Att E.4_Ambulartory Surgical Centers & Outpatient ACF Dept

Vol. 78

Tuesday,

No. 237

December 10, 2013

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services
42 CFR Parts 405, 410, 412, et al.
Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment
and Ambulatory Surgical Center Payment Systems and Quality Reporting
Programs; Hospital Value-Based Purchasing Program; Organ Procurement
Organizations; Quality Improvement Organizations; Electronic Health
Records (EHR) Incentive Program; Provider Reimbursement Determinations
and Appeals; Final Rule

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 405, 410, 412, 419, 475,
476, 486, and 495
[CMS–1601–FC]
RIN 0938–AR54

Medicare and Medicaid Programs:
Hospital Outpatient Prospective
Payment and Ambulatory Surgical
Center Payment Systems and Quality
Reporting Programs; Hospital ValueBased Purchasing Program; Organ
Procurement Organizations; Quality
Improvement Organizations; Electronic
Health Records (EHR) Incentive
Program; Provider Reimbursement
Determinations and Appeals
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period
and final rules.
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 2014 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 Hospital
Value-Based Purchasing (VBP) Program.
In the final rules in this document, we
are finalizing changes to the conditions
for coverage (CfCs) for organ
procurement organizations (OPOs);
revisions to the Quality Improvement
Organization (QIO) regulations; changes
to the Medicare fee-for-service
Electronic Health Record (EHR)
Incentive Program; and changes relating
to provider reimbursement
determinations and appeals.
DATES: Effective Dates: The final rule
with comment period and final rules in
this document are effective on January
1, 2014, with the exception of 42 CFR
412.167; 42 CFR 486.316 and 486.318;
42 CFR 475.1 and 475.100 through
475.107; and 42 CFR 495.4 and 495.104,
which are effective on January 27, 2014.

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SUMMARY:

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Implementation Date: The
implementation date for the policies
specified under section II.A.2.e. of the
final rule with comment period relating
to comprehensive Ambulatory Payment
Classification (APC) groups is January 1,
2015.
Comment Period: We will consider
comments on the payment classification
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 rule, received
at one of the addresses provided in the
ADDRESSES section no later than 5 p.m.
EST on January 27, 2014.
Application Deadline—New Class of
New Technology Intraocular Lenses:
Request for review of applications for a
new class of new technology intraocular
lenses must be received by 5 p.m. EST
on March 3, 2014.
ADDRESSES: In commenting, please refer
to file code CMS–1601–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–1601–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–1601–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

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readily available to persons without
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.
Applications for a new class of new
technology intraocular lenses: Requests
for review of applications for a new
class of new technology intraocular
lenses must be sent by regular mail to:
ASC/NTIOL, Division of Outpatient
Care, Mailstop C4–05–17, Centers for
Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, MD
21244–1850.
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, platelet rich plasma, and
stereotactic radiosurgery services.
Anita Bhatia, (410) 786–7236, for
issues related to the Ambulatory
Surgical Center Quality Reporting
(ASCQR) Program—Program
Administration and Reconsideration
Issues.
Chuck Braver, (410) 786–9379, for
issues related to the Advisory Panel on
Hospital Outpatient Payment (HOP
Panel).
Erick Chuang, (410) 786–1816, for
issues related to OPPS APC weights,
mean calculation, copayments, wage
index, outlier payments, cost-to-charge
ratios (CCRs), and rural hospital
payments.
Diane Corning, (410) 786–8486, for
issues related to the Conditions for
Coverage for Organ Procurement
Organizations (OPOs).
Dexter Dickey, (410) 786–6856, or
Dorothy Myrick, (410) 786–9671, for
issues related to partial hospitalization
and community mental health center
(CMHC) issues.

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
Roxanne Dupert-Frank, (410) 786–
4827, for issues related to the Hospital
Value-Based Purchasing (VBP) Program.
Dan Duvall, (410) 786–4592, for issues
related to comprehensive APCs.
Shaheen Halim, (410) 786–0641, for
issues related to the 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.
James Hart, (410) 786–9520, for issues
related to the Medicare fee-for-service
Electronic Health Record (EHR)
Incentive Program.
Jeneen Iwugo, (410) 786–1028, for
issues related to the revisions of the
Quality Improvement Organization
(QIO) Regulations.
Twi Jackson, (410) 786–1159, for
issues related to blood products, devicedependent APCs, extended assessment
and management composite APCs,
hospital outpatient visits, inpatient-only
procedures, and no cost/full credit and
partial credit devices.
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, and cardiac
electrophysiologic evaluation and
ablation composite APC.
Ann Marshall, (410) 786–3059, for
issues related to packaged items/
services, hospital outpatient
supervision, proton beam therapy,
therapy caps in CAHs, incident to
physician or nonphysician practitioner
services, and provider-based issues.
Danielle Moskos, (410) 786–8866, or
Michael Zleit, (410) 786–2050, for issues
related to Provider Reimbursement
Determination Appeals.
James Poyer, (410) 786–2261, for
issues related to the 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, new technology
intraocular lenses (NTIOLs), 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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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.

SUPPLEMENTARY INFORMATION:

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 are 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.
Alphabetical List of Acronyms
Appearing in This Federal Register
Document
AHA American Hospital Association
AMA American Medical Association
APC Ambulatory Payment Classification

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ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center
Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L.
105–33
BBRA Medicare, Medicaid, and SCHIP
[State Children’s Health Insurance
Program] Balanced Budget Refinement Act
of 1999, Pub. L. 106–113
BIPA Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act
of 2000, Pub. L. 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
CDC Centers for Disease Control and
Prevention
CEO Chief executive officer
CERT Comprehensive Error Rate Testing
CfC [Medicare] Condition for coverage
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, Pub. L.
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,
Pub. L. 92–463
FDA ood and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
FFY Federal fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education
Reconciliation Act of 2010, Pub. L. 111–
152
HCPCS Healthcare Common Procedure
Coding System
HCRIS Hospital Cost Report Information
System
HEU Highly enriched uranium

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HIPAA Health Insurance Portability and
Accountability Act of 1996, Pub. L. 104–
191
HITECH Health Information Technology for
Economic and Clinical Health [Act] (found
in the American Recovery and
Reinvestment Act of 2009, Pub. L. 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
IPPS [Hospital] Inpatient Prospective
Payment System
IQR [Hospital] Inpatient Quality Reporting
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,
Pub. L. 109–432
MIPPA Medicare Improvements for Patients
and Providers Act of 2008, Pub. L. 110–275
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003, Pub. L. 108–173
MMEA Medicare and Medicaid Extenders
Act of 2010, Pub. L. 111–309
MMSEA Medicare, Medicaid, and SCHIP
Extension Act of 2007, Pub. L. 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, Pub. L. 99–509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPO Organ Procurement Organization
OPPS [Hospital] Outpatient Prospective
Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality
Reporting
OT Occupational therapy
PBD Provider-Based Department
PCR Payment-to-cost ratio
PE Practice expense
PEPPER Program for Evaluating Payment
Patterns Electronic Report
PHP Partial hospitalization program

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PHS Public Health Service [Act], Pub. L.
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
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
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 Document
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 2014 OPPS/ASC Proposed
Rule
G. Public Comments Received on the CY
2013 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 Panel
Regarding Data Development

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d. Calculation of Single Procedure APC
Criteria-Based Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Brachytherapy Source Payment
e. Establishment of Comprehensive APCs
(1) Definitions and General Principles
(2) Comprehensive APCs for DeviceDependent Services
f. 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)
3. Changes to Packaged Items and Services
a. Summary of CY 2014 Final Packaging
Policies
b. Background
c. Basis for New Packaging Policies for CY
2014
d. New Packaging Policies for CY 2014
(1) Drugs, Biologicals, and
Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic Test
or Procedure
(2) Drugs and Biologicals That Function as
Supplies When Used in a Surgical
Procedure
(3) Clinical Diagnostic Laboratory Tests
(4) Procedures Described by Add-On Codes
(5) Ancillary Services (Status Indicator
‘‘X’’)
(6) Diagnostic Tests on the Bypass List
(7) Device Removal Procedures
e. Clarification Regarding Supplies That
Are Packaged in the OPPS
f. Revision and Clarification of the
Regulations at 42 CFR 419.2(b) and 42
CFR 419.22
g. Comment Solicitation on Increased
Packaging for Imaging Services
4. Calculation of OPPS Scaled Payment
Weights
B. Conversion Factor Update
C. Wage Index Changes
D. Statewide Average Default CCRs
E. 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 2014
G. Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Final Outlier Calculation
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

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III. OPPS Ambulatory Payment Classification
(APC) Group Policies
A. OPPS Treatment of New CPT and Level
II HCPCS Codes
1. Treatment of New CY 2013 Level II
HCPCS and CPT Codes Effective April 1,
2013 and July 1, 2013 for Which We
Solicited Public Comments in the CY
2014 OPPS/ASC Proposed Rule
2. Process for New Level II HCPCS Codes
That Will Be Effective October 1, 2013
and New CPT and Level II HCPCS Codes
That Will Be Effective January 1, 2014
for Which We Are Soliciting Public
Comments in this CY 2014 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. OPPS APC-Specific Policies
1. Cardiovascular and Vascular Services
a. Non-Ophthalmic Fluorescent Vascular
Angiography (APC 0263)
b. Subcutaneous Defibrillator (APC 0107)
c. Thrombolytic Therapy (APC 0621)
d. Vascular Ligation (APCs 0091 and 0092)
2. Gastrointestinal Services
a. Fecal Microbiota Transplantation (APC
0340)
b. Transoral Incisionless Fundoplication
(APC 0422)
3. Genitourinary Services
a. Percutaneous Renal Cryoablation (APC
0423)
b. Anoscopy with Directed Submucosal
Injection (APC 0150)
4. Musculoskeletal Services
a. Arthroplasty (APC 0425)
b. Joint Stabilization (APC 0052)
5. Nervous System Services
a. Chemodenervation (APCs 0161 and
0204)
b. Nerve Conduction Studies (APCs 0216
and 0218)
c. Parasympathetic Function and
Sympathetic Function (APC 0215)
d. Epidural Lysis (APCs 0203 and 0207)
e. Cerebrospinal Shunt Reprogramming
(APC 0692)
6. Ocular Services
a. Retinal Prosthesis (APC 0672)
b. Tear Film (APC 0230)
7. Imaging
a. Myocardial Sympathetic Innervation
Imaging (APC 0398)
b. Neurologic Imaging (APCs 0402, 0403,
0406 and 0414)
8. Radiology Oncology
a. Intraoperative Radiation Therapy (IORT)
Related Services (APCs 0028 and 0065)
b. Proton Beam Therapy (APCs 0664 and
0667)
c. Stereotactic Radiosurgery (SRS) Services
(APCs 0066 and 0067)
9. Respiratory Services
a. Bronchial Thermoplasty (APC 0415)
b. Direct Laryngoscopy (APC 0074)
c. Pulmonary Rehabilitation Services (APC
0077)
10. Other Services
a. Balloon Sinus Dilation (APCs 0074 and
0075)
b. Radiofrequency Ablation of Uterine
Fibroids (APC 0174)
c. Magnetic Resonance Image Guided
Focused Ultrasound (APC 0065)

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d. Flow Cytometry (APC 0443)
e. Hormone Pellet Implant (APC 0420)
f. Peyronie Disease Injection Procedure
(APC 0164)
g. Negative Pressure Wound Therapy
(NPWT) (APC 0016)
h. Platelet Rich Plasma (PRP) (APC 0186)
i. Payment for Radioisotopes Derived From
Non-Highly Enriched Uranium (HEU)
Sources (APC 1442)
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 2014 Policy
2. Provisions for Reducing Transitional
Pass-Through Payments to Offset Costs
Packaged into APC Groups
a. Background
b. CY 2014 Policy
3. Changes to Device Pass-Through
Criteria: Integral and Subordinate
Criterion
B. Adjustment to OPPS Payment for No
Cost/Full Credit and Partial Credit
Devices
1. Background
2. Policy for CY 2014
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 2013
3. Drugs, Biologicals, and
Radiopharmaceuticals with New or
Continuing Pass-Through Status in CY
2014
4. Provisions for Reducing Transitional
Pass-Through Payments for Diagnostic
Radiopharmaceuticals; Contrast Agents;
Drugs, Biologicals, and
Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic Test
or Procedure; and Drugs and Biologicals
That Function as Supplies When Used in
a Surgical Procedure to Offset Costs
Packaged into APC Groups
a. Background
b. Payment Offset Policy for Diagnostic
Radiopharmaceuticals
c. Payment Offset Policy for Contrast
Agents
d. Payment Offset Policy for Products
Packaged According to the Policy to
Package Drugs, Biologicals, and
Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic Test
or Procedure and Drugs and Biologicals
That Function as Supplies When Used in
a Surgical Procedure
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, Certain Biologicals, and
Therapeutic Radiopharmaceuticals
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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 2014 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
C. Nuclear Medicine Procedure-toRadiolabeled Product Edits
VI. Estimate of OPPS Transitional PassThrough Spending for Drugs, Biologicals,
Radiopharmaceuticals, and Devices
A. Background
B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient
Visits
A. Background
B. Payment for Hospital Outpatient Clinic
and Emergency Department Visits
C. Payment for Critical Care Services
VIII. Payment for Partial Hospitalization
Services
A. Background
B. PHP APC Update for CY 2014
C. Discussion of Possible Future Initiatives,
Request for Public Comments, and
Summary of Public Comments Received
D. Separate Threshold for Outlier
Payments to CMHCs
IX. Procedures That Will Be Paid Only as
Inpatient Procedures
A. Background
B. Changes to the Inpatient List
X. Nonrecurring Policy Changes
A. Supervision of Hospital Outpatient
Therapeutic Services
1. Enforcement Instruction for the
Supervision of Outpatient Therapeutic
Services in CAHs and Certain Small
Rural Hospitals
2. Supervision Requirements for
Observation Services
B. Application of Therapy Caps in CAHs
C. Requirements for Payment of Outpatient
Therapeutic (‘‘Incident to’’) Hospital or
CAH Services
1. Overview
2. Background
3. Proposed and Final Policy
4. Technical Correction
D. Collecting Data on Services Furnished
in Off-Campus Provider-Based
Departments
XI. CY 2014 OPPS Payment Status and
Comment Indicators
A. CY 2014 OPPS Payment Status Indicator
Definitions
B. CY 2014 Comment Indicator Definitions
XII. 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

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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 2013 and July 2013 for Which
We Solicited Public Comments in the CY
2014 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 2014
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 2014 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 ASC
Surgical Procedures Designated as
Device-Intensive for CY 2014
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 2014
2. Covered Ancillary Services
D. ASC Payment for Covered Surgical
Procedures and Covered Ancillary
Services
1. ASC Payment for Covered Surgical
Procedures
a. Background
b. Update to ASC Covered Surgical
Procedure Payment Rates for CY 2014
c. Waiver of Coinsurance and Deductible
for Certain Preventive Services
d. Payment for Cardiac Resynchronization
Therapy Services
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 2014
E. New Technology Intraocular Lenses
(NTIOLs)
1. NTIOL Application Cycle
2. Requests to Establish New NTIOL
Classes for CY 2015
3. Payment Adjustment
4. Announcement of CY 2014 Deadline for
Submitting Requests for CMS Review of
Applications for a New Class of NTIOLs
F. ASC Payment and Comment Indicators
1. Background
2. ASC Payment and Comment Indicators
G. Calculation of the ASC Conversion
Factor and the ASC Payment Rates
1. Background
2. Calculation of the ASC Payment Rates

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a. Updating the ASC Relative Payment
Weights for CY 2014 and Future Years
b. Updating the ASC Conversion Factor
3. Display of CY 2014 ASC Payment Rates
XIII. 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 Two Chart-Abstracted
Measures from the Hospital OQR
Program
a. Removal of OP–19: Transition Record
with Specified Elements Received by
Discharged ED Patients
b. Removal of OP–24: Cardiac
Rehabilitation Measure: Patient Referral
from an Outpatient Setting
D. Quality Measures Previously Adopted
for the CY 2014 and CY 2015 Payment
Determinations and Subsequent Years
E. Quality Measures for the CY 2016
Payment Determination and Subsequent
Years
1. Influenza Vaccination Coverage Among
Healthcare Personnel (NQF #0431)
2. Complications Within 30 Days
Following Cataract Surgery Requiring
Additional Surgical Procedures (NQF
#0564)
3. Endoscopy/Polyp Surveillance:
Appropriate Follow-up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658)
4. Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps—
Avoidance of Inappropriate Use (NQF
#0659)
5. Cataracts—Improvement in Patient’s
Visual Function Within 90 Days
Following Cataract Surgery (NQF #1536)
F. Possible Hospital OQR Program Measure
Topics for Future Consideration
G. Payment Reduction for Hospitals That
Fail to Meet the Hospital OQR Program
Requirements for the CY 2014 Payment
Update
1. Background
2. Reporting Ratio Application and
Associated Adjustment Policy for CY
2014
H. Requirements for Reporting of Hospital
OQR Data for the CY 2015 Payment
Determination and Subsequent Years
1. Administrative Requirements for the CY
2015 Payment Determination and
Subsequent Years
2. Form, Manner, and Timing of Data
Submitted for the Hospital OQR Program
a. Background

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b. Effects of Changes on Data Submission
for CY 2015 and CY 2016 Payment
Determinations and Subsequent Years
c. General Requirements
d. Chart-Abstracted Measure Requirements
for the CY 2015 Payment Determination
and Subsequent Years
e. Claims-Based Measure Data
Requirements for the CY 2015 Payment
Determination and Subsequent Years
f. Data Submission Requirements for
Measure Data Submitted via Web-Based
Tool for the CY 2016 Payment
Determination and Subsequent Years
g. Data Submission Requirements for a
Measure Reported via NHSN for the CY
2016 Payment Determination and
Subsequent Years
h. Population and Sampling Data
Requirements for the CY 2015 Payment
Determination and Subsequent Years
3. Hospital OQR Program Validation
Requirements for Chart-Abstracted
Measure Data Submitted Directly to CMS
for the CY 2015 Payment Determination
and Subsequent Years
a. Selection of Hospitals for Data
Validation of Chart-Abstracted Measures
for the CY 2015 Payment Determination
and Subsequent Years
b. Targeting Criteria for Data Validation
Selection for the CY 2015 Payment
Determination and Subsequent Years
c. Methodology for Encounter Selection for
the CY 2015 Payment Determination and
Subsequent Years
d. Medical Record Documentation
Requests for Validation and Validation
Score Calculation for the CY 2015
Payment Determination and Subsequent
Years
I. Hospital OQR Reconsideration and
Appeals Procedures for the CY 2015
Payment Determination and Subsequent
Years
J. Extraordinary Circumstances Extension
or Waiver for the CY 2014 Payment
Determination and Subsequent Years
XIV. Hospital Value-Based Purchasing (VBP)
Program Updates
A. Background
B. Additional CMS Appeals Review
Process
1. Statutory Basis
2. Independent CMS Review
C. Performance and Baseline Periods for
Certain Outcome Measures for the FY
2016 Hospital VBP Program
XV. 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. Regulatory 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
Adopted in Previous Rulemaking
3. Additional ASCQR Program Quality
Measures for the CY 2016 Payment
Determination and Subsequent Years

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
a. Complications Within 30 Days
Following Cataract Surgery Requiring
Additional Surgical Procedures
b. Endoscopy/Polyp Surveillance:
Appropriate Follow-Up for Normal
Colonoscopy in Average Risk Patients
(NQR #0658)
c. Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps—
Avoidance of Inappropriate Use (NQF
#0659)
d. Cataracts: Improvement in Patient’s
Visual Function within 90 Days
Following Cataract Surgery (NQF #1536)
4. ASCQR Program Measure Topics for
Future Consideration
5. Technical Specification Updates and
Data Publication
C. 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 Each Payment
Determination Year
D. Administrative Requirements
1. Requirements Regarding QualityNet
Account and Security Administrator
a. Background for the CY 2014 and CY
2015 Payment Determinations
b. Requirements for the CY 2016 Payment
Determination and Subsequent Years
2. Requirements Regarding Participation
Status
a. Background for the CY 2014 Payment
Determination and Subsequent Years
b. Requirements for the CY 2016 Payment
Determination and Subsequent Years
3. Requirements Regarding Data Processing
and Collection Periods for Claims-Based
Measures for the CY 2014 Payment
Determination and Subsequent Years
4. Minimum Threshold, Minimum Case
Volume, and Data Completeness for
Claims-Based Measures Using QDCs
a. Background for the CY 2014 Payment
Determination and Subsequent Years
b. Requirements for the CY 2016 Payment
Determination and Subsequent Years
5. Requirements for Data Submitted Via a
CMS Online Data Submission Tool
a. Background for the CY 2015 Payment
Determination and Subsequent Years
b. Requirements for the CY 2016 Payment
Determination and Subsequent Years for
Measures Currently Finalized
c. Requirements for the CY 2016 Payment
Determination and Subsequent Years for
New Measures with Data Submission Via
a CMS Web-Based Tool
6. Data Submission Requirements for a
Measure Reported Via the National
Healthcare Safety Network (NHSN) for
the CY 2016 Payment Determination
a. Background for the CY 2016 Payment
Determination
b. Requirements for the CY 2016 Payment
Determination
7. ASCQR Program Validation of ClaimsBased and CMS Web-Based Measures
8. Extraordinary Circumstances Extensions
or Waivers for the CY 2014 Payment
Determination and Subsequent Years
a. Background

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b. Additional Criterion for Extraordinary
Circumstance Waiver or Extension for
CY 2014 and Subsequent Years
9. ASCQR Program Reconsideration
Procedures for the CY 2014 Payment
Determination and Subsequent Years
XVI. Final Rule: Changes to the Conditions
for Coverage (CfCs) for Organ
Procurement Organizations (OPOs) (42
CFR Part 486, Subpart G)
A. Background
B. Regulatory Changes
XVII. Final Rule: Revisions of the Quality
Improvement Organization (QIO)
Regulations
A. Legislative History
B. Basis for Proposals and Finalized
Policies
C. Changes to the Nomenclature and
Regulations under 42 CFR Parts 475 and
476
1. Nomenclature Changes
2. Addition and Revision of Definitions
3. Scope and Applicability of Subpart C of
Part 475
4. Eligibility Requirements for QIOs
(§§ 475.101 through 475.106)
a. Eligibility to be Awarded a QIO Contract
(§ 475.101)
b. Eligibility Requirements for QIOs to
Perform Case Reviews and Quality
Improvement Initiatives (§ 475.102 and
§ 475.103)
c. Prohibitions on Eligibility as a QIO
(§§ 475.105 and 475.106)
5. QIO Contract Awards (§ 475.107)
XVIII. Final Rule: Medicare Fee-for-Service
Electronic Health Record (EHR)
Incentive Program
A. Incentive Payments for Eligible
Professionals (EPs) Reassigning Benefits
to Method II CAHs
1. Background for Definition of EPs and
EHR Incentive Payments to EPs
2. Special Circumstances of EPs
Reassigning Benefits to Method II CAHs
B. Cost Reporting Periods for Interim and
Final EHR Incentive Payments to
Hospitals
1. Background
2. Special Circumstances
XIX. Medicare Program: Provider
Reimbursement Determinations and
Appeals: Final Rule
A. Matters Not Subject to Administrative or
Judicial Review (§ 405.1804)
1. Background
2. Technical Conforming Change
B. Clarification of Reopening of Predicate
Facts in Intermediary Determinations of
Provider Reimbursement (§ 405.1885)
XX. Files Available to the Public Via the
Internet
XXI. Collection of Information Requirements
A. Legislative Requirements for
Solicitation of Comments
B. Requirements in Regulation Text
1. Changes to the Outcome Measure
Requirement for OPOs
2. Changes to the Medicare Fee-for-Service
EHR Incentive Program
C. Associated Information Collections Not
Specified in Regulatory Text
1. Hospital OQR Program
a. Hospital OQR Program Requirements for
the CY 2015 Payment Determinations
and subsequent Years

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b. Chart-Abstracted Measures for the CY
2016 Payment Determination and
Subsequent Years
c. Web-Based Measures Submitted Directly
to CMS for the CY 2016 Payment
Determination and Subsequent Years
d. NHSN HAI Measure for the CY 2016
Payment Determination and Subsequent
Years
e. Hospital OQR Program Validation
Requirements for the CY 2015 Payment
Determination and Subsequent Years
f. Hospital OQR Program Reconsideration
and Appeals Procedures
2. ASCQR Program Requirements
a. Claims-Based Measures for the CY 2014
Payment Determination
b. Claims-Based and Web-Based Measures
for the CY 2015 and CY 2016 Payment
Determinations
c. Program Administrative Requirements
and QualityNet Accounts; Extraordinary
Circumstance and Extension or Waiver
Requests; Reconsideration Requests
3. Hospital VBP Program Requirements
XXII. Response to Comments
XXIII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impacts for the OPPS and ASC
Payment Provisions
4. Detailed Economic Analyses
a. Estimated Effects of Final 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 CY2014 ASC
Payment System Final Policies
(1) Limitations of Our Analysis
(2) Estimated Effects of CY2014ASC
Payment System Final Policies on ASCs
(3) Estimated Effects of ASC Payment
System Final Policies on Beneficiaries
(4) Alternative ASC Payment Policies
Considered
c. Accounting Statements and Tables
d. Effects of Requirements for the Hospital
OQR Program
e. Effects of CY2014 Policies for the
ASCQR Program
f. Effects of Changes to the CfCs for OPOs
Relating to the Outcome Measure
Requirement for Recertification
g. Effects of Revisions of the QIO
Regulations
h. Effects of Revised Policies Regarding
Medicare Fee-for-Service EHR Incentive
Program
B. Regulatory Flexibility Act (RFA)
Analysis
C. Unfunded Mandates Reform Act
Analysis
D. Conclusion
XXIV. Federalism Analysis
XXV. Waiver of 60-Day Delay of Effective
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Regulation Text
I. Summary and Background

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A. Executive Summary of This
Document
1. Purpose
In the final rule with comment period
of this document, 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,
2014. 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
with comment period. In addition, the
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
Hospital Value-Based Purchasing (VBP)
Program.
In the final rules in this document, we
are finalizing changes to the conditions
for coverage (CfCs) for organ
procurement organizations (OPOs);
revisions to the Quality Improvement
Organization (QIO) regulations; changes
to the Medicare fee-for-service
Electronic Health Record (EHR)
Incentive Program; and changes relating
to provider reimbursement
determinations and appeals.
After publication of our annual
proposed rule for CY 2014, we
discovered that in applying our
established and proposed
methodologies to develop the CY 2014
proposed OPPS and ASC payment rates,
specific cost estimation errors occurred
in the OPPS modeling process. The
errors resulting from the cost modeling
used to develop the CY 2014 proposed
OPPS payment rates were isolated to a
few specific ambulatory payment
classifications (APCs). However,
because the OPPS is a budget neutral
payment system, there was a resulting
impact on other proposed OPPS
payment rates. In addition, because the
ASC payment rates are based on the
OPPS relative payment weights for the
majority of items and services that are
provided at ASCs, corrections to the
proposed CY 2014 OPPS relative
payment weights also had an impact on
the proposed CY 2014 ASC relative
payment weights and ASC payment

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rates. Therefore, we released corrected
data files on August 28, 2013, and
extended the comment period to
September 16, 2013, on the technical
corrections noted in the correcting
document published in the Federal
Register on September 6, 2013 (78 FR
54842). This final rule with comment
period refers to the corrected OPPS and
ASC information.
2. Summary of the Major Provisions
• OPPS Update: For CY 2014, we are
increasing the payment rates under the
OPPS by an Outpatient Department
(OPD) fee schedule increase factor of 1.7
percent. This increase is based on the
final hospital inpatient market basket
percentage increase of 2.5 percent for
inpatient services paid under the
hospital inpatient prospective payment
system (IPPS), minus the multifactor
productivity (MFP) adjustment of 0.5
percentage points, and minus a 0.3
percentage point adjustment required by
the Affordable Care Act. Under this final
rule with comment period, we estimate
that total payments for CY 2014,
including beneficiary cost-sharing, to
the approximately 4,100 facilities paid
under the OPPS (including general
acute care hospitals, children’s
hospitals, cancer hospitals, and
community mental health centers
(CMHCs)), will be approximately $50.4
billion, an increase of approximately
$4.372 billion compared to CY 2013
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.
• 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 2014, 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

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submitted or settled cost report data.
Based on those data, a target PCR of 0.89
will be used to determine the CY 2014
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 0.89 for each
cancer hospital.
• Payment of Drugs, Biologicals, and
Radiopharmaceuticals: For CY 2014,
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.
• Packaging Policies: Beginning in CY
2014, we are unconditionally or
conditionally packaging the following
five categories of items and services and
adding them to the list of OPPS
packaged items and services in 42 CFR
419.2(b):
(1) Drugs, biologicals, and
radiopharmaceuticals used in a
diagnostic test or procedure;
(2) Drugs and biologicals when used
as supplies in a surgical procedure;
(3) Certain clinical diagnostic
laboratory tests;
(4) Procedures described by add-on
codes; and
(5) Device removal procedures.
Further details are provided in section
II.A.3. of this document.
• Establishing Comprehensive APCs:
In order to improve the accuracy and
transparency of our payment for certain
device-dependent services, we are
finalizing our policy to establish 29
comprehensive APCs to prospectively
pay for the most costly hospital
outpatient device-dependent services,
but we are delaying implementation of
this policy until CY 2015. We have
defined a comprehensive APC as a
classification for the provision of a
primary service and all adjunct services
provided to support the delivery of the
primary service. For services that trigger
a comprehensive APC payment, the
comprehensive APC will treat all
individually reported codes on the
claim as representing components of the
comprehensive service, resulting in a
single prospective payment based on the
cost of all individually reported codes
on the claim. We will make a single
payment for the comprehensive service
based on all charges on the claim,
excluding only charges for services that
cannot be covered by Medicare Part B or
that are not payable under the OPPS.
We also have modified our methodology
to make larger payments for many
complex and costly multiple device
procedures. Due to our decision to delay

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
implementation until CY 2015 for
operational reasons, we are inviting
comment on this section of the final
rule. We have published tables in the
rule to demonstrate how this policy
would have been implemented in CY
2014, and we will be considering
comments as we update the policy for
CY 2015 to account for changes that
may occur in the CY 2013 claims data.
• Payment of Hospital Outpatient
Visits: For CY 2014, we are finalizing
our proposal to replace the current five
levels of visit codes for each clinic visit
with a new alphanumeric Level II
HCPCS code representing a single level
of payment for clinic visits. We are
finalizing our proposal to assign the
new alphanumeric Level II HCPCS to
newly created APC 0634 with CY 2014
OPPS payment rates based on the total
mean costs of Level 1 through Level 5
clinic visit codes obtained from CY 2012
OPPS claims data. For CY 2014, we are
not finalizing our proposal to replace
the current five levels of visit codes for
each Type A ED, and Type B ED visits
with two new alphanumeric Level II
HCPCS codes representing a single level
of payment for two types of ED visits,
respectively.
• OPPS Nonrecurring Policy Changes:
The enforcement instruction for the
supervision of outpatient therapeutic
services furnished in CAHs and small
rural hospitals will expire at the end of
CY 2013. In addition, we are amending
the conditions of payment for ‘‘incident
to’’ hospital or CAH outpatient services
(sometimes referred to as hospital or
CAH ‘‘therapeutic’’ services) to
explicitly require that individuals
furnishing these services be in
compliance with State law. In the CY
2014 OPPS/ASC proposed rule, we
solicited public comments regarding a
potential new claims or other data
element that would indicate that the
services were furnished in an offcampus provider-based department,
which we discuss in this final rule with
comment period. Finally, we refer
readers to the CY 2014 Medicare
Physician Fee Schedule (MPFS) final
rule (CMS–1600–F) to review
Medicare’s policies on application of
the therapy caps and related provisions
under section 1833(g) of the Act to
physical therapy (PT), speech-language
pathology (SLP) and occupational
therapy (OT) (‘‘therapy’’) services that
are furnished by a CAH, effective
January 1, 2014.
• Ambulatory Surgical Center
Payment Update: For CY 2014, we are
increasing payment rates under the ASC
payment system by 1.2 percent. This
increase is based on a projected CPI–U
update of 1.7 percent minus a

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multifactor productivity adjustment
required by the Affordable Care Act that
is projected to be 0.5 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 2014 will be
approximately $3.992 billion, an
increase of approximately $143 million
compared to estimated CY 2013
payments.
• Hospital Outpatient Quality
Reporting (OQR) Program: For the
Hospital OQR Program, we are adopting
four new quality measures for the CY
2016 payment determination and
subsequent years: Three where aggregate
data (numerators, denominators, and
exclusions) are collected and data
submitted via an online Web-based tool
located on a CMS Web page and one
HAI measure submitted through the
CDC’s NHSN. We also are removing two
measures and are codifying
administrative procedures.
• Ambulatory Surgical Center Quality
Reporting (ASCQR) Program: For the
ASCQR Program, we are adopting three
new quality measures for the CY 2016
payment determination and subsequent
years where data collection will begin in
CY 2014. We are collecting aggregate
data (numerators, denominators, and
exclusions) on all ASC patients for these
four chart-abstracted measures via an
online Web-based tool located on a CMS
Web page. We also are adopting, for the
CY 2016 payment determination and
subsequent years’ payment
determinations, requirements for a
QualityNet account and security
administrator, facility participation, a
minimum threshold and minimum
volume for claims-based measures, and
data collection and submission for new
measures and for certain previously
finalized measures.
• Changes to Organ Procurement
Organization (OPO) Regulations. In
section XVI. of this document, we are
finalizing our proposals to modify the
current requirement that OPOs meet all
three outcome measures set forth in 42
CFR 486.318. Specifically, the final rule
provides that an OPO must meet two
out of the three outcome measures. This
change to the outcome measures
requirement will allow those OPOs that
fail only one outcome measure to avoid
automatic decertification in the 2014
recertification cycle.
• Revisions to the Quality
Improvement Organizations
Regulations. We are updating the
regulations at 42 CFR Parts 475 and 476
based on the recently enacted Trade
Adjustment Assistance Extension Act of
2011 (TAAEA) (Pub. L. 112–40, Section

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261) whereby Congress authorized
numerous changes to the original
legislation and included additional
flexibility for the Secretary in the
administration of the QIO program. The
existing regulations at 42 CFR Part 475
include definitions and standards
governing eligibility and the award of
contracts to QIOs. In this final rule with
comment period, we are finalizing the
partial deletion and revision of the
regulations under 42 CFR Parts 475 and
476, which relate to the QIO program,
including the following: (1) Replace
nomenclature in Parts 475 and 476 that
has been amended by the TAAEA; (2)
revise the existing definition for the
term ‘‘physician’’; (3) add new
definitions as necessary to support the
new substantive provisions in Subpart
C; and (4) replace some of the
substantive provisions in Subpart C in
their entirety to fully exercise the
Secretary’s authority for the program
and update the contracting requirements
to align with contemporary quality
improvement.
• Changes to the Medicare Fee-forService Electronic Health Record (EHR)
Incentive Program. We are revising the
regulations to provide a special method
for making hospital-based
determinations for 2014 only in the
cases of those eligible professionals
(EPs) who reassign their benefits to
Method II CAHs. Previously, we have
been unable to make EHR payments to
these EPs for their CAH II claims, or to
take those claims into consideration in
making hospital-based determinations
because of systems limitations.
Finalizing the adoption of our method
for 2014 will allow us to begin making
payments based on CAH II one year
earlier than we would be able to do
under existing regulations. We also are
adopting a minor clarification to the
regulations concerning the cost
reporting period to be used in
determining final EHR payments for
hospitals.
3. Summary of Costs and Benefits
In sections XXIII. and XXIV. 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 are described below.
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
Table 55 in section XXIII. of this final
rule with comment period displays the
distributional impact of all the OPPS
changes on various groups of hospitals
and CMHCs for CY 2014 compared to all

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estimated OPPS payments in CY 2013.
We estimate that the policies in this
final rule will result in a 1.8 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 $4.372 billion in OPPS
expenditures, including beneficiary
cost-sharing, for CY 2014 compared to
CY 2013 OPPS expenditures. We
estimate that total OPPS payments,
including beneficiary cost-sharing, will
be $50.4 billion for CY 2014.
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 beginning in
CY 2011 and basing payment fully on
the type of provider furnishing the
service, we estimate a 1.8 percent
increase in CY 2014 payments to
CMHCs relative to their CY 2013
payments.

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(2) Impacts of Policies Other Than
Outpatient Laboratory Test Packaging
We estimate that our final policies
other than packaging outpatient
laboratory tests will have a less
significant impact than we proposed for
CY 2014, as several proposed policies
were not finalized. These final policies
include packaging drugs, biologicals,
and radiopharmaceuticals that function
as supplies when used in a diagnostic
test or procedure (stress agents and
Cysview), drugs and biologicals that
function as supplies when used in a
surgical procedure (skin substitutes),
certain procedures described by add-on
codes, and device removal procedures;
new cost report data for estimating CT
and MRI relative weights; and revisions
to coding and APC structure for
stereotactic radiosurgery.

will result in payment increases to rural
and urban hospitals in West North
Central and Mountain States.
(5) Impacts of the Rural Adjustment and
the Cancer Hospital Payment
Adjustment
There are no significant impacts of
our CY 2014 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.
(6) Impacts of the OPD Fee Schedule
Increase Factor
We estimate that, for many hospitals,
the application of the OPD fee schedule
increase factor of 1.7 percent to the
conversion factor for CY 2014 will
mitigate the small negative impacts of
the budget neutrality adjustments.
While most classes of hospitals will
receive an increase that is in line with
the 1.7 percent overall increase after the
update is applied to the budget
neutrality adjustments, some hospitals
will receive smaller but still generally
positive overall increases.
b. Impacts of the ASC Payment Update
For impact purposes, the procedures
on the ASC list of covered surgical
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 2014
payment rates compared to estimated
CY 2013 payment rates ranges between
¥11 percent for ancillary items and
services and 14 percent for respiratory
system procedures.
c. Impacts of the Hospital OQR Program
We do not expect our CY 2014 final
policies to significantly affect the
number of hospitals that do not receive
a full annual payment update.

(3) Impacts of Packaging Outpatient
Laboratory Tests
Packaging laboratory services
modestly reduces payment to rural and
major teaching hospitals, as they will no
longer receive separate payment for
common laboratory tests.

d. Impacts of the ASCQR Program

(4) Impacts of the Updated Wage Indices
Adjustments to the wage indices other
than the frontier State wage adjustment
will not significantly affect most
hospitals and CMHCs. The nonbudget
neutral frontier wage index adjustment

We estimate the effects of the QIO
Program changes to be consistent with
the Congressional Budget Office’s 2011
Cost Estimate of the Trade Bill (H.R.
2832) which included a reduction in
spending of $330 million over the 2012–

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We do not expect our CY 2014 final
policies to significantly affect the
number of ASCs that do not receive a
full annual payment update beginning
in CY 2015.
e. Impacts for the QIO Program Changes

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2021 period. According to the CBO
Estimate and subsequently the
regulatory changes ‘‘would modify the
provisions under which CMS contracts
with independent entities called
[‘‘]Quality Improvement Organizations
(QIOs)[’’] in Medicare. QIOs, generally
staffed by health care professionals,
review medical care, help beneficiaries
with complaints about the quality of
care, and implement care
improvements. H.R. 2832 would make
several changes to the composition and
operation of QIOs, and would
harmonize QIO contracts with
requirements of the Federal Acquisition
Regulation. Among those changes are a
modification to expand the geographic
scope of QIO contracts and a
lengthening of the contract period. CBO
estimates that those provisions would
reduce spending by $330 million over
the 2012–2021 period.’’
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
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

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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; the Middle Class Tax Relief
and Job Creation Act of 2012
(MCTRJCA, Pub. L. 112–96), enacted on
February 22, 2012; and the American
Taxpayer Relief Act of 2012 (Pub. L.
112–240), enacted January 2, 2013.
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.
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 that are paid under Part B.
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,

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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
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 originally 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 prospective
payment system; and services and
procedures that require an inpatient stay
that are paid under the hospital IPPS.
We set forth the services that are

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excluded from payment under the OPPS
in regulations at 42 CFR 419.22. This
final rule with comment period
modifies 42 CFR 419.22 and includes in
the OPPS some of these previously
excluded services.
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
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/Hospital
OutpatientPPS/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 Pub. L.
106–113, and redesignated by section
202(a)(2) of Pub. L. 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

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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.
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
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). 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 meetings taking place on

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March 11, 2013 and August 26–27,
2013. 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.
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
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 at
the August 2013 meeting that the
subcommittees continue. We accepted
this recommendation.
Discussions of the other
recommendations made by the Panel at
the March 2013 and August 2013 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 2014 OPPS/ASC
Proposed Rule
We received approximately 2,677
timely pieces of correspondence on the
CY 2014 OPPS/ASC proposed rule that
appeared in the Federal Register on July
19, 2013 (78 FR 43534) and the
correcting document published in the
Federal Register on September 6, 2013

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(78 FR 54842). This final rule with
comment period refers to the corrected
information wherever applicable. 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 to the proposed rule
and the correcting document 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
2013 OPPS/ASC Final Rule With
Comment Period
We received approximately 27 timely
pieces of correspondence on the CY
2013 OPPS/ASC final rule with
comment period that appeared in the
Federal Register on November 15, 2012
(77 FR 68210), some of which contained
comments on the interim APC
assignments and/or status indicators of
HCPCS codes identified with comment
indicator ‘‘NI’’ in Addenda B, AA, and
BB 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.
II. Updates Affecting OPPS Payments
A. Recalibration of APC Relative
Payment Weights
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 2014 OPPS/ASC proposed
rule (78 FR 43544), for the CY 2014
OPPS, we proposed to recalibrate the
APC relative payment weights for
services furnished on or after January 1,
2014, and before January 1, 2015 (CY
2014), using the same basic
methodology that we described in the
CY 2013 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

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construct a database for calculating APC
group weights. Therefore, for the
purpose of recalibrating the proposed
APC relative payment weights for CY
2014, we used approximately 146
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, 2012, and before January
1, 2013. For this final rule with
comment period, for the purpose of
recalibrating the final APC relative
payment weights for CY 2014, we used
approximately 158 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,
2012, and before January 1, 2013. For
exact counts of claims used, we refer
readers to the claims accounting
narrative under supporting
documentation for the CY 2014 OPPS/
ASC proposed rule and this final rule
with comment period on the CMS Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
Of the approximately 158 million
final action claims for services provided
in hospital outpatient settings used to
calculate the CY 2014 OPPS payment
rates for this final rule with comment
period, approximately 125 million
claims were the type of bill potentially
appropriate for use in setting rates for
OPPS services (but did not necessarily
contain services payable under the
OPPS). Of the approximately 125
million claims, approximately 6 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 119
million claims, we created
approximately 125 million single
records, of which approximately 80
million were ‘‘pseudo’’ single or ‘‘single
session’’ claims (created from
approximately 31 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
124 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

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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.
The final APC relative weights and
payments for CY 2014 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 2012
that were processed through June 30,
2013. While prior to CY 2013 we had
historically based the payments on
median hospital costs for services in the
APC groups, beginning with the CY
2013 OPPS, we established the costbased relative payment weights for the
OPPS using geometric mean costs, as
discussed in the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68259 through 68271). For the CY 2014
OPPS, we proposed and are using this
same methodology, basing payments on
geometric mean 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 2014 payment rates.
b. Use of Single and Multiple Procedure
Claims
For CY 2014, in general, as we
proposed, we are continuing 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

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recalibrate the APC relative payment
weights, including those claims for
multiple procedures. As we have for
several years, we are continuing 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 2013 OPPS/ASC final
rule with comment period (77 FR 68227
through 68229). In addition, for CY 2008
(72 FR 66614 through 66664), we
increased packaging and created the
first composite APCs, and continued
those policies through CY 2013.
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
2013, and as we proposed, we are
continuing this policy for CY 2014. In
addition, as we proposed, we are further
expanding our packaging policies for CY
2014. We refer readers to section
II.A.2.f. of this final rule with comment
period for a discussion of the use of
claims in modeling the costs for
composite APCs and to section II.A.3. of
this final rule with comment period for
a discussion of our packaging policies
for CY 2014.
As we proposed, we are continuing to
apply these processes to enable us to
use as much claims data as possible for
ratesetting for the CY 2014 OPPS. This
methodology enabled us to create, for
this final rule with comment period,
approximately 80 million ‘‘pseudo’’
single procedure claims, including

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multiple imaging composite ‘‘single
session’’ bills (we refer readers to
section II.A.2.f.(5) of this final rule with
comment period for further discussion),
to add to the approximately 43 million
‘‘natural’’ single procedure claims.
For CY 2014, we proposed to bypass
179 HCPCS codes that were identified
in Addendum N to the CY 2014 OPPS/
ASC proposed rule (which is 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 2014, data available for the
March 11, 2013 meeting of the Advisory
Panel on Hospital Outpatient Payment
(the Panel) from CY 2012 claims
processed through September 30, 2012,
and CY 2011 claims data processed
through June 30, 2012, used to model
the payment rates for CY 2013) to
determine whether it would be
appropriate to add additional codes to
the previous year’s bypass list. For CY
2014, we proposed to continue to
bypass all of the HCPCS codes on the
CY 2013 OPPS bypass list, with the
exception of HCPCS codes that we
proposed to delete for CY 2014, which
were listed in Table 1 of the proposed
rule (78 FR 43546). 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. Some of the
codes we proposed to remove from the
CY 2014 bypass list are affected by the
CY 2014 packaging final policy,
discussed in section II.A.3. of this final
rule with comment period. In addition,
we proposed to add to the bypass list for
CY 2014 HCPCS codes not on the CY
2013 bypass list that, using either the
CY 2013 final rule data (CY 2011
claims) or the March 11, 2013 Panel
data (first 9 months of CY 2012 claims),
met the empirical criteria for the bypass
list that are summarized below. Finally,
to remain consistent with the CY 2014
final policy to continue to develop
OPPS relative payment weights based
on geometric mean costs, we also
proposed that the packaged cost
criterion continue to be based on the
geometric mean cost. The entire list
proposed for CY 2014 (including the
codes that remain on the bypass list
from prior years) was open to public

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comment in the CY 2014 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
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, as we did for CY 2013,
we proposed to continue to establish the
CY 2014 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.
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

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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
2013 OPPS/ASC final rule with
comment period (77 FR 68221), we
proposed for CY 2014 to continue to
update the packaged cost threshold by
the market basket increase. By applying
the final CY 2013 market basket increase
of 1.8 percent to the prior nonrounded
dollar threshold of $53.76 (77 FR
68221), we determined that the
threshold remains for CY 2014 at $55
($54.73 rounded to $55, the nearest $5
increment). Therefore, we proposed to
set the geometric mean packaged cost
threshold on the CY 2012 claims at $55
for a code to be considered for addition
to the CY 2014 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
believe have minimal associated
packaging based on their clinical
assessment of the complete CY 2014
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) to the bypass list (73 FR 68513).
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

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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
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).
Comment: One commenter supported
the CY 2014 proposal to remove certain
codes from the bypass list, in particular
for the anatomic pathology procedures,
suggesting that the bypass list
undervalues codes, and artificially
lowers their estimated costs, as
evidenced by the estimated increase in
payment for some of those services in
the proposed CY 2014 OPPS.
Response: We appreciate the
commenter’s support. The bypass list
process is used to extract more data
from claims that would otherwise be
unusable. We use a variety of
information in identifying codes that
could be potentially added to the bypass
list each year, including codes selected
based on the empirical criteria, CMS
medical advisor recommendations, and
commenter requests. In doing so, we
attempt to ensure that the amount of
packaged cost being redistributed as a
result of the process is limited.
As discussed in the CY 2014 OPPS/
ASC proposed rule (78 FR 43545
through 43546), we proposed to remove
the bypass codes listed in Table 1 of the
proposed rule, several of which were
affected by the CY 2014 proposed
packaging policy. Codes that would not
be separately paid in the prospective
year, whether because of prospective
packaging policies or deletions prior to
the claims year, would not be
appropriately applied to the bypass
process. Bypassing packaged codes
would potentially remove costs that
would otherwise be used in calculating
payment weights for other separately
payable procedures, which would be
inappropriate. We note that OPPS
payment rates may fluctuate from year

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to year based on a variety of other
factors, including updated data, APC
recalibration, and increased packaging.
Comment: Several commenters
believed that an inconsistency existed
in the application of the bypass policy
and the E&M codes. They noted that
visit codes 99211 and 99215 were not
included on the proposed CY 2014
OPPS bypass list, and that because those
codes were part of the proposed new
visit APC 0634 (Hospital Clinic Visits),
which also would be used in calculating
the OPPS relative payment weights, an
error had occurred.
Response: We acknowledge that the
proposed CY 2014 OPPS bypass list did
not include several of the E&M codes.
With the exception of CPT code 99205,
which we proposed to add to the CY
2014 OPPS bypass list, the other visit
codes already had been on the bypass
list in prior years based on the empirical
criteria previously described. Applying
those empirical criteria would continue
to exclude the remaining E&M codes
from the bypass list. Therefore, we do
not believe that those exclusions are an
error. While we recognize that there are
interactions between the visits policy
discussed in section VII. of this final
rule with comment period and the
bypass process to derive more
information, those interactions allow for
policy interpretations based on the
individual rules and goals being
applied. In developing the proposed CY
2014 OPPS bypass list, we tried to retain
the principles and guidelines we have
used in the past while accommodating
other proposals where they might
interact, such as with the CY 2014 OPPS
proposed packaging policy. We
appreciate the meaningful policy
comments that stakeholders provide,
especially where these policy
intersections occur. We will continue to
review the codes on the bypass list and
their appropriateness, especially in the
context of the packaging policies
described in section II.A.3. of this final
rule with comment period.
We note that while we proposed that
the new CY 2014 visit APC 0634 would
be the new base APC on which the
scaled weights would be calculated, it
was selected as a baseline because clinic
visits are one of the most frequently
performed services in the hospital
outpatient setting, similar to APCs 0606
and 0601 in prior years. However,
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
because the weights are scaled for
budget neutrality. Therefore, any
potential miscalculations or policy
issues related to an APC would

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generally be concentrated in those APCs
because, for scaling purposes, it would
be similar to selecting any number as a
baseline, which would later be budget
neutralized through a weight scaler. The
CY 2014 OPPS weight scaler is
discussed in section II.A.4. of this final
rule with comment period.
Comment: One commenter noted that
many of the codes on the bypass list
may no longer be appropriate because
the proposed CY 2014 packaging policy
would potentially cause many of the
natural single major claims, to which
CMS applies the empirical criteria, to
exceed the packaged cost thresholds.
Response: We appreciate the issue
that the commenter has raised regarding
the application of the bypass list and its
interaction with our proposed CY 2014
policies. In prior years, we generally
continued bypassing codes that were on
the previous year’s bypass list under the
assumption that packaging, billing, and
clinical patterns would generally remain
similar from year to year. As the
commenter noted, under the proposed
CY 2014 OPPS packaging policies, the
data on which we identify codes
potentially added to the bypass list may
change. We will continue to examine
the cost patterns for codes which may
be appropriately added or removed from
the bypass list.
After consideration of the public
comments we received, we are adopting
as final the proposed ‘‘pseudo’’ single
claims process. As discussed earlier in
this section, there are interactions
between the application of a bypass list
and various other OPPS payment
policies. As a result of modifications to
the packaging policies described in
section III. of this final rule with
comment period, we are adding codes
that we had originally proposed to
remove from the CY 2014 bypass list
back on the CY 2014 final OPPS bypass
list. Addendum N to this final rule with
comment period (which is available via
the Internet on the CMS Web site)
includes the list of bypass codes for CY
2014.
The list of bypass codes contains
codes that were reported on claims for
services in CY 2012 and, therefore,
includes codes that were in effect in CY
2012 and used for billing but were
deleted for CY 2013. We retained these
deleted bypass codes on the CY 2014
bypass list because these codes existed
in CY 2012 and were covered OPD
services in that period, and CY 2012
claims data are used to calculate CY
2014 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

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codes’’ that were members of the
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 2014
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 2014
bypass list for CY 2014 (78 FR 43546).
Table 1 below contains the list of codes
that we are removing from the final CY
2014 bypass list because these codes
were either deleted from the HCPCS
before CY 2012 (and therefore were not
covered OPD services in CY 2012) or
were not separately payable codes under

the CY 2014 OPPS because these codes
are not used for ratesetting through the
bypass process. The list of codes for
removal from the bypass list includes
those that will be affected by the CY
2014 OPPS packaging policy described
in section II.A.3. of this final rule with
comment period.

c. Calculation and Use of Cost-to-Charge
Ratios (CCRs)
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43547), we proposed to
continue to use the hospital-specific
overall ancillary and departmental costto-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 2014
APC payment rates were based, we
calculated hospital-specific overall
ancillary CCRs and hospital-specific
departmental CCRs for each hospital for
which we had CY 2012 claims data from
the most recent available hospital cost
reports, in most cases, cost reports
beginning in CY 2011. For the CY 2014
OPPS proposed rates, we used the set of
claims processed during CY 2012. 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 2012 (the year of

claims data we used to calculate the
proposed CY 2014 OPPS payment rates)
and found that the National Uniform
Billing Committee (NUBC) did not add
any new revenue codes to the NUBC
2012 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
the hospital-specific departmental level.
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 2012
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, which, in most cases, were
from cost reports with cost reporting
periods beginning in CY 2011. 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 2014
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
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

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longstanding methodology for the
calculation of costs for CY 2014.
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 the 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
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

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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,’’ a summary of public
comments received, and our responses
to those public comments, 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. In the CY 2013 OPPS/ASC final
rule with comment period, we
determined that a significant volume of
hospitals were utilizing the
‘‘Implantable Devices Charged to
Patients’’ cost center. Because a
sufficient amount of data from which to
generate a meaningful analysis was
available, we established in the CY 2013
OPPS/ASC final rule with comment
period a policy to create a distinct CCR
using the ‘‘Implantable Devices Charged
to Patients’’ cost center (77 FR 68225).
For the CY 2014 OPPS, as we proposed,
we are continuing 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.
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
these 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
costs and charges of CT scans, MRIs,
and cardiac catheterization differ

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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 were effective for cost
report periods beginning on or after May
1, 2010, on the revised cost report Form
CMS–2552–10.
Using the December 2012 HCRIS
update which we used to estimate costs
in the CY 2014 OPPS ratesetting
process, as discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43549),
we were able to calculate a valid
implantable device CCR for 2,936
hospitals, a valid MRI CCR for 1,853
hospitals, a valid CT scan CCR for 1,956
hospitals, and a valid Cardiac
Catheterization CCR for 1,367 hospitals.
We believed that there was a sufficient
amount of data in the Form CMS 2552–
10 cost reports from which to generate
a meaningful analysis of the impact on
CCRs associated with using the new
MRI, CT, and cardiac catheterization
cost centers. We provided the data
analyses in Tables 2 and 3 of the
proposed rule (and are republishing
them below) demonstrating the changes
as a result of including the distinct
CCRs calculated from the new standard
cost centers into the CY 2014 OPPS
ratesetting process.
BILLING CODE 4120–01–P

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TABLE 2.-MEDIAN CCRs CALCULATED USING DIFFERENT COST
REPORT DISTRIBUTIONS

Calculated CCR
Cardiology
Cardiac Catheterization
Radiology - Diagnostic
Magnetic Resonance Imaging
(MRI)
CT Scan
Medical Supplies Charged to
Patient
Implantable Devices Charged to
Patient

"New"
Standard
Cost
Center

*
*
*

*

Using Form
CMS-2552-96
CCRs only
0.2915
0.1685
0.2025

Using Form
CMS-2552-96
and Form
CMS-2552-10
CCRs
0.5112
0.1590
0.2279

0.1074
0.0568

0.0959
0.0502

0.3389

0.3315

0.4371

0.4190

TABLE 3.-PERCENTAGE CHANGE IN ESTIMATED COST FOR THOSE
APCs SIGNIFICANTLY AFFECTED BY USE OF THE NEW STANDARD COST
CENTER CCRs IN THE FORM CMS-2552-10 COST REPORTS

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0336
8008
8007
0337
0284

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APC Descriptor
Miscellaneous Computed Axial Tomography
Computed Tomography without Contrast
CT and CTA without Contrast Composite
Combined Abdomen and Pelvis CT without Contrast
CT and CTA with Contrast Composite
Combined Abdomen and Pelvis CT with Contrast
CT Angiography
Computed Tomography with Contrast
Computed Tomography without Contrast followed by Contrast
Cardiac Computed Tomographic Imaging
Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast
MRI and MRA with Contrast Composite
MRI and MRA without Contrast Composite
Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast followed by Contrast
Magnetic Resonance Imaging and Magnetic Resonance

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-19.3%
-18.9%
-18.5%
-18.2%
-14.9%

ER10DE13.262

APC
0282
0332
8005
0331
8006
0334
0662
0283
0333
0383

Percentage
Change in
Estimated
Cost
-38.1%
-34.0%
-33.9%
-32.9%
-29.0%
-28.8%
-27.0%
-27.0%
-26.3%
-24.8%

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BILLING CODE 4120–01–C

In our CY 2014 OPPS/ASC proposed
rule discussion, we noted that the
estimated changes in geometric mean
estimated APC cost of using data from
the new standard cost centers for CT
scans and MRIs appeared consistent
with RTI’s analysis of cost report and
claims data in the July 2008 final report
(pages 5 and 6). RTI concludes that ‘‘in
hospitals that aggregate data for CT
scanning, MRI, or nuclear medicine
services with the standard line for
Diagnostic Radiology, costs for these
services all appear substantially
overstated, while the costs for plain
films, ultrasound and other imaging
procedures are correspondingly
understated.’’ We also noted that there
were limited additional impacts in the
implantable device-related APCs from
adopting the new cost report form CMS
2552–10 because we had used data from
the standard cost center for implantable
medical devices in CY 2013 OPPS
ratesetting, as discussed above.
As we have indicated in prior
rulemaking (77 FR 68223 through
68225), once we have determined that
cost report data for the new standard
cost centers were sufficiently available,
we would analyze that data and, if
appropriate, we would propose to use
the distinct CCRs for new standard cost

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centers described above in the
calculation of the OPPS relative
payment weights. As stated in the CY
2014 OPPS/ASC proposed rule (78 FR
43550), we have conducted our analysis
and concluded that we should develop
distinct CCRs for each of the new cost
centers and use them in ratesetting.
Therefore, beginning in the CY 2014
OPPS, we proposed to calculate the
OPPS relative payment weights using
distinct CCRs for cardiac
catheterization, CT scan, and MRI and
to continue using a distinct CCR for
implantable medical devices. Section
XXIII. of this final rule with comment
period includes the impacts of
calculating the CY 2014 OPPS relative
payment weights using these new
standard cost centers.
Comment: Commenters generally
supported the proposals to implement
the standard cost center CCRs for
implantable devices and cardiac
catheterization. However, many
commenters requested that CMS
reconsider the impact of distinct CCRs
for MRI and CT scan cost centers before
adopting them. Various commenters
opposed the implementation of distinct
MRI and CT scan CCRs, expressing
concern that doing so would result in
very low CCRs for these services
because of gross hospital cost reporting

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practices that allocate capital costs for
MRIs and CT scans across the entire
hospital, rather than to the appropriate
CT scan and MRI cost centers.
Specifically, commenters reported that
some hospitals currently use an
imprecise ‘‘square feet’’ allocation
methodology for the costs of large
moveable equipment like CT scan and
MRI machines. They indicated that
while CMS recommends using two
alternative allocation methods, ‘‘direct
assignment’’ or ‘‘dollar value,’’ as a
more accurate methodology for directly
assigning equipment costs, industry
analysis suggests that approximately
only half of the reported cost centers for
CT scans and MRIs rely on these
preferred methodologies. The
commenters expressed concern that
‘‘square feet’’ allocation results in CCRs
that lack face validity because the
proposed CCRs for CT scans and MRIs
are less than the proposed CCR for
general diagnostic radiology,
inaccurately reflecting the higher
resources used for MRIs and CT scans
relative to the less expensive plain film
x-rays. These commenters also noted
that, under the CY 2014 OPPS proposed
policy of using standard CT and MRI
cost center data from the Medicare cost
report Form CMS 2552–10, payment for
certain x-rays would be similar to that

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of CT imaging services, despite their
belief that CT services would cost
significantly more to perform. Other
commenters suggested that if CMS were
to finalize the new CCRs, CMS should
only use cost report data that meet
minimum data quality standards, such
as only including: (1) Cost report data
based on dollar value or direct
assignment cost allocation methods; (2)
‘‘plausible’’ costs for CT and MRI cost
centers; and (3) data when there is
evidence of reclassified costs from
diagnostic radiology to standard CT and
MRI cost centers. Commenters also
raised concerns with CMS’ analysis and
indicated that similarity of the APC
payment impacts in the CY 2014 OPPS
proposed rule and those in the RTI
report did not confirm the validity of
the proposed CCRs. Commenters
asserted that more time is needed by
hospitals to modify their cost reporting
practices, while other commenters
suggested that it was unrealistic to
expect hospitals to adopt cost allocation
methods that would improve the
accuracy of the cost data at all, due to
the significant expenses involved and
the limited benefit to each individual
hospital.
Commenters also noted that the
Deficit Reduction Act (DRA) of 2005
sets the technical component (TC) of
advanced imaging services under the
Medicare Physician Fee Schedule
(MPFS) to the lesser of: (1) The payment
under the MPFS; or (2) the payment
under the OPPS. The commenters stated
that, as proposed, the separate cost
centers for MRI and CT scans would
result in significant cuts to the MPFS
technical component payments and that
such payment cuts could affect
beneficiary access to care. The
commenters urged CMS not to use the
proposed CCRs for MRIs and CT scans
until the payment effects have been
thoroughly analyzed.
Response: We appreciate the
comments regarding the use of standard
cost center CCRs for implantable
devices, MRIs, CT scans, and cardiac
catheterization. We appreciate the
support for our proposal to use distinct
CCRs for implantable devices and
cardiac catheterization. We have
reviewed the comments objecting to
implementation of distinct CCRs for
MRIs and CT scans. We note that the
new standard cost centers for CT scans,
MRIs, and cardiac catheterization have
been in effect since cost reporting
periods beginning on or after May 1,
2010, on the revised Medicare cost
report Form CMS–2552–10. Therefore,
the cost reports that we are using to
develop the CY 2014 OPPS relative
payment weights were either the first or

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the second opportunity for hospitals to
submit cost reports with the new CT
scan and MRI cost centers (lines 57 and
58 of Worksheets A and C, Part I of the
Form CMS–2552–10), depending on the
hospital’s cost reporting period.
Simultaneous with implementing the
new CT scan and MRI cost centers, in
the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50077) and the CY 2011 OPPS/
ASC final rule (75 FR 71824), we also
notified hospitals of the need and
importance of properly reporting the
capital costs of moveable equipment on
the Medicare cost report.
In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50078), we explained that,
in accordance with Section 104 of CMS
Pub. 15–1, Chapter 1, CT scans and
MRIs are major moveable equipment,
and the costs should be reported
together with the rest of the hospital’s
major moveable equipment cost in the
Capital-Related Costs—Moveable
Equipment cost centers on Worksheet A
(lines 2 and 4 on the Form CMS–2552–
96 and line 2 on the Form CMS–2552–
10). The costs in these cost centers are
allocated to all the hospital’s cost
centers that use major moveable
equipment (including CT and MRI),
using ‘‘dollar value’’ (which is the
‘‘recommended’’ or default statistical
basis, in accordance with the cost
reporting instructions contained in
Section 4095 of CMS Pub. 15–2, for the
Form CMS–2552–10). Alternatively, the
hospital may have obtained the
contractor’s approval under Section
2313 of CMS Pub. 15–1 to use the
simplified cost allocation methodology
known as ‘‘square feet.’’ However, a
hospital that historically has been using
‘‘square feet’’ and is concerned that this
method of allocation may result in
inaccurate CCRs (on Worksheet C, Part
I) for the CT scan, MRI, and other
ancillary cost centers may request
contractor approval in accordance with
Section 2307 of the CMS Pub. 15–1 to
use the ‘‘direct assignment’’ allocation
method, and directly assign the cost of
moveable equipment to all of the
hospital’s cost centers that use moveable
equipment, including CT scans and
MRIs, using the provider’s routine
accounting process. This would ensure
that the cost of the CT scanning and
MRI equipment would be reflected in
the CCR that would be calculated for
those departments and that would be
used to estimate the cost of CT scan and
MRI services. In any case, hospitals
should correct their cost reporting
practices to come into compliance with
CMS’ longstanding policy regarding the
‘‘Capital-Related Costs—Moveable
Equipment’’ cost center, by either using

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the recommended statistical allocation
method of ‘‘dollar value’’ for costs in
Worksheet A, Column 2 for CapitalRelated Costs—Moveable Equipment or
by requesting contractor approval in
accordance with Section 2307 of CMS
Pub. 15–1 to use the ‘‘direct
assignment’’ allocation method. In the
FY 2013 IPPS/LTCH PPS final rule (77
FR 53283), we reiterated this policy, and
added that ‘‘Hospitals that still need to
correct their cost reporting practices in
this regard should do so soon’’ so that
distinct CT and MRI cost center CCRs
would accurately reflect the costs
associated with providing those
services.
In the CY 2014 OPPS/ASC proposed
rule, we provided information about the
CT and MRI cost center CCRs and the
estimated effects on APC payment of
adopting those cost centers. We noted
the similarities between our estimations
and the RTI report results not only to
demonstrate that they were generally
consistent with each other, but to again
note that any concerns and criticisms of
the data and its corresponding impact
on the payment rates would be the same
as were expected when the report was
initially published in July 2008, absent
any improvements in cost reporting
practice. We further note that some of
the concerns that commenters described
related to differentials in payment for
plain film x-rays based on proposed CY
2014 OPPS payment rates being similar
to those of the CT and MRI services
have abated because the ancillary
services and diagnostic tests on the
bypass list packaging proposals are not
being finalized for CY 2014. Various
packaged items and services under
those proposals may have created some
of the estimated increase in service cost
for plain film x-rays.
While some commenters believe that
it is unrealistic for hospitals to adopt
cost allocation methods that improve
data and payment accuracy, we believe
that those recommended changes are
critical in the shared goal of developing
OPPS relative payment weights that
accurately reflect service costs. We also
believe that because approximately half
of hospitals reporting either the new CT
scan or MRI standard cost center thus
far have adopted one of the more
accurate cost allocation methods, other
hospitals also should be able to do so.
Of the 1,961 hospitals reporting a new
CT scan standard cost center, 1,055
hospitals reported using either ‘‘direct
assignment’’ or ‘‘dollar value’’ as the
cost allocation method. Similarly, of the
1,871 hospitals reporting a new MRI
standard cost center, approximately 985
hospitals report using either ‘‘direct
assignment’’ or ‘‘dollar value’’ as the

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cost allocation method. Commenters
have previously recognized the
significant impact that the CT scan and
MRI standard cost center data would
have on multiple payment systems, and
we believe that the significant effects of
these data on payment should
inherently encourage more accurate cost
reporting (75 FR 71824). Standard cost
centers for CT and MRI services were
developed in the revised Medicare cost
report Form CMS–2552–10 to more
accurately capture the costs associated
with providing these important services.
Not including the cost report data
derived from these cost centers in
ratesetting with no future indication of
improvement would be contrary to their
purpose and our goal to develop OPPS
relative payment weights that accurately
reflect service costs.
We have considered the public
comments recommending that if CMS
does finalize distinct CCRs for CT scans
and MRIs for the OPPS relative payment
weights, CMS adopt certain minimum
quality standards, such as using only
cost report data of hospitals that use
either direct assignment or the dollar
value statistical allocation method, have
at least $250,000 of cost in the CT scan
or MRI cost center, and have reclassified
overhead costs from the diagnostic
radiology cost center to the CT scan
and/or MRI cost centers. We appreciate
the commenters’ shared concern
surrounding the goal of using the best
available information to estimated costs
associated with these new standard cost
centers.
For the FY 2014 IPPS/LTCH PPS final
rule, we did not agree with the adoption
of commenters’ suggested minimum
data standards because doing so would
have ignored the fact that many
hospitals have chosen (at least up to this
point) to employ the square feet
statistical allocation methodology,
perhaps for reasons unrelated to the
costs of MRIs and CT scans, and,
therefore, those data reflect, in large
part, the best available data that we
have. It also is not administratively
feasible for CMS to determine, using
HCRIS data, whether hospitals have
reclassified overhead costs from the
diagnostic radiology cost center to the
CT scan and/or MRI cost centers.
However, in the FY 2014 IPPS/LTCH
PPS final rule, we recognized that while
only a fraction of the negative impact
would be manifested in the IPPS MS–
DRGs, the OPPS relative payment
weights would be more significantly
affected by the adoption of the new
standard cost center CCRs (78 FR
50521).
We took note of the many comments
regarding the ramifications of

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developing distinct CT scan and MRI
CCRs on beneficiary access to care and
other payment systems. We understand
that any such change could have
significant payment impacts under the
MPFS where the TC payment for many
imaging services is capped at the OPPS
payment. These significant payment
effects based on adoption of the new CT
scan and MRI standard cost center CCRs
further underscore the need for accurate
cost reporting for ratesetting purposes.
Although these payment effects are
significant, we do not believe that they
would likely significantly affect
beneficiary access to imaging because
imaging is readily available at different
sites of service and the magnitude of the
payment effects are not so drastic that
providers and suppliers of imaging
would likely discontinue offering CT
and MRI services.
We appreciate the concerns expressed
by the commenters related to payment
changes of implementing these cost
center CCRs, and the importance of not
providing an incentive for hospitals to
furnish, or not furnish, certain services.
However, we are not convinced that
further delay or further trimming of CCR
values is necessary in order to
implement all of the proposed CCRs.
Although hospitals have been permitted
to use the alternative basis cost
allocation (that is, ‘‘square feet’’) under
Section 2313 of CMS Pub. 15–1, this
methodology does not ensure precise
CCRs for CT scans and MRIs. Therefore,
we encouraged hospitals over the past
several years to use the most precise
cost reporting methods in response to
the new cost report lines. Specifically,
the longstanding cost report instructions
contained in Section 4020 (previously
Section 3617) of CMS Pub. 15–2 state
that ‘‘The statistical basis shown at the
top of each column on Worksheet B–1
is the recommended basis of allocation
of the cost center indicated which must
be used by all providers completing this
form (Form CMS–2552–10), even if a
basis of allocation other than the
recommended basis of allocation was
used in the previous iteration of the cost
report (Form CMS–2552–96).’’ Under
Table 1 of the Medicare cost report,
which lists the Record Specifications for
the cost centers on Worksheet B–1,
‘‘dollar value’’ is specified as the
recommended statistical allocation
method for Column 2, Capital-Related
Costs—Moveable Equipment. While the
‘‘dollar value’’ statistical allocation
method is more precise than ‘‘square
feet,’’ to ensure even more precise CCRs
for CT scans and MRIs, 90 days prior to
the beginning of their next cost
reporting period, hospitals may request

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permission from their Medicare
contractors in accordance with Section
2307 of CMS Pub. 15–1 to use the
‘‘direct assignment’’ allocation method
on Worksheet B, Part II, Column 0.
Although ‘‘direct assignment’’ is the
preferred and most precise allocation
method, hospitals that do not have the
resources to directly assign the costs of
every cost center are strongly
encouraged to instead use the ‘‘dollar
value’’ statistical allocation method.
(We note that, under Section 2313 of
CMS Pub. 15–1, hospitals not currently
using ‘‘dollar value’’ should notify their
contractor of their intention to switch
their statistical allocation basis to
‘‘dollar value’’ at least 90 days prior to
the end of a cost reporting period.) We
also intend to communicate with the
Medicare contractors to facilitate
approval of hospitals’ requests to switch
from the square feet statistical allocation
method to the ‘‘direct assignment’’ or
‘‘dollar value’’ allocation method for the
costs of major moveable equipment. We
believe that, by adopting more refined
CCRs, we are fostering more careful cost
reporting. Therefore, we generally do
not believe that the concerns expressed
by the commenters warrant further
delay in implementing the proposed
CCRs for CT scans and MRIs for use in
OPPS ratesetting.
However, we recognize the
commenters’ concerns with regard to
the application of the new CT and MRI
standard cost center CCRs and their use
in OPPS ratesetting. As compared to the
IPPS, there is increased sensitivity to
the cost allocation method being used
on the cost report forms for these new
standard imaging cost centers under the
OPPS due to the limited size of the
OPPS payment bundles and because the
OPPS applies the CCRs at the
departmental level for cost estimation
purposes. As a means of addressing the
commenters’ concerns related to the
new CT and MRI standard cost centers,
when calculating the CT and MRI cost
center CCRs used to estimate costs for
the CT and MRI APCs listed in Table 4
below, we removed all claims from
providers that use ‘‘square feet’’ as a
cost allocation method. We identified
providers using ‘‘square feet’’ as the cost
allocation method by extracting HCRIS
data on Worksheet B–1. Table 4 displays
information about the relative effect on
CT and MRI APC payments after
removing cost data for providers that
report CT and MRI standard cost centers
using ‘‘square feet’’ as the cost
allocation method. Table 5 below
provides statistical values based on the
CT and MRI standard cost center CCRs

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using the different cost allocation
methods.

TABLE 4.-PERCENTAGE CHANGE IN ESTIMATED COST FOR CT AND
MRI APCs WHEN EXCLUDING CLAIMS FROM PROVIDERS USING
"SQUARE FEET" AS THE COST ALLOCATION METHOD
CY
2014
APC
0282
0283
0284
0331
0332
0333
0334
0336
0337
0383
0662
8005
8006
8007
8008

CY 2014 APC Descriptor
Miscellaneous Computed Axial Tomography
Computed Tomography with Contrast
Magnetic Resonance Imaging and Magnetic Resonance
Angiography with Contrast
Combined Abdomen and Pelvis CT without Contrast
Computed Tomography without Contrast
Computed Tomography without Contrast followed by Contrast
Combined Abdomen and Pelvis CT with Contrast
Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast
Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast followed by Contrast
Cardiac Computed Tomographic Imaging
CT Angiography
CT and CTA without Contrast Composite
CT and CTA with Contrast Composite
MRI and MRA without Contrast Composite
MRI and MRA with Contrast Composite

Percent
Change
17.7%
8.7%
4.5%
10.4%
14.0%
11.6%
9.3%
8.3%
6.1%
2.6%
9.9%
12.4%
8.7%
7.4%
6.4%

Cost Allocation Method
All Providers
Square Feet Only
Direct Assign
Dollar Value
Direct Assign and Dollar
Value
As we have stated in prior rulemaking
(77 FR 53281 through 53283 and 77 FR
68224), once we determined that a
sufficient amount of cost report data
were available from which to generate a
meaningful analysis, we would propose,

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CT
MRI
Median Mean Median Mean
CCR
CCR
CCR
CCR
0.049
0.118
0.063
0.093
0.049
0.081
0.101
0.038
0.061
0.112
0.126
0.070
0.059
0.070
0.106
0.129
0.058

0.070

and finalize if appropriate, the use of
the distinct CCRs described above in the
calculation of the OPPS relative
payment weights. We believe that the
analytic findings described in the
proposed rule, and the volume of

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0.129

hospitals that have ‘‘valid’’ CCRs
described above, computed using the
July 2013 HCRIS update, support our
original decision to create new cost
centers and distinct CCRs for
implantable devices, MRIs, CT scans,

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TABLE S.-CCR STATISTICAL VALUES BASED ON USE OF DIFFERENT
COST ALLOCATION METHODS

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and cardiac catheterization, and we see
no reason to further delay
implementation of the CCRs of each of
these cost centers for the OPPS.
Therefore, we are finalizing a policy for
the CY 2014 OPPS to remove claims
from providers that use a cost allocation
method of ‘‘square feet’’ to calculate
CCRs used to estimate costs associated
with the CT and MRI APCs identified in
Table 4. This change allows hospitals
additional time to use one of the more
accurate cost allocation methods, and
thereby improve the accuracy of the
CCRs on which the OPPS relative
payment weights are developed. As part
of this transitional policy to estimate the
CT and MRI APC relative payment
weights using only cost data from
providers that do not use ‘‘square feet’’
as the cost allocation statistic, we will
sunset this policy in 4 years once the
updated cost report data become
available for ratesetting purposes. We
believe that 4 years is sufficient time for
hospitals that have not done so to
transition to a more accurate cost
allocation method and for the related
data to be available for ratesetting
purposes. Therefore, in CY 2018, we
will estimate the CT and MRI APC
relative payment weights using cost data
from all providers, regardless of the cost
allocation statistic employed.
After consideration of the public
comments we received, we are
finalizing, without modification, our
proposal to use data from the
‘‘Implantable Devices Charged to
Patients’’ and ‘‘Cardiac Catheterization’’
cost centers to create distinct CCRs for
use in calculating the OPPS relative
payment weights for CY 2014. For the
‘‘Magnetic Resonance Imaging (MRI)’’
and ‘‘Computed Tomography (CT)
Scan’’ APCs identified in Table 4 earlier
in this section, we are modifying our
proposal so that the final policy will
remove claims from cost modeling for
those providers using ‘‘square feet’’ as
the cost allocation statistic.
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 the OPPS payment
rates for CY 2014. 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

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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/
HospitalOutpatientPPS/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 2012 claims that were used
to calculate the final payment rates for
the CY 2014 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 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 the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68259
through 68271), we finalized the use of
geometric mean costs to calculate the
relative weights on which the CY 2013
OPPS payment rates were based. While
this policy changed the cost metric on
which the relative payments are based,
the data process in general remained the
same, under the methodologies that we
used to obtain appropriate claims data
and accurate cost information in
determining estimated service cost. For
CY 2014, as we proposed, we are
continuing to use geometric mean costs
to calculate the relative weights on
which the CY 2014 OPPS payments
rates are based.
We used the methodology described
in sections II.A.2.a. through II.A.2.f. 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 2014
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 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. One commenter suggested a
‘‘dampening policy’’ that would limit
declines in payment service from year to
year.
Response: As previously discussed in
the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68225), there
are a number of factors that contribute
to cost fluctuations from one year to the

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next, including (but not limited to)
hospital behavior in adjusting mix of
services, changes in hospital costs and
charges each year resulting in changes
to the CCRs, reassignments of HCPCS
codes, changes to OPPS payment policy
(for example, changes to packaging
policies), 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, 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. 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 2012 hospital
outpatient claims processed through
June 30, 2013, to calculate the geometric
mean costs of APCs that underpin the
relative payment weights for CY 2014.
(For the proposed rule, we used CY
2012 hospital outpatient claims
processed through December 31, 2012.)
To begin the calculation of the relative
payment weights for CY 2014, we
pulled all claims for outpatient services
furnished in CY 2012 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 tests for
persons who are neither inpatients nor
outpatients of the hospital).

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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 125 million claims
that contain hospital bill types paid
under the OPPS.
1. Claims that were not bill types 12X
(Hospital Inpatient (Medicare Part B
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

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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/
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

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rates, such as a unit-to-day ratio for
drugs.
Prior to CY 2013, our payment policy
for nonpass-through separately paid
drugs and biologicals was based on a
redistribution methodology that
accounted for pharmacy overhead by
allocating cost from packaged drugs to
separately paid drugs. This
methodology 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, we paid 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. Under
that policy, we did not redistribute the
pharmacy overhead costs from packaged
drugs to separately paid drugs. For the
CY 2014 OPPS, as we proposed, we are
continuing the CY 2013 payment policy
for separately payable drugs and
biologicals. We refer readers to section
V.B.3. of this final rule with comment
period for a complete discussion of our
CY 2014 final payment policy for
separately paid drugs and biologicals.
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 2013 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 2014, as we proposed, we are
continuing the policy we implemented
for CY 2013 to exclude line-item data
for pass-through drugs and biologicals

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(status indicator ‘‘G’’ for CY 2012) and
nonpass-through drugs and biologicals
(status indicator ‘‘K’’ for CY 2012)
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 2013
OPPS/ASC final rule with comment
period (77 FR 68226) 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
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.
For the CY 2014 OPPS, as part of our
packaging of certain clinical diagnostic
laboratory tests, we also apply the line
item trim to these services if they did
not receive payment in the claims year.
Removing these lines ensures that, in
establishing the CY 2014 OPPS relative
payments weights, we appropriately
allocate the costs associated with
packaging these services. For a more
detailed discussion of the final policy to
package certain clinical diagnostic
laboratory tests, we refer readers to
section II.A.3.b.(3) of this final rule with
comment period.

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b. Splitting Claims and Creation of
‘‘Pseudo’’ Single Procedure Claims
(1) Splitting Claims
For the CY 2014 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.) We note
that, under the final CY 2014 OPPS
packaging policy, we are not deleting
status indicator ‘‘X’’ and not revising the
title and description of status indicator
‘‘Q1’’ to reflect that deletion, as
discussed in sections II.A.3. and XI. of
this final rule with comment period. For
CY 2014, as we proposed, we are
continuing our current policy of

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defining major procedures as any
HCPCS code having a status indicator of
‘‘S,’’ ‘‘T,’’ or ‘‘V’’; 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 2014, we had originally proposed to
delete status indicator ‘‘X’’ as part of our
proposal to package ancillary services
under that status indicator. However, as
discussed in section II.A.3. of this final
rule with comment period, we are not
establishing that policy in CY 2014 and
may reexamine that policy in the future.
Therefore, for CY 2014, we are defining
HCPCS codes having a status indicator
of ‘‘X’’ as major procedure, due to the
retention of the status indicator. For CY
2014, we are continuing to assign status
indicator ‘‘R’’ to blood and blood
products; status indicator ‘‘U’’ to
brachytherapy sources; status indicator
‘‘Q1’’ to all ‘‘STVX-packaged 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 compositespecific 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 2014
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
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

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claims is discussed in section II.A.2.f. of
this final rule with comment period.
Specifically, 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’’ (Tpackaged), 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.

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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, 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).
As proposed, 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
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

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bypass list and are members of the
multiple imaging composite APCs, in
this initial assessment for ‘‘pseudo’’
single procedure claims. The final CY
2014 ‘‘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.f.(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 2014 OPPS relative
payment weights are based. Having
identified ‘‘single session’’ claims for
the imaging 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

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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 examined
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 2013 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 ‘‘Q1.’’ We then
packaged all costs for the following into
a single cost for the ‘‘Q1’’ HCPCS code
that had the highest CY 2013 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
2013 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
2013 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
2013 relative payment weight to create
a ‘‘pseudo’’ single procedure claim for
that code: additional units of the status
indicator ‘‘Q2’’ HCPCS code with the
highest CY 2013 relative payment
weight; other codes with status
indicator ‘‘Q2’’; and other packaged
HCPCS codes and packaged revenue

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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 2013 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 (‘‘Tpackaged’’) 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 2013 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 2013 relative payment weights. If a
status indicator ‘‘Q1’’ HCPCS code had
a higher CY 2013 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 XI.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
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

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(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.
We proposed to continue to apply the
methodology described above for the
purpose of creating ‘‘pseudo’’ single
procedure claims for the CY 2014 OPPS.
We did not receive any public
comments on this proposal, and
therefore are finalizing our proposal to
continue to apply the methodology
described above for the purpose of
creating ‘‘pseudo’’ single procedure
claims for the CY 2014 OPPS.
c. Completion of Claim Records and
Geometric Mean Cost Calculations
(1) General Process
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
status indicator ‘‘Q1’’ or ‘‘Q2’’ when
they are not separately paid), and the
costs of the services reported under
packaged revenue codes in Table 6
below that appeared on the claim
without a HCPCS code into the cost of
the single major procedure remaining on
the claim. For a more complete
discussion of our final CY 2014 OPPS
packaging policy, we refer readers to
section II.A.3. of this final rule with
comment period.
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 adopt for CY 2014 to the
revenue codes that the I/OCE will
package for CY 2014 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

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60363), we finalized changes to the
packaged revenue code list based on our
examination of the updated NUBC
codes and public comment on the CY
2010 proposed list of packaged revenue
codes.
For CY 2014, as we did for CY 2013,
we reviewed the changes to revenue
codes that were effective during CY
2012 for purposes of determining the
charges reported with revenue codes but
without HCPCS codes that we proposed
to package for CY 2014. We believe that
the charges reported under the revenue
codes listed in Table 6 below continue
to reflect ancillary and supportive
services for which hospitals report
charges without HCPCS codes.
Therefore, for CY 2014, we proposed to
continue to package the costs that we
derive from the charges reported
without HCPCS codes under the
revenue codes displayed in Table 6
below for purposes of calculating the
geometric mean costs on which the final
CY 2014 OPPS/ASC payment rates are
based.
Comment: One commenter
recommended that CMS consider
examining revenue codes not currently
on the list of CY 2014 packaged revenue
codes for potential addition to the list of
packaged revenue codes. The
commenter stated that with increased
packaging of ancillary and adjunctive
services, it becomes more important to
ensure that all OPPS service costs are
packaged into the pertinent OPPS
furnished service.
Response: In the CY 2010 OPPS/ASC
proposed rule and the final rule with
comment period, we reviewed the
revenue code-to-cost center crosswalk
and the revenue codes which are
considered for use in OPPS ratesetting.
Although there was an extensive
discussion in the CY 2010 OPPS/ASC
final rule with comment period about
the use of revenue codes in OPPS
ratesetting, we did not receive any
public comments regarding additions or
removals of revenue codes from the
packaged revenue code list (78 FR
43554). Similarly, commenters’ specific
concerns have typically been isolated to
the adoption of the new standard cost
center CCRs in the Medicare cost report
Form CMS–2552–10. However, we
recognize the commenter’s concern and
believe that an examination of both the
current packaged revenue code list and
potential addition or removal of revenue
codes in the future may be worth
performing.
After consideration of the public
comments we received, we are
finalizing the proposed packaged
revenue codes for CY 2014, which are
identified in Table 6 below, without

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modification. We note that these
revenue codes include only revenue
codes that were in effect in CY 2012, the

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year of the claims data on which the

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final CY 2014 OPPS payment rates are
based.
BILLING CODE 4120–01–P

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TABLE 6.-CY 2014 PACKAGED REVENUE CODES

0390
0392
0399

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0621
0622
0623
0624
0630

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Description
Pharmacy; General Classification
Pharmacy; Generic Drugs
Pharmacy; Non-Generic Drugs
Pharmacy; Drugs Incident to Other Diagnostic Services
Pharmacy; Drugs Incident to Radiology
Pharmacy; N on-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
MedicaVSurgical Supplies and Devices; General Classification
Medical/Surgical Supplies and Devices; Non-sterile Supply
MedicaVSurgical Supplies and Devices; Sterile Supply
MedicaVSurgical Supplies and Devices; Pacemaker
MedicaVSurgical Supplies and Devices; Intraocular Lens
MedicaVSurgical Supplies and Devices; Other Implants
MedicaVSurgical 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
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

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ER10DE13.265

Revenue
Code
0250
0251
0252
0254
0255
0257
0258
0259
0260
0261
0262
0263
0264
0269
0270
0271
0272
0275
0276
0278
0279
0280
0289
0343
0344
0370
0371
0372
0379

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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 Medicare administrative
contractor (MAC) was required to
allocate the sum of charges for services

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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.

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We proposed to continue these
processes for the CY 2014 OPPS.
For the remaining claims, we
proposed to then standardize 60 percent
of the costs of the claim (which we have
previously determined to be the laborrelated 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

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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 proposed to use the
pre-reclassified wage indices for
standardization because we believe 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 119 million claims were
left. Using these approximately 119
million claims, we created
approximately 125 million single and
‘‘pseudo’’ single procedure claims, of
which we used approximately 124
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 2014 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 calculated the APC
relative payment weights using
geometric mean costs, and we do the
same for CY 2014. 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 2014 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.
We proposed to use these claims to
calculate the CY 2014 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

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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, in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68270), as part of the CY
2013 policy to develop the OPPS
relative payment weights based on
geometric mean costs, we also applied
the 2 times rule based on geometric
mean costs. For the CY 2014 OPPS, we
are continuing to develop the APC
relative payment weights based on
geometric mean costs.
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 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 124 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
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
proposed CY 2014 policy to continue 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 median-based 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.
The APC geometric means were

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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: Several commenters
remarked on the quality of the data and
the degree to which technical errors
caused modeling problems throughout
the rest of the system. These
commenters believed that CMS did not
provide adequate data to allow hospitals
to assess the impact of the major
revisions. Commenters also commented
on the complexity inherently in the
payment system and increased by the
many interactions between various
proposed and existing policies. These
commenters remarked that CMS had not
fully explained the impacts of each
proposal in a manner that would allow
stakeholders to provide meaningful
input. Based on the assertions about a
lack of transparency, impact analysis,
guidance on how rates were developed,
policy details, technical errors, etc.,
commenters suggested that those
proposals be delayed until more
accurate and detailed information was
available. Other commenters stated that
CMS had ignored previous HOP Panel
suggestions on analyzing the impact of
expanded packaging policies, and
believed that the potential for
unintended downstream consequences
existed.
Response: We appreciate the
commenters’ concerns with regards to
the complexity of modeling the OPPS.
There are many interactions between
the various goals and pieces of the
payment system. For example, as
discussed in section II.A.1.b. of this
final rule with comment period, the goal
of extracting more data from the
available claims through the bypass list
process is also balanced by the impact
of any packaged costs that may be
redistributed as a result of that data
process. In developing the CY 2014
OPPS/ASC proposed rule, we strived to
provide as accurate information as
possible with regard to the calculated
rates. We discovered that, in the process
of applying established and proposed
methodologies to develop the CY 2014
proposed OPPS and ASC payment rates,
specific cost estimation errors occurred
in the OPPS modeling process. We
released corrected data files on August
28, 2013, and extended the comment
period to September 16, 2013, on the
technical corrections noted in the
correcting document published in the
Federal Register on September 6, 2013
(78 FR 54842). While, in a budget
neutral system, changes to any OPPS

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relative payment weights have
redistributional effects throughout the
system, any policy change or data
update has the potential to do the same.
Therefore, the technical corrections
described in the correcting document
were made to address issues where the
calculated payment rates were not
appropriately reflective of the proposed
policies. While, as discussed in the
correcting document to the CY 2014
OPPS/ASC proposed rule, new
proposed visit APC 0634 contained a
technical error that excluded certain
packaged costs from the APC, the fact
that we proposed to use APC 0634 as
the baseline APC for scaling the
aggregate CY 2014 OPPS weight for
budget neutrality, did not distort the
relativity of the OPPS payment weights.
As discussed in section II.A.4. of this
final rule with comment period, the
selection of the base APC or any other
number, from which to establish the
relative payment weights, does not have
an impact because OPPS weights are
scaled for budget neutrality.
With regard to the adequacy of
available data, each year, CMS makes
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 display of the proposed and final
rules. In addition, 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, we
believe commenters 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 their 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 geometric mean cost for
every independent service. However,
commenters 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

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code-specific data analysis on packaged
and separately paid codes using the data
from this and prior proposed and final
rules. Among the public comments
received in response to the CY 2014
OPPS/ASC proposed rule, we received
many detailed public comments that
included data analysis.
We disagree that the CY 2014 OPPS
policy proposals should be delayed as a
result of the data concerns that
commenters have raised. While we are
sympathetic to the challenges that have
been described, we develop policy and
model the OPPS payment rates under
those same constraints. In general, we
have tried to limit the changes beyond
the current year OPPS with regards to
data modeling, so that little additional
logic changes would be necessary and
would instead be built off existing
processes. While we continuously
examine ways in which the data process
could be simplified or made clearer, we
also welcome and appreciate public
comment with regards to potential
improvements. Similarly, we appreciate
the meaningful comments that
stakeholders provide regarding ways
that the cost modeling process could be
more accurate or methods to extract
more appropriate data from the claims
available for OPPS cost modeling.
The technical errors described in the
correcting document published in the
Federal Register on September 6, 2013
(78 FR 54842) were generally isolated to
specific policy areas and did not
substantively affect the proposed
policies described in the CY 2014
OPPS/ASC proposed rule. The
correcting document merely corrected
the underlying data errors to conform to
the proposed policies clearly intended
in the preamble of the proposed rule.
As commenters have described,
modeling the OPPS payment rates can
sometimes be a complex undertaking.
We have tried to alleviate some of those
concerns about the complexity and
transparency of the OPPS cost modeling
process by having an extensive
discussion of the data process in the
preamble discussion, through providing
code lists, isolating the impacts of
certain proposals in the regulatory
impact analysis, and providing a claims
accounting with documented claims
volume throughout each stage of the
process. Commenters have stated that
CMS has not provided data regarding
packaging policies to the Advisory
Panel on Hospital Outpatient Payment
(referred to in this document as the
Panel). However, in the CY 2009 OPPS/
ASC final rule with comment period (73
FR 68573), the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60409
through 60412), the CY 2011 OPPS/ASC

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final rule with comment period (75 FR
71682 through 71868), the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74184 through 74185),
and the CY 2013 OPPS/ASC final rule
final rule with comment period (77 FR
68273 through 68274), we describe
various data analyses we have provided
to the Panel based on its
recommendations.
After consideration of the public
comments we received, we are
finalizing our proposed CY 2014
methodology for calculating the
geometric mean costs upon which the
CY 2014 OPPS payment rates are based.
As we discuss in sections II.A.2.d.,
II.A.2.f., and 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.f.
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 Panel
Regarding Data Development
At the August 2013 meeting of the
Panel, we discussed the claims
accounting process for the CY 2014
OPPS proposed rule, the proposed
adoption of the new standard cost
centers for CT, MRI, and cardiac
catheterization in the new Medicare cost
report Form CMS–2552–10, as well as
the CY 2014 OPPS policy of calculating
OPPS relative payment weights using
geometric mean costs.
At the August 2013 Panel meeting, the
Panel made a number of
recommendations related to the data
process. The Panel’s data-related
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 John Marshall, C.R.A.,
R.C.C, R.T., serve as chair of the Data
Subcommittee.
CMS Response: We are accepting this
recommendation.
In addition, the Panel requested that
CMS provide additional information
about the impacts of certain CY 2014
policy proposals at the 2014 spring

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meeting. Depending upon the CY 2014
final policy decisions, we will consider
providing additional relevant
information to the Panel at the Spring
2014 Panel meeting.

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d. Calculation of Single Procedure APC
Criteria-Based Costs
(1) Device-Dependent APCs
Historically, 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. The standard
methodology for calculating devicedependent APC costs utilizes claims
data that generally reflect the full cost
of the required device by using only the
subset of single procedure claims that
pass the procedure-to-device and
device-to-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. 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 device-dependent 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-to-device edits and device-toprocedure edits used in ratesetting for
device-dependent 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 2014 OPPS/ASC proposed
rule (78 FR 43558 through 43561), for
CY 2014, we proposed in section
II.A.2.e. to define 29 device-dependent
APCs as single complete services and to
assign them to comprehensive APCs
that would provide all-inclusive
payments for those services. As we
explained in that section, we proposed
this policy as a further step to improve
the accuracy and transparency of our
payments for these services where the
cost of the device is large compared to
the other costs that contribute to the
cost of the service. Table 5 of the
proposed rule provided a list of the 39
APCs currently recognized as devicedependent APCs and identified those 29
APCs that we proposed to include in the
comprehensive APCs proposal (78 FR
43557). We proposed to treat the
remaining 10 device-dependent APCs

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by applying our standard APC
ratesetting methodology to calculate
their CY 2014 payment rates. We
initially adopted a specific devicedependent APC ratesetting methodology
because commenters had previously
expressed concerns that the costs
associated with certain high-cost
devices were not always being
accurately reported and included in the
calculation of relative payment weights
for the associated procedures. As we
stated in the proposed rule, we do not
believe that it is necessary to continue
to apply the more specific devicedependent APC ratesetting methodology
to ensure accurate ratesetting for the 10
APCs that were not included in the
comprehensive APCs proposal because
hospitals now have had several years of
experience reporting procedures
involving implantable devices and have
grown accustomed to ensuring that they
code and report charges so that their
claims fully and appropriately reflect
the costs of those devices. Therefore, we
believe that it is possible to calculate the
payment rates for these APCs using our
standard APC ratesetting methodology
(78 FR 43556).
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43556 through 43557),
beginning in CY 2014, we also proposed
to no longer implement procedure-todevice edits and device-to-procedure
edits for any APCs. We explained that,
under this proposal, hospitals would
still be expected to adhere to the
guidelines of correct coding and append
the correct device code to the claim
when applicable. However, claims
would no longer be returned to
providers when specific procedure and
device code pairings do not appear on
a claim. We stated that we believe that
this is appropriate because of the
experience hospitals now have had in
coding and reporting these claims fully
and because, for the more costly
devices, the proposed comprehensive
APCs would reliably reflect the cost of
the device if it is included anywhere on
the claim. Therefore, we do not believe
that the burden on hospitals of adhering
to the procedure-to-device edits and
device-to-procedure edits, and the
burden on the Medicare program of
maintaining those edits, continue to be
warranted. As with all other items and
services recognized under the OPPS, we
expect hospitals to code and report their
costs appropriately, regardless of
whether there are claims processing
edits in place.
Comment: Commenters urged CMS
not to finalize its proposal to eliminate
device-to-procedure edits and
procedure-to-device edits in order to
ensure continued complete and accurate

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74857

cost reporting by hospitals. In addition,
one commenter requested that CMS, if
it elects to delete these edits, commit to
only using complete and correctly
coded claims from CY 2014 for the CY
2016 ratesetting process. Some
commenters, while supporting
elimination of the contractor edits,
opposed dropping the use of the edit
criteria when selecting the set of claims
to be used to calculate the geometric
mean costs of services. One commenter
requested that CMS remove APC 0648
from the list of device-dependent APCs.
Response: We continue to believe that
the elimination of device-to-procedure
edits and procedure-to-device edits is
appropriate due to the experience
hospitals now have in coding and
reporting these claims fully and
because, for the more costly devices, the
proposed comprehensive APCs would
reliably reflect the cost of the device if
it is included anywhere on the claim.
We remind commenters that, under our
proposed policy, hospitals would still
be expected to adhere to the guidelines
of correct coding and append the correct
device code to the claim when
applicable. As with all other items and
services recognized under the OPPS, we
expect hospitals to code and report their
costs appropriately, regardless of
whether there are claims processing
edits in place. We expect the CY 2014
claims that we will use for the CY 2016
ratesetting to reflect this correct coding
and cost reporting. While we believe
that device-to-procedure edits and
procedure-to-device edits are no longer
necessary at this time, we are sensitive
to the commenters’ concerns that all
relevant costs for the 39 APCs currently
recognized as device-dependent APCs
are appropriately included in the claims
that CMS will use for ratesetting. In
light of those concerns, we are further
assessing whether we need to continue
claims processing edits requiring a
device code to be on the claim under the
comprehensive APCs in CY 2015.
We believe that APC 0648 is
appropriately included in the current
list of device-dependent APCs, as APC
0648 is populated by HCPCS codes that
usually, but not always, require that a
device be implanted or used to perform
the procedure.
After consideration of the public
comments we received, and in
conjunction with our finalized
comprehensive APC policy, which is
fully discussed in section II.A.2.e. of
this final rule with comment period, we
are finalizing our proposal to no longer
apply the current device-dependent
APC ratesetting methodology to the 10
currently recognized device-dependent
APCs not included in the

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comprehensive APC proposal and apply
our standard APC ratesetting
methodology to calculate their payment
rates, but delaying the implementation
of this finalized policy until CY 2015.
For CY 2014, we will continue to apply

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the current device-dependent APC
ratesetting methodology to the 39
currently recognized device-dependent
APCs.
Table 7 below provides a list of the 39
APCs currently recognized as device-

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dependent APCs for CY 2014 and
identifies those 29 APCs that we are
including in the finalized
comprehensive APCs policy for CY
2015.

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TABLE 7.-APCs CURRENTLY RECOGNIZED AS DEVICE-DEPENDENT
APCs
APC

0039*
0040*
0061*
0082*
0083*

0656*
0674*
0680*
0687

*Denotes comprehenslVe APC for CY 2015.

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0084
0085*
0086
0089*
0090*
0104*
0106*
0107*
0108*
0115
0202*
0227*
0229*
0259*
0293*
0315*
0318*
0319*
0384
0385*
0386*
0425*
0427
0622
0623
0648*
0652
0653
0654*
0655*

APC Title
Level I Implantation ofNeurostimulator Generator
Level I ImplantationlRevision/Replacement of N eurostimulator Electrodes
Level II Implantation/Revision/Replacement ofNeurostimulator Electrodes
Coronary or Non-Coronary Atherectomy
Coronary Angioplasty, Valvuloplasty, and Level I Endovascular
Revascularization
Level I Electrophysiologic Procedures
Level II Electrophysiologic Procedures
Level III Electrophysiologic Procedures
InsertionlReplacement of Permanent Pacemaker and Electrodes
Level I Insertion/Replacement of Permanent Pacemaker
Transcatheter Placement of Intracoronary Stents
InsertionlReplacement of Pacemaker Leads and/or Electrodes
Level I Implantation ofCardioverter-Defibrillators (ICDs)
Level II Implantation ofCardioverter-Defibrillators (ICDs)
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 VI Anterior Segment Eye Procedures
Level II Implantation ofNeurostimulator Generator
Implantation of Neurostimulator 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
Level II Tube or Catheter Changes or Repositioning
Level II Vascular Access Procedures
Level III Vascular Access Procedures
Level IV Breast Surgery
Insertion of Intraperitoneal and Pleural Catheters
Vascular Reconstruction/Fistula Repair with Device
Level II Insertion/Replacement of Permanent Pacemaker
InsertionlReplacement/Conversion of a Permanent Dual Chamber
Pacemaker or Pacing
Transcatheter Placement of Intracoronary Drug-Eluting Stents
Prostate Cryoablation
Insertion of Patient Activated Event Recorders
RevisionlRemoval of N eurostimulator Electrodes

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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 2014 OPPS/ASC proposed
rule (78 FR 43557), for CY 2014, we
proposed 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. 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.
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 stated that we
calculated the costs upon which the
proposed CY 2014 payment rates for
blood and blood products are based
using the actual blood-specific CCR for
hospitals that reported costs and charges
for a blood cost center and a hospitalspecific simulated blood-specific CCR
for hospitals that did not report costs
and charges for a blood cost center.
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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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 believe
that it yields more accurate estimated
costs for these products. We continue to
believe that this methodology in CY
2014 would 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 did not receive any public
comments on this proposal. Therefore,
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
2014. We continue to believe that this
methodology in CY 2014 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 note that, as discussed in section
II.A.2.e. of this final rule with comment
period, we are establishing
comprehensive APCs that will provide
all-inclusive payments for certain
device-dependent procedures. Under
this policy, we will include the costs of
blood and blood products when
calculating the overall costs of these
comprehensive APCs. We note that we
will continue to apply the bloodspecific CCR methodology described in
this section when calculating the costs
of the blood and blood products that
appear on claims with services assigned
to the comprehensive APCs. Because the
costs of blood and blood products will
be reflected in the overall costs of the
comprehensive APCs (and, as a result,
in the payment rates of the
comprehensive APCs), we will not make
separate payments for blood and blood
products when they appear on the same
claims as services assigned to the
comprehensive APCs.
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 CY 2014
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

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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 Source Payment
Section 1833(t)(2)(H) of the Act
provides that the Secretary shall create
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, in a manner that reflects the
number, isotope, and radioactive
intensity of the brachytherapy sources
furnished and must include separate
groups for palladium-103 and iodine125 sources, and for stranded and nonstranded devices furnished on or after
July 1, 2007. In the CY 2010 OPPS/ASC
final rule with comment period (74 FR
60533 through 60537), we adopted for
CY 2010 the general OPPS prospective
payment methodology for
brachytherapy sources, consistent with
section 1833(t)(2)(C) of the Act, with
payment rates based on source-specific
costs, which has been utilized for each
year’s brachytherapy source payment
since CY 2010 (74 FR 60537; 75 FR
71980; 76 FR 74162; 77 FR 68242). As
we have previously stated, we believe
that adoption of the general OPPS
prospective payment methodology for
brachytherapy sources is appropriate
(77 FR 68240).
Comment: Commenters expressed
concern regarding CMS’ brachytherapy
source data and stated that there are
longstanding problems with CMS’ OPPS
data used to set brachytherapy source
payment rates. Commenters also stated
that the brachytherapy source data
continue to show huge variation in per
unit costs across hospitals. Commenters
noted that high dose rate (HDR)
brachytherapy sources decay over a 90day period and are used to treat
multiple patients. Therefore, the
commenters believed that the true cost
of brachytherapy sources per use
depends on the number of patients
treated during the 90-day period, which
makes it difficult to establish fair and
adequate payment rates. Commenters
also believed that CMS’ claims data
contain rank order anomalies between
the high-activity palladium-103 source
(HCPCS code C2635) and the lowactivity palladium-103 sources (HCPCS
codes C2640 and C2641), and stated that
the high-activity palladium-103 source
always costs more than low-activity
palladium-103 sources.
Response: We believe that the claims
data used for brachytherapy ratesetting

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are adequate to ensure accurate payment
for these services. Also, as we have
stated in previous OPPS/ASC proposed
and final rules, 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 (72 FR 66782; 74 FR 60534;
75 FR 71979; 76 FR 74161; and 77 FR
68241). We have also explained in
previous OPPS/ASC proposed and final
rules that 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, and with the exception of
outlier cases, the prospective payment is
adequate to ensure access to appropriate
care (72 FR 66782; 74 FR 60535; 75 FR
71979; and 77 FR 68241). 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. In
addition, relative payment weights are
typically estimated using a smaller set
of claims.
As we have stated in previous OPPS/
ASC proposed and final rules, we agree
that HDR brachytherapy sources such as
HDR irirdium-192 have a fixed active
life and must be replaced every 90 days
(75 FR 71980; 76 FR 74162; and 77 FR
68242). 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, when 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
(72 FR 66783; 74 FR 60535; 75 FR
71980; 76 FR 74162; and 77 FR 68242).
For most of these OPPS services, our
practice is to establish prospective
payment rates based on the costs
determined from hospitals’ claims data
to provide incentives for efficient and
cost effective delivery of these services.
In the case of high-activity and lowactivity iodine-125 sources, our CY 2012
claims data show that the hospitals’
relative costs for the high-activity source
as reported on hospital claims and in

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cost report data are greater than the
costs of the low-activity sources, as we
have noticed in the past. However, this
relationship is reversed for palladium103 sources, as a few commenters
pointed out. As we have stated in the
past, we do not have any information
about the expected cost differential
between high-activity and low-activity
sources of various isotopes other than
what is available in our claims and
hospital cost report data (75 FR 71979;
76 FR 74162; and 77 FR 68242). For the
high-activity palladium-103 source,
only 7 hospitals reported this service in
CY 2012, compared to 118 and 171
hospitals for the low-activity palladium103 sources described by HCPCS codes
C2640 and C2641, respectively. As we
stated regarding this issue in the CYs
2010, 2011, 2012, and 2013 OPPS/ASC
final rules with comment period, it is
clear that fewer hospitals furnished the
high-activity palladium-103 source than
the 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 palladium-103 sources
(74 FR 60535; 75 FR 71979; 76 FR
74162; and 77 FR 68242).
After consideration of the public
comments we received, we are
finalizing our proposal to continue to
set the payment rates for brachytherapy
sources using our established
prospective payment methodology,
which is based on geometric mean costs.
The CY 2014 final payment rates for
brachytherapy sources are found in
Addendum B to this final rule with
comment period.
e. Establishment of Comprehensive
APCs
(1) Definition and General Principles
During the initial development of a
proposal for an outpatient prospective
payment system in 1998 (63 FR 47552
through 48036), we considered
developing the payment system based
on a comprehensive outpatient bundle,
as opposed to on a HCPCS component
level. In 2000, we implemented an
OPPS based generally on making
payments at the HCPCS level (65 FR
18434 through 18820). Since then,
however, we have been steadily moving
the OPPS towards a more
comprehensive approach that increases
flexibility and opportunity for
efficiencies in a prospective system.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43534), for CY 2014, we
proposed to create 29 comprehensive
APCs to replace 29 existing devicedependent APCs. We proposed to define

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a comprehensive APC as a classification
for the provision of a primary service
and all adjunctive services provided to
support the delivery of the primary
service. Because a comprehensive APC
would treat all individually reported
codes as representing components of the
comprehensive service, our proposal
was to make a single prospective
payment based on the cost of all
individually reported codes that
represent the provision of a primary
service and all adjunctive services
provided to support that delivery of the
primary service. Specifically, we
proposed to create comprehensive APCs
for the 29 most costly device-dependent
services, where the cost of the device is
more expensive than the other costs that
contribute to the cost of delivering the
primary service.
We stated in the proposed rule that
we believe that, under the authority of
sections 1833(t)(1) and (t)(2) of the Act,
the Secretary has the discretion to
establish comprehensive APCs as part of
developing the OPPS classification
system, and that this proposal furthers
our ongoing efforts to move the OPPS
towards a more comprehensive payment
system in support of our objectives to
increase flexibility and efficiencies.
The OPPS data we have accumulated
over the past decade have enabled us to
continue to address several
longstanding goals, including:
continuing to improve the validity of
our payments to most accurately reflect
costs; improving transparency and
reducing complexity and administrative
burden whenever possible; and
increasing flexibility for hospitals to
develop increased efficiencies in the
delivery of quality care.
We stated that we believe that this
proposal to establish comprehensive
APCs will improve our ability to
accurately set payment rates. In the
normal process of setting payment rates,
costs in certain cost centers (‘‘uncoded
costs’’) are added to the costs of services
reported with specific HCPCS codes
only when they can be reliably assigned
to a single service. Under the proposal,
the entire claim would be associated
with a single comprehensive service so
all costs reported on the claim may be
reliably assigned to that service. This
increases the accuracy of the payment
for the comprehensive service and also
increases the stability of the payment
from year to year.
We also stated that we believe that
our policy will enhance beneficiary
understanding and transparency.
Typically beneficiaries understand the
primary procedure to be the OPPS
service they receive, and do not
generally consider that the other HCPCS

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codes are separate services. For
example, beneficiaries believe that a
single service includes procedures such
as ‘‘getting my gall bladder removed’’ or
‘‘getting a pacemaker.’’ We believe that
defining certain services within the
OPPS in terms of a single
comprehensive service delivered to the
beneficiary improves transparency for
the beneficiary, for physicians, and for
hospitals by creating a common
reference point with a similar meaning
for all three groups and using the
comprehensive service concept that
already identifies these same services
when they are performed in an inpatient
environment.
Finally, we believe that larger bundles
that contain a wider mix of related
services in the prospectively paid
bundles increase the opportunities for
providers to tailor services to the
specific needs of individual
beneficiaries, thereby increasing the
opportunities for efficiencies and
improving the delivery of medical care.
Comment: Overall, commenters were
generally supportive of the concept of
creating larger payment bundles, but
were uncertain that they fully
understood the specifics of the proposed
comprehensive APC payment policy.
Commenters acknowledged many
potential advantages for hospitals, and
possibly also for beneficiaries in terms
of lower coinsurance payments and
increased transparency, as well as for
increased physician flexibility.
A few commenters fully endorsed the
proposal for CY 2014. For example,
MedPAC stated that it has long
supported CMS’ efforts to expand the
size of payment units in the OPPS and
supported this proposal, as well as other
packaging proposals in this final rule
with comment period. MedPAC stated
that the comprehensive APC groups
have similarities to the diagnosis related
groups (DRGs) used in the inpatient
prospective payment system (IPPS) and
that this payment structure encourages
hospitals to identify the most efficient
and efficacious methods to provide care
for each patient, which will help
contain Medicare spending. Another
commenter believed that the proposed
device-dependent APCs were
particularly appropriate for
comprehensive APCs because the
independent services that require these
devices are generally clearly defined
and the other services furnished during
the encounter are generally furnished in
order to facilitate the independent
service. The commenter supported the
ability of this proposal to use all claims
data in establishing a payment rate for
the comprehensive APC.

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Several commenters recommended a
more expansive policy. One commenter
recommended that CMS identify other
procedures that would be suitable for
the creation of comprehensive APCs.
Other commenters suggested that CMS
require hospitals to report charges for all
items and services for which
comprehensive APC payment is being
made as covered charges and specify
that hospitals may not charge
beneficiaries for these items and
services (because the copayment for the
APC constitutes the only beneficiary
cost sharing for the package of services).
Commenters also suggested that CMS
limit the national unadjusted payment
for each comprehensive APC under the
OPPS to no more than the standardized
DRG amount that would be paid for the
same service provided to an inpatient
without complications or comorbidities.
Response: We appreciate the support
of the commenters for our proposal to
create comprehensive packages. We
agree with the commenters that this
would improve our ability to more
accurately establish payment rates for
these services by enabling us to use all
claims for the primary service in a
comprehensive APC when establishing
payment for that APC. We appreciate
the commenters’ interest in identifying
other services that would be suitable for
the creation of comprehensive APCs, as
well as ways to consider setting
payment relative to the IPPS. We agree
with the commenters that hospitals
should report charges for all items and
services for which a comprehensive
APC payment is being made, and note
that it has been a longstanding
requirement as stated in the Claims
Processing Manual IOM 100–4, Chapter
4, Section. 10.4.A that hospitals must
report all services that were furnished
on an outpatient claim regardless of
whether or not those services are
separately paid, and that Medicare
providers may not separately bill
beneficiaries for services that are
covered under Medicare.
Comment: The majority of
commenters recommended that CMS
delay implementation of the
comprehensive APCs until CY 2015 or
later. While they generally supported
the idea of larger payment bundles,
commenters were concerned that they
could not verify the accuracy of the
proposed payments and urged CMS not
to implement these policies until the
agency has verified that its calculations
are accurate. Commenters asserted that
it has become increasingly difficult for
stakeholders to verify OPPS payment
rates because the complexity of the
modeling logic is far beyond other
payment systems that CMS administers,

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such as the IPPS. Some commenters
were concerned that they were not able
to replicate CMS’ calculations,
preventing independent analyses and
affecting their ability to develop
comments and alternative proposals.
Some commenters requested that CMS
provide stakeholders with additional
information about how estimated costs
for these APCs are being calculated for
CY 2014, and give stakeholders an
opportunity to comment on the
additional information provided.
Some commenters requested that
CMS provide individual impacts of each
proposed policy when proposing several
policies that have an interactive effect.
Several commenters stated that CMS’
packaging proposals discussed in
section II.A.3. of the proposed rule,
combined with this proposal to create
29 new comprehensive APCs, created a
complicated ‘‘layering’’ effect that made
their understanding of how final
estimated costs for proposed
comprehensive APCs would be
calculated a much more involved
process.
Finally, commenters recommended a
delayed implementation to allow
hospitals more time to assess the impact
of such a new payment approach on
their particular institution and to
consider how they may need to adjust
organizational processes. Commenters
also suggested that we might need more
time to implement revisions to our
claims processing systems.
Response: We agree with the
commenters that we should delay
implementation of the proposed
comprehensive APCs. As we discuss
later in this section, we are finalizing
our proposal to create 29 comprehensive
APCs with modification, but we are
delaying implementation and final
configuration of those comprehensive
APCs until CY 2015. We acknowledge
commenters’ concerns that this is a
complex proposal for a new payment
structure under the OPPS. We agree that
hospitals should have time to prepare
for a comprehensive payment structure,
and we also agree with the commenters
that a delay in implementation will
allow us more time to operationalize
changes necessary to process
comprehensive payments.
In response to public commenters’
requesting additional detail on our
calculation of the comprehensive APC
relative payment weights, we provide a
granular discussion of our methodology
for constructing the comprehensive APC
payment rates later in this section, as
well as the specific APC configurations
we would implement for CY 2014 if we
had not delayed implementation until
CY 2015. We also believe that the delay

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in implementation will give hospitals
more time to study the final
methodology for calculating APC
relative payment weights that we
discuss in this section for the
modification that recognizes resource
differences in complex and simple
versions of the same primary service.
We are taking advantage of the delay in
implementation and requesting
additional public comments on this
methodology.
With regard to the commenters’
concern that they could not fully model
the proposal, we provide all of the
information we would have used to
create APC relative payment weights for
CY 2014 using the CY 2012 claims data
to illustrate the final methodology
below. We believe that this will assist
interested parties in replicating our
methodology. We will recalibrate all of
the comprehensive APC relative
payment weights for CY 2015 using CY
2013 claims data consistent with our
annual recalibration of APC relative
payment weights to reflect the most
recently available claims and cost report
information in next year’s rulemaking
cycle. We discuss the limited
methodological errors that we
discovered in the proposed rule and
subsequent correcting document in
section II.A.3. of this final rule with
comment period.
With regard to the availability of
detailed impacts, we believe that a delay
in implementation until CY 2015 along
with the illustrations of the
methodology included in this section
will give stakeholders the requested
time to model this final policy and
assess the impact on their organization.
We will incorporate the proposed
payment rates for CY 2015
comprehensive APCs in our CY 2015
impact analysis in the CY 2015 OPPS/
ASC proposed rule.
Comment: Commenters were also
concerned that this proposal would
impose a significant administrative
burden on providers and that there is
not sufficient time for information
system technology vendors and
operational processes to adjust to the
new regulations or to allow hospitals
enough time to fully understand how
the proposals would affect their
outpatient finances, making hospital
budgeting for the upcoming year nearly
impossible. Moreover, several
commenters were concerned that
neither CMS nor its Medicare
Administrative Contractors (MACs)
would be prepared to implement the
proposed changes for CY 2014.
Other commenters believed that
providers are likely to have increased
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accurately separate claims for unrelated
services. One commenter recommended
that CMS make the necessary
operational changes to billing
instructions before moving forward with
its proposal, and implement the
proposed comprehensive APCs only
after the agency has used the new
billing instructions long enough to have
claims data that identify related services
for the purpose of defining a
comprehensive APC.
Response: This proposal does not
require any changes in provider coding
and billing practices, nor would we
expect providers to change their billing
and coding practices in response to a
change in payments. We do expect
providers to assess their delivery of
these comprehensive services in light of
internal organizational processes. As
previously stated, we are finalizing the
comprehensive APC proposal with
modification in this final rule with
comment period, but we are delaying
implementation of the finalized policy
until CY 2015. This will allow us
sufficient time to develop appropriate
claims processing systems protocols for
comprehensive APCs and to test those
new protocols prior to implementation.
Comment: Many commenters were
concerned that a comprehensive DRGlike payment would provide a single
payment for a wide range of cases
characterized by widely varying
complexity and widely varying costs.
Such a system could potentially
disadvantage hospitals willing to take
on the treatment of sicker, more
complex and costly cases while
rewarding those that handle less
complex and less costly cases. One
commenter was specifically concerned
that the level of payment was not
sufficient to support the higher level of
diagnostic testing and ancillary services
that occur at academic medical centers.
Another commenter stated that the costs
of these cases are relatively fixed when
they are dependent on one or more
expensive devices and hospitals can
either perform these complex
procedures at a loss or cease performing
them altogether, which has implications
for beneficiary access to care. One
commenter stated that hospitals have
only limited ability to reduce costs for
complex procedures and recommended
that CMS incorporate a ‘‘severity level’’
APC similar to the Medicare Severity
Diagnosis Related Group (MS–DRG)
system where there is a base DRG, a
complication or comorbidity DRG (CC
DRG), and a major complication or
comorbitity DRG (MCC DRG). In
adapting the concept to the APC
classification system, the commenter
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based on the included components, for
example, an ICD insertion
comprehensive APC and another higherweighted comprehensive APC for ICD
insertion with removal of previously
implanted device.
A few commenters believed that the
comprehensive payment may have
unintended consequences that could
include quality consequences, cost
consequences, and payment
consequences. Several commenters were
concerned that the quality of care could
suffer because the commenters believed
that there are currently no outcome
programs or measures in place, similar
to inpatient quality measures,
readmission reduction programs and
value based purchasing incentives, to
monitor the quality of care provided
under an encounter-based payment that
creates an incentive for hospitals to
improve delivery efficiency. The
commenters believed that inappropriate
attempts to garner additional profit
could lead to reduced access and lower
quality of health care services provided
in the hospital outpatient setting.
Several commenters were concerned
that there might be unintended
Medicare cost consequences if hospitals
split services and delayed ancillary
procedures until a subsequent
encounter. Some of these commenters
believed that the proposal should be
tested or evaluated through a
demonstration project or some other
appropriate mechanism before broader
introduction, while one commenter
objected to the CY 2014 implementation
because CMS had not proposed
mechanisms to retrospectively assess
the ramifications of these proposed
policy changes on patients. Finally, one
commenter opined that the proposal
does not conform the requirement under
section 1833(t)(2) of the Act that items
and services shall not be treated as
comparable with respect to the use of
resources if the highest mean cost for an
item or service is more than 2 times
greater than the lowest mean cost.
Response: We agree with the
commenters that there is wide spread
variation in the comprehensive costs of
individual claims within each primary
procedure, and we further agree with
the commenters that we do not want to
financially disadvantage hospitals that
treat beneficiaries who require more
complex and costly procedures. We also
understand that complex beneficiaries
may require more diagnostic tests. We
agree with the commenters that there
are constraints on individual hospitals’
ability to reduce costs associated with
complex procedures, and we agree with
the commenters who recommended
recognizing the level of resources

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associated with more complex forms of
a procedure not unlike the severity
levels used in the IPPS. Therefore, we
are modifying our proposed policy for
creating comprehensive APCs to
recognize variation in the complexity of
services that will be paid through
comprehensive APCs for CY 2015.
We do not believe that there is any
issue with 2 times rule violations in the
proposed rule or in this final rule with
comment period. The statute directs the
Secretary to establish groups of covered
OPD services that are comparable both
clinically and with respect to use of
resources. In doing so, the statute
requires the Secretary to compare the
mean cost of items and services within
a group and ensure that the highest
mean cost item or service is no more
than 2 times greater than the lowest
mean cost item or service within a
group (2 times rule). With respect to
each proposed comprehensive APC, no
2 times rule violations were observed.
However, as noted above, we do observe
widespread variation within the
comprehensive costs of primary
services. As we discuss below in more
detail, our final policy recognizes
differences in complexity and resource
costs of complex forms of the primary
service to address variation within the
comprehensive costs of individual
primary procedures.
Commenters raised concerns about
quality decreases because of economic
pressures, and access issues because of
a reluctance of facilities to provide these
device-intensive procedures to certain
beneficiaries if the expected costs for
complex cases would greatly exceed the
comprehensive APC payment. We note
that these same concerns were raised
with the introduction of both the IPPS
and the OPPS, but that claims data
continue to show that hospitals
continue to provide complex services to
beneficiaries. We believe that hospitals
understand that there will be
considerable variation in the costs of
providing a comprehensive primary
service to individual beneficiaries
relative to the comprehensive payment
amount.
We disagree with the commenters on
the need for greater outcomes measures
prior to implementation of the
comprehensive APC payment policy. As
noted, in this final rule with comment
period, we are recognizing the resource
differential for complex forms of
primary procedures. Further, we believe
that outpatient procedures, such as
these device-intensive procedures, that
are also performed on an inpatient basis
benefit from hospital protocols
established for inpatient hospital quality
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readmission reduction programs, and
value-based purchasing incentives.
Therefore, we do not agree with the
commenters who were concerned that
patient care might suffer or that quality
measures need to be strengthened before
implementation of the comprehensive
APC policy.
We are concerned by some of the
comments that imply that some
providers might change their practice of
providing a comprehensive service and
instead perform split or staged
procedures in order to maximize
payment. Although we do not believe
that practitioners or facilities would
voluntarily expose beneficiaries to an
increased risk of additional surgery and
anesthesia, we recognize that payment
can influence behavior. When we
implement the finalized comprehensive
APC policy in CY 2015, we will closely
monitor billing patterns for split or
staged procedures and consider claims
processing edits or other approaches to
ensure that our prospective payments
uniformly apply to complete services, if
necessary.
With regard to the commenters’
request for evaluation under a
demonstration project before full
implementation, we do not believe that
comprehensive APCs are sufficiently
different from our historical hospital
payment practices to warrant a
demonstration project. Further, we are
adopting the proposed policy with
modification and are delaying
implementation of the comprehensive
APC policy until CY 2015 in this final
rule with comment period to the public
to allow us and the public time to
transition to this new payment
approach.
(2) Comprehensive APCs for DeviceDependent Services
(a) Identification of High-Cost DeviceDependent Procedures
As we discussed in the CY 2014
OPPS/ASC proposed rule, in order to
identify those services for which
comprehensive packaging would have
the greatest impact on cost validity,
payment accuracy, beneficiary
transparency, and hospital efficiency,
we ranked all APCs by CY 2012 costs
and then identified 29 devicedependent APCs where we believe that
the device-dependent APC is
characterized by a costly primary
service with relatively small cost
contributions from adjunctive services.
Comment: Several commenters asked
for additional information on the
criteria utilized by CMS to create the
comprehensive APCs and how CMS
would evaluate services and procedures

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to qualify for comprehensive APCs
going forward. One commenter asked
why the other 10 device-dependent
APCs were not included, and why no
other nondevice-dependent APCs were
classified as a comprehensive APC.
Another commenter recommended that
CMS consider the comprehensive
approach for a smaller number of APCs
(four or five), while other commenters
recommended that additional APCs be
paid as comprehensive APCs, including
recommendations for a broader
application of the comprehensive APC
criteria to all claims dominated by a
single procedure and specifically
recommended procedures such as those
assigned to APC 0067 (Stereotactic
Radiosurgery).
Response: As we stated in the
proposed rule, we initially proposed a
subset of device-dependent APCs for
conversion to comprehensive APCs
because we believed that these
procedures represented a cohesive
subgroup with which to introduce a
broader packaging initiative. We stated
that comprehensive APCs are
appropriate when they reflect a single
global service that the beneficiary would
be receiving from the hospital. In this
case, we have identified procedures
where the beneficiary would reasonably
consider the encounter to be for the
implantation of a device, and we limited
our proposal to the most costly
procedures where the geometric mean
cost of the comprehensive procedure
was approximately five times the
current beneficiary inpatient deductible
or greater. This created a consistent
group of services with similar clinical
and resource characteristics, which
were archetypal for our definition of a
comprehensive service.
However, we agree with the
commenters that there is no reason that
comprehensive payments could not be
extended in future years to other
procedures. In addition, we do not agree
with the commenters that we should
limit the comprehensive APCs to a
small trial of four or five APCs. We are
adopting the proposed policy with
modification and are delaying
implementation of the comprehensive
APC policy until CY 2015 in this final
rule with comment period to the public
to allow us and the public time to
transition to this new payment
approach. We believe that the identified
subgroup of device-related APCs is
clinically cohesive and similar in
resource construction. We will consider
possibly adding a comprehensive APC
for single session cranial stereotactic
radiosurgery (procedures assigned to
APC 0067) in CY 2015.

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(b) Creation of Comprehensive APCs for
Certain Device-Dependent Procedures
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43534), for CY 2014, we
proposed to create 29 comprehensive
APCs to prospectively pay for devicedependent services associated with 136
HCPCS codes. We proposed to base the
single all-inclusive comprehensive APC
payment on all outpatient charges
reported on the claim, excluding only
charges that cannot be covered by
Medicare Part B or that are not payable
under the OPPS. This comprehensive
APC payment would include: (1)
packaged payment for all packaged
services and supplies in CY 2014 and as
discussed in section II.A.3. of this final
rule with comment period; and (2)
packaged payment for all adjunctive
services, which are those services and
supplies that typically would receive
separate payment when appearing on
any claim that does not contain a
HCPCS code reported as a primary
service assigned to a comprehensive
APC, including certain items and
services currently paid through other fee
schedules. We present these two
categories for ease of presentation, but
generally consider both sets of services
to be ‘‘adjunctive’’ in that they are
integral and ancillary to, supportive of,
and dependent on the primary
procedure. Therefore, we consider all
outpatient services on a comprehensive
APC claim to be adjunctive to the
primary service with a few exceptions,
such as mammography services and
ambulance services, which are never
payable as hospital outpatient services
in accordance with section
1833(t)(1)(B)(iv) of the Act;
brachytherapy seeds, which must
receive separate payment under section
1833(t)(2)(H) of the Act; and passthrough drugs and devices, which also
require separate payment under section
1833(t)(6) of the Act.

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(3) Inclusion of Otherwise Packaged
Services and Supplies
As part of the comprehensive APCs,
we proposed to package all services that
are packaged in CY 2013, and all
services proposed for unconditional or
conditional packaging for CY 2014.
We did not receive any separate
public comments on this proposal
outside of the public comments we
received on our proposal to create
comprehensive APCs for CY 2014
(which final policy with modification,
we are delaying implementation until
CY 2015) discussed in section II.A.3. of
this final rule with comment period.

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(4) Inclusion of Adjunctive Services
We previously noted in section
II.A.3.a. of the proposed rule that it has
been a goal of the OPPS to package
services that are typically integral,
ancillary, supportive, dependent, or
adjunctive to a primary service. We
proposed to package into the
comprehensive APCs all of these
integral, ancillary, supportive,
dependent, and adjunctive services,
hereinafter collectively referred to as
‘‘adjunctive services,’’ provided during
the delivery of the comprehensive
service. This includes the diagnostic
procedures, laboratory tests and other
diagnostic tests, and treatments that
assist in the delivery of the primary
procedure; visits and evaluations
performed in association with the
procedure; uncoded services and
supplies used during the service;
outpatient department services
delivered by therapists as part of the
comprehensive service; durable medical
equipment as well as prosthetic and
orthotic items and supplies when
provided as part of the outpatient
service; and any other components
reported by HCPCS codes that are
provided during the comprehensive
service, except for mammography
services and ambulance services, which
are never payable as OPD services in
accordance with section
1833(t)(1)(B)(iv) of the Act.
Comment: Several commenters
expressed concerns regarding the
packaging of unrelated services reported
on the claim. Given that a single claim
can span multiple days, a few
commenters believed that under current
billing instructions this proposal would
arbitrarily package all services occurring
within a 30-day or 60-day period.
Currently, there is no means on
outpatient claims to differentiate
between adjunct services that are related
to the primary procedure and other
services that are ordered by other
physicians and/or are unrelated to the
primary procedure. These commenters
were concerned that if CMS assumed
that all services reported on the claim
are related, it could lead to incorrect
ratesetting. Alternatively, these
commenters reasoned that if CMS
revised billing instructions to allow all
unrelated services (not merely labs) to
be billed on separate claims, hospitals
would need to change their billing
systems to bill separately for unrelated
services and would experience
significant administrative burden
separating unrelated from related items
and services.
Response: We do not agree with the
commenters’ assertions that a significant

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amount of unrelated services would be
billed on the claim for the primary
service. We note that most commenters
were concerned about unrelated
services reported on claims spanning 30
days. We remind hospitals that we have
previously issued manual guidance in
the Internet Only Manual at 100–4,
Chapter 1, Section 50.2.2 that only
recurring services should be billed
monthly. Moreover, we have further
specified that in the event that a
recurring service occurs on the same
day as an acute service that falls within
the span of the recurring service claim,
hospitals should bill separately for
recurring services on a monthly claim
(repetitive billing) and submit a separate
claim for the acute service. We also do
not expect that these claims for
comprehensive services in the
outpatient setting would extend beyond
a few days.
Additionally, we have noted that
occasionally beneficiaries may, for
reasons of convenience or coincidence,
receive laboratory services at the
hospital that are unrelated to the
primary service. When beneficiaries are
at the hospital for the non-trivial
procedures in comprehensive APCs, we
do not expect that unrelated laboratory
services would be a common
occurrence, but we have nonetheless
instructed hospitals that laboratory tests
ordered by unrelated providers for
unrelated medical conditions may be
billed on a 14X bill-type. We refer
readers to section II.A.3.c.(3) of this
final rule with comment period for more
discussion of this final policy.
Beyond these two sets of
circumstances, we believe that other
services performed at the time of these
major procedures can reasonably be
considered to be related to the primary
service or procedure. We proposed that
we would consider all services reported
on the claim to be related to the primary
service. Under such a presumption, all
services delivered to a beneficiary
during an encounter for a
comprehensive procedure would be
included in establishing the payment
rate for the comprehensive APC. As we
are including all adjunctive services in
the comprehensive APC calculation,
hospitals would not need to look for
unrelated services. We considered all
covered costs when calculating the
comprehensive APC payment as is done
with IPPS DRGs. As previously noted,
hospitals would continue to code and
bill for these services in the same way
that they currently code and bill.
Comment: One commenter asked that
CMS modify the proposal by
specifically excluding clinical
diagnostic laboratory tests and the

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facility component of anatomic
pathology procedures from
comprehensive APC payment for the
same reasons that other commenters
believed that these services should not
be packaged as part of our general
packaging proposals.
Response: We do not agree with this
commenter that laboratory and the
facility component of anatomic
pathology procedures should be
excluded from the comprehensive APC
payment. We are finalizing our other
proposed policy to package laboratory
tests, as described in section II.A.3.c.(3)
of this final rule with comment period.
We note that laboratory and anatomic
pathology tests are almost always
performed as part of the provision of the
primary service in the case of these
comprehensive services and are,
therefore, appropriately considered
ancillary and supportive. In summary,
we believe that these device-dependent
procedures represent archetypal cases of
a single comprehensive service and that
laboratory and anatomic pathology
services are classic examples of
adjunctive services that are supportive
of the primary procedure.
(5) Inclusion of Devices, Durable
Medical Equipment, Prosthetics,
Orthotics and Supplies (DMEPOS)
As part of the comprehensive service
packaging policy described above, we
proposed to package all devices;
implantable durable medical equipment
(DME); implantable prosthetics; DME,
prosthetics, and orthotics when used as
supplies in the delivery of the
comprehensive service; and supplies
used in support of these items when
these items or supplies are provided as
part of the delivery of a comprehensive
service. We have a longstanding policy
of providing payment under the OPPS
for implantable DME, implantable
prosthetics, and medical and surgical
supplies, as provided at sections
1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the
Act and 42 CFR 419.2(b)(4), (b)(10), and
(b)(11). Under this proposal, DME,
prosthetics, and orthotics, when used as
supplies in the delivery of the
comprehensive service, would be
covered OPD services as provided under
section 1833(t)(1)(B)(i) of the Act and
§ 419.2(b)(4) of the regulations. Under
this proposal, we believe that when
such items and services are provided as
adjunctive components in the delivery
of a comprehensive service, such items
are appropriate for coverage under the
OPPS as covered OPD services, and for
payment under the OPPS. We noted
that, at other times, such items when
not provided as adjunctive components
in the delivery of a comprehensive

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service would not constitute covered
OPD services, and such items would be
appropriately provided by suppliers and
paid for under the DMEPOS benefit.
More specifically, we do not believe that
this proposed policy limits a hospital’s
ability to function as a DMEPOS
supplier and bill DMEPOS items to the
DME–MAC when those items are
unrelated to the outpatient procedure
and provided outside of the delivery of
the comprehensive service.
In summary, we proposed to consider
all DMEPOS items to be covered
hospital outpatient department services
and to be adjunctive to the primary
service when they are delivered during
the comprehensive service, as described
above and, therefore, proposed to
package such items into the applicable
comprehensive service. This policy
includes any items described by codes
that are otherwise covered and paid
separately in accordance with the
payment rules for DMEPOS items and
services, and applies to those items
when they are provided as part of the
delivery of the comprehensive service.
Under this proposal, when such items
are provided during the delivery of a
comprehensive service, we proposed
that they are covered OPD services as
provided under sections 1833(t)(1)(B)(i)
and (t)(1)(B)(iii) of the Act and
§§ 419.2(b)(4), (b)(10), and (b)(11) of the
regulations, and payable under the
OPPS, as described above.
We did not receive any public
comments on our proposal to include
these DMEPOS items in the
comprehensive APC payment. We did
receive public comments on the impact
of these new items on budget neutrality,
which we discuss below, and comments
on how DMEPOS items impact APC
0227 (Implantation of Drug Infusion
Device), which we discuss in greater
detail later in this section.
(6) Inclusion of OPD Services Reported
by Therapy Codes
Generally, section 1833(t)(1)(B)(4) of
the Act excludes therapy services from
the OPPS. We have previously noted
that therapy services are those provided
by therapists under a plan of care, and
are paid under section 1834(k) of the
Act subject to an annual therapy cap,
when applied. However, certain other
activities similar to therapy services are
considered and paid as outpatient
services. Although some adjunctive
services may be provided by therapists
and reported with therapy codes, we do
not believe that these services always
constitute therapy services. In the case
of adjunctive components of a
comprehensive service that are
described by codes that would, under

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other circumstances, be indicative of
therapy services, we note that there are
a number of factors that would more
appropriately identify them as OPD
services. These services are not
independent services, but are delivered
as an integral part of the OPD service on
the order of the physician who is
providing the service; they are not
typically provided under an established
plan of care, but on a direct physician
order; they may be performed by
nontherapists; and they frequently do
not contribute to a rehabilitative
process. For example, we note that
therapists might be asked to provide a
detailed documentation of patient
weaknesses to be used by the physician
to help identify or quantify a possible
procedure-associated stroke or help
with the mobilization of the patient after
surgery in order to prevent blood clots.
We note that these nontherapy services
furnished by a therapist are limited to
the immediate perioperative period,
consistent with their inclusion as part of
the larger service to deliver the device,
and are distinct from subsequent
therapy services furnished under a
therapy plan of care, which serve to
establish rehabilitative needs and begin
the process of rehabilitation.
For that reason, when provided
within this very limited context of a
comprehensive service such as the
implantation of an expensive device, in
the CY 2014 OPPS/ASC proposed rule
(78 FR 43534), we proposed that
services reported by therapy HCPCS
codes, including costs associated with
revenue codes 042X, 043X and 044X
would be considered to be adjunctive
OPD services in support of the primary
service when those services occur
within the perioperative period; that is,
during the delivery of this
comprehensive service that is bracketed
by the OPD registration to initiate the
service and the OPD discharge at the
conclusion of the service. These services
do not constitute therapy services
provided under a plan of care, are not
subject to a therapy cap, if applied, and
are not paid separately as therapy
services.
Comment: Physical therapy
stakeholders commented that they were
concerned about the effect this proposal
may have on necessary physical therapy
services that are provided in
conjunction with these proposed 29
APCs and any comprehensive APCs that
may be added in the future. The
commenter stated that, generally,
section 1833(t)(1)(B)(4) of the Act
excludes therapy services from the
OPPS. The commenter further stated
that, instead, the majority of therapy
services in the hospital setting are

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provided by therapists under a plan of
care, and are paid under the physician
fee schedule (we refer readers to section
1834(k) of the Act). However, the
commenter acknowledged that there is a
subset of services designated as
‘‘sometimes therapy’’ services that are
paid under the OPPS when they are not
furnished as therapy under a certified
plan of care in an outpatient hospital or
critical access hospital (CAH).
The commenter stated that physical
therapy should not be considered to be
an adjunctive service because physical
therapists are consultative members of
the health care team, physical therapy is
a separate benefit, and some services
provided during the perioperative
period, such as a physical therapy
evaluation to establish a plan of care,
could still be considered to be therapy
services. The commenter was also
concerned that the comprehensive APC
payment would not be adequate to cover
the services provided by therapists
during this perioperative period, that
rehabilitation could be prolonged if the
therapist is unable to intervene ‘‘to
increase the patient’s mobility, function
and endurance prior to surgery,’’ and
that it could be difficult to reliably and
reproducibly differentiate those
perioperative services that are not
therapy from those that could be
separately billed as therapy services.
Another commenter asked if functional
reporting requirements would apply in
these cases of adjunctive services
reported with therapy codes.
Response: We agree with the
commenter that physical therapy is a
separate benefit that is not part of an
OPPS service. However, after
consideration of the public comments
we received, we continue to believe that
services provided during the
perioperative period are adjunctive
services and not therapy services as
described in section 1834(k) of the Act
regardless of whether the services are
delivered by therapists or other
nontherapist health care workers. We
note that adjunctive services are those
services provided in support of another
service, that is, they are typically
performed to facilitate the primary
service and are unnecessary or serve a
different function if the primary service
is not provided. Adjunctive services
may be provided by consultative
members of the healthcare team. For
example, an add-on procedure
performed by a cardiac surgeon is
nonetheless adjunctive to the primary
procedure, as an add-on procedure by
definition cannot exist in the absence of
the procedure to which it is added.
We have previously noted that
therapy services are those provided by

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therapists under a plan of care in
accordance with section 1835(a)(2)(C)
and section 1835(a)(2)(D) of the Act and
are paid under section 1834(k) of the
Act subject to an annual therapy cap,
when applied. However, certain other
activities similar to therapy services are
considered and paid as outpatient
services. Specifically, we have said in
the Claims Processing Manual IOM 100–
4, Chapter 5, Section 20.1 that some
services, described as ‘‘sometimes
therapy services,’’ may at times be
considered therapy, but at other times
may be consider to be outpatient
department services, such as when
those services are provided by nontherapists or provided in the absence of
a plan of care. We stated in the
proposed rule that we believe services
reported with therapy codes, but that
are provided as part of a comprehensive
service are similar to ‘‘sometimes
therapy’’ services in that these services
are not properly considered to be
therapy services even though they may
be reported with therapy HCPCS codes
(78 FR 43559 through 43560).
Considering the services that
commenters believed should be therapy
services, we note that these are
outpatient procedures; therefore, the
comprehensive procedure includes only
the perioperative period, a brief period
of time immediately before and
immediately following the procedure.
We would not expect that an evaluation
performed immediately following the
surgery would establish the
beneficiary’s needs for rehabilitation
because the beneficiary is still under the
influence of the completed primary
surgical procedure. Rather, services
reported with therapy codes during that
brief time period may represent
interventions to promote breathing and
ambulation, traditional post-operative
nursing services, or may represent
assessments to provide the surgeon with
specific clinical information relative to
the immediate effects of the surgery. We
would not expect therapy assessments
or rehabilitative therapy until after the
patient has recovered from the
immediate effects of the procedure and
associated anesthesia. With respect to
the statement that it may be beneficial
to increase the beneficiary’s endurance
prior to surgery, we agree with the
commenter that this can be a desirable
and necessary service, but we would not
expect that therapists are routinely
increasing ‘‘mobility, function and
endurance’’ in the hour or two
immediately before the surgery.
Therefore, we do not expect that
providers and reviewers would struggle
to differentiate separately paid therapy

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services from appropriately packaged
nontherapy services. We believe that
therapy services would be separated in
time from the comprehensive services,
and would not be provided during the
span of the comprehensive service, from
OPD registration to discharge, because
we do not expect that the
comprehensive service would extend
beyond the immediate perioperative
period. We also believe that, for a
beneficiary who is already receiving
therapy on an ongoing basis, it is very
unlikely that a therapist would deliver
that service during a comprehensive
service. There are rare exceptions, for
example, in the case of a beneficiary
receiving therapy for a burn or
contracture. In that case, we have
previously published guidance stating
that recurring services may be separated
from acute services and billed on a
separate claim.
We have stated that the relative cost
of these comprehensive services
includes all of the estimated costs
reported on the claims for these
services. Therefore, the total payment
for the comprehensive service includes
a payment for the services reported with
therapy codes that is proportional to the
frequency with which these codes are
reported on the claims. As the
comprehensive payment now reflects
costs, we believe that the aggregate
comprehensive payment will continue
to be adequate to cover the cost of the
service provided, and we do not expect
that these services would be
discontinued when they are medically
necessary. We also note that there is no
provision in this final rule with
comment period that prohibits a
hospital from providing any medically
necessary service as part of a
comprehensive service, regardless of the
code with which it is otherwise
commonly reported.
With respect to functional reporting,
we note that these services reported
with therapy codes are outpatient
department services not therapy
services and, therefore, the requirement
for functional reporting does not apply.
These changes will be implemented in
the claims processing systems prior to
the start of CY 2015.
(7) Inclusion of Additional Hospital
Room and Board Revenue Cost Centers
in the Calculation of Covered Costs
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43534), we stated that we
believe that the cost of the bed and room
occupied by the patient, the cost of
nursing services, and the cost of any
necessary fluid and nutrition (board) are
considered covered costs when incurred
during the provision of an OPD service,

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that is, during the provision of the
comprehensive service. Because we are
able to assign all costs reported on the
claim to the comprehensive service, we
believe that we have an opportunity to
better capture costs by including these
costs in our calculations even when
they appear in certain revenue cost
centers not usually used to report OPPS
costs. Specifically, we proposed to
include costs reported with room,
board, and nursing revenue codes 012X,
013X, 015X, 0160, 0169, 0200 through
0204, 0206 through 0209, 0210 through
0212, 0214, 0219, 0230 through 0234,
0239, 0240 through 0243, and 0249
because we believe these revenue cost
centers are sometimes associated with
the costs of room, nutrition, and nursing
care provided during these
comprehensive services.
Comment: One commenter supported
the specific inclusion of room and board
revenue cost centers on outpatient
claims, but another commenter believed
that reporting may be difficult for
hospitals and hospital systems.
Commenters were concerned that CMS
did not discuss how those charges
would be included in the cost
calculation for the comprehensive APCs
or provide a cost center source for
converting those charges to costs in the
CY 2014 OPPS Revenue Code to Cost
Center Crosswalk released with the
proposed rule. Another commenter was
concerned that additional funds were
not moved into the OPPS system to
account for these ‘‘new’’ costs.
Response: We appreciate the
commenter’s support for our decision to
specifically identify the costs of room
and board as being covered costs in
certain outpatient stays. We understand
the other commenters’ confusion as to
why room and board revenue codes
would appear on an outpatient claim
because our claims processing
instructions do not allow payment for
these revenue codes on Part B claims as
they are reserved exclusively for
inpatient use. (For example, we refer
readers to our recent contractor
instructions under Change Request (CR)
8185, ‘‘CMS Administrator’s Ruling:
Part A to Part B Rebilling of Denied
Hospital Inpatient Claims’’, which
excludes these revenue codes on
rebilled Part B inpatient claims because
room and board services are not covered
under Medicare Part B). For this reason,
we have not included these revenue
codes on our revenue code to cost center
crosswalk. Although we proposed to
include costs estimated from charges for
these revenue codes in our estimate of
comprehensive APC costs, we did not
include any of these costs. We failed to
modify our revenue code-to-cost center

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crosswalk that we use to estimate costs
from charges on claims to include room
and board revenue codes. Without
revenue codes and associated CCRs
from identified cost centers, our model
ignored those revenue codes and did not
estimate a cost for the room and board
revenue codes. We did not include any
additional estimated costs in our
proposed comprehensive APC payment
calculation. We discuss the role of the
revenue code-to-cost center crosswalk in
section II.A.1.c. of this final rule with
comment period.
We now believe that the appearance
of these revenue codes on hospital
outpatient claims would be improper
billing. Charges on ancillary revenue
codes for recovery room and
observation, for example, should reflect
the complete costs of furnishing those
services, including the capital cost of
the room and nursing labor costs.
Further, we would expect that hospitals
would allocate these costs, and if
appropriate, board costs for services
furnished to outpatients, to ancillary
cost centers on their Medicare hospital
cost report consistent with the matching
principles of cost accounting principles.
We believe that, as calculated, our
estimated costs for comprehensive APCs
appropriately includes all costs and
charges associated with staying in a
room for the duration of the
comprehensive service as an outpatient,
and we are not finalizing our proposal
to include the costs reported with
certain inpatient room, board, and
nursing revenue codes.
(8) Inclusion of Hospital-Administered
Drugs
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43534), we also proposed to
package all drugs provided to the
beneficiary as part of the delivery of the
comprehensive service, except for those
drugs separately paid through a
transitional pass-through payment.
Intravenous drugs, for example, are
OPPS services that are considered
adjunctive to the primary procedure
because the correct administration of
the drug either promotes a beneficial
outcome, such as the use of intravenous
pain medications, or prevents possible
complications, such as the use of
intravenous blood pressure medications
to temporarily replace oral blood
pressure medications and reduce the
risk of a sudden rise in blood pressure
when a normal daily medication is
stopped. We noted that, in defining
these packaged drugs, we were applying
both our existing definitions of selfadministered drugs (SADs) and our
existing definition of drugs as supplies

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to the situation where the OPD service
is a comprehensive service.
We proposed that all medications
provided by the hospital for delivery
during a comprehensive service
pursuant to a physician order,
regardless of the route of administration,
would be considered to be adjunctive
supplies and, therefore, packaged as
part of the comprehensive APC
payment. We stated that we believe that
the physician order demonstrates that
the delivery of the medication by the
hospital is necessary to avoid possible
complications during the delivery of the
comprehensive service, to ensure
patient safety, and to ensure that the
comprehensive service delivery is not
compromised and, therefore, the
medication should be considered an
adjunctive supply.
Therefore, we proposed to consider
all medications to be supplies that are
adjunctive to the primary service if the
medicines are ordered by the physician
and supplied and delivered by the
hospital for administration during the
comprehensive service.
Comment: Commenters generally
supported the inclusion of drugs as
supplies in the comprehensive APC
payment. For example, one commenter
stated that this proposal would be
extremely helpful to beneficiaries by
reducing their financial burden and
would greatly reduce the processing
burden on the hospital. Several
commenters stated that CMS’ reasoning
was sound and the concept should be
expanded to all self-administered drugs
incident to practitioners’ therapeutic
services, not just in comprehensive
APCs because the commenters believed
that the concept that drugs are integral
and adjunctive to the furnishing of a
therapeutic service applies to
observation and other procedures. For
example, one commenter stated that
self-administered drugs provided during
an ED visit are directly related to the
necessary care. The commenter
suggested that a requirement to bill for
self-administered drugs be established
so that these costs could be identified
for inclusion in ratesetting.
However, one commenter was
concerned that including all hospitaladministered drugs, regardless of the
route of administration, in the cost
calculations of the comprehensive APCs
will not accurately account for the
significant cost variation in required
drugs from beneficiary to beneficiary
based on individual beneficiary
requirements and that, as a result, the
payment rate for a comprehensive APC
might not provide adequate payment for
the specific drugs and biologicals an
individual beneficiary needs, and that

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hospitals would be discouraged from
providing appropriate drugs during a
comprehensive service.
Response: We appreciate the
commenters’ support for our proposal to
consider drugs, regardless of their route
of administration, to be adjunctive
supplies used in support of the primary
comprehensive service when ordered by
a physician and delivered during the
administration of a comprehensive
service.
Self-administered drugs are a special
issue because they are excluded from
Medicare Part B coverage by section
1861(s)(2)(B) of the Act as implemented
in the regulations at 42 CFR 410.27.
However, as we have stated in the
Benefit Policy Manual IOM 100–2,
Chapter 15, Section 50.2, drugs that are
integral to a procedure are considered to
be supplies used in the delivery of
covered hospital outpatient services,
and not part of the Part B drug benefit
as described under section 1861(s)(2)(B)
of the Act and 42 CFR 410.27. We do
not view this proposal to include all
medications provided by the hospital
for delivery during a comprehensive
service pursuant to a physician order,
regardless of the route of administration,
as adjunctive supplies to be an
exception to the benefit category
exclusion for self-administered drugs,
but rather that covered outpatient
services include supplies and other
ancillary items needed to deliver these
comprehensive services. As stated in
our discussion above, we have
historically instructed hospitals to
include charges for self-administered
drugs as supplies on submitted claims,
and we, therefore, include them in our
calculation of APC payments. We also
do not view this proposal as an
expansion of coverage, but rather as the
application of an existing policy to a
broader payment bundle.

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Although some cost of drugs that are
used as supplies have been included in
APC payments, we recognize that there
are some drugs that previously may not
have been considered as supplies
because previously they were provided
outside of the defined service. We
generally address public comments
about how costs for newly included
adjunctive items will be considered
under budget neutrality below.
We do not believe that including
these drugs and biologicals in the
comprehensive APC payment greatly
increases a hospital’s financial risk for
providing a comprehensive service.
Further, we expect that a payment based
on geometric mean estimated cost
would reflect the relative resources of
drugs used as supplies included on
comprehensive service claims, along
with all other ancillary supplies and
services, and that while the cost of any
given case will vary, the hospital would
receive a payment based on average
estimated cost for all cases. We do not
believe that comprehensive APC
payments that include physicianordered, hospital-administered drugs
delivered during the comprehensive
service would be inadequate to cover
the cost of providing the service, and we
do not believe that the comprehensive
APC payment would discourage
hospitals from providing appropriate
drugs during delivery of these
comprehensive services.
Finally, we agree with the
commenters that all covered costs
related to a service should be included
on the claim per our manual instruction
in the Claims Processing Manual IOM
100–4, Chapter 4, Section 10.4.A and as
discussed in section II.3.a. (Packaging)
of this final rule with comment period
and that those costs should be reported
as precisely as possible using HCPCS
codes when available or uncoded
revenue cost centers when HCPCS codes

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74869

do not exist. Overall, we believe that
drug costs, regardless of the route of
administration, are accurately
accounted for in the APC relative
payment weight. We believe that overall
payment for the comprehensive service
is adequate and will permit access to the
specific drugs and biologicals required
for an individual beneficiary.
After consideration of all of the public
comments we received, we are
finalizing our proposal to package all
outpatient services, including diagnostic
procedures, laboratory tests and other
diagnostic tests, and treatments that
assist in the delivery of the primary
procedure; visits and evaluations
performed in association with the
procedure; coded and uncoded services
and supplies used during the service;
outpatient department services
delivered by therapists as part of the
comprehensive service; durable medical
equipment, as well as prosthetic and
orthotic items and supplies when
provided as part of the outpatient
service; and any other outpatient
components reported by HCPCS codes
that are provided during the
comprehensive service, except for
certain services including
mammography services, ambulance
services, brachytherapy seeds, and passthrough drugs and devices. When billed
on a claim in conjunction with a
primary procedure assigned to status
indicator ‘‘J1’’ in CY 2015, we will pay
for these services through the OPPS
comprehensive APC payment. We are
not finalizing our proposal to include
costs reported with room, board, and
nursing revenue codes 012X, 013X,
015X, 0160, 0169, 0200 through 0204,
0206 through 0209, 0210 through 0212,
0214, 0219, 0230 through 0234, 0239,
0240 through 0243, and 0249.
The APCs for which we are finalizing
this proposal for CY 2015 are identified
below in Table 8.

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Clinical
Family

CY
2014
APC*

NSTIM
NSTIM

0039
0040

Level I Implantation ofNeurostimulator
Level I
ImplantationlRevisionlReplacement of
N eurostimulator Electrodes

NSTIM

0061

EVASC
EPHYS
AICDP

0083
0085
0089

Level II
ImplantationlRevisionlReplacement of
Neurostimulator Electrodes
Level I Endovascular Procedures
Level II Electrophysiologic Procedures
Level III InsertionlReplacement of
Permanent Pacemaker

AICDP

0090

EVASC
AICDP

0104
0106

AICDP

0107

AICDP

0108

UROGN

0202

PUMPS
EVASC
ENTXX
EYEXX

0227
0229
0259
0293

NSTIM

0318

EVASC
UROGN
UROGN
ARTHR

0319
0385
0386
0425

EPHYS
EVASC
BREAS
AICDP

0444
0445
0648
0654

AICDP

0655

EVASC
UROGN
EVENT

0656
0674
0680

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Group Title

Comments

Level I InsertionlReplacement of
Permanent Pacemaker
Level 1 Endovascular Stents
Insertion/Replacement of Pacemaker
Components
Level I Implantation of CardioverterDefibrillators (ICDs)
Level II Implantation of CardioverterDefibrillators (ICDs)
Level VII Female Reproductive
Procedures
Implantation of Drug Infusion Device
Level II Endovascular Procedures
Level VII ENT Procedures
Level VI Anterior Segment Eye
Procedures
Level II Implantation of
N eurostimulator
Level IV Endovascular Procedures
Level I Urogenital Procedures
Level II Urogenital Procedures
Level II Arthroplasty or Implantation
with Prosthesis
Level IV Electrophysiologic Procedures
Level III Endovascular Procedures
Level IV Breast and Skin Surgery
Level II Insertion/Replacement of
Permanent Pacemaker
Insertion/Replacement/Conversion of a
Permanent Dual Chamber Pacemaker or
Pacing Electrode
Level II Endovascular Stents
Level III Urogenital Procedures
Insertion of Patient Activated Event

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CY2014
Estimated
Geometric
Mean Cost*

Renamed

CY2014
Proposed
APC

$17,590.47
$4,714.87

0039
0040

$6,567.49

0061

$4,229.68
$5,058.62
$10,754.87

0083
0085
0089

$7,480.34

0090

$8,554.42
$4,946.02

0104
0106

$25,557.38

0107

$32,947.68

0108

$4,595.75

0202

$15,790.66
$8,769.82
$30,445.75
$8,459.01

0227
0229
0259
0293

Renamed

$27,227.27

0318

Renamed
Renamed
Renamed

$15,891.12
$7,668.56
$13,611.48
$10,240.36

0319
0385
0386
0425

New
New

$14,302.41
$13,375.31
$7,262.53
$8,424.63

0648
0654

$15,425.03

0655

$10,061.92
$15,729.54
$6,993.24

0656
0674
0680

Renamed
Renamed

Renamed
Renamed

Renamed

Renamed
Renamed

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TABLE 8.-CY 2014 COMPREHENSIVE APCs ILLUSTRATION

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(c) Methodology
As we stated in the CY 2014 OPPS/
ASC proposed rule (78 FR 43534), we
calculated the proposed relative
payment weights for these devicedependent comprehensive APCs by
using relative costs derived from our
standard process as described in section
II.A. of the proposed rule and this final
rule with comment period. Specifically,
after converting charges to costs on the
claims, we identified all claims
containing 1 of the 136 HCPCS codes
that define procedures specified as
constituting a comprehensive service.
These claims were, by definition,
classified as single major procedure
claims. Any claims that contained more
than one of these HCPCS codes were
identified, but were not included in
calculating the cost of the procedure
that had the greatest cost when
traditional HCPCS level accounting was
applied. All other costs were summed to
calculate the total cost of the
comprehensive service, and statistics for
those services were calculated in the
usual manner. Comprehensive claims
for each primary service reported by a
HCPCS code were excluded when their
comprehensive claim cost exceeded +/
¥ 3 standard deviations from the
geometric mean comprehensive cost of
the primary service HCPCS code.
(d) Payments
As we further stated in the CY 2014
OPPS/ASC proposed rule (78 FR 43534),
we used the proposed APC relative
payment weights for each of these
device-dependent comprehensive
services to calculate proposed payments
following our standard methodology.

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The proposed payments for the HCPCS
codes assigned to these proposed
comprehensive APCs were included in
Addendum B of the proposed rule
(which is available via the Internet on
the CMS Web site). We proposed to
assign a new status indicator, ‘‘J1’’ (OPD
services paid through a comprehensive
APC), to these device-dependent
procedures. The claims processing
system would be configured to make a
single payment for the devicedependent comprehensive service
whenever a HCPCS code reporting one
of these primary procedures appears on
the claim. From a processing system
perspective, all other adjunctive
services except mammography,
ambulance, and pass-through services
would be conditionally packaged when
a comprehensive service is identified on
a claim. From our data, we determined
that multiple primary HCPCS codes are
reported together in 24 percent of these
device-dependent claims, but rarely
represent unrelated services. Having
determined that having multiple
unrelated device-dependent services
reported on a claim is an uncommon
event, we proposed to only pay the
largest comprehensive payment
associated with a claim. However, the
costs of all of these more extensive or
additional services are included in the
calculations of the relative payment
weights for the comprehensive service,
so the prospective payment includes
payment for these occurrences.
Comment: Some commenters
suggested that errors and lack of clarity
pertaining to some HCPCS codes
proposed for comprehensive payment in
the proposed rule prevented the public

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from being able to respond
informatively to the comprehensive
APC proposal. One commenter was
concerned that CMS stated in the
preamble text that there are 136 HCPCS
codes that define the device-dependent
services to be included in the proposed
comprehensive APCs whereas, in
Addendum B to the proposed rule, there
are 148 HCPCS codes listed. Other
commenters identified occasional
instances in the proposed rule APC cost
statistics data files where the number of
single procedures was reported as more
than the number of total procedures,
and they also identified several
inconsistencies in Addendum B where
the HCPCS code’s status indicator was
listed as ‘‘Q2’’ (conditionally packaged),
yet the APC assignment was associated
with status indicator ‘‘J1’’
(comprehensive APC, all other items on
the claim are packaged).
Response: We discussed 136 primary
procedure codes in our proposal for
comprehensive APCs (78 FR 43534).
Commenters are correct that we also
identified 148 primary procedure codes
in Addendum B to the proposed rule as
corrected (which is available on the
CMS Web site at: http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
HospitalOutpatientPPS/index.html). As
we discussed in our September 6, 2013
correcting document, we revised the
status indicators of several HCPCS
codes that appeared in Addendum B
from ‘‘Q2’’ to ‘‘J1’’ to reflect their status
as a primary procedure code in a
comprehensive APC. The remaining
difference in these two numbers is that
136 represents the number of CY 2012

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device-dependent HCPCS codes
reported on the CY 2012 claims that we
are using to model CY 2014 geometric
mean costs to illustrate the
comprehensive APC methodology. We
generally discuss our modeling of the
CY 2012 claims data to establish CY
2014 payment rates in section II.A.1.c.
of this final rule with comment period.
However, considering the revisions to
specific procedure codes used to report
certain procedures, such as the new
percutaneous coronary intervention
procedure codes (CPT codes 92920
through 92943) beginning in CY 2013,
the number of CY 2013 devicedependent HCPCS codes appropriately
assigned to comprehensive APCs
increased to 148. Upon adoption of the
new coding scheme for CY 2014, the
number of HCPCS codes assigned to a
comprehensive APC for payment in this
final rule with comment period as it
would have been implemented for CY
2014 is 167. All of these comprehensive
HCPCS codes for each year (CY 2012

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through 2014) appear below in Table 9.
Before we implement this policy in CY
2015, we will assess all active codes for
CY 2015 and assign the procedure to
status indicator ‘‘J1,’’ as appropriate.
We believe that the corrections to the
status indicators assigned to the devicedependent procedure codes that
appeared in Addendum B to our
correcting document (http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
HospitalOutpatientPPS/index.html)
were minor and did not compromise the
ability of commenters to analyze and
respond to our comprehensive APC
proposal. We note that some
commenters were able to correctly
identify the claims that we used to
model the proposed CY 2014 payment
rates for comprehensive APCs by
identifying the device-related HCPCS
codes associated with the 29
comprehensive APCs for CY 2012. Some
commenters also were able to correctly
identify the HCPCS codes that we

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proposed would trigger a
comprehensive payment in CY 2014
based on our identification of HCPCS
codes in Addendum B. The commenters
were able to model relative payments
based on our identification of the
inclusion of all services reported on the
claim except mammography,
ambulance, and pass-through services,
and were able to determine the impact
of the proposal based on our publication
of proposed payment rates for those 29
comprehensive APCs. Our proposed
payment rate for these comprehensive
APCs did not change appreciably with
the correcting document. In addition,
we are delaying implementation of the
finalized comprehensive APC policy
until CY 2015, and we are providing a
detailed discussion of our final
methodology for establishing
comprehensive APC relative payment
weights through this final rule with
comment period.
BILLING CODE 4120–01–P

E:\FR\FM\10DER4.SGM

10DER4

74873

TABLE 9.-APC ASSIGNMENTS FOR HCPCS CODES PROPOSED TO BE ASSIGNED TO
STATUS INDICATOR "JI" FOR CY 2014 AND DISPLAYED HERE FOR ILLUSTRATION
HCPCS
APC Single Single"J1"
CY
Geometric
"J1"
Proposed 2014
Geometric
Mean
HCPCS
CY2014 APC
Mean
Modeled
*
Short Descriptor
APC
Comment
Source
Cost*
Cost*
Code
Place po breast cath
Existing
CY 2012
forrad
0648
0648 Code
Data
$6,430
$5,789
19296
Place breast rad
Existing
CY 2012
tube/caths
Data
$6,430
$5,290
19298
0648
0648 Code
Enlarge breast with
Existing
CY 2012
19325
implant
0648
Data
$6,430
$5,328
0648 Code
Delayed breast
Existing
CY 2012
19342
prosthesis
0648
0648 Code
Data
$6,430
$4,836
Existing
CY 2012
19357
Breast reconstruction 0648
0648 Code
Data
$6,430
$7,600
Reconstruct shoulder
Existing
CY 2012
23470
joint
0425
0425 Code
Data
$10,184
$9,816
Revis reconst
New For
Model/20
$10,184
$6,169
23473
shoulder joint
0425
0425 2013
13
Reconstruct elbow
Existing
CY 2012
24361
joint
0425
0425 Code
Data
$10,184
$11,921
Existing
CY 2012
Replace elbow joint 0425
24363
0425 Code
Data
$10,184
$15,496
Existing
CY 2012
Reconstruct head of
24366
radius
0425
0425 Code
Data
$10,184
$8,989
Revise reconst
New For
Model120
elbow joint
13
$10,184
TBD
24370
0425
0425 2013
Revise reconst
New For
Model/20
24371
elbow joint
0425
0425 2013
$10,184
TBD
13
Reconstruct wrist
Existing
CY 2012
25441
joint
0425
0425 Code
Data
$10,184
$10,973
Reconstruct wrist
Existing
CY 2012
joint
Data
$10,184
$10,754
25442
0425
0425 Code
Existing
CY 2012
Wrist replacement
25446
0425
0425 Code
Data
$10,184
$12,987
Existing
CY 2012
Revision of knee
joint
27446
0425
0425 Code
Data
$10,184
$10,640
Existing
CY 2012
33206
Insert heart pm atrial 0089
Data
$10,752
$10,272
0089 Code

VerDate Mar<15>2010

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ER10DE13.270

maindgalligan on DSK5VPTVN1PROD with RULES

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$10,752

$9,319

$10,752

$11,087

$4,944

$4,447

$4,944

$5,129

$7,479

$7,212

APC Single

HCPCS
Code
33207

CY
2014
APC
*

0089

0089

0655

0089

0106

0106

0106

0106

0090

"Jl"
Comment
Existing
Code

Source
CY 2012
Data

0090

Existing
Code
Existing
Code
Existing
Code
Existing
Code

CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

$8,423

$9,087

$10,752

$11,158

$4,944

$5,066

$7,479

$7,256

$10,752

$12,539

$10,752

$12,176

$7,479

$7,499

$8,423

$8,384

$15,419

$14,543

$25,556

$26,715

$32,946

$30,149

33212

Insrt heart pm atrial
& vent
Insert electrdlpm
cath sng1
Insert card
electrodes dual
Insert pulse gen sngl
lead

33213

Insert pulse gen dual
leads

0654

0654

Existing
Code

33214

Upgrade of
pacemaker system

0655

0089

Existing
Code

CY 2012
Data

0106

0106

0106

0090

0654

0089

0655

0089

0090

0090

0654

0654

0654

0655

0107

0107

0107

0108

Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code

CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

33208
33210
33211

33216
33217
33221
33224
33227
33228
33229
33230
maindgalligan on DSK5VPTVN1PROD with RULES

Short Descriptor
Insert heart pm
ventricular

Proposed
CY2014
APC

33231

VerDate Mar<15>2010

Insert 1 electrode
pm-defib
Insert 2 electrode
pm-defib
Insert pulse gen mult
leads
Insert pacing lead &
connect
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/mult leads

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ER10DE13.271

74874

HCPCS
Code
33240
33249
33262
33263
33264
33282
35458
35460
35471
35472
35475
35476
37183
37204
37205
37206

maindgalligan on DSK5VPTVN1PROD with RULES

37207
37208

VerDate Mar<15>2010

Short Descriptor
Insrt pulse gen
w/singllead
N sert pace-defib
w/lead
Remv&rep1c cvd
gen sing lead
Remv&replc cvd
gen dual lead
Remv&replc cvd
gen mult lead
Implant pat-active ht
record
Repair arterial
blockage
Repair venous
blockage
Repair arterial
blockage
Repair arterial
blockage
Repair arterial
blockage
Repair venous
blockage
Remove hepatic
shunt (tips)
Transcatheter
occlusion
Transcath iv stent
percut
Transcath iv
stentiperc addl
Transcath iv stent
open
Transcath iv
stent/open addl

21:46 Dec 09, 2013

Jkt 232001

Proposed
CY2014
APC

CY
2014
APC
*

0107

0107

0108

0108

0107

0107

0107

0107

0107

0107

0680

0680

0083

0083

0083

0083

0083

0083

0083

0083

0083

0083

0083

0083

0229

0229

0082

0229

0229

0229

N/A

N/A

0229

0229

N/A

N/A

PO 00000

Frm 00051

Fmt 4701

Comment
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Deleted for
2014
Deleted for
2014
Deleted for
2014
Deleted for
2014
Deleted for
2014

Sfmt 4725

Source
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

74875

APC Single
"Jl"
Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$25,556

$26,540

$32,946

$32,938

$25,556

$21,896

$25,556

$23,795

$25,556

$28,165

$6,992

$6,992

$4,229

$4,824

$4,229

$4,670

$4,229

$6,413

$4,229

$5,319

$4,229

$4,411

$4,229

$4,000

$8,767

$4,953

$8,767

$8,508

$8,767

$9,534

Packaged
CY 2012
Data

N/A

N/A

$8,767

$8,803

Packaged

N/A

N/A

E:\FR\FM\10DER4.SGM

10DER4

ER10DE13.272

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

APC Single
"Jl"
Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$8,767

$6,044

$4,229

$5,561

$8,767

$9,068

$4,229

$5,528

$8,767

$10,489

$8,767

$10,317

$15,857

$17,239

$4,229

$6,157

$13,336

$12,527

$13,336

$11,318

$15,857

$17,095

Model

$8,767

TBD

Model

$13,375

TBD

Model

$8,767

TBD

37210

Short Descriptor
Embolization uterine
fibroid

Proposed
CY2014
APC

CY
2014
APC
*

0229

0229

37220

Iliac revasc

0083

0083

37221

Iliac revasc w/stent

0229

0229

37224

Fern/popl revas w/tla
Fern/popl revas
w/ather
Fern/popl revasc
w/stent
Fern/popl revasc stnt
& ather

0083

0083

0229

0229

0229

0229

0319

0319

0083

0083

0229

0445

0229

0445

0319

0319

N/A

0229

N/A

0445

N/A

0229

Comment
Deleted for
2014
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
New For
2014
New For
2014
New For
2014

0445

New For
2014

Model

$13,375

TBD

0229

New For
2014

Model

$8,767

TBD

0229

New For
2014

Model

$8,767

TBD

HCPCS
Code

37225
37226
37227
37228

37238

Tib/per revasc w/tla
Tib/per revasc
w/ather
Tib/per revasc
w/stent
Tib/per revasc stent
& ather
Open/perq place
stent 1st
Open/perq place
stent ea add
Open/perq place
stent same

37239

Open/perq place
stent ea add

37241

Vasc
embolize/occlude
venous

37242

Vasc
embolize/occlude
artery

37229
37230
37231
37236
37237

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N/A
N/A

PO 00000

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Source
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

E:\FR\FM\10DER4.SGM

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74876

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

CY
2014
APC
*

Comment

N/A

0229

New For
2014

Model

$8,767

TBD

N/A

0229
0039

$17,590

$20,380

51845

Repair bladder neck

0202

0202

$4,593

$4,057

53440

Male sling procedure

0385

0385

$7,666

$8,252

53444

0385

0385

$7,666

$7,953

0386

0674

$15,726

$15,515

0386

0386

$13,609

$12,323

0385

0385

$7,666

$9,493

0386

0386

$13,609

$13,420

0386

0386

$13,609

$14,161

0386

0386

$13,609

$12,887

54416

Insert tandem cuff
Insert uro/ves nck
sphincter
Remove/replace ur
sphincter
Insert semi-rigid
prosthesis
Insert self-contd
prosthesis
Insert multi -comp
penis pros
Remove/replace
penis prosth
Remv/repl penis
contain pros

0386

0386

$13,609

$12,167

55873

Cryoablate prostate

0674

0385

$7,666

$8,188

57220

Revision of urethra
Extensive repair of
vagma
Colpopexy
extraperitoneal

0202

0202

$4,593

$3,806

0202

0202

$4,593

$4,510

0202

0202

Model
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

TBD

0061

New For
2014
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code

$8,767

43647

Vasc
embolize/occlude
bleed
Lap impl electrode
antrum

$4,593

$5,437

37243

37244

53445
53447
54400
54401
54405
54410

57265
57282

VerDate Mar<15>2010

Short Descriptor
Vasc
embolize/occlude
organ

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10DER4

ER10DE13.274

HCPCS
APC Single Single"J1"
Geometric
"J1"
Mean
Geometric
Mean
Modeled
Cost*
Cost*

Proposed
CY2014
APC

HCPCS
Code

maindgalligan on DSK5VPTVN1PROD with RULES

74877

HCPCS
Code
57283
57284
57285

57288
57310
57423
57556
58290
58291

Proposed
CY2014
APC

Short Descriptor
Colpopexy
intraperitoneal
Repair paravag
defect open
Repair paravag
defect vag
Repair bladder
defect
Repair
urethrovaginal lesion
Repair paravag
defect lap
Remove cervix
repair bowel
Vag hyst complex
Vag hyst incl tlo
complex

61626
61885

VerDate Mar<15>2010

Transcath occlusion
non-cns
Insrt/redo neurostim
1 array

21:46 Dec 09, 2013

Jkt 232001

$4,593

$4,484

$4,593

$3,131

$7,666

$9,672

$4,593

$4,568

$4,593

$4,643

$4,593

$4,660

$4,593

$4,154

0202

$4,593

$2,771

0202

Existing
Code

CY 2012
Data

$4,593

$3,958

0229

Existing
Code

CY 2012
Data

$8,767

$8,571

Existing
Code
Existing
Code

CY 2012
Data
CY 2012
Data

$8,767

$9,151

$17,590

$17,828

0202

0202

0385

0202

0202

0202

0202

0202

0202

0202
0202

0082

0229

0039

0039

Frm 00054

$5,011

$6,231

0202

PO 00000

$4,593

$4,593

0202

0082

$4,580

CY 2012
Data
CY 2012
Data
CY 2012
Data

0202

61623

$4,593

Existing
Code
Existing
Code
Existing
Code

0202

Endovasc tempory
vesseloccl

$5,258

CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

0202

0202

$4,593

Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code

0202

58565

HCPCS
Single"J1"
Geometric
Mean
Modeled
Cost*

Source
CY 2012
Data
CY 2012
Data
CY 2012
Data

0202

Hysteroscopy
sterilization

APC Single
"J1"
Geometric
Mean
Cost*

Comment
Existing
Code
Existing
Code
Existing
Code

*
0202

58356

58294

CY
2014
APC

0202

Vag hyst tlo & repair
compl
0202
Vag hyst
w/enterocele compl
0202
Endometrial
cryoablation
0202

58292

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ER10DE13.275

74878

Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$27,197

$23,245

$15,789

$12,307

$15,789

$15,854

$4,754

$4,640

$17,590

$12,339

$4,754

$5,426

$6,552

$6,852

$17,590

$20,143

$6,552

$6,860

$4,754

$3,959

$4,754

$4,875

$4,754

$5,575

$27,197

$27,561

$4,754

$5,329

$6,552

$8,377

$6,552

$10,676

$6,552

$6,991

$17,590

$17,254

APC Single

HCPCS
Code
61886
62361
62362
63650
63655
63663
63664
63685
64553
64555
64561
64565
64568
64569
64575
64580

maindgalligan on DSK5VPTVN1PROD with RULES

64581
64590

VerDate Mar<15>2010

Short Descriptor
Implant neurostim
arrays
Implant spine
infusion pump
Implant spine
infusion pump
Implant
neuroelectrodes
Implant
neuroelectrodes
Revise spine eltrd
perq aray
Revise spine eltrd
plate
Insrt/redo spine n
generator
Implant
neuroelectrodes
Implant
neuroelectrodes
Implant
neuroelectrodes
Implant
neuroelectrodes
Inc for vagus n elect
impl
Revise/repl vagus n
eltrd
Implant
neuroelectrodes
Implant
neuroelectrodes
Implant
neuroelectrodes
Insrt/redo pn/gastr
stimul

21:46 Dec 09, 2013

Jkt 232001

Proposed
CY2014
APC

CY
2014
APC
*

0315

0318

0227

0227

0227

0227

0040

0040

0061

0039

0040

0040

0040

0061

0039

0039

0040

0061

0040

0040

0040

0040

0040

0040

0318

0318

0040

0040

0061

0061

0061

0061

0061

0061

0039

0039

PO 00000

Frm 00055

Fmt 4701

"Jl"
Comment
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code

Sfmt 4725

Source
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

E:\FR\FM\10DER4.SGM

74879

10DER4

ER10DE13.276

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

HCPCS
Code
65770

Short Descriptor
Revise cornea with
implant

92920

Implant temple bone
w/stimul
Temple bne implnt
w/stimulat
Temple bone
implant revision
Revise temple bone
implant
Implant cochlear
device
Transcath iv stent
rs&i
Prq cardiac
angioplast 1 art

92921

Prq cardiac angio
addlart

69714
69715
69717
69718
69930
75960

92924
92925
92928
92929
92933
92934

maindgalligan on DSK5VPTVN1PROD with RULES

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

92937
92938

VerDate Mar<15>2010

Prq card
angio/athrect 1 art
Prq card
angio/athrect addl
Prq card stent
w/angio 1 vsl
Prq card stent
w/angio addl
Prq card
stent/athiangio
Prq card
stent/athiangio
Prq revasc byp graft
1 vsl
Prq revasc byp graft
addl

21:46 Dec 09, 2013

Jkt 232001

Proposed
CY2014
APC

CY
2014
APC
*

0293

0293

0425

0425

0425

0425

0425

0425

0425

0425

0259

0259

N/A

N/A

0083

APC Single
"Jl"
Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$8,459

$8,459

$10,184

$9,167

$10,184

$10,188

$10,184

$5,907

$10,184

$14,575

$30,356

$30,356

Comment
Existing
Code

Source
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
Packaged
Model/20
13

N/A

N/A

0083

Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Deleted for
2014
New For
2013

$4,229

TBD

0083

0229

New For
2013

Model/20
13

$8,767

TBD

0082

0229

TBD

0445

$13,375

TBD

0104

0104

$8,550

TBD

0104

0656

$10,059

TBD

0104

0656

$10,059

TBD

0104

0445

$13,375

TBD

0104

0104

$8,550

TBD

0104

0656

Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13

$8,767

0082

New For
2013
New For
2013
New For
2013
New For
2013
New For
2013
New For
2013
New For
2013
New For
2013

$10,059

TBD

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74880

HCPCS
Code

92943

Short Descriptor
Prq card revasc mi 1
vsl
Prq card revasc
chronic 1vsl

92944

Prq card revasc
chronic addl

92941

92980
92981
92982
92984
92986
92987
92990

92995
92996
92997
93619

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93620
93624
93650

VerDate Mar<15>2010

Insert intracoronary
stent
Insert intracoronary
stent
Coronary artery
dilation
Coronary artery
dilation
Revision of aortic
valve
Revision of mitral
valve
Revision of
pulmonary valve
Coronary
atherectomy
Coronary
atherectomyadd-on
Pul art balloon repr
percut
Electrophysiology
evaluation
Electrophysiology
evaluation
Electrophysiologic
study
Ablate heart
dysrhythm focus

21:46 Dec 09, 2013

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Proposed
CY2014
APC

CY
2014
APC
*

0104

0104

0104

0104

Comment
New For
2013
New For
2013

Source
Model/20
13
Model/20
13

0104

0445

New For
2013

Model/20
13

N/A

0104

N/A

0656

N/A

0083

N/A

0104

0083

0083

0083

0104

0083

0104

Deleted for
2013
Deleted for
2013
Deleted for
2013
Deleted for
2013
Existing
Code
Existing
Code
Existing
Code

CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

Deleted for
2013
Deleted for
2013
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code

CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data

N/A

0445

N/A

0229

0083

0104

0085

0085

0085

0085

0085

0085

0085

0083

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74881

APC Single
"Jl"
Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$8,550

TBD

$8,550

TBD

$13,375

TBD

$8,550

$8,637

$10,059

$12,602

$4,229

$6,420

$8,550

$7,616

$4,229

$7,029

$8,550

$8,540

$8,550

$8,181

$13,336

$9,712

$8,767

$14,966

$8,550

$8,405

$5,056

$3,616

$5,056

$5,160

$5,056

$8,633

$4,229

$4,161

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HCPCS
Code
93653
93654
93656
0234T
0236T
0237T
0238T
0268T
0282T
0283T
0302T
0303T
0304T
0316T
0319T
0320T

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0323T

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Short Descriptor
Ep & ablate
supravent arrhyt
Ep & ablate ventric
tachy
Tx atrial fib pulm
vein isol
Trluml perip athrc
renal art
Trluml perip athrc
abd aorta
Trluml perip athrc
brchiocph
Trluml perip athrc
iliac art
Implt/rpl crtd sns
dev gen
Periph field stimul
trial
Periph field stimul
perm
lear ischm mntrng
sys compl
lear ischm mntrng
sys eltrd
Icar ischm mntrng
sys device
Replc vagus nerve
pIs gen
Insert subq defib
w/eltrd
Insert subq defib
electrode
Insert subq de fib pIs
gen
Rmvl & replc subq
pIs gen

21:46 Dec 09, 2013

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Proposed
CY2014
APC

CY
2014
APC
*

8000

0444

8000

0444

8000

0444

0082

0229

0082

0229

0082

0229

0082

0229

0039

0040

0040

0040

0318

0318

0089

0089

0106

0106

0090

0090

0039

0039

0107

0107

0106

0106

0107

0107

0107

0107

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Comment
New For
2013
New For
2013
New For
2013
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
Existing
Code
New for
2013
New for
2013
New for
2013
New For
2013
New For
2013
New For
2013
New For
2013
New For
2013

Sfmt 4725

Source
Model/20
13
Model/20
13
Model/20
13
CY 2012
Data

APC Single
"Jl"
Geometric
Mean
Cost*

HCPCS
Single "Jl"
Geometric
Mean
Modeled
Cost*

$14,302

TBD

$14,302

TBD

$14,302

TBD

$8,767

$7,217

$8,767

$9,578

$8,767

$9,601

$8,767

$9,621

$4,754

$1,588

$4,754

$5,114

$27,197

$26,616

$10,752

TBD

$4,944

TBD

$7,479

TBD

$17,590

TBD

$25,556

TBD

$4,944

TBD

$25,556

TBD

$25,556

TBD

Model
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
CY 2012
Data
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13
Model/20
13

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BILLING CODE 4120–01–C

Comment: Commenters stated that
they had difficulty understanding the
APC assignment of a specific claim
when two or more procedure codes
assigned to status indicator ‘‘J1’’ appear
on a single claim and indicated that
they could not independently replicate
the proposed comprehensive APC
methodology. Commenters believed that
there was ambiguity in whether the
primary HCPCS code assignment was
based on CY 2012 Medicare payment for
the primary procedure or CY 2012
claims cost as determined by reported
charges converted to costs in the CY
2012 claims data set using CMS’
methodology outlined in section
II.A.1.c. of the proposed rule and this
final rule with comment period. One

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commenter believed that using a
ranking based on CY 2012 payments
would be inconsistent with setting a
prospective payment rate for CY 2014
because prioritizing by payment was
potentially more reflective of historical
costs than CY 2102 costs and also
reflected units in a way that assigned
some procedures reporting claims with
single units to one APC and other
procedures reporting claims with
multiple units to a different APC. This
latter issue was particularly concerning
to commenters because the commenters
believed that some claims contributed to
the cost of one APC, yet would actually
be paid through a different APC.
Response: We disagree with the
commenters that we proposed different
criteria to assign procedures to

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comprehensive APCs for modeling
payments and to assign procedures to
comprehensive APCs for payment in the
claims processing system. However, we
recognize that the wording of our
proposed methodology for assigning
procedures to comprehensive APCs
could be interpreted in several ways,
and we are receptive to commenters
concerns that they better understand the
proposed comprehensive APC payment
methodology for the treatment of claims
reporting multiple device-related
procedures. While we are finalizing a
comprehensive APC policy, we are
delaying the effective date of this policy
until CY 2015, and we invite comment
on the final methodology discussed in
this section.

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We stated in the proposed rule that,
‘‘Any claims that contained more than
one of these procedures were identified
but were included in calculating the
cost of the procedure that had the
greatest cost when traditional HCPCS
level accounting was applied.’’ Using
this methodology, we proposed to
identify a primary service on claims
reporting multiple HCPCS codes
assigned to status indicator ‘‘J1’’ by
identifying the HCPCS code assigned to
status indicator ‘‘J1’’ on the claim that
had the highest device-dependent APC
geometric mean cost. The primary
service is not only the most costly
service but also typically represents the
most significant or core service that is
being provided to the beneficiary. To
facilitate claims processing and to
ensure that we identified the most
costly device-related procedure on each
claim, including those billed with
multiple units, we envisioned using the
CY 2014 device-dependent APC
payment amount that would have been
made for the service in the absence of
a proposal for comprehensive APCs to
identify the most costly procedure
described by a HCPCS code assigned to
status indicator ‘‘J1’’ on the claim. We
proposed to assign the procedure
described by a HCPCS code assigned to
status indicator ‘‘J1’’ with the highest
device-dependent APC line-item
payment, considering the entire
payment when multiple units are billed,
as the primary procedure and to make
payment for the claim through the
associated comprehensive APC. We note
that the device-dependent APC payment
rates have the same relativity as devicedependent geometric mean costs, as
those costs underpin final budget
neutral payment rates.
We agree with the commenters that
the methodology by which a claim that
has at least one procedure described by
a HCPCS code that is assigned to status
indicator ‘‘J1’’ is assigned to a
comprehensive APC is fundamental to
understanding final payment under the
comprehensive APC policy. If there is
only one procedure described by a
HCPCS code assigned to status indicator
‘‘J1’’ reported on the claim, the
comprehensive APC assignment is
straightforward; the claim is paid
through the comprehensive APC
associated with that procedure. This is
true under the proposed methodology as
well as under the revised methodology
we are finalizing in this final rule with
comment period. In the event that more
than one procedure described by a
HCPCS code assigned to status indicator
‘‘J1’’ was present on the claim, an
important goal of our proposed

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methodology was to ensure that the
costliest procedure, including increased
cost due to multiple units, would be
identified as the primary procedure on
the claim so that the claim would be
paid through the most costly potential
comprehensive APC and ultimately
garner the highest potential
comprehensive APC payment. After
review of the public comments we
received, we are modifying our
proposed methodology for assigning a
primary procedure described by a
HCPCS code assigned to status indicator
‘‘J1’’ reported on a claim to an
appropriate comprehensive APC when
more than one procedure described by
a HCPCS code assigned to status
indicator ‘‘J1’’ is reported. First, we will
only use current ratesetting estimated
cost information and not devicedependent APC payment rates to
identify the primary procedure
described by the HCPCS code assigned
to status indicator ‘‘J1’’ on the claim and
the subsequent comprehensive APC
through which payment for the service
would be made. For CY 2015, we will
use estimated costs on CY 2013 claims
to calibrate comprehensive APC
payment amounts.
Second, we will recognize the greater
resources attributable to more complex
cases. Commenters suggested addressing
variations in cost of comprehensive
APCs by recognizing the greater
resources attributable to more complex
cases with multiple device-dependent
procedures in some manner similar to
the severity adjustment incorporated
into the IPPS MS–DRG system. We agree
with the commenters that instituting a
higher comprehensive payment for
complex cases would both allow us to
continue a comprehensive payment
methodology where the most costly
service reported with status indicator
‘‘J1’’ on the claim determines the
comprehensive APC assignment and
also recognize relative resource
differences associated with multiple
device-dependent procedures. In this
response, we discuss the first step in
this process of identifying a primary
HCPCS service assigned to status
indicator of ‘‘J1’’ for each claim. We
present the methodology for identifying
complex subsets of primary services and
reassigning claims to higher-level APCs
in the following comment and response.
To address concerns presented by
some of the commenters that they could
not fully model the proposal, we
provide all of the information we used
to create relative payment weights for
CY 2014 using the CY 2012 claims data
to illustrate the final methodology
below. We believe that this will assist
interested parties in replicating our

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methodology. We will recalibrate all of
the comprehensive APC relative
payment weights for CY 2015 using CY
2013 claims data, consistent with our
annual recalibration of APC relative
payment weights, to reflect the most
recently available claims and cost
information.
To arrive at the illustrative CY 2014
comprehensive geometric mean cost for
the comprehensive APCs in Table 8, we
began by first identifying all claims
reporting a single procedure described
by a HCPCS code with status indicator
‘‘J1.’’ As noted earlier, this is
approximately 75 percent of claims with
any procedure described by a HCPCS
code reported with status indicator ‘‘J1.’’
On claims reporting a single procedure
described by a HCPCS code with status
indicator ‘‘J1,’’ we considered that
procedure to be the primary service that
determines the comprehensive APC
assignment. We then used these single
‘‘J1’’ claims to calculate a
comprehensive APC single ‘‘J1’’
procedure claim geometric mean cost
for all comprehensive APCs using the
total cost on each claim. These
comprehensive APC single ‘‘J1’’
procedure claim geometric mean costs
appear in Table 9.
We then began the process of
identifying a ‘‘primary HCPCS code’’
that represents the ‘‘primary service’’ or
‘‘primary procedure’’ on a claim
reporting multiple procedures described
by HCPCS codes with status indicator
‘‘J1.’’ We used the APC geometric mean
comprehensive cost based on claims
reporting a single ‘‘J1’’ procedure
described by a HCPCS code with status
indicator ‘‘J1’’ (Table 9) to identify the
most costly procedure reported on each
claim. Specifically, we selected the
primary HCPCS code by determining
the comprehensive procedure that is
assigned to the APC with the highest
geometric mean comprehensive cost
based on claims with a single service
with status indicator ‘‘J1.’’ We
undertook a second step when a
comprehensive service claim contained
two or more procedures described by a
HCPCS code with status indicator ‘‘J1’’
that are assigned to the same APC. Of
those procedures described by a HCPCS
code with status indicator ‘‘J1’’ that are
also assigned to the same APC with the
highest comprehensive APC cost from
Table 9, we identified the service
described by a HCPCS code reported
with status indicator ‘‘J1’’ with the
highest HCPCS-level geometric mean
cost, also derived from the
comprehensive cost of claims that
contain a single procedure with status
indicator ‘‘J1,’’ to be the primary HCPCS
code on the claim.

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In the event that a HCPCS-level
geometric mean comprehensive cost
cannot be determined for a particular
HCPCS code from the claims data, such
as new HCPCS codes that are not
represented in the claims data or an
add-on code for which there are no
claims with only that procedure, we
will model a HCPCS-level
comprehensive geometric mean cost
that we will only use to identify a
primary procedure. For procedure codes
with missing data, we will include an
estimated comprehensive HCPCS code
geometric mean cost in each proposed
or final rule, as appropriate, using the
best information we have available
about each code. However, we will not
use modeled HCPCS-level
comprehensive geometric mean costs to
set comprehensive APC payment rates.
We will only use modeled HCPCS-level
comprehensive geometric mean costs in
our claims processing systems to
identify a primary HCPCS code reported
on a claim with multiple procedures
described by HCPCS codes assigned to
status indicator ‘‘J1’’ in the same
comprehensive APC. Our goal in
modeling such a HCPCS-specific
geometric mean cost is to identify a
primary HCPCS code on a claim with
multiple procedures in the same
comprehensive APC with sufficient
accuracy for a few years until actual
claims data become available. This
modeled geometric mean cost is not
intended in any way to presuppose the
actual cost of the service for future
ratesetting.
Table 9 contains a list of all HCPCS
codes assigned to status indicator ‘‘J1’’
that are assigned to APCs, which are
associated with a comprehensive
payment. Deleted codes are those codes
that were used to estimate geometric
mean costs, but are not valid codes for
CY 2104 while new codes are those
codes that will be valid for payment in
CY 2014, but were not present in the CY
2012 claims data. The comprehensive
APC assignment that we proposed for
each HCPCS code assigned to status
indicator ‘‘J1’’ in the proposed rule is
shown in Column 3, and the illustrative
final CY 2014 comprehensive APC
assignment that we would have been
established based on public comment
on the CY 2014 proposed rule and using
CY 2012 claims data is shown in
Column 4. Column 7 shows the APC
geometric mean cost and Column 8
shows the HCPCS code geometric mean
cost; together these two columns allow
the determination of the primary service
HCPCS code and initial APC assignment
for any claims with a combination of
HCPCS codes reported with status

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indicator ‘‘J1.’’ We have not provided
any modeled HCPCS geometric mean
costs for CY 2013 or CY 2014 ‘‘J1’’
HCPCS codes for which we do not have
claims data as we are finalizing this
policy with modification, but delaying
implementation until CY 2015. We will
make those modeled geometric mean
costs available in next year’s proposed
rule.
Comment: Commenters expressed
concern that CMS’ proposal for a single,
comprehensive APC payment would not
adequately cover the higher cost of cases
where multiple expensive devices are
used. Commenters also raised several
concerns with paying claims with
multiple primary procedures under a
single APC payment. The commenters
noted that, under comprehensive APCs,
hospitals would find simple claims with
a single comprehensive HCPCS code
and few services to be more profitable
on a case basis than complex claims
with a greater number of comprehensive
HCPCS codes and more ancillary
services. Commenters believed that this
could be a significant issue for many of
the comprehensive APCs because only
one primary service is paid and one
quarter of all claims have multiple
procedures. Many commenters believed
that a single, comprehensive APC
payment for single and multiple device
insertion procedures would create an
incentive to not perform complex and
multiple procedures where the cost
materially exceeds payment and that it
also could create an incentive for
hospitals to use inappropriately less
expensive devices, services, and
supplies to offset the financial threat of
reduced ‘‘packaged’’ payments,
including cases where those
substitutions could increase program
costs as a whole and carry greater risk
for beneficiaries.
Commenters argued that hospitals
systematically performing more
multiple device insertion procedures
may face severe financial hardship
because they would not have enough
simple, single primary procedure cases
to cover the cost of their many multiple
device insertion procedures, which may
limit their ability to provide these
services as they have in the past. While
we stated that we believed that the
comprehensive APC proposal would
encourage hospitals to negotiate better
rates on supplies and increase the
efficiency of individual procedures,
commenters stated that the added cost
of additional expensive devices cannot
be routinely reduced to approximate the
cost of a single device procedure.
Response: We agree with the
commenters that there is wide spread
variation in the comprehensive costs of

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74885

individual claims within each primary
procedure, and we further agree with
the commenters that we do not want to
financially disadvantage hospitals that
treat sicker beneficiaries that require
more complex and costly procedures.
We also agree with the commenters that
the presence of certain device-related
procedures reported together on a claim
can, but does not always, constitute a
more complex and resource-intensive
subset of a comprehensive procedure.
In calculating the proposed payment
rates for comprehensive APCs, we
proposed to allocate the costs of all
ancillary and adjunctive services to the
primary procedure assigned to status
indicator ‘‘J1,’’ including the costs of
additional procedures identified with
status indicator ‘‘J1.’’ A comprehensive
approach increases opportunities for
hospitals to garner efficiencies in the
delivery of these services, but also
increases the variation in estimated total
claim costs contributing to the
comprehensive APC relative payment
weight calculation. We agree with the
commenters that, in certain instances,
cost variation could be too large and
could potentially create undue financial
risk for hospitals that treat complex
patients. We also agree with the
commenters that there are some
limitations on individual hospitals’
ability to reduce costs associated with
complex procedures, especially in the
short term. Cost reductions may involve
changing suppliers or renegotiating
contracts for expensive devices. Further,
it may be difficult for hospitals to
immediately analyze the effects of
changing payment models and rapidly
implement the practices that they use to
handle cost variations within inpatient
DRGs.
Given our interest in establishing a
comprehensive APC payment under the
OPPS that is comparable to a severity
level DRG payment adjustment, we
agree with the commenters who
recommended assigning combinations
of procedures that are reported together
which indicate a more complex and
resource-intensive version of the
primary procedure to higher level
comprehensive APCs, not unlike the
IPPS policy of assigning procedures
with certain conditions to higher paying
MS–DRGs. After reviewing significant
public comments pointing out common
clinical scenarios for combinations of
device insertion procedures assigned to
status indicator ‘‘J1,’’ we decided to
recognize complexity in these devicedependent procedures by reassigning
claims for certain forms of the primary
procedures to higher level
comprehensive APCs as a modification
to our proposal. We welcome public

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comments on recognizing the cost of
more complex forms of primary
procedures through our final policy to
reassign claims for complex forms of the
primary procedures discussed below.
We identify the complex forms of
primary procedures that we would
reassign for CY 2014 using CY 2012
claims data if we were implementing
the comprehensive APC policy in CY
2014 in Table 10. We discuss our
consideration of code-specific
comments by clinical family later in this
section.
We took several steps to moderate
resource cost variation in
comprehensive APC payments. First, we
undertook a standard APC recalibration.
We specifically evaluated the APC
assignment of some primary procedures
and moved those procedures from one
APC to another to better align resource
and clinical homogeneity. In
considering the APC assignment of
these procedures, we looked at the
traditional parameters of geometric
mean cost for the primary service and
clinical characteristics of the APC. We
created, consolidated, or redefined the
primary procedures in the
comprehensive APCs as necessary to
better group services with clinical and
resource homogeneity. Second, we
identified complex subsets of primary
procedures, which consist of the
primary HCPCS code reported in
combination with other HCPCS codes
that together describe a more complex
form of the primary service. We
reassigned many claims with complex
subsets of primary procedures to a
higher level comprehensive APC in the
same clinical family through this
methodology. We define a clinical
family of comprehensive APCs to be a
set of clinically related comprehensive
APCs that represent different resource
levels of clinically comparable services.
Reassignment of claims with complex
subsets of the primary procedures does
not change the primary service
identified on a claim. We continue to
consider all services reported on the
claim, even the additional ‘‘J1’’ HCPCS
codes identifying a claim as complex, to
be adjunctive and packaged into the
primary service. We make a distinction
here between the idea of a primary
service under comprehensive APCs and
the concept of a composite service as
discussed in section II.A.2.f. of this final
rule with comment period. Both
methodologies foster more accurate
ratesetting by allowing us to use
additional information reported on a
claim to establish a geometric mean cost
and accompanying relative payment
weight. However, under a composite
payment approach, we identify certain

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procedures that are frequently
performed together during a single
clinical encounter as a single service
and identify that set of services as a
complete service. For comprehensive
APCs, we assess many combinations of
procedure codes for purposes of
determining complex forms of a primary
service, but the combination of codes is
not considered to be separate and
distinct service. For comprehensive
APCs, the primary service continues to
represent the complete furnished
service.
For the purpose of evaluating HCPCS
code combinations for reassignment to a
higher level comprehensive APC after
identifying one of the procedures
described by a HCPCS code assigned to
status indicator ‘‘J1’’reported on the
claim as being the primary service, we
recognized a combination of procedure
codes as complex and appropriately
reassigned to a higher level APC in the
same clinical family of services if the
complex combination of procedures met
all of the following criteria.
• The comprehensive geometric mean
cost of the claims with the combination
of procedures was more than two times
the comprehensive geometric mean cost
of claims reporting only a single
comprehensive procedure described by
a HCPCS code assigned to status
indicator ‘‘J1.’’
• There were greater than 100 claims
with the specific combination of
procedure codes.
• The number of claims reporting the
specific combination of procedure codes
exceeded 5 percent of the total volume
of claims reporting that procedure as the
primary service described by a HCPCS
code assigned to status indicator ‘‘J1’’,
and we did not determine that the
combination of procedure codes
represented an uncommon clinical or
resource extreme value within the entire
family of services.
In reviewing the CY 2012 claims data
for purposes of illustrating this final
methodology, we addressed all of the
combinations of procedures reported on
claims that met all of these criteria, but
also addressed other combinations of
procedures reported on claims that did
not meet all of these criteria if clinical
consistency suggested that additional
reassignment was necessary.
Once we determined that a particular
procedure code combination for a
primary service was complex because it
represented a sufficiently costly case
and frequent subset within the primary
procedure overall, we evaluated
alternate APC assignments for those
claims reporting a combination of
procedure codes. We assessed resource
variation for reassigned claims within

PO 00000

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Fmt 4701

Sfmt 4700

the receiving APC using the geometric
mean cost for all reassigned claims for
the primary service relative to other
services assigned to that APC using the
2 times rule criteria. We maintained
clinical homogeneity by reassigning
claims within the same clinical family
of comprehensive APCs. Any
combinations of multiple
comprehensive HCPCS codes that were
not sufficiently frequent or which did
not represent sufficiently costly cases
relative to the cost of the primary
procedure established with simple,
single procedure claims were not
identified as complex subsets of the
primary procedures and were not
reassigned. We repeated this process for
each APC for which commenters
expressed concerns regarding
complexity of cases contributing to wide
variation in costs. After both reassigning
some procedure codes to different
comprehensive APCs and reassigning
claims for complex cases of primary
services, we then calculated the final
comprehensive geometric mean cost for
the comprehensive APCs. The
illustrative comprehensive geometric
mean costs that we would have
calculated for the comprehensive APCs
for CY 2014 appear in Table 8.
Infrequently, we will not have claims
data for some procedures described by
HCPCS codes that are assigned to status
indicator ‘‘J1’’ and, therefore, no claims
cost information upon which to base an
assessment of volume or costliness. In
this case, we will use the best
information available to us to
prospectively identify a complex
version of the primary service, which is
indicated by the combination of
procedure codes reported on a claim
and assign those complex cases to a
higher level comprehensive APC. We
will reassess the appropriateness of
identifying certain combinations of
procedure codes as complex subsets of
a primary service once cost information
becomes available. This is comparable
to our policy for assigning new codes or
codes without claims data to an APC
based on the best information we have
available at the time of assignment and
reassessing that resource homogeneity
of that APC assignment when claims
data become available.
Table 10 shows the combinations of
procedure codes that we identified
within the 136 primary procedure codes
assigned to status indicator ‘‘J1’’ in the
CY 2012 claims data that we used in our
illustration of CY 2014 modeling and
the APC to which those combinations of
procedures would be reassigned, as well
as combinations of CY 2013 and CY
2014 procedure codes that are not
represented in our modeling dataset for

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
which we identified a clinical similarity
to existing services and would have
identified for reassignment as a complex
subset of the primary service for CY
2014. We intend to reassess both
procedure code assignments in the
comprehensive APCs and our
identification and reassignment of
complex cases represented by
combinations of procedure codes using
updated claims and cost report data as
we establish relative payment weights
each year. We note that we will have CY
2013 claims data for some of the
procedure codes listed in Table 10 and
we will reassess our identification of
combinations of procedures as complex
for CY 2015 in light of data and in
response to comments received on this
final rule with comment period in our
CY 2015 OPPS/ASC proposed rule.
In summary, after consideration of the
public comments we received, we are
finalizing the following methodology for
establishing an APC relative payment
weight for the comprehensive APC
policy, which is our proposed policy
with a modification. During ratesetting,
single claims reporting a single
procedure described by a HCPCS code
assigned to status indicator ‘‘J1’’ are
used to establish an initial APC
assignment for each procedure
described by that HCPCS code. The
geometric mean of the total estimated
costs on each claim is used to establish
resource similarity for each procedure
code’s APC assignment and is evaluated
within the context of clinical similarity,
with assignment starting from the APC
assignments in effect for the current
payment year. Claims reporting multiple
procedures described by HCPCS codes
assigned to status indicator ‘‘J1’’ are
identified and the procedures are then
assigned to a comprehensive APC, based
on the primary HCPCS code, that has
the highest geometric mean estimated
cost. This ensures that multiple
procedures described by HCPCS codes
assigned to status indicator ‘‘J1’’
reported on claims are always paid
through and assigned to the
comprehensive APC that would
generate the highest APC payment. If
multiple procedures described by
HCPCS codes assigned to status
indicator ‘‘J1’’ that are reported on the
same claim have the same APC
geometric mean estimated cost, as
would be the case when two different
procedures described by HCPCS codes
assigned to status indicator ‘‘J1’’ are
assigned to the same APC, identification
of the primary HCPCS code is then
based on the procedure described by the
HCPCS code assigned to status indicator
‘‘J1’’ with the highest HCPCS-level

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21:46 Dec 09, 2013

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geometric mean cost based on claims
with a single HCPCS code assigned to
status indicator ‘‘J1.’’ Where we have no
claims data upon which to establish a
HCPCS-level comprehensive geometric
mean cost, we will model a HCPCSlevel geometric mean cost for the sole
purpose of appropriately assigning the
primary HCPCS code reported on a
claim. The comprehensive APC
assignment of each procedure described
by HCPCS codes assigned to status
indicator ‘‘J1’’ is then confirmed by
verifying that the APC assignment
remains appropriate when considering
the clinical similarity, as well as the
estimated cost of all claims reporting
each procedure described by HCPCS
codes assigned to status indicator ‘‘J1,’’
including simple and complex claims,
with multiple device-related
procedures.
We are providing in Table 9 the APC
assignments for each procedure
described by HCPCS codes assigned to
status indicator ‘‘J1,’’ the APC geometric
mean estimated cost based on claims
reporting single procedures, and the
HCPCS geometric mean estimated cost
based on the claims reporting single
procedures that we used to identify
primary HCPCS codes and to assign the
procedure to an appropriate
comprehensive APC. If we were
implementing this policy in CY 2014,
Table 9 would contain the same
information as the claims processing
system and could, therefore, be used to
determine the initial APC assignment
and APC geometric mean estimated cost
for any procedure described by HCPCS
codes assigned to status indicator ‘‘J1’’
reported on claims prior to any
reassignment of certain costly claims for
a primary service that represent a
complex form of the primary service to
higher level APCs. Table 9 is configured
for CY 2104 and will be updated for
implementation in CY 2015.
We then considered reassigning
complex subsets of claims for each
primary service HCPCS code. All claims
reporting more than one procedure
described by HCPCS codes assigned to
status indicator ‘‘J1’’ are evaluated for
the existence of commonly occurring
combinations of procedure codes
reported on claims that exhibit a
materially greater comprehensive
geometric mean cost relative to the
geometric mean cost of the claims
reporting that primary HCPCS code.
This indicates that the subset of
procedures identified by the secondary
HCPCS code has increased resource
requirements relative to less complex
subsets of that procedure. If a
combination of procedure codes
reported on claims is identified that

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74887

meets these requirements, that is,
commonly occurring and exhibiting
materially greater resource
requirements, it is further evaluated to
confirm clinical validity as a complex
subset of the primary procedure and the
combination of procedure codes is then
identified as complex, and primary
service claims with that combination of
procedure codes are subsequently
reassigned as appropriate. If a
combination of procedure codes does
not meet the requirement for a
materially different cost or does not
occur commonly, it is not considered to
be a complex, and primary service
claims with that combination of
procedure codes are not reassigned. All
combinations of procedures described
by HCPCS codes assigned to status
indicator ‘‘J1’’ for each primary HCPCS
code are similarly evaluated.
Once all combinations of procedures
described by HCPCS codes assigned to
status indicator ‘‘J1’’ have been
evaluated, all claims identified for
reassignment for each primary service
are combined and the group is assigned
to a higher level comprehensive APC
within a clinical family of
comprehensive APCs, that is, an APC
with greater estimated resource
requirements than the initially assigned
comprehensive APC and with
appropriate clinical homogeneity. We
assessed resource variation for
reassigned claims within the receiving
APC using the geometric mean cost for
all reassigned claims for the primary
service relative to other services
assigned to that APC using the 2 times
rule criteria.
For new HCPCS codes and codes
without data, we will use the best data
available to us to identify combinations
of procedures that represent a more
complex form of the primary procedure
and warrant reassignment to a higher
level APC. We will reevaluate our APC
assignments, and identification and
APC placement of complex claims once
claims data become available. We then
recalculate all APC comprehensive
geometric mean costs and ensure
clinical and resource homogeneity.
We have provided in Table 10 the
combinations of procedures described
by HCPCS codes assigned to status
indicator ‘‘J1’’ that we used to set
payment rates and the additional
combinations of procedures described
by new HCPCS codes assigned to status
indicator ‘‘J1’’ that would be identified
for reassignment as a complex form of
the primary procedure in CY 2014. If we
were implementing this policy in CY
2014, Table 10 would contain the same
information as the claims processing
system and could, therefore, be used to

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maindgalligan on DSK5VPTVN1PROD with RULES

determine the final comprehensive APC
assignment and comprehensive APC
geometric mean estimated cost for any
procedure described by HCPCS codes

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assigned to status indicator ‘‘J1’’
reported on an individual claims. Table
10 is configured for CY 2104. We will

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update this table for implementation in
CY 2015.
BILLING CODE 4120–01–P

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74889

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

33206
33207
33207
33207

Insert heart
pm atrial
Insert heart
pm
ventricular
Insert heart
pm
ventricular
Insert heart
pm
ventricular

33208

Insrt heart
pm atrial &
vent
Insrt heart
pm atrial &
vent

33208

Insrt heart
pm atrial &
vent

33208

33208
33208
33208
33208
maindgalligan on DSK5VPTVN1PROD with RULES

Descriptor

VerDate Mar<15>2010

Insrt heart
pm atrial &
vent
Insrt heart
pm atrial &
vent
Insrt heart
pm atrial &
vent
Insrt heart
pm atrial &
vent

21:46 Dec 09, 2013

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Initial
APC**

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

Descriptor

0089

93620

0089

33210

0089

93620

0089

93650

0089

G0290

0089

33208

Electrophy
siology
evaluation
Insert
electrdipm
cath sngl
Electrophy
siology
evaluation
Periph field
stimul
perm
Drugeluting
stents,
single
Insrt heart
pm atrial &
vent

33210

Insert
electrd/pm
cath sngl

0089

0089

33217

0089

92980

0089

93619

0089

93620

PO 00000

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Fmt 4701

Insert 2
electrode
pm-de fib
Insert
intracorona
ry stent
Electrophy
siology
evaluation
Electrophy
siology
evaluation

Sfmt 4725

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

Final
APC**

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ER10DE13.281

TABLE 10.-CY 2014 COMPLEXITY REASSIGNMENTS: ILLUSTRATION

74890

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

33208

Insrt heart
pm atrial &
vent

33210

Insert
electrdlpm
cath sngl

33212

Insert pulse
gen sngllead

33213

33216

33216

33216

33224

33224

33224

33224

33227
maindgalligan on DSK5VPTVN1PROD with RULES

Descriptor

VerDate Mar<15>2010

0089

0106

Insert pulse
gen dual
leads
Insert 1
electrode
pm-de fib
Insert I
electrode
pm-de fib
Insert 1
electrode
pm-defib
Insert pacing
lead &
connect
Insert pacing
lead &
connect
Insert pacing
lead &
connect
Insert pacing
lead &
connect
Remove&rep
lace pm gen
singl

21:46 Dec 09, 2013

Jkt 232001

Initial
APC**

0090

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

Descriptor

Final
APC**

93650

Periph field
stimul
perm

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0655

Yes

Yes

92982

Coronary
artery
dilation

0090

Yes

Yes

33210

Insert
electrdlpm
cath sngl

0654

Yes

Yes

0089

Yes

Yes

0089

Yes

Yes

0089

Yes

Yes

0089

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0655

Yes

Yes

0654

Yes

Yes

0654

33210

0106

33210

0106

33216

0106

35476

0089

33208

0089

33216

0089

33217

0089

93650

0090

33210

PO 00000

Frm 00066

Fmt 4701

Insert
electrd/pm
cath sngl
Insert
electrd/pm
cath sngl
Insert I
electrode
pm-de fib
Repair
venous
blockage
Insrt heart
pm atrial &
vent
Insert I
electrode
pm-de fib
Insert 2
electrode
pm-defib
Periph field
stimul
perm
Insert
electrdlpm
cath sngl

Sfmt 4725

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ER10DE13.282

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Primary
HCPCS
Assigned
to Status
Indicator
"J1"

33227

Remove&rep
lace pm gen
singl

33228

Remv&replc
pmgen dual
lead

33230

Remv&replc
pm gen dual
lead
Remv&replc
pm gen dual
lead
Remv&replc
pm gen dual
lead
Insrt pulse
gen wldua1
leads

33240

Insrt pulse
gen w/singl
lead

33240

Insrt pulse
gen w/singl
lead

33263

Remv&replc
cvd gen dual
lead

33264

Remv&replc
cvd gen mult
lead

33264

Remv&replc
cvd gen mult
lead

33264

Remv&replc
cvdgenmult
lead

33228

33228

33228

maindgalligan on DSK5VPTVN1PROD with RULES

Descriptor

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Initial
APC**

0090

0654

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

Descriptor

Final
APC**

35475

Repair
arterial
blockage

33210

Insert
electrd/pm
cath sngl

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0654

Yes

Yes

0089

Yes

Yes

0089

Yes

Yes

0089

Yes

Yes

0089

Yes

Yes

0108

Yes

Yes

0654

33211

0654

33228

0654

93620

0107

33216

Insert card
electrodes
dual
Remv&repl
cpmgen
dual lead
Electrophy
siology
evaluation
Insert 1
electrode
pm-defib

33216

Insert 1
electrode
pm-defib

0108

Yes

Yes

33217

Insert 2
electrode
pm-defib

0108

Yes

Yes

33263

Remv&repl
c cvd gen
dual lead

0108

Yes

Yes

33210

Insert
electrdipm
cath sngl

0108

Yes

Yes

33216

Insert 1
electrode
pm-defib

0108

Yes

Yes

33217

Insert 2
electrode
pm-defib

0108

Yes

Yes

0107

0107

0107

0107

0107

0107

PO 00000

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Fmt 4701

Sfmt 4725

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74891

ER10DE13.283

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74892

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

33264

Descriptor
Remv&replc
cvdgenmult
lead

33264

Remv&replc
cvd gen mult
lead

33264
33264

35471
35471

35471
35471

Repair
arterial
blockage
Repair
arterial
blockage
Repair
arterial
blockage
Repair
arterial
blockage

0107

0107

33224

0108

Yes

Yes

35476

Repair
venous
blockage

0108

Yes

Yes

0108

Yes

Yes

0108

Yes

Yes

0229

Yes

Yes

0229

Yes

Yes

0107

93620

0107

93650

0083

35471

0083

35476

0083

37220

Iliac revasc

0229

Yes

Yes

0083

37224

FemJpopl
revas w/tla

0229

Yes

Yes

0229

Yes

Yes

0229

Yes

Yes

0445

Yes

Yes

0445

Yes

Yes

37204

Transcatheter
occlusion

0229

37204

37205

Transcath iv
stent percut

0229

G0290

21:46 Dec 09, 2013

Jkt 232001

Electrophy
siology
evaluation
Periph field
stimul
perm
Repair
arterial
blockage
Repair
venous
blockage

35476

VerDate Mar<15>2010

Final
APC**

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

Descriptor
Insert
pacing lead
& connect

Repair
arterial
blockage
Repair
venous
blockage

35475

maindgalligan on DSK5VPTVN1PROD with RULES

Remv&replc
cvdgenmult
lead
Remv&replc
cvdgenmult
lead

Initial
APC**

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

0083

35476

0083

35476

PO 00000

Frm 00068

Fmt 4701

Repair
venous
blockage
Repair
venous
blockage
Transcathet
er
occlusion
Drugeluting
stents,
single

Sfmt 4725

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Primary
HCPCS
Assigned
to Status
Indicator
"J1"

maindgalligan on DSK5VPTVN1PROD with RULES

37205

Descriptor
Transcath iv
stent percut

Initial
APC**

0229

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

Descriptor

Final
APC**

37204

Transcathet
er
occlusion

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0445

Yes

Yes

0445

Yes

Yes

37205

Transcath iv
stent percut

0229

37205

Transcath
iv stent
percut

37220

Iliac revasc

0083

37220

Iliac revasc

0104

Yes

Yes

37221

Iliac revasc
w/stent

0229

37205

Transcath
iv stent
percut

0445

Yes

Yes

37221

Iliac revasc
w/stent

0229

37220

Iliac revasc

0445

Yes

Yes

37221

Iliac revasc
w/stent

0229

37221

37224

Fern/popl
revas w/tla

0083

37224

Fern/popl
revas w/tla

37224

Fern/popl
revas w/tla

37225

Fern/popl
revas w/ather

37225

Fern/popl
revas w/ather

0445

Yes

Yes

35475

Iliac revasc
w/stent
Repair
arterial
blockage

0104

Yes

Yes

0083

37220

Iliac revasc

0104

Yes

Yes

0083

37224

Fern/popl
revas w/tla

0104

Yes

Yes

35476

Repair
venous
blockage

0445

Yes

Yes

0229

37205

Transcath
iv stent
percut

0445

Yes

Yes

37225

Fern/popl
revas w/ather

0229

37220

Iliac revasc

0445

Yes

Yes

37225

Fern/popl
revas w/ather

0229

37221

Iliac revasc
w/stent

0445

Yes

Yes

VerDate Mar<15>2010

21:46 Dec 09, 2013

Jkt 232001

0229

PO 00000

Frm 00069

Fmt 4701

Sfmt 4725

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ER10DE13.285

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74894

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

Initial
APC**

Descriptor

Final
APC**

37225

Fern/popl
revas
w/ather

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0445

Yes

Yes

0445

Yes

Yes

0445

Yes

Yes

0445

Yes

Yes

37225

Fern/popl
revas w/ather

37225

Fern/popl
revas w/ather

0229

37226

37225

Fern/popl
revas w/ather

0229

37228

37226

Fern/popl
revasc
w/stent

0229

G0290

Fern/popl
revasc
w/stent
Tib/per
revasc
w/tla
Drugeluting
stents,
single

37226

Fern/popl
revasc
w/stent

35471

Repair
arterial
blockage

0445

Yes

Yes

37226

Fern/popl
revasc
w/stent

37204

Transcathet
er
occlusion

0445

Yes

Yes

37226

Fern/popl
revasc
w/stent

0229

37205

Transcath
iv stent
percut

0445

Yes

Yes

0229

37220

Iliac revasc

0445

Yes

Yes

0229

37221

0445

Yes

Yes

0229

37226

0445

Yes

Yes

0229

37228

Iliac revasc
w/stent
Fern/popl
revasc
w/stent
Tib/per
revasc
w/tla

0445

Yes

Yes

35476

Repair
venous
blockage

0104

Yes

Yes

37226

37226

37226

37226

maindgalligan on DSK5VPTVN1PROD with RULES

Descriptor

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

37228

VerDate Mar<15>2010

Fern/popl
revasc
w/stent
Fern/popl
revasc
w/stent
Fern/popl
revasc
w/stent
Fern/popl
revasc
w/stent
Tib/per
revasc w/tla

21:46 Dec 09, 2013

Jkt 232001

0229

0229

0229

0083

PO 00000

Frm 00070

Fmt 4701

Sfmt 4725

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

Initial
APC**

Descriptor

Final
APC**

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

37228

Tib/per
revasc w/tla

0083

37220

Iliac revasc

0104

Yes

Yes

37228

Tib/per
revasc w/tla

0083

37224

Fern/popl
revas w/tla

0104

Yes

Yes

37228

Tib/per
revasc w/tla

0083

37228

Tib/per
revasc
w/tla

0104

Yes

Yes

0445

37221

0319

Yes

Yes

0445

37226

0319

Yes

Yes

0445

37229

0319

Yes

Yes

0319

Yes

Yes

0319

Yes

Yes

0319

Yes

Yes

0674

Yes

Yes

0674

Yes

Yes

0674

Yes

Yes

0385

Yes

Yes

37229

37229

37229

37230

37230

37230

54405

54405

54405

maindgalligan on DSK5VPTVN1PROD with RULES

Descriptor

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

57265

VerDate Mar<15>2010

Tib/per
revasc
w/ather
Tib/per
revasc
w/ather
Tib/per
revasc
w/ather
Tib/per
revasc
w/stent
Tib/per
revasc
w/stent
Tib/per
revasc
w/stent
Insert multicomp penis
pros
Insert multicomppems
pros
Insert multicomp penis
pros
Extensive
repair of
vagina

21:46 Dec 09, 2013

Jkt 232001

0445

37221

0445

37226

0445

37228

0386

53440

0386

53447

0386

54410

0202

57288

PO 00000

Frm 00071

Fmt 4701

Iliac revasc
w/stent
Fern/popl
revasc
w/stent
Tib/per
revasc
w/ather
Iliac revasc
w/stent
Fern/popl
revasc
w/stent
Tib/per
revasc
w/tla
Male sling
procedure
Remove/re
place ur
sphincter
Remove/re
place penis
prosth
Repair
bladder
defect

Sfmt 4725

E:\FR\FM\10DER4.SGM

10DER4

74895

ER10DE13.287

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

74896

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

57282

57282

57283

57283

57285

61885

61885

61885

63650

63650

63663

63663

maindgalligan on DSK5VPTVN1PROD with RULES

63685

VerDate Mar<15>2010

Descriptor
Colpopexy
extraperitone
al
Colpopexy
extraperitone
al
Colpopexy
intraperitone
al
Colpopexy
intraperitone
al
Repair
paravag
defect vag
Insrtlredo
neurostim 1
array
Insrtlredo
neurostim 1
array
Insrtlredo
neurostim 1
array
Implant
neuroelectro
des
Implant
neuroelectro
des
Revise spine
eltrd perq
aray
Revise spine
eltrd perq
aray
Insrtlredo
spine n
generator

21:46 Dec 09, 2013

Jkt 232001

Initial
APC**

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

0202

57285

0202

57288

0202

57285

0202

57288

0202

57288

0039

61885

0039

64553

0039

64569

0040

63650

0040

64555

0040

63663

0040

64555

0039

63650

PO 00000

Frm 00072

Fmt 4701

Descriptor
Repair
paravag
defect vag
Repair
bladder
defect
Repair
paravag
defect vag
Repair
bladder
defect
Repair
bladder
defect
Insrtlredo
neurostim
1 array
Implant
neuroelectr
odes
Revise/repl
vagus n
eltrd
Implant
neuroelectr
odes
Implant
neuroelectr
odes
Revise
spine eltrd
perq aray
Implant
neuroelectr
odes
Implant
neuroelectr
odes

Sfmt 4725

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0385

Yes

Yes

0385

Yes

Yes

0385

Yes

Yes

0385

Yes

Yes

0385

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0061

Yes

Yes

0061

Yes

Yes

0061

Yes

Yes

0061

Yes

Yes

0318

Yes

Yes

Final
APC**

E:\FR\FM\10DER4.SGM

10DER4

ER10DE13.288

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

63685
63685
63685
63685
63685
63685
63685
64555
64590
64590
64590
64590

maindgalligan on DSK5VPTVN1PROD with RULES

64590

VerDate Mar<15>2010

Descriptor
Insrtlredo
spIllen
generator
Insrtlredo
spine n
generator
Insrtlredo
spine n
generator
Insrtlredo
spine n
generator
Insrtlredo
spine n
generator
Insrtlredo
spIllen
generator
Insrtlredo
spine n
generator
Implant
neuroelectro
des
Insrtlredo
pn/gastr
stimul
Insrtlredo
pn/gastr
stimul
Insrtlredo
pn/gastr
stimul
Insrtlredo
pn/gastr
stimul
Insrtlredo
pn/gastr
stimul

21:46 Dec 09, 2013

Jkt 232001

Initial
APC**

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

0039

63655

0039

63663

0039

63664

0039

63685

0039

64555

0039

64565

0039

64575

0040

64555

0039

63650

0039

63664

0039

64555

0039

64575

0039

64590

PO 00000

Frm 00073

Fmt 4701

Descriptor
Implant
neuroelectr
odes
Revise
spine eltrd
perq aray
Revise
spine eltrd
plate
Insrtlredo
spine n
generator
Implant
neuroelectr
odes
Implant
neuroelectr
odes
Implant
neuroelectr
odes
Implant
neuroelectr
odes
Implant
neuroelectr
odes
Revise
spine eltrd
plate
Implant
neuroelectr
odes
Implant
neuroelectr
odes
Insrtlredo
pn/gastr
stimul

Sfmt 4725

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0061

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

0318

Yes

Yes

Final
APC**

E:\FR\FM\10DER4.SGM

10DER4

74897

ER10DE13.289

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

74898

Initial
APC**

92920

Descriptor
Prq cardiac
angioplast 1
art

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

0083

92920

92928

Prq card
stent w/angio
1 vsl

0104

92928

0104

92928

0104

92937

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

92928

92928

92933

0

0656

92933

92941

Prq card
revasc mi 1
vsl

0104

92941

0104

92943

0104

33210

0104

92980

0656

92981

0083

92982

0445

G0290

92982

Prq card
revasc
chronic 1vsl
Insert
intracoronary
stent
Insert
intracoronary
stent
Insert
intracoronary
stent
Coronary
artery
dilation

92995

Coronary
atherectomy

92943

92980

92980

92981

maindgalligan on DSK5VPTVN1PROD with RULES

Prq card
stent w/angio
1 vsl
Prq card
stent w/angio
1 vsl
Prq card
stentlathiangi

VerDate Mar<15>2010

21:46 Dec 09, 2013

Jkt 232001

PO 00000

Frm 00074

Fmt 4701

Descriptor
Prq cardiac
angioplast
1 art
Prq card
stent
w/angio 1
vsl
Prq card
stent
w/angio 1
vsl
Prq revasc
byp graft 1
vsl
Prq card
stentlathlan
gio
Prq card
revasc mi 1
vsl
Prq card
revasc
chronic
Ivsl
Insert
electrdipm
cath sngl
Insert
intracorona
ry stent
Insert
intracorona
ry stent
Coronary
artery
dilation
Drugeluting
stents,
single

Sfmt 4725

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0229

No

Yes

0656

No

Yes

0656

No

Yes

0656

No

Yes

0445

No

Yes

0656

No

Yes

0656

No

Yes

0656

Yes

Yes

0656

Yes

Yes

0319

Yes

Yes

0229

Yes

Yes

0319

Yes

Yes

Final
APC**

E:\FR\FM\10DER4.SGM

10DER4

ER10DE13.290

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

Initial
APC**

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

93619

Electrophysi
ology
evaluation

0085

93650

93619

Electrophysi
ology
evaluation

0085

93651

93619

Electrophysi
ology
evaluation

0085

93652

93620

Electrophysi
ology
evaluation

0085

93650

93620

Electrophysi
ology
evaluation

0085

93651

93620

Electrophysi
ology
evaluation

0085

93652

Descriptor
Ablate
heart
dysrhythm
focus
Ablate
heart
dysrhythm
focus
Ablate
heart
dysrhythm
focus
Ablate
heart
dysrhythm
focus
Ablate
heart
dysrhythm
focus
Ablate
heart
dysrhythm
focus

0238T

Trluml perip
athrc iliac art

0229

37220

Iliac revasc

0282T

Periph field
stimul trial

0040

0282T

0282T

Periph field
stimul trial

0040

63650

C9600

Perc drug-el
cor stent sing

0656

C9600

C9602

Perc d-e cor
stent ather s

0656

C9602

C9602

Perc d-e cor
stent ather s

0656

C9600

maindgalligan on DSK5VPTVN1PROD with RULES

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

VerDate Mar<15>2010

Descriptor

21:46 Dec 09, 2013

Jkt 232001

PO 00000

Frm 00075

Fmt 4701

Periph field
stimul trial
Implant
neuroelectr
odes
Perc drugel cor stent
sing
Perc d-e
cor stent
ather s
Perc drugel cor stent
sing

Sfmt 4725

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0444

Yes

Yes

0444

Yes

No

0444

Yes

No

0444

Yes

Yes

0444

Yes

No

0444

Yes

No

0445

Yes

Yes

0039

Yes

Yes

0039

Yes

Yes

0445

No

Yes

0445

No

Yes

0445

No

Yes

Final
APC**

E:\FR\FM\10DER4.SGM

10DER4

74899

ER10DE13.291

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

74900

Primary
HCPCS
Assigned
to Status
Indicator
"J1"

0656

C9604

0656

C9600

0656

C9606

0656

C9600

0656

C9600

0656

C9608

C9608

Descriptor
Perc d-e cor
revasc t cabg
s
Perc d-e cor
revasc t cabg
s
Perc d-e cor
revasc w
AMIs
Perc d-e cor
revasc w
AMIs
Perc d-e cor
revasc chro
sin
Perc d-e cor
revasc chro
add

G0290

Drug-eluting
stents, single

0656

G0290

G0290

Drug-eluting
stents, single

0656

33210

G0290

Drug-eluting
stents, single

0656

37224

G0290

Drug-eluting
stents, single

0656

37228

G0290

Drug-eluting
stents, single

0656

93620

G0291

Drug-eluting
stents,each
add

0319

G0290

G0291

Drug-eluting
stents,each
add

0319

G0291

C9604
C9604
C9606
C9606
C9607

maindgalligan on DSK5VPTVN1PROD with RULES

Initial
APC**

Combination
HCPCS
Assigned
to Status
Indicator
"J1"

VerDate Mar<15>2010

21:46 Dec 09, 2013

Jkt 232001

PO 00000

Frm 00076

Fmt 4701

Descriptor
Perc d-e
cor revasc t
cabg s
Perc drugel cor stent
sing
Perc d-e
cor revasc
wAMIs
Perc drugel cor stent
sing
Perc drugel cor stent
sing
Perc d-e
cor revasc
chro add
Drugeluting
stents,
single
Insert
electrdJpm
cath sngl
Fern/popl
revas w/tla
Tib/per
revasc
w/tla
Electrophy
siology
evaluation
Drugeluting
stents,
single
Drugeluting
stents,each
add

Sfmt 4700

Used
inCY
2012
Data

Would be
Used in
CY2014
Claim
Processing

0445

No

Yes

0445

No

Yes

0445

No

Yes

0445

No

Yes

0445

No

Yes

0445

No

Yes

0445

Yes

No

0445

Yes

No

0445

Yes

No

0445

Yes

No

0445

Yes

No

0319

Yes

No

0319

Yes

No

Final
APC**

E:\FR\FM\10DER4.SGM

10DER4

ER10DE13.292

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
BILLING CODE 4120–01–C

maindgalligan on DSK5VPTVN1PROD with RULES

(e) Impact of Proposed Comprehensive
APCs for Device-Dependent Procedures
• Impact on Medicare Payments
In our proposed rule, we stated that
because these device-dependent
comprehensive APCs are entirely
derived from existing services currently
reported on Medicare claims, the policy
is effectively budget neutral in its
impact on Medicare payments. We
noted that room, board, and nursing
services have been covered costs in the
delivery of outpatient services that
require the patient to receive nursing
services, occupy a bed for outpatient
care, and maintain a controlled
metabolic intake during a prolonged
outpatient stay. Although we proposed
to include new revenue center costs for
room and board when reported on these
claims, we emphasized that we were
proposing to include them to increase
the accuracy of reporting and not
because they represent a new cost.
Comment: One commenter opined
that CMS is correct to include the costs
of all component services and supplies
that would be packaged under the
proposal for CY 2014; all adjunctive
services, including laboratory tests,
diagnostic tests and evaluation and
management services; DMEPOS for
which payment would be made under
the OPPS; services reported by therapy
codes that would be payable under the
OPPS; room and board as reported in
room and board revenue cost centers;
and cost of hospital-administered drugs
(regardless of the route of
administration) to ensure that the
geometric mean cost upon which the
payment for these comprehensive APCs
would be based would include all
necessary costs of the services.
However, several commenters were
concerned that CMS did not account for
the payments for services proposed to
contribute to the comprehensive APC
geometric mean costs into the CY 2013
current year payment estimates in
budget neutrality calculations, but
included these costs in the CY 2014
OPPS payment rate calculations. The
commenters pointed out that CMS
proposed to include the CLFS payments
for laboratory services proposed for
packaging in the OPPS current year (CY
2013) total payment amount when
calculating budget neutrality
adjustments for the prospective
payment year (CY 2014), but that CMS
apparently did not add payments to the
OPPS current year total payment
estimate for the adjunctive items and
services that would be newly paid
under the OPPS through the 29
comprehensive APCs. In short, payment

VerDate Mar<15>2010

21:46 Dec 09, 2013

Jkt 232001

for newly added services should be
added to the total CY 2013 payment
level against which CY 2014 payments
would be held budget neutral. These
commenters defined the additional
services that would be newly paid
under the OPPS to include durable
medical equipment, therapy services,
inpatient nursing services, and inpatient
room and board for overnight outpatient
stays. The commenters further stated
that the proposed rule provides no
information concerning how this
calculation was made and data was not
provided to allow the public to review
and validate the determination of
budget neutrality.
Response: We appreciate the
acknowledgement that we correctly
identified and included the costs of
adjunctive services contributing to these
comprehensive OPD services, with the
exception of charges on inpatient
revenue codes, including room and
board revenue codes. We agree with the
commenters that we should have
included payments for adjunctive
services proposed for payment through
the OPPS for the first time in the current
year budget neutrality calculations as
well as in the relative payment weights
for the proposed year calculation. In
calculating budget neutrality
adjustments for CY 2015 we will
incorporate modeled payments for
services that will be newly included in
the comprehensive APCs on both sides
of the budget neutrality calculation as
we did for those laboratory services that
we are packaging for CY 2014.
Comment: Several commenters stated
that, although they recognized that
changes in assignments in a prospective
(average) payment system cause some
payments to increase and others to
decrease, the commenters were
concerned that payment amounts have
not been set to appropriately encompass
the additional services that will be
packaged. Another commenter noted
that the shift from limited to
comprehensive APCs would be
accompanied by wide shifts in payment
and questioned whether the changes
with the expanded bundles, including
occasional decreases, accurately
reflected the costs of the additional
packaged services. They requested that
CMS delay proposed payments for the
comprehensive APCs to ensure payment
amounts have been set appropriately to
include the additional packaged
services.
Response: We agree with commenters
that, for some services, there was
considerable variation in the payment
change from an isolated payment for the
primary service, a device-related
procedure, to a comprehensive payment

PO 00000

Frm 00077

Fmt 4701

Sfmt 4700

74901

for the complete service. There were a
number of reasons for this variation.
First, services varied considerably with
respect to the number and estimated
cost of adjunctive services that were
typically provided during the same
encounter. Some services were almost
completely described by the primary
HCPCS code with status indicator ‘‘J1’’
with few additional adjunctive services
reported in the claims data. Proposed
comprehensive payment for these
services did not change significantly.
Other services, however, appear with
many adjunctive services reported in
the claims data that became packaged
into the comprehensive payment, so the
comprehensive payment for those
primary HCPCS codes was considerably
greater than the payment for the primary
service alone.
Second, comprehensive payments
allow us to use almost all of the claims
for the primary service, rather than
using a smaller subset of claims that
have a single major procedure and no
other significant procedures. We believe
that this methodology provides much
more accurate cost estimates for these
comprehensive services, including
incorporating the cost of all adjunctive
services proportional to their presence
on claims reporting comprehensive
services into our final APC relative
payment weight calculation. Our
adoption of the geometric mean-based
methodology rather than the medianbased methodology to establish relative
payment weights finalized in the CY
2013 OPPS/ASC final rule with
comment period (77 FR 68229 through
68233) ensures that the final APC
relative payment weight captures the
complete spectrum of estimated
geometric mean costs of procedures
reported on claims and assigned to that
APC. We recognize that the magnitude
and direction of the change in payment
from current OPPS payment structure
for more granular payment for
individual services to the proposed
single comprehensive APC payment for
the primary service and its adjunctive
services varied from primary service to
primary service. In a few instances, the
relative geometric mean cost of the
entire comprehensive service was less
than the geometric mean cost of the
primary service alone. We believe that
this is largely attributable to the
improved accuracy of our ratesetting
process. Under our traditional
ratesetting methodology, we attempt to
identify a cost for each separately
payable service from our claims data.
We use many strategies to use as much
claims data as possible, but we cannot
use all claims to estimate the APC

E:\FR\FM\10DER4.SGM

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maindgalligan on DSK5VPTVN1PROD with RULES

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

geometric mean cost underpinning the
relative payment weight.
Comprehensive APCs allow us to use
almost all of the claims for the primary
service to calculate the geometric mean
cost and the comprehensive APC to
which the primary service is assigned.
Finally, we note that we reassigned
some procedures described by HCPCS
codes assigned to status indicator ‘‘J1’’
to different comprehensive APCs based
on public comments that we received.
Also in response to public comments
that we received, we are finalizing a
methodology for identifying complex
subsets of the procedures reported in
combination with the primary service
that contain multiple device-dependent
procedures and require greater
resources, and we are reassigning these
complex cases to a higher level
comprehensive APC. We believe that
reassigning claims for complex forms of
the primary procedure to a higher level
APC within the same clinical family
directly addresses commenters’
concerns regarding recognizing the
additional cost of ancillary services in
complex procedures and improves the
relative accuracy of the final OPPS
payment for the primary service.
Comment: Several commenters
questioned whether outlier payments
would be adequate under the OPPS as
the new comprehensive APCs are
formed and packaging is expanded. The
commenters noted that under the IPPS
outlier payments are set at 5.1 percent
of total payments, compared to 1
percent under the OPPS, and costs
reported above the outlier threshold
under the IPPS are paid at 80 percent
compared to 50 percent under the
OPPS. One commenter suggested that
CMS increase outlier payments for
comprehensive APCs, while another
commenter suggested that outlier
payments are an issue that CMS should
examine and perhaps should have
examined prior to advancing new
packaging policies.
Response: Although we did not
propose a change in outlier payments,
we will consider whether we should
expand our current outlier payment
policy. Section 1833(t)(5)(C) of the Act
specifies that the estimated total of
additional payments for outliers cannot
exceed 3 percent of estimated total
program payments in that year.
Currently, we allocate 1 percent of total
program payments to outlier payments
each year. Overall, we believe that the
current structure of the OPPS, which
continues to make separate payment for
most services, does not create the same
financial risk for individually costly
cases as IPPS payment through MS–
DRGs, for example. Further, we are not

VerDate Mar<15>2010

21:46 Dec 09, 2013

Jkt 232001

sure an expansion to our outlier
payment policy is necessary because we
believe that our final policy to reassign
claims for complex forms of primary
services to higher level APCs reduces
financial risk associated with
comprehensive APC payment.
• Impact on APCs
Impact on Composite APCs. There is
currently one device-dependent
composite service under the OPPS,
cardiac resynchronization therapy,
which is assigned to APC 0108. Because
a comprehensive APC will treat all
individually reported codes as
representing components of the
comprehensive service, all of the
elements of the composite service are
included in the new comprehensive
service. Therefore, cardiac
resynchronization therapy will no
longer be identified as a composite
service, but will be identified as a
comprehensive service. All services
currently assigned to APC 0108,
including cardiac resynchronization
therapy services, were assigned to the
new comprehensive APC in our CY
2014 proposal.
Comment: Several commenters noted
that, whereas we proposed making APC
0085 (Level II Electrophysiologic
Procedures) a comprehensive APC, we
did not discuss composite APC 8000
(Cardiac Electrophysiologic Evaluation
and Ablation Composite), which also
would be absorbed by the new
comprehensive APC policy. The
commenters also noted that they
believed that CMS calculated an APC
geometric mean cost and payment rate
based on the same set of claims for both
APCs.
Response: We stated that cardiac
resynchronization therapy services
(assigned to APC 0108 Cardiac
Resychronization Therapy) would no
longer be identified as a composite
service because it would be
incorporated into a comprehensive
service. However, we did not state in
the proposed rule that the same
situation existed in terms of APC 8000.
Commenters are correct that the same
principle applies. Because one of the
components of the composite service is
assigned a procedure assigned to status
indicator ‘‘J1,’’ all of those claims
reporting these services would trigger
the comprehensive payment policy that
we are finalizing with modification in
this final rule with comment period.
Commenters also are correct that in the
proposed rule, we incorrectly assigned
procedures to both APCs and calculated
geometric mean costs and relative
payment weights based on the same set
of claims. We will reassign the previous

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status indicators for procedures
assigned to APC 8000 from ‘‘S’’ and ‘‘T’’
to status indicator ‘‘J1’’ for CY 2015, and
we will make a comprehensive APC
payment for cardiac electrophysiologic
evaluation and ablation services.
Impact on Claims Used to Calculate
Other APCs. Some of the costs reported
on claims for device-dependent
procedures may no longer be available
to contribute to the calculations for
other services through the pseudo-single
process described in section II.A. of this
final rule with comment period.
However, the loss of usable cost data for
these services will not create a
significant impact on other APCs
because most of these services currently
cannot be isolated as the ‘‘single
services’’ that can be used in the cost
calculation process. The exceptions are
services such as EKGs and chest x-rays
that occur in very high frequency across
all types of encounters, and laboratory
services and drugs, neither of which are
calculated based on average cost.
Finally, it is also important to note that
the impact associated with the loss in
usable claims data is lessened when
assessing the benefit of more accurate
cost calculations and ratesetting that
will be achieved from the use of 400,000
new claims that can now be used for
these purposes because of the
establishment of the comprehensive
APCs.
Impact on Device-Dependent APCs.
The impact on current devicedependent APCs is described above in
section II.A.2.d.(1) of this final rule with
comment period. Comprehensive APC
geometric mean costs generally exceed
the device-dependent procedure
geometric mean costs by an average of
11 percent, less than $1,000 per claim.
The direct cost contribution of other
adjunctive OPPS services accounts for
most of this increase, with laboratory
tests contributing approximately $18 per
claim (a 0.1 percent increase) and other
adjunctive covered outpatient services
(not currently paid under the OPPS)
contributing an additional $18 per
claim. There is significant variation
across comprehensive APCs, however,
not only because the distribution of
adjunctive services varies, but also
because the larger bundles allow a more
complete incorporation of packaged
costs. Finally, the use of comprehensive
APCs would allow the number of claims
used to estimate costs for these services
to almost triple from 233,000 to 649,000,
increasing the accuracy of our relative
cost estimates.
Comment: Several commenters were
concerned about hospitals’ willingness
to consider new technologies, which
can be costly. The commenters

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expressed concern that this proposal
would impact device pass-through
payment, New Technology APC
provisions, and payments for devicedependent APCs. The commenters also
were concerned that packaging is likely
to limit the data available for future
OPPS updates because the commenters
believed that hospital reporting would
be less accurate if there were no
payment consequences for omitting a
device on the claim and that the sunset
of device edits would reduce the
reliability of the data provided for
payment calculations for the same
reason. The commenters also were
concerned that future potential passthrough device categories may be
disadvantaged because pass-through
eligibility includes demonstrating
costliness relative to several thresholds
based on APC payment. Specifically, the
commenters were concerned that fewer
device categories would be eligible for
pass-though payment because fewer
device categories would exceed a new
higher threshold as a percent of the APC
payment amount as payment increases
with expanded packaging. Some
commenters requested that CMS
continue to apply the procedure-todevice and device-to-procedure edits.
One commenter asserted that hospitals
do not find these edits to be
burdensome, that the edits are a useful
flag for accurate charging and that, if it
is eliminated, providers could fail to
report device charges completely.
Response: We do not agree with
commenters that comprehensive APC
payment will inhibit adoption of new
technology. We have not proposed any
changes to the New Technology APCs or
device pass-through payment provisions
and we discuss these payment policies
in sections II.A.2.d.(1) and I.B. of this
final rule with comment period. These
processes for supporting new
technologies will continue. New
Technology APCs are reserved for new
services that are not eligible for
transitional pass-through payments for a
device, drug, or biological, and for
which we lack sufficient clinical
information and cost data to
appropriately assign them to a clinical
APC group. Our proposed policy does
not impact our New Technology APC
policy, and our determination of new
technology eligibility is not dependent
on a particular cost threshold.
With regard to pass-through payment
eligibility, we agree with the
commenters that comprehensive APCs
will create expanded bundles and
generally higher payment from which
the dollar value of the various cost
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determined. The specific cost thresholds
used in determining eligibility of a new
device pass-through category are listed
in 42 CFR 419.66(d). For CY 2015,
payment for device-dependent
procedures through comprehensive APC
payment will create a higher costliness
threshold against which new device
categories interested in pass-through
status must demonstrate costliness. We
believe that the statutory construction of
the OPPS envisions the relative cost of
services to vary over time as services are
redefined, recoded, and reassigned
among APCs, and as new claims and
cost report data become available,
which would raise or lower the cost
threshold for pass-through payment
eligibility under section
1833(t)(6)(A)(iv)(II) of the Act. We
estimate that, for CY 2014, the inclusion
of additional adjunctive packaged
services, in aggregate, account for
approximately 11 percent of the cost of
these device-intensive services. Relative
payment weights for device-related
procedures can change by this amount
each year due to annual recalibration.
As we implement the comprehensive
APC payment policy in CY 2015, we
will monitor the impact of eligibility for
device pass-through payments for a
change in the percent of potential
device categories failing to clear the
current cost threshold criteria.
We also believe that that expanded
payment bundles encourage adoption of
new technologies by giving hospitals
more flexibility over how they deliver a
particular service and creating more
opportunities for hospitals to make
tradeoffs to absorb the cost of improved
devices. As we discuss in section
II.A.2.d.(1) of this final rule with
comment period, we plan to continue
our historical device editing in CY 2014.
Also as indicated in that section, we are
further assessing whether we need to
continue claims processing edits
requiring a device HCPCS code to be
reported on the claim when we
implement the comprehensive APCs
policy in CY 2015.
• Impact on Beneficiary Payments
Under the comprehensive service
APCs, instead of paying copayments for
a number of separate services that are
generally, individually subject to the
copayment liability cap at section
1833(t)(8)(C)(i) of the Act, beneficiaries
can expect to only pay a single
copayment that is subject to the cap.
This will likely reduce beneficiary
overall liability for most of these claims.
Comment: Several commenters agreed
with CMS that, due to the inpatient
deductible cap on beneficiary
copayments, net beneficiary

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coinsurance would decrease under the
proposed change. One commenter was
concerned that beneficiary out-of-pocket
costs may still be higher for any
individual beneficiary. The commenter
was particularly concerned that new
cost-sharing with beneficiaries for
laboratory services would be contrary to
statue and congressional intent. The
commenter objected to a proposal that
would impose new beneficiary costsharing requirements in order to cut
total projected Medicare spending for
outpatient services.
Response: We believe that this
proposal decreases the liability for
almost all beneficiaries receiving
primary procedures assigned to
comprehensive APCs in CY 2015
because the inpatient deductible cap,
mandated by statute to apply to single
services, will now apply to the entire
hospital claim, as it is now considered
a single service or procedure. We agree
with the commenters that there may be
some isolated beneficiaries who may
have a higher beneficiary liability than
they would have had we not proposed
comprehensive APCs. In many
instances, and for these device-related
procedures in particular, beneficiaries
will no longer make copayments for
individual ancillary services. Because
the device insertion procedures that we
have proposed as comprehensive
services are universally very expensive,
the cap will apply to the majority of
claims reporting services assigned to
comprehensive APC. We received many
public comments on our proposal to
package laboratory services and address
those comments and concerns in our
discussion of that final policy in section
II.A.3.c.(3) of this final rule with
comment period.
• Impact on Specific APCs
In conjunction with our proposed
rule, we published Addendum B, which
identified specific proposed
comprehensive payments associated
with HCPCS codes proposed for
assignment to status indicator ‘‘J1’’
under the proposed comprehensive APC
payment policy. We identified the 29
device-dependent APCs proposed for
comprehensive APCs and assigned
HCPCS codes based on their prior APC
assignment. Most of the public
comments that we received were
specific to certain HCPCS codes, certain
APCs, or certain families of services.
Although we are not implementing
this final comprehensive APC payment
policy until CY 2015, to address
concerns by some commenters that they
could not fully model the proposal, we
provide all of the information we would
use to create a relative payment weight

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for CY 2014 using the CY 2012 claims
data in order to illustrate the final
comprehensive APC methodology. We
summarize and respond to the public
comments on individual services in this
section, as if we were implementing this
policy for CY 2014, grouped by those
families of services below. We will
recalibrate all of the comprehensive
APC relative payment weights for CY
2015 using CY 2013 claims data,
consistent with our annual recalibration
of APC relative payment weights, to
reflect the most recently available
claims and cost information in next
year’s rulemaking cycle.
Comment: With reference to the
neurostimulator family of APCs, APCs
0039, 0041, 0061, and 0318, one
commenter was concerned that the CY
2014 proposal would broadly decrease
payments for neurostimulator
insertions. Other commenters believed
that total payments would remain
approximately the same, but also
believed that the spread of costs within
a given APC was too great when certain
combinations of devices were used.
Commenters argued that there is a vast
difference in supply (device) costs
between a battery or generator
replacement and a paddle lead implant
or even a percutaneous lead implant.
Commenters argued that bundling all of
the different variations of
neurostimulator implants into one
comprehensive payment could create an
unintended incentive to use less
effective single leads and to increase the
number of device replacements and
revisions, which could potentially limit
the therapeutic effectiveness for patients
with complex pain syndromes.
With respect to leads, commenters
stated that payment for dual lead trials
would be decreased by nearly 40
percent, while single lead trials would
be increased by 25 percent, encouraging
single lead trials. Similarly, the payment
for the initial dual lead implant would
decrease by 16 percent. The commenter
asserted that this policy may reverse the
common clinical practice of dual lead
trials for the majority of patients and
create a financial incentive to reduce the
number of leads used for permanent
implants, increasing the need for
additional lead placements at a later
time, which would result in an increase
in readmissions and possible increase in
adverse events and complications.
Additionally, commenters believed
that this proposal could create
incentives to use shorter life devices
such as non-rechargeable devices,
requiring more frequent replacement
procedures in future years. The
commenters stated that on the one hand,
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incentive to use less expensive devices
initially. However, the commenter
further stated that on the other hand
because CMS is proposing to increase
the generator replacement payment rate
by 29 percent, providers could be
encouraged to use shorter life devices
that may require more frequent
replacements with a consequent
increase in Medicare spending and
beneficiary cost sharing.
Commenters proposed a number of
modifications to address these issues,
including the creation of composite
APCs to pay appropriately for the
combination of devices provided to an
individual patient. The commenters
recommended that CMS retain the
existing single component APCs for use
when only one component (that is, a
generator or an array) is implanted or
replaced, and create two new composite
APCs that reflect different combinations
of components—pulse generator and
one array and pulse generator and two
or more arrays. Alternatively, the
commenters recommended
Comprehensive APC 0318 (Implantation
of Neurostimulator Pulse Generator and
Electrode) as the appropriate assignment
for most complete neurostimulator
systems procedures because it is already
used to describe complete cranial nerve
and vagus nerve systems procedures.
Several commenters recommended
maintaining a differentiation between
laminectomy lead implants and
percutaneous implants, and between
spinal systems and sacral systems.
Response: We do not agree with the
commenters who are concerned that we
are underestimating payments for
neurostimulators. We believe that by
using all claims for these services,
instead of the much smaller subsets of
single claims that we used for our
device-dependent methodology, any
adjustments in the payments for specific
services represent a more accurate
estimation of relative resources required
for the primary service than past
estimates. We also note that by
estimating the total cost of the
procedure by packaging all charges
reported on the claim, we ensure that all
of the estimated costs of all of these
services contribute to the cost
estimation for the neurostimulator
procedure. Our methodology for
identifying single claims, which is
designed to isolate the unique costs
associated with a specific service, makes
some assumptions about assigning
packaged costs to individual services.
However, we agree with the commenters
who were concerned that complex
procedures such as those characterized
by multiple units and multiple
comprehensive components have a wide

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variation in comprehensive costs and
that the geometric mean cost of these
subsets is often materially greater than
the geometric mean cost of all claims
that include both simple and complex
versions of the procedure. We agree
with the commenters that delivery of
these complex services could
potentially be impacted under our
proposed comprehensive APC payment
policy.
Specifically, we agree with the
commenters that procedures that
implant individual elements of device
systems, such as a generator without
leads, may have significantly different
costs than procedures that implant
entire systems. We also agree with the
commenters that there may be
significant resource differences between
individual elements of neurostimulator
systems, such as transcutaneous leads
and implanted paddles, and between
different systems, such as epidural
systems and sacral systems. These
differences may then be reflected in the
variation in the estimated geometric
mean costs of the comprehensive
service due to different combinations of
component services. Therefore, we are
accepting the commenters’ suggestions
and we would reconfigure these APCs to
better separate procedures for
individual elements of neurostimulator
systems from procedures in which the
entire system is implanted, and to more
closely align relative resource
requirements of complex subsets of the
service with the corresponding payment
for that subset if we were implementing
this comprehensive APC policy in CY
2014.
Once we reassign complex claims for
a primary service to a higher level APC,
as we discuss below, we believe that
many of the concerns raised by the
commenters would be directly
addressed, and therefore, we do not
believe that we should not consider
these procedures for a comprehensive
APC assignment in CY 2015. We believe
that hospitals understand that under a
prospective payment system the cost of
providing care to individual patients
may vary relative to the payment
amount, which is one hallmark of a
prospective payment system. We are
comfortable implementing
comprehensive APCs for
neurostimulators in CY 2015 with
variance in the geometric mean costs of
individual services that are comparable
to the variance we see in estimated
hospital costs for traditional, discrete,
noncomprehensive services.
To implement the commenters’
suggestions we would use the four
techniques described above to reassign
claims for complex forms of the primary

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service to higher level APCs. We have
analyzed the claims in which multiple
units or multiple HCPCS codes assigned
to status indicator ‘‘J1’’are present and
have divided individual services into
simple and complex services, with
complex services characterized by
complete systems, multiple components
or other associations that correlate with
high resource requirements (high cost).
We are adopting the basic suggestion of
differentiating between partial systems
and complete systems, and we plan to
use the claims data to group clinically
similar, high-volume, complex
procedures into APCs with similar costs
in CY 2015. In this final rule with
comment period, we invite commenters
to apply the analysis, methodology, and
the payment estimation techniques
presented here to specific
neurostimulator services and to provide
comment on these illustrative CY 2014
reassignments of complex
neurostimulator claims.
Changes to implement the
commenters’ suggestions and concerns
for CY 2014, if we were implementing
this policy for CY 2014, for this
neurostimulator family of APCs are as
follows:
• APC Redesignations: We would
eliminate APC 0315, and we would
rename APC 0039 and APC 0318.
• APC Reassignments: We would
reassign CPT codes 43647 and 63655
from APC 0061 to APC 0039; CPT code
0268T from APC 0039 to APC 0040; CPT
codes 63664 and 64553 from APC 0040
to APC 0061; and CPT code 61886 from
APC 0315 to APC 0318.
• Complexity Reassignment: We
would reassign certain HCPCS code
combinations that occur with CPT codes
0282T, 61885, 63650, 63663, 63685,
64555, and 64590 as complex forms of
the primary service. We summarize all
of the codes that we would reassign as
complex forms of their primary
procedure in Table 10 as if we were
implementing this policy in CY 2014.
We request comment on these specific
HCPCS code movements and complex
claim reassignments. We will reassess
the application of this policy to this
neurostimulator family of APCs with CY
2013 claims data for CY 2015
implementation, and we will update
them based on new claim and cost
report data and any relevant new CY
2015 codes through next year’s
rulemaking cycle.
Comment: With reference to the
endovascular family of APCs, APCs
0082, 0083, 0104, 0229, 0319, and 0656,
one commenter was supportive of the
approach to further integrate the
payment methodologies for the
inpatient and outpatient systems in this

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case and agreed that patients who
receive the major services contained
within the 29 comprehensive APCs are
unlikely to be receiving unrelated
services on the same day. The
commenter urged CMS to monitor the
effects of this new system to ensure that
patients continue to receive access to
the most appropriate care. Other
commenters were generally supportive
of the approach, but believed that there
were specific reasons for not applying
comprehensive status to the
endovascular family APCs, for delaying
the implementation for these
comprehensive APCs, or for modifying
payments within the family. One
commenter specifically was concerned
about a substantial decline in payment
for APC 0083 (Coronary Angioplasty,
Valvuloplasty, and Level I Endovascular
Revascularization of the Lower
Extremity).
Commenters noted that for CY 2011,
16 new HCPCS codes were
implemented to create comprehensive
codes for endovascular treatment in the
lower extremity arterial territories; for
CY 2013, new base and add-on codes
were created for coronary artery
interventions; and four new
comprehensive endovascular codes will
be added for CY 2014. Several
commenters objected to the creation of
any comprehensive APCs using any CPT
codes that are less than 3 years old, as
they believe the data is not yet reliable.
Several commenters noted that the
existing OPPS payment structure for
coronary and peripheral
revascularization procedures
(angioplasty and stent placement) is
component-based, providing separate
but often reduced APC payments for
each clinical aspect of the
revascularization service, which are
frequently assigned a status indicator of
‘‘T’’ (multiple reduction applies).
Commenters argued that the clinical
scenarios for revascularization
procedures are based on each
beneficiary’s unique clinical needs,
making them incredibly complex with
required resources varying significantly
from patient to patient. Given this
complexity, one commenter opined that
coronary and peripheral
revascularization procedures are illsuited for comprehensive APCs because
this type of payment structure is unable
to capture the differences in hospital
resources associated with the
differences in revascularization services
offered to patients. A few commenters
believed that the proposal will
inevitably give hospitals an incentive to
use less expensive items and less
extensive procedures even if those items
will increase program costs as a whole

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and carry greater risk for beneficiaries.
In a specific example, one commenter
was concerned that all cardiac magnetic
resonance imaging and other imaging
studies within a 30-day period would be
bundled into payment for the
comprehensive APC, discourage the use
of appropriate imaging modalities, and
result in cost as the driving factor in
patient access to needed medical
imaging services.
Finally, another commenter believed
that comprehensive APCs for stent
placement procedures would allow a
few patients receiving all the possible
components of the bundle to experience
a lesser hospital outpatient copayment
amount, but would cause many
beneficiaries to pay for services that
they have not received and do not need.
Response: We appreciate the
commenters’ support for our conclusion
that beneficiaries receiving these major
services are unlikely to be receiving
unrelated services on the same day, and
we appreciate commenters who were
generally supportive of our intent to
create comprehensive packages. We
recognize that there has been recent
change in the coding and billing of
many of these endovascular procedures,
but we believe that hospitals prepare to
adopt new codes each year and establish
a charge relative to the best cost
information available to them. We use
estimated costs from claims data as soon
as it becomes available to establish APC
relative payment weights generally, and
we have no reason to believe that
continuing that practice for
comprehensive APCs is not appropriate.
With respect to the comments
concerning APC 0083, for example, we
note that the estimated hospital costs for
the procedure alone did not change
significantly between CY 2011 and CY
2012, and that the proposed
comprehensive service geometric mean
cost was approximately 10 percent
higher than the single procedure
geometric mean cost, a ratio that is
comparable to the average aggregate
increase in cost for the additional
ancillary services observed across all
proposed comprehensive services,
indicating continued stability in the
relative cost estimations despite changes
to a methodology that now aggregates all
estimated costs reported on each claim
before calculating a geometric mean
cost.
However, we agree with the
commenters that endovascular
procedure coding has historically been
component based. In general,
commenters argued that multi-vessel
endovascular procedures have different
resource requirements than single-vessel
procedures. We agree with the

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commenters that there is a correlation
between the number of vessels treated
and hospital costs. However, we also
observe that there are a variety of
endovascular procedures where the
geometric mean costs of some singlevessel procedures are similar to the
geometric mean costs of other multi
vessel procedures. Nonetheless, we
generally agree with the commenters
that the range of estimated costs for any
individual HCPCS code or HCPCS code
combination is wide, with considerable
overlap occurring across primary service
codes and code combinations. We agree
that, in general, payments for multiple
vessel services should be adjusted to
account for higher complexity and
resources when those higher resources
are reflected in our claims data.
To model commenters’ suggestions for
illustration purposes in CY 2014, we
have used the techniques described
above to reassign claims for certain
high-cost, complex versions of the
primary service, primarily multiple
vessel endovascular procedures. We
analyzed the claims in which multiple
units of a primary service or multiple
HCPCS codes assigned to status
indicator ‘‘J1,’’ including the primary
service, are present. We divided
individual services into simple and
complex services, with complex
services characterized by multiple
components, multiple vessels, or other
associations that correlate with high
resource requirements (high cost). For
our CY 2014 illustration, we are
adopting the basic suggestion of
differentiating between single vessel
and multiple vessel procedures, and we
are using the claims data to group
clinically similar, high-volume,
complex procedures into APCs with
similar costs. In this final rule with
comment period, we invite commenters
to apply the analysis, methodology, and
the payment estimation techniques
presented here to specific endovascular
services and to provide comment on
these illustrative CY 2014 reassignments
of complex claims for endovascular
services.
Changes to implement the
commenters’ suggestions and concerns
for CY 2014, if we were implementing
this policy for CY 2014 for this
endovascular family of APCs are as
follows:
• APC Redesignations: We would
delete APC 0082 and reassign its
services to other APCs. We would create
a new APC, APC 0445 (Level III
Endovascular Procedures). We would
rename APCs 0083, 0104, 0229, 0319,
and 0656.
• APC Reassignments: We would
reassign CPT codes 37229, 37230 and

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92995 from APC 0082 to APC 0445; CPT
codes 92984, 92987, 92990, and 92997
from APC 0083 to APC 0104; and
HCPCS code G0291 from APC 0656 to
APC 0319 (for the purpose of estimating
geometric mean costs from CY 2012
claims data used for CY 2014
ratesetting).
• New HCPCS Codes: The
comprehensive APC assignments that
we would make for new HCPCS codes
for this family are listed in Table 9. The
new codes in this family would include
CPT codes 37236, 37237, 37238, 37239,
37241, 37242, 37243, 37244, 92920,
92921, 92924, 92925, 92928, 92933,
92934, 92937, 92938, 92941, 92943,
92944, and HCPCS codes C9600, C9601,
C9602, C9603, C9604, C9605, C9606,
C9607, and C9608.
• Complexity Reassignments: We
would reassign certain HCPCS code
combinations that occur with HCPCS
and CPT codes 0238T, 35471,
35475,35476, 37204, 37205, 37220,
37221, 37224, 37225, 92920, 92928,
92933, 92941, 92943, 92980, 92981,
92982, 92995, C9600, C9602, C9604,
C9606, C9608, G0290, and G0291. We
summarize all of the codes that we
would reassign as complex forms of
their primary service in Table 10 as if
we were implementing this policy in CY
2014.
We request comment on these specific
HCPCS movements and complex claim
reassignments. We will reassess the
application of this policy to this
endovascular services family of APCs
with CY 2013 claims data for CY 2015
implementation, and we will update
them based on new claims data and any
relevant new CY 2015 codes through
next year’s rulemaking cycle.
Comment: Commenters generally did
not object to the creation of
comprehensive APCs for cardiac
electrophysiology (EP) studies and one
commenter specifically supported the
proposal. However, commenters were
confused and concerned about the
impact of comprehensive APCs on
payment for certain ablation procedures
when performed in conjunction with EP
studies. In the proposed rule, we
discussed the creation of comprehensive
APCs for EP studies, applying our
proposed methodology in which all
adjunctive services, with a few
exceptions already discussed, reported
on the claim are packaged into the
payment for the primary service, which
is based on the average comprehensive
cost of those claims. However, we also
inadvertently included a discussion of
the continued existence of composite
APC 8000 (Cardiac Electrophysiologic
Evaluation and Ablation), a composite
payment based on the performance of an

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ablation procedure with an EP service.
Claims containing HCPCS codes for
both an ablation and an EP study would,
therefore, meet the criteria for the
composite, but would also meet the
criteria for comprehensive APC 0085
(Level II Electrophysiologic Procedures),
understandably generating reader
confusion and causing commenters to
ask how any services would be paid as
composite APC 8000 services when they
would all be subsumed under
comprehensive APC 0085. We also
believe that we added to this confusion
by initially including some claims and
estimated costs in the cost calculation of
both APC 8000 and APC 0085,
duplicating the reporting of composite
APC 8000 claims and causing some
statistics for the two APCs to be
incorrect. Moreover, we also were not
consistent in our application of status
indicators or in our treatment of EPablation composites that for CY 2013
were reported with new CPT codes.
Commenters proposed several
alternatives to our proposed treatment
of EP studies and ablations but all of the
alternatives involved differentially
paying for ablation procedures when
those procedures were performed in
conjunction with EP procedures. One
commenter recommended retaining one
of the remaining ablation codes, CPT
code 93650 (Ablate heart dysrhythm
focus), as a status indicator ‘‘Q3’’ codes
that may be paid through a composite
APC when not conditionally packaged.
Noting that a status indicator of ‘‘Q3’’
would have the same packaging effect as
including it in the comprehensive
package as proposed, we believe this
commenter intended to recommend a
higher payment for EP procedures
performed with an ablation, such as
would occur when the two codes would
determine a composite APC assignment.
Another commenter expressed concerns
that CPT code 93620 (Electrophysiology
evaluation) was also listed with a status
indicator of ‘‘Q3’’ but assigned to
comprehensive APC 0085. Commenters
requested that we clarify the intended
treatment of EP and ablation services,
differentially pay for the lower costs of
EP studies performed alone relative to
the higher costs of EP-ablation
procedures, and create a consistent
treatment of services within these sets of
codes.
Response: We agree with the
commenters that our proposed rule
provisions were not consistent in regard
to our treatment of the
electrophysiology-ablation procedures
as composite services and as
comprehensive services. We also agree
with the commenters that there are
significant differences between

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estimated costs of EP studies and
estimated costs of EP-ablation
procedures, and that the costs of
services reported with EP-ablation
combination codes are similar to the
costs of single EP-ablation services
assigned to composite APC 8000. For
CY 2015, we intend to modify our
proposal to create a separate
comprehensive APC for new CY 2013
HCPCS codes that represent an EP study
procedure with ablation, and we also
intend to identify combined EP-ablation
services reported with multiple HCPCS
codes as a complex form of EP services
and reassign them to a higher level APC.
Finally, we also intend to delete
composite APC 8000 as we move
payment for these services under the
comprehensive APC payment policy. In
this final rule with comment period, we
invite commenters to apply the analysis,
methodology, and the payment
estimation techniques presented here to
specific EP services and to provide
comment on these illustrative CY 2014
reassignments of complex claims for EP
services.
Changes to implement the
commenters’ suggestions and concerns
for CY 2014, as if we were
implementing this policy for CY 2014,
for this set of electrophysiologic
evaluation and ablation APCs are as
follows:
• APC Redesignations: We would
redesignate composite APC 8000 as
comprehensive APC 0444 (Level III
Electrophysiologic Procedures).
• New codes: We would reassign CPT
codes 93653, 93654 and 93656 from
APC 8000 to APC 0444.
• Complexity Reassignments: We
would reassign HCPCS codes 93619 and
93620, in combination with CPT code
93650, as complex forms of the primary
EP service, and we would reassign those
claims to APC 0444. For purposes of
modeling the policy for CY 2014, we
treated claims previously assigned to
composite APC 8000 as complex forms
of the primary service. We summarize
all of the codes that we would reassign
as complex forms of their primary
procedures in Table 10 as if we were
implementing this policy in CY 2014.
We request public comment on these
specific HCPCS movements and
complex claim reassignments. We will
reassess the application of this policy to
this set of electrophysiologic evaluation
and ablation APCs with CY 2013 claims
data for CY 2015 implementation, and
we will update them based on new
claims data and any relevant new CY
2015 codes through next year’s
rulemaking cycle.
Comment: In addition to the general
comment that CMS should ensure that

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complex (multiple device) procedures
are not inappropriately grouped with
single device insertions, there were
several public comments regarding the
pacemaker-defibrillator family of
services, APCs 0089, 0090, 0106, 0107,
0108, 0654, 0655, and 0674. With the
exception of public comments on
cardiac resynchronization therapy
(CRT), these comments dealt with
general issues such as the difficulty in
modeling the impacts of payment
changes based on the information
provided in the proposed rule and are
discussed elsewhere in this final rule
with comment period. Currently, we
pay for CRT services through composite
APC 0108 (Level II Implantation of
Cardioverter-Defibrillators (ICDs)) based
on the geometric mean costs of
procedures reported on claims with a
specific set of codes describing the parts
of this composite service (77 FR 68258).
Our proposal for comprehensive
payment would have subsumed the
need for a composite APC in CY 2014.
One commenter requested that CRT
services continue to be paid based on
the geometric mean cost of the
composite service rather than based on
the geometric mean cost of all services
furnished with multiple lead
pacemakers or defibrillators that would
occur with both our proposal to package
procedures described by add-on codes
and the comprehensive APC policy.
Response: We agree with the
commenters that complex forms of
certain services, generally characterized
by combinations of codes in which
components were separately reported in
order to describe the delivery of an
entire pacemaker or defibrillator system,
have different resource profiles from
simple procedures that implant system
components or certain simple devices.
We agree that CRT services are one of
the most costly subsets of pacemaker
implantation services but that other
complex combinations of codes also
exist. However, as part of the process of
converting these APCs to
comprehensive APCs, we noted that the
comprehensive geometric mean cost of
these services differed considerably, in
some cases, from our estimates of the
primary service calculated through our
traditional single bill methodology and
these new cost estimates suggested
reassigning codes among the family of
pacemaker APCs in order to increase
resource homogeneity. These
reassignments also suggested renaming
or restructuring APCs as necessary. We
found these reassignments would
reduce much of the cost to payment
variance.
Therefore, in response to public
comments we received, we would

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modify our proposal to establish
comprehensive payments for pacemaker
related services. We would realign the
APCs by moving primary services
subject to our standard 2 times rule
methodology. In addition, we have
identified a number of HCPCS
combinations that represent high
volume, high cost, more complex
subsets of the primary service, and we
would reassign those claims to a higher
level APC. We note that our decision to
finalize this proposed comprehensive
APC policy with modification in this
final rule with comment period, but to
delay implementation of the policy until
CY 2015 creates the opportunity for the
public to further review the illustrative
reconfigurations of comprehensive
APCs that we would make in response
to comment. In this final rule with
comment period, we invite commenters
to apply the analysis, methodology, and
the payment estimation techniques
presented here to specific pacemaker
services and to provide comment on
these illustrative CY 2014 APC
configurations, APC assignments, and
complexity reassignments.
Changes to implement commenters’
suggestions and concerns for CY 2014,
if we were implementing this policy for
CY 2014, for this pacemakerdefibrillator family of APCs are as
follows:
• APC Redesignations: We would
rename APC 0089 ‘‘Level III Insertion/
Replacement of Permanent Pacemaker,’’
and we would rename APC 0106
‘‘Insertion/Replacement of Pacemaker
Components.’’
• APC Reassignments: We would
reassign CPT code 33217 from APC
0106 to APC 0090; CPT code 33229 from
APC 0645 to APC 0655; CPT code 33231
from APC 0107 to APC 0108; CPT codes
33208, 33214, and 33224 from APC
0655 to APC 0089; and CPT code 33221
from APC 0654 to APC 0089.
• Complexity Reassignments: We
would reassign certain combinations of
the following CPT codes 33206, 33207,
33208, 33210, 33212, 33213, 33216,
33224, 33227, 33228, 33230, 33240,
33263, and 33264 as complex forms of
the primary pacemaker-defibrillator
service. We summarize all of the codes
that we would reassign as complex
forms of their primary procedures in
Table 10 as if we were implementing
this policy in CY 2014.
We request comment on these specific
HCPCS movements and complex claim
reassignments. We will reassess the
application of this policy to this
pacemaker-defibrillator family of APCs
with CY 2013 claims data for CY 2015
implementation, and we will update
them based on new claims data and any

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relevant new CY 2015 codes through
next year’s rulemaking cycle.
Comment: Several commenters
requested that CMS not designate APC
0202 (Level VII Female Reproductive
Procedures) as a comprehensive APC.
The commenters opined that, as
opposed to the stated description of
comprehensive APCs, APC 0202 does
not contain a single major procedure
with relatively small cost contributions
from adjunctive services but contains
independent services that are frequently
performed in combination with each
other. Commenters also noted that CMS
is currently achieving payment
efficiencies for these concomitant
procedures by reducing the payment for
any second procedure to 50 percent
even when that second procedure
contains an additional medical device.
The commenters stated that when
multiple services are performed together
under a comprehensive payment, the
averaged payment assigned to the APC
may be significantly less than the cost
of the individual services performed.
The commenters believed that this may
encourage some hospitals to delay or
stage procedures inappropriately,
increasing overall Medicare costs and
potentially threatening patient access to
certain devices.
One commenter believed that APCs
0385 (Level I Prosthetic Urological
Procedures) and 0386 (Level II
Prosthetic Urological Procedures)
similarly would have sizable reductions
in Medicare payments that could create
significant disincentives for hospitals to
perform certain procedures that utilize
medical devices. Another commenter
believed that this result also applied to
APC 0674 (Prostate Cryoablation).
Response: We do not agree with the
commenters that these APCs represent a
different class of services. All of the
services described by the HCPCS codes
in these APCs represent major surgical
procedures where the encounter can be
viewed as a single primary service and
where a beneficiary would view the
encounter globally. What commenters
are describing as unrelated procedures
are individual components of a single
surgical procedure, which is, in turn,
the primary reason for the encounter.
CPT codes are designed by physicians to
facilitate reporting of variation in
physician work and, as a result, often
describe individual components of
services that can be grouped in various
ways. However, from a hospital
payment perspective, many of those
component codes are ancillary to or
supportive of a primary service. For
example, during a procedure to repair
the urogenital tract the surgeon may
report CPT code 57265 (Extensive repair

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of vagina) along with CPT code 57288
(Repair bladder defect), but these
individual physician services are both
part of the comprehensive surgical
repair procedure. In the proposed rule,
we proposed defining the most costly
component of a comprehensive service
as the primary service that determines
the APC assignment and final payment
of the service, and we believe that this
methodology remains appropriate for
these services.
We agree with the commenters
generally and that, with respect to these
reproductive surgery APCs specifically,
there are some instances of commonly
performed clinically coherent
combinations of HCPCS codes assigned
to status indicator ‘‘J1’’ that are
associated with high estimated cost and
sufficient volume, and we would
designate these procedures as complex
subsets of these primary services
eligible for reassignment to a higher
level APC if we were implementing this
policy in CY 2014. We would have
applied this methodology along with
other techniques described above for CY
2014 in order to facilitate the transition
from discrete incremental payments to a
single comprehensive payment for the
entire service. For APCs 0385, 0386, and
0674, as well as APC 0202, we also
identified several combinations of
HCPCS codes that represented common,
costly subsets of services and we would
reassign several HCPCS codes to
different APCs to reduce the variance
between the geometric mean estimated
cost of the complex services and
geometric mean cost of the APC to
which the services would be assigned.
In this final rule with comment period,
we are inviting commenters to apply the
analysis, methodology, and the payment
estimation techniques presented here to
specific reproductive services and to
provide comment on these illustrative
CY 2014 reassignment of complex
reproductive services claims.
Changes to implement the
commenters’ suggestions and concerns
for CY 2014, if we were implementing
the policy for CY 2014, for this
urogenital procedures family of APCs
are as follows:
• APC Redesignations: We would
rename APC 0385 ‘‘Level I Urogenital
Procedures’’; APC 0386 ‘‘Level II
Urogenital Procedures’’; and APC 0674
‘‘Level III Urogenital Procedures’’.
• APC Reassignments: We would
reassign CPT code 53445 from APC
0386 to APC 0674; CPT code 55873 from
APC 0674 to APC 0385; and CPT code
57423 from APC 0202 to APC 0385.
• Complexity Reassignments: We
would reassign certain combinations of
CPT codes 54405, 57265, 57282, and

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57285 as complex forms of the primary
service. We summarize all of the codes
that we would reassign as complex
forms of their primary procedures in
Table 10 as if we were implementing
this policy in CY 2014.
We request comment on these specific
HCPCS movements and complex claim
reassignments. We will reassess the
application of this policy to this
urogenital procedures family of APCs
with CY 2013 claims data for CY 2015
implementation, and we will update
them based on new claims data and any
relevant new CY 2015 codes through
next year’s rulemaking cycle.
Comment: One commenter noted that
APC 0082, a cardiovascular APC,
includes CPT code 37204 (Transcatheter
occlusion), which is occasionally used
to report brachytherapy for liver
therapy. The commenter believed that
packaging yttrium in the cost of APC
0082 would be in conflict with section
1833(t)(2)(H) of the Act, which requires
separate payment for brachytherapy.
Response: We agree with the
commenters that the statute specifies
that brachytherapy devices (seeds) shall
be classified separately under the OPPS
from other services. Because
brachytherapy devices could be used
during some encounters to deliver
comprehensive services, we will modify
our proposal to state that brachytherapy
devices, like mammography and
ambulance services, will not be
included in the comprehensive
payments beginning in CY 2015 and
will continue to receive separate
payment.
Comment: One commenter stated that
CMS should not consider APC 0227
(Implantation of Drug Infusion Device)
to be a comprehensive APC because the
drug that is used to fill the reservoir is
not part of the comprehensive service.
The commenter stated that the drug that
is used to fill the pump should not be
considered adjunctive because the drug
itself is therapeutic and separate and
apart from the implantation of the
primary (pump) service. This
commenter believed that therapeutic
drugs in general should be excluded
from a comprehensive APC payment
and expressed concern that packaging
may decrease hospital use of costly
drugs, such as PRIALT, which is a nonnarcotic alternative. Another commenter
stated that CMS should provide greater
data transparency if it decides to move
ahead with the inclusion of DME items
within a comprehensive APC. The
commenter was concerned that there
will be a decrease in the payment rate
for APC 0227 relative to the CY 2013
payment rate, which will render the

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payment inadequate to cover the cost of
the services in question.
Response: We do not agree with the
commenters that drugs being supplied
to the patient to fill the reservoir of a
pump at the time of pump implantation
should be excluded from the
comprehensive APC payment. Drugs
supplied to fill the pump during
implantation of the pump are adjunctive
to the procedure. As we have noted
above, costs of costly adjunctive
services are included proportionally
into the cost estimation for the primary
services through our ability to use
almost all claims for a service and
adoption of the geometric mean cost
upon which to establish relative
payment weights. Certainly, the greater
the cost variance of a particular
component and the less frequently that
exceptional component is used, the less
the relative payment weight, based on a
geometric mean of estimated cost, will
reflect those less frequent, costly cases.
Hospitals are also aware that the costs
of extremely costly cases are partially
mitigated by outlier payments, which
would continue to apply in this case
upon implementation of the
comprehensive APC policy in CY 2015.
Finally, with respect to APC 0227, we
note that the comprehensive estimated
geometric mean costs are in fact
approximately 10 percent higher than
the individual procedure estimated
geometric mean costs, consistent with
the relative contribution of adjunctive
services across all comprehensive APCs.
Therefore, we are confirming that
drugs used to fill in pumps at the time
of a comprehensive pump insertion
procedure are considered to be ancillary
and supportive to the primary
procedure and packaged as part of the
comprehensive APC payment regardless
of whether the drug was previously
packaged within the OPPS payment,
was previously separately paid under
the OPPS, or was previously paid
according to a DMEPOS fee schedule.
(f) Summary of Creation of
Comprehensive APCs for High-Cost
Device Dependent Procedures for
Implementation in CY 2015
In summary, in response to public
comments we received, we have
decided to finalize the comprehensive
APCs with modification and to delay
the implementation or effective date of
the policy until CY 2015. We
acknowledge commenters’ concerns that
this is a complex new payment structure
under the OPPS. We agree that hospitals
should have time to prepare for this
comprehensive payment structure, and
we also agree with the commenters that
a delay in implementation will allow us

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(and them) more time to operationalize
changes necessary to process
comprehensive payments.
In response to public commenters’
request for additional detail on our
calculation of the comprehensive APC
relative payment weights, we have
provided a granular discussion of our
methodology for constructing the
comprehensive APC payment rates as
well as the specific APC configurations
we would implement for CY 2014 if we
were not delaying implementation to CY
2015. We also believe that the delay in
implementation will give hospitals more
time to study the final methodology for
calculating relative payment weights
that we discuss in this section, and
specifically how the methodology
recognizes resource differences in
complex and simple versions of the
same primary service. We are taking
advantage of the delay in
implementation and requesting
additional comment on this
methodology.
For CY 2015, we will recalibrate
comprehensive APCs and final
reassignment of complex claims in light
of any comments on the illustrative CY
2014 assignments that we present and
updated CY 2013 claims and cost report
data next year. For CY 2014, we will
continue our payment for devicedependent APCs and composite
payment for both CRT and cardiac
electrophysiologic evaluation and
ablation as discussed elsewhere in this
final rule with comment period.
Effective for CY 2015, we will include
all integral, ancillary, supportive,
dependent, and adjunctive outpatient
services into the comprehensive APC
payment, excluding certain services
such as ambulance services;
mammography services; brachytherapy
sources; and drugs, biologicals, and
devices receiving pass-through
payment. We will not include charges
reported with inpatient room and board
revenue codes as we do not believe
outpatient costs are correctly reported in
those revenue codes. Adjunctive items
and services that will be
unconditionally packaged into the
comprehensive APC payment for CY
2015 include the following.
• All packaged services that were
packaged in CY 2013.
• All services finalized for
unconditional or conditional packaging
for CY 2014.
• All adjunctive services and supplies
provided during the delivery of the
comprehensive service, which includes
all other cover OPPS items and services
appearing on a claim, including those
with a HCPCS with status indicator
‘‘J1’’; implantable DMEPOS supplies

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provided during the comprehensive
OPPS service; services performed by
therapists provided during the OPPS
service; and all other covered outpatient
items and services appearing on the
claim.
• All packaged hospital-administered
drugs pursuant to a physician order,
excluding pass-through drugs that are
required to be separately paid by statute.
We are finalizing a modification to
our proposed methodology for
identifying a primary service, assigned
to status indicator ‘‘J1’’ on a claim
reporting multiple procedures described
by HCPCS codes assigned to status
indicator ‘‘J1’’ in order to effectuate an
appropriate comprehensive APC
payment. We are finalizing a multiple
step process to include an evaluation of
costliness based on the comprehensive
geometric mean cost of single
procedures assigned to status indicator
‘‘J1’’ reported on claims. We also have
determined that there are certain subsets
of outpatient cases for a primary service
that should be more appropriately paid
when stratified according to the
complexity of the service. Therefore, we
have identified a number of complexity
reassignments for certain high-volume,
costly, complex versions of a primary
service, and we have reassigned these
subsets of procedures representing a
complex version of the primary service
to higher-level APCs in the same
clinical family.
In response to public comments we
received, we discuss how we would
have revised some comprehensive APC
definitions and reassigned HCPCS codes
to specific APCs in order to better align
the comprehensive geometric mean cost
of primary services with APCs that
better capture the resource and clinical
aspects of the service if we were
implementing this policy for CY 2014.
We discuss the methodology that we
followed for all of those modifications
to our proposal in detail earlier in this
section. We display the final APC
revisions that we would make and final
comprehensive geometric mean cost for
those APCs, if we were implementing
this policy for CY 2014 in Table 8. We
display final HCPCS assignments in
Table 9 and complexity reassignments
in Table 10 that we would make if we
were implementing this policy for CY
2014.
We have reconciled the inconsistency
in our proposal to pay for cardiac
electrophysiology-ablation procedures
under both composite and
comprehensive methodologies. For CY
2015, we are reassigning the codes
assigned to composite APC 8000 into a
new composite APC 0444, along with
complex services from APC 0085 that

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are characterized by composite EPablation procedures described by
HCPCS code combinations.
Therefore, for CY 2015, we are
creating 29 comprehensive APCs to
prospectively pay for services associated
with 167 CY 2014 HCPCS codes, which
is the most recent code set available. We
note that the list of HCPCS codes
represent the procedures that would be
assigned to a comprehensive APC if we
implemented this policy for CY 2014.
We will update this list as indicated in
our proposed and final OPPS rules for
CY 2015.
For CY 2015, we are treating all
individually reported procedures that
are assigned to status indicator ‘‘J1,’’
which will appear in the CY 2015
Addendum B to the proposed rule, as
representing components of a
comprehensive service characterized by
a primary service, and we will make a
single payment for the comprehensive
service. We will be making a single allinclusive payment for each
comprehensive service reported on a
claim with that payment subject to a
single beneficiary copayment, up to the
cap set at the level of the inpatient
hospital deductible, as provided at
section 1833(t)(8)(C)(i) of the Act.
f. 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 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
currently have composite policies for
extended assessment and management
services, low dose rate (LDR) prostate
brachytherapy, cardiac
electrophysiologic evaluation and
ablation services, mental health
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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 2014 OPPS/ASC proposed
rule (78 FR 43561), for CY 2014, we
proposed to continue our composite
policies for extended assessment and
management services, LDR prostate
brachytherapy services, cardiac
electrophysiologic evaluation and
ablation services, mental health
services, and multiple imaging services,
as discussed below. We proposed to
discontinue and supersede the cardiac
resynchronization therapy composite
APC with our proposed comprehensive
APC 0108, as discussed in section
II.A.2.e. of the proposed rule (78 FR
43561). Comments on cardiac
resynchronization therapy relating to
comprehensive APCs are discussed in
section II.A.2.e. of this final rule with
comment period.
(1) Extended Assessment and
Management Composite APCs (APCs
8002 and 8003)
(a) Background
Beginning in CY 2008, we included
composite APC 8002 (Level I Extended
Assessment and Management
Composite) and composite APC 8003
(Level II Extended Assessment and
Management Composite) in the OPPS to
provide payment to hospitals in certain
circumstances when extended
assessment and management of a patient
occur (an extended visit). In most of
these circumstances, observation
services are supportive and ancillary to
the other services provided to a patient.
From CY 2008 through CY 2013, in the
circumstances when observation care is
provided in conjunction with a high
level visit, critical care, 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 and
prior years.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43562 through 43563), for
CY 2014, we proposed to modify our
longstanding policy to provide payment
to hospitals in certain circumstances
when extended assessment and

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management of a patient occur. We
proposed to create one new composite
APC, entitled ‘‘Extended Assessment
and Management (EAM) Composite’’
(APC 8009), to provide payment for all
qualifying extended assessment and
management encounters rather than
recognize two levels of EAM composite
APCs. We proposed to allow any visit
furnished by a hospital in conjunction
with observation services of substantial
duration to qualify for payment through
EAM composite APC 8009. These
policies are discussed in greater detail
below.
(b) Payment for Extended Assessment
and Management Services
As we discussed in section VII. of the
CY 2014 OPPS/ASC proposed rule (78
FR 43614 through 43617), we proposed
to no longer recognize five distinct visit
levels for clinic visits and emergency
department visits based on the existing
HCPCS E/M codes, and instead
recognize three new alphanumeric
HCPCS codes for each visit type.
Currently, the payment criteria for the
EAM composite APCs 8002 and 8003
include a high level visit represented by
HCPCS code 99205, 99215, 99284,
99285, or G0304; critical care
represented by CPT code 99281; or
direct referral represented by HCPCS
code G0379 provided in conjunction
with observation care represented by
HCPCS code G0378. We stated that in
light of the proposal to no longer
differentiate visit payment levels, and
the fact that the current high level visit
codes (HCPCS codes 99205, 99215,
99284, 99285 and G0304) would no
longer be recognized under the OPPS, it
would no longer be feasible to continue
with our current payment criteria for the
EAM composite APCs 8002 and 8003 for
CY 2014. Therefore, to ensure that we
continue to provide payment to
hospitals in certain circumstances when
extended assessment and management
of a patient occur, for CY 2014, we
proposed to provide payment for the
entire care encounter through proposed
new EAM Composite APC 8009 when
observation care is provided in
conjunction with a visit, critical care, or
direct referral and is an integral part of
a patient’s extended encounter of care.
Specifically, for CY 2014, we proposed
to provide EAM composite APC
payment through a newly created
composite APC in circumstances when
a clinic or ED visit, identified by one of
the three new alphanumeric HCPCS
codes proposed in section VII. of the
proposed rule, is accompanied by
observation care of substantial duration
on a claim. We would no longer
recognize composite APC 8002 or APC

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8003. The specific criteria we proposed
to be met for the proposed new EAM
composite APC to be paid is provided
below in the description of the claims
that we proposed to select for the
calculation of the proposed CY 2016
geometric mean costs for this composite
APC.
We proposed to calculate the
geometric mean costs for the proposed
new EAM composite APC (APC 8009)
for CY 2014 using CY 2012 single and
‘‘pseudo’’ single procedure claims that
meet each of the following criteria:
• The claim does not contain a
HCPCS code to which we have assigned
status indicator ‘‘T’’ that is reported
with a date of service 1 day earlier than
the date of service associated with
HCPCS code G0378. (By selecting these
claims from single and ‘‘pseudo’’ single
claims, we assured that they would not
contain a code for a service with status
indicator ‘‘T’’ on the same date of
service.);
• The claim contains 8 or more units
of HCPCS code G0378 (Observation
services, per hour); and
• The claim contains one of the
following codes: HCPCS code G0379
(Direct referral of patient for hospital
observation care) on the same date of
service as G0378; or CPT code 99201
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 1)); CPT code 99202
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 2)); CPT code 99203
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 3)); CPT code 99204
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 4)); CPT code 99205
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 5)); CPT code 99211
(Office or other outpatient visit for the
evaluation and management of an
established patient (Level 1)); CPT code
99212 (Office or other outpatient visit
for the evaluation and management of
an established patient (Level 2)); CPT
code 99213 (Office or other outpatient
visit for the evaluation and management
of an established patient (Level 3)); CPT
code 99214 (Office or other outpatient
visit for the evaluation and management
of an established patient (Level 4)); CPT
code 99215 (Office or other outpatient
visit for the evaluation and management
of an established patient (Level 5)); CPT
code 99281 (Emergency department
visit for the evaluation and management
of a patient (Level 1)); CPT code 99282
(Emergency department visit for the
evaluation and management of a patient
(Level 2)); CPT code 99283 (Emergency

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department visit for the evaluation and
management of a patient (Level 3)); CPT
code 99284 (Emergency department
visit for the evaluation and management
of a patient (Level 4)); CPT code 99285
(Emergency department visit for the
evaluation and management of a patient
(Level 5)); or HCPCS code G0380 (Type
B emergency department visit (Level 1));
HCPCS code G0381 (Type B emergency
department visit (Level 2)); HCPCS code
G0382 (Type B emergency department
visit (Level 3)); HCPCS code G0383
(Type B emergency department visit
(Level 4)); HCPCS code G0384 (Type B
emergency department visit (Level 5));
or CPT code 99291 (Critical care,
evaluation and management of the
critically ill or critically injured patient;
first 30–74 minutes) provided on the
same date of service or 1 day before the
date of service for HCPCS code G0378.
The proposed CY 2014 geometric
means cost resulting from this
methodology for the proposed new EAM
composite APC (APC 8009) was
approximately $1,357, which was
calculated from 318,265 single and
‘‘pseudo’’ single claims that met the
required criteria.
We stated in the proposed rule that
when hospital claims data for the CY
2014 proposed clinic and ED visit codes
becomes available, we proposed to
calculate the geometric mean cost for
the proposed new EAM composite APC
(APC 8009) for CY 2016 using CY 2014
single and ‘‘pseudo’’ single procedure
claims that meet each of the following
criteria:
• The claims do not contain a HCPCS
code to which we have assigned status
indicator ‘‘T’’ that is reported with a
date of service 1 day earlier than the
date of service associated with HCPCS
code G0378. (By selecting these claims
from single and ‘‘pseudo’’ single claims,
we ensure that they would not contain
a code for a service with status indicator
‘‘T’’ on the same date of service.);
• The claims contain 8 or more units
of HCPCS code G0378 (Observation
services, per hour); and
• The claims contain one of the
following codes: HCPCS code G0379
(Direct referral of patient for hospital
observation care) on the same date of
service as HCPCS code G0378; or CPT
code 99291 (Critical care, evaluation
and management of the critically ill or
critically injured patient; first 30–74
minutes); or newly proposed
alphanumeric Level II HCPCS code
GXXXA (Type A ED visit); newly
proposed alphanumeric Level II HCPCS
code GXXXB (Type B ED visit); or
newly proposed alphanumeric Level II
HCPCS code GXXXC (Clinic visit)
provided on the same date of service or

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1 day before the date of service for
HCPCS code G0378.
Comment: One commenter supported
CMS’ proposal to delete composite
APCs 8002 and 8003 and to pay for
extended assessment and management
services through newly created
composite APC 8009. Another
commenter, who did not support the
proposal, stated that the proposed
policy did not accurately account for the
cost of providing an extended
assessment and management service
and urged CMS to carefully assess the
potential impact of this proposal upon
different types of facilities and patients
before moving forward.
Response: We appreciate the
commenter’s support of our proposal.
We disagree with the one commenter’s
argument that our proposal does not
accurately account for the cost of
providing an extended assessment and
management service. We believe that
this proposal accurately accounts for the
cost of providing an extended
assessment and management service
and that this proposal does not have any
substantial impact on any particular
type of facility or patient type.
After consideration of the public
comments we received, we are
finalizing our proposal to create a new
composite APC, entitled ‘‘Extended
Assessment and Management (EAM)
Composite’’ (APC 8009), to provide
payment for all qualifying extended
assessment and management encounters
rather than recognizing two levels of
EAM Composite APCs. In light of our
CY 2014 final visit payment policy,
which is discussed in detail in section
VII. of this final rule with comment
period, we are modifying our proposal
to allow any clinic and certain high
level ED visits furnished by a hospital
in conjunction with observation services
of substantial duration to qualify for
payment through the newly created
Extended Assessment and Management
(EAM) Composite APC (APC 8009).
Specifically, we are allowing a clinic
visit (for CY 2014, there will be one
code to describe all clinic visits), a Level
4 or Level 5 Type A ED visit, or a Level
5 Type B ED visit furnished by a
hospital in conjunction with
observation services of substantial
duration to qualify for payment through
composite APC 8009. This modification
of the proposed EAM composite APC
criteria is due to our decision not to
finalize any changes to the Type A or
Type B ED visit codes for CY 2014.
Because we are not changing the ED
visit codes for CY 2014, we also are not
changing for CY 2014 the particular ED
visit codes that qualify for the EAM
composite APC.

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We also are modifying our proposal to
calculate the payment rate for the new
EAM composite APC (APC 8009).
Specifically, we calculated the
geometric mean cost for procedures
assigned to APC 8009 for CY 2014 using
CY 2012 single and ‘‘pseudo’’ single
procedure claims that met each of the
following criteria:
• The claim does not contain a
HCPCS code to which we have assigned
status indicator ‘‘T’’ that is reported
with a date of service 1 day earlier than
the date of service associated with
HCPCS code G0378. (By selecting these
claims from single and ‘‘pseudo’’ single
claims, we assured that they would not
contain a code for a service with status
indicator ‘‘T’’ on the same date of
service.);
• The claim contains 8 or more units
of HCPCS code G0378 (Observation
services, per hour); and
• The claim contains one of the
following codes: HCPCS code G0379
(Direct referral of patient for hospital
observation care) on the same date of
service as HCPCS code G0378; or CPT
code 99201 (Office or other outpatient
visit for the evaluation and management
of a new patient (Level 1)); CPT code
99202 (Office or other outpatient visit
for the evaluation and management of a
new patient (Level 2)); CPT code 99203
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 3)); CPT code 99204
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 4)); CPT code 99205
(Office or other outpatient visit for the
evaluation and management of a new
patient (Level 5)); CPT code 99211
(Office or other outpatient visit for the
evaluation and management of an
established patient (Level 1)); CPT code
99212 (Office or other outpatient visit
for the evaluation and management of
an established patient (Level 2)); CPT
code 99213 (Office or other outpatient
visit for the evaluation and management
of an established patient (Level 3)); CPT
code 99214 (Office or other outpatient
visit for the evaluation and management
of an established patient (Level 4)); CPT
code 99215 (Office or other outpatient
visit for the evaluation and management
of an established patient (Level 5)); CPT
code 99284 (Emergency department
visit for the evaluation and management
of a patient (Level 4)); CPT code 99285
(Emergency department visit for the
evaluation and management of a patient
(Level 5)); or HCPCS code G0384 (Type
B emergency department visit (Level 5));
or CPT code 99291 (Critical care,
evaluation and management of the
critically ill or critically injured patient;
first 30–74 minutes) provided on the

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same date of service or 1 day before the
date of service for HCPCS code G0378.
The final CY 2014 payment rate for
composite APC 8009 is approximately
$1,199.
(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
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 geometric mean 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 services and a detailed
description of how we developed the
LDR prostate brachytherapy composite
APC.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43563), for CY 2014, we
proposed to continue to pay for LDR
prostate brachytherapy services using
the composite APC methodology
proposed and implemented for CY 2008
through CY 2013. That is, we proposed
to use CY 2012 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

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calculate the payment rate for composite
APC 8001. Consistent with our CY 2008
through CY 2013 practice, we proposed
not to use the claims that meet these
criteria in the calculation of the
geometric mean costs of procedures or
services assigned to 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 geometric
mean costs of procedures or services
assigned to 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 continue to believe that data from
claims reporting both services required
for LDR prostate brachytherapy provide
the most accurate geometric mean cost
upon which to base the composite APC
payment rate.
Using a partial year of CY 2012 claims
data available for the CY 2014 OPPS/
ASC proposed rule, we were able to use
1,487 claims that contained both CPT
codes 55875 and 77778 to calculate the
geometric mean cost of these procedures
upon which the proposed CY 2014
payment rate for composite APC 8001
was based. The proposed payment rate
for composite APC 8001 for CY 2014
was approximately $4,340.
Comment: A few commenters asserted
that the existing methodology to create
‘‘pseudo’’ single claims from multiple
procedure claims is not yielding a
significant number of claims to be used
to calculate adequate payment rates for
APC 8001, APC 0312 (Radioelement
Applications), and APC 0313
(Brachytherapy). The commenters
believed that use of this methodology
and its insignificant results is a
continuing trend.
Response: For CY 2014, we have 591
final rule claims available for APC 8001
geometric mean cost calculation, while
for CY 2013 we were able to use 677
claims that contained both CPT codes
55875 and 77778 to calculate the
geometric mean cost of these procedures
upon which the final CY 2013 payment
rate for composite APC 8001 was based.
For CY 2014, we have 52 single claims
available for geometric mean cost
calculation for APC 0312, compared to
74 claims available for CY 2013. For
APC 0313, we have 17,810 single claims
available for CY 2014 for geometric
mean cost calculation compared to
17,743 single claims available for CY

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2013. Therefore, there is approximately
the same number of ‘‘pseudo’’ single
claims available for APCs 8001 and
0313 geometric mean cost calculation
compared to CY 2013. With regard to
APC 0312 geometric mean cost
calculation, the number of single claims
available for ratesetting for CY 2014
compared to CY 2013 is somewhat low
for both years. We agree with the
commenter that it would be preferable
if we had a larger volume of single
claims on which to base the payment
rate for APC 0312. We will continue to
evaluate additional refinements and
improvements to our ratesetting
methodologies in order to maximize our
use of claims data. In addition, we will
continue to study means by which we
can use a larger volume of claims data
to establish the payment rate for APC
0312 specifically.
Comment: One commenter supported
CMS’ proposal to continue paying for
LDR prostate brachytherapy services
using composite APC 8001 and noted
recognition of the proposed increase in
payment.
Response: We appreciate the
commenter’s support for this proposal.
After consideration of the public
comments we received, we are
finalizing our policy to continue paying
for LDR prostate brachytherapy services
using composite APC 8001 for CY 2014,
with a final CY 2014 geometric mean
cost for APC 8001 of approximately
$3,858.
(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
geometric mean costs for these services,
and advanced our stated goal of
promoting hospital efficiency through
larger payment bundles. In order to
calculate the geometric mean cost upon

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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
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.
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, 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, cavotricuspid 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

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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.
As we described in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68425), 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 assigned 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 assigned
them interim status indicator ‘‘Q3’’
(paid through a composite APC) in
Addendum B to the CY 2013 OPPS/ASC
final rule with comment period. To
facilitate implementing this policy, we
assigned CPT codes 93653, 93654, and
93656 to a new Group C, which is paid
at the composite APC 8000 payment
rate. (We noted that we will use single
and pseudo single claims for CPT codes
93653, 93654, and 93656 when they
become available for calculating the
geometric mean costs upon which the
payment rate for APC 8000 will be
based in future ratesetting.) Because
CPT codes 93655 and 93657 are

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dependent services that may only be
performed as ancillary services to the
primary CPT codes 93653, 93654, and
93656, we believed that packaging CPT
codes 93655 and 93657 with the
primary procedures is appropriate, and
we assigned them interim status
indicator ‘‘N.’’ Because the CPT
Editorial Panel deleted CPT codes 93651
and 93652, effective January 1, 2013, we
deleted them from the Group B code
list, leaving only CPT code 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.
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 was open to public
comment for a period of 60 days
following the publication of the CY
2013 OPPS/ASC final rule with
comment period.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43564), for CY 2014, we
proposed to continue to pay for cardiac
electrophysiologic evaluation and
ablation services using the composite
APC methodology proposed and
implemented for CY 2008 through CY
2013. We also proposed to continue the
new Group C methodology we first
established for CY 2013, described
above, in response to the CPT Editorial
Panel’s creation of primary CPT codes
93653, 93654, and 93656. We stated that
we continue to believe that the
geometric mean cost for cardiac
electrophysiologic evaluation and
ablation services calculated from a high
volume of correctly coded multiple
procedure claims would result in an
accurate and appropriate proposed
payment for these 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 geometric mean costs
for APC 0085, to which the CPT codes
in both Groups A and B for composite
APC 8000 are otherwise assigned. We
proposed that the geometric mean costs
for APC 0085 would continue to be
calculated using single procedure
claims. For CY 2014, using a partial year
of CY 2012 claims data available for the
CY 2014 OPPS/ASC proposed rule, we
were able to use 15,817 claims
containing a combination of Group A
and Group B CPT codes (Group C was
not effective until January 1, 2013) to
calculate a proposed geometric mean

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cost of approximately $13,402 for
composite APC 8000.
Table 6 of the proposed rule listed the
groups of procedures upon which we
proposed to base composite APC 8000
for CY 2014 (78 FR 43565).
Comment: One commenter on the CY
2013 OPPS/ASC final rule with
comment period expressed concern
with CMS’ treatment of CPT codes
93653, 93654, and 93656, which are
assigned to new Group C and paid at the
composite APC 8000 payment rate.
Specifically, the commenter stated that
CMS considers CPT code 93462 (Left
heart catheterization by transseptal
puncture through intact septum or by
transapical puncture (List separately in
addition to code for primary procedure))
as separately payable. However, the
commenter believed that when CPT
code 93462 appears on the claim in
combination with CPT code 93656 CMS
should treat the claims as single
procedures for building composite APC
8000 in regard to cases where CPT code
93462 was used to describe services to
treat atrial fibrillation (AF). The
commenter contended that CMS did not
do so for CY 2013, which resulted in an
underpayment for cases assigned to
composite APC 8000. The commenter
noted that when the CPT Editorial Panel
created CPT code 93656, it specifically
listed CPT code 93462 as one of the
codes that should not be reported in
combination with CPT code 93656. The
commenter asserted that CMS’ treatment
of CPT code 93462 had several
ratesetting consequences. According to
the commenter, when CPT code 93462
appeared on any electrophysiology (EP)
claim, it prevented that claim from
becoming a ‘‘single procedure’’ claim for
composite APC 8000 ratesetting
purposes. Because CPT code 93462
occurs most frequently for EP treatment
of AF, preventing EP claims with CPT
code 93462 from becoming ‘‘single
procedure’’ claims disproportionately
excludes AF claims from composite
APC 8000 cost calculation. In addition,
the commenter stated, because those
claims are more expensive than the
average EP claim, this result also
reduces both the frequency and average
cost of claims used to calculate the
geometric mean cost of composite APC
8000. The commenter stated that
separate payment of CPT code 93462
prevents packaging CPT code 93462
costs on claims for EP involved with
AF, which is contrary to the CPT
instructions regarding CPT code 93656.
In response to the CY 2014 OPPS/ASC
proposed rule, this same commenter
and one other commenter expressed
appreciation for CMS’ proposal to
package the cost of CPT code 93462

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within the APC payment rates of other
services, and recommended that CMS
finalize the proposed method of
calculating the cost of APC 8000 for CY
2014.
Response: We assigned CPT code
93462 to APC 0080 for CY 2013, with
a payment rate of $2,649.52. CPT code
93462 is an add-on code. For CY 2014,
we proposed to package most add-on
codes, including CPT code 93462. As a
result of our packaging proposal, the
geometric mean cost and frequency for
composite APC 8000 have increased.
Based on CY 2014 final cost data, the
geometric mean cost of composite APC
8000 is approximately $13,161 based on
16,937 claims available for cost
calculation of composite APC 8000. We
believe that packaging the cost of CPT
code 93462 within the APC payment
rates of other services as a result of the
add-on code packaging policy addresses
the commenters’ concerns.
Comment: One commenter who
agreed with CMS’ proposed
methodology not to use claims that meet
the composite APC 8000 criteria for
geometric mean cost calculation
purposes for APC 0085, expressed
concern regarding the proposed
payment rate for APC 0085. The
commenter noted that the proposed
payment rate for APC 0085 for CY 2014
is $11,517 (the corrected proposed rate
included in the September 6, 2013
OPPS Addendum B, which was posted
on the CMS Web site is approximately
$11,345), which is significantly higher
than the CY 2013 payment rate of
$4,035. However, the commenter
believed that this variation is a result of
unintended reuse of claims used to
calculate the composite APC 8000
payment rate. The commenter further
believed that excluding the composite
APC 8000 claims from APC 0085 cost
calculation will lower the geometric
mean cost of APC 0085 significantly,
and urged CMS to correct this error.
Response: We acknowledge that the
proposed payment rate for APC 0085
was incorrectly initially published as
approximately $11,517, as well as the
corrected payment rate (which was
posted on the CMS Web site) of $11,345.
The proposed rule payment rate for APC
0085 was based on our comprehensive
APC methodology, which packaged the
cost of ancillary and other services.
However, our comprehensive APC
methodology will not be effective until
CY 2015. The final geometric mean cost
for APC 0085 is approximately $4,248,
based on 6,362 claims available for
ratesetting.
After consideration of the public
comments we received, we are
finalizing our proposal to continue

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payment for composite APC 8000 for CY
2014. Based on a full year of CY 2012
claims data, the final geometric mean
cost of composite APC 8000 is
approximately $13,162, based on 16,935

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claims available for ratesetting. We also
are finalizing the payment for APC
0085, based on a geometric mean cost of
approximately $4,248.

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Table 11 below lists the groups of
procedures upon which we based
composite APC 8000 for CY 2014
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Codes Used in Combinations: At Least
One in Group A and One in Group B, or
CY 2014
At Least One in Group C
CPT Code
Group A
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
93619
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
93620
recording, His bundle recording
Group B
Intracardiac catheter ablation of
atrioventricular node function,
atrioventricular conduction for creation of
complete heart block, with or without
temporary pacemaker placement
93650

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Single Code
CY 2014
APC

CY 2014 SI
(Composite)

0085

Q3

0085

Q3

0085

Q3

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TABLE It.-GROUPS OF CARDIAC ELECTROPHYSIOLOGIC
EVALUATION AND ABLATION PROCEDURES UPON WHICH COMPOSITE
APC 8000 IS BASED FOR CY 2014

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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
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
Comprehensive electrophysiologic
evaluation including trans septal
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

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BILLING CODE 4120–01–C

(4) Mental Health Services Composite
APC (APC 0034)
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43565), for CY 2104, we
proposed 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

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93653

8000

Q3

93654

8000

Q3

93656

8000

Q3

partial hospitalization services provided
by a hospital, which we consider to be
the most resource-intensive of all
outpatient mental health treatments. We
refer readers to the April 7, 2000 OPPS
final rule with comment period (65 FR
18452 through 18455) for the initial
discussion of this longstanding policy
and the CY 2012 OPPS/ASC final rule

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with comment period (76 FR 74168) for
more recent background.
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
payment rate for partial hospitalization

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Group C

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services provided by a hospital, those
specified mental health services would
be assigned to APC 0034 (Mental Health
Services Composite). Specifically, we
proposed to continue to set the payment
rate for APC 0034 at the same payment
rate that we proposed to establish for
APC 0176 (Level II Partial
Hospitalization (4 or more services) for
hospital-based PHPs), which is the
maximum partial hospitalization per
diem payment rate for a hospital and
proposed 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 to make a single
payment at the same payment rate
established for APC 0176 for all of the
specified mental health services
furnished by the hospital on that single
date of service. We stated that we
continue to believe that the costs
associated with administering a partial
hospitalization program at a hospital
represent the most resource-intensive of
all outpatient mental health treatments.
Therefore, we do not believe that we
should pay more for mental health
services under the OPPS than the
highest partial hospitalization per diem
payment rate for hospitals.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our CY 2014 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
hospitalization per diem payment for a
hospital for CY 2014.
(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 6 of the CY

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2013 OPPS/ASC final rule with
comment period (77 FR 68253 through
68257).
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
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 2014 OPPS/ASC proposed
rule (78 FR 43566), for CY 2014, we
proposed to continue 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 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 2014 payment
rates for the five multiple imaging
composite APCs (APC 8004, APC 8005,
APC 8006, APC 8007, and APC 8008)

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were based on geometric mean costs
calculated from a partial year of CY
2012 claims available for the CY 2014
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 geometric
mean costs, we used the same
methodology that we used to calculate
the final CY 2012 and CY 2013
geometric mean costs for these
composite APCs, as described in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74169). The
imaging HCPCS codes referred to as
‘‘overlap bypass codes’’ that we
removed from the bypass list for
purposes of calculating the proposed
multiple imaging composite APC
geometric mean costs, pursuant to our
established methodology (76 FR 74169),
were identified by asterisks in
Addendum N to the proposed rule
(which is available via the Internet on
the CMS Web site) and were discussed
in more detail in section II.A.1.b. of the
proposed rule.
For the CY 2014 proposed rule, we
were able to identify approximately 0.8
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 2014 geometric mean costs
for the multiple imaging composite
APCs.
Table 7 of the proposed rule listed the
proposed HCPCS codes that would be
subject to the multiple imaging
composite policy and their respective
families and approximate composite
APC geometric mean costs for CY 2014
(78 FR 43567). We noted that the
proposed geometric mean costs
calculated for many imaging APCs,
including the multiple imaging
composite APCs, have changed
significantly from the geometric mean
costs calculated for the CY 2013 OPPS/
ASC final rule with comment period for
these APCs as a result of the proposed
adoption of the new MRI and CT cost
centers, as discussed in section II.A.1.c.
of the proposed rule.
Comment: Some commenters
supported CMS’ decision not to propose
any new multiple imaging composite
APCs. Other commenters urged CMS to
restore separate payment for each
imaging procedure, regardless of the
date of service because of the decreases
in payment for imaging services over
several years, which according to the
commenters may create disincentives to
performing multiple imaging services on
the same date. Some commenters stated

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that other CMS proposals such as the
CY 2014 proposed new CCRs for CT and
MRI services have further decreased
payment rates for imaging services for
CY 2014, and the use of the new cost
centers is directly responsible for the
substantial decreases in payment for
multiple imaging APCs, including
composite APCs. Some commenters
suggested that CMS provide an analysis
of the impacts from decreases in
payments for imaging services.
Response: As explained earlier in this
section, we continue to believe that our
multiple imaging composite policies
reflect and promote the efficiencies

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hospitals can achieve when performing
multiple imaging procedures during a
single session. We have a total of 1.6
million composite cases in our claims
data for CY 2014 ratesetting, which we
believe is a sufficiently robust number
of multiple imaging cases performed for
ratesetting purposes. We address the
concern that the new cost centers may
be responsible for substantial decreases
in payment for multiple imaging APCs
in section II.A.1.c. of this final rule with
comment period.
After consideration of the public
comments we received, for this CY 2014
final rule with comment period, we

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74919

were able to identify approximately 0.7
million ‘‘single session’’ claims out of
an estimated 1.6 million potential
composite cases from our ratesetting
claims data, approximately 45 percent
of all eligible claims, to calculate the
final CY 2014 geometric mean costs for
the multiple imaging composite APCs.
Table 12 below lists the HCPCS codes
that will be subject to the multiple
imaging composite policy and their
respective families and approximate
composite APC geometric mean costs
for CY 2014.
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TABLE 12.-0PPS IMAGING FAMILIES AND MULTIPLE IMAGING
PROCEDURE COMPOSITE APCs
Family 1 - Ultrasound
CY 2014 Approximate
APC Geometric Mean Cost = $287
76604
Us exam, chest
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 w/Doppler
76831
Echo exam, uterus
Us exam, pelvic, complete
76856
Us exam, scrotum
76870
76857
Us exam, pelvic, limited
Family 2 - CT and CTA with and without Contrast

CY 2014 APC 8004 (Ultrasound Composite)

70450
70480
70486
70490
71250
72125
72128
72131
72192
73200
73700
74150
74261
74176

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CY 2014 APC 8006 (CT and CTA with
Contrast Composite)

70487

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CY 2014 Approximate
APC Geometric Mean Cost = $307
Ct headibrain 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 2014 Approximate
APC Geometric Mean Cost = $550
Ct maxillofacial w/dye

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CY 2014 APC 8005 (CT and CTA without
Contrast Composite)*

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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

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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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* If a "without contrast" CT or CTA procedure is performed during the same session as a

Family 3 - MRI and MRA with and without Contrast
CY 2014 APC 8007 (MRI and MRA without
CY 2014 Approximate
Contrast Composite)*
APC Geometric Mean Cost = $623
70336
Magnetic image, jaw joint
70540
Mri orbit/face/neck w/o dye
Mr angiography head w/o dye
70544
Mr angiography neck w/o dye
70547
70551
Mri brain w/o dye
70554
Fmri brain by tech
71550
Mri chest w/o dye
72141
Mri neck spine w/o dye
Mri chest spine w/o dye
72146
72148
Mri lumbar spine w/o dye
72195
Mri pelvis w/o dye
73218
Mri upper extremity w/o dye
73221
Mri joint upr extrem w/o dye
Mri lower extremity w/o dye
73718
Mrijnt oflwr extre w/o dye
73721
74181
Mri abdomen w/o dye
Cardiac mri for morph
75557
Cardiac mri w/stress img
75559
C8901
MRA w/o c~nt, abd
C8904
MRI w/o c~nt, breast, uni
MRI w/o c~nt, breast, bi
C8907
MRA w/o c~nt, chest
C8910
MRA w/o c~nt, lwr ext
C8913
MRA w/o c~nt, pelvis
C8919
C8932
MRA, w/o dye, spinal canal
MRA, w/o dye, upper extr
C8935
CY 2014 APC 8008 (MRI and MRA with
CY 2014 Approximate
Contrast Composite)
APC Geometric Mean Cost = $931
70549
Mr angiograph neck w/o & w/dye
70542
Mri orbit/face/neck w/dye
70543
Mri orbt/fac/nck w/o & w/dye

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"with contrast" CT or CTA procedure, the I10CE will assign APC 8006 rather than
APC 8005.

70545
70546
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

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Mr angiography head w/dye
Mr angiograph head w/o & w/dye
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
Mri j oint of lwr 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

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(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 codes 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 33249 (Insertion or repositioning of
electrode lead(s) for single or dual
chamber pacing cardioverterdefibrillator 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
procedure described by CPT code
33225, the procedure described by CPT
code 33249 is also assigned to APC
0108. When not performed on the same
day as the procedure described by CPT
code 33249, the procedure described by
CPT code 33225 is assigned to APC
0655 (Insertion/Replacement/
Conversion of a Permanent Dual
Chamber Pacemaker).
In order to ensure that hospitals
correctly code for CRT services, 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);

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• 33213 (Insertion or replacement of
pacemaker pulse generator only; dual
chamber, atrial or ventricular);
• 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).
We continued for CY 2013 to
recognize CRT–D as a single, composite
service as described above and finalized
in the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68259). 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.
We also noted that this policy is
consistent with the principles of a
prospective payment system,
specifically to place similar services that

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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.
Because CPT codes 33225 and 33249
may be treated as a composite service
for payment purposes, we continued to
assign them status indicator ‘‘Q3’’
(Codes that may be paid through a
composite APC) in Addendum B to the
proposed rule (which is available via
the Internet on the CMS Web site). 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).
In addition, for CY 2013, we revised
the claims processing edits in place for
CPT code 33225 due to revised guidance
from the AMA in the CPT codebook
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 codebook 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
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 (77 FR 68259).
For CY 2014, we proposed to
discontinue and supersede the cardiac
resynchronization therapy composite
APC with our proposed comprehensive
APC 0108, as discussed in section
II.A.2.e. of the proposed rule (78 FR
43561). The public comments that we
received on cardiac resynchronization
therapy that relate to proposed
comprehensive APCs are discussed in

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section II.A.2.e. of this final rule with
comment period.
As discussed in section II.A.2.e. of
this final rule with comment period,
comprehensive APCs will not be
effective until CY 2015. Therefore, for
CY 2014, we are finalizing the
continuation of our current CRT–D
composite policy, without modification
and finalizing payment for CRT services
using the composite APC 0108 payment
methodology that we used for CYs 2012
and 2013, as discussed above. That is,
for CY 2014, CRT–D will be recognized
as a single, composite service as
described above and finalized in the CY
2012 and CY 2013 OPPS/ASC final rules
with comment period. In calculating the
costs upon which the final payment rate
for APC 0108 is based for CY 2014, 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 15,454 single bills from the CY 2014
final rule claims data to calculate a final
geometric mean cost of approximately
$32,257 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.
3. Changes to Packaged Items and
Services
a. Summary of CY 2014 Final Packaging
Policies
Beginning in CY 2014, we are
unconditionally or conditionally
packaging the following items and
services and adding them to the list of
OPPS packaged items and services in 42
CFR 419.2(b):
(1) Drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure;
(2) Drugs and biologicals that function
as supplies when used in a surgical
procedure;
(3) Certain clinical diagnostic
laboratory tests;
(4) Certain procedures described by
add-on codes; and
(5) Device removal procedures.
The HCPCS codes that we are
packaging for CY 2014 are displayed in
both Addendum P and Addendum B of
this final rule with comment period.
The supporting documents for this final
rule with comment period, including

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but not limited to these Addenda, are
available at the CMS Web site at: http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/Hospital
OutpatientPPS/index.html. Further
details including comments and
responses on the particular packaging
proposals are discussed below.
b. Background
Like other prospective payment
systems, the OPPS relies on the concept
of averaging to establish a payment rate
for services. 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.
The OPPS packages payment for
multiple interrelated items and services
into a single payment to create
incentives for hospitals to furnish
services most efficiently and to manage
their resources with maximum
flexibility. Our packaging policies
support our strategic goal of using larger
payment bundles to maximize hospitals’
incentives to provide care in the most
efficient manner. For example, where
there are a variety of devices, drugs,
items, supplies, etc. that could be used
to furnish a service, some of 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 often
results if separate payment is provided
for the items.
Packaging also encourages hospitals
to effectively negotiate with
manufacturers and suppliers to reduce
the purchase price of items and services
or to explore alternative group
purchasing arrangements, thereby
encouraging the most economical health
care delivery. 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
items and services and lower cost cases
requiring fewer ancillary items and
services. Because packaging encourages
efficiency and is an essential component
of a prospective payment system,
packaging payment for items and
services that are typically integral,
ancillary, supportive, dependent, or
adjunctive to a primary service has been

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a fundamental part of the OPPS since its
implementation in August 2000. Most,
but not necessarily all, items and
services currently packaged in the OPPS
are listed in 42 CFR 419.2(b). For an
extensive discussion of the history and
background of the OPPS packaging
policy, we refer readers to the CY 2000
OPPS final rule (65 FR 18434), the CY
2008 OPPS/ASC proposed rule (72 FR
42628) and the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66580).
Over the last 15 years, we have
refined our understanding and
implementation of the OPPS and have
packaged numerous services that we
originally paid as primary services. As
we continue to consider the
development of larger payment groups
that more broadly reflect services
provided in an encounter or episode of
care, we may propose to expand these
packaging policies as they apply to
services that we currently separately
pay as primary services. We use the
term ‘‘primary service’’ to refer to the
HCPCS codes that represent the primary
therapeutic or diagnostic modality into
which we package payment for a
dependent service.
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
for the combination of the separately
payable services and any associated
packaged services. We emphasize that
hospitals should report all HCPCS codes
for provided services, including those
for packaged services, unless the CPT
Editorial Panel or CMS provides other
specific 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

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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. In addition, in the
CY 2009 OPPS/ASC final rule with
comment period (73 FR 68634), we
packaged products described as
implantable biologicals. As discussed
below, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43575), we
proposed to add each of these categories
of packaged items and services that
were packaged beginning in CYs 2008
and 2009, along with newly proposed
packaged items and services for CY
2014 as described below to the OPPS
packaging regulation at 42 CFR 419.2(b).
Composite APCs under the OPPS,
which are described in section II.A.2.f.
of this final rule with comment period,
and comprehensive APCs, which are
described in section II.A.2.e. of this final
rule with comment period, also include
packaging.
c. Basis for New Packaging Policies for
CY 2014
As discussed above, the OPPS is a
prospective payment system. It is not
intended to be a fee schedule, in which
separate payment is made for each
coded line item. However, the OPPS is
currently a prospective payment system
that packages some items and services
but not others. Payment for some items
and services in the OPPS is according to
the principles of a prospective payment
system, while the payment for other
items and services is more like that of
a fee schedule. Our overarching goal is
to make OPPS payments for all services
paid under the OPPS more consistent
with those of a prospective payment
system and less like those of a per
service fee schedule, which pays
separately for each coded item. As a part
of this effort, we have continued to
examine the payment for items and
services provided in the OPPS to
determine which OPPS services can be
packaged to achieve the objective of
advancing the OPPS as a prospective
payment system.
Therefore, as we did in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66610 through 66659), we
have examined the items and services
currently provided under the OPPS,
reviewing categories of integral,
ancillary, supportive, dependent, or
adjunctive items and services for which
we believe payment would be
appropriately packaged into payment of
the primary service they support.
Specifically, we examined the HCPCS
code definitions (including CPT code

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descriptors) to see whether there were
categories of codes for which packaging
would be appropriate according to
existing OPPS packaging policies or a
logical expansion of those existing
OPPS packaging policies. In general, in
the CY 2014 OPPS/ASC proposed rule,
we proposed to package the costs of
selected HCPCS codes into payment for
services reported with other HCPCS
codes where we believe that one code
reported an item or service that was
integral, ancillary, supportive,
dependent, or adjunctive to the
provision of care that was reported by
another HCPCS code. Below we discuss
categories and classes of items and
services that we proposed to package
beginning in CY 2014. In several cases,
we proposed that services be
conditionally packaged so that if they
are provided without other services,
there will be a separate payment for the
service. The proposed policies detailed
below are not exhaustive, and we expect
to continue to review the OPPS and
consider additional packaging policies
in the future.
d. New Packaging Policies for CY 2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43570 through 43575), we
proposed to package the following
categories of items and services
beginning in 2014:
(1) Drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure;
(2) Drugs and biologicals that function
as supplies when used in a surgical
procedure;
(3) Certain clinical diagnostic
laboratory tests;
(4) Procedures described by add-on
codes;
(5) Ancillary services (status indicator
‘‘X’’);
(6) Diagnostic tests on the bypass list;
and
(7) Device removal procedures.
Category (2) listed above was
described in the proposed rule as ‘‘drugs
and biologicals that function as supplies
or devices when used in a surgical
procedure.’’ In this final rule with
comment period, we are deleting the
words ‘‘or devices’’ from the name of
this category because the words are
redundant of ‘‘supplies.’’ In this context,
devices are a type of supply (78 FR
43571), so it is not necessary to include
the words ‘‘or devices’’ after supplies in
the name of this category of packaged
items.
Comment: Many commenters
requested that CMS postpone finalizing
all of the packaging proposals because
of the commenters’ inability to replicate

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the CY 2014 proposed OPPS payment
rates, which the commenters asserted
limited their ability to fully evaluate
and, therefore, meaningfully comment
on the packaging proposals. Many
commenters also stated that, given the
significance and scope of the proposals,
CMS should delay implementation of
these policies to allow stakeholders
more time to evaluate these packaging
proposals. In addition, the Advisory
Panel on Hospital Outpatient Payment
recommended that CMS delay
implementation of the CY 2014
packaging proposals until data can be
reviewed by the Panel at its spring 2014
meeting regarding interactions between
the proposals and their potential
cumulative impact.
Response: We appreciate that it
requires time and effort to examine
proposed policies. We discovered some
limited methodological errors
concentrated in a handful of APCs
during the comment period. In
response, we issued corrected data files
on August 28, 2013, and published a
correcting document in the Federal
Register on September 6, 2013 (78 FR
54842) to address these technical errors.
We also afforded the public a 10-day
extension of the comment period on
those topics affected by the corrected
proposed rates. We believe that our
standard 60-day comment period
afforded commenters an adequate
amount of time to meaningfully
comment on the proposed policies.
While we acknowledge that the OPPS is
one of the more complicated Medicare
payment systems to simulate, we make
extensive data files and descriptions
publicly available, in addition to
proposed payment rates, in an effort to
assist commenters in their review.
Furthermore, the isolated technical
errors that were corrected in the
correcting document had limited
interaction with the packaging
proposals, and we believe the relativity
(the relative magnitude of the difference
between payment rates for different
procedures) of the proposed payment
rates for almost all APCs was sufficient
for meaningful comment. Finally, we
received numerous substantive,
thoughtful, and helpful comments on
our packaging proposals, which
suggested that the public had sufficient
time to meaningfully comment on the
seven CY 2014 proposed packaging
policies, and therefore, we do not
believe a delay in implementation is
necessary. We will review additional
information regarding the impacts of the
packaging policies with the Panel at
future Panel meetings.
Below we discuss our proposals and
summarize and respond to the

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numerous substantive public comments
we received on each packaging
proposal.
(1) Drugs, Biologicals, and
Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic
Test or Procedure
As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43570),
in the OPPS, we currently
unconditionally package the following
six categories of drugs, biologicals, and
radiopharmaceuticals (unless temporary
pass-through status applies): (1) those
with per day costs at or below the
packaging threshold (discussed further
in section V.B.2. of the proposed rule
and this final rule with comment
period); (2) diagnostic
radiopharmaceuticals; (3) contrast
agents; (4) anesthesia drugs; (5) drugs
used as supplies according to
§ 419.2(b)(4); and (6) implantable
biologicals. For CY 2014, we reviewed
all of the drugs, biologicals, and
radiopharmaceuticals administered in
the hospital outpatient setting to
identify categories or classes of drugs,
biologicals, and radiopharmaceuticals
that either should be packaged
according to existing packaging policies
or should be packaged as a logical
expansion of existing OPPS packaging
policies for drugs, biologicals, and
radiopharmaceuticals.
Currently, two of the categories of
drugs, biologicals, and
radiopharmaceuticals that are packaged
in the OPPS (contrast agents and
diagnostic radiopharmaceuticals) have a
common characteristic—they both
describe products that function as
supplies when used in a diagnostic test
or procedure. Although in the past we
identified these specific categories of
drugs, biologicals, and
radiopharmaceuticals as packaged
unless pass-through status applied, we
recognize that they actually represent
subcategories of a broader category of
drugs, biologicals, and
radiopharmaceuticals that should be
packaged in the OPPS according to
OPPS packaging principles: drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure. In
particular, we are referring to drugs,
biologicals, and radiopharmaceuticals
that function as supplies as a part of a
larger, more encompassing service or
procedure, namely, the diagnostic test
or procedure in which the drug,
biological, or radiopharmaceutical is
employed. Because diagnostic
radiopharmaceuticals and contrast
agents represent specific examples of a
broader category of drugs, biologicals, or

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radiopharmaceuticals that function as
supplies that are integral and supportive
to a diagnostic test or procedure, we
proposed to unconditionally package
drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure, except when the drug,
biological, or radiopharmaceutical has
pass-through payment status.
A diagnostic test or procedure is
defined as any kind of test or procedure
performed to aid in the diagnosis,
detection, monitoring, or evaluation of a
disease or condition. A diagnostic test
or procedure also includes tests or
procedures performed to determine
which treatment option is optimal. A
diagnostic test or procedure can have
multiple purposes, but at least one
purpose must be diagnostic. We
proposed to revise the regulations at 42
CFR 419.2(b) to specify that any drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
diagnostic tests or procedures will be
packaged as supplies in the OPPS,
except when pass-through status
applies. This proposed broader category
of packaged drugs, biologicals, and
radiopharmaceuticals includes the
currently packaged categories of
contrast agents and diagnostic
radiopharmaceuticals.
In the proposed rule, we identified
one new class of drugs (stress agents)
and one specific drug (Cysview) that we
believe also fit within this new category
of packaged items, that is, drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure. We
discuss the application of this policy to
these specific drugs and the associated
comments below.
(a) Stress Agents
Our review of OPPS drugs identified
pharmacologic stress agents (‘‘stress
agents’’) as a class of drugs that is
described by the proposed packaged
category of drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure. Stress agents are a class of
drugs that are used in diagnostic tests to
evaluate certain aspects of cardiac
function. In many cases, these agents are
used in patients who are unable to
perform an exercise stress test, which
typically precedes additional diagnostic
imaging. The primary diagnostic test in
which these agents are used is
myocardial perfusion imaging (MPI),
which is primarily reported with CPT
code 78452 and is the highest cost
nuclear medicine procedure in the
OPPS, with total payments exceeding
$800 million in CY 2012. In the

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proposed rule, we reported that
approximately 96 percent of MPI is
billed with CPT code 78452. Stress
agents include the following drugs
described by these HCPCS codes:
HCPCS codes J0152 (Injection,
adenosine for diagnostic use, 30 mg);
J1245 (Injection, dipyridamole, per 10
mg); J1250 (Injection, dobutamine
hydrochloride, per 250 mg); and J2785
(Injection, regadenoson, 0.1 mg). For CY
2013, HCPCS codes J1245 and J1250 are
packaged in the OPPS, and J0152 and
J2785 are separately paid. OPPS
payments for the two separately payable
stress agents totaled approximately $111
million in CY 2012.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43570), we proposed to
package all stress agents that function as
supplies into the diagnostic tests or
procedures in which they are employed,
consistent with the policy proposed
above. The primary service in which
stress agents are employed is MPI. MPI
with stress encompasses the imaging
service, the stress test, and either
exercise to induce stress or the
administration of a pharmacologic stress
agent. In the proposed rule, we included
Table 8 which showed the CY 2013
separate payment versus the proposed
CY 2014 packaged payment for MPI (78
FR 43571). We note that some of the
payment rates for MPI in Table 8 were
corrected in the correcting document
published in the Federal Register on
September 6, 2013 (78 FR 54842).
Comment: Some commenters
supported packaging stress agents into
MPI because they believed that it
supports CMS’ goal to make OPPS
payments more consistent with those of
a prospective payment system.
Response: We appreciate the
commenters’ support.
Comment: Several commenters
objected to this proposal. Some
commenters stated that CMS should not
expand packaging to any new categories
of drugs, biologicals, and
radiopharmaceuticals, including stress
agents. One commenter objected to the
proposed policy for the following
reasons and suggested changes or
alternatives to the proposed policy:
• Packaging stress agents into MPI
could adversely affect patient access to
stress agents;
• Because a stress agent is not used
with 100 percent of MPI tests, CMS
should only package drugs that are used
at least 80 percent of the time with the
primary procedure, to ensure that the
packaged payment reflects the full cost
of the packaged drug;
• Hospitals would have a financial
incentive not to use a stress agent with

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MPI, because stress can be induced with
exercise instead of a stress agent;
• To avoid incurring the cost of a
stress agent, hospitals will encourage
patients to exercise, and this could be
dangerous for the patient;
• As a consequence of packaging
stress agents, hospitals may perform
inadequate MPI tests (without proper
stress), resulting is misdiagnoses;
• CMS should require hospitals to
code stress agents on MPI claims to
ensure that costs are adequately
captured; and
• CMS should create separate APCs
for MPI with and without use of a stress
agent.
Response: We disagree with the
commenter that packaging stress agents
will limit beneficiary access to MPI tests
with a stress agent when it is not
clinically appropriate for the patient to
induce stress through exercise. Rather,
as we discuss below, we believe that a
single payment for MPI establishes
better incentives to ensure clinically
appropriate patient care.
We are not adopting the commenter’s
recommendation that we adopt a
minimum utilization requirement of 80
percent for drug packaging. We package
services that are typically integral,
ancillary, supportive, dependent, or
adjunctive to a primary service,
irrespective of the frequency with which
this packaged service is used in any
given primary procedure. This policy
has been a fundamental part of the
OPPS since its implementation in
August 2000. In some cases, a packaged
item may be associated with a primary
service 100 percent of the time and in
other cases a packaged item may be
rarely used with the procedure or
service with which it is packaged. Using
the geometric mean cost for an APC
ensures that minor changes in the total
for items and services from low volume
packaged services will impact the APC
payment rate. Receiving some
incremental amount for packaged items
allows the hospital to best determine the
most efficient and clinically appropriate
delivery of a service. An 80 percent
utilization threshold for packaging is
more reflective of a fee schedule than a
prospective payment system, creating
payment for a single service of MPI and
stress agent that would not encourage
the efficient delivery of MPI. We believe
a minimum utilization threshold would
be unduly restrictive in the context of a
prospective payment system because
such a threshold would exclude services
or items from packaging that are
typically integral, ancillary, supportive,
dependent, or adjunctive to a primary
service.

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Regarding the commenter’s concern
that hospitals will have a financial
incentive not to use a stress agent with
MPI, again we note that the established
payment rate is based on the geometric
mean cost of claims with and without a
stress agent and that hospitals will now
receive incrementally more payment for
each MPI, proportional to included
costs for stress agents on the claims,
even when they do not use a stress
agent. We believe that knowing the full
amount of payment for the MPI, with or
without the stress agent, will allow the
hospital to make the most efficient
decision that is clinically appropriate.
As we state above, 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. Finally,
the recent availability of certain generic
stress agents should further mitigate any
financial incentive not to use a stress
agent with MPI.
With regard to clinical concerns that
hospitals may encourage physicians to
order exercise rather than an MPI with
stress agent, we disagree that hospitals
and physicians are likely to settle for
inadequate stress-MPI tests rather than
incur the cost of the stress agent because
a truly inadequate stress test would not
provide the physician with sufficient
information to arrive at a diagnosis and
would require repeat testing. We believe
that hospitals and physicians choose the
most clinically appropriate diagnostic
testing approach for their patients and
that they will use a stress agent when
necessary.
With regard to the suggestion that we
require hospitals to code stress agents in
MPI claims, we have repeatedly stated
that hospitals should report all codes
and associated charges on the claim for
the item and services provided to the
patient, so that we will be able to
monitor trends in stress agent utilization
over time.
Finally, we are not accepting the
suggestion that we assign MPI tests with
and without the use of a stress agent to
different APCs. As with the minimum
utilization threshold, we believe that
establishing separate APCs would result
in unnecessary differentiation between
stress MPI with stress induced through
exercise and stress MPI with stress
induced through a stress agent, and that
such a difference could discourage the
efficient delivery of MPI. Further, the
MPI CPT code descriptors include stress
or rest, and stress can be induced either
through exercise or use of a stress agent.
After consideration of the public
comments we received, we are

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finalizing our proposed policy to
package stress agents under our policy
that packages all drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure. We are assigning HCPCS
codes J0151 (which replaces HCPCS
code J0152 in CY 2014) and J2785 the
status indicator of ‘‘N,’’ indicating
unconditional packaging in the OPPS
for CY 2014.

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(b) Hexaminolevulinate Hydrochloride
(Cysview®)—HCPCS Code C9275
Cysview is a drug for which passthrough status expired on December 31,
2012. Beginning in CY 2013, Cysview
was unconditionally packaged in the
OPPS as a contrast agent (77 FR 68364).
The indications and usage of Cysview as
listed in the FDA-approved label are as
follows: ‘‘Cysview is an optical imaging
agent indicated for use in the
cystoscopic detection of non-muscle
invasive papillary cancer of the bladder
among patients suspected or known to
have lesion(s) on the basis of a prior
cystoscopy. Cysview is used with the
Karl Storz D-Light C Photodynamic
Diagnostic (PDD) system to perform
cystoscopy with the blue light setting
(Mode 2) as an adjunct to the white light
setting (Mode 1).’’
In the CY 2008 OPPS/ASC final rule
with comment period (72 FR 42672), we
described contrast agents as follows:
‘‘Contrast agents are generally
considered to be those substances
introduced into or around a structure
that, because of the differential
absorption of x-rays, alteration of
magnetic fields, or other effects of the
contrast medium in comparison with
surrounding tissues, permit
visualization of the structure through an
imaging modality. The use of certain
contrast agents is generally associated
with specific imaging modalities,
including x-ray, computed tomography
(CT), ultrasound, and magnetic
resonance imaging (MRI), for purposes
of diagnostic testing or treatment.’’
Upon reexamining this description of
contrast agents and considering our
prior application of this description to
specific compounds, we believe that
contrast agents should include those
compounds that are used with the
imaging modalities x-ray, computed
tomography (CT), ultrasound, magnetic
resonance imaging (MRI), and other
related modalities that could represent
advancements of these modalities.
Based on the indications and usage
described above for Cysview, we do not
believe that Cysview is best described as
a contrast agent. Rather, we believe
Cysview is more appropriately

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described as a drug used in a procedure
to diagnose bladder cancer.
As discussed above, in the CY 2014
OPPS/ASC proposed rule, we proposed
a new policy to package all drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure. Cysview
is a drug that functions as a supply
when used in a diagnostic test or
procedure for the purpose of the
‘‘detection of non-muscle invasive
papillary cancer of the bladder.’’
Therefore, as a drug that functions as a
supply when used in a diagnostic test or
procedure, we proposed to package
Cysview for CY 2014 under the OPPS
(78 FR 43571). Cysview is currently
assigned to status indicator ‘‘N’’ for CY
2013, and under this proposal, the
status indicator assignment of ‘‘N’’
would continue for CY 2014.
Comment: Many of the commenters
on CMS’ proposal to package Cysview
were urologists who consider Cysview
to be valuable in the care of bladder
cancer patients and who expressed
concern that CMS’ proposed packaging
policy will restrict access to blue light
cystoscopy, which is the service in
which Cysview is employed. One
commenter stated that:
• Packaging Cysview limits patient
access to the drug;
• Cystoscopy procedures that employ
Cysview are not clinically comparable
to other procedures assigned to the same
APCs;
• CMS does not have the authority to
package drugs, biologicals, and
radiopharmaceuticals used in a
diagnostic test or procedure;
• Packaging Cysview results in an
inequitable payment for Cysview;
• Cysview does not function as a
supply and therefore should not be
packaged;
• Cysview is a treatment and is not
used in a diagnostic test and therefore
should not be packaged under the
policy that packages drugs, biologicals,
and radiopharmaceuticals used as a
supply in a diagnostic test or procedure.
• CMS must create a separate APC for
Cysview as it has done for procedures
that use contrast agents.
Response: We disagree with the
commenters that packaging will limit
patient access to Cysview. As we state
above, 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.
There are many items and services in
the OPPS in which use of the item or
service may increase the cost per case
above that of the average or typical case,

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and there are cases where no additional
items or services are necessary and the
cost of a typical case is much less than
the average. This is a fundamental
aspect of a prospective payment system.
Overall, we believe that OPPS payments
reflect average estimated costs for both
situations and encourage the hospital to
assess the appropriate use of those
additional items and services in
diagnosing bladder cancer and other
diseases.
Cysview is used in blue light
cystoscopy, which is an optional
adjunct to white light cystoscopy. The
various CPT codes for cystoscopy
include white light cystoscopy with or
without blue light cystoscopy. Cysview
is packaged into the cystoscopy
procedures. We believe that the current
structure of the APCs that include the
various cystoscopy procedures
sufficiently reflects clinical and
resource homogeneity as required by
section 1833(t)(2)(B) of the Act because
most of the codes in these APCs are
cystoscopy procedures or other
urological endoscopy procedures that,
like cystoscopy, employ an endoscope.
We also do not believe that packaging
Cysview in the OPPS is inequitable. We
package all drugs that function as
supplies when used in a diagnostic test
or procedure, and we will continue to
review drugs used in the OPPS to assess
whether they function as supplies or are
otherwise integral, ancillary, and
supportive to a diagnostic test or
procedure, and therefore appropriately
packaged into the procedure.
We disagree with the commenters
who suggested that we do not have the
authority to package drugs, biologicals,
and radiopharmaceuticals that function
as supplies when used in a diagnostic
test or procedure. We discussed our
authority to package drugs, biologicals,
and radiopharmaceuticals extensively in
2008, when we packaged diagnostic
radiopharmaceuticals and contrast
agents, and refer readers to that
discussion in the CY 2008 OPPS final
rule (72 FR 66610).
We disagree with the commenter’s
view that Cysview should not be
packaged because it does not function as
a supply when used in a diagnostic test.
We believe that the commenter
misunderstands the term ‘‘supply’’ as it
is used in the OPPS. Supply is a very
broad term that describes many types of
products in the OPPS. As discussed
elsewhere in this section and in the CY
2014 OPPS/ASC proposed rule (78 FR
43571 through 43575), supplies is a
large category of items that typically are
either for single patient use or have a
shorter life span in use than equipment.
A supply in the OPPS can be anything

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that is not equipment, and supplies can
be either expensive or inexpensive and
either commonly or uncommonly used.
According to OPPS policy, drugs,
biologicals, radiopharmaceuticals,
medical devices, and other items and
products that are not equipment can be
supplies in the OPPS (78 FR 43571 and
43575). Since the inception of the OPPS,
implantable medical devices have been
considered supplies in the OPPS (65 FR
18443). Many implantable medical
devices are very technologically
sophisticated, costly, and tailored to
specific medical needs but they are
nonetheless supplies in the OPPS.
Cysview facilitates diagnosis through
blue light cystoscopy, and therefore we
consider it to be a drug that functions
as a supply in a diagnostic test in the
OPPS.
We do not believe that Cysview and
blue light cystoscopy are therapeutic.
The FDA-approved label for Cysview
states that Cysview is used for
‘‘cystoscopic detection of non-muscle
invasive papillary cancer of the
bladder,’’ which is a diagnostic purpose
according to our definition of a
diagnostic test described above and in
the proposed rule (78 FR 43570). Also,
Cysview itself does not eliminate
bladder cancer cells. It enables better
localization of the bladder cancer cells
as compared to white light cystoscopy
alone, which then requires a therapeutic
procedure such as resection.
Finally, we disagree with the
commenter’s suggestion that we must
create a separate APC according to
section 1833(t)(2)(G) of the Act for
procedures that use Cysview. Cysview is
not being packaged as a contrast agent.
Instead, it is being packaged into the
service in which it is used under the
policy of packaging drugs, biologicals,
and radiopharmaceuticals that function
as supplies when used in a diagnostic
test or procedure, which also currently
includes diagnostic
radiopharmaceuticals, contrast agents,
and stress agents.
Comment: One commenter requested
clarification regarding CMS’ definition
of the term ‘‘contrast agent,’’ and
requested that CMS recognize these
products as drugs and that CMS refrain
from calling these products supplies.
Response: The purpose of the
clarification of the term ‘‘contrast agent’’
in the proposed rule (78 FR 43571),
which is repeated above, was to explain
that we believe that contrast agents are
products used in certain types of
imaging techniques (or advancements of
those techniques), namely x-ray,
computed tomography (CT), ultrasound,
and magnetic resonance imaging (MRI).
Contrast agents are typically drugs and

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are eligible for pass-through as drugs in
the OPPS. However, as mentioned
above, drugs can also function as
supplies, and be paid as such, when
used in a diagnostic test or procedure in
the OPPS. Contrast agents function as
supplies when used in an imaging test
and are packaged in the OPPS, unless
pass-through status applies. This is a
well-established OPPS packaging
policy, and this policy makes no
fundamental changes to the policy of
unconditionally packaging contrast
agents. We consider packaging of
contrast agents under the more general
packaging category of drugs, biologicals,
and radiopharmaceuticals that function
as supplies when used in a diagnostic
test or procedure, and this packaging
category is being codified at 42 CFR
419.2(b)(15).
After consideration of the public
comments we received, we are
finalizing our proposed policy to
package Cysview as a drug under our
policy that packages drugs, biologicals,
and radiopharmaceuticals that function
as supplies when used in a diagnostic
test or procedure. Therefore, HCPCS
code C9275 (Cysview) will be assigned
status indicator ‘‘N’’ (unconditionally
packaged) in CY 2014.
Comment: One commenter requested
that radiopharmaceuticals used for
dosimetry not be considered diagnostic
radiopharmaceuticals but instead be
treated as therapeutic
radiopharmaceuticals.
Response: Radiopharmaceuticals used
for dosimetry are packaged supplies in
the OPPS according to established OPPS
policy (68 FR 63443). In addition, the
purpose of dosimetry is to establish the
treatment dose or the optimal treatment
for the patient. As stated in the
proposed rule (78 FR 43570) and again
above, diagnostic items ‘‘include tests or
procedures performed to determine
which treatment option is optimal.’’
Therefore, because dosimetry is
performed to determine the optimal
treatment dose of a therapeutic
radiopharmaceutical, we believe,
according to our definition of a
diagnostic item, test, or procedure, that
it is diagnostic and not therapeutic.
Therefore, radiopharmaceuticals used
for dosimetry are packaged in the OPPS.
(2) Drugs and Biologicals That Function
As Supplies When Used in a Surgical
Procedure
Since the inception of the OPPS we
have packaged medical devices, medical
and surgical supplies, and surgical
dressings into the related procedure
under § 419.2(b)(4). Medical and
surgical supplies are a broad category of
items used in the hospital outpatient

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setting. Supplies is a large category of
items that typically are either for single
patient use or have a shorter life span
in use than equipment. Supplies
include not only minor, inexpensive, or
commodity-type items but also include
a wide range of products used in the
hospital outpatient setting, including
certain implantable medical devices. We
consider implantable medical devices to
be integral to, dependent on, and
supportive to a surgical implantation
procedure. For further discussion, we
refer readers to the CY 2000 OPPS final
rule (65 FR 18443). Packaged supplies
can include certain drugs, biologicals,
and radiopharmaceuticals. Packaged
supplies in the OPPS also include
implantable biologicals, which are
packaged because they function as
implantable devices which, as noted
above, are considered to be a type of
supply in the OPPS. We refer readers to
the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68634) for a
more detailed discussion of implantable
biologicals. We believe that the existing
packaging policy for implantable
biologicals represents an example of a
broader category of drugs and
biologicals that should be packaged in
the OPPS according to longstanding
regulations and existing policies: drugs
and biologicals that function as supplies
when used in a surgical procedure.
Therefore, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43571), beginning
in the CY 2014 OPPS, we proposed to
unconditionally package all drugs and
biologicals that function as supplies in
a surgical procedure, following the
current packaging policy for
implantable biologicals.
Skin substitutes are a class of
products that we treat as biologicals that
fit within the proposed packaging
category of drugs and biologicals that
function as supplies in a surgical
procedure. The term ‘‘skin substitutes’’
refers to a category of products that are
most commonly used in outpatient
settings for the treatment of diabetic foot
ulcers and venous leg ulcers. Although
the term ‘‘skin substitute’’ has been
adopted to refer to this category of
products in certain contexts, these
products do not actually function like
human skin that is grafted onto a
wound; they are not a substitute for a
skin graft. Instead, these products are
applied to wounds to aid wound healing
and through various mechanisms of
action they stimulate the host to
regenerate lost tissue. We refer readers
to the ‘‘Skin Substitutes for Treating
Chronic Wounds Technology
Assessment Report at ES–2’’ which is
available on the AHRQ Web site at:

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
http://www.ahrq.gov/research/findings/
ta/skinsubs/HCPR0610_skinsubstfinal.pdf. Skin substitutes are regulated
by the FDA as either medical devices
(and classified as wound dressings) or
as human cell, tissue, and cellular and
tissue-based products (HCT/Ps) under
section 361 of the Public Health Service
Act. Most of the various skin substitutes
are applied to a wound during a surgical
procedure described by CPT codes
under the heading in the 2013 CPT
codebook ‘‘Skin Replacement Surgery’’
and the subheading ‘‘Skin Substitute
Grafts’’ in the CPT code range 15271
through 15278. To be properly
performed, every surgical procedure in
this CPT code range requires the use of
at least one skin substitute product.
These surgical procedures include
preparation of the wound and
application of the skin substitute
product through suturing or various
other techniques. Currently skin
substitutes are separately paid in the
OPPS as if they are biologicals
according to the ASP methodology and
are subject to the drug and biological
packaging threshold.
Because a skin substitute must be
used to perform any of the procedures
described by a CPT code in the range
15271 through 15278, and conversely
because it is the surgical procedure of
treating the wound and applying a
covering to the wound that is the
independent service, skin substitute
products serve as a necessary supply for
these surgical repair procedures. In
addition, the FDA classifies many skin
substitutes as wound dressings, which
make them in many cases similar to
surgical dressings that are packaged
under § 419.2(b)(4). Finally, implantable
biological products are very similar to
(and in some instances the same as) skin
substitute products, except that the
clinical applications for implantable
biologicals are typically an internal
surgery versus the application to a
wound for a skin substitute. Some
products that are used as skin
substitutes have dual uses as both skin
substitutes and implantable biologicals,
which underscores the similarity of
these overlapping classes of products.
Some products that function as skin
substitutes can also function as
implantable biologicals. Implantable
biologicals and skin substitutes both
function as supplies that are used in
surgical procedures and, therefore, we
believe that they should be packaged
with the surgical procedure in which
the products are used. Since CY 2009,
we have packaged implantable
biologicals. We see no reason to
distinguish skin substitutes from

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implantable biologicals for OPPS
packaging purposes based on the
clinical application of individual
products. Therefore, in the CY 2014
OPPS/ASC proposed rule (78 FR 43572),
we proposed to unconditionally package
skin substitutes into their associated
surgical procedures. Packaging payment
for these skin substitutes into the APC
payment for the related surgical
procedures would result in a total
prospective payment that is more
reflective of the average resource costs
of the procedures because prices for
these products vary significantly from
product to product. Packaging these
products also would promote more
efficient resource use by hospitals and
would be more consistent with the
treatment of similar products under the
OPPS. Pass-through payment status
would still be available to new skin
substitutes that meet the pass-through
payment criteria.
Comment: Many commenters
supported CMS’ proposal to package
skin substitutes, and believed that
packaging will result in greater access to
the full range of skin substitute
products, that patients will benefit, and
that Medicare will also benefit through
cost savings from this proposed change
in payment policy.
Response: We appreciate the
commenters’ support.
Comment: Many commenters opposed
CMS’ proposal to package skin
substitutes and argued that because all
skin substitutes or two skin substitutes
in particular, Apligraf and Dermagraft,
are specified covered outpatient drugs
(SCODs) under section 1833(t)(14)(B) of
the Act, CMS cannot package these
products and instead must pay
separately for them in the OPPS.
Response: We disagree with the
commenters’ assertion that skin
substitutes generally or Apligraf and
Dermagraft specifically are SCODs.
Section 1833(t)(14)(B) of the Act defines
a SCOD as a ‘‘covered outpatient drug
(as defined in section 1927(k)(2)) . . . .’’
Covered outpatient drugs under section
1927(k)(2) of the Act are generally
limited to products approved as drugs
by the FDA, biologicals licensed under
section 351 of the Public Health Service
Act, and insulin. Skin substitutes,
including Apligraf and Dermagraft, are
not within any of these categories of
products because they were approved
by the FDA as either medical devices or
as human cell, tissue, and cellular and
tissue-based products (HCT/Ps) under
section 361 of the Public Health Service
Act. Therefore, none of these products
are covered outpatient drugs under
section 1927(k)(2) of the Act, and
therefore no skin substitutes are SCODs

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according to section 1833(t)(14)(B) of
the Act. Furthermore, we explained in
finalizing our policies of packaging
diagnostic radiopharmaceuticals and
contrast agents in the CY 2008 OPPS
final rule (72 FR 66766) that CMS has
the authority to package the payment of
SCODs in the OPPS and that we may
consider additional packaging options
for SCODs and other separately payable
drugs in the future.
Comment: Many commenters believed
that skin substitutes should continue to
be separately paid and not packaged
because, according to these commenters,
they are neither supplies, nor
comparable to implantable biologicals,
nor wound dressings, and because they
have a therapeutic purpose. Some
commenters requested that CMS begin
referring to these products as ‘‘cellular
and/or tissue based products for
wounds (CTPs)’’ instead of using the
term ‘‘skin substitutes’’ to describe the
products that are applied in the
procedures described by the CPT codes
15271 through 15278. Commenters also
expressed concern about CMS’ use of
the term ‘‘wound dressing’’ to describe
skin substitutes.
Response: We disagree with the
commenters that we should not describe
skin substitutes as a type of supply used
in a surgical procedure. As explained in
the proposed rule (78 FR 43571 and
43575) and elsewhere in this final rule
with comment period, supplies are a
large category of items that typically are
either for single patient use or have a
shorter life span in use than equipment.
Supplies can be anything that is not
equipment and include not only minor,
inexpensive, or commodity-type items
but also include a wide range of
products used in the hospital outpatient
setting, including certain implantable
medical devices, which we have
considered supplies since the inception
of the OPPS (65 FR 18443). Supplies can
also be drugs, biologicals, or
radiopharmaceuticals. We consider
implantable medical devices to be
integral to, dependent on, and
supportive to a surgical implantation
procedure. We consider implantable
biologicals to be supplies used in a
surgical procedure because, as a part of
a surgical procedure, they reinforce and
aid the healing of various internal
structures, which makes them integral
to, dependent on, and supportive to a
surgical procedure. Similarly, we
believe that skin substitutes are supplies
used in a surgical procedure because, as
a part of a surgical repair procedure,
they reinforce and aid the healing of
tissue like implantable biologicals, but
with skin substitutes, the tissue is skin
instead of internal connective tissues.

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Like implantable biologicals, skin
substitutes are integral to, dependent
on, and supportive to the surgical
procedures in which they are used.
Therefore, we believe it is appropriate to
describe skin substitutes as supplies,
and it is consistent with OPPS policy to
consider skin substitutes as a type of
supply (like an implantable biological or
medical device) used in a surgical repair
procedure.
We disagree with the commenters
who stated that skin substitutes are
unlike packaged implantable biologicals
and therefore should not be packaged.
Our proposal to package skin substitutes
relies on our determination that these
products act as supplies that are integral
to, dependent on, and supportive to a
surgical procedure. We also believe that
a reasonable analogy can be made that
skin substitutes are similar to and
operate as implantable biologicals in
terms of composition, clinical use, role
in hospital outpatient care, and product
function in healing and repair such that
packaging skin substitutes represents a
logical expansion of our current
packaging policy that packages
implantable biologicals as surgical
supplies. For example, implantable
biologicals are used in internal surgeries
for healing and to improve the structural
integrity of joints, soft tissues and
nerves, among others, and skin
substitutes do the same for external
surgical repairs of the integumentary
system. In fact, several of the skin
substitute products that are described by
HCPCS Q-codes in the Q4100 series are
used both as implantable biologicals
and skin substitutes.
With regard to the comments relating
to our use of the term ‘‘wound dressing’’
to describe skin substitutes, we
discussed surgical dressings in the
proposed rule as an example of
packaged surgical supplies that have
some similarities to skin substitutes,
many of which FDA classifies as
‘‘wound dressings.’’ We believe that
commenters may have misunderstood
our description of skin substitutes in the
proposed rule as wound dressings and
assumed that we were conflating skin
substitutes with products in the
Medicare benefit category of surgical
dressings described in section 1861(s)(5)
of the Act. We are not conflating these
two product categories. We note that the
FDA uses the term ‘‘wound dressing’’ to
classify many of the skin substitutes.
For example, the skin substitutes
Apligraf and Dermagraft are classified
by the FDA as ‘‘dressing, wound and
burn, interactive,’’ and the skin
substitute Oasis is classified by the FDA
as ‘‘dressing, wound, collagen.’’ Further,
we assign HCPCS A-codes to surgical

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dressings; HCPCS Q-codes are typically
assigned to drugs and biologicals and
are used to describe skin substitutes,
unless a HCPCS C-code has been
assigned to a skin substitute with passthrough payment status.
Regarding the comment that skin
substitutes should not be packaged
because they have a therapeutic
purpose, we proposed for CY 2014 the
packaging of drugs and biologicals that
function as supplies when used in a
surgical procedure, and surgical
procedures typically have a therapeutic
purpose. This CY 2014 packaging
proposal for drugs and biologicals that
function as supplies does not exclude
items with a therapeutic purpose.
We use the term ‘‘skin substitute’’ to
describe the products that are used in
the surgical procedures described by
CPT codes 15271 through 15278
because the CPT code descriptors for
these codes include the term ‘‘skin
substitute graft’’ for the products that
are applied in these procedures. For
example, the descriptor for CPT code
15271 is ‘‘Application of skin substitute
graft to trunk, arms, legs, total wound
surface area up to 100 sq cm; first 25 sq
cm or less wound surface area.’’ While
we acknowledge that the term ‘‘skin
substitutes’’ may be more or less
appropriate for specific products, we
believe that this term is currently the
best term for these products in order to
avoid ambiguity. The term ‘‘skin
substitutes’’ is conventional in the
medical vernacular for these products
and it is also used in the CPT code
descriptor for the surgical procedures
that apply these products. In addition,
we do not believe that we should adopt
the term ‘‘cellular and/or tissue based
products for wounds (CTPs) to describe
skin substitutes,’’ because ‘‘CTP’’ is too
close to the abbreviation HCT/P that the
FDA uses to refer to human cell, tissue,
and cellular and tissue-based products
(HCT/Ps) under section 361 of the
Public Health Service Act, which is the
regulatory pathway for only some skin
substitutes.
We acknowledge that there are
differences in composition among the
various skin substitute products and
that is why each is assigned a distinct
HCPCS Q-code (or HCPCS C-code in
some cases). If all of the products were
identical, we would only need one code
to describe all of them. Skin substitutes
are those products that are used in
wound healing procedures and that are
typically assigned a HCPCS Q-code in
the Q4100 series (or assigned a HCPCS
C-code if OPPS pass-through payment
status applies). We understand that
some of the products described by
HCPCS Q-codes in the HCPCS code

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Q4100 series function both as skin
substitutes and implantable biologicals.
Comment: Many commenters opposed
packaging skin substitutes, but also
requested that, if CMS does package
skin substitutes, CMS exclude from the
packaging policy any products that are
approved by the FDA through the
premarket approval (PMA) process, the
biologic license application (BLA)
process, or the new drug application
(NDA) process. Some commenters
believed that products that achieve
marketability through one of these
processes are clinically superior to the
other skin substitutes that are regulated
by FDA as either 510(k) medical devices
or as HCT/Ps because the PMA, NDA, or
BLA-approval routes are more rigorous.
As a consequence, they believe that
PMA, NDA, or BLA-approved products
deserve special recognition under the
OPPS versus other skin substitutes that
are regulated by FDA through another
process. However, other commenters
stated that the FDA regulatory pathway
does not necessarily establish the
clinical utility of the product. Other
commenters argued that the various skin
substitutes should not be packaged
because they are different products each
with different characteristics; for
example, some skin substitutes are
constructed of living cells while others
are not.
Commenters also stated that among
the range of skin substitutes, some
products, including those approved
through the PMA process, have higher
costs than other skin substitutes that are
used in the skin substitute surgical
procedures. They argued that surgical
procedures using these higher cost skin
substitutes should not receive the same
payment rate as those surgical
procedures using less costly skin
substitutes. These commenters were
concerned that hospitals would have a
financial incentive to use the least
expensive skin substitute. Other
commenters suggested different
approaches to payment based on
differential skin substitute cost or other
skin substitute properties.
Response: Payment under the OPPS is
established based on an assessment of
resource and clinical homogeneity. We
disagree that certain products with FDA
regulatory approval should be exempt
from packaging. With notable regulatory
and statutory exceptions, clinical
superiority, utility, and efficacy are not
aspects of a service or product that we
consider in developing a payment rate
under the OPPS. However, we are
persuaded by numerous public
comments that there is a significant
difference in resource costs among the
numerous skin substitute products and

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that multiple codes based on resource
differences may be more appropriate.
We do not believe that the FDA
approval process should exempt
products from this packaging proposal
or factor into the level of Medicare
payment. While some skin substitutes
have been approved by FDA as medical
devices through the PMA process,
including Apligraf, Dermagraft, and the
Integra skin substitutes, all of the other
current skin substitutes are regulated as
either 510(k) medical devices or HCT/Ps
under section 361 of the Public Health
Service Act. Proponents of some of the
products approved through the PMA
process request that we make an
exception to packaging for these
products (or any products approved
through a PMA, NDA, or BLA). We
believe that this request is based on the
presumption that, because these FDA
approval routes typically require
clinical trials, these products have
stronger evidence that supports their
clinical performance as compared to the
non-PMA approved products, and
therefore PMA approval can be used as
a proxy for evidence of clinical
superiority relative to non-PMAapproved skin substitutes. However, we
consider factors such as clinical and
resource homogeneity for OPPS
payment. As previously stated in regard
to implantable biologicals, ‘‘We do not
believe that it is necessary to make our
OPPS payment policies regarding
implantable biologicals dependent on
categories of FDA approval, the intent of

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which is to ensure safety and efficacy
. . .’’ (74 FR 60476), but rather
according to our established criteria of
clinical and resource homogeneity.
Therefore, as in the case of implantable
biologicals, we also believe that the FDA
regulatory pathway should not
determine OPPS skin substitute
payment policy. Generally, once a
service is covered, clinical and resource
homogeneity, as well as other
considerations, determines APC
placement and packaging status.
Determinations related to the clinical
merits of a product are outside the scope
of this rule. We proposed to apply the
packaging policy to all skin substitutes
recognized by CMS, regardless of the
FDA regulatory pathway.
However, we agree with commenters
that, among the range of skin
substitutes, there is sufficient resource
heterogeneity such that all of the skin
substitutes should not be packaged into
the same application procedures and
placed in the same APC. As noted
above, factors in APC assignment in the
OPPS include clinical homogeneity and
resource homogeneity. While the
procedures described by CPT codes
15271 through 15278 are clearly
clinically homogeneous, there is
significant resource heterogeneity in the
payment amount for the various skin
substitutes from approximately $6.95
per sq cm for the least expensive to
approximately $200 per sq cm for the
most expensive. In order to ensure
adequate resource homogeneity among

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74933

APC assignments, in this final rule with
comment period, we are dividing the
skin substitutes into two groups for
packaging purposes: high cost skin
substitutes and low cost skin
substitutes. Assignments to the high
cost or low cost groups depended upon
a comparison of the July 2013 payment
amount for the skin substitute in OPPS
Addendum B to the weighted average
payment per unit of all skin substitutes
using the skin substitute utilization
from the CY 2012 claims data and the
July 2013 payment amounts in OPPS
Addendum B; this weighted average is
$32 per sq cm. Skin substitutes with a
payment amount above $32 per sq cm
are classified in the high cost group and
those at or below $32 are classified in
the low cost group. Table 13 below lists
the skin substitutes and their
assignment as either a high cost or low
cost skin substitute. We also note that a
few skin substitute products are applied
as either liquids or powders per
milliliter or per milligram and are
employed in procedures outside of CPT
codes 15271 through 15278. These
products will not be classified as either
high cost or low cost but will be
packaged into the surgical procedure in
which they are used. These products are
not listed below in Table 13 but appear
in Addendum B to this final rule with
comment period (which is available via
Internet on the CMS Web site).
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CY 2014
HCPCS
Code
C9358
C9360
C9363
Q4100
Q4101
Q4102
Q4103
Q4104
Q4105
Q4106
Q4107
Q4108
Q4110
Q4111
Q4115
Q4116
Q4117
Q4119
Q4120
Q4121
Q4122
Q4123
Q4124
Q4125
Q4126
Q4127
Q4128
Q4129
Q4131
Q4132
Q4133
Q4134
Q4135
Q4136
Q4137

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CY 2014 Short Descriptor
SurgiMend, fetal
SurgiMend, neonatal
Integra Meshed Bil Wound Mat
Skin substitute, NOS
Apligraf
Oasis wound matrix
Oasis bum matrix
Integra BMWD
Integra DRT
Derrnagraft
Graftjacket
Integra matrix
Primatrix
Garnrnagraft
Alloskin
Alloderrn
Hyalomatrix
Matristem wound matrix
Matristem bum matrix
Theraskin
Derrnacell
Alloskin
Oasis tri-Iayer wound matrix
Arthroflex
Memoderrn/derrna/tranz/integup
Talymed
FlexhdlAllopatchhdlmatrixhd
Unite biomatrix
Epifix
Grafix core
Grafix prime
HMatrix
Mediskin
EZderrn
Arnnioexcel or biodexcel, 1ern

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CY 2014
SI
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
G
N
N
N
N
G
N
N
G
G
G
N
N
N
N

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LowlHigh
Cost Skin
Substitute
Low
Low
Low
Low
High
Low
Low
Low
Low
High
High
Low
High
Low
Low
High
Low
Low
Low
Low
nla
Low
Low
High
High
nla
Low
Low
nla
nla
nla
High
Low
Low
Low

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TABLE 13.-SKIN SUBSTITUTE ASSIGNMENTS TO HIGH COST
AND LOW COST GROUPS

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We will update the groupings of high
cost and low cost skin substitutes
annually through rulemaking for
existing skin substitutes according to
the current skin substitute prices. We
also will initially assign new skin
substitutes that do not qualify for passthrough payment status to either the
high cost or low cost category on a
quarterly basis using the weighted
average per square centimeter number
defining high and low cost identified in
each final rule. For any new skin
substitute products approved for
payment during CY 2014, we will use
$32 per square centimeter to determine
mapping to the high or low cost skin
substitute category. We expect
manufacturers to continue reporting
ASP to facilitate cost category
assignment. Any new skin substitutes
without pricing information will be
assigned to the low cost category until
pricing information is available.
High cost skin substitutes will
continue to be billed using the existing

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skin substitute application CPT codes
15271 through 15278. We are creating a
new set of HCPCS C-codes that parallel
the current set of skin substitute
application CPT codes (15271 through
15278) for application of low cost skin
substitutes beginning in CY 2014
(HCPCS codes C5271, C5272, C5273,
C5274, C5275, C5276, C5277, and
C5278). We are establishing code edits
in our claims processing system that
require that the high cost skin
substitutes be reported with the CPT
codes and the low cost skin substitutes
be reported with the new HCPCS Ccodes. Geometric mean costs for the
various procedures were calculated
using only claims for the skin
substitutes that are assigned to each
class; that is, claims for services
described by CPT codes 15271, 15273,
15275, and 15277, including only high
cost skin substitutes, were used to
calculate the geometric mean costs for
these procedures and claims for HCPCS
codes C5271, C5273, C5275, and C5277,

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including only low cost skin substitutes,
were used to calculate the geometric
mean costs for these procedures. The
add-on CPT skin substitute application
codes (CPT codes 15272, 15274, 15276,
and 15278) and the add-on HCPCS Ccodes for skin substitute application
(HCPCS codes C5272, C5274, C5276,
and C5278) are packaged in the OPPS
under the add-on code packaging policy
described in section II.B.3.d.(4) of this
final rule with comment period. CPT
codes 15271, 15273, 15275, and 15277
and HCPCS C-codes C5271, C5273,
C5275, and C5277 were assigned to one
of the following four skin repair APCs
according to the geometric mean cost for
the code: APC 0326 (Level I Skin
Repair); APC 0327 (Level II Skin
Repair); APC 0328 (Level III Skin
Repair); and APC 0329 (Level IV Skin
Repair). These procedure codes and the
CY 2014 APC assignments and status
indicator for each of the procedure
codes are listed in the Table 14 below.
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TABLE 14.-CY 2014 SKIN REPAIR PROCEDURE CODES, APC
ASSIGNMENTS, AND STATUS INDICATORS
CY
2014
HCPCS
Code

CY
2014
SI

CY 2014 Long Descriptor

CY
2014
APC

Skin Substitute Application Procedures for High Cost Skin Substitute Products
Application of skin substitute graft to trunk, anus, legs, total wound
surface area up to 100 sq cm; first 25 sq cm or less wound surface
area
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; first 100 sq cm
wound surface area, or 1% of body area of infants and children

T

0328

N

nla

T

0329

N

nla

T

0328

N

nla

15277

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; first 100 sq
cm wound surface area, or 1% of body area of infants and children

T

0328

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 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)

N

nla

15271

15272

15273

15274

15275

15276

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, and/or multiple digits, total
wound surface area up to 100 sq cm; first 25 sq cm or less wound
surface area
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
wound surface area, or part thereof (list separately in addition to
code for primary procedure)

C5271

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Application of low cost skin substitute graft to trunk, arms, legs,
total wound surface area up to 100 sq cm; first 25 sq cm or less
wound surface area

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T

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Skin Substitute Application Procedures for Low Cost Skin Substitute Products

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BILLING CODE 4120–01–C

Skin substitutes with pass-through
payment status should be reported with
CPT codes 15271 through 15278. We
will apply an offset to the payment for
pass-through skin substitutes according
to the offset policy described in section
V.A.4.d of this final rule with comment
period.
Comment: A few commenters stated
that CMS should not package skin
substitutes because the claims data used
for modeling the cost does not
accurately represent the actual cost of
the skin substitutes used in the HOPD.
They suggested that inaccurate coding
and reporting by hospitals, and charge

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compression, result in packaged costs
that are lower than the actual costs of
the skin substitutes used in the surgical
procedures in which skin substitutes are
employed.
Response: It is our longstanding
policy to use the claims and cost report
data available to us, without significant
editing or modification, to model the
prospective payment year OPPS
payment rates. We have stated
previously that: ‘‘[b]eyond our standard
OPPS trimming methodology . . . that
we apply to those claims that have
passed various types of claims
processing edits, it is not our general

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74937

policy to judge the accuracy of hospital
coding and charging for purposes of
ratesetting’’ (75 FR 71838). We do not
believe that a problem exists with skin
substitute reporting or with the
associated data used in modeling the
packaged payments for the procedures
that includes the cost of the skin
substitute. Currently, there is an
incentive to code properly for skin
substitute application services as the
significant majority of the overall
payment for these services stems from
the separately paid and reported skin
substitute, which we believe provides
sufficient motivation for the hospitals to

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accurately report the amount of skin
substitute used. We do not have any
evidence of systemic underreporting of
these products. We have estimated costs
for skin substitutes as we have for all
other services in our claims data using
our standard methodology outlined in
section II.A.2.c. of this final rule with
comment period, and we believe these
costs to be sufficient for establishing
payment for skin substitute application
procedures as they are for all other
services paid under the OPPS and ASC
payment systems. Regarding charge
compression, we have addressed charge
compression in the OPPS through new
cost centers. We refer readers to section
II.A.1.c. of this final rule with comment
period for a discussion of this topic.
Comment: A few commenters
requested that CMS not package
implantable biologicals that are used for
various surgical procedures in which
the implantable biological product is
implanted into the body as a part of
surgical procedure.
Response: Implantable biologicals
have been packaged in the OPPS since
2009. We did not propose to reconsider
this packaging policy for CY 2014. In
fact, part of the rationale for extending
packaging in the OPPS to include skin
substitutes that function as surgical
supplies is that we already package
several products that are the same as or
similar to skin substitutes in the OPPS
that are described by the term
‘‘implantable biological’’ due to their
particular clinical use. Several of the
products in the HCPCS code Q4100
series are dual use or multi-use products
in that they serve as both skin
substitutes and implantable biologicals.
We believe that both implantable
biologicals and skin substitutes should
be packaged into the surgical
procedures that employ these products
when they function as supplies.
Comment: Some commenters
expressed concern that packaging skin
substitutes in the OPPS will inhibit the
development of biotechnology products
and that this proposed policy will result
in less investment in such technology.
Response: We do not believe that this
policy will result in less investment in
biotechnology. New skin substitutes
remain eligible for pass-through
payment status for at least 2 years, but
not more than 3 years. Pass-through
payments are intended to facilitate the
adoption of certain new products. In
addition, we believe that the packaged
payments for the associated surgical
procedures, including payment for the
skin substitute are adequate and will not
discourage use of the skin substitute
products used in these procedures.
Furthermore, the final policy that

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distinguishes high cost from low cost
skin substitutes addresses the issue of
differential cost among the range of skin
substitute products. Finally, this
packaging policy applies to skin
substitutes and other drugs and
biologicals used in surgical procedures.
It does not apply broadly to all
biotechnology.
Comment: Some commenters
mentioned that the skin substitute
packaging policy will result in a site-ofservice shift to the physician office
setting where separate payment for skin
substitutes will be made in CY 2014.
Response: The physician, in
consultation with his or her patient,
decides the site of service for treatment
and many factors are considered as a
part of that decision. We believe that we
have adequately addressed concerns
about heterogeneous resource costs
resulting in payment inadequacy and
that these procedures will continue to
be performed in the HOPD.
We received a few additional public
comments regarding a single product
that we also proposed to package
because it is a drug that functions as a
supply in a surgical procedure. We
summarize and respond to these
comments below.
Comment: A few commenters
objected to the packaging of the drug
Mitosol (HCPCS code J7315) when used
as a supply in a surgical procedure,
which was the interim assignment for
new HCPCS code J7315 in the CY 2013
OPPS/ASC final rule with comment
period. We refer readers to Addendum
B.—Final OPPS Payment by HCPCS
Code for CY 2013 available on the Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-and-NoticesItems/CMS-1589-FC.html?DLPage=1&
DLSort=2&DLSortDir=descending. One
commenter in particular complained
that, although Mitosol is indicated as
‘‘an adjunct for ab externo glaucoma
surgery,’’ OPPS packaging requires that
an item be integral to the procedure.
The commenter stated that because the
use of Mitosol is optional in some cases
of glaucoma surgery, it should not be
packaged in the OPPS. The commenter
stated that ‘‘up to 20% of glaucoma
surgeries do not include an anti-fibrotic
[including Mitosol].’’ The commenter
further stated that Mitosol serves a
separate clinical purpose from glaucoma
surgery. The commenter emphasized
CMS’ threshold packaging policy for
drugs, biologicals, and
radiopharmaceuticals, and suggested
that drugs with per day costs above the
threshold should not be packaged.
Finally, the commenter stated that the

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clinical benefits and orphan drug
designation are reasons to not package
Mitosol.
Response: Mitosol is an anti-fibrotic
drug (meaning that it inhibits wound
healing) that is used in glaucoma
surgery. Since this comment was filed,
we granted Mitosol pass-through
payment status. We address the
commenter’s specific points as follows.
First, we want to dispel the notion that
packaged drugs must be used in the
associated procedure 100 percent of the
time that the procedure is performed.
That is not our OPPS packaging policy.
As stated above and throughout the
proposed rule, we believe packaging is
appropriate for items and services that
are integral or ancillary or supportive or
dependent or adjunctive to the primary
procedure. Therefore, items and services
that fall within any of these categories
may be properly packaged in the OPPS.
Mitosol, as an adjunct to
trabeculectomy, would therefore be
appropriately packaged as a surgical
supply if pass-through payment status
were not in effect because it functions
as a supply in a surgical procedure, and
supplies are integral to, dependent on,
and supportive of a primary service, as
noted above.
We also disagree with the
commenter’s assertion that Mitosol
serves a different clinical purpose than
trabeculectomy, which is to create a
functioning filtering bleb for control of
intraocular pressure. Mitosol prevents
the bleb from scarring, which helps to
maintain a functioning filtering bleb,
which is the purpose of the glaucoma
surgery. Determinations related to the
clinical merit of a product are outside
the scope of this rule. As noted above,
relative clinical value or effectiveness
was not proposed as a criterion for
OPPS packaging determinations.
Finally, while FDA orphan drug
designation results in additional
exclusivity according to the Federal
Food Drug, and Cosmetic Act, it does
not exempt a drug from packaging in the
OPPS. Upon expiration of pass-through
payment status for Mitosol, it is our
intent to package it as a supply with
glaucoma surgery in the OPPS.
After consideration of the public
comments we received, we are
packaging all skin substitutes according
to the scheme described above, which
assigns skin substitutes to either the
high cost category or the low cost
category unless pass-through payment
status applies. Skin substitutes assigned
to the high cost category will be
reported with CPT codes 15271 through
15278 and the applicable skin substitute
HCPCS Q-code, while skin substitutes
assigned to the low cost category will be

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reported with HCPCS codes C5271
through C5278 and the applicable skin
substitute HCPCS Q-code. In addition,
the few skin substitute products that are
applied as either liquids or powders per
milliliter or per milligram and are
currently employed in procedures
outside of the CPT code range of 15271
through 15278 will not be classified as
either high cost or low cost, but will be
packaged into the surgical procedure in
which they are used.
The skin substitute products that are
unconditionally packaged under this
final policy and assigned to status
indicator ‘‘N’’ for CY 2014 are listed in
Addendum P to this CY 2014 OPPS/
ASC final rule with comment period.
The payment for CPT codes 15271
through 15278 for surgical application
of high cost skin substitutes (payment
rate per square centimeter over $32 for
CY 2014) and HCPCS codes C5271
through C5278 for surgical application
of low cost skin substitutes (payment
rate per square centimeter $32 and
under for CY 2014), including the cost
of the packaged skin substitutes, for CY
2014, are listed in Addendum B to this
final rule with comment period. The
OPPS addenda are available on the CMS
Web site at: http://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html.
(3) Clinical Diagnostic Laboratory Tests
Since the beginning of the OPPS,
clinical diagnostic laboratory tests
(laboratory tests) provided in the
hospital outpatient setting have been
separately paid to hospitals at Clinical
Laboratory Fee Schedule (CLFS) rates
(65 FR 18442). Section 1833(t)(1)(B)(i) of
the Act authorizes the Secretary to
designate the hospital outpatient
services that are paid under the OPPS.
Under this authority, the Secretary
excluded from the OPPS those services
that are paid under fee schedules or
other payment systems. As stated in the
April 17, 2000 OPPS final rule with
comment period: ‘‘Rather than duplicate
existing payment systems that are
effectively achieving consistency of
payments across different service
delivery sites, we proposed to exclude
from the outpatient PPS those services
furnished in a hospital outpatient
setting that were already subject to an
existing fee schedule or other
prospectively determined payment rate’’
(65 FR 18442). Because payment rates
for laboratory tests were based on the
CLFS, laboratory tests are among the
services excluded from the OPPS. We
codified this policy at 42 CFR 419.22(l).
As discussed above, it is our intent to
revise the structure of the OPPS to adopt

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greater aspects of a prospective payment
system and retain less of a fee schedule
structure, which makes separate
payment for each separately coded item.
We have examined the services
performed in the hospital outpatient
setting to determine those services that
we believe should be packaged in order
to make the OPPS a more complete and
robust prospective payment system. We
were guided by our longstanding OPPS
packaging principle of packaging the
payment of items or services when they
are provided along with primary
services they support. Based on this
approach, we believe that laboratory
tests (other than molecular pathology
tests, as discussed below) that are
integral, ancillary, supportive,
dependent, or adjunctive to the primary
services provided in the hospital
outpatient setting are services that
should be packaged. Laboratory tests
and their results support clinical
decision making for a broad spectrum of
primary services provided in the
hospital outpatient setting, including
surgery and diagnostic evaluations.
Therefore, except as discussed below for
molecular pathology tests, in the CY
2014 OPPS/ASC proposed rule (78 FR
43572), we proposed to package
laboratory tests when they are integral,
ancillary, supportive, dependent, or
adjunctive to a primary service or
services provided in the hospital
outpatient setting. Specifically, we
proposed that laboratory tests would be
integral, ancillary, supportive,
dependent, or adjunctive to a primary
service or services provided in the
hospital outpatient setting and
appropriate for packaging into the
payment of the primary service when
they are provided on the same date of
service as the primary service and when
they are ordered by the same
practitioner who ordered the primary
service. We stated that the laboratory
test codes that we were proposing to be
packaged and assigned status indicator
‘‘N’’ for CY 2014 were listed in
Addendum P to the proposed rule
(which is available via the Internet on
the CMS Web site). We also proposed to
revise the regulation text at § 419.2(b)
and § 419.22(l) to reflect this laboratory
test packaging proposal.
We stated that we would consider a
laboratory test to be unrelated to a
primary service and, therefore, not part
of the proposed packaging policy when
the laboratory test is the only service
provided on a date of service or when
the laboratory test is provided on the
same date of service as the primary
service but is ordered for a different
purpose than the primary service by a

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practitioner different than the
practitioner who ordered the primary
service provided in the hospital
outpatient setting. We stated that
laboratory tests not included in the
packaging proposal would continue to
be paid separately at CLFS rates when
billed on a 14X bill type. We note that
hospitals already use the 14X bill type
to bill for referred specimens or any
situation where the beneficiary receives
laboratory tests but is not a registered
outpatient of the hospital.
We also proposed an exception to our
proposal to package laboratory tests for
molecular pathology tests described by
CPT codes in the ranges of 81200
through 81383, 81400 through 81408,
and 81479. We did not propose that
these services be packaged because we
believe that these relatively new tests
may have a different pattern of clinical
use, which may make them generally
less tied to a primary service in the
hospital outpatient setting than the
more common and routine laboratory
tests that we proposed to package. As
we gain more experience with
molecular pathology tests, we stated
that we will consider if packaging them
in the OPPS in the future would be
appropriate. These services would
continue to be billed on a 13x claim and
be assigned status indicator ‘‘A.’’
In addition to the laboratory
packaging policy proposals described
above, we considered proposing an
alternative laboratory packaging policy
that would package those laboratory
tests meeting the proposed policies
above, but exclude laboratory tests with
costs greater than some dollar threshold
similar to the approach we use for
separately paid drugs and biologicals in
the OPPS so that only laboratory tests
(meeting the proposed standards above)
with CLFS payment rates below a
certain dollar threshold amount would
be packaged. Under this alternative
policy, tests meeting the proposed
standards above, but for which the CLFS
payment rates are above the threshold
amount, would continue to be
separately paid. We decided not to
propose this alternative policy because,
as discussed above in the background
section, our packaging policies generally
do not consider the cost of the
individual items and services that are
packaged, meaning that we package
both inexpensive and expensive items
according to OPPS packaging principles.
We recognize that the Medicare Part
B deductible and coinsurance generally
do not apply for laboratory tests paid to
hospitals at CLFS rates and that the
deductible and coinsurance would
apply to laboratory tests packaged into
other services in the OPPS. The purpose

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of the laboratory packaging proposal
was not to shift program costs onto
beneficiaries. It is to encourage greater
efficiency by hospitals and the most
economical delivery of medically
necessary laboratory tests which would
contain unnecessary growth in hospital
outpatient spending over the long run,
which benefits all stakeholders. We
stated that we estimate that the
combination of packaging laboratory
tests into a wide array of primary
services provided in the hospital
outpatient setting combined with our
longstanding methodology to adjust the
copayment percentages to 20 percent as
provided in section 1833(t)(3)(B)(ii) of
the Act and as discussed in section II.I.
of the proposed rule (78 FR 43586
through 43587), and the limitation on
the copayment amount for a procedure
to the inpatient hospital deductible as
set forth at section 1833(t)(8)(C)(i) of the
Act would fully offset the financial
impact on Medicare beneficiaries
receiving laboratory tests that would be
subject to the proposed packaging
policy.
Further, we stated that we believe that
creating these larger bundles will result
in a more efficient use of laboratory tests
when they are adjunctive to an
outpatient service. In addition, to the
extent that the coinsurance and
deductible do not apply under the
CLFS, they would continue not to apply
for tests that are ordered, provided, and
billed independently from a primary
service as discussed above, or for
molecular pathology tests. We invited
public comments on the effect of
packaging laboratory tests on
beneficiary coinsurance.
Comment: Some commenters
supported the proposal to package
laboratory tests because they believed
that packaging laboratory tests is
consistent with CMS’ goal to move the
structure of the OPPS closer to a
prospective payment system and away
from a fee schedule construction.
Response: We appreciate the
commenters’ support.
Comment: A few commenters
opposed the proposal to package
laboratory tests because they believed
that it could harm beneficiary access to
these laboratory tests.
Response: We disagree. We believe
that beneficiaries will continue to
receive laboratory tests that are
medically necessary. We are continuing
to pay for these laboratory tests and
have included the cost of the associated
laboratory tests with the estimated cost
of primary hospital outpatient services
when establishing payment for these
services. We believe that packaged
payment will allow hospitals to better

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assess when and which laboratory tests
are appropriate and provide these
services more efficiently, but that this
policy will not affect beneficiaries’
access to reasonable and appropriate
care.
Comment: A few commenters
opposed the proposal to package
laboratory tests because they believed
that it would not achieve CMS’ objective
of greater cost efficiency in hospitals.
Response: We disagree. Packaging
encourages efficiency and is an essential
component of a prospective payment
system. Packaging payment for items
and services that are typically integral,
ancillary, supportive, dependent, or
adjunctive to a primary service has been
a fundamental part of the OPPS since its
implementation in August 2000. We
believe that packaging encourages
hospitals to furnish services in the most
efficient way by enabling hospitals to
manage their resources with the
maximum flexibility, thereby
encouraging long-term cost
containment. Therefore, our packaging
policies support our strategic goal of
incentivizing hospitals to provide
appropriate care in the most efficient
manner.
Comment: One commenter suggested
that CMS does not have the legislative
authority to package laboratory tests in
the OPPS. The commenter states that
section 1833(h)(1)(A) of the Act requires
that CMS pay for laboratory tests (except
inpatient laboratory tests) in all settings
according to the CLFS.
Response: We disagree. Although
section 1833(h)(1)(A) of the Act
established the CLFS, it does not
prohibit outpatient laboratory tests from
being paid either separately or as part of
a packaged payment under the OPPS.
Section 1833(t) of the Act gives the
Secretary discretion to designate which
services are covered OPD services, with
the exception of those listed in section
1833(t)(1)(B)(iv) of the Act, and
laboratory tests are not among the
services listed in section
1833(t)(1)(B)(iv) of the Act. Laboratory
tests provided in the hospital outpatient
department have always been
considered hospital outpatient services.
However, until this proposal, we have
since the inception of the OPPS elected
to separately pay for laboratory tests in
the hospital outpatient setting at the
CLFS payment rates. For CY 2014, we
proposed to include certain laboratory
tests as covered OPD services under the
OPPS, and we proposed to package
payment for certain tests, similar to
other covered outpatient services that
are typically integral, ancillary,
supportive, dependent, or adjunctive to

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a primary hospital outpatient services
under the OPPS.
Comment: A few commenters
expressed concern about increased
beneficiary liability associated with
laboratory tests being paid under the
OPPS, which has a coinsurance
obligation, unlike payment for
laboratory tests under the CLFS, which
does not have an associated coinsurance
obligation by statute. One commenter
also requested that, if CMS does finalize
the laboratory test packaging policy for
CY 2014, it exclude laboratory tests
from the services into which they are
packaged for the purpose of determining
the coinsurance amount.
Response: We appreciate the
commenters’ concern about the welfare
of Medicare beneficiaries. We assessed
the financial impact of packaging
laboratory tests on beneficiaries for the
proposed rule and reassessed the impact
for this final rule with comment period.
We estimated in the proposed rule that
the combination of packaging laboratory
tests into a wide array of primary
services provided in the hospital
outpatient setting combined with our
longstanding methodology to adjust the
copayment percentages to 20 percent, as
provided in section 1833(t)(3)(B)(ii) of
the Act and as discussed in section II.I.
of the proposed rule (78 FR 43573,
43586 through 43587), and the
limitation on the copayment amount for
a procedure to the inpatient hospital
deductible as set forth at section
1833(t)(8)(C)(i) of the Act, would offset
the financial impact on Medicare
beneficiaries receiving laboratory tests
that will be subject to the finalized
packaging policy.
In this final rule with comment
period, we are not finalizing our
proposed policy to package ancillary
services with a CY 2013 status indicator
of ‘‘X’’ and diagnostic tests on the
bypass list in response to public
comments. We estimate that, in
aggregate, the percentage of beneficiary
liability for OPPS payments for CY
2014, including payment for certain
clinical diagnostic laboratory tests, will
be 21.7 percent in CY 2014, consistent
with aggregate beneficiary liability
under the OPPS in recent years. We
believe that our final policy to create 29
comprehensive APCs for CY 2015 will
reduce the aggregate beneficiary liability
in CY 2015.
In addition, we believe that creating
larger payment bundles will result in a
more efficient use of clinical diagnostic
laboratory tests when they are integral
or supportive of an outpatient service.
Furthermore, to the extent that the
coinsurance and deductible do not
apply under the CLFS, they would

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continue not to apply for tests that are
ordered, provided, and billed
independently from a primary service as
discussed above, or for molecular
pathology tests, which will continue to
be paid under the CLFS.
Regarding the commenter’s request
that CMS exclude laboratory tests from
the services into which they are
packaged for the purpose of determining
the coinsurance amount, we do not have
the authority under section 1833(t)(8) of
the Act to exclude laboratory tests from
the services into which they are
packaged for the purpose of determining
the coinsurance amount.
Comment: Some commenters
expressed concern about CMS’ proposed
exception to packaging for laboratory
tests provided on the same date of
service as another hospital outpatient
service or services, but that are ordered
by a different practitioner than the
practitioner who ordered the primary
hospital outpatient service or services
and where the ordered laboratory test
also is for a different purpose than the
primary service. Commenters were
concerned about hospitals’
administrative burden associated with
billing for separately paid laboratory
tests. Commenters suggested that CMS
implement claims processing changes
and instructions in advance of adopting
the laboratory packaging policy to ease
hospitals’ transition to this policy and
the exceptions to this policy.
Response: We believe that these
commenters may have misunderstood
the nature of the proposed laboratory
packaging policy. We proposed to
package laboratory tests when they are
integral, ancillary, supportive,
dependent, or adjunctive to a primary
service or services provided in the
hospital outpatient setting; that is, when
they are provided on the same date of
service as the primary service and when
they are ordered by the same
practitioner who ordered the primary
service. One exception to our proposal
to package laboratory tests is to exempt
molecular pathology tests, which would
continue to be separately paid when
billed on a 13x claim.
A laboratory test can be separately
paid when (1) the laboratory test is the
only service provided to that beneficiary
on that date of service; or (2) the
laboratory test is on the same date of
service as the primary service but is
ordered for a different purpose than the
primary service by a practitioner
different than the practitioner who
ordered the primary service. When a
laboratory test is the only service
provided to a beneficiary at the hospital,
the hospital can receive separate
payment for those laboratory tests by

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billing for these services on a 14x claim;
we would pay hospitals for these
laboratory tests based on the CLFS
payment rate. To illustrate the second
scenario, a beneficiary has eye surgery
scheduled with physician A, an
ophthalmologist, but also has an order
from physician B, a cardiologist, for
unrelated laboratory tests. The
beneficiary goes to the hospital for the
eye procedure and decides to have the
laboratory tests that have been ordered
by physician B for a different purpose
than the eye procedure on the same date
of service. While the laboratory test is
on the same date of service as the eye
procedure, the laboratory tests are
ordered for a different purpose than the
primary service by a practitioner
different than the practitioner who
ordered the eye procedure. In this
situation, the hospital can bill Medicare
for the unrelated laboratory tests on a
14x claim and receive separate payment
under the CLFS, similar to when the
laboratory tests are the only service
performed in the hospital outpatient
department on a given date of service.
However, if, in this example, physician
A also ordered some laboratory tests as
a part of a preoperative evaluation for
the eye procedure and the beneficiary
had the tests on the same date of service
as the eye procedure, then the hospital
would report those laboratory tests on a
13x claim along with the eye surgery.
Payment for those preoperative
laboratory tests would be packaged into
the payment for the surgery, which is
the primary procedure that would be
paid separately. It will be the hospital’s
responsibility to determine when to
separately bill laboratory tests on the
14x claim according to this description
of these limited exceptions. We plan to
issue revised contractor instructions for
billing for these laboratory tests on a 14x
bill type in January 2014, and we also
will install claims processing edits.
Comment: A few commenters
suggested that CMS adopt the
alternative laboratory packaging policy
discussed briefly above and in the
proposed rule (78 FR 43573) to package
only those laboratory tests with
payment rates below some dollar
threshold, similar to the approach that
CMS uses for most drugs, biologicals,
and therapeutic radiopharmaceuticals in
the OPPS. Commenters stated that such
a policy would enable hospital specialty
clinics to perform more complex,
expensive, and esoteric laboratory tests.
Response: We appreciate the
commenters’ thoughts on this
alternative. We continue to believe that
a dollar packaging threshold is not
appropriate for laboratory tests because
almost all laboratory tests are

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inexpensive (97 percent of all laboratory
tests have CLFS national limitation
amounts of less than $100) relative to
other services that are provided in the
hospital outpatient department. This is
unlike many of the drugs and
biologicals that are used in the hospital
outpatient department that not
uncommonly cost thousands of dollars
per dose. Therefore, we continue to
believe that it is not necessary to adopt
a payment threshold policy for
packaging laboratory tests similar to the
threshold policy for packaging drugs
and biologicals.
Comment: A few commenters
requested additional exceptions to the
proposal to package specific laboratory
tests, including, for example, tests for in
situ hybridization and cardiovascular
screening. These commenters stated
that, like molecular pathology tests for
which CMS proposed an exception to
the proposal to conditionally package
laboratory tests, these tests have a
different pattern of clinical use than
most other laboratory tests and,
therefore, should continue to be
separately paid in the hospital
outpatient setting.
Response: After considering the
various requests for exceptions for
specific laboratory tests that we
received, we do not believe that
additional exceptions to the laboratory
packaging policy are necessary. We
understand that there are laboratory
tests that are less common and frequent
than a standard panel, such as new
tests. We do not believe that the tests
described by the commenters or other
laboratory tests that were proposed to be
packaged are similar to the tests in the
molecular pathology test series such
that additional exceptions are
warranted. We proposed to exclude the
molecular pathology tests from our
packaging proposal because, as a class
of laboratory tests, their overall pattern
of clinical use has not yet developed
and we believe that these tests are less
tied to a primary service than other
laboratory tests. Once their pattern of
use develops, we will assess whether we
believe these laboratory tests also
should be conditionally packaged. We
do not believe that in situ hybridization
and cardiovascular screening or other
types of laboratory tests are a
developing class of laboratory tests for
which we do not know the pattern of
use. For example, in situ hybridization
may be a part of a comprehensive
evaluation for a suspected malignancy.
In response to commenter requests for
additional exceptions, we also reviewed
all of the laboratory tests listed in
Addendum P to the proposed rule and
do not believe that further exceptions to

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our proposal to conditionally package
laboratory tests are necessary.
After consideration of the public
comments we received, for CY 2014, we
are finalizing our proposal without
modification to package laboratory tests
in the OPPS when they are integral,
ancillary, supportive, dependent, or
adjunctive to a primary service or
services provided in the hospital
outpatient setting; that is, when they are
provided on the same date of service as
the primary service and when they are
ordered by the same practitioner who
ordered the primary service. This means
that a laboratory test will not be
packaged when (1) a laboratory test is
the only service provided to that
beneficiary on that date of service; or (2)
a laboratory test is conducted on the
same date of service as the primary
service but is ordered for a different
purpose than the primary service by a
practitioner different than the
practitioner who ordered the primary
service. We also are finalizing our
proposal without modification to except
molecular pathology tests described by
CPT codes in the ranges of 81200
through 81383, 81400 through 81408,
and 81479 from this packaging proposal.
In addition, we are finalizing our
proposal without modification to revise
the regulation text at § 419.2(b) and
§ 419.22(l) to reflect this conditional
laboratory test packaging policy.
The laboratory test codes subject to
this packaging policy will be assigned
status indicator ‘‘N’’ because any
laboratory tests reported on a 13x bill
type will be packaged for CY 2014.
These codes are listed in Addendum P
to this final rule with comment period
(which is available via the Internet on
the CMS Web site).
(4) Procedures Described by Add-On
Codes
Add-on codes describe procedures
that are always performed in addition to
a primary procedure. CPT defines addon codes as codes that describe
‘‘procedures [that] are commonly
carried out in addition to the primary
procedure performed,’’ and also states
that ‘‘[a]dd-on codes are always
performed in addition to the primary
service or procedure and must never be
reported as a stand-alone code’’ (2013
CPT Codebook Professional Edition,
page xi). CPT add-on codes are listed in
Appendix D of the CPT codebook. Addon codes can also be Level II HCPCS
codes. For example, the procedure
described by CPT code 11001 is
‘‘Debridement of extensive eczematous
or infected skin; each additional 10% of
the body surface, or part thereof (list
separately in addition to code for

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primary procedure).’’ This code is used
for additional debridement beyond that
described by the primary procedure
code. Historically, the OPPS has
generally paid separately for add-on
codes based on an APC assignment with
status indicator ‘‘T’’ indicating that the
multiple procedure payment reduction
for surgeries applies.
Procedures described by add-on codes
represent an extension or continuation
of a primary procedure, which means
that they are typically supportive,
dependent, or adjunctive to a primary
service, which is usually a surgical
procedure. The primary code defines
the purpose and typical scope of the
patient encounter and the add-on code
describes incremental work, when the
extent of the procedure encompasses a
range rather than a single defined
endpoint applicable to all patients. The
CPT codebook states that an add-on
code describes ‘‘additional intra-service
work associated with the primary
procedure’’ (2013 CPT Codebook
Professional Edition, page xi). For
example, add-on CPT code 11001 is
used for each additional 10 percent of
debridement beyond that described by
the primary code. Given the dependent
nature and adjunctive characteristics of
procedures described by add-on codes
and in light of longstanding OPPS
packaging principles described above,
we believe add-on procedures should be
packaged with the primary procedure.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43573), we proposed to
unconditionally package all procedures
described by add-on codes in the OPPS.
Aside from advancing the OPPS as a
prospective payment system by
packaging add-on codes, an additional
benefit to packaging add-on codes is
more accurate OPPS payment for
procedures described by add-on codes.
Currently, calculating geometric mean
costs for procedures described by addon codes is problematic in the OPPS
because, as with many claims with
multiple procedures, we cannot
determine which costs on a claim are
attributable to the primary procedure
and which costs are attributable to the
add-on procedure. Furthermore, because
we use single claims and pseudo single
procedure claims for ratesetting, we
generally must rely on incorrectly coded
claims containing only the add-on code
to determine payment rates for add-on
procedures. Claims containing only an
add-on code are incorrectly coded
because they should be reported with
(or ‘‘added-on’’ to) a primary procedure.
Packaging the line item costs associated
with an add-on code into the cost of the
primary procedure will help address
this ratesetting problem because the

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costs of the add-on code would be
packaged into the primary procedure,
and we would no longer have to use
miscoded claims to calculate estimated
costs for add-on codes. Packaging addon codes also would increase the
number of single bills available for
ratesetting for the primary procedures.
We discuss how we model claims to
establish relative payment weights,
including definitions of multiple, single,
and pseudo single claims in section
II.A.2. of this final rule with comment
period.
We proposed to revise the regulations
at § 419.2(b) to include the packaging of
add-on codes. The specific add-on codes
that we proposed to be unconditionally
packaged and assigned status indicator
‘‘N’’ for CY 2014 are listed in
Addendum P to the proposed rule,
which is available via the Internet on
the CMS Web site.
Comment: Some commenters
supported the proposal to package addon codes, and agreed with CMS that
packaging add-on codes is consistent
with a prospective payment system and
will improve OPPS ratesetting.
Response: We appreciate the
commenters’ support.
Comment: Several commenters
objected to the proposal to package addon codes for the following reasons:
• According to the commenters,
procedures described by add-on codes
are not necessarily integral, ancillary,
supportive, dependent, or adjunctive to
the primary service into which they
would be packaged.
• Some procedures described by addon codes include expensive implantable
medical devices, and although they are
integral to the primary procedure,
commenters note that packaging these
procedures into the primary procedure
risks significant underpayment for the
overall procedure that includes
additional medical devices, which
could negatively affect patient access to
these devices.
• Add-on code packaging should not
apply to infrequently performed add-on
codes as the cost of these infrequent
services will not be sufficiently reflected
in the payment for the primary
procedure.
• Some add-on codes are not related
to the primary procedure but represent
incremental additional physician work,
and for this reason should not be
packaged.
To insure continued patient access to
these procedures, commenters requested
that CMS establish exceptions to its
proposal to package add-on codes for
specific services that commenters
believed would be underpaid under the
policy, including, but not limited to,

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kyphoplasty add-on procedure,
endoscopic retrograde
cholangiopancreatography add-on
procedure, pelvic reconstruction add-on
procedures, neurolysis, and pathology
services.
Response: We disagree with
commenters that add-on services are not
integral, ancillary, supportive,
dependent, or adjunctive to the primary
service. The fundamental nature of an
add-on code procedure is that it
typically describes some form of a
related extension of or addition to the
primary procedure or service described
by the primary procedure. The very
definition of an add-on code is that it is
an extension of a primary, base service.
CPT states that ‘‘add-on codes describe
additional intra-service work associated
with the primary procedure’’ (emphasis

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added) (2013 CPT Codebook
Professional Edition, page xi).
Therefore, we believe that add-on code
procedures are related extensions,
supportive, integral, or adjunctive of the
primary procedure and, therefore, it is
appropriate to package the cost of the
add-on codes into the payment
calculation for the primary procedure.
For the same reasons, we also do not
agree with commenters that some addon codes are not related to the primary
procedure but represent a separate
procedure that should be paid
separately from the primary procedure.
Regarding the packaging of add-on
procedures that use expensive medical
devices, we note that the most
expensive medical devices used in
procedures to insert or implant devices
in the outpatient setting are included in

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procedures we proposed to be assigned
to comprehensive APCs. In section
II.A.2.e. of this final rule with comment
period, we discuss this policy, which
we are adopting, but delaying the
implementation until CY 2015. We will
continue to separately pay for
procedures described by add-on codes
that are currently assigned to devicedependent APCs. We note that almost
all such codes will be included in a
comprehensive APC for CY 2015.
Therefore, until the comprehensive APC
policy is implemented, we will continue
to pay separately for procedures
described by add-on codes that are
assigned to device-dependent APCs.
The device-dependent add-on codes
that will continue to be separately paid
in CY 2014 are listed below in Table 15.
BILLING CODE 4120–01–P

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TABLE IS.-ADD-ON CODES ASSIGNED TO DEVICE-DEPENDENT APCS
FORCY2014
CY 2014 APC

19297

Place breast cath for rad

0648

33225

L ventric pacing lead add-on

0655

37222

Iliac revasc add-on

0083

37223

Iliac revasc w/stent add-on

0083

37232

Tib/per revasc add-on

0083

37233

Tibper revasc w/ather add-on 0229

37234

Revsc opn/prq tib/pero stent

0083

37235

Tib/per revasc stnt & ather

0083

37237

Open/perq place stent ea add

0083

37239

Open/perq place stent ea add

0083

49435

Insert subq exten to ip cath

0427

92921

Prq cardiac angio addl art

0083

92925

Prq card angio/athrect addl

0082

92929

Prq card stent w/angio addl

0104

92934

Prq card stentlathlangio

0104

92938

Prq revasc byp graft addl

0104

92944

Prq card revasc chronic addl

0104

92998

Pul art balloon repr percut

0083

C9601

Perc drug-el cor stent bran

0656

C9603

Perc d-e cor stent ather br

0656

C9605

Perc d-e cor revasc t cabg b

0656

C9608

Perc d-e cor revasc chro add

0656

BILLING CODE 4120–01–C

However, in general the cost of all
medical devices used along with all of
the other costs associated with the addon code procedures are a part of the
costs used to calculate the payment for

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a primary procedure when add-on codes
are packaged. Most important, a
prospective payment system pays an
average amount for a unit of service,
which may be more or less costly on a
case-by-case basis. Unless an ancillary

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service is always performed with a
primary procedure or service, a
prospective payment will not reflect the
full estimated cost of the packaged
procedure or service. Payment for the
primary procedure rather would reflect

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some payment for the ancillary
procedure, but each time the primary
procedure is performed, the hospital
receives additional payment, even when
the ancillary service is not provided.
Unless an add-on code is always
performed with a primary procedure,
we would not expect the relative
payment weight to reflect the full costs
associated with performing the primary
procedure and certain add-on
procedures, especially if the add-on
procedures are performed relatively
infrequently as compared to the primary
procedure. Our experience with
packaging services under the OPPS,
where we continue to see packaged
services furnished with the primary
procedure, leads us to believe that
hospitals will continue to provide the
full range of medically necessary care to
beneficiaries under overall prospective
payment for the primary procedure and
any add-on procedures. Therefore, we
do not believe that it is necessary to
create additional exceptions to the addon code policy for select infrequently
performed services that may cost more
(in addition to the cost of the primary
procedure) to pay more than the
prospective payment for the primary
service with add-on code procedures
packaged into them.
However, we acknowledge that, under
certain circumstances, certain primary
code and add-on code combinations
could be more likely to result in a
relatively highly costly case as
compared to the packaged payment for
the primary code. Therefore, in light of
this new policy to unconditionally
package most add-on codes, we will
examine our estimated OPPS outlier
percentage in light of all final packaging
policies contained in this final rule with
comment period and consider
increasing it in the future to
accommodate greater potential risk from
high cost outlier cases that would result
from packaging of certain add-on codes.
An increase in the outlier percentage
would accommodate more relatively
high cost cases.
Comment: Some commenters objected
to packaging drug administration addon codes, which typically describe each
additional hour of infusion or each
additional intravenous push, etc. in
addition to the initial drug
administration service. The commenters
believed that such a policy could
disadvantage providers of longer drug
administration services, which are often
protocol driven and are not necessarily
dictated by the hospital but by the
characteristics of the specific drug or
biological being administered to the
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Response: We believe that, given the
frequency of drug administration
services in the hospital outpatient
department and their use in such a wide
variety of different drug treatment
protocols for various diseases in all
types of hospitals, further study of the
payment methodology for these services
is warranted at this time. Therefore, we
are not finalizing our proposal to
package the drug administration add-on
codes in CY 2014. However, we may
continue to explore other payment
options, including packaging and
variations on packaging, in future years.
After consideration of the public
comments we received, we are
finalizing our proposal to
unconditionally package procedures
described by add-on codes, with the
exception of add-on codes for drug
administration services and for CY 2014
add-on codes assigned to devicedependent APCs. In addition, for CY
2014 only, we will continue to
separately pay for procedures described
by add-on codes that are currently
assigned to device-dependent APCs. We
also are revising § 419.2(b) to include
add-on code procedures among the
services that are packaged in the OPPS.
The specific add-on codes that we are
unconditionally packaging and
assigning status indicator ‘‘N’’ for CY
2014 are listed in Addendum P and
Addendum B to this final rule with
comment period (which are available
via the Internet on the CMS Web site).
(5) Ancillary Services (Status Indicator
‘‘X’’)
Under the OPPS, we currently pay
separately for certain ancillary services
that are assigned to status indicator ‘‘X,’’
defined as ‘‘ancillary services.’’ Those
ancillary services assigned status
indicator ‘‘X’’ in the OPPS and paid
separately are, by definition, ancillary to
primary services provided in the OPPS
and include many minor diagnostic
tests and procedures that are typically
performed with a primary service,
although there are instances where
hospitals provide such services alone
and without another primary service on
the same date.
As mentioned above, our intent is that
the OPPS be more of a prospective
payment system through expanded
packaging. Given that the longstanding
OPPS policy is to package items and
services that are integral, ancillary,
supportive, dependent, or adjunctive to
a primary service, we stated in the CY
2014 OPPS/ASC proposed rule (78 FR
43573) that we believe that these
ancillary services, which are assigned
status indicator ‘‘X,’’ should be
packaged when they are performed with

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another service, but should continue to
be separately paid when performed
alone. We indicated that this packaging
approach is most consistent with a
prospective payment system and the
regulation at § 419.2(b) that packages
ancillary services into primary services
while preserving separate payment for
those instances in which one of these
services is provided alone (not with a
separate primary service) to a hospital
outpatient.
In summary, in the proposed rule, we
proposed to conditionally package all
ancillary services that were previously
assigned a status indicator of ‘‘X’’ and
assign these services to status indicator
‘‘Q1’’ (packaged when provided with a
service assigned a status indicator of
‘‘S,’’ ‘‘T,’’ or ‘‘V’’). Status indicator ‘‘X’’
would be discontinued. To encourage
maximum flexibility to beneficiaries
across different sites of service, we did
not propose to conditionally package
preventive services assigned to status
indicator ‘‘X’’ and instead proposed to
change the status indicator for
preventive services from the currently
assigned status indicator ‘‘X’’ to status
indicator ‘‘S.’’ The specific codes for
procedures assigned to status indicator
‘‘X’’ that were proposed to be
conditionally packaged and assigned to
status indicator ‘‘Q1’’ for CY 2014 were
listed in Addendum P to the proposed
rule (which is available via the Internet
on the CMS Web site).
Comment: A few commenters agreed
with CMS’ proposal to package services
assigned the status indictor ‘‘X’’
(ancillary services) because they
believed that this proposal was
consistent with CMS’ policy of
packaging services that are typically
integral, ancillary, supportive,
dependent, or adjunctive to a primary
HOPD service.
Response: We appreciate the
commenters’ support.
Comment: Many commenters opposed
the proposal to conditionally package
services currently assigned status
indicator ‘‘X.’’ These commenters stated
that this category of services is too
varied and that the services in this
category are not always ancillary to the
services into which they would be
packaged. The commenters specifically
mentioned radiation oncology planning
services and pathology services as
examples of services that, under the
proposal, could be packaged into a visit
but would not be ancillary to that visit.
They also objected because, in some
cases, relatively costly services could be
packaged into services with a low
payment, especially a visit code because
there is so much volume in visit codes
that high cost, low volume ancillary

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services would not measurably impact
visit payments.
Response: We believe that the
commenters have raised some valid
points regarding whether all of the
services currently assigned status
indicator ‘‘X’’ are in all cases ancillary
to the services into which their payment
would be packaged. We believe that a
reexamination of this group of services
is warranted to determine which
services are best described as ancillary
services and packaged on that basis and
which services should either be
packaged under a different policy or
separately paid in the OPPS.
However, we will finalize the
conditional packaging of one ancillary
service described by CPT code 93017
(Cardiovascular stress test using
maximal or submaximal treadmill or
bicycle exercise, continuous
electrocardiographic monitoring, and/or
pharmacological stress; tracing only,
without interpretation and report).
Stress testing is often performed as a
part of myocardial perfusion imaging
(MPI). MPI is most commonly reported
with CPT code 78452 (Myocardial
perfusion imaging, tomographic
(SPECT) (including attenuation
correction, qualitative or quantitative
wall motion, ejection fraction, by first
pass or gated technique, additional
quantification, when performed);
multiple studies, at rest and/or stress
(exercise or pharmacologic) and/or
redistribution and/or rest reinjection).
As indicated by the code descriptor,
MPI includes stress testing as described
by CPT code 93017, and approximately
96 percent of MPI is performed under
stress. Therefore, we believe that,
because stress testing is both integral
and ancillary to MPI, it should be
packaged into MPI when a stress test
accompanies MPI.
After consideration of the public
comments we received, we are not
finalizing our proposal to conditionally
package codes currently assigned the
ancillary service status indicator ‘‘X’’ for
CY 2014 when performed with another
service, with the exception that CPT
code 93017 will be conditionally
packaged. We may review the services
assigned status indicator ‘‘X’’ (ancillary
services) to determine which may be
appropriate for packaging as ancillary
services in the OPPS in future years.
(6) Diagnostic Tests on the Bypass List
For the CY 2013 OPPS, we continued
our policy to use a bypass list to convert
lines from multiple procedure claims
into ‘‘pseudo’’ single procedure claims.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43574), we proposed to
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procedure claims using a bypass list for
the CY 2014 OPPS, as discussed in
section II.A.1.b. of the proposed rule.
The bypass list of separately paid
services is used to convert claims with
multiple separately payable procedures,
which are generally not used for
ratesetting purposes, into claims with
the isolated costs of a single separately
paid procedure that can be used for
ratesetting. Services on the bypass list
have limited associated packaged costs
so they can be bypassed when assigning
packaged costs on a claim to a
separately paid procedure on the same
claim.
As noted above, beginning in CY
2008, we packaged several diagnostic
items and services including guidance
services, image processing services,
intraoperative services, imaging
supervision and interpretation services,
diagnostic radiopharmaceuticals, and
contrast agents. In the CY 2014 OPPS/
ASC proposed rule (78 FR 43570), we
also proposed to conditionally package
several diagnostic items and services,
including drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure, ancillary services (many
of which are diagnostic tests), and
certain clinical laboratory tests. We
stated that we believe that the
diagnostic tests on the bypass list share
many of the characteristics with these
other conditionally or unconditionally
packaged or proposed packaged
categories of items and services in that
they are diagnostic and are integral,
ancillary, supportive, dependent, or
adjunctive to a primary service.
Examples include a barium swallow test
(CPT code 74220) and a visual field
examination (CPT code 92081). Given
the nature of these services, we
proposed to conditionally package these
procedures. We recognize that some of
these services are sometimes provided
without other services and, therefore,
they will continue to be separately paid
in those circumstances.
We proposed to conditionally package
codes on the bypass list and to assign
them the appropriate status indicator
‘‘Q1’’ beginning in the CY 2014 OPPS.
Some of these diagnostic tests on the
bypass list are currently assigned to
status indicator ‘‘X’’ and, therefore,
would be conditionally packaged under
the proposed policy to conditionally
package ancillary services currently
assigned status indicator ‘‘X.’’ The only
diagnostic codes on the bypass list
affected by this proposal are currently
assigned to status indicator ‘‘S.’’ The
specific codes for the diagnostic tests on
the bypass list that we proposed to be
conditionally packaged and assigned to

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status indicator ‘‘Q1’’ for CY 2014 were
listed in Addendum P to the proposed
rule (which is available via the Internet
on the CMS Web site). Similar to our
conditional packaging proposal for
services previously assigned to status
indicator ‘‘X,’’ we did not propose to
conditionally package preventive
services that are diagnostic tests on the
bypass list.
Comment: Some commenters
supported CMS’ proposal to package
diagnostic codes on the bypass list
because they believed that they are
generally ancillary and supportive to
other HOPD services.
Response: We appreciate the
commenters’ support.
Comment: Some commenters opposed
packaging diagnostic tests on the bypass
list for the following reasons:
• Some of the tests, for example,
echocardiography, included in this
category are not typically integral,
ancillary, supportive, dependent, or
adjunctive to the service into which
they would be packaged.
• Some of the procedures on the
bypass list would be packaged into
significantly lower paying procedures,
including visits.
• The interaction between
conditional packaging of these
diagnostic tests and other status
indicator logic sometimes produces
anomalous payments.
• Hospitals have an incentive to
schedule procedures on different days
to avoid packaging.
• Access to some of these tests may
be negatively impacted by packaging.
Response: We believe that the
commenters have raised some valid
points regarding whether all of the
services included in the category
‘‘diagnostic codes on the bypass list’’ are
integral, ancillary, supportive,
dependent, or adjunctive to the service
into which their payment is packaged.
We believe that a reexamination of this
group of services is warranted to
determine which services are best
described as integral, ancillary,
supportive, dependent, or adjunctive
services to the service into which it
would be packaged to determine which
services should either be packaged
under a different policy or separately
paid in the OPPS.
Therefore, after consideration of the
public comments we received, we are
not finalizing our proposal to
conditionally package diagnostic tests
on the bypass list for CY 2014, or our
proposal to assign these codes a status
indicator of ‘‘Q1.’’ We will review the
services currently listed in Addendum P
under ‘‘diagnostic tests on the bypass
list’’ to determine which tests may be

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appropriate for packaging in the OPPS
in future years. Codes that would have
been affected by the CY 2014 packaging
proposal for this category of services
will remain on the bypasss list for the
CY 2014 OPPS, as discussed in section
II.A.1.b. of this final rule with comment
period.
(7) Device Removal Procedures
Implantable devices frequently
require a procedure to remove or replace
the device due to wear, failure, recall,
and infection, among other reasons.
Since the beginning of the OPPS,
implantable devices have been packaged
(either as supplies, implantable
prosthetics, or implantable DME) into
their associated procedures. A device
removal procedure is sometimes
described by a code that may include
repair or replacement. In other cases, a
device removal procedure is described
by a separate code that only describes
the surgical procedure to remove a
device. Device removal procedures are
frequently performed with procedures
to repair or replace devices, although it
is possible that a device removal
procedure may occur without repair or
replacement if the clinical indication for
the device that was removed no longer
exists. When a separately coded device
removal procedure is performed with a
separately coded device repair or
replacement procedure, the device
removal procedure should be
considered as one part of an overall
procedure for removing a device with
repair or replacement of the device.
Given that a separately coded device
removal procedure that accompanies a
device repair or replacement procedure
represents a service that is integral and
supportive to a primary service, in the
CY 2014 OPPS/ASC proposed rule (78
FR 73574), we proposed to
conditionally package device removal
codes when they are billed with other
surgical procedures involving repair or
replacement and assign a status
indicator of ‘‘Q2.’’ We stated that we
believe that this conditional packaging
policy is appropriate under
longstanding OPPS packaging principles
because these device removal
procedures are an integral and
supportive step in a more
comprehensive overall procedure.
Furthermore, conditionally packaging
these device removal procedures with
the replacement or revision codes
would be consistent with our packaging
policies for other dependent services.
The specific codes for the device
removal procedures that we proposed to
be conditionally packaged and assigned
to status indicator ‘‘Q2’’ for CY 2014
were listed in Addendum P to the

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proposed rule (which is available via
the Internet on the CMS Web site).
Comment: Some commenters agreed
with CMS’ proposal to conditionally
package device removal procedures in
the OPPS because they are often part of
a larger procedure to revise or replace a
device.
Response: We appreciate the
commenters’ support.
After consideration of the public
comments we received, we are
finalizing our policy to conditionally
package device removal procedures in
the OPPS when performed together with
a repair or replacement of a device and
to assign a status indicator of ‘‘Q2.’’ The
specific device removal procedure codes
that we are conditionally packaging and
assigning to status indicator ‘‘Q2’’ for
CY 2014 are listed in Addendum P to
this final rule with comment period
(which is available via the Internet on
the CMS Web site).
e. Clarification Regarding Supplies That
Are Packaged in the OPPS
Under the regulations at § 419.2(b)(4),
medical and surgical supplies and
equipment are unconditionally
packaged in the OPPS and have been
since the beginning of the payment
system. Supplies is a large category of
items that typically are either for single
patient use or have a shorter life span
in use than equipment. Packaged
supplies can include certain drugs,
biologicals, and radiopharmaceuticals.
The only supplies that are sometimes
paid separately in the hospital
outpatient setting are prosthetic
supplies under § 419.22(j), and if paid
separately, they are paid according to
the DMEPOS fee schedule. As we
discussed in the CY 2014 OPPS/ASC
proposed rule (78 FR 43575), in our
annual review of the OPPS for CY 2014,
we discovered many supplies that
should be packaged in the OPPS
according to § 419.2(b)(4), but that are
currently assigned to status indicator
‘‘A’’ and are separately paid in the
hospital outpatient setting according to
the DMEPOS fee schedule. For CY 2014,
we proposed to revise the status
indicator for all supplies described by
Level II HCPCS A-codes (except for
prosthetic supplies) from status
indicator ‘‘A’’ to ‘‘N,’’ so that these
supplies would be unconditionally
packaged as required by § 419.2(b)(4).
Comment: A few commenters
supported CMS’ proposed change in the
status indicators for these supplies from
‘‘A’’ to ‘‘N.’’ One commenter urged CMS
not to finalize this proposal because the
commenter believed that hospitals
should be separately paid for supplies
given to the patient to take home.

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Response: Our longstanding
regulations at § 419.2(b)(4) require that
we package all supplies in the OPPS
except prosthetic supplies.
After consideration of the public
comments we received, we are updating
the status indicators for all supplies
(except prosthetic supplies) to ‘‘N.’’ The
specific Level II HCPCS A-codes whose
status indicator are revised from ‘‘A’’ to
‘‘N’’ are listed in Addendum P to this
CY 2014 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site).
f. Revision and Clarification of the
Regulations at 42 CFR 419.2(b) and 42
CFR 419.22
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68272),
after consideration of public comments
we received on the proposed rule, we
clarified the regulatory language at
§ 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. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43575), we
proposed to further revise this
regulation to add the packaging
categories that were adopted in CYs
2008 and 2009 in addition to the new
proposed policies described above. We
also proposed to make some further
minor revisions and editorial
clarifications to the existing language of
§ 419.2(b) to make it more clearly reflect
current packaging policy. Finally, we
proposed to revise the list of services
excluded from the OPPS at § 419.22.
Comment: Some commenters urged
CMS not to revise the regulations at 42
CFR 419.2(b) as a part of their request
that CMS not adopt any of the packaging
proposals.
Response: We believe that codifying
the new policies will promote clarity
regarding OPPS packaging policy, and
therefore we are finalizing our revision
of the regulations.
After consideration of the public
comments received, we are finalizing
our revision of the regulations at 42 CFR
419.2(b) and 419.22 to reflect the new
packaging policies.
g. Comment Solicitation on Increased
Packaging for Imaging Services
We currently package several kinds of
imaging services in the OPPS, including
image guidance services, image
processing services, intraoperative
imaging, and imaging supervision and
interpretation services. In addition to

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these imaging services that are either
packaged or proposed to be packaged,
we stated in the CY 2014 OPPS/ASC
proposed rule (78 FR 43575) that we are
considering a proposal for CY 2015 that
would conditionally package all
imaging services with any associated
surgical procedures. We stated that
imaging services not provided with a
surgical procedure would continue to
either be separately paid according to a
standard clinical APC or a composite
APC. We requested public comments on
this potential CY 2015 proposal.
Comment: Some commenters objected
to this potential future proposal on the
grounds that such a packaging policy
could result in less access to imaging in
the HOPD. One commenter asked about
the claims logic hierarchy for packaging
imaging into surgery as it relates to the
imaging composites.
Response: We appreciate these
thoughtful comments, and we will
consider them as we further consider
packaging imaging services in the OPPS.
4. Calculation of OPPS Scaled Payment
Weights
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43576), for CY 2014, we
proposed to calculate the relative
payment weights for each APC for CY
2014 shown in Addenda A and B to the
proposed rule (which are 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.
For this CY 2014 final rule with
comment period, we are continuing to
use this methodology to calculate the
relative payment weights for each APC
for CY 2014. In years prior to CY 2007,
we standardized all the relative
payment weights to APC 0601 (MidLevel 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 the CY 2013 OPPS (77 FR 68283),
we established a policy of using
geometric mean-based APC costs to
calculate relative payment weights. For
the CY 2014 OPPS, we proposed to

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continue basing the relative payment
weights on which OPPS payments will
be made by using geometric mean costs
(78 FR 43576). As we discuss in section
VII. of the proposed rule and this final
rule with comment period, we proposed
to reconfigure the CY 2014 visit APCs so
that they would include a single level
for each visit type. 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 use the cost of
the clinic visit APC in calculating
unscaled weights, which for CY 2014
was proposed APC 0634. While we have
previously used APC 0606 as the base
from which to develop the OPPS budget
neutral weight scaler, under our
proposal to reconfigure the visit APCs,
we proposed to have a single APC for
each visit type. The proposal to
reconfigure the visit APCs is discussed
in more detail in section VII. of the
proposed rule and this final rule with
comment period. Following our general
methodology for establishing relative
payment weights derived from APC
costs, but using the proposed CY 2014
geometric mean cost for APC 0634, for
CY 2014, we proposed to assign APC
0634 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 0634 to derive the
proposed unscaled relative payment
weight for each APC. 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 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
2014 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, as we proposed, we compare
the estimated aggregate weight using the
CY 2013 scaled relative payment
weights to the estimated aggregate
weight using the CY 2014 unscaled
relative payment weights.
For CY 2013, we multiplied the CY
2013 scaled APC relative payment
weight applicable to a service paid
under the OPPS by the volume of that
service from CY 2012 claims to calculate
the total relative payment weight for
each service. We then added together
the total relative payment weight for
each of these services in order to

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calculate an estimated aggregate weight
for the year. For CY 2014, we are
applying the same process using the CY
2014 unscaled relative payment weights
rather than scaled relative payment
weights. We calculate the weight scaler
by dividing the CY 2013 estimated
aggregate weight by the CY 2014
estimated aggregate weight. The servicemix 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. We note that, as a result of the CY
2014 OPPS packaging policy for
laboratory tests described in section
II.A.3.b.(3) of this final rule with
comment period, we need to incorporate
the estimated relative payment weights
from those services. Therefore, the CY
2013 estimated OPPS aggregate weight
include payments for outpatient
laboratory tests paid at the CLFS rates.
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.
We include estimated payments to
CMHCs in our comparison of the
estimated unscaled relative payment
weights in CY 2014 to the estimated
total relative payment weights in CY
2013 using CY 2012 claims data,
holding all other components of the
payment system constant to isolate
changes in total weight. Based on this
comparison, we adjusted the CY 2014
unscaled relative payment weights for
purposes of budget neutrality. The CY
2014 unscaled relative payment weights
were adjusted by multiplying them by a
weight scaler of 1.2732 to ensure that
the CY 2014 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
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 with comment period) is included
in the budget neutrality calculations for
the CY 2014 OPPS.
Comment: One commenter expressed
the concern that CMS may have
underfunded the OPPS in developing
the budget neutral weight scaler for the
additional costs associated with
laboratory tests for CY 2014.

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Response: We appreciate the
commenter’s concern. We discussed the
calculation of the proposed CY 2014
budget neutral weight scaler in the CY
2014 OPPS/ASC proposed rule (78 FR
43576) as well as the claims accounting
narrative that we make available via the
Internet on the CMS Web site. In
calculating the CY 2014 OPPS budget
neutral weight scaler, we calculated the
CY 2013 aggregate payment weight
associated with the laboratory tests paid
at CLFS rates by applying the CY 2013
CLFS payment rates to the laboratory
tests performed in the hospital setting.
We note that this is the standard process
we use to develop relative payment
weights for budget neutrality for items
and services that have predetermined
payment rates, such as separately paid
OPPS drugs and New Technology APCs.
We note that we released corrected data
files on August 28, 2013, and extended
the comment period to September 16,
2013, on the technical corrections noted
in the correcting document published in
the Federal Register on September 6,
2013 (78 FR 54842). However, there
were no corrections associated with the
amount of the estimated payment
weight being budget neutralized from
these clinical diagnostic laboratory tests.
After consideration of the public
comments we received, we are
finalizing our proposed methodology for
calculating the OPPS scaled relative
payment weights without modification,
including updating of the budget
neutrality scaler for this final rule with
comment period. Under this
methodology, the final unscaled relative
payment weights were adjusted by a
weight scaler of 1.2732 for this final rule
with comment period. The CY 2014
unscaled 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
2014 IPPS/LTCH PPS final rule (78 FR

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50607), consistent with current law,
based on IHS Global Insight, Inc.’s
second quarter 2013 forecast of the FY
2014 market basket increase, the final
FY 2014 IPPS market basket update is
2.5 percent. However, sections
1833(t)(3)(F) and 1833(t)(3)(G)(iii) of the
Act, as added by section 3401(i) of the
Patient Protection and Affordable Care
Act of 2010 (Pub. L. 111–148) and as
amended by section 10319(g) of that law
and further amended by section 1105(e)
of the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152), provide adjustments to the OPD
fee schedule increase factor for CY 2014.
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
2014 IPPS/LTCH PPS proposed rule (78
FR 27572), we discussed the calculation
of the proposed MFP adjustment for FY
2014, which was 0.4 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 2014
market basket update and the MFP
adjustment, components in calculating
the OPD fee schedule increase factor
under sections 1833(t)(3)(C)(iv) and
1833(t)(3)(F) of the Act, in this CY 2014
OPPS/ASC final rule with comment
period. In the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50607), we discussed
the calculation of the final MFP
adjustment for FY 2014, which is 0.5
percentage point.
In addition, section 1833(t)(3)(F)(ii) of
the Act requires that, for each of years
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 2014,
section 1833(t)(3)(G)(iii) of the Act
provides a 0.3 percentage point
reduction to the OPD fee schedule

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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)(iii) of
the Act, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43577), we
proposed to apply a 0.3 percentage
point reduction to the OPD fee schedule
increase factor for CY 2014.
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
results in an OPD fee schedule increase
factor of 1.7 percent for the CY 2014
OPPS (which is 2.5 percent, the final
estimate of the hospital inpatient market
basket percentage increase, less the final
0.5 percentage point MFP adjustment,
and less the 0.3 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 –0.3 percent
(which is 2.5 percent, the final estimate
of the hospital inpatient market basket
percentage increase, less the final 0.5
percentage point MFP adjustment, less
the 0.3 percentage point additional
adjustment, and less 2.0 percentage
points for the Hospital OQR Program
reduction). For further discussion of the
Hospital OQR Program, we refer readers
to section XIII. of this final rule with
comment period.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43577), we proposed to
amend 42 CFR 419.32(b)(1)(iv)(B) by
adding a new paragraph (5) to reflect the
requirement in section 1833(t)(3)(F)(i) of
the Act that, for CY 2014, 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)(iii) 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 0.3
percentage point for CY 2014.

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We did not receive any public
comments on our proposed adjustments
to the OPD fee schedule increase factor
or on the proposed changes to
§ 419.32(b)(1)(iv)(B) to add a new
paragraph (5). For the reasons discussed
above, we are adjusting the OPD fee
schedule increase factor and adopting,
as final, the amendment to
§ 419.32(b)(1)(iv)(B), as proposed.
We did not receive any public
comments on our proposed
methodology for calculating the CY
2014 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 2014, we are
increasing the CY 2013 conversion
factor of $71.313 by 1.7 percent. In
accordance with section 1833(t)(9)(B) of
the Act, we are further adjusting the
conversion factor for CY 2014 to ensure
that any revisions made to the updates
for a revised wage index and rural
adjustment are made on a budget
neutral basis. We are calculating an
overall budget neutrality factor of
1.0002 for wage index changes by
comparing total estimated payments
from our simulation model using the
final FY 2014 IPPS wage indices to
those payments using the FY 2013 IPPS
wage indices, as adopted on a calendar
year basis for the OPPS.
For CY 2014, 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 2014, 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 2014 budget neutrality
adjustment factor for the cancer hospital
payment adjustment by comparing the
estimated total CY 2014 payments under
section 1833(t) of the Act, including the
CY 2014 cancer hospital payment
adjustment, to the estimated CY 2014
total payments using the CY 2013 final
cancer hospital payment adjustment as
required under section 1833(t)(18)(B) of
the Act. The difference in the CY 2014
estimated payments as a result of
applying the CY 2014 cancer hospital
payment adjustment relative to the CY
2013 final cancer hospital payment
adjustment has a limited impact on the
budget neutrality calculation. Therefore,

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we are applying a budget neutrality
adjustment factor of 1.0005 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 2014 will equal
approximately $12.3 million, which
represents 0.02 percent of total
projected CY 2014 OPPS spending.
Therefore, the conversion factor is also
adjusted by the difference between the
0.15 percent estimate of pass-through
spending for CY 2013 and the 0.02
percent estimate of CY 2014 passthrough spending, resulting in an
adjustment for CY 2014 of 0.13 percent.
Finally, estimated payments for outliers
remain at 1.0 percent of total OPPS
payments for CY 2014.
The final OPD fee schedule increase
factor of 1.7 percent for CY 2014 (that
is, the estimate of the hospital inpatient
market basket percentage increase of 2.5
percent less the final 0.5 percentage
point MFP adjustment and less the 0.3
percentage point required under section
1833(t)(3)(F)(ii) of the Act), the required
wage index budget neutrality
adjustment of approximately 1.0002, the
cancer hospital payment adjustment of
1.0005, and the adjustment of 0.13
percent of projected OPPS spending for
the difference in the pass-through
spending result in a conversion factor
for CY 2014 of $72.672.
As we stated in the proposed rule (78
FR 43578), 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 XIII.G. of this final
rule with comment period. To calculate
the CY 2014 reduced market basket
conversion factor for those hospitals
that fail to meet the requirements of the
Hospital OQR Program for the full CY
2014 payment update, we are making all
other adjustments discussed above, but
using a reduced OPD fee schedule
update factor of ¥0.3 percent (that is,
the OPD fee schedule increase factor of
1.7 percent further reduced by 2.0
percentage points as required by section
1833(t)(17)(A)(i) of the Act for failure to
comply with the Hospital OQR
requirements). This results in a reduced

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conversion factor for CY 2014 of
$71.219 for those hospitals that fail to
meet the Hospital OQR requirements (a
difference of ¥$1.453 in the conversion
factor relative to those hospitals that
met the Hospital OQR requirements).
In summary, for CY 2014, we are
using a final conversion factor of
$72.672 in the calculation of the
national unadjusted payment rates for
those items and services for which
payment rates are calculated using
geometric mean costs. We are finalizing
our proposed amendment to
§ 419.32(b)(1)(iv)(B) by adding a new
paragraph (5) to reflect the reductions to
the OPD fee schedule increase factor
that are required for CY 2014 in order
to satisfy the statutory requirements of
sections 1833(t)(3)(F) and (t)(3)(G)(iii) of
the Act. We also are using a reduced
conversion factor of $71.219 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 adjust the
portion of payment and coinsurance
attributable to labor-related costs for
relative differences in labor and laborrelated costs across geographic regions
in a budget neutral manner’’ (codified at
42 CFR 419.43(a)). This portion of the
OPPS payment rate is called the OPPS
labor-related share. 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, we did
not propose to revise this policy for the
CY 2014 OPPS. We refer readers to
section II.H. of this final rule with
comment period for a description 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

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
same FY 2014 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.
Under 42 CFR 419.41(c)(1) and
419.43(c) (published in the original
OPPS April 7, 2000 final rule with
comment period (65 FR 18495 and
18545)), the OPPS 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 added section
1886(d)(3)(E)(iii)(II) to the Act, which
defines ‘‘frontier State,’’ and amended
section 1833(t) of the Act to add new
paragraph (19), which requires a
‘‘frontier State’’ wage index floor of 1.00
in certain cases, and states that the
frontier State floor shall not be applied
in a budget neutral manner. We codified
these requirements in § 419.43(c)(2) and
(c)(3) of our regulations. In the CY 2014
OPPS/ASC proposed rule, we stated
that, for the CY 2014 OPPS, we will
implement this provision in the same
manner as we have since CY 2011. That
is, frontier State hospitals will receive a
wage index of 1.00 if the otherwise
applicable wage index (including
reclassification, rural and imputed 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 following

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sections in the FY 2011 through FY
2014 IPPS/LTCH PPS final rules for
discussions 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: FY 2011 (75 FR 50160 through
50161), FY 2012 (76 FR 51793, 51795,
and 51825), FY 2013 (77 FR 53369
through 53370), and FY 2014 (78 FR
50590 through 50591).
In addition to the changes required by
the Affordable Care Act, we note that
the final FY 2014 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 and imputed
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
2014 IPPS/LTCH PPS final rule (78 FR
50585 through 50596) for a detailed
discussion of all changes to the FY 2014
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.
For purposes of the OPPS, we
proposed to continue our policy for CY
2014 of allowing non-IPPS hospitals
paid under the OPPS to qualify for the
out-migration adjustment if they are
located in a section 505 out-migration
county (section 505 of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub.
L. 108–173)). We noted that, because
non-IPPS hospitals cannot reclassify,
they are eligible for the out-migration
wage adjustment. Table 4J from the FY
2014 IPPS/LTCH PPS final rule as
corrected (available via the Internet on
the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
AcuteInpatientPPS/index.html)
identifies counties eligible for the outmigration adjustment and hospitals that
will receive the adjustment for FY 2014.
We also noted that, beginning with FY
2012, under the IPPS, an eligible
hospital that waives its Lugar status in
order to receive the out-migration
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.

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We refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50592) 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 2014 IPPS/LTCH PPS final
rule as corrected 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 2014 OPPS.
Addendum L is available via the
Internet on the CMS Web site.
As discussed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50586), the
Office of Management and Budget
(OMB) issued revisions to the current
geographic area designations on
February 28, 2013, that included a
number of significant changes such as
new CBSAs, urban counties that become
rural, rural counties that become urban,
and splitting existing CBSAs (OMB
Bulletin 13–01). This bulletin can be
found at: http://www.whitehouse.gov/
sites/default/files/omb/bulletins/2013/
b13-01.pdf. All of these designations
have corresponding effects on the wage
index system and its adjustments. In
order to allow for sufficient time to
assess the new revisions and their
ramifications, we intend to propose
changes to the IPPS wage index based
on the newest CBSA designations in the
FY 2015 IPPS/LTCH PPS proposed rule.
Similarly, in the OPPS, which uses the
IPPS wage index, we intend to propose
changes based on the new OMB
revisions in the CY 2015 OPPS/ASC
proposed rule, consistent with any
proposals in the FY 2015 IPPS/LTCH
PPS proposed rule.
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 did not propose to change
our current regulations which require
that we use the FY 2014 IPPS wage
indices for calculating OPPS payments
in CY 2014.
We did not receive any public
comments on our proposals. Therefore,
we are finalizing our proposals without
modification and are adopting the FY
2014 IPPS wage index for the CY 2014
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

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HOPD within the hospital overall.
Therefore, we are using the final FY
2014 IPPS wage indices for calculating
OPPS payments in CY 2014. 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 2014 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 2014 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

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ceiling threshold for a valid CCR) or for
hospitals in which the most recent cost
report reflects an all-inclusive rate
status (Medicare Claims Processing
Manual (Pub. 100–04), Chapter 4,
Section 10.11). In the CY 2014 OPPS/
ASC proposed rule (78 FR 43579), we
proposed to update the default ratios for
CY 2014 using the most recent cost
report data. 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 2014, 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 2014 OPPS relative
payment weights. Table 9 published in
the proposed rule (78 FR 43580 through
43581) listed the proposed CY 2014
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

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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.
We did not receive any public
comments on our CY 2014 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 2014 OPPS
relative payment weights. We used this
methodology to calculate the statewide
average default CCRs listed in Table 16
below.
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 2013 and CY 2014 are modest and
the few significant changes are
associated with areas that have a small
number of hospitals.
Table 16 below lists the finalized
statewide average default CCRs for
OPPS services furnished on or after
January 1, 2014.
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74953

State
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
KENTUCKY

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CY 2014
Default
U rbanlRural CCR
RURAL
0.473
URBAN
0.302
RURAL
0.229
URBAN
0.188
RURAL
0.244
URBAN
0.220
RURAL
0.254
URBAN
0.182
RURAL
0.190
URBAN
0.206
RURAL
0.393
URBAN
0.221
RURAL
0.343
URBAN
0.276
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN
RURAL
URBAN

Frm 00129

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Previous
Default
CCR(CY
2013 OPPS
Final Rule)
0.489
0.307
0.209
0.193
0.219
0.234
0.238
0.190
0.192
0.202
0.331
0.226
0.364
0.287

0.279
0.246
0.356
0.160
0.160
0.260
0.205
0.345
0.298
0.308
0.266
0.359
0.478
0.252
0.222
0.326
0.288
0.313
0.239
0.221
0.225

Sfmt 4725

E:\FR\FM\10DER4.SGM

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
0.241

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TABLE 16.-CY 2014 STATEWIDE AVERAGE CCRs

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State
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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CY2014
Default
UrbanlRural CCR
RURAL
0.257
URBAN
0.222
RURAL
0.283
URBAN
0.248
RURAL
0.395
URBAN
0.336
RURAL
0.452
URBAN
0.438
RURAL
0.341
URBAN
0.322
RURAL
0.462
URBAN
0.349
RURAL
0.263
URBAN
0.280
RURAL
0.233
URBAN
0.200
RURAL
0.481
URBAN
0.384
RURAL

0.258

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

0.256
0.661
0.400
0.323
0.243
0.326
0.287
0.213
0.291
0.304
0.220
0.154
0.345
0.351
0.327
0.232

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Previous
Default
CCR(CY
20130PPS
Final Rule)
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

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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

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BILLING CODE 4120–01–C

E. 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,

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RURAL

0.190

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

0.203
0.287
0.219
0.207
0.190
0.235
0.197
0.474
0.334
0.226
0.238
0.456
0.397
0.330
0.360
0.344
0.291
0.283
0.319
0.400
0.269

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 the Medicare Prescription
Drug, Improvement, and Modernization
Act of 2003 (MMA) (Pub. L. 108–173).
Section 1833(t)(13) of the Act provided
the Secretary the authority to make an

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Previous
Default
CCR(CY
2013 OPPS
Final Rule)
0.239
0.212
0.314
0.335
0.267
0.200
0.504
0.264
0.211
0.214
0.307
0.218
0.209
0.195
0.235
0.206
0.374
0.359
0.227
0.237
0.408
0.384
0.366
0.301
0.345
0.307
0.277
0.338
0.379
0.301
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

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State
OKLAHOMA
OKLAHOMA
OREGON
OREGON
PENNSYLVANIA
PENNSYLVANIA
PUERTO RICO
RHODE ISLAND
SOUTH
CAROLINA
SOUTH
CAROLINA
SOUTH DAKOTA
SOUTH DAKOTA
TENNESSEE
TENNESSEE
TEXAS
TEXAS
UTAH
UTAH
VIRGINIA
VIRGINIA
VERMONT
VERMONT
WASHINGTON
WASHINGTON
WISCONSIN
WISCONSIN
WEST VIRGINIA
WEST VIRGINIA
WYOMING
WYOMING

CY2014
Default
UrbanlRural CCR
RURAL
0.258
URBAN
0.205
RURAL
0.311
URBAN
0.357
RURAL
0.257
URBAN
0.198
URBAN
0.614
URBAN
0.295

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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) of the regulations to
clarify that EACHs also are 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 2013. 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
charges adjusted to costs by application
of a hospital-specific CCR are excluded
from the 7.1 percent payment
adjustment.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43582), we proposed to
continue our policy of a 7.1 percent
payment adjustment that is done in a
budget neutral manner 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.
Comment: Several commenters
supported the proposed continuation of
the 7.1 percent rural SCH adjustment.
One commenter also recommended that
CMS update the analysis in the near
future to assess if the 7.1 percent
payment adjustment remains a valid
figure. One commenter recommended
that any potential future changes to the
rural adjustment be implemented 12

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months after the changes are finalized,
to address concerns about budgeting.
Response: We appreciate the
commenters’ support. We agree that it is
appropriate to continue the 7.1 percent
adjustment for rural SCHs (including
EACHs) as we proposed for CY 2014. As
we indicated in the proposed rule (78
FR 43582), we may reassess the 7.1
percent rural adjustment in the near
future by examining differences
between urban hospitals’ costs and rural
hospitals’ costs using updated claims,
cost reports, and provider information.
We recognize the concerns that
commenters present regarding
budgeting concerns and will take into
consideration these concerns for any
review and revision of the adjustment in
the future.
After consideration of the public
comments we received, we are
finalizing our CY 2014 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 2014, excluding separately payable
drugs and biologicals, devices paid
under the pass-through payment policy,
and items paid at charges reduced to
costs.
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) (Pub. L. 105–
33), Medicare has paid cancer hospitals
identified in section 1886(d)(1)(B)(v) of
the Act 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 that are
exempted from payment under the IPPS.
With the Medicare, Medicaid and
SCHIP Balanced Budget Refinement Act
of 1999 (Pub. L. 106–113), Congress
established section 1833(t)(7) of the Act,
‘‘Transitional Adjustment to Limit
Decline in Payment,’’ to hold harmless
cancer hospitals and children’s
hospitals based on their pre-BBA
amount under the OPPS. As required
under 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
transitional outpatient payments (TOPs)
or hold harmless payments to ensure
that they do not receive a payment that

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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 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-tocost ratio (PCR) for the hospital defined
in section 1833(t)(7)(F)(ii) of the Act.
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 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 of 2010 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
1833(t)(18)(A) of the 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
1833(t)(18)(B) of the Act provides that if
the Secretary determines that costs by
these cancer hospitals 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 1833(t)(18)(A) of the Act, we
determined in 2011 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

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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
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 CYs 2012
and 2013, the target PCR for purposes of
the cancer hospital payment adjustment
was 0.91.
2. Payment Adjustment for Certain
Cancer Hospitals for CY 2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43582), 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
development of the proposed rule. To
calculate the proposed CY 2014 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 2014 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 90 percent of reasonable
cost (weighted average PCR of 0.90).
Based on these data, we proposed a
target PCR of 0.90 that would be used
to determine the CY 2014 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

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needed to result in a proposed target
PCR equal to 0.90 for each cancer
hospital.
Comment: Similar to public
comments received in response to the
CY 2013 OPPS/ASC proposed rule that
we addressed in the CY 2013 OPPS/ASC
final rule with comment period,
commenters representing the cancer
hospitals again stated 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 indicated would result in a
target PCR equal to 0.94 for CY 2014.
Response: As we indicated in the CY
2013 OPPS/ASC final rule with
comment period (77 FR 68293), section
3138 of the Affordable Care Act
provides that if the Secretary determines
under section 1833(t)(18)(A) of the Act
that costs incurred by cancer hospitals
exceed those costs of other hospitals
furnishing services under section
1833(t) of the Act, 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: As we stated in the CY
2013 OPPS/ASC final rule with
comment period (77 FR 68294) in
response to this same comment, 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, 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

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74957

target PCR for the following year and
budget accordingly.
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 2014 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 2014
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
then limited the dataset to the hospitals
with CY 2012 claims data that we used
to model the impact of the final CY 2014
APC relative payment weights (4,044
hospitals) because it is appropriate to
use the same set of hospitals that we are
using to calibrate the modeled CY 2014
OPPS. The cost report data for the
hospitals in this dataset were from cost
report periods with fiscal year ends
ranging from 2011 to 2012. 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 116 hospitals because
these hospitals had 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 3,880
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 89 percent of
reasonable cost (weighted average PCR
of 0.89). Based on these data, we used
a target PCR of 0.89 to determine the CY
2014 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 0.89 for each
cancer hospital.

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Table 17 below indicates the
estimated percentage increase in OPPS
payments to each cancer hospital for CY
2014 due to the cancer hospital payment
adjustment policy. The actual amount of
the CY 2014 cancer hospital payment
adjustment for each cancer hospital will

be determined at cost report settlement
and will depend on each hospital’s CY
2014 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

BILLING CODE 4120–01–C

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
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 2012 OPPS payment,
using available CY 2012 claims and the
revised OPPS expenditure estimate for
the 2013 Trustee’s Report, is

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G. Hospital Outpatient Outlier
Payments
1. Background
Currently, the OPPS provides outlier
payments on a service-by-service basis.
In CY 2012, 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

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will be assessed as usual after all
payments, including the cancer hospital
payment adjustment, have been made
for a cost reporting period.
BILLING CODE 4120–01–P

approximately 1.2 percent of the total
aggregated OPPS payments. Therefore,
for CY 2012, we estimate that we paid
0.2 percent above the CY 2012 outlier
target of 1.0 percent of total aggregated
OPPS payments.
As explained in the CY 2013 OPPS/
ASC final rule with comment period (77
FR 68295 through 68297), we set our
projected target for aggregate outlier
payments at 1.0 percent of the estimated
aggregate total payments under the
OPPS for CY 2013. The outlier
thresholds were set so that estimated CY
2013 aggregate outlier payments would
equal 1.0 percent of the total estimated
aggregate payments under the OPPS.
Using CY 2012 claims data and CY 2013
payment rates, we currently estimate
that the aggregate outlier payments for
CY 2013 will be approximately 1.1
percent of the total CY 2013 OPPS
payments. The difference between 1.1
percent and 1.0 percent is reflected in

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the regulatory impact analysis in section
XXIII. of this final rule with comment
period. We note that we provide
estimated CY 2014 outlier payments for
hospitals and CMHCs with claims
included in the claims data that we used
to model impacts in the Hospital–
Specific 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 2014 OPPS/ASC proposed
rule (78 FR 43584), we proposed to
continue 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 0.18
percent of outlier payments (or 0.0018
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
threshold as a proportion of total
estimated OPPS outlier payments. As
discussed in section VIII.D. of the CY
2014 OPPS/ASC proposed rule (78 FR
43622), 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.D. of this
final rule with comment period.
To ensure that the estimated CY 2014
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 $2,775 fixed-dollar
threshold.
We calculated the proposed fixeddollar threshold using largely the
standard methodology, most recently
used for CY 2013 (77 FR 68295 through
68297). For purposes of estimating
outlier payments for the proposed rule,
we used the hospital-specific overall
ancillary CCRs available in the April
2013 update to the Outpatient Provider-

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Specific File (OPSF). The OPSF
contains provider-specific 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 2014
hospital outlier payments for the
proposed rule, we inflated the charges
on the CY 2012 claims using the same
inflation factor of 1.0993 that we used
to estimate the IPPS fixed-dollar outlier
threshold for the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27767). We
used an inflation factor of 1.0485 to
estimate CY 2013 charges from the CY
2012 charges reported on CY 2012
claims. The methodology for
determining this charge inflation factor
is discussed in the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27767) as well
as the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50982). 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 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, in the CY 2014 OPPS/ASC
proposed rule, we proposed to apply the
same CCR inflation adjustment factor
that we apply for the FY 2014 IPPS
outlier calculation to the CCRs used to
simulate the CY 2014 OPPS outlier
payments to determine the fixed-dollar
threshold. Specifically, for CY 2014, we
proposed to apply an adjustment factor
of 0.9732 to the CCRs that were in the
April 2013 OPSF to trend them forward
from CY 2013 to CY 2014. The
methodology for calculating this
proposed adjustment was discussed in
the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27766 through 27768) as
well as the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50978 through 50982).
Therefore, to model hospital outlier
payments for the proposed rule, we
applied the overall CCRs from the April
2013 OPSF file after adjustment (using
the proposed CCR inflation adjustment
factor of 0.9732 to approximate CY 2014
CCRs) to charges on CY 2012 claims that
were adjusted (using the charge
inflation factor of 1.0993 to approximate
CY 2014 charges). We simulated
aggregated CY 2014 hospital outlier
payments using these costs for several

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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 2014 OPPS
payments. We estimated that a proposed
fixed-dollar threshold of $2,775,
combined with the proposed 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 both the 1.75
multiple threshold and the proposed
fixed-dollar threshold of $2,775 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
XIII. of this final rule with comment
period.
Comment: Several commenters urged
CMS to reconsider the increase in the
CY 2014 OPPS outlier threshold. The
commenters believed that the thresholds
were being set higher than was

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necessary to achieve the OPPS outlier
spending target, based on their analysis
of the thresholds and aggregate outlier
spending in prior years. Commenters
also desired transparency about why an
outlier threshold increase was
necessary, when historical evidence
suggested that such a change is
unwarranted. One commenter
recommended that the OPPS outlier
percentage spending target be reduced
to 0.5 percent of the system because
patients who develop complications
requiring complex care are highly likely
to be admitted to inpatient care.
Response: Many of the commenters
who recommended changes to the OPPS
fixed-dollar outlier threshold relied on
direct comparisons between aggregate
spending and the OPPS outlier
thresholds. As discussed earlier in this
section, OPPS outliers are paid and
modeled based on comparisons between
APC payment and estimated cost. As a
result, changing the OPPS fixed-dollar
outlier threshold by any increment does
not result in an evenly distributed
change in OPPS outlier spending as well
as services that receive OPPS outlier
payments.
There are a variety of factors that may
affect the OPPS fixed-dollar outlier
threshold, including data changes such
as hospital charging practices and
fluctuations in the overall ancillary
CCRs as well as changes in OPPS
payment policy such as those involving
packaging and compositing. Those
changes can influence the individual
comparisons between APC service
payment and estimated costs. While the
OPPS outlier threshold has been
relatively stable in the past several
years, historically the OPPS fixed-dollar
outlier threshold has fluctuated from
year to year as identified in the Annual
Policy Files which are available via the
Internet on the CMS Web site. In the CY
2014 OPPS/ASC proposed rule, we
proposed to update several OPPS
packaging policies which would have a
corresponding effect on the OPPS fixeddollar outlier threshold by potentially
increasing APC payment for certain paid
service lines while moving affected
services from previously being on the
payment portion of the OPPS outlier
payment comparison into the cost
portion. In particular, by conditionally
packaging certain clinical diagnostic
laboratory tests previously paid at CLFS
rates, the CY 2014 fixed-dollar OPPS
outlier threshold would have to account
for significant changes to both the APC
payment and estimated cost portions of
the OPPS outlier payment comparison.
We appreciate the recommendation
regarding revisiting the correct OPPS
outlier spending target and will

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continue to consider whether a 1.0
percent OPPS outlier percentage
spending target continues to remain
appropriate.
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 2014, we are
applying the overall CCRs from the
October 2013 OPSF with a CCR
adjustment factor of 0.9645 to
approximate CY 2014 CCRs to charges
on the final CY 2012 claims that were
adjusted to approximate CY 2014
charges (using the final 2-year charge
inflation factor of 1.0969). These are the
same CCR adjustment and charge
inflation factors that were used to set
the IPPS fixed dollar threshold for the
FY 2014 IPPS/LTCH PPS final rule (78
FR 50982). We simulated aggregated CY
2014 hospital outlier payments using
these costs for several different fixeddollar 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 2014
OPPS payments. We estimate that a
fixed-dollar threshold of $2,900,
combined 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 2014, 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 $2,900 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 0.16 percent
of outlier payments to CMHCs for PHP
outlier payments.
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
Part 419, Subparts C and D. For this CY

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2014 OPPS/ASC 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 2014 scaled weight for the APC
by the CY 2014 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 XIII. 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 note that we
had proposed to create status indicator
‘‘J1’’ to reflect the comprehensive APCs
discussed in section II.A.2.e. of this
final rule with comment period.
However, the comprehensive APCs will
not be implemented in the CY 2014
OPPS, and therefore status indicator
‘‘J1’’ will not apply. We also note that
we had proposed to delete status
indicator ‘‘X’’ as part of the CY 2014
packaging proposal for ancillary
services, discussed in section II.A.4. of
this final rule with comment period. We
are not finalizing the ancillary services
packaging policy, and therefore status
indicator ‘‘X’’ will continue to be active
in the CY 2014 OPPS.
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 2014 OPPS fee schedule increase
factor of 1.7 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. During our regression

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analysis for the payment adjustment for
rural hospitals in the CY 2006 OPPS
final rule with comment period (70 FR
68553), we confirmed that this laborrelated share for hospital outpatient
services is appropriate.
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.
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
2014 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 Pub. L. 98–21. (For
further discussion of the changes to the
FY 2014 IPPS wage indices, as applied
to the CY 2014 OPPS, we refer readers
to section II.C. of this final rule with
comment period.) As we proposed, we
are continuing to apply a wage index
floor of 1.00 to frontier States, in
accordance with section 10324 of the
Affordable Care Act of 2010.
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
Pub. L. 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 2014 IPPS
and listed as Table 4J in the FY 2014
IPPS/LTCH PPS final rule and available
via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
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

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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).
Xa = .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 + Xa.
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
(Level I Excision/Biopsy). The CY 2014
full national unadjusted payment rate
for APC 0019 is approximately $318.79.
The reduced national unadjusted
payment rate for APC 0019 for a
hospital that fails to meet the Hospital
OQR Program requirements is
approximately $312.41. This reduced
rate is calculated by multiplying the
reporting ratio of 0.980 by the full
unadjusted payment rate for APC 0019.

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The FY 2014 wage index for a
provider located in CBSA 35644 in New
York is 1.3129. The labor-related
portion of the full national unadjusted
payment is approximately $251.12 (.60
* $318.79 * 1.3129). The labor-related
portion of the reduced national
unadjusted payment is approximately
$246.10 (.60 * $312.41 * 1.3129). The
nonlabor-related portion of the full
national unadjusted payment is
approximately $127.52 (.40 * 318.79).
The nonlabor-related portion of the
reduced national unadjusted payment is
approximately $124.96 (.40 * $312.41).
The sum of the labor-related and
nonlabor-related portions of the full
national adjusted payment is
approximately $378.64 ($251.12 +
$127.52). The sum of the reduced
national adjusted payment is
approximately $371.06 ($246.10 +
$124.96).

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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 for a procedure
performed in a year to the amount of the
inpatient hospital deductible for that
year.
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
requirements, including flexible
sigmoidoscopies and screening
colonoscopies, and waived the Part B
deductible for screening colonoscopies

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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 2014 OPPS/ASC proposed
rule (78 FR 43586), for CY 2014, 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
proposed national unadjusted
copayment amounts for services payable
under the OPPS that would be effective
January 1, 2014, were shown in
Addenda A and B to the proposed rule
(which are available via the Internet on
the CMS Web site). As discussed in
section XIII.G. of the proposed rule, for
CY 2014, the proposed Medicare
beneficiary’s minimum unadjusted
copayment and national unadjusted
copayment for a service to which a
reduced national unadjusted payment
rate applies will equal 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 noted that OPPS 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. However,
as described in the CY 2004 OPPS/ASC
final rule with comment period, the
development of the copayment
methodology generally moves
beneficiary copayments closer to 20
percent of OPPS APC payments (68 FR
63458 through 63459).
We did not receive any public
comments regarding the proposed
methodology for calculating copayments
for CY 2014. Therefore, for the reasons

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set forth in this final rule with comment
period, we are finalizing our CY 2014
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,
approximately $63.76 is 20 percent of
the full national unadjusted payment
rate of approximately $318.79. For APCs
with only a minimum unadjusted
copayment in Addenda A and B to 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
the 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
and without the rural adjustment, to
calculate the adjusted beneficiary
copayment for a given service.
Wage-adjusted copayment amount for
the APC = Adjusted Medicare Payment
* B.
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

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
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, 2014, 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 2014 OPD fee
schedule increase factor discussed in
section II.B. of this final rule with
comment period.
In addition, as noted above, section
1833(t)(8)(C)(i) of the Act limits the
amount of beneficiary copayment that
may be collected for a procedure
performed in a year to the amount of the
inpatient hospital deductible for that
year.
III. OPPS Ambulatory Payment
Classification (APC) Group Policies
A. OPPS Treatment of New CPT and
Level II HCPCS Codes

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CPT and Level II HCPCS codes are
used to report procedures, services,
items, and supplies under the hospital

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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
process offers hospitals access to codes
that may more accurately describe items
or services furnished and/or provides

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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 2014 OPPS/ASC proposed rule
(78 FR 43587), in Table 18 below (Table
11 of the proposed rule), we
summarized 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
2013 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
2013 OPPS quarterly update were
included in Addendum B. Nevertheless,
we requested public comments on the
codes included in the July 2013 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 2014 OPPS/ASC proposed
rule or whether we are soliciting public
comments in this CY 2014 OPPS/ASC
final rule with comment period. We
note that we sought public comments in
the CY 2013 OPPS/ASC final rule with
comment period on the new CPT and
Level II HCPCS codes that were effective
January 1, 2013. We also sought public
comments in the CY 2013 OPPS/ASC
final rule with comment period on the
new Level II HCPCS codes effective
October 1, 2012. These new codes, with
an effective date of October 1, 2012, or

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January 1, 2013, 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 2013 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 2013 OPPS/ASC
final rule with comment period. We are
responding to public comments and
finalizing our interim OPPS treatment of
these codes in this CY 2014 OPPS/ASC
final rule with comment period.

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We received public comments on
several new codes that were assigned to
comment indicator ‘‘NI’’ in Addendum
B of the CY 2013 OPPS/ASC final rule
with comment period. We respond to
those comments in sections II.A.2.,
III.C., V.A., and V.B. of this CY 2014
OPPS/ASC final rule with comment
period. Table 19 below lists the long
descriptors for the CPT and Level II
HCPCS codes that were assigned to
comment indicator ‘‘NI’’ for which we
received public comments on the CY
2013 OPPS/ASC final rule with
comment period and the specific
sections where the comments are
addressed.

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74965

TABLE 19.-COMMENTS TO THE CY 2013 OPPS/ASC FINAL RULE WITH
COMMENT PERIOD ON NEW HCPCS CODES ASSIGNED TO COMMENT
INDICATOR "NI"

0319T

37211

37212

52287

64615

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CY 2013 Long Descriptor
Insertion or replacement of subcutaneous
implantable defibrillator system with
subcutaneous electrode
Transcatheter therapy, arterial infusion for
thrombolysis other than coronary, any method,
including radiological supervision and
interpretation, initial treatment day
Transcatheter therapy, venous infusion for
thrombolysis, any method, including radiological
supervision and interpretation, initial treatment
day
Cystourethroscopy, with injection(s) for
chemodenervation of the bladder
Chemodenervation of muscle( s); muscle( s)
innervated by facial, trigeminal, cervical spinal
and accessory nerves, bilateral (eg, for chronic
migraine)
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, cavotricuspid isthmus or other single atrial focus or
source of atrial re-entry

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III.C.l.c.
(Thrombolytic Therapy)

III.C.l.c.
(Thrombolytic Therapy)
III.C.5.a.
(Chemodenervation)
III.C.5.a.
(Chemodenervation)

II.A.2.f.(3)
(Cardiac
Electrophysiologic
Evaluation and Ablation
Composite)

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CY 2013
CPT/HCPCS
Code

Section in This CY 2014
OPPSIASC Final Rule
With Comment Period
Where Comments Are
Addressed
III.C.l.b.
(Subcutaneous
Defibrillator)

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93654

93655

93656

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CY 2013 Long Descriptor
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
e1ectrophysiologic 3d mapping, when performed,
and left ventricular pacing and recording, when
performed
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)
Comprehensive electrophysiologic evaluation
including trans septal 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
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)

95907

Nerve conduction studies; 1-2 studies

95908

Nerve conduction studies; 3-4 studies

95909

Nerve conduction studies; 5-6 studies

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II.A.2.f.(3)
(Cardiac
Electrophysiologic
Evaluation and Ablation
Composite)

II.A.2.f.(3)
(Cardiac
Electrophysiologic
Evaluation and Ablation
Composite)

ILA.2.f.(3)
(Cardiac
Electrophysiologic
Evaluation and Ablation
Composite)

II.A.2.f.(3)
(Cardiac
Electrophysiologic
Evaluation and Ablation
Composite)
IILC.5.b.
(Nerve Conduction
Studies)
IILC.5.b.
(Nerve Conduction
Studies)
IILC.5.b.
(Nerve Conduction
Studies)

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CY 2013
CPTIHCPCS
Code

Section in This CY 2014
OPPS/ASC Final Rule
With Comment Period
Where Comments Are
Addressed

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CY 2013
CY 2013 Long Descriptor

Code

95910

Nerve conduction studies; 7-8 studies

95911

Nerve conduction studies; 9-10 studies

95912

Nerve conduction studies; 11-12 studies

95913

Nerve conduction studies; 13 or more studies

95943

G0456

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G0457

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Simultaneous, independent, quantitative
measures of both parasympathetic function and
sympathetic function, based on time-frequency
analysis of heart rate variability concurrent with
time-frequency analysis of continuous respiratory
activity, with mean heart rate and blood pressure
measures, during rest, paced (deep) breathing,
valsalva maneuvers, and head-up postural change
Negative pressure wound therapy, (e.g. vacuum
assisted drainage collection) using a
mechanically-powered device, not durable
medical equipment, including provision of
cartridge and dressing(s), topical application(s),
wound assessment, and instructions for ongoing
care, per session; total wounds( s) surface area
less than or equal to 50 square centimeters
Negative pressure wound therapy, (e.g. vacuum
assisted drainage collection) using a
mechanically-powered device, not durable
medical equipment, including provision of
cartridge and dressing(s), topical application(s),
wound assessment, and instructions for ongoing
care, per session; total wounds( s) surface area
greater than 50 square centimeters

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III.C.5.c.
(Parasympathetic
Function and Sympathetic
Function)

III.C.10.g.
(Negative Pressure
Wound Therapy)

III.C.10.g.
(Negative Pressure
Wound Therapy)

V.
(OPPS Drugs,
Biologicals, and
Radiopharmaceuticals)

Mitomycin, opthalmic, 0.2 mg

21:46 Dec 09, 2013

Section in This CY 2014
OPPSIASC Final Rule
With Comment Period
Where Comments Are
Addressed
III.C.5.b.
(Nerve Conduction
Studies)
III.C.5.b.
(Nerve Conduction
Studies)
III.C.5.b.
(Nerve Conduction
Studies)
III.C.5.b.
(Nerve Conduction
Studies)

Sfmt 4725

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CPT/HCPCS

74967

Through the April 2013 OPPS
quarterly update CR (Transmittal 2664,
Change Request 8228, dated March 1,
2013), and the July 2013 OPPS quarterly
update CR (Transmittal 2718, Change
Request 8338, dated June 7, 2013), we
recognized several new HCPCS codes
for separate payment under the OPPS.
Effective April 1 and July 1 of CY 2013,
we made effective 18 new Level II

HCPCS codes and 6 Category III CPT
codes. Specifically, 8 new Level II
HCPCS codes were effective for the
April 2013 quarterly update and another
10 new Level II HCPCS codes were
effective for the July 2013 quarterly
update for a total of 18. In addition, six
new Category III CPT codes were
effective for the July 2013 quarterly
update. Of the 24 new HCPCS and CPT
codes, we recognized for separate
payment under the OPPS 14 new codes
from the April and July 2013 OPPS
quarterly updates.
Through the April 2013 OPPS
quarterly update CR, we allowed

separate payment for five new Level II
HCPCS codes. Specifically, as displayed
in Table 12 of the proposed rule, we
provided separate payment for HCPCS
codes C9130, C9297, C9298, C9734, and
C9735. HCPCS codes Q0507, Q0508,
and Q0509 were assigned to OPPS
status indicator ‘‘A’’ to indicate that
they are paid through another Medicare
payment system other than the OPPS.
Although HCPCS codes Q0507, Q0508,
and Q0509 were effective April 1, 2013,
they were previously described by
HCPCS code Q0505, which was deleted
on March 31, 2013.

In the CY 2014 OPPS/ASC proposed
rule (78 FR 43588), we solicited public
comments on the proposed status
indicators and APC assignments for
Level II HCPCS codes C9130, C9297,

C9298, C9734, C9735, Q0507, Q0508,
and Q0509, which were listed in Table
12 of the proposed rule (78 FR 43588)
and now appear in Table 20 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 C9130, C9297, C9298,
Q0507, Q0508, and Q0509. However, we

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1. Treatment of New CY 2013 Level II
HCPCS and CPT Codes Effective April
1, 2013 and July 1, 2013 for Which We
Solicited Public Comments in the CY
2014 OPPS/ASC Proposed Rule

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74969

received several public comments on
HCPCS codes C9734 and C9735, which
are addressed in sections III.C.10.c. and
III.C.3.b., respectively, of this final rule
with comment period.
For CY 2014, the HCPCS Workgroup
replaced HCPCS codes C9130, C9297,
and C9298 with permanent HCPCS Jcodes. Table 21 below lists the

replacement HCPCS J-codes for the
temporary HCPCS C-codes. Consistent
with our general policy of using
permanent 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

for HCPCS codes C9130, C9297, and
C9298, which are effective January 1,
2014, in Table 21.
In this final rule with comment
period, we are assigning the Level II
HCPCS codes listed in Table 21 below
to the specified APCs and status
indicators for CY 2014.

For CY 2014, we note that we are not
making any changes to the status
indicator and APC assignment for
HCPCS code C9735. Specifically,
HCPCS code C9735 will continue to be
assigned to APC 0150 for CY 2014 with
a status indicator of ‘‘T.’’ However, we
are reassigning HCPCS code C9734 from
APC 0067 (Level II Stereotactic
Radiosurgery) to APC 0065 (IORT,
MRgFUS, and MEG), as discussed in
section III.C.10.c. of this final rule with
comment period. In addition, we are
reassigning HCPCS codes Q0507,
Q0508, and Q0509 from status indicator

‘‘A’’ to ‘‘N’’ to indicate that they are now
packaged under the hospital OPPS,
consistent with our packaging
guidelines, which are discussed in
section II.A.3. of this final rule with
comment period.
Furthermore, because HCPCS codes
J1556, J9262, and J7316 describe the
same drug and the same dosage
currently described by HCPCS codes
C9130, C9297, and C9298, respectively,
these drugs will continue their passthrough status in CY 2014. Therefore,
we are assigning HCPCS codes J1556,
J9262, and J7316 to the same APCs and

the same status indicators as their
predecessor HCPCS codes, as shown in
Table 21.
As discussed in the CY 2014 OPPS/
ASC proposed rule (78 FR 43589),
through the July 2013 OPPS quarterly
update CR, which included HCPCS
codes that were made effective July 1,
2013, we allowed separate payment for
5 of the 10 new Level II HCPCS codes.
Specifically, as displayed in Table 22
below (also Table 13 of the proposed
rule), we provided separate OPPS
payment for HCPCS codes C9131,
C9736, G0460, Q2050, and Q2051.

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We note that two of the Level II
HCPCS Q-codes that were made
effective July 1, 2013, were previously
described by HCPCS J-codes that were
separately payable under the hospital
OPPS. First, the HCPCS Workgroup
replaced HCPCS code J9002 (Injection,
doxorubicin hydrochloride, liposomal,
Doxil, 10 mg) with new HCPCS code
Q2050, effective July 1, 2013, to
appropriately identify and pay for both
the brand and generic forms of
doxorubicin hydrochloride liposome.
Consequently, the status indicator for
HCPCS code J9002 was changed to ‘‘E’’
(Not Payable by Medicare), effective July
1, 2013. Because HCPCS code Q2050
describes the same product as HCPCS

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code J9002, we continued its separate
payment status and assigned HCPCS
code Q2050 to status indicator ‘‘K’’
(Nonpass-through drugs and
nonimplantable biologicals, including
therapeutic radiopharmaceuticals; paid
under OPPS; separate APC payment).
We also assigned HCPCS code Q2050 to
the same APC as HCPCS code J9002,
specifically APC 7046 (Doxil injection),
effective July 1, 2013.
Secondly, the HCPCS Workgroup
replaced HCPCS codes J3487 (Injection,
zoledronic acid (Zometa), 1 mg) and
J3488 (Injection, zoledronic acid
(Reclast), 1 mg) with one new HCPCS
code, specifically Q2051, effective July
1, 2013, to appropriately identify and

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pay for both the brand and generic
forms of zoledronic acid. Consequently,
the status indicators for HCPCS codes
J3487 and J3488 were changed to ‘‘E,’’
effective July 1, 2013, to indicate that
the codes were not separately payable
by Medicare. Because HCPCS code
Q2051 described the same product as
HCPCS codes J3487 and J3488, we
assigned HCPCS code Q2051 to separate
payment status indicator ‘‘K,’’ effective
July 1, 2013. Because HCPCS codes
J3487 and J3488, which were assigned
to two separate APCs, were replaced
with only one code, we assigned HCPCS
code Q2051 to a new APC to maintain
data consistency for future rulemaking.
Specifically, HCPCS code Q2051 was

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(Not payable/Non-covered by Medicare;
not paid under OPPS).
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43589), we solicited public
comments on the proposed status
indicators and APC assignments for the
HCPCS codes that were listed in Table
13 of the proposed rule and now appear
in Tables 22 and 23 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 C9131, K0008, K0013,
K0900, Q0090, Q2033, Q2050, and

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Q2051. Therefore, we are adopting as
final, without modification, our
proposal to assign these eight Level II
HCPCS codes to the APCs and status
indicators as proposed for CY 2014.
We received several public comments
on HCPCS codes C9736 and G0460,
which are addressed in section III.C. of
this final rule with comment period.
Table 23 below includes a complete
list of the Level II HCPCS codes that
were made effective July 1, 2013, with
their final status indicators and APC
assignments for CY 2014.

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assigned to APC 1356 (Zoldedronic acid
1 mg), effective July 1, 2013.
Of the 10 Level II HCPCS codes that
were made effective July 1, 2013, we did
not recognize for separate payment the
following 5 HCPCS codes: HCPCS codes
K0008, K0013, and K0900, which were
assigned to status indicator ‘‘Y’’ (Nonimplantable durable medical
equipment; not paid under OPPS);
HCPCS code Q2033, which was
assigned to status indicator ‘‘L’’ (Not
paid under OPPS; paid at reasonable
cost); and HCPCS code Q0090, which
was assigned to status indicator ‘‘E’’

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We note that the HCPCS Workgroup
replaced HCPCS codes C9131, Q0090,
and Q2051 with HCPCS codes J9354,
J7301, and J3489, respectively, effective
January 1, 2014. Because HCPCS code
J9354 describes the same drug currently
described by HCPCS code C9131, this
drug will continue its pass-through
status in CY 2014. Therefore, we are
assigning HCPCS code J9354 to the same
APC and status indicator as its
predecessor HCPCS code, which shares
the same dosage descriptor, as shown in
Table 23. We note that because HCPCS
code Q2051 is assigned to status
indicator ‘‘K’’ (Nonpass-Through Drugs;
Paid under OPPS; Separate APC
payment), its replacement HCPCS code
J3489, which describes the same item as
its predecessor code, will also continue
its nonpass-through status and APC
assignment in CY 2014. In addition,
because HCPCS code Q0090 is assigned
to status indicator ‘‘E’’ to indicate that
this drug is not covered by Medicare, its
replacement HCPCS code J7301 will
also continue its noncovered status in
CY 2014. We note that two HCPCS
codes, specifically, HCPCS codes C9736
and Q2033, will be replaced with CPT
codes 0336T and 90673, respectively,
effective January 1, 2014. As noted in
Table 23, CPT code 90673, which is the
replacement code for HCPCS code
Q2033, will be assigned to status

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indicator ‘‘L.’’ However, CPT code
0336T, which replaces HCPCS code
C9736, will be assigned to APC 0174.
We refer readers to section III.C.10.b. of
this final rule with comment period for
further discussion of the APC
assignment of CPT code 0336T, which
replaced HCPCS code C9736.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43589), 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 2013 quarterly
update, there were no new Category I
CPT vaccine codes. However, we note
that Level II HCPCS code Q2033, which
is listed in Tables 22 and 23, describes
a flu vaccine that was effective July 1,
2013, and is separately payable by
Medicare at reasonable cost.
Through the July 2013 OPPS quarterly
update CR (Transmittal 2718, Change
Request 8338, dated June 7, 2013), we

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allowed separate payment for four of the
six new Category III CPT codes effective
July 1, 2013. Specifically, as displayed
in Table 24 (also shown in Table 14 of
the CY 2014 OPPS/ASC proposed rule),
we allowed separate payment for
Category III CPT codes 0330T, 0331T,
0332T, and 0334T. We did not recognize
for separate payment Category III CPT
code 0329T because the device
associated with this procedure has not
received FDA approval. In addition, we
did not recognize for separate payment
Category III CPT code 0333T because
this procedure is not covered by
Medicare. As listed in Table 24, both
CPT codes 0329T and 0333T were
assigned to status indicator ‘‘E’’ (Not
payable/Non-covered by Medicare; not
paid under OPPS).
We received public comments on
several of the Category III CPT codes
that were implemented in July 2013,
specifically on CPT codes 0330T,
0331T, 0332T, and 0334T, which are
addressed in section III.C. of this final
rule with comment period. Table 24
below lists the Category III CPT codes
that were implemented in July 2013,
along with their final status indicators,
APC assignments, and payment rates for
CY 2014.

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In the CY 2014 OPPS/ASC proposed
rule (78 FR 43588 through 43590), we
proposed to continue our process of
soliciting public comments on our
status indicators and APC assignments
for the CPT/HCPCS codes effective
April 1 and July 1. For the CY 2014
update, we solicited public comments
on the CY 2014 proposed status
indicators and the proposed APC
assignments and payment rates for the
Level II HCPCS codes and the Category
III CPT codes that were effective April
1, 2013, and July 1, 2013, through the
respective OPPS quarterly update CRs.
These codes were listed in Tables 12,
13, and 14 of the proposed rule. We
proposed to finalize their status
indicators and their APC assignments
and payment rates, if applicable, in this
CY 2014 OPPS/ASC 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

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to include the codes, their proposed
status indicators, 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 13 and 14,
respectively, of the proposed rule. We
proposed to incorporate these codes into
Addendum B to this CY 2014 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 2013 OPPS update CR
and displayed in Table 12 were
included in Addendum B to the
proposed rule (which is available via
the Internet on the CMS Web site),
where their proposed CY 2014 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

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April 2013 or July 2013 OPPS update
CR can be found in Tables 21, 23, and
24, or 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 Were Effective October 1,
2013 and New CPT and Level II HCPCS
Codes That Will Be Effective January 1,
2014 for Which We Are Soliciting
Public Comments in This CY 2014
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
Workgroup Web site (for Level II HCPCS
codes) and the AMA Web site (for CPT
codes), and also through the January
OPPS quarterly update CRs. In the past,
we also have released new Level II

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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 2014,
these codes are flagged with comment
indicator ‘‘NI’’ in Addendum B to this
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, 2014, are flagged
with comment indicator ‘‘NI’’ in
Addendum B to this 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 final
rule with comment period for the next
calendar year’s OPPS/ASC update. In
the CY 2014 OPPS/ASC proposed rule
(78 FR 43590), we proposed to continue
this process for CY 2014. Specifically,
for CY 2014, we proposed to include in
Addendum B to this CY 2014 OPPS/
ASC final rule with comment period the
new Category I and III CPT codes
effective January 1, 2014 (including the
Category III CPT codes that were
released by the AMA in July 2013) that
would be incorporated in the January
2014 OPPS quarterly update CR and the
new Level II HCPCS codes, effective
October 1, 2013, or January 1, 2014, that
would be released by CMS in its
October 2013 and January 2014 OPPS
quarterly update CRs. As proposed, in
this final rule with comment period, the
October 1, 2013 and January 1, 2014
codes are flagged with comment
indicator ‘‘NI’’ in Addendum B to this
CY 2014 OPPS/ASC final rule with
comment period to indicate that we
have assigned them an interim OPPS
payment status for CY 2014. 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
2015 OPPS/ASC final rule with
comment period.
For the CY 2014 update, we are
finalizing our proposal to flag new Level
II HCPCS codes that become effective
October 1, 2013, and new CPT and
Level II HCPCS codes that become
effective January 1, 2014 with comment
indicator ‘‘NI’’ in Addendum B to this
CY 2014 OPPS/ASC final rule with
comment period to indicate that these
codes have been assigned an interim
OPPS payment status for CY 2014. In

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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 2015
OPPS/ASC final rule with comment
period.
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 also have
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 primary and complete
services. Therefore, we do not make
separate payment for these packaged
items or services. In general, according
to the regulations at § 419.2(b), packaged
items and services include, but are not
limited to:
(1) Use of an operating suite,
procedure room, or treatment room;
(2) Use of recovery room;
(3) Use of an observation bed;
(4) Anesthesia, certain drugs,
biologicals, and other pharmaceuticals;
medical and surgical supplies and
equipment; surgical dressings; and
devices used for external reduction of
fractures and dislocations;
(5) Supplies and equipment for
administering and monitoring
anesthesia or sedation;
(6) Intraocular lenses (IOLs);

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(7) Incidental services such as
venipuncture;
(8) Capital-related costs;
(9) Implantable items used in
connection with diagnostic X-ray tests,
diagnostic laboratory tests, and other
diagnostic tests;
(10) Durable medical equipment that
is implantable;
(11) Implantable prosthetic devices
(other than dental) which replace all or
part of an internal body organ
(including colostomy bags and supplies
directly related to colostomy care),
including replacement of these devices;
(12) Costs incurred to procure donor
tissue other than corneal tissue.
Significant revisions to the
regulations at § 419.2(b) were proposed.
Further discussion of our packaging
proposals was included in section
II.A.3. of the proposed rule (78 FR
43568 through 43575).
In CY 2008, we implemented
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
(72 FR 66650 through 66652). Under the
CY 2013 OPPS (77 FR 68243 through
68258), we provided composite APC
payments for 10 categories of services:
(1) Mental Health Services (APC
0034);
(2) Cardiac Electrophysiologic
Evaluation and Ablation (APC 8000);
(3) Low Dose Rate (LDR) Prostate
Brachytherapy (APC 8001);
(4) Level I Extended Assessment &
Management Composite (APC 8002);
(5) Level II Extended Assessment &
Management Composite (APC 8003);
(6) Ultrasound (APC 8004);
(7) CT and CTA without Contrast
(APC 8005);
(8) CT and CTA with Contrast (APC
8006);
(9) MRI and MRA without Contrast
Composite (APC 8007); and
(10) MRI and MRA with Contrast
Composite (APC 8008).
Further discussion of composite APCs
is included in section II.A.2.f. 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 relative payment
weight represents the hospital cost of
the services included in that APC,
relative to the hospital cost of the
services included in new proposed APC
0634 (Hospital Clinic Visits). The APC
relative payment weights are scaled to

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new APC 0634 because it is the hospital
clinic visit APC and because clinic
visits are among the most frequently
furnished services in the hospital
outpatient setting. We refer readers to
section VII. of the proposed rule and
this final rule with comment period for
further discussion of the establishment
of new APC 0634.
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
Panel recommendations for specific
services for the CY 2014 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
lowest cost for an item or service within
the same group (referred to as the ‘‘2
times rule’’). 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 of the 2

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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 criterion to determine
when a HCPCS code is significant for
purposes of the 2 times rule was
established 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 2014
OPPS/ASC proposed rule (78 FR 43592),
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 2014.
In the CY 2014 OPPS/ASC proposed
rule, we identified APCs with 2 times
rule violations, 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
2014 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 HCPCS 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 2014 included in the proposed rule
are related to changes in costs of
services that were observed in the CY
2012 claims data newly available for CY
2014 ratesetting. We also proposed
changes to the status indicators for some
HCPCS codes that were not specifically
and separately discussed in the CY 2014
OPPS/ASC proposed rule. In these
cases, we proposed to change the status
indicators for some HCPCS codes
because we believe that another status
indicator would more accurately
describe their payment status from an

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OPPS perspective based on the policies
that we proposed for CY 2014.
Addendum B to the CY 2014 OPPS/ASC
proposed rule identified with comment
indicator ‘‘CH’’ those HCPCS codes for
which we proposed a change to the APC
assignment or status indicator, or both,
that were initially assigned in the April
2013 Addendum B Update (available via
the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html). In
contrast, Addendum B to this final rule
with comment period (available via the
Internet on the CMS Web site) identifies
with the ‘‘CH’’ comment indicator the
final CY 2014 changes compared to the
HCPCS codes’ status as reflected in the
October 2013 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 2014, 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;
• 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).
For the CY 2014 OPPS/ASC proposed
rule, the list of 10 APCs that appeared
in Table 15 of the CY 2014 OPPS/ASC
proposed rule (78 FR 43592) that were
excepted from the 2 times rule were
based on claims data for dates of service
between January 1, 2012, and December
31, 2012, that were processed before
January 1, 2013. For this final rule with
comment period, we used claims data
for dates of service between January 1,
2012, and December 31, 2012, that were
processed on or before June 30, 2013
and updated CCRs, if available.
Therefore, after considering the public
comments we received on the CY 2014
OPPS/ASC proposed rule and making
changes to APC assignments based on
those comments, we analyzed the CY
2012 claims data used for this final rule
with comment period to identify the
APCs with 2 times rule violations.
Based on the final CY 2012 claims data,
we found 10 APCs with 2 times rule

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violations, which is the same number of
APCs that violated the 2 times rule in
the proposed rule. We applied the
criteria as described earlier to identify
the APCs that are exceptions to the 2
times rule for CY 2014, and identified
six new APCs that meet the criteria for
exception to the 2 times rule for this
final rule with comment period, but that
did not meet the criteria using proposed
rule claims data. Specifically, we found
that the following six new APCs
violated the 2 times rule: APC 0066
(Level I Stereotactic Radiosurgery); APC
0067 (Level II Stereotactic
Radiosurgery); APC 0193 (Level V
Female Reproductive Procedures); APC
0342 (Level I Pathology); APC 0370
(Multiple Allergy Tests); and APC 0634
(Hospital Clinic Visits).
After consideration of the public
comments we received and our review
of the CY 2012 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 proposal to except 4 of the
proposed 10 original APCs from the 2
times rule for CY 2014, specifically,
APCs 0057, 0272, 0330, and 0690. In
contrast, we are not finalizing our
proposal to except 6 of the proposed 10
original APCs from the 2 times rule,
specifically, APCs 0060 (Manipulation
Therapy), 0075 (Level V Endoscopy
Upper Airway), 0105 (Repair/Revision/
Removal of Pacemakers, AICDs, or
Vascular Devices), 0148 (Level I Anal/
Rectal Procedures), 0278 (Diagnostic
Urography), and 0402 (Level II Nervous
System Imaging). Our data analysis for
this final rule with comment period
revealed that these six APCs no longer
violate the 2 times rule. Table 25 below
lists 10 APCs that we are excepting from

the 2 times rule for CY 2014 based on
the criteria above and a review of
updated claims data. 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. The
geometric mean costs for hospital
outpatient services for these and all
other APCs that were used in the
development of this final rule with
comment period can be found on the
CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Hospital-Outpatient-Regulations-andNotices.html.

C. OPPS APC-Specific Policies

circumstances, a separate APC payment
for the service will be made. We
maintained the assignment of HCPCS
code C9733 to APC 0397 for CY 2013,
which has a payment rate of $330.97,
and continued the assignment of status
indicator ‘‘Q2.’’
Comment: One commenter objected to
the continued assignment of status
indicator ‘‘Q2’’ to the service described
by HCPCS code C9733, as well as
packaging payment for the service as a
result of the breast reconstruction
surgery primary code being included in
a comprehensive APC, because the
commenter believed that both of these
proposed policies would result in
packaging the payment for the service
described by HCPCS code C9733. The
commenter stated that packaging
payment for a service or item is only

appropriate when the cost of the service
or item can be taken into account in
establishing the payment rate for the
separately paid services. The
commenter pointed out that there were
no single claims reporting HCPCS code
C9733 in the claims data used for the
proposed rule ratesetting, and asserted
that, because HCPCS code C9733
described a new service with no single
claims, payment should not be packaged
until several years after the code’s
creation, when there will be sufficient
claims data. The commenter further
asserted that the proposed packaging
payment for the service described by
HCPCS code C9733 with payment for
CPT code 19357 (Breast reconstruction,
immediate or delayed, with tissue
expander, including subsequent
expansion) does not comport with CMS’

1. Cardiovascular and Vascular Services

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a. Non-Ophthalmic Fluorescent
Vascular Angiography (APC 0263)
We created HCPCS code C9733 (Nonophthalmic fluorescent vascular
angiography (FVA)), effective April 1,
2012, for a service that became known
to us through the new technology APC
application process. We assigned
HCPCS code C9733 to APC 0397
(Vascular Imaging), which had a CY
2012 payment rate of $154.87 and a
status indicator of ‘‘Q2.’’ The ‘‘Q2’’
status indicator shows that payment for
the service will be packaged in the APC
payment if billed on the same date of
service as a HCPCS code assigned status
indicator ‘‘T’’; and in all other

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principle that packaging payment for
services should reflect how the service
is reported. The commenter stated that
its disagreement with the packaging
proposals is supported by CMS’
acknowledgement that none of the 10
claims reporting HCPCS code C9733
were identified as single claims and,
according to an analysis that the
commenter conducted, HCPCS code
C9733 was reported in combination
with CPT code 19357 approximately 90
percent of the time. The commenter also
believed that packaging payment for
HCPCS code C9733 contradicts the
principle that CMS should be able to
map the costs of the packaged service to
the separately payable services with
which it is performed.
Response: We disagree with the
commenter that payment for the service
described by HCPCS code C9733 should
not be packaged when it is used
intraoperatively on the same date of
service as the primary procedure. While
it is true that HCPCS code C9733 is a
relatively new service, the commenter
stated that its own data analysis shows
that the service is being reported in
combination with CPT code 19357
approximately 90 percent of the time.
Therefore, payment for the service
described by HCPCS code C9733 is
being taken into account in establishing
the payment rate for the separately paid
services with which it is performed. In
addition, we believe that packaging
payment for the service described by
HCPCS code C9733 does reflect how the
service is furnished and how it is being
reported on a claim in combination with
CPT code 19357. Although none of the
10 claims available for the proposed
rule ratesetting were single claims, the
services reported on the 10 claims
appear to have been mapped to
appropriate separately paid procedures.
The procedure described by HCPCS
code C9733 is often performed
intraoperatively in combination with a
number of primary procedures,
including facial reconstruction and
reanimation, muscle flaps, trauma
reconstruction, and digital and limb
reattachment and, as the commenter
stated, breast reconstruction, which
appears to be the focus of the
commenter’s concern. In other words,
there are a number of plastic and
reconstructive surgical procedures with
which the imaging procedure described
by HCPCS code C9733 can be used, not
just breast reconstruction surgery.
While we proposed to maintain the
assignment of HCPCS code C9733 to
APC 0397, in this final rule with
comment period, we are deleting APC
0397 because of multiple 2 times rule
violations in APC 0397 based on the

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final rule claims data. Once we removed
the high-cost services from APC 0397,
only several low-volume services
remained in this APC, including HCPCS
code C9733, which we reassigned to
another APC. We have reassigned
HCPCS code C9733 to APC 0263 (Level
I Miscellaneous Radiology Procedures)
for CY 2014, with a final rule geometric
mean cost of approximately $319.
After consideration of the public
comment we received, we are finalizing
our proposal to maintain the assignment
of ‘‘Q2’’ status indicator to HCPCS code
C9733. However, we are reassigning
HCPCS code C9733 to APC 0263 when
the service described by HCPCS code
C9733 is performed and reported
separately. Further discussion of
comprehensive APCs is included in
section II.A.2.e. of this final rule with
comment period. However, we note that
we are not implementing our
comprehensive APC policy until CY
2015.
b. Subcutaneous Defibrillator (APC
0107)
For CY 2014, we proposed to continue
to assign CPT code 0319T (Insertion or
replacement of subcutaneous
implantable defibrillator system with
subcutaneous electrode) to APC 0107
(Level I Implantation of CardioverterDefibrillators (ICDs)), for which we
proposed a CY 2014 geometric mean
cost of approximately $25,447. (The
proposed payment rate reflects the
corrected proposed rate included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: Commenters objected to
the proposed assignment of CPT code
0319T to APC 0107 and requested that
CMS reassign CPT code 0319T to APC
0108 (Level II Implantation of
Cardioverter-Defibrillators (ICDs)), for
which we proposed a CY 2014
geometric mean cost of approximately
$31,911. The commenters believed that
CPT code 0319T is similar in clinical
application and resource use to CPT
code 33249 (Insertion or replacement of
permanent pacing cardioverterdefibrillator system with transvenous
lead(s), single or dual chamber), which
is currently assigned to APC 0108.
Response: We believe that the
procedure described by CPT code 0319T
is sufficiently clinically similar to the
other procedures assigned to APC 0107.
In addition, because we do not have CY
2012 claims data for CPT code 0319T for
the CY 2014 ratesetting cycle, we cannot
determine the resource costs for this
procedure at this time. We expect to
have claims data for CPT code 0319T in
preparation for the CY 2015 rulemaking

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cycle and will reevaluate the APC
assignment of CPT code 0319T at that
time.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal,
without modification, to continue to
assign CPT code 0319T to APC 0107,
which has a final CY 2014 APC
geometric mean cost of approximately
$25,106.
c. Thrombolytic Therapy (APC 0621)
For CY 2014, we proposed to continue
to assign CPT code 37211 (Transcatheter
therapy, arterial infusion for
thrombolysis other than coronary, any
method, including radiological
supervision and interpretation, initial
treatment day) and CPT code 37212
(Transcatheter therapy, venous infusion
for thrombolysis other than coronary,
any method, including radiological
supervision and interpretation, initial
treatment day) to APC 0621 (Level I
Vascular Access Procedures), for which
we proposed a CY 2014 geometric mean
cost of approximately $866. (The
proposed payment rate reflects the
corrected proposed rate included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: One commenter objected to
the proposed continued assignment of
CPT codes 37211 and 37212 to APC
0621. The commenter stated that CPT
codes 37211 and 37212, which both are
assigned status indicator ‘‘T,’’ are often
times performed in conjunction with
CPT code 75710 (Angiography, spinal
selective, radiological supervision and
interpretation) which is assigned status
indicator ‘‘Q2’’ and is assigned to APC
0279 (Level II Angiography and
Venography), for which we proposed a
CY 2014 geometric mean cost of
approximately $2,700. The commenter
stated that, because CPT code 75710 is
not separately paid when it appears on
a claim in combination with other
services assigned to status indicator ‘‘T’’
(such as CPT codes 37211 and 37212),
providers receive significantly lower
payment for CPT code 75710 when
performed and reported in conjunction
with CPT code 37211 or CPT code
37212, compared to payment for the
services when performed and reported
separately, although significantly more
resources are used. The commenter
stated that payment for CPT codes
37211 and 37212 should not be
packaged with payment for CPT code
75710 when the services described by
CPT codes 37211 and 37212 are
performed on the same date as CPT code
75710.

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Response: We believe that the
procedure described by CPT codes
37211 and 37212 are sufficiently
clinically similar to the other
procedures assigned to APC 0621. In
addition, CPT codes 37211 and 37212
are new codes for CY 2013, and because
we do not have claims data available for
these two new CPT codes for CY 2013
ratesetting, we do not have a way to
validate or substantiate the claims made
by commenters. We expect to have
claims data for CPT codes 37211 and
37212 in preparation for the CY 2015
rulemaking cycle and will reevaluate
the APC assignment of CPT codes 37211
and 37212 at that time.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal,
without modification, to continue to
assign CPT codes 37211 and 37212 to
APC 0621, which has a final CY 2014
APC geometric mean cost of
approximately $853.
d. Vascular Ligation (APCs 0091 and
0092)
For CY 2014, we proposed to continue
to assign CPT codes 36475 (Endovenous
ablation therapy of incompetent vein,
extremity, inclusive of all imaging
guidance and monitoring, percutaneous,
radiofrequency; first vein treated) and
37191 (Insertion of intravascular vena
cava filter, endovascular approach
including vascular access, vessel
selection, and radiological supervision
and interpretation, intraprocedural
roadmapping, and imaging guidance
(ultrasound and fluoroscopy), when
performed) to APC 0091 (Level II
Vascular Ligation), which had a
proposed payment rate of approximately
$2,882.
In addition, we proposed to continue
to assign CPT code 36478 (Endovenous
ablation therapy of incompetent vein,
extremity, inclusive of all imaging
guidance and monitoring, percutaneous,
laser; first vein treated) to APC 0092
(Level I Vascular Ligation), which had a
proposed payment rate of approximately
$2,047.
(The proposed payment rates reflect
the corrected proposed rates included in
the September 6, 2013 OPPS Addendum
B, which was posted on the CMS Web
site.)
Comment: One commenter stated that
the CPT codes assigned to APCs 0091
and 0092 do not meet the CMS
requirement of clinical and cost
homogeneity, and requested that CMS
consider restructuring APCs 0091 and
0092. The commenter requested that
CMS review the clinical and cost
characteristics of all the procedures
assigned to these APCs and consider

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either combining APCs 0091 and 0092
or reassigning specific procedures to
more appropriate APCs in order to
establish clinical homogeneity. In
particular, the commenter requested
that CMS review the APC assignments
for CPT codes 37191 and 36475
(assigned to APC 0091) and CPT code
36478 (assigned to APC 0092). The
commenter stated that CPT code 37191
is not similar to the other procedures
assigned to APC 0091 because it is not
a ligation procedure, and is the only
procedure assigned to APC 0091 that
requires an expensive implanted device.
The commenter further stated that the
cost associated with CPT code 37191 is
significantly higher than the cost of
most of the other procedures assigned to
APC 0091. The commenter also
recommended that CPT codes 36475
and 36478 be assigned to the same APC
because they are nearly identical
procedures. The commenter stated that
the CPT clinical vignettes for CPT code
36475 (radiofrequency) and CPT code
36478 (laser) show similarities between
these two procedures, which further
support the clinical homogeneity of
these two procedures. The commenter
believed that assigning both of these
procedures to two different APCs, and
maintaining a payment differential
between CPT code 36475 and CPT code
36478, incentivizes providers to choose
radiofrequency instead of laser, which is
a clinically comparable procedure. The
commenter believed that assigning the
two procedures to the same APC would
encourage providers to make treatment
decisions based solely on clinical
characteristics.
Response: We appreciate the
commenter’s suggestions. We agree with
the commenter’s recommendations for
reassignment of CPT codes 36475,
36478, and 37191. With respect to CPT
codes 36475 and 36478, we have further
analyzed updated hospital outpatient
claims data and determined that both
procedures are comparable in terms of
clinical homogeneity and resource costs
and should be assigned to the same
APC. Analysis of updated CY 2012
hospital outpatient claims data for the
CY 2014 final rule shows a geometric
mean cost of approximately $1,966 for
CPT code 36478, which is comparable
to the geometric mean cost of
approximately $2,382 for CPT code
36475. We also agree with the
commenter that CPT code 37191 should
be reassigned to another APC that is
more appropriate based on the nature of
the procedure. Based on our review of
the existing vascular-related APCs and
input from our medical advisors, we
believe that CPT code 37191 would be

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more appropriately reassigned to APC
0093 (Vascular Reconstruction/Fistula
Repair) because of the clinical
homogeneity and similar resource costs
of other procedures assigned to APC
0093.
By accepting the commenter’s
recommendation to reassign CPT code
37191 from APC 0091 to APC 0093, and
after taking into consideration all of the
procedures in APCs 0091 and 0092, we
have determined that combining APCs
0091 and 0092 into one APC is
appropriate. To accomplish this
reconfiguration, we are establishing new
APC 0219 (Vascular Ligation), which
has a geometric mean cost of
approximately $2,147. The geometric
mean cost of new APC 0219 is based on
the costs of all of the 22 procedures
assigned to APCs 0091 and 0092; the
most significant cost among these 22
procedures ranged between $1,455 (for
CPT code 37765) and $2,382 (for CPT
code 36475). In addition, because of the
reassignment of CPT code 37191 to APC
0093, we are modifying the title of APC
0093 to read: ‘‘Vascular Reconstruction/
Fistula Repair’’ to appropriately
describe all the procedures assigned to
this APC.
After further consideration of the
public comment that we received, we
are revising the APC assignment for CPT
codes 36475, 36478, and 37191.
Specifically, we are reassigning CPT
codes 36475 and 36478 to new APC
0219, reassigning CPT code 37191 to
APC 0093, and modifying the title of
APC 0093 to read: ‘‘Vascular
Reconstruction/Fistula Repair’’. The
final CY 2014 geometric mean cost of
APC 0219 is approximately $2,147, and
approximately $2,857 for APC 0093.
The final CY 2014 payment rates for
CPT codes 36475, 36478, and 37191 can
be found in Addendum B to this CY
2014 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site).
2. Gastrointestinal Services
a. Fecal Microbiota Transplantation
(APC 0340)
For CY 2014, we proposed to continue
to assign HCPCS code G0455
(Preparation with instillation of fecal
microbiota by any method, including
assessment of donor specimen) to APC
0340 (Level I Minor Procedures), which
had a proposed payment rate of
approximately $74. Although the CPT
Editorial Panel established CPT code
44705 (Preparation of fecal microbiota
for instillation, including assessment of
donor specimen), effective January 1,
2013, to describe a fecal microbiota
procedure, we did not recognize the

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CPT code for payment under the OPPS.
As we stated in the CY 2013 MPFS final
rule with comment period (77 FR
69052), by policy, Medicare’s payment
for the preparation of the donor
specimen would only be made if the
specimen is ultimately used for the
treatment of a beneficiary. Because of
this policy, we believe that it was
appropriate to bundle the preparation
and instillation of fecal microbiota into
one payable HCPCS code. Consequently,
we established HCPCS code G0455,
effective January 1, 2013, for Medicare
reporting of the fecal microbiota
procedure.
Comment: One commenter stated that
the CY 2013 payment rate of
approximately $50 for HCPCS code
G0455 is insufficient. The commenter
further stated that this payment rate
does not appear to recognize the patient
preparation for the implantation or the
instillation of the donor microbes, the
supplies, or the overall work involved
in providing this procedure. The
commenter stated that if the microbiota
instillation is performed via
colonoscopy or
esophagogastroduodenoscopy (EGD),
the CY 2013 payment rate for the
procedure does not include the cost of
the endoscopic portion of the
procedure. To pay appropriately for this
procedure, the commenter
recommended that CMS delete existing
HCPCS code G0455 and replace it with
three new HCPCS G-codes. The
commenter suggested that the three
recommended HCPCS G-codes
differentiate the various preparation
methods used in performing the
procedure and be assigned accordingly
to appropriate APCs. Specifically, the
commenter recommended that one
HCPCS G-code describe instillation by
oronasogastric tube or enema, the
second HCPCS G-code describe
instillation by upper endoscopy, and the
third HCPCS G-code describe
instillation by colonoscopy.
Response: We appreciate the
commenter’s suggestions. However, we
believe that the existing HCPCS code
G0455 appropriately describes the
procedure for which Medicare should
pay. Under Medicare, payment for the
preparation of the donor specimen
would only be made if the specimen is
ultimately used for the treatment of a
beneficiary because Medicare is not
authorized to pay for the costs of any
services not directly related to the
diagnosis and treatment of a beneficiary.
Because of this policy, we believe that
it is appropriate to bundle the
preparation and instillation of fecal
microbiota under HCPCS code G0455.

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Based on our understanding of the
procedure, we believe that HCPCS code
G0455 is appropriately assigned to APC
0340 for CY 2014. Because this code
was new for CY 2013, we expect to have
claims data for HCPCS code G0455 for
the CY 2015 ratesetting process. 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.
We will reevaluate the status indicator
and APC assignment for HCPCS code
G0455 for the CY 2015 OPPS
rulemaking cycle.
After consideration of the public
comment that we received, we are
finalizing our CY 2014 proposal,
without modification, to continue to
assign HCPCS code G0455 to APC 0340.
The final CY 2014 geometric mean cost
of HCPCS code G0455 is approximately
$54. The final CY 2014 payment rate for
HCPCS code G0455 can be found in
Addendum B to this CY 2014 OPPS/
ASC final rule with comment period
(which is available via the Internet on
the CMS Web site).
b. Transoral Incisionless Fundoplication
(APC 0422)
For CY 2014, we proposed to continue
to assign CPT code C9724 (Endoscopic
full-thickness plication of the stomach
using endoscopic plication system (eps);
includes endoscopy) to APC 0422 (Level
III Upper GI Procedures), which had a
proposed payment rate of approximately
$1,967. (The proposed payment rate
reflects the corrected proposed rate
included in the September 6, 2013
OPPS Addendum B, which was posted
on the CMS Web site.)
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. Of the three existing upper
GI APCs, APC 0422 is the highest
paying APC.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68333), we
stated that a presenter at the August
2012 HOP Panel meeting requested that
CMS either reassign HCPCS code C9724
from APC 0422 to New Technology APC
1565 (New Technology—Level XXVIII
($5000–$5500)) or create a new APC
with a descriptor of ‘‘Level IV Upper GI

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Procedures.’’ We also stated that, based
on the Panel’s review and discussion of
the claims data, we accepted the Panel’s
recommendation to continue to assign
HCPCS code C9724 to APC 0422 for the
CY 2013 update.
Furthermore, because of concerns
related to the descriptor of HCPCS code
C9724, in that same final rule with
comment period, we revised the long
descriptor of HCPCS code C9724 to read
‘‘Endoscopic full-thickness plication of
the stomach using endoscopic plication
system (eps); includes endoscopy,’’
effective January 1, 2013, to accurately
describe how the procedure is currently
performed.
At the August 2013 HOP Panel
meeting, the same presenter at the
August 2012 HOP Panel meeting
requested that the Panel recommend
that CMS reassign HCPCS code C9724
from APC 0422 to a new APC with a
descriptor of ‘‘Level IV Upper GI
Procedures.’’ The Panel did not make
this recommendation at the meeting.
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
does not adequately pay for the cost of
performing the procedure. These
commenters urged CMS to establish a
new APC with a descriptor of ‘‘Level IV
Upper GI Procedures’’ or ‘‘Level IV
Upper GI Transoral Procedures,’’ with a
payment rate of between $3,000 and
$5,000, and reassign HCPCS code C9724
and CPT code 43257 to this newly
created APC.
Response: Because HCPCS code
C9724 became effective April 1, 2005,
we have several years of claims data. We
examined the latest hospital outpatient
claims data for HCPCS code C9724,
based on claims data for dates of service
between January 1, 2012, and December
31, 2012, that were processed on or
before June 30, 2013. Our analysis of
these latest claims data shows a
geometric mean cost of approximately
$6,801 based on 12 single claims (out of
73 total claims) for HCPCS code C9724.
Overall, APC 0422 has a geometric mean
cost of approximately $1,976, which is
based on the seven procedures assigned
to this APC. Of the seven procedures
assigned to APC 0422, three procedures
have geometric mean cost ranging
between approximately $1,431 (for CPT
code 43830) and approximately $2,042
(for CPT code 43228).
APC 0422 consists of other
procedures that manipulate the natural
or an artificial entrance to the stomach,
similar to the procedure described by
TIF. We believe that maintaining the
assignment of HCPCS code C9724 to

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APC 0422 continues to be appropriate
because several other procedures
assigned to this APC are highly
clinically similar to the procedure
described by HCPCS code C9724 in that
they are upper gastrointestinal
endoscopy procedures. In particular,
CPT code 43257 describes an upper
gastrointestinal endoscopy procedure
for the treatment of GERD, which is also
the method and purpose of HCPCS code
C9724. Consistent with our
longstanding policy since the
implementation of OPPS in 2000, we
will reevaluate the APC assignment for
every code during our annual
rulemaking cycle.
After consideration of the public
comments that we received, we are
finalizing our CY 2014 proposal,
without modification, to maintain the
assignment of HCPCS code C9724 to
APC 0422. The final CY 2014 geometric
mean costs for APC 0422 is
approximately $1,976. The final CY
2014 payment rate for HCPCS code
C9724 can be found in Addendum B to
this CY 2014 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site).
3. Genitourinary Services

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a. Percutaneous Renal Cryoablation
(APC 0423)
For CY 2014, we proposed to continue
to assign CPT code 50593 (Ablation,
renal tumor(s), unilateral, percutaneous,
cryotherapy) to APC 0423 (Level II
Percutaneous Abdominal and Biliary
Procedures), with a proposed payment
rate of approximately $4,114. (The
proposed payment rate reflects the
corrected proposed rate included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.) CPT code 50593 became effective
in CY 2008; however, the same service
was previously described by CPT code
0135T (Ablation renal tumor(s),
unilateral, percutaneous, cryotherapy).
We note that, for CY 2007, based upon
the APC Panel’s recommendation made
at its March 2006 meeting, we
reassigned CPT code 0135T (now CPT
code 50593) from APC 0163 (Level IV
Cystourethroscopy and Other
Genitourinary Procedures) to APC 0423,
effective January 1, 2007.
Comment: One commenter expressed
concern that the proposed payment rate
of approximately $4,114 for APC 0423,
the APC to which CPT code 50593 is
assigned, is inadequate because the
proposed payment rate does not
accurately account for the costs incurred
by hospitals in performing the
procedure described by CPT code
50593. Further, the commenter

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indicated that hospitals are hesitant to
perform this procedure because of the
inadequate APC payment rate assigned
to the procedure. The commenter asked
CMS to designate CPT code 50593 as a
‘‘device-dependent’’ procedure and
require hospitals to submit claims with
the appropriate device C-code,
specifically, HCPCS code C2618 (Probe,
cryoablation). The commenter believed
that the inadequacy of the proposed
payment rate for APC 0423 is
attributable to claims data that do not
accurately capture the full costs of the
procedure described by CPT code
50593. The commenter stated that
approximately half of the single claims
reporting CPT code 50593 do not
contain the associated charge for the
required device used in performing the
service, specifically HCPCS code C2618
(Probe, cryoablation). The commenter
stated that designating CPT code 50593
as a device-dependent procedure would
result in a more accurate payment for
the procedure and continued Medicare
beneficiary access to percutaneous renal
cryoablation in the HOPD.
Response: We continue to believe that
CPT code 50593 is appropriately
assigned to APC 0423 based on clinical
and resource similarities compared to
other procedures also proposed for
assignment to APC 0423 for CY 2014. As
we stated in the CY 2007 OPPS final
rule with comment period (71 FR 68049
through 68050), the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66709), the CY 2009 OPPS/ASC final
rule with comment period (73 FR
68611), the CY 2010 OPPS/ASC final
rule with comment period (74 FR
60444), and the CY 2011 OPPS/ASC
final rule with comment period (75 FR
71910), we initially revised the APC
assignment for the percutaneous renal
cryoablation procedure from APC 0163
to APC 0423 in CY 2007 based on the
APC Panel’s recommendation. In
addition, based on our CY 2012 claims
data, the resource use associated with
CPT code 50593 is comparable to the
other procedures assigned to APC 0423.
Specifically, our latest hospital
outpatient claims data shows that the
geometric mean cost for CPT code
50593, based on 667 single claims (out
of 1,357 total claims), is approximately
$5,047. Overall, APC 0423 has a
geometric mean cost of approximately
$4,121, which is based on claims data
for the eight procedures assigned to this
APC. Of the eight procedures, six
procedures have the most significant
geometric mean cost, ranging between
approximately $3,117 (for CPT code
47511) and approximately $5,047 (for
CPT code 50593). Based on our latest

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claims data, and the clinical
homogeneity and resource similarity of
the procedure described by CPT code
50593 to the other procedures assigned
to APC 0423, we believe that CPT code
50593 is appropriately assigned to APC
0423.
Moreover, we disagree with the
commenter’s assertion that hospitals are
reluctant to perform this procedure
because of the inadequate payment rate.
We believe that the payment rate for
APC 0423, the APC to which CPT code
50593 is assigned, is sufficient to ensure
Medicare beneficiary access to this
service.
With regard to the commenter’s
request to designate CPT code 50593 as
a device-dependent procedure in an
APC, we do not agree that CPT code
50593 should be designated as a devicedependent procedure. We do not
identify individual HCPCS codes as
device-dependent HCPCS codes under
the OPPS. Rather, we first consider the
clinical and resource characteristics of a
procedure and determine the most
appropriate APC assignment. When we
determine that we should assign a
procedure to an APC that is devicedependent, based on whether that APC
has been historically identified under
the OPPS as having very high device
costs, we then consider the
implementation of device edits, as
appropriate. We again note that the
identification of device-dependent APCs
was particularly important in the early
years of the OPPS when separate passthrough payment for many implantable
devices expired. At that time, a variety
of methodologies to package the costs of
those devices into procedural APCs was
utilized over several years to ensure
appropriate incorporation of the device
costs into the procedure payments. At
this point in time, hospitals have
significantly more experience reporting
HCPCS codes for packaged and
separately payable items and services
under the OPPS and the payment
groups are more mature. We believe that
our standard ratesetting methodology
typically results in appropriate payment
rates for new procedures that utilize
devices, as well as those that do not use
high-cost devices. In recent years, we
have not encountered circumstances
whereby we have had to establish new
device-dependent APCs because we
were not able to accommodate the
clinical and resource characteristics of a
procedure by assigning it to an existing
APC (whether device-dependent or nondevice-dependent), and the procedure
described by CPT code 50593 is no
exception.
While all of the procedures assigned
to APC 0423 require the use of

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implantable devices, for many of the
procedures, there are no Level II HCPCS
codes that describe all of the
technologies that may be used in the
procedures. Therefore, it would not be
possible for us to develop procedure-todevice edits for all of the CPT codes
assigned to APC 0423. Under the OPPS,
there are many other procedures that
require the use of implantable devices
that, because they are assigned to OPPS
APCs that are not device-dependent, do
not have procedure-to-device edits
applied, even if those claims processing
edits would be feasible. We continue to
believe that our payments for
procedures that utilize high-cost devices
are appropriate for those services, even
when those services are grouped with
other procedures that either do not
require the use of implantable devices
or which utilize devices that are not
described by specific Level II HCPCS
codes. When reporting CPT code 50593,
we expect hospitals to also report the
device HCPCS code C2618, which is
associated with this procedure. We also
remind hospitals that they must report
all of the HCPCS codes that
appropriately describe the items used to
provide services, regardless of whether
the HCPCS codes are packaged or paid
separately. If hospitals use more than
one probe in performing the procedure
described by CPT code 50593, we
expect hospitals to report this
information on the claim and adjust
their charges accordingly. Hospitals
should report the number of
cryoablation probes used to perform the
procedure described by CPT code 50593
as the number of units of HCPCS code
C2618, which describes these devices,
with their charges for the probes. Since
CY 2005, we have required hospitals to
report device HCPCS codes for all
devices used in procedures if there are
appropriate HCPCS codes available. In
this way, we can be confident that
hospitals have included charges on their
claims for costly devices used in
procedures when they submit claims for
those procedures. For further discussion
of device-dependent edits, we refer
readers to section II.A.2.d. of this CY
2014 OPPS/ASC final rule with
comment period.
Comment: One commenter requested
that CMS revise the code descriptor for
device HCPCS code C2618 consistent
with how cryoablation probes are now
classified by the medical industry. The
commenter stated that since the
implementation of the OPPS and the
development of device descriptions,
cryoablation probes have improved and
these devices are now referred to as
cryoablation needles. The commenter

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believed that modifying the description
of HCPCS code C2618 will enable
hospitals to appropriately report the use
of the device when submitting claims to
CMS and other payers.
Response: Based on input from our
medical advisors, we agree that a change
in the description of HCPCS code C2618
is appropriate. Therefore, for the CY
2014 update, we are revising the
description for HCPCS code C2618 from
‘‘Probe, cryoablation’’ to ‘‘Probe/needle,
cryoablation’’ effective January 1, 2014.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal,
without modification, to continue to
assign CPT code 50593 to APC 0423,
which has a final CY 2014 geometric
mean cost of approximately $4,121. In
addition, we are revising the code
descriptor for HCPCS code C2618 to
read: ‘‘Probe/needle, cryoablation’’
effective January 1, 2014. The final CY
2014 payment rate for CPT code 50593
can be found in Addendum B to this CY
2014 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site).
b. Anoscopy With Directed Submucosal
Injection (APC 0150)
We created HCPCS code C9735
(Anoscopy; with directed submucosal
injection(s), any substance) effective
April 1, 2013, and assigned the code to
APC 0150 (Level IV Anal/Rectal
Procedures) for CY 2013, which has a
payment rate of $2,365.97. The
procedure described by HCPCS code
C9735 involves injection of a bulking
agent, L8605 (Injectable bulking agent
dextranomer/hyaluronic acid copolymer
implant, anal canal, 1 ml, includes
shipping and necessary supplies). For
CY 2014, we proposed to maintain the
assignment of HCPCS code C9735 to
APC 0150, with a proposed payment
rate of approximately $2,520. (The
proposed payment rate reflects the
corrected proposed rate included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: One commenter believed
that the proposed assignment of HCPCS
code C9735 to APC 0150 is
inappropriate. The commenter stated
that the bulking agent used in the
performance of the procedure described
by HCPCS code C9735 costs $4,900 for
the 4 mL required for the injections, and
that the total cost of the procedure
described by HCPCS code C9735 is
more than the proposed payment rate of
approximately $2,519 for APC 0150.
The commenter recommended creating
a new Level V Anal/Rectal Procedures
APC, composed of HCPCS code C9735,

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and two other procedures, CPT code
46762 (Sphincteroplasty, anal, for
incontinence, adult; implantation
artificial sphincter), and CPT code
0184T (Excision of rectal tumor,
transanal endoscopic microsurgical
approach (ie, TEMS), including
muscularis propria (ie, full thickness)).
The commenter stated that the
procedure described by CPT code 46762
is clinically similar to the procedure
described by HCPCS code C9735
because both procedures involve
implantation of a product to treat fecal
incontinence, and that the procedure
described by HCPCS code C9735 is
similar to the procedure described by
CPT code 0184T because both
procedures involve new technology
with significant procedure costs.
Alternatively, the commenter
recommended assigning HCPCS code
C9735 to New Technology APC 1526,
with a CY 2014 proposed payment rate
of approximately $4,250.
Response: HCPCS code C9735 was
created effective April 1, 2013.
Therefore, we do not have claims data
on this procedure at this time. Our
longstanding policy is to wait until
claims data are available on a new
procedure before reassigning the
procedure to another clinical APC. We
do not agree with the commenter that
creating a Level V Anal/Rectal
Procedures APC is warranted at this
time. The three codes recommended for
assignment to such an APC, all of which
are currently assigned to the Level IV
Anal/Rectal Procedures APC, are low
volume or no volume services.
According to our CY 2012 claims data,
CPT code 0184T has 104 single
frequency claims, CPT code 46762 has
8 single claims, and HCPCS code C9735
has no claims volume. The low volume
of claims for such an APC would
contribute to APC cost and payment
volatility. Regarding the commenter’s
recommendation to assign HCPCS code
C9735 to a New Technology APC, we
believe that HCPCS code C9735 is
clinically similar to the other services
assigned to APC 0150, which includes
another anoscopy service, and,
therefore, APC 0150 is an appropriate
APC assignment for HCPCS code C9735.
Based on our established OPPS
ratesetting methodology, we will review
the APC assignment for HCPCS code
C9735 once we have OPPS claims data
for this service during our annual OPPS
update process. Therefore, we are
finalizing our proposal to maintain the
assignment of HCPCS code C9735 to
APC 0150 for CY 2014. The final CY
2014 geometric mean cost for APC 0150
is approximately $2,510.

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4. Musculoskeletal Services
a. Arthroplasty (APC 0425)
APC 0425 (Level II Arthroplasty or
Implantation with Prosthesis) contains
arthroplasty procedures as well as
osseointegrated implant procedures. For
CY 2014, we proposed to convert APC
0425 to a comprehensive APC, with a
proposed geometric mean cost of
approximate $9,939. (The proposed
payment rate reflects the corrected
proposed rate included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: One commenter requested
that CMS review the current
composition of APC 0425 for clinical
homogeneity and resource cost
cohesion, including the newly added
adjunctive costs that would result from
converting APC 0425 to a
comprehensive APC. The commenter
recommended that CMS remove the
following osseointegrated implant
procedure codes from APC 0425 and
assign them to a more clinically
appropriate APC: CPT code 69714
(Implantation, osseointegrated implant,
temporal bone, with percutaneous
attachment to external speech
processor/cochlear stimulator; without
mastoidectomy); CPT code 69715
(Implantation, osseointegrated implant,
temporal bone, with percutaneous
attachment to external speech
processor/cochlear stimulator; with
mastoidectomy); CPT code 69717
(Replacement (including removal of
existing device), osseointegrated
implant, temporal bone, with
percutaneous attachment to external
speech processor/cochlear stimulator;
without mastoidectomy); and CPT code
69718 (Replacement (including removal
of existing device), osseointegrated
implant, temporal bone, with
percutaneous attachment to external
speech processor/cochlear stimulator;
with mastoidectomy).
Response: In response to the
commenter’s request, we have again
reviewed the composition of APC 0425
for clinical and resource homogeneity.
Although we are not making
comprehensive APCs effective until CY
2015, the proposed procedural
composition of APC 0425 is the same
whether this APC is a comprehensive
APC or not. We found in our review that
the clinical and resource composition of
proposed APC 0425 is appropriate
because all of the procedures assigned
to the APC involve surgical procedures
that use high-cost devices, including the
osseointegrated device procedures
represented by CPT codes 69714, 69715,
69717, and 69718. Therefore, we do not

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believe that it is necessary to
reconfigure the proposed APC 0425.
After consideration of the public
comment we received, we are finalizing
the proposed composition of APC 0425
for CY 2014 with the modification that
APC 0425 will not be made a
comprehensive APC until CY 2015. The
final CY 2014 geometric mean cost of
APC 0425 is approximately $9,766.
b. Joint Stabilization (APC 0052)
The CPT Editorial Panel created CPT
Code 0334T (Sacroiliac joint
stabilization for arthrodesis,
percutaneous or minimally invasive
(indirect visualization), includes
obtaining and applying autograft or
allograft (structural or morselized) when
performed, includes image guidance
when performed (eg., CT or
fluoroscopic)), effective July 1, 2013. For
CY 2013, we assigned CPT code 0334T
to APC 0208 (Laminotomies and
Laminectomies) with a payment rate of
$3,758.59. For CY 2014, we proposed to
maintain the assignment of CPT code
0334T to APC 0208, with a proposed
payment rate of approximately $4,109.
(The proposed payment rate reflects the
corrected proposed rate included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: A few commenters
objected to our proposed assignment of
CPT code 0334T to APC 0208, and
stated that APC 0208 is not an
appropriate assignment for CPT code
0334T either in terms of resources or
clinical homogeneity. The commenters
stated that the proposed payment rate
for APC 0208 is insufficient to cover the
approximately $10,500 in implant costs.
The commenters further stated that the
other procedures assigned to APC 0208
do not have appreciable device costs.
One commenter performed a cost
analysis on claims reporting CPT code
27280 (Arthrodesis, sacroiliac joint
(including obtaining graft)), the CPT
code that would have been used for
minimally invasive Sacroiliac (SI)
fusion procedures in CY 2012, the year
used for the CY 2014 ratesetting. Based
on the commenter’s analysis, 38
hospitals submitted outpatient claims
reporting CPT code 27280. However, no
claims were used for CY 2014 Medicare
ratesetting because CPT code 27280 was
included on the OPPS inpatient only list
for CY 2012 (and currently remains on
this list). The commenter calculated a
geometric mean cost of $14,733 based
on these 38 claims. The commenter
believed that these 38 claims
represented migration of the procedure
described by CPT code 27280, which
uses minimally invasive techniques and

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implants, to the hospital outpatient
setting. Some commenters also stated
that other procedures assigned to APC
0208 are primarily used for
decompressing the disc and neural
structures, which differ in location and
purpose from the procedure described
by CPT code 0334T. The commenters
recommended that CMS consider
assigning CPT code 0334T to a New
Technology APC with a payment rate
range between $14,500 and $15,000,
based on the commenter’s analysis of
the claims reporting CPT code 27280; or
creating a new clinical APC and
assigning CPT code 0334T to that APC
based on the cost estimate for
performing the procedure described by
CPT code 27280 because there are no
other clinical APCs that are appropriate
to assign CPT code 0334T.
Response: We appreciate the
commenters’ suggestions. However, in
regard to the commenter’s cost analysis
performed using the 38 CY 2012 claims
for CPT code 27280, we do not believe
that these 38 claims likely represent the
cost of performing the procedure
described by CPT code 0334T. As the
commenter stated, CPT code 27280 was
listed as an inpatient only service for CY
2012, currently remains on the inpatient
only list for CY 2013, and is proposed
to remain on the inpatient only list for
CY 2014. CPT code 27280 is used
primarily to report open sacroiliac joint
fusion procedures, rather than
minimally invasive SI joint fusion
procedures. Therefore, while some of
the 38 claims may involve the
minimally invasive techniques, we are
not convinced that these claims
represent minimally invasive
techniques, but consist mainly of open
SI joint fusion procedures, which are
the primarily reported procedures for
this code. Regarding the commenters’
suggested option to create a new device
pass-through category, we do not
discuss the merits of OPPS pass-through
status applications in our proposed or
final rules. Regarding the commenters’
recommended option to assign CPT
code 0334T to a New Technology APC
or to create a new clinical APC for CPT
code 0334T, we agree with the
commenters that there may be a more
appropriate APC to which we could
assign CPT code 0334T based on
resource use and clinical homogeneity.
However, we believe that CPT code
0334T can be appropriately assigned to
an existing clinical APC, which is
preferable because other clinically
similar procedures populate the APC.
The final geometric mean cost of APC
0208 is approximately $4,017. We agree
that the resource use associated with the

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procedure described by CPT code 0334T
is likely to be greater than the resource
use associated with the typical
procedures assigned to APC 0208.
Therefore, we believe that a more
appropriate initial APC assignment
based on clinical and resource
homogeneity for this new procedure is
APC 0052 (Level IV Musculoskeletal
Procedures Except Hand and Foot). APC
0052 includes several orthopedic fusion
procedures that are clinically similar to
the procedure described by CPT code
0334T, and we believe that it is
appropriate clinically to assign CPT
code 0344T to APC 0052, which has a
final geometric mean cost of
approximately $6,530. In accordance
with our longstanding policy, we will
review the assignment of CPT code
0334T in a future annual OPPS update,
when we have available claims data for
ratesetting.
After consideration of the public
comments we received, we are not
finalizing our CY 2014 proposal to
maintain the assignment of CPT code
0334T to APC 0208. Rather, for CY
2014, we are assigning CPT code 0334T
to APC 0052, which has a final
geometric mean cost of approximately
$6,530.
5. Nervous System Services

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a. Chemodenervation (APCs 0161 and
0204)
CPT codes 64615 (Chemodenervation
of muscle(s); muscle(s) innervated by
facial, trigeminal, cervical spinal and
accessory nerves, bilateral (e.g., for
chronic migraine)) and 52287
(Cystourethroscopy, with injection(s) for
chemodenervation of the bladder) both
became effective January 1, 2013. For
CY 2014, we proposed to continue to
assign CPT code 52287 to APC 0161
(Level II Cystourethroscopy and Other
Genitourinary Procedures), with a
proposed payment rate of approximately
$1,201. In addition, we proposed to
continue to assign CPT code 64615 to
APC 0204 (Level I Nerve Injections),
with a proposed payment rate of
approximately $214. (The proposed
payment rates reflect the corrected
proposed rates included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: One commenter requested
that CMS reassign CPT code 64615 from
APC 0204 to APC 0206 (Level II Nerve
Injections) because of the clinical
similarity to the procedure described by
CPT code 64613 (Chemodenervation of
muscle(s); neck muscle(s) (eg, for
spasmodic torticollis, spasmodic
dysphonia)), which is assigned to APC

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0206. This commenter stated that the
payment rate for APC 0204 does not
adequately pay for the cost of providing
the procedure. The commenter
submitted this same request in response
to the CY 2013 OPPS/ASC final rule
with comment period.
Response: We disagree with the
commenter’s assertion that the
procedure described by CPT code 64615
is more similar to the procedure
described by CPT code 64613. Based on
the description of the procedure, the
procedure described by CPT code 64615
is most similar to the procedure
described by CPT code 64612
(Chemodenervation of muscle(s);
muscle(s) innervated by facial nerve,
unilateral (eg, for blepharospasm,
hemifacial spasm)), which is assigned to
APC 0204. The procedures described by
CPT codes 64612 and 64615 both
involve facial nerve muscles, whereas
the procedure described by CPT code
64613 involves the neck muscles.
Consequently, we believe that CPT code
64615 is appropriately assigned to APC
0204 based on its clinical homogeneity
to CPT code 64612.
We note that, in addition to the
payment for the procedure, hospitals
would receive separate payment for the
drug onabotulinumtoxina, which is
described by HCPCS code J0585
(Injection, onabotulinumtoxina, 1 unit),
when the drug is administered during
the procedure.
Consistent with CMS’ longstanding
policy since the implementation of the
OPPS in 2000, we evaluate, on an
annual basis, all of the APC assignments
for appropriateness. We note that
because CPT code 64615 is a new code
that became effective for CY 2013, we
will have a full year of claims data
available next year, and as with every
HCPCS code or CPT code, we will
reevaluate its APC assignment during
the annual rulemaking cycle.
Comment: One commenter requested
that CMS reassign CPT code 52287 from
APC 0161 to APC 0162 (Level III
Cystourethroscopy and Other
Genitourinary Procedures). The
commenter stated that the proposed
APC assignment for CPT code 52287 is
economically and clinically
inappropriate. The commenter further
stated that the procedure described by
CPT code 52287 is more clinically
similar to the procedure described by
CPT code 52283 (Cystourethroscopy,
with steroid injection into stricture),
which is assigned to APC 0162. The
commenter submitted this same request
in response to the CY 2013 OPPS/ASC
final rule with comment period.
Response: APC 0161 consists of a
variety of procedures, some of which

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describe cystourethroscopic procedures
of the urethra and bladder. We believe
that the procedure described by CPT
code 52287 is more clinically similar to
the other cystourethroscopic procedures
assigned to APC 0161, such as the
procedure described by CPT code
52281, than to procedures assigned to
APC 0162, such as the procedure
described by CPT code 52287 as
mentioned by the commenter. We also
note that in addition to a payment for
the procedure at the payment rate for
APC 0161, hospitals also receive
separate payment for the
chemodenervation drug. For the CY
2014 update, the payment rate for APC
0161 is approximately $1,205. As has
been our practice since the
implementation of the OPPS, we
annually review all of the items and
services within an APC group to
determine, with respect to
comparability of the use of resources,
any 2 times rule violations. In making
this determination, we review all claims
data and determine whether we need to
make changes to the current APC
assignments for the following year. We
will reevaluate the status indicator and
APC assignment for CPT code 52287 for
the CY 2015 OPPS rulemaking cycle.
After consideration of the public
comments received, we are finalizing
our CY 2014 proposals, without
modification, to continue to assign CPT
code 64615 to APC 0204, and to
continue to assign CPT code 52287 to
APC 0161. The final CY 2014 geometric
mean costs for APCs 0204 and 0161 are
approximately $203 and $1,209,
respectively.
b. Nerve Conduction Studies (APCs
0216 and 0218)
For CY 2013, the AMA’s CPT
Editorial Panel established seven new
CPT codes to describe nerve conduction
tests, which were effective January 1,
2013. For CY 2014, we proposed to
continue to assign CPT codes 95907,
95908, 95909, and 95910 to APC 0215
(Level I Nerve and Muscle Services),
with a proposed payment rate of
approximately $67. In addition, we
proposed to reassign CPT codes 95911,
95912, and 95913 from APC 0218 (Level
II Nerve and Muscle Services) to APC
0215. The descriptors for these seven
CPT codes and our proposed APC
assignments are listed in Table 26
below.
Comment: Some commenters
expressed concern with the proposed
APC assignments of CPT codes that
describe the nerve conduction tests. The
commenters stated that the proposed
payment of $67 for APC 0215 is
inadequate because it does not cover the

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expenses associated with providing
these services. The commenters urged
CMS to reconsider the proposed APC
assignments for CPT codes 95907
through 95913, and suggested specific
alternative APC assignments for these
specific codes. Specifically, the
commenters recommended the
reassignment of CPT code 95907 from
APC 0215 to APC 0218, the
reassignment of CPT codes 95908,
95909, and 95910 from APC 0215 to
APC 0216 (Level III Nerve and Muscle
Services), and the reassignment of CPT
codes 95911, 95912, and 95913 from
APC 0218 to APC 0216.
We also received a comment in
response to the CY 2013 OPPS/ASC
final rule with comment period relating
to these codes. The commenter stated
that the CY 2013 OPPS payment rates
for these new codes were significantly
lower for these services when they were
performed in the hospital outpatient
setting compared to when they were
performed in the physician office
setting, and suggested that the lower
payment rates would negatively impact
beneficiary access to neurologic care.
Response: After further consultation
with our medical advisors, we agree

with the commenters that a revision to
the APC assignments for CPT codes
95907 through 95913 is necessary.
Based on the nature of the procedures
described by these codes and the
additional information submitted to us
by the commenters on the CY 2013
OPPS/ASC final rule with comment
period and the CY 2014 OPPS/ASC
proposed rule, we believe that the nerve
conduction tests described by CPT
codes 95908, 95909, 95910, 95911,
95912, and 95913 would be more
appropriately assigned to APC 0216. In
addition, we believe that the nerve
conduction test described by CPT code
95907 would be more appropriately
assigned to APC 0218.
Therefore, after consideration of the
public comments we received, we are
revising our CY 2014 proposed APC
reassignment of CPT codes 95908,
95909, 95910, 95911, 95912, and 95913
from APC 0215 to APC 0216. In
addition, we are revising our CY 2014
proposed APC reassignment of CPT
code 95907 from APC 0215 to APC
0218. The final APC assignments for
these codes, along with the final status
indicators are listed in Table 26 below.
The final CY 2014 payment rates for

CPT codes 95907 through 95913 are
included in Addendum B to this final
rule with comment period (which is
available via the Internet on the CMS
Web site).
We remind hospitals that, consistent
with our longstanding policy since the
implementation of OPPS in 2000, we
will reevaluate the APC assignments for
these codes in next year’s rulemaking
cycle. As has been our practice, we
annually review all the items and
services within an APC group to
determine, with respect to
comparability of the use of resources, if
the geometric mean cost of the highest
cost item or service within an APC
group is more than 2 times greater than
the geometric mean cost of the lowest
cost item or service within that same
group. 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. We note that, because
CPT codes 95907 through 95913 became
effective for CY 2013, we will not have
applicable claims data available for
these services for ratesetting until the
CY 2015 rulemaking cycle.

c. Parasympathetic Function and
Sympathetic Function (APC 0215)

testing of parasympathetic and
sympathetic functions of the autonomic
nervous system at the same time, with
and without use of passive tilt: CPT

code 95943 (Simultaneous,
independent, quantitative measures of
both parasympathetic function and
sympathetic function) and CPT code

In CY 2013, the AMA’s Editorial
Panel created two new codes to describe

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95924 (Testing of autonomic nervous
system function; combined
parasympathetic and sympathetic
adrenergic function testing with at least
5 minutes of passive tilt). For CY 2013,
we assigned CPT code 95943 to APC
0215 (Level I Nerve and Muscle Tests),
which has a CY 2013 payment rate of
approximately $43. We also assigned
comment indicator ‘‘NI’’ to CPT code
95943 to indicate that the code was new
for CY 2013 with an interim APC
assignment that was subject to public
comment following the publication of
the CY 2013 final rule with comment
period. We assigned CPT code 95924
(Testing of autonomic nervous system
function; combined parasympathetic
and sympathetic adrenergic function
testing with at least 5 minutes of passive
tilt) to APC 0218 (Level II Nerve and
Muscle Tests), which has a CY 2013
payment rate of approximately $80.
Comment: One commenter who
addressed the interim APC assignment
of CPT code 95943 believed that the test
described by CPT code 95943 is more
similar in terms of clinical homogeneity
and resource use to the services
assigned to APC 0218, and requested
that CMS reassign CPT code 95943 to
APC 0218 for CY 2014, which has a
final rule geometric mean cost of
approximately $128. APC 0215 has a
final rule geometric mean cost of
approximately $50. The commenter
noted that the predecessor codes for
CPT code 95943, CPT code 95921
(Testing of autonomic nervous system
function; cardiovagal innervation
(parasympathetic function)) and CPT
code 95922 (Testing of autonomic
nervous system function; vasomotor
adrenergic innervation (sympathetic
adrenergic function)), were assigned to
APC 0218. In addition, the commenter
stated that the test described by CPT
code 95943 is almost identical to the
test described by CPT code 95924,
which is assigned to APC 0218. The
commenter stated that, although the test
described by CPT code 95924 is the only
test that uses a tilt table, the monitor
used to perform the test described by
CPT code 95943 is more expensive than
the monitor used to perform the test
described by CPT code 95924.
Response: We agree with the
commenter that the service described by
CPT code 95943 is clinically similar to
the other services assigned to APC 0218,
including its predecessor codes, CPT
codes 95921 and 95922. Therefore, for
CY 2014, we are reassigning CPT code
95943 from APC 0215 to APC 0218.
We will reconsider the APC
assignments for this code once claims
data are available, as part of our usual
ratesetting methodology for CY 2015.

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d. Epidural Lysis (APCs 0203 and 0207)
For CY 2013, CPT code 62263
(Epidural lysis, multiple sessions) and
CPT code 62264 (Epidural lysis on
single day) are assigned to APC 0203
(Level IV Nerve Injections), with a
payment rate of approximately $857.
For CY 2014, we proposed to reassign
CPT code 62264, which had a proposed
rule geometric mean cost of
approximately $874 from APC 0203
(which had a proposed rule geometric
mean cost of approximately $1,574) to
APC 0207 (Level III Nerve Injections),
which had a proposed rule geometric
mean cost of approximately $687.
Comment: One commenter objected to
the reassignment of CPT code 62264
from APC 0203 to APC 0207 asserting
that the resources used to perform the
procedures described by CPT codes
62263 and 62264 are the same and that
CPT code 62263 is rarely used.
Response: The geometric mean costs
for performing the procedures described
by CPT codes 62263 and 62264 were not
the same for CY 2013: CPT code 62263
had a CY 2013 final rule geometric
mean cost of approximately $1,406, and
CPT code 62264 had a CY 2013 final
rule geometric mean cost of
approximately $876. The geometric
mean costs of the procedures described
by CPT codes 62263 and 62264
continued to differ by a similar
magnitude for CY 2014: the CY 2014
proposed rule geometric mean cost of
the procedure described by CPT code
62263 was approximately $1,492, while
the CY 2014 proposed rule geometric
mean cost of CPT code 62264 was
approximately $874. However, for CY
2014, we determined that continuing to
assign CPT code 62264 to APC 0203
would create a 2 times rule violation
because the geometric mean cost of the
APC increased from approximately $881
in CY 2013 to approximately $1,550 for
CY 2014. To correct the 2 times rule
violation, we proposed to reassign CPT
code 62264 from APC 0203 to APC
0207, which has a final rule geometric
mean cost of approximately $672.
Based on updated claims data, the
resources required to furnish the
procedure described by CPT code 62264
(which has a final rule geometric mean
cost of approximately $883) continue to
be more similar to the resources
required for services assigned to APC
0207 (which has a final rule geometric
mean cost of approximately $672) than
for services assigned to APC 0203
(which has a final rule geometric mean
cost of approximately $1,550).
Therefore, after consideration of the
public comment we received, we are
finalizing our proposal to reassign CPT

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code 62264 from APC 0203 to APC 0207
for CY 2014.
e. Cerebrospinal Shunt Reprogramming
(APC 0692)
For CY 2014, we proposed to reassign
CPT code 62252 (Reprogramming of
programmable cerebrospinal shunt),
which had a proposed rule geometric
mean cost of approximately $155, from
APC 0691 (Level III Electronic Analysis
of Devices), which had a proposed
payment rate of approximately $274, to
APC 0692 (Level II Electronic Analysis
of Devices), which had a proposed
payment rate of approximately $139.
(These proposed rates reflect the
corrected proposed rates included in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: One commenter asked
CMS to explain the rationale for the
proposed reassignment of CPT code
62252 from APC 0691 to APC 0692.
Response: We proposed to reassign
CPT code 62252 from APC 0691 to APC
0692 because it would violate the 2
times rule if we continued to assign it
to APC 0691.
After consideration of the public
comment we received, we are finalizing
our proposal to reassign CPT code
62252 from APC 0691 to APC 0692,
which has a final rule geometric mean
cost of approximately $116. In addition,
based on our review of the configuration
of APCs 0691 and 0692, we determined
that we need to improve the clinical and
resource homogeneity of these two
APCs. In order to avoid several 2 times
rule violations in these APCs, we are
reassigning CPT code 95971 (Simple
neurostimulator analysis), which has a
final rule geometric mean cost of
approximately $113 and CPT code
95972 (Complex neurostimulator
analysis), which has a final rule
geometric mean cost of approximately
$145 from the higher Level III APC 0691
(which has a final rule geometric mean
cost of approximately $277) to the lower
Level II APC 0692 (which has a final
rule geometric mean cost of
approximately $116). In addition, to
avoid 2 times rule violations we are
reassigning CPT code 62367 (Analysis of
spinal fusion pump), which has a final
rule geometric mean cost of
approximately $202, CPT code 62368
(Analysis with reprogramming), which
has a final rule geometric mean cost of
approximately $216, CPT code 62369
(Analysis with reprogramming and fill),
which has a final rule geometric mean
cost of approximately $339, and CPT
code 62370 (Analysis with
reprogramming and fill requiring the
skill of a physician or other qualified

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health care professional), which has a
final rule geometric mean cost of
approximately $286, from the lower
Level II APC 0692 to the higher Level
III APC 0691, which has a final rule
geometric mean cost of approximately
$277.
6. Ocular Services

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a. Retinal Prosthesis (APC 0672)
For CY 2014, we proposed to continue
to assign the category III CPT code
0100T (Placement of a subconjunctival
retinal prosthesis receiver and pulse
generator, and implantation of intraocular retinal electrode array, with
vitrectomy), to APC 0672 (Level III
Posterior Segment Eye Procedures),
based on the similarity of the procedure
to the other services currently assigned
to APC 0672. The device implanted
during this procedure (HCPCS code
C1841 (Retinal prosthesis)) includes all
internal and external components, and
was granted pass-through status
beginning October 1, 2013.
Comment: One commenter requested
that CMS reassign CPT code 0100T to a
new APC with a payment rate of
approximately $6,500, which the
commenter estimated by combining the
costs of procedures that the commenter
believed to be components of CPT code
0100T. The commenter also asserted
that the procedure described by CPT
code 0100T is more complex than the
other procedures assigned to APC 0672.
Response: There are no claims data
available for the procedure described by
CPT code 0100T at this time. We
estimate that more than 95 percent of
the overall cost of the procedure is
associated with the device, which is
paid separately as a pass-through
payment device. Because the device
used in the procedure described by CPT
code 0100T is in pass-through payment
status, we do not believe that it is
appropriate to create and assign CPT
code 0100T to a new APC at this time.
We also believe that the procedure
described by CPT code 0100T is similar
to the other procedures assigned to APC
0672. While we acknowledge that the
procedure described by CPT code 0100T
is complex, the other services assigned
to APC 0672, for example the procedure
described by CPT code 67113 (Repair of
complex retinal detachment), are also
complex and involve many different
techniques and require extensive
resources.
b. Tear Film (APC 0230)
For CY 2014, we proposed to assign
the new Category III CPT code 0330T
(Tear film imaging, unilateral or
bilateral, with interpretation and

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report), effective July 1, 2013, to APC
0230 (Level I Eye Tests and Treatments)
based on the similarity of the service to
the other services currently assigned to
APC 0230.
Comment: One commenter requested
that CMS reassign CPT code 0330T to
APC 0698 (Level II Eye Tests and
Treatments). The commenter believed
that the clinical and resource
similarities of the service described by
CPT code 0330T to the services
currently assigned to APC 0698 warrant
reassignment.
Response: We believe that the service
described by CPT code 0330T is most
similar to the other imaging services
assigned to APC 0230, such as corneal
topography or eye photography. We
currently have no claims data for this
service for ratesetting purposes because
CPT code 0330T became effective July l,
2013, and is considered new. Once we
have claims data for CPT code 0330T,
we will reevaluate the APC assignment
of CPT code 0330T in future years
through our standard review process.
After consideration of the public
comment we received, we are finalizing
our CY 2014 proposal to assign CPT
code 0330T to APC 0230.
7. Imaging
a. Myocardial Sympathetic Innervation
Imaging (APC 0398)
Effective July 1, 2013, the AMA’s CPT
Editorial Panel created CPT code 0331T
(Myocardial sympathetic innervation
imaging, planar qualitative and
quantitative assessment) and CPT code
0332T (Myocardial sympathetic
innervation imaging, planar qualitative
and quantitative assessment; with
tomographic SPECT). For CY 2014, we
proposed to assign CPT codes 0331T
and 0332T to APC 0398 (Level I Cardiac
Imaging), which had a proposed
payment rate of approximately $397.
(The proposed payment rate reflects the
corrected proposed rate in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: Several commenters
disagreed with the proposed assignment
of CPT codes 0331T and 0332T to APC
0398. The commenters stated that the
proposed payment rate for APC 0398
would not cover the cost of performing
the new procedures. Some of these
commenters emphasized that the
proposed payment rate for APC 0398 is
substantially lower than the cost of the
radiopharmaceutical alone used in these
procedures. The commenters believed
that the assignment of CPT codes 0331T
and 0332T to APC 0398 would impede
Medicare beneficiaries’ access to these

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new services. Some commenters
suggested that CPT codes 0331T and
0332T be assigned to a New Technology
APC with a payment rate that would
better reflect the estimated costs for
these procedures. Other commenters
indicated that these new procedures are
more comparable to the procedures
assigned to APC 0377 (Level II Cardiac
Imaging) in terms of clinical and
resource similarities.
Response: We do not agree with the
commenters that CPT codes 0331T and
0332T should be assigned to a New
Technology APC for CY 2014 because
we believe that these procedures are
clinically similar to the other services
assigned to either APC 0398 (Level I
Cardiac Imaging) or APC 0377 (Level II
Cardiac Imaging). However, because the
estimated cost of the diagnostic
radiopharmaceutical that is used in
performing the procedures described by
CPT codes 0331T and 0332T (HCPCS
code A9582) is approximately $1,320
based on the drug cost statistics file for
the proposed rule, we agree with the
commenters that it is more appropriate
in terms of resource similarity to assign
CPT codes 0331T and 0332T to APC
0377 and, therefore, are modifying the
codes’ APC assignment for CT 2014.
After consideration of the public
comments we received, for CY 2014, we
are assigning CPT codes 0331T and
0332T to APC 0377, which has a final
geometric mean cost of approximately
$1,158.
b. Neurologic Imaging (APCs 0402,
0403, 0406 and 0414)
The pass-through payment status of
HCPCS code A9584 (Iodine I-123
ioflupane, diagnostic, per study dose up
to 5 millicuries) expires on December
31, 2013. For CY 2014, payment for this
radiopharmaceutical, typically referred
to as DaTscan, will be packaged with
payment for CPT code 78607 (Brain
imaging; tomographic (SPECT)), which
had a CY 2014 proposed rule geometric
cost of approximately $1,179). The
procedure described by CPT code 78607
is used to assist in the evaluation of
adult patients with suspected
Parkinson’s disease. For CY 2014, we
proposed to continue to assign CPT
code 78607 to APC 0402 (Level II
Nervous System Imaging), which had a
proposed payment rate of approximately
$1,009. (The proposed payment rate
reflects the corrected proposed rate in
the September 6, 2013 OPPS Addendum
B, which was posted on the CMS Web
site.) We proposed to maintain the
assignment of CPT code 78607 to APC
0402 for CY 2014, providing an
exception to a 2 times rule violation
involving the cost of CPT code 78645 as

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compared to the cost of CPT code 78607
(78 FR 43592).
For CY 2014, we proposed to reassign
CPT code 78647 (Cerebrospinal fluid
flow, imaging (not including
introduction of material); tomographic
(SPECT)), which had a proposed rule
geometric mean cost of approximately
$467 from APC 0402 (Level II Nervous
System Imaging), which had a proposed
rule geometric mean cost of
approximately $1,009) to APC 0403
(Level I Nervous System Imaging),
which had a proposed rule geometric
mean cost of approximately $179.
For CY 2014, we proposed to reassign
CPT code 78605 (Brain imaging, 4 or
more static views), which had a CY
2014 proposed rule geometric mean cost
of approximately $835 from APC 0403
(Level I Nervous System Imaging),
which has a CY 2013 payment rate of
approximately $264, to APC 0402 (Level
II Nervous System Imaging) which had
a CY 2014 proposed payment rate of
approximately $1,009.
For CY 2014, we also proposed to
reassign CPT code 78801
(Radiopharmaceutical localization of
tumor or distribution of
radiopharmaceutical agent(s); multiple
areas) from APC 0414 (Level II Tumor/
Infection Imaging), which has a CY 2013
payment rate of approximately $503, to
APC 0406 (Level I Tumor/Infection
Imaging), which had a proposed rule
payment rate of approximately $383.
(The proposed payment rates cited
above reflect the corrected proposed
rates in the September 6, 2013 OPPS
Addendum B, which was posted on the
CMS Web site.)
Comment: Several commenters
objected to the proposed reduction in
the CY 2014 payment rate for the
DaTscan imaging procedure (including
the packaged radiopharmaceutical) as a
result of packaging of the
radiopharmaceutical into CPT code
78607 and retention of the procedure in
APC 0402, following expiration of the
pass-through status of the procedure.
The commenters objected to the
reduction from the pass-through
payment amount of approximately
$1,975 for HCPCS code A9584 in
addition to the payment of
approximately $458 for CPT code 78607
for CY 2013. The commenters believed
that the payment rate reduction for CPT
code 78607 (into which the
radiopharmaceutical will be packaged
for CY 2014) would hinder beneficiary
access to care for this service. Several
commenters believed that CPT code
78607 would be more appropriately
assigned to APC 0308 (Positron
Emission Tomography (PET) Imaging)
rather than APC 0402 because CPT code

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78607 is a new imaging service that uses
more resources and is not clinically
similar to the cisternography and shunt
evaluation scans assigned to APC 0402.
(We note that the CY 2014 final rule
geometric mean cost of APC 0308 is
approximately $1,315.)
Response: We agree with the
commenters that it would be
appropriate to reassign CPT code 78607
to an APC that contains services more
similar in terms of costs to CPT code
78607 and to correct the 2 times rule
violation in APC 0402. However, we do
not agree with the commenters that the
procedure described by CPT code 78607
is clinically similar to PET scans.
Therefore, we are not assigning CPT
code 78607 to APC 0308. Based on
clinical homogeneity and similar
resource use, we are reassigning CPT
code 78607 from APC 0402 to APC 0408
(Level III Tumor/Infection Imaging) for
CY 2014, which has a final rule
geometric mean cost of approximately
$1,161.
Comment: One commenter asked
CMS to explain its rationale for
proposing to reassign CPT code 78647
from APC 0402 to APC 0403. The
commenter believed that this
reassignment would decrease the
payment rate for the procedure
described by CPT code 78647.
Response: The final rule geometric
mean cost of APC 0402 is approximately
$535, and the final rule geometric mean
cost of APC 0403 is approximately $163.
The final rule geometric mean cost of
CPT code 78647 is approximately $434,
which is much closer to the final rule
geometric mean cost of APC 0402 than
the final rule geometric mean cost of
APC 0403. While there is no violation
of the 2 times rule in APC 0403 due to
the claims volume of the services in this
APC, the geometric mean cost of CPT
code 78647 is more than two times the
geometric mean cost of the other
services in APC 0403. Because the final
rule geometric mean cost of CPT code
78647 is more similar to the geometric
mean costs of the services assigned to
APC 0402, we are not finalizing our
proposal to reassign CPT code 78647
from APC 0402 to APC 0403. We will
continue to maintain the code’s current
assignment to APC 0402 for CY 2014.
Comment: One commenter asked
CMS to explain its rationale for
proposing to reassign CPT code 78605
from APC 0403 to APC 0402 for CY
2014.
Response: Based on updated CY 2012
claims data, the final rule geometric
mean cost of CPT code 78605
(approximately $781) is much closer to
the final rule geometric mean cost of
APC 0402 (approximately $535) than to

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the final rule geometric mean cost of
APC 0403 (approximately $163).
Therefore, based on the similarity of the
costs of the services assigned to APCs
0402 and 0403, we are finalizing our
proposal to reassign CPT code 78605
from APC 0403 to APC 0402.
Comment: One commenter asked
CMS to explain its rationale for
proposing to reassign CPT code 78801
from APC 0414 to APC 0406 for CY
2014.
Response: We proposed the
reassignment of CPT code 78801 from
APC 0414 to APC 0406 for CY 2014
because we had updated claims data for
CY 2014 ratesetting, which indicated
that the continued assignment of CPT
code 78801 to APC 0414 would violate
the 2 times rule. The final rule
geometric mean cost of CPT code 78801
(approximately $362) is much closer to
the final rule geometric mean cost of
APC 0406 (approximately $384) than
the final rule geometric mean cost of
APC 0414 (approximately $659), and is
clinically similar to the other tumor
imaging services assigned to APC 0406.
Therefore, we are finalizing our
proposal to reassign CPT code 78801
from APC 0414 to APC 0406 for CY
2014.
8. Radiology Oncology
a. Intraoperative Radiation Therapy
(IORT) Related Services (APCs 0028 and
0065)
HCPCS code C9726 (Placement and
removal (if performed) of applicator into
breast for radiation therapy) was
created, effective January 1, 2006, to
describe the procedure of placing and
removing (if performed) an applicator
into the breast for radiation therapy. We
became aware of the procedure via a
New Technology APC application, and
upon approval of the application, we
created HCPCS code C9726 because
there were no HCPCS codes that
described this procedure. For CY 2013,
HCPCS code C9726 is assigned to APC
0028, which has a payment rate of
$1,862.77. Based on our CY 2014
proposed rule claims data, HCPCS code
C9726 had a proposed geometric mean
cost of approximately $2,165 based
upon 8 single claims, and APC 0028 had
a proposed geometric mean cost of
approximately $2,047.
The AMA’s CPT Editorial Panel
created two new Category I CPT codes
for intraoperative radiation therapy
(IORT) treatment delivery, effective
January 1, 2012: CPT codes 77424
(Intraoperative radiation treatment
delivery, x-ray, single treatment session)
and 77425 (Intraoperative radiation
treatment delivery, electrons, single

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treatment session). For CY 2013, we
finalized a policy to assign these CPT
codes to APC 0065 (Level I Stereotactic
Radiosurgery, MRgFUS, and MEG), with
a CY 2013 payment rate of $978.25
because we believed these IORT service
codes were similar to other services
assigned to APC 0065 in terms of
clinical characteristics, and the range of
estimated costs for IORT services (77 FR
68345). For CY 2014, we proposed to
maintain the APC assignment for CPT
codes 77424 and 77425 to APC 0065,
which we proposed to rename ‘‘APC
0065 (IORT, MRgFUS, and MEG)’’, with
a proposed payment rate of
approximately $1,715. (The proposed
payment rate reflects the corrected
proposed rate in the September 6, 2013
OPPS Addendum B, which was posted
on the CMS Web site.)
In the CY 2014 OPPS/ASC proposed
rule, we noted that both CPT codes
77424 and 77425 describe the
placement and removal (if performed) of
an applicator into the breast for
radiation therapy, as well as the
delivery of radiation therapy when
performed intraoperatively, and that it
would no longer be required to report
the placement and removal of the
applicator via HCPCS code C9726 on a
claim. Therefore, we proposed to delete
HCPCS code C9726, effective January 1,
2014 (78 FR 43593). Under this
proposal, hospitals would report the
costs of the service to place and remove
(if performed) an applicator into the
breast for radiation therapy, as well as
the delivery of radiation therapy when
performed intraoperatively, with CPT
codes 77424 and 77425, which we
proposed to continue to assign to APC
0065.
Comment: Many commenters
disagreed with CMS’ assertion that
IORT services include the placement
and removal (if performed) of an
applicator into the breast for radiation
therapy, as well as the delivery of
radiation therapy when performed
intraoperatively, and with the proposal
to delete HCPCS code C9726 because it
would no longer be required to report
that service on the claim. Several
commenters indicated that the service
described by HCPCS code C9726 is
performed by the surgeon before and
after IORT delivery, and represents the
cost of the applicator and hospital costs
related to the surgeon’s placement of the
applicator, while CPT codes 77424 and
77425 represent radiation therapy
treatment delivery performed by the
radiation oncologist and medical
physicist and are limited to the
technical costs of IORT delivery. Many
commenters stated that the AMA’s CPT
Editorial Panel did not include

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placement and removal of the applicator
in the descriptions of CPT codes 77424
and 77425. Some commenters also
indicated that placement and removal of
applicators for radiation therapy for
various other parts of the body are
separately reported on claims and paid
under the OPPS. Some commenters
expressed concern with the quality of
the data used for ratesetting, such as the
small number of single frequency claims
available reporting CPT codes 77424
and 77425. One commenter suggested
that CMS propose a comprehensive APC
payment methodology for IORT for CY
2015 to include CPT codes 77424 and
77424 because the services are
performed in a single operative session.
Response: Our proposal to delete
HCPCS code C9726 was based on the
premise that placement of an applicator
is a necessary part of the delivery of
IORT, and that the placement of an
applicator was included in the
procedures described by CPT codes
77424 and 77425. There are currently no
service codes other than HCPCS code
C9726 that separately describe
placement of a rigid applicator for IORT
breast radiation delivery, as there are for
some other radiation delivery services.
The commenters argued that the service
that has been reported along with
HCPCS code C9726 by providers on
claims is surgical, not a radiation
oncology service, and that the service is
not included in the descriptions of CPT
codes 77424 and 77425. Therefore, after
considering all of the public comments
on IORT, we are not finalizing our
proposal to delete HCPCS code C9726
for CY 2014. However, to make the
coding consistent with other
intraoperative procedures involving
catheters or applicators used for
radiation therapy treatment of the
breast, for CY 2014, we are designating
HCPCS code C9726 as an add-on code
to the primary procedure that involved
the intraoperative placement of the
applicator into the breast. We are
revising the code descriptor for HCPCS
code C9726 to read: ‘‘Placement and
removal (if performed) of applicator into
breast for intraoperative radiation
therapy, add-on to primary breast
procedure.’’ Payment for HCPCS code
C9726 is being packaged into the
payment for the primary procedure,
consistent with our policy to package
add-on codes for CY 2014.
We agree with the commenters that
there are a small number of single
frequency claims for CPT codes 77424
and 77425, and we believe that is the
case for HCPCS code C9726 as well. We
appreciate the commenters’ suggestions
for alternative payment methodologies

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for IORT and may consider such
alternatives in the future.
After consideration of the public
comments we received, we are not
finalizing our proposal to delete HCPCS
code C9726 for CY 2014. We are
designating HCPCS code C9726 as an
add-on code for which payment is being
packaged into the payment for CPT
codes 77424 and 77425, the primary
procedures that involve the
intraoperative placement of the
applicator into the breast, consistent
with our policy to package add-on codes
for CY 2014. We are revising the code
descriptor for HCPCS code C9726 to
read: ‘‘Placement and removal (if
performed) of applicator into breast for
intraoperative radiation therapy, add-on
to primary breast procedure.’’ We are
continuing to assign CPT codes 77424
and 77425 to APC 0065 for CY 2014,
which has a final geometric mean cost
of $1,253. We are also changing the
descriptor of APC 0065 to ‘‘IORT,
MRgFUS, and MEG’’.
b. 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) and CPT code 77522
(Proton treatment delivery; simple, with
compensation). APC 0667 (Level II
Proton Beam Radiation Therapy) also
includes two procedures: CPT code
77523 (Proton treatment delivery,
intermediate) and CPT code 77525
(Proton treatment delivery, complex).
The payment rates for proton beam
radiation therapy services are set
annually based on claims data according
to the standard OPPS ratesetting
methodology.
Based on the claims data used in
developing the CY 2014 proposed rule,
we determined a violation of the 2 times
rule in APC 0664. As we discuss in
section III.B. of this final rule with
comment period, a 2 times rule
violation occurs when the cost of the
highest cost significant item or service
within an APC group is more than 2
times greater than the cost of the lowest
cost significant item or service within
that same group. In making this
determination, we consider only 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. If neither of these
claims thresholds is met, there is not a
2 times rule violation even if the highest
cost item or service is more than 2 times
greater than the cost of the lowest cost

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item or service in the APC. In prior
years, even though the cost of CPT code
77522 was more than 2 times the cost
of CPT code 77520, there was no 2 times
rule violation within APC 0664 because
the claims volume for CPT code 77520
was not significant (72 FR 66719; 75 FR
71901; and 77 FR 68341). However, for
CY 2014, the volume of claims in the
proposed rule claims data for CPT code
77520 increased—the number of single
claims was greater than 99 and
contributed at least 2 percent of the
single claims used to establish the cost
of APC 0664—resulting in a 2 times rule
violation within APC 0664.
To resolve the 2 times rule violation,
in the CY 2014 OPPS/ASC proposed
rule (78 FR 43593), we proposed to
reassign CPT codes 77520 and 77522
from APC 0664 to APC 0667, and to
revise the title of APC 0667 to ‘‘Proton
Beam Radiation Therapy,’’ which would
now include all proton beam radiation
therapy services. We also proposed to
delete APC 0664. We invited public
comments on this proposal.
Comment: Several commenters stated
that they duplicated CMS’ ratesetting
calculations for proton beam therapy
services and determined that the
threshold for claims volume that would
constitute a 2 times rule violation in
APC 0664 was not met. The commenters
asserted that because there was no 2
times rule violation within APC 0664
according to their calculations, CMS
should not finalize its proposal to delete
APC 0664 and reassign CPT codes
77520 and 77522 to APC 0667 in order
to avoid a 2 times rule violation. The
commenters also believed that the
simple proton beam treatment delivery
services assigned to APC 0664 are not
clinically similar enough to warrant
their combination with the intermediate
and complex proton beam treatment
delivery services currently assigned to
APC 0667.
Response: Using the additional final
rule claims data in accordance with our
standard OPPS ratesetting methodology,
we determined that the number of
claims for CPT code 77520 is not
significant and, therefore, a 2 times rule
violation within APC 0664 does not
exist for CY 2014.
After consideration of the public
comments we received, because there is
now no 2 times rule violation within
APC 0664, we are not finalizing our
proposal to delete APC 0664 and
reassign CPT codes 77520 and 77522 to
APC 0667. We are continuing the
current APC configuration for CY 2014.
As we do annually for all APCs, we will
review the appropriateness of the APC
assignments for proton beam therapy

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services for the CY 2015 rulemaking
cycle.
c. Stereotactic Radiosurgery (SRS)
Services (APCs 0066 and 0067)
Since 2001, we have distinguished the
various methods of delivery of
stereotactic radiosurgery (SRS) with
HCPCS G-codes. SRS includes two
different radiation source types,
specifically, Cobalt-60 and linear
accelerator (linac). Among the linacbased SRS procedures, the current
HCPCS G-codes distinguish between
procedures that use robotic and nonrobotic linac devices (66 FR 59865). In
CY 2007, new CPT codes for SRS were
established, and at that time, we
recognized one of the three SRS CPT
codes for separate payment under the
OPPS. We did not replace all of the
HCPCS G-codes for SRS with all of the
new CPT codes in CY 2007 because we
believed at that time that the
distinctions reflected in the HCPCS Gcodes should be maintained for APC
assignment purposes. Specifically, in
CY 2007 we replaced HCPCS code
G0243 (Multi-source photon stereotactic
radiosurgery, delivery including
collimator changes and custom
plugging, complete course of treatment,
all lesions) with CPT code 77371
because this CPT code corresponded
directly to procedures described by
HCPCS code G0243. We refer readers to
the CY 2007 OPPS final rule (71 FR
68023 through 68026) for a detailed
discussion of the history of the SRS
codes.
Since CY 2007, HCPCS codes G0173,
G0251, G0339, G0340, and CPT code
77371 have been the codes used under
the OPPS to describe SRS treatment
delivery procedures. However, SRS
techniques and equipment have evolved
and expanded over time. In light of
these developments and our
understanding of current SRS
technology and clinical practice, we
have reexamined the HCPCS G-codes
and CPT codes for SRS with the intent
of identifying the codes that would best
capture the significant differences
between the various procedures while
eliminating unnecessary complexity,
redundancy, and outdated distinctions
that no longer represent meaningful
distinctions for purposes of OPPS
payment. Based on our review of the
current SRS technology, we understand
that most current linac-based SRS
technology incorporates some type of
robotic feature. Therefore, we believe
that it is no longer necessary to continue
to distinguish robotic versus non-robotic
linac-based SRS through the HCPCS Gcodes.

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74989

In the CY 2014 OPPS/ASC proposed
rule (78 FR 43593 through 43594), we
proposed to replace the existing four
HCPCS codes: G0173, G0251, G0339,
and G0340 with the SRS CPT codes
77372 and 77373. We stated that we
believe that utilizing all of the CPT
codes for SRS (CPT codes 77371, 77372,
and 77373) would more accurately
capture the distinctions between the
various SRS procedures that are
currently used; namely, (1) Cobalt-60
versus linac and (2) single session
cranial treatment versus fractionated
treatments. Table 16 of the proposed
rule showed the complete list of HCPCS
G-codes and CPT codes for SRS, along
with their long descriptors. The table
also showed the proposed CPT codes
and their associated status indicators
and APC assignments for the current
HCPCS G-codes for SRS that we
proposed to replace. We proposed to
assign only CPT code 77373 to APC
0066, which we proposed to rename
‘‘Level I Stereotactic Radiosurgery.’’ We
proposed to reassign CPT code 77371
and assign CPT code 77372, the two
single session cranial treatment codes,
to APC 0067, which we proposed to
rename ‘‘Level II Stereotactic
Radiosurgery.’’ We believe that the high
degree of clinical similarity of CPT
codes 77371 and 77372 supports the
proposed grouping of these procedures
together in the proposed renamed APC
0067. The CY 2014 proposed APC
payment rates for the CPT codes for SRS
were listed in Addendum B to the
proposed rule (which is available via
the Internet on the CMS Web site).
Further, we proposed to finalize their
status indicators and their APC
assignments and payment rates in this
CY 2014 OPPS/ASC final rule with
comment period.
We note that we published a corrected
OPPS Addendum B payment file that
was posted on the CMS Web site on
September 6, 2013, after it was brought
to our attention that the initial proposed
payment rates that were published on
July 19, 2013, for the SRS codes did not
include the claims data for the SRS
HCPCS G-codes. Specifically, our initial
proposed payment rate of approximately
$2,481 for APC 0066 only included
claims data for CPT code 77373 and did
not include claims data for HCPCS
codes G0251, G0339, and G0340. In
addition, our initial proposed payment
rate of approximately $8,576 for APC
0067 only included claims data for CPT
codes 77372 and 77371 and did not
include claims data for HCPCS code
G0173. Consequently, we corrected this
error and posted the corrected payment
rates for APCs 0066 and 0067 on

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September 6, 2013. Because of this
correction, we extended the public
comment period for the CY 2014 SRS
proposals to September 16, 2013 (78 FR
54842). Table 27 below shows the list of
HCPCS G-codes and CPT codes for SRS,
along with their long descriptors, and
the corrected CY 2014 proposed APC
payment rates.
In addition, although the SRS HCPCS
G-codes will no longer be separately
payable under the OPPS, the HCPCS
codes will remain active under the
MPFS for CY 2014. Consequently, we
proposed to change the OPPS status
indicator for HCPCS G-codes for SRS
from status indicator ‘‘S’’ to ‘‘B’’
(Alternative code may be available
under the OPPS) for CY 2014.
Comment: Most commenters agreed
with CMS’ proposal and urged CMS to
finalize the coding, APC assignment,
and payment levels for the SRS CPT
codes. The commenters agreed that
utilizing the CPT codes would
standardize the reporting of SRS
services across all payers, which the
hospital industry has favored since the
SRS treatment delivery CPT codes were
established in CY 2007. One commenter
noted that the use of the CPT codes
would eliminate confusion among
providers regarding how to report the
SRS treatment delivery services.
Response: We appreciate the
commenters’ support for our proposal.
We believe that adopting the SRS
treatment delivery CPT codes and
restructuring the SRS APCs
appropriately distinguishes payment for
single session cranial SRS treatment
from fractionated SRS treatment.
Comment: Several commenters that
utilize both the linear accelerator-based
SRS technology and Cobalt-60 SRS
technology supported CMS’ proposal
and stated that the change would
equalize payments for both technologies
for single session cranial SRS. One
commenter stated that the proposal is
appropriate because there is no clinical
data that supports the need for
differential payment for these
technologies. This commenter further
stated that current medical literature
cites no difference in clinical
effectiveness for one system over

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another, and stated that in terms of
outcomes, the linac-based system is
clinically comparable to a Cobalt-60
system for single session cranial SRS. In
addition, some commenters stated that
the proposal is consistent with the
provisions of section 634 of the
American Taxpayer Relief Act (ATRA)
of 2012.
Response: We appreciate the
commenters’ support for our proposal.
As specified in the April 2013 OPPS
Update CR (Transmittal 2664, CR 8228)
dated March 1, 2013, section 634 of the
ATRA requires that, effective April 1,
2013, if the payment amount for Cobalt60 based SRS, as described by CPT code
77371, exceeds the payment amount for
linear accelerator-based SRS, as
described by HCPCS code G0173 (or a
successor code), the payment for CPT
code 77371 must be reduced to the
payment amount for HCPCS code
G0173. The requirement does not apply
to rural hospitals, sole community
hospitals, or rural referral centers. In
this final rule with comment period, for
CY 2014, we are reassigning CPT code
77371 and assigning CPT code 77372
(the successor codes for HCPCS code
G0173) to APC 0067. Therefore, CPT
codes 77371 and 77372 will have the
same payment amount. We agree with
the commenters that this APC
assignment satisfies the requirements of
section 634 of the ATRA.
Comment: Some commenters
expressed concern regarding the
proposal for SRS and suggested that
CMS delay implementation of the
proposal. The commenters suggested
that, to pay appropriately for SRS
services, CMS consider for CY 2015 the
development of a comprehensive APC
for the procedures assigned to APC 0067
(which includes CPT codes 77371 and
77372), similar to the comprehensive
APC proposal for high-cost, devicedependent services. The commenters
stated that single session cranial SRS
procedures performed with either
Cobalt 60-based SRS or linac-based SRS
are device-dependent procedures and
cannot be performed without use of the
costly technology. The commenter
further stated that having one
comprehensive APC for single session

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cranial SRS is appropriate and
consistent with the requirements of
section 634 of the ATRA. The
commenters encouraged CMS to
consider the comprehensive APC
payment methodology to appropriately
pay for services, regardless of the
specific equipment used to deliver SRS
treatment.
Response: We do not agree with the
commenters’ suggestion to delay
implementation of the proposal because
we believe that adopting the CPT codes
and restructuring the SRS APCs
improve the clinical and resource
homogeneity for SRS while satisfying
the requirements of section 634 of the
ATRA.
We appreciate the commenters’
suggestion to create a comprehensive
APC payment methodology for SRS
services. However, because such a
change would require public notice and
opportunity to comment, we will
consider and evaluate the
appropriateness of such a payment
methodology in the future.
Comment: Some commenters who
were not supportive of the proposals
relating to SRS stated that the corrected
proposed APC payment rates for the
SRS codes were too low, and requested
that CMS utilize the initial proposed
APC payment rates for APCs 0066 and
0067.
Response: As explained above, we
revised the initial proposed payment
rates for APCs 0066 and 0067 after it
was brought to our attention that our
ratesetting for these APCs did not
include claims data for the appropriate
HCPCS codes, including the various
HCPCS G-codes that were proposed for
deletion. We should have included the
CY 2012 SRS HCPCS G-code claims data
in our proposed CY 2014 ratesetting;
otherwise, some of the services would
be significantly underrepresented in the
APC payment calculations. We believe
that the corrected proposed APC
payment rates that include claims data
for the SRS HCPCS G-codes accurately
reflect all of the SRS services that are
used to configure APCs 0066 and 0067.
BILLING CODE 4120–01–P

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74991

CY2013
CPT
Code

77371

G0173

G0251

G0339**

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G0340

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CY
2013
APC

Long descriptor

CY2013
Payment

Radiation treatment
delivery, stereotactic
radiosurgery (SRS),
complete course of
treatment of cranial
lesion(s) consisting of
1 session; multisource Cobalt 60
based

0127

Linear accelerator
based stereotactic
radiosurgery,
complete course of
therapy in one session

0067

$3,300.64

0065

$978.25

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
Image-guided robotic
linear acceleratorbased stereotactic
radiosurgery,
complete course of
therapy in one session
or first session of
fractionated
treatment.
Image-guided robotic
linear acceleratorbased stereotactic
radiosurgery, delivery
including collimator
changes and custom
plugging, fractionated
treatment, all lesions,
per session, second

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CY
2014
CPT
Code

$3,300.64*
-----------------

77371

$7,910.51 *

77372

77373
0067

$3,300.64

0066

$2,354.79

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Long descriptor

Original
Proposed
OPPS
CY2014
APC

Corrected
Proposed
OPPS
CY2014
Payment#

0067

$5,615.41

0067

$5,615.41

0066

$2,047.86

Radiation treatment
delivery,
stereotactic
radiosurgery (SRS),
complete course of
treatment of cranial
lesion(s) consisting
of 1 session; multisource Cobalt 60
based
Radiation treatment
delivery,
stereotactic
radiosurgery (SRS),
complete course of
treatment of cranial
lesion(s) consisting
of 1 session; linear
accelerator based

Stereotactic body
radiation therapy,
treatment delivery,
per fraction to 1 or
more lesions,
including image
guidance, entire
course not to exceed
5 fractions

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TABLE 27.-PROPOSED (ORIGINAL AND CORRECTED) CY 2014 APC
ASSIGNMENTS FOR THE STEREOTACTIC RADIOSURGERY (SRS)
CPT CODES

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Comment: Some commenters
expressed concern with the proposed
packaging of payments for certain CPT
codes describing the Cobalt-60 SRS
procedure. In particular, the
commenters indicated that the proposal
to package ancillary services, including
certain SRS radiation planning codes,
penalizes hospitals for providing the
more efficient form of SRS, namely, the
Cobalt-60 technology, which is provided
as a single-day service. Some of the
commenters stated that under CMS’
packaging proposal, hospitals would
experience a decrease in payment for

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performing the Cobalt-60 procedure
because the procedures that they
perform on the same day would no
longer be paid separately. In particular,
the commenters were concerned that the
proposed policy for packaging of
payment for CPT codes 77290, 77295,
77300, 77334, and 77370, if finalized,
would result in higher payments for
patients treated with linac-based SRS
technologies because the payment for
planning services would not be
packaged—that is, planning services
occur on a different day than the day of
delivery of linac-based SRS services.

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Response: As discussed in section
II.A.3. of this final rule with comment
period, we are not finalizing our
proposal to package payment of
ancillary tests. The SRS planning
services, specifically those described by
CPT codes 77290, 77295, 77300, 77334,
and 77370, for which payments were
initially proposed to be packaged under
our packaging proposal for ancillary
services, will continue to be paid
separately for CY 2014. The final CY
2014 long descriptors, status indicators,
and APC assignments for these CPT
codes are listed in Table 28 below.

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BILLING CODE 4120–1–C

Comment: Some commenters
questioned the use of claims data for
certain HCPCS G-codes for determining
the corrected payment rates for APCs
0066 and 0067. The commenters stated
that the initial proposed payment rates
were correct. In addition, some
commenters did not believe that claims
data for HCPCS code G0173 should have
been used to determine the payment
rate for APC 0067 because this code was
more than likely reported for ‘‘other
than brain’’ tumors. In addition, the
commenters stated that the corrected
payment rates result in a 2 times rule
violation in both APC 0066 and APC
0067, and, therefore, CMS should not
finalize its proposal.
Response: HCPCS code G0173
describes a single session linac-based

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SRS procedure. We believe that this
code is appropriately crosswalked to
CPT code 77372, and adequately
represents single session cranial SRS
cases. Although a 2 times rule violation
did occur in APC 0067, as we describe
in section II.A.B.3. of this final rule with
comment period, we may make
exceptions to the 2 times rule in certain
cases. In the case of the SRS treatment
delivery services, we believe that
adopting the CPT codes and
restructuring the SRS APCs improves
clinical and resource homogeneity for
both types of cranial single session SRS
procedures. Furthermore, assigning CPT
codes 77371 and 77372 to the same APC
also satisfies the requirements of section
634 of the ATRA. If CPT codes 77371
and 77372 were assigned to different

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74993

APCs, the payment rate for CPT code
77371 would have to be reduced to
equal the payment rate for CPT code
77372. As a majority of the commenters
preferred, we believe that the
assignment of CPT codes 77371 and
77372 to the same APC, with the
blended payment rate as opposed to
current CY 2013 payment reduction for
CPT code 77371, is most appropriate.
Comment: One commenter
recommended that CMS exclude the
claims data associated with HCPCS code
G0251 when determining the payment
rate for APC 0066. The commenter
indicated that HCPCS code G0251 is
used most often for fractionated cranial
SRS, not for stereotactic body radiation
therapy (SBRT), as described by CPT
code 77373. The commenter

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recommended that CMS reassign
HCPCS code G0251 to its own APC,
which is similar to the CY 2013 APC
assignment.
Response: Both HCPCS code G0251
and CPT code 77373 describe
fractionated cranial SRS services that
involve between 1 to 5 fractions of
treatment. Based on the code descriptor,
we believe that the service described by
HCPCS code G0251 is appropriately
crosswalked to CPT code 77373.
Comment: Some commenters stated
that CMS only used approximately 20
percent of the claims data for CPT code
77371 to set the payment rate for APC
0067, and suggested that CMS use more
of the claims data for Cobalt-60 SRS in
the ratesetting process.
Response: For the CY 2014 update, we
proposed to set the payment rate for
APC 0067 based on claims data for
HCPCS code G0173 and CPT codes
77371 and 77372. To determine the
corrected proposed APC payment rates,
we used approximately 41 percent (953
single claims out of 4,672 total claims)
of the claims for CPT code 77371 to set
the proposed payment rate for APC
0067. For this final rule with comment
period, we used approximately 27
percent (425 single claims out of 4,672
total claims) of the claims for CPT code
77371 and approximately 72 percent of
the claims for HCPCS code G0173 (1,136
single claims out of 1,771 total claims to
set the payment rate for APC 0067.
Based on these codes, our analysis of
the latest hospital outpatient claims data
shows a final CY 2014 geometric mean
cost of approximately $3,604 for APC
0067.
Comment: Several commenters
disagreed with the proposal to replace
the HCPCS G-codes and use the CPT
codes to describe the SRS treatment
delivery services. The commenters
stated that the SRS HCPCS G-codes are
preferable to the CPT codes because
they accurately describe the current
standard SRS techniques. The
commenters further stated that the CPT
code descriptors reflect old
technologies. In addition, some
commenters requested that CMS retain
the existing APC structure and use of
HCPCS G-codes for SRS treatment
delivery services because they believed
the HCPCS G-codes more accurately
reflect the costs and practice of full
body, cranial, multi- and single-session
robotic SRS. One commenter also
suggested that CMS delete CPT codes
77371 and 77372 and replace them with
one code that describes a single session
intracranial SRS treatment procedure
with no mention of the radiation source
in the code descriptor.

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Response: As stated above, we believe
that it is no longer necessary to continue
to distinguish robotic versus non-robotic
linac-based SRS through HCPCS Gcodes. We believe that the CPT codes for
SRS treatment delivery, although more
general than the HCPCS G-codes,
accurately describe the most significant
distinctions between the various SRS
procedures: (1) Cobalt-60 versus linac
radiation sources; and (2) single session
cranial versus fractionated treatments. If
the three-code SRS delivery CPT coding
scheme that was created by the CPT
Editorial Panel for CY 2007 is
considered to be inadequate by SRS
stakeholders, we believe that coding
reform in this area would be best
addressed through a dedicated CPT
workgroup that would include all of the
various physician specialties, such as
neurosurgery and radiation oncology,
and the other stakeholders involved in
the delivery of this critical treatment
modality. We also believe that it is best
that we generally refrain from creating
supplemental HCPCS G-codes or Ccodes that describe the attributes of a
particular device under the assumption
of more precise coding but without the
benefit of a broad perspective of
stakeholder and physician specialist
input. Otherwise, we risk
unintentionally creating a competitive
advantage for a particular technology
through the establishment and use of
codes that may not be based on the most
complete understanding of the clinical
science of SRS treatment delivery.
Comment: Several commenters
requested that CMS clarify the report
instructions for CPT codes 77372 and
77373 because there is confusion
regarding how these services should be
reported. The commenters stated that
the lack of clarify promotes inefficiency
and ensures misuse of CPT codes.
Response: We agree with the
commenters that the transition from the
HCPCS G-codes to the CPT codes could
be confusing in certain cases. Therefore,
we are providing the following coding
guidance for CPT codes 77371, 77372,
and 77373. CPT code 77371 is to be
used only for single session cranial SRS
cases performed with a Cobalt-60
device, and CPT code 77372 is to be
used only for single session cranial SRS
cases performed with a linac-based
device. The term ‘‘cranial’’ means that
the pathological lesion(s) that are the
target of the radiation is located in the
patient’s cranium or head. The term
‘‘single session’’ means that the entire
intracranial lesion or lesions that
comprise the patient’s diagnosis are
treated in their entirety during a single
treatment session on a single day. CPT
code 77372 is never to be used for the

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first fraction or any other fraction of a
fractionated treatment. CPT code 77372
is to be used only for single session
cranial linac-based SRS treatment.
Fractionated SRS treatment is any SRS
delivery service requiring more than a
single session of SRS treatment for a
cranial lesion, up to a total of no more
than five fractions, and one to five
sessions (but no more than five) for noncranial lesions. CPT code 77373 is to be
used for any fraction (including the first
fraction) in any series of fractionated
treatments, regardless of the anatomical
location of the lesion or lesions being
radiated. Fractionated cranial SRS
treatment is any cranial SRS delivery
service that exceeds one treatment
session and fractionated non-cranial
SRS treatment is any non-cranial SRS
delivery service, regardless of the
number of fractions but never more than
five. Therefore, CPT code 77373 is the
exclusive code (and the use of no other
SRS treatment delivery code is
permitted) for any and all fractionated
SRS treatment services delivered
anywhere in the body, including, but
not limited to, the cranium or head. CPT
code 77372 is not to be used for the first
fraction of a fractionated cranial SRS
treatment series and must only be used
in cranial SRS delivery service when
there is a single treatment session to
treat the patient’s entire condition.
Although we believe that this coding
guidance is clear to ensure reporting
compliance, we will activate coding
edits to prevent the use of more than
one type of SRS treatment delivery CPT
code per diagnosis per patient along
with no more than five fractions for CPT
code 77373.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal without
modification. Specifically, we are
finalizing our proposal to reassign CPT
code 77371 to APC 0067; replace
HCPCS code G0173 with CPT code
77372 and assign the code to APC 0067;
and replace HCPCS codes G0251,
G0339, and G0340 with CPT code 77373
and assign this code to APC 0066. In
addition, although the SRS HCPCS Gcodes will no longer be separately
payable under the OPPS, the codes will
remain active under the MPFS for CY
2014. Consequently, we are finalizing
our proposal to change the status
indicator for the HCPCS G-codes for
SRS services to OPPS status indicator
‘‘B’’ (Alternative code may be available
under the OPPS) for CY 2014. Table 29
below shows the final CPT codes for the
SRS treatment delivery services, their
status indicators, APC assignments, and
payment rates for CY 2014.
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74995

TABLE 29.-FINAL CY 2014 APC ASSIGNMENTS FOR THE
STEREOTACTIC RADIOSURGERY (SRS) CPT CODES
CY
2013
CPT
Code

Long descriptor

77371

Radiation treatment
delivery, stereotactic
radiosurgery (SRS),
complete course of
treatment of cranial
lesion(s) consisting of
1 session; multi-source
Cobalt 60 based

0127

Linear accelerator
based stereotactic
radiosurgery, complete
course of therapy in
one session

0067

CY2013
Payment

CY
2014
CPT
Code

$3,300.64*
-----------------

77371

$7,910.51 *

$3,300.64

77372

Final
OPPS
CY2014
APC

Long descriptor
Radiation treatment
delivery, stereotactic
radiosurgery (SRS),
complete course of
treatment of cranial
lesion(s) consisting of
1 session; multisource Cobalt 60
based
Radiation treatment
delivery, stereotactic
radiosurgery (SRS),
complete course of
treatment of cranial
lesion(s) consisting of
1 session; linear
accelerator based

0067

Final
OPPS
CY2014
Payment

$3,591.65

Linear accelerator
based stereotactic
radiosurgery, delivery
including collimator
changes and custom
G0251
$978.25
0065
plugging, fractionated
treatment, all lesions,
per session, maximum
five sessions per
course of treatment
Image-guided robotic
Stereotactic body
linear acceleratorradiation therapy,
based stereotactic
treatment delivery,
radiosurgery, complete
$3,300.64
G0339
0067
per fraction to 1 or
course of therapy in
$1,921.30
77373 more lesions,
0066
one session or first
including image
session of fractionated
guidance, entire
treatment.
course not to exceed
Image-guided robotic
5 fractions
linear acceleratorbased stereotactic
radiosurgery, delivery
including collimator
changes and custom
G0340 plugging, fractionated
$2,354.79
0066
treatment, all lesions,
per session, second
through fifth sessions,
maximum five sessions
per course of
treatment.
*Under sectIOn 634 of the ATRA of2012, effectIve Apnl1, 2013, payment to rural hospItals, rural referral
centers, and sole community hospitals is $7,910.51. Payment to most hospital outpatient facilities is
$3,300.64.

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G0173

CY
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APC

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9. Respiratory Services
a. Bronchial Thermoplasty (APC 0415)
Effective January 1, 2013, the CPT
Editorial Panel created two new
Category I CPT codes: CPT code 31660
(Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with bronchial
thermoplasty, 1 lobe) and CPT code
31661 (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when
performed; with bronchial
thermoplasty, 2 or more lobes). These
new CPT codes replaced two Category
III CPT 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), which
were deleted as of January 1, 2013. In
the CY OPPS/ASC 2013 final rule with
comment period (77 FR 68352), we
finalized a policy that, beginning
January 1, 2014, device category C1886
(Catheter, extravascular tissue ablation,
any modality (insertable)) will no longer
be eligible for pass-through payments,
and its device costs will be packaged
with the costs of the procedures with
which the HCPCS code C1886 device is
reported in the claims data. We
reiterated that final policy in the CY
2014 OPPS/ASC proposed rule (78 FR
43595). The HCPCS code C1886 device
is used in the procedures described by
CPT codes 31660 and 31661. Therefore,
the HCPCS code C1886 device costs will
be packaged with the costs of the
procedures described by CPT codes
31660 and 31661. Bronchial
thermoplasty CPT codes 0276T and
0277T are assigned to APC 0415 (Level
II Endoscopy Lower Airway) for CY
2013, and we proposed to assign
bronchial thermoplasty CPT codes
31660 and 31661 to APC 0415 for CY
2014 with a proposed payment rate of
approximately $2,177.
Comment: One commenter stated that
bronchial thermoplasty CPT codes
31660 and 31661 (as well as the CPT
codes 0276T and 0277T) are
inappropriately assigned to APC 0415.
The commenter expressed concern that
under the CMS proposal to expire
device HCPCS code C1886 from passthrough payment status, the payment
rate for APC 0415 will not reflect the
costs associated with CPT codes 31660
and 31661, the procedure with which
the HCPCS code C1886 device is used.
The commenter stated that the two
bronchial thermoplasty CPT codes

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available in CY 2012, CPT code 0276T
and CPT code 0277T, were subject to
noncoverage policies for all Category III
CPT codes by most Medicare
Administrative Contractors (MACs),
which resulted in few Medicare claims
for CY 2012, the claims data year used
for CY 2014 ratesetting. The commenter
further stated that claims data show that
some providers submitted claims
reporting bronchial thermoplasty
services with the HCPCS code C1886
device, while others did not, and that,
as a result, the HCPCS code C1886
device charge data understate the cost of
the C1886 device, which is reportedly
$2,500.
The commenter also expressed its
concerns regarding the composition of
APC 0415. The commenter believed that
the payment rate for APC 0415 is driven
by claims reporting one high-volume
code, 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)) because the proposed
payment rate of APC 0415 of
approximately $2,177 is close to the
CPT code 31629 proposed rule
geometric mean cost of approximately
$2,122. The commenter recommended
two options to increase the payment rate
for bronchial thermoplasty services as a
means to adequately pay for the cost of
the service. One option was to split APC
0415 into two levels, with many of the
higher volume, lower cost procedure
codes assigned to the Level II
Endoscopy Lower Airway APC and the
lower volume, higher cost procedure
codes assigned to a new proposed Level
III Endoscopy Lower Airway APC. The
second option recommended by the
commenter was to assign CPT codes
31660 and 31661 to APC 0423 (Level II
Percutaneous Abdominal and Biliary
Procedures), which the commenter
believed has a number of clinical
similarities, including one pulmonary
procedure described by CPT code 32998
(Ablation therapy for reduction or
eradication of 1 or more pulmonary
tumor(s) including pleura or chest wall
when involved by tumor extension,
percutaneous, radiofrequency,
unilateral).
Response: Regarding the commenter’s
concerns about the claims data for
bronchial thermoplasty services, we
believe that the cost of the HCPCS code
C1886 device is reflected in the
proposed payment rate for APC 0415,
the APC to which we proposed to assign
CPT codes 31660 and 31661. In a data
analysis of the claims reporting CPT
codes 0276T and 0277T, we found that,
of the 37 single frequency claims

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available for the data analysis for CPT
code 0276T, 16 single claims reported
the HCPCS code C1886 device with a
geometric mean cost of approximately
$3,726, while 21 single claims did not
report the HCPCS code C1886 device,
yet the geometric mean cost was
approximately $3,825. Therefore, it
appears that hospitals did not separately
report the HCPCS code C1886 device for
pass-through payment on claims
reporting CPT code 0276T but instead
reported the cost of the HCPCS code
C1886 device as part of the cost of the
procedure described by CPT code
0276T. Of the 18 claims reporting the
procedure described by CPT code 0277T
in our CY 2012 claims data, 10 claims
were submitted with the HCPCS code
C1886 device reported separately, with
a geometric mean cost of approximately
$4,175, while 8 claims were submitted
without the HCPCS code C1886 device
reported separately, with a somewhat
lower geometric mean cost of $2,780.
However, our final geometric mean
costs (based on the final rule claims
data) for CPT codes 0276T and 0277T,
$4,019 and $3,700, respectively, are
similar to the geometric mean cost of
bronchial thermoplasty services with
the HCPCS code C1886 device reported
separately that we found in our analysis
of CPT codes 0276T and 0277T
described above. Therefore, we believe
that the payment rate for APC 0415
appropriately reflects the costs of the
HCPCS code C1886 device.
We do not agree that APC 0423 would
be a more appropriate APC assignment
for CPT codes 31660 and 31661.
Although there is one pulmonary
procedure in APC 0423, CPT code
32998, it is a procedure with a
percutaneous approach, which is very
different than a bronchoscopy approach.
In addition, we do not agree with the
commenter’s suggestion that APC 0415
be split into two lower airway
endoscopy APCs. The creation of a
Level III lower airway endoscopy APC
suggested by the commenter would
result in relatively few single frequency
claims available for ratesetting—495
claims for the suggested Level III APC
compared to 5,174 single claims for the
suggested Level II APC, based on CY
2014 final rule claims data. This lower
frequency would promote volatility of
costs for such a Level III lower airway
endoscopy APC. Based on the reasons
set forth above, we are finalizing our
proposal to assign bronchial
thermoplasty services CPT codes 31660
and 31661 to APC 0415 for CY 2014,
which has a geometric mean cost of
approximately $2,007.

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b. Direct Laryngoscopy (APC 0074)
For CY 2013, we assigned CPT code
31571 (Laryngoscopy, direct, with
injection into vocal cord(s), therapeutic;
with operating microscope or telescope)
to APC 0075 (Level V Endoscopy Upper
Airway), with a payment rate of
$2,026.82. For CY 2014, we proposed to
assign CPT code 31571 to APC 0074
(Level IV Endoscopy Upper Airway),
with a proposed payment rate of
approximately $1,532. (The proposed
payment rate reflects the corrected
proposed rate in the September 6, 2013
OPPS Addendum B, which was posted
on the CMS Web site.)
Comment: One commenter stated that
the proposed rule cost of CPT code
31571 does not support the
reassignment of this procedure code
from APC 0075 to APC 0074. The
commenter believed that the proposed
payment rate for APC 0074 does not
adequately cover the cost of the
procedure described by CPT code
31571, in light of the fact that the
geometric mean cost of CPT code 31571
increased from approximately $1,849 for
CY 2013 to $1,956 in the CY 2014
proposed rule.
Response: The structure of APCs 0074
and 0075 required the proposed
realignment of the procedures within
those APCs to avoid 2 times rule
violations. If CPT code 31571 remained
assigned to APC 0075, a 2 times rule
violation would have resulted because
the cost of the procedure is more than
two times less than the significant
procedure with the highest geometric
mean cost, CPT code 31276 (Nasal/sinus
endoscopy, surgical with frontal sinus
exploration, with or without removal of
tissue from frontal sinus), which had a
proposed rule geometric mean cost of
approximately $4,623. This situation
appears to remain the case based on
final rule claims data. The final rule
geometric mean cost of CPT code 31571
is approximately $1,951 and the final
rule geometric mean cost of CPT code
31276 is approximately $4,504, which
would result in a 2 times rule violation
if the two procedures were assigned to
the same APC. We note that the
geometric mean cost of APC 0074 has
increased from $1,390.85 for CY 2013,
to approximately $1,547 for the CY 2014
proposed rule, and approximately
$1,887 for this CY 2014 final rule with
comment period. Furthermore, we
believe that the procedure described by
CPT code 31571 is similar in terms of
clinical composition and resource costs
to the other procedures assigned to APC
0074. The final rule geometric mean
cost of CPT code 31571 is
approximately $1,951, while the final

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rule geometric mean cost for APC 0074
is approximately $1,887, and the final
rule geometric mean cost for APC 0075
is approximately $3,062. Therefore, we
are finalizing our proposal to reassign
CPT code 31571 from APC 0075 to APC
0074 for CY 2014.
c. Pulmonary Rehabilitation Services
(APC 0077)
For CY 2014, we proposed to reassign
HCPCS code G0424 (Pulmonary
rehabilitation, including exercise
(includes monitoring), one hour, per
session, up to two sessions per day)
from APC 0102 (Level II Pulmonary
Treatment) to APC 0077 (Level I
Pulmonary Treatment), with a proposed
payment rate of approximately $39.
(The proposed payment rate reflects the
corrected proposed rate in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.) We note that, for CY 2013, HCPCS
code G0424 was assigned to APC 0102
with a similar payment rate of
approximately $39.
CMS established HCPCS code G0424
effective January 1, 2010, to describe a
one-hour session of pulmonary
rehabilitation. This HCPCS code was
established consistent with the
requirements set forth in section
144(a)(1) of Public Law 110–275
(MIPPA), which added section 1861(fff)
to the Act, to provide Medicare Part B
coverage and payment for a
comprehensive program of pulmonary
rehabilitation services furnished to
beneficiaries with chronic obstructive
pulmonary disease, effective January 1,
2010.
Comment: Several commenters
expressed concern about the
reassignment of HCPCS code G0424 to
APC 0077, which is the same APC to
which HCPCS codes G0237
(Therapeutic procedures to increase
strength or endurance of respiratory
muscles, face to face, one on one, each
15 minutes (includes monitoring)),
G0238 (Therapeutic procedures to
improve respiratory function, other than
described by G0237, one on one, face to
face, per 15 minutes (includes
monitoring)), and G0239 (Therapeutic
procedures to improve respiratory
function or increase strength or
endurance of respiratory muscles, two
or more individuals (includes
monitoring)), are assigned. Several
commenters stated that the length of
time in performing the service described
by HCPCS code G0424 is not consistent
with the length of time to perform the
other services assigned to APC 0077. In
particular, the commenters stated that
HCPCS code G0424 represents a 60minute to 90-minute procedure, which

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is not similar to the time requirement of
the two procedures assigned to APC
0077, HCPCS codes G0237 and G0238,
which represent 15-minute procedures.
Because of the time required to perform
the service, the commenters believed
that HCPCS code G0424 should not be
assigned to the same APC as HCPCS
codes G0237 and G0238. In addition,
several commenters stated that the
assignment of HCPCS code G0424 to
APC 0077 would create a 2 times rule
violation. Some commenters further
believed that hospitals are
underreporting the costs of the
procedure described by HCPCS code
G0424, and stated that hospitals may be
confused about the differences in costs
for the procedures described by HCPCS
codes G0237 and G0238 (15-minute
procedures) and G0424 (60–90 minute
procedures). Some commenters
recommended that CMS establish a
payment for HCPCS code G0424 using
claims data from HCPCS codes G0237,
G0238, and G0239, similar to the
simulated methodology that CMS used
in CY 2010 before actual claims data for
HCPCS code G0424 became available.
Response: Prior to CY 2012, we did
not have available actual claims data for
HCPCS code G0424, and consequently,
for CY 2010 and CY 2011, we utilized
a simulated methodology to arrive at an
appropriate payment for the procedure
described by HCPCS code G0424. We
discussed this simulated methodology
extensively in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74263 through 74267). Because HCPCS
code G0424 became effective January 1,
2010, the first year of actual claims data
for this service was used in the CY 2012
OPPS update. Specifically, in CY 2012,
we had data available for HCPCS code
G0424 for payments for OPPS services
based on claims submitted from January
1, 2010 through December 31, 2010.
Payment for HCPCS code G0424 for CY
2012 was approximately $37.42. For the
CY 2014 OPPS update, payment for the
procedure described by HCPCS code
G0424 is based on claims submitted
from January 1, 2012 through December
31, 2012. Similar to our findings for the
CY 2012 and CY 2013 OPPS updates,
we have a very robust set of claims for
the procedure described by HCPCS code
G0424 for the CY 2014 update. Based on
our latest hospital outpatient claims
data, the resource cost associated with
HCPCS code G0424 is comparable to the
other services assigned to APC 0077.
Specifically, our latest hospital
outpatient claims data show that the
geometric mean cost for HCPCS code
G0424 is approximately $43, based on
457,226 single claims (out of 459,199

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total claims), which is similar to the
proposed payment rate of approximately
$39 for APC 0077. We note that APC
0077 included various pulmonary
treatments whose geometric mean costs
range between $23 and $43. Based on
the latest hospital outpatient claims
data, we believe that HCPCS code
G0424 can be appropriately reassigned
to APC 0077.
Regarding the commenters’ statement
about hospitals underreporting the costs
of the procedure described by HCPCS
code G0424, we have no evidence of
such underreporting. Furthermore, as
we have previously stated, ‘‘[b]eyond
our standard OPPS trimming
methodology . . . that we apply to those
claims that have passed various types of
claims processing edits, it is not our
general policy to judge the accuracy of
hospital coding and charging for
purposes of ratesetting’’ (75 FR 71838).
We expect hospitals to report their
services appropriately.
We disagree with the commenters’
assertion that assigning HCPCS code
G0424 to APC 0077 would create a 2
times rule violation. We reviewed the
costs of the procedures that would be
assigned to APC 0077, including the
cost of the procedure described by
HCPCS code G0424 and did not find a
violation of the 2 times rule in the APC.
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,
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 HCPCS code G0424, we evaluated
its APC assignment for the CY 2014
update, and determined that APC 0077
is the appropriate assignment for this
service based on its clinical
homogeneity and resource similarity to
the other services assigned to APC 0077.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal,
without modification, to reassign
HCPCS code G0424 from APC 0102 to
APC 0077. APC 0077 has a final CY
2014 geometric mean cost of
approximately $39. The final CY 2014
payment rate for HCPCS code G0424
can be found in Addendum B to this CY
2014 OPPS/ASC final rule with
comment period (which is available via
the Internet on the CMS Web site).

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10. Other Services
a. Balloon Sinus Dilation (APCs 0074
and 0075)
For CY 2013, we assigned 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), with a
payment rate of $2,026.82. For CY 2014,
we proposed to continue to assign CPT
codes 31295, 31296, and 31297 to APC
0075.
Comment: One commenter stated that
the proposed geometric mean cost of
APC 0075 of approximately $2,378 is
driven by the cost and frequency of a
single code, CPT code 31541
(Laryngoscopy, direct, operative, with
excision of tumor and/or stripping of
vocal cords or epiglottis; with operating
microscope or telescope), which had a
proposed geometric mean cost of
approximately $2,085, and comprised
61 percent of the APC’s single frequency
claims for ratesetting. The commenter
requested that CMS analyze the
appropriateness of continuing to assign
CPT codes 31295, 31296, and 31297 to
APC 0075 and/or the appropriateness of
continuing to assign CPT code 31541 to
APC 0075.
Response: Based on updated claims
data, we reviewed the procedures in
APC 0074 (Level IV Endoscopy Upper
Airway) and APC 0075. During our
review, we found 2 times rule violations
in both APCs. To resolve one of the 2
times rule violations, we reassigned CPT
code 31541 from APC 0075 to APC 0074
for CY 2014. As a result, the final rule
geometric mean cost of APC 0075
increased to approximately $3,062.
The final rule geometric mean costs of
CPT codes 31295, 31296, and 31297 are
$2,456, $2,894, and $1,905, respectively.
Therefore, while we are continuing to
assign CPT codes 31295 and 31296 to
APC 0075 for CY 2014, to avoid another
2 times rule violation, we are
reassigning CPT code 31297, which has
an appreciably lower geometric mean
cost than the geometric mean cost of
CPT codes 31295 and 31296, to APC
0074 for CY 2014. APC 0074 has a CY
2014 final geometric mean cost of
approximately $1,887.
After consideration of the public
comments we received, we are
continuing to assign CPT codes 31295
and 31296 to APC 0075 for CY 2014, as
we proposed. However, we are

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reassigning CPT code 31297 to APC
0074 for CY 2014. In addition, we are
reassigning CPT code 31541 from APC
0075 to APC 0074 for CY 2014.
b. Radiofrequency Ablation of Uterine
Fibroids (APC 0174)
We created HCPCS code C9736
(Laparoscopy, surgical, radiofrequency
ablation of uterine fibroid(s), including
intraoperative guidance and monitoring,
when performed) effective July 1, 2013.
The procedure became known to us by
means of an application to assign the
procedure to a New Technology APC.
We assigned HCPCS code C9736 to APC
0131 (Level II Laparoscopy) because we
believed that it has the greatest degree
of clinical similarity to the laparoscopic
procedures assigned to that APC. APC
0131 has a CY 2013 payment rate of
$3,487.15. We proposed to continue to
assign HCPCS code C9736 to APC 0131
for CY 2014, with a proposed payment
rate of approximately $3,765. (The
proposed payment rate reflects the
corrected proposed rate in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
The AMA’s CPT Editorial Panel
recently created new Category III CPT
code 0336T (Laparoscopy, surgical,
ablation of uterine fibroid(s), including
intraoperative ultrasound guidance and
monitoring, radiofrequency), to be
effective January 1, 2014, which
describes the procedure described by
HCPCS code C9736. Because HCPCS
code C9736 became effective July 1,
2013, there are no claims data available
for this code for ratesetting purposes.
At its August 26, 2013 meeting, the
HOP Panel recommended that CMS
move HCPCS code C9736 from APC
0131 to APC 0174 (Level IV
Laparoscopy).
Comment: A few commenters
recommended that CMS reassign
HCPCS code C9736 (or its successor
code, CPT code 0336T) to APC 0174 for
CY 2014 because the resources involved
in performing the procedure are more
similar to the resources used in
performing procedures assigned to APC
0174. The commenters stated that two
CPT codes assigned to APC 0174, CPT
code 47370 (Laparoscopy, surgical,
ablation of 1 or more liver tumor(s);
radiofrequency) and CPT code 50542
(Laparoscopy, surgical; ablation of renal
mass lesion(s), including intraoperative
ultrasound guidance and monitoring,
when performed), have clinical and
resource characteristics similar to the
characteristics of the procedures
described by HCPCS code C9736. The
commenters stated that both procedures
are performed in an operating room

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(OR) under general anesthesia and
involve diagnostic laparoscopy, and
both procedures use approximately 160
to 180 minutes of OR time. One
commenter estimated that OR time for
other procedures assigned to APC 0131
averages 122 minutes. Other
commenters stated that the single-use
RF probe used in the procedure
described by HCPCS code C9736 costs
$2,584, which is part of more than
$3,400 in total device and supply costs.
They added that other procedures
assigned to APC 0131 are not as device
intensive, whereas procedures assigned
to APC 0174 are device intensive. The
commenters also requested that CMS
delete HCPCS code C9736 and use the
new CPT code 0336T, upon its effective
date, January 1, 2014.
Response: We do not have claims data
on HCPCS code C9736 for ratesetting
purposes because the code is new,
effective July 1, 2013. We routinely
assign procedure or service codes to
clinical APCs before we have claims
data that are indicative of the resource
costs of a procedure or service. 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 agree with the HOP
Panel and the commenters that
resources used to perform the procedure
described by HCPCS code C9736 appear
to be more similar to the resources used
to perform some of the services already
assigned to APC 0174. Because new CPT
code 0336T describes the procedure
described by HCPCS code C9736 and is
considered its successor code, we are
deleting HCPCS code C9736, effective
January 1, 2014, and assigning CPT code
0336T to APC 0174 for CY 2014. As
with all new services under the OPPS,
the APC assignment of CPT code 0336T
is subject to review once our claims data
begin to reflect the cost of this
procedure.
After consideration of the public
comments we received, we are deleting
HCPCS code C9736, effective January 1,
2014, and assigning CPT code 0336T to
APC 0174 for CY 2014, which has a
final geometric mean cost of
approximately $8,623.
c. Magnetic Resonance Image Guided
Focused Ultrasound (APC 0065)
The AMA’s CPT Editorial Panel
created two Category III CPT codes that
describe Magnetic Resonance Image
Guided Focused Ultrasound (MRgFUS)
used in ablation of uterine fibroids,
effective January 1, 2005: CPT codes
0071T (Focused ultrasound ablation of
uterine leiomyomata, including MR

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guidance; total leiomyomata volume
less than 200 cc of tissue) and 0072T
(Focused ultrasound ablation of uterine
leiomyomata, including MR guidance;
total leiomyomata volume greater or
equal to 200 cc of tissue). The CMS
HCPCS Workgroup created a third code
related to MRgFUS, HCPCS code C9734
(Focused ultrasound ablation/
therapeutic intervention, other than
uterine leiomyomata, with magnetic
resonance (MR) guidance), effective
April 1, 2013. HCPCS code C9734
originally described the service ‘‘with or
without MR guidance’’. However,
effective July l, 2013, we changed the
descriptor to only specify ‘‘with
magnetic resonance guidance’’. For CY
2013, all three of the MRgFUS codes are
assigned to APC 0067 (Level II
Stereotactic Radiosurgery), with HCPCS
code C9734 added to APC 0067 effective
April 1, 2013. The CY 2013 payment
rate for APC 0067 is $3,300.64. For CY
2014, as part of a proposed restructuring
of the Stereotactic Radiosurgery (SRS)
APCs and procedures, we proposed to
reassign SRS procedures to other APCs
and to maintain intraoperative radiation
therapy (IORT) and
magnetoencephalography (MEG)
procedures in APC 0065. We proposed
to reassign the service codes for
MRgFUS procedures to APC 0065 based
on clinical coherence to the other
procedures assigned to APC 0065. In
addition, we proposed to rename APC
0065 ‘‘IORT, MRgFUS, and MEG,’’
which has a CY 2014 proposed payment
rate of approximately $1,714 (78 FR
43593 through 43594). (The CY 2014
proposed payment rate reflects the
corrected proposed rate in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.) The proposal to restructure the
APCs that pay for SRS, IORT, MRgFUS,
and MEG procedures would reduce the
number of APCs under which payment
is made for SRS, IORT, MRgFUS, and
MEG procedures from four to three
APCs. We note that there are no claims
data for CPT codes 0071T and 0072T, or
HCPCS code C9734, available for CY
2014 ratesetting purposes.
Comment: Commenters expressed
concern about the CY 2014 proposed
reassignment of MRgFUS services to
APC 0065, and stated that MRgFUS
services are not appropriate for
assignment to APC 0065 based on
clinical and resource characteristics of
other services assigned to APC 0065.
One commenter opined that MRgFUS
services are more similar clinically to
the SRS services assigned to APC 0067,
in terms of treatment set-up, delivery of
radiation, and post-procedure recovery,

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except that MRgFUS services use
nonionizing radiation. This commenter
also believed that MRgFUS services are
similar in resources to the SRS services
assigned to APC 0067, estimating
hospital costs for services described by
CPT codes 0071T and 0072T at $5,439
each, and the cost of the service
described by HCPCS code C9734 at
$6,073, which are similar to the
proposed payment rate of APC 0067 of
approximately $5,615.
A few commenters urged CMS not to
reduce the payment rates for MRgFUS
services, as part of restructuring the SRS
APCs, or to package payment for other
services related to MRgFUS. The
commenters noted that the CY 2014
proposal would reduce the payment rate
for MRgFUS services by nearly half of
the amount of the payment rate for APC
0067 for CY 2013, in addition to
reductions in payment as a result of the
packaging of related radiation oncology
services.
One commenter identified a number
of services performed with MRgFUS for
which CMS has proposed to package
payment and estimated the foregone
separate payments for these services, if
CMS packages them, to total
approximately $2,800. The commenter
recommended that, if CMS finalizes
packaging of these services, CMS
compensate providers for performance
of the MRgFUS services by assigning
MRgFUS procedure codes to either APC
0229 (Level II Endovascular
Revascularization of the Lower
Extremity), which has a proposed
payment rate of approximately $10,314,
or a New Technology APC reflecting a
similar level of resources use. The
commenter acknowledged that there are
few Medicare claims data reporting the
MRgFUS procedure codes, and stated
that the procedures described by CPT
codes 0071T and 0072T are generally
performed on younger women and that,
although HCPCS code C9734 is a new
code effective in CY 2013, the
commenter expects there will be a
significant number of patients over age
65 with metastatic bone cancer who will
receive treatment with the procedure
described by HCPCS code C9734.
Response: We do not agree with the
commenter that MRgFUS procedures are
similar to SRS procedures assigned to
APC 0067 because of the clinical
differences between MRgFUS and SRS,
which is a specialized type of radiation
therapy. We believe that MRgFUS
procedures are more similar to the
services in restructured APC 0065,
which are distinct from SRS clinical
characteristics. We note there are no
claims data available for CPT codes
0071T and 0072T or HCPCS code C9734

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for CY 2014 ratesetting. Regarding the
cost estimates for MRgFUS procedures
presented by the commenter, it is our
longstanding policy to reassign
procedures to APCs based on Medicare
claims data that support reassignment,
rather than relying on external cost
estimates.
After consideration of the public
comments we received, we are
finalizing our proposal to reassign CPT
codes 0071T, 0072T, and HCPCS code
C9734 to APC 0065 for CY 2014. The
final rule geometric mean cost of APC
0065 is approximately $1,253.
Our proposed and final packaging
policies for CY 2014 are discussed in
section II.A.3. of this final rule with
comment period.
d. Flow Cytometry (APC 0433)
For CY 2014, we proposed to reassign
CPT code 88184 (Flow cytometry, cell
surface, cytoplasmic, or nuclear marker,
technical component only; first marker)
from APC 0433 (Level II Pathology) to
APC 0344 (Level IV Pathology), with a
proposed payment rate of approximately
$273. (The proposed payment rate
reflects the corrected proposed rate in
the September 6, 2013 OPPS Addendum
B, which was posted on the CMS Web
site.) In addition, for CY 2014, we
proposed to package payment for CPT
code 88185 (Flow cytometry, cell
surface, cytoplasmic, or nuclear marker,
technical component only; each
additional marker (list separately in
addition to code for first marker)),
which is currently assigned to APC 0342
(Level I Pathology) as an add-on code.
We refer readers to section II.A.3. of this
final rule with comment period for
further discussion of our proposed and
final payment methodology for add-on
codes for CY 2014.
Comment: One commenter expressed
disappointment with CMS’ decision to
decrease the payment rate for flow
cytometry CPT codes 88184 and 88185.
Response: We note that the CY 2013
payment rate for CPT code 88184 was
approximately $23 and the CY 2013
payment rate for CPT code 88185 was
approximately $13. For CY 2014, we
proposed to reassign CPT code 88184
from APC 0433 to APC 0344 with a
payment rate of approximately $273
based on our claims data for the
proposed rule.
We also proposed to package payment
for CPT code 88185 because it is an addon code. We refer readers to section
II.A.3. of this final rule with comment
period for further discussion of our final
payment methodology for add-on codes
for CY 2014.
Based on our latest hospital
outpatient claims data, we decided not

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to revise the APC assignment for CPT
code 88184 and instead decided to
retain the code’s assignment to APC
0433 (Level II Pathology), which is the
same APC to which CPT code 88184
was assigned for CY 2013. Analysis of
the claims data shows a final rule
geometric mean cost of approximately
$35 for CPT code 88184, which is
similar to the final rule geometric mean
cost of approximately $37 for APC 0433.
After consideration of the public
comment that we received and review of
our latest hospital outpatient claims
data for this final rule with comment
period, we are revising our proposal and
will continue to assign CPT code 88184
to APC 0433 for CY 2014. CPT code
88184 has a final payment rate of
approximately $37 for CY 2014, which
is slightly higher than the payment rate
of approximately $23 for CY 2013. This
final payment rate also can be found in
Addendum B to this CY 2014 OPPS/
ASC final rule with comment period
(which is available via the Internet on
the CMS Web site). The final policy for
packaging CPT code 88185 as an add-on
code for CY 2014 is discussed in section
II.A.3. of this final rule with comment
period.
e. Hormone Pellet Implant (APC 0420)
For CY 2014, we proposed to reassign
CPT code 11980 (Subcutaneous
hormone pellet implantation
(implantation of estradiol and/or
testosterone pellets beneath the skin))
from APC 0340 (Level I Minor
Procedures) to APC 0420 (Level II Minor
Procedures), with a proposed payment
rate of approximately $103. (The
proposed payment rate reflects the
corrected proposed rate in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
In the proposed rule, we note that we
proposed to make some changes related
to APC 0340 for CY 2014. We proposed
to revise the title of APC 0340 from
‘‘Minor Ancillary Procedures’’ to ‘‘Level
I Minor Procedures’’ and to establish a
second level APC to describe minor
ancillary procedures, specifically, APC
0420, with the title of ‘‘Level II Minor
Procedures,’’ as listed in Addendum A
to the CY 2014 OPPS/ASC proposed
rule, which was posted on the CMS Web
site. Based on our review of the latest
CY 2012 hospital outpatient claims data,
we believed that these changes were
necessary to pay appropriately for the
services assigned to APC 0340.
Comment: One commenter expressed
concern about the APC assignment of
CPT code 11980 and suggested two
options to address the code’s APC
assignment. Under the first option, the

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commenter suggested that CMS consider
establishing a new APC that describes
minor ancillary procedures, specifically
a Level III Minor Procedures APC, and
assign CPT code 11980 to this newly
created APC. Because there are several
procedures with varying costs assigned
to APC 0340 and APC 0420, the
commenter suggested restructuring the
minor procedures APCs by establishing
payment ranges for each level of service.
In particular, the commenter suggested
that the Level I Minor Procedures APC
would have a geometric means cost in
the range of $0 to $120, the Level II
Minor Procedures APC would have a
geometric mean cost in the range of
$121 to $300, and the Level III Minor
Procedures would have a geometric
mean cost of greater than $300. As an
alternative option, the commenter
recommended that CMS reassign CPT
code 11980 to APC 0189 (Level III
Female Reproductive Procedure).
Response: As the commenter stated,
the procedure described by CPT code
11980 involves both testosterone pellets
for men and estradiol pellets for women.
Because all the procedures in APC 0189
relate to female procedures, we do not
believe that APC 0189 would be an
appropriate APC assignment for CPT
code 11980. In addition, based on our
review of the updated hospital
outpatient claims data, we believe the
two-level APC appropriately pays for
the minor procedures that are currently
assigned to APCs 0340 and 0420.
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.
We will reevaluate the APC assignment
of CPT code 11980 for the CY 2015
OPPS rulemaking cycle.
After consideration of the public
comment that we received, we are
finalizing our proposal to reassign CPT
code 11980 to APC 0420, which has a
final geometric mean cost of
approximately $99 for CY 2014. The
final CY 2014 payment rate for CPT
code 11980 can be found in Addendum
B to this final rule with comment period
(which is available via the Internet on
the CMS Web site).
f. Peyronie Disease Injection Procedure
(APC 0164)
For CY 2014, we proposed to reassign
CPT code 54200 (Injection procedure for
peyronie disease) from APC 0164 (Level

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II Urinary and Anal Procedures) to APC
0126 (Level I Urinary and Anal
Procedures), with a proposed payment
rate of approximately $137, based on its
clinical and resource similarity to other
procedures assigned to APC 0126. (The
proposed payment rate reflects the
corrected proposed rate in the
September 6, 2013 OPPS Addendum B,
which was posted on the CMS Web
site.)
Comment: One commenter expressed
concern with the proposal to reassign
CPT code 54200 to APC 0126 and
requested that CMS continue to assign
this code to APC 0164, which is the
APC assignment for CY 2013. The
commenter stated the CPT code 54200
is clinically similar to the procedures
described by CPT codes 54220
(Irrigation of corpora cavernosa for
priapism) and 54235 (Injection of
corpora cavernosa with pharmacologic
agent(s) (eg, papaverine,
phentolamine)), which are assigned to
APC 0164. The commenter indicated
that all three procedures (CPT codes
54200, 54220, and 54235) involve
needle placements and should be
assigned to the same APC. In addition,
the commenter requested that CMS
establish a low geometric mean cost of
$163 for APC 0164.
Response: We examined the latest CY
2012 hospital outpatient claims data,
which are based on claims submitted
from January 1, 2012 through December
31, 2012, and we agree with the
commenter’s suggestion to continue to
assign CPT code 54200 to APC 0164.
Our analysis reveals that the resource
cost associated with the procedure
described by CPT code 54200 is similar
to the resource cost of the procedure
described by CPT code 54220, which is
assigned to APC 0164. Specifically, the
geometric mean cost for CPT code 54200
is approximately $167 based on 330
single claims (out of 351 total claims),
which is similar to the geometric mean
cost of approximately $166 for CPT code
54220 based on 25 single claims (out of
427 total claims). Based on the claims
data, we believe that CPT code 54200
should continue to be assigned to APC
0164.
With regard to the commenter’s
suggestion to set the geometric mean
cost at $163 for APC 0164, we do not
cap the geometric mean cost based on
suggested amounts. The geometric mean
cost is determined based on
consideration of the costs of all of the
procedures and the number of claims
within a given APC. We refer readers to
section II.A. of this final rule with
comment period for a discussion of our
methodology in determining the APC
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After consideration of the public
comment we received, we are not
finalizing our proposal to reassign CPT
code 54200 from APC 0164 to APC 0126
for CY 2014. Rather, we are maintaining
the APC assignment for CPT code 54200
to APC 0164, which has a final CY 2014
geometric mean cost of approximately
$212. The final CY 2014 payment rate
for CPT code 54200 can be found in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
g. Negative Pressure Wound Therapy
(NPWT) (APC 0016)
We established HCPCS code G0456
(Negative pressure wound therapy, (e.g.
vacuum assisted drainage collection)
using a mechanically-powered device,
not durable medical equipment,
including provision of cartridge and
dressing(s), topical application(s),
wound assessment, and instructions for
ongoing care, per session; total
wound(s) surface area less than or equal
to 50 square centimeters) and HCPCS
code G0457 (Negative pressure wound
therapy, (e.g. vacuum assisted drainage
collection) using a mechanicallypowered device, not durable medical
equipment, including provision of
cartridge and dressing(s), topical
application(s), wound assessment, and
instructions for ongoing care, per
session; total wound(s) surface area
greater than 50 square centimeters),
effective January 1, 2013, to provide a
payment mechanism for negative
pressure wound therapy services
furnished through a disposable device.
We assigned these services to APC 0016
(Level IV Debridement & Destruction),
which has a CY 2013 payment rate of
approximately $210. For CY 2014, we
proposed to continue to assign HCPCS
codes G0456 and G0457 to APC 0016,
with a proposed payment rate of
approximately $272. (The proposed
payment rate reflects the corrected
proposed rate in the September 6, 2013
OPPS Addendum B, which was posted
on the CMS Web site.)
Comment: Some commenters
requested that CMS reassign HCPCS
codes G0456 and G0457 from APC 0016
to proposed APC 0186 (Level III Skin
Repair). The commenters believed that,
based on clinical homogeneity and
resource costs of the other procedures
assigned to proposed APC 0186,
proposed APC 0186 is the most
appropriate assignment for HCPCS
codes G0456 and G0457. Another
commenter stated that the cost of
providing NPWT is in the range of $450
to $500, which more closely aligns with
the CY 2013 payment rate of
approximately $393 for proposed APC

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0135 (Level IV Skin Repair). One
commenter believed that HCPCS codes
G0456 and G0457 are clinically similar
to the wound care procedures described
by CPT codes 12020, 13100, 13101,
15002, and 15003, which were assigned
to APC 0135 for CY 2013.
Response: We disagree with the
commenters’ assertion that HCPCS
codes G0456 and G0457 are similar, in
terms of clinical homogeneity or
resource costs, to CPT codes 12020,
13100, 13101, and 15002. Our analysis
of the latest hospital outpatient claims
data indicates that the resource costs for
the services described by CPT codes
12020, 13100, 13101, and 15002 are in
the range of $474 to $570. Specifically,
the geometric mean cost for CPT code
12020 is approximately $522 based on
1,082 single claims (out of 2,254 total
claims), for CPT code 13100,
approximately $474 based on 81 single
claims (out of 341 total claims), for CPT
code 13101, approximately $570 based
on 1,198 single claims (out of 3,725 total
claims), and for CPT code 15002,
approximately $547 based on 657 single
claims (out of 4,119 total claims). (We
have not included the geometric mean
cost for CPT code 15003 in this
discussion because it is an add-on code
that will be packaged in the CY 2014
OPPS update.) We believe that the
resource costs for the services described
by the negative pressure wound therapy
HCPCS codes G0456 and G0457 may be
slightly higher than the resource costs
for the services described by the
negative pressure wound therapy CPT
codes 97605 and 97606, but not as
significant as those services described
by CPT codes 12020, 13100, 13101, and
15002. Our claims data show that the
geometric mean cost for HCPCS code
97605 is approximately $100 based on
66,355 single claims (out of 85,285 total
claims), and approximately $140 for
CPT code 97606 based on 7,681 single
claims (out of 10,771 total claims).
Based on the nature of the procedure,
the advice from our medical advisors,
and our claims data for CPT codes
12020, 13100, 13101, 15002, 97605, and
97606, we believe that APC 0016, which
has a geometric mean cost of
approximately $276, is the more
appropriate APC assignment for HCPCS
codes G0456 and G0457 because these
procedures describe debridement-type
services rather than skin repair
procedures.
Because HCPCS codes G0456 and
G0457 are new for CY 2013, we expect
to have claims data next year, at which
time, we will reevaluate the APC
assignments for both codes in
preparation for the CY 2015 rulemaking
cycle. We remind hospitals that we

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review, on an annual basis, the APC
assignments for all services and items
paid under the OPPS.
Comment: One commenter who
responded to the CY 2013 OPPS/ASC
final rule with comment period believed
that the CY 2013 payment rate of
approximately $210 for both HCPCS
codes G0456 and G0457 is inappropriate
considering that the current national
average selling price for the device used
with the procedure is approximately
$270. In addition, the commenter
requested that CMS revise the status
indicator of HCPCS codes G0456 and
G0457 from ‘‘T’’ (Significant Procedure,
Multiple Reduction Applies) to ‘‘S’’
(Significant Procedure, Not Discounted
When Multiple) in order to not
undercompensate hospitals for
performing the procedure when it is
performed with other services on the
same day.
Response: For the CY 2014 update,
the payment rate for HCPCS codes
G0456 and G0457 will increase from
$210 for CY 2013 to approximately $275
for CY 2014. As stated above, because
HCPCS codes G0456 and G0457 are new
for CY 2013, we expect to have claims
data next year, at which time we will
reevaluate the APC assignments for both
codes in preparation for the CY 2015
rulemaking cycle.
With regards to the status indicator
assignment of HCPCS codes G0456 and
G0457, we note that all codes assigned
to APC 0016 are crosswalked to status
indicator ‘‘T’’ and have no
corresponding ‘‘S’’ status indicator. In
addition, we do not believe that every
service or procedure should be paid at
100 percent. The multiple procedure
reduction for status indicator ‘‘T’’
services recognizes that efficiencies are
gained when multiple procedures are
performed in a single session. We
believe that this policy is appropriately
applied to the wound treatment
procedures in question.
After consideration of the public
comments that we received, we are
finalizing our CY 2014 proposal,
without modification, to continue to
assign HCPCS codes G0456 and G0457
to APC 0016, which has a final CY 2014
geometric mean cost of approximately
$276. The final CY 2014 payment rate
for HCPCS codes G0456 and G0457 can
be found in Addendum B to this final
rule with comment period (which is
available via the Internet on the CMS
Web site).
h. Platelet Rich Plasma (PRP) (APC
0327)
For CY 2014, we proposed to continue
to assign HCPCS code G0460
(Autologous platelet rich plasma for

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chronic wounds/ulcers, including
phlebotomy, centrifugation, and all
other preparatory procedures,
administration and dressings, per
treatment) to APC 0013 (Level II
Debridement & Destruction) with a
proposed payment rate of approximately
$83. (The proposed payment rate
reflects the corrected proposed rate in
the September 6, 2013 OPPS Addendum
B, which was posted on the CMS Web
site.)
Comment: Many of the commenters
disagreed with the proposed APC
assignment for HCPCS code G0460.
Several commenters stated that the
proposed payment rate of approximately
$83 for APC 0013 does not adequately
pay for the cost of providing the service
described by HCPCS code G0460. Some
of the commenters reported that the
actual cost to provide PRP services is
between $400 and $450. Other
commenters reported a specific cost of
$458 to perform the procedure. Most of
the commenters stated that HCPCS code
G0460 is inappropriately assigned to
APC 0013 and urged CMS to reassign
the code to APC 0135 (Level IV Skin
Repair), which had a proposed payment
rate of approximately $862. One
commenter stated that PRP services are
more analogous to the tissue-based
wound procedures that are assigned to
APC 0135 (Level III Skin Repair) for CY
2013, which has a payment rate of
$393.38 for the first 100cm2.
Response: We reviewed all the codes
assigned to the Debridement &
Destruction APCs as well as the Skin
Repair APCs. After further consultation
with our medical advisors, we agree
with the commenters that HCPCS code
G0460 would be more appropriately
assigned to one of the Skin Repair APCs.
For CY 2014, there are four Skin Repair
APCs. We have renumbered these APCS
with sequential numbers as follows: (1)
APC 0326 (Level I Skin Repair); (2) APC
0327 (Level II Skin Repair); (3) APC
0328 (Level III Skin Repair); and (4)
APC 0329 (Level IV Skin Repair). After
consideration of the public comments
we received, and based on the clinical
comparability of the procedure and the
approximate resource costs associated
with the procedure as compared to other
procedures assigned to the Skin Repair
APCs, we believe that APC 0327 is the
most appropriate APC assignment for
HCPCS code G0460. APC 0327 has a
final geometric mean cost of
approximately $411 for CY 2014. The
final CY 2014 payment rate for HCPCS
code G0460 can be found in Addendum
B to this final rule with comment period
(which is available via the Internet on
the CMS Web site).

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It has been our practice since the
implementation of the OPPS in 2000 to
review, on an annual basis, the APC
assignments for the procedures and
services paid under the OPPS. We will
review the APC assignment for HCPCS
code G0460 and determine whether an
APC reassignment is necessary for the
CY 2015 ratesetting.
i. Payment for Radioisotopes Derived
From Non-Highly Enriched Uranium
(HEU) Sources (APC 1442)
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. Therefore, for CY
2013, we finalized a policy to provide
an additional payment of $10 for the
marginal cost for radioisotopes
produced from non-HEU sources over
the costs for radioisotopes produced by
HEU sources (77 FR 68316). Under this
policy, hospitals report HCPCS code
Q9969 (Tc-99m from non-highly
enriched uranium source, full cost
recovery add-on, per study dose) 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 to be at least 95
percent derived from non-HEU sources.
Comment: Several commenters
requested changes in the additional
payment for Technetium-99m produced
from non-highly enriched uranium
(non-HEU) sources, as described by
HCPCS code Q9969. One commenter
was concerned that CMS did not utilize
stakeholder feedback to craft a more
effective payment methodology, such as
ensuring that the payment leads to Full
Cost Recovery higher in the supply
chain, or paying radiopharmacies for the
additional costs of maintaining
segregated channels for HEU and LEU.

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One commenter was concerned about
the beneficiary’s responsibility for a 20percent copayment. That commenter
also believed that the $10 payment was
too low. Specific changes requested by
commenters included elimination of the
copayment, increase in the payment
rate, expanding it to other radioisotopes,
and modifying the payment in response
to industry suggestions during
stakeholder meetings and/or paying
separately for diagnostic
radiopharmaceuticals.
Response: We implemented this
payment for a specific purpose based on
industry and government concerns and
considering stakeholder requests and
stakeholder feedback. We determined
that non-HEU sourced Mo-99, the Tc99m 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 a probability that those
costs will not be passed on uniformly as
the industry converts. Therefore, we
used our authority under section
1833(t)(2)(E) of the Act to ensure
payment equity among hospitals to
propose and finalize a policy through
rulemaking that created this additional
payment to address the incremental cost
of obtaining Tc-99m from the new
sources of supply. We stated in our CY
2013 OPPS/ASC final rule with
comment period (77 FR 68316) that our
expectation was that the transition to
non-HEU sourced Mo-99 would be
completed within 4 to 5 years and that
there might be a need to make
differential payments for a period of 4
to 5 years. We further stated that we
would reassess, and propose if
necessary, on an annual basis, whether
such an adjustment continued to be
necessary and whether any changes to
the adjustment were warranted. We
have reassessed this payment for CY
2014 and have not identified any new
information that would cause us to
modify the payment at this time. We do
not agree with the commenters’
suggestion to eliminate the beneficiary’s
copayment because section 1833(t)(8) of
the Act and §§ 419.41 through 419.45 of
the regulations require a beneficiary
copayment.
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IV. OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional PassThrough Payments for Certain Devices
a. Background
Section 1833(t)(6)(B)(iii) of the Act
requires that, under the OPPS, a
category of devices be eligible for

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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 three device
categories eligible for pass-through
payment. These device categories are
described by HCPCS codes C1830
(Powered bone marrow biopsy needle)
and C1840 (Lens, intraocular
(telescopic)), which we made effective
for pass-through payment as of October
1, 2011; and HCPCS code C1886
(Catheter, extravascular tissue ablation,
any modality (insertable)), which we
made effective for pass-through
payment as of January 1, 2012.
Recognizing that these three device
categories were eligible for at least 2, but
not more than 3, years of pass-through
status, in the CY 2013 OPPS/ASC final
rule with comment period, we finalized
the expiration of pass-through payment
for all three of these HCPCS codes,
which will expire after December 31,
2013 (77 FR 68352). Therefore, in
accordance with our established policy,
after December 31, 2013, we will
package the respective costs of the
HCPCS codes C1830, C1840, and C1886
devices into the costs of the procedures
with which the devices are reported in
the hospital claims data used in OPPS
ratesetting.
b. CY 2014 Policy
As previously stated, we 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

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devices are reported in the claims data
used to set the payment rates (67 FR
66763). In the CY 2013 OPPS/ASC
proposed rule (78 FR 43595), in the case
of device category C1840, we proposed
that the device costs be packaged only
when billed with CPT code 0308T
(Insertion of ocular telescope prosthesis
including removal of crystalline lens),
which became effective on July 1, 2012.
We announced the policy that device
category C1840 must be billed with CPT
code 0308T, effective July 1, 2012, in
Transmittal 2483, dated June 8, 2012.
CPT code 0308T is currently assigned to
APC 0234 (Level IV Anterior Segment
Eye Procedures), which had a proposed
geometric mean cost of approximately
$1,794. When the HCPCS code C1840
device costs are packaged into the cost
of CPT code 0308T (and the equivalent
procedure described by HCPCS code
C9732 for the first half of 2012), the
proposed geometric mean cost of the
procedure is approximately $15,249.
Based on this geometric mean cost for
CPT code 0308T, we proposed to create
new APC 0351 (Level VII Anterior
Segment Eye Procedures), and to assign
CPT code 0308T to this APC, which had
a proposed geometric mean cost of
approximately $15,249. We stated in the
proposed rule that the geometric mean
cost for CY 2014 that will be reported
in the final rule for this new APC will
depend on the geometric mean cost of
CPT code 0308T (including the cost of
HCPCS code C1840) as calculated using
claims data available for the final rule.
Comment: One commenter requested
that CMS extend the pass-through
payment period of HCPCS code C1830
because one local Medicare contractor
had denied ASC payment at least twice
because the Medicare claim form was
reportedly incorrectly completed. The
commenter stated that there is a lack of
consistent guidance on how ASC claims
for pass-through items are to be
submitted.
Response: We are not extending the
period of pass-through payment of
HCPCS code C1830. Under the ASC
payment system, § 416.164(b)(2) of the
regulations requires that we pay
separately for certain implantable items
and services that have pass-through
status under the OPPS.
HCPCS code C1830 was made
effective for pass-through payment as of
October 1, 2011, and we finalized a
December 31, 2013 expiration date from
pass-through payment for HCPCS code
C1830 under the OPPS in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68353). We cannot extend
the pass-through payment status of
HCPCS code C1830 through CY 2014,
because such an extension would make

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the pass-through payment status
effective longer than the maximum 3year period permitted under section
1833(t)(6)(B)(iii) of the Act. As we stated
in the proposed rule, after December 31,
2013, the costs for devices described by
HCPCS code C1830 will be packaged
into the costs of the procedure with
which the device is reported in the
hospital claims data used in the
development of the OPPS relative
payment weights that will be used to
establish the ASC payment rates for CY
2014 (78 FR 43638). Therefore, we are
not altering the decision to expire
category C1830 from pass-through
payment as of January 1, 2014, or our
ASC policy. We are not aware of
systematic problems with billing of
HCPCS code C1830 either in the OPPS
payment system or the ASC payment
system. The commenter cited that there
were several instances in which one
local contractor rejected HCPCS code
C1830 claims from an ASC. Our OPPS
claims data reflect that nearly 1,900
claims from for HCPCS code C1830
were processed with a geometric mean
cost of approximately $126. Therefore, it
appears that most HCPCS code C1830
pass-through payment claims were
adjudicated successfully in the OPPS,
and we believe this is true in the ASC
setting as well. Because pass-through
devices are contractor priced in the
ASC, there may be more interactions
between ASCs and MACs on passthrough claims than is typical for
hospitals. We are not aware of
widespread problems with ASC
processing of claims for HCPCS code
C1830.
Comment: One commenter concurred
with the proposed assignment of CPT
code 0308T to new APC 0351, as well
as the designation of this procedure as
device-intensive in the ASC setting. The
commenter also urged CMS to only use
claims from hospitals that are customers
of the manufacturer of the HCPCS code
C1840 device as claims used with CPT
code 0308T because that company is
reportedly the sole manufacturer of the
device. The commenter noted that four
claims were from a hospital that was not
a customer, and which apparently
reported costs with CPT code 0308T
that were much too low to represent the
HCPCS code C1840 device cost.
Response: We appreciate the
commenter’s support for the APC
assignment of CPT code 0308T.
Regarding the recommendation to use
claims only from customers of the
device manufacturer, we do not
generally screen claims in the manner
suggested by the commenter.
After consideration of the public
comments we received, we are

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maintaining our previous decision to
expire device categories C1830, C1840,
and C1886 from pass-through payment
status, which we finalized in the CY
2013 OPPS/ASC final rule with
comment period, and we are finalizing
our proposal to package the costs of
these devices with the procedures with
which they are billed. We also are
finalizing for CY 2014 the proposed
assignment of CPT code 0308T to APC
0351. The final CY 2014 geometric mean
cost of APC 0351 is approximately
$15,606.
As we indicated in the CY 2014
OPPS/ASC proposed rule, with the
expiration of device categories C1830,
C1840, and C1886 from pass-through
payment status at the end of CY 2013,
there are no currently active categories
for which we would expire pass-through
status in CY 2014. If we create new
device categories for pass-through
payment status during the remainder of
CY 2013 or during CY 2014, we will
propose future expiration dates in
accordance with the statutory
requirement that they be eligible for
pass-through payments for at least 2, but
not more than 3, years from the date on
which pass-through payment for any
medical device described by the
category may first be made. (There is
one new device category eligible for
pass-through payment that we created
effective October 1, 2013, C1841
(Retinal prosthesis, includes all internal
and external components). However,
this category will not expire in CY
2014.)
2. Provisions for Reducing Transitional
Pass-Through Payments To Offset Costs
Packaged Into APC Groups
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 (the cost
of the device) exceeds the portion of the
otherwise applicable Medicare
outpatient department fee schedule
amount (the 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 passthrough devices. 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

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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 used 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.
Currently, we have published a list of
all procedural APCs with the CY 2013
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).
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 2014 Policy
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43595), we proposed to
continue, for CY 2014, 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
payment rates. We proposed to continue
our policy, for CY 2014, that the passthrough evaluation process and pass-

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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. 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)).
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43595), for CY 2014, we also
proposed to continue our policy
established in CY 2010 to include
implantable biologicals in our
calculation of the device APC offset
amounts. In addition, we proposed to
continue to calculate and set any device
APC offset amount for any new device
pass-through category that includes a
newly eligible implantable biological
beginning in CY 2014 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 (78 FR
43596).
In addition, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43596), we
proposed to update the list of all
procedural APCs with the final CY 2014
portions 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 so
that this information is available for use
by the public in developing potential
CY 2014 device pass-through payment

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applications and by CMS in reviewing
those applications.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing them for CY
2014 without modification. In addition,
we will update, on the CMS Web site at
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html, the
list of all procedural APCs with the final
CY 2014 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 2014 device pass-through payment
applications and by CMS in reviewing
those applications.
3. Changes to Device Pass-Through
Criteria: Integral and Subordinate
Criterion
We established a number of specific
criteria that new medical devices must
meet to be considered eligible for passthrough payments under section
1833(t)(6) of the Act (42 CFR 419.66; 65
FR 18480 and 65 FR 47672 through
47674). In the CY 2014 OPPS/ASC
proposed rule (78 FR 43596), we
proposed to change one of these criteria
for device pass-through payment,
described at § 419.66(b)(3), which
requires that a device ‘‘is an integral and
subordinate part of the service
furnished, is used for one patient only,
comes in contact with human tissue,
and is surgically implanted or inserted
whether or not it remains with the
patient when the patient is released
from the hospital’’ (65 FR 47674).
Regarding the existing regulation at
§ 419.66(b)(3), applicants for device
pass-through status have continued to
ask what is meant by the phrase
‘‘integral and subordinate part of the
service furnished,’’ and more
specifically, what the terms ‘‘integral’’
and ‘‘subordinate’’ mean. These terms
have not been specifically defined or
described in prior regulatory language,
preamble, or guidance. In an effort to
reduce further confusion and ensure all
applicants understand the intent of the
existing regulation, we proposed to
provide guidance on the meaning of the
term ‘‘integral’’ and delete the term
‘‘subordinate’’ from the existing
regulation in the proposed rule. In the
proposed rule, we stated that we have
interpreted the term ‘‘integral’’ to mean
that the device is necessary to furnish or
deliver the primary procedure with
which it is used. For example, a
pacemaker is integral to the procedure
of implantation of a pacemaker. We
have interpreted the accompanying term
‘‘subordinate’’ in conjunction with the

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term ‘‘integral,’’ in that a ‘‘subordinate’’
device is dependent upon the overall
procedure of implanting the device, and
we have not interpreted the term
separately, or applied the term
‘‘subordinate’’ as a separate criterion.
Because of confusion among passthrough status applicants regarding the
use of both terms ‘‘integral’’ and
‘‘subordinate,’’ and because we do not
believe it is necessary that the
regulation specifically state that a
device must be subordinate to the
procedure, in addition to the
requirement that a device be integral to
the procedure, and have not treated
‘‘subordinate’’ as a separate criterion, as
previously explained, we proposed to
delete the term ‘‘subordinate’’ from this
criterion’s regulatory text under existing
§ 419.66(b)(3). The proposed revised
§ 419.66(b)(3) regulatory language read
as follows: ‘‘The device is an integral
part of the service furnished, is used for
one patient only, comes in contact with
human tissue, and is surgically
implanted or inserted, whether or not it
remains with the patient when the
patient is released from the hospital.’’
We did not receive any public
comments on this proposal. Therefore,
we are finalizing, without modification,
our proposal to delete the term
‘‘subordinate’’ from this criterion’s
regulatory text under existing
§ 419.66(b)(3). The final revised
§ 419.66(b)(3) regulatory language reads
as follows: ‘‘The device is an integral
part of the service furnished, is used for
one patient only, comes in contact with
human tissue, and is surgically
implanted or inserted, whether or not it
remains with the patient when the
patient is released from the hospital.’’
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

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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. Policy for CY 2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43596 through 43597),
beginning in CY 2014, we proposed to
modify our existing policy of reducing
OPPS payment for specified APCs when
a hospital furnishes a specified device
without cost or with a full or partial
credit. For CY 2013 and prior years, our
policy has been to reduce OPPS
payment 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. For CY 2014, we
proposed to reduce OPPS payment, for
the applicable APCs listed in Table 17
of the proposed rule, by the full or
partial credit a hospital receives for a
replaced device. Specifically, under this
proposed policy for CY 2014, hospitals
would be required to report the amount
of the credit in the amount portion for
value code ‘‘FD’’ (Credit Received from
the Manufacturer for a Replaced
Medical Device) when the hospital
receives a credit for a replaced device
listed in Table 18 of the proposed rule
that is 50 percent or greater than the
cost of the device. Under this proposal,
hospitals would no longer be required to
append the ‘‘FB’’ or ‘‘FC’’ modifier
when receiving a device at no cost or
with a full or partial credit.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43596 through 43597), for
CY 2014, we proposed to continue using
the three criteria established in the CY
2007 OPPS/ASC final rule with

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comment period for determining the
APCs to which our modified CY 2014
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 that
we continue to believe these criteria are
appropriate because no cost 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.
Comment: A majority of commenters
supported CMS’ proposed adjustment to
the OPPS payment for no cost/full credit
and partial credit devices, while some
commenters requested that CMS rescind
its proposal because they believed it
would cause additional administrative
burden. One commenter argued that
using the ‘‘FD’’ value code methodology
in the OPPS would lead to inaccuracy
of claims. One commenter stated that, in
some cases, if a full credit were
received, the entire APC payment would
be consumed by the credit and the
hospital would receive no payment for
the procedural portion of the service.
That commenter suggested that CMS
develop a floor for the offset and urged
CMS to work with hospital stakeholders
to better understand the overall impact
to hospitals and to ensure that hospitals
would be appropriately paid for the
procedural aspect of the device/lead
replacement. Another commenter
requested that CMS remove APCs 0082,
0083 0104, 0229, 0319, and 0656 from
the final listing of APCs covered by the
no cost/full credit policy.

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Response: We appreciate the support
of our proposal by the majority of
commenters. We disagree with
commenters’ assertion that the proposed
change from the ‘‘FB’’/‘‘FC’’ modifiers to
the ‘‘FD’’ value code for the adjustment
to OPPS payment for no cost/full credit
and partial credit devices would cause
added administrative burden. We
believe that the use of the ‘‘FD’’ value
code will not cause added
administrative burden for hospitals. We
also disagree with the assertion that
using the ‘‘FD’’ value code methodology
in the OPPS would lead to an
inaccuracy in claims. We believe that
the use of the ‘‘FD’’ value code
methodology could lead to greater
accuracy in our claims data. However,
we are sensitive to the commenter’s
concerns that, in some cases, if a full
credit were received, the entire APC
payment would be consumed by the
credit and the hospital would receive no
payment for the nondevice portion of
the costs related to the service.
Therefore, we are limiting the OPPS
payment deduction for the applicable
APCs listed below in Table 30 of this
final rule with comment period to the
total amount of the device offset when
the ‘‘FD’’ value code appears on a claim.
Hospitals would still be required to
report the amount of the credit in the
amount portion for value code ‘‘FD’’
when the hospital receives a credit for
a replaced device listed in Table 18 of
the proposed rule that is 50 percent or
greater than the cost of the device. We
continue to believe that APCs 0082,
0083, 0104, 0229, 0319, and 0656 are
appropriately identified as APCs to
which the no cost/full credit and partial
credit device adjustment policy will
apply for CY 2014.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal to
modify our existing policy of reducing
OPPS payment for specified APCs when
a hospital furnishes a specified device
without cost or with a full or partial
credit. Specifically, we are finalizing
our proposal to require hospitals to
report the amount of the credit in the
amount portion for value code ‘‘FD’’
(Credit Received from the Manufacturer
for a Replaced Medical Device) when
the hospital receives a credit for a
replaced device listed in Table 31 of this
final rule with comment period that is
50 percent or greater than the cost of the
device. We also are finalizing our
proposal to limit the OPPS payment
deduction for the applicable APCs listed
below in Table 30 of this final rule with
comment period to the total amount of

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the device offset when the ‘‘FD’’ value
code appears on a claim.
We proposed to update the lists of
APCs and devices to which the
proposed modified no cost/full credit
and partial credit device adjustment
policy would apply for CY 2014,
consistent with the three criteria
discussed earlier in this section, based
on the final CY 2012 claims data
available for the CY 2014 OPPS/ASC
final rule with comment period.

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We examined the offset amounts
calculated from the CY 2014 final rule
data and the clinical characteristics of
the final CY 2014 APCs to determine
which APCs meet the criteria for CY
2014. Based on the CY 2012 claims data
available for this final rule with
comment period, we are not making any
changes to the proposed lists of APCs
and devices to which this modified
policy applies.

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75007

Table 30 below lists the APCs to
which the finalized modified payment
adjustment policy for no cost/full credit
and partial credit devices applies in CY
2014.
Table 31 below lists the devices to
which the finalized modified payment
adjustment policy for no cost/full credit
and partial credit devices applies in CY
2014.
BILLING CODE 4120–01–P

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TABLE 30.-APCs TO WHICH THE MODIFIED NO COSTIFULL CREDIT
AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY
APPLIES IN CY 2014
CY 2014
APC

0040
0061
0082

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0083
0085
0086
0089
0090
0104
0106
0107
0108
0227
0229
0259
0293
0315
0318
0319
0385
0386
0425
0648
0654
0655
0656
0674
0680

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Level I Implantation ofNeurostimulator Generator
Level I Implantation/Revision/Replacement ofNeurostimulator
Electrodes
Level II ImplantationlRevisionlReplacement ofNeurostimulator
Electrodes
Coronary or Non-Coronary Atherectomy
Coronary Angioplasty, Valvuloplasty, and Level I Endovascular
Revascularization
Level II Electrophysiologic Procedures
Level III Electrophysiologic Procedures
InsertionlReplacement of Permanent Pacemaker and Electrodes
Level I Insertion/Replacement of Permanent Pacemaker
Transcatheter Placement of Intracoronary Stents
InsertionlReplacement of Pacemaker Leads and/or Electrodes
Level I Implantation ofCardioverter-Defibrillators (ICDs)
Level II Implantation ofCardioverter-Defibrillators (ICDs)
Implantation of Drug Infusion Device
Level II Endovascular Revascularization of the Lower Extremity
Level VII ENT Procedures
Level VI Anterior Segment Eye Procedures
Level II Implantation ofNeurostimulator Generator
Implantation ofNeurostimulator Pulse Generator and Electrode
Level III Endovascular Revascularization of the Lower Extremity
Level I Prosthetic Urological Procedures
Level II Prosthetic Urological Procedures
Level II Arthroplasty or Implantation with Prosthesis
Level IV Breast Surgery
Level II Insertion/Replacement of Permanent Pacemaker
InsertionlReplacement/Conversion of a Permanent Dual Chamber
Pacemaker or Pacing
Transcatheter Placement of Intracoronary Drug-Eluting Stents
Prostate Cryoablation
Insertion of Patient Activated Event Recorders

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0039

CY 2014 APC Title

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75009

CY 2014 Device
HCPCS Code
C1721
C1722
C1728
C1764
C1767
C1771
C1772
C1776
C1777
C1778
C1779
C1785
C1786
C1789
C1813
C1815
C1820
C1881
C1882
C1891
C1895
C1896
C1897
C1898
C1899
C1900
C2619
C2620
C2621
C2622
C2626
C2631

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CY 2014 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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TABLE 31.-DEVICES TO WHICH THE MODIFIED NO COST/FULL CREDIT
AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY
APPLIES IN CY 2014

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BILLING CODE 4120–01–C

V. OPPS Payment Changes for Drugs,
Biologicals, and Radiopharmaceuticals

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A. OPPS Transitional Pass-Through
Payment for Additional Costs of Drugs,
Biologicals, and Radiopharmaceuticals
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 of
1999 (BBRA) (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 in cancer
therapy; and current
radiopharmaceutical drugs and
biologicals. ‘‘Current’’ refers to drugs or
biologicals that are outpatient hospital
services under Part B for which
payment was made 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.’’ As required by
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 payment was first made
for the product as a hospital outpatient
service under Medicare Part B. Proposed
CY 2014 pass-through drugs and
biologicals and their designated APCs
were assigned status indicator ‘‘G’’ in
Addenda A and B to the proposed rule,
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

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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 competitive acquisition
program (CAP) has been postponed
since CY 2009, and such a program has
not been reinstated for CY 2014.
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),
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.
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/
HospitalOutpatientPPS/passthrough_
payment.html.
2. Drugs and Biologicals With Expiring
Pass-Through Status in CY 2013
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43598), we proposed that
the pass-through status of 15 drugs and
biologicals would expire on December
31, 2013, as listed in Table 19 of the
proposed rule (78 FR 43599). 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, 2013. These
drugs and biologicals were approved for
pass-through status on or before January
1, 2012. 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,
contrast agents, anesthesia drugs, and

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our new groups of policy packaged
products described in section II.A.3. of
the proposed rule, namely drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure and drugs
and biologicals that function as supplies
when used in a surgical procedure, 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 $90 for CY 2014), as
discussed further in section V.B.2. of
this final rule with comment period. If
the estimated per day cost for the drug
or biological 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 ASP-based payment amount
(which is ASP+6 percent for CY 2014,
as discussed further in section V.B.3. of
this final rule with comment period).
Comment: One commenter
recommended that CMS provide passthrough status for new drugs,
specifically diagnostic
radiopharmaceuticals, for a full 3-year
period. The commenter asserted that
providing pass-through status for 3
years would help provide a more
current and accurate data set on which
to base payment for the associated
nuclear medicine procedure into which
the radiopharmaceutical is subsequently
packaged. To provide for a full 3-year
pass-through period, the commenter
recommended that the pass-through
status for drugs and biologicals expire
on a quarterly basis rather than on an
annual basis.
Response: As we stated in the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74287), the CY
2013 OPPS/ASC final rule with
comment period (77 FR 68363), and 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
appropriately facilitates dissemination
of these new products into clinical
practice and facilitates the collection of
sufficient hospital claims data reflective

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least 2 but no more than 3 years, is
appropriate 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.
Comment: One commenter stated that
the pass-through status for HCPCS code
Q4131 (Epifix, per square centimeter)
should not expire on December 31,
2013, because this product has not
received pass-through payments for a
period of at least 2 years after the
payment was first made for this product
as a hospital outpatient service under
Medicare Part B, as required by statute.
The commenter indicated that passthrough payment for HCPCS code
Q4131 was first made in February 2012.
Response: Upon review of our CY
2012 claims data, we agree with the
commenter that HCPCS code Q4131 has

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not received pass-through payments for
the minimum period of ‘‘at least 2
years’’ as required by statute. Therefore,
we are not finalizing our proposal to
expire the pass-through status for
HCPCS code Q4131 on December 31,
2013.
After consideration of the public
comments we received, we are
modifying our proposal to expire the
pass-through status of the 15 drugs and
biologicals that were listed in Table 19
of the CY 2014 OPPS/ASC proposed
rule (78 FR 43599). The pass-through
status for HCPCS code Q4131 will not
expire on December 31, 2013, but will
continue for CY 2014. Table 32 lists the
drugs and biologicals for which passthrough status will expire on December
31, 2013, as well as the final status
indicators and the final APC
assignments for these drugs and
biologicals for CY 2014.

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of their costs for future OPPS
ratesetting. Our longstanding practice
has been to provide pass-through
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, we begin
pass-through payment on a quarterly
basis, depending on when applications
are submitted to us for consideration.
We are confident that the period of time
for which drugs, biologicals, contrast
agents, and radiopharmaceuticals
receive pass-through status, which is at

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3. Drugs, Biologicals, and
Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY
2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43599), we proposed to
continue pass-through status in CY 2014
for 18 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, 2013. These
drugs and biologicals, which were
approved for pass-through status
between April 1, 2012 and July 1, 2013,
were listed in Table 20 of the proposed
rule (78 FR 43600). The APCs and
HCPCS codes for these drugs and
biologicals approved for pass-through
status through April 1, 2013 were
assigned status indicator ‘‘G’’ in
Addenda A and B of the proposed rule.
Addenda A and B for the proposed rule
are 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 stated in the
proposed rule that we believe it is
consistent with the statute to propose to
continue to provide payment for drugs
and biologicals with pass-through status
at a rate of ASP+6 percent in CY 2014,
which is the amount that drugs and
biologicals receive under section
1842(o) of the Act.
Therefore, for CY 2014, 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 2014. We proposed that a
$0.00 pass-through payment amount
would be paid for most pass-through
drugs and biologicals under the CY 2014
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 policy-packaged drugs
(which include contrast agents,
diagnostic radiopharmaceuticals,
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policy packaged products described in
section II.A.3. of this final rule with
comment period, namely drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure and drugs
and biologicals that function as supplies
when used in a surgical procedure), we
proposed that their pass-through
payment amount would be equal to
ASP+6 percent for CY 2014 because, if
not on pass-through status, payment for
these products would be packaged into
the associated procedure.
In addition, we proposed to continue
to update pass-through payment rates
on a quarterly basis on the CMS Web
site during CY 2014 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).
In CY 2014, as is consistent with our
CY 2013 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 2014, 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
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: One commenter requested
that CMS provide a higher payment
amount for radiopharmaceuticals that
are granted pass-through status.
Response: We note that, for CY 2014,
consistent with our CY 2013 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

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OPPS, uses several sources of data as a
basis for payment, including the ASP,
WAC if ASP is unavailable, and 95
percent of the radiopharmaceutical’s
most recent AWP if ASP and WAC are
unavailable. For purposes of passthrough payment, we consider
radiopharmaceuticals to be drugs under
the OPPS. Therefore, if a diagnostic or
therapeutic radiopharmaceutical
receives pass-through status during CY
2014, we proposed to follow the
standard ASP methodology to determine
its pass-through payment rate under the
OPPS to account for the acquisition as
well as pharmacy overhead and
handling costs. We continue to believe
that a single payment is appropriate for
diagnostic radiopharmaceuticals with
pass-through status in CY 2014, 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 handling and
overhead costs.
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 2014, 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
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. of this final rule with comment
period, over the last 6 years, we
implemented a policy whereby payment
for all nonpass-through diagnostic
radiopharmaceuticals, contrast agents,
and anesthesia drugs is packaged into
payment for the associated procedure.
In the CY 2014 OPPS/ASC proposed
rule, we proposed to continue the
packaging of these items, and we also
proposed new groups of policypackaged products described in section
II.A.3. of the proposed rule, namely
drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test

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or procedure and drugs and biologicals
that function as supplies when used in
a surgical procedure, regardless of their
per day cost, in CY 2014. 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 policy-packaged 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
policy-packaged drug APC offset
amount for the associated clinical APC
in which the drug or biological is
utilized. The calculation of the policypackaged 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
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 2013, we proposed to
continue to set the associated
copayment amount to zero for CY 2014
for pass-through diagnostic

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radiopharmaceuticals, contrast agents,
and anesthesia drugs that would
otherwise be packaged if the item did
not have pass-through status. We also
proposed to set the associated
copayment amount to zero for the
additional categories of policy-packaged
products proposed for CY 2014
described in section II.A.3. of the
proposed rule.
The separate OPPS payment to a
hospital for the pass-through diagnostic
radiopharmaceutical, contrast agent,
anesthesia drug, and the additional
categories of policy-packaged products
proposed for CY 2014 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 are available via the Internet on
the CMS Web site).
Comment: Commenters supported the
CY 2014 proposal to continue to set the
associated copayment amounts to zero
for pass-through diagnostic
radiopharmaceuticals, contrast agents,
and other drugs and biologicals that
would otherwise be packaged if the
product did not have pass-through
status. The commenters noted that this
policy is consistent with statutory
requirements and provides cost-saving
benefits to beneficiaries. One
commenter requested that CMS expand
the $0 copayment policy to passthrough therapeutic
radiopharmaceuticals as well.
Response: We appreciate the
commenters’ support of our proposal.
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

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adjustment was not applied. Therefore,
we believe that the copayment amount
should be zero for drugs and biologicals
that would otherwise be packaged if the
item did not have pass-through status.
However, therapeutic
radiopharmaceuticals without passthrough status are not packaged but are
paid at ASP+6 percent. Therefore, the
copayment for a therapeutic
radiopharmaceutical with pass-through
status cannot be zero but must be based
on the payment amount for the
therapeutic radiopharmaceutical when
it does 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,
contrast agents, and anesthesia drugs
that would otherwise be packaged if the
item did not have pass-through status to
zero for CY 2014. We also are finalizing
our proposal to extend this policy to the
additional categories of policy-packaged
drugs and biologicals that have passthrough status, and to set a copayment
amount of zero for these drugs and
biologicals for CY 2014.
The 26 drugs and biologicals that will
continue to have pass-through status for
CY 2014 or have been granted passthrough status as of January 2014 are
shown in Table 33 below. As is our
standard methodology, we annually
review new permanent HCPCS codes
and delete temporary HCPCS C-codes if
an alternate permanent HCPCS code is
available for purposes of OPPS billing
and payment. Table 33 includes those
coding changes.
BILLING CODE 4120–01–P

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TABLE 33.-DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS
IN CY2014

CY2013
HCPCS
Code

CY
2014
HCPCS
Code

C1204

A9520

C9130

11556

C9131

J9354

C9132

C9132

C9290
C9292
C9293
C9294
C9295
C9296

C9290
J9306
C9293
13060
J9047
J9400

C9297

J9262

C9298

17316

N/A

C9133

N/A
N/A
N/A

C9441
C9497
17508

N/A

J9371

10178

J0178

10716

J0716

17315
J9019
Q4122
Q4127
Q4131
Q4132
Q4133

17315
J9019
Q4122
Q4127
Q4131
Q4132
Q4133

CY 2014 Long Descriptor
Technetium Tc 99m tilmanocept, diagnostic,
up to 0.5 millicuries
Injection, immune globulin (Bivigam), 500
mg
Injection, ado-trastuzumab emtansine, 1 mg
Prothrombin complex concentrate (human),
Kcentra, per i.u. of Factor IX activity
Injection, bupivicaine liposome, 1 mg
Injection, pertuzumab, 1 mg
Injection, glucarpidase, 10 units
Injection, taliglucerase alfa, 10 units
Injection, carfilzomib, 1 mg
Injection, ziv-aflibercept, 1 mg
Injection, omacetaxine mepesuccinate, 0.01
mg
Injection, ocriplasmin, 0.125 mg
Factor ix (antihemophilic factor,
recombinant), Rixubus, per i.u.
Injection, ferric carboxymaltose, 1 mg
Loxapine, inhalation powder, 10 mg
Tacrolimus, Extended Release, Oral, 0.1 mg
Injection, Vincristine Sulfate Liposome, 1
mg
Injection, aflibercept, 1 mg vial
Injection, centruroides (scorpion) immune
f(ab)2, up to 120 milligrams
Mitomycin, ophthalmic, 0.2 mg
Injection, asparaginase (erwinaze), 1,000 iu
Dermacell, per square centimeter
Talymed, per square centimeter
Epifix, per square centimeter
Grafix core, per square centimeter
Grafix prime, per square centimeter

Final
CY
2014 SI

Final
CY
2014
APC

G

1463

G

9130

G

9131

G

9132

G
G
G
G
G
G

9290
9292
9293
9294
9295
9296

G

9297

G

9298

G

1467

G
G
G

9441
9497
1465

G

1466

G

1420

G

1431

G
G
G
G
G
G
G

1448
9289
1419
1449
9366
9368
9369

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*HCPCS codes C9133, C9441, C9497, 17508, and J9371 are effective January 1,2014.

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BILLING CODE 4120–01–C

4. Provisions for Reducing Transitional
Pass-Through Payments for Diagnostic
Radiopharmaceuticals; Contrast Agents;
Drugs, Biologicals, and
Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic
Test or Procedure; and Drugs and
Biologicals That Function as Supplies
When Used in a Surgical Procedure 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 2014, in the CY 2014
OPPS/ASC proposed rule (78 FR 43601),
we proposed to continue to package
payment for all nonpass-through
diagnostic radiopharmaceuticals,
contrast agents, and anesthesia drugs
and to begin packaging all nonpassthrough drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure and drugs and biologicals
that function as supplies when used in
a surgical procedure, as discussed in
section II.A.3. of 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
difference between the amount paid
under section 1842(o) of the Act and the
otherwise applicable OPD fee schedule
amount. There are currently two
diagnostic radiopharmaceuticals with
pass-through status under the OPPS.
HCPCS code A9584 (Iodine I–123
ioflupane, diagnostic, per study dose,

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up to 5 millicuries) was granted passthrough status using HCPCS code C9406
beginning July 1, 2011, and we
proposed that its pass-through status
would expire on December 31, 2013.
HCPCS code C1204 (Technetium Tc
99m tilmanocept, diagnostic, up to 0.5
millicuries) was granted pass-through
status beginning October 1, 2013. We
currently apply the established
radiopharmaceutical payment offset
policy to pass-through payment for
these products. 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 new passthrough diagnostic
radiopharmaceuticals 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 policy-packaged
drug offset fraction for APCs containing
nuclear medicine 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

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orifice) with newly approved passthrough status beginning in CY 2010 or
later as devices, for purposes of the
OPPS, 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.
For CY 2014, as we did in CY 2013, we
proposed to continue to apply the
diagnostic radiopharmaceutical offset
policy to payment for pass-through
diagnostic radiopharmaceuticals.
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 and to report a
token charge of less than $1.01 in cases
in which the diagnostic
radiopharmaceutical is received without
cost or with full credit. Beginning in CY
2014, we proposed to no longer require
hospitals to append modifier ‘‘FB’’ to
specified nuclear medicine procedures
or to report a token charge of less than
$1.01 in cases in which the diagnostic
radiopharmaceutical is received at no
cost/full credit (78 FR 43601). Under
this proposed policy, the OPPS payment
amount for nuclear medicine
procedures are not reduced when a
diagnostic radiopharmaceutical is
received at no cost or full credit. Based
on claims data, it appears that hospitals
rarely receive diagnostic
radiopharmaceuticals at no cost or full
credit. Therefore, we do not believe that
the burden on hospitals of adhering to
the nuclear medicine ‘‘FB’’ modifier
policy continues to be warranted.
Comment: Commenters recommended
that CMS publish preliminary offset
amounts for 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 2014 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/HospitalOutpatientPPS/
index.html. This Web site includes

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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.
Comment: One commenter believed
that CMS should not discontinue the

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requirement for hospitals to append
modifier ‘‘FB’’ to specified nuclear
medicine procedures in cases in which
the diagnostic radiopharmaceutical is
received at no cost or full credit. The
commenter suggested that this is a
relatively new policy and, therefore,
should be maintained for at least
another year.
Response: Based on claims data, it
appears that hospitals rarely receive
diagnostic radiopharmaceuticals at no
cost or full credit. Therefore, we do not
believe that the ‘‘FB’’ modifier policy, as
it relates to diagnostic
radiopharmaceuticals, is warranted.
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 2014 OPPS/ASC
proposed rule (78 FR 43601). We will

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continue to reduce the payment amount
for procedures in the APCs listed in
Table 34 in this final rule with comment
period by the full policy-packaged offset
amount appropriate for diagnostic
radiopharmaceuticals. We also are
finalizing our proposal to no longer
require hospitals to append modifier
‘‘FB’’ to specified nuclear medicine
procedures or to report a token charge
of less than $1.01 in cases in which the
diagnostic radiopharmaceutical is
received at no cost or full credit. Under
this finalized policy, the OPPS payment
amount for nuclear medicine
procedures is not reduced when a
diagnostic radiopharmaceutical is
received at no cost or full credit.
Table 34 below displays the APCs to
which nuclear medicine procedures will
be assigned in CY 2014 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. Currently, there are no contrast
agents with pass-through status under
the OPPS. As described in section
V.A.4.c. of the proposed rule (78 FR
43602), we proposed that new passthrough contrast agents would be paid
at ASP+6 percent, while those new
pass-through contrast agents without
ASP information would be paid at
WAC+6 percent or, if WAC is not
available, at 95 percent of the product’s
most recently published AWP.
Although there are currently 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 passthrough status during CY 2014 in order
to provide an appropriate transitional
pass-through payment for new contrast
agents because all of these items are
packaged when they do not have passthrough status. In accordance with our
standard offset methodology, in the CY
2014 OPPS/ASC proposed rule (78 FR
43602), we proposed, for new contrast
agents that are approved for passthrough status as a drug or biological
during CY 2014, to deduct from the
payment an amount that reflects the
portion of the APC payment associated
with predecessor contrast agents. This
was proposed in order to ensure that no
duplicate contrast agent payment is
made.
In CY 2010, we established a policy
to estimate the portion of each APC
payment rate that could reasonably be

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attributed to the cost of predecessor
contrast agents when considering new
contrast agents for pass-through
payment (74 FR 60482 through 60484).
For CY 2014, as we did in CY 2013, we
proposed to continue to apply this same
policy to contrast agents. Specifically,
we proposed to utilize the policypackaged drug offset fraction for
procedural APCs, 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. To
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 policy
packaged 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 2014 to recognize
that when a contrast agent with passthrough status is billed with any
procedural APC listed in Table 22 of the
proposed rule (78 FR 43602 through
43603), a specific offset based on the
procedural APC would be applied to the
payment for the contrast agent to ensure
that duplicate payment is not made for
the contrast agent.
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 policy-packaged
drug amount greater than $20 that is not
a nuclear medicine APC identified in
Table 34 above, and these APCs are
displayed in Table 35 below. The
methodology used to determine a

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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 2014, we
proposed to continue to recognize that
when a contrast agent with pass-through
status is billed with any procedural APC
listed in Table 22 of the proposed rule
(78 FR 43602 through 43603), 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.
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
percentages of APC payment associated
with packaged implantable devices,
‘‘policy packaged’’ drugs, and
‘‘threshold-packaged’’ drugs and
biologicals for every OPPS clinical APC.
After consideration of the public
comments we received, we are
finalizing our proposal for CY 2014
without modification. We will continue
to recognize that when a contrast agent
with pass-through status is billed with
any procedural APC listed in Table 35
below, a specific offset based on the
procedural APC will be applied to the
payment for the contrast agent to ensure
that duplicate payment is not made for
the contrast agent.

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d. Payment Offset Policy for Products
Packaged According to the Policy To
Package Drugs, Biologicals, and
Radiopharmaceuticals That Function as
Supplies When Used in a Diagnostic
Test or Procedure and Drugs and
Biologicals That Function as Supplies
When Used in a Surgical Procedure
Section 1833(t)(6)(D)(i) of the Act
specifies that the transitional pass-

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through 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. As discussed in section II.A.3.
of the CY 2014 OPPS/ASC proposed
rule, as a part of our proposed policy to
package drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test

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or procedure and drugs and biologicals
that function as supplies when used in
a surgical procedure, we specifically
proposed that skin substitutes and stress
agents used in myocardial perfusion
imaging (MPI) be policy packaged in CY
2014, in addition to diagnostic
radiopharmaceuticals, contrast agents,
and anesthesia drugs (78 FR 43570
through 43572). We believe that a
payment offset, similar to the offset

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currently in place for pass-through
devices, diagnostic
radiopharmaceuticals, and contrast
agents, is necessary in order to provide
an appropriate transitional pass-through
payment for drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure and drugs and biologicals
that function as supplies when used in
a surgical procedure because all of these
are packaged, or proposed to be
packaged, when they do not have passthrough status. In accordance with our
standard offset methodology, we
proposed for CY 2014 to deduct an
amount that reflects the portion of the
APC payment associated with
predecessor products in order to ensure
no duplicate payment is made from the
payment for pass-through drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure and drugs
and biologicals that function as supplies
when used in a surgical procedure (78
FR 43603).
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).
For CY 2014, we proposed to apply this
same policy to drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure and drugs and biologicals
that function as supplies when used in
a surgical procedure (78 FR 43603).
Specifically, in the case of pass-through
skin substitutes, we proposed to utilize

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the policy-packaged drug offset fraction
for skin substitute procedural APCs,
calculated as 1 minus the following: 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.
Because policy packaged
radiopharmaceuticals also would be
included in the drug offset fraction for
the APC to which MPI procedures are
assigned, in the case of pass-through
stress agents, we proposed to utilize the
policy-packaged drug offset fraction for
the procedural APC, calculated as 1
minus the following: The cost from
single procedure claims in the APC after
removing the cost for policy-packaged
drugs excluding policy-packaged
diagnostic radiopharmaceuticals
divided by the cost from single
procedure claims in the APC. To
determine the actual APC offset amount
for pass-through skin substitutes and
pass-through stress 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 skin
substitute or pass-through stress agent is
used and, accordingly, reduce the
separate OPPS payment for the passthrough skin substitute or pass-through
stress agent by this amount (78 FR
43603).
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our proposal, without
modification, to recognize that when a
skin substitute with pass-through status
is billed with any procedural APC listed
in Table 36 below, a specific offset

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based on the procedural APC will be
applied to the payment for the skin
substitute to ensure that duplicate
payment is not made for the skin
substitute. In addition, when a stress
agent with pass-through status is billed
with any procedural APC listed in Table
37 below, a specific offset based on the
procedural APC will be applied to the
payment for the stress agent to ensure
that duplicate payment is not made for
the stress agent.
Table 36 below displays the APCs to
which skin substitute procedures will
be assigned in CY 2014 and for which
we expect that an APC offset could be
applicable in the case of skin substitutes
with pass-through status.
Table 37 below displays the APCs to
which MPI procedures will be assigned
in CY 2014 and for which we expect
that an APC offset could be applicable
in the case of a stress agent with passthrough status.
As we proposed, 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 and establishing any
appropriate APC offset amounts.
Specifically, the file will continue to
provide the amounts and percentages of
APC payment associated with packaged
implantable devices, policy-packaged
drugs, and threshold packaged drugs
and biologicals for every OPPS clinical
APC.

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B. OPPS Payment for Drugs, Biologicals,
and Radiopharmaceuticals Without
Pass-Through Status
1. Background
Under the CY 2013 OPPS, we
currently pay for drugs, biologicals, and
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
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
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

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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
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;

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for CY 2012, we set the packaging
threshold at $75; and for CY 2013, we
set the packaging threshold at $80.
Following the CY 2007 methodology,
for the CY 2014 OPPS/ASC proposed
rule (78 FR 43604), 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
2014 and rounded the resulting dollar
amount ($87.70) to the nearest $5
increment, which yielded a figure of
$90. In performing this calculation, we
used the most recent forecast of the
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
refer below to this series generally as the
PPI for Prescription Drugs.
We chose the PPI for Prescription
Drugs 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

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comment period) and have been
incorporated into our calculation. Based
on the calculations described above, we
proposed a packaging threshold for CY
2014 of $90. (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, Certain
Biologicals, and Therapeutic
Radiopharmaceuticals (‘‘ThresholdPackaged Drugs’’)
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43604), to determine the
proposed CY 2014 packaging status for
all nonpass-through drugs and
biologicals that are not policy packaged,
we calculated, on a HCPCS codespecific basis, the per day cost of all
drugs, biologicals, and therapeutic
radiopharmaceuticals (collectively
called ‘‘threshold-packaged’’ drugs) that
had a HCPCS code in CY 2012 and were
paid (via packaged or separate payment)
under the OPPS. We used data from CY
2012 claims processed before January 1,
2013 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 the proposed rule, or
for diagnostic radiopharmaceuticals,
contrast agents, anesthesia drugs, and
implantable biologicals that we
proposed to continue to package in CY
2014, or for the new categories of
policy-packaged products proposed for
CY 2014, as discussed in section II.A.3.
of the proposed rule.
In order to calculate the per day costs
for drugs, biologicals, and therapeutic
radiopharmaceuticals to determine their
proposed packaging status in CY 2014,
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 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 biologicals for CY 2014, as
discussed in more detail in section
V.B.3.b. of the proposed rule) to
calculate the CY 2014 proposed rule per
day costs. We used the manufacturer
submitted ASP data from the fourth
quarter of CY 2012 (data that were used
for payment purposes in the physician’s
office setting, effective April 1, 2013) to

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determine the proposed rule per day
cost.
As is our standard methodology, for
CY 2014, we proposed to use payment
rates based on the ASP data from the
fourth quarter of CY 2012 for budget
neutrality estimates, packaging
determinations, impact analyses, and
completion of Addenda A and B to the
proposed rule (which are 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 also were the basis for drug
payments in the physician’s office
setting, effective April 1, 2013. 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
2012 hospital claims data to determine
their per day cost.
We proposed to package items with a
per day cost less than or equal to $90,
and identify items with a per day cost
greater than $90 as separately payable.
Consistent with our past practice, we
crosswalked historical OPPS claims data
from the CY 2012 HCPCS codes that
were reported to the CY 2013 HCPCS
codes that we displayed in Addendum
B of the proposed rule (which is
available via the Internet on the CMS
Web site) for payment in CY 2014.
Comment: The majority of
commenters objected to the proposed
increase in the OPPS packaging
threshold to $90 for CY 2014. The
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 $80 for CY 2014. A few
commenters suggested that CMS limit
increases in the packaging threshold
amount to the hospital market basket
update factor for the year that is
reflective of all statutory adjustments.
Response: 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
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

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75021

commenters’ recommendations to pay
separately for all drugs, biologicals, and
radiopharmaceuticals for CY 2014 or to
eliminate or to freeze the packaging
threshold at $80.
We disagree with the commenters
who suggested that CMS 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 of 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. 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.
Since publication of the CY 2014
OPPS/ASC proposed rule, consistent
with our policy of updating the
packaging threshold with more recently
available data for this final rule with
comment period, we have again
followed the CY 2007 methodology for
CY 2014 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 2014. We
then rounded the resulting updated
dollar amount ($91.27) to the nearest $5
increment, which yielded a figure of
$90. Therefore, after consideration for
the public comments we received, and
consistent with our methodology for

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establishing the packaging threshold
using the most recent PPI forecast data,
we are adopting a CY 2014 packaging
threshold of $90.
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, 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 biologicals in this
final rule with comment period, we
used ASP data from the first quarter of
CY 2013, 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, 2013, along with
updated hospital claims data from CY
2012. We note that we also used these
data for budget neutrality estimates and
impact analyses for this final rule with
comment period.
Payment rates for HCPCS codes for
separately payable drugs and 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 2013. 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, 2013.
These payment rates will then be
updated in the January 2014 OPPS
update, based on the most recent ASP
data to be used for physician’s office
and OPPS payment as of January 1,
2014. For items that do not currently
have an ASP-based payment rate, we
recalculated their mean unit cost from
all of the CY 2012 claims data and
updated cost report information
available for this CY 2014 final rule
with comment period to determine their
final per day cost.
Consequently, the packaging status of
some HCPCS codes for drugs,
biologicals, and therapeutic
radiopharmaceuticals in this CY 2014
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

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(69 FR 65780) in order to more equitably
pay for those drugs whose cost
fluctuates relative to the proposed CY
2014 OPPS drug packaging threshold
and the drug’s payment status (packaged
or separately payable) in CY 2013.
Specifically, for CY 2014, consistent
with our historical practice, we
proposed to apply the following policies
to these HCPCS codes for drugs,
biologicals, and therapeutic
radiopharmaceuticals whose
relationship to the drug packaging
threshold changes based on the updated
drug packaging threshold and on the
final updated data:
• HCPCS codes for drugs and
biologicals that were paid separately in
CY 2013 and that were proposed for
separate payment in CY 2014, and that
then have per day costs equal to or less
than the CY 2014 final rule drug
packaging threshold, based on the
updated ASPs and hospital claims data
used for the CY 2014 final rule, would
continue to receive separate payment in
CY 2014.
• HCPCS codes for drugs and
biologicals that were packaged in CY
2013 and that are proposed for separate
payment in CY 2014, and that then have
per day costs equal to or less than the
CY 2014 final rule drug packaging
threshold, based on the updated ASPs
and hospital claims data used for the CY
2014 final rule, would remain packaged
in CY 2014.
• HCPCS codes for drugs and
biologicals for which we proposed
packaged payment in CY 2014 but then
have per day costs greater than the CY
2014 final rule drug packaging
threshold, based on the updated ASPs
and hospital claims data used for the CY
2014 final rule, would receive separate
payment in CY 2014.
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 2014 OPPS drug packaging
threshold and the drug’s payment status
(packaged or separately payable) in CY
2013. Therefore, we are finalizing our
proposal, without modification, for CY
2014.
We note that we proposed to package
HCPCS codes 90734 (Meningococcal
conjugate vaccine, serogroups a, c, y and
w-135 (tetravalent), for intramuscular
use), J0630 (Injection, calcitonin
salmon, up to 400 units), and J1570
(Injection, ganciclovir sodium, 500 mg)
for CY 2014. Using updated ASPs and
the CY 2012 hospital claims data
available for this final rule with
comment period, HCPCS codes 90734,

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J0630, and J1570 now have per day costs
greater than $90. In accordance with our
established policy for such cases, for CY
2014 we will pay for HCPCS codes
90734, J0630, and J1570 separately.
In addition, because we did not have
claims data for HCPCS code J7191
(Factor viii (antihemophilic factor
(porcine)), per IU) in the CY 2014 OPPS/
ASC proposed rule, we had proposed a
status indicator of ‘‘E’’ for this product
in CY 2014. However, since publication
of the proposed rule, we have received
claims data and the per day cost for this
product is more than the $90 CY 2014
packaged threshold. HCPCS code J7191
will be paid separately and will be
assigned a status indicator of ‘‘K’’ for CY
2014.
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

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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
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 2014, 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 2014 OPPS/ASC proposed
rule (78 FR 43606), we proposed to
continue our policy to make packaging

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determinations on a drug-specific basis,
rather than a HCPCS code-specific basis,
for those HCPCS codes that describe the
same drug or biological but different
dosages in CY 2014.
For CY 2014, 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 2012 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 2014
OPPS/ASC final rule with comment
period 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
2012 claims data to make the packaging
determinations for these drugs: HCPCS
codes J3471 (Injection, hyaluronidase,
ovine, preservative free, per 1 usp unit
(up to 999 usp units)); 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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75023

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 doses, 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 $90 (so that all HCPCS codes
for the same drug or biological would be
packaged) or greater than $90 (so that 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 2014 proposal,
without modification, to continue to
make packaging determinations on a
drug-specific basis, rather than a HCPCS
code-specific basis, for those HCPCS
codes that describe the same drug or
biological but different dosages. The
packaging status of each drug and
biological HCPCS code to which this
methodology will apply is displayed in
Table 38 below.
BILLING CODE 4120–01–P

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TABLE 38.-HCPCS CODES TO WHICH THE CY 2014 DRUG-SPECIFIC
PACKAGING DETERMINATION METHODOLOGY APPLIES

J2788
J2790
J2920
J2930
J3120
J3130
J3471

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J3472
J7050
J7040
J7030
J7515
J7502
J8520
J8521
J9250
J9260

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CY 2014 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)
Infusion, normal saline solution, 1000 cc
Cyclosporine, oral, 25 mg
Cyclosporine, oral, 100 mg
Capecitabine, oral, 150 mg
Capecitabine, oral, 500 mg
Methotrexate sodium, 5 mg
Methotrexate sodium, 50 mg

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10DER4

CY2014
SI
K
K
N
N
N
N
N
K
K
K
K
N
N
N
N
N
N

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

ER10DE13.336

CY2014
HCPCS
Code
C9257
J9035
11020
11030
11040
11070
11080
11440
11441
11460
11560
11642
11644
11850
J1840
J2270
J2271

Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

QOl64

Q0165

Q0167

Q0168

Q0169

Q0170

Q0171

Q0172

QOl75

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Q0176

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CY 2014 Long Descriptor
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 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
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 chemotherapy
treatment, not to exceed a 48-hour dosage regimen
Chlorpromazine hydrochloride, 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
Perphenazine, 4 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
Perphenazine, 8 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

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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
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’’ (known as a
SCOD) is defined as 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
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 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
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

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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.
Section 1833(t)(14)(E)(ii) of the Act
provides for an adjustment in OPPS
payment rates for SCODs to take into
account 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) 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 determination rather than a
statutory requirement. In the CY 2014
OPPS/ASC proposed rule (78 FR 43608),
we proposed to apply section
1833(t)(14)(A)(iii)(II) of the Act to all
separately payable drugs and
biologicals, including SCODs. Although

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we do not distinguish SCODs in this
discussion, we note that we are required
to apply section 1833(t)(14)(A)(iii)(II) of
the Act to SCODs, but we also are
applying this provision to other
separately payable drugs and
biologicals, consistent with our history
of using the same payment methodology
for all separately payable drugs and
biologicals.
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
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).
We referred 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

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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
to keep the redistribution ratio constant
between the proposed rule and the final
rule. For a detailed discussion of our
OPPS drug payment policies from CY
2006 to CY 2012, we refer readers to the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68383 through
68385).
We noted in the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68386) that 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 stated 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
indicated our concern that the
continued use of the 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.
In that final rule with comment
period, we discussed that 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
as necessary. In the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68386), we noted that section
1833(t)(14)(A)(iii)(II) of the Act
authorizes the Secretary to calculate and
adjust, as necessary, the average price
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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,
Part B drugs are paid at ASP+6 percent
when furnished in physicians’ offices.
We indicated that we believe that
establishing the payment rates based on
the statutory default of ASP+6 percent
is appropriate as it yields increased
predictability in payment for separately
payable drugs and biologicals under the
OPPS. We also noted that ASP+6
percent is an appropriate payment
amount because it is consistent with the
range of payment amounts yielded by
our drug payment methodologies over
the past 7 years. Therefore, 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 final rule with comment
period (77 FR 68389), we finalized our
proposal 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, referred
to as the statutory default. We also
finalized our proposal 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, 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
biological for CY 2013 (77 FR 68389).
b. CY 2014 Payment Policy
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43608), we proposed to
continue our CY 2013 policy and pay
for separately payable drugs and
biologicals at ASP+6 percent pursuant
to section 1833(t)(14)(A)(iii)(II) of the
Act, referred to as the ‘‘statutory
default.’’ 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. We also 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.

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Comment: Commenters 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. 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. One commenter
recommended that CMS design a
payment strategy that would maintain
the current ASP+6 percent for branded
drug products but provide for a much
higher payment rate for multi-source
generic drugs.
Response: We appreciate the
commenters’ support of our proposal.
We continue to believe that ASP+6
percent based on the statutory default is
appropriate for hospitals for CY 2014
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 2014. With
regard to the development of a multitiered payment strategy that would
encourage the use of generic drugs over
their branded counterparts, we made no
such proposal and, therefore, consider
this comment outside the scope of the
proposed rule.
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.
Response: We do not accept the
commenter’s recommendation that CMS
require drugs and biologicals to be
reported under revenue code 0636. We
believe that drugs and biologicals also
may 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. In addition, 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.

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Comment: One commenter asked that,
for CY 2014, CMS consider paying for
influenza and PPV vaccines at 106
percent of ASP instead of paying for the
items at reasonable cost.
Response: We consider this comment
outside the scope of the proposed rule.
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 (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 2014. 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 2014 payment of ASP+6
percent for separately payable nonpassthrough 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, 2013, or
WAC, AWP, or mean unit cost from CY
2012 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 2014
payment rates. This is because payment
rates for drugs and biologicals with ASP
information for January 2014 will be
determined through the standard
quarterly process where ASP data
submitted by manufacturers for the
third quarter of 2013 (July 1, 2013
through September 30, 2013) are used to
set the payment rates that are released
for the quarter beginning in January
2014 near the end of December 2013. 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 2013 are based on
mean unit cost in the available CY 2012
claims data. If ASP information becomes
available for payment for the quarter
beginning in January 2014, we will price

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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 2013 ASP data) that do not have
ASP information available for the
quarter beginning in January 2014.
These drugs and biologicals will then be
paid based on mean unit cost data
derived from CY 2012 hospital claims.
Therefore, the payment rates listed in
Addenda A and B to this final rule with
comment period are not for January
2014 payment purposes and are only
illustrative of the CY 2014 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 2013, we established a policy to
pay for separately paid therapeutic
radiopharmaceuticals under the ASP
methodology adopted for separately
payable drugs and biologicals. If ASP
information is unavailable for a
therapeutic radiopharmaceutical, 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 2014.
Therefore, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43609), we
proposed for CY 2014 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. For a
full discussion of ASP-based payment
for therapeutic radiopharmaceuticals,
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 2012 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.

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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 are submitted to
CMS.
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 will 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. Payment based on
WAC or AWP under the established
OPPS ASP methodology for payment of
separately payable drugs and biologicals
is usually temporary for a calendar
quarter until a manufacturer is able to
submit the required ASP data in
accordance with the quarterly ASP
submission timeframes for reporting
under section 1847A of the Act. Because
ASP reporting for OPPS payment of
separately payable therapeutic
radiopharmaceutical is not required, a
manufacturer’s choice to not submit
ASP could result in payment for a
separately payable therapeutic
radiopharmaceutical based on WAC or
AWP for a full year, a result which we
believe would be inappropriate.

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Comment: One commenter indicated
that the proposed payment rate for the
therapeutic radiopharmaceutical
identified by HCPCS code A9517
(Iodine i-131 sodium iodide capsule(s),
therapeutic, per millicurie) decreased by
54 percent compared to the CY 2013
payment rate and questioned the reason
for this proposed reduction.
Response: The CY 2013 payment rate
for HCPCS code A9517 is $17.74 per
millicurie. The proposed CY 2014
payment rate for HCPCS code A9517
was $18.70, which is a 5.4 percent
increase compared to the CY 2013
payment rate. The final CY 2014
payment rate for HCPCS code A9517 is
$18.52, which is a 4.4 percent increase
compared to the CY 2013 payment rate.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to pay all
nonpass-through, separately payable
therapeutic radiopharmaceuticals at
ASP+6 percent. We are also finalizing
our proposal to continue to rely on CY
2012 mean unit cost data derived from
hospital claims data for payment rates
for therapeutic radiopharmaceuticals for
which ASP data are unavailable. The CY
2014 final rule payment rates for
nonpass-through separately payable
therapeutic radiopharmaceuticals are
included in Addenda A and B to this
final rule with comment period (which
are available via the Internet on the
CMS Web site).
5. Payment for Blood Clotting Factors
For CY 2013, 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 2013, we provided payment for
blood clotting factors under the OPPS at
ASP+6 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 2013 updated
furnishing fee was $0.188 per unit.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43609), for CY 2014, we
proposed to pay for blood clotting
factors at ASP+6 percent, consistent
with our proposed payment policy for
other nonpass-through 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
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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
applicable program instructions and
posting on the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Part-B-Drugs/
McrPartBDrugAvgSalesPrice/
index.html.
Comment: Commenters supported
CMS’ proposal to pay for blood clotting
factors at ASP+6 percent and to
continue to apply the furnishing fee for
blood clotting factors provided in the
OPD.
Response: We appreciate the
commenters’ support of our policy.
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
subsequent years 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 was no
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payment for such drugs, 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 biologicals with
HCPCS codes that do not have passthrough 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
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 CYs 2011, 2012, and 2013,
paying for new drugs, biologicals, and

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radiopharmaceuticals that do not have
pass-through status, and are without
OPPS hospital claims data at ASP+5
percent, ASP+4 percent, and ASP+6
percent, respectively, consistent with
the final OPPS payment methodology
for other separately payable drugs and
biological during those payment years.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43610), we proposed to
provide payment for new drugs,
biologicals, and therapeutic
radiopharmaceuticals that do not have
pass-through status at ASP+6 percent,
consistent with the proposed CY 2014
payment methodology for other
separately payable nonpass-through
drugs, 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,
biologicals, and therapeutic
radiopharmaceuticals would be treated
like other drugs, biologicals, and
therapeutic radiopharmaceuticals under
the OPPS.
For CY 2014, we also proposed to
package payment for all new nonpassthrough policy-packaged products
(diagnostic radiopharmaceuticals,
contrast agents, anesthesia drugs, drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure, and drugs
and biologicals that function as supplies
when used in a surgical procedure) with
HCPCS codes but without claims data
(those new CY 2014 HCPCS codes that
do not crosswalk to predecessor HCPCS
codes). This is consistent with the
proposed policy packaging of all
existing nonpass-through diagnostic
radiopharmaceuticals, contrast agents,
anesthesia drugs, drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure, and drugs and biologicals
that function as supplies when used in
a surgical procedure, as discussed in
more detail in section II.A.3. of the
proposed rule and this final rule with
comment period.
In accordance with the OPPS ASP
methodology, in the absence of ASP
data, for CY 2014, we proposed to
continue our policy 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. 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’’
(Separately paid nonpass-through drugs
and biologicals, including therapeutic
radiopharmaceuticals) to HCPCS codes

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for new drugs and biologicals without
OPPS claims data and for which we
have not granted pass-through status.
With respect to new nonpass-through
drugs and biologicals 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 2014 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 and biologicals
would be treated like other drugs and
biologicals 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, we proposed to announce any
changes to the payment amounts for
new drugs and biologicals in this CY
2014 OPPS/ASC final rule with
comment period and also on a quarterly
basis on the CMS Web site during CY
2014 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 also
would be changed accordingly based on
later quarter ASP submissions. We note
that the new CY 2014 HCPCS codes for
drugs, biologicals, and therapeutic
radiopharmaceuticals were not available
at the time of development of the

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proposed rule. However, these agents
are included in Addendum B to this CY
2014 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 2014 OPPS/ASC final rule with
comment period.
There are several nonpass-through
drugs and biologicals that were payable
in CY 2012 and/or CY 2013 for which
we did not have CY 2012 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. In order to determine
the packaging status of these products
for CY 2014, we proposed to continue
our policy to calculate 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 (78 FR 43610). This
rationale was first adopted in the CY
2006 OPPS/ASC final rule with
comment period (70 FR 68666 and
68667). We proposed to package items
for which we estimated the per day
administration cost to be less than or
equal to $90 and to pay separately for
items for which we estimated the per
day administration cost to be greater
than $90 (with the exception of
diagnostic radiopharmaceuticals,
contrast agents, anesthesia drugs, drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure, and drugs
and biologicals that function as supplies
when used in a surgical procedure,
which we proposed to package
regardless of cost) in CY 2014. We also
proposed that the CY 2014 payment for
separately payable items without CY
2012 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 and, if the WAC is also
unavailable, we would make payment at
95 percent of the most recent AWP
available. The proposed estimated units

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per day and status indicators for these
items were displayed in Table 26 of the
proposed rule (78 FR 43611).
Finally, there were 11 drugs and
biologicals, shown in Table 27 of the
proposed rule (78 FR 43612), that were
payable in CY 2012 but for which we
lacked CY 2012 claims data and any
other pricing information for the ASP
methodology for the CY 2014 OPPS/
ASC proposed rule. For CY 2010, we
finalized a policy to assign status
indicator ‘‘E’’ (Not paid by Medicare
when submitted on outpatient claims
(any outpatient bill type)) whenever we
lacked claims data and pricing
information and were unable to
determine the per day cost of a drug or
biological. 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 for the ASP
methodology. We continued this policy
for CY 2011, CY 2012, and CY 2013 (75
FR 71973, 76 FR 74334, and 77 FR

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68396, respectively). For CY 2014, we
proposed to continue to assign status
indicator ‘‘E’’ to drugs and biologicals
that lack CY 2012 claims data and
pricing information for the ASP
methodology. All drugs and biologicals
without CY 2012 hospital claims data
and data based on the ASP methodology
that were assigned status indicator ‘‘E’’
on this basis at the time of the proposed
rule for CY 2014 were displayed in
Table 27 of the proposed rule (78 FR
43612). We also proposed to continue
our policy to assign the products status
indicator ‘‘K’’ and pay for them
separately for the remainder of CY 2014
if pricing information were to become
available.
We did not receive any public
comments on our CY 2014 proposals to
provide payment for new drugs,
biologicals, and therapeutic
radiopharmaceuticals using the ASP
methodology and to use an estimated
per day cost in order to determine the
packaging status of drugs and

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75031

biologicals for which we have pricing
information available but do not have
hospital claims data available.
Therefore, we are finalizing these
proposals without modification. The
final estimated units per day and status
indicators for drugs and biologicals for
which we have pricing information
available but do not have hospital
claims data available for CY 2014 are
displayed in Table 39 below.
We also did not receive any public
comments on our proposal to continue
to assign status indicator ‘‘E’’ to drugs
and biologicals that lack CY 2012 claims
data and pricing information for the
ASP methodology and, therefore, we are
finalizing this proposal without
modification. All drugs and biologicals
without CY 2012 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 2014 are
displayed in Table 40 below.
BILLING CODE 4120–01–P

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CY2014
HCPCS
Code
90581
J0205
J0215
J0364
J0725
J1324
J2724
J2725
J2941
J3355
J7196
J7513
J8562
J8650
J9216
J9226
J9300

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CY 2014 Long Descriptor
Anthrax vaccine, for subcutaneous or
intramuscular use
Injection, alglucerase, per 10 units
Injection, alefacept, O. 5 mg
Injection, apomorphine hydrochloride, 1
mg
Injection, chorionic gonadotropin, per
1,000 usp units
Injection, enfuvirtide, 1 mg
Injection, protein c concentrate,
intravenous, human, 10 iu
Injection, protirelin, per 250 mcg
Injection, somatropin, 1 mg
Injection, urofollitropin, 75 iu
Injection, antithrombin recombinant, 50
i. U.
Daclizumab, parenteral, 25 mg
Fludarabine phosphate, oral, 10 mg
Nabilone, oral, 1 mg
Injection, interferon, gamma I-b, 3
million units
Histrelin implant (supprelin la), 50 mg
Injection, gemtuzumab ozogamicin, 5
mg
Injection, sermorelin acetate, 1
microgram

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Estimated
Average
Number
of Units
Per Day

CY 2014
SI

CY2014
APC

1

K

1422

420
29

K
K

0900
1633

1

N

N/A

1

N

N/A

216

K

1361

1540

K

1139

4
1
2

K

1357

N
K

N/A
1741

268

K

1332

2
1
4

K

1612

N
K

N/A
1424

1

K

0838

1

K

1142

1

K

9004

70

K

3050

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ER10DE13.339

TABLE 39.-DRUGS AND BIOLOGICALS WITHOUT CY 2012 CLAIMS DATA

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C. Nuclear Medicine Procedure-toRadiolabeled Product Edits
Beginning January 1, 2008, CMS
implemented OPPS edits that require
hospitals to include a HCPCS code for
a radiolabeled product when a
separately payable nuclear medicine
procedure is present on a claim. In the
CY 2014 OPPS/ASC proposed rule (78
FR 43612), we proposed to no longer
require the nuclear medicine procedureto-radiolabeled product edits. Under
this proposal, hospitals would still be
expected to adhere to the guidelines of
correct coding and append the correct
radiolabeled product code to the claim

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when applicable. However, claims
would no longer be returned to
providers when HCPCS codes for
radiolabeled products do not appear on
claims with nuclear medicine
procedures.
Comment: Several commenters
indicated that CMS should continue to
apply the nuclear medicine procedureto-radiolabeled product edits to ensure
that all packaged costs are included on
nuclear medicine claims in order to
establish appropriate payment rates in
the future.
Response: We do not agree with
commenters that we should continue
the nuclear medicine procedure-toradiolabeled product edits. We believe

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that hospitals have now had several
years of experience reporting
procedures involving radiolabeled
products and have grown accustomed to
ensuring that they code and report
charges so that their claims fully and
appropriately reflect the costs of those
radiolabeled products. As with all other
items and services recognized under the
OPPS, we expect hospitals to code and
report their costs appropriately,
regardless of whether there are claims
processing edits in place.
After consideration of the public
comments we received, we are
finalizing our proposal to no longer
require the nuclear medicine procedureto-radiolabeled product edits. Hospitals

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will still be expected to adhere to the
guidelines of correct coding and append
the correct radiolabeled product code to
the claim when applicable.

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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 passthrough 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
whether payments exceed the
applicable percentage and the
appropriate prorata 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 2014
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
2014. 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
be newly eligible, for device passthrough payment in the remaining
quarters of CY 2013 or beginning in CY
2014. The sum of the CY 2014 passthrough estimates for these two groups
of device categories equals the total CY
2014 pass-through spending estimate for
device categories with pass-through
status. We base the device pass-through

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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 2013 OPPS/ASC
final rule with comment period (77 FR
68397). 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 pass-through
process and payment methodology (74
FR 60476). As has been our past practice
(76 FR 74335), we include an estimate
of any implantable biologicals eligible
for pass-through payment in our
estimate of pass-through spending for
devices.
For drugs and 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 has
not been proposed to be reinstated for
CY 2014. Because we will pay for most
nonpass-through separately payable
drugs and biologicals under the CY 2014
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 biologicals, and
because we will pay for CY 2014 passthrough drugs and biologicals at ASP+6
percent, as we discussed in section V.A.
of this final rule with comment period,
our estimate of drug and biological passthrough payment for CY 2014 for this
group of items was $0, 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 and these
products will not be separately paid. In
addition, as we proposed, we are policy-

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packaging all nonpass-through drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure and drugs
and biologicals that function as supplies
when used in a surgical procedure for
CY 2014, as discussed in section II.A.3.
of this final rule with comment period.
All of these policy-packaged drugs and
biologicals with pass-through status will
be paid at ASP+6 percent like other
pass-through drugs and biologicals for
CY 2014. Therefore, our estimate of
pass-through payment for policypackaged drugs and biologicals with
pass-through status approved prior to
CY 2014 is not $0. In section V.A.4. of
this final rule with comment period, we
discuss our proposed and finalized
policy to determine if the costs of
certain policy-packaged drugs or
biologicals are already packaged into the
existing APC structure. If we determine
that a policy-packaged drug or
biological approved for pass-through
payment resembles predecessor drugs or
biologicals already included in the costs
of the APCs that are associated with the
drug receiving pass-through payment,
we offset the amount of pass-through
payment for the policy-packaged drug or
biological. For these drugs or
biologicals, the APC offset amount is the
portion of the APC payment for the
specific procedure performed with the
pass-through drug or biological which
we refer to as the policy-packaged drug
APC offset amount. If we determine that
an offset is appropriate for a specific
policy-packaged drug or biological
receiving pass-through payment, we
reduce our estimate of pass-through
payments for these drugs or biologicals
by this amount.
Similar to pass-through estimates for
devices, the first group of drugs and
biologicals requiring a pass-through
payment estimate consists of those
products that were recently made
eligible for pass-through payment and
that will continue to be eligible for passthrough payment in CY 2014. The
second group contains drugs and
biologicals that we know are newly
eligible, or project will be newly
eligible, in the remaining quarters of CY
2013 or beginning in CY 2014. The sum
of the CY 2014 pass-through estimates
for these two groups of drugs and
biologicals equals the total CY 2014
pass-through spending estimate for
drugs and biologicals with pass-through
status.
B. Estimate of Pass-Through Spending
As we proposed in the CY 2014
OPPS/ASC proposed rule (78 FR 43613),
we are setting the applicable passthrough payment percentage limit at 2.0

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percent of the total projected OPPS
payments for CY 2014, consistent with
section 1833(t)(6)(E)(ii)(II) of the Act,
and our OPPS policy from CY 2004
through CY 2013 (77 FR 68398).
For the first group of devices for passthrough payment estimation purposes,
there is one device category, C1841
(Retinal prosthesis, includes all internal
and external components), receiving
pass-through payment for CY 2013,
made effective subsequent to the
proposed rule on October 1, 2013, that
will continue to be eligible for passthrough payment for CY 2014. As
discussed in section IV.A. of this final
rule with comment period, we finalized
in the CY 2013 OPPS/ASC final rule
with comment period the expiration of
pass-through payment for three device
categories after the end of CY 2013.
Therefore, we estimate that CY 2014
pass-through expenditures for the first
group of pass-through device categories
to be $0.5 million. In estimating our CY
2014 pass-through spending for device
categories in the second group, we
include: device categories that we knew
at the time of the development of the
final rule will be newly eligible for passthrough payment in CY 2014 (of which
there are none); additional device
categories that we estimate could be
approved for pass-through status
subsequent to the development of the
final rule and before January 1, 2014;
and contingent projections for new
device categories established in the
second through fourth quarters of CY
2014. We are using 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 pass-through device
categories.
We did not receive any public
comments regarding our proposed
estimate for device pass-through
spending. For this final rule with
comment period, the estimate of CY
2014 pass-through spending for this
second group of device categories is
$9.5 million, which is a slight decrease
from the $10 million estimate in the
proposed rule (78 FR 43613). Using our
established methodology, we are
establishing that the total estimated
pass-through spending for device
categories for CY 2014 (spending for the
first group of device categories ($0.5
million) plus spending for the second
group of device categories ($9.5
million)) will be $10 million.
To estimate CY 2014 pass-through
spending for drugs and biologicals in
the first group, specifically those drugs
and biologicals recently made eligible
for pass-through payment and

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continuing on pass-through status for
CY 2014, we utilized 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
regarding those drugs or biologicals to
project the CY 2014 OPPS utilization of
the products.
For the known drugs and biologicals
(excluding policy-packaged diagnostic
radiopharmaceuticals, contrast agents,
drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure, and drugs and biologicals
that function as supplies when used in
a surgical procedure) that will be
continuing on pass-through status in CY
2014, we estimate the pass-through
payment amount as the difference
between ASP+6 percent and the
payment rate for nonpass-through drugs
and biologicals that will be separately
paid at ASP+6 percent, which is zero for
this group of drugs. Because payment
for policy-packaged drugs and
biologicals is packaged if the product
was not paid separately due to its passthrough status, we include in the CY
2014 pass-through estimate the
difference between payment for the
policy-packaged 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
policy-packaged drug or biological
approved for pass-through payment
resembles predecessor drugs or
biologicals already included in the costs
of the APCs that are associated with the
drug receiving pass-through payment.
For the proposed rule, using the
methodology described above, we
calculated a CY 2014 proposed
spending estimate for this first group of
drugs and biologicals of approximately
$0.962 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 2014 spending estimate for the
first group of drugs and nonimplantable
biologicals of approximately $1.4
million.
To estimate CY 2014 pass-through
spending for drugs and biologicals in
the second group (that is, drugs and

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75035

biologicals that we knew at the time of
development of the final rule are newly
eligible for pass-through payment in CY
2014, additional drugs and biologicals
that we estimate could be approved for
pass-through status subsequent to the
development of the final rule and before
January 1, 2014, and projections for new
drugs and biologicals that could be
initially eligible for pass-through
payment in the second through fourth
quarters of CY 2014), we 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 2014 pass-through
payment estimate. We also consider the
most recent OPPS experience in
approving new pass-through drugs and
biologicals. Using our proposed
methodology for estimating CY 2014
pass-through payments for this second
group of drugs, we calculated a
spending estimate for this second group
of drugs and biologicals of
approximately $0.165 million.
We did not receive any public
comments on our proposed
methodology for estimating CY 2014
pass-through payments for this second
group of drugs and nonimplantable
biologicals. Therefore, for this final rule
with comment period, we are finalizing
our proposed methodology. Using that
methodology and updated data and
information, we calculated a final CY
2014 spending estimate for this second
group of drugs and implantable
biologicals of approximately $0.9
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 2014
pass-through spending estimate for
drugs and biologicals. Our CY 2014
estimate for total pass-through spending
for drugs and biologicals (spending for
the first group of drugs and biologicals
($1.4 million) plus spending for the
second group of drugs and biologicals
($0.9 million)) equals $2.3 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 biologicals
that are continuing to receive passthrough payment in CY 2014 and those
device categories, drugs, and biologicals
that first become eligible for passthrough payment during CY 2014 will
be approximately $12.3 million

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(approximately $10 million for device
categories and approximately $2.3
million for drugs and biologicals),
which represents 0.02 percent of total
projected OPPS payments for CY 2014.
We estimate that pass-through spending
in CY 2014 will not amount to 2.0
percent of total projected OPPS CY 2014
program spending.

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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 (ED) visits, and critical care
services, including trauma team
activation. Historically, we have
recognized the CPT and HCPCS codes

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describing clinic visits, Type A and
Type B (ED) visits, and critical care
services, which are listed below in
Table 41. 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 policy
on OPPS payment for hospital
outpatient visits for CY 2013 and prior
years.
BILLING CODE 4120–01–P

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TABLE 41.-CY 2013 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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99284
99285
00380
00381

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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)
Emergency department visit for the evaluation and management of a
patient (Level 5)
Type B emergency department visit (Levell)
Type B emergency department visit (Level 2)

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B. Payment for Hospital Outpatient
Clinic and Emergency Department Visits
Since April 7, 2000, we have
instructed hospitals to report facility
resources for clinic and ED hospital
outpatient visits using the CPT E/M
codes and to develop internal hospital
guidelines for reporting the appropriate
visit level (65 FR 18451). Because a
national set of hospital-specific codes
and guidelines do not currently exist,
we have advised hospitals that each
hospital’s internal guidelines that
determine the levels of clinic and ED
visits to be reported should follow the
intent of the CPT code descriptors, in
that the guidelines should be designed
to reasonably relate the intensity of
hospital resources to the different levels
of effort represented by the codes.
While many hospitals have advocated
for hospital-specific national guidelines
for visit billing since the OPPS started
in 2000, and we have signaled through
rulemaking our intent to develop
guidelines, this complex undertaking
has proven challenging. Our work with
interested stakeholders, such as hospital
associations, along with a contractor,
has confirmed that no single approach
could consistently and accurately
capture hospitals’ relative costs. Public
comments received on this issue, as
well as our own knowledge of how
clinics operate, have led us to conclude
that it is not feasible to adopt a set of
national guidelines for reporting
hospital clinic visits that can
accommodate the enormous variety of
patient populations and service-mix
provided by hospitals of all types and
sizes throughout the country. Moreover,
no single approach appears to be
broadly endorsed by the stakeholder
community.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43614 through 43616), for
CY 2014, we proposed to modify our
longstanding policies related to hospital
outpatient clinic and ED visits. Rather
than recognizing five levels of clinic and

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ED visits respectively, we proposed to
create three new alphanumeric Level II
HCPCS codes to describe all levels of
each type of clinic and ED visit, as
discussed in greater detail below. We
stated that we believe a policy that
recognizes a single visit level for clinic
visits, Type A ED visits, and Type B ED
visits for payment under the OPPS is
appropriate for several reasons. First, we
indicated that the proposal is in line
with our strategic goal of using larger
payment bundles to maximize hospitals’
incentives to provide care in the most
efficient manner as stated in section
II.A.3. of the proposed rule. We stated
that we believed this proposal will
remove any incentives hospitals may
have to provide medically unnecessary
services or expend additional,
unnecessary resources to achieve a
higher level of visit payment under the
OPPS. Second, we stated that we believe
that it is important to consider ways in
which we can reduce the administrative
burden that Medicare payment policies
place on hospitals, while maintaining
our ability to calculate accurate
payment rates under the OPPS. We
believed that replacing the 20 HCPCS
codes currently recognized for clinic
visits and ED visits with three new
alphanumeric Level II HCPCS codes
would reduce administrative burden
and would be easily adopted by
hospitals, because the three new codes
would require hospitals to distinguish
only among clinic visits, Type A ED
visits, and Type B ED visits. We stated
that discontinuing the use of the five
levels of HCPCS visit codes for clinic
and Type A and Type B ED visits would
reduce hospitals’ administrative burden
by eliminating the need for them to
develop and apply their own internal
guidelines to differentiate among five
levels of resource use for every clinic
visit and ED visit they provide, and by
eliminating the need to distinguish
between new and established patients.
Third, we stated that our proposal
would allow a large universe of claims

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to be utilized for ratesetting for each of
the three newly proposed alphanumeric
Level II HCPCS visit codes. We stated
that we believe this large volume of
claims available for ratesetting for each
of the newly proposed alphanumeric
Level II HCPCS visit codes will allow us
to capture a very broad spectrum of
cases ranging from extremely low
complexity cases to extremely high
complexity cases. We believed this large
and diverse spectrum of clinical
complexity and resource variation
within the claims as well as the very
high volume of claims that we proposed
to use for ratesetting for the newly
proposed alphanumeric Level II HCPCS
visit new codes will allow us to have
very accurate data upon which to
develop accurate and appropriate
payments. Lastly, we also stated that we
believe that removing the differentiation
among five levels of intensity for each
visit will eliminate any incentive for
hospitals to ‘‘upcode’’ patients whose
visits do not fall clearly into one
category or another.
For these reasons, for CY 2014, we
proposed to discontinue our
longstanding policy of recognizing five
distinct visit levels for clinic visits and
ED visits based on the existing HCPCS
E/M codes, and instead recognize three
new alphanumeric HCPCS codes for
each visit type. Specifically, we
proposed to create a new alphanumeric
HCPCS G-code for hospital use only
representing any clinic visit under the
OPPS and to assign the newly created
alphanumeric clinic visit HCPCS G-code
to its own newly created APC 0634.
Using CY 2012 claims data, we
proposed to develop CY 2014 OPPS
payment rates for the new HCPCS Gcode based on the total geometric mean
cost of the levels 1 through 5 CPT E/M
codes for clinic visits currently
recognized under the OPPS (CPT codes
99201 through 99205 and 99211 through
99215). We stated that while we would
use data for CPT codes 99201 through
99205 and 99211 through 99215 from

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claims billed in CY 2012 to calculate the
geometric mean cost for new APC 0634,
we would no longer recognize those
CPT codes when they appear on
hospital claims effective January 1,
2014. We also proposed to no longer
recognize a distinction between new
and established patient clinic visits.
Under this proposal, all clinic visits
would be reported using the new
HCPCS G-code, regardless of whether or
not the patient has been registered as an
inpatient or outpatient of the hospital
within the 3 years prior to a visit.
In addition, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43614
through 43617), we proposed to
discontinue our longstanding policy of
recognizing five distinct visit levels for
Type A ED visits and instead proposed
to create a new alphanumeric HCPCS Gcode for hospital use only representing
any Type A ED visit under the OPPS.
We proposed to assign the newly
created alphanumeric Type A ED visit
HCPCS G-code to its own newly created
APC 0635. Using CY 2012 claims data,
we proposed to develop CY 2014 OPPS
payment rates for new HCPCS G-code
based on the total geometric mean cost
of the levels 1 through 5 CPT E/M codes
for Type A ED visits currently
recognized under the OPPS (CPT codes
99281 through 99285). We stated that
while we would use data for CPT codes
99281 through 99285 from claims billed
in CY 2012 to calculate the geometric
mean cost for new APC 0635, we would
no longer recognize those CPT codes
when they appear on hospital claims
effective January 1, 2014. Similarly, we
also proposed to discontinue our
longstanding policy of recognizing five
distinct visit levels for Type B ED visits
and instead proposed to create a new
alphanumeric HCPCS G-code
representing all Type B ED visits under
the OPPS. We proposed to assign the
newly created alphanumeric Type B ED
visit HCPCS G-code to its own newly
created APC 0636. Using CY 2012
claims data, we proposed to develop CY
2014 OPPS payment rates for new
HCPCS G-code based on the total
geometric mean cost of the levels 1
through 5 HCPCS codes for Type B ED
visits currently recognized under the
OPPS (HCPCS codes G0380 through
G0384). We stated that while we would
use data for HCPCS codes G0380
through G0384 from claims billed in CY
2012 to calculate the geometric mean
cost for new APC 0636, we would no
longer recognize those HCPCS codes for
Type B ED visits when they appear on
hospital claims effective January 1,
2014.
We noted that we would use the
hospital claims data for the three new

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HCPCS G-codes when available for
future ratesetting. We summarized the
proposed changes to the visit coding
and payment structure in Table 29 of
the proposed rule (78 FR 43616). We
welcomed public comments on our CY
2014 proposal to recognize a single visit
level for clinic, Type A ED, and Type B
ED visits for payment under the OPPS.
We stated that we believe this proposal
will allow us to make accurate
payments for visits broad-scale because
we will be using data from the universe
of hospital outpatient visits, for which
we have an extremely high volume of
claims representing the entire spectrum
of costs incurred by hospitals.
Nonetheless, we indicated that we were
interested in hearing from stakeholders
regarding whether a different approach
may be preferable to capture the
resource utilization for extremely low
complexity cases as well as extremely
high complexity cases or to otherwise
recognize a difference among visit
levels. We stated that while we do not
believe, based on our current
assessment, that it is necessary to
provide additional payment levels or
carve out these cases to make accurate
and appropriate payments for visits, we
were interested in hearing from
hospitals whether there are certain cases
that would not be best accommodated
by a single level of payment. If such
cases exist, we welcomed stakeholder
input into whether and how this
proposal could be changed in the final
rule to either make exceptions for or
accommodate these special cases. We
stated that if commenters provided
compelling comments describing such
special cases or the need for additional
payment levels, should they exist, and
if there are alternative policies that
would more accurately and
appropriately pay for visits, we would
consider implementing a different
policy in the final rule. We noted that,
to the extent that commenters
recommended that additional levels of
payment or special high complexity or
low complexity cases be recognized, we
also would be interested in how we
should define and differentiate those
levels or cases.
Comment: Commenters specifically
opposed CMS’ proposal to collapse the
current five levels of ED visits into a
single visit level for both Type A and
Type B ED visits. Commenters stated
that the proposed single payment for
Type A ED and Type B ED visits
captures too broad a range of ED visits,
which could result in payment rates that
are inadequate for treatment of
beneficiaries who require higher levels
of care. Commenters also stated that a

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75039

single ED visit level would result in
higher copayment amounts for
beneficiaries receiving services
consistent with a lower level ED visit.
Commenters expressed concern that
hospitals would pressure physicians
and hospital staff to reduce the time in
the ED to lessen the potential loss of
revenues associated with a single level
ED visit payment, potentially leading to
a deterioration of patient care.
Commenters argued that the proposed
ED visit policy is inequitable to
hospitals that consistently have a more
complex case-mix and a greater than
average utilization of the higher level
ED visit codes, such as trauma centers,
teaching hospitals, and hospitals that
have taken steps to shift lower-acuity
ED patients into Type B EDs or onsite
or nearby urgent care clinics.
Commenters urged CMS to exclude
trauma care from any consolidation of
ED payment levels to ensure that
designated trauma centers are fairly
paid for the care they provide.
Commenters expressed reservations
about a single payment for ED visits in
light of a potential increase in ED usage
and ED patient acuity due to newly
insured individuals having access to
care under the Affordable Care Act.
Commenters also argued that there is
a bias toward lower level visit code
costs in calculating the geometric mean
cost for the new collapsed visit codes as
higher level visit codes are more often
billed with separately paid procedures
on the same day of service. Commenters
expressed additional reservations with
the proposed policy in light of their
inability to conduct impact analysis on
the proposed policy due to initial errors
in the CY 2014 OPPS/ASC proposed
rule data. Commenters also stated the
proposed policy removes CMS’ ability
to track and document differences in
patient acuity and is inconsistent with
CMS’ previously stated purpose in
creating Medicare Severity DiagnosisRelated Groups (MS–DRGs) under the
IPPS to account for differences in costs
due to differences in patient severity.
Moreover, commenters stated that the
proposed policy should not be
implemented in CY 2014 due to its
interaction with CMS’ proposal to
expand packaging of services and
hospitals’ administrative training
sessions currently underway to
implement International Classification
of Diseases, 10th Edition (ICD–10).
Commenters asserted that the proposed
policy would create added
administrative burden as other payers
will continue to require the reporting of
the five E/M code levels. Commenters
suggested that CMS work with the AMA
to develop facility-specific CPT codes

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for Type A ED and Type B ED visits and
seek input from industry stakeholders,
specifically hospital representatives, to
develop descriptions for these new
codes that allow for their consistent
application by hospital outpatient
departments. Commenters also
recommended that CMS develop
hospital-specific national guidelines for
hospitals to report ED visits.
Commenters stated that they did not
understand why this proposal is
necessary in light of CMS’ previous
statements that hospitals are generally
billing appropriately and in a consistent
manner that distinguishes among the
different levels of visits based on the
required hospital resources and CMS’
current utilization of Comprehensive
Error Rate Testing (CERT), Recovery
Audit Contractors (RACs), Zone
Program Integrity Contractors (ZPICs),
and other methods of review to identify
medically unnecessary services.
Commenters stated that CMS should
conduct selected focused audits in lieu
of the proposed policy if CMS believes
that hospitals are upcoding.
Response: We appreciate all of the
public comments we received on our
proposal to collapse the current five
levels of ED visits into a single visit
level for both Type A and Type B ED
visits. We specifically sought comment
on whether there are certain high or low
complexity cases that would not be best
accommodated by a single level of
payment. We stated in the proposed rule
that, if such cases exist, we would
welcome stakeholder input into whether
and how this proposal could be changed
in the final rule to either make
exceptions for or accommodate these
special cases. We also stated in the
proposed rule that if commenters
provided compelling comments
describing such special cases or the
need for additional payment levels,
should they exist, and if there are
alternative policies that would more
accurately and appropriately pay for
visits, we would consider implementing
a different policy in the final rule. As
discussed above, we received several
comments that a single payment for an
ED visit might underrepresent resources
required to treat the most complex
patients, such as trauma patients. We
find this to be a compelling issue, for
which an alternative payment structure,
possibly including more than one
payment level, may be warranted.
However, at this time, additional study
is needed to fully assess the most
suitable payment structure for ED visits,
including the particular number of visit
levels that would not underrepresent
resources required to treat the most
complex patients, such as trauma

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patients. For CY 2014, we believe it is
best to delay any change in ED visit
coding while we reevaluate the most
appropriate payment structure for Type
A and Type B ED visits. We will
maintain the current coding structure
consisting of five visit levels for CY
2014 while we consider alternative
payment structures.
Comment: Commenters suggested the
following alternatives to our proposed
policy: One commenter requested that
CMS alter its proposal and create one
APC for Type A ED and Type B ED
visits as proposed, but continue to allow
the reporting of the current CPT E/M
codes instead of creating new HCPCS
codes. Multiple commenters suggested
that CMS employ a three acuity level
model to pay for Type A ED and Type
B ED visits under the OPPS. Another
commenter suggested CMS continue to
use the current CPT codes for clinic E/
M services but assign the CPT codes to
one of three ED Visit APCs. One
commenter suggested CMS create three
composite ED services based on the
ancillary services packaged with ED
claim. A few commenters
recommended, on a short-term basis,
that CMS develop a set of three
trauma-specific HCPCS codes for all
trauma patients, for whom a trauma
team is activated.
Response: We appreciate the
thoughtful and detailed alternatives
presented by commenters. We need
additional time to study and fully
consider these alternatives and other
comments received with respect to how
our proposed ED visits policy would
affect payments for the most complex
patients. We believe it is best to delay
any change in ED visit coding while we
consider further the most appropriate
payment structure for Type A and Type
B ED visits.
Comment: Commenters generally
opposed our proposal to create a single
new alphanumeric HCPCS G-code for
hospital use only representing all clinic
visits under the OPPS and to assign the
newly created alphanumeric clinic visit
HCPCS G-code to its own newly created
APC 0634. Some commenters raised
similar concerns about a single payment
for clinic visits as they did for ED visits,
although there were fewer objections to
a single payment for clinic visits and
those objections lacked the forcefulness
and specificity of the objections to a
single level of payment for Type A and
Type B ED visits. A few commenters
stated that, while they did not favor a
single payment for clinic visits, given
the nature of the services provided at
clinic visits, a single payment level
would be acceptable. A majority of
commenters supported CMS’ proposal

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to eliminate the distinction between
‘‘new’’ and ‘‘established’’ patient visits.
As with ED visits, commenters stated
that the proposed single clinic visit code
and associated single payment are
overly broad, which could result in
payment rates that are inadequate for
treatment of beneficiaries who require
higher levels of care and higher
copayment amounts for beneficiaries
receiving lower level visits. Commenters
expressed concern that hospitals would
pressure physicians and hospital staff to
reduce the time in clinic visits to lessen
the potential loss of revenues associated
with a single level clinic visit payment,
potentially leading to a deterioration of
patient care. Commenters asserted that
the proposed policy would create added
administrative burden as other payers
will continue to require the reporting of
the five E/M CPT codes to describe
clinic visits. Commenters argued that
the proposed policy is inequitable to
many tertiary care and teaching
hospitals, including those hospitals that
consistently have a more complex casemix and a greater than average
utilization of the higher level E/M
codes. Commenters also argued there is
a likely bias toward lower level visit
code costs in calculating the geometric
mean cost for the new collapsed visit
codes as higher level visit codes are
more often billed with separately paid
procedures on the same day of service.
Commenters expressed additional
reservations with the proposal in light
of their inability to conduct impact
analysis on the proposed policy due to
initial errors in the CY 2014 OPPS/ASC
proposed rule data. Commenters stated
that the proposed policy removes CMS’
ability to track and document
differences in patient acuity and is
inconsistent with CMS’ previously
stated purpose in creating MS–DRGs
under the IPPS to account for
differences in costs due to differences in
patient severity. Moreover, commenters
stated the proposed policy should not
be implemented in CY 2014 due to its
interaction with CMS’ proposal to
expand packaging and hospitals’
administrative training sessions
currently underway to implement ICD–
10. Commenters suggested CMS work
with the AMA to develop facilityspecific CPT codes for E/M clinic visits
(with no distinction between new and
established patients) and seek input
from industry stakeholders, specifically
hospital representatives, to develop
descriptions for these new codes that
allow for their consistent application by
hospital outpatient clinics. Commenters
also recommended that CMS develop

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hospital-specific national guidelines for
hospitals to report clinic visits.
Commenters expressed a lack of
understanding of why this proposal is
necessary in light of CMS’ previous
statements that hospitals are generally
billing appropriately and in a consistent
manner that distinguishes among the
different levels of visits based on the
required hospital resources and CMS’
current utilization of CERT, RACs,
ZPICs, and other methods of review to
identify medically unnecessary services.
Commenters stated that CMS should
conduct selected focused audits in lieu
of the proposed policy if CMS believes
that hospitals are upcoding.
Response: We appreciate all of the
public comments we received on our
proposed policy to create a single new
alphanumeric HCPCS G-code for
hospital use only representing any
clinic visit under the OPPS and the
assignment of the newly created
alphanumeric clinic visit HCPCS G-code
to its own newly created APC 0634. We
disagree with the commenters that the
proposed clinic visit code is overly
broad. While we agree that the proposed
clinic APC encompasses a range of visits
for beneficiaries with different medical
issues, we believe that the spectrum of
hospital resources provided during an
outpatient hospital clinic visit is
appropriately captured and reflected in
the single level payment for clinic visits.
We also believe that a single visit code
is consistent with a prospective
payment system, where payment is
based on an average estimated relative
cost for the service, although the cost of
individual cases may be more or less
costly than the average. We do not
observe wide disparity among the
estimated geometric mean costs for new
or established clinic visits in our data,
and there is significantly less disparity
in estimated geometric mean costs
among the current five clinic visit levels
than there is among the five ED visit
levels.
We believe the proposed payment rate
for APC 0634 represents an appropriate
payment for clinic visits as it is based
on the geometric mean costs of all visits.
Although the cost for any given clinic
visit may be higher or lower than the
geometric mean cost of APC 0634, the
payment remains appropriate to the
hospital delivering a variety of clinic
visits. The high volume of claims from
every level of clinic CPT code that we
used for ratesetting for the newly
created alphanumeric Level II HCPCS
clinic visit code allows us to have
accurate data upon which to develop
appropriate payment rates.
With regard to specific concerns for
hospitals that treat patients with a more

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complex case-mix, we note that the
relatively low estimated cost of clinic
visits overall would result in much less
underpayment or overpayment for
hospitals that may serve a population
with a more complex overall case-mix.
We also note that the range among the
geometric mean cost of the current five
clinic visit levels is much smaller than
the range for the current five levels of
ED visits. In addition, the commenters’
support for eliminating distinctions for
new and established patients suggests
that hospitals prefer the administrative
ease of not tracking new or established
patients even though we make
differential payment for these visits, and
we observe differential costs for these
CPT codes in our claims data.
We disagree with the commenters’
statement that there is a likely bias
toward including more lower level visit
code costs in calculating the geometric
mean cost for the new collapsed visit
codes. Commenters have argued that
higher level visit codes are more often
billed with separately paid procedures
on the same day of service and that we
are less likely to be able to isolate claims
with a single higher level CPT code. For
clinic visits, we observed comparable
distributions of claims between higher
and lower levels across new and
established clinic visit CPT codes in
both the single bill claims used for
ratesetting and all claims. We concluded
that the distribution of claims data
among higher and lower level CPT
codes used to establish the proposed
payment rate for APC 0634 is
comparable to the total distribution of
claims among CPT code levels in the CY
2012 claims data in our CPT cost files.
We do not believe that our single bill
methodology biases the resulting
geometric mean in any way.
We disagree with commenters that
our proposal for a single payment is
contrary to CMS’ stated purpose in
creating MS–DRGs under the IPPS to
account for differences in costs due to
differences in patient severity. MS–
DRGs are designed to reflect significant
differences in resource costs for an
inpatient stay. The MS–DRG
classification of a particular discharge is
based, as appropriate, on the patient’s
age, sex, principal diagnosis (that is, the
diagnosis established after study to be
chiefly responsible for causing the
patient’s admission to the hospital),
secondary diagnoses, procedures
performed, and discharge status. A
single payment for a clinic visit does not
pose the same level of financial risk.
The observed cost differences among
levels of CPT codes in the claims data
are not dramatic. Further, hospitals will
receive separate payment for many other

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services furnished in the same
encounter and will not incur the same
level of financial risk as for an inpatient
stay.
Regarding the commenters’ inability
to conduct impact analysis on our visit
proposal because of some initial limited
errors in the proposed rule payment
files, we note that we released corrected
data files on August 28, 2013, and
extended the comment period to
September 16, 2013, on the technical
corrections noted in the correcting
document published in the Federal
Register on September 6, 2013 (78 FR
54842). For a more detailed discussion
of the OPPS data process, we refer
readers to section II.A. of this final rule
with comment period.
We disagree with the commenters that
hospitals would pressure physicians
and hospital staff to furnish a
diminished level of care to beneficiaries
in an attempt to mitigate any potential
loss of revenue associated with a single
level clinic visit payment that is based
on an average of relative costs of all
clinic visit codes and is proportional to
their appearance in the claims data. As
with all prospective payment systems
that depend upon a prospectively
established payment derived from
relative cost, less costly cases generate
greater net revenue for the hospital than
more costly cases. Payments may be
greater than or less than the cost of any
particular case. It is our belief and
continued expectation that hospitals
and physicians and other practitioners
will furnish appropriate care to
Medicare beneficiaries.
We continue to believe discontinuing
the use of the five levels of HCPCS visit
codes for clinic visits will reduce
hospitals’ administrative burden by
eliminating the need for them to
develop and apply their own internal
guidelines to differentiate among five
levels of resource use for every clinic
visit they provide. We believe the
advantages of this reduced
administrative burden outweigh any
potential loss in CMS’ ability to track
and document differences in patient
acuity for clinic visits. We note that the
level of CPT code is not the only
method for assessing patient acuity.
Diagnosis coding and the type and
frequency of other services billed on a
visit claim also communicate patient
acuity. We disagree with the
commenters that finalization of our
proposed clinic visit policy should be
delayed because of our CY 2014
proposal to expand packaging or the
presence of hospital training sessions to
implement ICD–10 coding. We note that
our CY 2014 OPPS packaging policies
create no additional administrative

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burden for hospital coding for visits. We
continue to expect hospitals to correctly
code for the services they furnish. We
also believe that the combination of a
single HCPCS G-code to describe all
clinic visits, the discontinuance of the
requirement that hospitals track criteria
for billing either new or established
clinic visits, and the discontinuance of
the requirement for hospitals to
distinguish different clinic visit levels
through internal guidelines will result
in significant administrative
simplification for hospitals.
With regard to national guidelines, we
have stated that it would be desirable to
many hospitals to have national
guidelines (76 FR 74345 through 74346).
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. With
regard to the potential for facilityspecific CPT codes, 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, we would consider such
codes for OPPS use.
With regard to the comment that the
proposal is unexpected, each annual
rulemaking cycle includes some
proposed policy changes to the OPPS,
and some of those proposals may be
more or less predictable. We believe
that, despite hospitals’ use of internal
guidelines, differentiating between five
different clinic visit levels is
challenging because the difference
between consecutive levels is
incremental and nuanced. A single code
and a single level of payment for all
clinic visits eliminate the difficulty of
distinguishing, for example, a level 1
clinic visit versus a level 2, or a level
2 versus a level 3, etc. A single code also
negates the ability or incentive for
hospitals to ‘‘upcode’’ patients whose
visits do not fall clearly into one

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category or another, and removes any
financial advantage to any hospitals that
would engage in upcoding in the future.
Comment: Commenters suggested the
following alternatives to our proposed
policy: One commenter suggested that
CMS alter its proposal and create one
APC for each type of E/M visit per
encounter as proposed, but continue to
allow the reporting of the current CPT
E/M codes instead of creating new
HCPCS codes. Multiple commenters
suggested that CMS employ a three
acuity level model to pay for clinic
visits under the OPPS. Another
commenter suggested that CMS
continue to use the current CPT codes
for clinic E/M services but assign the
CPT codes to one of two Clinic Visit
APCs.
Response: We appreciate the
thoughtful and detailed suggestions
presented by the commenters. We
continue to believe that creating a new
HCPCS code is more appropriate than
maintaining the current CPT coding and
then creating a separate payment.
Separate CPT codes would continue to
require guidelines. It also would be
more difficult to eliminate the
distinction between new and
established clinic visits while
continuing to recognize CPT codes that
make that distinction. With regard to
creating three APCs rather than one, we
do not believe this achieves the
incentive for efficiency associated with
a single clinic visit code, and that three
APCs would maintain some of the same
incentives in the current five levels of
APCs. At this time we believe that
collapsing the existing five levels of
clinic visit codes into one new
alphanumeric HCPCS G-code and
assigning this code to new APC 0634 is
the optimal OPPS payment policy for
clinic visits.
After consideration of the public
comments we received, we are
finalizing our proposal to create a new
alphanumeric HCPCS code, G0463
(Hospital outpatient clinic visit for

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assessment and management of a
patient), for hospital use only
representing any clinic visit under the
OPPS and to assign new HCPCS code
G0463 to new APC 0634. We also are
finalizing our proposal to use CY 2012
claims data to develop CY 2014 OPPS
payment rates for the new HCPCS code
G0463 based on the total geometric
mean cost of the levels one through five
CPT E/M codes for clinic visits
currently recognized under the OPPS
(CPT codes 99201 through 99205 and
99211 through 99215). In addition, we
are finalizing our proposal to no longer
recognize a distinction between new
and established patient clinic visits.
We are not finalizing our proposal for
CY 2014 to discontinue our
longstanding policy of recognizing five
distinct visit levels for Type A ED visits
and to create a new alphanumeric
HCPCS G-code for hospital use only
representing any Type A ED visit under
the OPPS. Similarly, we are not
finalizing our proposal for CY 2014 to
discontinue our longstanding policy of
recognizing five distinct visit levels for
Type B ED visits and to create a new
alphanumeric HCPCS G-code for
hospital use only representing any Type
B ED visit under the OPPS. In addition,
we are not finalizing our proposal to
assign the newly created alphanumeric
Type A ED visit HCPCS G-code to its
own newly created APC 0635, nor are
we finalizing our proposal to assign the
newly created alphanumeric Type B ED
visit HCPCS G-code to its own newly
created APC 0636. Instead, we will
continue to use our existing
methodology to recognize the existing
CPT codes for Type A ED visits as well
as the five HCPCS codes that apply to
Type B ED visits, and establish the CY
2014 OPPS payment under our
established standard process (77 FR
68399 through 68404). These codes and
their APC assignments for CY 2013
compared to their APC assignments for
CY 2014 are depicted below in Table 42.

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We intend to further explore the
issues described above related to ED
visits, for example, concerns about
excessively costly patients, such as
trauma patients, and potential
alternatives that commenters provided
to address this issue. We may propose
changes to the coding and APC
assignments for ED visits in future
rulemaking.

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C. Payment for Critical Care Services
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43616 through 43617), we
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 critically ill or
critically injured patient; first 30–74

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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

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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
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

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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 reflected 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
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.

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As we discussed in the CY 2013
OPPS/ASC final rule with comment
period, 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 (77 FR
68402). Because our policy to establish
relative payment weights based on
geometric mean cost data for CY 2013
represented a change from our historical
practice to base payment rates on
median costs, and because we had
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 CY 2013 OPPS/ASC final rule with
comment period and determined that
the data showed increases in both the
geometric mean and median line item
costs as well as the geometric mean and
median line item charges for CPT code
99291, when compared to CY 2010
hospital claims data. Specifically, we
noted that the geometric mean and
median line item costs increased 13
percent and 16 percent, respectively,
and the geometric 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 were presented on the
same claims as critical care services,
and also showed continued low
volumes of many ancillary services. We
stated in the CY 2013 OPPS/ASC final
rule with comment period 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 suggested 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 CY
2013 OPPS/ASC final rule with
comment period that we continued to

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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 continued
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 continued to implement
claims processing edits that
conditionally packaged payment for the
ancillary services that were reported on
the same date of service as critical care
services in order to avoid overpayment.
We stated that we would 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.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43617), we stated that when
compared to CY 2011 hospital claims
data used for the CY 2013 OPPS
ratesetting, CY 2012 hospital claims
data used for the CY 2014 OPPS
ratesetting showed increases in the
geometric mean line item costs as well
as the geometric mean line item charges
for CPT code 99291, which continue to
suggest that 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 that
we continue to believe that it is
inappropriate to pay separately in CY
2014 for the ancillary services that
hospitals may now report in addition to
critical care services. Therefore, for CY
2014, we proposed to continue our CY
2011, CY 2012, and CY 2013 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.
Comment: Commenters recommended
that CMS, in setting the payment rate for
packaging ancillary services into the
critical care services, establish a
methodology that ensures that multiple
cost report revenue centers are included
in the review.
Response: The methodology that 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

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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
geometric mean cost calculation for
critical care.
After consideration of the public
comments received, we are finalizing
our proposal to continue our CY 2011,
CY 2012, and CY 2013 policy to
recognize the existing CPT codes for
critical care services and establish a
payment rate based on historical claims
data. We also are finalizing our proposal
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 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.

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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
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

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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 a
community mental health center for
purposes of this benefit.
Section 1833(t)(1)(B)(i) of the Act
provides the Secretary with the
authority to designate the OPD services
to be covered under the OPPS. The
Medicare regulations that implement
this provision specify, under 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 PHP 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

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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
finalized in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66670 through 66676). We made two
refinements to the methodology for
computing the PHP median: the first
remapped 10 revenue codes that are
common among hospital-based 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 under 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

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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
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
under 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), based on each
provider’s own unique data. 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 the CY 2009 policies.
CMHCs have a lower cost structure than
hospital-based PHP providers, in part,
because the data showed that CMHCs
generally 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 hospital-based 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 hospitalbased PHP closures and possible access
problems for Medicare beneficiaries
because hospital-based PHPs are located
throughout the country and, therefore,
offer the widest access to PHP services.
In contrast, CMHC-based PHPs are
largely concentrated in certain
geographical areas with particular

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prevalence in Florida, Texas, and
Louisiana. 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
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 PHP APCs 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
median costs and the CY 2011 final
CMHC median and then adding that
number to the CY 2011 final CMHC
median. 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, based on these
analyses, we might 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

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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
a preliminary injunction for lack of
subject-matter jurisdiction, which the
plaintiffs appealed to the United States
Court of Appeals for the Fifth Circuit.
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 PHP APCs, as set forth in § 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

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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
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.’’ We used 1996 data (in
addition to 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.’’
In the CY 2013 OPPS/ASC final rule
with comment period, we finalized our

proposal to base the relative payment
weights that underpin the OPPS APCs,
including the four PHP APCs, on
geometric means rather than on the
medians. For CY 2013, we established
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. We
refer readers to the CY 2013 OPPS/ASC
final rule with comment period for a
more detailed discussion (77 FR 68406
through 68412).

For CY 2014, the proposed geometric
mean per diem costs for days with 3
services (Level I) was approximately $95
for CMHCs and approximately $213 for
hospital-based PHPs. The proposed
geometric mean per diem costs for days

with 4 or more services (Level II) was
approximately $106 for CMHCs and
approximately $215 for hospital-based
PHPs.
The CY 2014 proposed geometric
mean per diem costs for CMHCs

calculated under the proposed CY 2014
methodology using CY 2012 claims data
have remained relatively constant when
compared to the CY 2013 final
geometric mean per diem costs for
CMHCs established in the CY 2013

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B. PHP APC Update for CY 2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43618 through 43622), for
CY 2014, we proposed to apply our
established policies to calculate the four
PHP APC per diem payment rates based
on geometric mean per diem costs using
the most recent claims data for each
provider type. 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) PHP services using only CY 2012
CMHC claims data, and proposed
hospital-based PHP APC geometric
mean per diem costs for Level I and
Level II PHP services using only CY
2012 hospital-based PHP claims data.
These proposed geometric mean per
diem costs that were shown in Table 30
of the CY 2014 OPPS/ASC proposed
rule (78 FR 43620) are reflected in Table
42a below.

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OPPS/ASC final rule with comment
period (77 FR 68412), with proposed
geometric mean per diem costs for Level
I PHP services increasing from
approximately $87 to approximately $95
for CY 2014, and proposed geometric
mean per diem costs for Level II PHP
services decreasing from approximately
$113 to approximately $106 for CY
2014.
The CY 2014 proposed geometric
mean per diem costs for hospital-based
PHPs calculated under the proposed CY
2014 methodology using CY 2012
claims data show more variation when
compared to the CY 2013 final
geometric mean per diem costs for
hospital-based PHPs, with proposed
geometric mean per diem costs for Level
I PHP services increasing from
approximately $186 to approximately
$213 for CY 2014, and proposed
geometric mean per diem costs for Level
II PHP services decreasing from
approximately $235 to approximately
$215 for CY 2014.
The proposed CY 2014 geometric
mean per diem costs for the PHP APCs
were shown in Tables 31 and 32 of the
CY 2014 OPPS/ASC proposed rule (78
FR 43620 through 43621). We invited
public comments on these proposals.
Comment: Many commenters
supported the continued distinction
between APC payments for PHP services
provided by CMHCs and APC payments
for PHP services provided by hospitalbased PHPs. These commenters believed
that the cost structures of the two
provider types are significantly different
and, therefore, the payments should be
different. Conversely, a few commenters
stated that they do not like the
distinction between provider types.
Instead, these commenters believed that
CMHCs and hospital-based PHPs should
receive the same payment rates. The
commenters believed that the ratesetting
methodology used to establish payment
rates for PHP services also has fueled a
fundamental shift in payments away
from less expensive CMHCs to more
expensive hospital-based PHPs,
resulting in overall higher CMS
expenditures for the same services,
which is discriminating against CMHCs
that provide identical PHP services.
One commenter did not agree with
CMS’ statement that ‘‘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 CMS implies that
‘‘CMHCs provide less valuable services
than hospital-based PHPs, hire less
qualified staff, and overall perform very

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poorly compared to hospital-based
PHPs.’’
Some commenters also continued to
support CMS’ creation of two-tiered
payments for partial hospitalization
services. They believed that these
changes to the PHP payment structure
have been a positive step in addressing
the twin goals of ensuring long-term
stability and improving the accuracy of
payments.
Response: We understand the
concerns raised by the commenters
regarding the differences between
CMHC PHP APC per diem payment
rates and hospital-based PHP APC per
diem payment rates. We are not
discriminating against CMHCs or any
other health care provider, nor are we
encouraging the use of a specific
provider type which would lead to a
shift in payments; we are calculating the
payment rates for PHP services based on
the claims and cost report data
submitted by our providers. 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. We also believe that
the CMHC and the hospital-based PHP
APC per diem payment rates accurately
reflect the claims and cost report data of
CMHCs and hospital-based providers,
respectively. The PHP APC per diem
payment rates are directly related to the
accuracy of the claims and cost report
data submitted by providers. Therefore,
it is imperative that providers submit
accurate claims and cost reports in order
for the payment rates to most accurately
reflect the costs to providers. The
resulting PHP APC per diem payment
rates reflect the cost of what providers
expend to maintain such programs.
CMHCs and hospital-based PHPs
continue to show significant differences
in their costs. As we explained in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74347), we
attributed the decrease in costs to
CMHCs having a lower cost structure
than hospital-based PHP providers, in
part, 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
PHP services during a day directly
contributes to a lower overall cost

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structure. We did not intend to imply
that, in comparison to hospital-based
PHPs, CMHCs provide inferior, less
valuable or poor quality services or are
poor performers; we were merely stating
the differences in these providers’ cost
structures based on cost analysis. In
light of these differences in cost
structures between provider types, it is
inappropriate to treat CMHCs and
hospital-based PHP providers in the
same manner. We have been concerned
that paying hospital-based PHPs at a
lower payment 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. At
the same time, we believe it is
inappropriate to overpay CMHCs in
comparison to their cost structures.
We appreciate the commenters who
continue to support the two-tiered
payments for PHP services. We believe
that 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.
Finally, we consistently monitor the
OPPS to identify potential refinements
that would improve the accuracy and
stability of the payment system. We will
continue to monitor the impact of our
payment policies on the PHP benefit
and its providers.
Comment: A few commenters
expressed concern regarding the adverse
impact the proposed payment rates for
CY 2014 would have on CMHC
providers across the country. One
commenter stated that since the
adoption of the provider-specific
structure in CY 2011, payment for
partial hospitalization services provided
by CMHCs has decreased by
approximately 50 percent. This
commenter indicated that, in CY 2013,
the per diem payment rates for PHP
services provided by CMHCs decreased
by another 4.4 percent as a result of
changing the methodology from medianbased relative payment weights to
geometric mean-based relative payment
weights. The commenter also stated
that, for CY 2014, CMS is proposing to
further decrease payments for PHP
services provided by CMHCs by
approximately 3.8 percent. A few
commenters stated that many Medicare
CMHCs have closed over the years and
they believed that payment rate
reductions are a primary reason for the
closures. These commenters pointed out

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that another reduction in the per diem
payment rates may result in more
CMHC closures, therefore decreasing the
number of providers and available
resources for the most disadvantaged
portion of the beneficiary population.
Commenters also expressed concern
regarding the decrease in payment rates
for Level II hospital-based PHP services.
One commenter stated that the proposed
9.2 percent decrease in the Level II per
diem payment rate for hospital-based
PHPs would result in inadequate
payment for hospitals’ direct and
indirect costs and that any further
reductions to Medicare payment rates
will put their program in jeopardy. A
few commenters requested that CMS
suspend the proposed PHP per diem
payment rates for CY 2014 and, instead,
maintain the CY 2013 PHP per diem
payment rates for CY 2014.
Response: We understand the
concerns raised by the commenters that
a reduction in payment rates for CY
2014 will not adequately pay for their
costs to provide PHP services and may
result in closures for both CMHCs and
hospital-based PHPs. However, based on
the final geometric mean per diem costs
for CY 2014, CMHCs will receive an
increase in geometric mean per diem
costs from CY 2013 to CY 2014 for APC
0172 Level I (3 service days) from
$87.39 to $99.39 and the geometric
mean per diem costs for APC 0173 Level
II (4 or more service days) will basically
remain the same ($112.12 for CY 2014
compared to $112.82 for CY 2013).
Hospital-based PHPs also will receive
an increase in geometric mean per diem
costs from CY 2013 to CY 2014 for APC
0175 Level I (3 service days) from
$185.90 to $190.82. Only the geometric
mean per diem costs for APC 0176 Level
II (4 or more service days) will decrease
from CY 2013 to CY 2014 from $234.81
to $214.39. As discussed in the prior
response, we believe that the CMHC and
the hospital-based PHP APC per diem
payment rates accurately reflect the
claims and cost report data of the
CMHCs and hospital-based providers,
respectively. The resulting PHP APC per
diem payment rates and the APC
payment structures reflect the cost of
what providers expend to maintain such
programs. Therefore, it is unclear to us
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 a number
of reasons, such as poor business
management or marketing decisions,
competition, oversaturation of certain
geographic areas, and Federal and State
fraud and abuse efforts, among others.
However, we take seriously the

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commenters’ concerns that a reduction
in PHP APC per diem payment rates
could erode the viability of PHPs and
make it more difficult for beneficiaries
to receive needed mental health
services. Therefore, we monitor facility
closings and openings to make sure that
access issues do not exist, and we will
continue to do so in the future.
In response to the comment that the
payment rates for PHP services have
decreased as a result of changing the
methodology from median-based
relative payment weights to geometric
mean-based relative payment weights,
we have made changes throughout the
history of the OPPS with a goal of
deriving more accurate information
from available claims and cost report
data, as well as increasing the benefits
of using a metric that more accurately
describes the range of costs associated
with providing services and, thus,
resulting in the most appropriate
payments. We continue to believe that
basing the relative payment weights on
geometric mean costs promotes better
stability in the payment system by
making OPPS payments more reflective
of the range of costs associated with
providing services. Therefore, 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 leads to the establishment
of relative payment weights that are
more reflective of service cost patterns.
Finally, in response to commenters
requesting that we suspend the
proposed CY 2014 PHP payment rates
and maintain the CY 2013 PHP APC
payment rates, as we discussed above,
we cannot establish payment rates that
do not accurately reflect current claims
and cost report data. Therefore, we are
not suspending implementation of the
CY 2014 PHP APC per diem payment
rates.
Comment: Several commenters
indicated that the proposed PHP per
diem payment rates for CY 2014 show
again that payment rates continue to
materially fluctuate from one year to
another. The commenters expressed
concern regarding the variation in
payment from year to year for this
critically important service and noted
that significant fluctuations from year to
year make budgeting difficult for
hospital-based PHPs. Another
commenter asked if the decrease in the
APC 0176 payment rate is due solely to
the costs associated with the services, or
if the decrease is compounded by the
other significant changes in the
proposed rule—namely, a significant
change in the packaging of services,

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75049

which will shift significant dollars
around in the OPPS system.
Response: We recognize the
commenters’ concern regarding variance
in payment rates from year to year. We
believe that payment rates for PHP
services fluctuate from year to year
based on a variety of factors, including
direct changes to the PHP APC per diem
payment rate, changes to the OPPS, and
provider-driven changes.
Over the past several years, we have
made changes to PHP APC per diem
payment rates to more accurately align
the payments with costs. The changes
have included establishing separate
APCs and associated per diem payment
rates for CMHCs and hospital-based
providers based on each provider’s
costs, under which we pay one amount
for days with 3 services and another
amount for days with 4 or more
services.
Additionally, the OPPS is a budget
neutral payment system, and as a result,
changes in the relative payment weights
associated with certain services may
affect those of other services in the
payment system. Further, changes in
payment policy also may have effects on
the payment rates each year. For
example, basing the relative payment
weights on geometric mean costs rather
than median costs affected the payment
rates.
Finally, provider-driven changes
affect the payment rates. The case-mix
and number of services provided, as
well as changes to the charging structure
and the variety of hospitals and CMHCs
providing the services, contribute to
changes in the payment rates. Providers
may choose to update or maintain their
charges each year based on a variety of
business reasons, but these changes to
charges often vary depending on the
different services each provider
furnishes as well as the business
decisions of the provider. Therefore, a
provider’s decision to change its mix of
services or to change its charges and
clinical practice for some services also
contributes to the fluctuation in
payment rates. Therefore, both policy
and data changes influence the changes
in the PHP APC payment rates, as they
do for all services each year.
In response to the commenter who
asked if the decrease in the payment
rate for APC 0176 is due solely to the
costs associated with PHP services, or if
the decrease is compounded by other
significant changes in the proposed rule,
the decrease is due to both. There is a
decrease in the Level II PHP hospitalbased geometric mean per diem costs of
approximately $21 from the CY 2013
Level II hospital-based PHP per diem
amount of $235 to the CY 2014 Level II

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hospital-based PHP per diem amount of
approximately $214 before any changes
that may result from relative payment
weights associated with other services
in the OPPS. That said, we believe that
the payment rate for APC 0176
continues to accurately reflect the costs
associated with providing PHP services
in the hospital setting.
We will continue to explore ways to
minimize fluctuations in the PHP

payment rates because we agree that a
high level of volatility is not desirable.
However, we also believe that changes
in estimated costs from one year to the
next are appropriate in a payment
system that is annually updated to more
accurately estimate the cost of a service
upon which the relative payment
weights are based.
In summary, after consideration of the
public comments we received, we are

finalizing our CY 2014 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 2014 are shown in
Tables 43 and 44 below.

C. Discussion of Possible Future
Initiatives, Request for Public
Comments, and Summary of Public
Comments Received
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43621 through 43622), we
noted that we are considering a number
of possible future initiatives that may
help to ensure the long-term stability of
PHPs and further improve the accuracy
of payment for PHP services. Along with
our broad, ongoing objectives of
ensuring stability of the PHP benefit and
promoting payment accuracy for PHPs,
we want to ensure that PHPs are used
by individuals who are specifically in
need of such services. The PHP benefit
was designed to assist individuals with
an acute exacerbation of a psychiatric
illness to manage debilitating symptoms
and prevent the need for admission and
readmission into hospitals. Accordingly,
we stated that we are considering a

number of possible future modifications
to certain aspects of the PHP benefit. We
did not propose new Medicare policy in
this discussion of possible future
modifications in the CY 2014 OPPS/
ASC proposed rule. Instead, we
requested public comments on possible
future initiatives.
For example, under the current
methodology, we use the most recent
claims data to compute geometric mean
per diem costs for Level I (3 services per
day) and Level II (4 or more services per
day) PHP services for CMHCs and for
hospital-based PHPs. We are interested
in examining the payment structure for
PHP services to determine whether
alternative methodologies to pay for
PHP services would reduce unnecessary
care while maintaining or increasing the
quality of care provided. We invited
public comments on alternative
payment methodologies.

Another area in which we solicited
public comments is whether payment
based on an episode of care, or a per
diem similar to those used in the
inpatient psychiatric facility (IPF) PPS,
would result in more appropriate
payment for PHP services than the
current payment structure. The IPF PPS
is a per diem prospective payment
system for inpatient psychiatric hospital
services furnished in psychiatric
hospitals, and psychiatric units in acute
care hospitals and critical access
hospitals. The IPF PPS base rate is
adjusted to account for patient and
facility characteristics that contribute to
higher costs per day, including age,
diagnosis-related group assignment,
comorbidities, days of the stay,
geographic wage area, rural location,
teaching status, cost of living for IPFs
located in Alaska and Hawaii, and the
presence of a qualifying emergency

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department. The IPF PPS methodology
includes a payment provision for
interrupted stays, additional payment
for outlier cases, and a per treatment
payment for electroconvulsive therapy
(ECT) treatments. For detailed
information regarding the
implementation of the IPF PPS, we refer
readers to the FY 2005 IPF PPS final
rule published in the Federal Register
on November 15, 2004 (69 FR 66922).
To find additional information about the
IPF PPS, we refer readers to the CMS
Web site at: http://www.cms.hhs.gov/
inpatientpsychfacilpps.
Comment: Commenters primarily
opposed changing the PHP payment
methodology from a per diem based
calculation to an episode of care based
calculation. We received several public
comments requesting a single payment
for PHP services, as well as several
public comments stating that there is a
need for more research to determine the
best method of payment. Mainly,
commenters suggested that CMS take
three steps: (1) Establish a ratesetting
task force to develop a new payment
rate methodology that captures all
relevant data and reflects the real costs
to providers to deliver these services; (2)
examine the Medicare mental health
benefits; and (3) encourage legislative
changes to expand mental health
services. These commenters stressed
that any proposed change to the
payment methodology for PHP services
must involve relevant stakeholders in
Federal agencies (such as SAMHSA) as
well as representatives from CMHCs and
hospital providers and associations.
Response: We appreciate the
commenters’ input and suggestions and
will take them under advisement for
future refinements.
Comment: Commenters indicated that
the Medicare PHP benefit is critical in
keeping beneficiaries out of emergency
rooms and in the community, and urged
CMS to proceed cautiously in proposing
reforms that may erode what is already
a fragile safety net of providers. The
commenters believed that any changes
to the PHP payment methodology
should not be considered in isolation.
The commenters suggested that CMS
look at Medicare benefits for psychiatric
services overall and take the necessary
steps to develop coverage of a
comprehensive set of services across all
settings of care that meet the needs of
the population.
Several commenters cited a recent
report sponsored by the National
Association of Psychiatric Health
Systems which they said found that the
benefits derived from patients
participating in PHPs extend the time
between readmissions. According to

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their analysis, the time-to-readmission
ratio for these Medicare beneficiaries
was 131 days versus 59 days between
admissions for those beneficiaries who
did not participate in PHPs.
Many commenters representing
hospitals and hospital associations
indicated that it would be premature to
assume that a change in the payment
methodology would achieve the goals
that CMS has described in the proposed
rule without statutory changes to the
existing PHP benefit. A few commenters
indicated that in the absence of any
relevant payment research or
substantive proposals, they could not
comment on whether an episode of care
or a per diem based payment for the
PHP benefit would result in more
suitable payment rates, indicating that
additional research is an important next
step before determining whether or not
either approach would have the
intended effects and is sustainable.
One commenter believed that
improvements in PHP models can be
made and suggested that CMS consider
other treatment approaches that are less
rigid than the current PHP guidelines,
especially the required number of
service hours and days of treatment
required per week. The commenter
believed that more flexibility in this
area is necessary to accommodate
patients’ work and family schedules.
For example, a model of intensive
outpatient services estimated at 3 hours
per day, 3 days per week would allow
more flexibility to meet patient needs
clinically and personally. The
commenter did not believe that the
application of an episode of care
payment methodology for PHP services
would be appropriate due to the
vagueness of the period and the
intensity and uniqueness of each
patient’s illness. However, the
commenter supported CMS’ efforts to
communicate with stakeholders on
possible future initiatives for PHP
services.
Commenters also stated that an
enhanced per diem payment rate that
reflects the costs of treating patients
with more complicated clinical needs
similar to the IPF PPS would also be
worth considering.
Many commenters representing
hospital associations indicated that it
would be useful to evaluate the way in
which overall Medicare mental health
benefits are structured. The commenters
believed that, compared to the scope of
services many private health insurers
cover, Medicare benefits are much
narrower. The commenters stated, for
instance, that Medicare beneficiaries are
currently limited to only 190 days of
inpatient psychiatric hospital care in

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their lifetime. According to the
commenters, no other Medicare
inpatient hospital service has this type
of arbitrary cap on benefits. In addition,
the commenters stated that, rather than
covering the full continuum of
behavioral health care services,
Medicare currently covers only
inpatient psychiatric care, hospitalbased and CMHC-based PHP services,
and office-based services. The
commenters further stated that the PHP
benefit is drawn very narrowly so as to
only cover care for the most acutely ill
patients who would otherwise require
hospitalization. As a result, according to
the commenters, the parts of the
continuum missing from current
Medicare benefits include formal
coverage of intensive outpatient care,
residential treatment, psychosocial
rehabilitation, and care management.
The commenters believed that this
makes it difficult for providers to
provide Medicare beneficiaries with the
appropriate services at the right level
and time.
These commenters stated that
broadening the Medicare mental health
benefit structure to encompass the other
components of the continuum would
require statutory changes. The
commenters believed that making
minimal changes, such as revising the
PHP payment structure, will not address
the larger limitations of the Medicare
benefit design.
One commenter recommended that a
single provider-based payment structure
be established for PHP services that
reflects the intensity of services that
people with serious mental illnesses
generally require because this benefit is
meant to substitute for inpatient care or
as a step-down level of care. To achieve
long-term stability and payment
accuracy, the commenter suggested that
CMS maintain the per diem payment
methodology. The commenter believed
that an episode-of-care payment
methodology is more appropriate for the
typical and predictable treatment of
physical ailments and issues, but not for
mental health treatment.
One commenter recommended that
CMS establish the same payment rates
and two-tiered payment structure for all
providers with no differentiation
between payment rates for hospitalbased PHP services and payments rates
for PHP services provided by CMHCs.
The commenter also urged CMS to
establish quality and outcomes criteria
to evaluate performance, influence
future ratesetting, and provide rewards
to individual providers for outstanding
quality and outcomes while at the same
time keeping their cost under control.

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Response: We appreciate the
commenters’ suggestions and
recommendations for strengthening the
PHP benefit and payment structure. We
will take them under advisement for any
future refinements.
Another area on which we solicited
public comments was physician
certification/recertification that an
individual would require inpatient
psychiatric care in the absence of PHP
services. In order for a hospital or
CMHC to be paid for partial
hospitalization services furnished to a
Medicare beneficiary, a physician must
certify (and recertify when such services
are furnished over a period of time),
among other things, that the individual
would require inpatient psychiatric care
in the absence of such services. In
addition, an individualized written plan
of treatment for furnishing such services
must be established and reviewed
periodically by a physician, and such
services must be furnished while the
individual is under the care of a
physician. For more details, we refer
readers to 42 CFR 424.24(e).
Current regulations specify that a
physician recertification must be signed
by a physician who is treating the
patient and has knowledge of the
patient’s response to treatment. A
recertification is required as of the 18th
day of partial hospitalization services.
Subsequent recertifications are required
at intervals established by the provider,
but no less frequently than every 30
days. We invited public comments on
whether the current requirement under
§ 424.24(e)(3)(ii) of the regulations,
which requires the first recertification
by the physician to be as of the 18th day
of partial hospitalization services,
reflects current PHP treatment practices.
Specifically, we stated that we were
interested in whether the first
recertification date should be changed
to some other standard that accords
with best practices and why.
Comment: Several commenters
indicated that they had no
recommended changes to physician
certification and recertification
requirements and did not believe that an
alternative recommendation is
warranted at this time. The commenters
indicated that they did not believe that
there was any reason to change the 18day recertification requirement and the
‘‘no longer than 30 days’’ length of time
requirement for a subsequent
recertification. In addition, the
commenters indicated that their
organization member hospitals have not
identified these requirements as a
problem, nor are they aware of any best
practices that would suggest the need
for such a change in the requirements.

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Response: We thank the commenters
for their input and suggestions and will
take them under advisement for future
refinements
With respect to the individualized
written plan of treatment for furnishing
partial hospitalization services, as
discussed above, a physician must
establish and periodically review the
written plan of treatment. The written
plan of treatment sets forth the
physician’s diagnosis, the type, amount,
duration, and frequency of the services,
and the treatment goals under the
written plan. The physician determines
the frequency and duration of the PHP
services taking into account accepted
norms of medical practice and a
reasonable expectation of improvement
in the patient’s condition. (We refer
readers to § 424.24(e)(2) of the
regulations.) We indicated that we are
interested in what requirements should
be included in the written plan of
treatment to better direct PHP resources
toward appropriate discharge and
follow-up with appropriate support
services. Specifically, we invited public
comments on two issues: (1) the best
way that discharge from a PHP could be
expedited for those individuals no
longer at risk of inpatient psychiatric
hospitalization; and (2) whether the
written plan of treatment requirements
under § 424.24(e)(2)(i)(C), which require
that the written plan of treatment set
forth the treatment goals, should be
revised to require that specific actions
be taken by the physician and/or staff to
assist a beneficiary in transitioning from
a PHP to a lower level of care. For
example, we are interested in whether
the written plan of treatment should
require that, upon discharge, patients
have written instructions that include:
• A full list of their medications,
dosages and any necessary
prescriptions;
• Their next scheduled appointment
with a psychiatrist or qualified
practitioner who may bill for his or her
professional services under Medicare
Part B, including the phone number,
address, and appointment date and
time;
• A confirmed place to live in a stable
environment with support services; and
• Other care coordination
information.
Comment: With regard to additions to
the written plan of treatment, several
commenters supported including in the
written plan of treatment a full list of
patients’ medications, dosages, and any
necessary prescriptions as well as
written notice of the next scheduled
appointment with a psychiatrist or
qualified practitioner who may bill for
his or her professional services under

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Medicare Part B, including the phone
number, address and appointment date
and time. However, the commenters did
not believe that it would be feasible for
a PHP to provide a ‘‘confirmed place to
live in a stable environment with
support services’’ for its patients. The
commenters noted that among the
admission criteria for a PHP is the
requirement that the patient ‘‘have an
adequate support system to sustain/
maintain themselves outside the partial
hospitalization program.’’ The
commenters believed that, while a PHP
may be able to provide some limited
assistance for a patient to maintain and
enhance his or her stable environment,
the program cannot ensure the
sustainability of the environment or
keep a patient enrolled in a PHP until
that environment can be established.
The commenters pointed out that
ensuring this type of environment
would require intensive case
management. The commenters believed
that, if intensive case management was
included in the PHP benefit available to
Medicare beneficiaries, it would be a
helpful enhancement to the program.
Therefore, the commenters urged CMS
to continue stakeholder engagement to
discuss the goals of additional
documentation requirements within the
written plan of treatment.
Several commenters suggested
additional requirements for the written
plan of treatment to better direct PHP
resources to ensure appropriate
discharges and follow-up services, such
as expedited discharge for patients who
are no longer at risk for inpatient
psychiatric hospitalizations, and
specific actions to assist patients at
discharge, including providing written
instructions for medications,
documentation of the next appointment
with the appropriate Medicare Part B
participating practitioner, confirmation
of a place of residence, and other care
coordination information. One
commenter stated that the PHP medical
necessity criterion should include care
for the acute exacerbation of a
psychiatric condition and care for
prevention of admission or readmission
to the hospital. One commenter
suggested that any written treatment
plan for a patient receiving PHP services
include goals that will curtail the
patient’s need for a higher level of care
through adherence to the PHP’s
attendance requirements and his or her
prescribed medication regimen, identify
the patient’s symptoms and prognosis
for improvement, and take into
consideration the patient’s coping skills.
The commenter stated that the treatment
plan must be concise. Another
commenter agreed that the diagnosis of

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a patient enrolled in a PHP should be
consistent with those attributable to
persons with chronic and persistent
mental illnesses and included in the
written treatment plan for PHP services.
Response: We thank the commenters
for their input and suggestions and will
take them under advisement for future
refinements.
We also stated that we were interested
in receiving public feedback about
quality measures for a PHP. Quality
health care is a high priority for CMS.
We implement quality initiatives to
ensure quality health care for Medicare
beneficiaries through accountability and
public disclosure. We use quality
measures under various quality
initiatives, which utilize pay-forreporting and public reporting
mechanisms. We requested public
comments on quality measures for PHP
services for future consideration.
Specifically, if we were to establish
quality measures for PHP services and
require quality data reporting, what
should be included in those measures?
In addition, should the quality measures
be similar or identical to those measures
established for IPFs under the IPF
Quality Reporting (IPFQR) Program?
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43622), we stated that we
would appreciate feedback on all of
these areas for future consideration and
invited public comments on these
issues.
Comment: Many commenters
indicated that they have long supported
the quality measures that are now
included as part of the IPFQR program,
and noted that the measures are well
tested, reliable, and valid and have
broad stakeholder support. The
commenters asked that CMS initiate a
conversation with the measure
developers to determine if any of these
measures would be suitable for the
outpatient setting. In particular, the
commenters indicated that the care
transition measure (HBIPS 7) and the
antipsychotic medication measures
(HBIPS 4 and 5) are likely candidates
and worthy of further discussion. Other
commenters also suggested that CMS
consider the HBIPS 6 measure regarding
continuity of care and the HBIPS 1
measure regarding admission screening
for violence risk, substance use,
psychological trauma history, and
patient strengths. These commenters
stated that preserving the continuity of
care between the inpatient and
outpatient setting is an important goal,
and indicated that starting with these
inpatient measures may prove
informative as CMS moves forward in
considering alternative measures for the
hospital outpatient department setting.

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Many commenters urged CMS to work
collaboratively with the Technical
Expert Panel that it has established to
develop, test, and fully vet any measure
concepts before proceeding with
measure development. Many
commenters supported measuring the
quality and safety of behavioral health
care across the continuum of care and
indicated that it may be appropriate to
implement measures for PHPs.
However, the commenters stated that
any measures selected to assess the
quality of PHP services should be
specified, tested and National Quality
Forum (NQF)-endorsed for that care
setting, and reviewed by the Measure
Applications Partnership (MAP) before
the measures are proposed for inclusion
under a quality reporting program for
PHP services provided on an outpatient
basis. One commenter supported the
development of quality measures for
PHP services and recommended that
CMS work with SAMHSA on their
proposed National Behavioral Health
Quality Framework that was recently
released for public comment, to
determine how this framework might
apply or be modified to apply to quality
measures for PHP services.
Another commenter stated that the
quality indicators CMS are seeking must
be very specific and relate to the
patient’s current outpatient visit. The
commenter suggested the following
quality indicators and discharge
requirements for PHP services in order
to evaluate performance: (1) Access—
The number of program days of
scheduled operation from the time of a
request for services to the first
scheduled day of service; (2) Treatment
Intensity—The percentage of scheduled
attendance consistent with a minimum
attendance average of 4 days per
calendar week over an episode of care;
(3) Discharge Planning—The percentage
of patients with a scheduled follow-up
appointment within 14 days after the
date of discharge (as needed); and (4)
Continuity of Care—The percentage of
post-discharge continuity of care plans
provided to the next level of care
providers upon discharge.
Another commenter suggested that,
instead of calculating the PHP APC 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. The commenter stated
that rewarding providers for higher
quality care as measured by selected
standards instead of rewarding
providers for increasing the cost of the

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services provided is a better way to
improve the quality of any service. The
commenter further stated that
establishing quality measures will
support constructive changes
throughout the payment system and will
encourage performance improvements
by all providers (regardless of setting—
CMHC or hospital outpatient
department). The commenter believed
that value-based purchasing incentives
(rather than antiquated payment
methodologies involving cost-based
purchasing) is more appropriate to
improve the quality of care provided.
Response: We thank the commenters
for their input and suggestions and will
take them under advisement for future
refinements.
We appreciate the wide range of
comments we received from health and
behavioral health care associations,
hospitals, providers and professionals
interested in future initiatives related to
partial hospitalization services. We will
take them into consideration for further
rulemaking to strengthen the PHP
benefit and payment structure.
D. Separate Threshold for Outlier
Payments to CMHCs
As discussed in the CY 2004 OPPS
final rule with comment period (68 FR
63469 through 63470), after examining
the costs, charges, and outlier payments
for CMHCs, we believed that
establishing a separate OPPS outlier
policy for CMHCs would be appropriate.
A CMHC-specific outlier policy would
direct OPPS outlier payments towards
genuine cost of outlier cases, and
address situations where charges were
being artificially increased to enhance
outlier payments. We created a separate
outlier policy that would be specific to
the estimated costs and OPPS payments
provided to CMHCs. We note that, in
the CY 2009 OPPS/ASC final rule with
comment period, we established an
outlier reconciliation policy to
comprehensively address charging
aberrations related to OPPS outlier
payments (73 FR 68594 through 68599).
Therefore, beginning in CY 2004, 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, and
established a separate outlier threshold
for CMHCs.
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

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believe that this difference in outlier
payments indicates that the separate
outlier threshold for CMHCs has been
successful in keeping outlier payments
to CMHCs in line with the percentage of
OPPS payments made to CMHCs.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43622), we proposed to
continue designating a portion of the
estimated 1.0 percent outlier target
amount specifically for CMHCs,
consistent with the percentage of
projected payments to CMHCs under the
OPPS in CY 2014, excluding outlier
payments. CMHCs are projected to
receive 0.07 percent of total OPPS
payments in CY 2014, excluding outlier
payments. Therefore, we proposed to
designate 0.0016 percent of the
estimated 1.0 percent outlier target
amount for CMHCs, and establish a
threshold to achieve that level of outlier
payments. Based on our simulations of
CMHC payments for CY 2014, we
proposed to continue to set the
threshold for CY 2014 at 3.40 times the
highest CMHC PHP APC payment rate
(that is, APC 0173 (Level II Partial
Hospitalization)). We stated that we
continue to believe that this approach
would neutralize the impact of inflated
CMHC charges on outlier payments and
better target outlier payments to those
truly exceptionally high-cost cases that
might otherwise limit beneficiary
access. In addition, we proposed to
continue to apply the same outlier
payment percentage that applies to
hospitals. Therefore, for CY 2014, we
proposed to continue to pay 50 percent
of CMHC per diem costs over the
threshold. In section II.G. of the CY
2014 OPPS/ASC proposed rule (78 FR
43622), for the hospital outpatient
outlier payment policy, we proposed to
set a dollar threshold in addition to an
APC multiplier threshold. 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.
In summary, 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 would 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.
Comment: A few commenters stated
that no changes should be made to
outlier payments for CMHCs.
Response: We appreciate the
commenters’ input.

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After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal to set
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 the
1.00 percent, an amount equal to 0.16
percent of outlier payments or 0.0016
percent of total estimated OPPS
payments to CMHCs for PHP outlier
payments. For CY 2014, as proposed, we
are setting the CMHC outlier threshold
at 3.40 multiplied by the APC 0173
payment amount and the CY 2014
outlier percentage applicable to costs in
excess of the threshold at 50 percent. In
other words, 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.
IX. Procedures That Will Be Paid Only
as Inpatient Procedures
A. Background
We refer readers to the CY 2012
OPPS/ASC 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 2014 OPPS/ASC proposed
rule (78 FR 43622), for the CY 2014
OPPS, 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 identify any
procedures that 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.

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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 did not
identify any procedures that potentially
could be removed from the inpatient list
for CY 2014. Therefore, we proposed to
not remove any procedures from the
inpatient list for CY 2014.
Comment: Several commenters
requested that CMS remove CPT codes
37182 (Insertion of transvenous
intrahepatic portosystemic shunt(s)
(TIPS) (includes venous access, hepatic
and portal vein catheterization,
portography with hemodynamic
evaluation, intrahepatic tract formation/
dilatation, stent placement and all
associated imaging guidance and
documentation); 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); 54411
(Removal and replacement of a multicomponent inflatable penile prosthesis
through an infected field at the same
operative session); and 54417 (Removal
and replacement of a non-inflatable
(semi-rigid) or inflatable (self-contained)
penile prosthesis through an infected
field at the same operative session) from
the CY 2014 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
CPT codes 37182, 37183, 54411, and
54417 using recent utilization data and
further clinical review performed by
CMS medical advisors. As a result of the
reevaluation, we have determined that
these procedures can be safely
performed only in the inpatient setting.
We are not removing them from the
inpatient list for CY 2014.
Comment: Some commenters
requested that CMS add CPT codes
44202 (Laparoscopy, surgical;
enterectomy, resection of small
intestine, single resection and
anastomosis), 44203 (Laparoscopy,
surgical; each additional small intestine

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dual lead system), 33241 (Removal of
pacing cardioverter defibrillator pulse
generator only), and 33244 (Removal of
single or dual chamber pacing
cardioverter-defibrillator electrodes; by
transvenous extraction) to the inpatient
list.
Response: We reevaluated data on
CPT codes 33233, 33234, 33235, 33241,
and 33244 using recent utilization data
and further clinical review performed
by CMS medical advisors. As a result of
the reevaluation, we determined that
these five procedures can be safely
performed in the outpatient setting.
Therefore, we are not adding CPT codes
33233, 33234, 33235, 33241, and 33244
to the inpatient list for CY 2014.
Comment: A few commenters
requested that the inpatient list be
eliminated in its entirety.
Response: We continue to believe that
the inpatient only list is a valuable tool
for ensuring that the OPPS only pays for
services that can safely be performed in
the hospital outpatient setting, and we
are not eliminating the inpatient only
list at this time. We believe that there
are many surgical procedures that
cannot be safely performed on a typical
Medicare beneficiary in the hospital
outpatient setting. Therefore, it would
be inappropriate for us to assign them
separately payable status indicators and
establish payment rates in the OPPS.
Comment: One commenter
recommended that CMS remove the
fourth criterion, ‘‘A determination is
made that the procedure is being
performed in numerous hospitals on an
outpatient basis,’’ to determine whether
codes potentially could be removed
from the inpatient list because it will be
difficult, if not impossible, to meet this
criterion.

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Response: We disagree with the
commenter that this criterion is
impossible to meet and note that the
criterion has been a part of our
longstanding and established
methodology for identifying any
procedures that potentially could be
removed from the inpatient list for a
number of years without significant
concern raised by public commenters.
We also remind the commenter that
removal from the inpatient list does not
necessarily require that all five criteria
be satisfied. It is possible that a
procedure could be removed from the
inpatient list even if only a subset of the
five criteria is satisfied for a particular
service. Therefore, we do not find
reason to remove the fourth criterion
from our established methodology for
identifying any procedures that
potentially could be removed from the
inpatient list. If this were the case for a
service (even though it may appear
unlikely), the service may be a good
candidate for removal from the inpatient
list.
After consideration of the public
comments we received, we are
finalizing our proposal to continue to
use the methodology described in the
November 15, 2004 final rule with
comment period to identify any
procedure that may be removed from
the inpatient list, and are modifying our
proposal for procedures on the inpatient
list for CY 2014 by adding CPT codes
44206, 44207, 44208, and 44213 to the
CY 2014 inpatient only list.
The procedures that we are adding to
the inpatient only list for CY 2014 and
their CPT codes, long descriptors, and
status indictors are displayed in Table
45 below.

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resection and anastomosis), 44204
(Laparoscopy, surgical; colectomy,
partial, with anastomosis); 44205
(Laparoscopy, surgical; colectomy,
partial, with removal of terminal ileum
with ileocolostomy), 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 reevaluated data on
CPT codes 44206, 44207, 44208, and
44213 using recent utilization data and
further clinical review performed by
CMS medical advisors. As a result of the
reevaluation, we agree with the
commenters that these procedures can
be safely performed only in the
inpatient setting. Therefore, we are
adding CPT codes 44206, 44207, 44208,
and 44213 to the inpatient list. We note
that CPT codes 44202, 44203, 44204,
and 44205 are currently assigned to the
inpatient list.
Comment: Other commenters
requested that CMS add CPT codes
33233 (Removal of permanent
pacemaker pulse generator only), 33234
(Removal of transvenous pacemaker
electrode(s): single lead system, atrial or
Ventricular), 33235 (Removal of
transvenous pacemaker electrode(s):

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The complete list of codes that we
will be paid by Medicare in CY 2014
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).
X. Nonrecurring Policy Changes

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A. Supervision of Hospital Outpatient
Therapeutic Services
1. Enforcement Instruction for the
Supervision of Outpatient Therapeutic
Services in CAHs and Certain Small
Rural Hospitals
In the CY 2009 OPPS/ASC proposed
rule and final rule with comment period
(73 FR 41518 through 41519 and 73 FR
68702 through 68704, respectively), we
clarified that direct supervision is
required for hospital outpatient
therapeutic services covered and paid
by Medicare in hospitals, as well as in
provider-based departments of
hospitals, as set forth in the CY 2000
OPPS final rule with comment period
(65 FR 18525). In the CY 2010 OPPS/
ASC final rule with comment period (74
FR 60575 through 60591), we finalized
a technical correction to the title and
text of the applicable regulations at 42
CFR 410.27 to clarify that this standard
applies in CAHs as well as hospitals. In
response to concerns expressed by the
hospital community, in particular CAHs
and small rural hospitals, that they
would have difficulty meeting this
standard, on March 15, 2010, we
instructed all Medicare contractors not
to evaluate or enforce the supervision
requirements for therapeutic services
provided to outpatients in CAHs from
January 1, 2010 through December 31,
2010, while the agency revisited the
supervision policy during the CY 2011
OPPS/ASC rulemaking cycle.
Due to continued concerns expressed
by CAHs and small rural hospitals, we
extended this notice of nonenforcement
(‘‘enforcement instruction’’) as an
interim measure for CY 2011, and
expanded it to apply to small rural
hospitals having 100 or fewer beds (75
FR 72007). We continued to consider
the issue further in our annual OPPS
notice and comment rulemaking, and
implemented an independent review
process in 2012 to obtain advice from
the Hospital Outpatient Payment Panel
(the Panel) on this matter (76 FR 74360
through 74371). Under this process used
since CY 2012, the Panel considers and
advises CMS regarding stakeholder
requests for changes in the required
level of supervision of individual
hospital outpatient therapeutic services.
In addition, we extended the
enforcement instruction the past 2 years
(through CY 2012 and CY 2013) to

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provide hospitals with adequate
opportunity to become familiar with the
new independent review process and
submit evaluation requests, and to meet
the required supervision levels for all
hospital outpatient therapeutic services
(we refer readers to 76 FR 74371 and 77
FR 68425). In the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68426), we stated that we expect CY
2013 to be the final year that the
enforcement instruction would be in
effect, as during this year there would
be 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 current enforcement
instruction is available on the CMS Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/
index.html?redirect=/
HospitalOutpatientPPS/01_
overview.asp.
In CY 2012 and CY 2013, the Panel
met and considered several requests
from CAHs and other stakeholders for
changes in the required level of
supervision for observation and other
services. Based on the Panel’s
recommendations, we modified our
supervision requirements to provide
that most of the services considered may
be furnished under general supervision,
in accordance with applicable Medicare
regulations and policies. These
decisions are posted on the CMS Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/Downloads/
CY2013-OPPS-General-Supervision.pdf.
We believe the independent Panel
review advisory process has proved an
effective means for the hospital
community to identify hospital
outpatient therapeutic services that can
safely be furnished under general
supervision, where the supervising
practitioner does not have to be
immediately available in person to
provide assistance and direction.
Therefore, as we discussed in the CY
2014 OPPS/ASC proposed rule (78 FR
43623), we believe it is appropriate to
allow the enforcement instruction to
expire at the end of CY 2013, to ensure
the quality and safety of hospital and
CAH outpatient therapeutic services
paid by Medicare. We stated in the
proposed rule that, for CY 2014, we
anticipated allowing the enforcement
instruction to expire, such that all
outpatient therapeutic services
furnished in hospitals and CAHs would
require a minimum of direct supervision
unless the service is on the list of
services that may be furnished under
general supervision or is designated as

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a nonsurgical extended duration
therapeutic service (the list of services
is available on the CMS Web site at
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/Downloads/
CY2013-OPPS-GeneralSupervision.pdf). In the proposed rule,
we stated that we were interested in
receiving public comments on any
potential impacts on access to care and
quality of care for specific services that
may result from allowing the
enforcement instruction to expire at the
end of CY 2013. We requested public
comments on specific services for which
CAHs and small rural hospitals
anticipate difficulty furnishing the
required direct supervision, including
specific factors that may contribute to
the lack of available staff.
Comment: Most commenters urged
CMS to extend the direct supervision
enforcement instruction for at least one
more year in order to study the possible
unintended consequences on Medicare
beneficiary access to care and, at the
same time, to develop policies that
exempt CAHs and small, rural PPS
hospitals from the requirement for
direct supervision. The commenters
stated that some small rural hospitals
and CAHs have insufficient staff
available to furnish direct supervision
in CY 2014. The primary contributing
factors cited were difficulty recruiting
physician and nonphysician
practitioners to practice in rural areas,
and a desire by patients to see the
providers they are familiar and
comfortable with locally, outside of
working hours. The commenters stated
that it is particularly difficult to furnish
direct supervision for critical specialty
services, such as radiation oncology
services, that cannot be supervised by a
hospital emergency department
physician or nonphysician practitioner,
because of the volume of emergency
patients or lack of specialty expertise.
These commenters believed that if the
direct supervision requirement is
enforced in CY 2014 for CAHs and small
rural hospitals, some of these facilities
will be forced to close altogether, and
others will have to limit their hours of
operation for chemotherapy,
intravenous infusion of antibiotics and
other drugs, cardiac and pulmonary
rehabilitation, observation, blood
transfusion, radiation oncology and
wound care services. The commenters
expressed concern that hospital
revenues would be reduced from these
business lines, and that some patients
would elect to discontinue their care
because of increased cost or inability to
travel farther distances to obtain access
to these services. The commenters

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believed that reduced access will result
in additional hospital readmissions and
increased Medicare spending. Several
commenters believed that access will be
especially difficult given the anticipated
increase in utilization likely to begin in
2014 as a result of the implementation
of the online health insurance
marketplaces and the expansion of
Medicaid under the Affordable Care
Act.
MedPAC stated in its public comment
that, in light of the decision to enforce
the supervision instructions, CMS
should continue working with the Panel
to define services that are appropriate
for general supervision.
Response: We continue to believe that
direct supervision is the most
appropriate level of supervision for
most hospital outpatient therapeutic
services under the ‘‘incident to’’
provisions of section 1861(s)(2)(B) of the
Act, as we discussed in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72006). Most hospital
outpatient therapeutic services must be
furnished directly (are not delegable);
therefore, general supervision would not
be appropriate for the majority of
services. The independent Panel review
advisory process was established
through notice and comment
rulemaking as the means of identifying
hospital outpatient therapeutic services
that can safely be furnished under
general supervision, where the
supervising practitioner does not have
to be immediately available in person to
provide assistance and direction (76 FR
74360 through 74371). We encourage
hospitals to continue using the Panel
process to bring to CMS’ attention
services that may not require the
immediate availability of a supervising
practitioner, especially where it is
possible to reduce the burden on the
workforce available to small rural
hospitals and CAHs while ensuring the
quality and safety of patient care. We
encourage hospitals and CAHs to
continue using the established Panel
process to request changes they believe
would be appropriate in supervision
levels for individual hospital outpatient
therapeutic services, especially those
the commenters mentioned that have
not yet been evaluated by the Panel,
such as blood transfusion,
chemotherapy and radiation therapy,
and wound care services. Instructions
for submitting evaluation requests are
available on the Panel Web site at:
http://www.cms.gov/Regulations-andGuidance/Guidance/FACA/Advisory
PanelonAmbulatoryPayment
ClassificationGroups.html).
Regarding pulmonary rehabilitation
(PR) and cardiac rehabilitation (CR)

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services also mentioned by the
commenters, in the CY 2009 OPPS/ASC
final rule with comment period (74 FR
60573), we stated that while we have
some flexibility to determine the type of
practitioner who may supervise other
hospital outpatient therapeutic services,
in the case of PR, CR, and intensive
cardiac rehabilitation (ICR) services, the
statutory language does not provide
such flexibility. Section 1861(eee)(2)(B)
of the Act imposes strict requirements,
describing the direct physician
supervision standard for PR, CR, and
ICR services, and does not give
flexibility to modify the requirement to
allow for other supervisory
practitioners.
After consideration of the public
comments we received, we are not
extending the enforcement instruction
another year for CY 2014. The
enforcement instruction will expire
December 31, 2013.
2. Supervision Requirements for
Observation Services
In the CY 2011 OPPS/ASC final rule
with comment period (75 FR 71999
through 72013), we revised the
supervision requirements for
observation services furnished in the
hospital by designating observation
services (HCPCS codes G0378 (Hospital
observation services, per hour) and
G0379 (Direct admission of patient for
observation care)) as nonsurgical
extended duration therapeutic services
(‘‘extended duration services’’). As we
provided in the CY 2011 OPPS/ASC
final rule with comment period and 42
CFR 410.27(a)(1)(iv)(E), extended
duration services require direct
supervision at the initiation of the
service, which may be followed by
general supervision for the remainder of
the service at the discretion of the
supervising physician or appropriate
nonphysician practitioner, once that
practitioner has determined that the
patient is stable. The determination by
the supervising physician or appropriate
nonphysician practitioner that the
beneficiary is stable and may be
transitioned to general supervision must
be documented in progress notes or in
the medical record (75 FR 72011).
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43624), we stated that since
we designated observation services as
extended duration services, we have
received several inquiries from
stakeholders regarding whether
Medicare requires multiple evaluations
of the beneficiary during the provision
of observation services. Specifically,
stakeholders asked whether, once the
supervising physician or appropriate
nonphysician practitioner transitions

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75057

the beneficiary to general supervision
and documents the transition in the
medical record, Medicare requires
further assessment of the beneficiary
either per hour (because observation
services are billed per hour) or at some
other point during provision of the
service. In the CY 2014 OPPS/ASC
proposed rule, we stated that we are
clarifying that, for observation services,
if the supervising physician or
appropriate nonphysician practitioner
determines and documents in the
medical record that the beneficiary is
stable and may be transitioned to
general supervision, general supervision
may be furnished for the duration of the
service. Medicare does not require an
additional initiation period(s) of direct
supervision during the service.
Comment: Commenters supported
this clarification, stating that it answers
many questions regarding whether
Medicare requires hourly evaluations of
the patient during the provision of
observation services.
Response: We appreciate the
commenters’ support and are finalizing
our clarification without modification.
We believe that this clarification will
assist hospitals in furnishing the
required supervision of observation
services without undue burden on their
staff.
B. Application of Therapy Caps in CAHs
For outpatient physical therapy (PT),
occupational therapy (OT), and speechlanguage pathology (SLP) (collectively,
‘‘outpatient therapy’’) services covered
under Medicare Part B, section 1833(g)
of the Act applies annual, per
beneficiary limitations on incurred
expenses, commonly referred to as
‘‘therapy caps,’’ for these services. There
is one therapy cap for OT services and
another separate therapy cap for PT and
SLP services combined. As we
discussed in the CY 2014 OPPS/ASC
proposed rule (78 FR 43624), in the CY
2014 Medicare Physician Fee Schedule
(MPFS) proposed rule (78 FR 43332), we
proposed to subject outpatient therapy
services furnished by a CAH to the
therapy caps and, if extended by statute,
the exceptions process and the manual
medical review process beginning on
January 1, 2014. The American
Taxpayer Relief Act of 2012 (Pub. L.
112–240) required that therapy services
furnished by a CAH during 2013 are
counted toward the therapy caps using
the MPFS rate, and we proposed to
continue this methodology for 2014 and
subsequent years. CAHs will still be
paid for therapy services under the
reasonable cost methodology for CAH
outpatient services described under
section 1834(g) of the Act. We refer

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readers to the CY 2014 MPFS final rule
with comment period for detailed
information about our proposal, a
summation of the public comments we
received on the proposal and our
responses, and detailed information
about our final policy. After
consideration of all of the public
comments we received, in the CY 2014
MPFS final rule, we are finalizing our
proposal to apply the therapy caps and
related provisions to services furnished
by a CAH beginning on January 1, 2014.
We are including in this CY 2014 OPPS/
ASC final rule with comment period a
reference to the final policy as an
additional means to direct CAHs’
attention to our policies in the CY 2014
MPFS final rule.

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C. Requirements for Payment of
Outpatient Therapeutic (‘‘Incident To’’)
Hospital or CAH Services
1. Overview
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43624 through 43626), we
proposed to amend the Medicare
conditions of payment for therapeutic
outpatient hospital or CAH services and
supplies furnished ‘‘incident to’’ a
physician’s or nonphysician
practitioner’s service (which we refer to
as hospital or CAH outpatient
therapeutic services) to require that
individuals furnishing these services do
so in compliance with applicable State
law. Under current policy, we generally
defer to hospitals to ensure that State
scope of practice and other State rules
relating to health care delivery are
followed, such that these services are
performed only by qualified personnel
in accordance with all applicable laws
and regulations. We proposed to revise
the existing regulations to explicitly
require that individuals who perform
hospital or CAH outpatient therapeutic
services must do so in compliance with
applicable State laws and regulations as
a condition of payment under Medicare
Part B. In this section, we are using the
term ‘‘hospital’’ to include a CAH unless
otherwise specified. Although the term
‘‘hospital’’ does not generally include a
CAH, section 1861(e) of the Act
provides that the term ‘‘hospital’’
includes a CAH if the context otherwise
requires. We believe it would be
appropriate to apply our policy
regarding compliance with applicable
State law, as we do for other conditions
of payment for hospital outpatient
therapeutic services, to CAHs as well as
other hospitals.
2. Background
Section 1861(s)(2)(B) of the Act
establishes the benefit category for

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hospital ‘‘incident to’’ medical and
other health services, which are paid
under Medicare Part B. The statute
specifies that ‘‘incident to’’ services are
‘‘hospital services (including drugs and
biological which are not usually selfadministered by the patient) incident to
physicians’ services rendered to
outpatients and partial hospitalization
services incident to such services.’’ In
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74369 through
74370), we clarified that hospital
outpatient therapeutic services
furnished incident to a physician’s
service even when described by benefit
categories other than the specific
‘‘incident to’’ provision in section
1861(s)(2)(B) of the Act (for example,
radiation therapy services described
under section 1861(s)(4) of the Act).
Because hospital outpatient therapeutic
services are furnished incident to a
physician’s professional service, the
conditions of payment that derive from
the ‘‘incident to’’ nature of the services
paid apply to all hospital outpatient
therapeutic services.
In addition to the requirements of the
statute, the regulation at 42 CFR 410.27
sets forth specific requirements that
must be met in order for a hospital to
be paid under Medicare Part B for
therapeutic hospital or CAH services
and supplies furnished incident to a
physician’s or nonphysician
practitioner’s service (hospital or CAH
outpatient therapeutic services). Section
410.27 describes hospital or CAH
services and supplies furnished incident
to a physician’s or nonphysician
practitioner’s services as therapeutic
services and provides the conditions of
payment. Specifically, § 410.27(a)
provides that Medicare Part B pays for
therapeutic hospital or CAH services
and supplies furnished incident to a
physician’s or nonphysician
practitioner’s service. These are defined,
in part, as all services and supplies
furnished to hospital or CAH
outpatients that are not diagnostic
services and that aid the physician or
nonphysician practitioner in the
treatment of the patient, including drugs
and biologicals that cannot be selfadministered, if they are furnished—
• By or under arrangements made by
the participating hospital or CAH,
except in the case of a SNF resident as
provided in 42 CFR 411.15(p);
• As an integral although incidental
part of a physician’s or nonphysician
practitioner’s services;
• In the hospital or CAH or in a
department of the hospital or CAH, as
defined in 42 CFR 413.65 [a providerbased department]; and

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• Under the direct supervision (or
other level of supervision as specified
by CMS for the particular service) of a
physician or a nonphysician
practitioner. For purposes of this
section, ‘‘nonphysician practitioner,’’ as
defined in § 410.27(g), means a clinical
psychologist, licensed clinical social
worker, physician assistant, nurse
practitioner, clinical nurse specialist, or
certified nurse-midwife.
Sections 410.27(b) through (f) provide
additional conditions of payment for
partial hospitalization services, drugs
and biologicals, emergency services, and
services furnished by an entity other
than the hospital (or CAH). We
commonly refer to the services
described in § 410.27 as ‘‘incident to’’
services.
In recent years, we have discussed
and refined the supervision regulations
under § 410.27, which are conditions of
Medicare Part B payment for hospital
outpatient ‘‘incident to’’ (‘‘therapeutic’’)
services. For example, we have
discussed our belief that direct
supervision is the most appropriate
level of supervision for most of these
services, unless personal supervision or
personal performance of the services by
the physician or nonphysician
practitioner is more appropriate, given
the ‘‘incident to’’ nature of the services
as an integral although incidental part of
a physician’s or nonphysician
practitioner’s services (74 FR 60584, 75
FR 72006, and 76 FR 42281). We have
stated our historical interpretation of
section 1861(s)(2)(B) of the Act,
specifically, that ‘‘incident to’’ services
are furnished under the order of a
physician (or nonphysician
practitioner), the physician is involved
in the management of the patient, and
the physician supervises the provision
of those services when he or she does
not provide them directly (75 FR
72006). This is reflected in our
requirement for a minimum of direct
supervision, except for a limited set of
services that may be furnished under
general supervision or are designated as
nonsurgical extended duration
therapeutic services which require
direct supervision initially with
potential transition to general
supervision (we refer readers to the
CMS Web site at http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Downloads/CY2013–OPPS-GeneralSupervision.pdf).
In § 410.27(a)(1)(iv)(C) and (D), we
regulate the qualifications of physicians
and nonphysician practitioners
supervising other personnel that are
personally performing a service, or part
of a service. In the CY 2011 OPPS/ASC

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final rule with comment period, we
stated our belief that that in order to
furnish assistance and direction, the
supervising practitioner would have to
be State-licensed and possess hospital
privileges to perform the supervised
procedure (75 FR 72007). Similarly, in
the CY 2010 OPPS/ASC final rule with
comment period, we stated that the
supervisory practitioner ‘‘must have,
within his or her State scope of practice
and hospital-granted privileges, the
ability to perform the service or
procedure’’ that he or she is supervising
(74 FR 60580).
Similarly, we provide in the Medicare
Benefit Policy Manual (MBPM, Pub.
100–02) that hospital outpatient
therapeutic services and supplies must
be furnished under the order of a
physician or other practitioner
practicing within the extent of the Act,
the Code of Federal Regulations, and
State law (Chapter 6, Section 20.5.2 of
the MBPM). Section 20.5.2 of the MBPM
specifies that the services must be
furnished by hospital personnel under
the appropriate supervision of a
physician or nonphysician practitioner
in accordance with 42 CFR 410.27 and
482.12. This does not mean that each
occasion of service by a nonphysician
need also be the occasion of the actual
rendition of a personal professional
service by the physician responsible for
care of the patient. However, during any
course of treatment rendered by
auxiliary personnel, the physician must
personally see the patient periodically
and sufficiently often to assess the
course of treatment and the patient’s
progress and, when necessary, to change
the treatment regimen. A hospital
service or supply would not be
considered incident to a physician’s
service if the attending physician
merely wrote an order for the services
or supplies and referred the patient to
the hospital without being involved in
the management of that course of
treatment.
Central to the issue of services that
hospitals may bill to Medicare that are
not performed personally by the
physician is the assessment of the
qualifications of the individuals to
whom the services are delegated. As
medical practice has evolved over time,
the services performed in the hospital
outpatient setting have expanded to
include more complicated services such
as advanced surgery and a complex
variety of radiation therapy. In addition,
the types of services that can be
furnished incident to a physician’s or
nonphysician practitioner’s services
have expanded. Under current Medicare
Part B payment policy, we generally
defer to hospitals to ensure that State

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scope of practice laws are followed and
that the personnel who furnish hospital
outpatient therapeutic (‘‘incident to’’)
services are licensed and are otherwise
qualified to do so. Specifically, we have
stated that, considering that hospitals
furnish a wide array of complex
outpatient services and procedures,
including surgical procedures, we
would expect that hospitals have the
credentialing procedures, bylaws, and
other policies in place to ensure that
hospital outpatient services furnished to
Medicare beneficiaries are being
provided only by qualified practitioners
in accordance with all applicable laws
and regulations (74 FR 60584; Chapter
6, Section 20.5.4 of the MBPM).
However, our payment regulations do
not contain restrictions on the types of
auxiliary personnel that can perform
hospital outpatient therapeutic
(‘‘incident to’’) services, other than rules
relating to supervision by a physician or
qualified nonphysician practitioner, and
do not specifically require that
performance of these services be in
compliance with applicable State law.
Over the past years, several situations
have come to our attention where
Medicare was billed for ‘‘incident to’’
services that were performed by an
individual who did not meet the State
standards for those services in the State
in which services were performed. The
physician or nonphysician practitioner
billing for the services would have been
permitted under State law to personally
furnish the services, but the services
were actually provided by other
individuals who were not in compliance
with State law in providing the
particular services (or aspect of the
services).
Although we would expect that all
hospital services for which Medicare
payment is made would be furnished in
accordance with State law, the Medicare
requirements for hospital outpatient
therapeutic services and supplies
incident to a physician’s services
(§ 410.27, discussed above) do not
specifically make compliance with State
law a condition of payment for services
(or aspects of services) and supplies
furnished and billed as ‘‘incident to’’
services. Nor do any of the payment
regulations regarding hospital
outpatient therapeutic services and
supplies incident to the services of
nonphysician practitioners contain this
requirement. Therefore, Medicare has
had limited recourse when hospital
outpatient therapeutic (‘‘incident to’’)
services are not furnished in compliance
with State law.
In 2009, the Office of Inspector
General (OIG) issued a report entitled
‘‘Prevalence and Qualifications of

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75059

Nonphysicians Who Performed
Medicare Physician Services’’ (OEI–09–
06–00430) that considered, in part, the
qualifications of auxiliary personnel
providing ‘‘incident to’’ physician
services. After finding that services were
being provided and billed to Medicare
by auxiliary personnel ‘‘ . . . who did
not possess the required licenses or
certifications according to State laws,
regulations, and/or Medicare rules,’’ the
OIG recommended that we revise the
‘‘incident to’’ rules to, among other
things, ‘‘require that physicians who do
not personally perform the services they
bill to Medicare ensure that no persons
except . . . nonphysicians who have the
necessary training, certification, and/or
licensure pursuant to State laws, State
regulations, and Medicare regulations
personally perform the services under
the direct supervision of a licensed
physician.’’ In the CY 2014 OPPS/ASC
proposed rule (78 FR 43624 through
43626), we proposed amendments to
our regulations in order to address this
recommendation.
3. Proposed and Final Policy
To ensure that the practitioners and
other personnel providing hospital
outpatient therapeutic services to
Medicare beneficiaries incident to a
physician’s or nonphysician
practitioner’s service do so in
accordance with the requirements of the
State in which the services are
furnished, and to ensure that Medicare
payments can be recovered when such
services are not furnished in compliance
with the State law, in the CY 2014
OPPS/ASC proposed rule (78 FR 43624
through 43626), we proposed to add a
new condition of payment to the
‘‘incident to’’ regulations at § 410.27,
Therapeutic outpatient hospital or CAH
services and supplies incident to a
physician’s or nonphysician
practitioner’s service: Conditions.
Specifically, we proposed to add a
provision under a new paragraph
(a)(1)(vi) under § 410.27 to specify that
‘‘Medicare Part B pays for therapeutic
hospital or CAH services and supplies
furnished incident to a physician’s or
nonphysician practitioner’s service . . .
if they are furnished ‘‘In accordance
with applicable State law.’’ We stated
that the proposed policy would
recognize the role of States in
establishing the licensure and other
qualifications of physicians and other
health care professionals for the
delivery of hospital (or CAH) outpatient
therapeutic services.
We indicated that the proposal is
consistent with other areas of the
Medicare program where CMS defers to
State rules regarding the delivery of

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hospital services. For example, in
determining who can admit patients as
inpatients of a hospital, the hospital
conditions of participation (CoPs) defer
to State law and the authority of the
hospital’s governing body and medical
staff to grant admitting privileges in
accordance with the laws of the State in
which the hospital is located. Section
482.12(c)(2) provides: ‘‘Patients are
admitted to the hospital only on the
recommendation of a licensed
practitioner permitted by the State to
admit patients to a hospital.’’ The CoP
also provides that, ‘‘If a Medicare
patient is admitted by a practitioner not
specified in paragraph (c)(1) of this
section [which lists practitioners that
must care for Medicare patients], that
patient is under the care of a doctor of
medicine or osteopathy.’’ Therefore, in
determining who may admit inpatients
to a hospital, Medicare defers to State
law rules. As we stated in a recent rule
addressing credentialing and privileging
and telemedicine services under the
CoPs (77 FR 29047): ‘‘CMS recognizes
that practitioner licensure laws and
regulations have traditionally been, and
continue to be, the provenance of
individual States, and we are not
seeking to preempt State authority in
this matter.’’ Similarly, under the CoP at
42 CFR 482.22(a), we provide that a
hospital’s medical staff which grants
admitting privileges ‘‘must include
doctors of medicine or osteopathy. In
accordance with State law, including
scope-of-practice laws, the medical staff
may also include other categories of
nonphysician practitioners determined
as eligible for appointment by the
governing body.’’ Under the CoP at 42
CFR 482.11(c), the hospital must assure
that personnel are licensed or meet
other applicable standards that are
required by State or local laws.
We believe it is appropriate to
similarly require as a condition of
payment for individual services that all
hospital outpatient services furnished
incident to a physician’s or
nonphysician practitioner’s services be
furnished in accordance with State law
requirements. As evidenced by these
examples, throughout the Medicare
program, the qualifications required for
the delivery of health care services are
generally determined with reference to
State law. In addition to the health and
safety benefits we believe would accrue
to the Medicare patient population, this
approach would assure that Federal
dollars are not expended for services
that do not meet the standards of the
States in which they are being
furnished, and provides the ability for
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funds paid where services and supplies
are not furnished in accordance with
State law.
We solicited public comments on our
proposal.
Comment: Several commenters
supported the general premise that
individuals who provide services and
supplies incident to a physician’s
services must do so in compliance with
State law. However, the commenters
opposed the ‘‘broad nature’’ of the
proposed regulatory text because they
believed that it might expose hospitals
to liability under the False Claims Act
in situations where a hospital
improperly billed Medicare for services
because the physician or practitioner
had some minor defect with his or her
license or certification, but there was no
concern about a practitioner acting
outside the scope of practice or the
quality of care furnished. Several
commenters asserted that the proposal
is not necessary or appropriate because
sanctions for these issues are already
available under the CoPs and section
1156 of the Act. These commenters
noted that section 1156 of the Act
requires hospitals to ensure that the
services it furnishes are of a quality that
meet professionally recognized
standards of care, and, upon a finding
that in a substantial number of cases the
hospital failed to comply substantially
with this obligation, or that it grossly
and flagrantly violated this obligation in
one or more instances, the hospital is
subject to a corrective action plan. The
commenters noted that, while the
sanction for violating the CoPs and the
penalties under section 1156 of the Act
do not include payment recoupment for
the particular services furnished, the
sanctions, including termination of the
Medicare provider agreement and
corrective action plans, are significant.
Several commenters supported the
proposal because they recommended
that CMS allow hospital personnel to
continue working, possibly indefinitely,
without the direct supervision of
physicians or other qualified
nonphysician practitioners in certain
smaller hospitals. These commenters
believed the proposal would be an
important means of ensuring that
ancillary personnel are properly trained,
experienced, and potentially—in some
States—even licensed, given that they
would furnish services relatively
independently in CAHs and small rural
hospitals without direct supervision.
The commenters stated that the
proposal would ensure that technicians
and other individuals furnishing
‘‘incident to’’ services are properly
educated, trained, and experienced, and
would ensure high quality care, not just

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for Medicare beneficiaries, but for all
patients.
Response: We agree with commenters
that the CoPs and other statutory
provisions provide for corrective action
plans as a condition to continued
eligibility to provide Medicare and
Medicaid services on a reimbursable
basis. However, we believe it is
appropriate to also recoup payment for
individual services if they are not
furnished in accordance with applicable
State law, and that the possibility of
sanctions in the form of payment
recoupment can help ensure compliance
with the law.
We are concerned with the comments
that indicated that our proposed
revision to § 410.27 is necessary, in the
absence of a direct supervision standard
for payment, to ensure the safety and
quality of care or compliance with State
law. The instruction regarding
enforcement of supervision
requirements (discussed in section XI.A.
of this final rule with comment period)
does not relieve CAHs or small rural
hospitals of their obligations under State
law, the hospital CoPs, or section 1156
of the Act, to ensure that the individuals
who furnish hospital outpatient
therapeutic services are licensed and
otherwise qualified to do so. The
enforcement instruction (available on
the CMS Web site at http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/Downloads/
Physician_Supervision_Nonenf_
Notice.pdf) specifically states, ‘‘CMS
continues to expect the hospitals
covered under this notice to fulfill all
other Medicare program requirements
when providing services to Medicare
beneficiaries and when billing Medicare
for those services. While CMS is
instructing contractors not to enforce
the supervision requirements for
outpatient therapeutic services in these
hospitals for CY 2010–2013, we
continue to emphasize quality and
safety for services provided to all
patients in these facilities.’’ We note
that as discussed in section X.A.1. of
this final rule with comment period, the
enforcement instruction will not be
extended for CY 2014. These public
comments reinforce our belief that
conditions of payment for individual
services, in the form of both the
outpatient supervision rules and the
proposed requirement for compliance
with State laws, are necessary to ensure
the safety and quality of care for
Medicare beneficiaries. The hospital
outpatient supervision rules are directed
at ensuring that supervisory
practitioners are licensed or authorized
by the State and possess hospital

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privileges to direct and, if necessary,
intervene in the services they supervise
(75 FR 72007), while our proposed
requirement for compliance with
applicable State law ensures that
supervised individuals are licensed and
qualified to provide the services or
aspects of services that are delegated to
them.
After consideration of the public
comments we received, we are
finalizing proposed new paragraph
(a)(1)(vi) under § 410.27, without
modification, to provide that Medicare
Part B pays for therapeutic hospital or
CAH services and supplies furnished
incident to a physician’s or
nonphysician practitioner’s service if
they are furnished ‘‘. . . In accordance
with applicable State law.’’ This final
policy does not impose any new
requirements on hospitals that bill the
Medicare program because practitioners
and other personnel furnishing services
already are required to comply with the
laws of the State in which the services
are furnished. This regulatory change
simply adopts the existing requirements
as a condition of payment under
Medicare. Codifying this requirement
provides the Federal government with a
clear basis to deny Medicare payment
when services are not furnished in
accordance with applicable State law, as
well as to ensure that Medicare pays for
services furnished to beneficiaries only
when the services meet the
requirements imposed by the States to
regulate health care delivery for the
health and safety of their citizens.
4. Technical Correction
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43626), we stated that, in
our review of § 410.27, we noted that
paragraph (a) defines therapeutic
hospital or CAH services and supplies
furnished incident to a physician’s or
nonphysician practitioner’s service as
‘‘all services and supplies furnished to
hospital or CAH outpatients that are not
diagnostic services and that aid the
physician or nonphysician practitioner
in the treatment of the patient,
including drugs and biologicals that
cannot be self-administered.’’ Section
1861(s)(2)(B) of the Act describes these
services as ‘‘hospital services (including
drugs and biologicals which are not
usually self-administered by the patient)
incident to physicians’ services
rendered to outpatients and partial
hospitalization services incident to such
services.’’ The statute includes in this
benefit category ‘‘drugs and biologicals
which are not usually self-administered
by the patient.’’ In the CY 2014 OPPS/
ASC proposed rule, we proposed to
make a technical correction that would

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amend the description of these drugs
and biologicals at § 410.27(a) to more
appropriately reflect the statutory
language. Specifically, we proposed to
delete the phrase ‘‘drugs and biologicals
that cannot be self-administered’’ and
replace it with the phrase ‘‘drugs and
biologicals which are not usually selfadministered.’’ Under this proposed
technical correction, the language of
§ 410.27(a) would read, ‘‘Medicare Part
B pays for therapeutic hospital or CAH
services and supplies furnished incident
to a physician’s or nonphysician
practitioner’s service, which are defined
as all services and supplies furnished to
hospital or CAH outpatients that are not
diagnostic services and that aid the
physician or nonphysician practitioner
in the treatment of the patient,
including drugs and biologicals which
are not usually self-administered. . . .’’
We did not receive any public
comments on this proposed technical
correction. Therefore, we are finalizing
the correction without modification.
D. Collecting Data on Services
Furnished in Off-Campus ProviderBased Departments
As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43626)
and in the CY 2014 Medicare Physician
Fee Schedule (MPFS) proposed rule (78
FR 43301), in recent years, the research
literature and popular press have
documented the increased trend toward
hospital acquisition of physician
practices, integration of those practices
as a department of the hospital, and the
resultant increase in the delivery of
physicians’ services in a hospital setting
(for example, we refer readers to Carol
M. Ostrom, ‘‘Why You Might Pay Twice
for One Visit to a Doctor,’’ Seattle
Times, November 3, 2012, and Ann
O’Malley, Amelia M. Bond, and Robert
Berenson, Rising Hospital Employment
of Physicians: Better Quality, Higher
Costs?, Issue Brief No. 136, Center for
Studying Health System Change, August
2011). When a Medicare beneficiary
receives outpatient services in a
hospital, the total payment amount for
outpatient services made by Medicare is
generally higher than the total payment
amount made by Medicare when a
physician furnishes those same services
in a freestanding clinic or in a
physician’s office. As more physician
practices become hospital-based, news
articles have highlighted beneficiary
liability that is incurred when services
are provided in a hospital-based
physician practice. MedPAC has
questioned the appropriateness of
increased Medicare payment and
beneficiary cost-sharing when
physicians’ offices become hospital

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outpatient departments and has
recommended that Medicare pay
selected hospital outpatient services at
the MPFS rates (MedPAC March 2012
Report to Congress, ‘‘Addressing
Medicare Payment Differences across
Settings,’’ presentation to the
Commission on March 7, 2013).
The total payment (including both
Medicare program payment and
beneficiary cost-sharing) generally is
higher when outpatient services are
furnished in the hospital outpatient
setting rather than in a freestanding
clinic or in a physician office. When a
service is furnished in a freestanding
clinic or a physician office, only one
payment is made to the physician
(under the MPFS). However, when a
service is provided in a hospital or a
‘‘physician office’’ that is a providerbased department of a hospital,
Medicare pays the hospital a ‘‘facility
fee’’ and pays the physician separately
for the physician portion of the service.
When a service is furnished in a
hospital (or a provider-based
department of a hospital), the payment
to the physician is lower than the
payment to the physician for the same
service furnished outside the hospital
(or the provider-based department of a
hospital). However, the total payment
(facility fee plus physician fee) is
generally more for a service furnished in
a hospital (or a provider-based
department of a hospital) than for the
same service furnished in a freestanding
clinic or a physician office. The
beneficiary pays coinsurance for both
the physician payment and the hospital
outpatient payment.
Upon acquisition of a physician
practice, hospitals frequently treat the
practice locations as off-campus
provider-based departments of the
hospital and bill Medicare for services
furnished at those locations under the
OPPS. (For further information on the
provider-based regulations at 42 CFR
413.65, we refer readers to http://
www.gpo.gov/fdsys/pkg/CFR-2010title42-vol2/pdf/CFR-2010-title42-vol2sec413-65.pdf). Since October 1, 2002,
we have not required hospitals to seek
from CMS a determination of providerbased status for a facility that is located
off campus. We also do not have a
formal process for gathering information
on the frequency, type, and payment of
services furnished in off-campus
provider-based departments of the
hospital.
We stated in the CY 2014 OPPS/ASC
and MPFS proposed rules that in order
to better understand the growing trend
toward hospital acquisition of physician
offices and subsequent treatment of
those locations as off-campus provider-

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based outpatient departments, we were
considering collecting information that
would allow us to analyze the
frequency, type, and payment of
services furnished in off-campus
provider-based hospital departments.
We stated that we have considered
several potential methods for physician
and hospital claims. Claims-based
approaches could include: (1) For
physician services, creating a new place
of service (POS) code for off campus
departments of a provider as part of
item 24B of the CMS–1500 claim form,
comparable to current POS codes such
as ‘‘22 Outpatient’’ and ‘‘23 Emergency
Room-Hospital’’ when physician
services are furnished in an off-campus
provider-based department; or (2)
creating a HCPCS modifier that could be
reported with every code for services
furnished in an off-campus providerbased department of a hospital on the
CMS–1500 claim form for physician
services and the UB–04 (CMS Form
1450) for hospital outpatient claims. In
addition, we have considered asking
hospitals to break out the costs and
charges for their provider-based
departments as outpatient service cost
centers on the Medicare hospital cost
report, CMS Form 2552–10. We noted
that some hospitals already break out
these costs voluntarily or because of
cost reporting requirements for the 340B
Drug Discount Program, but this
practice is not consistent or
standardized. In the proposed rules, we
invited public comments on the best
means for collecting information on the
frequency, type, and payment of
services furnished in off-campus
provider-based departments of
hospitals.
Comment: While most commenters
agreed on the need to collect
information on the frequency, type, and
payment of services furnished in offcampus provider-based departments of
hospitals, they expressed different
opinions on how to best collect these
additional data. Some commenters
preferred identifying services furnished
in provider-based departments on the
Medicare cost report, while other
commenters preferred one of the claimsbased approaches. Some commenters
supported either approach and noted
the trade-offs in terms of the type of data
that could be collected accurately and
the administrative burden involved.
Some commenters suggested that CMS
convene a group of stakeholders to
develop consensus on the best
approach. Commenters generally
recommended that CMS choose the least
administratively burdensome approach
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collection, but did not necessarily agree
on what approach would optimally
achieve that result. For example,
commenters indicated that limiting the
data collection to cost report approaches
results in little administrative burden
for physicians because they do not file
cost reports, but could result in varying
degrees of administrative effort for
hospitals, depending on the specific
cost reporting requirements.
Several commenters noted that some
hospitals already voluntarily identify
costs specific to provider-based
departments on their cost reports. These
commenters asserted that because cost
and charge information is already
reported separately, there would be no
additional burden, although additional
variables or changes to the structure of
the cost report may be required. In
addition, the commenters noted that
cost report information would be
transparent and audited for accuracy.
One commenter recommended aggregate
reporting of all off-campus providerbased departments as one or several cost
centers. Another commenter suggested
that CMS consider assigning separate
subprovider numbers for off-campus
departments similar to those used for
rehabilitation and psychiatric units.
Other commenters believed that a
HCPCS modifier would more clearly
identify specific services provided, and
would provide better information about
the type and level of care furnished.
Some commenters believed that a
HCPCS modifier would be the least
administratively burdensome approach
because hospitals and physicians
already report a number of claims-based
modifiers. However, other commenters,
using this same fact about the number
of existing claims-based modifiers,
argued that additional modifiers would
increase administrative burden because
this approach would increase the
modifiers that would need to be
considered when billing. Commenters
recommended that CMS consider the
establishment of a new POS code
because they believed this approach
would be less administratively
burdensome than attaching a modifier to
each service reported on the claim that
was furnished in an off-campus
provider-based department. Some
commenters stated that establishing a
new POS code would generate a better
outcome under the MPFS than the OPPS
because, under the OPPS, a single claim
is more likely to contain lines for
services furnished in both on-campus
and off-campus departments of the
hospital on the same day for the same
beneficiary.
MedPAC believed there may be some
limited value in collecting data on

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services furnished in off-campus
provider-based departments to validate
the accuracy of site-of-service reporting
when the physician’s office is offcampus but bills as an outpatient
department, but did not recommend a
particular data collection approach.
MedPAC indicated that any data
collection effort should not prevent the
development of policies to align
payment rates across settings.
Response: We appreciate the public
feedback in response to our solicitation
of public comments in the CY 2014
OPPS/ASC and MPFS proposed rules.
We will take the public comments
received into consideration as we
continue to consider approaches to
collecting data on services furnished in
off-campus provider-based departments.
XI. CY 2014 OPPS Payment Status and
Comment Indicators
A. CY 2014 OPPS Payment Status
Indicator Definitions
Payment status indicators (SIs) that
we assign to HCPCS codes and APCs
serve 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
complete list of the CY 2014 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. The CY 2014 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-Feefor-Service-Payment/
HospitalOutpatientPPS/index.html. The
changes to CY 2014 status indicators
and their definitions are discussed in
detail below.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43627), for CY 2014, we
proposed to create a new status
indicator ‘‘J1’’ to identify HCPCS codes
that are paid under a comprehensive
APC. We proposed that a claim with the
new proposed status indicator ‘‘J1’’
would trigger a comprehensive APC
payment for the claim.
The public comments that we
received on the status indicator ‘‘J1’’ are
discussed in detail in section II.A.2.e. of
this final rule with comment period.
After consideration of the public
comments we received, we have
decided to finalize status indicator ‘‘J1’’

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but with a delayed effective date of CY
2015.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43627), for CY 2014, we
proposed to delete status indicator ‘‘X’’
and assign ancillary services that are
currently assigned status indicator ‘‘X’’
to either status indicator ‘‘Q1’’ or ‘‘S.’’
Services assigned status indicator ‘‘Q1’’
include many minor diagnostic tests
that are generally ancillary to and
performed with another service.
However, services assigned to status
indicator ‘‘Q1’’ also may be performed
alone. Given the nature of these services
and their role in hospital outpatient
care, we stated that we believe that
when these services are performed with
another service, they should be
packaged, but that they should be
separately paid when performed alone.
Therefore, we stated that we believe it
is appropriate to conditionally package
all ancillary services that are currently
assigned to status indicator ‘‘X,’’ and we
proposed to assign them to status
indicator ‘‘Q1.’’ We also proposed that
preventive services currently assigned
status indicator ‘‘X’’ would continue to
receive separate payment in all cases
and be assigned status indicator ‘‘S’’ for
CY 2014. These proposed changes are
discussed in greater detail in section
II.A.3. of this final rule with comment
period. In addition, we proposed to
revise the definition of status indicator
‘‘Q1’’ by removing status indicator ‘‘X’’
from the packaging criteria, so that
codes assigned status indicator ‘‘Q1’’ are
STV-packaged, rather than STVXpackaged, because status indicator ‘‘X’’
was proposed for deletion.
The public comments that we
received regarding ancillary services
assigned to status indicator ‘‘X’’ are
discussed in detail in section II.A.3. of
this final rule with comment period. As
discussed in that section, we are not
finalizing our CY 2014 proposal to
package ancillary services. Therefore,
we are not deleting status indicator ‘‘X’’
for CY 2014.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43628), for CY 2014, we
proposed to revise the definitions of
status indicators ‘‘S’’ and ‘‘T’’ to remove
the word ‘‘significant’’ from these
definitions. We stated that it is no
longer necessary to distinguish
significant procedures from ancillary
services because we proposed to delete
the status indicator that describes
ancillary services. We also proposed to
add the word ‘‘service’’ to the
definitions of status indicators ‘‘S’’ and
‘‘T’’ to indicate ‘‘procedure or service;
not discounted when multiple,’’ as
applicable to status indicator ‘‘S’’ and
‘‘procedure or service; multiple

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reduction applies,’’ as applicable to
status indicator ‘‘T.’’
Comment: One commenter
recommended that CMS consider
allowing different status indicator
assignments for HCPCS codes within an
APC (for example, some of the codes
within an APC could be assigned status
indicator ‘‘S’’ and others could be
assigned status indicator ‘‘T’’) and
evaluate the need to permit HCPCS
codes within the same APC to have a
different assigned status indicator than
that assigned to the APC under which
it is being paid. The commenter
believed this was needed to ensure
appropriate payments and access to
affected services.
Response: We appreciate the
commenter’s interest in refining the
methodology used for assigning status
indicators ‘‘S’’ and ‘‘T’’ under the OPPS.
However, we did propose a change to
our policy of assigning status indicators
to APCs and, therefore, are not making
such a change for CY 2014. However,
we may consider this comment during
future rulemaking.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal,
without modification. We are finalizing
our proposal to revise the definitions of
status indicators ‘‘S’’ and ‘‘T’’ to remove
the word ‘‘significant’’ from these
definitions; and to add the word
‘‘service’’ to the definition of status
indicator ‘‘S’’ to indicate ‘‘procedure or
service; not discounted when multiple’’
and to status indicator ‘‘T’’ to indicate
‘‘procedure or service; multiple
reduction applies.’’ We believe that
these revisions better describe the entire
range of procedures and services that
will be assigned these status indicators
for CY 2014.
In addition, we proposed to update
the definition of status indicator ‘‘A’’ for
CY 2014. We proposed to remove
‘‘Routine Dialysis Services for ESRD
Patients Provided in a Certified Dialysis
Unit of a Hospital’’ from the list of items
and services applicable for the
definition of status indicator ‘‘A’’
because these services are not
recognized by OPPS when submitted on
an outpatient hospital Part B bill type
and are instead assigned to status
indicator ‘‘B.’’
We did not receive any public
comments regarding our proposed
update of the definition of status
indicator ‘‘A.’’ Therefore, we are
adopting, as final, our proposal for CY
2014.

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B. CY 2014 Comment Indicator
Definitions
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43628), for the CY 2014
OPPS, we proposed to use the same two
comment indicators that are in effect for
the CY 2013 OPPS.
• ‘‘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 2014
OPPS/ASC proposed rule to indicate
HCPCS codes for which the status
indicator or APC assignment, or both,
were proposed for change in CY 2014
compared to their assignment as of June
30, 2013. We stated that we believe that
using the ‘‘CH’’ indicator in the
proposed rule would facilitate the
public’s review of the changes that we
proposed for CY 2014.
We proposed to use the ‘‘CH’’
comment indicator in this CY 2014
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 2014 compared to their assignment
as of December 31, 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 would be changed in the
CY 2014 OPPS/ASC final rule with
comment period.
In addition, we proposed that any
existing HCPCS codes with substantial
revisions to the code descriptors for CY
2014 compared to the CY 2013
descriptors would be labeled with
comment indicator ‘‘NI’’ in Addendum
B to the CY 2014 OPPS/ASC final rule
with comment period. However, we
stated that in order to receive the
comment indicator ‘‘NI,’’ the CY 2014
revision to the code descriptor
(compared to the CY 2013 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 will be open for comment
as part of this CY 2014 OPPS/ASC final
rule with comment period. Like all
codes labeled with comment indicator

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‘‘NI,’’ we stated that we would respond
to public comments and finalize their
OPPS treatment in the CY 2015 OPPS/
ASC final rule with comment period.
In accordance with our usual practice,
we proposed that CPT and Level II
HCPCS codes that are new for CY 2014
also would be labeled with comment
indicator ‘‘NI’’ in Addendum B to the
CY 2014 OPPS/ASC final rule with
comment period.
Only HCPCS codes with comment
indicator ‘‘NI’’ in this CY 2014 OPPS/
ASC final rule with comment period are
subject to comment. HCPCS codes that
do not appear with comment indicator
‘‘NI’’ in this CY 2014 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.
Comment: One commenter requested
that CMS create a new comment
indicator for changes to an APC
assignment and to keep comment
indicator ‘‘CH’’ to designate changes to
status indicators. The commenter also
suggested that CMS create a new
comment indictor to indicate that a
code’s descriptor has changed
significantly while retaining comment
indicator ‘‘NI’’ to indicate that a code is
brand new.
Response: We have no operational
need to create additional comment
indicators that are specific to various
types of changes. Therefore, we believe
that the CY 2013 definitions of the
OPPS comment indicators continue to
be appropriate for CY 2014 and we are
continuing to use those definitions
without modification for CY 2014. The
final definitions of the OPPS status
indicators are listed in Addendum D2
on the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/index.html.
XII. Updates to the Ambulatory
Surgical Center (ASC) Payment System

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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) and

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the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68434 through
68467).
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
in an ASC 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 to be furnished to 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
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 ASCs
in conjunction with the annual

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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 XII.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,
these quarterly 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
ASC covered surgical procedures and
covered ancillary services, as well as
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.

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B. Treatment of New Codes
1. Process for Recognizing New Category
I and Category III CPT Codes and Level
II HCPCS Codes
Category I CPT, Category III 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 and vaccine codes;
(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 2014 OPPS/ASC
proposed rule (and respond to those
comments in this CY 2014 OPPS/ASC
final rule with comment period) or
whether we are soliciting public
comments in this CY 2014 OPPS/ASC
final rule with comment period (and
responding to those comments in the CY
2015 OPPS/ASC final rule with
comment period).
We note that we sought public
comment in the CY 2013 OPPS/ASC
final rule with comment period on the
new Category I and III CPT and Level II
HCPCS codes that were effective
January 1, 2013. We also sought public
comment in the CY 2013 OPPS/ASC
final rule with comment period on the
new Level II HCPCS codes effective
October 1, 2012. These new codes, with
an effective date of October 1, 2012, or
January 1, 2013, were flagged with
comment indicator ‘‘NI’’ in Addenda
AA and BB to the CY 2013 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

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of the CY 2013 OPPS/ASC final rule
with comment period. In the proposed
rule, we stated that we will respond to
public comments and finalize the
treatment of these codes under the ASC
payment system in this CY 2014 OPPS/
ASC final rule with comment period.
2. Treatment of New Level II HCPCS
Codes and Category III CPT Codes
Implemented in April 2013 and July
2013 for Which We Solicited Public
Comments in the CY 2014 OPPS/ASC
Proposed Rule
In the April 2013 and July 2013 CRs,
we made effective for April 1, 2013 and
July 1, 2013, respectively, a total of nine
new Level II HCPCS codes and two new
Category III CPT codes that describe
covered ASC services that were not
addressed in the CY 2013 OPPS/ASC
final rule with comment period.
In the April 2013 ASC quarterly
update (Transmittal 2662, CR 8237,
dated March 1, 2013), we added one
new surgical Level II HCPCS code and
three new drug and biological Level II
HCPCS codes to the list of covered
surgical procedures and covered
ancillary services, respectively. Table 33
of the CY 2014 OPPS/ASC proposed
rule (78 FR 43630) listed the new Level
II HCPCS codes that were implemented
April 1, 2013, along with their proposed
payment indicators for CY 2014.
In the July 2013 quarterly update
(Transmittal 2717, Change Request
8328, dated May 31, 2013), we added
one new surgical Level II HCPCS code
to the list of covered surgical procedures
and one new vaccine Level II HCPCS
code, and three new drug and biological
Level II HCPCS codes to the list of
covered ancillary services. Table 34 of
the CY 2014 OPPS/ASC proposed rule,
as corrected (78 FR 43630; Table 34 was
corrected in the September 6, 2013
correcting document (78 FR 54845))
listed the new Level II HCPCS codes
that were implemented July 1, 2013,
along with their proposed payment
indicators and proposed ASC payment
rates for CY 2014.
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 six new drug
and biological 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 payment made) to
the new vaccine Level II HCPCS code
and payment indicator ‘‘G2’’ (Nonoffice-based surgical procedure added in
CY 2008 or later; payment based on

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OPPS relative payment weight) to the
two new surgical Level II HCPCS codes.
We solicited public comment on the
proposed CY 2014 ASC payment
indicators and payment rates for the
covered surgical procedures and
covered ancillary services listed in
Tables 33 and 34 of the proposed rule,
as corrected (78 FR 43630; Table 34 was
corrected in the September 6, 2013
correcting document (78 FR 54845)).
Those HCPCS codes became payable in
ASCs beginning April 1, or July 1, 2013,
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 33
of the CY 2014 OPPS/ASC proposed
rule (78 FR 43630) were included in
Addenda AA or BB to the proposed
rule, as corrected (which are available
via the Internet on the CMS Web site).
We note 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 July 1, 2013
(listed in Table 34 of the proposed rule,
as corrected) 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 2014
OPPS/ASC final rule with comment
period. Thus, the codes implemented by
the July 2013 ASC quarterly update CR
and their proposed CY 2014 payment
rates (based on July 2013 ASP data) that
are displayed in Table 34 of the CY 2014
OPPS/ASC proposed rule as corrected
(78 FR 43630; 78 FR 54845) were not
included in Addenda AA or BB to the
proposed rule, as corrected (which are
available via the Internet on the CMS
Web site). The final list of ASC covered
surgical procedures and covered
ancillary services and the associated
payment weights and payment
indicators are included in Addenda AA
or BB to this CY 2014 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 surgical
procedures or covered ancillary services
in April 2013 and July 2013 through the
quarterly update CRs, as listed in Tables

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33 and 34 of the CY 2014 OPPS/ASC
proposed rule, as corrected (78 FR
43630; 78 FR 54845). We proposed to
finalize their payment indicators and
their payment rates in this CY 2014
OPPS/ASC final rule with comment
period.
We did not receive any public
comments regarding our proposals. We
are adopting as final for CY 2014 the

ASC payment indicators for the ASC
covered surgical procedures and
covered ancillary services described by
the new Level II HCPCS codes
implemented in April and July 2013
through the quarterly update CRs as
shown below, in Tables 46 and 47,
respectively. These new HCPCS codes
are also displayed in Addenda AA and
BB to this final rule with comment

period. We note that after publication of
the CY 2014 OPPS/ASC proposed rule,
the CMS HCPCS Workgroup created
permanent HCPCS J-codes for CY 2014
to replace certain temporary HCPCS Ccodes made effective for CY 2013. These
permanent CY 2014 HCPCS J-codes are
listed alongside the temporary CY 2013
HCPCS C-codes in Tables 46 and 47
below.

Through the July 2013 quarterly
update CR, we also implemented ASC
payment for two new Category III CPT

codes as ASC covered ancillary services,
effective July 1, 2013. These codes were
listed in Table 35 of the CY 2014 OPPS/

ASC proposed rule, as corrected (78 FR
43631; Table 35 was corrected in the
September 6, 2013 correcting document

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(78 FR 54845)), along with their
proposed payment indicators and
proposed payment rates for CY 2014.
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 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 35 of the
CY 2014 OPPS/ASC proposed rule, as
corrected (78 FR 43631; 78 FR 54845)
and their final payment indicators and
rates are included in Addendum BB to

this CY 2014 OPPS/ASC final rule with
comment period.
We proposed to assign payment
indicator ‘‘Z2’’ (Radiology service paid
separately when provided integral to a
surgical procedure on ASC list; payment
based on OPPS relative payment weight)
to the two new Category III CPT codes
implemented in July 2013. ASC covered
ancillary services are certain items and
services that are integrally related to the
provision of ASC covered surgical
procedures that are paid separately
under the OPPS. We solicited public
comment on the proposed payment
indicators and the payment rates for the
new Category III CPT codes that were
newly recognized as ASC covered
ancillary services in July 2013 through

the quarterly update CR, as listed in
Table 35 of the proposed rule, as
corrected. We proposed to finalize their
payment indicators and their payment
rates in this CY 2014 OPPS/ASC final
rule with comment period.
We did not receive any public
comments regarding this proposal. We
are adopting as final for CY 2014 the
ASC payment indicators for the covered
ancillary services described by the new
Category III CPT codes implemented in
the July 2013 CR as shown in Table 48
below. The new CPT codes
implemented in July 2013 are also
displayed in Addendum BB 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 2014 OPPS/ASC
Final Rule With Comment Period
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
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 2014 OPPS/ASC proposed
rule (78 FR 43631), we proposed to
continue this process for CY 2014.
Specifically, for CY 2014, we proposed
to include in Addenda AA and BB to
the CY 2014 OPPS/ASC final rule with
comment period the new Category I and
III CPT codes effective January 1, 2014,
that would be incorporated in the
January 2014 ASC quarterly update CR
and the new Level II HCPCS codes,
effective October 1, 2013 or January 1,
2014, that would be released by CMS in
its October 2013 and January 2014 ASC
quarterly update CRs. We stated that
these codes would be flagged with
comment indicator ‘‘NI’’ in Addenda
AA and BB to this CY 2014 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 2014
OPPS/ASC final rule with comment
period and would be finalized in the CY
2015 OPPS/ASC final rule with
comment period.
We did not receive any public
comments regarding this proposed
process. For CY 2014, 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 on October 1, 2013, or
January 1, 2014, as described above.

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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
We conducted a review of all HCPCS
codes that currently are paid under the

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OPPS, but not included on the ASC list
of covered surgical procedures, to
determine if changes in technology and/
or medical practice affected the clinical
appropriateness of these procedures for
the ASC setting. Upon review, we did
not identify any procedures that are
currently excluded from the ASC list of
procedures that met the definition of a
covered surgical procedure based on our
expectation that they would not pose a
significant safety risk to Medicare
beneficiaries or would require an
overnight stay if performed in ASCs.
Therefore, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43631), we did not
propose additions to the list of ASC
covered surgical procedures for CY
2014.
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

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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 through 72033; 76 FR 74380; and
77 FR 68439), procedures that are
reported by the CPT unlisted codes are
not eligible for addition to the ASC list
because we do not know what specific
procedure would be represented by an
unlisted code. Our charge requires us to
evaluate each surgical procedure for
potential safety risk and expected need

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for overnight monitoring and to exclude
from ASC payment procedures that
would be expected to pose a threat to
beneficiary safety or require active
medical monitoring at midnight
following the procedure. 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: Commenters requested that
CMS add the procedures described by
the 54 CPT codes displayed in Table 49
below to the list of ASC covered surgical
procedures. The 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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75069

CY 2014
CPT
Code
19307
22551
22552*
22554
22612
22851
23470
23472*
27093***
27095***
27415
27447*
27524
35907*
41899**
44970
44979**
54332
54336
54411 *
54417*
54535
54650
57282
57310
57425
58260
58262
58541***
58542***
58543
58570***
58571***
60240

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CY 2014 Short Descriptor
Mast mod rad
Neck spine fuse&remov bel c2
Addl neck spine fusion
Neck spine fusion
Lumbar spine fusion
Apply spine prosth device
Reconstruct shoulder joint
Reconstruct shoulder joint
Injection for hip x-ray
Injection for hip x-ray
Osteochondral knee allograft
Total knee arthroplasty
Treat kneecap fracture
Excision graft abdomen
Dental surgery procedure
Laparoscopy appendectomy
Laparoscope proc app
Revise penis/urethra
Revise penis/urethra
Remov/replc penis pros comp
Remv/replc penis pros compl
Extensive testis surgery
Orchiopexy (Fowler-Stephens)
Colpopexy extraperitoneal
Repair urethrovaginal lesion
Laparoscopy surg colpopexy
Vaginal hysterectomy
Vag hyst including tlo
Lsh uterus 250 g or less
Lsh w/tlo ut 250 g or less
Lsh uterus above 250 g
Tlh uterus 250 g or less
Tlh w/t/o 250 g or less
Removal of thyroid

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TABLE 49.--PROCEDURES REQUESTED FOR ADDITION TO THE CY 2014
LIST OF ASC COVERED SURGICAL PROCEDURES

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Response: We reviewed all of the
eligible surgical procedures that
commenters requested for addition to
the ASC list of covered surgical
procedures. Of the 54 requested
procedures requested for addition to the
ASC list, we did not review the 6
procedures that are reported by CPT
codes that are on the OPPS inpatient
only list (identified with one asterisk in
Table 49) or the 2 procedures that may
be reported by CPT unlisted codes
because these codes are not eligible for
addition to the ASC list (identified with
two asterisks in Table 49), consistent
with our final policy which is discussed
in detail in the August 2, 2007 final rule
(72 FR 42484 through 42486; 42 CFR
416.171(c)). In addition, we did not
review the 7 procedures reported by
CPT codes that are already on the ASC
list of covered surgical procedures

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(identified with three asterisks in Table
49).
With regard to the remaining 39
procedures in Table 49 that commenters
requested be added to the list of ASC
covered surgical procedures, we do not
agree that all of the procedures are
appropriate for provision to Medicare
beneficiaries in ASCs. Although the
commenters asserted that the
procedures they were requesting for
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

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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 generally 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).
In our review of the procedures listed
in Table 49, we found that many of the

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procedures either would 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. However,
we agree with commenters that the
procedures described by CPT codes
27415, 27524, 60240, and 60500 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 2014.

After consideration of the public
comments we received, we are
finalizing the addition of the four
procedures requested by the
commenters to the CY 2014 list of ASC
covered surgical procedures. The
procedures, their descriptors, and
payment indicators are displayed in
Table 50 below.

b. Covered Surgical Procedures
Designated as Office-Based

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.

indicators, specifically ‘‘P2*,’’ ‘‘P3*,’’ or
‘‘R2*’’ in the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68444
through 68448).
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43632), we stated that our
review of the CY 2012 volume and
utilization data resulted in our
identification of three covered surgical
procedures that we believe meet the
criteria for designation as office-based.
We stated that the data indicated that
these procedures are performed more
than 50 percent of the time in
physicians’ offices and that our medical
advisors believe the services are of a
level of complexity consistent with
other procedures performed routinely in
physicians’ offices. The three CPT codes
we proposed to permanently designate
as office-based were listed in Table 36
of the CY 2014 OPPS/ASC proposed
rule (78 FR 43632). We invited public
comment 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
believe that our policy of identifying
low complexity procedures that are
usually provided in physicians’ offices

(1) Background

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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
‘‘R2’’ (Office-based surgical procedure
added to ASC list in CY 2008 or later

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(2) Changes for CY 2014 to Covered
Surgical Procedures Designated as
Office-Based
In developing the CY 2014 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 2012 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 2013, as well as
for those procedures assigned one of the
temporary office-based payment

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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
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, CY
2012, and CY 2013 OPPS/ASC final
rules with comment period (74 FR
60605 through 60607; 75 FR 72034
through 72036; 76 FR 74401; and 77 FR
68444 through 68445, respectively).
Comment: One commenter believed
that the procedure described by CPT

code 37761 (Ligation of perforator
vein(s), subfascial, open, including
ultrasound guidance, when performed,
1 leg) should not be designated as officebased. This commenter suggested that
inaccurate coding for place of service
results in the volume and utilization
data indicating that the procedure is
performed more than 50 percent of the
time in physicians’ offices and that the
level of complexity associated with CPT
code 37761 is not consistent with other
procedures performed routinely in
physicians’ offices.
Response: Our review of the CY 2012
volume and utilization data indicates
that CPT code 37761 is performed 53

percent of the time in physicians’
offices. Our policy is to designate as
office-based those procedures that are
performed more than 50 percent of the
time in physicians’ offices; therefore, we
are designating CPT code 37761 as
office-based for CY 2014 as we
proposed.
After consideration of the public
comments we received, we are
finalizing our CY 2014 proposal to
designate the procedures described by
CPT codes 26341, 36595, and 37761 as
permanently office-based as displayed
in Table 51 below.

We also reviewed CY 2012 volume
and utilization data and other
information for the eight procedures
finalized for temporary office-based
status in Table 51 and Table 53 in the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68442 through
68444 and 68448). Among these eight
procedures, there were very few claims
data for four procedures: CPT code
0099T (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 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 (e.g., retinopathy of
prematurity), photocoagulation or
cryotherapy). Consequently, we

proposed to maintain their temporary
office-based designations for CY 2014.
The volume and utilization data for
one procedure that has a temporary
office-based designation for CY 2013,
CPT code 0227T (Anoscopy, high
resolution (HRA) (with magnification
and chemical agent enhancement); with
biopsy(ies)), is sufficient to indicate that
this procedure is not performed
predominantly in physicians’ offices
and, therefore, should not be assigned
an office-based payment indicator in CY
2014. Consequently, we proposed to

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assign payment indicator ‘‘G2’’ to this
covered surgical procedure code in CY
2014 (78 FR 43632).
The three remaining procedures that
have temporary office-based
designations for CY 2013 were proposed
to be packaged under the OPPS for CY
2014 as discussed in section II.A.3. of
the proposed rule. Consequently, we
proposed to assign payment indicator
‘‘N1’’ to the following three covered
surgical procedure codes in CY 2014:
• 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 0299T (Extracorporeal
shock wave for integumentary wound
healing, high energy, including topical
application and dressing care; initial
wound); and
• CPT code 0300T (Extracorporeal
shock wave for integumentary wound
healing, high energy, including topical
application and dressing care; each

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additional wound (list separately in
addition to code for primary
procedure)).
The proposed CY 2014 payment
indicator designations for the eight
procedures that were temporarily
designated as office-based in CY 2013
were displayed in Table 37 of the CY
2014 OPPS/ASC proposed rule (78 FR
43632 through 43633). The procedures
for which the proposed office-based
designations for CY 2014 are temporary
also were indicated by asterisks in
Addendum AA to the proposed rule, as
corrected (which is available via the
Internet on the CMS Web site). We
invited public comment on these
proposals.
We did not receive any public
comments on these proposals. For CY
2014, we are finalizing our proposal,
without modification, to continue to
designate four of the eight procedures
(listed in Table 37 of the CY 2014 OPPS/
ASC proposed rule (78 FR 43632
through 43633) and restated in Table 52
below), which were designated as

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temporarily office-based for CY 2013, as
temporarily office-based for CY 2014. In
addition, we are finalizing our proposal
to not designate CPT code 0227T
(Anoscopy, high resolution (HRA) (with
magnification and chemical agent
enhancement); with biopsy(ies)) as
office-based in CY 2014 and are
assigning payment indicator ‘‘G2’’ to
this code. Finally, we are finalizing our
proposal to assign payment indicator
‘‘N1’’ to HCPCS code 0300T because
this procedure will be packaged under
the OPPS for CY 2014. However, we are
not finalizing our proposal to package
the procedures identified by HCPCS
codes 0226T and 0299T under the
OPPS. We reviewed CY 2012 volume
and utilization data and other
information for HCPCS codes 0226T and
0299T which had temporary officebased designations in CY 2013. Because
there are very few claims reporting
HCPCS codes 0226T and 0299T, we will
maintain their temporary office-based
designations for CY 2014.
BILLING CODE 4120–01–P

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TABLE 52.-CY 2014 PAYMENT INDICATORS FOR ASC COVERED
SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY
OFFICE-BASED IN THE CY 2013 OPPS/ASC FINAL RULE WITH COMMENT
PERIOD
CY2013
CY2014
CY 2014
ASC
ASC
CPT
Payment
Payment
Indicator Indicator**
CY 2014 Long Descriptor
Code
Implantation of intrastromal corneal ring
R2*
R2*
0099T
segments
Conjunctival incision with posterior extrascleral
R2*
R2*
Ol24T placement of pharmacological agent (does not
include supply of medication)
Anoscopy, high resolution (HRA) (with
magnification and chemical agent enhancement);
R2*
R2*
0226T
diagnostic, including collection of specimen( s)
by brushing or washing when performed
Anoscopy, high resolution (HRA) (with
R2*
G2
0227T
magnification and chemical agent enhancement);
with biopsy(ies)
Extracorporeal shock wave for integumentary
R2*
R2*
0299T wound healing, high energy, including topical
application and dressing care; initial wound
Extracorporeal shock wave for integumentary
wound healing, high energy, including topical
R2*
Nl
0300T
application and dressing care; each additional
wound (list separately in addition to code for
primary procedure)
Dermal injection procedure(s) for facial
lipodystrophy syndrome (LDS) and provision of
R2*
R2*
C9800
Radiesse or Sculptra dermal filler, including all
items and supplies
Treatment of extensive or progressive
retinopathy, one or more sessions; preterm infant
(less than 37 weeks gestation at birth),
R2*
R2*
67229
performed from birth up to 1 year of age (eg,
retinopathy of prematurity), photocoagulation or
cryotherapy

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

As we discuss in section XII.B.3. of
the CY 2014 OPPS/ASC proposed rule
(78 FR 43631) 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, 2013 and January 1,

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2014 in this final rule with comment
period. Because these codes were not
available to us until after the CY 2014
OPPS/ASC proposed rule was
published, these codes were not
included in that rule. After reviewing
the clinical characteristics, utilization,

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and volume of related codes, we
determined that two of the procedures
described by new CPT codes would be
predominantly performed in physicians’
offices. However, because we had no
utilization data for the procedures
specifically described by these new CPT

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rate setting methodology and the MPFS final rates. According to the statutory formula, current law requires
a negative update to the MPFS payment rates for CY 2014. For a discussion of those rates, we refer
readers to the CY 2014 MPFS final rule with comment period.

codes, we made the office-based
designations temporary rather than
permanent and we will reevaluate the
procedures when data become available.
The temporary payment indicators for
the two office-based procedures

displayed in Table 53 below 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
2015 OPPS/ASC final rule with
comment period.

c. ASC Covered Surgical Procedures
Designated as Device-Intensive

service. Because a comprehensive APC
would treat all individually reported
codes as representing components of the
comprehensive service, our OPPS
proposal is to make a single prospective
payment based on the cost of all
individually reported codes that
represent the provision of a primary
service and all adjunctive services
provided to support the delivery of the
primary service. We proposed to apply
our standard APC ratesetting
methodology to the remaining 10
device-dependent APCs to calculate
their CY 2014 OPPS payment rates.
Unlike the OPPS claims processing
system that can be configured to make
a single payment for the encounterbased comprehensive service whenever
a HCPCS code that is assigned to a
comprehensive APC appears on the
claim, the ASC claims-processing
system does not allow for this type of
conditional packaging. Therefore, we
proposed that all separately paid OPPS
ancillary services that are provided
integral to surgical procedures that map
to comprehensive APCs would continue
to be separately paid under the ASC
payment system instead of being
packaged into the payment for the
comprehensive APC as under the OPPS.
In addition, to avoid duplicate payment

for separately paid ancillary services
provided integral to the surgical
procedure because the OPPS relative
weights for comprehensive APCs
include costs for ancillary services, we
proposed that the ASC payment rates
and device offset amounts for
comprehensive APCs would be based on
the CY 2014 OPPS relative payments
weights that have been calculated using
the standard APC ratesetting
methodology instead of the relative
payment weights that are based on the
comprehensive service.
Payment rates for ASC deviceintensive procedures are based on a
modified payment methodology to
ensure that payment for the procedure
is adequate to provide packaged
payment for the high-cost implantable
devices used in those procedures.
Device-intensive procedures are
currently defined as those procedures
that are assigned to device-dependent
APCs with a device offset percentage
greater than 50 percent of the APC cost
under the OPPS. Because we proposed
to create comprehensive APCs to
replace 29 of the 39 device-dependent
APCs under the OPPS, we proposed to
define ASC device-intensive procedures
as those procedures that are assigned to
any APC with a device offset percentage

(1) Background
As discussed in the August 2, 2007
final rule (72 FR 42503 through 42508),
we adopted a modified payment
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
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 ASC Covered
Surgical Procedures Designated as
Device-Intensive for CY 2014

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As discussed in section II.A.2.e of the
CY 2014 OPPS/ASC proposed rule (78
FR 43558 through 43561), for CY 2014,
we proposed to create 29
comprehensive APCs to replace 29 of
the most costly device-dependent APCs
under the OPPS. We proposed to define
a comprehensive APC as a classification
for the provision of a primary service
and all adjunctive services provided to
support the delivery of the primary

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greater than 50 percent based on the
standard OPPS APC ratesetting
methodology. We proposed changes to
§ 416.171(b)(2) to reflect this proposal.
We also proposed to update the ASC
list of covered surgical procedures that
are eligible for payment according to our
device-intensive procedure payment
methodology, consistent with this
modified definition of device-intensive
procedures, reflecting the proposed APC
assignments of procedures and APC
device offset percentages based on the
CY 2012 OPPS claims and cost report
data available for the proposed rule.
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 2014 were listed in
Table 38 of the CY 2014 OPPS/ASC
proposed rule (78 FR 43634 through
43635). The CPT code, the CPT code
short descriptor, the proposed CY 2014
ASC payment indicator (PI), the
proposed CY 2014 OPPS APC
assignment, the proposed CY 2014
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
38. All of these procedures were
included in Addendum AA to the
proposed rule, as corrected (which is
available via the Internet on the CMS
Web site). We invited public comment
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 and not just to the
procedures where the device offset
percentage is greater than 50 percent of
the APC cost under the OPPS. In a
related suggestion, some commenters
urged CMS to establish the threshold
used to determine device-intensive
procedures at 50 percent of the
‘‘unadjusted’’ ASC payment rate (OPPS
relative weight multiplied by the ASC
conversion factor) instead of the OPPS
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 a
modified payment methodology for
calculating ASC payment rates for

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device-intensive procedures under the
ASC payment system. We defined
device-intensive procedures as those
procedures that are assigned to devicedependent APCs under the OPPS with
device costs of greater than 50 percent
of the APC cost (that is, the device offset
percentage is greater than 50). In the CY
2014 OPPS/ASC proposed rule (78 FR
43558 through 43561), we proposed to
create comprehensive APCs to replace
29 of the 39 device-dependent APCs
under the OPPS. Because of this
proposed change for the OPPS, we
proposed to define ASC deviceintensive procedures as those
procedures that are assigned to any APC
with a device offset percentage greater
than 50 percent. Because we are not
implementing the comprehensive APC
policy under the OPPS until CY 2015,
as discussed in section II.A.2.e. of this
final rule with comment period, we are
not finalizing this proposal for the ASC
payment system and will continue to
use our current definition of deviceintensive procedures.
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.
Nor do we agree with the commenters
who suggested 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 50
percent or less 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, CY
2012, and CY 2013 OPPS/ASC final
rules with comment period (74 FR
60608 and 60609; 75 FR 72039; 76 FR
74409; and 77 FR 68449, 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, because our ASC
policy is to be consistent with the OPPS
because ASC payment rates are based on
the OPPS relative payment weights.
Therefore, 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

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2009, CY 2010, CY 2011, CY 2012 and
CY 2013 OPPS/ASC final rules with
comment period (73 FR 68735; 74 FR
60608 through 60609; 75 FR 72039; 76
FR 74409; and 77 FR 68449,
respectively).
As indicated in section II.A.2.e of this
final rule with comment period, after
consideration of the public comments
we received regarding the proposed
OPPS comprehensive APC policy, we
are finalizing our proposal to create 29
comprehensive APCs to replace 29 of
the most costly device dependent APCs
under the OPPS, but we will not
implement the comprehensive APC
policy until CY 2015. Therefore, under
the ASC payment system, we are not
finalizing our proposal to revise
§ 416.171(b)(2) to define ASC deviceintensive procedures as those
procedures that are assigned to any APC
with a device offset percentage greater
than 50 percent. For CY 2014, we will
continue to define ASC device-intensive
procedures as those procedures that are
assigned to device-dependent APCs
under the OPPS with device costs
greater than 50 percent of the APC cost.
We are updating the ASC list of covered
surgical procedures that are eligible for
payment according to our current
device-intensive procedure payment
methodology and reflecting the APC
assignments of procedures and APC
device offset percentages based on the
CY 2012 OPPS claims and cost report
data available for this final rule with
comment period. We are designating the
ASC covered surgical procedures
displayed in Table 54 below as deviceintensive and subject to the deviceintensive procedure payment
methodology for CY 2014. The CPT
code, the CPT code short descriptor, the
final CY 2014 ASC payment indicator
(PI), the final CY 2014 OPPS APC
assignment, the final CY 2014 OPPS
APC device offset percentage, and an
indication if the full credit/partial credit
(FB/FC) device adjustment policy will
apply, also are listed in Table 54 of this
final rule with comment period. 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).
d. Adjustment to ASC Payments for No
Cost/Full Credit and Partial Credit
Devices
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 current OPPS
policy. The established ASC policy
adopts the OPPS policy and reduces
payment to ASCs when a specified

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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).
As discussed in section IV.B. of the
CY 2014 OPPS/ASC proposed rule (78
FR 43596 through 43598), we proposed
to modify our existing policy of
reducing OPPS payment for specified
APCs when a hospital furnishes a
specified device without cost or with a
full or partial credit. Currently under
the OPPS, our policy is to reduce OPPS
payment 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. For CY 2014, we
proposed to reduce OPPS payment for
applicable APCs by the full or partial
credit a provider receives for a replaced
device.
Although we proposed to modify the
policy of reducing payments when a
hospital furnishes a specified device
without cost or with full or partial credit
under the OPPS, we proposed to
maintain our current ASC policy for
reducing payments to ASCs for
specified device-intensive procedures
when the ASC furnishes a device
without cost or with full or partial
credit. Unlike the OPPS, there is
currently no mechanism within the ASC
claims processing system for ASCs to
submit to CMS the actual amount
received when furnishing a specified
device at full or partial credit.
Therefore, under the ASC payment
system, we proposed to continue to
reduce ASC payments by 100 percent or
50 percent of the device offset amount
when an ASC furnishes a device

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without cost or with full or partial
credit, respectively. We also proposed to
update the list of ASC covered deviceintensive procedures that would be
subject to the no cost/full credit and
partial credit device adjustment policy
for CY 2014. Table 38 of the CY 2014
OPPS/ASC proposed rule (78 FR 43634
through 43635) displays the ASC
covered device-intensive procedures
that we proposed would be subject to
the no cost/full credit or partial credit
device adjustment policy for CY 2014.
Specifically, when a procedure that was
listed in Table 38 is subject to the no
cost/full credit or partial credit device
adjustment policy and is performed to
implant a device that 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 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 38 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 38
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. In order to report
that they received a partial credit of 50
percent or more of the cost of a new

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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 comment on these
proposals.
We did not receive any comments on
our CY 2014 proposal to continue the no
cost/full credit and partial credit device
adjustment policy for ASCs. For CY
2014, as 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 if a device is
furnished without cost or with full
credit. ASCs must append the HCPCS
modifier ‘‘FB’’ to the HCPCS code for a
surgical procedure listed in Table 54
below when the device is furnished
without cost or with full credit. In
addition, for CY 2014, we will reduce
the payment for the device implantation
procedures listed in Table 54 below 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. The ASC must
append the HCPCS ‘‘FC’’ modifier to the
HCPCS code for a surgical procedure
listed in Table 54 below that is subject
to the partial credit device adjustment
policy when the facility receives a
partial credit of 50 percent or more of
the cost of a device.
BILLING CODE 4120–01–P

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CPT
Code
24361
24363
24366
24370
24371
25441
25442
25446
27446
33206
33207
33208
33212
33213
33214
33221
33224
33225
33227
33228
33229
33230
33231
33240
33249
33262
33263
33264

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Short Descriptor
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
Insert heart pm atrial
Insert heart pm ventricular
Insrt heart pm atrial & vent
Insert pulse gen sngllead
Insert pulse gen dual leads
Upgrade of pacemaker system
Insert pulse gen mult leads
Insert pacing lead & connect
L ventric 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/mult leads
Insrt pulse gen w/singllead
Nsert pace-defib wile ad
Remv&replc cvd gen sing lead
Remv&replc cvd gen dual lead
Remv&replc cvd gen mult lead

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Final
CY2014
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

Fmt 4701

Sfmt 4725

Final
CY 2014
OPPS
APC
0425
0425
0425
0425
0425
0425
0425
0425
0425
0089
0089
0655
0090
0654
0655
0654
0655
0655
0090
0654
0654
0107
0107
0107
0108
0107
0107
0107

Final
CY2014
DeviceDependent
APC
Offset
Percent
60%
60%
60%
60%
60%
60%
60%
60%
60%
69%
69%
73%
67%
70%
72%
70%
73%
73%
67%
70%
70%
81%
81%
81%
82%
81%
81%
81%

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10DER4

FBIFC
Policy Will
Apply
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

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TABLE 54.-ASC COVERED SURGICAL PROCEDURES DESIGNATED AS
DEVICE-INTENSIVE FOR CY 2014, INCLUDING ASC COVERED SURGICAL
PROCEDURES FOR WHICH THE NO COSTIFULL CREDIT OR PARTIAL
CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY

CPT
Code
33282
37227
37231
53440
53444
53445
53447
54400
54401
54405
54410
54416
55873
61885
61886
62361
62362
63650
63655
63663
63664
63685
64553
64555
64561
64565
64568
64569
64575
64580
64581
64590
65770

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Short Descriptor
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 self-contd prosthesis
Insert multi-comp penis pros
Remove/replace penis prosth
Remv/repl penis contain pros
Cryoablate prostate
Insrtlredo neurostim 1 array
Implant neurostim arrays
Implant spine infusion pump
Implant spine infusion pump
Implant neuroelectrodes
Implant neuroelectrodes
Revise spine eltrd perq aray
Revise spine eltrd plate
Insrtlredo spine n generator
Implant neuroelectrodes
Implant neuroelectrodes
Implant neuroelectrodes
Implant neuroelectrodes
Inc for vagus n elect impl
Revise/repl vagus n eltrd
Implant neuroelectrodes
Implant neuroelectrodes
Implant neuroelectrodes
Insrtlredo pnlgastr stimul
Revise cornea with implant

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Final
CY2014
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
CY 2014
OPPS
APC
0680
0319
0319
0385
0385
0386
0386
0385
0386
0386
0386
0386
0674
0039
0315
0227
0227
0040
0061
0040
0040
0039
0040
0040
0040
0040
0318
0040
0061
0061
0061
0039
0293

Final
CY2014
DeviceDependent
APC
Offset
Percent
74%
52%
52%
63%
63%
70%
70%
63%
70%
70%
70%
70%
57%
86%
88%
81%
81%
55%
66%
55%
55%
86%
55%
55%
55%
55%
87%
55%
66%
66%
66%
86%
65%

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75079

FBIFC
Policy Will
Apply
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

e. ASC Treatment of Surgical
Procedures Removed From the OPPS
Inpatient List for CY 2014
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. There are
no procedures proposed for removal
from the OPPS inpatient list for CY
2014, so in the CY 2014 OPPS/ASC
proposed rule (78 FR 43636) we did not
propose any procedures for possible
inclusion on the ASC list of covered
surgical procedures under this section.

maindgalligan on DSK5VPTVN1PROD with RULES

2. Covered Ancillary Services
Consistent with the established ASC
payment system policy, we proposed to
update the ASC list of covered ancillary
services to reflect the proposed payment
status for the services under the CY
2014 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

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2014. For example, a covered ancillary
service that was separately paid under
the revised ASC payment system in CY
2013 may be proposed for packaged
status under the CY 2014 OPPS and,
therefore, also under the ASC payment
system for CY 2014. More specifically,
as discussed in section II.A.3. of the CY
2014 OPPS/ASC proposed rule (78 FR
43568 through 43576), we proposed to
package the following categories of
ancillary or adjunctive services under
the OPPS for CY 2014: Drugs,
biologicals, and radiopharmaceuticals
that function as supplies when used in
a diagnostic test or procedure; drugs and
biologicals that function as supplies
when used in a surgical procedure;
clinical diagnostic laboratory tests;
procedures described by add-on codes;
ancillary services (status indicator ‘‘X’’);
diagnostic tests on the bypass list; and
device removal procedures.
To maintain consistency with the
OPPS, we proposed that these services
also would be packaged under the ASC
payment system for CY 2014. Comment
indicator ‘‘CH,’’ discussed in section
XII.F. of the proposed rule (78 FR
43639), was used in Addendum BB to
the proposed rule, as corrected (which
is available via the Internet on the CMS
Web site) to indicate covered ancillary
services for which we proposed a

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change in the ASC payment indicator to
reflect a proposed change in the OPPS
treatment of the service for CY 2014.
Except for the Level II HCPCS codes
and Level III CPT codes listed in Table
34 and Table 35 of the CY 2014 OPPS/
ASC proposed rule, as corrected (78 FR
43630 through 43631; 78 FR 54845), all
ASC covered ancillary services and their
proposed payment indicators for CY
2014 were included in Addendum BB to
the proposed rule, as corrected. We
invited public comment on this
proposal.
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
the OPPS. All CY 2014 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).

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
D. ASC Payment for Covered Surgical
Procedures and Covered Ancillary
Services
1. ASC Payment for Covered Surgical
Procedures

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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 2013 OPPS/
ASC final rule with comment period (77
FR 68434 through 68467), we updated
the CY 2012 ASC payment rates for ASC
covered surgical procedures with
payment indicators of ‘‘A2,’’ ‘‘G2,’’ and
‘‘J8’’ using CY 2011 data, consistent
with the CY 2013 OPPS update.
Payment rates for device-intensive
procedures also were updated to
incorporate the CY 2013 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 2014
MPFS final rule with comment period)
or the amount calculated using the ASC
standard ratesetting methodology for the
procedure. In the CY 2013 OPPS/ASC
final rule with comment period, we
updated the payment amounts for
office-based procedures (payment
indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) using

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the most recent available MPFS and
OPPS data. We compared the estimated
CY 2013 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 2013
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 2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43636 through 43637), we
proposed to update ASC payment rates
for CY 2014 using the established rate
calculation methodologies under
§ 416.171 and using our proposed
modified definition for device-intensive
procedures as discussed above. Because
the proposed OPPS relative payment
weights are based on geometric mean
costs for CY 2014, the ASC system will
use geometric means to determine
proposed relative payment weights
under the ASC standard 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, using our proposed
modified definition of device intensive
procedures, based on the CY 2014 OPPS
device offset percentages that have been
calculated using the standard APC
ratesetting methodology, and to make
payment for office-based procedures at
the lesser of the proposed CY 2014
MPFS nonfacility PE RVU-based
amount or the proposed CY 2014 ASC
payment amount calculated according
to the standard ratesetting methodology.
We invited public comment on these
proposals.
Comment: With regard to device
removal procedures, commenters
recommended that CMS modify its
policy to package procedures in the ASC
when the procedures are conditionally
packaged in the OPPS. The commenters
stated that, under this policy, no
Medicare payment would be made for
device removal procedures performed in
an ASC if the device was removed and
not replaced because the device removal

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75081

procedures are proposed to be
conditionally packaged under the OPPS.
Response: We agree with the
commenters’ concerns regarding
payment for device removal procedures
performed in an ASC. Under the OPPS,
a conditionally packaged code (status
indicators ‘‘Q1’’ or ‘‘Q2’’) 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
indicator ‘‘N1’’) under the ASC payment
system. Under the OPPS, we are
finalizing a proposal to conditionally
package device removal codes for CY
2014. Therefore, under our current ASC
policy to package payment for services
that are conditionally packaged in the
OPPS, no Medicare payment would be
made when a device removal procedure
is performed in an ASC without another
surgical procedure included on the
claim. We believe that our ASC policy
to package procedures that are
conditionally packaged in the OPPS
should be modified with regard to
device removal procedures so that these
procedures will continue to be
separately paid in the ASC.
After consideration of the public
comments we received, we are
finalizing our proposal to calculate CY
2014 payment rates for ASC covered
surgical procedures according to our
established methodologies, with the
exception of device removal procedures.
For the 71 device removal procedures
that are conditionally packaged in the
OPPS (status indicator ‘‘Q2’’), we will
not follow our usual policy to package
these procedures in the ASC but,
instead, will assign the current ASC
payment indicators associated with
these procedures and continue to
provide separate payment in CY 2014.
c. Waiver of Coinsurance and
Deductible for Certain Preventive
Services
As discussed in the CY 2014 OPPS/
ASC proposed rule (78 FR 43637),
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

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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 categories of services and
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 categories of 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 for CY 2014 in
the CY 2014 OPPS/ASC proposed rule
(78 FR 43637). We identify the specific
services with a double asterisk in
Addenda AA and BB to this final rule
with comment period.
d. Payment for Cardiac
Resynchronization Therapy Services
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 (Insertion of pacing
electrode, cardiac venous system, for
left ventricular pacing, at time of
insertion of pacing cardioverterdefibrillator or pacemaker pulse
generator (eg, for upgrade to dual
chamber system) (list separately in
addition to code for primary procedure))
and 33249 (Insertion or replacement of
permanent pacing cardioverterdefibrillator system with transvenous
lead(s), single or dual chamber) 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
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). For CY 2014, CPT code 33249,
the primary code for CRT–D services, is

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proposed for continued assignment to
APC 0108 but CPT code 33225 is
proposed to be packaged under the
OPPS.
Consequently, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43637), we
proposed that CPT code 33225 would
also be packaged under the ASC
payment system for CY 2014. Because
CPT code 33225 is proposed to be
packaged under the ASC payment
system and, therefore, would not receive
separate payment, it would no longer be
necessary that ASCs use the HCPCS
Level II G-code (G0448) for proper
reporting when the procedures
described by CPT codes 33225 and
33249 are performed on the same date
of service. Therefore, we proposed that
the ASC payment rate for CRT–D
services (procedures described by CPT
codes 33249 and 33225) would be based
on the OPPS relative payment weight
for APC 0108 for CY 2014 and that ASCs
would no longer be required to assign
HCPCS code G0448 when the
procedures described by CPT codes
33225 and 33249 are performed on the
same date of service. We invited public
comment on these proposals.
As indicated in section II.A.2.e. of this
final rule with comment period, after
consideration of public comments we
received regarding the proposed OPPS
comprehensive APC policy, we are
finalizing our proposal to create 29
comprehensive APCs to replace 29 of
the most costly device-dependent APCs
under the OPPS but we will not
implement the finalized comprehensive
APC policy until CY 2015.
Consequently, CPT code 33225 will not
be packaged under the OPPS for CY
2014 but will be separately paid.
Therefore, we are not finalizing our
proposal to package CPT code 33225
under the ASC payment system. For CY
2014, we will continue our current
policy regarding ASC payment for CRT–
D services. The CY 2014 ASC payment
rate for CRT–D services will be 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 will use the
corresponding HCPCS Level II G-code
(G0448) for proper reporting when the
procedures described by CPT codes
33225 and 33249 are performed on the
same date of service. When not
performed on the same day as the
service described by CPT code 33225,
ASC payment for the service described
by CPT code 33249 will be based on
APC 0108 using the device-intensive
methodology. When not performed on
the same day as the service described by
CPT code 33249, ASC payment for the

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service described by CPT code 33225
will be based on APC 0655 using the
device-intensive methodology.
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
service to the Medicare beneficiary
being treated with LDR brachytherapy
for prostate cancer.
In the CY 2013 OPPS/ASC final rule
with comment period, we finalized our
proposal 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 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. For a complete
discussion of our policy regarding
payment for LDR prostate brachytherapy
services in ASCs, we refer readers to the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68457). In the
CY 2014 OPPS/ASC proposed rule (78
FR 43637), we did not propose any
changes to our current policy regarding
ASC payment for LDR prostate
brachytherapy services for CY 2014.

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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
(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 generally 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. 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

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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 (42
CFR 416.171(d)(1)). 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 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 (42 CFR 416.171(d)(2)).
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

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under the ASC payment system.
Currently, the four devices that are
eligible for pass-through payment in the
OPPS are described by HCPCS code
C1830 (Powered bone marrow biopsy
needle), HCPCS code C1840 (Lens,
intraocular (telescopic)), HCPCS code
C1841 (Retinal prosthesis, includes all
internal and external components), and
HCPCS code C1886 (Catheter,
extravascular tissue ablation, any
modality (insertable)). Payment amounts
for HCPCS codes C1830, C1840, C1841,
and C1886 under the ASC payment
system are contractor priced. In the CY
2013 OPPS/ASC final rule with
comment period, we finalized the
expiration of pass-through payment for
HCPCS codes C1830, C1840, and C1886,
which will expire after December 31,
2013 (77 FR 68353). Therefore, after
December 31, 2013, the costs for devices
described by HCPCS codes C1830,
C1840, and C1886 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
are used to establish ASC payment rates
for CY 2014. HCPCS code C1841 was
approved for pass-through payment
effective October 1, 2013, and will
continue to be eligible for pass-through
payment in CY 2014.
b. Payment for Covered Ancillary
Services for CY 2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43638 through 43639), for
CY 2014, 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 2014
OPPS and ASC payment rates. We also
proposed to set the CY 2014 ASC
payment rates for brachytherapy sources
and separately payable drugs and
biologicals equal to the proposed CY
2014 OPPS rates.
Consistent with established ASC
payment policy (72 FR 42497), the
proposed CY 2014 payment for
separately payable covered radiology
services was based on a comparison of
the proposed CY 2014 MPFS nonfacility
PE RVU-based amounts (we refer
readers to the CY 2014 MPFS proposed
rule) and the proposed CY 2014 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

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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, as corrected, 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 were assigned
payment indicator ‘‘Z2’’ (Radiology
service paid separately when provided
integral to a surgical procedure on ASC
list; payment based on OPPS relative
payment weight) and those for which
the proposed payment is based on the
MPFS nonfacility PE RVU-based
amount were 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 for these
procedures will be based on the OPPS
relative payment weight (rather than the
MPFS nonfacility PE RVU-based
amount, regardless of which is lower)
and, therefore, will include the cost for
the diagnostic radiopharmaceutical. We
proposed to continue this modification
to the payment methodology in CY 2014
and, therefore, set the payment indicator
to ‘‘Z2’’ for nuclear medicine
procedures.
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. We proposed
to continue this modification to the
payment methodology in CY 2014 and,
therefore, set the payment indicator to
‘‘Z2’’ for radiology services that use
contrast agents.
Most covered ancillary services and
their proposed payment indicators were
listed in Addendum BB to the proposed
rule, as corrected (which is available via
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invited public comment on these
proposals.
Comment: One commenter requested
that the procedure described by 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 (e.g., for upgrade to dual
chamber system) (list separately in
addition to code for primary procedure))
be excluded from the OPPS policy to
package add-on codes due to impact on
the proposed CY 2014 ASC payment
rates for cardiac resynchronization
therapy implant procedures (CRT–P,
which is identified by CPT codes 33206
(Insertion of new or replacement of
permanent pacemaker with transvenous
electrode(s); atrial) and 33207 (Insertion
of new or replacement of permanent
pacemaker with transvenous
electrode(s); ventricular)) that include
this add-on code. The commenter
indicated that the proposed ASC
payment rates for CRT–P services
decrease by about 35 percent due to
OPPS packaging of the add-on CPT code
33225.
Response: Our payment policies
under the revised ASC payment system
for covered ancillary services provide
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 provide
packaged ASC payment for other
ancillary items and services that are
packaged or conditionally packaged
(status indicators ‘‘N,’’ ‘‘Q1,’’ and ‘‘Q2’’)
under the OPPS. As detailed in section
II.A.3.c. of this final rule with comment
period, we are finalizing our proposal to
package procedures described by add-on
codes under the OPPS for CY 2014.
Therefore, in order to align the ASC
payment bundles with those under the
OPPS, the ASC payment for CPT code
33225 will be packaged into the
payment for the associated procedures
and will not be separately paid in CY
2014.
Comment: Commenters stated that
hospitals perform more ancillary
services than ASCs and, therefore,
greater packaging is appropriate under
the OPPS, but not under the ASC
payment system. Commenters also
suggested that, because laboratory tests
associated with ASC procedures are
paid under the Clinical Laboratory Fee
Schedule, duplicate payment will occur
if the OPPS relative weights that are
used to calculate ASC payment rates
include costs for laboratory tests.
Response: As detailed in section
II.A.3. of this final rule with comment

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period, we are finalizing our proposal to
package the following items and
services under the OPPS for CY 2014:
(1) Drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure; (2) drugs and biologicals
that function as supplies when used in
a surgical procedure; (3) clinical
diagnostic laboratory tests; (4)
procedures described by add-on codes;
and (5) device removal procedures.
However, we are not finalizing our
proposal to package ancillary services or
diagnostic tests on the bypass list under
the OPPS for CY 2014. Therefore, with
respect to the commenters’ concerns
about the proposed packaging of
ancillary services, ancillary services will
continue to have separate payment in
CY 2014 under the OPPS.
With respect to the concern raised by
commenters regarding duplicate
payment of laboratory tests, packaging
laboratory services under the OPPS will
increase the relative payment weights
and, subsequently, the ASC payment
rates for those surgical procedures that
include laboratory tests when provided
in the hospital outpatient department.
However, because we uniformly scale
the ASC relative payment weights each
update year to make them budget
neutral, the changes to the relative
payment weights that are associated
with laboratory packaging will not
result in duplicate or additional
Medicare payment in aggregate. In
addition, because the packaged
laboratory tests are spread over many
APCs, we also believe that the impact
on particular services is minor.
Furthermore, fewer laboratory tests
should be necessary in the ASC as
diagnostic evaluations are not
performed in the ASC.
After consideration of the public
comments we received, we are
providing CY 2014 payment for covered
ancillary services in accordance with
the policies finalized in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68458 through 68459).
Covered ancillary services and their
final CY 2014 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 Application Cycle
Our process for reviewing
applications to establish new classes of
new technology intraocular lenses
(NTIOLs) is as follows:

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• Applicants submit their NTIOL
requests for review to CMS by the
annual deadline. 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 Lenses (NTIOLs) or
Inclusion of an IOL in an existing
NTIOL Class’’ posted on the CMS Web
site at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
ASCPayment/NTIOLs.html.
• 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;
Æ 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 previously approved as
members of other expired or active
NTIOL classes) and that is associated
with an improved clinical outcome.
Æ 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.
Æ Announce the deadline for
submitting requests for review of an
application for a new NTIOL class for
the following calendar year.

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2. Requests To Establish New NTIOL
Classes for CY 2014
As discussed in the CY 2014 OPPS/
ASC proposed rule (78 FR 43639), we
did not receive any requests for review
to establish a new NTIOL class for CY
2014 by March 1, 2013, the due date
published in the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68461).

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3. 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 we did not propose to
revise the payment adjustment amount
for CY 2014.
4. Announcement of CY 2014 Deadline
for Submitting Requests for CMS
Review of Applications for a New Class
of NTIOLs
In accordance with 42 CFR 416.185(a)
of our regulations, CMS announces that
in order to be considered for payment
effective beginning in CY 2015, 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 3, 2014. 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
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.

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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 2014 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 2013
OPPS/ASC final rule with comment
period.
The ‘‘CH’’ comment indicator is used
in Addenda AA and BB to the proposed
rule, as corrected (which are available
via the Internet on the CMS Web site)
to indicate that the payment indicator
assignment has changed for an active
HCPCS code in the current year and
next calendar year; 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 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 2014 OPPS/ASC proposed
rule (78 FR 43640), we did not propose
any changes to the definitions of the
ASC payment and comment indicators
for CY 2014. We referred readers to
Addenda DD1 and DD2 to the CY 2014
OPPS/ASC proposed rule (which are
available via the Internet on the CMS
Web site) for the complete list of ASC
payment and comment indicators
proposed for the CY 2014 update.
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 2014 update.

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G. 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
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; 42 CFR
416.171(e)).
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
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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
XII.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,
device-intensive procedures).
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 based on a GAO report of ASC
costs using 2004 survey data. 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

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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).
When all of the areas contiguous to
the CBSA of interest are rural and there
is no IPPS hospital that has wage index
data that could be used to set the wage
index for that area, we determine the
ASC wage index by calculating the
average of all wage indices for urban
areas in the State (75 FR 72058 through
72059). 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), CY 2012 (76 FR
74446), and CY 2013 (77 FR 68463)
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

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values that CMS calculated for payment,
using updated CBSAs. Further, we are
continuing our established policy 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. For CY
2014, 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
that has wage index data that could be
used to set the wage index for that area,
and all contiguous areas to the CBSA are
rural.

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2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment
Weights for CY 2014 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). Consistent with
our established policy, in the CY 2014
OPPS/ASC proposed rule (78 FR 43640
through 43641), we proposed to scale
the CY 2014 relative payment weights
for ASCs according to the following
method. Holding ASC utilization and
the mix of services constant from CY
2012, we proposed to compare the total
payment using the CY 2013 ASC
relative payment weights with the total
payment using the CY 2014 relative
payment weights to take into account
the changes in the OPPS relative
payment weights between CY 2013 and
CY 2014. We proposed to use the ratio
of CY 2013 to CY 2014 total payment
(the weight scaler) to scale the ASC
relative payment weights for CY 2014.
The proposed CY 2014 ASC scaler is
0.9102 as corrected (78 FR 43641; 78 FR
54843, 54845) 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

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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 2014 proposed rule, we
had available 98 percent of CY 2012
ASC claims data. For this final rule with
comment period, we have
approximately 99 percent of all ASC
claims data for CY 2012.
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 2012 ASC
claims by ASC and by HCPCS code. We
used the National Provider Identifier for
the purpose of identifying unique ASCs
within the CY 2012 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-Dataand-Systems/Files-for-Order/
LimitedDataSets/
ASCPaymentSystem.html.
For this final rule with comment
period, we used our methodology
described above to calculate the scaler
adjustment using updated ASC claims
data. The final CY 2014 scaler
adjustment is 0.9235. This scaler
adjustment is necessary to make the
difference in aggregate ASC payments
calculated using the CY 2013 ASC
relative payment weights and the CY
2014 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 2012 ASC utilization
from our claims data, and the CY 2013
wage index values. For this final CY
2014 calculation, we used the CY 2013
ASC conversion factor updated by the
CY 2014 CPI–U, which is projected to be
1.7 percent, less the multifactor
productivity adjustment of 0.5 percent,
as discussed below in section XIV.H.2.b.
of this final rule with comment period.

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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, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43641 through
43642), for the CY 2014 ASC payment
system, 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 calculated and applied to
the OPPS conversion factor. For CY
2014, we calculated this proposed
adjustment for the ASC payment system
by using the most recent CY 2012 claims
data available and estimating the
difference in total payment that would
be created by introducing the proposed
CY 2014 pre-floor and pre-reclassified
hospital wage indices. Specifically,
holding CY 2012 ASC utilization and
service-mix and the proposed CY 2014
national payment rates after application
of the weight scaler constant, we
calculated the total adjusted payment
using the CY 2013 pre-floor and prereclassified hospital wage indices and
the total adjusted payment using the
proposed CY 2014 pre-floor and prereclassified hospital wage indices. We
used the 50-percent labor-related share
for both total adjusted payment
calculations. We then compared the
total adjusted payment calculated with
the CY 2013 pre-floor and prereclassified hospital wage indices to the
total adjusted payment calculated with
the proposed CY 2014 pre-floor and prereclassified hospital wage indices and
applied the resulting ratio of 1.0004 (the
proposed CY 2014 ASC wage index
budget neutrality adjustment) to the CY
2013 ASC conversion factor to calculate
the proposed CY 2014 ASC conversion
factor. We note that, on February 28,
2013, OMB issued OMB Bulletin No.
13–01 announcing revisions to the
delineation of Metropolitan Statistical
Areas, Micropolitan Statistical Areas,
and Combined Statistical Areas. The
proposed pre-floor and pre-reclassified
hospital wage indices for FY 2014 do
not reflect OMB’s new area delineations.
Because the ASC wage indices are the
pre-floor and pre-reclassified hospital
wage indices, the CY 2014 ASC wage
indices do not reflect the OMB changes.
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

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‘‘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).
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
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. In the CY
2013 OPPS/ASC final rule with
comment period (77 FR 68499 through
68500), we finalized a methodology 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 for the CY 2014 payment

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determination and subsequent years.
The 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
amended §§ 416.160(a)(1) and 416.171
to reflect these policies.
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
percentage. 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 years, under section
1833(i)(2)(D)(iv) of the Act, we would
reduce the annual update by 2.0
percentage points for an 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 to the annual
update factor after application of any
quality reporting reduction may result
in the update being less than zero for a
year. If the application of the MFP
adjustment to the annual update factor
after application of any quality reporting
reduction would result in an MFPadjusted 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 2014 OPPS/ASC proposed
rule (78 FR 43642), based on IHS Global
Insight’s (IGI’s) 2013 first quarter
forecast with historical data through
2012 fourth quarter, for the 12-month
period ending with the midpoint of CY
2014, the CPI–U update was projected to
be 1.4 percent. Also, based on IGI’s 2013
first quarter forecast, the MFP
adjustment for the period ending with
the midpoint of CY 2014 was projected
to be 0.5 percent. IGI is a nationally
recognized economic and financial
forecasting firm that contracts with CMS
to forecast the components of CMS’

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market baskets as well as the CPI–U and
MFP. The methodology for calculating
the MFP adjustment was 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). Because the ASCQR
Program affects payment rates beginning
in CY 2014, there would be a 2.0
percentage point reduction to the CPI–
U for ASCs that fail to meet the ASCQR
Program requirements.
We proposed to reduce the CPI–U
update of 1.4 percent by the MFP
adjustment of 0.5 percentage point,
resulting in an MFP-adjusted CPI–U
update factor of 0.9 percent for ASCs
meeting the quality reporting
requirements. Therefore, we proposed to
apply a 0.9 percent MFP-adjusted CPI–
U update factor to the CY 2013 ASC
conversion factor for ASCs meeting the
quality reporting requirements. We
proposed to reduce the CPI–U update of
1.4 percent by 2.0 percentage points for
ASCs that do not meet the quality
reporting requirements and then apply
the 0.5 percentage point MFP reduction.
Therefore, we proposed to apply a ¥1.1
percent quality reporting/MFP-adjusted
CPI–U update factor to the CY 2013 ASC
conversion factor for ASCs not meeting
the quality reporting requirements. We
also proposed that if more recent data
are subsequently available (for example,
a more recent estimate of the CY 2014
CPI–U update and MFP adjustment), we
would use such data, if appropriate, to
determine the CY 2014 ASC update for
the final rule with comment period.
For CY 2014, we also proposed to
adjust the CY 2013 ASC conversion
factor ($42.917) by the wage adjustment
for budget neutrality of 1.0004 in
addition to the MFP-adjusted update
factor of 0.9 percent discussed above,
which results in a proposed CY 2014
ASC conversion factor of $43.321 for
ASCs meeting the quality reporting
requirements. For ASCs not meeting the
quality reporting requirements, we
proposed to adjust the CY 2013 ASC
conversion factor ($42.917) by the wage
adjustment for budget neutrality of
1.0004 in addition to the quality
reporting/MFP-adjusted update factor of
¥1.1 percent discussed above, which
results in a proposed CY 2014 ASC
conversion factor of $42.462. We invited
public comment on these proposals.
Comment: As in previous years,
commenters requested that CMS adopt
the hospital market basket to update the
ASC payment system instead of using
the CPI–U. The commenters argued that
the CPI–U does not fairly represent the
costs borne by the ASC industry because
the prices measured in the basket of

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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 2014 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. These
commenters suggested that if the CPI–U
continues to be used to update ASC
payment rates, CMS should remove the
productivity gains from the CPI–U.
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.
We recognize that the CPI–U is an
output price index that accounts for
productivity. However, section

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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
appropriately reflects the cost structures
of ASCs, and because we do not have
cost data on ASCs, we are continuing to
use the CPI–U which we believe
provides a reasonable approximation of
the price increases facing ASCs. We
appreciate the commenter’s suggestion
to adjust the CPI–U for productivity and
will take this suggestion into
consideration should we propose
changes to the ASC update factor in the
future. Regarding alignment of the MFP
adjustment across payment systems, for
the 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 timeframe 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 2014 ASC
conversion factor. Using more complete
CY 2012 data for this final rule with
comment period than was available for
the proposed rule, we calculated a wage
index budget neutrality adjustment of
1.0009. Based on IGI’s 2013 third
quarter forecast, the CPI–U for the 12month period ending with the midpoint
of CY 2014 is now projected to be 1.7
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 (76 FR 73300 through
73301) is 0.5 percent, resulting in an
MFP-adjusted CPI–U update factor of
1.2 percent for ASCs that meet the
quality reporting requirements. The
final ASC conversion factor of $43.471,
for ASCs that meet the quality reporting
requirements, is the product of the CY
2013 conversion factor of $42.917
multiplied by the wage index budget
neutrality adjustment of 1.0009 and the
MFP-adjusted CPI–U payment update of
1.2 percent. For ASCs that do not meet
the quality reporting requirements, we
are reducing the CPI–U update of 1.7
percent by 2.0 percentage points and
then we are applying the 0.5 percent
MFP reduction, resulting in a –0.8
percent quality reporting/MFP-adjusted
CPI–U update factor. The final ASC
conversion factor of $42.612 for ASCs
that do not meet the quality reporting
requirements is the product of the CY
2013 conversion factor of $42.917

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multiplied by the wage index budget
neutrality adjustment of 1.0009 and the
quality reporting/MFP-adjusted CPI–U
payment update of –0.8 percent.
3. Display of CY 2014 ASC Payment
Rates
Addenda AA and BB to this CY 2014
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 2014 for covered surgical procedures
and covered ancillary services,
respectively. The payment rates
included in these addenda reflect the
full ASC payment update and not the
reduced payment update used to
calculate payment rates for ASCs not
meeting the quality reporting
requirements under the ASCQR
Program. These addenda contain several
types of information related to the CY
2014 payment rates. Specifically, 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 2014. 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 the final rule
with comment period.
The values displayed in the column
titled ‘‘CY 2014 Payment Weight’’ are
the relative payment weights for each of
the listed services for CY 2014. 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

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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 2014 payment rate
displayed in the ‘‘CY 2014 Payment
Rate’’ column, each ASC payment
weight in the ‘‘CY 2014 Payment
Weight’’ column was multiplied by the
CY 2014 conversion factor of $43.471.
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 XII.H.2.b. of this final rule with
comment period).
In Addendum BB, there are no
relative payment weights displayed in
the ‘‘CY 2014 Payment Weight’’ column
for items and services with
predetermined national payment
amounts, such as separately payable
drugs and biologicals. The ‘‘CY 2014
Payment’’ column displays the CY 2014
national unadjusted ASC payment rates
for all items and services. The CY 2014
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 2013.
Addendum EE provides the HCPCS
codes and short descriptors for surgical
procedures that are to be excluded from
payment in ASCs for CY 2014.
We did not receive any public
comments regarding the continuation of
our policy to provide CY 2014 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 2014 for covered
surgical procedures and covered
ancillary services, respectively, and
provide additional information related
to the CY 2014 rates.
XIII. Hospital Outpatient Quality
Reporting Program Updates

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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

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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
measure reporting programs for other
settings of care and for certain
professionals, including:
• Care furnished by physicians and
other eligible professionals, under the
Physician Quality Reporting System
(PQRS, formerly referred to as the
Physician Quality Reporting Program
Initiative (PQRI));
• Inpatient rehabilitation facilities,
under the Inpatient Rehabilitation
Facility Quality Reporting Program (IRF
QRP);
• Long-term care hospitals, under the
Long-Term Care Hospital Quality
Reporting (LTCHQR) Program;
• PPS-exempt cancer hospitals, under
the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program;
• Ambulatory surgical centers, under
the Ambulatory Surgical Center Quality
Reporting (ASCQR) Program;
• Inpatient psychiatric facilities,
under the Inpatient Psychiatric Facility
Quality Reporting (IPFQR) Program;
• Home health agencies, under the
Home Health Quality Reporting Program
(HH QRP); and
• Hospices, under the Hospice
Quality Reporting Program.
Finally, CMS has implemented a
Hospital Value-Based Purchasing
Program and an end-stage renal disease
(ESRD) Quality Incentive Program 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. To the
extent possible under various
authorizing statutes, 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

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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 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 refer
readers to the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68467
through 68469) for the discussion of the
principles for our considerations for
future measures, and we intend to
generally apply these same principles in
future rulemaking.
Comment: One commenter requested
that for burden reduction purposes,
CMS should not implement more than
two chart-abstracted measures per year.
Response: We consider potential
reporting burden on hospitals. We do
weigh the relevance and the utility of
measures against potential burden on
providers. We thank the commenters for
the feedback and will take it into
consideration for future proposals. We
note that we are working toward the
eventual adoption of electronicallyspecified measures, which will reduce
the burden of chart-abstracted measures.
Comment: A few commenters
recommended that CMS ensure that the
proposed measures are specified to
provide an opportunity for stakeholders’
input.
Response: We note that all the
proposed measures are fully specified
and we have provided links to the
detailed measure specifications. Since
all of the proposed measures are NQFendorsed, the specifications were all
submitted to NQF by the measure
stewards. We believe that these measure
specifications will provide the detailed
information needed for the public to
understand the measures being
proposed and to provide meaningful
comments on the proposed measures
during the rulemaking process.
Proposed measures are not included in
the Hospital OQR Specifications Manual
because we generally incorporate

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specifications for measures to be used in
the program into the Hospital OQR
Specifications Manual, along with
implementation guidance after
publication of the final rule with
comment period, but prior to
implementation. For maintenance of
technical specifications, our general
policy is to provide six months lead
time between Hospital OQR
Specifications Manual publication and
the start date of collection so that
providers have adequate time to prepare
for new reporting requirements.
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

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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=Qnet
Public%2FPage%2FSpecsManual
Template&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. We believe that a measure can
be updated through this subregulatory
process provided it is a nonsubstantive
change. We expect to make the
determination of what constitutes a
substantive versus a nonsubstantive
change on a case-by-case basis.
Examples of nonsubstantive changes
to measures might include updated
diagnosis or procedure codes,
medication updates for categories of
medications, broadening of age ranges,
and exclusions for a measure (such as

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the addition of a hospice exclusion to
the 30-day mortality measures). We
believe that non-substantive changes
may include updates to measures based
upon changes to guidelines upon which
the measures are based. We will revise
the Hospital OQR Specifications Manual
so that it clearly identifies the updates
and provide links to where additional
information on the updates can be
found. As stated in CY 2009 OPPS/ASC,
we also will post the updates on the
QualityNet Web site at https://
www.QualityNet.org. We will provide
sufficient lead time for facilities to
implement the changes where changes
to the data collection systems would be
necessary. 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–10, CPT, NUBC, and
HCPCS codes, and at least 6 months of
advance notice for changes to data
elements that would require significant
systems changes.
We will continue to use rulemaking to
adopt substantive updates to measures
we have adopted for the Hospital OQR
Program. Examples of changes that we
might 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, procedure/process, or test
administration). Another example of a
substantive change would be where the
NQF has extended its endorsement of a
previously endorsed measure to a new
setting, such as extending a measure
from the inpatient setting to hospice.
We believe that the policy finalized in
the CY 2009 OPPS/ASC final rule
adequately balances our need to
incorporate nonsubstantive updates to
Hospital OQR Program measures in the
most expeditious manner possible,
while preserving the public’s ability to
comment on updates that so
fundamentally change an endorsed
measure that it is no longer the same
measure that we originally adopted. We
also note that the NQF process
incorporates an opportunity for public
comment and engagement in the
measure maintenance process. These
policies regarding what is considered
substantive versus non-substantive
apply to all measures in the Hospital
OQR Program.
Comment: One commenter noted that
the conversion of a measure to use ICD–
10–CM/PCS should be considered a
substantive change that follows current

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75091

proposed rulemaking processes. The
commenter requested clarification
regarding the publication, preview, and
comment period via rulemaking for
ICD–9–CM to ICD–10–CM/PCS
mappings for all value sets for diagnoses
and procedures used by measures
specified in this rule.
Response: In the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53504), we
included examples in the Hospital IQR
Program context of what we might
generally regard as nonsubstantive
changes to measures. Our examples
included updated diagnosis or
procedure codes, medication updates
for categories of medications, or a
broadening of age ranges.
We will be transitioning all of our
billing and measurement systems from
ICD–9 to ICD–10. In preparation for this
transition, we: (1) translated the ICD–9
versions of the measure specifications to
ICD–10; (2) recently published this
crosswalk for the Hospital OQR Program
on our Web site at: http://www.cms.gov/
Medicare/Quality-Initiatives-PatientAssessment-Instruments/Hospital
QualityInits/HospitalOutpatientQuality
ReportingProgram.html; and. (3)
solicited comment on this crosswalk
from July 1, 2013 through August 31,
2013.
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. Moving from ICD–9 to the
ICD–10 coding system falls within the
parameters of our subregulatory process.
However, we recognize that in moving
to ICD–10 coding, there may be some
nuances in the measures that, when
translated, result in unanticipated
differences in performance, and
consequently, prior measure results do
not correspond to results for the same
measures under the new coding system.
In this situation, we will determine
whether to continue publicly reporting
the quarters of data that were collected
under the ICD–9 coding system, or
report only the newer quarters of data
collected under the ICD–10 coding
system. We intend to study the effect of
transitioning to the ICD–10 system on
trendability of results once
implementation has occurred and data
are available to do so in order to inform
this future policy.
We will continue to use rulemaking to
adopt substantive updates to measures
we have adopted for the Hospital OQR
Program. However, any change to a
measure would need to be evaluated on
a case by-case basis to determine
whether or not it is, in fact, substantive.

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b. Publication of Hospital OQR Program
Data
We refer readers to the CY 2014
OPPS/ASC proposed rule (78 FR 43645)
for the discussion of our policy for the
publication of Hospital OQR Program
data on Hospital Compare and noninteractive CMS Web sites.
Comment: One commenter
encouraged CMS to ensure the Hospital
Compare Web site remains userfriendly, even though it must present
data that can be complicated and
potentially confusing if not well
structured. The commenter emphasized
that the information published on
Hospital Compare be accurate and fair,
but also impartial and presented in
plain English at a sixth-grade reading
level. The commenter recommended
that CMS display data on Hospital
Compare in a simple format with easy
navigation and minimal graphics in the
interest of data that loads quickly on a
variety of devices and at slower internet
connection speeds. The commenter
encouraged CMS to offer the data in
languages commonly spoken in the
United States, and cites the Medicare
Prescription Drug Benefit Manual,
Chapter 2, Section 30.7 to point out that
CMS has standards governing Web site
translation that should be applied for
the purpose of making the data available
on Hospital Compare more accessible.
Response: We thank this commenter
for this thoughtful feedback regarding
the public reporting of data on Hospital
Compare. We will look at the feasibility
of modifying the Web site to incorporate
these suggestions.

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B. Process for Retention of Hospital
OQR Program Measures Adopted in
Previous Payment Determinations
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68471), for
the purpose of streamlining the
rulemaking process, we finalized a
policy that, beginning with the CY 2013
rulemaking, when we adopt measures
for the Hospital OQR Program as
beginning with a payment
determination and subsequent years,
these measures are automatically
adopted for all subsequent years’
payment determinations, unless we
propose to remove, suspend, or replace
the measures.
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

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immediate retirement (a term we later
changed to ‘‘removal’’) of Hospital IQR
Program measures based on evidence
that the continued use of the measure as
specified raised 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 the CY 2013 OPPS/ASC final rule
with comment period, we changed the
term from ‘‘retirement’’ to ‘‘removal,’’ in
line with the same change in the
Hospital IQR Program. We discuss our
reasons for this change at 77 FR 68472
through 68473. 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
measures from the Hospital IQR
Program (formerly known as the
RHQDAPU 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
(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 final rule
with comment period (77 FR 68472
through 68473), we finalized our
proposal to apply these measure
removal criteria in the Hospital OQR
Program as well.
In addition to these criteria, we take
into account the views of the MAP in
the evaluation of measure removal.
Furthermore, for efficiency and
streamlining purposes, we strive to
eliminate redundancy of similar
measures.
Comment: A few commenters urged
CMS to remove 7 previously adopted
Hospital OQR Program measures (OP–9,
OP–10, OP–14, OP–15, OP–20, OP–22,

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and OP–25), which are either not NQFendorsed or not recommended by the
MAP.
Response: While this comment is
outside the scope of what we proposed,
we would like to provide some
clarification. In the CY 2013 OPPS/ASC
final rule with comment period, we
responded to the same comments on
these measures. We refer readers to our
responses in 77 FR 68472 through
68473.
2. Removal of Two Chart-Abstracted
Measures from the Hospital OQR
Program
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43646 through 43647), we
proposed in section XIII.C.2, titled
‘‘Proposed Removal of Two ChartAbstracted Measures From the Hospital
OQR Program,’’ to remove two measures
from the Hospital OQR Program for the
CY 2016 payment determination and
subsequent years: (1) OP–19: Transition
Record with Specified Elements
Received by Discharged ED Patients,
and (2) OP–24: Cardiac Rehabilitation
Measure: Patient Referral from an
Outpatient Setting. We reflected our
proposal in a chart (78 FR 43647)
depicting measures we proposed to
remove, and also referred in the title of
the chart to CY 2016 as the first
payment year affected by our proposal.
However, in section XIII.H.2.b of the
proposed rule (78 FR 43653), titled
‘‘Effects of Proposed Changes on data
submission for CY 2015 and CY 2016
Payment Determinations and
Subsequent Years,’’ we proposed to
remove these measures for the CY 2015
payment determination and subsequent
years. We received comments regarding
this contradictory information and
inquiries about when the proposed
removal of both OP–19 and OP–24
would actually be effective. We would
like to address those comments here
before discussing individual measures.
Comment: Many commenters noted
that the discussions in the preamble of
the proposed rule regarding the removal
of OP–19 and OP–24 were inconsistent
in sections XIII.C.2 and XIII.H.2.b. of the
proposed rule. Commenters requested
clarification and many also encouraged
CMS to remove these measures for the
CY 2015 payment determination and
subsequent years.
Response: We would like to apologize
for this error and wish to clarify that we
intended to propose removing these
measures for the CY 2015 payment
determination and subsequent years,
and instead inadvertently referred to
their removal as being proposed for the
CY 2016 payment determination and
subsequent years in XIII.C.2. We

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appreciate commenters support for
removing OP–19 and OP–24 for the CY
2015 payment determination and
subsequent years.
The rationales for proposing to
remove these measures are discussed
below.
a. Removal of OP–19: Transition Record
with Specified Elements Received by
Discharged ED Patients
We previously adopted measure OP–
19 for the Hospital OQR Program for the
CY 2013 payment determination with
data collection beginning with January
1, 2012 encounters in the CY 2011
OPPS/ASC final rule with comment
period. Shortly after data collection for
this measure began in January 2012,
hospitals raised concerns about the
measure specifications, including
potential privacy issues related to
releasing certain elements of the
transition record to either the patient
being discharged from an emergency
department or the patient’s caregiver.
Some examples provided by hospitals
are 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 order to address the safety concerns
related to confidentiality as raised by
the industry in the above discussion, in
April 2012, we took immediate action to
suspend OP–19. On April 12, 2012, we
released a Memorandum entitled SDPS
12–100–OD, ‘‘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 data validation. This
memorandum can be located at http://
qualitynet.org under the option ‘‘Email
Notifications’’ within the ‘‘Hospitals—
Outpatient’’ drop down menu found at
the top of the page.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68474
through 68476) for the CY 2014
payment determination and subsequent
years, we confirmed that we suspended
the collection of data for the measure
OP–19: Transition Record with
Specified Elements Received by
Discharged ED Patients, which specified
that either patients or their caregivers
(emphasis added) receive a transition
record at the time of ED discharge.
We chose to suspend this measure
rather than to immediately remove the
measure from the program at the time,
because the probability of harm
occurring was relatively low; any

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potential harm that occurred would not
be the direct result of patient care
rendered at facilities; and the measure
steward, the American Medical
Association Physician Consortium for
Performance Improvement (AMA–
PCPI), believed that the measure could
be quickly re-specified in a manner that
would mitigate the concerns raised by
hospitals and stakeholders. In the CY
2013 OPPS/ASC final rule with
comment period, we noted that the
measure steward was working to revise
the measure specifications to address
the concerns raised by affected parties.
We also noted that the measure was
scheduled for NQF maintenance review
in 2013. We stated that after completion
of the NQF maintenance process, we
anticipated that normal program
operations for this measure could
resume once we updated the Hospital
OQR Specifications Manual and made
any necessary changes to our data
collection infrastructure. In addition, we
stated that we would notify hospitals of
changes in the suspension status of the
measure for the Hospital OQR Program
via email blast. However, we indicated
that if we determined that these
concerns cannot be adequately
addressed by measure specifications, we
would propose to remove this measure
in a future OPPS/ASC rule.
We have determined that the measure
cannot be implemented with the degree
of specificity that would be needed to
fully address the concerns of
stakeholders without being overly
burdensome to both hospitals and CMS.
The measure steward resolved the safety
issue by refining the measure, but the
refinement has made data abstraction
more subjective because individual
hospitals can determine which
information should be included in the
transition record in order to comply
with this measure. In the absence of
standardized data elements, we were
not able to resolve this issue of data
abstraction for common data elements,
and therefore, could not ensure
consistency of data submission and
accuracy of measure results.
We also learned that all aspects for
this transition record measure are
currently required to meet the Medicare
EHR Incentive Program’s meaningful
use (MU) core objective for eligible
hospitals and critical access hospitals
(CAHs) to provide patients the ability to
view online, download, and transmit
information about a hospital admission.
This measure is workable in the
Medicare EHR Incentive Program
because, unlike the Hospital OQR
Program, it does not rely on chartabstraction, which can result in
variations in data elements. Instead, the

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75093

Medicare EHR Incentive Program
incorporates a methodology that
includes standardized data elements. In
addition, there are no comparable
patient privacy concerns, since in the
Medicare EHR Incentive Program,
patient e-data is password protected.
This MU core objective provides
patients discharged from the inpatient
department or Emergency Department
(ED) online access to the ED visit data.
These ED visit data are the specified
data elements included in the OP–19
Transition Record measure. This means
that if we were to keep this measure,
hospitals would need to submit this
data for both the Hospital OQR Program
using chart-abstraction and via
attestation for the MU core objective.
Therefore, to reduce duplicative
requirements among programs and
measurement burden, we proposed to
remove this measure from the Hospital
OQR Program. We invited public
comment on the proposed removal of
this measure from the Hospital OQR
Program.
Comment: Many commenters stated
that data collection for measure OP–19
is burdensome and strongly supported
CMS’ justifications for removing the
measure.
Response: We thank the commenters
for supporting our decision to remove
OP–19 for the CY 2015 payment
determination and subsequent years.
Comment: One commenter noted that,
in the case of OP–19, hospitals were
instructed to continue to report some
value for this measure because the CMS
data systems are not able to
accommodate a missing field without
error. The commenter stated that while
OP–19 was suspended, reporting
hospitals needed to continue to collect
and report data and ensure that the data
field for OP–19 was completed to ensure
the entire file would be accepted into
the CMS clinical data warehouse.
Response: We appreciate the
commenter’s concern. We refer the
reader to the CY 2012 OPPS/ASC final
rule with comment period (77 FR 68475
through 68476) for a discussion of this
same topic. We reiterate that, while it is
true that the burden of populating some
value in the data field for OP–19 is
indeed placed on the reporting hospital,
it is not accurate that the hospital is
now or ever was required to continue to
collect OP–19 data by chart abstraction
or to report a meaningful value for OP–
19 to the clinical data warehouse once
we suspended the measure. In our
memorandum to suspend OP–19, in
subsequent discussions in the Federal
Register, and in our educational
materials and educational support calls,
we attempted to make clear that we

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would not use or validate any data that
came in for OP–19.
We agree it is burdensome that our
current system will not accept a null
value for OP–19. An upcoming release
of our Hospital Reporting system will
address this issue by removing OP–19
and OP–24 from our data collection
fields. This system release is anticipated
for summer 2014. We have also
instructed the system contractor to build
flexibility into the data collection
system so that, in the future, we are able
to execute our policy for suspension or
removal of measures without causing
undue burden to the reporting
community.
After consideration of the public
comments we received, we are
finalizing the removal of OP–19 with
the clarification that removal applies for
the CY 2015 payment determination and
subsequent years.
b. Removal of OP–24: Cardiac
Rehabilitation Measure: Patient Referral
from an Outpatient Setting
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68476), we

D. Quality Measures Previously Adopted
for the CY 2014 and CY 2015 Payment
Determinations and Subsequent Years

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The table below lists 25 measures that
we previously adopted and retained for

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deferred data collection for this measure
to January 1, 2014 encounters. This was
due to the unavailability of detailed
abstraction instructions for data
collection in time for the July 2012
release of the Hospital OQR
Specifications Manual. These
instructions were needed for chartabstraction beginning on January 1,
2013. We also indicated that this
measure would be applied to the CY
2015 payment determination.
In the CY 2014 OPPS/ASC proposed
rule, we proposed to remove this
measure from the Hospital OQR
Program due to continued difficulties
with defining the measure care setting.
The measure specifications provided by
the measure steward, the American
College of Cardiology (ACC), identify
the applicable care setting as a
‘Clinician Office/Clinic.’ However, in
developing the specifications for this
measure for a hospital outpatient clinic
setting, several issues arose, including
difficulty in accurately identifying
hospital outpatient visits for evaluation
and management purposes using either

chart abstraction or HOPD claims data,
and difficulty in determining the
particular hospital outpatient clinic visit
that resulted in a cardiac rehabilitation
referral for any given patient. Therefore,
given the difficulties in accurately
applying the measure to the hospital
outpatient setting, we proposed to
remove OP–24 from the Hospital OQR
Program. We invited public comment on
this proposal.
Comment: Many commenters strongly
supported CMS’ justification for
removing measure OP–24.
Response: We appreciate all the
feedback supporting our proposal to
remove OP–24 from the Hospital OQR
Program measure set for the CY 2015
payment determination and subsequent
years.
After consideration of the public
comments we received, we are
finalizing the removal of OP–19 and
OP–24 for the CY 2015 payment
determination and subsequent years.

the CY 2014 and CY 2015 payment
determination and subsequent years
under the Hospital OQR Program. This
table also includes OP–19 and OP–24,
with a notation that we are removing

these two measures for the CY 2015
payment determination and subsequent
years.

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BILLING CODE 4120–01–P

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75095

Hospital OQR Program Measures for the CY 2014 and CY 2015 Payment
Determinations and Subsequent Years
NQF#
Measure Name
0287

OP-1: Median Time to Fibrinolysis

0288
0290
0286

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

0289

OP-5: Median Time to ECG

0270

OP-6: Timing of Antibiotic Prophylaxis

0268

OP-7: Prophylactic Antibiotic Selection for Surgical Patients

0514

OP-8: MRI Lumbar Spine for Low Back Pain

0513
0489

0669

--0491
0496
0649

-0662

-0661

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0643

---

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OP-9: Mammography Follow-up Rates
OP-lO: Abdomen CT - Use of Contrast Material
OP-11: Thorax CT - Use of Contrast Material
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their ONC-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-21: Median Time to Pain Management for Long Bone Fracture
OP-22: ED- Patient Left Without Being Seen
OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or
Hemorrhagic Stroke who Received Head CT or MRI 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 on Selected Outpatient Surgical
Procedures**

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Comment: Some commenters
expressed views regarding some of the
previously finalized measures that CMS
intends to continue using under the
Hospital OQR Program. Commenters
also provided suggestions on these
measures, regarding measure
implementation, adding exceptions, and
revising measure specifications.
Response: We thank the commenters
for their comments. Because these
comments address measures that we
have finalized in the past through notice
and comment rulemaking, we do not
believe they are within the scope of this
current rulemaking. However, we intend
to consider all of these views for future
rulemaking and Hospital OQR Program
development.
E. Quality Measures for the CY 2016
Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43647 through 43651), we
proposed to adopt five new measures for
the Hospital OQR Program for the CY
2016 payment determination and
subsequent years. These measures
include one HAI measure—Influenza
Vaccination Coverage among Healthcare
Personnel (NQF #0431), currently
collected by the Centers for Disease
Control and Prevention (CDC) via the
National Healthcare Safety Network
(NHSN)—and four chart-abstracted
measures. The chart-abstracted
measures are: (1) Complications within
30 Days Following Cataract Surgery
Requiring Additional Surgical
Procedures (NQF #0564), (2)
Endoscopy/Polyp Surveillance:
Appropriate follow-up interval for
normal colonoscopy in average risk
patients (NQF #0658), (3) Endoscopy/
Polyp surveillance: Colonoscopy
Interval for Patients with a History of
Adenomatous Polyps—Avoidance of
Inappropriate Use (NQF #0659), and (4)
Cataracts: Improvement in Patient’s
Visional Function within 90 Days
Following Cataract Surgery (NQF
#1536).
All of the proposed measures were
included on a publicly available
document entitled ‘‘List of Measures

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Under Consideration for December 1,
2012’’ on the NQF Web site at: http://
www.qualityforum.org/Setting_
Priorities/Partnership/Measure_
Applications_Partnership.aspx in
compliance with section 1890A(a)(2) of
the Act. Section 1890A(a)(2) is part of
the pre-rulemaking process established
under section 1890A of the Act, and
requires the Secretary to make available
to the public by December 1st of each
year a list of certain categories of quality
and efficiency measures that the
Secretary is considering for the
Medicare program. The measures we
proposed were reviewed by the MAP in
its ‘‘MAP Pre-Rulemaking Report: 2013
Recommendations on Measures Under
Consideration by HHS,’’ which has been
made available on the NQF Web site at:
http://www.qualityforum.org/Setting_
Priorities/Partnership/Measure_
Applications_Partnership.aspx. As
required under section 1890A(a)(4) of
the Act, we considered the input and
recommendations provided by the MAP
in selecting measures to propose for the
Hospital OQR Program.
All five of the proposed measures are
NQF-endorsed, and therefore meet the
requirements that measures selected for
the program ‘‘reflect consensus among
affected parties and, to the extent
feasible and practicable, that these
measures include measures set forth by
one or more national consensus
building entities’’ under section
1833(t)(17)(C)(i) of the Act.
Furthermore, the services targeted in the
proposed measures are services
commonly provided to patients who
visit hospital outpatient departments
and, for this reason, we believe that
these proposed measures are
appropriate for the measurement of
quality of care furnished by hospitals in
outpatient settings as required under
section 1833(t)(17)(C)(i) of the Act.
We proposed to collect aggregate data
(numerators, denominators, exclusions)
for the four chart-abstracted measures
via an online, Web-based tool that will
be made available to HOPDs via the
QualityNet Web site, just as we do for
OP–22. This Web-based tool is currently

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in use in the Hospital OQR Program to
collect structural measure information.
More information regarding the
proposed method of collection was
provided in section XIII.H.2. of the
proposed rule (78 FR 43653).
To enhance our efforts to collect high
quality data for the Hospital OQR
measures while minimizing burden for
HOPDs, we also sought public comment
on whether we should collect patientlevel data via certified EHR technology
on the four proposed chart-abstracted
measures (this would not apply to the
one HAI measure, Influenza Vaccination
Coverage among Healthcare Personnel),
and the potential timing for doing so.
Any future ability to collect patientlevel data via EHR technology would
allow CMS to validate the accuracy of
the data and also link data for patients
over time to assess patient outcomes of
care related to treatment.
Comment: A few commenters
recommended that if CMS finalizes new
chart-abstracted measures in the
Hospital OQR Program, CMS should not
collect patient-level data through EHR
technology for these measures; rather,
CMS should limit data collection to
aggregate data. Many commenters did
not support patient-level data collection
specifically due to EHR system
concerns. These commenters supported
collecting aggregate data because the
EHR environment is not mature. One
commenter stated that a group of its
stakeholder hospitals are in the early
stages of adopting EHR systems and
encouraged CMS to delay requiring
patient-level data where their
infrastructure is not ready to collect
patient information.
Some commenters do not support
patient-level data collection using EHR
technology due to concerns about
protecting the privacy of EHR data. One
commenter believed that until CMS can
ensure patients’ records can be securely
maintained and transmitted, CMS
should not collect patient-level data via
EHR technology.
Response: We appreciate the
comments we received on whether we
should collect patient-level data via
certified EHR technology on the four

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proposed chart-abstracted measures and
the potential timing for doing so.
We agree with commenters that chartabstracted measure data collected in
aggregate form is currently the most
appropriate collection method, and we
are finalizing the aggregate mode of data
collection for the three new chartabstracted measures in section
XIII.H.2.f. of this final rule with
comment period.
We will consider these commenters’
concerns in proposing future updates to
the program and updates or expansions
to the Hospital OQR Program measures.
Specifically, we will continue to
consider the maturity of EHR systems in
future proposals to collect HOPD data
via EHR technology. We understand the
need for additional infrastructural
development on the part of hospitals
and CMS and the adoption of standards
for capturing, formatting, and securely
transmitting the data elements that
make up 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.
Comment: A few commenters did not
support aggregate data collection for the
proposed chart-abstracted measures,
and suggested that CMS only adopt
measures where a validation strategy is
in place. These commenters pointed out
that the use of aggregate data in lieu of
patient-level data does not allow for
validation of data accuracy. The
commenters believed that without
validation, there is no opportunity for
robust field-testing to ensure that
electronic and chart-abstracted
measures provide comparable results.
Response: We interpret these
commenters’ views as being in support
of patient-level data collection and data
collection via EHR technology. We
likewise support the future adoption of
measures with patient-level data
collection, via EHR technology, and
where submitted data may be validated.
We have not, to date, proposed
measures for the OQR Program with the
EHR mode of data collection. In this
final rule with comment period, we
have finalized three measures that are
chart-abstracted with aggregate data
submission via the Web-based tool. We
cannot validate the data that is
submitted in this manner. We agree
with commenters that validation is a
way to measure the accuracy of data
submitted, and hope to be able to
accomplish validation using EHR
technology to collect data sometime in
the near future.

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Comment: Some commenters pointed
out that CMS’ collection of aggregate
data might not actually have the effect
of reducing burden. These commenters
believed this would be the case if
hospitals must first perform a patientlevel review for each medical record in
order to compile the aggregate data.
Commenters were generally concerned
about burden, and some commenters
favored both an emphasis on adoption
of claims-based measures and measures
that do not require chart abstraction.
Response: We appreciate the
commenters’ concerns about the burden
that can be involved in collecting
aggregate-level data. We sought public
comment on whether we should collect
patient-level data via certified EHR
technology on the four proposed chartabstracted measures (this would not
apply to the one HAI measure, Influenza
Vaccination Coverage among Healthcare
Personnel), and the potential timing for
doing so. We interpret these
commenters as being in favor of
collecting patient-level data when it is
feasible. We will take these comments
into consideration in future rulemaking.
These comments are similar to
comments we received related to how
hospitals should gather information to
report on our most recent proposed
measures. We refer readers to section
XIII.H.2.f of this final rule with
comment period where we address
these comments.
Comment: Many commenters offered
views generally applicable to data
collection in the Hospital OQR Program,
but not specific to the proposed
measures described in section XIII.E of
the CY 2014 OPPS/ASC proposed rule
(78 FR 43647). Commenters voiced
commitment to: (1) providing data to
measure quality of care; (2) supporting
CMS’ alignment of measures and
requirements across data reporting and
value based purchasing programs
whenever possible and as early as
possible in the implementation phases
of new programs; (3) allowing
stakeholders to meet Meaningful Use
(MU) standards through submission of
data to the Hospital OQR Program; and,
(4) adopting future EHR measures that
are fully endorsed, tested, and specified
by CMS. Many commenters asked CMS
to consider technology barriers to
efficient and accurate EHR-based quality
reporting, including the need for widely
adopted standards, information models,
and vocabularies to support EHR-based
reporting. Many commenters also asked
CMS not to adopt aggressive timelines
for EHR data submission and
recommended specific policies and
timelines related to electronic
submission. Some commenters urged

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CMS to carefully consider
confidentiality, privacy, and security
regulations, and to consider State-based
regulations before implementing EHR
measures for use by Partial
Hospitalization Programs (PHPs) in
HOPDs. Finally, several commenters
suggested that CMS should convene a
work group that includes the hospital
industry to collaborate on how best to
collect the data needed to accurately
capture the care provided in off-campus
provider-based departments.
Response: We will take these
comments into consideration for future
rulemaking for our quality reporting
programs.
Each of the proposed measures is
described in greater detail below.
1. Influenza Vaccination Coverage
Among Healthcare Personnel (NQF
# 0431)
The proposed measure assesses the
percentage of healthcare personnel
(HCP) who have been immunized for
influenza. Rates of serious illness and
death resulting from influenza and its
complications are increased in high-risk
populations such as persons over 50
years or under four years of age, and
persons of any age who have underlying
conditions that put them at an increased
risk. HCP can acquire influenza from
patients and can transmit influenza to
patients and other HCP. Many HCP
provide care for, or are in frequent
contact with, patients with influenza or
patients at high risk for complications of
influenza. The involvement of HCP in
influenza transmission has been a longstanding concern.1 2 3
Vaccination is an effective preventive
measure against influenza, and can
prevent many illnesses, deaths, and
losses in productivity.4 HCP are
considered a high priority for expanding
influenza vaccine use. Achieving and
sustaining a high rate of influenza
vaccination coverage among HCP is
intended to help protect HCP and their
patients in hospital settings and reduce
disease burden and healthcare costs.
Due to the potentially significant impact
of HCP influenza vaccination on patient
outcomes, we believe this measure is
1 Maltezou, H.C., Drancourt, M.: Nosocomial
influenza in children. Journal of Hospital Infection
2003; 55:83–91.
2 Hurley, J.C., Flockhart, S.: An influenza
outbreak in a regional residential facility. Journal of
Infection Prevention 2010; 11:58–61.
3 Salgado, C.D, Farr, B.M., Hall, K.K., Hayden,
F.G.: Influenza in the acute hospital setting. The
Lancet Infectious Diseases 2002; 2:145–155.
4 Wilde, M.A., McMillan, J.A., Serwint, J., Butta,
J., O’Riordan, M.A., Steinhoff, M.C.: Effectiveness of
influenza vaccine in health care professionals; a
randomized trial. The Journal of the American
Medical Association 1999;281:908–913.

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appropriate for measuring the quality of
care in hospital outpatient departments.
We proposed to adopt this process
measure for the CY 2016 payment
determination and subsequent years. We
also proposed that Hospital OPDs use
the NHSN infrastructure and protocol to
report the measure for Hospital OQR
Program purposes. Hospitals currently
submit data to NHSN to comply with
the requirements of the Hospital IQR
Program and those requirements will be
unchanged for data submission to
NHSN for the Hospital OQR Program.
The measure numerator is: HCP in the
denominator population who during the
time from October 1 (or when the
vaccine became available) through
March 31 of the following year: (a)
received an influenza vaccination
administered at the healthcare facility,
or reported in writing (paper or
electronic) or provided documentation
that influenza vaccination was received
elsewhere; (b) were determined to have
a medical contraindication/condition of
severe allergic reaction to eggs or to
other component(s) of the vaccine, or
history of Guillain-Barre Syndrome
within 6 weeks after a previous
influenza vaccination; (c) declined a
vaccination; or (d) persons with
unknown vaccination status or who do
not otherwise meet any of the
definitions of the above-mentioned
numerator categories. The measure
denominator is: the number of HCP who
are working in the healthcare facility for
at least 1 working day between October
1 and March 31 of the influenza season,
regardless of clinical responsibility or
patient contact. The specifications for
this measure are available at http://
www.qualityforum.org/QPS/QPSTool.
aspx?Exact=false&Keyword=0431.
In its 2013 Pre-Rulemaking Report,
(http://www.qualityforum.org/
Publications/2013/02/MAP_PreRulemaking_Report_-_February_
2013.aspx), the MAP supported
inclusion of this measure in the
Hospital OQR Program and noted that
the measure would address a measure
type that is not adequately represented
in the program measure set.
Furthermore, the adoption of this
measure will align with both the
Hospital IQR Program, which adopted
the measure for the FY 2015 payment
determination and subsequent years,
and the ASCQR Program, which
adopted the measure for the CY 2016
payment determination and subsequent
years.
In the CY 2012 OPPS/ASC proposed
rule (76 FR 42323 through 42324), we
proposed this measure for the CY 2015
payment determination. However, in the
CY 2012 OPPS/ASC final rule with

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comment period (76 FR 74470 through
74472), we decided not to finalize the
measure (76 FR 74472) and, instead,
decided to propose it in future
rulemaking for the CY 2016 payment
determination and subsequent years in
order to address measure refinements in
the denominator and operational issues.
We believe that these refinements have
since been made and that the
operational issues have been resolved.
We have learned that many States are
proactively aligning their reporting
requirements for this measure to mirror
the federal requirements in an effort to
reduce burden on providers and
suppliers. We also recently learned that
the measure may soon be undergoing
some minor updates and review by
NQF. Consistent with our policy to use
a subregulatory process to adopt
nonsubstantive changes to measures
arising out of the NQF process stated in
the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68766 through
68767), we would use this process to
adopt the upcoming NQF revisions for
this measure, if the revisions are
nonsubstantive.
We refer readers to section XIII.H.2. of
the proposed rule for a detailed
discussion of data collection (78 FR
43656). We invited public comment on
this proposal.
Comment: Several commenters
opposed this measure and contended
that the measure is duplicative of the
Influenza vaccination measure in the
Hospital IQR Program. Commenters
stated that it is burdensome to report the
same measure for both settings. A few
commenters requested clarifications for
the measure inclusions for both hospital
inpatient and outpatient settings. Some
commenters noted that hospital staff
may float between different hospital
inpatient and outpatient locations on
different days and they requested clear
guidelines to identify staff working at
different hospital locations. A few
commenters recommended allowing
hospitals to report by attesting through
the Hospital IQR Program that both their
inpatient and outpatient healthcare
personnel are vaccinated.
Response: We recognize that the
current measure specifications may lead
to some redundancy in data collection
and data submission of this measure in
both the inpatient and outpatient
settings. We are aware that some HCP
may work across both of these settings.
We also realize that it may be difficult
for hospitals to accurately attribute HCP
using current instructions to report
accurate data for both the Hospital IQR
and Hospital OQR Programs.
After considering the public
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discussion with the CDC’s NHSN, we
plan to address the commenters’
concerns by providing clear instructions
on the appropriate attribution of HCP
working in the outpatient setting. We
intend to provide these instructions in
time for the first data collection period
beginning in October 2014 and before
the data submission deadline on May
15, 2015. The instructions will be
included in the measure specifications
in our planned December 2013
addendum to the Hospital OQR
Specifications Manual, which will be
available on the QualityNet Web site
(https://www.qualitynet.org).
We also intend to separately clarify
HCP definitions for the inpatient setting
with respect to the Hospital IQR
Program in the Hospital IQR
Specifications Manual, which we
anticipate will be published on April 1,
2014 to cover the discharges dated
October 1, 2014–June 30, 2015. In
addition, as the measure steward, the
CDC’s NHSN plans to set up the
capability to clearly differentiate
reporting on its Web site for the hospital
inpatient and outpatient settings.
Comment: One commenter believed
that this measure may not be necessary
as many hospitals already require the
influenza vaccination as a condition for
employment. Another commenter
requested a waiver for States with
legislation prohibiting healthcare
providers from requiring employees to
obtain influenza vaccination as a
condition for employment.
Response: We believe that this
proposed measure is necessary for
achieving high levels of vaccination in
HCP and that this new measure
provides useful information to
consumers of healthcare services. We
note that a recent report by CDC
(Morbidity and Mortality Weekly Report
2013; 62(38):781–786) found that during
the 2012–2013 influenza season, 30
percent of HCP worked in settings
where influenza vaccination was
required, 46 percent worked in settings
where it was promoted but not required,
and 24 percent worked in settings where
it was neither required nor promoted.
Vaccination adherence at facilities with
a contingency requirement for
employment was 96.5 percent. Rates
were lower in facilities that promoted,
but did not require vaccination (76.9
percent) and lower still in facilities that
neither required nor promoted
vaccination (50.4 percent). Thus, there
is wide variation in workplace programs
for the influenza vaccination and in
vaccine coverage among HCP.
Therefore, we believe that tracking
influenza vaccination coverage is
pivotal to raise vaccination adherence to

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higher and more uniform levels across
the Nation.
We acknowledge the commenter’s
concern regarding State laws prohibiting
providers from requiring that healthcare
workers get an influenza vaccination.
We want to clarify that the numerator of
the population of this measure includes
more than just HCPs who received an
influenza vaccination administered at
the healthcare facility, or who reported
in writing (paper or electronic) or
provided documentation that they
received an influenza vaccination
elsewhere. The numerator population
also includes HCP who: (a) have a
medical contraindication/condition of
severe allergic reaction to eggs or to
other components of the vaccine; (b)
have a history of Guillain-Barre
Syndrome within 6 weeks after a
previous influenza vaccination; (c)
declined a vaccination; (d) have an
unknown vaccination status or do not
otherwise meet any of the other
definitions in the numerator categories.
We believe that these last three
categories encompass HCP who may not
have been vaccinated and cannot be
required to comply with a vaccination
requirement under State law. Therefore,
we do not believe that a waiver is
needed for States where legislation
prohibits providers from requiring that
HCPs get influenza vaccinations as a
condition of employment. Regardless of
whether requiring the influenza
vaccination with employment is
prohibited by the State, HOPDs can still
take actions to improve their
vaccination rates.
Comment: One commenter asked
whether CMS would publicly report this
measure separately for the Hospital
OQR Program, instead of reporting a
hospital-wide rate, which includes
hospital inpatient units and off-campus
clinics, among others.
Response: In the upcoming CY 2015
OPPS/ASC proposed rulemaking, we
will provide detailed proposals
regarding the public reporting of this
measure as stated above.
After consideration of the public
comments we received, we are
finalizing as proposed the measure OP–
27: Influenza Vaccination Coverage
among Healthcare Personnel (NQF
#0431) for the Hospital OQR Program
for the CY 2016 payment determination
and subsequent years.
For the proposed rule, we received
many general comments applicable to
the four proposed chart-abstracted
measures. We have organized this
preamble by first summarizing and
responding to these general comments
applicable to these four measures,
summarizing and responding to

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measure-specific comments, and then
describing our final policy.
Comment: A few commenters
supported adopting all four proposed
chart-abstracted measures. However,
many other commenters opposed all
four proposed chart-abstracted measures
based on their claims that follow-up
visits and assessments are performed in
places other than in HOPDs. Thus,
HOPDs may not be able to access other
patient records or they may not be able
to track down the patients who may go
elsewhere for follow-up. The
commenters stated that HOPDs merely
provide a facility for physicians to
perform certain procedures, but followup visits are performed at physician
offices. Many commenters viewed the
four proposed chart-abstracted measures
as ‘‘Clinician Office’’ setting measures
designed to measure, for example,
ophthalmologist and other physician
performance and not HOPD
performance. Commenters stated that,
for example, ophthalmologists assess
post-operative visual function and
patient outcomes, and determine
additional surgical procedures as
necessary in their respective offices and
not in the HOPD. Likewise, physicians
perform colonoscopy at HOPDs, but
follow-up colonoscopy intervals are
determined by the physician and
documented in medical records kept in
the physician’s office.
Some commenters asserted that
measures for the outpatient setting
should be geared towards tracking the
care of patients during their HOPD
visits. Patients who receive some type of
care in the HOPD do not always receive
the majority of their care in HOPDs,
because they are most likely to be
followed by their primary care
physicians for other medical care.
Therefore, it is generally not practical to
have the HOPD tracking the long-term
follow-up care of its patients.
The commenters recommended that
because CMS wishes to eventually align
the hospital and physician quality
programs, CMS must design measures
that recognize that there are differences
in how facilities and physicians collect
information, report quality measures,
and interact with patients.
Many commenters concluded that
these four measures are more
appropriate as Physician Quality
Reporting System (PQRS) measures,
because physicians are better suited to
track and follow-up patients (PQRS is a
voluntary reporting system that
provides an incentive payment to
identified individual eligible
physicians). Commenters asserted that
the measures are duplicative as both

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PQRS measures and Hospital OQR
Program measures.
Some commenters expressed concerns
that the measures are neither NQFendorsed for the HOPD setting nor fieldtested.
Response: We thank those
commenters who expressed support for
the measures. While these measures are
suitable for clinician office settings, as
indicated by commenters, we also
believe they are suitable for settings that
supply services to the same target
populations for the measures, such as
HOPDs. The intent of the measures is to
promote accountability for Medicare
beneficiaries, improve the coordination
of services, reduce fragmented care,
encourage redesigned care processes for
high quality and efficient service
delivery, and incentivize higher value
care. These measures focus on the
patient and encourage physicians, such
as ophthalmologists, to collaborate,
communicate, and share information
with HOPDs. We hope this new mode
of coordination will become the
common practice in healthcare delivery.
HOPDs provide care without the
higher cost associated with inpatient
hospitalization. More and more
procedures are done safely and
effectively on an outpatient basis and
we expect this trend will continue.
Therefore, we believe that assessing care
coordination is a very important aspect
of evaluating the overall quality of care
furnished by HOPDs. We stress that true
clinical integration is evidenced by
effective patient coordination of care
across health care settings, providers,
and suppliers and is best shown when
there is a structure in place that is
patient-focused and where clinicians
collaborate on best practices in an effort
to furnish higher quality care that they
likely would not achieve if working
independently.
We do not believe these measures are
duplicative of PQRS measures because,
even though the measures’ indicators
are the same, the level of analysis is
different (facility versus physician). We
plan to make nonsubstantive tweaks to
the measure, such as updating and
modifying HCPCS codes, in order to
better fit the measure for a HOPD level
of analysis. We hope to set new
milestones in the integral coordination
and collaboration of care across
outpatient provider types and facilities,
as spurred by these measures. Regarding
the comments that the proposed chartabstracted measures have not been fieldtested, we note that all three measures
that we are finalizing (as discussed
below) were field-tested in the HOPD
facility setting by the measure stewards.
These three measures are: (1)

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Endoscopy/Polyp Surveillance:
Appropriate follow-up interval for
normal colonoscopy in average risk
patients (NQF #0658); (2) Endoscopy/
Polyp Surveillance: Colonoscopy
Interval for Patients with a History of
Adenomatous Polyps—Avoidance of
Inappropriate Use (NQF #0659); and, (3)
Cataracts: Improvement in Patient’s
Visual Function within 90 Days
Following Cataract Surgery (NQF
#1536).
We are finalizing the same three
chart-abstracted measures in both the
Hospital OQR Program and ASCQR
Program for the CY 2016 payment
determination and subsequent years.
Finalizing these measures for the
Hospital OQR Program would further
align measures across outpatient
hospital and ambulatory settings, which
furnish many similar services to
beneficiaries. The availability of
identical outcome measures at HOPDs
and ASCs will enable beneficiaries to
compare facilities and make informed
decisions.
In addition, we believe the measures
are appropriate for the HOPD setting,
because the services assessed by these
measures are frequently performed in
HOPDs. Also, all three of the chartabstracted measures that we are
finalizing are NQF-endorsed for the
Ambulatory Care: Clinician Office/
Clinic setting, which we have
historically interpreted as including the
HOPD setting.
Comment: Some commenters noted
that an initial cataract surgery or
colonoscopy may be performed at a
different HOPD. This situation would
make retrieving data burdensome. Some
commenters believed that obtaining
office visit records and surgical outcome
data from other physician offices is an
intrusive violation of patient privacy.
Response: There may be some
instances in which a HOPD may have
great difficulty in obtaining information
from other HOPDs, and some additional
information may need to be obtained
directly from patients for these
measures. But as a general matter, our
overarching goal for adopting the three
proposed measures is to encourage the
coordination of care across health care
settings, providers, and suppliers as
often as possible. We would like to see
HOPDs, ophthalmologists and other
physicians actively and routinely
engaged in exchanging information to
better communicate and coordinate the
care of patients.
We note that there are a variety of
ways to collect patient-related data and,
at times, it may be appropriate for
HOPDs to obtain data directly from the
ophthalmologist or other physician who

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either ordered a procedure for a patient
or performed that procedure. HOPDs
may have professional and commercial
relationships with these
ophthalmologists or other physicians.
As such, an HOPD may have the ability
to develop the means to obtain followup information including using
contractual requirements to share such
information with HOPDs.
We also note that HOPDs and
referring physicians are generally
subject to the HIPAA Privacy, Security,
and Breach Notification Rules, and are
required to protect the privacy and
confidentiality of their patients’
protected health information as required
by those rules. We expect that HOPDs
and physicians would adhere to any
applicable requirements in providing
and obtaining this information in order
to prevent any violations of patient
privacy.
We believe that our implementation
strategy for these measures will
minimize collection and reporting
burden. We detail the data submission
procedures for the measures in section
XIII.H.2. of this final rule with comment
period.
Comment: Many commenters asserted
that it is extremely burdensome to
retrieve timely the data from physician
offices and that the data would be
difficult to validate. A few commenters
strongly believed that the huge reporting
burden from the four proposed chartabstracted measures could be
diminished if claims are used as the
data source.
Response: We appreciate commenters’
concerns that it could be difficult or
burdensome for hospitals to retrieve
from physician offices the data they will
need for the chart-abstracted measures
in a timely manner. We believe such
problems are more likely to occur in the
early phases of establishing these
measures, when hospitals and
physicians have not yet set up effective
infrastructures to routinely exchange
information. In order to accommodate
these concerns, we have taken several
steps that we believe should alleviate
some of this burden. The Web-based
collection strategy we are finalizing for
the measures and subsequent release of
specifications and implementation
guidance in the Hospital OQR
Specifications Manual will address
some of the concerns about feasibility of
data collection raised by the
commenters. To further reduce burden,
we are also finalizing a low case
threshold exemption and a sampling
methodology for hospitals with a high
volume of cases covered by the new
measures. We believe that these
provisions should together significantly

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reduce burden for the three chartabstracted measures we are finalizing.
We have discussed these modifications
in more detail in section XIII.H.2.f of
this final rule with comment period.
We do not include chart-abstracted
measures submitted via the Web-based
tool in our validation procedures and,
therefore, we will not be validating
these measures at this time. Although
some commenters would prefer that we
use claims as the source for this data,
we believe these measures will have the
positive effect, in a number of instances,
of requiring providers to communicate
with each other. Using these kinds of
measures will help us capture HOPDs’
efforts at care coordination, which is
something we want to measure, and that
we do not believe we can measure with
claims. We are also not aware of any
applicable coding to capture this
communication and coordination of
patient care.
We received specific comments on the
individual proposed chart-abstracted
measures and they are discussed below.
2. Complications Within 30 Days
Following Cataract Surgery Requiring
Additional Surgical Procedures (NQF
#0564)
The proposed measure assesses the
percentage of patients aged 18 years and
older with a diagnosis of uncomplicated
cataract who had cataract surgery and
had any of a specified list of surgical
procedures in the 30 days following
cataract surgery which would indicate
the occurrence of any of the following
major complications: retained nuclear
fragments, endophthalmitis, dislocated
or wrong power intraocular lens (IOL),
retinal detachment, or wound
dehiscence.
Although complications that may
result in a permanent loss of vision
following cataract surgery are
uncommon, this outcome measure seeks
to identify those complications from
surgery that can reasonably be attributed
to the surgery. It focuses on patient
safety and monitoring for events that,
while uncommon, can signify important
issues in the care being provided.
Advances in technology and surgical
skills over the last 30 years have
rendered cataract surgery safer and more
effective. An analysis of Managed Care
Organization data demonstrated that the
rate of complications for this measure
were 1 to 2 percent. However, with an
annual volume of 2.8 million cataract
surgeries in the United States, many of
which are performed in hospital
surgical outpatient departments, a 2percent rate is a significant number of

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surgeries associated with
complications.5
The measure numerator is: patients
who had one or more specified
operative procedures for any of the
following major complications within
30 days following cataract surgery:
retained nuclear fragments,
endophthalmitis, dislocated or wrong
power IOL, retinal detachment, or
wound dehiscence. The measure
denominator is: all patients aged 18
years and older who had cataract
surgery and no significant pre-operative
ocular conditions impacting the surgical
complication rate. This measure
excludes patients with certain comorbid
conditions impacting the surgical
complication rate. The specifications for
this measure are available at http://
www.qualityforum.org/QPS/0564.
In its 2013 Pre-Rulemaking Report,
(http://www.qualityforum.org/
Publications/2013/02/MAP_PreRulemaking_Report_-_February_2013.
aspx), the MAP supported this measure
and noted that the measure addresses a
high impact condition that is not
adequately addressed in the Hospital
OQR measure set. Currently the NQF
endorsement is time-limited.
We refer readers to section XIII.H.2. of
the proposed rule for a detailed
discussion of data collection. We
invited public comment on this
proposal.
Comment: Many commenters noted
that this measure is unnecessary as
complications from cataract surgery are
rare and data collection would be very
burdensome, since the volume of
cataract surgery performed is huge.
Commenters added that this measure
requires very detailed information about
not only specific complications that
may have occurred, but also data on any
additional follow up surgical
procedures to accurately report data for
this measure.
Response: As discussed in the
proposed rule (78 FR 43649), a large
number of complications from cataract
surgery occur even though the
percentage of complications from
cataract surgery is small. The MAP
indicated that the measure addresses a
high impact condition that is not
adequately addressed in the Hospital
OQR measure set. Therefore, we believe
that complications following cataract
surgery which would require additional
surgical procedures are important to
measure.
5 National Quality Measures Clearing House.
Agency for Healthcare Research and Quality.
Available at http://qualitymeasures.ahrq.gov/
content.aspx?id=27981&search=complications+
within+30+days+following+cataract+surgery.

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However, unlike the other three
measures we proposed, we agree that a
HOPD would incur significant
additional burden to collect the detailed
information about specific
complications and required additional
surgical procedures to accurately report
this measure. This would far exceed the
burden we believe accompanies the
other chart-abstracted measures that we
proposed in the proposed rule. We have
emphasized that we believe that care
coordination between providers and
practitioners is an essential element of
appropriate, high quality care, and that
the element of coordination cannot be
measured using a claims-based or other
form of measure.
Nonetheless, this is one instance in
which we believe the burden involved
in collecting the data required for chartabstraction far outweighs the benefits in
measuring care coordination.
We have based our conclusion on the
fact that a HOPD would be required to
acquire far more information than the
more fundamental follow up
information that accompanies the other
measures we proposed (such as the
patient survey data for OP–31, which
basically involves collecting a patient’s
perceptions about visual improvement
following cataract surgery). In contrast,
there is far more information necessary
for OP–28 and the nature of that
information is more detailed,
complicated, and very likely much more
difficult for an HOPD to acquire. We
agree with the commenters that this
measure requires very detailed
information about not only specific
complications that may have occurred,
but also data on specific additional
follow up surgical procedures to
accurately report data for this measure.
Because we continue to believe this is
an important area to measure quality of
care, we plan to explore other ways to
collect this data, including the potential
development of a claims-based riskadjusted outcome measure of cataract
complications, which would address the
same quality issues as this measure, but
minimize the burden associated with
measurement to the greatest degree
possible. Further, we anticipate that the
new measure would be applicable to
both the ASC and HOPD settings. We
have previously developed a robust
methodology for using claims to identify
surgical complications for patients who
have had total hip and knee
replacements, and therefore, we believe
that it may be possible to do so for
cataract surgeries as well. This is not the
case with the other three measures,
which do not measure surgical
complications.

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After consideration of the public
comments we received, and in light of
the above reasons, we are not finalizing
this proposed measure for the Hospital
OQR Program at this time.
3. Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658)
The proposed measure assesses the
percentage of patients aged 50 years and
older receiving screening colonoscopy
without biopsy or polypectomy who
had a recommended follow-up interval
of at least 10 years for repeat
colonoscopy documented in their
colonoscopy report.
In the average-risk population,
colonoscopy screening is recommended
in current guidelines at 10-year
intervals.6 Our analysis indicated that
about 25 percent of surgeries/
procedures performed in HOPDs and
ASCs are colonoscopies. Performing
colonoscopy too frequently increases
patients’ exposure to procedural harm.
This measure aims to assess whether
average risk patients with normal
colonoscopies receive a
recommendation to receive a repeat
colonoscopy in an interval that is less
than the recommended amount of 10
years.
The measure numerator is: patients
who had a recommended follow-up
interval of at least 10 years for repeat
colonoscopy documented in their
colonoscopy report. The measure
denominator is: all patients aged 50
years and older receiving screening
colonoscopy without biopsy or
polypectomy. This measure excludes
patients with documentation of medical
reason(s) for recommending a follow-up
interval of less than 10 years (for
example, an above-average risk patient
or inadequate prep). The specifications
for this measure are available at:
http://www.qualityforum.org/QPS/0658.
In its 2013 Pre-Rulemaking Report,
(http://www.qualityforum.org/
Publications/2013/02/MAP_PreRulemaking_Report_-_February_2013.
aspx), the MAP supported the direction
of the measure. Currently the NQF
endorsement is time-limited.
We refer readers to section XIII.H.2. of
the proposed rule for a detailed
discussion of data collection. We
6 Davila RE, Rajan E, Baron TH, Adler DG, Egan
JV, Faigel DO, Gan SI, Hirota WK, Leighton JA,
Lichtenstein D, Qureshi WA, Shen B, Zuckerman
MJ, VanGuilder T, Fanelli RD, Standards of Practice
Committee, American Society for Gastrointestinal
Endoscopy. ASGE guideline: colorectal cancer
screening and surveillance. Gastrointest Endosc
2006 Apr;63(4):546–57. http://www.ncbi.nlm.nih.
gov/pubmed/16564851?dopt=Abstract.

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invited public comment on this
proposal.
Comment: One commenter
interpreted the MAP’s recommendation
of ‘‘Support Direction,’’ to mean that a
measure was not, in the MAP’s opinion,
ready for implementation in the
Hospital OQR Program. Commenters
stated that CMS should only finalize
measures fully supported by the MAP.
Response: We take into account all
MAP input when deciding on which
measures to adopt for the program. We
note that in addition to MAP input, we
also consider feedback that we receive
from many other stakeholders such as
providers, specialty societies, measure
developers, patients, and their
caregivers during the rulemaking public
comment period in evaluating whether
to finalize measures. We continuously
review and revise the measures in our
programs to ensure that only the highest
caliber measures are selected. We stress,
however, that we are only required to
consider the input provided by the
MAP. The ultimate decision on whether
to include a measure for the program
rests solely with the Secretary.
Although, ideally, we would want the
MAP to fully support all measures for
our programs, we recognize that it is not
always possible. A ‘‘support direction’’
recommendation by the MAP indicates
‘‘measures, measure concepts, or
measure ideas that should be phased
into the program measure set over time,
after specific issues are addressed.’’ The
MAP’s reasons for supporting the
direction of a measure can vary greatly,
from measure to measure. In some
instances, for example, the MAP might
simply believe that a measure should
first receive NQF endorsement.
We believe that this measure
addresses the critical issue of
colonoscopies potentially performed too
frequently and potentially increasing
patients’ exposure to procedural harm.
Because the procedure is performed
often at HOPDs, we believe that this
measure is necessary for the Hospital
OQR Program.
After consideration of the public
comments we received, we are
finalizing this measure for the CY 2016
payment determination and subsequent
years as proposed.
4. Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps—
Avoidance of Inappropriate Use (NQF
#0659)
This measure assesses the percentage
of patients aged 18 years and older
receiving a surveillance colonoscopy,
with a history of a prior colonic polyp
in previous colonoscopy findings who
had a follow-up interval of 3 or more

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years since their last colonoscopy
documented in the colonoscopy report.
Colonoscopy is the recommended
method of surveillance after the removal
of adenomatous polyps, because it has
been shown to significantly reduce
subsequent colorectal cancer incidence.
The timing of follow-up colonoscopy
should be tailored to the number, size,
and pathologic findings of the
adenomatous polyps removed. A
randomized trial of 699 patients showed
that after newly diagnosed adenomatous
polyps have been removed by
colonoscopy, follow-up colonoscopy at
3 years detects important colonic
lesions as effectively as follow-up
colonoscopy at both 1 and 3 years.7 8
The measure numerator for the
proposed measure is: patients who had
an interval of 3 or more years since their
last colonoscopy. The measure
denominator is: all patients aged 18
years and older receiving a surveillance
colonoscopy with a history of a prior
colonic polyp in a previous
colonoscopy. This measure excludes
patients with: (1) Documentation of
medical reason(s) for an interval of less
than 3 years since the last colonoscopy
(for example, last colonoscopy
incomplete, last colonoscopy had
inadequate prep, piecemeal removal of
adenomas, or last colonoscopy found
greater than 10 adenomas); or (2)
documentation of a system reason(s) for
an interval of less than 3 years since the
last colonoscopy (for example, unable to
locate previous colonoscopy report,
previous colonoscopy report was
incomplete). The specifications for this
measure are available at http://
www.qualityforum.org/QPS/0659.
In its 2013 Pre-Rulemaking Report,
(http://www.qualityforum.org/
Publications/2013/02/MAP_PreRulemaking_Report_-_February_
2013.aspx), the MAP supported the
direction of the measure. A ‘‘support
direction’’ recommendation by the MAP
indicates ‘‘measures, measure concepts,
or measure ideas that should be phased
into the program measure set over time,
after specific issues are addressed’’ (for
example, obtaining NQF endorsement).
7 National Quality Measures Clearing House.
Agency for Healthcare Research and Quality.
Available at http://qualitymeasures.ahrq.gov/
content.aspx?id=27981&search=complications+
within+30+days+following+cataract+surgery.
8 Davila RE, Rajan E, Baron TH, Adler DG, Egan
JV, Faigel DO, Gan SI, Hirota WK, Leighton JA,
Lichtenstein D, Qureshi WA, Shen B, Zuckerman
MJ, VanGuilder T, Fanelli RD, Standards of Practice
Committee, American Society for Gastrointestinal
Endoscopy. ASGE guideline: colorectal cancer
screening and surveillance. Gastrointest Endosc
2006 Apr;63(4):546–57. http://www.ncbi.nlm.nih.
gov/pubmed/16564851?dopt=Abstract.

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Currently the NQF endorsement is timelimited.
We refer readers to section XIII.H.2. of
the proposed rule for a detailed
discussion of data collection. We
invited public comment on this
proposal.
Comment: One commenter
interpreted the MAP’s ‘‘Support
Direction’’ recommendation to mean
that a measure was not, in the MAP’s
opinion, ready for implementation in
the HQQR Program. Commenters stated
that CMS should only finalize measures
fully supported by the MAP.
Response: We refer readers to our
response above to the same MAP
recommendation concerns expressed
with respect to the Endoscopy/Polyp
Surveillance: Appropriate Follow-Up
Interval for Normal Colonoscopy in
Average Risk Patients (NQF #0658)
measure.
We believe that this measure
addresses the critical area of timely
following-up colonoscopies to detect
important colonic lesions after newly
diagnosed adenomatous polyps have
been removed by colonoscopy. Proper
timing can be effective in reducing the
incidence of subsequent colorectal
cancer. Because colonoscopy is so
commonly performed at HOPDs, and
because this measure addresses a
significant gap in the Hospital OQR
Program, we believe that this measure is
necessary for the Hospital OQR
Program. We also note that NQF
recently lifted its time-limited
endorsement and the measure is now
fully-endorsed by NQF. We expect that
this change will appear on the NQF Web
site in the near future.
After consideration of the public
comments we received, we are
finalizing this measure, without
modification, for the Hospital OQR
Program as proposed.
5. Cataracts—Improvement in Patient’s
Visual Function Within 90 Days
Following Cataract Surgery (NQF #1536)
The proposed measure assesses the
percentage of patients aged 18 years and
older who had cataract surgery and had
improvement in visual function
achieved within 90 days following the
cataract surgery.
Cataract surgery is performed to
improve a patient’s vision and
associated functioning. This outcome is
achieved consistently through careful
attention to the accurate measurement
of axial length and corneal power and
the appropriate selection of an IOL.
Failure to achieve improved visual
functioning after surgery in eyes
without comorbid ocular conditions that
could impact the success of the surgery

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would reflect care that should be
assessed for opportunities for
improvement. Evidence suggests that
visual improvement occurs in about 86–
98 percent of surgeries in eyes without
comorbid conditions. However, with an
annual volume of 2.8 million cataract
surgeries in the United States, many of
which are performed in hospital
outpatient surgical departments, the
impact could affect a significant number
of patients per year.9
We proposed to adopt this measure
for the CY 2016 payment determination
and subsequent years. The measure
numerator is: patients 18 years and
older (with a diagnosis of
uncomplicated cataract) in a sample
who had improvement in visual
function achieved within 90 days
following cataract surgery, based on
completing a pre-operative and postoperative visual function instrument.
The measure denominator is: all
patients aged 18 years and older in
sample who had cataract surgery. There
are no exclusions. The specifications for
this measure are available at http://
www.qualityforum.org/QPS/1536.
Additional information for the measure
specifications can be found in the NQF
Measure Evaluation available at http://
www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=
68317.
In its 2013 Pre-Rulemaking Report,
(http://www.qualityforum.org/
Publications/2013/02/MAP_PreRulemaking_Report_-_February_
2013.aspx), the MAP supported the
inclusion of the measure in the Hospital
OQR Program and noted that the
measure addresses a high impact
condition not adequately addressed in

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9 National Quality Measures Clearing House.
Agency for Healthcare Research and Quality.
Available at http://www.qualitymeasures.ahrq.gov/
content.aspx?id=27982.

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the program measure set. The MAP
added that this measure, which
addresses outcomes, falls under a
category of measures inadequately
represented in the program measure set.
It also meets the consensus requirement
and the requirement that it be set forth
by a national consensus building entity
because it is NQF-endorsed. We refer
readers to section XIII.H.2. of the
proposed rule for a detailed discussion
of data collection. We invited public
comment on this proposal.
Comment: One commenter stated that
the measure requires patients to
complete a pre-operative and a postoperative visual function questionnaire.
The follow-up survey may occur in
intervals of one day, two weeks or one
month post-op. The pre- and postsurgery surveys are conducted in the
physician office and they are compared
for analysis. The commenter noted it
takes a third-party administrator to
process the questionnaire in order to
prevent the introduction of bias (such as
how a physician characterizes a
patient’s progress) and this
administrative cost would impose a new
burden for HOPDs.
Response: We note that the preoperative and post-operative surveys
can be done in person at the HOPD or
physician’s office or via phone, email,
or mail. The two surveys can be
analyzed by the physician or the HOPD.
However, given that this measure
collects standard clinical follow-up
information, we would expect
physicians and HOPDs to already have
standard operating procedures in place
in order to conduct these visual
assessments or for HOPDs to acquire
them from patients’ physicians in order
to properly follow up by comparing preand post-operative surveys. Therefore,
we do not believe this measure should
impose undue additional burden.

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Also, while a HOPD may want to
utilize a third party administrator to
process survey information, we do not
believe one should be necessary. We
believe that including this measure in
the Hospital OQR Program is important
because, as the MAP stated and we
believe, this measure falls under a
category of measures inadequately
represented in the Hospital OQR
Program measure set, and the measure
exemplifies patient reported outcomes
in the delivery of care.
In response to the comments we have
received on the burden associated with
the chart-abstracted measures we are
finalizing, we have modified our
implementation strategy in a manner
that we believe will significantly
minimize collection and reporting
burden. We detail the data submission
procedures for this measure and others
in section XIII.H.2. of this final rule
with comment period.
After consideration of the public
comments we received, we are
finalizing this measure for the CY 2016
payment determination and subsequent
years as proposed.
In summary, we are finalizing four
new measures (one CDC/NHSN measure
and three chart-abstracted measures): (1)
Influenza Vaccination Coverage among
Healthcare Personnel; (2) Endoscopy/
Polyp Surveillance: Appropriate
Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients;
(3) Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps—
Avoidance of Inappropriate Use; and (4)
Cataracts—Improvement in Patient’s
Visual Function Within 90 Days
Following Cataract Surgery for the CY
2016 payment determination and
subsequent years.

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The finalized measure set (a total of
28 measures) for the Hospital OQR
Program for the CY 2016 payment

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determination and subsequent years is
listed in the table below.
BILLING CODE 4120–01–P

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Finalized Hospital OQR Program Measure Set for the CY 2016 Payment
Determination and Subsequent Years
NQF#
Measure Name
0287
OP-I: Median Time to Fibrinolysis
0288
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
0290
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
Intervention
0286
OP-4: Aspirin at Arrival
0289
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
0270
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
0268
OP-8: MRl Lumbar Spine for Low Back Pain
0514
OP-9: Mammography Follow-up Rates
-OP-lO: Abdomen CT - Use of Contrast Material
-OP-II: Thorax CT - Use of Contrast Material
0513
0489
OP-I2: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their ONC-Certified EHR System as Discrete
Searchable Data
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
0669
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*
0491
OP-17: Tracking Clinical Results between Visits
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
0496
Patients
OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional
-0662
OP-21: Median Time to Pain Management for Long Bone Fracture
OP-22: ED- Patient Left Without Being Seen
-0661
OP-23: ED- Head CT or MRl Scan Results for Acute Ischemic Stroke or
Hemorrhagic Stroke who Received Head CT or MRl Scan Interpretation
Within 45 minutes of Arrival
OP-25: Safe Surgery Checklist Use
-OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical
-Procedures**
0431
OP-27: Influenza Vaccination Coverage among Healthcare Personnel***
OP-29: EndoscopylPolyp Surveillance: Appropriate Follow-up Interval for
0658
Normal Colonoscopy in Average Risk Patients***
0659
OP-30: EndoscopylPolyp Surveillance: Colonoscopy Interval for Patients with

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

BILLING CODE 4120–01–C

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F. Possible Hospital OQR Program
Measure Topics for Future
Consideration
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 Health Information
Technology (HIT) care coordination,
patient safety, and volume. We
anticipate that as EHR technology
evolves and more infrastructure is put
into place, we will have the capacity to
accept electronic reporting of many
clinical chart-abstracted measures that
are currently part of the Hospital OQR
Program using certified EHR technology.
We are working diligently toward this
goal. We believe that this progress, at a
near future date, 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 electronic
specifications (e-specifications). This
includes completing e-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

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beneficiaries who receive health care in
hospital outpatient settings, including
partial hospitalization programs (PHPs)
that are part of HOPDs.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43651), we indicated that we
are considering the following measure
domains for future measures: 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 programs
such as the Hospital IQR Program and
the ASCQR Program, all of which are
targeting the same broad measure
domains for future expansion.
We invited public comment on this
approach and on our suggestions and
rationale for possible measure topics for
future consideration in the Hospital
OQR Program.
Comment: Commenters presented the
following as possible future measure
topics:
• A patients’ experience of care
measure
• A core patient safety measure set or
a serious hospital-acquired infection
composite measure that includes
Central Line Bundle Compliance,
Clostridium difficile (C-difficile),
catheter-associated urinary tract
infection (CAUTI), and MRSA
Bacteremia (MRSA)
• Clinician-level measures that can be
applied appropriately in the hospital
outpatient setting for conditions such as
diabetes, coronary artery disease, and
COPD
• Patient-Reported Outcomes
Measures
Response: We thank the commenters
for the feedback and will take it into
consideration for future measures.

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In addition, we solicited comments on
the following potential quality measure
topics for partial hospitalization
programs (PHPs) that are part of HOPDs.
Some of these measure topics are
currently part of the IPFQR Program,
and some of them we are currently
considering for the IPFQR Program:
Polyp-therapy with antipsychotic
medications; Post-discharge of
continuity of care; Alcohol screening;
Alcohol and drug use; Tobacco use
assessment; and Follow-up after
hospitalization for mental illness. These
measure topics would advance our goal
of aligning measurement of PHPs in
HOPDs with that of the IPFQR Program
over time.
Comment: One commenter
recommended that CMS not propose
any of the measures topics for PHPs in
HOPDs for the Hospital OQR Program
until such measures are specified and
tested in the PHP setting, and NQFendorsed and reviewed by the MAP.
The commenter was concerned about
the need for more infrastructure support
for additional measures.
Response: We thank the commenter
for the suggestions. We will take these
comments into account when
considering whether to propose the
measures for PHPs in future rulemaking.
Comment: Some commenters made
specific recommendations for new
measure proposals for PHPs.
Commenters believed that with
appropriate modification, the adoption
of some of the IPFQR Program measures
for PHPs could promote enhanced care
coordination between PHPs and IPFs.
Specifically, the commenters
recommended modifying two pairs of
IPFQR measures for the PHP setting:
Hospital-Based Inpatient Psychiatric
Services (HBIPS) 4 and 5 (multiple
antipsychotics); and HBIPS 6 and 7
(continuity of care). According to the

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commenters, HBIPS 4 requires the
identification of patients who are
discharged on two or more
antipsychotic medications, while HBIPS
5 reports the number of patients
discharged on multiple antipsychotic
medications with appropriate
justification. Antipsychotics are
important tools in managing behavior,
but often have significant side effects,
especially when multiple antipsychotic
medications are used concurrently. It is
often appropriate to reduce (or ‘‘taper’’)
the number of antipsychotics given to
patients, but the tapering of drugs
cannot always be completed during an
inpatient hospitalization. Based on the
information they presented, commenters
contended it would be appropriate to
measure PHPs on HBIPS 4 and 5
because antipsychotic medication
tapering can and often does continue in
PHPs. Furthermore, commenters stated
that using setting-appropriate versions
of HBIPS 4 and 5 in both IPFs and PHPs
might encourage better coordination of
the use of antipsychotic medications
across these two settings.
Commenters also noted that similarly,
HBIPS 6 measures whether a postdischarge continuing care plan is
created, while HBIPS 7 measures
whether the post-discharge continuing
care plan is transmitted to the next level
of care provider. A plan of care provides
the next provider with a summary of a
patient’s course of treatment, discharge
medications and any recommendations
for ongoing care. Whenever a patient
changes care settings, the transmission
of a plan of care equips the new health
care team with important information to
shape a patient’s treatment plan. Based
on the commenters’ understanding of
the measures they described, they
asserted that assessing both IPFs and
PHPs on these measures could reinforce
the need for ongoing, two-way
communication across a patient’s
behavioral health care team.
Response: We thank the commenters
for the detailed recommendations for
future measures for PHPs. We will take
them into consideration when we
develop measures for PHPs.

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G. Payment Reduction for Hospitals
That Fail To Meet the Hospital OQR
Program Requirements for the CY 2014
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,

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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.
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 in order to
receive the full payment update factor
and that fail to meet the Hospital OQR
Program requirements. All other
hospitals paid under the OPPS that meet
the reporting requirements receive the
full OPPS payment update without the
reduction. For a more detailed
discussion of how the payment
reduction for failure to meet the
administrative, data collection, and data
submission requirements of the Hospital
OQR Program was initially
implemented, we refer readers to the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68769 through
68772).
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,’’ or ‘‘U.’’ We note that we
proposed to delete status indicator ‘‘X’’
as described in sections II.A.3. and XI.
of the proposed rule. We also note that
we proposed to develop status indicator
‘‘J1’’ as part of the proposed
comprehensive APC discussed in
section II.A.2.e. of the proposed rule.
Payment for all services assigned to
these status indicators will 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.’’ We refer
readers to the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68770
through 68771) for a discussion of this
policy.
We did not receive any public
comments on the CY 2014 OPPS status

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indicators to which the payment
reduction to OPPS payment rates would
apply, for hospitals who fail to meet the
OQR reporting requirements. We note
that the ‘‘J1’’ status indicator would not
apply in the CY 2014 OPPS, due to the
delay in implementation of the
comprehensive APC policy, which is
discussed in section II.A.2.e. of this
final rule with comment period. We also
note that status indicator ‘‘X’’ was not
deleted, because the packaging proposal
for ancillary services was not finalized
for the CY 2014 OPPS, as discussed in
section II.A.3. of this final rule with
comment period. Therefore, the
reporting ratio would continue to apply
to services with status indicator ‘‘X.’’
The OPD fee schedule increase factor
is an input into the OPPS conversion
factor, which is used to calculate OPPS
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 multiplied 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

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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
applicable adjustments to the OPPS
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
established this policy in the OPPS
beginning in the CY 2010 OPPS/ASC
final rule with comment period (74 FR
60642). For a complete discussion of the
OPPS outlier calculation and eligibility
criteria, we refer readers to section II.G.
of the proposed rule.
2. Reporting Ratio Application and
Associated Adjustment Policy for CY
2014
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43652), 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

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2014 annual payment update factor. For
the CY 2014 OPPS, the proposed
reporting ratio was 0.980, calculated by
dividing the proposed reduced
conversion factor of $71.273 by the
proposed full conversion factor of
$72.728. We proposed to continue to
apply the reporting ratio to all services
calculated using the OPPS conversion
factor. For the CY 2014 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,’’ and ‘‘U’’ (other than new
technology APCs to which we have
assigned status indicators ‘‘S’’ and ‘‘T’’).
We note that we proposed to delete
status indicator ‘‘X’’ as described in
sections II.A.3. and XI. of the proposed
rule. We also note that we proposed to
develop status indicator ‘‘J1’’ as part of
the proposed comprehensive APC
discussed in section II.A.2.e. of the
proposed rule and to apply the reporting
ratio to the comprehensive APCs. We
proposed to continue to exclude
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 comment on these
proposals.
Comment: One commenter suggested
that OPPS outlier payments for
hospitals that failed to meet the Hospital
OQR Program requirements be
calculated based on the full adjusted
payment as if they met the
requirements. The commenter believed
that otherwise, hospitals could
potentially receive an outlier payment
as a result of failing to comply with the
quality reporting requirements.
Response: In the CY 2009 OPPS/ASC
final rule with comment period (78 FR
68772), we described how failure to
meet the Hospital OQR Program
requirements would affect certain OPPS
payment adjustments. For the OPPS
outlier payment calculation, we
finalized a policy to calculate OPPS
outliers using payments with the

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Hospital OQR Program reduction
already applied. This application of the
quality reporting payment reduction in
calculating the OPPS outliers is similar
to how this issue is handled under the
IPPS.
After consideration of the public
comment we received, we are finalizing
our proposal to apply the Hospital OQR
Program reduction in the manner
described above and, therefore, are
finalizing our proposal, with
modification to reflect the CY 2014
OPPS status indicators to which the
adjustment would apply.
As a result, for the CY 2014 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.
H. Requirements for Reporting of
Hospital OQR Data for the CY 2015
Payment Determination and Subsequent
Years
1. Administrative Requirements for the
CY 2015 Payment Determination and
Subsequent Years
To participate successfully 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
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 payment update and subsequent
years in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74479
through 74487). In the CY 2013 OPPS/

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ASC final rule with comment period (77
FR 68480 through 68481), we modified
these requirements by extending the
deadline for certain hospitals to submit
a participation form. For the CY 2014
payment determination and subsequent
years, we modified the deadline for
hospitals that are not currently
participating in the Hospital OQR
Program and wish to participate,
provided they have 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, and
we are referring to an acceptance date
before January 1, 2013. The hospitals
must submit a participation form by July
31 rather than March 31 of the year
prior to the affected annual payment
update in order to participate in the
Hospital OQR Program for purposes of
the CY 2014 payment update. In the
example, the deadline would be July 31,
2013.
The Hospital OQR Program
procedural requirements are unchanged
from those adopted in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68480 through 68481). In
the CY 2014 OPPS/ASC proposed rule
(78 FR 43653), we proposed to codify
these procedural requirements at
§ 419.46(a). To participate in the
Hospital OQR Program, a hospital—as
defined in section 1886(d)(1)(B) of the
Act and that is reimbursed under the
OPPS—must:
• Register with QualityNet before
beginning to report data.
• Identify and register a QualityNet
security administrator as part of the
registration process located on the
QualityNet Web site (http://
www.QualityNet.org);
• Complete and submit an online
participation form available at the
QualityNet Web site if this form has not
been previously completed, if a hospital
has previously withdrawn, or if the
hospital acquires a new CMS
Certification Number (CCN). For
Hospital OQR Program purposes,
hospitals that share the same CCN are
required to complete a single online
participation form. Once a hospital has
submitted a participation form, it is
considered to be an active Hospital OQR
Program participant until such time as
it submits a withdrawal form to CMS or
no longer has an effective Medicare
provider agreement.
Deadlines for submitting the notice of
participation form are based on the date
identified as a hospital’s Medicare
acceptance date:
• If a hospital has a Medicare
acceptance date before January 1 of the

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year prior to the affected annual
payment update, the hospital must
complete and submit to CMS a
completed Hospital OQR Notice of
Participation Form by July 31 of the
calendar year prior to the affected
annual payment update.
• If a hospital has a Medicare
acceptance date on or after January 1 of
the year prior to the affected annual
payment update, the hospital must
submit a completed participation form
no later than 180 days from the date
identified as its Medicare acceptance
date.
Hospitals may withdraw from
participating in the Hospital OQR
Program and the procedural
requirements for this are unchanged
from those adopted in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 77480). In the CY 2014
OPPS/ASC proposed rule (78 FR 43653),
we proposed to codify these procedural
requirements at § 419.46(b). Under these
procedures, a participating hospital may
withdraw from the Hospital OQR
Program by submitting to CMS a
withdrawal form that can be found in
the secure portion of the QualityNet
Web site. The hospital may withdraw
any time from January 1 to November 1
of the year prior to the affected annual
payment update. A withdrawn hospital
will not be able to later sign up to
participate in that payment update, is
subject to a reduced annual payment
update as specified under § 419.43(h),
and is required to submit a new
participation form in order to
participate in any future year of the
Hospital OQR Program.
We invited public comment on this
proposal.
Comment: One commenter supported
codifying administrative requirements
for the Hospital OQR Program.
Response: We thank the commenter
for this support.
Comment: One commenter requested
clarification regarding whether the
proposed regulations apply to a hospital
provider-based free standing emergency
department that is not located on the
campus of a hospital.
Response: Hospital OQR Program
reporting is by CMS Certification
Number (CCN), not by the physical
location of clinical services provided. If
the hospital has a free standing location
that is included in a hospital CCN
governing its eligibility to bill Medicare
claims via OPPS, then services provided
at that location should be included in
the Hospital OQR Program reporting,
along with all activity reported for that
CCN. A hospital may refer to the Web
site (https://www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=Qnet

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Public%2FPage%2FQnetTier2&cid=
1191255879384) for technical and
educational support including contact
information for questions on how to
participate in the Hospital OQR Program
to successfully receive a full APU.
After consideration of the public
comments we received, we are
finalizing as proposed, our proposal to
codify certain Hospital OQR Program
procedural requirements at § 419.46.
2. Form, Manner, and Timing of Data
Submitted for the Hospital OQR
Program
a. Background
We refer readers to the following
OPPS/ASC final rules with comment
period for a history of measures adopted
for the Hospital OQR Program,
including lists of: 11 measures finalized
for the CY 2011 payment determination
in the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60637); 15
measures finalized for the CY 2012
payment determination in the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72083 through 72084); 23
measures finalized for the CY 2013
payment determination in the CY 2011
OPPS/ASC final rule with comment (75
FR 72090); 26 measures finalized for the
CY 2014 and CY 2015 payment
determination in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74469 and 74473) and no additional
measures finalized for the CY 2015
payment determination in the CY 2013
OPPS/ASC final rule with comment (77
FR 68476 through 68478). In the CY
2013 OPPS/ASC final rule with
comment period, we confirmed the
removal of one measure for the CY 2013
payment determination and subsequent
years (77 FR 68473 through 68474),
confirmed the suspension of one
measure for the CY 2014 payment
determination (77 FR 68474 through
68476), and finalized the deferred data
collection for one measure (77 FR
68476).
In this final rule with comment
period, we are finalizing four additional
new measures. For a full list of current
Hospital OQR measures, we refer
readers to the table in section XIII.H.2.f.
of this final rule with comment period.
b. Effects of Changes on Data
Submission for CY 2015 and CY 2016
Payment Determinations and
Subsequent Years
In section XIII.C.2.a. of the CY 2014
OPPS/ASC proposed rule (78 FR 43646
through 43647), we proposed to remove
OP–19 for the CY 2016 payment
determination and subsequent years. In
section XIII.H.2.b. of the CY 2014 OPPS/

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ASC proposed rule (78 FR 43653),
however, we referred to the removal of
OP–19 as being proposed for removal
for CY 2015 and subsequent years. We
intended for the proposal language in
these two sections to match;
specifically, we intended that the
removal of OP–19 should begin with the
CY 2015 payment determination and
continue forward into subsequent years.
Our proposal to remove OP–19 from the
Hospital OQR Program beginning with
the CY 2015 payment determination
(this is our earliest opportunity to
remove the measure from the Hospital
OQR Program) would not require a
participating hospital to take any new
action, because we previously
suspended OP–19 effective with January
1, 2012 encounters, and we have not
used OP–19 data to meet requirements
for any payment determination under
the Hospital OQR Program or in public
reporting.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43646 through 43647) in
section XIII.C.2.a, we proposed to
remove OP–24 from the Hospital OQR
Program for the CY 2016 payment
determination and subsequent years. In
section XIII.H.2.b. of the CY 2014 OPPS/
ASC proposed rule (78 FR 43653),
however, we referred to the removal of
OP–24 as being proposed for removal
for the CY 2015 payment determination
and subsequent years. We intended for
the proposal language in these two
sections to match; specifically, we
intended that the removal of OP–24
should begin with the CY 2015 payment
determination and continue forward
into subsequent years. Our proposal to
remove OP–24 from the Hospital OQR
Program beginning with the CY 2015
payment determination (this is our
earliest opportunity to remove the
measure from the Hospital OQR
Program) would not require a
participating hospital to take any new
action, because to date, we have not
required hospitals to submit data for
OP–24.
For the CY 2016 payment
determination and subsequent years, in
section XIII.E. of the proposed rule, we
proposed to add five additional
measures to the program, but we are
only finalizing four of the five as
additional new measures.
The four finalized, new measures are:
One measure that requires hospitals to
submit data annually via an online tool
located on the CDC’s NHSN Web site:
• OP–27: Influenza Vaccination
Coverage among Healthcare Personnel.
Three remaining measures that
require hospitals to submit data
annually via the QualityNet Web site:

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• OP–29: Endoscopy/Polyp
Surveillance: Appropriate follow-up
interval for normal colonoscopy in
average risk patients;
• OP–30: Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use; and
• OP–31: Cataracts—Improvement in
Patient’s Visual Function within 90
Days Following Cataract Surgery.
We refer readers to section XIII.E. for
a discussion about these new finalized
measures, and our decision not to
finalize measure OP–28: Complications
within 30 Days Following Cataract
Surgery Requiring Additional Surgical
Procedures.
In section XIII.H.2.f below, we discuss
proposed and finalized requirements for
data collection for each of the four new
measures by mode of data submission.
c. General Requirements
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43654), we did not propose
to make any changes to the Hospital
OQR Program procedural requirements
that we discussed and adopted in the
CY 2012 OPPS/ASC final rule with
comment period (76 FR 74480 through
74482). We proposed to codify the
policy that, to be eligible to receive the
full OPD fee schedule increase factor for
any payment determination, hospitals
that participate in the Hospital OQR
Program must submit to CMS data on
measures selected under section
1833(17)(C) of the Act in a form and
manner, and at a time specified by CMS.
This means that hospitals must comply
with our submission requirements for
chart-abstracted data, population and
sampling data, claims-based measure
data, and Web-based quality measure
data. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43654), we
proposed to codify these general
submission requirements at § 419.46(c).
Submission deadlines by measure and
data type are posted on the QualityNet
Web site. In general, deadlines for
patient-level data submitted directly to
CMS would be approximately 4 months
after the last day of each calendar
quarter. For example, the submission
deadline for data for services furnished
during the first quarter of CY 2014
(January–March 2014) would be on or
around August 1, 2014. We proposed to
codify language at § 419.46(c)(2) stating
our practice of posting actual
submission deadlines by measure and
by data type on the QualityNet Web site
(http://www.QualityNet.org).
We proposed to codify our policies for
initial data collection periods and
submission deadlines for a hospital that

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did not participate in the previous
year’s Hospital OQR Program in
§ 419.46(c)(3) of our regulations. We
refer readers to our previously finalized
policy in the CY 2013 OPPS/ASC final
rule with comment period (77 FR
68481) to establish data collection and
submission requirements for the CY
2014 payment determination and
subsequent years. To determine when a
hospital that did not participate in a
previous year’s payment determination
must begin collecting and submitting
data to meet Hospital OQR Program
requirements for a full annual payment
update, we continue to use the January
1 Medicare acceptance date. If a hospital
has a Medicare acceptance date before
January 1 of the year prior to the
affected annual payment update, the
hospital must collect data beginning
with encounters occurring during the
first calendar quarter of the year prior to
the affected annual payment update, in
addition to submitting a completed
Hospital OQR Notice of Participation
Form. If a hospital has a Medicare
acceptance date on or after January 1 of
the year prior to the affected annual
payment update, the hospital must
collect data for encounters beginning
with the first full quarter following
submission of the completed Hospital
OQR Notice of Participation Form. All
hospitals, whether the Medicare
acceptance date is before or after
January 1 of the year prior to an affected
annual payment update, must follow
data submission deadlines as specified
on the QualityNet Web site.
We invited public comment on these
proposals.
Comment: One commenter supported
codifying procedural requirements for
the Hospital OQR Program.
Response: We thank this commenter
for support.
Comment: Commenters expressed
concerns regarding the 30 day preview
period for a hospital to preview data
that will be posted on the Hospital
Compare Web site and made available
to the public. Commenters question the
adequacy of this preview period to
correct errors.
Response: While we appreciate these
concerns, because these comments are
outside the scope of our proposed rule,
we will take the comments into
consideration for future rulemaking.
After consideration of the public
comments we received, we are
finalizing as proposed our proposal to
codify general submission requirements
at § 419.46(c): (1) our practice of posting
actual submission deadlines by measure
and by data type on the QualityNet Web
site (http://www.QualityNet.org) at
§ 419.46(c)(2); and (2) our policies for

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initial data collection periods and
submission deadlines for a hospital that
did not participate in the previous
year’s Hospital OQR Program in
§ 419.46(c)(3) of our regulations.

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d. Chart-Abstracted Measure
Requirements for the CY 2015 Payment
Determination and Subsequent Years
The following chart-abstracted
measures in the Hospital OQR Program
require data submission for the CY 2015
payment determination and subsequent
years:
• 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; and
• 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.
The form and manner for submission
of one of these measures, OP–22: ED
Patient Left Without Being Seen, is
unique, and is detailed in section
XV.G.2.f. of the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68484). As discussed above, we did not
propose any new chart-abstracted
measures where patient-level data is
submitted directly to CMS in the
proposed rule.
e. Claims-Based Measure Data
Requirements for the CY 2015 Payment
Determination and Subsequent Years
The table in section XIII.D. of the
proposed rule includes measures that
the Hospital OQR Program collects by
accessing electronic Medicare claims
data submitted by hospitals for
reimbursement.
We did not propose any new claimsbased measures in the proposed rule.
Therefore, the following 6 existing
claims-based measures will be included
for the CY 2015 payment determination
and subsequent years:
• OP–8: MRI Lumbar Spine for Low
Back Pain;

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• 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 NonCardiac Low Risk Surgery; and
• OP–14: Simultaneous Use of Brain
Computed Tomography (CT) and Sinus
Computed Tomography (CT).
In the CY 2012 OPPS/ASC final rule
with comment period, we deferred the
public reporting of OP–15, a claimsbased measure (76 FR 74456). We did
not propose any changes to this policy.
As discussed in the CY 2014 OPPS/ASC
proposed rule (78 FR 43654), public
reporting for OP–15 continues to be
deferred, and this deferral has no effect
on any payment determinations at this
time.
We will continue our policy of
calculating the measures using
hospitals’ 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 2014
payment update, we would use paid
Medicare FFS claims for services
furnished from January 1, 2011 to
December 31, 2011.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68482
through 68485), for the CY 2015
payment determination, we finalized
our proposal to use paid Medicare FFS
claims for services from a 12 month
encounter period from July 1, 2012
through June 30, 2013 for the
calculation of the claims-based
measures. This is a departure from the
previous deadlines used for these
measures. Prior to the CY 2013 final
rule, the time period for encounters for
the CY 2014 payment determination
was January 1, 2011 to December 31,
2011. Under the policy finalized in the
CY 2013 OPPS/ASC final rule with
comment period, for the CY 2015
payment determination, we are using
the encounter period July 1, 2012 to
June 30, 2013. As stated in that final
rule with comment period, we adopted
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
claims-based measures on the Web site.
This modification brings our claims data
six months more current effective with
the CY 2015 payment determination.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43655), we proposed, for the

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CY 2016 payment determination and
subsequent years, to continue this
approach and to use paid Medicare FFS
claims for services from a 12 month
period from July three years before the
payment determination through June of
the following year. For the CY 2016
payment determination, this 12 month
period for calculation of claims-based
measures would be from July 1, 2013
through June 30, 2014. We invited
public comment on this proposal.
Comment: One commenter believed
that the recent changes in the IPPS
rulemaking regarding the two midnight
benchmarks for Medicare Part A
payment will result in more bills that
are ‘‘split’’ bills (denied Medicare Part A
inpatient, but allowed to bill Medicare
Part B outpatient services). The
commenter expressed concern that these
billing situations would pose a problem
for under-submission in the Hospital
OQR Program and would like to
understand how these billing types will
be handled in the outpatient ‘‘core
measures’’ program such that hospitals
do not have to identify up to hundreds
of outpatient bills that were intended to
be inpatient for the purpose of
accurately meeting the submission
requirements. The commenter appeared
to be concerned that, at the time chartabstraction happens, the hospital’s
universe of claims may not be complete
as it would exclude Part B outpatient
claims that are created and billed at
some future point in time pursuant to a
Part A inpatient claim denial. The
commenter believes the chart abstractor
might be at risk of ‘‘under-submission’’
(failing to sample or submit data
corresponding to a sufficiently high
enough number of cases to meet
Hospital OQR Program requirements).
Response: We believe this commenter
is referring to our policies finalized in
the FY 2014 IPPS/LTCH PPS final rule
regarding hospital Part B billing
following reasonable and necessary Part
A hospital inpatient claim denials (78
FR 50908 through 50938). Specifically,
in the final rule we provided that if a
Medicare Part A claim for inpatient
hospital services is denied because the
inpatient admission was not reasonable
and necessary, or if a hospital
determines under § 482.30(d) or
§ 485.641 (utilization review) after a
beneficiary is discharged that the
beneficiary’s inpatient admission was
not reasonable and necessary, the
hospital may bill Medicare for the Part
B inpatient services (furnished after the
time of inpatient admission) that would
have been reasonable and necessary if
the beneficiary had been treated as a
hospital outpatient rather than admitted
as an inpatient, provided the beneficiary

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is enrolled in Medicare Part B. These
services must be submitted on a Part B
inpatient claim. We also provided that
for beneficiaries treated as hospital
outpatients prior to an inpatient
admission who are enrolled in Medicare
Part B, hospitals may continue to bill
Part B for hospital outpatient services
that were furnished in the 3-day (1-day
for non-IPPS hospitals) payment
window prior to the inpatient
admission. These services must be
submitted on a Part B outpatient claim.
When billing Part B following this type
of Part A hospital inpatient claim
denial, hospitals cannot change a
beneficiary’s patient status from
inpatient to outpatient. The beneficiary
was formally admitted as an inpatient
and there is no provision to change a
beneficiary’s status after he or she is
discharged from the hospital. Therefore,
the beneficiary is considered an
outpatient for services billed on the Part
B outpatient claim, and is considered an
inpatient for services billed on the Part
B inpatient claim. For Part A claims
with dates of admission on or after
October 1, 2013, timely filing applies
such that hospitals must submit the Part
B claims within 12 months of the date
of service in order to receive payment
(78 FR 50922 through 50924).
Under the Hospital OQR Program,
hospitals are required to submit data on
quality measures for hospital outpatient
services furnished within a given
timeframe (encounter dates). A
hospital’s claims data supports two
types of OQR measures of quality:
claims based measures and chartabstracted measures (claims data can be
used to identify cases eligible for chartabstraction). With regard to claimsbased measures, in the CY 2013 OPPS/
ASC final rule with comment period (77
FR 68483), we described that, for the
upcoming CY 2015 payment
determination, we will use paid, FFS
claims for services during the time
period from July 1, 2012 through June
30, 2013. We would like to clarify that
these paid, FFS claims are Part B
outpatient claims. Inpatient services are
excluded, so all Part B inpatient claims
are excluded. However, we will include
paid Part B outpatient claims for
services furnished in the 3-day (1-day
for non-IPPS hospitals) payment
window prior to an inpatient admission,
along with other paid Part B outpatient
claims, if they are paid prior to the cutoff date for claims inclusion of
September 30, 2013. For the CY 2015
payment determination, we note that
hospitals have a longer timeframe
(beyond the usual timely filing
deadline) to submit certain rebilled Part

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B outpatient claims for services
furnished during the Hospital OQR
reporting period of July 1, 2012 through
June 30, 2013 (78 FR 50935 through
50936). Part B outpatient claims for
these dates of service that are processed
and paid after the claims inclusion cutoff of September 30, 2013 will not be
included in the Hospital OQR Program
CY 2015 payment determination.
As it relates to chart-abstracted data,
the hospital is responsible for
submitting complete data that are
available at the submission deadline for
each measure of quality, and we will
assess submitted data. If a claim is not
timely available for the associated
medical record’s inclusion in the chartabstractor’s universe of records, the
chart-abstractor cannot include data
from that record in data submitted to
CMS.
After consideration of the public
comments we received, we are
finalizing as proposed our proposal to
continue to use paid Medicare FFS
claims from a 12-month period from
July 1st of the 3 years before the
payment determination through June
30th of the following year.
f. Data Submission Requirements for
Measure Data Submitted Via Web-Based
Tool for the CY 2016 Payment
Determination and Subsequent Years
In previous rulemaking, we have
referred to measures where data are
submitted via a Web-based tool on a
CMS Web site under our quality data
reporting programs as structural
measures (measures concerned with
attributes of where care occurs, such as
material resources, human resources,
and organizational structure.10 For
example, the Hospital OQR measure
OP–12: The Ability for Providers with
HIT to Receive Laboratory Data
Electronically Directly into their ONCCertified EHR System as Discrete
Searchable Data is a structural measure.
However, because measures where data
is submitted in this manner may or may
not be structural, for example, the
Hospital IQR chart-abstracted, process
of care measure PC–01: Elective
Delivery Prior to 39 Completed Weeks
Gestation, we have refined our
terminology and now refer to the mode
of data submission as Web-based.
Thus, the previously finalized Webbased measures where data is entered
on a CMS Web site that we require for
the CY 2015 payment determination and
subsequent years are listed below:
10 Maintz, J. Defining and Classifying Clinical
Indicators for Quality Improvement, Inter J Quality
Health Care (2003) 15(6), 523–530).

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• 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–22: ED Patient Left Without
Being Seen;
• OP 25: Safe Surgery Check List Use;
and
• OP 26: Hospital Outpatient Volume
on Selected Outpatient Surgical
Procedures.
Measure OP–22: ED Patient Left
Without Being Seen, is included in this
list because, while patient-level data for
this measure is collected via chartabstraction, HOPDs submit aggregate
data using an online tool. Thus, the
same schedule for encounter periods
and data submission deadlines applies
to OP–22.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68483
through 68484), we finalized that, for
the CY 2014 payment determination,
hospitals are required to submit data on
all Web-based measures between July 1,
2013 and November 1, 2013 with
respect to the time period from January
1, 2012 to December 31, 2012.
We also finalized in the CY 2013
OPPS/ASC final rule with comment
period for the CY 2015 payment
determination, that hospitals are
required to submit data on all Webbased measure data between July 1,
2014 and November 1, 2014 with
respect to the time period from January
1, 2013 to December 31, 2013.
In the CY 2014 OPPS/ASC proposed
rule, we proposed to apply a similar
schedule for the CY 2016 payment
determination and subsequent years. We
proposed that hospitals would be
required to submit data between July 1
and November 1 of the year prior to a
payment determination with respect to
the time period of January 1 to
December 31 of two years prior to a
payment determination year. Thus, for
example, for the CY 2016 payment
determination, hospitals would be
required to submit data between July 1,
2015 and November 1, 2015 with
respect to the time period of January 1,
2014 to December 31, 2014.
We also proposed to apply the same
mode of data collection and deadlines to
the following proposed chart-abstracted
measures.
• OP–28: Complications within 30
days Following Cataract Surgery
Requiring Additional Surgical
Procedures (this measure was not
finalized and will not be implemented);
• OP–29: Endoscopy/Polyp
Surveillance: Appropriate follow-up

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interval for normal colonoscopy in
average risk patients;
• OP–30: Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use; and
• OP–31: Cataracts—Improvement in
Patient’s Visual Function within 90
Days Following Cataract Surgery.
Specifically, for data collection, we
proposed that hospitals submit
aggregate-level data through the CMS
Web-based tool (the QualityNet Web
site). As with OP–22, a chart-abstracted
measure that is submitted once annually
via the Web-based tool, hospitals would
submit the data required for these newly
proposed measures for a particular
program year once annually during the
data submission window proposed for
Web-based measures as stated above,
and would do so via the Outpatient
section on the QualityNet secure Web
site. While we proposed submission
deadlines with an annual frequency, the
data input forms on the QualityNet Web
site for such submission will require
hospitals to submit aggregate data
represented by each separate quarter.
We proposed to use the Web-based
collection tool and collect aggregatelevel data because we believe these
options are less burdensome to hospitals
than patient-level reporting.
While this proposal applies to the CY
2016 payment determination and
subsequent years, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43656), we
summarized for the proposed and
existing chart-abstracted measures
collected via the Web-based tool, data
collection periods and deadlines as they
apply to just the CY 2016 payment
determination.
We recognize that aggregate-level
reporting has the potential to result in
less accurate measure rates than patientlevel reporting. However, to reduce
burden for hospitals, we believe that an
aggregate data submission approach is
the preferable approach at this time.
We invited public comment on these
proposals.
In section XIII.E of this final rule with
comment period, we describe that, in
the CY 2014 OPPS/ASC proposed rule
(78 FR 43647 through 43648) we sought
public comment on whether we should
collect patient-level data via certified
EHR technology on the four proposed
chart-abstracted measures (this would
not apply to the one HAI measure, OP–
27: Influenza Vaccination Coverage
among Healthcare Personnel), and the
potential timing for doing so. We refer
readers to section XIII.E of this final rule
with comment period for a discussion of
the related public comments.

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Comment: Several commenters raised
general questions about the two
colonoscopy measures CMS proposed
without making a distinction between
the two measures. Commenters
expressed concern about determining
the appropriate interval between
colonoscopies if a patient had his or her
last colonoscopy in a different HOPD or
other facility. Another commenter was
concerned about how HOPDs should be
collecting the pre-procedure
information necessary to make these
determinations, noting that it would
require significant system changes to
achieve accurate data collection. The
commenter described as an example
having to set up a system with an NP
or RN collecting a sufficient amount of
accurate colonoscopy history from a
patient during the patient’s preprocedure visits. The commenter
believed that such a system would be
necessary to determine whether an
additional colonoscopy is necessary
based on recommended frequency
guidelines. The commenters also
pointed out that many colonoscopies are
performed at a facility that is not within
the same entity as the ordering
physician’s practice, making it difficult
for the HOPD to acquire medical records
that are in the physician’s possession.
Response: We appreciate these
comments. We expect that, to address
these measures, HOPDs will need to
either ask patients about their
colonoscopy history and polyp status, or
acquire that information from such
sources as the patient’s physician or the
facility that performed the most recent
colonoscopy. This data will be critical
for HOPDs attempting to determine an
appropriate interval between
colonoscopies.
Pre-procedure information can
include a patient’s history, perhaps in
the form of a medical record or as
obtained through verbal communication
with the patient. We believe this
information, which includes how
recently patients had their previous
colonoscopy and any other factors that
might affect a HOPD’s determination of
an appropriate interval, is essential to a
HOPD’s decision about when to perform
a follow-up colonoscopy. Acquiring this
information may mean that some
HOPDs must gather more information
than they may be accustomed to.
We believe that HOPDs that perform
certain procedures must manage the risk
of procedural harm to patients and
coordinate care by improving the
communication between the HOPD, its
patients, specialist physician offices,
ASCs, surgeons performing procedures,
and other outpatient departments. We
expect some providers will need to

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adopt new processes to effectively
gather this information in order to
manage the risk of procedural harm, and
to report data for this measure. For
example, HOPDs may in some cases
need to establish some form of preprocedure interaction with patients in
order to establish their procedural
history, either by using an NP or RN, as
one commenter suggested, by using a
survey form, or by some other method.
There may be some concern that,
despite HOPDs managing risk of
procedural harm to the best of their
abilities, patients may not always be
able to accurately represent their polyp
history during direct interactions with
caregivers. In these instances, patients
can authorize the release of medical
information from one provider or
practitioner to another.
Comment: One commenter
recommended that CMS require
reporting of data that is included in
validation.
Response: We believe this commenter
would like the Hospital OQR Program to
restrict data collection to measures that
are also subject to validation processes.
We refer readers to section XIII.E.1.
above for a discussion of this issue.
Comment: Many commenters believed
that these measures are burdensome and
the data is not easily attained in the
outpatient setting. Many commenters
argued that CMS’ proposed requirement
to collect aggregate-level data to report
through the Web-based tool would
actually increase the burden on
hospitals. These commenters point out
that the hospital must perform patientlevel reviews to report aggregate-level
data. One commenter believed that the
submission of aggregate data using the
Web-based tool required time spent
manually entering data into QualityNet
and made it more burdensome for a
hospital to work with a vendor.
The commenters stated that, unless
CMS intends to release full
specifications, including clear and
complete measure numerator,
denominator, exclusion criteria, and
algorithms, hospitals will experience
burden in having to review and
interpret NQF specifications for each of
the new measures. One commenter
stated that there are difficulties with
CMS’ infrastructure, and the commenter
believes that any additional measures
are likely to cause operational
difficulties with data collection via the
QualityNet Web site.
Response: We understand all new
measures impose some burden on
hospitals to gather and report data. We
also appreciate that many commenters
favor CMS adopting claims-based
measures into the Hospital OQR

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Program whenever possible, as we
discuss in section XIII.E.1 above.
However, we believe that the measures
we are adopting are important
indicators of the quality of care HOPDs
provide and that any effort in acquiring
data and burden in reporting that data
is appropriate based on the importance
of measuring the quality of care.
Regarding the burden imposed by
Web-based reporting, we would like to
clarify that the Hospital OQR Program
requires entering aggregate data via the
Web-based tool, not patient-level data or
detail. A hospital is required to populate
one numerator and one denominator
field for the applicable measures onto
QualityNet. However, hospitals would
still be required to perform a patientlevel review of medical records to
compile aggregate data. Hospitals would
abstract data for new measures OP–29,
OP–30, and OP–31 the same way they
have been abstracting data for all other
previously finalized chart-abstracted
measures; this process involves
identifying their total aggregate sums for
the numerator and denominator.
For the new measures (OP–29, OP–30,
and OP–31), it should not be difficult
for a hospital to use the Web-based tool
to enter aggregate data, making a vendor
unnecessary. In fact, we are not aware
that any hospitals currently use a
vendor to submit data for measure OP–
22. However, if a hospital does choose
to use a vendor, we do not see any
reason why finalizing these new
measures would necessarily make
working with a vendor more difficult.
Vendors routinely provide services to
hospitals, submitting large amounts of
detailed, and often complex, data to
CMS on the hospitals’ behalf.
We believe that reporting the
aggregate-level data required by the new
measures via the Web-based tool is less
burdensome to hospitals than reporting
patient-level data. We believe that the
ease with which hospitals can submit
their aggregate counts using our Webbased tool (the QualityNet Web site)
reduces the burden of reporting. As we
noted above, this process is the same
process we finalized for OP–22 and
similar to the process we finalized for a
quality measure in the Hospital IQR
Program in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53537).
We will provide full, in-depth
specifications for OP–29, OP–30, and
OP–31 in the upcoming December 2013
addendum to the Hospital OQR
Specifications Manual. We note that
numerators, denominators, and
exclusions have been established and
made public as shown on the NQF Web
site. The Hospital OQR Specifications
Manual includes instructions for

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identifying a measure’s population (for
example, using specific data elements),
an algorithm for each measure in both
diagram and narrative form, and
sampling methodology for measures as
applicable. The Hospital OQR
Specifications Manual also includes
information on the rationale for each
measure, how each measure is publicly
reported, how improvement is noted,
etc., and it identifies references to
Medical or other scientific journals that
include discussion of a measure’s focus.
We would like to clarify that we are
finalizing that a hospital would submit
aggregate numerators, denominators,
exclusion counts, and total populations
and sample sizes for the new measures
(OP–29, OP–30, and OP–31) according
to the measure specifications.
However, we are sensitive to
commenters’ concerns regarding
burden, and as such, we are addressing
it in two ways—applying a sampling
scheme and a low case threshold
exemption. We intend to decrease
burden and facilitate data reporting for
these measures by allowing random
sampling of cases when volume is high,
instead of collecting information for all
eligible patients. In our December 2013
addendum to the Hospital OQR
Specifications Manual, we will publish
a sampling methodology for these new
measures that will take into account the
burden that these new measures may
place on hospitals during the CY 2014
encounter period. Specifically, we will
employ the same sampling requirements
for these measures that are currently
used for the ED Throughput measure set
(that is, measures OP–18/NQF 0496,
OP–20/NQF 0498, and OP–22/NQF
0499). Sampling is a process of selecting
a representative part of a population in
order to estimate the hospital’s
performance, without collecting data for
its entire population. In this way, using
a statistically valid sample, a hospital
can measure its performance in an
effective and efficient manner. We
describe how to obtain a statistically
valid sample and the current sampling
methodology and requirements for ED
Throughput Measure Set within
‘‘Section 4—Population and Sampling
Specifications’’ of the Hospital OQR
Specifications Manual, v7.0 at the
QualityNet Web site (https://
www.qualitynet.org). There, the ED
Throughput Sampling requirement is
located in Table 3. A hospital should
follow the same methodology for new
measures OP–29 (NQF 0658), OP–30
(NQF 0659), and OP–31 (NQF 1536). In
the upcoming release of the addendum
to the Hospital OQR Specifications
Manual (available at the QualityNet

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Web site https://www.qualitynet.org),
we will include information that the ED
Throughput Sampling requirements at
Table 3 are also applicable to new
measures OP–29, OP–30, and OP–31.
We will adjust the sampling
requirement based on our experience
with collecting this data in the first year.
In addition, we are implementing a
low case threshold exemption for newly
finalized measures OP–29, OP–30, and
OP–31. To reduce the burden on
hospitals that treat a low number of
patients, this exemption excludes
hospitals that perform 20 or fewer
relevant procedures per measure in any
year from having to submit data for that
year for measures OP–29, OP–30, and
OP–31. This low case threshold
exemption is consistent with our
practice for chart-abstracted measures in
the Hospital IQR Program (73 FR
48617), but annualized to be consistent
with the Hospital OQR Program’s single
annual reporting requirement for these
three measures. Because data for OP–29,
OP–30, and OP–31 are to be submitted
once annually via Web-based tool, we
will not require hospitals that perform
20 or fewer cases per year per measure
to submit this data annually.
We agree our data collection system
experiences malfunctions, and we work
to resolve system issues as quickly as
we are able to through our contractors.
However, the system functionality to
report aggregate data using the Web
based tool is stable at this time and our
contractors assure us that the system
will be able to collect aggregate data for
OP–29, OP–30, and OP–31 by the first
deadline for measure submission.
After consideration of the public
comments we received, we are
finalizing our proposal, for the CY 2016
payment determination and subsequent
years, that hospitals will be required to
submit Web-based data between July 1
and November 1 of the year prior to a
payment determination with respect to
the encounter period of January 1 to
December 31 of two years prior to a
payment determination year. For
example, for the CY 2016 payment
determination, the encounter period is
January 1, 2014 to December 31, 2014
and the data submission window is July
1, 2015 through November 1, 2015. The
CY 2014 encounter data is scheduled to
be displayed on Hospital Compare in
December 2015.
We also are finalizing our proposals:
(1) To apply a uniform mode of data
collection and deadlines to the new
measures OP–29, OP–30, and OP–31; (2)
that hospitals submit aggregate-level
data through the CMS Web-based tool
(the outpatient section of the QualityNet
Web site); and, (3) that hospitals submit

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all aggregate-level data required for a
particular program year once annually
during the data submission window.
In addition, we are finalizing a
sampling scheme and low case
threshold exemption. We will publish a
sampling scheme for newly finalized
measures in the upcoming December

2013 addendum to the Hospital OQR
Specifications Manual. For the low case
threshold exemption, we are finalizing
that any hospital that performs 20 or
fewer procedures annually for a
particular new measure, will not be
required to submit any data for that new
measure.

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Set out below are the finalized data
collection requirements for chartabstracted measures that are collected
annually via the Web-based tool
illustrating how these policies will
apply to just the CY 2016 payment
determination.

Illustrative Data Collection Requirements for the CY 2016 Payment Determination
for Hospital OQR Program Web-Based Measures that are also Chart-Abstracted
Measures
Measure

Data Submission
Timeframe
July 1,2015 November 1,2015

Public Reporting

July 1, 2015 November 1,2015

CY 2014 encounter data
to be published
December 2015.

January 1,2014
- December 31,
2014

July 1,2015 November 1,2015

CY 2014 encounter data
to be published
December 2015.

January 1,2014
- December 31,
2014

July 1,2015 November 1,2015

CY 2014 encounter data
to be published
December 2015.

Quarterly (April, July,
October, December)

* Previously finalized with payment determination beginning CY 2013.
** Finalized for the CY 2016 payment determination and subsequent years.

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ER10DE13.365

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OP-22: ED Patient
Left Without Being
Seen*
OP-29:
Endoscopy/polyp
Surveillance:
Appropriate followup interval for
normal colonoscopy
in average risk
patients**
OP-30:
Endoscopy/polyp
surveillance:
Colonoscopy
Interval for Patients
with a History of
Adenomatous
Polyps - Avoidance
of Inappropriate
Use**
OP -31 -- Cataracts Improvement in
Patient's Visual
Function within 90
Days Following
Cataract Surgery**

Encounter
Dates
January 1,2014
- December 31,
2014
January 1,2014
- December 31,
2014

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g. Data Submission Requirements for a
Measure Reported Via NHSN for the CY
2016 Payment Determination and
Subsequent Years
As discussed in section XIII.E.1. of
this final rule with comment period, we
are finalizing the addition of OP–27:
Influenza Vaccination Coverage among
Healthcare Personnel to the Hospital
OQR Program measure set. We proposed
to use the data submission and reporting
standard procedures set forth by the
CDC for NHSN participation for
submission of this measure to NHSN.
Hospitals currently submit data to
NHSN to comply with the requirements
of the Hospital IQR Program and those
requirements will be unchanged for data
submission to NHSN for the Hospital
OQR Program. We refer readers to the
CDC’s NHSN Web site (http://
www.cdc.gov/nhsn) for detailed data
submission and reporting procedures.
We believe that these procedures are
feasible because they are already widely
used by over 4,000 hospitals reporting
HAI data using NHSN. Our proposal
seeks to reduce hospital burden by
aligning our data submission and
reporting procedures with NHSN
procedures currently used by hospitals
who participate in the reporting
requirements for the Hospital IQR
Program as well as hospitals in the 30
States and the District of Columbia that
mandate HAI reporting via NHSN.
We proposed to adopt the NHSN HAI
measure data collection timeframe of
October 1 through March 31st, as
previously finalized in the Hospital IQR
Program (76 FR 51631 through 51633),
which links data collection to the time
period in which influenza vaccinations
are administered during the influenza
season. Because data for this measure
would be collected seasonally, we
proposed that hospitals submit their
data for this measure to NHSN for
purposes of the Hospital OQR Program
by May 15th of the calendar year in
which the vaccination season has
ended. For example, for vaccinations
given from October 1, 2014 (or when the
vaccine becomes available) to March 31,
2015, the submission deadline would be
May 15, 2015. This data submission
deadline corresponds to that finalized
by the Hospital IQR Program in the FY
2014 IPPS/LTCH final rule (78 FR
50821).
We invited public comment on these
proposals.
Comment: One commenter expressed
concern regarding whether the NHSN
system will be overwhelmed if a large
number of independent HOPDs began to
submit data on the influenza measure.
The commenter urged that prior to

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implementation of any HOPD measures
in the NHSN, CMS and CDC must work
together to find the necessary resources
to sustain and expand the reporting
capabilities of the NHSN.
The commenter also stated that
hospitals are having difficulty in
obtaining reports from the NHSN system
and when this problem is reported to
NHSN, hospitals either receive no
response or a generic response with no
expected correction date provided. The
commenter voiced concerns that this
limits hospitals’ ability to use NHSN
data for performance improvement
efforts, and that the concerns raised by
the lack of system reliability must be
mitigated through appropriate funding
and quality control.
Response: We thank the commenter
for the feedback. We believe this
commenter is referring to the
availability of feedback, in report form,
to indicate whether a hospital has
successfully reported HAI data to NHSN
for purposes of meeting payment
determination requirements for the
Hospital IQR Program. The Hospital
OQR Program has not, to date, required
reporting to the NHSN system. HOPDs
will report to the CDC using their CCN.
Since hospitals have a single CCN,
hospitals that already report data to the
CDC’s NHSN Web site for purposes of
the Hospital IQR Program will not need
to reenroll or get a new account, because
they have already established their CCN
identity. Where hospitals currently
report data for the HCP vaccination rate
for the inpatient setting, the CDC will
add a drop-down option for hospitals to
distinguish the reporting of data for the
outpatient setting. The CDC will capture
and transmit this outpatient data to
CMS using the existing infrastructure
for capturing and transmitting data for
the inpatient setting.
The Hospital IQR Program has
experienced problems with HAI
feedback reports generated from CDC
data in the past due to programming
issues which have been corrected as
they are identified. These experiences
with the Hospital IQR Program report
will be leveraged in the CMS outpatient
feedback report, called the Provider
Participation Report. The existing
Provider Participation Report will be
modified to include a column to
indicate whether a facility has
successfully reported the HCP influenza
vaccination measure data for purposes
of the Hospital OQR program.
NHSN has addressed and corrected
previous issues with system strain and
slow data-set generation due to high
volume requests for data and reports.
NHSN continues to closely monitor the
Web site for any new potential issues

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and strives to respond immediately. In
light of these changes, we do not believe
that it is likely that the NHSN system
will be overwhelmed by this proposed
reporting. The proposed reporting relies
on making modest extensions to the
existing NHSN infrastructure where the
reporting is parallel to existing HCP data
capture for the inpatient setting.
Comment: Several commenters asked
how we will require reporting of
students and volunteers at the hospital
for this measure. One commenter would
like clarification on how to gather data
for personnel who were immunized
outside of the reporting hospital.
Commenters point out that it is a strain
on resources to collect data on these
categories of vaccinated personnel.
Response: We believe that hospitals
are well equipped to report these
categories of vaccinated personnel,
since they already report these
categories for personnel working in
hospital inpatient departments in the
Hospital IQR Program. CMS and CDC
believe that only small modifications
are necessary to report these categories
of vaccinated personnel for hospital
outpatient departments, since many
hospitals use the same human resource
system to collect relevant information
on both hospital inpatient and
outpatient department personnel. The
CDC will collaborate with CMS on
refining and publishing specifications
for how to attribute workers by setting.
CMS will refer to the CDC’s
specifications in the December 2013
addendum to the Hospital OQR
Specifications Manual that will be
available on the Quality Net Web site
(https://qualitynet.org).
The numerator of the population of
this measure includes personnel who
received an influenza vaccination
administered at the healthcare facility,
or reported in writing (paper or
electronic) or provided documentation
that influenza vaccination was received
elsewhere. The numerator also includes
those who were determined to have a
medical contraindication or particular
allergy or immune status, who declined
the influenza vaccination, or who have
an unknown vaccination status or do
not meet other NQF numerator
categories (to review the NQF Measure
Description and Numerator and
Denominator Statements, please refer to
the NQF Web site at http://
www.qualityforum.org/Home.aspx). We
believe the numerator categories will
alleviate some of the difficulty a
hospital may have in tracking down the
vaccination status of some categories of
HCW. We recognize the challenge for
hospitals in collecting data for students,
volunteers, and offsite personnel. We

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nonetheless believe that the benefit of
reducing influenza in hospitals
outweighs any burden incurred by
screening all staff, volunteers, students,
and offsite personnel. We believe that
this burden should, by and large,
amount to gathering information about
immunization during initial worker
orientation and during flu vaccine
season for existing workers, providing
vaccines when appropriate, and keeping
track of who has been vaccinated.
After consideration of the public
comments we received, we are
finalizing as proposed our proposal to
use the data submission and reporting
standard procedures set forth by the
CDC for NHSN participation in general
and for submission of data for this
measure to NHSN. We are also
finalizing our proposal to adopt the
NHSN HAI measure data collection
timeframe of October 1st through March
31st for this measure. The first deadline
for hospitals to submit this data will be
May 15, 2015 with respect to the
October 1, 2015 through March 31, 2015
encounter period.

maindgalligan on DSK5VPTVN1PROD with RULES

h. Population and Sampling Data
Requirements for the CY 2015 Payment
Determination and Subsequent Years
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68484), for
the CY 2014 payment determination and
subsequent years, we continued 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/
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.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43656), we did not propose
any changes to this policy.

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3. Hospital OQR Program Validation
Requirements for Chart-Abstracted
Measure Data Submitted Directly to
CMS for the CY 2015 Payment
Determination and Subsequent Years
a. Selection of Hospitals for Data
Validation of Chart-Abstracted Measures
for the CY 2015 Payment Determination
and Subsequent Years
We refer readers to the CY 2012 and
CY 2013 OPPS/ASC final rules with
comment period (76 FR 74484 through
74487 and 77 FR 68484 through 68487)
for a discussion of finalized policies
regarding our sampling methodology,
including sample size, eligibility for
validation selection, and encounter
minimums for patient-level data for
measures where data is obtained from
chart abstraction and submitted directly
to CMS from selected hospitals. In the
CY 2014 OPPS/ASC proposed rule (78
FR 43656 through 43657), we did not
propose any changes to this policy.
However, we proposed to codify at
§ 419.46(e) of our regulations the
existing policy that we may validate one
or more measures selected under section
1833(17)(C) of the Act by reviewing
documentation of patient encounters
submitted by selected participating
hospitals. Upon written request, a
hospital must submit to CMS or its
contractor supporting medical record
documentation that the hospital used
for purposes of data submission under
the program. The specific sample that a
hospital must submit will be identified
in the written request. A hospital must
submit the supporting medical record
documentation to CMS or its contractor
within 45 days of the date identified on
the written request, in the form and
manner specified in the written request.
A hospital meets the validation
requirement with respect to a fiscal year
if it achieves at least a 75-percent
reliability score, as determined by CMS.
We invited public comment on our
proposal to codify these requirements.
Comment: One commenter supported
codifying Hospital OQR procedures.
Response: We appreciate this
commenter’s support.
Comment: One commenter was
opposed to the Hospital OQR Program
using any threshold for establishing a
passing rate of reliability for validation
as criteria for a hospital achieving a full
annual payment update. The commenter
stated that, due to the complexity of the
measures and the fact that there has
been no evidence facilities submit
inaccurate data to give the appearance
of higher quality of care on the Hospital
Compare Web site, the Hospital OQR
Program should only look at whether a
facility submits records when and as

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requested. The commenter believed that
successful submission of records should
be sufficient to assure data integrity.
Response: We disagree. While we
appreciate the commenter’s perspective
that hospitals are not motivated to
submit data that inaccurately represents
their care to appear to have higher
quality of care on the Hospital Compare
Web site, we nevertheless remain
committed that all hospitals are
responsible for submitting accurate data.
All reporting hospitals are subject to
selection for validation each payment
determination year, which provides an
additional incentive to maintain data
quality. The validation process assesses
overall data accuracy using data
abstracted by CMS from hospital
medical record copies, as compared to
the data that a hospital submits to CMS.
This process is intended to ensure that
hospitals submit high quality and
accurate data to CMS. We believe the
opportunity for a hospital to be selected
for validation is a motivator for the
hospital to maintain stringent chart
abstraction and data submission
standards.
However, we believe that requiring
hospitals to meet a reliability score
serves a purpose beyond deterring
hospitals from manipulating their data
for display purposes. We believe that
requiring a reliability score also
motivates hospitals: (1) To continuously
improve their internal operations to
accurately capture the high quality care
they provide; (2) to obtain data that can
be measured and compared
meaningfully across peer hospitals; and,
(3) to report data to support our
movement away from reimbursement
for volume of care provided and toward
reimbursement for quality of care. We
appreciate the work hospitals do to
refine processes to improve the quality
of care they provide to patients and to
report data reliably on measures of
quality.
After consideration of the public
comments we received, we are
finalizing our proposal to codify at
§ 419.46(e) of our regulations our
existing policies regarding validation of
patient encounters at selected
participating hospitals.
b. Targeting Criteria for Data Validation
Selection for the CY 2015 Payment
Determination and Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68485 through 68486) for
a discussion of our targeting criteria. In
the CY 2014 OPPS/ASC proposed rule
(78 FR 43657), we did not propose any
changes to this policy.

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c. Methodology for Encounter Selection
for the CY 2015 Payment Determination
and Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68486) for a discussion of
our methodology for encounter
selection. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43657), we did not
propose any changes to this policy.

maindgalligan on DSK5VPTVN1PROD with RULES

d. Medical Record Documentation
Requests for Validation and Validation
Score Calculation for the CY 2015
Payment Determination and Subsequent
Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68486 through 68487) for
a discussion of our procedures for
requesting medical record
documentation for validation and
validation score calculation. In the CY
2014 OPPS/ASC proposed rule (78 FR
43657), we did not propose any changes
to our procedures regarding medical
record requests.
However, we proposed to codify these
procedures at §§ 419.46(e)(1) and (e)(2)
as summarized below:
• CMS may validate one or more
measures selected under section
1833(17)(C) of the Act by reviewing
documentation of patient encounters
submitted by selected participating
hospitals.
• Upon written request by CMS or its
contractor, a hospital must submit to
CMS supporting medical record
documentation that the hospital used
for purposes of data submission under
the program. The specific sample that a
hospital must submit will be identified
in the written request. A hospital must
submit the supporting medical record
documentation to CMS or its contractor
within 45 days of the date identified on
the written request, in the form and
manner specified in the written request.
• A hospital meets the validation
requirement with respect to a fiscal year
if it achieves at least a 75-percent
reliability score, as determined by CMS.
We invited public comment on our
proposal to codify these procedures.
We did not receive any public
comment on our proposal to codify
medical record documentation requests
and validation and validation score
calculation procedures. Therefore, we
are finalizing our proposal to codify
these procedures at §§ 419.46(e)(1) and
(e)(2).

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I. Hospital OQR Reconsideration and
Appeals Procedures for the CY 2015
Payment Determination and Subsequent
Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68487) for a discussion of
our reconsideration and appeals
procedures.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43657 through 43658), we
proposed one change to the
reconsideration request procedures to
ensure our deadline for reconsideration
requests will always fall on a business
day. We also proposed to codify the
process, including our proposal to
change the deadline by which
participating hospitals may submit
requests for reconsideration at
§ 419.46(f) of our regulations.
A hospital seeking reconsideration
would submit to CMS, via the
QualityNet Web site, a Reconsideration
Request form that will be made
available on the QualityNet Web site.
Where we have required that this form
must be submitted by February 3 of the
affected payment year (for example, for
the CY 2014 payment determination, the
request was required to be submitted by
February 3, 2014), we proposed to
modify this requirement so that the
Reconsideration Request form would be
required to be submitted on the first
business day in February of the affected
payment year instead. As proposed, the
Reconsideration Request form for the
CY 2014 payment determination would
be required on February 3, 2014, which
is a Monday, because this is the first
business day in February; however, the
form for the CY 2015 payment
determination would be required on
February 2, 2015, which is also a
Monday, and the first business day in
February. We note that while we use the
CY 2014 and 2015 payment
determinations as examples, we
proposed this policy for the CY 2014
payment determination and subsequent
years. The other requirements of the
form would remain unchanged. We
requested public comment on this
proposal.
We also proposed to codify this
process by which participating hospitals
may submit requests for
reconsideration, including our proposal
to change the reconsideration request
deadline at § 419.46(f). Under these
proposed procedures, the hospital must
submit to CMS via QualityNet, a
reconsideration request via the
QualityNet Web site, no later than the
first business day in the month of
February of the affected payment year
containing the following information:

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• The hospital’s CMS Certification
Number (CCN);
• The name of the hospital;
• The 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;
• The hospital’s basis for requesting
reconsideration. The hospital must
identify its specific reason(s) for
believing it should not be subject to the
reduced annual payment update;
• The hospital-designated personnel
contact information, including name,
email address, telephone number, and
mailing address (must include physical
address, not just a post office box).
• The hospital-designated personnel’s
signature;
• A copy of all materials that the
hospital submitted to comply with the
requirements of the affected Hospital
OQR Program payment determination
year; and
• If the hospital is requesting
reconsideration on the basis that CMS
has determined it did not meet an
affected payment determination 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 are
eligible to be reconsidered.
We also proposed to codify language
at § 419.46(f)(3) stating that a hospital
that is dissatisfied with a decision made
by CMS on its reconsideration request
may file an appeal with the Provider
Reimbursement Review Board.
While we did not propose to codify
the following process, we note that, after
receiving 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
reconsideration request, notifying the
hospital of the outcome of the
reconsideration process.
• Applies policies 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

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
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 will 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 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 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 45 calendar day
timeframe, 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 copies of the requested
medical record documentation, we
abstract data elements from the medical
record documentation submitted by the
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. (We note that in the proposed
rule (78 FR 43658), we inadvertently
referred to 30 calendar days, instead of
45 calendar days in this bulleted item.
We used the correct 45 day timeframe
in our discussion of Hospital OQR
Program validation requirements in
section XIII.H.3. of the proposed rule
(78 FR 43656) and in proposed
§ 419.46(e)(1) (78 FR 43704).

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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), as we have provided
in our codification at § 419.46(f)(3).
We invited public comment on these
proposals.
Comment: Several commenters
supported CMS’ proposed change to the
reconsideration request procedures to
ensure our deadline for reconsideration
requests will always fall on a business
day.
Response: We appreciate these
commenters’ support.
After consideration of the public
comments we received, we are
finalizing our proposal to: (1) Change
the deadline by which participating
hospitals may submit requests for
reconsideration; and, (2) codify this
deadline and our procedural
requirements for requesting a
reconsideration at § 419.46(f) of our
regulations.
J. Extraordinary Circumstances
Extension or Waiver for the CY 2014
Payment Determination and Subsequent
Years
In our experience, there have been
times when facilities have been unable
to submit information to meet program
requirements due to extraordinary
circumstances that are not within their
control. It is our goal to not penalize
such entities for such circumstances and
we do not want to unduly increase their
burden during these times. We refer
readers to the CY 2013 OPPS/ASC final
rule with comment period (77 FR
68489) for a complete discussion of our
extraordinary circumstances extension
or waiver process under the Hospital
OQR Program.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43658), we proposed one
change to our 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. Specifically, we
proposed that we may grant a waiver or
extension to hospitals if we determine
that a systemic problem with one of our
data collection systems directly or
indirectly affected the ability of
hospitals to submit data. Because we do
not anticipate that such systemic errors
will happen often, we do not anticipate
granting a waiver or extension on this
basis frequently.
We also proposed to codify language
for the general requirements for our
extension or waiver process including
the proposal for systemic errors at
§ 419.46(d) as described below:

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CMS may grant an extension or
waiver of one or more data submission
deadlines and requirements in the event
of extraordinary circumstances beyond
the control of the hospital such as when
an act of nature affects an entire region
or locale or a systemic problem with one
of CMS’ data collection systems directly
or indirectly affects data submission.
CMS may grant an extension or waiver
as follows:
• Upon request by the hospital.
Specific requirements for submission of
a request for an extension or waiver are
available on the QualityNet Web site.
• At the discretion of CMS. CMS may
grant waivers or extensions to hospitals
that have not requested them when CMS
determines that an extraordinary
circumstance has occurred.
For the hospital to request
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 follow specific requirements for
submission of a request available on
QualityNet. While we did not propose
to codify the following process, we note
that the following information must
appear on the request 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
but not limited to photographs,
newspaper and other media articles; and
• A date when the hospital believes it
would again be able to submit Hospital
OQR data and/or medical record
documentation, and a justification for
the proposed date.
The request form must be signed by
the hospital’s designated contact,
whether or not that individual is the
CEO. A request form is 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;
and,
(2) If we make the determination to
grant a waiver or extension to hospitals
that have not requested them, because
we determine that an extraordinary

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circumstance has occurred 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 comment on these
proposals.
Comment: Several commenters
supported CMS’ proposal to waive
requirements where we have systemic
errors.
Response: We appreciate these
commenters’ support.
After consideration of the public
comments we received, we are
finalizing our proposal to include a
waiver or extension for CMS’ systemic
errors and to codify language for the
general requirements for our extension
or waiver process, including our
systemic errors waiver/extension policy
at § 419.46(d).
XIV. Hospital Value-Based Purchasing
(VBP) Program Updates
A. Background
Section 1886(o) of the Act, as added
by section 3001(a)(1) of the Affordable
Care Act, requires the Secretary to
establish a hospital value-based
purchasing program (the Hospital
Value-Based Purchasing (VBP) Program)
under which value-based incentive
payments are made in a fiscal year to
hospitals that meet performance
standards established for a performance
period for such fiscal year. Both the
performance standards and the
performance period for a fiscal year are
to be established by the Secretary.

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B. Additional CMS Appeals Review
Process
1. Statutory Basis
Section 1886(o)(11)(A) of the Act
requires the Secretary to establish a
process by which hospitals may appeal
the calculation of a hospital’s
performance assessment with respect to
the performance standards (section
1886(o)(3)(A) of the Act) and the
hospital’s performance score (section
1886(o)(5) of the Act).
Under section 1886(o)(11)(B) of the
Act, there is no administrative or
judicial review under section 1869 of
the Act, section 1878 of the Act, or
otherwise of the following: (1) The
methodology used to determine the
amount of the value-based incentive
payment under section 1886(o)(6) of the
Act and the determination of such
amount; (2) the determination of the
amount of funding available for the
value-based incentive payments under
section 1886(o)(7)(A) of the Act and the

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payment reduction under section
1886(o)(7)(B)(i) of the Act; (3) the
establishment of the performance
standards under section 1886(o)(3) of
the Act and the performance period
under section 1886(o)(4) of the Act; (4)
the measures specified under section
1886(b)(3)(B)(viii) of the Act and the
measures selected under section
1886(o)(2) of the Act; (5) the
methodology developed under section
1886(o)(5) of the Act that is used to
calculate hospital performance scores
and the calculation of such scores; or (6)
the validation methodology specified in
section 1886(b)(3)(B)(XI) of the Act.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53581), we finalized an
administrative appeals process and
codified that process at 42 CFR 412.167.
2. Independent CMS Review
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43659), for the Hospital VBP
Program, we proposed to implement an
independent CMS review that will be an
additional appeal process available to
hospitals, beyond the existing review
and corrections process (77 FR 53578
through 53581 and 76 FR 74544 through
74547) and appeal process codified at
§ 412.167. We proposed that a hospital
would be able to request this additional
independent CMS review only if it first
completes the appeal process at
§ 412.167(b) and is dissatisfied with the
result. We stated our belief that our
proposal to require hospitals to
complete the existing appeal process at
§ 412.167(b) before they can request an
additional independent CMS review
will facilitate the efficient resolution of
many disputed issues, thus decreasing
the number of independent CMS
reviews that are requested. We stated
our intent to provide hospitals with our
independent review decision within 90
calendar days following the receipt of a
hospital’s independent review request.
We also proposed to codify this policy
in our regulations at § 412.167 by
redesignating the existing paragraph (c)
as paragraph (d), and inserting a new
paragraph (c).
We invited public comments on these
proposals.
Comment: Numerous commenters
supported the proposed independent
review process, including the proposed
90-day limit on independent review
requests. Some commenters suggested
that CMS include the proposed 90-day
time limit for hospitals to request the
independent review process in the
regulation text. One commenter also
urged CMS to align the Hospital VBP
Program with the Physician ValueBased Payment Modifier Program,

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including the appeals and independent
review process.
Response: We appreciate the
commenters’ support and note that our
intention is to provide hospitals with a
decision on an independent review
request as quickly as possible. We also
appreciate the commenters’ suggestion
that we include the 90-day timeframe
for independent CMS reviews in our
regulation text. While we will strive to
complete those reviews within 90 days,
we do not believe that it is appropriate
at this time to incorporate a firm
deadline into our regulations. We
recognize that the number and
complexity of these reviews will impact
the actual completion timeframe. We
also strongly encourage hospitals to
request this additional independent
CMS review within 30 days after they
receive a decision on an appeal
submitted under the regulations at
§ 412.167(b).
With respect to the commenters’
suggestion that we align the Hospital
VBP Program with the Physician ValueBased Payment Modifier Program, we
are currently examining how we might
be able to align various quality reporting
and pay-for-performance programs.
After consideration of the public
comments we received, we are
finalizing the independent CMS review
process as proposed. We also are
finalizing our proposal to codify this
policy at § 412.167 by redesignating
existing paragraph (c) as paragraph (d),
and inserting a new paragraph (c).
C. Performance and Baseline Periods for
Certain Outcome Measures for the FY
2016 Hospital VBP Program
As described in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50681
through 50687), we have adopted the
CLABSI, CAUTI, and SSI measures,
which are reported to CDC’s National
Healthcare Safety Network (NHSN), for
the FY 2016 Hospital VBP Program.
However, when we proposed to adopt
these measures in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27610
through 27611), we inadvertently did
not make FY 2016 performance and
baseline period proposals for these
proposed measures. In the CY 2014
OPPS/ASC proposed rule (78 FR 43659),
we proposed to adopt FY 2016
performance and baseline periods for
these measures so that we would have
enough time to consider and respond to
public comments before the proposed
start of the performance periods.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53597 through 53598), we
finalized an 11-month performance
period for the CLABSI measure for the
FY 2015 Hospital VBP Program

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2016 performance and baseline periods
for the CAUTI, CLABSI, and SSI
measures, not the adoption of the
measures themselves. We adopted these
measures for the FY 2016 Hospital VBP
Program in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50686 through 50687),
and responded to public comments on
the substance of those measures in the
same final rule (78 FR 50683).
Accordingly, we view the public
comments we received on the substance
of these measures to be outside the
scope of the CY 2014 OPPS/ASC
proposed rule.
Comment: Some commenters noted
that the CAUTI, CLABSI, and SSI
measures underwent changes between
the proposed baseline period of CY 2012
and the proposed performance period of
CY 2014. The commenters noted that
these changes may be confounding as
CMS attempts to assess hospital
performance on the measures.
Commenters also noted that CDC may
make additional definition changes to
the CAUTI measure in CY 2014, and
urged CMS to consider data instability
when comparing data collection
periods.
Response: We appreciate the
commenters’ suggestion. The changes to
the CAUTI, CLABSI, and SSI measures
cited by the commenters were changes
the CDC made to standardize the
process hospitals use to identify
healthcare-associated infections (HAIs)
and reflect operational practices already
widely used for identifying those
infections. Specifically, the change to
the definition of ‘‘HAI’’ that applies to
each of these measures improves each
measure’s objectivity and promotes
greater standardized reporting. The CDC
has informed CMS that it does not
expect those changes to significantly
impact the measure rates. In addition,
our own clinically based qualitative
review of the measure definition
changes indicate that these measure
definition refinements will not

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substantially change national and
hospital performance rates used in our
FY 2016 measure rate and score
calculations using CY 2012 and CY 2014
data. In this clinically based review, we
assessed the clinical consistency of
measure definitions across time,
hospital adherence to current clinical
guidelines, and relevant clinical
outcomes associated with these
infections. Our review found that the
overall measure definitions for each of
these measures remained consistent
from a clinical perspective, and
supported consistent and valid
measurement of relevant clinical
outcomes in CY 2012 and CY 2014.
We will continue to closely monitor
the impact of the definitional changes
made to the CAUTI, CLABSI, and SSI
measures between CY 2012 and CY
2014 as we continue to collect data in
these measures.
As we stated in prior rulemaking, we
believe strongly that hospitals must be
encouraged through the Hospital VBP
Program to minimize infection events
that present significant health risks to
patients. We also believe that the
CAUTI, CLABSI, and SSI measures
provide information critical to this
quality improvement effort by tracking
infection events.
Comment: Numerous commenters
supported the proposals and stated that
adopting the calendar year makes more
sense than the finalized 11-month
performance period for the CLABSI
measure for FY 2015.
Response: We appreciate the
commenters’ support.
After consideration of the public
comments we received, we are
finalizing the FY 2016 performance and
baseline periods for the CAUTI,
CLABSI, and SSI measures as proposed.
The finalized performance and
baseline periods for the CAUTI,
CLABSI, and SSI measures for the FY
2016 Hospital VBP Program appear in
the following table.

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(February 1, 2013 through December 31,
2013), with a corresponding baseline
period of January 1, 2011 through
December 31, 2011. While we adopted
an 11-month performance period for the
CLABSI measure for FY 2015 based on
its posting date on the Hospital
Compare Web site, beginning with FY
2016, we proposed to align the NHSN
measures’ performance and baseline
periods with other domains’
performance and baseline periods,
where possible, and with the calendar
year. As we have stated with regard to
other domains, a 12-month performance
period provides us more data on which
to score hospital performance, which is
an important goal both for CMS and for
stakeholders.
Therefore, we proposed to adopt CY
2014 (January 1, 2014 through December
31, 2014) as the performance period for
the CLABSI, CAUTI, and SSI measures
for the FY 2016 Hospital VBP Program,
with CY 2012 (January 1, 2012 through
December 31, 2012) as the baseline
period. We invited public comments on
these proposals.
Comment: Numerous commenters
supported the proposed performance
and baseline periods, but argued that
CMS should not adopt the CAUTI and
CLABSI measures for the Hospital VBP
Program because they have been
finalized for the HAC Reduction
Program. Commenters stated that it is
inappropriate to penalize hospitals more
than once for the same measure, and
that two programs adopting the same
measures may be confusing for hospitals
and patients, especially because the two
programs calculate performance
differently. Other commenters opposed
any measures that are not NQFendorsed or risk-adjusted, and suggested
that CMS suspend the CLABSI and SSI
measures from the Hospital VBP
Program.
Response: We appreciate the
commenters’ input. However, the
proposals in the CY 2014 OPPS/ASC
proposed rule were limited to the FY

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XV. Requirements for the Ambulatory
Surgical Center Quality Reporting
(ASCQR) Program
A. Background
1. Overview
We refer readers to section XIII.A.1. of
this final rule with comment period for
a general overview of our quality
reporting programs.

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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. Regulatory 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 comment on 10
measures.
In addition to CMS 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, and submitted a report to
Congress entitled ‘‘Medicare
Ambulatory Surgical Center ValueBased Purchasing Implementation Plan’’
that details this plan. The plan and the
report to Congress were required under
section 3006(f) of the Affordable Care
Act as added by section 10301(a) of the
Affordable Care Act. The report is found
on the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ASCPayment/
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Currently, we do not have express
statutory authority to implement an
ASC VBP program.
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
determinations and subsequent 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 the updating of
measures, publication of ASCQR
Program data and, for the CY 2014
payment determination, 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
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 was 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.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68492
through 68500), we issued final policies
regarding our approach to selecting
quality measures, reporting
requirements, and payment reductions
for ASCs that fail to meet the ASCQR
Program requirements.
B. ASCQR Program Quality Measures
1. Considerations in the Selection of
ASCQR Program Quality Measures
We refer readers to the CY 2013
OPPS/ASC final rule with comment

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period (77 FR 68493 through 68494) for
a detailed discussion of the
considerations we use for the selection
of ASCQR Program quality measures.
Comment: A few commenters
recommended that CMS ensure that the
proposed measures are specified to
provide an opportunity for stakeholders
input.
Response: We note that all the
proposed measures are fully specified
and we provide the links to the detailed
measure specifications which were
submitted to NQF by the measure
stewards. We believe that these measure
specifications provided the detailed
information needed for the public to
understand the measures being
proposed and to be able to provide
meaningful comments on the proposed
measures during the rulemaking
process. Proposed measures are not
included in the ASCQR Specifications
Manual (Specifications Manual) because
we generally incorporate specifications
for measures to be used in the ASCQR
Program into the Specifications Manual,
along with implementation guidance,
after publication of the rule, but prior to
implementation. As mentioned in
section XV.B.5. of this final rule with
comment period, which discusses
maintenance of technical specifications,
our general policy is to provide six
months lead time between
Specifications Manual publication and
the start date of collection so that ASCs
have adequate time to prepare for new
reporting requirements.
2. ASCQR Program Quality Measures
Adopted in Previous 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 and adopted
measures for the CY 2014, CY 2015, and
CY 2016 payment determinations. In an
effort to streamline the rulemaking
process, we also finalized our policy
that, when we adopt measures for the
ASCQR Program, these measures are
automatically adopted for all
subsequent years payment
determinations unless we propose to
remove, suspend, or replace the
measures (76 FR 74494, 74504, 74509,
and 74510).
The quality measures that we have
previously adopted are listed below.

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ASC-l: Patient Bum*
ASC-2: Patient Fall*
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant*
ASC-4: Hospital Transfer/Admission*

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ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing*
ASC-6: Safe Surgery Checklist Use**

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ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures**

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Procedure categories and corresponding HCPCS codes are located at:
http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid= 1228772475754
ASC- 8: Influenza Vaccination Coverage among Healthcare Personnel ***
*New measure for the CY 2014 payment determination.
* * New measure for the CY 2015 payment determination.
***New measure for the CY 2016 payment determination.

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3. Additional ASCQR Program Quality
Measures for the CY 2016 Payment
Determination and Subsequent Years
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43661 through 43664), we
proposed quality measures for the CY
2016 payment determination and
subsequent years based on our approach
for future measure selection and
development finalized in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68493 through 68494),
which includes, among other
considerations, aligning the ASCQR
Program measures with our efforts in
other clinical care settings and taking
into account the views of the Measures
Application Partnership (MAP).
We stated that we believe that ASCs
and HOPDs are similar in their delivery
of surgical and related nonsurgical
services. Therefore, we seek to propose
quality measures that can be applied to
both HOPDs and ASCs to the extent
possible because many of the same
surgical procedures are performed in
both of these settings. Measure
harmonization assures that quality of
care for similar services is measured in
a comparable manner across settings.
This approach would provide
meaningful information for Medicare
beneficiaries to make informed
decisions.
Section 3014 of the Affordable Care
Act added section 1890A of the Act
establishing a pre-rulemaking process,
which, among other steps, requires the
Secretary to take into consideration the
input from multi-stakeholder groups in
selecting certain categories of quality
and efficiency measures described in
section 1890(b)(7)(B) of the Act. As part
of the pre-rulemaking process, the
consensus-based entity that CMS must
contract with under section 1890 of the
Act (currently NQF) convened the
multi-stakeholder groups, referred to as
the MAP. The MAP is a public-private
partnership created for the primary
purpose of providing input to HHS on
the selection of the categories of
measures in section 1890(b)(7)(B) of the
Act, which includes measures for use in
certain specific Medicare programs,
measures for use in reporting
performance information to the public,
and measures for use in health care
programs other than for use under the
Act.
After we selected quality measures
that we might propose for the ASCQR
Program based on our established
policies regarding the approach to
selecting quality measures in CY 2013
OPPS/ASC final rule with comment
period (77 FR 68493 through 68494), we
included the measures in a publicly

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available document entitled ‘‘List of
Measures Under Consideration for
December 1, 2012’’ in compliance with
section 1890A(a)(2) of the Act, and the
measures were reviewed by the MAP in
its ‘‘MAP Pre-Rulemaking Report: 2013
Recommendations on Measures Under
Consideration by HHS,’’ which has been
made available on the NQF Web site at:
http://www.qualityforum.org/
Publications/2013/02/MAP_PreRulemaking_Report_-_February_
2013.aspx. We considered the input and
recommendations provided by the MAP
in selecting measures to propose for the
ASCQR Program.
As part of the MAP’s input and
recommendations in its 2013 PreRulemaking Report, the MAP also
supports: (1) HHS’ efforts to move
toward greater alignment across the
Hospital OQR and ASCQR Programs;
and (2) the inclusion of ASCs within a
broader approach to measuring
performance and improving care that is
aligned across health care settings (page
35, MAP Pre-Rulemaking Report: 2013
Recommendations on Measures Under
Consideration by HHS).
For the CY 2016 payment
determination and subsequent years, we
proposed to adopt four measures for the
ASCQR Program, all of which were
reviewed by the MAP and three of
which are NQF-endorsed for the ASC
setting (NQF #0564 being the
exception): (a) Complications within 30
Days following Cataract Surgery
Requiring Additional Surgical
Procedures (NQF #0564); (b)
Endoscopy/Polyp Surveillance:
Appropriate follow-up interval for
normal colonoscopy in average risk
patients (NQF #0658); (c) Endoscopy/
Polyp Surveillance: Colonoscopy
Interval for Patients with a History of
Adenomatous Polyps—Avoidance of
Inappropriate Use (NQF #0659); and (d)
Cataracts: Improvement in Patient’s
Visual Function within 90 Days
Following Cataract Surgery (NQF
#1536).
For purposes of the ASCQR Program,
sections 1833(i)(7)(B) and
1833(t)(17)(C)(i) of the Act, read
together, require the Secretary, except as
the Secretary may otherwise provide, to
develop measures appropriate for the
measurement of the quality of care
(including medication errors) furnished
by ASCs, that reflect consensus among
affected parties and, to the extent
feasible and practicable, that include
measures set forth by one or more
national consensus building entities. As
stated in the CY 2012 OPPS/ASC final
rule with comment period (76 FR 74465
and 74505), we believe that consensus
among affected parties can be reflected

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through means other than NQF
endorsement, including consensus
achieved during the measure
development process; consensus shown
through broad acceptance and use of
measures; and consensus through public
comment. The proposed measures are
described in greater detail below.
We proposed that data collection for
these four measures would begin in CY
2014. We referred readers to section
XV.D. of the proposed rule for detailed
discussion of data collection and
submission time frames. We proposed to
collect aggregate data (numerators,
denominators, and exclusions) on all
ASC patients for these four proposed
chart-abstracted measures via an online
Web-based tool that would be made
available to ASCs via the QualityNet
Web site. This online Web-based tool is
currently in use in the ASCQR Program
for ASC–6 (Safe Surgery Checklist Use)
and ASC–7 (ASC Facility Volume Data
on Selected ASC Surgical Procedures).
We invited public comment on these
proposals. More information regarding
this proposed method of collection was
provided in section XV.D.5.c. of the
proposed rule.
To advance our efforts to collect high
quality data on all ASC patients for the
ASCQR measures while minimizing
burden for ASCs, we also sought public
comment on alternative data collection
strategies for these four proposed
measures. In particular, we sought
comment on collection of patient-level
data through registries or other third
party data aggregators, and via certified
electronic health record (EHR)
technology, along with the potential
timing for doing so.
Comment: Some commenters believed
that CMS should allow ASCs to meet
the requirements of the ASCQR Program
using registry-based reporting and urged
CMS to propose a registry-based
reporting option that would allow ASCs
to fulfill all program requirements
through a single mechanism to simplify
and streamline the process of data
submission. Other commenters urged
CMS to focus on options to reduce
reporting burden associated with data
submission through multiple portals
(claims-based, QualityNet, and NHSN),
suggesting instead the use of registries
or electronic health records.
Response: We thank the commenters
for these suggestions. We agree that it
could reduce burden to have a registrybased mechanism for data submission.
We have not proposed a registrybased reporting option because
currently, there is not a registry in place
that is collecting information on the
quality measures that we have adopted
in this program. Should registry-based

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reporting of the ASC quality measures
become available in the future, we will
explore further the viability of
incorporating a registry-based reporting
mechanism in the ASCQR Program.
Regarding the use of EHR systems for
reporting quality data, we agree that
reporting by this method could reduce
reporting burden. However, we are not
aware of quality measures for ASCs that
have been specified for electronic
reporting. In addition, if such measures
do exist, we would need to understand
the current state of EHR adoption by
ASCs before proposing them. In a
previous environmental scan, which
included an assessment of the readiness
of ASC to electronically report quality
data, we found low levels of EHR use by
ASCs. We are in the process of updating
the environmental scan of ASCs, which
will include an analysis of EHR
adoption and an assessment of ASCs’
abilities to report quality data via EHR
systems. We believe that ASCs continue
to be slow to adopt EHRs because many
of them are small facilities and there has
been no incentive program to encourage
such adoption, but we intend to assess
this position based upon the results of
our updated environmental scan.
For the proposed rule, we received
many general comments that are
applicable to all four proposed
measures. We have organized the
document by first summarizing and
responding to these general comments
that are applicable to all the four
proposed measures, and then
summarizing and responding to
measure-specific comments and
describing our final policy.
Comment: Many commenters stated
that ASCs only render the facility for
ophthalmologists to perform cataract
surgery and that follow-up visits, postoperative visual assessments and
tracking of complications are performed
at the ophthalmologists’ offices.
Likewise, physicians perform
colonoscopies at ASCs, but follow-up
colonoscopy intervals are determined
and documented by the physician in
medical records kept in the physicians’
offices. Commenters noted that ASCs do
not have long term relationships with
patients and Federal regulations do not
permit ASCs to provide postoperative
follow-up care; therefore, the patient
would not visit the ASC, but rather
another site, for post-operative care and
identification of complications. Many
commenters perceived the four
proposed chart-abstracted measures as
‘‘Clinician Office’’ setting measures
designed to measure ophthalmologist
and other physician performance and
not ASC performance. Commenters gave
as examples ophthalmologists who

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assess post-operative visual function
and patient outcomes, and determine
whether additional surgical procedures
are necessary, and physicians who
receive pathology reports and determine
the colonoscopy intervals for their
patients. Therefore, commenters
believed these four measures are better
suited as Physician Quality Reporting
System (PQRS) measures. Commenters
considered the measures as duplicative
of the PQRS measures.
Some commenters expressed concerns
that the measures are neither NQFendorsed nor field tested for the facility
setting. Other commenters stated that
CMS must re-specify, test, and obtain
NQF endorsement of these measures at
the facility level of analysis before they
can be adopted for the ASCQR Program.
Some commenters believed that the
four proposed measures require ASCs to
expend resources engaged in quality
reporting activities that would have no
direct impact on facility performance
improvement efforts.
Response: As noted above, for
purposes of the ASCQR Program,
sections 1833(i)(7)(B) and
1833(t)(17)(C)(i) of the Act, read
together, require the Secretary, except as
the Secretary may otherwise provide, to
develop measures appropriate for the
measurement of the quality of care
(including medication errors) furnished
by ASCs. As stated in the CY 2014
OPPS/ASC proposed rule (78 FR 43661
through 43664), we believe these
measures are appropriate for measuring
the quality of care in the ASC setting.
Further, the three measures that we are
finalizing (as discussed below) are NQFendorsed for the ‘‘Ambulatory Care:
Ambulatory Surgery Center (ASC)’’
setting. Therefore, we respectfully
disagree with the commenters and
continue to believe that these quality
measures are appropriate for the ASC
setting. With respect to the commenters
who stated that the proposed chartabstracted measures should be respecified and field-tested, we note that
all three measures that we are finalizing
(as discussed below) were specified for
the ASC setting and field tested at the
ASC facility setting level by the measure
steward.
Further, we do not believe these
measures are duplicative of PQRS
measures because even though the
measure indicators are the same, the
level of analysis (facility versus
physician) is different. The measure
indicators for the ASCQR Program will
reflect the HCPCS codes for the ASC
facility level of analysis. As we stated in
the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68493), in
implementing the ASCQR Program, one

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of our principles is that measures
should be aligned across Medicare and
Medicaid public reporting and incentive
payment systems to promote
coordinated efforts to improve quality.
We hope to set new milestones in the
intrinsic coordination and collaboration
of hand-off care across outpatient
providers and suppliers, as reflected in
these measures.
We also do not agree that the four
proposed measures would have no
direct impact on facility performance
improvement efforts. Rather, we believe
that these measures promote
accountability for the care provided to
Medicare beneficiaries, improve the
coordination and collaboration of
services, reduce fragmented care,
encourage redesigned care processes for
high quality and efficient service
delivery, and incentivize higher value
care.
ASCs provide care without the higher
costs associated with hospitalization.
More and more procedures are done
safely and effectively in an ambulatory
care setting and we expect such trend
will continue. Hence, we believe that
assessing care coordination is a very
important aspect of evaluating the
overall quality of the care furnished by
ASCs. We stress that real clinical
integration is evidenced by effective
patient coordination of care across
health care settings, providers, and
suppliers and is best shown when there
is a structure in place that is patientfocused and where clinicians
collaborate on best practices in an effort
to furnish higher quality care that they
likely would not achieve if working
independently.
As discussed in detail in sections
XIII.E.3., 4., and 5. of this final rule with
comment period and below, we are
finalizing the same chart-abstracted
measures for the Hospital OQR Program
as we are for the ASCQR Program for the
CY 2016 payment determination and
subsequent years: (1) Endoscopy/Polyp
Surveillance: Appropriate Follow-up
Interval for Normal Colonoscopy in
Average Risk Patients; (2) Endoscopy/
Polyp Surveillance: Colonoscopy
Interval for Patients with a History of
Adenomatous Polyps—Avoidance of
Inappropriate Use; and (3) Cataracts—
Improvement in Patient’s Visual
Function Within 90 Days Following
Cataract Surgery. The adoption of these
measures in the hospital outpatient and
ASC settings will further align measures
across outpatient and ambulatory
settings which furnish many similar
services to beneficiaries. The
availability of identical outcome
measures at HOPDs and ASCs enable

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beneficiaries to compare facilities and
make informed decisions.
Comment: Some commenters believed
that obtaining patient data from the
ophthalmologist’s or other physician’s
office is not always feasible.
Commenters also noted that the initial
and subsequent surgical cataract and
colonoscopy procedures due to
complications may occur at two
different ASCs. In addition, commenters
also believed that obtaining patient
information from the ophthalmologist’s
or other physician’s office would be an
intrusive violation of patient privacy.
Response: Our overarching goal for
adopting the three proposed measures is
to encourage the coordination of care
across health care settings, providers,
and suppliers as frequently as possible.
We would like to see ASCs,
ophthalmologists, and other physicians
actively and routinely engaged in
exchanging information to better
communicate and coordinate the care of
patients.
We note that ASCs have professional
and commercial relationships with the
ophthalmologists or other physicians
that perform procedures and are paid for
services rendered at their facilities. As
such, ASCs have the ability to develop
the means to obtain follow-up
information that include, but are not
limited to, inclusion of contractual
requirements to supply such
information to the ASC. The availability
of follow-up information from
physicians performing procedures at an
ASC is further discussed in section
XVI.D.5.c. of this final rule with
comment period
Regarding the issue of patient privacy,
we note that ASCs and referring
physicians are generally subject to the
HIPAA Privacy, Security, and Breach
Notification Rules, and are required to
protect the privacy and confidentiality
of their patients’ protected health
information as required by those rules.
We expect that ASCs and physicians
would adhere to any applicable
requirements in providing and obtaining
this information and would not violate
patient privacy.
We believe that our implementation
strategy for these measures will
minimize collection and reporting
burden, as discussed in section
XV.D.5.c. of this final rule with
comment period.
Comment: Many commenters
expressed concern that it is extremely
burdensome for ASCs, which do not
widely use EHRs, to retrieve outcome
data from ophthalmologist and other
physician offices.
Response: We appreciate commenters’
concerns that it could be difficult or

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burdensome for ASCs to retrieve from
physician offices the data they will need
for the chart-abstracted measures. We
believe such problems are more likely to
occur in the early phases of establishing
these measures, when ASCs and
physicians have not yet set up effective
infrastructures to routinely exchange
information. In order to accommodate
these concerns, we have taken steps that
we believe should alleviate some of this
burden. The Web-based collection
strategy we are finalizing for the
measures and subsequent release of
specifications and implementation
guidance in the ASCQR Specifications
Manual will address some of the
concerns about feasibility of data
collection raised by the commenters. To
further reduce burden, we are finalizing
a sampling methodology for ASCs. We
believe that this should significantly
reduce burden for the three chartabstracted measures that we are
finalizing. We discuss these steps
designed to reduce burden in more
detail in section XV.D.5.c. of this final
rule with comment period.
We recognize that EHR technology
currently may not be widely used in
ASCs. However, with the ongoing
progress of EHR technology in
healthcare delivery, we expect more
ASCs will have EHR technology at their
disposal in the future. As mentioned
previously, we will be conducting an
environmental scan to assess EHR
implementation in ASCs and readiness
for electronic reporting in the future. We
will take these factors into account
before including an EHR-based
reporting mechanism for the ASCQR
Program.
We received specific comments on the
individual proposed measures and they
are discussed below in the sections
addressing each of the proposed
measures.
a. Complications Within 30 Days
Following Cataract Surgery Requiring
Additional Surgical Procedures
It is uncommon to have complications
that may result in a permanent loss of
vision following cataract surgery.
Cataract surgery has become safer and
more effective due to advances in
technology and surgical skills over the
last 30 years. Based on an analysis of
Managed Care Organization data, it is
estimated that the annual volume for
cataract surgeries is 2.8 million in the
U.S with the rate of cataract surgery
complications being 1 to 2 percent.
However, with an annual volume of 2.8
million cataract surgeries in the United
States, a 2 percent rate is significant and

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translates to over 36,000 surgeries
associated with complications.11
Therefore, for the CY 2016 payment
determination and subsequent years, we
proposed to adopt the Complications
within 30 Days Following Cataract
Surgery Requiring Additional Surgical
Procedures measure, which assesses the
‘‘[p]ercentage of patients aged 18 years
and older with a diagnosis of
uncomplicated cataract who had
cataract surgery and had any of a
specified list of surgical procedures in
the 30 days following cataract surgery
which would indicate the occurrence of
any of the following major
complications: retained nuclear
fragments, endophthalmitis, dislocated
or wrong power IOL, retinal
detachment, or wound dehiscence.’’
This outcome measure seeks to identify
those complications from surgery that
can reasonably be attributed to the
surgery. It focuses on patient safety and
monitoring for events that, while
uncommon, can signify important issues
in the care being provided. The
numerator for this measure is the
number of ‘‘[p]atients who had one or
more specified operative procedures for
any of the following major
complications within 30 days following
cataract surgery: retained nuclear
fragments, endophthalmitis, dislocated
or wrong power IOL, retinal
detachment, or wound dehiscence.’’ The
denominator for this measure is the total
number of ‘‘[p]atients aged 18 years and
older who had cataract surgery and no
significant pre-operative ocular
conditions impacting the surgical
complication rate.’’ This measure
excludes patients with certain
‘‘comorbid conditions impacting the
surgical complication rate.’’ The
measure specifications can be found at:
http://www.qualityforum.org/QPS/0564.
This measure has been endorsed by
NQF for the ‘‘Ambulatory Care: Clinic’’
setting (NQF #0564) but, currently, is
not NQF-endorsed for the ASC setting.
We believe this measure meets the
statutory requirements discussed above.
This measure is not NQF-endorsed in
the ASC setting and we could not find
any other comparable measure that is
specifically endorsed for the ASC
setting. However, we believe that this
measure is appropriate for the
measurement of quality of care
furnished by ASCs because this
procedure is commonly performed in
ASCs and, as discussed above, can
signify important issues in the care
11 National Quality Measures Clearing House.
Agency for Healthcare Research and Quality.
Available at http://qualitymeasures.ahrq.gov/
content.aspx?id=27981&search=complications+
within+30+days+following+cataract+surgery.

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being provided in ASCs. Further, this
measure reflects consensus among
affected parties as it has been endorsed
by NQF for the ‘‘Ambulatory Care:
Clinic’’ setting. We believe that this
consensus also applies to the same
surgeries that are performed in other
ambulatory settings, such as ASCs and
HOPDs. Given the high volume of
cataract surgeries performed in
ambulatory care settings and the
potential 2 percent complication rate,
we believe it is important for us to
include this measure in the ASCQR
Program measure set, and that this is an
appropriate application of NQF #0564 to
the ASC setting.
We note that section 1833(t)(17) of the
Act does not require that each measure
we adopt be endorsed by a national
consensus building entity. Further,
section 1833(i)(7)(B) of the Act states
that section 1833(t)(17) of the Act
applies to the ASCQR Program, except
as the Secretary may otherwise provide.
Under this provision, the Secretary has
further authority to adopt non-endorsed
measures. In its 2013 Pre-Rulemaking
Report, the MAP supported inclusion of
this measure in the ASCQR Program and
noted that this measure ‘‘[a]ddresses a
high impact condition not adequately
addressed in the program measure set.’’
Currently, the NQF endorsement for this
measure is time-limited.
We invited public comment on this
proposal.
Comment: Many commenters believed
that this measure is not a good measure
to include in the ASCQR Program
measure set because complications from
cataract surgery are rare, data collection
would be very burdensome, and the
volume of cataract surgery performed at
ASCs is huge. Commenters added that
this measure requires very detailed
information about not only specific
complications that may have occurred,
but also data on any additional followup surgical procedures to accurately
report data for this measure. A few
commenters stated that subsequent
surgical procedures due to
complications from the previous
cataract surgery may not occur at the
same ASC. ASCs also would need to
determine if a patient who experienced
any of the above-listed complications
then underwent any of a list of 39
specified operative procedures
(identified by a list of CPT codes) within
the 30-day period following the index
surgery.
Response: As discussed in the CY
2014 OPPS/ASC proposed rule (78 FR
43661) and in this final rule with
comment period, a large number of
complications from cataract surgery
occur even though the percentage of

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complications from cataract surgery is
small. Therefore, we believe that
complications following cataract surgery
which would require additional surgical
procedures are important to measure.
However, after consideration of the
public comments we received, we agree
that this measure as specified imposes
a significant burden on an ASC to
collect the required data that far exceeds
the burden we believe accompanies the
other chart-abstracted measures that we
proposed in the CY 2014 OPPS/ASC
proposed rule. We have emphasized
that we believe that care coordination
between ASCs and practitioners is an
essential element of appropriate, high
quality care, and that the element of
coordination cannot be measured using
a claims-based or other form of measure.
Nonetheless, this is one instance in
which we believe the burden involved
in collecting the data required for chartabstraction far outweighs the benefits in
measuring care coordination. That is
because an ASC would be required to
acquire far more information than the
more fundamental follow up
information that accompanies the other
measures (such as the patient survey
data for ASC–11, which basically
involves collecting information on a
patient’s perceptions about visual
improvement following cataract
surgery). In contrast, there is far more
information necessary for this measure
and the nature of that information is
more detailed, complicated and very
likely much more difficult for an ASC
to acquire. We agree with the
commenters that this measure requires
very detailed information about not only
specific complications that may have
occurred, but also data on specific
additional follow up surgical
procedures to accurately report data for
this measure.
Because we continue to believe this is
an important area to measure quality of
care, we plan to explore ways to collect
these data, including the potential
development of a claims-based riskadjusted outcome measure of cataract
complications, which would address the
same quality issues as this measure, but
minimize the burden associated with
measurement to the greatest degree
possible. Further, we anticipate that the
proposed new measure would be
applicable to the ASC and HOPD
settings. For these reasons, we have
decided not to finalize this particular
measure of cataract surgery
complications.
After consideration of the public
comments we received, we are not
finalizing this measure for the ASCQR
Program for the CY 2016 payment
determination and subsequent years.

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b. Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658)
The American Cancer Society’s
current guidelines recommend
colonoscopy screening at 10-year
intervals 12 for the average risk
population (http://www.cancer.org/
cancer/colonandrectumcancer/
moreinformation/
colonandrectumcancerearlydetection/
colorectal-cancer-early-detection-acsrecommendations).
For the CY 2016 payment
determination and subsequent years, we
proposed to adopt the Endoscopy/Polyp
Surveillance: Appropriate follow-up
interval for normal colonoscopy in
average risk patients measure, which
assesses the ‘‘[p]ercentage of patients
aged 50 years and older receiving a
screening colonoscopy without biopsy
or polypectomy who had a
recommended follow-up interval of at
least 10 years for repeat colonoscopy
documented in their colonoscopy
report.’’ Performing colonoscopy too
frequently increases a patients’ exposure
to procedural harm. This measure aims
to assess whether average risk patients
with normal colonoscopies receive a
recommendation to receive a repeat
colonoscopy in an interval that is less
than the recommended amount of 10
years. This measure is NQF-endorsed
for the ASC setting. The numerator for
this measure is the number of
‘‘[p]atients who had a recommended
follow-up interval of at least 10 years for
repeat colonoscopy documented in their
colonoscopy report.’’ The denominator
for this measure is the total number of
‘‘[p]atients aged 50 years and older
receiving screening colonoscopy
without biopsy or polypectomy.’’ The
measure excludes patients whose
medical records contain reason(s) for
recommending a follow up interval of
less than 10 years. The specifications for
this measure can be found at: http://
www.qualityforum.org/QPS/0658.
We believe this measure meets the
statutory requirements discussed above.
This measure is appropriate for the
measurement of quality of care
furnished by ASCs because colonoscopy
screening is commonly performed in
ASCs and this measure was developed
12 Davila RE, Rajan E, Baron TH, Adler DG, Egan
JV, Faigel DO, Gan SI, Hirota WK, Leighton JA,
Lichtenstein D, Qureshi WA, Shen B, Zuckerman
MJ, VanGuilder T, Fanelli RD, Standards of Practice
Committee, American Society for Gastrointestinal
Endoscopy. ASGE guideline: colorectal cancer
screening and surveillance. Gastrointest Endosc
2006 Apr;63(4):546–57. http://
www.ncbi.nlm.nih.gov/pubmed/
16564851?dopt=Abstract.

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to specifically measure quality of care
furnished by ASCs. We also believe it
meets the consensus requirement and
the requirement that it be set forth by a
national consensus building entity
because it is NQF-endorsed for the ASC
setting.
In its 2013 Pre-Rulemaking Report,
the MAP supported the direction of this
measure. Currently, the NQF
endorsement for this measure is timelimited.
We invited public comment on this
proposal.
Comment: One commenter asserted
that the MAP’s ‘‘Support Direction,’’
recommendation means the measure
was not, in the MAP’s opinion, ready for
implementation in the ASCQR Program.
Commenters stated that CMS should
only finalize measures fully supported
by the MAP.
Response: We take into account all
MAP input when deciding on which
measures to adopt for the program. We
note that in addition to MAP input, we
also consider feedback that we receive
from many other stakeholders such as
suppliers, specialty societies, measure
developers, patients, and their
caregivers during the rulemaking public
comment period in evaluating whether
to finalize measures. We continuously
review and revise the measures in our
programs to ensure that only the highest
caliber measures are selected. We stress,
however, that we are only required to
consider the input provided by the
MAP. The ultimate decision on whether
to include a measure for the program
rests solely with the Secretary.
We believe that this measure
addresses a critical area of
colonoscopies being performed too
frequently, which may increase patients’
exposure to procedural harm. The
procedure is performed often at ASCs;
therefore, we believe the measure is
important for the ASCQR Program.
Further, we believe that the Web-based
collection strategy we are finalizing for
the measures along with the release of
specifications and implementation
guidance in the Specifications Manual
will address concerns about feasibility
of data collection raised by the MAP.
After consideration of the public
comments we received, we are adopting
this measure for the CY 2016 payment
determination and subsequent years as
proposed.
c. Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients With
a History of Adenomatous Polyps—
Avoidance of Inappropriate Use (NQF
#0659)
According to the American Cancer
Society, in patients with increased or

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high risk of colorectal cancer,
colonoscopy screening is recommended
based on risk factors. One such factor is
a history of adenomatous polyps. The
frequency of colonoscopy screening
varies depending on the size and
amount of polyps found; however, the
general recommendation is a 3 year
follow-up (http://www.cancer.org/
cancer/colonandrectumcancer/
moreinformation/
colonandrectumcancerearlydetection/
colorectal-cancer-early-detection-acsrecommendations).
A randomized trial of 699 patients
showed that after newly diagnosed
adenomatous polyps have been removed
by colonoscopy, follow-up colonoscopy
at 3 years detects important colonic
lesions as effectively as follow-up
colonoscopy at both 1 and 3 years.13
For the CY 2016 payment
determination and subsequent years, we
proposed to adopt the Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use measure, which assesses the
‘‘[p]ercentage of patients aged 18 years
and older receiving a surveillance
colonoscopy, with a history of a prior
colonic polyp in previous colonoscopy
findings who had a follow-up interval of
3 or more years since their last
colonoscopy documented in the
colonoscopy report’’ This measure is
NQF-endorsed for the ASC setting. The
numerator for this measure is the
number of ‘‘[p]atients who had an
interval of 3 or more years since their
last colonoscopy.’’ The denominator for
this measure is the total number of
‘‘[p]atients aged 18 years and older
receiving a surveillance colonoscopy
with a history of a prior colonic polyp
in a previous colonoscopy.’’ This
measure excludes patients with: (1)
Documentation of medical reason(s) for
an interval of less than 3 years since the
last colonoscopy (for example, last
colonoscopy incomplete, last
colonoscopy had inadequate prep,
piecemeal removal of adenomas, or last
colonoscopy found greater than 10
adenomas); or (2) documentation of a
system reason(s) for an interval of less
than 3 years since the last colonoscopy
(for example, unable to locate previous
colonoscopy report, previous
colonoscopy report was incomplete).
13 Davila RE, Rajan E, Baron TH, Adler DG, Egan
JV, Faigel DO, Gan SI, Hirota WK, Leighton JA,
Lichtenstein D, Qureshi WA, Shen B, Zuckerman
MJ, VanGuilder T, Fanelli RD, Standards of Practice
Committee, American Society for Gastrointestinal
Endoscopy. ASGE guideline: colorectal cancer
screening and surveillance. Gastrointest Endosc
2006 Apr;63(4):546–57. http://
www.ncbi.nlm.nih.gov/pubmed/
16564851?dopt=Abstract.

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The specifications for this measure can
be found at: http://
www.qualityforum.org/QPS/0659.
We believe this measure meets the
statutory requirements discussed above.
This measure is appropriate for the
measurement of quality of care
furnished by ASCs because colonoscopy
is commonly performed in ASCs and
this measure was developed to
specifically measure quality of care
furnished by ASCs. We also believe it
meets the consensus requirement and
the requirement that it be set forth by a
national consensus building entity
because it is NQF-endorsed for the ASC
setting.
In its 2013 Pre-Rulemaking Report,
the MAP supported the direction of this
measure. While this measure had been
endorsed by the NQF for a limited time
period, recent communications with
NQF have revealed that this measure is
now fully endorsed; it is expected that
this status update will be reflected on
the NQF Web site in the near future.
We invited public comment on this
proposal.
Comment: Some commenters asserted
that the MAP’s ‘‘Support Direction’’
recommendation means the measure is
not, in the MAP’s opinion, ready for
implementation in the ASCQR Program.
Commenters stated that CMS should
only finalize measures fully supported
by the MAP.
Response: We refer readers to our
response above to the same MAP
recommendation concerns expressed
with respect to the Endoscopy/Polyp
Surveillance: Appropriate Follow-Up
Interval for Normal Colonoscopy in
Average Risk Patients (NQF #0658)
measure. We believe that Endoscopy/
Polyp Surveillance: Colonoscopy
Interval for Patients with a History of
Adenomatous Polyps—Avoidance of
Inappropriate Use measure addresses a
critical area of timely follow-up
colonoscopy to detect important colonic
lesions effectively in reducing
subsequent colorectal cancer incidence,
after newly diagnosed adenomatous
polyps have been removed by
colonoscopy. Because colonoscopies are
performed so often at ASCs, the measure
is important for the ASCQR Program.
Further, we believe that the Web-based
collection strategy we are finalizing for
the measures and subsequent release of
specifications and implementation
guidance in the Specifications Manual
will address concerns about feasibility
of data collection raised by the MAP.
After consideration of the public
comments we received, we are adopting
this measure for the CY 2016 payment
determination and subsequent years as
proposed.

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d. Cataracts: Improvement in Patient’s
Visual Function Within 90 Days
Following Cataract Surgery (NQF #1536)
Cataract surgery is performed to
improve a patient’s vision and
associated functioning. This outcome is
achieved consistently with careful
attention to the accurate measurement
of axial length and corneal power and
the appropriate selection of an
intraocular lens (IOL). Failure to achieve
improved visual functioning after
surgery in eyes without comorbid ocular
conditions that could impact the
success of the surgery would reflect care
that should be assessed for
opportunities for improvement.
Evidence suggests that visual
improvement occurs in about 86 to 98
percent of surgeries in eyes without
comorbid conditions. However, with an
annual volume of 2.8 million cataract
surgeries in the U.S., an improvement
rate from 86 to 98 percent could impact
a significant number of patients per
year.14
For the CY 2016 payment
determination and subsequent years, we
proposed to adopt the Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following
Cataract Surgery measure, which
assesses the ‘‘[p]ercentage of patients
aged 18 years and older who had
cataract surgery and had improvement
in visual function achieved within 90
days following the cataract surgery.’’
This measure is NQF-endorsed for the
ASC setting. The measure numerator is
the number of ‘‘[p]atients 18 years and
older in sample who had improvement
in visual function achieved within 90
days following cataract surgery, based
on completing a pre-operative and postoperative visual function instrument.’’
The measure denominator is the total
number of ‘‘[p]atients aged 18 years and
older in sample who had cataract
surgery.’’ There are no exclusions. The
specifications for this measure are
available on the Web site at:
http://www.qualityforum.org/QPS/1536.
Additional information for the measure

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14 National Quality Measures Clearing House.
Agency for Healthcare Research and Quality.
Available at http://www.qualitymeasures.ahrq.gov/
content.aspx?id=27982.

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specifications can be found in the NQF
Measure Evaluation available on the
Web site at: http://www.qualityforum.
org/WorkArea/linkit.aspx?Link
Identifier=id&ItemID=68317.
We believe this measure meets the
statutory requirements discussed above.
This measure is appropriate for the
measurement of quality of care
furnished by ASCs because cataract
surgery is commonly performed in ASCs
and this measure was developed to
specifically measure quality of care
furnished by ASCs.’’ It also meets the
consensus requirement and the
requirement that it be set forth by a
national consensus building entity
because it is NQF-endorsed for the ASC
setting.
In its 2013 Pre-Rulemaking Report,
the MAP supported the inclusion of this
measure in the ASCQR Program and
noted that this measure ‘‘[a]ddresses a
high-impact condition not adequately
addressed in the program measure set.’’
We invited public comment on this
proposal.
Comment: One commenter stated that
the measure requires patients to
complete a pre-operative and a postoperative visual function questionnaire.
The follow-up survey may occur in
intervals of one day, two weeks or one
month post-op. The pre- and postsurgery surveys are conducted in the
physician office and they are compared
for analysis. The commenter noted it
takes a third-party administrator to
process the questionnaire in order to
prevent the introduction of bias and this
administrative cost would impose a new
burden for ASCs.
Response: This measure collects
standard clinical follow-up information.
We would expect that physicians
responsible for post-operative cataract
surgery care to have standard operating
procedures in place under which
physicians would conduct these visual
assessments. We do not believe a third
party administrator to process survey
information for ASC interpretation is
necessary because we expect that ASCs
would obtain the outcome information
necessary for this measure from the
physician that performed the surgery (as
discussed in section XVI.D.5.c. of this
final rule with comment period, all

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75129

physicians involved in co-management
of a cataract surgery patient should have
these results). We believe that no bias
would be introduced or associated
administrative cost imposed because
outcome interpretation would not be
done at the ASC. Finally, we believe
that including this measure in the
ASCQR Program is important because,
as the MAP stated and we believe, this
measure falls under a category of
measures inadequately addressed in the
ASCQR Program measure set, and the
measure serves to drive coordination of
care.
In response to the comments we have
received on the burden associated with
the chart-abstracted measures we are
finalizing, we have modified our
implementation strategy in a manner
that we believe will significantly
minimize collection and reporting
burden. We detail these procedures for
and further discuss the issue of
obtaining data for this measure in
section XV.D.5.c. of this final rule with
comment period.
After consideration of the public
comments we received, we are adopting
this measure for CY 2016 payment
determination and subsequent years as
proposed.
In summary, we are finalizing our
proposals for the CY 2016 payment
determination and subsequent years to
adopt three chart-abstracted measures:
(1) Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients; (2) Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use; and (3) Cataracts: Improvement in
Patient’s Visual Function within 90
Days Following Cataract Surgery. We
will collect aggregate data (numerators,
denominators, and exclusions) on all
ASC patients for these three finalized
chart-abstracted measures via an online
Web-based tool that will be made
available to ASCs via the QualityNet
Web site. Data submission requirements
for these three measures are discussed
in section XV.D.5.c. of this final rule
with comment period.

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The finalized measure set (a total of
11 measures) for the ASCQR Program
for the CY 2016 payment determination

and subsequent years is listed in the
table below.

4. ASCQR Program Measure Topics for
Future Consideration

clinical quality of care, patient safety,
care coordination, patient experience of
care, surgical outcomes, surgical
complications, complications of
anesthesia, and patient reported
outcomes of care. We invited public
comment on these measurement topics.
Comment: Commenters presented the
following suggestions for future measure
topics:

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.
Through future rulemaking, we intend
to propose new measures that address

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• Equipment Reprocessing;
• Sedation Safety;
• Post-Discharge Emergency
Department Visit within 72 Hours of
ASC Procedure;
• Hospital admission following
discharge from an ASC;
• Normothermia;
• Venous Thromboembolism; and
• Surgical Site Infection.

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Response: We thank the commenters
for their feedback and will take the
suggestions into considerations for
future measure topics for the ASCQR
Program.

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5. Technical Specification Updates and
Data Publication
In the CY 2012 OPPS/ASC final rule
with comment period, we finalized our
proposal to follow the same process for
updating the ASCQR Program measures
that we adopted for the Hospital OQR
Program measures (76 FR 74513 through
74514), including the subregulatory
process for making updates to the
adopted measures. We believe that a
measure can be updated through this
subregulatory process provided it is a
nonsubstantive change. We make the
determination of what constitutes a
substantive versus a nonsubstantive
change on a case-by-case basis.
Examples of nonsubstantive changes
to measures might include updated
diagnosis or procedure codes,
medication updates for categories of
medications, broadening of age ranges,
and exclusions for a measure. We
believe that non-substantive changes
may include updates to any measure
based upon changes to guidelines upon
which the measures are based. We will
revise the Specifications Manual so that
it clearly identifies the updates and
provide links to where additional
information on the updates can be
found. We also will post the updates on
the QualityNet Web site at: https://
www.QualityNet.org. We will provide
sufficient lead time for ASCs to
implement the changes where changes
to the data collection systems would be
necessary. We generally release the
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–10, CPT, and HCPCS codes, and
at least 6 months of advance notice for
changes to data elements that would
require significant systems changes.
We will continue to use rulemaking to
adopt substantive updates. 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, procedure/process, or test
administration). Again, we make the
determination of what constitutes a
substantive versus a nonsubstantive
change on a case-by-case basis.

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We believe that this policy adequately
balances our need to incorporate
nonsubstantive updates to ASCQR
Program measures in the most
expeditious manner possible, while
preserving the public’s ability to
comment on updates that so
fundamentally change a measure that it
is no longer the same measure that we
originally adopted. We also note that the
NQF endorsement process incorporates
an opportunity for public comment and
engagement in the measure maintenance
process. These policies regarding what
is considered substantive versus
nonsubstantive apply to all measures in
the ASCQR Program.
As noted above, we finalized our
proposal to follow the same process for
updating the ASCQR Program measures
that we adopted for the Hospital OQR
Program measures in the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74513 through 74514). We
also provided additional clarification
regarding the ASCQR Program policy in
the context of the previously finalized
Hospital OQR program policy in the CY
2013 OPPS/ASC final rule with
comment period. We refer readers to the
CY 2013 OPPS/ASC final rule with
comment period for a discussion of the
process for updating the ASCQR
Program quality measures (77 FR 68496
through 68497).
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74514
through 74515), we also finalized a
policy to make data that an ASC
submitted for the ASCQR Program
publicly available on a CMS Web site
after providing an ASC an opportunity
to review the data to be made public.
These data will be displayed at the CCN
level.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43664), we did not propose
any changes to these policies.
Comment: One commenter noted that
the conversion of a measure to use ICD–
10–CM/PCS should be considered as a
substantive change that follows current
proposed rulemaking processes. The
commenter requested clarification
regarding the publication, preview, and
comment period for ICD–9–CM to ICD–
10–CM/PCS mappings for all value sets
for diagnoses and procedures used by
measures specified in this rule.
Response: None of the current ASCQR
measures utilize ICD–9 codes to define
numerators, denominators, exclusions,
and other data elements for the
measures. To the extent that we adopt
any future ASCQR measures that utilize
ICD–9 codes in measure data elements,
we will crosswalk those ICD–9 codes to
ICD–10 prior to including the measures
in the ASCQR Specifications Manual to

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inform data collection. We note that we
do not consider updating codes from
ICD–9 to ICD–10 a substantive change to
a measure because doing so does not
change the intent or meaning of the
measure.
Comment: Some commenters stated
that ASCs should be allowed to review
their data. These commenters also
believed that ASCs should have the
ability to correct any errors prior to the
data being made publicly available
because a few errors could cause
extreme differences in actual versus
publicly reported rates.
Response: We thank the commenters
for raising these issues. In the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74514 through 74515), we
finalized a policy to make data that an
ASC submitted for the ASCQR Program
publicly available on a CMS Web site
after providing an ASC an opportunity
to review the data to be made public.
We will address processes for public
reporting in further detail in future
rulemaking.
C. 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

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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 Each
Payment Determination Year
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,
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 XII.G. of this final rule with
comment period.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68499
through 68500), in order to implement
the requirement to reduce the annual
update for ASCs that fail to meet the
ASCQR Program requirements, we
finalized our proposal that we would
calculate two conversion factors: a full
update conversion factor and an ASCQR
Program reduced update conversion
factor. We finalized our proposal 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
finalized our proposal that application
of the 2.0 percentage point reduction to

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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
finalized our proposal 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
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 finalized
our proposal 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 XII.C.1.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 finalized
our proposal 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

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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
finalized our proposal in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68500) 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 finalized our proposal 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
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.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43664 through 43665), we
did not propose any changes to these
policies.
D. Administrative Requirements
1. Requirements Regarding QualityNet
Account and Security Administrator
a. Background for the CY 2014 and CY
2015 Payment Determinations
A QualityNet account is required to
submit quality measure data to the
QualityNet Web site via a Web-based
tool and, in accordance with CMS
policy, a QualityNet security
administrator is necessary to set-up
such an account for the purpose of
submitting this information to the
QualityNet Web site. In previous
rulemaking, we referred to this role as
the QualityNet administrator; we are
referring to this role in this rulemaking
as the QualityNet security
administrator, which emphasizes the
security function of this role and aligns
terminology for the ASCQR Program
with the Hospital IQR and OQR
Programs. While the main purpose of a
QualityNet security administrator is to

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serve as a point of contact for security
purposes for quality reporting programs,
we believe from our experience that a
QualityNet security administrator
typically fulfills a variety of tasks
related to quality reporting, such as
creating, approving, editing, and
terminating QualityNet user accounts
within an organization, and monitoring
QualityNet usage to maintain proper
security and confidentiality measures.
Therefore, we highly recommend that
ASCs have and maintain a QualityNet
security administrator.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53638 through 53639), we
did not require that ASCs do so for the
CY 2014 payment determination
because ASCs are not required to submit
data directly to the quality data
warehouse for the CY 2014 payment
determination (76 FR 74504) and we do
not want to unduly burden ASCs by
requiring ASCs to have a QualityNet
security administrator. We note that a
QualityNet account is not necessary to
access information that is posted to the
QualityNet Web site, such as the
Specifications Manual and educational
materials.
As finalized in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74504 through 74509), for the CY
2015 payment determination, we
required ASCs to submit quality
measure data for two quality measures
(safe surgery checklist use and ASC
facility volume data on selected ASC
surgical procedures) collected from
services provided during the January 1,
2012 to December 31, 2012 timeframe
via an online tool located on the
QualityNet Web page. As set forth in the
FY 2013 IPPS/LTCH PPS final rule (77
FR 53638 through 53639), to enter these
data into our data system, we required
that ASCs identify and register a
QualityNet security administrator who
followed the registration process located
on the QualityNet Web site and
submitted the information as specified
on this site. Because submission of these
data was not required until the July 1,
2013 to August 15, 2013 time period, we
required that ASCs have a QualityNet
security administrator at the time ASCs
submit Web-based measure data in 2013
for the CY 2015 payment determination,
which was no later than August 15,
2013. ASCs could have had a
QualityNet security administrator prior
to this date, but it was not required.
We noted that there are necessary
mailing and processing procedures that
must be completed in order to have a
QualityNet security administrator which
are separate from completion of the
forms by the ASC that can require
significant time to complete. We

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strongly cautioned ASCs to not wait
until the deadline to apply; instead, we
recommended allowing a minimum of 2
weeks, and strongly suggested allowing
additional time prior to the deadline to
submit required documentation in case
of unforeseen issues. We did not require
that ASCs maintain a QualityNet
security administrator after the entry of
their data via an online tool located on
the QualityNet Web site in 2013 for the
CY 2015 payment determination.
We also noted that QualityNet users
must complete a user enrollment
process, which is part of the registration
process, to ensure access to the Secure
QualityNet Portal beginning July 1,
2013. Portal access will be required for
ASCs submitting data under the ASCQR
Program using an online tool located on
the QualityNet Web site.
b. Requirements for the CY 2016
Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43666), for the CY 2016
payment determination and subsequent
years, we proposed that, similar to the
requirement for the CY 2015 payment
determination, ASCs would be required
to have a QualityNet security
administrator for the purposes of setting
up a QualityNet account for the purpose
of entering data via an online tool
located on the QualityNet Web site if
this had not been completed previously,
or the current user accounts lapsed or
were discontinued. If an ASC does not
already have a QualityNet account, the
facility would need to identify and
register a QualityNet security
administrator who follows the
registration process located on the
QualityNet Web site and submits the
information as specified on this site. A
QualityNet security administrator is not
required for submitting data. A
QualityNet security administrator is
required to set up user accounts and for
security purposes and a current user
account is required for submitting data.
Therefore, an ASC would need to
acquire a QualityNet security
administrator only if no current
QualityNet account exists for the ASC.
An ASC would be required to have an
active account by any specified data
entry deadline. For example, the
deadline would be August 15, 2014 for
the CY 2016 payment determination.
Although we highly recommend that
ASCs have and maintain a QualityNet
security administrator, we believe that
requiring an ASC to maintain a
QualityNet administrator throughout the
year would unnecessarily increase
burden on ASCs.

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As noted previously, there are
necessary mailing and processing
procedures for having a QualityNet
security administrator assigned by CMS
separate from completion of the forms
by the ASC that can require significant
time to complete and we strongly
caution ASCs to not wait until any data
entry deadline to apply. While we
previously recommended allowing a
minimum of 2 weeks, based upon recent
experience, we strongly suggest
allowing 4 to 6 weeks prior to any data
submission deadline to submit required
documentation for processing and in
case of unforeseen issues. Also,
QualityNet users must complete a user
enrollment process, which is part of the
registration process, to ensure access to
the Secure QualityNet Portal. Portal
access is required for ASCs submitting
data under the ASCQR Program to meet
CMS IT security requirements. The
legislative source for this requirement
originates in the Federal Information
Security Management Act of 2002
which was amended by the
Cybersecurity Act of 2012. The
Document Library on the http://
www.idmanagement.gov Web site
contains documentation related to
identity management including the
Federal Identity, Credential and Access
Management (FICAM) Roadmap and
Implementation Guidance (version 2,
12/08/2011).
We invited public comment on these
proposals.
We did not receive any public
comments regarding our proposals on
QualityNet account and security
administrator requirements under the
ASCQR Program. Therefore, we are
finalizing our proposals that ASCs will
be required to have a QualityNet
security administrator for the purposes
of setting up a QualityNet account for
the purpose of entering data via an
online tool located on the QualityNet
Web site if this had not been completed
previously or no current user accounts
were available and that ASCs will be
required to have an active account by
any specified data entry deadline in
order to submit required data for the CY
2016 payment determination and
subsequent years.
2. Requirements Regarding Participation
Status
a. Background for the CY 2014 Payment
Determination and Subsequent Years
We finalized in the CY 2012 OPPS/
ASC final rule with comment period (76
FR 74516) a policy to consider an ASC
as participating in the ASCQR Program
for the CY 2014 payment determination
if the ASC includes Quality Data Codes

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(QDCs) specified for the ASCQR
Program on their CY 2012 claims
relating to the finalized measures.
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53639 through 53640), we
stated that once an ASC submits any
quality measure data, it would be
considered to be participating in the
ASCQR Program. Further, once an ASC
submits any quality measure data and is
considered to be participating in the
ASCQR Program, an ASC would
continue to be considered participating
in the ASCQR Program, regardless of
whether the ASC continues to submit
quality measure data, unless the ASC
withdraws from the Program by
indicating on a participation form that
it is withdrawing, as discussed below.
For example, if an ASC includes any
QDCs on its claims for the CY 2014
payment determination, it would be
considered participating in the ASCQR
Program for the CY 2014 payment
determination and for each subsequent
year’s payment determination unless the
ASC withdraws.
Likewise, if an ASC did not submit
any QDCs for the CY 2014 payment
determination, but submitted quality
measure data for the CY 2015 payment
determination, the ASC would be
considered participating in the ASCQR
Program starting with the CY 2015
payment determination and continuing
for each subsequent year’s payment
determination unless the ASC
withdraws from the ASCQR Program.
In the FY 2013 IPPS/LTCH PPS
rulemaking (77 FR 28103, 53639), we
considered whether to require that an
ASC complete and submit a notice of
participation form for each year’s
payment determination to indicate that
the ASC is participating in the ASCQR
Program as we require for hospitals, but
decided against this approach because
we were concerned about the burden on
ASCs. We believe these requirements
will reduce burden on ASCs while
accomplishing the purpose of notifying
us of an ASC’s participation in the
ASCQR Program.
We stated that any and all quality
measure data submitted by the ASC
while participating in the ASCQR
Program could be made publicly
available. This policy allows us to
provide information on the quality of
care provided to Medicare beneficiaries
which promotes transparency.
Once an ASC submits quality measure
data indicating its participation in the
ASCQR Program, an ASC must complete
and submit an online form indicating
withdrawal in order to withdraw from
the ASCQR Program. This form is
located on the QualityNet Web site. We
also require that an ASC indicate on the

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form the initial payment determination
year to which the withdrawal applies.
We established a different process for
ASCs to withdraw from participation
than the process we established for an
ASC to participate in the ASCQR
Program because of the payment
implications of withdrawal. We stated
that, in withdrawing from the ASCQR
Program, the ASC would incur a 2.0
percentage point reduction in its annual
payment update for that payment
determination year and any subsequent
payment determinations in which it is
withdrawn.
We stated that we will not make
quality measure data publicly available
for that payment determination year and
any subsequent payment determinations
for which the ASC is withdrawn from
the ASCQR Program.
We established that an ASC would
continue to be deemed withdrawn
unless the ASC starts submitting quality
measure data again. Once an ASC starts
submitting quality measure data, the
ASC would be considered participating
unless the ASC withdraws, as discussed
above. We believe that these policies
reduce the burden on ASCs by not
having to notify us as to when they are
participating.
We established that an ASC can
withdraw from the ASCQR Program at
any time up to August 31, 2013 for the
CY 2014 payment determination. We
anticipated that this would be the latest
date possible to allow an ASC to
withdraw before payment
determinations affecting CY 2014
payment are made. We established that
an ASC can withdraw from the ASCQR
Program at any time up to August 31,
2014 for the CY 2015 payment
determination. We clarified in the CY
2014 OPPS/ASC proposed rule (78 FR
43667) that these deadlines mean up to
and including August 31 in each of
these respective years.
We stated that these program
requirements would apply to all ASCs
designated as open in the CASPER
system before January 1, 2012 for the CY
2014 payment determination. Because
ASCs were not required to include
QDCs on claims until October 2012 for
the CY 2014 payment determination, an
ASC designated as open in the CASPER
system before January 1, 2012 was
operating for at least 10 months before
having to report any data. We believe
this is a sufficient amount of time for
ASCs to be established to report quality
data for the CY 2014 payment
determination.
For the CY 2015 payment
determination, we established that
program requirements would apply to
all ASCs designated as open in the

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CASPER system for at least 4 months
prior to January 1, 2013. We believe that
this date and length of operations
experience would provide new ASCs
sufficient time before having to meet
quality data reporting requirements after
the ASCQR Program’s initial
implementation year.
b. Requirements for the CY 2016
Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43667), for the CY 2016
payment determination and subsequent
years, we proposed that an ASC can
withdraw from the ASCQR Program at
any time up to and including August 31
of the year preceding a payment
determination. We anticipate that this
will be the latest date possible to allow
an ASC to withdraw before payment
determinations affecting the next
calendar year’s payment are made.
Therefore, for example, for the CY 2016
payment determination, an ASC would
be able to withdraw from the ASCQR
Program at any time up to and including
August 31, 2015. Once an ASC has
withdrawn for any payment
determination year, it would have a 2.0
percentage point reduction in their
annual payment update and it would
not be possible to reinstate participation
status for that year.
For the CY 2016 payment
determination and subsequent years, we
proposed that all program requirements
would apply to all ASCs designated as
open in the CASPER system at least 4
months prior to the beginning of data
collection for a payment determination.
Therefore, for the CY 2016 payment
determination, data collection begins
with January 1, 2014 services; these
program requirements would apply to
all ASCs designated as open in the
CASPER system for at least 4 months
prior to January 1, 2014 (that is, an open
date of September 1, 2013 or earlier).
We believe that this date and length of
operations experience would provide
any new ASCs sufficient time before
having to meet quality data reporting
requirements.
We invited public comment on these
proposals.
We did not receive any comments
regarding participation status under the
ASCQR Program and we are finalizing
our proposals without modification.
Specifically, we are finalizing that, for
the CY 2016 payment determination and
subsequent years, an ASC can withdraw
from the ASCQR Program at any time up
to and including August 31 of the year
preceding a payment determination, and
all ASCQR Program requirements would
apply to all ASCs designated as open in

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the CASPER system at least 4 months
prior to the beginning of data collection
for a payment determination.
3. Requirements Regarding Data
Processing and Collection Periods for
Claims-Based Measures for the CY 2014
Payment Determination and Subsequent
Years
In the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74496
through 74511), we adopted five claimsbased measures for the CY 2014, CY
2015, and CY 2016 payment
determinations and subsequent years.
We also finalized that, to be eligible for
the full CY 2014 ASC annual payment
update, for the claims-based measures,
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). Further, we finalized
the data collection period for the CY
2014 payment determination, as the
Medicare fee-for-service ASC claims
submitted for services furnished
between October 1, 2012 and December
31, 2012. ASCs will add the appropriate
QDCs on their Medicare Part B claims,
using the Form CMS–1500 or associated
electronic data set 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-Feefor-Service-Payment/ASCPayment/ASCTransmittals-Items/ASC–CR7754–
R2425CP.html). Details on how to use
these codes for submitting numerator
and denominator information are
available in the Specifications Manual
located on the QualityNet Web site
(https://www.QualityNet.org).
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53640), we adopted a policy
that only claims for services furnished
between October 1, 2012 and December
31, 2012 paid by the administrative
contractor by April 30, 2013 would be
included in the data used for the CY
2014 payment determination. We
believe that this claim paid date allowed
ASCs sufficient time to submit claims
while allowing sufficient time for CMS
to complete required data analysis and
processing to make payment
determinations and to supply this
information to administrative
contractors.
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68497
through 68498), we finalized a data
collection and processing period for the
CY 2015 payment determination and
subsequent years. For the CY 2015

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payment determination and subsequent
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. The data collection
period for such claims-based quality
measures is the calendar year 2 years
prior to a payment determination year.
Only claims for services furnished in
each calendar year paid by the
administrative contractor by April 30 of
the following year of the ending data
collection time period would be
included in the data used for the
payment determination year. Therefore,
for example, only claims for services
furnished in CY 2013 (January 1, 2013
through December 31, 2013) paid by the
administrative contractor by April 30,
2014 would be included in the data
used for the CY 2015 payment
determination.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43667 through 43668), we
did not propose any changes to these
policies.
4. Minimum Threshold, Minimum Case
Volume, and Data Completeness for
Claims-Based Measures Using QDCs
a. Background for the CY 2014 Payment
Determination and Subsequent Years
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 for the initial implementation
years of the ASCQR Program because
ASCs are not familiar with how to
report quality data under the ASCQR
Program and because many ASCs are
relatively small and may need more
time to set up reporting systems. We
stated in that final rule that we intend
to propose to increase this percentage
for subsequent years’ payment
determinations as ASCs become more

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familiar with reporting requirements for
the ASCQR Program.
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 also finalized our proposal in the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68498 through
68499) that data completeness for
claims-based quality measures for the
CY 2015 payment determination and
subsequent years will 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
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
years. We made this change based on
the fact that private payers had QDCs in
their required HCPCS data files
beginning January 1, 2013.
b. Requirements for the CY 2016
Payment Determination and Subsequent
Years
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43668 through 43669), for
the CY 2016 payment determination and
subsequent years, we proposed to
continue our policy 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 for the
initial implementation years of the
ASCQR Program. Because ASCs cannot
re-submit claims for the sole purpose of
adding QDCs (such claims are rejected
by administrative contractors as
duplicate claims), we believe
maintaining this minimum as the
program matures is reasonable. We
intend to propose to increase this
percentage for future payment
determinations as ASCs, administrative
contractors, and billing clearing houses
become more familiar with reporting
requirements for the ASCQR Program
and the program itself becomes more
established.

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As finalized in the FY 2013 IPPS/
LTCH PPS final rule, data completeness
for claims-based quality measures will
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 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 years.
In our initial implementation of
claims-based measures, we determined
that some ASCs have relatively small
numbers of Medicare claims. Therefore,
for the CY 2016 payment determination
and subsequent years, we proposed a
minimum case volume of 240 Medicare
claims (primary plus secondary payer)
per year (which is an average of 60 per
quarter). ASCs that have fewer than 240
Medicare claims per year during a
reporting period for a payment
determination year would not be
required to participate in the ASCQR
Program for the subsequent reporting
period for that subsequent payment
determination year. For example, if an
ASC had 200 Medicare claims during
the calendar year of January 1, 2013 to
December 31, 2013 (data submitted on
claims during this year would be
applied to CY 2015 payment
determinations), the ASC would not be
required to participate in the ASCQR
Program for the CY 2016 payment
determination (which would use data
submitted on claims during the January
1, 2014 to December 31, 2014 calendar
year). We proposed a minimum case
threshold to exempt smaller facilities
where program implementation can be
overly burdensome. We have selected
240 Medicare claims per year because
10 percent of ASCs have less than 240
Medicare claims per year so this policy
would exempt only those ASCs with the
fewest number of Medicare claims. If an
ASC exceeds this 240 Medicare claim
threshold in any given calendar year,
the ASC would be required to
participate in the ASCQR Program the
subsequent calendar year and would be
subject to all program requirements.
We invited public comment on this
proposal.
Comment: Many commenters
supported CMS’ proposal that ASCs
must have a minimum of 240 Medicare
claims (primary plus secondary payer)
or otherwise be exempt from ASCQR
Program requirements.
Response: We thank the commenters
for their support. We agree that a
minimum case threshold for program

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participation to alleviate burden on
small facilities and for those with few
Medicare claims is appropriate.
Comment: Many commenters stated
that while they appreciated that a
claims-based reporting mechanism can
lessen the burden of data collection and
reporting, they were concerned that the
current measures using the QDC
reporting mechanism were not
specified, tested, or NQF-endorsed for
claims-based reporting.
Response: We thank the commenters
for their understanding of how the use
of QDCs can limit burden and that this
is an important consideration.
Regarding the use of QDCs submitted on
claims for ASC–1 through ASC–5, the
NQF has endorsed ASC–1 through
ASC–5 as appropriate for the ASC
setting and data collection of case
information has been tested in this
setting. Further, for all of these
measures which count rare, adverse
events, it is expected that the number of
cases for any ASC would be very small.
Therefore, while ASCs would garner the
information from patient records, the
QDC reporting mechanism is the way
ASCs report the collected data. The
measures using the QDCs for reporting
and the QDCs are specified and
contained in the Specifications Manual
which is available on the QualityNet
Web site. Based upon our initial data
collection for encounters occurring
during October 1, 2012 to December 31,
2012, the vast majority of ASCs are able
to successfully submit data for these
measures using QDCs. In addition,
QDCs are successfully used for data
collection for other CMS quality
programs, including the PQRS and ePrescribing Incentive Program.
Therefore, we do not see a need to also
test the ability of ASCs to submit data
for these measures via QDCs placed on
Medicare claims.
Comment: Several commenters
suggested that measure-level
exemptions for ASC–5, Prophylactic
Intravenous (IV) Antibiotic Timing
would be appropriate. These
commenters argued that single-specialty
ASCs that provide gastrointestinal
endoscopies or ophthalmic procedures
do not administer IV prophylaxis and
that not having an exemption method
created undue burden. Suggested
exemption methods included an
attestation form or the development of
a QDC indicating non-use.
Response: We thank the commenters
for these ideas and agree that single
specialty ASCs would rarely, if at all,
use IV prophylaxis. We have
investigated using administrative claims
data as a means to exclude ASCs from
having to report data for this measure

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based on procedures billed as well as
examined QDC-data reported to date.
Unfortunately, we have not yet been
able to identify a method to exclude
ASCs based on these data and are
reluctant to allow a blanket exemption
from reporting measure data based upon
the completion of a form or one-time
reporting of a QDC without any ability
to assess the veracity of the basis for
exemption. At issue is a means to
independently verify that an ASC does
not ever administer IV prophylaxis. We
remain open to various means of
reducing burden, including the
potential use of measure-level
exemptions if an evidence-based
solution can be developed. However, we
note that this particular measure does
not place any more burden on ASCs
compared to any of the other finalized
measures where data are reported via
QDCs because all of the current ASCQR
Program measures reported using QDCs
are expected to have low numbers of
events.
Comment: Some commenters agreed
with the proposal to have a minimum
case volume, but indicated that it was
not clear how the 240-claim threshold
correlates to the 10 percent of ASCs
submitting the lowest volume of
Medicare claims. These commenters’
review of the CMS Limited Data Set file
accompanying the CY 2014 OPPS/ASC
proposed rule suggested the 10 percent
target would be reached with a lower
claim threshold. Some commenters
agreed that implementation of a
minimum threshold policy was
important, but expressed concern that
some ASCs may ‘‘fall in and out’’ of
being required to participate and
encouraged CMS to issue annual
reminders of this policy. Some
commenters also believed that any ASC
eligible for the exemption that wishes to
report for reasons other than receiving a
payment should be able to do so.
Response: We thank these
commenters for supporting our proposal
while requesting clarification of the
basis for the selected threshold value. In
selecting the 240-claim threshold, we
utilized the October 1, 2012 to
December 31, 2012 claims data
submitted for the CY 2014 payment
determination. Based upon this
analysis, approximately 10 percent of
ASCs fell below the 60 claims per
quarter, which we extrapolated to 240
claims per year threshold. We will
continue to monitor these data and, if
adjustment in the claims volume
threshold appears necessary, we will
make proposals in future rulemaking.
Regarding ASCs that may have claims
volume such that they would be
required to participate one year and not

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the next, we would encourage ASCs to
monitor their claims volume via CMSsupplied reports. We agree that annual
reminders of the policy would be useful
and intend to issue such reminders via
listserv and postings on the QualityNet
Web site.
Regarding the ability of an ASC
eligible for the exemption that wished to
report data, though not being required to
do so for ASCQR Program purposes, we
did not make any proposals that would
prohibit ASCs from reporting data.
Therefore, we clarify here that, if any
Medicare-certified ASCs wish to report
data under the ASCQR Program, they
may do so, however, they must follow
all program requirements for submitting
data and any data reported could be
made publicly available unless the ASC
withdraws using the process outlined in
section XV.D.2.a. of this final rule with
comment period. We clarify here that
ASCs that are exempt from all
requirements due to low Medicare case
volume would not be subject to a
reduction in their annual payment
update if they voluntarily report data.
After consideration of the public
comments we received, we are
finalizing our proposals without
modification. Specifically, for the CY
2016 payment determination and
subsequent years, we are finalizing our
proposal that the minimum threshold
for successful reporting be that at least
50 percent of claims meeting measure
specifications contain QDCs. We also
are finalizing that an ASC must have a
minimum case volume of 240 Medicare
claims (primary plus secondary payer)
per year (which is an average of 60 per
quarter) to be required to participate in
the ASCQR Program. ASCs that have
fewer than 240 Medicare claims per year
during a reporting period for a payment
determination year will not be required
to participate in the ASCQR Program for
the subsequent reporting period for that
subsequent payment determination
year.
5. Requirements for Data Submitted via
a CMS Online Data Submission Tool

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a. Background for the CY 2015 Payment
Determination and Subsequent Years
In the CY 2012 OPPS/ASC final rule
with comment period, we finalized two
measures with data submission required
using an online measure submission
Web page available at http://
www.qualitynet.org beginning with the
CY 2015 payment determination: Safe
Surgery Checklist Use and ASC Facility
Volume Data on Selected ASC Surgical
Procedures (76 FR 74509). In that final
rule with comment period, we finalized
that, for the CY 2015 payment

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determination, ASCs would report data
for these two measures between July 1,
2013 and August 15, 2013 for services
furnished between January 1, 2012 and
December 31, 2012.
b. Requirements for the CY 2016
Payment Determination and Subsequent
Years for Measures Currently Finalized
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43669), for the CY 2016
payment determination and subsequent
years, we proposed for the Safe Surgery
Checklist Use and ASC Facility Volume
Data on Selected ASC Surgical
Procedures for which data will be
submitted via a using an online data
submission tool available on http://
www.qualitynet.org, that the data
collection time periods would be for
services furnished during the calendar
year two years prior to the payment
determination year and that data would
be submitted during the January 1 to
August 15 time period in the year prior
to the payment determination.
Therefore, for the CY 2016 payment
determination, the data collection time
period for these measures would be
calendar year 2014 (January 1, 2014 to
December 31, 2014) and the data
submission time period would be
January 1, 2015 to August 15, 2015. We
proposed these changes to increase the
timeframe for allowing data submission
for these measures and to align the data
collection time periods for the claimsbased and Web-based measures. This
alignment has the additional benefit of
providing more current data for these
Web-based measures for a payment
determination and would prevent the
need for retrospective data collection by
ASCs, which can be burdensome.
Under this proposal, no data would be
collected for calendar year 2013
(January 1, 2013 to December 31, 2013)
for the Safe Surgery Checklist Use and
ASC Facility Volume Data on Selected
ASC Surgical Procedures because the
CY 2015 payment determination will
use data from services performed in the
January 1, 2012 to December 31, 2012
time period and, under our proposal,
the CY 2016 payment determination
would use data from services performed
in January 1, 2014 to December 31,
2014. (In the proposed rule (78 FR
43669), although we stated that data
collection time periods would be for
services furnished during the calendar
year two years prior to the payment
determination year, we inadvertently
stated that the time period for the CY
2016 payment determination was
‘‘January 1, 2014 to December 1, 2014.’’)
We invited public comment on these
proposals.

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Comment: Several commenters agreed
that moving the data collection period
ahead one year and expanding the data
submission timeframe to begin January
1 through August 15 for the CY 2016
payment determination and subsequent
years rather than July 1 through August
15 as finalized previously for the CY
2015 payment determination are
appropriate and beneficial changes for
the Safe Surgery Checklist Use and ASC
Facility Volume Data on Selected ASC
Surgical Procedures measures. Some of
these commenters cautioned that, while
they supported the shifting of the data
collection time period, they believed the
alignment will result in a significant
amount of confusion and that extensive
educational outreach would be
necessary.
Response: We thank the commenters
for their support of our proposals; we
agree that aligning data collection
periods and data submission time
frames for these measures across
payment determination years are
appropriate and beneficial changes for
the ASCQR Program. We appreciate the
cautioning of possible confusion with
the data collection timeframes. We
believe that, since there will be a year
of not having to collect these data, there
will be sufficient time to provide
educational outreach on this matter.
After consideration of the public
comments we received, we are
finalizing our proposals regarding data
collection and submission requirements
for the Safe Surgery Checklist Use and
ASC Facility Volume Data on Selected
ASC Surgical Procedures measures for
the CY 2016 payment determination and
subsequent years. Specifically, for these
measures for which data will be
submitted via an online data submission
tool available on http://
www.qualitynet.org, we are finalizing
that the data collection time periods
would be for services furnished during
the calendar year two years prior to the
payment determination year and that
data would be submitted during the
January 1 to August 15 time period in
the year prior to the payment
determination. These changes provide a
longer timeframe for allowing data
submission for these measures
compared to the CY 2015 payment
determination, align the data collection
time periods for the claims-based and
Web-based measures, and result in data
not being collected for calendar year
2013 (January 1, 2013 to December 31,
2013) for the Safe Surgery Checklist Use
and ASC Facility Volume Data on
Selected ASC Surgical Procedures
measures. No data will be collected for
calendar year 2013 (January 1, 2013 to
December 31, 2013) for the Safe Surgery

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Checklist Use and ASC Facility Volume
Data on Selected ASC Surgical
Procedures measures because the CY
2015 payment determination will use
data from services performed in the
January 1, 2012 to December 31, 2012
time period and the CY 2016 payment
determination will use data from
services performed in January 1, 2014 to
December 31, 2014.

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c. Requirements for the CY 2016
Payment Determination and Subsequent
Years for New Measures With Data
Submission via a CMS Web-Based Tool
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43669), we proposed to
adopt four additional chart-abstracted
measures for the ASCQR Program and
proposed that aggregate data
(numerators, denominators, and
exclusions) on all ASC patients would
be collected via an online Web-based
tool that would be made available to
ASCs via the QualityNet Web site.
These measures are: (1) Complications
within 30 Days following Cataract
Surgery Requiring Additional Surgical
Procedures; (2) Endoscopy/Polyp
Surveillance: Appropriate follow-up
interval for normal colonoscopy in
average risk patients; (3) Endoscopy/
Polyp Surveillance: Colonoscopy
Interval for Patients with a History of
Adenomatous Polyps—Avoidance of
Inappropriate Use; and (4) Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following
Cataract Surgery. We describe our
timeframes and process for measure
specifications in section XV.B.5. of this
final rule with comment period.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43669), we wished to clarify
that, while we have referred to measures
where data are submitted via a Webbased tool on a CMS Web site under our
quality data reporting programs by the
type of measure, that is, structural
measures (measures concerned with
attributes of where care occurs, such as
material resources, human resources,
and organizational structure),15 not all
quality measures where data are
submitted via a Web-based tool on a
CMS Web site are structural measures.
For example, the four proposed new
measures proposed are not structural
measures. Therefore, we have refined
our terminology and now refer to the
mode of data submission, Web-based,
rather than the type of measure.
We proposed that data collection and
reporting for these measures would
15 Maintz, J. Defining and Classifying Clinical
Indicators for Quality Improvement, Inter J Quality
Health Care (2003) 15(6), 523–530.

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begin with the CY 2016 payment
determination.
In addition, we proposed for these
measures, and any future measures for
the ASCQR Program where data are
submitted via an online measure
submission Web page available on
http://www.qualitynet.org, that
beginning with the CY 2016 payment
determination:
• The data collection time period
would be the calendar year (January 1
to December 31) 2 years prior to the
affected payment determination year,
and;
• Data collected would be submitted
during the time period of January 1 to
August 15 in the year prior to the
affected payment determination year.
Therefore, for the CY 2016 payment
determination, the data collection time
period would be January 1, 2014 to
December 31, 2014 and the data
submission time period for the collected
data would be January 1, 2015 to August
15, 2015. We stated that these proposals
are in alignment with proposals in
section XV.D.5. of the proposed rule
regarding data collection and
submission time frames for measures
already adopted for the ASCQR Program
where data is submitted via an online
data submission tool available on the
Web site at: http://www.qualitynet.org.
We invited public comment on these
proposals.
Comment: Many commenters did not
support collection of aggregate data for
the four proposed measures because
they did not support the addition of
these measures to the ASCQR Program.
Response: We discuss the adoption of
three of the four proposed new
measures for the ASCQR Program in
section XV.B.3. of this final rule with
comment period.
Comment: Some commenters stated
that the collection of follow-up data for
the proposed measures would be
burdensome because ASCs would have
data related only to the procedures
performed at the ASC and not for
procedures performed off-site. Many
commenters asserted that it is extremely
burdensome to retrieve timely the data
from the physician or ophthalmologist
offices and such data would be difficult
to validate. Other commenters stated
that given the high volume of cataract
surgery, it would be extremely
burdensome to extract data from
medical records. In addition,
commenters noted that the initial and
subsequent surgical cataract and
colonoscopy procedures due to
complications may occur at more than
one facility. Some commenters strongly
believed that the huge reporting burden
from the four proposed chart-abstracted

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measures could be diminished if claims
are used as the data source.
Response: We appreciate the
commenters’ concerns and acknowledge
that the adoption of the three new
measures we are finalizing will result in
some additional burden to ASCs.
However, we do not believe that this
will be an undue or insurmountable
burden. Regarding the ability to obtain
follow-up information, we believe that
ASCs have professional and commercial
relationships with the physicians that
perform surgical procedures and are
paid for those services rendered at their
facilities. The newly adopted measures
are concerned only with the procedures
performed at the ASC.
For the three measures being adopted
in this final rule with comment period,
the physician performing and billing for
the procedure would have or is
expected to have the information
necessary to report on the measure. For
the Endoscopy/Polyp Surveillance:
Appropriate Follow-up Interval for
Normal Colonscopy in Average Risk
Patient measure, standard medical
practice is that the physician performing
the procedure would make the
determination of whether the results
were normal and would make the
appropriate recommendation that would
be documented in the patient’s medical
record. For the Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use measure, the physician performing
the procedure would have the
information of whether a patient had a
history of adenomatous polyps and for
Medicare claims, this is reflected on the
claim by including HCPCS code G0105
which indicates a colonoscopy on an
individual at high risk. In the case of the
Cataracts: Improvement in Patient’s
Visual Function within 90 Days
Following Cataract Surgery measure,
patients undergoing cataract surgery are
often co-managed with preoperative
care, intraoperative services, and postoperative care (90 days) stages identified
by Medicare. Co-management of cataract
care requires a written transfer
agreement between the surgeon and
receiving doctor(s) with all physicians
involved retaining the results of the first
post-operative visit as part of the
patient’s medical record.
Although we believe this approach is
reasonable and not unduly burdensome,
after consideration of the many
comments we received on this issue
regarding the burden of collecting this
information, in this final rule with
comment period we are permitting
ASCs to collect information on a sample
of eligible patients, with minimal case

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
number requirements, instead of
requiring the collection of information
on all eligible patients. Sampling is a
process of selecting a representative part
of a population in order to estimate the
ASC’s performance, without collecting
data for its entire population. In this
way, using a statistically valid sample,
an ASC can measure its performance in
an effective and efficient manner.
Sampling will reduce burden
significantly for ASCs with high volume
because the number of cases that must
have data reported will be significantly
reduced. We have provided the option
of sampling in other quality reporting
programs when we have determined
that it would be appropriate, including
the Hospital IQR and OQR Programs. As
with our other quality reporting
programs, sampling specifications for
the new ASCQR Program quality
measures, which describe how to obtain
a statistically valid sample and the
current sampling methodology and
requirements for these measures, will be
included in the ASCQR Specifications
Manual, which will be made available
on the QualityNet Web site in December
2013. We believe that the improved
clinical patient outcomes that can result
from these measures outweigh any
remaining burden that ASCs may incur
from data collection associated with
them.
Regarding the use of claims data as
the information source for the three
measures being adopted, we agree that
this data collection mechanism can be
used to reduce burden. However, we are
not aware of coding for claims payment
that could be used to specify the new
measures being adopted for the ASCQR
Program.
Comment: Several commenters
expressed concern about the limited
amount of time that ASCs would have
to respond to and prepare for any new
measures finalized in the rulemaking
process. Because the CY 2014 OPPS/
ASC final rule with comment period
will likely be published in November
2013, ASCs would have only 2 months
to become aware of and versed in the
new quality measures finalized in the
rule, to develop and implement the
changes in daily processes and
operational systems needed to collect
the required data, and to initiate data
collection making this timeline
inadequate in length. These commenters
believed that implementing a new
measure is more challenging than
revising an existing measure; as such, a
minimum of 6 months of advance notice
should be extended for any new
measures. In addition, these
commenters suggested that if any of the
proposed measures are adopted in this

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rulemaking, the data collection period
should be modified to January 1, 2015
through December 31, 2015 with data
submission in 2016, for use toward the
CY 2017 payment determination.
Response: We thank the commenters
for their well-thought out suggestions
regarding data collection, submission,
and use for new measures. However,
due to the importance of the new
measures being finalized in this
rulemaking, we believe the proposed
timeframes for these activities are
justifiable and adequate because,
although the data would be collected for
services furnished during the CY 2014
timeframe, data would not need to be
submitted until 2015, providing
additional time from finalization of this
final rule with comment period to time
when the data would actually have to be
submitted.
After consideration of the public
comments we received, we are
finalizing our proposal without
modification for data submission and
timeframes on three new measures for
the ASCQR Program being adopted in
this final rule with comment period.
The new measures we are adopting are:
(1) Endoscopy/Polyp Surveillance:
Appropriate follow-up interval for
normal colonoscopy in average risk
patients; (2) Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use; and, (3) Cataracts: Improvement in
Patient’s Visual Function within 90
Days Following Cataract Surgery.
Specifically, we are finalizing that ASCs
must submit aggregate data (numerators,
denominators, and exclusions) for these
three measures on all ASC patients and
that these data will be collected via an
online Web-based tool that would be
made available to ASCs via the
QualityNet Web site. However, as
discussed above, we are permitting
ASCs to collect information on a sample
of eligible patients, with minimal case
number requirements, instead of
requiring the collection of information
on all eligible patients. The sampling
specifications for the new ASCQR
Program quality measures will be
included in the ASCQR Specifications
Manual, which will be made available
on the QualityNet Web site in December
2013.
We are also finalizing, as proposed
without modification, that beginning
with the CY 2016 payment
determination (and for all subsequent
payment determination years), the data
collection time period will be the
calendar year (January 1 to December
31) 2 years prior to the affected payment
determination year, and the data

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collected will be submitted during the
time period of January 1 to August 15
in the year prior to the affected payment
determination year. Therefore, for the
CY 2016 payment determination, the
data collection time period will be
January 1, 2014 to December 31, 2014,
and the data submission time period
will be January 1, 2015 to August 15,
2015.
6. Data Submission Requirements for a
Measure Reported via the National
Healthcare Safety Network (NHSN) for
the CY 2016 Payment Determination
a. Background for the CY 2016 Payment
Determination
For the CY 2016 payment
determination, we finalized the
adoption of the Influenza Vaccination
Coverage among Healthcare Personnel
(NQF #0431), a process of care,
healthcare-associated infection (HAI)
measure, in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74510). We specified that data
collection for the influenza vaccination
measure would be via the NHSN from
October 1, 2014 to March 31, 2015 and
that details for data submission would
be made in future rulemaking.
b. Requirements for the CY 2016
Payment Determination
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43670), we proposed to use
the data submission and reporting
standard procedures that have been set
forth by CDC for NHSN participation in
general and for submission of this
measure to NHSN. We refer readers to
the CDC’s NHSN Web site (for detailed
procedures for enrollment (http://
www.cdc.gov/nhsn/ambulatory-surgery/
enroll.html), set-up (http://
www.cdc.gov/nhsn/ambulatory-surgery/
setup.html), and reporting (https://
sdn.cdc.gov (data certificate installation
is required to access this site)). We
stated in the proposed rule that we
believed that ASCs would know and be
comfortable with these procedures
because these procedures are already
used by many ASCs to fulfill Statemandated reporting of HAI data through
the NHSN in at least 17 States.
However, based on public comments we
received, ASCs may not be as familiar
with NHSN reporting as we previously
believed.
We separately proposed that ASCs
would have until August 15, 2015 to
submit their 2014–2015 influenza
season data (October 1, 2014 through
March 31, 2015) to NHSN. We proposed
an August 15, 2015 deadline because
this date is the latest date possible for
data entry that will provide sufficient

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time for CMS to make the CY 2016
payment determinations. Further, this
date aligns the data entry deadline with
the deadline for the measures entered
via the CMS online tool. We believe this
data submission deadline allows ASCs
to have sufficient time to collect and
compile the necessary data while taking
into account ASCQR Program
considerations.
We invited public comment on these
proposals.
Comment: Several commenters
protested that ASCs are entirely
unfamiliar with NHSN. These
commenters pointed out that, while a
number of States have mandated NHSN
reporting, many of those State
requirements do not include ASCs and
though some States mandate NHSN
reporting for ASCs, the surgical
procedures being monitored for
reporting purposes are not often
performed in the ASC setting. Thus,
ASCs generally do not have data to
report to NHSN. These commenters
cautioned that CMS and CDC should
plan to make significant investments of
time, personnel, and other resources to
support initial enrollment and reporting
to ensure successful implementation of
NHSN reporting by ASCs. These
commenters also suggested that
revisions in the CDC’s NHSN site to
reduce confusion for ASCs, such as
revising documentation to include
ASCs, replace the term ‘‘hospital’’ with
‘‘facility’’, simplifying set-up
instructions, and continuance of the
planned elimination of the digital
certificate requirement for NHSN access
could facilitate ASC participation.
Response: We thank the commenters
for voicing these concerns and
providing constructive suggestions. We
note that CDC estimates that only 285
ASCs are currently enrolled and
reporting in the NHSN. We agree that
resources will be required to ensure
successful implementation of ASC
reporting to the NHSN to meet ASCQR
Program requirements. CMS and CDC
are working together in this endeavor
and will be considering the comments
received that are aimed at improving the
NHSN site and will be implementing
educational efforts for ASCs.
Because we believe CMS’ and CDC’s
efforts will address many of the
commenters’ concerns, we are finalizing
our proposal to use the data submission
and reporting standard procedures
without modification; that is, to use
those procedures that have been set
forth by CDC for NHSN participation in
general and for submission of this
measure to NHSN. We believe ASCs
have sufficient time to set up NHSN
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all reporting procedures to be able to
successfully report data because we
intend to propose a 2015 data
submission deadline.
Comment: Several commenters
supported CMS’ proposal of an August
15, 2015 deadline as alignment of
submission deadlines within the
ASCQR Program was a sensible
approach that would limit confusion.
Some of these commenters noted that an
earlier deadline served no useful
ASCQR Program purpose. Other
commenters supported an August 15,
2015 deadline for ASCs to submit their
2014–2015 influenza season data
because, while this date is not
consistent with the deadline for other
quality reporting programs that enter
data for this measure via NHSN, the
ASCQR Program is already quite
complex, featuring three different data
submission methods for the CY 2016
payment determination. Given this
complexity, a consistent data
submission deadline could help
minimize confusion across the NHSN
and QualityNet data entry systems.
Several commenters disagreed with
an August 15, 2015 data submission
deadline for ASCs as it differed from the
May 15th deadline proposed for two
other CMS quality data reporting
programs, the Hospital IQR and Hospital
OQR Programs. Some of these
commenters believed that providing
ASCs with a later deadline would
provide an unfair advantage because
ASCs would have longer to submit their
data. Other commenters believed that
having a differing date for ASCs than
other facilities would be confusing to
ASCs, thereby, disadvantaging ASCs.
Response: We thank the commenters
for their thoughts regarding an August
15, 2015 deadline for ASCs to submit
their 2014–2015 influenza vaccination
data (October 1, 2014 through March 31,
2015). We generally try, when feasible,
to align requirements across quality
reporting programs, but program
requirements are tailored to individual
quality reporting program needs. Due to
issues raised by commenters regarding
our proposed August 15, 2015 deadline,
we are not finalizing a data submission
deadline for 2014–2015 influenza
vaccination and instead intend to issue
proposals regarding a 2015 data
submission deadline for this measure in
the CY 2015 OPPS/ASC proposed rule.
After consideration of the public
comments received, we are finalizing
our proposal to use the data submission
and reporting standard procedures set
forth by CDC for NHSN participation for
the ASCQR Program without
modification. As stated above, we are
not finalizing our proposal regarding an

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August 15, 2015 data submission
deadline for ASC–8 due to concerns
expressed by commenters. We intend to
issue proposals regarding a 2015 data
submission deadline for this measure in
the CY 2015 OPPS/ASC proposed rule
which is scheduled to be finalized in
late CY 2014.
7. ASCQR Program Validation of
Claims-Based and CMS Web-Based
Measures
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53641 through 53642),
consistent with other CMS quality
reporting programs, we did not require
validation of claims-based measures
(beyond the usual claims validation
activities conducted by our
administrative contractors) or structural
(Web-based) measures for the ASCQR
Program. We also do not require
validation of claims-based or Web-based
measures under the Hospital IQR and
OQR Programs.
We noted that with regard to the
current ASCQR Program claims-based
measures, the number of events
expected to be reported is small because
most of the measures are for adverse or
rare events. In this situation, any
random selection of cases would require
a burdensome sample size. Further, we
expect the accuracy for reported adverse
events to be high. We stated that,
because we do not believe at this time
that any results that could be obtained
justify the burden associated with a data
validation process which would
necessitate an independent validation
effort, we also are not requiring a data
validation process for our current
claims-based measures, and we
continue to believe so.
We stated that as we gain more
experience with the ASCQR Program,
we will reassess whether a data
validation process for claims-based and
measures where aggregate data is
reported via an online tool is needed. At
this time, we believe that it would be
overly burdensome to validate the
reported data given the inexperience
that ASCs have with reporting quality
data to CMS coupled with the low
incidence of cases for the claims-based
measures.
8. Extraordinary Circumstances
Extensions or Waivers for the CY 2014
Payment Determination and Subsequent
Years
a. Background
In our experience, there have been
times when facilities have been unable
to submit information to meet program
requirements due to extraordinary
circumstances that are not within their

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control. It is our goal to not penalize
such entities for such circumstances and
we do not want to unduly increase their
burden during these times. Therefore, in
the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53642 through 53643), we
established procedures for extraordinary
circumstance extension or waiver
requests for the submission of
information required under the ASCQR
Program. We refer readers to that rule
for a complete discussion of the process.

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b. Additional Criterion for Extraordinary
Circumstance Waivers or Extensions for
CY 2014 and Subsequent Years
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43670), we proposed that,
starting in CY 2014, we may grant a
waiver or extension to ASCs for data
submission requirements if we
determine that a systematic problem
with one of our data collection systems
directly or indirectly affected the ability
of ASCs to submit data. Because we do
not anticipate that such systematic
errors will happen often, we do not
anticipate granting a waiver or
extension on this basis frequently. If we
make the determination to grant a
waiver or extension, we proposed to
communicate this decision through
listserv notice and posting via our
QualityNet Web site (https://
www.qualitynet.org) as we have done in
the past with CMS-issued waivers
where a geographic location was
affected by adverse weather.
We invited public comment on this
proposal.
Comment: Several commenters
supported and expressed their
appreciation for CMS’ proposal to grant
waivers or extensions for data
submission requirements if we
determine a systematic problem with
any data collection system directly or
indirectly affected the ability of ASCs to
submit data.
Response: We thank the commenters
for supporting our proposal.
After consideration of the public
comments we received, we are
finalizing our proposal without
modification to grant waivers or
extensions to ASCs for data submission
requirements if we determine that a
systematic problem with any part of our
data collection system directly or
indirectly affected the ability of ASCs to
submit data. If we make the
determination to grant a waiver or
extension, we will communicate this
decision through listserv notice and
posting via our QualityNet Web site
(https://www.qualitynet.org).

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9. ASCQR Program Reconsideration
Procedures for the CY 2014 Payment
Determination and Subsequent Years
We have established similar processes
by which participating hospitals can
submit requests for reconsideration of
quality reporting program payment
determinations for the Hospital IQR
Program and the Hospital OQR Program.
We believe these reconsideration
processes have been effective in the
hospital quality reporting programs and
such a process would be effective for
ASC quality reporting. Therefore, in the
FY 2013 IPPS/LTCH PPS final rule (77
FR 53643 through 56344), we adopted
an informal reconsideration process for
the ASCQR Program for the CY 2014
payment determination and subsequent
years modeled after the reconsideration
processes we implemented for the
Hospital IQR and Hospital OQR
Programs. We refer readers to that rule
for a complete discussion of our
procedures.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43670), we did not propose
any changes to this informal
reconsideration process. However, we
clarified some aspects of the informal
reconsideration review process that we
established in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53643 to 53644).
As we stated in that rule, we intend to
complete any reconsideration reviews
and communicate the results of these
determinations within 90 days
following the deadline for submitting
requests for reconsideration. For those
ASCs that submit a reconsideration
request, the reconsideration
determination would be the final
ASCQR Program payment
determination. For those ASCs that do
not submit a reconsideration request or
do not submit a reconsideration request
as specified in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53643 through
53644), for example, the request was not
submitted by the deadline, the CMS
determination would be the final
payment determination. There would be
no appeal of any final ASCQR Program
payment determination.
XVI. Final Rule: Changes to the
Conditions for Coverage (CfCs) for
Organ Procurement Organizations
(OPOs) (42 CFR Part 486, Subpart G)
A. Background
The Organ Procurement Organization
Certification Act of 2000 (section 701 of
Pub. L. 106–505) amended section
371(b)(1) of the Public Health Service
Act (42 U.S.C. 273(b)(1)) and directed
the Secretary to establish regulations
governing the certification and/or
recertification of Organ Procurement

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Organizations (OPOs). Among other
things, section 371(b)(1)(D)(ii) of the
Public Health Service Act requires that
regulations be established for the
certification and/or recertification
process, which (1) ‘‘rely on outcome and
process performance measures that are
based on empirical evidence obtained
through reasonable efforts, of organ
donor potential and other related factors
in each service area of qualified organ
procurement organizations,’’ and (2)
‘‘use multiple outcome measures as part
of the certification process.’’ Payment
under the Medicare and Medicaid
programs for organ procurement costs
may be made only if, among other
requirements, the OPO is certified or
recertified as meeting the standards to
be a qualified OPO under section 371(b)
of the Public Health Service Act and
meets the performance-related standards
prescribed by the Secretary, as provided
for in section 1138(b) of the Social
Security Act.
The final rules implementing these
statutory requirements and setting out
the Conditions for Coverage (CfCs) for
OPOs (OPO CfCs) were published in the
Federal Register on May 31, 2006 (71
FR 30982). The OPO CfCs are codified
at 42 CFR Part 486 and set forth the
certification and recertification
processes for OPOs. OPOs are required
to meet their CfCs, which include both
outcome and process performance
measures.
In general, with the exception of
OPOs operating exclusively in
noncontiguous States, Commonwealths,
Territories, or possessions, the three
outcome measures are: (1) A donation
rate of eligible donors as a percentage of
eligible deaths; (2) an observed donation
rate as compared to the expected
donation rate; and (3) a yield measure,
which requires that two of the following
three outcome measures be met: (i) The
number of organs transplanted per
standard criteria donor, (ii) the number
of organs transplanted per expanded
criteria donors, and (iii) the number of
organs used for research per donor. For
OPOs that operate exclusively in
noncontiguous States, Commonwealths,
Territories, and possessions, the three
outcome measures are: (1) A donation
rate of eligible donors as a percentage of
eligible deaths; (2) an observed donation
rate as compared to the expected
donation rate; and (3) a yield measure,
which requires that two of the following
three outcome measures be met: (i) the
number of kidneys transplanted per
standard criteria donor; (ii) the number
of kidneys transplanted per expanded
criteria donors; and (iii) the number of
organs used for research per donor. All
of the yield measures include pancreata

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used for islet cell transplantation as
required by section 371(c) of the Public
Health Service Act (42 U.S.C. 273(c)).
The first and third outcome measures
are compared to a national mean. The
second outcome measure is calculated
by the Scientific Registry of Transplant
Recipients (SRTR).
B. Regulatory Changes
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43534), we proposed to
modify the regulations so that all of the
OPOs must meet two out of the three
outcome measures to be recertified. We
were concerned about the requirement
to automatically decertify OPOs if they
fail to meet all three of the outcome
measures. We believed that the
requirement that each OPO meet all
three outcome measures as set forth in
§ 486.318 was unnecessarily stringent.
For that reason, we proposed to modify
the outcome measure requirement so
that OPOs would be required to meet
two of the three outcome measures. We
noted that the majority of OPOs were
meeting all three of the outcome
measures. Based on our experience, we
observed that many of the OPOs that
were failing to meet all three outcome
measures were meeting two of the three
measures and were in compliance with
all of the other requirements in the OPO
CfCs; that is, the process performance
measures set forth at §§ 486.320 through
486.348. We believe these OPOs were
performing satisfactorily and should not
be decertified based solely on their
failure to meet one outcome measure.
This belief was based not only on our
observation and monitoring of these
OPOs’ performance, but also on some
concerns with the outcome measures,
which we discussed in detail in the
proposed rule (78 FR 43671 through
43672).
Specifically, we proposed to revise
paragraphs (a)(1) and (b) of §§ 486.316
and the introductory text of paragraphs
(a) and (b) of § 486.318 of the
regulations to require that OPOs meet at
least two out of the three outcome
measures instead of the requirement to
meet all three outcome measures. We
also asked for public comments on any
other potential empirically based
outcome measures for OPOs that might
be used in the future. Most of the
commenters opposed this proposal. The
commenters indicated that the proposal
did not address the problems with the
current outcome measures and
recommended that CMS develop a
different strategy for the upcoming
recertification cycle. Some of the
commenters expressed concerns about
the outcome measures and requested
additional changes so that an OPO

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could be recertified even if it failed to
meet any of the outcome measures. A
summary of the public comments and
our responses follow.
Comment: Some commenters
acknowledged the thought that CMS
had put into the proposal and the
challenges CMS would face in revising
the outcome measures. Commenters also
acknowledged that the proposal would
have a beneficial effect on some of the
OPOs that would otherwise be
decertified under the current outcome
measures requirement.
Response: We appreciate these
comments. We believe that modifying
the outcome measure requirement so
that OPOs must now meet two out of the
three outcome measures will benefit
both the OPOs and the potential
recipients on the waiting lists by
avoiding the decertification of OPOs
that are performing satisfactorily.
Comment: Other commenters
indicated that the proposed revisions
were insufficient to address their
numerous concerns about problems that
the commenters believed were
inherently related to the existing
outcome measures.
Response: As we noted in the
proposed rule, we have received
feedback from various members of the
OPO community regarding these
concerns, which are addressed in more
detail below. We acknowledge that the
provisions set forth in this final rule do
not address all of the specific concerns
raised by commenters. Despite the
critical comments relating to the current
measures, no commenters suggested any
empirically based outcome measures
that could be used in the future, except
for a few commenters that suggested
using the OPTN yield measure.
However, other commenters were also
critical of that measure.
OPOs perform an important role in
the health care system, and we
understand the challenge OPOs face in
developing relationships with hospitals
and health care professionals, as well as
in obtaining consent from families to
procure organs. However, Congress
required the Secretary to create outcome
and process performance measures to
encourage OPOs to improve their
performance. The OPO CfCs are
designed to encourage OPOs to be more
efficient in procuring organs in order to
save more lives. We also note that the
current outcome measures were largely
based upon public comments we
received to the OPO proposed rule
(CMS–3064–P), and that many of the
concerns relating to the outcome
measures were not raised during prior
rulemaking (71 FR 30999 through
31005). We believe that the vast

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majority of the 58 OPOs will be able to
meet two out of the three outcome
measures. We also believe that the
outcome measures continue to provide
a fair basis for comparing OPOs’
performance.
Comment: Several commenters
suggested that, instead of proposing a
modification to the outcome measures
requirement, CMS take a two-part
approach concerning the outcome
measures and recertification. First, the
commenters suggested a revision to 42
CFR 486.312(c) to state that CMS ‘‘may’’
voluntarily not renew an OPO’s
agreement if it failed to meet the
performance measures. The commenters
suggested that the CfCs be modified so
that CMS has the discretion to renew
the agreement despite an OPO’s failure
to meet all three of the outcome
measures, essentially changing the
regulatory language from ‘‘will not
voluntarily renew’’ the agreement with
an OPO to ‘‘may renew’’ the agreement.
Second, the commenters recommended
that CMS be allowed to work with OPOs
that failed to meet the performance
measures to develop corrective action
plans, or a similar improvement
process, comparable to the process
currently used for transplant centers.
Response: We appreciate the concerns
expressed by the commenters. However,
we believe that the commenters’
recommended approach would be
inconsistent with section 1138(b)(1)(C)
of the Act that permits payment for
organ procurement costs ‘‘only if’’ the
OPO meets ‘‘performance-related
standards prescribed by the Secretary.’’
In addition, we note that the Organ
Procurement Organization Certification
Act of 2000 required the Secretary to
establish through rulemaking multiple
outcome measures based upon
empirical evidence, obtained through
reasonable efforts, of organ donor
potential and other related factors in
each service area of qualified OPOs and
that these measures must be used as part
of the recertification process. Consistent
with the statute, the Secretary
developed the standards through notice
and comment rulemaking and the final
standards reflect public input. The
outcome measures constitute an
empirically based standard that is
applied to all of the OPOs and allow a
comparison of an OPO’s performance to
the performance of its peers. We believe
that changing ‘‘will not’’ to ‘‘may’’ in the
regulations would effectively render this
empirically based standard a nullity and
would eliminate any meaningful
empirically based standards for the
recertification process. We believe that
the suggested change would be contrary
to the plain language of the relevant

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statutes; therefore, we are not able to
adopt the suggested change. We also
believe that it would be contrary to
Congress’ express intent to recertify an
OPO that failed to meet the outcome
and performance measures during the
past performance period. OPO
performance is a critical element of the
organ transplantation system in the
United States. An OPO that is efficient
in procuring organs and delivering them
to recipients will save more lives than
an ineffective OPO. Replacing an OPO
that failed to meet the performance
measures with an alternative
organization that has been successful in
the past is likely to increase the supply
of organs available to patients on the
organ transplant waiting lists.
Comment: Several commenters
expressed concerns about the ‘‘limited
appeals process’’ available to OPOs that
are decertified due to the outcome
measures. The commenters also
indicated that ‘‘CMS noted repeatedly
that no appeal on ‘substantive’ issues
may be allowed.’’
Response: The OPO CfCs set forth at
42 CFR 486.314 specifically state that
‘‘the OPO may appeal the decertification on substantive and
procedural grounds.’’ Therefore, the
OPO CfCs do not ‘‘limit’’ the grounds
upon which an OPO can appeal a
decertification. In addition, we will
consider exercising our enforcement
discretion, including consideration of
outcome measures, on a case-by-case
basis when appropriate as part of the
review process.
Comment: Many commenters
indicated that the proposed revisions
were insufficient to address their
numerous concerns about problems that
the commenters believed were
inherently related to the existing
outcome measures. Some commenters
asserted that the measures are flawed
because there were significant problems
with how the outcome measures were
initially developed and the validity of
the outcome measures has not been
established. They also stated that CMS
had acknowledged that the current
outcome measures are flawed or have
significant problems.
Response: We disagree with the
comment. The outcomes measures were
developed through a public process,
using notice and comment rulemaking.
We made significant changes to our
proposed standards based on the
comments and recommendations of the
OPOs, including the national
association that represents all OPOs (71
FR 30999). The first outcome measure
allows us to assess an OPO’s conversion
rate of potential donors to actual donors
so that we can determine how an OPO

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has performed in regard to donor
potential in its own designated service
area as well as how it has performed
compared to other OPOs. The second
outcome measure uses the statistical
methodology developed by the SRTR for
determining an expected donation rate
for each OPO, allowing an assessment of
how an OPO has performed in view of
its expected performance. Our third
measure is comprised of three
individual measures for organs
transplanted per donor and organs used
for research per donor. This third
measure allows us to assess how well an
OPO fulfills its ultimate mission—
recovering viable organs and placing
them with transplant centers for
transplantation—as well as its
commitment to placing organs for
research (71 FR 31000).
In the preamble to the proposed rule,
we acknowledged that we had some
concerns about the outcome measures
due to input we had received from the
OPO community. We also indicated that
we believe that OPOs should not be
decertified based solely on their failure
to meet one outcome measure because
our experience with the OPOs indicated
that the OPOs that were failing one of
the outcome measures were performing
satisfactorily. In addition, we noted that
the majority of OPOs are meeting all
three outcome measures and we expect
that only a small number of OPOs
would not be able to meet at least two
of the outcome measures. If the current
outcome measures were fundamentally
flawed or had significant problems, we
would anticipate that the number of
OPOs that would not successfully meet
this requirement would be much higher.
Therefore, while we acknowledge that
there are concerns with the current
outcome measures, we believe the
current measures are a valid means of
measuring OPO performance in keeping
with the statutory requirements. Each
measure is empirical; that is, based
upon observation or statistically derived
from data.
Comment: Some commenters believe
the existing regulatory standards are
flawed because the data upon which the
outcome measures are based are selfreported and are not verified by another
source; therefore, the accuracy of the
data cannot be verified.
Response: We disagree with the
commenters’ premise that the reported
information cannot be verified. All
OPOs are required to provide specific
information to the OPTN, the SRTR, and
CMS (42 CFR 486.328). This
information includes, but is not limited
to, the number of eligible deaths; the
number of eligible donors; the number
of organs transplanted, by organ type;

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and the results of death record reviews.
In addition, the data that are to be used
for recertification purposes must be
reported to the OPTN of all deaths in all
hospitals and critical access hospitals
(CAHs) in the OPO’s DSA, unless a
particular hospital or CAH has been
granted a waiver and is working with
another OPO (42 CFR 486.328(c)). We
are able to independently audit the
hospital’s records. Moreover, if an OPO
determines that any data was incorrect,
through death record reviews or any
other means, it has 30 days to report the
accurate data to the OPTN (42 CFR
486.328(d)). Therefore, if any OPOs are
not reporting accurate data, they are not
incompliance with this condition and
could be subject to regulatory sanctions,
up to and including decertification.
Thus, we believe that there are
sufficient tools to verify the reported
information.
Comment: Some commenters
suggested that the definitions of
‘‘eligible death’’ and ‘‘donor’’ are being
interpreted and clinically implemented
in an inconsistent manner among the
OPOs, which could negatively impact
some of the OPOs’ performance on the
outcome measures.
Response: We agree that data should
be accurately and consistently reported,
and we established these definitions to
standardize the terms to the greatest
extent possible. We expect that all of the
OPOs will interpret and implement all
of the CfCs, including the definitions,
and report their data in good faith. We
adopted the definition of ‘‘eligible
deaths’’ using the OPTN definition of
that term in response to public
comments (71 FR 30985). We note that
the commenter does not criticize the
definitions per se, but instead focuses
on how some OPOs are applying those
definitions. Considering the very
divergent circumstances present with
donors, we acknowledge that there may
be times that different OPOs would
disagree about whether a particular
individual’s death should be classified
as an ‘‘eligible death’’ and subsequently
whether the donor is an ‘‘eligible
donor.’’ While some variation is
possible, we believe that these cases
should be rare. If there are questions or
concerns about how to interpret and
implement any of the requirements or
report data, those questions or concerns
should be communicated to CMS or
OPTN so they can be addressed.
We are disturbed by the commenters’
suggestion that some OPOs may be
interpreting certain requirements and
reporting their data in a way designed
to gain an unfair advantage over other
OPOs in their performance on the
outcome measures. Despite these

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comments, we have not been given any
specific evidence that the alleged
practice is actually occurring. We also
note that we evaluate OPOs for their
compliance with the applicable CfCs,
including the condition for reporting of
data at 42 CFR 486.328. An OPO could
face decertification if it is found in
violation of those rules. We will
scrutinize the data to assess for any
unfair actions taken by an OPO.
Comment: Some commenters
suggested that the outcome measures
provide a disincentive to organ
procurement, which is resulting in
fewer, rather than more, organs being
recovered for transplantation. One
commenter gave the example of a
potential donor with multiple
comorbidities for whom the OPO could
only expect to be able to procure the
liver for transplant. The commenter
stated that if an OPO is concerned about
the third outcome measure, which,
among other things, measures the organs
transplanted per donor (yield
measurement), there is a disincentive to
pursue that donor because they would
likely only recover a single organ.
Response: We disagree. While our
empirically based outcome measures do
measure various aspects of the OPOs
performance, the measures specifically
encourage OPOs to fulfill their ultimate
mission, which is the recovery of
transplantable organs and placement
with transplant centers for
transplantation for patients, as well as
for research purposes.
Comment: Some commenters
suggested that there are conflicts
between the OPO CfCs and the
transplant center (TC) Conditions of
Participation (CoPs). The commenters
stated that the OPO CfCs incentivize
OPOs to pursue as many donors as
possible and procure as many
transplantable organs as possible.
However, the commenter added, the TC
CoPs require transplant centers to meet
specific outcome measures for graft and
patient survival. For example, the
commenter stated that concerns related
to these outcome measures may cause
some transplant surgeons to decide not
to transplant certain types of organs,
such as organs procured from Donors
after Cardiac Determination of Death
(DCDD). The commenter believed that
this could result in some organs
procured by OPOs not being
transplanted, which would negatively
impact the third (yield) measure.
Response: As explained in the
proposed rule and in the background
section above, our regulations with
respect to outcomes measures for OPOs
reflect the specific standards Congress
required the Secretary to develop for

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measuring OPO performance under the
Organ Procurement Organization
Certification Act of 2000. Our rules are
fully consistent with those statutory
directives. Transplant centers, in
contrast, are not required to meet
regulatory standards that are based on
the OPO statute. However, we will
examine our standards in an attempt to
determine if greater synergy is possible
in the future.
Comment: Many commenters noted
that they agreed with the DHHS
Secretary’s Advisory Committee on
Organ Transplantation’s (ACOT)
Recommendation 55 that was made in
August 2012 (http://
www.organdonor.gov/legislation/
acotrecs55.html accessed on November
18, 2013), which, among other things,
includes a recommendation that the
DHHS Secretary direct CMS and the
Health Resources and Services
Administration (HRSA) to confer with
the OPO community to conduct a
comprehensive review of the regulatory
requirements for OPOs and transplant
centers and promulgate regulatory and
policy changes to OPO requirements,
including, but not limited to, ‘‘a
statistically sound method for yield
measures for OPOs’’ (http://
www.organdonor.gov/legislation/
acotrecs55.html).
Response: We are interested in
continuing to improve our standards
and are currently conducting a
comprehensive review of the OPO CfCs
and will consider these public
comments in any future rulemaking.
However, we believe it would be unfair
to OPOs to develop new standards at
this time and to apply those standards
retroactively for past periods.
After consideration of the public
comments we received, we are
finalizing as proposed the revisions to
§§ 486.316 and 486.318 of our
regulations by modifying the current
outcome measures requirement to
require that OPOs must meet two out of
the three outcome measures instead of
all three outcome measures.
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43672), we also solicited
public comments on any other potential
empirically based outcome measures for
OPOs that might be used in future
rulemaking. We stated that we would
especially appreciate public comments
on the new yield measure that was
produced by the SRTR and is being used
by the OPTN. The OPTN recently
adopted this new yield measure, which
calculates the expected number of
organs transplanted for each donor
based on multiple donor risk factors.
The measure uses more extensive risk
factors that mitigate the differences in

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the donor pool of the each DSA. This
may allow an OPO’s performance to be
measured in terms of the expected
outcomes for the DSA based upon the
expected outcomes for individual
donors within the DSA and not against
a national average. In the proposed rule,
we stated that when comparing OPOs
currently identified to be below
expected performance levels by the
OPTN matrix and the OPOs identified
as below expected performance levels
by the CMS measures, we had noted
that the lists are not the same. We stated
that if the new OPTN measure proves to
be a more accurate reflection of
performance as measured by the organs
transplanted for each donor in each
individual DSA (as it is accepted by
HRSA and the OPO community), this
may provide an alternative outcome
measure that could be adopted in the
future. We referred readers to the SRTR
Web site at http://www.srtr.org/csr/
current/Tech_notes.aspx for specific
details on the risk adjustment models
used for this measure.
Comment: A few of the commenters
noted the the OPTN yield measure was
an improvement over the current
outcome measures and that it should be
considered by CMS. However, these
commenters also noted that there were
issues with this measure. One
commenter noted that the OPTN
measure was ‘‘too new’’ and ‘‘needs
some vetting before it can be accurately
used to define performance.’’ Another
commenter noted that the measure
‘‘requires further revision.’’
Response: We are currently
conducting a comprehensive review of
the OPO CfCs. We will consider these
public comments concerning the current
outcome measures and the new OPTN
yield measure if we proceed with future
rulemaking.
XVII. Final Rule: Revisions of the
Quality Improvement Organization
(QIO) Regulations
A. Legislative History
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 ‘‘Peer Review
Organizations.’’ In a final rule with
comment period published in the
Federal Register on May 24, 2002 (67
FR 36539), we revised the regulatory
references to these organizations to
‘‘Quality Improvement Organizations’’
(QIOs)—without changing the definition
or functions of the QIOs—to reflect the

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program’s shift from a complianceoriented focus to one emphasizing
quality improvement. There have been a
number of amendments to the QIO
statute over the years, but they have not
resulted in any substantial changes in
how the program operates. However, in
section 261 of the recently enacted
Trade Adjustment Assistance Extension
Act of 2011 (TAAEA) (Pub. L. 112–40),
Congress authorized numerous changes
to the original legislation that
modernize and improve the QIO
Program and included additional
flexibility for the Secretary in the
administration of the QIO Program. This
legislation also updated the
nomenclature from the Peer Review
Organization Program to the QIO
Program and included amendments to
update the terminology of the program
(replacing ‘‘peer review organization’’
and ‘‘utilization and quality control peer
review organization’’ with ‘‘quality
improvement organization’’ in relevant
provisions of the Act).
Specifically, section 261 of the
TAAEA increased the flexibility
available to the Secretary by updating
the statutory definition of the
organizations that can contract with
CMS as QIOs (as described in section
1152 of the Act), changing certain
contract terms and processes by which
the Secretary contracts with QIOs (as
described in section 1153 of the Act),
and broadening the Secretary’s authority
to delineate the scope of work for QIOs
(as described in section 1154 of the Act).
The regulations that implement
sections 1152 and 1153 of the Act are
codified at 42 CFR Part 475; Subpart C
of Part 475 includes provisions that
specifically govern the types of
organizations eligible to become QIOs.
The regulations that implement section
1154 of the Act and much of the work
performed by QIOs are codified at 42
CFR Part 476. Section 1154 of the Act
states that much of the work QIOs will
perform is subject to the terms of their
contracts with CMS. We note that,
consistent with this provision, the
contracts and requests for proposals
(RFPs) used to contract with QIOs
include significant detail on the work
performed by the QIOs. Our proposal
did not include changes to this
approach to the QIO Program and was
intended to provide a framework to
guide the contracting process by
establishing minimum eligibility
criteria, direction for how CMS will
determine that the minimum criteria are
met, and a basic process for how awards
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B. Basis for Proposals and Finalized
Policies
Section 261 of the TAAEA eliminated
certain limitations specified in sections
1152 and 1153 of the Act that appear in
several existing provisions in Part 475.
In order to eliminate these limitations in
the regulations and fully utilize the
flexibility provided as a result of the
statutory changes, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43672
through 43678 and 43705 through
43706), we proposed regulatory changes
to implement the statutory amendments.
These changes involve, among other
things, changing the eligibility
standards for an entity to be awarded a
QIO contract and defining specific terms
that will be used to describe QIOs and
their work. We proposed to change the
terminology related to the geographic
area in which a QIO must perform its
different functions. As amended, the
statute authorizes the establishment of
‘‘such local, State, regional, national or
other geographic areas as the Secretary
determines appropriate’’ for QIO
contract awards. We also proposed
revisions to existing regulation text
regarding the eligibility of a health care
facility association to be a QIO and
revisions to eliminate provisions at
§ 475.106 regarding the eligibility of
payor organizations to be QIOs based on
the proposed revisions to eliminate
obsolete text and to codify the eligibility
provisions for payor organizations in a
different section. The statutory
amendments also include a change in
the contract period for a QIO, extending
it from 3 to 5 years. Therefore, we
proposed to include in § 475.107
language to reflect the TAAEA
amendment to section 1153(c) of the
Act, which modified the statutory 3-year
QIO contract term to a 5-year contract
term. Although we did not previously
update this regulation with a prior
statutory change in the QIO contract
term from 2 years to 3 years, we
included the 5-year time period in the
proposed rule as a technical correction
in order to make the regulation
consistent with the amended statute. We
believe that these changes would be
instrumental in improving aspects of the
QIO’s review activities and would
enable us to improve the program by
ensuring that QIOs are better able to
meet the needs of Medicare
beneficiaries. We stated in the preamble
to our proposal that the proposed
revisions to §§ 475.101 through 475.107
were intended to allow organizations
that currently perform QIO work to
compete for new QIO contracts, while
expanding eligibility to additional
entities under the new authority granted

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by the TAAEA. We stated that we will
focus contract determinations on the
ability of organizations to perform QIO
functions as stated in the RFP. In the
proposed rule, we solicited public
comments on whether our proposed
regulation text for Subpart C of Part 475
sufficiently meets this goal as well as
our explained goal to implement the
flexibility provided by Congress in the
TAAEA amendments. In addition, we
proposed in § 475.1 and § 476.1 a
technical correction to redesignate
paragraphs (a) through (d) in the
definition of ‘‘Five percent or more
owner’’ as paragraphs (1) through (4).
The specific proposed changes and
corrections are explained in more detail
in the following sections.
QIOs work at the grassroots level of
American health care delivery systems
in all 50 States, the District of Columbia,
and most U.S. Territories in order to
improve care for Medicare beneficiaries.
QIOs originally reviewed Medicare
services to determine whether they were
reasonable and medically necessary,
met professionally recognized standards
of care, and were provided in the
appropriate setting. However, the QIO
contract has evolved over the course of
the years as the literature supports the
concept that defects in the health care
process are rarely related to the
performance of one individual but to a
system of care with multiple
opportunities for failure. Attempts to
improve quality through inspection
methods, that is, by performing one
chart review at a time, are less likely to
yield the systemic improvements in care
for Medicare beneficiaries that can come
from analyzing aggregate data in order
to identify problems, developing a plan
of action, monitoring the result through
data driven processes, and making
changes as needed based on those
results.
The qualifications and expertise
required to execute these quality
improvement initiatives have evolved to
now include expertise from disciplines
such as physicians, nurses, other
clinicians, health care leaders, experts
in statistics and health care system
reengineering, and many other kinds of
professionals. As we discussed in the
CY 2014 OPPS/ASC proposed rule (78
FR 43673), we interpret our proposed
regulation so as not to prohibit the use
of professionals in the health care
industry that are not licensed
physicians or certified practitioners in
connection with quality improvement
initiatives or other activities that do not,
by law, require use of licensed
physicians or certified practitioners. We
anticipate that these other professionals
may offer valuable insight to QIOs on

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ways to enhance the performance of
their QIO functions, as well as provide
services designed to help QIOs
maximize their impact. We proposed to
adopt this approach to further our goal
that the regulations under 42 CFR Part
475 reflect a multidisciplinary approach
to the performance of QIOs. Therefore,
we intended that the proposed
standards would not be a barrier to the
inclusion of any other nonphysician or
nonpractitioner professional that CMS
or the QIO deems appropriate for the
successful performance of QIO
functions. Patients and their families
also play a critical role in the success of
quality improvement initiatives.
Amendments to the Act made by the
TAAEA would accommodate the
evolution of quality improvement and
would allow CMS the flexibility to
expand the types of organizations
eligible to provide multidisciplinary
support in quality improvement. As
indicated in the CY 2014 OPPS/ASC
proposed rule (78 FR 43673), we sought
with this proposal to ensure that the
regulations governing QIO eligibility
reflect the increased flexibility afforded
by the TAAEA. This will help us ensure
that we can administer the QIO Program
in a manner that reflects contemporary
practices and allows us to include the
appropriate individuals and entities in
working toward improving care
processes.
As described in section 1154 of the
Act, QIOs perform many specific review
functions that are necessary to ensure
the quality of care provided to Medicare
beneficiaries. The addition of section
1154(a)(18) by the TAAEA explicitly
provides the Secretary with the broad
authority to require that QIOs perform
any additional activities the Secretary
determines may be necessary for the
purpose of improving the quality of
Medicare services. Based on this
authority, QIOs will, as a general matter,
be required to represent CMS as
‘‘change agents’’ that work at local
levels in their individual QIO
geographic areas. The TAAEA also
amended section 1154(a) of the Act to
permit QIOs to perform one or more
QIO functions instead of all QIO
functions listed in the statute. Different
QIOs might now be required to work on
one or more different tasks within a QIO
area; that is, all QIOs might no longer be
required to handle the complete and
broad range of QIO activities within
their respective geographic areas but to
focus on particular tasks of QIO work.
For example, one QIO might be required
to offer to a variety of stakeholders the
knowledge and resources for improving
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designed to improve the care provided
to Medicare beneficiaries, while another
QIO is required to perform case review
in the same area.
As under the current program, QIOs
will be required to base their work on
clinical evidence and some may be
required to generate reliable data about
clinical performance. QIOs may also
serve as independent, objective, and
collaborative partners that support CMS’
mission to improve health care quality
in the Medicare program (which, in
turn, has the potential to greatly benefit
the broader health care community) by
leveraging the best efforts of all health
care stakeholders, including
beneficiaries and their families. While
the goal of the QIOs is to benefit
Medicare beneficiaries, the work of the
QIOs may also, as a secondary matter,
benefit other patients and residents who
receive medical care. In this context, we
are seeking to ensure that the
regulations governing QIO eligibility
reflect contemporary practices and
permit the inclusion of organizations
that can help to improve care processes
for Medicare beneficiaries. We proposed
to do so by removing restrictions that
are no longer statutorily mandated and
including requirements that reflect the
current goals of the QIO Program.
One such contemporary practice is
the inclusion of patients and families in
health care quality improvement. As a
result, we proposed the addition to the
QIO requirements of a new focus on
patient and family engagement and
patient and family inclusion in case
reviews and quality improvement
initiatives.
We believe that the TAAEA
legislation allows us a great deal of
flexibility in how we restructure the
work that QIOs perform and the types
of organizations qualified to perform
that work. We intend to continually
examine methods for providing care to
beneficiaries in a way that maximizes
efficiency, eliminates waste, decreases
harm, lowers costs through
improvement, and engages patients
more effectively. One way to continue
improving the quality, efficacy, and
efficiency of care in the Medicare
program is to reconsider how QIOs
provide services to determine whether
the current longstanding contract
structure and eligibility requirements
best fit the continually evolving science
related to driving quality improvement.
The changes we proposed and are
adopting as final are intended to ensure
that we have the flexibility we need to
reconsider as necessary certain aspects
of the QIO Program structure in
response to experience and changes in
research findings and the health care

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community’s approach to quality
improvement.
The regulatory proposals in the CY
2014 OPPS/ASC proposed rule (78 FR
43672 through 43678) focus on the
primary functional responsibilities of a
QIO as a basis for determining
eligibility. These responsibilities are
case review (which includes the
statutory minimum standards) and
quality improvement initiatives. As
stated in the proposed rule, we believe
that the eligibility and contracting
standards proposed for QIOs focus on
the necessary minimum requirements
for successful operation of the QIO
Program.
C. Changes to the Nomenclature and
Regulations Under 42 CFR Parts 475
and 476
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43673 through 43678), we
set forth proposals for updating the
nomenclature and the definition of
physician in both 42 CFR Parts 475 and
476 and for the partial deletion and
revision of the regulations under 42 CFR
Part 475. Part 475 includes definitions
and standards governing eligibility and
the award of contracts to QIOs. We
proposed to replace nomenclature that
has been amended by the TAAEA;
revise the existing definition in Part
475, Subpart A and Part 476, Subpart A
of the term ‘‘physician;’’ add new
definitions to Part 475, Subpart A as
necessary to support proposed new
substantive provisions in Part 475,
Subpart C; and revise, add, and replace
some substantive provisions in Part 475,
Subpart C.
We have summarized the public
comments we received and our
responses below, using the regulation
sections as headings to guide the
discussion. In some cases, we have
summarized and discussed issues raised
by commenters in connection with the
substantive issue rather than the
regulation section identified by the
commenter in order to better discuss
each topic. For example, we have
addressed comments about the need for
objectivity and neutrality from all QIOs
in connection with our discussion
below in § 475.101 below, although
some commenters raised this issue in
connection with § 475.105.
Comment: As a general matter about
the proposal, one commenter urged
CMS to postpone proposed changes to
the QIO Program until ‘‘the pace of
healthcare reform is less frenetic,
physician practices are more stable,’’
and ‘‘CMS has a clearer sense of how
the proposed changes would impact the
quality and costs of patient care.’’

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Response: Although there have been
many changes made through health care
reform since 2010, there have been very
few programmatic changes made in this
particular area of health care quality
improvement. The science of quality
improvement has changed significantly
over the last few decades and we believe
that these proposed regulatory changes,
which allow flexibility for any number
of possible configurations, are long
overdue. Further, the substantial
changes made by the TAAEA are
generally effective with QIO contracts
awarded after January 1, 2012. As we
approach the conclusion of the current
QIO contracts and consider awarding
QIO contracts after the enactment of the
TAAEA, we believe that these changes
are best accomplished now. As we move
forward, we hope to capitalize on past
successes of the QIO Program as well as
improve the program by establishing a
more flexible, efficient, patient-centered
and family-centered model.
1. Nomenclature Changes
In order to align the regulations with
the nomenclature changes made by
section 261 of the TAAEA, we proposed
nomenclature changes where necessary
in 42 CFR Part 475. For example, we
proposed to revise the heading of
Subpart C of Part 475 to read ‘‘Subpart
C—Quality Improvement
Organizations’’ and to replace the term
‘‘peer review’’ with ‘‘quality
improvement’’. In each proposed
provision in Part 475, Subpart C, we
used the new nomenclature where
appropriate.
In addition, Part 476 is currently
entitled ‘‘Utilization and Quality
Control Review,’’ and Subpart C of Part
476 is entitled ‘‘Review Responsibilities
of Utilization and Quality Control
Quality Improvement Organizations
(QIOs),’’ both of which reflect the
terminology used before enactment of
the TAAEA. In order to reflect the
nomenclature changes made by the
TAAEA, we proposed to revise the title
of Part 476 to read: ‘‘Part 476—Quality
Improvement Organization Review’’ and
the title of Subpart C of Part 476 to read:
‘‘Subpart C—Review Responsibilities of
Quality Improvement Organizations
(QIOs).’’
Comment: One commenter asserted
that CMS’ proposed change of the term
‘‘peer review’’ to ‘‘quality
improvement’’ is vague and its impact is
unclear.
Response: We have made changes to
the nomenclature throughout Parts 475
and 476 consistent with the changes
made to nomenclature in the title and
text of the statute at sections 1151, 1152,
1153 and 1154 of the Act. As we

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mention above, similar changes to the
regulatory references to these
organizations have been made in the
past. However, the prior nomenclature
changes were made without changing
the definition or function of the QIOs.
We have made changes in this final rule
to reflect the program’s shift from a
compliance-oriented focus to one
emphasizing quality improvement in
addition to completing the
nomenclature changes made by the
TAAEA, modernizing and improving
the QIO Program, and changing the
eligibility requirements for QIOs.
After consideration of the public
comment we received on the
nomenclature changes, we are finalizing
these proposed changes to Parts 475 and
476 without modification.
2. Addition and Revision of Definitions
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43674), we proposed
changes to §§ 475.101 through 475.107
to reflect new eligibility standards for an
entity to be awarded a QIO contract and
to use specific terms that will be used
to describe QIOs and their quality
improvement work. In connection with
these changes, we proposed to add
definitions of ‘‘case review’’, and ‘‘QIO
area,’’ add cross-references to
definitions in § 476.1 of ‘‘practitioner’’
and ‘‘quality improvement initiative’’,
and revise the definition of ‘‘physician’’
under § 475.1 and § 476.1, as discussed
below. Further, we proposed a technical
revision to the definition of ‘‘Five
percent or more owner’’ in Part 475. In
the proposed rule, we solicited public
comments on our proposed definitions
and revisions.
We proposed to define ‘‘case reviews’’
to mean ‘‘the different types of reviews
that QIOs are authorized to perform.
Such reviews include, but are not
limited to: (1) Beneficiary complaint
reviews; (2) general quality of care
reviews; (3) Emergency Medical
Treatment and Labor Act (EMTALA)
reviews; (4) medical necessity reviews,
including appeals and DRG validation
reviews; and (5) admission and
discharge reviews.’’ We provided this
list to illustrate the range and scope of
case reviews but we noted in the
proposed rule that the Act and other
provisions in Chapter IV of Title 42 of
the Code of Federal Regulations require
additional reviews and that the
Secretary, pursuant to section
1154(a)(18) of the Act, may require
additional reviews under the contracts
awarded to QIOs.
We did not receive any public
comments on the proposed definition of
‘‘case review’’ and proposed
amendments to the definition of ‘‘five

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percent or more owner’’. We are
finalizing the technical revision to the
definition of ‘‘five percent or more
owner’’. We are finalizing the proposed
definition of ‘‘case review’’ with one
slight modification to eliminate the
word ‘‘including’’ in paragraph (5) to
avoid the suggestion that appeals and
DRG validation reviews are the only
types of medical necessity review. As
with the proposed definition, the final
rule provides a nonexhaustive list of
types of case reviews.
We proposed to expand the definition
of ‘‘physician’’ beyond the existing
definition under § 475.1 and § 476.1 to
reflect the definition in section 1861(r)
of the Act, as well as to cover several
additional characteristics that are
unique to the QIO Program. We
proposed the following definition of
physician for both Parts 475 and 476:
Physician means ‘‘(1) A doctor of
medicine or osteopathy, a doctor of
dental surgery or dental medicine, a
doctor of podiatry, a doctor of
optometry, or a chiropractor as
described in section 1861(r) of the Act;
(2) An intern, resident, or Federal
Government employee authorized under
State or Federal law to practice as a
doctor as described in paragraph (1)
above; and (3) An individual licensed to
practice as a doctor as described in
paragraph (1) above in any Territory or
Commonwealth of the United States of
America.’’ We stated our belief that the
proposed revisions are necessary to
eliminate references in paragraphs (1)
and (2) of the existing definition to
physicians licensed in the State in
which the QIO is located, in order to
reflect the fact that a QIO’s contract area
may no longer be limited to one State.
In addition, we proposed to amend
paragraph (3) of the existing definition
so that it no longer applies to only
American Samoa, the Northern Mariana
Islands, and the Trust Territory of the
Pacific Islands. We proposed to enlarge
this part of the definition to apply to
physicians licensed to practice in all
U.S. Territories and Commonwealths to
more closely align with the Secretary’s
flexibility in awarding QIO contracts
granted by the TAAEA. In the proposed
rule, we solicited public comments on
whether our proposed definition is
sufficiently inclusive and appropriate to
achieve these goals.
In addition, we proposed to define the
terms ‘‘practitioner’’ and ‘‘quality
improvement initiative’’ for purposes of
Part 475 by cross-referencing the
existing definitions for these terms at
§ 476.1.
Comment: A few commenters
supported the proposed changes to the
definition of ‘‘physician’’, and one

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commenter supported the expanded
definition of ‘‘physician’’ which the
commenter believed better reflected the
definition contained in the TAAEA.
Several other commenters suggested
that CMS’ proposed change to expand
the definition of ‘‘physician’’ may lead
to review of the actions of doctors of
medicine and osteopathy by other
‘‘limited’’ licensed practitioners and
recommended that physicians should
only be subject to review by other
physicians, preferably practicing
physicians in the same specialty or a
peer level match. Commenters requested
that CMS clarify that the proposed
changes are not intended to replace peer
review by QIOs with reviews of
physicians’ decisions by nonphysician
providers. Another commenter was
concerned with the potential impact the
broad definition of ‘‘physician’’ will
have with respect to its use in § 476.98.
Response: We appreciate the
commenters’ responses on this issue.
While we believe that the requirements
in section 1154(d) of the Act and the
regulations at § 476.98(a) make it clear
that QIOs are, except in limited
circumstances, required to use a peer-topeer match when performing reviews,
we understand that the expansion of the
definition of ‘‘physician’’ may mean that
the peer conducting the review may not
always be licensed in the same State
where the care took place but must be
licensed where the physician is
working. We note that section 1154(d) of
the Act provides that no QIO shall use
the services of an individual who is not
a duly licensed doctor of medicine,
osteopathy, dentistry, optometry, or
podiatry to make final determinations of
denial of services provided by such
physicians. In addition, we understand
the commenters concern that the
expanded definition of ‘‘physician’’ may
lead to review of the action of
physicians by physicians practicing in
another specialty. We would like to
clarify that, despite one commenter’s
suggestion in support of the proposed
definition, the TAAEA does not include
a definition of physician. It remains
unclear why some commenters believed
that our broadening of the definition of
‘‘physician’’ would lead to care
provided by physicians being reviewed
by nonphysicians. We reiterate that
there are safeguards in the statute and
regulations to ensure that, during case
review, there is a peer-to-peer match
whenever possible and that physician
decisions will not be reviewed by
nonphysician providers. We also note
that our subregulatory guidance, such as
the definition of ‘‘peer reviewer’’ in the
QIO Manual, emphasizes the

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requirement to use a specialty match
whenever possible. The QIO Manual
can be found on our Web site at:
http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/
Downloads/qio110c05.pdf. The QIO
Manual stipulates that a peer reviewer
is ‘‘a reviewer who is either a physician
or other practitioner who matches, as
closely as possible, the variables of
licensure, specialty, and practice setting
of the physician or practitioner under
review’’ and that only in ‘‘cases in
which there is no peer match available,
the QIO can use another physician
reviewer without the same expertise.’’
After consideration of the public
comments we received, we are
finalizing, without modification, our
proposal to revise the definition of
‘‘physician’’ under § 475.1 and § 476.1.
In connection with our proposal to
revise the requirements that an entity
must meet to serve as a QIO, we also
proposed to define, in § 475.1, the
terminology related to the geographic
area in which a QIO must perform its
different functions. Before our proposal
in the CY 2014 OPPS/ASC proposed
rule, the regulations in Part 475 did not
define this area but did refer to a QIO’s
‘‘review area’’ in a number of places in
existing text at §§ 475.102 and 475.103,
and ‘‘QIO area’’ in §§ 475.1, 475.105(a),
and 475.107(a) and (d). The term
‘‘review area’’ was used to refer to the
geographic area in which each QIO
performs its review functions under its
contract with CMS while the term ‘‘QIO
area’’ was used to refer to the geographic
area covered by the contract. We
proposed to define and use the term
‘‘QIO area’’ to mean ‘‘the defined
geographic area, such as the State(s),
region(s), or community(ties), in which
the CMS contract directs the QIO to
perform.’’ We stated that our proposal to
add this definition was meant to reflect
the flexibility afforded to us by the
TAAEA to establish a QIO area as the
geographic area we believe will be most
effective in accomplishing the goals of
a particular QIO contract. In addition,
we also stated that the change in
terminology from ‘‘QIO review area’’ to
‘‘QIO area’’ is intended to emphasize
that the term can encompass more than
just ‘‘review’’ functions. With this
proposed change, we stated our intent to
not only broaden the scope for choosing
an appropriately sized geographic area,
but also to identify capability and
functionality as the primary way to
identify the appropriate organization to
perform specific QIO contract functions.
We note that, on May 2, 2013, a
Request for Information (RFI) was
distributed seeking information about
the methods we may use to assign work

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to QIO contractors. In the RFI, we stated
that ‘‘to accomplish our goal of further
improving care for Medicare
beneficiaries, CMS intends to
restructure how it administers the
Program.’’ In addition, we solicited
‘‘comments about four potential options
the Agency may use to divide work
among a varying number of QIO
contractors across the country.’’ Many of
the commenters who responded to the
proposed rule appear to have been
aware of the RFI and many seem to have
been addressing the regional proposals
in the RFI as part of their comments on
the proposed rule.
Under the current QIO Program,
although there are State-based contract
awards, some QIOs share corporate
parents and several QIOs subcontract to
other QIOs for QIO work. The regulatory
proposal was not to regionalize QIOs
but to adopt a definition of ‘‘QIO area’’
that would apply if the contracts were
awarded on a regional basis or a Stateby-State basis and to implement
statutory flexibility that does not
mandate specific geographic areas for
QIO contracts nor prohibit regional
contracts.
The RFP process will be the process
through which the contract’s geographic
areas are defined. We would like to
make clear that it is our intent that the
regulation as proposed, and as finalized,
permits flexibility in terms of designing
the work and the geographic area for
each QIO. The contracting process will
finalize the details of the program’s
structural changes, if any.
Comment: One commenter supported
CMS’ proposed changes in terminology
from ‘‘QIO review area’’ to ‘‘QIO area’’
in order to emphasize that this term may
encompass more than ‘‘review’’
functions. One commenter supported
the expansion of a greater geographic
area and stated that the proposed
definition of ‘‘QIO area’’ versus ‘‘QIO
review area’’ emphasizes that the
proposed term encompasses more than
‘‘review’’ functions which may provide
a broader scope for choosing an
appropriately sized geographic area and
may assist in identifying the capability
and functionality as a means to identify
organizations to perform specific QIO
contract functions. Some commenters
stated that this proposed definition
allows for more flexibility and will
allow for the designation of QIOs that
are best equipped to provide a specific
set of services. Other commenters
indicated that the rapidly changing
requirements make it increasingly
difficult for every QIO to have the
requisite expertise and specialization in
order to be a subject matter expert on all
QIO initiatives and activities. These

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commenters stated that a regional QIO
approach has great potential to ensure
every State has the same level of expert
support and is consistently receiving the
same information.
Response: We appreciate the
comments in support of the expanded
definition of ‘‘QIO area’’ and the general
approach underpinning our proposal
that would allow specific QIOs to focus
and develop expertise in a single area of
quality improvement. The QIO Program
has expanded beyond case reviews and
the changes proposed reflect the array of
tasks that QIOs are currently
performing. We agree that the increased
flexibility is beneficial and plan to,
wherever possible, create efficiencies of
scale to pool expertise in the interests of
establishing and spreading best
practices. We would like to clarify that
a regional approach to the QIO Program
structure is one option that we are
considering. However, we have a variety
of geographic options available under
the statute and the regulation as
finalized in this final rule.
Comment: Several commenters stated
that many practicing physicians have
spent years building relationships with
their local QIOs and suggested that
these State-based QIOs have a degree of
credibility with local Medicare
beneficiaries and providers. In addition,
commenters stated that the State-based
QIOs are better able to identify problems
in their local communities, design
appropriate solutions, and identify local
physician leaders to initiate projects.
The commenters also stated that they
have had ‘‘long and fruitful
collaboration’’ with their respective
State-based QIO and indicated that this
relationship has resulted in sustained
quality improvements for their Medicare
beneficiaries. These commenters further
stated that valuable time and resources
would be lost as relationships and trust
would need to be forged again to ensure
provider engagement in educational
opportunities. One commenter stated
that, although some function-specific
QIOs may address unmet needs, these
QIOs should not be established at the
expense of State-based QIOs. This
commenter recommended that a cost
effective alternative would be for CMS
to give high-performing existing QIOs
the option to expand their portfolio of
quality improvement activities during
contract renegotiations.
Response: The proposed rule and this
final rule do not require regionalization
but rather permit the creation of
contract areas other than on a State-byState basis. In determining how to best
implement the flexibility afforded to the
Secretary by the statutory changes made
through the TAAEA, we will consider

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several factors. For example, under the
current structure of the QIO Program,
there already exists a multi-State
subcontracting structure for the appeal
case reviews. There also are several
multi-State corporate QIO management
structures that have operated
successfully for many scopes of work.
These structures have been able to
capitalize on the strengths and the
expertise of particular entities.
In addition, we believe that, for some
functions, QIO contracts that cross State
lines would create economies of scale
and standardization of processes and
eliminate duplicative administrative
and management overhead. This
potential structure would improve
communication between CMS and the
QIOs and decrease the contracting and
administrative burden currently faced
by both entities. Further, to the extent
that quality improvement initiatives are
designed in connection with nationwide
quality measurements or quality
improvement programs, QIOs would not
be hampered by serving larger QIO
areas. We are aware that many providers
have established strong relationships
with local QIO staff, and we understand
the importance of preserving these ties.
We expect to maintain in future QIO
contracts the type of local ‘‘on the
ground’’ involvement, which is tailored
to meet the needs of communities and
longstanding relationships that have
been built between providers and QIO
staff under the existing structure.
We believe that the proposed changes
to the definition of ‘‘QIO area’’ will
enable flexibility and targeting of
program expertise in the best interests of
beneficiaries and are consistent with our
efforts to continually strive to make the
QIO Program more efficient. In addition,
we note that in §§ 475.102 and 475.103,
discussed in more detail below, we
proposed and are finalizing provisions
to take into account the geographic
location of an organization applying for
a QIO contract. Those provisions do not
list exhaustive factors for consideration
in awarding QIO contracts and we may
include additional factors where and
when necessary.
Comment: One commenter supported
CMS’ proposal to define ‘‘QIO area’’ and
believed that it would be in the best
interest of Medicare beneficiaries. In
addition, the commenter encouraged
CMS to take advantage of the
opportunity for flexibility provided
when contracting with QIOs. Some
commenters supported CMS’ proposed
QIO Program changes by affirming that
greater standardization and nationally
recognized expertise are advantageous
for activities such as assistance with
education and data submission for

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quality measurement programs, and
technical advice related to quality
measurement specifications. One
commenter asserted that the proposed
QIO Program changes may result in
reduced spending by approximately
$330 million based upon Congressional
Budget Office estimates by
demonstrating more cost effective
strategies for delivering services. This
commenter also supported CMS’
proposal to expand the definition of a
QIO area that would allow a QIO to
serve in more than one State. The
commenter indicated that regional QIOs
(formed by more than one single-State
QIO contract held by a single corporate
entity) already currently exist and
believed that having regional QIOs is
logical from an economy of scale
perspective. One commenter stated that
it recognizes that economies of scale
and efficiencies may occur but indicated
its concern that a ‘‘dramatic change to
mandated multi-State [QIO] contracts’’
would introduce the possibility that
some States may be left without a local
source for quality improvement
technical assistance.
Some commenters recognized the
efficiencies and effectiveness that may
be achieved to the QIO Program and
recommended that, in situations where
successful work has been demonstrated
through QIOs that cover multiple States
(formed by more than one single-State
QIO contract held by a single corporate
entity), CMS use these collaborations to
test the feasibility and effectiveness of
the expanded ‘‘QIO area’’ definition as
a first phase in restructuring the QIO
contracts and QIO areas.
However, some commenters asserted
that it would be difficult to maintain the
‘‘local perspective’’ in a regionalized
QIO structure, that they did not see
evidence for ‘‘radical, untested’’ changes
to the State-based nature of the QIO
Program and stated that CMS’ proposed
changes seem to have been undertaken
with little consultation with either the
national or local practitioner
community of their respective States.
Some commenters maintained that the
proposed changes in the QIO Program
would cause the current State-based
QIO experience and expertise to be
‘‘sacrificed.’’ One commenter also
believed that long-term care providers
may be held responsible to increase
their administrative duties in order to
interact with a separate organization for
each function. One commenter stated
that a single-State QIO may be better
able to understand and focus on the
Medicare beneficiaries and providers
being served for more densely
populated States.

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Response: We reiterate that the
proposed rule and this final rule do not
require regionalization but rather permit
the creation of contract areas other than
on a State-by-State basis. We appreciate
the support for these regulatory
provisions and agree that
standardization and better targeting of
subject-matter expertise will help
increase the efficiency of the QIO
Program and create better value for
Medicare beneficiaries. While we did
not propose in the proposed rule that
we would establish a regional structure,
we acknowledge that the proposed rule,
once finalized, would accommodate that
structure. We believe that having the
flexibility to adopt a different QIO
contract structure, if we choose to
establish one, would enable the QIO
Program to benefit from the lessons
already learned through the multi-State
corporate structure of many QIOs. There
are currently 10 corporations that have
coordinated separate QIO contracts to
cover 26 States. In addition to the multiState corporate structure, some QIOs
have established subcontracting
relationships with other QIOs for
conflict of interest or administrative
efficiency purposes that have also
generated savings. Based on the QIO
Program’s history with these
subcontracting and corporate structures
that cross State lines, we believe that
multi-State QIO structures have been
successfully tested as a model for
potential QIO structural changes. At the
same time, we believe that this final rule
makes it clear that the local involvement
and expertise that is so important will
be maintained. As an example, the
requirements in § 475.102(a) of this final
rule make it clear that, in determining
eligibility for performing case review,
we will take into consideration ‘‘the
organization’s proposed involvement of
and access to physicians and
practitioners in the QIO area with the
appropriate expertise and specialization
in the areas of health care related to case
reviews’’ and ‘‘the organization’s ability
to take into consideration urban versus
rural, local, and regional characteristics
in the health care setting where care
under review is provided.’’
Furthermore, the RFI issued in May
2013 also generated significant
comment, in some cases from providers
and provider associations, which we
intend to consider as part of the
procurement process. Also, we received
public comments on our regulatory
proposal from practitioners and
providers, which we considered as part
of this rulemaking. In addition to these
opportunities to comment and present
their views, we anticipate that providers

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and practitioners will provide us
feedback on any changes that we will be
implementing in the next QIO
procurement and contract cycle so that
we may continue to improve the QIO
Program. In addition, §§ 475.102(b) and
475.103(b), as finalized, permit CMS to
consider size and location of an
organization as part of determining
whether the organization has
demonstrated the ability to perform case
review or quality improvement
initiatives as a QIO. We intend to
interpret and apply the provisions in
Part 475 as finalized in this rule to
ensure local experience and expertise
are available, maintained, and utilized
by all QIOs in connection with case
reviews and where necessary for quality
improvement initiatives.
After consideration of the public
comments we received, we are
finalizing the proposed definition,
without modification, of the term ‘‘QIO
area’’ to mean ‘‘the defined geographic
area, such as the State(s), region(s), or
community(ties), in which the CMS
contract directs the QIO to perform.’’
This term appears throughout Part 475
and is used consistent with this
definition.
We also proposed to add definitions
of the terms ‘‘quality improvement
initiative’’ and ‘‘practitioner’’ to Part
475 and to define them by cross
referencing the definitions of the terms
in § 476.1.
Comment: One commenter noted that
CMS proposed to cross-reference the
definition of ‘‘quality improvement
initiative’’ in § 475.1 to § 476.1 and
indicated that a definition of ‘‘quality
improvement initiative’’ was not
included in the proposed rule nor does
the Code of Federal Regulations
(October 1, 2012 Edition) include a
definition of it. The commenter
suggested that CMS provide a definition
of ‘‘quality improvement initiative’’ that
reflects the principles of contemporary
quality improvement.
Response: The current definition of
‘‘quality improvement initiative’’ under
§ 476.1 was finalized in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68559). The regulations as
amended are accessible through the
electronic Code of Federal Regulations
at www.ecfr.gov.
We did not receive any public
comments on the proposed crossreference to the term ‘‘practitioner’’ and
are finalizing that definition for Part 475
without modification. After
consideration of the public comment we
received regarding the term ‘‘quality
improvement initiative,’’ we also are
finalizing this definition without
modification.

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3. Scope and Applicability of Subpart C
of Part 475
We believe that the scope and
applicability provision for 42 CFR Part
475, Subpart C should reflect that the
statutory authority for the QIO Program
was amended by the TAAEA. In the CY
2014 OPPS/ASC proposed rule (78 FR
43674 through 43675), we proposed to
replace the regulatory language in
§ 475.100 with new language that
explicitly acknowledges that the
regulations in Subpart C implement
sections 1152 and 1153(b) and (c) of the
Act as amended by section 261 of the
TAAEA.
We did not receive any public
comments on the proposed revisions to
§ 475.100, and we are finalizing these
revisions as proposed without
modification.
4. Eligibility Requirements for QIOs
(§§ 475.101 Through 475.106)
We have interpreted and the
regulations in Part 475 implement the
statutory definition in section 1152 of
the Act as setting minimum eligibility
requirements for an entity to hold a QIO
contract. Our regulatory proposal in the
CY 2014 OPPS/ASC proposed rule (78
FR 43675 through 43678 and 43705
through 43706) proposed to implement
the changes in the QIO eligibility
standards made by the TAAEA.
As a general matter, we recognize and
appreciate the vital role of physicians in
the work of the QIOs but also believe
that some of the functions of the QIOs
necessitate a multidisciplinary approach
to quality improvement, inclusive of
expertise from a wide breadth of
disciplines. With the elimination of the
requirement that a QIO be sponsored by
or have access to physicians in a
specific organizational structure, we
proposed to delete the eligibility
requirements in §§ 475.101 through
476.104 related to the concepts of
‘‘physician-sponsored organization’’ and
‘‘physician-access organization.’’ In
light of the current multidisciplinary
approach to QIO activities, we believe
that expanding the existing eligibility
requirements beyond ‘‘physiciansponsored organizations’’ and
‘‘physician-access organizations’’ will
both better reflect the flexibility
Congress provided in the TAAEA
amendments to section 1152 of the Act
and be inclusive of the
multidisciplinary approach that
currently exists in contemporary quality
improvement.
In the proposed rule, we solicited
public comments on our focus on these
primary QIO functions of case review
and quality improvement initiatives and

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how this functional approach would
ensure that QIOs are appropriately
selected for contract award. We
proposed to vacate existing text at
§§ 475.104 and 475.106 and reserve
these two section numbers.
We respond to the public comments
we received that are specific to each
regulation topic below and address how
we are finalizing §§ 475.101 through
475.106. We note that, while some
commenters specifically identified
regulation sections as part of the
comment, we have grouped the
comments by topic.
a. Eligibility To Be Awarded a QIO
Contract (§ 475.101)
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43675 through 43676), we
proposed that revised § 475.101 would
no longer reference ‘‘physiciansponsored organizations’’ and
‘‘physician-access organizations,’’
would include a requirement that the
governing body of the QIO include at
least one consumer representative, and
would include new eligibility standards
for an organization to be awarded a QIO
contract based on the TAAEA
amendments to section 1152 of the Act.
First, in paragraph (a), we proposed that
a QIO must have a governing body that
includes at least one representative of
health care providers and one
representative of consumers as required
by sections 1152(2) and (3) of the Act as
amended by the TAAEA. Second, in
paragraph (b), we proposed to interpret
and implement the amended language
in section 1152(1) of the Act that an
organization awarded a QIO contract
must be able, as determined by the
Secretary, to perform the functions
under the Act consistent with the
purposes of the QIO Program and the
Medicare program by requiring that an
organization demonstrate the ability to
meet eligibility requirements and
perform the functions of a QIO. Our
proposal characterized the functions of
a QIO as the activities that are built into
the request for proposals used to award
QIO contracts and the ability to perform
case reviews and/or quality
improvement initiatives as described in
these regulations. We stated that, in our
view, these broad categories encompass
the work QIOs are required to perform
under section 1154 of the Act. We stated
our belief that our proposal reflects a
different approach to structuring the
QIO requirements than the current rule:
We proposed to focus on the functions
the organization performs under the
QIO contract instead of the structure of
the organization itself. As discussed in
more detail below in connection with
proposed §§ 475.102 and 475.103, this

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function-focused approach also reflects
both the important role of physicians
and a multidisciplinary approach for the
two primary functions of the QIO
contracts, case reviews and quality
improvement initiatives. These two
primary functions are based on the
statutory requirements for the functions
QIOs must perform and our current
approach of using quality improvement
initiatives to improve the quality of care
provided to Medicare beneficiaries. By
referencing the contractual requirements
set forth in the requests for proposals,
we proposed to incorporate the
flexibility provided in section 1154(a) of
the Act to require a QIO to perform one
or more of the listed QIO functions and
section 1154(a)(18) of the Act for the
inclusion of additional activities for
QIOs to perform when such additional
activities are determined necessary to
improve the quality of care for Medicare
beneficiaries.
Finally, in paragraph (c) of § 475.101,
we proposed that a QIO must
demonstrate the ability to actively
engage beneficiaries, families, and
consumers, as applicable, in case
reviews and quality improvement
initiatives. Although this is not a
specifically required qualification for a
QIO under sections 1152 and 1153 of
the Act, we proposed this requirement
because it reflects the multidisciplinary
and multi-stakeholder approach to QIO
functions that we intend to establish.
Health care costs have doubled as a
share of the economy over the past three
decades, causing stress on beneficiaries,
families, employers, and government
budgets. We stated our belief that
motivating beneficiaries to become
involved in their own health care may
reduce waste and ultimately improve
the quality and efficiency of health care.
We noted that one important way to
accomplish this is by educating
beneficiaries, their families, providers,
and the public about the importance of
identifying and pursuing value in health
care. Value represents the best possible
quality of health care at the most
reasonable cost. A major component of
a successful value initiative depends on
a QIO’s understanding of patient and
family goals, expectations, motivations,
and aspirations. Our inclusion of the
requirement that a QIO have the ability
to actively engage beneficiaries,
families, and consumers in health care
decisions emphasizes our commitment
to patient and family engagement as an
essential component of the QIO
Program.
In the proposed rule, we solicited
public comments on whether our
proposal sufficiently incorporated the
statutory flexibility, identified the goals

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of the QIO eligibility requirements, and
provided guidance on how
organizations will be determined
eligible for QIO contracts.
Comment: One commenter suggested
that these proposed changes may qualify
as ‘‘lowering the standards to become a
QIO’’ and therefore stated that providers
may not be willing to engage with these
entities and progress may cease.
Response: The commenter was not
specific about how the proposal
appeared to lower standards for QIOs.
We recognize that our proposal would
establish, in § 475.101, the ‘‘minimum
level of resources and skills’’ an
organization must have in order to
demonstrate its capability to perform as
a QIO. However, we do not intend for
these factors to be the only criteria we
use to evaluate organizations requesting
QIO contracts. The RFPs will include
detailed information that will be used in
evaluating each offeror. The standards
we proposed at §§ 475.102 and 475.103
are a description of the factors we may
use and should not be interpreted as an
exhaustive list.
Comment: One commenter stated that
the proposed change in the definition of
eligible organizations to remove from
§ 475. 105 the restriction from
contracting with an association of health
facilities may not ensure that all
providers have equal access to quality
improvement efforts within a given
region. The commenter indicated that
all trade and professional associations
do not represent all providers within a
region and questioned how CMS will
assure ‘‘equal access and assistance’’
will be provided to all providers,
regardless of membership status in the
potential association being responsible
for or involved in working with
providers on quality initiatives. This
commenter believed that if a trade or
professional association were to become
a QIO, that QIO would show preference
to those providers who are members of
its trade or association.
Response: Although these comments
were made in reference to proposed
§ 475.102 and § 475.103, we believe that
all public comments concerning
eligibility and our proposed changes to
make some general requirement changes
are best discussed together with the
comments specifically addressing our
proposed eligibility changes in
§ 475.101. We also appreciate the
concern that, by amending § 475.105 to
expand eligibility to associations of
health care facilities, some providers
may not receive treatment equal to those
providers affiliated with the
professional organization. We note that
the TAAEA specifically amended the
statutory prohibition on associations of

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health care facilities serving as QIOs
and that our proposal to change
§ 475.105 was designed to reflect the
statutory change. In response to these
concerns, we have added language to
the QIO eligibility requirements in
§ 475.101(d) to emphasize that an
organization must demonstrate its
‘‘ability to perform the functions of a
QIO with objectivity and impartiality
and in a fair and neutral manner.’’
Comment: In the context of the
definition of ‘‘QIO area’’, some
commenters stated that QIOs should
have experience and a trusted
relationship with practitioners when
engaging in quality improvement
initiatives, as these characteristics are
necessary to ensure that patients are
protected from errors, and that errors,
when they occur, are corrected. These
commenters also stated that QIOs must
be able to demonstrate fairness to
practitioners as well as a commitment to
patient-centered care.
Response: We agree with the
commenters who requested that we
include a requirement that an
organization be able to perform QIO
quality improvement initiative
functions in a fair and neutral manner.
We also believe that this criterion
should be applied to all QIO functions.
We agree that an organization should be
free from any conflicts of interest and be
able to demonstrate fairness and serve
as an objective party. To address these
concerns, we have added final language
at § 475.101(d), a requirement that QIO
organizations be able to ‘‘Demonstrate
the ability to perform the functions of a
QIO with objectivity and impartiality
and in a fair and neutral manner.’’
Comment: Some commenters were
concerned with CMS’ proposal in
§ 475.101(c) that, in order for
organizations to qualify for QIO
contracts, they must demonstrate the
ability to actively engage beneficiaries,
families and consumers, as applicable,
in case reviews or quality improvement
initiatives. These commenters asked for
further clarification as to how CMS
envisions incorporating patients and
families into the case review function.
Some commenters asserted that it is
appropriate to consider how patients
and families can be of assistance in
areas such as patient perception of care,
patient decision-making, patient safety,
and quality. In addition, these
commenters asserted that consumer
engagement in health care is a relatively
new field with a small body of research
and evidence and believed that CMS
may be challenged to assess whether
QIO applicants are able to demonstrate
the ability to actively engage
beneficiaries in case reviews.

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Response: We recently began a Patient
and Family Engagement Campaign
(PFEC), which has been implemented in
25 States. The purpose of this project is
to support QIOs who propose fresh and
original models to develop and
implement a local PFEC that supports
HHS’ and CMS’ goals of personcenteredness and family engagement.
The underlying goals of this effort are to
involve patients and families in
decisions regarding health and
healthcare in order to ensure
consistency with patient preferences
and priorities and empower them to
take action for their own health care that
could improve quality of life. We
believe that this 1-year project will
provide strategies and results that can
be available for all QIOs to use. We also
believe that the beneficiary complaint,
and beneficiary appeal processes are
excellent opportunities to incorporate
patient and family engagement into case
review activities. We expect to learn
strategies from the PFEC that can be
spread and utilized in future case
review activities that involve direct
communication with Medicare
beneficiaries.
Although Patient and Family
Engagement is a relatively new field, we
believe that there is sufficient activity in
the health care community to require
that QIOs incorporate Patient and
Family Engagement techniques in their
contract proposals, strategies, and
techniques. Because current information
regarding evaluation and measurement
of Patient and Family Engagement is
limited, we intend use evaluation
strategies and benchmarks successfully
adopted by the Hospital Engagement
Networks (HENs) to measure this new
QIO activity. Outside of those
measurement techniques tested by
HENs and proposed by QIOs, we are not
planning to be immediately prescriptive
in our requirements for measuring QIOs’
tasks in this new field. We refer readers
to the following CMS Web site for more
information concerning HENs: http://
partnershipforpatients.cms.gov/aboutthe-partnership/hospital-engagementnetworks/
thehospitalengagementnetworks.html.
Comment: Some commenters
supported the proposed changes to
separate the two primary functions of
the QIO contracts, case reviews and
quality improvement initiatives, and
supported the focus on the functions the
organization performs rather than the
structure of the organization itself. One
commenter expressed concern regarding
the extent to which CMS may further
delineate or separate work within the
case review and quality improvement
functions and cautioned CMS against

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severe subdivision of work within each
of the functions, as they believe this
would require hospitals to potentially
work with many different QIO
contractors.
One commenter argued that
bifurcating case review and quality
improvement initiatives would increase
administrative burden on providers and
weaken the collaborative relationship
with providers, QIOs, and other
community stakeholders. This
commenter urged CMS to retain an
integrated approach to QIO work. Other
commenters supported separating these
functions, but requested that CMS not
separate the case reviews so much so
that a provider could be working with
multiple QIOs for different types of
cases, as this could prove confusing,
burdensome, and expensive.
One commenter argued that the case
review and quality improvement
functions of QIOs should not be
bifurcated because case review provides
a QIO with the opportunity to identify,
test, implement, and measure results in
areas where providers need quality
improvement assistance. The
commenter also stated that fragmenting
the functions would increase
administrative burdens on providers
because they would be required to act
with multiple entities, and this would
impede relationships between QIOs and
facilities that are essential to quality
improvement. Another commenter
stated that CMS should consider a
mechanism for linking quality
improvement and case review
contractors for the purpose of
information sharing because, without
this link, it is difficult to determine
systemic and isolated issues. Another
commenter stated that, if the two
functions are bifurcated, there should be
a plan for how these organizations will
avoid giving conflicting, competing, or
fragmented messages.
Response: We believe that a division
of case review from quality
improvement work would benefit the
program by removing the tension and
potential conflict of interest between
performing case review of providers’
care and then attempting to engage
those same providers in quality
improvement initiatives to improve
quality. As we have previously done,
the QIO Program will continue and
possibly expand its use of National
Coordinating Centers (NCCs) to help
with the coordination of case review
and quality improvement work.
Although providers may be asked to
work with more than one QIO, allowing
a single QIO to focus on a specific task
will be beneficial to that QIO in
becoming a stronger subject-matter

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expert. The more expertise a QIO
achieves, the more likely it will be that
the QIO will effectively spread best
practices in its engagement with
providers. We believe that the flexibility
to combine or separate these functions
is best made during the contract
process. Therefore, the regulation we are
finalizing explicitly permits but does
not require the division of these
functions.
Comment: Some commenters
supported CMS’ proposal to ensure that
QIO governance includes
representatives of consumers and health
care providers. The commenters
believed that including these
representatives would ensure that the
CMS envisioned multidisciplinary and
multi-stakeholder approach to QIO
activities is implemented.
One commenter agreed with the
importance of ensuring that essential
voices have a role in the governance of
the QIOs but suggested that CMS avoid
specifying QIO governance
requirements which may be viewed as
too prescriptive and may result in token
rather than meaningful representation.
Response: The requirement to have at
least one consumer and one provider
representative on the QIO’s governance
board is a statutory requirement from
section 1152 of the Act. Therefore, we
have no authority to eliminate this
requirement in our regulations. We also
believe that it is beneficial to the QIO
Program to have both provider and
consumer groups properly involved in
QIO governance level decision-making.
However, to ensure that we are not too
prescriptive in our governance
requirements, we did not propose
additional requirements or details
beyond the statutory mandate. For
example, we did not require that
beneficiaries also be represented as
members of the board. Instead, in
§ 475.101(c), we chose to require that a
QIO demonstrate its ability to actively
engage these partners in case reviews
and quality improvement initiatives.
Comment: One commenter expressed
concern that the possible change where
by regional review agents would no
longer need to be local, physician-based
organizations and could be for-profit
entities was insulated from public
comment in the recent RFI.
Response: We appreciate the public
comments regarding our eligibility
proposal in the proposed rule. The RFI
was issued to solicit comments only on
potential options for restructuring and
dividing work among QIOs. Although
some commenters believed that the RFI
provided limited opportunity to
comment on the overall changes CMS is
considering, we knew that the public

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would have ample opportunity to
comment on our proposal for revisions
to the regulations to implement the
statutory amendments that were created
by the TAAEA through this regulation
comment process. We understand the
commenters’ concern that QIOs are no
longer required to be physiciansponsored or physician-access
organizations. However, as we
discussed in the preamble to the
proposed rule, we believe that
contemporary quality improvement
should involve a multidisciplinary team
of practitioners. Although the revisions
do allow for additional for-profit entities
(health care associations) to be QIOs,
there has never been a requirement that
QIO organizations be nonprofit
organizations.
Comment: One commenter expressed
concern that because quality
improvement initiatives require
complete trust in the participating
organizations, it may be difficult for
providers to separate the potential
conflict that would exist between a
payor organization that is both paying
for services and providing assistance in
improving quality and efficiency. The
commenter stated that providers would
be placed in the position of determining
whether activities are truly in the best
interest of the beneficiary or in the best
interest of the payor organization.
Some commenters requested that
CMS revise the proposed regulatory
language changes in the final rule to
exclude provider and payor
organizations from QIO eligibility
criteria as either a prime contractor or
as subcontractors, or to revise the
proposed changes to reflect similar
language to that of the State Medicaid
agencies that are required to
demonstrate that they can act with
independence and objectivity from their
own program. These commenters
suggested that provider and payor
organizations are advocates for their
paying members and believed that there
may be an unfair competitive advantage
for other business opportunities where,
for example, a State hospital association
may be put in the position of reviewing
and/or undertaking quality initiatives
with its own members. In addition, the
commenters stated that these proposed
changes may undermine conflict-ofinterest safeguards currently in place
because these organizations have
professional and financial relationships
that they believe may hinder their
ability to be independent and neutral.
Response: We agree with the
commenters that impartiality and
objectivity are keystones to QIO success;
these commenters suggested that we
revise our proposed changes to

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§§ 475.102 and 475.103 to reflect similar
language to that of proposed
§ 475.102(c), which requires that State
Medicaid agencies demonstrate that
they can act with independence and
objectivity from their own program. We
also understand that payor
organizations may find themselves in a
difficult position when working with
the providers who receive payments
from the organization. We appreciate
the public comments cautioning us
about potential conflicts of interest that
may arise from our proposal in
§ 475.105 about the eligibility of payor
organizations to serve as QIOs. We
believe that all QIOs should be required
to perform quality improvement
initiatives in a fair and neutral manner
and believe that this criterion should be
applied to all QIO functions. We also
agree that an organization should be free
from any conflicts of interest and be
able to serve as an objective party.
To address these concerns, we are
finalizing proposed § 475.101 by adding
a new paragraph (d) that requires all
QIOs to ‘‘[d]emonstrate the ability to
perform the functions of a QIO with
objectivity and impartiality and in a fair
and neutral manner.’’ In addition, in
this final rule, we have added language
to § 475.105(a)(3) to make payor
organizations ineligible for QIO
contracts unless the payor organization
‘‘demonstrates to the satisfaction of
CMS that, in performing QIO activities,
the payor organization will act with
complete objectivity and independence
from its payor program.’’
After consideration of the public
comments we received, we are adopting
as final, with one minor technical
modification, the proposed revised
provisions of § 475.101(a) through (c)
that contain the requirements that an
organization must meet to be eligible for
a QIO contract. In paragraph (c), we are
finalizing a minor technical
modification to the text to use ‘‘and/or’’
instead of ‘‘or’’ to be consistent with
how paragraph (b)(2) treats eligibility
standards for performing case review
and quality improvement initiatives. We
are finalizing a new paragraph at
§ 475.101(d) to add an objectivity and
neutrality requirement as well.
b. Eligibility Requirements for QIOs to
Perform Case Reviews and Quality
Improvement Initiatives (§ 475.102 and
§ 475.103)
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43676), we proposed to list
the various factors CMS may use to
determine that an organization has
demonstrated its ability to perform case
reviews. We stated that we do not
consider this list to be comprehensive,
but an indication of the types of factors

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we intend to focus on. The list of factors
emphasizes the importance of QIOs
having access to qualified physicians
and practitioners for the purpose of
performing case reviews.
Case reviews are concerned with care
that was, should be, or should have
been provided based on the facts of a
particular case, concerning a particular
episode of care or concerning a
particular beneficiary, or both. By
contrast, the vast majority of quality
improvement initiatives are not initiated
in the same manner as case reviews.
Rather, quality improvement initiatives
are based on patterns of care that reveal
problems that are more systematic in
nature, such as those that result in
inefficiency, waste, or high cost, or that
could potentially harm beneficiaries.
These patterns of care can reflect
problems that might impact large
segments of the population or single
episodes of care where the impact might
affect fewer people, but the QIO is
concerned about the health and safety of
the public due to the severity of the
quality of care issue. We proposed to
revise §§ 475.102 and 475.103 to
provide that CMS will determine if an
organization is capable of performing
case reviews and quality improvement
initiatives, respectively, using an
illustrative list of similar factors and
including the same constraints on
Medicaid agencies serving as QIOs (with
the one additional requirement that
these agencies demonstrate objectivity
and independence from the Medicaid
program). Because the proposals at
§§ 475.102 and 475.103 are similar, we
discuss these proposals, the public
comments we received, and the final
provisions together.
In § 475.102(a) and § 475.103(a), we
proposed illustrative lists of the types of
factors CMS may use to determine that
an organization has demonstrated the
ability to perform case reviews or
quality improvement initiatives based
on factors related to how the QIO work
will be performed and the underlying
capabilities necessary for performing
well. We do not consider these lists to
be comprehensive, but an indication of
the kinds of factors on which we intend
to focus. Under our proposals in
§ 475.102(a)(1) and (a)(2) and
§ 475.103(a)(1) and (a)(2), CMS would
consider virtually identical factors such
as: (1) The organization’s proposed
processes, capabilities, quantitative and/
or qualitative performance objectives,
and methodology for performing case
reviews or quality improvement
initiatives; and (2) the organization’s
proposed involvement of and access to
physicians and practitioners in the QIO
area with appropriate expertise and

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specialization in the areas of health care
related to case reviews or quality
improvement initiatives.
Under § 475.102(a)(3) and (a)(4), with
respect to performing case reviews, we
proposed that CMS would consider the
organization’s ability to take into
consideration urban versus rural, and
regional characteristics in the health
care setting where the care under review
was provided; and the organization’s
ability to take into consideration
evidence-based national clinical
guidelines and professionally
recognized standards of care. Under
§ 475.103(a)(3), with respect to
performing quality improvement
initiatives, we proposed that CMS
would consider the organization’s
access to professionals with appropriate
knowledge of quality improvement
methodologies and practices. Our
proposals at § 475.102(a)(5) and
§ 475.103(a)(3) included the use of
virtually identical evaluation factors
such as the organization’s access to
qualified information technology (IT)
expertise. In the proposed rule,
regarding § 475.102(a) and § 475.103(a),
we solicited comment on whether the
regulation text should incorporate the
standards for QIOs that we proposed to
use and the factors we intend to
consider when determining whether
those standards have been met. The
comments received and our responses
are set forth below.
Comment: One commenter suggested
that, in determining QIO eligibility as a
result of the proposed changes, CMS
consider how case review types, such as
beneficiary complaints and general
quality of care reviews, may be more
effective when carried out by a local
QIO organization rather than a regional
model. In addition, as noted above,
several other commenters raised
concerns about using regions rather than
States as the service area for QIO
contracts.
Response: We discuss above many of
the public comments about regional QIO
contracts in the context of our rule
finalizing the definition of ‘‘QIO area.’’
We also considered whether the success
of case review types that involve direct
contact with beneficiaries would suffer
under a regional model. We believe that
an established subcontracting
relationship that one QIO currently has
with 20 other QIOs to perform appeals
work for them during the weekends
serves as a model that has shown that
this type of multi-State coordination can
be done. In fact, this arrangement has
been done seamlessly and with greater
efficiency than the State-based model.
This model allows those QIOs who have
a low volume of appeals during their

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weekend downtime to direct those cases
to a single entity. This arrangement has
generated savings in administrative
overhead by redirecting the fragmented
volume to one QIO for more efficient
processing. We believe that the success
of this existing model could be
replicated under regional QIO contracts
for case review functions. However, as
we discuss above, we agree with
commenters that sensitivity to and
knowledge of the local health care area
and issues are necessary for QIO
success. Along these lines, we are
finalizing § 475.102(a)(3) with the
addition of the word ‘‘local’’ to clarify
that this is one of the factors to be
considered in determining whether an
organization has demonstrated the
ability to perform case reviews. In
addition, we note that §§ 475.102(b) and
475.103(b) explicitly permit CMS to
consider the geographic location of an
organization as part of this
determination about the ability to
perform, respectively, case reviews and
quality improvement initiatives.
Comment: Although some
commenters supported CMS’ proposed
criteria, many commenters suggested
additional or revised criteria for
determining whether an organization
has demonstrated the ability to perform
case reviews. Some commenters
indicated that CMS should add to its
evaluation criteria whether an
organization can conduct case reviews
in a fair and neutral manner. One
commenter suggested that CMS add: (1)
Experience as a QIO; (2) whether the
organization has a formal, internal
quality management system; (3) whether
the staff has quality credentials (for
example, Certified Professional in
Healthcare Quality, Certified Health
Care Quality Management, and Six
Sigma); and (4) whether the
organization is free of actual or
perceived organizational conflicts of
interest and able to serve as an objective
party. One commenter specifically
requested guidance regarding CMS’
statement that it will not ‘‘limit
evidence an organization may present to
demonstrate its capability to perform
case reviews’’ when reviewing prior
experience. Many commenters
suggested additional or revised criteria
for determining whether an organization
has demonstrated the ability to perform
quality improvement activities. These
commenters suggested that CMS add: (1)
Ability to foster a relationship of trust
and engagement with clinicians and
executive leaders; (2) demonstrated
capability to convene and establish
effective working relationship with
various stakeholders, because QIOs

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should support coordinated care and
breaking down silos and building a
more coordinated infrastructure; (3)
demonstrated capacity to collect,
analyze, and share data with providers
that spurs improvement because data
collection and sharing data are critical
in quality improvement; (4) ability to
complement and not duplicate quality
improvement efforts already underway
through State, regional, and Federal
programs; (5) ability to access and
include others, especially those with
performance improvement experience;
(6) experience with and an approach to
change management because CMS has
on many occasions stated that QIOs will
be required to represent CMS as
‘‘change agents’’; (7) demonstrated
ability to be a neutral, independent
organization and provide objective
assistance to providers without
favoritism or conflict of interest,
specifically because failing to achieve
quality metrics can lead to financial
penalties; and (8) demonstrated ability
to share best practices.
Response: As discussed above in
connection with our final rule at
§ 475.101(d), we believe that whether an
organization can conduct case reviews
in a fair and neutral manner is an
important consideration and that this
criterion of neutrality and fairness
should be applied to all QIO functions.
In addition, we agree that this regulation
should not limit the information and
factors used to determine whether an
organization applying to be a QIO has
demonstrated its ability to perform case
review and/or quality improvement
initiatives. Because we are finalizing our
proposal to expand criteria to qualify for
QIO contracts beyond physiciansponsored and physician-access
organizations and we intend to make
our qualification criteria fair for all
potential organizations who qualify, we
will interpret and implement §§ 475.102
and 475.103 as providing illustrative
and nonexhaustive criteria for
consideration. We do not plan to
unreasonably limit evidence an
organization may present to
demonstrate its capability to perform
QIO functions to specific QIO
experience and agree that information
such as that identified by the
commenters may be relevant. We
particularly appreciate the
recommendation that we require that all
QIO organizations have a formal
internal quality management system and
a staff with quality credentials, and
although the factors listed in paragraph
(a) are not meant as an exhaustive list,
we will take into consideration the
requirements recommended by these

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commenters and we may include them
in our RFPs.
Comment: Commenters requested
more information regarding how CMS
will evaluate and weigh reasons for and
against the award of contracts, and
noted that CMS proposed
nonexhaustive lists of types of factors
without specifying the weight each
would receive or what other factors
CMS might consider.
Response: Although we proposed to
establish the ‘‘minimum level of
resources and skills’’ an organization
must have in order to demonstrate its
capability to perform as a QIO, we do
not intend for the factors listed in the
regulations to be the only criteria we use
in our evaluation of organizations
requesting QIO contracts. The RFP will
include detailed information that will
be used in evaluating each offeror and,
if we decide to use a weighted
evaluation methodology, the weights to
be used in the evaluation of proposals.
Our proposals at § 475.102(b) and
§ 475.103(b) include the following
virtually identical evaluation factors. In
paragraph (b) of these sections, we
proposed that CMS may consider
characteristics such as the geographic
location, size, and prior experience, that
CMS finds relevant, of an organization
in order to determine whether the
organization has the capability to
perform case review activities or quality
improvement initiatives. A summary of
the public comments we received on
paragraph (b) of §§ 475.102 and 475.103
and our responses are set forth below.
Comment: Some commenters
supported using a regional approach to
conduct case reviews. However, the
commenters urged CMS to make sure
that contractors have mechanisms in
place to ensure that they comprehend
and consider regional characteristics of
providers. Another commenter argued
that case reviews would be more
effective when done locally rather than
by a centralized or regional organization
because it is more effective for a local
QIO to uncover breakdowns in systems
and processes of care.
Response: In addition to the
provisions in paragraph (a) of
§§ 475.102 and 475.103 that address
involvement and access to physicians
with appropriate expertise and our
addition of local characteristics to the
list of what a QIO must be able to
consider in performing case review, our
proposal in paragraph (b) for both
§§ 475.102 and 475.103 would permit
CMS to consider the geographic location
and size of organizations applying to be
QIOs. As noted above, we believe that
the current QIO tested subcontracting
structure for handling appeals review

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across State lines verifies that case
review can be performed effectively and
efficiently through a more regionalized
structure. To the extent that the
geographic location of an organization is
a barrier or enhancement to successful
performance, the regulation as proposed
and as finalized would permit CMS to
consider the location. The final rule
provides the flexibility that is necessary
to consider all relevant facts about the
geographic location and size of an
organization compared to the QIO area
that will be served. Further, the addition
of the term ‘‘local’’ to § 475.102(a)
clarifies that we deem the consideration
of local characteristics essential.
Comment: Another commenter stated
that the second sentence proposed in
§ 475.103(b) should be revised so that
CMS must consider prior experience in
health care quality improvement and
that such prior experience must include
conducting quality improvement
initiatives that achieved successful
results.
Response: We agree with the
recommendation that CMS should
consider prior experience in health care
quality improvement and whether that
such prior experience achieved
successful results. In response to this
comment, we are finalizing § 475.103(b)
with additional language to include the
commenter’s suggestion that CMS
consider relevant quality improvement
initiative experience and whether it
achieved successful results.
Finally, we proposed to include in a
revised version of paragraph (c) of
§ 475.102 clarifications to the text that
reflect the existing regulatory text at
§ 475.104(d), with some minor
modifications. Section 475.104(d)
currently includes requirements that a
State government must meet in order to
qualify as a QIO. Under our proposal,
§ 475.102 would be revised to apply this
additional requirement in connection
with case reviews. Similarly, as
proposed, the provision at § 475.103(c)
includes the requirements that a State
government must meet to qualify as a
QIO that performs quality improvement
initiatives. While both §§ 475.102(c) and
475.103(c), with respect to State
governments that administer a Medicaid
program, maintain the substance of the
existing rule, each of this makes it clear
that the scope of the review will be
limited to case review and quality
improvement initiatives, respectively. In
order to do this, in § 475.102(c), we
proposed to replace the term
‘‘utilization and quality review
functions’’ with the term ‘‘case review’’
and in § 475.103(c), we proposed to
replace the same term with ‘‘quality
improvement initiatives.’’ We proposed

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to revise the language in § 475.102(c)
and § 475.103(c) to clarify that the
objectivity and independence
mentioned in the existing regulation
relate to objectivity and independence
from the Medicaid program, as we
believe there is an inherent conflict of
interest that arises from the State’s
financial interest in the administration
of that program. We did not receive any
public comments on the proposed
revisions to § 475.102(c) and
§ 475.103(c), and therefore are finalizing
them as proposed.
We also received a number of public
comments about §§ 475.102 and 475.103
generally rather than about specific
paragraphs of those sections. We
address those public comments below.
Comment: Commenters stated that
QIOs should be permitted flexibility to
offer different types of assistance to
providers because many different
approaches may be pursued by
providers in a given jurisdiction.
Response: We appreciate this
comment and do not plan to use this
regulation to prohibit QIOs from
offering technical assistance or to
implement quality improvement
initiatives through approaches and
techniques if they are determined to be
the best for the population in the QIO
area.
Comment: Commenters suggested that
CMS allow hospitals to work with
multiple QIOs because different QIOs
may have various types of subjectmatter expertise. However, commenters
also noted that managing multiple
contracts may be difficult for small or
resource-strapped hospitals, potentially
limiting their involvement in quality
improvement activities.
Response: We appreciate the support
for separating some QIO functions to
allow for QIO development of
specialized expertise and will take this
comment into consideration when
developing the details in our RFPs. We
also understand that working with
multiple QIOs may be difficult, and we
will include national coordination of
QIO tasks through NCCs to aid
providers in navigating the QIO contract
structure.
Comment: One commenter stated that
it is essential to quality improvement
initiative work to have a local presence
and understand contextual factors such
as pressures and incentives of the
community and its circumstances.
Another commenter stated that the
planned changes would make QIOs less
focused on quality improvement at the
community level and less able to forge
partnerships with providers and
patients to address challenges.

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Response: We agree with the
importance of a local presence as a
means to forge important partnerships
with providers and beneficiaries. We
intend to spell out these requirements in
detail in the RFPs. We believe that our
intent is made clear in § 475.103 of the
regulations which states that in
determining eligibility for performing
quality improvement initiatives, we will
take into consideration ‘‘the
organization’s proposed involvement of
and access to physicians and
practitioners in the QIO area with the
appropriate expertise and specialization
in the areas of health care concerning
the quality improvement initiative’’ and
that paragraph (b) permits us to consider
the geographic location of a QIO as
necessary. Our intent is to put in place
safeguards to ensure there is local
involvement during quality
improvement initiatives. Although case
review concerns care that was given at
one specific place, quality improvement
initiatives may address national or
regional issues. We would like to
reiterate that these characteristics are
not an exhaustive list and that these
factors can be considered in each
procurement as necessary.
Commenters on the proposed
revisions to § 475.102 and § 475.103 also
raised the topic of objectivity and
impartiality of the QIO. These public
comments are addressed above in
connection with the general eligibility
requirements in § 475.101.
After consideration of the public
comments we received, we are adopting
proposed §§ 475.102 and 475.103 as
final, with modifications. We are
finalizing paragraph (a)(3) of § 475.102
with the addition of ‘‘local’’ to the list
of characteristics that an organization
must be able to take into consideration.
We also are making minor revisions to
the proposed text in finalizing
§ 475.103: (1) to change the wording in
§ 475.103(a)(2) and (a)(3) in order to
mirror the language in § 475.102(a)(2)
and to avoid any inadvertent ambiguity
as to whether these provisions will be
interpreted consistently; (2) to make
technical edits to the text of
§ 475.103(a)(2) and (a)(3) to change
‘‘initiative’’ to ‘‘initiatives’’ and
‘‘methodologies’’ to ‘‘methodology’’ to
improve readability of these paragraphs;
(3) to create § 475.103(a)(4) to reorganize
how we have included access to
qualified information technology
expertise as a factor; and (4) to revise
§ 475.103(b) to specify that CMS may
consider whether quality improvement
initiative experience ‘‘achieved
successful results.’’

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c. Prohibitions on Eligibility as a QIO
(§§ 475.105 and 475.106)
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43677), we proposed
revisions to § 475.105(a)(2) to eliminate
the prohibition against an association of
health care facilities being awarded a
QIO contract, to reflect a TAAEA
amendment deleting this restriction
from section 1153(b)(3) of the Act. We
also proposed to move the existing
provision covering the exclusion of
health care facility affiliates in
paragraph (a)(3) to paragraph (a)(2), and
to create a revised paragraph (a)(3) that
would include payor organizations as
excluded entities unless they meet
certain exception requirements
identified in section 1153(b)(2)(B) of the
Act. Prior to the TAAEA amendment,
the statute imposed two prohibitions on
CMS contracting with a payor
organization to perform QIO functions:
A prohibition applicable before
November 15, 1984 and a prohibition
with exceptions for periods of time after
November 15, 1984. After November 15,
1984, a payor organization could
perform as a QIO if the Secretary
determined that there were no other
entities available for a QIO area. These
restrictions were implemented in the
existing regulations codified at
§§ 475.105(b) and 475.106. The TAAEA
amendments left unchanged the
prohibition in effect for the period of
time before November 15, 1984, but
revised section 1153(b)(2)(B) of the Act
to add exceptions to the prohibition
applicable after November 15, 1984.
Section 1153(b)(2)(B) of the Act, as
amended, permits the award of a QIO
contract to a payor organization not only
when the Secretary determines that
there is no other entity available for an
area, but also when the Secretary
determines that there is a more qualified
entity to perform one or more of the
functions in section 1154(a) of the Act,
if the entity meets all other
requirements and standards in the QIO
statute. We read this provision to mean
that, when the Secretary determines that
a payor organization is more qualified
than a nonpayor organization in the QIO
area to perform one or more of the
functions in section 1154(a) of the Act,
the payor entity can qualify as a QIO so
long as all other eligibility criteria are
met. We reflected this interpretation in
the proposed rule as § 475.105(a)(3). As
discussed in section XVII.C.4.a. of this
final rule with comment period, after
consideration of the public comments
we received, we also are revising the
final requirement under § 475.101(d) to
impose a general objectivity
requirement for all QIOs. In addition to

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that, under § 475.105(a)(3), we are
finalizing specific provisions for payor
organizations that serve as QIOs which
state that any payor organization
meeting these requirements (now
broken out and specified in
§ 475.105(a)(3)(i)) must also demonstrate
to CMS’ satisfaction that ‘‘in performing
QIO activities,’’ the payor organization
will act with complete objectivity and
independence from its payor program
(now specified in § 475.105(a)(3)(ii)).
The existing paragraph (b) of
§ 475.105 prohibits payor organizations
from being QIOs prior to November 15,
1984. Since that date has long passed,
we believe this paragraph should be
eliminated. We proposed to delete and
reserve paragraph (b) of § 475.105 in its
entirety. Paragraph (c) was proposed to
remain largely unchanged except for a
minor terminology update to clarify in
the regulation text that the term
‘‘facility’’ is meant to refer to a ‘‘health
care facility’’ and to change the term
‘‘conduct any review activities’’ to
‘‘perform any case review activities’’ to
indicate our separation of case review
functions from quality improvement
initiatives. We stated that we do not
believe that these proposed changes
affect the underlying substance of the
prohibitions.
As noted above, we proposed to
delete and reserve all of § 475.106 in
light of our proposed changes to
§ 475.105. We noted our belief that
aspects of § 475.106 that we have not
proposed to incorporate into § 475.105
are obsolete due to the passage of time.
Comment: Some commenters believed
that health care affiliates should not
conduct case reviews of health care
facilities in the QIO area but also
believed health care facility affiliates
may be excellent organizations to lead
the quality improvement functions of
QIOs as evidenced through the
achievements made through the HEN
initiative. Therefore, the commenters
requested that CMS revise the language
of the proposed changes in the final rule
so that health care facility affiliates
would be eligible for QIO contracts that
focus on quality improvement efforts. In
addition, the commenters indicated that
if CMS were not to make this suggested
revision, then CMS would preclude
some of the entities with whom CMS
currently partners under the HEN
initiative from becoming QIO
contractors.
Response: We believe that
implementing the additional flexibilities
granted by the changes in the statute
will improve the QIO Program.
However, based on the authority being
adopted with the revisions to §§ 475.101
through 475.103, we will cautiously

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make changes that have been tested and
that have appropriate safeguards to
protect against any real or perceived
conflict of interest among QIOs,
providers, and beneficiaries. Section
1153(b)(3) of the Act expressly prohibits
a health care facility or an affiliate of a
health care facility from serving as a
QIO in the area within the area served
by the facility. The statute also specifies
when an organization will not be
considered to be affiliated with a health
care facility in connection with this
prohibition. We believe that the
restriction under section 1153(b)(3) of
the Act prohibits CMS from entering
into QIO contracts with health care
affiliates, as reflected in this final rule,
means that some current quality
contractors (such as some HENs
participating in the Partnership for
Patients initiative, for example) may not
qualify as QIOs.
After consideration of the public
comment we received, we are adopting,
as final, proposed revised § 475.105
with one modification: We are adding
language under paragraph (a)(3) and, in
the process, splitting some of the text in
paragraph (a)(3) into two paragraphs (i)
and (ii), to specify that a payor
organization will be considered
ineligible for QIO contracts unless a
payor organization is a more qualified
entity to perform one or more of the
functions of a QIO described in
§ 475.101(b), meets all the other
requirements and standards of the part,
and demonstrates to the satisfaction of
CMS that, ‘‘in performing QIO activities,
the payor organization will act with
complete objectivity and independence
from its payor program.’’
5. QIO Contract Awards (§ 475.107)
The existing regulations at 42 CFR
Part 475 include requirements related to
the establishment of QIO contracts and
the assignment of bonus points. We
proposed to delete the portions of
existing § 475.107(c) pertaining to the
assignment of up to 10 percent of
available bonus points to physiciansponsored organizations, and the
assignment of points in connection with
the structure of the organization as
‘‘physician-sponsored’’ or ‘‘physicianaccess’’ because these provisions are
obsolete in light of the changes to
section 1152(1) of the Act and our
proposals relating to the eligibility
standards for an organization awarded a
QIO contract. We also proposed to use
cross-references in § 475.107(a) and (b)
to the revised standards we proposed in
§§ 475.101 through 475.103. We
proposed to retain the regulatory
language that requires CMS to identify
proposals that meet the requirements of

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§ 475.101 (proposed § 475.107(a)) and to
identify those proposals that set forth
minimally acceptable plans in
accordance with the requirements of
§ 475.102 or § 475.103, or both as
applicable (proposed § 475.107(b)).
In addition, we proposed to revise the
regulatory language addressing the
length of QIO contracts. The existing
§ 475.107(d) states that the contract for
a given QIO area to the selected
organization cannot exceed 2 years,
which is inconsistent with the current
statutory provision at section 1153(c)(3)
of the Act. We proposed to redesignate
this provision as paragraph (c) and to
provide for a 5-year contract term as
required by section 1153(c)(3) of the
Act, as amended by section 261 of the
TAAEA.
We received public comments related
to these topics and discuss them below.
Comment: Some commenters stated
that CMS’ proposal that QIO contract
awards be based on the selection of an
organization from all proposals that set
forth minimally acceptable plans may
be construed to limit the contract award
determination to a ‘‘lowest price
technically acceptable standard’’
(LPTA). In addition, the commenters
discouraged CMS from applying LPTA
evaluation criteria and proposed that
CMS continue its current policies and
make selection based on a
determination of best value using a
‘‘tradeoff’’ evaluation process in which
technical quality is the primary
consideration and all other evaluation
factors are more important than cost/
price.
One commenter also noted that
ensuring the highest quality services
should be considered the ultimate
criterion in selecting a quality
improvement organization. Another
commenter noted the value of LPTA
procurements, but suggested that, if
CMS applies this approach to case
reviews, it define ‘‘technically
acceptable’’ to ensure adequate quality
because ensuring the highest quality
services should be considered the
ultimate criterion in selecting a case
review QIO. Some commenters further
suggested that CMS clarify the proposed
changes pertaining to past performance
because they believed that, in the
context of lowest price technically
acceptable, an offeror whose experience
is ‘‘unknown’’ is considered
‘‘acceptable’’ for contract award. These
commenters asserted that CMS’
proposed changes (to use lowest price
technically acceptable and consider past
performance) are conflicting and
reiterates that, if prior experience/past
performance is important, lowest price

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technically acceptable bids are not an
acceptable evaluation criterion.
Response: Although these
commenters generally identified
§§ 475.101, 475.102 and 475.103 as the
basis for the comments, we discuss
these comments here because they also
address concerns about the process we
proposed in § 475.107 for how to
conduct the procurement for QIO
contracts. Part of our proposal was
meant to establish the ‘‘minimum level
of resources and skills’’ that an
organization must have in order to
demonstrate its capability to perform as
a QIO and we proposed at § 475.107(a)
and (b) that CMS identify the proposals
that meet the standards described in
§§ 475.101 through 475.103. However,
we did not intend for the factors listed
in those sections to be the only criteria
in our evaluation of organizations
requesting QIO contracts or the ultimate
decision to award a QIO contract. In
addition to the minimum requirements
listed in § 475.101, other standards we
included in other sections are examples
of the factors we may use and should
not be interpreted as an exhaustive list.
We do not intend to change our
evaluation methodology to begin using
the lowest price technically acceptable
standard and did not intend our
proposal to suggest that. We will
continue our current practice of making
a selection based on a determination of
best value that takes into consideration
both technical quality and price. As the
contracting process is a public one, with
administrative processes for questions
to be asked and answered, protests to be
filed and addressed, and subject to
oversight, we are confident that
organizations applying to receive QIO
contracts will be adequately informed of
the evaluation criteria and methods
used to award contracts and that it is in
the best interest of the QIO Program for
the regulatory standards to be flexible.
We are finalizing text at § 475.107(a)
that we believe more clearly
communicates that CMS will ensure
compliance with the minimum
standards described in §§ 475.101
through 475.105 without suggesting that
CMS will award contracts to every
entity that meets those minimum
requirements. The text finalized in this
final rule at § 475.107 makes it clear that
CMS will ensure that all QIO awardees
meet the requirements of §§ 475.101
through 475.103, subject to the
restrictions at § 475.105. In addition, we
believe that the text as finalized
preserves the statutory flexibility
provided for the contracting process
consistent with the intent underlying
our proposal. The finalized regulation at
§ 475.107(a) will ensure that QIO

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contract awardees meet the
requirements of §§ 475.101, 475.102,
and 475.103, as applicable and subject
to the prohibitions in § 475.105.
Comment: Many commenters
supported CMS’ proposed changes of
extending the contracting period from 3
years to 5 years. Some commenters
stated that this proposal may allow for
an improvement in the QIO’s review
activities through sustained data
collection. In addition, these
commenters indicated that this
proposed change would provide more
time to focus on the assigned tasks
rather than the demands of the
contracting cycle.
One commenter stated that it would
be prudent for CMS in awarding a
contract to a new QIO organizational
type to consider awarding a 2-year
contract with 3 optional 1-year
expansions in order to be certain that
the new QIO organization is capable of
performing the tasks in an acceptable
manner.
Response: We appreciate the
commenters’ support of the change in
contract term to 5 years. We agree that
the 5-year contract cycle will allow CMS
and the QIOs to have a meaningful
portion of the contract term to
concentrate on program work and the
assigned tasks rather than preparing for
contract transition. We acknowledge the
commenter’s suggestion that a shorter
base period with option years may allow
for us to make contract changes if a new
organization is having difficulty with
the contract requirements. However,
section 1153(c)(3) of the Act requires
that the contract ‘‘shall be for an initial
term of five years and shall be
renewable for terms of five years
thereafter.’’ Therefore, we are finalizing
the proposed language that extends the
QIO contract term to 5 years.
After consideration of the public
comments we received, we are adopting,
as final, proposed § 475.107 with
modifications. We are revising § 475.107
to make the language more succinct and
to avoid any misinterpretation that this
section might somehow restrict
contracting procedures or otherwise
limit the Agency’s flexibility. Further,
we are finalizing, at paragraph (b)
instead of at paragraph (c), the proposed
language for the length of QIO contracts.
XVIII. Final Rule: Medicare Fee-forService Electronic Health Record (EHR)
Incentive Program
A. Incentive Payments for Eligible
Professionals (EPs) Reassigning Benefits
to Method II CAHs
Section 1848(o)(1)(A) of the Act, as
amended by section 4101(a) of the

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HITECH Act, establishes the Medicare
EHR Incentive Program, which provides
for incentive payments to eligible
professionals (EPs) who are meaningful
users of certified EHR technology during
the relevant EHR reporting periods.
Section 1848(o)(1)(A)(i) of the Act
provides that EPs who are meaningful
EHR users during the relevant EHR
reporting period are entitled to an
incentive payment amount, subject to an
annual limit, equal to 75 percent of the
Secretary’s estimate of the Medicare
allowed charges for covered
professional services furnished by the
EP during the relevant payment year.
Under section 1848(o)(1)(B)(ii) of the
Act, an EP is entitled to an incentive
payment for up to 5 years. In addition,
in accordance with section
1848(o)(1)(A)(ii) of the Act, there shall
be no incentive payments made with
respect to a year after 2016.
1. Background for Definition of EPs and
EHR Incentive Payments to EPs
In accordance with section
1848(o)(5)(C) of the Act, in the final rule
for Stage 1 of the EHR Incentive
Program (75 FR 44442), we established
a definition of the term ‘‘eligible
professional’’ in the regulations at 42
CFR 495.100 to mean a physician as
defined under section 1861(r) of the Act.
Section 1861(r) of the Act defines the
term ‘‘physician’’ to mean the following
five types of professionals, each of
which must be legally authorized to
practice their profession under State
law: A doctor of medicine or
osteopathy; a doctor of dental surgery or
dental medicine; a doctor of podiatric
medicine; a doctor of optometry; or a
chiropractor. As also discussed in that
final rule (75 FR 44439), in accordance
with section 1848(o)(1)(C) of the Act,
hospital-based EPs are not eligible for an
EHR incentive payment. The term
‘‘hospital-based EP’’ is defined in
§ 495.4 of the regulations as ‘‘Unless it
meets the requirements of § 495.5 of this
part, a hospital-based EP means an EP
who furnishes 90 percent or more of his
or her covered professional services in
sites of service identified by the codes
used in the HIPAA standard transaction
as an inpatient hospital or emergency
room setting in the year preceding the
payment year, or in the case of a
payment adjustment year, in either of
the 2 years before such payment
adjustment year.’’ Paragraphs (1)(i) and
(1)(ii) of the definition specify how the
percentage of covered professional
services is calculated for Medicare for
purposes of the payment years and
payment adjustment years, respectively.
We note a discrepancy between the
regulation text for this definition and

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the final policy we established in the
preamble of the EHR Incentive Program
Stage 2 final rule (77 FR 54102). Under
the policy we finalized in that rule, we
determine whether an EP is hospitalbased for a payment adjustment year
using either of the following Federal
fiscal year’s (FY) data: (1) The fiscal year
before the year that is 1 year prior to the
payment adjustment year (for example,
FY 2013 data for payment adjustment
year 2015); or (2) the fiscal year before
the year that is 2 years prior to the
payment adjustment year (for example,
FY 2012 data for payment adjustment
year 2015). If the data from either year
result in a hospital-based determination,
the EP would not be subject to the
payment adjustments for the relevant
year. In the definition under § 495.4 of
the regulations, however, paragraph
(1)(ii) incorrectly refers to the fiscal year
preceding the payment adjustment year
and the fiscal year 2 years before the
payment adjustment year. The
introductory text of the definition also
incorrectly references either of the 2
years before such payment adjustment
year. In the CY 2014 OPPS/ASC
proposed rule (78 FR 43678), we
indicated that we were taking this
opportunity to make a technical
correction to paragraph (1)(ii) and the
introductory text of the definition of
‘‘hospital-based EP’’ at § 495.4 to
conform to the policy stated in the
preamble of the EHR Incentive Program
Stage 2 final rule (77 FR 54102). We
proposed to revise paragraph (1)(ii)(A)
of the definition to read ‘‘The Federal
fiscal year 2 years before the payment
adjustment year; or’’ and paragraph
(1)(ii)(B) of the definition to read ‘‘The
Federal fiscal year 3 years before the
payment adjustment year.’’ We also
proposed to revise the introductory text
of the definition to reference, in the case
of a payment adjustment year, either of
the 2 years before the year preceding
such payment adjustment year.
We did not receive any public
comments on our proposal to make
these technical corrections to the
definition of ‘‘hospital-based EP’’ in
§ 495.4 of the regulations. Therefore, we
are finalizing these technical corrections
as proposed. Specifically, (1) paragraph
(1)(ii)(A) of the definition of ‘‘hospitalbased EP’’ in § 495.4 is revised to read
‘‘The Federal fiscal year 2 years before
the payment adjustment year; or’’ and
paragraph (1)(ii)(B) of the definition is
revised to read ‘‘The Federal fiscal year
3 years before the payment adjustment
year.’’; and (2) the introductory text of
the definition is revised to reference, in
the case of a payment adjustment year,
either of the 2 years before the year

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preceding such payment adjustment
year.
Section 1848(o)(5)(A) of the Act
defines covered professional services as
having the same meaning as in section
1848(k)(3) of the Act; that is, services
furnished by an eligible professional for
which payment is made under, or is
based on, the Medicare Physician Fee
Schedule (MPFS). In accordance with
section 1848(a)(1) of the Act, the
Medicare allowed charge for covered
professional services is the lesser of the
actual charge or the MPFS amount
established in section 1848 the Act. As
specified under section 1848(o)(1)(A)(i)
of the Act, the Secretary’s estimate of
allowed charges for EHR incentive
payments is based on claims submitted
to Medicare no later than 2 months
following the end of the relevant
payment year.
Section 1848(o)(1)(B)(i) of the Act sets
forth the annual limits on the EHR
incentive payments to EPs. Specifically,
section 1848(o)(1)(B) of the Act provides
that the incentive payment for an EP for
a given payment year shall not exceed
the following amounts:
• For the EP’s first payment year, for
such professional, $15,000 (or $18,000,
if the EP’s first payment year is 2011 or
2012);
• For the EP’s second payment year,
$12,000;
• For the EP’s third payment year,
$8,000;
• For the EP’s fourth payment year,
$4,000;
• For the EP’s fifth payment year,
$2,000; and
• For any succeeding year, $0.
Under section 1848(o)(1)(B)(iv) of the
Act, for EPs who predominantly furnish
services in a geographic HPSA (as
designated by the Secretary under
section 332(a)(1)(A) of the Public Health
Service Act), the incentive payment
limitation amounts for each payment
year are increased by 10 percent.
Section 1848(o)(1)(B)(iii) of the Act also
provides for a phased reduction in
payment limits for EPs who first
demonstrate meaningful use of certified
EHR technology after 2013. Section
1848(o)(1)(D)(i) of the Act, as amended
by section 4101(a) of the HITECH Act,
provides that the incentive payments
may be disbursed as a single
consolidated payment or in periodic
installments as the Secretary may
specify. We make a single, consolidated,
annual incentive payment to EPs.
Payments are made on a rolling basis, as
soon as we ascertain that an EP has
demonstrated meaningful use for the
applicable reporting period (that is, 90
days for the first year or a calendar year

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for subsequent years), and reached the
threshold for maximum payment.
Section 1848(o)(1)(A) of the Act
provides that ‘‘with respect to covered
professional services provided by an
eligible professional,’’ the incentive
payment ‘‘shall be paid to the eligible
professional (or to an employer or
facility in the cases described in clause
(A) of section 1842(b)(6)).’’ Section
1842(b)(6)(A) of the Act allows for
reassignment of payments to an
employer or entity with which the
physician has a valid contractual
arrangement allowing the entity to bill
for the physician’s services. Therefore,
we provided that EPs would be allowed
to reassign their incentive payments to
their employer or an entity that they
have a valid employment agreement or
contract providing for such
reassignment, consistent with all rules
governing reassignments (75 FR 44445).
Section 495.10(f) of the regulations
permits EPs to reassign their incentive
payments to an employer or to an entity
with which they have a contractual
arrangement, consistent with all rules
governing reassignments, including 42
CFR Part 424, Subpart F. Section
495.10(f) also precludes an EP from
reassigning the incentive payment to
more than one employer or entity. To
implement this requirement, we use the
EP’s Medicare enrollment information
to determine whether an EP belongs to
more than one practice (that is, whether
the EP’s National Provider Identifier
(NPI) is associated with more than one
practice). In cases where an EP is
associated with more than one practice,
the EP would select one tax
identification number to receive any
applicable EHR incentive payment.
2. Special Circumstances of EPs
Reassigning Benefits to Method II CAHs
Since we implemented the EHR
Incentive Program, we have received
many requests from CAHs billing under
Method II (Method II CAHs), members
of Congress, and hospital associations
requesting that we make it possible for
EPs who assign their reimbursement
and billing to a Method II CAH to
participate in the program. Under
section 1834(g)(2) of the Act, a CAH
may elect to receive a cost-based
payment for the facility costs of
providing outpatient services, plus 115
percent of the fee schedule amount for
professional services included within
outpatient CAH services. CAHs that
elect to receive both a facility payment
and a professional payment for
outpatient services are commonly
referred to as Method II CAHs. The
statute also provides that, as a condition
for applying this provision, the

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Secretary may not require that each
physician or other practitioner
providing professional services in a
CAH must assign billing rights for such
services to the CAH. Physicians and
other practitioners who do not assign
such rights to their Method II CAH
continue to receive payment for their
professional services directly under the
appropriate professional fee schedule.
Since the inception of the EHR
Incentive Program, we have been unable
to account for the services furnished by
EPs in Method II CAH outpatient
departments (including emergency
departments) due to limitations in our
information systems. Specifically, our
information systems have not been
capable of receiving and storing linelevel rendering EP identifying
information for these Method II CAH
claims for services furnished by EPs in
outpatient departments. These claims
are billed by the CAH on behalf of the
EPs furnishing the services using the
institutional claim form UB–04 or its
electronic counterpart, the X12 837I
format. Until a recent information
systems change was implemented, we
were unable to identify the NPI of the
EP furnishing the service at the service
line-level on the claim. While the
information systems received and stored
NPIs from each claim, the NPIs were not
tied to the specific services furnished on
the claim. This limitation made it
impossible to take into account the
services furnished by EPs in Method II
CAH outpatient settings when we
annually determined the hospital-based
status of each EP for each payment year
for purposes of the EHR Incentive
Program. In addition, for those EPs who
were determined to be not hospitalbased and who successfully
demonstrated meaningful use, we were
unable to take into account such
services in calculating the amount of an
EP’s EHR incentive payment for a
payment year. Because the limitations
in our information systems prevented us
from identifying the NPIs of the EPs
who furnished the services on the
Method II CAH claims, we were unable
to include those claims for purposes of
the hospital-based determinations and
EHR incentive payment calculations.
However, it is important to note that
these EPs could still participate in the
EHR Incentive Program and qualify for
an incentive payment based on their
non-Method II CAH claims.
We began soon after the
implementation of the EHR Incentive
Program to develop the requisite
changes so that our information systems
would be able to receive and store linelevel rendering EP identifying
information for these Method II CAH

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claims. We were able to implement
these information systems changes
effective for claims submitted on or after
October 1, 2012 (in other words, on or
after the start of FY 2013). Under the
existing regulations at § 495.4, we
determine an EP’s hospital-based status
for a payment year based on claims data
from the fiscal year preceding the
payment year. Thus, for purposes of the
2013 payment year, we determine
whether an EP is hospital-based using
claims data from FY 2012. However, as
noted above, we are unable to take into
account Method II CAH claims prior to
the start of FY 2013. As a result, under
the existing regulations, the hospitalbased determinations for EPs for the
2013 payment year are based on FY
2012 claims data that do not include
Method II CAH claims. The earliest that
we would be able to include such
claims under the existing regulations
would be for the hospital-based
determinations for the 2014 payment
year, which are based on FY 2013
claims data.
As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43679),
we want to avoid further delay in taking
into account the services furnished by
EPs in Method II CAH outpatient
settings. Therefore, we proposed to add
a provision to the definition of
‘‘hospital-based EP’’ at § 495.4 under
new paragraph (3) to provide a special
methodology for making hospital-based
determinations for the 2013 payment
year for EPs with services billed by
Method II CAHs. We made this proposal
solely in order to take into account the
special circumstances of those EPs as
described above. We stated that, under
this proposal, we would be able to take
into account Method II CAH claims
when making hospital-based
determinations for payment year 2013,
one year before we would be able to do
so under the existing regulations.
Specifically, we proposed that, for
payment year 2013 only, we would use
a two-step process to make hospitalbased determinations for EPs who
furnish covered professional services
billed by Method II CAHs. First, after we
have accumulated the Method II CAH
claims with the line-level furnishing EP
identifying information for FY 2013
(October 1, 2012 through September 30,
2013), we would use that data to
identify which EPs had Method II CAH
service billings during that year, and we
would make a special hospital-based
determination for that subset of EPs for
payment year 2013. Any EP determined
to be nonhospital-based on the basis of
FY 2013 claims data would be eligible
to demonstrate meaningful use for the

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relevant EHR reporting period and
potentially qualify for an EHR incentive
payment for payment year 2013. We
indicated in the proposed rule that an
EP who believes that he or she would
be determined to be nonhospital-based
under this proposed provision and
wishes to qualify for the EHR incentive
payment for payment year 2013 should
not wait for the determination to
implement Certified EHR Technology
and begin meaningful use for an EHR
reporting period in 2013. To qualify for
an EHR incentive payment for payment
year 2013, an EP will need to
demonstrate meaningful use of Certified
EHR Technology for an EHR reporting
period in 2013. As is the case with other
EPs that reassign their EHR incentive
payments to another entity, these EPs
may reassign their EHR incentive
payments to the Method II CAH that
bills on their behalf if the CAH is an
employer or they have a contractual
arrangement, consistent with the rules
governing reassignments. Second, in the
case of an EP determined to be hospitalbased on the basis of FY 2013 claims
data, we would check the hospital-based
determination we have already for that
EP under the existing regulation using
the FY 2012 file. Any EP found to be
nonhospital-based on the basis of the FY
2012 claims data (which do not include
Method II CAH claims) would be held
harmless to the determination made on
the basis of FY 2013 claims data and
considered nonhospital-based for
payment year 2013. We believe that this
second step of the proposed
methodology is important to protect EPs
who were initially determined
nonhospital-based at the beginning of
payment year 2013 under the existing
regulation. We do not believe those EPs
who were determined nonhospitalbased under the existing regulation
should have those determinations
reversed by later (although more
complete) FY 2013 claims data. This
hold-harmless provision would preserve
the prospectivity of nonhospital-based
determinations for payment year 2013
that were made under the existing
regulation and maintain the eligibility of
those EPs to receive EHR incentive
payments for payment year 2013. At the
same time, the first step of our proposal
would provide an opportunity for EPs
who were determined to be hospitalbased for payment year 2013 on the
basis of FY 2012 data, which did not
include the Method II CAH claims for
their services, to establish their
nonhospital-based status on the basis of
the more complete FY 2013 data. We
stated that it was important to note that,
due to the systems limitations described

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above, we were unable to propose any
special method for making EHR
incentive payments and hospital-based
determinations for the payment years
prior to payment year 2013. We lacked
the ability to retrieve line-level
furnishing EP identifying information
for Method II CAH claims during the
years prior to FY 2013. We invited
public comments on this proposal.
Comment: Commenters were
uniformly in favor of the proposal.
Specifically, the commenters stated that
they appreciated the agency’s proposal
to allow physicians who provide
services in the outpatient departments
of CAHs and have their services billed
by the CAH under Method 2 to
participate in the EHR incentive
program in 2013. While the commenters
noted that it is unfortunate that CMS’
information systems have, until now,
unfairly prevented these physicians
from participating in the EHR Incentive
Program because they could not use
data from the UB–04 claims to identify
services provided by the physician, they
urged CMS to adopt both the proposed
approach to identifying eligible
physicians using 2013 claims data
submitted on the UB–04 and the
proposed hold harmless policy for those
physicians who are determined to be
eligible using the 2012 data, but not the
new 2013 data. They also urged CMS to
act as quickly as possible to provide
detailed guidance on how physicians
can take advantage of this policy
change.
Response: We appreciate the
commenters’ support.
After consideration of the public
comments we received, we are
finalizing our proposal concerning
hospital-based determinations for
certain EPs for the 2013 payment year.
We will move as quickly as possible to
provide detailed guidance on how EPs
can take advantage of this policy change
and to educate rural providers
accordingly.
We are finalizing our proposal,
without modification, to add a provision
to the definition of ‘‘hospital-based EP’’
at § 495.4 under new paragraph (3) to
provide a special methodology for
making hospital-based determinations
for the 2013 payment year for EPs with
services billed by Method II CAHs. For
payment year 2013 only, we will use a
two-step process to make hospital-based
determinations for EPs who furnish
covered professional services billed by
Method II CAHs.
First, after we have accumulated the
Method II CAH claims with the linelevel furnishing EP identifying
information for FY 2013 (October 1,
2012 through September 30, 2013), we

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will use that data to identify which EPs
had Method II CAH service billings
during that year, and we will make a
special hospital-based determination for
that subset of EPs for payment year
2013. Any EP determined to be
nonhospital-based on the basis of FY
2013 claims data will be eligible to
demonstrate meaningful use for the
relevant EHR reporting period and
potentially qualify for an EHR incentive
payment for payment year 2013. As we
indicated in the proposed rule, an EP
who believes that he or she would be
determined to be nonhospital-based
under this proposed provision and
wishes to qualify for the EHR incentive
payment for payment year 2013 should
not wait for the determination to
implement Certified EHR Technology
and begin meaningful use for an EHR
reporting period in 2013. To qualify for
an EHR incentive payment for payment
year 2013, an EP will need to
demonstrate meaningful use of Certified
EHR Technology for an EHR reporting
period in 2013. As is the case with other
EPs that reassign their EHR incentive
payments to another entity, these EPs
may reassign their EHR incentive
payments to the Method II CAH that
bills on their behalf if the CAH is an
employer or they have a contractual
arrangement, consistent with the rules
governing reassignments.
Second, in the case of an EP
determined to be hospital-based on the
basis of FY 2013 claims data, we will
check the hospital-based determination
we have already for that EP under the
existing regulation using the FY 2012
file. Any EP found to be nonhospitalbased on the basis of the FY 2012 claims
data (which do not include Method II
CAH claims) will be held harmless to
the determination made on the basis of
FY 2013 claims data and considered
nonhospital-based for payment year
2013.
B. Cost Reporting Periods for Interim
and Final EHR Incentive Payments to
Eligible Hospitals
1. Background
In the July 28, 2010 final rule for
Stage 1 of the EHR Incentive Program,
we established the cost report periods
from which we would draw the
requisite data (for example, hospital
acute care inpatient discharges and
Medicare Part A acute care inpatient
days) for determining interim and final
EHR incentive payments to eligible
hospitals (75 FR 44450). We specified in
§ 495.104(c)(2) of the regulations that we
would use discharge and other relevant
data from the hospital’s most recently
submitted 12-month cost report in order

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to determine preliminary hospital EHR
incentive payments. Similarly, we
specified in § 495.104(c)(2) that we
would make final EHR incentive
payments to hospitals based on
discharge and other relevant data from
the hospital’s first 12-month cost
reporting period that begins on or after
the first day of the payment year. (For
purposes of EHR incentive payments for
eligible hospitals, a payment year is a
Federal fiscal year.) As we noted in the
final rule (75 FR 44450 through 44451),
section 1886(n)(2)(C) of the Act requires
that a ‘‘12-month period selected by the
Secretary’’ be employed for purposes of
determining the discharge related
amount. As we also stated in that final
rule (77 FR 44452), we believe that the
requirement for using 12-month cost
reporting periods for purposes of
determining preliminary and final
payments is important to avoid the use
of nonstandard cost reporting periods,
which are often quite short (for
example, 3 months) and therefore are
‘‘not likely to be truly representative of
a hospital’s experience, even if methods
were to be adopted for extrapolating
data over a full cost reporting period.’’
2. Special Circumstances
As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43680),
since the publication of the EHR
Incentive Program final rule for Stage 1,
we have become aware of circumstances
in which the only cost reporting period
for an eligible hospital that begins on or
after the first day of a payment year is
a nonstandard cost reporting period. For
example, a hospital may be merging
with another hospital under an
arrangement in which its CCN, and
therefore its existence as an identifiable
hospital for Medicare EHR Incentive
Program purposes, will not survive the
merger. In such circumstances, the last
cost reporting period for the hospital
after its final payment year and prior to
its merger into the surviving hospital
may be a short period. In order to
accommodate these situations, we
proposed to revise § 495.104(c)(2) of the
regulations to provide that, in cases
where there is no 12-month cost
reporting period that begins on or after
the beginning of a payment year, we
will use the most recent 12-month cost
reporting period available at the time of
final settlement in order to determine
final EHR incentive payments for the
hospital. We stated that we understood
that, under this proposal, the last
available cost reporting period that we
would use for the final determination of
EHR incentive payments may be the
same 12-month cost reporting period
that had been used for purposes of

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determining the hospital’s interim EHR
incentive payments. We believe that this
result is preferable to resorting to a
nonstandard cost reporting period
because a 12-month period is required
by the statute to determine the discharge
related amount and such periods tend,
for reasons discussed in the EHR
Incentive Program Stage 1 final rule, to
be unrepresentative of the hospital’s
experience. We invited public
comments on this proposal.
Comment: One commenter supported
the proposal.
Response: We appreciate the
commenter’s support.
After consideration of the public
comment we received, we are finalizing,
without modification, the proposed
revision to § 495.104(c)(2) of the
regulations to provide that, in cases
where there is no 12-month cost
reporting period that begins on or after
the beginning of a payment year, we
will use the most recent 12-month cost
reporting period available at the time of
final settlement in order to determine
final EHR incentive payments for the
hospital.
XIX. Medicare Program: Provider
Reimbursement Determinations and
Appeals: Final Rule

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A. Matters Not Subject to
Administrative or Judicial Review
(§ 405.1804)
1. Background
Section 1878(a) of the Act addresses
appeals of certain Medicare payment
determinations to the Provider
Reimbursement Review Board (the
‘‘Board’’). Below we briefly discuss the
prospective payment system (PPS)
under which payments for certain
Medicare inpatient hospital services are
made.
The Social Security Amendments of
1983 (Pub. L. 98–21) added section
1886(d) to the Act, which changed the
method of payment for inpatient
hospital services under Medicare Part A
for short-term acute care hospitals. The
method of payment for these hospitals
was changed from a cost-based
retrospective reimbursement system to a
system based on prospectively set
payment rates; that is, a PPS. Under
Medicare’s hospital inpatient
prospective payment system (the
hospital IPPS), payment is made at a
predetermined rate for each hospital
discharge.
The Social Security Amendments of
1983 also added section 1886(e)(1) to
the Act, which required that, for cost
reporting periods beginning in FYs 1984
and 1985, the IPPS result in aggregate
program reimbursement equal to ‘‘what

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would have been payable’’ under the
reasonable cost-based reimbursement
provisions of prior law; that was, for
FYs 1984 and 1985, the IPPS would be
‘‘budget neutral.’’ Section 1886(e)(1)(A)
of the Act required that the projected
aggregate payments for the hospitalspecific portion should equal the
comparable share of estimated
reimbursement under prior law. Section
1886(e)(1)(B) of the Act required that
projected aggregate reimbursement for
the Federal portion of the prospective
payment rates equal the corresponding
share of estimated amounts payable
prior to the passage of Pub. L. 98–21. In
the 1983 IPPS interim final rule
published in the Federal Register on
September 1, 1983, we explained how
the adjustment of the Federal portion of
the prospective payment rate was
determined, as well as the resulting
adjustment factors for FY 1984 (48 FR
39887).
Under section 1878 of the Act and the
regulations at Subpart R of 42 CFR Part
405, the Board has the authority to
adjudicate certain reimbursement
appeals by providers. The Board’s
decisions are subject to review by the
Administrator of CMS under section
1878(f)(1) of the Act, as implemented by
§ 405.1875 of the regulations. A final
decision of the Board, or any reversal,
affirmance, or modification of a final
Board decision by the Administrator,
may be subject to review by a United
States District Court.
2. Technical Conforming Change
As we discussed in the CY 2014
OPPS/ASC proposed rule (78 FR 43680
through 43681), certain matters affecting
payment to hospitals under the IPPS are
not subject to administrative or judicial
review. For example, section 1886(d)(7)
of the Act precludes administrative and
judicial review of the budget neutrality
adjustment effected pursuant to section
1886(e)(1) of the Act. This preclusion of
review is also reflected in section
1878(g)(2) of the Act (which states that
‘‘determinations and other decisions
described in section 1886(d)(7) shall not
be reviewed by the Board or any other
court. . . .’’). The existing regulatory
text at § 405.1804(a) provides that there
is no administrative or judicial review
of ‘‘any budget neutrality adjustment in
the prospective payment rates.’’
The language of § 405.1804(a) was
promulgated as part of the
implementing regulations (48 FR 39785
and 39835) for the hospital IPPS.
Section 405.1804(a) was codified
pursuant to section 1886(d)(7) of the
Act. At the time of promulgation,
section 1886(d)(7) of the Act specified
only the budget neutrality adjustment in

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section 1886(e)(1) of the Act. Additional
budget neutrality adjustments under the
IPPS were added by law and were not
precluded from administrative or
judicial review. For example, section
4410 of the Balanced Budget Act of 1997
(the BBA), Pub. L. 105–33, established
the rural floor wage index budget
neutrality adjustment, and did not
preclude administrative or judicial
review in the statute for this adjustment.
As we stated in the CY 2014 OPPS/
ASC proposed rule, we recognize that
the language of the regulation at
§ 405.1804(a) is overly broad because it
states that there is no administrative or
judicial review of ‘‘any’’ budget
neutrality adjustment in the prospective
payment rates, and its terms are not
limited to the budget neutrality
adjustment specified in section
1886(e)(1) of the Act. We understand
that the Board has relied on
§ 405.1804(a) to deny jurisdiction in
appeals relating to budget neutrality
adjustments other than the adjustment
in section 1886(e)(1) of the Act. To the
extent that the existing § 405.1804(a)
refers to ‘‘any’’ budget neutrality
adjustment, we believe that this
regulatory text is not consistent with the
current statute. Therefore, in the CY
2014 OPPS/ASC proposed rule (78 FR
43681), we proposed to make a
technical conforming change to
§ 405.1804(a) to conform the regulation
to the current statute. This technical
conforming change clarifies that there is
no administrative or judicial review
with respect to the budget neutrality
adjustments enumerated in section
1886(e)(1) of the Act, and this
preclusion of review does not apply to
other budget neutrality adjustments
under the IPPS.
We did not receive any public
comments on this proposed technical
conforming change. Therefore, for the
reasons set out in the proposed rule, we
are finalizing the proposed revisions to
§ 405.1804(a) without modification.
B. Clarification of Reopening of
Predicate Facts in Intermediary
Determinations of Provider
Reimbursement (§ 405.1885)
A provider must submit an annual
cost report to a fiscal intermediary
(currently referred to as a Medicare
Administrative Contractor (MAC)), as
specified in regulations at 42 CFR
413.20(b) and 413.24(f). Through its
review and settlement process, the
intermediary determines the total
amount of reimbursement due to a
provider for its cost reporting period.
This constitutes an ‘‘intermediary
determination,’’ as defined in
§ 405.1801(a). In accordance with

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§ 405.1803, an intermediary
determination is set forth in a notice of
program reimbursement (NPR), which
explains the intermediary’s final
determination of the total amount of
program reimbursement due to the
provider for the cost reporting period in
question.
Section 405.1803(b) requires that the
NPR explain any differences between
the intermediary determination and the
amount of program reimbursement
claimed by the provider. Such
differences may be attributable to
specific provisions of the Medicare
statute, regulations, CMS rulings, or
program instructions. In addition, the
intermediary determination may reflect
specific findings of fact by the
intermediary that differ from the
provider’s understanding of the facts.
The factual underpinnings of a
specific determination of the amount of
reimbursement due to a provider
sometimes first arise in, that is, the
pertinent facts occur or start during, or
are reported by the provider and
determined by the intermediary for, the
same fiscal period as the cost reporting
period under review. For example, the
determination of whether a hospital
subject to the inpatient prospective
payment system (IPPS) should receive a
payment adjustment for serving a
significantly disproportionate share of
low-income patients under section
1886(d)(5)(F) of the Act and § 412.106 of
the regulations in a given fiscal period
depends on the number of the hospital’s
patient days for the same period.
However, the factual underpinnings
of a specific determination of the
amount of reimbursement due to a
provider may first arise in, or be
determined for, a different fiscal period
than the cost reporting period under
review. We refer to these factual
determinations as ‘‘predicate facts.’’
Some of the factual underpinnings of
determinations of reasonable cost
reimbursement under section 1861(v) of
the Act are subject to review for each
cost report in which the provider claims
the cost under the general principle that
‘‘payment is to be made on the basis of
current costs of the individual provider,
rather than costs of a past period’’ (42
CFR 413.5(a)). For example,
reimbursement for a provider’s bad
debts arising from unpaid Medicare
deductibles and coinsurance may be
denied under 42 CFR 413.89 in the first
fiscal period it is claimed because the
collection effort on the account has not
ceased and the account cannot yet be
deemed worthless. However, the same
bad debt may be deemed allowable in
the following fiscal period, when the
collection effort has ceased and the

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account has been determined to be
worthless. Similarly, interest expense is
subject to review each fiscal period to
determine whether it is allowable for
each fiscal period during the life of the
loan (42 CFR 413.153).
Other ‘‘predicate facts’’ are
determined once, either in the first
fiscal period in which they arise or are
first determined, or in the first fiscal
period that they are used as part of a
formula for reimbursement, and then
applied as part of that reimbursement
formula for several fiscal periods
thereafter. These facts are not
reevaluated annually to determine
whether they support a determination
that a particular cost is reasonable
because the formula is a proxy for
reasonable costs. Instead, the formula
itself will provide for changes in costs
through an updating factor or otherwise.
For example, the determination of an
IPPS-exempt hospital’s target amount
(that is, per-discharge (case) limitation)
or rate-of-increase ceiling under section
1886(b) of the Act and regulations at
§ 413.40 depends on: (1) The hospital’s
allowable net inpatient operating costs
for a base period of at least 12 months
before the first cost reporting period
subject to the rate-of-increase ceiling; or
(2) for later cost reporting periods, the
target amount for the preceding 12month cost reporting period. The
hospital’s allowable costs for its base
period are ‘‘predicate facts’’ with respect
to the first cost reporting period that is
subject to the target amount because
such base period costs figure in the
determination of the hospital’s first
target amount. The target amount for
each cost reporting period after the base
period itself is a ‘‘predicate fact’’ for the
following cost reporting period. We
refer readers to section 1886(b)(3)(A) of
the Act (for the first period, the target
amount is calculated using ‘‘allowable
operating costs of inpatient hospital
services for the preceding 12-month cost
reporting period’’; the target amount for
later cost reporting periods is calculated
using the target amount for the
preceding 12-month cost reporting
period, increased by an applicable
update factor).
A provider may challenge an
intermediary determination by filing an
appeal within 180 days of the NPR to
the Board (under section 1878(a) of the
Act and regulations at § 405.1835) or, if
the amount in controversy is at least
$1,000 but less than $10,000, to the
intermediary hearing officer(s) (under
§ 405.1811). Alternatively, in
accordance with § 405.1885, the
provider may request that the
intermediary reopen its NPR. In
addition, the intermediary may reopen

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the NPR on its own motion. Under
§ 405.1885(b), reopening must be
requested by the provider, or initiated
on the intermediary’s own motion,
within 3 years of the NPR, although
there is no time limit for the reopening
of an intermediary determination that
was procured by fraud or similar fault
of a party to such determination.
Appeal and reopening of an
intermediary determination are both
‘‘issue-specific.’’ In order to meet the
jurisdictional requirements for appeal to
the Board or to the intermediary hearing
officer(s), the provider must establish its
dissatisfaction with each specific matter
in the intermediary determination that
is appealed. We refer readers to section
1878(a) of the Act and current
regulations at §§ 405.1835(a)(1) and (b)
(Board appeals) and §§ 405.1811(a)(1)
and (b) (intermediary hearing officer
appeals). Similarly, § 405.1885(a)(1)
provides that the intermediary
determination may be reopened ‘‘for
findings on matters at issue in a
determination.’’ We also refer readers to
§ 405.1887, which provides that a notice
of reopening and any revised
intermediary determination must
specify the findings on matters at issue
to be reopened and the particular
findings to be revised through
reopening, respectively, and
§ 405.1889(b), which provides that a
provider’s appeal rights after reopening
are limited to the specific matters
altered in the revised intermediary
determination.
In many instances, when a factual
matter arises in, or is determined for,
the same fiscal period as the cost
reporting period at issue, such a factual
determination may be appealed or
reopened as part of that period’s
intermediary determination. For
example, if an IPPS hospital challenges
the patient day count used to determine
its DSH payment adjustment for its 2010
cost reporting period, the hospital must
appeal its DSH patient day count within
180 days of the NPR for the 2010 cost
reporting period (and meet the other
jurisdictional requirements for appeal to
the Board or to the intermediary hearing
officer(s), as applicable). Similarly, the
hospital would have to request, or the
intermediary would have to initiate on
its own motion, the reopening of the
hospital’s 2010 DSH patient day count
within 3 years of the NPR for the 2010
cost reporting period.
When the specific matter at issue is a
predicate fact that first arose in, or was
determined for, an earlier fiscal period
and that factual data then is used
differently or applied to determine
reimbursement in one or more later
fiscal periods, our longstanding

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interpretation and practice is that the
pertinent provisions of the statute and
regulations provide for review and
potential redetermination of such
predicate fact only by a timely appeal or
reopening of: (1) The NPR for the cost
reporting period in which the predicate
fact first arose, or was first determined;
or (2) the NPR for the period for which
such predicate fact was first used or
applied by the intermediary to
determine reimbursement. For example,
assuming base period costs calculated
for the period consisting of the 12
months prior to the hospital’s 2002 cost
reporting period, that is, its 2001 cost
reporting period, if an IPPS-exempt
hospital challenges the determination of
its 2008 cost reporting period target
amount, the hospital could not appeal
the determination of the base period
predicate facts unless it was within 180
days of the NPR for the hospital’s 2001
base period or its 2002 period (when the
base year costs were first used to
determine reimbursement). Similarly,
the hospital would have to request, or
the intermediary would have to initiate
on its own motion, the reopening of the
determination of the hospital’s base
period costs within 3 years of the NPR
for the base year cost reporting period,
that is, its 2001 or 2002 cost reporting
periods. These are the only fiscal
periods in which the hospital could or
seek reopening of its base period costs.
Of course, if the hospital’s base period
costs were later redetermined through
appeal or reopening of its 2001 or 2002
NPRs, then the hospital could appeal or
request reopening of those
determinations. In addition, the hospital
could appeal the determination of the
2008 cost reporting period target
amount within 180 days of the NPR for
the 2008 cost reporting period. The
hospital could also request the
reopening of the determination of its
2008 cost reporting period target
amount within 3 years of the NPR for its
2008 cost reporting period. However,
the hospital could not revise the
determination of its 2001 base year costs
through an appeal or reopening of its
2008 target amount.
Many reimbursement formulas
require the use of predicate facts, where
data or a factual finding is taken from
an earlier fiscal period and used to
determine the amount of provider
reimbursement in the fiscal period
under review. As discussed above, we
believe that these predicate facts should
be subject to change only through a
timely appeal or reopening for the fiscal
period in which the predicate fact first
arose or was first determined by the
intermediary or the fiscal period in

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which such fact was first used or
applied to determine reimbursement. In
some instances, a reimbursement statute
may necessitate the use of data from a
fiscal period that is not found in that
period’s cost report or NPR (such as ‘‘off
the cost report,’’ or underlying
documentation). We believe that this
kind of determination may be reviewed
and redetermined through a timely
appeal or reopening of the NPR for the
cost reporting period in which the
predicate fact was first used (or applied)
by the intermediary to determine the
provider’s reimbursement pursuant to
that reimbursement statute.
However, we recognize exceptions
when a particular legal provision (of the
Medicare statute, regulations, or CMS
rulings) authorizes, as part of a specific
reimbursement rule, the review and
revision of a predicate fact after the
expiration of the 3-year reopening
period. For example, the reaudit
regulation in § 413.77(a), promulgated to
implement section 1886(h)(2) of the Act
(which is related to the determination of
the average per-resident amount used to
calculate reimbursement for direct
graduate medical education (GME)
costs), authorizes intermediaries to
modify base-period costs solely for
purposes of computing the per resident
amount after the hospital’s base-period
cost report is no longer subject to
reopening under § 405.1885. We refer
readers to the decision in Regions
Hospital v. Shalala, 522 U.S. 448 (1998),
which sustained the lawfulness of the
reaudit regulation (then designated as
§ 413.86(e)).
As discussed above, we also recognize
that not all facts occurring in prior fiscal
periods are ‘‘predicate facts’’ in the
same sense, because they are not
determined once, but may be subject to
review on an annual basis as part of the
determination of a provider’s reasonable
cost reimbursement under section
1861(v) of the Act, such as the facts
underpinning reimbursement for
Medicare bad debts or allowable interest
expense. Because these facts are subject
to review each fiscal period by the
intermediary, the intermediary’s
findings should also continue to be
subject to review, either through an
appeal or reopening.
As we stated in the CY 2014 OPPS/
ASC proposed rule (78 FR 43683), we
believe that the above-described
interpretation of our rules regarding the
appeal and reopening of predicate facts
furthers the interests of both providers
and the agency in maintaining the
finality of intermediary determinations.
The alternative, of allowing appeal and
reopening of a predicate fact after the
expiration of the 3-year reopening

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period, may result in inconsistent
intermediary determinations on a
reimbursement matter recurring in
different fiscal periods for the same
provider. An alternative approach of
allowing appeal and reopening of a
predicate fact beyond the 3-year
reopening period could also result in
intermediary determinations that are
contrary to Medicare law and policy
regarding a specific reimbursement
matter. As with the target amount
example discussed above,
reimbursement for various items is
premised on a base period cost
determination that could affect
reimbursement for a given item for
many cost reporting periods thereafter.
If a provider disputes such a base period
cost determination, it can appeal or
request reopening of the NPR for the
base period. However, unless such an
appeal or reopening results in a
different finding as to the predicate fact
in question, reimbursement for a given
provider’s cost should not be based on
one finding about a predicate fact in the
base period and a different finding
about the same predicate fact for
purposes of determining reimbursement
in later fiscal periods.
Under our longstanding interpretation
and practice, once the 3-year reopening
period has expired, neither the provider
nor the intermediary is allowed to
revisit a predicate fact that was not
changed through the appeal or
reopening of the cost report for the fiscal
period in which such predicate fact first
arose or for the fiscal period for which
such fact was first determined by the
intermediary. Further, the use or
application of such facts is subject to
change only through a timely appeal or
reopening of the cost report for the fiscal
period where the predicate fact was first
used (or applied) by the intermediary to
determine the reimbursement for the
provider’s cost in question.
Accordingly, in the CY 2014 OPPS/ASC
proposed rule (78 FR 43682 through
43683), we proposed to revise
§ 405.1885 to clarify that, absent a
specific statute, regulation, or other
legal provision permitting reauditing,
revising, or similar actions changing
predicate facts: (1) A predicate fact is
subject to change only through a timely
appeal or reopening of the NPR for the
fiscal period in which the predicate fact
first arose or the fiscal period for which
such fact was first determined by the
intermediary; and/or (2) the application
of the predicate fact is subject to change
through a timely appeal or reopening of
the NPR for the fiscal period in which
the fact was first used (or applied) by
the intermediary to determine the

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provider’s reimbursement. As discussed
earlier, this ‘‘first application’’ or ‘‘first
use’’ of a predicate fact may involve
underlying documentation that is ‘‘off
the cost report.’’
We note that a recent court decision
conflicts with our settled interpretation
of the regulations for provider appeals
and cost report reopenings. In Kaiser
Foundation Hospitals v. Sebelius, 708
F.3d 226 (D.C. Cir. 2013), the court held
that providers could appeal predicate
facts used to determine their
reimbursement in later fiscal periods
even though such predicate facts were
not timely appealed or reopened for the
periods when they first arose or were
determined by the intermediary, nor
were such predicate facts timely
appealed or reopened for the fiscal
periods in which such facts were first
used (or applied) by the intermediary to
determine the providers’
reimbursement. The predicate facts at
issue in this case were the teaching
hospitals’ full-time equivalent (FTE)
resident counts for their 1996 cost
reporting periods, which, as required by
section 1886(h)(4)(F)(i) of the Act, were
used to calculate the statutory cap on
residents for direct GME reimbursement
for the first time in the hospitals’ 1998
cost reporting periods. The providers
could have challenged their FTE
resident counts through timely appeals
or reopening of their 1996 fiscal period
NPRs, and they could have challenged
the calculation of their resident caps
through timely appeals or reopening of
their 1998 fiscal period NPRs, the first
time the caps were applied. Instead, the
hospitals appealed their resident caps as
applied to later cost reporting periods.
The court held that the definition of
‘‘intermediary determination’’ under
§ 405.1801(a)(1), which is incorporated
in the reopening rules at
§ 405.1885(a)(1), did not include factual
findings, standing alone, where the
providers made no attempt to challenge
their direct GME reimbursement for
their 1996 or 1998 fiscal periods due to
the expiration of the 180-day appeal
period and the 3-year period for
reopening. Because the providers were
not challenging the total amount of
program reimbursement for their 1996
or 1998 fiscal periods, the court
concluded that the intermediary
determinations for those periods were
not at issue and thus the 3-year
limitation on reopening was not
applicable.
We disagree with the court’s decision,
which we believe is contrary to our
reopening regulations at § 405.1885(a),
and the corresponding appeals
regulations (discussed above), and
which necessitates our proposed

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clarification of the regulations. As noted
above, we proposed to revise § 405.1885
to clarify that the specific ‘‘matters at
issue in a determination’’ that are
subject to the reopening rules include
factual findings for one fiscal period
that are predicate facts for later fiscal
periods. The general 3-year reopening
period applies to findings about such
predicate facts and the reopening period
is calculated separately for each finding
about a predicate fact. We noted that
this proposed revision of § 405.1885
would apply to all Medicare
reimbursement determinations, and not
only to direct GME payment, which was
the particular issue in Kaiser
Foundation Hospitals v. Sebelius. In the
CY 2014 OPPS/ASC proposed rule (78
FR 43683 through 43684), we stated
that, because the proposed revision
clarifies longstanding agency policy, we
were proposing that it be effective for
any intermediary determination issued
on or after the effective date of the final
rule, and for any appeals or reopenings
(or requests for reopening) pending on
or after the effective date of the final
rule, even if the intermediary
determination (at issue in such an
appeal or reopening) preceded the
effective date of the final rule. We stated
our view that the proposed revision was
not impermissibly retroactive in effect
because the proposal clarified
longstanding agency policy and
practice, and was procedural in nature.
We referred readers, for example, to
Heimmermann v. First Union Mortgage
Corp., 305 F.3d 1257, 1260–61 (11th Cir.
2002) (a rule clarifying the law,
especially in an unsettled or confusing
area of the law, is not a substantive
change in the law, and thus the rule
may apply to matters that preceded
issuance of the rule).
However, if the proposed revision to
§ 405.1885 were deemed a retroactive
application of a substantive change to a
regulation, we referred readers to
section 1871(e)(1)(A) of the Act, which
permits retroactive application of a
substantive change to a regulation if the
Secretary determines that such
retroactive application is necessary to
comply with statutory requirements or
that failure to apply the change
retroactively would be contrary to the
public interest. We have determined
that retroactive application of the
proposed revision to § 405.1885 is
necessary to ensure compliance with
various statutory provisions such as the
target amount (under section 1886(b) of
the Act) and the cap on residents for
GME reimbursement (under section
1886(h)(4)(F)(i) of the Act); the 180-day
period for filing appeals to the Board

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(under section 1878(a)(3) of the Act);
and the 3-year limit on reopening
(under §§ 405.1885(b)(1), (2) of the
regulations). We have further
determined that it would be in the
public interest to apply the proposed
revision to intermediary determinations,
appeals, and reopenings (including
requests for reopening) that are pending
on or after the effective date of the final
rule. Not applying the proposed
revisions to pending intermediary
determinations, appeals, and reopenings
would undermine the 3-year limit on
reopening and the interests of both the
Medicare program and Medicare
providers in the finality of
reimbursement determinations, and
would be inconsistent with the statutory
scheme.
Finally, although we proposed
revisions only to § 405.1885, in order to
clarify our regulations in accordance
with this proposal, we stated that we
were considering making similar
changes regarding predicate facts to the
regulations governing intermediary
appeals at § 405.1811 and appeals to the
Board at § 405.1835. We requested
public comments with respect to
amending the language of these
additional regulations for appeals before
the intermediary and the Board, but did
not receive any timely comments on this
point.
Comment: Two commenters opposed
adoption of the proposed revisions
because including findings of predicate
facts in the reopening rule would
undermine the accuracy of
reimbursement determinations when a
provider or the Medicare program
learned of the inaccuracy after the 3year period for reopening had expired.
Other commenters opposed the change
because it would prevent teaching
hospitals from challenging their IME or
direct GME resident caps if they have
not already done so.
Response: We disagree with the
commenters that the revisions to the
reopening rules would materially
undermine the accuracy of Medicare
reimbursement because a provider
could still seek revisions to a final
intermediary determination by filing an
appeal or requesting reopening and the
intermediary could still initiate
reopening on its own motion, and those
appeal and reopening procedures are
available over a lengthy period under
the statute and regulations. Even before
the appeal and reopening periods begin,
providers have 5 months after the close
of the cost reporting period to submit
reports, and the intermediary is required
to make its determination within a
reasonable period of time thereafter.
After a final intermediary determination

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is issued, the Medicare statute
authorizes appeal to the Board within
180 days of the final intermediary
determination. The reopening
regulations allow six times as long—3
years—for reopening of a final
intermediary determination. Therefore,
an NPR may be reopened many years
after a fact arises during the cost
reporting period at issue, depending on
when the intermediary determination is
issued. When a reopening results in a
revised intermediary determination, the
provider then may appeal or request
reopening of the specific issue in the
revised intermediary determination,
resulting in review of the revised
intermediary determination at an even
more remote time. This reopening
scheme, which the Supreme Court
described as ‘‘generous’’ in Your Home
Visiting Nurse Services, Inc. v. Shalala,
525 U.S. 449, 455 (1999), is intended to
strike a balance between accurate
reimbursement and administrative
finality, in the interests of both the
provider and the Medicare program. The
proposed revisions merely clarify that a
finding of predicate fact is also subject
to reopening for a 3-year period.
Moreover, the proposed revisions would
not affect the exception to the 3-year
reopening period for fraud or similar
fault by a party to the final intermediary
determination.
With respect to the IME and direct
GME resident caps, we established in an
August 1997 interim final rule that we
would determine those caps in the
course of settling cost reports starting on
or after October 1, 1997 (for direct GME)
or with discharges on or after October 1,
1997 (for IME), thereby putting teaching
hospitals on notice that their caps
would be determined at that time (62 FR
45966, 46003 through 46005 (August 29,
1997)). This is consistent with the
resident cap statutory provisions (under
section 1886(h)(4)(F) and section
1886(d)(5)(b)(v) of the Act), which
require the use of the number of
unweighted FTE residents for the cost
reporting period ending on or before
December 31, 1996, for cost reporting
periods (or discharges, for IME) starting
on or after October 1, 1997. We did not
read this provision to allow for
continuing challenges to this number of
residents. Before the Kaiser decision,
neither providers nor the Medicare
program were allowed to challenge the
1996 FTE resident cap except through a
timely appeal or reopening of the NPR
for the 1996 base year or the first fiscal
period in which the caps were applied.
For example, we refer readers to
Hillcrest Riverside, Inc. v. Sebelius, 680
F. Supp. 2d 30 (D.D.C. 2010); and

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Swedish Am. Hosp. v. Sebelius, 773 F.
Supp. 2d 1 (D.D.C. 2011). Indeed, many
teaching hospitals challenged their
NPRs for the 1996 fiscal period in order
to correct perceived deficiencies in their
caps. For example, we refer readers to
Henry Ford Health Sys. v. Dep’t of
Health & Human Servs, 654 F. 3d 660
(6th Cir. 2011); Univ. of Chicago Med.
Ctr. v. Sebelius, 618 F.3d 739 (7th Cir.
2010); Rhode Island Hosp. v. Leavitt,
548 F.3d 29 (1st Cir. 2008); and
Riverside Methodist Hosp. v. Thompson,
No. C2–02–94, 2003 WL 22658129 (S.D.
Ohio July 31, 2003). In our view,
teaching hospitals have been allowed
ample opportunity to correct their
resident caps.
Comment: One commenter stated that
it would support the proposed revisions
if they bound CMS to accept as final a
determination of predicate fact that had
not been timely appealed or reopened,
but which the provider now recognized
had been determined inaccurately.
According to the commenter, it was
classified as a sole community hospital
(SCH), but later realized that it was not
the only like hospital within 25 miles.
The then-applicable regulations for SCH
status specified that the designation will
be revisited if there is ‘‘a change in
circumstance’’ and that ‘‘CMS will
cancel the hospital’s classification as a
sole community hospital effective with
the date that the hospital no longer met
the criteria for classification consistent
with the provisions of § 405.1885’’ for
the reopening of NPRs (42 CFR
412.92(b)(3)(iii) (2011)). The commenter
asserted that, because it was not the
only like hospital within 25 miles, it
was appropriate to cancel its SCH
designation, but it was not appropriate
to recover reimbursement for past cost
years because there had been no change
in circumstances. The commenter asked
whether the proposed revisions to the
reopening rules, which apply to
pending appeals, would govern its
pending Board appeal challenging the
recovery of reimbursement for past
fiscal periods.
Response: Without passing judgment
on the merits of the commenter’s
pending Board appeal, this would
appear to present a situation where,
under the proposed revisions, the
determination of a predicate fact (the
provider’s distance from a like hospital)
was beyond the 3-year reopening
period. We note that in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53258,
53674), we amended § 412.92(b)(3) to
require providers to disclose facts to
CMS that would be material to initial
SCH designations and if providers fail to
disclose these facts, their SCH status
will be cancelled.

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Comment: One commenter asked if
the proposed revisions would apply to
determinations of successive predicate
facts, such as the commenter’s Medicare
Advantage days, total days, and
education costs used in the Nursing and
Allied Health Education (NAHE)
Managed Care payment. The commenter
also asked whether these predicate facts
could be challenged by reopening the
NPR for the fiscal period in which such
facts are used to calculate payment,
which is usually two fiscal periods
afterward.
Response: As discussed in the
example of the TEFRA target amount,
predicate facts may arise in multiple
years. The proposed revisions would
permit reopening of the final
determination of a provider’s Medicare
Advantage days, total days, and NAHE
payment for purposes of computing the
NAHE Managed Care payment either in
the fiscal period such costs and days
were first determined, or in the fiscal
period they were first used to calculate
the NAHE Managed Care payment.
Comment: One commenter, noting
that reopening of intermediary
determinations is completely within the
discretion of the intermediary,
requested that CMS ensure that the
intermediaries do not use this discretion
to impair a provider’s ability to correct
a predicate fact. The commenter
suggested that if a provider’s request to
reopen a predicate fact determination is
denied, then recognition should be
given to the timely filed reopening
request in an appeal of the subsequent
cost year, especially in situations where
the first application of the predicate fact
results in a reimbursement impact that
is less than the jurisdictional amount for
appeal to the Board.
Response: The regulations provide the
fiscal intermediaries with unreviewable
discretion as to whether to reopen
specific findings on matters at issue in
a final intermediary determination, and
program manual instructions include
guidance for the intermediary’s exercise
of its discretionary reopening authority.
We refer readers to the Provider
Reimbursement Manual (CMS Pub. 15–
1), Section 2931.2. We believe that the
intermediary’s reopening authority has
always encompassed specific findings
about predicate facts, and we see no
basis for limiting the intermediary’s
discretion whether to reopen particular
findings of predicate fact. As the
Supreme Court recognized, reopening is
provided by the grace of the Secretary
(Your Home, 525 U.S. at 455). The Court
found that the discretionary nature of
reopening reflected the practical
realities of the Medicare program where
‘‘the few dozen [intermediaries] often

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need 3 years within which to discover
overpayments in the tens of thousands
of NPRs that they issue, while each of
the tens of thousands of sophisticated
Medicare-provider recipients of these
NPRs is generally capable of identifying
an underpayment in its own NPR within
the 180-day time period specified in 42
U.S.C. 1395oo(a)(3)’’ for appeals to the
Board (Id. at 455–56). If a provider
wants to challenge a finding of predicate
fact where the reimbursement impact is
less than the statutory jurisdictional
minimum of $10,000 for Board appeals,
§ 405.1811 of the regulations gives the
provider a right to appeal to the
intermediary hearing officers if the
amount in controversy is at least $1,000
and the other requirements for
intermediary hearing officer jurisdiction
are satisfied. Thus, providers can appeal
findings of predicate fact to the Board or
the intermediary hearing officers within
180 days of a final intermediary
determination, in addition to requesting
reopening of a predicate fact within 3
years of such determinations.
Comment: One commenter suggested
that application of the proposed
revisions be limited to findings of fact
that had not been appealed, instead of
applying to issues on which the
provider had received an adverse
finding on the merits. For those issues,
the commenter believed that it had the
right to bring successive challenges to
the finding of predicate fact after an
adverse decision on the merits of a
challenge to the finding of predicate fact
in the first year it arose or was
determined.
Response: We do not perceive a basis
to limit the application of the proposed
revisions to findings of predicate facts
that have not been appealed. We believe
that the proposed revisions should also
apply to issues on which the provider
has received an adverse final decision
on the merits. Indeed, § 405.1803(d) of
the regulations requires the
intermediary to determine the effect of
a final decision and issue any revised
intermediary determination that proves
necessary. Moreover, settled rules of
issue preclusion, including the
requirement that the issue be litigated
on the merits by opposing parties,
would apply to a final decision on the
merits of the disputed predicate facts
after exhaustion of administrative
remedies and judicial review. We note
that because appeals of an NPR
sometime are not resolved finally before
NPRs are issued for later fiscal periods,
providers that wish to preserve their
rights to administrative and judicial
review sometimes will challenge
predicate facts in successive appeals
and actions for judicial review until the

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first appeal is finally resolved. But upon
final resolution of the first appeal, the
parties usually do not relitigate the same
finding of predicate facts in the appeals
for later fiscal periods.
Comment: Several commenters
opposed the proposed revisions to the
reopening rules because the commenters
were concerned that the Medicare
program had reserved the right to create
exceptions by regulation or Ruling that
would benefit the program, but not
Medicare providers. The commenters
were also concerned that the Medicare
program would interpret reimbursement
provisions in the Medicare statute to
authorize the revision of predicate facts
only when it would result in reduced
reimbursement to providers.
Response: In discussing the proposed
revisions, we stated that the 3-year limit
on reopening of a predicate fact might
be countered by a statutory provision or
a specific regulation on reimbursement
of the matter at issue. This statement
acknowledges that the proposed
revisions cannot override a contrary
statutory provision, and that revisions to
the generally applicable reopening rules
are not intended to trump the provisions
of a specific reimbursement regulation.
Instead, the proposed revisions to the
reopening rules reflect the Medicare
program’s longstanding policy not to
revisit predicate facts more than 3 years
after the predicate fact arose or was first
determined in a final intermediary
determination. In cases where it has
been necessary to adjust cost report data
for use in later fiscal periods as a base
year or cap after the 3-year reopening
period has expired, the Medicare
program has relied on statutory
authority to make such adjustments and
used notice and comment rulemaking to
alert providers to the basis, purpose,
and scope of the adjustments. For
example, we refer readers to Regions
Hospital v. Shalala, 522 U.S. 448 (1998)
(sustaining the GME reaudit rule). These
procedural protections would be
reinforced by the proposed revisions to
the reopening rules.
However, in light of the comments we
received, we are limiting the scope of
this final rule to ‘‘predicate facts’’ that
are determined once and then used to
determine payments for one or more
fiscal periods after the fiscal period in
which the facts arose or were
determined. We are not applying these
final provisions to facts that are subject
to annual evaluation as part of the
intermediary’s final determination of
reasonable cost reimbursement under
section 1861(v) of the Act. We believe
that narrowing the definition of
‘‘predicate facts’’ in this fashion will
help allay commenters’ concerns that

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the proposed revisions will be subject to
ad hoc exceptions that only serve to
disadvantage providers. We note that
the annual evaluation of certain
predicate facts in the determination of
reasonable cost reimbursement can
increase the provider’s reimbursement
in later fiscal periods. For example, if a
provider incurs a Medicare bad debt in
2002, but the debt is not deemed
uncollectable until 2009, the bad debt
would be reimbursable in 2009 if all the
requirements of § 413.89 were satisfied.
Comment: Several commenters took
issue with CMS’ characterization of the
proposed revisions as codifying
longstanding policy. Instead, the
commenters pointed to the decisions
cited in the D.C. Circuit’s Kaiser
Foundation Hospitals decision as
evidence that CMS has not taken a
consistent position on when predicate
facts can be reexamined, but instead has
taken the position that benefits the
program.
Response: We disagree with the
commenters’ assertion that the proposed
revisions do not reflect our longstanding
interpretation of the reopening
regulations. The reopening rules, which
were first promulgated in 1974, have
always been interpreted and applied in
an even-handed manner such that a
given reopening might increase,
decrease, or leave unchanged the
provider’s program reimbursement. The
reimbursement effect of a specific
reopening is determined by the
governing law and the factual
circumstances of the matter at issue.
Moreover, we disagree with the
commenters’ assertion that in certain
cases we have reexamined predicate
facts beyond the 3-year reopening
period without authority for doing so. In
three of these cases, a reimbursement
regulation allowed reexamination of
predicate facts so long as the underlying
amount of reimbursement was not
changed beyond the 3-year reopening
period. For example, in proposing the
GME reaudit rule that the Supreme
Court later upheld in Regions Hospital,
we acknowledged that ‘‘a special
exception’’ to the general reopening
rules was required to reexamine cost
reports from the inpatient prospective
payment system base year beyond the 3year reopening period (53 FR 36592,
September 21, 1988). In Edgemont
Hospital v. Mutual of Omaha Insurance
Co., PRRB Dec. No. 95–D34, 1995 WL
933971 (Apr. 6, 1995), adjustments to
the amount of operating costs
considered in establishing the TEFRA
target amount or rate-of-increase ceiling
were authorized by § 413.40(g). If the
Medicare program took the view that the
reopening rules permitted the

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reexamination of predicate facts beyond
the 3-year reopening period, as the
commenters suggested, then there
would have been no need for the abovereferenced regulations on GME
reauditing and TEFRA limit adjustments
to operating costs.
Contrary to the commenters’
assertions, the Medicare program has
applied its reopening rules to
determinations of predicate facts to the
benefit of providers. For example, when
a provider received an adverse decision
on its target amount for its first year, but
the intermediary had failed to issue
timely notices of reopening for the
following fiscal periods, we instructed
the intermediaries not to attempt to
adjust those target amounts, which
allowed the provider to retain
reimbursement in excess of the cost
ceilings calculated with the correct
target amounts. Similarly, we have
instructed intermediaries not to attempt
to change incorrectly calculated high
direct GME or IME resident caps for
fiscal periods that were beyond the
reopening period.
The other cases cited by commenters
do not concern ‘‘predicate facts’’ as
defined in the proposed revisions.
HealthEast Bethesda Lutheran Hospital
& Rehabilitation Center v. Shalala, 164
F.3d 415 (8th Cir. 1998), concerned
interest expenses evaluated under
§ 413.153(b)(2). As we have discussed
above, interest expense, when
considered on a reasonable cost basis, is
subject to reexamination in each fiscal
period to determine whether the cost at
issue qualifies as ‘‘necessary’’ interest
expense for that fiscal period. We refer
readers to § 413.5(a) of the regulations.
The facts associated with these
expenses, like bad debt arising from
non-payment of Medicare deductibles
and coinsurance, are not determined
once and applied thereafter to
determine reimbursement in subsequent
fiscal periods. They are not within the
scope of the proposed revisions, as we
have revised it in response to the
comments.
The remaining decision referenced by
the commenters, Mark Twain St.
Joseph’s Healthcare Corp. v. Leavitt, 154
Fed. Appx. 651 (9th Cir. 2005), also
does not support the commenters’ view.
In that case, the court held that
recalculation of the provider’s hospital
specific rate did not violate the finality
provisions of §§ 412.71 and 412.72;
rather, the intermediary properly
reopened the determination to correct
an administrative error. If anything, the
finality provisions of §§ 412.71(d) and
412.72(b) are consistent with our
position that once a predicate fact, such
as the hospital specific rate, is finally

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determined, it is not subject to
continuing requests for review or
reopening beyond the 3-year reopening
period at the instigation of either the
intermediary or the provider.
Comment: Several commenters stated
that CMS proposed to apply the
revisions to the reopening rules
retroactively, but that CMS had no
authority to do so. Based on the D.C.
Circuit’s decision in Kaiser Foundation
Hospitals and earlier decisions cited
therein, the commenters stated that the
proposed revisions to the reopening
rules did not reflect longstanding
Medicare policy, and thus the revisions
did not clarify such policy. The
commenters also stated that the
proposed revisions would be contrary to
the public interest in ensuring the
accuracy of reimbursement
determinations. One commenter also
stated that it would be contrary to the
public interest to apply the proposed
revisions to pending appeals when
providers have relied on the existing
regulations.
Response: As explained in the
proposed rule, we disagree with the D.C.
Circuit’s decision in Kaiser Foundation
Hospitals, including the court’s
discussion of decisions in a few prior
cases. As discussed above, we believe
that the circumstances presented in
those prior cases are not similar to those
in Kaiser, and we also have narrowed
the scope of the proposed revisions to
address these concerns. In any event, in
a program the size of the Medicare
program, with thousands of providers
submitting voluminous cost reports
annually over the course of nearly 50
years, we do not believe that the few
reimbursement decisions cited by the
D.C. Circuit provide a reasonable basis
for providers to forego their statutory
right to appeal to the Board, and the
regulatory process for reopening, by
invoking an alleged right to seek
revisions to predicate facts beyond the
3-year reopening period.
Nonetheless, we recognize that the
D.C. Circuit rejected our interpretation
of the reopening rules, and the court
found that we had applied the rules
differently in a few earlier cases. By
amending the reopening rules now, our
purpose is to articulate clearly what we
had intended the regulations to say in
the first place, so that the revised rules
will be applied consistently by
confining the reopening of predicate
facts to the 3-year reopening period.
We continue to believe that
application of the revised rules to
intermediary determinations issued on
or after the effective date of this final
rule, and to appeals and reopenings
(including requests for reopening) that

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are pending on or after the same
effective date, is not impermissibly
retroactive in effect. Any finding of a
predicate fact inherently has a degree of
retroactivity because Congress (or the
Medicare program) has assigned a future
reimbursement consequence to provider
actions that have already taken place,
usually before the enactment of the
relevant reimbursement statute. For
example, when Congress enacted the
direct GME and IME resident cap statute
in 1997, and used a base year that ended
no later than December 31, 1996, it
assigned future consequences (the
resident cap) to actions that were
already completed (the provider’s
employment of residents during the
1996 cost reporting period).
We believe that this is a form of
‘‘secondary retroactivity’’ inasmuch as
future consequences are attached to past
actions, but such secondary retroactivity
does not violate due process or, in the
case of regulations, the Administrative
Procedure Act, if the regulation is not
unreasonable. For example, we refer
readers to Bowen v. Georgetown Univ.
Hosp., 488 U.S. 203, 219–220 (1988)
(Scalia, J., concurring); and Nat’l Cable
& Telecomms. Ass’n v. FCC, 567 F.3d
659, 670–71 (D.C. Cir. 2009). Applying
the proposed revisions to pending
intermediary determinations, appeals,
and reopenings will not affect the
amount of reimbursement a provider
received for the cost reporting period in
which the predicate fact first arose or
was determined. Nor would such
application of the proposed changes to
the reopening rules invalidate any
revisions to predicate facts that were
finalized prior to the effective date of
this final rule. Instead, the revised
reopening rules govern only the timing
of permissible revisions to predicate
facts, as of the effective date of this final
rule, and thus the revisions to the
reopening rules are procedural in
nature.
The scope of applicability of the
revised reopening rules also does not
undermine providers’ settled
expectations. A provider cannot
reasonably expect to be allowed to
revise a predicate fact after the 180-day
filing period for an appeal after the right
has expired, when the only remaining
means of securing such relief is through
the discretionary reopening process. We
refer readers to Bergerco Canada v. U.S.
Treasury Dept., 129 F.3d 189, 194–95
(D.C. Cir. 1997) (changes to
discretionary licensing procedure made
after plaintiff had filed request for
license did not impair any rights of the
plaintiff). After the 3-year period to
request reopening has elapsed, a
provider has no reasonable expectation

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of securing revisions to predicate facts.
While one of the commenters suggested
that the Kaiser decision effectively
established the governing law, the
decision is of such recent vintage that
few providers could have relied on it as
a basis for changing predicate facts after
expiration of the 3-year reopening
period. Moreover, the strictures against
retroactivity do not apply to procedural
rules, which the reopening rules plainly
are. We refer readers to Combs v.
Commissioner of Social Security, 459
F.3d 640, 647 (6th Cir. 2006) (en banc).
In any event, if the revisions to the
reopening rules were deemed a
retroactive application of a substantive
change to a regulation, we continue to
believe that section 1871(e)(1)(A) of the
Act permits retroactive application
because it is necessary to ensure
compliance with various statutory
payment provisions such as the TEFRA
target amount (under section 1886(b) of
the Act) and the caps on residents for
GME and IME reimbursement (under
sections 1886(h)(4)(F) and
1886(d)(5)(B)(v) of the Act); the 180-day
filing period for appeals to the Board
(under section 1878(a)(3) of the Act);
and the 3-year period for reopening
(under §§ 405.1885(b)(1), and (b)(2) of
the regulations). In addition, we
continue to believe that retroactive
application furthers the public interest
in safeguarding the 3-year limit on
reopening and the interests of both
Medicare providers and the Medicare
program in preserving the finality of
reimbursement determinations.
Contrary to the commenter’s assertion,
the revised reopening rules still provide
an avenue to correct predicate facts,
thus promoting accuracy in
reimbursement determinations. The
revised reopening rules also protect the
interests of administrative finality by
ensuring that both Medicare providers
and the Medicare program can close
their books on a cost reporting period
without worrying that the other party
will invoke the Kaiser decision to make
changes to predicate facts long after the
close of the 3-year reopening period,
when documents and witnesses may no
longer be available.
After consideration of the public
comments we received, we are adopting
the proposed revisions to
§§ 405.1885(a)(1) and (a)(2)(iv) to clarify
that the specific ‘‘matters at issue in a
determination’’ that are subject to the
reopening rules include factual findings
for one fiscal period that are predicate
facts for later fiscal periods with the
following modifications: We are adding
language to paragraph (a)(1)(iii) that
defines the ‘‘predicate facts’’ that are
subject to the revisions as factual

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findings for one cost reporting period
that once determined are used in one or
more subsequent cost reporting periods
to determine reimbursement. We are
adding language to paragraph (b)(2)(iv)
to clarify that it does not apply to
factual findings when made as part of a
determination of reasonable cost under
section 1861(v)(1)(A) of the Act.
Paragraph (a)(1)(iv) also was reworded
for clarity. Absent a specific statute,
regulation, or other legal provision
permitting reauditing, revising, or
similar actions changing predicate facts:
(1) A predicate fact is subject to change
only through a timely appeal or
reopening of the NPR for the fiscal
period in which the predicate fact first
arose or the fiscal period for which such
fact was first determined by the
intermediary; and/or (2) the application
of the predicate fact is subject to change
through a timely appeal or reopening of
the NPR for the fiscal period in which
the fact was first used (or applied), by
the intermediary to determine the
provider’s reimbursement. The general
3-year reopening period applies to
findings about such predicate facts and
the reopening period is calculated
separately for each finding about each
predicate fact. At this time, we have
decided not to make similar changes
regarding predicate facts to the
regulations governing intermediary
appeals at § 405.1811 and appeals to the
Board at § 405.1835.
XX. Files Available to the Public Via
the Internet
In the CY 2014 OPPS/ASC proposed
rule (78 FR 43684), we proposed to
create new Addendum P—Proposed
OPPS Items and Services That Will Be
Packaged for CY 2014.
We did not receive any public
comments related to the proposed
creation of new Addendum P and are
finalizing our proposal without
modification.
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 CY 2014
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 ‘‘1601–FC’’ from
the list of regulations. All Addenda for
this final rule with comment period are
contained in the zipped folder entitled
‘‘2014 OPPS 1601–FC Addenda’’ at the
bottom of the page.
To view the Addenda of this final rule
with comment period pertaining to CY

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2014 payments under the ASC payment
system, go to the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
ASCPayment/ASC-Regulations-andNotices.html and select ‘‘1601–FC’’ from
the list of regulations. All Addenda for
this final rule with comment period are
contained in the zipped folders entitled
‘‘Addendum AA, BB, DD1 and DD2,’’
and ‘‘Addendum EE’’ at the bottom of
the page.
XXI. 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 estimate 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 2014 OPPS/ASC proposed
rule (78 FR 43684), we solicited public
comments on each of the issues outlined
above for the information collection
requirements discussed below.
B. Requirements in Regulation Text
1. Changes to the Outcome Measure
Requirement for OPOs
In section XVI. of this final rule with
comment period, we discussed our
proposal to modify the outcome
measures requirement for OPOs set forth
at § 486.318. Currently, OPOs are
required to meet all three outcome
measures in that section or they are
automatically decertified. We proposed
to modify that requirement so that OPOs
will meet the outcome measures
requirement if they meet two out of the
three outcome measures.
Based on our experience with OPOs
and historical data concerning how
many OPOs typically fail to meet one of
the outcome measures, we believe that
there would be about five OPOs that
would fail to meet one of the outcome

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measures. Our proposal would result in
those five OPOs meeting the outcome
measures requirement and not being
automatically de-certified. Therefore,
these five OPOs would not have to
perform the ICRs under this section,
which would be the time and resources
needed to go through the appeals
process in an attempt to secure a
reversal of the decertification.
The ICRs that an OPO would be
required to expend would depend upon
how it chose to handle the
decertification. An OPO may choose to
not engage in the appeals process and
merge with another OPO prior to the
effective date of the decertification.
Other OPOs would likely choose to take
advantage of the appeals process, which
would begin with reconsideration at the
regional administrator level. It is likely
that an OPO would expend considerable
resources during the reconsideration
and, if that was unsuccessful, a hearing
before a CMS hearing officer. We believe
both would require considerable time
and other resources from the OPO’s
senior staff and legal counsel. We also
believe that those OPOs that went onto
a hearing would expend considerably
more resources than those that received
a reversal of their decertification at the
reconsideration. While we do not have
a reliable estimate on how much these
OPOs would save due to the numerous
unknown variables, we are confident
that these OPOs would sustain a
significantly positive effect from not
being automatically de-certified as is
currently required under the OPO CfCs.
In addition, under 5 CFR 1320.3(c), a
‘‘collection of information’’ does not
include requirements imposed on fewer
than 10 entities. Therefore, the
requirements of this section are not
subject to the PRA.
2. Changes to the Medicare Fee-forService EHR Incentive Program
In section XVIII. of the CY 2014
OPPS/ASC proposed rule, we proposed
to revise 42 CFR 495.4 to provide a
special method for making hospitalbased determinations for 2013 only in
the cases of those EPs who reassign their
benefits to Method II CAHs. We also
proposed a minor clarification to the
regulations at § 495.104(c)(2) concerning
the cost reporting period to be used in
determining final EHR payments for
hospitals. We refer readers to the Stage
1 (75 FR 44517 through 44544) and
Stage 2 (77 FR 54125 through 54135)
final rules for the Medicare EHR
Incentive Program for the discussions of
the burden of the information collection
requirements of the Medicare Fee-forService EHR Incentive Program. Our
proposals in the proposed rule did not

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modify or increase the information
collection requirements of the program
in any way.
After reviewing the public comments
we received on the proposed rule, we
are finalizing our proposals discussed in
section XVIII. of this document. These
final policies do not modify or increase
the information collection requirements
of the Medicare Fee-for-Service EHR
Incentive Program in any way.
C. Associated Information Collections
Not Specified in Regulatory Text
In the CY 2014 OPPS/ASC proposed
rule, we made reference to proposed
associated information collection
requirements that were not discussed in
the regulation text contained in the
proposed rule. The following is a
discussion of those requirements, any
public comments we received, and our
responses to those public comments.
1. Hospital OQR Program
As we stated in section XIV. of the CY
2012 OPPS/ASC final rule with
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 72111
through 72114), the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74549 through 74554) and the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68527 through 68532) for
detailed discussions of the Hospital
OQR Program information collection
requirements we have previously
finalized.
a. Hospital OQR Program Requirements
for the CY 2015 Payment Determination
and Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68531) for a discussion on
the burden of the information collection
requirements of the previously adopted
Hospital OQR Program measures for the
CY 2015 payment determination. In the
CY 2014 OPPS/ASC proposed rule, we
did not propose to add any additional
measures for the CY 2015 payment
determination and subsequent years;
therefore, there will not be an increase
in our previous burden estimate.
We note that we had previously
suspended data collection for the OP–19
measure and deferred data collection for
the OP–24 measure. In this final rule
with comment period, we are finalizing
our proposal to remove the OP–19 and
OP–24 measures from the Hospital OQR
Program for the CY 2015 payment
determination and subsequent years (78
FR 43646 through 43647, 78 FR 43653).

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We refer readers to section XIII.C.2. of
this final rule with comment period for
our discussion of the removal of these
measures. Because one of the measures
was previously suspended and the other
deferred, removing them will not impact
our previous burden estimate and it
remains unchanged.
In addition, we are finalizing our
proposals to codify existing policies
related to program participation and
withdrawal, data submission,
extraordinary circumstances extensions
or waivers, data validation, and the
reconsideration process. Because we are
only codifying existing policies
(including finalizing a clarification that
we may grant extensions or waivers if
systemic problems in our data collection
systems directly or indirectly affect the
ability of hospitals to submit data), we
do not anticipate any additional burden
to hospitals based on these proposals
affecting the CY 2015 payment
determination or subsequent years.
The Hospital OQR program has 3
types of measures that utilize different
methods of data collection/
submission—chart-abstracted measures
that require HOPDs to collected data
from chart-abstraction, and submit that
data directly to CMS, Web-based
measures submitted via the QualityNet
Web site (this includes some chart
abstracted measures that are also
submitted via the QualityNet Web site)
and measures submitted via the CDC’s
NHSN Web site. In the CY 2014 OPPS/
ASC proposed rule, there is only one
section heading for all of these
measures: ‘‘Web-based Measures for the
CY 2016 Payment Determination and
Subsequent Years’’ (78 FR 43685). We
intended to include headings for the
other two kinds of measures, but these
were inadvertently deleted. For the new
measures, this resulted in burden
estimates for three chart-abstracted
measures submitted directly to CMS via
a Web-based tool, and one measure
submitted via CDC’s NHSN all
appearing under a heading that refers to
just one type of measure. In this final
rule with comment period, we have
corrected this error and separated the
content appropriately using separate
section headings for each of the
different kinds of measures.
For the CY 2016 payment
determination and subsequent years, the
burden associated with Hospital OQR
Program procedures consists of the time
and effort associated with collecting and
submitting data for the 3 different kinds
of measures. Where we have chartabstracted measures that are collected
via Web-based tool, they are included
below in section XXI.C.1.b., where their
chart-abstraction burden is estimated,

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and in section XXI.C.1.c., where we
estimate their Web submission burden.
We believe there is a burden
associated with successful participation
in the Hospital OQR Program, where
successful participation results in a full
annual payment update (APU) for a
particular payment determination. This
burden would include, but not be
limited to: maintaining familiarity with
the Hospital OQR Program requirements
(for example, participating in the
monthly educational webinars, reading
information available at the QualityNet
Web site https://qualitynet.org, checking
feedback reports to indicate a facility’s
current status or performance, reaching
out to the Hospital OQR Program
support contractor to make specific
inquiries); staying up to date with
system requirements (for example,
updating passwords, maintaining a
system that is fully functional in the
QualityNet environment, etc.); and
communicating how program
requirements must be operationalized
within the individual facility. For each
hospital, we estimate burden as follows,
for one annual cycle of the program:
• Program requirements (20 hours),
• System requirements (2 hours)
• Managing facility operations (20
hours)
The burden for one hospital is
therefore the sum of these 3 areas above
and therefore estimated at 42 hours. We
calculate the total burden for the
approximately 3,300 participating
hospitals as 138,600 hours (42 hours
multiplied by 3,300 facilities).
b. Chart-Abstracted Measures for the CY
2016 Payment Determination and
Subsequent Years
We estimated, based on our past
experiences with chart-abstracted
measures, that there will be
approximately 3,300 respondents per
year and that each participating hospital
will spend 35 minutes per case to
collect and submit the data. As a result,
the estimated burden associated with
one case per hospital would be 1,924
hours (3,300 hospitals × 0.583 hours per
hospital). We estimated the financial
burden for all hospitals to collect and
submit data using our estimate of one
case per hospital would be $57,717
(3,300 hospitals × $30.00 per hour ×
0.583 hours). We note that this estimate
is based on estimates of all of these
measures being collected using the same
methods of chart abstraction, but
excludes estimates for data submission
for measures that HOPDs will report via
a Web-based tool.
Based upon the data submitted for the
CY 2012 and CY 2013 payment
determinations, we estimated there will

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be a total of 1,679,700 cases per year, or
approximately 509 cases per year per
hospital. However, hospitals will vary
greatly on the number of cases per
HOPD due to specialization. Based on
those numbers though, the estimated
annual hourly burden associated with
the aforementioned data submission
requirements for the chart-abstracted
data for all hospitals (excluding
submission burden for measures
submitted through the Web-based tool)
is 979,265 hours (1,679,700 cases per
year × 0.583 hours per case). This
estimate is based on data submitted
previously and includes burden
associated with measure OP–22, which
is a chart-abstracted measure with Webbased submission.
For the CY 2016 payment
determination, the three newly finalized
measures (OP–29, OP–30, and OP–31)
are chart-abstracted measures with Webbased submission. These three measures
will add to the burden. In this
rulemaking, we estimate the maximum
burden, but in future rulemaking, we
will update our burden estimate based
on actual data we receive. To estimate
maximum burden, we assume all
facilities will have adequate volume to
sample at the highest number of
required cases. If a hospital is obligated
to chart-abstract the highest number of
cases from the instructions we provide
to indicate appropriate sampling
methodology based on hospital’s
volume, this is a basis for us to calculate
a maximum burden estimate. Using the
same sampling methodology we have
used in the past, which can be found on
Table 3 (ED Throughput) of ‘‘Section 4Population, Sampling and
Transmission’’ in the Hospital
Outpatient Quality Reporting
Specifications Manual, v7.0 available at
https://qualitynet.org, we estimate that
each of the approximately 3,300
responding hospitals will have volume
adequate to support quarterly sample
sizes of 96 cases, for a total of 384 cases
(96 cases per quarter × 4 quarters) to be
abstracted by each hospital annually for
one new measure.
Based on these assumptions for the
three new measures, the total additional
cases for one hospital to sample would
be 1,152 (384 cases annually per
measure x 3 measures). We estimate that
the time to chart abstract one case is 25
minutes. We estimate 25 minutes per
case (or 0.417 hours per case) based on
chart-abstraction time less the time to
submit Web-based measures in
aggregate (0.583 hours ¥ 0.167 hours =
0.417 hours per measure). For the
approximately 3,300 reporting hospitals,
we therefore estimate the total
maximum burden associated is

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1,584,000 hours (3,300 hospitals × 0.417
hours per hospital × 1,152 cases). We
estimate the maximum financial burden
for all hospitals to collect and submit
data via the Web-based tool for the three
new measures to be $47,520,000 (3,300
hospitals × $30.00 per hour × 1,584,000
hours).
For chart-abstracted measures that
HOPDs will not submit via a Web-based
tool, HOPDs will incur a financial
burden associated with chart abstraction
and data submission for these non-Webbased measures, which requires that
HOPDs submit patient-level data
directly to CMS. We estimated the
financial burden associated with these
measures for all hospitals as
$29,377,953 (1,679,700 cases per year ×
$30.00 per hour × 0.583 hours per case).
c. Web-Based Measures Submitted
Directly to CMS for the CY 2016
Payment Determination and Subsequent
Years
For the CY 2016 payment
determination and subsequent years, we
proposed to add five measures to the
program. Of these five measures, four
are chart-abstracted measures requiring
that HOPDs submit patient-level data
directly to CMS using a Web-based tool,
with data collection beginning in CY
2014. Based on public comment we
received regarding burden, we are not
finalizing proposed measure OP–28 as
part of the Hospital OQR Program
measure set. Therefore, we are only
finalizing three of the four chartabstracted measures that we proposed.
We refer readers to section XIII.E.2 of
this final rule with comment period for
a discussion of public comments
regarding OP–28. We also refer readers
to section XIII.G.2.f. of this final rule
with comment period for our discussion
of specific data collection requirements
we finalized, which serves as the basis
of our estimates of burden described.
For previously finalized Web-based
measures (OP–12, OP–17, OP–25, and
OP–26), our measurement methods are
somewhat different from the methods
we use for one existing measure and the
three newly finalized Web-based
measures (OP–29, OP–30, and OP–31).
We estimated the burden of chartabstraction for the subset of the four of
these measures that are also chartabstracted (OP–22, OP–29, OP–30, and
OP–31). It is appropriate to consider this
subset of four measures in both the
section on chart-abstraction burden and
in this section estimating Web-based
measure burden because not all Webbased measures are also chartabstracted. Our estimate in this section
is based on the chart-abstraction for
these four measures being complete by

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the hospital at the time of Web-based
entry. Each participating hospital would
spend 10 minutes per measure per year
to collect and submit the data. In the
case of the subset of four chartabstracted measures, the estimate here is
only for the time associated with
entering aggregate totals into our Webbased tool. The estimated annual
burden associated with these measures
is 4,409 hours (3,300 hospitals × 0.167
hours per measure × 8 measures per
hospital) for the CY 2016 payment
determination. This burden is based on
a collection burden for OP–12, OP–17,
OP–25, and OP–26 and a Web-based
submission burden for all of the
measures that are submitted via a Webbased tool.
HOPDs will incur a financial burden
associated with identifying and
submitting data for these eight Webbased measures. We estimated that the
financial burden associated with these
measures would be $132,264 (3,300
hospitals × $30.00 per hour × 0.167
hours per measure × 8 measures). Of
these eight measures, 4 are chartabstracted. As noted above, we include
the chart-abstraction burden for the
subset of 4 chart-abstracted measures (1
previously finalized, 3 finalized in this
rulemaking) submitted via Web-based
tool in the section on chart-abstracted
data collection above.
d. NHSN HAI Measure for the CY 2016
Payment Determination and Subsequent
Years
For the NHSN HAI measure Influenza
Vaccination Coverage among Healthcare
Personnel (OP–27), the burden involved
would be from gathering information
either from existing reports or by other
methods such as surveying the
healthcare personnel population. In the
CY 2014 OPPS/ASC proposed rule (78
FR 43685), we used an estimate of 10
vaccinations per outpatient hospital.
Since then, we have obtained a more
accurate estimate for the number of
vaccinations per hospital and have
reflected that in our calculations below.
Using data from the United States
Department of Labor Bureau of Labor
Statistics, Occupational Employment
Statistics Query System, and the total of
all workers for Outpatient Care Centers
Code 621400, the number of personnel
for all hospitals is 640,360. We estimate
640,360 responses for a total burden of
106,940 hours (0.167 hours per response
× 640,360 responses).
HOPDs will incur a financial burden
associated with data submission for this
measure. Using the total of all
Outpatient Care Center workers from the
Bureau of Labor Statistics, as described
above, we estimate that the financial

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burden associated with this measure for
all HOPDs would be $3,208,203 ($30.00
per hour × 106,940 hours).
We invited public comment on the
burden associated with the information
collection requirements for the chartabstracted measures, the Web-based
measures submitted directly to CMS,
and the measure submitted via CDC’s
NHSN. We did not receive any
comments on the burden associated
with information collection
requirements. Therefore, we are
finalizing our burden estimates.
e. Hospital OQR Program Validation
Requirements for the CY 2015 Payment
Determination and Subsequent Years
We use a sampling methodology,
which involves establishing a particular
sample size, eligibility for validation
selection, and encounter minimums for
patient-level data for measures where
data is obtained from chart abstraction
and submitted directly to CMS from
selected hospitals. We do not validate
measures submitted via Web-based tool
or submitted to NHSN. The validation
burden for a HOPD is the time and effort
necessary to submit validation data to a
CMS contractor. In the CY 2014 OPPS/
ASC proposed rule, we did not propose
any changes to our validation
procedures. As a result, the burden
associated with the validation
procedures for the CY 2015 payment
determination is the same as previously
finalized for CY 2014 in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68531). We estimated that
it would take each of the 500 sampled
hospitals approximately 12 hours to
comply with these data submission
requirements. To comply with the
requirements, we estimated each
hospital would 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 the CY 2015 payment
determination is approximately 6,000
hours (500 selected hospitals × 12 hours
per hospital).
HOPDs will incur a financial burden
associated with the required data
abstraction and data submission for the
validation process. We estimated that
the financial burden associated with
validation would be $180,000 ($30.00
per hour × 6,000 hours).
These requirements were approved
under OCN: 0938–1109. This approval
expired on October 31, 2013.
We invited public comment on the
burden associated with data validation

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information collection procedures. We
did not receive any public comments.
Therefore, we are finalizing our burden
estimates as proposed.
f. Hospital OQR Program
Reconsideration and Appeals
Procedures
In section XIII.I. of the proposed rule
and this final rule with comment
period, for the CY 2015 payment
determination and subsequent years, we
proposed and are finalizing a minor
change to the reconsideration request
process to ensure our deadline for these
requests will always fall on a business
day. We also proposed and are
finalizing our proposal to codify our
reconsideration request process at 42
CFR 419.46(h).
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.
2. ASCQR Program Requirements
a. Claims-Based Measures for the CY
2014 Payment Determination
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68532), we
discussed the information collection
requirements for the five claims-based
measures (four outcome measures and
one process measure) to be used for the
CY 2014 payment determination. The
five measures are: (1) Patient Burn (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). We
collected quality measure data for the
five claims-based measures using QDCs
placed on submitted claims for services
furnished from October 1, 2012 through
December 31, 2012 that were paid by
the contractor by April 30, 2013.
Approximately 71 percent of ASCs
participated in Medical Event Reporting
(the ASC Quality Collaboration’s
voluntary reporting program) (http://
www.ascquality.org), which included
reporting on the first four claims-based
measures, which are outcome measures.
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 Surgical Center
Environmental Scan (July 2008)
(Contract No. GS–10F–0096T)). We

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estimated the burden to report QDCs for
these 4 claims-based outcome measures
to be nominal due to the small number
of cases. Based on the data above,
extrapolating from 71 percent to 100
percent of ASCs reporting, there would
be an average of 11.8 events per year or
less than 1 case per month per ASC.
For the claims-based process measure,
Prophylactic IV Antibiotic Timing, we
also estimated the burden associated
with submitting QDCs to be nominal
because few procedures performed by
ASCs will require prophylactic
antibiotic administration.
We invited public comment on the
burden associated with these
information collection requirements. We
did not receive any public comments on
our burden discussion in the CY 2014
OPPS/ASC proposed rule (78 FR 43686)
regarding the five previously finalized
claims-based measures for the CY 2014
payment determination.
b. Claims-Based and Web-Based
Measures for the CY 2015 and CY 2016
Payment Determinations
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68532), we
discussed the information collection
requirements for the measures to be
used 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, Web-based, measures:
Safe Surgery Checklist Use and ASC
Facility Volume Data on Selected ASC
Surgical Procedures (76 FR 74504
through 74509). For the CY 2016
payment determination, we adopted the
seven measures for the CY 2015
payment determination and added
Influenza Vaccination Coverage among
Healthcare Personnel (NQF # 0431) (76
FR 74509).
Based on our data for CY 2014
payment determinations above for
claims-based measures, extrapolating to
100 percent of ASCs reporting, there
would be an average of 11.8 events per
year. Therefore, we estimated the
burden to report QDCs on this number
of claims per year for the first four
claims-based outcome measures to be
nominal due to the small number of
cases (approximately one case per
month per ASC) for the CY 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 Web-based
measures, ASCs will enter required
information using a Web-based

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collection tool between July 1, 2013 and
August 15, 2013. For the Safe Surgery
Checklist Use 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 878 hours (5,260
ASCs × 1 measure × 0.167 hours per
ASC). For the CY 2015 payment
determination, we estimated that, for
the ASC Facility Volume Data on
Selected ASC Surgical Procedures
measure, each participating ASC would
spend 10 minutes per year to collect and
submit the required data, making the
estimated annual burden associated
with this measure 878 hours (5,260
ASCs × 1 measure × 0.167 hours per
ASC).
For the CY 2016 payment
determination, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43669), we
proposed, and are finalizing in this final
rule with comment period, that ASCs
would report data for the Safe Surgery
Checklist Use measure and the ASC
Facility Volume Data on Selected ASC
Surgical Procedures measure between
January 1, 2015 and August 15, 2015 for
services furnished between January 1,
2014 and December 31, 2014. For the
Safe Surgery Checklist Use measure for
the CY 2016 payment determination, we
estimated that each participating ASC
would spend 10 minutes per year to
collect and submit the required data,
making the estimated annual burden
associated with this measure 878 hours
(5,260 ASCs × 1 measure × 0.167 hours
per ASC). For the CY 2016 payment
determination, for the ASC Facility
Volume Data on Selected ASC Surgical
Procedures measure, we estimated that
each participating ASC would spend 10
minutes per year to collect and submit
the required data, making the estimated
annual burden associated with this
measure 878 hours (5,260 ASCs × 1
measure × 0.167 hours per ASC).
For the CY 2016 payment
determination, for the NHSN HAI
measure: Influenza Vaccination
Coverage among Healthcare Personnel,
we estimated that the total annual
burden associated with this measure for
ASCs, including NHSN registration
(5,260 ASCs × 0.083 hour per facility =
437 hours) and data submission (5,260
ASCs × 0.167 hour per response for 20
workers per facility = 17,568) would be
18,005 hours. This estimate is based
upon burden estimates from the CDC
(OMB No. 0920–0666) and reported
numbers for the average number of
workers per ASC.
For the CY 2016 payment
determination, in the CY 2014 OPPS/
ASC proposed rule (78 FR 43686), we

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proposed to add four measures to the
program with data collection to begin
during CY 2014 and submission to be
via a Web-based tool. As we discuss in
section XV.B.3. of this final rule with
comment period, we are finalizing the
adoption of three of these four
measures. For the chart-abstracted
measures, we estimated that each
participating ASC would spend 35
minutes per case to collect and submit
the data, making the total estimated
burden for ASCs with a single case per
ASC of 3,067 hours (5,260 ASCs × 0.583
hours per case per ASC). We expect that
ASCs would vary greatly as to the
number of cases per ASC due to ASC
specialization.
In addition, in the proposed rule we
stated that ASCs would incur a financial
burden associated with chart abstraction
and data submission for these four
proposed measures. We estimated that
ASCs (in the proposed rule (78 FR
43686), we erroneously referred to ‘‘for
a chart-abstracted case, an ASC’’) would
incur costs of $91,997 (5,260 ASCs ×
$30.00 per hour × 0.583 hours). We
solicited public comment on the impact
of adding these measures and requiring
data submission. We also invited public
comment on the burden associated with
these information collection
requirements.
For the previously finalized Webbased Safe Surgery Checklist Use and
ASC Facility Volume Data on Selected
ASC Surgical Procedures measures for
the CY 2016 payment determination, we
received public comments that
increasing the data submission time
period was an appropriate and
beneficial change that did not increase
burden. These comments are discussed
in section XV.D.5.b of this final rule
with comment period.
For the claims-based measures, we
received public comments that data
collection via claims was a way to
reduce burden. These comments are
discussed in sections XV.D.4 and
XV.D.5. of this final rule with comment
period.
We discuss public comments we
received on burden associated with data
collection for the NHSN HAI measure:
Influenza Vaccination Coverage among
Healthcare Personnel in section
XV.D.6.b. of this final rule with
comment period.
We discuss public comments we
received on burden associated with the
collection of aggregated data via a CMS
Web-based tool in sections XV.B.3 and
XV.D.5.c. of this final rule with
comment period.
After consideration of the public
comments received, we are finalizing
our burden estimates related to claims-

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based and Web-based measures for the
CY 2015 and 2016 payment
determinations as proposed.

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c. Program Administrative
Requirements and QualityNet Accounts;
Extraordinary Circumstances Extension
or Waiver 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
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 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
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 (77 FR 53638 through 53639), we
finalized for the CY 2015 payment
determination the requirement that
ASCs 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 52,600 hours (10 hours × 5,260
ASCs). The financial burden associated
with these requirements is estimated to

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be $1,578,000 ($30.00 per hour × 52,600
hours).
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 ASCs that have
submitted a request for an extension or
waiver from the ASCQR Program over
the past year, we estimated that 200
ASCs 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 400 hours per year. This
estimate takes into account continued
billing and claims processing issues.
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.
We invited public comment on the
burden associated with these
information collection requirements.
We did not receive any public
comments on our burden discussion in
the proposed rule and are finalizing
these burden estimates as proposed.
3. Hospital VBP Program Requirements
In section XIV. of the proposed rule,
for the Hospital VBP Program, we
proposed to allow hospitals to request
an independent CMS review that would
be an additional appeal process beyond
the existing review and corrections
process (77 FR 53578 through 53581
and 76 FR 74544 through 74547) and
appeal process codified at 42 CFR
412.167.
While there is burden associated with
a hospital requesting an independent
CMS review, the regulations at 5 CFR
§ 1320.4 for the Paperwork Reduction
Act of 1995 exclude collection activities
during the conduct of administrative
actions such as redeterminations,
reconsiderations, or appeals or all of
these actions.

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We invited public comment on the
burden associated with these
information collection requirements.
We did not receive any public
comments on our burden discussion in
the proposed rule.
XXII. 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.
XXIII. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
We have examined the impacts of the
final rule with comment period and the
final rules in this document 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
(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 final
rule with comment period 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 final rule with
comment period has been reviewed by

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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
CY 2014 OPPS/ASC proposed rule (78
FR 43687 through 43688), we solicited
public comments on the regulatory
impact analysis provided. We address
the public comments we received in this
section below and in other sections of
this final rule with comment period as
appropriate.
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 2014. 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 are revising the APC
relative payment weights using claims
data for services furnished on and after
January 1, 2012, through and including
December 31, 2012, and updated cost
report information.
For CY 2014, 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
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.
This final rule with comment period
is also necessary to update the ASC
payment rates for CY 2014, 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 2014. 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

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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 2014, we discuss the impacts
associated with this payment reduction
in section XV.C. of this final rule with
comment period.
3. Overall Impacts for the OPPS and
ASC Payment Provisions
We estimate that the effects of the
final 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
Federal government expenditures under
the OPPS for CY 2014 compared to CY
2013 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 2014
will be approximately $4.372 billion
higher relative to expenditures in CY
2013. Because this final rule with
comment period is 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 55 displays the
redistributional impact of the CY 2014
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 2014) will
increase total OPPS payments by 1.7
percent in CY 2014. 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 are budget neutral. However,

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these updates will change the
distribution of payments within the
budget neutral system. We estimate that
the total change in payments between
CY 2013 and CY 2014, 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 1.8
percent.
We estimate the total increase (from
changes to the ASC provisions in this
final rule with comment period as well
as from enrollment, utilization, and
case-mix changes) in expenditures
under the ASC payment system for CY
2014 compared to CY 2013 to be
approximately $143 million. Because
the provisions for the ASC payment
system are part of a final rule that 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 portion of
the final rule with comment period.
Tables 56 and Table 57 of this final rule
with comment period display the
redistributional impact of the CY 2014
changes on ASC payment, grouped by
specialty area and then grouped by
procedures with the greatest ASC
expenditures, respectively.
4. Detailed Economic Analyses
a. Estimated Effects of Final 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
2014 policy changes on various hospital
groups. As we did for the proposed rule,
we post on the CMS Web site our
hospital-specific estimated payments for
CY 2014 with the other supporting
documentation for this final rule with
comment period. To view the hospitalspecific estimates, we refer readers to
the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/index.html. At
the Web site, select ‘‘regulations and
notices’’ from the left side of the page
and then select ‘‘CMS–1601–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

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final rule with comment period. We
show hospital-specific data only for
hospitals whose claims were used for
modeling the impacts shown in Table
55 below. We do not show hospitalspecific impacts for hospitals whose
claims we were unable to use. We refer
readers to section II.A. of this final rule
with comment period 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 CY 2014 OPPS/ASC
proposed rule (78 FR 43687 through
43688), we solicited public comment
and information about the anticipated
effects of our proposed changes on
providers and our methodology for
estimating them. Any public comments
that we received are addressed in the
applicable sections of this final rule
with comment period that discuss the
specific policies.
Comment: Numerous comments
raised concerns about the lack of
transparency created by introducing
multiple policies into a complex
payment system that was created by
insufficient guidance on how proposed
payment rates were developed,
technical errors, insufficient policy
details, and a lack of detailed impact
analyses for each proposal.
Response: With regard to the lack of
detailed impact analyses, we believe
that our approach of modeling the
overall impact of the payment system on
classes of hospitals is one aspect of
fostering transparency. However,
assessing the impacts of a specific
policy also relies on clear discussion of
proposed changes and rationale, final
modeled relative weights, summary data
files and tables, and public use files.
Overall impacts can allow a quick
assessment of how multiple interacting
policies combine to impact proposed
payments, but can never provide the
amount of additional detail that an
individual commenter would desire for
their specific product(s) or set of
services.
We make numerous separate
summary data files and public use files
available, along with a discussion of our
modeling processes, and we believe that
this is the best means to foster robust
public data-related comments on
specific policies. We continuously
examine ways in which the data process

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could be simplified or made clearer, and
we also welcome and appreciate public
comment with regards to potential
improvements. This year, we again
received numerous thoughtful
comments supported by detailed data
analyses suggesting that commenters
have modeled the data to draw detail on
their specific policy interest. Finally,
individual facilities have more recent
internal data on the mix of services that
they provide than the distribution of
services in our claims data, and this
should allow them to assess the impact
on their facility along with discussion of
the proposed policy in preamble text.
(2) Estimated Effects of OPPS Changes
on Hospitals
Table 55 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 scaler
estimate. We now include a second line
for all hospitals, excluding permanently
held harmless hospitals and CMHCs.
We present separate impacts for
CMHCs in Table 55 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 2014, we are continuing to pay
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). We
display separately the impact of our
updates 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

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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
final IPPS market basket percentage
increase for FY 2014 is 2.5 percent (78
FR 50507). Section 1833(t)(3)(F)(i) of the
Act reduces that 2.5 percent by the
multifactor productivity adjustment
described in section 1886(b)(3)(B)(xi)(II)
of the Act, which is 0.5 percentage
points for FY 2014 (which is also the
MFP adjustment for FY 2014 in the FY
2014 IPPS/LTCH PPS final rule (78 FR
51003); and sections 1833(t)(3)(F)(ii)
and 1833(t)(3)(G)(ii) of the Act further
reduce the market basket percentage
increase by 0.3 percentage points,
resulting in the OPD fee schedule
increase factor of 1.7 percent, which we
are using in the calculation of the CY
2014 OPPS conversion factor. Section
10324 of the Affordable Care Act, as
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
2014 estimates in Table 55.
To illustrate the impact of the CY
2014 changes, our analysis begins with
a baseline simulation model that uses
the CY 2013 relative payment weights,
the FY 2013 final IPPS wage indices that
include reclassifications, and the final
CY 2013 conversion factor. Table 55
shows the estimated redistribution of
the proposed increase in payments for
CY 2014 over CY 2013 payments to
hospitals and CMHCs as a result of the
following factors: The independent
effect of all relative weight changes
between CY 2014 and CY 2013,
resulting from final policies other than
the packaging of outpatient laboratory
services previously paid under the
clinical laboratory fee schedule (CLFS)
into the OPPS (Column 2); the marginal
impact of the final policy to package
clinical laboratory services (Column 3);
the combined impact of the changes
between CY 2013 and CY 2014 modeled
in Columns 2 and 3 (Column 4: APC
reconfiguration and recalibration for CY
2014 compared to CY 2013 payments,
the combined effect of Columns 2 and
3); the final wage indices and the rural
and cancer hospital adjustments
(Column 5); the combined impact of all
the changes described in the preceding
columns plus the 1.7 percent OPD fee
schedule increase factor update to the
conversion factor (Column 6); the
combined impact shown in Column 6
plus the CY 2014 frontier State wage

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index adjustment (Column 7); and the
estimated impact taking into account all
payments for CY 2014 relative to all
payments for CY 2013, including the
impact of changes in estimated outlier
payments and changes to the passthrough payment estimate (Column 8).
We did not model an explicit budget
neutrality adjustment for the rural
adjustment for SCHs because we are not
making any changes to the policy for CY
2014. 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
2014 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
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 2013 and CY 2014 by various groups
of hospitals, which CMS cannot
forecast.
Overall, we estimate that the final
OPPS rates for CY 2014 will have a
positive effect for providers paid under
the OPPS, resulting in a 1.8 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 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 55
shows the total number of facilities
(4,068), including designated cancer and
children’s hospitals and CMHCs, for
which we were able to use CY 2012
hospital outpatient and CMHC claims
data to model CY 2013 and CY 2014
payments, by classes of hospitals, for
CMHCs and for dedicated cancer
hospitals. We excluded all hospitals and
CMHCs for which we could not
plausibly estimate CY 2013 or CY 2014
payment and entities that are not paid
under the OPPS. The latter entities
include CAHs, all-inclusive hospitals,

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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 of OPPS hospitals (3,905),
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 101 CMHCs at the bottom of
the impact table and discuss that impact
separately below.
Column 2: APC Recalibration for
Policies Other Than Outpatient
Laboratory Test Packaging
Column 2 shows the estimated
independent effect of all relative weight
changes between CY 2013 and CY 2014
resulting from final policies other than
packaging outpatient laboratory tests
previously paid under the clinical
laboratory fee schedule into the OPPS.
These final policies include packaging
drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure (stress agents and
Cysview), drugs and biologicals that
function as supplies when used in a
surgical procedure (skin substitutes),
certain procedures described by add-on
codes, and device removal procedures;
new cost report data for estimating CT
and MRI relative weights; and revisions
to coding and APC structure for
stereotactic radiosurgery. This column
also reflects reclassification of services
among APC groups due to updated CY
2012 hospital claims data and the most
recent hospital cost report data
available. Changes due to APC
recalibration are less significant than in
the CY 2014 OPPS/ASC proposed rule
impact analysis, as several proposed
policies were not finalized. Increases for
rural hospitals are largely attributable to
adoption of a single payment for clinic
visits. Reductions for low volume
hospitals, particularly rural hospitals,
are attributable to reductions for certain

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75177

mental health services. Under the OPPS,
payment for mental health services on a
single day cannot exceed payment for
partial hospitalization, and APC
recalibration reduces the relative weight
for partial hospitalization for CY 2014.
Column 3: APC Recalibration Due to
Packaging Outpatient Laboratory
Services
Column 3 shows the estimated impact
of APC recalibration within the CY 2014
OPPS resulting from our packaging
policy for outpatient laboratory services
currently paid under the CLFS. This
column compares the estimated CY
2014 OPPS payments with the addition
of packaged laboratory services to CY
2014 OPPS payment in Column 2 plus
payment for laboratory services at CY
2013 CLFS payment rates. Packaging
laboratory services modestly reduces
payment to rural hospitals who no
longer receive separate payment for
common laboratory tests. Relative
weights for visits, x-rays, and the small
set of common services furnished by
rural hospitals (shown in Column 1) do
increase with packaging, but this does
not fully offset the impact of packaging
laboratory tests. Packaging laboratory
services also results in modest
reductions to major teaching hospitals.
Column 4: APC Recalibration—All
Changes
Column 4 shows the estimated
combined effect of APC recalibration
related to the policies modeled in
Columns 2 and 3. 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. As a result of APC
recalibration, we estimate that urban
hospitals will experience an increase of
0.1 percent, with the impact ranging
from an increase of 0.4 percent to a
decrease of 0.3 percent depending on
the number of beds. Rural hospitals will
experience a decrease of 0.4 percent,
with the impact ranging from an
increase of 0.5 percent to a decrease of
1.7 percent depending on the number of
beds. Major teaching hospitals
experience a decrease of 0.6 percent
overall, largely attributable to packaging
laboratory services. Packaging
laboratory services also modestly
reduces the relative weight for major
teaching hospitals, while minor
teaching hospitals and nonteaching
hospitals experience modest increases.

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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; updating the wage indexes
with the final fiscal year (FY) 2014 IPPS
post-reclassification wage indexes; the
rural adjustment; and the cancer
hospital payment adjustment. We
modeled the independent effect of the
budget neutrality adjustments and the
OPD fee schedule increase factor by
using the relative payment weights and
wage indices for each year, and using a
CY 2013 conversion factor that included
the OPD fee schedule increase and a
budget neutrality adjustment for
differences in wage indices. We also
updated the list of counties qualifying
for the section 505 out-migration
adjustment.
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 are not making any
changes to the policy for CY 2014. We
are continuing the rural payment
adjustment of 7.1 percent to rural SCHs
for CY 2014, as described in section II.E.
of this final rule with comment period.
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 2014 scaled weights and
a CY 2013 conversion factor that
included a budget neutrality adjustment
for the effect of changing the wage
indices between CY 2013 and CY 2014.
Modest redistributions are the result of
final FY 2014 wage policy.
The modeled differential between the
CY 2013 cancer hospital payment
adjustment and the CY 2014 cancer
hospital payment adjustment had a
minor effect on budget neutrality. We
note that cancer hospitals receive about
$24 million less under the CY 2014
adjustment, which appears as a 0.1
increase for the general hospital
population in row 2 of Column 5, All
Hospitals (excluding cancer and
children’s hospitals, and CMHCs).
Column 6: All Budget Neutrality
Changes Combined With the Market
Basket Update
Column 6 demonstrates the combined
impact of all the changes previously

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described and the update to the
conversion factor of 1.7 percent. It
shows the estimated cumulative impact
of the budget neutral adjustments from
Columns 4 and 5 and the OPD fee
schedule increase factor of 1.7 percent.
With the exception of small rural
hospitals and rural hospitals in the
Middle Atlantic, we estimate that the
addition of the 1.7 percent market
basket alleviates negative impacts on
payments for CY 2014 created by budget
neutrality made in Columns 4 and 5 for
payments made to most hospitals.
Overall, these changes increase
payments to urban hospitals by 1.9
percent and to rural hospitals by 1.1
percent. Most classes of hospitals will
receive an increase in line with the 1.7
percent overall increase after the update
is applied to the budget neutrality
adjustments.
Column 7: All Adjustments With the
Frontier State Wage Index Adjustment
This column shows the impact of all
budget neutrality adjustments,
application of the 1.7 percent OPD fee
schedule increase factor, and the
nonbudget neutral impact of applying
the CY 2014 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 nonbudget
neutral frontier State wage index
adjustment. Rural hospitals in West
North Central and Mountain States
experience increases in payment of 3.2
and 2.3 percent, respectively, as a result
of the frontier State wage index
adjustment, while urban hospitals in
those States experience increases of 3.6
and 2.1 percent, respectively.
Column 8: All Changes for CY 2014
Column 8 depicts the full impact of
the CY 2014 policies on each hospital
group by including the effect of all of
the changes for CY 2014 and comparing
them to all estimated payments in CY
2013. Column 8 shows the combined
budget neutral effects of Column 4 and
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 XIII.
of this final rule with comment period);
and the difference in total OPPS
payments dedicated to transitional passthrough payments.

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Of those hospitals that failed to meet
the Hospital OQR Program reporting
requirements for the full CY 2013
update (and assumed, for modeling
purposes, to be the same number for CY
2014), we included 52 hospitals in our
model because they had both CY 2012
claims data and recent cost report data.
We estimate that the cumulative effect
of all changes for CY 2014 will increase
payments to all providers by 1.8 percent
for CY 2014. We modeled the
independent effect of all changes in
Column 8 using the final relative
payment weights for CY 2013 and the
final relative payment weights for CY
2014. We used the final conversion
factor for CY 2013 of $71.313 and the
final CY 2014 conversion factor of
$72.672 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 2014 IPPS/LTCH PPS final rule
(78 FR 50982) of 4.73 percent (1.0473)
to increase individual costs on the CY
2012 claims, and we used the most
recent overall CCR in the July 2013
Outpatient Provider-Specific File
(OPSF) to estimate outlier payments for
CY 2013. Using the CY 2012 claims and
a 4.73 percent charge inflation factor,
we currently estimate that outlier
payments for CY 2013, using a multiple
threshold of 1.75 and a fixed-dollar
threshold of $2,025 will be
approximately 1.1 percent of total
payments. The estimated current outlier
payments of 1.1 percent are
incorporated in the comparison in
Column 8. We used the same set of
claims and a charge inflation factor of
9.69 percent (1.0969) and the CCRs in
the July 2013 OPSF, with an adjustment
of 0.9645, to reflect relative changes in
cost and charge inflation between CY
2012 and CY 2014, to model the CY
2014 outliers at 1.0 percent of estimated
total payments using a multiple
threshold of 1.75 and a fixed-dollar
threshold of $2,900.
We estimate that the anticipated
change in payment between CY 2013
and CY 2014 for the hospitals failing to
meet the Hospital OQR Program
requirements will be negligible. Overall,
we estimate that facilities will
experience an increase of 1.8 percent
under this final rule with comment
period in CY 2014 relative to total
spending in CY 2013. This projected
increase (shown in Column 8) of Table
55 reflects the 1.7 percent OPD fee
schedule increase factor, with 0.13
percent for the change in the passthrough estimate between CY 2013 and
CY 2014, less 0.1 percent for the
difference in estimated outlier payments

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between CY 2013 (1.1 percent) and CY
2014 (1.0 percent), less 0.1 percent due
to the frontier adjustment in CY 2013,
plus 0.1 percent due to the frontier State
wage index adjustment in CY 2014.
When we exclude cancer and children’s
hospitals (which are held harmless to
their pre-BBA amount) and CMHCs, the
estimated update increases is 1.9
percent after rounding. We estimate that
the combined effect of all changes for
CY 2014 will increase payments to
urban hospitals by 2.0 percent.
Overall, we estimate that rural
hospitals will experience a 1.1 percent

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increase as a result of the combined
effects of all changes for CY 2014. We
estimate that rural hospitals that bill
less than 5,000 lines of OPPS services
will experience an increase of 2.2
percent and rural hospitals that bill
5,000 or more lines of OPPS services
will experience increases ranging from
0.1 to 5.0 percent.
Among hospitals by teaching status,
we estimate that the impacts resulting
from the combined effects of all changes
will include an increase of 1.4 percent
for major teaching hospitals and 1.8
percent for nonteaching hospitals.

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75179

Minor teaching hospitals will
experience an estimated increase of 2.3
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 2.0 percent,
proprietary hospitals will experience an
increase of 2.0 percent, and
governmental hospitals will experience
an increase of 1.1 percent.
BILLING CODE 4120–01–P

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(2)

Number of
Hospitals

APC
Recalibration
(Policies
Other than
Outpatient
Laboratory
Services) (%)

(3)
APC
Recalibration
(Outpatient
Laboratory
Services
Packaging
Policy) (0/;)

Fmt 4701
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E:\FR\FM\10DER4.SGM

ALL FACILITIES *
4,068
0.0
ALL HOSPITALS
3,905
0.0
(excludes hospitals permanently held harmless and CMHCs)

0.0
0.0

URBAN HOSPITALS
LARGE URBAN
(GT 1 MILL.)
OTHER URBAN
(LE 1 MILL.)
RURAL HOSPITALS
SOLE COMMUNITY
OTHER RURAL

10DER4

BEDS (URBAN)
0- 99 BEDS
100-199 BEDS
200-299 BEDS
300-499 BEDS
500 + BEDS
BEDS (RURAL)

ER10DE13.370

(1 )

(4)

(5)

(6)

(7)

(8)

APC
Recalibration (all
changes)

New Wage
Index and
Provider
Adjustments

Column 6
with Frontier
State Wage
Index
Adjustment

All
Changes

(%)

(%)

Combined
Cols 4, 5
with
Market
Basket
Update (%)

(%)

(%)

0.0
0.0

0.0
0.1

1.7
1.8

1.8
1.9

1.8
1.9

I

2,959
1,612

0.0
0.0

0.2
0.2

0.1
0.3

0.1
0.2

1.9
2.1

2.0
2.1

2.0
2.2

1,347

-0.1

0.1

0.0

0.0

1.7

1.9

1.7

946
391
555

0.4
0.5
0.3

-0.8
-0.5
-1.0

-0.4
0.0
-0.8

-0.2
-0.2
-0.2

1.1
1.5
0.7

1.4
1.9
0.8

1.1
1.6
0.8

1,037
843
458
410
211

-0.5
0.0
0.0
0.1
-0.1

0.4
0.2
0.3
0.3
-0.2

-0.1
0.2
0.3
0.4
-0.3

0.0
0.0
0.1
0.1
0.2

1.7
1.9
2.1
2.1
1.6

1.8
2.0
2.3
2.3
1.6

1.7
2.0
2.2
2.2
1.6

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21:46 Dec 09, 2013

TABLE SS.-ESTIMATED IMPACT OF THE CY 2014 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE
PAYMENTS SYSTEM

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Number of
Hospitals

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0-49 BEDS
50-100 BEDS
101- 149 BEDS
150- 199 BEDS
200 + BEDS

(2)

(3)

(4)

(5)

(6)

(7)

(8)

APC
Recalibration
(Policies
Other than
Outpatient
Laboratory
Services) ("10)

APC
Recalibration
(Outpatient
Laboratory
Services
Packaging
Policy) (DI~)

APC
Recalibration (all
changes)
("10)

New Wage
Index and
Provider
Adjustments
("10)

Combined
Co Is 4, 5
with
Market
Basket
Update ("10)

Column 6
with Frontier
State Wage
Index
Adjustment
("10)

All
Changes
("10)

Fmt 4701
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E:\FR\FM\10DER4.SGM
10DER4

363
346
133
60
44

0.9
0.6
0.2
0.0
0.1

-2.5
-1.1
-0.2
-0.6
0.4

-1.7
-0.5
0.1
-0.6
0.5

-0.5
-0.1
-0.2
-0.1
0.0

-0.5
1.1
1.6
1.0
2.1

-0.3
1.3
1.8
1.5
2.1

-0.6
1.0
1.6
1.0
2.3

523
124
121
232
480
1,479

-1.9
-1.5
-1.3
-0.5
-0.2
0.0

1.0
1.7
1.4
1.6
1.4
0.0

-0.9
0.1
0.1
1.1
1.2
0.0

0.0
-0.2
0.0
-0.2
0.1
0.1

0.9
1.6
1.8
2.6
3.0
1.8

1.1
2.1
2.0
2.6
3.0
1.9

0.6
1.7
1.8
2.6
3.0
1.9

VOLUME (RURAL)
LT 5,000
Lines
Lines
5,000 - 10,999
11,000 - 20,999 Lines
21,000 - 42,999 Lines
GT 42,999
Lines

34
28
54
163
667

-1.0
2.4
6.5
1.0
0.3

1.8
-2.8
-2.1
-0.8
-0.8

0.8
-0.5
4.2
0.1
-0.5

-0.4
-0.8
-0.8
-0.2
-0.2

2.1
0.4
5.1
1.6
1.1

6.8
0.4
5.1
2.4
1.3

2.2
0.1
5.0
1.5
1.1

REGION (URBAN)
NEW ENGLAND
MIDDLE ATLANTIC
SOUTH ATLANTIC
EAST NORTH CENT.
EAST SOUTH CENT.
WEST NORTH CENT.
WEST SOUTH CENT.
MOUNTAIN
PACIFIC

152
351
453
474
176
198
519
198
389

0.2
0.1
-0.2
0.3
-0.2
0.1
-0.6
-0.3
0.2

-1.2
-0.9
0.5
-0.3
0.7
1.1
0.5
0.9
0.7

-1.0
-0.7
0.3
-0.1
0.5
1.2
-0.2
0.6
0.9

0.6
0.7
-0.3
-0.1
-0.2
-0.4
-0.4
-0.6
1.0

1.2
1.7
1.7
1.6
2.0
2.5
1.2
1.7
3.6

1.2
1.7
1.7
1.6
2.0
3.6
1.2
2.1
3.6

1.2
1.7
1.9
1.6
2.1
2.7
1.3
1.8
3.5

VOLUME (URBAN)
Lines
LT 5,000
5,000 - 10,999
Lines
11,000 - 20,999 Lines
21,000 - 42,999 Lines
42,999 - 89,999 Lines
GT 89,999
Lines

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21:46 Dec 09, 2013

(1 )

75181

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75182

VerDate Mar<15>2010

(3)

(4)

(5)

(6)

(7)

(B)

Number of
Hospitals

APC
Recalibration
(Policies
Other than
Outpatient
Laboratory
Services) ("10)

APC
Recalibration
(Outpatient
Laboratory
Services
Packaging
Policy) (DI~)

APC
Recalibration (all
changes)
("10)

New Wage
Index and
Provider
Adjustments
("10)

Combined
Co Is 4, 5
with
Market
Basket
Update ("10)

Column 6
with Frontier
State Wage
Index
Adjustment
("10)

All
Changes
("10)

49

O.B

-O.B

0.0

0.5

2.1

2.1

2.2

25
69
160
127
171
99
200
66
29

0.4
1.0
0.2
0.4
0.2
0.3
0.5
0.0
0.5

-1.0
-3.6
-0.1
-1.6
-0.2
0.2
-0.6
-1.2
0.3

-0.6
-2.6
0.1
-1.1
0.1
0.6
-0.1
-1.1
0.8

0.4
0.2
-0.3
-0.3
-0.5
-0.2
-0.5
0.2
1.1

1.5
-0.7
1.5
0.3
1.2
2.1
1.1
0.8
3.6

1.5
-0.7
1.5
0.3
1.2
3.2
1.1
2.3
3.6

1.4
-O.B
1.6
0.4
1.3
2.1
1.2
0.2
3.5

2,885
699
321

0.0
0.1
0.0

0.1
0.4
-0.6

0.1
0.5
-0.6

0.0
0.0
0.3

1.7
2.2
1.3

1.B

1.B

2.5
1.3

2.3
1.4

2.8
-0.6
-0.1
0.2
0.0
0.1
0.0

1.3
0.1
-0.1
-0.2
0.3
-0.1
0.5

4.1
-0.5
-0.2
-0.1
0.3
0.0
0.5

0.1
0.1
0.1
0.1
0.0
0.1
-0.1

5.9
1.3
1.6
1.7
2.0
1.8
2.1

5.9
1.4
1.7

5.6
1.4
1.7

1.B

1.B

DSH NOT AVAILABLE **

11
350
341
685
1,080
823
615

2.2
1.9
2.1

2.1
1.8
2.4

URBAN TEACHING/DSH
TEACHING & DSH
NO TEACHING/DSH
NO TEACHING/NO DSH

923
1,450
11

0.0
-0.1
2.8

0.0
0.4
1.3

0.0
0.3
4.1

0.1
0.0
0.1

1.9
2.0
5.9

2.0
2.0
5.9

1.9
2.0
5.6

21:46 Dec 09, 2013
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E:\FR\FM\10DER4.SGM
10DER4
ER10DE13.372

PUERTO RICO
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
MINOR
MAJOR
DSH PATIENT PERCENT

0
GT 0 - 0.10

0.10-0.16
0.16 - 0.23
0.23 - 0.35
GE 0.35

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Number of
Hospitals
DSH NOT AVAILABLE**

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TYPE OF OWNERSHIP
VOLUNTARY
PROPRIETARY
GOVERNMENT
CMHCs

(2)

(3)

APC
Recalibration
(Policies
Other than
Outpatient
Laboratory
Services) ("10)

APC
Recalibration
(Outpatient
Laboratory
Services
Packaging
Policy) ("10)

(4)

(5)

(6)

(7)

(8)

APC
Recalibration (all
changes)

New Wage
Index and
Provider
Adjustments

Column 6
with Frontier
State Wage
Index
Adjustment

All
Changes

("10)

("10)

Combined
Co Is 4, 5
with
Market
Basket
Update ("10)

("10)

("10)

575

-0.2

0.4

0.2

0.0

1.9

2.0

2.3

2,040
1,300
565

0.1
-0.5
0.3

0.0
0.9
-0.7

0.1
0.4
-0.5

0.1
-0.2
-0.2

1.9
1.9
1.1

2.1
2.0
1.1

2.0
2.0
1.1

101

-1.3

1.8

0.4

-0.4

1.7

1.7

1.8

Sfmt 4700
E:\FR\FM\10DER4.SGM
10DER4

Column (1) shows total hospitals and/or CMHCs.
Column (2) shows the additional impact of changes resulting from the reclassification ofHCPCS codes among APC groups and other data changes as a result of including the CY 2014
OPPS packaging policies (but excluding the packaging of outpatient laboratory services currently paid at CLFS rates).
Column (3) shows the additional impact of changes resulting from the reclassification of HCPCS codes among APC groups and other data changes as a result of including the CY 2014
OPPS policy to package outpatient laboratory services currently paid at CLFS rates.
Column (4) includes an CY 2014 OPPS proposals and compares those to the CY 2013 OPPS (which includes outpatient laboratory services previously paid at CLFS rates).
Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2014 hospital inpatient wage index. The rural adjustment continues our current policy of 7.1
percent so the budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the adjustment is limited and thus results in a budget neutrality factor of
1.0005.
Column (6) shows the impact of an budget neutrality adjustments and the addition of the 1.7 percent OPD fee schedule update factor (2.5 percent reduced by 0.5 percentage points for the
productivity adjustment and further reduced by 0.3 percentage point in order to satisfy statutory requirements set forth in the Affordable Care Act).
Column (7) shows the nonbudget neutral impact of applying the CY 2014 frontier State wage index adjustment.
Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier payments, and applying payment wage
indexes.
*These 4,068 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. Payments for laboratory services at CLFS rates, which we are
packaging in the CY 2014 OPPS, are included in the columns where appropriate.
** 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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BILLING CODE 4120–01–C

(3) Estimated Effects of OPPS Changes
on CMHCs
The last line of Table 55 demonstrates
the isolated impact on CMHCs, which
furnish only partial hospitalization
(PHP) services under the OPPS. In CY
2013, 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
use our standard ratesetting
methodology to derive the 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. For CY 2014, we are
continuing the provider-specific APC
structure that we adopted in CY 2011.
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 2012 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.
Packaging outpatient laboratory tests
results in a 1.8 percent payment
increase to CMHCs, which is offset by
a 1.3 percent decrease in payments from
APC recalibration for policies other than
packaging outpatient laboratory tests.
Together with the market basket and all
other changes, we estimate that CMHCs
will experience an overall 1.8 percent
increase in payments from CY 2013
(shown in Column 8).
Column 5 shows that the estimated
impact of adopting the final FY 2014
wage index values will result in a small
decrease of 0.4 percent to CMHCs. We
note that all providers paid under the
OPPS, including CMHCs, will receive a
1.7 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 2014 and the FY 2014 wage index
updates, will result in an estimated
increase of 1.7 percent. Column 7 shows
that adding the frontier State wage
index adjustment will result in no
change to the cumulative 1.7 percent
increase. Column 8 shows that adding
the changes in outlier and pass-though

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payments will result in an additional
0.1 percent increase in payment for
CMHCs, for a total increase of 1.8
percent. This reflects all changes to
CMHCs for CY 2014.
(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 further
discussion on the calculation of the
national unadjusted copayments and
minimum unadjusted copayments, we
refer readers to section II.I. 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 2014 inpatient
hospital deductible is $1,216.
We estimate that the aggregate
beneficiary coinsurance percentage will
be 21.7 percent for all services paid
under the OPPS in CY 2014. The
estimated aggregate beneficiary
coinsurance reflects the final policy to
package laboratory services into the
outpatient hospital services with which
they are billed in addition to general
system adjustments, including
recalibration of the APC relative
payment weights, change in the portion
of OPPS payments dedicated to passthrough payments, and changes in the
cancer hospital payment adjustment.
(5) Estimated Effects of OPPS Changes
on Other Providers
The relative payment weights and
payment amounts established under the
OPPS affect the payments made to ASCs
as discussed in section XII. 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.
(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 2014. 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 XXIII.A. of
this final rule with comment period.

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(7) Alternative OPPS Policies
Considered
Alternatives to the OPPS changes we
proposed and 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 the
Establishment of Comprehensive APCs
We proposed in section II.A.2.e. of the
OPPS proposed rule to create 29
comprehensive APCs for CY 2014 to
prospectively pay for device-dependent
hospital outpatient services associated
with 121 HCPCS codes. We proposed to
define a comprehensive APC as a
classification for the provision of a
primary service and all adjunct services
provided to support the delivery of the
primary service. For services that trigger
a comprehensive APC payment, the
comprehensive APC would treat all
individually reported codes on the
claim as representing components of the
comprehensive service, resulting in a
single prospective payment based on the
cost of all individually reported codes
on the claim. For these APCs, we
proposed to treat all previously
individually reported codes as
representing components of the
comprehensive service, making a single
payment for the comprehensive service
based on all charges on the claim,
excluding only charges for services that
cannot be covered by Medicare Part B or
that are not payable under the OPPS.
This would create a single all-inclusive
payment for the claim that is subject to
a single beneficiary copayment, up to
the cap set at the level of the inpatient
hospital deductible.
We proposed this as a step that we
believe will further improve the
accuracy of our payments for these
services where there is a substantial cost
for a device that is large compared to the
other costs that contribute to the cost of
the procedure, and where the cost of the
procedure is large compared to the
adjunctive and supportive services
delivered along with that procedure. We
also believed the proposed polices
would enhance beneficiary
understanding and transparency for the
beneficiary, for physicians, and for
hospitals by creating a common
reference point with a similar meaning
for all three groups by using the
comprehensive service concept that
already identifies these services when
they are furnished to a hospital
inpatient.
We considered implementing this
policy for CY 2014 as proposed, but in

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response to public comments we
received and because we are providing
significantly greater detail on the
comprehensive APC payment
calculation methodology, we are
delaying implementation of the policy
for 1 year (we refer readers to section
II.A.2.e. of this final rule with comment
period). Although we are finalizing our
comprehensive APC policy effective CY
2015, we also are inviting additional
public comment because there is
significant additional information on
the comprehensive APC policy in the
preamble of this final rule with
comment period. We also believe that
additional time to consider operational
issues over a longer period of time is
appropriate for this new payment
methodology. We have published tables
in this final rule with comment period
to demonstrate how this policy would
have been implemented in CY 2014, and
we will be considering any additional
public comments we receive when we
update the policy for CY 2015 to
account for changes that may occur in
the CY 2013 claims data.
In our final policy, we have revised
some of our APC assignments to better
align resource requirements in
accordance with our usual 2 times rule
adjustments and also to ensure that the
resources required with certain complex
subsets of procedures are similarly
aligned with the other services in the
APC. We have created a complexity
adjustment to assign certain other
subsets of complex procedures to
different APCs than the simpler versions
of those services. We have reassigned
the composite cardiac ablation APC to
the comprehensive APC for combined
electrophysiology and cardiac ablation
in order to remove an ambiguity in our
proposed rule, and we have modified
our proposal to base the APC
assignment on the identification of the
service with the greatest single service
cost in the CY 2012 claims data rather
than the proposed service with the
greatest CY 2012 single service
payment. Finally, we are not finalizing
our proposal to include costs from
certain inpatient room and board cost
centers for comprehensive APC
ratesetting because the outpatient costs
associated with services in
comprehensive APCs should not be
reported in these inpatient cost centers.
Also, we have removed the cost of
brachytherapy seeds from
comprehensive payment and specified
that these seeds will be paid through
unpackaged dedicated APC payments.
We considered but did not implement
a number of other options. We
considered implementing this policy for
CY 2014 as proposed, but did not do so

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because we believe we should provide
an opportunity for additional public
comment as well as a longer time period
for operational implementation by CMS
contractors and other stakeholders. We
considered but did not implement
comprehensive APCs as originally
proposed. Although we believe that an
averaged payment system similar to the
IPPS with a single payment for a
primary or comprehensive service is our
goal and would be feasible, we agreed
with commenters that the sudden
transition from component payments to
comprehensive payments could
potentially create some economic
challenges for some hospitals. Although
we noted that a single payment for
single and multiple component
procedures, including short stay
procedures, has worked well in the IPPS
for almost 30 years, we determined that
a complexity adjustment as
recommended by commenters could
reduce the spread of costs and ease the
transition as hospitals explore
mechanisms to increase efficiencies if
their mean costs of a specific complex
procedure exceed the average cost.
We considered but did not implement
recommendations to eliminate certain
proposed APCs from conversion to
comprehensive payments. All of the
proposals for exclusion were based on
multiple component payments or on
coding changes. We considered
excluding the different APCs where
commenters expressed concerns.
However, after analysis of each APC,
after applying our usual processes of
modeling coding changes, and after
developing and applying a complexity
adjustment for high volume complex
services with a high cost variance from
the mean payment, we determined that
these processes applied equally well to
the various APCs and no sets of services
stood out as inappropriate for
conversion on the basis of coding
changes or the basis of multiple
component procedures that could not
have any potential adverse impact
mitigated.
We considered but did not implement
a multiple procedure adjustment to the
comprehensive APC payment. As an
alternative to the complexity
adjustment, we considered a multiplier
to be applied when two or more
individual procedures were performed
during the same comprehensive service.
However we did not consider that, in
our current year analyses, a single
multiplier reflected the entire range of
services that could be combined. We
also did not believe that a multiple
procedure adjustment was consistent
with the concept of the comprehensive
service representing a single entire

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service to a beneficiary. However we
will continue to explore other options to
account for multiple components,
including multiple surgical procedures
as well as multiple devices, as we
continue to analyze comprehensive
APCs in the future.
We considered but did not implement
a less comprehensive packaging policy
for comprehensive APCs. We had
considered a less comprehensive
packaging policy before our proposed
rule, but we did not believe that was
advantageous as we discussed in the
proposed rule. We reconsidered those
options after receiving comments, but
noted that the few comments suggesting
more limited packaging were balanced
by the comments agreeing with our
comprehensive concept. We did not
receive any public comments on this
topic concerning issues that we had not
already considered, so therefore we did
not modify the packaging rules other
than the exclusion of brachytherapy
seeds as noted.
• Alternatives Considered for Payment
of Hospital Outpatient Visits
As described in section VII. of this
final rule with comment period, we are
finalizing our proposal to replace the
current five levels of visit codes for each
clinic visit with a new alphanumeric
Level II HCPCS code representing a
single level of payment for clinic visits.
We also are finalizing our proposal to
assign the new alphanumeric Level II
HCPCS to newly created APC 0634 with
CY 2014 OPPS payment rates based on
the total geometric mean costs of Level
1 through Level 5 clinic visit codes
obtained from CY 2012 OPPS claims
data. For CY 2014, we are not finalizing
our proposal to replace the current five
levels of visit codes for each Type A ED,
and Type B ED visits with two new
alphanumeric Level II HCPCS codes
representing a single level of payment
for Type A and Type B of ED visits,
respectively.
In developing this policy, we
considered two alternatives, the first of
which was to finalize our proposal to
replace the current five levels of visit
codes for each Type A ED, and Type B
ED visits with two new alphanumeric
Level II HCPCS codes representing a
single level of payment for Type A and
Type B of ED visits, respectively, in
addition to finalizing our proposal to
replace the current five levels of visit
codes for each clinic visit with a new
alphanumeric Level II HCPCS code
representing a single level of payment
for clinic visits.
While we believe this alternative
could offer advantages over the current
CY 2013 OPPS visit payment policy, we

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did not choose this alternative because
as we describe is section VII. of this
final rule with comment period, in light
of the thoughtful and detailed
alternatives put forth by commenters, as
well as the comments on the potential
issues associated with a single level of
payment for ED visits that both require
additional study on our part here at
CMS, we believe it is best to delay any
change in ED visit coding while we
further consider the most appropriate
payment structure for Type A and Type
B ED visits.
We also considered replacing the
current five levels of visit codes for each
clinic, Type A ED, and Type B ED visit
with six new alphanumeric Level II
HCPCS codes representing two levels
(lower level and higher level) of
payment for each of the three types of
visits. The lower-level alphanumeric
codes for clinic, Type A ED, and Type
B ED visits would replace the current
Level 1 and Level 2 visit codes,
respectively, and would be assigned to
newly created or reconfigured APCs
with CY 2014 OPPS payment rates
based on the total mean costs of Level
1 and 2 visit codes obtained from CY
2012 OPPS claims data for each visit
type. The higher-level alphanumeric
codes for clinic, Type A ED, and Type
B ED visits would replace the current
Level 3 through Level 5 visit codes,
respectively, and would be assigned to
newly created or reconfigured APCs
with CY 2014 OPPS payment rates
based on the total mean costs of Level
3 through Level 5 visit codes obtained
from CY 2012 OPPS claims data for each
visit type.
While we believe that this alternative
could also offer advantages over the
current CY 2013 OPPS visit payment
policy, we did not choose this
alternative because, as we describe in
section VII. of this final rule with
comment period, we believed that a
single level of payment for each type of
clinic visit was the best policy option as
this proposal would be easily
implemented by hospitals; reduces
administrative burden relative to the
existing 5-level visit payment structure;
and maximizes hospitals’ incentives to
provide care in the most efficient
manner as there would be no incentive
to provide unnecessary care to achieve
a higher level visit threshold. A twolevel visit payment structure would not
be as easily implemented by hospitals as
a single-level visit payment structure,
and the need for hospitals to develop
and implement guidelines to
differentiate the levels of service would
continue to exist. Also, while the twolevel visit payment structure may
provide incentives for hospitals to be

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efficient, the incentives may not be so
great as under a single-level visit
payment structure. For ED visits, we
believe it is best to delay any change in
ED visit coding while we consider
further the most appropriate payment
structure for Type A and Type B ED
visits, for the reasons stated earlier in
this section. Therefore, we are finalizing
our proposal to create a new
alphanumeric Level II HCPCS code to
describe all levels of clinic visits rather
than continue to recognize five levels
each of clinic visits. We are not
finalizing our proposal to create two
new alphanumeric Level II HCPCS
codes to describe all levels of Type A
and Type B ED visits, respectively,
rather than continue to recognize five
levels each of Type A and Type B ED
visits.
b. Estimated Effects of CY 2014 ASC
Payment System Final Policies
ASC payment rates are calculated by
multiplying the ASC conversion factor
by the ASC relative payment weight. As
discussed fully in section XII. of this
final rule with comment period, we are
setting the CY 2014 ASC relative
payment weights by scaling the CY 2014
OPPS relative payment weights by the
proposed ASC scaler of 0.9235. The
estimated effects of the updated relative
payment weights on payment rates are
varied and are reflected in the estimated
payments displayed in Tables 56 and 57
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). For ASCs that fail to meet their
quality reporting requirements, the CY
2014 payment determinations will be
based on the application of a 2.0
percentage point reduction to the
annual update factor, which currently is
the CPI–U. We calculated the CY 2014
ASC conversion factor by adjusting the
CY 2013 ASC conversion factor by
1.0009 to account for changes in the prefloor and pre-reclassified hospital wage
indices between CY 2013 and CY 2014
and by applying the CY 2014 MFPadjusted CPI–U update factor of 1.2
percent (projected CPI–U update of 1.7
percent minus a projected productivity

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adjustment of 0.5 percent). The CY 2014
ASC conversion factor is $43.471.
(1) Limitations of Our Analysis
Presented here are the projected
effects of the changes for CY 2014 on
Medicare payment to ASCs. A key
limitation of our analysis is our inability
to predict changes in ASC service-mix
between CY 2012 and CY 2014 with
precision. We believe that the net effect
on Medicare expenditures resulting
from the CY 2014 changes will 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 will experience
changes in payment that differ from the
aggregated estimated impacts presented
below.
(2) Estimated Effects of CY 2014 ASC
Payment System 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
2014 payments will 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 2014 updates to
the ASC payment system on Medicare
payments to ASCs, assuming the same
mix of services as reflected in our CY
2012 claims data. Table 56 depicts the
estimated aggregate percent change in
payment by surgical specialty or
ancillary items and services group by
comparing estimated CY 2013 payments
to estimated CY 2014 payments, and
Table 57 shows a comparison of
estimated CY 2013 payments to
estimated CY 2014 payments for
procedures that we estimate will receive
the most Medicare payment in CY 2013.
Table 56 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,

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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
56.
• 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
appropriate, to account for all surgical
procedures to which the Medicare
program payments are attributed.
• Column 2—Estimated CY 2013 ASC
Payments were calculated using CY
2012 ASC utilization (the most recent
full year of ASC utilization) and CY

2013 ASC payment rates. The surgical
specialty and ancillary items and
services groups are displayed in
descending order based on estimated CY
2013 ASC payments.
• Column 3—Estimated CY 2014
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 are
attributable to updates to ASC payment
rates for CY 2014 compared to CY 2013.
As seen in Table 56, we estimate that
the update to ASC rates for CY 2014 will
result in a 1 percent increase in
aggregate payment amounts for eye and
ocular adnexa procedures, a 5 percent
increase in aggregate payment amounts
for digestive system procedures, and a 3
percent decrease 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 2014
update are variable. For instance, we
estimate that, in the aggregate, payment
for musculoskeletal system procedures

will not change, whereas payment for
genitourinary system procedures,
integumentary system procedures and
respiratory system procedures will
increase by 3 to 14 percent under the CY
2014 rates.
An estimated increase in aggregate
payment for the specialty group does
not mean that all procedures in the
group will experience increased
payment rates. For example, the
estimated increase for CY 2014 for
digestive system procedures is likely
due to an increase in the ASC payment
weight for some of the high volume
procedures, such as CPT code 43239
(Upper GI endoscopy biopsy) where
estimated payment will increase by 6
percent for CY 2014.
Also displayed in Table 56 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
will decrease by 11 percent for CY 2014.

Table 57 below shows the estimated
impact of the updates to the revised

ASC payment system on aggregate ASC
payments for selected surgical

procedures during CY 2014. The table
displays 30 of the procedures receiving

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the greatest estimated CY 2013 aggregate
Medicare payments to ASCs. The
HCPCS codes are sorted in descending
order by estimated CY 2013 program
payment.
• Column 1—CPT/HCPCS code.
• Column 2—Short Descriptor of the
HCPCS code.

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• Column 3—Estimated CY 2013 ASC
Payments were calculated using CY
2012 ASC utilization (the most recent
full year of ASC utilization) and the CY
2013 ASC payment rates. The estimated
CY 2013 payments are expressed in
millions of dollars.

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• Column 4—Estimated CY 2014
Percent Change reflects the percent
differences between the estimated ASC
payment for CY 2013 and the estimated
payment for CY 2014 based on the
update.
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TABLE S7.--ESTIMATED IMPACT OF THE FINAL CY 2014 UPDATE TO THE
ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED
PROCEDURES

Short Descriptor
(2)
Cataract surg w/iol, 1 stage
Upper GI endoscopy, biopsy
Colonoscopy and biopsy
Lesion removal colonoscopy
Cataract surgery, complex
Diagnostic colonoscopy
Inj foramen epidural lis
Inject spine lis (cd)
After cataract laser surgery
Colorectal scm; hi risk ind
Inj paravert f jnt lis 1 lev
Revision of upper eyelid
Implant neuroelectrodes
Colon ca scm not hi rsk ind
Insrtlredo pnigastr stimul
Carpal tunnel surgery
Insrtlredo spine n generator
Destroy lis facet jnt addl
Shoulder/arthroscopy/surgery
Knee arthroscopy/surgery
Arthroscop rotator cuff repr
Knee arthroscopy/surgery
Ini foramen epidural add-on
Uppr gi endoscopy diagnosis
Destroy lumb/sac facet jnt
Lesion remove colonoscopy
Cystoscopy
Inj ect spine cit
Shoulder arthroscopy/surgery
Vit for macular hole

Estimated
CY2014
Percent
Change
(4)
0%
6%
5%
5%
0%
5%
16%
16%
3%
4%
16%
-11%
4%
4%
5%
1%
5%
-100%
-100%
0%
8%
0%
-100%
6%
77%
5%
4%
16%
8%
3%

*Note that HCPCS codes we are deletmg for CY 2014 are not dIsplayed m thIS table.
** The 100 percent decrease in estimated payment reflects our CY 2014 policy to package the payment for
CPT codes 64636, 29826, and 64484.

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CPTIHCPCS
Code*
(1)
66984
43239
45380
45385
66982
45378
64483
62311
66821
GO 105
64493
15823
63650
G0121
64590
64721
63685
64636**
29826**
29881
29827
29880
64484**
43235
64635
45384
52000
62310
29823
67042

Estimated
CY 2013
ASC
Payments
(in millions)
(3)
$1,102
$163
$154
$97
$88
$80
$78
$71
$59
$41
$40
$40
$39
$36
$33
$31
$31
$31
$30
$30
$28
$25
$24
$23
$23
$22
$21
$20
$19
$19

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(3) Estimated Effects of ASC Payment
System Policies on Beneficiaries
We estimate that the CY 2014 update
to the ASC payment system will 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 2014. 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

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requires that copayment amounts under
the OPPS not exceed the inpatient
deductible.) 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 2014,
the beneficiary coinsurance amount will
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).
(4) Alternative ASC Payment Policies
Considered
Alternatives to the minor changes that
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. There are no major changes to
ASC policies for CY 2014.
c. Accounting Statements and Tables
As required by OMB Circular A–4
(available on the Office of Management

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and Budget Web site at: http://
www.whitehouse.gov/sites/default/files/
omb/assets/regulatory_matters_pdf/a4.pdf), we have prepared two
accounting statements to illustrate the
impacts of this final rule with comment
period. The first accounting statement,
Table 58 (below) illustrates the
classification of expenditures for the CY
2014 estimated hospital OPPS incurred
benefit impacts associated with the CY
2014 OPD fee schedule increase, based
on the 2013 Trustee’s Report. The
second accounting statement, Table 59
(below) illustrates the classification of
expenditures associated with the 1.2
percent CY 2014 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 2013
Trustee’s Report. The third accounting
statement, Table 60 (below), illustrates
the classification of expenditures
associated with the revision to the
definition of hospital-based EP in
payment year 2013 for EPs reassigning
benefits to Method II CAHs. Lastly, the
tables classify most estimated impacts
as transfers.

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d. Effects of Requirements for the
Hospital OQR Program
In section XIII. of this final rule with
comment period, we are adopting
policies affecting the Hospital OQR
Program.
Out of 3,352 hospitals that met
eligibility requirements, we determined
that 94 hospitals did not meet the
requirements to receive the full OPD fee
schedule increase factor for CY 2013.
Most of these hospitals (90 of the 94)
chose not to participate in the Hospital
OQR Program. We estimate that 88
hospitals may not receive the full OPD
fee schedule increase factor in CY 2014
and that 90 hospitals may not receive
the full OPD fee schedule increase factor
in CY 2015. We are unable at this time

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to estimate the number of hospitals that
may not receive the full OPD fee
schedule increase factor in CY 2016.
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
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

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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

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for the validation score because we
believed this level was reasonable for
hospitals to achieve while still ensuring
accuracy of the data. In addition, this
level is consistent with what we
adopted in the Hospital IQR 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 the CY 2013 OPPS/ASC final rule
with comment period, for the CY 2014
payment determination and subsequent
years, we made 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
did not make any modifications to our
validation requirements. We expect
these policies to have minimal impact
on the program.
In this CY 2014 OPPS/ASC final rule
with comment period, for CY 2016
payment determination and subsequent
years, we are adding four quality
measures with data collection to begin
in CY 2014. For three of these measures,
data will be submitted via an online tool
located on a CMS Web site and one will
be submitted via CDC’s NHSN. We are
removing two measures from the
Hospital OQR Program.
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 2016. We
also are unable to estimate the number
of hospitals that would fail the
validation documentation submission
requirement for the CY 2016 payment
update.
The validation requirements for CY
2014 will 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

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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 6,000 total cases per
quarter for up to 500 hospitals for CY
2014 represents a minimal burden to
Hospital OQR Program participating
hospitals.
e. Effects of CY 2014 Policies for the
ASCQR Program
In section XV. of this final rule with
comment period, for the ASCQR
Program, we are adopting three
additional quality measures for the CY
2016 payment determination and
subsequent years. Data collection for
these proposed measures will begin in
CY 2014. We will collect aggregate data
(numerators, denominators, and
exclusions) on all ASC patients for these
four proposed chart-abstracted measures
via an online Web-based tool located on
a CMS Web page. We also are adopting
for the CY 2016 payment determination
and subsequent years requirements for a
QualityNet account and security
administrator, facility participation, a
minimum threshold and minimum
volume for claims-based measures, and
data collection and submission for new
measures and for certain previously
finalized 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 expect our new policies
to significantly affect the number of
ASCs that do not receive a full annual
payment update in CY 2016, although
we are not able to estimate the level of
this impact at this time.
f. Effects of Changes to the CfCs for
OPOs Relating to the Outcome Measures
Requirement for Recertification
In section XVI. of this final rule with
comment period, we discussed our
proposed and final policies to modify
the current outcome measures
requirement that OPOs meet all three
outcome measures set forth in § 486.318
to a requirement that they meet two out
of the three outcome measures. Our
revised policy will result in those OPOs
that fail only one outcome measures
avoiding automatic decertification based
upon the current outcome measures
requirement.

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While we are confident that our
revised policy will have a significantly
positive effect on the OPOs that avoided
automatic decertification, it is very
difficult to quantify the impact of this
policy change. As discussed under
section XXI.C. of this final rule with
comment period relating to the ICR
requirements, we anticipate that most
OPOs that are decertified will engage in
the appeals process as set forth in
§ 486.314. However, we have no reliable
way of estimating how many OPOs will
likely obtain reversals of their
decertifications during reconsideration
or how many would continue on to a
hearing before a CMS hearing officer.
Therefore, although we believe there
would be a considerably large positive
effect as a result of our policy change to
the outcome measures requirement, we
are unable to provide a specific estimate
of that cost savings.
g. Effects of Revisions of the QIO
Regulations
In section XVII. of this final rule with
comment period rule, we are updating
the regulations at 42 CFR 475 and 476
based on the recently enacted Trade
Adjustment Assistance Extension Act of
2011 (TAAEA) (Pub. L. 112–40, Section
261) whereby Congress authorized
numerous changes to the original
legislation and included additional
flexibility for the Secretary in the
administration of the QIO program.
Currently, 42 CFR Part 475 includes
definitions and standards governing
eligibility and the award of contracts to
QIOs. In this final rule with comment
period, we set forth policies for the
partial deletion and revision of the
regulations under 42 CFR Parts 475 and
476, which relate to the QIO program,
including the following: (1) Replace
nomenclature that has been amended by
the TAAEA; (2) revise the existing
definition for the term ‘‘physician’’ in
Parts 475 and 476; (3) add new
definitions as necessary to support the
new substantive provisions in Subpart
C; and (4) revise, add, and replace some
of the substantive provisions in Subpart
C to fully exercise the Secretary’s
authority for the program and update
the contracting requirements to align
with contemporary quality
improvement.
We estimate the effects of the QIO
Program changes to be consistent with
the Congressional Budget Office’s 2011
Cost Estimate of the Trade Bill (H.R.
2832) which included a reduction in
spending of $330 million over the 2012–
2021 period. According to the CBO
Estimate, the Act and subsequently the
regulatory changes ‘‘would modify the
provisions under which CMS contracts

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
with independent entities called
[‘‘]Quality Improvement Organizations
[(QIOs)’’] in Medicare. QIOs, generally
staffed by health care professionals,
review medical care, help beneficiaries
with complaints about the quality of
care, and implement care
improvements. H.R. 2832 would make
several changes to the composition and
operation of QIOs, and would
harmonize QIO contracts with
requirements of the Federal Acquisition
Regulation. Among those changes are a
modification to expand the geographic
scope of QIO contracts and a
lengthening of the contract period. CBO
estimates that those provisions would
reduce spending by $330 million over
the 2012–2021 period.’’

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h. Effects of Revised Policies Regarding
Medicare-Fee-for-Service EHR Incentive
Program
(1) Incentive Payments for Eligible
Professionals (EPs) Reassigning Benefits
to Method II CAHs
As discussed in section XVIII.A. of
this final rule with comment period, we
are revising the regulations to provide,
during payment year 2013 alone, a
special method for determining the
hospital-based status of EPs who
reassign their benefits to Method II
CAHs. It is difficult to determine with
precision the cost impact of this policy
change. We lack specific information on
key factors affecting this impact,
including the number of EPs who
reassign their benefits to Method II
CAHs, the proportion of those EPs who
will be determined to be nonhospitalbased for 2013 under our revised policy,
the proportion of those EPs who will
qualify for Medicaid incentive payments
and choose to accept those payments
because they are higher, and the
proportion of the remaining EPs who
will successfully demonstrate
meaningful use in order to qualify for
Medicare incentive payments.
Therefore, it is necessary to rely on
estimates for each of these factors. As
much as possible, we employ the
methods of cost estimation that we used
to determine the estimated costs of the
Medicare incentives for EPs in our Stage
1 final rule (75 FR 44549) and Stage 2
final rule (77 FR 54139) for the
Medicare Electronic Health Record
Incentive Program, as well as the
estimates that we have previously
employed for specific factors.
Of the approximately 1,200 CAHs,
about three-quarters, or 900, elect under
section 1834(g)(2) of the Act to receive
a cost-based payment for the facility
costs of providing outpatient services,
plus 115 percent of the fee schedule

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amount for professional services
included within outpatient CAH
services. As we have indicated, we lack
specific information on the numbers of
EPs who reassign their benefits to these
Method II CAHs. While CAHs are
relatively small inpatient facilities, we
understand that many of them have
fairly substantial outpatient clinics. At
the same time, we have also been
informed that they rely largely on
nonphysician practitioners (nurses and
nurse practitioners) to staff these
outpatient clinics. Therefore, we will
assume that the typical outpatient
department in a Method II CAH has a
relatively small number of physicians,
between 5 and 10, on staff and billing
for professional services that are
reassigned to the CAH. We also use this
estimate of 5 to 10 physicians per
Method II CAH to establish an upper
and lower range to our impact estimate.
The number of EPs reassigning benefits
for outpatient services to Method II
CAHs is therefore between 4,500 and
9,000.
In our Stage 2 final rule (77 FR 54139)
for the Medicare Electronic Health
Record Incentive Program, we
determined that about 14 percent of EPs
with Medicare claims were hospitalbased, and thus ineligible to receive
Medicare EHR incentive payments. For
purposes of this impact statement, we
assume that 10 percent of EPs
reassigning benefits to Method II CAHs
are hospital-based. Because CAHs have
relatively small inpatient hospital
facilities, we believe that the physicians
practicing in these facilities will bill for
somewhat fewer inpatient services than
EPs generally. Using this assumption,
the estimate of nonhospital-based EPs
reassigning benefits to Method II CAHs
is therefore between 4,050 and 8,100. Of
these nonhospital-based EPs reassigning
benefits to Method II CAHs, some
proportion will qualify for Medicaid
incentive payments and will choose to
receive payments under that program
because the payments are higher. For
these purposes we employ the same
estimate (20 percent) that we have
employed for developing cost estimate
in our Stage 2 final rule (77 FR 54140).
Thus, we estimate that between 3,240
and 6,480 non-hospital-based EPs
reassigning benefits to Method II CAHs
do not choose to receive Medicaid
incentive payments.
As we have discussed in prior rules
(77 FR 54140), our estimates for the
number of EPs that will successfully
demonstrate meaningful use of CEHRT
are uncertain. The percentage of
Medicare EPs who will satisfy the
criteria for demonstrating meaningful
use of CEHRT and will qualify for

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incentive payments is a key, but highly
uncertain factor in developing cost
estimates for the EHR incentive program
in general and for the present purposes
in particular. Consistent with the
estimates that we have employed for
EPs generally in developing cost
estimates in the Stage II final rule, we
assume that 37 percent of the
nonhospital-based EPs reassigning
benefits to Method II CAHs will satisfy
the criteria for demonstrating
meaningful use of CEHRT and will
qualify for incentive payments in
payment years 2013. Thus, we estimate
that between 1,199 and 2,398 EPs
reassigning benefits to Method II CAHs
will actually qualify to receive Medicare
EHR incentive payments in 2013. As we
have previously discussed, section
1848(o)(1)(B) of the Act provides that
the incentive payment for an EP for a
given payment year shall not exceed the
following amounts:
• For the EP’s first payment year, for
such professional, $15,000 (or $18,000,
if the EP’s first payment year is 2011 or
2012);
• For the EP’s second payment year,
$12,000;
• For the EP’s third payment year,
$8,000;
• For the EP’s fourth payment year,
$4,000;
• For the EP’s fifth payment year,
$2,000; and
• For any succeeding year, $0.
We lack any information on how
many of the EPs reassigning benefits to
Method II CAHs will qualify for
incentive payments for the first time in
2013. However, if we assume, for
purposes of setting upper limits on our
estimates, that all of the 1,199 to 2,398
EPs we have estimated will qualify for
the first time and receive the maximum
incentive payment, our revised policy
will cost between $17,985,000 and
$35,970,000 in payments that we have
not previously been making in 2013.
Despite the uncertainties of the
assumptions that we have employed in
developing these estimates, we can state
with reasonable confidence that our
revised policy will result in
considerably less than $50,000,000 in
payments over and above the payments
we would make in the absence of this
policy for 2013.
(2) Cost Reporting Periods for Interim
and Final EHR Incentive Payments to
Eligible Hospitals
As we discussed in section XVIII.B. of
this final rule with comment period, we
are revising the regulations to provide
that, in cases where there is no 12month cost reporting period that begins
on or after the beginning of a payment

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year, we will use the most recent 12month cost reporting period available at
the time of final settlement in order to
determine final EHR incentive payments
for the hospital. We are making this
policy change solely to address
situations in which hospitals have been
receiving interim EHR payments but the
contractors have not been able to make
a determination of final payments
because there is no hospital cost report
that meets the existing requirements of
the regulations. Therefore, we do not
expect this to have any financial impact.
This policy change will merely allow us
to make final settlements in cases that
the current regulations do not cover.
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 $35.5
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 2,040
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 709 small rural hospitals.
The analysis above, together with the
remainder of this preamble, provides a
regulatory flexibility analysis and a
regulatory impact analysis.
C. Unfunded Mandates Reform Act
Analysis
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)

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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 $141
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 55 demonstrates the
estimated distributional impact of the
OPPS budget neutrality requirements
that will result in a 1.8 percent increase
in payments for all services paid under
the OPPS in CY 2014, after considering
all of the 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 passthrough 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 2014.
The updates to the ASC payment
system for CY 2014 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 56 demonstrates
the estimated distributional impact
among ASC surgical specialties of the
MFP-adjusted CPI–U update factor of
1.2 percent for CY 2014.
XXIIV. 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

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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 55 of
this final rule with comment period, we
estimate that OPPS payments to
governmental hospitals (including State
and local governmental hospitals) will
increase by 1.1 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.
XXV. Waiver of 60-Day Delay of
Effective Date
In the absence of an appropriation for
FY 2014 or a Continuing Resolution, the
Federal Government shut down on
October 1, 2013. During this shutdown,
which lasted from October 1, 2013
through October 16, 2013, only excepted
operations continued, which largely
excluded work on the final rule with
comment period and the final rules
contained in this document.
Accordingly, most of the work on these
rules was not completed in accordance
with our usual schedule for final
payment rules, which aims for an
issuance date of November 1, followed
by an effective date of January 1, to
ensure that the policies are effective at
the start of the calendar year to which
they apply.
We ordinarily provide a 60-day delay
in the effective date of final rules after
the date they are issued. The 60-day
delay in effective date can be waived,
however, if the agency finds, for good
cause, that the delay is impracticable,
unnecessary, or contrary to the public
interest, and the agency incorporates a
statement of the findings and its reasons
in the rule issued. We believe it would
be contrary to the public interest to
delay the effective date of the OPPS and
ASC payment systems portions,

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
including the Hospital OQR Program
and the ASCQR Program parts of the
final rule with comment period
contained in this document. In
accordance with sections 1833(t) and
1833(i) of the Act, the OPPS and the
ASC payment systems are calendar year
payment systems, and we typically
issue the OPPS/ASC payment systems
final rule with comment period by
November 1 of each year to both comply
with the requirement to annually review
and update these payment systems and
ensure that the payment policies for
these systems are effective on January 1,
the first day of the calendar year to
which the policies are intended to
apply. The Hospital OQR Program and
the ASCQR Program are intended to
align with the OPPS and the ASC
payment system, respectively.
We also believe it would be contrary
to the public interest to delay the
effective date of the Hospital VBP
Program performance and baseline
period policies being finalized in this
document. These policies are being
finalized in this document solely
because we inadvertently neglected to
propose and finalize them in the FY
2014 IPPS/LTCH PPS proposed and
final rules. These policies are intended
to align with the previously finalized
performance and baseline periods for
other measures included in the FY 2016
Hospital VBP Program, with January 1,
2014 being the start date of reporting. In
addition, a delay in effective date would
be contrary to the public interest in
ensuring that payments under the IPPS
to hospitals in FY 2016 properly and
completely reflect their performance on
quality measures in 2014.
We also believe that it would be
contrary to the public interest to delay
the effective date of the revisions to the
provider reimbursement determinations
and appeals reopening rule under 42
CFR 405.1885 in this document because,
as stated herein, we have determined
that applying these revisions to
currently pending cost reports, appeals,
and reopenings is in the public interest
in finality of payment amounts and
necessary to comply with the
requirements of sections 1878 and 1886
of the Act.
If the effective date of this final rule
with comment period and final rules
mentioned above in this document is
delayed by 60 days, the OPPS and ASC
payment system policies (including the
Hospital OQR and the ASCQR Program
policies), the Hospital VBP Program
performance and baseline period
policies, and the revisions to the
provider reimbursement determinations
and appeals regulations at 42 CFR
405.1885, adopted in this final rule with

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comment period and final rules, will not
be effective as of the beginning of the
payment year. We note that our waiver
of the delayed effective date only
applies to the OPPS and ASC payment
system policies (including the Hospital
OQR and the ASCQR Program policies),
the Hospital VBP Program performance
and baseline period policies, and the
revisions to the provider reimbursement
determinations and appeals regulations
at 42 CFR 405.1885, that are adopted in
this final rule with comment period and
in the applicable final rules. The
delayed effective date for all other
policies in the final rules in this
document is not waived, and these
policies will be effective on January 27,
2014.
List of Subjects
42 CFR Part 405
Administrative practice and
procedure, Health facilities, Health
professions, Kidney diseases, Medicare,
Reporting and recordkeeping, Rural
areas, X-rays.
42 CFR Part 410
Health facilities, Health professions,
Laboratories, Medicare, Rural areas, Xrays.
42 CFR Part 412
Administrative practice and
procedure, Health facilities, Medicare,
Puerto Rico, Reporting and
recordkeeping requirements.
42 CFR Part 419
Hospitals, Medicare, Reporting and
recordkeeping requirements.
42 CFR Part 475
Grant programs-health, Health care,
Health professions, Quality
Improvement Organization (QIO).
42 CFR Part 476
Health care, Health professional,
Health record, Quality Improvement
Organization (QIO), Penalties, Privacy,
Reporting and recordkeeping
requirements.
42 CFR Part 486
Grant programs-health, Health
facilities, Medicare, Reporting and
recordkeeping requirements, X-rays.
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.

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75195

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 405—FEDERAL HEALTH
INSURANCE FOR THE AGED AND
DISABLED
1. The authority citation for part 405,
Subpart R continues to read as follows:

■

Authority: Secs. 205, 1102, 1814(b),
1815(a), 1833, 1861(v), 1871, 1872, 1878, and
1886 of the Social Security Act (42 U.S.C.
405, 1302, 1395f(b), 1395g(a), 1395l,
1395x(v), 1395hh, 1395ii, 1395oo, and
1395ww).

2. Section 405.1804 is amended by
revising paragraph (a) to read as follows:

■

§ 405.1804 Matters not subject to
administrative and judicial review under
prospective payment system.

*

*
*
*
*
(a) The determination of the
requirement, or the proportional
amount, of the budget neutrality
adjustment in the prospective payment
rates required under section 1886(e)(1)
of the Social Security Act.
*
*
*
*
*
■ 3. Section 405.1885 is amended by
revising paragraph (a)(1) and adding
paragraph (b)(2)(iv) to read as follows:
§ 405.1885 Reopening an intermediary
determination or reviewing entity decision.

(a) * * *
(1) A Secretary determination, an
intermediary determination, or a
decision by a reviewing entity (as
described in § 405.1801(a)) may be
reopened, with respect to specific
findings on matters at issue in a
determination or decision, by CMS
(with respect to Secretary
determinations), by the intermediary
(with respect to intermediary
determinations), or by the reviewing
entity that made the decision (as
described in paragraph (c) of this
section).
(i) A specific finding on a matter at
issue may be legal or factual in nature
or a mixed matter of both law and fact.
(ii) A specific finding on a matter at
issue may include a factual matter that
arose in or was determined for the same
cost reporting period as the period at
issue in an appeal filed, or a reopening
requested by a provider or initiated by
an intermediary, under this subpart.
(iii) A specific finding on a matter at
issue may include a predicate fact,
which is a finding of fact based on a
factual matter that first arose in or was
first determined for a cost reporting
period that predates the period at issue
(in an appeal filed, or a reopening

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requested by a provider or initiated by
an intermediary, under this subpart),
and once determined, was used to
determine an aspect of the provider’s
reimbursement for one or more later
cost reporting periods.
(iv) Except as provided for by this
section, § 405.1887, and § 405.1889, a
specific finding on a matter at issue may
not be reopened and, if reopened,
revised.
*
*
*
*
*
(b) * * *
(2) * * *
(iv) The 3-year period described in
paragraphs (b)(2)(i) through (b)(2)(iii) of
this section applies to, and is calculated
separately for, each specific finding on
a matter at issue (as described in
paragraphs (a)(1)(i) through (a)(1)(iv) of
this section, but not to such findings
when made as part of a determination
of reasonable cost under section
1861(v)(1)(A) of the Act.
*
*
*
*
*
PART 410—SUPPLEMENTARY
MEDICAL INSURANCE (SMI)
BENEFITS

§ 412.167 Appeals under the Hospital
Value-Based Purchasing (VBP) Program.

*

*
*
*
*
(c) If a hospital is dissatisfied with
CMS’ decision on an appeal request
submitted under paragraph (b) of this
section, the hospital may request an
independent CMS review of that
decision.
*
*
*
*
*
PART 419—PROSPECTIVE PAYMENT
SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES

9. Section 419.2 is amended by
revising paragraphs (b) introductory
text, (b)(3), and (b)(11) and adding
paragraphs (b)(13) through (18) to read
as follows:

■

5. Section 410.27 is amended by—
a. Revising paragraph (a) introductory
text.
■ b. Removing the word ‘‘and’’ at the
end of paragraph (a)(1)(iii).
■ c. Removing the period at the end of
paragraph (a)(1)(iv)(E) and adding in its
place ‘‘; and’’.
■ d. Adding paragraph (a)(1)(v).
The revisions and addition read as
follows:
■
■

§ 410.27 Therapeutic outpatient hospital or
CAH services and supplies incident to a
physician’s or nonphysician practitioner’s
service: Conditions.

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7. Section 412.167 is amended by
redesignating paragraph (c) as paragraph
(d) and adding a new paragraph (c) to
read as follows:

■

Authority: Secs. 1102, 1833(t), and 1871 of
the Social Security Act (42 U.S.C. 1302,
1395l(t), and 1395hh).

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

(a) Medicare Part B pays for
therapeutic hospital or CAH services
and supplies furnished incident to a
physician’s or nonphysician
practitioner’s service, which are defined
as all services and supplies furnished to
hospital or CAH outpatients that are not
diagnostic services and that aid the
physician or nonphysician practitioner
in the treatment of the patient,
including drugs and biologicals which
are not usually self-administered, if—
(1) * * *
(v) In accordance with applicable
State law.
*
*
*
*
*

Jkt 232001

Authority: Secs. 1102, 1862, and 1871 of
the Social Security Act (42 U.S.C. 1302,
1395y, and 1395hh).

8. The authority citation for part 419
continues to read as follows:

4. The authority citation for part 410
continues to read as follows:

21:46 Dec 09, 2013

6. The authority citation for part 412
continues to read as follows:

■

■

■

VerDate Mar<15>2010

PART 412—PROSPECTIVE PAYMENT
SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

§ 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 integral, ancillary,
supportive, dependent, or adjunctive to
performing a procedure or furnishing a
service on an outpatient basis. In
general, these packaged costs may
include, but are not limited to, the
following items and services, the
payment for which are packaged or
conditionally packaged into the
payment for the related procedures or
services.
*
*
*
*
*
(3) Observation services;
*
*
*
*
*
(11) Implantable and insertable
medical items and devices, including,
but not limited to, prosthetic devices
(other than dental) which replace all or
part of an internal body organ

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(including colostomy bags and supplies
directly related to colostomy care),
including replacement of these devices;
*
*
*
*
*
(13) Image guidance, processing,
supervision, and interpretation services;
(14) Intraoperative items and services;
(15) Drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure (including but not limited
to, diagnostic radiopharmaceuticals,
contrast agents, and pharmacologic
stress agents;
(16) Drugs and biological that
function as supplies when used in a
surgical procedure (including, but not
limited to, skin substitutes and similar
products that aid wound healing and
implantable biological);
(17) Certain clinical diagnostic
laboratory tests; and
(18) Certain services described by
add-on codes.
*
*
*
*
*
■ 10. Section 419.22 is amended by
revising the introductory text and
paragraphs (j) and (1) to read as follows:
§ 419.22 Hospital services excluded from
payment under the hospital outpatient
prospective payment system.

The following services are not paid
for under the hospital outpatient
prospective payment system (except
when packaged as a part of a bundled
payment):
*
*
*
*
*
(j) Except as provided in
§ 419.2(b)(11), prosthetic devices,
prosthetic supplies, and orthotic
devices.
*
*
*
*
*
(l) Except as provided in
§ 419.2(b)(17), clinical diagnostic
laboratory tests.
*
*
*
*
*
■ 11. Section 419.32 is amended by
adding paragraph (b)(1)(iv)(B)(5) to read
as follows:
§ 419.32 Calculation of prospective
payment rates for hospital outpatient
services.

*

*
*
*
*
(b) * * *
(1) * * *
(iv) * * *
(B) * * *
(5) For calendar year 2014, a
multifactor productivity adjustment (as
determined by CMS) and 0.3 percentage
point.
*
*
*
*
*
■ 12. Section 419.46 is added to Subpart
D to read as follows:

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§ 419.46 Participation, data submission,
and validation requirements under the
Hospital Outpatient Quality Reporting
(OQR) Program.

(a) Participation in the Hospital OQR
Program. To participate in the Hospital
OQR Program, a hospital as defined in
section 1886(d)(1)(B) of the Act and is
paid under the OPPS must—
(1) Register on the QualityNet Web
site before beginning to report data;
(2) Identify and register a QualityNet
security administrator as part of the
registration process under paragraph
(a)(1) of this section; and
(3) Complete and submit an online
participation form available at the
QualityNet.org Web site if this form has
not been previously completed, if a
hospital has previously withdrawn, or if
the hospital acquires a new CMS
Certification Number (CCN). For
Hospital OQR Program purposes,
hospitals that share the same CCN are
required to complete a single online
participation form. Once a hospital has
submitted a participation form, it is
considered to be an active Hospital OQR
Program participant until such time as
it submits a withdrawal form to CMS or
no longer has an effective Medicare
provider agreement. Deadlines for the
participation form are described in
paragraphs (a)(3)(i) and (ii) of this
section, and are based on the date
identified as a hospital’s Medicare
acceptance date.
(i) If a hospital has a Medicare
acceptance date before January 1 of the
year prior to the affected annual
payment update, the hospital must
complete and submit to CMS a
completed Hospital OQR Notice of
Participation Form by July 31 of the
calendar year prior to the affected
annual payment update.
(ii) If a hospital has a Medicare
acceptance date on or after January 1 of
the year prior to the affected annual
payment update, the hospital must
submit a completed participation form
no later than 180 days from the date
identified as its Medicare acceptance
date.
(b) Withdrawal from the Hospital
OQR Program. A participating hospital
may withdraw from the Hospital OQR
Program by submitting to CMS a
withdrawal form that can be found in
the secure portion of the QualityNet
Web site. The hospital may withdraw
any time from January 1 to November 1
of the year prior to the affected annual
payment updates. A withdrawn hospital
will not be able to later sign up to
participate in that payment update, is
subject to a reduced annual payment
update as specified under § 419.43(h),
and is required to submit a new

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participation form in order to
participate in any future year of the
Hospital OQR Program.
(c) Submission of Hospital OQR
Program data. (1) General rule. Except
as provided in paragraph (d) of this
section, hospitals that participate in the
Hospital OQR Program must submit to
CMS data on measures selected under
section 1833(17)(C) of the Act in a form
and manner, and at a time, specified by
CMS.
(2) Submission deadlines. Submission
deadlines by measure and by data type
are posted on the QualityNet Web site.
(3) Initial submission deadlines for a
hospital that did not participate in the
previous year’s Hospital OQR Program.
(i) If a hospital has a Medicare
acceptance date before January 1 of the
year prior to the affected annual
payment update, the hospital must
submit data beginning with encounters
occurring during the first calendar
quarter of the year prior to the affected
annual payment update, in addition to
submitting a completed Hospital OQR
Notice of Participation Form under
paragraph (a)(3)(i) of this section.
(ii) If a hospital has a Medicare
acceptance date on or after January 1 of
the year prior to the affected annual
payment update, the hospital must
submit data for encounters beginning
with the first full quarter following
submission of the completed Hospital
OQR Notice of Participation Form under
paragraph (a)(3)(ii) of this section.
(iii) Hospitals with a Medicare
acceptance date before or after January
1 of the year prior to an affected annual
payment update must follow data
submission deadlines as specified in
paragraph (c)(2) of this section.
(d) Exception. CMS may grant an
extension or waiver of one or more data
submission deadlines and requirements
in the event of extraordinary
circumstances beyond the control of the
hospital, such as when an act of nature
affects an entire region or locale or a
systemic problem with one of CMS’ data
collection systems directly or indirectly
affects data submission. CMS may grant
an extension or waiver as follows:
(1) Upon request by the hospital.
Specific requirements for submission of
a request for an extension or waiver are
available on the QualityNet Web site.
(2) At the discretion of CMS. CMS
may grant waivers or extensions to
hospitals that have not requested them
when CMS determines that an
extraordinary circumstance has
occurred.
(e) Validation of Hospital OQR
Program data. CMS may validate one or
more measures selected under section
1833(17)(C) of the Act by reviewing

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documentation of patient encounters
submitted by selected participating
hospitals.
(1) Upon written request by CMS or
its contractor, a hospital must submit to
CMS supporting medical record
documentation that the hospital used
for purposes of data submission under
the program. The specific sample that a
hospital must submit will be identified
in the written request. A hospital must
submit the supporting medical record
documentation to CMS or its contractor
within 45 days of the date identified on
the written request, in the form and
manner specified in the written request.
(2) A hospital meets the validation
requirement with respect to a fiscal year
if it achieves at least a 75-percent
reliability score, as determined by CMS.
(f) Reconsiderations and appeals of
Hospital OQR Program decisions. (1) A
hospital may request reconsideration of
a decision by CMS that the hospital has
not met the requirements of the Hospital
OQR Program for a particular fiscal year.
Except as provided in paragraph (d) of
this section, a hospital must submit a
reconsideration request to CMS via the
QualityNet Web site, no later than the
first business day of the month of
February of the affected payment year.
(2) A reconsideration request must
contain the following information:
(i) The hospital’s CMS Certification
Number (CCN);
(ii) The name of the hospital;
(iii) The 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;
(iv) The hospital’s basis for requesting
reconsideration. The hospital must
identify its specific reason(s) for
believing it should not be subject to the
reduced annual payment update;
(v) The hospital-designated personnel
contact information, including name,
email address, telephone number, and
mailing address (must include physical
mailing address, not just a post office
box);
(vi) The hospital-designated
personnel’s signature;
(vii) A copy of all materials that the
hospital submitted to comply with the
requirements of the affected Hospital
OQR Program payment determination
year; and
(viii) If the hospital is requesting
reconsideration on the basis that CMS
determined it did not meet the affected
payment determination year’s validation
requirement set forth in paragraph (e)(1)
of this section, the hospital must
provide a written justification for each
appealed data element classified during
the validation process as a mismatch.

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Only data elements that affect a
hospital’s validation score are eligible to
be reconsidered.
(3) A hospital that is dissatisfied with
a decision made by CMS on its
reconsideration request may file an
appeal with the Provider
Reimbursement Review Board under
part 405, subpart R, of this chapter.
■ 13. Section 419.66 is amended by
revising paragraph (b)(3) to read as
follows:
§ 419.66 Transitional pass-through
payments: Medical devices.

*

*
*
*
*
(b) * * *
(3) The device is an integral part of
the service furnished, is used for one
patient only, comes in contact with
human tissue, and is surgically
implanted or inserted, whether or not it
remains with the patient when the
patient is released from the hospital.
*
*
*
*
*
PART 475—QUALITY IMPROVEMENT
ORGANIZATIONS
14. The authority citation for part 475
continues to read as follows:

■

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

15. Section 475.1 is amended by—
a. Redesignating paragraphs (a)
through (d) in the definition of ‘‘Five
percent or more owner’’ as paragraphs
(1) though (4).
■ b. Adding, in alphabetical order, the
definitions of ‘‘Case reviews’’,
‘‘Practitioner’’, ‘‘QIO area’’, and
‘‘Quality improvement initiative’’.
■ c. Revising the definition of
‘‘Physician.’’
The additions and revision read as
follows:
■
■

§ 475.1

Definitions.

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*

*
*
*
*
Case reviews means the different
types of reviews that QIOs are
authorized to perform. Such reviews
include, but are not limited to—
(1) Beneficiary complaint reviews;
(2) General quality of care reviews;
(3) Emergency Medical Treatment and
Labor Act (EMTALA) reviews;
(4) Medical necessity reviews,
including appeals and DRG validation
reviews; and
(5) Admission and discharge reviews.
*
*
*
*
*
Physician means:
(1) A doctor of medicine or
osteopathy, a doctor of dental surgery or
dental medicine, a doctor of podiatry, a
doctor of optometry, or a chiropractor as
described in section 1861(r) of the Act;

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(2) An intern, resident, or Federal
Government employee authorized under
State or Federal law to practice as a
doctor as described in paragraph (1) of
this definition; and
(3) An individual licensed to practice
as a doctor as described in paragraph (1)
of this definition in any Territory or
Commonwealth of the United States of
America.
Practitioner has the same meaning as
provided in § 476.1 of this chapter.
QIO area means the defined
geographic area, such as the State(s),
region(s), or community(ies), in which
the CMS contract directs the QIO to
perform.
Quality improvement initiative has
the same meaning as provided in § 476.1
of this chapter.
■ 16. Subpart C is revised to read as
follows:
Subpart C—Quality Improvement
Organizations
Sec.
475.100 Scope and applicability.
475.101 Eligibility requirements for QIO
contracts.
475.102 Requirements for performing case
reviews.
475.103 Requirements for performing
quality improvement initiatives.
475.104 [Reserved]
475.105 Prohibition against contracting
with health care facilities, affiliates, and
payor organizations.
475.106 [Reserved]
475.107 QIO contract awards.

Subpart C—Quality Improvement
Organizations
§ 475.100

Scope and applicability.

This subpart implements sections
1152 and 1153(b) and (c) of the Social
Security Act as amended by section 261
of the Trade Adjustment Assistance
Extension Act of 2011. This subpart
defines the types of organizations that
are eligible to become Quality
Improvement Organizations (QIOs) and
describes certain steps CMS will take in
selecting QIOs.
§ 475.101 Eligibility requirements for QIO
contracts.

In order to be eligible for a QIO
contract, an organization must meet the
following requirements:
(a) Have a governing body that
includes at least one individual who is
a representative of health care providers
and at least one individual who is a
representative of consumers.
(b) Demonstrate the ability to perform
the functions of a QIO, including—
(1) The ability to meet the eligibility
requirements and perform activities as
set forth in the QIO Request for
Proposal; and

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(2) The ability to—
(i) Perform case reviews as described
in § 475.102; and/or
(ii) Perform quality improvement
initiatives as set forth in § 475.103.
(c) Demonstrate the ability to actively
engage beneficiaries, families, and
consumers, as applicable, in case
reviews as set forth in § 475.102, and/or
quality improvement initiatives as set
forth in § 475.103.
(d) Demonstrate the ability to perform
the functions of a QIO with objectivity
and impartiality and in a fair and
neutral manner.
§ 475.102 Requirements for performing
case reviews.

(a) In determining whether or not an
organization has demonstrated the
ability to perform case review, CMS will
take into consideration factors such as:
(1) The organization’s proposed
processes, capabilities, quantitative,
and/or qualitative performance
objectives and methodology to perform
case reviews;
(2) The organization’s proposed
involvement of and access to physicians
and practitioners in the QIO area with
the appropriate expertise and
specialization in the areas of health care
related to case reviews;
(3) The organization’s ability to take
into consideration urban versus rural,
local, and regional characteristics in the
health care setting where the care under
review was provided;
(4) The organization’s ability to take
into consideration evidence-based
national clinical guidelines and
professionally recognized standards of
care; and
(5) The organization’s access to
qualified information technology (IT)
expertise.
(b) In making determinations under
this section, CMS may consider
characteristics such as the
organization’s geographic location and
size. CMS may also consider prior
experience in health care quality
improvement that CMS considers
relevant to performing case reviews;
such prior experience may include prior
similar case review experience.
(c) A State government that
administers a Medicaid program will be
considered incapable of performing case
review in an effective manner, unless
the State demonstrates to the
satisfaction of CMS that the State agency
performing the case review will act with
complete objectivity and independence
from the Medicaid program.
§ 475.103 Requirements for performing
quality improvement initiatives.

(a) In determining whether or not an
organization has demonstrated the

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations
ability to perform quality improvement
initiatives, CMS will take into
consideration factors such as:
(1) The organization’s proposed
processes, capabilities, quantitative,
and/or qualitative performance
objectives, and methodology to perform
quality improvement initiatives;
(2) The organization’s proposed
involvement of and access to physicians
and practitioners in the QIO area with
the appropriate expertise and
specialization in the areas of health care
concerning the quality improvement
initiatives;
(3) The organization’s access to
professionals with appropriate
knowledge of quality improvement
methodologies and practices; and
(4) The organization’s access to
qualified information technology (IT)
expertise.
(b) In making determinations under
this section, CMS may consider
characteristics such as the
organization’s geographic location and
size. CMS may also consider prior
experience in health care quality
improvement that CMS considers
relevant to performing quality
improvement initiatives; such prior
experience may include prior similar
quality improvement initiative
experience and whether it achieved
successful results.
(c) A State government that
administers a Medicaid program will be
considered incapable of performing
quality improvement initiative
functions in an effective manner, unless
the State demonstrates to the
satisfaction of CMS that the State agency
performing the quality improvement
initiatives will act with complete
objectivity and independence from the
Medicaid program.
§ 475.104

[Reserved]

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(a) Basic rule. Except as permitted
under paragraph (a)(3) of this section,
the following are not eligible for QIO
contracts:
(1) A health care facility in the QIO
area.
(2) A health care facility affiliate; that
is, an organization in which more than
20 percent of the members of the
governing body are also either a
governing body member, officer,
partner, five percent or more owner, or
managing employee in a health care
facility in the QIO area.
(3) A payor organization, unless the
Secretary determines that—

21:46 Dec 09, 2013

§ 475.106

[Reserved]

§ 475.107

QIO contract awards.

Subject to the provisions of § 475.105,
CMS will—
(a) Ensure that all awardees meet the
requirements of §§ 475.101 through
475.103, as applicable; and
(b) Award the contract to the selected
organization for a specific QIO area for
a period of 5 years.
PART 476—QUALITY IMPROVEMENT
ORGANIZATION REVIEW
17. 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).

18. The heading of part 476 is revised
to read as set forth above.
■ 19. In § 476.1, paragraphs (a) through
(d) in the definition of ‘‘Five percent or
more owner’’ are redesignated as
paragraphs (1) though (4) and the
definition of ‘‘Physician’’ is revised to
read as follows:
■

§ 476.1

§ 475.105 Prohibition against contracting
with health care facilities, affiliates, and
payor organizations.

VerDate Mar<15>2010

(i) There is no other entity available
for an area with which the Secretary can
enter into a contract under this part; or
(ii) A payor organization is a more
qualified entity to perform one or more
of the functions of a QIO described in
§ 475.101(b), meets all other
requirements and standards of this part,
and demonstrates to the satisfaction of
CMS that, in performing QIO activities,
the payor organization will act with
complete objectivity and independence
from its payor program.
(b) [Reserved]
(c) Subcontracting. A QIO must not
subcontract with a health care facility to
perform any case review activities
except for the review of the quality of
care.

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Definitions.

*

*
*
*
*
Physician means:
(1) A doctor or medicine or
osteopathy, a doctor of dental surgery or
dental medicine, a doctor of podiatry, a
doctor of optometry, or a chiropractor,
as described in section 1861(r) of the
Act;
(2) An intern, resident, or Federal
Government employee authorized under
State or Federal law to practice as a
doctor as described in paragraph (1) of
this definition; and
(3) An individual licensed to practice
as a doctor as described in paragraph (1)
of this definition in any Territory or
Commonwealth of the United States of
America.
*
*
*
*
*

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75199

20. The heading of Subpart C is
revised to read as follows:

■

Subpart C—Review Responsibilities of
Quality Improvement Organizations
(QIOs)
PART 486—CONDITIONS FOR
COVERAGE OF SPECIALIZED
SERVICES FURNISHED BY
SUPPLIERS
21. The authority citation of part 486
continues to read as follows:

■

Authority: Secs. 1102, 1138, and 1871 of
the Social Security Act (42 U.S.C. 1302,
1302b-8, and 1395hh) and section 371 of the
Public Health Service Act (42 U.S.C. 273).

22. Section 486.316 is amended by
revising paragraphs (a)(1) and (b) to read
as follows:

■

§ 486.316 Re-certification and competition
processes.

(a) * * *
(1) Meets two out of the three
outcome measures requirements at
§ 486.318; and * * *
(b) De-certification and competition. If
an OPO does not meet two out of the
three outcome measures as described in
paragraph (a)(1) of this section or the
requirements described in paragraph
(a)(2) of this section, the OPO is decertified. If the OPO does not appeal or
the OPO appeals and the
reconsideration official and CMS
hearing officer uphold the decertification, the OPO’s service area is
opened for competition from other
OPOs. The de-certified OPO is not
permitted to compete for its open area
or any other open area. An OPO
competing for an open service area must
submit information and data that
describe the barriers in its service area,
how they affected organ donation, what
steps the OPO took to overcome them,
and the results.
*
*
*
*
*
■ 23. Section 486.318 is amended by
revising paragraph (a) introductory text
and paragraph (b) introductory text to
read as follows:
§ 486.318

Condition: Outcome measures.

(a) With the exception of OPOs
operating exclusively in noncontiguous
States, Commonwealths, Territories, or
possessions, an OPO must meet two out
of the three following outcome
measures:
*
*
*
*
*
(b) For OPOs operating exclusively in
noncontiguous States, Commonwealths,
Territories, and possessions, an OPO
must meet two out of the three
following outcome measures:
*
*
*
*
*

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Federal Register / Vol. 78, No. 237 / Tuesday, December 10, 2013 / Rules and Regulations

PART 495—STANDARDS FOR THE
ELECTRONIC HEALTH RECORD
TECHNOLOGY INCENTIVE PROGRAM
24. 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).

25. Section 495.4 is amended by
revising the definition of ‘‘Hospitalbased EP’’ to read as follows:

■

§ 495.4

Definitions.

*
*
*
*
Hospital-based EP. Unless it meets the
requirements of § 495.5, a hospitalbased EP means an EP who furnishes 90
percent or more of his or her covered
professional services in sites of service
identified by the codes used in the
HIPAA standard transaction as an
inpatient hospital or emergency room
setting in the year preceding the
payment year, or in the case of a
payment adjustment year, in either of
the 2 years before the year preceding
such payment adjustment year.
(1) For Medicare, this is calculated
based on—
(i) The Federal fiscal year preceding
the payment year; and
(ii) For the payment adjustments,
based on—

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*

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(A) The Federal fiscal year 2 years
before the payment adjustment year; or
(B) The Federal fiscal year 3 years
before the payment adjustment year.
(2) For Medicaid, it is at the State’s
discretion if the data are gathered on the
Federal fiscal year or calendar year
preceding the payment year.
(3) For the CY 2013 payment year
only, an EP who furnishes services
billed by a CAH receiving payment
under Method II (as described in
§ 413.70(b)(3) of this chapter) is
considered to be hospital-based if 90
percent or more of his or her covered
professional services are furnished in
sites of service identified by the codes
used in the HIPAA standard transaction
as an inpatient hospital or emergency
room setting in each of the Federal fiscal
years 2012 and 2013.
*
*
*
*
*
■ 26. Section 495.104 is amended by
revising paragraph (c)(2) to read as
follows:
§ 495.104 Incentive payments to eligible
hospitals.

*

*
*
*
*
(c) * * *
(2) Interim and final payments. CMS
uses data on hospital acute care
inpatient discharges, Medicare Part A
acute care inpatient bed-days, Medicare
Part C acute care inpatient bed-days,

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and total acute care inpatient bed-days
from the latest submitted 12-month
hospital cost report as the basis for
making preliminary incentive payments.
Final payments are determined at the
time of settling the first 12-month
hospital cost report for the hospital
fiscal year that begins on or after the
first day of the payment year, and
settled on the basis of data from that
cost reporting period. In cases where
there is no 12-month hospital cost
report period beginning on or after the
first day of the payment year, final
payments may be determined and
settled on the basis of data from the
most recently submitted 12-month
hospital cost report.
*
*
*
*
*
(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital
Insurance; Program No. 93.774, Medicare—
Supplementary Medical Insurance Program;
and Program No. 93.778 (Medical Assistance)
Dated: November 14, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: November 20, 2013.
Kathleen Sebelius,
Secretary.
[FR Doc. 2013–28737 Filed 11–27–13; 4:15 pm]
BILLING CODE 4120–01–P

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