Effective April 1 and July 1 of CY 2012,
we made effective 13 new Level II
HCPCS codes and 7 Category III CPT
codes. Specifically, 5 new Level II
HCPCS codes were effective for the
April 2012 update and another 8 new
Level II HCPCS codes were effective for
the July 2012 update for a total of 13.
Seven new Category III CPT codes were
effective for the July 2012 update. Of the
13 new Level II HCPCS codes, we
recognized for separate payment 11 of
these codes, and of the 7 new Category

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III CPT codes, we recognized for
separate payment all 7 new Category III
CPT codes, for a total of 18 new Level
II HCPCS and Category III CPT codes
that are recognized for separate payment
for CY 2013.
Through the April 2012 OPPS
quarterly update CR, we allowed
separate payment for each of the five
new Level II HCPCS codes. Specifically,
as displayed in Table 12 below, we
provided separate payment for HCPCS
codes C9288, C9289, C9290, C9291 and
C9733.

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HCPCS codes rather than using
temporary HCPCS codes for the
reporting of drugs under the OPPS in
order to streamline coding, we are
showing the replacement HCPCS codes
C9288, C9289, and C9291/Q2046,
effective January 1, 2013, in Table 13.
In this final rule with comment
period, we are assigning the Level II
HCPCS codes listed in Table 13 below
to the specific APCs and status
indicators for CY 2013.

ER15NO12.025

C9291. However, we received several
public comments on HCPCS code
C9733, which are addressed in section
III.D.7.a. of this final rule with comment
period.
For CY 2013, the HCPCS Workgroup
replaced HCPCS codes C9288, C9289,
and C9291 (which was replaced with
HCPCS code Q2046, effective July 1,
2012) with permanent HCPCS J-codes.
Table 13 below list the replacement
HCPCS J-codes for the temporary
HCPCS C-codes. Consistent with our
general policy of using permanent

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In the CY 2013 OPPS/ASC proposed
rule (77 FR 45115), we solicited public
comments on the proposed status
indicators and APC assignments for
Level II HCPCS codes C9288, C9289,
C9290, C9291, and C9733, which were
listed in Table 14 of the proposed rule
(77 FR 45115) and now appear in Tables
12 and 13 of this final rule with
comment period.
We did not receive any public
comments on the proposed APC
assignments and status indicators for
HCPCS codes C9288, C9289, C9290, and

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For CY 2013, we note that we are not
making any changes to the status
indicators and APC assignments for
HCPCS code C9290 and C9733. That is,
HCPCS code C9290 will continue its
pass-through status and will also
continue to be assigned to APC 9290 for
CY 2013. Similarly, HCPCS code C9733
will continue to be assigned to status
indicator ‘‘Q2’’ and also will continue to
be assigned to APC 0397 for CY 2013.
Furthermore, because HCPCS code
J9019 describes the same drug and the
same dosage currently designated by
HCPCS code C9289, this drug will
continue its pass-through status in CY
2013. Therefore, we are assigning
HCPCS code J9019 to the same status
indicator and APC as its predecessor
HCPCS code, as shown in Table 13.
However, we note that the
replacement code for HCPCS code

C9291, which was replaced with HCPCS
code Q2046 effective July 1, 2012, did
not describe the same dosage descriptor,
and consequently, the replacement
HCPCS code was assigned a new APC
number. Specifically, HCPCS code
Q2046, which has a dosage descriptor of
1 mg, was assigned to APC 1420
effective July 1, 2012. Because the
predecessor HCPCS code C9291 was
assigned to pass-through status, HCPCS
code Q2046 also was assigned to passthrough status for CY 2013. Similarly,
the replacement code for HCPCS code
C9288 does not describe the same
dosage descriptor, and, consequently, its
replacement HCPCS code J0716 was
assigned a new APC. Specifically,
HCPCS code C9288 has a dosage
descriptor of 1 vial; however, its
replacement HCPCS code J0716 has a
dosage descriptor of ‘‘up to 120

milligrams.’’ Therefore, effective
January 1, 2013, HCPCS codes J0716 is
assigned to APC 1431, a different APC,
to maintain data consistency for future
rulemaking. Because the predecessor
HCPCS code C9288 was assigned to
pass-through status, HCPCS code J0716
will continue to be assigned status
indicator ‘‘G’’ for CY 2013.
As discussed in the CY 2013 OPPS/
ASC proposed rule (77 FR 45115
through 45116), through the July 2012
OPPS quarterly update CR, which
included HCPCS codes that were made
effective July 1, 2012, we allowed
separate payment for 6 of the 8 new
Level II HCPCS codes. Specifically, as
displayed in Table 14 below (also Table
14 of the proposed rule), we provided
separate OPPS payment for HCPCS
codes C9368, C9369, Q2045, Q2046,
Q2048, and Q2049.

We note that three of the Level II
HCPCS Q-codes that were made
effective July 1, 2012, were previously
described by HCPCS J-codes or C-codes
that were separately payable under the

hospital OPPS. First, HCPCS code
Q2045 replaced HCPCS code J1680
(Injection, human fibrinogen
concentrate, 100 mg), beginning July 1,
2012. HCPCS code J1680 was assigned

to status indicator ‘‘K’’ (Nonpassthrough drugs and nonimplantable
biologicals, including therapeutic
radiopharmaceuticals; paid under
OPPS; separate APC payment) on

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January 1, 2012. However, because
HCPCS code J1680 was replaced by
HCPCS code Q2045 effective July 1,
2012, we changed its status indicator to
‘‘E’’ (Not Payable by Medicare) effective
July 1, 2012. Because HCPCS code
Q2045 describes the same drug as
HCPCS code J1680, we continued its
separate payment status and assigned it
to status indicator ‘‘K’’ effective July 1,
2012. However, because the dosage
descriptor for HCPCS code Q2045 is not
the same as HCPCS code J1680, we
assigned HCPCS code Q2045 to a new
APC to maintain data consistency for
future rulemaking. Specifically, HCPCS
code Q2045 was assigned to APC 1414
effective July 1, 2012.
Second, HCPCS code Q2046 replaced
HCPCS code C9291 effective July 1,
2012. HCPCS code C9291 was assigned
pass-through status when it was
effective April 1, 2012. Because HCPCS
code Q2046 describes the same product
as HCPCS code C9291, we continued its
pass-through status and assigned
HCPCS code Q2046 to status indicator
‘‘G’’ as well as assigned it to the same

APC, specifically APC 9291, effective
July 1, 2012. HCPCS code C9291 was
deleted on June 30, 2012.
Third, the HCPCS Workgroup
replaced HCPCS code J9001 (Injection,
doxorubicin hydrochloride, all lipid
formulations, 10 mg) with new HCPCS
code Q2048, effective July 1, 2012.
Consequently, the status indicator for
HCPCS code J9001 was changed to ‘‘E’’
(Not Payable by Medicare) effective July
1, 2012. Because HCPCS code Q2048
describes the same drug as HCPCS code
J9001, we continued its separate
payment status and assigned HCPCS
code Q2048 to status indicator ‘‘K’’
effective July 1, 2012. In addition,
because, HCPCS code Q2049 is similar
to HCPCS code Q2048, we assigned
HCPCS code Q2049 to status indicator
‘‘K’’ effective July 1, 2012.
Of the 15 HCPCS codes that were
effective July 1, 2012, we did not
recognize for separate OPPS payment
two HCPCS codes because they are both
paid under a payment system other than
OPPS. Specifically, HCPCS code Q2047
was assigned to status indicator ‘‘A’’

(Not paid under OPPS; paid by fiscal
intermediaries/MACs under a fee
schedule or payment system other than
OPPS), and HCPCS code Q2034 was
assigned to status indicator ‘‘L’’ (Not
paid under OPPS; paid at reasonable
cost).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45116), we solicited public
comments on the proposed status
indicators and APC assignments for the
HCPCS codes that were listed in Table
15 of the proposed rule and now appear
in Table 14 and 15 of this final rule with
comment period.
We did not receive any other public
comments on the new Level II HCPCS
codes that were implemented in July
2012. We are adopting as final, without
modification, our proposal to assign the
Level II HCPCS codes listed in Table 15
to the APCs and status indicators as
proposed for CY 2013.
Table 15 below includes a complete
list of the Level II HCPCS codes that
were made effective July 1, 2012, with
their final status indicators and APC
assignments for CY 2013.

We note that the HCPCS Workgroup
replaced HCPCS codes C9368, C9369,

Q2045, Q2046, Q2047, and Q2048 with
HCPCS codes Q4132, Q4133, J7178,

J0178, J0890, and J9002, respectively,
effective January 1, 2013. Because

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HCPCS codes Q4132, Q4133, and J0178
describe the same products currently
designated by HCPCS codes C9368,
C9369, and Q2046, respectively, these
products will continue their passthrough status in CY 2013. Therefore,
we are assigning HCPCS codes Q4132,
Q4133 and J0178 to the same status
indicators and APCs as their
predecessor HCPCS codes, which share
the same dosage descriptors, as shown
in Table 15. We note that because
HCPCS codes Q2045 and Q2048 are
assigned to status indicator ‘‘K’’
(Nonpass-Through Drugs; Paid under
OPPS; Separate APC payment), their
replacement HCPCS codes J7178 and
J9002, which share the same code
descriptors as their predecessor codes,
also will continue their nonpassthrough status and APC assignments in
CY 2013.
Finally, HCPCS code Q2047 will be
replaced with HCPCS code J0890
effective January 1, 2013. Because
HCPCS code J0890 describes the same

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product currently designated by HCPCS
code Q2047, this product will continue
to be assigned to the same status
indicator as its predecessor HCPCS
code, as shown in Table 15.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45116), we proposed to
continue our established policy of
recognizing Category I CPT vaccine
codes for which FDA approval is
imminent and Category III CPT codes
that the AMA releases in January of
each year for implementation in July
through the OPPS quarterly update
process. Under the OPPS, Category I
CPT vaccine codes and Category III CPT
codes that are released on the AMA Web
site in January are made effective in July
of the same year through the July
quarterly update CR, consistent with the
AMA’s implementation date for the
codes. For the July 2012 update, there
were no new Category I CPT vaccine
codes. Through the July 2012 OPPS
quarterly update CR (Transmittal 2483,
Change Request 7847, dated June 8,

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2012), we allowed separate OPPS
payment for all seven new Category III
CPT codes effective July 1, 2012.
Specifically, as displayed in Table 16 of
the proposed rule and in Table 16
below, we allowed separate payment for
Category III CPT codes 0302T, 0303T,
0304T, 0305T, 0306T, 0307T, and
0308T.
We received one public comment on
one of the Category III CPT codes that
were implemented in July 2012,
specifically on CPT code 0304T, which
is addressed in section II.A.2.d.(1) of
this final rule with comment period.
Table 16 below lists the Category III CPT
codes that were implemented in July
2012, along with their final status
indicators and APC assignments, for CY
2013. The final payment rates for these
codes can be found in Addendum B to
this CY 2013 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site).
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CY 2013
CPT
Code

0302T

0303T

0304T

0305T

0306T
0307T
0308T

CY 2013 Long Descriptor

sroberts on DSK5SPTVN1PROD with

In the CY 2013 OPPS/ASC proposed
rule (77 FR 45114 through 45117), we
solicited public comments on the CY
2013 proposed status indicators and the
proposed APC assignments and
payment rates for the Level II HCPCS
codes and the Category III CPT codes

16:20 Nov 14, 2012

Final
CY2013
APC

T

0089

T

0106

T

0090

S

0690

S

0690

T

0105

T

0234

Insertion or removal and replacement of
intracardiac ischemia monitoring system
including imaging supervision and
interpretation when performed and intraoperative interrogation and programming when
performed; complete system (includes device
and electrode)
Insertion or removal and replacement of
intracardiac ischemia monitoring system
including imaging supervision and
interpretation when performed and intraoperative interrogation and programming when
performed; electrode only
Insertion or removal and replacement of
intracardiac ischemia monitoring system
including imaging supervision and
interpretation when performed and intraoperative interrogation and programming when
performed; device only
Programming device evaluation (in person) of
intracardiac ischemia monitoring system with
iterative adjustment of programmed values,
with analysis, review, and report
Interrogation device evaluation (in person) of
intracardiac ischemia monitoring system with
analysis, review, and report
Removal of intracardiac ischemia monitoring
device
Insertion of ocular telescope prosthesis
including removal of crystalline lens

BILLING CODE 4120–01–C

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Final
CY2013
Status
Indicator

Jkt 229001

that were effective April 1, 2012, and
July 1, 2012, through the respective
OPPS quarterly update CRs. These
codes were listed in Tables 14, 15, and
16 of the proposed rule. We proposed to
finalize their status indicators and their
APC assignments and payment rates, if
applicable, in this CY 2013 OPPS/ASC

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final rule with comment period.
Because the new Category III CPT and
Level II HCPCS codes that become
effective for July are not available to us
in time for incorporation into the
Addenda to the OPPS/ASC proposed
rule, our policy is to include the codes,
their proposed status indicators,

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TABLE 16.-NEW CATEGORY III CPT CODES IMPLEMENTED
IN JULY 2012

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sroberts on DSK5SPTVN1PROD with

proposed APCs (where applicable), and
proposed payment rates (where
applicable) in the preamble of the
proposed rule but not in the Addenda
to the proposed rule. These codes were
listed in Tables 15 and 16, respectively,
of the proposed rule. We proposed to
incorporate these codes into Addendum
B to this CY 2013 OPPS/ASC final rule
with comment period, which is
consistent with our annual OPPS update
policy. The Level II HCPCS codes
implemented or modified through the
April 2012 OPPS update CR and
displayed in Table 14 were included in
Addendum B to the proposed rule
(which was available via the Internet on
the CMS Web site), where their
proposed CY 2013 payment rates were
also shown.
We did not receive any additional
public comments on this process. The
final status indicators, APC
assignments, and payment rates if
applicable, for the Level II HCPCS codes
and the Category III CPT codes that were
implemented or modified through the
April 2012 or July 2012 OPPS update
CR are found in Addendum B to this
final rule with comment period (which
is available via the Internet on the CMS
Web site).
2. Process for New Level II HCPCS
Codes That Will Be Effective October 1,
2012 and New CPT and Level II HCPCS
Codes That Will Be Effective January 1,
2013 for Which We Are Soliciting
Public Comments in This CY 2013
OPPS/ASC Final Rule With Comment
Period
As has been our practice in the past,
we incorporate those new Category I
and III CPT codes and new Level II
HCPCS codes that are effective January
1 in the final rule with comment period
updating the OPPS for the following
calendar year. These codes are released
to the public via the CMS HCPCS (for
Level II HCPCS codes) and AMA Web
sites (for CPT codes), and also through
the January OPPS quarterly update CRs.
In the past, we also have released new
Level II HCPCS codes that are effective
October 1 through the October OPPS
quarterly update CRs and incorporated
these new codes in the final rule with
comment period updating the OPPS for
the following calendar year. For CY
2013, these codes are flagged with
comment indicator ‘‘NI’’ in Addendum
B to the OPPS/ASC final rule with
comment period to indicate that we are
assigning them an interim payment
status which is subject to public
comment. In addition, the CPT and
Level II HCPCS codes that will be
effective January 1, 2013, are flagged
with comment indicator ‘‘NI’’ in

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Addendum B to the OPPS/ASC final
rule with comment period. Specifically,
the status indicator and the APC
assignment and payment rate, if
applicable, for all such codes flagged
with comment indicator ‘‘NI’’ are open
to public comment in the final rule with
comment period, and we respond to
these comments in the OPPS/ASC final
rule with comment period for the next
calendar year’s OPPS/ASC update. In
the CY 2013 OPPS/ASC proposed rule
(77 FR 45117 through 45118), we
proposed to continue this process for
CY 2013. Specifically, for CY 2013, we
proposed to include in Addendum B to
this CY 2013 OPPS/ASC final rule with
comment period the new Category I and
III CPT codes effective January 1, 2013
(including the Category III CPT codes
that were released by the AMA in July
2012) that would be incorporated in the
January 2013 OPPS quarterly update CR
and the new Level II HCPCS codes,
effective October 1, 2012, or January 1,
2013, that would be released by CMS in
its October 2012 and January 2013 OPPS
quarterly update CRs. As proposed, in
this final rule with comment period, the
October 1, 2012 and January 1, 2013
codes are flagged with comment
indicator ‘‘NI’’ in Addendum B to this
CY 2013 OPPS/ASC final rule with
comment period to indicate that we
have assigned them an interim OPPS
payment status for CY 2013. As
proposed, in this final rule with
comment period, their status indicators
and their APC assignments and payment
rates, if applicable, are open to public
comment and will be finalized in the CY
2014 OPPS/ASC final rule with
comment period.
We did not receive any public
comments on our proposal. Therefore,
we are finalizing our proposal to flag
new Level II HCPCS codes that become
effective October 1, 2012, and new CPT
and Level II HCPCS codes that become
effective January 1, 2013 with comment
indicator ‘‘NI’’ in Addendum B to this
CY 2013 OPPS/ASC final rule with
comment period to indicate that these
codes have been assigned an interim
OPPS payment status for CY 2013. In
addition, because these codes have been
assigned to comment indicator ‘‘NI,’’
their status indicators and their APC
assignments and payment rates, if
applicable, are open to public comment
and will be finalized in the CY 2014
OPPS/ASC final rule with comment
period.

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B. OPPS Changes—Variations Within
APCs
1. Background
Section 1833(t)(2)(A) of the Act
requires the Secretary to develop a
classification system for covered
hospital outpatient department services.
Section 1833(t)(2)(B) of the Act provides
that the Secretary may establish groups
of covered OPD services within this
classification system, so that services
classified within each group are
comparable clinically and with respect
to the use of resources. In accordance
with these provisions, we developed a
grouping classification system, referred
to as Ambulatory Payment
Classifications (APCs), as set forth in
§ 419.31 of the regulations. We use
Level I and Level II HCPCS codes to
identify and group the services within
each APC. The APCs are organized such
that each group is homogeneous both
clinically and in terms of resource use.
Using this classification system, we
have established distinct groups of
similar services. We have also
developed separate APC groups for
certain medical devices, drugs,
biologicals, therapeutic
radiopharmaceuticals, and
brachytherapy devices.
We have packaged into payment for
each procedure or service within an
APC group the costs associated with
those items or services that are directly
related to, and supportive of, performing
the main independent procedures or
furnishing the services. Therefore, we
do not make separate payment for these
packaged items or services. For
example, packaged items and services
include:
(a) Use of an operating, treatment, or
procedure room;
(b) Use of a recovery room;
(c) Observation services;
(d) Anesthesia;
(e) Medical/surgical supplies;
(f) Pharmaceuticals (other than those
for which separate payment may be
allowed under the provisions discussed
in section V. of the proposed rule and
this final rule with comment period);
(g) Incidental services such as
venipuncture;
(h) Guidance services, image
processing services, intraoperative
services, imaging, supervision and
interpretation services, diagnostic
radiopharmaceuticals, and contrast
media.
Further discussion of packaged
services is included in section II.A.3. of
this final rule with comment period.
In CY 2008, we implemented
composite APCs to provide a single
payment for groups of services that are

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typically performed together during a
single clinical encounter and that result
in the provision of a complete service
(72 FR 66650 through 66652). Under CY
2012 OPPS policy, we provide
composite APC payment for certain
extended assessment and management
services, low dose rate (LDR) prostate
brachytherapy, cardiac
electrophysiologic evaluation and
ablation, mental health services,
multiple imaging services, and cardiac
resynchronization therapy services.
Further discussion of composite APCs is
included in section II.A.2.e. of this final
rule with comment period.
Under the OPPS, we generally pay for
hospital outpatient services on a rateper-service basis, where the service may
be reported with one or more HCPCS
codes. Payment varies according to the
APC group to which the independent
service or combination of services is
assigned. Each APC weight represents
the hospital cost of the services
included in that APC, relative to the
hospital cost of the services included in
APC 0606 (Level 3 Hospital Clinic
Visits). The APC weights are scaled to
APC 0606 because it is the middle level
hospital clinic visit APC (the Level 3
hospital clinic visit CPT code out of five
levels), and because middle level
hospital clinic visits are among the most
frequently furnished services in the
hospital outpatient setting.
Section 1833(t)(9)(A) of the Act
requires the Secretary to review, on a
recurring basis occurring no less than
annually, and revise the groups, the
relative payment weights, and the wage
and other adjustments to take into
account changes in medical practice,
changes in technology, the addition of
new services, new cost data, and other
relevant information and factors.
Section 1833(t)(9)(A) of the Act also
requires the Secretary to consult with an
expert outside advisory panel composed
of an appropriate selection of
representatives of providers to review
(and advise the Secretary concerning)
the clinical integrity of the APC groups
and the relative payment weights (the
HOP Panel recommendations for
specific services for the CY 2013 OPPS
and our responses to them are discussed
in the relevant specific sections
throughout this final rule with comment
period).
Finally, section 1833(t)(2) of the Act
provides that, subject to certain
exceptions, the items and services
within an APC group cannot be
considered comparable with respect to
the use of resources if the highest cost
for an item or service in the group is
more than 2 times greater than the
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the same group (referred to as the ‘‘2
times rule’’). In the CY 2013 OPPS/ASC
proposed rule (77 FR 45118), for CY
2013, we proposed to use the cost of the
item or service in implementing this
provision, as discussed in section
II.A.2.f. of this final rule with comment
period. The statute authorizes the
Secretary to make exceptions to the 2
times rule in unusual cases, such as
low-volume items and services (but the
Secretary may not make such an
exception in the case of a drug or
biological that has been designated as an
orphan drug under section 526 of the
Federal Food, Drug, and Cosmetic Act).
2. Application of the 2 Times Rule
In accordance with section 1833(t)(2)
of the Act and § 419.31 of the
regulations, we annually review the
items and services within an APC group
to determine, with respect to
comparability of the use of resources, if
the cost of the highest cost item or
service within an APC group is more
than 2 times greater than the cost of the
lowest cost item or service within that
same group. In making this
determination, we consider only those
HCPCS codes that are significant based
on the number of claims. We note that,
for purposes of identifying significant
HCPCS codes for examination in the 2
times rule, we consider codes that have
more than 1,000 single major claims or
codes that have both greater than 99
single major claims and contribute at
least 2 percent of the single major
claims used to establish the APC cost to
be significant (75 FR 71832). This
longstanding definition of when a
HCPCS code is significant for purposes
of the 2 times rule was selected because
we believe that a subset of 1,000 claims
is negligible within the set of
approximately 100 million single
procedure or single session claims we
use for establishing costs. Similarly, a
HCPCS code for which there are fewer
than 99 single bills and which
comprises less than 2 percent of the
single major claims within an APC will
have a negligible impact on the APC
cost. In the CY 2013 OPPS/ASC
proposed rule (77 FR 45118), we
proposed to make exceptions to this
limit on the variation of costs within
each APC group in unusual cases, such
as low-volume items and services, for
CY 2013.
In the CY 2013 OPPS/ASC proposed
rule, we identified APCs with 2 times
rule violations but for which we
proposed changes to their HCPCS codes’
APC assignments in Addendum B to the
proposed rule. We note that Addendum
B did not appear in the printed version
of the Federal Register as part of the CY

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68311

2013 OPPS/ASC proposed rule. Rather,
it was published and made available via
the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. In
these cases, to eliminate a 2 times rule
violation or to improve clinical and
resource homogeneity, we proposed to
reassign the codes to APCs that contain
services that are similar with regard to
both their clinical and resource
characteristics. We also proposed to
rename existing APCs or create new
clinical APCs to accommodate proposed
HCPCS code reassignments. In many
cases, the proposed HCPCS code
reassignments and associated APC
reconfigurations for CY 2013 included
in the proposed rule were related to
changes in costs of services that were
observed in the CY 2011 claims data
newly available for CY 2013 ratesetting.
We also proposed changes to the status
indicators for some codes that were not
specifically and separately discussed in
the proposed rule. In these cases, we
proposed to change the status indicators
for some codes because we believe that
another status indicator would more
accurately describe their payment status
from an OPPS perspective based on the
policies that we proposed for CY 2013.
Addendum B of the CY 2013 OPPS/ASC
proposed rule identified with a
comment indicator ‘‘CH’’ those HCPCS
codes for which we proposed a change
to the APC assignment or status
indicator as assigned in the April 2012
Addendum B Update (available via the
Internet on the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/index.html). In contrast,
Addendum B of this final rule with
comment period (available via the
Internet on the CMS Web site) identifies
with the ‘‘CH’’ comment indicator the
final CY 2013 changes compared to the
codes’ status as reflected in the October
2012 Addendum B update.
3. Exceptions to the 2 Times Rule
As discussed earlier, we may make
exceptions to the 2 times limit on the
variation of costs within each APC
group in unusual cases such as lowvolume items and services. Taking into
account the APC changes that we
proposed for CY 2013, we reviewed all
the APCs to determine which APCs
would not satisfy the 2 times rule. Then
we used the following criteria to decide
whether to propose exceptions to the 2
times rule for affected APCs:
• Resource homogeneity;
• Clinical homogeneity;
• Hospital outpatient setting
utilization;

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• Frequency of service (volume); and
• Opportunity for upcoding and code
fragments.
For a detailed discussion of these
criteria, we refer readers to the April 7,
2000 OPPS final rule with comment
period (65 FR 18457 and 18458).
Table 17 of the CY 2013 OPPS/ASC
proposed rule listed 21 APCs that we
proposed to exempt from the 2 times
rule for CY 2013 based on the criteria
cited above and based on claims data
processed from January 1, 2011, through
December 31, 2011.
We note that, for cases in which a
recommendation by the HOP Panel
appears to result in or allow a violation
of the 2 times rule, we generally accept
the Panel’s recommendation because
those recommendations are based on
explicit consideration of resource use,
clinical homogeneity, site of service,
and the quality of the claims data used
to determine the APC payment rates.
For the CY 2013 OPPS/ASC proposed
rule, we based the listed exceptions to
the 2 times rule on claims data for dates
of service between January 1, 2011, and
December 31, 2011, that were processed
before January 1, 2011. For this final
rule with comment period, we used
claims data for dates of service between
January 1, 2011, and December 31, 2011,
that were processed on or before June
30, 2012 and updated CCRs, if available.
Thus, after considering the public
comments we received on the CY 2013
OPPS/ASC proposed rule and making
changes to APC assignments based on
those comments, we analyzed the CY
2011 claims data used for this final rule
with comment period to identify the
APCs with 2 times rule violations.
Based on the final CY 2011 claims data,
we found that there are 19 APCs with
2 times rule violations, a cumulative
decrease of 2 APCs compared to the
proposed rule. We applied the criteria
as described earlier to identify the APCs
that are exceptions to the 2 times rule
for CY 2013, and identified two
additional APCs that meet the criteria
for exception to the 2 times rule for this
final rule with comment period:
• APC 0148 (Level I Anal/Rectal
Procedures)
• APC 0254 (Level V ENT
Procedures)
In addition, we also determined that
four APCs no longer violated the 2 times
rule:
• APC 0128 (Echocardiogram with
Contrast)
• APC 0173 (Level II Partial
Hospitalization (4 or more services) for
CMHCs)
• APC 0604 (Level 1 Hospital Clinic
Visits)

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• APC 0655 (Insertion/Replacement/
Conversion of a Permanent Dual
Chamber Pacemaker or Pacing)
As discussed in section III.D.1.f. of
this final rule with comment period,
because of concerns raised regarding the
2 times rule violation for
echocardiography services, and after
further analysis of our claims data, we
deleted APC 0128 and replaced it with
two new APCs to correct the 2 times
rule violation. Specifically, APC 0128
has been replaced with APC 0177 (Level
I Echocardiogram with Contrast) and
APC 0178 (Level II Echocardiogram
with Contrast). We have not included in
this count those APCs where a 2 times
rule violation is not a relevant concept,
such as APC 0375 (Ancillary Outpatient
Services when Patient Expires), with an
APC cost set based on multiple
procedure claims; therefore, we have
identified only final APCs, including
those with criteria-based costs, such as
device-dependent APCs, with 2 times
rule violations.
Comment: Several commenters urged
CMS to reassign HCPCS G0379 (Direct
admission of patient for hospital
observation care) from APC 0604 (Level
1 Hospital Clinic Visits) to APC 0608
(Level 5 Hospital Clinic Visits). In
particular, the commenters requested
that CMS assign HCPCS G0379 to the
same APC as CPT code 99205 (Office or
other outpatient visit for the evaluation
and management of a new patient (Level
5)) when the Composite APC 8002
(Level I Extended Assessment &
Management Composite) criteria are not
met. The commenters indicated that the
reassignment of HCPCS code G0379 to
APC 0608 would be appropriate because
it would resolve the 2 times rule
violation in APC 0604 and also align the
resources with a high-level hospital visit
when the criteria for Composite APC
8002 are not met. The commenters
suggested that continuing to assign
HCPCS code G0379 to APC 0604 would
result in continued underpayments to
HOPDs when the services and claims
processing requirements for APC 8002
are not met for a direct referral. The
commenters further added that this
same issue was discussed during the
February 2012 HOP Panel meeting, and
that after the discussion, the Panel
recommended that CMS reassign
HCPCS code G0379 from APC 0604 to
an appropriate APC. The commenters
urged CMS to accept the Panel’s
recommendation.
Response: Based on the
recommendation of the HOP Panel at its
February 2012 meeting, we reviewed
our claims data for HCPCS code G0379.
Our analyses revealed that the level of
hospital resources used to provide

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HCPCS code G0379 is about the same as
for CPT code 99205. In particular, our
claims data show similar geometric
mean costs for HCPCS code G0379 and
CPT code 99205. Specifically, our
claims data show a geometric mean cost
of approximately $181 for HCPCS code
G0379 based on 2,368 single claims (out
of 3,975 total claims), and a geometric
mean cost of approximately $179 based
on 95,017 single claims (out of 104,246
total claims) for CPT code 99205. Based
on our review of the claims data
associated with HCPCS code G0379 and
CPT code 99025, we agree with the
commenters that the reassignment of
HCPCS code G0379 to APC 0608 is
appropriate. Because APC assignments
are made based on consideration of both
hospital resources and clinical
homogeneity, we believe this
reassignment improves the clinical
homogeneity of APC 0608 and
appropriately aligns the resource costs
of HCPCS code G0379 to those
procedures assigned to APC 0608.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal with
modification to reassign HCPCS code
G0379 from APC 0604 to APC 0608,
which has a final CY 2013 geometric
mean cost of approximately $181.
Comment: One commenter indicated
that APC 0623 violates the 2 times rule
and requested that CMS review the costs
associated with CPT code 36260
(Insertion of implantable intra-arterial
infusion pump (eg, for chemotherapy of
liver)) and reassign the CPT code to a
more appropriate APC.
Response: Table 17 of the CY 2013
OPPS/ASC proposed rule listed 21
APCs that violated the 2 times rule for
CY 2013. APC 0623 does not appear in
Table 17 and assignment of CPT code
36260 to APC 0623 does not violate the
2 times rule. As stated above, in
determining whether a 2 times rule
violation exist in an APC, we consider
only those HCPCS codes that are
significant based on the number of
claims. For purposes of identifying
significant HCPCS codes for
examination in the 2 times rule, we
consider codes that have more than
1,000 single major claims or codes that
have both greater than 99 single major
claims and contribute at least 2 percent
of the single major claims used to
establish the APC cost to be significant
(75 FR 71832). This longstanding
definition of when a HCPCS code is
significant for purposes of the 2 times
rule was selected because we believe
that a subset of 1,000 claims is
negligible within the set of
approximately 100 million single
procedure or single session claims we

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use for establishing costs. Similarly, a
HCPCS code for which there are fewer
than 99 single bills and which
comprises less than 2 percent of the
single major claims within an APC will
have a negligible impact on the APC
cost. For this CY 2013 OPPS/ASC final
rule with comment period, there are
only 3 single claims for CPT code 36260
(each of the 3 total claims). Because CPT
code 36260 does not represent a
significant HCPCS code based on the

number of claims, it does not violate the
2 times rule.
After consideration of the public
comments we received and our review
of the CY 2011 costs from hospital
claims and cost report data available for
this final rule with comment period, we
are finalizing our proposals with some
modifications. Specifically, we are
finalizing our exemption of 17 of the
original APCs (that appeared in Table 17
of the CY 2013 OPPS/ASC proposed

rule with comment period and also
appears in Table 17 below) from the 2
times rule for CY 2013. We are removing
four APCs that no longer violated the 2
times rule and decreasing the number of
APC exceptions from 21 to 19 APCs, as
described previously in this section.
Our final list of 19 APCs exempted from
the 2 times rule for CY 2013 is
displayed in Table 17 below.

C. New Technology APCs

to an appropriate clinical APC. This
policy allows us to move a service from
a New Technology APC in less than 2
years if sufficient data are available. It
also allows us to retain a service in a
New Technology APC for more than 2
years if sufficient data upon which to
base a decision for reassignment have
not been collected.
We note that the cost bands for New
Technology APCs range from $0 to $50

in increments of $10, from $50 to $100
in increments of $50, from $100 to
$2,000 in increments of $100, and from
$2,000 to $10,000 in increments of $500.
These cost bands identify the APCs to
which new technology procedures and
services with estimated service costs
that fall within those cost bands are
assigned under the OPPS. Payment for
each APC is made at the mid-point of
the APC’s assigned cost band. For

1. Background

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In the November 30, 2001 final rule
(66 FR 59903), we finalized changes to
the time period a service was eligible for
payment under a New Technology APC.
Beginning in CY 2002, we retain
services within New Technology APC
groups until we gather sufficient claims
data to enable us to assign the service

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example, payment for New Technology
APC 1507 (New Technology—Level VII
($500—$600)) is made at $550.
Currently, there are 82 New Technology
APCs, ranging from the lowest cost band
assigned to APC 1491 (New
Technology—Level IA ($0—$10))
through the highest cost band assigned
to APC 1574 (New Technology—Level
XXXVII ($9,500—$10,000). In CY 2004
(68 FR 63416), we last restructured the
New Technology APCs to make the cost
intervals more consistent across
payment levels and refined the cost
bands for these APCs to retain two
parallel sets of New Technology APCs,
one set with a status indicator of ‘‘S’’
(Significant Procedure, Not Discounted
When Multiple) and the other set with
a status indicator of ‘‘T’’ (Significant
Procedure, Multiple Reduction
Applies). These current New
Technology APC configurations allow
us to price new technology services
more appropriately and consistently.
Every year we receive many requests
for higher payment amounts under our
New Technology APCs for specific
procedures under the OPPS because
they require the use of expensive
equipment. We are taking this
opportunity to reiterate our response in
general to the issue of hospitals’ capital
expenditures as they relate to the OPPS
and Medicare.
Under the OPPS, one of our goals is
to make payments that are appropriate
for the services that are necessary for the
treatment of Medicare beneficiaries. The
OPPS, like other Medicare payment
systems, is budget neutral and increases
are limited to the annual hospital
inpatient market basket increase. We
believe that our payment rates generally
reflect the costs that are associated with
providing care to Medicare beneficiaries
in cost-efficient settings, and we believe
that our rates are adequate to ensure
access to services.
For many emerging technologies,
there is a transitional period during
which utilization may be low, often
because providers are first learning
about the techniques and their clinical
utility. Quite often, parties request that
Medicare make higher payment
amounts under our New Technology
APCs for new procedures in that
transitional phase. These requests, and
their accompanying estimates for
expected total patient utilization, often
reflect very low rates of patient use of
expensive equipment, resulting in high
per use costs for which requesters
believe Medicare should make full

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payment. Medicare does not, and we
believe should not, assume
responsibility for more than its share of
the costs of procedures based on
projected utilization for Medicare
beneficiaries and does not set its
payment rates based on initial
projections of low utilization for
services that require expensive capital
equipment. For the OPPS, we rely on
hospitals to make informed business
decisions regarding the acquisition of
high cost capital equipment, taking into
consideration their knowledge about
their entire patient base (Medicare
beneficiaries included) and an
understanding of Medicare’s and other
payers’ payment policies.
We note that, in a budget neutral
environment, payments may not fully
cover hospitals’ costs in a particular
circumstance, including those for the
purchase and maintenance of capital
equipment. We rely on hospitals to
make their decisions regarding the
acquisition of high cost equipment with
the understanding that the Medicare
program must be careful to establish its
initial payment rates, including those
made through New Technology APCs,
for new services that lack hospital
claims data based on realistic utilization
projections for all such services
delivered in cost-efficient hospital
outpatient settings. As the OPPS
acquires claims data regarding hospital
costs associated with new procedures,
we regularly examine the claims data
and any available new information
regarding the clinical aspects of new
procedures to confirm that our OPPS
payments remain appropriate for
procedures as they transition into
mainstream medical practice.
2. Movement of Procedures From New
Technology APCs to Clinical APCs
As we explained in the November 30,
2001 final rule (66 FR 59902), we
generally keep a procedure in the New
Technology APC to which it is initially
assigned until we have collected
sufficient data to enable us to move the
procedure to a clinically appropriate
APC. However, in cases where we find
that our original New Technology APC
assignment was based on inaccurate or
inadequate information (although it was
the best information available at the
time), or where the New Technology
APCs are restructured, we may, based
on more recent resource utilization
information (including claims data) or
the availability of refined New
Technology APC cost bands, reassign

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the procedure or service to a different
New Technology APC that most
appropriately reflects its cost.
Consistent with our current policy, in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45120), for CY 2013, we
proposed to retain services within New
Technology APC groups until we gather
sufficient claims data to enable us to
assign the service to a clinically
appropriate APC. The flexibility
associated with this policy allows us to
move a service from a New Technology
APC in less than 2 years if sufficient
claims data are available. It also allows
us to retain a service in a New
Technology APC for more than 2 years
if sufficient claims data upon which to
base a decision for reassignment have
not been collected. Table 18 of the
proposed rule listed the HCPCS codes
and associated status indicators that we
proposed to reassign from a New
Technology APC to a clinically
appropriate APC or to a different New
Technology APC for CY 2013.
In the CY 2013 OPPS/ASC proposed
rule, we noted that currently, in CY
2012, there are three procedures
described by HCPCS G-codes receiving
payment through a New Technology
APC(77 FR 45121). Specifically, HCPCS
code G0417 (Surgical pathology, gross
and microscopic examination for
prostate needle saturation biopsy
sampling, 21–40 specimens) is assigned
to New Technology APC 1505 (New
Technology—Level V ($300–$400));
HCPCS code G0418 (Surgical pathology,
gross and microscopic examination for
prostate needle saturation biopsy
sampling, 41–60 specimens) is assigned
to New Technology APC 1506 (New
Technology—Level VI ($400–$500));
and HCPCS code G0419 (Surgical
pathology, gross and microscopic
examination for prostate needle
saturation biopsy sampling, greater than
60 specimens) is assigned to New
Technology APC 1508 (New
Technology—Level VIII ($600–$700)).
These HCPCS codes have been assigned
to New Technology APCs since CY
2009.
Analysis of the hospital outpatient
data for claims submitted in CYs 2009,
2010, and 2011 indicate that prostate
needle saturation biopsy procedures are
rarely performed on Medicare
beneficiaries. For OPPS claims
submitted from CY 2009 through CY
2011, our final rule claims data show
very minimal claims for HCPCS code
G0417, G0418, and G0419, as shown in
Table 18.

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are revising the long descriptor for
HCPCS code G0416 to read ‘‘Surgical
pathology gross and microscopic
examination for prostate needle
saturation biopsy sampling 10–20
specimens’’ effective January 1, 2013.
The final CY 2013 geometric mean cost
for APC 0661 is approximately $162.
Table 19 below lists the HCPCS codes
and associated status indicators that we
are reassigning from a New Technology
APC to a different New Technology APC
for CY 2013. The final CY 2013 payment
rates for HCPCS codes G0417, G0418,
and G0419 can be found in Addendum
B of this final rule with comment period
(which is available via the Internet on
the CMS Web site).

ER15NO12.031

indicators that we proposed to reassign
from New Technology APCs 1505, 1506,
and 1508 to APC 0661 for CY 2013.
We did not receive any public
comments on the APC reassignments for
HCPCS codes G0417, G0418, and
G0419. Therefore, for the reasons set
forth above, we are finalizing our
proposal, without modification, to
assign these codes to APC 0661. We
note that APC 0661 is the same APC to
which the other HCPCS G-code for
prostate needle saturation biopsy
procedure, G0416 (Surgical pathology,
gross and microscopic examination for
prostate needle saturation biopsy
sampling, 1–20 specimens), is assigned.
In addition, for the CY 2013 update, we

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Given the continued lack of cost data
for these HCPCS codes, we proposed to
reassign these procedures to an APC
that is appropriate from a clinical
standpoint (77 FR 45121). Specifically,
we proposed to reassign HCPCS G-codes
G0417, G0418, and G0419 to clinical
APC 0661 (Level V Pathology), with a
proposed APC payment rate of
approximately $160 for CY 2013. We
stated that we believe that all three
procedures, as described by HCPCS
codes G0417, G0418, and G0419, are
comparable clinically to other pathology
services currently assigned to APC 0661
and likely require similar resources.
Table 18 of the proposed rule listed the
HCPCS G-codes and associated status

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3. Payment Adjustment Policy for
Radioisotopes Derived From NonHighly Enriched Uranium Sources
a. Background
Radioisotopes are widely used in
modern medical imaging, particularly
for cardiac imaging and predominantly
for the elderly (Medicare) population.
Technetium-99 (Tc-99m), the
radioisotope used in the majority of
such diagnostic imaging services, is
currently produced in legacy reactors
outside of the United States using
highly enriched uranium (HEU).
The Administration has established
an agenda to eliminate domestic
reliance on these reactors, and is
promoting the conversion of all medical
radioisotope production to non-HEU
sources. Alternative methods for
producing Tc-99m without HEU are
technologically and economically
viable, and conversion to such
production has begun and is expected to
be completed within a 5-year time
period. We expect this change in the
supply source for the radioisotope used
for modern medical imaging will
introduce new costs into the payment
system that are not accounted for in the
historical claims data.
Full Cost Recovery, which is routinely
considered in CMS payment under
Medicare, is the accounting practice
used by producers and suppliers to
describe the recovery of all contributing
costs. Unlike legacy sources that often
benefit from government subsidized
multifunction facilities, the cost of these
alternative methods will be increased
over the cost of medical radioisotopes
produced using HEU because hospitals’
payments to producers and suppliers
will have to cover capital expense (such
as, for example, the cost of building new
reactors, particle accelerators, or other
very long-term investments), as well as
all other new industry-specific ancillary
costs (such as, for example, the cost of
long-term storage of radioactive waste).
Hospitals that use medical radioisotopes
that are produced from non-HEU
sources can expect producers and
suppliers to pass on to them the full
impact of these costs.
In the short term, some hospitals will
be able to depend on low cost legacy
producers using aging subsidized
reactors while other hospitals will be
forced to absorb the full cost of nonHEU alternative sources. Over several
years, we believe that these cost
differentials will promote increased
regional shortages and create larger cost
differentials and greater cost variations
among hospitals. As a result, we believe
this change in supply source will create
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b. Payment Policy
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45121 through 45123), we
proposed to exercise our authority to
establish ‘‘other adjustments as
determined to be necessary to ensure
equitable payments’’ under the OPPS in
accordance with section 1833(t)(2)(E) of
the Act. We stated that we do not
believe that we can ensure equitable
payments to hospitals over the next 4 to
5 years in the absence of an adjustment
to account for the significant payment
inequities created by factors that will
likely arise due to the change in supply
source for the radioisotope used
commonly in modern medical imaging
procedures. We proposed to provide an
adjustment for the marginal cost for
radioisotopes produced from non-HEU
sources over the costs for radioisotopes
produced by HEU sources. We stated
that we believe such an adjustment
would ensure equitable payments in
light of the Administration’s HEU
agenda, market influences, cost
differentials, and cost variations that
will create significant payment
inequities among hospitals.
For CY 2013, we proposed to make an
additional payment of $10, which is an
amount based on the best available
estimations of the incremental costs
associated with non-HEU Tc-99m
production as calculated using the Full
Cost Recovery accounting methodology.
We proposed to establish a new HCPCS
code, QXXXX (Tc-99m from non-HEU
source, full cost recovery add-on, per
dose), to describe the Tc-99m
radioisotope produced by non-HEU
methods and used in a diagnostic
procedure. Under the proposal,
hospitals would be able to report this
HCPCS Q-code once per dose along with
any diagnostic scan or scans furnished
using Tc-99m as long as the Tc-99m
doses used can be certified by the
hospital as coming from non-HEU
sources and have been priced using a
Full Cost Recovery accounting
methodology. The HCPCS Q-code
would be used to pay hospitals for the
additional (incremental) cost of using
Tc-99m from a non-HEU source.
Under the proposal, hospitals would
not be required to make a separate
certification of the non-HEU source on
the claim; the inclusion of the new
HCPCS code QXXXX on the claim
would indicate that the hospital has met
the conditions of the service definition
as it does for any billed service.
However, in the event of an audit, we
stated that hospitals would be expected
to be able to produce documentation

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that the individual dose delivered to the
patient was completely produced from a
non-HEU source. We proposed three
ways in which hospitals could
accomplish this.
First, the hospital could produce
documentation such as invoices or
patient dose labels or tracking sheets
that indicated that the patient’s dose
was completely produced from nonHEU sources and priced based on Full
Cost Recovery. In this first case, the
supplier would be expected to be able
to trace a specific dose of Tc-99m to a
completely non-HEU batch. Current
pharmacy recordkeeping is generally
able to trace all components of
radiopharmaceuticals back to their
source production batches. A hospital
would not be compliant with the
HCPCS Q-code definition if the
documentation indicated the supplier
produced a mixed batch and labeled a
fraction of the doses equal to the nonHEU fraction in the batch.
Second, a hospital could produce
documentation that the entire batch of
Tc-99m doses derives from non-HEU
sources for a specified period of time,
for example, the time that a single nonHEU based generator is in use. This
approach would obviate the need for
specific dose tracking from a claims
audit perspective, although that
information is typically required for
other purposes. An attestation from the
generator supplier would be sufficient
evidence for the hospital, as would
invoices that show that all doses of Tc99m during a specified period came
from inherently non-HEU alternative
sources.
Third, if the industry was to
implement labeling of generators and/or
doses with labels attesting to 100
percent non-HEU sources priced based
on Full Cost Recovery, documentation
of labeled isotope usage using either the
specific dose approach or the 100
percent hospital usage approach could
provide evidence of hospital
compliance. The hospital would be
required to retain appropriate
documentation within the hospital
(including pharmacy) records but would
not need to keep any specific
documentation within the individual
medical record. Also, we would
consider a dose to be priced based on
Full Cost Recovery when the supplier
could attest that the supply chain
adheres to usual industry practices to
account for Full Cost Recovery,
specifically including the capital cost of
sustainable production and the
environmental cost of waste
management.
To reduce the administrative
overhead for hospitals, we proposed not

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to require hospitals to separately track
additional costs for Tc-99m doses from
non-HEU sources, but to include the
cost of the radioisotope in the cost of the
diagnostic radiopharmaceutical as
usual, reporting only a token $1 charge
for the HCPCS code QXXXX line. Under
the proposal, we would continue to
calculate the total costs of radionuclide
scans using claims data, and would
periodically recalculate the estimated
incremental cost of Tc-99m from nonHEU sources based on Full Cost
Recovery, using models relying on the
best available industry reports and
projections, and would adjust the
payment for HCPCS code QXXXX
accordingly, reducing the payment for
the scans by the amount of cost paid
through HCPCS code QXXXX payment.
We stated that we believe this proposal
allows us to continuously compensate
for unanticipated changes in Tc-99m
cost attributable to new non-HEU
supply sources while avoiding a double
payment for the increased cost.
Comment: The vast majority of
commenters conceptually agreed with
CMS’ proposed payment policy.
However, the commenters differed in
opinion on how CMS should implement
a proposal to encourage hospitals to
switch from Tc-99m derived from HEU
sources to Tc-99m derived from nonHEU sources.
Many commenters disagreed
specifically with CMS’ proposal to make
an additional payment of $10 per dose
for Tc-99m radioisotopes produced by
non-HEU methods, used in a diagnostic
procedure. These commenters agreed
that an additional payment is necessary
in order to ensure that hospitals are
fully paid for the additional costs
incurred for the use of non-HEU Tc-99m
radioisotopes, but the commenters
argued that the additional $10 payment
is insufficient and inadequate to
incentivize hospitals to change their
current practices and transition
purchases of Tc-99m to non-HEU
sources. The commenters suggested that
CMS instead adjust or increase the
payment amount to more adequately
cover any additional costs to providers.
One commenter asked that CMS
conduct a study of the actual costs at a
time when non-HEU Tc-99m is actually
available to hospitals, and propose an
adjustment that will better reflect both
the marginal additional costs of the nonHEU sources and the administrative and
compliance burden on hospitals.
Another commenter recommended
that CMS establish HCPCS code QXXXX
(Tc-99m from non-HEU sources, full
cost recovery add-on, per dose) and
make an interim payment of $10 per
unit for CY 2013 and CY 2014. The

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commenter further suggested that,
beginning in CY 2015, CMS calculate
the cost of the service described by the
recommended code based on the
standard CMS payment methodology
because the calculations will be based
on charges for services furnished in CY
2013, and for CY 2015 and years
following, CMS will have estimated
costs on which to base the additional
payment for the HCPCS Q-code. In
addition, the commenter recommended
that CMS carefully track the phase-out
of the HEU sources and eliminate
HCPCS code QXXXX once HEU is
phased out of the market in the United
States.
Overall, most of the commenters
encouraged CMS to continue to work
with pertinent stakeholders and
providers in the industry on this issue.
Response: We agree with the
commenters that $10 is not a large
incentive payment to promote a
conversion to non-HEU sources of Tc99m. However, we are concerned that
many commenters have
mischaracterized this payment. We did
not create an additional payment to
promote the Administration’s initiative
to eliminate domestic reliance on legacy
production processes producing Tc-99m
from HEU, as that is outside the scope
of the OPPS. Rather, the industry has
conveyed to us that this conversion to
non-HEU sources will occur in response
to U.S. strategic policy, but that cost
considerations have created barriers to
that movement. One of the cost
considerations is the fact that non-HEU
sourced Mo-99, the Tc-99m precursor, is
expected to cost more than current
sources from legacy reactors, and this
increased cost will adversely impact
hospitals. In evaluating that concern, we
determined that there is, in fact, a
probability not only that costs will
increase but that those costs will not be
passed on uniformly as the industry
converts. Therefore, we used our
authority to ensure payment equity
among hospitals by proposing to create
this additional payment to address the
incremental cost of obtaining Tc-99m
from the new sources of supply.
Although commenters have opined that
a larger payment would be a better
incentive to support non-HEU
conversion, the purpose for the
additional payment is limited to
mitigating any adverse impact of
existing payment policy and is based on
the authority set forth at section
1833(t)(2)(E) of the Act.
Most of the comments raising
concerns about the inadequacy of the
additional payment suggested that we
did not account for the administrative
costs involved in implementing this

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additional payment at the hospital level,
at the radiopharmacy level, and at the
level of the generator manufacturer.
However, we note that previous
discussions with the industry indicated
that the actual costs of conversion,
distinct from the administrative costs of
billing, are confined to the producer
(reactor) and the processor and are
passed down through the supply chain
from there. In our own analysis, we
concurred with that finding and
calculated a payment that would readily
cover the additional cost of this change
in supply as it is passed down the
supply chain. We do not believe that it
promotes efficiency to add
administrative markup to this increased
cost of a supply, especially given that
we believe that the administrative cost
of adding a new service into the billing
system should be small at the hospital
and the pharmacy levels. Moreover, due
to the small absolute difference in cost
between non-HEU and HEU sourced Tc99m, we do not believe that significant
inequities would exist in hospital costs
until a significant amount of more
expensive non-HEU Mo-99 enters the
system, at which point any
administrative cost would be spread
over a large number of claims.
Finally, we agree with commenters
who stated that this additional payment
should be updated as better data become
available. We stated in the proposed
rule that we intend to look at the
amount of the add-on payment and
potentially update it as better economic
information becomes available.
Although we did not limit ourselves to
the methodology beyond a commitment
to use the best available data, we also
did not propose using our usual OPPS
methodologies to update the payment.
We had specifically advised hospitals
that separate reporting of the cost of Tc99m from non-HEU sources was not
required for several reasons. First, a
particular generator manufacturer could
elect to provide HEU and non-HEU
generators at the same averaged cost, a
method that would enable the client
hospitals to defray any overall cost
increase as non-HEU generators became
randomly available. Because there could
still be an incremental cost differential
incurred by doing business with that
manufacturer as compared with a purely
non-HEU manufacturer, our normal
OPPS methods would show no
incremental cost and thus could not be
used to mitigate a payment inequity.
Second, we noted that separate
reporting of the costs of the two sources
or the calculation and reporting of a cost
differential would significantly increase
the administrative burden on hospitals,

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a burden of which we have been
particularly mindful.
Comment: Several commenters asked
that CMS provide separate payment for
all diagnostic radiopharmaceuticals,
regardless of their per day cost, as this
policy would support conversion to
non-HEU sources. A few commenters
recommended that CMS unpackage all
radiopharmaceuticals that meet the
annual packaging threshold. They also
suggested that CMS unpackage all
radiopharmaceuticals that use Tc-99m,
regardless of their per day cost. One
commenter suggested that the proposed
add-on payment of $10 be made in
addition to separate payment for the
diagnostic radiopharmaceutical.
The commenters emphasized their
concern over increased costs of
conversion to 100 percent non-HEU for
radioisotopes. One commenter argued
that separate payment would provide a
direct, measurable incentive to the
entire radiopharmaceutical market
supply chain to support the efforts to
convert from HEU to non-HEU sources.
Additionally, the commenter stated that
separate payment would allow CMS to
obtain accurate hospital cost data on the
cost of both HEU and non-HEU
radiopharmaceuticals.
Response: We have already discussed
in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66765
through 66768) the reasons why the
agency has determined that it is
appropriate to package payment for a
diagnostic radiopharmaceutical into the
payment for the nuclear medicine scan,
and we have finalized this policy again
in section II.A.3.f. of this final rule with
comment period. However, specifically
from the standpoint of this add-on
payment to ensure equitable payments
to hospitals, a separate payment for the
diagnostic radiopharmaceutical would
not unpackage the cost of the
radioisotope from the much larger cost
of the drug component, nor would it
differentiate between HEU and nonHEU sources. Therefore, unpackaging
the cost of the diagnostic
radiopharmaceutical would not create a
differential payment to ensure payment
equity amongst hospitals.
Comment: Several commenters were
concerned with CMS’ proposal that Tc99m doses be derived 100 percent from
non-HEU sources in order to receive the
additional $10 payment. A few
commenters stated that it would be
impossible to accurately predict the
percentage of Tc-99m doses that will be
comprised 100 percent from non-HEU
sources. Other commenters expressed
concern over the significant costs that
will be incurred for segregating 100

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percent non-HEU sources, especially in
the radiopharmacy.
Response: We agree with the
commenters that it will be impossible to
accurately predict the percentage of Tc99m doses that will be comprised of 100
percent of non-HEU sourced material,
but that is because it will be impossible
to predict the percentage of non-HEU
Tc-99m available to manufacturers at
any point in time. This presumption is
one of the reasons that led us to the
conclusion that payment for doses
where 100 percent comes from non-HEU
sources was the only reasonable option.
We do not need to predict the amount
of non-HEU Mo-99 available to the
industry to establish a blend; instead,
the HCPCS Q-code can be used
whenever and wherever enough nonHEU Tc-99m is available to be kept
separate down to the level of the
generator or patient dose. Multiple
codes to reflect different blends are not
needed, and we do not need to create
smaller payments for blends that reflect
smaller amounts of non-HEU material.
Because payment must be driven by
cost, a 20-percent blend would be
limited to 20 percent of the $10 cost or
$2, and hospitals are already concerned
that the $10 additional payment is a
small payment when they consider it
against the effort involved in making
tracking and billing changes.
However, we do not believe that any
costs created by changes in
radiopharmacy procedures will be
significant in the charges passed on to
hospitals. We do understand that there
may be some instances in which a
radiopharmacy will have both a nonHEU and an HEU generator, and the
pharmacy will need to determine
whether it wants to keep those sources
separate or blend them and eschew
labeling of a non-HEU source. We also
understand that this may be a larger
issue at the generator manufacturer
level, especially very early in the
conversion when non-HEU Mo-99 is
scarce. On the other hand, when nonHEU Mo-99 is scarce, the incremental
cost of higher priced non-HEU Mo-99 is
small and the blending of small
amounts of non-HEU Mo-99 will not
create payment inequities among
hospitals. We expect that as conversion
progresses and more non-HEU Mo-99
enters the supply chain, manufacturing
processes may evolve. Ultimately, there
is no requirement to use this HCPCS Qcode or label non-HEU based Mo-99; the
payment exists as a tool if it is necessary
to reduce payment inequities that might
occur as a consequence of industry
conversion to non-HEU based Mo-99.
One of the concerns about reporting
doses derived from 100 percent non-

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HEU sources had to do with compliance
concerns if, in the process of switching
between an HEU and a non-HEU run,
the manufacturer or pharmacy did not
add in an extra step of flushing lines to
ensure that cross-contamination did not
occur. Our understanding is that using
different sources for consecutive
manufacturing runs would not create
source contamination of more than 1 or
2 percent based on usual manufacturing
processes. We note that it is not our
intent to introduce unnecessary
inefficiencies solely to support
payment, and in this case we can
confirm that production steps, such as
cleaning lines, should be driven by FDA
manufacturing requirements, not by
payment artificialities. We believe that
manufacturing steps that do not risk
reducing the non-HEU sourced Mo-99 or
Tc-99m to less than 95 percent of the
generator, elution or dose (that is, do not
risk reducing the content of the dose
supplied to the patient to less than 95
percent non-HEU sourced Tc-99m) are
consistent with a product that is
completely derived from a non-HEU
source. Therefore, we are modifying our
proposal to state that any dose of Tc99m that can be traced to a Mo-99
supply containing no more than 5
percent HEU sourced Mo-99 shall be
considered to be completely derived
from non-HEU sources for the purposes
of this final rule with comment period,
this additional payment, and any
compliance practices that support it. It
is our understanding that the normal
manufacturing records will still support
processes that created the non-HEU
supply.
Comment: One commenter expressed
concern regarding the administrative
and financial burden that hospitals may
incur upon adoption of this proposed
policy. The commenter stated that these
burdens may exceed the marginal
additional cost of moving to non-HEU
sources. The commenter believed that
the proposed policy would result in
additional administration and
documentation burdens which include
the following additional expenses:
expenses for developing and
maintaining policies to track, certify,
and document HEU versus non-HEU
sources in order to use the newly
required HCPCS Q-code; new
compliance program checks and
monitoring to ensure the appropriate
codes are used and documentation is
maintained should an audit be
conducted; additional personnel time
and resources to create and maintain
line items on the hospital charge master
for non-HEU versus HEU codes and
charges; and additional resources to

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develop nuclear medicine department
information technology infrastructure,
as well as billing policies for
documentation and use of the new
HCPCS Q-code.
Another commenter also believed that
this proposal would create a significant
burden on hospitals by requiring them
to obtain, document, and track
information from the supplier and
thereby create an unnecessary level of
complexity for hospitals that could
result in code errors and omissions on
claims. The commenter urged CMS not
to finalize this proposal.
Response: We do not believe that this
additional payment will result in a
significant administrative burden to
hospitals. We note that most hospitals
have computerized inventory and
billing systems that are able to track
low-cost items such as needles and
aspirins. We have reiterated in our
response to public comments in this
final rule with comment period that we
expect hospitals requesting this
additional payment to be able to track
a dose that has been labeled or claimed
as ‘‘non-HEU sourced’’ and do not
expect hospitals to audit the validity of
such claims made by their suppliers. We
also note that the cost of adding a new
code to the hospital chargemaster is not
large, and that a hospital is not being
subject to a significant payment inequity
if the cost of adding a new code to the
chargemaster actually exceeds the
added cost of non-HEU sourced Tc99m
to the hospital. Hospitals that are not
experiencing high volumes of
significantly increased costs are not
obligated to use this additional payment
as its use is entirely optional.
Comment: One commenter asked that
CMS confirm in this final rule with
comment period that hospitals will not
be required to audit or otherwise
independently verify manufacturer or
radiopharmacy documentation that a
dose/injection meets the standard of
non-HEU priced at Full Cost Recovery.
A few commenters expressed concern
regarding the compliance and liability
burden that adopting this policy may
place on hospitals. These commenters
stated that hospitals may be
uncomfortable attesting that the
supplies they receive are from non-HEU
sources when there is no reliable
guarantee that the products are from
non-HEU sources. Further, the
commenters stated that they believe that
the term ‘‘attesting’’ in the ASP model
is significantly different from what they
believe is the original intent of this
proposal. Therefore, the commenters
suggested that CMS clarify the adequate
documentation necessary to confirm

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that the provider obtained a dose that is
100 percent from non-HEU sources.
Response: We are aware that
providers must exert considerable effort
to conscientiously perform their
compliance responsibilities over such a
vast health care system, and we
specifically attempted to offer examples
of acceptable compliance steps to
alleviate that burden in this instance.
We acknowledge that the end product
used by hospitals is effectively
homogenous, and there is no practical
way for a hospital to prove chemically
that a supply purported to be derived
from a non-HEU source truly meets
those requirements. On the other hand,
the radiopharmaceutical industry is a
heavily regulated industry closely
monitored by the Food and Drug
Administration, and it is our
understanding that if a supplier
indicates that a source is non-HEU,
manufacturing records will be able to
confirm that. We are confident that
claims by suppliers as to the source of
the Tc-99m used can be satisfactorily
audited through usual manufacturing
processes without creating additional
requirements for hospitals. We do not
expect hospitals to assay doses of drugs
to ensure that they received what the
invoice claimed, and we do not expect
any chemical or physical verification
here. It was our intent in the proposed
rule to indicate that providers are
expected to exercise due diligence, and
to ensure that their claims are supported
by internal records of some type, but
that facilities could accept any tracking
mechanism by a supplier (invoice, label,
contract, among others) regarding a nonHEU source as satisfactory proof for the
purposes of the facility.
We also note that any use of the word
‘‘attestation’’ in the proposed rule was
meant only to indicate a formal
statement by one party to assure another
party of the source and composition. We
further note that these were examples in
the proposed rule rather than
requirements.
Comment: Several commenters asked
that CMS publish the methodology and
data used to establish the additional
payment amount of $10 for Tc-99m
derived from non-HEU sources.
Response: There are two data sources
on which we relied. First, the
Organization for Economic Cooperation
and Development—Nuclear Energy
Agency (OECD–NEA) has published
several economic analyses of the world
market for Tc-99m, which are pertinent
for the United States because, at present,
our entire supply comes from foreign
sources. Although some members of the
industry have opined that these data are
not accurate because the data include

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little information from U.S. suppliers,
the fact remains that there is currently
no supply available domestically. Thus,
while the data we used may not reflect
all of the unique market forces present
in the domestic market, this data source
provides the best estimation of the costs
of non-HEU sources compared to HEU
sources because the manufacturing steps
are primarily performed overseas and
therefore reflect the global market.
Nonetheless, as an additional data
source, we invited industry entities to
submit additional information regarding
their manufacturing and supply costs,
production levels, and prices. However,
given that the industry is small with
limited numbers of competitors at each
level of the supply chain, most
American companies were reluctant to
provide information and were insistent
on confidentiality (as protected by FOIA
Exemption 4) to safeguard the sensitive
(business competitive) information that
they did share. Therefore, we accepted
supplemental information from the
industry and pledged to maintain its
confidentiality, and consequently are
unable to provide details of the
additional information. We can disclose
our methodology and refer readers to
the OECD–NEA models that form the
basis of our model, noting that the
supplemental information submitted to
date has not significantly altered the
conclusions drawn by the OECD–NEA.
To estimate costs, we tracked costs
through the entire supply chain, using
a building block approach to add the
cost of each step onto the steps that
occurred before it. Because the OECD–
NEA provided ranges rather than point
estimations, we used an averaging
approach to factor in the possible low
cost, the possible high cost, and the
most likely ‘‘expected’’ cost. This is a
common estimation technique used in
business when significant uncertainty
exists. By avoiding optimistic
assumptions, we were able to model a
payment that reflects not only the likely
costs but ones that would also be
adequate to cover unexpected costs in
one or more of the manufacturing steps.
In response to the request to provide
as much detail about our methodology
as possible, we are detailing that
methodology here. We used a supply
chain model to accumulate costs
through the Tc-99m supply chain based
on—
(Unit Cost of Supply/Production
Efficiency) + Unit Production Cost +
((Fixed Production Costs + Overhead)/
Units Produced) = Unit Production Cost
= Downstream Unit Cost of Supply.
In tracking units (efficiency), we
allowed for product loss during
production and for product loss as a

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function of time (decay). We applied
this model across a supply chain that
consisted of—
Irradiator/Producer > Processor >
Generator Manufacturer > Nuclear
Pharmacy > Hospital > Patient.
Using a Program Evaluation and
Review Technique (PERT) 3-point
estimation applied to costs, we based
the upper and lower bounds on the
OECD–NEA economic models for Full
Cost Recovery (2011) and non-HEU
Conversion (2012), given that U.S.
supply is based on the global market.
We then varied the expected value to
model a range of outcomes. Finally we
calculated the incremental cost of
process changes by subtracting current
costs. Almost all of the incremental
costs of switching to non-HEU sources
occur in the irradiation and the
processing steps, with very little impact
on generator assembly, generator
elution, or the preparation of the patient
dose. We noted that any artificial costs
of tracking during conversion would not
be reflected in the final post-conversion
costs of supply. Due to the wide
variation in cost projections, we
rounded up to the nearest $5 as most of
the estimators could not be regarded as
sufficiently precise to justify a more
precise value until actual cost data
become available. This methodology
resulted in a projection that fully
accounts for the cost of conversion in
almost all probable scenarios and that
also accounts for or significantly offsets
the costs of Full Cost Recovery under
most combinations of assumptions.
Therefore, the $10 value can be
expected to offset any payment
inequities under most likely
combinations of cost changes within the
Tc-99m supply chain.
Comment: One commenter stated that
suppliers of Mo-99 are currently
working toward full conversion to nonHEU sources by 2015. However, the
commenter stated that it is estimated
that only 10 percent of the Tc-99m
doses used in the United States could be
produced from 100 percent non-HEU
sources in 2013. The commenter further
believed that the proposed policy will
cause a substantial increase in material
costs, require duplicative effort in the
preparation of radiopharmaceutical
doses, add additional administrative
costs, increase the costs for non-HEU
products, and create a disincentive for
hospitals that cannot purchase non-HEU
products as they would be unwilling to
pay higher prices for their nuclear
pharmaceutical products when they are
not receiving any additional benefits.
The commenter instead suggested that
these impacts can be reduced by
establishing a threshold amount of Mo-

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99 that must be used by a generator
manufacturer for CY 2013, based on
information provided by the OECD–
NEA and other pertinent stakeholders.
The commenter stated that this amount
could then be adjusted upward in later
years. The commenter further explained
that, in order for a technetium generator
to be considered ‘‘compliant’’ with the
requirements for the additional
payment, the manufacturer of that
generator would need to certify to
providers that it used at least the
established threshold amount of nonHEU sourced Mo-99 in the production
of its generators for CY 2013 and for
subsequent quarters. In turn, the
hospitals that purchased the Tc-99m
doses prepared by complaint
manufactures would receive separate
payment during that specific period.
The commenter stated that this
approach would require a downward
adjustment to the proposed $10
additional payment to reflect the lower
amount of non-HEU Mo-99.
Response: We acknowledge the
desirability of a simplified payment for
non-HEU sourced material in the
generators, and agree that the proposed
blended payment would be much easier
to implement. However, we note that we
do not have the authority to create that
type of payment. Within the OPPS, we
depend on reported costs, as calculated
from claims and cost report information,
to set prospective payments. Our
authority to deviate from this system in
this instance is based on the authority
of the Secretary to adjust payments if
necessary to ensure payment equity
among hospitals. A payment adjustment
based on industry-wide thresholds
would not create a payment differential
among those hospitals with
predominantly higher cost non-HEU
sources and those hospitals with
predominantly lower cost HEU sources.
However, although we lack the
authority to create a special payment to
cover rising costs at the industry or
manufacturer level, we note that the
normal OPPS payment mechanism does
exactly that: as costs rise, those costs
will be passed on globally to hospitals
and reflected in their charges adjusted
to costs and, therefore, ultimately
reflected in the prospective payments
calculated by our usual methodology.
This add-on payment merely ensures
equitable payments to hospitals through
the transition where non-HEU sources
are not uniformly distributed, while our
established OPPS mechanisms will
ensure that the total costs of new
sources are incorporated into final
payments year by year. We also have
previously stated that we believe that

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costly changes in manufacturing solely
to facilitate a transitional payment are
not likely to occur, and that instead the
payment can be expected to trigger
small administrative changes. We
expect that expensive changes in
industry processes will not be driven by
an interim payment but will occur only
when those changes will continue to be
necessary or desirable after the
transition is complete.
Comment: A few commenters
suggested that CMS, at a minimum,
allow a payment adjustment for lower
percentages (less than 100 percent) of
non-HEU sources and institute a
multiyear phase-in period. One
commenter suggested that CMS
establish a ‘‘threshold quotient’’ of nonHEU content in Tc-99m
radiopharmaceuticals during CY 2013
and allow partial payment of the $10
additional payment amount. The
commenter explained that this would
require CMS to accept a given
percentage amount of non-HEU source
content and pay a corresponding
percentage of the proposed $10
additional payment amount. The
commenter gave the example of a
payment of $1.50 for Tc-99m sources
that contain 15 percent non-HEU, as
$1.50 is 15 percent of the $10 proposed
additional payment amount. The
commenter also suggested that CMS
could further promote the conversion to
100 percent non-HEU sources by
adopting industry-wide targets for
conversion, which would include
conversion to 25 percent in CY 2013, 50
percent in CY 2014, 75 percent in CY
2015, and 100 percent in CY 2016.
Another commenter suggested that a
10-percent industry threshold program
be considered for CY 2013 in lieu of the
100 percent non-HEU sources proposed
requirement. The commenter stated that
a payment of no less than $10 could be
given for non-HEU documented doses
and that this would be more reflective
of the short-term non-HEU Mo-99
supply.
Response: As noted above, our
authority to establish this additional
payment is based on the necessity to
ensure equitable payments to hospitals,
an authority that does not allow us to
develop payments to promote the
conversion of the industry to non-HEU
sources. Therefore, our ability to create
industry-wide payments is limited. We
considered using one or more
thresholds ranging from 10 percent to 80
percent to pay for blended sources that
were not derived entirely from non-HEU
sourced Mo-99, but determined that to
be impractical for several reasons. First,
the use of multiple codes to describe
different mixtures of HEU and non-HEU

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sourced Mo-99 is immeasurably more
complex than a simple single all or
nothing coding choice, and many
commenters were concerned about the
complexity of even our proposed coding
schema. Second, any blend of HEU and
non-HEU sourced material will, as
mentioned by the commenters, have
reduced additional costs in proportion
to the percentage of the blend. Because
many commenters were concerned that
$10 was small compared to the
administrative effort they believed
might be involved, we did not believe
that a significantly smaller payment
would be acceptable to that level of the
supply chain.
Comment: Several commenters
suggested that CMS extend the $10
additional payment for non-HEU
sources for at least 5 years. The
commenters stated that this period of
time will be required to convert fully to
non-HEU sources. Another commenter
requested clarification of the proposed
implementation date and methodology
for calculating the total costs of
radionuclide scans using claims data
and the periodic recalculation of the
estimated marginal cost of non-HEU
Full Cost Recovery sources using
models relying on the best available
industry reports and projections,
resulting in an adjustment in the
payment of the proposed HCPCS code
QXXXX accordingly, reducing the
payment for the scans by the amount of
cost paid through the HCPCS code
QXXXX payment.
Response: Although we typically
propose only the payments for the
subsequent calendar year except in the
case of adjustments that need to be
phased in over multiple years, we did
state our current expectations of the
state of the industry and our
expectations of a probable need for this
additional payment over multiple years.
We stated that our current expectation
is that the transition to non-HEU
sourced Mo-99 will be completed
within 4 to 5 years. Therefore, we
expect there may be a need to make
differential payments for a period of 4
to 5 years. We will reassess, and
propose, on an annual basis, whether
such an adjustment under section
1833(t)(2)(E) of the Act continues to be
necessary and whether any changes to
the adjustment are needed. Again, our
current expectation is that this
additional payment will be needed for
the duration of the industry’s
conversion to alternative methods to
producing Tc-99m without HEU, which
is expected to be completed within 4 to
5 years.
With respect to the request for
clarification regarding future

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adjustments of this proposed payment,
we note that the payment is being
applied in addition to the standard
procedure payment amount for nuclear
medicine scans, including the
diagnostic radioisotope and
pharmaceutical, that is paid based on
reported costs. As more non-HEU
sourced Mo-99 is used, the costs
reported by hospitals will contain costs
associated with non-HEU conversion.
Because the HCPCS code QXXXX is the
indicator of non-HEU Mo-99 use and is
also the vehicle for the additional
payment, the rate at which extra
payments are made will exactly follow
the rate at which non-HEU sources are
reported with their attendant additional
costs. Therefore, even as we increase the
payment for the nuclear medicine scan
with radioisotope in the future due to
increasing radioisotope costs, we expect
to offset (reduce) the payment by the
amount of the non-HEU add-on
payment to avoid paying twice for nonHEU costs. This approach has the effect
of using the add-on payment to make an
additional payment for the cost of nonHEU sourced Mo-99 in the year that the
cost appears, rather than waiting 18
months until the cost is reflected in the
claims data. Consistent with our OPPS
methods, though, we will still be basing
the final payments for the nuclear
medicine scans on the aggregate costs of
the scan and its radioisotopes and
pharmaceuticals as reported by
hospitals. For example, suppose that 20
percent of hospitals in CY 2013 report
non-HEU Tc-99m usage billed with
HCPCS code QXXXX. The OPPS
payment for the scan with its diagnostic
radioisotope will still reflect 100
percent of the reported CY 2011 costs.
The $10 from HCPCS code QXXXX will
represent additional money because the
higher cost non-HEU Tc-99m was not
reflected in the CY 2011 cost data.
However, when we set the rates for CY
2015, those 20 percent of the hospitals
who used non-HEU Tc-99m in CY 2013
will have reported higher costs for scans
in the CY 2013 claims data because they
had an additional cost from the nonHEU Tc-99m that they used. To
eliminate a double payment, we will
need to make an adjustment, such as
removing the total dollars paid by
HCPCS code QXXXX in CY 2013 (that
is, the estimated additional cost of the
non-HEU sourced isotope in those 20
percent of the claims) from the total
reported procedure dollars in CY 2013
before setting the base procedure rate for
CY 2015. We note that this offset does
not reduce the payment for the scan
below its current level; it only keeps the
payment from going up as the cost of the

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radioisotope rises, because the increased
cost of the radioisotope is being paid
separately using HCPCS code QXXXX.
In fact, in CY 2015, the utilization of
non-HEU sourced Tc-99m should have
continued to climb well beyond 20
percent. As in CY 2013, the dollars
associated with increased utilization,
that is, HCPCS code QXXXX billing in
excess of the 20 percent, will again
represent additional money over the
total costs reflected in the CY 2013
claims.
Comment: A few commenters
suggested that CMS alter the description
of the proposed HCPCS code QXXXX by
adding the word ‘‘study’’ into the
descriptor in order to make this
definition more consistent with the
arcana of the radiopharmaceutical
industry. The commenters stated that
the descriptor for the HCPCS Q-code
therefore would be HCPCS code QXXXX
(Tc-99m from non-HEU source, full cost
recovery add-on, per study dose). The
commenters stated that it would be
logical to add the word ‘‘study’’ because
several nuclear cardiology procedures
could require multiple Tc-99m doses
administered alone with one CPT
procedure code. Thus, they believed
that providers would purchase one to
three study doses. The commenters
further suggested that CMS clarify in
this final rule with comment period that
the add-on payment would apply to
each per study dose of the complete
service as described by the CPT
procedure code. Therefore, the
commenters stated, providers would be
able to bill the HCPCS Q-code with
multiple units and be paid $10 per the
number of study doses provided during
the procedure described by the CPT
code, as appropriate.
Response: We acknowledge that it
was our intent that this additional
payment would be applied per study
dose, such as the dose for the study
performed at rest and the dose for the
study performed with exercise.
Therefore, we accept these
recommendations and are modifying the
proposed HCPCS definition to include
the word ‘‘study’’ as follows: HCPCS
code Q9969 (Tc-99m from non-highly
enriched uranium source, full cost
recovery add-on, per study dose).
Comment: Several commenters
requested that CMS clarify the proposal
which requires a reduction to the
payment for the scans by the amount of
cost paid through the proposed HCPCS
code QXXXX. The commenters were not
sure whether the payment offset would
be applied uniformly to all hospitals or
only to those hospitals reporting nonHEU source doses. The commenters
further requested that no reduction in

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payment for nuclear scans by made as
a result of the additional $10 payment
amount.
Response: Although commenters were
not making this comment in the context
of budget neutrality, the considerations
that caused us to create a payment offset
were driven by precisely that statutory
constraint. As discussed above, because
hospitals will not be required to
separately report costs for non-HEU
radioisotopes, all increased costs will be
reported as part of the charges for the
nuclear scans. To preserve budget
neutrality, an additional payment in one
place must be accompanied by an offset
somewhere else. To prevent double
payment for the radioisotope, this offset
will have to come from the payment for
nuclear scans. Because all hospitals use
the same codes for scans, and because
parallel families of codes for scans using
HEU and non-HEU sourced Tc-99m
were not feasible, the offset will be
applied to all hospitals. However, this
offset will not occur until the claims
data show non-HEU payments, at which
time reported charges will presumably
also reflect these increases in
radioisotope costs. Thus, under the
current expectations, if 10 percent of CY
2013 claims for a given nuclear scan
show a $10 non-HEU add-on payment,
$1 (10 percent of $10) will be offset in
CY 2015 from the nuclear scan payment.
However, if the 10 percent of hospitals
claiming the $10 add-on payment also
had $10 in increased costs, the
calculated cost of a scan using CY 2013
data will have increased by $1 (10
percent of $10). The payment for CY
2015 would therefore increase by $1
because of the new costs in the claims
data, and that new $1 will then be
removed (offset) to go exclusively to the
hospitals that are actually using the
non-HEU sourced Tc-99m and are
carrying the added cost. Therefore, we
note that we are not reducing payments
to all hospitals to offset the cost of this
payment; rather, we are ensuring that
the added costs of the non-HEU sourced
Tc-99m go only to the hospitals
incurring the costs and that their
payments are not diluted by increased
payments to uninvolved facilities. In
this way, we are not offsetting the
current nuclear scan payment by the
$10 non-HEU add-on payment even
though we currently plan to offset future
payment increases to the extent
necessary to avoid double payments, as
those increased costs will be included
in the costs reported by hospitals.
Comment: Several commenters
suggested that CMS use the average
sales price (ASP) methodology to
establish the additional payment
amount for Tc-99m based on non-HEU

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sources. One commenter suggested that
CMS use the ASP data when available
as a benchmark for determining costs
that are packaged. A few commenters
suggested that payment based on the
ASP methodology be applied in the
same manner CMS pays for therapeutic
radiopharmaceuticals. The commenters
stated that this will establish
transparency in the ratesetting for
radioisotopes derived from non-HEU
sources.
Response: We note that the ASP
methodology does not apply to the Tc99m radioisotope but only to the
radiopharmaceutical that results from
the combination of the isotope with the
pharmaceutical moiety. Moreover, the
ASP methodology is particularly
unsuited to use on the radioisotope
component alone because the isotope
does not have an ASP. The radioisotope
is typically produced by a generator
and, whereas the ASP of a generator can
be determined, the cost of a single dose
is highly dependent on the number and
timing of elutions of the generator,
information that is not captured in the
ASP. In fact, ASP is marginally valuable
for Tc-99m radiopharmaceuticals only
because the cost of the drug component
is typically large compared to the cost
of the isotope. This fact also argues
against the comment that ASP would
increase ‘‘transparency’’ of the cost of
Tc-99m: There is no additional
transparency of an isotope packaged
into a payment with the drug than there
is for an isotope packaged into a
payment with the scan. Finally, the use
of the ASP methodology would not
differentiate between the cost of a nonHEU sourced Tc-99m and the cost of
using an HEU source, which is the
purpose of this payment. The proposed
additional payment accounts for the
increased cost of the isotope, which
meets both incremental payment and
transparency goals.
Comment: A few commenters
recommended that CMS establish
parallel codes for the use of HEU and
non-HEU sourced radiopharmaceuticals
to collect cost data for future ratesetting.
Most of the commenters were concerned
with the complexity involved in adding
and reporting a single code.
Response: We do not believe that an
entire set of parallel codes would lessen
the complexity or the administrative
cost and, in fact, we believe it would
significantly increase them. We
acknowledge that this, like many other
options we have had on other issues,
could significantly improve the
accuracy of our ratesetting. However,
based on other comments from the
hospitals that would have to use these
parallel codes, we do not believe that

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we or the hospitals would consider the
increased administrative cost to be
worth the slight increase in payment
precision.
Comment: A few commenters
requested that CMS clarify the meaning
of ‘‘calculation by ‘Full Cost
Recovery’ ’’. Some commenters also
requested clarification of what this
method encompasses.
Response: Full Cost Recovery is a
concept that is well known to the
producers, processors, and
manufacturers but is not commonly
discussed by radiopharmacies and
hospitals. Unlike other supplies,
radioisotopes typically require nuclear
reactors for initial production, and
many of the capital and environmental
costs are not captured in the prices. For
example, some reactors were built
decades ago for other purposes and can
be used (relatively) ‘‘free of charge’’
because it costs almost the same to run
the reactor and do nothing as it does to
run the reactor and irradiate some
uranium. This has implications on the
accounting of capital costs, which, in
many cases, were or are recovered by
other uses to which the reactors were
put. Similarly, moderately enriched
uranium left over from previous
programs may be cheaply downgraded
and provided at a ‘‘low’’ cost because
the alternative is to allow it to decay in
storage with no consequent benefit. In
both cases, the Tc-99m produced is
obtained by hospitals at a bargain price,
but not at a price that is sustainable
because the old reactors will need to be
replaced and the enriched uranium will
be depleted. There are other unique
costs for radioisotopes, such as the need
to make arrangements for long-term
storage of radioactive waste. Failure to
account for those costs can lower the
price of the radioisotope for some
hospitals today but creates a long-term
problem in that other hospitals must
pick up the costs. Full Cost Recovery is
the accounting principle that ensures
that all of these long-term costs are
included in cost calculations.
Full Cost Recovery is obviously not
important to the hospitals although,
because it is critically important in
providing for the long-term supply of
the radioisotope, it is actually a major
underlying cause of payment inequities
associated with this transition. From the
standpoint of this final rule with
comment period then, Full Cost
Recovery is coupled to the non-HEU
criterion for purposes of the additional
payment. Just as manufacturers will
indicate that certain Tc-99m doses are
derived from non-HEU sources, it is our
expectation that the irradiator (reactor)
and the processor of the non-HEU Mo-

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99 will be able to confirm that Full Cost
Recovery accounting was used in setting
the price of the non-HEU sourced Mo99, an accounting principle that is
considered integral to the conversion to
non-HEU sources. We expect the
generator manufacturer to affirm to the
radiopharmacy that its source is nonHEU, with this designation including
accounting according to Full Cost
Recovery. As mentioned earlier, we
consider this affirmation to be sufficient
for the radiopharmacy and the hospital,
regardless of whether the affirmation is
in the form of a letter or statement, a
notation on the invoice, or a label on the
vial or tracking slip. We do not believe
that independent verification is
necessary or even possible for the
radiopharmacy and the hospital and
require only their due diligence in
accepting claims made by their
suppliers. The costs of new capital
expenses such as new reactors,
including all their associated costs, are
factored into the manufacturer’s price of
the Tc-99m and passed down to
hospitals, and the additional payment is
made to account for those unique costs
that the hospitals will incur.
Comment: One commenter asked that
CMS delay finalizing the proposal until
CY 2014 so that hospitals have adequate
time to implement the proposed change.
Another commenter recommended that
CMS postpone the implementation of
the proposed policy until CY 2015, so
that hospitals could avoid the
complexities of handling and
segregating HEU sources versus nonHEU sources. Another commenter
expressed doubt that hospitals would be
able to obtain Tc-99m derived from nonHEU sources in CY 2013. Therefore,
they requested that the proposal be
deferred until CY 2014.
One commenter expressed concern
about the availability of non-HEU
sources because they were told by their
suppliers that a 100 percent non-HEU
source supply is unavailable for CY
2012 and also will be unavailable by CY
2013. The commenter questioned
whether this issue should be addressed
by a payment system and suggested that
this issue instead be addressed by the
Administration as opposed to CMS. The
commenter further suggested that the
implementation of this proposal be
delayed until there is some availability
of 100 percent non-HEU sourced
isotopes in this country.
Response: We considered the timing
of this proposed additional payment
after advice and consultation from both
the Mo-99 industry and other U.S.
agencies. We were initially advised that
it is the understanding of the industry
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already underway and is expected to be
completed by the end of 2016. We
understand this remains the case. We
are aware that currently commercial Tc99m is not readily available in the
United States as it is in the world
market, but that there also has not been
a demand from within the United
States. We do understand there is an
expectation that it will make an
appearance in CY 2013.
We acknowledge that the supply of
non-HEU sourced Mo-99 may be small
in CY 2013. However, we believe, as the
industry believes, that conversion to
non-HEU sourced Tc-99m is inevitable
and will occur over the next several
years. From the standpoint of the
Medicare payment system, it is
important for us to have some
mechanism in place to mitigate any
adverse impact on hospitals. If the
supply is very low, hospitals will not be
significantly disadvantaged and may
elect to not make use of this additional
payment in CY 2013. Conversely, if the
supply starts to increase, some hospitals
may be forced to shoulder a
disproportionate share of the cost due to
supplier relationships and contract
status; this additional payment will
create an opportunity for those hospitals
to mitigate that cost. We fully expect
that utilization of this additional
payment will be small in CY 2013 but
will increase in CYs 2014, 2015, and
2016 as this conversion occurs. We
reiterate that the normal mechanisms of
the OPPS will ultimately incorporate
increased costs into APC calculations
with resultant increased payments for
the nuclear scans that use this
radioisotope that will allow us to retire
or modify this payment and incorporate
the entire additional cost into the base
payment. This additional payment will
enable hospitals to avoid any inequities
caused by suddenly rising local costs
that are not able to be captured in a
timely fashion by usual methods. Based
on the timetable for conversion and the
rescue nature of the payment, we
believe that a delay until CY 2014 or CY
2015 is unnecessary.
Comment: Several commenters
suggested that an additional separate
payment be given in other Medicare
settings, including the physician’s office
and ASC, for radioisotopes derived from
non-HEU sources. One commenter
recommended that these additional
payments also be made under Medicaid,
the Department of Defense/Veterans
Affairs, Indian Health Services health
programs, and any other government
health programs where nuclear
medicine procedures are covered. This
commenter acknowledged that its
comments are outside the scope of the

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OPPS/ASC final rule with comment
period.
Response: We agree with the
commenter that addressing additional
payments for radioisotopes derived from
non-HEU sources in other settings and
payment systems, such as the
Physician’s Office, Medicaid, the
Department of Defense/Veterans Affairs,
Indian Health Services health programs,
and any other government health
programs where nuclear medicine
procedures are covered, is outside the
scope of the proposed rule and cannot
be addressed in this final rule with
comment period. In addition, we note
that the Medicare authority for this
additional payment is based on the need
to establish equitable payments for
hospitals. The authority to make
equitable adjustments under section
1833(t)(2)(E) of the Act does not extend
to the ASC setting. We do use a HCPCS
Q-code as the vehicle for this additional
payment so that other payers and other
payment systems could use this code if
desired.
After consideration of the public
comments we received, we are
finalizing our proposed policy with the
modifications discussed above.
Specifically, we are modifying the
policy to provide that a product
identified as non-HEU sourced must be
at least 95 percent derived from nonHEU sources. We also are finalizing our
proposal to establish a HCPCS code for
Tc-99m from non-HEU sources with a
revised code definition. The number
and title of the new HCPCS code is
HCPCS code Q9969 (Tc-99m from nonhighly enriched uranium source, full
cost recovery add-on, per study dose)
for CY 2013. HCPCS code Q9969 is
assigned to APC 1442 (Non-HEU TC–
99M Add-On/Dose) with a status
indicator of ‘‘K’’ and a CY 2013 payment
rate of $10.
D. OPPS APC-Specific Policies
1. Cardiovascular and Vascular Services
a. Cardiac Telemetry (APC 0213)
For CY 2013, we proposed to reassign
CPT code 93229 (External mobile
cardiovascular telemetry with
electrocardiographic recording,
concurrent computerized real time data
analysis and greater than 24 hours of
accessible ecg data storage (retrievable
with query) with ecg triggered and
patient selected events transmitted to a
remote attended surveillance center for
up to 30 days; technical support for
connection and patient instructions for
use, attended surveillance, analysis and
physician prescribed transmission of
daily and emergent data reports) from
APC 0209 (Level II Extended EEG,

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Sleep, and Cardiovascular Studies),
which had a proposed rule payment rate
of approximately $808, to APC 0340
(Minor Ancillary Procedures), which
had a proposed rule payment rate of
approximately $49.
Comment: One commenter disagreed
with CMS’ proposal to reassign CPT
code 93229 to APC 0340 because the
service described by CPT code 93229
involves the use of sophisticated
technology requiring 24-hour, 7 days a
week monitoring by a technician for up
to 30 days, which according to the
commenter, is not a minor procedure.
According to the commenter, the
proposed rule payment rate of
approximately $49 is significantly lower
than the MPFS payment rate of $694,
and much lower than the average
contractual arrangement charge to
hospitals of $674. The commenter
explained that while this procedure is
performed primarily by independent
diagnostic testing facilities
(approximately 98 percent), this service
is provided in the HOPD setting under
contractual arrangements with
hospitals. The commenter stated that
the CPT code is fairly new because it
was effective January 1, 2009, and
suggested that the low geometric mean
cost for the service could be attributed
to miscoding by hospitals. The
commenter believed that hospitals may
be reporting CPT code 93229 incorrectly
when they are actually performing other
remote cardiac tests, such as the
services described by CPT code 93226
(External electrocardiographic recording
up to 48 hours by continuous rhythm
recording and storage; scanning analysis
with report) or CPT code 93271
(External patient and, when performed,
auto activated electrocardiographic
rhythm derived event recording with
symptom-related memory loop with
remote download capability up to 30
days, 24-hour attended monitoring;
transmission and analysis), that require
fewer resources. In addition, the
commenter questioned the validity of
the claims data, given the low number
of claims billed under the OPPS. The
commenter requested that CMS delay
the reassignment of the service
described by CPT code 93229 to APC
0340, and urged CMS to maintain CPT
code 93229 in APC 0209 until more data
are available to determine an
appropriate payment for the service.
Response: The commenter is correct
that CPT code 93229 was effective
January 1, 2009. However, we believe
that since that time hospitals have
familiarized themselves with how to
code this service appropriately. We have
no reason to believe that hospitals are
incorrectly reporting the service

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described by CPT code 93229, and note
that we do not specify the
methodologies that hospitals must use
to set charges for this, or any other,
procedure. The calculation of OPPS
relative payment weights that reflect the
relative resources required for HOPD
services is the foundation of the OPPS.
We rely on hospitals to bill all HCPCS
codes accurately in accordance with
their code descriptors and CPT and
CMS instructions, as applicable, and to
report charges on claims and charges
and costs on their Medicare hospital
cost report appropriately.
We do not agree with the commenter
that it is necessary to delay the
reassignment of CPT code 93229 to APC
0340. We examined our claims data for
the last 3 years, given the concerns
raised by the commenter regarding the
low number of claims. Our analysis
revealed that the claims submitted for
the service described by CPT code
93229 have steadily increased since CY
2009, but the cost for the procedure has
been significantly lower than the APC
payment rate. Specifically, the cost for
the service described by CPT code
93229 in CY 2009 was approximately
$287, based on 103 single claims (out of
114 total claims), approximately $260 in
CY 2010, based on 184 single claims
(out of 184 total claims), and
approximately $172 for CY 2011, based
on 1,949 single claims (out of 1,949 total
claims). Based on the claims data, we
have no reason to believe that the claims
data used to calculate the cost for CPT
code 93229 for CY 2013 does not
appropriately reflect the hospitals cost
for providing this service.
In addition, because of concerns
raised by the commenter regarding
reassigning CPT code 93229 to an APC
that is labeled ‘‘Minor Ancillary
Procedures,’’ further review of our
claims data for this final rule with
comment period showed that CPT code
93229 would be more appropriately
assigned to APC 0213 (Level I Extended
EEG, Sleep, and Cardiovascular Studies)
than APC 0340 based on its clinical
homogeneity and resource costs in
relation to the other procedures
assigned to APC 0213. Our claims data
show a geometric mean cost of
approximately $172 for CPT code
93229, which is relatively similar to the
final geometric mean cost of
approximately $178 for APC 0213.
Further, we recognize that the MPFS
pays separately for CPT code 93229, but
the MPFS and the OPPS are very
different payment systems. Each system
is established under a different set of
statutory and regulatory principles, and
the policies established under the MPFS

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do not have bearing on the payment
policies under the OPPS.
In summary, after consideration of the
public comment we received, we are
finalizing our CY 2013 proposal, with
modification. Specifically, we are
reassigning CPT code 93229 from APC
0209 to APC 0213 (instead of the
proposed APC 0340) for CY 2013. The
final CY 2013 geometric mean cost for
APC 0213 is approximately $178.
b. Mechanical Thrombectomy (APC
0653)
For CY 2013, we proposed to continue
to assign CPT code 36870
(Thrombectomy, percutaneous,
arteriovenous fistula, autogenous or
nonautogenous graft (includes
mechanical thrombus extraction and
intra-graft thrombolysis)) to APC 0653
(Level I Hand Musculoskeletal
Procedures), which had a proposed rule
payment rate of approximately $2,445.
Comment: Some commenters
expressed concern regarding the
proposed 19.7 percent reduction in the
payment rate for the APC in which the
procedure describing a mechanical
thrombectomy by arteriovenous access,
CPT code 36870, is assigned. The
commenters believed that such a
reduction would impede Medicare
beneficiary’s access to the procedure. In
addition, the commenters stated that
CMS offered no explanation for the
payment rate reduction, nor permitted
adequate notice for a meaningful
opportunity to comment. The
commenters requested that CMS delay
its proposal to reduce the payment rate
for mechanical thrombectomy by AV
access until stakeholders have been
given a meaningful opportunity to
comment.
Response: On an annual basis, CMS
evaluates hospital outpatient claims
data to determine the cost of procedures
and services paid under the OPPS to
ensure appropriate APC assignment for
the following year. This evaluation
generally results in establishing new
APCs, reassigning procedures and
services to more appropriate APCs, or
deleting APCs that are no longer
applicable. In addition, this evaluation
may result in revising relative payment
weights, as well as wage and other
adjustments, to take into account
changes in medical practices, changes in
technology, the addition of new
services, new cost data, and other
relevant information and factors. The
OPPS proposed rule is published
annually in the summer and is the
mechanism used by CMS to inform the
public of the proposed changes for the
upcoming year and provide an
opportunity for comment. As has been

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our practice, we encourage the public to
submit their comments on issues
addressed in the proposed rule.
Comments received in response to the
proposed rule are addressed in the final
rule with comment period, which is also
published annually in the winter.
For the CY 2013 update, our analysis
of the latest hospital outpatient data for
claims submitted for services provided
during CY 2011 shows a geometric
mean cost for CPT code 36870 of
approximately $2,662, based on 539
single claims (out of 50,476 total
claims), which is relatively similar to
the proposed rule payment rate of
approximately $2,748 for APC 0653.
Based on our claims data, we believe
that APC 0653 is the most appropriate
APC assignment for CPT code 36870
based on its clinical homogeneity and
resource costs in relation to the other
procedures assigned to the APC.
Consistent with our policy of reviewing
APC assignments annually, we will
again reevaluate the cost of CPT code
36870 and its APC assignment in CY
2013 for the CY 2014 rulemaking cycle.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal without
modification. We will continue to
maintain CPT code 36870 in APC 0653
for CY 2013. The final CY 2013
geometric mean cost for APC 0653 is
approximately $2,748.
c. Non-Congenital Cardiac
Catheterization (APC 0080)
For CY 2011, the AMA’s CPT
Editorial Panel restructured the Cardiac
Catheterization section of the CPT
codebook so that combinations of
services that were previously reported
using multiple codes are now reported
with one CPT code. This revision
deleted several non-congenital cardiac
catheterization-related CPT codes from
the 93500 series and created new CPT
codes in the 93400 series and in the
93500 series. We discussed these coding
changes in detail in the CY 2011 OPPS/
ASC final rule with comment period (75
FR 71846 through 71849), along with
the process by which we assigned the
new CPT codes to APCs that we believe
are comparable with respect to clinical
characteristics and resources required to
furnish the cardiac catheterization
services described by the new CPT
codes. As discussed in that final rule
with comment period, we were able to
use the existing CY 2009 hospital
outpatient claims data and the most
recent cost report data to create
simulated costs for the new separately
payable CPT codes for CY 2011.
Specifically, to estimate the hospital
costs associated with the 20 new non-

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congenital cardiac catheterizationrelated CPT codes based on their CY
2011 descriptors, we used claims and
cost report data from CY 2009. Because
of the substantive coding changes
associated with the new non-congenital
cardiac catheterization-related CPT
codes for CY 2011, we used our CY 2009
single and ‘‘pseudo’’ single claims data
to simulate the new CY 2011 CPT code
definitions. We stated that many of the
new CPT codes were previously
reported using multiple CY 2009 CPT
codes, and we provided a crosswalk of
the new CY 2011 cardiac catheterization
CPT codes mapped to the CY 2009
cardiac catheterization CPT codes in
Table 11 of the CY 2011 OPPS/ASC
final rule with comment period (75 FR
71849). Table 11 showed the criteria we
applied to select a claim to be used in
the calculation of the cost for the new
codes (shown in Column A). As we
stated in the CY 2011 OPPS/ASC final
rule with comment period (75 FR 71847
through 71848), we developed these
criteria based on our clinicians’
understanding of the services that were
reported by the CY 2009 CPT codes that,
in various combinations, reflect the
services provided that are described in
the new CPT codes. We used
approximately 175,000 claims for the
new non-congenital catheterizationrelated CPT codes, together with the
single and ‘‘pseudo’’ single procedure
claims for the remaining non-congenital
catheterization-related CPT codes in
APC 0080 (Diagnostic Cardiac
Catheterization), to calculate CPT code
level costs and the payment rate for APC
0080 of approximately $2,698. We noted
that, because the CPT codes listed in
Table 11 were new for CY 2011, they
were identified with comment indicator
‘‘NI’’ in Addendum B to that final rule
with comment period to indicate that
the interim APC assignment was subject
to public comment. We specifically
requested public comment on our
methodology for simulating the costs for
these new CY 2011 CPT codes, in
addition to public comments on the
payment rates themselves (75 FR
71848).
For CY 2012, we continued to use the
CY 2011 methodology in determining
the APC assignments for the new
cardiac catheterization CPT codes. That
is, we continued to use the CY 2011
methodology in determining the APC
assignments for the cardiac
catheterization CPT codes by using the
existing hospital outpatient claims and
the cost report data from the
predecessor cardiac catheterization CPT
codes to simulate an estimated cost for
the new cardiac catheterization CPT

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68325

codes in determining the appropriate
APC assignments. Specifically, we used
the CY 2010 hospital outpatient claims
data and the most recent cost report data
to create simulated costs for the new
separately payable CPT codes for CY
2012 to determine the payment rates for
the APC to which the cardiac
catheterization CPT codes were
assigned. For CY 2012, we did not make
any changes to the CY 2011 APC
assignments of any of the CPT codes
assigned to APC 0080 because the
claims data supported continuation of
these APC assignments.
As we discussed in the CY 2013
OPPS/ASC proposed rule, because the
cardiac catheterization CPT codes were
new for CY 2011, CY 2013 is the first
year that claims data are available for
ratesetting for these specific CPT codes
(77 FR 45084 through 45085). For CY
2013, our analysis of the CY 2011 claims
data available for the proposed rule
showed no violation of the 2 times rule
for the cardiac catheterization CPT
codes because the lowest cost of a CPT
code with significant claims data in
APC 0080 was approximately $1,716
(for CPT code 93451), while the highest
cost of a CPT code with significant
claims data was approximately $3,308
(for CPT code 93461). We stated in the
proposed rule that we believe that the
cardiac catheterization CPT codes
continue to be appropriately assigned to
APC 0080 based on clinical
homogeneity and resource costs.
Therefore, for CY 2013, we proposed to
continue to assign the cardiac
catheterization CPT codes to APC 0080.
Comment: One commenter pointed
out that CPT codes 93463
(Pharmacologic agent administration
(eg, inhaled nitric oxide, intravenous
infusion of nitroprusside, dobutamine,
milrinone, or other agent) including
assessing hemodynamic measurements
before, during, after and repeat
pharmacologic agent administration,
when performed (list separately in
addition to code for primary procedure))
and 93464 (Physiologic exercise study
(eg, bicycle or arm ergometry) including
assessing hemodynamic measurements
before and after (list separately in
addition to code for primary
procedure)), which appeared in Table 5
(Proposed APCs to Which NonCongenital Cardiac Catheterization CPT
Codes Would Be Assigned for CY 2013)
of the CY 2013 OPPS/ASC proposed
rule do not appear to represent cardiac
catheterization procedures.
Response: CPT codes 93463 and
93464 are packaged procedures. These
CPT codes appeared in Table 5 of the
CY 2013 OPPS/ASC proposed rule
because these procedures are performed

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in conjunction with cardiac
catheterization procedures. CPT code
93463 is an add-on code that describes
a pharmacologic agent that may be
administered when a cardiac
catherization procedure is performed.
Similarly, CPT code 93464 is an add-on
code that describes a physiologic

exercise test that may be combined with
a cardiac catheterization. Because these
procedures are used in conjunction with
cardiac catherization procedures, we
believe that listing them in Table 5 of
the CY 2013 OPPS/ASC proposed rule
was appropriate.
After consideration of the public
comment that we received, we are

finalizing our proposal, without
modification, to continue to assign the
cardiac catheterization CPT codes to
APC 0080 for CY 2013, as listed below
in Table 20 below. The final CY 2013
geometric mean cost for APC 0080 is
approximately $2,726.

d. Endovascular Revascularization of
the Lower Extremity (APCs 0083, 0229,
and 0319)

process and methodology by which we
assigned the CY 2011 endovascular
revascularization CPT codes to APCs
that we believe are comparable with
respect to clinical characteristics and
resources required to furnish the
services. Specifically, we were able to
use the existing CY 2009 hospital
outpatient claims data and the most
recent cost report data to create
simulated costs for 12 of the 16 new
separately payable CPT codes for CY
2011. Because the endovascular
revascularization CPT codes were new

for CY 2011, we used our CY 2009
single and ‘‘pseudo’’ single claims data
to simulate the new CY 2011 CPT code
definitions. As shown in Table 7 of the
CY 2011 OPPS/ASC final rule with
comment period (75 FR 71844), many of
the new endovascular revascularization
CPT codes were previously reported
using a combination of CY 2009 CPT
codes. In order to simulate costs, we
selected claims that we believe met the
definition for each of the new
endovascular revascularization CPT
codes. Table 7 showed the criteria we

For the CY 2011 update, the AMA’s
CPT Editorial Panel created 16 new CPT
codes under the Endovascular
Revascularization section of the 2011
CPT codebook to describe endovascular
revascularization procedures of the
lower extremity performed for occlusive
disease. In the CY 2011 OPPS/ASC final
rule with comment period (75 FR 71841
through 71845), we discussed the

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applied to select a claim to be used in
the calculation of the costs for the new
CPT codes (shown in Column A). As we
stated in the CY 2011 OPPS/ASC final
rule with comment period (75 FR
71842), we developed these criteria
based on our clinicians’ understanding
of services that were reported by the CY
2009 CPT codes that, in various
combinations, reflect the services
provided that are described by the new
CPT codes for CY 2011.
After determining the simulated costs
for the procedures, we assigned each
CPT code to appropriate APCs based on
their clinical homogeneity and resource
use. Of the 16 CPT new codes, we
assigned 9 CPT codes to APC 0083
(Coronary or Non-Coronary Angioplasty
and Percutaneous Valvuloplasty) and 5
CPT codes to APC 0229 (Transcatheter
Placement of Intravascular Shunts), and
created new APC 0319 (Endovascular
Revascularization of the Lower
Extremity) for the remaining 2 CPT
codes. Table 8 of the CY 2011 OPPS/
ASC final rule with comment period (75
FR 71845) displayed their final CY 2011
APC assignments and CPT code costs.
We noted that, because these CPT codes
were new for CY 2011, they were
assigned comment indicator ‘‘NI’’ in
Addendum B to the CY 2011 OPPS/ASC
final rule with comment period to
identify them as new interim APC
assignments for CY 2011, and subject to
public comment. We specifically
requested public comment on our
methodology for simulating the costs for
these new CY 2011 CPT codes in
addition to public comments on the
payment rates themselves (75 FR
71845).
As stated in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74156), for CY 2012, we continued to
use the CY 2011 methodology to
determine the APC assignments for the
CPT codes that describe endovascular
revascularization of the lower extremity.
Because previous endovascular
revascularization CPT codes were in
existence prior to CY 2011 and assigned
to designated APCs, we continued to
use existing hospital outpatient claims
and cost report data from the
established CPT codes to simulate
estimated costs for the endovascular
revascularization CPT codes to
determine the appropriate APC
assignments for CY 2012, as we did for
CY 2011. In the CY 2012 OPPS/ASC
final rule with comment period, we also
revised the title of APC 0083 from
‘‘Coronary or Non-Coronary Angioplasty
and Percutaneous Valvuloplasty’’ to
‘‘Coronary Angioplasty, Valvuloplasty,
and Level I Endovascular
Revascularization of the Lower

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Extremity’’; revised the title of APC
0229 from ‘‘Transcatheter Placement of
Intravascular Shunts and Stents’’ to
‘‘Level II Endovascular
Revascularization of the Lower
Extremity’’; and revised the title of APC
0319 from ‘‘Endovascular
Revascularization of the Lower
Extremity’’ to ‘‘Level III Endovascular
Revascularization of the Lower
Extremity’’.
Because the endovascular
revascularization of the lower extremity
CPT codes were new for CY 2011, CY
2013 is the first year of claims data that
are available for ratesetting for these
specific CPT codes. For CY 2013, review
of the procedures with significant
claims data in APCs 0083, 0229, and
0319 did not show 2 times rule
violations in these APCs. In the CY 2013
OPPS/ASC proposed rule, we stated that
we believe that the endovascular
revascularization CPT codes assigned to
APCs 0083, 0229, and 0319 continue to
be appropriately assigned based on
clinical homogeneity and resource costs.
Therefore, we proposed to continue to
assign the endovascular
revascularization CPT codes to APCs
0083, 0229, and 0319 for CY 2013 (77
FR 45083 through 45084).
Comment: Several commenters
believed that the assignment of CPT
code 37183 (Revision of transvenous
intrahepatic portosystemic shunt(s)
(tips) (includes venous access, hepatic
and portal vein catheterization,
portography with hemodynamic
evaluation, intrahepatic tract
recanulization/dilatation, stent
placement and all associated imaging
guidance and documentation) and
37210 (Uterine fibroid embolization
(ufe, embolization of the uterine arteries
to treat uterine fibroids, leiomyomata),
percutaneous approach inclusive of
vascular access, vessel selection,
embolization, and all radiological
supervision and interpretation,
intraprocedural roadmapping, and
imaging guidance necessary to complete
the procedure) to APC 0229 (Level II
Endovascular Revascularization of the
Lower Extremity) violated the 2 times
rule. The commenter believed that these
two codes should be reassigned to APC
0083 (Coronary Angioplasty,
Valvuloplasty, and Level I Endovascular
Revascularization of the Lower
Extremity).
Response: As stated above, in
determining whether a 2 times rule
violation exists in an APC, we consider
only those HCPCS (both CPT and Level
II Alphanumeric HCPCS codes) codes
that are significant based on the number
of claims. For purposes of identifying
significant HCPCS codes for

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examination to determine if they violate
the 2 times rule, we consider codes that
have more than 1,000 single major
claims or codes that have both greater
than 99 single major claims and
contribute at least 2 percent of the single
major claims used to establish the APC
cost to be significant (75 FR 71832).
This longstanding definition of when a
code is significant for purposes of the 2
times rule was selected because we
believe that a subset of 1,000 claims is
negligible within the set of
approximately 100 million single
procedure or single session claims we
use for establishing costs. Similarly, a
code for which there are fewer than 99
single claims and which comprises less
than 2 percent of the single major claims
within an APC will have a negligible
impact on the APC cost.
For this CY 2013 OPPS/ASC final rule
with comment period, our analysis of
the CY 2011 claims data showed that
CPT code 37183 had 211 single claims
(out of 302 total claims) while CPT code
37210 had 211 single claims (out of 254
total claims). Of the 12 procedures
assigned to APC 0229, only 5
procedures meet the definition of
significant claims. Specifically, CPT
codes 37205 (Transcatheter placement
of an intravascular stent(s) (except
coronary, carotid, vertebral, iliac, and
lower extremity arteries), percutaneous;
initial vessel), 37221 (Revascularization,
endovascular, open or percutaneous,
iliac artery, unilateral, initial vessel;
with transluminal stent placement(s),
includes angioplasty within the same
vessel, when performed), 37225
(Revascularization, endovascular, open
or percutaneous, femoral, popliteal
artery(s), unilateral; with atherectomy,
includes angioplasty within the same
vessel, when performed), 37226
(Revascularization, endovascular, open
or percutaneous, femoral, popliteal
artery(s), unilateral; with transluminal
stent placement(s), includes angioplasty
within the same vessel, when
performed), and 37229
(Revascularization, endovascular, open
or percutaneous, tibial, peroneal artery,
unilateral, initial vessel; with
atherectomy, includes angioplasty
within the same vessel, when
performed) have significant claims data
to determine whether a violating of the
2 times rule exists within APC 0229.
Review of the procedures assigned to
APC 0229 revealed that the range of the
CPT geometric mean costs for the
procedures with significant claims data
is between approximately $7,013 (for
CPT code 37205, which represents 14
percent of the single claims) and
approximately $9,915 (for CPT code

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37229, which represents 5 percent of the
single claims). Taking into
consideration all of the codes with
significant claims that are assigned to
APC 0229, CPT codes 37183 and 37210
do not meet the definition of significant
claims to determine if there is a
violation of the 2 times rule within APC
0229.
Therefore, based on the clinical
similarity to other procedures currently
assigned to APC 0229, and because
there is no determination of a violation
of the 2 times rule, we are continuing to
assign CPT codes 37183 and 37210 to
APC 0229 for CY 2013. For CY 2013,
APC 0229 has a final geometric mean
cost of approximately $8,905.
Comment: Several commenters
recommended the reassignment of addon CPT code 37223 (Revascularization,
endovascular, open or percutaneous,
iliac artery, each additional ipsilateral
iliac vessel; with transluminal stent
placement(s), includes angioplasty
within the same vessel, when performed
(list separately in addition to code for
primary procedure)) from APC 0083 to
APC 0229 because the proposed
geometric mean cost of the procedure is

similar to the geometric mean costs of
procedures assigned to APC 0229
(although the commenters also pointed
out that the cost data calculated from
single claims for CPT code 37223 are
unreliable because CPT code 37223 is
an add-on code and would not appear
by itself on a claim). Some commenters
also argued that the assignment of CPT
code 37223 to APC 0083 results in a
violation of the 2 times rule. The
commenters stated that the
reassignment of CPT code 37223 to APC
0229 would be consistent with CMS’
policy of assigning add-on codes to the
same APC as their base codes. In
addition, the commenters asserted that
this reassignment would not only
ensure patient access for this
therapeutic procedure, but also would
promote clinical homogeneity and
similar resource cost of procedures
assigned to APC 0229 and provide
accurate payment for the procedure.
Response: Although there are many
add-on codes that have been assigned to
the same APC as their base code, there
are some procedures that are add-on
codes that have been assigned to
different APCs from their base or

primary codes. In establishing an
appropriate APC assignment, we take
into consideration the clinical
homogeneity and similarity in resource
use associated with the procedure or
service. This determination may result
in the same APC assignment for both the
base code and the add-on code, or in
different APC assignments, as illustrated
in Table 21 below. Therefore, we
disagree with the commenters’ assertion
that we should reassign CPT code 37223
to APC 0229 so that it is in the same
APC as its base code.
We also do not agree with
commenters that the composition of
APC 0083 constitutes a violation of the
2 times rule because CPT code 37223
does not have sufficient single claims to
qualify as a significant procedure for
purposes of applying the 2 times rule,
as described earlier in this section.
Based on our understanding of the
procedure, we continue to believe that
APC 0083 is the most appropriate
assignment for CPT code 37223 based
on clinical considerations and similarity
in resource use to other procedures
assigned to APC 0083, as we have stated
in the past (76 FR 74156).

Further, in response to the
commenters’ concerns regarding
providing accurate payment for the
procedure described by CPT code 37223
to ensure patient access, we believe that
the payment rate for the procedure does

not inhibit HOPDs from performing the
procedure. The OPPS, like other
Medicare payment systems, is budget
neutral and overall increases in
payments are limited to the hospital
inpatient market basket increase. We

believe that our payment rates generally
reflect the costs that are associated with
providing care to Medicare beneficiaries
in cost efficient settings, and we believe
that our payment rates are adequate to
ensure access to services.

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After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to assign CPT
code 37223 to APC 0083 for CY 2013.
Comment: One commenter believed
that CPT codes 37234
(Revascularization, endovascular, open
or percutaneous, tibial/peroneal artery,
unilateral, each additional vessel; with
transluminal stent placement(s),
includes angioplasty within the same
vessel, when performed (list separately
in addition to code for primary
procedure)), and 37235
(Revascularization, endovascular, open
or percutaneous, tibial/peroneal artery,
unilateral, each additional vessel; with
transluminal stent placement(s) and
atherectomy, includes angioplasty
within the same vessel, when performed
(list separately in addition to code for
primary procedure)) are inappropriately
assigned to APC 0083, and
recommended that they be reassigned to
APC 0229. The commenter indicated
that these procedures involve both
angioplasty with stent placements,
similar to the procedure described by
CPT code 37221 (Revascularization,
endovascular, open or percutaneous,

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iliac artery, unilateral, initial vessel;
with transluminal stent placement(s),
includes angioplasty within the same
vessel, when performed), which is
assigned to APC 0229. The commenter
also stated that CPT codes 37234 and
37235 are similar to the stent
procedures described by CPT codes
37205 (Transcatheter placement of an
intravascular stent(s) (except coronary,
carotid, vertebral, iliac, and lower
extremity arteries), percutaneous; initial
vessel) and 37206 (Transcatheter
placement of an intravascular stent(s)
(except coronary, carotid, vertebral,
iliac, and lower extremity arteries),
percutaneous; each additional vessel
(list separately in addition to code for
primary procedure)), which are assigned
to APC 0229. The commenter concluded
that the payment rate for APC 0083 does
not reflect the resources associated with
placement of a cardiovascular stent;
therefore, CPT codes 37234 and 37235
should be reassigned to APC 0229.
Response: We continue to believe that
APC 0083 is the most appropriate
assignment for these CPT codes based
on clinical and resource considerations.
We do not agree that the procedures
described by CPT codes 37234 and

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37235 are dissimilar to other procedures
in APC 0083 because they involve a
stent. In addition, an analysis of CY
2011 claims data shows only one single
claim for CPT code 37234 (out of 153
total claims) and no single claims (out
of 31 total claims) for CPT code 37235.
Therefore, the outpatient claims data do
not support an APC reassignment of
these CPT codes. Because these CPT
codes were made effective January 1,
2011, CY 2011 is the first year of claims
data available for CPT codes 37234 and
37235. Consistent with CMS’ policy of
reviewing APC assignments annually,
we will reevaluate the cost of these
procedures and their APC assignments
next year for the CY 2014 rulemaking
cycle.
After consideration of the public
comment we received, we are finalizing
our CY 2013 proposal, without
modification, to continue to assign CPT
codes 37234 and 37235 to APC 0083,
which has a CY 2013 final geometric
mean cost of approximately $4,139.
Table 22 below provides the list of
endovascular revascularization CPT
codes assigned to APCs 0083, 0229, and
0319 for CY 2013.

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e. External Electrocardiographic
Monitoring (APC 0097)
In the CY 2012 OPPS/ASC final rule
with comment period, we assigned new
CPT codes 0296T (External
electrocardiographic recording) and
0297T (External electrocardiographic
recording; scanning analysis with
report) on an interim basis to APC 0097
(Level I Non-Invasive Physiologic
Studies), which has a CY 2012 payment
rate of approximately $68 and a CY
2013 proposed payment rate of
approximately $67.
Comment: One commenter who
responded to the CY 2012 OPPS/ASC
final rule with comment period
supported our placement of CPT code
0296T in APC 0097. The commenter
stated that the service described by CPT
code 0296T is clinically similar to other
services in that APC. However, the
commenter believed that CPT code
0297T would be more appropriately
assigned to APC 0692 (Level II
Electronic Analysis of Devices), which
has a CY 2013 proposed rule cost of
approximately $113). The commenter

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argued that CPT code 0297T is similar
in nature and in required resources to
CPT code 93271 (Electrocardiographic
monitoring and analysis), which is
assigned to APC 0692, because it has a
similar monitoring period and requires
similar network and information
technology resources.
Response: Based on our
understanding of the resources that are
required to furnish the services
described by CPT codes 93271 and
0297T, we do not agree with the
commenter. The service described by
CPT code 93271 includes 24-hour
attended monitoring, while the service
described by CPT 0297T does not.
Therefore, we believe that CPT code
0297T is more clinically similar to the
services assigned to APC 0097.
Therefore, for CY 2013, we will
continue to assign this service to APC
0097, which has a final CY 2013
geometric mean cost of approximately
$68. We will reevaluate the APC
placement using our standard
ratesetting methodology when we
receive claims data for these services.

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f. Echocardiography (APCs 0177, 0178,
0269, 0270, and 0697)
Under the OPPS, echocardiography
services are reported using a
combination of CPT codes and HCPCS
C-codes. Hospitals report the
echocardiography CPT codes when
performing echocardiography
procedures without contrast.
Alternatively, hospitals report the
HCPCS C-codes when performing
echocardiography procedures with
contrast, or procedures without contrast
followed by procedures with contrast. In
addition to the HCPCS C-codes,
hospitals should also report the
appropriate units of the HCPCS codes
for the contrast agents used in the
performance of the echocardiograms.
Currently, there are four APCs that
describe echocardiography services:
• APC 0128 (Echocardiogram With
Contrast)
• APC 0697 (Level I Echocardiogram
Without Contrast)
• APC 0269 (Level II Echocardiogram
Without Contrast)

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• APC 0270 (Level III Echocardiogram
Without Contrast)
For CY 2013, we proposed payment
rates for these APCs of approximately
$571, $212, $392, and $558,
respectively.
Comment: One commenter expressed
concern regarding the APC assignment
of the procedures for fetal
echocardiography to APC 0697. The
commenter believed that this APC
classification and payment rate are
inconsistent with the resources required
to perform fetal echocardiography
studies. These resources, the commenter
noted, substantially exceed the
resources generally needed for adult
services. Therefore, the commenter
recommended that CMS reassign fetal
echocardiography CPT codes 76825
(Echocardiography, fetal, cardiovascular
system, real time with image
documentation (2d), with or without mmode recording;) and 76826
(Echocardiography, fetal, cardiovascular
system, real time with image
documentation (2d), with or without mmode recording; follow-up or repeat
study) to the same APC as adult
echocardiography procedures, APC
0269 (Level II Echocardiogram Without
Contrast).
Response: For the CY 2013 OPPS/ASC
proposed rule, we proposed to assign
CPT codes 76825 and 76826 to APC
0697, which had a proposed payment
rate of $211.71. As we stated in the CY
2012 OPPS/ASC final rule with
comment period, because these codes
have been in existence for almost 20
years, and have been reportable under
the OPPS since it was implemented in
2000, we believe that the low frequency
of these services is the result of
infrequent use of this procedure on
Medicare beneficiaries. Analysis of our
claims data from past years revealed
that these procedures are relatively low
volume procedures. CPT code 76825 has
had fewer than 330 single claims for
ratesetting for each year with a cost that
has ranged between approximately $88
and approximately $140. Similarly, CPT
code 76826 has had fewer than 50 single
claims for ratesetting for each year with
a cost that has ranged between
approximately $85 and approximately
$92. For this CY 2013 OPPS/ASC final
rule with comment period, CPT codes
76826 and 76825 are assigned APCs
with payment rates that exceed their
respective individual geometric mean
costs. Therefore, based on our claims

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data, we believe that CPT codes 76825
and 76826 are appropriately assigned to
APC 0697 for CY 2013 based on their
clinical homogeneity and resource costs
of the other procedure assigned to APC
0697.
Comment: Several commenters
expressed concern regarding a violation
of the 2 times rule for APC 0128 and
urged CMS not to finalize an exemption
from the 2 times rule for APC 0128. The
commenters stated that the assignment
of HCPCS codes C8924 (Transthoracic
echocardiography with contrast, or
without contrast followed by with
contrast, real-time with image
documentation (2d), includes m-mode
recording, when performed, follow-up
or limited study) and C8930
(Transthoracic echocardiography, with
contrast, or without contrast followed
by with contrast, real-time with image
documentation (2d), includes m-mode
recording, when performed, during rest
and cardiovascular stress test using
treadmill, bicycle exercise and/or
pharmacologically induced stress, with
interpretation and report; including
performance of continuous
electrocardiographic monitoring, with
physician supervision) to APC 0128
results in a violation of the 2 times rule
in particular, and that the other
procedures assigned to APC 0128 are
not clinically comparable in nature,
therefore resulting in an APC payment
rate that does not reflect the wide range
of resources utilized for the procedures
assigned to APC 0128. The commenters
further recommended that CMS
reconfigure APC 0128 so that the
procedures are clinically similar with
respect to resources. One commenter
recommended that CMS adopt three
levels of contrast-enhanced APCs that
parallel the three APCs that have been
established for non-contrast enhanced
procedures.
Response: As stated above, we have
four separate APCs to which
echocardiography services are assigned.
Procedures that utilize contrast agents
are currently assigned to APC 0128,
while procedures without contrast
agents are assigned to one of three
APCs, specifically APC 0270, APC 0269,
or APC 0697. In the CY 2013 OPPS/ASC
proposed rule, we proposed a payment
rate for APC 0128 of approximately
$571 for CY 2013. As we do every year,
we reviewed our claims data for the
services assigned to APC 0128. Based on
our review, and taking into

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consideration the public comments
received in response to the final rule
with comment period, we agree with
commenters that APC 0128 has a 2
times violation that cannot be exempted
for this CY 2013 OPPS/ASC final rule
with comment period. As we have
stated in section III.B. of this final rule
with comment period, we make
exemptions to the 2 times rule’s limit on
the variation of costs within each APC
group in unusual cases, such as low
volume items and services. In deciding
to propose exemptions to the 2 times
rule, we look at the respective APC’s
resource homogeneity, clinical
homogeneity, hospital outpatient
setting, frequency of service (volume),
and opportunity for upcoding and code
fragmentation. We believe that, for this
CY 2013 OPPS/ASC final rule with
comment period, it would be
inappropriate to exempt APC 0128 from
the 2 times rule and to continue to
assign echocardiography services
utilizing contrast agents to one APC,
based on our evaluation of the
aforementioned criteria. Therefore, for
CY 2013, we are splitting APC 0128 to
create two new level APCs: APC 0177
(Level I Echocardiogram with Contrast)
and APC 0178 (Level II Echocardiogram
with Contrast).
After consideration of the public
comments we received, we are
finalizing our proposals, with the
modifications mentioned above, to
continue to calculate the costs of the
HCPCS codes describing the noncontrast echocardiography procedures
based on APCs 0697, 0269, and 0270,
and to calculate the costs for the HCPCS
codes describing contrast
echocardiography procedures based on
new APCs 0177 and 0178. For a more
detailed discussion and history of the
OPPS payment for echocardiography
services, we refer readers to the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66644 through 66646), the
CY 2009 OPPS/ASC final rule with
comment period (72 FR 68542 through
68544), and the CY 2010 OPPS/ASC
final rule with comment period (74 FR
60374 through 60383).
Table 23 below shows the procedure
assignments and the final geometric
mean cost assigned to echocardiography
APCs, including the new Level I and
Level II Echocardiogram with Contrast
APCs.
BILLING CODE 4120–01–P

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BILLING CODE 4120–01–C

2. Gastrointestinal Services

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a. Laparoscopic Adjustable Gastric Band
(APC 0132)
Effective January 1, 2006, the AMA’s
CPT Editorial Panel established CPT
code 43770 (Laparoscopy, surgical,
gastric restrictive procedure; placement
of adjustable gastric restrictive device
(eg, gastric band and subcutaneous port
components)) to describe the bariatric
placement of an adjustable band by
laparoscopy. From January 1, 2006
through December 31, 2011, CPT code

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43770 was assigned to status indicator
‘‘C’’ to indicate that the procedure was
not paid separately under the OPPS
because the procedure was considered
an ‘‘inpatient’’ procedure. However, in
the CY 2012 OPPS/ASC final rule (76
FR 74355), we stated that we received
a comment requesting that this CPT
code be removed from the inpatient list
and assigned to a separately payable
APC, effective January 1, 2012. Based on
input from our physicians and review of
our claims data, we determined that it
was appropriate to remove CPT code
43770 from the inpatient list because

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patients undergoing this procedure can
typically be managed postoperatively as
outpatients. Consequently, we assigned
CPT code 43770 to APC 0131 (Level II
Laparoscopy), effective January 1, 2012.
At the August 2012 HOP Panel
meeting, a presenter requested that the
Panel recommend to CMS the
reassignment of CPT code 43770 from
APC 0131 to a new APC. The
commenter expressed concern about the
existing APC assignment and indicated
that APC 0131 does not adequately
cover the costs of performing the
procedure. After discussion of the

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procedure and review of the hospital
outpatient claims data, the Panel
recommended that CPT code 43770
remain in APC 0131 for the CY 2013
update.
For CY 2013, we proposed to continue
to assign CPT code 43770 to APC 0131,
which had a proposed rule payment rate
of approximately $3,497.
Comment: Several commenters
disagreed with the proposal to continue
to assign CPT code 43770 to APC 0131
because the procedure is different from
other procedures assigned to this APC.
According to one commenter, the
procedures assigned to APC 0131 are
less intensive (for example, resource
cost) than CPT code 43770. Another
commenter stated that the procedures
assigned to APC 0131 are not similar to
CPT code 43770 because this procedure
includes the implantation of a gastric
band device as well as a port device,
while the other procedures assigned to
this APC do not. In addition, some
commenters believed that assignment of
CPT code 43770 to APC 0131 violates
the 2 times rule. According to the
commenters, there is no existing APC
that includes procedures that are
comparable to the procedures described
by CPT code 43770, both clinically and
in terms of resource utilization.
Therefore, they requested that CMS
establish a new APC for CPT code 43770
to ensure the most appropriate payment
for this procedure.
However, we received conflicting
statements on the issue of clinical
comparability from some of the
commenters. One commenter stated
that, although there is no existing APC
that accurately fits with CPT code
43770, the commenter mentioned that
APC 0132 (Level III Laparoscopy) does
include some procedures that are more
clinically comparable to CPT code
43770 than the procedures assigned to
APC 0131, and suggested that APC 0132
would be an appropriate APC
assignment for this procedure. Another
commenter considered suggesting a
reassignment of CPT code 43770 to APC
0132 but stated that the procedures
assigned to APC 0132 are not
comparable in terms of resource
utilization. Although most of the
commenters agreed that establishing a
new APC for CPT code 43770 would be
more appropriate, some commenters
suggested assigning the procedure to
APC 0132 as an interim APC assignment
if a new APC cannot be established for
the CY 2013 update.
Response: We do not agree with the
commenters’ assertion that assigning
CPT code 43770 to APC 0131 violates
the 2 times rule. In determining whether
a 2 times rule violation exists in an

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APC, we consider only those HCPCS
codes that are significant based on the
number of claims. For purposes of
identifying significant HCPCS codes for
examination in the 2 times rule, we
consider codes that have more than
1,000 single major claims or codes that
have both greater than 99 single major
claims and comprise at least 2 percent
of the single major claims used to
establish the costs of the procedures
assigned to an APC to be significant (75
FR 71832). This longstanding definition
of when a HCPCS code is significant for
purposes of the 2 times rule was
selected because we believe that a
subset of 1,000 claims is negligible
within the set of approximately 100
million single procedure or single
session claims we use for establishing
costs. Similarly, a HCPCS code for
which there are fewer than 99 single
claims and which comprises less than 2
percent of the single major claims
within an APC will have a negligible
impact on the costs of the procedures in
an APC. For the CY 2013 OPPS/ASC
proposed rule, claims data for CPT code
43770 showed 171 single claims out of
216 total claims and comprised less
than 1 percent of the claims for
procedures within APC 0131. Although
CPT code 43770 had more than 99
single major claims, it did not
contribute to at least 2 percent of the
single major claims for procedures
within APC 0131. Therefore, in the CY
2013 OPPS/ASC proposed rule, we
determined that assigning CPT code
43770 to APC 0131 did not violate the
2 times rule because it did not meet the
definition of a significant HCPCS code.
As stated above, the HOP Panel made
a recommendation to continue to assign
CPT code 43770 to APC 0131 for the CY
2013 update. However, after the Panel
meeting, we reviewed our more recent
claims data for this final rule with
comment period, and our analysis
revealed that the procedure would be
more appropriately assigned to APC
0132 (Level III Laparoscopy).
Specifically, our analysis showed 213
single claims (out of 262 total claims)
for CPT code 43770 with a geometric
mean cost of approximately $7,410.
Furthermore, our analysis revealed that
CPT code 43770 meets the definition of
significant claims because the procedure
represents more than 99 single major
claims and contribute to at least 2
percent of the claims for procedures
within APC 0132. Consequently, we do
not agree with the Panel’s
recommendation, and are reassigning
CPT code 43770 to APC 0132.
In summary, after consideration of the
public comments we received, we are
revising the APC assignment for CPT

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code 43770 from APC 0131 to 0132 for
CY 2013. The final CY 2013 geometric
mean cost for APC 0132 is
approximately $5,268.
b. Transoral Incisionless Fundoplication
(APC 0422)
For CY 2013, we proposed to continue
to assign CPT code C9724 (Endoscopic
full-thickness plication in the gastric
cardia using endoscopic plication
system (eps); includes endoscopy) to
APC 0422 (Level III Upper GI
Procedures), which had a proposed
payment rate of approximately $1,878.
We note that at the August 2012 HOP
Panel meeting, a presenter requested
that the Panel recommend to CMS the
reassignment of HCPCS code C9724
from APC 0422 to a new APC, or
alternatively, to establish a new APC
with a descriptor of ‘‘Level IV Upper GI
Procedures.’’ The commenter stated that
the payment rate for APC 0422 does not
cover the cost of providing the
procedure. After discussion of the
procedure and review of the hospital
outpatient claims data, the Panel
recommended that HCPCS code C9724
remain in APC 0422 for the CY 2013
update.
Comment: Several commenters
disagreed with the proposal to continue
to assign HCPCS code C9724 to APC
0422. The commenters stated that the
proposed payment rate for APC 0422
would not cover the cost of performing
the procedure. According to the
commenters, the cost of performing the
procedure is approximately $5,000. The
commenters urged CMS to either
reassign HCPCS code C9724 to APC
1565 (New Technology—Level XXVIII
($5000-$5500)), which had a proposed
payment rate of approximately $5,250,
or establish a new APC titled ‘‘Level IV
Upper GI Procedures’’ with a payment
rate of approximately $5,000.
Response: HCPCS code C9724, which
was established by CMS effective April
1, 2005, describes an endoscopic fullthickness plication procedure for the
treatment of gastroesophageal reflux
disease (GERD). Since April 2005,
HCPCS code C9724 has been assigned to
APC 0422. Because this code has been
in existence since April 2005, we have
claims data for several years. For this
final rule with comment period, which
is based on claims submitted from
January 1, 2011 through December 31,
2011, our data show a geometric mean
cost of approximately $5,728 based on
24 single claims (out of 120 total claims)
for HCPCS code C9724. In addition, we
agree with the Panel’s recommendation
to maintain HCPCS code C9724 in APC
0422 for the CY 2013 update. Based on
the clinical similarity to other

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procedures currently assigned to APC
0422, and because there is no violation
with the 2 times rule, we will continue
to assign HCPCS code C9724 to APC
0422. Consistent with CMS’ policy of
reviewing APC assignments annually,
we will reevaluate the cost of HCPCS
code C9724 and its APC assignment for
the CY 2014 rulemaking cycle.
In addition, because of concerns
related to the current descriptor for
HCPCS code C9724, we are revising the
long descriptor to read ‘‘Endoscopic
full-thickness plication of the stomach
using endoscopic plication system (eps);
includes endoscopy,’’ effective January
1, 2013. This change in the long
descriptor is necessary to accurately
describe how the procedure is currently
performed.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal without
modification and will continue to
maintain HCPCS code C9724 in APC
0422. The final CY 2013 geometric mean
cost for APC 0422 is approximately
$1,921.
c. Gastrointestinal Transit and Pressure
Measurement (APC 0361)
The AMA’s CPT Editorial Panel
created CPT code 0242T
(Gastrointestinal tract transit and
pressure measurement, stomach trough
colon, wireless capsule, with
interpretation and report) effective
January 1, 2011. For CY 2011, we
initially assigned CPT code 0242T to
APC 0361 (Level II Alimentary Tests),
with a payment rate of $282.48.
For CY 2012, we maintained the
assignment of CPT code 0242T to APC
0361 with a payment rate of $285.59.
We noted in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74242) that we routinely make
assignments of new CPT codes to
clinical APCs before we have claims
data that are indicative of the resource
costs of a procedure. We make these
assignments initially using the best
currently available information, while
reviewing claims data once such data
become available and making
reassignments accordingly based on
those data.
We stated in the CY 2012 OPPS/ASC
final rule with comment period that, as
was the case when we made the initial
assignment for CY 2011, we continued
to believe that there are relevant clinical
similarities between the service
described by CPT code 0242T and other
services assigned to APC 0361 to
continue to justify this APC assignment.
The service described by CPT code
0242T and the services assigned to APC
0361 all involve tests of the alimentary

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canal. We believed that the clinical
attributes and CY 2012 costs of the
services assigned to APC 0361
supported the initial assignment of CPT
code 0242T to APC 0361. We indicated
that we routinely make assignments of
new CPT codes to clinical APCs before
we have claims data to indicate the
procedural resource costs, and that we
generally wait until claims data are
available before reassignment to a new
APC. For CY 2012, we maintained our
assignment of CPT code 0242T to APC
0361, which has a final median cost of
$285.89, and we stated that we would
review this assignment for CY 2013
when some claims data should be
available for this procedure.
For CY 2013, we proposed to
maintain the assignment of CPT code
0242T to APC 0361, which had a
proposed rule geometric mean cost of
approximately $311 and a proposed
payment rate of approximately $303. We
now have a small number of claims for
use in CY 2013 for CPT code 0242T,
which had a proposed rule geometric
mean cost of approximately $613. The
range of procedure level costs in APC
0361 for the CY 2013 proposed rule was
approximately $214 to approximately
$633. This range of costs does not
constitute a 2 times rule violation
because the range of costs for
procedures with significant volume in
the APC is approximately $302 to
approximately $406.
We did not receive any public
comments on our proposed APC
assignment of CPT code 0242T to APC
0361.
At the August 2012 meeting of the
HOP Panel, the Panel recommended
that CMS assign CPT code 0242T to
APC 0142 (Level I Small Intestine
Endoscopy), based on the procedure’s
proposed rule mean cost of
approximately $613, with a frequency of
8 claims.
Our CY 2013 final rule claims data
show a cost of approximately $497 for
CPT code 0242T, based on 8 claims. Our
analysis comparing the proposed rule
data and the final rule data for CPT code
0242T shows that one claim was
dropped and another added, resulting in
the fluctuation in geometric mean costs
for the small number of claims between
the proposed rule dataset and the final
rule dataset for this procedure. The CY
2013 final geometric mean cost for APC
0361 is approximately $311, which
includes a range of costs for procedures
in the APC of approximately $209 to
approximately $633. The CY 2013 final
geometric mean cost for APC 0142 is
approximately $772, which includes a
range of costs for procedures in the APC
of approximately $569 to approximately

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$826. Therefore, based on the final rule
geometric mean cost for CPT code
0242T, assignment of the code to APC
0361 is appropriate. We also continue to
believe that CPT code 0242T is similar
clinically to other procedures assigned
to APC 0361. Therefore we are
maintaining our assignment of the CPT
code 0242T procedure to APC 0361 for
CY 2013.
We note that the CPT Editorial Panel
is replacing the CPT code for the
procedure described by CPT code 0242T
with a Category I CPT code, CPT code
91112 (Gastrointestinal transit and
pressure measurement, stomach trough
colon, wireless capsule, with
interpretation and report), effective
January 1, 2013. Therefore, we are
deleting CPT code 0242T from the OPPS
effective January 1, 2013, and assigning
replacement CPT code 91112 to APC
0361 for this procedure.
3. Integumentary System Services
a. Extracorporeal Shock Wave Wound
Treatment (APC 0340)
In the CY 2012 OPPS/ASC final rule
with comment period, we assigned new
CPT codes 0299T (Extracorporeal shock
wave for integumentary wound healing,
initial wound) and 0300T
(Extracorporeal shock wave for
integumentary wound healing, each
additional wound) on an interim basis
to APC 0340 (Minor Ancillary
Procedures), which has a CY 2012
payment rate of approximately $46 and
a CY 2013 proposed rule payment rate
of approximately $49.
Comment: One commenter objecting
to the interim APC assignment of CPT
codes 0299T and 0300T believed that
the assignment is not consistent
clinically or in terms of the resources
associated with the shock wave
treatment procedures. The commenter
stated that these services are more
similar clinically and in related
resources to the high-energy shock wave
procedure for musculoskeletal
conditions that is assigned to APC 0050
(Level II Musculoskeletal Procedures
Except Hand and Foot), which has a CY
2012 payment rate of approximately
$2,269. The commenter believed that
assignment of these codes to a New
Technology APC would be appropriate
to gather cost data, and indicated that
they would submit an application for
new technology payments for these
codes to CMS.
We received other similar comments
to the proposed rule from several
clinicians in the field who were
involved in the initial clinical trial of
the extracorporeal shock wave
procedure. These commenters discussed

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the clinical trial and the clinical
attributes of this treatment, indicating
that it offers significantly greater clinical
benefit than other wound healing
therapies at a considerably lower cost.
They objected to CMS’ assignment of
CPT codes 0299T and 0300T to APC
0340. The commenters believed that the
payment rate for this APC would inhibit
the use of this emerging technology and
would prevent patient access to the
treatment.
Response: We agree with the
commenters that it may be more
appropriate in terms of clinical and
resource similarity to assign CPT codes
0299T and 0300T to an APC other than
APC 0340. However, we do not agree
that CPT codes 0299T and 0300T should
be assigned to APC 0050. Having
considered the information provided by
the commenters, and based on our
evaluation of clinical and resource
similarity to existing services, we
believe that placement in APC 0133
(Level I Skin Repair) would be more
appropriate for these services until
claims data are available. For CY 2013,
we are placing CPT codes 0299T and
0300T in APC 0133, which has a final
geometric mean cost of approximately
$88. We will reevaluate the APC
placement when claims data are
available for CY 2014.
b. Application of Skin Substitute (APCs
0133 and 0134)
For CY 2012, we made assignments
for several new (replacement) CPT
codes for the application of skin
substitutes. We assigned CPT code
15272 (Application of skin substitute
graft to trunk, arms, legs, total wound
surface area up to 100 sq cm; each
additional 25 sq cm or part thereof) and
CPT code 15276 (Application of skin
substitute graft to face, scalp, eyelids,
mouth, neck, ears, orbits, genitalia,
hands, feet and/or multiple digits, total
wound surface area up to 100 sq cm;
each additional 25 sq cm or part thereof)
to APC 0133 (Level I Skin Repair),
which has a CY 2012 payment rate of
approximately $84 and a CY 2013
proposed payment rate of approximately
$86. We assigned CPT code 15274
(Application of skin substitute graft to
trunk, arms, legs, total wound surface
area greater than or equal to 100 sq cm;
each additional 100 sq cm or part
thereof) and CPT code 15278
(Application of skin substitute graft to
face, scalp, eyelids, mouth, neck, ears,
orbits, genitalia, hands, feet and/or
multiple digits, total wound surface area
greater than or equal to 100 sq cm; each
additional 100 sq cm or part thereof) to
APC 0134 (Level II Skin Repair), which
has a CY 2012 payment rate of

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approximately $228 and a CY 2013
proposed payment rate of approximately
$252.
Comment: One commenter stated that
CMS should have assigned the new
codes to the APC that includes their
predecessor base codes so that a 2 times
rule violation is avoided. They
requested that for CY 2013, CMS
reassign CPT codes 15272 and 15276 to
APC 0134, crosswalking them to the
predecessor add-on CPT code 15341 and
assign them to the same APC as the
former base CPT code 15340. Similarly,
the commenter requested that CMS
reassign CPT codes 15274 and 15278 to
APC 0135 (Level III Skin Repair) which
includes their applicable base codes
(CPT codes 15273 and 15277).
Response: As we indicated in the CY
2012 OPPS/ASC final rule (76 FR
74269), we assigned these four
replacement CPT codes for CY 2012
based on their clinical and estimated
resource similarity to the services in
their assigned APCs. We also took into
account the size descriptions in the new
codes’ long descriptors. There was not
a one-to-one crosswalk between the old
skin substitute application codes and
the new CPT codes, as suggested by the
commenter. Several of the old CPT
codes map to a single new code.
Therefore, we made the most
appropriate assignment based on
clinical homogeneity and estimated
resource similarity, taking into account
all of the former procedures that are
now encompassed by a single code and
the new coding structure for the family
of codes.
For CY 2013, we will continue to
assign CPT codes 15272 and 15276 to
APC 0133, which has a final geometric
mean cost of approximately $88, and
CPT codes 15274 and 15278 to APC
0134, which has a final geometric mean
cost of approximately $259. We will
reevaluate the placement of these codes
when claims data become available in
the CY 2014 rulemaking cycle.
c. Low Frequency, Non-Contact, NonThermal Ultrasound (APC 0015)
Effective January 1, 2008, the CPT
Editorial Panel created CPT code 0183T
(Low Frequency, Non-Contact, NonThermal Ultrasound). Since that time,
we have assigned this service to either
APC 0013 (Level II Debridement and
Destruction) or APC 0015 (Level III
Debridement and Destruction). Initially,
for CY 2008 and CY 2009, we placed
this service in the higher Level III APC
0015, with a payment rate of
approximately $100. Based on our
review of the first year of hospital
claims data (CY 2008 claims), for CY
2010 we reassigned the service to the

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lower Level II APC 0013, with a
payment rate of approximately $59. For
CY 2011 and CY 2012, due to a change
in the estimated cost of CPT code
0183T, we reassigned it to the higher
level APC 0015, with a payment rate of
approximately $105 in CY 2011 and
approximately $103 in CY 2012.
For CY 2013, we proposed to reassign
CPT 0183T to APC 0013 because its
proposed rule geometric mean cost of
approximately $89 was closer to the
proposed rule geometric mean cost of
APC 0013 (approximately $73) than the
proposed rule geometric mean cost of
APC 0015 (approximately $110).
Comment: One commenter objected to
the reassignment of CPT code 0183T to
APC 0013 because the commenter’s
estimated cost of furnishing this service
of approximately $101 would be greater
than its proposed payment. The
commenter believed that procedures
currently assigned to APC 0013 and
those assigned to APC 0015 are not
homogeneous clinically or in terms of
resource requirements. The commenter
requested that CMS split APC 0013 and
APC 0015 to create a third APC, such
that APC 0013 would include the
services with costs less than $80; the
new APC would include services with
costs between $80 and $110; and APC
0015 would include services with costs
greater than or equal to $110.
Another commenter recommended
that CMS merge APC 0013 and APC
0015, arguing that both APCs are for
skin procedures and noting that the
proposed cost for the highest volume
service in APC 0013, described by CPT
code 17000 (Destruction of
premalignant lesions; first lesion), is
more than half of the cost of the highest
volume service in APC 0015, described
by CPT code 97597 (Open wound
debridement; first 20 sq cm or less).
Response: The final rule geometric
mean cost of CPT code 0183T and APC
0013 (approximately $88 and $74,
respectively) did not change
significantly from their proposed rule
costs and remain very similar. There
also is no significant change in the final
rule geometric mean cost of APC 0015
(approximately $110). We note that
merging the two APCs as one
commenter suggested would create
several 2-times rule violations, and we
see no clinical or other need to further
split the APCs. Therefore, because the
geometric mean cost of CPT code 0183T
continues to be closer to the geometric
mean cost of APC 0013 than that of APC
0015, and because merging the APCs
would create several 2 times rule
violations, for CY 2013, we are
finalizing our proposal to reassign CPT
code 0183T to APC 0013.

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4. Nervous System Services
a. Scrambler Therapy (APC 0275)
For the CY 2012 update, the AMA’s
CPT Editorial Panel established
Category III CPT code 0278T
(Transcutaneous electrical modulation
pain reprocessing (eg, scrambler
therapy), each treatment session
(includes placement of electrodes))
effective January 1, 2012. CPT code
0278T describes a transcutaneous
electrical modulation pain reprocessing
procedure and involves the use of four
to five electrodes that deliver electrical
stimulation to treat chronic chemoinduced neuropathic pain. Based on the
nature of the procedure, which can be
performed by physicians, nurses, or
physical therapists, the therapy involves
10 sessions (1 session per day for 10
days), and each session takes
approximately between 30 and 45
minutes.
In Addendum B of the CY 2012
OPPS/ASC final rule with comment
period, we assigned CPT code 0278T to
APC 0215 (Level I Nerve and Muscle
Tests) which has a CY 2012 payment
rate of approximately $44. We also
assigned this CPT code comment
indicator ‘‘NI’’ to indicate that the code
was new for CY 2012 with an interim
APC assignment that was subject to
public comment following the
publication of the final rule with
comment period. Specifically, the
code’s APC assignment and status
indicator were subject to public
comment. We received one public
comment regarding the interim APC
assignment for CPT code 0278T which
we address below in this section.
We note that we do not discuss APC
or status indicator assignments for new
codes for the upcoming year in the
proposed rule because the new codes
are not available when we publish the
proposed rule. Rather, as has been our
practice in the past, we implement new
HCPCS codes in the OPPS final rule
with comment period, at which time we
invite public comments regarding the
treatment of the new codes. We
subsequently respond to those
comments in the final rule with
comment period for the following year’s
OPPS update.
As has been our practice since the
implementation of the OPPS in 2000,
we carefully review all new procedures
before assigning them to an APC. In
determining the APC assignment for
CPT code 0278T, we took into
consideration the clinical and resource
characteristics involved with Scrambler
Therapy. Based on our initial review of
the components of these services and
consultation with our medical advisors,

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we assigned CPT code 0278T to APC
0215 for CY 2012.
At the February 2012 HOP Panel
meeting, a presenter requested the
reassignment of CPT code 0278T from
APC 0215 to APC 0206 (Level II Nerve
Injections) based on resource cost and
clinical homogeneity. The presenter
stated that the assignment of CPT code
0278T to APC 0215 is not appropriate
because the procedures in this APC are
primarily diagnostic in nature, whereas
CPT code 0278T represents a
therapeutic procedure. The presenter
further added that the time and cost
involved with providing the service
associated with CPT code 0278T is
considerably greater than the time and
cost involved for procedures assigned to
APC 0215, and recommended that the
Scrambler Therapy would be more
appropriately assigned to APC 0206
because the procedures in APC 0206 are
mostly therapeutic in nature and
represent similar costs. At the February
2012 meeting, the Panel made no
recommendation to reassign CPT code
0278T from its current APC 0215
assignment for CY 2013.
In Addendum B of the CY 2013
OPPS/ASC proposed rule, we proposed
to continue to assign CPT code 0278T to
APC 0215. At the August 2012 HOP
Panel meeting, the same presenter at
February 2012 Panel meeting made the
same request to the Panel to recommend
to CMS to reassign CPT code 0278T to
a more appropriate APC. Specifically, at
the August 2012 HOP Panel meeting,
the requester recommended that CPT
code 0278T be reassigned to APC 0204
(Level I Nerve Injections) based on
clinical and cost considerations. During
the discussion, one of the Panel
members pointed out that the
procedures assigned to APC 0204
represent nerve injections, which is in
contrast to how the procedure described
by CPT code 0278T is delivered because
the procedure associated with the
Scrambler Therapy does not involve
injections. After discussion of the issue,
the HOP Panel recommended that CMS
assign CPT code 0278T to APC 0218
(Level II Nerve and Muscle Tests).
Comment: One commenter to the CY
2012 OPPS/ASC final rule with
comment period recommended the
reassignment of CPT code 0278T from
APC 0215 to APC 0206 based on the
commenter’s cost analysis.
Alternatively, the commenter
recommended assignment of CPT code
0278T to APC 0204 because this is the
APC assigned to unlisted CPT code
64999 (Unlisted procedure, nervous
system), which would be used to report
the Scrambler Therapy if CPT code
0278T had not been established.

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Response: As a new Category III CPT
code for CY 2012, we do not yet have
hospital claims data for the procedure.
Category III CPT codes are temporary
codes that describe emerging
technology, procedures, and services,
and are created by the AMA to allow for
data collection for new services or
procedures. Under the OPPS, we
generally assign a payment rate to a new
Category III CPT code based on input
from a variety of sources, including but
not limited to, review of resource costs
and clinical homogeneity of the service
to existing procedures, information from
specialty societies, input from CMS
medical advisors, and other information
available to us. Based on our review of
the clinical characteristics of the service
described by CPT code 0278T and the
information provided by the
commenter, we do not believe that we
have sufficient clinical or cost
information to justify a reassignment to
a different APC at this time. As we do
every year for other services and
procedures under the OPPS, we will
review the claims data for CPT code
0278T for CY 2012 for the CY 2014
rulemaking cycle. Because CPT code
0278T was a new code for CY 2012, the
first time we will have claims data for
this procedure is next year for the CY
2014 update, and at which time we will
reevaluate the APC assignment for this
code.
Comment: Some commenters
recommended a range of the appropriate
payment for CPT code 0278T based on
their internal analysis. One commenter
recommended that CPT code 0278T be
assigned to an APC that has a payment
rate of between $124 to $144 based on
their analysis, by taking into
consideration the site of service, staff
time involved, and system costs
associated with providing the therapy.
Another commenter stated that the total
cost of providing Scrambler Therapy is
approximately $274; however, an initial
payment of approximately $184 may be
adequate for hospitals to initiate
treatment. The commenter further stated
that the proposed payment rate of
approximately $81 for APC 0218, which
was recommended by the HOP Panel at
the August 2012 meeting, is adequate.
However, the commenter asserted that
the proposed payment rate of
approximately $150 for New
Technology APC 1540 (New
Technology—Level III ($100—$200))
would be more appropriate.
Response: After further review of the
HOP Panel recommendation at the
August 2012 meeting and consideration
of the public comments that we received
on this particular procedure, we believe
that we should continue to assign the

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Scrambler Therapy to APC 0215.
Therefore, we are not accepting the
Panel’s recommendation to reassign
CPT code 0278T to APC 0218. In
addition, we do not agree with the
commenter that CPT code 0278T should
be assigned to New Technology APC
1540. Based on our understanding of the
procedure, we believe that APC 0215 is
the most appropriate APC assignment
for CPT code 0278T based on its
similarity to other procedures assigned
to APC 0215. We will review the claims
data for CPT 0278T next year for the CY
2014 rulemaking to determine whether
an APC reassignment for the Scrambler
Therapy is necessary.
After consideration of the public
comments received, we are finalizing
our CY 2013 proposal, without
modification, to continue to assign CPT
code 0278T to APC 0215 for CY 2013.
The final CY 2013 geometric mean cost
for APC 0215 is approximately $44.
b. Transcranial Magnetic Stimulation
Therapy (TMS) (APC 0216)
Since July 2006, CPT codes have
existed to describe Transcranial
Magnetic Stimulation Therapy (TMS)
therapy. The initial CPT codes were
temporary Category III CPT codes,
specifically, CPT code 0160T
(Therapeutic repetitive transcranial
magnetic stimulation treatment
planning) and 0161T (Therapeutic
repetitive transcranial magnetic
stimulation treatment delivery and
management, per session), that were
effective July 1, 2006. For CY 2011, the
CPT Editorial Panel deleted CPT code
0160T on December 31, 2010, and
replaced it with CPT code 90867
(Therapeutic repetitive transcranial
magnetic stimulation (tms) treatment;
initial, including cortical mapping,
motor threshold determination, delivery
and management) effective January 1,
2011. Similarly, CPT code 0161T was
deleted on December 31, 2010, and was
replaced with CPT code 90868
(Therapeutic repetitive transcranial
magnetic stimulation (tms) treatment;
subsequent delivery and management,
per session) effective January 1, 2011. In
CY 2012, the AMA’s CPT Editorial
Panel established an additional TMS
therapy code, specifically CPT code
90869 (Therapeutic repetitive
transcranial magnetic stimulation (tms)
treatment; subsequent motor threshold
re-determination with delivery and
management), that was effective January
1, 2012.
In Addendum B of the CY 2013
OPPS/ASC proposed rule, we proposed
to continue to assign CPT codes 90867,
90868, and 90869 to APC 0218 (Level II
Nerve and Muscle Tests), which had a

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proposed payment rate of approximately
$81.
Comment: One commenter disagreed
with the proposed APC assignment and
stated that the TMS therapy codes are
not similar to the services assigned to
APC 0218. The commenter
recommended three options on the
appropriate APC assignment.
Under the first option, the commenter
recommended the reassignment of CPT
codes 90867, 90868, and 90869 to APC
0216 (Level III Nerve and Muscle Tests),
which had a proposed payment rate of
approximately $182. The commenter
also recommended the revision of the
APC title description to read ‘‘Level III
Nerve and Muscle Tests & TMS’’. The
commenter stated that the TMS therapy
services are similar to the services
described by CPT codes 95961
(Functional cortical and subcortical
mapping by stimulation and/or
recording of electrodes on brain surface,
or of depth electrodes, to provoke
seizures or identify vital brain
structures; initial hour of physician
attendance), 95962 (Functional cortical
and subcortical mapping by stimulation
and/or recording of electrodes on brain
surface, or of depth electrodes, to
provoke seizures or identify vital brain
structures; each additional hour of
physician attendance (list separately in
addition to code for primary
procedure)), and 96000 (Comprehensive
computer-based motion analysis by
video-taping and 3d kinematics), which
are assigned to APC 0216.
Under the second option, the
commenter recommended the
establishment of a new APC for the
three TMS therapy CPT codes, and
further recommended revising the APC
title description to read ‘‘Transcranial
Magnetic Stimulation’’.
Under the third option, the
commenter suggested assigning CPT
codes 90867, 90868, and 90869 to APC
0320 (Electroconvulsive Therapy),
which had a proposed payment rate of
approximately $441. Although TMS
therapy is clinically related to
electroconvulsive therapy (ECT), the
commenter stated that its resource costs
are lower than ECT.
Response: We appreciate the
commenter’s thoughtful suggestions on
the APC assignments for CPT codes
90867, 90868, and 90869. We do not
agree with the commenter that the
procedures described by CPT codes
90867, 90868, and 90869 would be
appropriately assigned to APC 0320
from a clinical perspective because the
provision of electroconvulsive therapy
generally requires more extensive
monitoring and services (for example,
muscle blockade) than transcranial

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magnetic treatment delivery and
management. However, based on the
latest claims data used for this
rulemaking, we do agree with the
commenter’s suggestion that APC 0216
would be the more appropriate APC
assignment for the three TMS therapy
CPT codes. Analysis of our more recent
claims data revealed that the resources
associated with CPT codes 90867,
90868, and 90869 are similar to those
services assigned to APC 0216.
Specifically, for claims submitted
during CY 2011, which were used for
this final rule with comment period,
CPT code 90867 showed a geometric
mean cost of approximately $190 based
on 15 single claims (out of 18 total
claims), and a geometric mean cost of
approximately $233 for CPT code 90868
based on 609 single claims (out of 614
total claims). In addition, review of the
procedures assigned to APC 0216
showed that the range of the geometric
mean cost for the procedures with
significant claims data is between
approximately $146 (for CPT code
92584 (Electrocochleography)) and
approximately $233 (for CPT code
90868 (Tcranial magn stim tx deli)).
Based on the clinical and resource
similarity to other procedures currently
assigned to this APC, we believe it is
appropriate to reassign the TMS therapy
services to APC 0216. Although CPT
code 90869 is a new code for CY 2012,
we believe that it is appropriate to
reassign this service to APC 0216,
similar to the APC assignment of CPT
codes 90867 and 90868. Because of this
reassignment, we also are revising the
APC title descriptions of APCs 0215,
0216, and 0218 to appropriately reflect
the services within each APC.
Specifically, we are revising the APC
title description of APC 0215 from
‘‘Level I Nerve and Muscle Tests’’ to
‘‘Level I Nerve and Muscle Services’’;
the title description of APC 0218 from
‘‘Level II Nerve and Muscle Tests’’ to
‘‘Level II Nerve and Muscle Services’’;
and the title description of APC 0216
from ‘‘Level III Nerve and Muscle Tests’’
to ‘‘Level III Nerve and Muscle
Services’’.
After consideration of the public
comment we received, we are finalizing
our CY 2013 proposal, with
modification. That is, we are reassigning
CPT codes 90867, 90868, and 90869
from APC 0218 to APC 0216, which has
a final CY 2013 geometric mean cost of
approximately $189. Table 24 below
shows the final APC assignments for
CPT codes 90867, 90868, and 90869 for
CY 2013.

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c. Paravertebral Neurolytic Agent (APC
0207)
Effective January 1, 2012, the AMA’s
CPT Editorial Panel created CPT code
64633 (Destruction by neurolytic agent,
paravertebral facet joint nerve(s), with
imaging guidance (fluoroscopy or ct);
cervical or thoracic, single facet joint).
For CY 2012, we assigned new CPT
code 64633 on an interim basis to APC
0207 (Level III Nerve Injections). This
interim APC assignment was consistent
with our standard process for dealing
with new CPT codes effective on
January 1 for the upcoming calendar
year, which is to assign each code to the
APC that we believe contains services
that are comparable with respect to
clinical characteristics and resources
required to furnish the service. CPT
code 64633 was assigned a comment
indicator of ‘‘NI’’ in Addendum B to the
CY 2012 OPPS/ASC final rule with
comment period to identify it as a new
interim APC assignment for the new
year and the APC assignment for this
new code was open to public comment
for 60 days following the publication of
the CY 2012 OPPS/ASC final rule with
comment period. For CY 2013, we
proposed to continue to assign CPT
code 64633 to APC 0207, which had a
proposed payment rate of approximately
$568.
Comment: One commenter who
responded to the CY 2012 OPPS/ASC
final rule with comment period objected
to the assignment of CPT code 64633 to
APC 0207 because the commenter
believed that the payment rate for APC
0207 substantially underpays providers
for this service.
Response: Due to the lack of any
claims data for CPT code 64633, we
have no way to validate or substantiate
the claim made by the commenter. We
expect to have CY 2012 claims data for
CPT code 64633 available in CY 2013 in
preparation for the CY 2014 rulemaking
cycle and will reevaluate the APC
assignment of CPT code 64633 at that
time.

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After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal,
without modification, to continue to
assign CPT code 64633 to APC 0207,
which has a final CY 2013 APC
geometric mean cost of approximately
$582.
d. Programmable Implantable Pump
(APC 0691)
Effective January 1, 2012, the AMA’s
CPT Editorial Panel created two new
CPT codes that combine pump refill and
programming/analysis procedures: CPT
code 62369 (Electronic analysis of
programmable, implanted pump for
intrathecal or epidural drug infusion
(includes evaluation of reservoir status,
alarm status, drub prescription status);
with reprogramming and refill) and CPT
code 62370 (Electronic analysis of
programmable, implanted pump for
intrathecal or epidural drug infusion
(includes evaluation of reservoir status,
alarm status, drub prescription status);
with reprogramming and refill
(requiring physician’s skill)). For CY
2012, CPT codes 62369 and 62370
received a new interim APC assignment
to APC 0691 (Level III Electronic
Analysis of Devices), consistent with
our standard process for dealing with
new CPT codes effective on January 1
for the upcoming calendar year, which
is to assign each code to the APC that
we believe contains services that are
comparable with respect to clinical
characteristics and resources required to
furnish the service. CPT codes 62369
and 62370 were both given a comment
indicator of ‘‘NI’’ in Addendum B to the
CY 2012 OPPS/ASC final rule with
comment period to identify it as a new
interim APC assignment for the new
year and the APC assignment for these
two new codes was open to public
comment for 60 days following the
publication of the CY 2012 OPPS/ASC
final rule with comment period. For CY
2013, we proposed to continue to assign
CPT codes 62369 and 62370 to APC

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0691, which had a proposed payment
rate of approximately $192.
Comment: Commenters who
responded to the CY 2012 OPPS/ASC
final rule with comment period objected
to the assignment of CPT codes 62369
and 62370 to APC 0691 because they
believed that the payment rate for APC
0691 substantially underpays providers
for these services.
Response: Due to the lack of any
claims data for CPT codes 62369 and
62370, we have no way to validate or
substantiate the claim made by
commenters. We expect to have CY
2012 claims data for CPT codes 62369
and 62370 in CY 2013 in preparation for
the CY 2014 rulemaking cycle and will
reevaluate the APC assignment of CPT
codes 62369 and 62370 at that time.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal,
without modification, to continue to
assign CPT codes 62369 and 62370 to
APC 0691, which has a final CY 2013
APC geometric mean cost of
approximately $197.
e. Revision/Removal of Neurostimulator
Electrodes (APC 0687)
For CY 2013, we proposed to continue
to assign CPT code 64569 (Revision or
replacement of cranial nerve (eg, vagus
nerve) neurostimulator electrode array,
including connection to existing pulse
generator) to APC 0687 (Revision/
Removal of Neurostimulator Electrodes),
which had a proposed CY 2013 payment
rate of approximately $1,576.
Comment: Commenters objected to
the assignment of CPT code 64569 in
APC 0687 because they stated that this
code is used to report both the revision
and the replacement of neurostimulator
electrodes. The commenters believed
that hospital resources are substantially
greater when neurostimulator electrodes
are being replaced rather than revised.
The commenters asked CMS to reassign
CPT code 64569 to device-dependent
APC 0040 (Level I Implantation/
Revision/Replacement of

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Neurostimulator Electrodes) or assign
new HCPCS codes to differentiate
between electrode replacements (with a
new electrode) and electrode revisions
(without a new electrode) so that
electrode revisions map to APC 0687
and electrode replacements map to APC
0040. The commenters noted that, like
CPT code 64569, the procedures
currently assigned to APC 0040 involve
the implantation of a new electrode,
either as an initial implant or as a
replacement, while all of the procedures
currently assigned to APC 0687, with
the exception of CPT code 64569, are
defined as ‘‘revision or removal’’ or
simply ‘‘removal’’ of electrodes. The
commenters stated that the resources
associated with the procedure described
by CPT code 64569 are similar to the
resources associated with the
procedures assigned to APC 0040.
Response: We agree with the
commenters that the resources
associated with the procedure described
by CPT code 64569 are similar to the
resources associated with procedures
assigned to APC 0040, and that these
procedures share clinical
characteristics. We note that the CY
2013 final rule geometric mean cost for
CPT code 64569 of approximately
$5,473 is more consistent with the CY
2013 final rule geometric mean cost of
APC 0040 of approximately $4,526 than
with the CY 2013 final rule geometric
mean cost of APC 0687 of
approximately $1,554. Therefore, we are
modifying our proposal and assigning
CPT code 64569 to APC 0040 for CY
2013.

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5. Ocular Services: Placement of
Amniotic Membrane (APC 0233)
In CY 2011, the AMA CPT Editorial
Panel revised the long descriptor for
CPT code 65780 (Ocular surface
reconstruction; amniotic membrane
transplantation, multiple layers) to
include the words ‘‘multiple layers’’ to
further clarify the code descriptor. In
addition, the AMA’s CPT Editorial
Panel created two new CPT codes that
describe the placement of amniotic
membrane on the ocular surface without
reconstruction: one describing the
placement of a self-retaining (nonsutured/non-glued) device on the
surface of the eye; and the other
describing a single layer of amniotic
membrane sutured to the surface of the
eye. Specifically, the AMA’s CPT
Editorial Panel established CPT codes
65778 (Placement of amniotic
membrane on the ocular surface for
wound healing; self-retaining) and
65779 (Placement of amniotic
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wound healing; single layer, sutured),
effective January 1, 2011.
As has been our practice since the
implementation of the OPPS in 2000,
we review all new procedures before
assigning them to an APC. In
determining the APC assignments for
CPT codes 65778 and 65779, we took
into consideration the clinical and
resource characteristics involved with
placement of amniotic membrane
products on the eye for wound healing
via a self-retaining device and a sutured,
single-layer technique. In the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72402), we assigned CPT
code 65778 to APC 0239 (Level II Repair
and Plastic Eye Procedures), which had
a payment rate of approximately $559,
and CPT code 65779 to APC 0255 (Level
II Anterior Segment Eye Procedures),
which had a payment rate of
approximately $519.
In addition, consistent with our
longstanding policy for new codes, we
assigned these two new CPT codes to
interim APCs for CY 2011. Specifically,
we assigned CPT codes 65778 and
65779 to comment indicator ‘‘NI’’ in
Addendum B of the CY 2011 OPPS/ASC
final rule with comment period to
indicate that the codes were new with
interim APC assignments that were
subject to public comment. In
accordance with our longstanding
policy, our interim APC assignment for
each code was based on our
understanding of the resources required
to furnish the service as defined in the
code descriptor and input from our
physicians.
At the Panel’s February 28–March 1,
2011 meeting, a presenter requested the
reassignment of CPT codes 65778 and
65779 to APC 0244 (Corneal and
Amniotic Membrane Transplant), which
is the same APC to which CPT code
65780 is assigned. The presenter
indicated that, prior to CY 2011, the
procedures described by CPT codes
65778 and 65779 were previously
reported under the original version of
CPT code 65780, which did not specify
‘‘multiple layers,’’ and as such these
new CPT codes should continue to be
assigned to APC 0244. Further, the
presenter stated that the costs of the
procedures described by CPT codes
65778 and 65779 are very similar to the
cost of the procedure described by CPT
code 65780.
The Panel recommended that CMS
reassign the APC assignments for both
CPT codes 65778 and 65779.
Specifically, the Panel recommended
the reassignment of CPT code 65778
from APC 0239 to APC 0233 (Level III
Anterior Segment Eye Procedures), and
the reassignment of CPT code 65779

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68339

from APC 0255 to APC 0233. In
addition, the Panel recommended that
CMS furnish data when data become
available for these two codes. We noted
at that time that because these CPT
codes were effective January 1, 2011, the
first available claims data for these
codes would be for the CY 2013 OPPS
rulemaking cycle.
We accepted the Panel’s
recommendations. However, in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74247), we
indicated that, while we agreed with the
Panel’s recommendation to reassign
CPT codes 65778 and 65779 to APC
0233, we believed that CPT code 65778
should be assigned to a conditionally
packaged status indicator of ‘‘Q2’’ to
indicate that the procedure would be
packaged when it is reported with
another procedure that is also assigned
to status indicator ‘‘T’’; but in all other
circumstances, the CPT code would be
paid separately. Because the procedure
described by CPT code 65778 would
rarely be provided as a separate, standalone service in the HOPD, and because
the procedure would almost exclusively
be provided in addition to and
following another procedure or service,
we proposed to reassign CPT code
65778 a conditionally packaged status
indicator of ‘‘Q2.’’ In addition, our
medical advisors indicated that the
procedure described by CPT code 65778
is not significantly different than
placing a bandage contact lens on the
surface of the eye to cover a corneal
epithelial defect. CPT code 65778
describes the simple placement of a
special type of bandage (a self-retaining
amniotic membrane device) on the
surface of the eye, which would most
commonly be used in the HOPD to
cover the surface of the eye after a
procedure that results in a corneal
epithelial defect.
At the August 10–11, 2011 Panel
meeting, a presenter urged the Panel to
recommend to CMS not to conditionally
package CPT code 65778 for CY 2012,
and instead, assign it status indicator
‘‘T.’’ Based on information presented at
the meeting, and after further discussion
of the issue, the Panel recommended
that CMS reassign the status indicator
for CPT code 65778 from conditionally
packaged ‘‘Q2’’ to status indicator ‘‘T.’’
Several commenters also urged CMS not
to finalize its proposal to conditionally
package CPT code 65778 by assigning it
status indicator ‘‘Q2’’ and instead adopt
the Panel’s recommendation to assign
status indicator ‘‘T.’’
After consideration of the Panel’s
August 2011 recommendation and the
public comments that we received in
response to the CY 2012 OPPS/ASC

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proposed rule, we finalized our
proposal and reassigned the status
indicator for CPT code 65778 from ‘‘T’’
to ‘‘Q2’’ effective January 1, 2012 (76 FR
74246). Given the clinical
characteristics of this procedure, we
believed that conditionally packaging
CPT code 65778 was appropriate under
the OPPS.
For the CY 2013 OPPS update, we
proposed (77 FR 45123) to continue to
assign CPT code 65778 a conditionally
packaged status indicator of ‘‘Q2.’’
Similarly, we stated that we believe that
we should assign CPT code 65779 to a
conditionally packaged status indicator
of ‘‘Q2.’’ Therefore, for CY 2013, we
proposed to revise the status indicator
for CPT code 65779 from status
indicator ‘‘T’’ to ‘‘Q2’’ to indicate that
the procedure would be packaged when
it is reported with another procedure
that is also assigned status indicator
‘‘T,’’ but in all other circumstances, the
CPT code would be paid separately.
This reassignment would enable
hospitals to perform either procedures
(CPT code 65778 or 65779) when
appropriate, and would not differentiate
one procedure from the other because of
the status indicator assignment under
the OPPS.
As indicated at the February 28March 1, 2011 Panel meeting, because
CPT codes 65778 and 65779 were
effective January 1, 2011, the first
available claims data for these codes
would be in CY 2012 for the CY 2013
OPPS rulemaking. We now have claims
data for CPT codes 65778 and 65779,
and our data show that both procedures
are performed in the HOPD setting.
Analysis of the CY 2011 claims data
available for the proposed rule, which
was based on claims processed from
January 1 through December 31, 2011,
revealed that the estimated cost for CPT
code 65778 is approximately $1,025
based on 33 single claims (out of 130
total claims), and the estimated cost for
CPT code 65779 is approximately
$2,303 based on 35 single claims (out of
260 total claims). Based on the clinical
similarity to other procedures currently
assigned to APC 0233, and because
there was no violation with the 2 times
rule, we stated that we believe that we
should continue to assign both CPT
codes 65778 and 65779 to APC 0233,
which had a payment rate of
approximately $1,150. Review of the

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procedures assigned to APC 0233
showed that the range of the cost for the
procedures with significant claims data
is between approximately $859 (for CPT
code 65400 (Removal of eye lesion)) and
approximately $1,397 (for CPT code
66840 (Removal of lens material)).
In summary, for CY 2013, we
proposed to continue to assign CPT
code 65778 to a conditionally packaged
status indicator of ‘‘Q2’’ and to reassign
the status indicator for CPT code 65779
from ‘‘T’’ to ‘‘Q2,’’ similar to CPT code
65778. In addition, we proposed to
continue to assign both CPT codes
65778 and 65779 to APC 0233, which
had a proposed geometric mean cost of
approximately $1,150. Both procedures
and their CY 2013 APC assignments
were displayed in Table 19 of the
proposed rule.
At the August 2012 HOP Panel
Meeting, a presenter urged the Panel to
recommend to CMS not to conditionally
package CPT code 65779 for CY 2013,
and instead, assign status indicator ‘‘T’’
to the code. Based on the information
presented at the meeting, and after
further discussion of the issue, the HOP
Panel made no recommendation to
revise the status indicator assignment
for CPT code 65779.
Comment: One commenter urged
CMS not to finalize its proposal to
conditionally package CPT code 65779
by assigning it status indicator ‘‘Q2,’’
and recommended that CMS continue to
assign the code status indicator ‘‘T.’’
The commenter expressed concern that
assigning a ‘‘Q2’’ status indicator to CPT
code 65779 would impede access to this
procedure because, in a majority of the
cases (84 percent), hospitals perform
this procedure with another procedure.
Consequently, a ‘‘Q2’’ status indicator
would result in no payment for CPT
code 65779. The commenter further
recommended that CMS assign CPT
code 65779 to APC 0244, or another
APC that better reflects the resources
associated with the procedure, such as
APC 0241 (Level IV Repair and Plastic
Eye Procedures) or APC 0234 (Level IV
Anterior Segment Eye Procedures).
Response: We believe that the
revision in status indicator for CPT code
65779 would enable hospitals to
perform either procedures (CPT code
65778 or 65779) when appropriate, and
would not differentiate one procedure
from the other because of the status

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indicator assignment under the hospital
OPPS. In addition, because CPT codes
65778 and 65779 were new for CY 2011,
CY 2013 is the first year of claims data
that we have available for ratesetting for
both CPT codes. Analysis of the CY
2011 claims data revealed a geometric
mean cost of approximately $989 for
CPT code 65778 based on 36 single
claims (out of 142 total claims), and
approximately $2,314 for CPT code
65779 based on 37 single claims (out of
280 total claims). Review of the
procedures assigned to APC 0233
showed that the range of the CPT
geometric mean cost for the procedures
with significant claims data is between
approximately $867 (for CPT code
65400 (Removal of eye lesion)) and
approximately $1,390 (for CPT code
66840 (Removal of lens material)).
Based on the clinical similarity to other
procedures currently assigned to APC
0233, and because there is no violation
with the 2 times rule, we believe that we
should continue to assign CPT code
65779 to APC 0233, which has a final
geometric mean cost of approximately
$1,162 for CY 2013.
As has been our practice since the
implementation of the OPPS, we
annually review all the items and
services within an APC group to
determine, with respect to
comparability of the use of resources,
for any 2 times rule violations. In
making this determination, we review
our claims data and determine whether
we need to make changes to the current
APC assignments for the following year.
For CPT codes 65778 and 65779, we
will again reevaluate their APC
assignments for the CY 2014 OPPS
rulemaking cycle.
After consideration of the public
comment that we received, we are
finalizing our CY 2013 proposal,
without modification, to assign status
indicator ‘‘Q2’’ to CPT code 65779.
When the service is furnished with a
separately payable surgical procedure
with status indicator ‘‘T’’ on the same
day, payment for CPT code 65779 is
packaged. Otherwise, payment for CPT
code 65779 is made separately through
APC 0233, which has a final CY 2013
geometric mean cost of approximately
$1,162. The amniotic membrane
procedures and their CY 2013 final APC
assignments are displayed in Table 25
below.

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6. Radiology Oncology
a. Proton Beam Therapy (APCs 0664 and
0667)
APC 0664 (Level I Proton Beam
Radiation Therapy) includes two
procedures: CPT code 77520 (Proton
treatment delivery; simple, without
compensation), which had a CY 2013
proposed rule cost of approximately
$331 (based on 185 single claims of 185
total claims submitted for CY 2011); and
CPT code 77522 (Proton treatment
delivery; simple, with compensation),
which had a proposed rule cost of
approximately $1,191 (based on 14,279
single claims of 15,405 total claims
submitted for CY 2011). APC 0667
(Level II Proton Beam Radiation
Therapy) also includes two procedures:
CPT code 77523 (Proton treatment
delivery, intermediate), which had a
proposed rule cost of approximately
$920 (based on 3,009 single claims out
of 3,202 total claims submitted for CY
2011), and CPT code 77525 (Proton
treatment delivery, complex), which
had a proposed rule cost of
approximately $483 (based on 1,400
single claims out of 1,591 total claims
submitted for CY 2011). Based on these
CY 2011 claims data, under the current
APC structuring the proposed rule cost
of APC 0664 was approximately $1,171,
and the proposed rule cost of APC 0667
was approximately $750.
Because only a few hospitals bill
Medicare for these services, their
payment rates, which are set annually
based on claims data according to the
standard OPPS ratesetting methodology,
may fluctuate significantly from year to
year. For CY 2013, under the current
APC assignments, the proposed rule
cost of APC 0664 was approximately the
same as its CY 2012 payment rate of
$1,184. However, the proposed rule cost
of APC 0667 decreased substantially
from the CY 2012 payment rate. We also
observed that for CY 2013, as in several
prior years, the lower level APC 0664
did not include the lower cost services
among the four CPT codes. For CY 2013,

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we proposed to improve the resource
homogeneity within the proton beam
therapy APCs by including the services
requiring fewer resources in APC 0664
(Level I) and the services requiring
greater resources in APC 0667 (Level II).
Specifically, we proposed to reassign
CPT code 77522 to APC 0667 and to
reassign CPT code 77525 to APC 0664.
Under the proposed reassignment, the
estimated cost of APC 0664 was
approximately $462, and the estimated
cost of APC 0667 was approximately
$1,138. We invited public comments on
this proposal.
Comment: Several commenters
indicated that the decrease in the cost
of APC 0667 is attributable to inaccurate
coding and cost reporting during part of
CY 2010 and part of CY 2011, on the
part of one hospital. The commenters
stated that one hospital’s services that
should have been billed as CPT code
77523 were instead billed as CPT
code77525, which has a lower estimated
cost. They stated that these services
were also reported under an unintended
cost center in the hospital’s cost report,
and argued that the current APC
configuration better reflects the clinical
similarity and relative resources used to
furnish proton beam therapy services.
We received a comment from the
hospital in question indicating the
same. This provider also stated that
these issues were corrected and do not
affect any claims in CY 2012. These
commenters requested that we therefore
forego using the CY 2011 claims data to
set CY 2013 rates because they are based
in part on inaccurate data reported by
one of the few billing providers. They
requested that CMS maintain both the
CY 2012 payment rates and the current
CY 2012 APC configuration through CY
2013, and the HOP Panel agreed with
this recommendation at its August 2012
public meeting.
One commenter recommended that
CMS obtain corrected data from the
provider in question and use the
corrected data in updating the CY 2012

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proton beam therapy payment rates for
CY 2013. The commenter recommended
that if CMS could not accomplish this
in time for publication of the CY 2013
final rule, CMS exclude the reportedly
erroneous data from its ratesetting
process and update the CY 2012
payments for proton beam services for
CY 2013 using the remaining claims
data. In either event, the commenter
recommended that we not restructure
the APCs this year because despite what
the cost data show, simple and complex
proton beam therapy services are not
clinically homogenous.
Another commenter supported the
proposed reduction in payments for
proton beam services. The commenter
stated that given the cost of establishing
and staffing proton beam centers, proton
beam therapy does not yield
commensurate benefit over other
therapies.
Response: We appreciate the public
comments and the HOP Panel’s
recommendation. After consideration of
the public comments we received, we
are updating the payment rates for
proton beam therapy for CY 2013 to
reflect the most recently available
claims data from all providers.
Therefore, we are not maintaining the
CY 2013 payment rates at CY 2012
levels, and we are not excluding the
reportedly erroneous data from the
ratesetting process. However, we are
maintaining the current APC structure
for CY 2013 and will reevaluate the
costs and appropriateness of the APC
structuring for proton beam services
next year. Using the current APC
assignments for proton beam services,
the CY 2013 final geometric mean cost
of APC 0664 (including CPT codes
77520 and 77522) is approximately
$1,169. The CY 2013 final geometric
mean cost of APC 0667 (including CPT
codes 77523 and 77525) is
approximately $702.

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b. Device Construction for Intensity
Modulated Radiation Therapy (IMRT)
(APC 0305)
Effective January 1, 2010, the CPT
Editorial Panel created CPT code 77338
(Construction of multi-leaf collimator
(MLC) device(s) for IMRT per IMRT
plan) to report all of the devices
furnished under a single IMRT
treatment plan. The code was created as
part of an effort to consolidate the
reporting of multiple services or units of
service into a single code. For CY 2011,
we assigned CPT 77338 to APC 0310
(Level III Therapeutic Radiation
Treatment Preparation) based on a
simulated cost of approximately $792
that we calculated using CY 2009 claims
data for the predecessor CPT code 77334
((Treatment devices, design and
construction; complex (irregular blocks,
special shields, compensators, wedges,
molds or casts)).
For CY 2012, using our standard
ratesetting methodology and the first
year of available claims data for CPT
code 77338, and based upon a final rule
cost of approximately $188, we
reassigned this service from APC 0310
to APC 0305 (Level II Therapeutic
Radiation Treatment Preparation) with a
final payment rate of approximately
$264. In our response to public
comments, we noted several possible
reasons for the discrepancy in the
reported cost of the service relative to its
predecessor code. We stated that it is
not unusual for providers to bill a given
service in a manner that is inconsistent
with what we would expect based on
the definition of a new code. We also
noted potential clinical reasons for the
apparent anomaly, such as the inclusion
of labor-intensive physical blocks,
shields, and molds in the service
described by CPT code77334, and
accounting rationales such as the
crosswalking of a single collimator
setting to the charges for the
construction of a physical block, also in
the service described by CPT code
77334. We stated that we saw no basis
to ignore our robust set of single
procedure claims submitted by a
significant number of hospitals by
continuing to simulate a cost for CPT
code 77338.
In the CY 2013 OPPS/ASC proposed
rule Addenda, based on a proposed rule
cost of approximately $293, we
proposed to continue the current
assignment of CPT code 77338 for CY
2013 to APC 0305, and to add this
service to the bypass list which would
increase the number of claims that
could be used in setting its payment
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Comment: One commenter objected to
the continued assignment of CPT code
77338 to APC 0305. The commenter
again noted the low estimated cost of
this service compared to its predecessor
code, and continued to believe that
providers are inappropriately coding the
service. They requested that for CY
2013, we simulate the cost of this
service using the alternative
methodology that we used in CY 2011,
and that we reassign the service to APC
0310, which has a final rule cost of
approximately $1,013.
Response: As we noted last year, we
see no reason to discard the reported
claims data for CPT code 77338, which
has a CY 2013 final rule geometric mean
cost of approximately $297. For the
reasons previously discussed, for CY
2013 we will continue assigning this
CPT code to APC 0305, which has a
final geometric mean cost of
approximately $299. We will reevaluate
whether this placement is appropriate
next year when additional claims data
are available.
c. Other Radiation Oncology Services
(APCs 0310 and 0412)
Comment: One commenter addressed
the proposed payment rates for the
following services: CPT code 77418
(Radiation treatment delivery intensity
modulated radiotherapy), which is
assigned to APC 0412 (Level II
Radiation Therapy) and is separately
paid; CPT code 77295 (3–D Therapeutic
radiology simulation-aided field
setting), which is assigned to APC 0310
(Level III Therapeutic Radiation
Treatment Preparation) and is also
separately paid; CPT code 77373
(Stereotactic body radiation therapy
delivery), which has a status indicator
of ‘‘B’’ (Not covered under the OPPS);
and CPT code 77014 (CT scan for
therapy guidance), which has status
indicator of ‘‘N’’ and is packaged. The
commenter expressed concern about
perceived decreases in payment for
these services.
Response: Under our standard
ratesetting methodology, we proposed a
slight payment increase for CPT 77418
from approximately $459 in CY 2012 to
approximately $484 in CY 2013, based
on a CY 2013 proposed rule geometric
mean cost of $497. Similarly, we
proposed a slight payment increase for
CPT 77295 from approximately $953 in
CY 2012 to approximately $985 in CY
2013, based on a CY 2013 proposed rule
geometric mean cost of $988. The final
CY 2013 geometric mean cost of CPT
77418 is approximately $498, and the
final CY 2013 geometric mean cost of
CPT 77295 is approximately $991.

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Since 2007, we have not recognized
CPT code 77373 under the OPPS, and
hospitals should instead report this
service using HCPCS code G0251
(Linear accelerator based stereotactic
radiosurgery, delivery). HCPCS code
G0251 is assigned to APC 0065 (Level I
Stereotactic Radiosurgery, MRgFUS, and
MEG), whose payment rate also
increased from CY 2012 (final CY 2012
payment of approximately $902) to CY
2013 (final CY 2013 geometric mean
cost of approximately $1,007). CPT code
77014 has been packaged under the
OPPS since 2008 when we implemented
our guidance services policy.
d. Stereotactic Radiosurgery (SRS)
Treatment Delivery Services (APCs
0065, 0066, 0067, and 0127)
For CY 2013, we proposed to continue
to assign CPT code 77371 (Radiation
treatment delivery, stereotactic
radiosurgery (SRS), complete course of
treatment of cranial lesion(s) consisting
of 1 session; multi-source Cobalt 60
based) to APC 0127 (Level IV
Stereotactic Radiosurgery, MRgFUS, and
MEG), which had a CY 2013 proposed
payment rate of approximately $8,011.
We also proposed to continue to
recognize four existing HCPCS G-codes
that describe linear accelerator-based
SRS treatment delivery services for
separate payment in CY 2013.
Specifically, we proposed the following:
to assign HCPCS code G0173 (Linear
accelerator based stereotactic
radiosurgery, complete course of
therapy in one session) and HCPCS code
G0339 (Image-guided robotic linear
accelerator-based stereotactic
radiosurgery, complete course of
therapy in one session or first session of
fractionated treatment) to APC 0067
(Level III Stereotactic Radiosurgery,
MRgFUS, and MEG), which had a CY
2013 proposed payment rate of
approximately $3,294; to assign HCPCS
code G0251 (Linear accelerator-based
stereotactic radiosurgery, delivery
including collimator changes and
custom plugging, fractionated treatment,
all lesions, per session, maximum five
sessions per course of treatment) to APC
0065 (Level I Stereotactic Radiosurgery,
MRgFUS, and MEG), which had a CY
2013 proposed payment rate of
approximately $967; and to assign
HCPCS code G0340 (Image-guided
robotic linear accelerator based
stereotactic radiosurgery, delivery
including collimator changes and
custom plugging, fractionated treatment,
all lesions, per session, second through
fifth sessions, maximum five sessions
per course of treatment) to APC 0066
(Level II Stereotactic Radiosurgery,
MRgFUS, and MEG), which had a CY

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2013 proposed payment rate of
approximately $2,361.
Further, we proposed to continue to
assign SRS CPT codes 77372 (Radiation
treatment delivery, stereotactic
radiosurgery (SRS) (complete course of
treatment of cerebral lesion(s) consisting
of 1 session); linear accelerator based)
and 77373 (Stereotactic body radiation
therapy, treatment delivery, per fraction
to 1 or more lesions, including image
guidance, entire course not to exceed 5
fractions) status indicator ‘‘B’’ (Codes
that are not recognized by OPPS when
submitted on an outpatient hospital Part
B bill type (12x and 13x)) under the
OPPS, to indicate that these CPT codes
are not payable under the OPPS.
Comment: One commenter urged
CMS to reevaluate the APC assignments
for the linear accelerator-based (LINAC)
and robotic Cobalt-60 based stereotactic
radiosurgery (r-SRS) HCPCS codes. The
commenter stated that no clinical data
exist to support the need for differential
payments for LINAC-based and Cobalt60 r-SRS procedures. The commenter
further explained that there is no
clinical evidence to suggest that one
system is superior to the other, and the
costs of purchasing and maintaining the
devices are similar. The commenter
recommended that CMS assign HCPCS
code G0339 and CPT code 77371 to the
same APC, thereby establishing
payment parity for the complete course
of treatment for intracranial and other
head and neck r-SRS, regardless of
equipment or energy source. In
addition, the commenter argued that
this APC reevaluation is necessary to
protect the Medicare program and
beneficiaries from excessive costs
associated with Cobalt-60-based system,
when both the LINAC-based and Cobalt60-based systems are similar in clinical
homogeneity and resource costs.
Response: We disagree with the
commenter’s argument that the LINACbased and Cobalt-60 based systems have
similar resource costs. For the past
several years, we have seen resource
differences based on the geometric mean
costs for the LINAC-based and Cobalt60-based systems, and analysis of our
claims data show that the geometric
mean costs for LINAC-based and Cobalt60-based SRS procedures differ
significantly. Since CY 2007, when CPT
code 77371 became effective, our claims
data have shown consistently a cost of
more than $7,000 for the service
associated with the Cobalt-60-based
system, which is higher than the mean
cost of approximately $3,500 for the
LINAC-based system (described by
HCPCS G-code G0339).
Analysis of the updated CY 2011
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comment period indicates that the codespecific geometric mean costs for the
LINAC-based and Cobalt-60-based
systems continue to differ. Our updated
claims data on the hospital outpatient
claims available for CY 2013 ratesetting
show a geometric mean cost of
approximately $8,138 for CPT code
77371 based on 410 single claims (out
of a total of 4,598 claims), which is
significantly higher than the geometric
mean costs associated with HCPCS
codes G0173, G0251, G0339, and G0340.
Specifically, our claims data indicate a
geometric mean cost of approximately
$2,605 for HCPCS code G0173 based on
923 single claims (out of a total of 1,597
claims), a geometric mean cost of
approximately $1,007 for HCPCS code
G0251 based on 12,965 single claims
(out of a total of 13,746 claims), a
geometric mean cost of approximately
$3,497 for HCPCS code G0339 based on
8,287 single claims (out of a total of
10,462 claims), and a geometric mean
cost of approximately $2,423 for HCPCS
code G0340 based on 25,444 single
claims (out of a total of 25,708 claims).
Because the geometric mean costs of
HCPCS code G0339 and CPT code
77371 differ significantly, we do not
believe it would be appropriate to
provide OPPS payment through a single
APC for these r-SRS treatment delivery
services in CY 2013. We continue to
believe that APC 0127 is an appropriate
APC assignment for CPT code 77371,
and, similarly, that APC 0067 is an
appropriate APC assignment for HCPCS
code G0339 based on consideration of
the clinical characteristics associated
with these procedures and based on the
geometric mean costs for these services
calculated from the most recently
available hospital outpatient claims and
cost report data. Consistent with our
current policy to annually assess the
appropriateness of the APC assignments
for all services under the hospital OPPS,
we will continue to monitor our claims
data for the SRS treatment delivery
services in the future.
As we have stated in the past (74 FR
60456), the OPPS is a prospective
payment system, where APC payment
rates are based on the relative costs of
services as reported to us by hospitals
according to the most recent claims and
cost report data as described in section
II.A. of this final rule with comment
period. The 2 times rule specifies that
the mean cost of the highest cost item
or service within a payment group may
be no more than 2 times greater than the
mean cost of the lowest cost item or
service within the same group. Based on
the 2 times rule, HCPCS code G0339
and CPT code 77371 could not be

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assigned to the same APC and, because
hospitals continue to report very
different costs for these services, we
believe it is appropriate to maintain
their assignments to different payment
groups for CY 2013. As a matter of
payment policy, the OPPS does not set
payment rates for services based on
considerations of clinical effectiveness.
Furthermore, in accordance with the
statute, we budget neutralize the OPPS
each year in the annual update so that
projected changes in spending for
certain services are redistributed to
payment for other services.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposals,
without modification, to continue to
assign CPT code 77371 to APC 0127,
which has a final CY 2013 APC
geometric mean cost of approximately
$8,138, and to continue to assign
HCPCS code G0339 to APC 0067, which
has a final CY 2013 APC geometric
mean cost of approximately $3,395.
e. Intraoperative Radiation Therapy
(IORT) (APC 0412)
(1) Background
The AMA’s CPT Editorial Panel
created three new Category I CPT codes
for intraoperative radiation therapy
(IORT), effective January 1, 2012: CPT
codes 77424 (Intraoperative radiation
treatment delivery, x-ray, single
treatment session); 77425
(Intraoperative radiation treatment
delivery, electrons, single treatment
session); and 77469 (Intraoperative
radiation treatment management). As
with all new CPT codes for CY 2012,
these three codes were included in
Addendum B to the CY 2012 OPPS/ASC
final rule with comment period
(available via the CMS Web site),
effective on January 1, 2012. In
accordance with our standard practice
each year, our clinicians review the
many CPT code changes that will be
effective in the forthcoming year and
make decisions regarding status
indicators and/or APC assignments
based on their understanding of the
nature of the services. We are unable to
include proposed status indicators and/
or APC assignments in the proposed
rule for codes that are not announced by
the AMA’s CPT Editorial Panel prior to
the issuance of the proposed rule.
Therefore, in accordance with our
longstanding policy, we include, in the
final rule with comment period, interim
status indicators and/or APC
assignments for all new CPT codes that
are announced by the AMA’s CPT
Editorial Panel subsequent to the
issuance of the OPPS/ASC proposed

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rule to enable payment for new services
as soon as the codes are effective.
We identified the new codes for IORT
for CY 2012 in Addendum B to the CY
2012 OPPS/ASC final rule with
comment period as being open to public
comment by showing a comment
indicator of ‘‘NI’’ and made interim
status indicator assignments for each of
these new IORT codes, based on our
understanding of the clinical nature of
the services they describe. Specifically,
for CY 2012, we packaged these IORT
service codes with the surgical
procedures with which they are billed,
assigning them interim status indicators
of ‘‘N’’ (Items and Services Packaged
into APC Rates). We did so based on a
policy that was adopted in the CY 2008
OPPS final rule with comment period
(72 FR 66610 through 66659) to package
services that are typically ancillary and
supportive of a principal diagnostic or
therapeutic procedure, which would
generally include intraoperative
services. Because IORT are
intraoperative services furnished as a
single dose during the time of the
related surgical session, we packaged
them into the payment for the principal
surgical procedures with which they are
performed based on claims data used for
the CY 2012 OPPS/ASC final rule with
comment period.
Subsequent to issuance of the CY
2012 OPPS/ASC final rule with
comment period, stakeholders provided
comments on the interim status of these
IORT service codes for CY 2012,
asserting that these services are not
ancillary to the surgical procedures,
urging us to unpackage these codes, and
requesting that we assign them to an
APC reflective of the resources used to
provide the IORT services. Commenters
who responded to the CY 2012 OPPS/
ASC final rule with comment period
argued that IORT services described by
CPT codes 77424 and 77425 are
separate, distinct, and independent
radiation treatment services from the
surgical services to remove a malignant
growth. According to the commenters,
IORT is performed separately by a
radiation oncologist and a medical
physicist when there is concern for
residual unresected cancer because of
narrow margins related to the surgical
resection. A number of the commenters
provided varied estimates of the cost of
IORT as between $4,000 and $7,000 per
treatment, and some commenters cited a
hospital survey of per treatment costs
for the procedure described by CPT
code 77424 of $4,441.17 and for the
procedure described by CPT code 77425
of $6,897.50.
One commenter stated that the x-ray
intraoperative service described by CPT

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code 77424 has previously been
reported with CPT code 0182T (High
dose rate electronic brachytherapy, per
fraction), which is a separately paid
OPPS service. However, the commenter
pointed out that it would not be proper
to report intraoperative radiation
therapy with CPT code 0182T because
now CPT codes 77424 and 77425 more
specifically and accurately describe the
intraoperative radiation services. One
commenter recommended that CPT
code 77425 be mapped to a new
technology APC.
(2) CY 2013 Proposals for CPT Codes
77424, 77425, and 77469
Based on the public comments and
information received on the IORT
policies contained in the CY 2012
OPPS/ASC final rule with comment
period, and after further review and
consideration of those public comments
and the clinical nature of the IORT
procedures, we agreed that IORT
services are not the typical
intraoperative services that we package,
as they are not integral to or dependent
upon the surgical procedure to remove
a malignancy that precedes IORT.
Therefore, for CY 2013, we proposed to
unpackage CPT codes 77424 and 77425
and assign them to APC 0412, currently
titled ‘‘IMRT Treatment Delivery’’ (77
FR 45124). We stated that IORT
treatment services are clinically similar
to other radiation treatment forms, such
as IMRT treatment, which are assigned
to APC 0412. Furthermore, we proposed
to change the title of APC 0412 to
‘‘Level III Radiation Therapy’’ to
encompass a greater number of
clinically similar radiation treatment
modalities. The CY 2013 proposed rule
geometric mean cost for APC 0412,
based on CY 2011 claims data, was
approximately $496. We also proposed
to monitor hospitals’ costs for
furnishing the services described by
CPT codes 77424 and 77425.
In the CY 2013 proposed rule, we
stated that we believe that CPT code
77469 should receive equal treatment to
other radiation management codes, such
as CPT code 77431 (Radiation therapy
management with complete course of
therapy consisting of 1 or 2 fractions
only) and CPT code 77432 (Stereotactic
radiation treatment management of
cranial lesion(s) (complete course of
treatment consisting of 1 session)),
which are assigned status indicator ‘‘B’’
(Codes that are not recognized by OPPS
when submitted on an outpatient
hospital Part B bill type (12x and 13x))
and are not paid under the OPPS.
Therefore, we proposed that the
appropriate status indicator code
assignment for CPT code 77469 be ‘‘B’’

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for nonpayable status under the OPPS
for CY 2013, a change from its current
CY 2012 status indicator assignment of
‘‘N’’ for packaged payment status.
At its August 2012 meeting, the HOP
Panel recommended that CMS assign
CPT code 77424 and CPT code 77425 to
APC 0313 (Brachytherapy), and
consider renaming the APC
‘‘Brachytherapy and Intraoperative
Radiation Therapy.’’ The Panel also
recommended that CMS present to the
Panel cost data regarding CPT codes
77424 and 77425, when available or by
the August 2013 Panel meeting.
Comment: Many commenters
supported the proposal to unpackage
CPT codes 77424 and 77425, but
objected to the proposed assignment of
these codes to APC 0412. The
commenters asserted that APC 0412 is
neither reflective of the clinical
characteristics nor the resources needed
to perform the IORT services described
by CPT codes 77424 and 77425. The
commenters pointed out the clinical
differences between IORT and IMRT, in
that IORT provides a much higher dose
of radiation during a single fraction
(session) lasting about 45 minutes,
while IMRT provides lower doses over
multiple fractions lasting about 15
minutes. The commenters asserted that
IMRT’s cost over the full course of
therapy is $17,000 to $20,000, much
higher than IORT’s cost.
Many commenters requested that
CMS assign CPT codes 77424 and 77425
to an appropriate APC based on clinical
similarity to other radiation treatments
and suggested that CMS use external
cost data to estimate the costs of IORT,
because cost data from hospital claims
are not yet available for these new CPT
codes. Some commenters recommended
that CPT codes 77424 and 77425 be
assigned to APC 0313 (Brachytherapy),
which has a proposed payment rate of
approximately $685, because the IORT
services are more similar to
brachytherapy services than the IMRT
services currently assigned to APC 0412.
These commenters asserted that both
IORT and brachytherapy involve
placement of a radiation source inside
or next to the area of the body requiring
treatment, while IMRT, which is a form
of external beam radiation therapy,
delivers radiation from outside the
body. The commenters opined that CPT
codes 77424 and 77425 and the APC
0313 brachytherapy procedures have
similar resource costs, particularly
because the X-ray based IORT procedure
is comparable to high dose rate (HDR)
brachytherapy, and the X-ray based
IORT system may be used for the
delivery of fractionated breast
brachytherapy, often billed with CPT

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code 0182T (High dose rate electronic
brachytherapy, per fraction), which is
assigned to APC 0313.
Several other commenters stated that
IORT is very different than HDR
brachytherapy, as well as IMRT and
multi-fraction stereotactic radiosurgery,
in terms of both clinical characteristics
and resource costs. Commenters stated
that IORT capital equipment can only be
used for IORT in the operating room,
and not for other forms of radiation
therapy, resulting in less patient
utilization over which to spread costs.
These commenters recommended that
CMS assign CPT codes 77424 and 77425
to APC 0067 (Level III Stereotactic
Radiosurgery, MRgFUS, and MEG),
which has a proposed payment rate of
approximately $3,294. These
commenters believed that IORT is more
similar clinically to stereotactic
radiosurgery (SRS) than IMRT, pointing
out that SRS may be delivered in single
or multiple fraction therapy and has
many fewer (that is, 2 to 5) fractions,
making it more similar to IORT, in that
regard. A few commenters
recommended that CMS assign IORT to
a New Technology APC, with a wide
range of recommended payment rates,
from approximately $4,000 to
approximately $7,000, citing various
data estimates and sources including a
survey of hospitals.
Regarding our proposal to change the
status indicator for CPT code 77469 to
‘‘B’’ and make the service non-payable,
one commenter supported the proposed
change on the basis that it is consistent
with our policy regarding other
radiation treatment management codes.
Response: We appreciate all of the
feedback we received on the CY 2012
interim status indicator assignment of
‘‘N’’ to CPT codes 77424 and 77425 and
the CY 2013 proposal to assign these
CPT codes to APC 0412. As stated in the
CY 2013 OPPS/ASC proposed rule and
described above, we agree with the
commenters that IORT services are not
the typical intraoperative services that
we package, as they are not integral to
or dependent upon the surgical
procedure to remove a malignancy that
precedes IORT.
We agree with commenters that the
resource costs of APC 0412 do not fit
well with single fraction radiation
therapy technologies, such as IORT.
However, we believe the resource costs
of IORT can be accommodated by one
of the existing APCs for radiation
therapy, and therefore, a new
technology APC assignment is not
needed. From a clinical standpoint, we
agree with commenters that the
procedures described by CPT codes
77424 and 77425 share important

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characteristics with SRS, particularly
because SRS may be a single fraction
therapy or involve many fewer fractions
than IMRT. Based on the range of
claimed costs provided by the
commenters, which are all based on
external costs, as we do not yet have
claims data, there is clearly a wide range
of reported or estimated costs for IORT
services, and, as some commenters
indicate, there may be a difference in
the cost structures of CPT codes 77424
and 77425.
After consideration of the public
comments we received, we believe that
an appropriate initial APC assignment
for CPT codes 77424 and 77425 is APC
0065 (Level I Stereotactic Radiosurgery,
MRgFUS, and MEG), in terms of clinical
characteristics, and the range of
estimated costs for IORT services.
Therefore, for CY 2013, we are assigning
CPT codes 77424 and 77425 to APC
0065, which has a CY 2013 final
geometric mean cost of approximately
$1,006. We will review the APC
assignment of CPT codes 77424 and
77425, individually, once we have
OPPS hospital claims data. Regarding
the Panel recommendation that we
present to the Panel cost data regarding
CPT codes 77424 and 77425, we agree
to provide cost data from claims for
these service codes when available.
7. Imaging
a. Non-Ophthalmic Fluorescent
Vascular Angiography (APC 0397)
Effective April 1, 2012, we created
HCPCS code C9733 (Non-ophthalmic
fluorescent vascular angiography (FVA))
for a service that became known to us
via the new technology APC application
process. We assigned HCPCS code
C9733 to APC 0397 (Vascular Imaging),
which has a CY 2012 payment rate of
$154.87 and a status indicator
assignment of ‘‘Q2.’’ The ‘‘Q2’’ status
indicator provides that the service will
have packaged APC payment if billed on
the same date of service as a HCPCS
code assigned status indicator ‘‘T’’; and
in all other circumstances, there is a
separate APC payment for the service.
We proposed to continue to assign
HCPCS code C9733 to APC 0397 for CY
2013, which had a CY 2013 proposed
payment rate of $192.21, and to
continue the assignment of the code to
the ‘‘Q2’’ status indicator.
The HOP Panel, at its August 2012
meeting, recommended that CMS
maintain a status indicator of ‘‘Q2’’ for
HCPCS code C9733, while making no
recommendation as to its APC
assignment. The proposed payment rate
for APC 0397 was $197.08, with a range
in individual procedure geometric mean

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costs from $140.78 to $202.97. We
proposed the assignment of HCPCS code
C9733 to APC 0397 because we believed
that the service described by HCPCS
code C9733 is similar in clinical
characteristics to other vascular imaging
services. We do not have claims cost
data available for HCPCS code C9733
because it was made effective on April
1, 2012. For new HCPCS codes, our
longstanding policy is to wait until we
have claims data on new services before
considering them for reassignment to
clinical APCs other than the originally
assigned APC.
Comment: A number of commenters
were appreciative that CMS created a
new HCPCS code for non-ophthalmic
FVA, but were concerned with the
packaged status that would result from
assigning HCPCS code C9733 status
indicator ‘‘Q2’’ because the procedure is
usually performed with a service having
a ‘‘T’’ status indicator. A few
commenters pointed out that FVA is
effective in assessing perfusion in
tissue, and is particularly useful when
vascular function is diminished. A
number of commenters pointed out that
the procedure is performed
intraoperatively for this purpose, and is
a valuable tool to assist the surgeon with
clinical decision-making. Commenters
also pointed out that the nonophthalmic FVA procedure has been
used primarily in the hospital inpatient
setting, and only recently offered in the
hospital outpatient setting; therefore,
outpatient data are only beginning to
accumulate. However, commenters
believed that because the ‘‘Q2’’ status
indicator will typically result in
packaging the cost of the procedure, the
procedure will not be performed at
many hospitals. The commenters
asserted that it was very important that
CMS change the status indicator of
HCPCS code C9733 to ‘‘S,’’ which is the
same status indicator as all other
procedures assigned to APC 0397.
Moreover, some commenters stated that
other vascular imaging procedures, such
as Doppler Ultrasound, fluoroscopy, and
magnetic resonance angiography (MRA),
are alternatives to the procedure
described by HCPCS code C9733 and
are assigned status indicator ‘‘S’’ rather
than status indicator ‘‘Q2.’’ Another
commenter noted that other modalities
used for tissue perfusion screening in
the hospital outpatient setting are
assigned to APC 0096 (Level II
Noninvasive Physiologic Studies), and
these procedures also are assigned
status indicator ‘‘S.’’ The commenter
opined that assignment of status
indicator ‘‘Q2’’ will encourage
outpatient clinics to schedule multiple

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visits to avoid the packaging of HCPCS
code C9733. One commenter claimed
that only a small number of APCs have
more than one status indicator for their
assigned procedures, and that no other
HCPCS C-codes have a status indicator
of ‘‘Q2.’’ The commenter asserted that
packaged status should only be assigned
to procedures where data indicate that
the costs and services associated with
the procedure are integral to existing
procedures.
One commenter asserted that the
assignment of HCPCS code C9733 to
APC 0397 is not appropriate based on
the costs of the procedure, and
estimated that the cost is approximately
$2,100 per procedure. The commenter
stated that this estimate is based on a
$6,000 monthly lease payment of the
system’s capital with 5 times per month
use, disposable kit costs of
approximately $800, plus $100 in
indirect costs. The commenter
recommended the assignment of HCPCS
code C9733 to APC 0279 (Level II
Angiography and Venography), which
has a CY 2013 proposed payment rate of
approximately $2,219, or assignment of
the C-code to New Technology APC
1522 (Level XXII New Technology),
which has a CY 2013 proposed payment
rate of $2,250, for at least a 3-year
transitional period, until the costs to
perform the non-ophthalmic FVA
procedure are known, in order to
package the procedure.
A few commenters were concerned
that the HOP Panel, and perhaps CMS
as well, were confusing the HCPCS code
C9733 technology with a ‘‘Wood’s
Lamp.’’ The commenters explained the
differences in the two technologies,
indicating that there are clinically
significant differences as a result of the
properties of the fluorescent dyes with
which they are used.
Response: We believe that, when the
non-ophthalmic FVA procedure is
performed with a surgical procedure, it
is ancillary to the surgical service,
providing imaging services that are
supportive and adjunctive to the
surgical service. As a number of
commenters stated, the procedure is
used intraoperatively to assist the
surgeon. In those instances when the
service described by HCPCS code C9733
is performed as a stand-alone service, it
is separately paid. Therefore, we believe
the ‘‘Q2’’ status indicator is appropriate.
Regarding the comment that there are
only a few APCs that have more than
one status indicator, we assign status
indicators to HCPCS codes, not to APCs.
APCs are sometimes composed of
procedures that have similar roles in the
overall provision of services (for
example, they are either major or minor

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services, serve an adjunct role), but this
is not always the case. We disagree that
the ‘‘Q2’’ status indicator will encourage
multiple clinic visits. In cases where
surgery requires intraoperative imaging
to assess tissue perfusion, the procedure
described by HCPCS code C9733 cannot
be provided separate from the surgery.
Regarding the estimated cost of the
procedure that a commenter provided,
we note that the assumptions regarding
the use of the capital equipment
markedly affects the estimate of the cost
of the procedure. The commenter’s
assumed use of the equipment at 5 times
per month, results in the $1,200
monthly capital cost. However, an
assumed monthly use of 20 times results
in $300 monthly costs, and 30 times per
month results in $200 monthly capital
costs, and so on. Low utilization of a
new technology can result in aberrantly
high per case cost estimates and
illustrates why it is important for us to
wait until hospital outpatient claims
data become available to us for use in
ratesetting. We understand the
differences between the non-ophthalmic
FVA and Wood’s Lamp technologies,
and assure the commenters that our
decision is not based on any confusion
regarding the two technologies.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal to
assign HCPCS code C9733 to APC 0397
and to continue to assign the code to
status indicator ‘‘Q2.’’ APC 0397 has a
CY 2013 final geometric mean cost of
approximately $340, which we note is a
significant increase over the CY 2012
proposed rule mean cost.
b. Level II Nervous System Imaging
(APC 0402)
For CY 2013, we proposed to continue
to assign CPT code 78607 (Brain
imaging, tomographic (spect)) in APC
0402 (Level II Nervous System Imaging),
which had a proposed payment rate of
approximately $477.
Comment: Some commenters
requested that CMS assess the accuracy
of the payment rate calculation for APC
0402. One commenter stated that the
proposed 22-percent payment reduction
does not appear to be due to any
significant reduction in hospital charges
for the procedures included in the APC
or the shift from the use of medical
charges to the use of the geometric mean
cost. Another commenter requested that
CMS reassess its APC payment rate
calculation, including the proposed
geometric mean cost of brain SPECT,
which is described by CPT code 78607,
and only phase in a change to the APC
payment rate if the data support a
reduction.

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Response: We reviewed our claims
data and, for the CY 2013 update, used
more claims to determine the payment
rate for APC 0402, as compared to the
CY 2012 update. For the CY 2012 final
rule with comment period, there were
2,593 single claims (out of 4,643 total
claims), while for the CY 2013 proposed
rule, there were 3,062 single claims (out
of 4,793 total claims) used to calculate
the proposed payment rate for APC
0402. Also, as indicated in the file that
we made available with the proposed
rule entitled ‘‘CY 2013 OPPS
Comparison Between Proposed
Geometric Mean and Median Based
Payments,’’ the proposed payment rate
using either payment methodology
shows a decrease in the payment rate for
APC 0402 for the CY 2013 update. That
is, the CY 2013 proposed payment rate
for APC 0402, based on the median cost
methodology, was approximately $497,
while the geometric mean cost
methodology resulted in a CY 2013
proposed payment rate of approximately
$477. While the proposed payment rate
decreased for APC 0402, overall, the use
of the geometric mean methodology has
been positive for many services. In
addition, basing the OPPS payment
calculations on geometric means aligns
the metric used in the ratesetting
methodology for the OPPS with that
used for the IPPS.
Further examination of the claims
data used for this final rule with
comment period revealed an increase in
services assigned to APC 0402.
Specifically, our claims data show a
geometric mean cost of approximately
$472 based on 3,446 single claims (out
of 5,345 total claims). Similarly, we saw
the same pattern of increase in services
and cost for CPT code 78607 from the
proposed rule claims data to this final
rule claims data. That is, for the CY
2013 OPPS/ASC proposed rule, the
proposed geometric mean cost for CPT
code 78607 was approximately $490
based on 2,295 single claims (out of
2,573 total claims), while the final rule
geometric mean cost is approximately
$468 based on 2,592 single claims (out
of 2,902 total claims). We note that CPT
code 78607 represents 75 percent of the
claims for services assigned to APC
0402. Because of the robust claims, we
believe that our claims data accurately
reflect the resource costs of the
procedures assigned to APC 0402,
including the service described by CPT
code 78607. We do not believe that
applying a phase-in change to the APC
payment rate for the brain SPECT CPT
code 78607 is necessary, given the
significant claims data for this
procedure.

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For CY 2011, the AMA’s CPT
Editorial Panel established three new
CPT codes to describe computed
tomography of the abdomen and pelvis.
CPT codes 74176 (Computed
tomography, abdomen and pelvis;
without contrast material), 74177

(Computed tomography, abdomen and
pelvis; with contrast material(s)), and
74178 (Computed tomography,
abdomen and pelvis; without contrast
material in one or both body regions,
followed by contrast material(s) and
further sections in one or both body
regions) were effective January 1, 2011.
As shown in Table 26, for CY 2011,
these services were paid under one of
two methods under the OPPS. They
were either paid separately through a
single APC or through a composite APC.
We assigned CPT code 74176 to APC
0332 (Computed Tomography Without
Contrast), CPT code 74177 to APC 0283
(Computed Tomography With Contrast),

and CPT code 74178 to APC 0333
(Computed Tomography Without
Contrast Followed By Contrast). We also
assigned CPT code 74176 to composite
APC 8005 (CT and CTA Without
Contrast Composite), and CPT codes
74177 and 74178 to composite 8006 (CT
and CTA With Contrast Composite). We
assigned the CPT codes to status
indicator ‘‘Q3’’ to indicate that they
were eligible for composite payment
under the multiple imaging composite
APC methodology when they are
furnished with other computed
tomography procedures performed on
the same patient on the same day.

Consistent with our longstanding
policy for new codes, in Addendum B
of the CY 2011 OPPS/ASC final rule
with comment period, we assigned
these new CPT codes to interim APCs
for CY 2011, with comment indicator
‘‘NI’’ to denote that the codes were new
and the interim APC assignment would
be open to public comment. In
accordance with our longstanding
policy to provide codes to enable
payment to be made for new services as
soon as the code is effective, our interim
APC assignment for each code was
based on our understanding of the
resources required to furnish the service
and its clinical characteristics as
defined in the code descriptor.
As we described in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74259), in general,
stakeholders who provided comments
on the interim APC assignments of these
CPT codes for CY 2011 stated that the
most appropriate approach to
establishing payment for these new
codes was to assign the procedures
described by the codes to APCs that
recognize that each of the new codes
reflects the reporting, under a single

code, of two services that were
previously reported under two separate
codes and that, therefore, payments
would be more accurate and better
reflective of the services under the
OPPS than if we were to establish
payment rates for the codes for CY 2012
using claims data that reflect the
combined cost of the two predecessor
codes. In addition, at the February 28March 1, 2011 Panel meeting, several
presenters expressed their concern and
disagreement with our single APC
assignments for these new codes. The
presenters stated that the payment rates
for the single APC assignments reflected
only half of the true costs of these
services based on their internal
calculated costs. Similar to the public
commenters, the presenters indicated
that, prior to CY 2011, these services
were reported using a combination of
codes, and suggested that CMS revise
the methodology to include these
combinations of codes to determine
accurate payment rates for these
services. Specifically, the presenters
indicated that simulating the costs for
CPT codes 74176, 74177, and 74178

using historical claims data from the
predecessor codes would result in the
best estimates of costs for these CPT
codes and, therefore, the most accurate
payment rates.
After examination of our claims data
for the predecessor codes, and after
considering the various concerns and
recommendations that we received on
this issue (specifically, the views of the
stakeholders who met with us to discuss
this issue, the comments received in
response to the CY 2011 OPPS/ASC
final rule with public comment period,
and input from the Panel at its February
28-March 1, 2011 meeting), we
proposed to revise our payment
methodology for CPT codes 74176,
74177, and 74178 for CY 2012 (76 FR
42235). That is, we proposed to simulate
the costs for CPT codes 74176, 74177,
and 74178 using historical claims data
from the predecessor codes to determine
the most accurate payment rates for
these CPT codes. This new proposed
payment methodology necessitated
establishing two new APCs, specifically,
APC 0331 (Combined Abdominal and
Pelvis CT Without Contrast) to which
CPT code 74176 would be assigned, and

After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal,
without modification, to continue to
assign CPT code 78607 to APC 0402.
The final CY 2013 geometric mean cost
for APC 0402 is approximately $472.
c. Computed Tomography of Abdomen/
Pelvis (APCs 0331 and 0334)

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APC 0334 (Combined Abdominal and
Pelvis CT With Contrast) to which CPT
codes 74177 and 74178 would be
assigned. In addition, we proposed to
continue to assign CPT code 74176 to
composite APC 8005 and CPT codes
74177 and 74178 to composite APC
8006 for CY 2012.
Based on the feedback that we
received from the Panel at its August
10–11, 2011 meeting, and the public
comments received in response to the
CY 2012 OPPS/ASC proposed rule in

support of the proposed revised
payment methodology for CPT codes
74176, 74177, and 74178, we finalized
our proposals in the CY 2012 OPPS/
ASC final rule with comment period.
Specifically, we reassigned CPT code
74176 from APC 0332 to APC 0331, CPT
code 74177 from APC 0283 to APC
0334, and CPT code 74178 from APC
0333 to APC 0334. (We refer readers to
the CY 2012 OPPS/ASC final rule with
comment period for a detailed
description of the methodology we used

to simulate the costs of these procedures
using claims data for the predecessor
CPT codes (76 FR 74259 through
74262).) We also continued with our
composite APC assignments for these
codes. Specifically, we continued to
assign CPT code 74176 to composite
APC 8005 and CPT codes 74177 and
74178 to composite APC 8006. Table 27
below shows the payment rates for these
CPT codes for the CY 2012 update.

We stated in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74262) that we would reassess whether
there is a continued need for these APCs
for the CY 2013 OPPS/ASC update once
we have actual charges for these
services. Because CPT codes 74176,
74177, and 74178 became effective on
January 1, 2011, we have hospital
claims data available for these codes
that we can use for ratesetting for the
first time. In the CY 2013 OPPS/ASC
proposed rule (77 FR 45086), we stated
that analysis of the latest CY 2011
hospital outpatient claims data for the
CY 2013 OPPS/ASC proposed
rulemaking update, which was based on
claims processed with dates of service
from January 1, 2011 through December
31, 2011, revealed a decrease in costs for
the three procedures, compared to the
costs simulated using the predecessor
CPT codes for CY 2012. CPT code 74176
showed a proposed geometric mean cost
of approximately $314 based on 312,493
single claims (out of 713,662 total
claims), while CPT code 74177 showed
a proposed geometric mean cost of
approximately $476 based on 367,002
single claims (out of 951,296 total
claims). In addition, CPT code 74178
showed a proposed geometric mean cost
of approximately $537 based on 184,580

single claims (out of 267,401 total
claims). Because we used hospital
claims data specific to CPT codes 74176,
74177, and 74178, we stated that we
believe these costs accurately reflect the
resources associated with providing
computed tomography of the abdomen
and pelvis as described by these CPT
codes in the HOPD.
Furthermore, our analysis of the CY
2011 claims data available for the
proposed rule showed no 2 times rule
violation for either APC 0331 or APC
0334. Therefore, for CY 2013, we
proposed to continue to assign CPT
code 74176 to APC 0331 and CPT codes
74177 and 74178 to APC 0334. (Because
we have claims data available for these
three CPT codes, we will no longer
simulate their costs using the
predecessor codes as we did in CY
2012.) In addition, we proposed to
continue to assign these codes to their
existing composite APCs for CY 2013.
Specifically, we proposed to continue to
assign CPT code 74176 to composite
APC 8005, and to assign CPT codes
74177 and 74178 to composite APC
8006.
Comment: Several commenters
expressed concern with the decreased
payment rates for APCs 0331 and 0334,
and suggested that the coding changes
that occurred in CY 2011 for CPT codes

74176, 74177, and 74178, attributed to
the payment reduction. Some of the
commenters believed that because the
codes were new in CY 2011, hospitals
have not had enough time to
appropriately adjust their charge
masters to accurately reflect the CY
2011 coding changes. One commenter
urged CMS to take whatever action
necessary to mitigate the payment cuts
for CY 2013. Some of commenters
requested that CMS delay the use of
claims data and continue the use of
historical data for an additional year to
give more time for education and
adjustment of hospital charge masters.
Response: We believe that hospitals
have a process in place to adjust to the
numerous coding changes that occur
annually. There are hundreds of coding
changes (that is, CPT, Level II
Alphanumeric HCPCS, and ICD–9–CM
codes) that occur every year, and
hospitals make changes to their internal
systems (for example, coding, charge
masters, grouper, business office
systems, among other) accordingly to
capture these changes so that their
claims are processed timely and
accurately.
Because of the substantial claims data
that we have for these procedures, we
see no reason to delay the use of the
claims data in determining the costs for

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CPT codes 74176, 74177, and 74178.
Specifically, we were able to use at least
1 million claims that were submitted
during CY 2011 in determining the
payment rates for CPT codes 74176,
74177, and 74178. Our analysis for this
final rule with comment period revealed
a geometric mean cost of approximately
$315 for CPT code 74176 based on
333,144 single claims (out of 769,757
total claims), a geometric mean cost of
approximately $477 for CPT code 74177
based on 388,506 single claims (out of

1,024,117 total claims), and a geometric
mean cost of approximately $538 for
CPT code 74178 based on 194,216 single
claims (out of 283,435 total claims). We
have no reason to believe that our
claims data, as reported by hospitals, do
not accurately reflect the hospital costs
for CPT codes 74176, 74177 and 74178.
After consideration of the public
comments received, we are finalizing
our CY 2013 proposal, without
modification. Specifically, for CY 2013,
we are continuing to assign CPT code
74176 to APC 0331 and CPT codes

74177 and 74178 to APC 0334. In
addition, we are continuing to assign
these CPT codes to their existing
composite APCs for CY 2013.
Specifically, we are continuing to assign
CPT code 74176 to composite APC
8005, and to assign CPT codes 74177
and 74178 to composite APC 8006.
Table 28 below lists the computed
tomography of the abdomen and pelvis
CPT codes along with their status
indicators, and single and composite
APC assignments for CY 2013.

8. Respiratory Services

CY 2013 rulemaking update. Based on
our analysis, we determined that the
configuration of APC 0076 violated the
2 times rule. To eliminate the 2 times
rule violation, we proposed to reassign
CPT codes 31629 and 31634 from APC
0076 to APC 0415 because we believe
this APC appropriately reflects these
services based on their resource costs as
well as clinical homogeneity.
At the August 2012 HOP Panel
meeting, a presenter requested that the
Panel recommend to CMS not to
reassign CPT codes 31629 and 31634 to
APC 0415 for CY 2013. The presenter
stated that including both procedures in
APC 0415 would result in a 2 times rule
violation. In addition, the presenter
recommended that CPT codes 31629
and 31634 be reassigned to APC 0074
(Level IV Endoscopy Upper Airway)
instead of APC 0415. After discussion of
the procedures and review of the
hospital outpatient claims and cost
report data, the Panel recommended
that CPT codes 31629 and 31634 be
reassigned from APC 0076 to APC 0415
for the CY 2013 OPPS update.
Comment: Some commenters
disagreed with the proposal to include
CPT codes 31629 and 31634 in APC
0415, and indicated that including both
procedures reduces the proposed
payment rate for APC 0415 by at least
23 percent. One commenter specified
that adding CPT codes 31629 and

31634, which have greater volumes of
lower geometric mean costs than other
services assigned to APC 0415, reduces
the overall payment of APC 0415. One
commenter indicated that the reduction
in payment would hinder patient access
to the pulmonary services listed under
APC 0415 and recommended alternative
endoscopy lower airway APC
configurations, such as establishing a
new APC titled ‘‘Level III Endoscopy
Lower Airway’’ for six lower endoscopy
procedures, that would include both
CPT codes 31629 and 31634 as well as
four other lower endoscopy procedures.
Specifically, the commenter suggested
including CPT codes 31626
(Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with placement of fiducial
markers, single or multiple), 31631
(Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with placement of tracheal
stent(s) (includes tracheal/bronchial
dilation as required)), 31636
(Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with placement of bronchial
stent(s) (includes tracheal/bronchial
dilation as required), initial bronchus),
31638 (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with revision of tracheal or
bronchial stent inserted at previous
session (includes tracheal/bronchial

a. Bronchoscopy (APC 0415)

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CPT code 31629 (Bronchoscopy, rigid
or flexible, including fluoroscopic
guidance, when performed; with
transbronchial needle aspiration
biopsy(s), trachea, main stem and/or
lobar bronchus(i)) was established by
the AMA’s CPT Editorial Panel in 1987.
CPT code 31634 (Bronchoscopy, rigid or
flexible, including fluoroscopic
guidance, when performed; with
balloon occlusion, with assessment of
air leak, with administration of
occlusive substance (eg, fibrin glue), if
performed) was established effective
January 1, 2011. CPT code 31629 has
been assigned to APC 0076 (Level I
Endoscopy Lower Airway) since August
2000, when the hospital OPPS was
implemented, while CPT code 31634
has been assigned to APC 0076 since the
code was effective on January 1, 2011.
In the CY 2013 OPPS/ASC proposed
rule, we proposed to reassign both CPT
codes 31629 and 31634 from APC 0076
to APC 0415 (the Level II Endoscopy
Lower Airway). Consistent with CMS’
policy of reviewing APC assignments
annually for any 2 times rule violations
and appropriateness of APC
assignments based on the latest hospital
outpatient claims data, we evaluated the
resource cost associated with the
procedures assigned to APC 0076 for the

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dilation as required)), and CPT codes
31629 and 31634. The commenter
explained that CPT codes 31626, 31631,
31636, and 31638 are different from
other procedures assigned to APC 0415
because they require implanting
medical devices in the patient (fiducial
markers, stents), which results in extra
cost. Another commenter requested that
CMS reevaluate the endoscopy lower
airway APCs (0076 and 0415) as more
claims data become available for newer
procedures, and to meet with
stakeholders to discuss the future
reconfiguration of APCs for endoscopy
lower airway.
Response: As indicated above, we
proposed to revise the APC assignments
for CPT codes 31629 and 31634 after our
analysis of the claims data for the CY
2013 rulemaking revealed a 2 times rule
violation in APC 0076. Based on the
latest hospital outpatient claims data for
this final rule with comment period, we
do not agree with the commenters that
we should implement an alternative
configuration for endoscopy lower
airway APCs because the existing APCs
are sufficient to reflect the costs of all
of the procedures assigned to these
APCs. We continue to believe that APC
0415 is the most appropriate APC
assignment for CPT codes 31629 and
31634 because their resource costs are
relatively similar to the procedures
assigned to APC 0415. Therefore, we are
accepting the Panel’s recommendation
and will assign both procedures to APC
0415. For the CY 2013 update, our
analysis of the claims data submitted
during CY 2011 and used for this final
rule with comment period show a
geometric mean cost of approximately
$1,381 based on 2,699 single claims (out
of 12,209 total claims) for CPT code
31629, and a relatively similar
geometric mean cost of approximately
$1,394 for CPT code 31634 based on 10
single claims (out of 16 total claims).
Consistent with CMS’ policy of
reviewing APC assignments annually,
we will again reevaluate the clinical
similarity and resource use of the
procedures in APC 0415 for the CY 2014
rulemaking cycle. Finally, we note that
we regularly accept meetings from
interested parties throughout the year,
and we encourage stakeholders to
continue a dialogue with us during the
rulemaking cycle and throughout the
year on this issue.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal,
without modification, to reassign CPT
codes 31629 and 31634 from APC 0076
to APC 0415. The final CY 2013
geometric mean cost for APC 0415 is
approximately $1,617.

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b. Upper Airway Endoscopy (APC 0075)
For CY 2013, we proposed to continue
to assign CPT codes 31295 (Nasal/sinus
endoscopy, surgical; with dilation of
maxillary sinus ostium (eg, balloon
dilation), transnasal or via canine
fossa;), 31296 (Nasal/sinus endoscopy,
surgical; with dilation of frontal sinus
ostium (eg, balloon dilation)), and 31297
(Nasal/sinus endoscopy, surgical; with
dilation of sphenoid sinus ostium (eg,
balloon dilation)) to APC 0075 (Level V
Endoscopy Upper Airway), which had a
CY 2013 proposed payment rate of
approximately $2,039. In addition, we
proposed to reassign CPT code 31541
(Laryngoscopy, direct, operative, with
excision of tumor and/or stripping of
vocal cords or epiglottis; with operating
microscope or telescope) from APC 0074
(Level IV Endoscopy Upper Airway) to
APC 0075.
Comment: Commenters objected to
the assignment of CPT codes 31295,
31296, and 31297 to APC 0075 because
the commenters believed that the
payment rate for APC 0075 substantially
underpays providers. The commenters
recommended that CMS create split
APCs for sinus surgery with balloon
catheter and without balloon catheter,
the former of which should be deemed
device-dependent to appropriately
account for the cost of such procedures.
The commenters also requested that
CMS not finalize its proposal to reassign
CPT 31541 to APC 0075 and, instead,
maintain the code in APC 0074 for CY
2013.
Response: We believe that the most
clinically appropriate APC assignment
for CPT codes 31295, 31296, and 31297
is APC 0075, which includes other nasal
and sinus endoscopy procedures. When
assigning procedures to an APC, we first
consider the clinical and resource
characteristics of a procedure and
determine the most appropriate APC
assignment. Regarding the resource
costs of the procedures in question, the
commenters asserted costs of
approximately $4,000 for these
procedures, which are currently
assigned to the highest paying clinically
appropriate APC (APC 0075), which is
Level 5 out of 5 levels of APCs for
‘‘endoscopy upper airway.’’ The highest
geometric mean cost of all of the
procedures assigned to APC 0075 is
approximately $4,000. Therefore, even
the nonclaims data-based cost estimate
for these procedures offered by the
commenters is within the approximate
range (although on the high end of the
range) of the geometric mean costs for
procedures assigned to APC 0075. We
do not agree with the commenters that
new APCs should be created to

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differentiate between sinus surgery with
balloon catheter and without balloon
catheter, as APC 0075 accurately reflects
a reasonable distribution of resource
costs reflected in the group of clinically
similar services currently assigned to
the APC. We note that there is currently
no 2 times rule violation in APC 0075.
We do not agree with the commenters
that CPT code 31541 should continue to
be assigned to APC 0074, as CPT code
31541’s geometric mean cost of
approximately $1,962 is higher than the
geometric mean cost for any service
currently assigned to APC 0074 and
would result in a 2 times rule violation
for APC 0074 as well. We believe that
the geometric mean cost and clinical
characteristics of CPT code 31541 justify
its assignment to APC 0075 for CY 2013.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposals,
without modification, to continue to
assign CPT codes 31295, 31296, and
31297 to APC 0075, and reassign CPT
code 31541 to APC 0075, which has a
final CY 2013 APC geometric mean cost
of approximately $2,085.
9. Other Services
a. Payment for Molecular Pathology
Services
For the January 2012 update, the
AMA’s CPT Editorial Panel established
101 new molecular pathology services
CPT codes that were designated as
either Molecular Pathology Procedures
Tier 1 or Molecular Pathology
Procedures Tier 2 effective January 1,
2012. Tier 1 consisted of CPT codes
81200 through 81383, while Tier 2
consisted of CPT codes 81400 through
81408. However, these new molecular
pathology CPT codes are not valid for
payment under Medicare for CY 2012.
Instead, molecular pathology tests for
CY 2012 are billed using combinations
of longstanding CPT codes that describe
each of the various steps required to
perform a given test. This billing
method is called ‘‘stacking’’ because
different ‘‘stacks’’ of codes are billed
depending on the components of the
furnished test. Currently, all of the
stacking codes are paid under the
Clinical Laboratory Fee Schedule
(CLFS) and one stacking code, CPT code
83912 (Molecular diagnostics;
interpretation and report), is paid on
both the CLFS and the Medicare
Physician Fee Schedule (MPFS).
Payment for the interpretation and
report of a molecular pathology test
when furnished and billed by a
physician is made under the MPFS
using the professional component (PC,
or modifier ‘‘26’’) of CPT code 83912

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(83912–26). Payment for the
interpretation and report of a molecular
pathology test when furnished by
nonphysician laboratory staff is made
under the CLFS using CPT code 83912.
Thus, under Medicare, molecular
pathology services are paid under a fee
schedule other than the OPPS.
In Addendum B of the CY 2012
OPPS/ASC final rule with comment
period, we assigned the 101 molecular
pathology services CPT codes to status
indicator ‘‘B’’ to indicate that Medicare
recognizes another more specific HCPCS
code for the service, as well as to
comment indicator ‘‘NI’’ to indicate that
the CPT code was new for CY 2012 and
that public comments would be
accepted on the interim APC assignment
for the new code, if applicable. We
subsequently corrected the status
indicator assignment for these CPT
codes from ‘‘B’’ to ‘‘E’’ to indicate that
they are not paid by Medicare in
Addendum B of the CY 2012 OPPS/ASC
final rule with comment period that was
posted on the CMS Web site. In the CY
2013 OPPS/ASC proposed rule, we
proposed to reassign the status indicator
for the 101 molecular pathology services
CPT codes from ‘‘E’’ to ‘‘A’’ for CY 2013
to indicate that the codes would be paid
under a Medicare fee schedule and not
under the OPPS. The public comments
that we received in response to the CY
2012 OPPS/ASC final rule with
comment period and the CY 2013
OPPS/ASC proposed rule are addressed
below.
Comment: One commenter to the CY
2012 OPPS/ASC final rule with
comment period requested that CMS
consider paying separately for the
molecular pathology services under the
OPPS, and recommended that CMS
reassign the services to status indicator
‘‘X’’ (Paid under OPPS; separate APC
payment).
Several commenters who responded
to the CY 2013 OPPS/ASC proposed
rule requested clarification of the status
indicator assignment and payment
status for the molecular pathology
services. One commenter indicated that
CMS did not specify whether CPT codes
81200 through 81299, 81300 through
81383, and 81400 through 81408 will
continue to be assigned status indicator
‘‘E’’ under the OPPS.
Another commenter pointed out that
CMS did not specifically discuss the
101 molecular pathology services CPT
codes in the CY 2013 OPPS/ASC
proposed rule, but did propose to assign
status indicator ‘‘A’’ to the new
molecular pathology services CPT
codes. The commenter believed that
CMS is unsure as to how these services
will be paid, whether they will be paid

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under the MPFS or under the CLFS. The
commenter recommended that CMS pay
for the molecular pathology services
codes under the MPFS to cover the
professional interpretation and work
components, and under the OPPS to
cover the technical component of the
services when provided in a HOPD.
Response: Molecular pathology
services are not paid under the OPPS.
As explained above, molecular
pathology services currently are billed
using stacking codes that are paid under
the CLFS with one stacking code,
specifically, CPT code 83912, being paid
under both the CLFS and the MPFS. For
the CY 2013 update, the CPT ‘‘stacking’’
codes 83890 through 83914 will be
deleted on December 31, 2012, and will
be replaced with 115 new molecular
pathology CPT codes. Specifically, this
includes the 101 molecular pathology
services CPT codes discussed above
plus an additional 14 new Tier I
Molecular Pathology Procedure CPT
codes that the AMA’s CPT Editorial
Panel established effective January 1,
2013. In addition, CMS established one
HCPCS G-code effective January 1, 2013.
With the exception of the HCPCS Gcode, the 115 molecular pathology CPT
codes will be paid under the CLFS.
Payment for the interpretation and
report of a molecular pathology test
when furnished and billed by a
physician will be made under the MPFS
using the professional component-only
HCPCS code G0452 (Molecular
pathology procedure; physican
interpretation and report). We refer
readers to the CY 2013 MPFS final rule
with comment period for further
information on the molecular pathology
services CPT codes.
Although we did not discuss this
issue in the preamble of the CY 2013
OPPS/ASC proposed rule, we proposed
to assign the 101 molecular pathology
services CPT codes to status indicator
‘‘A’’ for the CY 2013 update.
Specifically, we assigned the 101
molecular pathology services CPT codes
to status indicator ‘‘A’’ in Addendum B
to the proposed rule (which is available
via the Internet on the CMS Web site).
We note that HCPCS codes listed in
Addenda A and B are subject to
comment, and responses to the
comments received are addressed in the
final rule with comment period.
For CY 2013, the 101 molecular
pathology services CPT codes will be
assigned to status indicator ‘‘A’’ because
they will be paid under the CLFS.
Consistent with the OPPS assignment
for the 101 molecular pathology
services, the 14 new CPT codes also will
be assigned to status indicator ‘‘A’’ for
CY 2013. Specifically, CPT codes 81201

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through 81203, 81235, 81252 through
81254, 81321 through 81326, and 81479
will be assigned to status indicator ‘‘A’’
because they will be paid under the
CLFS. In addition, HCPCS code G0452
will be assigned to status indicator ‘‘B’’
to indicate that the HCPCS code
describes a professional componentonly service that is paid under the
MPFS.
In summary, after consideration of the
public comments we received, we are
finalizing our proposal, without
modification, to assign the 101
molecular pathology services CPT codes
to status indicator ‘‘A’’ for CY 2013.
Consistent with the OPPS assignment
for the 101 molecular pathology
services, the 14 new CPT codes also will
be assigned to status indicator ‘‘A’’ for
CY 2013. In addition, HCPCS code
G0452 will be assigned to status
indicator ‘‘B’’ under the OPPS for the
CY 2013 update.
b. Bone Marrow (APC 0112)
For CY 2013, we proposed to continue
to assign CPT code 38240 (Bone marrow
or blood-derived peripheral stem cell
transplantation; allogeneic) and CPT
code 38241 (Bone marrow or bloodderived peripheral stem cell
transplantation; autologous) to APC
0112 (Apheresis and Stem Cell
Procedures), which had a CY 2013
proposed payment rate of approximately
$2,878.
Comment: One commenter requested
that CMS create separate APCs for
autologous and allogeneic transplants in
recognition of the cost difference
between the two procedures. In
addition, the commenter urged CMS to
develop an alternate ratesetting
methodology for low volume services or
services performed by a small number of
providers to more accurately capture
their costs.
Response: We believe that CPT codes
38240 and 38241 are both appropriately
assigned to APC 0112 based on clinical
homogeneity. We note that there is no
2 times rule violation in APC 0112;
therefore, we do not agree with the
commenter’s suggestion that we need to
create separate APCs for autologous and
allogeneic transplants. We appreciate
the commenter’s interest in developing
an alternate ratesetting methodology for
low-volume services as we are always
eager to find improved methods to more
accurately capture costs of services
performed in the hospital outpatient
setting.
After consideration of the public
comment we received, we are finalizing
our CY 2013 proposal, without
modification, to continue to assign CPT
codes 38240 and 38241 to APC 0112,

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
2012, we will package the costs of the
HCPCS code C1749 device into the costs
of the procedures with which the
devices are reported in the hospital
claims data used in OPPS ratesetting.

which has a final CY 2013 APC
geometric mean cost of approximately
$2,972.
IV. OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional PassThrough Payments for Certain Devices

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a. Background
Section 1833(t)(6)(B)(iii) of the Act
requires that, under the OPPS, a
category of devices be eligible for
transitional pass-through payments for
at least 2, but not more than 3 years.
This pass-through payment eligibility
period begins with the first date on
which transitional pass-through
payments may be made for any medical
device that is described by the category.
We may establish a new device category
for pass-through payment in any
quarter. Under our established policy,
we base the pass-through status
expiration date for a device category on
the date on which pass-through
payment is effective for the category,
which is the first date on which passthrough payment may be made for any
medical device that is described by such
category. We propose and finalize the
dates for expiration of pass-through
status for device categories as part of the
OPPS annual update.
We also have an established policy to
package the costs of the devices that are
no longer eligible for pass-through
payments into the costs of the
procedures with which the devices are
reported in the claims data used to set
the payment rates (67 FR 66763).
Brachytherapy sources, which are now
separately paid in accordance with
section 1833(t)(2)(H) of the Act, are an
exception to this established policy.
There currently are four device
categories eligible for pass-through
payment. These device categories are
described by HCPCS code C1749
(Endoscope, retrograde imaging/
illumination colonoscope device
(implantable)), which we made effective
for pass-through payment October 1,
2010; HCPCS codes C1830 (Powered
bone marrow biopsy needle) and C1840
(Lens, intraocular (telescopic)), which
we made effective for pass-through
payment October 1, 2011; and HCPCS
code C1886 (Catheter, extravascular
tissue ablation, any modality
(insertable)), which we made effective
for pass-through payment January 1,
2012. In the CY 2012 OPPS/ASC final
rule with comment period, we finalized
the expiration of pass-through payment
for HCPCS code C1749, which will
expire after December 31, 2012 (76 FR
74278). Therefore, after December 31,

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b. CY 2013 Policy
As stated above, section
1833(t)(6)(B)(iii) of the Act requires that,
under the OPPS, a category of devices
be eligible for transitional pass-through
payments for at least 2, but not more
than 3 years. Device pass-through
categories C1830 and C1840 were
established for pass-through payments
on October 1, 2011, and will have been
eligible for pass-through payments for
more than 2 years but less than 3 years
as of the end of CY 2013. Also, device
pass-through category C1886 was
established for pass-through payments
on January 1, 2012, and will have been
eligible for pass-through payments for at
least 2 years but less than 3 years as of
the end of CY 2013. Therefore, in the CY
2013 OPPS/ASC proposed rule (77 FR
45125), we proposed a pass-through
payment expiration date for device
categories C1830, C1840, and C1886 of
December 31, 2013. Under our proposal,
beginning January 1, 2014, device
categories C1830, C1840, and C1886
will no longer be eligible for passthrough payments, and their respective
device costs would be packaged into the
costs of the procedures with which the
devices are reported in the claims data.
Comment: One commenter expressed
concern that under the CMS proposal to
expire device HCPCS code C1886 from
pass-through payment, CMS will have
difficulty in establishing a payment rate
that will reflect all costs associated with
bronchial thermoplasty, the procedure
with which the HCPCS code C1886
device is used. The commenter
indicated that the two bronchial
thermoplasty codes, CPT code 0276T
(Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with bronchial
thermoplasty, 1 lobe) and CPT code
0277T (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with bronchial
thermoplasty, 2 or more lobes) are
subject to noncoverage policies for all
Category III CPT codes for all but two
MACs, resulting in few Medicare claims
for CY 2012, the year for which CPT
codes 0276T and 0277T are reported for
bronchial thermoplasty, and which will
be used for CY 2014 ratesetting. The
commenter estimated that there are nine
Medicare claims for bronchial
thermoplasty in CY 2011, available for
CY 2013 ratesetting, which were billed
with HCPCS codes C9730 and C9731.
The commenter requested that CMS

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delay the expiration of pass-through
status for HCPCS code C1886 because of
limited data available for CY 2014
ratesetting, and because two Category 1
CPT codes related to bronchial
thermoplasty are expected to become
effective January 1, 2013, which would
result in these procedures being
removed from the MAC local coverage
determinations for noncovered services.
Response: We created HCPCS code
C1886 as a new device category effective
January 1, 2012. As such, there are no
claims for HCPCS code C1886 in our CY
2011 claims data. However, although we
have no claims data for CY 2011, we
have over 300 units of HCPCS code
C1886 reported in the first 8 months of
CY 2012, with robust cost data.
Therefore, we believe that we will have
sufficient CY 2012 claims on which to
base payment rates for the bronchial
thermoplasty procedures with which
HCPCS code C1886 is billed.
After consideration of the public
comment we received, we are finalizing
our proposal to expire from passthrough payment HCPCS C1886 on
December 31, 2013, and to package its
costs with the costs of the procedures
with which it is billed.
We did not receive any public
comments regarding our proposals to
expire pass-through payment eligibility
for device categories C1830 and C1840
and to package their respective costs
into the costs of the procedures with
which the devices are reported.
Therefore, we are finalizing our
proposals to expire from pass-through
payment these device categories, and to
package their costs with the costs of the
procedures with which they are billed.
We also received a number of
comments related to packaging the costs
of HCPCS code C1749 into the costs of
the procedures with which the HCPCS
code C1749 device are reported, a policy
we finalized in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74278). We are discussing these public
comments in this section instead of the
section on packaging because of their
relationship to device pass-through
payment.
Comment: A few commenters asserted
that packaging payment for the HCPCS
code C1749 device (retrograde
colonoscope or Third Eye Retroscope)
into the costs of colonoscopy procedure
codes, with which it is billed, after the
period of pass-through payment ends on
December 31, 2012, will not provide
adequate payment for use of the device.
One commenter based this assertion
on a study of CY 2011 Medicare claims
data (which the commenter summarized
in its comment letter) for 7 diagnostic
colonoscopy procedures found in APC

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0143 (Lower GI endoscopy) performed
with HCPCS code C1749, finding that
the weighted geometric mean costs of
procedures in which HCPCS code
C1749 was used is approximately $969;
the cost of the same 7 colonoscopy
procedures without HCPCS code C1749
is approximately $437, showing a cost
difference of approximately $532, which
it attributed to the cost of the HCPCS
code C1749 device. At the same time,
the commenter pointed out that it
identified 688 claims for these 7
colonoscopy procedure codes that
included units of HCPCS code C1749,
while there were 1,067,828 claims for
the same 7 procedure codes that did not
include HCPCS code C1749 on the
claim, or only 0.064 percent of the total
claims for these 7 codes that included
HCPCS code C1749. Therefore, the
commenter claimed that the proposed
rates for existing colonoscopy
procedures do not fairly reflect the costs
of HCPCS code C1749. The commenter
further asserted that the proposed APC
0143 payment rate of $691.58 would not
pay hospitals adequately for the cost of
a procedure using the HCPCS code
C1749 device. The commenter claimed
that the payment shortfall would be
even greater in the ASC setting, where
the proposed payment rate for
colonoscopies is $389.60. The
commenter requested that CMS create a
G-code (entitled ‘‘colonoscopy, flexible,
proximal to splenic flexure; with
continuous retrograde examination’’) to
be billed along with existing
colonoscopy procedure codes when
using the HCPCS code C1749 device;
assign the new G-code and its costs to
a unique device dependent APC under
the OPPS and a device-intensive APC
under the ASC payment system; and
require that HCPCS code C1749 be
billed with the new G-code.
Some commenters suggested that
CMS continue to pay for HCPCS code
C1749 separately, based on OPPS claims
data, from the APC payment for the
procedure under a unique devicedependent APC in the OPPS and a
device-intensive APC for ASC payment
because the HCPCS code C1749 device
represents the primary cost of this
procedure. Another commenter
requested that CMS extend the passthrough payment for HCPCS code C1749
through CY 2013 to help further data
collection for the device regarding its
clinical role and to ensure access to the
device for endoscopists’ use.
A number of commenters, including
those who were patients or relatives of
patients, emphasized the importance of
being examined by the Third Eye
Retroscope, the device upon which
HCPCS code C1749 is based, because it

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provides dramatically improved
detection rates of pre-cancerous
adenomas, and urged CMS to improve
payment for the HCPCS code C1749
procedure. Several commenters claimed
that the proposal did not provide a code
or payment to report use of the HCPCS
code C1749 device.
Response: HCPCS code C1749 was
created for device pass-through payment
of the retrograde colonoscope effective
October 1, 2010. Under the statute,
hospitals are paid for devices eligible for
pass-through payment, which is
payment for the device in addition to
the usual APC payment rate, for at least
2 but not more than 3 years from the
date we establish pass-through payment.
We finalized the expiration of passthrough payment eligibility for HCPCS
code C1749 on December 31, 2012, and,
consistent with our normal ratesetting
methodology for expired device passthrough payment, we finalized in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74278) our
policy to package the costs of the
HCPCS code C1749 device with the
procedures with which it is billed,
effective January 1, 2013 (76 FR 74278).
For CY 2013, there are 692 units of
HCPCS code C1749 reported in our CY
2011 OPPS claims data, with a
geometric mean cost of approximately
$536. For CY 2013, these costs would be
packaged into the procedures with
which HCPCS code C1749 are billed. CY
2011 was the first complete year that
HCPCS code C1749 was effective, and
we assume that utilization of this new
device will grow over time.
We do not agree with the commenter
that using the HCPCS code C1749
retrograde colonoscope during a
colonoscopy is a separate procedure,
and therefore would require a G-code to
describe a separate procedure. We
believe that the retrograde colonoscopic
portion of the procedure entails a small
incremental amount of colonoscopy
procedure time, as it is primarily used
during withdrawal of the colonoscope,
and there are few additional resource
costs (such as procedure room time,
equipment costs) other than the HCPCS
code C1749 device itself, according to
the commenter in its study of the 7
colonoscopy procedure codes.
Therefore, the retrograde portion of the
procedure is not a separate procedure
on which to base a new G-code.
Therefore, we will package costs for
HCPCS code C1749 with the
colonoscopic procedures with which
they are billed according to our standard
policy. Because we are declining to
create a G-code to describe the
retrograde colonoscopic portion of
colonoscopy procedures, there is no

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need to create a new, dedicated devicedependent APC, as requested by the
commenter.
We also do not agree with the
commenter’s alternate suggestion that
separate payment is needed for HCPCS
code C1749 at this time. HCPCS code
C1749 is currently under separate
payment under the pass-through
provision, and once pass-through status
expires, device costs are packaged into
the payment for the procedure.
Regarding the commenter’s request
that we extend the eligibility for passthrough payment of HCPCS code C1749
through CY 2013, based on the statutory
limits at section 1833(t)(6)(B)(iii) of the
Act and related payment policies not
permitting partial year rate changes, we
are not able to further extend passthrough payment for HCPCS code
C1749. Moreover, we will be able to
track the HCPCS code C1886 device
utilization in CY 2013 even without the
pass-through payment eligibility
because HCPCS code C1749 will still be
required to be reported with the
procedures with which it is billed.
The commenters who believe that
HCPCS codes for pass-through devices
become inactive when pass-through
status for a device expires are incorrect.
Under our longstanding policy, once the
period of device pass-through payment
is complete, we package the costs of the
devices with the procedures with which
they are billed. In the case of HCPCS
code C1749, as stated previously, it is
our proposal to package the device costs
with the colonoscopy procedures with
which the retrograde colonoscope is
billed, effective January 1, 2013, to
maintain HCPCS code C1749 for the
device, and to require hospitals to
include HCPCS code C1749 and its costs
on the claims for the procedures with
which it is billed. This will provide
assurance that the costs of HCPCS code
C1749 will be represented in our claims
data and accounted for in the relevant
APC payment rates.
After consideration of the public
comments we received, we are
finalizing our proposals concerning the
expiration for pass-through payment
eligibility for device category codes
C1830, C1840, and C1886 as of
December 31, 2013, and to package the
device costs with the respective
procedures with which these devices
are billed. Furthermore, we are
maintaining our previous decision to
package the costs of HCPCS code C1749
with the procedures with which it is
billed, as of January 1, 2013.

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2. Provisions for Reducing Transitional
Pass-through Payments To Offset Costs
Packaged Into APC Groups

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a. Background
Section 1833(t)(6)(D)(ii) of the Act sets
the amount of additional pass-through
payment for an eligible device as the
amount by which the hospital’s charges
for a device, adjusted to cost (cost of
device) exceeds the portion of the
otherwise applicable Medicare
outpatient department fee schedule
amount (APC payment amount)
associated with the device. We have an
established policy to estimate the
portion of each APC payment rate that
could reasonably be attributed to the
cost of the associated devices that are
eligible for pass-through payments (66
FR 59904) for purposes of estimating the
portion of the otherwise applicable APC
payment amount associated with the
device. For eligible device categories,
we deduct an amount that reflects the
portion of the APC payment amount
that we determine is associated with the
cost of the device, defined as the device
APC offset amount, from the charges
adjusted to cost for the device, as
provided by section 1833(t)(6)(D)(ii) of
the Act, to determine the eligible
device’s pass-through payment amount.
We have consistently employed an
established methodology to estimate the
portion of each APC payment rate that
could reasonably be attributed to the
cost of an associated device eligible for
pass-through payment, using claims
data from the period used for the most
recent recalibration of the APC rates (72
FR 66751 through 66752). We establish
and update the applicable device APC
offset amounts for eligible pass-through
device categories through the
transmittals that implement the
quarterly OPPS updates.
We currently have published a list of
all procedural APCs with the CY 2012
portions (both percentages and dollar
amounts) of the APC payment amounts
that we determine are associated with
the cost of devices on the CMS Web site
at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. The
dollar amounts are used as the device
APC offset amounts. In addition, in
accordance with our established
practice, the device APC offset amounts
in a related APC are used in order to
evaluate whether the cost of a device in
an application for a new device category
for pass-through payment is not
insignificant in relation to the APC
payment amount for the service related
to the category of devices, as specified
in our regulations at § 419.66(d).

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Beginning in CY 2010, we include
packaged costs related to implantable
biologicals in the device offset
calculations in accordance with our
policy that the pass-through evaluation
process and payment methodology for
implantable biologicals that are
surgically inserted or implanted
(through a surgical incision or a natural
orifice) and that are newly approved for
pass-through status beginning on or
after January 1, 2010, be the device passthrough process and payment
methodology only (74 FR 60476).
b. CY 2013 Policy
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45125), we proposed to
continue, for CY 2013, our established
methodology to estimate the portion of
each APC payment rate that could
reasonably be attributed to (that is,
reflect) the cost of an associated device
eligible for pass-through payment, using
claims data from the period used for the
most recent recalibration of the APC
rates. We proposed to continue our
policy, for CY 2013, that the passthrough evaluation process and passthrough payment methodology for
implantable biologicals that are
surgically inserted or implanted
(through a surgical incision or a natural
orifice) and that are newly approved for
pass-through status beginning on or
after January 1, 2010, be the device passthrough process and payment
methodology only. The rationale for this
policy is provided in the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60471 through 60477). We
also proposed to continue our
established policies for calculating and
setting the device APC offset amounts
for each device category eligible for
pass-through payment. In addition, we
proposed to continue to review each
new device category on a case-by-case
basis to determine whether device costs
associated with the new category are
already packaged into the existing APC
structure. If device costs packaged into
the existing APC structure are
associated with the new category, we
proposed to deduct the device APC
offset amount from the pass-through
payment for the device category. As
stated earlier, these device APC offset
amounts also would be used in order to
evaluate whether the cost of a device in
an application for a new device category
for pass-through payment is not
insignificant in relation to the APC
payment amount for the service related
to the category of devices (§ 419.66(d)).
For CY 2013, we also proposed to
continue our policy established in CY
2010 to include implantable biologicals
in our calculation of the device APC

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offset amounts. In addition, we
proposed to continue to calculate and
set any device APC offset amount for a
new device pass-through category that
includes a newly eligible implantable
biological beginning in CY 2013 using
the same methodology we have
historically used to calculate and set
device APC offset amounts for device
categories eligible for pass-through
payment, and to include the costs of
implantable biologicals in the
calculation of the device APC offset
amounts.
In addition, we proposed to update,
on the CMS Web site at http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/index.html the list of all procedural
APCs with the final CY 2013 portions of
the APC payment amounts that we
determine are associated with the cost
of devices so that this information is
available for use by the public in
developing potential CY 2013 device
pass-through payment applications and
by CMS in reviewing those applications.
Comment: One commenter
recommended that all biologicals,
including implantable biologicals that
are approved by the FDA under
biological license applications (BLAs),
be treated as drugs, rather than as
devices, for pass-through payment
purposes for CY 2013. The commenter
claimed that when Congress enacted the
current payment system for SCODs that
previously had pass-through status, it
intended for biologicals approved under
BLAs to be paid under the specific
statutory provisions for drugs. The
commenter argued that it is only logical,
then, that Congress would have
intended for these BLA-approved
therapies to be paid as pass-through
drugs as well. The commenter requested
that, if CMS continues to evaluate
implantable biologicals under the passthrough device criteria, CMS clarify its
policy that the device pass-through
criteria apply only to biologicals if they
are solely surgically implanted
according to their FDA approved
indications. The commenter stated that
the current regulation at 42 CFR
419.64(a)(4) is unclear how we would
evaluate pass-through eligibility of a
biological that has both surgically
implanted and nonimplantable
indications. The commenter stated that
the explanation CMS provided in the
CY 2012 OPPS/ASC final rule with
comment period, that ‘‘we mean to
exclude from consideration for drug and
biological pass-through status any
biological that has an indication such
that it may function as a surgically
implanted or inserted biological, even if
there are also indications in which the

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biological is not surgically implanted or
inserted’’ (76 FR 74280), is unclear and
inconsistent with what CMS has stated
previously in policy and billing
instructions. The commenter
recommended that CMS revise the
regulation text so that if refers to ‘‘a
biological that is not always surgically
implanted into the body.’’
Response: As stated in previous
OPPS/ASC final rules with comment
period, we evaluate implantable
biologicals that function as, and are
substitutes for, implantable devices for
OPPS payment purposes. This is done
regardless of their category of FDA
approval (74 FR 60476; 75 FR 71924; 76
FR 74279 through 74280). We do not
believe it is necessary to make our OPPS
payment policies regarding implantable
biologicals dependent on categories of
FDA approval, the intent of which is to
ensure the safety and effectiveness of
medical products.
We do not agree with the commenter
who asserted that Congress intended
biologicals approved under BLAs to be
paid under the specific OPPS statutory
provisions that apply to SCODs,
including the pass-through provisions.
Moreover, as we stated in previous
OPPS/ASC final rules with comment
period, Congress did not specify in the
statute that we must pay for implantable
biologicals as biologicals rather than
devices, if they also meet our criteria for
payment as a device (74 FR 60476; 75
FR 71924; and 76 FR 74280). We
continue to believe that implantable
biologicals meet both the definitions of
a device and a biological and that, for
payment purposes, it is appropriate for
us to consider implantable biologicals as
implantable devices in all cases, and not
as biologicals.
We do not agree with the commenter’s
assertion that the explanation offered in
the CY 2012 OPPS/ASC final rule with
comment period of the regulation text at
42 CFR 419.64(a)(4)(iii) which indicates
that a biological for drug pass-through
payment purposes must not be
surgically implanted or inserted into the
body, is inconsistent with our prior
description of this policy, the
application of this policy to date, and
billing instruction to hospitals. Our
policy and application process have
consistently reflected that implantable
biologicals are subject to the device
application process since the beginning
of CY 2010. For CYs 2010, 2011, and
2012, we finalized the same policy that
the pass-through evaluation process and
payment methodology for implantable
biologicals that are surgically inserted or
implanted (through a surgical incision
or a natural orifice), and that are newly
approved for pass-through status as of

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January 1, 2010, be the device passthrough process and payment
methodology only (74 FR 60476, 75 FR
71924, and 76 FR 74280, respectively).
We have not established a policy in any
year that stated that implantable
biologicals needed to be solely
surgically inserted or implanted to be
subject to the device pass-through
process and payment methodology.
Furthermore, there is no inconsistency
with our policy and billing instructions
regarding pass-through devices or
implantable biologicals because there
are no billing instructions regarding the
device pass-through application
process. Rather, application instructions
are found on the CMS Web site
(currently at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Downloads/catapp.pdf). The language
on the device application web site is
consistent with the language in the CYs
2010, 2011, and 2012 final rules with
comment period, stating that, as of
January 1, 2010, implantable biologicals
that are surgically inserted or implanted
(through a surgical incision or natural
orifice) are being evaluated for device
pass-through payment under the
instructions using the device passthrough process. We reiterate our
explanation provided in the CY 2012
final rule with comment period (76 FR
74280) regarding the regulatory
language at 42 CFR 419.64(a)(4), that we
mean to exclude from consideration for
drug and biological pass-through status
any biological that has an indication
such that it may function as a surgically
implanted or inserted biological, even if
there also are indications in which the
biological is not surgically implanted or
inserted. We will add similar language
to our device and drug pass-through
application Web sites as well.
We are finalizing the following
proposals for CY 2013: to continue our
established methodology to estimate the
portion of each APC payment rate that
could reasonably reflect the cost of an
associated device eligible for passthrough payment; to continue our policy
that the pass-through evaluation process
and pass-through payment methodology
for implantable biologicals that are
surgically inserted or implanted
(through a surgical incision or a natural
orifice) and that are newly approved for
pass-through status beginning on or
after January 1, 2010, be the device passthrough process and payment
methodology only; to continue our
established policies for calculating and
setting the device APC offset amounts
for each device category eligible for
pass-through payment; and to continue

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to review each new device category on
a case-by-case basis to determine
whether device costs associated with
the new category are already packaged
into the existing APC structure, and, if
device costs packaged into the existing
APC structure are associated with the
new category, to deduct the device APC
offset amount from the pass-through
payment for the device category.
For CY 2013, we also are finalizing
our proposal and continuing our policy
established in CY 2010 to include
implantable biologicals in our
calculation of the device APC offset
amounts, and to continue to calculate
and set any device APC offset amount
for a new device pass-through category
that includes a newly eligible
implantable biological beginning in CY
2013 using the same methodology we
have historically used to calculate and
set device APC offset amounts for
device categories eligible for passthrough payment, and to include the
costs of implantable biologicals in the
calculation of the device APC offset
amounts.
In addition, we will update, on the
CMS Web site at http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html the list of all procedural
APCs with the final CY 2013 portions of
the APC payment amounts that we
determine are associated with the cost
of devices so that this information is
available for use by the public in
developing potential CY 2013 device
pass-through payment applications and
by CMS in reviewing those applications.
3. Clarification of Existing Device
Category Criterion
a. Background
Section 1833(t)(6)(B)(ii)(IV) of the Act
directs the Secretary to establish a new
device category for pass-through
payment for which none of the passthrough categories in effect (or that were
previously in effect) is appropriate.
Commenters who responded to our
various proposed rules, as well as
applicants for new device categories,
had expressed concern that some of our
existing and previously in effect device
category descriptors were overly broad,
and that the device category descriptors
as they are currently written may
preclude some new technologies from
qualifying for establishment of a new
device category for pass-through
payment (70 FR 68630 through 68631).
As a result of these comments, we
finalized a policy, effective January 1,
2006, to create an additional category
for devices that meet all of the criteria
required to establish a new category for

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pass-through payment in instances
where we believe that an existing or
previously in effect category descriptor
does not appropriately describe the new
device. Accordingly, effective January 1,
2006, we revised § 419.66(c)(1) of the
regulations to reflect this policy change.
In order to determine if a new device is
appropriately described by any existing
or previously in effect category of
devices, we apply two tests based upon
our evaluation of information provided
to us in the device category application.
First, an applicant for a new device
category must show that its device is not
similar to devices (including related
predicate devices) whose costs are
reflected in the currently available
OPPS claims data in the most recent
OPPS update. Second, an applicant
must demonstrate that utilization of its
device provides a substantial clinical
improvement for Medicare beneficiaries
compared with currently available
treatments, including procedures
utilizing devices in any existing or
previously in effect device categories.
We consider a new device that meets
both of these tests not to be
appropriately described by any existing
or previously in effect pass-through
device categories (70 FR 68630 through
68631).
b. Clarification of CY 2013 Policy
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45126), we proposed, for CY
2013, to clarify the test that requires an
applicant for a new device category to
show that its device is not similar to
devices (including related predicate
devices) whose costs are reflected in the
currently available OPPS claims data in
the most recent OPPS update. We
clarified that this test includes showing
that a new device is not similar to
predicate devices that once belonged in
any existing or previously in effect passthrough device categories. Under this
test, a candidate device may not be
considered to be appropriately
described by any existing or previously
in effect pass-through device categories
if the applicant adequately demonstrates
that the candidate device is not similar
to devices (including related predicate
devices) that belong or once belonged to
an existing or any previously in effect
device category, and that the candidate
device is not similar to devices whose
costs are reflected in the OPPS claims
data in the most recent OPPS update.
The substantial clinical improvement
criterion, which also must be satisfied
in every case, as indicated in
§ 419.66(c)(2) of our regulations, is
separate from the criterion that a
candidate device not be similar to
devices in any existing or previously in

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effect pass-through categories. We
invited public comments regarding this
proposed clarification.
We did not receive any public
comments on our proposal to clarify the
test that requires an applicant for a new
device category to show that its device
is not similar to devices (including
related predicate devices) whose costs
are reflected in the currently available
OPPS claims data. Therefore, we are
clarifying our existing policy as noted
above.
B. Adjustment to OPPS Payment for No
Cost/Full Credit and Partial Credit
Devices
1. Background
To ensure equitable payment when
the hospital receives a device without
cost or with full credit, in CY 2007, we
implemented a policy to reduce the
payment for specified device-dependent
APCs by the estimated portion of the
APC payment attributable to device
costs (that is, the device offset) when the
hospital receives a specified device at
no cost or with full credit (71 FR 68071
through 68077). Hospitals are instructed
to report no cost/full credit cases using
the ‘‘FB’’ modifier on the line with the
procedure code in which the no cost/
full credit device is used. In cases in
which the device is furnished without
cost or with full credit, the hospital is
instructed to report a token device
charge of less than $1.01. In cases in
which the device being inserted is an
upgrade (either of the same type of
device or to a different type of device)
with a full credit for the device being
replaced, the hospital is instructed to
report as the device charge the
difference between its usual charge for
the device being implanted and its usual
charge for the device for which it
received full credit. In CY 2008, we
expanded this payment adjustment
policy to include cases in which
hospitals receive partial credit of 50
percent or more of the cost of a specified
device. Hospitals are instructed to
append the ‘‘FC’’ modifier to the
procedure code that reports the service
provided to furnish the device when
they receive a partial credit of 50
percent or more of the cost of the new
device. We refer readers to the CY 2008
OPPS/ASC final rule with comment
period for more background information
on the ‘‘FB’’ and ‘‘FC’’ payment
adjustment policies (72 FR 66743
through 66749).
2. APCs and Devices Subject to the
Adjustment Policy
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45126), we proposed, for CY

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2013, to continue the existing policy of
reducing OPPS payment for specified
APCs by 100 percent of the device offset
amount when a hospital furnishes a
specified device without cost or with a
full credit and by 50 percent of the
device offset amount when the hospital
receives partial credit in the amount of
50 percent or more of the cost for the
specified device. (We refer readers to
section II.A.2.d.(1) of this final rule with
comment period for a description of our
standard ratesetting methodology for
device-dependent APCs.)
For CY 2013, we also proposed to
continue using the three criteria
established in the CY 2007 OPPS/ASC
final rule with comment period for
determining the APCs to which this
policy applies (71 FR 68072 through
68077). Specifically: (1) All procedures
assigned to the selected APCs must
involve implantable devices that would
be reported if device insertion
procedures were performed; (2) the
required devices must be surgically
inserted or implanted devices that
remain in the patient’s body after the
conclusion of the procedure (at least
temporarily); and (3) the device offset
amount must be significant, which, for
purposes of this policy, is defined as
exceeding 40 percent of the APC cost.
We also proposed to continue to restrict
the devices to which the APC payment
adjustment would apply to a specific set
of costly devices to ensure that the
adjustment would not be triggered by
the implantation of an inexpensive
device whose cost would not constitute
a significant proportion of the total
payment rate for an APC. We stated in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45127) that we continue to
believe these criteria are appropriate
because free devices and device credits
are likely to be associated with
particular cases only when the device
must be reported on the claim and is of
a type that is implanted and remains in
the body when the beneficiary leaves
the hospital. We believe that the
reduction in payment is appropriate
only when the cost of the device is a
significant part of the total cost of the
APC into which the device cost is
packaged, and that the 40-percent
threshold is a reasonable definition of a
significant cost.
As indicated in the CY 2013 OPPS/
ASC proposed rule (77 FR 45127), we
examined the offset amounts calculated
from the CY 2013 proposed rule data
and the clinical characteristics of APCs
to determine whether the APCs to
which the no cost/full credit and partial
credit device adjustment policy applied
in CY 2012 continue to meet the criteria
for CY 2013, and to determine whether

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other APCs to which the policy did not
apply in CY 2012 would meet the
criteria for CY 2013. Based on the CY
2011 claims data available for the
proposed rule, we did not propose any
changes to the APCs and devices to
which this policy applies.
Table 20 of the CY 2013 OPPS/ASC
proposed rule (77 FR 45127) listed the
proposed APCs to which the payment
adjustment policy for no cost/full credit
and partial credit devices would apply
in CY 2013, and displayed the proposed
payment adjustment percentages for
both no cost/full credit and partial
credit circumstances. We proposed that
the no cost/full credit adjustment for
each APC to which this policy would
continue to apply would be the device
offset percentage for the APC (the
estimated percentage of the APC cost
that is attributable to the device costs
that are already packaged into the APC).
We also proposed that the partial credit
device adjustment for each APC would
continue to be 50 percent of the no cost/
full credit adjustment for the APC.
Table 21 of the CY 2013 OPPS/ASC
proposed rule (77 FR 45128) listed the
proposed devices to which the payment
adjustment policy for no cost/full credit
and partial credit devices would apply
in CY 2013. We stated in the CY 2013
proposed rule (77 FR 45127) that we
would update the lists of APCs and
devices to which the no cost/full credit
and partial credit device adjustment
policy would apply for CY 2013,
consistent with the three criteria
discussed earlier in this section, based
on the final CY 2011 claims data
available for the CY 2013 OPPS/ASC
final rule with comment period. The
updated lists of APCs and devices
appear below in Table 29 and Table 30,
respectively, of this final rule with
comment period. We note that there are
no changes to the lists of APCs and
devices compared to the proposed rule
for CY 2013.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45127), we proposed, for CY
2013, that OPPS payments for
implantation procedures to which the
‘‘FB’’ modifier is appended are reduced
by 100 percent of the device offset for
no cost/full credit cases when both a
device code listed in Table 21 of the
proposed rule is present on the claim,
and the procedure code maps to an APC
listed in Table 20 of the proposed rule.
We also proposed that OPPS payments
for implantation procedures to which
the ‘‘FC’’ modifier is appended are
reduced by 50 percent of the device
offset when both a device code listed in
Table 21 of the proposed rule is present
on the claim and the procedure code
maps to an APC listed in Table 20 of the

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proposed rule. Beneficiary copayment is
based on the reduced amount when
either the ‘‘FB’’ modifier or the ‘‘FC’’
modifier is billed and the procedure and
device codes appear on the lists of
procedures and devices to which this
policy applies.
Comment: Commenters reported that
there are some instances in which the
hospital receives a full credit for only
one component of a pacemaker or ICD
replacement procedure that involves
both a lead and a generator. Specifically,
the commenters noted that the 2012
CPT Code Book states that when a pulse
generator insertion involves the
insertion or replacement of one or more
lead(s), use system CPT codes 33206
(Insertion of new or replacement of
permanent pacemaker with transvenous
electrode(s); atrial), 33207 (Insertion of
new or replacement of permanent
pacemaker with transvenous
electrode(s); ventricular), and 33208
(Insertion of new or replacement of
permanent pacemaker with transvenous
electrode(s); atrial and ventricular) for
pacemakers or CPT code 33249
(Insertion or replacement of permanent
pacing cardioverter-defibrillator system
with transvenous lead(s), single or dual
chamber) for pacing cardioverterdefibrillators. The commenters noted
that hospitals would still be required to
assign an ‘‘FB’’ or ‘‘FC’’ modifier to the
procedure code representing the
replacement procedure, and the
applicable offset would be applied to
the entire APC payment, even when
only one of the devices involved in the
procedure was received at no cost or
with full or partial credit. According to
the commenters, the offset reduction
may actually be much greater or much
less than the credit received by the
hospital, depending upon the
component that was credited. The
commenters requested that CMS
alleviate this issue by allowing hospitals
to bill individual CPT codes for each
component of the replacement
procedure, rather than requiring the
reporting of a full system as suggested
by the CPT guidance. The commenters
stated that this would allow the FB or
FC modifiers and the respective offsets
to be applied accurately to the payment
for the individual component receiving
the credit, rather than being broadly
applied to the APC payment for the
entire replacement.
Response: We agree with the
commenters that hospitals would be
required to assign an ‘‘FB’’ or ‘‘FC’’
modifier to the procedure code
representing the pacemaker or ICD
replacement procedure as they describe,
and that the applicable offset would be
applied to the entire APC payment, even

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when just one of the devices involved
in the procedure (that is, a lead or a
generator) was received at no cost or
with full or partial credit. However, we
do not agree that this is problematic. As
the commenter noted, the offset
reduction may actually be much greater
or much less than the credit received by
the hospital, depending upon the
component that was credited. As we
have stated in the past (76 FR 74282),
we recognize that, in some cases, the
estimated device cost and, therefore, the
amount of the payment reduction will
be more or less than the cost a hospital
would otherwise incur. However,
because averaging is inherent in a
prospective payment system, we do not
believe this is inappropriate. Therefore,
we do not agree that we should allow
hospitals to bill individual CPT codes
for each component of the replacement
procedure, rather than requiring the
reporting of a full system as suggested
by the CPT guidance, as the commenters
suggested.
Comment: One commenter noted that
the no cost/full credit and partial credit
adjustment policy applies only when
expensive devices are replaced and
requested clarification regarding the
assignment of the ‘‘FB/FC’’ modifier to
devices that providers receive at no cost
or at an ‘‘inexpensive’’ cost. According
to the commenter, providers lack clear
guidelines to determine what is meant
by ‘‘inexpensive.’’ The commenter also
noted that there are inconsistencies
between the ‘‘FB/FC’’ modifier list and
the list of device-dependent APCs in the
CY 2013 OPPS/ASC proposed rule,
specifically that the FB/FC listing is not
an inclusive listing of all devicedependent APCs.
Response: As we stated in the
Medicare Claims Processing Manual
(Pub. 100–04, Chapter 4, Section 61.3.1),
when a hospital furnishes a device
received without cost or with full credit
from a manufacturer, the hospital must
append modifier ‘‘–FB’’ to the
procedure code (not the device code)
that reports the service provided to
furnish the device. As we stated in the
Medicare Claims Processing Manual
(Pub. 100–04, Chapter 4, Section 61.3.3),
when a hospital receives a partial credit
of 50 percent or more of the cost of a
new replacement device due to
warranty, recall, or field action, the
hospital must append modifier ‘‘–FC’’ to
the procedure code (not on the device
code) that reports the service provided
to replace the device. This guidance
does not instruct providers to determine
whether a no cost/full credit or partial
credit device is ‘‘expensive’’ or
‘‘inexpensive.’’ Rather, providers should
append the ‘‘FB’’ and ‘‘FC’’ modifiers to

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all procedures that meet the
requirements of these instructions. The
I/OCE determines, on a claim by claim
basis, when to apply the no cost/full
credit and partial credit device
adjustment policy (that is, when both a
specified device code is present on the
claim, and the procedure code to which
the ‘‘FB’’ or ‘‘FC’’ modifier is appended
maps to a specified APC, as described
previously in this section).
Regarding the comment that there are
inconsistencies between the ‘‘FB/FC’’
modifier list and the list of devicedependent APCs in the CY 2013 OPPS/
ASC proposed rule, we believe that the
commenter is referring to the fact that
Table 20 in the CY 2013 OPPS/ASC
proposed rule (the list of proposed APCs
to which the no cost/full credit and
partial credit device adjustment policy
would apply (77 FR 45127)) and Table
4A (the list of proposed devicedependent APCs (77 FR 45082)) are not
identical. The commenter is correct that

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the list of APCs to which the no cost/
full credit and partial credit device
adjustment policy will apply in CY 2013
in this section and the list of devicedependent APCs in section II.A.2.d.(1)
of the proposed rule and this final rule
with comment period are not the same.
We believe this is appropriate because,
as we describe earlier in this section, we
use the following criteria to determine
the list of APCs to which this policy
will apply: (1) All procedures assigned
to the selected APCs must involve
implantable devices that would be
reported if device insertion procedures
were performed; (2) the required devices
must be surgically inserted or implanted
devices that remain in the patient’s
body after the conclusion of the
procedure (at least temporarily); and (3)
the device offset amount must be
significant. Not all device-dependent
APCs meet these criteria, and therefore
are appropriately excluded from the list
of APCs to which the no cost/full credit

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and partial credit device adjustment
policy applies.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposals,
without modification, to continue the
established no cost/full credit and
partial credit adjustment policies. Table
29 below lists the APCs to which the
payment adjustment policy for no cost/
full credit and partial credit devices will
apply in CY 2013 and displays the final
adjustment percentages for both no cost/
full credit and partial credit
circumstances. Table 30 below lists the
devices to which the no cost/full credit
and partial credit device adjustment
policy will apply for CY 2013,
consistent with the three selection
criteria discussed earlier in this section
and based on the CY 2011 claims data
available for this final rule with
comment period.
BILLING CODE 4120–01–P

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CY 2013
APC

0039

0040

0061

0089
0090

0106

0107

0108
0227
0259

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0315

0318

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CY 2013 APC Title

Level I Implantation of
N eurostimulator Generator
Level I
ImplantationlRevisionlReplac
ement of Neurostimulator
Electrodes
Level II
ImplantationlRevisionlReplac
ement of Neurostimulator
Electrodes
InsertionlReplacement of
Permanent Pacemaker and
Electrodes
InsertionlReplacement of
Pacemaker Pulse Generator
InsertionlReplacement of
Pacemaker Leads and/or
Electrodes
Level I Implantation of
Cardioverter-Defibrillators
(ICDs)
Level II Implantation of
Cardioverter-Defibrillators
(ICDs)
Implantation of Drug Infusion
Device
Level VII ENT Procedures
Level II Implantation of
N eurostimulator Generator
Implantation of Cranial
N eurostimulator Pulse
Generator and Electrode

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CY2013
Device Offset
Percentage for
No Cost/
Full Credit
Case

CY2013
Device Offset
Percentage
for Partial
Credit Case

87%

43%

56%

28%

69%

34%

69%

35%

71%

36%

48%

24%

84%

42%

84%

42%

82%
84%

41%
42%

88%

44%

89%

44%

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TABLE 29.-APCs TO WHICH THE NO COSTIFULL CREDIT AND PARTIAL
CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY IN CY 2013

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CY2013
APC

0385
0386
0425
0648

0654

0655

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0680

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CY 2013 APC Title

Level I Prosthetic Urological
Procedures
Level II Prosthetic Urological
Procedures
Level II Arthroplasty or
Implantation with Prosthesis
Level IV Breast Surgery
InsertioniReplacement of a
permanent dual chamber
pacemaker
InsertioniReplacement/Conve
rsion of a Permanent Dual
Chamber Pacemaker or
Pacing Electrode
Insertion of Patient Activated
Event Recorders

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CY2013
Device Offset
Percentage for
No Cost/
Full Credit
Case

CY2013
Device Offset
Percentage
for Partial
Credit Case

62%

31%

70%

35%

59%
50%

30%
25%

74%

37%

73%

37%

74%

37%

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TABLE 30.-DEVICES TO WHICH THE NO COST/FULL CREDIT AND
PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY IN CY 2013

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CY 2013 Short Descriptor
AICD, dual chamber
AICD, single chamber
Cath, brachytx seed adm
Event recorder, cardiac
Generator, neurostim, imp
Rep dev, urinary, w/sling
Infusion pump, programmable
Joint device (implantable)
Lead, AICD, endo single coil
Lead, neurostimulator
Lead, pmkr, transvenous VDD
Pmkr, dual, rate-resp
Pmkr, single, rate-resp
Prosthesis, breast, imp
Prosthesis, penile, inflatab
Pros, urinary sph, imp
Generator, neuro rechg bat sys
Dialysis access system
AICD, other than sing/dual
Infusion pump, non-prog, perm
Lead, AICD, endo dual coil
Lead, AICD, non sing/dual
Lead, neurostim, test kit
Lead, pmkr, other than trans
Lead, pmkr/AICD combination
Lead coronary venous
Pmkr, dual, non rate-resp
Pmkr, single, non rate-resp
Pmkr, other than sing/dual
Prosthesis, penile, non-inf
Infusion pump, non-prog, temp
Rep dev, urinary, w/o sling

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CY 2013 Device
HCPCS Code
C1721
Cl722
Cl728
C1764
C1767
CI771
Cl772
Cl776
Cl777
Cl778
Cl779
C1785
C1786
Cl789
C1813
Cl815
Cl820
Cl881
Cl882
Cl891
Cl895
C1896
Cl897
Cl898
C1899
Cl900
C2619
C2620
C2621
C2622
C2626
C2631

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BILLING CODE 4120–01–C

V. OPPS Payment Changes for Drugs,
Biologicals, and Radiopharmaceuticals
A. OPPS Transitional Pass-Through
Payment for Additional Costs of Drugs,
Biologicals, and Radiopharmaceuticals

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1. Background
Section 1833(t)(6) of the Act provides
for temporary additional payments or
‘‘transitional pass-through payments’’
for certain drugs and biologicals (also
referred to as biologics). As enacted by
the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act
(BBRA) of 1999 (Pub. L. 106–113), this
provision requires the Secretary to make
additional payments to hospitals for:
current orphan drugs, as designated
under section 526 of the Federal Food,
Drug, and Cosmetic Act (Pub. L. 107–
186); current drugs and biologicals and
brachytherapy sources used for the
treatment of cancer; and current
radiopharmaceutical drugs and
biologicals. For those drugs and
biologicals referred to as ‘‘current,’’ the
transitional pass-through payment
began on the first date the hospital
OPPS was implemented.
Transitional pass-through payments
also are provided for certain ‘‘new’’
drugs and biologicals that were not
being paid for as an HOPD service as of
December 31, 1996, and whose cost is
‘‘not insignificant’’ in relation to the
OPPS payments for the procedures or
services associated with the new drug or
biological. For pass-through payment
purposes, radiopharmaceuticals are
included as ‘‘drugs.’’ Under the statute,
transitional pass-through payments for a
drug or biological described in section
1833(t)(6)(C)(i)(II) of the Act can be
made for a period of at least 2 years, but
not more than 3 years, after the
product’s first payment as a hospital
outpatient service under Medicare Part
B. Proposed CY 2013 pass-through

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drugs and biologicals and their
designated APCs were assigned status
indicator ‘‘G’’ in Addenda A and B to
the proposed rule and in this final rule
with comment period, which are
available via the Internet on the CMS
Web site.
Section 1833(t)(6)(D)(i) of the Act
specifies that the pass-through payment
amount, in the case of a drug or
biological, is the amount by which the
amount determined under section
1842(o) of the Act for the drug or
biological exceeds the portion of the
otherwise applicable Medicare OPD fee
schedule that the Secretary determines
is associated with the drug or biological.
If the drug or biological is covered
under a competitive acquisition contract
under section 1847B of the Act, the
pass-through payment amount is
determined by the Secretary to be equal
to the average price for the drug or
biological for all competitive acquisition
areas and the year established under
such section as calculated and adjusted
by the Secretary. However, we note that
the Part B drug CAP program has been
postponed since CY 2009, and such a
program has not been reinstated for CY
2013.
This methodology for determining the
pass-through payment amount is set
forth in regulations at 42 CFR 419.64.
These regulations specify that the passthrough payment equals the amount
determined under section 1842(o) of the
Act minus the portion of the APC
payment that CMS determines is
associated with the drug or biological.
Section 1847A of the Act establishes the
average sales price (ASP) methodology,
which is used for payment for drugs and
biologicals described in section
1842(o)(1)(C) of the Act furnished on or
after January 1, 2005. The ASP
methodology, as applied under the
OPPS, uses several sources of data as a
basis for payment, including the ASP,
the wholesale acquisition cost (WAC),

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and the average wholesale price (AWP).
In this final rule with comment period,
the term ‘‘ASP methodology’’ and ‘‘ASPbased’’ are inclusive of all data sources
and methodologies described therein.
Additional information on the ASP
methodology can be found on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-Service-PartB-Drugs/McrPartBDrugAvgSalesPrice/
index.html.
For CYs 2005, 2006, and 2007, we
estimated the OPPS pass-through
payment amount for drugs and
biologicals to be zero based on our
interpretation that the ‘‘otherwise
applicable Medicare OPD fee schedule’’
amount was equivalent to the amount to
be paid for pass-through drugs and
biologicals under section 1842(o) of the
Act (or section 1847B of the Act if the
drug or biological is covered under a
competitive acquisition contract). We
concluded for those years that the
resulting difference between these two
rates would be zero. For CYs 2008 and
2009, we estimated the OPPS passthrough payment amount for drugs and
biologicals to be $6.6 million and $23.3
million, respectively. For CY 2010, we
estimated the OPPS pass-through
payment estimate for drugs and
biologicals to be $35.5 million. For CY
2011, we estimated the OPPS passthrough payment for drugs and
biologicals to be $15.5 million. For CY
2012, we estimated the OPPS passthrough payment for drugs and
biologicals to be $19 million. Our OPPS
pass-through payment estimate for
drugs and biologicals in CY 2013 is $22
million, which is discussed in section
VI.B. of this final rule with comment
period.
The pass-through application and
review process for drugs and biologicals
is explained on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/

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HospitalOutpatientPPS/
passthrough_payment.html.
2. Drugs and Biologicals With Expiring
Pass-Through Status in CY 2012
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45128), we proposed that
the pass-through status of 23 drugs and
biologicals would expire on December
31, 2012, as listed in Table 22 of the
proposed rule (77 FR 45129). All of
these drugs and biologicals will have
received OPPS pass-through payment
for at least 2 years and no more than 3
years by December 31, 2012. These
drugs and biologicals were approved for
pass-through status on or before January
1, 2011. With the exception of those
groups of drugs and biologicals that are
always packaged when they do not have
pass-through status, specifically
diagnostic radiopharmaceuticals and
contrast agents, our standard
methodology for providing payment for
drugs and biologicals with expiring
pass-through status in an upcoming
calendar year is to determine the
product’s estimated per day cost and
compare it with the OPPS drug
packaging threshold for that calendar
year (which is $80), as discussed further
in section V.B.2. of this final rule with
comment period. If the drug’s or
biological’s estimated per day cost is
less than or equal to the applicable
OPPS drug packaging threshold, we
would package payment for the drug or
biological into the payment for the
associated procedure in the upcoming
calendar year. If the estimated per day
cost of the drug or biological is greater
than the OPPS drug packaging
threshold, we would provide separate
payment at the applicable relative ASPbased payment amount (which is ASP+6
percent for CY 2013, as discussed
further in section V.B.3. of this final rule
with comment period). Section II.A.3.e.
of this final rule with comment period
discusses the packaging of all nonpassthrough contrast agents and diagnostic
radiopharmaceuticals.
Comment: Several commenters
recommended that CMS continue passthrough status for new drugs,
specifically diagnostic
radiopharmaceuticals and contrast
agents, for 3 years. The commenters
asserted that providing pass-through
status for 3 years would help provide a
more current and accurate data set on
which to base payment amounts of the
procedure when the diagnostic
radiopharmaceutical or contrast agent is
subsequently packaged. The
commenters further recommended that
CMS expire pass-through status for
drugs and biologicals on a quarterly as
opposed to an annual basis. One

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commenter disagreed with a prior CMS
proposal to begin the pass-through
payment eligibility period on the date of
first sale of the drug in the United States
following FDA approval. The
commenter however approved of the
concurrent proposal made at that time
that would require CMS to accept and
expire pass-through applications for
drugs and biologicals on a quarterly
basis.
Response: As we stated in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74287), as
described in section V.A. of this final
rule with comment period, section
1833(t)(6)(C)(i)(II) of the Act permits
CMS to make pass-through payments for
a period of at least 2 but not more than
3 years, after the product’s first payment
as a hospital outpatient service under
Medicare Part B. We continue to believe
that this period of payment facilitates
dissemination of these new products
into clinical practice and facilitates the
collection of sufficient hospital claims
data reflective of their costs for future
OPPS ratesetting. Our longstanding
practice has been to provide passthrough payment for a period of 2 to 3
years, with expiration of pass-through
status proposed and finalized through
the annual rulemaking process. Each
year, when proposing to expire the passthrough status of certain drugs and
biologicals, we examine our claims data
for these products. We observe that
hospitals typically have incorporated
these products into their chargemasters
based on the utilization and costs
observed in our claims data. Under the
existing pass-through policy, which has
been generally supported by
commenters, we begin pass-through
payment on a quarterly basis that
depends on when applications are
submitted to us for consideration and
because we expire pass-through status
only on an annual basis, there is no way
to ensure that all pass-through drugs
and biologicals receive pass-through
payment for a full 3 years, while also
providing pass-though payment for no
more than 3 years as the statute
requires. Further, we are confident that
the period of time for which drugs,
biologicals, contrast agents, and
radiopharmaceuticals receive passthrough status, which is at least 2 but no
more than 3 years, is adequate for CMS
to collect the sufficient amount of data
to make a packaging determination.
We further note that we are in full
compliance with the requirements of the
Act, which states that pass-through
status is given for at least 2 but no more
than 3 years. As noted in section V.A.1.
of this final rule with comment period,
when a product’s pass-through status

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68363

expires, it is either packaged into an
APC if it is a relatively low-cost product
that does not exceed the packaging
threshold or is ‘‘policy packaged’’, or if
it is a relatively high-cost product, it is
paid separately on the basis of the
product’s ASP (we refer readers to
section V.B.3. of this final rule with
comment period for more details
regarding our payment policy for
separately payable drugs). Because our
policies for drugs with expiring passthrough status recognize products’
relative costliness and establish either
separate or bundled payment as
appropriate, based on such costliness,
we disagree with commenters that
certain relatively high cost products
currently receiving pass-through
payment would not be adequately paid
if taken off pass-through, and as a result
should continue on such status. We
expire pass-though status on an annual
basis. Depending on when a drug is
initially approved for pass-through
status, the drug receives pass-through
payment for at least 2 but not more than
3 years.
Comment: Commenters, including
several medical societies, individual
practitioners, and a manufacturer,
requested that CMS appropriately pay
for HCPCS code C9275 (Injection,
hexaminolevulinate hydrochloride, 100
mg, per study dose). Some commenters
believed that payment would be
eliminated for HCPCS code C9275 and
requested that CMS evaluate its
statutory authority and establish
appropriate payment as necessary. One
commenter recommended that CMS
either continue to pay separately for
HCPCS code C9275 because, the
commenter argued, an insufficient
amount of claims data have been
collected, or assign HCPCS code C9275
to a new technology APC with the
accompanying blue light cystoscopy
procedure until sufficient claims are
gathered to determine assignment of an
appropriate clinical APC category. The
commenter further argued that because
C9275 will always be used with the blue
light cystoscopy procedure, packaging
C9275 will result in zero payment for
the imaging agent, since current
cystoscopy APCs do not include costs of
imaging agents.
The commenter stated that if CMS
chooses to not provide payment for
HCPCS code C9275 as a separately
billable product, CMS should use its
‘‘waiver authority’’ under section
1833(t)(2)(E) of the Act to ensure that
equitable payments are made under the
OPPS for C9275. The commenter noted
that, for CY 2013, CMS used this
statutory authority to propose an

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additional payment for radioisotopes
derived from non-HEU sources.
Response: We proposed for CY 2013
to package the payment, for all contrast
agents, that are not on pass-through
status, into the payment for the
associated service. We continue to
believe that all nonpass-through
contrast agents function effectively as
supplies that are ancillary and
supportive to an independent service.
The product described by HCPCS code
C9275 is a contrast agent that was
approved for pass-through status
beginning on January 1, 2011. For the
CY 2013 OPPS/ASC proposed rule (77
FR 45128 through 45129), we proposed
to expire pass-through status for this
product because it had received at least
2 and no more than 3 years, as
permitted by the Act in section
1833(t)(6). We note that because we
expire pass-through status on an annual
basis and not a quarterly basis, we
cannot extend the pass-through status
for HCPCS code C9275 for an additional
number of years because it would be
counter to our current policy. Therefore,
we believe that our proposal to expire
pass-through status for HCPCS code
C9275 for CY 2013 is appropriate.
We disagree with the commenter that
a sufficient amount of data was not
collected for HCPCS code C9275 during
its period under pass-through status. As
we stated previously, we believe this
pass-through period of payment
facilitates dissemination for new
products into clinical practice and
facilitates the collection of hospital
claims data, reflective of their costs for
future OPPS ratesetting. Each year,
when proposing to expire the passthrough status of certain drugs and
biologicals, we examine our claims data
for these products. We observe that
hospitals typically have incorporated
these products, where the product is
being used, into their chargemasters
based on the utilization and costs
observed in our claims data. We believe
a sufficient amount of claims data has
been collected in this case and we see
no reason to exempt C9275 as an
extraordinary case from our
longstanding packaging policy to

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package payment for nonpass-through
contrast agents.
We also do not believe that it is
appropriate to extend separate payment
for HCPCS code C9275 based on section
1833(t)(2)(E) of the Act. We believe that
all hospitals have the opportunity to bill
for and receive equitable payment for
HCPCS code C9275. Hospitals can bill
for an appropriate unlisted code for the
cystoscopy procedure and include the
costs of the product currently reported
by HCPCS code C9275 in that specific
claim, in order to receive payment for
the procedure and the product.
Therefore, we do not believe that there
is an inequity that should be adjusted.
Additionally, we do not believe that an
additional payment amount should be
made for HCPCS code C9275, for the
reasons given in this final rule with
comment period, to ensure equitable
payments are made to hospitals.
Further, extending the pass-through
status for HCPCS code C9275 beyond 3
years would not be permitted under the
statutory requirements of section
1833(t)(6) of the Act.
We believe that commenters have
erroneously stated that payment will not
be made under the OPPS or that an
insufficient amount of payment will be
given to the product described by
HCPCS code C9275. We remind
commenters that products that are
packaged under the OPPS receive
payment that is packaged into the
payment for the associated procedure.
Hospitals include HCPCS codes and
charges for packaged services on their
claims, and the estimated costs
associated with those packaged services
are then added to the costs of separately
payable procedures on the same claims
in establishing payment rates for the
separately payable services. Payment for
the packaged product is then included
in the payment for the independent
service. For HCPCS code C9275,
hospitals may bill an unlisted code for
the cystoscopy procedure and include
the costs for HCPCS code C9275 on that
claim. These costs will additionally be
included in future ratesetting for these
products.
We continue to believe that packaging
payment for ancillary and dependent

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services creates appropriate incentives
for hospitals to seriously consider
whether a new service or a new
technology offers a benefit that is
sufficient to justify the cost of the new
service or new technology. Therefore,
we believe that HCPCS code C9275 is
appropriately packaged for CY 2013 and
we are finalizing our proposal to expire
pass-through status for C9275 and
assign this HCPCS code to a status
indicator of ‘‘N’’ for CY 2013.
We note that comments pertaining to
a potential future new technology APC
assignment or new technology APC
application for HCPCS code C9275 and
the accompanying blue light cystoscopy
procedure are outside the scope of this
final rule with comment period.
Comment: One commenter requested
that CMS review the claims used in
calculating the packaging status of
HCPCS code J7183 (Injection, von
willebrand factor complex (human),
wilate, 1 i.u. vwf:rco) and assign HCPCS
code J7183 to status indicator ‘‘K’’ as
pass-through status has expired, but the
cost per day exceeds $80.
Response: We appreciate the
commenter’s diligence. HCPCS code
J7183 was erroneously assigned to a
status indicator of ‘‘N’’ for the CY 2013
OPPS/ASC proposed rule (77 FR 45129).
The per day cost for HCPCS code J7183
for this final rule with comment period
exceeds the $80 packaging threshold for
CY 2013. Therefore, we are finalizing
our proposal, with modification, to
expire the pass-through status for
HCPCS code J7183 and assign it to a
status indicator of ‘‘K’’ for CY 2013.
After consideration of the public
comments we received, we are
finalizing our proposal, with
modification as described above, to
expire the pass-through status of the 23
drugs and biologicals listed in Table 31
below. We are assigning HCPCS code
J7183 to status indicator ‘‘K’’ for CY
2013. Table 31 lists the drugs and
biologicals for which pass-through
status will expire on December 31, 2012,
the status indicators, and the assigned
APCs for CY 2013.
BILLING CODE 4120–01–P

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CY2013
HCPCS
Code
C9275
C9367
J0221
J0588
J0597
J0775
J0840
J0897
J1290
J1557
J1741
J3095
J3262
J3357
J3385
J7183

J7335

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J8562
J9043
J9302

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CY 2013 Long Descriptor
Injection, hexaminolevulinate
hydrochloride, 100 mg, per study dose
Skin substitute, Endoform Dermal
Template, per square centimeter
Injection, alglucosidase alfa,
(lumizyme), 10 mg
Injection, incobotulinumtoxin A, 1 unit
Injection, C-l esterase inhibitor
(human), Berinert, 10 units
Injection, collagenase clostridium
histolyticum, 0.01 mg
Injection, crotalidae polyvalent immune
fab (ovine), up to 1 gram
Injection, denosumab, 1 mg
Injection, ecallantide, 1 mg
Injection, immune globulin
(Gammaplex), intravenous, nonlyophilized (e.g. liquid), 500 mg
Injection, ibuprofen, 100 mg
Injection, telavancin, 10 mg
Injection, tocilizumab, 1 mg
Injection, ustekinumab, 1 mg
Injection, velaglucerase alfa, 100 units
Injection, von Willebrand factor
complex (human), Wilate, per 100 IV
VWF:RCO
Capsaicin 8% patch,per 10 square
centimeters
Fludarabine phosphate, oral, 10 mg
Injection, cabazitaxe1, 1 mg
Injection,ofatumumab, 10 mg

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CY2013
SI

CY 2013
APC

N

N/A

K

9367

K

1413

K

9278

K

9269

K

1340

K

9274

K
K

9272
9263

K

9270

N
K
K
K

N/A
9258
9264
9261
9271

K

1352

K

9268

K
K
K

1339
1339
9260

K

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TABLE 31.-DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH
STATUS WILL EXPIRE DECEMBER 31,2012

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3. Drugs, Biologicals, and
Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY
2013
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45129), we proposed to
continue pass-through status in CY 2013
for 21 drugs and biologicals. None of
these drugs and biologicals will have
received OPPS pass-through payment
for at least 2 years and no more than 3
years by December 31, 2012. These
drugs and biologicals, which were
approved for pass-through status
between April 1, 2011 and July 1, 2012,
were listed in Table 23 of the proposed
rule (77 FR 45130 through 45131). The
APCs and HCPCS codes for these drugs
and biologicals approved for passthrough status through April 1, 2012
were assigned status indicator ‘‘G’’ in
Addenda A and B of the proposed rule.
Addenda A and B for the proposed rule
were available via the Internet on the
CMS Web site.
Section 1833(t)(6)(D)(i) of the Act sets
the amount of pass-through payment for
pass-through drugs and biologicals (the
pass-through payment amount) as the
difference between the amount
authorized under section 1842(o) of the
Act and the portion of the otherwise
applicable OPD fee schedule that the
Secretary determines is associated with
the drug or biological. Payment for
drugs and biologicals with pass-through
status under the OPPS is currently made
at the physician’s office payment rate of
ASP+6 percent. We believe it is
consistent with the statute and we
proposed to continue to provide
payment for drugs and biologicals with
pass-through status at a rate of ASP+6
percent in CY 2013, the amount that
drugs and biologicals receive under
section 1842(o) of the Act.

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Thus, for CY 2013, we proposed to
pay for pass-through drugs and
biologicals at ASP+6 percent, equivalent
to the rate these drugs and biologicals
would receive in the physician’s office
setting in CY 2013. We proposed that a
$0.00 pass-through payment amount
would be paid for most pass-through
drugs and biologicals under the CY 2013
OPPS because the difference between
the amount authorized under section
1842(o) of the Act, which is ASP+6
percent, and the portion of the
otherwise applicable OPD fee schedule
that the Secretary determines is
appropriate, proposed at ASP+6
percent, is $0.
In the case of pass-through contrast
agents and diagnostic
radiopharmaceuticals, their passthrough payment amount would be
equal to ASP+6 percent because, if not
on pass-through status, payment for
these products would be packaged into
the associated procedure. Therefore, we
proposed that the difference between
ASP+6 percent and the ‘‘policypackaged’’ drug APC offset amount for
the associated clinical APC in which the
drug or biological is utilized would be
the CY 2013 pass-through payment
amount for these policy-packaged
products.
In addition, we proposed to continue
to update pass-through payment rates
on a quarterly basis on the CMS Web
site during CY 2013 if later quarter ASP
submissions (or more recent WAC or
AWP information, as applicable)
indicate that adjustments to the
payment rates for these pass-through
drugs or biologicals are necessary. For a
full description of this policy, we refer
readers to the CY 2006 OPPS/ASC final
rule with comment period (70 FR 42722
and 42723).
As is our standard methodology, we
annually review new permanent HCPCS
codes and delete temporary HCPCS C-

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codes if an alternate permanent HCPCS
code is available for purposes of OPPS
billing and payment. We specifically
reviewed drugs with pass-through status
for CY 2013 that will change from Ccodes to J-codes for CY 2013. For our CY
2013 review, we have determined that
HCPCS code J1741 (Injection, ibuprofen,
100 mg) describes the product reported
under HCPCS code C9279 (Injection,
ibuprofen, 100 mg), HCPCS code J0485
(Injection, belatacept, 1 mg) describes
the product reported under HCPCS code
C9286 (Injection, belatacept, 1 mg),
HCPCS code J9042 (Injection,
brentuximab vedotin, 1 mg) describes
the code reported under HCPCS code
C9287 (Injection, brentuximab vedotin,
1 mg), HCPCS code J0716 (Injection,
centruroides immune f(ab)2, up to 120
milligrams) describes the code reported
under HCPCS code C9288 (Injection,
centruroides (scorpion) immune f(ab)2
(equine), 1 vial), and HCPCS code J9019
(Injection, asparaginase (erwinaze),
1,000 iu) describes the code reported
under HCPCS code C9289 (Injection,
asparaginase Erwinia chrysanthemi,
1,000 international units (I.U.)).
In CY 2013, as is consistent with our
CY 2012 policy for diagnostic and
therapeutic radiopharmaceuticals, we
proposed to provide payment for both
diagnostic and therapeutic
radiopharmaceuticals that are granted
pass-through status based on the ASP
methodology. As stated above, for
purposes of pass-through payment, we
consider radiopharmaceuticals to be
drugs under the OPPS. Therefore, if a
diagnostic or therapeutic
radiopharmaceutical receives passthrough status during CY 2013, we
proposed to follow the standard ASP
methodology to determine the passthrough payment rate that drugs receive
under section 1842(o) of the Act, which
is ASP+6 percent. If ASP data are not
available for a radiopharmaceutical, we

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proposed to provide pass-through
payment at WAC+6 percent, the
equivalent payment provided to passthrough drugs and biologicals without
ASP information. If WAC information is
also not available, we proposed to
provide payment for the pass-through
radiopharmaceutical at 95 percent of its
most recent AWP.
Comment: Several commenters
supported CMS’ proposal to provide
payment at ASP+6 percent for drugs,
biologicals, contrast agents, and
radiopharmaceuticals that are granted
pass-through status. A few commenters
approved of the proposal to use the ASP
methodology that would provide
payment based on WAC if ASP
information is not available, and
payment at 95 percent of AWP if WAC
information is not available. Another
commenter requested that CMS provide
an additional payment for
radiopharmaceuticals that are granted
pass-through status. The commenter
gave an example amount of ASP+10
percent. Finally, one commenter, in
response to both the proposal to
continue to pay for drugs and
biologicals on pass-through status and
those not on pass-through status at
ASP+6 percent, suggested that CMS
explore alternative payment
mechanisms that reward the
pharmaceutical care provided by
specialty trained pharmacists who
ensure safe and effective medication use
and provide for screening of drug
interactions and contraindications.
Response: As discussed above, the
statutorily mandated pass-through
payment for pass-through drugs and
biologicals for CY 2013 generally equals
the amount determined under section
1842(o) of the Act minus the portion of
the otherwise applicable APC payment
that CMS determines is associated with
the drug or biological. Therefore, the
pass-through payment is determined by
subtracting the otherwise applicable
payment amount under the OPPS
(ASP+6 percent for CY 2013) from the
amount determined under section
1842(o) of the Act (ASP+6 percent).
Regarding the comments that CMS
should provide an additional payment
for radiopharmaceuticals that are
granted pass-through status, we note
that for CY 2013, consistent with our CY
2012 payment policy for diagnostic and
therapeutic radiopharmaceuticals, we
proposed to provide payment for both
diagnostic and therapeutic
radiopharmaceuticals with pass-through
status based on the ASP methodology.
As stated above, the ASP methodology,
as applied under the OPPS, uses several
sources of data as a basis for payment,
including the ASP, WAC if ASP is

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unavailable, and 95 percent of the
radiopharmaceutical’s most recent AWP
if ASP and WAC are unavailable. For
purposes of pass-through payment, we
consider radiopharmaceuticals to be
drugs under the OPPS. Therefore, if a
diagnostic or therapeutic
radiopharmaceutical receives passthrough status during CY 2013, we
proposed to follow the standard ASP
methodology to determine its passthrough payment rate under the OPPS to
account for the acquisition and
pharmacy overhead costs, including
compounding costs. We continue to
believe that a single payment is
appropriate for diagnostic
radiopharmaceuticals with pass-through
status in CY 2013, and that the payment
rate of ASP+6 percent (or payment
based on the ASP methodology) is
appropriate to provide payment for both
the radiopharmaceutical’s acquisition
cost and any associated nuclear
medicine handling and compounding
costs. We refer readers to section V.B.3.
of this final rule with comment period
for further discussion of payment for
therapeutic radiopharmaceuticals based
on ASP information submitted by
manufacturers, and readers may also
refer to the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/index.html.
Finally, we note that the comment
that suggested that CMS explore
alternative payment mechanisms that
reward the pharmaceutical care
provided by specialty trained
pharmacists who ensure safe and
effective medication use and provide for
screening of drug interactions and
contraindications is outside the scope of
this final rule with comment period.
Comment: One commenter stated that
HCPCS code J1572 (Injection, immune
globulin (flebogamma/flebogamma dif),
intravenous, non-lyophilized (e.g.
liquid), 500 mg) received an approval
for a labeling change for the extraction
process on January 20, 2012, but that
this did not constitute the approval of
a ‘‘new drug.’’ The commenter
requested that CMS reevaluate the status
indicator for HCPCS code J1572 and
assign it to a status indicator of ‘‘K’’
instead of ‘‘G’’ for CY 2013, because the
original FDA approval date for the
product of December 15, 2003 does not
meet the criteria for pass-through status.
Response: For the CY 2013 OPPS/ASC
proposed rule (77 FR 45129 through
45131), we proposed to continue passthrough status for HCPCS code J1572 for
the remainder of CY 2013. HCPCS code
J1572 replaced HCPCS code Q4091 on
January 1, 2008. The product described
by HCPCS code J1572 also received FDA

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68367

approval on December 15, 2003. When
we reviewed the drug pass-through
application for the product described by
HCPCS code J1572, we concluded that
the product described by HCPCS code
J1572 had not previously received passthrough payment under the OPPS and
had a cost that was not insignificant in
relation to the OPD fee schedule
amount. Therefore, we approved passthrough status for HCPCS code J1572
beginning on July 1, 2011. We believe
that we appropriately assigned passthrough status to HCPCS code J1572 and
we continue to believe that pass-through
status should continue through CY
2013.
We disagree with the commenter that
HCPCS code J1572 does not meet the
criteria for pass-through status because
the original FDA approval date for this
product was December 15, 2003. We
note that section 1833(t)(6)(A)(iv)(I) of
the Act allows for pass-through payment
for a device, drug, or biological as long
as payment for such item was not being
made as an outpatient hospital service
as of December 31, 1996. Furthermore,
we reiterate that the statute provides in
section 1833(t)(6)(B)(iii) of the Act that
pass-through status shall be in effect for
a period of at least 2 but no more than
3 years of pass-through payment.
Therefore, we believe continuing passthrough status for HCPCS code J1572 is
appropriate.
Comment: One commenter who
responded to the CY 2012 OPPS/ASC
final rule with comment period
requested clarification on the dosage
descriptor for HCPCS code J9179
(Injection, eribulin mesylate, 0.1 mg).
The commenter noted that the final rule
display version referenced inconsistent
dosage size.
Response: As displayed in Table 32
below, the correct dosage descriptor for
HCPCS code J9179 is 0.1mg. HCPCS
code J9179 will continue on passthrough status, with a status indicator of
‘‘G,’’ for CY 2013.
After consideration of the public
comments we received, we are
finalizing our proposal to provide
payment for drugs, biologicals,
diagnostic and therapeutic
radiopharmaceuticals and contrast
agents that are granted pass-through
status based on the ASP methodology. If
a diagnostic or therapeutic
radiopharmaceutical receives passthrough status during CY 2013, we will
follow the standard ASP methodology to
determine the pass-through payment
rate that drugs receive under section
1842(o) of the Act, which is ASP+6
percent. If ASP data are not available for
a radiopharmaceutical, we will provide
pass-through payment at WAC+6

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percent, the equivalent payment
provided to pass-through drugs and
biologicals without ASP information. If
WAC information is also not available,
we will provide payment for the passthrough radiopharmaceutical at 95
percent of its most recent AWP.
As discussed in more detail in section
II.A.3.d. of this final rule with comment
period, over the last 5 years, we
implemented a policy whereby payment
for all nonpass-through diagnostic
radiopharmaceuticals and contrast
agents is packaged into payment for the
associated procedure. We proposed to
continue the packaging of these items,
regardless of their per day cost, in CY
2013. As stated earlier, pass-through
payment is the difference between the
amount authorized under section
1842(o) of the Act and the portion of the
otherwise applicable OPD fee schedule
that the Secretary determines is
associated with the drug or biological.
Because payment for a drug that is
either a diagnostic radiopharmaceutical
or a contrast agent (identified as a
‘‘policy-packaged’’ drug, first described
in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68639))
would otherwise be packaged if the
product did not have pass-through
status, we believe the otherwise
applicable OPPS payment amount
would be equal to the ‘‘policypackaged’’ drug APC offset amount for
the associated clinical APC in which the
drug or biological is utilized. The
calculation of the ‘‘policy-packaged’’
drug APC offset amounts is described in
more detail in section IV.A.2. of this
final rule with comment period. It
follows that the copayment for the
nonpass-through payment portion (the
otherwise applicable fee schedule
amount that we would also offset from
payment for the drug or biological if a
payment offset applies) of the total
OPPS payment for those drugs and

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biologicals would, therefore, be
accounted for in the copayment for the
associated clinical APC in which the
drug or biological is used.
According to section 1833(t)(8)(E) of
the Act, the amount of copayment
associated with pass-through items is
equal to the amount of copayment that
would be applicable if the pass-through
adjustment was not applied. Therefore,
as we did in CY 2012, we proposed to
continue to set the associated
copayment amount for pass-through
diagnostic radiopharmaceuticals and
contrast agents that would otherwise be
packaged if the item did not have passthrough status to zero for CY 2013.
Similarly, we proposed that the
associated copayment amount for passthrough anesthesia drugs that would
otherwise be packaged if the item did
not have pass-through status would be
zero for CY 2013. As discussed in
further detail in section II.3.c.(2) of this
final rule with comment period, we are
clarifying that our general policy is to
package drugs used for anesthesia, and
that those anesthesia drugs with passthrough status will be packaged upon
the expiration of pass-through status.
The separate OPPS payment to a
hospital for the pass-through diagnostic
radiopharmaceutical, contrast agent, or
anesthesia drug is not subject to a
copayment according to the statute.
Therefore, we proposed to not publish
a copayment amount for these items in
Addenda A and B to the proposed rule
(which were available via the Internet
on the CMS Web site).
Comment: Commenters supported the
CY 2013 proposal to continue to set the
associated copayment amounts for passthrough diagnostic
radiopharmaceuticals and contrast
agents that would otherwise be
packaged if the product did not have
pass-through status to zero. The
commenters noted that this policy is
consistent with statutory requirements

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and provides cost-saving benefits to
beneficiaries.
Response: We appreciate the
commenters’ support of our proposal.
As discussed in the CY 2013 OPPS/ASC
proposed rule (77 FR 45129 through
45130), we believe that for drugs and
biologicals that are ‘‘policy-packaged,’’
the copayment for the nonpass-through
payment portion of the total OPPS
payment for this subset of drugs and
biologicals is accounted for in the
copayment of the associated clinical
APC in which the drug or biological is
used. According to section 1833(t)(8)(E)
of the Act, the amount of copayment
associated with pass-through items is
equal to the amount of copayment that
would be applicable if the pass-through
adjustment was not applied. Therefore,
we believe that the copayment amount
should be zero for drugs and biologicals
that are ‘‘policy-packaged,’’ including
diagnostic radiopharmaceuticals and
contrast agents. We also believe that the
copayment amount should be zero for
anesthesia drugs that would otherwise
be packaged if the item did not have
pass-through status.
After consideration of the public
comments received, we are finalizing
our proposal, without modification, to
continue to set the associated
copayment amount for pass-through
diagnostic radiopharmaceuticals and
contrast agents that would otherwise be
packaged if the item did not have passthrough status to zero for CY 2013. We
are also finalizing our proposal to
extend this policy to anesthesia drugs
that have pass-through status, and to set
a copayment amount of zero for these
drugs for CY 2013.
The 26 drugs and biologicals that we
are continuing on pass-through status
for CY 2013 or have been granted passthrough status as of January 2013 are
displayed in Table 32 below.
BILLING CODE 4120–01–P

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CY 2012
HCPCS
Code

CY2013
HCPCS
Code

A9584

A9584

C9285

C9285

C9286
C9287

10485
19042

C9288

10716

C9289

19019

C9290

C9290

C9292
C9293
N/A
N/A
N/A
C9366
C9368
C9369
10131
10490
10638
10712

C9292
C9293
C9294*
C9295*
C9296*
Q4131
Q4132
Q4133
10131
10490
10638
10712

11572

11572

12507
17180

12507
17180

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CY 2013 Long Descriptor

Iodine 1-123 ioflupane, diagnostic,
per study dose, up to 5 millicuries
Lidocaine 70 mg/tetracaine 70 mg,
per patch
Injection, belatacept, 1 mg
Injection, brentuximab vedotin, 1 mg
Injection, centruroides immune
f(ab)2, up to 120 milligrams
Injection, asparaginase (erwinaze),
1,000 iu
Injection, bupivicaine liposome, 1
mg
Injection, pertuzumab, 10 mg
Injection, glucarpidase, 10 units
Injection, taliglucerase alfa, 100 units
Injection, carfilzomib, 1 mg
Injection, ziv-aflibercept, 1 mg
EpiFix, per square centimeter
Grafix core, per square centimeter
Grafix prime, per square centimeter
Injection, acetaminophen, 10 mg
Injection, belimumab, 10 mg
Injection, canakinumab, Img
Injection, ceftaroline fosamil, 10 mg
Injection, immune globulin,
(flebogammalflebogamma dit),
intravenous, non-lyophilized (e.g.
liquid), 500 mg
Injection, pegloticase, 1 mg
Injection, factor xiii (antihemophilic

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Final CY
2013 SI

Final
CY
2013
APC

G

9406

G

9285

G
G

9286
9287

G

1431

G

9289

G

9290

G
G
G
G
G
G
G
G
G
G
G
G

9292
9293
9294
9295
9296
9366
9368
9369
9283
1353
1311
9282

G

0947

G
G

9281
1416

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TABLE 32.-DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS
IN CY2013

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4. Provisions for Reducing Transitional
Pass-Through Payments for Diagnostic
Radiopharmaceuticals and Contrast
Agents To Offset Costs Packaged Into
APC Groups

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a. Background
Prior to CY 2008, diagnostic
radiopharmaceuticals and contrast
agents were paid separately under the
OPPS if their mean per day costs were
greater than the applicable year’s drug
packaging threshold. In CY 2008 (72 FR
66768), we began a policy of packaging
payment for all nonpass-through
diagnostic radiopharmaceuticals and
contrast agents as ancillary and
supportive items and services into their
associated nuclear medicine procedures.
Therefore, beginning in CY 2008,
nonpass-through diagnostic
radiopharmaceuticals and contrast
agents were not subject to the annual
OPPS drug packaging threshold to
determine their packaged or separately
payable payment status, and instead all
nonpass-through diagnostic
radiopharmaceuticals and contrast
agents were packaged as a matter of
policy. For CY 2013, in the CY 2013
OPPS/ASC proposed rule (77 FR 45131),
we proposed to continue to package
payment for all nonpass-through
diagnostic radiopharmaceuticals and
contrast agents, as discussed in section
II.A.3.e. of the proposed rule and this
final rule with comment period.
b. Payment Offset Policy for Diagnostic
Radiopharmaceuticals
As previously noted,
radiopharmaceuticals are considered to
be drugs for OPPS pass-through
payment purposes. As described above,
section 1833(t)(6)(D)(i) of the Act
specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the

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difference between the amount paid
under section 1842(o) of the Act and the
otherwise applicable OPD fee schedule
amount. There is currently one
radiopharmaceutical with pass-through
status under the OPPS, HCPCS code
A9584 (Iodine I–123 ioflupane,
diagnostic, per study dose, up to 5
millicuries). This product, which is
presently referred to using HCPCS code
A9584, was granted pass-through status
using HCPCS code C9406 beginning July
1, 2011, and we proposed that it
continue receiving pass-through status
in CY 2013. We currently apply the
established radiopharmaceutical
payment offset policy to pass-through
payment for this product. As described
earlier in section V.A.3. of this final rule
with comment period, we proposed that
new pass-through diagnostic
radiopharmaceuticals would be paid at
ASP+6 percent, while those without
ASP information would be paid at
WAC+6 percent or, if WAC is not
available, payment would be based on
95 percent of the product’s most
recently published AWP.
Because a payment offset is necessary
in order to provide an appropriate
transitional pass-through payment, we
deduct from the pass-through payment
for diagnostic radiopharmaceuticals an
amount reflecting the portion of the
APC payment associated with
predecessor radiopharmaceuticals in
order to ensure no duplicate
radiopharmaceutical payment is made.
In CY 2009, we established a policy to
estimate the portion of each APC
payment rate that could reasonably be
attributed to the cost of predecessor
diagnostic radiopharmaceuticals when
considering a new diagnostic
radiopharmaceutical for pass-through
payment (73 FR 68638 through 68641).
Specifically, we use the ‘‘policypackaged’’ drug offset fraction for APCs
containing nuclear medicine

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procedures, calculated as 1 minus the
following: the cost from single
procedure claims in the APC after
removing the cost for ‘‘policy-packaged’’
drugs divided by the cost from single
procedure claims in the APC.
In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60480
through 60484), we finalized a policy to
redefine ‘‘policy-packaged’’ drugs as
only nonpass-through diagnostic
radiopharmaceuticals and contrast
agents, as a result of the policy
discussed in sections V.A.4. and
V.B.2.d. of the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60471
through 60477 and 60495 through
60499, respectively) that treats nonpassthrough implantable biologicals that are
surgically inserted or implanted
(through a surgical incision or a natural
orifice) and implantable biologicals that
are surgically inserted or implanted
(through a surgical incision or a natural
orifice) with newly approved passthrough status beginning in CY 2010 or
later as devices, rather than drugs. To
determine the actual APC offset amount
for pass-through diagnostic
radiopharmaceuticals that takes into
consideration the otherwise applicable
OPPS payment amount, we multiply the
‘‘policy-packaged’’ drug offset fraction
by the APC payment amount for the
nuclear medicine procedure with which
the pass-through diagnostic
radiopharmaceutical is used and,
accordingly, reduce the separate OPPS
payment for the pass-through diagnostic
radiopharmaceutical by this amount.
Beginning in CY 2011 and as
discussed in the CY 2011 OPPS/ASC
final rule with comment period (75 FR
71934 through 71936), we finalized a
policy to require hospitals to append
modifier ‘‘FB’’ to specified nuclear
medicine procedures when the
diagnostic radiopharmaceutical is
received at no cost/full credit. These

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instructions are contained within the I/
OCE CMS specifications on the CMS
Web site at http://www.cms.gov/
Medicare/Coding/OutpatientCodeEdit/
index.html.
For CY 2013 and future years, we
proposed to continue to require
hospitals to append modifier ‘‘FB’’ to
specified nuclear medicine procedures
when the diagnostic
radiopharmaceutical is received at no
cost/full credit. In addition, we
proposed to continue to require that
when a hospital bills with an ‘‘FB’’
modifier with the nuclear medicine
scan, the payment amount for
procedures in the APCs listed in Table
24 of the proposed rule (77 FR 45132)
would be reduced by the full ‘‘policypackaged’’ offset amount appropriate for
diagnostic radiopharmaceuticals.
Finally, we also proposed to continue to
require hospitals to report a token
charge of less than $1.01 in cases in
which the diagnostic
radiopharmaceutical is furnished
without cost or with full credit.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our policy, without
modification, to continue requiring
hospitals to append modifier ‘‘FB’’ to
specified nuclear medicine procedures
when the diagnostic
radiopharmaceutical is received at no
cost/full credit in CY 2013 and future
years. In addition, we will continue to
reduce the payment amount for
procedures in the APCs listed in Table
33 in this final rule with comment
period by the full ‘‘policy-packaged’’
offset amount appropriate for diagnostic
radiopharmaceuticals. Finally, we also
will continue to require hospitals to
report a token charge of less than $1.01
in cases in which the diagnostic
radiopharmaceutical is furnished
without cost or with full credit.
For CY 2012, we finalized a policy to
apply the diagnostic
radiopharmaceutical offset policy to
payment for pass-through diagnostic
radiopharmaceuticals, as described
above. For CY 2013, we proposed to
continue to apply the diagnostic
radiopharmaceutical offset policy to

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payment for pass-through diagnostic
radiopharmaceuticals.
Comment: Commenters recommended
that CMS continue to apply
radiopharmaceutical edits for nuclear
medicine procedures using
radiopharmaceuticals as long as
diagnostic radiopharmaceuticals are
packaged. The commenters noted that
the proposed rule was silent on whether
CMS will continue this policy for CY
2013 and they requested that CMS
confirm in the final rule that it will
continue to apply the
radiopharmaceutical edits and use only
claims with a radiopharmaceutical code
in determining nuclear medicine APC
rates.
Response: Beginning in CY 2008, we
implemented nuclear medicine
procedure-to-radiolabeled product
claims processing edits in the I/OCE
that required a diagnostic
radiopharmaceutical to be present on
the same claim as a nuclear medicine
procedure for payment under the OPPS
to be made. These edits ensure that
hospitals submit correctly coded claims
that report the HCPCS codes for the
products and their charges that are
necessary for performance of nuclear
medicine procedures. Although we do
not discuss our policy regarding nuclear
medicine-to-radiolabeled product
claims processing edits in this final rule
with comment period, we will continue
to annually update and implement this
list in accordance with our original
finalized policy. We refer readers to the
CY 2010 OPPS/ASC final rule with
comment period (74 FR 60384 through
60390) for a detailed discussion of the
nuclear medicine procedure-toradiolabeled product edits and the
evolution of our edit policy. In addition,
specific instructions for the nuclear
medicine procedure-to-radiolabeled
product claims processing edits are
contained within the I/OCE CMS
specifications on the CMS Web site at
http://www.cms.gov/OutpatientCode
Edit/02OCEQtrReleaseSpecs.asp#TopOf
Page.
Comment: A few commenters
recommended that CMS publish
preliminary offset amounts for

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diagnostic radiopharmaceuticals and
contrast agents with the proposed rule
to allow for meaningful assessment of
and public comment on the data.
Response: The exact data used to
calculate all of the proposed and final
payment rates, including the associated
offset amounts, for the CY 2013 OPPS
are available for purchase under a CMS
data use agreement through the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HhospitalOutpatientPPS/
index.html. This Web site includes
information about purchasing the
‘‘OPPS Limited Data Set’’, which now
includes the additional variables
previously available only in the OPPS
identifiable data set, including ICD–9–
CMS diagnosis codes and revenue code
payment amounts. We do not post the
offset amounts by APC until publication
of the final rule with comment period
because we assign services to APCs
based on our estimate of their full
resource cost, including, but not limited
to, packaged diagnostic
radiopharmaceuticals and contrast
agents. The offset amount is the portion
of each APC payment rate that could
reasonably be attributed to the cost of
predecessor diagnostic
radiopharmaceuticals and contrast
agents when considering a new
diagnostic radiopharmaceutical and
contrast agent for pass-through payment
and has no bearing on APC assignment.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to apply the
diagnostic radiopharmaceutical offset
policy to payment for pass-through
diagnostic radiopharmaceuticals, as
described in the CY 2013 OPPS/ASC
proposed rule (77 FR 45131).
Table 33 below displays the APCs to
which nuclear medicine procedures will
be assigned in CY 2013 and for which
we expect that an APC offset could be
applicable in the case of diagnostic
radiopharmaceuticals with pass-through
status.
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c. Payment Offset Policy for Contrast
Agents
Section 1833(t)(6)(D)(i) of the Act
specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the
difference between the amount paid
under section 1842(o) of the Act and the
otherwise applicable OPD fee schedule
amount. There currently are no contrast
agents with pass-through status under
the OPPS. As described in section
V.A.3. of the proposed rule, we
proposed that new pass-through
contrast agents would be paid at ASP+6
percent, while those without ASP
information would be paid at WAC+6
percent or, if WAC is not available,
payment would be based on 95 percent
of the product’s most recently published
AWP.

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Although there are no contrast agents
with pass-through status, we believe
that a payment offset is necessary in the
event that a new contrast agent is
approved for pass-through status during
CY 2013, in order to provide an
appropriate transitional pass-through
payment for them because all of these
items are packaged when they do not
have pass-through status. In accordance
with our standard offset methodology,
in the CY 2013 OPPS/ASC proposed
rule (77 FR 45132), we proposed for CY
2013 to deduct from the payment for
new pass-through contrast agents that
are approved for pass-through status as
a drug or biological during CY 2013, an
amount that reflects the portion of the
APC payment associated with
predecessor contrast agents, in order to
ensure no duplicate contrast agent
payment is made.

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In CY 2010, we established a policy
to estimate the portion of each APC
payment rate that could reasonably be
attributed to the cost of predecessor
contrast agents when considering new
contrast agents for pass-through
payment (74 FR 60482 through 60484).
For CY 2013, as we did in CY 2012, we
proposed to continue to apply this same
policy to contrast agents. Specifically,
we proposed to utilize the ‘‘policypackaged’’ drug offset fraction for
clinical APCs calculated as 1 minus (the
cost from single procedure claims in the
APC after removing the cost for ‘‘policypackaged’’ drugs divided by the cost
from single procedure claims in the
APC). In CY 2010, we finalized a policy
to redefine ‘‘policy-packaged’’ drugs as
only nonpass-through diagnostic
radiopharmaceuticals and contrast
agents (74 FR 60495 through 60499). To

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determine the actual APC offset amount
for pass-through contrast agents that
takes into consideration the otherwise
applicable OPPS payment amount, we
proposed to multiply the ‘‘policypackaged’’ drug offset fraction by the
APC payment amount for the procedure
with which the pass-through contrast
agent is used and, accordingly, reduce
the separate OPPS payment for the passthrough contrast agent by this amount.
We proposed to continue to apply this
methodology for CY 2013 to recognize
that when a contrast agent with passthrough status is billed with any
procedural APC listed in Table 25 of the
proposed rule (77 FR 45132 through
45133), a specific offset based on the
procedural APC would be applied to
payments for the contrast agent to
ensure that duplicate payment is not
made for the contrast agent.
As we proposed, for this final rule
with comment period, we will continue
to post annually on the CMS Web site
at http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html a
file that contains the APC offset
amounts that will be used for that year
for purposes of both evaluating cost
significance for candidate pass-through
device categories and drugs and
biologicals, including contrast agents,
and establishing any appropriate APC
offset amounts. Specifically, the file will
continue to provide the amounts and

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percentages of APC payment associated
with packaged implantable devices,
‘‘policy-packaged’’ drugs, and
‘‘threshold-packaged’’ drugs and
biologicals for every OPPS clinical APC.
We proposed to identify procedural
APCs for which we expect a contrast
offset could be applicable in the case of
a pass-through contrast agent as any
procedural APC with a ‘‘policypackaged’’ drug amount greater than $20
that is not a nuclear medicine APC
identified in Table 33 above, and these
APCs are displayed in Table 34 below.
The methodology used to determine a
threshold cost for application of a
contrast agent offset policy is described
in detail in the CY 2010 OPPS/ASC final
rule with comment period (70 FR 60483
through 60484). For CY 2013, we
proposed to continue to recognize that
when a contrast agent with pass-through
status is billed with any procedural APC
listed in Table 25 of the proposed rule
(77 FR 45132 through 45133), a specific
offset based on the procedural APC
would be applied to payment for the
contrast agent to ensure that duplicate
payment is not made for the contrast
agent.
Comment: One commenter urged
CMS to publish the proposed offset
amount for contrast agents in the
proposed rule to allow interested
stakeholders the opportunity to review
the data and comment on the amount of
the offset.

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Response: As we stated previously,
the exact data used to calculate all of the
proposed and final payment rates,
including the associated offset amounts,
for the CY 2013 OPPS are available for
purchase under a CMS data use
agreement through the CMS Web site at
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
This Web site includes information
about purchasing the ‘‘OPPS Limited
Data Set’’, which now includes the
additional variables previously available
only in the OPPS identifiable data set,
including ICD–9–CMS diagnosis codes
and revenue code payment amounts. We
do not post the offset amounts by APC
until publication of the final rule
because we assign services to APCs
based on our estimate of their full
resource cost, including, but not limited
to, packaged contrast agents. The offset
amount is the portion of each APC
payment rate that could reasonably be
attributed to the cost of a predecessor
contrast agent when considering a new
diagnostic radiopharmaceutical and
contrast agent for pass-through payment
and has no bearing on APC assignment.
After consideration of the public
comments we received, we are
finalizing our proposal for CY 2013
without modification.
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TABLE 34.-APCs TO WHICH A CONTRAST AGENT OFFSET MAY BE
APPLICABLE FOR CY 2013
CY2013
APC

0083
0093
0104
0152
0177
0178
0229
0278
0279
0280
0283
0284
0333
0334
0337
0375
0383
0388
0442
0653
0656
0662
0668
8006
8008

Diagnostic Cardiac Catheterization.
Coronary or Non-Coronary Atherectomy.
Coronary Angioplasty, Valvuloplasty, and Level I Endovascular
Revascularization.
Vascular Reconstruction/Fistula Repair without Device.
Transcathether Placement of Intracoronary Stents.
Level I Percutaneous Abdominal and Biliary Procedures.
Level I Echocardiogram With Contrast.
Level II Echocardiogram With Contrast.
Level II Endovascular Revascularization of the Lower Extremity.
Diagnostic Urography.
Level II Angiography and Venography.
Level III Angiography and Venography.
Computed Tomography with Contrast.
Magnetic Resonance Imaging and Magnetic Resonance
Angiography with Contrast.
Computed Tomography without Contrast followed by Contrast.
Combined Abdomen and Pelvis CT with Contrast.
Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast followed by Contrast.
Ancillary Outpatient Services When Patient Expires.
Cardiac Computed Tomographic Imaging.
Discography.
Dosimetric Drug Administration.
Vascular Reconstruction/Fistula Repair with Device.
Transcatheter Placement of Intracoronary Drug-Eluting Stents.
CT Angiography.
Level I Angiography and Venography.
CT and CTA with Contrast Composite.
MRI and MRA with Contrast Composite.

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B. OPPS Payment for Drugs, Biologicals,
and Radiopharmaceuticals Without
Pass-Through Status
1. Background
Under the CY 2012 OPPS, we
currently pay for drugs, biologicals, and

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radiopharmaceuticals that do not have
pass-through status in one of two ways:
As a packaged payment included in the
payment for the associated service, or as
a separate payment (individual APCs).
We explained in the April 7, 2000 OPPS
final rule with comment period (65 FR
18450) that we generally package the

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cost of drugs and radiopharmaceuticals
into the APC payment rate for the
procedure or treatment with which the
products are usually furnished.
Hospitals do not receive separate
payment for packaged items and
supplies, and hospitals may not bill
beneficiaries separately for any

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packaged items and supplies whose
costs are recognized and paid within the
national OPPS payment rate for the
associated procedure or service.
(Transmittal A–01–133, issued on
November 20, 2001, explains in greater
detail the rules regarding separate
payment for packaged services.)
Packaging costs into a single aggregate
payment for a service, procedure, or
episode-of-care is a fundamental
principle that distinguishes a
prospective payment system from a fee
schedule. In general, packaging the costs
of items and services into the payment
for the primary procedure or service
with which they are associated
encourages hospital efficiencies and
also enables hospitals to manage their
resources with maximum flexibility.
2. Criteria for Packaging Payment for
Drugs, Biologicals, and
Radiopharmaceuticals

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a. Background
As indicated in section V.B.1. of this
final rule with comment period, in
accordance with section 1833(t)(16)(B)
of the Act, the threshold for establishing
separate APCs for payment of drugs and
biologicals was set to $50 per
administration during CYs 2005 and
2006. In CY 2007, we used the four
quarter moving average Producer Price
Index (PPI) levels for Pharmaceutical
Preparations (Prescription) to trend the
$50 threshold forward from the third
quarter of CY 2005 (when the Pub. L.
108–173 mandated threshold became
effective) to the third quarter of CY
2007. We then rounded the resulting
dollar amount to the nearest $5
increment in order to determine the CY
2007 threshold amount of $55. Using
the same methodology as that used in
CY 2007 (which is discussed in more
detail in the CY 2007 OPPS/ASC final
rule with comment period (71 FR 68085
through 68086)), we set the packaging
threshold for establishing separate APCs
for drugs and biologicals at $60 for CYs
2008 and 2009. For CY 2010, we set the
packaging threshold at $65; for CY 2011,
we set the packaging threshold at $70;
and for CY 2012, we set the packaging
threshold at $75.
Following the CY 2007 methodology,
for the CY 2013 OPPS/ASC proposed
rule (77 FR 45133), we used the most
recently available four quarter moving
average PPI levels to trend the $50
threshold forward from the third quarter
of CY 2005 to the third quarter of CY
2013 and rounded the resulting dollar
amount ($81.59) to the nearest $5
increment, which yielded a figure of
$80. In performing this calculation, we
used the most recent forecast of the

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quarterly index levels for the PPI for
Pharmaceuticals for Human Use
(Prescription) (Bureau of Labor Statistics
(BLS) series code WPUSI07003) from
CMS’ Office of the Actuary (OACT). (We
note that we did not propose a change
to the PPI that is used to calculate the
threshold for CY 2013; rather, this
change in terminology reflects a change
to the BLS naming convention for this
series.) We refer below to this series
generally as the PPI for Prescription
Drugs.
We chose this PPI as it reflects price
changes associated with the average mix
of all pharmaceuticals in the overall
economy. In addition, we chose this
price series because it is publicly
available and regularly published,
improving public access and
transparency. Forecasts of the PPI for
Prescription Drugs are developed by IHS
Global Insight, Inc., a nationally
recognized economic and financial
forecasting firm. As actual inflation for
past quarters replaced forecasted
amounts, the PPI estimates for prior
quarters have been revised (compared
with those used in the CY 2007 OPPS/
ASC final rule with comment period)
and have been incorporated into our
calculation. Based on the calculations
described above, we proposed a
packaging threshold for CY 2013 of $80.
(For a more detailed discussion of the
OPPS drug packaging threshold and the
use of the PPI for Prescription Drugs, we
refer readers to the CY 2007 OPPS/ASC
final rule with comment period (71 FR
68085 through 68086).)
b. Cost Threshold for Packaging of
Payment for HCPCS Codes That
Describe Certain Drugs, Nonimplantable
Biologicals, and Therapeutic
Radiopharmaceuticals (‘‘ThresholdPackaged Drugs’’)
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45134), to determine the
proposed CY 2013 packaging status for
all nonpass-through drugs and
biologicals that are not policy packaged,
we calculated on a HCPCS code-specific
basis the per day cost of all drugs,
nonimplantable biologicals, and
therapeutic radiopharmaceuticals
(collectively called ‘‘thresholdpackaged’’ drugs) that had a HCPCS
code in CY 2011 and were paid (via
packaged or separate payment) under
the OPPS. We used data from CY 2011
claims processed before January 1, 2012
for this calculation. However, we did
not perform this calculation for those
drugs and biologicals with multiple
HCPCS codes that include different
dosages as described in section V.B.2.c.
of this final rule with comment period
or for diagnostic radiopharmaceuticals,

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contrast agents, and implantable
biologicals that we proposed to continue
to package in CY 2013, as discussed in
section V.B.2.d. of this final rule with
comment period.
In order to calculate the per day costs
for drugs, nonimplantable biologicals,
and therapeutic radiopharmaceuticals to
determine their proposed packaging
status in CY 2013, we used the
methodology that was described in
detail in the CY 2006 OPPS proposed
rule (70 FR 42723 through 42724) and
finalized in the CY 2006 OPPS final rule
with comment period (70 FR 68636
through 70 FR 68638). For each drug
and nonimplantable biological HCPCS
code, we used an estimated payment
rate of ASP+6 percent (which is the
payment rate we proposed for separately
payable drugs and nonimplantable
biologicals for CY 2013, as discussed in
more detail in section V.B.3.b. of this
final rule with comment period) to
calculate the CY 2013 proposed rule per
day costs. We used the manufacturer
submitted ASP data from the fourth
quarter of CY 2011 (data that were used
for payment purposes in the physician’s
office setting, effective April 1, 2012) to
determine the proposed rule per day
cost.
As is our standard methodology, for
CY 2013 we proposed to use payment
rates based on the ASP data from the
fourth quarter of CY 2011 for budget
neutrality estimates, packaging
determinations, impact analyses, and
completion of Addenda A and B to the
proposed rule (which was available via
the Internet on the CMS Web site)
because these were the most recent data
available for use at the time of
development of the proposed rule.
These data were also the bases for drug
payments in the physician’s office
setting, effective April 1, 2012. For
items that did not have an ASP-based
payment rate, such as some therapeutic
radiopharmaceuticals, we used their
mean unit cost derived from the CY
2011 hospital claims data to determine
their per day cost.
We proposed to package items with a
per day cost less than or equal to $80,
and identify items with a per day cost
greater than $80 as separately payable.
Consistent with our past practice, we
crosswalked historical OPPS claims data
from the CY 2011 HCPCS codes that
were reported to the CY 2012 HCPCS
codes that we displayed in Addendum
B of the proposed rule (which was
available via the Internet on the CMS
Web site) for payment in CY 2013.
Comment: The majority of
commenters objected to the proposed
increase in the OPPS packaging
threshold to $80 for CY 2013. The

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commenters recommended that CMS
consider either eliminating the drug
packaging threshold and providing
separate payment for all drugs with
HCPCS codes or freezing the packaging
threshold at $75 for CY 2013. Many
commenters objected to the use of a
packaging threshold under the OPPS
when one is not used for physician’s
office payment. These commenters
argued for parity across the payment
systems and they expressed concern
that the packaging threshold may
impede beneficiary access to lower cost
packaged drugs in the HOPD setting. A
few commenters suggested that CMS
limit increases in the packaging
threshold amount to the hospital update
factor for the year, reflective of all
statutory adjustments. One commenter
believed that these dollar figures are
arbitrary and recommended that CMS
tie the threshold for separate payment to
the annual market basket rather than
randomly assigning thresholds for
separate payment for these products.
One commenter noted that increasing
the packaging threshold could have the
unintended impact of undermining
conversion to LEU sources of diagnostic
radiopharmaceuticals if CMS adopts a
proposal to unbundle diagnostic
radiopharmaceuticals from the APC rate
under the policy packaging rule without
also waiving the dollar threshold for
radiopharmaceuticals produced from
LEU sources.
Response: As discussed in detail in
the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66758 through
66767), the CY 2009 OPPS/ASC final
rule with comment period (73 FR
68643), the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60485
through 60487), the CY 2011 OPPS/ASC
final rule with comment period (75 FR
71940 through 71943), and the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74300 through 74301), we
continue to believe that unpackaging
payment for all drugs, biologicals and
radiopharmaceuticals is inconsistent
with the concept of a prospective
payment system and that such a change
could create an additional reporting
burden for hospitals. The OPPS and the
MPFS (which applies to physician’s
services) are fundamentally different
payment systems with essential
differences in their payment policies
and structures. Specifically, the OPPS is
a prospective payment system based on
the concept of payment for groups of
services that share clinical and resource
characteristics. Payment is made under
the OPPS according to prospectively
established payment rates that are
related to the relative costs of hospital
resources for services. When physician’s

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services are furnished in an office
setting, they are paid under the MPFS,
which is a fee schedule based on the
relative value of each component. Under
the MPFS, separate payment is made for
each service provided in the physician’s
office; when individual drugs are
administered to beneficiaries in the
physician’s office, they are generally
paid under the ASP methodology. In
contrast, the OPPS includes various
drugs within a prospective payment
system, where payment for certain drugs
is packaged into the associated
procedure payment for the APC group.
Given the fundamental differences in
the way payment is made in an HOPD
and a physician’s office setting for these
drugs, differences in payment are to be
expected.
In general, we do not believe that our
packaging methodology under the OPPS
results in limited beneficiary access to
drugs because packaging is a
fundamental component of a
prospective payment system that
accounts for the cost of certain items
and services in larger payment bundles,
recognizing that some cases may be
more costly and others less costly, but
that, on average, OPPS payment is
appropriate for the services provided.
The growing utilization associated with
packaged drugs and biologicals in our
claims data suggests Medicare
beneficiaries have sufficient access to
these items.
We note that, in CYs 2005 and 2006,
the statutorily mandated drug packaging
threshold was set at $50, and we
continue to believe that it is appropriate
to continue a drug packaging threshold
for the CY 2013 OPPS for the reasons set
forth below. As stated in the CY 2007
OPPS/ASC final rule with comment
period (71 FR 68086), we believe that
packaging certain items is a
fundamental component of a
prospective payment system, that
packaging these items does not lead to
beneficiary access issues and does not
create a problematic site of service
differential, that updating the packaging
threshold of $50 for the CY 2005 OPPS
is consistent with industry and
government practices, and that the PPI
for Prescription Drugs is an appropriate
mechanism to gauge Part B drug
inflation. Therefore, because of our
continued belief that packaging is a
fundamental component of a
prospective payment system that
continues to provide important
flexibility and efficiency in the delivery
of high quality hospital outpatient
services, we are not adopting the
commenters’ recommendations to pay
separately for all drugs, biologicals, and
radiopharmaceuticals for CY 2013 or to

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eliminate or to freeze the packaging
threshold at $75.
We disagree with the commenters
who suggested that CMS should limit
increases in the outpatient drug
packaging threshold amount to the
hospital update factor for the year,
reflective of all statutory adjustments or
the market basket update. As stated
above, we continue to believe that
updating the $50 threshold is consistent
with industry and government practices
and that the PPI for Prescription Drugs
is an appropriate mechanism to gauge
Part B drug inflation. As we stated in
the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68085), we
believe that the PPI for Prescription
Drugs reflects price changes at the
wholesale or manufacturer stage.
Because OPPS payment rates for drugs
and biologicals are generally based on
the ASP data that are reported by their
manufacturers, we believe that the PPI
for Prescription Drugs is an appropriate
price index to use to update the
packaging threshold for CY 2007 and
beyond.
In contrast, the market basket update
contains numerous price proxies,
including, but not limited to, proxies for
wages and salaries, utilities, and
nonlabor-related expenses, that are not
related to price increases for
prescription drugs. Therefore, we
believe that the market basket as a
whole is not an appropriate mechanism
for determining the outpatient drug
packaging threshold amount. Within the
calculation of the market basket update,
we use the PPI for Prescription Drugs
specifically to measure the price growth
for prescription drugs, but price changes
for prescription drugs are only one
component of price changes for the
numerous items and services hospitals
purchase.
Additionally, we strongly disagree
with the commenter who suggested that
our methodology for updating the
packaging threshold is arbitrary and
recommended that CMS tie the
threshold for separate payment to the
annual market basket rather than
randomly assigning thresholds for
separate payment for these products. As
we have stated above, the PPI for
Prescription Drugs reflects price
changes at the wholesale or
manufacturer stage. Because OPPS
payment rates for drugs and biologicals
are generally based on the ASP data that
are reported by their manufacturer, we
believe that the PPI for Prescription
Drugs is an appropriate price index to
use to update the packaging threshold
for CY 2007 and subsequent years.
Therefore, we believe that our
continued methodology of updating the

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CY 2005 $50 packaging threshold for
inflation based on the PPI for
Prescription Drugs is not arbitrary in
nature nor does it have the effect of
randomly assigning a payment
threshold for drugs. Our methodology
continues to be an accurate way to
apply an annual inflation adjustment
factor that is consistent with the
practices of many health care payment
policy areas, and many other areas of
government policy, that acknowledge
real costs by using an inflation
adjustment factor instead of a static
dollar value.
Finally, we disagree with commenters
that increasing the packaging threshold
could have the unintended impact of
undermining conversion to LEU
sources. As we discuss in section
II.A.3.e. of this final rule with comment
period, we are finalizing our proposals
for CY 2013 to continue to package
payment for all nonpass-through
diagnostic radiopharmaceuticals.
Therefore, diagnostic
radiopharmaceuticals will not be subject
to the packaging threshold and will
instead be packaged regardless of their
per day cost. Additionally, as we
discuss in section III.A.C.3., removing
the diagnostic radiopharmaceutical so
that this cost is passed through directly
to Medicare is not consistent with the
fundamental concept of packaging
under the OPPS. Moreover, the
diagnostic radiopharmaceutical is never
separately billed, being a supply in the
diagnostic procedure it supports, so the
true cost cannot be captured by single
service claims. Most significantly from
the standpoint of payment for non-HEU
sources, however, a separate payment
for the diagnostic radiopharmaceutical
does not unbundle the cost of the
isotope from the much larger cost of the
drug component, nor does it
differentiate between HEU and nonHEU sources, so it does not create a
differential payment to further the CMS
goals of payment equity or the
Administration’s goal of promoting nonHEU conversion.
Comment: Several commenters
suggested that CMS reinstate its policy
of separate payment for 5–HT3
antiemetics, which are a class of drugs
often used as part of an anticancer
treatment regiment to treat nausea. One
commenter believed that CMS packaged
all 5–HT3 antiemetic drugs (HCPCS
codes J1260 (Injection, dolasetron
mesylate, 10 mg), J1626 (Injection,
granisetron hydrochloride, 100 mcg),
J2405 (Injection, ondansetron
hydrochloride, per 1 mg), J2469
(Injection, palonosetron hcl, 25 mcg),
Q0166 (Granisetron hydrochloride, 1
mg, oral, FDA-approved prescription

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anti-emetic, for use as a complete
therapeutic substitute for an iv antiemetic at the time of chemotherapy
treatment, not to exceed a 24 hour
dosage regimen), Q0180 (Dolasetron
mesylate, 100 mg, oral, FDA-approved
prescription antiemetic, for use as a
complete therapeutic substitute for an iv
anti-emetic at the time of chemotherapy
treatment, not to exceed a 24 hour
dosage regimen)). The commenter
opposed the packaging of these drugs.
Response: We continue to believe that
use of these antiemetics is an integral
part of an anticancer treatment regimen
and that OPPS claims data demonstrate
their increasingly common hospital
outpatient utilization. As we stated in
the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60488), we no
longer believe that a specific exemption
to our standard drug payment
methodology is necessary to ensure
access to the most appropriate
antiemetic products for Medicare
beneficiaries. We continue to believe
that our analysis conducted in the CY
2010 OPPS/ASC proposed rule on 5–
HT3 antiemetics (74 FR 35320), along
with the historical stability in
prescribing patterns for these products
and the availability of generic
alternatives for several of these
products, allows us to continue our
policy of not specifically exempting
these products from the OPPS drug
packaging threshold.
Additionally, we clarify that we did
not propose to assign a packaged
payment status indicator to all 5–HT3
antiemetic codes in the CY 2013 OPPS/
ASC proposed rule. HCPCS code J2469
(Injection, palonosetron hcl, 25 mcg)
had a per day cost above the proposed
$80 packaging threshold and was
assigned a separately payable status
indicator of ‘‘K’’ for the proposed rule.
HCPCS code J2469 has a CY 2013
estimated per day cost, from the CY
2011 claims data, above the CY 2013
drug packaging threshold and therefore
will receive separate payment in CY
2013.
Comment: One commenter
recommended that CMS not package
any drugs used in anticancer regimens.
Response: We disagree with the
commenter for the reasons mentioned
above. We believe that packaging certain
items, including items used in
anticancer regimens, is a fundamental
component of a prospective payment
system, and is an essential feature that
distinguishes a prospective payment
system from a fee schedule. We do not
believe that packaging drugs used in an
anticancer regimen or in outpatient
treatment of other significant disease
leads to beneficiary access issues. This

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finding is confirmed by our analysis of
hospital claims data in which we have
found that beneficiaries appear to have
adequate access to cancer treatments, as
is signified by ongoing volume growth
in cancer-related APCs and stability in
prescribing products for anticancer
drugs such as 5–HT3 antiemetics, for
which CMS has continued to observe
volume growth, even after we ended our
multiyear exemption from the packaging
threshold for these products. In
summary, after consideration of the
public comments we received, we are
not providing any exceptions to the
standard drug packaging methodology
for any class of drugs, including
anticancer therapies, for CY 2013.
Since publication of the CY 2013
OPPS/ASC proposed rule, consistent
with our policy of updating the
packaging threshold with more recently
available data for the final rule, we have
again followed the CY 2007
methodology for CY 2013 and used
updated four quarter moving average
PPI index levels provided by the CMS
Office of the Actuary to trend the $50
threshold forward from the third quarter
of CY 2005 to the third quarter of CY
2013. We then rounded the resulting
updated dollar amount ($81.91) to the
nearest $5 increment, which yielded a
figure of $80. Therefore, after
consideration for the public comments
we received, and consistent with our
methodology for establishing the
packaging threshold using the most
recent PPI forecast data, we are adopting
a CY 2013 packaging threshold of $80.
Our policy during previous cycles of the
OPPS has been to use updated ASP and
claims data to make final
determinations of the packaging status
of HCPCS codes for drugs,
nonimplantable biologicals, and
therapeutic radiopharmaceuticals for
the OPPS/ASC final rule with comment
period. We note that it is also our policy
to make an annual packaging
determination for a HCPCS code only
when we develop the OPPS/ASC final
rule with comment period for the
update year. Only HCPCS codes that are
identified as separately payable in the
final rule with comment period are
subject to quarterly updates. For our
calculation of per day costs of HCPCS
codes for drugs and nonimplantable
biologicals in this CY 2013 OPPS/ASC
final rule with comment period, we
proposed to use ASP data from the first
quarter of CY 2012, which is the basis
for calculating payment rates for drugs
and biologicals in the physician’s office
setting using the ASP methodology,
effective July 1, 2012, along with
updated hospital claims data from CY

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2011. We note that we also proposed to
use these data for budget neutrality
estimates and impact analyses for this
CY 2013 OPPS/ASC final rule with
comment period.
Payment rates for HCPCS codes for
separately payable drugs and
nonimplantable biologicals included in
Addenda A and B to this final rule with
comment period are based on ASP data
from the second quarter of CY 2012.
These data are the basis for calculating
payment rates for drugs and biologicals
in the physician’s office setting using
the ASP methodology, effective October
1, 2012. These physician’s office
payment rates will then be updated in
the January 2013 OPPS update, based on
the most recent ASP data to be used for
physician’s office and OPPS payment as
of January 1, 2013. For items that do not
currently have an ASP-based payment
rate, we proposed to recalculate their
mean unit cost from all of the CY 2011
claims data and updated cost report
information available for this CY 2013
final rule with comment period to
determine their final per day cost.
Consequently, the packaging status of
some HCPCS codes for drugs,
nonimplantable biologicals, and
therapeutic radiopharmaceuticals in this
CY 2013 OPPS/ASC final rule with
comment period may be different from
the same drug HCPCS code’s packaging
status determined based on the data
used for the proposed rule. Under such
circumstances, we proposed to continue
to follow the established policies
initially adopted for the CY 2005 OPPS
(69 FR 65780) in order to more equitably
pay for those drugs whose cost
fluctuates relative to the proposed CY
2013 OPPS drug packaging threshold
and the drug’s payment status (packaged
or separately payable) in CY 2012.
Specifically, for CY 2013, consistent
with our historical practice, we
proposed to apply the following policies
to these HCPCS codes for drugs,
nonimplantable biologicals, and
therapeutic radiopharmaceuticals whose
relationship to the proposed $80 drug
packaging threshold changes based on
the updated drug packaging threshold
and on the final updated data:
• HCPCS codes for drugs and
nonimplantable biologicals that were
paid separately in CY 2012 and that
were proposed for separate payment in
CY 2013, and that then have per day
costs equal to or less than $80, based on
the updated ASPs and hospital claims
data used for this CY 2013 final rule
with comment period, would continue
to receive separate payment in CY 2013.
• HCPCS codes for drugs and
nonimplantable biologicals that were
packaged in CY 2012 and that are

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proposed for separate payment in CY
2013, and that then have per day costs
equal to or less than $80, based on the
updated ASPs and hospital claims data
used for this CY 2013 final rule with
comment period, would remain
packaged in CY 2013.
• HCPCS codes for drugs and
nonimplantable biologicals for which
we proposed packaged payment in CY
2013 but then have per day costs greater
than $80, based on the updated ASPs
and hospital claims data used for this
CY 2013 final rule with comment
period, would receive separate payment
in CY 2013.
We did not receive any public
comments on our proposal to apply the
established policies initially adopted for
the CY 2005 OPPS (69 FR 65780) in
order to more equitably pay for those
drugs whose cost fluctuates relative to
the CY 2013 OPPS drug packaging
threshold and the drug’s payment status
(packaged or separately payable) in CY
2012. Therefore, we are finalizing our
proposal, without modification, for CY
2013.
We note that HCPCS codes J2700
(Injection, oxacillin sodium, up to 250
mg) and J9218 (Leuprolide acetate, per
1 mg) were paid separately for CY 2012
and were proposed for separate payment
in the CY 2013 OPPS/ASC proposed
rule and had final per day costs of less
than the $80 drug packaging threshold,
based on updated ASPs and the CY
2011 hospital claims data available for
this CY 2013 final rule with comment
period. Therefore, HCPCS codes J2700
and J9218 will continue to be paid
separately in CY 2013 according to the
established methodology set forth
above.
In addition, we proposed to package
HCPCS codes J0365 (Injection,
aprotonin, 10,000 kiu), J1460 (Injection,
gamma globulin, intramuscular, 1 cc),
J1560 (Injection, gamma globulin,
intramuscular, over 10 cc), J7183
(Injection, von willebrand factor
complex (human), wilate, 1 i.u.
vwf:rco), and Q4105 (Integra dermal
regeneration template (drt), per square
centimeter) for CY 2013. Using updated
ASPs and the CY 2011 hospital claims
data available for this final rule with
comment period, HCPCS codes J0365,
J1460, J1560, J7183, and Q4105 now
have per day costs greater than $80. In
accordance with our established policy
for such cases, for CY 2013 we will pay
for HCPCS codes J0365, J1460, J1560,
J7183, and Q4105 separately.
Finally, because we did not have
claims data for HCPCS codes J1452
(Injection, fomivirsen sodium,
intraocular, 1.65 mg) and J1835
(Injection, itraconazole, 50 mg) in the

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CY 2013 OPPS/ASC proposed rule, we
had proposed a status indicator of ‘‘E’’
for these products in CY 2013. However,
since publication of the proposed rule,
we have received claims data and the
per day cost for these products are more
than the $80 CY 2013 packaged
threshold. These products will be paid
separately and will be assigned a status
indicator of ‘‘K’’ for CY 2013.
c. Packaging Determination for HCPCS
Codes That Describe the Same Drug or
Biological but Different Dosages
In the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66776), we
began recognizing, for OPPS payment
purposes, multiple HCPCS codes
reporting different dosages for the same
covered Part B drugs or biologicals in
order to reduce hospitals’ administrative
burden by permitting them to report all
HCPCS codes for drugs and biologicals.
In general, prior to CY 2008, the OPPS
recognized for payment only the HCPCS
code that described the lowest dosage of
a drug or biological. We extended this
recognition to multiple HCPCS codes for
several other drugs under the CY 2009
OPPS (73 FR 68665). During CYs 2008
and 2009, we applied a policy that
assigned the status indicator of the
previously recognized HCPCS code to
the associated newly recognized code(s),
reflecting the packaged or separately
payable status of the new code(s). In the
CY 2008 OPPS/ASC final rule with
comment period (72 FR 66775), we
explained that once claims data were
available for these previously
unrecognized HCPCS codes, we would
determine the packaging status and
resulting status indicator for each
HCPCS code according to the general,
established HCPCS code-specific
methodology for determining a code’s
packaging status for a given update year.
However, we also stated that we
planned to closely follow our claims
data to ensure that our annual packaging
determinations for the different HCPCS
codes describing the same drug or
biological did not create inappropriate
payment incentives for hospitals to
report certain HCPCS codes instead of
others.
In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60490
through 60491), we finalized a policy to
make a single packaging determination
for a drug, rather than an individual
HCPCS code, when a drug has multiple
HCPCS codes describing different
dosages. We analyzed CY 2008 claims
data for the HCPCS codes describing
different dosages of the same drug or
biological that were newly recognized in
CY 2008 and found that our claims data
would result in several different

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sroberts on DSK5SPTVN1PROD with

packaging determinations for different
codes describing the same drug or
biological. Furthermore, we found that
our claims data included few units and
days for a number of newly recognized
HCPCS codes, resulting in our concern
that these data reflected claims from
only a small number of hospitals, even
though the drug or biological itself may
be reported by many other hospitals
under the most common HCPCS code.
Based on these findings from our first
available claims data for the newly
recognized HCPCS codes, we believed
that adopting our standard HCPCS codespecific packaging determinations for
these codes could lead to payment
incentives for hospitals to report certain
HCPCS codes instead of others,
particularly because we do not currently
require hospitals to report all drug and
biological HCPCS codes under the OPPS
in consideration of our previous policy
that generally recognized only the
lowest dosage HCPCS code for a drug or
biological for OPPS payment.
For CY 2013, we continue to believe
that adopting the standard HCPCS codespecific packaging determinations for
these codes could lead to payment
incentives for hospitals to report certain
HCPCS codes for drugs instead of
others. Making packaging
determinations on a drug-specific basis
eliminates these incentives and allows
hospitals flexibility in choosing to
report all HCPCS codes for different
dosages of the same drug or only the
lowest dosage HCPCS code. Therefore,
in the CY 2013 OPPS/ASC proposed
rule (77 FR 45135), we proposed to
continue our policy to make packaging
determinations on a drug-specific basis,
rather than a HCPCS code-specific basis,
for those HCPCS codes that describe the

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same drug or biological but different
dosages in CY 2013.
For CY 2013, in order to propose a
packaging determination that is
consistent across all HCPCS codes that
describe different dosages of the same
drug or biological, we aggregated both
our CY 2011 claims data and our pricing
information at ASP+6 percent across all
of the HCPCS codes that describe each
distinct drug or biological in order to
determine the mean units per day of the
drug or biological in terms of the HCPCS
code with the lowest dosage descriptor.
The following drugs did not have
pricing information available for the
ASP methodology for this CY 2013
OPPS/ASC final rule and, as is our
current policy for determining the
packaging status of other drugs, we used
the mean unit cost available from the
fourth quarter CY 2011 claims data to
make the packaging determinations for
these drugs: HCPCS codes J3472
(Injection, hyaluronidase, ovine,
preservative free, per 1000 usp units),
Q0171 (Chlorpromazine hydrochloride,
10 mg, oral, FDA approved prescription
antiemetic, for use as a complete
therapeutic substitute for an IV
antiemetic at the time of chemotherapy
treatment, not to exceed a 48-hour
dosage regimen), Q0172
(Chlorpromazine hydrochloride, 25 mg,
oral, FDA approved prescription antiemetic, for use as a complete
therapeutic substitute for an IV antiemetic at the time of chemotherapy
treatment, not to exceed a 48-hour
dosage regimen), Q0175 (Perphenazine,
4 mg, oral, FDA approved prescription
anti-emetic, for use as a complete
therapeutic substitute for an IV antiemetic at the time of chemotherapy
treatment, not to exceed a 48-hour

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68379

dosage regimen), Q0176 (Perphenazine,
8 mg, oral, FDA approved prescription
anti-emetic, for use as a complete
therapeutic substitute for an IV antiemetic at the time of chemotherapy
treatment, not to exceed a 48-hour
dosage regimen), Q0177 (Hydroxyzine
pamoate, 25 mg, oral, FDA approved
prescription anti-emetic, for use as a
complete therapeutic substitute for an
IV anti-emetic at the time of
chemotherapy treatment, not to exceed
a 48-hour dosage regimen), and Q0178
(Hydroxyzine pamoate, 50 mg, oral,
FDA approved prescription anti-emetic,
for use as a complete therapeutic
substitute for an IV anti-emetic at the
time of chemotherapy treatment, not to
exceed a 48-hour dosage regimen).
For all other drugs and biologicals
that have HCPCS codes describing
different dosages, we then multiplied
the weighted average ASP+6 percent per
unit payment amount across all dosage
levels of a specific drug or biological by
the estimated units per day for all
HCPCS codes that describe each drug or
biological from our claims data to
determine the estimated per day cost of
each drug or biological at less than or
equal to $80 (whereupon all HCPCS
codes for the same drug or biological
would be packaged) or greater than $80
(whereupon all HCPCS codes for the
same drug or biological would be
separately payable).
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our CY 2013 proposal,
without modification. The packaging
status of each drug and biological
HCPCS code to which this methodology
would apply is displayed in Table 35
below.
BILLING CODE 4120–01–P

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TABLE 3S.-HCPCS CODES TO WHICH THE CY 2013 DRUGSPECIFIC PACKAGING DETERMINATION METHODOLOGY APPLIES

JI642
JI644
JI850
J1840
J2270
J2271
J2788
J2790
J2920
J2930
J3120
J3130

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J3471
J3472
J7050
J7040

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CY2013
SI

CY 2013 Long Descriptor
Injection, bevacizumab, 0.25 mg
Injection, bevacizumab, 10 mg
Injection, methylprednisolone acetate, 20 mg
Injection, methylprednisolone acetate, 40 mg
Injection, methylprednisolone acetate, 80 mg
Injection, testosterone cypionate, up to 100 mg
Injection, testosterone cypionate, 1 cc, 200 mg
Injection, filgrastim (g-csf), 300 mcg
Injection, filgrastim (g-csf), 480 mcg
Injection, gamma globulin, intramuscular, 1 cc
Injection, gamma globulin, intramuscular over 10 cc
Injection, heparin sodium, (heparin lock flush), per 10
units
Injection, heparin sodium, per 1000 units
Injection, kanamycin sulfate, up to 75 mg
Injection, kanamycin sulfate, up to 500 mg
Injection, morphine sulfate, up to 10 mg
Injection, morphine sulfate, 100mg
Injection, rho d immune globulin, human, minidose, 50
micrograms (250 i.u.)
Injection, rho d immune globulin, human, full dose, 300
micrograms (1500 i.u.)
Injection, methylprednisolone sodium succinate, up to 40
mg
Injection, methylprednisolone sodium succinate, up to
125 mg
Injection, testosterone enanthate, up to 100 mg
Injection, testosterone enanthate, up to 200 mg
Injection, hyaluronidase, ovine, preservative free, per 1
usp unit (up to 999 usp units)
Injection, hyaluronidase, ovine, preservative free, per
1000 usp units
Infusion, normal saline solution, 250 cc
Infusion, normal saline solution, sterile (500 ml=l unit)

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15NOR2

K
K
N
N
N
N
N
K
K
N
N
N
N
N
N
N
N
K
K
N
N
N
N
N
N
N
N

ER15NO12.051

CY 2013
HCPCS
Code
C9257
J9035
JI020
JI030
JI040
JI070
JI080
JI440
JI441
J1460
JI560

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Q0164

Q0165

Q0167

Q0168

Q0169

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Q0170

Q0171

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CY 2013
SI

CY 2013 Long Descriptor
Infusion, normal saline solution, 1000 cc
Cyc1osporine, oral, 25 mg
Cyc1osporine, oral, 100 mg
Capecitabine, oral, 150 mg
Capecitabine, oral, 500 mg
Methotrexate sodium, 5 mg
Methotrexate sodium, 50 mg
Prochlorperazine maleate, 5 mg, oral, FDA approved
prescription anti-emetic, for use as a complete therapeutic
substitute for an IV anti-emetic at the time of
chemotherapy treatment, not to exceed a 48-hour dosage
regImen
Prochlorperazine maleate, 10 mg, oral, FDA approved
prescription anti-emetic, for use as a complete therapeutic
substitute for an IV anti-emetic at the time of
chemotherapy treatment, not to exceed a 48-hour dosage
regImen
Dronabinol, 2.5 mg, oral, FDA approved prescription
anti-emetic, for use as a complete therapeutic substitute
for an IV anti-emetic at the time of chemotherapy
treatment, not to exceed a 48-hour dosage regimen
Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an
IV anti-emetic at the time of chemotherapy treatment, not
to exceed a 48-hour dosage regimen
Promethazine hydrochloride, 12.5 mg, oral, FDA
approved prescription anti-emetic, for use as a complete
therapeutic substitute for an IV antiemetic at the time of
chemotherapy treatment, not to exceed a 48-hour dosage
regImen
Promethazine hydrochloride, 25 mg, oral, FDA approved
prescription anti-emetic, for use as a complete therapeutic
substitute for an IV antiemetic at the time of
chemotherapy treatment, not to exceed a 48-hour dosage
regImen
Chlorpromazine hydrochloride, 10 mg, oral, FDA
approved prescription antiemetic, for use as a complete
therapeutic substitute for an IV antiemetic at the time of

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N
N
N
K
K
N
N

N

N

N

N

N

N

N

ER15NO12.052

CY2013
HCPCS
Code
17030
17515
17502
J8520
J8521
J9250
J9260

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BILLING CODE 4120–01–C

3. Payment for Drugs and Biologicals
Without Pass-Through Status That Are
Not Packaged

sroberts on DSK5SPTVN1PROD with

a. Payment for Specified Covered
Outpatient Drugs (SCODs) and Other
Separately Payable and Packaged Drugs
and Biologicals
Section 1833(t)(14) of the Act defines
certain separately payable
radiopharmaceuticals, drugs, and
biologicals and mandates specific
payments for these items. Under section
1833(t)(14)(B)(i) of the Act, a ‘‘specified
covered outpatient drug’’ is a covered
outpatient drug, as defined in section
1927(k)(2) of the Act, for which a
separate APC has been established and
that either is a radiopharmaceutical
agent or is a drug or biological for which

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payment was made on a pass-through
basis on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the
Act, certain drugs and biologicals are
designated as exceptions and are not
included in the definition of ‘‘specified
covered outpatient drugs,’’ known as
SCODs. These exceptions are—
• A drug or biological for which
payment is first made on or after
January 1, 2003, under the transitional
pass-through payment provision in
section 1833(t)(6) of the Act.
• A drug or biological for which a
temporary HCPCS code has not been
assigned.
• During CYs 2004 and 2005, an
orphan drug (as designated by the
Secretary).
Section 1833(t)(14)(A)(iii) of the Act
requires that payment for SCODs in CY

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2006 and subsequent years be equal to
the average acquisition cost for the drug
for that year as determined by the
Secretary, subject to any adjustment for
overhead costs and taking into account
the hospital acquisition cost survey data
collected by the Government
Accountability Office (GAO) in CYs
2004 and 2005, and later periodic
surveys conducted by the Secretary as
set forth in the statute. If hospital
acquisition cost data are not available,
the law requires that payment be equal
to payment rates established under the
methodology described in section
1842(o), section 1847A, or section
1847B of the Act, as calculated and
adjusted by the Secretary as necessary.
Most physician Part B drugs are paid at
ASP+6 percent pursuant to section
1842(o) and section 1847A of the Act.

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Section 1833(t)(14)(E) of the Act
provides for an adjustment in OPPS
payment rates for overhead and related
expenses, such as pharmacy services
and handling costs. Section
1833(t)(14)(E)(i) of the Act required
MedPAC to study pharmacy overhead
and related expenses and to make
recommendations to the Secretary
regarding whether, and if so how, a
payment adjustment should be made to
compensate hospitals for overhead and
related expenses. Section
1833(t)(14)(E)(ii) of the Act authorizes
the Secretary to adjust the weights for
ambulatory procedure classifications for
SCODs to take into account the findings
of the MedPAC study.
It has been our longstanding policy to
apply the same treatment to all
separately payable drugs and
biologicals, which include SCODs, and
drugs and biologicals that are not
SCODs. Therefore, we apply the
payment methodology in section
1833(t)(14)(A)(iii)(I) of the Act to
SCODs, as required by statute, but we
also apply it to separately payable drugs
and biologicals that are not SCODs,
which is a policy choice rather than a
statutory requirement. In the CY 2013
OPPS/ASC proposed rule, we proposed
to apply section 1833(t)(14)(A)(iii)(II) of
the Act to all separately payable drugs
and biologicals. Although we did not
distinguish SCODs in that discussion,
we note that we are required to apply
section 1833(t)(14)(A)(iii)(II) of the Act
to SCODs, but we are choosing to apply
it to other separately payable drugs and
biologicals, consistent with our history
of using the same payment methodology
for all separately payable drugs and
biologicals.
In the CY 2006 OPPS proposed rule
(70 FR 42728 through 42731), we
discussed the June 2005 report by
MedPAC regarding pharmacy overhead
costs in HOPDs and summarized the
findings of that study. In response to the
MedPAC findings, in the CY 2006 OPPS
proposed rule (70 FR 42729), we
discussed our belief that, because of the
varied handling resources required to
prepare different forms of drugs, it
would be impossible to exclusively and
appropriately assign a drug to a certain
overhead category that would apply to
all hospital outpatient uses of the drug.
Therefore, our CY 2006 OPPS proposal
included a proposal to establish three
distinct Level II HCPCS C-codes and
three corresponding APCs for drug
handling categories to differentiate
overhead costs for drugs and biologicals
(70 FR 42730). We also proposed: (1) To
combine several overhead categories
recommended by MedPAC; (2) to
establish three drug handling categories,

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as we believed that larger groups would
minimize the number of drugs that may
fit into more than one category and
would lessen any undesirable payment
policy incentives to utilize particular
forms of drugs or specific preparation
methods; (3) to collect hospital charges
for these HCPCS C-codes for 2 years;
and (4) to ultimately base payment for
the corresponding drug handling APCs
on CY 2006 claims data available for the
CY 2008 OPPS.
In the CY 2006 OPPS final rule with
comment period (70 FR 68659 through
68665), we discussed the public
comments we received on our proposal
regarding pharmacy overhead. The
overwhelming majority of commenters
did not support our proposal regarding
pharmacy overhead and urged us not to
finalize this policy, as it would be
administratively burdensome for
hospitals to establish charges for HCPCS
codes for pharmacy overhead and to
report them. Therefore, we did not
finalize this proposal for CY 2006.
Instead, we established payment for
separately payable drugs and biologicals
at ASP+6 percent, which we calculated
by comparing the estimated aggregate
cost of separately payable drugs and
biologicals in our claims data to the
estimated aggregate ASP dollars for
separately payable drugs and
biologicals, using the ASP as a proxy for
average acquisition cost (70 FR 68642).
Hereinafter, we refer to this
methodology as our standard drug
payment methodology. We concluded
that payment for drugs and biologicals
and pharmacy overhead at a combined
ASP+6 percent rate would serve as an
acceptable proxy for the combined
acquisition and overhead costs of each
of these products.
In the CY 2007 OPPS/ASC final rule
with comment period (71 FR 68091), we
finalized our proposed policy to provide
a single payment of ASP+6 percent for
the hospital’s acquisition cost for the
drug or biological and all associated
pharmacy overhead and handling costs.
The ASP+6 percent rate that we
finalized was higher than the equivalent
average ASP-based amount calculated
from claims of ASP+4 percent according
to our standard drug payment
methodology, but we adopted payment
at ASP+6 percent for stability while we
continued to examine the issue of the
costs of pharmacy overhead in the
HOPD and awaited the accumulation of
CY 2006 data as discussed in the prior
year’s rule.
In the CY 2008 OPPS/ASC proposed
rule (72 FR 42735), in response to
ongoing discussions with interested
parties, we proposed to continue our
methodology of providing a combined

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payment rate for drug and biological
acquisition and pharmacy overhead
costs while continuing our efforts to
improve the available data. We also
proposed to instruct hospitals to remove
the pharmacy overhead charge for both
packaged and separately payable drugs
and biologicals from the charge for the
drug or biological and report the
pharmacy overhead charge on an
uncoded revenue code line on the
claim. We believed that this would
provide us with an avenue for collecting
pharmacy handling cost data specific to
drugs in order to package the overhead
costs of these items into the associated
procedures, most likely drug
administration services. Similar to the
public response to our CY 2006
pharmacy overhead proposal, the
overwhelming majority of commenters
did not support our CY 2008 proposal
and urged us to not finalize this policy
(72 FR 66761). At its September 2007
meeting, the APC Panel recommended
that hospitals not be required to
separately report charges for pharmacy
overhead and handling and that
payment for overhead be included as
part of drug payment. The APC Panel
also recommended that CMS continue
to evaluate alternative methods to
standardize the capture of pharmacy
overhead costs in a manner that is
simple to implement at the
organizational level (72 FR 66761).
Because of concerns expressed by the
APC Panel and public commenters, we
did not finalize the proposal to instruct
hospitals to separately report pharmacy
overhead charges for CY 2008. Instead,
in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66763), we
finalized a policy of providing payment
for separately payable drugs and
biologicals and their pharmacy
overhead at ASP+5 percent as a
transition from their CY 2007 payment
of ASP+6 percent to payment based on
the equivalent average ASP-based
payment rate calculated from hospital
claims according to our standard drug
payment methodology, which was
ASP+3 percent for the CY 2008 OPPS/
ASC final rule with comment period.
Hospitals continued to include charges
for pharmacy overhead costs in the lineitem charges for the associated drugs
reported on claims.
For CY 2009, we proposed to pay
separately payable drugs and biologicals
at ASP+4 percent, including both
SCODs and other drugs without CY
2009 OPPS pass-through status, based
on our standard drug payment
methodology. We also continued to
explore mechanisms to improve the
available data. We proposed to split the

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‘‘Drugs Charged to Patients’’ cost center
into two cost centers: One for drugs
with high pharmacy overhead costs and
one for drugs with low pharmacy
overhead costs (73 FR 41492). We noted
that we expected that CCRs from the
proposed new cost centers would be
available in 2 to 3 years to refine OPPS
drug cost estimates by accounting for
differential hospital markup practices
for drugs with high and low overhead
costs. After consideration of the public
comments received and the APC Panel
recommendations, we finalized a CY
2009 policy (73 FR 68659) to provide
payment for separately payable
nonpass-through drugs and biologicals
based on costs calculated from hospital
claims at a 1-year transitional rate of
ASP+4 percent, in the context of an
equivalent average ASP-based payment
rate of ASP+2 percent calculated
according to our standard drug payment
methodology from the final rule claims
data and cost report data. We did not
finalize our proposal to split the single
standard ‘‘Drugs Charged to Patients’’
cost center into two cost centers largely
due to concerns raised by hospitals
about the associated administrative
burden. Instead, we indicated in the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68659) that we
would continue to explore other
potential approaches to improve our
drug cost estimation methodology,
thereby increasing payment accuracy for
separately payable drugs and
biologicals.
In response to the CMS proposals for
the CY 2008 and CY 2009 OPPS, a group
of pharmacy stakeholders (hereinafter
referred to as the pharmacy
stakeholders), including some cancer
hospitals, some pharmaceutical
manufacturers, and some hospital and
professional associations, commented
that CMS should pay an acquisition cost
of ASP+6 percent for separately payable
drugs, should substitute ASP+6 percent
for the packaged cost of all packaged
drugs and biologicals on procedure
claims, and should redistribute the
difference between the aggregate
estimated packaged drug cost in claims
and payment for all drugs, including
packaged drugs at ASP+6 percent, as
separate pharmacy overhead payments
for separately payable drugs. They
indicated that this approach would
preserve the aggregate drug cost
observed in the claims data, while
significantly increasing payment
accuracy for individual drugs and
procedures by redistributing drug cost
from packaged drugs. Their suggested
approach would provide a separate
overhead payment for each separately

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payable drug or biological at one of
three different levels, depending on the
pharmacy stakeholders’ assessment of
the complexity of pharmacy handling
associated with each specific drug or
biological (73 FR 68651 through 68652).
Each separately payable drug or
biological HCPCS code would be
assigned to one of the three overhead
categories, and the separate pharmacy
overhead payment applicable to the
category would be made when each of
the separately payable drugs or
biologicals was paid.
In the CY 2010 OPPS/ASC proposed
rule (74 FR 35332), we acknowledged
the limitations of our data and our
availability to find a method to improve
that data in a way that did not impose
unacceptable administrative burdens on
providers. Accepting that charge
compression was a reasonable but
unverifiable supposition, we proposed
to redistribute between one-third and
one-half of the estimated overhead cost
associated with coded packaged drugs
and biologicals with an ASP, which
resulted in our proposal to pay for the
acquisition and pharmacy overhead
costs of separately payable drugs and
biologicals that did not have passthrough payment status at ASP+4
percent. We calculated estimated
overhead cost for coded packaged drugs
and biologicals by determining the
difference between the aggregate claims
cost for coded packaged drugs and
biologicals with an ASP and the ASP
dollars (ASP multiplied by the drug’s or
biological’s units in the claims data) for
those same coded drugs and biologicals;
this difference was our estimated
overhead cost for coded packaged drugs
and biologicals. In our rationale
described in the CY 2010 OPPS/ASC
proposed rule (74 FR 35326 through
35333), we stated that we believed that
approximately $150 million of the
estimated $395 million total in
pharmacy overhead cost, specifically
between one-third and one-half of that
cost, included in our claims data for
coded packaged drugs and biologicals
with reported ASP data should be
attributed to separately payable drugs
and biologicals and that the $150
million serves as the adjustment for the
pharmacy overhead costs of separately
payable drugs and biologicals. As a
result, we also proposed to reduce the
costs of coded drugs and biologicals that
are packaged into payment for
procedural APCs to offset the $150
million adjustment to payment for
separately payable drugs and
biologicals. In addition, we proposed
that any redistribution of pharmacy
overhead cost that may arise from the

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CY 2010 final rule data would occur
only from some drugs and biologicals to
other drugs and biologicals, thereby
maintaining the estimated total cost of
drugs and biologicals that we calculate
based on the charges and costs reported
by hospitals on claims and cost reports.
As a result of this approach, no
redistribution of cost would occur from
other services to drugs and biologicals
or vice versa.
While we had no way of assessing
whether this current distribution of
overhead cost to coded packaged drugs
and biologicals with an ASP was
appropriate, we acknowledged that the
established method of converting billed
charges to costs had the potential to
‘‘compress’’ the calculated costs to some
degree. Further, we recognized that the
attribution of pharmacy overhead costs
to packaged or separately payable drugs
and biologicals through our standard
drug payment methodology of a
combined payment for acquisition and
pharmacy overhead costs depends, in
part, on the treatment of all drugs and
biologicals each year under our annual
drug packaging threshold. Changes to
the packaging threshold may result in
changes to payment for the overhead
cost of drugs and biologicals that do not
reflect actual changes in hospital
pharmacy overhead cost for those
products. For these reasons, we stated
that we believed some portion, but not
all, of the total overhead cost that is
associated with coded packaged drugs
and biologicals (the difference between
aggregate cost for those drugs and
biologicals on the claims and ASP
dollars for the same drugs and
biologicals), based on our standard drug
payment methodology, should, at least
for CY 2010, be attributed to separately
payable drugs and biologicals.
We acknowledged that the observed
combined payment for acquisition and
pharmacy overhead costs of ASP–2
percent for separately payable drugs and
biologicals may be too low and
ASP+247 percent for coded packaged
drugs and biologicals with reported ASP
data in the CY 2010 claims data may be
too high (74 FR 35327 and 35328).
Therefore, we stated that a middle
ground would represent the most
accurate redistribution of pharmacy
overhead cost. Our assumption was that
approximately one-third to one-half of
the total pharmacy overhead cost
currently associated with coded
packaged drugs and biologicals in the
CY 2008 claims data offered a more
appropriate allocation of drug and
biological cost to separately payable
drugs and biologicals (74 FR 35328).
One-third of the $395 million of
pharmacy overhead cost associated with

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packaged drugs and biologicals was
$132 million, whereas one-half was
$198 million.
Within the one-third to one-half
parameters, we proposed reallocating
$150 million in drug and biological cost
observed in the claims data from coded
packaged drugs and biologicals with an
ASP to separately payable drugs and
biologicals for CY 2010 for their
pharmacy overhead costs. Based on this
redistribution, we proposed a CY 2010
payment rate for separately payable
drugs and biologicals of ASP+4 percent.
In the CY 2010 OPPS final rule with
comment period, we adopted a
transitional payment rate of ASP+4
percent based on a pharmacy overhead
adjustment methodology for CY 2010
that redistributed $200 million from
packaged drug and biological cost to
separately payable drug cost (74 FR
60499 through 60518). This $200
million included the proposed $150
million redistribution from the
pharmacy overhead cost of coded
packaged drugs and biologicals for
which an ASP is reported and an
additional $50 million dollars from the
total uncoded drug and biological cost
to separately payable drugs and
biologicals as a conservative estimate of
the pharmacy overhead cost of uncoded
packaged drugs and biologicals that
should be appropriately associated with
the cost of separately payable drugs and
biologicals (74 FR 60517). We stated
that this was an intentionally
conservative estimate as we could not
identify definitive evidence that
uncoded packaged drug and biological
cost included a pharmacy overhead
amount comparable to that of coded
packaged drugs and biologicals with an
ASP. We stated that we could not know
the amount of overhead associated with
these drugs without making significant
assumptions about the amount of
pharmacy overhead cost associated with
the drugs and biologicals captured by
these uncoded packaged drug costs (74
FR 60511 through 60513). In addition,
as in prior years, we reiterated our
commitment to continue in our efforts
to refine our analyses.
For CY 2011, we continued the CY
2010 pharmacy overhead adjustment
methodology (74 FR 60500 through
60512). Consistent with our supposition
that the combined payment for average
acquisition and pharmacy overhead
costs under our standard methodology
may understate the cost of separately
payable drugs and biologicals and
related pharmacy overhead for those
drugs and biologicals, we redistributed
$150 million from the pharmacy
overhead cost of coded packaged drugs
and biologicals with an ASP and

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redistributed $50 million from the cost
of uncoded packaged drugs and
biologicals, for a total redistribution of
$200 million from costs for coded and
uncoded packaged drugs to separately
payable drugs and biologicals, with the
result that we pay separately paid drugs
and biologicals at ASP+5 percent for CY
2011. The redistribution amount of $150
million in overhead cost from coded
packaged drugs and biologicals with an
ASP and $50 million in costs from
uncoded packaged drugs and biologicals
without an ASP were within the
parameters established in the CY 2010
OPPS/ASC final rule. In addition, as in
prior years, we described some of our
work to improve our analyses during the
preceding year, including an analysis of
uncoded packaged drug and biological
cost and our evaluation of the services
with which uncoded packaged drug cost
appears in the claims data. We
conducted this analysis in an effort to
assess how much uncoded drugs
resemble coded packaged drugs (75 FR
71966). We stated that, in light of this
information, we were not confident that
the drugs captured by uncoded drug
cost are the same drugs captured by
coded packaged drug cost, and
therefore, we did not believe we could
assume that they are the same drugs,
with comparable overhead and handling
costs. Without being able to calculate
the ASP for these uncoded packaged
drugs and biologicals and without being
able to gauge the magnitude of overhead
complexity associated with these drugs
and biologicals, we did not believe that
we should have assumed that the same
amount of proportional overhead should
be redistributed between coded and
uncoded packaged drugs, and therefore,
we redistributed $50 million from
uncoded packaged drugs and $150
million from coded packaged drugs (75
FR 71966). We reiterated our
commitment to continue to refine our
drug pricing methodology and noted
that we would continue to pursue the
most appropriate methodology for
establishing payment for drugs and
biologicals under the OPPS and
continue to evaluate the appropriateness
of this methodology when we establish
each year’s payment for drugs and
biologicals under the OPPS (75 FR
71967).
For CY 2012, we continued our
overhead adjustment methodology of
redistributing 1⁄3 to 1⁄2 of allocated
overhead for coded packaged drugs or
$150 million plus an additional $50
million in allocated overhead for
uncoded packaged drugs. Additionally,
we finalized a policy to update these
amounts by the PPI for pharmaceuticals

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and redistributed $161 million in
allocated overhead from coded
packaged drugs and $54 million from
uncoded packaged drugs. We further
finalized a policy to hold the
redistributed proportion of packaged
drugs constant between the proposed
and the final rule, which increased the
final redistribution amount in the CY
2012 final rule to $240.3 million ($169
million from coded packaged drugs and
$71.3 million from uncoded packaged
drugs). This approach resulted in a final
payment rate of ASP+4 percent for
separately payable drugs.
b. CY 2013 Payment Policy
In reexamining our current drug
payment methodology for the CY 2013
OPPS/ASC proposed rule, we reviewed
our past efforts to determine an
appropriate payment methodology for
drugs and biologicals, as described
above. Since the inception of the OPPS,
we have remained committed to
establishing a drug payment
methodology that is predictable,
accurate, and appropriate. Pharmacy
stakeholders and the hospital
community have also, throughout the
years, continually emphasized the
importance of both predictable and
accurate payment rates for drugs, noting
that a payment methodology that
emphasizes predictability and accuracy
leads to appropriate payment rates that
reflect the cost of drugs and biologicals
(including overhead) in HOPDs.
Pertinent stakeholders also have noted
that predictable and accurate payment
rates minimize the effect of anomalies in
the claims data that may incorrectly
influence the future payment for
services. We understand that, with
predictable payment rates, hospitals are
better able to plan for the future.
As discussed above, since CY 2006,
we have attempted to establish a drug
payment methodology that reflects
hospitals’ acquisition costs for drugs
and biologicals while taking into
account relevant pharmacy overhead
and related handling expenses. We have
attempted to collect more data on
hospital overhead charges for drugs and
biologicals by making several proposals
that would require hospitals to change
the way they report the cost and charges
for drugs. None of these proposals were
adopted due to significant stakeholder
concern, including that hospitals stated
that it would be administratively
burdensome to report hospital overhead
charges. We established a payment
policy for separately payable drugs and
biologicals, authorized by section
1833(t)(14)(A)(iii)(I) of the Act, based on
an ASP+X amount that is calculated by
comparing the estimated aggregate cost

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of separately payable drugs and
biologicals in our claims data to the
estimated aggregate ASP dollars for
separately payable drugs and
biologicals, using the ASP as a proxy for
average acquisition cost (70 FR 68642).
As we previously stated, we refer to this
methodology as our standard drug
payment methodology.
In CY 2010, taking into consideration
comments made by the pharmacy
stakeholders and acknowledging the
limitations of the reported data due to
charge compression and hospitals’
reporting practices, we added an
‘‘overhead adjustment’’ (an internal
adjustment of the data) by redistributing
cost from coded and uncoded packaged
drugs and biologicals to separately
payable drugs in order to provide more
appropriate payments for drugs and
biologicals in the HOPD. We continued
this overhead adjustment methodology
through CY 2012, and further refined
our overhead adjustment methodology
by finalizing a policy to update the
redistribution amount for inflation and
keep the redistribution ratio constant
between the proposed rule and the final
rule.
Application of the standard drug
payment methodology, with the
overhead adjustment, has always
yielded a finalized payment rate in the
range of ASP+4 percent to ASP+6
percent for nonpass-through separately
payable drugs. We believe that the
historic ASP+4 to ASP+6 percentage
range is an appropriate payment rate for
separately payable drugs and biologicals
administered within the HOPD,
including acquisition and pharmacy
overhead and related expenses.
However, because of continuing
uncertainty about the full cost of
pharmacy overhead and acquisition
cost, based in large part on the
limitations of the submitted hospital
charge and claims data for drugs, we are
concerned that the continued use of our
current standard drug payment
methodology (including the overhead
adjustment) still may not appropriately
account for average acquisition and
pharmacy overhead cost and, therefore,
may result in payment rates that are not
as predictable, accurate, or appropriate
as they could be.
Section 1833(t)(14)(A)(iii)(II) of the
Act requires an alternative methodology
for determining payment rates for
SCODs wherein, if hospital acquisition
cost data are not available, payment
shall be equal (subject to any adjustment
for overhead costs) to payment rates
established under the methodology
described in section 1842(o), section
1847A, or section 1847B of the Act, as
calculated and adjusted by the Secretary

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as necessary. Considering stakeholder
and provider feedback, continued
limitations of the hospital claims and
cost data on drugs and biologicals, and
Panel recommendations, in the CY 2013
OPPS/ASC proposed rule (77 FR 45140),
we proposed for CY 2013 to pay for
separately payable drugs and biologicals
at ASP+6 percent based on section
1833(t)(14)(A)(iii)(II) of the Act,
hereinafter referred to as the statutory
default.
As noted above, section
1833(t)(14)(A)(iii)(II) of the Act
authorizes the Secretary to calculate and
adjust, as necessary, the average price
for a drug in the year established under
section 1842(o), 1847A, or 1847B of the
Act, as the case may be, in determining
payment for SCODs. Pursuant to
sections 1842(o) and 1847A of the Act,
physician Part B drugs are paid at
ASP+6 percent. We believe that
proposing the statutory default of
ASP+6 percent is appropriate at this
time as it yields increased predictability
in payment for separately payable drugs
and biologicals under the OPPS. We
believe that ASP+6 percent is an
appropriate payment amount because it
is consistent with payment amounts
yielded by our drug payment
methodologies over the past 7 years. We
proposed that the ASP+6 percent
payment amount for separately payable
drugs and biologicals requires no further
adjustment, and represents the
combined acquisition and pharmacy
overhead payment for drugs and
biologicals for CY 2013.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45140), we proposed that
payments for separately payable drugs
and biologicals are included in the
budget neutrality adjustments, under
the requirements in section 1833(t)(9)(B)
of the Act, and that the budget neutral
weight scaler is not applied in
determining payments for these
separately paid drugs and biologicals.
Comment: Commenters strongly
supported CMS’ proposal to pay for
separately payable drugs and biologicals
based on the statutory default rate of
ASP+6 percent. The commenters stated
that ASP+6 percent is administratively
simple, improves stability of drug and
biological payments, and better covers
the costs of drug acquisition and
pharmacy overhead than the payment
rates CMS has finalized in previous
years. The commenters noted that, by
contrast, the current payment
methodology involves complex
calculations and an annual overhead
adjustment in which costs are
redistributed from packaged drugs to
separately payable drugs. Another
commenter supported CMS’ proposal to

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pay for separately payable drugs and
biologicals because it believed that this
change in the payment methodology
will prevent the inappropriate shifting
of overhead costs from contrast agents.
One commenter also expressed support
for the proposal and noted the
importance of finalizing the proposal, as
more hospitals seek to access preferred
drug pricing under the 340B program.
One commenter noted that the
implementation of the survey of
hospital drug costs required by section
1833(t)(14)(D)(iii), instead of the
proposed statutory default rate of
ASP+6 percent, would impose a costly
administrative burden on both hospitals
and CMS without demonstrating an
equivalent benefit compared to the use
of the average sales price that is based
on the certified sales price of the drugs
and biologicals. Other commenters
supported CMS’ proposal to pay for
drugs and biologicals at ASP+6 percent
because neither the GAO nor CMS have
conducted the periodic surveys required
by the statute since CY 2005 on average
acquisition costs. They argued that, in
the absence of current survey data on
average acquisition costs, the statute
requires that payment be set at the
statutory default rate of ASP+6 percent
and that an additional adjustment for
overhead be made.
Several commenters agreed with CMS
and noted that this proposal allowed for
stable and predictable payment rates for
separately paid drugs and biologicals
while removing the need to address
charge compression and other issues.
One commenter noted, in particular,
that the proposal eliminates the issues
related to the inclusion of 340B sales in
the rate calculation. The commenter
further recommended that CMS
continue its policy of paying 340B and
non-340B hospitals at the same rate for
separately paid drugs and biologicals.
Other commenters noted that payment
for the acquisition and overhead costs of
drugs and biologicals at ASP+6 percent
will help to protect patients’ access to
care in the most clinically appropriate
setting. The commenters also argued
that this payment rate would create
parity with the physician office setting.
Finally, many of the comments
supported CMS’ goal to establish a
payment methodology that accurately
and predictably estimates acquisition
and overhead costs for separately paid
drugs and biologicals.
Response: We appreciate the
commenters’ support. For several years,
we have attempted to identify a
methodology for paying for the average
acquisition cost and pharmacy overhead
costs for SCODs in a manner that is both
appropriate and that is not burdensome

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to hospitals. After several years of
refining a payment methodology, which
has included the standard payment
methodology and the overhead
adjustment methodology, we
determined in the CY 2013 OPPS/ASC
proposed rule (77 FR 45140) that,
because of continuing uncertainty about
the full cost of pharmacy overhead and
acquisition cost, based in large part on
the limitations of the submitted hospital
charge and claims data for drugs, the
continued use of our current standard
drug payment methodology (including
the overhead adjustment) still may not
appropriately account for average
acquisition and pharmacy overhead cost
and therefore may result in payment
rates that are not as predictable,
accurate, or appropriate as they could
be. Therefore, we proposed to pay for
separately payable drugs and biologicals
at the statutory default rate of ASP+6
percent, as is consistent with section
1833(t)(14)(iii)(II) of the Act which
requires an alternative methodology for
determining payment rates for SCODs
wherein, if hospital acquisition cost
data are not available, payment shall be
equal (subject to any adjustment for
overhead costs) to the payment rates
established under the methodology
described in section 1842(o), section
1847A, or section 1847B of the Act, as
calculated and adjusted by the Secretary
as necessary.
In the past, commenters, pertinent
stakeholders, and the HOP Panel
(previously known as the APC Panel)
have strongly advocated for the use of
the statutory default payment rate of
ASP+6 percent. As we stated in the
proposed rule, we believe that our
proposal is consistent with these
previous comments and we agree with
the commenters that proposing a
payment rate of ASP+6 percent based on
the statutory default for separately
payable drugs and biologicals is
appropriate at this time. We agree with
commenters that the statutory default
obviates both the need to utilize
complex calculations for acquisition
and overhead costs and the requirement
to collect data from hospital surveys,
which would prove to be burdensome to
both hospitals and to CMS.
Additionally, we agree with
commenters that the statutory default
payment rate of ASP+6 percent
eliminates the 340B program concerns
many commenters have expressed in the
past. Therefore, we believe that the
statutory default payment rate of ASP+6
percent is appropriate for CY 2013.
Comment: Several commenters
supported CMS’ proposal of ASP+6
percent but stated their concerns that
this level of payment is not sufficient to

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cover both drug acquisition and
pharmacy overhead cost. The
commenters stated that they considered
this an improvement over the rate used
in previous years and that this payment
rate should be the minimum level of
payment, or the payment floor,
necessary to cover acquisition costs
alone. Therefore, the commenters
recommended that CMS finalize ASP+6
percent as the payment rate for
acquisition costs alone and provide an
additional, separate payment for
hospital pharmacy overhead costs. One
commenter also expressed concern
whether ASP+6 percent is sufficient to
cover both acquisition and handling.
However, the commenter stated that the
ASP+6 percent proposed payment rate
is preferable to CMS continuing to
attempt to determine what level of
redistribution from packaged drugs to
separately payable drugs should occur
on an annual basis. One commenter
reaffirmed the notion that ASP+6
percent should be the minimum level of
payment that should be provided to
cover hospitals’ drug acquisition costs
but the commenter recommended that
CMS reconsider ASP+6 percent to be
the minimum payment level to cover
drug acquisition costs in both the
physician’s office and the hospital
outpatient setting. The commenter
argued that this would create payment
parity and also enable the creation of a
supplemental system to make a separate
and additional ASP plus percentage
amount to hospitals to cover their
significant overhead costs.
One commenter supported CMS’
proposal and stated that if CMS should
finalize its policy to pay for separately
payable drugs and biologicals at ASP+6
percent, CMS should not pay for
pharmacy overhead, which is permitted
but not required by section
1833(t)(14)(E)(iii) of the Act, in addition
to the ASP+6 percent payment because
payment at ASP+6 percent already
includes payment for pharmacy
overhead equal to 5 percent of ASP (the
difference between ASP+6 percent and
the ASP+1 percent that the OIG found
to be the average acquisition cost of
hospital drugs and biologicals in a study
conducted by the OIG in 2010)
(https://oig.hhs.gov/oei/reports/oei-0309-00420.pdf). Moreover, the
commenter further noted that payment
for separately payable drugs and
biologicals under section 1842(o) of the
Act at 106 percent of ASP includes
payment for the services of the
pharmacy from which the physician
purchases the drugs and biologicals.
Therefore, the commenter further noted,
if CMS pays hospitals ASP+6 percent

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for separately paid drugs and
biologicals, it is also paying for the
associated pharmacy overhead and
should pay nothing more.
Response: We disagree with the
commenters who stated that ASP+6
percent should be the payment for the
acquisition cost alone and that separate
payment for overhead should be made.
We note that while the statute states that
payment for SCODs under section
1833(t)(14)(A)(iii)(II) of the Act equals
the payment rates established in the
physician’s office, subject to any
adjustment for overhead costs, the
statute does not mandate that such an
adjustment for overhead be made. We
believe that the payment rate of ASP+6
percent includes a sufficient amount for
overhead costs for separately payable
drugs and biologicals and we see no
further evidence that any additional
adjustment for overhead is required. As
we stated in the proposed rule, we
believe that the historic ASP+4 to
ASP+6 percentage range is an
appropriate payment rate for separately
payable drugs and biologicals
administered within the HOPD,
including acquisition and pharmacy
overhead and related expenses, and we
have not seen any evidence to indicate
that these rates have limited beneficiary
access to drugs, insufficiently paid for
acquisition and overhead costs for drugs
administered in the HOPD, or caused a
migration of care from the hospital
outpatient setting to the physician’s
office. To the contrary, we continue to
see increases in the utilization of drugs
and biologicals administered in the
outpatient department in our claims
data, even at payment rates of ASP+4 or
5 percent. Therefore, we believe that
ASP+6 percent is an appropriate
payment rate for separately payable
drugs and biologicals.
Additionally, we agree with the
commenter who cited the OIG study
conducted in 2010, which used first
quarter 2009 Medicare payment
amounts compared to first quarter 2009
hospital acquisition costs for 33
separately payable drugs. The OIG
concluded that, in the aggregate,
Medicare payments were 1 percent
higher than acquisition costs amounts
for the responding non-340B hospitals
for the selected separately payable
drugs. This study supports our position
that the ASP+6 percentage amount
proposed for CY 2013 sufficiently pays
for overhead and acquisition costs for
drugs and requires no further
adjustment.
We continue to believe that ASP+6
percent based on the statutory default is
appropriate for hospitals for CY 2013
and that this percentage amount

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includes payment for acquisition and
overhead cost. Furthermore, many
hospitals and major hospital
associations supported our proposed
ASP+6 percent for CY 2013 and made
no request for additional payment for
overhead costs in their comments to the
CY 2013 OPPS/ASC proposed rule.
Therefore, we believe that a payment
rate of ASP+6 percent is appropriate for
CY 2013.
Comment: A few commenters
supported CMS’ proposal, but
recommended that CMS examine ways
to compensate hospitals for the unique,
higher overhead and handling costs
associated with therapeutic
radiopharmaceuticals.
Response: As we stated above, we
continue to believe that ASP+6 percent
based on the statutory default is
appropriate for hospitals for CY 2013
and that this percentage amount
includes payment for acquisition and
overhead cost. We see no evidence that
an additional overhead adjustment is
required for separately payable drugs,
biologicals and therapeutic
radiopharmaceuticals for CY 2013.
Comment: One commenter remained
concerned that the comparison of ASP
to cost is not an ‘‘apple to apples’’
comparison because the cost data
incorporate data from hospitals that
receive 340B program discounts from
drugs they purchase. The commenter
further stated that the ASP calculation
excludes 340B program sales, which
underestimates the aggregate costs of
drugs for most hospitals and the ASPbased rate that CMS produces by
comparing aggregate costs to ASP is too
low. The commenter asked that CMS
review its cost calculation to ASP to
ensure that 340B program drugs are not
artificially reducing the CMS
calculation.
Response: For CY 2013, we proposed
to pay for separately payable drugs and
biologicals at ASP+6 percent based on
the statutory default established in
section 1833(t)(14)(A)(iii)(II) of the Act.
While we understand that commenters
were previously concerned about the
impact of 340B hospital data on our
previous standard and overhead
adjustment methodology calculations,
we did not in fact propose to continue
these methodologies for CY 2013.
Comment: One commenter supported
CMS’ proposal to increase the payment
rate for SCODs to ASP+6 percent for CY
2013. However, the commenter believed
that the law requires that SCOD
payment rates, other than the ASP+6
percent default rate, must be set on a
drug by drug basis, as mandated by
section 1833(t)(14)(A)(iii)(I) of the Act.
Therefore, the commenter

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recommended that CMS perform an
individualized, drug by drug
determination for the payment rate for
each SCOD.
Response: Section
1833(t)(14)(A)(iii)(I) of the Act requires
that payment for SCODs in CY 2006 and
subsequent years be equal to the average
acquisition cost for the drug for that
year, subject to any adjustment of
overhead costs. If hospital acquisition
cost data are not available, section
1833(t)(14)(A)(iii)(II) of the Act requires
that payment be equal to payment rates
established under the methodology
described in section 1842(o), section
1847A, or section 1847B of the Act, as
calculated and adjusted by the Secretary
as necessary. Previously under the
standard methodology and the overhead
adjustment methodology, we
established ASP as a proxy for the
average acquisition cost. However, we
did not propose to use the authority
given under section 1833(t)(14)(A)(iii)(I)
of the Act to pay for SCODs for CY 2013.
For CY 2013, we instead proposed to
pay for separately payable drugs and
biologicals based on the statutory
authority established in section
1833(t)(14)(A)(iii)(II) of the Act.
Comment: One commenter
recommended that CMS design a
payment strategy that would maintain
one formula for health care prescribers,
but develop a multi-tiered
reimbursement strategy that would
encourage the use of generic drugs over
their branded counterparts, using
ASP+6 percent as an appropriate base
for the most expensive drugs and
providing additional reimbursement for
multi-source generic drugs. Another
commenter recommended that CMS
adopt a new policy of assigning each
‘‘branded prescription drug’’ a unique
HCPCS code, so that Part B utilization
of these drugs can be accurately
determined.
Response: We made no such proposal
to develop a multi-tiered payment
strategy that would encourage the use of
generic drugs over their branded
counterparts, using ASP+6 percent as an
appropriate base for the most expensive
drugs and providing additional payment
for multi-source generic drugs. The
commenters’ recommendation to assign
a unique HCPCS code for each ‘‘branded
prescription drug’’ is outside the scope
of this final rule with comment period.
Comment: One commenter asked that,
for CY 2014, CMS consider paying for
influenza and PPV vaccines at 106
percent of ASP.
Response: This comment is outside
the scope of the CY 2013 OPPS/ASC
final rule. However, we plan to address

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this issue in an upcoming rulemaking
cycle.
Comment: One commenter supported
CMS’ proposal to pay for separately
payable drugs at ASP+6 percent, but the
commenter urged CMS to consider the
effect of its coding practices on brand
manufacturers’ annual fee payment
under section 9008 of the Patient
Protection and Affordable Care Act
(ACA) and asked that CMS support the
exclusion of wholesaler prompt pay
discounts from the ASP calculations of
separately payable drugs.
Response: Comments about
individual ASP calculations for drugs
and biologicals, or the inclusion or
exclusion of prompt pay discounts in
these calculations, are outside the scope
of this final rule with comment period.
At its February 2012 Panel meeting,
the Panel made four recommendations
on drugs and biologicals paid under the
OPPS. First, the Panel recommended
that CMS require hospitals to bill all
drugs that are described by Healthcare
Common Procedure Coding System
(HCPCS) codes under revenue code
0636. While we agree that drugs and
biologicals may be reported under
revenue code 0636, we believe that
drugs and biologicals may also be
appropriately reported in revenue code
categories other than revenue code
0636, including but not limited to,
revenue codes 025x and 062x. As we
stated in the CY 2011 OPPS/ASC final
rule with comment period (75 FR
71966), we recognize that hospitals may
carry the costs of drugs and biologicals
in multiple cost centers and that it may
not be appropriate to report the cost of
all drugs and biologicals in one
specified revenue code. Additionally,
we generally require hospitals to follow
National Uniform Billing Committee
(NUBC) guidance for the choice of an
appropriate revenue code that is also
appropriate for the hospital’s internal
accounting processes. Therefore, we are
not accepting the Panel’s
recommendation to require hospitals to
bill all drugs that are described by
HCPCS codes under revenue code 0636.
However, we continue to believe that
OPPS ratesetting is most accurate when
hospitals report charges for all items
and services that have HCPCS codes
using those HCPCS codes, regardless of
whether payment for the items and
services is packaged. It is our standard
ratesetting methodology to rely on
hospital cost report and charge
information as it is reported to us
through the claims data. We continue to
believe that more complete data from
hospitals identifying the specific drugs
that were provided during an episode of
care may improve payment accuracy for

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drugs in the future. Therefore, we
continue to encourage hospitals to
change their reporting practices if they
are not already reporting HCPCS codes
for all drugs and biologicals furnished,
when specific HCPCS codes are
available for those drugs and
biologicals.
Comment: Some commenters
recommended that CMS require
hospitals to bill all drugs with HCPCS
codes under revenue code 0636 in order
to improve its data on packaged drugs.
One commenter recommended that
CMS not require hospitals to report the
HCPCS code for each drug and
biological in revenue code 0636 because
to do so would impose an unreasonable
burden on hospitals without a
commensurate benefit to the accuracy of
Medicare payment for drugs and
biologicals under the OPPS if CMS
finalizes its proposal to pay separately
paid drugs at ASP+6 percent. Moreover,
the commenter continued, in the case of
packaged drugs and biologicals, the
charges that are reported with revenue
codes but without HCPCS codes are
reduced to costs by application of the
CCR for the cost center that applies to
the revenue code under which the
charges are reported and are packaged
into the cost of the service. The
commenter further stated that, therefore,
to require that all drugs and biologicals
be reported under any specific revenue
code would require hospitals to revise
their cost accounting systems to
accommodate such a change because the
revenue code in which charges are
reported must correspond to the cost
center in which the costs are reported
on the cost report for the cost report to
be completed correctly and for the cost
of packaged drugs and biologicals to be
calculated correctly.
Response: We do not accept the
commenter’s recommendation that CMS
require drugs and biologicals to be
reported under revenue code 0636. We
do agree with the commenter who
recommended that CMS not require
hospitals to report the HCPCS code for
each drug and biological in revenue
code 0636 because doing so would
impose an unreasonable burden on
hospitals. Further, we agree that charges
that are reported with revenue codes but
without HCPCS codes are reduced to
costs by application of the CCR for the
cost center that applies to the revenue
code under which the charges are
reported and are packaged into the cost
of the service. As we stated in the CY
2013 OPPS/ASC proposed rule, we
believe that drugs and biologicals may
also be appropriately reported in
revenue code categories other than
revenue code 0636, including, but not

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limited to, revenue codes 025x and
062x. As we stated in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 71966), we recognize that
hospitals may carry the costs of drugs
and biologicals in multiple cost centers
and that it may not be appropriate to
report the cost of all drugs and
biologicals in one specified revenue
code. Additionally, we generally require
hospitals to follow National Uniform
Billing Committee (NUBC) guidance for
the choice of an appropriate revenue
code that is also appropriate for the
hospital’s internal accounting processes.
Therefore, we are not accepting the
Panel’s recommendation to require
hospitals to bill all drugs that are
described by HCPCS codes under
revenue code 0636.
However, we are reiterating once
again in this CY 2013 OPPS/ASC final
rule with comment period that the
OPPS ratesetting as a whole, not just for
drugs and biologicals, is most accurate
when hospitals report charges for all
items and services that have HCPCS
codes using those HCPCS codes,
regardless of whether payment for the
items and services is packaged.
Therefore, we continue to encourage
hospitals to report a charge for each
service they furnish, either by billing
the HCPCS code and a charge for that
service if separate reporting is
consistent with CPT and CMS
instructions or by reporting the charge
for the packaged service with an
appropriate revenue code but without a
HCPCS code, when specific HCPCS
codes are unavailable.
Second, the Panel recommended that
CMS exclude data from hospitals that
participate in the 340B program from its
ratesetting calculations for drugs. Under
the proposed statutory default payment
rate of ASP+6 percent, hospitals’ 340B
status does not affect the drug payment
rate.
Third, the Panel recommended that
CMS freeze the packaging threshold at
$75 until the drug payment issue is
more equitably addressed. The OPPS is
based on the concept of payment for
groups of services that share clinical
and resource characteristics. We believe
that the packaging threshold is
reasonable based on the initial
establishment in law of a $50 threshold
for the CY 2005 OPPS, that updating the
$50 threshold is consistent with
industry and government practices, and
that the PPI for Prescription Drugs is an
appropriate mechanism to gauge Part B
drug inflation. Therefore, we are not
accepting the Panel’s recommendation
to freeze the packaging threshold at $75
until the drug payment issue is more
equitably addressed. Instead, as

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68389

discussed in section V.B.2. of the
proposed rule and this final rule with
comment period, we proposed and are
finalizing an OPPS drug packaging
threshold for CY 2013 of $80. However,
we do believe that we have addressed
the drug payment issue by proposing to
pay for separately paid drugs and
biologicals at ASP+6 percent for CY
2013 based upon the statutory default.
Finally, the Panel recommended that
CMS pay hospitals for separately
payable drugs at a rate of ASP+6
percent. This Panel recommendation is
consistent with our CY 2013 proposed
payment rate based upon the statutory
default under section
1833(t)(14)(A)(iii)(II) of the Act, which
authorizes us to pay for drugs and
biologicals under the OPPS at ASP+6
percent, when hospital acquisition cost
data are not available.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to pay for separately
payable drugs and biologicals at ASP+6
percent based on section
1833(t)(14)(A)(iii)(II) of the Act,
hereinafter referred to as the statutory
default. The ASP+6 percent payment
amount for separately payable drugs and
biologicals requires no further
adjustment and represents the combined
acquisition and pharmacy overhead
payment for drugs and biologicals for
CY 2013. As we stated in the proposed
rule (77 FR 45140), our goals continue
to be to develop a methodology that
accurately and predictably estimates
acquisition and overhead costs for
separately payable drugs and biologicals
in order to pay for them appropriately.
If a better payment methodology is
developed in the future then the
proposed policy to pay ASP+6 percent
according to the statutory default would
be an interim step in the development
of this payment policy. We recognize
the challenges in doing so given the
current data sources and the object of
maintaining the smallest administrative
burden possible.
In addition, we are finalizing our
proposal which states that payment for
separately payable drugs and biologicals
be included in the budget neutrality
adjustments, under the requirements of
section 1833(t)(9)(B) of the Act, and that
the budget neutral weight scaler is not
applied in determining payment of
these separately paid drugs and
biologicals.
We note that separately payable drug
and biological payment rates listed in
Addenda A and B to this final rule with
comment period, which illustrate the
final CY 2013 payment of ASP+6
percent for separately payable nonpass-

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through drugs and biologicals and
ASP+6 percent for pass-through drugs
and biologicals, reflect either ASP
information that is the basis for
calculating payment rates for drugs and
biologicals in the physician’s office
setting effective October 1, 2012, or
WAC, AWP or mean unit cost from 2011
claims data and updated cost report
information available for this final rule
with comment period. In general, these
published payment rates are not
reflective of actual January 2013
payment rates. This is because payment
rates for drugs and biologicals with ASP
information for January 2013 will be
determined through the standard
quarterly process where ASP data
submitted by manufacturers for the
third quarter of 2012 (July 1, 2012
through September 30, 2012) are used to
set the payment rates that are released
for the quarter beginning in January
2013 near the end of December 2012. In
addition, payment rates for drugs and
biologicals in Addenda A and B to this
final rule with comment period for
which there was no ASP information
available for October 2012 are based on
mean unit cost in the available CY 2011
claims data. If ASP information becomes
available for payment for the quarter
beginning in January 2013, we will price
payment for these drugs and biologicals
based on their newly available ASP
information. Finally, there may be drugs
and biologicals that have ASP
information available for this final rule
with comment period (reflecting
October 2012 ASP data) that do not have
ASP information available for the
quarter beginning in January 2013.
These drugs and biologicals will then be
paid based on mean unit cost data
derived from CY 2011 hospital claims.
Therefore, the payment rates listed in
Addenda A and B to this final rule with
comment period are not for January
2013 payment purposes and are only
illustrative of the CY 2013 OPPS
payment methodology using the most
recently available information at the
time of issuance of this final rule with
comment period.
4. Payment Policy for Therapeutic
Radiopharmaceuticals
Beginning in CY 2010 and continuing
for CY 2012, we established a policy to
pay for separately paid therapeutic
radiopharmaceuticals under the ASP
methodology adopted for separately
payable drugs and biologicals. We allow
manufacturers to submit the ASP data in
a patient-specific dose or patient-ready
form in order to properly calculate the
ASP amount for a given HCPCS code. If
ASP information is unavailable for a
therapeutic radiopharmaceutical, then

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we base therapeutic
radiopharmaceutical payment on mean
unit cost data derived from hospital
claims. We believe that the rationale
outlined in the CY 2010 OPPS/ASC
final rule with comment period (74 FR
60524 through 60525) for applying the
principles of separately payable drug
pricing to therapeutic
radiopharmaceuticals continues to be
appropriate for nonpass-through
separately payable therapeutic
radiopharmaceuticals in CY 2013.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45141), we
proposed for CY 2013 to pay all
nonpass-through, separately payable
therapeutic radiopharmaceuticals at
ASP+6 percent, based on the statutory
default described in section
1833(t)(14)(A)(iii)(II) of the Act. We
proposed to continue to set payment
rates for therapeutic
radiopharmaceuticals based on ASP
information, if available, for a ‘‘patient
ready’’ dose and updated on a quarterly
basis for products for which
manufacturers report ASP data. For a
full discussion of how a ‘‘patient ready’’
dose is defined, we refer readers to the
CY 2010 OPPS/ASC final rule with
comment period (74 FR 60520 through
60521). We also proposed to rely on CY
2011 mean unit cost data derived from
hospital claims data for payment rates
for therapeutic radiopharmaceuticals for
which ASP data are unavailable and to
update the payment rates for separately
payable therapeutic
radiopharmaceuticals, according to our
usual process for updating the payment
rates for separately payable drugs and
biologicals, on a quarterly basis if
updated ASP information is available.
For a complete history of the OPPS
payment policy for therapeutic
radiopharmaceuticals, we refer readers
to the CY 2005 OPPS final rule with
comment period (69 FR 65811), the CY
2006 OPPS final rule with comment
period (70 FR 68655), and the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60524).
Comment: Commenters supported
CMS’ proposal to pay for separately
payable therapeutic
radiopharmaceuticals under the
statutory default payment rate of ASP+6
percent, if ASP data is submitted to
CMS. The commenters also supported
CMS’ proposal to continue to set
payment rates for therapeutic
radiopharmaceuticals based on ASP
information, if available, for a ‘‘patient
ready’’ dose. One commenter
recommended that CMS use its
discretion and continue to pay on the
basis of hospital specific reasonable

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cost-finding where ASP information is
not available.
Response: We appreciate the
commenters’ support. We continue to
believe that providing payment for
therapeutic radiopharmaceuticals based
on ASP or mean unit cost if ASP
information is not available would
provide appropriate payment for these
products. When ASP data are not
available, we believe that paying for
therapeutic radiopharmaceuticals using
mean unit cost would appropriately pay
for the average hospital acquisition and
associated handling costs of nonpassthrough separately payable therapeutic
radiopharmaceuticals. As we stated in
the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60523),
although using mean unit cost for
payment for therapeutic
radiopharmaceuticals when ASP data
are not available is not the usual OPPS
process (the usual process relies on
alternative data sources such as WAC or
AWP when ASP information is
temporarily unavailable, prior to
defaulting to the mean unit cost from
hospital claims data), we continue to
believe that WAC or AWP is not an
appropriate proxy to provide OPPS
payment for average therapeutic
radiopharmaceutical acquisition cost
and associated handling costs when
manufacturers are not required to
submit ASP data. In addition, we do not
believe that we should provide payment
at charges reduced to cost or reasonable
cost when ASP data are not available.
We have stated previously, in the CY
2008 OPPS/ASC final rule with
comment period, that we continue to
believe that payment on a claimsspecific basis is not consistent with the
payment of times and services on a
prospective basis under the OPPS and
may lead to extremely high or low
payment to hospitals for
radiopharmaceuticals, even when those
products would be expected to have
relatively predictable and consistent
acquisition and holding costs across
individual clinical cases and hospitals.
For CY 2013, Medicare pays for only a
few outpatient services at reasonable
cost. These services include, but are not
limited to, corneal tissue acquisition
and influenza vaccines, and are paid at
reasonable cost in part because the
input costs for future years are highly
unpredictable and to set a prospective
payment rate for them may result in
payment that is so deficient that
hospitals would not be able to provide
the services and the general public
could be denied the benefits. In
particular, it is not possible to forecast
with confidence what the cost of

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influenza vaccine would be a year in
advance because the composition of the
vaccine is not constant from year to
year. In contrast, however, the input
costs of therapeutic
radiopharmaceuticals are not hugely
unpredictable. Therefore, we do not
believe that therapeutic
radiopharmaceuticals should be paid in
the same manner as the few outpatient
services paid at reasonable cost. We
continue to believe that when ASP data
are unavailable, therapeutic
radiopharmaceutical payment based on
mean unit cost is an appropriate proxy
for hospitals’ acquisition and handling
data.
Comment: One commenter requested
that CMS create a HCPCS J-code for
tositumomab, currently provided under
a radioimmunotherapy regimen and
billed as part of HCPCS code G3001
(Administration and supply of
tositumomab, 450 mg). The commenter
argued that because tositumomab is
approved by the FDA as part of the
BEXXAR® regimen and has its own
National Drug Code (NDC), it should be
recognized as a drug and, therefore, be
paid as other drugs are paid under the
OPPS methodology, instead of having a
payment rate determined by hospital
claims data. The commenter
recommended that payment for all of
the BEXXAR® drug components be paid
as a SCOD.
Response: We have consistently noted
that unlabeled tositumomab is not
approved as either a drug or a
radiopharmaceutical. It is a supply that
is required as part of the
radioimmunotherapy treatment regimen
(as noted in the CY 2009 OPPS/ASC
final rule with comment period (73 FR
68658), the CY 2008 OPPS final rule
with comment period (72 FR 66765), the
CY 2006 OPPS final rule with comment
period (70 FR 68654), and the CY 2004
OPPS final rule with comment period
(68 FR 63443)). We do not make
separate payment for supplies used in
services provided under the OPPS.
Payments for necessary supplies are
packaged into payments for the
separately payable services provided by
the hospital. Payment for unlabeled
tositumomab is included in the payment
for the administration procedure
(described by HCPCS code G3001).
Therefore, we do not agree with the
commenter’s recommendation that we
should assign a separate HCPCS code to
unlabeled tositumomab, which is a
packaged supply.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to pay all
nonpass-through, separately payable

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therapeutic radiopharmaceuticals based
on ASP information, if available, for a
‘‘patient ready’’ dose and updated on a
quarterly basis for products for which
manufacturers report ASP data. For CY
2013, therapeutic radiopharmaceuticals
will be paid based on the statutory
default payment rate of ASP+6 percent.
The final CY 2013 payment rates for
nonpass-through separately payable
therapeutic radiopharmaceuticals are
included in Addenda A and B to the
proposed rule (which is available via
the Internet on the CMS Web site).
5. Payment for Blood Clotting Factors
For CY 2012, we provided payment
for blood clotting factors under the same
methodology as other nonpass-through
separately payable drugs and biologicals
under the OPPS and continued paying
an updated furnishing fee. That is, for
CY 2012, we provided payment for
blood clotting factors under the OPPS at
ASP+4 percent, plus an additional
payment for the furnishing fee. We note
that when blood clotting factors are
provided in physicians’ offices under
Medicare Part B and in other Medicare
settings, a furnishing fee is also applied
to the payment. The CY 2012 updated
furnishing fee is $0.181 per unit.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45141), we proposed to pay
for blood clotting factors at ASP+6
percent, consistent with our proposed
payment policy for other nonpassthrough separately payable drugs and
biologicals, and to continue our policy
for payment of the furnishing fee using
an updated amount. Our policy to pay
for a furnishing fee for blood clotting
factors under the OPPS is consistent
with the methodology applied in the
physician office and inpatient hospital
setting, and first articulated in the CY
2006 OPPS final rule with comment
period (70 FR 68661) and later
discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66765). The proposed furnishing fee
update was based on the percentage
increase in the Consumer Price Index
(CPI) for medical care for the 12-month
period ending with June of the previous
year. Because the Bureau of Labor
Statistics releases the applicable CPI
data after the MPFS and OPPS/ASC
proposed rules are published, we were
not able to include the actual updated
furnishing fee in the proposed rules.
Therefore, in accordance with our
policy, as finalized in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66765), we proposed to
announce the actual figure for the
percent change in the applicable CPI
and the updated furnishing fee
calculated based on that figure through

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applicable program instructions and
posting on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Part-B-Drugs/
McrPartBDrugAvgSalesPrice/
index.html.
Comment: Commenters supported
CMS’ proposal to continue to apply the
furnishing fee for blood clotting factors
provided in the OPD. One commenter
stated that the furnishing fee helps
ensure patient access to blood clotting
factors by increasing the payment rate
for these items. These commenters also
supported CMS’ proposal to pay for
separately payable drugs at ASP+6
percent based on the statutory default,
for CY 2013.
Response: We appreciate the
commenters’ support. We continue to
believe that applying the furnishing fee
for blood clotting factors is appropriate
for CY 2013. In addition, because we
recognize that there is additional work
involved in acquiring the product that is
neither acquisition cost nor pharmacy
overhead, we believe that it continues to
be appropriate to pay a furnishing fee
for blood clotting factors under the
OPPS as is done in the physician’s
office setting and the inpatient hospital
setting. Additionally, for the reasons
discussed in section V.B.3. of this final
rule with comment period, we agree
with the commenters that ASP+6
percent based on the statutory default is
an appropriate payment rate for CY
2013.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to provide payment for
blood clotting factors under the same
methodology as other separately payable
drugs and biologicals under the OPPS
and to continue payment of an updated
furnishing fee. We will announce the
actual figure of the percent change in
the applicable CPI and the updated
furnishing fee calculation based on that
figure through the applicable program
instructions and posting on the CMS
Web site.
6. Payment for Nonpass-Through Drugs,
Biologicals, and Radiopharmaceuticals
With HCPCS Codes but Without OPPS
Hospital Claims Data
The Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (Pub. L. 108–173) did not address
the OPPS payment in CY 2005 and after
for drugs, biologicals, and
radiopharmaceuticals that have assigned
HCPCS codes, but that do not have a
reference AWP or approval for payment
as pass-through drugs or biologicals.
Because there is no statutory provision
that dictated payment for such drugs,

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biologicals, and radiopharmaceuticals in
CY 2005, and because we had no
hospital claims data to use in
establishing a payment rate for them, we
investigated several payment options for
CY 2005 and discussed them in detail
in the CY 2005 OPPS final rule with
comment period (69 FR 65797 through
65799).
For CYs 2005 to 2007, we
implemented a policy to provide
separate payment for new drugs,
biologicals, and radiopharmaceuticals
with HCPCS codes (specifically those
new drug, biological, and
radiopharmaceutical HCPCS codes in
each of those calendar years that did not
crosswalk to predecessor HCPCS codes)
but which did not have pass-through
status, at a rate that was equivalent to
the payment they received in the
physician’s office setting, established in
accordance with the ASP methodology
for drugs and biologicals, and based on
charges adjusted to cost for
radiopharmaceuticals. For CYs 2008 and
2009, we finalized a policy to provide
payment for new drugs (excluding
contrast agents and diagnostic
radiopharmaceuticals) and biologicals
(excluding implantable biologicals for
CY 2009) with HCPCS codes, but which
did not have pass-through status and
were without OPPS hospital claims
data, at ASP+5 percent and ASP+4
percent, respectively, consistent with
the final OPPS payment methodology
for other separately payable drugs and
biologicals. New therapeutic
radiopharmaceuticals were paid at
charges adjusted to cost based on the
statutory requirement for CY 2008 and
CY 2009 and payment for new
diagnostic radiopharmaceuticals was
packaged in both years.
For CY 2010, we continued to provide
payment for new drugs (excluding
contrast agents) and nonimplantable
biologicals with HCPCS codes that do
not have pass-through status and are
without OPPS hospital claims data at
ASP+4 percent, consistent with the CY
2010 payment methodology for other
separately payable nonpass-through
drugs and nonimplantable biologicals.
We also finalized a policy to extend the
CY 2009 payment methodology to new
therapeutic radiopharmaceutical HCPCS
codes, consistent with our final policy
in the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60581
through 60526), providing separate
payment for therapeutic
radiopharmaceuticals that do not
crosswalk to CY 2009 HCPCS codes, do
not have pass-through status, and are
without OPPS hospital claims data at
ASP+4 percent. This policy was
continued in the CY 2011 OPPS/ASC

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final rule with comment period (75 FR
71970 through 71973), paying for new
drugs, nonimplantable biologicals, and
radiopharmaceuticals that do not
crosswalk to CY 2010 HCPCS codes, do
not have pass-through status, and are
without OPPS hospital claims data at
ASP+5 percent and the CY 2012 OPPS/
ASC final rule with comment period at
ASP+4 percent (76 FR 74330 through
74332).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45142), we proposed to
provide payment for new CY 2013 drugs
(excluding contrast agents and
diagnostic radiopharmaceuticals),
nonimplantable biologicals, and
therapeutic radiopharmaceuticals, at
ASP+6 percent, consistent with the
proposed CY 2013 payment
methodology for other separately
payable nonpass-through drugs,
nonimplantable biologicals, and
therapeutic radiopharmaceuticals to pay
at ASP+6 percent based on the statutory
default. We believe this proposed policy
would ensure that new nonpass-through
drugs, nonimplantable biologicals and
therapeutic radiopharmaceuticals would
be treated like other drugs,
nonimplantable biologicals, and
therapeutic radiopharmaceuticals under
the OPPS.
We also proposed to continue to
package payment for all new nonpassthrough diagnostic
radiopharmaceuticals and contrast
agents with HCPCS codes but without
claims data (those new CY 2013
diagnostic radiopharmaceuticals,
contrast agents, and implantable
biological HCPCS codes that do not
crosswalk to predecessor HCPCS codes).
This is consistent with the proposed
policy packaging all existing nonpassthrough diagnostic
radiopharmaceuticals and contrast
agents, as discussed in more detail in
section II.A.3.g. of this final rule with
comment period.
In accordance with the OPPS ASP
methodology, in the absence of ASP
data, for CY 2013, we proposed to
continue the policy we implemented
beginning in CY 2005 of using the WAC
for the product to establish the initial
payment rate for new nonpass-through
drugs and biologicals with HCPCS
codes, but which are without OPPS
claims data and are not diagnostic
radiopharmaceuticals and contrast
agents. However, we noted that if the
WAC is also unavailable, we would
make payment at 95 percent of the
product’s most recent AWP. We also
proposed to assign status indicator ‘‘K’’
(for separately paid nonpass-through
drugs and nonimplantable biologicals,
including therapeutic

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radiopharmaceuticals) to HCPCS codes
for new drugs and nonimplantable
biologicals without OPPS claims data
and for which we have not granted passthrough status. With respect to new,
nonpass-through drugs, nonimplantable
biologicals, and therapeutic
radiopharmaceuticals for which we do
not have ASP data, we proposed that
once their ASP data become available in
later quarterly submissions, their
payment rates under the OPPS would be
adjusted so that the rates would be
based on the ASP methodology and set
to the finalized ASP-based amount
(proposed for CY 2013 at ASP+6
percent) for items that have not been
granted pass-through status. This
proposed policy, which utilizes the ASP
methodology that requires us to use
WAC data when ASP data are
unavailable and 95 percent of AWP
when WAC and ASP data are
unavailable, for new nonpass-through
drugs and biologicals with an ASP, is
consistent with prior years’ policies for
these items, and would ensure that new
nonpass-through drugs, nonimplantable
biologicals, and therapeutic
radiopharmaceuticals would be treated
like other drugs, nonimplantable
biologicals, and therapeutic
radiopharmaceuticals under the OPPS,
unless they are granted pass-through
status.
Similarly, we proposed to continue to
base the initial payment for new
therapeutic radiopharmaceuticals with
HCPCS codes, but which do not have
pass-through status and are without
claims data, on the WACs for these
products if ASP data for these
therapeutic radiopharmaceuticals are
not available. If the WACs are also
unavailable, we proposed to make
payment for new therapeutic
radiopharmaceuticals at 95 percent of
the products’ most recent AWP because
we would not have mean costs from
hospital claims data upon which to base
payment. As we proposed with new
drugs and biologicals, we proposed to
continue our policy of assigning status
indicator ‘‘K’’ to HCPCS codes for new
therapeutic radiopharmaceuticals
without OPPS claims data for which we
have not granted pass-through status.
Consistent with other ASP-based
payment, for CY 2013 we proposed to
announce any changes to the payment
amounts for new drugs and biologicals
in this CY 2013 OPPS/ASC final rule
with comment period and also on a
quarterly basis on the CMS Web site
during CY 2013 if later quarter ASP
submissions (or more recent WACs or
AWPs) indicate that changes to the
payment rates for these drugs and
biologicals are necessary. The payment

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rates for new therapeutic
radiopharmaceuticals would also be
changed accordingly based on later
quarter ASP submissions. We note that
the new CY 2013 HCPCS codes for
drugs, biologicals and therapeutic
radiopharmaceuticals were not available
at the time of development of the
proposed rule. However, these agents
are included in Addendum B to this CY
2013 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site),
where they are assigned comment
indicator ‘‘NI.’’ This comment indicator
reflects that their interim final OPPS
treatment is open to public comment in
this CY 2013 OPPS/ASC final rule with
comment period.
There are several nonpass-through
drugs and biologicals that were payable
in CY 2011 and/or CY 2012 for which
we did not have CY 2011 hospital
claims data available for the proposed
rule and for which there are no other
HCPCS codes that describe different
doses of the same drug, but which have
pricing information available for the
ASP methodology. We note that there
are currently no therapeutic
radiopharmaceuticals in this category.
In order to determine the packaging
status of these products for CY 2013, we
calculated an estimate of the per day
cost of each of these items by
multiplying the payment rate of each
product based on ASP+6 percent,
similar to other nonpass-through drugs
and biologicals paid separately under
the OPPS, by an estimated average
number of units of each product that
would typically be furnished to a
patient during one day in the hospital
outpatient setting. This rationale was
first adopted in the CY 2006 OPPS/ASC
final rule with comment period (70 FR
68666 and 68667).
We did not receive any public
comments on our proposal to use
estimated per day costs for these drugs
and biologicals or on the resulting
packaging status of these drugs and
biologicals. Therefore, for the reasons
described in our proposed rule, we are
finalizing our CY 2013 proposal, with
modification, to use the estimated
number of units per day included in
Table 37 below to determine estimated
per day costs for the corresponding
drugs and biologicals for CY 2013. For
those drugs and biologicals without CY
2011 claims data that we determine to
be separately payable in CY 2013,
payment will be made at ASP+6
percent. If ASP information is not
available, payment will be based on
WAC, or 95 percent of the most recently
published AWP if WAC is not available.

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The proposed estimated units per day
and status indicators for these items
were displayed in Table 27 of the
proposed rule (77 FR 45143).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45143), we proposed to
package items for which we estimated
the per day administration cost to be
less than or equal to $80, which is the
general packaging threshold that we
proposed for drugs, nonimplantable
biologicals, and therapeutic
radiopharmaceuticals in CY 2013. We
proposed to pay separately for items
with an estimated per day cost greater
than $80 (with the exception of
diagnostic radiopharmaceuticals and
contrast agents, which we proposed to
continue to package regardless of cost as
discussed in more detail in section
II.A.3.d. of this final rule with comment
period) in CY 2013. We proposed that
the CY 2013 payment for separately
payable items without CY 2011 claims
data would be ASP+6 percent, similar to
payment for other separately payable
nonpass-through drugs and biologicals
under the OPPS. In accordance with the
ASP methodology paid in the
physician’s office setting, in the absence
of ASP data, we proposed to use the
WAC for the product to establish the
initial payment rate. However, we note
that if the WAC is also unavailable, we
would make payment at 95 percent of
the most recent AWP available.
Although we did not receive any
specific public comments regarding our
proposed payment for nonpass-through
drugs, biologicals, and
radiopharmaceuticals with HCPCS
codes, but without OPPS hospital
claims data, many commenters
supported our proposal to pay for
separately payable drugs at ASP+6
percent under the statutory default.
However, these comments were not
specific to new drugs and biologicals
with HCPCS codes but without OPPS
claims data. For more information
regarding payment for separately
payable drugs, including general public
comments and our responses, we refer
readers to section V.B.3.b. of this final
rule with comment period. In addition,
commenters responding to the CY 2013
OPPS/ASC proposed rule objected to
packaging payment for diagnostic
radiopharmaceuticals and contrast
agents in general, but these comments
were not directed to new diagnostic
radiopharmaceuticals or contrast agent
with HCPCS codes but without OPPS
claims data. We summarize these
comments and provide our response in
section II.A.3.e. of this final rule with
comment period. We are finalizing our
CY 2013 proposal, without
modification, as follows: Payment for

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new drugs (excluding contrast agents
and diagnostic radiopharmaceuticals),
nonimplantable biologicals, and
therapeutic radiopharmaceuticals with
HCPCS codes that do not crosswalk to
CY 2012 HCPCS codes, but which do
not have pass-through status and for
which we do not have OPPS hospital
claims data, will be made at ASP+6
percent for CY 2013, consistent with the
final CY 2013 payment methodology for
other new separately payable nonpassthrough drugs, nonimplantable
biologicals and therapeutic
radiopharmaceuticals, described in
section V.B.3.b. of this final rule with
comment period. In cases where ASP
information is not available, payment
will be made using WAC, and, if WAC
is also unavailable, payment will be
made at 95 percent of the product’s
most recent AWP. Further, payment for
all new nonpass-through diagnostic
radiopharmaceuticals, contrast agents,
and implantable biologicals with
HCPCS codes but for which we do not
have OPPS claims data will be packaged
for CY 2013. Finally, we are assigning
status indicator ‘‘K’’ to HCPCS codes for
new drugs and nonimplantable
biologicals for which we do not have
OPPS claims data and for which we
have not granted pass-through status for
CY 2012. With respect to new items for
which we do not have ASP data, once
their ASP data become available in later
quarterly submissions, their payments
will be adjusted so that the rates will be
based on the ASP methodology and set
to the finalized ASP amount of ASP+4
percent. This policy will ensure that
payment is made for actual acquisition
cost and pharmacy overhead for these
new products.
For CY 2013, we also proposed to
continue our CY 2012 policy to base
payment for new therapeutic
radiopharmaceuticals with HCPCS
codes, but which do not have passthrough status and for which we do not
have claims data, on the WACs for these
products if ASP data for these
therapeutic radiopharmaceuticals are
not available. If the WACs are also
unavailable, we proposed to make
payment for a new therapeutic
radiopharmaceutical at 95 percent of the
product’s most recent AWP because we
would not have mean costs from
hospital claims data upon which to base
payment. Analogous to new drugs and
biologicals, we proposed to continue
our policy of assigning status indicator
‘‘K’’ to HCPCS codes for new
therapeutic radiopharmaceuticals
without OPPS claims data for which we
have not granted pass-through status.
We did not receive any public
comments specific to our proposal for

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new therapeutic radiopharmaceuticals
with HCPCS codes but without passthrough status. However, commenters
responding to the CY 2013 OPPS/ASC
proposed rule were generally supportive
of the ASP methodology for payment for
therapeutic radiopharmaceuticals in the
HOPD, and we are finalizing an ASP
payment methodology for separately
payable therapeutic
radiopharmaceuticals for CY 2013, as
discussed in section V.B.3.c. of this final
rule with comment period.
We are finalizing our CY 2013
proposals, without modification, to
provide payment based on WAC for new
therapeutic radiopharmaceuticals with
HCPCS codes but without pass-through
status and for which we do not have
claims data, if ASP data for these
therapeutic radiopharmaceuticals are
not available. If WAC information is
also unavailable, we will make payment
for new therapeutic
radiopharmaceuticals at 95 percent of

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the product’s most recent AWP. In
addition, we are assigning status
indicator ‘‘K’’ to HCPCS codes for new
therapeutic radiopharmaceuticals
without claims data in CY 2013 that do
not have pass-through status.
Consistent with other ASP-based
payments, for CY 2013, we proposed to
announce any changes to the payment
amounts for new drugs and biologicals
in the CY 2013 OPPS/ASC final rule
with comment period and also on a
quarterly basis on the CMS Web site
during CY 2013 if later quarter ASP
submissions (or more recent WACs or
AWPs) indicate that changes to the
payment rates for these drugs and
biologicals are necessary. The payment
rates for new therapeutic
radiopharmaceuticals will also be
changed accordingly, based on later
quarter ASP submissions. We note that
the new CY 2013 HCPCS codes for
drugs, biologicals, and therapeutic
radiopharmaceuticals were not available

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at the time of development of the
proposed rule. However, they are
included in Addendum B to this CY
2013 OPPS/ASC final rule with
comment period. They are assigned
comment indicator ‘‘NI’’ in Addendum
B to reflect that their interim final OPPS
treatment is open to public comment on
this CY 2013 OPPS/ASC final rule with
comment period.
We did not receive any public
comments on our proposal to announce,
via the CMS Web site, any changes to
the OPPS payment amounts for new
drugs and biologicals on a quarterly
basis. Therefore, for the reasons
described in the CY 2013 proposed rule,
we are finalizing our proposal and will
update payment rates for new drugs,
biologicals, and therapeutic
radiopharmaceuticals, as necessary, in
association with our quarterly update
process and provide this information on
the CMS Web site.
BILLING CODE 4120–01–P

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Finally, there were 19 drugs and
biologicals, shown in Table 28 of the
proposed rule (77 FR 45144), that were
payable in CY 2011, but for which we
lacked CY 2011 claims data and any
other pricing information for the ASP
methodology for the CY 2013 OPPS/
ASC proposed rule. In CY 2009, for
similar items without CY 2007 claims
data and without pricing information for
the ASP methodology, we stated that we
were unable to determine their per day
cost and we packaged these items for
the year, assigning these items status
indicator ‘‘N.’’
For CY 2010, we finalized a policy to
change the status indicator for drugs
and biologicals previously assigned a
payable status indicator to status
indicator ‘‘E’’ (Not paid by Medicare
when submitted on outpatient claims
(any outpatient bill type)) whenever we
lacked claims data and pricing

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information and were unable to
determine the per day cost. In addition,
we noted that we would provide
separate payment for these drugs and
biologicals if pricing information
reflecting recent sales became available
mid-year in CY 2010 for the ASP
methodology. If pricing information
became available, we would assign the
products status indicator ‘‘K’’ and pay
for them separately for the remainder of
CY 2010. We continued this policy for
CY 2011 and CY 2012 (75 FR 71973 and
76 FR 74334).
For CY 2013, we proposed to continue
to assign status indicator ‘‘E’’ to drugs
and biologicals that lack CY 2011 claims
data and pricing information for the
ASP methodology. All drugs and
biologicals without CY 2011 hospital
claims data and data based on the ASP
methodology that are assigned status
indicator ‘‘E’’ on this basis at the time
of the proposed rule for CY 2013 were

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displayed in Table 28 of the proposed
rule (77 FR 45144). If pricing
information becomes available, we
proposed to assign the products status
indicator ‘‘K’’ and pay for them
separately for the remainder of CY 2013.
Comment: Several commenters
disagreed with CMS’ proposal to assign
a status indicator ‘‘E’’ to HCPCS code
Q4102 (Talymed, per square centimeter)
for CY 2013. The commenters requested
a status indicator of ‘‘K’’ to more closely
align the product with others on the
market, such as the products
represented by HCPCS code Q4101 and
Q4102. The commenters indicated that
a status indicator of ‘‘E’’ would make it
impossible for the necessary claims data
and pricing to be collected.
The manufacturers of the product that
is described by HCPCS code Q4101
assured CMS that they will be
submitting ASP data shortly and
anticipate that CMS will replace the

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status indicator ‘‘E’’ with the status
indicator ‘‘K’’ upon submission of this
data.
Response: For this final rule with
comment period, we have not received
ASP pricing information in order to
assign a status indicator of ‘‘K’’ to
HCPCS code Q4101. Therefore,
according to our longstanding policy,
we will continue to assign HCPCS code
Q4101 to a status indicator of ‘‘E.’’ If
pricing information becomes available,
we will assign HCPCS code Q4101 a
status indicator ‘‘K’’ and pay for it
separately for the remainder of CY 2013.
We cannot assign a payable status
indicator to products that have no
available payment information.
Comment: One commenter who
responded to the CY 2012 OPPS/ASC
final rule with comment period
expressed concern that the assignment
of status indicator ‘‘E’’ to HCPCS code
Q4128 was a technical error that should
have been changed to status indicator
‘‘K’’ effective January 1, 2012.
Response: For the CY 2012 OPPS/ASC
final rule with comment period, HCPCS
code Q4128 (Flexhd or allopatch hd, per
square centimeter) was not erroneously
assigned a status indicator of ‘‘E’’
because we did not have ASP pricing
information available to us at the time

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of the publication of the final rule.
However, during CY 2012, we received
pricing information for HCPCS code
Q4128 and assigned status indicator
‘‘K’’ to this code. For CY 2013, this
HCPCS code continues to have a status
indicator of ‘‘K’’ and the price is
published in Addendum B of this final
rule with comment period.
After the proposed rule was
published, we were able to use updated
CY 2011 claims data and ASP pricing
information for HCPCS code J1452
(Injection, fomivirsen sodium,
intraocular, 1.65 mg), HCPCS code
J1835 (Injection, itraconazole, 50 mg),
and HCPCS code J9212 (Injection,
interferon alfacon-1, recombinant, 1
microgram). Therefore, we are assigning
HCPCS code J1452, HCPCS code J1835,
and HCPCS code J9212 a status
indicator of ‘‘K’’ for CY 2013. The
revised status indicators for these
HCPCS codes are included in
Addendum B to this CY 2013 OPPS/
ASC final rule with comment period
(which is available via the Internet on
the CMS Web site).
Further, as we have used updated
claims data and ASP pricing
information for this final rule with
comment period, we have newly
identified HCPCS codes Q4134

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(Hmatrix, per square centimeter), Q4135
(Mediskin, per square centimeter), and
Q4136 (Ez-derm, per square centimeter)
as lacking CY 2011 claims data and any
other pricing information for the ASP
methodology. Therefore, in addition to
the HCPCS codes for which we
proposed to assign status indicator ‘‘E’’
for CY 2013 due to a lack of claims data
and any other pricing information in the
proposed rule, we are assigning status
indicator ‘‘E’’ to HCPCS codes Q4134,
Q4135, and Q4136.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to assign status indicator
‘‘E’’ to these drugs and biologicals. As
was our policy in CY 2012, if pricing
information becomes available for these
products in CY 2013, we will assign the
products status indicator ‘‘K’’ and pay
for them separately for the remainder of
CY 2013.
All drugs and biologicals without CY
2011 hospital claims data and data
based on the ASP methodology that are
assigned status indicator ‘‘E’’ on this
basis at the time of this final rule with
comment period for CY 2013 are
displayed in Table 37 below.

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VI. Estimate of OPPS Transitional PassThrough Spending for Drugs,
Biologicals, Radiopharmaceuticals, and
Devices
A. Background
Section 1833(t)(6)(E) of the Act limits
the total projected amount of
transitional pass-through payments for
drugs, biologicals,
radiopharmaceuticals, and categories of
devices for a given year to an
‘‘applicable percentage,’’ currently not
to exceed 2.0 percent of total program
payments estimated to be made for all
covered services under the OPPS
furnished for that year.
If we estimate before the beginning of
the calendar year that the total amount
of pass-through payments in that year
would exceed the applicable percentage,
section 1833(t)(6)(E)(iii) of the Act
requires a uniform prospective
reduction in the amount of each of the
transitional pass-through payments
made in that year to ensure that the
limit is not exceeded. We estimate the
pass-through spending to determine

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whether payments exceed the
applicable percentage and the
appropriate pro rata reduction to the
conversion factor for the projected level
of pass-through spending in the
following year to ensure that total
estimated pass-through spending for the
prospective payment year is budget
neutral, as required by section
1833(t)(6)(E) of the Act.
For devices, developing an estimate of
pass-through spending in CY 2013
entails estimating spending for two
groups of items. The first group of items
consists of device categories that were
recently made eligible for pass-through
payment and that will continue to be
eligible for pass-through payment in CY
2013. The CY 2008 OPPS/ASC final rule
with comment period (72 FR 66778)
describes the methodology we have
used in previous years to develop the
pass-through spending estimate for
known device categories continuing into
the applicable update year. The second
group of items consists of items that we
know are newly eligible, or project may

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be newly eligible, for device passthrough payment in the remaining
quarters of CY 2012 or beginning in CY
2013. The sum of the CY 2013 passthrough estimates for these two groups
of device categories equals the total CY
2013 pass-through spending estimate for
device categories with pass-through
status. We base the device pass-through
estimated payments for each device
category on the amount of payment as
established in section 1833(t)(6)(D)(ii) of
the Act, and as outlined in previous
rules, including the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74335 through 74336). We note that,
beginning in CY 2010, the pass-through
evaluation process and pass-through
payment for implantable biologicals
newly approved for pass-through
payment beginning on or after January
1, 2010, that are surgically inserted or
implanted (through a surgical incision
or a natural orifice), is the device passthrough process and payment
methodology (74 FR 60476). As has
been our past practice (76 FR 74335), we

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include an estimate of any implantable
biologicals eligible for pass-through
payment in our estimate of pass-through
spending for devices.
For drugs and nonimplantable
biologicals eligible for pass-through
payment, section 1833(t)(6)(D)(i) of the
Act establishes the pass-through
payment amount as the amount by
which the amount authorized under
section 1842(o) of the Act (or, if the drug
or biological is covered under a
competitive acquisition contract under
section 1847B of the Act, an amount
determined by the Secretary equal to the
average price for the drug or biological
for all competitive acquisition areas and
year established under such section as
calculated and adjusted by the
Secretary) exceeds the portion of the
otherwise applicable fee schedule
amount that the Secretary determines is
associated with the drug or biological.
We note that the Part B drug CAP
program has been postponed since CY
2009, and such a program was not
proposed to be reinstated for CY 2013.
Because we will pay for most nonpassthrough separately payable drugs and
nonimplantable biologicals under the
CY 2013 OPPS at ASP+6 percent, as we
discussed in section V.B.3. of this final
rule with comment period, which
represents the otherwise applicable fee
schedule amount associated with most
pass-through drugs and nonimplantable
biologicals, and because we will pay for
CY 2013 pass-through drugs and
nonimplantable biologicals at ASP+6
percent, as we discussed in section V.A.
of this final rule with comment period,
our estimate of drug and
nonimplantable biological pass-through
payment for CY 2013 for this group of
items is zero, as discussed below.
Furthermore, payment for certain drugs,
specifically diagnostic
radiopharmaceuticals and contrast
agents, without pass-through status, will
always be packaged into payment for
the associated procedures because these
products will never be separately paid.
However, all pass-through diagnostic
radiopharmaceuticals and contrast
agents with pass-through status
approved prior to CY 2013 will be paid
at ASP+6 percent like other passthrough drugs and nonimplantable
biologicals. Therefore, our estimate of
pass-through payment for all diagnostic
radiopharmaceuticals and contrast
agents with pass-through status
approved prior to CY 2013 is not zero.
In section V.A.4. of this final rule with
comment period, we discuss our policy
to determine if the cost of certain
‘‘policy-packaged’’ drugs, including
diagnostic radiopharmaceuticals and

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contrast agents, are already packaged
into the existing APC structure. If we
determine that a ‘‘policy-packaged’’
drug approved for pass-through
payment resembles predecessor
diagnostic radiopharmaceuticals or
contrast agents already included in the
costs of the APCs that are associated
with the drug receiving pass-through
payment, we are offsetting the amount
of pass-through payment for diagnostic
radiopharmaceuticals or contrast agents.
For these drugs, the APC offset amount
is the portion of the APC payment for
the specific procedure performed with
the pass-through radiopharmaceuticals
or contrast agents, which we refer to as
the ‘‘policy-packaged’’ drug APC offset
amount. If we determine that an offset
is appropriate for a specific diagnostic
radiopharmaceutical or contrast agent
receiving pass-through payment, we
reduce our estimate of pass-through
payment for these drugs by this amount.
Similar to pass-through estimates for
devices, the first group of drugs and
nonimplantable biologicals requiring a
pass-through payment estimate consists
of those products that were recently
made eligible for pass-through payment
for CY 2012 and that will continue to be
eligible for pass-through payment in CY
2013. The second group contains drugs
and nonimplantable biologicals that we
know are newly eligible, or project will
be newly eligible, in the remaining
quarters of CY 2012 or beginning in CY
2013. The sum of the CY 2013 passthrough estimates for these two groups
of drugs and nonimplantable biologicals
equals the total CY 2013 pass-through
spending estimate for drugs and
nonimplantable biologicals with passthrough status.
B. Estimate of Pass-Through Spending
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45145), we proposed to set
the applicable pass-through payment
percentage limit at 2.0 percent of the
total projected OPPS payments for CY
2013, consistent with section
1833(t)(6)(E)(ii)(II) of the Act, and our
OPPS policy from CY 2004 through CY
2012 (76 FR 74336).
For the first group of devices for passthrough payment estimation purposes,
there currently are three device
categories eligible for pass-through
payment for CY 2013: C1830 (Powered
bone marrow biopsy needle); C1840
(Lens, intraocular (telescopic)); and
C1886 (Catheter, extravascular tissue
ablation, any modality (insertable). In
the proposed rule, we estimated that CY
2013 pass-through expenditures related
to these three eligible device categories
would be approximately $42 million. In
estimating our CY 2013 pass-through

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spending for device categories in the
second group, we include: Device
categories that we knew at the time of
the development of the proposed rule
will be newly eligible for pass-through
payment in CY 2013 (of which there are
none); additional device categories that
we estimate could be approved for passthrough status subsequent to the
development of the proposed rule and
before January 1, 2013; and contingent
projections for new device categories
established in the second through fourth
quarters of CY 2013. We proposed to use
the general methodology described in
the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66778), while
also taking into account recent OPPS
experience in approving new passthrough device categories. For the
proposed rule, the estimate of CY 2013
pass-through spending for this second
group of device categories was $10
million. Using our established
methodology, we proposed that the total
estimated pass-through spending for
device categories for CY 2013 (spending
for the first group of device categories
($42 million) plus spending for the
second group of device categories ($10
million)) would be $52 million.
We did not receive any public
comments regarding our proposed passthrough spending estimate for devices.
Therefore, for CY 2013, we are
continuing to use our established
methodology for estimating passthrough spending for device categories.
For this final rule with comment period,
using our established methodology and
updated data and information, we
estimate CY 2013 pass-through
spending for the first group of device
categories to be $42, and the CY 2013
pass-through spending for the second
group of device categories to be $10
million. The total estimated passthrough spending for device categories
for CY 2013 (spending for the first group
of device categories ($42 million) plus
spending for the second group of device
categories ($10 million)) is $52 million.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45146), to estimate CY 2013
pass-through spending for drugs and
nonimplantable biologicals in the first
group, specifically those drugs
(including radiopharmaceuticals and
contrast agents) and nonimplantable
biologicals recently made eligible for
pass-through payment and continuing
on pass-through status for CY 2013, we
proposed to utilize the most recent
Medicare physician’s office data
regarding their utilization, information
provided in the respective pass-through
applications, historical hospital claims
data, pharmaceutical industry
information, and clinical information

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regarding those drugs or nonimplantable
biologicals, to project the CY 2013 OPPS
utilization of the products.
For the known drugs and
nonimplantable biologicals (excluding
diagnostic radiopharmaceuticals and
contrast agents) that will be continuing
on pass-through status in CY 2013, in
the proposed rule (77 FR 45145), we
estimated the pass-through payment
amount as the difference between
ASP+6 percent and the payment rate for
nonpass-through drugs and
nonimplantable biologicals that will be
separately paid at ASP+6 percent,
which is zero for this group of drugs.
Because payment for a diagnostic
radiopharmaceutical or contrast agent is
packaged if the product was not paid
separately due to its pass-through status,
we proposed to include in the CY 2013
pass-through estimate the difference
between payment for the drug or
biological at ASP+6 percent (or WAC+6
percent, or 95 percent of AWP, if ASP
or WAC information is not available)
and the ‘‘policy-packaged’’ drug APC
offset amount, if we determined that the
diagnostic radiopharmaceutical or
contrast agent approved for passthrough payment resembles predecessor
diagnostic radiopharmaceuticals or
contrast agents already included in the
costs of the APCs that are associated
with the drug receiving pass-through
payment. In the proposed rule, using the
proposed methodology described above,
we calculated a CY 2013 proposed
spending estimate for this first group of
drugs and nonimplantable biologicals of
approximately $13 million.
We did not receive any public
comments on our proposed
methodology for calculating the
spending estimate for the first group of
drugs and nonimplantable biologicals.
Therefore, for this final rule with
comment period, we are finalizing our
proposed methodology. Using our
established methodology and updated
data and information, we calculated a
final CY 2013 spending estimate for the
first group of drugs and nonimplantable
biologicals of approximately $15
million.
In the proposed rule (77 FR 45146), to
estimate CY 2013 pass-through

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spending for drugs and nonimplantable
biologicals in the second group (that is,
drugs and nonimplantable biologicals
that we knew at the time of
development of the proposed rule are
newly eligible for pass-through payment
in CY 2013, additional drugs and
nonimplantable biologicals that we
estimate could be approved for passthrough status subsequent to the
development of the proposed rule and
before January 1, 2013, and projections
for new drugs and nonimplantable
biologicals that could be initially
eligible for pass-through payment in the
second through fourth quarters of CY
2013), we proposed to use utilization
estimates from pass-through applicants,
pharmaceutical industry data, clinical
information, recent trends in the per
unit ASPs of hospital outpatient drugs,
and projected annual changes in service
volume and intensity as our basis for
making the CY 2013 pass-through
payment estimate. We also proposed to
consider the most recent OPPS
experience in approving new passthrough drugs and nonimplantable
biologicals. Using our proposed
methodology for estimating CY 2013
pass-through payments for this second
group of drugs, we calculated a
proposed spending estimate for this
second group of drugs and
nonimplantable biologicals of
approximately $19 million.
We did not receive any public
comments on our proposed
methodology for estimating CY 2013
pass-through payments for this second
group of drugs and nonimplantable
biologicals. Therefore, for this final rule
with comment period, are finalizing our
proposed methodology. Using that
methodology and updated data and
information, we calculated a final CY
2013 spending estimate for this second
group of drugs and implantable
biologicals of approximately $7 million.
As discussed in section V.A. of this
final rule with comment period,
radiopharmaceuticals are considered
drugs for pass-through purposes.
Therefore, we include
radiopharmaceuticals in our CY 2013
pass-through spending estimate for
drugs and nonimplantable biologicals.

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Our CY 2013 estimate for total passthrough spending for drugs and
nonimplantable biologicals (spending
for the first group of drugs and
nonimplantable biologicals ($15
million) plus spending for the second
group of drugs and nonimplantable
biologicals ($7 million)) equals $22
million.
In summary, in accordance with the
methodology described above in this
section, for this final rule with comment
period, we estimate that total passthrough spending for the device
categories and the drugs and
nonimplantable biologicals that are
continuing to receive pass-through
payment in CY 2013 and those device
categories, drugs, and biologicals that
first become eligible for pass-through
payment during CY 2013 will be
approximately $74 million
(approximately $52 million for device
categories and approximately $22
million for drugs and nonimplantable
biologicals), which represents 0.15
percent of total projected OPPS
payments for CY 2013. We estimate that
pass-through spending in CY 2013 will
not amount to 2.0 percent of total
projected OPPS CY 2013 program
spending.
VII. OPPS Payment for Hospital
Outpatient Visits
A. Background
Currently, hospitals report HCPCS
visit codes to describe three types of
OPPS services: Clinic visits, emergency
department visits, and critical care
services, including trauma team
activation. As we proposed in the CY
2013 OPPS/ASC proposed rule (77 FR
45146 through 45148), for CY 2013, we
are continuing to recognize these CPT
and HCPCS codes describing clinic
visits, Type A and Type B emergency
department visits, and critical care
services, which are listed below in
Table 38, for CY 2013. We refer readers
to the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74338
through 74346) for a full discussion of
our longstanding policy on OPPS
payment for hospital outpatient visits.
BILLING CODE 4120–01–P

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TABLE 38.-HCPCS CODES USED TO REPORT CLINIC AND EMERGENCY
DEPARTMENT VISITS AND CRITICAL CARE SERVICES
CY2013
HCPCS
Code

99202
99203
99204
99205
99211
99212
99213
99214
99215

99281

99282

99283

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Clinic Visit HCPCS Codes
Office or other outpatient visit for the evaluation and management of a
new patient (Levell)
Office or other outpatient visit for the evaluation and management of a
new patient (Level 2)
Office or other outpatient visit for the evaluation and management of a
new patient (Level 3)
Office or other outpatient visit for the evaluation and management of a
new patient (Level 4)
Office or other outpatient visit for the evaluation and management of a
new patient (Level 5)
Office or other outpatient visit for the evaluation and management of
an established patient (Levell)
Office or other outpatient visit for the evaluation and management of
an established patient (Level 2)
Office or other outpatient visit for the evaluation and management of
an established patient (Level 3)
Office or other outpatient visit for the evaluation and management of
an established patient (Level 4)
Office or other outpatient visit for the evaluation and management of
an established patient (Level 5)
Emergency Department Visit HCPCS Codes
Emergency department visit for the evaluation and management of a
patient
(Levell)
Emergency department visit for the evaluation and management of a
patient
(Level 2)
Emergency department visit for the evaluation and management of a
patient
(Level 3)
Emergency department visit for the evaluation and management of a
patient
(Level 4)

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At its August 27–28, 2012 meeting,
the HOP Panel recommended that CMS
move HCPCS code G0379 (Direct
admission of patient for hospital
observation care) to APC 0608 (Level 5
Hospital Clinic Visits). We are accepting
this recommendation, as discussed
below in this section.
B. Policies for Hospital Outpatient Visits
We proposed in the CY 2013 OPPS/
ASC proposed rule (77 FR 45147
through 45148), for CY 2013, to
continue our longstanding policies
related to hospital outpatient visits,
which includes clinic visits, emergency
department visits, and critical care
services. Specifically, we proposed to
continue to recognize the definitions of
a new patient and an established
patient, which are based on whether the
patient has been registered as an
inpatient or outpatient of the hospital
within the 3 years prior to a visit. We
also proposed to continue to apply our
policy of calculating costs for clinic
visits under the OPPS using historical
hospital claims data through five levels
of clinic visit APCs (APCs 0604 through
0608). In addition, we proposed to
continue to recognize Type A
emergency departments and Type B
emergency departments for payment
purposes under the OPPS, and to pay
for Type A emergency department visits
based on their costs through the five
levels of Type A emergency department
APCs (APCs 0609 and 0613 through
0616) and to pay for Type B emergency
department visits based on their costs
through the five levels of Type B
emergency department APCs (APCs
0626 through 0630). We refer readers to

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Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site) for
the APC assignments and payment rates
for these hospital outpatient visits.
Finally, we proposed to continue to
instruct hospitals to report facility
resources for clinic and emergency
department hospital outpatient visits
using the CPT E/M codes and to develop
internal hospital guidelines for
reporting the appropriate visit level. We
note that our continued expectation is
that hospitals’ internal guidelines will
comport with the principles listed in the
CY 2008 OPPS/ASC final rule with
comment period (72 FR 66805). We
encourage hospitals with specific
questions related to the creation of
internal guidelines to contact their
servicing fiscal intermediary or MAC.
We refer readers to the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74338 through 74346) for a full
historical discussion of these
longstanding policies. We note recent
reports in the public media of billing
inaccuracies in hospital outpatient
clinic visits, and remind hospitals that
we are committed to vigorously
enforcing our payment policies and will
pursue appropriate action against any
potentially fraudulent activities we
identify.
We also proposed to continue the
methodology established in the CY 2011
OPPS/ASC final rule with comment
period for calculating a payment rate for
critical care services that includes
packaged payment of ancillary services.
For CY 2010 and in prior years, the
AMA CPT Editorial Panel defined
critical care CPT codes 99291 (Critical
care, evaluation and management of the

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68401

critically ill or critically injured patient;
first 30–74 minutes) and 99292 (Critical
care, evaluation and management of the
critically ill or critically injured patient;
each additional 30 minutes (List
separately in addition to code for
primary service)) to include a wide
range of ancillary services such as
electrocardiograms, chest X-rays and
pulse oximetry. As we have stated in
manual instruction, we expect hospitals
to report in accordance with CPT
guidance unless we instruct otherwise.
For critical care in particular, we
instructed hospitals that any services
that the CPT Editorial Panel indicates
are included in the reporting of CPT
code 99291 (including those services
that would otherwise be reported by and
paid to hospitals using any of the CPT
codes specified by the CPT Editorial
Panel) should not be billed separately.
Instead, hospitals were instructed to
report charges for any services provided
as part of the critical care services. In
establishing payment rates for critical
care services, and other services, CMS
packages the costs of certain items and
services separately reported by HCPCS
codes into payment for critical care
services and other services, according to
the standard OPPS methodology for
packaging costs (Medicare Claims
Processing Manual, Pub. 100–04,
Chapter 4, Section 160.1).
For CY 2011, the AMA CPT Editorial
Panel revised its guidance for the
critical care codes to specifically state
that, for hospital reporting purposes,
critical care codes do not include the
specified ancillary services. Beginning
in CY 2011, hospitals that report in
accordance with the CPT guidelines
should report all of the ancillary

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services and their associated charges
separately when they are provided in
conjunction with critical care. Because
the CY 2011 payment rate for critical
care services was based on hospital
claims data from CY 2009, during which
time hospitals would have reported
charges for any ancillary services
provided as part of the critical care
services, we stated in the CY 2011
OPPS/ASC final rule with comment
period that we believed it was
inappropriate to pay separately in CY
2011 for the ancillary services that
hospitals may now report in addition to
critical care services (75 FR 71988).
Therefore, for CY 2011, we continued to
recognize the existing CPT codes for
critical care services and established a
payment rate based on historical data,
into which the cost of the ancillary
services was intrinsically packaged. We
also implemented claims processing
edits that conditionally package
payment for the ancillary services that
are reported on the same date of service
as critical care services in order to avoid
overpayment. We noted in the CY 2011
OPPS/ASC final rule with comment
period that the payment status of the
ancillary services would not change
when they are not provided in
conjunction with critical care services.
We assigned status indicator ‘‘Q3’’
(Codes That May Be Paid Through a
Composite APC) to the ancillary
services to indicate that payment for
these services is packaged into a single
payment for specific combinations of
services and made through a separate
APC payment or packaged in all other
circumstances, in accordance with the
OPPS payment status indicated for
status indicator ‘‘Q3’’ in Addendum D1
to the CY 2011 OPPS/ASC final rule
with comment period. The ancillary
services that were included in the
definition of critical care prior to CY
2011 and that are conditionally
packaged into the payment for critical
care services when provided on the
same date of service as critical care
services for CY 2011 were listed in
Addendum M to that final rule with
comment period.
Because the CY 2012 costs for critical
care services were based upon CY 2010
claims data, which reflect the CPT
billing guidance that was in effect prior
to CY 2011, in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74343 through 74344), we continued the
methodology established in the CY 2011
OPPS/ASC final rule with comment
period of calculating a payment rate for
critical care services based on our
historical claims data, into which the
cost of the ancillary services is

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intrinsically packaged for CY 2012. We
also continued to implement claims
processing edits that conditionally
package payment for the ancillary
services that are reported on the same
date of service as critical care services
in order to avoid overpayment.
As we discussed in the CY 2013
OPPS/ASC proposed rule (77 FR 45148),
the CY 2011 hospital claims data on
which the CY 2013 payment rates are
based reflect the first year of claims
billed under the revised CPT guidance
to allow the reporting of all the ancillary
services and their associated charges
separately when they are provided in
conjunction with critical care. Because
our policy to establish relative payment
weights based on geometric mean cost
data for CY 2013 represents a change
from our historical practice to base
payment rates on median costs, and
because we now have hospital claims
data for the first time reflecting the
revised coding guidance for critical care,
we reviewed the CY 2011 hospital
claims data available for the proposed
rule and determined that the data show
increases in both the mean and median
line item costs as well as the mean and
median line item charges for CPT code
99291, when compared to CY 2010
hospital claims data. Specifically, the
mean and median line item costs
increased 13 percent and 16 percent,
respectively, and the mean and median
line item charges increased 11 percent
and 14 percent, respectively.
Additionally, when compared to CY
2010 hospital claims data, CY 2011
hospital claims data showed no
substantial change in the ancillary
services that are present on the same
claims as critical care services, and also
showed continued low volumes of many
ancillary services. We stated in the
proposed rule that, had the majority of
hospitals changed their billing practices
to separately report and charge for the
ancillary services formerly included in
the definition of critical care CPT codes
99291 and 99292, we would have
expected to see a decrease in the costs
and charges for these CPT codes, and a
significant increase in ancillary services
reported on the same claims. We
indicated that the lack of a substantial
change in the services reported on
critical care claims, along with the
increases in the line item costs and
charges for critical care services,
strongly suggests that many hospitals
did not change their billing practices for
CPT code 99291 following the revision
to the CPT coding guidance effective
January 1, 2011.
In light of not having claims data to
support a significant change in hospital
billing practices, we stated in the

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proposed rule that we continue to
believe that it is inappropriate to pay
separately in CY 2013 for the ancillary
services that hospitals may now report
in addition to critical care services.
Therefore, for CY 2013, we proposed, to
continue our CY 2011 and CY 2012
policy to recognize the existing CPT
codes for critical care services and
establish a payment rate based on
historical claims data. We also proposed
to continue to implement claims
processing edits that conditionally
package payment for the ancillary
services that are reported on the same
date of service as critical care services
in order to avoid overpayment. We
stated that we will continue to monitor
the hospital claims data for CPT code
99291 in order to determine whether
revisions to this policy are warranted
based on changes in hospitals’ billing
practices.
Comment: One commenter indicated
that because hospitals have used
internal, hospital-defined guidelines for
over 10 years, CMS should not move to
standard national guidelines. In the
absence of national guidelines for visit
reporting, some commenters urged CMS
to support a request to the AMA’s CPT
Editorial Panel to create unique CPT
codes for hospital reporting of
emergency department and clinic visits.
Response: We agree with the
commenter that we should not move to
national guidelines for visits in CY
2013. As we have in the past (76 FR
74345 through 74346), we acknowledge
that it would be desirable to many
hospitals to have national guidelines.
However, we also understand that it
would be disruptive and
administratively burdensome to other
hospitals that have successfully adopted
internal guidelines to implement any
new set of national guidelines while we
address the problems that would be
inevitable in the case of any new set of
guidelines that would be applied by
thousands of hospitals. As we have also
stated in the past (76 FR 74346), if the
AMA were to create facility-specific
CPT codes for reporting visits provided
in HOPDs [based on internally
developed guidelines], we would
consider such codes for OPPS use.
Comment: One commenter
recommended that CMS reassign
HCPCS code G0379 to APC 0608 (Level
5 Hospital Clinic Visits) because of the
consistent 2 times rule violation in APC
0604 (Level 1 Hospital Clinic Visits) and
HCPCS code G0379’s similarity in both
mean cost and clinical characteristics to
CPT code 99205 (Office or other
outpatient visit for the evaluation and
management of a new patient (Level 5)).
The commenter pointed out that the

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mean cost for HCPCS code G0379 is
more similar to the mean cost for APC
0608 than it is to the mean cost for APC
0604. The commenter argued that the
resources associated with HCPCS code
G0379 resemble those expended for
high-level clinic visits more than
resources for low-level clinic visits, and
noted that CMS’ claims logic for
composite APC 8002 (Level I Extended
Assessment and Management) treats
HCPCS code G0379 similarly to highlevel clinic visit CPT codes 99205 and
99215 (Office or other outpatient visit
for the evaluation and management of
an established patient (Level 5)).
Response: We agree with the rationale
set forth by the commenter and with the
Panel, which recommended CMS
reassign HCPCS code G0379 from APC
0604 to APC 0608. Therefore, we are
reassigning HCPCS code G0379 to APC
0608 for CY 2013.
Comment: Commenters recommended
that CMS, in setting the payment rate for
critical care services by estimating the
costs of the packaged ancillary services,
establish a methodology that includes
review of multiple cost report revenue
centers.
Response: The methodology the
commenters recommended is consistent
with the methodology we already have
in place. As discussed in section
II.A.1.c. of this final rule with comment
period, we calculate hospital-specific
overall ancillary CCRs and hospitalspecific departmental CCRs for each
hospital for which we have claims data.
We apply the hospital-specific CCR to
the hospital’s charges at the most
detailed level possible, based on a
revenue code-to-cost center crosswalk
that contains a hierarchy of CCRs used
to estimate costs from charges for each
revenue code. Therefore, we base our
cost estimation of each packaged
ancillary service on the most specific
cost center to which the revenue code
reported with that service maps. We
then package the cost that we estimate
as a result of that process into the mean
cost calculation for critical care.
Comment: One commenter argued
that the ancillary services associated
with critical care do not meet CMS’
criteria for packaging. The commenter
suggested that, rather than packaging
the ancillary services associated with
critical care, CMS use CY 2008 cost data
for CPT code 99291 updated with an
overall inflation factor to recalculate the
cost of critical care exclusive of bundled
ancillary services.
Response: As we discussed above in
this section and in the CY 2013 OPPS/
ASC proposed rule (76 45147 through
45148), the policy to package ancillary
services associated with critical care

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was implemented in CY 2011 and
resulted from a change in CPT guidance
effective January 1, 2011. We packaged
the ancillary services because the costs
of those ancillary services were already
intrinsically included in the cost
calculated for critical care; to pay for the
ancillary services separately result in
overpayment. Because the claims data
for critical care for CY 2011 do not
reflect that hospitals have changed their
billing practices in response to the
revised CPT guidance effective January
1, 2011—that is, they have not adjusted
their charging practices to reflect that
the ancillary services are no longer
included in the definition of critical
care—we continue to believe that the
costs of the ancillary services continue
to be reflected in the hospitals’ charges
for critical care, and that to pay
separately for the ancillary services
would be inappropriate. We also do not
agree with the commenter that we
should use claims data from CY 2008 to
calculate costs for critical care. We
remind the commenter that the OPPS is
a system of averages, in which the costs
of services, calculated from the most
recent year’s claims data, are weighted
relative to the other services in the
system, for that given year. To utilize a
payment rate derived from claims
outside of the most recent claims data,
despite any update by the overall
inflation factor, would be inconsistent
with the standard methodology of the
OPPS, and would not allow for that
service to be appropriately valued
relative to the other services in the
OPPS.
After consideration of the public
comments we received, we are
finalizing our CY 2013 proposals related
hospital outpatient visits, with one
modification. As described above, we
are reassigning HCPCS code G0379 to
APC 0608 for CY 2013.
C. Transitional Care Management
In the CY 2013 MPFS proposed rule
(77 FR 44774 through 44780), we
discussed a multiple year strategy
exploring the best means to encourage
the provision of primary care and care
coordination services to Medicare
beneficiaries. As part of the strategy
discussed in that proposed rule, we
proposed to address the non-face-to-face
work involved in hospital or SNF
discharge care coordination by creating
a HCPCS G-code for care management
involving the transition of a beneficiary
from care furnished by a treating
physician during a hospital stay
(inpatient, outpatient observation
services, or outpatient partial
hospitalization), SNF stay, or CMHC
partial hospitalization program to care

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furnished by the beneficiary’s physician
or qualified nonphysician practitioner
in the community. As discussed in the
CY 2013 MPFS proposed rule, care
management involving the transition of
a beneficiary from care furnished by a
treating physician during a hospital or
a SNF stay to the beneficiary’s primary
physician or qualified nonphysician
practitioner in the community could
avoid adverse events such as
readmissions or subsequent illnesses,
improve beneficiary outcomes, and
avoid a financial burden on the health
care system. Successful efforts to
improve hospital discharge care
coordination and care transitions could
improve the quality of care while
simultaneously decreasing costs.
The proposed HCPCS G-code
included in the CY 2013 MPFS
proposed rule, GXXX1, specifically
describes post-discharge transitional
care management services, which
include all non-face-to-face services
related to the transitional care
management, furnished by the
community physician or nonphysician
practitioner within 30 calendar days
following the date of discharge from an
inpatient acute care hospital,
psychiatric hospital, LTCH, SNF, and
IRF; discharge from hospital outpatient
observation or partial hospitalization
services; or discharge from a PHP at a
CMHC, to the community-based care.
The post-discharge transitional care
management services include non-faceto-face care management services
provided by clinical staff member(s) or
office-based case manager(s) under the
supervision of the community physician
or qualified nonphysician practitioner.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45148 through 45159), we
stated that while we do not pay for
physician or nonpractitioner
professional services under the OPPS
(42 CFR 419.22), we recognize that
certain elements of the transitional care
coordination services described by
proposed HCPCS code GXXX1 could be
provided to a hospital outpatient as an
ancillary or supportive service in
conjunction with a primary diagnostic
or therapeutic service that would be
payable under the OPPS, such as a
clinic visit. We stated that, as described
in section II.A.3. of the proposed rule,
we package payment for services that
are typically ancillary and supportive to
a primary service. While we do not
make separate payment for such
services, their costs are included in the
costs of other services furnished by the
hospital to the beneficiary on the same
day. We indicated in the CY 2013
OPPS/ASC proposed rule that, because
transitional care management services

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described by HCPCS code GXXX1 may
be ancillary and supportive to a primary
service provided to a hospital
outpatient, we proposed to assign
HCPCS code GXXX1 a status indicator
of ‘‘N’’ (Items and Services Packaged
into APC Rates), signifying that its
payment would be packaged (77 FR
45159).
Comment: The majority of
commenters supported the proposed
development of a HCPCS G-code to
identify the non-face-to-face work
involved in hospital or SNF discharge
care coordination. Some commenters
supported establishing a HCPCS G-code
as a short-term solution to capture the
non-face-to-face services, but suggested
that in the long term, CMS consider
generating new CPT codes specific to
the post-discharge transitional care
management that would also capture
face-to-face components of transitional
care. Some commenters also stated that
the requirements for billing the postdischarge transitional care services
(regardless of whether they are
identified with the new HCPCS G-code
or a CPT code) should not be arduous
or complex. A few commenters
expressed concern that the proposed
HCPCS G-code for transitional care
management would be duplicative of
discharge day management services
described by other CPT codes. Some
commenters requested that CMS
establish a separate APC for the
proposed HCPCS G-code with a status
indicator of ‘‘S’’ or ‘‘X’’ for transitional
care management services or assign the
HCPCS G-code to APC 0605 (Level 2
Hospital Clinic Visits).
Response: For the reasons outlined in
the CY 2013 MPFS final rule with
comment period, we are adopting the
following CPT transitional care
management codes in place of the
proposed HCPCS G-code: CPT code
99495 (Transitional care management
services w/moderate medical decision
complexity; Face to face visit within 14
days) and CPT code 99496 (Transitional
care management services w/high
medical decision complexity; Face to
face visit within 7 days). We agree with
the commenters that the requirements
for billing the post-discharge
transitional care management services
should not be arduous or complex, and
we refer readers to the CY 2013 MPFS
final rule with comment period for a full
discussion of the billing requirements
for CPT codes 99495 and 99496. We also
refer readers to the CY 2013 MPFS final
rule with comment period for a full
discussion of why we do not believe
that recognition of the transitional care
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codes 99495 and 99496 is duplicative of
services described by other CPT codes.
The CPT transitional care
management code 99495 includes the
following required elements:
• Communication (direct contact,
telephone, electronic) with the patient
and/or caregiver within 2 business days
of discharge;
• Medical decision-making of at least
moderate complexity during the service
period; and
• Face-to-face visit, within 14
calendar days of discharge.
CPT code 99496 includes the
following required elements:
• Communication (direct contact,
telephone, electronic) with the patient
and/or caregiver within 2 business days
of discharge;
• Medical decision-making of high
complexity during the service period;
and
• Face-to-face visit, within 7 calendar
days of discharge.
As we describe in the CY 2013 MPFS
final rule with comment period, the
services described by CPT codes 99495
and 99496 are for an established patient
whose medical and/or psychosocial
problems require moderate or high
complexity medical decision-making
during transitions in care from an
inpatient hospital setting (including
acute hospital, rehabilitation hospital,
long-term acute care hospital), partial
hospital, observation status in a
hospital, or SNF/nursing facility, to the
patient’s community setting (home,
domiciliary, rest home, or assisted
living). Transitional care management
commences upon the date of discharge
and continues for the next 29 days.
Transitional care management is
comprised of one face-to-face visit
within the specified timeframes, in
combination with non-face-to-face
services that may be performed by the
physician or other qualified health care
professional and/or licensed clinical
staff under his or her direction. Because
the transitional care management
services described by CPT codes 99495
and 99496 involve at least one face-toface visit, (unlike the proposed HCPCS
G-code), we believe that CPT codes
99495 and 99496 represent a primary,
independent service that should be
separately payable under the OPPS. We
are assigning CPT code 99495 to APC
0605 (Level 2 Hospital Clinic Visit) and
CPT code 99496 to APC 0606 (Level 3
Hospital Clinic Visit) on an interim
basis for CY 2013. As with all new CPT
codes, these interim assignments are
open to public comment for a period of
60 days following the publication of this
final rule with comment period.

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As we discuss in the CY 2013 MPFS
final rule with comment period, we are
adopting these new transitional care
management codes to provide a separate
reporting mechanism to the community
physician for these services in the
context of the broader CMS multi-year
strategy to recognize and support
primary care and care management. We
wish to emphasize again that the
policies we are finalizing in this final
rule with comment period may be shortterm payment strategies that may be
modified and/or revised over time to be
consistent with broader primary care
and care management initiatives. We
refer readers to the CY 2013 MPFS final
rule with comment period for a full
discussion of post-discharge transitional
care management services in particular
and, more broadly, the multiple year
strategy exploring the best means to
encourage primary care and care
coordination services.
VIII. Payment for Partial
Hospitalization Services
A. Background
Partial hospitalization is an intensive
outpatient program of psychiatric
services provided to patients as an
alternative to inpatient psychiatric care
for individuals who have an acute
mental illness. Section 1861(ff)(1) of the
Act defines partial hospitalization
services as ‘‘the items and services
described in paragraph (2) prescribed by
a physician and provided under a
program described in paragraph (3)
under the supervision of a physician
pursuant to an individualized, written
plan of treatment established and
periodically reviewed by a physician (in
consultation with appropriate staff
participating in such program), which
plan sets forth the physician’s diagnosis,
the type, amount, frequency, and
duration of the items and services
provided under the plan, and the goals
for treatment under the plan.’’ Section
1861(ff)(2) of the Act describes the items
and services included in partial
hospitalization services. Section
1861(ff)(3)(A) of the Act specifies that a
partial hospitalization program (PHP) is
a program furnished by a hospital to its
outpatients or by a community mental
health center (CMHC) (as defined in
subparagraph (B)), and ‘‘which is a
distinct and organized intensive
ambulatory treatment service offering
less than 24-hour-daily care other than
in an individual’s home or in an
inpatient or residential setting.’’ Section
1861(ff)(3)(B) of the Act defines
community mental health center.
Section 1833(t)(1)(B)(i) of the Act
provides the Secretary with the

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authority to designate the OPD services
to be covered under the OPPS. The
Medicare regulations that implement
this provision specify, at 42 CFR 419.21,
that payments under the OPPS will be
made for partial hospitalization services
furnished by CMHCs as well as
Medicare Part B services furnished to
hospital outpatients designated by the
Secretary, which include partial
hospitalization services (65 FR 18444
through 18445).
Section 1833(t)(2)(C) of the Act, in
pertinent part, requires the Secretary to
‘‘establish relative payment weights for
covered OPD services (and any groups
of such services described in
subparagraph (B)) based on median (or,
at the election of the Secretary, mean)
hospital costs’’ using data on claims
from 1996 and data from the most recent
available cost reports. In pertinent part,
subparagraph (B) provides that the
Secretary may establish groups of
covered OPD services, within a
classification system developed by the
Secretary for covered OPD services, so
that services classified within each
group are comparable clinically and
with respect to the use of resources. In
accordance with these provisions, we
have developed the APCs. Section
1833(t)(9)(A) of the Act requires the
Secretary to ‘‘review not less often than
annually and revise the groups, the
relative payment weights, and the wage
and other adjustments described in
paragraph (2) to take into account
changes in medical practice, changes in
technology, the addition of new
services, new cost data, and other
relevant information and factors.’’
Because a day of care is the unit that
defines the structure and scheduling of
partial hospitalization services, we
established a per diem payment
methodology for the PHP APCs,
effective for services furnished on or
after July 1, 2000 (65 FR 18452 through
18455). Under this methodology, the
median per diem costs have been used
to calculate the relative payment
weights for PHP APCs.
From CY 2003 through CY 2006, the
median per diem costs for CMHCs
fluctuated significantly from year to
year, while the median per diem costs
for hospital-based PHPs remained
relatively constant. We were concerned
that CMHCs may have increased and
decreased their charges in response to
Medicare payment policies. Therefore,
we began efforts to strengthen the PHP
benefit through extensive data analysis
and policy and payment changes in the
CY 2008 update (72 FR 66670 through
66676). We made two refinements to the
methodology for computing the PHP
median: the first remapped 10 revenue

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codes that are common among hospitalbased PHP claims to the most
appropriate cost centers; and the second
refined our methodology for computing
the PHP median per diem cost by
computing a separate per diem cost for
each day rather than for each bill. We
refer readers to a complete discussion of
these refinements in the CY 2008 OPPS/
ASC final rule with comment period (72
FR 66670 through 66676).
In CY 2009, we implemented several
regulatory, policy, and payment
changes, including a two-tiered
payment approach for PHP services
under which we paid one amount for
days with 3 services (APC 0172 (Level
I Partial Hospitalization)) and a higher
amount for days with 4 or more services
(APC 0173 (Level II Partial
Hospitalization)). We refer readers to
section X.B. of the CY 2009 OPPS/ASC
final rule with comment period (73 FR
68688 through 68693) for a full
discussion of the two-tiered payment
system. In addition, for CY 2009, we
finalized our policy to deny payment for
any PHP claims submitted for days
when fewer than 3 units of therapeutic
services are provided (73 FR 68694).
Furthermore, for CY 2009, we revised
the regulations at 42 CFR 410.43 to
codify existing basic PHP patient
eligibility criteria and to add a reference
to current physician certification
requirements at 42 CFR 424.24 to
conform our regulations to our
longstanding policy (73 FR 68694
through 68695). These changes have
helped to strengthen the PHP benefit.
We also revised the partial
hospitalization benefit to include
several coding updates. We refer readers
to section X.C.3. of the CY 2009 OPPS/
ASC final rule with comment period (73
FR 68695 through 68697) for a full
discussion of these requirements.
For CY 2010, we retained the twotiered payment approach for PHP
services and used only hospital-based
PHP data in computing the APC per
diem payment rates. We used only
hospital-based PHP data because we
were concerned about further reducing
both PHP APC per diem payment rates
without knowing the impact of the
policy and payment changes we made
in CY 2009. Because of the 2-year lag
between data collection and rulemaking,
the changes we made in CY 2009 were
reflected for the first time in the claims
data that we used to determine payment
rates for the CY 2011 rulemaking (74 FR
60556 through 60559).
In CY 2011, in accordance with
section 1301(b) of the Health Care and
Education Reconciliation Act of 2010
(HCERA 2010), we amended the
description of a PHP in our regulations

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to specify that a PHP must be a distinct
and organized intensive ambulatory
treatment program offering less than 24hour daily care ‘‘other than in an
individual’s home or in an inpatient or
residential setting.’’ In addition, in
accordance with section 1301(a) of
HCERA 2010, we revised the definition
of a CMHC in the regulations to conform
to the revised definition now set forth
at section 1861(ff)(3)(B) of the Act. We
discussed our finalized policies for
these two provisions of HCERA 2010 in
section X.C. of the CY 2011 OPPS/ASC
final rule with comment period (75 FR
71990).
In the CY 2011 OPPS/ASC final rule
with comment period (75 FR 71994), we
also established four separate PHP APC
per diem payment rates, two for CMHCs
(for Level I and Level II services) and
two for hospital-based PHPs (for Level
I and Level II services). In the CY 2011
OPPS/ASC proposed rule, we proposed
that CMHC APC medians would be
based only on CMHC data and hospitalbased PHP APC medians would be
based only on hospital-based PHP data
(75 FR 46300). As stated in the CY 2011
OPPS/ASC proposed rule (75 FR 46300)
and the final rule with comment period
(75 FR 71991), for CY 2011, using CY
2009 claims data, CMHC costs had
significantly decreased again. We
attributed the decrease to the lower cost
structure of CMHCs compared to
hospital-based PHP providers, and not
the impact of CY 2009 policies. CMHCs
have a lower cost structure than
hospital-based PHP providers, in part
because the data showed that CMHCs
provide fewer PHP services in a day and
use less costly staff than hospital-based
PHPs. Therefore, it was inappropriate to
continue to treat CMHCs and hospitalbased providers in the same manner
regarding payment, particularly in light
of such disparate differences in costs.
We also were concerned that paying
hospital-based PHPs at a lower rate than
their cost structure reflects could lead to
hospital-based PHP closures and
possible access problems for Medicare
beneficiaries, given that hospital-based
PHPs offer the widest access to PHP
services because they are located across
the country. Creating the four payment
rates (two for CMHCs and two for
hospital-based PHPs) based on each
provider’s data supported continued
access to the PHP benefit, while also
providing appropriate payment based
on the unique cost structures of CMHCs
and hospital-based PHPs. In addition,
separation of data by provider type was
supported by several hospital-based
PHP commenters who responded to the

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CY 2011 OPPS/ASC proposed rule (75
FR 71992).
For CY 2011, we instituted a 2-year
transition period for CMHCs to the
CMHC APC per diem payment rates
based solely on CMHC data. For CY
2011, under the transition methodology,
CMHC APC Level I and Level II per
diem costs were calculated by taking 50
percent of the difference between the
CY 2010 final hospital-based PHP
medians and the CY 2011 final CMHC
medians and then adding that number
to the CY 2011 final CMHC medians. A
2-year transition under this
methodology moved us in the direction
of our goal, which is to pay
appropriately for PHP services based on
each provider type’s data, while at the
same time allowing providers time to
adjust their business operations and
protect access to care for beneficiaries.
We also stated that we would review
and analyze the data during the CY 2012
rulemaking cycle and may, based on
these analyses, further refine the
payment mechanism. We refer readers
to section X.B. of the CY 2011 OPPS/
ASC final rule with comment period (75
FR 71991 through 71994) for a full
discussion.
After publication of the CY 2011
OPPS/ASC final rule with comment
period, a CMHC and one of its patients
filed an application for a preliminary
injunction, challenging the OPPS
payment rates for PHP services provided
by CMHCs in CY 2011 as adopted in the
CY 2011 OPPS/ASC final rule with
comment period (75 FR 71995). We refer
readers to the court case, Paladin Cmty.
Mental Health Ctr. v. Sebelius, No. 10–
949, 2011 WL 3102049 (W.D.Tex. 2011),
aff’d, No. 11–50682, 2012 WL 2161137
(5th Cir. June 15, 2012) (Paladin). The
plaintiffs in the Paladin case challenged
the agency’s use of cost data derived
from both hospitals and CMHCs in
determining the relative payment
weights for the OPPS payment rates for
PHP services furnished by CMHCs,
alleging that section 1833(t)(2)(C) of the
Act requires that such relative payment
weights be based on cost data derived
solely from hospitals. As discussed
above, section 1833(t)(2)(C) of the Act
requires CMS to ‘‘establish relative
payment weights for covered OPD
services (and any groups of such
services * * *) * * * based on * * *
hospital costs.’’ Numerous courts have
held that ‘‘based on’’ does not mean
‘‘based exclusively on.’’ On July 25,
2011, the District Court dismissed the
plaintiffs’ complaint and application for
preliminary injunction for lack of
subject-matter jurisdiction, which the
plaintiffs appealed to the United States
Court of Appeals for the Fifth Circuit.

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On June 15, 2012, the Court of Appeals
affirmed the District Court’s dismissal
for lack of subject-matter jurisdiction
and found that the Secretary’s payment
rate determinations for PHP services are
not a facial violation of a clear statutory
mandate. (Paladin at *6).
For CY 2012, as discussed in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74348 through
74352), we determined the relative
payment weights for PHP services
provided by CMHCs based on data
derived solely from CMHCs and the
relative payment weights for hospitalbased PHP services based exclusively on
hospital data. The statute is reasonably
interpreted to allow the relative
payment weights for the OPPS payment
rates for PHP services provided by
CMHCs to be based solely on CMHC
data and relative payment weights for
hospital-based PHP services to be based
exclusively on hospital data. Section
1833(t)(2)(C) of the Act requires the
Secretary to ‘‘establish relative payment
weights for covered OPD services (and
any groups of such services described in
subparagraph (B)) based on * * *
hospital costs.’’ In pertinent part,
subparagraph (B) provides that ‘‘the
Secretary may establish groups of
covered OPD services * * * so that
services classified within each group are
comparable clinically and with respect
to the use of resources.’’ In accordance
with subparagraph (B), we developed
the APCs, as set forth in 42 CFR 419.31
of the regulations (65 FR 18446 and
18447; 63 FR 47559 through 47562 and
47567 through 47569). As discussed
above, PHP services are grouped into
APCs.
Based on section 1833(t)(2)(C) of the
Act, we believe that the word
‘‘establish’’ can be interpreted as
applying to APCs at the inception of the
OPPS in 2000 or whenever a new APC
is added to the OPPS. In creating the
original APC for PHP services (APC
0033), we did ‘‘establish’’ the initial
relative payment weight for PHP
services, provided in both hospitalbased and CMHC-based settings, only
on the basis of hospital data.
Subsequently, from CY 2003 through CY
2008, the relative payment weights for
PHP services were based on a
combination of hospital and CMHC
data. For CY 2009, we established new
APCs for PHP services based exclusively
on hospital data. Specifically, we
adopted a two-tiered APC methodology
(in lieu of the original APC 0033) under
which CMS paid one rate for days with
3 services (APC 0172) and a different
payment rate for days with 4 or more
services (APC 0173). These two new
APCs were established using only

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hospital data. For CY 2011, we added
two new APCs (APCs 0175 and 0176)
for PHP services provided by hospitals
and based the relative payment weights
for these APCs solely on hospital data.
APCs 0172 and 0173 were designated
for PHP services provided by CMHCs
and were based on a mixture of hospital
and CMHC data. As the Secretary
argued in the Paladin case, the courts
have consistently held that the phrase
‘‘based on’’ does not mean ‘‘based
exclusively on.’’ Thus, the relative
payment weights for the two APCs for
PHP services provided by CMHCs in CY
2011 were ‘‘based on’’ hospital data, no
less than the relative payment weights
for the two APCs for hospital-based PHP
services.
Although we used hospital data to
establish the relative payment weights
for APCs 0033, 0172, 0173, 0175, and
0176 for PHP services, we believe that
we have the authority to discontinue the
use of hospital data in determining the
OPPS relative payment weights for PHP
services provided by CMHCs. Other
parts of section 1833(t)(2)(C) of the Act
make plain that the data source for the
relative payment weights is subject to
change from one period to another.
Section 1833(t)(2)(C) of the Act provides
that, in establishing the relative
payment weights, ‘‘the Secretary shall [
] us[e] data on claims from 1996 and
us[e] data from the most recent available
cost reports.’’ However, we used 1996
data (plus 1997 data) in determining
only the original relative payment
weights for 2000; in the ensuing
calendar year updates, we continually
used more recent cost report data.
Moreover, section 1833(t)(9)(A) of the
Act requires the Secretary to ‘‘review
not less often than annually and revise
the groups, the relative payment
weights, and the wage and other
adjustments described in paragraph (2)
to take into account changes in medical
practice, changes in technology, the
addition of new services, new cost data,
and other relevant information and
factors.’’ For purposes of the CY 2012
update, we exercised our authority
under section 1833(t)(9)(A) of the Act to
change the data source for the relative
payment weights for PHP services
provided by CMHCs based on ‘‘new cost
data, and other relevant information and
factors.’’
B. PHP APC Update for CY 2013
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45094 through 45098 and
45151), we proposed to develop the
relative payment weights that underpin
the OPPS using geometric means rather
than the current median-based
methodology. We stated that this

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proposal to base the relative payment
weights on geometric means would also
apply to the per diem costs used to
determine the relative payment weights
for the four PHP APCs (77 FR 45151).
We stated that, for PHP APCs, as with
all other OPPS APCs, the proposal to
base the relative payment weights on
geometric means rather than medians
would not affect the general process to
establish appropriate claims for
modeling. We stated that, as with the
current median-based methodology, the
PHP APC per diem payment rates would
continue to be calculated by computing
a separate per diem cost for each day of
PHP service. When there are multiple
days of PHP services entered on a claim,

a unique cost would continue to be
computed for each day of care.
However, a geometric mean would be
used to calculate the per diem costs
rather than a median. We stated that the
process would still be repeated
separately for CMHCs and hospitalbased PHPs using that provider’s claims
data for the two categories of days with
3 services and days with 4 or more
services. We stated that the four PHP
APC per diem costs would continue to
be included in the scaling of all APCs
under the OPPS to the mid-level office
visit (APC 0606). For a detailed
discussion of the CY 2013 OPPS weight
scaler, we refer readers to section II.A.4.
of this final rule with comment period.

In the CY 2013 OPPS/ASC proposed
rule, for CY 2013, using CY 2011 claims
data, we computed proposed CMHC
PHP APC geometric mean per diem
costs for Level I (3 services per day) and
Level II (4 or more services per day)
services using only CY 2011 CMHC
claims data, and hospital-based PHP
APC geometric mean per diem costs for
Level I and Level II services using only
CY 2011 hospital-based PHP claims
data. These proposed geometric mean
per diem costs were shown in Table 30
of the CY 2013 OPPS/ASC proposed
rule (77 FR 45151) and are reprinted
below.

Under the CY 2013 proposal to base
the OPPS relative payment weights on
geometric mean costs, the proposed
geometric mean per diem costs for
CMHCs would continue to be
substantially lower than the proposed
geometric mean per diem costs for
hospital-based PHPs for the same units
of service. For CY 2013, the proposed
geometric mean per diem costs for days
with 3 services (Level I) were
approximately $88 for CMHCs and
approximately $183 for hospital-based
PHPs. The proposed geometric mean per
diem costs for days with 4 or more
services (Level II) were approximately
$112 for CMHCs and approximately
$233 for hospital-based PHPs. We stated
that this analysis indicated that there
continue to be fundamental differences

between the cost structures of CMHCs
and hospital-based PHPs.
The CY 2013 proposed geometric
mean per diem costs for CMHCs
calculated under the proposed CY 2013
methodology using CY 2011 claims data
also have decreased compared to the CY
2012 final median per diem costs for
CMHCs established in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74352), with per diem
costs for Level I services decreasing
from approximately $98 to
approximately $88, and costs for Level
II services decreasing from
approximately $114 to approximately
$112. In contrast, the CY 2013 proposed
geometric mean per diem costs for
hospital-based PHPs calculated under
the proposed CY 2013 methodology
using CY 2011 claims data have

increased compared to the CY 2012 final
median per diem costs for hospitalbased PHPs, with per diem costs for
Level I services increasing from
approximately $161 to approximately
$183, and per diem costs for Level II
services increasing from approximately
$191 to approximately $233.
To provide a comparison in the CY
2013 OPPS/ASC proposed rule, we also
calculated PHP median per diem costs
for CY 2013 using CY 2011 claims data
(77 FR 45151 through 45152). We
computed median per diem costs for
each provider type using that provider’s
claims data for Level I services and for
Level II services. These comparative
median per diem costs were shown in
Table 31 of the CY 2013 OPPS/ASC
proposed rule (77 FR 45152) and are
reprinted and discussed below.

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The proposed geometric mean per
diem costs for hospital-based PHPs for
Level I and Level II services calculated
under the proposed CY 2013
methodology using CY 2011 claims data
would be higher than the median per
diem costs calculated under the current
median-based methodology, using CY
2011 claims data. For hospital-based
PHPs, the per diem costs would increase
from approximately $164 under the
current median-based methodology to
approximately $183 under the proposed
geometric mean-based methodology for
Level I services, and from
approximately $225 to approximately
$233 for Level II services.
The proposed geometric mean per
diem costs for CMHCs for Level I
services calculated under the proposed
CY 2013 methodology using CY 2011
claims data would be approximately the
same as the median per diem costs
calculated under the current medianbased methodology, using CY 2011
claims data. The proposed geometric
mean per diem costs for CMHCs for
Level II services calculated under the
proposed CY 2013 methodology using
CY 2011 claims data would be slightly
lower than the median per diem costs
calculated under the current medianbased methodology, using CY 2011
claims data. For CMHCs, the per diem
costs would be approximately $88
under both the current median-based
methodology and the proposed
geometric mean-based methodology for
CMHC Level I services, and would
decrease from approximately $121
under the current median-based
methodology to approximately $112
under the proposed geometric mean-

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based methodology for CMHC Level II
services.
We stated that the data analysis also
shows that the median per diem costs
for CMHCs continue to be substantially
lower than the median per diem costs
for hospital-based PHPs for the same
units of service provided. The median
per diem costs for Level I services were
approximately $88 for CMHCs and
approximately $164 for hospital-based
PHPs. The median per diem costs for
Level II services were approximately
$121 for CMHCs and approximately
$225 for hospital-based PHPs. We stated
that the significant difference in per
diem costs between CMHCs and
hospital-based PHPs emphasizes the
distinct cost structures between the two
provider types.
Finally, we stated that the data
analysis indicates that CMHC median
per diem costs for Level I services
would have decreased from CY 2012
final median per diem costs (using CY
2010 claims data) (established in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74352)) to CY
2013 (using CY 2011 claims data) from
approximately $98 to approximately
$88, using only CMHC claims data. The
CMHC median per diem costs for Level
II services would have slightly increased
from CY 2012 final median per diem
costs (using CY 2010 claims data) to CY
2013 (using CY 2011 claims data) from
approximately $114 to approximately
$121, using only CMHC claims data.
Hospital-based PHP median per diem
costs for Level I and Level II services
would have increased from the CY 2012
final median per diem costs (using CY
2010 claims data) to CY 2013 (using CY
2011 claims data) from approximately

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$161 to approximately $164 for Level I
services and from approximately $191
to approximately $225 for Level II
services, using only hospital claims
data.
In summary, while we have
historically based the OPPS payments
on median costs for services in the APC
groups, for CY 2013, we proposed to
calculate the relative payment weights
for the OPPS APCs using geometric
means, including the four PHP APCs, as
discussed in section II.A.2.f. of the
proposed rule. We invited public
comments on these proposals.
Comment: A few commenters
representing CMHCs opposed the
proposed conversion from the
historically applied median-based
methodology to the geometric meanbased methodology and the resulting
CMHC payment rates. The commenters
believed that the median cost approach
is more stable and less sensitive to
extreme observations and, therefore, a
more appropriate methodology. One
CMHC commenter preferred the
median-based methodology because it
resulted in a higher payment rate for the
CMHC APC for Level II services than
when calculated using a geometric
mean-based methodology. The
commenters recommended that CMS
continue using a median-based
methodology and not change to a
geometric mean-based methodology for
calculating the per diem costs.
Response: We acknowledge the
commenters’ concern about the change
from the median-based methodology to
the geometric mean-based methodology
and its impact on CMHCs. In the CY
2013 OPPS/ASC proposed rule, we
proposed to develop the OPPS relative

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payment weights using geometric mean
cost for all APCs that were previously
calculated using median cost, including
the PHP APCs (77 FR 45094 through
45098 and 45151). Under the CY 2013
proposal, OPPS payments to CMHCs for
partial hospitalization also would be
calculated based on geometric mean per
diem costs, rather than the previous use
of median per diem costs. This would
help ensure that the relativity of the
OPPS payment weights was properly
aligned. As discussed in section II.A.2.f.
of this final rule with comment period,
we do not believe that paying for some
services based on median costs while
using geometric mean costs for other
services is appropriate, equitable, or
consistent with statute. Therefore, our
CY 2013 proposal was to develop the
OPPS relative payment weights using
geometric mean costs for any services
previously calculated using median
costs, whether that was on a standard,
per diem, or line item basis (77 FR
45097).
In the CY 2013 OPPS/ASC proposed
rule, we recognized that median costs
had historically served as an
appropriate measure on which to
establish relative payment weights.
However, in our proposal to establish
the CY 2013 OPPS relative payment
weights using geometric mean cost, we
discussed a number of reasons why we
believed that changing to geometric
mean cost would represent an
incremental improvement as well as be
appropriate. These reasons included
changes CMS has made throughout the
history of the OPPS with the goal of
deriving more accurate information
from available claims and cost report
data, as well as benefits of using a
metric that more accurately describes
the range of costs associated with
providing services.
While commenters have suggested
that medians are more appropriate
because they are less sensitive to outlier
observations, in particular for CMHCs,
we believe that including those outlier
observations in developing the weights
and capturing the full range of service
costs will lead to more accurate relative
payment weights. In addition to better
incorporating those cost values that
surround the median and, therefore,
describing a broader range of cost
patterns, basing the relative payment
weights on geometric mean costs may
also promote better stability in the
payment system by making OPPS
payments more reflective of the range of
costs associated with providing services.
In the short term, geometric mean-based
relative payment weights would make
the relative payment weights more
reflective of the service costs. However,

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making this change also may promote
more payment stability in the long term
by including a broader range of
observations in the relative payment
weights, making them less susceptible
to gaps in estimated cost near the
median observation and also making
changes in the relative payment weight
a better function of changes in estimated
service costs.
We note that using the geometric
means would increase the relative
payment weights for some services and
decrease the relative payment weights
for others. We believe those updated
relative payment weights to be more
reflective of the costs associated with
providing those services, which is
consistent with the goal of developing
relative payment weights that accurately
describe service costs. As described in
the CY 2013 OPPS/ASC proposed rule,
we have made a number of changes in
the history of the OPPS to derive more
information from what is available to us
and ensure that the cost information we
use for ratesetting is as accurate as
possible. We believe that making
changes consistent with those goals is
preferable, rather than choosing one
methodology or another simply due to
the numeric payment rates that arise
from any different methodology.
Thus, for the reasons discussed above,
we believe that using geometric mean
costs to calculate the relative payment
weights for the OPPS represents an
improvement to our cost estimation
process and will lead to relative
payment weights that are more
reflective of service cost patterns. For
these reasons, we disagree with the
commenters’ assertion that use of the
median-based methodology is a
preferable option. We believe that this
change is appropriate and requires all
OPPS services previously paid through
median-based calculations (including
CMHC based per diem costs) to
transition together to geometric mean
cost calculations to establish accurate
cost relativity in the system. Therefore,
we are finalizing the geometric meanbased methodology in this final rule
with comment period. For a more
detailed discussion of geometric meanbased relative payment weights, we
refer readers to section II.A.2.f. of this
final rule with comment period.
Comment: Several hospital-based PHP
providers supported the conversion
from a median-based methodology to a
geometric mean-based methodology and
the resulting hospital-based PHP per
diem payments. These commenters also
recommended that CMS continue to
recognize the cost structure differences
between hospital-based PHPs and
CMHCs by calculating four separate

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PHP APCs based on each providers’
own unique data, and stated that it was
a necessary improvement to help ensure
PHP access in hospital-based settings for
the future. The commenters also
encouraged CMS to continue to refine
data analysis strategies that help bring
payment accuracy as well as stability to
the partial hospitalization benefit in
order to allow programs that meet the
needs of Medicare beneficiaries to exist.
Response: We appreciate the
commenters’ support of the two-tiered,
four PHP APC per diem payment rates
based on each providers’ own unique
data. We continue to believe that it is
important to calculate PHP APC per
diem payment rates based on the data
for each type of provider in order to
appropriately pay for PHP services,
which will support continued access to
quality services. We are constantly
monitoring the OPPS in search of
potential refinements that would
improve the accuracy and stability of
the payment system. Over the past
several years, we have made changes to
PHP APC per diem payment rates to
more accurately align the payments
with costs. These changes have
included establishing separate APC per
diem payment rates for CMHCs and
hospital-based providers based on each
providers’ costs as well as a two-tiered
APC per diem payment rate for both
CMHC and hospital-based PHPs under
which we pay one amount for days with
3 services and another amount for days
with 4 or more services. As discussed in
the CY 2013 OPPS/ASC proposed rule,
we believe that the use of geometric
mean costs rather than median costs in
the ratesetting process is another
improvement, because it allows the
payment metric to consider a broader
range of service costs among other
factors (77 FR 45097). We will continue
to monitor the impact of our payment
policies on the PHP benefit and
providers.
Comment: A few CMHC providers
requested that CMS suspend
implementation of the proposed PHP
APC per diem payment rates for CMHCs
and maintain the current CY 2012
CMHC PHP APC per diem payment
rates as a means to preserve CMHCs.
The commenters stated that many of the
CMHCs throughout the country have
already closed due to CMS’ ongoing
payment rate reductions. Another
commenter stated that no business in
the United States or anywhere else in
the world can survive and continue to
operate after such a decrease over 3
years. The commenter further stated that
it appeared that the goal of CMS was to
substantially reduce the total number of
CMHCs participating in the Medicare

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program and consequentially reduce
payments nationwide. One commenter
expressed concern that, instead of being
rewarded, CMHCs are being targeted
and punished for providing more costeffective services than the hospitalbased PHPs. This same commenter was
‘‘highly offended’’ by the following
sentence from the CY 2012 OPPS/ASC
proposed rule (77 FR 45150): ‘‘CMHCs
have a lower cost structure than
hospital-based PHP providers, in part
because the data showed that CMHCs
provide fewer PHP services in a day and
use less costly staff than hospital-based
PHPs.’’ The commenter stated that the
sentence implies ‘‘CMHCs provide less
valuable services than hospital-based
PHPs, hire less qualified staff, and
overall perform very poorly compared to
hospital based PHPs.’’
Several commenters expressed
concern that the proposed reductions to
the CMHC PHP APC per diem payment
rates could further erode the viability of
the safety net system, and make it more
difficult for patients to receive needed
mental health care and services. One of
these commenters also stated that if
patients are unable to receive care in a
CMHC, many will have only the
emergency departments as a last resort.
Response: We understand the
concerns raised by the commenters
regarding CMHC APC per diem payment
rate reductions. We are not targeting or
trying to punish specific providers, and
we are not trying to reduce the number
of CMHCs participating in the Medicare
program. However, we continue to
believe that it is important to calculate
PHP APC per diem payment rates based
on the data for each type of provider in
order to appropriately pay for services.
CMHCs’ costs have fluctuated
significantly and then generally
declined over the years. CMHCs’ costs
also have remained significantly lower
than hospital-based PHPs’ costs, which
have been relatively stable since the
inception of the OPPS. In the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74347), we stated that
CMHCs have a lower cost structure than
hospital-based PHP providers because
the data showed and continue to show
that CMHCs provide fewer PHP services
in a day and use less costly staff than
hospital-based PHPs. In other words,
hospital-based providers have
traditionally provided more services
than CMHCs during a PHP day.
Providing fewer services during a PHP
day results in less overhead expense for
the provider; that is, less time the
provider needs to pay staff, less time the
provider needs to heat the building, and
less time the provider needs to light the
building. Therefore, providing fewer

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PHP services during a day directly
contributes to a lower overall cost
structure. We did not intend to offend
any of our providers. We also did not
mean to imply that, in comparison to
hospital-based PHPs, CMHCs provide
inferior, less valuable or poor quality
services; we were only stating the
differences in these providers’ cost
structures based on our cost analysis.
In light of these differences in cost
structures between provider types, it
was inappropriate to continue to treat
CMHCs and hospital-based PHP
providers in the same manner. We were
concerned that paying hospital-based
PHPs at a lower rate than their cost
structure reflects could lead to closures
and possible access problems for
hospital-based programs providing
services to Medicare beneficiaries, given
that hospital-based PHPs offer the
widest access to PHP services because
they are located across the country.
Paying providers based on the four PHP
APC per diem payment rates supports
continued access to the PHP benefit,
while also providing appropriate
payment based on the unique cost
structures of CMHCs and hospital-based
PHPs. We believe that the CMHC APC
per diem payment rates accurately
reflect the cost data of the CMHCs.
The PHP APC per diem payment rates
are directly related to the accuracy of
the claims and cost reports submitted by
providers. It is imperative that providers
submit accurate claims and cost reports
in order for the payment rates to most
accurately reflect the providers’ costs.
The resulting PHP APC per diem
payment rates reflect the cost of what
providers expend to maintain such
programs. So, it is unclear why this
would lead to program or business
closures. As we stated in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74350), the closure of
PHPs may be due to any number of
reasons, such as poor business
management or marketing decisions,
competition, over-saturation of certain
geographic areas, and Federal and State
fraud and abuse efforts, among others. It
does not directly imply that closure
could be due to reduced payment rates
alone, especially when these payment
rates reflect the costs of PHP providers.
In response to the commenters’
concerns that further reduction in the
CMHC PHP APC per diem payment
rates could further erode the viability of
the safety net system and make it more
difficult for patients to receive needed
mental health services, we take such
concerns seriously. Currently, we
monitor facility closings and openings
to make sure that access issues do not
exist, and we will continue to do so in

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the future. We also remain steadfast in
our concern regarding access to care for
all beneficiaries, while also providing
appropriate payments for such care. A
PHP is not the only program in which
a Medicare beneficiary is able to receive
needed mental health care. Although
not equivalent to a PHP, Medicare
provides payment for outpatient mental
health services in addition to PHP
services. Many beneficiaries in need of
mental health treatment receive other
outpatient services generally from
hospital programs which are available
nationwide, and no evidence suggests
that there is an increase in adverse
outcomes due to lack of access to care.
Other forms of access to mental health
services remain available. We continue
to believe that it is important to
calculate PHP APC per diem payment
rates based on the data of each type of
provider in order to appropriately pay
for PHP services, which will support
continued access to quality services.
Commenters also requested that we
suspend implementation of the
proposed CY 2013 PHP APC per diem
payment rates for CMHCs, and that we
pay based on the CY 2012 per diem
payment rates to preserve CMHCs. As
discussed above, we cannot establish
payment rates that do not accurately
reflect the current cost data. We believe
that having separate payment rates for
CMHCs and hospital-based providers
based on each providers’ costs as well
as a two-tiered APC per diem payment
rate for both CMHC and hospital-based
PHPs under which we pay one amount
for days with 3 services and another
amount for days with 4 or more services
along with using geometric means to
more accurately reflect the costs
associated with providing OPPS
services supports the PHP benefit and
pays providers appropriately for the
services that they provide. For these
reasons, we are not suspending
implementation of the CY 2013 PHP
APC per diem payment rates for
CMHCs.
Comment: One commenter stated that
the database of claim payments used in
calculating the new payment rates
includes at least two providers indicted
for fraud, and recommended that these
claims be removed.
Response: We strive to ensure that the
claims we use for modeling the OPPS
payment rates contain accurate cost
information on services. In addition, we
note that providers with questionable
data are subject to further investigation.
We request that the commenter provide
us with more details regarding those
providers.
Comment: One commenter suggested
that, instead of calculating the PHP APC

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per diem payment rates using claims
data, CMS should use the quality of the
provided services to base payments,
including record reviews, denials due to
lack of medical necessity or inadequate
documentation, site visits, interviews
with patients, and most importantly
patient outcomes. Another commenter
recommended that CMS establish
quality and outcome criteria to judge
performance that would influence
future ratesetting, and provide rewards
to individual providers for outstanding
quality and outcomes.
Response: Sections 1833(t)(2) and
1833(t)(9) of the Act set forth the
requirements for establishing and
adjusting the OPPS payment rates,
including the PHP payment rates. The
existing policies and procedures
implementing these statutory provisions
do not consider quality measures when
setting base payment rates. However, we
note that section 1833(t)(17) of the Act
implements an outpatient quality
reporting program for subsection (d)
hospitals that applies a payment
reduction for hospitals that fail to meet
the program requirements.
Comment: One commenter requested
that CMS establish a ratesetting task
force to review the CMS ratesetting
methodology and CMHCs’ and hospitalbased PHPs’ costs as a means to identify
fair and adequate payment rates for
both. Another commenter requested an
open discussion with CMS and
associations whose members are PHP
providers.
Response: We maintain positive
working relationships with various
industry leaders representing both
CMHCs and hospital-based PHP
providers with whom we have
consistently met over the years to
discuss industry concerns and ideas.
These relationships have provided
significant and valued input regarding
PHP ratesetting. We also hold Hospital
Outpatient Open Door Forum calls
monthly, in which all individuals are
welcome to participate and/or submit
questions regarding specific issues,
including questions related to PHPs.
Furthermore, we initiate rulemaking
annually, through which we receive
public comments on proposals set forth
in a proposed rule and respond to those
comments in a final rule. All
individuals are provided an opportunity
to comment, and we give consideration
to each comment that we receive.
Given the relationships that we have
established with various industry
leaders and the various means for us to
receive comments and
recommendations, we believe that we
receive adequate input regarding
ratesetting and take that input into

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consideration when establishing the
payment rates. We continue to welcome
any input and information that the
industry is willing to provide.
Comment: A few commenters
addressed issues related to the costs
used to calculate the PHP APC per diem
payment rates. One commenter
expressed concern that CMS’ ratesetting
methodology does not take into
consideration the array of services that
are delivered in PHPs, such as assisting
with appointments regarding social
security and Medicare; housing
searches; primary healthcare; eye and
dental services; working with families;
obtaining prescription medications; and
accessing transportation, food banks and
food stamps.
Two commenters expressed concern
that CMHCs must retain the same level
of licensed staff as hospital-based PHPs,
yet the discrepancy between the
proposed CMHC and hospital-based
PHP per diem payment rates is now
significant. The commenters stated that
because all PHPs must hire
psychiatrists, licensed clinicians,
licensed supervisors, and bachelor-level
case managers, it is difficult to
understand why and how CMS
calculated such different payment rates
for essentially the same services.
Lastly, one commenter further
questioned why a licensed therapist in
a community-based treatment setting
can be paid $110.27 for a 45 to 50
minute individual counseling session,
while a CMHC is expected to deliver up
to 6 hours of care per day including
treatment, food, transportation, among
others, for $111.89 per day (for 4 or
more services).
Response: Section 1861(ff) of the Act
and 42 CFR 410.43 describe the items
and services included in partial
hospitalization services. As set forth in
these sections, partial hospitalization
services generally consist of a variety of
group, individual, and family
psychotherapy sessions, supplemented
with occupational therapy, the services
of social workers, trained psychiatric
nurses, and other staff trained to work
with psychiatric patients, drugs and
biologicals furnished for therapeutic
purposes that cannot be selfadministered, diagnostic services,
education and training, and certain
activity therapies designed to stabilize
an acute episode of mental illness. The
PHP APC per diem payment rate is the
bundled payment for these partial
hospitalization services. Physician
services that meet the requirements of
§ 415.102(a) for payment on a fee
schedule basis, physician assistant
services, nurse practitioner and clinical
nurse specialist services, and qualified

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psychologist services are separately
covered (as are services furnished to
skilled nursing facility residents as
defined in § 411.15(p)) and are not paid
as partial hospitalization services
(§ 410.43(b)). Further, section
1861(ff)(2)(I) of the Act explicitly
excludes meals and transportation from
the items and services included in
partial hospitalization services.
Regarding the concern about the
discrepancy between the proposed
CMHC and hospital-based PHP per diem
payment rates, as discussed above, we
believe that it is important to calculate
PHP APC per diem payment rates based
on the data for each type of provider in
order to appropriately pay for services.
We base the PHP APC per diem
payment rates on claims and cost
reports submitted by providers. The
resulting PHP APC per diem payment
rates reflect the cost of what providers
expend to maintain such programs.
In response to the commenter who
questioned why the payment to a CMHC
for a full day of mental health treatment
is about the same as the amount a
therapist is paid for one individual
counseling session, we believe the
commenter is comparing the
professional fee the therapist is paid
under the MPFS for providing a therapy
service ($110.27, according to the
commenter) to the proposed Level II
APC per diem payment rate to a CMHC
under the OPPS for CY 2013 ($111.89).
We believe that this is not an
appropriate comparison because these
payments are for completely different
services. It is important to note that
CMHCs receive the per diem amount
per person per day. Thus, assuming the
PHP has 10 patients, the facility is
receiving over $1,000 for the day. That
amount, which is intended to cover the
facility’s per diem cost for a day of PHP,
includes the cost of staff who are not
authorized to bill Medicare Part B as
discussed above. Again, we base the
PHP APC per diem payment rates on
claims and cost reports submitted by
providers. Thus, resulting PHP APC per
diem payment rates reflect the cost of
what providers expend to maintain such
programs.
In summary, after consideration of the
public comments we received, we are
finalizing our CY 2013 proposal,
without modification, to update the four
PHP APC per diem payment rates based
on geometric mean cost levels
calculated using the most recent claims
data for each provider type. The
updated PHP APCs geometric mean per
diem costs for PHP services that we are
finalizing for CY 2013 are shown in
Tables 39 and 40 below. We will
continue our efforts to explore payment

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reforms that will support quality and
result in greater payment accuracy and

reduction of fraud and abuse within the
partial hospitalization program.

C. Coding Changes
CPT codes are established by the
AMA and the Level II HCPCS codes are
established by the CMS HCPCS
Workgroup. CPT and Level II HCPCS
codes are used to report procedures,
services, and items and supplies under
the hospital OPPS. These codes are
updated and changed throughout the
year.
Subsequent to the publication of the
CY 2013 OPPS/ASC proposed rule, the
AMA’s CPT Editorial Panel deleted 28
psychiatric CPT codes, including those
related to PHP services, and replaced
them with 12 new CPT codes, effective
January 1, 2013. For a detailed
explanation of the OPPS treatment of
new, deleted or revised CPT and Level
II HCPCS codes we refer readers to
section III.A. of this final rule with
comment period. As a result of the
AMA’s CPT coding changes to the
psychiatric CPT codes, we are making
corresponding changes to the PHP code
set that is used for billing and
documenting PHP services. Specifically,
we are making the following changes:
• The initial E/M codes are being
separated based on whether the service
was completed by a physician (CPT
code 90792 (Initial evaluation with
medical services done by a physician)),

or a nonphysician (CPT code 90791
(Initial evaluation done by a nonphysician)). Currently, for PHPs, E/M
services are billed under: CPT codes
90801 (Psychiatric diagnostic interview
examination) and 90802 (Interactive
psychiatric diagnostic interview).
Effective January 1, 2013, CPT codes
90801 and 90802 will be deleted and the
E/M services will be billed using the
following CPT codes: CPT code 90791
(Psychiatric diagnostic evaluation (no
medical services) when completed by a
non-physician) and CPT code 90792
(Psychiatric diagnostic evaluation (with
medical services) when completed by a
physician).
• The psychotherapy codes will no
longer be for a range of time, but for a
specific period of time. The following
CPT codes that are currently used to bill
for and document PHP individual
psychotherapies will be deleted in CY
2013: CPT code 90816 (Psytx hosp 20–
30 min); CPT code 90817 (Psytx hosp
20–30 min w/e&m); CPT code 90818
(Psytx hosp 45–50 min); CPT code
90819 (Psytx hosp 45–50 min w/e&m);
CPT code 90821 (Psytx hosp 75–80
min); CPT code 90822 (Psytx hosp 75–
80 min w/e&m); CPT code 90823 (Intac
psytx hosp 20–30 min); CPT code 90824
(Intac psytx hsp 20–30 w/e&m); CPT

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code 90826 (Intac psytx hosp 45–50
min); CPT code 90827 (Intac psytx hsp
45–50 w/e&m); CPT code 90828 (Intac
psytx hosp 75–80 min); and CPT code
90829 (Intac psytx hsp 75–80 w/e&m).
These codes will be replaced with the
following new psychotherapy CPT
codes: CPT codes 90832
(Psychotherapy, 30 minutes); CPT codes
90834 (Psychotherapy, 45 minutes); and
CPT codes 90837 (Psychotherapy, 60
minutes). If the time spent for
psychotherapy is more than half the
time of the code, then that code can be
used to bill for PHP services. For
example, if the time spent for
psychotherapy is 16 minutes up to 37
minutes, CPT code 90832
(Psychotherapy, 30 minutes) would be
used. For psychotherapy lasting 38 to 52
minutes, CPT code 90834
(Psychotherapy, 45 minutes) would be
used, and for psychotherapy lasting 53
minutes or more, CPT code 90837
(Psychotherapy, 60 minutes) would be
used. When psychotherapy is provided
during the same encounter as an E/M
service, there will be timed add-on CPT
codes for psychotherapy that are to be
used by psychiatrists to indicate that
psychotherapy was provided during the
same encounter as an E/M service.
When E/M services are completed with

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psychotherapy, the following CPT codes
may be used effective January 1, 2013:
Appropriate E/M code (not selected on
basis of time) and CPT code +90833 (30minute psychotherapy add-on code);
Appropriate E/M code (not selected on

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basis of time) and CPT code +90836 (45minute psychotherapy add-on code);
and Appropriate E/M code (not selected
on basis of time) and CPT code +90838
(60-minute psychotherapy add-on code).
The following table provides a list of the

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68413

PHP-related individual psychotherapy
CPT codes that will be deleted
December 31, 2012.
BILLING CODE 4120–01–P

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TABLE 41.-INDIVIDUAL PSYCHOTHERAPY CPT CODES THAT
WILL BE DELETED DECEMBER 31,2012

90816

90817

90818

90819

90821

90822

90823

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90824

90826

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Long Descriptor
Individual psychotherapy, insight oriented, behavior modifying and/or
supportive, in an inpatient hospital, partial hospital or residential care
setting, approximately 20 to 30 minutes face-to-face with the patient
Individual psychotherapy, insight oriented, behavior modifying and/or
supportive, in an inpatient hospital, partial hospital or residential care
setting, approximately 20 to 30 minutes face-to-face with the patient;
with medical evaluation and management services
Individual psychotherapy, insight oriented, behavior modifying and/or
supportive, in an inpatient hospital, partial hospital or residential care
setting, approximately 45 to 50 minutes face-to-face with the patient
Individual psychotherapy, insight oriented, behavior modifying and/or
supportive, in an inpatient hospital, partial hospital or residential care
setting, approximately 45 to 50 minutes face-to-face with the patient;
with medical evaluation and management services
Individual psychotherapy, insight oriented, behavior modifying and/or
supportive, in an inpatient hospital, partial hospital or residential care
setting, approximately 75 to 80 minutes face-to-face with the patient
Individual psychotherapy, insight oriented, behavior modifying and/or
supportive, in an inpatient hospital, partial hospital or residential care
setting, approximately 75 to 80 minutes face-to-face with the patient;
with medical evaluation and management services
Individual psychotherapy, interactive, using play equipment, physical
devices, language interpreter, or other mechanisms of non-verbal
communication, in an inpatient hospital, partial hospital or residential
care setting, approximately 20 to 30 minutes face-to-face with the
patient
Individual psychotherapy, interactive, using play equipment, physical
devices, language interpreter, or other mechanisms of non-verbal
communication, in an inpatient hospital, partial hospital or residential
care setting, approximately 20 to 30 minutes face-to-face with the
patient; with medical evaluation and management services
Individual psychotherapy, interactive, using play equipment, physical
devices, language interpreter, or other mechanisms of non-verbal
communication, in an inpatient hospital, partial hospital or residential
care setting, approximately 45 to 50 minutes face-to-face with the
patient

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CPT Code

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CPT code is used. Documentation must
clearly indicate exactly what the
complexity was.
Beginning on January 1, 2013,
interactive psychotherapy should be
billed using the psychiatric evaluation
codes, the psychotherapy and
psychotherapy add-on CPT codes, and
the group (nonfamily) psychotherapy
CPT code +90785 (Interactive
psychotherapy).
Relevant coding requirements must be
followed. We recommend learning how
to accurately bill for and document
these new codes. More information may
be found on the CPT/AMA Web site:
http://www.ama-assn.org/ama/pub/

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physician-resources/solutionsmanaging-your-practice/coding-billinginsurance/cpt.page.
All other PHP CPT and HCPCS codes
will remain unchanged and active for
billing and documentation of PHP
services. We refer readers to the table
below that highlights which PHP CPT/
HCPCS codes are changing and which
PHP CPT/HCPCS codes will remain
unchanged and active for billing and
documentation of services.
The following Table 42 provides a
crosswalk between the CPT/HCPCS
code options in CY 2012 and the CPT/
HCPCS code options that are effective
on January 1, 2013.

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• Instead of separate codes for
interactive psychotherapy, there is now
an add-on CPT code for interactive
complexity, which may be used when
the patient encounter is more complex
because of the need to involve people
other than the patient (CPT code
+90785). This add-on CPT code can be
used with initial evaluation codes, with
the psychotherapy codes, with the
nonfamily group psychotherapy code,
and with the E/M codes when they are
used in conjunction with psychotherapy
services. The CPT manual includes
specific guidelines as to what
constitutes interactive complexity that
should be understood before this add-on

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TABLE 42.-CROSSWALK OF DELETED AND NEW PHP CPT AND HCPCS
BILLABLE CODES FOR 2013
CURRENT CPT/HCPCS CODE

90802 (Intac psychiatric diagnostic
interview)
90816 (Psytx hosp 20-30 min)
90817 ( Psytx hosp 20-30 min w/e&m)

90818 (Psytx hosp 45-50 min)
90819 (Psytx hosp 45-50 min w/e&m)

90821 (Psytx hosp 75-80 min)
90822 (Psytx hosp 75-80 min w/e&m)

90823 (Intac psytx hosp 20-30 min)

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90824 (Intac psytx hsp 20-30 w/e&m)

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90791 (psychiatric diagnostic evaluation
(no medical services)
90792 (psychiatric diagnostic evaluation
with medical services)
90791 or 90792, with
+90785 (interactive complexity add-on
code)
90832 psychotherapy, 30 min. (with
patient and/or family)
Appropriate inpatient ElM code (not
selected on basis of time), and
+90833, 30-minute psychotherapy add-on
code (with patient and/or family)
90834 psychotherapy, 45 min. (with
patient and/or family)
Appropriate inpatient ElM code (not
selected on basis of time), and
+90836, 45-minute psychotherapy add-on
code (with patient and/or family)
90837 psychotherapy, 60 min. (with
patient and/or family)
Appropriate inpatient ElM code (not
selected on basis of time), and
+90838, 60-minute psychotherapy add-on
code (with patient and/or family)
90832, psychotherapy, 30 min.
+90785, interactive complexity add-on
code (with patient and/or family)
Appropriate inpatient ElM code (not
selected on basis of time), and
+90833, 30-minute psychotherapy add-on
code, and
+90785, interactive complexity add-on
code (with patient and/or family)

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90801 (Psychiatric diagnostic interview)

NEW CPT/HCPCS CODE

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CURRENT CPT/HCPCS CODE

90827 (lntac psytx hsp 45-50 w/e&m)

90828 (lntac psytx hosp 75-80 min)

90829 (lntac psytx hsp 75-80 w/e&m)

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90845 (Psychoanalysis)
90846 (Family psytx w/o patient)
90847 (Family psytx w/patient)
90865 (Narcosynthesis)
90880 (Hypnotherapy)
96101 (Psycho testing by psych/phys)
96102 (Psycho testing by technician)
96103 (Psycho testing admin by comp)
96116 (Neurobehavioral status exam)
96118 (Neuropsych tst by psych/phys)
96119 (Neuropsych testing by tec)
96120 (Neuropsych tst admin w/comp)
G0129 (Partial hosp prog service)
G0176 (OPPS/PHP;activity therapy)
G0177 (OPPS/PHP; train & educ serv)
G0410 (Grp psych partial hosp 45-50)
G0411 (Inter active grp psych parti)
The following Table 43 shows all of
the billable PHP revenue and CPT/
HCPCS codes effective on January 1,
2013. This table is also located in the

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NEW CPT/HCPCS CODE

90834, psychotherapy, 45 min.
+90785, interactive complexity add-on
code (with patient and/or family)
Appropriate inpatient ElM code (not
selected on basis of time), and
+90836, 45-minute psychotherapy add-on
code, and
+90785, interactive complexity add-on
code (with patient and/or family)
90837, psychotherapy, 60 min.
+90785, interactive complexity add-on
code (with patient and/or family)
Appropriate inpatient ElM code (not
selected on basis of time), and
+90838, 60-minute psychotherapy add-on
code, and
+90785, interactive complexity add-on
code (with patient and/or family)
RetainedIN0 changes
RetainedIN 0 changes
RetainedIN0 changes
RetainedIN0 changes
RetainedINo changes
RetainedINo changes
RetainedINo changes
RetainedIN 0 changes
RetainedIN 0 changes
RetainedINo changes
RetainedINo changes
RetainedINo changes
RetainedINo changes
RetainedINo changes
RetainedINo changes
RetainedINo changes
RetainedINo changes

Medicare Claims Processing Manual,
Pub. 100–04, Chapter 4, Section 260.1,
which is available on the CMS Web site
at: http://www.cms.gov/Regulations-

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and-Guidance/Guidance/Manuals/
Downloads/clm104c04.pdf.

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90826 (lntac psytx hosp 45-50 min)

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D. Separate Threshold for Outlier
Payments to CMHCs
In the CY 2004 OPPS final rule with
comment period (68 FR 63469 through
63470), we indicated that, given the
difference in charges for PHP services
provided between hospitals and
CMHCs, we did not believe it was
appropriate to make outlier payments to
CMHCs using the outlier percentage
target amount and threshold established
for hospitals. Prior to that time, there
was a significant difference in the
amount of outlier payments made to
hospitals and CMHCs for PHP services.
Therefore, we designated a portion of
the estimated OPPS outlier target
amount specifically for CMHCs,
consistent with the percentage of
projected payments to CMHCs under the
OPPS each year, excluding outlier
payments. In addition, further analysis
indicated that using the same OPPS
outlier threshold for both hospitals and
CMHCs did not limit outlier payments
to high-cost cases and resulted in
excessive outlier payments to CMHCs.
Therefore, beginning in CY 2004, we
established a separate outlier threshold
for CMHCs. The separate outlier
threshold for CMHCs has resulted in
more commensurate outlier payments.
The separate outlier threshold for
CMHCs resulted in $1.8 million in
outlier payments to CMHCs in CY 2004,
and $0.5 million in outlier payments to
CMHCs in CY 2005. In contrast, in CY
2003, more than $30 million was paid
to CMHCs in outlier payments. We
believe this difference in outlier
payments indicates that the separate
outlier threshold for CMHCs has been
successful in keeping outlier payments

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to CMHCs in line with the percentage of
OPPS payments made to CMHCs.
We proposed in the CY 2013 OPPS/
ASC proposed rule (77 FR 45153) to
continue our policy of identifying 1.0
percent of the aggregate total payments
under the OPPS for outlier payments for
CY 2013. We proposed that a portion of
that 1.0 percent, an amount equal to
0.12 percent of outlier payments (or
0.0012 percent of total OPPS payments)
would be allocated to CMHCs for PHP
outlier payments. In section II.G. of the
CY 2013 OPPS/ASC proposed rule, for
the hospital outpatient outlier payment
policy, we proposed to set a dollar
threshold in addition to an APC
multiplier threshold (77 FR 45110
through 45111). Because the PHP APCs
are the only APCs for which CMHCs
may receive payment under the OPPS,
we would not expect to redirect outlier
payments by imposing a dollar
threshold. Therefore, we did not
propose to set a dollar threshold for
CMHC outlier payments. We proposed
to set the outlier threshold for CMHCs
for CY 2013 at 3.40 times the APC
payment amount and the CY 2013
outlier payment percentage applicable
to costs in excess of the threshold at 50
percent. Specifically, we proposed to
establish that if a CMHC’s cost for
partial hospitalization services, paid
under either APC 0172 or APC 0173,
exceeds 3.40 times the payment rate for
APC 0173, the outlier payment will be
calculated as 50 percent of the amount
by which the cost exceeds 3.40 times
the APC 0173 payment rate. We invited
public comments on these proposals.
We did not receive any public
comments regarding our proposed
outlier policy. Therefore, we are
finalizing our CY 2013 proposal to set

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a separate outlier threshold for CMHCs.
As discussed in section II.G. of this final
rule with comment period, using more
recent data for this final rule with
comment period, we set the target for
hospital outpatient outlier payments at
1.00 percent of total estimated OPPS
payments. We allocated a portion of that
1.00 percent, an amount equal to 0.12
percent of outlier payments or 0.0012
percent of total estimated OPPS
payments to CMHCs for PHP outlier
payments. For CY 2013, as proposed, we
are setting the outlier threshold at 3.40
multiplied by the APC payment amount
and the CY 2013 outlier percentage
applicable to costs in excess of the
threshold at 50 percent.
IX. Procedures That Would Be Paid
Only as Inpatient Procedures
A. Background
We refer readers to the CY 2012 final
rule with comment period (76 FR 74352
through 74353) for a full historical
discussion of our longstanding policies
on how we identify procedures that are
typically provided only in an inpatient
setting (referred to as the inpatient list)
and, therefore, will not be paid by
Medicare under the OPPS; and on the
criteria that we use to review the
inpatient list each year to determine
whether or not any procedures should
be removed from the list.
B. Changes to the Inpatient List
In the CY 2013 OPPS/ASAC proposed
rule (77 FR 45153), for CY 2013, we
proposed to use the same methodology
(described in the November 15, 2004
final rule with comment period (69 FR
65835)) of reviewing the current list of
procedures on the inpatient list to

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identify any procedures that are being
performed a significant amount of the
time on an outpatient basis, and
appropriately may be removed from the
list. The established criteria upon which
we make such a determination are as
follows:
1. Most outpatient departments are
equipped to provide the services to the
Medicare population.
2. The simplest procedure described
by the code may be performed in most
outpatient departments.
3. The procedure is related to codes
that we have already removed from the
inpatient list.
4. A determination is made that the
procedure is being performed in
numerous hospitals on an outpatient
basis.
5. A determination is made that the
procedure can be appropriately and
safely performed in an ASC, and is on
the list of approved ASC procedures or
has been proposed by us for addition to
the ASC list.
Using this methodology, we identified
two procedures that potentially could be
removed from the inpatient list for CY
2013: CPT code 22856 (Total disc
arthroplasty (artificial disc), anterior
approach, including discectomy with
end plate preparation (includes
osteophytectomy for nerve root or spinal
cord decompression and
microdissection), single interspace,
cervical); and CPT code 27447
(Arthroplasty, knee, condyle and
plateau; medical and lateral
compartments with or without patella
resurfacing (total knee arthroplasty)).
We then reviewed the clinical
characteristics and related evidence for
these two potential procedures for
possible removal from the inpatient list
and found them to be appropriate
candidates for removal from the
inpatient list. For CY 2013, we proposed
to remove the procedures described by
CPT codes 22856 and 27447 from the
inpatient list because we believe that
the procedures may be appropriately
provided as hospital outpatient
procedures for some Medicare
beneficiaries, based upon the evaluation
criteria mentioned above and should
thus be paid under the OPPS.
The two procedures that we proposed
to remove from the inpatient list for CY
2013 and their CPT codes, long
descriptors, proposed APC assignments,
and proposed status indictors were
displayed in Table 34 of the proposed
rule.
Comment: A few commenters
supported CMS’ proposal to remove
CPT code 27447 (Total knee
arthroplasty) from the list of inpatient
procedures, and asserted that this

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procedure may be appropriately
provided on an outpatient basis for
some Medicare beneficiaries, given
thorough preoperative screening by
medical teams with significant
experience and expertise involving knee
replacement procedures. The
commenters referenced a study
presented at the American Academy of
Orthopedic Surgeons 2009 annual
meeting, which noted recent advances
in total knee replacement procedures,
including improved perioperative
anesthesia, and expedited rehabilitation
protocols, as well as significant
enhancements to the postoperative
process, such as improvements in pain
management, early mobilization, careful
monitoring, and that early preventive
intervention for the most common
medical complications have decreased
the average length of hospital stays to
the point that total knee arthroplasty
can now be performed on an outpatient
basis in certain cases. The commenters
noted significant success involving
same day discharge for patients who
met the screening criteria and whose
experienced medical teams were able to
perform the procedure early enough in
the day for the patients to achieve
postoperative goals, allowing home
discharge by the end of the day. The
commenters remarked that the benefits
of providing total knee arthroplasty on
an outpatient basis will lead to
significant enhancements in patient
well-being and cost savings to the
Medicare program, including shorter
hospital stays resulting in fewer medical
complications, improved results, and
enhanced patient satisfaction.
A few commenters urged CMS to
group total knee arthroplasty into a new
APC with unicompartmental knee
replacement or to group these two
procedures with other clinically similar
orthopedic implant procedures from
APC 0425 to create a more clinically
homogenous APC for resource-intensive
arthroplasty, if CMS finalized its
proposal to remove total knee
arthroplasty from the inpatient list. One
commenter requested CMS to assign
CPT code 27447 a status indicator of
‘‘S.’’
The majority of commenters asked
that CMS retract its proposal to remove
CPT code 27447 from the inpatient list.
Commenters argued that CPT code
27447 is not being performed in
numerous hospitals on an outpatient
basis and noted that the published
average length of stay for this procedure
is over 3 days, with a recommended best
practice target of 3 days when no
complications exist. Commenters stated
that removing CPT code 27447 from the
inpatient list will create a dangerous

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situation for Medicare beneficiaries,
who are older and more medically
complex patients, as there are serious
potential adverse effects, including
inadequate pain management, unsafe
ambulation, and risk for falls.
Commenters also noted that patients
undergoing total knee replacement often
have several comorbidities and
increased risks, such as death, loss of a
limb, nerve damage resulting from
neurovascular injury, myocardial
infarction (MI), pulmonary embolism
(PE), deep vein thrombosis (DVT), and
infection and loss of mobility, as well as
anaphylaxis, obstructive sleep apnea,
and aspiration of stomach contents into
the lungs. Several commenters stated
that many patients will require some
type of sub acute rehabilitation, which
could include a SNF, and if these
patients are not admitted, they will not
meet their qualifying 3-day inpatient
stay and will not be eligible for SNF
care, which likely will lead to poor
outcomes postoperatively. Some
commenters stated that Medicare
patients require greater than 24 hours of
inpatient hospital care following total
knee replacement procedures for
clinical reasons, including anesthesia
recovery, physical therapy, blood loss
monitoring, and pain control, which
often includes intravenous pain
medications for 24 to 48 hours following
the procedure, and the outpatient
setting cannot handle the high acuity for
the extended postoperative care that this
type of patient requires. Other
commenters stated that they do not
believe that the clinical characteristics
of CPT code 27447 justify its selection
as an appropriate candidate for removal
from the inpatient list.
Commenters pointed out that, while
Medicare’s definition of outpatient
surgery specified that it includes the
care provided during the normal
recovery period, which is defined as
less than 24 hours, the length of stay for
total knee arthroplasty patients is
markedly longer than 24 hours for
outpatient surgery recovery. In addition,
the commenters noted that, according to
the Medicare Claims Processing Manual,
Chapter 4, section 180.7, ‘‘ ‘Inpatient
only’ services are generally, but not
always, surgical services that require
inpatient care because of the nature of
the procedure, the typical underlying
physical condition of patients who
require the service, or the need for at
least 24 hours of postoperative recovery
time or monitoring before the patient
can be safely discharged.’’ Several
commenters cited the lack of any
evidence-based publications supporting
outpatient total knee arthroplasty in

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patients over the age of 65 and asserted
that patients having total knee
replacement surgery as outpatients were
significantly more likely to die or need
readmission within 90 days, compared
with inpatients remaining in the
hospital for 3 to 4 days, according to a
study presented at the February 2012
American Association of Orthopedic
Surgery meeting. Commenters also
noted, according to the same study, the
rates of subsequent revision surgery
were nearly doubled in patients having
1-day hospital stays compared with the
3- to- 4-day standard.
Commenters further noted that
performing total knee arthroplasty in the
outpatient setting may impact the types
of rehabilitation services available to
patients upon completion of the surgery,
and may make justifying the medical
necessity of inpatient rehabilitation
more difficult. Furthermore,
commenters expressed concern that
commercial carriers will change total
knee arthroplasty to an outpatient
procedure, thereby making it more
difficult to get such a procedure
authorized.
Commenters also stated that all
hospitals do not have the robotics
available for less invasive surgical
technique and only a few centers across
the country are routinely doing knee
replacement as outpatients, and even
those hospitals are doing them on
specific patient types. One commenter
remarked that, while outpatient joint
replacements are possible in hospitals
in major cities with large resources and
an educated skilled support staff, it

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would be dangerous to the patient to
perform outpatient total knee
arthroplasties in small rural
communities, as there are limited
nurses, therapists, and other support
staff in many communities across the
country.
Some commenters expressed concern
about the effects of CMS’ proposed
removal of CPT 27447 on participants in
the CMS Innovation Center’s (CMMI’s)
Bundled Payments for Care
Improvement (BPCI) initiative.
Response: We appreciate all of the
public comments we received on the
removal of CPT code 27447 from the
inpatient list. In light of all of these
public comments, for CY 2013, we have
decided not to remove CPT code 27447
from the inpatient list as we proposed.
Based on the public comments, we have
concerns regarding whether this
procedure may be appropriately
provided as a hospital outpatient
procedure for some Medicare
beneficiaries based upon the evaluation
criteria above.
Comment: The majority of
commenters supported CMS’ proposal
to provide payment for CPT code 22856
in the hospital outpatient setting, but
recommended assigning CPT code
22856, as well as CPT codes 22551 and
22554, to APC 0052 (Level IV
Musculoskeletal Procedures Except
Hand and Foot), APC 0425 (Level II
Arthroplasty or Implantation of
Prosthesis), or a newly created APCs in
order to appropriately compensate
hospitals for their costs associated with
this procedure. One commenter

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believed that CPT code 22856, for
patient safety reasons, should remain on
the inpatient list.
Response: We appreciate commenters’
support of our proposal to provide
payment for CPT code 22856 in the
hospital outpatient setting. We believe
that this procedure may be
appropriately provided as a hospital
outpatient procedure for some Medicare
beneficiaries based upon the evaluation
criteria above. However, we do not agree
with the commenters’ recommendation
to assign CPT code 22856, as well as
CPT codes 22551 and 22554, to APC
0052, 0425, or a newly created APC. We
believe that CPT code 22856, as well as
CPT codes 22551 and 22554, are
appropriately placed in APC 0208.
Comment: Several commenters
requested that CMS remove 39
additional CPT codes from the CY 2012
inpatient list based on their own
experience, specialty society
recommendation, or designation of a
procedure as safe in the outpatient
setting under one of the many clinical
guidelines available.
Response: We reevaluated data on the
39 additional CPT codes requested by
the commenters, using more recent
utilization data and further clinical
review by CMS medical advisors. These
codes are listed in Table 44 below. As
a result of the reevaluation, we remain
convinced that these procedures can be
safely performed only in the inpatient
setting.
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TABLE 44.-ADDITIONAL PROCEDURES REQUESTED BY COMMENTERS
TO BE REMOVED FROM THE INPATIENT ONLY LIST FOR CY 2013

0075T
20661
20664

20936

20937

20938

21141
21196
22114

22552

22558

22585

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CY 2013
Status
Indicator

Long Descriptor
Transcatheter placement of extracranial vertebral or intrathoracic
carotid artery stent(s), including radiologic supervision and
interpretation, percutaneous; initial vessel
Application of halo, including removal; cranial
Application of halo, including removal, cranial, 6 or more pins
placed, for thin skull osteology (eg, pediatric patients,
hydrocephalus, osteogenesis imperfecta), requiring general
anesthesia
Autograft for spine surgery only (includes harvesting the graft);
local (eg, ribs, spinous process, or laminar fragments) obtained
from same incision (List separately in addition to code for
primary procedure)
Autograft for spine surgery only (including harvesting the graft);
morselized (through separate skin or fascial incision) (list
separately in addition to code for primary procedure)
Autograft for spine surgery only (including harvesting the graft);
structural, bicortical or tricortical (through separate skin or
fascial incision) (list separately in addition to code for primary
procedure)
Reconstruction midface, LeFort I; single piece, segment
movement in any direction, without bonegraft
Reconstruction of mandibular rami & body with sag split & int
fix
Partial excision of vertebral body, for intrinsic bony lesion,
without decompression of spinal cord or nerve root( s), single
vertebral segment; lumbar
Arthrodesis, anterior interbody, including disc space preparation,
discectomy, osteophytectomy and decompression of spinal cord
and/or nerve roots; cervical below C2, each additional interspace
(List separately in addition to code for separate procedure).
Arthrodesis, anterior interbody technique, including minimal
discectomy to prepare interspace (other than for decompression);
lumbar.
Arthrodesis, anterior interbody technique, including minimal
discectomy to prepare interspace (other than for decompression);
each additional interspace (List separately in addition to code for
primary procedure
Anterior instrumentation; 2 to 3 vertebral segments (list
separately in addition to code for primary procedure)

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C
C
C

C

C

C

C
C
C

C

C

C

C

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Code

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HCPCS
Code
22862

22840

23472
35221
35372
35721
35800
37182
37617
38562
43840
44300
44314
44345
44346
44602
49010
49255
51840
54411
54417

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Status
Indicator

Long Descriptor
Revision including replacement of total disc arthroplasty
(artificial disc), anterior approach, single interspace; lumbar
Posterior nonsegmental instrumentation (eg, Harrington rod
technique, pedicle fixation across I interspace, atlantoaxial
trans articular screw fixation, sublaminar wiring at C 1, facet
screw fixation) (List separately in addition to code for primary
procedure)
Arthroplasty, glenohumeral joint total shoulder (glenoid and
proximal humeral replacement)
Repair blood vessel, direct; intra-abdominal
Thromboendarterectomy, including patch graft, if performed;
deep (profunda) femoral
Exploration (not followed by surgical repair), with or without
lysis of artery; femoral artery
Exploration for post op hemorrhage, thrombosis or infection;
neck
TIPS procedure
Ligation, major artery; abdomen
Limited lymphadenectomy for staging (separate procedure);
pelvic and para-aortic
Gastrorrhaphy, suture of perforated duodenal or gastric ulcer,
wound, or injury
Open jejunostomy following a diagnostic laparoscopy
Revision of ileostomy; complicated (reconstruction indepth)
(separate procedure)
Revision of colostomy; complicated (reconstruction indepth)
(separate procedure)
Revision of colostomy; with repair of paracolostomy hernia
(separate procedure)
Suture of small intestine accidental laceration
Exploration, retroperitoneal area with or without biopsy( s)
(separate procedure)
Omentectomy, epiploectomy, resection of omentum
Anterior vesicourethropexy , or urethropexy (eg, MarshallMarchetti-Krantz, Burch); simple
Removal and replacement of a multi-component inflatable penile
prosthesis through an infected field at the same operative session
Removal and replacement of a non-inflatable (semi-rigid) or
inflatable (self-contained) penile prosthesis through an infected
field at the same operative session
Vulvectomy, radical, partial;
Transcatheter permanent occlusion or embolization,
percutaneous, any method; central nervous system

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C

C

C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C

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Comment: Some commenters
requested that CMS add CPT codes
44206 (Laparoscopy, surgical;
colectomy, partial, with end colostomy
and closure of distal segment (Hartmann
type procedure)), 44207 (Laparoscopy,
surgical; colectomy, partial, with
anastomosis, with coloproctostomy (low
pelvic anastomosis)), 44208
(Laparoscopy, surgical; colectomy,
partial, with anastomosis, with
coloproctostomy (low pelvic
anastomosis) with colostomy), and
44213 (Laparoscopy, surgical,
mobilization (take-down) of splenic
flexure performed in conjunction with
partial colectomy (List separately in
addition to primary procedure)) to the
inpatient list.
Response: We note that CPT codes
44206, 44207, 44208, and 44213 have
been payable in the outpatient setting
for a number of years without
significant concern raised by the public.
Therefore, we find no reason to reassign
CPT codes 44206, 44207, 44208, and
44213 to the inpatient list at this time.
Comment: A number of commenters
requested that the inpatient list be
eliminated in its entirety, and if the
inpatient list cannot be eliminated in its
entirety, an appeals process be
developed. Commenters also requested
that the inpatient list be reviewed
clinically. In addition, commenters
expressed concern about the way
Recovery Audit Contractors (RACs)
target procedures removed from the
inpatient list and encouraged CMS to
provide a period to allow hospitals to
make the appropriate adjustments
without being at risk of an audit. The
commenters urged CMS to provide, in
both regulatory language and
transmittals, that procedures with APC

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payment rates can be performed,
covered, and paid by Medicare on an
inpatient basis when medical necessity
is documented and the physician has
ordered inpatient status.
Response: We appreciate these
comments and thoughtful suggestions.
We continue to believe that the
inpatient list is a valuable tool for
ensuring that the OPPS only pays for
services that can safely and
appropriately be performed in the
hospital outpatient setting, and we will
not eliminate the inpatient only list at
this time. We do not plan to adopt a
specific appeals process for claims
related to inpatient procedures
performed in the HOPD in light of the
added administrative burden, and the
existing processes established for a
beneficiary or a provider to appeal a
specific claim remain in effect. We are
committed to clinically reviewing the
inpatient list timely to reflect changes in
medical practice, and we plan to
continue our current practice of
reviewing procedures for removal from
the inpatient list through the formal
notice-and-comment rulemaking
process. The inpatient list is made
available to the public through the
OPPS/ASC final rule with comment
period at least 60 days prior to its
effective date of January 1 of the
upcoming year. We believe that the 60
days between the release of the OPPS/
ASC final rule with comment period
and the effective date of January 1 of the
upcoming year provide sufficient time
for hospitals to make the appropriate
adjustments to reflect the upcoming
year’s inpatient list. As we have stated
in Section 180.7 of Chapter 4 of the
Medicare Claims Processing Manual,
procedures removed from the inpatient

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list may be appropriately furnished in
either the inpatient or outpatient
settings and such procedures continue
to be payable when furnished in the
inpatient setting.
Comment: One commenter who
responded to the CY 2012 OPPS/ASC
final rule with comment period
supported CMS’ decision to assign a
status indicator of ‘‘C’’ to Category III
codes 0293T (Insertion of left atrial
hemodynamic monitor; complete
system, includes implanted
communication module and pressure
sensor lead in left atrium including
transseptal access, radiological
supervision and interpretation, and
associated injection procedures, when
performed) and 0294T (Insertion of left
atrial hemodynamic monitor; pressure
sensor lead at time of insertion of pacing
cardioverter-defibrillator pulse
generator including radiological
supervision and interpretation and
associated injection procedures, when
performed (list separately in addition to
primary procedure)).
Response: We appreciate the
commenter’s support.
At its August 27–28, 2012 meeting,
the Panel recommended that CMS
remove HCPCS code 22856 from the list
of inpatient procedures. We are
accepting this recommendation.
After consideration of the public
comments we received, we are
modifying our proposal and only
removing CPT code 22856 from the CY
2013 inpatient list. CPT code 27447 will
remain on the inpatient list for CY 2013.
The procedure that we are removing
from the inpatient list for CY 2013 and
its CPT code, long descriptor, APC
assignment, and status indictor are
displayed in Table 45 below.

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The complete list of codes to be paid
by Medicare in CY 2013 only as
inpatient procedures is included as
Addendum E to this final rule with
comment period (which is available via
the Internet on the CMS Web site).

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X. Policies for the Supervision of
Outpatient Services in Hospitals and
CAHs
A. Conditions of Payment for Physical
Therapy, Speech-Language Pathology,
and Occupational Therapy Services in
Hospitals and CAHs
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74360
through 74371), we clarified that
hospital outpatient therapeutic services
and supplies, including those described
by benefit categories other than the
hospital outpatient ‘‘incident to’’
category under section 1861(s)(2)(B) of
the Act, are subject to the conditions of
payment in 42 CFR 410.27 when they
are paid under the OPPS or paid to
CAHs under section 1834(g) of the Act.
We issued this clarification in response
to inquiries regarding the application of
these conditions of payment to radiation
therapy services that are described
under section 1861(s)(4) of the Act
when these services are furnished to
hospital outpatients.
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74369), in
our response to public comments on the
CY 2012 OPPS/ASC proposed rule, we
indicated that the supervision and other
requirements of § 410.27 do not apply to
professional services or to services that
are paid under other fee schedules such
as the Clinical Laboratory Fee Schedule
(CLFS). After the publication of the CY
2012 OPPS/ASC final rule with
comment period, we continued to
receive questions about the applicability
of the regulations to physical therapy
(PT), speech-language pathology (SLP),
and occupational therapy (OT) services
furnished in CAHs. Several stakeholders

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expressed concern that the rules could
be applied differently in CAHs than in
OPPS hospitals. The stakeholders were
concerned that OPPS hospitals, which
are paid for outpatient therapy services
at the applicable amount based on the
Medicare Physician Fee Schedule
(MPFS), would not be subject to the
regulations, but that CAHs, which are
paid for outpatient therapy services on
a reasonable cost basis, would be subject
to them.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45154), we clarified that it
was not our intent in the CY 2012
OPPS/ASC final rule with comment
period to establish different
requirements for CAHs and for OPPS
hospitals for the same services. We
clarified that the limited set of PT/SLP/
OT services that are paid under the
OPPS are subject to the supervision
requirements in § 410.27, whether they
are furnished in OPPS hospitals or
CAHs. The PT/SLP/OT services that are
not paid under the OPPS and are paid
instead at the applicable amount based
on the MPFS are not subject to the
supervision requirements in § 410.27,
whether they are furnished in OPPS
hospitals or in CAHs.
Comment: Commenters expressed
appreciation and support for the
clarification in the proposed rule. One
commenter requested that CMS rescind
the requirement of direct supervision for
all PT/SLP/OT services, regardless of
whether they are furnished as therapy
services and paid at the applicable
amount under the MPFS or are
furnished as nontherapy services and
paid under the OPPS.
Response: Stakeholders may direct
requests for changes in the minimum
required level of supervision for
therapeutic services, including therapy
or other services that are hospital
outpatient services, to the independent
review process that we established for
considering such requests in the CY

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2012 OPPS/ASC final rule with
comment period. The instructions for
submitting a request are discussed in
the CY 2012 final rule with comment
period and are available on the CMS
Web site at: http://www.cms.gov/
Regulations-and-Guidance/Guidance/
FACA/AdvisoryPanelonAmbulatory
PaymentClassificationGroups.html.
In this final rule with comment
period, we are clarifying that the
supervision and other requirements of
the regulation at § 410.27 apply to
facility services that are paid to
hospitals under the OPPS and to these
same services when they are furnished
in CAHs and paid on a reasonable cost
basis. In OPPS hospitals, the
requirements of § 410.27 do not apply to
professional services that are separately
billed under the MPFS or to PT, SLP,
and OT services that are billed by the
hospital as therapy services and are paid
at the applicable amount based on the
MPFS. The requirements of § 410.27
also do not apply to these same
professional and PT, SLP, and OT
services when they are furnished in
CAHs.
In OPPS hospitals, a small subset of
‘‘sometimes therapy’’ PT, SLP, and OT
services are paid under the OPPS when
they are not furnished as therapy,
meaning not under a certified therapy
plan of care. Because the supervision
and other conditions of payment under
§ 410.27 apply to this subset of
‘‘sometimes therapy’’ services when
they are furnished in OPPS hospitals as
nontherapy services (because they are
paid under the OPPS and not based on
the MPFS), those conditions of payment
also apply to this subset of ‘‘sometimes
therapy’’ services when they are
furnished as nontherapy in CAHs. When
OPPS hospitals and CAHs furnish these
services as therapy services (under a
therapy plan of care by a qualified
therapist), the conditions of payment
under § 410.27 do not apply because

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68424

OPPS hospitals are paid for these
services based on the MPFS and not
under the OPPS. As we did in the CY

2013 OPPS/ASC proposed rule, we are
providing a list of the ‘‘sometimes

B. Enforcement Instruction for the
Supervision of Outpatient Therapeutic
Services in CAHs and Certain Small
Rural Hospitals

redirect=/HospitalOutpatientPPS/01_
overview.asp). We extended this
enforcement instruction to our
contractors for another year, through CY
2012, to allow time for the initiation of
supervision reviews by the Advisory
Panel on Hospital Outpatient Payment
(the Panel), which began in early 2012
and are continuing in accordance with
the provisions of the CY 2012 OPPS/
ASC final rule with comment period.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45154), we requested that
CAHs and small rural hospitals submit
to CMS for potential evaluation by the
Panel at its summer meeting any
services for which they anticipate

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therapy’’ services that may be paid
under the OPPS in Table 46 below.
BILLING CODE 4120–20–P

As we indicated in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74371), we extended
through CY 2012 the notice of
nonenforcement of the requirement for
direct supervision of outpatient
therapeutic services furnished in CAHs
and small rural hospitals having 100 or
fewer beds (available on the CMS Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html?

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difficulty complying with the direct
supervision standard in CY 2013. We
stated that, in developing evaluation
requests, hospitals should refer to the
evaluation criteria that we finalized in
the CY 2012 OPPS/ASC final rule with
comment period. In order to give
hospitals additional opportunity during
CY 2012 to become familiar with the
new submission and review process at
the summer Panel meeting, and to allow
hospitals time to meet the required
supervision levels for the services that
would be considered for CY 2013, we
indicated that we anticipated extending
the nonenforcement instruction one

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additional year through CY 2013. We
stated that we expect that CY 2013 will
be the final year for the instruction,
regardless of the services reviewed by
the Panel during its summer meeting.
Comment: Most commenters
supported an extension of the
enforcement instruction another year
through CY 2013, and reiterated
requests made in previous years that we
limit CAHs to the requirements in their
staffing Conditions of Participation
(CoPs) by making the definition of
‘‘direct supervision’’ in § 410.27
consistent with the CAH staffing CoPs.
These CoPs require that a doctor of
medicine or osteopathy, nurse
practitioner, clinical nurse specialist, or
physician assistant be available to
furnish patient care services at all times
the CAH operates (§ 485.631) and be
available on site within 30 minutes
(§ 485.618). They apply to all services
that are furnished by a CAH. In contrast,
for payment of most outpatient
therapeutic services, under § 410.27 the
CAH (like all OPPS hospitals) must
furnish direct supervision, meaning the
supervising physician or appropriate
nonphysician practitioner is
immediately available to furnish
assistance and direction for the duration
of the service. The requirement in
§ 410.27 does not apply to CAH
inpatient services or to CAH outpatient
diagnostic services.) Some commenters
similarly requested that CMS require
only general supervision in CAHs and
small rural hospitals, meaning the
services would be furnished under the
supervising physician’s or appropriate
nonphysician practitioner’s overall
direction and control but he or she need
not be physically present.
One commenter stated that while the
commenter understands the need to
allow CAHs and small rural hospitals to
become compliant with the recent
clarifications regarding the outpatient
supervision requirements, and while the
commenter shares the concerns of these
facilities regarding the available supply
of certain types of physicians, the
supervision requirements should be
applied uniformly across all care
settings for reasons of patient safety. In
addition, several commenters offered
suggestions for improving the
subregulatory supervision review
process.
Response: We appreciate the
suggestions for improving the
supervision review process and will
take them into consideration for future
Panel meetings. Regarding the
supervision requirements for payment
of hospital and CAH outpatient services,
we previously discussed in the CY 2012
OPPS/ASC final rule with comment

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period (76 FR 74362) that the Act
applies the same regulations to hospitals
and CAHs when appropriate (CAHs are
included if ‘‘the context otherwise
requires’’ under section 1861(e) of the
Act). As we indicated in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72000 through 72005), we
elected not to limit the CAHs to their
CoPs or to exclude them from the direct
supervision requirement for payment
because we believe that Medicare
should purchase outpatient services
from CAHs and other hospitals that are
of the same basic level of safety and
quality. In addition, while CoPs apply to
all services that a hospital or a CAH
furnishes, the payment rule in § 410.27
applies only to outpatient therapeutic
services.
Regarding the enforcement
instruction, as we discussed in the CY
2013 OPPS/ASC proposed rule, we will
extend the enforcement instruction one
additional year through CY 2013. This
additional year, which we expect to be
the final year of the extension, will
provide additional opportunities for
stakeholders to bring their issues to the
Panel, and for the Panel to evaluate and
provide us with recommendations on
those issues.
The Panel held its second meeting on
supervision levels for outpatient
therapeutic services in August 2012,
and considered several stakeholder
requests for a reduction in the minimum
required level of supervision for certain
services. These included observation
services; administration of certain drugs
and agents; and selected bladder, skin/
wound care, injection/infusion,
intravenous and central venous access
services. In accordance with the
subregulatory review process finalized
in the CY 2012 OPPS/ASC final rule
with comment period, we are currently
reviewing public comments on the
agency’s preliminary decisions
regarding supervision levels for these
services based upon the Panel’s
recommendations. We will issue our
final decisions on these services prior to
January 1, 2013 on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
XI. Outpatient Status: Solicitation of
Public Comments in the CY 2013 OPPS/
ASC Proposed Rule
A. Background
Under section 402(a)(1)(A) of the
Social Security Amendments of 1967
(Pub. L. 90–248), the Secretary is
permitted to engage in demonstration
projects to determine whether changes
in the methods of payment for health

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care and services under the Medicare
program would increase the efficiency
and economy of those services through
the creation of incentives to those ends
without adversely affecting the quality
of such services. Under this statutory
authority, CMS has implemented the
Medicare Part A to Part B Rebilling (AB
Rebilling) Demonstration, which allows
participating hospitals to receive 90
percent of the allowable Part B payment
for Part A short-stay claims that are
denied on the basis that the inpatient
admission was not reasonable and
necessary. Participating hospitals can
rebill these denied Part A claims under
Part B and be paid for additional Part B
services than would usually be payable
when an inpatient admission is deemed
not reasonable and necessary. This
demonstration is slated to last for 3
years, from CY 2012 through CY 2014.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45155 through 45157), we
provided an update of the status of the
demonstration. In addition, we solicited
public comments on a related issue:
potential policy changes we could make
to improve clarity and consensus among
providers, Medicare, and other
stakeholders regarding the relationship
between admission decisions and
appropriate Medicare payment, such as
when a Medicare beneficiary is
appropriately admitted to the hospital
as an inpatient and the cost to hospitals
associated with making this decision.
In the proposed rule, we discussed
that when a Medicare beneficiary
arrives at a hospital in need of medical
or surgical care, the physician or other
qualified practitioner must decide
whether to admit the beneficiary for
inpatient care or treat him or her as an
outpatient. In some cases, when the
physician admits the beneficiary and
the hospital provides inpatient care, a
Medicare claims review contractor, such
as the Medicare Administrative
Contractor (MAC), the Recovery Audit
Contractor (RAC), or the Comprehensive
Error Rate Testing (CERT) Contractor,
determines that inpatient care was not
reasonable and necessary under section
1862(a)(1)(A) of the Act and denies the
hospital inpatient claim for payment. In
these cases, under Medicare’s
longstanding policy, hospitals may
rebill a separate inpatient claim for only
a limited set of Part B services, referred
to as ‘‘Inpatient Part B’’ or ‘‘Part B Only’’
services (Section 10, Chapter 6 of the
Medicare Benefit Policy Manual (Pub.
100–02)). The hospital also may bill
Medicare Part B for any outpatient
services that were provided in the 3-day
payment window prior to the admission
(Section 10.12, Chapter 4 of the
Medicare Claims Processing Manual

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(Pub. 100–04)). These claims are subject
to the timely filing restrictions.
Once a Medicare beneficiary is
discharged from the hospital, the
hospital cannot change the beneficiary’s
patient status from inpatient to
outpatient and then submit an
outpatient claim because of the
potentially significant impact on
beneficiary liability. As we discuss
below, hospital inpatients have
significantly different Medicare benefits
and liabilities than hospital outpatients,
notably coverage of self-administered
drugs and, for patients who are admitted
to the hospital as inpatients for 3 or
more consecutive calendar days,
Medicare coverage of postacute SNF
care (to the extent all other SNF
coverage requirements are met). To
enable beneficiaries to make informed
financial and other decisions prior to
hospital discharge, Medicare allows the
hospital to change a beneficiary’s
inpatient status to outpatient (using
condition code 44 on an outpatient
claim) and bill all medically necessary
services that it provided to Part B as
outpatient services, but only if the
change in patient status is made prior to
discharge, the hospital has not
submitted a Medicare claim for the
admission, and both the practitioner
responsible for the care of the patient
and the utilization review committee
concur with the decision (Section 50.3,
Chapter 1 of the Medicare Claims
Processing Manual (Pub. 100–04); MLN
Matters article SE0622, Clarification of
Medicare Payment Policy When
Inpatient Admission Is Determined Not
To Be Medically Necessary, Including
the Use of Condition Code 44:
‘‘Inpatient Admission Changed to
Outpatient,’’ September 2004). Medicare
beneficiaries are provided with similar
protections, which are outlined in the
Hospital Conditions of Participation
(CoPs). For example, in accordance with
42 CFR 482.13(b), Medicare
beneficiaries have the right to
participate in the development and
implementation of their plan of care and
treatment, to make informed decisions,
and to accept or refuse treatment.
Informed discharge planning between
the patient and the physician is
important for patient autonomy and for
achieving efficient outcomes.
In the proposed rule, we stated that
while the limited scope of allowed
rebilling for ‘‘Inpatient Part B’’ services
protects Medicare beneficiaries and
provides disincentives for hospitals to
admit patients inappropriately,
hospitals have expressed concern that
this policy provides inadequate
payment for resources that they have
expended to take care of the beneficiary

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in need of medically necessary hospital
care, although not necessarily at the
level of inpatient care. A significant
proportion of the Medicare CERT error
rate consists of short (1- or 2-day) stays
where the beneficiary received
medically necessary services that the
CERT contractor determined should
have been provided as outpatient
services and not as inpatient services.
Hospitals have indicated that often they
do not have the necessary staff (for
example, utilization review (UR) staff or
case managers) on hand after normal
business hours to confirm the
physician’s decision to admit the
beneficiary. Thus, for a short-stay
admission, the hospital may be unable
to timely review and change a
beneficiary’s patient status from
inpatient to outpatient prior to
discharge in accordance with the
condition code 44 requirements.
In the proposed rule, we indicated
that we have heard from various
stakeholders that hospitals appear to be
responding to the financial risk of
admitting Medicare beneficiaries for
inpatient stays that may later be denied
upon contractor review by electing to
treat beneficiaries as outpatients
receiving observation services, often for
longer periods of time, rather than
admitting them as inpatients. In recent
years, the number of cases of Medicare
beneficiaries receiving observation
services for more than 48 hours, while
still small, has increased from
approximately 3 percent in 2006 to
approximately 7.5 percent in 2010. This
trend is concerning because of its effect
on Medicare beneficiaries. There could
be significant financial implications for
Medicare beneficiaries of being treated
as outpatients rather than being
admitted as inpatients, of which CMS
has informed beneficiaries.1 For
instance, if a beneficiary is admitted as
an inpatient, the beneficiary pays a onetime deductible for all hospital services
provided during the first 60 days in the
hospital. As a hospital inpatient, the
beneficiary would not pay for selfadministered drugs or have any
copayments for the first 60 days;
whereas if the beneficiary is treated as
an outpatient, the beneficiary has a
copayment for each individual
outpatient hospital service received.
While the Medicare copayment for a
single outpatient hospital service cannot
be more than the inpatient hospital
deductible, the beneficiary’s total
1 CMS Pamphlets: ‘‘Are You a Hospital Inpatient
or Outpatient? If You Have Medicare—Ask!’’, CMS
Product No. 11435, Revised, February 2011; ‘‘How
Medicare Covers Self-Administered Drugs Given in
Hospital Outpatient Settings,’’ CMS Product No.
11333, Revised, February 2011.

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68427

copayment for all outpatient services
received may be more than the inpatient
hospital deductible. In addition, usually
self-administered drugs provided in an
outpatient setting are not covered by
Medicare Part B and hospitals may
charge the beneficiary for them. Also,
the time spent in the hospital as an
outpatient is not counted towards the 3day qualifying inpatient stay that
section 1861(i) of the Act requires for
Medicare Part A coverage of postacute
care in a SNF.
As a result of these concerns related
to the impact of extended time as an
outpatient on Medicare beneficiaries,
the CERT error rate, and the impact on
hospitals of a later inpatient denial,
CMS initiated the AB Rebilling
Demonstration for a 3-year period for
hospitals. This demonstration is
voluntary and allows participating
hospitals to rebill outside of the usual
timely filing requirements for services
relating to all inpatient short-stay claims
that are denied for lack of medical
necessity because the inpatient
admission was not medically necessary.
Under the demonstration, hospitals may
receive 90 percent of the Medicare
allowable payment for all Part B
services that would have been medically
necessary had the beneficiaries
originally been treated as outpatients
and not admitted as inpatients. We note
that hospitals cannot rebill for
observation services, which, by
definition, must be ordered
prospectively to determine whether an
inpatient admission is necessary
(Chapter 1, Section 50.3.2 of the
Medicare Claims Processing Manual
(Pub. 100–04); FAQ 2723, available on
the CMS Web site at https://questions.
cms.gov/faq.php?id=5005&faqId=2723).
Hospitals that participate in the AB
Rebilling Demonstration will waive any
appeal rights associated with the denied
inpatient claims eligible for rebilling.
Under the demonstration, Medicare
beneficiaries are protected from any
adverse impacts of expanded rebilling.
For example, hospitals cannot bill
beneficiaries for self-administered drugs
or additional cost-sharing that would be
required under Medicare Part B. The
demonstration will inform us on the
impact that expanded rebilling may
have on the Medicare Trust Funds,
beneficiaries, hospitals, and the CERT
error rate. The demonstration is
designed to evaluate potential impacts
of expanded rebilling on admission and
utilization patterns, including whether
expanded rebilling would reduce
hospitals’ incentive to make appropriate
initial admission decisions.
Hospitals expressed significant
interest in the AB Rebilling

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Demonstration, which began on January
1, 2012. The demonstration was
approved to accept up to 380 hospitals.
In order to participate in the
demonstration, a hospital must not be
receiving periodic interim payments
from CMS, and must be a Medicareparticipating hospital as defined by
section 1886(d) of the Act, a category
that includes all hospitals paid under
the Medicare IPPS, but excludes
hospitals paid under the IPF PPS, the
IRF PPS, and the LTCH PPS, and cancer
hospitals, CAHs, and children’s
hospitals.
The hospitals that volunteered to
participate and were accepted in the
demonstration began rebilling in early
spring of 2012. More information about
the demonstration is available on the
CMS Web site at: http://www.cms.gov/
Research-Statistics-Data-and-Systems/
Monitoring-Programs/CERT/Part_A_to_
Part_B_Rebilling_Demonstration.html.
We stated in the proposed rule that we
plan to conduct an evaluation of the
demonstration during and after its
completion.
B. Summary of Public Comments
Received
While we are implementing the AB
Rebilling Demonstration, we also
solicited public comments in the CY
2013 OPPS/ASC proposed rule on other
actions that we could potentially
undertake to address stakeholders’
concerns. In the proposed rule, we
stated that there may be several ways of
approaching the multifaceted issues that
have been raised in recent months
around a beneficiary’s patient status and
Medicare hospital payment. Given the
complexity of this topic, we sought
public perspectives on potential options
the agency might adopt to provide more
clarity and consensus regarding patient
status for purposes of Medicare
payment. We invited commenters to
draw on their knowledge of these issues
to offer any suggestions that they believe
would be most helpful to them in
addressing the current challenges, while
keeping in mind the various impacts in
terms of recently observed increases in
the length of time for which patients
receive observation services, beneficiary
liability, Medicare spending, and the
feasibility of implementation of any
suggested changes for both the Medicare
program and hospitals.
We received approximately 350
public comments in response to our
solicitation in the CY 2013 OPPS/ASC
proposed rule from hospitals and
hospital associations, physician
associations, rehabilitative and longterm care facilities, beneficiaries,
beneficiary advocacy organizations,

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Quality Improvement Organizations
(QIOs), organizations specializing in
medical necessity review, and other
interested parties. The commenters
provided significant input, and the
majority requested that CMS not
implement a comprehensive solution or
set of solutions regarding patient status
in the CY 2013 OPPS/ASC final rule
with comment period. Instead, many
commenters recommended that CMS
develop an informed course of action in
the upcoming months through a formal,
ongoing dialogue with all interested
stakeholders (for example, through open
door forums or a task force). A few
commenters recommended a more
immediate course of action to limit
beneficiary liability for SNF care and for
the difference in beneficiary costsharing between hospital inpatient and
outpatient services.
In this section, we summarize the
feedback we received in response to our
solicitation of public comments in the
CY 2013 OPPS/ASC proposed rule. We
are not providing responses to the
public comments we received because
in the proposed rule we strictly solicited
public comments, and did not propose
any changes in policy. We will consider
the feedback we received from the
public as we move forward. We
structured our summary of the public
comments around key suggestions that
we have heard from stakeholders in the
following areas: (1) Part A to Part B
Rebilling; (2) Clarifying Current
Admission Instructions or Establishing
Specified Clinical Criteria; (3) Hospital
Utilization Review; (4) Prior
Authorization; (5) Time-Based Criteria
for Inpatient Admission; (6) Payment
Alignment; and (7) Public Comments on
Other Topics (including Rules for
External Review of Inpatient Claims,
Improving Beneficiary Protections, and
Revising the Qualifying Criteria for SNF
Coverage). We summarize the public
comments below in the context of each
of these suggestions.
1. Part A to Part B Rebilling
Some stakeholders have suggested
that, when a Part A inpatient claim is
denied because an inpatient level of
care was not reasonable and necessary
although some medical care was
necessary, CMS allow hospitals to rebill
Medicare and receive payment for all
Part B services that would have been
payable had the patient originally been
treated as an outpatient rather than an
inpatient. As we describe above, the AB
Rebilling Demonstration allows
participating providers to receive 90
percent of the allowable payment
amount for such services (except
observation services) as Part B Inpatient

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services. Because establishing such a
policy on a national basis could result
in increases in Medicare expenditures
and could affect beneficiary liability for
hospital care, CMS implemented the
demonstration to assess Medicare
spending and other outcomes while
protecting beneficiaries from any
increase in liability.
Comments: Commenters expressed
some support for the AB Rebilling
Demonstration as an important step in
determining what types of policy
clarifications are needed. The
commenters noted that the beneficiary
protections against changes in liability
are a key benefit of the demonstration.
While some commenters expressed
appreciation for the opportunity for
increased Part B payment to hospitals,
they disagreed with the demonstration’s
requirement to forego appeals of the
denied inpatient claims eligible for
rebilling. One commenter requested that
CMS provide interim reports to
stakeholders describing the
demonstration’s evaluation criteria and
its progress towards meeting its goals.
Some commenters recommended that
CMS establish a national policy
allowing the rebilling of all Part B
services that would have been payable
if the patient had been treated as an
outpatient rather than admitted as an
inpatient because, according to the
commenters, outpatient and inpatient
services are sometimes
indistinguishable. The commenters
believed that the Medicare statute does
not preclude such a policy and that, due
to the recent focus on claims audit and
review, hospitals would have no
incentive to admit beneficiaries
inappropriately in response to a more
generous rebilling policy. However,
other commenters expressed concern
that there would be such an incentive.
They indicated that allowing expanded
rebilling with a change in bill type from
a Part A claim to a Part B claim would
remove the incentive to bill accurately,
as hospitals would file more inpatient
claims under Part A in order to receive
the (typically higher) Diagnosis-Related
Group (DRG) payment under the IPPS,
knowing that, in the event of the
inpatient claim being denied, they could
rebill under Part B and receive the same
(typically lower) OPPS payment they
would have received if they had billed
an outpatient claim initially.
Several commenters suggested that
allowing full Part B rebilling would
negate and undermine the designs of the
OPPS and the IPPS. The commenters
stated that OPPS payments are
established to compensate hospitals for
the care provided in the outpatient
setting, and that they act as a natural

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complement to the IPPS. They indicated
that making the two payment systems
retroactively interchangeable would
result in the payment rates calculated
under each system being miscalibrated
and failing to adjust appropriately over
time to migration of services from the
inpatient to the outpatient setting. In
addition, according to the commenters,
a national policy allowing full Part B
rebilling would provide an unfair
market advantage to providers who
make inappropriate inpatient admission
determinations over those who do not.
The commenters reasoned that
Medicare’s current policies are wellfounded, longstanding, widely known
and largely followed, and that the
current challenges do not warrant the
extensive resources that full rebilling
and other policy changes would entail.
Some commenters indicated that a
national policy allowing full Part B
rebilling following the denial of an
inpatient claim would have limited
utility because typically the timely
filing period has lapsed by the time the
inpatient claim is denied, providers
could not appeal the inpatient claim,
and providers would not receive the
Part A payment that they seek. In
addition, according to the commenters,
the manual process of recoding the
inpatient claim as an outpatient claim is
costly. A few commenters suggested that
CMS allow rebilling of all Part B
services but apply a penalty by limiting
payment to a discounted amount. Other
commenters were concerned about the
significant financial burden of Part B
rebilling for beneficiaries who have Part
A coverage but do not have coverage for
Part B services.
Some commenters also suggested that
CMS allow hospitals to change a
beneficiary’s inpatient status to
outpatient after discharge in order to
submit a Part B outpatient claim either
prior to or after submitting an inpatient
claim. Other commenters recommended
that CMS extend the timely filing
deadline to 1 year from the date of
service or 6 months to 1 year from the
date of the inpatient claim denial,
whichever is later. Some commenters
suggested that CMS extend the timely
filing deadline only for claims that are
denied after a significant amount of time
has passed since the date of service.
Commenters suggested mechanisms to
protect beneficiaries from increases in
their liability associated with any of
these policy changes. For example,
several commenters believed that
hospitals could waive any increases in
beneficiary cost-sharing or that CMS
could provide coverage for selfadministered drugs in the outpatient
department, cap the sum of outpatient

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services at the inpatient deductible, or
establish annual maximum out-ofpocket costs. Many commenters also
recommended the modernization and
reform of the SNF qualification criteria
(we describe these comments further
below).
2. Clarifying Current Admission
Instructions or Establishing Specified
Clinical Criteria
In recent months, we have heard from
some stakeholders who suggested a
need for us to clarify our current
instructions regarding the circumstances
under which Medicare will pay for an
admission in order to improve hospitals’
ability to make appropriate admission
decisions. Stakeholders have suggested
the establishment of more specific
clinical criteria for admission and
payment such as adopting specific
clinical measures because, according to
the commenters, the current criteria are
not clear-cut. We have issued
longstanding instructions that the need
for admission is a complex medical
judgment that depends upon multiple
factors, including an expectation that
the beneficiary will require an overnight
stay in the hospital or need more than
24 hours of care, the patient’s medical
history and current medical needs, the
types of facilities available to inpatients
and to outpatients, the hospital’s
policies, the relative appropriateness of
outpatient and inpatient treatment, and
other factors (Section 10, Chapter 1 of
the Medicare Benefit Policy Manual
(Pub. 100–02)). We stated in the CY
2013 OPPS/ASC proposed rule that we
are interested in receiving public
comments and suggestions regarding
whether and how we might improve our
current instructions and clarify the
application of Medicare payment
policies for both hospitals and
physicians, keeping in mind the
challenges of implementing national
standards that are broad enough to
contemplate the range of clinical
scenarios but prescriptive enough to
provide greater clarity.
Comments: The public comments
reflected a widespread understanding
and agreement with CMS’ guidance that
the inpatient admission decision is
ultimately a complex medical judgment
that involves the consideration of many
factors. Many commenters indicated
that if Medicare adopted more specific
guidelines or criteria, the clinical
judgment of the treating physician
should have primacy. A recurrent
comment was that this judgment would
always be necessary in certain cases,
and should take precedence over other
criteria that may be used. Many
commenters were concerned that

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68429

decision-making tools (such as Interqual
Clinical Decision Support or the
Milliman Care Guidelines, alternatively
described by commenters as commercial
or proprietary screening tools), which
are designed for use as guidelines rather
than prescriptive tools, do not take into
account patient ‘‘risk’’ and may
undermine the physician’s judgment.
In addition, many commenters
believed that any selected criteria must
apply equally to Medicare contractors,
hospitals, and others and should match
the audit review criteria. Many
commenters expressed concern that
Medicare’s claims review contractors
inappropriately disregard the
physician’s judgment, and do not
employ a physician in making their
determinations. (We describe the
comments on external review criteria in
further detail below). One commenter
indicated that commercial screening
tools do not always comport with
Medicare rules. The commenter
provided as an example that one
popular tool fails to distinguish
scheduled replacement pacemaker
procedures from the placement of a new
pacemaker on an emergency basis. Some
of the public comments received from
physicians identified what they
characterized as significant problems
with the accuracy, validity, and
transparency of proprietary screening
tools, including use of appropriateness
standards that are not accepted by the
relevant physician specialties and
failure to follow Medicare payment
policy.
Nevertheless, many commenters
expressed support for various types of
national criteria. These criteria included
evidence-based guidelines such as the
Agency for Healthcare Research and
Quality’s National Clearinghouse
Guidelines or other rules developed in
consultation with physician societies.
Some commenters supported the use of
specific proprietary screening tools such
as Interqual Clinical Decision Support
or the Milliman Care Guidelines. Other
commenters favored more transparent
criteria similar to the Correct Coding
Initiative (CCI) that are adapted for
Medicare and are developed using
physician input. One commenter
indicated that the CCI edits have proven
more cost-effective than proprietary
tools. A few commenters suggested that
use of the Program for Evaluating
Payment Patterns Electronic Report
(PEPPER) reports, which provide
hospital-specific Medicare data statistics
for discharges that are vulnerable to
improper payments, would allow for
continuous improvement in utilization
and coding. One commenter noted that
it would be useful to choose the set of

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criteria that are used by Medicaid and
other payers, in order to facilitate
uniform documentation that supports
the specific criteria required by the
various screening tools.
Some commenters pointed out
process improvements that hospitals
and physicians should make, regardless
of whether CMS adopts specific clinical
criteria or issues more specific
admission instructions. Several
commenters stated that physicians
should improve their documentation in
support of the patient status that they
order, and that sometimes it is not clear
whether the physician ordered inpatient
admission or outpatient observation
services. The commenters suggested that
physicians document the need for
admission in a standardized field on
electronic health records or elsewhere.
Other commenters emphasized the
importance of the role of the hospital in
selecting patient status for purposes of
billing because they believed that the
physician is focused on ordering the
necessary care and, for good reason
according to the commenters, is not
occupied with the nuances of patient
status designation for payment
purposes.
3. Hospital Utilization Review
In the proposed rule, we asked
commenters to consider the
responsibility of hospitals to utilize all
of the tools necessary to make
appropriate initial admission decisions.
We stated that we believe this is
important because some hospitals have
indicated that simply having case
management and UR staff available to
assist in decision-making outside of
regular business hours may improve the
accuracy of admission decisions.
Comments: Several commenters
stated that some hospitals do not have
UR staff on hand outside normal
business hours or on weekends to assist
with patient status determinations, and
that this is especially problematic for
patients with short inpatient stays. The
commenters expressed varying opinions
on hospital UR. Some commenters
recognized that Medicare’s regulations
require the collaboration of the treating
physician and the hospital’s UR staff in
making the appropriate patient status
determination, and believed that neither
party is dispensable. Several
commenters indicated that 24-hour, 7
days a week availability of hospital UR
and/or case management staff should be
a hospital best practice, as it assists in
making appropriate admission
determinations for short-stay cases
where the need for admission is unclear.
Several commenters opined that
Medicare should require the availability

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of hospital UR on a 24-hour/7 days a
week basis. One commenter stated that
CMS should develop a certification
process of ‘‘deeming’’ acceptable
individual hospital UR processes, using
a standard of 24-hour/7 days a week
availability, confirmation by an external
physician, and adherence to the hospital
CoPs. Another commenter
recommended the use of a condition
code on claims to track whether UR
confirmation of appropriate patient
status is associated with fewer claim
denials. Some commenters preferred
reinforcement of hospital UR over the
institution of external guidelines for
admission.
However, several commenters
indicated that Medicare’s current UR
requirements in the CoPs should be
eliminated because of the administrative
cost to the hospital, or because they do
not result in more accurate admission
determinations that are commensurate
with their associated cost. One
association believed that hospital UR
will have limited utility as long as
admission criteria are unclear. Yet
another physician professional
association stated that hospitals should
be required to submit their claims based
on the admitting physician’s judgment
rather than the opinion of another
physician in the hospital.
4. Prior Authorization
In our proposed rule, we also invited
public comments on the potential use of
prior authorization for payment of a
hospital inpatient admission.
Comments: Many commenters
believed that the concept of using prior
authorization on a targeted basis was
promising and worthy of consideration.
To facilitate administrative feasibility,
many commenters suggested that it be
used selectively for elective procedures,
specific services that are not designated
as inpatient-only services under the
OPPS, or conditions that are at high-risk
for inappropriate inpatient admission.
The commenters were concerned that
mandatory prior authorization could
become a barrier to the provision of
urgent care, and some recommended
that CMS exclude patients in the
emergency department or those
receiving critical care. Alternatively, the
commenters suggested that prior
authorization be used as an adjunct
method for cases not meeting the
admission criteria of commercial
screening tools.
Several commenters believed that
prior authorization is feasible because
hospitals already have an infrastructure
for obtaining prior authorization for
commercial insurers. The commenters
suggested that CMS could similarly

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redirect current resources towards a
prior authorization program. Several
commenters suggested an online tool for
prior authorization.
A few commenters opposed prior
authorization altogether based on
administrative burden, and many
commenters believed that it would need
to result in guaranteed payment in order
to be useful. One commenter observed
that retrospective review is still required
in many cases when prior
authorizations are obtained from
commercial insurers, due to incomplete
or inaccurate prior authorization
information and changes in what was
planned or expected when the initial
clinical information was submitted. The
commenter stated that for this reason,
commercial insurers reserve the right to
perform, and often do perform,
retrospective audits based on the
completed medical record. In addition,
the commenter stated that the CERT
error rate evidences that the vast
majority of providers understand and
follow the current Medicare statutes and
rules. Thus, according to the
commenter, requiring prior
authorization will add significant cost to
the program without eliminating the
inpatient error rate, at a time when the
Medicare Trust Fund is at risk.
5. Time-Based Criteria for Inpatient
Admission
In the proposed rule, we stated that
some stakeholders have suggested that
CMS has authority to define whether a
patient is an inpatient or an outpatient.
They believed that it may be permissible
and appropriate for us to redefine
‘‘inpatient’’ using parameters in
addition to medical necessity and a
physician order that we currently use,
such as length of stay (LOS) or other
variables. For example, currently a
beneficiary’s anticipated LOS at the
hospital may be a factor in determining
whether the beneficiary should be
admitted to the hospital, but is not the
only factor. We have issued instructions
that state that, typically, the decision to
admit should be made within 24 to 48
hours, and that expectation of an
overnight stay may be a factor in the
admission decision (Section 20.6,
Chapter 6 and Section 10, Chapter 1 of
the Medicare Benefit Policy Manual
(Pub. 100–02)). However, we stated in
the proposed rule that we are interested
in hearing from stakeholders regarding
whether it may be appropriate and
useful to establish a point in time after
which the encounter becomes an
inpatient stay if the beneficiary is still
receiving medically necessary care to
treat or evaluate his or her condition.
We indicated that such a policy could

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potentially limit the amount of time that
a beneficiary is treated as an outpatient
receiving observation services before the
hospital encounter becomes inpatient,
provided the additional time in the
hospital is medically necessary.
Currently, we do not specify a limit on
the time a beneficiary may be an
outpatient receiving observation
services, although, in the past, we have
limited payment of observation services
to a specific timeframe, such as 24 or 48
hours. Some in the hospital community
have indicated that it may be helpful for
the agency to establish more specific
criteria for patient status in terms of
how many hours the beneficiary is in
the hospital, or to provide a limit on
how long a beneficiary receives
observation services as an outpatient.
We invited public comments regarding
whether there would be more clarity
regarding patient status under such
alternative approaches to defining
inpatient status. We also noted that it is
important for CMS to maintain its
ability to audit and otherwise carry out
its statutory obligation to ensure that the
Medicare program pays only for
reasonable and necessary care. We
asked that commenters consider
opportunities for inappropriately taking
advantage of the Medicare system that
time-based and other changes in criteria
for patient status may create.
Comments: Some commenters
expressed interest and support for
criteria that are strictly time-based,
based largely on a primary goal of
eliminating extended observation cases.
These commenters supported defining a
patient as an inpatient after 24, 48, or 72
hours, and noted that such a policy
could improve the problem of
beneficiaries not qualifying for needed
SNF care due to their outpatient status.
One commenter believed that a 48-hour
benchmark made sense because it is
consistent with the activities that are
required under the CoPs within the first
48 hours of a hospital stay. Another
commenter suggested establishing a
second decision point during the
observation period, when the physician
must reevaluate whether the patient
needs to be admitted as an inpatient.
However, the commenter noted that this
may increase administrative complexity
without commensurate benefit.
Some commenters representing the
hospital community believed that
patients who have been actively
monitored for more than 24 to 48 hours
as outpatients under observation and
cannot be safely discharged are likely
sufficiently complex cases that would
benefit from being admitted as an
inpatient, regardless of whether they
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criteria. The commenters posited that
observation services are more
comparable to inpatient care than they
are to other outpatient services, and that
this fact would be more accurately
reflected by a time-based admission
policy. A few commenters suggested
that CMS limit observation care to 24
hours, with exceptions for physician
discretion. Several commenters
suggested that CMS clarify the
definition and parameters of outpatient
observation services to help
stakeholders determine when it is
appropriate to furnish observation
services and for how long. Another
commenter suggested that CMS limit a
patient’s time in observation by
requiring additional assessments and
increased documentation of
involvement by the physician.
In contrast, many commenters
expressed reservations about a timebased approach. Some commenters
posited that inpatient and outpatient
services are different in nature. One
physician association stated that the
primary difference between the
inpatient and outpatient setting is the
availability of nurses (and related staff)
and advanced technology in the
inpatient setting, which accounts for the
added cost of inpatient care. The
commenter recommended structuring
an inpatient DRG payment around
short-stay admissions where the
physician believes that these added
components of care are necessary. Other
commenters were concerned that under
a time-based policy, the level of service
would no longer be taken into account
in hospital payment and that such a
policy would inappropriately negate the
need for medical necessity review.
Some commenters stated that the
medical review would simply shift to
assessing the necessity of the patient’s
LOS as an outpatient or whether the
patient needed continuing hospital care
at the time they became an inpatient.
Some commenters believed that a timebased policy would result in additional
short inpatient stays than under current
Medicare guidance. Therefore, these
commenters believed that hospitals
would continue to be subject to audit
risk and that short-stay audits would
simply increase.
Another commenter expressed
concern that hospitals may be
substituting outpatient observation
services for inpatient admissions in
order to maximize their outpatient drug
revenues under the Federal 340B Drug
Pricing Program. The commenter
recommended that CMS modify the
definitions of ‘‘outpatient’’ and
‘‘inpatient’’ to explicitly clarify that a
patient’s status determination should be

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based solely on appropriate clinical
judgment, and should not be influenced
by financial motives under programs
such as the 340B Drug Pricing Program.
Some commenters opposed timebased rules because, according to the
commenters, it would undermine the
judgment of the treating physician.
Other commenters noted that the
absence of objective clinical criteria for
choosing a timeframe would render
time-based criteria for admission
arbitrary. Several commenters opposed
limiting observation services to 24 hours
because hospitals often need more time
(particularly up to 48 hours) to evaluate
diagnostic testing and develop the right
treatment plan. They noted that practice
patterns vary widely nationally and
among facilities in the same region.
Other commenters were concerned that
a policy of never counting certain days
as inpatient days could actually reduce
beneficiary access to SNF care. Other
commenters believed that a time-based
policy would need refinement around
issues like requirement of a physician
order for inpatient admission.
Several commenters opposed timebased criteria because such criteria may
conflict with the provision of inpatient
surgical care for patients who require
only short admissions. The commenters
pointed out that such a policy could
conflict with Medicare’s inpatient only
list, and that as the standard of practice
evolves to enable longer inpatient
services to be furnished during short (1or 2-day) inpatient stays, those services
would no longer qualify as inpatient
services. One commenter stated that
there are some procedures that are so
inherently complex that they may be
performed only on an inpatient basis,
regardless of how long (or short) the
time was that the patient spent in the
hospital. The commenter stated that
establishing a bright-line time rule
could create a situation whereby these
services could be denied solely on the
basis of the time spent in the hospital
while ignoring the level of service
required for subjecting a patient to an
inherently risky procedure. The
commenter expressed concern that CMS
might require that all patients,
regardless of clinical presentation, first
undergo a period of 48 hours of
observation before being admitted as
inpatients to the hospital, despite the
fact that their medical condition and
treatment plan may be wholly
consistent with an inpatient admission
upon presentation to the hospital.
Several commenters recommended
that rather than limiting the timeframe
for observation services, observation
care should be furnished in dedicated
observation units in emergency

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departments rather than on floor units.
They cited studies showing that the
dedicated units save costs compared to
inpatient care and demonstrate shorter
timeframes than the floor units for
diagnosing or discharging.
6. Payment Alignment
In the proposed rule, we asked
commenters to consider how aligning
payment rates more closely with the
resources expended by a hospital when
providing outpatient care versus
inpatient care of short duration might
reduce payment disparities and
influence financial incentives and
disincentives to admit.
Comments: Commenters expressed
significant interest in various means of
improving the alignment of payment for
what they termed equivalent outpatient
and short inpatient hospital stays. Most
of the commenters who supported
payment alignment suggested
developing a DRG for short inpatient
stays, although several commenters
recommended an expanded outpatient
APC payment in addition to or in lieu
of a short-stay DRG. Some commenters
suggested basing the payment for shortstay inpatient admissions on a
percentage of the related DRG by mean
LOS. For example, if the mean LOS for
a given DRG is 3 days, then the hospital
would be paid one-third of that DRG for
an inpatient admission with a 1-day
stay. Several commenters suggested a
short-stay outlier policy similar to the
LTCH PPS, or a policy similar to the
IPPS transfer policy. Other commenters
more broadly suggested developing a
resource-based payment structure
specifically for short-stay, lower acuity
admissions.
Some commenters noted, however,
that aligning payment rates would
reduce but not eliminate the financial
risk of claim denial. According to the
commenters, a payment alignment
approach would not eliminate the
potential for continued use of
observation care over inpatient
admission. One commenter asserted that
the resources expended by a hospital for
inpatient and outpatient care are already
aligned when the care is billed
appropriately.

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7. Public Comments on Other Topics
We received a number of public
comments on other related issues.
a. Rules for the External Review of
Inpatient Claims
Comments: Many commenters
expressed concerns about the criteria
that are used by Medicare’s contractors
to determine the medical necessity of
hospital inpatient admissions. The

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commenters were concerned that the
review criteria being utilized by
contractors do not match the admission
criteria set forth in Medicare’s guidance.
In particular, according to the
commenters, contractors are not
employing physicians in making their
medical necessity determinations, even
though Medicare instructs that the
admission decision is a complex
medical judgment that involves
forecasting a potential (not definite)
need for an overnight stay or more than
24 hours of hospital care, or the risk of
harm to the patient if not admitted
(predictability of an adverse event). The
commenters asserted that, as a result,
claims reviewers inappropriately base
their judgment on information that was
not predictable or available to the
physician at the time of admission.
Many commenters recommended that
CMS increase its oversight of the
Agency’s medical review contractors,
and ensure that its review rules are
being followed. Commenters asked that
CMS require all review contractors to
use the same criteria to determine
medical necessity that physicians and
hospitals are required to use in making
the inpatient admission decision; to use
a physician reviewer in accordance with
the QIO claim review standard, or to
consult with the treating physician or a
physician in the same specialty as the
admitting physician; and to provide
justification to the treating physician in
support of a claim denial. According to
the commenters, the review criteria that
are used should apply uniformly to
Medicare contractors, hospitals, and
others.
Several commenters indicated that
physician payment for professional
services should be denied whenever
inpatient hospital payment is denied,
due to the role of the physician in the
admission decision. In contrast, some
physician commenters were concerned
that they already are often
inappropriately at risk for denial of their
Part B claim when a hospital inpatient
claim is denied, or when a hospital
changes a patient’s status to outpatient
without their knowledge such that the
place of service on the physician claim
does not match that claimed by the
hospital. They stated that, in some
cases, the hospital does not bill
Medicare, so there is no companion
claim at all. Similarly, some physicians
expressed concern that hospitals use
‘‘black box’’ proprietary tools to identify
allegedly inappropriate admissions and
change the patient’s status to outpatient
without the knowledge of the patient or
the physician. These commenters also
expressed concern for any adverse
impact on beneficiary liability.

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b. Improving Beneficiary Protections
Comments: Many commenters
suggested means of improving
beneficiary protections against
unforeseen changes in his or her
liability. These included providing
Medicare coverage for self-administered
drugs in the hospital outpatient
department, waiving beneficiary
coinsurance, capping the sum of
outpatient services at the inpatient
deductible, or establishing annual
maximum out-of-pocket costs. Some
commenters suggested that Medicare
clarify and strengthen beneficiary
notification and appeal rights regarding
changes in patient status and the receipt
of observation care. For example,
according to the commenters, Medicare
should require a straightforward
explanation to beneficiaries of the costsharing implications of being an
outpatient receiving observation
services compared to being an inpatient.
One QIO noted that as part of their case
review activities, QIOs review
beneficiary appeals of inpatient hospital
discharges to assure that patients are
medically ready to move to the next
level of care. The QIO believed that if
a beneficiary receives only outpatient
observation services and is not an
inpatient, he or she has no right to
appeal his or her discharge from the
hospital to the QIO. The QIO stated that
it often receives complaints from
beneficiaries who believe they are being
discharged prematurely, only to find out
that the QIO cannot review that care
because the hospital classified the stay
as observation rather than inpatient.
Some commenters suggested means of
penalizing hospitals for inappropriate
admission patterns. They provided
examples such as developing quality
measures with payment penalties to
identify instances of inappropriate use
of observation care for patients meeting
inpatient admission criteria, or counting
time spent receiving observation
services as inpatient time for the
purposes of hospital readmission
penalties. Other commenters
recommended improving physician
education regarding the beneficiary
liabilities that are associated with
patient status to facilitate patient status
determinations that take beneficiary
cost-sharing into account.
c. Revising the Qualifying Criteria for
Skilled Nursing Facility (SNF) Coverage
Comments: Many commenters
recommended that Congress and/or
CMS modernize and revise the SNF
qualification rules. Many beneficiaries,
beneficiary representatives, SNFs, and
others requested that CMS count the

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time a beneficiary spends as an
outpatient receiving observation
services towards the 3-day hospital
inpatient stay that is required for
coverage of SNF care. Many commenters
indicated that the statutory time-based
rule that requires a beneficiary to have
a 3-day inpatient hospital stay in order
to qualify for SNF care is obsolete, given
the advances in medical care, the trend
towards reduced LOS, and the migration
of services from inpatient to outpatient
over the course of the Medicare
program’s history. These commenters
recommended that this rule be replaced
with clinically meaningful criteria that
are not time-based or based on patient
status.
A few commenters asserted that CMS
could use its statutory authority under
section 1812(f) of the Act (as enacted by
section 123 of the Tax Equity and Fiscal
Responsibility Act of 1982, Pub. L. 97–
248) to waive the 3-day qualification
rule. Some commenters asserted that the
criteria for using this authority would be
met, namely that there would be no
increase in associated costs to the
Medicare program and that the acute
nature of the SNF benefit would be
maintained. The Act provides that the
Secretary shall provide for coverage of
extended care services which are not
post-hospital extended care services at
such time and for so long as the
Secretary determines that the inclusion
of such services will not result in any
increase in the total payments made
under Title XVIII, and will not alter the
acute care nature of the SNF benefit.
Other commenters believed that new
statutory authority would be required to
change the SNF criteria, and they
expressed their support for bills they
stated have been introduced in the
Congress to count time in observation as
inpatient time for purposes of SNF
qualification. Some commenters
recommended waiving the 3-day rule
for certain diagnoses that benefit from
short inpatient stays and speedy access
to postacute rehabilitative services.
They indicated that some beneficiaries
require only a brief hospital assessment,
rather than a lengthy stay in acute care,
prior to long-term skilled care, and that
it is not uncommon for patients with
hospital stays of less than 3 days to
require follow up care in a SNF.

sroberts on DSK5SPTVN1PROD with

C. Summary
We appreciate all of the public
comments that we received on this
multi-faceted topic. We will take all of
the public comments that we received
into consideration as we consider future
actions that we could potentially
undertake to provide more clarity and

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consensus regarding patient status for
purposes of Medicare payment.
XII. CY 2013 OPPS Payment Status and
Comment Indicators
A. CY 2013 OPPS Payment Status
Indicator Definitions
Payment status indicators (SIs) that
we assign to HCPCS codes and APCs
play an important role in determining
payment for services under the OPPS.
They indicate whether a service
represented by a HCPCS code is payable
under the OPPS or another payment
system and also whether particular
OPPS policies apply to the code. The
CY 2013 status indicator assignments
for APCs and HCPCS codes are shown
in Addendum A and Addendum B,
respectively, on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. We
note that, in the past, a majority of the
Addenda referred to throughout the
preamble of our OPPS/ASC proposed
and final rules appeared in the printed
version of the Federal Register as part
of the annual rulemakings. However,
beginning with the CY 2012 OPPS/ASC
proposed rule, the Addenda will no
longer appear in the printed version of
the OPPS/ASC rules that are found in
the Federal Register. Instead, these
Addenda will be published and
available only via the Internet on the
CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html.
We did not receive any public
comments related to the definitions of
the OPPS status indicators, and
therefore, as we proposed in the CY
2013 OPPS/ASC proposed rule (77 FR
45157), for CY 2013, we are not making
any changes to the definitions of status
indicators that were listed in
Addendum D1 of the CY 2012 OPPS/
ASC final rule with comment period.
We believe that these definitions of the
OPPS status indicators continue to be
appropriate for CY 2013.
The complete list of the final CY 2013
status indicators and their definitions is
displayed in Addendum D1 on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html.
B. CY 2013 Comment Indicator
Definitions
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45158), for the CY 2013
OPPS, we proposed to use the same two
comment indicators that are in effect for
the CY 2012 OPPS.

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68433

• ‘‘CH’’—Active HCPCS codes in
current and next calendar year; status
indicator and/or APC assignment have
changed or active HCPCS code that will
be discontinued at the end of the
current calendar year.
• ‘‘NI’’—New code for the next
calendar year or existing code with
substantial revision to its code
descriptor in the next calendar year as
compared to current calendar year,
interim APC assignment; comments will
be accepted on the interim APC
assignment for the new code.
We proposed to use the ‘‘CH’’
comment indicator in the CY 2013
OPPS/ASC proposed rule to indicate
HCPCS codes for which the status
indicator or APC assignment, or both,
are proposed for change in CY 2013
compared to their assignment as of June
30, 2012. We stated that we believed
that using the ‘‘CH’’ indicator in the CY
2013 OPPS/ASC proposed rule would
facilitate the public’s review of the
changes that we were proposing for CY
2013. We stated that the use of the
comment indicator ‘‘CH’’ in association
with a composite APC indicates that the
configuration of the composite APC is
proposed to be changed in the CY 2013
OPPS/ASC final rule with comment
period.
We proposed to use the ‘‘CH’’
comment indicator in the CY 2013
OPPS/ASC final rule with comment
period to indicate HCPCS codes for
which the status indicator or APC
assignment, or both, would change in
CY 2013 compared to their assignment
as of December 31, 2012.
In addition, any existing HCPCS
codes with substantial revisions to the
code descriptors for CY 2013 compared
to the CY 2012 descriptors are labeled
with comment indicator ‘‘NI’’ in
Addendum B to the CY 2013 OPPS/ASC
final rule with comment period.
However, as we stated in the proposed
rule, in order to receive the comment
indicator ‘‘NI,’’ the CY 2013 revision to
the code descriptor (compared to the CY
2012 descriptor) must be significant
such that the new code descriptor
describes a new service or procedure for
which the OPPS treatment may change.
We use comment indicator ‘‘NI’’ to
indicate that these HCPCS codes are
open for comment as part of the CY
2013 OPPS/ASC final rule with
comment period. Like all codes labeled
with comment indicator ‘‘NI,’’ as we
stated in the CY 2013 OPPS/ASC
proposed rule, we will respond to
public comments and finalize their
OPPS treatment in the CY 2014 OPPS/
ASC final rule with comment period.
In accordance with our usual practice,
CPT and Level II HCPCS codes that are

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new for CY 2013 are also labeled with
comment indicator ‘‘NI’’ in Addendum
B to the CY 2013 OPPS/ASC final rule
with comment period.
Only HCPCS codes with comment
indicator ‘‘NI’’ in this CY 2013 OPPS/
ASC final rule with comment period are
subject to comment. HCPCS codes that
do not appear with comment indicator
‘‘NI’’ in this CY 2013 OPPS/ASC final
rule with comment period are not open
to public comment, unless we
specifically request additional
comments elsewhere in this final rule
with comment period. The CY 2013
treatment of HCPCS codes that appear
in this CY 2013 OPPS/ASC final rule
with comment period to which
comment indicator ‘‘NI’’ is not
appended was open for public comment
during the comment period for the
proposed rule, and we indicated that we
would respond to those comments in
this CY 2013 OPPS/ASC final rule with
comment period.
We did not receive any public
comments on the proposed comment
indicators. We believe that the CY 2012
definitions of the OPPS status indicators
continue to be appropriate for CY 2013,
and therefore, as proposed, we are
continuing to use those definitions
without modification for CY 2013. The
final definitions are listed in Addendum
D2 on the CMS Web site at: http://www.
cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatient
PPS/index.html.

sroberts on DSK5SPTVN1PROD with

XIII. OPPS Policy and Payment
Recommendations
A. MedPAC Recommendations
The Medicare Payment Advisory
Commission (MedPAC) was established
under section 1805 of the Act to advise
the Congress on issues affecting the
Medicare program. As required under
the statute, MedPAC submits reports to
Congress no later than March and June
of each year that contain its Medicare
payment policy recommendations. In
our CY 2013 OPPS/ASC proposed rule,
we noted several recommendations
regarding the OPPS from the March
2012 report (‘‘Report to the Congress:
Medicare Payment Policy,’’ available on
MedPAC’s Web site at: http://www.
medpac.gov/documents/Mar12_Entire
Report.pdf). Since the publication of the
proposed rule, MedPAC has not made
any other recommendations regarding
the OPPS, although we discuss
MedPAC’s public comments to our
proposed rule in the applicable sections
of this final rule with comment period.
In its March report, MedPAC
recommended that Congress increase
payment rates for the OPPS in CY 2013

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by 1.0 percent. We discuss our final
policy to follow the statutory
requirements for the CY 2013 OPD fee
schedule increase factor in section II.B
of this final rule with comment period.
In addition, MedPAC recommended
that Congress enact legislation to reduce
payment rates for evaluation and
management office visits provided in
hospital outpatient departments to the
rates paid for these services in physician
offices. MedPAC recommended that the
change be phased in over 3 years.
During the phase-in, MedPAC stated
that the associated payment reductions
to hospitals with a disproportionate
share patient percentage at or above the
median should be limited to 2 percent
of overall Medicare payments. MedPAC
also recommended that the Secretary of
Health and Human Services conduct a
study by January 2015 to examine
whether this policy change would
reduce access to ambulatory physician
and other services for low-income
patients. Congress has not enacted such
legislation.
B. GAO Recommendations
Congress established the U.S.
Government Accountability Office
(GAO) under the Budget and
Accounting Act of 1921 (Pub. L. 67–13)
as an independent agency that advises
Congress and the heads of Executive
agencies regarding Federal program
expenditures. The GAO conducts audits
and other analyses to ensure that
Federal funds are being spent efficiently
and effectively. Since the issuance of
the CY 2012 OPPS/ASC final rule with
comment period, the GAO has not
released any reports regarding the
OPPS.
C. OIG Recommendations
The mission of the Office of the
Inspector General (OIG) as mandated by
Public Law 95–452 (as amended) is to
protect the integrity of the Department
of Health and Human Services programs
and the health and welfare of program
beneficiaries. The OIG conducts
independent audits, inspections, and
investigations to improve the efficiency
of these programs and to identify and
prevent fraud, waste and abuse. Since
the issuance of the CY 2012 OPPS/ASC
final rule with comment period, the OIG
has not made any recommendations
regarding the OPPS.

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XIV. Updates to the Ambulatory
Surgical Center (ASC) Payment System
A. Background
1. Legislative History, Statutory
Authority, and Prior Rulemaking for the
ASC Payment System
For a detailed discussion of the
legislative history and statutory
authority related to ASCs, we refer
readers to the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74377
through 74378) and the June 12, 1998
proposed rule (63 FR 32291 through
32292). For a discussion of prior
rulemaking on the ASC payment
system, we refer readers to the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74378 through 74379).
2. Policies Governing Changes to the
Lists of Codes and Payment Rates for
ASC Covered Surgical Procedures and
Covered Ancillary Services
Under § 416.2 and § 416.166 of the
regulations, subject to certain
exclusions, covered surgical procedures
are surgical procedures that are
separately paid under the OPPS, that
would not be expected to pose a
significant risk to beneficiary safety
when performed in an ASC, and that
would not be expected to require active
medical monitoring and care at
midnight following the procedure
(‘‘overnight stay’’). We adopted this
standard for defining which surgical
procedures are covered under the ASC
payment system as an indicator of the
complexity of the procedure and its
appropriateness for Medicare payment
in ASCs. We use this standard only for
purposes of evaluating procedures to
determine whether or not they are
appropriate for Medicare beneficiaries
in ASCs. We define surgical procedures
as those described by Category I CPT
codes in the surgical range from 10000
through 69999, as well as those Category
III CPT codes and Level II HCPCS codes
that directly crosswalk or are clinically
similar to ASC covered surgical
procedures (72 FR 42478).
In the August 2, 2007 final rule, we
also established our policy to make
separate ASC payments for the
following ancillary items and services
when they are provided integral to ASC
covered surgical procedures: (1)
Brachytherapy sources; (2) certain
implantable items that have passthrough status under the OPPS; (3)
certain items and services that we
designate as contractor-priced,
including, but not limited to,
procurement of corneal tissue; (4)
certain drugs and biologicals for which
separate payment is allowed under the

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OPPS; and (5) certain radiology services
for which separate payment is allowed
under the OPPS. These covered
ancillary services are specified in
§ 416.164(b) and, as stated previously,
are eligible for separate ASC payment
(72 FR 42495). Payment for ancillary
items and services that are not paid
separately under the ASC payment
system is packaged into the ASC
payment for the covered surgical
procedure.
We update the lists of, and payment
rates for, covered surgical procedures
and covered ancillary services in
conjunction with the annual proposed
and final rulemaking process to update
the OPPS and the ASC payment system
(§ 416.173; 72 FR 42535). In addition, as
discussed in detail in section XIV.B. of
this final rule with comment period,
because we base ASC payment policies
for covered surgical procedures, drugs,
biologicals, and certain other covered
ancillary services on the OPPS payment
policies, we also provide quarterly
update change requests (CRs) for ASC
services throughout the year (January,
April, July, and October). CMS releases
new Level II codes to the public or
recognizes the release of new CPT codes
by the AMA and makes these codes
effective (that is, the codes are
recognized on Medicare claims) outside
of the formal rulemaking process via
these ASC quarterly update CRs. Thus,
the updates are to implement newly
created Level II HCPCS and Category III
CPT codes for ASC payment and to
update the payment rates for separately
paid drugs and biologicals based on the
most recently submitted ASP data. New
Category I CPT codes, except vaccine
codes, are released only once a year and,
therefore, are implemented only through
the January quarterly update. New
Category I CPT vaccine codes are
released twice a year and, therefore, are
implemented through the January and
July quarterly updates. We refer readers
to Table 41 in the CY 2012 OPPS/ASC
proposed rule for the process used to
update the HCPCS and CPT codes (76
FR 42291).
In our annual updates to the ASC list
of, and payment rates for, covered
surgical procedures and covered
ancillary services, we undertake a
review of excluded surgical procedures
(including all procedures newly
proposed for removal from the OPPS
inpatient list), new procedures, and
procedures for which there is revised
coding, to identify any that we believe
meet the criteria for designation as ASC
covered surgical procedures or covered
ancillary services. Updating the lists of
covered surgical procedures and
covered ancillary services, as well as

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their payment rates, in association with
the annual OPPS rulemaking cycle is
particularly important because the
OPPS relative payment weights and, in
some cases, payment rates, are used as
the basis for the payment of covered
surgical procedures and covered
ancillary services under the revised ASC
payment system. This joint update
process ensures that the ASC updates
occur in a regular, predictable, and
timely manner. We did not receive any
public comments on this process.
Therefore, we are continuing our
established process without
modification for determining the list of
codes and payment rates for ASC
covered surgical procedures and
covered ancillary services.
B. Treatment of New Codes
1. Process for Recognizing New Category
I and Category III CPT Codes and Level
II HCPCS Codes
CPT and Level II HCPCS codes are
used to report procedures, services,
items, and supplies under the ASC
payment system. Specifically, we
recognize the following codes on ASC
claims: (1) Category I CPT codes, which
describe surgical procedures; (2)
Category III CPT codes, which describe
new and emerging technologies,
services, and procedures; and (3) Level
II HCPCS codes, which are used
primarily to identify products, supplies,
temporary procedures, and services not
described by CPT codes.
We finalized a policy in the August 2,
2007 final rule to evaluate each year all
new Category I and Category III CPT
codes and Level II HCPCS codes that
describe surgical procedures, and to
make preliminary determinations
during the annual OPPS/ASC
rulemaking process regarding whether
or not they meet the criteria for payment
in the ASC setting as covered surgical
procedures and, if so, whether or not
they are office-based procedures (72 FR
42533 through 42535). In addition, we
identify new codes as ASC covered
ancillary services based upon the final
payment policies of the revised ASC
payment system.
We have separated our discussion
below into two sections based on
whether we proposed to solicit public
comments in the CY 2013 OPPS/ASC
proposed rule (and respond to those
comments in this CY 2013 OPPS/ASC
final rule with comment period) or
whether we are soliciting public
comments in this CY 2013 OPPS/ASC
final rule with comment period (and
responding to those comments in the CY
2014 OPPS/ASC final rule with
comment period).

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68435

We note that we sought public
comment in the CY 2012 OPPS/ASC
final rule with comment period on the
new CPT and Level II HCPCS codes that
were effective January 1, 2012. We also
sought public comments in the CY 2012
OPPS/ASC final rule with comment
period on the new Level II HCPCS codes
effective October 1, 2011. These new
codes, with an effective date of October
1, 2011, or January 1, 2012, were flagged
with comment indicator ‘‘NI’’ in
Addenda AA and BB to the CY 2012
OPPS/ASC final rule with comment
period to indicate that we were
assigning them an interim payment
status and payment rate, if applicable,
which were subject to public comment
following publication of the CY 2012
OPPS/ASC final rule with comment
period. In the proposed rule, we stated
that we would respond to public
comments and finalize the ASC
treatment of these codes in this CY 2013
OPPS/ASC final rule with comment
period.
We did not receive any public
comments regarding our process for
recognizing new Category I and
Category III CPT codes and Level II
HCPCS codes under the ASC payment
system and are implementing our
proposed policy as final, without
modification, for CY 2013.
2. Treatment of New Level II HCPCS
Codes and Category III CPT Codes
Implemented in April and July 2012 for
Which We Solicited Public Comments
in the CY 2013 OPPS/ASC Proposed
Rule
In the April and July CRs, we made
effective for April 1, 2012 or July 1,
2012, respectively, a total of 12 new
Level II HCPCS codes and 5 new
Category III CPT codes that were not
addressed in the CY 2012 OPPS/ASC
final rule with comment period. The 12
new Level II HCPCS codes describe
covered ancillary services.
In the April 2012 ASC quarterly
update (Transmittal 2425, CR 7754,
dated March 16, 2012), we added one
new radiology Level II HCPCS code and
four new drug and biological Level II
HCPCS codes to the list of covered
ancillary services. Specifically, as
displayed in Table 36 of the CY 2013
OPPS/ASC proposed rule (77 FR 45160),
we added the following codes to the list
of covered ancillary services:
• HCPCS code C9288 (Injection,
centruroides (scorpion) immune f(ab)2
(equine), 1 vial);
• HCPCS code C9289 (Injection,
asparaginase Erwinia chrysanthemi,
1,000international units (I.U.));
• HCPCS code C9290 (Injection,
bupivacaine liposome, 1 mg);

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• HCPCS code C9291 (Injection,
aflibercept, 2 mg vial); and
• HCPCS code C9733 (Nonophthalmic fluorescent vascular
angiography).
In the July 2012 quarterly update
(Transmittal 2479, Change Request
7854, dated May 25, 2012), we added
seven new drug and biological Level II
HCPCS codes to the list of covered
ancillary services. Specifically, as
displayed in Table 37 of the CY 2013
OPPS/ASC proposed rule (77 FR 45161),
we added the following codes to the list
of covered ancillary services:
• HCPCS code C9368 (Grafix core, per
square centimeter);
• HCPCS code C9369 (Grafix prime,
per square centimeter);
• HCPCS code Q2034 (Influenza virus
vaccine, split virus, for intramuscular
use (Agriflu));
• HCPCS code Q2045 (Injection,
human fibrinogen concentrate, 1 mg);
• HCPCS code Q2046 (Injection,
aflibercept, 1 mg);
• HCPCS code Q2048 (Injection,
doxorubicin hydrochloride, liposomal,
doxil, 10 mg); and
• HCPCS code Q2049 (Injection,
doxorubicin hydrochloride, liposomal,
imported lipodox, 10 mg).
We noted that HCPCS code Q2045
replaced code J1680, HCPCS code
Q2046 replaced code C9291, and
HCPCS code Q2048 replaced code J9001
beginning July 1, 2012.
We assigned payment indicator ‘‘K2’’
(Drugs and biologicals paid separately
when provided integral to a surgical
procedure on the ASC list; payment
based on OPPS rate) to the 10 new Level
II HCPCS codes that are separately paid
when provided in ASCs. We assigned
payment indicator ‘‘L1’’ (Influenza
vaccine; pneumococcal vaccine;
packaged item/service; no separate

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payment made) or payment indicator
‘‘N1’’ (Packaged service/item; no
separate payment made) to the two new
Level II HCPCS codes that are packaged
when provided in ASCs. In the CY 2013
OPPS/ASC proposed rule (77 FR 45160),
we solicited public comment on the
proposed CY 2013 ASC payment
indicators and payment rates for the
covered ancillary services listed in
Tables 36 and 37 of the proposed rule
(77 FR 45160 through 45161). Those
HCPCS codes became payable in ASCs,
beginning in April or July 2012, and are
paid at the ASC rates posted for the
appropriate calendar quarter on the
CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/11_Addenda_
Updates.html.
The HCPCS codes listed in Table 36
of the proposed rule were included in
Addendum BB to the proposed rule
(which was available via the Internet on
the CMS Web site). We noted that all
ASC addenda are only available via the
Internet on the CMS Web site. Because
the payment rates associated with the
new Level II HCPCS codes that became
effective for July 2012 (listed in Table 37
of the proposed rule) were not available
to us in time for incorporation into the
Addenda to the OPPS/ASC proposed
rule, our policy is to include these
HCPCS codes and their proposed
payment indicators and payment rates
in the preamble to the proposed rule but
not in the Addenda to the proposed
rule. These codes and their final
payment indicators and rates are
included in the appropriate Addendum
to this CY 2013 OPPS/ASC final rule
with comment period. Thus, the codes
implemented by the July 2012 ASC
quarterly update CR and their proposed
CY 2013 payment rates (based on July

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2012 ASP data) that were displayed in
Table 37 were not included in
Addendum BB to the proposed rule
(which was available via the Internet on
the CMS Web site). The final list of
covered ancillary services and the
associated payment weights and
payment indicators is included in
Addendum BB to this CY 2013 OPPS/
ASC final rule with comment period,
consistent with our annual update
policy. We solicited public comment on
these proposed payment indicators and
the proposed payment rates for the new
Level II HCPCS codes that were newly
recognized as ASC covered ancillary
services in April and July 2012 through
the quarterly update CRs, as listed in
Tables 36 and 37 of the proposed rule.
We proposed to finalize their payment
indicators and their payment rates in
this CY 2013 OPPS/ASC final rule with
comment period.
We did not receive any public
comments regarding our proposals. We
are adopting as final for CY 2013 the
ASC payment indicators for the
ancillary services described by the new
Level II HCPCS codes implemented in
April and July 2012 through the
quarterly update CRs as shown below,
in Tables 47 and 48, respectively. These
new HCPCS codes are also displayed in
Addendum BB to this final rule with
comment period. We note that after
publication of the CY 2013 OPPS/ASC
proposed rule, the CMS HCPCS
Workgroup created permanent HCPCS Jcodes for CY 2013 to replace certain
temporary HCPCS C-codes made
effective for CY 2012. These permanent
CY 2013 HCPCS J-codes are listed
alongside the temporary CY 2012
HCPCS C-codes in Tables 47 and 48
below.
BILLING CODE 4120–01–P

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68437

TABLE 47.-NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY
SERVICES IMPLEMENTED IN APRIL 2012

CY 2012
HCPCS
Code

CY2013
HCPCS
Code

C9288

J0716

C9289
C9290
C9291 *
C9733

J9019
C9290
J0178
C9733

CY 2013 Long Descriptor
Injection, centruroides immune f(ab)2, up to 120
milligrams
Injection, asparaginase (Erwinaze), 1,000 IV
Injection, bupivacaine liposome, 1 mg
Injection, aflibercept, 1 mg
Non-ophthalmic fluorescent vascular angiography

Final
CY2013
Payment
Indicator
K2
K2
K2
K2
N1

*Note: Level II HCPCS code C9291 (Injection, aflibercept, 2 mg vial) was deleted June 30, 2012, and
replaced with HCPCS code Q2046 (Injection, aflibercept, 1 mg), effective July 1,2012. HCPCS code
Q2046 was deleted December 31, 2012, and replaced with HCPCS code J0178 effective January 1, 2013.

TABLE 48.-NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY
SERVICES IMPLEMENTED IN JULY 2012

CY 2012
HCPCS
Code
C9368
C9369

CY2013
HCPCS
Code
Q4132
Q4133

Q2034

Q2034

Q2045*
Q2046*

J7178
J0178

Q2048*

J9002

Q2049

Q2049

CY 2013 Long Descriptor
Grafix core, per square centimeter
Grafix prime, per square centimeter
Influenza virus vaccine, split virus, for
intramuscular use (Agriflu)
Injection, human fibrinogen concentrate, 1 mg
Injection, aflibercept, 1 mg
Injection, doxorubicin hydrochloride, 1iposoma1,
doxil, 10 mg
Injection, doxorubicin hydrochloride, liposomal,
imported lipodox, 10 mg

Final
CY2013
Payment
Indicator
K2
K2
L1
K2
K2
K2
K2

Through the July 2012 quarterly
update CR, we also implemented ASC
payment for five new Category III CPT
codes as ASC covered surgical
procedures, effective July 1, 2012. These
codes were listed in Table 38 of the CY
2013 OPPS/ASC proposed rule (77 FR

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45161), along with their proposed
payment indicators and proposed
payment rates for CY 2013. Because the
payment rates associated with the new
Category III CPT codes that became
effective for July were not available to
us in time for incorporation into the

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Addenda to the OPPS/ASC proposed
rule, our policy is to include the codes,
their proposed payment indicators, and
proposed payment rates in the preamble
to the proposed rule but not in the
Addenda to the proposed rule. The
codes listed in Table 38 of the proposed

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*Note: HCPCS code Q2045 replaced HCPCS code 11680, HCPCS code Q2046 replaced HCPCS code
C9291, and HCPCS code Q2048 replaced HCPCS code J9001 beginning July 1,2012.

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rule and their final payment indicators
and rates are included in Addendum
AA to this CY 2013 OPPS/ASC final
rule with comment period.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45161), we proposed to
assign payment indicator ‘‘G2’’ (Nonoffice-based surgical procedure added in
CY 2008 or later; payment based on
OPPS relative payment weight) to three
of the five new Category III CPT codes
implemented in July 2012 and to assign
payment indicator ‘‘J8’’ (Deviceintensive procedure added to ASC list
in CY 2008 or later; paid at adjusted
rate) to the remaining two new Category

III CPT codes implemented in July 2012.
We believe that these procedures would
not be expected to pose a significant
safety risk to Medicare beneficiaries or
would not be expected to require an
overnight stay if performed in ASCs. We
solicited public comment on these
proposed payment indicators and the
payment rates for the new Category III
CPT codes that were newly recognized
as ASC covered surgical procedures in
July 2012 through the quarterly update
CR, as listed in Table 38 of the proposed
rule (77 FR 45161). We proposed to
finalize their payment indicators and
their payment rates in this CY 2013

OPPS/ASC final rule with comment
period.
We did not receive any public
comments regarding this proposal. We
are adopting as final for CY 2013 the
ASC payment indicators for the covered
surgical procedures described by the
new Category III CPT codes
implemented in the July 2012 CR as
shown below in Table 49. The new CPT
codes implemented in July 2012 are also
displayed in Addendum AA to this final
rule with comment period (which is
available via the Internet on the CMS
Web site).

3. Process for New Level II HCPCS
Codes and Category I and III CPT Codes
for Which We Are Soliciting Public
Comments in This CY 2013 OPPS/ASC
Final Rule With Comment Period

Level II HCPCS codes) and AMA Web
sites (for CPT codes), and also through
the January ASC quarterly update CRs.
In the past, we also have released new
Level II HCPCS codes that are effective
October 1 through the October ASC
quarterly update CRs and incorporated
these new codes in the final rule with
comment period updating the ASC
payment system for the following
calendar year. All of these codes are
flagged with comment indicator ‘‘NI’’ in
Addenda AA and BB to the OPPS/ASC
final rule with comment period to
indicate that we are assigning them an

interim payment status which is subject
to public comment. The payment
indicator and payment rate, if
applicable, for all such codes flagged
with comment indicator ‘‘NI’’ are open
to public comment in the OPPS/ASC
final rule with comment period, and we
respond to these comments in the final
rule with comment period for the next
calendar year’s OPPS/ASC update. In
the CY 2013 OPPS/ASC proposed rule
(77 FR 45161 through 45162), we
proposed to continue this process for
CY 2013. Specifically, for CY 2013, we
proposed to include in Addenda AA

As has been our practice in the past,
we incorporate those new Category I
and Category III CPT codes and new
Level II HCPCS codes that are effective
January 1 in the final rule with
comment period updating the ASC
payment system for the following
calendar year. These codes are released
to the public via the CMS HCPCS (for

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
and BB to the CY 2013 OPPS/ASC final
rule with comment period the new
Category I and III CPT codes effective
January 1, 2013, that would be
incorporated in the January 2013 ASC
quarterly update CR and the new Level
II HCPCS codes, effective October 1,
2012 or January 1, 2013, that would be
released by CMS in its October 2012 and
January 2013 ASC quarterly update CRs.
We stated that these codes would be
flagged with comment indicator ‘‘NI’’ in
Addenda AA and BB to this CY 2013
OPPS/ASC final rule with comment
period to indicate that we have assigned
them an interim payment status. We
also stated that their payment indicators
and payment rates, if applicable, would
be open to public comment in the CY
2013 OPPS/ASC final rule with
comment period and would be finalized
in the CY 2014 OPPS/ASC final rule
with comment period.
We did not receive any public
comments regarding this proposed
process. For CY 2013, we are finalizing
our proposal, without modification, to
continue our established process for
recognizing and soliciting public
comments on new Level II HCPCS codes
and Category I and III CPT codes that
become effective for the following year,
as described above.
C. Update to the Lists of ASC Covered
Surgical Procedures and Covered
Ancillary Services
1. Covered Surgical Procedures

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a. Additions to the List of ASC Covered
Surgical Procedures
We conducted a review of all HCPCS
codes that currently are paid under the
OPPS, but not included on the ASC list
of covered surgical procedures, to
determine if changes in technology and/
or medical practice changed the clinical
appropriateness of these procedures for
the ASC setting. In the CY 2013 OPPS/
ASC proposed rule (77 FR 45162), we
proposed to update the list of ASC
covered surgical procedures by adding
16 procedures to the list. We
determined that these 16 procedures
would not be expected to pose a
significant safety risk to Medicare
beneficiaries and would not be expected
to require an overnight stay if performed
in ASCs.
The 16 procedures that we proposed
to add to the ASC list of covered

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surgical procedures, including their
HCPCS code long descriptors and
proposed CY 2013 payment indicators,
were displayed in Table 39 of the
proposed rule (77 FR 45162). We invited
public comment on this proposal.
Comment: Many commenters
supported the addition of the
procedures listed in Table 39 of the CY
2013 OPPS/ASC proposed rule to the
list of ASC covered surgical procedures.
One commenter believed that CPT
codes 0299T (Extracorporeal shock
wave for integumentary wound healing,
high energy, including topical
application and dressing care; initial
wound) and 0300T (Extracorporeal
shock wave for integumentary wound
healing, high energy, including topical
application and dressing care) should
not be added to the list of ASC covered
surgical procedures. The commenter
agreed with CMS that these codes
would not pose a significant safety risk
to Medicare beneficiaries and would not
be expected to require an overnight stay
if performed in an ASC. However, the
commenter believed that additional
information on the clinical efficacy and
outcomes of these services should be
collected before adding these
procedures to the list of ASC covered
surgical procedures.
Response: We appreciate commenters’
support of the proposed addition of the
procedures listed in Table 39 of the CY
2013 OPPS/ASC proposed rule to the
list of ASC covered surgical procedures
for CY 2013. With regard to the
commenter’s belief that CPT codes
0299T and 0300T should not be added
to the list of ASC covered surgical
procedures until additional information
regarding the clinical efficacy and
outcomes of these services is collected,
our policy is to review all HCPCS codes
that are currently paid under the OPPS
to identify any procedures that are
currently excluded from the ASC list of
covered procedures that we believe
would not pose a safety risk to Medicare
beneficiaries and would not require an
overnight stay if performed in an ASC
(42 CFR 416.166). We do not make our
assessment regarding what codes should
be included on the list of covered
surgical procedures based on data
regarding the clinical efficacy and
outcomes of the services. Because it is
our expectation that the procedures
identified by CPT codes 0299T and

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68439

0300T would not pose a significant
safety risk to Medicare beneficiaries or
require an overnight stay if performed in
an ASC, we do not agree with the
commenter that these procedures
should continue to be excluded from the
list of ASC covered surgical procedures.
Comment: One commenter reiterated
a previous request that, with knowledge
of the anatomic location, CMS should
apply the safety criteria to the entire
spectrum of services reportable by an
unlisted code. The commenter believed
that under such an analysis, CMS would
determine that the following unlisted
codes associated with eye procedures
would not compromise patient safety
and, therefore, should be added to the
list of ASC covered surgical procedures:
CPT code 66999 (Unlisted procedure,
anterior segment of eye), CPT code
67299 (Unlisted procedure, posterior
segment);, CPT code 67399 (Unlisted
procedure, ocular muscle); CPT code
67999 (Unlisted procedure, eyelids);
CPT code 68399 (Unlisted procedure,
conjunctiva); and CPT code 68899
(Unlisted procedure, lacrimal system).
Response: As we have stated in the
past (72 FR 42484 through 42486; 75 FR
72032; and 76 FR 74380, and 74399),
procedures that are reported by the CPT
unlisted codes are not eligible for
addition to the ASC list because our
charge requires us to evaluate each
surgical procedure for potential safety
risk and expected need for overnight
monitoring and to exclude such
procedures from ASC payment. It is not
possible to evaluate procedures that
would be reported by unlisted CPT
codes according to these criteria. This
final policy is discussed in detail in the
August 2, 2007 final rule (72 FR 42484
through 42486).
Comment: In addition to the
procedures listed in Table 39 of the CY
2013 OPPS/ASC proposed rule,
commenters requested that CMS add the
procedures described by the 57 CPT
codes displayed in Table 50 below to
the list of ASC covered surgical
procedures. Commenters argued that
these procedures are as safe as
procedures that are currently on the list
of ASC covered procedures and, based
on a survey, ASCs report positive
outcomes when these procedures are
performed on non-Medicare patients.
BILLING CODE 4120–01–P

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CY2013
CPT
Code
0274T
0275T
21141 *
21142*
22551
22552*
22554
22612
22845*
22846*
22851
23470
22856
27096
27125*
27130*
27415
27447*
27524
27556*
27558*
27702*
27703*
27715*
54332
54336
54411 *
54417*
54535
54650
57310
58541
58542
58570
58571
63001
63003
63005
63012

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CY 2013 Short Descriptor
Perq lamot/lam crv/thrc
Perq lamot/lam lumbarbar
Reconstruct midface lefort
Reconstruct midface lefort
Neck spine fuse&remov bel c2
Addl neck spine fusion
Neck spine fusion
Lumbar spine fusion
Insert spine fixation device
Insert spine fixation device
Apply spine prosth device
Reconstruct shoulder joint
Cerv artific diskectomy
Inject sacroiliac joint
Partial hip replacement
Total hip arthroplasty
Osteochondral knee allograft
Total knee arthroplasty
Treat kneecap fracture
Treat knee dislocation
Treat knee dislocation
Reconstruct ankle joint
Reconstruct ankle joint
Revision of lower leg
Revise penis/urethra
Revise penis/urethra
Remov/rep1c penis pros comp
Remv/rep1c penis pros compl
Extensive testis surgery
Orchiopexy (Fowler-Stephens)
Repair urethrovaginal lesion
Lsh uterus 250 g or less
Lsh w/t/o ut 250 g or less
Tlh uterus 250 g or less
Tlh w/t/o 250 g or less
Removal of spinal lamina
Removal of spinal lamina
Removal of spinal lamina
Removal of spinal lamina

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TABLE 50.--PROCEDURES REQUESTED FOR ADDITION TO THE CY 2013
LIST OF ASC COVERED SURGICAL PROCEDURES

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BILLING CODE 4120–01–C

Response: We reviewed all of the
eligible surgical procedures that
commenters requested for addition to
the ASC list of covered surgical
procedures. Of the 57 requested
procedures, we did not review the 22
procedures that are reported by CPT
codes that are on the OPPS inpatient
list. These procedures are not paid
under the OPPS and, therefore, are not
eligible for addition to the list of ASC
covered procedures. The procedures
that are paid only as inpatient
procedures are identified with an
asterisk in Table 50. In addition, the
procedure that is identified by CPT code
27096 (Injection procedure for sacroiliac
joint, anesthetic/steroid, with image
guidance (fluoroscopy or ct) including
arthrography when performed) is not
paid under the OPPS and, therefore, is
not eligible for addition to the list of
ASC covered procedures.
With regard to the remaining
procedures in Table 50 that commenters
requested be added to the list of ASC
covered surgical procedures, we do not
agree that most of the procedures are
appropriate for provision to Medicare
beneficiaries in ASCs. Although the
commenters asserted that the
procedures they were requesting for

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addition to the list are as safe as
procedures already on the list, our
review did not support those assertions.
We exclude from ASC payment any
procedure for which standard medical
practice dictates that the beneficiary
who undergoes the procedure would
typically be expected to require active
medical monitoring and care at
midnight following the procedure
(overnight stay) as well as all surgical
procedures that our medical advisors
determine may be expected to pose a
significant safety risk to Medicare
beneficiaries when performed in an
ASC. The criteria used under the
revised ASC payment system to identify
procedures that would be expected to
pose a significant safety risk when
performed in an ASC include, but are
not limited to, those procedures that:
generally result in extensive blood loss;
require major or prolonged invasion of
body cavities; directly involve major
blood vessels; are emergent or life
threatening in nature; commonly require
systemic thrombolytic therapy; are
designated as requiring inpatient care
under § 419.22(n); can only be reported
using a CPT unlisted surgical procedure
code; or are otherwise excluded under
§ 411.15 (we refer readers to § 416.166).

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68441

In our review of the procedures listed
in Table 50, we found that most of the
procedures either may be expected to
pose a threat to beneficiary safety or
require active medical monitoring at
midnight following the procedure.
Specifically, we found that prevailing
medical practice called for inpatient
hospital stays for beneficiaries
undergoing many of the procedures and
that some of the procedures directly
involve major blood vessels and/or may
result in extensive blood loss. Several of
the urology procedures appear to
require major invasion of a body cavity.
However, we agree with commenters
that the procedures described by CPT
codes 0274T, 0275T, 58541, 58542,
58570, 58571, 63001, 63003, and 63005
meet the criteria under § 416.166 and
would be safely performed in the ASC
setting and would not require overnight
stays. We are adding these CPT codes to
the ASC list of covered surgical
procedures for CY 2013.
After consideration of the public
comments we received, we are
finalizing the addition of the 16
procedures that we proposed to add to
the list of ASC covered surgical
procedures for CY 2013. We are also
adding 9 of the procedures requested by
the commenters to the CY 2013 list of

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ASC covered surgical procedures. The
procedures, their descriptors, and

payment indicators are displayed in
Table 51 below.
BILLING CODE 4120–01–P

TABLE SI.-NEW ASC COVERED SURGICAL PROCEDURES FOR CY 2013

0274T

0275T

Percutaneous laminotomy/laminectomy (interlaminar approach)
for decompression of neural elements, (with or without
ligamentous resection, discectomy, facetectomy and/or
foraminotomy), any method, under indirect image guidance (eg,
fluoroscopic, ct), with or without the use of an endoscope,
single or multiple levels, unilateral or bilateral; cervical or
thoracic
Percutaneous laminotomy/laminectomy (interlaminar approach)
for decompression of neural elements, (with or without
ligamentous resection, discectomy, facetectomy and/or
foraminotomy), any method, under indirect image guidance (eg,
fluoroscopic, ct), with or without the use of an endoscope,
single or multiple levels, unilateral or bilateral; lumbar

G2

G2

Extracorporeal shock wave for integumentary wound healing,
high energy, including topical application and dressing care;
initial wound

R2*

0300T

Extracorporeal shock wave for integumentary wound healing,
high energy, including topical application and dressing care

R2*

37205

Transcatheter placement of an intravascular stent(s) (except
coronary, carotid, vertebral, iliac, and lower extremity arteries),
percutaneous; initial vessel

G2

37224

37225

37226

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CY 2013 Long Descriptor

0299T

37206

37227

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Final CY
2013 ASC
Payment
Indicator**

Transcatheter placement of an intravascular stent( s) (except
coronary, carotid, vertebral, iliac, and lower extremity arteries),
percutaneous; each additional vessel (list separately in addition
to code for primary procedure)
Revascularization, endovascular, open or percutaneous,
femoral, popliteal artery(s), unilateral; with transluminal
angioplasty
Revascularization, endovascular, open or percutaneous,
femoral, popliteal artery(s), unilateral; with atherectomy,
includes angioplasty within the same vessel, when performed
Revascularization, endovascular, open or percutaneous,
femoral, popliteal artery(s), unilateral; with trans luminal stent
placement(s), includes angioplasty within the same vessel, when
performed
Revascularization, endovascular, open or percutaneous,
femoral, popliteal artery(s), unilateral; with trans luminal stent
placement(s) and atherectomy, includes angioplasty within the

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G2

G2

G2

G2

J8

ER15NO12.075

CY
2013
HCPCS
Code

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37228

37229

37230

37231

37232

37233

37234

37235

58541
58542
58570

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58571
63001

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Final CY
2013 ASC
Payment
Indicator**

CY 2013 Long Descriptor
same vessel, when perfonned
Revascularization, endovascular, open or percutaneous, tibial,
peroneal artery, unilateral, initial vessel; with transluminal
angioplasty
Revascularization, endovascular, open or percutaneous, tibial,
peroneal artery, unilateral, initial vessel; with atherectomy,
includes angioplasty within the same vessel, when perfonned
Revascularization, endovascular, open or percutaneous, tibial,
peroneal artery, unilateral, initial vessel; with transluminal stent
placement(s), includes angioplasty within the same vessel, when
perfonned
Revascularization, endovascular, open or percutaneous, tibial,
peroneal artery, unilateral, initial vessel; with transluminal stent
placement(s) and atherectomy, includes angioplasty within the
same vessel, when perfonned
Revascularization, endovascular, open or percutaneous, tibial!
peroneal artery, unilateral, each additional vessel; with
transluminal angioplasty (list separately in addition to code for
primary procedure)
Revascularization, endovascular, open or percutaneous, tibial!
peroneal artery, unilateral, each additional vessel; with
atherectomy, includes angioplasty within the same vessel, when
perfonned (list separately in addition to code for primary
procedure)
Revascularization, endovascular, open or percutaneous, tibial!
peroneal artery, unilateral, each additional vessel; with
trans luminal stent placement(s), includes angioplasty within the
same vessel, when perfonned (list separately in addition to code
for primary procedure)
Revascularization, endovascular, open or percutaneous, tibial!
peroneal artery, unilateral, each additional vessel; with
transluminal stent placement(s) and atherectomy, includes
angioplasty within the same vessel, when perfonned (list
separately in addition to code for primary procedure)
Laparoscopy, surgical, supracervical hysterectomy, for uterus
250 g or less
Laparoscopy, surgical, supracervical hysterectomy, for uterus
250 g or less; with removal oftube(s) andlor ovary(s)
Laparoscopy, surgical, with total hysterectomy, for uterus 250 g
or less
Laparoscopy, surgical, with total hysterectomy, for uterus 250 g
or less; with removal oftube(s) andlor ovary(s)
Laminectomy with exploration andlor decompression of spinal

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G2

G2

G2

J8

G2

G2

G2

G2

G2
G2
G2
G2
G2

ER15NO12.076

CY
2013
HCPCS
Code

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BILLING CODE 4120–01–C

b. Covered Surgical Procedures
Designated as Office-Based

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(1) Background
In the August 2, 2007 ASC final rule,
we finalized our policy to designate as
‘‘office-based’’ those procedures that are
added to the ASC list of covered
surgical procedures in CY 2008 or later
years that we determine are performed
predominantly (more than 50 percent of
the time) in physicians’ offices based on
consideration of the most recent
available volume and utilization data for
each individual procedure code and/or,
if appropriate, the clinical
characteristics, utilization, and volume
of related codes. In that rule, we also
finalized our policy to exempt all
procedures on the CY 2007 ASC list
from application of the office-based
classification (72 FR 42512). The
procedures that were added to the ASC
list of covered surgical procedures
beginning in CY 2008 that we
determined were office-based were
identified in Addendum AA to that rule
by payment indicator ‘‘P2’’ (Officebased surgical procedure added to ASC
list in CY 2008 or later with MPFS
nonfacility PE RVUs; payment based on
OPPS relative payment weight); ‘‘P3’’
(Office-based surgical procedures added
to ASC list in CY 2008 or later with
MPFS nonfacility PE RVUs; payment
based on MPFS nonfacility PE RVUs); or

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‘‘R2’’ (Office-based surgical procedure
added to ASC list in CY 2008 or later
without MPFS nonfacility PE RVUs;
payment based on OPPS relative
payment weight), depending on whether
we estimated it would be paid according
to the standard ASC payment
methodology based on its OPPS relative
payment weight or at the MPFS
nonfacility PE RVU-based amount.
Consistent with our final policy to
annually review and update the list of
surgical procedures eligible for payment
in ASCs, each year we identify surgical
procedures as either temporarily officebased, permanently office-based, or nonoffice-based, after taking into account
updated volume and utilization data.
(2) Changes for CY 2013 to Covered
Surgical Procedures Designated as
Office-Based
In developing the CY 2013 OPPS/ASC
proposed rule, we followed our policy
to annually review and update the
surgical procedures for which ASC
payment is made and to identify new
procedures that may be appropriate for
ASC payment, including their potential
designation as office-based. We
reviewed CY 2011 volume and
utilization data and the clinical
characteristics for all surgical
procedures that are assigned payment
indicator ‘‘G2’’ (Non-office-based
surgical procedure added in CY 2008 or
later; payment based on OPPS relative
payment weight) in CY 2012, as well as

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for those procedures assigned one of the
temporary office-based payment
indicators, specifically ‘‘P2*,’’ ‘‘P3*,’’ or
‘‘R2*’’ in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74400
through 74408).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45163), we stated that our
review of the CY 2011 volume and
utilization data resulted in our
identification of six covered surgical
procedures that we believe meet the
criteria for designation as office-based.
We stated that the data indicated that
the procedures are performed more than
50 percent of the time in physicians’
offices, and that our medical advisors
believed the services are of a level of
complexity consistent with other
procedures performed routinely in
physicians’ offices. The six CPT codes
we proposed to permanently designate
as office-based were listed in Table 40
of the CY 2013 OPPS/ASC proposed
rule (77 FR 45163), and are listed in
Table 52 below. We invited public
comments on this proposal.
Comment: One commenter disagreed
with the policy to make payment at the
lower of the ASC rate or the MPFS
nonfacility PE RVU payment amount for
procedures that CMS identifies as officebased. This commenter expressed
concern that this policy does not
provide adequate payment for some
services performed in an ASC.
Response: We have responded to this
comment in the past and we continue to

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believe that our policy of identifying
low complexity procedures that are
usually provided in physicians’ offices
and limiting their payment in ASCs to
the physician’s office payment amount
is necessary and valid. We believe this
is the most appropriate approach to
prevent payment incentives for services
to move from physicians’ offices to

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ASCs for the many newly covered low
complexity procedures on the ASC list.
We refer readers to our response to this
comment in the CY 2010, CY 2011, and
CY 2012 OPPS/ASC final rules with
comment period (74 FR 60605 through
60607; 75 FR 72034 through 72036; and
76 FR 74401, respectively).

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68445

After consideration of the public
comments we received, we are
finalizing our CY 2013 proposal to
designate the procedures displayed in
Table 52 below as permanently officebased for CY 2013.
BILLING CODE 4120–01–P

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TABLE 52.-ASC COVERED SURGICAL PROCEDURES NEWLY
DESIGNATED AS PERMANENTLY OFFICE-BASED FOR CY 2013

CY2013
CPT
Code

31295

31296

31297

53860

64566

Proposed
CY2013
ASC
Payment
Indicator*

Final CY
2013 ASC
Payment
Indicator*

G2

P2

P2

G2

P2

P2

G2

P2

P2

G2

P2

P2

G2

P3

P3

G2

P2

P2

*Final payment indicators are based on a comparison of the final rates according to the ASC standard
rate setting methodology and the MPFS final rates. At the time this final rule with comment period was
being developed for publication, current law authorizes a negative update to the MPFS payment rates for
CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS final rule with comment
period.
We also reviewed CY 2011 volume
and utilization data and other
information for the eight procedures

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finalized for temporary office-based
status in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74404

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through 74408). Among these eight
procedures, there were very few claims
data for six procedures: CPT code 0099T

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G0365

CY 2013 Long Descriptor
Nasal/sinus endoscopy,
surgical; with dilation of
maxillary sinus ostium (eg,
balloon dilation), transnasal
or via canine fossa
Nasal/sinus endoscopy,
surgical; with dilation of
frontal sinus ostium (eg,
balloon dilation)
Nasal/sinus endoscopy,
surgical; with dilation of
sphenoid sinus ostium (eg,
balloon dilation)
Transurethral radiofrequency
micro-remodeling of the
female bladder neck and
proximal urethra for stress
urinary incontinence
Posterior tibial
neurostimulation,
percutaneous needle
electrode, single treatment,
includes programming
Vessel mapping of vessels
for hemodialysis access
(services for preoperative
vessel mapping prior to
creation of hemodialysis
access using an autogenous
hemodialysis conduit,
including arterial inflow and
venous outflow)

CY 2012
ASC
Payment
Indicator

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(Implantation of intrastromal corneal
ring segments); CPT code 0124T
(Conjunctival incision with posterior
extrascleral placement of
pharmacological agent (does not include
supply of medication)); CPT code 0226T
(Anoscopy, high resolution (HRA) (with
magnification and chemical agent
enhancement); diagnostic, including
collection of specimen(s) by brushing or
washing when performed); CPT code
0227T (Anoscopy, high resolution
(HRA) (with magnification and chemical
agent enhancement); with biopsy(ies));
CPT code C9800 (Dermal injection
procedure(s) for facial lipodystrophy
syndrome (LDS) and provision of
Radiesse or Sculptra dermal filler,
including all items and supplies); and
CPT code 67229 (Treatment of extensive
or progressive retinopathy, one or more
sessions; preterm infant (less than 37
weeks gestation at birth), performed
from birth up to 1 year of age (eg,
retinopathy of prematurity),
photocoagulation or cryotherapy).
Consequently, we proposed in the CY
2013 OPPS/ASC proposed rule (77 FR
45163) to maintain their temporary
office-based designations for CY 2013.

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The volume and utilization data for
the remaining two procedures that have
temporary office-based designations for
CY 2012 are sufficient to indicate that
these procedures are not performed
predominantly in physicians’ offices
and, therefore, should not be assigned
an office-based payment indicator in CY
2013. Consequently, we proposed to
assign payment indicator ‘‘G2’’ to the
following two covered surgical
procedure codes in CY 2013:
• CPT code 37761 (Ligation of
perforator vein(s), subfascial, open,
including ultrasound guidance, when
performed, 1 leg); and
• CPT code 0232T (Injection(s),
platelet rich plasma, any tissue,
including image guidance, harvesting
and preparation when performed).
The proposed CY 2013 payment
indicator designations for the eight
procedures that were temporarily
designated as office-based in CY 2012
were displayed in Table 41 of the CY
2013 OPPS/ASC proposed rule (77 FR
45164). The procedures for which the
proposed office-based designations for
CY 2013 are temporary also were
indicated by asterisks in Addendum AA
to the proposed rule (which was

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68447

available via the Internet on the CMS
Web site). We invited public comments
on this proposal.
We did not receive any public
comments that addressed our proposal
to continue to designate six of the eight
procedures, which were designated as
temporarily office-based for CY 2012, as
temporarily office-based for CY 2013.
Therefore, we are finalizing our
proposal to designate the six procedures
listed in Table 41 of the CY 2013 OPPS/
ASC proposed rule (77 FR 45164) and
restated in Table 53 below, which were
designated as temporarily office-based
for CY 2012, as temporarily office-based
for CY 2013. In addition, we did not
receive any public comments that
addressed our proposal to not designate
as office-based in CY 2013 the two
remaining procedures that were
designated as temporarily office-based
for CY 2012. Therefore, we are finalizing
our proposal to not provide an officebased designation to the 2 procedures
listed in Table 41 of the CY 2013 OPPS/
ASC proposed rule (77 FR 45164), and
restated below in Table 53, which were
designated as temporarily office-based
for CY 2012.

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TABLE 53.-CY 2013 PAYMENT INDICATORS FOR ASC COVERED
SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICEBASED IN THE CY 2012 OPPS/ASC FINAL RULE WITH COMMENT PERIOD

CY
2013
CPT
Code
37761

67229

0099T
0124T

0226T

0227T

0232T

C9800

CY 2013 Long Descriptor
Ligation of perforator vein(s), subfascial, open,
including ultrasound guidance, when performed,
1 leg
Treatment of extensive or progressive
retinopathy, one or more sessions; preterm infant
(less than 37 weeks gestation at birth), performed
from birth up to 1 year of age (eg, retinopathy of
prematurity), photocoagulation or cryotherapy
Implantation of intrastromal corneal ring
segments
Conjunctival incision with posterior extrascleral
placement of pharmacological agent (does not
include supply of medication)
Anoscopy, high resolution (HRA) (with
magnification and chemical agent enhancement);
diagnostic, including collection of specimen(s) by
brushing or washing when performed
Anoscopy, high resolution (HRA) (with
magnification and chemical agent enhancement);
with biopsy(ies)
Injection(s), platelet rich plasma, any tissue,
including image guidance, harvesting and
preparation when performed
Dermal injection procedure(s) for facial
lipodystrophy syndrome (LDS) and provision of
Radiesse or Sculptra dermal filler, including all
items and supplies

CY2012
ASC
Payment
Indicator

CY2013
ASC
Payment
Indicator**

R2*

G2

R2*

R1*

R2*

R2*

R2*

R2*

R2*

R2*

R2*

R2*

R2*

G2

R2*

R2*

* If designation is temporary.
** Final payment indicators are based on a comparison of the fmal rates according to the ASC standard

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BILLING CODE 4120–01–C

c. ASC Covered Surgical Procedures
Designated as Device-Intensive
(1) Background
As discussed in the August 2, 2007
final rule (72 FR 42503 through 42508),
we adopted a modified payment

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methodology for calculating the ASC
payment rates for covered surgical
procedures that are assigned to the
subset of OPPS device-dependent APCs
with a device offset percentage greater
than 50 percent of the APC cost under

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ratesetting methodology and the MPFS fmal rates. At the time this fmal rule with comment periodi was
being developed for pUblication, current law authorizes a negative update to the MPFS payment rates for
CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS fmal rule with cqmment
period.

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the OPPS, in order to ensure that
payment for the procedure is adequate
to provide packaged payment for the
high-cost implantable devices used in
those procedures.
(2) Changes to List of Covered Surgical
Procedures Designated as DeviceIntensive for CY 2013
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45164), we proposed for CY
2013 to update the ASC list of covered
surgical procedures that are eligible for
payment according to our deviceintensive procedure payment
methodology, consistent with the
proposed OPPS device-dependent APC
update, reflecting the proposed APC
assignments of procedures, designation
of APCs as device-dependent, and APC
device offset percentages based on the
CY 2011 OPPS claims and cost report
data available for the proposed rule. The
OPPS device-dependent APCs are
discussed further in section II.A.2.d.(1)
of this final rule with comment period.
The ASC covered surgical procedures
that we proposed to designate as deviceintensive and that would be subject to
the device-intensive procedure payment
methodology for CY 2013 were listed in
Table 42 of the CY 2013 OPPS/ASC
proposed rule (77 FR 45165 through
45166). The CPT code, the CPT code
short descriptor, the proposed CY 2013
ASC payment indicator (PI), the
proposed CY 2013 OPPS APC
assignment, the proposed CY 2013
OPPS APC device offset percentage, and
an indication if the full credit/partial
credit (FB/FC) device adjustment policy
would apply were also listed in Table
42 of the proposed rule. All of these
procedures were included in
Addendum AA to the proposed rule
(which was available via the Internet on
the CMS Web site). We invited public
comments on this proposal.
Comment: Some commenters
expressed the same general concerns
made in previous rulemakings regarding
the sufficiency of ASC payment for
device-related services and
recommended modifications to the ASC
device-intensive payment methodology.
The commenters argued that CMS
should apply the device-intensive
payment methodology to all procedures
for which CMS can establish a median
device cost, regardless of whether the
procedures are assigned to APCs that are
designated as device-dependent under
the OPPS. In a related suggestion, the
commenters urged CMS to establish the
threshold used to determine deviceintensive procedures at 50 percent of
the ‘‘unadjusted’’ ASC payment rate
(OPPS relative weight X ASC
conversion factor) instead of the OPPS

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Jkt 229001

payment rate. The commenters also
made the same argument as made in
prior rulemakings—that CMS should
not adjust the device portion of the ASC
payment for device-intensive
procedures by the wage index.
Response: In the August 2, 2007 final
rule (72 FR 42504), we established that
the modified payment methodology for
calculating ASC payment rates for
device-intensive procedures shall apply
to ASC covered surgical procedures that
are assigned to device-dependent APCs
under the OPPS for the same calendar
year, where those APCs have a device
cost of greater than 50 percent of the
APC cost (that is, the device offset
percentage is greater than 50). We
continue to believe these criteria ensure
that ASC payment rates are adequate to
provide packaged payment for high cost
implantable devices and ensure
Medicare beneficiaries have access to
these procedures in all appropriate
settings of care.
We do not agree with the commenters
that the device-intensive methodology
should be applied to all procedures
where a device offset can be established,
regardless of whether the procedure is
assigned to a device-dependent APC
under the OPPS. Nor do we agree with
the commenters who suggest using a
threshold to determine device-intensive
procedures that is based on 50 percent
of the ASC payment rate instead of the
OPPS payment rate. We continue to
believe that when device costs comprise
less than 50 percent of total procedure
costs, those costs are less likely to be as
predictable across sites-of-service.
Accordingly, we believe that it is
possible for ASCs to achieve efficiencies
relative to HOPDs when providing those
procedures, and that the application of
the ASC conversion factor to the entire
ASC payment weight is appropriate. We
refer readers to our response to this
comment in the CY 2010, CY 2011, and
CY 2012 OPPS/ASC final rules with
comment period (74 FR 60608 and
60609; 75 FR 72039; and 76 FR 74409,
respectively).
We also continue to believe it would
not be appropriate to vary the portion of
the national payment that is wageadjusted for different services, such as
applying the wage index only to the
service portion of the ASC payment for
device-intensive procedures, as the
commenters requested. Consistent with
the OPPS, we apply the ASC geographic
wage adjustment to the entire ASC
payment rate for device-intensive
procedures. We refer readers to our
response to this comment in the CY
2009, CY 2010, CY 2011, and CY 2012
OPPS/ASC final rules with comment
period (73 FR 68735; 74 FR 60608

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68449

through 60609; 75 FR 72039; and 76 FR
74409, respectively).
After consideration of the public
comments we received, we are
designating the ASC covered surgical
procedures displayed in Table 54 below
as device-intensive for CY 2013. The
CPT code, the CPT code short
descriptor, the final CY 2013 ASC
payment indicator (PI), the final CY
2013 OPPS APC assignment, the final
CY 2013 OPPS APC device offset
percentage, and an indication if the full
credit/partial credit (FB/FC) device
adjustment policy will apply are also
listed in Table 54 of this final rule with
comment period. As we discuss in
section XIII.B.3. of the CY 2013 OPPS/
ASC proposed rule (77 FR 45161
through 45162) and this final rule with
comment period, we incorporate new
Category I and Category III CPT codes
and new Level II HCPCS codes that are
effective October 1, 2012 and January 1,
2013 in this final rule with comment
period. Because these codes were not
available to us until after the CY 2013
OPPS/ASC proposed rule was
published, these codes were not
included in that rule. We have reviewed
these new codes and have added six of
these CPT codes to Table 54 because
they are ASC covered surgical
procedures and are assigned to devicedependent APCs that meet the ASC
device-intensive criteria. Specifically,
we added the following new codes to
the list of ASC device-intensive
procedures: CPT code 0316T (Vagus
nerve blocking therapy (morbid obesity);
replacement of pulse generator); CPT
code 0319T (Insertion or replacement of
subcutaneous implantable defibrillator
system with subcutaneous electrode);
CPT code 0321T (Insertion of
subcutaneous implantable defibrillator
pulse generator only with existing
subcutaneous electrode); CPT code
0323T (Removal of subcutaneous
implantable defibrillator pulse generator
with replacement of subcutenous
implantable defibrillator pulse generator
only); CPT code 24370 (Revision of total
elbow arthroplasty, including allograft
when performed; humeral or ulnar
component); and CPT code 24371
(Revision of total elbow arthroplasty,
including allograft when performed;
humeral and ulnar component). These
new device-intensive procedures are
flagged with comment indicator ‘‘NI’’ in
Addendum AA to this OPPS/ASC final
rule with comment period to indicate
that we are assigning them an interim
payment status which is subject to
public comment. We will respond to
any public comments received in the CY
2014 OPPS/ASC final rule with

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comment period. Each device-intensive
procedure is assigned payment indicator
‘‘J8.’’ All of these procedures are
included in Addendum AA to this final
rule with comment period (which is
available via the Internet on the CMS
Web site). The OPPS device-dependent
APCs are discussed further in section
II.A.2.d.(1) of this final rule with
comment period.
d. Adjustment to ASC Payments for No
Cost/Full Credit and Partial Credit
Devices

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We generally discuss the no cost/full
credit and partial credit devices under
the heading entitled ‘‘ASC Payment for
Covered Surgical Procedures.’’
However, because the no cost/full credit
and partial credit device policy applies
to a subset of device-intensive
procedures, we believe it would be
clearer to discuss the device-intensive
procedure policy and the no cost/full
credit and partial credit device policy
consecutively and to consolidate the
tables that we usually publish
separately. Our ASC policy with regard
to payment for costly devices implanted
in ASCs at no cost/full credit or partial
credit as set forth in § 416.179 is
consistent with the OPPS policy. The
proposed and final CY 2013 OPPS APCs
and devices subject to the adjustment
policy are discussed in section IV.B.2. of
this final rule with comment period.
The established ASC policy adopts the
OPPS policy and reduces payment to
ASCs when a specified device is
furnished without cost or with full
credit or partial credit for the cost of the
device for those ASC covered surgical
procedures that are assigned to APCs
under the OPPS to which this policy
applies. We refer readers to the CY 2009
OPPS/ASC final rule with comment
period for a full discussion of the ASC
payment adjustment policy for no cost/
full credit and partial credit devices (73
FR 68742 through 68744).
Consistent with the OPPS, in the CY
2013 OPPS/ASC proposed rule (77 FR
45165), we proposed to update the list
of ASC covered device-intensive
procedures and devices that would be

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subject to the no cost/full credit and
partial credit device adjustment policy
for CY 2013. Table 42 of the proposed
rule (77 FR 45165 through 45166)
displayed the ASC covered deviceintensive procedures that we proposed
would be subject to the no cost/full
credit or partial credit device
adjustment policy for CY 2013.
Specifically, we stated that when a
procedure that is listed in Table 42 of
the proposed rule is subject to the no
cost/full credit or partial credit device
adjustment policy and is performed to
implant a device that is listed in Table
43 of the proposed rule (77 FR 45166
through 45167), where that device is
furnished at no cost or with full credit
from the manufacturer, the ASC would
append the HCPCS ‘‘FB’’ modifier on
the line with the procedure to implant
the device. The contractor would reduce
payment to the ASC by the device offset
amount that we estimate represents the
cost of the device when the necessary
device is furnished without cost to the
ASC or with full credit. We would
provide the same amount of payment
reduction based on the device offset
amount in ASCs that would apply under
the OPPS under the same
circumstances. We continue to believe
that the reduction of ASC payment in
these circumstances is necessary to pay
appropriately for the covered surgical
procedure being furnished by the ASC.
For partial credit, we proposed to
reduce the payment for implantation
procedures listed in Table 42 of the
proposed rule that are subject to the no
cost/full credit or partial credit device
adjustment policy by one-half of the
device offset amount that would be
applied if a device was provided at no
cost or with full credit, if the credit to
the ASC is 50 percent or more of the
cost of the new device. The ASC would
append the HCPCS ‘‘FC’’ modifier to the
HCPCS code for a surgical procedure
listed in Table 42 of the proposed rule
that is subject to the no cost/full credit
or partial credit device adjustment
policy, when the facility receives a
partial credit of 50 percent or more of
the cost of a device listed in Table 43

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of the proposed rule. In order to report
that they received a partial credit of 50
percent or more of the cost of a new
device, ASCs would have the option of
either: (1) Submitting the claim for the
device replacement procedure to their
Medicare contractor after the
procedure’s performance but prior to
manufacturer acknowledgment of credit
for the device, and subsequently
contacting the contractor regarding a
claim adjustment once the credit
determination is made; or (2) holding
the claim for the device implantation
procedure until a determination is made
by the manufacturer on the partial credit
and submitting the claim with the ‘‘FC’’
modifier appended to the implantation
procedure HCPCS code if the partial
credit is 50 percent or more of the cost
of the replacement device. Beneficiary
coinsurance would continue to be based
on the reduced payment amount. We
invited public comments on these
proposals
We did not receive any comments on
our CY 2013 proposal to continue the no
cost/full credit and partial credit device
adjustment policy for ASCs. For CY
2013, as we proposed, we will reduce
the payment for the device implantation
procedures listed in Table 54 below that
are subject to the adjustment by the full
device offset amount for no cost/full
credit cases. ASCs must append the
modifier ‘‘FB’’ to the HCPCS procedure
code when the device furnished without
cost or with full credit is listed in Table
55, below, and the associated
implantation procedure code is listed in
Table 54. In addition, for CY 2013, we
will reduce the payment for
implantation procedures listed in Table
54 that are subject to the adjustment by
one half of the device offset amount if
a device is provided with partial credit,
if the credit to the ASC is 50 percent or
more of the device cost. If the ASC
receives a partial credit of 50 percent or
more of the cost of a device listed in
Table 55, the ASC must append the
modifier ‘‘FC’’ to the associated
implantation procedure code if the
procedure is listed in Table 54.
BILLING CODE 4120–01–P

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68451

CPT
Code
0282T
0283T
0302T
0304T
0316T
0319T
0321T
0323T
19296
19297
19298
19325
19342
19357
24361
24363
24366
24370
24371
25441
25442
25446
27446
33206
33207
33208
33212
33213
33214

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Short Descriptor
Periph field stimul trial
Periph field stimul penn
Icar ischm mntrng sys compl
Icar isch mntmg sys device
Replc vagus nerve pIs gen
Insert subq defib w/eltrd
Insert subq de fib pIs gen
Rmvl & replc subq pIs gen
Place po breast cath for rad
Place breast cath for rad
Place breast rad tube/caths
Enlarge breast with implant
Delayed breast prosthesis
Breast reconstruction
Reconstruct elbow joint
Replace elbow joint
Reconstruct head of radius
Revise reconst elbow joint
Revise reconst elbow joint
Reconstruct wrist joint
Reconstruct wrist joint
Wrist replacement
Revision of knee joint
Insertion of heart pacemaker
Insertion of heart pacemaker
Insertion of heart pacemaker
Insertion of pulse generator
Insertion of pulse generator
Upgrade of pacemaker system

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Final
CY 2013
ASCPI
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8

Fmt 4701

Sfmt 4725

Final
CY2013
OPPS
APC
0040
0318
0089
0090
0039
0107
0107
0107
0648
0648
0648
0648
0648
0648
0425
0425
0425
0425
0425
0425
0425
0425
0425
0089
0089
0655
0090
0654
0655

Final
CY2013
DeviceDependent
APC
FBIFC
Offset
Policy Will
Percent
Apply
56%
Yes
89%
Yes
69%
Yes
71%
Yes
87%
Yes
84%
Yes
84%
Yes
84%
Yes
50%
Yes
50%
Yes
50%
Yes
50%
Yes
50%
Yes
50%
Yes
59%
Yes
59%
Yes
59%
Yes
59%
Yes
59%
Yes
59%
Yes
59%
Yes
59%
Yes
59%
Yes
69%
Yes
69%
Yes
73%
Yes
71%
Yes
74%
Yes
73%
Yes

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ER15NO12.080

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TABLE 54.-ASC COVERED SURGICAL PROCEDURES DESIGNATED AS
DEVICE-INTENSIVE FOR CY 2013, INCLUDING ASC COVERED SURGICAL
PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL
CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY

Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations

CPT
Code
33221
33224
33225
33227
33228
33229
33230
33231
33240
33249
33262
33263
33264
33282
37227
37231
53440
53444
53445
53447
54400
54401
54405
54410
54416
55873
61885
61886
62361
62362
63650
63655
63663

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Short Descriptor
Insert pulse gen mult leads
Insert pacing lead & connect
Lventric pacing lead add-on
Remove&replace pm gen singl
Remv&replc pm gen dual lead
Remv&replc pm gen mult leads
Insrt pulse gen w/dualleads
Insrt pulse gen w/dualleads
Insert pulse generator
Eltrdlinsert pace-defib
Remv&replc cvd gen sing lead
Remv&replc cvd gen dual lead
Remv&replc cvd gen mult lead
Implant pat-active ht record
Fern/popl revasc stnt & ather
Tib/per revasc stent & ather
Male sling procedure
Insert tandem cuff
Insert uro/ves nck sphincter
Remove/replace ur sphincter
Insert semi-rigid prosthesis
Insert se1f-contd prosthesis
Insert multi-comp penis pros
Remove/replace penis prosth
Remv/repl penis contain pros
Cryoablate prostate
Insrt/redo neurostim 1 array
Implant neurostim arrays
Implant spine infusion pump
Implant spine infusion pump
Implant neuro-electrodes
Implant neuro-electrodes
Revise spine eltrd perq aray

16:20 Nov 14, 2012

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Final
CY2013
ASCPI
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8

Fmt 4701

Sfmt 4725

Final
CY2013
OPPS
APC
0654
0655
0655
0090
0654
0654
0107
0107
0107
0108
0107
0107
0107
0680
0319
0319
0385
0385
0386
0386
0385
0386
0386
0386
0386
0674
0039
0315
0227
0227
0040
0061
0040

Final
CY2013
DeviceDependent
APC
Offset
Percent
74%
73%
73%
71%
74%
74%
84%
84%
84%
84%
84%
84%
84%
74%
53%
53%
62%
62%
70%
70%
62%
70%
70%
70%
70%
55%
87%
88%
82%
82%
56%
69%
56%

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15NOR2

FBIFC
Policy Will
Apply
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes

ER15NO12.081

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63664
63685
64553
64555
64561
64565
64568
64569
64575
64580
64581
64590
65770
69714
69715
69717
69718
69930
G0448

VerDate Mar<15>2010

Short Descriptor
Revise spine eltrd plate
Insrt/redo spine n generator
Implant neuro-electrodes
Implant neuro-electrodes
Implant neuro-electrodes
Implant neuro-electrodes
Implant neuro-electrodes
Revise/repl vagus n eltrd
Implant neuro-electrodes
Implant neuro-electrodes
Implant neuro-electrodes
Insrt/redo pn/gastr stimul
Revise cornea with implant
Implant temple bone w/stimul
Temple bne implnt w/stimulat
Temple bone implant revision
Revise temple bone implant
Implant cochlear device
Place perm pacing cardiovert

16:20 Nov 14, 2012

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Final
CY 2013
OPPS
APC

J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8

0040
0039
0040
0040
0040
0040
0318
0040
0061
0061
0061
0039
0293
0425
0425
0425
0425
0259
0108

56%
87%
56%
56%
56%
56%
89%
56%
69%
69%
69%
87%
63%
59%
59%
59%
59%
84%
84%

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15NOR2

FBIFC
Policy Will
Apply
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes

ER15NO12.082

CPT
Code

Final
CY2013
ASCPI

Final
CY2013
DeviceDependent
APC
Offset
Percent

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TABLE 55.-DEVICES FOR WHICH THE "FB" OR "FC" MODIFIER MUST
BE REPORTED WITH THE PROCEDURE CODE IN CY 2013 WHEN
FURNISHED AT NO COST OR WITH FULL OR PARTIAL CREDIT

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CY 2013 Short Descriptor
AICD, dual chamber
AICD, single chamber
Cath, brachytx seed adm
Conn tiss, human(inc fascia)
Conn tiss, non-human
Event recorder, cardiac
Generator, neurostim, imp
Rep dey, urinary, wlsling
Infusion pump, programmable
Joint device (implantable)
Stent, non-coat/coy wlo del
Lead, neurostimulator
Lead, pmkr, transvenous VDD
Mesh (implantable)
Pmkr, dual, rate-resp
Pmkr, single, rate-resp
Prosthesis, breast, imp
Prosthesis, penile, inflatab
Pros, urinary sph, imp
Generator, neuro rechg bat sys
Dialysis access system
AICD, other than sing/dual
Infusion pump, non-prog, perm
Lead, AICD, endo dual coil
Lead, neurostim, test kit
Lead, pmkr, other than trans
Lead coronary venous
Probe, cryoablation
Pmkr, dual, non rate-resp
Pmkr, single, non rate-resp
Pmkr, other than sing/dual
Prosthesis, penile, non-inf
Infusion pump, non-prog, temp
Rep dey, urinary, wlo sling
Implant breast silicone/eq

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ER15NO12.083

sroberts on DSK5SPTVN1PROD with

CY2013
Device HCPCS
Code
C1721
C1722
C1728
C1762
C1763
C1764
C1767
C1771
C1772
C1776
C1777
C1778
C1779
C1781
C1785
C1786
C1789
C1813
C1815
C1820
C1881
C1882
C1891
C1895
C1897
C1898
C1900
C2618
C2619
C2620
C2621
C2622
C2626
C2631
L8600

e. ASC Treatment of Surgical
Procedures Removed From the OPPS
Inpatient List for CY 2013
As we discussed in the CY 2009
OPPS/ASC final rule with comment
period (73 FR 68724), we adopted a
policy to include in our annual
evaluation of the ASC list of covered
surgical procedures, a review of the
procedures that are being proposed for
removal from the OPPS inpatient list for
possible inclusion on the ASC list of
covered surgical procedures. As stated
in the CY 2013 OPPS/ASC proposed
rule (77 FR 45167), we evaluated each
of the two procedures we proposed to
remove from the OPPS inpatient list for
CY 2013 based on the criteria for
exclusion from the list of covered ASC

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2. Covered Ancillary Services
Consistent with the established ASC
payment system policy, in the CY 2013
OPPS/ASC proposed rule (77 FR 45167),
we proposed to update the ASC list of
covered ancillary services to reflect the
proposed payment status for the
services under the CY 2013 OPPS.
Maintaining consistency with the OPPS
may result in proposed changes to ASC
payment indicators for some covered
ancillary items and services because of
changes that are being proposed under
the OPPS for CY 2013. For example, a

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16:20 Nov 14, 2012

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surgical procedures. As stated in the
proposed rule, we believe that these two
procedures should continue to be
excluded from the ASC list of covered
surgical procedures for CY 2013 because
they would be expected to pose a
significant risk to beneficiary safety or
to require an overnight stay in ASCs.
The CPT codes for these two procedures
and their long descriptors were listed in
Table 44 of the proposed rule (77 FR
45167). We invited public comments on
this proposal.
We did not receive any public
comments regarding the procedures that
we proposed to exclude from the list of
ASC covered procedures for CY 2013
that were proposed for removal from the
CY 2013 OPPS inpatient list. However,
as detailed in section IX of this final

rule with comment period, the proposal
to remove the procedure described by
CPT code 27447 (Arthroplasty, knee,
condyle and plateau; medical and
lateral compartments with or without
patella resurfacing (total knee
arthroplasty)) from the OPPS inpatient
list is not being finalized for CY 2013.
Based on public comments received,
CPT code 27447 will remain on the
OPPS inpatient list for CY 2013.
Therefore, we are finalizing our
proposal to continue to exclude the
procedure described by the CPT code
22856, which is listed in Table 56
below, from the list of ASC covered
surgical procedures for CY 2013. In
addition, we are excluding CPT code
27447 because it will remain on the
OPPS inpatient list for CY 2013.

covered ancillary service that was
separately paid under the revised ASC
payment system in CY 2012 may be
proposed for packaged status under the
CY 2013 OPPS and, therefore, also
under the ASC payment system for CY
2013. Comment indicator ‘‘CH,’’
discussed in section XIV.F. of the CY
2013 OPPS/ASC proposed rule (77 FR
45172), was used in Addendum BB to
that proposed rule (which is available
via the Internet on the CMS Web site)
to indicate covered ancillary services for
which we proposed a change in the ASC
payment indicator to reflect a proposed

change in the OPPS treatment of the
service for CY 2013.
Except for the Level II HCPCS codes
listed in Table 37 of the CY 2013 OPPS/
ASC proposed rule (77 FR 45161), all
ASC covered ancillary services and their
proposed payment indicators for CY
2013 were included in Addendum BB to
that proposed rule.
We did not receive any public
comments on our proposal. Therefore,
we are finalizing, without modification,
our proposal to update the ASC list of
covered ancillary services to reflect the
payment status for the services under

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the OPPS. All CY 2013 ASC covered
ancillary services and their final
payment indicators are included in
Addendum BB to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
D. ASC Payment for Covered Surgical
Procedures and Covered Ancillary
Services

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1. Payment for Covered Surgical
Procedures
a. Background
Our ASC payment policies for
covered surgical procedures under the
revised ASC payment system are fully
described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66828 through 66831). Under our
established policy for the revised ASC
payment system, the ASC standard
ratesetting methodology of multiplying
the ASC relative payment weight for the
procedure by the ASC conversion factor
for that same year is used to calculate
the national unadjusted payment rates
for procedures with payment indicators
‘‘G2’’ and ‘‘A2.’’ Payment indicator
‘‘A2’’ was developed to identify
procedures that were included on the
list of ASC covered surgical procedures
in CY 2007 and were, therefore, subject
to transitional payment prior to CY
2011. Although the 4-year transitional
period has ended and payment indicator
‘‘A2’’ is no longer required to identify
surgical procedures subject to
transitional payment, we retained
payment indicator ‘‘A2’’ because it is
used to identify procedures that are
exempted from application of the officebased designation.
The rate calculation established for
device-intensive procedures (payment
indicator ‘‘J8’’) is structured so that the
packaged device payment amount is the
same as under the OPPS, and only the
service portion of the rate is subject to
the ASC standard ratesetting
methodology. In the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74377 through 74451), we updated
the CY 2011 ASC payment rates for ASC
covered surgical procedures with
payment indicators of ‘‘A2,’’ ‘‘G2,’’ and
‘‘J8’’ using CY 2010 data, consistent
with the CY 2012 OPPS update.
Payment rates for device-intensive
procedures also were updated to
incorporate the CY 2012 OPPS device
offset percentages.
Payment rates for office-based
procedures (payment indicators ‘‘P2,’’
‘‘P3,’’ and ‘‘R2’’) are the lower of the
MPFS nonfacility PE RVU-based
amount (we refer readers to the CY 2013
MPFS final rule with comment period)
or the amount calculated using the ASC

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standard ratesetting methodology for the
procedure. In the CY 2012 OPPS/ASC
final rule with comment period, we
updated the payment amounts for
office-based procedures (payment
indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) using
the most recent available MPFS and
OPPS data. We compared the estimated
CY 2012 rate for each of the office-based
procedures, calculated according to the
ASC standard ratesetting methodology,
to the MPFS nonfacility PE RVU-based
amount to determine which was lower
and, therefore, would be the CY 2012
payment rate for the procedure
according to the final policy of the
revised ASC payment system
(§ 416.171(d)).
b. Update to ASC Covered Surgical
Procedure Payment Rates for CY 2013
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45168), we proposed to
update ASC payment rates for CY 2013
using the established rate calculation
methodologies under § 416.171. We note
that, as discussed in section II.A.2.f. of
that proposed rule (77 FR 45094 through
45098), because we proposed to base the
OPPS relative payment weights on
geometric mean costs for CY 2013, the
ASC system would shift to the use of
geometric means to determine relative
payment weights under the ASC
standard ratesetting methodology. We
proposed to continue to use the amount
calculated under the ASC standard
ratesetting methodology for procedures
assigned payment indicators ‘‘A2’’ and
‘‘G2.’’
We proposed that payment rates for
office-based procedures (payment
indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) and
device-intensive procedures (payment
indicator ‘‘J8’’) be calculated according
to our established policies,
incorporating the device-intensive
procedure methodology as appropriate.
Thus, we proposed to update the
payment amounts for device-intensive
procedures based on the CY 2013 OPPS
proposal that reflects updated proposed
OPPS device offset percentages, and to
make payment for office-based
procedures at the lesser of the proposed
CY 2013 MPFS nonfacility PE RVUbased amount or the proposed CY 2013
ASC payment amount calculated
according to the standard ratesetting
methodology. We invited public
comments on these proposals.
We did not receive any public
comments on our proposal to calculate
CY 2013 payment rates for ASC-covered
surgical procedures according to our
established methodologies. Therefore,
we are finalizing our CY 2013 proposal,
without modification, to calculate the
CY 2013 final ASC payment rates for

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ASC-covered surgical procedures
according to our established
methodologies.
c. Waiver of Coinsurance and
Deductible for Certain Preventive
Services
As discussed in the CY 2013 OPPS/
ASC proposed rule (77 FR 45168),
section 1833(a)(1) and section 1833(b)(1)
of the Act waive the coinsurance and
the Part B deductible for those
preventive services under section
1861(ddd)(3)(A) of the Act as described
in section 1861(ww)(2) of the Act
(excluding electrocardiograms) that are
recommended by the United States
Preventive Services Task Force
(USPSTF) with a grade of A or B for any
indication or population and that are
appropriate for the individual. Section
1833(b) of the Act also waives the Part
B deductible for colorectal cancer
screening tests that become diagnostic.
In the CY 2011 OPPS/ASC final rule
with comment period, we finalized our
policies with respect to these provisions
and identified the ASC covered surgical
procedures and covered ancillary
services that are preventive services that
are recommended by the USPSTF with
a grade of A or B for which the
coinsurance and the deductible are
waived. For a complete discussion of
our policies and identified services, we
refer readers to the CY 2011 OPPS/ASC
final rule with comment period (75 FR
72047 through 72049). We did not
propose any changes to our policies or
the categories of services in the CY 2013
OPPS/ASC proposed rule. We identify
the specific services with a double
asterisk in Addenda AA and BB to this
CY 2013 OPPS/ASC final rule with
comment period.
d. Payment for the Cardiac
Resynchronization Therapy Composite
Cardiac resynchronization therapy
(CRT) uses electronic devices to
sequentially pace both sides of the heart
to improve its output. CRT utilizes a
pacing electrode implanted in
combination with either a pacemaker or
an implantable cardioverter defibrillator
(ICD). CRT performed by the
implantation of an ICD along with a
pacing electrode is referred to as ‘‘CRT–
D.’’ In the CY 2012 OPPS/ASC final rule
with comment period, we finalized our
proposal to establish the CY 2012 ASC
payment rate for CRT–D services based
on the OPPS payment rate applicable to
APC 0108 when procedures described
by CPT codes 33225 and 33249 are
performed on the same date of service
in an ASC. ASCs use the corresponding
HCPCS Level II G-code (G0448) for
proper reporting when the procedures

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described by CPT codes 33225 and
33249 are performed on the same date
of service. For a complete discussion of
our policy regarding payment for CRT–
D services in ASCs, we refer readers to
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74427 through
74428). We did not propose any changes
to our current policy regarding ASC
payment for CRT–D services for CY
2013.
e. Payment for Low Dose Rate (LDR)
Prostate Brachytherapy Composite
LDR prostate brachytherapy is a
treatment for prostate cancer in which
hollow needles or catheters are inserted
into the prostate, followed by
permanent implantation of radioactive
sources into the prostate through the
needles/catheters. At least two CPT
codes are used to report the treatment
service because there are separate codes
that describe placement of the needles/
catheters and the application of the
brachytherapy sources: CPT code 55875
(Transperineal placement of needles or
catheters into prostate for interstitial
radioelement application, with or
without cystoscopy) and CPT code
77778 (Interstitial radiation source
application; complex). Generally, the
component services represented by both
codes are provided in the same
operative session on the same date of
services to the Medicare beneficiary
being treated with LDR brachytherapy
for prostate cancer.
As detailed in section II.A.2.e.(2) of
the CY 2013 OPPS/ASC proposed rule
(77 FR 45088 through 45089), in CY
2008 under the OPPS, we began
providing a single payment for LDR
prostate brachytherapy when the
composite service, reported as CPT
codes 55875 and 77778, is furnished in
a single hospital encounter. We based
the payment for composite APC 8001
(LDR Prostate Brachytherapy
Composite) on the cost derived from
claims for the same date of service that
contain both CPT codes 55875 and
77778 and that do not contain other
separately paid codes that are not on the
bypass list. We implemented this policy
in the OPPS because reliance on single
procedure claims to set payment rates
for these services resulted in the use of
mainly incorrectly coded claims for LDR
prostate brachytherapy because a
correctly coded claim should include,
for the same date of service, CPT codes
for both needle/catheter placement and
application of radiation sources, as well
as separately coded imaging and
radiation therapy planning services (72
FR 66652 through 66655).
Currently under the ASC payment
system, ASCs receive separate payment

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for the component services that
comprise the LDR Prostate
Brachytherapy Composite when the two
services are provided on the same date
of service. Specifically, ASCs that report
CPT codes 55875 and 77778 on the
same date of service receive a payment
for CPT code 55875 where the payment
rate is based on the OPPS relative
payment weight for single procedure
claims, and a separate payment for CPT
code 77778 where payment is the lower
of the rate based on the OPPS relative
payment weight for single procedure
claims or the MPFS nonfacility PE–RVU
based amount.
A commenter to the CY 2012 OPPS/
ASC proposed rule (76 FR 74429
through 74430) requested that CMS pay
for LDR prostate brachytherapy services
under the ASC payment system based
on the composite OPPS payment rate
rather than making two separate
payments for the service reported by
CPT codes 55875 and 77778. The
commenter asserted that basing ASC
payments for the services on the
composite APC methodology in which
one payment is made for the
combination of the two services would
result in a more accurate payment than
is currently being made to ASCs because
ASC payment is based on costs from
single-service claims that CMS has
acknowledged are mostly incorrectly
coded claims. We responded that we
would take the commenter’s request
into consideration in future rulemaking,
recognizing the lead time that is
necessary for the creation of the
associated G-code that would be used to
identify when the procedures in the
LDR prostate brachytherapy composite
are performed on the same date of
service in an ASC.
Because we agree that data from OPPS
claims reporting both services required
for LDR prostate brachytherapy provide
the most accurate relative payment
weight upon which to base ASC
payment for the component services, in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45169), we proposed to establish
an ASC payment rate that is based on
the OPPS relative payment weight
applicable to APC 8001 when CPT
codes 55875 and 77778 are performed
on the same date of service in an ASC.
We also proposed to create a HCPCS
Level II G-code so that ASCs can
properly report when the procedures
described by CPT codes 55875 and
77778 are performed on the same date
of service and, therefore, receive the
appropriate LDR Prostate Brachytherapy
Composite payment. We stated that the
payment rate associated with the LDR
prostate brachytherapy composite will
be temporarily identified by HCPCS G-

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68457

code ‘‘GXXX1’’ in Addendum AA to the
CY 2013 OPPS/ASC proposed rule and
the permanent HCPCS G-code that will
identify this composite for ASCs will
appear in this final rule with comment
period. When not performed on the
same day as the service described by
CPT code 55875, the service described
by CPT code 77778 will continue to be
assigned to APC 0651. When not
performed on the same day as the
service described by CPT code 77778,
the service described by CPT code
55875 will continue to be assigned to
APC 0163. We invited public comment
on this proposal.
Comment: Several commenters
supported CMS’ proposal to establish an
ASC payment rate that is based on the
OPPS relative payment weight
applicable to APC 8001 when CPT
codes 55875 and 77778 are performed
on the same date of service in an ASC.
Response: We appreciate commenters’
support of our proposal. We are
finalizing our proposal, without
modification, to establish the CY 2013
ASC payment rate for LDR prostate
brachytherapy services based on the
OPPS relative payment weight
applicable to APC 8001 when CPT
codes 55875 and 77778 are performed
on the same date of service in an ASC.
ASCs will use the corresponding HCPCS
Level II G-code (G0458) for proper
reporting when the procedures
described by CPT codes 55875 and
77778 are performed on the same date
of service, and therefore receive the
appropriate LDR prostate brachytherapy
composite payment. When not
performed on the same day as the
service described by CPT code 55875,
the service described by CPT code
77778 will continue to be assigned to
APC 0651. When not performed on the
same day as the service described by
CPT code 77778, the service described
by CPT code 55875 will continue to be
assigned to APC 0163.
2. Payment for Covered Ancillary
Services
a. Background
Our final payment policies under the
revised ASC payment system for
covered ancillary services vary
according to the particular type of
service and its payment policy under
the OPPS. Our overall policy provides
separate ASC payment for certain
ancillary items and services integrally
related to the provision of ASC covered
surgical procedures that are paid
separately under the OPPS and provides
packaged ASC payment for other
ancillary items and services that are
packaged or conditionally packaged

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(status indicators ‘‘N,’’ ‘‘Q1,’’ and ‘‘Q2’’)
under the OPPS. In the CY 2013 OPPS/
ASC proposed rule (77 FR 45169), we
further clarified our policy regarding the
payment indicator assignment of codes
that are conditionally packaged in the
OPPS (status indicators ‘‘Q1’’ and
‘‘Q2’’). Under the OPPS, a conditionally
packaged code describes a HCPCS code
where the payment is packaged when it
is provided with a significant procedure
but is separately paid when the service
appears on the claim without a
significant procedure. Because ASC
services always include a surgical
procedure, HCPCS codes that are
conditionally packaged under the OPPS
are always packaged (payment indictor
‘‘N1’’) under the ASC payment system.
Thus, our final policy aligns ASC
payment bundles with those under the
OPPS (72 FR 42495). In all cases, in
order for those ancillary services also to
be paid, ancillary items and services
must be provided integral to the
performance of ASC covered surgical
procedures for which the ASC bills
Medicare.
Our ASC payment policies provide
separate payment for drugs and
biologicals that are separately paid
under the OPPS at the OPPS rates, while
we generally pay for separately payable
radiology services at the lower of the
MPFS nonfacility PE RVU-based (or
technical component) amount or the
rate calculated according to the ASC
standard ratesetting methodology (72 FR
42497). However, as finalized in the CY
2011 OPPS/ASC final rule with
comment period (75 FR 72050),
payment indicators for all nuclear
medicine procedures (defined as CPT
codes in the range of 78000 through
78999) that are designated as radiology
services that are paid separately when
provided integral to a surgical
procedure on the ASC list are set to
‘‘Z2’’ so that payment is made based on
the ASC standard ratesetting
methodology rather than the MPFS
nonfacility PE RVU amount, regardless
of which is lower. This modification to
the ASC payment methodology for
ancillary services was finalized in
response to a comment on the CY 2011
OPPS/ASC proposed rule that suggested
it is inappropriate to use the MPFSbased payment methodology for nuclear
medicine procedures because the
associated diagnostic
radiopharmaceutical, although packaged
under the ASC payment system, is
separately paid under the MPFS. We set
the payment indicator to ‘‘Z2’’ for these
nuclear medicine procedures in the ASC
setting so that payment for these
procedures would be based on the OPPS

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relative payment weight rather than the
MPFS nonfacility PE RVU-based
amount to ensure that the ASC will be
compensated for the cost associated
with the diagnostic
radiopharmaceuticals.
In addition, because the same issue
exists for radiology procedures that use
contrast agents (the contrast agent is
packaged under the ASC payment
system but is separately paid under the
MPFS), we finalized in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74429 through 74430) to
set the payment indicator to ‘‘Z2’’ for
radiology services that use contrast
agents so that payment for these
procedures will be based on the OPPS
relative payment weight and will,
therefore, include the cost for the
contrast agent.
ASC payment policy for
brachytherapy sources mirrors the
payment policy under the OPPS. ASCs
are paid for brachytherapy sources
provided integral to ASC covered
surgical procedures at prospective rates
adopted under the OPPS or, if OPPS
rates are unavailable, at contractorpriced rates (72 FR 42499). Since
December 31, 2009, ASCs have been
paid for brachytherapy sources provided
integral to ASC covered surgical
procedures at prospective rates adopted
under the OPPS.
Other separately paid covered
ancillary services in ASCs, specifically
corneal tissue acquisition and device
categories with OPPS pass-through
status, do not have prospectively
established ASC payment rates
according to the final policies of the
revised ASC payment system (72 FR
42502 and 42508 through 42509; 42 CFR
416.164(b)). Under the revised ASC
payment system, corneal tissue
acquisition is paid based on the
invoiced costs for acquiring the corneal
tissue for transplantation. Devices that
are eligible for pass-through payment
under the OPPS are separately paid
under the ASC payment system.
Currently, the four devices that are
eligible for pass-through payment in the
OPPS are described by HCPCS code
C1749 (Endoscope, retrograde imaging/
illumination colonoscope device
(Implantable)), HCPCS code C1830
(Powered bone marrow biopsy needle),
HCPCS code C1840 (Lens, intraocular
(telescopic)), and HCPCS code C1886
(Catheter, extravascular tissue ablation,
any modality (insertable)). Payment
amounts for HCPCS codes C1749,
C1830, C1840, and C1886 under the
ASC payment system are contractor
priced. In the CY 2012 OPPS/ASC final
rule with comment period, we finalized
the expiration of pass-through payment

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for HCPCS code C1749, which will
expire after December 31, 2012 (76 FR
74278). Therefore, after December 31,
2012, the HCPCS code C1749 device
costs will be packaged into the costs of
the procedures with which the devices
are reported in the hospital claims data
used in the development of the OPPS
relative payment weights that will be
used to establish ASC payment rates for
CY 2013.
b. Payment for Covered Ancillary
Services for CY 2013
For CY 2013, we proposed to update
the ASC payment rates and make
changes to ASC payment indicators as
necessary to maintain consistency
between the OPPS and ASC payment
system regarding the packaged or
separately payable status of services and
the proposed CY 2013 OPPS and ASC
payment rates (77 FR 45170). The
proposed CY 2013 OPPS payment
methodologies for brachytherapy
sources and separately payable drugs
and biologicals were discussed in
section II.A. and section V.B. of that
proposed rule, respectively, and we
proposed to set the CY 2013 ASC
payment rates for those services equal to
the proposed CY 2013 OPPS rates.
Consistent with established ASC
payment policy (72 FR 42497), the
proposed CY 2013 payment for
separately payable covered radiology
services was based on a comparison of
the CY 2013 proposed MPFS nonfacility
PE RVU-based amounts (we referred
readers to the CY 2013 MPFS proposed
rule) and the proposed CY 2013 ASC
payment rates calculated according to
the ASC standard ratesetting
methodology and then set at the lower
of the two amounts (except as discussed
below for nuclear medicine procedures
and radiology services that use contrast
agents). Alternatively, payment for a
radiology service may be packaged into
the payment for the ASC covered
surgical procedure if the radiology
service is packaged or conditionally
packaged under the OPPS. The payment
indicators in Addendum BB to the
proposed rule indicate whether the
proposed payment rates for radiology
services are based on the MPFS
nonfacility PE RVU-based amount or the
ASC standard ratesetting methodology,
or whether payment for a radiology
service is packaged into the payment for
the covered surgical procedure
(payment indicator ‘‘N1’’). Radiology
services that we proposed to pay based
on the ASC standard ratesetting
methodology are assigned payment
indicator ‘‘Z2’’ (Radiology service paid
separately when provided integral to a
surgical procedure on ASC list; payment

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based on OPPS relative payment weight)
and those for which the proposed
payment is based on the MPFS
nonfacility PE RVU-based amount are
assigned payment indicator ‘‘Z3’’
(Radiology service paid separately when
provided integral to a surgical
procedure on ASC list; payment based
on MPFS nonfacility PE RVUs).
As finalized in the CY 2011 OPPS/
ASC final rule with comment period (75
FR 72050), payment indicators for all
nuclear medicine procedures (defined
as CPT codes in the range of 78000
through 78999) that are designated as
radiology services that are paid
separately when provided integral to a
surgical procedure on the ASC list are
set to ‘‘Z2’’ so that payment is made
based on the OPPS relative payment
weights rather than the MPFS
nonfacility PE RVU-based amount,
regardless of which is lower. As
finalized in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74429 through 74430), payment
indicators for radiology services that use
contrast agents are set to ‘‘Z2’’ so that
payment for these procedures will be
based on the OPPS relative payment
weight and, therefore, will include the
cost for the contrast agent. In the CY
2013 OPPS/ASC proposed rule (77 FR
45170), we proposed for CY 2013 to
continue these modifications to the
payment methodology and, therefore,
set the payment indicator to ‘‘Z2’’ for
these covered ancillary radiology
services that involve nuclear medicine
procedures or that use contrast agents.
Most covered ancillary services and
their proposed payment indicators were
listed in Addendum BB to the CY 2013
OPPS/ASC proposed rule (which is
available via the Internet on the CMS
Web site). We invited public comment
on these proposals.
Comment: One commenter expressed
appreciation to CMS for its
responsiveness in the CY 2011 OPPS/
ASC final rule with comment period to
stakeholder concerns regarding ASC
payment for nuclear medicine
procedures. However, the commenter
suggested that ASC payment policy for
nuclear medicine procedures would be
further improved by providing separate
payment for the diagnostic
radiopharmaceuticals that are used in
nuclear medicine procedures.
Response: As we stated in the CY
2011 OPPS/ASC final rule with
comment period (75 FR 72050)
regarding separate payment for
diagnostic radiopharmaceuticals used in
ASCs, we do not agree with the
commenter that we should establish
separate payment for diagnostic
radiopharmaceuticals under the ASC

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payment system because we follow the
OPPS packaging policies which require
that payment for these items is always
packaged.
After consideration of the public
comments we received, we are
providing CY 2013 payment for covered
ancillary services in accordance with
the policies finalized in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74430). Covered ancillary
services and their final CY 2013
payment indicators are listed in
Addendum BB (which is available via
the Internet on the CMS Web site) to
this final rule with comment period.
E. New Technology Intraocular Lenses
(NTIOLs)
1. NTIOL Cycle and Evaluation Criteria
In the CY 2007 OPPS/ASC final rule
with comment period (71 FR 68176), we
finalized our current process for
reviewing applications to establish new
classes of new technology intraocular
lenses (NTIOLs), and for recognizing
new candidate intraocular lenses (IOLs)
inserted during or subsequent to
cataract extraction as belonging to an
NTIOL class that is qualified for a
payment adjustment. Specifically, we
established the following process:
• We announce annually in the
proposed rule updating the ASC and
OPPS payment rates for the following
calendar year, a list of all requests to
establish new NTIOL classes accepted
for review during the calendar year in
which the proposal is published. In
accordance with section 141(b)(3) of
Pub. L. 103–432 and our regulations at
§ 416.185(b), the deadline for receipt of
public comments is 30 days following
publication of the list of requests in the
proposed rule.
• In the final rule updating the ASC
and OPPS payment rates for the
following calendar year, we—
Æ Provide a list of determinations
made as a result of our review of all new
NTIOL class requests and public
comments; and
Æ Announce the deadline for
submitting requests for review of an
application for a new NTIOL class for
the following calendar year.
In the CY 2007 OPPS/ASC final rule
with comment period (71 FR 68227), we
finalized our proposal to base our
determinations on consideration of the
following major criteria set out at 42
CFR 416.195:
• 42 CFR 416.195(a)(1): The IOL is
approved by the FDA;
• 42 CFR 416.195(a)(2): Claims of
specific clinical benefits and/or lens
characteristics with established clinical
relevance in comparison with currently

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available IOLs are approved by the FDA
for use in labeling and advertising;
• 42 CFR 416.195(a)(3): The IOL is
not described by an active or expired
NTIOL class; that is, it does not share
the predominant, class-defining
characteristic associated with the
improved clinical outcome with
designated members of an active or
expired NTIOL class; and
• 42 CFR 416.195(a)(4): Evidence
demonstrates that use of the IOL results
in measurable, clinically meaningful,
improved outcomes in comparison with
use of currently available IOLs. The
statute requires us to consider the
following improved outcomes:
Æ Reduced risk of intraoperative or
postoperative complication or trauma;
Æ Accelerated postoperative recovery;
Æ Reduced induced astigmatism;
Æ Improved postoperative visual
acuity;
Æ More stable postoperative vision; or
Æ Other comparable clinical
advantages.
Since implementation of the process
for adjustment of payment amounts for
NTIOLs that was established in the June
16, 1999 Federal Register, we have
approved three classes of NTIOLs, as
shown in the table with the associated
qualifying IOL models, at the link
entitled ‘‘NTIOL Application
Determination Reference document
Updated 01/06/2012,’’ posted on the
CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/NTIOLs.html.
2. NTIOL Application Process for
Payment Adjustment
For a request to be considered
complete, we require submission of the
information that is found in the
guidance document entitled
‘‘Application Process and Information
Requirements for Requests for a New
Class of New Technology Intraocular
Lens (NTIOL)’’ posted on the CMS Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
ASCPayment/NTIOLs.html. For each
completed request for a new class that
is received by the established deadline,
a determination is announced annually
in the final rule updating the ASC and
OPPS payment rates for the next
calendar year.
We also summarize briefly in the final
rule the evidence that we reviewed, the
public comments we received timely,
and the basis for our determinations in
consideration of applications for
establishment of a new NTIOL class.
When a new NTIOL class is created, we
identify the predominant characteristic
of NTIOLs in that class that sets them
apart from other IOLs (including those

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previously approved as members of
other expired or active NTIOL classes)
and that is associated with an improved
clinical outcome. The date of
implementation of a payment
adjustment in the case of approval of an
IOL as a member of a new NTIOL class
would be set prospectively as of 30 days
after publication of the ASC payment
update final rule, consistent with the
statutory requirement.
3. Requests To Establish New NTIOL
Classes for CY 2013 and Deadline for
Public Comments
As discussed in the CY 2013 OPPS/
ASC proposed rule (77 FR 45171), we
did not receive any requests for review
to establish a new NTIOL class for CY
2013 by the March 2, 2012 due date
(this due date was stated in the CY 2012
OPPS/ASC final rule with comment
period at 76 FR 74443).

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4. Payment Adjustment
The current payment adjustment for a
5-year period from the implementation
date of a new NTIOL class is $50 per
lens. Since implementation of the
process for adjustment of payment
amounts for NTIOLs in 1999, we have
not revised the payment adjustment
amount, and in the CY 2013 OPPS/ASC
proposed rule (77 FR 45171), we did not
propose to revise the payment
adjustment amount for CY 2013.
5. Revisions to the Major NTIOL Criteria
Described in 42 CFR 416.195
The last significant revisions to the
regulations containing the substantive
NTIOL evaluation criteria under 42 CFR
416.195 occurred in 2007. In the CY
2013 OPPS/ASC proposed rule (77 FR
45171), we proposed significant
revisions to § 416.195(a)(2) and
§ 416.195(a)(4). We stated our belief that
revising § 416.195 is necessary in order
to improve the quality of the NTIOL
applications. In recent years, we have
received low quality NTIOL
applications that may have been due in
part to overly-broad evaluation criteria.
We proposed to revise § 416.195(a)(2)
to require that the IOL’s FDA-approved
labeling contains a claim of a specific
clinical benefit imparted by a new lens
characteristic. The IOL would have to
have a new lens characteristic in
comparison to currently available IOLs.
We also proposed to revise
§ 416.195(a)(4) to require that any
specific clinical benefit referred to in
§ 416.195(a)(2) would have to be
supported by evidence that
demonstrated that the IOL results in a
measurable, clinically meaningful,
improved outcome. Improved outcomes
include: (i) Reduced risk of

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intraoperative or postoperative
complication or trauma; (ii) accelerated
postoperative recovery; (iii) reduced
induced astigmatism; (iv) improved
postoperative visual acuity; (v) more
stable postoperative vision; and (vi)
other comparable clinical advantages.
The proposed revision to
§ 416.195(a)(2) is necessary because
recent NTIOL applications have not
included FDA labeling claims of clinical
benefit. Instead, the candidate IOLs
have, in most cases, had some
characteristic for which the applicant
has tried to prove clinical relevance
through various kinds of evidence that
have not been evaluated by the FDA
because the evidence is not associated
with a labeling claim. The result has
been the submission of low quality
evidence that has been insufficient for
NTIOL status. We believe that the
quality of the evidence would improve
if applicants were required to obtain a
labeling claim for the NTIOL benefit and
therefore have the evidence for such
benefit evaluated by FDA. We believe
that this proposed approach would
better serve CMS, FDA, and the
applicants because any ultimate grant of
NTIOL status would be supported by a
labeling claim. The manufacturer could
then advertise the NTIOL benefit
without running afoul of FDA
advertising limitations. We would have
the benefit of an FDA review of the
relevant evidence, which would be
particularly valuable because the FDA
has a dedicated team of scientists,
physicians, and engineers who are
experts in evaluating IOLs.
The proposed revision to
§ 416.195(a)(4) is necessary to insure
that the claim is clinically relevant and
represents an improved outcome for
Medicare beneficiaries. We requested
public comments on these proposed
revisions to the NTIOL regulations.
Comment: Several commenters
supported our proposed changes to the
NTIOL regulations. These commenters
believed that the proposed changes will
better insure that any grants of NTIOL
status will be supported by rigorous
scientific evidence.
Response: We appreciate these
comments and the commenters’ support
for our efforts to require rigor and
accountability in the NTIOL program.
Comment: One commenter disagreed
with the proposed revision to
416.195(a)(2), complaining that
obtaining a label claim is difficult and
time consuming. In addition, this
commenter made the following main
points:
• It is not the FDA’s job to review
evidence related to an NTIOL
application;

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• FDA does not typically evaluate
claims of comparative clinical benefits,
and is not obligated to do so;
• Clinical studies to support a label
claim require substantial time and
resources, and there is no guarantee that
such efforts will be successful;
• Other new technology programs,
such as transitional pass-through
payments, do not require a claim of
clinical benefit;
• Requiring a claim of clinical benefit
would provide extended exclusivity to
the first company to establish the
NTIOL class;
• Requiring a claim of clinical benefit
will limit patient access to new
technology.
Response: We believe that this
commenter’s objections reflect at least a
partial misunderstanding of the
proposal. Our current regulations
require that the FDA approved label
contain information about the clinical
benefit of a candidate IOL. They provide
two options for satisfying this
requirement; the candidate lens must
have either: (1) claims of specific
clinical benefits in comparison with
currently available IOLs approved by
the FDA for use in labeling and
advertising; or (2) lens characteristics
with established clinical relevance in
comparison with currently available
IOLs approved by the FDA for use in
labeling and advertising. Both of these
options require evaluation by the FDA.
In recent years, lens manufacturers have
used Option 2 to claim, for example,
that the applicant lens had a specific
lens characteristic (for example, blue
filter, availability in .25 D increments,
absence of glistenings, packaging in a
disposable injector) listed somewhere in
the FDA labeling; however, the
manufacturer would provide no
information about the clinical relevance
of this characteristic in the FDA’s
labeling. The manufacturer would
submit to CMS weak or nonexistent
evidence of a clinical benefit that it
claimed could be attributed to the
characteristic described on the FDAapproved label. We believe that to
remedy this problem and to clarify the
intent of this regulation it is necessary
that the label contain a claim of a
clinical benefit, which would be
supported by evidence evaluated by the
FDA.
Regarding this commenter’s statement
about the scope of FDA’s duties, the
evaluation of clinical evidence in
support of a labeling claim is a core
function of the FDA and is something
that they do on a daily basis. There is
nothing unusual about the FDA’s
proposed role as it relates to evaluating
evidence in support of a labeling claim

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that could be used to satisfy the
requirements for NTIOL status. This
rule does not usurp or interfere with any
functions currently carried out by the
FDA.
Regarding this commenter’s other
points, the various new technology
payment programs we administer have
somewhat different requirements,
depending on the statutory authority
and the specific purposes of the various
programs. We believe that Congress
intended that NTIOL status function as
an incentive for innovation. If requiring
a claim of clinical benefit results in a
longer period of a single manufacturer
utilizing a new NTIOL class exclusively,
we believe that such extended
exclusivity would serve as an additional
inducement for manufacturers to
innovate and seek NTIOL status for their
innovations. While we agree with the
commenter that seeking a label claim
requires time and effort, we believe that
this process will better serve NTIOL
applicants in that having a claim of a
clinical benefit will substantially
increase the likelihood of ultimate
NTIOL approval.
Finally, this commenter predicted
that if we finalize these proposed
changes to the regulations, then
Medicare beneficiaries will have
reduced access to new IOL technology.
We disagree that the proposed changes
to the NTIOL regulations will affect
patient access to IOLs. For example, one
of the 2012 NTIOL candidate IOLs had
been on the market for 10 years and was
the U.S. market leader at the time of
NTIOL application. Lack of NTIOL
status did not limit patient access to this
IOL and we believe that it would also
be unlikely to result in limited access to
future IOLs. We also believe that having
NTIOLs supported by a labeling claim of
clinical benefit will increase patient
confidence that they are receiving a
medical device with a real evidencebased benefit versus existing
technology.
After consideration of the public
comments we received, we are
finalizing the proposed changes to the
NTIOL regulations.
6. Request for Public Comment on the
‘‘Other Comparable Clinical
Advantages’’ Improved Outcome
Section 416.195(a)(4)), discussed
above, lists the following improved
outcomes: (i) Reduced risk of
intraoperative or postoperative
complication or trauma; (ii) accelerated
postoperative recovery; (iii) reduced
induced astigmatism; (iv) improved
postoperative visual acuity; (v) more
stable postoperative vision; and (vi)
other comparable clinical advantages.

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This list is from the original 1994
NTIOL statutory provision. Because this
provision is almost 20 years old,
outcomes (i) through (v) have only
limited relevance to modern cataract
surgery. For example, regarding
outcome (i), it is unclear what, if any,
type of IOL could reduce the risk of
complication or trauma associated with
cataract surgery, or what, if any,
contemporary cataract surgery
complication could be affected by a new
type of IOL. As for outcome (ii),
postoperative recovery is already rapid
in uncomplicated cataract surgery;
therefore, it is difficult to see how it
could be significantly accelerated. Also,
regarding outcome (iii), clinically
significant induced astigmatism would
be reflective of poor surgical technique
and would not depend upon IOL design.
Regarding outcome (iv), currently
available IOLs provide such high quality
postoperative visual acuity that it would
be difficult to measure clinically
significant improved postoperative
visual acuity due to a new type of IOL.
Finally, for outcome (v), postoperative
vision is typically stable after
uncomplicated cataract surgery, so again
it would be difficult to improve upon
this outcome.
The last of the listed improved
outcomes is the nonspecific category
described as ‘‘other comparable clinical
advantages.’’ Given that present-day
cataract surgery is such a successful
procedure that results in significantly
improved vision for almost all patients
who undergo the procedure and who are
appropriate candidates for cataract
surgery, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45172), we
solicited comments on what potential
benefits associated with a new IOL
could be considered to be a
‘‘comparable clinical advantage’’ as
compared to the list of the five
improved outcomes from the statute and
regulation described above.
Comment: Several commenters
supported retaining the ‘‘comparable
clinical advantage’’ outcome as an openended category as necessary to
accommodate future innovations. One
commenter offered the following
examples of potential comparable
clinical advantages:
• Reduced incidence of posterior
capsular opacity;
• Improved delivery to reduce error
and minimize changes to the wound
from insertion’
• Reduced inflammation;
• Reduced astigmatism;
• Improved vision;
• Improved vision stability; and
• Improved quality of life.

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Response: It is important that
companies consider all of the various
possibilities for new clinical advantages,
and we appreciate the range of potential
issues that could be addressed through
new IOL technology. However, some
significant questions remain. For
example, it could be that the incidence
of some of these complications so low
such that it would be impossible to
design a study to measure any
improvement due to a new IOL. It also
could be that some surgical
complications could be the result of
surgical technique that could not be
easily compensated for with a new IOL
design. We also remind stakeholders
that innovations that provide greater
surgeon convenience, but no direct
patient benefit, would not qualify for
NTIOL status. Also, vision
improvements cannot be merely
improved optical performance but must
relate to a meaningful improved
outcome in visual performance.
The list of improved outcomes in the
regulation is statutory and therefore we
are not modifying it. After consideration
of the public comments we received, we
are adopting, without modification, our
NTIOL proposals.
7. Announcement of CY 2013 Deadline
for Submitting Requests for CMS
Review of Appropriateness of ASC
Payment for Insertion of an NTIOL
Following Cataract Surgery
In accordance with 42 CFR 416.185(a)
of our regulations, CMS announces that
in order to be considered for payment
effective January 1, 2014, requests for
review of applications for a new class of
new technology IOLs must be received
at CMS by 5 p.m. EST, on March 1,
2013. Send requests to ASC/NTIOL,
Division of Outpatient Care, Mailstop
C4–05–17, Centers for Medicare and
Medicaid Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
To be considered, requests for NTIOL
reviews must include the information
requested on the CMS Web site at:
http://www.cms.gov/ASCPayment/
downloads/NTIOLprocess.pdf.
F. ASC Payment and Comment
Indicators
1. Background
In addition to the payment indicators
that we introduced in the August 2,
2007 final rule, we also created final
comment indicators for the ASC
payment system in the CY 2008 OPPS/
ASC final rule with comment period (72
FR 66855). We created Addendum DD1
to define ASC payment indicators that
we use in Addenda AA and BB to
provide payment information regarding

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covered surgical procedures and
covered ancillary services, respectively,
under the revised ASC payment system.
The ASC payment indicators in
Addendum DD1 are intended to capture
policy relevant characteristics of HCPCS
codes that may receive packaged or
separate payment in ASCs, such as
whether they were on the ASC list of
covered services prior to CY 2008;
payment designation, such as deviceintensive or office-based, and the
corresponding ASC payment
methodology; and their classification as
separately payable ancillary services
including radiology services,
brachytherapy sources, OPPS passthrough devices, corneal tissue
acquisition services, drugs or
biologicals, or NTIOLs.
We also created Addendum DD2 that
lists the ASC comment indicators. The
ASC comment indicators used in
Addenda AA and BB to the proposed
rules and final rules with comment
period serve to identify, for the revised
ASC payment system, the status of a
specific HCPCS code and its payment
indicator with respect to the timeframe
when comments will be accepted. The
comment indicator ‘‘NI’’ is used in the
OPPS/ASC final rule with comment
period to indicate new codes for the
next calendar year for which the interim
payment indicator assigned is subject to
comment. The comment indicator ‘‘NI’’
is also assigned to existing codes with
substantial revisions to their descriptors
such that we consider them to be
describing new services, as discussed in
the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60622). In this
CY 2013 OPPS/ASC final rule with
comment period, we respond to public
comments and finalize the ASC
treatment of all codes that are labeled
with comment indicator ‘‘NI’’ in
Addenda AA and BB to the CY 2012
OPPS/ASC final rule with comment
period. These addenda can be found in
a file labeled ‘‘January 2012 ASC
Approved HCPCS Code and Payment
Rates’’ in the ASC Addenda Update
section of the CMS Web site.
The ‘‘CH’’ comment indicator was
used in Addenda AA and BB to the CY
2013 OPPS/ASC proposed rule (which
were available via the Internet on the
CMS Web site) to indicate that the
payment indicator assignment has
changed for an active HCPCS code; an
active HCPCS code is newly recognized
as payable in ASCs; or an active HCPCS
code is discontinued at the end of the
current calendar year. The ‘‘CH’’
comment indicators that are published
in the final rule with comment period
are provided to alert readers that a
change has been made from one

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calendar year to the next, but do not
indicate that the change is subject to
comment.
2. ASC Payment and Comment
Indicators
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45172), we did not propose
any changes to the definitions of the
ASC payment and comment indicators
for CY 2013. We referred readers to
Addenda DD1 and DD2 to the CY 2013
OPPS/ASC proposed rule (which were
available via the Internet on the CMS
Web site) for the complete list of ASC
payment and comment indicators
proposed for the CY 2013 update.
We did not receive any public
comments on the ASC payment and
comment indicators. Addenda DD1 and
DD2 to this final rule with comment
period (which are available via the
Internet on the CMS Web site) contain
the complete list of payment and
commenter indicators for the CY 2013
update.
G. ASC Policy and Payment
Recommendations
MedPAC was established under
section 1805 of the Act to advise
Congress on issues affecting the
Medicare program. Subparagraphs (C)
and (D) of section 1805(b)(1) of the Act
require MedPAC to submit reports to
Congress not later than March 15 and
June 15 of each year that present its
Medicare payment policy reviews and
recommendations and its examination
of issues affecting the Medicare
program, respectively. The March 2012
MedPAC ‘‘Report to the Congress:
Medicare Payment Policy’’ included the
following recommendations relating
specifically to the ASC payment system
for CY 2013:
Recommendation 5–1: ‘‘The Congress
should update the payment rates for
ambulatory surgical centers by 0.5
percent for calendar year 2013. The
Congress should also require
ambulatory surgical centers to submit
cost data.’’
Regarding the ASC payment update
for CY 2013, MedPAC further stated
that: ‘‘On the basis of our payment
adequacy indicators, the lack of ASC
cost data, and our concerns about the
potential effect of ASC growth on
overall program spending, we believe a
moderate update of 0.5 percent is
warranted for CY 2013.’’ With regard to
the collection of cost data, MedPAC
indicated that cost data are needed to
fully assess ASC payment adequacy
under the revised ASC payment system
and to examine whether an alternative
input price index would be an
appropriate proxy for ASC costs or

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whether an ASC-specific market basket
should be developed to annually update
ASC payment rates.
CMS Response: We note that
MedPAC’s recommendation is for the
Congress to increase ASC payment rates
by 0.5 percent in CY 2013 and require
ASCs to submit cost data. Congress has
not yet acted on these
recommendations. In the CY 2013
OPPS/ASC proposed rule (77 FR 45172),
we proposed to continue our current
policy to update the ASC conversion
factor using the CPI–U, and we did not
propose to require ASCs to submit cost
data in the proposed rule. However, as
discussed in section XIV.H.2.b. of the
proposed rule (77 FR 45174), while we
believe the CPI–U is appropriate to
apply to update the ASC payment
system, the CPI–U may not best reflect
inflation for the goods and services
provided by ASCs and, therefore, we
sought public comment on the type of
cost information that would be feasible
to collect from ASCs that would assist
us in determining possible alternatives
to using the CPI–U to update ASC
payment rates for inflation. In section
XIV.H.2.b. of this final rule with
comment period, we summarize and
respond to the public comments we
received regarding the ASC update and
the feasibility of collecting ASC cost
data.
H. Calculation of the ASC Conversion
Factor and the ASC Payment Rates
1. Background
In the August 2, 2007 final rule (72 FR
42493), we established our policy to
base ASC relative payment weights and
payment rates under the revised ASC
payment system on APC groups and the
OPPS relative payment weights.
Consistent with that policy and the
requirement at section 1833(i)(2)(D)(ii)
of the Act that the revised payment
system be implemented so that it would
be budget neutral, the initial ASC
conversion factor (CY 2008) was
calculated so that estimated total
Medicare payments under the revised
ASC payment system in the first year
would be budget neutral to estimated
total Medicare payments under the prior
(CY 2007) ASC payment system (the
ASC conversion factor is multiplied by
the relative payment weights calculated
for many ASC services in order to
establish payment rates). That is,
application of the ASC conversion factor
was designed to result in aggregate
Medicare expenditures under the
revised ASC payment system in CY
2008 equal to aggregate Medicare
expenditures that would have occurred
in CY 2008 in the absence of the revised

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system, taking into consideration the
cap on ASC payments in CY 2007 as
required under section 1833(i)(2)(E) of
the Act (72 FR 42522). We adopted a
policy to make the system budget
neutral in subsequent calendar years (72
FR 42532 through 42533).
We note that we consider the term
‘‘expenditures’’ in the context of the
budget neutrality requirement under
section 1833(i)(2)(D)(ii) of the Act to
mean expenditures from the Medicare
Part B Trust Fund. We do not consider
expenditures to include beneficiary
coinsurance and copayments. This
distinction was important for the CY
2008 ASC budget neutrality model that
considered payments across the OPPS,
ASC, and MPFS payment systems.
However, because coinsurance is almost
always 20 percent for ASC services, this
interpretation of expenditures has
minimal impact for subsequent budget
neutrality adjustments calculated within
the revised ASC payment system.
In the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66857
through 66858), we set out a step-bystep illustration of the final budget
neutrality adjustment calculation based
on the methodology finalized in the
August 2, 2007 final rule (72 FR 42521
through 42531) and as applied to
updated data available for the CY 2008
OPPS/ASC final rule with comment
period. The application of that
methodology to the data available for
the CY 2008 OPPS/ASC final rule with
comment period resulted in a budget
neutrality adjustment of 0.65.
For CY 2008, we adopted the OPPS
relative payment weights as the ASC
relative payment weights for most
services and, consistent with the final
policy, we calculated the CY 2008 ASC
payment rates by multiplying the ASC
relative payment weights by the final
CY 2008 ASC conversion factor of
$41.401. For covered office-based
surgical procedures and covered
ancillary radiology services (excluding
covered ancillary radiology services
involving certain nuclear medicine
procedures or involving the use of
contrast agents, as discussed in section
XIV.D.2.b. of this final rule with
comment period), the established policy
is to set the payment rate at the lower
of the MPFS unadjusted nonfacility PE
RVU-based amount or the amount
calculated using the ASC standard
ratesetting methodology. Further, as
discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66841 through 66843), we also adopted
alternative ratesetting methodologies for
specific types of services (for example,
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As discussed in the August 2, 2007
final rule (72 FR 42517 through 42518)
and as codified at § 416.172(c) of the
regulations, the revised ASC payment
system accounts for geographic wage
variation when calculating individual
ASC payments by applying the pre-floor
and pre-reclassified hospital wage
indices to the labor-related share, which
is 50 percent of the ASC payment
amount. Beginning in CY 2008, CMS
accounted for geographic wage variation
in labor cost when calculating
individual ASC payments by applying
the pre-floor and pre-reclassified
hospital wage index values that CMS
calculates for payment, using updated
Core Based Statistical Areas (CBSAs)
issued by OMB in June 2003. The
reclassification provision provided at
section 1886(d)(10) of the Act is specific
to hospitals. We believe that using the
most recently available raw pre-floor
and pre-reclassified hospital wage
indices results in the most appropriate
adjustment to the labor portion of ASC
costs. In addition, use of the unadjusted
hospital wage data avoids further
reductions in certain rural statewide
wage index values that result from
reclassification. We continue to believe
that the unadjusted hospital wage
indices, which are updated yearly and
are used by many other Medicare
payment systems, appropriately account
for geographic variation in labor costs
for ASCs.
We note that in certain instances there
might be urban or rural areas for which
there is no IPPS hospital whose wage
index data would be used to set the
wage index for that area. For these areas,
our policy has been to use the average
of the wage indices for CBSAs (or
metropolitan divisions as applicable)
that are contiguous to the area that has
no wage index (where ‘‘contiguous’’ is
defined as sharing a border). We have
applied a proxy wage index based on
this methodology to ASCs located in
CBSA 25980 Hinesville-Fort Stewart,
GA, and CBSA 22 Rural Massachusetts.
In CY 2011, we identified another
area, specifically, CBSA 11340
Anderson, SC for which there is no IPPS
hospital whose wage index data would
be used to set the wage index for that
area. Generally, we would use the
methodology described above; however,
in this situation, all of the areas
contiguous to CBSA 11340 Anderson,
SC are rural. Therefore, in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72058 through 72059), we
finalized our proposal to set the ASC
wage index by calculating the average of
all wage indices for urban areas in the
State when all contiguous areas to a
CBSA are rural and there is no IPPS

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hospital whose wage index data could
be used to set the wage index for that
area. In other situations, where there are
no IPPS hospitals located in a relevant
labor market area, we will continue our
current policy of calculating an urban or
rural area’s wage index by calculating
the average of the wage indices for
CBSAs (or metropolitan divisions where
applicable) that are contiguous to the
area with no wage index.
Comment: Several commenters made
the same recommendation that was
made in the CY 2010 (74 FR 60625), CY
2011 (75 FR 72059), and CY 2012 (76 FR
74446) rulemakings—that is, that CMS
adopt for the ASC payment system the
same wage index values used for
hospital payment under the OPPS.
Response: We have responded to this
comment in the past, and believe our
prior rationale for using unadjusted
wage indices is still a sound one. We
continue to believe that the unadjusted
hospital wage indices, which are
updated yearly and are used by almost
all Medicare payment systems,
appropriately account for geographic
variance in labor costs for ASCs. We
refer readers to our response to this
comment in the CY 2011 OPPS/ASC
final rule with comment period (75 FR
72059). We discuss our budget
neutrality adjustment for changes to the
wage indices below in section XIV.H.2.b
of this final rule with comment period.
After consideration of the public
comments we received, we are
continuing our established policy to
account for geographic wage variation in
labor cost when calculating individual
ASC payment by applying the pre-floor
and pre-reclassified hospital wage index
values that CMS calculated for payment,
using updated CBSAs. For CY 2013, we
also are continuing our policy
established in the CY 2011 OPPS/ASC
final rule with comment period (75 FR
72058 through 72059) to set the ASC
wage index by calculating the average of
all wage indices for urban areas in the
state when there is no IPPS hospital
whose wage index data could be used to
set the wage index for that area, and all
contiguous areas to the CBSA are rural.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment
Weights for CY 2013 and Future Years
We update the ASC relative payment
weights each year using the national
OPPS relative payment weights (and
MPFS nonfacility PE RVU-based
amounts, as applicable) for that same
calendar year and uniformly scale the
ASC relative payment weights for each
update year to make them budget
neutral (72 FR 42533). We note that, as

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discussed in section II.A.2.f. of the CY
2013 OPPS/ASC proposed rule (45094
through 45098) and in this final rule
with comment period, because we
proposed to base the OPPS relative
payment weights on geometric mean
costs for CY 2013, the ASC system
would shift to the use of geometric
means to determine relative payment
weights under the ASC standard
ratesetting methodology. Consistent
with our established policy, in the CY
2013 OPPS/ASC proposed rule (77 FR
45173), we proposed to scale the CY
2013 relative payment weights for ASCs
according to the following method.
Holding ASC utilization and the mix of
services constant from CY 2011, we
proposed to compare the total payment
using the CY 2012 ASC relative
payment weights with the total payment
using the CY 2013 relative payment
weights to take into account the changes
in the OPPS relative payment weights
between CY 2012 and CY 2013. We
proposed to use the ratio of CY 2012 to
CY 2013 total payment (the weight
scaler) to scale the ASC relative
payment weights for CY 2013. The
proposed CY 2013 ASC scaler was
0.9331 (77 FR 45174) and scaling would
apply to the ASC relative payment
weights of the covered surgical
procedures and covered ancillary
radiology services for which the ASC
payment rates are based on OPPS
relative payment weights.
Scaling would not apply in the case
of ASC payment for separately payable
covered ancillary services that have a
predetermined national payment
amount (that is, their national ASC
payment amounts are not based on
OPPS relative payment weights), such
as drugs and biologicals that are
separately paid or services that are
contractor-priced or paid at reasonable
cost in ASCs. Any service with a
predetermined national payment
amount would be included in the ASC
budget neutrality comparison, but
scaling of the ASC relative payment
weights would not apply to those
services. The ASC payment weights for
those services without predetermined
national payment amounts (that is,
those services with national payment
amounts that would be based on OPPS
relative payment weights) would be
scaled to eliminate any difference in the
total payment between the current year
and the update year.
For any given year’s ratesetting, we
typically use the most recent full
calendar year of claims data to model
budget neutrality adjustments. At the
time of the CY 2013 proposed rule, we
had available 98 percent of CY 2011
ASC claims data. For this final rule with

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comment period, we have
approximately 99 percent of all ASC
claims data for CY 2011.
To create an analytic file to support
calculation of the weight scaler and
budget neutrality adjustment for the
wage index (discussed below), we
summarized available CY 2011 ASC
claims by ASC and by HCPCS code. We
used the National Provider Identifier for
the purpose of identifying unique ASCs
within the CY 2011 claims data. We
used the supplier zip code reported on
the claim to associate State, county, and
CBSA with each ASC. This file,
available to the public as a supporting
data file for the proposed rule, is posted
on the CMS Web site at: http://www.
cms.gov/Research-Statistics-Data-andSystems/Files-for-Order/LimitedData
Sets/ASCPaymentSystem.html.
We did not receive any comments
and, therefore, we are finalizing our CY
2013 ASC relative payment weight
scaling methodology, without
modification.
For this final rule with comment
period, we used our proposed
methodology described above to
calculate the scaler adjustment using
updated ASC claims data. The final CY
2013 scaler adjustment is 0.9324. This
scaler adjustment is necessary to make
the difference in aggregate ASC
payments calculated using the CY 2012
ASC relative payment weights and the
CY 2013 relative payment weights
budget neutral. We calculated the
difference in aggregate payments due to
the change in relative payment weights
holding constant the ASC conversion
factor, the most recent CY 2011 ASC
utilization from our claims data, and the
CY 2012 wage index values. For this
final CY 2013 calculation, we used the
CY 2012 ASC conversion factor updated
by the CY 2013 CPI–U, which is
projected to be 1.4 percent, less the
multifactor productivity adjustment of
0.8 percent, as discussed below in
section XIV.H.2.b. of this final rule with
comment period.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply
a budget neutrality adjustment for
provider level changes, most notably a
change in the wage index values for the
upcoming year, to the conversion factor.
Consistent with our final ASC payment
policy, for the CY 2013 ASC payment
system, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45174), we
proposed to calculate and apply a
budget neutrality adjustment to the ASC
conversion factor for supplier level
changes in wage index values for the
upcoming year, just as the OPPS wage
index budget neutrality adjustment is

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calculated and applied to the OPPS
conversion factor. For CY 2013, we
calculated this proposed adjustment for
the ASC payment system by using the
most recent CY 2011 claims data
available and estimating the difference
in total payment that would be created
by introducing the proposed CY 2013
pre-floor and pre-reclassified hospital
wage indices. Specifically, holding CY
2011 ASC utilization and service-mix
and the proposed CY 2013 national
payment rates after application of the
weight scaler constant, we calculated
the total adjusted payment using the CY
2012 pre-floor and pre-reclassified
hospital wage indices and the total
adjusted payment using the proposed
CY 2013 pre-floor and pre-reclassified
hospital wage indices. We used the 50percent labor-related share for both total
adjusted payment calculations. We then
compared the total adjusted payment
calculated with the CY 2012 pre-floor
and pre-reclassified hospital wage
indices to the total adjusted payment
calculated with the proposed CY 2013
pre-floor and pre-reclassified hospital
wage indices and applied the resulting
ratio of 1.0002 (the proposed CY 2013
ASC wage index budget neutrality
adjustment) to the CY 2012 ASC
conversion factor to calculate the
proposed CY 2013 ASC conversion
factor.
Section 1833(i)(2)(C)(i) of the Act
requires that, ‘‘if the Secretary has not
updated amounts established’’ under
the revised ASC payment system in a
calendar year, the payment amounts
‘‘shall be increased by the percentage
increase in the Consumer Price Index
for all urban consumers (U.S. city
average) as estimated by the Secretary
for the 12-month period ending with the
midpoint of the year involved.’’ The
statute, therefore, does not mandate the
adoption of any particular update
mechanism, but it requires the payment
amounts to be increased by the CPI–U
in the absence of any update. Because
the Secretary updates the ASC payment
amounts annually, we adopted a policy,
which we codified at 42 CFR
416.171(a)(2)(ii), to update the ASC
conversion factor using the CPI–U for
CY 2010 and subsequent calendar years.
Therefore, the annual update to the ASC
payment system is the CPI–U (referred
to as the CPI–U update factor).
Stakeholders, as well as MedPAC,
have commented throughout the years
that the CPI–U may not adequately
measure inflation for the goods and
services provided by ASCs (for example,
76 FR 74444, 74448 through 74450; 73
FR 68757; and 72 FR 66859). While we
believe the CPI–U is appropriate to
apply to update the ASC payment

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system, we are aware that the CPI–U is
highly weighted for housing and
transportation and may not best reflect
inflation in the cost of providing ASC
services. In developing the CY 2013
OPPS/ASC proposed rule, we
considered possible alternatives to using
the CPI–U to update ASC payment rates
for inflation.
ASC stakeholders have urged us to
adopt the hospital market basket to
update ASC payment rates for inflation
when commenting on each proposed
rule since the beginning of the revised
ASC payment system (72 FR 66859; 73
FR 68757; 74 FR 60628 through 60629;
75 FR 72063; and 76 FR 74449). We
considered the hospital market basket as
an alternative to the CPI–U and, while
the items included in the hospital
market basket seem reflective of the
kinds of costs incurred by ASCs, as
stated in the CY 2012 OPPS/ASC final
rule with comment period, we believe
that the hospital market basket does not
align with the cost structures of ASCs.
A much wider range of services, such as
room and board and emergency
services, are provided by hospitals but
are not reflective of costs associated
with providing services in ASCs (76 FR
74450). As other possible alternatives to
the CPI–U update, we considered using
the physician’s practice expense (PE)
component of the Medicare Economic
Index (MEI) update, as well as using an
average of the hospital market basket
update and the PE component of the
MEI update. However, until we have
more information regarding the cost
inputs of ASCs, we are not confident
that any of these alternatives are a better
proxy for ASC costs than the CPI–U.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45174), we
proposed a continuation of the
established policy of basing the ASC
update on the CPI–U. In addition, we
requested public comment on the type
of cost information that would be
feasible to collect from ASCs in the
future in order to determine if one of
these alternative updates or an ASCspecific market basket would be a better
proxy for ASC cost inflation than the
CPI–U.
Section 3401(k) of the Affordable Care
Act amended section 1833(i)(2)(D) of the
Act by adding a new clause (v) which
requires that ‘‘any annual update under
[the ASC payment] system for the year,
after application of clause (iv), shall be
reduced by the productivity adjustment
described in section
1886(b)(3)(B)(xi)(II)’’ of the Act effective
with the calendar year beginning
January 1, 2011. The statute defines the
productivity adjustment to be equal to
the 10-year moving average of changes

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in annual economy-wide private
nonfarm business multifactor
productivity (MFP) (as projected by the
Secretary for the 10-year period ending
with the applicable fiscal year, year,
cost reporting period, or other annual
period) (the ‘‘MFP adjustment’’). Clause
(iv) of section 1833(i)(2)(D) of the Act
authorizes the Secretary to provide for
a reduction in any annual update for
failure to report on quality measures.
Clause (v) of section 1833(i)(2)(D) of the
Act states that application of the MFP
adjustment to the ASC payment system
may result in the update to the ASC
payment system being less than zero for
a year and may result in payment rates
under the ASC payment system for a
year being less than such payment rates
for the preceding year.
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74516), we
finalized a policy that ASCs begin
submitting data on quality measures for
services beginning on October 1, 2012
for the CY 2014 payment determination
under the ASCQR Program. Section
XVI.D. of the CY 2013 OPPS/ASC
proposed rule (77 FR 45192 through
45193) provided a discussion of the
proposed payment reduction to the
annual update for ASCs that fail to meet
the ASCQR Program requirements. In
summary, we proposed to calculate
reduced national unadjusted payment
rates using the ASCQR Program reduced
update conversion factor that would
apply to ASCs that fail to meet their
quality reporting requirements. The
reduced rates would apply beginning in
CY 2014. We proposed that application
of the 2.0 percentage point reduction to
the annual update factor, which
currently is the CPI–U, may result in the
update to the ASC payment system
being less than zero for a year for ASCs
that fail to meet the ASCQR Program
requirements. We proposed changes to
§§ 416.160(a)(1) and 416.171 to reflect
this proposal. Comments to this
proposal are addressed in section
XVI.D.2 of this final rule with comment
period.
In accordance with section
1833(i)(2)(C)(i) of the Act, before
applying the MFP adjustment, the
Secretary first determines the
‘‘percentage increase’’ in the CPI–U,
which we interpret cannot be a negative
number. Thus, in the instance where the
percentage change in the CPI–U for a
year is negative, we would hold the
CPI–U update factor for the ASC
payment system to zero. For the CY
2014 payment determination and
subsequent payment determination
years, under section 1833(i)(2)(D)(iv) of
the Act, we would reduce the annual
update by 2.0 percentage points for an

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ASC that fails to submit quality
information under the rules established
by the Secretary in accordance with
section 1833(i)(7) of the Act. Section
1833(i)(2)(D)(v) of the Act, as added by
section 3401(k) of the Affordable Care
Act, requires that the Secretary reduce
the annual update factor, after
application of any quality reporting
reduction by the MFP adjustment, and
states that application of the MFP
adjustment may reduce this percentage
change below zero. If the application of
the MFP adjustment to the annual
update factor after application of any
quality reporting reduction would result
in an MFP-adjusted update factor that is
less than zero, the resulting update to
the ASC payment rates would be
negative and payments would decrease
relative to the prior year. Illustrative
examples of how the MFP adjustment
would be applied to the ASC payment
system update are found in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72062 through 72064).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45175), for the 12-month
period ending with the midpoint of CY
2013, the CPI–U update was projected to
be 2.2 percent. Because the ASCQR
Program does not affect payment rates
until CY 2014, there would be no
quality reporting reduction to the CPI–
U for CY 2013. The MFP adjustment for
the period ending with the midpoint of
CY 2013 was projected to be 0.9 percent
based on the methodology for
calculating the MFP adjustment
finalized in the CY 2011 MPFS final
rule with comment period (75 FR 73394
through 73396) as revised in the CY
2012 MPFS final rule with comment
period (76 FR 73300 through 73301). We
proposed to reduce the CPI–U update of
2.2 percent by the MFP adjustment of
0.9 percent, resulting in an MFPadjusted CPI–U update factor of 1.3
percent. Therefore, as stated in the CY
2013 OPPS/ASC proposed rule (77 FR
45175), we proposed to apply a 1.3
percent MFP-adjusted CPI–U update
factor to the CY 2012 ASC conversion
factor.
For CY 2013, we also proposed to
adjust the CY 2012 ASC conversion
factor ($42.627) by the wage adjustment
for budget neutrality of 1.0002 in
addition to the MFP-adjusted update
factor of 1.3 percent discussed above,
which resulted in a proposed CY 2013
ASC conversion factor of $43.190 (77 FR
45175). We invited public comments on
these proposals.
Comment: Commenters expressed
varied opinions regarding the feasibility
of requiring ASCs to submit cost data to
the Secretary. One commenter believes
that CMS should require ASCs to submit

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cost data so that an appropriate market
basket for ASC annual updates can be
identified and so that analysts can
determine the costs of an efficient
provider of ASC services. The
commenter believes that reporting such
data is feasible because businesses such
as ASCs typically keep record of their
costs for filing taxes and other purposes.
In addition, this commenter pointed out
that other small providers, including
home health agencies and hospices,
submit cost data to CMS.
Other commenters (predominantly
commenters who represent ASCs)
opposed a requirement that ASCs
submit cost data to CMS. The
commenters believed that a requirement
to submit cost data would be both
unnecessary and administratively
burdensome for ASCs.
Further, some commenters stated that
requiring ASCs to submit cost data that
would not be directly tied to receipt of
payment would likely result in the
submission of data that is unreliable.
These commenters also maintained that
using cost data to develop an ASCspecific market basket would not
provide a more accurate reflection of
ASC cost growth. Commenters believed
that creating a single set of cost weights
that are representative of the industry
average would relate to few ASCs as
most centers are specialized and would
have a cost structure that is specific to
the procedures they provide. These
commenters also stated that, by CMS’
own description, the hospital market
basket itself is an imperfect measure of
hospital outpatient costs but CMS has
rationalized use of the hospital market
basket as the best available measure of
costs in the hospital outpatient setting.
The commenters believe that, likewise,
the best available proxy to measure
costs in the ASC setting is the hospital
market basket. Commenters expressed
frustration that CMS has not adopted
the hospital market basket to update
ASC payment rates and urged the
agency to not waste precious resources
collecting ASC cost data when this
reasonable measure of input prices is
readily available.
Response: We thank all of the
commenters for their thoughts regarding
the type of cost information that would
be feasible to collect from ASCs in the
future in order to determine if an
alternative update or an ASC-specific
market basket would be a better proxy
for ASC cost inflation compared to the
CPI–U. We will keep the commenters’
perspectives about collecting cost
information from ASCs in mind as we
consider this issue further.
Comment: As in previous years,
commenters requested that CMS adopt

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the hospital market basket to update the
ASC payment system instead of using
the CPI–U. The commenters explained
that the CPI–U does not fairly represent
the costs borne by the ASC industry
because the prices measured in the
basket of goods comprising the index
reflect the types and weights of
categories typical of an American
household, rather than an outpatient
surgical provider. Commenters believed
that the hospital market basket more
closely reflects the cost structure of
ASCs than does the basket of goods
included in the CPI–U. Commenters
stated that adopting the hospital market
basket to update ASC payment rates
would minimize the divergence in CY
2013 payments in ASCs compared to
HOPDs and would ensure continued
beneficiary access to ASCs.
Commenters also indicated that the
hospital market basket is a more
appropriate index to use for the ASC
update now that CMS is required to
apply the MFP adjustment to the ASC
annual update. Commenters stated that,
as an output price index, the CPI–U
index already accounts for productivity
thus ASCs, in essence, are receiving a
productivity adjustment that is twice
that applied to the HOPD update.
Because CMS has discretion regarding
the index used to update ASCs, but is
required in statute to adjust the ASC
update by the MFP, commenters urged
CMS to use the hospital market basket,
which is an input price index that does
not already account for productivity, to
update ASC payment rates and thereby
allow the appropriate application of the
required productivity adjustment.
Commenters also requested that the 10year MFP measurement period be
uniform in ASCs and HOPDs so that
there is no discrepancy in the estimates
of the MFP that will provide additional
divergence between the ASC and HOPD
updates.
Response: While commenters argue
that the items included in the CPI–U
index may not adequately measure
inflation for the goods and services
provided by ASCs and that use of the
hospital market basket would minimize
the divergence in the payment rates
between the OPPS and ASC payment
system, we believe that the hospital
market basket does not align with the
cost structures of ASCs. Hospitals
provide a much wider range of services,
such as room and board and emergency
services, and the costs associated with
providing these services are not part of
the ASC cost structure. Therefore, at this
time, we do not believe that it is
appropriate to use the hospital market
basket for the ASC annual update.

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We recognize that the CPI–U is an
output price index that accounts for
productivity. However, section
1833(i)(2)(D)(v) of the Act requires the
agency to reduce the annual update
factor by the MFP adjustment. For the
reasons stated above, we do not believe
that the hospital market basket would
appropriately reflect the cost structures
of ASCs, and because we do not have
cost data on ASCs, we are not able to
recommend a more accurate update.
Therefore, the CPI–U remains the most
appropriate update. Regarding
alignment of the MFP adjustment across
payment systems, for reasons stated in
the CY 2011 MPFS final rule with
comment period (75 FR 73396), we
believe that it is more appropriate to
align the MFP adjustment with the
update timeframes for each payment
system rather than aligning the MFP
adjustment across payment systems.
After consideration of the public
comments we received, we are applying
our established methodology for
determining the final CY 2013 ASC
conversion factor. Using more complete
CY 2011 data for this final rule with
comment period than was available for
the proposed rule, we calculated a wage
index budget neutrality adjustment of
1.0008. Based on updated data, the CPI–
U for the 12-month period ending with
the midpoint of CY 2013 is now
projected to be 1.4 percent, while the
MFP adjustment (using the revised IGI
series to proxy the labor index used in
the MFP forecast calculation as
discussed and finalized in the CY 2012
MPFS final rule with comment period)
is 0.8 percent, resulting in an MFPadjusted CPI–U update factor of 0.6
percent. The final ASC conversion
factor of $42.917 is the product of the
CY 2012 conversion factor of $42.627
multiplied by the wage index budget
neutrality adjustment of 1.0008 and the
MFP-adjusted CPI–U payment update of
0.6 percent. We also are finalizing
proposed changes to §§ 416.160(a)(1)
and 416.171, without modification,
regarding the reduction to payment rates
beginning in CY 2014 for ASCs that fail
to meet the ASCQR Program
requirements.
3. Display of CY 2013 ASC Payment
Rates
Addenda AA and BB to this CY 2013
OPPS/ASC final rule with comment
period (which are available via the
Internet on the CMS Web site) display
the final updated ASC payment rates for
CY 2013 for covered surgical procedures
and covered ancillary services,
respectively. These addenda contain
several types of information related to
the CY 2013 payment rates. Specifically,

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in Addendum AA, a ‘‘Y’’ in the column
titled ‘‘Subject to Multiple Procedure
Discounting’’ indicates that the surgical
procedure will be subject to the
multiple procedure payment reduction
policy. As discussed in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66829 through 66830),
most covered surgical procedures are
subject to a 50-percent reduction in the
ASC payment for the lower-paying
procedure when more than one
procedure is performed in a single
operative session. Display of the
comment indicator ‘‘CH’’ in the column
titled ‘‘Comment Indicator’’ indicates a
change in payment policy for the item
or service, including identifying
discontinued HCPCS codes, designating
items or services newly payable under
the ASC payment system, and
identifying items or services with
changes in the ASC payment indicator
for CY 2013. Display of the comment
indicator ‘‘NI’’ in the column titled
‘‘Comment Indicator’’ indicates that the
code is new (or substantially revised)
and that the payment indicator
assignment is an interim assignment
that is open to comment in this final
rule with comment period.
The values displayed in the column
titled ‘‘CY 2013 Payment Weight’’ are
the relative payment weights for each of
the listed services for CY 2013. The
payment weights for all covered surgical
procedures and covered ancillary
services whose ASC payment rates are
based on OPPS relative payment
weights were scaled for budget
neutrality. Thus, scaling was not
applied to the device portion of the
device-intensive procedures, services
that are paid at the MPFS nonfacility PE
RVU-based amount, separately payable
covered ancillary services that have a
predetermined national payment
amount, such as drugs and biologicals
and brachytherapy sources that are
separately paid under the OPPS, or
services that are contractor-priced or
paid at reasonable cost in ASCs.
To derive the CY 2013 payment rate
displayed in the ‘‘CY 2013 Payment’’
column, each ASC payment weight in
the ‘‘CY 2013 Payment Weight’’ column
was multiplied by the CY 2013
conversion factor of $42.917. The
conversion factor includes a budget
neutrality adjustment for changes in the
wage index values and the annual
update factor as reduced by the
productivity adjustment (as discussed in
section XIV.H.2.b. of this final rule with
comment period).
In Addendum BB, there are no
relative payment weights displayed in
the ‘‘CY 2013 Payment Weight’’ column
for items and services with

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predetermined national payment
amounts, such as separately payable
drugs and biologicals. The ‘‘CY 2013
Payment’’ column displays the CY 2013
national unadjusted ASC payment rates
for all items and services. The CY 2013
ASC payment rates listed in Addendum
BB for separately payable drugs and
biologicals are based on ASP data used
for payment in physicians’ offices in
October 2012.
Addendum EE provides the HCPCS
codes and short descriptors for surgical
procedures that are to be excluded from
payment in ASCs for CY 2013.
We did not receive any public
comments regarding the continuation of
our policy to provide CY 2013 ASC
payment information as detailed in
Addenda AA and BB. Therefore,
Addenda AA and BB to this final rule
with comment period (which are
available via the Internet on the CMS
Web site) display the updated ASC
payment rates for CY 2013 for covered
surgical procedures and covered
ancillary services, respectively, and
provide additional information related
to the CY 2013 rates.
XV. Hospital Outpatient Quality
Reporting Program Updates
A. Background
1. Overview
CMS has implemented quality
measure reporting programs for multiple
settings of care. These programs
promote higher quality, more efficient
health care for Medicare beneficiaries.
The quality data reporting program for
hospital outpatient care, known as the
Hospital Outpatient Quality Reporting
(Hospital OQR) Program, formerly
known as the Hospital Outpatient
Quality Data Reporting Program (HOP
QDRP), has been generally modeled
after the quality data reporting program
for hospital inpatient services known as
the Hospital Inpatient Quality Reporting
(Hospital IQR) Program (formerly
known as the Reporting Hospital
Quality Data for Annual Payment
Update (RHQDAPU) Program). Both of
these quality reporting programs for
hospital services have financial
incentives for the reporting of quality
data to CMS.
CMS also has implemented quality
reporting programs for long term care
hospitals, inpatient rehabilitation
hospitals, the hospice program,
ambulatory surgical centers (the
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program), as well as
a program for physicians and other
eligible professionals, known as the
Physician Quality Reporting System
(PQRS) (formerly known as the

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Physician Quality Reporting Initiative
(PQRI)). CMS has recently finalized
quality reporting programs for inpatient
psychiatric facilities and PPS-exempt
cancer hospitals.
Finally, CMS has implemented a
Hospital Value-Based Purchasing
Program and an end-stage renal disease
(ESRD) Quality Incentive Program (76
FR 628 through 646) that link payment
to performance.
In implementing the Hospital OQR
Program and other quality reporting
programs, we have focused on measures
that have high impact and support
national priorities for improved quality
and efficiency of care for Medicare
beneficiaries as reflected in the National
Quality Strategy, as well as conditions
for which wide cost and treatment
variations have been reported, despite
established clinical guidelines. Our
ultimate goal is to align the clinical
quality measure requirements of the
Hospital OQR Program and various
other programs, such as the Hospital
IQR Program, the ASCQR Program, and
the Medicare and Medicaid Electronic
Health Record (EHR) Incentive
Programs, authorized by the Health
Information Technology for Economic
and Clinical Health Act, so that the
burden for reporting will be reduced. As
appropriate, we will consider the
adoption of measures with electronic
specifications, to enable the collection
of this information as part of care
delivery. Establishing such an alignment
will require interoperability between
electronic health records (EHRs), and
CMS data collection systems, with data
being calculated and submitted via
certified EHR technology; additional
infrastructural development on the part
of hospitals and CMS; and the adoption
of standards for capturing, formatting,
and transmitting the data elements that
make up the measures. Once these
activities are accomplished, the
adoption of many measures that rely on
data obtained directly from EHRs will
enable us to expand the Hospital OQR
Program measure set with less cost and
burden to hospitals.
In implementing this and other
quality reporting programs, we generally
applied the same principles for the
development and the use of measures,
with some differences:
• Our overarching goal is to support
the National Quality Strategy’s goal of
better health care for individuals, better
health for populations, and lower costs
for health care. The Hospital OQR
Program will help achieve these goals
by creating transparency around the
quality of care at hospital outpatient
departments to support patient
decision-making and quality

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improvement. Given the availability of
well validated measures and the need to
balance breadth with minimizing
burden, measures should take into
account and address, as fully as
possible, the six domains of
measurement that arise from the six
priorities of the National Quality
Strategy: Clinical care; Person- and
caregiver-centered experience and
outcomes; Safety; Efficiency and cost
reduction; Care coordination; and
Community/population health. More
information regarding the National
Quality Strategy can be found at: http://
www.healthcare.gov/law/resources/
reports/. HHS engaged a wide range of
stakeholders to develop the National
Quality Strategy, as required by the
Affordable Care Act.
• Pay-for-reporting and public
reporting should rely on a mix of
standards, processes, outcomes,
efficiency, and patient experience of
care measures, including measures of
care transitions and changes in patient
functional status.
• To the extent possible and
recognizing differences in payment
system maturity and statutory
authorities, measures should be aligned
across Medicare and Medicaid public
reporting and incentive payment
systems to promote coordinated efforts
to improve quality. The measure sets
should evolve so that they include a
focused set of measures appropriate to
the specific provider category that
reflects the level of care and the most
important areas of service and measures
for that provider category.
• We weigh the relevance and the
utility of measures compared to the
burden on hospitals in submitting data
under the Hospital OQR Program. The
collection of information burden on
providers should be minimized to the
extent possible. To this end, we are
working toward the eventual adoption
of electronically-specified measures so
that data can be calculated and
submitted via certified EHR technology
with minimal burden. We also seek to
use measures based on alternative
sources of data that do not require chart
abstraction or that utilize data already
being reported by many hospitals, such
as data that hospitals report to clinical
data registries, or all-payer claims
databases. In recent years we have
adopted measures that do not require
chart abstraction, including structural
measures and claims-based measures
that we can calculate using other data
sources.
• To the extent practicable and
feasible, and recognizing differences in
statutory authorities, measures used by
CMS should be endorsed by a national,

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multi-stakeholder organization. We take
into account the views of the Measure
Application Partnership (MAP). The
MAP is a public-private partnership
convened by the National Quality
Forum (NQF) for the primary purpose of
providing input to HHS on selecting
performance measures for quality
reporting programs and pay for
reporting programs. The MAP views
patient safety as a high priority area and
it strongly supports the use of NQFendorsed safety measures. Accordingly,
we consider the MAP’s
recommendations in selecting quality
and efficiency measures. Information
about the MAP can be found at http://
www.qualityforum.org/Setting_
Priorities/Partnership/Measure_
Applications_Partnership.aspx
• Measures should be developed with
the input of providers, purchasers/
payers, consumers, and other
stakeholders. Measures should be
aligned with best practices among other
payers and the needs of the end users
of the measures. We take into account
widely accepted criteria established in
medical literature.
• HHS Strategic Plan and Initiatives.
HHS is the U.S. government’s principal
agency for protecting the health of all
Americans. HHS accomplishes its
mission through programs and
initiatives. Every 4 years HHS updates
its Strategic Plan and measures its
progress in addressing specific national
problems, needs, or mission-related
challenges. The goals of the HHS
Strategic Plan for Fiscal Years 2010
through 2015 are to: Transform Health
Care; Advance Scientific Knowledge
and Innovation; Advance the Health,
Safety, and Well-Being of the American
People; Increase Efficiency,
Transparency, and Accountability of
HHS Programs; and Strengthen the
Nation’s Health and Human Services
Infrastructure and Workforce (http://
www.hhs.gov/about/FY2012budget/
strategicplandetail.pdf). HHS prioritizes
policy and program interventions to
address the leading causes of death and
disability in the United States,
including heart disease, cancer, stroke,
chronic lower respiratory diseases,
unintentional injuries and preventable
behaviors. Initiatives such as the HHS
Action Plan to Reduce Healthcareassociated Infections (HAIs) in clinical
settings and the Partnership for Patients
exemplify these programs.
• CMS Strategic Plan. We strive to
ensure that measures for different
Medicare and Medicaid programs are
aligned with priority quality goals, that
measure specifications are aligned
across settings, that outcome measures
are used whenever possible, and that

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quality measures are collected from
EHRs as appropriate.
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74451
through 74452), we responded to public
comment on many of these principles.
In the CY 2013 OPPS/ASC proposed
rulemaking, we generally applied the
same principals for our considerations
for future measures, with some
differences.
Comment: Many commenters
supported CMS’ general principles of
measure development, selection, and
implementation, specifically, CMS’
combined approach of using process
and outcomes measures, as well as our
intent to adopt NQF-endorsed measures
whenever feasible, and to align
measures across settings under different
quality reporting programs. One
commenter stated that CMS should only
adopt measures that are useful for
hospital outpatient departments to
improve their quality performance.
A few commenters recommended that
the Hospital OQR Program only adopt
NQF-endorsed measures which undergo
established sound, and timely measure
maintenance and update procedures.
Several commenters urged that CMS
proceed cautiously when considering
adopting non-NQF-endorsed measures,
which in some cases may not have been
rigorously field-tested and may end up
in subsequent suspension or
implementation deferral. Commenters
requested that CMS delay adoption of
measures in the future until
specification problems are completely
ironed out so that hospitals do not have
to spend resources on preparing for
incompletely specified or untested
measures.
Response: As discussed, we usually
focus on measures appropriate to the
specific provider category that reflect
the level of care and the most important
areas of service and measures for that
provider category. Section
1833(t)(17)(C)(i) of the Act requires the
Secretary to ‘‘develop measures that the
Secretary determines to be appropriate
for the measurement of the quality of
care (including medication errors)
furnished by hospitals in outpatient
settings and that reflect consensus
among affected parties and, to the extent
feasible and practicable, shall include
measures set forth by one or more
national consensus building entities.’’
This provision does not require that the
measures we adopt for the Hospital
OQR Program be endorsed by any
particular entity, and we believe that
consensus among affected parties can be
achieved by means other than
endorsement by a national consensus
building entity, including through the

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measure development process, through
broad acceptance and use of the
measure(s), and through public
comment.
Generally, we prefer to adopt NQFendorsed measures. We rely on NQF to
endorse only those measures that have
met the rigorous field testing
requirement and we do not re-test these
measures prior to adoption. However, in
some circumstances, as with OP–19,
when we find the specifications require
revision after the measure has been
adopted, CMS chooses to suspend a
measure rather than requiring continued
data collection to alleviate burden on
hospitals.
We strive to field test each measure
we use in our programs. However, on
rare occasions, we adopt measures that
were developed and tested by other
measure stewards. With respect to the
commenters who recommended that, in
the future, we delay adoption of
measures until specification problems
are completely resolved so that
hospitals would not have to spend
resources on preparing for incompletely
specified or untested measures, we
believe the commenters may have been
referring specifically to one measure—
OP–24: Cardiac Rehabilitation Patient
Referral from an Outpatient Setting. For
that measure, we are delaying data
collection until January 1, 2014, and its
application toward a payment
determination will be for CY 2015 rather
than CY 2014. If our interpretation of
the comment was correct, we
understand the commenter’s concerns.
However, we clarify that because we
have not added any OP–24 measure
specifications to the Specification
Manual yet, it is highly unlikely that
hospitals would have spent resources in
preparing for this measure.
In instances where we develop our
measures, we do proceed with caution,
employing a rigorous consensus-based
measure development and field testing
process that incorporates broad
stakeholder input. Therefore, we believe
it is reasonable to adopt measures
developed in this manner whether or
not they achieve NQF endorsement. For
those measures that we have not
developed, we strive to obtain testing
information on the technical aspects
from the developer and to work with the
developer to create specifications that
enable standardized collection in
national programs. In the case of
measures we do not develop, the above
specification process may occur after
adoption of the measure in a reporting
program, but prior to implementing data
collection.
Comment: Some commenters
supported CMS’ goal to align measures

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in the Hospital IQR, Hospital OQR, and
Medicare and Medicaid EHR Incentive
Programs. Commenters also commended
CMS for striving for quality reporting
that is based upon meaningful and
comparable measures.
Response: We thank the commenters
for supporting our strategy to align
measures across settings and programs
whenever feasible and to move toward
more meaningful measures in our
programs.
2. Statutory History of the Hospital
Outpatient Quality Reporting (Hospital
OQR) Program
We refer readers to the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72064) for a detailed
discussion of the statutory history of the
Hospital OQR Program.
3. Measure Updates and Data
Publication
a. Process for Updating Quality
Measures
Technical specifications for the
Hospital OQR Program measures are
listed in the Hospital OQR
Specifications Manual, which is posted
on the CMS QualityNet Web site at:
http://www.qualitynet.org/dcs/Content
Server?c=Page&pagename=QnetPublic
%2FPage%2FSpecsManualTemplate&
cid=1228772438492.
We maintain the technical
specifications for the measures by
updating this Hospital OQR
Specifications Manual and including
detailed instructions and calculation
algorithms. In some cases where the
specifications are available elsewhere,
we may include links to Web sites
hosting technical specifications. These
resources are for hospitals to use when
collecting and submitting data on
required measures.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68766
through 68767), we established an
additional subregulatory process for
making updates to the measures we
have adopted for the Hospital OQR
Program. This process is necessary so
that the Hospital OQR measures are
calculated based on the most up-to-date
scientific and consensus standards.
Under this process, when a national
consensus building entity updates the
specifications for a measure that we
have adopted for the Hospital OQR
Program, we update our specifications
for that measure accordingly. For
measures that are not endorsed by a
national consensus building entity, the
subregulatory process is based on
scientific advances as determined
necessary by CMS, in part, through our

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68469

measure maintenance process involving
Technical Expert Panels (73 FR 68767).
We provide notice of the updates via the
QualityNet Web site, http://
www.QualityNet.org, and in the
Hospital OQR Specifications Manual.
We generally release the Hospital
OQR Specifications Manual every 6
months and release addenda as
necessary. This release schedule
provides at least 3 months of advance
notice for nonsubstantive changes such
as changes to ICD–9, CPT, NUBC, and
HCPCS codes, and at least 6 months of
advance notice for changes to data
elements that would require significant
systems changes.
Comment: One commenter believed
that conversion of measures to use ICD–
10–CM/PCS and eMeasure formats
should be considered a substantial
change and should warrant the
proposed rulemaking process. One
commenter asserted that there are
shortcomings in the CMS subregulatory
process. The commenter was concerned
that this rapid subregulatory process
may not include a field review of the
measure. Secondly, the commenter
stated that some measure changes affect
data accuracy and completeness, such
as change of diagnosis, procedure codes
and changes to exclusions to the patient
population and extended application of
the measure to other hospital locations.
The commenter believed that these are
substantive changes rather than nonsubstantive changes as noted by CMS.
Response: We will be transitioning all
of our billing and measurement systems
from ICD–9 to ICD–10. We intend to
solicit public comment on the ICD–10
versions of our measure specifications
through future rulemaking prior to
implementation. We normally
incorporate coding updates for the
measures using our established
subregulatory process because such
updates do not change the basic
underlying concepts being measured.
This is theoretically true of moving from
ICD–9 to the ICD–10 coding system (or
eMeasure format). However, we
recognize that in moving to ICD–10
coding (or eMeasure format) there may
be some nuances in the measures that
when translated result in unanticipated
differences in performance, rendering
prior measure results untrendable with
results for the same measures under the
new coding system. We also intend to
study this effect further once
implementation has occurred and data
are available to do so.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53504), we indicated that
examples of what we might generally
regard as nonsubstantive changes to
measures might include updated

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diagnosis or procedure codes,
medication updates for categories of
medications, or a broadening of age
ranges. We believe that nonsubstantive
changes may also include updates to
NQF-endorsed measures based upon
changes to guidelines upon which the
measures are based. We note that the
NQF process has already incorporated
an opportunity for public comment and
engagement in the measure maintenance
process.
We will continue to use rulemaking to
adopt substantive updates made by the
NQF to the endorsed measures we have
adopted for the Hospital OQR Program.
Examples of changes that we might
generally consider to be substantive
would be those in which the changes
are so significant that the measure is no
longer the same measure, or when a
standard of performance assessed by a
measure becomes more stringent (for
example, changes in acceptable timing
of medication, NQF expansion of
endorsement of a previously endorsed
measure to a new setting, procedure/
process, or test administration).
However, these and other changes
would need to be evaluated on a caseby-case basis to determine whether or
not a change to a measure is in fact
substantive.
Comment: A few commenters
expressed concern that the CMS
procedures for notifying providers of
significant changes to quality measures
and general changes to the Hospital
OQR Program may be problematic at
times, as email blasts, one of the CMS
communication methods, do not always
reach the appropriate quality measure
personnel. The commenters requested
consistency in transparency of CMS’
communications to hospitals, vendors,
and QIOs and requested sufficient
notice be given to hospitals regarding
the new start date of any measure
changes.
Response: We thank these
commenters for feedback on
communication. We endeavor to
communicate clearly to all Hospital
OQR Program stakeholders. We offer
email blasts to subscribers who sign up
to receive them, indicating they prefer
to receive information by email. The
QualityNet Web site contains a full list
of all email blasts sent, and it is
available for any stakeholder to review
at any time. We do not intend the
listserv to replace QualityNet as the
primary source for information and
resources for the Hospital OQR Program.
We offer a helpline that is available
weekdays to offer technical support and
assistance to callers, in an effort to help
any caller successfully comply with
program requirements. Please find this

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helpline and program contact
information by visiting the QualityNet
Web site at https://www.qualitynet.org.
From this page, choose ‘‘HospitalsOutpatient’’ from the drop down menus
across the top of the page, then click on
‘‘Support Contact.’’
Comment: A few commenters
appreciated the 6-month advance notice
of data elements and system changes but
noted that the 6-month period for
measure update and Specifications
Manual release may not provide
sufficient time for hospitals to make
changes in data elements and system.
Another commenter requested more
detailed instructions on chart
abstraction be provided because the
training Qs and As posted on the
QualityNet Web site are insufficient and
appear to contradict the Specifications
Manual at times.
Response: Our experience with this
and other quality reporting programs
indicates that 6 months’ notice is
sufficient for hospitals and their
vendors to accommodate data element
and system changes. We provide
detailed abstraction instructions in our
measure Specifications Manual, and
provide additional guidance through Qs
and As posted on the QualityNet Web
site, and by offering periodic training.
We will take into consideration the
recommendation to provide more
detailed instructions on chart
abstraction due to insufficient Qs and
As posted on the QualityNet Web site.
We are aware of a specific situation we
corrected earlier this year. Under the ED
Throughput topic, we had two
contradictory answers posted within our
Qs and As for a brief period. We have
corrected the situation and we apologize
for the confusion it may have caused.
We will address this comment by
having our primary support contractor
review the current and incoming Qs and
As to look for opportunities to
incorporate answers into the
Specifications Manual where
appropriate. We strive to maintain high
quality Qs and As that stakeholders can
use as a reference for chart abstraction
and measure specifications.
b. Publication of Hospital OQR Program
Data
Section 1833(t)(17)(E) of the Act
requires that the Secretary establish
procedures to make data collected under
the Hospital OQR Program available to
the public. It also states that such
procedures must ensure that a hospital
has the opportunity to review the data
that are to be made public, with respect
to the hospital prior to such data being
made public. To meet these
requirements, data that a hospital has

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submitted for the Hospital OQR Program
are typically provided to hospitals for a
preview period via QualityNet, and then
displayed on CMS Web sites such as the
Hospital Compare Web site, http://
www.hospitalcompare.hhs.gov
following the preview period. The
Hospital Compare Web site is an
interactive Web tool that assists
beneficiaries by providing information
on hospital quality of care. We believe
this information motivates beneficiaries
to work with their doctors and hospitals
to discuss the quality of care hospitals
provide to patients, thus providing
additional incentives to hospitals to
improve the quality of care that they
furnish.
Under our current policy, we publish
quality data by the corresponding
hospital CMS Certification Number
(CCN), and indicate instances where
data from two or more hospitals are
combined to form the publicly reported
measures on the Hospital Compare Web
site. That is, in a situation in which a
larger hospital has taken over ownership
of a smaller hospital, the smaller
hospital’s CCN will be replaced by the
larger hospital’s CCN (the principal
CCN). For data display purposes, we
will only display data received under
the principal CCN. If both hospitals are
submitting data, those data are not
distinguishable in the warehouse; and
the data is calculated together as one
hospital.
Consistent with our current policy,
we make Hospital IQR and Hospital
OQR data publicly available whether or
not the data have been validated for
payment purposes. The Hospital
Compare Web site currently displays
information covering process of care,
structural, ED throughput timing, health
IT, and imaging efficiency measure data
under the Hospital OQR Program.
In general, we strive to display
hospital quality measures on the
Hospital Compare Web site as soon as
possible, after they have been adopted
and have been reported to CMS.
However, if there are unresolved display
issues or pending design considerations,
we may make the data available on
other, non-interactive, CMS Web sites
such as http://www.cms.hhs.gov/
HospitalQualityInits/. Publicly reporting
the information in this manner, though
not on the interactive Hospital Compare
Web site, allows us to meet the
requirement under section
1833(t)(17)(E) of the Act for establishing
procedures to make quality data
submitted available to the public
following a preview period. When we
display hospital quality information on
non-interactive CMS Web sites, affected
parties will be notified via CMS

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listservs, CMS email blasts, memoranda,
Hospital Open Door Forums, national
provider calls, and QualityNet
announcements regarding the release of
preview reports followed by the posting
of data on a Web site other than
Hospital Compare.
We also require hospitals to complete
and submit a registration form
(‘‘participation form’’) in order to
participate in the Hospital OQR
Program. With submission of this
participation form, participating
hospitals agree that they will allow CMS
to publicly report the quality measure
data submitted under the Hospital OQR
Program, including measures that we
calculate using Medicare claims.
Comment: One commenter urged
CMS to continue to use both
stakeholders and focus groups to
develop and evaluate terminology to
present user-friendly measurement data
on Hospital Compare. The commenter
believed this procedure would help to
decrease misinformation and
unnecessary alarm to patients. Another
commenter questioned the value of the
‘‘old’’ data and the ‘‘outdated timeframe of data collection period’’
presented in Hospital Compare, in
facilitating health care decisions by
Medicare beneficiaries.
Response: On Hospital Compare, we
strive to provide consumers with
meaningful information that they can
use to help make healthcare decisions.
When warranted, we use formative
consumer testing to assure the language
and display of information makes sense
to consumers before posting. Formative
testing allows CMS to adjust displays
and language so that they are more
meaningful to consumers based on
consumer feedback. At the same time,
we believe that it is critical to maintain
the integrity of the measure intent,
thereby not simplifying the data too
much as to risk making the information
so general that it is not meaningful.
The data we publicly report do not all
have the same performance period. For
example, the process-of-care measures
are collected quarterly and are
displayed as a rolling four quarters of
data on Hospital Compare. We allow 4
to 4.5 months after the reporting quarter
for hospitals to submit their complete
data to the CMS clinical data
warehouse. In contrast, the outcomes
measures are calculated using 3 years of
data from Medicare fee for service
claims.
Comment: One commenter was
concerned that the display of the
acceptable quality range and
benchmarks publicly reported for the
Outpatient Imaging Efficiency (OIE)

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measures may cause unnecessary alarm
to consumers.
Response: We appreciate the
commenter’s concerns. To provide
meaningful performance benchmarks,
we will emphasize the ‘‘within range’’
rates and facility outlier results in a
facility’s public reporting so as to
minimize the potential for negatively
affecting access to imaging services. In
addition, we continue to use both
stakeholder and focus groups for
developing and evaluating terminology
for presenting measurement data to the
public, in order to avoid misleading or
alarming patients unnecessarily.
B. Process for Retention of Hospital
OQR Program Measures Adopted in
Previous Payment Determinations
In past rulemakings, we have
proposed to retain previously adopted
measures for each payment
determination on a year-by-year basis
and invited public comments on the
proposal to retain such measures for all
future payment determinations unless
otherwise specified. In the CY 2013
OPPS/ASC proposed rule (77 FR 45178),
for the purpose of streamlining the
rulemaking process, beginning with this
rulemaking, we proposed that when we
adopt measures for the Hospital OQR
Program beginning with a payment
determination and subsequent years,
these measures are automatically
adopted for all subsequent year payment
determinations unless we propose to
remove, suspend, or replace the
measures. We invited public comment
on this proposal.
Comment: Some commenters
recognized the importance of stability
and consistency in the Hospital OQR
Program set and supported the proposed
automatic retention of Hospital OQR
Program measures adopted in a previous
year for subsequent payment year
determinations. One commenter stated
that proposed rulemakings should be
devoted to address new changes rather
than repeating discussions of continuing
measures previously adopted. However,
the commenter urged CMS to publish
the full list of measures to be continued,
in the OPPS/ASC proposed rule each
year. The commenter believed
publishing the list of measures would
provide the public the opportunity to
comment and to share experience on
current measures.
Response: We appreciate the
commenters’ recognition of the
importance of our goal to streamline the
administrative process in rulemaking.
As suggested by the commenters, we
will continue to publish the full list of
measures to be continued in the OPPS

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proposed rules, for the public to provide
input and share experience.
Comment: A few commenters urged
that CMS continue to propose all
Hospital OQR Program measures
adopted, on an annual basis.
Commenters were concerned that if
measure retention occurs without going
through the rulemaking process year by
year, irrelevant and obsolete measures
may not be removed timely, and the
transparency of the rulemaking process
will be compromised.
Response: We do not believe the
proposed measure retention policy will
compromise the transparency in
rulemaking or slow down the removal
or suspension of problematic measures.
Rather, the measure retention policy
would enhance administrative
efficiency while providing clear
expectations to hospital providers.
Should we decide there is a need to
remove or suspend a measure for
concerns of patient safety, we will act
expeditiously to remove or suspend the
measure between rulemaking cycles. We
will notify the public by using
memoranda, email blasts distributed
through QualityNet, and news postings
on the ‘‘Splash page’’ on QualityNet. We
will thereafter confirm the removal or
suspension of the measure through
rulemaking.
In the FY 2010 IPPS/LTCH PPS
rulemaking, we adopted a process for
the Hospital IQR Program for immediate
measure removal based on evidence that
the continued use of the measure as
specified raises patient safety concerns.
In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60634), we
adopted this same policy to be used in
the Hospital OQR Program.
Furthermore, should we determine that
a measure is problematic based upon
other criteria stated in the CY 2013
OPPS/ASC proposed rule (77 FR 45178),
we will utilize rulemaking to propose
the removal or suspension of the
measure and obtain public comment
prior to determining whether to remove
or suspend the measure.
After consideration of the public
comments we received, we are
finalizing the automatic retention of
Hospital OQR Program measures
adopted in previous payment
determinations for subsequent year
payment determinations.

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C. Removal or Suspension of Quality
Measures From the Hospital OQR
Program Measure Set
1. Considerations in Removing Quality
Measures From the Hospital OQR
Program
In the FY 2010 IPPS/LTCH PPS
rulemaking, we finalized a process for
immediate retirement of Hospital IQR
Program measures based on evidence
that the continued use of the measure as
specified raises patient safety concerns
(74 FR 43864 through 43865). We
adopted this same immediate measure
retirement policy for the Hospital OQR
Program in the CY 2010 OPPS/ASC final
rule with comment period (74 FR
60634).
In previous Hospital IQR Program
rulemakings, we have referred to the
removal of measures from the Hospital
IQR Program as ‘‘retirement.’’ We have
used this term to indicate that Hospital
IQR Program measures are no longer
included in the Hospital IQR Program
measure set for one or more indicated
reasons. However, we note that this
term may imply that other payers/
purchasers/programs should cease using
these measures that are no longer
required for the Hospital IQR Program.
In order to clarify that this is not our
intent, we stated in the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 28034)
that we will use the term ‘‘remove’’
rather than ‘‘retire’’ to refer to the action
of no longer including a measure in the
Hospital IQR Program. In the CY 2013
OPPS/ASC proposed rule (77 FR 45178),
we proposed to adopt the same
terminology of ‘‘removal’’ in the
Hospital OQR Program to indicate our
action of discontinuing a measure in the
Hospital OQR Program.
In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50185), we finalized a set of
criteria to use when determining
whether to remove Hospital OQR
Program measures. These criteria are: (1)
Measure performance among hospitals
is so high and unvarying that
meaningful distinctions and
improvements in performance can no
longer be made (‘‘topped out’’
measures); (2) performance or
improvement on a measure does not
result in better patient outcomes; (3) a
measure does not align with current
clinical guidelines or practice; (4) the
availability of a more broadly applicable
(across settings, populations, or
conditions) measure for the topic; (5)
the availability of a measure that is more
proximal in time to desired patient
outcomes for the particular topic; (6) the
availability of a measure that is more
strongly associated with desired patient
outcomes for the particular topic; and

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(7) collection or public reporting of a
measure leads to negative unintended
consequences such as patient harm.
These criteria were suggested by
commenters during Hospital IQR
Program rulemaking, and we
determined that these criteria are also
applicable in evaluating Hospital OQR
Program quality measures for removal.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45178), we proposed to
apply these measure removal criteria in
the Hospital OQR Program as well, and
we invited public comments on these
proposals.
In addition to these criteria, we take
into account the views of the Measure
Application Partnership (MAP) in the
evaluation of measure removal. The
MAP is a public-private partnership
convened by the NQF for the primary
purpose of providing input to HHS on
selecting performance measures for
certain quality reporting programs and
pay for performance programs. The
MAP views patient safety as a high
priority area and it strongly supports the
use of NQF-endorsed measures.
Furthermore, for efficiency and
streamlining purposes, we strive to
eliminate redundancy of similar
measures.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45178), we did not propose
to retire any measures from the Hospital
OQR Program.
Comment: A few commenters agreed
with CMS that the term ‘‘removal’’ is
preferable to ‘‘retirement’’ as the
measure at issue may still be relevant in
other payers/purchasers/programs. The
commenters supported all of the
proposed measure removal criteria. One
commenter noted that CMS should not
always choose the availability of
measures applicable to a broader patient
population as a measure removal
criterion, over focused measures
targeted at subsets of patient population.
The commenter asserted that in some
instances, condition-specific measures
are warranted.
Response: We thank the commenters
for the support of the measure removal
criteria. We are cognizant that some
focused measures targeted at subsets of
patient population are also relevant in
the Hospital OQR Program. We want to
clarify that before considering the
removal of a measure in any given
situation, we first assess whether the
removal criteria are relevant. We would
not be likely to propose the removal of
a measure because there is a measure
with broader applicability if what we
seek to measure requires a more
targeted, condition or patient-specific
assessment. We might, on the other
hand, consider removal of a measure

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based on the availability of a measure
that is more strongly associated with
desired patient outcomes for a particular
topic, since this might result in a
focused measure that is targeted to
subsets of patient populations. In any
given situation, we will focus only on
removal criteria that are relevant to a
particular set of circumstances. If more
than one of the measure removal criteria
appears to be relevant, we intend to take
a balanced approach in assessing the
value of each of the different criteria in
a given situation before removing any
measure.
Comment: One commenter requested
that besides using CMS program data,
CMS should also solicit input from
developers and analyze data from EHRs
and registries to identify topped-out
measures. To avoid the unintended
consequence of hospitals not spending
resources on specific interventions due
to measure removal, one commenter
urged CMS to suspend the measures at
issue rather than removing measures
whenever feasible. In addition, the
commenter requested that CMS solicit
public input before suspending or
removing a measure.
Response: We expect hospitals to
always follow appropriate standard of
care and clinical guidelines in
exercising positive interventions,
regardless of whether a measure is being
suspended or removed. Should we
propose to remove measures using the
rulemaking process, we seek input from
the public, including measure
developers and entities using EHRs to
collect the measures. However, in the
case of suspension or removal due to
patient safety concerns, action would
need to be taken quickly and may not
coincide with rulemaking cycles.
Should this occur, we would seek to
suspend measures in situations where
we believe the measure can be respecified in a manner that would not be
overly prescriptive or overly
burdensome to providers.
Comment: A few commenters urged
CMS to closely align its measure
removal with the MAP
recommendations. The commenters
cited as examples of measures that
should be removed 7previously adopted
Hospital OQR Program measures that
are not NQF-endorsed and not
recommended by the MAP.
Response: As we have already stated,
we consider all of the MAP input we
receive, including its recommendations
for removal of measures, before making
a decision about removing or keeping
any particular measure. We did not
include any proposals regarding the 7
measures that the commenters
mentioned in the CY 2013 OPPS/ASC

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proposed rule. As such, we are not
making any revisions to these measures
in this rulemaking. However, we thank
the commenters for these measure
removal suggestions and will take them
into consideration for future measure
removal.
We note that section 1833(t)(17)(C)(i)
of the Act requires the Secretary to
develop measures that the Secretary
determines to be appropriate for the
measurement of the quality of care
furnished by hospitals in outpatient
settings and that reflect consensus
among affected parties and, to the extent
feasible and practicable to include
measures set forth by one or more
national consensus building entities.
The Act does not require that the
measures we adopt for the Hospital
OQR Program be endorsed by any
particular entity, such as the NQF. In
addition, we believe that consensus
among affected parties can be reflected
by means other than endorsement by a
national consensus building entity,
including consensus achieved during
the measure development process,
consensus shown through broad
acceptance and use of measures, and
consensus through public comment.
Finally, the Act does not require us to
do more than consider MAP input.
Comment: One commenter inquired
about the criteria for resuming data
collection for measures that are removed
or temporarily suspended from the
Hospital OQR Program.
Response: Measures that are removed
must be proposed through rulemaking
in order to be added back to the program
prior to collecting data. For suspended
measures, we will strive to align with
the regular quarterly collection cycle
that has been established for chartabstracted measures, and we will
provide sufficient notice (at least 3
months) prior to resuming collection of
suspended measures. We will notify
hospitals of resumed collection the
same way we notify them of
suspension—through QualityNet
memoranda and email blasts. We also
intend to issue addenda to
Specifications Manual releases.
However, should we determine that the
re-specified measure is substantively
changed; that is, changes have been
made that affect the underlying quality
concepts being measured, we would use
rulemaking to formally propose to
replace the suspended measure with the
modified measure. As we have noted in
an earlier response, examples of changes
that we might generally consider to be
substantive would be those in which the
changes are so significant that the
measure is no longer the same measure,
or when a standard of performance

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assessed by a measure becomes more
stringent.
After consideration of the public
comments we received, we are
finalizing the term ‘‘removal’’ to
indicate future action of discontinuing a
measure in the Hospital OQR Program.
Also, we are finalizing the adoption of
the measure removal criteria used in the
Hospital IQR Program for the Hospital
OQR Program. We also thank the
commenters for the suggestions to keep,
remove, or change the status of some of
the measures we previously adopted. At
this time, we intend to keep the
measures as adopted.
2. Removal of One Chart-Abstracted
Measure for the CY 2013 and
Subsequent Years Payment
Determinations
In the FY 2010 IPPS/LTCH PPS final
rule (74 FR 43863), we established a
precedent to immediately remove a
measure from a measure set using a
subregulatory notification process
followed by subsequent confirmation in
rulemaking in situations when there is
a reason to believe that continued
collection of the measure raises patient
safety concerns, and the measure cannot
be reasonably revised in a manner that
would alleviate the concern without
being overly complex. For CY 2013 and
subsequent year payment
determinations, we are confirming what
we stated in our August 13, 2012,
memorandum ‘‘Removal of Hospital
Outpatient Quality Reporting Measure
(OQR) OP–16: Troponin results for
Emergency Department acute
myocardial infarction (AMI) patients or
chest pain patients (with Probable
Cardiac Chest Pain) Received Within 60
minutes of arrival’’ that we have
removed measure OP–16. (To review
this memorandum, visit http://
www.qualitynet.org; from this page,
choose ‘‘Hospitals-Outpatient’’ from the
drop down menus across the top of the
page, then click on ‘‘EmailNotifications.’’ Memoranda are listed by
date of publication.)
We adopted measure OP–16 for the
Hospital OQR Program for the CY 2013
payment determination with data
collection beginning with January 1,
2012 encounters. However, we are
removing OP–16 from the Hospital OQR
measure set based on patient safety
concerns. On July 11, 2012 the Food and
Drug Administration (FDA) issued a
Class I recall on several point of care
(POC) testing kits, including those that
provide Troponin results. The Class I
recall was due to an increased frequency
of false positive and false negative
results. FDA defines a Class I recall as:
‘‘a situation in which there is a

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68473

reasonable probability that the use of or
exposure to a violative product will
cause serious adverse health
consequences or death.’’ The FDA safety
alert appears at the following Web site:
http://www.fda.gov/Safety/MedWatch/
SafetyInformation/
SafetyAlertsforHumanMedicalProducts/
ucm311405.htm.
While OP–16 did not specify which
type of laboratory equipment should be
used to obtain Troponin results,
hospitals may be using these POC tests
in order to expedite results. We
understand that the FDA considers the
size of this recent Class I recall to be
large. Due to the magnitude of this
recall, we became concerned that
continued collection of the measure
may potentially impact patient safety
because of the high probability of false
results associated with the equipment.
We chose to remove the measure from
the program rather than suspend the
measure because revision of the
measure to address this issue would
result in an overly prescriptive and
complex measure. On August 13, 2012,
we released a memorandum ‘‘Removal
of Hospital Outpatient Quality
Reporting Measure (OQR) OP–16:
Troponin results for Emergency
Department acute myocardial infarction
(AMI) patients or chest pain patients
(with Probable Cardiac Chest Pain)
Received Within 60 minutes of arrival.’’
This memorandum notified the Hospital
OQR Program stakeholder community to
cease chart abstraction for the OP–16
measure immediately, and that CMS
will not publically report, validate or
use in the CY 2013 payment
determination any data collected on this
measure. The memorandum dated
August 13, 2012 is available for review
at the QualityNet Web site. To review
this memorandum, access http://
www.qualitynet.org; from this page,
choose ‘‘Hospitals-Outpatient’’ from the
drop down menus across the top of the
page, then click on ‘‘EmailNotifications.’’ Memoranda are listed by
date of publication.) Since the
memorandum was issued, we have
received two Congressional inquiries
from POC device manufacturers
indicating that our decision to remove
the measure will impact them
negatively. One commenter also
indicated that the measure has
encouraged increased communication in
the Emergency Department and
expressed concern that removal of the
measure would result in reduced
communication.
We emphasize that despite the
removal of OP–16 from the Hospital
OQR Program, we expect hospitals to
continue the timely triage, diagnosis

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and treatment of cardiac and other
patients in the ED according to
established clinical guidelines. We also
expect that hospitals will continue their
efforts to improve communication and
throughput in the ED.
Although we have requested
immediate discontinuation of chart
abstraction for OP–16, CMS is unable to
cease data collection in the system until
January 1, 2013, when we have made
certain system changes. In order to
overcome CMS’s system limitation,
hospitals can choose to submit a
meaningless value for this measure
through December 31, 2012. We ask
hospitals not to submit a blank value for
OP–16, as a lack of a populated value
for OP–16 will cause a case to be
rejected. If a case is rejected due to lack
of data, this could impact a hospital’s
ability to meet the Hospital OQR
requirements. Some vendors may have
the capability to provide a default value
for OP–16. Hospitals are encouraged to
work with their vendors to determine
options to populate the OP–16 data field
at submission.
Comment: A few commenters
supported the removal of OP–16 and
believed that there was insufficient
evidence to link this process measure to
patient outcomes. However, some
commenters were concerned that the
removal of OP–16 may undermine the
importance of Troponin testing or the
need to receive the results of Troponin
testing in a timely manner. Commenters
asserted that clinical guidelines for the
diagnostic evaluation of patients with
AMI or presumed cardiac chest pain
still recommend receiving results from
cardiac marker testing, including
Troponin, within 60 minutes. The
commenters urged that CMS either
reconsider the removal of OP–16 or
provide guidance on when the measure
will be reinstated. Commenters added
that currently, there are new and
improved Troponin testing technologies
available that would meet the intent of
OP–16.
Response: We thank the commenter
for the support of the removal of this
measure. We also clarify that hospitals
should not cease testing Troponin and
other cardiac markers, nor should they
cease following clinical guidelines for
diagnosis and treatment of cardiac
patients based on our decision to
remove OP–16 from the Hospital OQR
Program. We are considering initiating a
call for measures for this program, and
will consider suggestions for measures
on this and other topics that are
submitted through such a process for
future rulemaking.
Comment: A few commenters
perceived the CMS’ instruction to

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submit a blank value for OP–16 to be
burdensome and stated that hospitals or
their vendors should not have to bear
the responsibility of submitting
meaningless data. Commenters urged
CMS to work with contractors to derive
a technical solution that would not
require hospitals to submit meaningless
data.
Response: As we stated in our
memorandum, we urge hospitals to
work with their data submission
vendors on low-burden ways to
populate fields for measures that are
suspended or removed until such time
as our system changes can be made. In
the case of OP–16, this will be January
1, 2013. We have asked our systems
developers to add functionality to
remove a measure from the data
collection system without any delay and
this feature will be incorporated into a
future release of our hospital reporting
data collection system. In addition, we
have added a business requirement for
our contractor to fix this as soon as
possible and it has been prioritized as
high as possible given all the competing
demands on contract programmers.
We are confirming the removal of
measure OP–16: Troponin Results for
Emergency Department Acute
Myocardial Infarction (AMI) Patients or
Chest Pain Patients (with probable
cardiac chest pain) Received Within 60
Minutes of Arrival from the Hospital
OQR Program in this final rule with
comment period.
3. Suspension of One Chart-Abstracted
Measure for the CY 2014 and
Subsequent Years Payment
Determinations
In April of this year, we took
immediate action to suspend OP–19
because of patient safety concerns. We
chose to suspend this measure rather
than to immediately remove the
measure from the program because the
probability of harm occurring was
relatively low, any potential harm that
occurred would not be the direct result
of patient care rendered at facilities, and
the measure steward believed that the
measure could be quickly re-specified in
a manner that would mitigate the
concerns raised by hospitals and
stakeholders.
For CY 2014 and subsequent year
payment determinations, we are
confirming that we have suspended the
collection of measure OP–19: Transition
Record with Specified Elements
Received by Discharged ED Patients,
which specifies patients or their
caregivers (emphasis added) receive a
transition record at the time of ED
discharge. We adopted measure OP–19
for the Hospital OQR Program for the

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CY 2013 payment determination with
data collection beginning with January
1, 2012 encounters. Since data
collection for this measure began,
concerns have been raised about the
current measure specifications,
including potential privacy concerns
related to releasing certain elements of
the transition record to a patient who is
being discharged from an emergency
department or the patient’s caregiver.
Some examples provided by hospitals of
this were the release of sensitive lab
results or radiological findings to a
parent, spouse, or guardian of a minor
patient, or to the responsible party for
a physically incapacitated patient.
In regard to the issue of patient safety,
there is evidence that, in some cases,
following the measure as currently
specified could lead to patient harm
especially when the medical results
relate to pregnancy. During field testing
of this measure, some women refused to
accept transition records that
documented pregnancy results. While it
is unclear what motivated these
particular women to decline to receive
transition records, literature supports a
rationale for why pregnant women may
be reluctant to receive documentation of
pregnancy results; under certain
circumstances, pregnancy is associated
with increased risk of physical violence
from a current or former male partner
(Richardson, J. et al., 2002. Identifying
domestic violence: cross sectional study
in primary care, British Medical
Journal).
After consideration of these issues
and internal review of the measure
specifications, we decided to suspend
data collection for OP–19 effective with
January 1, 2012 encounters until further
notice. On April 2, 2012 we released a
memorandum ‘‘Temporary Suspension
of Hospital Outpatient Quality
Reporting Measure OP–19: Transition
Record with Specified Elements
Received by Discharged Patients.’’ This
memorandum notified the Hospital
OQR Program stakeholder community
that we had suspended data collection
for the OP–19 measure effective with
January 1, 2012 encounters and until
further notice.
On April 12, 2012, we released a
memorandum, ‘‘Revised: Temporary
Suspension of Hospital Outpatient
Quality Reporting Measure OP–19:
Transition Record with Specified
Elements Received by Discharged
Patients’’ to make clear our intent not to
use any data submitted on this measure
for payment determinations, public
reporting, or in validation. The revised
SDPS Memo is available for review at
the QualityNet Web site (http://
www.qualitynet.org) under the option

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‘‘Email Notifications’’ within the
‘‘Hospitals—Outpatient’’ drop down
menu found at the top of the page.
When NQF completes its maintenance
review on this measure, and we have
incorporated the necessary changes to
the measure specifications in our
measure manual, we anticipate being
able to resume data collection, and will
notify hospitals of changes in the
suspension status of the measure for
Hospital OQR via email blast.
Because CMS system constraints
prevent immediate cessation of data
collection, hospitals must continue to
submit information for this measure
during this temporary suspension. The
data collection system currently
requires a populated value for OP–19.
During the period of time that the
measure is suspended, hospitals may
choose to populate their OP–19
submission field with a value that is not
meaningful. Hospitals should not
submit a null value because the lack of
data for OP–19 will cause the submitted
case to be rejected entirely from the data
warehouse. In other words, failure to
populate the OP–19 field could
compromise reporting data for other
measures for that same case because
more than one measure can be reported
within a single case.
Some vendors may have the
capability to provide a default value for
this measure to reduce data abstraction.
Hospitals are encouraged to work with
their vendors to determine options to
reduce abstraction burden.
If a case is rejected from the data
warehouse on the basis of a system error
due to the current system’s inability to
accept a case without OP–19 data
populated, in the event that the rejected
case would have also fulfilled reporting
requirements for one or more other
measures, this rejection would could
affect a hospital’s ability to meet
Hospital OQR Program requirements.
Therefore, we recommend continuing
to submit a value for OP–19, although
we will not use data submitted on OP–
19 for payment determinations, will not
publicly report these data, and will not
validate these data until all concerns are
resolved and measure specifications are
refined as necessary.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45178), because the
developer is working to revise the
measure specifications to address the
concerns raised by affected parties, and
the measure is undergoing NQF
maintenance review this year, we did
not propose to remove the measure from
the program at this time. After
completion of the NQF maintenance
process, we anticipate that normal
program operations for this measure

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could resume once we have updated the
Hospital OQR Specifications Manual
and made any necessary changes to our
data collection infrastructure. However,
should we determine that these
concerns cannot be addressed, we
would propose to remove this measure
in a future OPPS/ASC rule. We invited
public comment on the suspension of
OP–19 until further notice. We also
invited public comment on whether the
measure should be removed from the
program at this time.
Comment: A few commenters strongly
urged CMS to retain the OP–19 measure,
with the ongoing revision of the
measure specifications to address
privacy concerns.
Some commenters advocated the
removal of this measure on grounds that
are completely different from CMS’s
rationale for removing this measure.
Some commenters were concerned that
many patients may not be able to
comprehend most of the data elements
(for example, lab tests and results, and
procedures performed in the ED)
required by the measure, which would
be in the transition record. Many
commenters believed that the provision
of transition records by EDs would not
enhance coordination between sites of
care. Rather, the commenters stated it
will increase the likelihood of confusion
for the patients. Commenters were
concerned that: (1) the transition
records including instructions issued
upon ED discharge are not final and
may be changed subsequently by the
observation unit staff, should the patient
be put in the observation unit; and (2)
the ED transition records may conflict
with the subsequent transition record
provided by the receiving provider,
such as the home health care agency. In
the commenters’ view, the Emergency
Medical Treatment and Labor Act
(EMTALA) regulation already provides
for the transfer of records that include
communication between nurses and
physicians. Some commenters suggested
the provision of a simplified, userfriendly ED visit summary to patients
would be a better alternative.
A few commenters requested
clarification of the data elements
specified in the Specifications Manual:
major procedures and tests; patient
instructions; follow up care; ED patient
population; and medication types.
Commenters stated that the data
elements specified in the Specifications
Manual are too vague and leave room
for different interpretation. One
commenter recommended creating
individual measures to address each of
the items that need to be included in the
ED visit summary.

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One commenter requested limiting
the transition record information to
include only diagnostic test procedures
performed in the ED. One commenter
did not view patients put on observation
as ED patients and requested they be
treated as exclusions in the measure
specification. These commenters did not
discuss their reasons for requesting
these changes.
One commenter stated that currently,
since hospitals are at different stages of
implementing electronic health records
technology, the time taken to generate
electronic transition records will vary
greatly. For some hospitals, this may
potentially delay the discharge of
patients from the ED.
Response: We appreciate the support
and the recommendations from the
commenters. As for the comments on
clarification of data elements in the
Specifications Manual, we note that
there are no specific requirements
related to what constitutes appropriate
documentation that must be transferred
to the next site of care.
We are aware of the concerns
expressed by the commenters. Since the
suspension of OP–19 on April 2, 2012,
we have been actively working with the
American Medical Association
Physician Consortium for Performance
Improvement (AMA–PCPI) (the measure
stewards) to clarify the specifications of
this measure. The intent of OP–19 is to
require a transition record to patients
discharged directly to home or home
health, not those patients who would
otherwise be transferred to an acute care
facility, regardless of EMTALA status. It
is our hope that the revised
specifications will address the
commenters’ concerns prior to
reinstatement of the measure in the
Hospital OQR Program.
Comment: Many commenters
perceived the submission of a blank
value for OP–19, as requested by CMS,
to be burdensome and stated that
hospitals or their vendors should not
have to bear the responsibility of
submitting meaningless data.
Commenters requested that CMS refine
specifications so that hospitals do not
have to submit meaningless data.
Response: As we stated in our April
12, 2012 revised memorandum, we urge
hospitals to work with their data
submission vendors on low-burden
ways to populate fields for measures
that are suspended or removed until
such time as our system changes can be
made.
We are confirming the suspension
until further notice of measure OP–19:
Transition Record with Specified
Elements Received by Discharged ED
Patients, effective with January 1, 2012

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encounters. We are working with the
measure steward, the AMA, to enhance
OP–19 for future use. When the measure
specifications have been updated and
reviewed by the NQF, we will consider
implementation of the revised measure.
4. Deferred Data Collection of OP–24:
Cardiac Rehabilitation Measure: Patient
Referral From an Outpatient Setting for
the CY 2014 Payment Determination
In the CY 2012 OPPS/ASC final rule
with comment period, we finalized OP–
24: Cardiac Rehabilitation Measure:
Patient Referral From an Outpatient
Setting for the CY 2014 payment
determination and indicated that the
applicable quarters for data collection
for this measure would be 1st quarter
CY 2013 and 2nd quarter CY 2013 (76
FR 74464, 74481). In order for us to
adhere to this data collection schedule,
we would have needed to have
published the measure specifications in
the July 2012 release of the Hospital
OQR Specifications Manual. While
there are NQF-endorsed specifications
for this measure, in order to implement
standardized data collection on a
national scale, we must include detailed
abstraction instructions for chart-based
measures in our Specifications Manual.
These instructions were not completed
and tested in time to include in the July
2012 release of the Specifications
Manual, which includes collection
instructions for measures beginning
January 1, 2013. This was an
unanticipated delay in implementation
that we do not expect to be a regularly
occurring issue for the Hospital OQR
Program.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45179), we
proposed to defer the data collection for
this measure to January 1, 2014
encounters. We also proposed that the
measure would no longer be used for
the CY 2014 payment determination,
and that its first application would be
for the CY 2015 payment determination.
The data collection deferral for this
measure is detailed in the ‘‘Form,
Manner, and Timing’’ section of this
final rule with comment period. We
invited public comments on these
proposals.
Comment: Many commenters
supported the proposed deferred data
collection of this measure until detailed
instructions for data collection are
completed. Commenters believed the
measure is beneficial for patients with
cardiovascular diseases and they were

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hopeful that the measure could be
included into the Hospital OQR
program for implementation beginning
with January 1, 2014 encounters.
Response: With the inclusion of the
abstraction instructions for this chartabstracted measure in our July 2013
release of the Specifications Manual, we
anticipate that data collection can begin
with January 1, 2014 encounters.
Comment: One commenter asked if
the data for this measure could be
collected through claims instead of
chart-abstraction. Also, the commenter
viewed this measure as merely
documentation of a referral being
offered as the patient could have refused
the referral to enroll in a cardiac
rehabilitation program.
Response: This measure cannot be
collected via claims because patient
referral is not captured in claims data.
We recognize that this measure does not
focus on whether the patient actually
enrolls in a cardiac rehabilitation
program. Rather, the measure focuses on
the process of referring a patient to a
cardiac rehabilitation or secondary
prevention program.
Comment: One commenter requested
clarification on: (1) What setting will be
included in the denominator for the
measure population; (2) definition of an
outpatient practice; and (3) definition of
an outpatient clinic practice. The
commenter interpreted the measure
specification developed by the
American Association of Cardiovascular
and Pulmonary Rehabilitation,
American College of Cardiology
Foundation, and the American Heart
Association (AACVPR/AACF/AHA)
Task Force to mean that the measure is
intended for physicians providing
follow-up care to patients after an acute
event, and not for hospital outpatient
department care. The commenter,
therefore, suggested the removal of the
current OP–24 measure and adoption of
the measure ‘‘Cardiac Rehabilitation
Patient Referral from an Inpatient
Setting’’ for the Hospital OQR Program.
Response: We intend to operationalize
the measure for patients seen for
ongoing care at outpatient clinics
affiliated with hospitals. The measure is
designed for the outpatient setting and
the denominator is intended to be the
percentage of patients who had a
qualifying event/diagnosis during the
previous 12 months and have not
participated in an outpatient cardiac
rehabilitation program. Given the
measure focus on the process of

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referring a hospital outpatient clinic
patient to a cardiac rehabilitation
program, we expect it will incentivize
Hospital Outpatient Departments
(HOPDs) to better coordinate the care
that their patients receive. We agree that
the measure could also be appropriate
as a measurement for physicians’
follow-up care. We are currently
working on the definitions the
commenter has requested, outpatient
practices and outpatient clinic practices,
in the context of the HOPD.
After consideration of the public
comments we received, we are
finalizing the deferred data collection
for OP–24 from January 1, 2013 to
January 1, 2014 encounters for the CY
2015 payment determination.
D. Quality Measures for the CY 2015
Payment Determination
We previously finalized 26 measures
for the CY 2015 Hospital OQR Program
measure set in the 2012 OPPS/ASC
rulemaking (76 FR 74472 through
74474).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45179), taking into
consideration the time and effort for
CMS to develop, align, and implement
the infrastructure necessary to collect
data on the Hospital OQR Program
measures and make payment
determinations, as well as the time and
effort on the part of hospital outpatient
departments to plan and prepare for
reporting additional measures, we did
not propose any additional quality
measures for CY 2015 and subsequent
years payment determinations in this
rulemaking.
As discussed above, we have removed
OP–16 as of August 2012, we suspended
measure OP–19 and deferred data
collection for OP–24 until the measure
specifications can be further refined.
In summary, in this final rule with
comment period, we are not adopting
additional measures for the CY 2015
payment determination, and we are
retaining 25 of the 26 measures
previously adopted for the CY 2014
payment determination for CY 2015 and
subsequent year payment
determinations.
Set out below are the previously
adopted measures which we are
retaining for the CY 2014, CY 2015, and
subsequent years payment
determinations under the Hospital OQR
Program.
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Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Year
Payment Determinations
OP-l: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention
OP-4: Aspirin at Arrival
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
OP-8: MRI Lumbar Spine for Low Back Pain
OP-9: Mammography Follow-up Rates
OP-10: Abdomen CT - Use of Contrast Material
OP-ll: Thorax CT - Use of Contrast Material
OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly
into their Qualified/Certified EHR System as Discrete Searchable Data
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed
Tomography (CT)
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic
Headache *
OP-17: Tracking Clinical Results between Visits
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients
OP-19: Transition Record with Specified Elements Received by Discharged ED Patients**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional
OP-2l: ED- Median Time to Pain Management for Long Bone Fracture
OP-22: ED Patient Left Without Being Seen
OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who
Received Head CT Scan Interpretation Within 45 minutes of Arrival
OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting ***
OP-25: Safe Surgery Checklist Use
OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures

Eye

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Corresponding HCPCS Codes
40000 through 49999, G0104, G0105,G012l,C97l6, C9724,
C9725,0170T
65000 through 68999,0186, 0124T, 0099T, 0017T, 0016T,
0123T, OlOOT, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T,
765l0,0099T
61000 through 64999, G0260, 0027T, 0213T, 02l4T, 02l5T,
02l6T,02l7T, 02l8T, 0062T

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Comment: Many commenters
commended CMS’ pausing in the
expansion of the Hospital OQR Program
by not proposing any new measures for
the CY 2014 and CY 2015 payment
determinations. Commenters
appreciated CMS’ recognition of burden
from quality reporting on providers.
Response: We thank the commenters
for supporting our decision not to add
any new measures. We plan to continue
to find ways to strike a balance between
quality reporting and burden reduction
for providers.
We received comments on some of the
previously finalized measures that we
have proposed to continue using under
the Hospital OQR Program.
Comment: Commenters expressed
support and opposition to the adopted
measures from previous rulemakings.
Commenters also provided suggestions
on these measures, regarding measure
implementation, adding exceptions, and
revising measure specifications.
Response: We thank the commenters
for their comments; those supporting
our previously finalized proposals as
well as those in opposition. We will
consider all of these views for future
rulemaking and Hospital OQR Program
development.

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E. Possible Quality Measures Under
Consideration for Future Inclusion in
the Hospital OQR Program
The current measure set for the
Hospital OQR Program includes
measures that assess process of care,
imaging efficiency patterns, care
transitions, ED throughput efficiency,
the use of HIT care coordination, patient
safety, and volume. We anticipate that
as EHR technology evolves and more
infrastructure is put into place, we will

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have the capacity to accept electronic
reporting of many clinical chartabstracted measures that are currently
part of the Hospital OQR Program using
certified EHR technology. We work
diligently toward this goal. We believe
that this future progress at a future date,
such as FY 2015, would significantly
reduce the administrative burden on
hospitals under the Hospital OQR
Program to report chart-abstracted
measures. We recognize that
considerable work needs to be done by
measure owners and developers to make
this possible with respect to the clinical
quality measures targeted for especifications. This includes completing
electronic specifications for measures,
pilot testing, reliability and validity
testing, and implementing such
specifications into certified EHR
technology to capture and calculate the
results, and implementing the systems.
We seek to develop a comprehensive
set of quality measures to be available
for widespread use for informed
decision-making and quality
improvement in the hospital outpatient
setting. Therefore, through future
rulemaking, we intend to propose new
measures that help us further our goal
of achieving better health care and
improved health for Medicare
beneficiaries who receive health care in
hospital outpatient settings. In addition,
we are considering initiating a call for
input to assess the following measure
domains: clinical quality of care; care
coordination; patient safety; patient and
caregiver experience of care;
population/community health; and
efficiency. We believe this approach
will promote better care while bringing
the Hospital OQR Program in line with
other established quality reporting and

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pay for performance programs such as
the Hospital IQR Program.
We invited public comment on this
approach and on our suggestions and
rationale for possible quality measures
for future inclusion in the Hospital OQR
Program.
Comment: One commenter noted that
it is important to address the priority
areas in the National Quality Strategy;
however, the commenter also suggested
that measure selection should not be
limited to only those that fall inside the
six domains, as this would hinder
improvement in other areas in HOPDs.
Response: We note that the six
domains of measurement that arise from
the six priorities of the National Quality
Strategy are some of our considerations
in measure selection. We also weigh
other aspects of measures as delineated
in our measure selection criteria.
Comment: A few commenters strongly
supported CMS in considering whether
to initiate a call to get input to assess the
measure domains. One commenter
requested that CMS use the same
process used in past rulemakings by
providing a list of measures under
consideration for future years for public
input.
Response: In the past, we have
solicited comments on a list of measures
in the rule that are under consideration
for future years of the program.
Although we did not provide a list in
this year’s rulemaking, we will take this
comment under consideration in future
years.
In addition, we will consider hosting
a call for measures for the Hospital OQR
Program in the future.
Comment: Commenters suggested that
CMS add the following measures to the
Hospital OQR Program: a
comprehensive ‘‘medication

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management’’ measure set; a system of
care metric that looks at the overall
median time to PCI in transferred
patients to capture the entire process of
care; a stroke measure set for
outpatients; measures for diabetes care,
congestive heart failure, heart attack,
breast cancer detection rate, central-line
associated blood stream infection,
chronic obstructive pulmonary disease,
coronary artery disease, and depression
screening.
Response: We thank the commenters
for the input on future measures and
will take them into consideration in
future measure selections.
Comment: One commenter strongly
encouraged CMS to adopt registry-based
measures for which providers submit
quality data directly to a registry instead
of to CMS.
Response: We thank the commenter
for the recommendation for registry
reporting. We intend to continue
considering how registry reporting may
be leveraged as a reporting mechanism
for this and other quality programs.
Comment: A few commenters
recommended that for burden
reduction, CMS should harmonize
measures in the Medicare and Medicaid
EHR Incentive Programs and the
Hospital OQR Program as well as
limiting adopting future measures to especified measures only.
Response: As we stated previously,
coordinated efforts to align measures in
the Medicare and Medicaid public
reporting programs and incentive
payment systems have been ongoing,
and we are working toward the eventual
adoption of electronically-specified
measures so that data can be calculated
and submitted via certified EHR
technology with minimal burden.
Comment: One commenter
recommended that CMS refrain from
adopting claims-based measures which
the commenter believed are purely
administrative in nature and yield little
value in measuring quality of care.
Response: While we recognize the
merits of chart-abstracted measures, we
also believe that claims may still be
needed to identify prior events and
diagnosis for measures that require lookback periods, involving the matching of
data for a single patient over a long
period of time (for example, 1 year of
prior history) across multiple settings.
Claims-based measurement facilitates
the use of historical and longitudinal
information on Medicare beneficiaries
across providers.
Comment: Commenters also
expressed views and provided
suggestions regarding additional topics
and previously finalized proposals
including:

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• Topped-out measures;
• ED measures;
• Outpatient imaging efficiency
measures; and
• Removal of additional adopted
measures.
Response: We appreciate the
commenters’ views on these additional
topics or our previously finalized
measures. However, these additional
topics were not the subject of our
proposed rule. It is our policy to retain
previously adopted measures unless we
specifically propose to remove or
suspend measures, or take action
outside of rulemaking to do so for
patient safety reasons. We will consider
these suggestions in future Hospital
OQR Program development.
F. Payment Reduction for Hospitals
That Fail To Meet the Hospital OQR
Program Requirements for the CY 2013
Payment Update
1. Background
Section 1833(t)(17) of the Act, which
applies to subsection (d) hospitals (as
defined under section 1886(d)(1)(B) of
the Act), states that hospitals that fail to
report data required to be submitted on
the measures selected by the Secretary,
in the form and manner, and at a time,
required by the Secretary will incur a
2.0 percentage point reduction to their
Outpatient Department (OPD) fee
schedule increase factor, that is, the
annual payment update factor. Section
1833(t)(17)(A)(ii) of the Act specifies
that any reduction applies only to the
payment year involved and will not be
taken into account in computing the
applicable OPD fee schedule increase
factor for a subsequent payment year.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68769
through 68772), we discussed how the
payment reduction for failure to meet
the administrative, data collection, and
data submission requirements of the
Hospital OQR Program affected the CY
2009 payment update applicable to
OPPS payments for HOPD services
furnished by the hospitals defined
under section 1886(d)(1)(B) of the Act to
which the program applies. The
application of a reduced OPD fee
schedule increase factor results in
reduced national unadjusted payment
rates that apply to certain outpatient
items and services provided by
hospitals that are required to report
outpatient quality data and that fail to
meet the Hospital OQR Program
requirements. All other hospitals paid
under the OPPS that meet the reporting
requirement receive the full OPPS
payment update without the reduction.

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The national unadjusted payment
rates for many services paid under the
OPPS equal the product of the OPPS
conversion factor and the scaled relative
weight for the APC to which the service
is assigned. The OPPS conversion
factor, which is updated annually by the
OPD fee schedule increase factor, is
used to calculate the OPPS payment rate
for services with the following status
indicators (listed in Addendum B to this
final rule with comment period, which
is available via the Internet on the CMS
Web site): ‘‘P,’’ ‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’
‘‘S,’’ ‘‘T,’’ ‘‘V,’’ ‘‘U,’’ or ‘‘X.’’ In the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68770), we
adopted a policy that payment for all
services assigned these status indicators
would be subject to the reduction of the
national unadjusted payment rates for
applicable hospitals, with the exception
of services assigned to New Technology
APCs with assigned status indicator ‘‘S’’
or ‘‘T,’’ and brachytherapy sources with
assigned status indicator ‘‘U,’’ which
were paid at charges adjusted to cost in
CY 2009. We excluded services assigned
to New Technology APCs from the list
of services subject to the reduced
national unadjusted payment rates
because the OPD fee schedule increase
factor is not used to update the payment
rates for these APCs.
In addition, section 1833(t)(16)(C) of
the Act, as amended by section 142 of
the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA)
(Pub. L. 110–275), specifically required
that brachytherapy sources be paid
during CY 2009 on the basis of charges
adjusted to cost, rather than under the
standard OPPS methodology. Therefore,
the reduced conversion factor also was
not applicable to CY 2009 payment for
brachytherapy sources because payment
would not be based on the OPPS
conversion factor and, consequently, the
payment rates for these services were
not updated by the OPD fee schedule
increase factor. However, in accordance
with section 1833(t)(16)(C) of the Act, as
amended by section 142 of the MIPPA,
payment for brachytherapy sources at
charges adjusted to cost expired on
January 1, 2010. Therefore, in the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60641), we
finalized our CY 2010 proposal, without
modification, to apply the reduction to
payment for brachytherapy sources to
hospitals that fail to meet the quality
data reporting requirements of the
Hospital OQR Program for
brachytherapy services furnished on
and after January 1, 2010.
The OPD fee schedule increase factor
is an input into the OPPS conversion
factor, which is used to calculate OPPS

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payment rates. To implement the
requirement to reduce the OPD fee
schedule increase factor for hospitals
that fail to meet reporting requirements,
we calculate two conversion factors: A
full market basket conversion factor
(that is, the full conversion factor), and
a reduced market basket conversion
factor (that is, the reduced conversion
factor). We then calculate a reduction
ratio by dividing the reduced
conversion factor by the full conversion
factor. We refer to this reduction ratio as
the ‘‘reporting ratio’’ to indicate that it
applies to payment for hospitals that fail
to meet their reporting requirements.
Applying this reporting ratio to the
OPPS payment amounts results in
reduced national unadjusted payment
rates that are mathematically equivalent
to the reduced national unadjusted
payment rates that would result if we
multiplied the scaled OPPS relative
weights by the reduced conversion
factor. To determine the reduced
national unadjusted payment rates that
applied to hospitals that failed to meet
their quality reporting requirements for
the CY 2010 OPPS, we multiply the
final full national unadjusted payment
rate found in Addendum B of the CY
2010 OPPS/ASC final rule with
comment period by the CY 2010 OPPS
final reporting ratio of 0.980 (74 FR
60642).
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68771
through 68772), we established a policy
that the Medicare beneficiary’s
minimum unadjusted copayment and
national unadjusted copayment for a
service to which a reduced national
unadjusted payment rate applies would
each equal the product of the reporting
ratio and the national unadjusted
copayment or the minimum unadjusted
copayment, as applicable, for the
service. Under this policy, we apply the
reporting ratio to both the minimum
unadjusted copayment and national
unadjusted copayment for those
hospitals that receive the payment
reduction for failure to meet the
Hospital OQR Program reporting
requirements. This application of the
reporting ratio to the national
unadjusted and minimum unadjusted
copayments is calculated according to
§ 419.41 of our regulations, prior to any
adjustment for a hospital’s failure to
meet the quality reporting standards
according to § 419.43(h). Beneficiaries
and secondary payers thereby share in
the reduction of payments to these
hospitals.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68772), we
established the policy that all other
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national unadjusted payment rates
apply in those cases when the OPD fee
schedule increase factor is reduced for
hospitals that fail to meet the
requirements of the Hospital OQR
Program. For example, the following
standard adjustments apply to the
reduced national unadjusted payment
rates: The wage index adjustment; the
multiple procedure adjustment; the
interrupted procedure adjustment; the
rural sole community hospital
adjustment; and the adjustment for
devices furnished with full or partial
credit or without cost. We believe that
these adjustments continue to be
equally applicable to payments for
hospitals that do not meet the Hospital
OQR Program requirements. Similarly,
OPPS outlier payments made for high
cost and complex procedures will
continue to be made when the criteria
are met. For hospitals that fail to meet
the quality data reporting requirements,
the hospitals’ costs are compared to the
reduced payments for purposes of
outlier eligibility and payment
calculation. This policy conforms to
current practice under the IPPS. We
continued this policy in the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60642), in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72099), and in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74478). For a
complete discussion of the OPPS outlier
calculation and eligibility criteria, we
refer readers to section II.G. of this final
rule with comment period.
2. Reporting Ratio Application and
Associated Adjustment Policy for CY
2013
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45182), we proposed to
continue our established policy of
applying the reduction of the OPD fee
schedule increase factor through the use
of a reporting ratio for those hospitals
that fail to meet the Hospital OQR
Program requirements for the full CY
2013 annual payment update factor. For
the CY 2013 OPPS, the reporting ratio
is 0.980, calculated by dividing the
reduced conversion factor of $69.887 by
the full conversion factor of $71.313. We
proposed to continue to apply the
reporting ratio to all services calculated
using the OPPS conversion factor. For
the CY 2013 OPPS, we proposed to
apply the reporting ratio, when
applicable, to all HCPCS codes to which
we have assigned status indicators ‘‘P,’’
‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’
‘‘U,’’ and ‘‘X’’ (other than new
technology APCs to which we have
assigned status indicators ‘‘S’’ and ‘‘T’’).
We proposed to continue to exclude

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services paid under New Technology
APCs. We proposed to continue to apply
the reporting ratio to the national
unadjusted payment rates and the
minimum unadjusted and national
unadjusted copayment rates of all
applicable services for those hospitals
that fail to meet the Hospital OQR
Program reporting requirements. We
also proposed to continue to apply all
other applicable standard adjustments
to the OPPS national unadjusted
payment rates for hospitals that fail to
meet the requirements of the Hospital
OQR Program. Similarly, we proposed
to continue to calculate OPPS outlier
eligibility and outlier payment based on
the reduced payment rates for those
hospitals that fail to meet the reporting
requirements.
We invited public comments on these
proposals. We did not receive any
public comments on our CY 2013
proposal to apply the Hospital OQR
Program reduction in the manner
described above and, therefore, are
finalizing our proposal, without
modification.
Therefore, for the CY 2013 OPPS, we
are applying a reporting ratio of 0.980 to
the national unadjusted payments,
minimum unadjusted copayments, and
national unadjusted copayments for all
applicable services for those hospitals
failing to meet the Hospital OQR
Program reporting requirements. This
reporting ratio applies to HCPCS codes
assigned status indicators ‘‘P,’’ ‘‘Q1,’’
‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘U,’’ ‘‘V,’’
or ‘‘X,’’ excluding services paid under
New Technology APCs. All other
applicable standard adjustments to the
OPPS national unadjusted payment
rates for hospitals that fail to meet the
requirements of the Hospital OQR
Program will continue to apply. We
continue to calculate OPPS outlier
eligibility and outlier payment based on
the reduced rates for those hospitals that
fail to meet the reporting requirements.
G. Requirements for Reporting of
Hospital OQR Data for the CY 2014
Payment Determination and Subsequent
Years
1. Administrative Requirements for the
CY 2014 Payment Determination and
Subsequent Years
In order to participate in the Hospital
OQR Program, hospitals must meet
administrative, data collection and
submission, and data validation
requirements (if applicable). Hospitals
that do not meet Hospital OQR Program
requirements, as well as hospitals not
participating in the program and
hospitals that withdraw from the
program, will not receive the full OPPS

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payment rate update. Instead, in
accordance with section 1833(t)(17)(A)
of the Act, those hospitals will receive
a reduction of 2.0 percentage points to
their OPD fee schedule increase factor
for the applicable payment year.
We established administrative
requirements for the payment
determination requirements for the CY
2013 and subsequent years’ payment
updates in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74479
through 74487).
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45182), with respect to the
payment determinations for CY 2014
and subsequent years, we proposed one
modification to these requirements.
Under current requirements, CMS
deadlines for hospitals to submit notice
of participation forms are based on the
date identified as a hospital’s Medicare
acceptance date on the CMS
Certification and Survey Provider
Enhanced Reporting (CASPER) system.
Deadlines are based on whether a
hospital’s Medicare acceptance date
falls before January 1 of the year prior
to the annual payment update, or on or
after January 1 of the year prior to the
annual payment update (for example,
2013 would be the year prior to the
affected CY 2014 annual payment
update). Currently, for a hospital whose
Medicare acceptance date is before
January 1 of the year prior to the
affected payment update affected, the
notice of participation form is due by
March 31 of the year prior to the
affected annual payment update (76 FR
74479 through 74480). We proposed to
extend this deadline for hospitals, as
described below.
Hospitals with Medicare acceptance
dates before January 1 of the year prior
to the affected annual payment update:
For the CY 2014 and subsequent years
payment update, we proposed that any
hospital that has a Medicare acceptance
date before January 1 of the year prior
to the affected annual payment update
(for example, 2013 would be the year
prior to the affected CY 2014 annual
payment update) that is not currently
participating in Hospital OQR and
wishes to participate in the Hospital
OQR Program must submit a
participation form by July 31, rather
than March 31, of the year prior to the
affected annual payment update. We
proposed a deadline of July 31 to give
hospitals the maximum amount of time
to decide whether they wish to
participate in the Hospital OQR
Program, as well as put into place the
necessary staff and resources to timely
report chart-abstracted data for the first
quarter of the year’s services which are
due August 1.

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We invited public comment on this
proposed modification to Hospital OQR
Program administrative requirements for
the CY 2014 and subsequent years’
payment determinations.
Comment: Several commenters
supported the proposal to extend the
deadline to submit a participation form
for a hospital that is not currently
participating in Hospital OQR and
wishes to participate in OQR to July 31,
rather than March 31, of the year prior
to the affected annual payment update.
Response: We thank these
commenters for supporting our proposal
to extend the deadline for submitting a
participation form for a hospital that is
not currently participating in Hospital
OQR and wishes to participate.
After consideration of the public
comments received, we are finalizing
our proposal to extend the deadline for
a hospital that is not currently
participating in the Hospital OQR
Program and wishes to participate in the
Program to submit a participation form
by July 31, rather than March 31, of the
year prior to the affected annual
payment update.
2. Form, Manner, and Timing of Data
Submitted for the Hospital OQR
Program for the CY 2014 Payment
Determination and Subsequent Years
a. Background
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45182), we did not propose
any additional measures for the CY 2014
payment determination year. We refer
readers to the following OPPS/ASC final
rules with comment periods for a
history of measures adopted for the
Hospital OQR Program, including lists
of: 11 measures finalized for the CY
2011 payment determination (74 FR
60637); 15 measures finalized for the CY
2012 payment determination (75 FR
72083 through 72084); 23 measures
finalized for the CY 2013 payment
determination (75 FR 72090); and 26
measures finalized for the CY 2014 and
CY 2015 payment determinations (76 FR
74469 and 74473).
Because of the clarification in the
measure table in section XV.D above
that public reporting for OP–15: Use of
Brain Computed Tomography (CT) in
the Emergency Department for
Atraumatic Headache is not planned
until July 2013 at the earliest, we
confirm this measure will not be used
in the CY 2014 payment determination.
We will confirm our intent to include or
exclude this measure in the CY 2015
payment determination in future
rulemaking.
We refer readers to section XV.C.2 of
this final rule with comment period for

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a discussion of measure OP–16:
Troponin Results for Emergency
Department acute myocardial infarction
(AMI) patients or chest pain patients
(with Probable Cardiac Chest pain)
Received Within 60 minutes of Arrival.
Due to a patient safety concern, this
measure has been removed from the
OQR Program measure set.
We refer readers to section XV.C.3. of
this final rule with comment period for
a discussion of measure OP–19:
Transition Record with Specified
Elements Received by Discharged ED
Patients. Because the data collection for
this measure is currently suspended,
this measure will not be used in the CY
2014 payment determination. We will
indicate whether data collection for this
measure will resume in time for the CY
2015 payment determination in future
rulemaking.
We refer readers to section XV.C.4. of
this final rule with comment period for
a discussion of measure OP–24: Cardiac
Rehabilitation Patient Referral From an
Outpatient Setting. We proposed not to
use this measure in the CY 2014
payment determination and deferred
data collection for this measure until the
CY 2015 payment determination.
b. General Requirements
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45183), we proposed to
continue the policy that, to be eligible
to receive the full OPD fee schedule
increase factor for any payment
determination, hospitals must comply
with our submission requirements for
chart-abstracted data, population and
sampling data, claims-based measure
data, and structural quality measure
data, including all-patient volume data.
We refer readers to the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74480 through 74482) for a
discussion of these requirements.
c. Chart-Abstracted Measure
Requirements for CY 2014 and
Subsequent Payment Determination
Years
The table in section XV.D. of this final
rule with comment period includes
measures that are collected by
abstracting the information from patient
charts. In this final rule with comment
period, we are confirming removal of
one chart-abstracted measure from the
program, OP–16: Troponin Results for
Emergency Department acute
myocardial infarction (AMI) patients or
chest pain patients (with Probable
Cardiac Chest Pain) Received Within 30
minutes of Arrival. For a full discussion
of this removal, please refer to section
XV.C.2. of this final rule with comment
period.

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Comment: Several commenters
supported the proposal not to collect
data for measures that CMS proposed to
exclude from the CY 2014 payment
determination.
Response: We thank the commenters
for supporting our proposal regarding
collection of data for measures which
are to be excluded from the CY 2014
payment determination. A discussion of
measures that are under review or have
been removed from the program is
found in section XV.C. above.
After consideration of the public
comments received, we are finalizing
our proposal to exclude chart abstracted
measures OP–19 and OP–24, from the
CY 2014 payment determination. In
addition, in this final rule with
comment period, we are confirming the
removal of chart-abstracted measure
OP–16. Thus, the following chartabstracted measures remain in the
Hospital OQR Program and data for
these measures is required for the CY
2014 payment determination:
• OP–1: Median Time to Fibrinolysis
• OP–2: Fibrinolytic Therapy
Received Within 30 Minutes
• OP–3: Median Time to Transfer to
Another Facility for Acute Coronary
Intervention
• OP–4: Aspirin at Arrival
• OP–5: Median Time to ECG
• OP–6: Timing of Antibiotic
Prophylaxis
• OP–7: Prophylactic Antibiotic
Selection for Surgical Patients
• OP–18: Median Time from ED
Arrival to ED Departure for Discharged
ED Patients
• OP–20: Door to Diagnostic
Evaluation by a Qualified Medical
Professional
• OP–21: ED—Median Time to Pain
Management for Long Bone Fracture
• OP–22: ED Patient Left Without
Being Seen
• OP–23: ED—Head CT Scan Results
for Acute Ischemic Stroke or
Hemorrhagic Stroke who Received Head
CT Scan Interpretation Within 45
Minutes of Arrival
Of those measures for which we
proposed to collect data for in CY 2014,
the form and manner for submission of
one of these measures, OP–22: ED
Patient Left Without Being Seen, is
unique, and the form and manner for
this measure is detailed in section
XV.G.2.f. of this final rule with
comment period.
For the chart-abstracted measures for
which we have finalized that we will
collect data for the CY 2014 payment
determination, we proposed that the
applicable quarters for data collection
would be as follows: 3rd quarter CY
2012, 4th quarter CY 2012, 1st quarter

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CY 2013, and 2nd quarter CY 2013 for
hospitals that are continuing
participants; newly participating
hospitals would follow reporting
requirements as outlined in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74480) and in section
XV.G.1. of this final rule with comment
period.
In general, submission deadlines
would be approximately 4 months after
the last day of each calendar quarter.
Thus, for example, the submission
deadline for data for services furnished
during the first quarter of CY 2013
(January–March 2013) would be on or
around August 1, 2013. We proposed to
post actual submission deadlines on the
http://www.QualityNet.org Web site.
Hospitals that did not participate in
the CY 2013 Hospital OQR Program, but
would like to participate in the CY 2014
Hospital OQR Program, and that have a
Medicare acceptance date on the
CASPER system before January 1, 2013,
would begin data submission with
respect to 1st quarter CY 2013
encounters using the previously
adopted measures which we are
retaining for the CY 2014 payment
determination, found in the table in
section XV.D above. For those hospitals
with Medicare acceptance dates on or
after January 1, 2013, data submission
must begin with the first full quarter
following the submission of a completed
online participation form.
For the CY 2015 payment
determination, we proposed that the
applicable quarters for previously
finalized chart-abstracted measures
would be as follows: 3rd quarter CY
2013, 4th quarter CY 2013, 1st quarter
CY 2014, and 2nd quarter CY 2014.
Hospitals that did not participate in
the CY 2014 Hospital OQR Program, but
would like to participate in the CY 2015
Hospital OQR Program, and that have a
Medicare acceptance date on the
CASPER system before January 1, 2014,
would begin data submission with
respect to 1st quarter CY 2014
encounters using the previously
adopted measures which we are
retaining for the CY 2015 payment
determination, found in the table in
section XV.D above. For those hospitals
with Medicare acceptance dates on or
after January 1, 2014, data submission
must begin with the first full quarter
following the submission of a completed
online participation form. We invited
public comments on these proposals.
Comment: Some commenters
encouraged CMS to improve alignment
among CMS quality reporting programs;
specifically, they would like to see
alignment of data submission deadlines
and encounter/discharge periods. These

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commenters urged CMS to review its
programs for opportunities to harmonize
program design. These commenters
stated their belief that aligning program
design and measures supports
stakeholders in fulfilling CMS’
requirements, whereas lack of alignment
results in stakeholders competing for
resources to fulfill requirements.
Response: We thank these
commenters for their suggestions. We
agree that end users and stakeholders,
especially those that fulfill reporting
requirements for multiple programs,
would benefit from standardized
program requirements.
Besides the Hospital OQR Program,
we have a significant number of quality
data reporting or incentive programs.
Currently, we are working on integrating
the Hospital OQR, Hospital Inpatient
Quality Reporting (IQR) Program, and
the Hospital Value-Based Purchasing
(VBP) Program more fully to meet the
requirements of the Health Information
Technology for Economic and Clinical
Health Act. This statute promotes
driving transformation through the
adoption and use of health information
technology (HIT), electronic health
records (EHR) and health information
organizations (HIOs)
We agree with commenters that
alignment is important to reduce
stakeholder burden, and we will also
continue to consider opportunities to
align program requirements for
programs outside of the Hospital OQR,
IQR, and VBP Programs.
Comment: Many commenters
supported the proposed data submission
deadlines for chart-abstracted measures.
Response: We thank these
commenters for supporting the
proposed deadlines.
After consideration of the public
comments we received, we are
finalizing our proposals for the
applicable quarters for chart abstracted
measures for the CY 2014 and CY 2015
payment determinations and for
subsequent years. We are finalizing our
proposals for submission deadlines for
chart abstracted data for the CY 2014
payment determination and for
subsequent years, and for posting these
deadlines on the QualityNet Web site.
We are finalizing our proposals for
hospitals who are newly participating or
who are resuming participation in the
OQR program to submit a notice of
participation and begin submitting data
to the OQR Program.
d. Claims-Based Measure Data
Requirements for the CY 2014 and CY
2015 Payment Determinations
The table in section XV.D. of this final
rule with comment period includes

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measures that the Hospital OQR
Program collects by accessing electronic
claims data submitted by hospitals for
reimbursement.
OP–15 is a claims-based measure that
has not been implemented for public
reporting through rulemaking (76 FR
74456), and it is not required for the CY
2014 payment determination.
Therefore, the 6 remaining claimsbased measures set out below will be
included for the CY 2014 payment
determination:
• OP–8: MRI Lumbar Spine for Low
Back Pain
• OP–9: Mammography Follow-up
Rates
• OP–10: Abdomen CT—Use of
Contrast Material
• OP–11: Thorax CT—Use of Contrast
Material
• OP–13: Cardiac Imaging for
Preoperative Risk Assessment for Non
Cardiac Low Risk Surgery
• OP–14: Simultaneous Use of Brain
Computed Tomography (CT) and Sinus
Computed Tomography (CT)
We will continue our policy of
calculating the measures using the
hospital’s Medicare claims data as
specified in the Hospital OQR
Specifications Manual; therefore, no
additional data submission is required
for hospitals. In the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74483), we stated that for the CY 2013
and CY 2014 payment updates, we will
use paid Medicare FFS claims for
services furnished from January 1, 2010
to December 31, 2010 and January 1,
2011 to December 31, 2011,
respectively.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45184), for the CY 2015
Hospital OQR payment determination,
we proposed to use paid Medicare FFS
claims for services from a 12-month
period from July 1, 2012 through June
30, 2013 for the calculation of the
claims-based measures. While this
would be a departure from the
traditional 12-month calendar year
period we have used for these measures,
we proposed this period in order to
align the data period for inpatient and
outpatient claims based measures
reported on the Hospital Compare Web
site, and also to be able to post more
recent data for the outpatient imaging
efficiency on the Web site. We invited
public comment on this proposal.
Comment: Some commenters
supported the proposal to move away
from the traditional 12-month data
period to align the data period for
inpatient and outpatient claims based
measures reported on the Hospital
Compare Web site, and also to be able
to post more recent data for the

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outpatient imaging efficiency on the
Web Site.
Response: We thank these
commenters for supporting our efforts to
align the data collection period for the
Hospital OQR Program with that of the
Hospital IQR Program.
Comment: One commenter questioned
why CMS needs such a long delay in
claims utilization. This commenter
believed that CY 2011 claims are not
appropriate to use in the CY 2014
payment determination.
Response: We have proposed to adjust
the time period of when services are
furnished; doing so moves the period
away from the traditional January–
December time period to make it six
months more current. Regarding the
data lag for claims based data, for the
CY 2015 payment determination year,
we proposed using paid, FFS claims for
services during the time period from
July 1, 2012 through June 30, 2013.
Calculations based on this time period
would be publicly reported on Hospital
Compare in July 2014, and we would
make actual payment determinations for
the CY 2015 payment year on or around
December 1, 2014.
For claims from the period July 1,
2012 through June 30, 2013, the data
lag, or time elapsed until payment
determination is made, is approximately
17 months at the longest (for data from
July 1, 2012) to 5 months at shortest (for
data from June 30, 2013). This is due to
several factors. First, we allow three
months after the last date of service to
pass before pulling the data extract for
claims based measures in order to
ensure that we are capturing most of the
final paid claims through the last date
of service (in this example, the last date
of service is June 30, 2012). Second, it
takes three to six months to build our
analytic files for the measures, generate
calculations, and ensure their accuracy.
For some claims-based measures, we
generate and deliver detailed
confidential reports for hospitals. About
two months prior to public reporting,
we allow 30 days for hospitals to
preview their data, after which we
deliver final public reporting files for
the Hospital Compare Web site.
With our proposal, we believe we
have adequately balanced the need for
current data with the need to have a
stable set of FFS claims data for a
payment determination and a preview
process that takes into account the
needs of hospital stakeholders.
Comment: One commenter believed
that there is an inconsistency in the use
of Medicare claims versus data from all
patients. According to the commenter,
CMS stated that it will use only
Medicare FFS claims for structural

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measures, but proposes to use data from
all patients (for example, including nonMedicare patients) for other measures.
Response: We do not use Medicare
FFS claims for structural measures. For
structural measures, hospitals currently
review the time period covered in the
reporting period to answer questions
about registry use, safe surgery checklist
use, etc. The structural measures in the
Hospital OQR Program apply to the
hospital outpatient department setting.
For clarification, the Hospital OQR
chart-abstracted measures apply to all
patients meeting the inclusion criteria
for the measure regardless of payer,
while the claims-based measures are
calculated using only Medicare FFS
claims. The structural measures apply to
the hospital outpatient department.
We require hospitals to complete and
submit a registration form
(‘‘participation form’’) in order to
participate in the Hospital OQR
Program. With submission of this
participation form, participating
hospitals agree that they will allow us
to publicly report the quality measure
data submitted under the Hospital OQR
Program, including measures that we
calculate using Medicare claims and all
other submitted data, including nonMedicare data.
After consideration of the public
comments we received, we are
finalizing our proposals for the data
periods we will use for claims-based
measures for the CY 2014 and CY 2015
payment determinations.
e. Structural Measure Data
Requirements for the CY 2014 Payment
Determination and Subsequent Years
A summary of the previously
finalized structural measures that we
require for the CY 2014 and subsequent
years payment determinations is set out
below:
• OP–12: The Ability for Providers
With HIT To Receive Laboratory Data
Electronically Directly Into Their
Qualified/Certified EHR System as
Discrete Searchable Data
• OP–17: Tracking Clinical Results
Between Visits
• OP 25: Safe Surgery Check List Use
• OP 26: Hospital Outpatient Volume
on Selected Outpatient Surgical
Procedures
We previously finalized that for the
CY 2014 payment determination,
hospitals will be required to submit data
on all structural measures between July
1, 2013 and August 15, 2013 with
respect to the time period from January
1, 2012 to December 31, 2012. In the CY
2013 OPPS/ASC proposed rule (77 FR
45184), we proposed to extend this
submission deadline. Under this

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proposed change, for the CY 2014
payment determination, hospitals
would be required to submit data on all
structural measures between July 1,
2013 and November 1, 2013 with
respect to the time period from January
1, 2012 to December 31, 2012. In section
XV.G.2.f. of this final rule with
comment period, we describe how this
proposal would likewise extend the
deadline to submit data for OP–22: ED
Patient Left Without Being Seen. We
proposed to continue this schedule so
that, for the CY 2015 payment
determination, hospitals would be
required to submit data on all structural
measures between July 1, 2014 and
November 1, 2014 with respect to the
time period from January 1, 2013 to
December 31, 2013. We invited public
comments on these proposals.
Comment: Two commenters
supported the change in the 12-month
period because it better aligns the
reporting period with that of other
claims based measures displayed on
Hospital Compare.
Response: We agree that this
alignment is beneficial and we seek to
align programs to the extent possible.
We are finalizing this policy as
proposed.
After consideration of the public
comments we received, we are
finalizing the proposal that, for the CY
2014 payment determination, hospitals
would be required to submit data on all
structural measures between July 1,
2013 and November 1, 2013 with
respect to the time period from January
1, 2012 to December 31, 2012, and for
the CY 2015 payment determination,
hospitals would be required to submit
data on all structural measures between
July 1, 2014 and November 1, 2014 with
respect to the time period from January
1, 2013 to December 31, 2013.
f. Data Submission Requirements for
OP–22: ED Patient Left Without Being
Seen for the CY 2015 Payment
Determination
OP–22: ED Patient Left Without Being
Seen is a chart-abstracted measure for
which aggregate data is collected via a
Web-based tool, as previously finalized.
In other words, for purposes of data
collection, this measure is treated like a
structural measure. For this reason, it is
collected on the same schedule as the
structural measures described above,
and, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45184) we
proposed to extend the submission
window for all structural measures,
including OP–22. In the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74485), with respect to OP–22, we
stated that hospitals would be required

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to submit data once for the CY 2014
payment determination via a Web-based
tool located on the QualityNet Web site.
For the CY 2014 payment
determination, we proposed that
hospitals would be required to submit
data, including numerator and
denominator counts, between July 1,
2013 and November 1, 2013
(comparable to the submission window
that we proposed for the structural
measures data collection in the section
above) with respect to the time period
of January 1, 2012 to December 31,
2012.
For the CY 2015 payment
determination, we proposed to continue
this policy. Hospitals would be required
to submit data between July 1, 2014 and
November 1, 2014 with respect to the
time period of January 1, 2013 to
December 31, 2013. We invited public
comment on these proposals.
Comment: Some commenters opposed
data collection for OP–22: ED Patient
Left Without Being Seen. These
commenters noted that OP–22 is not
NQF-endorsed and believed it is not a
clear measure of quality of care for a
variety of reasons: Because there are
credible reasons why a patient might
choose to leave an ER prior to treatment;
the measure disadvantages ED’s in areas
where an ED is used as a primary care
facility; and there are no underlying
patient records to validate this data.
Response: We thank the commenters
for their feedback. Please refer to section
XV.C.1 of this final rule with comment
period for a discussion of measure OP–
22.
After consideration of the public
comments we received, we are
finalizing our proposal to extend the
data submission window for OP–22.
g. Population and Sampling Data
Requirements for the CY 2014 Payment
Determination and Subsequent Years
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45184), for the CY 2014
payment determination and subsequent
years, we proposed to continue our
policy that hospitals may submit
voluntarily on a quarterly basis,
aggregate population and sample size
counts for Medicare and non-Medicare
encounters for the measure populations
for which chart-abstracted data must be
submitted, but they will not be required
to do so. Where hospitals do choose to
submit this data, the deadlines for
submission are the same as those for
reporting data for chart-abstracted
measures, and hospitals may also
choose to submit data prior to these
deadlines. The deadline schedule is
available on the QualityNet Web site.
We refer readers to the CY 2011 OPPS/

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ASC final rule with comment period (75
FR 72101 through 72103) and the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74482 through
74483) for discussions of these policies.
We invited public comments on these
proposals.
Comment: One commenter
appreciated the policy that program
participants can continue to submit
population and sampling data
voluntarily.
Response: We believe there is no need
to require the submission of population
and sampling data due to the high level
of voluntary submission of these data.
After consideration of the public
comments we received, we are
finalizing our policies for population
and sampling data requirements for the
CY 2014 payment determination and
subsequent years.
3. Hospital OQR Program Validation
Requirements for Chart-Abstracted
Measure Data Submitted Directly to
CMS for the CY 2014 Payment
Determination and Subsequent Years
a. Random Selection of Hospitals for
Data Validation of Chart-Abstracted
Measures for the CY 2014 Payment
Determination and Subsequent Years
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74484
through 74485), similar to our approach
for the CY 2012 payment determination
(75 FR 72103 through 72106), we
adopted a policy to validate chartabstracted patient-level data submitted
directly to CMS from randomly selected
hospitals for the CY 2013 payment
determination.
For the CY 2013 payment
determination, we reduced the number
of randomly selected hospitals from 800
to 450.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45184), we proposed to
continue this policy for the CY 2014
payment determination and for
subsequent years. We refer readers to
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74484) for a
discussion of sample size, eligibility for
validation selection, and encounter
minimums for chart abstracted data
submitted directly to CMS from
randomly selected hospitals. We invited
public comment on this proposal.
Comment: One commenter was
pleased that the number of hospitals
selected dropped from 800 to 450 for the
CY 2013 payment determination.
Response: We thank this commenter
for supporting our proposal to maintain
the sample size for hospitals selected for
validation. We note that in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53552)

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the total base sample size of hospitals
included in the annual validation
random sample has recently been
reduced from 800 to 400, to reduce
overall burden. For both the Hospital
IQR and Hospital OQR Programs, we
believe we can reduce the annual
random sample size without adversely
affecting our ability to infer reliability of
the chart-abstracted clinical data
submitted to the programs.
After consideration of the public
comments we received, we are
finalizing our proposal to retain our
sample size for hospitals randomly
selected for data validation of chartabstracted measures for the CY 2014
payment determination and subsequent
years.

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b. Targeting and Targeting Criteria for
Data Validation Selection for the CY
2014 Payment Determination and
Subsequent Years
In the CY 2011 OPPS/ASC proposed
rule (75 FR 46380) we discussed
applying, to CY 2013 and subsequent
years’ data submission, criteria to
determine whether a hospital would be
included in our validation selection
based on abnormal data patterns or a
specific situation. At that time we
provided, for public comment, specific
examples of what we thought could be
appropriate criteria.
In the CY 2011 OPPS/ASC final rule
with comment period (75 FR 72106) we
stated our belief that the targeting
criteria we shared for comment were
reasonable. We considered one
commenter’s concern that we should
use targeting criteria to ensure we do
not over-select a hospital for validation.
We reiterated our intent to propose the
specific targeting criteria in the
upcoming CY 2012 OPPS/ASC proposed
rule (76 FR 42332), in order to finalize
and apply it to 2012 encounter data
collected for the CY 2013 validation
process year. We did so, and finalized
our proposal without modification in
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74485).
In summary, we finalized our intent
to select a random sample of hospitals
for validation purposes, and to select an
additional 50 hospitals based on
specific criteria designed to measure
whether the data these hospitals have
reported raises a concern regarding data
accuracy.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45185), for the CY 2014
payment determination and subsequent
years, we proposed to continue these
policies and to continue to use the
targeting criteria finalized previously.
Specifically, a hospital will be

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preliminarily selected for validation
based on targeting criteria if it:
• Fails the validation requirement
that applies to the previous year’s
payment determination. For example, if
a hospital was selected for validation for
the CY 2013 payment determination
year, either on a random or targeted
basis, and the hospital did not meet the
75 percent validation score for the
designated time period, based upon our
validation process, for the designated
time period, the hospital would be
included in the targeted sample pool for
the CY 2014 payment determination); or
• Has an outlier value for a measure
based on the data it submitted, based on
finalized criteria from the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74485).
In the CY 2012 OPPS/ASC proposed
rule (76 FR 42333) and CY 2012 OPPS/
ASC final rule with comment period (76
FR 74486) we describe additional data
validation conditions under
consideration for the CY 2014 payment
determination and subsequent years. We
thank those who commented on the CY
2012 proposed additional data
validation targeting conditions and will
take their views under consideration as
we develop any future proposals on
these issues. In the CY 2013 OPPS/ASC
proposed rule (77 FR 45185), we did not
propose any additional targeting criteria
to use in selecting the additional 50
hospitals we include in the validation
process for CY 2014 payment
determination or in subsequent years.
We invited public comment on this
proposal.
Comment: One commenter believed
that CMS quality measures should be
based strictly on data derived either
through claims or data abstracting on
the Medicare population, not on all
patients who are treated in the
outpatient setting.
Response: Data submitted to the
Hospital OQR Program are intended to
provide the public with information on
as many patients treated in the
outpatient hospital setting as possible,
including both Medicare and nonMedicare patients. As noted above,
however, claims-based data collection is
limited to Medicare FFS patients.
The Hospital OQR Program requires
this data to be submitted under section
1833(t)(17)(A) of the Act, which applies
to hospitals as defined under section
1886(d)(1)(B) of the Act. That provision
states that subsection (d) hospitals that
do not report data required for the
quality measures selected by the
Secretary in the form and manner
required by the Secretary will not
receive the full payment rate update. We

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modeled the Hospital OQR Program
after the Hospital IQR Program.
In order for us to evaluate the care of
the Medicare population which is a
subset of the entire population, we look
at data of the whole population, to
ensure Medicare beneficiaries are
receiving the same level of care as nonMedicare beneficiaries receive. Because
we collect chart-abstracted quality
measure data on both Medicare and
non-Medicare patients, we believe it is
appropriate to establish sampling
criteria that apply to the same
populations, which include both
Medicare and non-Medicare patients.
Comment: One commenter advocated
selecting a valid sample based on local
practice patterns, desiring inter-rater
reliability. This commenter suggested
that CMS select all 450 hospitals using
criteria that measure whether the data
hospitals have reported raises a concern
regarding accuracy.
Response: We interpret the
commenter to be suggesting that
sampling criteria should be refined in
order to reflect local practice patterns.
Because we use quality measures
reflecting national consensus, we do not
believe that such further refinement is
necessary. Regarding inter-rater
reliability, this should not be affected by
the criteria used for sample selection.
Comment: One commenter believed
that our sample sizes would be
acceptable if they were the only Federal
data submission requirement. This
commenter believed that the records
requested by the Hospital OQR Program
are in addition to those that are already
established as part of the Federal
integrity audit processes (for example,
RAC, Medicaid Integrity, ZPIC, and
MAC). The commenter encourages CMS
to review the validation process with
respect to other CMS data requirements.
Response: We understand the
commenter’s concern regarding multiple
Federal medical record requests. For
Hospital OQR Program validation, we
have worked to limit overall burden by
reducing the number of hospitals
participating annually in validation
through our random sampling of
hospitals. In addition, hospitals are
reimbursed for photocopying and
mailing costs. We agree that efforts
should be made to keep record requests
for validation purposes at the minimum
necessary to ensure accuracy of
submitted data.
We refer readers to section XV.J.
Electronic Health Records (EHRs),
below, for a discussion of how Hospital
IQR and Hospital OQR Programs are
transitioning to the use of certified EHR
technology, for measures that otherwise
require information from the clinical

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record. We look forward to the adoption
of EHR technology as a means to reduce
burden, allowing us to collect data for
measures without the need for manual
chart abstraction, and we will explore
validating these data in ways that
likewise reduce burden to providers.
Comment: One commenter would like
CMS to clearly identify whether a
record has been requested as a result of
random selection or targeted selection.
Response: We interpret this
commenter’s suggestion to mean that we
should indicate whether we selected a
hospital for validation as a result of
random or targeted selection.
For example, because all hospitals are
eligible for random selection, a hospital
that failed validation in one payment
determination year would not know
whether it was selected for validation in
the subsequent payment determination
year based on random or targeted
selection. The hospital might have been
selected in either of these categories.
We have refrained from noting on
what basis a hospital is selected on
public Web sites, since our targeting
criteria are based on possible data
quality issues.
However, we do have that information
available. If a hospital would like to
understand why it was selected for
validation, the hospital may call the
support contractor and request that
information. Contact information for the
Hospital OQR support contractor is
available at https://qualitynet.org.
After consideration of the public
comments we received, we are
finalizing our proposal not to include
any additional targeting criteria to use
in selecting the additional 50 hospitals
we include in the validation process for
the CY 2014 payment determination or
in subsequent years.
c. Methodology for Encounter Selection
for the CY 2014 Payment Determination
and Subsequent Years
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45185), for each selected
hospital (random or targeted), we
proposed to continue the approach we
adopted in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74485
through 74486) for the CY 2014
payment determination and subsequent
years. For the CY 2014 payment
determination, for each selected
hospital (random or targeted), we would
continue to validate up to 48 randomly
selected patient encounters (12 per
quarter; 48 per year) from the total
number of encounters that the hospital
successfully submitted to the OPPS
Clinical Warehouse. If a selected
hospital has submitted less than 12
encounters in one or more quarters, only

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those encounters available would be
validated. For each selected encounter,
a designated CMS contractor would
request that the hospital submit the
complete supporting medical record
documentation that corresponds to the
encounter. We refer readers to 42 CFR
482.24(c)(2) for a definition of what is
expected in a medical record submitted
for validation. The validation process
requires full supporting medical
documentation, including ECG tapes
and/or other pieces of a medical record
that may not be stored in a single
location. The hospital must ensure a full
medical record goes to the contractor for
accurate validation.
We continue to believe that validating
a larger number of encounters per
hospital for fewer hospitals at the
measure level has several benefits. We
believe that this approach is suitable for
the Hospital OQR Program because it
will: (1) Produce a more reliable
estimate of whether a hospital’s
submitted data have been abstracted
accurately; (2) provide more statistically
reliable estimates of the quality of care
delivered in each measured hospital as
well as at a national level; and (3)
reduce overall burden, for example, in
submitting validation documentation,
because hospitals most likely will not be
selected to undergo validation each
year, and a smaller number of hospitals
per year will be selected.
For all selected hospitals, we would
not be selecting cases stratified by
measure or topic; our interest is whether
the data submitted by hospitals
accurately reflects the care delivered
and documented in the medical record,
not what the accuracy is by measure or
whether there are differences by
measure or topic. We would be
validating data from April 1 to March 31
of the year preceding the payment
determination year. This provides
validation results data in time to use to
make the payment determination. For
example, encounter data from April 1,
2012 to March 31, 2013 provides a full
year of the most recent data possible to
validate in time to make the CY 2014
payment determination. We invited
public comment on our proposal to
continue to use our established
methodology for encounter selection
and to continue to use our annual
schedule for encounters to be validated
and used in payment determinations.
We did not receive any public
comments regarding our proposal to
continue to use our established
methodology for encounter selection
and our annual schedule for encounters
to be validated and used in payment
determinations. As a result, we are
finalizing our proposal to continue to

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use our established methodology for
encounter selection and our annual
schedule for encounters to be validated
and used in payment determinations.
d. Validation Score Calculation for the
CY 2014 Payment Determination and
Subsequent Years
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45185) we proposed to
retain the medical record return policy
that we finalized in the CY 2011 OPPS/
ASC final rule with comment period (75
FR 72104) for the CY 2014 payment
determination and subsequent years.
For the CY 2014 payment
determination, we proposed to continue
the validation score policies we adopted
in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74486), for
the CY 2013 payment determination.
We proposed to use the validation
calculation approach finalized for the
CY 2012 and CY 2013 payment
determinations with validation being
done for each selected hospital.
Specifically, we proposed to conduct a
measures level validation by calculating
each measure within a submitted record
using the independently abstracted data
and then comparing this to the measure
reported by the hospital; a percent
agreement would then be calculated. We
would also compare the measure
category for quality measures with
continuous units of measurement, such
as time, so that for these measures, both
the category and the measure would
need to match.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45185), for the CY 2014
payment determination and subsequent
years, we proposed to use the medical
record validation procedure we
finalized in the CY 2011 OPPS/ASC
final rule with comment period (75 FR
72105). A designated CMS contractor
would, for each quarter that applies to
the validation, ask each of the selected
hospitals to submit medical
documentation for up to 12 randomly
selected cases submitted to and
accepted by the OPPS Clinical
Warehouse. The CMS contractor would
request paper copies of medical
documentation corresponding to
selected cases from each hospital via
certified mail or another trackable
method that requires a hospital
representative to sign for the request
letter. A trackable method would be
used so that we would be assured that
the hospital received the request. The
hospital would have 45 calendar days
from the date of the request as
documented in the request letter to
submit the requested documentation
and have the documentation received by
the CMS contractor. If the hospital does

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not comply within 30 calendar days of
receipt of the initial medical
documentation request, the CMS
contractor would send a second letter by
certified mail or other trackable method
to the hospital, reminding the hospital
that paper copies of the requested
documentation must be submitted and
received within 45 calendar days
following the date of the initial CMS
contractor request. If the hospital does
not submit the requested documentation
and the documentation is not received
by the CMS contractor within the 45
calendar days, then the CMS contractor
would assign a ‘‘zero’’ score to each data
element for each selected case and the
case would fail for all measures in the
same topic (for example, OP–6 and OP–
7 measures for a Surgical Care case).
We proposed that the letter from the
designated CMS contractor would be
addressed to the hospital’s medical
record staff identified by the hospital for
the submission of records under the
Hospital IQR Program (that is, the
hospital’s medical records staff
identified by the hospital to its State
QIO). If CMS has evidence that the
hospital received both letters requesting
medical records, the hospital would be
deemed responsible for not returning
the requested medical record
documentation and the hospital would
not be allowed to submit such medical
documentation as part of its
reconsideration request so that
information not utilized in making a
payment determination is not included
in any reconsideration request.
Once the CMS contractor receives the
requested medical documentation, the
contractor would independently
reabstract the same quality measure data
elements that the hospital previously
abstracted and submitted, and the CMS
contractor would then compare the two
sets of data to determine whether the
two sets of data match. Specifically, the
CMS contractor would conduct a
measures level validation by calculating
each measure within a submitted case
using the independently reabstracted
data and then comparing this to the
measure reported by the hospital; a
percent agreement would then be
calculated. The validation score for a
hospital would equal the total number
of measure matches divided by the total
number of measures multiplied by 100
percent.
We invited public comment on our
proposals regarding the medical record
request policy for the CY 2014 payment
determination and subsequent payment
determination years.
Comment: Many commenters
supported our proposal to continue the
45 day time period for medical record

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submission. These commenters noted
that they appreciated the Hospital OQR
Program’s consistency with the RAC
auditing.
Response: We thank these
commenters for their support. We agree
that the 45 day time period to submit
medical record documentation for
validation is reasonable and has the
additional benefit of being consistent
with RAC medical documentation
requests.
To receive the full OPPS OPD fee
schedule increase factor for CY 2014, we
proposed that hospitals must attain at
least a 75 percent reliability score, based
upon the proposed validation process.
We proposed to use the upper bound of
a two-tailed 95 percent confidence
interval to estimate the validation score.
If the calculated upper limit is above the
required 75 percent reliability
threshold, we would consider a
hospital’s data to be ‘‘validated’’ for
payment purposes. Because we are more
interested in whether the measure has
been accurately reported, we would
continue to focus on whether the
measure data reported by the hospital
matches the data documented in the
medical record as determined by our
reabstraction.
We proposed to calculate the
validation score using the same
methodology we finalized for the CY
2012 and CY 2013 payment
determinations (75 FR 72105 and 76 FR
74486). We also proposed to use the
same medical record documentation
submission procedures that we also
finalized for the CY 2012 and CY 2013
payment determinations (75 FR 72104
and 76 FR 74486). We invited public
comments on these proposals.
Comment: One commenter expressed
concerns regarding the strict validation
of ED throughput measures, and
recommended that CMS adopt the 5
minute allowance for the Hospital OQR
Program, which was previously adopted
for the Hospital IQR Program.
Response: We thank this commenter
for expressing this concern. We believe
the commenter is referring to our policy
requiring validation of measures
requiring time values. The commenter is
referring to the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53549).
We agree with the commenter that
requiring time values to match exactly
is not realistic based on our historical
experience with clinical data
abstraction, the recognition that hospital
clocks may vary from system to system
such that the same time may be
recorded differently depending on the
source, and the limited clinical
significance of small deviations in time.
We note that this particular concern

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68487

affects the validation score for the CY
2014 payment determination as well as
for future years.
Accordingly, we are finalizing that,
for the CY 2014 payment determination
and for subsequent years, we will not
require, when scoring the following
chart-abstracted measures, that these
measures have matching numerator and
denominator states:
• OP–18: Median Time from ED
Arrival to ED Departure for Discharged
ED Patients
• OP–19: Transition Record with
Specified Elements Received by
Discharged ED Patients (this measure is
currently suspended and will not be
used in the CY 2014 payment
determination. We intend to confirm
whether this measure will be included
in future payment determinations in
future rulemaking).
• OP–20: Door to Diagnostic
Evaluation by a Qualified Medical
Professional
• OP–21: ED—Median Time to Pain
Management for Long Bone Fracture
• OP–22: ED Patient Left Without
Being Seen
• OP–23: ED—Head CT Scan Results
for Acute Ischemic Stroke
Instead, for scoring of these measures,
we will allow a 5 minute variance
between the time abstracted by the
hospital and that abstracted by the
Clinical Data Abstraction Center
(CDAC).
After consideration of the public
comments we received, we are
finalizing our proposals as modified
regarding the validation score
calculation methodology and timeframe
for submission of medical record
documentation requested for validation.
H. Hospital OQR Reconsideration and
Appeals Procedures for the CY 2014
Payment Determination and Subsequent
Years
When the Hospital IQR Program was
initially implemented, it did not include
a reconsideration process for hospitals.
Subsequently, we received many
requests for reconsideration of those
payment decisions and, as a result,
established a process by which
participating hospitals could submit
requests for reconsideration. We
anticipated similar concerns with the
Hospital OQR Program and, therefore, in
the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66875), we
stated our intent to implement for the
Hospital OQR Program a
reconsideration process modeled after
the reconsideration process we
implemented for the Hospital IQR
Program. In the CY 2009 OPPS/ASC
final rule with comment period (73 FR

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68779), we adopted a reconsideration
process that applied to the CY 2010
payment decisions. In the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60654 through 60655), we
continued this process for the CY 2011
payment update. This process required
that a hospital’s CEO sign any request
for a reconsideration.
In the CY 2011 and CY 2012 OPPS/
ASC final rules with comment periods
(75 FR 72106 through 72108 and 76 FR
74486 through 75587), we continued
this process for the CY 2012 and CY
2013 payment updates with some
modification. In the CY 2011 OPPS/ASC
final rule with comment period(75 FR
72107), we finalized that the CEO was
not required to sign the reconsideration
request form.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45186), we proposed to
continue this process, with additional
modifications, for the CY 2014 payment
determination and subsequent years’
payment determinations. We have now
realized that, in eliminating the
requirement that a CEO sign a request
form, we did not include any
requirement for a signature on the
reconsideration request form. To
increase accountability, we proposed for
the CY 2014 payment determination and
subsequent years’ payment
determinations, that the hospital
designate a contact on its
reconsideration request form, who may
or may not be the CEO. We would
communicate with this designee. We
also proposed that the hospital’s
designee must sign its reconsideration
request form. This process is consistent
with our recently adopted proposals for
reconsideration requests under the
ASCQR Program (77 FR 53643 through
53644).
Under this process, a hospital seeking
reconsideration must—
• Submit to CMS, via QualityNet, a
Reconsideration Request form that will
be made available on the QualityNet
Web site; this form must be submitted
by February 3 of the affected payment
year (for example, for the CY 2014
payment determination, the request
must be submitted by February 3, 2014)
and must contain the following
information:
Æ Hospital CCN.
Æ Hospital Name.
Æ CMS-identified reason for not
meeting the requirements of the affected
payment year’s Hospital OQR Program
as provided in any CMS notification to
the hospital.
Æ Hospital basis for requesting
reconsideration. This must identify the
hospital’s specific reason(s) for
believing it met the affected year’s

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Hospital OQR Program requirements
and should receive the full OPD fee
schedule increase factor.
Æ Designated hospital personnel
contact information, including name,
email address, telephone number, and
mailing address (must include physical
address, not just a post office box). We
proposed that the designee, who may or
may not be the hospital’s CEO, must
sign the form submitted to request
reconsideration.
Æ A copy of all materials that the
hospital submitted to comply with the
requirements of the affected year’s
Hospital OQR Program. Such material
might include, but does not need to be
limited to, the applicable Notice of
Participation form or completed online
registration form, and measure data that
the hospital submitted via QualityNet.
• Paper copies of all the medical
record documentation that it submitted
for the initial validation (if applicable).
Hospitals submit this documentation to
a designated CMS contractor which has
authority to review patient level
information. We post the address where
hospitals are to send this documentation
on the QualityNet Web site.
• To the extent that the hospital is
requesting reconsideration on the basis
that CMS has determined it did not
meet an affected year’s validation
requirement, the hospital must provide
a written justification for each appealed
data element classified during the
validation process as a mismatch. Only
data elements that affect a hospital’s
validation score would be eligible to be
reconsidered. We review the data
elements that were labeled as
mismatched as well as the written
justifications provided by the hospital,
and make a decision on the
reconsideration request.
We proposed these requirements for
the CY 2014 payment determination
year program and for subsequent years.
We invited public comment on these
proposed changes.
Comment: Many commenters
supported the proposal that the CEO or
designee be able to sign the
reconsideration request form.
Response: We thank these
commenters for their support.
Following receipt of a request for
reconsideration, CMS—
• Provides an email
acknowledgement, using the contact
information provided in the
reconsideration request, to the
designated hospital personnel notifying
them that the hospital’s request has
been received.
• Provides a formal response to the
hospital-designated personnel, using the
contact information provided in the

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reconsideration request, notifying the
hospital of the outcome of the
reconsideration process.
• Applies policies that we finalized
for the CY 2012 and CY 2013 payment
determinations regarding the scope of
our review when a hospital requests
reconsideration because it failed our
validation requirement.
These policies are as follows:
• If a hospital requests
reconsideration on the basis that it
disagrees with a determination that one
or more data elements were classified as
mismatches, we only consider the
hospital’s request if the hospital timely
submitted all requested medical record
documentation to the CMS contractor
each quarter under the validation
process.
• If a hospital requests
reconsideration on the basis that it
disagrees with a determination that one
or more of the complete medical records
it submitted during the quarterly
validation process was classified as an
invalid record selection (that is, the
CMS contractor determined that one or
more of the complete medical records
submitted by the hospital did not match
what was requested), thus resulting in a
zero validation score for the
encounter(s), our review is initially
limited. We would review only to
determine whether the medical
documentation submitted in response to
the designated CMS contractor’s request
was the correct and complete
documentation. If we determine that the
hospital did submit the correct and
complete medical documentation, we
abstract the data elements and compute
a new validation score for the
encounter. If we conclude that the
hospital did not submit the correct and
complete medical record
documentation, we do not further
consider the hospital’s request.
• If a hospital requests
reconsideration on the basis that it
disagrees with a determination that it
did not submit the requested medical
record documentation to the CMS
contractor within the proposed 45
calendar day timeframe (which we are
finalizing in this final rule with
comment period), our review is initially
limited to determining whether the CMS
contractor received the requested
medical record documentation within
45 calendar days, and whether the
hospital received the initial medical
record request and reminder notice. If
we determine that the CMS contractor
timely received paper copies of the
requested medical record
documentation, we abstract data
elements from the medical record
documentation submitted by the

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hospital and compute a validation score
for the hospital. If we determine that the
hospital received two letters requesting
medical documentation but did not
submit the requested documentation
within the 45 calendar day period, we
do not further consider the hospital’s
request.
If a hospital is dissatisfied with the
result of a Hospital OQR reconsideration
decision, the hospital is able to file an
appeal under 42 CFR Part 405, Subpart
R (PRRB appeal).
We invited public comment on the
modifications we proposed to the
Hospital OQR Program reconsideration
and appeals procedures.
Comment: One commenter thanked
CMS for fully describing the process for
making a reconsideration request.
Response: We thank the commenter
and appreciate the support. We agree
that the program process for
reconsiderations should be clear and
fully described.
After consideration of the public
comments we received, we are
finalizing our proposals to the Hospital
OQR Program reconsideration and
appeals procedures.
I. Extraordinary Circumstances
Extension or Waiver for the CY 2013
Payment Determination and Subsequent
Years
In our experience, there have been
times when hospitals have been unable
to submit required quality data due to
extraordinary circumstances that are not
within their control. It is our goal to not
penalize hospitals for such
circumstances and we do not want to
unduly increase their burden during
these times. Therefore, in the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60046 through 600647),
we adopted a process for hospitals to
request and for CMS to grant extensions
or waivers with respect to the reporting
of required quality data when there are
extraordinary circumstances beyond the
control of the hospital. In the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72103), we retained these
procedures with a modification to
eliminate redundancy in the
information a hospital must provide in
the request. In the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74478 through 74479), for CY 2012 and
subsequent years, we retained these
procedures with one modification. The
CY 2012 modification allowed that the
original procedures for requesting an
extension or waiver of quality data
submission would thereafter also extend
to include medical record
documentation submission for purposes
of complying with our validation

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requirement for the Hospital OQR
Program. In the CY 2013 OPPS/ASC
proposed rule (77 FR 45187), we
proposed to retain these procedures
with a modification for CY 2013 and
subsequent years.
We proposed to modify one element
of the information required on the CMS
request form. Under the procedures set
out in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74479),
hospitals were required to submit ‘‘CEO
and any other designated personnel
contact information’’ (emphasis added),
the CEO was required to sign the form,
and CMS was required to respond to the
CEO and additional designated hospital
personnel. The information required in
CY 2013 and subsequent years would
include ‘‘CEO or other hospitaldesignated personnel contact
information’’ (emphasis added). This
proposed change would allow the
hospital to designate an appropriate,
non-CEO, contact at its discretion. This
individual would be responsible for the
submission, and would be the one
signing the form. Therefore, the
hospital’s designated-contact may or
may not hold the title of CEO. We
invited public comment on this
proposed modification to the process for
granting extraordinary circumstances
extensions or waivers for the Hospital
OQR Program.
Comment: Many commenters
supported the proposal that the hospital
should designate its own most
appropriate contact for the signing and
submission of the extraordinary
circumstance extension and waiver
form.
Response: We appreciate these
commenters’ support.
Thus, we proposed that, in the event
of extraordinary circumstances, such as
a natural disaster, not within the control
of the hospital, for the hospital to
receive consideration for an extension
or waiver of the requirement to submit
quality data or medical record
documentation for one or more quarters,
a hospital would submit to CMS a
request form that would be made
available on the QualityNet Web site.
The following information should be
noted on the form:
• Hospital CCN;
• Hospital Name;
• CEO or other hospital-designated
personnel contact information,
including name, email address,
telephone number, and mailing address
(must include a physical address, a post
office box address is not acceptable);
• Hospital’s reason for requesting an
extension or waiver;
• Evidence of the impact of the
extraordinary circumstances, including

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but not limited to photographs,
newspaper and other media articles; and
• A date when the hospital would
again be able to submit Hospital OQR
data and/or medical record
documentation, and a justification for
the proposed date.
The request form would be signed by
the hospital’s designated contact,
whether or not that individual is the
CEO. A request form would be required
to be submitted within 45 days of the
date that the extraordinary circumstance
occurred.
Following receipt of such a request,
CMS would—
(1) Provide an email
acknowledgement using the contact
information provided in the request
notifying the designated contact that the
hospital’s request has been received;
(2) Provide a formal response to the
hospital’s designated contact using the
contact information provided in the
request notifying them of our decision;
and
(3) Complete our review of any CY
2013 request and communicate our
response within 90 days following our
receipt of such a request.
We note that we might also decide to
grant waivers or extensions to hospitals
that have not requested them when we
determine that an extraordinary
circumstance, such as an act of nature
(for example, hurricane) affects an entire
region or locale. If we make the
determination to grant a waiver or
extension to hospitals in a region or
locale, we would communicate this
decision to hospitals and vendors
through routine communication
channels, including but not limited to
emails and notices on the QualityNet
Web site. We invited public comments
on these proposals.
Comment: One commenter thanked
CMS for fully describing the process for
making a request for an extension or
waiver of program requirements.
Response: We thank this commenter
for supporting our efforts.
After consideration of the public
comments we received, we are
finalizing our proposed modifications to
the procedures for requesting an
extension or waiver of Hospital OQR
Program requirements.
J. Electronic Health Records (EHRs)
Starting with the FY 2006 IPPS final
rule, we have encouraged hospitals to
take steps toward the adoption of EHRs
(also referred to in previous rulemaking
documents as electronic medical
records) that will allow for reporting of
clinical quality data from EHRs to a
CMS data repository (70 FR 47420
through 47421). We sought to prepare

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for future EHR submission of electronic
clinical quality measures (eCQMs), as
they are referred to in the EHR Incentive
Program), by sponsoring the creation of
electronic specifications for eCQMs
under consideration for the Hospital
IQR Program. Through the Medicare and
Medicaid EHR Incentive Programs, we
expect that the submission of quality
data through EHRs will provide a
foundation for establishing the capacity
of hospitals to send, and for CMS, in the
future, to receive, eCQMs via hospital
EHRs for Hospital IQR Program and
Hospital OQR Program measures. We
expect the Hospital IQR and Hospital
OQR Programs to transition to the use
of electronic specifications for eCQMs
that otherwise require information from
the clinical record. This would allow us
to collect data for eCQMs without the
need for manual chart abstraction.
In the FY 2012 IPPS/LTCH PPS
proposed rule (75 FR 25894), we
identified FY 2015 as a potential
transition date to move to EHR-based
submission and phase out manual chart
abstraction for the Hospital IQR
Program. We also anticipate such a
transition for hospital outpatient
measures, although likely somewhat
after the transition for hospital inpatient
measures. This is because we hope to
first align the eCQMs in the Medicare
EHR Incentive Program with the
Hospital IQR Program measures. Our
goals are to align the hospital quality
reporting programs, to seek to avoid
redundant and duplicative reporting of
quality measures for hospitals, and to
rely largely on EHR submission for
many eCQMs based on clinical record
data.
As noted below, the Medicare and
Medicaid EHR Incentive Programs—
Stage 2 final rule (77 FR 54088) requires
electronic reporting of eCQMs beginning
in 2014 for eligible hospitals and CAHs
that are beyond the first year of Stage 1
of meaningful use. Under our timeline
for EHR-based submission under the
Hospital OQR Program, some eligible
hospitals would be in their second year
of Stage 2 reporting and these eligible
hospitals could be using two methods to
report similar information for the
Medicare and Medicaid EHR Incentive
Programs and the Hospital OQR
Program. In the CY 2013 OPPS/ASC
proposed rule (77 FR 45188), we stated
that we had considered allowing, but
not requiring, EHR-based submission at
the earliest possible date, so as to reduce
the burden of hospitals. We did not
propose this approach because we
believe that it would not be consistent
with our goal that measure results that
must be publicly reported should be
based on consistent, comparable results

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among reporting hospitals and because
our first priority is the align EHR-based
submissions under the Hospital IQR
Program. We invited public comment on
this issue.
Comment: A few commenters pointed
out that the transition from manual to
electronic submission is a huge task and
could be very labor intensive. Another
commenter stated that the timeline to
transition to electronic reporting is too
aggressive. Some commenters urged
CMS to immediately allow data
submission via chart abstraction or
electronically to ease the burden of
quality reporting. Another commenter
agreed with CMS’s consideration for a
full migration to electronic quality
measurement and reporting. The
commenter stated it is inappropriate to
report data using chart-abstraction and
electronic submission concurrently in
the interim.
Response: We understand the
transition to electronic submission is an
immense undertaking that requires
intense collaboration among
stakeholders. As stated earlier, we still
believe that public reporting should be
consistent and comparable among
reporting hospitals. We intend to move
toward a full migration to electronic
quality measurement and reporting. In
addition, the EHR Incentive Program
has incorporated eCQMs that are part of
various hospital reporting programs,
including the Hospital IQR and Hospital
OQR Programs, in order to maximize
financial incentives to help with this
transition.
Comment: One commenter urged
CMS to lay out its vision for electronic
reporting, stating that it is overly
burdensome for hospitals to collect and
report data via chart abstraction and
electronically.
Response: We have previously stated
our vision, including in the Medicare
and Medicaid EHR Incentive
Programs—Stage 2 final rule (77 FR
54053). We noted that our alignment
efforts focus on several fronts including
using the same eCQMs for different
programs, standardizing the measure
development and electronic
specification processes across our
programs, coordinating quality
measurement stakeholder involvement
efforts, and identifying ways to
minimize multiple submission
requirements and mechanisms. We gave
the example that we are working toward
allowing eCQM data submitted via
certified EHR technology (CEHRT) by
eligible professionals (EPs), eligible
hospitals and CAHs to apply to other
CMS quality reporting programs. A
longer-term vision would be hospitals
and clinicians reporting through a

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single, aligned mechanism for multiple
CMS programs. For EPs, we have
finalized such an alignment between the
PQRS and the EHR Incentive Program,
and we expect hospital reporting
programs such as Hospital IQR and
Hospital OQR Programs to follow.
In order to properly transition to
electronic reporting, it is imperative that
we take a staggered approach to
electronic reporting in order to allow for
careful review of the infrastructure and
data integrity during the process. We
have and will continue to look for ways
to reduce reporting burden. We note
that providers could collect data in
EHRs even if the submission of the data
is not done electronically for all quality
reporting programs.
Comment: One commenter strongly
recommended that all eCQMs should be
field-tested and validated prior to
implementation.
Response: We agree with the
commenter that eCQMs should be tested
and validated prior to implementation.
We are collaborating with the NQF,
measure stewards, and the ONC to
develop accurate, and medical-record
compatible electronic specifications
while maintaining the integrity of the
measures as endorsed.
We thank the commenters for
submitting comments on the use of
EHRs in the Hospital OQR Program and
will take these comments into
consideration as we develop future
policies on this issue.
K. 2013 Medicare EHR Incentive
Program Electronic Reporting Pilot for
Eligible Hospitals and CAHs
In the CY 2012 OPPS/ASC final rule
with comment period, we finalized the
voluntary 2012 Electronic Reporting
Pilot for eligible hospitals and CAHs
participating in the Medicare EHR
Incentive Program for FY 2012 and also
revised our regulations at § 495.8(b)(2)
accordingly. We refer readers to the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74489 through
74492) for detailed discussion of the
2012 Electronic Reporting Pilot.
We proposed to continue the
Electronic Reporting Pilot for FY 2013
as finalized for FY 2012. We proposed
to revise our regulations at
§ 495.8(b)(2)(vi) to reflect the
continuation of the Electronic Reporting
Pilot for FY 2013, and also to remove
the reference to § 495.6(f)(9) in order to
conform with the proposed changes to
§ 495.6(f) that were included in the
Medicare and Medicaid EHR Incentive
Programs—Stage 2 proposed rule (77 FR
13817). (We note we recently published
the Medicare and Medicaid EHR
Incentive Programs—Stage 2 final rule

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(77 FR 53968).)We invited public
comments on these proposals.
We noted in the proposed rule that we
finalized reporting clinical quality
measures for the Medicare EHR
Incentive Program by attestation of
clinical quality measure results in the
CY 2012 OPPS/ASC final rule with
comment period for FY 2012 and
subsequent years, such as FY 2013 (76
FR 74489). Thus, eligible hospitals and
CAHs may continue to report clinical
quality measure results as calculated by
CEHRT by attestation for FY 2013, as
they did for FYs 2011 and 2012. We also
noted the intent of CMS to move to
electronic reporting. In the Medicare
and Medicaid EHR Incentive
Programs—Stage 2 final rule, we
finalized that the Medicare EHR
Incentive Program would require
electronic reporting of clinical quality
measures beginning in FY 2014 for
eligible hospitals and CAHs that are
beyond the first year of Stage 1 of
meaningful use (77 FR 54088).
Comment: A few commenters stated
that some eCQMs have not been
sufficiently validated. One commenter
also stated that not enough clinical
quality measures in the Hospital IQR
and Hospital OQR Programs are
electronically specified, noting that
some data elements are not always
captured in CEHRT and still require
manual review and input. A few
commenters stated that electronic
specifications have not undergone field
testing.
Response: The clinical quality
measures finalized in the Medicare and
Medicaid EHR Incentive Programs—
Stage 2 final rule (77 FR 53968) for
reporting beginning with FY 2014 have
either undergone feasibility testing in
EHR systems and clinical settings or
were finalized in the Stage 1 final rule
for reporting in FYs 2011 and 2012, and
specifications have been and will
continue to be updated based on
experiences with reporting those
clinical quality measures in the EHR
Incentive Program.
In addition, the Office of the National
Coordinator for Health Information
Technology’s (ONC) 2014 Edition EHR
certification criteria explicitly requires
that EHR technology presented for
certification must be able to capture the
requisite data for each and every clinical
quality measure to which the EHR
technology is requested to be certified
(see 45 CFR 170.314(c)(1) and 77 FR
54226 through 54232). Therefore EHR
technology that is certified to the 2014
Edition EHR certification criteria should
include all of the data elements needed
for each and every clinical quality
measure to which an EHR technology is

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certified for the purposes of the EHR
Incentive Program (for a list of these
measures, including other quality
measure programs that use the same
measure, please refer to Table 10 of the
Medicare and Medicaid EHR Incentive
Programs—Stage 2 final rule at 77 FR
54083 through 54087). Finally, we do
not believe that many of the issues
experienced by providers with eCQMs
in 2011 and 2012 of the EHR Incentive
Program would continue.
We expect that eCQMs that will be
electronically reported in hospital
reporting programs such as the Hospital
OQR Program would have undergone
the same or similar processes as the
eCQMs in the EHR Incentive Program
(for more information, please refer to the
Medicare and Medicaid EHR Incentive
Programs—Stage 2 final rule 77 FR
54053 through 54056, section B.3.
Criteria for Selecting CQMs and section
B.4. CQM Specification). As the
transition to electronic reporting
becomes more ubiquitous in the
hospital reporting programs, we expect
that more eCQMs would be created de
novo based on data that is readily
available in EHR systems rather than
retooled from paper-based
specifications.
Comment: Several commenters stated
that CMS should establish a process for
updating specifications for eCQMs.
These commenters also suggested that
we establish a mechanism through
which vendors and providers can offer
feedback on problematic or unclear
measures.
Response: The Electronic Reporting
Pilot, which began in FY 2012 and is
being finalized to continue in FY 2013,
is used in part as a mechanism for
testing the entire infrastructure for
reporting eCQMs, including the ability
to accurately abstract clinical quality
data from EHRs, transmit them to CMS,
and for CMS to receive the data. The
EHR Incentive Program is currently the
only CMS quality reporting program
using electronic clinical quality
measures for hospitals. The process of
updating specifications regularly is
expected to continue in order to
maintain alignment with current
clinical guidelines and ensure that the
measure remains relevant and
actionable within the clinical care
setting.
In addition, we expect to make
updates based on experiences of
vendors, providers, and CMS during the
process of reporting clinical quality
data. We currently have various forums
in which vendors and providers can
provide feedback, such as the joint CMS
and the Joint Commission ePilot vendor
conference call, national partners’ calls

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and open door forums. We continue to
engage with the vendor and provider
communities to keep an open dialogue
for feedback and continuous
improvement in electronic quality
measurement.
Comment: One commenter did not
support CMS having direct access to a
facility’s EHR for data abstraction.
Response: We have not proposed nor
do we intend to directly access a
facility’s EHR for data abstraction. The
Electronic Reporting Pilot for the
Medicare EHR Incentive Program
(established in the CY 2012 OPPS/ASC
final rule with comment period and
being finalized to continue in FY 2013
in this final rule with comment period)
is expected to be the basis for electronic
reporting of clinical quality data in
Hospital IQR and Hospital OQR
Programs, as well as potentially in other
hospital reporting programs.
Comment: Several commenters were
concerned about participation levels in
the Electronic Reporting Pilot and
suggested flexibility with data
transmission standards, such as using
standards that EHR vendors already use.
One commenter urged CMS to perform
a comprehensive assessment of the
pilot.
Response: The submission period for
the first Electronic Reporting Pilot (that
is, the pilot established for FY 2012) is
October 1, 2012 through November 30,
2012. Therefore, when this final rule
with comment period is published, the
submission period for the first
Electronic Reporting Pilot for hospitals
would not yet be completed and a
comprehensive assessment would not
yet be possible. The data transmission
standard used in the Electronic
Reporting Pilot (Quality Reporting Data
Architecture category I, or QRDA–I) has
also been finalized in the Medicare and
Medicaid EHR Incentive Programs—
Stage 2 final rule as a standard that we
will accept beginning with FY 2014 (77
FR 54088). ONC has also included
QRDA–I in its 2014 Edition EHR
certification criteria, which means that
CEHRT should be capable of
transmitting data using this standard if
certified to the 2014 Edition EHR
certification criteria. Therefore, it is a
standard that we believe will continue
to be used more widely for electronic
reporting of clinical quality measures.
As stated previously, we have and will
continue to engage with the vendor
community in order to continue to
improve the ease and accuracy of
electronic transmission of clinical
quality data.
Comment: One commenter provided
suggestions on development and
selection of future electronic clinical

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quality measures, including
considerations such as measure validity,
quality improvement potential,
reporting burden, and the National
Quality Strategy described in the
Medicare and Medicaid EHR Incentive
Programs—Stage 2 final rule (77 FR
54054).
Response: We appreciate the
suggestions on development and
selection of future electronic clinical
quality measures; however, this is
outside the scope of this rulemaking.
We will consider these suggestions
when developing new electronic
clinical quality measures and in future
rulemaking when selecting new
measures in our quality reporting
programs.
Comment: One commenter stated that
it is inconsistent for the Electronic
Reporting Pilot to collect only Medicare
data when reporting of all payer data is
instrumental to meeting the goals of
national initiatives as well as needed for
Hospital Compare. This commenter was
concerned that submission of patientlevel data is inconsistent with the
requirement in the EHR Incentive
Program to report summary-level data
and could have adverse consequences
for patient privacy.
Response: In order to work towards
the goal of transitioning our quality
reporting programs to electronic
reporting, we are piloting the electronic
submission of patient-level data, which
is the data level required in the hospital
reporting programs, such as the Hospital
IQR and Hospital OQR Programs.
Whether the data are submitted to us
through a manual process or
electronically, all parties are expected to
comply with HIPAA as applicable in
order to maintain patient confidentiality
and secure data transmission. Since this
is a pilot, we limited the data
submission to Medicare patients only in
order to limit the reporting burden on
participating hospitals during the pilot
phase.
Comment: One commenter suggested
piloting both the QRDA–I (patient-level)
and QRDA–III (aggregate-level)
transmission formats in 2013.
Response: We proposed to continue
the Electronic Reporting Pilot for FY
2013 exactly as adopted for FY 2012,
which only included the QRDA–I
transmission format. The QRDA–III
format is currently being finalized and
is not ready for full implementation in
FY 2013.
Comment: Several commenters
supported continuing the Electronic
Reporting Pilot through the EHR
Incentive Program. One of these
commenters specifically supported the
electronic reporting of clinical quality

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measures under the terms in the EHR
Incentive Program.
Response: We thank the commenters
for the support to continue the
Electronic Reporting Pilot and for
electronically-reported clinical quality
measures.
After consideration of the public
comments we received, we are
finalizing our proposal to continue the
Electronic Reporting Pilot for FY 2013,
as finalized for FY 2012. We are revising
our regulations as proposed at
§ 495.8(b)(2)(vi) to reflect the
continuation of the Electronic Reporting
Pilot for FY 2013 and to remove the
reference to § 495.6(f)(9).
XVI. Requirements for the Ambulatory
Surgical Center Quality Reporting
(ASCQR) Program
A. Background
1. Overview
We refer readers to section XV.A.1. of
this final rule with comment period for
a general overview of our quality
reporting programs.
2. Statutory History of the ASC Quality
Reporting (ASCQR) Program
We refer readers to section XIV.K.1. of
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74492 through
74493) for a detailed discussion of the
statutory history of the ASCQR Program.
3. History of the ASCQR Program
In the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66875), the
CY 2009 OPPS/ASC final rule with
comment period (73 FR 68780), the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60656), and the
CY 2011 OPPS/ASC final rule with
comment period (75 FR 72109), we did
not implement a quality data reporting
program for ASCs. We determined that
it would be more appropriate to allow
ASCs to acquire some experience with
the revised ASC payment system, which
was implemented for CY 2008, before
implementing new quality reporting
requirements. However, in these rules,
we indicated that we intended to
implement a quality reporting program
for ASCs in the future.
In preparation for proposing a quality
reporting program for ASCs, in the CY
2011 OPPS/ASC proposed rule (75 FR
46383), we solicited public comments
on 10 measures. In addition to preparing
to propose implementation of a quality
reporting program for ASCs, HHS
developed a plan to implement a valuebased purchasing (VBP) program for
payments under title XVIII of the Act for
ASCs as required by section 3006(f) of
the Affordable Care Act, as added by

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section 10301(a) of the Affordable Care
Act. We also submitted a report to
Congress, as required by section
3006(f)(4) of the Affordable Care Act,
entitled ‘‘Medicare Ambulatory Surgical
Center Value-Based Purchasing
Implementation Plan’’ that details this
plan. This report is found on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/Downloads/
C_ASC_RTC–2011.pdf. Currently, we do
not have express statutory authority to
implement an ASC VBP program. If and
when legislation is enacted that
authorizes CMS to implement an ASC
VBP program, we will develop the
program and propose its
implementation through notice-andcomment rulemaking.
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74492
through 74517), we finalized our
proposal to implement the ASCQR
Program beginning with the CY 2014
payment determination. We adopted
quality measures for the CY 2014, CY
2015, and CY 2016 payment
determination years and finalized some
data collection and reporting timeframes
for these measures. We also adopted
policies with respect to the maintenance
of technical specifications and updating
of measures, publication of ASCQR
Program data, and, for the CY 2014
payment determination, data collection
and submission requirements for the
claims-based measures. For a discussion
of these final policies, we refer readers
to the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74492
through 74517).
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74515), we
indicated our intent to issue proposals
for administrative requirements, data
validation and completeness
requirements, and reconsideration and
appeals processes in the FY 2013 IPPS/
LTCH PPS proposed rule, rather than in
the CY 2013 OPPS/ASC proposed rule,
because the FY 2013 IPPS/LTCH PPS
proposed rule was scheduled to be
finalized earlier and prior to data
collection for the CY 2014 payment
determination, which is to begin with
services furnished on October 1, 2012.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53636 through 53644), we
issued final policies for administrative
requirements, data completeness
requirements, extraordinary
circumstances waiver or extension
requests, and a reconsideration process.
For a complete discussion of these
policies, we refer readers to the FY 2013
IPPS/LTCH PPS final rule.
Because we included proposals for
the ASCQR Program in the FY 2013

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IPPS/LTCH PPS proposed rule, we
limited the number of proposals in the
CY 2013 OPPS/ASC proposed rule. In
addition, in an effort to prevent
confusion regarding what we proposed
in the CY 2013 OPPS/ASC proposed
rule and what we proposed in the FY
2013 IPPS/LTCH PPS proposed rule, in
the CY 2013 OPPS/ASC proposed rule,
we limited our discussion of the
proposals contained in the FY 2013
IPPS/LTCH PPS proposed rule primarily
to background related to the proposals
in the CY 2013 OPPS/ASC proposed
rule.
Comment: Two commenters
supported the implementation of a payfor-performance program (that is, an
ASC Value-Based Purchasing (VBP)
Program) by CY 2016 to reward high
performing facilities and penalize low
performing facilities. The commenters
also recommended that the measure set
for such a program focus not only on
clinical outcomes and include clinical
process, structural, and patient
experience of care measures, but also
minimize burden.
Response: Currently, we do not have
the statutory authority to implement an
ASC VBP Program. If legislation is
enacted that authorizes CMS to
implement such a program for ASCs, we
will consider these recommendations.

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B. ASCQR Program Quality Measures
1. Considerations in the Selection of
ASCQR Program Quality Measures
Section 1833(i)(7)(B) of the Act states
that section 1833(t)(17)(C) of the Act
shall apply with respect to ASC services
in a similar manner in which they apply
to hospitals for the Hospital OQR
Program, ‘‘except as the Secretary may
otherwise provide.’’ The requirements
under section 1833(t)(17)(C)(i) of the Act
state that measures developed shall ‘‘be
appropriate for the measurement of
quality of care (including medication
errors) furnished by hospitals in
outpatient settings and that reflect
consensus among affected parties and,
to the extent feasible and practicable,
shall include measures set forth by one
or more national consensus building
entities.’’
In addition to following the statutory
requirements, in selecting measures for
the ASCQR Program and other quality
reporting programs, we have focused on
measures that have a high impact on
and support HHS’ and CMS’ priorities
for improved health care outcomes,
quality, safety, efficiency, and
satisfaction for patients. Our goal for the
future is to expand any measure set
adopted for the ASCQR Program to
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to align ASC quality measure
requirements with those of other
reporting programs as appropriate,
including the Hospital OQR Program, so
that the burden for reporting will be
reduced.
In general, we prefer to adopt
measures that have been endorsed by
the NQF because it is a national multistakeholder organization with a welldocumented and rigorous approach to
consensus development. However, as
discussed above, the Hospital OQR
Program statute only requires that we
adopt measures that are appropriate for
the measurement of the quality of care
furnished by hospitals in outpatient
settings, reflect consensus among
affected parties, and, to the extent
feasible and practicable, include
measures set forth by one or more
national consensus building entities.
Therefore, measures are not required to
be endorsed by the NQF or any other
national consensus building entity and,
as we have noted in a previous
rulemaking for the Hospital OQR
Program (75 FR 72065), the requirement
that measures reflect consensus among
affected parties can be achieved in other
ways, including through the measure
development process, through broad
acceptance and use of the measure(s),
and through public comment. Further,
the Secretary has broader authority
under the ASCQR Program statute, as
discussed above, to adopt non-endorsed
measures or measures that do not reflect
consensus for the ASCQR Program
because, under the ASCQR Program
statute, these Hospital OQR Program
provisions apply ‘‘except as the
Secretary may otherwise provide.’’
In developing the ASCQR Program,
we applied the principles set forth in
the CY 2011 OPPS/ASC proposed rule
and final rule with comment period (76
FR 42337 through 42338 and 74494
through 74495, respectively). Although
we did not propose any new measures
for the ASCQR Program in the CY 2013
OPPS/ASC proposed rule as discussed
below, we stated that we plan to apply
the following principles in future
measure selection and development for
the ASCQR Program. These principles
were applied in developing other
quality reporting programs and many
are the same principles applied in
developing the ASCQR Program last
year.
• Our overarching goal is to support
the National Quality Strategy’s goal of
better health care for individuals, better
health for populations, and lower costs
for health care. The ASCQR Program
will help achieve these goals by creating
transparency around the quality of care
provided by ASCs to support patient

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decision-making and quality
improvement. More information
regarding the National Quality Strategy
can be found at: http://www.healthcare
.gov/law/resources/reports/quality
03212011a.html. HHS engaged a wide
range of stakeholders to develop the
National Quality Strategy, as required
by the Affordable Care Act.
• Pay-for-reporting and public
reporting programs should rely on a mix
of standards, process, outcomes, and
patient experience of care measures.
Across all programs, we seek to move as
quickly as possible to the use of
primarily outcome and patient
experience measures. To the extent
practicable and appropriate, outcome
and patient experience measures should
be adjusted for risk or other appropriate
patient population or provider/supplier
characteristics.
• To the extent possible and
recognizing the differences in payment
system maturity and statutory
authorities, measures should be aligned
across public reporting and payment
systems under Medicare and Medicaid.
The measure sets should evolve so that
they include a focused core set of
measures appropriate to the specific
provider/supplier category that reflects
the level of care and the most important
areas of service and measures for that
provider/supplier.
• We weigh the relevance and the
utility of measures compared to the
burden on ASCs for submitting data
under the ASCQR Program. The
collection of information burden on
providers and suppliers should be
minimized to the extent possible. To
this end, we continuously seek to adopt
electronic-specified measures so that
data can be calculated and submitted
via certified EHR technology with
minimal burden. We also seek to use
measures based on alternative sources of
data that do not require chart
abstraction or that use data already
being reported by ASCs.
• We take into account the views of
the Measure Application Partnership
(MAP). The MAP is a public-private
partnership convened by the NQF for
the primary purpose of providing input
to HHS on selecting performance
measures for quality reporting programs
and pay-for-reporting programs. The
MAP views patient safety as a high
priority area and it strongly supports the
use of NQF-endorsed safety measures.
Accordingly, we consider the MAP’s
recommendations in selecting quality
and efficiency measures (we refer
readers to the Web sites at: http://
www.qualityforum.org/Setting_Priorities
/Partnership/Measure_Applications_
Partnership.aspx, and http://

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www.qualityforum.org/WorkArea/linkit
.aspx?LinkIdentifier=id&ItemID=69885).
• Measures should be developed with
the input of providers/suppliers,
purchasers/payers and other
stakeholders. Measures should be
aligned with best practices among other
payers and the needs of the end users
of the measures. We take into account
widely accepted criteria established in
medical literature.
• HHS’ Strategic Plan and Initiatives.
HHS is the U.S. Government’s principal
agency for protecting the health of all
Americans. HHS accomplishes its
mission through programs and
initiatives. Every 4 years, HHS updates
its Strategic Plan and measures its
progress in addressing specific national
problems, needs, or mission-related
challenges. The current goals of the
HHS Strategic Plan can be located on
the Web site at: http://www.hhs.gov/
secretary/about/priorities/
strategicplan2010-2015.pdf.
• CMS Strategic Plan. We strive to
ensure that measures for different
Medicare and Medicaid programs are
aligned with priority quality goals, that
measure specifications are aligned
across settings, that outcome measures
are used whenever possible, and that
quality measures are collected from
EHRs as appropriate.
We believe that ASCs are similar to
HOPDs, insofar as the delivery of
surgical and related nonsurgical
services. Similar standards and
guidelines can be applied between
HOPDs and ASCs with respect to
surgical care improvement because
many of the same surgical procedures
are provided in both settings. Measure
harmonization assures that comparable
care in these settings can be evaluated
in similar ways, which further assures
that quality measurement can focus
more on the needs of a patient with a
particular condition rather than on the
specific program or policy attributes of
the setting in which the care is
provided.
We invited public comment on this
approach for future measure selection
and development for the ASCQR
Program.
Comment: Some commenters
supported CMS’ efforts to establish the
ASCQR Program. One commenter
emphasized that ASCQR Program
measures should reflect ASC facilitylevel accountability rather than
physician-level accountability.
Response: We appreciate the
commenters’ support for the
implementation of the ASCQR Program.
The measures we adopted for the
ASCQR Program are directly attributable
to ASCs. The quality data are submitted

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by ASCs and are reported at a facilitylevel and not at a physician-level. We
finalized a policy to publish ASC
quality data by CMS Certification
Number (CCN) in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74514 through 74515), which is a
facility-level identifier.
Comment: A few commenters asserted
that ASCs are small entities and the
utilization of EHR technology in the
ASC industry is limited. Nonetheless,
commenters requested that CMS
consider electronic submission as an
option for ASCs that have implemented
EHR technology.
Response: We recognize that many
ASCs are small entities and some may
have limited EHR technology. We are
still in the beginning stages of
implementing the ASCQR Program, and
we will need to assess the readiness of
ASCs prior to considering an option of
allowing electronic submission of
measures for the ASCQR Program.
Comment: One commenter
encouraged the adoption of NQFendorsed measures to ensure that field
testing and the consensus process are
rigorous. Another commenter urged
CMS to facilitate direct representation
from the ASC industry on either the
National Priorities Partnership (NPP) or
the MAP to formulate priorities for
outpatient settings and coordinate
efforts across inpatient and outpatient
settings.
Response: In general, we prefer to
adopt measures that have been endorsed
by the NQF because it is a national
multi-stakeholder organization with a
well-documented and rigorous approach
to consensus development. However,
sections 1833(i)(7)(B) and
1833(t)(17)(C)(i) of the Act, read
together, require that the Secretary
develop measures that the Secretary
determines to be appropriate for the
measurement of quality of care
(including medication errors) furnished
by ASCs and that reflect consensus
among affected parties and, to the extent
feasible and practicable, shall include
measures set forth by one or more
national consensus building entities.
Therefore, measures are not required to
be endorsed by the NQF or any other
national consensus building entity and,
as we have noted in a previous
rulemaking (75 FR 72065), the
requirement that measures reflect
consensus among affected parties can be
achieved in other ways, including
through the measure development
process, through broad acceptance and
use of the measure(s), and through
public comment. Further, section
1833(i)(7)(B) of the Act states that these
provisions shall apply to the ASCQR

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Program ‘‘except as the Secretary may
otherwise provide.’’ Thus, the Secretary
has broad authority under the ASCQR
Program statute to adopt non-endorsed
measures or measures that do not reflect
consensus.
As required by section 1890A of the
Act, as added by section 3014 of the
Affordable Care Act, we submit
measures under consideration for this
Program (and other programs utilizing
quality measures) to the MAP by
December 1 of each year, at the same
time that we make the list of measures
available to the public. We consider the
recommendations issued by the MAP
prior to proposing measures for the
ASCQR Program.
We encourage stakeholders interested
in direct representation on either the
NPP or the MAP to submit nominations
to the NQF for consideration. The NQF
holds open calls for membership
nominations annually for both the NPP
and the MAP, followed by a public
comment period for vetting of balanced
stakeholder groups.
Comment: A few commenters strongly
supported CMS’ measure selection
criteria for ASCs. Commenters also
commended CMS’ effort to align some
of the measures for the ASCQR Program
with the Hospital OQR Program
measures, and encouraged greater
alignment of the measures so that
Medicare beneficiaries can compare
ASC and HOPD quality data.
Response: We appreciate the
commenters’ support for CMS’ measure
selection criteria. We believe that ASCs
are similar to HOPDs, insofar as they
deliver similar surgical and related
nonsurgical services. Therefore, many of
the measures may be applicable across
these two settings. We agree with the
commenters that greater harmonization
of measures across these programs
would allow beneficiaries to compare
quality of care for similar services across
these settings, and we will seek greater
alignment in future program years.
After consideration of the public
comments we received, we are
finalizing our approach for future
measure selection and development for
the ASCQR Program.
2. ASCQR Program Quality Measures
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74492
through 74517), we finalized our
proposal to implement the ASCQR
Program beginning with the CY 2014
payment determination and adopted
measures for the CY 2014, CY 2015, and
CY 2016 payment determinations. We
also finalized our policy to retain
measures from one calendar year
payment determination to the next so

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that measures adopted for a previous
payment determination year would be
retained for subsequent payment
determination years (76 FR 74504,
74509, and 74510).
We adopted the following five claimsbased measures for the CY 2014
payment determination for services
furnished between October 1, 2012 and
December 31, 2012: (1) Patient Burns
(NQF #0263); (2) Patient Fall (NQF
#0266); (3) Wrong Site, Wrong Side,
Wrong Patient, Wrong Procedure,
Wrong Implant (NQF #0267); (4)
Hospital Transfer/Admission (NQF
#0265); and (5) Prophylactic
Intravenous (IV) Antibiotic Timing
(NQF #0264).
For the CY 2015 payment
determination, we retained the five
claims-based measures we adopted for
the CY 2014 payment determination and
adopted the following two structural
measures: (1) Safe Surgery Checklist
Use; and (2) ASC Facility Volume Data
on Selected ASC Surgical Procedures.
We specified that reporting for the
structural measures would be between
July 1, 2013 and August 15, 2013 for

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services furnished between January 1,
2012 and December 31, 2012, using an
online measure submission Web page
available at: https://
www.QualityNet.org. We did not specify
the data collection period for the five
claims-based measures for the CY 2015
payment determination.
For the CY 2016 payment
determination, we finalized the
retention of the seven measures from the
CY 2015 payment determination (five
claims-based measures and two
structural measures) and adopted
Influenza Vaccination Coverage Among
Healthcare Personnel (NQF #0431), a
process of care, healthcare-associated
infection measure (HAI). We specified
that data collection for the influenza
vaccination measure would be via the
National Healthcare Safety Network
(NHSN) from October 1, 2014 through
March 31, 2015. We did not specify the
data collection period for the claimsbased or structural measures.
We stated that, to the extent we
finalize some or all of the measures for
future payment determination years, we
would not be precluded from adopting

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68495

additional measures or changing the list
of measures for future payment
determination years through annual
rulemaking cycles so that we may
address changes in program needs
arising from new legislation or from
changes in HHS’ and CMS’ priorities.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45191), considering the time
and effort required for us to develop,
align, and implement the infrastructure
necessary to collect data on the ASCQR
Program quality measures and make
payment determinations, and likewise
the time and effort required on the part
of ASCs to plan and prepare for quality
reporting, we did not propose to delete
or add any quality measures for the
ASCQR Program for the CY 2014, CY
2015, and CY 2016 payment
determination years, or to adopt quality
measures for subsequent payment
determination years. For readers’
reference, the following table lists the
ASCQR Program quality measures that
were previously finalized in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74504 through
74511).

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Comment: Many commenters
applauded CMS’ plan of not adding new
measures to the ASCQR Program at this
time because it would allow ASCs
adequate time to adapt to reporting
requirements for the initial measure set
for the CY 2014 payment determination.
Response: We appreciate the
commenters’ support.
3. ASC Measure Topics for Future
Consideration
We seek to develop a comprehensive
set of quality measures to be available
for widespread use for informed
decision-making and quality
improvement in the ASC setting.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45191), we stated
that, through future rulemaking, we
intend to propose new measures
consistent with the principles discussed
in section XVI.B.1. of the proposed rule,
in order to select quality measures that
address clinical quality of care, patient
safety, and patient and caregiver
experience of care. We invited public

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comment specifically on the inclusion
of procedure-specific measures for
cataract surgery, colonoscopy,
endoscopy, and for anesthesia-related
complications in the ASCQR Program
measure set.
Comment: Commenters either
supported or suggested the inclusion of
the following measure topics under the
ASCQR Program:
• Patient Experience of Care
• Surgical Site Infection
• Surgical Complications
• Anesthesia-Related Complications
• Otolaryngology
• Gastroenterology
• Equipment Reprocessing
• Adverse Events after Discharge
Response: We appreciate the
commenters’ suggestions for future
measure topics for the ASCQR Program.
4. Clarification Regarding the Process
for Updating ASCQR Program Quality
Measures
In the CY 2012 OPPS/ASC final rule
with comment period, we finalized our

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proposal to follow the same process for
updating the ASCQR Program measures
that we adopted for the Hospital OQR
Program’s measures (76 FR 74513
through 74514). This process includes
the same subregulatory process for the
ASCQR Program as used for the
Hospital OQR Program for updating
measures, including issuing regular
manual releases at 6-month intervals,
providing addenda as necessary, and
providing at least 3 months of advance
notice for nonsubstantive changes such
as changes to ICD–9–CM, CPT, NUBC,
and HCPCS codes, and at least 6
months’ notice for substantive changes
to data elements that would require
significant systems changes. We
provided a citation to the CY 2009
OPPS/ASC final rule with comment
period where the final Hospital OQR
Program policies are discussed (73 FR
68766 through 68767).
In examining last year’s finalized
policy for the ASCQR Program, we
recognize that we may need to provide

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additional clarification of the ASCQR
Program policy in the context of the
previously finalized Hospital OQR
Program policy in the CY 2009 OPPS/
ASC final rule with comment period (73
FR 68766 through 68767). Therefore, in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45191), we sought to more
clearly articulate the policy that we
adopted for the ASCQR Program, which
is the same policy that has been adopted
for the Hospital OQR Program.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68766
through 68767), we established a
subregulatory process for making
updates to the measures we have
adopted for the Hospital OQR Program.
This process is necessary so that the
Hospital OQR measures are calculated
based on the most up-to-date scientific
evidence and consensus standards.
Under this process, when a national
consensus building entity updates the
specifications for a measure that we
have adopted for the Hospital OQR
Program, we update our specifications
for that measure accordingly and
provide notice as described above and
in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74514). An
example of such an entity is the NQF.
For measures that are not endorsed by
a national consensus building entity, the
subregulatory process is based on
scientific advances as determined
necessary by CMS, in part, through our
measure maintenance process involving
Technical Expert Panels (73 FR 68767).
We invited public comment on this
clarification of the finalized ASCQR
Program policy of using a subregulatory
process to update measures.
Comment: A few commenters
requested that CMS consider the
measure changes made by measure
developers and stewards of measures, as
these can occur at any time based on a
change in evidence, consensus
standards, or other factors that merit an
update. With respect to measures that
are not endorsed by a national entity,
the commenters recommended that
CMS consult with ASC clinical and
operational experts. Further, the
commenters suggested that the
Technical Expert Panels (TEPs), which
are charged with maintenance of the
ASCQR Program measures, include
substantial representation from the ASC
community and relevant surgical
specialty societies.
Response: We regularly monitor
changes to measures adopted for the
ASCQR Program and other quality
programs that are made by measure
stewards, as well as the evidence upon
which the measures are based. The
current ASCQR Program measure set

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has been implemented with input by
ASC stakeholders, including the
measure stewards, as well as other
affected parties.
For NQF-endorsed measures, measure
developers and stewards are expected to
present these changes to the NQF for
review annually. We would incorporate
these changes based upon the NQF’s
acceptance. For non-NQF-endorsed
measures, we evaluate changes to
measures recommended by our
contractors’ surgical TEP, which
includes outpatient ASC surgical
representatives.
In summary, we clarified that we
adopted the Hospital OQR Program’s
process for updating the ASCQR
Program measures that was finalized in
the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68766 through
68767), which is explained above.
C. Requirements for Reporting of ASC
Quality Data
1. Form, Manner, and Timing for
Claims-Based Measures for the CY 2014
Payment Determination and Subsequent
Payment Determination Years
a. Background
In the CY 2012 OPPS/ASC final rule
with comment period, we adopted
claims-based measures for the CY 2014,
CY 2015, and CY 2016 payment
determination years (76 FR 74504
through 74511). We also finalized that,
to be eligible for the full CY 2014 ASC
annual payment update, an ASC must
submit complete data on individual
quality measures through a claims-based
reporting mechanism by submitting the
appropriate QDCs on the ASC’s
Medicare claims (76 FR 74515 through
74516). As stated in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74516), ASCs will add the
appropriate QDCs on their Medicare
Part B claims forms, the Form CMS–
1500s submitted for payment, to submit
the applicable quality data. A listing of
the QDCs with long and short
descriptors is available in Transmittal
2425, Change Request 7754 released
March 16, 2012 (http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/ASCTransmittals-Items/ASC-CR7754R2425CP.html). Details on how to use
these codes for submitting numerator
and denominator information are
available in the ASCQR Program
Specifications Manual located on the
QualityNet Web site (https://
www.QualityNet.org). We also finalized
the data collection period for the CY
2014 payment determination, as the
Medicare fee-for-service ASC claims
submitted for services furnished

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between October 1, 2012 and December
31, 2012. In the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53640), we
adopted a policy that claims for services
furnished between October 1, 2012 and
December 31, 2012, would have to be
paid by the Medicare administrative
contractor (MAC) by April 30, 2013, to
be included in the data used for the CY
2014 payment determination. We
believe that this claim paid date will
allow ASCs sufficient time to submit
claims while allowing CMS sufficient
time to complete required data analysis
and processing to make payment
determinations and to supply this
information to administrative
contractors.
b. Form, Manner, and Timing for
Claims-Based Measures for the CY 2015
Payment Determination and Subsequent
Payment Determination Years
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45192) we proposed that, for
the CY 2015 payment determination and
subsequent payment determination
years, an ASC must submit complete
data on individual claims-based quality
measures through a claims-based
reporting mechanism by submitting the
appropriate QDCs on the ASC’s
Medicare claims. We proposed that the
data collection period for the claimsbased quality measures would be for the
calendar year 2 years prior to a payment
determination. We also proposed that
the claims for services furnished in each
calendar year would have to be paid by
the MAC by April 30 of the following
year of the ending data collection time
period to be included in the data used
for the payment determination. Thus,
for example, for the CY 2015 payment
determination, we proposed the data
collection period to be claims for
services furnished in CY 2013 (January
1, 2013 through December 31, 2013)
which are paid by the MAC by April 30,
2014. We believe that this claim paid
date would allow ASCs sufficient time
to submit claims while allowing CMS
sufficient time to complete required
data analysis and processing to make
payment determinations and to supply
this information to administrative
contractors. We invited public comment
on these proposals.
Comment: Some commenters agreed
with CMS’ proposals to begin the data
collection period for claims-based
measures in the calendar year 2 years
prior to a payment determination, and
to establish the policy that the claims
for services furnished in each calendar
year would have to be paid by the MAC
by April 30 of the following year of the
ending data collection time period to be
included in the data used for the

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payment determination. The
commenters stated that they believed
the April 30 deadline would allow
sufficient time for claims processing.
However, other commenters believed
the proposed period for the collection of
claims data may be too abbreviated to
capture all pertinent data. Because ASCs
have up to 1 year to submit claims for
services furnished, some commenters
suggested that the period for the
collection of claims data be as close to
1 year from the date the service was
furnished to be included in a payment
determination. Some commenters
suggested that CMS establish a longer
time period for the claims payment
deadline in order to include all
available claims data in the data used
for payment determinations; one
commenter suggested a June 30 deadline
rather than April 30 deadline.
Response: We appreciate the
commenters’ support of our proposals
regarding the period for the collection of
claims data and the time allowed for
data processing to be included in
payment determinations. We agree that
sufficient time should be allowed for
claims processing to obtain complete
data. We have conducted an internal
analysis of claims submission by ASCs
and have found that over 90 percent of
the ASC claims are submitted and paid
within the proposed timeframe.
Therefore, we believe at this time that
the proposed April 30 claims paid date
is the latest date that would allow CMS
to acquire and analyze the claims data,
make payment determinations, and
importantly, provide sufficient time for
the MACs to program their systems.
However, as we gain more experience
and our systems become established, we
will explore whether allowing more
time for claims processing may be
possible; if so, we will propose such
changes through notice-and-comment
rulemaking.
Comment: One commenter expressed
concern with the lag between the
quality data reporting period and the
payment reductions under the ASCQR
Program by basing payment adjustments
on participation a full 2 years before the
results of a payment determination take
effect.
Response: We understand the
commenter’s concern with the lag
between when data are reported and
when payment is affected, and we will
strive to reduce this lag without
significant adverse effects on data
completeness and quality. However, we
note that with the data collection period
ending December 31 for the payment
determinations becoming effective
beginning January 1, the lag basically is
1 year past the end of the data collection

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period. Based upon our current
experience, we believe the timeline we
are finalizing provides a balance
between data completeness and
expediency.
Comment: One commenter stated that
the ASCQR Program’s use of the term
‘‘claims-based’’ is not consistent with
the Hospital IQR Program’s use and
does generate additional costs to the
organization. The commenter stated that
claims-based measures under the
Hospital IQR Program truly means that
CMS can obtain the data solely based on
coding data without the organization
taking additional steps of manually
applying quality coding and having a
clinician review the record for
inclusion/exclusion criteria. The
commenter further stated that for
process measures, it is not accurate to
label them as ‘‘claims-based’’ and state
that this process is not time consuming
and costly.
Response: We understand the
commenter’s concerns. However, we are
clarifying that we have used the term
‘‘claims-based’’ to indicate the data
source and mechanism for data
submission as well as to differentiate
claims-based measures from measures
based on manual chart-abstracted data.
We believe that a claims-based
mechanism for data collection is less
time consuming and less costly than
such chart-abstracted quality measures.
In addition, the use of the term ‘‘claimsbased’’ for the claims-based ASCQR
Program quality measures is consistent
with the Physician Quality Reporting
Program (PQRS), which also uses QDCs
for the reporting of quality data via
claims.
After consideration of the public
comments we received, we are
finalizing our proposals without
modification that, for the CY 2015
payment determination and subsequent
payment determination years, an ASC
must submit complete data on
individual claims-based quality
measures through a claims-based
reporting mechanism by submitting the
appropriate QDCs on the ASC’s
Medicare claims. We also are finalizing
that the data collection period for such
claims-based quality measures will be
for the calendar year 2 years prior to a
payment determination and that the
claims for services furnished in each
calendar year will have to be paid by the
MAC by April 30 of the following year
of the ending data collection time
period to be included in the data used
for the payment determination.

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2. Data Completeness and Minimum
Threshold for Claims-Based Measures
Using QDCs
a. Background
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74516), we
finalized our proposal that data
completeness for claims-based measures
for the CY 2014 payment determination
be determined by comparing the
number of claims meeting measure
specifications that contain the
appropriate QDCs with the number of
claims that would meet measure
specifications, but did not have the
appropriate QDCs on the submitted
claims. In the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53641), we finalized
our policy for the CY 2014 and CY 2015
payment determination years that the
minimum threshold for successful
reporting be that at least 50 percent of
claims meeting measure specifications
contain QDCs. We believe that 50
percent is a reasonable minimum
threshold based upon the considerations
discussed above for the initial
implementation years of the ASCQR
Program. We stated in that final rule
that we intend to propose to increase
this percentage for subsequent payment
determination years as ASCs become
more familiar with reporting
requirements for the ASCQR Program.
Comment: One commenter asked
what method CMS would use to assess
when to raise the required threshold for
the level of completeness.
Response: We plan to monitor the
level of completeness for submitting
QDCs and to monitor the ASCQR
Program for issues as they arise. Based
upon program experience, we will
assess what level of completeness
should be required. Any changes in the
threshold level for completeness of
reporting for ASCQR Program claimsbased measures will be proposed
through notice-and-comment
rulemaking.
b. Data Completeness Requirements for
the CY 2015 Payment Determination
and Subsequent Payment Determination
Years
After publication of the FY 2013
IPPS/LTCH PPS proposed rule (77 FR
28101 through 28105), we realized that
we did not propose a methodology for
determining data completeness for the
CY 2015 payment determination and
subsequent payment determination
years. Therefore, in the CY 2013 OPPS/
ASC proposed rule (77 FR 45192), we
proposed that data completeness for
claims-based measures for the CY 2015
payment determination and subsequent
payment determination years be

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determined by comparing the number of
Medicare claims (where Medicare is the
primary or secondary payer) meeting
measure specifications that contain the
appropriate QDCs with the number of
Medicare claims (where Medicare is the
primary or secondary payer) that would
meet measure specifications, but did not
have the appropriate QDCs on the
submitted claims for the CY 2015
payment determination and subsequent
payment determination years. We stated
that this method is the same method for
determining data completeness for
claims-based measures that was
finalized in the CY 2012 OPPS/ASC
final rule with comment period for the
CY 2014 payment determination (76 FR
74516).
However, in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53641), we stated
that, because private payers would not
have QDCs in their required HCPCS
data files until January 1, 2013, claims
with QDCs received prior to January 1,
2013 could be rejected for invalid codes.
Because it is not possible for ASCs to
submit differing codes on primary
versus secondary payer claims for at
least some payers, we specified that
only claims where Medicare is the
primary payer—not the secondary
payer—will be used in the calculation of
data completeness for the CY 2014
payment determination.
We invited public comment on this
proposal.
Comment: One commenter asked how
ASCs would be notified of their claim
completeness percentages and
encouraged CMS to post claim
completeness percentages on the
QualityNet Web site (http://
www.QualityNet.org).
Response: We appreciate the
commenter’s suggestion. We intend to
supply preliminary completeness
percentages and other data submission
information to ASCs prior to the closing
of the data submission deadline in April
2013 either electronically or by the
mailing of a facility-specific report so
ASCs can assess their data completeness
levels. In addition, ASCs can use their
remittance information to assess if QDCs
have been successfully processed by
MACs.
We did not receive any public
comments regarding our proposal that
data completeness for claims-based
quality measures for the CY 2015
payment determination and subsequent
payment determination years be
determined by comparing the number of
Medicare claims (where Medicare is the
primary or secondary payer) meeting
measure specifications that contain the
appropriate QDCs with the number of
Medicare claims (where Medicare is the

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primary or secondary payer) that would
meet measure specifications, but did not
have the appropriate QDCs on the
submitted claims for the CY 2015
payment determination and subsequent
payment determination years.
Therefore, we are finalizing this
proposal without modification.
3. Other Comments on the ASCQR
Program
Comment: Commenters expressed
views and provided suggestions
regarding additional topics and
previously finalized policies for which
we did not make proposals in the CY
2013 OPPS/ASC proposed rule,
including comments and suggestions on
the following:
• The NHSN infrastructure;
• Retention of quality measures from
one calendar year to the next;
• Case thresholds for determining
completeness of reporting;
• Alternative methods of data
collection for certain finalized
measures;
• The utility of certain finalized
measures;
• Public reporting of data, including
previewing data prior to public display;
• Patient exclusions for specific
measures;
• Data collection and submission
time periods for finalized measures;
• Validation;
• Mechanisms for opting out of
reporting due to lack of cases meeting
measure specifications;
• The use of alternatives to claimsbased reporting such as registries and
EHRs;
• The use of administrative claims
data for the identification of HAIs;
• ASCQR Program implementation
date; and
• Educational outreach to ASCs
regarding the ASCQR Program.
Response: We greatly appreciate the
commenters’ views on these new topics
and our previously finalized policies.
Although we did not make proposals in
the CY 2013 OPPS/ASC proposed rule
on these topics or finalized policies, we
will consider all of these views for
future rulemaking and program
development. For information on the
ASCQR program, we refer readers to the
information posted on the QualityNet
Web site (http://www.QualityNet.org)
and the CMS Web site (http://
www.cms.hhs.gov) under the Quality
Initiatives and ASC sections.

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D. Payment Reduction for ASCs That
Fail To Meet the ASCQR Program
Requirements
1. Statutory Background
Section 1833(i)(2)(D)(iv) of the Act
states that the Secretary may implement
the revised ASC payment system ‘‘in a
manner so as to provide for a reduction
in any annual update for failure to
report on quality measures in
accordance with paragraph (7).’’
Paragraph (7) contains subparagraphs
(A) and (B). Subparagraph (A) of
paragraph (7) states the Secretary may
provide that an ASC that does not
submit ‘‘data required to be submitted
on measures selected under this
paragraph with respect to a year’’ to the
Secretary in accordance with this
paragraph will incur a 2.0 percentage
point reduction to any annual increase
provided under the revised ASC
payment system for such year. It also
specifies that this reduction applies
only with respect to the year involved
and will not be taken into account in
computing any annual increase factor
for a subsequent year. Subparagraph (B)
of paragraph (7) makes many of the
provisions of the Hospital OQR Program
applicable to the ASCQR Program
‘‘[e]xcept as the Secretary may
otherwise provide.’’ Finally, section
1833(i)(2)(D)(v) of the Act states that, in
implementing the revised ASC payment
system for 2011 and each subsequent
year, ‘‘any annual update under such
system for the year, after application of
clause (iv) [regarding the reduction in
the annual update for failure to report
on quality measures] shall be reduced
by the productivity adjustment
described in section
1886(b)(3)(B)(xi)(II).’’ Section
1833(i)(2)(D)(v) of the Act also states
that the ‘‘application of the preceding
sentence may result in such update
being less than 0.0 for a year, and may
result in payment rates under the
[revised ASC payment system] for a year
being less than such payment rates for
the preceding year.’’
2. Reduction to the ASC Payment Rates
for ASCs That Fail To Meet the ASCQR
Program Requirements for the CY 2014
Payment Determination and Subsequent
Payment Determination Years
The national unadjusted payment
rates for many services paid under the
ASC payment system equal the product
of the ASC conversion factor and the
scaled relative payment weight for the
APC to which the service is assigned.
Currently, the ASC conversion factor is
equal to the conversion factor calculated
for the previous year updated by the
MFP-adjusted CPI–U update factor,

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which is the adjustment set forth in
section 1833(i)(2)(D)(v) of the Act. The
MFP-adjusted CPI–U update factor is
the Consumer Price Index for all urban
consumers (CPI–U), which currently is
the annual update for the ASC payment
system, minus the MFP adjustment. As
discussed in the CY 2011 MPFS final
rule with comment period (75 FR
73397), if the CPI–U is a negative
number, the CPI–U would be held to
zero. Under the ASCQR Program, any
annual update would be reduced by 2.0
percentage points for ASCs that fail to
meet the reporting requirements of the
ASCQR Program. This reduction would
apply beginning with the CY 2014
payment rates. For a complete
discussion of the calculation of the ASC
conversion factor, we refer readers to
section XIV.H. of this final rule with
comment period.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45193), in order to
implement the requirement to reduce
the annual update for ASCs that fail to
meet the ASCQR Program requirements,
we proposed that we would calculate
two conversion factors: a full update
conversion factor and an ASCQR
Program reduced update conversion
factor. We proposed to calculate the
reduced national unadjusted payment
rates using the ASCQR Program reduced
update conversion factor that would
apply to ASCs that fail to meet their
quality reporting requirements for that
calendar year payment determination.
We proposed that application of the 2.0
percentage point reduction to the
annual update may result in the update
to the ASC payment system being less
than zero prior to the application of the
MFP adjustment.
The ASC conversion factor is used to
calculate the ASC payment rate for
services with the following payment
indicators (listed in Addenda AA and
BB to this final rule with comment
period, which are available via the
Internet on the CMS Web site): ‘‘A2,’’
‘‘G2,’’ ‘‘P2,’’ ‘‘R2,’’ ‘‘Z2,’’ as well as the
service portion of device-intensive
procedures identified by ‘‘J8.’’ We
proposed that payment for all services
assigned the payment indicators listed
above would be subject to the reduction
of the national unadjusted payment
rates for applicable ASCs using the
ASCQR Program reduced update
conversion factor.
The conversion factor is not used to
calculate the ASC payment rates for
separately payable services that are
assigned status indicators other than
payment indicators ‘‘A2,’’ ‘‘G2,’’ ‘‘J8,’’
‘‘P2,’’ ‘‘R2,’’ and ‘‘Z2.’’ These services
include separately payable drugs and
biologicals, pass-through devices that

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are contractor-priced, brachytherapy
sources that are paid based on the OPPS
payment rates, and certain office-based
procedures and radiology services
where payment is based on the MPFS
PE RVU amount and a few other specific
services that receive cost-based
payment. As a result, we also proposed
that the ASC payment rates for these
services would not be reduced for
failure to meet the ASCQR Program
requirements because the payment rates
for these services are not calculated
using the ASC conversion factor and,
therefore, not affected by reductions to
the annual update.
Office-based surgical procedures
(performed more than 50 percent of the
time in physicians’ offices) and
separately paid radiology services
(excluding covered ancillary radiology
services involving certain nuclear
medicine procedures or involving the
use of contrast agents, as discussed in
section XIV.D.2.b. of this final rule with
comment period) are paid at the lesser
of the MPFS non-facility PE RVU-based
amounts and the standard ASC
ratesetting methodology. We proposed
that the standard ASC ratesetting
methodology for this comparison would
use the ASC conversion factor that has
been calculated using the full ASC
update adjusted for productivity. This is
necessary so that the resulting ASC
payment indicator, based on the
comparison, assigned to an office-based
or radiology procedure is consistent for
each HCPCS code regardless of whether
payment is based on the full update
conversion factor or the reduced update
conversion factor.
For ASCs that receive the reduced
ASC payment for failure to meet the
ASCQR Program requirements, we
believe that it is both equitable and
appropriate that a reduction in the
payment for a service should result in
proportionately reduced copayment
liability for beneficiaries. Therefore, we
proposed that the Medicare
beneficiary’s national unadjusted
copayment for a service to which a
reduced national unadjusted payment
rate applies would be based on the
reduced national unadjusted payment
rate.
We proposed that all other applicable
adjustments to the ASC national
unadjusted payment rates would apply
in those cases when the annual update
is reduced for ASCs that fail to meet the
requirements of the ASCQR Program.
For example, the following standard
adjustments would apply to the reduced
national unadjusted payment rates: the
wage index adjustment, the multiple
procedure adjustment, the interrupted
procedure adjustment, and the

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adjustment for devices furnished with
full or partial credit or without cost. We
believe that these adjustments continue
to be equally applicable to payment for
ASCs that do not meet the ASCQR
Program requirements.
We invited public comment on these
proposals but did not receive any public
comments. Therefore, we are finalizing
our proposals without modification
regarding the process for reducing ASC
payment rates for ASCs that fail to meet
the ASCQR Program requirements for
the CY 2014 payment determination and
subsequent payment determination
years.
XVII. Inpatient Rehabilitation Facility
(IRF) Quality Reporting Program
Updates
A. Overview
In accordance with section 1886(j)(7)
of the Act, as added by section 3004 of
the Affordable Care Act, the Secretary
established a quality reporting program
(QRP) for Inpatient Rehabilitation
Facilities (IRFs). The IRF Quality
Reporting Program (IRF QRP) was
implemented in the FY 2012 IRF PPS
final rule (76 FR 47836). We refer
readers to the FY 2012 IRF PPS final
rule (76 FR 47873 through 47883) for a
detailed discussion on the background
and statutory authority for the IRF QRP.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45193 through 45196), we
proposed to: (1) Adopt updates to a
previously adopted measure for the IRF
QRP that will affect the annual
prospective payment amounts in FY
2014; (2) adopt a policy that would
provide that any measure that has been
adopted for use in the IRF QRP will
remain in effect until the measure is
actively removed, suspended, or
replaced; and (3) adopt policies
regarding when rulemaking will be used
to update existing IRF QRP measures.
While we generally would expect to
publish IRF QRP proposals in the
annual IRF PPS rule, there are no
proposals for substantive changes to the
IRF PPS this year; therefore, we
published only an IRF PPS payment
update notice for FY 2013.2 Because full
notice-and-comment rulemaking is
required for the proposals mentioned
above in regard to the IRF QRP, we
needed to identify an appropriate
rulemaking vehicle in which we could
insert our IRF QRP proposals. Because
the CY 2013 OPPS/ASC proposed rule
was already scheduled to include
2 The FY 2013 IRF PPS Payment Update Notice
was published in the Federal Register on July 30,
2012 (77 FR 44618). We refer readers to: http://
www.gpo.gov/fdsys/pkg/FR-2012-07-30/pdf/201218433.pdf.

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additional pay-for-reporting proposals
for the Hospital OQR Program and
quality reporting requirements for the
ASCQR Program, it offered an
opportunity to allow the public to
review all three quality programs’
proposals in concert with one another in
a timeframe that would be appropriate
for implementing the IRF QRP proposals
in time for the FY 2014 IRF PPS
payment cycle. Therefore, we elected to
include the IRF QRP proposals in the
CY 2013 OPPS/ASC proposed rule.

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B. Updates to IRF QRP Measures Which
Are Made as a Result of Review by the
National Quality Forum (NQF) Process
Section 1886(j)(7) of the Act generally
requires the Secretary to adopt measures
that have been endorsed by the entity
with a contract under section 1890(a) of
the Act. This contract is currently held
by the National Quality Forum (NQF).
The NQF is a voluntary consensus
standard-setting organization with a
diverse representation of consumer,
purchaser, provider, academic, clinical,
and other health care stakeholder
organizations. The NQF was established
to standardize health care quality
measurement and reporting through its
consensus development process.3
The NQF’s responsibilities include:
(1) Reviewing new quality measures and
national consensus standards for
measuring and publicly reporting on
performance; (2) providing annual
measure maintenance updates to be
submitted by the measure steward for
endorsed quality measures; (3)
providing measure maintenance
endorsement on a 3-year cycle; (4)
conducting required follow-up reviews
of measures with time-limited
endorsement for consideration of full
endorsement; and (5) conducting ad hoc
reviews of endorsed quality measures,
practices, consensus standards, or
events when there is adequate
justification for a review.4 In the normal
course of measure maintenance, the
NQF solicits information from measure
stewards for annual reviews and in
order to review measures for continued
endorsement in a specific 3-year cycle.
In this measure maintenance process,
the measure steward is responsible for
updating and maintaining the currency
and relevance of the measure and for
confirming existing specifications to the
3 For more information about the NQF Consensus
Development Process, we refer readers to the Web
site at: http://www.qualityforum.org/
Measuring_Performance/Maintenance_of_NQFEndorsed%C2%AE_Performance_Measures.aspx).
4 For more information about the NFQ Ad Hoc
Review process, we refer readers to the Web site at:
http://www.qualityforum.org/Projects/ab/
Ad_Hoc_Reviews/CMS/Ad_Hoc_ReviewsCMS.aspx).

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NQF on an annual basis.5 As part of the
ad hoc review process, the ad hoc
review requester and the measure
steward are responsible for submitting
evidence to be reviewed by a NQF
technical expert panel (TEP) which, in
turn, provides input to the Consensus
Standards Approval Committee (CSAC).
This committee then makes a
recommendation to the NQF Board on
endorsement status and/or specification
changes for the measure, practice, or
event.
Through the NQF’s measure
maintenance process, the NQF-endorsed
measures are sometimes updated to
incorporate changes that we believe do
not substantially change the nature of
the measure. Examples of such changes
that we gave in the CY 2013 OPPS/ASC
proposed rule (77 FR 45194) included
updated diagnosis or procedure codes,
changes to exclusions to the patient
population, definitions, or extension of
the measure’s endorsement to apply to
other settings. We stated in the
proposed rule that we believed these
types of maintenance changes are
distinct from more substantive changes
to measures that result in what can be
considered new or different measures,
and that they do not trigger the same
agency obligations under the
Administrative Procedure Act.
In the CY 2013 OPPS/ASC proposed
rule, we proposed that if the NQF
updates an endorsed measure that we
have adopted for the IRF QRP in a
manner that we consider to not
substantially change the nature of the
measure, we would use a subregulatory
process to incorporate those updates to
the measure specifications that apply to
the program. Specifically, we would
revise the information that is posted on
the CMS IRF QRP Web site at: http://
www.cms.gov/IRF-Quality-Reporting/ so
that it clearly identifies the updates and
provides links to where additional
information on the updates can be
found. In addition, we would refer IRFs
to the NQF Web site for the most up-todate information about the quality
measures (http://www.qualityforum.
org/). We would provide sufficient lead
time for IRFs to implement the changes
where changes to the data collection
systems would be necessary.
We proposed to continue to use the
rulemaking process to adopt changes to
measures that we consider to
substantially change the nature of the
measure. We believe that our proposal
adequately balances our need to
5 For more information about the NQF Measure
Maintenance process, we refer readers to the NQF
Web site at: http://www.qualityforum.org/
Measuring_Performance/Improving_NQF_Process/
Process_Assessment_Measure_Maintenance.aspx.

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incorporate NQF updates to NQFendorsed IRF QRP measures in the most
expeditious manner possible, while
preserving the public’s ability to
comment on updates to measures that so
fundamentally change an endorsed
measure that it is no longer the same
measure that we originally adopted. We
noted that, in the FY 2013 IPPS/LTCH
PPS proposed rule, we proposed a
similar policy for the Long-Term Care
Hospital Quality Reporting (LTCHQR)
Program (77 FR 53652 through 53653).
CMS finalized a modified version of this
policy for the LTCHQR Program, as
discussed below.
Comment: Many of the commenters
supported the use of the subregulatory
process to incorporate NQF updates to
measures that do not substantially
change the nature of the measure. One
commenter believed that this approach
would be reasonable, as long as the use
of the subregulatory process does not
create any additional burden for IRFs.
Another commenter stated that not all
NQF updates need to be subject to a
formal rulemaking process before the
update can be implemented.
Response: We appreciate the
commenters’ support of our proposal.
However, in response to some of the
concerns expressed by other
commenters below, and to be consistent
with the policy that we have adopted for
other quality reporting programs, we are
finalizing this proposal with the
modifications discussed below.
Comment: Several commenters
supported the proposal to use the
subregulatory process to incorporate
non-substantial NQF updates to quality
measures that are made between
rulemaking cycles. However, the
commenters expressed concern
regarding how CMS would define
substantial and non-substantial changes.
The commenters were concerned that
even slight changes to a measure’s
specifications will cause them to incur
significant burden. The commenters
urged CMS to use great caution in
making decisions about what should be
classified as a substantial change and a
non-substantial change. One commenter
expressed concern regarding the lack of
specificity in the definition of a
substantial change to a measure. One
commenter suggested that the decision
on whether a change to a measure rises
to the level of substantial should be
made by giving consideration not only
to the measure itself, but also to what
data the provider is required to report
on the changed measure and how it
would impact providers. Another
commenter expressed concern that there
was a lack of specificity by both CMS
and the NQF regarding the definition of

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a substantive change in a measure.
Several commenters disagreed with the
examples of substantial and nonsubstantial changes to a measure that
were presented in the CY 2013 OPPS/
ASC proposed rule. Another commenter
urged CMS to consider any update to a
measure that requires any additional
data collection as a substantial change
and thus subject to the more formal
rulemaking process.
Response: The NQF regularly
maintains its endorsed measures
through annual and triennial reviews,
which may result in the NQF making
updates to the NQF-endorsed measures.
We believe that it is important to have
a subregulatory process in place, which
we can use to incorporate nonsubstantive changes made by the NQF to
measures we have adopted for use in the
IRF QRP. Such a policy would allow for
IRF QRP measures to be updated
quickly and with a minimum amount of
burden to IRF providers. However, we
do recognize that some changes the NQF
might make to its endorsed measures are
substantive in nature and, therefore, it
might not be appropriate for CMS to
adopt these changes to the measures
used in the IRF QRP using a
subregulatory process.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45194), we proposed a
policy to use a subregulatory process to
adopt changes made to quality measures
by the NQF that we consider to be nonsubstantial in nature. We further
proposed to continue using the
rulemaking process to adopt changes
made by the NQF if we consider them
to substantially change the nature of a
measure. We have recently reconsidered
these proposals in light of modified
policies that were finalized in other
quality reporting programs, such as the
LTCHQR Program and the Hospital IQR
Program. We have also reconsidered our
proposals regarding this policy in light
of the public comments we received. We
believe that consistency and
harmonization among the Medicare
quality reporting programs is vitally
important and helps to reduce provider
burden.
In the FY 2013 IPPS/LTCH final rule
(77 FR 53504) we indicated examples of
what we might generally regard as nonsubstantive changes to measures might
include, but are not limited to, updated
diagnosis or procedure codes,
medication updates for categories of
medications, or a broadening of age
ranges. We believe that non-substantive
changes may also include updates to
NQF-endorsed measures based upon
changes to guidelines upon which the
measures are based. We noted that the
NQF process has already incorporated

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an opportunity for public comment and
engagement in the measure maintenance
process.
We stated that we will continue to use
rulemaking to adopt substantive updates
made by the NQF to the endorsed
measures we have adopted for the IRF
Quality Reporting Program. Examples of
changes that we might generally
consider to be substantive would
include, but are not limited to, those
circumstances in which the changes are
so significant that the measure is no
longer the same measure, or when a
standard of performance assessed by a
measure becomes more stringent (for
example, changes in acceptable timing
of medication, NQF expansion of
endorsement of a previously endorsed
measure to a new setting, procedure/
process, or test administration).
However, these and other changes
would need to be evaluated on a caseby-case basis to determine whether or
not a change to a measure is in fact
substantive. We intend to follow this
modified policy when making changes
to all IRF QRP measures.
Comment: One commenter
recommended that CMS clearly identify
subregulatory updates, provide links to
where additional information about the
updates can be found, and provide
sufficient lead time for IRFs to
implement any changes related to the
NQF’s updates. Another commenter
recommended that CMS confer with a
sufficient number of stakeholders in the
rehabilitation hospital community to
apprise them of the impending change
and to seek informal feedback and input
prior to adopting the measure’s change.
Further, the commenter recommended
that CMS conduct testing of the change
to determine its effectiveness before
implementation.
Response: In the event that any
measure that has been previously
adopted for use in the IRF QRP is
updated in a manner that we deem to
be non-substantive in nature, we will
use the subregulatory process to
incorporate those changes. We will
ensure that stakeholders are fully
informed about these changes and that
they have been afforded adequate lead
time to make any necessary changes.
Some of the methods that we will use
to keep our stakeholders informed
include: posting of information on the
IRF QRP Web page 6; holding special
open door forums, posting information
in the CMS weekly E-News publication,
and responding to provider questions
6 http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/IRFQuality-Reporting/index.html?redirect=/IRFQuality-Reporting/.

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that we receive through the IRF QRP
helpdesk.7 While we expect to provide
notice to stakeholders when we intend
to seek NQF’s review of measures, the
NQF process incorporates an
opportunity for public comment and
engagement in the measure maintenance
process.8
After consideration of the public
comments we received, we are adopting
as final a policy to: (a) Utilize a
subregulatory process to incorporate
updates to the IRF QRP quality
measures that are not substantive in
nature; and (b) continue use of the
rulemaking process to adopt changes to
measures that we consider to be
substantive in nature.
C. Process for Retention of IRF Quality
Measures Adopted in Previous Fiscal
Year Rulemaking Cycles
We expect that the measures that we
adopt for purposes of the IRF QRP will
remain current and useful for a number
of years after their initial adoption.
While we could elect to adopt measures
for each fiscal year’s payment
determinations, we believe that it would
be easier for all parties concerned if we
adopt the measures in perpetuity with
an expectation that we will propose to
remove, suspend or replace measures
through future rulemaking, if necessary.
Therefore, for the purpose of
streamlining the rulemaking process, in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45194), we proposed that when
we initially adopt a measure for the IRF
QRP for a payment determination, that
measure will be automatically adopted
for all subsequent fiscal year’s payment
determinations or until such time as we
might propose and finalize the
measure’s removal, suspension, or
replacement.
Quality measures may be considered
for removal by CMS if: (1) Measure
performance among IRFs is so high and
unvarying that meaningful distinctions
in improvements in performance can no
longer be made; (2) performance or
improvement on a measure does not
result in better patient outcomes; (3) a
measure does not align with current
clinical guidelines or practice; (4) a
more broadly applicable measure
(across settings, populations, or
conditions) for the particular topic is
available; (5) a measure that is more
proximal in time to desired patient
outcomes for the particular topic is
7 [email protected].
8 For information about the NQF consensus
development process, we refer readers to the NQF
Web site at: http://www.qualityforum.org/
Measuring_Performance/Consensus_Development_
Process%e2%80%99s_Principle/Public_and
_Member_Comment.aspx.

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available; (6) a measure that is more
strongly associated with desired patient
outcomes for the particular topic
becomes available; or (7) collection or
public reporting of a measure leads to
negative unintended consequences.
For any such removal, the public will
be given an opportunity to comment
through the next annual rulemaking
process. However, if there is reason to
believe that continued data collection of
a measure raises potential safety
concerns, we will take immediate action
to remove the measure from the IRF
QRP and not wait for the annual
rulemaking cycle. Such measures will
be promptly removed with IRFs and the
public being immediately notified of
such a decision through the usual IRF
QRP communication channels,
including listening sessions, memos,
email notifications, and Web site
postings. In such instances, the
immediate removal of a measure will
also be formally confirmed in the next
annual rulemaking cycle. We invited
public comment on our proposal that
once a quality measure is adopted, it is
retained for use in the subsequent fiscal
year’s payment determinations unless
otherwise stated.
Comment: One commenter suggested
that CMS should be required to repropose quality measures each year so
that stakeholders have the opportunity
to submit comments before measures are
finalized for use. The commenter stated
that there needs to be a continuing
opportunity for the public to comment
each year on not only measures that are
being proposed, but also on measures
that were previously adopted. Further,
the commenter expressed concern that
this policy would result in a scenario in
which stakeholder comments about
previously adopted measures would not
be given proper consideration.
Response: Our proposal to retain
previously finalized IRF QRP measures
for future years aligns with our policy
to retain measures for future years in
other Medicare quality reporting
programs such as the LTCHQR Program
and the Hospital IQR Program. We plan
to review quality measures that have
been adopted for use in the IRF QRP on
at least an annual basis to make sure
that each measure remains relevant,
valid and reliable. The optimum time to
perform this review would be at the
time when we review and analyze the
quality measure data received from IRFs
for any given reporting period or data
reporting cycle. Some of the IRF QRP
measures may be reviewed more often,
depending upon the frequency with
which we receive data for these
measures or whether other
circumstances prompt review. We will

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perform ad hoc reviews of IRF QRP
quality measures if we find any
indication that a measure is no longer
valid, reliable or that continued
collection of data for this measure leads
to negative unintended consequences.
Regardless of the type of review
performed, if our analysis of these data
reveals that a quality measure meets any
of the above-stated enumerated criteria
for removal (for reasons other than
patient safety) we will propose to
remove that measure in the next
rulemaking cycle. If, at any time, we
discover that an IRF quality measure
poses a potential safety concern, we will
take immediate action to remove that
measure from the IRF QRP.
We have provided IRFs with a
mechanism by which to submit
comments regarding quality measures
that have previously been adopted for
use in the IRF QRP. IRFs may submit
comments regarding quality measures
that are already being used in the IRF
QRP through the IRF QRP helpdesk
email box.9 We will give full
consideration to any comments that we
receive.
Finally, we also plan to solicit input
in regard to the quality measures that
are already being used in the IRF QRP
from technical experts, as well as the
public, through venues such as listening
sessions, special open door forums, and
national provider calls. These venues
will provide IRFs with several ways to
provide us with input on quality
measures that are currently in use under
the IRF QRP. We will give equal
consideration to comments that we
receive in regard to measures, whether
they are being proposed or have
previously been finalized for use under
the IRF QRP. This will help to ensure
that each of the adopted measures
remains appropriate for continued
inclusion in the IRF QRP.
After consideration of the public
comments we received, we are
finalizing our proposal to retain adopted
quality measures for subsequent
reporting periods (and the associated
annual payment determinations) unless
we propose to remove, suspend, or
replace these measures.
We proposed to apply this principle
to the two measures that were selected
for use in the IRF QRP beginning on
October 1, 2012. These adopted
measures are: (1)) An application of the
NHSN Catheter-Associated Urinary
Tract Infection (CAUTI) Outcome
measure (NQF #0138),10 and (2) An
9 [email protected].
10 The CAUTI measure that was adopted in the
FY 2012 IRF PPS final rule (76 FR 47836 through
47915) was titled ‘‘Urinary Catheter-Associated

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application of the Percent of Residents
with Pressure Ulcers that Are New or
Worsened measure (NQF #0678). We
also invited public comment on our
proposal to apply the principle of
retention to the two above-stated quality
measures that were adopted for use
under the IRF QRP in the FY 2012 IRF
PPS final rule (76 FR 47874 through
47878) for the second and all
subsequent reporting periods (and
associated payment determinations).
Likewise, we invited public comment
on our proposed use of the process, as
stated above, for retention of any
additional future quality measures that
may be adopted for use in the IRF QRP.
Comment: Two commenters
supported CMS’ proposal for retention
of the two quality measures that were
previously finalized for use under the
IRF QRP.
Response: We appreciate the
commenters’ support of our proposed
approach for retention of the two quality
measures adopted for use under the IRF
QRP.
After consideration of the public
comments we received, for the reasons
set forth above, we are finalizing our
proposal to apply this policy of
retention of IRF QRP quality measures
to the two measures that were finalized
in the FY 2012 IRF PPS final rule. These
measures are (1) An application of the
NHSN Catheter-Associated Urinary
Tract Infection (CAUTI) Outcome
Measure (NQF #0138) (previously titled
‘‘CAUTI rate per 1,000 urinary catheter
days, for Intensive Care Unit Patients’’);
and (2) An application of the Percent of
Residents with Pressure Ulcers that Are
New or Worsened measure (NQF
#0678).11 Although we are retaining
these measures for the IRF QRP, we
discuss below certain updates that we
are making with respect to each of them.
Urinary Tract Infection [CAUTI] Rate Per 1,000
Urinary Catheter Days for ICU patients.’’ However,
this measure was submitted by the CDC (measure
steward) to the NQF for a measure maintenance
review. As part of their NQF submission, the CDC
asked for changes to the measure, including
expansion of the scope of the measure to non-ICU
settings, including IRFs. The NQF approved the
CDC’s request on January 12, 2012. Due to the
changes that were made to the measure, the CDC
believed that it was appropriate that the measure
title be changed. This measure is now titled
‘‘National Health Safety Network (NHSN) Catheter
Associated Urinary Tract Infection (CAUTI)
Outcome Measure.’’
11 This measure was recently reviewed by the
NQF and the scope of the measure was expanded
to include post-acute care settings such as IRFs.
Patients in post-acute care settings are referred to
as ‘‘patients’’ as opposed to ‘‘residents’’, which is
a term used in the nursing home setting. To reflect
the expansion in the scope of this measure, the title
was changed to ‘‘Percent of Patients/Residents with
Pressure Ulcers that Are New or Worsened (NQF
#0678)’’ (emphasis added).

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D. Measures for the FY 2014 Payment
Determination
We have previously identified the
measurement of pressure ulcers and the
prevalence of urinary tract infections
(UTI) as two critical areas for quality
measurement under the IRF QRP. While
section 1886(j)(7) of the Act generally
requires the adoption of endorsed
measures, there were no NQF-endorsed
measures for the two desired areas in
the IRF context at the time CMS was
conducting its rulemaking. As section
1886(j)(7)(D)(ii) of the Act authorizes the
use of measures that are not endorsed
when there are no feasible and
practicable endorsed options, in the FY
2012 IRF PPS final rule (76 FR 47874
through 47878), we adopted
applications of an NQF-endorsed
pressure ulcer measure that had been
endorsed for use in skilled nursing
facilities (NQF #0678) and a CDC
measure, the CDC’s Urinary Catheter
Associated Urinary Tract Infection
[CAUTI] rate per 1, 000 urinary catheter
days, for Intensive Care Unit [ICU]
Patients (NQF #0138), that had NQF
endorsement for use in intensive care
settings of hospitals.

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1. Clarification Regarding Existing IRF
Quality Measures That Have Undergone
Changes During NQF Measure
Maintenance Processes
In the FY 2012 IRF PPS final rule (76
FR 47874 through 47876), we used the
endorsement exception authority under
section 1886(j)(7)(D)(ii) of the Act. This
authority permitted us to adopt the
Urinary Catheter-Associated Urinary
Tract Infection [CAUTI] rate per 1,000
urinary catheter days, for Intensive Care
Unit [ICU] Patients measure (NQF
#0138). We chose to adopt this measure
because there was no NQF-endorsed
CAUTI measure available to assess the
prevalence of urinary CAUTI rates in
the IRF setting.
As stated in section XVII.C. of this
final rule with comment period, the
CAUTI measure steward, the CDC,
submitted the CAUTI measure to the
NQF for a scheduled measure
maintenance review in late 2011. At that
time, the CDC also filed a request to
expand the CAUTI measure to non-ICU
settings, including IRFs. The NQF
granted the CDC’s request for an
expansion of the scope of endorsement
of the CAUTI measure to additional
non-ICU care settings, including
‘‘rehabilitation hospitals.’’ The NQF
defined the term ‘‘rehabilitation
hospitals’’ as including both
freestanding IRFs, as well as IRF units
that are located within an acute care
facility. Despite the expansion in the

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scope of endorsement of the CAUTI
measure, the original NQF endorsement
number (NQF #0138) was retained.
However, the measure was re-titled
‘‘National Health Safety Network
(NHSN) Catheter Associated Urinary
Tract Infection (CAUTI) Outcome
Measure.’’ 12
As amended, the expanded CAUTI
measure includes a different data
calculation method, which is referred to
as the standardized infection ratio
(SIR).13 The change in the data
calculation method does not, however,
change the way in which IRFs will
submit CAUTI data to the CDC. IRFs
will still be required to submit their
CAUTI data to the CDC via the National
Healthcare Safety Network (NHSN)
online system.
Under the originally endorsed version
of the CAUTI measure, the CDC
calculated an infection rate per 1,000
urinary catheter days. Under the new
method, CDC will use a SIR calculation
method, which is comprised of the
observed number of infections over the
expected number of infections.14 The
SIR calculation consists of an
‘‘observed’’ rate of CAUTI infections
over the ‘‘expected rate’’ of CAUTI
infections for that particular healthcare
location. The CDC calculates the
‘‘expected rate’’ of CAUTI infections
from CAUTI data that is reported to
them by healthcare facilities. According
to the epidemiologists at the CDC, they
will need to analyze approximately 12
months of CAUTI data in order to
calculate the ‘‘expected rate’’ of CAUTI
infections for any given healthcare
facility.
We believe that the SIR calculation
method is a more accurate way to
calculate the CAUTI measure results for
comparative purposes because it takes
into account an IRF’s case mix. In
addition, use of the SIR calculation does
not require any change to the type of
data required to be submitted by IRFs or
the method of data submission that IRFs
must use in order to comply with the
CAUTI measure reporting requirements.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45196), we made the
following proposals in regards to the
CAUTI measure: (1) We proposed to
adopt the changes made to the NQF
#0138 CAUTI measure, which will
12 http://www.qualityforum.org/MeasureDetails.
aspx?actid=0&SubmissionId=1121#k=0138&e=0&
st=&sd=&s=n&so=a&p=1&mt=&cs=&ss=.
13 Centers for Disease Control and Prevention
(2012, January), Catheter Associated Urinary Tract
Infection Event. Retrieved from: http://
www.cdc.gov/nhsn/PDFs/pscManual/7pscCAUTI
current.pdf.
14 http://www.cdc.gov/nhsn/pdfs/pscmanual/
7psccauticurrent.pdf.

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apply to the FY 2014 annual payment
update determination; (2) we proposed
to adopt the CAUTI measure, as revised
by the NQF on January 12, 2012, for the
FY 2015 payment determination and all
subsequent fiscal year’s payment
determinations; and (3) we proposed to
incorporate, for use under the IRF QRP,
any future changes to the CAUTI
measure to the extent these changes are
consistent with our proposal in section
XVII.B. of the CY 2013 OPPS/ASC
proposed rule to update measures.
Comment: Several commenters
supported our proposal to adopt the
changes made by the NQF to the CAUTI
measure. Several commenters also
supported use of the SIR calculation.
The commenters also supported the
delay in the implementation of the SIR
calculation by the CDC. One commenter
agreed that CMS should delay public
reporting of the CAUTI measure data
until after the CDC has collected enough
data to calculate the expected CAUTI
infection rate that will be used in the
SIR calculations.
Response: We agree that use of the
SIR calculation will be a more accurate
method for risk stratified calculation of
the CAUTI measure data. We also agree
that public reporting of the CAUTI
measure data should not take place until
sufficient baseline data has been
collected by the CDC.
Comment: One commenter expressed
concern regarding CMS being able to
properly risk adjust the CAUTI data
results using the SIR calculation. The
commenter was concerned that IRFs
caring for more complicated patients
will appear to have worse quality
outcomes than other IRFs that care for
less specialized patients, unless CMS
can make the proper type of risk
adjustments. The commenter further
expressed concern that the SIR
calculation method will be unable to
provide adequate risk adjustment when
comparing IRFs that have a specialized
patient population to other IRFs that
tend to have a more general patient
population.
Response: After the IRF QRP begins,
the CDC will take time to collect and
analyze the CAUTI measure data in an
amount that is sufficient to calculate an
‘‘expected rate’’ of CAUTI infection for
IRF locations/units. The CDC needs up
to 12 months of CAUTI data from
various IRF’s in order to calculate the
‘‘expected’’ CAUTI rates for the IRFs
locations and units. These expected
CAUTI infection rates can then be used
to calculate a SIR for each IRF that
includes adjustment for the patient
population mix. The CDC and their
subject matter experts, will make a
determination with regard to how the

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patient population mix will be used in
the risk adjustment for the SIR.
Comment: One commenter expressed
concern regarding IRFs being held
accountable for CAUTI infections that a
patient acquired prior to an admission
or transfer into that IRF.
Response: To help determine where
the CAUTI infection may have
developed, the CAUTI measure
specifications incorporate a ‘‘transfer
rule.’’ The ‘‘transfer rule’’ provides that
if a patient develops a CAUTI within 48
hours of transfer from another location,
the CAUTI is attributed back to the
transferring location (http://
www.cdc.gov/nhsn/pdfs/pscmanual/
7psccauticurrent.pdf). We believe that
the use of the transfer rule to the CAUTI
measure calculations will help ensure
that CAUTI infections are properly
attributed to the facility where they
originated.
Comment: One commenter suggested
that pediatric patients should be
excluded from the CAUTI measure
because it has not been NQF-endorsed
for the pediatric population due to low
frequency of catheter use and difficulty
in attributing UTIs.
Response: We disagree with the
commenter’s suggestion that pediatric
patients should be excluded from this
measure for the reasons stated below.
The measure specifications for the NQF
#0138 CAUTI measure exclude patients
in a neonatal ICU, but otherwise have
no other age based exclusions. The
target population age range for the NQF
#0138 CAUTI measure is described in
the measure specifications as follows:
‘‘Patients of all ages are eligible except
patients in Levels I, II, II/III and III
nurseries, and in locations where
patients do not reside overnight.’’
(Emphasis added)
Second, we believe that it is
important to gather and analyze CAUTI
measure data from patients of all age
groups so that we can study the rate of
CAUTI infections in not only adults and
the elderly, but also in children. There
are several IRFs that specialize in the
rehabilitation of pediatric patients.
Many other IRFs also treat pediatric
patients. We would be remiss in our
duty to measure the quality of care in
the IRF setting if we did not gather
CAUTI measure data from these IRFs on
their pediatric patients.
After consideration of the public
comments we received, we are
finalizing our proposals to: (1) Adopt
the changes made to the NHSN
Catheter-Associated Urinary Tract
Infection (CAUTI) Outcome Measure
(NQF #0138) as applicable to the FY
2014 annual payment update
determination; and (2) adopt the NHSN

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Catheter-Associated Urinary Tract
Infection (CAUTI) Outcome Measure
(NQF #0138) measure for the FY 2015
payment determination and all
subsequent fiscal year payment
determinations thereafter.
2. Updates to the ‘‘Percent of Residents
Who Have Pressure Ulcers That Are
New or Worsened’’ Measure
In the FY 2012 IRF PPS final rule (76
FR 47876 through 47878), we again used
the endorsement exception authority
under section 1886(j)(7)(D)(ii) of the Act
to adopt an application of the ‘‘Percent
of Residents with Pressure Ulcers that
Are New or Worsened’’ measure (NQF
#0678). We selected this measure
because there was no other NQFendorsed measure available to assess the
percentage of patients with pressure
ulcers that are new or worsened in the
IRF setting at that time. We recognized
that the NQF endorsement of this
measure was, at that time, limited to
short-stay nursing home patients, but
we noted our belief that this measure
was highly relevant to patients in any
setting who are at risk of pressure ulcer
development and a high priority quality
issue in the care of IRF patients.
Therefore, in the FY 2012 IRF PPS final
rule, we finalized the adoption of an
application of the NQF-endorsed #0678
pressure ulcer measure. We also stated
that we would request that the NQF
extend its endorsement of this short-stay
nursing home pressure ulcer measure to
the IRF setting (76 FR 47876 through
47878).
In April 2012, CMS filed an ad hoc
request for review of the NQF #0678
short-stay pressure ulcer measure with
the NQF. As part of that request, we
asked the NQF to expand its
endorsement of the measure to several
other care settings, including IRFs. As
we noted in the FY 2012 IRF PPS final
rule, we believe this measure is highly
applicable to all post acute care settings,
including IRFs (76 FR 47876). We stated
in the proposed rule that if the pressure
ulcer measure was revised by the NQF,
we anticipated that it would be re-titled
‘‘Percent of Patients or Residents with
Pressure Ulcers That Are New or
Worsened’’ (NQF #0678) (emphasis
added) so as to reflect the expansion in
the scope of the applicable patient
population.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45196), we noted that, as of
the publication of that proposed rule,
the NQF review process for the NQF
#0678 pressure ulcer measure expansion
request was still in progress. We
proposed that if the NQF expands the
scope of endorsement for this measure
to the IRF setting, without any

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substantive changes, we would adopt
and use the NQF-endorsed pressure
ulcer measure in the IRF QRP, in
accordance with the policy set forth
above in section XVII.B. of that
proposed rule. We believed that, in this
anticipated scenario, the pressure ulcer
measure, as revised, would be
substantively the same measure,
although broader in scope, than the
current NQF-endorsed #0678 pressure
ulcer measure. We invited public
comments on our proposed use of this
policy. For the reasons stated below, we
have decided not to finalize this
proposal.
In the meantime, in the CY 2013
OPPS/ASC proposed rule (77 FR 45196),
we proposed to proceed with our plan,
as finalized in the FY 2012 IRF PPS
final rule, to use an application of the
Percent of Residents With Pressure
Ulcers that Are New or Worsened (NQF
#0678) measure for the FY 2014
payment determination and all
subsequent fiscal year payment
determinations. For the reasons stated
below, we will collect only part of the
pressure ulcer measure data as part of
the pressure ulcer measure that we
adopted last year. We have decided to
adopt a non-risk-adjusted version of the
NQF #0678 short-stay pressure ulcer
measure, and will not publicly report
the measure data until such time that
we are able to collect data on the IRF–
PAI necessary to calculate risk-adjusted
measure rates.
Comment: Many commenters
supported the use of the ‘‘Percent of
Residents with Pressure Ulcers That Are
New or Worsened’’ (NQF #0678)
measure in the IRF QRP. The
commenters also supported CMS’
request to expand this measure to the
IRF setting. One commenter expressed
support for the use of the updated
pressure ulcer measure, but
recommended adding the term
‘‘patients’’ to the title of this measure.
Response: We appreciate the
commenters’ support and agree that
adding the word ‘‘patients’’ to the title
of the revised pressure ulcer measure
will help to distinguish the IRF
population from patients in nursing
homes who are typically referred to as
‘‘residents.’’ However, for the reasons
discussed below, at this time, we are
adopting a non-risk-adjusted version of
the NQF-endorsed pressure ulcer
measure (NQF #0678).
Comment: One commenter expressed
doubt regarding the applicability of the
pressure ulcer measure to the IRF
setting.
Response: We believe that pressure
ulcer development and worsening is an
issue that is highly relevant to the IRF

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setting. Pressure ulcers are high-volume
and high-cost adverse events across the
spectrum of health care settings from
acute hospitals to home health. Patients
in the IRF setting may have medically
complex conditions and severe
functional limitations, and are,
therefore, at high risk for the
development, or worsening, of pressure
ulcers. Pressure ulcers are serious
medical conditions and an important
measure of quality. Pressure ulcers can
lead to serious, life threatening
infections, which substantially increase
the total cost of care. Even if the
proportion of patients in IRFs with new
or worsening pressure ulcers is small,
any such cases are particularly
troubling.
Comment: One commenter urged
CMS to remove this measure from the
IRF QRP until such time as the issues
that have been raised in stakeholder
calls regarding the measure
specifications and definitions can be
resolved. The commenter stated that
CMS has given conflicting guidance on
how to stage pressure ulcers and
document pressure ulcer data on the
Inpatient Rehabilitation Facility—
Patient Assessment Instrument (IRF–
PAI) during several different provider
outreach activities. The commenter
opposed ‘‘back-staging’’ of pressure
ulcers, and suggested that the IRF–PAI
does not allow for the documentation of
unstageable pressure ulcers that develop
after the patient is admitted. Another
commenter expressed concern that the
modifications to the ‘‘Quality Indicator’’
section of the IRF–PAI are confusing.
The commenter stated that the pressure
ulcer questions that were added to the
IRF–PAI do not account for all
categories of pressure ulcers, such as
unstageable pressure ulcers and
suspected deep tissue injuries. Two
commenters suggested that CMS delay
implementation of the pressure ulcer
measure and take time to work with
IRFs and the National Pressure Ulcer
Advisory Panel (NPUAP) to develop a
standardized approach to reporting
pressure ulcers.
Response: We have made several
different types of training opportunities
available to the IRF provider
community. We held special open door
forums on November, 29, 2011, and
April 19, 2012. We also provided a full
day in-person provider training on May
2, 2012. Most recently, we initiated a
four-part series of special open door
forums held on July 26, 2012; August
16, 2012; September 20, 2012; and
October 18, 2012. PowerPoint slides
used at the IRF Open Door Forums are
available on the IRF QRP Web page.
(http://www.cms.gov/Medicare/Quality-

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Initiatives-Patient-AssessmentInstruments/IRF-Quality-Reporting/
index.html?redirect=/IRF-QualityReporting/). Documentation of the
collection of pressure ulcer data is
contained in Section 4 of the IRF–PAI
training manual. This manual is
available on the CMS Web site
(https://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
InpatientRehabFacPPS/Downloads/
IRFPAI-manual-2012.pdf).
During each of these training/outreach
activities, we provided individuals with
information regarding the IRF quality
reporting program, including
information about CAUTI and pressure
ulcer data reporting. The information
that we have offered to providers at each
of the outreach activities noted above
has been consistent.
We have also engaged the help of two
widely known experts in the area of
skin conditions and wound care. These
experts have served as consultants to
CMS and have taught our outreach
activities. These experts have given
presentations on how to stage and report
pressure ulcer data. One of these experts
was a guest lecturer at our provider
training, which took place on May 2,
2012. Our pressure ulcer experts also
attended the open door forums held on
July 26, 2011, August 16, 2012, and
October 18, 2012. At three of the open
door forums held, these experts were
available to answer questions from
providers.
In addition, we held an open door
forum on September 20, 2012, that dealt
exclusively with the issue of pressure
ulcer staging and documentation on the
IRF–PAI. We also presented answers to
questions that had been previously
raised as well as a copy of a properly
completed ‘‘Quality Indicator’’ section
(questions 48A to 50C) of the IRF–PAI,
which corresponded to the scenarios
presented in each question. We believed
that showing examples of a properly
completed IRF–PAI for each question
would help to reduce the confusion that
IRFs were experiencing regarding the
coding of pressure ulcer data on the
IRF–PAI. We also discussed during this
open door forum the issue of ‘‘backstaging’’ pressure ulcers, and explained
that we do not, nor have we ever
recommended, ‘‘back-staging’’ pressure
ulcers in the IRF QRP.
We have provided IRFs with written
guidance related to the staging of
pressure ulcers, collection of pressure
ulcer data, and documentation of
pressure ulcer data in the ‘‘Quality
Indicator’’ section of the IRF–PAI. This
written guidance is contained in Section
4 of the IRF–PAI training manual. This
manual is available on the CMS Web

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site (https://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
InpatientRehabFacPPS/Downloads/
IRFPAI-manual-2012.pdf).
We recognize that the format and
structure of the pressure ulcer
questions, which are located in the
‘‘Quality Indicator’’ section of the
revised IRF–PAI has resulted in some
unintended limitations in the type and
amount of pressure ulcer data that can
be collected. We will continue to work
with stakeholders to address their
concerns and make the appropriate
modifications to the data collection
instrument over time. In the meantime,
we will continue with the collection of
the pressure ulcer measure data using
the questions contained in the ‘‘Quality
Indicator’’ section of the IRF–PAI.
We do not believe that it would be in
the best interest of many of the IRF
providers if we were to delay the use of
the pressure ulcer measure in the IRF
QRP until such time as the IRF–PAI is
modified. We recognize that IRFs have
incurred a significant financial burden
preparing their EHR systems and staff to
report pressure ulcer measure data
beginning on October 1, 2012.15
Comment: One commenter expressed
concern that revisions to the IRF–PAI do
not allow IRFs to adequately document
suspected deep tissue injury (DTI) that
is present when the patient is admitted
to the IRF. The commenter stated that
DTIs are ‘‘wounds’’ that are evolving or
in the process of ‘‘declaring’’ their final
stage. The commenter stated that if the
suspected DTI cannot be adequately
recorded upon admission, and the
wound later progresses to its final stage
(stage 3 or 4), it will appear that the IRF
was responsible for the pressure ulcer,
instead of the location where the DTI
occurred.
Response: We believe that it is
important to do a thorough admission
assessment on each patient who is
admitted to an IRF at the soonest
possible time after admission. This
admission assessment should include a
through skin assessment and should
include the documentation of the
presence of any pressure ulcers as well
as any unstageable pressure ulcers,
including suspected deep tissue injury.
The IRF–PAI admission assessments
must be performed within 3 days after
admission. However, the IRF staff
would also document the admission
15 For quality reporting purposes, only those
patients that are admitted on after 10/01/2012 will
be included in the measure. Data obtained from
patients that are admitted before 10/01/2012 but
discharged after 10/01/2012 will not be used in the
measure calculations. For more information about
this policy, we refer readers to the IRF–PAI training
manual.

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assessment findings in their medical
records as well.
We also agree with the commenter
that it is not possible to directly
document suspected DTIs on the revised
IRF–PAI (which became effective on
October 1, 2012) immediately when
doing the IRF–PAI admission
assessment. However, an IRF provider
can and certainly should, as part of its
normal patient assessment and good
care, perform the skin assessment and
note any finding of suspected DTI or
pressure ulcers at any stage in the
patient’s medical record.
Documentation of pressure ulcer data on
the IRF–PAI is not a replacement for
proper clinical documentation in a
patient’s medical record.
A suspected DTI is one of three types
of unstageable pressure ulcers, which
can be documented on the IRF–PAI after
it becomes stageable and ‘‘declares’’ its
final stage. We believe that we have
given IRF providers instructions about
how to document unstageable pressure
ulcers on the IRF–PAI on several
different occasions. This issue was
discussed during a question and answer
session that took place during the IRF
QRP special open door forum held on
July 26, 2012, and at another IRF QRP
special open door forum held on August
16, 2012. In addition, this issue was
discussed again at another IRF QRP
special open door forum held on
September 20, 2012. The September 20,
2012 open door forum was devoted
solely to the discussion of staging and
documentation of pressure ulcers on the
IRF–PAI. PowerPoint slides used during
the September 20, 2012 special open
door forum included scenarios in the
form of questions and answers, as well
as examples of the IRF–PAI with the
correct coding to correspond to the
scenario presented in each question. As
noted above, the PowerPoint slides used
at any of the IRF QRP open door forums
are available to IRFs on the IRF QRP
Web page (http://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/IRF-QualityReporting/index.html?redirect=/IRFQuality-Reporting/).
Also, we have provided written
guidance on how to document
unstageable pressure ulcers that have
become stageable on the IRF–PAI in
Section 4 of the IRF–PAI training
manual. On page IV–3 of Section 4 of
the IRF–PAI training manual, suspected
deep tissue injury is defined as one of
the three types of unstageable pressure
ulcers. Section 4 of the IRF–PAI training
manual further states that unstageable
pressure ulcers that are present at the
time of admission are not documented
on the IRF–PAI.

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As documented in Section 4 of the
IRF–PAI training manual, if a pressure
ulcer is unstageable upon admission,
but becomes stageable later during the
patient’s IRF stay, this pressure ulcer
should be considered as present on
admission, at the stage at which it first
becomes stageable. The admission
assessment should be modified to reflect
this. For example, if the IRF had
documented on the patient’s admission
assessment that there were no pressure
ulcers on admission, and then a
suspected DTI progressed to a Stage 2 or
higher pressure ulcer, the IRF would
change the admission assessment to
document the final stage of that pressure
ulcer. Doing so will help to ensure that
the IRF–PAI reflects that this pressure
ulcer was present on admission, and
what stage the ulcer was when it first
became stageable. We believe that this
effectively prevents the finding that an
unstageable pressure ulcer that became
stageable during the IRF stay developed
during the patient’s IRF stay and/or is
attributed to the IRF.
Comment: One commenter expressed
concern about making comparisons in
pressure ulcer rates between IRFs
because of the differences in patient
populations that are served by each IRF.
The commenter suggested that CMS
develop a mechanism whereby these
IRFs are not unfairly compared against
peers that do not care for like
populations of patients in any public
reporting of the pressure ulcer measure
data or other quality measures.
Response: The specifications for both
the application of the pressure ulcer
measure that we adopted in the FY 2012
IRF PPS final rule, as well as the
specifications for the updated NQFendorsed version of the measure (NQF
#0678), include data elements that allow
the measure to be risk adjusted when
calculated in the IRF setting. These risk
adjustment specifications take into
consideration items such as the patient’s
height, weight, and co-morbid
conditions. When we were revising the
‘‘Quality Indicator’’ section of the IRF–
PAI by replacing the old voluntary
quality items with the mandatory
pressure ulcer questions, we worked
within the existing format and
framework of the IRF–PAI. We
recognize that placement of quality
measurement data items within the
format of the IRF–PAI has resulted in
some unintended limitations in the type
and amount of pressure ulcer data that
can be collected.
We will continue to work with
stakeholders to address their concerns
and make the appropriate modifications
to the ‘‘Quality Indicator’’ section of the
IRF–PAI. However, we do not believe

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that it would benefit IRFs to delay the
start of the pressure ulcer measure data
reporting during the time that we are
working to make the necessary revision
to the IRF–PAI. We say this for several
reasons. First, evaluating the pressure
ulcer data that is reported to us during
the first several reporting periods is one
of the best ways for us to see what
changes and modifications are needed
to the IRF–PAI to ensure that it properly
collects all of the data elements needed
to calculate risk-adjusted rates. Second,
many IRFs have incurred a significant
amount of time and money to prepare
themselves to report pressure ulcer data.
Also, use of a non-risk adjusted version
of the NQF-endorsed pressure ulcer
measure will not cause IRF providers
any increased burden because it will not
require any change in the way that IRFs
are required to collect and report
pressure ulcer data.
After giving full consideration to the
public comments we have received, we
have decided to: (1) Adopt a non-riskadjusted version (numerator and
denominator data only) of the NQF
#0678 pressure ulcer measure; (2)
collect the pressure ulcer measure data
using the current version of the IRF–
PAI; and (3) not begin public reporting
of pressure ulcer measure data until we
have: (a) Thoroughly reviewed and
researched this matter and consulted
technical experts; (b) made appropriate
modifications to the ‘‘Quality Indicator’’
section of the IRF–PAI to add the risk
adjustment items; and (c) adopted the
NQF-endorsed pressure ulcer measure
(#0678) and notified stakeholders of our
intentions through the rulemaking
process.
Comment: MedPAC made suggestions
related to additional quality measures
that it believed CMS should add to the
IRF QRP. MedPAC suggested that CMS
develop a risk-adjusted readmission
measure. Further, MedPAC requested
that CMS comment, in this final rule
with comment period, on the progress of
the development of this type of
readmission measure. MedPAC also
urged CMS to consider adding a
measure of functional improvement.
MedPAC pointed out that regaining
functional status represents a central
goal of IRF care.
Response: We appreciate MedPAC’s
input. We agree that both a risk-adjusted
readmission measure and a measure of
functional improvement would be
extremely valuable measures of quality
in the IRF setting. We are working to
develop and implement these measures
in the IRF QRP at the soonest possible
time. We invite MedPAC to meet with
the CMS IRF QRP team for further
discussion of these quality measures.

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Comment: One commenter made
reference to the IRF quality measures
that CMS included on a list made
publicly available in late 2012 in
accordance with section 1890A(a)(2) of
the Act. The commenter noted that none
of these measures were proposed for
adoption into the IRF QRP in the
proposed rule. This commenter offered
their opinion and rationale as to
whether some of measures should, or
should not be added to the IRF QRP.
The measures are as follows:
• Incidence of potentially preventable
venous thromboembolism (VTE)—The
commenter stated that this measure
requires considerable clarification
because, many, if not most,
rehabilitation patients are at very high
risk for VTE. The commenter further
pointed out that many IRF patients are
on VTE prophylaxis, yet, some of the
IRF patients still get VTEs.
• Health care worker influenza
immunization—This commenter
supported adoption of this measure as
long as data is reported by IRFs to
NHSN;
• The percent of patients/residents on
a scheduled pain medication regimen
on admission who self-report—The
commenter stated that in intensive
rehabilitation, providers need to strike a
balance between relieving pain
completely, and avoiding
overmedication so that the patient can
safely participate in an intensive
rehabilitation program;
• Percent of nursing home residents
who were assessed and appropriately
given the seasonal influenza vaccine—
Because most patients that enter IRFs
were previously hospitalized, it is likely
that their influenza vaccination status
already was established in the hospital
during the flu season. The commenter
further stated that, in some cases, with
repeat questioning, some patients may
elect vaccination after they have left the
acute care facility or had a change of
mind within the facility;
• Percent of nursing home residents
who were assessed and appropriately
given the pneumococcal vaccine.—This
commenter stated that the same
problems that may occur with the
patient influenza vaccination measure
may also occur with this measure;
• Functional improvement measure—
Of particular note is that the commenter
expressed opposition to the use of a
functional measure that is based upon
the FIMTM scale. The commenter stated
that data related to FIMTM change are
impacted dramatically by high rates of
discharges back to acute care hospitals
from rehabilitation facilities caring for
the most complex and unstable
rehabilitation patients. The commenter

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further stated that if quality measures
for rehabilitation emphasize FIMTM
change during rehabilitation, it is quite
possible that IRFs will be incentivized
to deny admission to the most complex
patients who, in fact, have the greatest
need for rehabilitation.
Response: We appreciate the
commenter’s thoughts and suggestions
offered regarding the above-stated
quality measures. All of these measures
remain under active consideration for
future adoption into the IRF QRP, and
we will consider this information
during future rulemaking cycles when
we are selecting quality measures for
inclusion under the IRF QRP.
XVIII. Revisions to the Quality
Improvement Organization (QIO)
Regulations (42 CFR Parts 476, 478, and
480)
A. Summary of Changes
The Utilization and Quality Control
Peer Review Program was originally
established by sections 142 and 143 of
the Tax Equity and Fiscal Responsibility
Act (TEFRA) of 1982 (Pub. L. 97–248).
The name of the individual
organizations covered under the
program was previously changed from
‘‘Peer Review Organizations’’ to
‘‘Quality Improvement Organizations’’
through rulemaking (67 FR 36539). In
the CY 2013 OPPS/ASC proposed rule
(77 FR 45196 through 45205), we
identified several changes that we
proposed because they are essential to
remedying longstanding problematic
aspects of the QIOs’ review activities.
These proposed changes would enable
us to improve the QIO program by
ensuring that QIOs are better able to
meet the needs of Medicare
beneficiaries.
Several of the proposed changes are
specific to the QIOs’ processing of
quality of care reviews, which includes
beneficiary complaint reviews.
Although references are made to QIO
sanction activities, the proposed
changes did not impact QIO sanction
activities or the regulations located in
42 CFR part 1004.
In addition, as part of our review of
our regulations in light of the
President’s Executive Order on
Regulatory Reform, Executive Order
13563 (January 18, 2011), we have
identified several technical corrections
that would improve the readability and
use of the QIO regulations.
B. Quality of Care Reviews
Section 9353(c) of Public Law 99–509
amended section 1154(a) of the Act
(adding a new paragraph (14)) to require
that QIOs (then PROs), effective August

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1, 1987, conduct an appropriate review
of all written complaints from
beneficiaries or their representatives
about the quality of services (for which
payment may otherwise be made under
Medicare) not meeting professionally
recognized standards of health care.
This authority was in addition to the
QIOs’ already existing authority under
section 1154(a)(1)(B) of the Act to
perform quality of care reviews. In order
to provide more clarity regarding the
QIOs’ roles, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45196), we
proposed to add a definition of ‘‘quality
of care review’’ under § 476.1 to make
clear that this review type refers to both
beneficiary complaint reviews (written
or oral) and general quality of care
reviews. We also proposed to add under
§ 476.1 definitions for ‘‘beneficiary
complaint’’ to mean a complaint by a
beneficiary or a beneficiary’s
representative alleging that the quality
of services received by the beneficiary
did not meet professionally recognized
standards of care and may consist of one
or more quality of care concerns;
‘‘beneficiary complaint review’’ to mean
a review conducted by a QIO in
response to the receipt of a written
beneficiary complaint to determine
whether the quality of Medicare covered
services provided to beneficiaries was
consistent with professionally
recognized standards of health care; and
‘‘general quality of care review’’ to mean
a review conducted by a QIO to
determine whether the quality of
services provided to a beneficiary(s) was
consistent with professionally
recognized standards of health care. We
proposed that a general quality of care
review may be carried out as a result of
a referral to the QIO or a QIO’s
identification of a potential concern
during the course of another review
activity or through the analysis of data.
In addition, we proposed to revise the
language under § 476.71(a)(2) to make
clear that the scope of a QIO’s review
includes the right to conduct quality of
care reviews, including beneficiary
complaint reviews and general quality
of care reviews, as well as a new review
process that QIOs can offer Medicare
beneficiaries called ‘‘immediate
advocacy,’’ which is described more
fully in section XVIII.B.1. of this final
rule with comment period.
We proposed additional changes to
the QIO regulations related to the
following issues:
1. Beneficiary Complaint Reviews
At the time QIOs assumed the
authority under section 9353(c) of
Public Law 99–509 to conduct reviews
of written beneficiary complaints, we

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made a decision to rely upon the
existing regulations for certain
requirements (for example, the
timeframes for requesting medical
records and the practitioner’s right to
consent to the release of specific
findings to beneficiaries), and to
subsequently establish other remaining
procedural requirements through
manual instructions. While this
approach has provided QIOs with a
basic framework for completing the
reviews, we have become aware of other
issues that need to be addressed through
the promulgation of new regulations as
well as revisions to existing regulations.
In 2003, the United States Court of
Appeals for the District of Columbia
Circuit issued a decision in the case of
Public Citizen, Inc. v. U.S. Department
of Health and Human Services (332
F.3d 654, June 20, 2003) (referred to
below as Public Citizen) in which the
court determined that QIOs must, at a
minimum, notify a complainant of the
results of its review. We recently
completed a comprehensive revision to
the manual instructions governing both
beneficiary complaints and quality of
care reviews, which, in part, was
designed to ensure compliance with this
court decision (Transmittal 17, April 6,
2012, CMS Manual System, Pub. 100–10
Medicare Quality Improvement
Organizations, Chapter 5, Quality of
Care Review) (available at http://
www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/
Downloads/R17QIO.pdf). These new
instructions were effective May 7, 2012.
While these manual revisions were
necessary, we believe that additional
regulatory changes are needed in order
to improve QIO operations. In order to
subject these additional changes to the
processing of beneficiary complaint
reviews and general quality of care
reviews to notice-and-comment
rulemaking, in the proposed rule, we
proposed to add new §§ 476.110,
476.120, 476.130, 476.140, 476.150,
476.160, and 476.170 as described
below in this section. We also proposed
to add new definitions of ‘‘authorized
representative’’, ‘‘appointed
representative; ‘‘beneficiary
representative’’ and ‘‘quality
improvement initiative,’’ and revise the
definition of ‘‘preadmission
certification’’ in § 476.1. In addition, to
ensure consistency with the proposed
revisions to or additional sections under
Part 476, we proposed to revise
§§ 480.107, 480.132, and 480.133, as
discussed more fully below.
The proposed revisions to the
regulations under Part 476 include
several changes that would improve the
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contacting a QIO about the quality of
health care he or she has received and
also shorten key timeframes so that
beneficiaries can achieve resolution of
their health care concerns in less time.
We proposed regulations under new
proposed § 476.110 regarding a new
alternative dispute resolution process
called ‘‘immediate advocacy.’’ We
proposed to add a definition of
‘‘immediate advocacy’’ under § 476.1,
and to make clear that this process is
specific to oral complaints. We
proposed to define ‘‘immediate
advocacy’’ as an informal alternative
dispute resolution process used to
quickly resolve an oral complaint that a
beneficiary or his or her representative
has regarding the quality of health care
received, and that this process involves
a QIO representative’s direct contact
with the provider and/or practitioner.
Comment: Several commenters
expressed support for the proposed
definitions and stated that the
availability of clear definitions would
help ensure consistent interpretation
and application of rules and processes,
as well as prevent confusion and
dissatisfaction for beneficiaries,
providers, practitioners, and QIOs.
Other commenters, although supportive
of the definitions, raised concerns with
specific definitions such as the
inclusion of ‘‘oral beneficiary
complaints’’ in the definition of quality
of care reviews, because, in the opinion
of the commenters, beneficiary
complaints must be written. In addition,
other commenters suggested that the
wording of a beneficiary complaint
should be modified to denote that a
complaint must contain at least one
quality of care concern because
nonmedical, ancillary issues, including
perceptions that staff are impolite, it is
too hot or cold in the facility, or
complaints about the reception process
in the waiting room, are not considered
to be quality of care issues. Moreover,
some commenters suggested that the
definition of beneficiary complaint
should be modified so that the focus is
not on whether the care met
professionally recognized standards
because care, even when meeting
professionally recognized standards of
care, could raise quality issues that a
QIO should address.
One commenter believed that a
definition of professionally recognized
standards of health care should be
included because it is not clear what
this entails. Another commenter
requested further clarification regarding
what is considered as an episode of care
and asked if it relates to one setting, one
continuous course of treatment across
multiple settings, or something else.

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68509

Response: We appreciate the
commenters’ support of our proposed
definitions. With regard to the inclusion
of oral beneficiary complaints in the
definition of quality of care reviews, we
recognize that, under section
1154(a)(14) of the Act, QIOs are required
to review written complaints submitted
by Medicare beneficiaries. However,
section 1154(a)(1)(B) of the Act also
gives QIOs general authority to conduct
quality of care reviews based on
concerns conveyed from a variety of
different sources, regardless of the
manner in which these concerns have
been conveyed. Therefore, a QIO can
review concerns that have been
expressed orally by any parties,
including beneficiaries. Moreover, with
regard to the comment that all
beneficiary complaints include at least
one quality of care concern and that
nonmedical, ancillary issues should be
excluded, we do not believe that the
statute limits the concept of a
beneficiary complaint in this way.
Beneficiaries have the right to lodge
complaints under section 1154 (a)(14) of
the Act based on their perception that
the quality of services they received did
not meet recognized standards of care.
This concept of a complaint does not
require that the complaint allege a
concern that the QIO believes could
actually relate to a violation of a
standard of care, only that the complaint
be about the quality of services not
meeting the standard. Many
beneficiaries are not in the position of
being able to determine whether or not
some aspect of their care actually
violated a medical standard—nor
should beneficiaries be discouraged
from filing complaints because they
must first make a judgment about
standards of care. Additionally, we
believe that the examples provided,
such as impolite staff, the facility being
too hot or too cold, or the reception
process in the waiting room, can
potentially contribute to the QIO’s
overall assessment of whether particular
services met standards of care. The
specific facets that impact the quality of
care are not always readily quantifiable,
and the QIO must consider various
factors before determining whether an
issue does or does not relate to the
standard of care received. As such, we
are not making any change to the
definition at this time.
While we considered the concern that
quality of care issues could be evident
even where professionally recognized
standards of care are met, we believe
that QIOs must fulfill their statutory
obligation to focus their efforts on
determining, in any given situation,

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whether professionally recognized
standards of care have been met. At this
time, we also have determined that a
definition of professionally recognized
standards of care is not something we
can define for all QIOs in all States.
Section 1154(a)(6) of the Act specifically
requires that each QIO apply
professionally developed norms of care
based upon typical patterns of practice
within the QIO’s own geographic area as
principal points of evaluation and
review, taking into consideration
national norms where appropriate. The
norms of care must be based on a list of
specific elements that each QIO must
consider. The intricacies on what must
go into a standard of care are further
discussed in the QIO regulations at 42
CFR 476.1 (definitions of norms;
standards; and regional norms, criteria,
and standards), and 42 CFR 476.100,
which includes details on establishing
these elements of review for a QIO’s
particular locale. Moreover, the QIOs
have extensive experience in identifying
and implementing their own standards
of care. Regarding the questions about
an ‘‘episode of care,’’ this term is
designed to incorporate flexibility so
that QIOs can identify the best approach
to assessing complaints. As such, we
believe that defining the term could
unintentionally restrict QIOs’ flexibility
to link different settings and/or services
when the QIO believes that a particular
complaint spans a beneficiary’s
experience with medical care across
different settings and/or services. An
‘‘episode’’ in one case might therefore
be different for different beneficiaries.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45197 through 45199), we
proposed an informal review process for
beneficiary complaints. Historically, the
only option available to beneficiaries,
regardless of the severity or type of
issue, has been the right to file a written
complaint. Once a written complaint is
received, the QIO is then obligated to
conduct a formal peer review of the
complaint, which includes a review of
the beneficiary’s medical information.
Although this peer review process is
effective, it can be quite lengthy and
burdensome on providers and
practitioners, given the various steps
that must be completed by the QIO prior
to the QIO rendering its final decision,
with providers and practitioners
cooperating with the QIO throughout
this process. These steps include the
time needed by the QIO to follow up
with beneficiaries to ensure receipt of
the complaint in writing, request and
receive the medical information from
the provider and/or practitioner, discuss
the QIO’s interim decision with the

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practitioner and/or provider, respond to
a practitioner’s and/or provider’s
request that a QIO conduct a re-review
of the initial peer reviewer’s decision,
and obtain the practitioner’s consent to
the release of specific findings in the
final letter to the beneficiary. By
regulation, QIOs must disclose to
patients or their representatives
information they have requested within
30 calendar days (42 CFR 480.132); it is
possible that obtaining a practitioner’s
consent alone could take 30 calendar
days. Even if there are no delays at any
point in the current peer review process,
it can take over 150 calendar days for a
QIO to complete its review of a
beneficiary’s written complaint.
At times, the length of the current
peer review process can render the
beneficiary’s original concern moot,
particularly where the beneficiary’s
concern relates to a communication
issue between his or her providers and/
or practitioners, the prescribing of
medications, or the failure to receive a
necessary medical item, such as a
wheelchair. For these types of concerns,
we believe that requiring a beneficiary
to submit the complaint in writing and
waiting more than 150 calendar days so
that the QIO can complete its review
does not provide prompt and customer
friendly service to Medicare
beneficiaries. Moreover, at times, certain
issues raised by a Medicare beneficiary
in a complaint may not even be
documented in the beneficiary’s
medical information. This is
particularly true for complaints related
to communication or coordination
issues surrounding the beneficiary’s
care. Thus, a QIO may actually know at
the outset of a review that the peer
review process will not divulge any
information related to the beneficiary’s
complaint.
We believe that, under an informal
process such as ‘‘immediate advocacy,’’
the QIO would be able to offer an
alternative to a Medicare beneficiary in
those situations where a resolution is
needed more quickly than the current
traditional peer review process. We
believe that the proposed new informal
process would also be beneficial in
those instances where information
relevant to a complaint would most
likely not be contained in the medical
information or where the Medicare
beneficiary may simply be put off by the
formality of the traditional peer review
process. We specified in proposed
§ 476.110(a) that this new informal
process would be available for oral
complaints so that there is a clear
distinction from the process requiring a
written complaint under section
1154(a)(14) of the Act. Again, the

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proposed definition of ‘‘immediate
advocacy’’ under § 476.1 also would
make this clear.
We also proposed that the use of
‘‘immediate advocacy’’ would not be
available if the QIO makes a preliminary
determination that the complaint
includes concerns that could be deemed
significant, substantial, or gross and
flagrant violations of the standard of
care to which a beneficiary is entitled
(proposed § 476.110(a)(2)(ii)). In
addition, we proposed to add
definitions of ‘‘quality of care concern’’
and ‘‘significant quality of care
concern’’ under § 476.1, and to
incorporate the definitions of ‘‘gross and
flagrant violation’’ and ‘‘substantial
violation in a substantial number of
cases’’ as these two terms are used in 42
CFR 1004.1. Section 1004.1 covers
definitions that apply to a QIO’s
sanction authority under 42 CFR part
1004. We proposed to define ‘‘quality of
care concern’’ to mean a concern that
care provided did not meet a
professionally recognized standard of
health care, and that a general quality of
care review or a beneficiary complaint
review may cover a single concern or
multiple concerns. ‘‘Significant quality
of care concern’’ would mean a
determination by the QIO that the
quality of care provided to a
beneficiary(s) did not meet the standard
of care and while not a gross and
flagrant or substantial violation of the
standard, represents a noticeable
departure from the standard that could
reasonably be expected to have a
negative impact on the health of a
beneficiary. ‘‘Gross and flagrant
violation’’ would mean that a violation
of an obligation specified in section
1156(a) of the Act has occurred in one
or more instances which presents an
imminent danger to the health, safety, or
well-being of a program patient or
places the program patient
unnecessarily in high-risk situations (as
specified in 42 CFR 1004.1).
‘‘Substantial violation in a substantial
number of cases’’ would mean a pattern
of providing care that is inappropriate,
unnecessary, or does not meet
recognized professional standards of
care, or is not supported by the
necessary documentation of care as
required by the QIO (as specified in 42
CFR 1004.1).
We stated that we believe that the
proposed definitions would give
improved clarity to the distinctions
made among concerns that do not meet
the standard of care and demonstrate
that QIOs are responsible for reviewing
all quality-related cases to determine
whether care provided to a beneficiary
could have violated a standard, and to

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address any violation, not just the most
significant or flagrant failures to meet a
standard of care. With regard to
‘‘immediate advocacy,’’ we believe that
this informal process is not appropriate
for those situations where a QIO
preliminarily determines that a
complaint could involve a ‘‘gross and
flagrant’’ or ‘‘substantial’’ concern. In
these circumstances, the QIO would not
offer the immediate advocacy process,
but instead would inform the
beneficiary of the right to file a written
complaint. Moreover, while we
proposed to exclude the use of the
immediate advocacy process for those
instances where ‘‘significant quality of
care concerns’’ might be present, we
requested public comments regarding
whether the immediate advocacy
process should be made available for
these concerns as well. In addition,
while we proposed to restrict the use of
the immediate advocacy process to a
period of 6 months after a beneficiary
has received the care at issue (proposed
§ 476.110(a)(1)), we also requested
public comments on whether this time
period should be extended beyond 6
months, whether based on the proposed
structure or in order to accommodate
the potential broadening of its use for
‘‘significant quality of care concerns.’’
The public comments that we received
are discussed later in this section.
We proposed, under proposed
§ 476.110(a)(2), to specify that the
immediate advocacy process can be
used for issues that are not directly
related to the clinical quality of health
care itself or that accompany or are
incidental to the medical care received,
but might, as a general matter,
contribute to a standard of care not
being met. This includes, but is not
limited to, issues such as delays in
obtaining much needed medical items
(for example, wheelchairs). In addition,
under § 476.110(a)(3), we proposed that
the Medicare beneficiary must agree to
the disclosure of his or her name in
order for the immediate advocacy
process to be used. We believe that it is
important for the Medicare beneficiary
to disclose his or her name because the
immediate advocacy process is based on
the need for open discussions to quickly
resolve a beneficiary’s concerns.
Moreover, we also proposed that all
parties orally consent to the use of
immediate advocacy (proposed
§ 476.110(a)(4)). Because our goal is to
work with the providers and
practitioners to resolve a beneficiary’s
concerns, we believe that consent is
necessary. The use of oral consent, and
not written consent, is in keeping with

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the cost-saving attributes of alternative
dispute resolution processes.
Although we believe that the
immediate advocacy process will be of
great value to Medicare beneficiaries,
providers, practitioners, and the QIOs,
we recognize that, for some, the process
may not provide the desired resolution.
In addition, there could be situations
where a QIO determines, after the
immediate advocacy process has begun,
that more serious concerns are evident.
Therefore, we proposed under
§ 476.110(b) that the QIO and either
party can discontinue participation in
immediate advocacy at any time and the
steps a QIO will take when this occurs.
This includes informing the beneficiary
of his or her right to submit a written
complaint.
Under proposed § 476.110(c), we
proposed to convey the need to
maintain the confidentiality of the
immediate advocacy proceedings by
specifically referencing the redisclosure
restrictions under § 480.107. We
proposed to make a corresponding
change to § 480.107 by adding new
paragraph (l), to specify that the
redisclosure of confidential information
related to immediate advocacy
proceedings can occur when there is
consent by all parties. Under proposed
§ 476.110(d), we proposed to include
procedures that QIOs would follow in
those instances where a party fails to
participate or otherwise comply with
the immediate advocacy procedures.
This includes making a beneficiary
aware of his or her right to submit a
written complaint.
We believe that the use of the
immediate advocacy process will greatly
reduce the burden on practitioners and
providers by avoiding the formality of
the traditional peer review process in
appropriate situations and quickly
identifying resolutions and
improvements in the provision of health
care. In fact, the immediate advocacy
process has already been introduced
through the recently completed manual
instructions, and preliminary feedback
indicates that it is being received
positively by providers, practitioners,
and Medicare beneficiaries. Medicare
beneficiaries have indicated their
appreciation of the quicker and more
appropriate resolution of their concerns.
Many times, Medicare beneficiaries
would wait months for the resolution of
a formal written complaint, only to be
disappointed in what the QIO actually
found or frustrated that the concern
initially raised was rendered obsolete by
more recent events. Under the
immediate advocacy process, the QIO
has a mechanism to resolve
beneficiaries’ concerns, sometimes the

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same day the beneficiary calls.
Moreover, providers and practitioners
have responded positively to being
given the opportunity to immediately
address beneficiary’s concerns and
improve care, particularly where
communication is one of the
beneficiary’s primary concerns. In
addition, the provider’s or practitioner’s
ability to avoid receiving and processing
a formal complaint letter from the QIO
and the related time and costs related to
forwarding medical records and
engaging in the lengthy review process
also have been positively received. The
decreased burden on Medicare
beneficiaries, providers, and
practitioners and the time and cost
savings are cornerstones of alternative
dispute resolution processes. We are
confident the positive responses to this
new option will continue.
Comment: Commenters supported the
establishment of the immediate
advocacy process. The commenters
noted the efficiencies of immediate
advocacy and the ability to identify and
achieve quality improvements much
more quickly in a less formal
environment. Many commenters noted
that immediate advocacy will enable
providers and practitioners to avoid the
costly and time-consuming written
beneficiary complaint process and, thus,
dedicate already scarce resources to
delivering high-quality care. Some
commenters noted that swift and
effective resolutions should be the goal,
whether the complaint is oral or written,
and that immediate advocacy is best for
nonsignificant concerns related to the
experience of care or issues that stem
from a breakdown in communication
that likely would not be documented in
a medical record. One commenter
suggested that CMS ensure the general
public is aware of the availability of
immediate advocacy.
Some commenters suggested that
immediate advocacy be used for all
complaints unrelated to quality of care
or patient safety issues, and that the
formal beneficiary complaint process be
restricted to complaints involving
patient safety issues or quality of care
issues. One commenter asked whether
immediate advocacy could tie up
hospital and QIO resources in the long
run, leading to slower response times
and more administrative burden and
whether it could increase ‘‘busy work’’
for providers. The same commenter then
suggested that immediate advocacy be
used only on a trial basis until the
benefits are clear. Another commenter
was similarly concerned that the
immediate advocacy process would
place a greater burden on the providers

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and practitioners because the QIOs
would be contacting them directly.
Other commenters indicated that CMS
should consider not implementing
immediate advocacy because other
avenues already exist for addressing
complaints about the quality of care,
such as reporting the concerns directly
to the provider or to State-based
agencies, and that having multiple
complaint processes impacts the
resources of providers because they are
sometimes forced to respond multiple
times to the same issues. One
commenter suggested that, because the
QIOs would be documenting the
complaint in its own words and it does
not require a proper investigation of the
patient’s experience and the staff’s
actions, the QIO will lose neutrality and
thus become an agent of the patient.
Response: We appreciate the
commenters’ support of the use of
immediate advocacy, and we have
already taken steps to ensure that
beneficiaries, providers, and
practitioners are aware that this new
alternative dispute resolution process is
available. We acknowledge the
commenters’ suggestion that the
division of precise categories or types of
concerns for which immediate advocacy
should be used be distinct from those
covered by the formal beneficiary
complaint process. However, we believe
that the proposed structure, which
considers the severity of the concern
and not the type of concern, represents
the best approach to the design of both
the immediate advocacy process and the
beneficiary complaint review process.
This approach gives beneficiaries as
well as providers and practitioners
options in achieving resolutions of
complaints. Moreover, the immediate
advocacy process is designed using the
principles of the well-established
alternative dispute resolution process,
which focuses on achieving results in
less time with lower costs. This is
certainly true when compared to the
traditional beneficiary complaint review
process, which can take months and
necessitates multiple reviews by
physician reviewers, along with ongoing
repetitive involvement of the pertinent
practitioners and/or providers. While
we appreciate the suggestion that
immediate advocacy only be used on a
trial basis, we indicated in the proposed
rule that immediate advocacy is already
being used and that initial results are
positive in that there is improved
satisfaction with results, with less time
and resources being expended to
achieve the results. This initial feedback
from practitioners and providers
indicates that the process is, in fact, less
burdensome and directly attributable to

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the complaint being resolved within
hours or a couple of days versus several
months, the avoidance of responding to
a request for medical records, and a
provider’s and/or practitioner’s limited
involvement in the immediate advocacy
process compared to the repeated back
and forth communication necessitated
throughout the lengthy formal
beneficiary complaint review process.
However, if any provider or practitioner
believes that immediate advocacy is
more burdensome and costly in any
given situation, the provider or
practitioner has the option to decline to
participate in the immediate advocacy
process. Although reference was made
to the impact on providers and
practitioners resulting from the
availability of multiple options for filing
a complaint, Federal law has
specifically provided Medicare
beneficiaries with the right to file
written complaints with the QIOs. Thus,
QIOs are obligated to appropriately
review these complaints. We believe
that the QIOs’ substantial experience in
resolving beneficiary complaints will
enable them to determine what is
necessary to conduct an appropriate
review of a patient’s experiences and
staff reactions. Moreover, because
immediate advocacy will only be used
for less severe quality of care concerns,
we believe the QIOs are well equipped
to determine the appropriate and
necessary level of their review efforts.
We also believe the QIOs’ substantial
experience in resolving complaints will
enable them to effectively fulfill their
roles in immediate advocacy without
becoming agents of the beneficiaries,
providers, or practitioners.
Comment: Numerous commenters
opposed the expansion of immediate
advocacy for use with significant quality
of care concerns. Many commenters
indicated that the immediate advocacy
approach is not appropriate for these
significant concerns because the roots of
these concerns do not lend themselves
to rapid resolution, and there is a risk
that the cursory analysis may not
sufficiently address the concerns in
light of the short timeframe (8 hours to
2 days) within which immediate
advocacy is intended to be completed.
These commenters believed that this
could ultimately be a disservice to
beneficiaries and that, for these
significant concerns, the medical record
should be reviewed. Some commenters
suggested that the review of medical
records offers the best protection for
providers, practitioners, and
beneficiaries. Others commenters stated
that the use of oral consent is not

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sufficient if significant quality of care
concerns are present.
Response: We appreciate the
commenters’ responses on this issue. In
light of these comments, we are not
expanding the use of immediate
advocacy for significant quality of care
concerns at this time. As the QIOs
continue to use immediate advocacy, we
will continue to evaluate its use to
determine if the future expansion to
include significant quality of care
concerns is warranted.
Comment: Several commenters agreed
with the proposed 6 month timeframe
regarding complaints that are eligible for
immediate advocacy because they
believed that this time seemed
reasonable. Others commenters stated
that, while the 6 month timeframe is
reasonable, exceptions should be
granted for extenuating circumstances.
However, other commenters believed
that 6 months is too long because
frequently these cases involve issues
happening at the time of the call and, as
such, 3 months is more appropriate.
They believed that the shorter
timeframe also would facilitate using
these issues as ‘‘teaching tools’’ for
practitioners and providers.
Commenters noted that the longer
window could result in staff involved in
the complaint no longer being with the
provider, which is significant because
the medical record is not being
reviewed. Other commenters believed
that immediate advocacy could be
effective for complaints received up to
a year after the date of care.
Response: In considering the exact
period of time applicable to the use of
immediate advocacy, we believe we
must balance the cost-saving aspects,
the desire to timely resolve the
complaints, and the level of
involvement required by practitioner
and provider staff. We continue to
believe that 6 months represents the
best balance of these factors. We
appreciate the comments provided and
will consider making additional
adjustments as the QIOs gain experience
in using immediate advocacy.
While we believe that the immediate
advocacy process represents a
significant step forward in ensuring the
timely, appropriate, and cost-efficient
resolution of Medicare beneficiaries’
concerns, we recognize that additional
changes are needed to improve the
QIOs’ review process in general.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45198 through
45202), we proposed regulations
governing written beneficiary complaint
reviews as well as general quality of
care reviews. We proposed to add a new
§ 476.120 that would govern a Medicare

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beneficiary’s submission of a written
complaint and proposed, under
proposed § 476.120(a), language limiting
the time period for submitting a written
complaint to 3 years from the date on
which the care giving rise to the
complaint occurred. We believe this is
necessary because the ability of a QIO
to thoroughly review a complaint
becomes more problematic the longer
the period of time is between the
circumstances giving rise to a complaint
and the actual filing of the complaint.
An individual’s memory can fade, and
we are aware of some instances where
Medicare beneficiaries have submitted
complaints about issues that have
occurred decades ago. In these
situations, the QIOs’ ability to obtain the
necessary information, let alone render
a valid decision, has been severely
compromised. As such, we believe that
a 3-year look back period should be
sufficient to ensure that a QIO can
effectively complete its review.
Under proposed § 476.120(a)(1), we
proposed that a complaint submitted
electronically to the QIO would meet
the requirement for the submission of a
written complaint. We proposed, under
proposed § 476.120(a)(2), that if a
beneficiary contacts a QIO about a
potential complaint but decides not to
submit it in writing (and the QIO did
not believe it was appropriate to offer
immediate advocacy), the QIO may use
its authority under section 1154(a)(1)(B)
of the Act to complete a general quality
of care review in accordance with new
proposed procedures at proposed
§ 476.160. We noted that, in these
situations, the beneficiary would not
receive any results of the QIO’s review.
We also proposed to limit the QIO’s
authority to conduct a general quality of
care review in response to an oral
complaint to those situations where the
QIO makes a preliminary determination
that the complaint contains a potential
gross and flagrant, substantial, or
significant quality of care concern.
Under proposed § 476.120(b), we
proposed instructions for QIOs when a
beneficiary submits additional concerns
after the initial submission of a written
complaint. We believe that the focus on
an episode of care, which we proposed
in § 476.130(a)(1), gives the QIO
adequate flexibility to consider all
related concerns surrounding a
complaint, but for those rare instances
where a beneficiary does convey a new
concern, the QIO would now have
specific instructions regarding the right
to consider the additional concerns
either during the same complaint review
or as a separate complaint.
Under proposed § 476.130(a), we
proposed to convey the QIO’s obligation

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to consider any information submitted
by the beneficiary or his/her
representative and by the provider and/
or practitioner, along with the QIO’s
obligation to maintain the information
received as confidential information, if
that information falls within the
definition of ‘‘confidential information’’
under existing § 480.101. Moreover,
proposed § 476.130(a)(1) also would
convey that the focus of the QIO’s
review will be on the episode of care
from which the complaint arose and
that in completing its review, the QIO
will respond to the specific concerns
raised by the beneficiary along with any
additional concerns the QIO identifies
while processing the complaint. We
believe that the focus on the episode of
care could potentially reduce the
burden on providers and practitioners
and reduce timeframes for completing
individual reviews. Historically, QIOs
would closely track the complaint as
originally conveyed by a Medicare
beneficiary. However, often Medicare
beneficiaries would become dissatisfied
with the focus and/or results of the
QIO’s review, and the QIO would be
forced to reexamine the same complaint
in light of these entirely new issues,
either in addition to or replacing the
original issues. On occasion, this could
result in the beneficiary raising
concerns that should have been filed as
an entirely new complaint, based on
issues that might be related to, but were
not reviewed as part of, the original
complaint. This situation could slow the
progress of the complaint indefinitely
because there were no limits on what
beneficiaries could add to existing
complaints and the time span in which
they could do this. These situations also
could add to the burden on providers
and practitioners because they would be
required to participate in the review of
the additional concerns and even
provide additional medical
documentation related to a complaint
that might have changed course
multiple times.
In conjunction with limiting
complaints to an episode of care, we
proposed, under proposed
§ 476.130(a)(1), to specify the details of
the QIO’s authority to separate a
beneficiary’s concerns into separate
complaints if the QIO determines that
the concerns relate to different episodes
of care. We believe that focusing on the
episode of care will put QIOs in a better
position to identify all potential
concerns at the onset and help alleviate
any potential back and forth based on
the specter of new or different concerns
arising after the review has begun.
Under proposed § 476.130(a)(2), we
proposed to set forth the QIO’s use of

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68513

evidence-based standards of care to the
maximum extent practicable, and
specify the method that the QIO must
use to establish standards if no standard
exists. Moreover, this paragraph (a)(2)
also conveys the finality of a QIO’s
determination regarding the standard to
be used for a particular concern, in that
the QIO’s determination regarding the
standard used is not subject to appeal.
We believe that the focus on evidencebased standards of care is vital to the
improvement of health care nationally.
Under proposed § 476.130(b), we
proposed to specify the timeframes that
practitioners and providers must follow
when a QIO requests medical
information in response to a written
beneficiary complaint. We proposed a
10 calendar day timeframe for
responding to these requests and
believed providers and practitioners
would also benefit from the faster
resolution of complaints. We also noted
that QIOs have historically employed a
different, shorter timeframe for reviews
where a Medicare beneficiary is still
receiving care (concurrent review),
compared to those situations where a
Medicare beneficiary has already been
discharged (retrospective review). For
concurrent reviews, QIOs request that
medical information be received within
1 calendar day, and typically this
timeframe has been adhered to by
providers and practitioners. Although
we did not propose the continued use
of the concurrent and retrospective
review framework for responding to
written complaints, we recognize that
there could be circumstances in which
an even shorter timeframe for receiving
medical information is warranted, and
we proposed to include language
detailing a QIO’s right to earlier receipt
of medical information. We proposed
that this right to earlier receipt of
medical information be related to
potential gross and flagrant or
substantial quality of care concerns.
However, we requested public
comments on whether there are other
circumstances, involving less serious
kinds of concerns, for which this
authority to employ a shorter timeframe
should be used.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53664 through 53665), we
finalized proposed changes to § 476.78
to add references to ‘‘practitioners’’ in
parts of this section, which referred only
to ‘‘providers,’’ in order to equalize the
30-day and 21-day timeframes for
submitting records. In that final rule, we
also made changes to § 476.90 to
equalize the ramifications for not
submitting records on time, including
denying payment, because we saw no
reason to differentiate between a

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provider’s and a practitioner’s records.
We note that these changes had not been
finalized when we issued the CY 2013
OPPS/ASC proposed rule, and in
anticipation of the changes proposed in
the FY 2013 IPPS/LTCH PPS proposed
rule (77 FR 28119 through 28120), we
requested public comment in the CY
2013 OPPS/ASC proposed rule on
whether changes similar to those we
proposed for beneficiary complaints,
including shortening of the 30-day and
21-day timeframes, should be
incorporated into § 476.78(b) for
requests for medical information in
general, for any kind of QIO reviews,
including nonquality related reviews. In
the CY 2013 OPPS/ASC proposed rule,
we also proposed to apply a shorter
timeframe for all of a QIO’s requests for
records, without limiting this
application to quality reviews in just
one instance: Where secure
transmissions of electronic versions of
medical information are available, we
proposed a shorter timeframe. Our
proposal regarding secure transmissions
of electronic versions of medical
information is discussed more fully later
in this section.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45200), under proposed
§ 476.130(c), we proposed to include a
requirement for beneficiary complaints
that the QIO issue its interim initial
determination within 7 calendar days
after receiving all medical information.
We stated that we believe that this
timeframe is sufficient to evaluate a
complaint and identify the key aspects
of the care provided. Under proposed
§ 476.130(c)(1), we proposed to specify
the provider’s and/or practitioner’s right
to discuss the QIO’s determination
before it is finalized, and to specify that
the QIO’s initial notification will be
made by telephone. We proposed a 7calendar day timeframe for completion
of the discussion. In addition, we
proposed that the QIO’s interim initial
determination would become the QIO’s
final determination if the discussion is
not completed timely because the
provider and/or practitioner has failed
to respond (proposed § 476.130(c)(2)).
Again, our focus is on obtaining
resolutions to complaints within
reasonable timeframes, and the
completion of the discussion is an area
where improved instructions may
benefit the timeliness of complaint
processing because we have
experienced significant delays in
completing this particular step. The
term ‘‘final initial determination’’
should not be confused with the term
used in 42 CFR Part 405, because Part
405 relates to whether a beneficiary is

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entitled to services or the amount of
those services, while this regulation
covers only the quality of services as
specified in the QIO statute. At the same
time, we proposed, under proposed
§ 476.130(c)(3), the provider’s or
practitioner’s right to submit a written
statement in lieu of a discussion, with
the requirement that the written
statement be received within the same
7-calendar day timeframe from the date
of the initial offer. We believed that
allowing the submission of a written
statement would benefit practitioners or
providers that may have trouble being
available at a specific time within the 7calendar day timeframe. Moreover,
under proposed § 476.130(c)(4), we
proposed to include the QIO’s right to
extend the timeframe for holding the
discussion or submission of a written
statement in lieu of a discussion in
those rare instances where a practitioner
or provider is unavailable, whether
because of military tours of duty, travel
or other unforeseen circumstances.
In addition, we noted in the CY 2013
OPPS/ASC proposed rule that we were
considering restricting a provider’s or
practitioner’s right to submit new or
additional medical evidence in the form
of test results, X-rays, and other
evidence, as part of this discussion. We
stated that we believe that doing so
would emphasize the need for providers
and practitioners to supply all relevant
evidence when first requested by the
QIO and also would maintain the focus
on the discussion a physician or
provider is due in accordance with
section 1154(a)(14) of the Act. Allowing
the submission of additional or new
evidence could also substantially raise
the possibility that the discussion will
become, in effect, an entirely new
review by the QIO. Moreover, providers
and practitioners will still be able to
submit information as part of a request
for a reconsideration review. We
requested public comments on whether
providers and/or practitioners should be
prohibited from submitting new or
additional medical evidence in response
to the offer of a discussion.
Under proposed § 476.130(d), we
proposed to specify the QIO’s obligation
to issue a written final initial
determination, regardless of whether
care did or did not meet standards for
all concerns, and that this determination
must be issued within 72 hours after
completion of the QIO’s review or, in
cases where the standard was not met,
the QIO’s discussion or receipt of the
provider’s and/or practitioner’s written
statement. In addition, we proposed,
under proposed § 476.130(d)(1), to
specify that the notice of the final initial
determination will be forwarded to all

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parties, and paragraph (d)(2) lists the
actual content of the notice. We also
proposed to specify that the QIO would
not forward the notice if either party
requests a reconsideration of the final
initial determination.
These proposed changes represent
significant departures from the process
QIOs have historically used when
resolving beneficiary complaints and are
necessary to improve the fairness of the
review process and increase the
transparency of the QIO review process.
When the process was originally
established, CMS determined that
physicians, providers, or Medicare
beneficiaries would not be afforded the
right to request a reconsideration of
these determinations under section 1155
of the Act. However, providers and
practitioners were afforded an
administratively created option, referred
to as a ‘‘re-review,’’ if the provider or
practitioner disagreed with the QIO’s
initial decision. Medicare beneficiaries
were not provided this re-review
opportunity and, in fact, were not given
any response until after completion of
the re-review. Moreover, the actual
information a beneficiary received in
response to the submission of a
complaint was further limited by certain
provisions in the existing regulations.
Section 480.132 covers the general
requirements that a QIO must meet in
disclosing information to a beneficiary
when that beneficiary has requested
information about him or herself.
Section 480.132(a)(1)(iii) states that this
information cannot include any
practitioner-specific information. We
have read this provision in conjunction
with § 480.133(a)(2)(iii), which
authorizes a QIO to disclose
practitioner-specific information when
the practitioner has consented to the
disclosure. In the past, we have
interpreted these provisions as applying
in the context of beneficiary complaints.
This limitation greatly reduced a
beneficiary’s access to information
related to the QIO’s specific findings. In
fact, § 480.132 also gave attending
practitioners the authority to direct that
a QIO not provide results directly to a
Medicare beneficiary should that
practitioner determine that the released
information could ‘‘harm the patient.’’
This same provision gave QIOs a full 30
calendar days before they had to
respond to a beneficiary’s request for
information, which would apply even in
the context of a complaint. Thus, the
QIO was required to obtain a
practitioner’s consent to disclose
information within this 30-calendar day
timeframe before the QIO could disclose

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the specific results of its complaint
review to the beneficiary.
As a result of the provisions in the
existing regulation, the QIO was often
delayed in its ability to respond to the
beneficiary, and was sometimes forced
to identify a representative and then
give the results to the representative
even if the Medicare beneficiary
believed he or she was able to represent
himself or herself and legally had not
been deemed otherwise. This scenario
has frustrated Medicare beneficiaries
over time and placed QIOs in difficult
situations. Furthermore, if a practitioner
did not consent to any disclosures or to
limited disclosures of information that
would identify the practitioner, a QIO’s
decision typically contained a
conclusory statement about the results
of the QIO’s review but no information
about the standards of care the QIO
used, the evidence the QIO considered,
or the rationale for how the QIO arrived
at its conclusion. The limitations on
what information Medicare beneficiaries
received and broad authority given to
attending practitioners have been
particularly troubling in those instances
in which the beneficiary’s complaint
relates to care that the attending
physician provided. In fact, the lack of
information given to Medicare
beneficiaries in response to a complaint
was the precise issue addressed in the
Public Citizen decision.
We stated in the proposed rule that
we believe that the proposed changes to
§ 476.130(d), including paragraphs
(d)(1) and (d)(2), are necessary to ensure
beneficiaries are given the same
information and rights as practitioners
and providers. The proposed changes
make clear that the timeframe given to
QIOs for issuing the final initial
determination in response to a
complaint is separate and distinct from
the timeframe given to QIOs when
responding to a beneficiary’s request for
information. Any requests for
information, including requests for
information pertaining to beneficiary
complaint reviews that are unrelated to
a QIO’s issuance of its final initial
determination, would continue to be
governed by § 480.132. Moreover, while
the proposed 72-hour timeframe in
§ 476.130 appears short in comparison
to the 30-calendar day timeframe in
§ 480.132 that has historically been
used, we believe that the 72-hour
timeframe represents a more appropriate
and reasonable period of time in which
to issue these decisions. In most cases,
the QIO’s final initial determination
may not change significantly from the
interim initial determination. Thus,
QIOs would be able to rely heavily upon
the interim initial determination in most

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instances, with only minor adjustments
being made in light of information
received in response to the opportunity
for discussion. In addition, in paragraph
(d)(2), we proposed the content of the
written decision to be given to the
beneficiary, provider, and/or
practitioner. We proposed that the
content include a statement for each
concern that the care did or did not
meet the standard of care, the standard
identified by the QIO for each of the
concerns, and a summary of the specific
facts that the QIO determines are
pertinent to its findings. This list makes
clear that § 480.132 will no longer
govern what information a QIO may
provide to a beneficiary in resolving a
complaint. We believe this approach
more fully supports the court’s decision
in the Public Citizen case.
In addition, we believe that the
language under section 1155 of the Act
supports the decision to give all parties
the right to request that the QIO
reconsider its initial decision, and we
proposed to offer providers,
practitioners, and beneficiaries the right
to request a reconsideration in proposed
§ 476.140(a) for complaints filed after
July 31, 2014. This includes proposed
specific requirements regarding the
manner in which these requests are to
be submitted and the obligations of
beneficiaries, providers, and
practitioners to participate in the
reconsideration process in proposed
§ 476.140(a)(1) through (a)(3). We
proposed to delay implementation of
this new proposed right to ensure all
processing requirements are fully
developed for QIOs to follow in
reviewing these reconsideration
requests.
In addition to the proposed specific
content of the notice at proposed
§ 476.130(d)(2) when a final initial
determination is issued and under
proposed § 476.140(b) when a
reconsideration final decision is issued,
we proposed to make corresponding
changes to existing §§ 480.132(a) and (b)
and 480.133(a) (proposed new
paragraph (a)(2)(iv)). In order to make
clear that § 480.132 relates solely to a
beneficiary’s request for information,
but not to a beneficiary’s receipt of
information from a QIO in resolution of
a complaint review, we proposed the
inclusion of a cross-reference to
§§ 476.130(d) and 476.140(b) in
paragraph (a). Similarly, we proposed to
include language in § 480.132(a)(1)(iii)
to denote that the removal of all other
patient and practitioner identifiers does
not apply to disclosures described in
§ 480.132(b). We also proposed
clarifications to § 480.132(b) to improve
the link between paragraph (b) and the

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provisions of § 478.24 regarding
requests for information relied upon in
rendering initial denial determinations,
which are cross-referenced in paragraph
(b). We note that § 478.24 does not
require seeking the advice or consent of
the practitioner that treated the patient,
nor does it prohibit the QIO from
disclosing practitioner identifiers. We
have made this clear by the proposed
deletion of paragraph (b)(1)(i) and added
language to the end of current paragraph
(b)(1)(ii) to indicate that the information
provided under § 478.24 includes
relevant practitioner identifiers. With
the deletion of paragraph (b)(1)(i), there
is no longer a need for multiple
paragraphs in (b)(1). Therefore, we
proposed to eliminate the current
designation for paragraph (b)(1)(ii), with
the provision being included as part of
paragraph (b)(1). We also proposed a
corresponding change to
§ 480.133(a)(2)(iv) that makes clear a
practitioner’s or provider’s consent is
not required prior to releasing
information to a beneficiary in
connection with an initial denial
determination or in providing a
beneficiary with the results of the QIO’s
findings related to a beneficiary
complaint review as described in
§§ 476.130(d) and 476.140(b).
We also proposed to remove from
existing § 480.132(a)(2) and (c)(1) the
right of an attending practitioner to
direct a QIO to withhold information
based on a ‘‘harm’’ determination. This
included the proposed removal of the
requirement from existing
§ 480.132(c)(2) that a QIO release results
to a beneficiary’s representative if a
‘‘harm’’ determination has been made
by the attending practitioner. This also
included our proposed decrease in the
timeframe that QIOs must follow in
responding to a beneficiary’s request for
information (in any situation, as well as
in the context of a beneficiary
complaint) in § 480.132(a)(2) from 30
calendar days to 14 calendar days. This
timeframe is strictly related to those
situations where a beneficiary is making
a request for information and will no
longer be associated with obtaining
responses to beneficiary complaints in
the form of the QIO’s final initial
determination and the QIO’s issuance of
a final decision after a reconsideration,
which are detailed in proposed
§§ 476.130(d) and 476.140(b). We
believe the decrease from 30 calendar
days to 14 calendar days is warranted in
light of the improved ability to maintain
data, including in electronic formats, so
that less time is needed when
responding to requests. The proposed
changes would ensure that Medicare

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beneficiaries have more control over the
designation of their representatives and
also give a QIO more appropriate steps
to follow in identifying a representative
when one is actually needed. As an
example, the existing regulations at
§ 480.132(c)(3) direct a QIO to ‘‘first’’
look to the medical record to identify a
representative but then direct the QIO to
‘‘rely on the attending practitioner’’ if
no information is contained in the
medical record. The changes we
proposed to § 480.132(c) place more
emphasis on the obligation of the QIO
to follow the requirements under State
law regarding the designation of health
care representatives or agents, rather
than focusing on ‘‘where’’ the
information might be contained.
Lastly, under proposed § 476.140(b),
we proposed to specify that the QIO
must notify the beneficiary and the
practitioner and/or provider of its final,
reconsidered, decision within 72 hours
after receipt of the request for a
reconsideration or, if later, 72 hours
after receipt of any medical or other
records needed for such a
reconsideration. The QIO may do so
orally, by telephone, in order to meet
this timeframe. Proposed § 476.140(b)(1)
also would specify that a written notice
must be mailed by noon of the next
calendar day and specifies the content
of the notice. In addition, under
proposed § 476.140(b)(2), we proposed
to describe the QIO’s authority to
provide information in its final decision
to beneficiaries, providers and/or
practitioners regarding improvement
opportunities. The information QIOs
provide regarding potential
improvements could include specific
opportunities related to the
practitioner’s or the provider’s delivery
of care and/or even broader
improvements focusing on the
community served by the practitioners
and/or the providers. Some QIOs have,
in fact, been providing this information
to beneficiaries since it can offer the
beneficiaries assurance that their
complaints and any underlying
problems are being addressed.
We proposed to include, under
proposed new § 476.150, specific
requirements for QIOs to follow in
response to abandoned complaints. We
believe that these instructions are
necessary in light of a QIO’s experience
when handling complaints where a
Medicare beneficiary initially submits a
complaint but then all attempts by the
QIO to contact the beneficiary are
unsuccessful. Historically, QIOs have
been responsible for continual followup with beneficiaries, even if months
later the beneficiary still had not
responded. We believe that giving QIOs

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the discretion to close these cases will
eliminate this unnecessary follow-up
and reduce costs. Moreover, it will
alleviate provider’s and/or practitioner’s
concerns in those situations where the
QIO may have already reached out to
them about a potential complaint. We
also proposed to add, under proposed
§ 476.150(b), instructions for QIOs to
follow in those situations, which we
believe will be rare, where a QIO must
reopen a beneficiary complaint review.
We would have QIOs apply the same
procedures that appear in the already
existing regulations at § 476.96 for the
reopening of cases involving initial
denial determinations and changes as a
result of DRG validation, simply using
those same procedures for a different
purpose. We proposed to do this by
placing a reference in § 476.150(b) to the
procedures in § 476.96.
Comment: Numerous commenters
supported the establishment of
regulatory provisions addressing
beneficiary complaint reviews,
including the streamlining of the overall
process. Several commenters supported
a beneficiary’s right to submit additional
concerns after the initial submission of
a written complaint, a QIO’s right to
determine whether concerns should be
processed as a single complaint or
separated into multiple complaints, as
well as the procedures for handling
abandoned complaints. In addition, one
commenter supported the provision
allowing payment denials for
practitioners and providers.
However, several commenters noted
that a strong operational infrastructure
must be developed to ensure the stricter
timeframes in the beneficiary complaint
review process can be effectively
implemented, particularly in light of the
QIO’s budget limits and the aggressive
system-wide changes being attempted.
Other commenters supported the
provision allowing the submission of
complaints electronically, although one
commenter stated that CMS does not
allow QIOs to accept electronic
beneficiary complaints. One commenter
also suggested that QIOs should not be
communicating directly with physicians
in resolving beneficiary complaints
since this undercuts quality
management of physician practices and
instead the QIOs should communicate
directly with the quality offices of the
practices’ system so that more orderly
systematic approach to quality control
can be maintained. Another commenter
recommended that all communications
exchanged between QIOs and
beneficiaries be written at a 6th grade
level and that, due to disabilities, visual
impairments and non-English speaking

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Medicare beneficiaries, communications
must be available in alternative formats.
Response: We appreciate the support
for these regulatory provisions. With
regard to the need for a strong
operational infrastructure, the QIOs
have been performing beneficiary
complaint reviews for over 25 years and
already have a strong operational
infrastructure in place. While some
adjustments could be necessary to the
content of letters, any changes to the
infrastructure will most likely be related
to the new reconsideration right to be
given to beneficiaries. In recognition of
this, we proposed delaying the
implementation of this new right until
August 2014. In addition, we appreciate
the commenters’ support for the
submission of complaints electronically.
However, we are concerned by the
comment that QIOs have been advised
by CMS that complaints cannot be
accepted electronically. This is
incorrect, and we have communicated
this to QIOs on several occasions. As
these regulations will make clear,
beneficiaries have the right to submit
complaints electronically, including by
email, if they desire. Although we
appreciate the concern that QIOs
communicate with the provider’s
system quality office in resolving
beneficiary complaints, we believe that
communication must ensure the
involved practitioner is also involved
and nothing in these regulations limit
the QIOs’ ability to communicate
directly with the provider’s quality
improvement staff. We appreciate the
recommendations regarding the QIOs
communications and availability of
alternative formats and have already
taken steps to ensure that
communications are written in plain
language and offered in other languages
so that the needs of Medicare
beneficiaries are met.
Comment: Some commenters
suggested that CMS also require that,
when QIOs investigate a complaint, all
parties are informed as to who else has
received the complaint, such as State
survey agencies and the Joint
Commission. Commenters suggested
that this level of coordination is
necessary because resources are being
expended by all of the various entities,
including the involved providers and/or
practitioners, and coordinating the
initial investigation or interview would
be a cost-effective method that could
also lead to an earlier resolution of the
complaint. Moreover, the commenters
believed that this would also ensure that
information is better shared between
oversight entities. They believed that
doing so could alleviate duplicative
efforts.

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Response: While we recognize that, at
times, several agencies could be
investigating the same or similar
concerns, our concern at this time is
ensuring that beneficiaries, providers,
practitioners, and QIOs have clear
instructions regarding the processing of
beneficiary complaints. As such, we are
not recommending specific changes
designed to improve the coordination
among various entities as a direct result
of these regulations.
Comment: Several commenters
expressed concern regarding the impact
of the proposed regulations on the
recently effectuated manual instructions
included in Transmittal 17 (issued on
April 6, 2012, CMS Manual System,
Pub. 100–10 Medicare Quality
Improvement Organizations, Chapter 5,
Quality of Care Review). Specifically,
commenters raised concerns regarding
the extent to which beneficiaries can
rely on the additional protections
included in Transmittal 17 because the
notice-and-comment rulemaking
process may take a different and
conflicting turn, leaving the beneficiary
who relied on the transmittal in an
insecure and vulnerable position.
Response: While we recognize that
the timing of Transmittal 17 could cause
confusion in light of the proposed
regulations, this rule does not remove
any of the additional protections
conveyed through Transmittal 17.
Rather, the regulatory provisions are
designed to bring about additional
changes that will improve the
processing of beneficiary complaint
reviews for all parties and provide
beneficiaries with even more access to
information. We anticipate making
additional changes to the manual
instructions to comply with the new
regulatory provisions once the
regulations are in effect.
Comment: Many commenters
supported the 3-year period for
submitting beneficiary complaints,
while other commenters believed that 3
years is too long. Many commenters
urged CMS to consider a 1- or 2-year
timeframe, with the potential to allow
for additional time in rare
circumstances. Many of the
commenters’ concerns about the 3-year
time period were based on the ability of
providers to reasonably defend against
allegations of inappropriate care after
three years, since memories fade.
Moreover, the commenters believed that
the time lapse could result in the
standards of care being different in light
of clinical advances that have occurred.
Other commenters believed that the
timeframe should be shortened because
the proposed time practitioners and/or

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providers are being given to provide
medical evidence is much shorter.
Response: While we recognize that a
variety of factors could impact the
success of the QIO’s review process, we
believe that because these reviews are
primarily conducted by reviewing
medical information supplied by the
practitioner and/or provider, the longer
time period is appropriate. Moreover,
QIOs are experienced at identifying the
appropriate standard of care, including
any changes or updates to the standard
of care since the time the actual care
was provided. Therefore, we believe
that 3 years represents a reasonable
period of time for submitting
complaints.
Comment: Numerous commenters
opposed giving QIOs the authority to
identify the standard of care, including
the right to determine a standard of care
where a clear standard does not exist.
Commenters noted that standards of
care are complex and can be reliably
developed only with clinical experts
assessing the available medical
information, and there is no reason to
believe that QIOs will have more
relevant medical expertise available to
make such determinations for all
medical care issues. Some commenters
also noted that there are numerous areas
of medical practice for which
insufficient evidence exists to guide the
conclusion of what should be the
standard of practice and that the QIOs
should not be expected to make up a
standard where evidence to support it
does not exist. One commenter noted
that allowing QIOs to determine the
standards of care will actually create
more variation in the standards. In
addition, some commenters believed
that it was cause for concern that the
QIO would make a determination as to
whether the care provided met
professionally recognized standards of
care but the provider’s/practitioner’s
perspective, including the provider’s/
practitioner’s intimate knowledge of the
patient’s care, was secondary. Many
commenters were troubled that a QIO’s
decision regarding the standard of care
is not subject to appeal and believed
that an independent third party entity
should be established to review QIOs’
decisions regarding the standard of care.
One commenter also suggested that
giving beneficiaries results of reviews
could be more problematic in light of
these concerns over the standards of
care.
Response: QIOs were specifically
established to make available a cadre of
peer reviewers, including both
physician and nonphysician
practitioners, with expertise who could
review complaints and other quality of

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care concerns in order to make
determinations as to whether the care
provided met professionally recognized
standards of care. As part of this
process, QIOs take care in matching the
clinical background of their peer
reviewers with the specific care at issue
in the complaint and ensure that the
peer reviewer’s knowledge of existing
practices in the relevant health care
setting and the particular geographic
area is current. Moreover, the
identification of the standard of care is
based on a robust review of current
literature and available evidence
pertaining to the standard in addition to
the peer reviewer’s own clinical
judgment. QIOs have been reviewing
quality of care concerns and making
decisions regarding the standards of
care to be used when conducting these
reviews for over 30 years. The
regulations merely continue a process
that has been in place since the program
was initially established, and we see no
reason to change the process at this
time. In particular, we believe the
suggestion that a third party be created
to review the QIOs’ decisions is
unnecessarily duplicative because this
is the precise reason QIOs were created,
and a QIO is specifically tasked with
applying the standards of care as
described in section 1154(a)(6)(A) of the
Act based on its evaluation of the
typical patterns of practice within the
geographic area it serves. This
responsibility is also detailed in 42 CFR
476.100.
Comment: Numerous commenters
supported the regulatory changes giving
beneficiaries more detailed results of
review findings, the removal of a
physician’s right to consent to the
release of specific findings, and the
provision of information to beneficiaries
regarding quality improvement
activities in the final decision letters.
Many commenters believed that it is
imperative that beneficiaries have the
same access to information about
complaints as practitioners and
providers and that this right should not
be defeated by the objection of a
practitioner or provider. Many
commenters also agreed that the
elimination of the consent requirement
would improve beneficiary satisfaction
and that it aligns with the value of
patient centered care in addition to
reducing the processing timeframe by 30
days.
Other commenters supported the
providing of information regarding
quality improvement activities, but
believed that the QIOs will need to take
care that the information is presented in
an easily understandable manner
because it can be difficult at times for

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a beneficiary to discern how particular
quality improvement activities relate to
the quality of care the beneficiary
received. One commenter supported the
proposal to reduce the time that a QIO
is given in responding to requests for
information from beneficiaries from 30
to 14 calendar days. However, another
commenter noted that giving
beneficiaries more information could be
contrary to State law, and provided an
example that, under Florida law,
psychiatrists may redact notes or
provide a summary statement to
patients in lieu of providing them
clinical notes, which may be harmful to
the patient. Another commenter
suggested that the failure to obtain a
practitioner’s consent could expose the
QIO to legal activity, which would
result in the need for increased liability
insurance, additional costs for the QIO
and for CMS and potentially peer
reviewers refusing to participate in the
process because of concerns over
potential litigation.
Response: We regard the provision of
more detailed information to
beneficiaries to be a direct, logical, and
reasonable outgrowth of the Public
Citizen decision and recognize the
benefits of providing this more detailed
information to beneficiaries. We
appreciate the support for providing this
information and agree that quality
improvement activities must be
conveyed in an easy and understandable
way to beneficiaries. We believe that the
QIOs are already well-equipped to
effectively communicate this
information. With regard to the
provision being contrary to State law,
we do not agree that this provision will
place a QIO in jeopardy of violating
State law requirements. QIOs would be
effectuating the procedures of a Federal
program that is mandated by a Federal
statute and interpreted under Federal
regulations. As such, a QIO’s obligations
to provide information under a Federal
statute and regulations would preempt
any State law requirements that conflict
with the QIO’s obligations. The
information conveyed by the QIO will
be limited because it will be specific to
the care a beneficiary has received, and
relate only to the facts that are essential
to determining whether a provider or
practitioner met professionally
recognized standards of care. Lastly,
with regard to a QIO or a peer reviewer
being exposed to legal action, the
liability protections afforded under
section 1157 of the Act would apply to
the QIO and its staff. Section 1157(b) of
the Act states that any QIO or person
employed by or who provides
professional services to the QIO, or who

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has a fiduciary relationship with a QIO,
cannot be held to have violated any
criminal law or to be civilly liable under
any Federal or State law as a result of
his or her performance of any duties,
functions, or activities required under or
authorized by the QIO statute or under
the QIO’s contract with CMS.
Comment: Several commenters
supported the reduction in timeframes
related to requests for medical
information. One commenter noted that,
because providers have already
demonstrated the ability to respond to
requests for medical information related
to expedited appeals within 4 hours, 10
days should be ample time. One
commenter also supported the removal
of the retrospective and concurrent
distinction in processing complaints, as
well as the authority to request medical
information in less time when
circumstances warranted. Other
commenters believed that the shorter
timeframes were necessary in order to
give beneficiaries results in a reasonable
period of time in response to a
complaint.
Some commenters supported the
efforts to shorten the timeframes
associated with completing quality of
care reviews, but believed that the 10day timeframe was insufficient because
navigating a hospital’s complex medical
records system is time-consuming.
Moreover, some commenters expressed
concerns that the shorter timeframes
would disrupt the providers’ and
practitioners’ daily work in order to
comply with the decreased timeframe
and will ultimately lead to additional
costs, including for providers and/or
practitioners using vendors. Other
commenters noted that a 10-day
timeframe could not be met until
providers and practitioners have
established electronic health record
systems that would easily facilitate the
collection of medical information and
that the current 21-day and 30-day
timeframes should be maintained. Many
of these commenters noted that a
significant number of providers and
practitioners either still rely entirely on
paper records or are in a hybrid state
with some paper records and some
electronic records. Several commenters
suggested that the 3-year ‘‘look back’’
period for complaints affected the
ability to comply with this requirement
because the providers and practitioners
may have to retrieve medical
information from offsite facilities. Other
commenters noted that providers and
practitioners receive numerous requests
for medical information from various
entities and that frequently the
timeframes for responding are different
for each entity, and these issues impact

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the ability of providers and practitioners
to respond in a timely fashion. Several
commenters also questioned whether
the shorter timeframes will have any
material benefit for beneficiaries that
have submitted complaints. One
commenter noted that, for one QIO,
approximately 75 percent of providers
are already complying with the 10-day
timeframe, and that the other 25 percent
are taking up to 25 days to respond,
with the non-hospital providers and
practitioners taking the longest to
respond.
In addition, many commenters
supported a similar shortening of the
timeframes for replying to requests for
medical information in response to
other review activities. However, several
commenters believed that the 21-day
and 30-day timeframes should be
maintained for other review activities
for the same reasons they supported
maintaining the current timeframes
associated with completing quality of
care reviews.
Response: In determining the precise
number of days for responding to
requests for medical information, we
must consider the impact on the QIOs’
ability to make timely decisions, the
beneficiaries’ right to have complaints
or other review activities decided in a
timely fashion, as well as the burden on
practitioners and providers in
responding to medical record requests.
While we recognize that the shorter
timeframes could cause concerns for
some practitioners and providers,
particularly nonhospital providers, we
also considered the additional
flexibilities we have proposed regarding
the ability to securely transmit
electronic versions of medical
information.
In light of the concerns raised, we are
modifying the proposed regulations to
require that medical information be
obtained within 14 calendar days when
requested in response to a quality of
care review. In addition, we are
adopting this same 14 calendar day
timeframe for all QIO review activities.
We believe that having a single
timeframe will facilitate provider’s and
practitioner’s response times. This same
timeframe will be applicable whether
the provider or practitioner is
forwarding paper copies of medical
records or electronic versions. We
believe that the ability to timely comply
with these requests will be further
enhanced by additional infrastructure
changes we are working towards
implementing in the near future,
including electronic facsimile
capabilities and secure file-sharing
capabilities. We will continue
evaluating additional changes to this

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timeframe as providers and practitioners
increasingly move towards electronic
health records. However, we are
finalizing the proposed regulatory
language that gives QIOs authority to
request medical information in less time
if circumstances warrant the earlier
receipt.
Comment: Several commenters
supported the proposed decrease in
timeframes for completing various steps
of the review process, and several
commenters commended CMS for
streamlining the process. Some
commenters noted that the prior lengthy
timeframes were not patient-centered
and have historically been a point of
beneficiary dissatisfaction. Other
commenters believed that the reduced
timeframes were necessary so that
providers and practitioners obtain
results more quickly, and this is
particularly helpful where the concerns
are unfounded.
However, numerous commenters
expressed concerns regarding the
decreased timeframes. In particular,
commenters raised concerns regarding
the ability to meet the 7-day timeframe
for completing the interim initial
determinations and that, in order to do
so, the more aggressive process
improvements for expedited appeals
would need to be adopted. Some
commenters alleged that CMS is
attempting to make the beneficiary
complaint process similar to the
expedited appeals process, and that this
is not appropriate because these are not
payment determinations in need of
rapid resolution. Some commenters
mentioned that the need of a QIO to
complete a Quality Review Decision
form for each concern and need to
identify evidence-based standards of
care will impact the ability of QIOs to
meet the reduced timeframes for making
the interim initial determination.
Some commenters also noted that the
72-hour timeframe for rendering the
final initial determination and the 72hour timeframe for rendering the
reconsideration decision are too short in
consideration of the scope of the review
necessary and need to thoroughly
evaluate the medical information. Other
commenters also believed that the
requirement that reconsideration
requests be submitted by noon the day
after the notification of the final initial
determination is too short because the
beneficiary and the providers and/or
practitioners need adequate time to
consider the essence of the QIO’s
decision. Moreover, the commenters
stated that the fact that the interim and
final initial determinations are
conveyed orally could impact the ability
to fully evaluate whether a

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reconsideration request should be filed
and may even violate confidentiality
and privacy rights of the individual.
Some commenters alleged that the
provider, practitioner, or beneficiary
could question the identity of the caller.
Still other commenters noted that it is
critical not to rush the QIOs’
investigations of these issues,
particularly because, when final, the
determinations could be used by
plaintiffs’ attorneys to pursue additional
actions against providers and
practitioners. Another commenter noted
that shortening the timeframes too
extensively could have unintentional
negative consequences resulting in the
value of the review process being
compromised for the beneficiaries who
would prefer that their concerns are
properly addressed. One commenter
noted that there are already shorter
processing timeframes currently in
place through the concurrent review
process and, thus, it is not clear why
there is a need for decreased timeframes
when responding to retrospective
reviews. Another commenter expressed
concern regarding the sequence of the
reconsideration right, for example,
should the review of a beneficiary’s
reconsideration request occur before or
after the practitioner’s or provider’s
request, and believed that a beneficiary
could be upset should a concern be
confirmed at the conclusion of the final
initial determination only to have it
overturned as a result of a practitioner’s
or provider’s reconsideration request.
Other commenters believed that the
shorter timeframes would increase
costs, including the compensation costs
for physician reviewers. Several
commenters noted that the new Chapter
5 instructions already include shorter
timeframes for completing various steps
of the review process and that these
timeframes should be maintained until
medical information can be received
electronically from providers and
practitioners and also conveyed
electronically to peer reviewers. Some
commenters questioned why a
beneficiary’s right to request a
reconsideration cannot be implemented
sooner than August 2014.
Response: In considering the reduced
timeframes for various steps, we
attempted to identify timeframes that
would balance the interests of
beneficiaries, providers, and
practitioners in obtaining timely
resolution of complaints with the time
necessary for the QIOs to effectively and
thoroughly complete the various tasks
involved in the review process. We have
routinely heard from beneficiaries that
the time necessary to complete reviews

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is a point of dissatisfaction, and clearly
a process that requires more than 150
days to complete a review can be
frustrating to all involved. Moreover, we
disagree with the suggestion that our
goal is to make the beneficiary
complaint review process similar to the
expedited appeals process. Because the
expedited appeal decisions are typically
made within 24 to 48 hours of the filing
of the appeal, the expedited appeal
process is quite different from the
proposed complaint process, which
allows 7 days to make the interim initial
determination, offers providers and
practitioners the opportunity to discuss
the results, and then permits several
more days before the final initial
determination is made.
We are concerned by the statement of
the commenter who noted the need to
create a Quality Review Decision form
for each concern identified during the
review. That is inaccurate. Only one
Quality Review Decision form needs to
be created to track the QIO’s review of
a beneficiary complaint or completion
of a general quality of care review.
Moreover, with regard to the comment
that these shorter timeframes appear
unnecessary in light of the already
existing authority to conduct concurrent
beneficiary complaint reviews, we
advised in the proposed rule that the
retrospective and concurrent distinction
in reviews would no longer be used.
Our goal is to move away from having
a distinction in processing requirements
that is determined by the beneficiary’s
inpatient (concurrent) or discharge
(retrospective) status and instead
consider the severity of the issues in
order to determine how quickly to
process the complaints. We have
already addressed that QIOs have the
authority to request medical information
within shorter periods of time if
circumstances warranted. Moreover, the
timeframes for completing the interim
initial determination and final initial
determination convey that the QIO must
complete its review ‘‘within’’ the
prescribed period of time. We believe
that our timeframe should be sufficient,
even for complaints that are
unexpectedly complex, and that QIOs
have the flexibility to use the full time
allotted for the interim and final initial
determinations or to complete these
steps in less time if circumstances
warrant it, such as when circumstances
surrounding the complaint have a
severe impact on the quality of care
received.
With regard to the sequence, all
parties will be offered the right to
request a reconsideration at the same
time, and each party must understand
that the review will be an independent

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review that could result in the final
initial determination being overturned.
In addition, while it is accurate that the
new Chapter 5 manual instructions
contain processing timeframes that are
shorter than those historically used, we
undertook the task of writing these new
regulatory provisions because we
believed that additional improvements,
including the potential incorporation of
even shorter timeframes, could be made
and that any additional and more
comprehensive timeframes should be
accomplished through notice-andcomment rulemaking.
However, we recognize that some of
the timeframes are considerably more
aggressive than those followed by the
QIOs as recently as 6 months ago. After
considering the public comments we
received, we have decided to extend the
timeframe for the QIO to make the
interim initial determination from 7
calendar days to 10 calendar days.
Although we do not agree that QIOs will
be unable to meet the proposed 7-day
timeframe based on the need to identify
evidence-based standards of care
because QIOs have always been
responsible for identifying standards of
care and will have a readily available
repository of up-to-date standards of
care for most concerns, we nonetheless
choose to extend the timeframe to 10
days based on the concerns that peer
reviewers be given adequate time to
review the medical information,
particularly if the medical information
is somewhat voluminous.
In addition, in this final rule with
comment period, we have modified the
timeframe for making the final initial
determination from 72 hours to 3
business days. We also have extended
the timeframe for filing reconsideration
requests from noon the calendar day
following the initial notification to 3
calendar days. In addition, to ensure
that all parties can properly evaluate the
need to file a reconsideration request,
we have modified the regulatory
requirements to require that QIOs issue
the final initial determination in
writing. Lastly, we have extended the
timeframe for QIOs to render the
reconsideration decision from 72 hours
to 5 calendar days. Although it was
suggested that the right to request
reconsiderations could be implemented
sooner than August 2014, we continue
to believe that this period of time is
necessary to ensure all process and
system requirements can be effectively
implemented. This includes ensuring
that beneficiaries, providers, and
practitioners are aware of this new right.
Comment: Several commenters
believed that the reduction of time for
completing the opportunity for

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discussion could impact the accuracy
and thoroughness of the review process
and that because the results of the
interim initial determination and right
to an opportunity for discussion are
initially conveyed orally, this will
require a physician with quality
improvement experience to ensure that
the issues are accurately conveyed to
the practitioner or provider and to
ensure that any response from the
practitioner is correctly transcribed.
Several commenters believed that it
would be better for the response to be
in writing in all circumstances. Other
commenters believed that the timeframe
for completing the opportunity should
be extended to 10 days with exceptions
built in for certain events. One
commenter noted that more time was
necessary because it is hard to reach
practitioners and/or providers and
leaving messages is not appropriate. The
commenter believed that this timeframe
is even more problematic where
multiple practitioners and/or providers
are involved in a single complaint and
that should the practitioners and
providers be reached on different days,
the QIOs would be forced to separately
track the response time period
applicable to each practitioner and/or
provider.
Several commenters suggested that
practitioners and providers be allowed
to submit new or additional medical
information during the opportunity for
discussion. Some commenters suggested
that refusing to allow the submission of
additional medical information is
grossly unfair if the amount of time
provided for submitting medical
information is reduced. Moreover,
commenters noted that providers and
practitioners could find additional
medical documentation in researching
the results of the interim initial
determination. Other commenters
believed that not allowing the
submission of additional evidence
during the opportunity for discussion
would result in the unnecessary filing of
additional reconsideration requests. In
addition, commenters noted that,
frequently, when a physician or
provider receives a call regarding the
opportunity to discuss the QIOs
findings, this is the first time the
provider and/or practitioner learns that
a complaint has been filed. Thus, the
commenters added, the discussion can
be helpful to explain the content of the
discussion, particularly because the
content of the medical information may
not be readily available.
Response: While we recognize that
any shortening of timeframes creates
concerns, our objective is to identify a
period of time that ensures beneficiaries

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obtain resolution of complaints in a
timely fashion, while also giving a
practitioner or provider an adequate
period of time to discuss the QIO’s
initial findings. In considering the
comments, we noted that, while some
concerns were related to the ability to
reach the physician and/or provider, the
primary concerns related to the impact
on the QIO’s initial decision and request
for medical information and not the
discussion itself. In fact, QIOs have
noted that, rather than focus being given
to the discussion of a QIO’s findings, the
‘‘discussion’’ instead frequently
becomes an additional period of time
during which the provider or
practitioner attempts to convey
additional medical information that was
not provided when the request was first
made. In shortening the timeframe and
restricting the submission of additional
medical information, we intend that
more focus be given to the discussion
with emphasis on improving the quality
of care provided. Moreover, many QIOs
already conduct the opportunity for
discussion based solely on oral
communications with the providers
and/or practitioners, and we see no
need to restrict the process to written
exchanges of information in light of the
QIOs’ historical experience in
effectively completing the discussions
orally. At the time of the discussion, the
QIO has made its interim initial
determination, with the specific
problematic care and pertinent standard
of care being identified. Thus, the
discussions can be narrowly focused to
the QIO’s findings. As such, in
considering the public comments
provided regarding the opportunity for
discussion, we have determined that the
7-day time period is an appropriate
period of time to complete this step.
However, we recognized that the offer of
the opportunity to discuss the QIO’s
interim initial determination findings
can be the first time the provider and/
or practitioner is made aware that a
complaint has been filed. Therefore, we
have modified the regulations at
§ 476.130(b) to add new language at
paragraph (2) that when requesting
medical information in response to a
complaint, the QIO must advise that the
information is being requested as the
result of a complaint and convey to the
provider and/or practitioner that they
will be given the right to discuss the
QIO’s interim initial determination. The
QIO also must request, at that time, a
contact name to ensure the opportunity
for discussion can be completed in a
timely fashion.
We are not persuaded that an
opportunity to submit additional

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medical information is necessary as part
of the opportunity for a discussion.
While we appreciate the fact that the
ability to submit additional medical
information could facilitate the
resolution of concerns and avoid the
submission of reconsideration requests,
we believe that there is sufficient time
to ensure QIOs receive the correct
medical information to resolve the
complaint correctly the first time such
that the discussion does not routinely
result in the QIO learning that its review
was completed without all the medical
information. Making providers and
practitioners aware that the initial
request for medical information is the
result of a beneficiary complaint will
facilitate the QIOs’ receipt of thorough
and complete medical information. This
will also ensure that the discussions are
focused more on ways to improve the
quality of care rather than the continued
pursuit of obtaining all pertinent
medical records.
After consideration of the public
comments we received, we are adopting
our proposals regarding the beneficiary
complaint review process, except for
those modifications to the proposed
timeframes related to the issuance of the
interim initial determination, the
issuance of the final initial
determination, the time period provided
for requesting a reconsideration, the
time given to QIOs for issuing the
reconsideration decision, the new
notification requirement for medical
information requests in response to
beneficiary complaints, and the change
requiring that written notice of the final
initial determination be forwarded in all
situations.

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2. Completion of General Quality of
Care Reviews
As we noted in the proposed rule,
although the QIO’s responsibility for
completing quality of care reviews is
already set forth in the QIO program
regulations at existing § 476.71(a)(2), the
procedures that QIOs use in completing
these reviews are not. As we previously
noted, many process improvements
were incorporated into the new manual
instructions mentioned previously
(Transmittal 17, April 6, 2012, CMS
Manual System, Pub. 100–10 Medicare
Quality Improvement Organizations,
Chapter 5, Quality of Care Review)
(available at http://www.cms.gov/
Regulations-and-Guidance/Guidance/
Transmittals/Downloads/R17QIO.pdf).
These new instructions were effective
May 7, 2012. However, we believe that
it was also necessary to propose these
regulations to attain additional
improvements and to ensure

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transparency of the QIO program
operations.
First, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45202), under new
§ 476.160(a)(1), we proposed to specify
those circumstances in which a QIO
may conduct a general quality of care
review. These circumstances would
include those situations where a
potential quality of care issue is referred
to the QIO by another source, such as
by another CMS contractor, an
individual submitting a request
anonymously, or another Federal or
State entity. In addition, we recognize
that more frequently the QIOs are
working to use the substantial data
available to them to identify potential
areas where improvements in the
quality of health care could be attained,
and we believe these instances should
be accounted for as we move forward.
We also are aware that QIOs frequently
identify potential quality of care issues
when conducting other case review
activities, including medical necessity
reviews, expedited discharge appeals,
among others; therefore, we have
included this as an instance where a
general quality of care review can be
initiated.
Under proposed new § 476.160(a)(2),
we proposed to specify that the QIO’s
review will focus on all concerns raised
by the source of a referral or report and/
or identified by the QIO. While the
episode of care should still be
considered, it may be less significant for
these reviews than those in response to
a complaint submitted by a beneficiary,
because the main goal of complaint
reviews is to address a beneficiary’s
particular experiences with receiving
certain services at a particular time.
However, we again proposed under
proposed § 476.160(a)(3) that the QIO
will use evidence-based standards of
care to the maximum extent practicable
in completing these reviews, and that
the QIO’s determination regarding the
standard used in completing the review
is not subject to appeal.
Under proposed new § 476.160(b), we
proposed to specify the responsibility of
providers and practitioners to supply
requested medical information. This
language is identical to the language in
proposed new § 476.130(b) applicable to
written beneficiary complaints,
including the proposed 10-calendar day
timeframe for practitioners and
providers to respond to requests for
medical information and the QIO’s right
to request even earlier receipt when the
QIO preliminarily determines that a
concern may be serious enough to
qualify as a gross and flagrant or
substantial quality of care concern.
Although the decreased timeframe is not

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68521

related to the goal of providing
beneficiaries with more timely
resolution of their complaints (because
beneficiaries will not be getting results
of these reviews), we still believe there
is ample justification to warrant the
reduced timeframe. Providers and
practitioners will benefit from the faster
resolution of these reviews and the
increased focus on identifying and
resolving impediments to improved
health care (particularly in cases
involving potential serious concerns).
These improvements will ultimately
benefit patients. Additionally, as with
written beneficiary complaints, the
timeframes are comparable to models
typically used by vendors. We also
considered that, as with written
beneficiary complaints, the QIOs
currently use shorter timeframes where
the beneficiaries impacted by the
general quality of care review are still
receiving care (concurrent review),
compared to those situations where a
beneficiary has already been discharged
(retrospective review). Again, while we
did not propose the continued use of the
concurrent and retrospective
designations, we recognize that there are
circumstances, even with general
quality of care reviews, where even
shorter timeframes may be warranted.
As mentioned previously, in the FY
2013 IPPS/LTCH PPS final rule (77 FR
53664 through 53665), we finalized
proposed changes to § 476.78 to add
references to ‘‘practitioners’’ in parts of
this section, which previously referred
only to ‘‘providers,’’ in order to equalize
the 30-day and 21-day timeframes for
submitting records. We also made
changes to § 476.90 to equalize the
ramifications for not submitting records
on time because we see no reason to
differentiate between a provider’s and a
practitioner’s records. While these
changes in the FY 2013 IPPS/LTCH PPS
final rule had not been finalized when
we issued the CY 2013 OPPS/ASC
proposed rule, in the CY 2013 OPPS/
ASC proposed rule, we proposed to
modify the current general 30-day and
21-day timeframes in § 476.78(b) to
reflect the new timeframes in
§§ 476.130(b) and 476.160(b), which
apply only to records submitted for
purposes of beneficiary complaint and
general quality reviews. We also
requested public comment on whether
changes similar to those we proposed
for beneficiary complaints and general
quality of care reviews, including
shortening of the 30-day and 21-day
timeframes, should be incorporated
more broadly into § 476.78(b) for
requests for medical information in
general, for any kind of QIO reviews,

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including nonquality-related reviews.
We proposed to apply a shorter
timeframe for all of a QIO’s requests for
records, without limiting this
application to beneficiary complaints or
general quality reviews in just one
instance; where secure transmissions of
electronic versions of medical
information are available, we proposed
a shorter timeframe. Our proposal
regarding secure transmissions of
electronic versions of medical
information is discussed more fully later
in this section.
We also proposed new § 476.160(c),
which would specify that the QIO peer
reviewer will render the initial
determination within 7 calendar days of
the receipt of all medical information;
this paragraph is substantially different
from the proposed beneficiary
complaint review procedures in
proposed new § 476.130 in two areas.
First, beneficiaries would not be
provided any information regarding
these reviews. Although we recognize
that, at times, potential quality concerns
a QIO identifies could impact a specific
beneficiary, we believe that this type of
review does not warrant any
communication directly to the
beneficiary. In fact, we believe that
giving feedback of potentially poor care
to an unknowing beneficiary could
cause more anxiety than is warranted by
the circumstances, and that is not our
goal. We also recognize that, in many
situations, the reviews could relate to or
involve numerous beneficiaries.
However, those beneficiaries may only
be a sample of the beneficiaries
potentially impacted. This is
particularly true in those circumstances
where the QIO is reviewing systemrelated aspects of care, and it will be
incumbent upon the QIO to determine
what medical information—and by
extension the sample of beneficiaries
receiving care—to be analyzed in
completing these reviews.
Second, we proposed that
practitioners and providers not be given
an opportunity to discuss the QIO’s
initial determination before it becomes
final. We believe that giving such an
opportunity is not necessary,
particularly because these discussions
frequently become, in effect, an entirely
new review by the QIO and not merely
a discussion, and because we already
proposed at proposed new § 476.170(a)
that the practitioner and/or provider be
given the right to request a
reconsideration of the QIO’s initial
determination. As with beneficiary
complaint reviews, we proposed that
this right not be available until after July
31, 2014, to give us time to fully
establish the process requirements and

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ensure that this right is meaningful for
providers and practitioners, although
they continue to have the right to
request a re-review.
In addition, under proposed new
§ 476.170(a)(1) through (a)(3), we
proposed requirements similar to those
in § 476.140 regarding the timeframe for
submitting a request for a
reconsideration (by noon of the calendar
day following initial notification), the
obligation of a practitioner and/or
provider to be available to answer
questions or supply information, as well
as the QIO’s obligation to offer the
provider the opportunity to provide
information as part of the
reconsideration request. We also
proposed provisions under proposed
new § 476.170(b) concerning the QIO’s
issuance of its final decision. This
includes the requirement that the QIO’s
decision be issued within 72 hours after
receipt of the request for a
reconsideration, or, if later, 72 hours
after receiving any medical information
or other records needed for such a
reconsideration, the specific content of
the final decision, and the right of the
QIO to provide information to the
provider or practitioner regarding
opportunities for improving care given
to beneficiaries based on the specific
findings of its review. The information
QIOs provide regarding potential
improvements could include specific
opportunities related to the
practitioner’s or provider’s delivery of
care and/or even broader improvements
focusing on the community served by
the practitioners and/or providers.
Comment: Commenters conveyed the
same concerns regarding several aspects
of general quality of care reviews as
were raised with beneficiary complaint
reviews, including the authority to
establish the standards of care and lack
of an appeal mechanism for these
standards, shorter timeframes for
medical information requests, decreased
timeframes for various steps, including
the timeframe for rendering the initial
determination, the time given to submit
reconsideration requests, and the
timeframe given to QIOs to render
reconsideration decisions.
Response: For the same reasons we
discussed regarding beneficiary
complaint reviews, we are not making
any changes to the proposed regulations
regarding the QIOs’ authority to
establish standards of care, but we are
modifying several key timeframes as
discussed below. As previously
mentioned, we are extending the time
period for responding to medical record
requests from 10 calendar days to 14
calendar days for all review types,
including general quality of care

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reviews. We are extending the period of
time given to the QIO peer reviewer in
rendering the initial determination from
7 calendar days to 10 calendar days, and
we believe this additional time is
warranted to ensure the peer reviewer
has adequate time to render a thorough
decision. In addition, as with
reconsideration requests submitted in
response to beneficiary complaints, we
are increasing the time to file a
reconsideration request from noon of
the calendar day following the initial
notification to 3 calendar days. We also
are increasing the time given to a QIO
to complete the reconsideration
decision from 72 hours to 5 calendar
days. Moreover, we are modifying
§ 476.160(c) to make clear that the
initial determination must be issued in
writing and also are adding a
corresponding change to § 476.170(a)
denoting that a reconsideration request
be received within 3 calendar days of
the receipt of the written determination.
Comment: Some commenters
expressed support for the QIOs’
authority to pursue quality of care
concerns when a beneficiary decides not
to file a complaint. However, some
commenters noted that using the
‘‘imminent danger’’ criterion embedded
within the definition of ‘‘gross and
flagrant’’ violations was too limiting and
QIOs should have more authority to
pursue these issues. One commenter
questioned why CMS was creating this
‘‘new authority’’—and a second
oversight body—when States already
have oversight over hospital quality.
This commenter also suggested that the
QIOs’ efforts are duplicative and thus
the overlap of State efforts is
problematic.
Response: We appreciate the
commenters’ support and agree that
having QIOs pursue certain quality of
care issues, even when a beneficiary
chooses not to file a complaint, can be
helpful in identifying improvements to
the quality of care. However, we believe
that some limits should be placed on the
type or severity of concerns that QIOs
should pursue in order to maximize the
use of QIO resources. Thus, we are
maintaining the limit on the QIOs’
authority to pursue these as conveyed in
the proposed regulation.
With regard to the concern that we are
creating a ‘‘new authority,’’ this is
inaccurate. QIOs have actually had and
used this authority for more than 30
years, although this is the first time the
process requirements have been detailed
in regulations. We are obligated to
ensure the effective implementation of
the QIO program in light of the statutory
authority granted the QIOs, regardless of
whether certain State programs have

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been established to address similar
issues.
Comment: Several commenters
expressed concern regarding the
proposed removal of the right to request
an opportunity for discussion. The
commenters expressed concern that the
QIO could make decisions on these
concerns without an opportunity for a
counter argument from the involved
practitioner and/or provider. Several
commenters suggested that the change
would merely result in the receipt of
more reconsideration requests being
filed based on initial determinations
being made without input from the
involved practitioner and/or provider or
the ability to obtain additional medical
information. Other commenters
suggested that providers and
practitioners should have the same
rights to due process here as with
beneficiary complaint reviews and that
the discussion can often clarify the
concerns so that the provider or
practitioner is better able to respond.
Some commenters suggested that the
opportunity for discussion was
necessary because, in comparison to
beneficiary complaints, these concerns
are often the most serious cases because
they include issues identified by the
QIO through evaluation of other QIO
review activities or from referrals from
other agencies.
Response: Although we appreciate the
concerns raised regarding the removal of
this step, we believe that it is not
necessary for purposes of general
quality of care reviews because, as many
commenters acknowledged, the
discussion has become little more than
an opportunity to convey additional
medical information to the QIO with no
actual discussion occurring about ways
to improve the quality of care. We
believe that there are modifications that
can be made to the manner in which
medical information is initially
requested by the QIO to ensure that all
medical information is obtained prior to
the QIO’s review, and we will work to
ensure that these modifications are
incorporated into the QIO’s processing
requirements. This will then eliminate
what many commenters suggested was
the primary purpose of the opportunity
for discussion.
Moreover, there is a statutory
distinction between situations in which
discussions have been specifically
required and those in which they are
not. In those circumstances where
Congress believed that such an
opportunity to discuss a particular type
of issue was warranted, the right was
specifically added to the statute, as in
section 1154(a)(3)(B)(ii) of the Act
regarding those situations where an item

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or service furnished or to be furnished
is disapproved and section 1154(a)(14)
of the Act regarding written beneficiary
complaints.
In terms of the commenters’ other
concerns—that providers and
practitioners will not have an
opportunity to make counter arguments,
that decisions would be made without
input from the involved practitioners or
providers, that providers and
practitioners will not have the same
rights to due process as in beneficiary
complaint reviews, and that providers’
and practitioners’ concerns in general
quality reviews often involve the most
serious cases—we would note that these
parties continue to have the opportunity
to make counter arguments and give
input on the QIO’s decisions by
requesting a re-review until the
reconsideration right becomes available.
A provider’s or practitioner’s right to
request a re-review is, in fact, a due
process right that beneficiaries are not
given. Providers and practitioners also
will have an opportunity to present
their point of view in the context of a
reconsideration when that right is
implemented, and beneficiaries will be
afforded the same right.
After consideration of the public
comments we received, we are adopting
as final our proposals regarding general
quality of care reviews, except that we
have extended the timeframes for
submitting medical records to 14
calendar days, rendering the initial
determination to 10 calendar days, filing
a reconsideration request to 3 calendar
days, and issuing the reconsideration
decision to 5 calendar days.
C. Use of Confidential Information That
Explicitly or Implicitly Identifies
Patients
The QIO regulations at § 480.101(b)
define any information that explicitly or
implicitly identifies an individual
patient as confidential information.
Although provisions are included in 42
CFR part 480 governing a practitioner’s
and/or provider’s right to allow a QIO
to use or disclose confidential
information about the named
practitioner or provider (§§ 480.105(b),
480.133(a)(2)(iii), and 480.140(d)), a
similar right is not conveyed for
beneficiaries. Thus, QIOs are prohibited
from obtaining a beneficiary’s
authorization to use or disclose the
beneficiary’s confidential information,
even in situations where a use or
disclosure could be helpful to the
beneficiary and his or her health care or
even where the beneficiary specifically
asks the QIO to disclose the
information.

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One of the key challenges for the QIOs
is identifying improvements in health
care delivery systems. In fact, the
‘‘patient-centeredness’’ aim of the QIO’s
current scope of work requires more
patient involvement, and the goal of
many patient and family engagement
efforts is to incorporate a ‘‘real-world
person’s’’ experiences to demonstrate
the compelling and urgent need for
healthcare delivery reform.
Additionally, beneficiaries have asked
to participate in the QIO’s work in a
meaningful way. Unfortunately, we are
often unable to accommodate these
requests in light of the current
regulatory restriction. We believe that
this restriction, which was developed
may years ago, is outdated, and that
beneficiaries should be given the right
to make choices regarding the use and
disclosure of their confidential
information.
Therefore, in the CY 2013 OPPS/ASC
proposed rule (77 FR 45204), we
proposed new § 480.145 that will govern
a beneficiary’s right to authorize a QIO’s
use or disclosure of the beneficiary’s
confidential information. Under
proposed § 480.145(a), we proposed
that, except as otherwise authorized by
the QIO confidentiality regulations, a
QIO may not use or disclose a
beneficiary’s confidential information
without an authorization from the
beneficiary and that the QIO’s use or
disclosure must be consistent with the
authorization. Under proposed
§ 480.145(b)(1) through (b)(6), we listed
those aspects of an authorization
necessary to make the authorization
valid. This includes the requirements
that a specific and meaningful
description of the confidential
information be included, and that the
authorization also include the name(s)
of the QIO(s) and QIO point(s) of contact
making the request to use or disclose the
information, the name or other specific
identification of the person, or class of
persons to whom the QIO may allow the
requested use or make the requested
disclosure, a description of the
purpose(s) of the use or disclosure, the
date or event upon which the
authorization will expire, and the
signature and date of the beneficiary
authorizing the use and/or disclosure of
the information. We also proposed
under § 480.145(c)(1) and (c)(2) that the
authorization must contain a statement
that the beneficiary maintains the right
to revoke his or her authorization in
writing and that the QIO must specify
any exceptions to the right to revoke, as
well as the process a beneficiary must
use to revoke the authorization. In
addition, under § 480.145(c)(3), we

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proposed the requirement that the QIO
convey to the beneficiary its inability to
condition the review or other activities
it is responsible for (such as beneficiary
complaint reviews, medical necessity of
a beneficiary’s services, or discharge
appeals) on whether or not the
beneficiary provides authorization. We
also proposed under § 480.145(c)(4) to
make clear the consequences of
authorizing the use or disclosure of
information, and the fact that the QIO
may be unable to protect the
information from redisclosure. Under
§ 480.145(d), we proposed that an
authorization must be written in plain
language, and under § 480.145(e) that a
QIO must provide the beneficiary with
a copy of the signed authorization.
Lastly, although we make reference to a
beneficiary’s right to revoke
authorization under proposed
§ 480.145(c)(1), in paragraph (f) we
proposed a specific provision that will
make clear that a beneficiary may
revoke, in writing, an authorization at
any time, except when the QIO has
taken action in reliance upon the
authorization.
We believe that these proposed
changes appropriately relax some of the
historical restraints on the QIO’s use of
a beneficiary’s confidential information,
enable QIOs to better meet the needs of
Medicare beneficiaries, and give
beneficiaries the opportunity to
participate in efforts to improve the
quality of their health care.
Comment: Several commenters
supported this new authority. One
commenter requested that the
regulations should also be changed to
allow for the use of video as well as
social media, while another commenter
requested that whatever authorization
form CMS develops should be in plain,
understandable language and as short as
possible.
Response: We appreciate the support
for this new regulatory authority. We
believe that the regulatory provisions as
proposed already give the flexibility to
use video and social media. The
proposed regulations specify the
beneficiary’s right to authorize the use
of his or her confidential information
and the mechanism through which
QIO’s can obtain this authorization.
However, the provisions do not, in any
way, restrict the use of the confidential
information to one specific mechanism,
such as print advertisements. In terms of
the development of an authorization
form, at this time we do not intend to
develop such a form. Each QIO will be
responsible for developing an
authorization form that meets the
requirements of the new regulatory
provisions.

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After consideration of the public
comments we received, we are adopting,
without modification, our proposals
regarding the use of confidential
information that implicitly or explicitly
identifies patients.
D. Secure Transmissions of Electronic
Versions of Medical Information
When the QIO program regulations
were first written in 1985, computers,
along with digitally or electronically
stored information, were still in their
infancy. Thus, the QIO program
regulations were written based on the
perspective that most information
sharing would be through the exchange
of paper copies of medical records and
other information. Since that time, we
have seen great advances in the ability
to electronically share data, whether
through the use of mass storage devices
(flash drives), the sending and receipt of
electronic facsimiles, and even the use
of email. At the same time, several laws,
including HIPAA and the Federal
Information Security and Management
Act (FISMA), have been established to
protect sensitive information. However,
because the QIO program regulations
have not undergone significant
modification since they were originally
adopted, the regulations do not account
for electronic sharing of information and
the QIOs’ work is carried out within the
context of exchanging paper copies of
documents and information. At times,
this creates additional work and costs
because those providers and
practitioners who have the ability to
securely share electronic versions of
medical records must actually print out
the records and pay to have the paper
copies mailed to the QIOs.
To address these issues, in the CY
2013 OPPS/ASC proposed rule (77 FR
45204) we proposed to revise existing
§ 476.78(b)(2) to add a new paragraph
(iii) to make clear the QIOs’ right to
exchange secure transmissions of
electronic versions of medical
information, subject to a QIO’s ability to
support the exchange of the electronic
version. We believe that this proposal
would enable QIOs to receive and send
medical information in a variety of
formats, including through secure
electronic faxes, and would reduce costs
for providers and practitioners because
they would no longer have to print and
mail paper copies. In addition, to fully
take advantage of the ability to receive
and send electronic versions of medical
information, we believe that a reduced
timeframe is warranted for those
instances where electronic versions are
to be forwarded in response to requests
from a QIO. Therefore, we proposed
under proposed § 476.78 (b)(2)(iii) to

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require providers and practitioners to
deliver electronic versions of medical
information within 10 calendar days of
the request from the QIO. As we noted
previously, changes to existing
§ 476.78(b) have already been adopted
in the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53664 through 53665). As
discussed earlier in this preamble, we
proposed in the CY 2013 OPPS/ASC
proposed rule additional changes to
§ 476.78 to take into account the
different, more expedited timeframes we
proposed for medical records related to
beneficiary complaint and general
quality of care reviews. In the CY 2013
OPPS/ASC proposed rule (77 FR 45204),
we also requested public comments on
whether additional changes should be
made to § 476.78(b) to expand the
different timeframes to cover medical
records for all kinds of reviews. We also
requested public comments on whether
any modifications should be made to
the reimbursement methodologies for
paper copies described in § 476.78(c).
We note that we carried forth in the
proposed rule the proposed change to
the section heading for § 476.78 that was
included in the FY 2013 IPPS/LTCH
PPS proposed rule, that is, the proposed
change from ‘‘Responsibilities of health
care facilities’’ to ‘‘Responsibilities of
providers and practitioners’’ (which has
now been finalized).
Comment: Several commenters
supported the proposed regulation that
would enable QIOs to securely transmit
electronic versions of medical
information. Some commenters noted
that the ability to transmit information
electronically is a long overdue process
change and the QIOs have been
‘‘severely hampered’’ by not being
allowed to incorporate more electronic
exchanges of information into their
activities. These commenters also urged
CMS to consider how QIOs can more
effectively accept electronic records.
Other commenters, while supportive of
the proposal to allow QIOs to securely
transmit electronic versions of medical
information, cautioned CMS that QIOs
will need instructions, equipment and
electronic exchange infrastructure to be
in place before these changes are
implemented. Some commenters noted
that ensuring remote access to CMS
information systems for QIO staff and
access to medical information is
necessary to achieve the full benefits of
this proposed regulation because peer
reviewers frequently are not located
onsite at the QIOs’ place of business.
Some commenters noted that the ability
to securely transmit electronic versions
of information is particularly significant
in light of the proposed tighter

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timeframes for completing review
activities, while other commenters
expressed concerns surrounding the
ability to correctly track the differences
in timeframes for responding to
different types of requests. In addition,
some commenters suggested that the
proposed provision could help reduce
costs related to the shipping of paper
copies of medical information from
providers and practitioners to the QIO,
as well as from the QIOs to their
physician reviewers and then back to
the QIOs.
Response: We appreciate the
commenters’ support and agree that
instructions, equipment, and electronic
exchange infrastructure must be put in
place in order to take full advantage of
this new flexibility. We are currently
initiating efforts to allow QIOs to
receive electronic versions of medical
information in multiple ways, as well as
exchange these electronic versions with
staff, including peer reviewers,
remotely. We agree that this new
flexibility can only facilitate providers’
and practitioners’ ability to comply with
requests for medical information and
also anticipate that the opportunity to
use electronic exchanges will enable
QIOs to complete their activities more
quickly at reduced costs compared to
the use of paper copies of medical
records. Moreover, we appreciate that
providers and practitioners receive a
variety of requests for medical records
and that these requests are not just from
QIOs. Thus, tracking the different
timeframes can be problematic. As we
previously noted, we are adopting a
uniform 14 calendar day timeframe for
responding to requests for medical
information for all requests, except that
QIOs will maintain the authority to
request medical information more
quickly if circumstances warrant earlier
receipt.
Comment: Some commenters stated
that the amounts of reimbursement for
photocopies do not adequately cover the
cost of what it takes to generate the
requested records and that the
methodology for determining
reimbursement rates needs to be
routinely updated to keep pace with
inflation.
Response: We thank the commenters
for their input. At this time we are
continuing to examine ways to possibly
accommodate changes in
reimbursement rates. We plan to
consider various factors, such as how
the new flexibility to securely transmit
electronic versions of medical
information might affect the payments
we will be able to make for the
submission of paper records. We are not
making specific changes at this time, but

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will consider the commenters’ input as
we pursue possible changes to these
regulations in future rulemaking.
After consideration of the public
comments we received, we are adopting,
as final, our proposals regarding secure
transmissions of electronic versions of
medical information, except that we are
extending the timeframe for submission
of medical information to 14 calendar
days.
E. Active Staff Privileges
In our efforts to ensure the QIO
program is able to meet the needs of
Medicare beneficiaries and improve the
quality of health care moving forward,
we have identified an aspect of the QIO
program regulations that has become
increasingly problematic for the QIOs.
Under existing § 476.98(a)(1), QIOs are
required to use an individual with
‘‘active staff privileges in one or more
hospitals’’ in making initial denial
determinations. However, there is an
accelerating trend toward primary care
physicians (family physicians/
internists) who provide care solely in
the outpatient care settings and a
corresponding decline in the number of
family practice physicians who provide
any care in hospitals. In fact, many of
these individuals do not provide any
inpatient care and either have no
hospital privileges or only ‘‘courtesy’’
privileges, which do not meet the
definition in existing § 476.1 of ‘‘active
staff privileges.’’ While we believe that
the continued use of peer reviewers is
necessary and vital to the success of the
QIO program, the need to use
physicians with ‘‘active staff privileges’’
is not. We believe that the proposed
removal of this requirement would
increase the number of peer reviewers
available for use by the QIOs, which, at
times, has become particularly
problematic for the QIOs. Therefore, in
the CY 2013 OPPS/ASC proposed rule
(77 FR 45204 through 45205), we
proposed to remove the definition of
‘‘active staff privileges’’ under § 476.1
and to remove the phrase referring to
using individuals ‘‘with active staff
privileges in one or more hospitals in
the QIO area’’ in making initial denial
determinations under § 476.98(a)(1).
Comment: Several commenters
opposed the proposal to remove ‘‘active
staff privileges’’ as a requirement for
peer reviewers making an initial denial
determination and indicated that having
active staff privileges is necessary
because there is a need to ensure peer
reviewers are cognizant of ‘‘emerging
clinical evidence and practices,’’
particularly because clinical practice
can change so rapidly. Others
commenters noted that CMS should at

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68525

least require active staff privileges in the
State where the care was provided,
while some commenters may have
misunderstood the terminology and
believed that the change would enable
QIOs to use physicians who are not
actively practicing. Some commenters
also noted that requiring QIOs to use
physicians with active staff privileges
made assessing the care provided by
potential reviewers easier because it
supplemented the information QIOs
could glean from State licensure,
National Practitioner Data Bank, and
self-reported information, and that the
use of physicians with active staff
privileges added to the credibility of the
QIOs’ peer review activities in the
medical community.
Several commenters supported the
removal of this requirement and
believed it would allow for the
inclusion of more specialized physician
reviewers, provide more flexibility to
QIOs in hiring peer reviewers by
increasing the pool of eligible reviewers,
and more closely mirror the current
practicing medical environment. In
particular, one commenter noted that,
by removing this language, QIOs would
be able to rely more on ‘‘setting-based’’
expertise (such as a nursing home or
clinic), than is currently allowed by the
more narrow active staff privilege
requirement. Another commenter
supported the change but not the
removal of the phrase ‘‘in the QIO area’’
because of a concern that it could be
interpreted to mean that a physician
from outside the QIO’s review area
could conduct the review.
Response: We appreciate the
comments and agree that having
physicians with current, relevant
knowledge of medical care is imperative
to the operations of the QIOs and its
cadre of physician reviewers. However,
it appears that some commenters
erroneously equated the removal of the
active staff privileges requirement to the
QIOs’ use of physicians who were not
actively practicing medicine. This is
inaccurate and QIOs are obligated to use
physicians who are actively practicing.
Other commenters believed that
physicians with active staff privileges
would be those with the most current
and relevant knowledge of medical care
that is the subject of the QIO’s review.
However, we are unaware of any studies
or research supporting this claim. In
identifying physicians for use as
reviewers, the QIOs would still be able
to procure the services of actively
practicing physicians with knowledge of
the most current, relevant medical care.
We believe that the removal of the
active staff privileges requirement,
however, would enable QIOs to better

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match and utilize the expertise of
physicians to the actual settings in
which the care in question is provided.
That is because, historically, the
requirement to use a physician with
active staff privileges could prevent the
use of a physician who practiced in, and
was more intimately familiar with, the
care provided in a particular setting (for
example, a nursing home setting) if that
physician lacked active staff privileges
in a hospital.
While it is possible that the removal
of this requirement might result in a
QIO being obligated to take some
additional steps in evaluating the
performance or effectiveness of a
potential peer reviewer, we see no
reason why having QIOs assume these
extra steps should amount to a
significant addition to their workload.
We regard these steps as an essential
part of the process a QIO should follow
in finding the best match, including by
specialty and setting, for any particular
review activity. Lastly, while we
appreciate the concern that removal of
the language ‘‘in the QIO area’’ could
cause confusion surrounding the QIO’s
obligation to use a physician within the
QIO’s area, we note that, in fact, this
obligation continues to be clearly laid
out in provisions of the statute,
including in section 1154(a)(7) of the
Act, and in other references within the
regulations at 42 CFR Part 476.
However, in order to minimize any
possible confusion, we are modifying
the proposal to maintain the ‘‘in the QIO
area’’ language within § 476.98(a)(1).
After consideration of the public
comments we received, we are adopting
as final our proposal to remove the
language regarding active staff
privileges, except that we are
maintaining the language ‘‘in the QIO
area.’’

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F. Technical Corrections
In addition to the proposed changes
discussed above, in the CY 2013 OPPS/
ASC proposed rule (77 FR 45205), we
proposed to make the following
technical corrections to the QIO
regulations:
• In 1989, several sections in 42 CFR
part 405 were redesignated to 42 CFR
part 411 (54 FR 41746), but the crossreferences to these sections in the QIO
regulations was never made. Therefore,
we proposed to make the following
reference changes:
± Changing the reference
‘‘§ 405.330(b)’’ in existing § 476.71(b) to
‘‘§ 411.400(b)’’;
± Changing the reference ‘‘§ 405.332’’
in § 476.74 to ‘‘§ 411.402’’;

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+ Changing the references
‘‘§ 405.310(g) or § 405.310(k)’’ in
§ 476.86 to ‘‘§ 411.15(g) or § 411.15(k)’’.
• In 1999, 42 CFR parts 466, 473, and
476 were redesignated as 42 CFR parts
476, 478, and 480, respectively (64 FR
66236). Therefore, we proposed to make
changes to correct several crossreferences to sections in these Parts:
+ Changing the reference
‘‘§ 466.73(b)(3)’’ in § 476.73 to
‘‘§ 476.78(b)(3)’’.
+ Changing the reference ‘‘part 473’’
in § 476.78(f) to ‘‘part 478’’.
+ Changing the reference ‘‘part 473’’
in § 476.94(c)(3) to ‘‘part 478’’.
+ Changing the reference ‘‘§ 473.24’’
in §§ 480.132 and 480.133 to ‘‘§ 478.24’’.
+ Changing the reference ‘‘§ 466.98’’
in § 478.28 to ‘‘§ 476.98’’.
+ Changing the reference to ‘‘Part
478’’ in §§ 478.15, 478.16, 478.20,
478.38, 478.42, and 478.48 to ‘‘Part
473’’.
+ Changing the reference ‘‘§ 473.24’’
in § 480.132 to ‘‘§ 478.24’’.
+ Changing the references ‘‘Part 466’’
and ‘‘§ 473.24’’ in § 480.133(b) to ‘‘Part
476’’ and ‘‘§ 478.24’’, respectively.
• We proposed the deletion of several
provisions in Part 476 regarding riskbasis contracts because risk-basis
contracts previously under section 1876
of the Act no longer exist. As such,
these provisions are obsolete and no
longer used under the QIO program.
Specifically, we are deleting the
following sentence from § 476.70(a):
‘‘Section 1154(a)(4) of the Act requires
QIOs, or, in certain circumstances, nonQIO entities, to perform quality of care
reviews of services furnished under
risk-basis contracts by health
maintenance organizations (HMOs) and
competitive medical plans (CMPs) that
are covered under subpart C of part 417
of this chapter.’’ We proposed to delete
the following sentence from § 476.70(b):
‘‘Section 466.72 of this part also applies,
for purposes of quality of care review
under section 1154(a)(4) of the Act, to
non-QIO entities that enter into
contracts to perform reviews of services
furnished under risk basis contracts by
HMOs and CMPs under subpart C of
part 417 of this chapter.’’ We proposed
to delete § 476.72—Review of the
quality of care of risk-basis health
maintenance organizations and
competitive medical plans, in its
entirety for the same reason.
• In § 476.70(a), we proposed to
change the word ‘‘basis’’ to ‘‘bases’’ to
match the title of this section and to
correctly denote that there is more than
one statutory basis described in
paragraph (a).
• We proposed technical corrections
to sections in Part 476 and 480 to

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accurately reflect the transition to
Medicare administrative contractors
(MACs) to process Medicare claims and
conduct other actions. This transition is
ongoing, and fiscal intermediaries and
carriers still exist. However, we believe
that the presence of MACs should be
accounted for to accurately reflect
current contractual relationships. As
such, we proposed to incorporate
references to ‘‘Medicare administrator
contractors’’ in the following sections,
where appropriate:
+ § 476.1, in the definition of
‘‘Preadmission Certification’’;
+ § 476.71(c)(1);
+ § 476.73(a);
+ § 476.74(b) and (c)(1);
+ § 476.80 section heading, and
§§ 476.80(a), (a)(1), (a)(2), (b)(1), (c),
(c)(3)(ii), (d)(1), (d)(2), (e) paragraph
heading, (e)(1), and (e)(2);
+ § 476.86(a)(2), (c) introductory text,
(c)(1), and (d);
+ § 476.94(a)(1)(iv) and (d);
+ § 476.104(a); and
+ § 480.105(a).
• We proposed a technical correction
to § 480.139 by adding a paragraph ‘‘(a)’’
in front of ‘‘(1)’’ to the beginning of the
text of the section to correct a recent
inadvertent coding error which had
removed the ‘‘(a)’’.
• We proposed to correct the
statutory citation in § 480.132(b) by
changing ‘‘section 1154(a)(3)’’ to
‘‘section 1154(a)(2)’’.
Comment: Commenters agreed with
the proposed technical changes.
Response: We appreciate the
commenters’ support.
After consideration of the public
comments we received, we are adopting,
without modification, our proposals
regarding the technical changes.
XIX. Files Available to the Public via
the Internet
The Addenda of the proposed rules
and the final rules with comment period
will be published and available only via
the Internet on the CMS Web site. To
view the Addenda of this final rule with
comment period pertaining to the CY
2013 payments under the OPPS, go to
the CMS Web site at: http://www.cms.
gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Hospital-Outpatient-Regulations-andNotices.html and select ‘‘1589–FC’’ from
the list of regulations. All Addenda for
this final rule with comment period are
contained in the zipped folder entitled
‘‘2013 OPPS 1589–FC Addenda’’ at the
bottom of the page.
To view the Addenda of this final rule
with comment period pertaining to the
CY 2013 payments under the ASC
payment system, go to the CMS Web site

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at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
ASCPayment/ASC-Regulations-andNotices.html and select ‘‘1589–FC’’ from
the list of regulations. All Addenda for
this final rule with comment period are
contained in the zipped folder entitled
‘‘Addenda AA, BB, DD1 and DD2’’, and
‘‘Addendum EE’’ at the bottom of the
page.
XX. Collection of Information
Requirements
A. Legislative Requirements for
Solicitation of Comments
Under the Paperwork Reduction Act
of 1995, we are required to provide 30day notice in the Federal Register and
to solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. In order to fairly evaluate
whether an information collection
should be approved by OMB, section
3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimated of
the information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
In the CY 2013 OPPS/ASC proposed
rule (77 FR 45206), we solicited public
comments on each of the issues outlined
above as discussed below that contained
information collection requirements.

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B. Requirements in Regulation Text
1. 2013 Medicare EHR Incentive
Program Electronic Reporting Pilot for
Hospitals and CAHs (§ 495.8)
Under the definition of ‘‘meaningful
EHR user’’ in 42 CFR 495.4, we require
eligible hospitals and CAHs
participating in the Medicare EHR
Incentive Program (which would
include those participating in the 2013
Medicare EHR Incentive Program
Electronic Reporting Pilot) to
successfully report the hospital clinical
quality measures (CQMs) selected by
CMS to CMS in the form and manner
specified by CMS. Although eligible
hospitals and CAHs may continue to
report CQM results as calculated by
certified EHR technology by attestation
for 2013, they also may choose to
participate in the 2013 Medicare EHR
Incentive Program Electronic Reporting
Pilot for Hospitals and CAHs. Eligible

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hospitals and CAHs participating in the
2013 Medicare EHR Incentive Program
Electronic Reporting Pilot must submit
CQM data on all 15 CQMs (listed in
Table 10 of the Stage 1 final rule (75 FR
44418 through 44420) for the Medicare
and Medicaid EHR Incentive Program)
to CMS, via a secure transmission based
on data obtained from the eligible
hospital or CAH’s certified EHR
technology.
Eligible hospitals and CAHs are
required to report on core and menu set
criteria for Stage 1 of meaningful use.
We estimated that it would take an
eligible hospital or CAH 0.5 hour to
submit the required CQM information
via the proposed 2013 Medicare EHR
Incentive Program Electronic Reporting
Pilot. Therefore, the estimated total
burden for all 4,922 Medicare eligible
hospitals and CAHs participating in the
Pilot (3,620 acute care hospitals and
1,302 CAHs) is 2,461 hours.
We believe that an eligible hospital or
CAH might assign a computer and
information systems manager to submit
the CQM information on its behalf. We
estimated the cost burden for an eligible
hospital or CAH to submit the CQMs
and hospital quality requirements is
$30.21 (0.5 hour × $60.41 (mean hourly
rate for a computer and information
systems manager based on the 2011
Bureau of Labor Statistics)) and the total
estimated annual cost burden for all
eligible hospitals and CAHs to submit
the required CQMs is $148,694 ($30.21
× 4,922 hospitals and CAHs). We
solicited public comments on the
estimated numbers of eligible hospitals
and CAHs that may register for the
Medicare EHR Incentive Program
Electronic Reporting Pilot that would
submit the CQM information via the
proposed Electronic Reporting Pilot in
2013. We also invited comments on the
type of personnel or staff that would
mostly likely submit on behalf of
eligible hospitals and CAHs.
We did not receive any public
comments on these information
collection requirements. Therefore, we
are finalizing the proposed burden
estimates.
C. Associated Information Collections
Not Specified in Regulatory Text
In the CY 2013 OPPS/ASC proposed
rule, we made reference to proposed
associated information collection
requirements that are not discussed in
the regulation text contained in the
proposed rule. The following is a
discussion of those requirements.
1. Hospital OQR Program
As previously stated in section XIV. of
the CY 2012 OPPS/ASC final rule with

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68527

comment period, the Hospital OQR
Program has been generally modeled
after the quality data reporting program
for the Hospital IQR Program. We refer
readers to the CY 2011 OPPS/ASC final
rule with comment period (75 FR 72064
through 72110 and 72111 through
72114) and the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74549 through 74554) for detailed
discussions of the Hospital OQR
Program information collection
requirements we have previously
finalized.
2. Hospital OQR Program Measures for
the CY 2012, CY 2013, CY 2014, and CY
2015 Payment Determinations
a. Previously Adopted Hospital OQR
Program Measures for the CY 2012, CY
2013, and CY 2014 Payment
Determinations
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68766), we
retained the 7 chart-abstracted measures
we used in CY 2009 and adopted 4 new
claims-based imaging measures for the
CY 2010 payment determination,
bringing the total number of quality
measures for which hospitals had to
submit data to 11 measures. In the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60637), we
required hospitals to continue to submit
data on the same 11 measures for the CY
2011 payment determination. The
burden associated with the
aforementioned data submission
requirements is currently approved
under OCN: 0938–1109. This approval
expires on October 31, 2013.
In the CY 2011 OPPS/ASC final rule
with comment period (75 FR 72071
through 72094), we adopted measures
for the CY 2012, CY 2013, and CY 2014
payment determinations.
For the CY 2012 payment
determination, we retained the 7 chartabstracted measures and the 4 claimsbased imaging measures we used for the
CY 2011 payment determination. We
also adopted 1 structural HIT measure
that tracks HOPDs’ ability to receive
laboratory results electronically, and 3
claims-based imaging efficiency
measures. These actions bring the total
number of measures for the CY 2012
payment determination for which
hospitals must submit data to 15
measures. In the CY 2011 OPPS/ASC
final rule with comment period (75 FR
72112 through 72113), we discussed the
burden associated with these
information collection requirements.
For the CY 2013 payment
determination, we required that
hospitals continue to submit data for all
of the quality measures that we adopted

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for the CY 2012 payment determination.
We also adopted 1 structural HIT
measure assessing the ability to track
clinical results between visits, 6 new
chart-abstracted measures on the topics
of HOPD care transitions and ED
efficiency, as well as 1 chart-abstracted
ED–AMI measure that we proposed for
the CY 2012 payment determination but
which we decided to finalize for the CY
2013 payment determination. These
actions bring the total number of quality
measures for the CY 2013 payment
determination for which hospitals must
submit data to 23 measures.
In the CY 2011 OPPS/ASC final rule
with comment period (75 FR 72071
through 72094), for the CY 2014
payment determination, we retained the
CY 2013 payment determination
measures, but did not adopt any
additional measures. In the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72112 through 72113), we
discussed the burden associated with
these information collection
requirements.

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b. Hospital OQR Program Measures for
the CY 2014 Payment Determination
In the CY 2011 OPPS/ASC final rule
with comment period, we did not adopt

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any new measures for the CY 2014
payment determination. In the CY 2012
OPPS/ASC final rule with comment
period, we added, for the CY 2014
payment determination, 1 chartabstracted measure and 2 structural
measures (including hospital outpatient
volume data for selected outpatient
surgical procedures). However, as
discussed in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74456), we did not implement public
reporting of the claims-based OP: 15 Use
of Brain Computed Tomography (CT) in
the ED for Atraumatic Headache.
Because this is a claims-based measure,
hospitals continue to submit relevant
claims to be paid, but these
administrative data and any measure
calculations from them are not being
made publicly available as specified for
required hospital outpatient hospital
quality of care measure data under
section 1833(t)(17)(E) of the Act.
In addition, in section XV.C. of the
proposed rule, we stated that we were
confirming that, using a subregulatory
process, we have suspended indefinitely
data collection for one measure, OP–19:
Transition Record with Specified
Elements Received by Discharged

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Patients, and have deferred data
collection for another measure, OP–24:
Cardiac Rehabilitation Patient Referral
From an Outpatient Setting. (We note
that, in this final rule with comment
period, we are confirming the removal
of the measure, OP–16: Troponin results
for Emergency Department acute
myocardial infarction (AMI) patients or
chest pain patients (with probable
cardiac chest pain) received within 60
minutes of arrival, and we will cease
data collection in the system for this
measure effective January 1, 2013.)
Thus, for the CY 2014 and subsequent
years payment determinations, as
proposed, we are finalizing in this final
rule with comment period a total of 25
measures (rather than 26 measures as
we indicated in the proposed rule (77
FR 45207), with hospitals reporting data
on only 22 of them (rather than 23
measures as we indicated in the
proposed rule (77 FR 45207)). The
required measure set for the CY 2014
and subsequent years’ payment
determinations includes the measures
shown below; all measures were
previously adopted.
BILLING CODE 4120–01–P

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68529

Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Years
Payment Determinations
OP-I: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention
OP-4:
OP-5:
OP-6:
OP-7:
OP-8:
OP-9:

Aspirin at Arrival
Median Time to ECG
Timing of Antibiotic Prophylaxis
Prophylactic Antibiotic Selection for Surgical Patients
MRI Lumbar Spine for Low Back Pain
Mammography Follow-up Rates

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ER15NO12.089

sroberts on DSK5SPTVN1PROD with

OP-lO: Abdomen CT - Use of Contrast Material
OP-II: Thorax CT - Use of Contrast Material
OP-I2: The Ability for Providers with HIT to Receive Laboratory Data Electronically
Directly into their Qualified/Certified EHR System as Discrete Searchable Data
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk
Surgery
OP-I4: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed
Tomography (CT)
OP-I5: Use of Brain Computed Tomography (CT) in the Emergency Department for
Atraumatic Headache·
OP-I7: Tracking Clinical Results between Visits
OP-I8: Median Time from ED Arrival to ED Departure for Discharged ED Patients
OP-I9: Transition Record with Specified Elements Received by discharged ED Patients"
OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional
OP-2I: ED- Median Time to Pain Management for Long Bone Fracture
OP-22: ED Patient Left Without Being Seen
OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who
Received Head CT Scan Interpretation Within 45 minutes of Arrival
OP-24: Cardiac Rehabilitation Patient Referral from an Outpatient Setting·"
OP-25: Safety Surgery Checklist
OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures

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BILLING CODE 4120–01–C

We will calculate the six claims-based
measures (rather than seven claimsbased measures as indicated in the
proposed rule (77 FR 45207) using
Medicare FFS claims data and do not
require additional hospital data
submissions. With the exception of OP–
22, we are using the same data
submission requirements related to the
chart-abstracted quality measures that
are submitted directly to CMS that we
used for the CY 2011 and CY 2012
payment determinations. For the four
structural measures, including the
collection of data for all-patient volume
for selected outpatient procedures,
hospitals will enter data into a Webbased collection tool during a specified
collection period once annually. Under
the Hospital OQR Program
requirements, hospitals must complete
and submit a notice of participation
form for the Hospital OQR Program if
they have not already done so or have
withdrawn from participation. By
submitting this document, hospitals
agree that they will allow CMS to
publicly report the measures for which
they have submitted data under the
Hospital OQR Program.
For the CY 2014 payment
determination, the burden associated
with these requirements is the time and
effort associated with completing the
notice of participation form, and

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collecting and submitting the data on
the required measures. For the chartabstracted measures (including those
measures for which data are submitted
directly to CMS, as well as the OP–22
measure for which data will be
submitted via a Web-based tool rather
than via an electronic file), we estimated
that there will be approximately 3,200
respondents per year. For hospitals to
collect and submit the information on
the chart-abstracted measures
(excluding the chart-abstracted OP–22
measure), we estimated it will take 35
minutes per sampled case. Based upon
the data submitted for the CY 2011 and
CY 2012 payment determinations, we
estimated there will be a total of
1,628,800 cases per year, approximately
509 cases per year per respondent. The
estimated annual burden associated
with the submission requirements for
these chart-abstracted measures is
949,590 hours (1,628,800 cases per year
× 0.583 hours per case).
For the chart-abstracted OP–22
measure plus the 3 structural measures
(excluding the all-patient volume for
selected surgical procedures measure),
we estimated that each participating
hospital will spend 10 minutes per year
to collect and submit the required data,
making the estimated annual burden
associated with these measures 2,138
hours (3,200 hospitals × 0.167 hours per

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hospital × 4 measures per hospital). For
the proposed rule (77 FR 45208), we
inadvertently stated the burden to be
1,603 hours because we excluded the
OP–22 measure in our burden
computation.
For the collection of all-patient
volume for selected outpatient surgical
procedures (OP–26: Hospital Outpatient
Volume Data on Selected Outpatient
Surgical Procedures), because hospitals
must determine their populations for
data reporting purposes and most
hospitals are voluntarily reporting
population and sampling data for
Hospital OQR Program purposes, we
believe the only additional burden
associated with this requirement is the
reporting of the data using the Webbased tool. We estimated that each
participating hospital will spend 10
minutes per year to collect and submit
the data, making the estimated annual
burden associated with this measure
534 hours (3,200 hospitals × 0.167 hours
per measure × 1 all-patient volume
measure per hospital). We note that we
inadvertently indicated that the total of
this computation was 53 hours in the
proposed rule (77 FR 45208).
We did not receive any public
comments on these information
collection requirements and, therefore,
are finalizing our proposed burden

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estimates with the modifications we
have described above.
c. Hospital OQR Program Measures for
CY 2015
In the CY 2012 OPPS/ASC final rule
with comment period, for the CY 2015
payment determination, we retained the
requirement that hospitals must
complete and submit a notice of
participation form in order to
participate in the Hospital OQR
Program. For the CY 2015 payment
determination, we also retained the
measures used for CY 2014 payment
determination (including the measures
adopted in the CY 2012 final rule with
comment period) and did not add any
additional measures.
For the CY 2015 payment
determination, the burden associated
with these requirements is the time and
effort associated with completing the
notice of participation form, collecting
and submitting the data on the
measures, and collecting and submitting
all-patient volume data for selected
outpatient surgical procedures. For the
chart-abstracted measures, we estimated
that there will be approximately 3,200
respondents per year. For hospitals to
collect and submit the information on
the chart-abstracted measures where
data are submitted directly to CMS
(excluding the chart-abstracted OP–22
measure), we estimated it will take 35
minutes per sampled case. Based upon
the data submitted for the CY 2011 and
CY 2012 payment determinations, we
estimated there will be a total of
1,628,800 cases per year, approximately
509 cases per year per respondent. The
estimated annual burden associated
with the aforementioned submission
requirements for the chart-abstracted
data is 949,590 hours (1,628,800 cases
per year × 0.583 hours per case).
For the chart-abstracted OP–22
measure plus the 3 structural measures
(excluding the all-patient volume for
selected surgical procedures measure),
we estimated that each participating
hospital will spend 10 minutes per year
to collect and submit the data, making
the estimated annual burden associated
with these measures 2,138 hours (3,200
hospitals × 0.167 hours per hospital × 4
measures per hospital). In the proposed
rule (77 FR 45208), we inadvertently
excluded the OP–22 measure in our
burden computation.
For the collection of all-patient
volume data for selected outpatient
surgical procedures, because hospitals
must determine their populations for
data reporting purposes and most
hospitals are voluntarily reporting
population and sampling data for
Hospital OQR purposes, we believe the

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only additional burden associated with
this requirement will be the reporting of
the data using the Web-based tool. We
estimated that each participating
hospital will spend 10 minutes per year
to collect and submit the data, making
the estimated annual burden associated
with this measure 534 hours (3,200
hospitals × 0.167 hours per hospital).
We note that we inadvertently indicated
that the total of this computation was 53
hours in the proposed rule (77 FR
45208).
We invited public comment on the
burden associated with the information
collection requirements.
We did not receive any public
comments on these information
collection requirements and, therefore,
are finalizing our proposed burden
estimates with the modifications we
have described above.
3. Hospital OQR Program Validation
Requirements for CY 2014
In the CY 2013 OPPS/ASC proposed
rule, we proposed to retain the
requirements related to data validation
for CY 2014 that we adopted in the CY
2011 OPPS/ASC final rule with
comment period (76 FR 74486) for CY
2013, and that we revised in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74553). While
these requirements are subject to the
PRA, they are currently approved under
OCN: 0938–1109. This approval expires
on October 31, 2013.
Similar to our approach for the CY
2013 Hospital OQR Program payment
determination (76 FR 74484 through
74485), we proposed to continue to
validate data from randomly selected
hospitals for the CY 2014 payment
determination, selecting 450 hospitals.
We note that, because hospitals would
be selected randomly, every hospital
participating in the Hospital OQR
Program would be eligible each year for
validation selection.
In the CY 2011 OPPS/ASC proposed
rule and final rule with comment period
(75 FR 46381 and 75 FR 72106,
respectively), we discussed additional
data validation conditions under
consideration for CY 2013 and
subsequent years. In the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74485 and 76 FR 74553), we
finalized a policy under which we will
select for validation up to 50 additional
hospitals based upon targeting criteria.
For each selected hospital (random or
targeted), generally we will randomly
select up to 48 patient encounters per
year (12 per quarter) for validation
purposes from the total number of cases
that the hospital successfully submitted
to the OPPS Clinical Warehouse during

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68531

the applicable time period. However, if
a selected hospital submitted less than
12 cases in one or more quarters, only
those cases available would be
validated.
The burden associated with the CY
2014 requirement is the time and effort
necessary to submit validation data to a
CMS contractor. We estimated that it
would take each of the sampled
hospitals approximately 12 hours to
comply with these data submission
requirements. To comply with the
requirements, we estimated each
hospital must submit up to 48 cases for
the affected year for review. All selected
hospitals must comply with these
requirements each year, which would
result in a total of up to 24,000 charts
being submitted by the sampled
hospitals. The estimated annual burden
associated with the data validation
process for CY 2014 is approximately
6,000 hours.
We proposed to maintain the deadline
of 45 days for hospitals to submit
requested medical record
documentation to a CMS contractor to
support our validation process.
We invited public comment on the
burden associated with these
information collection requirements.
We did not receive any public
comments on these information
collection requirements. Therefore, we
are finalizing our burden estimates as
proposed.
4. Hospital OQR Program
Reconsideration and Appeals
Procedures
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68779), we
adopted a mandatory reconsideration
process that applied to the CY 2010
payment decisions. In the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60654 through 60655), we
continued this process for the CY 2011
payment update. In the CY 2011 OPPS/
ASC final rule with comment period (75
FR 72106 through 72108), we continued
this process for the CY 2012 payment
update with some modifications. We
eliminated the requirement that the
reconsideration request form be signed
by the hospital CEO to facilitate
electronic submission of the form and
reduce hospital burden. In the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74487 and 74488 and 76
FR 74553 and 74554), we specified that
we were continuing this process for the
CY 2013 and subsequent years’ payment
determinations.
In this CY 2013 OPPS/ASC final rule
with comment period, we are making
one change to this process—to modify a
requirement that the CEO must sign the

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reconsideration request to allow the
CEO or other designated personnel to
sign the required form.
While there is burden associated with
filing a reconsideration request, 5 CFR
1320.4 of the Paperwork Reduction Act
of 1995 regulations excludes collection
activities during the conduct of
administrative actions such as
redeterminations, reconsiderations, or
appeals or all of these actions.
We did not receive any public
comments on our proposed burden
statement and therefore are finalizing it
with modification in this final rule with
comment period.

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5. ASCQR Program Requirements
a. Claims-Based Outcome Measures for
the CY 2014 Payment Determination
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74496
through 74504), we adopted five claimsbased measures (four outcome and one
process) to be used for the CY 2014
payment determination. We will collect
quality measure data for the five claimsbased measures by using QDCs placed
on submitted claims beginning with
services furnished from October 1, 2012
through December 31, 2012. The five
outcome measures are:
• Patient Burns (NQF #0263)
• Patient Falls (NQF #0266)
• Wrong Site, Wrong Side, Wrong
Patient, Wrong Procedure, Wrong
Implant (NQF #0267)
• Hospital Transfer/Admission (NQF
#0265)
• Prophylactic Intravenous (IV)
Antibiotic Timing (NQF #0264)
The first four measures listed above
are outcome measures and the fifth
measure is a process measure.
Approximately 71 percent of ASCs
participate in Medical Event Reporting,
which includes reporting on the first
four claims-based measures listed
above. Between January 1995 and
December 2007, ASCs reported 126
events, an average of 8.4 events per year
(Florida Medical Quality Assurance,
Inc. and Health Services Advisory
Group: Ambulatory Surgery Center
Environmental Scan (July 2008)
(Contract No. GS–10F–0096T)). Thus,
we estimated the burden to report QDCs
on this number of claims per year for
the first four claims-based measures to
be nominal due to the small number of
cases (less than 1 case per month per
ASC, or about 11.8 events per year).
For the remaining claims-based
measure, Prophylactic IV Antibiotic
Timing, we estimated the burden
associated with submitting QDCs to be
nominal, as few procedures performed
by ASCs will require prophylactic
antibiotic administration.

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b. Claims-Based Process, Structural, and
Volume Measures for the CY 2015 and
CY 2016 Payment Determinations
For the CY 2015 payment
determination, we finalized the
retention of the five measures we
adopted for the CY 2014 payment
determination, and we added two
structural measures: Safe Surgery
Checklist Use and ASC Facility Volume
Data on Selected ASC Surgical
Procedures (76 FR 74504 through
74509). For the CY 2015 payment
determination, we proposed (and are
finalizing in this final rule with
comment period) that the data
collection period for claims-based
measures would be for services
furnished from January 1, 2013, through
December 31, 2013, that are paid by the
administrative contractor by April 30,
2014.
For the CY 2016 payment
determination, we finalized the
retention of the seven measures for the
CY 2015 payment determination and
added Influenza Vaccination Coverage
among Healthcare Personnel (NQF
#0431) (76 FR 74509). For the CY 2016
payment determination, we proposed
(and are finalizing in this final rule with
comment period) that the data
collection period for claims-based
measures would be for services
furnished from January 1, 2014, through
December 31, 2014, that are paid by the
administrative contractor by April 30,
2015.
Based on our data for CY 2014
payment determinations above,
extrapolating to 100 percent of ASCs
reporting, there would be an average of
11.8 events per year. Thus, we estimated
the burden to report QDCs on this
number of claims per year for the first
four claims-based measures to be
nominal due to the small number of
cases (approximately one case per
month per ASC) for the CYs 2015 and
CY 2016 payment determinations. We
estimated the burden associated with
submitting QDCs for the fifth measure to
be nominal as well, as discussed above.
For the CY 2015 payment
determination, for the structural
measures, ASCs will enter required
information using a Web-based
collection tool between July 1, 2013 and
August 15, 2013. For the Safe Surgery
Checklist Use structural measure, we
estimated that each participating ASC
will spend 10 minutes per year to
collect and submit the required data,
making the estimated annual burden
associated with this measure 864 hours
(5,175 ASCs × 1 measure × 0.167 hours
per ASC).

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For the ASC Facility Volume Data on
Selected ASC Surgical Procedures
structural measure, we estimated that
each participating ASC will spend 10
minutes per year to collect and submit
the required data, making the estimated
annual burden associated with this
measure, 864 hours (5,175 ASCs × 1
measure 0.167 hours per ASC).
We have not yet proposed reporting
requirements for the Safe Surgery
Checklist or the ASC Volume Data on
Selected ASC Surgical Procedures nor
have we proposed details on submission
of the NHSN HAI measure: Influenza
Vaccination Coverage Among
Healthcare Personnel for the CY 2016
payment determination.
Public comments in reference to the
use of the term ‘‘claims-based’’ on these
information collection requirements are
discussed in section XVI.C.1.b. of this
final rule with comment period. We did
not receive any other public comments
on these information collection
requirements and, therefore, are
finalizing our burden estimates as
proposed.
c. Program Administrative
Requirements and QualityNet Accounts;
Extraordinary Circumstance and
Extension Requests; Reconsideration
Requests
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74516), we
finalized our proposal to consider an
ASC to be participating in the ASCQR
Program for the CY 2014 payment
determination if the ASC includes QDCs
specified for the program on their CY
2012 claims relating to the finalized
measures.
In the FY 2013 IPPS/LTCH PPS final
rule, we finalized, for the CY 2015
payment determination and subsequent
payment determination years, that once
an ASC submits any quality measure
data, it would be considered to be
participating in the ASCQR Program.
Once an ASC submits quality measure
data indicating its participation in the
ASCQR Program, in order to withdraw,
an ASC must complete and submit an
online form indicating that it is
withdrawing from the program.
For the CY 2015 payment
determination and subsequent payment
determination years, if the ASC submits
quality measure data, there is no
additional action required by the ASC to
indicate participation in the program.
The burden associated with the
requirements to withdraw from the
program is the time and effort associated
with accessing, completing, and
submitting the online form. Based on
the number of hospitals that have
withdrawn from the Hospital OQR

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Program over the past 4 years, we
estimated that 2 ASCs would withdraw
per year and that an ASC would expend
30 minutes to access and complete the
form, for a total burden of 1 hour per
year.
In the FY 2013 IPPS/LTCH PPS final
rule, we finalized for the CY 2015
payment determination the requirement
that ASCs to identify and register a
QualityNet administrator in order to set
up accounts necessary to enter
structural measure data. We estimated
that, based upon previous experience
with the Hospital OQR Program, it
would take an ASC 10 hours to obtain,
complete, and submit an application for
a QualityNet administrator and then set
up the necessary accounts for structural
measure data entry. We estimated the
total burden to meet these requirements
to be 51,750 hours (10 hours × 5,175
ASCs).
In the FY 2013 IPPS/LTCH PPS final
rule, we adopted a process for an
extension or waiver for submitting
information required under the program
due to extraordinary circumstances that
are not within the ASC’s control. We are
requiring that an ASC would complete
a request form that would be available
on the QualityNet Web site, supply
requested information, and submit the
request. The burden associated with
these requirements is the time and effort
associated with gathering required
information as well as accessing,
completing, and submitting the form.
Based on the number of hospitals that
have submitted a request for an
extension or waiver from the Hospital
OQR Program over the past 4 years, we
estimated that 1 ASC per year would
request an extension or waiver and that
an ASC would expend 2 hours to gather
required information as well as access,
complete, and submit the form, for a
total burden of 2 hours per year.
We also adopted a reconsideration
process that would apply to the CY 2014
payment determination and subsequent
payment determination years under the
ASCQR Program. While there is burden
associated with an ASC filing a
reconsideration request, the regulations
at 5 CFR 1320.4 for the Paperwork
Reduction Act of 1995 exclude data
collection activities during the conduct
of administrative actions such as
redeterminations, reconsiderations, or
appeals or all of these actions.
We did not receive any public
comments on our burden discussion in
the proposed rule.

IRF QRP, including two quality
measures for CY 2012 reporting. These
two quality measures are: (1) Percent of
Residents with Pressure Ulcers that are
New or Worsened (NQF #0678); and (2)
Urinary Catheter Associated Urinary
Tract Infection (CAUTI) rate per 1,000
urinary catheter days, for Intensive Care
Unit (ICU) Patients (NQF #0138).
We also established reporting
mechanisms for these two measures in
the FY 2012 IRF PPS final rule. IRFs
were instructed to use the Inpatient
Rehabilitation Facility-Patient
Assessment Instrument (IRF–PAI)
(approved under OCN: 0938–0842) to
collect pressure ulcer measure data on
Medicare Part A, Part B, and Medicare
Advantage beneficiaries, and they were
to collect CAUTI measure data on all
patients and report that data to CDC’s
National Healthcare Safety Network
(NHSN). The burden associated with
this collection of information for IRFs
was included in the FY 2012 IRF PPS
final rule (76 FR 47884 through 47885).
In section XVII. of the proposed rule,
we proposed to adopt three proposals
for the IRF QRP, which are: (1) A
proposal to implement updates made by
the NQF to the CAUTI measure which
will affect the annual payment update
in FY 2014; (2) a proposal that any
measure selected for use in the IRF QRP
would remain in effect until actively
removed, suspended, or replaced; and
(3) a proposal to implement policies
regarding when rulemaking will be used
to update existing IRF QRP measures.
We stated that the first proposal
would allow us to incorporate recent
updates that were made to the CAUTI
measure (NQF#0138) by the NQF.
However, we stated that these changes
would not affect the type or amount of
data that IRFs will be required to collect
and submit.
The second proposal involves the
implementation of a policy that IRF
quality measures will remain in effect
until a measure is actively removed,
suspended, or replaced. We stated that
this policy would not add any
additional information collection
requirements for CY 2013 and beyond as
discussed below.
The third proposal involves
implementing a policy regarding when
rulemaking would be used to update
existing IRF QRP measures that have
been updated by the NQF. We stated
that this proposal would likewise not
create any increased information
collection burden on IRFs.

6. IRF QRP
In the FY 2012 IRF PPS final rule (76
FR 47873 through 47883), we finalized
the initial reporting requirements of the

a. Pressure Ulcer Measure
In the CY 2013 OPPS/ASC proposed
rule, we did not propose to make any
changes in the way the pressure ulcer

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68533

data are to be collected and submitted
to CMS using the current version of the
IRF–PAI. As discussed in section
XVII.D.2. of this final rule with
comment period, we have decided to
adopt a nonrisk-adjusted version of the
NQF #0678 pressure ulcer measure. We
will collect pressure ulcer data using the
current version of the IRF–PAI, which
became effective on October 1, 2012.
We have decided to use a nonriskadjusted application of the NQF #0678
pressure ulcer measure as opposed to
the NQF-endorsed version of this
measure. However, this change in the
nature of the measure will not change
the information collection burden that
IRFs will incur for the reporting of
pressure ulcer data. Nor will the burden
differ from that which was stated in the
FY 2012 IRF PPS final rule (76 FR 47884
through 47885). Likewise, the
information collection burden will not
differ from the burden estimated that is
currently approved for the IRF–PAI
under OCN: 0938–0842. It is important
to note that, while the FY 2012 IRF PPS
final rule mainly discusses the reporting
requirement that will be incurred by
IRFs for the FY 2014 payment
determination, we do not anticipate that
the policies we are finalizing in this
final rule with comment will create an
increase in the information collection
burden for subsequent fiscal years.
b. CAUTI Measure
As discussed above, the FY 2012 IRF
PPS final rule adopted the ‘‘Urinary
Catheter Associated Urinary Tract
Infection (CAUTI) rate per 1,000 urinary
catheter days, for Intensive Care Unit
(ICU) Patients’’ (NQF# 0138) measure
for the IRF QRP. However, subsequent
to the publication of the FY 2012 IRF
PPS final rule, this measure was
expanded to several non-ICU settings,
including IRFs. The CDC also changed
the way the CAUTI measure is
calculated from an infection rate per
1,000 days to a standardized infection
ratio (‘‘SIR’’). The SIR calculation is
comprised of the actual rate of infection
over the expected rate of infection.
These changes will not impact the
type or amount of data that IRFs will be
required to collect and submit.
Therefore, the information collection
estimates that are stated in the FY 2012
IRF PPS final rule (76 FR 47884 through
47885) for reporting CAUTI data remain
unchanged for the FY 2014 payment
determination as well as for subsequent
years payment determinations.
Summaries of the public comments
we received on the proposed policies
and the burden associated with these
proposed information collection
requirements and our responses are

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discussed in section XVII. of this final
rule with comment period.
If you comment on these information
collection and recordkeeping
requirements, please submit your
comments to the Office of Information
and Regulatory Affairs, Office of
Management and Budget, Attention:
CMS Desk Officer, CMS–1589–FC; Fax:
(202) 395–6974; or Email:
[email protected].

sroberts on DSK5SPTVN1PROD with

XXI. Waiver of Proposed Rulemaking
and Response to Comments
A. Waiver of Proposed Rulemaking
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register and invite public comment on
the proposed rule. The notice of
proposed rulemaking includes a
reference to the legal authority under
which the rule is proposed, and the
terms and substance of the proposed
rule or a description of the subjects and
issues involved. This procedure can be
waived, however, if an agency finds
good cause that a notice-and-comment
procedure is impracticable,
unnecessary, or contrary to the public
interest and incorporates a statement of
the finding and its reasons in the rule
issued.
We utilize HCPCS codes for Medicare
payment purposes. The HCPCS is a
national coding system comprised of
Level I codes (CPT codes) and Level II
codes that are intended to provide
uniformity to coding procedures,
services, and supplies across all types of
medical providers and suppliers. CPT
codes are copyrighted by the AMA and
consist of several categories, including
Category I codes which are 5-digit
numeric codes, and Category III codes
which are temporary codes to track
emerging technology, services, and
procedures. The AMA issues an annual
update of the CPT code set each Fall,
with January 1 as the effective date for
implementing the updated CPT codes.
The HCPCS, including both CPT codes
and Level II codes, is similarly updated
annually on a calendar year basis.
Annual coding changes are not available
to the public until the Fall immediately
preceding the annual January update of
the OPPS and the ASC payment system.
Because of the timing of the release of
these new codes, it is impracticable for
us to provide prior notice and solicit
comment on these codes and the
payments assigned to them in advance
of publication of the final rule that
implements the OPPS and the ASC
payment system. However, it is
imperative that these coding changes be
accounted for and recognized timely
under the OPPS and the ASC payment

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system for payment because services
represented by these codes will be
provided to Medicare beneficiaries in
hospital outpatient departments and
ASCs during the calendar year in which
they become effective. Moreover,
regulations implementing HIPAA (42
CFR Parts 160 and 162) require that the
HCPCS be used to report health care
services, including services paid under
the OPPS and the ASC payment system.
We assign interim payment amounts
and status indicators to any new codes
according to our assessment of the most
appropriate APC based on clinical and
resource homogeneity with other
procedures and services in the APC. If
we did not assign payment amounts to
new codes on an interim basis, the
alternative would be to not pay for these
services during the initial calendar year
in which the codes become effective.
We believe it would be contrary to the
public interest to delay establishment of
payment amounts for these codes.
Therefore, we find good cause to
waive the notice of proposed
rulemaking for the establishment of
payment amounts for selected HCPCS
codes identified with comment
indicator ‘‘NI’’ in Addendum B and
Addendum BB to this final rule with
comment period. We are providing a 60day public comment period.

(Pub. L. 104–121) (5 U.S.C. 804(2)). This
section of the final rule with comment
period contains the impact and other
economic analyses for the provisions
that we are finalizing.
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This rule
has been designated as an
‘‘economically’’ significant rule under
section 3(f)(1) of Executive Order 12866
and a major rule under the Contract
with America Advancement Act of 1996
(Pub. L. 104–121). Accordingly, the rule
has been reviewed by the Office of
Management and Budget. We have
prepared a regulatory impact analysis
that, to the best of our ability, presents
the costs and benefits of this final rule
with comment period. In the proposed
rule (77 FR 45210), we solicited public
comments on the regulatory impact
analysis provided.

B. Response to Comments
Because of the large number of public
comments we normally receive on
Federal Register documents, we are not
able to acknowledge or respond to them
individually. We will consider all
comments we receive by the date and
time specified in the DATES section of
this final rule with comment period,
and, when we proceed with a
subsequent document(s), we will
respond to those comments in the
preamble to that document.

2. Statement of Need
This final rule with comment period
is necessary to update the Medicare
hospital OPPS rates. It is necessary to
make changes to the payment policies
and rates for outpatient services
furnished by hospitals and CMHCs in
CY 2013. We are required under section
1833(t)(3)(C)(ii) of the Act to update
annually the OPPS conversion factor
used to determine the payment rates for
APCs. We also are required under
section 1833(t)(9)(A) of the Act to
review, not less often than annually,
and revise the groups, the relative
payment weights, and the wage and
other adjustments described in section
1833(t)(2) of the Act. We must review
the clinical integrity of payment groups
and relative payment weights at least
annually. We revised the APC relative
payment weights using claims data for
services furnished on and after January
1, 2011, through and including
December 31, 2011, and updated cost
report information.
For CY 2013, we are continuing the
current payment adjustment for rural
SCHs, including EACHs. In addition,
section 10324 of the Affordable Care
Act, as amended by HCERA, authorizes
a wage index of 1.00 for certain frontier
States. Section 1833(t)(17) of the Act
requires that subsection (d) hospitals

XXII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
We have examined the impacts of this
final rule with comment period as
required by Executive Order 12866 on
Regulatory Planning and Review
(September 30, 1993), Executive Order
13563 on Improving Regulation and
Regulatory Review (January 18, 2011),
the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
(March 22, 1995, Pub. L. 104–4),
Executive Order 13132 on Federalism
(August 4, 1999), and the Contract with
America Advancement Act of 1996

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that fail to meet quality reporting
requirements under the Hospital OQR
Program incur a reduction of 2.0
percentage points to their OPD fee
schedule increase factor. In this final
rule with comment period, we are
implementing these payment
provisions. Also, we list the 23 drugs
and biologicals in Table 32 that we are
removing from pass-through payment
status for CY 2013.
This final rule with comment period
is also necessary to update the ASC
payment rates for CY 2013, enabling
CMS to make changes to payment
policies and payment rates for covered
surgical procedures and covered
ancillary services that are performed in
an ASC in CY 2013. Because the ASC
payment rates are based on the OPPS
relative payment weights for the
majority of the procedures performed in
ASCs, the ASC payment rates are
updated annually to reflect annual
changes to the OPPS relative payment
weights. In addition, because the
services provided in ASCs are identified
by HCPCS codes that are reviewed and
revised either quarterly or annually,
depending on the type of code, it is
necessary to update the ASC payment
rates annually to reflect these changes to
HCPCS codes. In addition, we are
required under section 1833(i)(1) of the
Act to review and update the list of
surgical procedures that can be
performed in an ASC not less frequently
than every 2 years. Sections
1833(i)(2)(D)(iv) and 1833(i)(7) of the
Act authorize the Secretary to
implement a quality reporting system
for ASCs in a manner so as to provide
for a reduction of 2.0 percentage points
in any annual update with respect to the
year involved for ASCs that fail to meet
the quality reporting requirements. For
CY 2013, there will be no impacts
associated with this payment reduction
because it will not be applied until CY
2014.
3. Overall Impacts for OPPS and ASC
Payment Provisions
We estimate that the effects of the
OPPS payment provisions will result in
expenditures exceeding $100 million in
any 1 year. We estimate that the total
increase from the changes in this final
rule with comment period in
expenditures under the OPPS for CY
2013 compared to CY 2012 will be
approximately $600 million. Taking into
account our estimated changes in
enrollment, utilization, and case-mix,
we estimate that the OPPS expenditures
for CY 2013 will be approximately
$4.571 billion higher, relative to
expenditures in CY 2012. Because this
final rule with comment period is

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‘‘economically significant’’ as measured
by the $100 million threshold, we have
prepared this regulatory impact analysis
that, to the best of our ability, presents
its costs and benefits. Table 57 displays
the redistributional impact of the CY
2013 changes in OPPS payment to
various groups of hospitals and for
CMHCs.
We estimate that the update to the
conversion factor and other adjustments
(not including the effects of outlier
payments, the pass-through estimates,
and the application of the frontier State
wage adjustment for CY 2013) will
increase total OPPS payments by 1.8
percent in CY 2013. The changes to the
APC weights, the changes to the wage
indices, the continuation of a payment
adjustment for rural SCHs, including
EACHs, and the payment adjustment for
cancer hospitals will not increase OPPS
payments because these changes to the
OPPS will be budget neutral. However,
these updates will change the
distribution of payments within the
budget neutral system. We estimate that
the total change in payments between
CY 2012 and CY 2013, considering all
payments, including changes in
estimated total outlier payments, passthrough payments, and the application
of the frontier State wage adjustment
outside of budget neutrality, in addition
to the application of the OPD fee
schedule increase factor after all
adjustments required by sections
1833(t)(3)(F), 1833(t)(3)(G) and
1833(t)(17) of the Act, will increase total
estimated OPPS payments by 1.9
percent.
We estimate that the effects of the
ASC provisions in this final rule with
comment period for the ASC payment
system would result in expenditures
exceeding $100 million in any 1 year.
We estimate the total increase (from
changes in this final rule with comment
period as well as enrollment, utilization,
and case-mix changes) in expenditures
under the ASC payment system for CY
2013 compared to CY 2012 to be
approximately $189 million. Because
this final rule with comment period for
the ASC payment system is
‘‘economically significant’’ as measured
by the $100 million threshold, we have
prepared a regulatory impact analysis of
the changes to the ASC payment system
that, to the best of our ability, presents
the costs and benefits of this final rule
with comment period. Tables 58 and
Table 59 of this final rule with comment
period display the redistributional
impact of the CY 2013 changes on ASC
payment, grouped by specialty area and
then grouped by procedures with the
greatest ASC expenditures, respectively.

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4. Detailed Economic Analyses
a. Estimated Effects of OPPS Changes in
This Final Rule With Comment Period
(1) Limitations of Our Analysis
The distributional impacts presented
here are the projected effects of the CY
2013 policy changes on various hospital
groups. We post on the CMS Web site
our hospital-specific estimated
payments for CY 2013 with the other
supporting documentation for this final
rule with comment period. To view the
hospital-specific estimates, we refer
readers to the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/index.html. At the Web site, select
‘‘regulations and notices’’ from the left
side of the page and then select ‘‘CMS–
1589–FC’’ from the list of regulations
and notices. The hospital-specific file
layout and the hospital-specific file are
listed with the other supporting
documentation for this final rule with
comment period. We show hospitalspecific data only for hospitals whose
claims were used for modeling the
impacts shown in Table 57 below. We
do not show hospital-specific impacts
for hospitals whose claims we were
unable to use. We refer readers to
section II.A. for a discussion of the
hospitals whose claims we do not use
for ratesetting and impact purposes.
We estimate the effects of the
individual policy changes by estimating
payments per service, while holding all
other payment policies constant. We use
the best data available, but do not
attempt to predict behavioral responses
to our policy changes. In addition, we
do not make adjustments for future
changes in variables such as service
volume, service-mix, or number of
encounters. In the proposed rule, we
solicited public comment and
information about the anticipated effects
of our changes on providers and our
methodology for estimating them. Any
public comments that we receive are
addressed in the applicable sections of
this final rule with comment period that
discuss the specific policies.
(2) Estimated Effects of OPPS Changes
on Hospitals
Table 57 below shows the estimated
impact of this final rule with comment
period on hospitals. Historically, the
first line of the impact table, which
estimates the change in payments to all
facilities, has always included cancer
and children’s hospitals, which are held
harmless to their pre-BBA amount. We
also include CMHCs in the first line that
includes all providers because we
include CMHCs in our weight scalar
estimate. We now include a second line

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for all hospitals, excluding permanently
held harmless hospitals and CMHCs.
We present separate impacts for
CMHCs in Table 57 and we discuss
them separately below, because CMHCs
are paid only for partial hospitalization
services under the OPPS and are a
different provider type from hospitals.
In CY 2012, we are paying CMHCs
under APC 0172 (Level I Partial
Hospitalization (3 services) for CMHCs)
and APC 0173 (Level II Partial
Hospitalization (4 or more services) for
CMHCs), and we are paying hospitals
for partial hospitalization services under
APC 0175 (Level I Partial
Hospitalization (3 services) for hospitalbased PHPs) and APC 0176 (Level II
Partial Hospitalization (4 or more
services) for hospital-based PHPs). For
CY 2013, we are finalizing our proposal
to continue this APC payment structure
and are basing payment fully on the
geometric mean costs calculated using
data for the type of provider for which
rates are being set, that is, hospital or
CMHC. We display separately the
impact of this policy on CMHCs, and we
discuss its impact on hospitals as part
of our discussion of the hospital
impacts.
The estimated increase in the total
payments made under the OPPS is
determined largely by the increase to
the conversion factor under the
statutory methodology. The
distributional impacts presented do not
include assumptions about changes in
volume and service-mix. The
conversion factor is updated annually
by the OPD fee schedule increase factor
as discussed in detail in section II.B of
this final rule with comment period.
Section 1833(t)(3)(C)(iv) of the Act
provides that the OPD fee schedule
increase factor is equal to the market
basket percentage increase applicable
under section 1886(b)(3)(B)(iii) of the
Act, which we refer to as the IPPS
market basket percentage increase. The
IPPS market basket percentage increase
for FY 2013 is 2.6 percent (77 FR
53258). Section 1833(t)(3)(F)(i) of the
Act reduces that 2.6 percent by the
multifactor productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act, which is 0.7 percentage
points (which is also the MFP
adjustment for FY 2013 in the FY 2013
IPPS/LTCH PPS final rule (77 FR
53258); and sections 1833(t)(3)(F)(ii)
and 1833(t)(3)(G)(ii) of the Act further
reduce the market basket percentage
increase by 0.1 percentage point,
resulting in the OPD fee schedule
increase factor of 1.8 percent, which we
are using in the calculation of the CY
2013 OPPS conversion factor. Section
10324 of the Affordable Care Act, as

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amended by HCERA, further authorized
additional expenditures outside budget
neutrality for hospitals in certain
frontier States that have a wage index
less than 1.00. The amounts attributable
to this frontier State wage index
adjustment are incorporated in the CY
2013 estimates in Table 57.
To illustrate the impact of the CY
2013 changes, our analysis begins with
a baseline simulation model that uses
the CY 2012 relative payment weights,
the FY 2012 final IPPS wage indices that
include reclassifications, and the final
CY 2012 conversion factor. Table 57
shows the estimated redistribution of
the increase in payments for CY 2013
over CY 2012 payments to hospitals and
CMHCs as a result of the following
factors: APC reconfiguration and
recalibration based on our historical
methodology using median costs
(Column 2); the marginal impact of
basing the APC relative payment
weights on geometric mean costs over
basing them on median costs (Column
3); APC recalibration based on
geometric mean costs (Column 4, the
combined effect of Columns 2 and 3);
the wage indices and the rural
adjustment (Column 5); the combined
impact of APC recalibration based on
geometric mean costs, the wage indices
and rural adjustment, and the OPD fee
schedule increase factor update to the
conversion factor (Column 6); the
combined impact of APC recalibration
based on geometric mean costs, the
wage indices and rural adjustment, the
conversion factor update, and the CY
2013 frontier State wage index
adjustment (Column 7); and the
estimated impact taking into account all
payments for CY 2013 relative to all
payments for CY 2012 (Column 8),
including the impact of changes in
estimated outlier payments and changes
to the pass-through payment estimate.
We did not model an explicit budget
neutrality adjustment for the rural
adjustment for SCHs because we did not
make any changes to the policy for CY
2013. Because the updates to the
conversion factor (including the update
of the OPD fee schedule increase factor),
the estimated cost of the rural
adjustment, and the estimated cost of
projected pass-through payment for CY
2012 are applied uniformly across
services, observed redistributions of
payments in the impact table for
hospitals largely depend on the mix of
services furnished by a hospital (for
example, how the APCs for the
hospital’s most frequently furnished
services will change), and the impact of
the wage index changes on the hospital.
However, total payments made under
this system and the extent to which this

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final rule with comment period will
redistribute money during
implementation also will depend on
changes in volume, practice patterns,
and the mix of services billed between
CY 2012 and CY 2013 by various groups
of hospitals, which CMS cannot
forecast.
Overall, we estimate that the OPPS
rates for CY 2013 will have a positive
effect for providers paid under the
OPPS, resulting in a 1.9 percent
estimated increase in Medicare
payments. Removing payments to
cancer and children’s hospitals because
their payments are held harmless to the
pre-OPPS ratio between payment and
cost and removing payments to CMHCs
suggest that these changes will still
result in a 1.9 percent estimated
increase in Medicare payments to all
other hospitals. Those estimated
payments will not significantly impact
other providers.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 57
shows the total number of facilities
(4,127), including designated cancer and
children’s hospitals and CMHCs, for
which we were able to use CY 2011
hospital outpatient and CMHC claims
data to model CY 2012 and CY 2013
payments, by classes of hospitals, for
CMHCs and for dedicated cancer
hospitals. We excluded all hospitals and
CMHCs for which we could not
accurately estimate CY 2012 or CY 2013
payment and entities that are not paid
under the OPPS. The latter entities
include CAHs, all-inclusive hospitals,
and hospitals located in Guam, the U.S.
Virgin Islands, Northern Mariana
Islands, American Samoa, and the State
of Maryland. This process is discussed
in greater detail in section II.A. of this
final rule with comment period. At this
time, we are unable to calculate a
disproportionate share (DSH) variable
for hospitals not participating in the
IPPS. Hospitals for which we do not
have a DSH variable are grouped
separately and generally include
freestanding psychiatric hospitals,
rehabilitation hospitals, and long-term
care hospitals. We show the total
number (3,905) of OPPS hospitals,
excluding the hold-harmless cancer and
children’s hospitals and CMHCs, on the
second line of the table. We excluded
cancer and children’s hospitals because
section 1833(t)(7)(D) of the Act
permanently holds harmless cancer
hospitals and children’s hospitals to
their ‘‘pre-BBA amount’’ as specified
under the terms of the statute, and
therefore, we removed them from our
impact analyses. We show the isolated
impact on 159 CMHCs at the bottom of

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the impact table and discuss that impact
separately below.
Columns 2, 3, and 4: APC Recalibration
These columns show the combined
effects of the reconfiguration,
recalibration, and other policies (such as
setting payment for separately payable
drugs and biologicals at ASP+6 under
our CY 2013 decision to apply the
statutory default). Column 2 shows the
reclassification effects if we were to base
the relative payment weights on the
median costs of services. Column 3
shows the marginal effects of using the
geometric mean costs compared to the
effects if we were to base the relative
payment weights on the median costs of
services, in other words the effects of
our policy change from medians to
geometric means. We are providing this
column comparing the additional
impact of developing the CY 2013 OPPS
relative payment weights using
geometric mean costs only in the CY
2013 OPPS/ASC proposed and final
rules because the CY 2013 OPPS will
establish geometric mean costs as a
baseline configuration for the OPPS.
Column 4 shows the combined effect of
Columns 2 and 3, in other words the
effect of our decision to base the relative
payment weights on geometric mean
costs. It reflects the impacts of the
reclassification of services among APC
groups and the recalibration of APC
relative payment weights, based on 12
months of CY 2011 OPPS hospital
claims data and the most recent cost
report data, and determining relative
payment weights using the geometric
mean costs of services. We modeled the
effect of the APC recalibration changes
by varying only the relative payment
weights (the final CY 2012 relative
weights versus the CY 2013 relative
weights calculated using the service-mix
and volume in the CY 2011 claims used
for this final rule with comment period)
and calculating the percent difference in
the relative weight. Column 4 also
reflects any changes in multiple
procedure discount patterns or
conditional packaging that occur as a
result of the changes in the relative
magnitude of payment weights.
Overall, we estimate that changes in
APC reassignment and recalibration
across all services paid under the OPPS
will slightly decrease payments to urban
hospitals by 0.1 percent. However, the
smallest urban hospitals will receive
slight payment increases of 0.6 percent
(hospitals with 0–99 beds), attributable
to increased payments for partial
hospitalization, group psychotherapy
and cardiac rehabilitation monitoring
services furnished in the hospital. Due
to recalibration, we estimate that low

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volume urban hospitals billing fewer
than 21,000 lines for OPPS services will
experience increases ranging from 1.0
percent to 4.9 percent. The increase of
4.9 percent for urban hospitals billing
fewer than 5,000 lines per year is
similarly attributable to an increase in
payment for partial hospitalization and
group psychotherapy services furnished
in the hospital.
Overall, we estimate that rural
hospitals will experience a small
increase of 0.5 percent as a result of
changes to the APC structure, with the
largest increases going to the smallest
hospitals both by number of beds (1.2
percent to those with less than 50 beds)
and volume (3.1 percent to those with
fewer than 5,000 lines). As a result of
the recalibration, we estimate that rural
hospitals that report 5,000 or more lines
for OPPS services will experience
payment increases ranging from 0.3
percent to 1.5 percent.
Classifying hospitals according to
teaching status, we estimate that the
APC recalibration will lead to small
payment decreases of 0.1 to 0.2 percent
for major and minor teaching hospitals,
respectively. We estimate that
nonteaching hospitals will experience
an increase of 0.2 percent. Classifying
hospitals by type of ownership suggests
that voluntary, proprietary, and
governmental hospitals will experience
changes ranging from a decrease of 0.1
percent to an increase of 0.3 percent as
a result of the APC recalibration.
For most hospitals, we estimate
insignificant impacts of our final policy
of using geometric mean-based relative
payment weights. Most hospitals will
receive small increases in payments of
up to 6.5 percent. We estimate that
hospitals for which DSH payments are
not available (mostly urban hospitals)
will experience an increase of 6.5
percent. Hospitals for which DSH data
are not available (non-IPPS hospitals)
furnish a large number of psychiatric
services and we believe that the increase
in payment is due to increased payment
for partial hospitalization and group
psychotherapy services, as well as for
hemodialysis services furnished in the
hospital.
Column 5: New Wage Indices and the
Effect of the Rural and Cancer Hospital
Adjustments
Column 5 demonstrates the combined
budget neutral impact of APC
recalibration using geometric means; the
wage index update; the rural
adjustment; and the cancer hospital
adjustment. We modeled the
independent effect of the budget
neutrality adjustments and the OPD fee
schedule increase factor by using the

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68537

relative payment weights and wage
indices for each year, and using a CY
2012 conversion factor that included the
OPD fee schedule increase and a budget
neutrality adjustment for differences in
wage indices.
Column 5 reflects the independent
effects of the updated wage indices,
including the application of budget
neutrality for the rural floor policy on a
nationwide basis. This column excludes
the effects of the frontier State wage
index adjustment, which is not budget
neutral and is included in Column 7.
We did not model a budget neutrality
adjustment for the rural adjustment for
SCHs because we did not make any
changes to the policy for CY 2013.
Similarly, the differential impact
between the CY 2012 cancer hospital
payment adjustment and the CY 2013
cancer hospital payment adjustment had
no effect on the budget neutral
adjustment to the conversion factor. We
modeled the independent effect of
updating the wage indices by varying
only the wage indices, holding APC
relative payment weights, service-mix,
and the rural adjustment constant and
using the CY 2013 scaled weights and
a CY 2012 conversion factor that
included a budget neutrality adjustment
for the effect of changing the wage
indices between CY 2012 and CY 2013.
This column estimates the impact of
applying the FY 2013 IPPS wage indices
for the CY 2013 OPPS without the
influence of the frontier State wage
index adjustment, which is not budget
neutral. The frontier State wage index
adjustment is reflected in the combined
impact shown in Column 7. We are
continuing the rural payment
adjustment of 7.1 percent to rural SCHs
for CY 2013, as described in section
II.E.2. of this final rule with comment
period. We estimate that the
combination of updated wage data and
nationwide application of rural floor
budget neutrality will redistribute
payment among regions. We also
updated the list of counties qualifying
for the section 505 out-migration
adjustments.
Overall, we estimate that as a result of
the updated wage indices and the rural
adjustment, urban hospitals will
experience no change from CY 2012 to
CY 2013. Rural sole community
hospitals will not be affected, but other
rural hospitals will experience
decreases of 0.4 percent. Urban
hospitals in the East South Central and
Pacific regions will experience the most
significant payment changes with a
decrease of 0.7 percent in the East South
Central region and an increase of 1.4
percent in the Pacific region. Overall,
we estimate that rural hospitals will

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experience a decrease of 0.2 percent as
a result of changes to the wage index for
CY 2013. Regionally, the changes will
range from a decrease of 0.9 percent in
the rural Pacific region to an increase of
0.7 percent in the rural Mountain
region.
Column 6: All Budget Neutrality
Changes Combined With the OPD Fee
Schedule Increase
Column 6 demonstrates the
cumulative impact of the budget neutral
adjustments from Column 5 and the
OPD fee schedule increase factor of 1.8
percent. We estimate that for most
hospitals, the addition of the OPD fee
schedule increase factor of 1.8 percent
will mitigate the negative impacts
created by the budget neutrality
adjustments made in Column 5.
While most classes of hospitals will
receive an increase that is more in line
with the 1.8 percent overall increase
after the update is applied to the budget
neutrality adjustments, urban hospitals
that bill fewer than 5,000 lines, rural
hospitals that bill fewer than 5,000
lines, and hospitals for which DSH
information is not available will
experience larger increases ranging from
4.5 percent to 8.2 percent. In particular,
urban hospitals that report fewer than
5,000 lines will experience a cumulative
increase, after application of the OPD
fee schedule increase factor and the
budget neutrality adjustments, of 6.7
percent, largely as a result of increases
in payments to partial hospitalization
and group psychotherapy services
furnished in the hospital. Similarly,
urban hospitals for which DSH data are
not available will experience an
increase of 8.0 percent, also largely as a
result of increases in payment for partial
hospitalization, group psychotherapy
and hemodialysis services furnished in
hospitals.
Overall, we estimate that these
changes will increase payments to urban
hospitals by 1.8 percent. We estimate
that large urban hospitals and ‘‘other’’
urban hospitals will also experience
increases of 1.9 and 1.6 percent,
respectively. Urban hospitals in the
Pacific region will experience an
increase of 3.3 percent, largely as a
result of the change in wage index
shown under column 3 and discussed
above. We estimate that rural hospitals
will experience a 2.1 percent increase as
a result of the OPD fee schedule
increase factor and other budget
neutrality adjustments.
Classifying hospitals by teaching
status suggests that the OPD fee
schedule increase factor and the budget
neutrality adjustments will result in an
increase of 1.7 percent for major

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teaching hospitals, 1.5 percent for minor
teaching hospitals and 2.0 percent for
nonteaching hospitals.
Classifying hospitals by type of
ownership suggests that proprietary
hospitals will experience an estimated
increase of 2.3 percent, while voluntary
hospitals will experience an estimated
increase of 2.0 percent and government
hospitals will experience an estimated
increase of 1.8 percent.
Column 7: All Adjustments With the
Frontier State Wage Index Adjustment
This column shows the impact of all
budget neutrality adjustments,
application of the 1.8 percent OPD fee
schedule increase factor, and the
nonbudget neutral impact of applying
the frontier State wage adjustment (that
is, the frontier State wage index change
in addition to all changes reflected in
Column 6). This column differs from
Column 6 solely based on application of
the non-budget neutral frontier State
wage index adjustment.
In general, we estimate that all
facilities and all hospitals will
experience a combined increase of 0.1
percent due to the nonbudget neutral
frontier State wage index adjustment.
The index will only affect urban
hospitals in the West North Central and
Mountain regions. Urban hospital in
those regions will experience increases
of 1.0 percent (West North Central) and
0.4 percent (Mountain) that are
attributable to the frontier State wage
index, and rural hospitals will
experience increases of 1.2 percent
(West North Central) and 2.1 percent
(Mountain) that are attributable to the
frontier State wage index.
Column 8: All Changes for CY 2013
Column 8 depicts the full impact of
the CY 2013 policies on each hospital
group by including the effect of all the
changes for CY 2013 and comparing
them to all estimated payments in CY
2012. Column 8 shows the combined
budget neutral effects of Columns 2
through 5; the OPD fee schedule
increase; the impact of the frontier State
wage index adjustment; the impact of
estimated OPPS outlier payments as
discussed in section II.G. of this final
rule with comment period; the change
in the Hospital OQR Program payment
reduction for the small number of
hospitals in our impact model that
failed to meet the reporting
requirements (discussed in section XV.
of this final rule with comment period);
and the impact of increasing the
estimate of the percentage of total OPPS
payments dedicated to transitional passthrough payments. Of the 101 hospitals
that failed to meet the Hospital OQR

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Program reporting requirements for the
full CY 2012 update (and assumed, for
modeling purposes, to be the same
number for CY 2013), we included 30
hospitals in our model because they had
both CY 2011 claims data and recent
cost report data. We estimate that the
cumulative effect of all changes for CY
2013 will increase payments to all
providers by 1.9 percent for CY 2013.
We modeled the independent effect of
all changes in Column 8 using the final
relative payment weights for CY 2012
and the relative payment weights for CY
2013. We used the final conversion
factor for CY 2012 of $70.016 and the
CY 2013 conversion factor of $71.313
discussed in section II.B. of this final
rule with comment period.
Column 8 contains simulated outlier
payments for each year. We used the
one year charge inflation factor used in
the FY 2013 IPPS/LTCH PPS final rule
of 4.24 percent (1.0424) to increase
individual costs on the CY 2011 claims,
and we used the most recent overall
CCR in the July 2012 Outpatient
Provider-Specific File (OPSF) to
estimate outlier payments for CY 2012.
Using the CY 2011 claims and a 4.24
percent charge inflation factor, we
currently estimate that outlier payments
for CY 2012, using a multiple threshold
of 1.75 and a fixed-dollar threshold of
$2,025 should be approximately 0.9
percent of total payments. The
estimated current outlier payments of
0.9 percent are incorporated in the CY
2013 comparison in Column 8. We used
the same set of claims and a charge
inflation factor of 8.66 percent (1.0866)
and the CCRs in the July 2012 OPSF,
with an adjustment of 0.9880, to reflect
relative changes in cost and charge
inflation between CY 2011 and CY 2013,
to model the CY 2013 outliers at 1.0
percent of estimated total payments
using a multiple threshold of 1.75 and
a fixed-dollar threshold of $2,025.
We estimate that the anticipated
change in payment between CY 2012
and CY 2013 for the hospitals failing to
meet the Hospital OQR Program
requirements will be negligible. Overall,
we estimate that facilities will
experience an increase of 1.9 percent
under this final rule with comment
period in CY 2013 relative to total
spending in CY 2012. This projected
increase (shown in Column 8) of Table
57 reflects the 1.8 percent OPD fee
schedule increase factor, with 0.07
percent for the change in the passthrough estimate between CY 2012 and
CY 2013, with an additional 0.1 percent
for the difference in estimated outlier
payments between CY 2012 (0.9
percent) and CY 2013 (1.0 percent), less
0.04 percent due to the expiration of the

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section 508 wage adjustment, less 0.1
percent due to the frontier adjustment in
CY 2012, plus 0.1 percent due to the
frontier State wage index adjustment in
CY 2013. When we exclude cancer and
children’s hospitals (which are held
harmless to their pre-BBA amount) and
CMHCs, the estimated increase
continues to be 1.9 percent after
rounding. We estimate that the
combined effect of all changes for CY
2013 will increase payments to urban
hospitals by 1.9 percent, with large
urban hospitals experiencing an
estimated 2.0 percent increase and
‘‘other’’ urban hospitals experiencing an
estimated 1.7 percent increase. We
estimate that urban hospitals that bill
less than 5,000 lines of OPPS services
will experience an increase of 6.8
percent, largely attributable to the

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increase in payment for partial
hospitalization and group
psychotherapy services furnished in the
hospital. We estimate that urban
hospitals that bill 11,000 or more lines
of OPPS services will experience
increases between 1.8 percent and 3.1
percent, while urban hospitals that
report between 5,000 and 10,999 lines
will experience an increase of 4.4
percent.
Overall, we estimate that rural
hospitals will experience a 2.2 percent
increase as a result of the combined
effects of all changes for CY 2013. We
estimate that rural hospitals that bill
less than 5,000 lines of OPPS services
will experience an increase of 4.6
percent and that rural hospitals that bill
5,000 or more lines of OPPS services

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68539

will experience increases ranging from
2.1 to 2.8 percent.
Among teaching hospitals, we
estimate that the impacts resulting from
the combined effects of all changes will
include an increase of 1.8 percent for
major teaching hospitals and 2.1 percent
for nonteaching hospitals. Minor
teaching hospitals will experience an
increase of 1.7 percent.
In our analysis, we also have
categorized hospitals by type of
ownership. Based on this analysis, we
estimate that voluntary hospitals will
experience an increase of 1.9 percent,
proprietary hospitals will experience an
increase of 2.2 percent, and
governmental hospitals will experience
an increase of 1.9 percent.
BILLING CODE 4120–01–P

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ALL FACILITIES

*

Sfmt 4725

ALL HOSPITALS

(5)

(6)

(7)

Column 6
with Frontier
Wage Index
Adjustment
(%)

All
Changes
(%)

APC
Recalibratio
n (Geo
Mean) (%)

New Wage
Index and
Provider
Adjustments
(%)

Combination of
Cols 4, 5
with
Market
Basket
Update
(%)

(8)

Number of
Hospitals

APC
Recalibration
(Median) (%)

Impact of
Basing
Weights
Using Geo
Mean(%)

4,127
3,905

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

1.8
1.8

1.9
1.9

1.9
1.9

(excludes hospitals permanently held harmless and CMHCs)

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URBAN HOSPITALS
LARGE URBAN

15NOR2

2,957
1,611

-0.1
-0.1

0.0
0.0

-0.1
-0.1

0.0
0.2

1.8
1.9

1.8
1.9

1.9
2.0

1,346

-0.1

0.0

-0.1

-0.1

1.6

1.8

1.7

948
385
563

0.3
0.4
0.3

0.1
0.1
0.1

0.5
0.5
0.4

-0.2
0.0
-0.4

2.1
2.3
1.9

2.3
2.8
1.9

2.2
2.4
2.0

(GT 1 MILL.)
OTHER URBAN
(LE 1 MILL.)
RURAL HOSPITALS
SOLE COMMUNITY
OTHER RURAL

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TABLE 57.-ESTIMATED IMPACT OF THE CY 2013 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE
PAYMENTS SYSTEM

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Column 6
with Frontier
Wage Index
Adjustment
(%)

All

APC
Recalibratio
n(Geo
Mean) (%)

New Wage
Index and
Provider
Adjustments
(%)

Combination of
Cols 4, 5
with
Market
Basket
Update
(%)

(8)

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15NOR2

Number of
Hospitals

APC
Recalibration
(Median) (%)

Impact of
Basing
Weights
UsingGeo
Mean(%)

1,047
833
458
415
204

0.4
0.1
-0.1
-0.2
-0.2

0.2
0.1
0.0
0.0
-0.1

0.6
0.2
-0.1
-0.2
-0.3

0.0
0.2
0.1
0.1
-0.2

2.5
2.2
1.7
1.7
1.3

2.6
2.3
1.9
1.8
1.3

2.7
2.3
1.9
1.9
1.5

356
352
137
55
48

0.8
0.5
0.2
0.3
-0.2

0.4
0.1
0.1
0.1
0.0

1.2
0.7
0.2
0.4
-0.2

-0.3
0.0
-0.6
-0.3
0.1

2.8
2.4
1.5
1.8
1.7

3.0
2.7
1.7
2.4
1.7

2.8
2.6
1.6
2.0
1.8

597
126
197

2.4
1.3
0.7

2.5
1.3
0.3

4.9
2.6
1.0

-0.1
-0.3
0.1

6.7
4.1
2.9

6.8
4.5
3.0

6.8
4.4
3.1

Changes
(%)

BEDS (URBAN)
0- 99 BEDS
100-199 BEDS
200-299 BEDS
300-499 BEDS
500 + BEDS
BEDS (RURAL)

o-49 BEDS
50- 100 BEDS
101- 149 BEDS
150- 199 BEDS
200 + BEDS
VOLUME (URBAN)
LT 5,000

Lines

5,000 - 10,999

Lines

11,000 - 20,999

Lines

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21,000 - 42,999

Lines

42,999 - 89,999

Lines

GT 89,999

Lines

(5)

(6)

(7)

Column 6
with Frontier
Wage Index
Adjustment
(%)

All
Changes
(%)

APC
Recalibratio
n(Geo
Mean) (%)

New Wage
Index and
Provider
Adjustments
(%)

Combination of
Cols 4, 5
with
Market
Basket
Update
(%)

(8)

Fmt 4701
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15NOR2

Number of
Hospitals

APC
Recalibration
(Median) (%)

Impact of
Basing
Weights
UsingGeo
Mean(%)

429
688
920

0.3
0.0
-0.2

0.1
0.0
0.0

0.4
0.0
-0.2

0.1
0.1
0.0

2.3
l.9
l.6

2.4
l.9
l.7

2.5
2.0
l.8

59
61
146
282
400

l.8
0.5
0.6
0.7
0.2

l.3
0.9
0.6
0.2
0.1

3.1
l.5
1.2
0.9
0.3

-0.3
-0.9
-0.3
-0.3
-0.2

4.5
2.3
2.7
2.4
1.9

7.6
2.3
3.1
2.7
2.2

4.6
2.5
2.8
2.5
2.1

149
349
453
474
179
188

0.3
-0.1
-0.1
-0.2
-0.3
0.0

0.0
-0.1
-0.1
0.0
-0.1
0.0

0.3
-0.1
-0.2
-0.2
-0.4
0.0

-0.6
-0.3
-0.5
0.3
-0.7
0.3

1.5
1.4
1.1
l.9
0.7
2.1

1.5
1.4
1.1
l.9
0.7
3.1

1.5
1.5
1.3
l.9
0.8
2.5

VOLUME (RURAL)
LT 5,000

Lines

5,000 - 10,999

Lines

11,000 - 20,999

Lines

21,000 - 42,999

Lines

GT42,999

Lines

REGION (URBAN)
NEW ENGLAND
MIDDLE ATLANTIC
SOUTH ATLANTIC
EAST NORTH CENT.
EAST SOUTH CENT.
WEST NORTH CENT.

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MOUNTAIN
PACIFIC

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(4)

(3)

(5)

(6)

(7)

Column 6
with Frontier
Wage Index
Adjustment
(%)

All

APC
Recalibratio
n(Geo
Mean) (%)

New Wage
Index and
Provider
Adjustments
(%)

Combination of
Cols 4, 5
with
Market
Basket
Update
(%)

(8)

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15NOR2

Number of
Hospitals

APC
Recalibration
(Median) (%)

Impact of
Basing
Weights
UsingGeo
Mean(%)

515
208
395
47

-0.1
0.2
-0.1
-0.1

0.1
0.0
0.1
0.0

-0.1
0.2
0.0
-0.1

-0.4
0.6
1.4
0.1

1.4
2.7
3.3
1.8

1.4
3.1
3.3
1.8

1.6
2.8
3.4
2.0

25
67
161
127
175
98
201
65
29

0.7
0.4
0.2
0.2
0.0
0.5
0.5
0.6
0.7

0.0
0.0
0.1
0.1
0.1
0.1
0.4
0.0
0.1

0.7
0.4
0.3
0.3
0.1
0.7
0.9
0.6
0.8

0.4
0.0
-0.4
0.4
-0.5
-0.5
-0.4
0.7
-0.9

3.0
2.2
1.6
2.5
1.4
2.0
2.3
3.1
1.7

3.0
2.2
1.6
2.5
1.4
3.2
2.3
5.2
1.7

3.1
2.3
1.7
2.5
1.5
2.1
2.4
3.5
1.8

2,930

0.1

0.1

0.2

0.0

2.0

2.1

2.1

Changes
(%)

REGION (RURAL)
NEW ENGLAND
MIDDLE ATLANTIC
SOUTH ATLANTIC
EAST NORTH CENT.
EAST SOUTH CENT.
WEST NORTH CENT.
WEST SOUTH CENT.
MOUNTAIN
PACIFIC
TEACHING STATUS
NON-TEACHING

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MINOR
MAJOR

(5)

(4)

(6)

(7)

Column 6
with Frontier
Wage Index
Adjustment
(%)

AIl
Changes
(%)

APC
Recalibratio
n(Geo
Mean) (%)

New Wage
Index and
Provider
Adjustments
(%)

Combination of
Cols 4, 5
with
Market
Basket
Update
(%)

(8)

Number of
Hospitals

APC
Recalibration
(Median) (%)

Impact of
Basing
Weights
UsingGeo
Mean(%)

687
288

-0.1
-0.1

0.0
-0.1

-0.2
-0.1

-0.1
0.1

1.5
1.7

1.8
1.7

1.7
1.8

14
343
327
686
1,064
832

1.4
0.1
0.1
0.0
0.0
-0.2

0.0
-0.1
0.0
0.0
0.0
0.0

1.4
0.0
0.0
0.0
0.0
-0.1

-0.1
0.0
0.1
0.0
-0.1
0.1

3.1
1.8
1.9
1.7
1.7
1.8

3.1
1.9
2.0
1.9
1.9
1.8

3.2
2.0
2.0
1.8
1.9
2.0

639

2.1

4.3

6.5

-0.1

8.2

8.2

8.3

-0.1
0.0
1.4
2.1

-0.1
0.0
0.0

-0.2
0.0
1.4
6.2

0.0
0.1
-0.1
0.0

1.6
1.9
3.1
8.0

DSH PATIENT PERCENT
0
GTO-O.10
0.10 - 0.16
0.16 - 0.23
0.23 - 0.35
GE 0.35
DSH NOT AVAILABLE

**
URBAN TEACHINGIDSH

885
1,458
NO TEACHINGIDSH
14
NO TEACHINGINO DSH
DSH NOT AVAILABLE~ _600
TEACHING & DSH

- -

~.1

1.7
1.7
2.0
2.0
3.1
3.2
_8.0_____ ,---~--L__

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(5)

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(6)

(7)

Column 6
with Frontier
Wage Index
Adjustment
(%)

APC
Recalibratio
n(Geo
Mean) (%)

New Wage
Index and
Provider
Adjustments
(%)

Combination of
Cols 4, 5
with
Market
Basket
Update
(%)

(8)

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Number of
Hospitals

APC
Recalibration
(Median) (%)

Impact of
Basing
Weights
UsingGeo
Mean(%)

2,053
1,294
558

-0.1
0.1
0.1

0.0
0.2
0.0

-0.1
0.3
0.1

0.0
-0.1
-0.1

1.8
2.0
1.8

1.9
2.1
1.8

1.9
2.2
1.9

159

-1.8

-3.9

-5.7

-0.6

-4.5

-4.5

-4.4

All
Changes
(%)

TYPE OF OWNERSHIP
VOLUNTARY
PROPRIETARY
GOVERNMENT
CMHCs

E:\FR\FM\15NOR2.SGM

Column (1) shows total hospitals and/or CMHCs.
Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use of median costs in developing relative
payment weights, and the final recalibration of APC weights based on CY 2011 hospital claims data.
Column (3) shows the estimated impact of basing the CY 2013 OPPS final payments on geometric mean costs, by comparing estimated CY 2013 payments under
the policy for a geometric mean cost based system to those under a median based OPPS.

15NOR2

Column (4) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use of geometric mean costs in developing
the CY 2013 fmal OPPS relative payment weights, and the recalibration of APC weights based on CY 2011 hospital claims data.
Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2013 hospital inpatient wage index. The rural adjustment is 7.1
percent in both years so its budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the final adjustment is minimal and
thus results in a budget neutrality factor of 1.

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Column (7) shows the non-budget neutral impact of applying the frontier State wage adjustment in CY 2013, after application of the CY 2013 final OPD fee
schedule increase factor.

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Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate and adds estimated outlier payments.
This column also shows the expiration of section 508 wages on March 30, 2012, and the application of the frontier State wage adjustment for CY 2012 and 2013.

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*These 4,127 facilities include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care hospitals.

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Column (6) shows the impact of all budget neutrality adjustments and the final addition of the 1.8 percent OPD fee schedule increase factor (2.6 percent reduced
by 0.7 percentage points for the multifactor productivity adjustment and further reduced by 0.1 percentage point in order to satisfY statutory requirements set forth
in the Affordable Care Act).

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
(3) Estimated Effects of OPPS Changes
on CMHCs
The last line of Table 57 demonstrates
the isolated impact on CMHCs, which
furnish only partial hospitalization
(PHP) services under the OPPS. In CY
2012, CMHCs are paid under two APCs
for these services: APC 0172 (Level I
Partial Hospitalization (3 services) for
CMHCs) and APC 0173 (Level II Partial
Hospitalization (4 or more services) for
CMHCs). In contrast, hospitals are paid
for partial hospitalization services under
APC 0175 (Level I Partial
Hospitalization (3 services) for hospitalbased PHPs) and APC 0176 (Level II
Partial Hospitalization (4 or more
services) for hospital-based PHPs). We
first implemented these four APCs for
CY 2011 and adopted payment rates for
each APC based on the cost data derived
from claims and cost reports for the
provider type to which the APC is
specific but provided a transition to
CMHC rates based solely on CMHC data
for the two CMHC PHP per diem rates.
For CY 2013, we are continuing the
provider-specific APC structure that we
adopted for CY 2011 and are basing
payment fully on the data for the type
of provider furnishing the service. We
modeled the impact of this APC policy
assuming that CMHCs will continue to
provide the same number of days of
PHP care, with each day having either
3 services or 4 or more services, as seen
in the CY 2011 claims data used for this
final rule with comment period. We
excluded days with 1 or 2 services
because our policy only pays a per diem
rate for partial hospitalization when 3 or
more qualifying services are provided to
the beneficiary. Because the relative
payment weights for APC 0173 (Level II
Partial Hospitalization (4 or more
services) for CMHCs) decline in CY
2013 using geometric mean-based
relative payment weights as opposed to
median-based relative payment weights
(shown in Columns 3 and 4), we
estimate that there will be an overall 4.4
percent decrease in payments to CMHCs
(shown in Column 8).
Column 5 shows that the estimated
impact of adopting the CY 2013 wage
index values will result in a small
decrease of 0.6 percent to CMHCs. We
note that all providers paid under the
OPPS, including CMHCs, will receive a
1.8 percent OPD fee schedule increase
factor. Column 6 shows that combining
this OPD fee schedule increase factor,
along with changes in APC policy for
CY 2013 and the CY 2013 wage index
updates, results in an estimated
decrease of 4.5 percent. Column 7
shows that adding the frontier State
wage adjustment will result in no

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change to the cumulative 4.5 percent
decrease. Column 8 shows that adding
the changes in outlier and pass-though
payments will result in a 0.1 percent
decrease in payment for CMHCs. This
reflects all changes to CMHCs for CY
2013.

OPPS affect the payments made to ASCs
as discussed in section XIV. of this final
rule with comment period. No types of
providers or suppliers other than
hospitals, CMHCs and ASCs will be
affected by the changes in this final rule
with comment period.

(4) Estimated Effect of OPPS Changes on
Beneficiaries
For services for which the beneficiary
pays a copayment of 20 percent of the
payment rate, the beneficiary share of
payment will increase for services for
which the OPPS payments will rise and
will decrease for services for which the
OPPS payments will fall. For example,
for a service assigned to Level IV Needle
Biopsy/Aspiration Except Bone Marrow
(APC 0037) in the CY 2012 OPPS, the
national unadjusted copayment is
$227.35, and the minimum unadjusted
copayment is $215.00, 20 percent of the
national unadjusted payment rate of
$1,074.99. For CY 2013, the national
unadjusted copayment for APC 0037 is
$227.35, the same amount as the
national unadjusted copayment in effect
for CY 2012. The minimum unadjusted
copayment for APC 0037 is $223.71 or
20 percent of the CY 2013 national
unadjusted payment rate for APC 0037
of $1,118.54. The minimum unadjusted
copayment will increase for CY 2013
compared to CY 2012 because the
payment rate for APC 0037 will increase
for CY 2013. For further discussion on
the calculation of the national
unadjusted copayments and minimum
unadjusted copayments, we refer
readers to section II.H. of this final rule
with comment period. In all cases, the
statute limits beneficiary liability for
copayment for a procedure to the
hospital inpatient deductible for the
applicable year. The CY 2012 hospital
inpatient deductible is $1,156. The
amount of the CY 2013 hospital
inpatient deductible is not available at
the time of publication of this final rule
with comment period.
In order to better understand the
impact of changes in copayment on
beneficiaries, we modeled the percent
change in total copayment liability
using CY 2011 claims. We estimate,
using the claims of the 4,127 hospitals
and CMHCs on which our modeling is
based, that total beneficiary liability for
copayments will decrease as an overall
percentage of total payments, from 22.0
percent in CY 2012 to 21.5 percent in
CY 2013 due largely to changes in
service-mix.

(6) Estimated Effects of OPPS Changes
on the Medicare and Medicaid Programs
The effect on the Medicare program is
expected to be $600 million in
additional program payments for OPPS
services furnished in CY 2013. The
effect on the Medicaid program is
expected to be limited to increased
copayments that Medicaid may make on
behalf of Medicaid recipients who are
also Medicare beneficiaries. We refer
readers to our discussion of the impact
on beneficiaries in section XXII.A. of
this final rule with comment period.

(5) Estimated Effects of OPPS Changes
on Other Providers
The relative payment weights and
payment amounts established under the

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(7) Alternative OPPS Policies
Considered
Alternatives to the OPPS changes we
are making and the reasons for our
selected alternatives are discussed
throughout this final rule with comment
period. In this section, we discuss some
of the major issues and the alternatives
considered.
• Alternatives Considered for Basing
the APC Relative Payment Weights on
Geometric Mean Costs Rather than
Median Costs
As described in section II.A.2.f. of this
final rule with comment period, we are
basing the CY 2013 relative payment
weights on which OPPS payments are
calculated using geometric mean costs
rather than median costs. We
established this policy based on
stakeholder public comments, the
improvements we have made to the data
process to obtain more data and
additional accuracy in estimating cost,
and the other reasons described in the
geometric mean based relative payment
weights section.
In developing this policy, we
considered another alternative, which
was to continue basing the relative
payment weights based on median
costs. As discussed in the geometric
mean based weights section, medians
have historically served as a good
measure of central tendency and
continue to do so. In the initial
establishment of the OPPS, we selected
medians as the measure of central
tendency on which to base the weights
for a number of reasons. Those included
statistical bases such as medians’
resistance to outlier observations and
their impact as well as reasons
surrounding the practical
implementation of the OPPS as a new
payment system. While some of those

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reasons for selecting medians continue
to apply, others are now less relevant
because of changes we have made in our
data process, or no longer apply because
of factors such as actual development of
a working payment system. We have
made a number of changes to the OPPS
to address some of the challenges in
arriving at better estimates of service
cost, including trims, more specific
application of cost to charge ratios in
estimating cost, modeling changes to
better simulate payment mechanisms,
and methods of obtaining additional
claims data through what is already
available such as the bypass list.
We believe that those changes have
helped to improve the relative costs on
which the payment system is based. We
also believe that geometric mean costs
better incorporate the range of costs
associated with providing a service, and
thus will represent one such additional
improvement. Therefore, in order to
improve the accuracy at which we
arrive at service costs used to set
relative payment weights, to be
responsive to stakeholder concerns
regarding the degree to which OPPS
payment appropriately reflects service
cost, and the other reasons described in
section II.A.2.f. of this final rule with
comment period, we will establish the
CY 2013 OPPS relative payment weights
based on geometric means rather than
continuing our historical practice of
modeling costs using median costs.
• Alternatives Considered for
Payment of Drugs and Biologicals That
Do Not Have Pass-Through Status
We are paying for separately payable
drugs and biologicals at ASP+6 percent,
based on section 1833(t)(14)(A)(iii)(II) of
the Act, also referred to as the statutory
default. As detailed in greater depth in
section V.B.3 of this final rule with
comment period, this payment will
represent the combined payment for
both the acquisition and pharmacy
overhead costs of separately payable
drugs and biologicals.
We considered three alternatives for
payment for drugs and biologicals that
do not have pass-through status for CY
2013 (separately payable drugs and
biologicals). The first alternative we
considered was to propose to use the
standard methodology, as described in
the CY 2006 OPPS/ASC final rule with
comment period (70 FR 68642). We
compared the estimated aggregate cost
of separately payable drugs and
biologicals in our claims data to the
estimated aggregate ASP dollars for
separately payable drugs and
biologicals, using the ASP as a proxy for
average acquisition cost, to calculate the
estimated percent of ASP that would
serve as the best proxy for the combined

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acquisition and pharmacy overhead
costs of separately payable drugs and
biologicals, but without redistribution of
estimated pharmacy overhead costs.
Under this methodology, without a
redistribution of overhead costs from
packaged drugs to separately payable
drugs, using April 2012 ASP
information and costs derived from CY
2011 OPPS claims data, we estimated
the combined acquisition and overhead
costs of separately payable drugs and
biologicals to be ASP+0 percent. We
also determined that the combined
acquisition and overhead costs of
packaged drugs are 311 percent of ASP.
We did not choose this alternative
because we believe that this analysis
indicates that hospital charging
practices reflected in our standard drug
payment methodology have the
potential to ‘‘compress’’ the calculated
costs of separately payable drugs and
biologicals to some degree when there is
no redistribution of estimated pharmacy
overhead costs. Further, we recognize
that the attribution of pharmacy
overhead costs to packaged or separately
payable drugs and biologicals through
our standard drug payment
methodology of a combined payment for
acquisition and pharmacy overhead
costs depends, in part, on the treatment
of all drugs and biologicals each year
under our annual drug packaging
threshold. Changes to the packaging
threshold may result in changes to
payment for the overhead cost of drugs
and biologicals that do not reflect actual
changes in hospital pharmacy overhead
cost for those products.
The second alternative we considered
was to propose to continue our
overhead adjustment methodology for
CY 2013 and redistribute $270 million
in overhead costs from packaged coded
and uncoded drugs and biologicals to
separately payable drugs and
biologicals. Using this approach, we
adjusted the CY 2011 pharmacy
overhead redistribution amount of $200
million using the PPI for
Pharmaceuticals for Human Use,
resulting in a redistribution amount of
$270 million and a payment rate for
separately payable drugs of ASP+6
percent. We did not choose this
alternative because of the reasons
discussed below and in further detail in
section V.B.3 of this final rule with
comment period.
The third option that we considered,
and the one that we are adopting for CY
2013, is to pay for separately payable
drugs and biologicals administered in
the hospital outpatient department, at
ASP+6 percent based on the statutory
default described in section
1833(t)(14)(A)(iii)(II) of the Act, which

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requires an alternative methodology for
determining payment rates for SCODs
wherein, if hospital acquisition cost
data are not available, payment shall be
equal (subject to any adjustment for
overhead costs) to payment rates
established under the methodology
described in section 1842(o), section
1847A, or section 1847B of the Act, as
calculated and adjusted by the Secretary
as necessary. We determined that this
ASP+6 percent payment amount for
separately payable drugs and biologicals
represents the combined acquisition and
pharmacy overhead payment for drugs
and biologicals for CY 2013.
As described in further detail in
section V.B.3 of this final rule with
comment period, we chose this
alternative because we are uncertain
about the full cost of pharmacy
overhead and acquisition cost, due to
the limitations of the submitted hospital
charge and claims data for drugs. We
believe that the continued use of our
current drug payment methodologies
may not appropriately account for
average acquisition and pharmacy
overhead cost and therefore could result
in future payment rates that are not
appropriate.
Therefore, we finalized our proposal
to pay for separately payable drugs and
biologicals based on the statutory
default at the physician’s office Part B
payment rates, as established in sections
1842(o) and 1847A of the Act, at ASP+6
percent. We believe that paying for
separately payable drugs and biologicals
at ASP+6 percent based on the statutory
default is appropriate at this time as it
yields increased predictability in
payment for drugs and biologicals under
the OPPS while appropriately paying for
drugs at a level consistent with payment
amounts yielded by our methodology of
the past 7 years.
b. Estimated Effects of ASC Payment
System Final Policies
On August 2, 2007, we published in
the Federal Register the final rule for
the revised ASC payment system,
effective January 1, 2008 (72 FR 42470).
In that final rule, we adopted the
methodologies to set payment rates for
covered ASC services to implement the
revised payment system so that it would
be designed to result in budget
neutrality as required by section 626 of
Pub. L. 108–173; established that the
OPPS relative payment weights would
be the basis for payment and that we
would update the system annually as
part of the OPPS rulemaking cycle; and
provided that the revised ASC payment
rates would be phased in over 4 years.
ASC payment rates are calculated by
multiplying the ASC conversion factor

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by the ASC relative payment weight. As
discussed fully in section XIV. of this
final rule with comment period, we set
the CY 2013 ASC relative payment
weights by scaling the CY 2013 OPPS
relative payment weights by the ASC
scaler of 0.9324. The estimated effects of
the updated relative payment weights
on payment rates are varied and are
reflected in the estimated payments
displayed in Tables 58 and 59 below.
Beginning in CY 2011, section 3401 of
the Affordable Care Act requires that the
annual update to the ASC payment
system (which currently is the CPI–U)
after application of any quality reporting
reduction be reduced by a productivity
adjustment. The Affordable Care Act
defines the productivity adjustment to
be equal to the 10-year moving average
of changes in annual economy-wide
private nonfarm business multifactor
productivity (MFP) (as projected by the
Secretary for the 10-year period ending
with the applicable fiscal year, year,
cost reporting period, or other annual
period). Because the ASCQR Program
will not affect payment rates until CY
2014, there will be no reduction to the
CPI–U for failure to meet the
requirements of the ASCQR Program for
CY 2013. We calculated the CY 2013
ASC conversion factor by adjusting the
CY 2012 ASC conversion factor by
1.0008 to account for changes in the prefloor and pre-reclassified hospital wage
indices between CY 2012 and CY 2013
and by applying the CY 2013 MFPadjusted CPI–U update factor of 0.6
percent (projected CPI–U update of 1.4
percent minus a projected productivity
adjustment of 0.8 percent). The CY 2013
ASC conversion factor is $42.917.
(1) Limitations of Our Analysis
Presented here are the projected
effects of the changes for CY 2013 on
Medicare payment to ASCs. A key
limitation of our analysis is our inability
to predict changes in ASC service-mix
between CY 2011 and CY 2013 with
precision. We believe that the net effect
on Medicare expenditures resulting
from the CY 2013 changes would be
small in the aggregate for all ASCs.
However, such changes may have
differential effects across surgical
specialty groups as ASCs continue to
adjust to the payment rates based on the
policies of the revised ASC payment
system. We are unable to accurately
project such changes at a disaggregated
level. Clearly, individual ASCs would
experience changes in payment that
differ from the aggregated estimated
impacts presented below.

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(2) Estimated Effects of ASC Payment
System Final Policies on ASCs
Some ASCs are multispecialty
facilities that perform the gamut of
surgical procedures from excision of
lesions to hernia repair to cataract
extraction; others focus on a single
specialty and perform only a limited
range of surgical procedures, such as
eye, digestive system, or orthopedic
procedures. The combined effect on an
individual ASC of the update to the CY
2013 payments would depend on a
number of factors, including, but not
limited to, the mix of services the ASC
provides, the volume of specific services
provided by the ASC, the percentage of
its patients who are Medicare
beneficiaries, and the extent to which an
ASC provides different services in the
coming year. The following discussion
presents tables that display estimates of
the impact of the CY 2013 updates to
the ASC payment system on Medicare
payments to ASCs, assuming the same
mix of services as reflected in our CY
2011 claims data. Table 58 depicts the
estimated aggregate percent change in
payment by surgical specialty or
ancillary items and services group by
comparing estimated CY 2012 payments
to estimated CY 2013 payments, and
Table 59 shows a comparison of
estimated CY 2012 payments to
estimated CY 2013 payments for
procedures that we estimate would
receive the most Medicare payment in
CY 2012.
Table 58 shows the estimated effects
on aggregate Medicare payments under
the ASC payment system by surgical
specialty or ancillary items and services
group. We have aggregated the surgical
HCPCS codes by specialty group,
grouped all HCPCS codes for covered
ancillary items and services into a single
group, and then estimated the effect on
aggregated payment for surgical
specialty and ancillary items and
services groups. The groups are sorted
for display in descending order by
estimated Medicare program payment to
ASCs. The following is an explanation
of the information presented in Table
58.
• Column 1—Surgical Specialty or
Ancillary Items and Services Group
indicates the surgical specialty into
which ASC procedures are grouped and
the ancillary items and services group
which includes all HCPCS codes for
covered ancillary items and services. To
group surgical procedures by surgical
specialty, we used the CPT code range
definitions and Level II HCPCS codes
and Category III CPT codes as

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68549

appropriate, to account for all surgical
procedures to which the Medicare
program payments are attributed.
• Column 2—Estimated CY 2012 ASC
Payments were calculated using CY
2011 ASC utilization (the most recent
full year of ASC utilization) and CY
2012 ASC payment rates. The surgical
specialty and ancillary items and
services groups are displayed in
descending order based on estimated CY
2012 ASC payments.
• Column 3—Estimated CY 2013
Percent Change is the aggregate
percentage increase or decrease in
Medicare program payment to ASCs for
each surgical specialty or ancillary
items and services group that would be
attributable to updates to ASC payment
rates for CY 2013 compared to CY 2012.
As seen in Table 58, we estimate that
the update to ASC rates for CY 2013
would result in a zero percent change in
aggregate payment amounts for eye and
ocular adnexa procedures, a 2-percent
increase in aggregate payment amounts
for digestive system procedures, and a
3-percent increase in aggregate payment
amounts for nervous system procedures.
Generally, for the surgical specialty
groups that account for less ASC
utilization and spending, we estimate
that the payment effects of the CY 2013
update are variable. For instance, we
estimate that, in the aggregate, payment
for integumentary system procedures,
respiratory system procedures, and
cardiovascular systems procedures
would decrease by 3 percent, whereas
auditory system procedures would
increase by 1 percent under the CY 2013
rates.
An estimated increase in aggregate
payment for the specialty group does
not mean that all procedures in the
group would experience increased
payment rates. For example, the
estimated increase for CY 2013 for
nervous system procedures is likely due
to an increase in the ASC payment
weight for some of the high volume
procedures, such as CPT code 63685
(Insrt/redo spine n generator) where
estimated payment would increase by 8
percent for CY 2013.
Also displayed in Table 58 is a
separate estimate of Medicare ASC
payments for the group of separately
payable covered ancillary items and
services. The payment estimates for the
covered surgical procedures include the
costs of packaged ancillary items and
services. We estimate that aggregate
payments for these items and services
would remain unchanged for CY 2013.

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Table 59 below shows the estimated
impact of the updates to the revised
ASC payment system on aggregate ASC
payments for selected surgical
procedures during CY 2013. The table
displays 30 of the procedures receiving
the greatest estimated CY 2012 aggregate
Medicare payments to ASCs. The
HCPCS codes are sorted in descending

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order by estimated CY 2012 program
payment.
• Column 1–CPT/HCPCS code.
• Column 2–Short Descriptor of the
HCPCS code.
• Column 3–Estimated CY 2012 ASC
Payments were calculated using CY
2011 ASC utilization (the most recent
full year of ASC utilization) and the CY
2012 ASC payment rates. The estimated

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CY 2012 payments are expressed in
millions of dollars.
• Column 4–Estimated CY 2013
Percent Change reflects the percent
differences between the estimated ASC
payment for CY 2012 and the estimated
payment for CY 2013 based on the
update.
BILLING CODE 4120–01–P

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TABLE 59.--ESTIMATED IMPACT OF THE FINAL CY 2013 UPDATE TO THE
ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED
PROCEDURES

CPTIHCPCS
Code*
(1)
66984
43239
45380
45385
45378
66982
64483
62311
66821
63650
15823
GOlD5
64493
29827
64721
G012I
29881
63685
64590
29880
45384
43235
52000
28285
62310
26055
67042
29826
67904
50590

Short Descriptor
(2)
Cataract surg wliol, 1 stage
Upper GI endoscopy, biopsy
Colonoscopy and biopsy
Lesion removal colonoscopy
Diagnostic colonoscopy
Cataract surgery, complex
Inj foramen epidural lis
Inject spine lis (cd)
After cataract laser surgery
Implant neuroelectrodes
Revision of upper eyelid
Colorectal scm; hi risk ind
Ini paravert fjnt lis I lev
Arthroscop rotator cuff repr
Carpal tunnel surgery
Colon ca scm not hi rsk ind
Knee arthroscopy/surgery
Insrt/redo spine n generator
Insrt/redo pnlgastr stimul
Knee arthroscopy/surgery
Lesion remove colonoscopy
Uppr gi endoscopy diagnosis
Cystoscopy
Repair of hammertoe
Inject spine cit
Incise finger tendon sheath
Vit for macular hole
Shoulder arthroscopy/surgery
Repair eyelid defect
Fragmenting of kidney stone

Estimated
CY 2012
ASC
Payments
(in millions)
(3)
$1,079
$157
$144
$92
$89
$83
$73
$68
$55
$40
$39
$38
$36
$36
$31
$30
$30
$28
$25
$25
$23
$23
$20
$19
$18
$17
$17
$17
$17
$17

Estimated
CY2013
Percent
Change
(4)
1%
2%
2%
2%
2%
1%
5%
5%
5%
-2%
-2%
2%
5%
-6%
-1%
2%
-1%
8%
8%
-1%
2%
2%
4%
-1%
5%
-4%
-1%
-1%
-3%
-4%

BILLING CODE–4120–01–C

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*Note that HCPCS codes we are deleting for CY 2013 are not displayed in this table.

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(3) Estimated Effects of ASC Payment
System Final Policies on Beneficiaries
We estimate that the CY 2013 update
to the ASC payment system would be
generally positive for beneficiaries with
respect to the new procedures that we
are adding to the ASC list of covered
surgical procedures and for those that
we are designating as office-based for
CY 2013. First, other than certain
preventive services where coinsurance
and the Part B deductible is waived to
comply with sections 1833(a)(1) and (b)
of the Act, the ASC coinsurance rate for
all procedures is 20 percent. This
contrasts with procedures performed in
HOPDs, where the beneficiary is
responsible for copayments that range
from 20 percent to 40 percent of the
procedure payment. Second, in almost
all cases, the ASC payment rates under
the ASC payment system are lower than
payment rates for the same procedures
under the OPPS. Therefore, the
beneficiary coinsurance amount under
the ASC payment system will almost
always be less than the OPPS
copayment amount for the same
services. (The only exceptions would be
if the ASC coinsurance amount exceeds
the inpatient deductible. The statute
requires that copayment amounts under
the OPPS not exceed the inpatient
deductible.) Furthermore, the additions
to the ASC list of covered surgical
procedures will provide beneficiaries
access to more surgical procedures in
ASCs. Beneficiary coinsurance for
services migrating from physicians’
offices to ASCs may decrease or increase
under the revised ASC payment system,
depending on the particular service and
the relative payment amounts for that
service in the physician’s office
compared to the ASC. However, for
those additional procedures that we are
designating as office-based in CY 2013,
the beneficiary coinsurance amount
would be no greater than the beneficiary
coinsurance in the physician’s office
because the coinsurance in both settings
is 20 percent (except for certain
preventive services where the
coinsurance is waived in both settings).

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(4) Alternative ASC Payment Policies
Considered
Alternatives to the changes we are
making to the ASC payment system and
the reasons that we have chosen specific
options are discussed throughout this
final rule with comment period. Some
of the major ASC issues discussed in
this final rule with comment period and
the options considered are discussed
below.

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• Alternatives Considered for the
Annual Update to ASC Payments for
Inflation
Section 1833(i)(2)(C)(i) of the Act
requires that, ‘‘if the Secretary has not
updated amounts established’’ under
the revised ASC payment system in a
calendar year, the payment amounts
‘‘shall be increased by the percentage
increase in the Consumer Price Index
for all urban consumers (U.S. city
average) as estimated by the Secretary
for the 12-month period ending with the
midpoint of the year involved.’’ The
statute, therefore, does not mandate the
adoption of any particular update
mechanism, but it requires the payment
amounts to be increased by the CPI–U
in the absence of any update. Because
the Secretary updates the ASC payment
amounts annually under the revised
payment system, we are not compelled
to increase the ASC payment amounts
by the CPI–U. Nonetheless, we adopted
a policy, which we codified at
§ 416.171(a)(2)(ii), to update the ASC
conversion factor using the CPI–U for
CY 2010 and subsequent calendar years.
While we believe the CPI–U is
appropriate to apply to update the ASC
payment system, we are aware that the
CPI–U is highly weighted for housing
and transportation and may not best
reflect inflation in the cost of providing
ASC services. Therefore, as alternatives
to using the CPI–U to update ASC
payment rates for inflation, in
developing this final rule with comment
period, we considered using: (1) the
hospital market basket, which is used to
update OPPS rates for inflation; (2) the
PE component of the MEI update, which
is used to update the MPFS payment
rates for inflation; or (3) the average of
the hospital market basket update and
the PE component of the MEI update.
However, until we have more
information regarding the cost inputs of
ASCs, we are not confident that any of
the alternatives are a better proxy for
ASC cost inputs than the CPI–U.
Therefore, we proposed and are
finalizing our established policy to
continue to base the ASC update on the
CPI–U.
• Alternatives Considered for OfficeBased Procedures
According to our existing policy for
the ASC payment system, we designate
as office-based those procedures that are
added to the ASC list of covered
surgical procedures in CY 2008 or later
years and that we determine are
predominantly performed in physicians’
offices based on consideration of the
most recent available volume and
utilization data for each individual
procedure HCPCS code and/or, if
appropriate, the clinical characteristics,

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utilization, and volume of related
HCPCS codes. We establish payment for
procedures designated as office-based at
the lesser of the MPFS nonfacility
practice expense payment amount or the
ASC rate developed according to the
standard methodology of the ASC
payment system.
In developing this final rule with
comment period, we reviewed CY 2011
utilization data for all surgical
procedures added to the ASC list of
covered surgical procedures in CY 2008
or later years and for those procedures
for which the office-based designation is
temporary in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74406 through 74408). Based on that
review and as discussed in section
XIV.C.1.b. of this final rule with
comment period, we are newly
designating 6 surgical procedures as
permanently office-based, are making
temporary office-based designations for
6 procedures in CY 2013 of the 8
procedures that were designated as
temporarily office-based for CY 2012,
and are making temporary office-based
designations for 2 procedures that are
new ASC covered surgical procedures
for CY 2013. We considered two
alternatives in developing this policy.
The first alternative we considered
was to make no change to the procedure
payment designations. This would mean
that we would pay for the 6 procedures
we proposed to designate as
permanently office-based and the 8
procedures we proposed to designate as
temporarily office-based at an ASC
payment rate calculated according to the
standard ratesetting methodology of the
ASC payment system. We did not select
this alternative because our analysis of
the data and our clinical review
indicated that all 6 procedures we
proposed to designate as permanently
office-based, as well as the 8 procedures
that we proposed to designate
temporarily as office-based, are
considered to be predominantly
performed in physicians’ offices.
Consistent with our final policy adopted
in the August 2, 2007 final rule (72 FR
42509 through 42513), we were
concerned that making payments at the
standard ASC payment rate for the 6
procedures we proposed to designate as
permanently office-based and the 8
procedures we proposed to designate as
temporarily office-based could create
financial incentives for the procedures
to shift from physicians’ offices to ASCs
for reasons unrelated to clinical
decisions regarding the most
appropriate setting for surgical care.
Further, consistent with our policy, we
believe that when adequate data become
available to make permanent

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determinations about procedures with
temporary office-based designations,
maintaining the temporary designation
is no longer appropriate.
The second alternative we considered
and the one we selected for CY 2013 is
to designate 6 additional procedures as
permanently office-based for CY 2013
and to designate 8 procedures as
temporarily office-based in CY 2013. We
chose this alternative because our
claims data and clinical review indicate
that these procedures would be
considered to be predominantly
performed in physicians’ offices. We
believe that designating these
procedures as office-based, which
results in the CY 2013 ASC payment
rate for these procedures potentially
being capped at the CY 2013 physicians’
office rate (that is, the MPFS nonfacility
practice expense payment amount), if
applicable, is an appropriate step to
ensure that Medicare payment policy
does not create financial incentives for
such procedures to shift unnecessarily
from physicians’ offices to ASCs,
consistent with our final policy adopted
in the August 2, 2007 final rule.
c. Effects of the Revisions to the QIO
Regulations
In section XVIII. of this final rule with
comment period, we discuss our
changes to the QIO program regulations,
including: adding provisions for
processing beneficiary complaints that
will give beneficiaries more information
about the QIO’s review process, which
includes a new alternative dispute
resolution option (immediate advocacy);
giving QIOs the authority to send and
receive secure transmissions of
electronic versions of health
information; conveying beneficiaries the
right to authorize the QIOs’ use and
disclosure of confidential information;
and removing outdated regulatory
provisions that will enable QIOs to give
more information regarding the results
of reviews. We believe the changes will
improve the QIO program, give
beneficiaries better information
regarding review activities and reduce
burden for both providers and
practitioners.
The QIO program requests
approximately 62,400 medical records
each year for the Hospital IQR and
Hospital OQR Programs combined
(38,400 for inpatient and 24,000 for
outpatient). For the Hospital IQR
Program, the average number of pages
per medical record is 289 pages, and for
the Hospital OQR Program, the average
number of pages is 74. Reimbursement
is made at a rate of $0.12 per page for
PPS hospitals, which includes the costs
of toner, paper, and labor associated

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with the copying of paper medical
records. We also note that the labor
associated with copying the medical
records can be considerable. In fact,
many providers and practitioners store
health information electronically, and
these same providers and practitioners
are forced to print hard copies of the
information for shipment to the QIOs.
Sometimes this may entail using the
‘‘print screen’’ function to create the
record to be shipped. On average, the
cost of shipping the records is
approximately $32.35 per shipment,
with approximately 5,200 shipments
being made. The shipping amount takes
into consideration that, for some QIO
review activities, multiple records are
shipped at one time, which can involve
the use of several boxes.
Under our proposal, by example,
assuming all hospitals operate under a
PPS, should all hospitals transfer health
information on a digital versatile device
(DVD), the costs associated with the
toner and paper would be replaced by
the costs of a DVD. In fact, numerous
medical records could be copied to a
single DVD. Moreover, the labor in
copying the records would be
substantially reduced because, for
example, rather than copying the
average 289 pages related to a Hospital
IQR Program review, the file could be
electronically transferred to a DVD for
shipping. We estimate that the $0.12 per
page rate could be reduced by as much
as $0.07 per page. Based on the overall
average number of pages for the
Hospital IQR Program and Hospital
OQR Program, respectively, reducing
the per page rate to $0.05 per page
would save $901,152 ((11,097,600 pages
× $0.12 = $1,331,712) + (1,776,000 pages
× $0.12 = $213,120) ¥ (11,097,600
pages × $0.05 = $554,880) ¥ (1,776,000
pages × $0.05 = $88,800)).
The changes also would reduce the
costs associated with mailing the
records. For the Hospital IQR Program,
hospitals sometimes need to ship as
many as four or five large boxes of
medical records. By comparison, a
single DVD can house multiple medical
records and even if multiple DVDs were
required, all the DVDs could be mailed
in a single envelope at a significantly
lower cost. Potentially, the per envelope
mailing cost could be as low as $5
compared to the per shipment average
cost of $32.35. Thus, if all records were
shipped on DVDs, the program would
save $142,220 ($168,220 ¥ $26,000).
The changes allowing the sending and
receiving of electronic versions of health
information also would reduce costs for
other QIO review activities. QIOs
request approximately 100,000 medical
records in completing other review

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activities, including but not limited to
requests related to the processing of
general quality of care reviews, written
beneficiary complaint reviews, medical
necessity reviews, and expedited
discharge appeal reviews. The average
number of pages associated with each of
these reviews varies greatly, and we
have estimated an overall average of
approximately 175 pages per request.
The reimbursement rate for requests
associated with these activities is $0.12
per page for PPS providers and $0.15
per page for practitioners and non-PPS
providers. Assuming an overall average
number of 175 pages for each record, we
estimate that the total number of pages
requested is approximately 17,500,000.
Assuming that approximately 75
percent (13,125,000) of the pages are
from practitioners and non-PPS
providers, with the remaining 25
percent (4,375,000) from PPS providers,
based on the $0.12 or $0.15 per page
reimbursement rate, we estimate that
the total costs would be approximately
$1,968,750 and $525,000, respectively.
If all these requests were fulfilled using
a DVD or other electronic means, we
estimate that the cost per page could be
reduced to approximately $0.05 per
page for PPS providers and $0.06 per
page for practitioners and non-PPS
providers. Thus, the estimated savings
related to PPS providers would be
approximately $306,250 ($525,000 ¥
$218,750) and the estimated savings
related to practitioners and non-PPS
providers would be approximately
$1,181,250 ($1,968,750 ¥ $787,500).
With regard to mailing, we also
believe the changes would significantly
reduce the costs for other QIO review
activities. Moreover, unlike the Hospital
IQR and Hospital OQR Programs, the
number of medical records requested for
these other QIO review activities more
closely mirrors the actual number of
shipments made. For example, on
average, the QIOs request 100,000
medical records related to these other
activities, and we estimate that this
equates to approximately 82,000
shipments. We estimate that there is a
corresponding decrease in the cost per
shipment ($7 per shipment compared to
$32.35 per shipment for the Hospital
IQR and OQR Programs). If DVDs were
used instead of paper copies of the
medical records, we estimate saving of
$164,000 (82,000 × $7 ¥ 82,000 × $5).
Beginning with the QIOs’ most recent
scope of work, which began August 1,
2011, QIOs began offering immediate
advocacy to Medicare beneficiaries for
the resolution of certain types of oral
complaints. We believe that cost savings
will be realized as a result. In
developing this new process, we had

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several goals. One of these goals was to
create a way for Medicare beneficiaries
to obtain resolutions of complaints
much faster than the traditional peer
review process, which usually take over
158 days to complete because,
inevitably, various timeframes
throughout the review process are not
met (for example, providers and
practitioners sometimes take more time
that allowed to respond to medical
record requests or the opportunity for
discussion). By comparison, we believe
that immediate advocacy normally can
be completed within 2 calendar days.
However, this process could result in
reductions of more than merely a
reduction in days. Because immediate
advocacy is completed without
reviewing a beneficiary’s medical
record, QIOs would save the costs
associated with requesting the records,
which includes the labor, supplies
(toner and paper), and mailing of the
records. Moreover, although there may
be some variation among QIOs,
immediate advocacy would typically be
carried out by a nurse or social worker,
and, thus, the QIO can avoid the more
expensive costs associated with the use
of a physician reviewer.
In addition, for a traditional
complaint review, the QIO’s peer
reviewer completes three separate and
distinct reviews (the interim initial
determination, the final initial
determination, and the reconsideration
determination), each time reviewing the
medical information and providing his/
her conclusion about the quality of care
provided. Moreover, the provider and/or
practitioner who is the subject of the
complaint will be brought into the

complaint process each time to respond
to the conclusions. With immediate
advocacy, the nurse or social work
would be involved once, early in the
process, with the primary role being to
listen to the beneficiary’s concerns and
then coordinate a resolution with the
provider or practitioner, instead of
merely reviewing information contained
in the beneficiary’s medical
information. Not only would this
process enable beneficiaries to obtain
resolution of complaints quicker, but it
would decrease the amount of time and
energy practitioners and providers
would devote to responding to the
complaints. This is especially true for
certain types of complaints where the
issues involved are not even
documented in the medical information
the physician reviewers would review
in the traditional complaint process.
Typically, we have estimated a total cost
per case of $960 for each case processed
using the traditional peer review
process. We estimate that, for those
instances where immediate advocacy is
used, the average cost per case would be
approximately $87. On average, QIOs
complete approximately 3,500
complaint reviews each year, and we
estimate that approximately 10 percent
of these reviews (350) would be
resolved using immediate advocacy
instead of the traditional peer review
process. This would result in savings of
$305,550 each year (($960 × 350 =
$336,000)¥($87 × 350 = $30,450)).
Comment: One commenter stated that
the estimate of $87 for immediate
advocacy ‘‘seems unreasonably low for
the actual staff time involved in these
cases.’’

Response: We appreciate the
comment. However, our ability to
evaluate the substance of the comment
is limited because the commenter did
not give any specific information
regarding why the commenter believes
the estimated amount is unreasonably
low. In identifying the estimated
amount, we considered the significantly
reduced time frame within which these
cases are resolved, the fact that the types
of complaints are less severe than what
can be handled through the traditional
complaint process, and the fact that
QIOs will be able to use review analysts
in completing these reviews compared
to other more costly peer reviewers used
as many as three times as part of the
traditional complaint review process.
While we recognize that the time
needed to achieve an actual resolution
may be longer, we estimated that, on
average, the actual amount of time spent
working on these cases to be
approximately 70 minutes, and using an
hourly rate of approximately $43.17 and
adding in other costs, such as leave and
other indirect costs, we believe $87 is
appropriate. In light of the above, we see
no need to adjust the estimated cost.
The technical changes to the QIO
regulations under section XVIII.F. of
this final rule with comment period that
we are making to improve the
regulations reflect CMS’ commitment to
the principles of the President’s
Executive Order on Regulatory Reform,
Executive Order 13563 (January 18,
2011).
Below is a table summarizing the
savings associated with both of these
provisions.

d. Accounting Statements and Tables

www.whitehouse.gov/sites/default/files/
omb/assets/regulatory_matters_pdf/a4.pdf, we have prepared three
accounting statements to illustrate the
impacts of this final rule with comment

period. The first accounting statement,
Table 60 below, illustrates the
classification of expenditures for the CY
2013 estimated hospital OPPS incurred
benefit impacts associated with the CY

As required by OMB Circular A–4
(available on the Office of Management
and Budget Web Site at: http://

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2013 OPD fee schedule increase, based
on the FY 2013 President’s Budget. The
second accounting statement, Table 61
below, illustrates the classification of
expenditures associated with the 0.6
percent CY 2013 update to the ASC
payment system, based on the

provisions of this final rule with
comment period and the baseline
spending estimates for ASCs in the FY
2013 President’s Budget. The third
accounting statement, Table 62 below,
illustrates the estimated impact based
on the provisions allowing QIOs to

securely send and receive electronic
versions of health information as well as
the use of alternative dispute resolution
process called immediate advocacy.
Lastly, the three tables classify most
estimated impacts as transfers.

e. Effects of Requirements for the
Hospital OQR Program
In section XVI. of the CY 2009 OPPS/
ASC final rule with comment period (73
FR 68758 through 68781), section XVI.
of the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60629
through 60655), section XVI. of the CY
2011 OPPS/ASC final rule with
comment period (75 FR 72064 through
72110), and section XVI. of the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74451 through 74492), we
discussed the requirements for
subsection (d) hospitals to report quality
data under the Hospital OQR Program in

order to receive the full OPD fee
schedule increase factor for CY 2010,
CY 2011, and CYs 2012 through 2014,
respectively. In section XV. of this final
rule with comment period, we adopted
additional policies affecting the
Hospital OQR Program.
We determined that 114 hospitals did
not meet the requirements to receive the
full OPD fee schedule increase factor for
CY 2012. Most of these hospitals (106 of
the 114) received little or no OPPS
payment on an annual basis and did not
participate in the Hospital OQR
Program. We estimate that 106 hospitals
may not receive the full OPD fee

schedule increase factor in CY 2014. We
are unable at this time to estimate the
number of hospitals that may not
receive the full OPD fee schedule
increase factor in CY 2015.
In section XVI.E.3.a. of the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60647 through 60650), for
the CY 2011 payment update, as part of
the validation process, we required
hospitals to submit paper copies of
requested medical records to a
designated contractor within the
required timeframe. Failure to submit
requested documentation could result in
a 2.0 percentage point reduction to a

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hospital’s CY 2011 OPD fee schedule
increase factor, but the failure to attain
a validation score threshold would not.
In section XVI.D.3.b of the CY 2011
OPPS/ASC final rule with comment
period, we finalized our proposal to
validate data submitted by 800 hospitals
of the approximately 3,200 participating
hospitals for purposes of the CY 2012
Hospital OQR Program payment
determination. We stated our belief that
this approach was suitable for the CY
2012 Hospital OQR Program because it
would: produce a more reliable estimate
of whether a hospital’s submitted data
have been abstracted accurately; provide
more statistically reliable estimates of
the quality of care delivered in each
selected hospital as well as at the
national level; and reduce overall
hospital burden because most hospitals
would not be selected to undergo
validation each year. We adopted a
threshold of 75 percent as the threshold
for the validation score because we
believed this level was reasonable for
hospitals to achieve while still ensuring
accuracy of the data. Additionally, this
level is consistent with what we
adopted in the Hospital Inpatient
Quality Reporting (IQR) Program
(formerly referred to as the Reporting
Hospital Quality Data for Annual
Payment Update (RHQDAPU) program))
(75 FR 50225 through 50229). As a
result, we believed that the effect of our
validation process for CY 2012 would be
minimal in terms of the number of
hospitals that would not meet all
program requirements.
In the CY 2012 OPPS/ASC final rule
with comment period, we finalized our
proposal to validate data submitted by
up to 500 of the approximately 3,200
participating hospitals for purposes of
the CY 2013 Hospital OQR Program
payment determination. Under our
policy for CY 2011, CY 2012, and CY
2013, we stated that we would conduct
a measure level validation by assessing
whether the measure data submitted by
the hospital matches the independently
reabstracted measure data.
In this final rule with comment
period, for CY 2014 and subsequent
years payment determinations, we are
making some modifications to
administrative requirements in
extending a deadline to submit a Notice
of Participation as well as to
extraordinary circumstance waiver or
extension and reconsideration processes
to broaden the scope of personnel who
can sign these requests. However, we
are not making any modifications to our
validation requirements. We expect
these policies to have minimal impact
on the program.

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As stated above, we are unable to
estimate the number of hospitals that
may not receive the full OPD fee
schedule increase factor in CY 2015. We
also are unable to estimate the number
of hospitals that would fail the
validation documentation submission
requirement for the CY 2015 payment
update.
The validation requirements for CY
2014 would result in medical record
documentation for approximately 6,000
cases per quarter for CY 2014, being
submitted to a designated CMS
contractor. We will pay for the cost of
sending this medical record
documentation to the designated CMS
contractor at the rate of 12 cents per
page for copying and approximately
$1.00 per case for postage. We have
found that an outpatient medical chart
is generally up to 10 pages. Thus, as a
result of validation requirements
effective for CY 2014, we estimate that
we will have expenditures of
approximately $13,200 per quarter for
CY 2014. Because we will pay for the
data collection effort, we believe that a
requirement for medical record
documentation for 7,300 total cases for
up to 500 hospitals for CY 2014
represents a minimal burden to Hospital
OQR Program participating hospitals.
We are maintaining a 45-day
timeframe for hospitals to submit
requested medical record
documentation to meet our validation
requirement. The total burden would be
a maximum of 12 charts for each of the
four quarters that must be copied and
mailed within a 45-day period after the
end of each quarter.
f. Effects of the EHR Electronic
Reporting Pilot
Under section XV.K. of this final rule
with comment period, we are allowing
eligible hospitals and CAHs that are
participating in the EHR Incentive
Program to meet the CQM reporting
requirement of the program in FY 2013
by participating in the Medicare EHR
Incentive Program Electronic Reporting
Pilot. This will facilitate the use of an
electronic infrastructure that supports
the use of EHRs by eligible hospitals
and CAHs to meet the requirements in
various CMS programs and reduce
reporting burden simultaneously.
Through this pilot, we have encouraged
hospitals and CAHs to take steps toward
the adoption of EHRs that will allow for
reporting of clinical quality data from
EHRs to a CMS data repository. We
expect that the submission of quality
data through EHRs will provide a
foundation for establishing the capacity
of hospitals to send, and for CMS, in the
future, to receive, quality measures via

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hospital EHRs for the Hospital IQR
Program’s measures. Hospitals that
choose to participate in the EHR
Incentive Program by means of this pilot
for the purpose of meeting the CQM
reporting requirement of meaningful use
will be taking those first steps toward
reporting clinical quality data in such a
way.
There are no changes to the costs or
impact in the 2012 OPPS/ASC final rule
for the 2013 Medicare EHR Incentive
Program Electronic Reporting Pilot for
Eligible Hospitals and CAHs.
g. Effects of Proposals for the ASCQR
Program
In section XVI. of this final rule with
comment period, for the ASCQR
Program, we discuss public comment on
our approach for future measures
selection and development as well as on
certain measures for potential future
inclusion in the ASCQR Program
measure set. We are finalizing our
approach to future measure selection
and development for the ASCQR
Program. For the CY 2015 payment
determination and subsequent calendar
year payment determinations, we are
adopting requirements for claims-based
measures regarding the dates for
submission and payment and data
completeness. We also are finalizing our
policy regarding how the payment rates
will be reduced in CY 2014 and in
subsequent calendar years for ASCs that
fail to meet program requirements, and
we are clarifying our policy on updating
measures.
We are unable at this time to estimate
the number of ASCs that may not
receive the full ASC annual payment
update in CYs 2014, 2015, and 2016.
However, we do not expect our new
policies to significantly affect the
number of ASCs that do not receive a
full annual payment update.
h. Effects of Updates to the IRF QRP
In section XVII. of this final rule with
comment period, we discuss our policy
that, once we initially adopt a measure
for the IRF QRP for a payment
determination, that measure will be
automatically adopted for all
subsequent fiscal years’ payment
determinations or until such time as we
might propose and finalize the
measure’s removal, suspension, or
replacement.
We also discuss how we will use the
CAUTI measure previously finalized.
We will use the CAUTI measure that
was previously finalized in the FY 2012
IRF PPS final rule (76 FR 24214) with
revisions which were made by the NQF
after publication of the FY 2012 IRF PPS
final rule. We will apply the revised

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CAUTI measure for the FY 2014
reporting period, which affects the FY
2012 APU, and each subsequent
reporting period thereafter. We also are
finalizing the use of a nonrisk-adjusted
version of the NQF-endorsed pressure
ulcer measure, which does not include
public reporting of any nonrisk-adjusted
pressure ulcer measure data.
There are no changes to the costs or
impact as stated in FY 2012 IRF PPS
final rule (76 FR 24214). IRFs will be
required to submit CAUTI data on all
patients that are admitted to their
facility and pressure ulcer data only on
those patients for which they are
required to submit the IRF–PAI. This
policy has not changed. Further, we do
not expect our new policies to
significantly affect the number of IRFs
that do not receive a full annual
payment update.
B. Regulatory Flexibility Act (RFA)
Analysis
The RFA requires agencies to analyze
options for regulatory relief of small
entities, if a rule has a significant impact
on a substantial number of small
entities. For purposes of the RFA, we
estimate that most hospitals, ASCs and
CMHCs are small entities as that term is
used in the RFA. For purposes of the
RFA, most hospitals are considered
small businesses according to the Small
Business Administration’s size
standards with total revenues of $34.5
million or less in any single year. Most
ASCs and most CMHCs are considered
small businesses with total revenues of
$10 million or less in any single year.
We estimate that this final rule with
comment period may have a significant
impact on approximately 2,053
hospitals with voluntary ownership. For
details, see the Small Business
Administration’s ‘‘Table of Small
Business Size Standards’’ at http://
www.sba.gov/content/table-smallbusiness-size-standards.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 604 of the
RFA. For purposes of section 1102(b) of
the Act, we define a small rural hospital
as a hospital that is located outside of
a metropolitan statistical area and has
100 or fewer beds. We estimate that this
final rule with comment period may
have a significant impact on
approximately 708 small rural hospitals.
The analysis above, together with the
remainder of this preamble, provides a
regulatory flexibility analysis and a
regulatory impact analysis.

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C. Unfunded Mandates Reform Act
Analysis
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. That threshold
level is currently approximately $139
million. This final rule with comment
period does not mandate any
requirements for State, local, or tribal
governments, or for the private sector.
D. Conclusion
The changes we are making in this
final rule with comment period will
affect all classes of hospitals paid under
the OPPS and will affect both CMHCs
and ASCs. We estimate that most classes
of hospitals paid under the OPPS will
experience a modest increase or a
minimal decrease in payment for
services furnished under the OPPS in
CY 2013. Table 57 demonstrates the
estimated distributional impact of the
OPPS budget neutrality requirements
that will result in a 1.9 percent increase
in payments for all services paid under
the OPPS in CY 2013, after considering
all changes to APC reconfiguration and
recalibration, as well as the OPD fee
schedule increase factor, wage index
changes, including the frontier State
wage index adjustment, estimated
payment for outliers, and changes to the
pass-through payment estimate.
However, some classes of providers that
are paid under the OPPS will
experience more significant gains and
others will experience modest losses in
OPPS payments in CY 2013. We
estimate that hospitals for whom DSH
data are not available (non-IPPS, largely
urban hospitals) will experience an
increase of 8.3 percent due to increased
payments for partial hospitalization,
group psychotherapy and hemodialysis
services. CMHCs will see an overall
decrease in payment of 4.4 percent as a
result of a decrease in their estimated
costs.
The updates to the ASC payment
system for CY 2013 will affect each of
the approximately 5,300 ASCs currently
approved for participation in the
Medicare program. The effect on an
individual ASC will depend on its mix
of patients, the proportion of the ASC’s
patients who are Medicare beneficiaries,
the degree to which the payments for
the procedures offered by the ASC are
changed under the ASC payment
system, and the extent to which the ASC
provides a different set of procedures in
the coming year. Table 58 demonstrates

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68557

the estimated distributional impact
among ASC surgical specialties of the
MFP-adjusted CPI–U update factor of
0.6 percent for CY 2013.
XXIII. Federalism Analysis
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
costs on State and local governments,
preempts State law, or otherwise has
Federalism implications. We have
examined the OPPS and ASC provisions
included in this final rule with
comment period in accordance with
Executive Order 13132, Federalism, and
have determined that they will not have
a substantial direct effect on State, local
or tribal governments, preempt State
law, or otherwise have a Federalism
implication. As reflected in Table 57 of
this final rule with comment period, we
estimate that OPPS payments to
governmental hospitals (including State
and local governmental hospitals) will
increase by 1.9 percent under this final
rule with comment period. While we do
not know the number of ASCs or
CMHCs with government ownership, we
anticipate that it is small. The analyses
we have provided in this section of this
final rule with comment period, in
conjunction with the remainder of this
document, demonstrate that this final
rule with comment period is consistent
with the regulatory philosophy and
principles identified in Executive Order
12866, the RFA, and section 1102(b) of
the Act.
This final rule with comment period
will affect payments to a substantial
number of small rural hospitals and a
small number of rural ASCs, as well as
other classes of hospitals, CMHCs, and
ASCs, and some effects may be
significant.
List of Subjects
42 CFR Part 416
Health facilities, Health professions,
Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 419
Hospitals, Medicare, Reporting and
recordkeeping requirements.
42 CFR Part 476
Health care, Health professional,
Health record, Peer Review
Organization (PRO), Penalties, Privacy,
Reporting and recordkeeping
requirements.
42 CFR Part 478
Administrative practice and
procedure, Health care, Health

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professions, Peer Review Organizations
(PRO), Reporting and recordkeeping
requirements.
42 CFR Part 480
Health care, Health professions,
Health records, Peer Review
Organizations (PRO), Privacy, Reporting
and recordkeeping requirements.
42 CFR Part 495
Computer technology, Electronic
health records, Electronic transactions,
Health, Health care, Health information
technology, Health insurance, Health
records, Hospitals, Laboratories,
Medicaid, Medicare, Privacy, Reporting
and recordkeeping requirements, Public
health, Security.
For reasons stated in the preamble of
this document, the Centers for Medicare
& Medicaid Services is amending 42
CFR Chapter IV as set forth below:
PART 416—AMBULATORY SURGICAL
SERVICES
1. The authority citation for Part 416
continues to read as follows:

■

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

2. Section 416.160 is amended by
revising paragraph (a)(1) to read as
follows:

■

sroberts on DSK5SPTVN1PROD with

§ 416.160

Basis and scope.

(a) * * *
(1) Section 1833(i)(2)(D) of the Act
requires the Secretary to implement a
revised payment system for payment of
surgical services furnished in ASCs. The
statute requires that, in the year such
system is implemented, the system shall
be designed to result in the same
amount of aggregate expenditures for
such services as would be made if there
was no requirement for a revised
payment system. The revised payment
system shall be implemented no earlier
than January 1, 2006, and no later than
January 1, 2008. The statute provides
that the Secretary may implement a
reduction in any annual update for
failure to report on quality measures as
specified by the Secretary. The statute
also requires that, for CY 2011 and each
subsequent year, any annual update to
the ASC payment system, after
application of any reduction in the
annual update for failure to report on
quality measures as specified by the
Secretary, be reduced by a productivity
adjustment. There shall be no
administrative or judicial review under
section 1869 of the Act, section 1878 of
the Act, or otherwise of the
classification system, the relative

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weights, payment amounts, and the
geographic adjustment factor, if any, of
the revised payment system.
*
*
*
*
*
3. Section 416.171 is amended by—
■ a. Redesignating paragraph (a)(2)(iii)
as paragraph (a)(2)(iv) and revising it.
■ b. Adding new paragraph (a)(2)(iii).
The revision and addition read as
follows:
■

§ 416.171 Determination of payment rates
for ASC services.

(a) * * *
(2) * * *
(iii) For CY 2014 and subsequent
calendar years, the Consumer Price
Index for All Urban Consumers update
determined under paragraph (a)(2)(ii) of
this section is reduced by 2.0 percentage
points for an ASC that fails to meet the
standards for reporting of ASC quality
measures as established by the Secretary
for the corresponding calendar year.
(iv) Productivity adjustment. (A) For
calendar year 2011 and subsequent
years, the Consumer Price Index for All
Urban Consumers determined under
paragraph (a)(2)(ii) of this section, after
application of any reduction under
paragraph (a)(2)(iii) of this section, is
reduced by the productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act.
(B) The application of the provisions
of paragraph (a)(2)(iv)(A) of this section
may result in the update being less than
zero percent for a year, and may result
in payment rates for a year being less
than the payment rates for the preceding
year.
*
*
*
*
*
4. Section 416.195 is amended by
revising paragraphs (a)(2) and (a)(4)
introductory text to read as follows:

■

§ 416.195 Determination of membership in
new classes of new technology IOLs.

(a) * * *
(2) The IOL shall have a new lens
characteristic in comparison to
currently available IOLs. The labeling,
which must be approved by FDA, shall
contain a claim of a specific clinical
benefit imparted by the new lens
characteristic.
*
*
*
*
*
(4) Any specific clinical benefit
referred to in paragraph (a)(2) of this
section must be supported by evidence
that demonstrates that the IOL results in
a measurable, clinically meaningful,
improved outcome. Improved outcomes
include:
*
*
*
*
*

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PART 419—PROSPECTIVE PAYMENT
SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES
5. The authority citation for Part 419
continues to read as follows:

■

Authority: Secs. 1102, 1833(t), and 1871
of the Social Security Act (42 U.S.C. 1302,
1395(t), and 1395hh).

6. Section 419.2 is amended by
revising paragraph (b) introductory text
to read as follows:

■

§ 419.2

Basis of payment.

*

*
*
*
*
(b) Determination of hospital
outpatient prospective payment rates:
Packaged costs. The prospective
payment system establishes a national
payment rate, standardized for
geographic wage differences, that
includes operating and capital-related
costs that are directly related and
integral to performing a procedure or
furnishing a service on an outpatient
basis. In general, these costs include,
but are not limited to, the following
items and services, the payments for
which are packaged into the payments
for the related procedures or services.
*
*
*
*
*
■ 7. Section 419.31 is amended by
revising paragraphs (a)(1), (b), and (c)(2)
to read as follows:
§ 419.31 Ambulatory payment
classification (APC) system and payment
weights.

(a) * * *
(1) CMS classifies outpatient services
and procedures that are comparable
clinically and in terms of resource use
into APC groups. Except as specified in
paragraph (a)(2) of this section, items
and services within a group are not
comparable with respect to the use of
resources if the highest geometric mean
cost for an item or service within the
group is more than 2 times greater than
the lowest geometric mean cost for an
item or service within the group.
*
*
*
*
*
(b) APC weighting factors. (1) Using
hospital outpatient claims data from
calendar year 1996 and data from the
most recent available hospital cost
reports, CMS determines the geometric
mean costs for the services and
procedures within each APC group.
(2) CMS assigns to each APC group an
appropriate weighting factor to reflect
the relative geometric mean costs for the
services within the APC group
compared to the geometric mean costs
for the services in all APC groups.
(c) * * *
(2) CMS standardizes the geometric
mean costs determined in paragraph

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(b)(1) of this section by adjusting for
variations in hospital labor costs across
geographic areas.
■ 8. Section 419.32 is amended by
revising paragraph (b)(1)(iv)(A) and
adding paragraph (b)(1)(iv)(B)(4) to read
as follows:
§ 419.32 Calculation of prospective
payment rates for hospital outpatient
services.

*

*
*
*
*
(b) * * *
(1) * * *
(iv)(A) For calendar year 2003 and
subsequent years, by the OPD fee
schedule increase factor, which, subject
to the adjustments specified in
paragraph (b)(1)(iv)(B) of this section, is
the hospital inpatient market basket
percentage increase applicable under
section 1886(b)(3)(B)(iii) of the Act.
(B) * * *
(4) For calendar year 2013, a
multifactor productivity adjustment (as
determined by CMS) and 0.1 percentage
point.
*
*
*
*
*
■ 9. Section 419.70 is amended by
revising paragraph (d)(2) introductory
text and adding paragraph (d)(7) to read
as follows:
§ 419.70 Transitional adjustments to limit
decline in payments.

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*

*
*
*
*
(d) * * *
(2) Temporary treatment for small
rural hospitals on or after January 1,
2006. For covered hospital outpatient
services furnished in a calendar year
from January 1, 2006 through December
31, 2012, for which the prospective
payment system amount is less than the
pre-BBA amount, the amount of
payment under this part is increased by
95 percent of that difference for services
furnished during CY 2006, 90 percent of
that difference for services furnished
during CY 2007, and 85 percent of that
difference for services furnished during
CYs 2008, 2009, 2010, 2011, and 2012
if the hospital—
*
*
*
*
*
(7) Temporary treatment of small sole
community hospitals on or after January
1, 2012 through December 31, 2012. (i)
For covered hospital outpatient services
furnished on or after January 1, 2012
through December 31, 2012, for which
the prospective payment system amount
is less than the pre-BBA amount, the
amount of payment under this part is
increased by 85 percent of that
difference if the hospital—
(A) Is a sole community hospital as
defined in § 412.92 of this chapter or is
an essential access community hospital

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as described under § 412.109 of this
chapter; and
(B) Has 100 or fewer beds as defined
in § 412.105(b) of this chapter, except as
provided in paragraph (d)(7)(ii) of this
section.
(ii) For covered hospital outpatient
services furnished on or after January 1,
2012 through February 29, 2012, the bed
size limitation under paragraph
(d)(7)(i)(B) of this section does not
apply.
*
*
*
*
*
PART 476—UTILIZATION AND
QUALITY CONTROL REVIEW
10. The authority for Part 476
continues to read as follows:

■

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

11. Section 476.1 is amended by—
a. Removing the definition of ‘‘Active
staff privileges’’.
■ b. Adding definitions of ‘‘Appointed
representative’’, ‘‘Authorized
representative’’, ‘‘Beneficiary
complaint’’, ‘‘Beneficiary complaint
review’’, ‘‘Beneficiary representative’’,
‘‘General quality of care reviews’’,
‘‘Gross and flagrant violation’’,
‘‘Immediate advocacy’’, ‘‘Quality
improvement initiative’’, ‘‘Quality of
care concern’’, ‘‘Quality of care review’’,
‘‘Significant quality of care concern’’,
and ‘‘Substantial violation in a
substantial number of cases’’.
■ c. Revising the definition of
‘‘Preadmission certification’’.
The additions and revisions read as
follows:
■
■

§ 476.1

Definitions.

*

*
*
*
*
Appointed representative means an
individual appointed by a Medicare
beneficiary to represent the beneficiary
in the beneficiary complaint review
process.
Authorized representative means an
individual authorized, under State or
other applicable law, to act on behalf of
a Medicare beneficiary. An authorized
representative has all of the rights and
responsibilities of a Medicare
beneficiary throughout the processing of
a beneficiary complaint.
Beneficiary complaint means a
complaint by a Medicare beneficiary or
a Medicare beneficiary’s representative
alleging that the quality of Medicare
covered services received by the
beneficiary did not meet professionally
recognized standards of care. A
complaint may consist of one or more
quality of care concerns.
Beneficiary complaint review means a
review conducted by a QIO in response

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68559

to the receipt of a written beneficiary
complaint to determine whether the
quality of Medicare covered services
provided to the beneficiary was
consistent with professionally
recognized standards of health care.
Beneficiary representative means an
individual identified as an authorized or
appointed representative of a Medicare
beneficiary.
*
*
*
*
*
General quality of care review means
a review conducted by a QIO to
determine whether the quality of
Medicare covered services provided to a
Medicare beneficiary was consistent
with professionally recognized
standards of health care. A general
quality of care review may be carried
out as a result of a referral to the QIO
or a QIO’s identification of a potential
concern during the course of another
review activity or through the analysis
of data.
Gross and flagrant violation means a
violation of an obligation resulting from
inappropriate or unnecessary services,
services that do not meet recognized
professional standards of care, or
services that are not supported by
evidence of medical necessity or quality
as required by the QIO. The violation
must have occurred in one or more
instances that present an imminent
danger to the health, safety, or wellbeing of a program patient or places the
program patient unnecessarily in highrisk situations.
*
*
*
*
*
Immediate advocacy means an
informal alternative dispute resolution
process used to quickly resolve an oral
complaint a Medicare beneficiary or his
or her representation has regarding the
quality of Medicare covered health care
received. This process involves a QIO
representative’s direct contact with the
provider and/or practitioner.
*
*
*
*
*
Preadmission certification means a
favorable determination, transmitted to
the hospital and the fiscal intermediary
or the Medicare administrative
contractor, approving the patient’s
admission for payment purposes.
*
*
*
*
*
Quality improvement initiative means
any formal activity designed to serve as
a catalyst and support for quality
improvement that uses proven
methodologies to achieve these
improvements. The improvements may
relate to safety, health care, health and
value and involve providers,
practitioners, beneficiaries, and/or
communities.
Quality of care concern means a
concern that care provided did not meet

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a professionally recognized standard of
health care. A general quality of care
review or a beneficiary complaint
review may cover a single or multiple
concerns.
Quality of care review means a review
conducted by a QIO to determine
whether the quality of Medicare covered
services provided to beneficiaries was
consistent with professionally
recognized standards of health care. A
quality of care review can either be a
beneficiary complaint review or a
general quality of care review.
*
*
*
*
*
Significant quality of care concern
means a determination by the QIO that
the quality of care provided to a
Medicare beneficiary did not meet the
standard of care and, while not a gross
and flagrant or substantial violation of
the standard, represents a noticeable
departure from the standard that could
reasonably be expected to have a
negative impact on the health of a
beneficiary.
Substantial violation in a substantial
number of cases means a pattern of
providing care that is inappropriate,
unnecessary, or does not meet
recognized professional standards of
care, or is not supported by the
necessary documentation of care as
required by the QIO.
*
*
*
*
*
■ 12. Section 476.70 is revised to read
as follows:
§ 476.70

Statutory bases and applicability.

(a) Statutory bases. Sections 1154,
1866(a)(1)(F), and 1886(f)(2) of the Act
require that a QIO review those services
furnished by physicians, other health
care professionals, providers and
suppliers as specified in its contract
with the Secretary.
(b) Applicability. The regulations in
this subpart apply to review conducted
by a QIO and its subcontractors.
■ 13. Section 476.71 is amended by—
■ a. Revising paragraph (a)(2).
■ b. In paragraph (b), removing the
reference ‘‘§ 405.330(b)’’ and adding in
its place the reference ‘‘§ 411.400(b) of
this chapter’’.
■ c. Revising paragraph (c)(1).
The revisions read as follows:

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§ 476.71

(a) * * *
(2) Whether the quality of the services
meets professionally recognized
standards of health care, as determined
through the resolution of oral
beneficiary complaints as specified in
§ 476.110, written beneficiary
complaints as specified in § 476.120, or

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§ 476.72
■

[Removed]

14. Section 476.72 is removed.

§ 476.73

[Amended]

15. In § 476.73—
a. In paragraph (a), first sentence, the
phrase ‘‘and Medicare fiscal
intermediaries and carriers.’’ is removed
and the phrase ‘‘Medicare
administrative contractors, fiscal
intermediaries, and carriers.’’ is added
in its place.
■ b. In paragraph (b)(1), the reference
‘‘§ 466.78(b)(3)’’ is removed and the
reference ‘‘§ 476.78(b)(3)’’ is added in its
place.
■
■

§ 476.74

[Amended]

16. In § 476.74—
a. In paragraph (b), the phrase
‘‘appropriate Medicare fiscal
intermediary or carrier’’ is removed and
the phrase ‘‘appropriate Medicare
administrative contractor, fiscal
intermediary, or carrier’’ is added in its
place.
■ b. In paragraph (c)(1), the phrase
‘‘Medicare fiscal intermediaries and
carriers’’ is removed, and the phrase
‘‘Medicare administrative contractors,
fiscal intermediaries, and carriers’’ is
added in its place.
■ c. In paragraph (e), the reference
‘‘§ 405.332’’ is removed and the
reference ‘‘§ 411.402’’ is added in its
place.
■ 17. Section 476.78 is amended by—
■ a. Revising the section heading.
■ b. Revising paragraphs (b)(2)(i) and
(ii).
The revisions read as follows:
■
■

§ 476.78 Responsibilities of providers and
practitioners.

*

QIO review requirements.

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the completion of general quality of care
reviews as specified in § 476.160.
*
*
*
*
*
(c) * * *
(1) The QIO must review at least a
random sample of hospital discharges
each quarter and submit new diagnostic
and procedural information to the
Medicare administrative contractor,
fiscal intermediary, or carrier if it
determines that the information
submitted by the hospital was incorrect.
*
*
*
*
*

*
*
*
*
(b) * * *
(2) * * *
(i) Except as provided under
§§ 476.130(b) and 476.160(b), relating to
beneficiary complaint reviews and
general quality of care reviews,
photocopy and deliver to the QIO all
required information within 14 calendar
days of a request. A QIO is authorized

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to require the receipt of the medical
information earlier than the 14-day
timeframe if the QIO makes a
preliminary determination that the
review involves a potential gross and
flagrant or substantial violation as
specified in Part 1004 of this title and
circumstances warrant earlier receipt of
the medical information. A
practitioner’s or provider’s failure to
comply with the request for medical
information within the established
timeframe may result in the QIO taking
action in accordance with § 476.90.
(ii) Send secure transmission of an
electronic version of medical
information, if available, subject to the
QIO’s ability to support receipt and
transmission of the electronic version.
Providers and practitioners must deliver
electronic versions of medical
information within 14 calendar days of
the request. A QIO is authorized to
require the receipt of the medical
information earlier than the 14-day
timeframe if the QIO makes a
preliminary determination that the
review involves a potential gross and
flagrant or substantial violation as
specified in Part 1004 of this title and
circumstances warrant earlier receipt of
the medical information. A
practitioner’s or provider’s failure to
comply with the request for medical
information within the established
timeframe may result in the QIO taking
action in accordance with § 476.90.
*
*
*
*
*
§ 476.80

[Amended]

18. In § 476.80—
a. In the section heading and
paragraphs (b)(1) introductory text and
(c)(1) (two places), the phrase ‘‘Medicare
fiscal intermediaries and carriers’’ is
removed and the phrase ‘‘Medicare
administrative contractors, fiscal
intermediaries, and carries’’ is added in
its place.
■ b. In paragraph (a) introductory text,
the phrase ‘‘Medicare fiscal
intermediary or carrier’’ is removed and
the phrase ‘‘Medicare administrative
contractor, fiscal intermediary, or
carrier’’ is added in its place.
■ c. In paragraphs (a)(1), (a)(2)
introductory text (two places), (c)(3)(ii),
(d)(1), and (d)(2), the phrase ‘‘fiscal
intermediary or carrier’’ is removed and
the phrase ‘‘Medicare administrative
contractor, fiscal intermediary, or
carrier’’ is added in its place.
■ d. In paragraph (e), in the paragraph
heading and in paragraphs (e)(1) and
(e)(2), the phrase ‘‘fiscal intermediary’’
is removed and the phrase ‘‘Medicare
administrative contractor or fiscal
intermediary’’ is added in its place.
■
■

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
§ 476.86

[Amended]

19. In § 476.86—
a. In paragraph (a)(1)(iii), the reference
‘‘§ 405.310(g) or § 405.310(k)’’ is
removed and the reference ‘‘§ 411.15(g)
or § 411.15(k)’’ is added in its place.
■ b. In paragraph (a)(2) and (d), the
phrase ‘‘Medicare fiscal intermediaries
and carriers’’ is removed and the phrase
‘‘Medicare administrative contractors,
fiscal intermediaries, and carriers’’ is
added in its place.
■ c. In paragraph (c) introductory text,
the phrase ‘‘Medicare fiscal
intermediary or carrier’’ is removed and
the phrase ‘‘Medicare administrative
contractor, fiscal intermediary, or
carrier’’ is added in its place.
■ d. In paragraph (c)(1), the phrase
‘‘fiscal intermediary or carrier’’ is
removed and the phrase ‘‘Medicare
administrative contractor, fiscal
intermediary, or carrier’’ is added in its
place.
■ e. In paragraph (e), the phrase
‘‘intermediaries and carriers’’ is
removed and the phrase ‘‘Medicare
administrative contractors, fiscal
intermediaries, and carriers’’ is added in
its place.
■ f. In paragraph (f), the reference ‘‘part
473’’ is removed and the reference ‘‘part
478’’ is added in its place.
■
■

§ 476.94

[Amended]

20. In § 476.94—
a. In paragraph (a)(1)(iv), the phrase
‘‘fiscal intermediary or carrier’’ is
removed and the phrase ‘‘Medicare
administrative contractor, fiscal
intermediary, or carrier’’ is added in its
place.
■ b. In paragraph (d), the phrase
‘‘Medicare fiscal intermediary or
carrier’’ is removed and the phrase
‘‘Medicare administrative contractor,
fiscal intermediary, or carrier’’ is added
in its place.
■ c. In paragraph (c)(3), the reference
‘‘part 473’’ is removed and the reference
‘‘part 478’’ is added in its place.
■
■

§ 476.98

[Amended]

21. In § 476.98, in paragraph (a)(1), the
phrase ‘‘with active staff privileges in
one or more hospitals’’ is removed.
■ 22. Section 476.104 is amended by
revising paragraph (a) to read as follows:
■

§ 476.104

Coordination of activities.

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*

*
*
*
*
(a) Medicare administrative
contractors, fiscal intermediaries, and
carriers.
*
*
*
*
*
■ 23. Sections 476.110, 476.120,
476.130, 476.140, 476.150, 476.160,
476.170 are added to subpart C to read
as follows:

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Subpart C—Review Responsibilities of
Utilization and Quality Control Quality
Improvement Organizations (QIOs)
Sec.

*

*

*

*

*

476.110 Use of immediate advocacy to
resolve oral beneficiary complaints.
476.120 Submission of written beneficiary
complaints.
476.130 Beneficiary complaint review
procedures.
476.140 Beneficiary complaint
reconsideration procedures.
476.150 Abandoned complaints and
reopening rights.
476.160 General quality of care review
procedures.
476.170 General quality of care
reconsideration procedures.

*

*

*

*

*

§ 476.110 Use of immediate advocacy to
resolve oral beneficiary complaints.

(a) Immediate advocacy. A QIO may
offer the option of resolving an oral
complaint through the use of immediate
advocacy if:
(1) The complaint is received not later
than 6 months from the date on which
the care giving rise to the complaint
occurred.
(2) After initial screening of the
complaint, the QIO makes a preliminary
determination that—
(i) The complaint is unrelated to the
clinical quality of health care itself but
relates to items or services that
accompany or are incidental to the
medical care and are provided by a
practitioner and/or provider; or
(ii) The complaint, while related to
the clinical quality of health care
received by the beneficiary, does not
rise to the level of being a gross and
flagrant, substantial, or significant
quality of care concern.
(3) The beneficiary agrees to the
disclosure of his or her name to the
involved provider and/or practitioner.
(4) All parties orally consent to the
use of immediate advocacy.
(5) All parties agree to the limitations
on redisclosure set forth in § 480.107 of
this subchapter.
(b) Discontinuation of immediate
advocacy. The QIO or either party may
discontinue participation in immediate
advocacy at any time.
(1) The QIO must inform the parties
that immediate advocacy will be
discontinued; and
(2) The beneficiary must be informed
of his or her right to submit a written
complaint in accordance with the
procedures in § 476.120.
(c) Confidentiality requirements. All
communications, written and oral,
exchanged during the immediate
advocacy process must not be

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68561

redisclosed without the written consent
of all parties.
(d) Abandoned complaints. If any
party fails to participate or otherwise
comply with the requirements of the
immediate advocacy process, the QIO
may determine that the complaint has
been abandoned and—
(1) Inform the parties that immediate
advocacy will be discontinued; and
(2) Inform the Medicare beneficiary of
his or her right to submit a written
complaint in accordance with the
procedures in § 476.120.
§ 476.120 Submission of written
beneficiary complaints.

(a) Timeframe for submission of
written complaints. A QIO shall be
responsible for conducting a review of
any written complaint received from a
Medicare beneficiary or a Medicare
beneficiary’s representative about the
quality of health care if the complaint is
received not later than 3 years from the
date on which the care giving rise to the
complaint occurred.
(1) A written complaint includes a
complaint submitted electronically to
the QIO.
(2) In those instances where a
Medicare beneficiary contacts the QIO
regarding a complaint but declines to
submit the complaint in writing and
immediate advocacy has not been
offered, the QIO may complete a general
quality of care review in accordance
with § 476.160 if the QIO makes a
preliminary determination that the
complaint involves a potential gross and
flagrant, substantial or significant
quality of care concern.
(b) New concerns raised by a
Medicare beneficiary. If a Medicare
beneficiary raises new concerns relating
to the same complaint after the
completion of the interim initial
determination in § 476.130(c), the
concerns will be processed as a new
complaint. The QIO may process new
concerns raised after the receipt of the
written complaint as part of the same
complaint, provided they are received
prior to the completion of the interim
initial determination. Even if a concern
is received before the interim initial
determination, the QIO can address it as
a separate complaint if the QIO
determines that this is warranted by the
circumstances.
§ 476.130 Beneficiary complaint review
procedures.

(a) Scope of the QIO review. In
completing its review, the QIO shall
consider any information and materials
submitted by the Medicare beneficiary
or his or her representative and any
information submitted by the provider

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and/or practitioner. All information
obtained by the QIO that fits within the
definition of ‘‘confidential information’’
under § 480.101, will be held by the QIO
as confidential.
(1) The QIO’s review will focus on the
episode of care from which the
complaint arose and address the specific
concerns identified by the beneficiary
and any additional concerns identified
by the QIO. The QIO may separate
concerns into different complaints if the
QIO determine that the concerns relate
to different episodes of care.
(2) The QIO will use evidence-based
standards of care to the maximum
extent practicable. If no standard of care
exists, the QIO will use available norms,
best practices and established
guidelines to establish the standard that
will be used in completing the review.
The QIO’s determination regarding the
standard used is not subject to appeal.
(b) Medical information requests. (1)
Upon request by the QIO, a provider or
practitioner must deliver all medical
information requested in response to a
Medicare beneficiary complaint within
14 calendar days of the request. A QIO
is authorized to require the receipt of
the medical information sooner if the
QIO make a preliminary determination
that the complaint involves a potential
gross and flagrant or substantial quality
of care concern as specified in Part 1004
of this title and circumstances warrant
earlier receipt of the medical
information. A practitioner’s or
provider’s failure to comply with the
request for medical information within
the established timeframe may result in
the QIO taking action in accordance
with § 476.90.
(2) In requesting medical information
in response to a Medicare beneficiary
complaint, the QIO must notify the
practitioner and/or provider that the
medical record is being requested in
response to a beneficiary complaint,
explain the practitioner’s and/or
provider’s right to discuss the QIO’s
interim initial determination, and
request the name of a contact person in
order to ensure timely completion of the
discussion.
(c) Interim initial determination. The
QIO peer reviewer will complete the
review and the practitioner and/or
provider will be notified of the interim
initial determination within 10 calendar
days of the receipt of all medical
information.
(1) A practitioner and provider will be
notified by telephone of the opportunity
to discuss the QIO’s interim initial
determination with the QIO in those
situations where the peer reviewer
determines that the quality of services
does not meet professionally recognized

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standards of care for any concern in the
complaint. The discussion must be held
no later than 7 calendar days from the
date of the initial offer.
(2) The interim initial determination
becomes the final initial determination
if the discussion is not completed
timely as a result of the practitioner’s
and/or provider’s failure to respond.
(3) Written statements in lieu of a
discussion must be received no later
than 7 calendar days from the date of
the initial offer.
(4) In rare circumstances, the QIO
may grant additional time to complete
the discussion or submission of a
written statement in lieu of a
discussion.
(d) Final initial determination. The
QIO must issue written notification of
its final initial determination in those
cases in which the QIO has determined
that care met professionally recognized
standards, as well as in those cases in
which the QIO determined that
standards were not met and the
opportunity for discussion has been
completed.
(1) No later than 3 business days after
completion of its review, or for cases in
which the standard was not met, no
later than 3 business days after the
discussion or receipt of the provider’s
and/or practitioner’s written statement,
the QIO will notify (by telephone) the
beneficiary and the provider/
practitioner of its final initial
determination and of the right to request
a reconsideration of the QIO’s final
initial determination.
(2) Written notice of the QIO’s final
initial determination will be forwarded
to all parties within 5 calendar days
after completion of its review, and must
include:
(i) A statement for each concern that
care did or did not meet the standard of
care;
(ii) The standard identified by the
QIO for each of the concerns; and
(iii) A summary of the specific facts
that the QIO determines are pertinent to
its findings, including references to
medical information and, if held, the
discussion with the involved
practitioner and/or provider.
§ 476.140 Beneficiary complaint
reconsideration procedures.

(a) Right to request a reconsideration.
Beginning with complaints filed after
July 31, 2014, a Medicare beneficiary, a
provider, or a practitioner who is
dissatisfied with a QIO’s final initial
determination may request a
reconsideration by the QIO.
(1) The reconsideration request must
be received by the QIO, in writing or by
telephone, no later than 3 calendar days

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following initial notification of the
QIO’s determination. If the QIO is
unable to accept a request, the request
must be submitted by noon of the next
day the QIO is available to accept a
request.
(2) The Medicare beneficiary, or his or
her representative, and the practitioner
and/or provider must be available to
answer any questions or supply any
information that the QIO requests in
order to conduct its reconsideration.
(3) The QIO must offer the Medicare
beneficiary and the practitioner and/or
provider an opportunity to provide
further information. A Medicare
beneficiary, a practitioner, and a
provider may, but are not required to,
submit evidence to be considered by the
QIO in making its reconsideration
decision.
(b) Issuance of the QIO’s final
decision. No later than 5 calendar days
after receipt of the request for a
reconsideration, or, if later, 5 calendar
days after receiving any medical or
other records needed for such
reconsideration, the QIO must complete
the review and notify the beneficiary
and the practitioner/provider of its
decision.
(1) The QIO’s initial notification may
be done by telephone, followed by the
mailing of a written notice by noon of
the next calendar day that includes—
(i) A statement for each concern that
care did or did not meet the standard of
care;
(ii) The standard identified by the
QIO for each of the concerns;
(iii) A summary of the specific facts
that the QIO determines are pertinent to
its findings; and
(iv) A statement that the letter
represents the QIO’s final determination
and that there is no right to further
appeal.
(2) The QIO may provide information
to the beneficiary, practitioner, and
provider regarding opportunities for
improving the care given to patients
based on the specific findings of its
review and the development of quality
improvement initiatives.
§ 476.150 Abandoned complaints and
reopening rights.

(a) Abandoned complaints. If a
Medicare beneficiary fails to participate
or otherwise comply with the
requirements of the beneficiary
complaint review process and the QIO
does not have sufficient information to
complete its review, the QIO may
determine that the complaint has been
abandoned and—
(1) Inform the parties that its
complaint review will be discontinued;
and

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
(2) Inform the beneficiary of his or her
right to resubmit a written complaint in
accordance with the procedures in
§ 476.120.
(b) Reopening complaint reviews. A
QIO may reopen a Medicare beneficiary
complaint review using the same
procedures that the QIO would use for
reopening initial denial determinations
and changes as a result of DRG
validation, as described in § 476.96.

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§ 476.160 General quality of care review
procedures.

(a) Scope of the QIO review. A QIO
may conduct a general quality of care
review in accordance with section
1154(a)(1)(B) of the Act.
(1) A QIO may conduct general
quality of care reviews based on—
(i) Concerns identified during the
course of other QIO review activities;
(ii) Referrals from other sources,
including but not limited to individuals,
contractors, other Federal or State
agencies; or
(iii) Analysis of data.
(2) The QIO’s review will focus on all
concerns identified by the QIO and/or
identified by those who have referred or
reported the concerns, with
consideration being given to the episode
of care related to the concerns.
(3) The QIO will use evidence-based
standards of care to the maximum
extent practicable. If no standard of care
exists, the QIO must use available
norms, best practices, and established
guidelines to establish the standard that
will be used in completing the review.
The QIO’s determination regarding the
standard used is not subject to appeal.
(b) Medical information requests.
Upon request by the QIO, a provider or
practitioner must deliver all medical
information requested within 14
calendar days of the request. A QIO is
authorized to require the receipt of the
medical information sooner if the QIO
makes a preliminary determination that
the review involves a potential gross
and flagrant or substantial quality of
care concern and circumstances warrant
earlier receipt of the medical
information. A practitioner’s or
provider’s failure to comply with the
request for medical information within
the established timeframe may result in
the QIO taking action in accordance
with § 476.90.
(c) Initial determination. The QIO
peer reviewer will complete the review
and the practitioner and/or provider
will be notified of the initial
determination in writing within 10
calendar days of the receipt of all
medical information.

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§ 476.170 General quality of care
reconsideration procedures.

(a) Right to request a reconsideration.
Beginning with reviews initiated after
July 31, 2014, a provider or practitioner
who is dissatisfied with a QIO’s initial
determination may request a
reconsideration by the QIO.
(1) The reconsideration request must
be received by the QIO, in writing or by
telephone, by no later than 3 calendar
days following receipt of the QIO’s
initial determination. If the QIO is
unable to accept the request, the request
must be submitted by noon of the next
day the QIO is available to accept a
request.
(2) The practitioner or provider must
be available to answer any questions or
supply any information that the QIO
requests in order to conduct its
reconsideration.
(3) The QIO must offer the
practitioner or provider an opportunity
to provide further information. A
practitioner or provider may, but is not
required to, submit evidence to be
considered by the QIO in making its
reconsideration decision.
(b) Issuance of the QIO’s final
decision. No later than 5 calendar days
after receipt of the request for a
reconsideration, or, if later, 5 calendar
days after receiving any medical or
other records needed for such
reconsideration, the QIO must complete
the review and notify the practitioner or
provider of its decision.
(1) The QIO’s initial notification may
be done by telephone, followed by the
mailing of a written notice by noon the
next calendar day that includes:
(i) A statement for each concern that
care did or did not meet the standard of
care;
(ii) The standard identified by the
QIO for each of the concerns;
(iii) A summary of the specific facts
that the QIO determines are pertinent to
its findings; and
(iv) A statement that the letter
represents the QIO’s final determination
and that there is no right to further
appeal.
(2) The QIO may provide information
regarding opportunities for improving
the care given to patients based on the
specific findings of its review.
PART 478—RECONSIDERATIONS AND
APPEALS
24. The authority citation for Part 478
continues to read as follows:

■

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

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§ 478.15

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[Amended]

25. In § 478.15(b), the reference
‘‘§§ 473.18 through 473.36, and
473.48(a) and (c)’’ is removed and the
reference ‘‘§§ 478.18 through 478.36 and
478.48(a) and (c)’’ is added in its place.

■

§ 478.16

[Amended]

26. In § 478.16, the reference
‘‘§ 473.14(a)’’ is removed and the
reference ‘‘§ 478.14’’ is added in its
place.

■

§ 478.20

[Amended]

27. In § 478.20—
a. In paragraph (a)(1), the reference
‘‘§ 473.22’’ is removed and the reference
‘‘§ 478.22’’ is added in its place.
■ b. In paragraph (b), the reference
‘‘§ 473.22’’ is removed and the reference
‘‘§ 478.22’’ is added in its place.
■ c. In paragraph (c), the reference
‘‘§ 473.18(c)’’ is removed and the
reference ‘‘§ 478.18(c)’’ is added in its
place.
■
■

§ 478.28

[Amended]

28. In § 478.28(a), the reference
‘‘§ 466.98’’ is removed and the reference
‘‘§ 476.98’’ is added in its place.

■

§ 478.38

[Amended]

29. In § 478.38—
a. In paragraph (a), the reference
‘‘§ 473.40’’ is removed and the reference
‘‘§ 478.40’’ is added in its place.
■ b. In paragraph (b), the reference
‘‘§ 473.48’’ is removed and the reference
‘‘§ 478.48’’ is added in its place.
■
■

§ 478.42

[Amended]

30. In § 478.42—
a. In paragraph (a) introductory text,
the reference ‘‘§ 473.40’’ is removed and
the reference ‘‘§ 478.40’’ is added in its
place.
■ b. In paragraph (b), the reference
‘‘§ 473.22’’ is removed and the reference
‘‘§ 478.22’’ is added in its place.
■
■

§ 478.48

[Amended]

31. In § 478.48—
a. In paragraph (a)(1), the reference
‘‘§ 473.15’’ is removed and the reference
‘‘§ 478.15’’ is added in its place.
■ b. In paragraph (a)(2) introductory
text, the reference ‘‘§ 473.15’’ is
removed and the reference ‘‘§ 478.15’’ is
added in its place.
■
■

PART 480—ACQUISITION,
PROTECTION, AND DISCLOSURE
QUALITY IMPROVEMENT
ORGANIZATION REVIEW
INFORMATION
32. The authority citation for Part 480
continues to read as follows:

■

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Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
§ 480.105

[Amended]

33. In § 480.105(a), the phrase
‘‘Medicare fiscal intermediaries’’ is
removed and the phrase ‘‘Medicare
administrative contractors or fiscal
intermediaries’’ is added in its place.
■ 34. Section 480.107 is amended by
adding paragraph (l) to read as follows:
■

§ 480.107

Limitations on redisclosure.

*

*
*
*
*
(l) Redisclosures of information that is
confidential because it identifies the
parties involved in immediate advocacy
may occur if all parties have consented
to the redisclosure, as provided for
under § 476.110(c) of this chapter.
■ 35. Section 480.132 is amended by—
■ a. Revising paragraphs (a)
introductory text, (a)(1)(iii), and (a)(2).
■ b. Revising paragraph (b)(1).
■ c. Revising paragraph (c).
■ d. Removing the undesignated text
following paragraph (c)(3).
The revisions read as follows.

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§ 480.132
patients.

Disclosure of information about

(a) General requirements for
disclosure. Except as specified in
§§ 476.130(d) and 476.140(b) of this
chapter and paragraph (b) of this
section, a QIO must—
(1) * * *
(iii) Except as provided under
paragraph (b) of this section, all other
patient and practitioner identifiers have
been removed.
(2) Make disclosure to the patient or
the patient’s representative within 14
calendar days of receipt of the request.
(b) * * *
(1) If a request for information is in
connection with an initial denial
determination under section 1154(a)(2)
of the Act, the QIO must provide only
the information used to support that
determination in accordance with the
procedures for disclosure of information
related to determinations under
§ 478.24, including relevant practitioner
identifiers.
*
*
*
*
*
(c) Manner of disclosure. (1) The QIO
must disclose the patient information
directly to the patient or the patient’s
representative when the representative
has been authorized or appointed to
receive that information.
(2) In identifying a representative, the
QIO must follow pertinent State law
requirements regarding the designation
of health care representatives and
agents. If the patient is unable to
designate a representative and the

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identity of the representative is not
already dictated by State law, the QIO
must disclose the information to a
person whom the QIO determines is
responsible for the patient.
*
*
*
*
*
■ 36. Section 480.133 is amended by—
■ a. Adding paragraph (a)(2)(iv).
■ b. In paragraph (b)(1), removing the
reference to ‘‘Part 466’’ and adding the
reference ‘‘Part 476’’ in its place; and
removing the reference ‘‘§ 473.24’’ and
adding the reference ‘‘§ 478.24 of this
subchapter’’ is its place.
The addition reads as follows:
§ 480.133 Disclosure of information about
practitioners, reviewers, and institutions.

(a) * * *
(2) * * *
(iv) A QIO is not required to obtain
the consent of a practitioner or provider
prior to the release of information to a
beneficiary in connection with an initial
denial determination or in providing a
beneficiary with the QIO’s findings in
response to a beneficiary complaint.
Information that must be specified in a
QIO’s final decision in a complaint
review is specified in §§ 476.130(d) and
476.140(b) of this subchapter.
*
*
*
*
*
§ 480.139

[Amended]

37. Section 480.139 is amended by
redesignating the existing paragraph (1)
as paragraph (a)(1).
■ 38. Section 480.145 is added to read
as follows:
■

§ 480.145 Beneficiary authorization of use
of confidential information.

(a) Except as otherwise provided
under this Part, a QIO may not use or
disclose a beneficiary’s confidential
information without an authorization
from the beneficiary. The QIO’s use or
disclosure must be consistent with the
authorization.
(b) A valid authorization is a
document that contains the following:
(1) A description of the information to
be used or disclosed that identifies the
information in a specific and
meaningful fashion.
(2) The name or other specific
identification of the QIO(s) and QIO
point(s) of contact making the request to
use or disclose the information.
(3) The name or other specific
identification of the person(s), or class
of persons, to whom the QIO(s) may
disclose the information or allow the
requested use.
(4) A description of each purpose of
the requested use or disclosure. The
statement ‘‘at the request of the
individual’’ is a sufficient description of

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the purpose when an individual
initiates the authorization and does not,
or elects not to, provide a statement of
purpose.
(5) An expiration date or an
expiration event that relates to the
beneficiary or the purpose of the use or
disclosure. The statement ‘‘end of the
QIO research study,’’ ‘‘none,’’ or similar
language is sufficient if the
authorization is for a use or disclosure
of confidential information for QIO
research, including for the creation and
maintenance of a research database or
research repository.
(6) Signature of the individual and
date. If the authorization is signed by a
beneficiary’s representative, a
description of such representative’s
authority to act for the beneficiary must
also be provided.
(c) In addition to those items
contained in paragraph (b) of this
section, the authorization must contain
statements adequate to place the
individual on notice of all of the
following:
(1) The individual’s right to revoke
the authorization in writing; and
(2) Any exceptions to the right to
revoke and a description of how the
individual may revoke the
authorization;
(3) The ability or inability of the QIO
to condition its review activities on the
authorization, by stating either:
(i) That the QIO may not condition
the review of complaints, appeals, or
payment determinations, or any other
QIO reviews or other tasks within the
QIO’s responsibility on whether the
individual signs the authorization;
(ii) The consequences to the
individual of a refusal to sign the
authorization when the refusal will
render the QIO unable to carry out an
activity.
(4) The potential for information
disclosed pursuant to the authorization
to be subject to either appropriate or
inappropriate redisclosure by a
recipient, after which the information
would no longer be protected by this
subpart.
(d) The authorization must be written
in plain language.
(e) If a QIO seeks an authorization
from a beneficiary for a use or
disclosure of confidential information,
the QIO must provide the beneficiary
with a copy of the signed authorization.
(f) A beneficiary may revoke an
authorization provided under this
section at any time, provided the
revocation is in writing, except to the
extent that the QIO has taken action in
reliance upon the authorization.

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Federal Register / Vol. 77, No. 221 / Thursday, November 15, 2012 / Rules and Regulations
PART 495—STANDARDS FOR THE
ELECTRONIC HEALTH RECORD
TECHNOLOGY INCENTIVE PROGRAM
45. The authority citation for Part 495
continues to read as follows:

■

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

46. Section 495.8 is amended by
revising paragraph (b)(2)(vi) to read as
follows:

■

§ 495.8 Demonstration of meaningful use
criteria.

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(b) * * *
(2) * * *
(vi) Exception for Medicare eligible
hospitals and CAHs for FY 2012 and
2013—Participation in the Medicare
EHR Incentive Program Electronic
Reporting Pilot. In order to satisfy the
clinical quality measure reporting
requirements of meaningful use, aside
from attestation, a Medicare eligible
hospital or CAH may participate in the
Medicare EHR Incentive Program
Electronic Reporting Pilot.
*
*
*
*
*

Insurance; Program No. 93.774, Medicare—
Supplementary Medical Insurance Program;
and Program No. 93.778 (Medical Assistance)
Dated: October 24, 2012.
Marilyn Tavenner
Acting Administrator, Centers for Medicare
& Medicaid Services.
Dated: October 30, 2012.
Kathleen Sebelius,
Secretary.
[FR Doc. 2012–26902 Filed 11–1–12; 4:15 pm]
BILLING CODE 4120–01–P

(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital

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