Att E5_Ambulatory Surgical Centers and Outpatient Acute Care Facility

Vol. 80

Friday,

No. 219

November 13, 2015

Part II

Department of Health and Human Services

jstallworth on DSK7TPTVN1PROD with RULES

Centers for Medicare & Medicaid Services
42 CFR Parts 405, 410, 412, et al.
Medicare Program: Hospital Outpatient Prospective Payment and
Ambulatory Surgical Center Payment Systems and Quality Reporting
Programs; Short Inpatient Hospital Stays; Transition for Certain MedicareDependent, Small Rural Hospitals Under the Hospital Inpatient Prospective
Payment System; Provider Administrative Appeals and Judicial Review;
Final Rule

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
appropriate claims in provider cost
reports.

DEPARTMENT OF HEALTH AND
HUMAN SERVICES

42 CFR Parts 405, 410, 412, 413, 416,
and 419
[CMS–1633–FC; CMS–1607–F2]
RIN 0938–AS42; 0938–AS11

Medicare Program: Hospital Outpatient
Prospective Payment and Ambulatory
Surgical Center Payment Systems and
Quality Reporting Programs; Short
Inpatient Hospital Stays; Transition for
Certain Medicare-Dependent, Small
Rural Hospitals Under the Hospital
Inpatient Prospective Payment
System; Provider Administrative
Appeals and Judicial Review
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period;
final rule.
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 2016 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 and the ASC Quality Reporting
(ASCQR) Program.
Further, this document includes
certain finalized policies relating to the
hospital inpatient prospective payment
system: Changes to the 2-midnight rule
under the short inpatient hospital stay
policy; and a payment transition for
hospitals that lost their status as a
Medicare-dependent, small rural
hospital (MDH) because they are no
longer in a rural area due to the
implementation of the new Office of
Management and Budget delineations in
FY 2015 and have not reclassified from
urban to rural before January 1, 2016.
In addition, this document contains a
final rule that finalizes certain 2015
proposals, and addresses public
comments received, relating to the
changes in the Medicare regulations
governing provider administrative
appeals and judicial review relating to

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SUMMARY:

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Effective Date: This final rule
with comment period and final rule are
effective on January 1, 2016.
Comment Period: To be assured
consideration, comments on the
payment classifications assigned to
HCPCS codes identified in Addenda B,
AA, and BB with the ‘‘NI’’ comment
indicator and on other areas specified
throughout this final rule with comment
period must be received at one of the
addresses provided in the ADDRESSES
section no later than 5 p.m. EST on
December 29, 2015.
Application Deadline—New Class of
New Technology Intraocular Lenses:
Requests for review of applications for
a new class of new technology
intraocular lenses must be received by
5 p.m. EST on March 1, 2016, at the
following address: ASC/NTIOL,
Division of Outpatient Care, Mailstop
C4–05–17, Centers for Medicare and
Medicaid Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
ADDRESSES: In commenting, please refer
to file code CMS–1633–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–1633–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–1633–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
DATES:

Centers for Medicare & Medicaid
Services

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H. Humphrey Building, 200
Independence Avenue SW.,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not
readily available to persons without
Federal Government identification,
commenters are encouraged to leave
their comments in the CMS drop slots
located in the main lobby of the
building. A stamp-in clock is available
for persons wishing to retain a proof of
filing by stamping in and retaining an
extra copy of the comments being filed.)
b. For delivery in Baltimore, MD—
Centers for Medicare & Medicaid
Services, Department of Health and
Human Services, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
If you intend to deliver your
comments to the Baltimore address,
please call the telephone number (410)
786–7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses
indicated as appropriate for hand or
courier delivery may be delayed and
received after the comment period.
For information on viewing public
comments, we refer readers to the
beginning of the SUPPLEMENTARY
INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Advisory Panel on Hospital Outpatient
Payment (HOP Panel), contact Carol
Schwartz at (410) 786–0576.
Ambulatory Surgical Center (ASC)
Payment System, contact Elisabeth
Daniel at (410) 786–0237.
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
Administration, Validation, and
Reconsideration Issues, contact Anita
Bhatia at (410) 786–7236.
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program Measures,
contact Vinitha Meyyur at (410) 786–
8819.
Blood and Blood Products, contact
Lela Strong at (410) 786–3213.
Cancer Hospital Payments, contact
David Rice at (410) 786–6004.
Chronic Care Management (CCM)
Hospital Services, contact Twi Jackson
at (410) 786–1159.
CPT and Level II Alphanumeric
HCPCS Codes—Process for Requesting
Comments, contact Marjorie Baldo at
(410) 786–4617.
CMS Web Posting of the OPPS and
ASC Payment Files, contact Chuck
Braver at (410) 786–9379.
Composite APCs (Extended
Assessment and Management, Low Dose
Brachytherapy, Multiple Imaging),
contact Twi Jackson at (410) 786–1159.
Comprehensive APCs, contact Lela
Strong at (410) 786–3213.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
Hospital Observation Services,
contact Twi Jackson at (410) 786–1159.
Hospital Outpatient Quality Reporting
(OQR) Program Administration,
Validation, and Reconsideration Issues,
contact Elizabeth Bainger at (410) 786–
0529.
Hospital Outpatient Quality Reporting
(OQR) Program Measures, contact
Vinitha Meyyur at (410) 786–8819.
Hospital Outpatient Visits (Emergency
Department Visits and Critical Care
Visits), contact Twi Jackson at (410)
786–1159.
Inpatient Only Procedures List,
contact Lela Strong at (410) 786–3213.
Medicare Cost Reports: Appropriate
Claims and Provider Appeals, contact
Kellie Shannon at (410) 786–0416.
New Technology Intraocular Lenses
(NTIOLs), contact John McInnes at (410)
786–0791.
No Cost/Full Credit and Partial Credit
Devices, contact Carol Schwartz at (410)
786–0576.
OPPS Brachytherapy, contact
Elisabeth Daniel at (410) 786–0237.
OPPS Data (APC Weights, Conversion
Factor, Copayments, Cost-to-Charge
Ratios (CCRs), Data Claims, Geometric
Mean Calculation, Outlier Payments,
and Wage Index), contact David Rice at
(410) 786–6004.
OPPS Drugs, Radiopharmaceuticals,
Biologicals, and Biosimilar Products,
contact Elisabeth Daniel at (410) 786–
0237.
OPPS Exceptions to the 2 Times Rule,
contact Marjorie Baldo at (410) 786–
4617.
OPPS Packaged Items/Services,
contact Elisabeth Daniel at (410) 786–
0237.
OPPS Pass-Through Devices and New
Technology Procedures/Services,
contact Carol Schwartz at (410) 786–
0576.
OPPS Status Indicators (SI) and
Comment Indicators (CI), contact
Marina Kushnirova at (410) 786–2682.
Partial Hospitalization Program (PHP)
and Community Mental Health Center
(CMHC) Issues, contact Dexter Dickey at
(410) 786–6856.
Rural Hospital Payments, contact
David Rice at (410) 786–6004.
Stereotactic Radiosurgery Services
(SRS), contact Elisabeth Daniel at (410)
786–0237.
Transition for Former MedicareDependent, Small Rural Hospitals,
contact Shevi Marciano at (410) 786–
4487.
Two-Midnight Policy—General
Issues, contact Twi Jackson at (410)
786–1159.
Two-Midnight Policy—Medical
Review, contact Steven Rubio at (410)
786–1782.

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All Other Issues Related to Hospital
Outpatient and Ambulatory Surgical
Center Payments Not Previously
Identified, contact Marjorie Baldo at
(410) 786–4617.
SUPPLEMENTARY INFORMATION:

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

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Alphabetical List of Acronyms
Appearing in This Federal Register
Document
AHA American Hospital Association
AMA American Medical Association
AMI Acute myocardial infarction
APC Ambulatory Payment Classification
APU Annual payment update
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
CAHPS Consumer Assessment of
Healthcare Providers and Systems
CAP Competitive Acquisition Program
C–APC Comprehensive Ambulatory
Payment Classification
CASPER Certification and Survey
Provider Enhanced Reporting
CAUTI Catheter-associated urinary tract
infection
CBSA Core-Based Statistical Area
CCM Chronic care management
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and
Prevention
CED Coverage with Evidence
Development
CERT Comprehensive Error Rate Testing
CFR Code of Federal Regulations
CI Comment indicator
CLABSI Central Line [Catheter] Associated
Blood Stream Infection
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid
Services
CoP Condition of participation
CPI–U Consumer Price Index for All Urban
Consumers
CPT Current Procedural Terminology
(copyrighted by the American Medical
Association)
CR Change request
CRC Colorectal cancer
CSAC Consensus Standards Approval
Committee
CT Computed tomography
CV Coefficient of variation
CY Calendar year
DFO Designated Federal Official
DIR Direct or indirect remuneration
DME Durable medical equipment
DMEPOS Durable Medical Equipment,
Prosthetic, Orthotics, and Supplies
DRA Deficit Reduction Act of 2005, Pub. L.
109–171
DSH Disproportionate share hospital
EACH Essential access community hospital
EAM Extended assessment and
management
EBRT External beam radiotherapy

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ECG Electrocardiogram
ED Emergency department
EDTC Emergency department transfer
communication
EHR Electronic health record
EJR Expedited judicial review
E/M Evaluation and management
ESRD End-stage renal disease
ESRD QIP End-Stage Renal Disease Quality
Improvement Program
FACA Federal Advisory Committee Act,
Pub. L. 92–463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FTE Full-time equivalent
FY Fiscal year
GAO Government Accountability Office
GI Gastrointestinal
GME Graduate medical education
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of
Healthcare Providers and Systems
HCERA Health Care and Education
Reconciliation Act of 2010, Pub. L. 111–
152
HCP Health care personnel
HCPCS Healthcare Common Procedure
Coding System
HCRIS Healthcare Cost Report Information
System
HCUP Healthcare Cost and Utilization
Project
HEU Highly enriched uranium
HH QRP Home Health Quality Reporting
Program
HHS Department of Health and Human
Services
HIE Health information exchange
HIPAA Health Insurance Portability and
Accountability Act of 1996, Pub. L. 104–
191
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality
Data Reporting Program
HPMS Health Plan Management System
IBD Inflammatory bowel disease
ICC Interclass correlation coefficient
ICD Implantable cardioverter defibrillator
ICD–9–CM International Classification of
Diseases, Ninth Revision, Clinical
Modification
ICD–10 International Classification of
Diseases, Tenth Revision
ICH In-center hemodialysis
IME Indirect medical education
IDTF Independent diagnostic testing facility
IGI IHS Global Insight, Inc.
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IORT Intraoperative radiation treatment
IPFQR Inpatient Psychiatric Facility
Quality Reporting
IPPS [Hospital] Inpatient Prospective
Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF QRP Inpatient Rehabilitation Facility
Quality Reporting Program
IT Information technology
LCD Local coverage determination
LDR Low dose rate
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality
Reporting

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MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP
Reauthorization Act of 2015, Pub. L. 114–
10
MAP Measure Application Partnership
MDH Medicare-dependent, small rural
hospital
MedPAC Medicare Payment Advisory
Commission
MEG Magnetoencephalography
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
MLR Medical loss ratio
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
MR Medical review
MRA Magnetic resonance angiography
MRgFUS Magnetic Resonance Image
Guided Focused Ultrasound
MRI Magnetic resonance imaging
MRSA Methicillin-Resistant
Staphylococcus Aures
MS–DRG Medicare severity diagnosisrelated group
MSIS Medicaid Statistical Information
System
MUC Measure under consideration
NCCI National Correct Coding Initiative
NDC National Drug Code
NEMA National Electrical Manufacturers
Association
NHSN National Healthcare Safety Network
NOS Not otherwise specified
NPI National Provider Identifier
NPR Notice of program reimbursement
NPWT Negative Pressure Wound Therapy
NQF National Quality Forum
NQS National Quality Strategy
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
ONC Office of the National Coordinator for
Health Information Technology
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
PAMA Protecting Access to Medicare Act of
2014, Pub. L. 113–93
PCHQR PPS-Exempt Cancer Hospital
Quality Reporting
PCR Payment-to-cost ratio
PDC Per day cost
PDE Prescription Drug Event
PE Practice expense

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PEPPER Program Evaluation Payment
Patterns Electronic Report
PHP Partial hospitalization program
PHSA Public Health Service Act, Pub. L.
96–88
PMA Premarket approval
PN Pneumonia
POS Place of service
PPI Producer Price Index
PPS Prospective payment system
PQRI Physician Quality Reporting Initiative
PQRS Physician Quality Reporting System
PRM Provider Reimbursement Manual
QDC Quality data code
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data
for Annual Payment Update
RTI Research Triangle Institute,
International
RVU Relative value unit
SAD Self-administered drug
SAMS Secure Access Management Services
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SES Socioeconomic status
SI Status indicator
SIR Standardized infection ratio
SNF Skilled nursing facility
SRS Stereotactic radiosurgery
SSA Social Security Administration
SSI Surgical site infection
TEP Technical Expert Panel
TIP Transprostatic implant procedure
TOPs Transitional Outpatient Payments
USPSTF United States Preventive Services
Task Force
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)
1. Authority of the Panel
2. Establishment of the Panel
3. Panel Meetings and Organizational
Structure
F. Public Comments Received on the CY
2015 OPPS/ASC Final Rule With
Comment Period
G. Public Comments Received on the CY
2016 OPPS/ASC Proposed Rule
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

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(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
d. Calculation of Single Procedure APC
Criteria-Based Costs
(1) Blood and Blood Products
(2) Brachytherapy Sources
e. Comprehensive APCs (C–APCs) for CY
2016
(1) Background
(2) C–APCs To Be Paid Under the C–APC
Payment Policy for CY 2016
(3) CY 2016 Policies for Specific C–APCs
f. Calculation of Composite APC CriteriaBased Costs
(1) Low Dose Rate (LDR) Prostate
Brachytherapy Composite APC
(2) Mental Health Services Composite APC
(3) Multiple Imaging Composite APCs
(APCs 8004, 8005, 8006, 8007, and 8008)
3. Changes to Packaged Items and Services
a. Background and Rationale for Packaging
in the OPPS
b. Packaging Policies for CY 2016
(1) Ancillary Services
(2) Drugs and Biologicals That Function as
Supplies When Used in a Surgical
Procedure
(3) Clinical Diagnostic Laboratory Tests
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 2016
G. Hospital Outpatient Outlier Payments
1. Background
2. 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
III. OPPS Ambulatory Payment Classification
(APC) Group Policies
A. OPPS Treatment of New CPT and Level
II HCPCS Codes
1. Treatment of New CY 2015 Level II
HCPCS and CPT Codes Effective April 1,
2015 and July 1, 2015 for Which We
Solicited Public Comments in the CY
2016 OPPS/ASC Proposed Rule
2. Process for New Level II HCPCS Codes
That Became Effective October 1, 2015
and New Level II HCPCS Codes That
Will Be Effective January 1, 2016 for
Which We Are Soliciting Public
Comments in this CY 2016 OPPS/ASC
Final Rule With Comment Period
3. Treatment of New and Revised CY 2016
Category I and III CPT Codes That Will

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Be Effective January 1, 2016 for Which
We Solicited Public Comments in the CY
2016 OPPS/ASC Proposed Rule
B. OPPS Changes—Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. APC Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background
2. Additional New Technology APC
Groups
3. Procedures Assigned to New Technology
APCs for CY 2016
a. Transprostatic Urethral Implant
Procedure
b. Retinal Prosthesis Implant Procedure
D. OPPS Ambulatory Payment
Classification (APC) Group Policies
1. Airway Endoscopy Procedures
2. Cardiovascular Procedures and Services
a. Cardiac Contractility Modulation (CCM)
Therapy
b. Cardiac Rehabilitation
c. Cardiac Telemetry
3. Diagnostic Tests and Related Services
4. Excision/Biopsy and Incision and
Drainage Procedures
5. Eye Surgery and Other Eye-Related
Procedures
a. Implantable Miniature Telescope (CPT
Code 0308T)
b. Other Ocular Procedures
6. Gastrointestinal (GI) Procedures
7. Gynecologic Procedures and Services
8. Imaging Services
6. Orthopedic Procedures
9. Skin Procedures
10. Pathology Services
11. Radiology Oncology Procedures and
Services
a. Therapeutic Radiation Treatment
Preparation
b. Radiation Therapy (Including
Brachytherapy)
c. Fractionated Stereotactic Radiosurgery
(SRS)
12. Skin Procedures
a. Negative Pressure Wound Therapy
(NPWT)
b. Platelet Rich Plasma (PRP)
13. Urology and Related Services
14. Vascular Procedures (Excluding
Endovascular Procedures)
15. Other Procedures and Services
a. Ear, Nose, Throat (ENT) Procedures
b. Magnetic Resonance-Guided Focused
Ultrasound Surgery (MRgFUS)
c. Stem Cell Transplant
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 2016 Policy
2. Annual Rulemaking Process in
Conjunction With Quarterly Review
Process for Device Pass-Through
Payment Applications
a. Background
b. Revision to the Application Process for
Device Pass-Through Payments
c. Criterion for Newness
3. Provisions for Reducing Transitional
Pass-Through Payments to Offset Costs
Packaged Into APC Groups
a. Background

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b. CY 2016 Policy
B. Device-Intensive Procedures
1. Background
2. Changes to Device Edit Policy
3. Adjustment to OPPS Payment for No
Cost/Full Credit and Partial Credit
Devices
a. Background
b. Policy for CY 2016
4. Adjustment to OPPS Payment for
Discontinued Device-Intensive
Procedures
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 2015
3. Drugs, Biologicals, and
Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY
2016
4. Provisions for Reducing Transitional
Pass-Through Payments for PolicyPackaged Drugs and Biologicals 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 Drugs,
Biologicals, and Radiopharmaceuticals
That Function as Supplies When Used in
a Diagnostic Test or Procedure (Other
Than Diagnostic Radiopharmaceuticals
and Contrast Agents 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
(‘‘Threshold-Packaged Drugs’’)
c. High Cost/Low Cost Threshold for
Packaged Skin Substitutes
d. 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 2016 Payment Policy
4. Payment Policy for Therapeutic
Radiopharmaceuticals
5. Payment Adjustment Policy for
Radioisotopes Derived From Non-Highly
Enriched Uranium Sources
6. Payment for Blood Clotting Factors
7. Payment for Nonpass-Through Drugs,
Biologicals, and Radiopharmaceuticals
With HCPCS Codes but Without OPPS
Hospital Claims Data

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C. Self-Administered Drugs (SADs)
Technical Correction
D. OPPS Payment for Biosimilar Biological
Products
1. Background
2. Payment Policy for Biosimilar Biological
Products
3. OPPS Transitional Pass-Through
Payment Policy for Biosimilar Biological
Products
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. Payment for Hospital Outpatient Clinic
and Emergency Department Visits
B. Payment for Critical Care Services
C. Payment for Chronic Care Management
Services
VIII. Payment for Partial Hospitalization
Services
A. Background
B. PHP APC Update for CY 2016
1. PHP APC Geometric Mean Per Diem
Costs
2. PHP Ratesetting Process
a. Development of PHP claims
b. Determination of CCRs for CMHCs and
Hospital-Based PHPs
c. Identification of PHP Allowable Charges
d. Determination of PHP APC Per Diem
Costs
e. Development of Service Days and Cost
Modeling
f. Issues Regarding Correct Coding and
Reasonable Charges
C. Separate Threshold for Outlier Payments
to CMHCs
IX. Procedures That Will Be Paid Only as
Inpatient Procedures
A. Background
B. Changes to the Inpatient Only List
X. Nonrecurring Policy Changes
A. Advance Care Planning Services
B. Changes for Payment for Computed
Tomography (CT)
C. Lung Cancer Screening With Low Dose
Computed Tomography
D. Payment for Procurement of Corneal
Tissue Used in Procedures in the HOPD
and the ASC
1. Background
2. CY 2016 Change to Corneal Tissue
Payment Policy in the HOPD and the
ASC
XI. CY 2016 OPPS Payment Status and
Comment Indicators
A. CY 2016 OPPS Payment Status Indicator
Definitions
B. CY 2016 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
Covered Surgical Procedures and
Covered Ancillary Services
B. Treatment of New and Revised Codes
1. Background on Current Process for
Recognizing New and Revised Category

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I and Category III CPT Codes and Level
II HCPCS Codes
2. Treatment of New and Revised Level II
HCPCS Codes and Category III CPT
Codes Implemented in April 2015 and
July 2015 for Which We Solicited Public
Comments in the Proposed Rule
3. Process for Recognizing New and
Revised Category I and Category III CPT
Codes That Will Be Effective January 1,
2016
a. Current Process for Accepting Comments
on New and Revised CPT Codes That are
Effective January 1
b. Modification of the Current Process for
Accepting Comments on New and
Revised Category I and III CPT Codes
That are Effective January 1
4. Process for New and Revised Level II
HCPCS Codes That Will Be Effective
October 1, 2015 and January 1, 2016 for
Which We Are Soliciting Public
Comments in This CY 2016 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. Covered Surgical Procedures Designated
as Office-Based
b. ASC Covered Surgical Procedures
Designated as Device-Intensive—
Finalized Policy for CY 2015 and Policy
for CY 2016
c. Adjustment to ASC Payments for No
Cost/Full Credit and Partial Credit
Devices
d. Adjustment to ASC Payments for
Discontinued Device-Intensive
Procedures
e. Additions to the List of ASC Covered
Surgical Procedures
f. ASC Treatment of Surgical Procedures
That Are Removed From the OPPS
Inpatient List for CY 2016
2. Covered Ancillary Services
a. List of Covered Ancillary Services
b. Exclusion of Corneal Tissue
Procurement From the Covered Ancillary
Services List When Used for
Nontransplant Procedures
c. Removal of Certain Services from the
Covered Ancillary Services List That are
Not Used as Ancillary and Integral to a
Covered Surgical Procedure
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 2016
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 2016
E. New Technology Intraocular Lenses
(NTIOLs)
1. NTIOL Application Cycle

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2. Requests to Establish New NTIOL
Classes for CY 2016
3. Payment Adjustment
4. Newness Criterion
5. Announcement of CY 2016 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
a. Updating the ASC Relative Payment
Weights for CY 2016 and Future Years
b. Updating the ASC Conversion Factor
3. Display of CY 2016 ASC Payment Rates
XIII. Requirements for the Hospital
Outpatient Quality Reporting (OQR)
Program
A. Background
1. Overview
2. Statutory History of the Hospital OQR
Program
B. Hospital OQR Program Quality
Measures
1. Considerations in the Selection of
Hospital OQR Program Quality Measures
2. Retention of Hospital OQR Program
Measures Adopted in Previous Payment
Determinations
3. Removal of Quality Measures From the
Hospital OQR Program Measure Set
a. Considerations in Removing Quality
Measures From the Hospital OQR
Program
b. Criteria for Removal of ‘‘Topped-Out’’
Measures
4. Hospital OQR Program Quality Measures
Adopted in Previous Rulemaking
5. Hospital OQR Program Quality Measure
Removed for the CY 2017 Payment
Determination and Subsequent Years
6. New Hospital OQR Program Quality
Measures for the CY 2018 and CY 2019
Payment Determinations and Subsequent
Years
a. New Quality Measure for the CY 2018
Payment Determination and Subsequent
Years: OP–33: External Beam
Radiotherapy (EBRT) for Bone
Metastases (NQF #1822)
b. Proposed New Hospital OQR Program
Quality Measure for the CY 2019
Payment Determination and Subsequent
Years: OP–34: Emergency Department
Transfer Communication (EDTC) (NQF
#0291)
7. Hospital OQR Program Measures and
Topics for Future Consideration
8. Maintenance of Technical Specifications
for Quality Measures
9. Public Display of Quality Measures
C. Administrative Requirements
1. QualityNet Account and Security
Administrator
2. Requirements Regarding Participation
Status
D. Form, Manner, and Timing of Data
Submitted for the Hospital OQR Program
1. Change Regarding Hospital OQR
Program Annual Percentage Update
(APU) Determinations
2. Requirements for Chart-Abstracted
Measures Where Patient-Level Data Are
Submitted Directly to CMS

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3. Claims-Based Measure Data
Requirements
4. Data Submission Requirements for
Measure Data Submitted Via a WebBased Tool
a. Previously Finalized Measures
b. Data Submission Requirements for WebBased Measure OP–33: External Beam
Radiotherapy (EBRT) for Bone
Metastases (NQF #1822) for the CY 2018
Payment Determination and Subsequent
Years
c. Proposed Data Submission Requirements
for Web-Based Measure OP–34:
Emergency Department Transfer
Communication (EDTC) Measure for the
CY 2019 Payment Determination and
Subsequent Years
5. Population and Sampling Data
Requirements for the CY 2018 Payment
Determination and Subsequent Years
6. Hospital OQR Program Validation
Requirements for Chart-Abstracted
Measure Data Submitted Directly to CMS
for the CY 2018 Payment Determination
and Subsequent Years
7. Extension or Exemption Process for the
CY 2018 Payment Determination and
Subsequent Years
8. Hospital OQR Program Reconsideration
and Appeals Procedures for the CY 2018
Payment Determination and Subsequent
Years
E. Payment Reduction for Hospitals That
Fail to Meet the Hospital Outpatient
Quality Reporting (OQR) Program
Requirements for the CY 2016 Payment
Determination
1. Background
2. Reporting Ratio Application and
Associated Adjustment Policy for CY
2016
XIV. Requirements for the Ambulatory
Surgical Center Quality Reporting
(ASCQR) Program
A. Background
1. Overview
2. Statutory History of the Ambulatory
Surgical Center 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. Policies for Retention and Removal of
Quality Measures From the ASCQR
Program
3. ASCQR Program Quality Measures
Adopted in Previous Rulemaking
4. ASCQR Program Quality Measures for
the CY 2018 Payment Determination and
Subsequent Years
5. ASCQR Program Measures for Future
Consideration
a. Normothermia Outcome
b. Unplanned Anterior Vitrectomy
6. Maintenance of Technical Specifications
for Quality Measures
7. Public Reporting of ASCQR Program
Data
C. Administrative Requirements
1. Requirements Regarding QualityNet
Account and Security Administrator
2. Requirements Regarding Participation
Status

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D. Form, Manner, and Timing of Data
Submitted for the ASCQR Program
1. Requirements Regarding Data Processing
and Collection Periods for Claims-Based
Measures Using Quality Data Codes
(QDCs)
2. Minimum Threshold, Minimum Case
Volume, and Data Completeness for
Claims-Based Measures Using QDCs
3. Requirements for Data Submitted Via a
CMS Online Data Submission Tool
4. Claims-Based Measure Data
Requirements for the ASC–12: Facility 7Day Risk-Standardized Hospital Visit
Rate After Outpatient Colonoscopy
Measure for the CY 2018 Payment
Determination and Subsequent Years
5. Indian Health Service (IHS) Hospital
Outpatient Departments Not Considered
ASCs for the Purpose of the ASCQR
Program
6. ASCQR Program Validation of ClaimsBased and CMS Web-Based Measures
7. Extraordinary Circumstances Extensions
or Exemptions for the CY 2018 Payment
Determination and Subsequent Years
8. ASCQR Program Reconsideration
Procedures
E. Payment Reduction for ASCs That Fail
to Meet the ASCQR Program
Requirements
XV. Short Inpatient Hospital Stays
A. Background for the 2-Midnight Rule
B. Policy Clarification for Medical Review
of Inpatient Hospital Admissions under
Medicare Part A
XVI. Transition for Former MedicareDependent, Small Rural Hospitals
(MDHs) Under the Hospital Inpatient
Prospective Payment System
A. Background on the MedicareDependent, Small Rural Hospital (MDH)
Program
B. Implementation of New OMB
Delineations and Urban to Rural
Reclassifications
XVII. Final Rule: Appropriate Claims in
Provider Cost Reports; Administrative
Appeals by Providers and Judicial
Review
A. Proposed Changes Included in the FY
2015 IPPS/LTCH PPS Proposed Rule
B. Summary of Related Changes Included
in the FY 2015 IPPS/LTCH PPS Final
Rule
C. Specific Provisions of the FY 2015 IPPS/
LTCH PPS Proposed Rule
1. Background for Payments and Cost
Reporting Requirements
2. Background for Administrative Appeals
by Providers and Judicial Review
3. Background for Appropriate Claims in
Provider Cost Reports
D. Addition to the Cost Reporting
Regulations of the Substantive
Reimbursement Requirement of an
Appropriate Cost Report Claim
1. Proposed Provisions (New § 413.24(j))
2. Statutory Authority and Rationale for
Proposed § 413.24(j)
3. Summary of Public Comments, CMS
Responses, and Statement of Finalized
Policies for § 413.24(j)
E. Revisions to the Provider
Reimbursement Appeals Regulations

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1. Elimination of the Jurisdictional
Requirement of an Appropriate Cost
Report Claim
a. Proposed Revisions to §§ 405.1835 and
405.1840
b. Summary of Public Comments and Our
Responses and Finalized Policies
2. Board Review of Compliance With Cost
Report Claim Requirements Under
§ 413.24(j)
a. Proposed Addition of New § 405.1873
b. Summary of Public Comments and Our
Responses and Finalized Policies
3. Related Revisions to § 405.1875
Regarding Administrator Review
4. Conforming Changes to the Board
Appeals Regulations and Corresponding
Revisions to the Contractor Hearing
Regulations
a. Technical Corrections to 42 CFR part
405, subpart R and All Subparts of 42
CFR Part 413
b. Technical Corrections and Conforming
Changes to §§ 405.1801 and 405.1803
c. Technical Corrections and Conforming
Changes to §§ 405.1811, 405.1813, and
405.1814
d. Addition of New § 405.1832
e. Revisions to § 405.1834
f. Technical Corrections and Conforming
Changes to §§ 405.1836, 405.1837, and
405.1839
F. Collection of Information Requirements
G. Impact of Requiring Appropriate Claims
in Provider Cost Reports and Eliminating
That Requirement for Administrative
Appeals by Providers
XVIII. Files Available to the Public Via the
Internet
XIX. Collection of Information Requirements
A. Legislative Requirements for
Solicitation of Comments
B. Associated Information Collections Not
Specified in Regulatory Text
1. Hospital OQR Program
2. ASCQR Program Requirements
XX. Response to Comments
XXI. 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 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 CY 2016 ASC
Payment System Policies
(1) Limitations of Our Analysis
(2) Estimated Effects of CY 2016 ASC
Payment System Policies on ASCs
(3) Estimated Effects of ASC Payment
System Policies on Beneficiaries
(4) Alternative ASC Payment Policies
Considered

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c. Accounting Statements and Tables
d. Effects of Requirements for the Hospital
OQR Program
e. Effects of Policies for the ASCQR
Program
f. Impact of the Policy Change for Medical
Review of Inpatient Hospital Admissions
Under Medicare Part A
g. Impact of Transition for Former MDHs
under the IPPS
B. Regulatory Flexibility Act (RFA)
Analysis
C. Unfunded Mandates Reform Act
Analysis
D. Conclusion
XXII. Federalism Analysis

I. Summary and Background
A. Executive Summary of This
Document

jstallworth on DSK7TPTVN1PROD with RULES

1. Purpose
In this document, we are updating the
payment policies and payment rates for
services furnished to Medicare
beneficiaries in hospital outpatient
departments (HOPDs) and ambulatory
surgical centers (ASCs) beginning
January 1, 2016. Section 1833(t) of the
Social Security Act (the Act) requires us
to annually review and update the
payment rates for services payable
under the Hospital Outpatient
Prospective Payment System (OPPS).
Specifically, section 1833(t)(9)(A) 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. In
addition, 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, this
document updates and refines the
requirements for the Hospital
Outpatient Quality Reporting (OQR)
Program and the ASC Quality Reporting
(ASCQR) Program.
Further, we are making certain
changes relating to the hospital
inpatient prospective payment system
(IPPS): Changes to the 2-midnight rule
under the short inpatient hospital stay
policy; and a payment transition for
hospitals that lost their MDH status
because they are no longer in a rural
area due to the implementation of the
new OMB delineations in FY 2015 and
have not reclassified from urban to rural
under 42 CFR 412.103 before January 1,
2016.
In addition, we are finalizing certain
2015 proposed policies, and addressing

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public comments, relating to the
changes in the Medicare regulations
governing provider administrative
appeals and judicial review relating to
appropriate claims in provider cost
reports.
2. Summary of the Major Provisions
• OPPS Update: For CY 2016, we are
decreasing the payment rates under the
OPPS by an Outpatient Department
(OPD) fee schedule increase factor of
-0.3 percent. This increase factor is
based on the hospital inpatient market
basket percentage increase of 2.4
percent for inpatient services paid
under the hospital inpatient prospective
payment system (IPPS), minus the
multifactor productivity (MFP)
adjustment of 0.5 percentage point, and
minus a 0.2 percentage point adjustment
required by the Affordable Care Act. In
addition, we are applying a 2.0 percent
reduction to the conversion factor to
redress the inflation in OPPS payment
rates resulting from excess packaged
payment under the OPPS for laboratory
tests that are excepted from our final CY
2014 laboratory packaging policy, as
discussed in section II.B. of this final
rule with comment period. Under this
rule, we estimate that total payments for
CY 2016, including beneficiary costsharing, to the approximate 4,000
facilities paid under the OPPS
(including general acute care hospitals,
children’s hospitals, cancer hospitals,
and community mental health centers
(CMHCs)), will decrease by
approximately $133 million compared
to CY 2015 payments, 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 proposed
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 2016, we are
continuing to provide additional
payments to cancer hospitals so that the
cancer hospital’s payment-to-cost ratio
(PCR) after the additional payments is

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equal to the weighted average PCR for
the other OPPS hospitals using the most
recently submitted or settled cost report
data. Based on those data, a target PCR
of 0.92 will be used to determine the CY
2016 cancer hospital payment
adjustment to be paid at cost report
settlement. That is, the payment
adjustments will be the additional
payments needed to result in a PCR
equal to 0.92 for each cancer hospital.
• Payment of Drugs, Biologicals, and
Radiopharmaceuticals: For CY 2016,
payment for the acquisition and
pharmacy overhead costs of separately
payable drugs and biologicals that do
not have pass-through status are set at
the statutory default of average sales
price (ASP) plus 6 percent.
• Payment of Skin Substitutes:
Payment for skin substitutes will utilize
the high/low cost APC structure based
on exceeding a threshold based on mean
unit cost (MUC) or per day cost (PDC).
Further, for CY 2016, skin substitutes
with pass-through payment status will
be assigned to the high cost category.
Skin substitutes with pricing
information but without claims data to
calculate either an MUC or PDC will be
assigned to either the high cost or low
cost category based on the product’s
ASP+6 percent payment rate. Moreover,
any new skin substitutes without
pricing information will be assigned to
the low cost category until pricing
information is available to compare to
the CY 2016 thresholds.
• Payment of Biosimilar Biological
Products: For CY 2016, we are paying
for biosimilar biological products based
on the payment allowance of the
product as determined under section
1847A of the Act. We also are extending
pass-through payment eligibility to
biosimilar biological products and to set
payment at the difference between the
amount paid under section 1842(o) of
the Act (that is, the payment allowance
of the product as determined under
section 1847A of the Act) and the
otherwise applicable HOPD fee
schedule amount.
• Packaging Policies: In CY 2015, we
conditionally packaged certain ancillary
services when they are integral,
ancillary, supportive, dependent, or
adjunctive to a primary service. For CY
2016, we are expanding the set of
conditionally packaged ancillary
services to include three new APCs.
• Conditionally Packaged Outpatient
Laboratory Tests: For CY 2016, we are
conditionally packaging laboratory tests
(regardless of the date of service) on a
claim with a service that is assigned
status indicator ‘‘S,’’ ‘‘T,’’ or ‘‘V’’ unless
an exception applies or the laboratory
test is ‘‘unrelated’’ to the other HOPD

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service or services on the claim. We are
establishing a new status indicator ‘‘Q4’’
for this purpose. When laboratory tests
are the only services on the claim, a
separate payment at CLFS payment rates
will be made. The ‘‘L1’’ modifier will
still be used for ‘‘unrelated’’ laboratory
tests.
• Comprehensive APCs: We
implemented the comprehensive APCs
(C–APCs) policy for CY 2015 with a
total of 25 C–APCs. In CY 2016, we are
not making extensive changes to the
already established methodology used
for C–APCs. However, we are creating
nine new C–APCs that meet the
previously established criteria.
• APC Restructuring: Section
1833(t)(9)(A) 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. For CY
2016, we conducted a comprehensive
review of the structure of the APCs and
codes and are restructuring the OPPS
APC groupings for nine APC clinical
families based on the following
principles: (1) Improved clinical
homogeneity; (2) improved resource
homogeneity; (3) reduced resource
overlap in longstanding APCs; and (4)
greater simplicity and improved
understandability of the OPPS APC
structure.
• New Process for Device PassThrough Payment: Beginning in CY
2016, we are adding a rulemaking
component to the current quarterly
device pass-through payment
application process. Specifically, we are
supplementing the quarterly process by
including a description of applications
received as well as our rationale for
approving the application in the next
applicable OPPS proposed rule.
Applications that we do not approve
based on the evidence available during
the quarterly review process will be
described in the next applicable OPPS
proposed rule, unless the applicant
withdraws its application. The addition
of rulemaking to the device passthrough application process will help
achieve the goals of increased
transparency and stakeholder input. In
addition, this change will align a
portion of the OPPS device pass-through
payment application process with the
already established IPPS application
process for new medical services and
new technology add-on payments. We
also are establishing policy that a device
that requires FDA premarket approval or

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clearance is eligible to apply for device
pass-through payment only if it is
‘‘new,’’ meaning that the pass-through
payment application is submitted
within 3 years from the date of the
initial FDA premarket approval or
clearance, or, in the case of a delay of
market availability, within 3 years of
market availability.
• Two-Midnight Rule: The 2-midnight
rule was adopted effective October 1,
2013. Under the 2-midnight rule, an
inpatient admission is generally
appropriate for Medicare Part A
payment if the physician (or other
qualified practitioner) admits the
patient as an inpatient based upon the
expectation that the patient will need
hospital care that crosses at least 2
midnights. In assessing the expected
duration of necessary care, the
physician (or other practitioner) may
take into account outpatient hospital
care received prior to inpatient
admission. If the patient is expected to
need less than 2 midnights of care in the
hospital, the services furnished should
generally be billed as outpatient
services. In this final rule, we are
modifying our existing ‘‘exceptions’’
policy under which previously the only
exceptions to the 2-midnight benchmark
were cases involving services
designated by CMS as inpatient only,
and those published on the CMS Web
site or other subregulatory guidance.
Specifically, we are finalizing our
proposal to also allow exceptions to the
2-midnight benchmark to be determined
on a case-by-case basis by the physician
responsible for the care of the
beneficiary, subject to medical review.
However, we continue to expect that
stays under 24 hours would rarely
qualify for an exception to the 2midnight benchmark. In addition, we
revised our medical review strategy to
have Quality Improvement Organization
(QIO) contractors conduct reviews of
short inpatient stays rather than the
Medicare administrative contractors
(MACs), and the QIOs assumed medical
responsibility for hospital stays affected
by the 2-midnight rule on October 1,
2015.
• Advanced Care Planning (ACP): For
CY 2016, we are conditionally
packaging payment for the service
described by CPT code 99497 (Advance
care planning including the explanation
and discussion of advance directives
such as standard forms (with
completion of such forms, when
performed), by the physician or other
qualified health care professional; first
30 minutes, face-to-face with the
patient, family member(s), and/or
surrogate). Consequently, this code is
assigned to a conditionally packaged

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payment status indicator of ‘‘Q1.’’ When
this service is furnished with another
service paid under the OPPS, payment
will be package; when it is the only
service furnished, payment will be
made separately. CPT code 99498
(Advance care planning including the
explanation and discussion of advance
directives such as standard forms (with
completion of such forms, when
performed), by the physician or other
qualified health care professional; each
additional 30 minutes (List separately in
addition to code for primary procedure))
is an add-on code and therefore
payment for the service described by
this code is unconditionally packaged
(assigned status indicator ‘‘N’’) in the
OPPS in accordance with 42 CFR
419.2(b)(18).
• Chronic Care Management (CCM):
For CY 2016, we are adding additional
requirements for hospitals to bill and
receive OPPS payment for CCM services
described by CPT code 99490. These
requirements include scope of service
elements analogous to the scope of
service elements finalized as
requirements in the CY 2015 Medicare
Physician Fee Schedule (MPFS) final
rule with comment period (79 FR 6715
through 67728).
• National Electrical Manufacturers
Association (NEMA) Modifier: Effective
for services furnished on or after
January 1, 2016, section 218(a) of the
PAMA amended section 1834 of the Act
by establishing a new subsection
1834(p), which reduces payment for the
technical component (TC) (and the TC
of the global fee) under the MPFS and
the OPPS (5 percent in 2016 and 15
percent in 2017 and subsequent years)
for applicable computed tomography
(CT) services identified by certain CPT
HCPCS codes furnished using
equipment that does not meet each of
the attributes of the National Electrical
Manufacturers Association (NEMA)
Standard XR–29–2013, entitled
‘‘Standard Attributes on CT Equipment
Related to Dose Optimization and
Management.’’ The provision requires
that information be provided and
attested to by a supplier and a hospital
outpatient department that indicates
whether an applicable CT service was
furnished that was not consistent with
the NEMA CT equipment standard. To
implement this provision, we are
establishing a new modifier that will be
reported with specific CPT codes,
effective January 1, 2016.
• New Process for Requesting
Comments on New and Revised
Category I and III CPT Codes: In the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66842 through
66844), we finalized a revised process of

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assigning APC and status indicators for
new and revised Category I and III CPT
codes that will be effective January 1.
Specifically, we stated that we would
include the proposed APC and status
indicator assignments for the vast
majority of new and revised CPT codes
before they are used for payment
purposes under the OPPS if the AMA
provides CMS with the codes in time for
the OPPS/ASC proposed rule. For the
CY 2016 OPPS update, we received the
CY 2016 CPT codes from AMA for
inclusion in the CY 2016 OPPS/ASC
proposed rule. We received public
comments on the proposed OPPS status
indicators for the new CY 2016 CPT
codes, which we address in this final
rule with comment period.
• Ambulatory Surgical Center
Payment Update: For CY 2016, we are
increasing payment rates under the ASC
payment system by 0.3 percent for ASCs
that meet the quality reporting
requirements under the ASCQR
Program. This increase is based on a
projected CPI–U update of 0.8 percent
minus a multifactor productivity
adjustment required by the Affordable
Care Act of 0.5 percentage point. 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 2016 will be
approximately $4.221 billion, an
increase of approximately $128 million
compared to estimated CY 2015
Medicare payments. In addition, we are
establishing a revised process of
assigning ASC payment indicators for
new and revised Category I and III CPT
codes that would be effective January 1,
similar to the OPPS process we finalized
in the CY 2015 OPPS/ASC final rule
with comment period. Specifically, we
are including the proposed ASC
payment indicator assignments in the
OPPS/ASC proposed rule for the vast
majority of new and revised CPT codes
before they are used for payment
purposes under the ASC payment
system if the American Medical
Association (AMA) provides CMS with
the codes in time for the OPPS/ASC
proposed rule. We received public
comments on the proposed ASC
payment indicators for the new CY 2016
CPT codes, which we address in this
final rule with comment period.
• Hospital Outpatient Quality
Reporting (OQR) Program: For the
Hospital OQR Program, we are
establishing requirements for the CY
2017 payment determination and
subsequent years and the CY 2018
payment determination and subsequent
years. For CY 2017 and subsequent
years, we are: (1) Removing the OP–15:

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Use of Brain Computed Tomography
(CT) in the Emergency Department for
Atraumatic Headache measure, effective
January 1, 2016 (no data for this
measure will be used for any payment
determination); (2) changing the
deadline for withdrawing from the
Hospital OQR Program from November
1 to August 31 and revising the related
regulations to reflect this change; (3)
transitioning to a new payment
determination timeframe that will use
only three quarters of data for the CY
2017 payment determination; (4)
making conforming changes to our
validation scoring process to reflect
changes in the APU determination
timeframe; (5) changing the data
submission timeframe for measures
submitted via the CMS Web-based tool
(QualityNet Web site) to January 1
through May 15; (6) fixing a
typographical error to correct the name
of our extension and exception policy to
extension and exemption policy; (7)
changing the deadline for submitting a
reconsideration request to the first
business day on or after March 17 of the
affected payment year; and (8)
amending 42 CFR 419.46(f)(1) and 42
CFR 419.46(e)(2) to replace the term
‘‘fiscal year’’ with the term ‘‘calendar
year.’’
For CY 2018 and subsequent years,
we are (1) adding a new measure: OP–
33: External Beam Radiotherapy (EBRT)
for Bone Metastases (NQF #1822) with
a modification to the proposed manner
of data submission, and (2) shifting the
quarters on which we base payment
determinations to again include four
quarters of data.
In addition, we are exploring use of
electronic clinical quality measures
(eCQMs) and whether, in future
rulemaking, we will propose that
hospitals have the option to voluntarily
submit data for the OP–18: Median
Time from ED Arrival to ED Departure
for Discharged ED Patients measure
electronically possibly beginning with
the CY 2019 payment determination.
• Ambulatory Surgical Center Quality
Reporting (ASCQR) Program: For the
ASCQR Program, we are aligning our
policies regarding paid claims to be
included in the calculation for all
claims-based measures, modifying the
submission date for reconsideration
requests, modifying our policy for the
facility identifier for public reporting of
ASCQR Program data, and finalizing our
policy to not consider IHS hospital
outpatient departments that bill as ASCs
to be ASCs for purposes of the ASCQR
Program. In addition, we are continuing
to use the existing submission deadlines
for data submitted via an online data
submission tool. We also are codifying

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a number of existing and new policies.
We also address public comments that
we solicited in the proposed rule on the
possible inclusion of two measures in
the ASCQR Program measure set in the
future.
3. Summary of Costs and Benefits
In sections XXI. and XXII. 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 70 in section XXI. 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 2016 compared to all
estimated OPPS payments in CY 2015.
We estimate that the policies finalized
in this final rule with comment period
will result in a 0.4 percent overall
decrease in OPPS payments to
providers. We estimate that total OPPS
payments for CY 2016, including
beneficiary cost-sharing, to the
approximate 4,000 facilities paid under
the OPPS (including general acute care
hospitals, children’s hospitals, cancer
hospitals, and CMHCs) will decrease by
approximately $133 million compared
to CY 2015 payments, excluding our
estimated changes in enrollment,
utilization, and case-mix.
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 23.1 percent
increase in CY 2016 payments to
CMHCs relative to their CY 2015
payments.
(2) Impacts of the Updated Wage
Indexes
We estimate that our update of the
wage indexes based on the FY 2016
IPPS final wage indexes results in no
change for urban hospitals and a 0.4
percent decrease for rural hospitals
under the OPPS. These wage indexes
include the continued implementation
of the OMB labor market area
delineations based on 2010 Decennial
Census data.

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(3) Impacts of the Rural Adjustment and
the Cancer Hospital Payment
Adjustment
There are no significant impacts of
our CY 2016 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.
(4) Impacts of the OPD Fee Schedule
Increase Factor
As a result of the OPD fee schedule
increase factor, the 2.0 percent
reduction to the conversion factor to
redress the inflation in OPPS payment
rates resulting from excess packaged
payment under the OPPS for laboratory
tests that are excepted from our final CY
2014 laboratory packaging policy, and
other budget neutrality adjustments, we
estimate that urban and rural hospitals
will experience decreases of
approximately 0.4 percent for urban
hospitals and 0.6 percent for rural
hospitals. Classifying hospitals by
teaching status or type of ownership
suggests that these hospitals will receive
similar decreases.
b. Impacts of the ASC Payment Update
For impact purposes, the surgical
procedures on the ASC list of covered
procedures are aggregated into surgical
specialty groups using CPT and HCPCS
code range definitions. The percentage
change in estimated total payments by
specialty groups under the CY 2016
payment rates compared to estimated
CY 2015 payment rates ranges between
5 percent for auditory system services
and ¥5 percent for hematologic and
lymphatic system procedures.
c. Impacts of the Hospital OQR Program
We do not expect our CY 2016
policies to significantly affect the
number of hospitals that do not receive
a full annual payment update.

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d. Impacts of the ASCQR Program
We do not expect our CY 2016
policies to significantly affect the
number of ASCs that do not receive a
full annual payment update.
B. Legislative and Regulatory Authority
for the Hospital OPPS
When Title XVIII of the Social
Security Act was enacted, Medicare
payment for hospital outpatient services
was based on hospital-specific costs. In
an effort to ensure that Medicare and its
beneficiaries pay appropriately for

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services and to encourage more efficient
delivery of care, the Congress mandated
replacement of the reasonable costbased payment methodology with a
prospective payment system (PPS). The
Balanced Budget Act of 1997 (BBA)
(Pub. L. 105–33) added section 1833(t)
to the Act authorizing implementation
of a PPS for hospital outpatient services.
The OPPS was first implemented for
services furnished on or after August 1,
2000. Implementing regulations for the
OPPS are located at 42 CFR parts 410
and 419.
The Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106–113) made
major changes in the hospital OPPS.
The following Acts made additional
changes to the OPPS: The Medicare,
Medicaid, and SCHIP Benefits
Improvement and Protection Act of
2000 (BIPA) (Pub. L. 106–554); the
Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA) (Pub. L. 108–173); the
Deficit Reduction Act of 2005 (DRA)
(Pub. L. 109–171), enacted on February
8, 2006; the Medicare Improvements
and Extension Act under Division B of
Title I of the Tax Relief and Health Care
Act of 2006 (MIEA–TRHCA) (Pub. L.
109–432), enacted on December 20,
2006; the Medicare, Medicaid, and
SCHIP Extension Act of 2007 (MMSEA)
(Pub. L. 110–173), enacted on December
29, 2007; the Medicare Improvements
for Patients and Providers Act of 2008
(MIPPA) (Pub. L. 110–275), enacted on
July 15, 2008; the Patient Protection and
Affordable Care Act (Pub. L. 111–148),
enacted on March 23, 2010, as amended
by the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152), enacted on March 30, 2010 (these
two public laws are collectively known
as the Affordable Care Act); the
Medicare and Medicaid Extenders Act
of 2010 (MMEA, Pub. L. 111–309); the
Temporary Payroll Tax Cut
Continuation Act of 2011 (TPTCCA,
Pub. L. 112–78), enacted on December
23, 2011; the Middle Class Tax Relief
and Job Creation Act of 2012
(MCTRJCA, Pub. L. 112–96), enacted on
February 22, 2012; the American
Taxpayer Relief Act of 2012 (Pub. L.
112–240), enacted January 2, 2013; the
Pathway for SGR Reform Act of 2013
(Pub. L. 113–67) enacted on December
26, 2013; the Protecting Access to
Medicare Act of 2014 (PAMA, Pub. L.
113–93), enacted on March 27, 2014;
and the Medicare Access and CHIP
Reauthorization Act (MACRA) of 2015
(Pub. L. 114–10), enacted April 16,
2015.
Under the OPPS, we pay for hospital
Part B services on a rate-per-service

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70307

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 Medicare
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,
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

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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.

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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 exercises the authority
granted under the statute to also exclude
from the OPPS certain 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 Medicare Physician Fee Schedule
(MPFS); certain 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 excluded from payment under
the OPPS in regulations at 42 CFR
419.22.
Under § 419.20(b) of the regulations,
we specify the types of hospitals that are
excluded from payment under the
OPPS. These excluded hospitals
include: critical access hospitals
(CAHs); hospitals located in Maryland
and paid under the Maryland All-Payer
Model; 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

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or after August 1, 2000. Section
1833(t)(9)(A) 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/
HospitalOutpatientPPS/index.html.
E. Advisory Panel on Hospital
Outpatient Payment (the HOP Panel or
the 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
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, and at that time named
the APC Panel. This expert panel is
composed of appropriate representatives
of providers (currently employed fulltime, not as consultants, in their
respective areas of expertise), reviews

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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 Panel’s charter was
amended on November 15, 2011,
renaming the Panel and expanding the
Panel’s authority to include supervision
of hospital outpatient therapeutic
services and to add Critical Access
Hospital (CAH) representation to its
membership. The current charter was
renewed on November 6, 2014 (80 FR
23009) and the number of panel
members was revised from up to 19 to
up to 15 members.
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/Regulationsand-Guidance/Guidance/FACA/
AdvisoryPanelonAmbulatoryPayment
ClassificationGroups.html.
3. Panel Meetings and Organizational
Structure
The Panel has held multiple meetings,
with the last meeting taking place on
August 24, 2015. 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

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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 status
indicators 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
assignment 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 24, 2015 meeting that the
subcommittees continue. We accepted
this recommendation.
Discussions of the other
recommendations made by the Panel at
the August 24, 2015 Panel meeting are
included in the sections of this final
rule with comment period 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://
facadatabase.gov/.

jstallworth on DSK7TPTVN1PROD with RULES

F. Public Comments Received on the CY
2015 OPPS/ASC Final Rule With
Comment Period
We received approximately 38 timely
pieces of correspondence on the CY
2015 OPPS/ASC final rule with
comment period that appeared in the
Federal Register on November 10, 2014
(79 FR 66770), as well as in the
correction notice that was published on
February 24, 2015 (80 FR 9629), some of
which contained comments on the
interim APC assignments and/or status
indicators of new or replacement
HCPCS codes (identified with comment
indicator ‘‘NI’’ in Addenda B, AA, and
BB to that final rule). Summaries of the
public comments on new or
replacement codes are set forth in this
CY 2016 OPPS/ASC final rule with
comment period under the appropriate
subject-matter headings.
G. Public Comments Received on the CY
2016 OPPS/ASC Proposed Rule
We received approximately 670
timely pieces of correspondence on the
CY 2016 OPPS/ASC proposed rule that
appeared in the Federal Register on July
8, 2015 (80 FR 39200). We note that we
received some public comments that
were outside the scope of the proposed
rule. Out-of-scope public comments are
not addressed in this CY 2016 OPPS/

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ASC final rule with comment period.
Summaries of the public comments that
are within the scope of the proposed
rule and our responses are set forth in
the various sections of this final rule
with comment period under the
appropriate 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 2016 OPPS/ASC proposed
rule (80 FR 39210), for the CY 2016
OPPS, we proposed to recalibrate the
APC relative payment weights for
services furnished on or after January 1,
2016, and before January 1, 2017 (CY
2016), using the same basic
methodology that we described in the
CY 2015 OPPS/ASC final rule with
comment period. That is, we proposed
to recalibrate the relative payment
weights for each APC based on claims
and cost report data for hospital
outpatient department (HOPD) services,
using the most recent available data to
construct a database for calculating APC
group weights. Therefore, for the
purpose of recalibrating the proposed
APC relative payment weights for CY
2016, we used approximately 151
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, 2014, and before
January 1, 2015. For this final rule with
comment period, for the purpose of
recalibrating the final APC relative
payment weights for CY 2016, we used
approximately 163 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,
2014, and before January 1, 2015. For
exact numbers of claims used, we refer
readers to the claims accounting
narrative under supporting
documentation for the CY 2016 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.

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Of the approximately 163 million
final action claims for services provided
in hospital outpatient settings used to
calculate the CY 2016 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 3 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 122
million claims, we created
approximately 95 million single records,
of which approximately 43 million were
‘‘pseudo’’ single or ‘‘single session’’
claims (created from approximately 52
million multiple procedure claims using
the process we discuss later in this
section). Approximately 3 million
claims were trimmed out on cost or
units in excess of +/¥3 standard
deviations from the geometric mean or
other trims, yielding approximately 92
million single claims for ratesetting. As
described in section II.A.2. of this final
rule with comment period, our data
development process is designed with
the goal of using appropriate cost
information in setting the APC relative
payment weights. The bypass process is
described in section II.A.1.b. of this
final rule with comment period. This
section discusses how we develop
‘‘pseudo’’ single procedure claims (as
defined below), with the intention of
using more appropriate data from the
available claims. In some cases, the
bypass process allows us to use some
portion of the submitted claim for cost
estimation purposes, while the
remaining information on the claim
continues to be unusable. Consistent
with the goal of using appropriate
information in our data development
process, we only use claims (or portions
of each claim) that are appropriate for
ratesetting purposes.
The final APC relative weights and
payments for CY 2016 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 2014
that were processed through June 30,
2015. While prior to CY 2013 we
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

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discussed in the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68259 through 68271). For the CY 2016
OPPS, as we proposed, we used 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 2016 payment rates.
b. Use of Single and Multiple Procedure
Claims
For CY 2016, in general, we proposed
to continue to use single procedure
claims to set the costs on which the APC
relative payment weights are based. We
generally use single procedure claims to
set the estimated costs for APCs because
we believe that the OPPS relative
weights on which payment rates are
based should be derived from the costs
of furnishing one unit of one procedure
and because, in many circumstances, we
are unable to ensure that packaged costs
can be appropriately allocated across
multiple procedures performed on the
same date of service.
It is generally desirable to use the data
from as many claims as possible to
recalibrate the APC relative payment
weights, including those claims for
multiple procedures. As we have for
several years, we proposed to 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 enabled 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 2015 OPPS/ASC final
rule with comment period (79 FR 66780
through 66783). In addition, for CY 2008
(72 FR 66614 through 66664), we
increased packaging and created the
first composite APCs, and continued

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those policies through CY 2015.
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
2015, and we proposed to continue this
policy for CY 2016. We refer readers to
section II.A.2.f. of the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66810 through 66816) for a
discussion of the use of claims in
modeling the costs for composite APCs
and to section II.A.3. of the CY 2015
OPPS/ASC final rule with comment
period (79 FR 66817 through 66823) for
a discussion of our packaging policies
for CY 2015. In addition, we proposed
to establish additional packaging
policies for the CY 2016 OPPS, as
discussed in section II.A.3. of this final
rule with comment period.
In the proposed rule, we proposed to
continue to apply these processes to
enable us to use as much claims data as
possible for ratesetting for the CY 2016
OPPS. This methodology enabled us to
create, for the proposed rule,
approximately 38 million ‘‘pseudo’’
single procedure claims, including
multiple imaging composite ‘‘single
session’’ bills (we refer readers to
section II.A.2.f.(4) of the proposed rule
for further discussion), to add to the
approximately 49 million ‘‘natural’’
single procedure claims.
In addition, we proposed to continue
our broader initiative to review, revise,
and reorganize APCs across the OPPS to
collectively group services that are
clinically similar and have similar
resource costs within the same APC.
The restructuring of APCs are discussed
in the applicable sections of this final
rule with comment period. In
conjunction with this initiative, we
proposed to renumber the APCs (except
for the composite APCs) primarily to
achieve consecutive numbering of APCs
within each clinical family of APCs, as
discussed in section III.D. of this final
rule with comment period. For the
proposed rule, we provided a crosswalk
from the existing APC numbers to the
proposed new APC renumber in
Addendum Q to the proposed rule
(which is available via the Internet on
the CMS Web site).

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For CY 2016, in the proposed rule, we
proposed to bypass 197 HCPCS codes
that were identified in Addendum N to
the 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 claims that contained packaging
for each HCPCS code and the amount of
packaging on each ‘‘natural’’ single
claim 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 2016, data
available for the proposed rule from CY
2014 claims processed through
December 31, 2014) to determine
whether it would be appropriate to add
additional codes to the previous year’s
bypass list. For CY 2016, we proposed
to continue to bypass all of the HCPCS
codes on the CY 2015 OPPS bypass list,
with the exception of HCPCS codes that
we proposed to delete for CY 2016,
which were listed in Table 1 of the
proposed rule. (We refer readers to
Addendum N to the CY 2015 OPPS/ASC
final rule with comment period for the
CY 2015 OPPS bypass list. Addendum
N is available via the Internet on the
CMS Web site.) 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 2016 bypass list were affected by the
CY 2016 proposed packaging policy,
discussed in section II.A.3. of this final
rule with comment period. Some of the
codes we proposed to remove have
packaged cost patterns associated with
their natural single major claims that
would no longer meet the bypass list
criterion of 5 percent or fewer of the
single major claims having packaged
costs on the claim. In addition, we
proposed to add to the bypass list for CY
2016 HCPCS codes that are not on the
CY 2015 bypass list that, using the
proposed rule data (CY 2014 claims),
met the empirical criteria for the bypass
list that are summarized below. Finally,
to remain consistent with the CY 2016
proposal to continue to develop OPPS
relative payment weights based on
geometric mean costs, we also proposed
to establish that the packaged cost
criterion would continue to be based on
the geometric mean cost. The entire list
proposed for CY 2016 (including the
codes that remain on the bypass list
from prior years) was open to public
comment in the CY 2016 OPPS/ASC

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
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. The proposed criteria
for the bypass list were:
• 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 2015,
we proposed to continue to establish the
CY 2016 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
considering additions to the bypass list.

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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
2015 OPPS/ASC final rule with
comment period (79 FR 66781), we
proposed for CY 2016 to continue to
update the packaged cost threshold by
the market basket increase. By applying
the final CY 2015 market basket increase
of 2.2 percent (79 FR 66825) to the prior
nonrounded dollar threshold of $55.66
(79 FR 66781), we determined that the
proposed threshold would remain for
CY 2016 at $55 ($56.88 rounded to $55,
the nearest $5 increment). Therefore, we
proposed to set the geometric mean
packaged cost threshold based on the
CY 2014 claims data at $55 for a code
to be considered for addition to the CY
2016 OPPS bypass list.
For inclusion on the bypass list, a
code cannot be a code for an unlisted
service. Unlisted codes do not describe
a specific service and, therefore, 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 we believe have minimal
associated packaging, based on our
clinical assessment of the complete CY
2016 OPPS proposal. Some of these
codes were identified by CMS, 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’’ claims, that is, claims
containing HCPCS codes from only one

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70311

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 the proposed rule
and 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’’ claims that could be
used for calculating composite APC
costs. ‘‘Overlap bypass codes’’ that are
members of the proposed multiple
imaging composite APCs were
identified by asterisks (*) in Addendum
N to the proposed rule (which is
available via the Internet on the CMS
Web site).
Addendum N to the proposed rule
included the proposed list of bypass
codes for CY 2016. The proposed list of
bypass codes contains codes that were
reported on claims for services in CY
2014 and, therefore, includes codes that
were in effect in CY 2014 and used for
billing but were deleted for CY 2015.
We retained these deleted bypass codes
on the proposed CY 2016 bypass list
because these codes existed in CY 2014
and were covered OPD services in that
period, and CY 2014 claims data are
used to calculate CY 2016 payment
rates. Keeping these deleted bypass
codes on the bypass list potentially
allowed us to create more ‘‘pseudo’’
single procedure claims for ratesetting
purposes. ‘‘Overlap bypass codes’’ that
were members of the proposed multiple
imaging composite APCs were
identified by asterisks (*) in the third
column of Addendum N to the proposed
rule. HCPCS codes that we proposed to
add for CY 2016 were identified by
asterisks (*) in the fourth column of
Addendum N.
We did not receive any public
comments on our proposals for use of
single and multiple procedure code
claims for ratesetting. Therefore, we are
adopting as final the proposed ‘‘pseudo’’
single claims process and the final CY
2016 bypass list of 197 HCPCS codes, as
displayed in Addendum N to this final
rule with comment period (which is
available via the Internet on the CMS
Web site). Table 1 below contains the
list of codes that we are removing from
the CY 2016 bypass list.

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TABLE 1—HCPCS CODES REMOVED
FROM THE CY 2016 BYPASS LIST
HCPCS code

HCPCS short descriptor

11057 ................
57454 ................

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88348 ................
92240 ................
92546 ................

Trim skin lesions over 4.
Bx/curett of cervix w/
scope.
Electron microscopy.
Icg angiography.
Sinusoidal rotational test.

c. Calculation and Use of Cost-to-Charge
Ratios (CCRs)
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39213), 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 2016
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 2014 claims data by
comparing these claims data to the most
recently available hospital cost reports,
which, in most cases, were from CY
2013. For the CY 2016 OPPS proposed
rates, we used the set of claims
processed during CY 2014. 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 2014 (the year of
claims data we used to calculate the
proposed CY 2016 OPPS payment rates)
and found that the National Uniform
Billing Committee (NUBC) did not add
any new revenue codes to the NUBC
2014 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). The calculation
of blood costs is a longstanding

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exception (since the CY 2005 OPPS) to
this general methodology for calculation
of CCRs used for converting charges to
costs on each claim. This exception is
discussed in detail in the CY 2007
OPPS/ASC final rule with comment
period and discussed further in section
II.A.2.d.(1) of the proposed rule and this
final rule with comment period.
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 2014
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 2013. 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 2016
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
longstanding methodology for the
calculation of costs for CY 2016.
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

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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
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).
We retained this policy through CY

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2015, and we proposed to continue this
practice for the CY 2016 OPPS.
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
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 June 2015 HCRIS update to
estimate costs in the final CY 2016
OPPS ratesetting process, of the 3,830
impact providers, we were able to
calculate a valid implantable device
CCR for 2,969 hospitals (78 percent), a
valid MRI CCR for 2,080 hospitals (54
percent), a valid CT scan CCR for 2,166
hospitals (57 percent), and a valid
Cardiac Catheterization CCR for 1,434
hospitals (37 percent).
In our CY 2014 OPPS/ASC proposed
rule discussion (78 FR 43549), we noted
that, for CY 2014, 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
concluded 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 beginning in CY 2013
OPPS ratesetting, as discussed above.
As we indicated in prior rulemaking
(77 FR 68223 through 68225), once we
determined that cost report data for the
new standard cost centers were

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sufficiently available, we would analyze
that data and, if appropriate, we would
propose to use the distinct CCRs for new
standard cost centers described above in
the calculation of the OPPS relative
payment weights. As stated in the CY
2014 OPPS/ASC final rule with
comment period (78 FR 74847), we
conducted our analysis and concluded
that we should develop distinct CCRs
for each of the new cost centers and use
them in ratesetting. Therefore, we began
in the CY 2014 OPPS, continued in the
CY 2015 OPPS, and we proposed to
retain this practice for the CY 2016
OPPS, to calculate the OPPS relative
payment weights using distinct CCRs for
cardiac catheterization, CT scan, MRI,
and implantable medical devices.
Section XIX. of the proposed rule and
section XXI. of this final rule with
comment period include the impacts of
calculating the CY 2016 OPPS relative
payment weights using these standard
cost centers that were adopted in CY
2014.
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 74847), we
finalized a policy 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. 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. In Table 2 below, we display
CCR values for providers based on
various cost allocation methods.

TABLE 2—CCR STATISCAL VALUES BASED ON USE OF DIFFERENT COST ALLOCATION METHODS
CT

MRI

Cost allocation method
Median CCR

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All Providers .............................................................................................
Square Feet Only ....................................................................................
Direct Assign ............................................................................................
Dollar Value .............................................................................................
Direct Assign and Dollar Value ...............................................................

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
adopted a policy in the CY 2014 OPPS/
ASC final rule with comment period
that we will sunset this policy in 4 years
once the updated cost report data

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Mean CCR

0.0436
0.0361
0.0638
0.0508
0.0508

become available for ratesetting
purposes. We stated that we believe 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

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Median CCR

0.0582
0.0507
0.0716
0.0667
0.0668

0.0874
0.0780
0.1076
0.0972
0.0976

Mean CCR
0.1111
0.1026
0.1273
0.1204
0.1203

cost data from all providers, regardless
of the cost allocation statistic employed.
In Table 3 below, we display the impact
of excluding claims based on the
‘‘square feet’’ cost allocation method
from estimates of CT and MRI costs in
CY 2016.

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TABLE 3—PERCENT CHANGE IN ESTIMATED COST FOR CT AND MRI APCS WHEN EXCLUDING CLAIMS FROM PROVIDERS
USING ‘‘SQUARE FEET’’ AS THE COST ALLOCATION METHOD
Percent
change

CY 2016 APC

CY 2016 APC descriptor

5570 * ................
5571 * ................
5572 * ................
5581 * ................
5582 * ................
8005 ..................
8006 ..................
8007 ..................
8008 ..................

Computed Tomography without Contrast .............................................................................................................
Level 1 Computed Tomography with Contrast and Computed Tomography Angiography .................................
Level 2 Computed Tomography with Contrast and Computed Tomography Angiography .................................
Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast ...................................
Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast ........................................
CT & CTA without Contrast Composite ...............................................................................................................
CT & CTA with Contrast Composite ....................................................................................................................
MRI & MRA without Contrast Composite .............................................................................................................
MRI & MRA with Contrast Composite ..................................................................................................................

15.4
10.2
10.5
8.1
6.2
13.7
9.8
6.9
6.8

jstallworth on DSK7TPTVN1PROD with RULES

* Renumbered APC for CY 2016.

In summary, we proposed to continue
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 the CY 2016 OPPS. For the
‘‘Magnetic Resonance Imaging (MRI)’’
and ‘‘Computed Tomography (CT)
Scan’’ APCs identified in Table 3 of the
proposed rule, we proposed to continue
our policy of removing claims from cost
modeling for those providers using
‘‘square feet’’ as the cost allocation
statistic for CY 2016.
Comment: Several commenters
supported CMS’ proposal to continue
removing claims submitted by providers
that use the ‘‘square feet’’ cost allocation
methodology from cost modeling for the
CT and MRI APCs. A few commenters
suggested that CMS continue its policy
of removing claims from providers that
use this method for the CY 2018 OPPS
update and subsequent calendar years.
Response: We appreciate the
commenters’ support. As described in
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 74847), the
current policy of calculating CT and
MRI APC relative payment weights
using only data from providers that do
not use the ‘‘square feet’’ cost allocation
method was part of a transitional policy
to allow providers to adopt cost
allocation methods that improve data
and payment accuracy. In the CY 2014
OPPS/ASC final rule with comment
period, we noted that we would sunset
that policy in 4 years and estimate the
CY 2018 CT and MRI APC relative
payment weights using cost data from
all providers, regardless of which cost
allocation method the provider
employed. While some commenters
believe that we should continue this
transition policy of excluding ‘‘square
feet’’ data from OPPS ratesetting for the
CY 2018 OPPS update and subsequent
calendar years, we believe that we have
given providers sufficient time to adopt

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one of the more precise cost allocation
methodologies.
After consideration of the public
comments we received, we are
finalizing our proposal to continue 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 the
CY 2016 OPPS. For the ‘‘Magnetic
Resonance Imaging (MRI)’’ and
‘‘Computed Tomography (CT) Scan’’
APCs identified in Table 3 above, we are
continuing our policy of removing
claims from providers that use the
‘‘square feet’’ cost allocation
methodology for CY 2016 CT and MRI
APC cost modeling.
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 2016. 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 payment
rates. That accounting provides
additional detail regarding the number
of claims derived at each stage of the
process. In addition, below in this
section we discuss the file of claims that
comprises the data set that is available
for purchase under a CMS data use
agreement. The CMS Web site, http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
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

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from the CY 2014 claims that were used
to calculate the proposed and final
payment rates for the CY 2016 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 2016, we proposed to continue to
use geometric mean costs to calculate
the relative weights on which the CY
2016 OPPS payment 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 payment weights used in
calculating the OPPS payment rates for
CY 2016 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 the proposed rule and
this final rule with comment period for
a discussion of the conversion of APC
costs to scaled payment weights.
Comment: A few commenters
suggested that CMS increase the
transparency of its cost estimation
process and provide additional detail on
how various types of HCPCS code are
treated within CMS’ claims processing.
Response: We thank the commenters
for these suggestions. We have updated
the claims accounting narrative for this

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jstallworth on DSK7TPTVN1PROD with RULES

final rule with comment period to
include additional information on the
requested various types of HCPCS code
where feasible. This updated claims
accounting narrative is available on the
2016 OPPS Final Rule page of the CMS
Web site (http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
index.html).
Comment: One commenter suggested
that CMS present proposals for
significant payment changes, such as
expanded packaging, APC
configurations, or new comprehensive
APCs, at least 1 year before issuance of
a proposed rule. The commenter
believed that this would increase the
transparency of policy changes and
facilitate stakeholder review and
analysis of the proposed changes.
Response: We thank the commenter
for this suggestion. We believe that, for
each proposed policy change, we assess
the appropriate timeframe for
implementation and will continue to do
so in the future. We understand that
modeling the OPPS is time-consuming
and technically complex, and we strive
to aid these efforts by providing
numerous data files, public use files,
and narrative descriptions of the claims
accounting process for each rule.
a. Claims Preparation
For the proposed rule, we used the CY
2014 hospital outpatient claims
processed through December 31, 2014,
to calculate the geometric mean costs of
APCs that underpin the proposed
relative payment weights for CY 2016.
For this final rule with comment period,
we used the CY 2014 hospital outpatient
claims processed through June 30, 2015,
to calculate the geometric mean costs of
APCs that underpin the final relative
payment weights for CY 2016. To begin
the calculation of the relative payment
weights for CY 2016, we selected all
claims for outpatient services furnished
in CY 2014 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).
We then excluded claims with
condition codes 04, 20, 21, and 77
because these claims are submitted by
providers to Medicare with the
knowledge that no payment would be
made. For example, providers submit
claims with a condition code 21 to elicit
an official denial notice from Medicare
to document that a service is not
covered under the OPPS. We then

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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
rates.
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.
3. Claims that were bill type 76X
(CMHC).
To convert charges on the claims to
estimated cost, we multiplied the
charges on each claim by the
appropriate hospital-specific CCR
associated with the revenue code for the
charge as discussed in section II.A.1.c.
of this final rule with comment period.
We then flagged and excluded CAH
claims (which are not paid under the
OPPS) and claims from hospitals with
invalid CCRs. The latter included claims
from hospitals without a CCR; those
from hospitals paid an all-inclusive rate;
those from hospitals with obviously
erroneous CCRs (greater than 90 or less
than 0.0001); and those from hospitals
with overall ancillary CCRs that were
identified as outliers (that exceeded ±3
standard deviations from the geometric
mean after removing error CCRs). In
addition, we trimmed the CCRs at the
cost center (that is, departmental) level
by removing the CCRs for each cost
center as outliers if they exceeded ±3
standard deviations from the geometric
mean. We used a four-tiered hierarchy
of cost center CCRs, which is the
revenue code-to-cost center crosswalk,
to match a cost center to every possible
revenue code appearing in the
outpatient claims that is relevant to
OPPS services, with the top tier being
the most common cost center and the
last tier being the default CCR. If a
hospital’s cost center CCR was deleted
by trimming, we set the CCR for that
cost center to ‘‘missing’’ so that another
cost center CCR in the revenue center
hierarchy could apply. If no other cost

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70315

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
excluding all claims from hospitals for
which CCRs were flagged as invalid.
We identified claims with condition
code 41 as partial hospitalization
services of hospitals and moved them to
another file. We note that the separate
file containing partial hospitalization
claims is included in the files that are
available for purchase as discussed
above.
We then excluded claims without a
HCPCS code. We moved to another file
claims that contained only influenza
and pneumococcal pneumonia (PPV)
vaccines. Influenza and PPV vaccines
are paid at reasonable cost; therefore,
these claims are not used to set OPPS
rates.
We next copied line-item costs for
drugs, blood, and brachytherapy sources
to a separate file (the lines stay on the
claim, but are copied onto another file).
No claims were deleted when we copied
these lines onto another file. These lineitems are used to calculate a per unit
arithmetic and geometric mean and
median cost and a per day arithmetic
and geometric mean and median cost for
drugs and nonimplantable biologicals,
therapeutic radiopharmaceutical agents,
and brachytherapy sources, as well as
other information used to set payment
rates, such as a unit-to-day ratio for
drugs.
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

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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. We
retained the CY 2013 payment policy for
separately payable drugs and biologicals
through CY 2015, and as we proposed,
we are continuing this payment policy
for CY 2016. We refer readers to section
V.B.3. of this final rule with comment
period for a complete discussion of our
CY 2016 payment policy for separately
paid drugs and biologicals.
We then removed line-items that were
not paid during claims 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,’’ and ‘‘V’’ 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 2015 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 2016, we proposed to continue
the policy we implemented for CY 2013
and retained in subsequent years to
exclude line-item data for pass-through
drugs and biologicals (status indicator
‘‘G’’ for CY 2013) and nonpass-through
drugs and biologicals (status indicator
‘‘K’’ for CY 2013) 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

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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 2015
OPPS/ASC final rule with comment
period (79 FR 66788) of line-items with
a status indicator of ‘‘S,’’ ‘‘T,’’ or ‘‘V,’’
we believe that unpaid line-items
represent services that are invalidly
reported and, therefore, should not be
used for ratesetting (we note that the
deletion of status indicator ‘‘X’’ was
finalized in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66821)). 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 2016 OPPS, as part of our
proposal and adoption of our proposal
to continue packaging payment for
clinical diagnostic laboratory tests, as
we proposed, we also are applying 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 2016 OPPS
relative payment weights, we
appropriately allocate the costs
associated with packaging these
services. Additional details and a
summary of public comments received
and our responses regarding packaging
payment for clinical laboratory tests can
be found in section II.A.3.b.(3) of this
final rule with comment period.
b. Splitting Claims and Creation of
‘‘Pseudo’’ Single Procedure Claims
(1) Splitting Claims
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39217), for the CY 2016
OPPS, we proposed to 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, in the CY 2015 OPPS/ASC final
rule with comment period (79 FR 66819
through 66821), we deleted status
indicator ‘‘X’’ and revised the title and
description of status indicator ‘‘Q1’’ to
reflect that deletion. We also finalized
the creation of status indicator ‘‘J1’’ in
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66800 through
66809) to reflect the comprehensive
APCs (C–APCs). For CY 2016, we

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proposed to define major procedures as
any procedure described by a HCPCS
code that is assigned a status indicator
of ‘‘J1,’’ ‘‘J2,’’ ‘‘S,’’ ‘‘T,’’ or ‘‘V,’’ to define
minor procedures as any procedure
described by a HCPCS code that is
assigned a status indicator of ‘‘F,’’ ‘‘G,’’
‘‘H,’’ ‘‘K,’’ ‘‘L,’’ ‘‘R,’’ ‘‘U,’’ or ‘‘N,’’ and
to classify ‘‘other’’ procedures as any
procedure described by a HCPCS code
that is assigned a status indicator other
than one that we have classified as
major or minor. For CY 2016, we
proposed to continue to assign status
indicator ‘‘R’’ to HCPCS codes for blood
and blood products; status indicator
‘‘U’’ to HCPCS codes for brachytherapy
sources; status indicator ‘‘Q1’’ to all
HCPCS ‘‘STV-packaged codes’’; status
indicator ‘‘Q2’’ to all HCPCS ‘‘Tpackaged codes’’; status indicator ‘‘Q3’’
to all HCPCS codes that may be paid
through a composite APC based on
composite-specific criteria or paid
separately through single code APCs
when the criteria are not met; and new
status indicator ‘‘Q4’’ to HCPCS codes
for laboratory tests that will be
conditionally packaged on a claim with
a service that is assigned status
indicator ‘‘S,’’ ‘‘T,’’ or ‘‘V’’ unless an
exception applies or the laboratory test
is ‘‘unrelated’’ to the other HOPD
service or services on the claim. For
more information on status indicator
‘‘Q4,’’ we refer readers to section
II.A.3.b.(3) of this final rule with
comment period.
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. We proposed to
treat these codes in the same manner for
data purposes for CY 2016 as we have
treated them since CY 2008.
Specifically, for CY 2016, we are
continuing to evaluate whether the
criteria for separate payment of codes
with a status indicator of ‘‘Q1’’ or ‘‘Q2’’
are met in determining whether they are
treated as major or minor codes. Claims
containing codes with a status indicator
of ‘‘Q1’’ or ‘‘Q2’’ are processed through
the data system either with status
indicator ‘‘N’’ to indicate that the
services are packaged for payment or, if
they meet the criteria for separate
payment, they are assigned the status
indicator of the APC to which they are
assigned and are considered as
‘‘pseudo’’ single procedure claims for
major codes. Claims containing codes
that are assigned status indicator ‘‘Q3’’
are paid under individual APCs unless
they occur in the combinations that
qualify for payment as composite APCs

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
and, therefore, they are assigned 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 claims is discussed in
section II.A.2.f. of this final rule with
comment period. HCPCS codes with
status indicator ‘‘Q4’’ only appear in the
OPPS model if they are packaged on a
claim with a service that is assigned
status indicator ‘‘S,’’ ‘‘T,’’ or ‘‘V.’’
Specifically, we proposed to divide
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,’’ or ‘‘V’’ which includes codes with
status indicator ‘‘Q3’’); claims with
status indicator ‘‘J1’’ or ‘‘J2,’’ which
receive special processing for C–APCs,
as discussed in section II.A.2.e. of this
final rule with comment period; claims
with one unit of a status indicator ‘‘Q1’’
code (‘‘STV-packaged’’) where there was
no code with status indicator ‘‘S,’’ ‘‘T,’’
or ‘‘V’’ on the same claim on the same
date; or claims with one unit of a status
indicator ‘‘Q2’’ code (‘‘T-packaged’’)
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,’’ or ‘‘V’’ 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’’ or ‘‘V’’). 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’’ (‘‘STVpackaged’’) or status indicator ‘‘Q2’’ (‘‘Tpackaged’’) code.

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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’’ (‘‘STV-packaged’’)
or more than one unit of a code with
status indicator ‘‘Q1’’ but no codes with
status indicator ‘‘S,’’ ‘‘T,’’ or ‘‘V’’ on the
same date of service; or claims that
contain more than one code with status
indicator ‘‘Q2’’ (T-packaged), or ‘‘Q2’’
and ‘‘Q1,’’ or more than one unit of a
code with status indicator ‘‘Q2’’ but no
code with status indicator ‘‘T’’ on the
same date of service.
5. Non-OPPS Claims: Claims that
contain no services payable under the
OPPS (that is, all status indicators other
than those listed for major or minor
status). These claims were excluded
from the files used for the OPPS. NonOPPS claims have codes paid under
other fee schedules, for example,
durable medical equipment, 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’’ (‘‘STV-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.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39217), we proposed to
adjust the claims sorting process to
determine whether a claim has a
bilateral procedure modifier (Modifier
50) before claims are assigned to one of
the five claims categories. This
proposed adjustment shifts some claims
that might otherwise be considered a
single major procedure claim to the
multiple major procedure claim
category due to the presence of the
bilateral modifier. We stated that we
believe that this proposed adjustment
more accurately sorts claims that have a
bilateral modifier.
We did not receive any public
comments on the proposed process to

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categorize claims used in CY 2016 OPPS
cost modeling. Therefore, we are
finalizing our policy as proposed.
(2) Creation of ‘‘Pseudo’’ Single
Procedure Claims
To develop ‘‘pseudo’’ single
procedure claims for the proposed rule,
we examined both the multiple
procedure major claims and the
multiple procedure minor claims. We
first examined the multiple major
procedure claims for dates of service to
determine if we could break them into
‘‘pseudo’’ single procedure claims using
the dates of service for all lines on the
claim. If we could create claims with
single major procedures by using dates
of service, we created a single procedure
claim record for each separately payable
procedure on a different date of service
(that is, a ‘‘pseudo’’ single procedure
claim).
We also proposed to use the bypass
codes listed in Addendum N to the
proposed rule (which is available via
the Internet on the CMS Web site) and
discussed in section II.A.1.b. of the
proposed rule and 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 ignored the
‘‘overlap bypass codes,’’ that is, those
HCPCS codes that were both on the
bypass list and are members of the
multiple imaging composite APCs, in
this initial assessment for ‘‘pseudo’’
single procedure claims. The proposed
CY 2016 ‘‘overlap bypass codes’’ were
listed in Addendum N to the proposed
rule (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,

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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.(3) of the proposed rule
and 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 will not be a separately
payable procedure, we considered it to
be unavailable for use in setting the
composite APC costs on which the CY
2016 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 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.
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’’ (‘‘STVpackaged’’) 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
2015 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
2015 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 2015 relative payment

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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, we proposed that if a
multiple procedure minor claim
contained multiple codes with status
indicator ‘‘Q2’’ (‘‘T-packaged’’) or
multiple units of a single code with
status indicator ‘‘Q2,’’ we selected the
status indicator ‘‘Q2’’ HCPCS code that
had the highest CY 2015 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 2015 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
2015 relative payment weight; other
codes with status indicator ‘‘Q2’’; and
other packaged HCPCS codes and
packaged revenue code costs. We
changed the status indicator for the
selected code from a data status
indicator of ‘‘N’’ to the status indicator
of the APC to which the selected code
was assigned, and we considered this
claim as a major procedure claim.
If a multiple procedure minor claim
contained multiple codes with status
indicator ‘‘Q2’’ (‘‘T-packaged’’) and
status indicator ‘‘Q1’’ (‘‘STVpackaged’’), we selected the T-packaged
status indicator ‘‘Q2’’ HCPCS code that
had the highest relative payment weight
for CY 2015 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 2015 relative payment
weight; other codes with status
indicator ‘‘Q2’’; codes with status
indicator ‘‘Q1’’ (‘‘STV-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 2015 relative payment weights. If a

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status indicator ‘‘Q1’’ HCPCS code had
a higher CY 2015 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 revised 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
procedure modifier (Modifier 50)
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 did not receive any public
comments on our proposed
methodology for creating ‘‘pseudo’’
single procedure claims. Therefore, we
are finalizing our proposal to continue
to apply the methodology described
above for the purpose of creating
‘‘pseudo’’ single procedure claims for
the CY 2016 OPPS. The final CY 2016
bypass codes and ‘‘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).
c. Completion of Claim Records and
Geometric Mean Cost Calculations
(1) General Process
We proposed to then package the
costs of packaged HCPCS codes (codes
with status indicator ‘‘N’’ listed in
Addendum B to the proposed rule
(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

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services reported under packaged
revenue codes in Table 4 of the
proposed rule (Table 4 below in this
final rule with comment period) 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 CY
2016 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, we are
continuing to compare the final list of
packaged revenue codes that we adopt
for CY 2016 to the revenue codes that
the I/OCE will package for CY 2016 to
ensure consistency.
In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68531), we
replaced the NUBC standard
abbreviations for the revenue codes
listed in Table 2 of the CY 2009 OPPS/
ASC proposed rule with the most
current NUBC descriptions of the
revenue code categories and
subcategories to better articulate the
meanings of the revenue codes without

changing the list of revenue codes. In
the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60362 through
60363), we finalized changes to the
packaged revenue code list based on our
examination of the updated NUBC
codes and public comment on the CY
2010 proposed list of packaged revenue
codes.
For CY 2016, as we did for CY 2015,
we reviewed the changes to revenue
codes that were effective during CY
2014 for purposes of determining the
charges reported with revenue codes but
without HCPCS codes that we proposed
to package for CY 2016. We stated in the
proposed rule that we believe that the
charges reported under the revenue
codes listed in Table 4 of the proposed
rule continue to reflect ancillary and
supportive services for which hospitals
report charges without HCPCS codes.
Therefore, for CY 2016, 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 4 of
the proposed rule for purposes of
calculating the geometric mean costs on
which the CY 2016 OPPS/ASC payment
rates are based.
Comment: One commenter suggested
that CMS revisit its ratesetting
methodology to prevent items or
services that are more costly than a

primary service from being packaged
into the payment for the primary
service. The commenter also suggested
that only items or services that are
clinically relevant to a primary service
be packaged for payment with a primary
service.
Response: We thank the commenter
for these suggestions. Since the
beginning of the OPPS and throughout
its development, we have striven to find
ways to improve our methodologies for
estimating the costs associated with
providing services, including our
methodology for packaging services. We
will continue to look at ways to improve
our ratesetting process, including
improving our packaging logic, in future
payment years. We only assign
packaged status indicators to services
that we determine are ancillary,
supportive, dependent, or adjunctive to
a primary service. We disagree with the
commenter that only payment for less
costly services should be packaged into
payment for a primary service, as the
cost of a packaged service relative to a
primary service is not necessarily
determinative of packaged status.
For the reasons set forth in the
proposed rule, we are finalizing the
proposed packaged revenue codes for
CY 2016, without modification, which
are identified in Table 4 below.

TABLE 4—CY 2016 PACKAGED REVENUE CODES

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Revenue code
250
251
252
254
255
257
258
259
260
261
262
263
264
269
270
271
272
275
276
278
279
280
289
331
332
335
343
344
360
361
362
369

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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; Non-Prescription.
Pharmacy; IV Solutions.
Pharmacy; Other Pharmacy.
IV Therapy; General Classification.
IV Therapy; Infusion Pump.
IV Therapy; IV Therapy/Pharmacy Svcs.
IV Therapy; IV Therapy/Drug/Supply Delivery.
IV Therapy; IV Therapy/Supplies.
IV Therapy; Other IV Therapy.
Medical/Surgical Supplies and Devices; General Classification.
Medical/Surgical Supplies and Devices; Non-sterile Supply.
Medical/Surgical Supplies and Devices; Sterile Supply.
Medical/Surgical Supplies and Devices; Pacemaker.
Medical/Surgical Supplies and Devices; Intraocular Lens.
Medical/Surgical Supplies and Devices; Other Implants.
Medical/Surgical Supplies and Devices; Other Supplies/Devices.
Oncology; General Classification.
Oncology; Other Oncology.
Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Injected.
Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—Oral.
Radiology—Therapeutic and/or Chemotherapy Administration; Chemotherapy Admin—IV.
Nuclear Medicine; Diagnostic Radiopharmaceuticals.
Nuclear Medicine; Therapeutic Radiopharmaceuticals.
Operating Room Services; General Classification.
Operating Room Services; Minor Surgery.
Operating Room Services; Organ Transplant—Other than Kidney.
Operating Room Services; Other OR Services.

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TABLE 4—CY 2016 PACKAGED REVENUE CODES—Continued

Revenue code

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370
371
372
379
390
392
399
410
412
413
419
621
622
623
624
630
631
632
633
681
682
683
684
689
700
710
720
721
722
724
729
732
760
761
762
769
770
801
802
803
804
809
810
819
821
824
825
829
942
943
948

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Description
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.
Respiratory Services; General Classification.
Respiratory Services; Inhalation Services.
Respiratory Services; Hyperbaric Oxygen Therapy.
Respiratory Services; Other Respiratory Services.
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 of 027X, Surgical Dressings.
Medical Surgical Supplies—Extension of 027X; FDA Investigational Devices.
Pharmacy—Extension of 025X; Reserved.
Pharmacy—Extension of 025X; Single Source Drug.
Pharmacy—Extension of 025X; Multiple Source Drug.
Pharmacy—Extension of 025X; Restrictive Prescription.
Trauma Response; Level I Trauma.
Trauma Response; Level II Trauma.
Trauma Response; Level III Trauma.
Trauma Response; Level IV Trauma.
Trauma Response; Other.
Cast Room; General Classification.
Recovery Room; General Classification.
Labor Room/Delivery; General Classification.
Labor Room/Delivery; Labor.
Labor Room/Delivery; Delivery Room.
Labor Room/Delivery; Birthing Center.
Labor Room/Delivery; Other Labor Room/Delivery.
EKG/ECG (Electrocardiogram); Telemetry.
Specialty Services; General Classification.
Specialty Services; Treatment Room.
Specialty services; Observation Hours.
Specialty Services; Other Specialty Services.
Preventive Care Services; General Classification.
Inpatient Renal Dialysis; Inpatient Hemodialysis.
Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD).
Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal Dialysis (CAPD).
Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis (CCPD).
Inpatient Renal Dialysis; Other Inpatient Dialysis.
Acquisition of Body Components; General Classification.
Acquisition of Body Components; Other Donor.
Hemodialysis—Outpatient or Home; Hemodialysis Composite or Other Rate.
Hemodialysis—Outpatient or Home; Maintenance—100%.
Hemodialysis—Outpatient or Home; Support Services.
Hemodialysis—Outpatient or Home; Other OP Hemodialysis.
Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.
Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.
Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.

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 after July 1, 2014, 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 Medicare
Administrative Contractor (MAC) was
required to allocate the sum of charges
for services with a status indicator

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equaling ‘‘S’’ or ‘‘T’’ based on the
relative payment weight of the APC to
which each code was assigned. We do
not believe that these charges, which
were token charges as submitted by the
hospital, are valid reflections of hospital
resources. Therefore, we deleted these
claims. We also deleted claims for
which the charges equaled the revenue
center payment (that is, the Medicare
payment) on the assumption that, where
the charge equaled the payment, to
apply a CCR to the charge would not
yield a valid estimate of relative
provider cost. We are continuing these
processes for the CY 2016 OPPS.

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For the remaining claims, we then
standardized 60 percent of the costs of
the claim (which we have previously
determined to be the labor-related
portion) for geographic differences in
labor input costs. We made this
adjustment by determining the wage
index that applied to the hospital that
furnished the service and dividing the
cost for the separately paid HCPCS code
furnished by the hospital by that wage
index. The claims accounting that we
provide for the proposed rule and final
rule with comment period contains the
formula we use to standardize the total
cost for the effects of the wage index. As

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
has been our policy since the inception
of the OPPS, we used the prereclassified 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. We used these pre-reclassified
wage indices for standardization using
the new OMB labor market area
delineations described in section II.C. of
this final rule with comment period.
In accordance with our longstanding
practice, we also excluded 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 122 million claims
remained. Using these approximately
122 million claims, we created
approximately 95 million single and
‘‘pseudo’’ single procedure claims, of
which we used approximately 92
million single claims (after trimming out
approximately 3 million claims as
discussed in section II.A.1.a. of this
final rule with comment period) in the
CY 2016 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
CYs 2013, 2014, and 2015 OPPS, we
calculated the APC relative payment
weights using geometric mean costs,
and we are continuing this practice for
CY 2016. 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
2016 OPPS/ASC policy to calculate
relative payment weights based on
geometric means, we refer readers to
section II.A.2.c. of this final rule with
comment period.
We used these claims to calculate the
CY 2016 geometric mean costs for each
separately payable procedure described
by the 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

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items and services within an APC group
shall not be treated as comparable with
respect to the use of resources if the
highest median cost (or mean cost, if
elected by the Secretary) for an item or
service within the group is more than 2
times greater than the lowest median
cost (or mean cost, if so elected) for an
item or service within the same group
(the 2 times rule). While we have
historically applied the 2 times rule
based on median costs, 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 2016 OPPS, as
we proposed, 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 92 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
claims 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 CY
2016 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 will pay
separately under this final rule with
comment period, and we reassigned
HCPCS codes to different APCs where it

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was necessary to ensure clinical and
resource homogeneity within the APCs.
The APC geometric means were
recalculated after we reassigned the
affected HCPCS codes. Both the HCPCS
code-specific geometric means and the
APC geometric means were weighted to
account for the inclusion of multiple
units of the bypass codes in the creation
of ‘‘pseudo’’ single procedure claims.
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 were
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.
We did not receive any public
comments on our proposal for
completion of claims records and
calculation of geometric means cost.
Therefore, we are adopting the
geometric means calculation process
that we proposed as final. We are
finalizing our proposed methodology for
calculating geometric means costs for
purposes of creating relative payment
weights and subsequent APC payment
rates for the CY 2016 OPPS.
(2) Recommendations of the Advisory
Panel on Hospital Outpatient Payment
(the Panel) Regarding Data Development
At the August 24, 2015 meeting of the
Panel, we discussed our standard
analysis of APCs, specifically those
APCs for which geometric mean costs in
the proposed rule run of CY 2014 claims
data varied significantly from the CY
2013 claims data used for the CY 2015
OPPS/ASC final rule with comment
period. We also discussed the ‘‘pseudo’’
single development process for the CY
2015 OPPS/ASC final rule with
comment period.
At the August 24, 2015 Panel meeting,
the Panel made two 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 CMS provide the
Panel with a list of APCs fluctuating

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significantly in costs at the next Panel
meeting.
CMS Response: We are accepting this
recommendation.
Recommendation: The Panel
recommends that Michael Schroyer
serve as Chair of the Data
Subcommittee.
CMS Response: We are accepting this
recommendation.
d. Calculation of Single Procedure APC
Criteria-Based Costs

jstallworth on DSK7TPTVN1PROD with RULES

(1) Blood and Blood Products
(a) Methodology
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 2016 OPPS/ASC proposed
rule (80 FR 39222), for CY 2016, 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 also proposed to 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 bloodspecific CCRs for those hospitals. We
proposed to calculate the costs upon

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which the CY 2016 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 stated in the proposed rule that
we continue to believe that the hospitalspecific simulated blood-specific CCR
methodology better responds to the
absence of a blood-specific CCR for a
hospital than alternative methodologies,
such as defaulting to the overall hospital
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
2016 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 invited public comments on this
proposal to continue this longstanding
methodology.
Comment: Commenters supported the
proposal to continue to separately pay
for blood and blood products using a
blood-specific CCR methodology.
Response: We appreciate the
commenters’ support.
Comment: Numerous commenters
(various hospitals, blood centers,
associations, and other stakeholders)
expressed concern regarding the
proposed CY 2016 payment rates for
blood and blood products. The
commenters believed that the proposed
payment rates do not accurately reflect
the cost of collecting, processing, and
distributing blood products to patients.
The commenters noted that the payment
rates did not align with the costs
statistics data provided with the
proposed rule, and therefore the
commenters believed that the CY 2016
proposed payment rates for blood and
blood products were produced in error.
Response: We acknowledge that an
error occurred in the calculation of the
proposed CY 2016 payment rates for
blood and blood products included in
the proposed rule. The payment rates
included in the proposed rule
erroneously were not calculated using
the hospital-specific simulated bloodspecific CCR methodology described in
the proposed rule (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). As a result

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of correcting this error, payment rates
for blood and blood products increased
approximately 10 percent to 60 percent
from the proposed CY 2016 payment
rates. We have corrected this error in
this final rule with comment period and
the final CY 2016 payment rates reflect
this correction.
After consideration of the public
comments we received, we are
finalizing, without modification, our CY
2016 proposal to continue to establish
payment rates for blood and blood
products using our blood-specific CCR
methodology. The final CY 2016
payment rates for blood and blood
products (which are identified with
status indicator ‘‘R’’) are reflective of the
use of the hospital-specific simulated
blood-specific CCR methodology and
can be found in Addendum B to this
final rule with comment period (which
is available via the Internet on the CMS
Web site).
(b) New HCPCS Codes for PathogenReduced Blood Products
For CY 2016, the HCPCS Workgroup
established three new HCPCS P-codes
for new pathogen-reduced blood
products, effective January 1, 2016, as
follows:
• P9070 (Plasma, pooled multiple
donor, pathogen reduced, frozen, each
unit);
• P9071 (Plasma (single donor),
pathogen reduced, frozen, each unit);
and
• P9072 (Platelets, pheresis, pathogen
reduced, each unit).
The term ‘‘pathogen reduction’’
describes various techniques (including
treatment with Amotosalen and UVA
light) used on blood products to
eliminate certain pathogens and reduce
the risk of transfusion-associated
infections. As discussed above, we
calculate 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. Because
these three HCPCS P-codes are new for
CY 2016, there are currently no claims
data on the charges and costs for these
blood products upon which to apply our
blood-specific CCR methodology.
Therefore, we are establishing interim
payment rates for these three HCPCS Pcodes based on a crosswalk to existing
blood product HCPCS codes that we
believe provide the best proxy for the
costs of the three new blood products
described by the above listed new
HCPCS P-codes. Table 5 below list the
new pathogen-reduced blood products

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HCPCS P-codes and their payment
crosswalks.

TABLE 5—NEW PATHOGEN-REDUCED BLOOD PRODUCTS HCPCS P-CODES AND INTERIM PAYMENT RATES AND
CROSSWALKS FOR CY 2016
New CY 2016
HCPCS
P-code
P9070 ...............
P9071 ...............
P9072 ...............

New HCPCS P-code long descriptor

Crosswalked
HCPCS P-code

Crosswalked HCPCS P-code long
descriptor

Plasma, pooled multiple donor, pathogen
reduced, frozen, each unit.
Plasma (single donor), pathogen reduced,
frozen, each unit.
Platelets, pheresis, pathogen reduced,
each unit.

P9059 ...............

Fresh frozen plasma between 8–24 hours
of collection, each unit.
Fresh frozen plasma (single donor), frozen
within 8 hours of collection, each unit.
Platelets, pheresis, leukocytes reduced, irradiated, each unit.

jstallworth on DSK7TPTVN1PROD with RULES

These interim payment rates are open
for public comment in this CY 2016
final rule with comment period.
Specifically, the new HCPCS P-codes
are flagged with comment indicator
‘‘NI’’ in Addendum B to this final rule
with comment period to indicate that
we have assigned the codes an interim
OPPS payment status for CY 2016 and
are seeking public comments on the
APC and status indicator assignments.
Once we have claims data for these new
HCPCS P-codes, we will calculate
payment rates using the claims data that
should be available for these new codes
beginning in CY 2018, which is our
practice for other blood products for
which claims data have been available
for 2 years.
During the process of creating these
new HCPCS P-codes for the three
pathogen-reduced blood products, we
examined the current set of HCPCS Pcodes, which became effective many
years ago. We believe that the HCPCS Pcodes for these products could benefit
from a careful examination and review
with possible revision and updating to
make the HCPCS P-codes describing
blood products reflect current product
descriptions and utilization while
minimizing redundancy and potentially
outdated descriptors. Therefore, we
intend in future rulemaking to evaluate
the set of HCPCS P-codes and propose
revisions that may be necessary to create
a current and robust code set for blood
products.
(2) Brachytherapy Sources
Section 1833(t)(2)(H) of the Act
mandates the creation of additional
groups of covered OPD services that
classify devices of brachytherapy
consisting of a seed or seeds (or
radioactive source) (‘‘brachytherapy
sources’’) separately from other services
or groups of services. The statute
provides certain criteria for the
additional groups. For the history of
OPPS payment for brachytherapy
sources, we refer readers to prior OPPS

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P9017 ...............
P9037 ...............

final rules, such as the CY 2012 OPPS/
ASC final rule with comment period (77
FR 68240 through 68241). As we have
stated in prior OPPS updates, we
believe that adopting the general OPPS
prospective payment methodology for
brachytherapy sources is appropriate for
a number of reasons (77 FR 68240). The
general OPPS methodology uses costs
based on claims data to set the relative
payment weights for hospital outpatient
services. This payment methodology
results in more consistent, predictable,
and equitable payment amounts per
source across hospitals by averaging the
extremely high and low values, in
contrast to payment based on hospitals’
charges adjusted to costs. We believe
that the OPPS methodology, as opposed
to payment based on hospitals’ charges
adjusted to cost, also would provide
hospitals with incentives for efficiency
in the provision of brachytherapy
services to Medicare beneficiaries.
Moreover, this approach is consistent
with our payment methodology for the
vast majority of items and services paid
under the OPPS. We refer readers to the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66796 through
66798) for further discussion of the
history of OPPS payment for
brachytherapy sources.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39222), for CY 2016, we
proposed to use the costs derived from
CY 2014 claims data to set the proposed
CY 2016 payment rates for
brachytherapy sources, as we proposed
to use to set the proposed payment rates
for most other items and services that
would be paid under the CY 2016 OPPS.
We based the proposed payment rates
for brachytherapy sources on the
geometric mean unit costs for each
source, consistent with the methodology
proposed for other items and services
paid under the OPPS, as discussed in
section II.A.2. of the proposed rule and
this final rule with comment period. We
also proposed to continue the other

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Final CY 2016
OPPS payment amount
$73.08
72.56
641.85

payment policies for brachytherapy
sources that we finalized and first
implemented in the CY 2010 OPPS/ASC
final rule with comment period (74 FR
60537). We proposed to pay for the
stranded and nonstranded not otherwise
specified (NOS) codes, HCPCS codes
C2698 and C2699, at a rate equal to the
lowest stranded or nonstranded
prospective payment rate for such
sources, respectively, on a per source
basis (as opposed to, for example, a per
mCi), which is based on the policy we
established in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66785). For CY 2016 and subsequent
years, we also proposed to continue the
policy we first implemented in the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60537)
regarding payment for new
brachytherapy sources for which we
have no claims data, based on the same
reasons we discussed in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66786; which was
delayed until January 1, 2010 by section
142 of Pub. L. 110–275). That policy is
intended to enable us to assign new
HCPCS codes for new brachytherapy
sources to their own APCs, with
prospective payment rates set based on
our consideration of external data and
other relevant information regarding the
expected costs of the sources to
hospitals.
The proposed CY 2016 payment rates
for brachytherapy sources were
included in Addendum B to the
proposed rule (which is available via
the Internet on the CMS Web site) and
were identified with status indicator
‘‘U.’’
We invited public comments on this
proposed policy. We also requested
recommendations for new HCPCS codes
to describe new brachytherapy sources
consisting of a radioactive isotope,
including a detailed rationale to support
recommended new sources.
Comment: One commenter expressed
concern regarding the outpatient

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hospital claims data that CMS used to
set the prospective payment rates for
brachytherapy sources. The commenter
stated that high dose rate (HDR)
brachytherapy devices are renewable
because the devices have a 90-day use
span and are used in the treatment of
multiple patients during this 90-day
span. According to the commenter, the
true cost of treatment involving
brachytherapy sources depends on the
number of patients treated by a hospital
within a 90-day period, as well as the
number of treatments required and the
intensity of the treatments. For this
reason, the commenter believed that it
is difficult to establish fair and adequate
prospective payment rates for
brachytherapy sources. The commenter
also noted that the brachytherapy source
payment data continue to show huge
variation in per unit cost across
hospitals.
In addition, the commenter believed
that CMS’ claims data contain rank
order anomalies, causing the usual cost
relationship between the high activity
palladium-103 source (HCPCS code
C2635, Brachytherapy source, nonstranded, high activity, palladium-103,
greater than 2.2 mci (NIST) per source)
and the low activity palladium-103
sources (HCPCS code C2640,
Brachytherapy source, stranded,
palladium-103, per source and HCPCS
code C2641, Brachytherapy source, nonstranded, palladium-103, per source) to
be reversed. The commenter noted that
the proposed geometric mean costs of
the brachytherapy source HCPCS codes
are approximately $35, $72, and $72,
respectively. The commenters stated
that, based on its experience, stranded
palladium-103 sources (HCPCS code
C2640) always cost more than nonstranded palladium-103 sources (HCPCS
code C2641), which is not reflected in
the proposed rule claims data that CMS
used. The commenter expressed
concern that payment for brachytherapy
sources are unstable and fluctuate
significantly since CMS implemented
the prospective payment methodology
based on source-specific median cost in
CY 2010 and geometric mean unit cost
in CY 2013.
Response: As stated above, we believe
that geometric mean costs based on
hospital claims data for brachytherapy
sources have produced reasonably
consistent per-source cost estimates
over the past several years, comparable
to the patterns we have observed for
many other OPPS services whose
payments are set based upon relative
payment weights from claims data. We
believe that our per-source payment
methodology specific to each source’s
radioisotope, radioactive intensity, and

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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. (We refer readers to
72 FR 66782; 74 FR 60534; 75 FR 71979;
76 FR 74161; 77 FR 68241; 78 FR 74861;
and 79 FR 66796.) We believe that the
CY 2014 brachytherapy source claims
data used for CY 2016 ratesetting
produce adequate payment rates for
brachytherapy sources. In addition, as
we have explained previously, a
prospective payment system relies upon
the concept of averaging, where the
payment may be more or less than the
estimated cost of providing a service for
a particular patient. With the exception
of outlier cases, the payment for services
is adequate to ensure access to
appropriate care. In the case of
brachytherapy sources for which the
law requires separate payment groups,
without packaging, the costs of these
individual items could be expected to
show greater variation than some other
APCs under the OPPS because higher
variability in costs for some component
items and services is not balanced with
lower variability in costs for others, and
because relative payment weights are
typically estimated using a smaller set
of claims. Nevertheless, we believe that
prospective payment rates for
brachytherapy sources based on
geometric mean costs of the services
reported on claims calculated according
to the standard OPPS methodology are
appropriate and provide hospitals with
the greatest incentives for efficiency in
furnishing brachytherapy treatment.
Under the OPPS, it is the relativity of
costs, not the absolute costs, that is
important, and we believe that
brachytherapy sources are appropriately
paid according to the standard OPPS
approach. Furthermore, some sources
may have geometric mean costs and
payment rates based on 50 or fewer
providers because it is not uncommon
for OPPS rates to be based on claims
from a relatively small number of
hospitals that furnished the service in
the year of claims data available for the
OPPS update year. Fifty hospitals may
report hundreds of brachytherapy
sources on claims for many cases and
comprise the universe of providers
using particular low volume sources, for
which we are required to pay separately
by statute. Further, our methodology for
estimating geometric mean costs for
brachytherapy sources utilizes all lineitem charges for those sources, which
allows us to use all hospital reported
charge and estimated cost information
to set payment rates for these items.

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Therefore, no brachytherapy source
claims are excluded from the
calculation of geometric means costs.
We have no reason to believe that
prospective payment rates based on
claims data from those providers
furnishing a particular source do not
appropriately reflect the cost of that
source to hospitals. As with most other
OPPS services, we note that the
geometric mean costs for brachytherapy
sources are based upon the costs of
those providers’ sources in CY 2014.
Hospitals individually determine their
charge for an item or service, and one
of Medicare’s primary requirements for
setting a charge is that it be reasonably
and consistently related to the cost of
the item or service for that facility. (We
refer readers to the Medicare Provider
Reimbursement Manual, Part I, Section
2203, which is available on the CMS
Web site at: http://www.cms.gov/
Regulations-and-Guidance/Guidance/
Manuals/Paper-Based-Manuals-Items/
CMS021929.html?DLPage=1&
DLSort=0&DLSortDir=ascending.) We
then estimate a cost from that charge
using the hospital’s most recent
Medicare hospital cost report data in
our standard OPPS ratesetting process.
We acknowledge that HDR
brachytherapy sources such as HDR
iridium-192 have a fixed active life and
must be replaced every 90 days. As a
result, a hospital’s per treatment cost for
the source would be dependent on the
number of treatments furnished per
source. The cost of the brachytherapy
source must be amortized over the life
of the source. Therefore, when
establishing charges for HDR iridium192, we expect hospitals to project the
number of treatments that would be
provided over the life of the source and
establish charges for the source
accordingly (72 FR 66783; 74 FR 60535;
75 FR 71980; 76 FR 74162; 77 FR 68242;
and 78 FR 74861). For most payable
services under the OPPS, our practice is
to establish prospective payment rates
based on the geometric mean costs
determined from hospitals’ claims data
to provide incentives for efficient and
cost effective delivery of these services.
With regard to the commenter’s stated
concerns relating to the differences in
costs for high-activity and low-activity
palladium-103 sources, our claims data
consistently have shown higher average
costs for low-activity palladium-103
sources. For the high-activity
palladium-103 sources described by
HCPCS code C2635, our claims data
showed that 9 hospitals submitted
claims for this source in CY 2014,
compared to 91 and 145 hospitals that
submitted claims for the low-activity
palladium-103 sources described by

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HCPCS codes C2640 and C2641,
respectively. It is clear from these
claims data that fewer hospitals
furnished the high-activity palladium103 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
numbers of hospitals reporting the lowactivity palladium-103 sources, as
previously stated (74 FR 60535; 75 FR
71979; 76 FR 74162; 77 FR 68242; and
78 FR 74861). These varied cost
distributions clearly contribute to the
observed relationship in geometric
mean cost between the different types of
sources. However, we see no reason
why our standard ratesetting
methodology for brachytherapy sources

that relies on all claims data from all
hospitals furnishing brachytherapy
sources would not yield valid geometric
mean costs for those hospitals
furnishing the different brachytherapy
sources upon which CY 2016
prospective payments are based.
Comment: A number of commenters
noted that the proposed CY 2016
payment rate for brachytherapy sources
described by HCPCS code C2616
(Brachytx, non-str, yttrium-90) would
not adequately cover a hospital’s true
cost for purchasing the device. The
commenters expressed concern that the
claims data used to calculate the CY
2016 proposed payment rate does not
accurately represent charges for the Y–
90 brachytherapy devices and the CY
2015 purchase price incurred by

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hospitals. In addition, the commenters
believed that inconsistent or incorrect
reporting (or both) of revenue codes for
the use of Y–90 brachytherapy devices
adversely affected the proposed CY
2016 payment rate for HCPCS code
C2616.
Response: As illustrated in Table 6
below, the CY 2016 geometric mean cost
of brachytherapy sources described by
HCPCS code C2616 for this final rule
with comment period is approximately
$16,760, compared with approximately
$16,160 for CY 2015, and $16,890 for
CY 2014. Furthermore, we note that the
CY 2016 geometric mean cost is based
on a greater number of providers, days,
and units in comparison to CY 2014 and
CY 2015.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 6—COST STATISTICS FOR BRACHYTHERAOPY SOURCES DESCRIBED BY HCPCS CODE C2616 FOR CY 2014
THROUGH CY 2016
Number of
providers

Calendar year

HCPCS code

2014 .................................................
2015 .................................................
2016 .................................................

C2616 ................................................
C2616 ................................................
C2616 ................................................

We believe that some variation in
relative cost from year to year is to be
expected in a prospective payment
system, particularly for low-volume
items.
For all APCs whose payment rates are
based upon relative payment weights,
we note that the quality and accuracy of
reported units and charges significantly
influence the final geometric mean costs
that are the basis for our payments.
Beyond our standard OPPS trimming
methodology (described in section
II.A.2. for this final rule with comment
period) that we apply to those claims
that have passed various types of claims
processing edits, it is not our policy to
critique the accuracy of hospital coding
and charging for the purpose of
ratesetting. Moreover, we do not believe
it is necessary to incorporate external
cost data from manufacturers of Y–90
brachytherapy sources (or any other
brachytherapy sources) because, in a
relative weight system like the OPPS, it
is the relativity of the costs of services
to one another, rather than absolute
cost, that is important in setting
payment rates. External data lack
relativity to the estimated costs derived
from the claims and cost report data and
generally are not appropriate for
determining relative weights that result
in payment rates when costs derives
from hospital claims and cost report
data for services are available.

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246
299
352

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 2016 final payment rates for
brachytherapy sources are found in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
As stated in the proposed rule, we
continue to invite hospitals and other
parties to submit recommendations to
us for new codes to describe new
brachytherapy sources. Such
recommendations should be directed to
the Division of Outpatient Care, Mail
Stop C4–03–27, Centers for Medicare
and Medicaid Services, 7500 Security
Boulevard, Baltimore, MD 21244. We
will continue to add new brachytherapy
source codes and descriptors to our
systems for payment on a quarterly
basis.
e. Comprehensive APCs (C–APCs) for
CY 2016
(1) Background
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 74861
through 74910), we finalized a
comprehensive payment policy that
packages payment for adjunctive and
secondary items, services, and
procedures into the most costly primary

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Days

Units

2,237
2,464
3,153

2,237
2,464
3,153

Geometric
mean unit cost
$16,888.06
16,164.79
16,764.72

procedure under the OPPS at the claim
level. The policy was finalized in CY
2014, but the effective date was delayed
until January 1, 2015, to allow
additional time for further analysis,
opportunity for public comment, and
systems preparation. The
comprehensive APC (C–APC) policy
was implemented effective January 1,
2015, with modifications and
clarifications in response to public
comments received regarding specific
provisions of the C–APC policy (79 FR
66798 through 66810).
A C–APC is defined as a classification
for the provision of a primary service
and all adjunctive services provided to
support the delivery of the primary
service. We established C–APCs as a
category broadly for OPPS payment and
implemented 25 C–APCs beginning in
CY 2015 (79 FR 66809 through 66810).
Under this policy, we designated a
HCPCS code assigned to a C–APC as the
primary service (identified by a new
OPPS status indicator ‘‘J1’’). When such
a primary service is reported on a
hospital outpatient claim, taking into
consideration the few exceptions that
are discussed below, we make payment
for all other items and services reported
on the hospital outpatient claim as
being integral, ancillary, supportive,
dependent, and adjunctive to the
primary service (hereinafter collectively
referred to as ‘‘adjunctive services’’) and
representing components of a complete

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comprehensive service (78 FR 74865
and 79 FR 66799). Payments for
adjunctive services are packaged into
the payments for the primary services.
This results in a single prospective
payment for each of the primary,
comprehensive services based on the
costs of all reported services at the claim
level.
Services excluded from the C–APC
policy include services that are not
covered OPD services, services that
cannot by statute be paid for under the
OPPS, and services that are required by
statute that must be separately paid.
This includes certain mammography
and ambulance services that are not ever
covered OPD services in accordance
with section 1833(t)(1)(B)(iv) of the Act;
brachytherapy seeds, which also are
required by statute to receive separate
payment under section 1833(t)(2)(H) of
the Act; pass-through drugs and devices,
which also require separate payment
under section 1833(t)(6) of the Act; selfadministered drugs (SADs) that are not
otherwise packaged as supplies because
they are not covered under Medicare
Part B under section 1861(s)(2)(B) of the
Act, and certain preventive services (78
FR 74865 and 79 FR 66800 through
66801).
The C–APC policy payment
methodology set forth in the CY 2014
OPPS/ASC final rule with comment
period for the C–APCs and modified
and implemented in CY 2015 is
summarized as follows (78 FR 74887
and 79 FR 66800):
Basic Methodology. As stated in the
CY 2015 OPPS/ASC final rule with
comment period, we define the C–APC
payment policy as including all covered
OPD services on a hospital outpatient
claim reporting a primary service that is
assigned to status indicator ‘‘J1,’’
excluding services that are not covered
OPD services or that cannot by statute
be paid for under the OPPS. Services
and procedures described by HCPCS
codes assigned to status indicator ‘‘J1’’
are assigned to C–APCs based on our
usual APC assignment methodology by
evaluating the geometric mean costs of
the primary service claims to establish
resource similarity and the clinical
characteristics of each procedure to
establish clinical similarity within each
APC.
Services included under the C–APC
payment packaging policy, that is,

services that are typically adjunctive to
the primary service, provided during the
delivery of the comprehensive service,
include 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; 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 represent
services that are provided during the
complete comprehensive service, except
the excluded services that are described
below (78 FR 74865 and 79 FR 66800).
In addition, payment for outpatient
department services that are similar to
therapy services and delivered either by
therapists or nontherapists is included
as part of the payment for the packaged
complete comprehensive service. These
services that are 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
have previously noted that therapy
services are those provided by 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 for
under section 1834(k) of the Act, subject
to annual therapy caps as applicable (78
FR 74867 and 79 FR 66800). However,
certain other services similar to therapy
services are considered and paid for as
outpatient department services.
Payment for these nontherapy
outpatient department services that are
reported with therapy codes and
provided with a comprehensive service
is included in the payment for the
packaged complete comprehensive
service. We note that these services,
even though they are reported with
therapy codes, are outpatient
department services and not therapy
services. Therefore, the requirement for
functional reporting under the
regulations at 42 CFR 410.59(a)(4) and
42 CFR 410.60(a)(4) does not apply.
Items included in the packaged
payment provided in conjunction with
the primary service also include all

drugs, biologicals, and
radiopharmaceuticals, regardless of cost,
except those drugs with pass-through
payment status and those drugs that are
usually self-administered (SADs), unless
they function as packaged supplies (78
FR 74868 through 74869 and 74909 and
79 FR 66800). We refer readers to
Section 50.2M, Chapter 15, of the
Medicare Benefit Policy Manual for a
description of our policy on SADs
treated as hospital outpatient supplies,
including lists of SADs that function as
supplies and those that do not function
as supplies.
Items and services excluded from the
C–APC payment policy include: SADs
that are not considered supplies because
they are not covered under Medicare
Part B under section 1861(s)(2)(B) of the
Act; services excluded from the OPPS
according to section 1833(t)(1)(B) of the
Act, including recurring therapy
services, which we considered
unrelated to the comprehensive service
(defined as therapy services reported on
a separate facility claim for recurring
services), ambulance services,
diagnostic and screening
mammography, the annual wellness
visit providing personalized prevention
plan services, and pass-through drugs
and devices that are paid according to
section 1833(t)(6) of the Act.
We also excluded preventive services.
For a description of the preventive
services that are excluded from the C–
APC payment policy, we refer readers to
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66800 through
66801) and the list below in Table 7,
which also includes any new preventive
services added for CY 2016.
Other exclusions include
brachytherapy services and passthrough drugs, biologicals, and devices
that are required by statute to be
separately payable (78 FR 74868 and
74909 and 79 FR 66801). In addition, we
also excluded services assigned to OPPS
status indicator ‘‘F,’’ which are services
not paid under the OPPS and are
instead paid on a reasonable cost basis
(that is, certain certified registered nurse
assistant (CRNA) services, Hepatitis B
vaccines, and corneal tissue acquisition,
which is not part of a comprehensive
service for CY 2015). In Table 7 below,
we list the services that are excluded
from the C–APC payment policy.

TABLE 7—COMPREHENSIVE APC PAYMENT POLICY EXCLUSIONS FOR CY 2016
Ambulance services;
Brachytherapy;

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TABLE 7—COMPREHENSIVE APC PAYMENT POLICY EXCLUSIONS FOR CY 2016—Continued
Diagnostic and mammography screenings;
Physical therapy, speech-language pathology and occupational therapy services—Therapy services reported on a separate facility claim for recurring services;
Pass-through drugs, biologicals, and devices;
Preventive services defined in 42 CFR 410.2:
• Annual wellness visits providing personalized prevention plan services
• Initial preventive physical examinations
• Pneumococcal, influenza, and hepatitis B vaccines and administrations
• Mammography Screenings
• Pap smear screenings and pelvic examination screenings
• Low Dose Computed Tomography
• Prostate cancer screening tests
• Colorectal cancer screening tests
• Diabetes outpatient self-management training services
• Bone mass measurements
• Glaucoma screenings
• Medical nutrition therapy services
• Cardiovascular screening blood tests
• Diabetes screening tests
• Ultrasound screenings for abdominal aortic aneurysm
• Additional preventive services (as defined in section 1861(ddd)(1) of the Act);
Self-administered drugs (SADs)—Drugs that are usually self-administered and do not function as supplies in the provision of the comprehensive
service;
Services assigned to OPPS status indicator ‘‘F’’ (certain CRNA services, Hepatitis B vaccines and corneal tissue acquisition);
Services assigned to OPPS status indicator ‘‘L’’ (influenza and pneumococcal pneumonia vaccines); and

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Certain Part B inpatient services—Ancillary Part B inpatient services payable under Part B when the primary ‘‘J1’’ service for the claim is not a
payable Medicare Part B inpatient service (for example, exhausted Medicare Part A benefits, beneficiaries with Part B only).

We define each hospital outpatient
claim reporting a single unit of a single
primary service assigned to status
indicator ‘‘J1’’ as a single ‘‘J1’’ unit
procedure claim (78 FR 74871 and 79
FR 66801). We sum all line item charges
for services included on the C–APC
claim, convert the charges to costs, and
calculate the ‘‘comprehensive’’
geometric mean cost of one unit of each
service assigned to status indicator ‘‘J1.’’
(We note that we use the term
‘‘comprehensive’’ to describe the
geometric mean cost of a claim reporting
‘‘J1’’ service(s) or the geometric mean
cost of a C–APC, inclusive of all of the
items and services included in the C–
APC service payment bundle.) Charges
for services that would otherwise be
separately payable are added to the
charges for the primary service. This
process differs from our traditional cost
accounting methodology only in that all
such services on the claim are packaged
(except certain services as described
above). We apply our standard data
trims, excluding claims with extremely
high primary units or extreme costs.
The comprehensive geometric mean
costs are used to establish resource
similarity and, along with clinical
similarity, dictate the assignment of the
primary services to the C–APCs. We
establish a ranking of each primary

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service (single unit only) to be assigned
to status indicator ‘‘J1’’ according to
their comprehensive geometric mean
costs. For the minority of claims
reporting more than one primary service
assigned to status indicator ‘‘J1’’ or units
thereof (approximately 20 percent of CY
2014 claims), we identify one ‘‘J1’’
service as the primary service for the
claim based on our cost-based ranking
of primary services. We then assign
these multiple ‘‘J1’’ procedure claims to
the C–APC to which the service
designated as the primary service is
assigned. If the reported ‘‘J1’’ services
reported on a claim map to different C–
APCs, we designate the ‘‘J1’’ service
assigned to the C–APC with the highest
comprehensive geometric mean cost as
the primary service for that claim. If the
reported multiple ‘‘J1’’ services on a
claim map to the same C–APC, we
designate the most costly service (at the
HCPCS code level) as the primary
service for that claim. This process
results in initial assignments of claims
for the primary services assigned to
status indicator ‘‘J1’’ to the most
appropriate C–APCs based on both
single and multiple procedure claims
reporting these services and clinical and
resource homogeneity.
Complexity Adjustments. We use
complexity adjustments to provide

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increased payment for certain
comprehensive services. We apply a
complexity adjustment by promoting
qualifying ‘‘J1’’ service code
combinations or code combinations of
‘‘J1’’ services and certain add-on codes
(as described further below) from the
originating C–APC (the C–APC to which
the designated primary service is first
assigned) to a higher paying C–APC in
the same clinical family of C–APCs, if
reassignment is clinically appropriate
and the reassignment would not create
a violation of the 2 times rule in the
receiving APC (the higher paying C–
APC in the same clinical family of C–
APCs). We implement this type of
complexity adjustment when the code
combination represents a complex,
costly form or version of the primary
service according to the following
criteria:
• Frequency of 25 or more claims
reporting the code combination
(frequency threshold); and
• Violation of the 2 times rule (cost
threshold).
After designating a single primary
service for a claim, we evaluate that
service in combination with each of the
other procedure codes reported on the
claim assigned to status indicator ‘‘J1’’
(or certain add-on codes) to determine if
they meet the complexity adjustment

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criteria. For new HCPCS codes, we
determine initial C–APC assignments
and complexity adjustments using the
best data available, crosswalking the
new HCPCS codes to predecessor codes
wherever possible.
Once we have determined that a
particular code combination of ‘‘J1’’
services (or combinations of ‘‘J1’’
services reported in conjunction with
certain add-on codes) represents a
complex version of the primary service
because it is sufficiently costly,
frequent, and a subset of the primary
comprehensive service overall
according to the criteria described
above, we promote the complex version
of the primary service as described by
the code combination to the next higher
cost C–APC within the clinical family,
unless the APC reassignment is not
clinically appropriate, the reassignment
would create a violation of the 2 times
rule in the receiving APC, or the
primary service is already assigned to
the highest cost APC within the C–APC
clinical family or assigned to the only
C–APC in a clinical family. We do not
create new APCs with a comprehensive
geometric mean cost that is higher than
the highest geometric mean cost (or
only) C–APC in a clinical family just to
accommodate potential complexity
adjustments. Therefore, the highest
payment for any code combination for
services assigned to a C–APC would be
the highest paying C–APC in the clinical
family (79 FR 66802).
We package payment for all add-on
codes into the payment for the C–APC.
However, certain primary service-addon combinations may qualify for a
complexity adjustment. First, the addon code must be an eligible add-on
code. The list of add-on codes that are
eligible for complexity adjustment
evaluation was included in Table 8 of
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66810), and also
was identified as Addendum J to the
proposed rule (which is available via
the Internet on the CMS Web site). In
the CY 2016 OPPS/ASC proposed rule
(80 FR 39225), for CY 2016, we did not
propose to add any add-on codes to the
list of add-on codes that are evaluated
for a complexity adjustment when
performed in conjunction with a
primary C–APC procedure.
To determine which combinations of
primary service codes reported in
conjunction with an eligible add-on
code may qualify for a complexity
adjustment for CY 2016, we apply the
frequency and cost criteria thresholds
discussed above, testing claims
reporting one unit of a single primary
service assigned to status indicator ‘‘J1’’
and any number of units of a single add-

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on code. If the frequency and cost
criteria thresholds for a complexity
adjustment are met, and reassignment to
the next higher cost APC in the clinical
family is appropriate, we make a
complexity adjustment for the code
combination; that is, we reassign the
primary service code reported in
conjunction with the eligible add-on
code combination to a higher cost C–
APC within the same clinical family of
C–APCs. If any add-on code
combination reported in conjunction
with the primary service code does not
qualify for a complexity adjustment,
payment for these services is packaged
within the payment for the complete
comprehensive service. We list the
complexity adjustments proposed for
add-on code combinations for CY 2016,
along with all of the other complexity
adjustments, in Addendum J to this
final rule with comment period (which
is available via the Internet on the CMS
Web site).
We are providing in Addendum J to
this final rule with comment period a
breakdown of cost statistics for each
code combination that will qualify for a
complexity adjustment (including
primary code and add-on code
combinations). Addendum J to this final
rule with comment period also contains
summary cost statistics for each of the
code combinations that describe a
complex code combination that will
qualify for a complexity adjustment and
will be reassigned to the next higher
cost C–APC within the clinical family.
The combined statistics for all
reassigned complex code combinations
are represented by an alphanumeric
code with the last 4 digits of the
designated primary service followed by
‘‘A’’ (indicating ‘‘adjustment’’). For
example, the geometric mean cost listed
in Addendum J for the code
combination described by complexity
adjustment assignment 3208A, which is
assigned to renumbered C–APC 5223
(Level 3 Pacemaker and Similar
Procedures) (previously APC 0089),
includes all code combinations that are
reassigned to renumbered C–APC 5223
when CPT code 33208 is the primary
code. Providing the information
contained in Addendum J in this final
rule with comment period allows
stakeholders the opportunity to better
assess the impact associated with the
reassignment of each of the code
combinations eligible for a complexity
adjustment.

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(2) C–APCs To Be Paid Under the C–
APC Payment Policy for CY 2016
(a) CY 2016 C–APCs
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39225), for CY 2016, we
proposed to continue to apply the C–
APC payment policy methodology made
effective in CY 2015, as described in
detail below. We proposed to continue
to define the services assigned to C–
APCs as primary services, and to define
a C–APC as a classification for the
provision of a primary service and all
adjunctive services and supplies
provided to support the delivery of the
primary service. We also proposed to
follow the C–APC payment policy
methodology of including all covered
OPD services on a hospital outpatient
claim reporting a primary service that is
assigned to status indicator ‘‘J1,’’
excluding services that are not covered
OPD services or that cannot by statute
be paid under the OPPS.
As indicated in the CY 2016 OPPS/
ASC proposed rule (80 FR 39225), after
our annual review of the OPPS, we
proposed to establish nine additional C–
APCs to be paid under the existing C–
APC payment policy beginning in CY
2016. All C–APCs, including those
effective in CY 2016 and those being
proposed for CY 2016, were displayed
in Table 6 of the proposed rule with the
proposed new C–APCs denoted with an
asterisk. Addendum J to the proposed
rule (which is available via the Internet
on the CMS Web site) contained all of
the data related to the C–APC payment
policy methodology, including the list
of proposed complexity adjustments.
Comment: Several commenters
generally supported the concept of
creating larger payment bundles under
the OPPS. The commenters endorsed
the C–APC payment policy and the
proposal to establish nine additional C–
APCs for CY 2016 to be paid under the
existing policy.
Response: We appreciate the
commenters’ support.
Comment: Some commenters
expressed concerns that the C–APC
payment rates do not accurately reflect
all of the costs associated with the
primary service and all adjunctive
services. Many of these commenters
opposed the expansion of the C–APC
policy and requested a delay in the
implementation of the proposed CY
2016 C–APCs until the effect of the
existing C–APCs can be assessed. Other
commenters stated that the C–APC
payment rates may not appropriately
account for the cost of recurring services
such as radiation oncology and dialysis
that are unrelated to the primary
service, but may be included in a C–

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APC claim. Some commenters also
requested CMS to provide for
transparency in the development of C–
APC payment rates and data inputs.
Response: We do not believe that we
should delay implementation of the
proposed CY 2016 C–APCs to allow
time for assessment of the effect of the
existing C–APCs. It is unclear what
specific analyses the commenters are
requesting we perform before
establishing additional C–APCs. In
addition, we believe we have provided
adequate information to enable
stakeholders sufficient time to perform
independent analysis of the proposed
C–APC payment rates and their effects.
We believe that the additional nine C–
APCs that we proposed for CY 2016 and
the existing 25 C–APCs meet the
established C–APC criteria. In addition,
the commenters did not present any
data or evidence that would suggest that
the C–APC payment methodology used
to calculate the CY 2016 payment rates
is inappropriate. We calculate payment
rates for C–APCs with the same basic
methodology used to calculate payment
rates for other APCs. We calculated the
final relative payment weights for C–
APCs by using relative costs derived
from our standard process as described
earlier in section II.A. of this final rule
with comment period. Specifically, after
converting charges to costs on the
claims, we identified all claims
reporting a single procedure described
by a HCPCS code assigned to status
indicator ‘‘J1’’ 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
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. 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. Claims
with extreme costs were excluded in
accordance with our usual process. We
used the final relative payment weights
of these comprehensive services to
calculate final payments following our
standard methodology. We believe that
the C–APC payment methodology is
consistent with our goal of making the
OPPS more like a prospective payment
system and less like a fee schedule. As
is our current practice, we intend to
continue to review and monitor all of
our payment rates to ensure that they
are accurate and reflect the average
resource costs of furnishing a service or
set of services. In the event that we
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development of payment rates, CMS
will take appropriate action and make
adjustments as necessary.
With respect to the public comments
regarding the inclusion of unrelated
services on a C–APC claim, we note that
we have responded to similar comments
in a prior rulemaking. We refer readers
to the CY 2014 OPPS/ASC final rule
with comment period (78 FR 74865) and
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66804 and
66806) for a complete discussion of this
issue. We believe that the central
attribute of the C–APC payment policy
is the packaging of all the services
related to the primary service, with the
exception of those services described
above that, according to the statute,
cannot be packaged or the list of
preventive services that generally would
not be provided at the time of a major
procedure assigned to a C–APC. We
believe that other services performed at
the time of major procedures included
in C–APCs can reasonably be
considered to be related to the primary
service or procedure. Therefore, we
consider all services reported on the
claim to be related to the primary
service and include these services in
establishing the payment rate for the C–
APC. We do not believe that a
significant amount of unrelated services
would be billed on the claim for the
primary service.
Further, we note that the comments
received regarding this issue were
primarily concerned with unrelated
services reported on claims spanning 30
days. We have previously issued
manual guidance in the Internet Only
Manual, Pub. 100–4, Chapter 1, Section
50.2.2, that states that only recurring
services should be billed monthly. We
also have 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 (79
FR 66804). In addition, we have
instructed hospitals that laboratory tests
ordered by unrelated providers for
unrelated medical conditions may be
billed on a 14X bill-type (78 FR 74926).
Lastly, we do not believe that it would
be an undue hardship for some
hospitals to alter their processes in
order to submit separate claims for
services that are unrelated both
clinically and in regard to time to the
comprehensive service.
In response to comments requesting
additional transparency of the
development of C–APCs and their
proposed cost, we believe that the data

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made available to the public as part of
the proposed rule was appropriate,
clear, and sufficient. For further
information on our data process, we
refer readers to section II.A.1.b. of this
final rule with comment period.
Comment: A few commenters
requested that CMS provide more clarity
regarding the definition of adjunctive
services.
Response: A description of services
that are considered to be adjunctive to
the primary comprehensive service is
provided in the CY 2014 OPPS/ASC
final rule with comment period (78 FR
74865) as well as the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66800). As previously stated,
adjunctive services include services that
are integral, ancillary, supportive, or
dependent that are 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: One commenter expressed
concerns regarding payment for durable
medical equipment that is included on
the claim with a primary service and
packaged into the C–APC payment for
the service. The commenter stated that,
with the implementation of the C–APC
payment policy, these items and
services are no longer paid under
separate fee schedules and their costs
are included in determining the relative
weights for the C–APCs. Further, the
commenter stated that CMS did not
provide any evidence that funds were
added to the OPPS for these packaged
groups and that not adding these funds
could potentially add costs to the
payment system without increasing
payment rates. In addition, the
commenter expressed concerns that the
relative weights of the new C–APCs will
increase, in turn causing the relative
weights of other APCs to decrease,
which would unfairly decrease payment
rates for those other separately paid
procedures.

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Response: The costs of durable
medical equipment, prosthetics, and
orthotics have been accounted for in the
OPPS. Funds were transferred from the
DMEPOS Fee Schedule to the OPPS to
account for costs of durable medical
equipment. We refer readers to the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66823) for a
discussion of the redistribution from the
DMEPOS Fee Schedule to the OPPS of
approximately $1 million.
Also, with regard to the effect of the
increase in the relative weights for the
C–APCs, we disagree with the
commenters that payment rates for other
separately paid procedures are unfairly
reduced. Because funds were transferred
from the DMEPOS Fee Schedule to
account for the costs of durable medical
equipment, the relativity of the OPPS
payment weights has not been distorted.
This accounting for additional DME
costs would make the relative payment
weights of OPPS services (both
comprehensive and noncomprehensive)
reflective of their estimated costs.
Further, in a budget neutral system,
changes to any OPPS relative payment
weights have redistributional effects
throughout the system and any policy
changes or data updates have the
potential to cause these effects.
Comment: One commenter opposed
CMS’ proposal to assign the procedure
described by new CPT code 0392T
(Laparoscopy, surgical, esophageal
sphincter augmentation procedure,
placement of sphincter augmentation
device (i.e., magnetic band)) to C–APC
5362 (Level 2 Laparoscopy). Although
the commenter did not suggest a
specific APC or C–APC to which the
procedure should be assigned, the
commenter stated that the proposed C–
APC assignment for the procedure
described by CPT code 0392T results in
a significant payment reduction for the
procedure and creates a situation where
the cost of the device represents
approximately 51 percent of the
payment rate for C–APC 5362.
Therefore, the commenter requested that
CMS consider an alternative APC
assignment for this procedure. Another
commenter suggested that CMS create a
third level to the C–APC structure for
the Laparoscopic Procedures clinical
family that includes laparoscopic
procedures with a mean geometric cost
that is greater than $8,000.
Response: We disagree with the
commenter’s request. As a part of our
broader efforts to thoroughly review,
revise, and consolidate APCs to improve
both resource and clinical homogeneity,
we proposed a two-level APC structure
for laparoscopy procedures for CY 2016.
This proposal reduced the levels in the

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Laparoscopic Procedures clinical family
from four levels in CY 2015 to two
levels proposed for CY 2016. The
procedure described by CPT code 0392T
is similar in terms of clinical
characteristics to the other procedures
assigned to C–APC 5362 (Level 2
Laparoscopy), which has the highest
payment rate in this clinical family. In
addition, CPT code 0392T replaced
HCPCS code C9737 (Laparoscopy,
surgical, esophageal sphincter
augmentation with device (e.g.,
magnetic band)), beginning July 1, 2015.
In CY 2015, the procedure described by
HCPCS code C9737 was assigned to
APC 0174 (Level 4 Laparoscopy).
Because CPT code 0392T describes the
same procedure as HCPCS code C9737,
we proposed to assign the new CPT
code to the same APC and status
indicator as its predecessor HCPCS Ccode. In addition, because CPT code
0392T is new for CY 2015 and we do
not have claims data for ratesetting
purposes for this code, we used the
geometric mean cost of the predecessor
HCPCS code (C9737) as a proxy for the
APC assignment. The geometric mean
cost of the procedure described by
HCPCS code C9737 is approximately
$9,779 and the geometric mean cost of
C–APC 5362 is approximately $7,179,
which comprises significant services
ranging in cost from approximately
$6,139 to approximately $9,551.
Therefore, the assignment of CPT code
0392T to C–APC 5362 is based on
similar resource use and does not result
in a violation of the 2 times rule. In
addition, CPT code 0392T is a
laparoscopic procedure that is similar in
clinical characteristics to other
procedures assigned to C–APC 5362.
Once we have available claims data for
the procedure described by CPT code
0392T, we intend to reevaluate this APC
assignment under the yearly review of
APC assignments.
We believe that the procedures
assigned to C–APC 5362 have similar
resource utilization and do not create a
violation of the 2 times rule within the
C–APC. Therefore, we do not believe
that creating another level in the
structure of this clinical family is
warranted.
Comment: One commenter
recommended that the Neurostimulators
C–APC clinical family be restructured
to: (1) Assign all of the single and
multiple lead combination procedures
to C–APC 5462 (Level 2
Neurostimulators); (2) assign all of the
single generators (without placement of
a lead) and low cost combination full
system implants (one generator and one
or more leads) to C–APC 5463 (Level 3
Neurostimulator); and (3) assign all of

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the multiple generators for bilateral
procedures and high cost full system
implants (one generator and one or more
leads) to C–APC 5464 (Level 4
Neurostimulators). The commenter
noted that it appears that the procedures
assigned to the Neurostimulators C–APC
clinical family were based on the
comparable cost of the procedures alone
rather than also factoring in clinical
similarity. The commenter believed that
the recommended restructuring would
improve the clinical coherence of the
procedures assigned to the
neurostimulators C–APC family and
increase the stability of the C–APC.
Response: We do not believe that we
should restructure the Neurostimulators
C–APC clinical family as recommended
by the commenter. We note that APC
groupings are based on two factors,
clinical similarity and resource
similarity. The highest level in this APC
series includes various combinations of
neurostimulator generator implantation
procedures with or without leads (and
no other types of procedures) within the
specified cost range. The commenter
suggested that we define clinical
similarity very narrowly with strict
adherence to the CPT code descriptors.
If the OPPS were a fee schedule that did
not assign procedures to groups, this
could be an acceptable approach.
However, the OPPS is a prospective
payment system that uses APC
groupings of clinically similar services.
We believe that the proposed structure
of this C–APC clinical family best meets
the objective of both clinical and
resource homogeneity within the
context of a prospective payment
system.
Comment: A few commenters
requested that CMS make modifications
to the C–APC complexity adjustment
policy. Some commenters requested that
CMS revise the criteria for a claim to
qualify for a complexity adjustment
beyond the current frequency and cost
thresholds to account for the patient
acuity experienced at institutions such
as academic medical centers, cancer
hospitals, and trauma centers. Other
commenters requested that CMS
consider the inclusion of three or more
primary ‘‘J1’’ codes in the evaluation of
complexity adjustments instead of the
current code pair comparison policy.
The commenter believed that the
reliance on code combinations based on
cost ranking of codes would lead to
instability in the complexity
adjustments from year to year, and
would not take into consideration a
large number of comprehensive claims
with multiple ‘‘J1’’ services.
Response: While we acknowledge the
challenges involved with treating

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
complex patients, as discussed in the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66805), OPPS
payments are not currently based on
patient severity or diagnosis like
payments under the IPPS. Therefore, we
are unable to make adjustments based
on these factors.
With regard to considering the
inclusion of three or more primary ‘‘J1’’
services in evaluation of complexity
adjustments, we reiterate our statement
in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66806) in
which we disagreed that assigning
complexity adjustments based on cost
ranking of primary and secondary codes
is either insufficient or would result in
instability of the complexity
adjustments in future years. Ranking
‘‘J1’’ services based on comprehensive
geometric mean costs to determine the
primary ‘‘J1’’ service on a claim does not
result in instability in the evaluation of
complexity adjustments because, by
definition, the complexity adjustment is
for costly cases relative to the primary
(most costly) ‘‘J1’’ service. We proposed
complexity adjustments for certain code
pairs to provide a higher payment by
promoting the claim for high cost
procedure pairs consisting of a primary
comprehensive procedure and a
secondary comprehensive procedure
that represent sufficiently frequent and
sufficiently costly comprehensive
procedure pairs to the next higher
paying APC within a clinical family,
such that these claims are separated
from and provided a higher payment
than all of the services that are
accounted for in the APC assignment of
the primary service. We do not believe
that providing a complexity adjustment
to any claim that has three or more ‘‘J1’’
services or to all claims reporting code
pairs of ‘‘J1’’ services that meet the cost
and frequency criteria would adequately
serve the stated purpose of the policy.
The intent of the complexity adjustment
policy is to identify a limited number of
costly procedure pairs that would
qualify for a higher payment at the next
higher paying C–APC within the clinical
family, not to unpackage and separately
pay for all of the high cost services that
are associated with the primary ‘‘J1’’
procedure.
Comment: One commenter requested
that CMS allow any add-on codes
describing status indicator ‘‘J1’’
procedures to be eligible for complexity
adjustments when the codes appear on
the claim in combination with a primary
‘‘J1’’service. The commenter noted that
the current list of add-on codes eligible
for complexity adjustments includes
only add-on codes formerly assigned to
device-dependent APCs. The

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commenter further reasoned that,
because CMS has extended the concept
of C–APCs beyond the original policy of
applying the comprehensive APC
methodology to device-dependent
APCs, the list of eligible add-on
procedures should be expanded as well.
Response: We agree with the
commenters. The current policy allows
add-on codes that were (prior to CY
2015) assigned to device-dependent
APCs to be evaluated for a complexity
adjustment when provided in
combination with a primary ‘‘J1’’
service. This policy was adopted
because the original group of C–APCs
was primarily the former devicedependent APCs; therefore, the add-on
codes that were evaluated for a
complexity adjustment were consistent
with the codes assigned as primary
‘‘J1’’services under the original C–APCs.
As we expand the number of C–APCs,
we believe that we must also expand the
number of add-on codes that can be
evaluated for a complexity adjustment
beyond only those add-on codes that
were once assigned to device-dependent
APCs. Therefore, we are revising the list
of add-on codes that are evaluated for a
complexity adjustment to include all
add-on codes that can be appropriately
reported in combination with a base
code that describes a primary
‘‘J1’’service.
In order to qualify for a complexity
adjustment, the primary service add-on
combination must meet the frequency
(25 or more claims reporting the code
combination) and cost (no violation of
the 2 times rule) thresholds discussed
above. Table 8 of the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66810) (now also Table 8 in this final
rule with comment period) has been
updated to include the additional addon codes that can be evaluated for a
complexity adjustment.

TABLE 8—FINAL CY 2016 PACKAGED
CPT ADD-ON CODES THAT ARE
EVALUATED FOR A COMPLEXITY ADJUSTMENT

C9601 ...............
C9603 ...............
C9605 ...............
C9608 ...............
G0289 ...............
0172T ...............
0205T ...............

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Frm 00035

TABLE 8—FINAL CY 2016 PACKAGED
CPT ADD-ON CODES THAT ARE
EVALUATED FOR A COMPLEXITY ADJUSTMENT—Continued
CY 2016 CPT/
HCPCS
add-on code
0289T
0290T
0291T
0294T
0376T

...............
...............
...............
...............
...............

0396T ...............
0397T ...............
20930 ................
20931 ................
20936 ................
20937 ................
20938 ................
22515 ................
22552 ................
22585 ................
22614 ................
22632 ................
22840
22841
22842
22843
22844
22845
22846
22847
22848
22851
22858

................
................
................
................
................
................
................
................
................
................
................

27358 ................
29826 ................
33225 ................
37222
37223
37232
37233

................
................
................
................

37234 ................

CY 2016 CPT/
HCPCS
add-on code

CY 2016 short descriptor

37235 ................
37237 ................

Perc drug-el cor stent
bran.
Perc d-e cor stent ather br.
Perc d-e cor revasc t cabg
b.
Perc d-e cor revasc chro
add.
Arthro, loose body +
chondro.
Lumbar spine process
addl.
Inirs each vessel add-on.

37239 ................

Fmt 4701

Sfmt 4700

70331

38900 ................
43273 ................
43283
43338
49326
49327
49435

E:\FR\FM\13NOR2.SGM

................
................
................
................
................

13NOR2

CY 2016 short descriptor
Laser inc for pkp/lkp donor.
Laser inc for pkp/lkp recip.
Iv oct for proc init vessel.
Ins lt atrl mont pres lead.
Insert ant segment drain
int.
Intraop kinetic balnce
sensr.
Ercp w/optical
endomicroscpy.
Sp bone algrft morsel addon.
Sp bone algrft struct add-o.
Sp bone agrft local add-on.
Sp bone agrft morsel addon.
Sp bone agrft struct addon.
Perq vertebral augmentation.
Addl neck spine fusion.
Additional spinal fusion.
Spine fusion extra segment.
Spine fusion extra segment.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Apply spine prosth device.
Second level cer
diskectomy.
Remove femur lesion/fixation.
Shoulder arthroscopy/surgery.
L ventric pacing lead addon.
Iliac revasc add-on.
Iliac revasc w/stent add-on.
Tib/per revasc add-on.
Tibper revasc w/ather addon.
Revsc opn/prq tib/pero
stent.
Tib/per revasc stnt & ather.
Open/perq place stent ea
add.
Open/perq place stent ea
add.
Io map of sent lymph
node.
Endoscopic
pancreatoscopy.
Lap esoph lengthening.
Esoph lengthening.
Lap w/omentopexy add-on.
Lap ins device for rt.
Insert subq exten to ip
cath.

70332

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

TABLE 8—FINAL CY 2016 PACKAGED
CPT ADD-ON CODES THAT ARE
EVALUATED FOR A COMPLEXITY ADJUSTMENT—Continued

After consideration of the public
TABLE 8—FINAL CY 2016 PACKAGED
CPT ADD-ON CODES THAT ARE comments we received, we are
EVALUATED FOR A COMPLEXITY AD- finalizing our proposal with a slight
modification to establish 10 additional
JUSTMENT—Continued

CY 2016 CPT/
HCPCS
add-on code

CY 2016 CPT/
HCPCS
add-on code

57267 ................
60512
63035
63043
63044
63048

................
................
................
................
................

63057 ................
63066 ................
63076 ................
65757 ................
66990 ................
92921 ................
92925 ................
92929 ................
92934 ................
92938 ................

CY 2016 short descriptor
Insert mesh/pelvic flr
addon.
Autotransplant parathyroid.
Spinal disk surgery add-on.
Laminotomy addl cervical.
Laminotomy addl lumbar.
Remove spinal lamina addon.
Decompress spine cord
add-on.
Decompress spine cord
add-on.
Neck spine disk surgery.
Prep corneal endo
allograft.
Ophthalmic endoscope
add-on.
Prq cardiac angio addl art.
Prq card angio/athrect
addl.
Prq card stent w/angio
addl.
Prq card stent/ath/angio.
Prq revasc byp graft addl.

92944 ................
92973 ................
92974
92978
92998
93462
93463

................
................
................
................
................

93571 ................
93609 ................
93613 ................
93621 ................
93622 ................
93623
93655
93657
93662

................
................
................
................

CY 2016 short descriptor
Prq card revasc chronic
addl.
Prq coronary mech
thrombect.
Cath place cardio brachytx.
Intravasc us heart add-on.
Pul art balloon repr precut.
L hrt cath trnsptl puncture.
Drug admin & hemodynmic
meas.
Heart flow reserve measure.
Map tachycardia add-on.
Electrophys map 3d addon.
Electrophysiology evaluation.
Electrophysiology evaluation.
Stimulation pacing heart.
Ablate arrhythmia add on.
Tx l/r atrial fib addl.
Intracardiac ecg (ice).

C–APCs to be paid under the existing C–
APC payment policy beginning in CY
2016. Because an additional level 5 was
added to the musculoskeletal
procedures APC series (we refer readers
to section III.D.9. of this final rule with
comment period), the final number of
additional C–APCs for CY 2016 is 10. In
addition, we are adopting a final policy
to include all add-on codes that are
paired with a primary service assigned
status indicator ‘‘J1’’ to be evaluated to
qualify for a complexity adjustment as
shown in Table 8 above. All C–APCs,
including those newly added for CY
2016, are displayed in Table 9 of this
final rule with comment period with the
new C–APCs denoted with an asterisk.
Addendum J to this final rule with
comment period (which is available via
the Internet on the CMS Web site)
contains all of the data related to the C–
APC payment policy methodology,
including the list of complexity
adjustments.

TABLE 9—FINAL CY 2016 C–APCS

jstallworth on DSK7TPTVN1PROD with RULES

CY 2016
C–APC +
5222
5223
5224
5231
5232
5093
5165
5166
5211
5212
5213
5492
5493
5494
5331
5415
5416
5361
5362
5462
5463
5464
5123
5124
5125
5471
5627
5375
5376
5377
5191
5192
5193
5881
8011

.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................

+ We

CY 2016 APC Group title

Clinical family

New C–APC

Level 2 Pacemaker and Similar Procedures ..............................................................
Level 3 Pacemaker and Similar Procedures ..............................................................
Level 4 Pacemaker and Similar Procedures ..............................................................
Level 1 ICD and Similar Procedures ..........................................................................
Level 2 ICD and Similar Procedures ..........................................................................
Level 3 Breast/Lymphatic Surgery and Related Procedures .....................................
Level 5 ENT Procedures ............................................................................................
Level 6 ENT Procedures ............................................................................................
Level 1 Electrophysiologic Procedures ......................................................................
Level 2 Electrophysiologic Procedures ......................................................................
Level 3 Electrophysiologic Procedures ......................................................................
Level 2 Intraocular Procedures ..................................................................................
Level 3 Intraocular Procedures ..................................................................................
Level 4 Intraocular Procedures ..................................................................................
Complex GI Procedures .............................................................................................
Level 5 Gynecologic Procedures ................................................................................
Level 6 Gynecologic Procedures ................................................................................
Level 1 Laparoscopy ..................................................................................................
Level 2 Laparoscopy ..................................................................................................
Level 2 Neurostimulator and Related Procedures .....................................................
Level 3 Neurostimulator and Related Procedures .....................................................
Level 4 Neurostimulator and Related Procedures .....................................................
Level 3 Musculoskeletal Procedures ..........................................................................
Level 4 Musculoskeletal Procedures ..........................................................................
Level 5 Musculoskeletal Procedures ..........................................................................
Implantation of Drug Infusion Device .........................................................................
Level 7 Radiation Therapy .........................................................................................
Level 5 Urology and Related Services .......................................................................
Level 6 Urology and Related Services .......................................................................
Level 7 Urology and Related Services .......................................................................
Level 1 Endovascular Procedures ..............................................................................
Level 2 Endovascular Procedures ..............................................................................
Level 3 Endovascular Procedures ..............................................................................
Ancillary Outpatient Services When Patient Expires ..................................................
Comprehensive Observation Services .......................................................................

AICDP ....................
AICDP ....................
AICDP ....................
AICDP ....................
AICDP ....................
BREAS ...................
ENTXX ...................
ENTXX ...................
EPHYS ...................
EPHYS ...................
EPHYS ...................
EYEXX ...................
EYEXX ...................
EYEXX ...................
GIXXX ....................
GYNXX ..................
GYNXX ..................
LAPXX ...................
LAPXX ...................
NSTIM ....................
NSTIM ....................
NSTIM ....................
ORTHO ..................
ORTHO ..................
ORTHO ..................
PUMPS ..................
RADTX ...................
UROXX ..................
UROXX ..................
UROXX ..................
VASCX ...................
VASCX ...................
VASCX ...................
N/A .........................
N/A .........................

........................
........................
........................
........................
........................
........................
*
........................
........................
........................
........................
*
........................
........................
........................
........................
*
*
*
........................
........................
........................
*
........................
*
........................
........................
*
........................
........................
........................
........................
........................
*
*

refer readers to section III.D. of this final rule with comment period for a discussion of the overall restructuring and renumbering of APCs.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70333

* New C–APC for CY 2016.
Clinical Family Descriptor Key:
AICDP = Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices.
BREAS = Breast Surgery.
ENTXX = ENT Procedures.
EPHYS = Cardiac Electrophysiology.
EYEXX = Ophthalmic Surgery.
GIXXX = Gastrointestinal Procedures.
GYNXX = Gynecologic Procedures.
LAPXX = Laparoscopic Procedures.
NSTIM = Neurostimulators.
ORTHO = Orthopedic Surgery.
PUMPS = Implantable Drug Delivery Systems.
RADTX = Radiation Oncology.
UROXX = Urologic Procedures.
VASCX = Vascular Procedures.

jstallworth on DSK7TPTVN1PROD with RULES

(b) Observation Comprehensive APC (C–
APC 8011)
As part of our expansion of the C–
APC payment policy methodology, we
have identified an instance where we
believe that comprehensive payments
are appropriate, that is, when a claim
contains a specific combination of
services performed in combination with
each other, as opposed to the presence
of a single primary service identified by
status indicator ‘‘J1.’’ To recognize such
instances, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39226), for CY
2016, we proposed to create a new
status indicator ‘‘J2’’ to designate
specific combinations of services that,
when performed in combination with
each other and reported on a hospital
Medicare Part B outpatient claim, would
allow for all other OPPS payable
services and items reported on the claim
(excluding all preventive services and
certain Medicare Part B inpatient
services) to be deemed adjunctive
services representing components of a
comprehensive service and resulting in
a single prospective payment for the
comprehensive service based on the
costs of all reported services on the
claim. Additional information about the
proposed new status indicator ‘‘J2’’ and
its proposed C–APC assignment is
provided below.
It has been our longstanding policy to
provide payment to hospitals in certain
circumstances when extended
assessment and management of a patient
occur (79 FR 66811 through 66812).
Currently, payment for all qualifying
extended assessment and management
encounters is provided through APC
8009 (Extended Assessment and
Management (EAM) Composite) (79 FR
66811 through 66812). Under this
policy, we allow services identified by
the following to qualify for payment
through EAM composite APC 8009: A
clinic visit (described by HCPCS code
G0463); a Level 4 or 5 Type A ED visit
(described by CPT codes 99284 or
99285); a Level 5 Type B ED visit
(described by HCPCS code G0384); and

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Jkt 238001

a direct referral for observation
(described by HCPCS code G0379), or
critical care services (described by CPT
code 99291) provided by a hospital in
conjunction with observation services of
substantial duration (8 or more hours)
(provided the observation was not
furnished on the same day as surgery or
postoperatively) (79 FR 66811 through
66812).
For CY 2016, we proposed to pay for
all qualifying extended assessment and
management encounters through a
newly created ‘‘Comprehensive
Observation Services’’ C–APC (C–APC
8011) and to assign the services within
this APC to proposed new status
indicator ‘‘J2,’’ as described earlier in
this section. Specifically, we proposed
to make a C–APC payment through the
proposed new C–APC 8011 for claims
that meet the following criteria:
• The claims do not contain a
procedure described by a HCPCS code
to which we have assigned status
indicator ‘‘T’’ that is reported with a
date of service on the same day or 1 day
earlier than the date of service
associated with services described by
HCPCS code G0378;
• The claims contain 8 or more units
of services described by HCPCS code
G0378 (Observation services, per hour);
• The claims contain services
described by one of the following codes:
HCPCS code G0379 (Direct referral of
patient for hospital observation care) on
the same date of service as services
described by HCPCS code G0378; 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));
CPT code 99291 (Critical care,
evaluation and management of the
critically ill or critically injured patient;
first 30–74 minutes); or HCPCS code
G0463 (Hospital outpatient clinic visit
for assessment and management of a
patient) provided on the same date of
service or 1 day before the date of

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service for services described by HCPCS
code G0378; and
• The claims do not contain services
described by a HCPCS code to which we
have assigned status indicator ‘‘J1.’’
We proposed to utilize all of the
claims that meet the above criteria in
ratesetting for the proposed new C–APC
8011, and to develop the geometric
mean costs of the comprehensive
service based on the costs of all reported
OPPS payable services reported on the
claim (excluding all preventive services
and certain Medicare Part B inpatient
services). The proposed CY 2016
geometric mean cost resulting from this
methodology was approximately $2,111,
based on 1,191,120 claims used for
ratesetting.
With the proposal to establish a new
C–APC 8011 to capture qualifying
extended assessment and management
encounters that currently are paid using
composite APC 8009, in the CY 2016
OPPS/ASC proposed rule, we
correspondingly proposed to delete APC
8009, as it would be replaced with
proposed new C–APC 8011.
As stated earlier, we proposed to
assign certain combinations of
procedures within proposed new C–
APC 8011 to the proposed new status
indicator ‘‘J2,’’ to distinguish the new
C–APC 8011 from the other C–APCs.
Comprehensive payment would be
made through the new C–APC 8011
when a claim contains a specific
combination of services performed in
combination with each other, as
opposed to the presence of a single
primary service identified by status
indicator ‘‘J1.’’ We believe that a
distinction in the status indicator is
necessary to distinguish between the
logic required to identify when a claim
qualifies for payment through a C–APC
because of the presence of a status
indicator ‘‘J1’’ procedure on the claim
versus when a claim qualifies for
payment through a C–APC because of
the presence of a specific combination
of services on the claim. Specifically, for
proposed new C–APC 8011, we believe
the assignment of certain combinations

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of services that qualify under proposed
new C–APC 8011 to the new proposed
status indicator ‘‘J2’’ is necessary
because claims containing procedures
assigned status indicator ‘‘T’’ that are
performed on the same day or day
before observation care is provided
would not be payable through the
proposed new C–APC 8011, and the
initial ‘‘J1’’ logic would not exclude
claims containing procedures assigned
status indicator ‘‘T’’ from qualifying for
payment through another appropriately
assigned C–APC based on the primary
‘‘J1’’ procedure.
For claims reporting services assigned
to status indicator ‘‘J1’’ that qualify for
payment through a C–APC and services
assigned to status indicator ‘‘J2’’ that
qualify for payment through a C–APC,
we proposed that payment for services
would be made through the C–APC to
which the primary ‘‘J1’’ procedure is
assigned or through the C–APC to which
the primary ‘‘J2’’ procedures is assigned,
and all of the OPPS payable services
performed would be deemed adjunctive
services to the primary status indicator
‘‘J1’’ service, including the specific
combination of services performed in
combination with each other that would
otherwise qualify for payment through a
C–APC based on the primary procedure
being assigned to status indicator ‘‘J2.’’
We proposed that the presence of the
specific combination of services
performed in combination with each
other that would otherwise qualify the
service for payment through a C–APC
because it is assigned to status indicator
‘‘J2’’ on a hospital outpatient claim
would not result in a complexity
adjustment for the service qualifying for
payment through a C–APC because the
primary procedure is assigned to status
indicator ‘‘J1.’’
Under the C–APC payment policy, we
note that, 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 pay a single copayment for
the comprehensive service that would
be subject to the copayment liability
cap. As a result, we expect that this
policy likely reduces the possibility that
the overall beneficiary liability exceeds
the cap for most of these types of claims.
Comment: Many commenters,
including MedPAC, supported the
proposal to create new C–APC 8011.
The majority of those commenters who
supported the proposal requested that
CMS not allow any claims reporting a
surgical procedure (assigned status
indicator ‘‘T’’) to qualify for payment
through C–APC 8011, regardless of
whether the procedure assigned status

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indicator ‘‘T’’ was furnished before or
after observation services (described by
HCPCS code G0378) were provided. A
few other commenters who supported
the proposal requested that CMS make
separate payment for services assigned
to the proposed new C–APC 8011 and
the procedure assigned status indicator
‘‘T,’’ when a procedure assigned status
indicator ‘‘T’’ was furnished after
observation services were provided as
part of an encounter that would
otherwise qualify for payment through
the proposed new C–APC 8011. One
commenter requested that CMS package
payment for all procedures assigned
status indicator ‘‘T’’ into the payment
for the services through the proposed
new C–APC 8011, regardless of whether
the procedure assigned status indicator
‘‘T’’ was provided prior to or after the
furnishing the services described by
HCPCS code G0378 when both services
are present on a claim that would
otherwise qualify for payment through
the proposed new C–APC 8011. Other
commenters recommended that CMS
make modifications to the proposal,
including creating a cost threshold to
exclude relative high-cost but low
frequency services from being packaged
into the payment for services assigned
to C–APC 8011; excluding the payment
for specified covered outpatient drugs
(SCODs) from being packaged into the
payment for proposed new C–APC 8011;
establishing multiple observation C–
APCs; and creating a complexity
adjustment factor for services assigned
to proposed new C–APC 8011 similar to
the complexity adjustment used for
services assigned status indicator ‘‘J1’’
and paid through other C–APCs.
Response: We appreciate the
commenters’ support of our proposal to
create new C–APC 8011. In response to
comments pertaining to packaging the
payment for procedures assigned status
indicator ‘‘T’’ into the payment for
proposed new C–APC 8011, we are
sensitive to commenters’ concerns
regarding packaging payment for
potentially high-cost surgical
procedures into the payment for an
observation C–APC and agree that
claims reporting procedures assigned
status indicator ‘‘T’’ should not qualify
for payment through C–APC 8011,
regardless of whether the procedure
assigned status indicator ‘‘T’’ was
furnished before or after observation
services (described by HCPCS code
G0378) were provided. We believe that
excluding all claims reporting
procedures assigned status indicator
‘‘T’’ from qualifying for payment
through the new C–APC 8011 will
eliminate any need to create a cost

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threshold to exclude payment for
relative high-cost but low frequency
services from being packaged into the
payment for C–APC 8011, as well as
eliminate any need to create a
complexity adjustment factor for
services assigned to C–APC 8011 or to
create multiple observation C–APCs.
While we believe that payment for
surgical procedures should not be
packaged into the payment for services
assigned to C–APC 8011, we do not
believe that separate payment should be
made for both C–APC 8011 and the
procedure assigned status indicator ‘‘T’’
when the procedure assigned status
indicator ‘‘T’’ was provided as part of an
encounter that would otherwise qualify
for payment through the proposed new
C–APC 8011.
Accordingly, we are adopting a policy
that payment for observation services
will always be packaged when
furnished with a procedure assigned
status indicator ‘‘T.’’ For CY 2016,
consistent with our modified final
policy discussed in this final rule with
comment period, payment for
observation services will be packaged
into the surgical procedure when
comprehensive observation services are
furnished with a procedure assigned
status indicator ‘‘T,’’ while eligible
separately payable services will receive
separate payment.
In addition, we do not believe that
payment for SCODs should be excluded
from packaging into the payment made
through C–APC 8011 because the
services are considered supportive and
ancillary when furnished during an
outpatient observation encounter and,
therefore, are appropriate for inclusion
in the comprehensive payment through
C–APC 8011.
Comment: A number of commenters
who supported the proposal suggested
that CMS include all emergency
department (ED) visits as eligible
services paid through C–APC 8011, as
opposed to limiting the eligible services
to only high-level ED visits.
Response: We agree with the
commenters’ suggestion that CMS assign
all ED visits to C–APC 8011, rather than
only the high-level ED visits, because
we believe that all ED visits should be
eligible to trigger C–APC payment in the
same fashion that all clinic visits are
eligible to trigger C–APC payment to C–
APC 8011. We believe that including all
ED visits in C–APC 8011 is more
consistent with our comprehensive
payment policy. Allowing all ED visits
to be eligible to trigger C–APC payment
through C–APC 8011 means that we will
make C–APC payment for the full
spectrum of ED and clinic visits when
furnished in conjunction with 8 or more

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hours of observation and without a
surgical procedure.
Comment: One commenter requested
that CMS withdraw its requirement to
‘‘carve out,’’ or not include under the
reported observation hours, the number
of hours associated with active
monitoring.
Response: We disagree with the
commenter. Consistent with Section
290.2.2 of Chapter 4 of the Medicare
Claims Processing Manual, observation
services should not be billed
concurrently with diagnostic or
therapeutic services for which active
monitoring is a part of the procedure.
Comment: Some commenters
expressed concern that the proposed
payment rate for C–APC 8011 does not
adequately cover the costs of the
services involved, and may result in a
disincentive for hospitals to establish
policies that result in premature
discharge of these patients.
Response: The proposed geometric
mean cost of C–APC 8011 upon which
the CY 2016 proposed payment rate is
based, represents the geometric mean
cost of all services reported on claims
that qualified for payment through the
former EAM composite APC. Based on
the approximately 1.2 million claims
used for ratesetting for C–APC 8011, we
believe that the CY 2016 geometric
mean cost and associated CY 2016
payment rate appropriately reflect the
appropriate comprehensive payment for
encounters qualifying for payment
through C–APC 8011. Accordingly, we
do not believe the proposed payment
rate for C–APC 8011 would incentivize
hospitals to prematurely discharge
patients.
Comment: A few commenters
expressed concern that, because the
breadth of services that may be included
in these observation stays varies widely
based on the specific diagnoses
associated with the stay, critical care
hospitals and those hospitals in areas
with low socio-demographic status may
be disproportionately penalized by
receiving payment for services through
C–APC 8011. Another commenter
expressed concern that the proposed
creation of C–APC 8011 would
incentivize use of the least expensive
test for complex Medicare patients with
serious life-threatening symptoms,
regardless of what may be the best test
for a patient at a given time based on the
physician’s clinical judgment.
Response: We do not agree with the
commenters’ assertion that the creation
of new C–APC 8011 would incentivize
hospitals to furnish the cheapest test to
complex Medicare patients at the
expense of what may be the most
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we believe that hospitals provide
appropriate reasonable and necessary
care that is in the best interest of the
patient, and if furnishing a more costly
test represents the most appropriate
course of treatment, hospitals would
provide such a service. As noted earlier
in this section, the payment rate for C–
APC 8011 was based on all services
reported on claims that previously
qualified for the EAM composite APC.
Therefore, we believe the payment rate
appropriately reflects the average
resources expended in furnishing
comprehensive observation services. In
addition, we have no reason or evidence
to support the commenters’ assertion
that critical care hospitals and those in
areas with low socio-demographic status
may be disproportionately penalized by
receiving payment for services through
C–APC 8011, as the commenter did not
explain the basis for this assertion. We
believe that hospitals will continue to
provide appropriate care that is
reasonable and necessary. We note that,
as part of our annual rulemaking cycle,
we will continue to examine the claims
data and monitor any changes in the
provision of care associated with
furnishing observation services and
payment through C–APC 8011.
Comment: A number of commenters
requested that CMS provide additional
transparency on the development of C–
APC 8011 and its proposed cost, as well
as assess the risk of care fragmentation
and analyze the impact of the C–APC
payment methodology on a variety of
factors such as length of stay, patient
diagnosis, and patient age. One
commenter asked CMS to remind
providers of the critical importance of
reporting all services provided to
patients, regardless of whether they are
separately paid or not.
Response: In response to comments
requesting additional transparency on
the development of C–APC 8011 and its
proposed cost, we believe that the data
made available to the public as part of
the addenda to the proposed rule was
appropriate, clear, and sufficient. For
further information on our data process,
we refer readers to section II.A.1.b. of
this final rule with comment period.
Furthermore, as indicated earlier in this
section, as part of our annual
rulemaking cycle, we will continue to
examine the claims data and monitor
any changes in the provision of care,
including care fragmentation and other
factors such as length of stay associated
with furnishing observation services
and payment through C–APC 8011. We
also remind providers to report all
services provided to patients, regardless
of whether they are separately paid or
not.

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A number of comments presented
specific issues pertaining to selfadministered drugs, long observation
stays, outpatient observation notice, and
the 3-day inpatient stay requirement for
Medicare paid skilled nursing facility
(SNF) coverage. We did not propose or
discuss policies in the proposed rule
that implicated any of the specific
issues raised by the commenters.
Therefore, we believe these comments
are outside the scope of the proposed
rule, and we are not responding to them
in this final with comment period.
After consideration of the public
comments we received, effective
beginning CY 2016, we are finalizing
our proposals to delete APC 8009, to
establish new C–APC 8011, and to
develop the geometric mean costs of the
C–APCs based on the costs of all
reported OPPS payable services
reported on the claim (excluding all
preventive services and certain
Medicare Part B inpatient services). We
also are finalizing our proposal to pay
for all qualifying extended assessment
and management encounters through C–
APC 8011 and to assign the services
within this APC to proposed new status
indicator ‘‘J2.’’ In addition, we are
modifying our proposed criteria for
services to qualify for comprehensive
payment through C–APC 8011 and how
we identify all claims used in ratesetting
for the new C–APC 8011. Specifically,
we are adopting the following two
modifications to our proposal: (1) The
criteria for services to qualify for
payment through C–APC 8011 and the
claims identified for purposes of
ratesetting for C–APC 8011 will exclude
all claims containing a status indicator
‘‘T’’ procedure from qualification; and
(2) any level ED visit is an eligible
service that could trigger qualification
and payment through C–APC 8011, as
opposed to only high-level emergency
department visits. The finalized criteria
for services to qualify for payment
through C–APC 8011 are listed below.
All claims meeting these criteria will be
utilized in ratesetting purposes for C–
APC 8011 for CY 2016.
• The claims do not contain a
procedure described by a HCPCS code
to which we have assigned status
indicator ‘‘T’’;
• The claims contain 8 or more units
of services described by HCPCS code
G0378 (Observation services, per hour);
• The claims contain services
provided on the same date of service or
1 day before the date of service for
HCPCS code G0378 that are described
by 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;

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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
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));
CPT code 99291 (Critical care,
evaluation and management of the
critically ill or critically injured patient;
first 30–74 minutes); or HCPCS code
G0463 (Hospital outpatient clinic visit
for assessment and management of a
patient); and
• The claims do not contain a service
that is described by a HCPCS code to
which we have assigned status indicator
‘‘J1.’’
The final CY 2016 geometric mean
cost for C–APC 8011 resulting from this
methodology is approximately $2,275,
based on 1,338,889 claims used for
ratesetting.
(3) CY 2016 Policies for Specific C–
APCs

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(a) Stereotactic Radiosurgery (SRS)
With the advent of C–APCs, the OPPS
consists of a wide array of payment
methodologies, ranging from separate
payment for a single service to a C–APC
payment for an entire outpatient
encounter with multiple services. As
described above, our C–APC payment
policy generally provides payment for a
primary service and all adjunctive
services provided to support the
delivery of the primary service, with
certain exceptions, reported on the same
claim, regardless of the date of service.
Since implementation of the C–APC
policy and subsequent claims data
analyses, we have observed
circumstances in which necessary
services that are appropriately included
in an entire outpatient encounter
payment are furnished prior to a
primary ‘‘J1’’ service and billed
separately. That is, our analysis of
billing patterns associated with certain
procedures assigned status indicator
‘‘J1’’ indicates that providers are
reporting planning services, imaging

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tests, and other ‘‘planning and
preparation’’ services that are integrally
associated with the direct provision of
the primary ‘‘J1’’ service on a separate
claim. The physician practice patterns
associated with reporting the provision
of various stereotactic radiosurgery
(SRS) treatments presents an example of
this issue.
Section 634 of the American Taxpayer
Relief Act (ATRA) of 2012 (Pub. L. 112–
240) amended section 1833(t)(16) of the
Act by adding a new subparagraph (D)
to require that OPPS payments for
Cobalt-60 based SRS (also referred to as
gamma knife) be reduced to equal that
of payments for robotic linear
accelerator-based (LINAC) SRS, for
covered OPD services furnished on or
after April 1, 2013. This payment
reduction does not apply to hospitals in
rural areas, rural referral centers, or
SCHs. In the CY 2015 OPPS/ASC final
rule with comment period (79 FR
66809), we created C–APC 0067 (which
was proposed to be renumbered to C–
APC 5631 for CY 2016) for procedures
involving single-session cranial SRS
services. Because section 1833(t)(16)(D)
of the Act requires equal payment for
SRS delivered by Cobalt-60 based or
LINAC based technology, proposed
renumbered C–APC 5631 includes two
types of services involving SRS delivery
instruments, which are described by
HCPCS code 77371 (Radiation treatment
delivery, stereotactic radiosurgery
[SRS], complete course of treatment
cranial lesion(s) consisting of 1 session;
multi-source Cobalt 60-based) and
HCPCS code 77372 (Linear accelerator
based) (79 FR 66862).
As discussed in the CY 2016 OPPS/
ASC proposed rule (80 FR 39228), based
on our analysis of CY 2014 claims data
(the data used to develop the proposed
CY 2016 payment rates), we identified
differences in the billing patterns for
SRS procedures delivered using Cobalt60 based and LINAC based technologies.
In particular, our claims data analysis
results revealed that services involving
SRS delivered by Cobalt-60 based
technologies (as described by HCPCS
code 77371) typically included SRS
treatment planning services (for
example, imaging studies, radiation
treatment aids, and treatment planning)
and the actual deliveries of SRS
treatment on the same date of service
and reported on the same claim. In
contrast, claims data analysis results
revealed that services involving SRS
delivered by LINAC-based technologies
(as described by HCPCS code 77372)
frequently included services related to
SRS treatment (for example, imaging
studies, radiation treatment aids, and
treatment planning) that were provided

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on different dates of services and
reported on claims separate from the
actual delivery of SRS treatment.
Because services involving Cobalt-60
based and LINAC-based technologies
are proposed to be assigned to proposed
renumbered C–APC 5631, the costs of
both technologies are reflected in the C–
APC payment rate.
The policy intent of C–APCs is to
bundle payment for all services related
and adjunctive to the primary ‘‘J1’’
procedure. In light of this, we believe
that all essential planning and
preparation services also should be paid
through the C–APC. For accuracy of
payment, we make a single payment
through the C–APC that includes
payment for these essential planning
and preparation services, and we do not
pay separately for C–APC services when
they are furnished prior to delivery of
the primary ‘‘J1’’ procedure and
reported on separate claims. Procedures
involving SRS services are just one
example of where this may be occurring
under our C–APC payment policy.
As a result of our SRS claims data
findings, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39228), for CY
2016, we proposed to change payment
for SRS treatment under proposed
renumbered C–APC 5631 by identifying
any services that are differentially
reported using HCPCS codes 77371 and
77372 on the same claim and on claims
one month prior to the delivery of SRS
services in proposed renumbered C–
APC 5631, including planning and
preparation services, and removing
these claims from our C–APC geometric
mean cost calculations for CY 2016 and
CY 2017, while we collect data using a
modifier, which is discussed in greater
detail below. For any of the services that
we remove from the C–APC payment
bundle, we proposed that those services
would receive separate payment even
when appearing in combination with a
primary ‘‘J1’’ procedure (described
either by HCPCS code 77371 or 77372)
on the same claim for both CY 2016 and
CY 2017. Specifically, we proposed to
apply this treatment for the following
codes for planning and preparation
services:
• CT localization (HCPCS codes
77011 and 77014);
• MRI imaging (HCPCS codes 70551,
70552, and 70553);
• Clinical treatment planning (HCPCS
codes 77280, 77285, 77290, and 77295);
and
• Physics consultation (HCPCS code
77336).
We invited public comments on our
proposal to remove claims reporting
planning and preparation service for
SRS treatment from our geometric mean

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cost calculation for the CY 2016 and CY
2017 payment rate for proposed
renumbered C–APC 5631 and to allow
for separate payment of these same
services during CY 2016 and CY 2017
using either modality. As discussed in
detail below, our long-term goal is to
create a single prospective payment for
the entire outpatient encounter by
packaging payment for all C–APC
services, including all planning and
preparation services that occur prior to
the primary ‘‘J1’’ procedure.
Comment: Several commenters
supported our policy proposal to
remove claims reporting planning and
preparation services from the geometric
mean cost calculations for proposed
renumbered C–APC 5631. The
commenters believed that because of the
coding changes implemented over the
past few years to describe SRS delivery
by LINAC-based and Cobalt-60 based
technologies, hospitals have incorrectly
coded claims reporting SRS services. To
remedy perceived payment inaccuracies
for C–APC 5631, the commenters urged
CMS to adopt the policy as proposed.
Response: We appreciate the
commenters’ support of our proposal.
Comment: In contrast, many
commenters opposed the policy
proposal regarding payment for SRS
services and recommended that CMS
leave the four identified categories of
services within the C–APC payment
methodology for CY 2016 and work
with stakeholders to improve the coding
guidance for SRS services.
Response: As we stated in the
proposed rule, the policy intent of the
C–APCs is to bundle payment for all
services related and adjunctive to the
primary ‘‘J1’’ procedure. In light of this,
we believe that all services that are
adjunctive to the primary service should
be paid through the C–APC. However,
our claims analysis has shown that the
services described by HCPCS codes that
we proposed to exclude from the C–APC
payment were frequently reported on a
separate claim than the primary ‘‘J1’’
SRS service and, therefore, received
separate payment in addition to the full
C–APC payment. Therefore, to collect
claims data on the adjunctive services
for the SRS ‘‘J1’’ procedures and to
ensure appropriate ratesetting for the
SRS C–APC in the future, we believe it
is necessary to unbundle payment for
the adjunctive services for CY 2016 and
CY 2017. Because the intent of a C–APC
is to bundle payment for all services
related and adjunctive to the primary
‘‘J1’’ procedure, we agree that coding
and billing guidance and instructions
for SRS services should reflect the
inclusion of the comprehensive services
that were furnished in conjunction with

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the primary ‘‘J1’’ service and we
proposed the use of a modifier to better
identify when related comprehensive
services were being billed separately.
Comment: One commenter requested
clarification on how CMS will pay for
planning and preparation services
performed prior to the actual delivery of
the SRS service, such as basic dosimetry
(CPT code 77300), since CMS did not
specifically propose to remove these
costs from the calculation of C–APC
5631.
Response: Only the above-identified
10 planning and preparation CPT codes
that we proposed to remove from the C–
APC bundle payment for SRS delivery
services will be paid for separately in
CY 2016 when furnished to a
beneficiary within one month of the
SRS treatment. For CY 2016 and CY
2017, these codes will not be included
in the C–APC payment for SRS even if
they are furnished on the same date of
service. The services that we did not
propose to remove from the geometric
mean cost calculations will continue to
be paid through C–APC 5631 (for CY
2016, this will be C–APC 5627).
However, we remind hospitals that
procedure codes related to the primary
SRS service should either be reported
on the same claim, or, if furnished on
a different date than the primary
service, must include modifier ‘‘CP’’
that we are adopting in this final rule
with comment period (as discussed in
detail below).
Comment: Commenters requested that
CMS provide additional guidance on the
specific items and services, apart from
the four identified categories, that are to
be reported with the proposed modifier
as integral, ancillary, supportive,
dependent, and adjunctive to either
HCPCS code 77371 or 77372.
Commenters also asked for clarification
on the time period in which CMS will
consider the delivery of a service to be
adjunctive to the primary ‘‘J1’’ SRS
treatment.
Response: As we stated in the
proposed rule, any service that is
integral, ancillary, supportive,
dependent and adjunctive to the
primary ‘‘J1’’ service identified by either
HCPCS code 77371 or 77372 that is
reported on a different claim than the
primary ‘‘J1’’ service must be billed with
the HCPCS modifier. We believe that
hospitals, physicians, and other clinical
staff that furnish comprehensive
services are in a position to identify
these types of related services. We do
not believe that it is feasible or
practicable for us to identify all of the
services that could potentially be related
to a primary ‘‘J1’’ service given
differences in medical practice. We

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expect providers to identify any
adjunctive services provided within 30
days prior to SRS treatment.
After consideration of the public
comments we received, for CY 2016 and
CY 2017, we are finalizing our proposal
to remove planning and preparation
services (identified by the following 10
specific HCPCS codes: 70551, 70552,
70553, 77011, 77014, 77280, 77285,
77290, 77295, and 77336) from the
geometric mean cost calculations for
proposed C–APC 5631 which, beginning
in CY 2016, will be C–APC 5627 (Level
7 Radiation Therapy). In addition, for
CY 2016 and CY 2017, we will
separately pay for planning and
preparation services adjunctive to the
delivery of the SRS treatment through
either modality, regardless of whether
they are furnished on the same date of
service as the primary ‘‘J1’’ SRS service.
(b) Data Collection for Nonprimary
Services in C–APCs
As mentioned above, provider
practice patterns can create a need for
hospitals to perform services that are
integral, ancillary, supportive,
dependent, and adjunctive, hereinafter
collectively referred to as ‘‘adjunctive
services’’, to a comprehensive service
prior to the delivery of that service—for
example, testing leads for a pacemaker
insertion or planning for radiation
treatment. As the C–APC policy
continues to expand, we need a
mechanism to identify these adjunctive
services that are furnished prior to the
delivery of the associated primary ‘‘J1’’
service so that payments under the
encounter-based C–APC will be more
accurate.
To meet this objective, in the CY 2016
OPPS/ASC proposed rule (80 FR 39228),
for CY 2016, we proposed to establish
a HCPCS modifier to be reported with
every service code that describes an
adjunctive service to a comprehensive
service, but is reported on a different
claim. We proposed that the modifier
would be reported on UB–04 form (CMS
Form 1450) for hospital outpatient
services. Specifically, hospitals would
report this modifier for services that are
adjunctive to a primary procedure code
assigned a status indicator ‘‘J1’’ and that
are reported on a different claim than
the primary ‘‘J1’’ service. The collection
of this information would allow us to
begin to assess the accuracy of the
claims data used to set payment rates for
C–APC services. This information
would be useful in refining our C–APC
ratesetting process. Based on the
collection of these data, we envision
creating a single encounter payment for
primary ‘‘J1’’ services that reflects the
costs of all of the resources used during

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the delivery of the primary services. We
also would discontinue separate
payment for any of these packaged
adjunctive services, even when
furnished prior to delivery of the
primary ‘‘J1’’service. As noted above, we
proposed to use the modifier to identify
planning and preparation services for
primary ‘‘J1’’ procedures involving SRS
services with this goal in mind.
We invited additional public
comments on whether to adopt a
condition code as early as CY 2017,
which would replace this modifier to be
used for CY 2016 data collection, for
collecting this service-level information.
Comment: Overall, few commenters
supported CMS’ proposed policy to
collect claims data on the costs of
adjunctive services furnished prior to a
primary ‘‘J1’’ procedure and reported on
a different claim. Those commenters
who supported the policy proposal
encouraged CMS to implement this
proposal to begin an effort to include
the costs of all planning and preparation
services in the payment bundles for C–
APCs.
Response: We appreciate the
commenters’ support.
Comment: A significant number of
commenters opposed the proposed
policy to require hospitals to report a
modifier with every HCPCS code that
describes services that are adjunctive to
a comprehensive service (as described
by a ‘‘J1’’ status indicator), but reported
on a different claim. The commonly
cited concerns among the commenters
who opposed the proposed policy were
as follows:
• Definition of related and adjunctive
services. Commenters requested that
CMS provide greater clarity on the
definition of adjunctive services.
Specifically, the commenters
recommended that CMS identify and
propose adjunctive services by HCPCS
code for each primary ‘‘J1’’ service,
similar to the SRS C–APC proposal, so
that hospitals will know which HCPCS
codes describing adjunctive services to
report with the modifier. Without
specific guidance from CMS on the
scope of these adjunctive services, some
commenters expressed uncertainty
about their ability to accurately report
services using the modifier.
• Operational challenges and
administrative burden. Commenters
asserted that operationalizing new
reporting requirements for modifiers is
challenging because it requires a manual
claims review to determine
appropriateness of a modifier. In
addition, commenters recommended
that CMS delay implementation or
withdraw the proposed modifier for C–
APC adjunctive services data collection

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so that facilities can successfully
implement ICD–10 and accurately use
the PO modifier and the new modifier
59 subset X (E,S,P, and U).
Response: We appreciate the
thoughtful comments that were
submitted and, based on the abovementioned issues, particularly the
desire for CMs to provide additional
information pertaining to adjunctive
services for each C–APC raised by the
commenters, are modifying our proposal
to only require that the modifier be used
with respect to reporting adjunctive
services related to primary ‘‘J1’’ SRS
services that are reported separately on
different claims. We believe that it is
appropriate to finalize our proposal to
require the use of the modifier for
adjunctive SRS services based on our
analysis of claims data and information
submitted by stakeholders who are
familiar with the distinct processes of
care for each type of SRS technology.
We are not finalizing our proposal to
require the use of the modifier for
reporting any other C–APC services at
this time. We will take these comments
into consideration if we propose a
modifier for the other C–APCs in future
rulemaking.
Comment: Several commenters raised
technical questions about the
application of the proposed adjunctive
services modifier. Specifically,
commenters posed the following
questions:
• Should facilities report adjunctive
planning and preparation services when
furnished in a setting outside of the
HOPD?
• Are adjunctive services limited to
preoperative testing and planning
services only?
• Does the modifier apply to services
performed by different physicians
within a health system?
Response: As noted above, we are
finalizing our proposal to require the
use of the modifier for reporting
adjunctive and related services to a
primary ‘‘J1’’ SRS procedure at this
time. We intend to issue further
subregulatory guidance on use of the
modifier with respect to SRS services
prior to January 1, 2016. The
commenters’ technical questions will be
addressed in that guidance.
Comment: One commenter supported
the use of a modifier over a condition
code to report adjunctive services. The
commenter stated that because CMS
proposed to require the use of the
modifier for CY 2016, it is less
burdensome to continue its use in
subsequent years than switch to a
condition code. In addition, several
commenters asked CMS to delay
implementation of the requirement to

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use the adjunctive services modifier
until additional clarifying instruction is
provided on how to identify adjunctive
services furnished prior to a primary
‘‘J1’’ service. Alternatively, commenters
recommended that CMS follow a stepwise roll out approach and propose
select C–APCs through annual
rulemaking for which the use of the
adjunctive services modifier will be
required.
Response: We appreciate the feedback
from the commenter regarding the
preference for use of a modifier rather
than a condition code. For CY 2016, we
are finalizing a policy to only require
the use of the HCPCS code modifier for
adjunctive services related to primary
‘‘J1’’ SRS services (described by HCPCS
codes 77371 and 77372) that are
reported on a separate claim than the
primary ‘‘J1’’ service. In response to
comments on additional clarification on
how to identify adjunctive services, we
have identified these services for SRS
treatments in this final rule with
comment period. Because we are not
adopting a policy to require the use of
this HCPCS modifier for other C–APCs
at this time, we are not providing
additional information relating to
adjunctive services for other C–APCs in
this final rule with comment period.
After consideration of the public
comments we received we are finalizing
our proposal, with modification.
Specifically, for CY 2016 and CY 2017,
we are adopting a policy to require the
use of a HCPCS code modifier for
adjunctive SRS C–APC services that are
reported separate from the primary ‘‘J1’’
SRS service. Effective January 1, 2016,
hospitals must use the HCPCS code
modifier ‘‘CP’’ (Adjunctive service
related to a procedure assigned to a
comprehensive ambulatory payment
classification (C–APC) procedure, but
reported on a different claim) to report
adjunctive service(s) related to a
primary ‘‘J1’’ SRS services that is
reported on a separate claim than the
primary ‘‘J1’’ service. With respect to
other C–APCs, we are not adopting a
policy to require the use of the HCPCS
code modifier to identify adjunctive
services that are reported separately at
this time, but may consider doing so in
the future.
(c) Payment for Claims Reporting
Inpatient Only Services Performed on a
Patient Who Dies Before Admission
Currently, composite APC 0375
(Ancillary Outpatient Services When
Patient Dies) packages payment for all
services provided on the same date as
an inpatient only procedure that is
performed on an emergence basis on an
outpatient who dies before admission

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when the modifier ‘‘–CA’’ appears on
the claim. For CY 2016, we proposed to
provide payment through proposed
renumbered C–APC 5881 for all services
reported on the same claim as an
inpatient only procedure with the
modifier ‘‘–CA.’’ We stated in the
proposed rule that this proposal
provides for all services reported on the
same claim as an inpatient only
procedure with modifier ‘‘–CA’’ would
be paid through a single prospective
payment for the comprehensive service.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39228), we proposed to
renumber APC 0375 as APC 5881
(Ancillary Outpatient Services When
Patient Dies) for CY 2016.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing, without modification,
our proposal to provide payment
through renumbered C–APC 5881 for all
services provided on the same date and
reported on the same claim as an
inpatient only procedure with the
modifier ‘‘–CA.’’

jstallworth on DSK7TPTVN1PROD with RULES

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, mental health services,
and multiple imaging 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

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final rule with comment period (76 FR
74163) for more recent background.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39228 through 39232), for
CY 2016, we proposed to continue our
composite APC payment policies for
LDR prostate brachytherapy services,
mental health services, and multiple
imaging services, as discussed below.
For CY 2016, we proposed to
discontinue our composite APC
payment policies for qualifying
extended assessment and management
services (APC 8009) and to pay for these
services through proposed new C–APC
8011 (Comprehensive Observation
Services), as presented in a proposal
included under section II.A.2.e. of the
proposed rule. As a result, we proposed
to delete APC 8009 for CY 2016.
We noted that we finalized a policy to
discontinue our composite APC
payment policies for cardiac
electrophysiologic evaluation and
ablation services (APC 8000), and to pay
for these services through C–APC 0086
(Level III Electrophysiologic
Procedures), as presented in a proposal
included under section II.A.2.e. of the
CY 2015 OPPS/ASC proposed rule (79
FR 66800 through 66810). As a result, in
the CY 2015 OPPS/ASC final rule with
comment period, we deleted APC 8000
for CY 2015 (79 FR 66810). For CY 2016,
we proposed to continue to pay for
cardiac electrophysiologic evaluation
and ablation services through existing
C–APC 0086 (that was proposed to be
renumbered C–APC 5213).
(1) Low Dose Rate (LDR) Prostate
Brachytherapy Composite APC
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

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70339

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 base 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. (We note that, for CY 2016, we did
not propose to renumber composite APC
8001 as part of our overall APC
restructuring and renumbering
discussed in section III.D. of the
proposed rule.)
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39229), for CY 2016, we
proposed to continue to pay for LDR
prostate brachytherapy services using
the composite APC payment
methodology proposed and
implemented for CY 2008 through CY
2015. That is, we proposed to use CY
2014 claims reporting charges for both
CPT codes 55875 and 77778 on the
same date of service with no other
separately paid procedure codes (other
than those on the bypass list) to
calculate the proposed payment rate for
composite APC 8001. Consistent with
our CY 2008 through CY 2015 practice,
in the proposed rule, we proposed to
not 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) (which was
proposed to be renumbered APC 5375 in
the proposed rule) and APC 0651
(Complex Interstitial Radiation Source
Application) (which was proposed to be
renumbered APC 5641 in the proposed
rule), the APCs to which CPT codes
55875 and 77778 are assigned,
respectively. We proposed to continue
to calculate the proposed geometric
mean costs of procedures or services
assigned to proposed renumbered APCs
5375 and 5641 using single and
‘‘pseudo’’ single procedure claims. We
stated that we continue to believe that
composite APC 8001 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

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jstallworth on DSK7TPTVN1PROD with RULES

also stated that we 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 proposed composite
APC payment rate.
Using a partial year of CY 2014 claims
data available for the CY 2016 proposed
rule, we were able to use 226 claims that
contained both CPT codes 55875 and
77778 to calculate the proposed
geometric mean cost of approximately
$3,807 for these procedures upon which
the proposed CY 2016 payment rate for
composite APC 8001 was based.
Comment: One commenter expressed
concern that the proposed CY 2016
payment rate for APC 8001 is based only
on 226 claims that reported both CPT
codes 55875 and 77778 on the same
date of service, a significant decrease in
the number of claims used from the CY
2015 final rule ratesetting, which was
based on 406 available claims.
Response: We were able to identify
240 claims in the CY 2014 claims data
available for this CY 2016 final rule,
which we used to set the final CY 2016
payment rate for APC 8001 (which has
a geometric mean cost of approximately
$3,542), compared to the 226 claims that
were available and used for ratesetting
for the CY 2016 proposed rule (which
had a geometric mean cost of
approximately $3,807). With regard to
the commenters’ concern regarding the
decrease in the number of claims
available for CY 2016 ratesetting relative
to the number of claims available for CY
2015 ratesetting, we note that there is
typically some fluctuation in costs from
year to year. We acknowledge that the
number of claims available and used for
ratesetting for APC 8001 has
continuously decreased over recent
years. However, the percentage of single
frequency claims compared to total
claims that were available and that we
were able to use for ratesetting in this
final rule with comment period is
comparable to prior years.
After consideration of the public
comment we received, we are finalizing
our proposal, without modification, to
continue to use the payment rate for
composite APC 8001 to pay for LDR
prostate brachytherapy services for CY
2016 and to set the payment rate for this
APC using our established methodology.
(2) Mental Health Services Composite
APC
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39229 through 39230), for
CY 2016, we proposed to continue our
longstanding policy of limiting the
aggregate payment for specified less
resource-intensive mental health

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services furnished on the same date to
the payment for a day of partial
hospitalization services provided by a
hospital, which we consider to be the
most resource-intensive of all outpatient
mental health services. 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 with
comment period (76 FR 74168) for more
recent background.
Specifically, we proposed that when
the aggregate payment for specified
mental health services provided by one
hospital to a single beneficiary on one
date of service based on the payment
rates associated with the APCs for the
individual services exceeds the
maximum per diem payment rate for
partial hospitalization services provided
by a hospital, those specified mental
health services would be assigned to
proposed renumbered composite APC
8010 (Mental Health Services
Composite) (existing APC 0034). We
also proposed to continue to set the
payment rate for proposed renumbered
composite APC 8010 at the same
payment rate that we proposed to
establish for proposed renumbered APC
5862 (Level 2 Partial Hospitalization (4
or more services) for hospital-based
PHPs) (existing APC 0176), which is the
maximum partial hospitalization per
diem payment rate for a hospital, and
that the hospital continue to be paid the
payment rate for proposed renumbered
composite APC 8010. 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 proposed
renumbered APC 5862 (existing 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 resourceintensive of all outpatient mental health
services. 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 2016 proposal,
without modification, 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

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maximum per diem payment rate for
partial hospitalization services provided
by a hospital, those specified mental
health services will be assigned to
renumbered composite APC 8010
(Mental Health Services Composite)
(existing APC 0034) for CY 2016. For CY
2016, we also will continue to set the
payment rate for renumbered composite
APC 8010 (existing APC 0034) at the
same payment rate that we established
for renumbered APC 5862 (Level 2
Partial Hospitalization (4 or more
services) for hospital-based PHPs)
(existing APC 0176), which is the
maximum partial hospitalization per
diem payment rate for a hospital, and
that the hospital will continue to be
paid the payment rate for renumbered
composite APC 8010.
(3) Multiple Imaging Composite APCs
(APCs 8004, 8005, 8006, 8007, and
8008)
Effective January 1, 2009, we provide
a single payment each time a hospital
submits a claim for 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 12 of the CY
2014 OPPS/ASC final rule with
comment period (78 FR 74920 through
74924).
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 under
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

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• APC 8008 (MRI and MRA with
Contrast Composite).
(We note that we did not propose to
renumber these composite APCs as part
of our overall restructuring and
renumbering of APCs as discussed in
section III.D. of the proposed rule.)
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 based on
the payment rate for APC 8008, the
‘‘with contrast’’ composite APC.
We make a single payment for those
imaging procedures that qualify for
payment based on the composite APC
payment rate, which includes 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 2016 OPPS/ASC proposed
rule (80 FR 39230), for CY 2016, 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 stated that we
continue to believe that this policy will
reflect and promote the efficiencies

hospitals can achieve when performing
multiple imaging procedures during a
single session.
The proposed CY 2016 payment rates
for the five multiple imaging composite
APCs (APCs 8004, 8005, 8006, 8007,
and 8008) were based on proposed
geometric mean costs calculated from a
partial year of CY 2014 claims available
for the proposed rule that qualified for
composite payment under the current
policy (that is, those claims reporting
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 2014 and CY 2015
geometric mean costs for these
composite APCs, as described in the CY
2014 OPPS/ASC final rule with
comment period (78 FR 74918). 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, in accordance
with our established methodology as
stated in the CY 2014 OPPS/ASC final
rule with comment period (78 FR
74918), were identified by asterisks in
Addendum N to the proposed rule
(which is available via the Internet on
the CMS Web site) and are discussed in
more detail in section II.A.1.b. of the
proposed rule and this final rule with
comment period.
For the CY 2016 OPPS/ASC proposed
rule, we were able to identify
approximately 584,194 ‘‘single session’’
claims out of an estimated 1.5 million
potential claims for payment through
composite APCs from our ratesetting
claims data, which represents

approximately 39 percent of all eligible
claims, to calculate the proposed CY
2016 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 APC policy and their
respective families and approximate
composite APC proposed geometric
mean costs for CY 2016.
Comment: One commenter supported
CMS’ decision to not propose any new
multiple imaging composite APCs and
requested that CMS provide
stakeholders with the opportunity to
meaningfully comment on any new
composite APCs that the agency may
propose in the future.
Response: We appreciate the
commenter’s support.
After consideration of the public
comment we received, we are finalizing
our proposal to continue the use of
multiple imaging composite APCs to
pay for services providing more than
one imaging procedure from the same
family on the same date, without
modification. For this CY 2016 final rule
with comment period, we were able to
identify approximately 616,602 ‘‘single
session’’ claims out of an estimated 1.6
million potential claims for payment
through composite APCs from our
ratesetting claims data, which
represents approximately 38 percent of
all eligible claims, to calculate the final
CY 2016 geometric mean costs for the
multiple imaging composite APCs.
Table 10 below lists the HCPCS codes
that are subject to the multiple imaging
composite APC policy and their
respective families and approximate
composite APC geometric mean costs
for CY 2016.

TABLE 10—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS
Family 1—Ultrasound
CY 2016 APC 8004 (Ultrasound Composite)

jstallworth on DSK7TPTVN1PROD with RULES

76604
76700
76705
76770
76775
76776
76831
76856
76870
76857

CY 2016 Approximate APC Geometric Mean Cost = $296

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Us exam, chest.
Us exam, abdom, complete.
Echo exam of abdomen.
Us exam abdo back wall, comp.
Us exam abdo back wall, lim.
Us exam k transpl w/Doppler.
Echo exam, uterus.
Us exam, pelvic, complete.
Us exam, scrotum.
Us exam, pelvic, limited.

Family 2—CT and CTA with and without Contrast
CY 2016 APC 8005 (CT and CTA without Contrast
Composite) *
70450 ........................................................................................
70480 ........................................................................................
70486 ........................................................................................

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CY 2016 Approximate APC Geometric Mean Cost = $325
Ct head/brain w/o dye.
Ct orbit/ear/fossa w/o dye.
Ct maxillofacial w/o dye.

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TABLE 10—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS—Continued

70490
71250
72125
72128
72131
72192
73200
73700
74150
74261
74176

........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................

CY 2016 APC 8006 (CT and CTA with Contrast Composite)
70487
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

........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................

Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct

soft tissue neck w/o dye.
thorax w/o dye.
neck spine w/o dye.
chest spine w/o dye.
lumbar spine w/o dye.
pelvis w/o dye.
upper extremity w/o dye.
lower extremity w/o dye.
abdomen w/o dye.
colonography, w/o dye.
angio abd & pelvis.

CY 2016 Approximate APC Geometric Mean Cost = $548
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct
Ct

maxillofacial w/dye.
head/brain w/dye.
head/brain w/o & w/dye.
orbit/ear/fossa w/dye.
orbit/ear/fossa w/o & w/dye.
maxillofacial w/o & w/dye.
soft tissue neck w/dye.
sft tsue nck w/o & w/dye.
angiography, head.
angiography, neck.
thorax w/dye.
thorax w/o & w/dye.
angiography, chest.
neck spine w/dye.
neck spine w/o & w/dye.
chest spine w/dye.
chest spine w/o & w/dye.
lumbar spine w/dye.
lumbar spine w/o & w/dye.
angiograph pelv w/o & w/dye.
pelvis w/dye.
pelvis w/o & w/dye.
upper extremity w/dye.
uppr extremity w/o & w/dye.
angio upr extrm w/o & w/dye.
lower extremity w/dye.
lwr extremity w/o & w/dye.
angio lwr extr w/o & w/dye.
abdomen w/dye.
abdomen w/o & w/dye.
angio abdom w/o & w/dye.
colonography, w/dye.
angio abdominal arteries.
angio abd & pelv w/contrast.
angio abd & pelv 1+ regns.

* If a ‘‘without contrast’’ CT or CTA procedure is performed during the same session as a ‘‘with contrast’’ CT or CTA procedure, the I/OCE assigns the procedure to APC 8006 rather than APC 8005.
Family 3—MRI and MRA with and without Contrast

jstallworth on DSK7TPTVN1PROD with RULES

CY 2016 APC 8007 (MRI and MRA without Contrast
Composite) *
70336
70540
70544
70547
70551
70554
71550
72141
72146
72148
72195
73218
73221
73718
73721
74181
75557

........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................
........................................................................................

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CY 2016 Approximate APC Geometric Mean Cost = $631
Magnetic image, jaw joint.
Mri orbit/face/neck w/o dye.
Mr angiography head w/o dye.
Mr angiography neck w/o dye.
Mri brain w/o dye.
Fmri brain by tech.
Mri chest w/o dye.
Mri neck spine w/o dye.
Mri chest spine w/o dye.
Mri lumbar spine w/o dye.
Mri pelvis w/o dye.
Mri upper extremity w/o dye.
Mri joint upr extrem w/o dye.
Mri lower extremity w/o dye.
Mri jnt of lwr extre w/o dye.
Mri abdomen w/o dye.
Cardiac mri for morph.

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TABLE 10—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS—Continued
75559 ........................................................................................
C8901 .......................................................................................
C8904 .......................................................................................
C8907 .......................................................................................
C8910 .......................................................................................
C8913 .......................................................................................
C8919 .......................................................................................
C8932 .......................................................................................
C8935 .......................................................................................

Cardiac mri w/stress img.
MRA w/o cont, abd.
MRI w/o cont, breast, uni.
MRI w/o cont, breast, bi.
MRA w/o cont, chest.
MRA w/o cont, lwr ext.
MRA w/o cont, pelvis.
MRA, w/o dye, spinal canal.
MRA, w/o dye, upper extr.

CY 2016 APC 8008 (MRI and MRA with Contrast Composite)

CY 2016 Approximate APC Geometric Mean Cost = $945

70549 ........................................................................................
70542 ........................................................................................
70543 ........................................................................................
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 .......................................................................................
C8914 .......................................................................................
C8918 .......................................................................................
C8920 .......................................................................................
C8931 .......................................................................................
C8933 .......................................................................................
C8934 .......................................................................................
C8936 .......................................................................................

Mr angiograph neck w/o & w/dye.
Mri orbit/face/neck w/dye.
Mri orbt/fac/nck w/o & w/dye.
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 joint 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.
MRA w/o fol w/cont, lwr ext.
MRA w/cont, pelvis.
MRA w/o fol w/cont, pelvis.
MRA, w/dye, spinal canal.
MRA, w/o&w/dye, spinal canal.
MRA, w/dye, upper extremity.
MRA, w/o&w/dye, upper extr.

jstallworth on DSK7TPTVN1PROD with RULES

* If a ‘‘without contrast’’ MRI or MRA procedure is performed during the same session as a ‘‘with contrast’’ MRI or MRA procedure, the I/OCE
assigns the procedure to APC 8008 rather than APC 8007.

3. Changes to Packaged Items and
Services
a. Background and Rationale for
Packaging in the OPPS
Like other prospective payment
systems, the OPPS relies on the concept
of averaging to establish a payment rate

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for services. The payment may be more
or less than the estimated cost of
providing a specific service or a 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

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services most efficiently and to manage
their resources with maximum
flexibility. Our packaging policies
support our strategic goal of using larger
payment bundles in the OPPS to
maximize hospitals’ incentives to
provide care in the most efficient
manner. For example, where there are a

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variety of devices, drugs, items, and
supplies that could be used to furnish
a service, some of which are more costly
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
item.
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
a fundamental part of the OPPS since its
implementation in August 2000. 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 final rule with
comment period (72 FR 66580), the CY
2014 OPPS/ASC final rule with
comment period (78 FR 74925), and the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66817). Over
the last 15 years, as we have refined our
understanding of the OPPS as a
prospective payment system, we have
packaged numerous services that were
originally paid separately. As we
continue to develop larger payment
groups that more broadly reflect services
provided in an encounter or episode of
care, we have expanded the OPPS
packaging policies. Most, but not
necessarily all, items and services
currently packaged in the OPPS are
listed in 42 CFR 419.2(b). Our
overarching goal is to make OPPS
payments for all services paid under the

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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 under the
OPPS to determine which OPPS
services can be packaged to further
achieve the objective of advancing the
OPPS toward a more prospective
payment system.
For CY 2016, 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 that they
support. Specifically, we examined the
HCPCS code definitions (including CPT
code descriptors) to determine 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 2016 OPPS/ASC
proposed rule (80 FR 39233 through
39236), for CY 2016, we proposed to
package the costs of selected newly
identified ancillary services into
payment with a primary service where
we believe that the proposed packaged
item or service is integral, ancillary,
supportive, dependent, or adjunctive to
the provision of care that was reported
by the primary service HCPCS code.
Below we discuss the items and services
that we proposed to package beginning
in CY 2016 and are finalizing in this
final rule with comment period.
b. Packaging Policies for CY 2016
(1) Ancillary Services
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66819
through 66822), we conditionally
packaged payment for ancillary services
assigned to APCs with a geometric mean
cost of less than or equal to $100 (prior
to application of the conditional
packaging status indicator). The
ancillary services that we identified are
primarily minor diagnostic tests and
procedures that are often performed
with a primary service, although there
are instances where hospitals provide
such services alone and without another
primary service during the same
encounter. Under this policy, we
assigned the conditionally packaged
services to status indicator ‘‘Q1,’’ which
indicates that the service is separately
payable when not billed on the same
date of service as a HCPCS code
assigned status indicator ‘‘S,’’ ‘‘T,’’ or

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‘‘V.’’ Exclusions to this ancillary service
packaging policy include preventive
services, certain psychiatric and
counseling-related services, and certain
low-cost drug administration services.
The policy adopted in CY 2015 was
proposed in response to public
comments on the CY 2014 ancillary
packaging proposal, which expressed
concern that certain low volume but
relatively costly ancillary services
would have been packaged into high
volume but relatively inexpensive
primary services (for example, a visit)
(74 FR 74945). We noted in the CY 2015
OPPS/ASC final rule with comment
period that the $100 geometric mean
cost limit target was a selection criterion
for the initial set of services in
conditionally packaged ancillary service
APCs under this packaging policy. The
$100 geometric mean cost target was not
intended to be a threshold above which
ancillary services will not be packaged,
but was a basis for selecting the initial
set of APCs under the conditional
packaging policy for ancillary services,
which would likely be updated and
expanded upon in the future. An
increase in the geometric mean cost of
any of those packaged APCs to above
$100 in future years does not change the
conditionally packaged status of
services assigned to the APCs selected
in CY 2015 in a future year. When we
finalized this policy, we stated that we
would continue to consider services in
these APCs to be conditionally packaged
and would review the conditionally
packaged status of ancillary services
annually. The ancillary services
packaging policy is codified in the
regulations at 42 CFR 419.2(b)(7).
For CY 2016, as we did in CY 2015,
we examined categories of ancillary
services that are integral, ancillary,
supportive, dependent, or adjunctive
items and services for which we believe
payment would be appropriately
packaged into payment of the primary
services that they support. As
previously stated, the $100 geometric
mean cost target we adopted in CY 2015
was not intended to be a threshold
above which ancillary services will not
be packaged, but was a basis for
selecting the initial set of APCs under
the conditional packaging policy for
ancillary services, which would likely
be updated and expanded upon in the
future. Accordingly, in the CY 2016
OPPS/ASC proposed rule (80 FR 39233),
for CY 2016, we proposed to not limit
our examination to ancillary service
APCs with a geometric mean cost of
$100 or less. The geometric mean cost
limit of $100 only applied in 2015, and
it is no longer relevant. We stated in the

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proposed rule that we believe there are
some ancillary services that are assigned
to APCs with a geometric mean cost
above $100, but for which conditional
packaging is appropriate, given the
context in which the service is
performed. For CY 2016, we proposed to
evaluate categories of ancillary services
by considering the clinical similarity of
such categories of services to the
currently conditionally packaged
ancillary services that have already been
determined to be integral, ancillary,
supportive, dependent, or adjunctive to
a primary service. Under this proposal,
we identified services in certain APCs
that meet these criteria. Specifically, for
CY 2016, we proposed to expand the set
of conditionally packaged ancillary
services to include services in the three
APCs listed in Table 8 of the proposed
rule (80 FR 39234) (APC 5734 (Level 4
Minor Procedures); APC 5673 (Level 3
Pathology); and APC 5674 (Level 4
Pathology)). Ancillary services in the
APCs in Table 8 of the proposed rule are
typically furnished with a higher
paying, separately payable primary
procedure.
However, to avoid packaging a subset
of high-cost pathology services into
lower cost and possibly nonprimary
services (for example, low-cost imaging
services) frequently billed with some of
the services assigned to Level 3 and

Level 4 pathology APCs, we proposed to
package Level 3 and 4 pathology
services only when they are billed with
a surgical service. We believe that
pathology services are routine tests that
are typically performed ancillary or
adjunctive to another primary service,
most commonly surgery, to establish or
confirm a diagnosis. For the Level 3 and
4 pathology APCs, we proposed that the
assigned status indicator would be ‘‘Q2’’
(‘‘T packaging’’). The HCPCS codes that
we proposed to conditionally package as
ancillary services for CY 2016 were
displayed in Addendum B to the CY
2016 OPPS/ASC proposed rule (which
is available via the Internet on the CMS
Web site). The supporting documents
for the proposed rule are available at the
CMS Web site at: http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
Comment: Several commenters
supported designating as conditionally
packaged the services assigned to APCs
5734, 5673, and 5674.
Response: We appreciate the
commenters’ support.
Comment: Several commenters
objected to the conditional packaging
proposal. Some commenters objected
because they believed that CMS has
finalized too many new packaging
policies in recent years. Other

commenters objected to the proposed
conditionally packaging of the services
in the Levels 3 and 4 Pathology APCs
because they believed that these more
expensive pathology tests (as compared
to the services assigned to the Levels 1
and 2 Pathology APCs) could be
packaged with less costly surgical
procedures.
Response: The number of other recent
packaging proposals in the CY 2014 and
CY 2015 OPPS/ASC final rules with
comment periods has no bearing on this
CY 2016 packaging proposal. The CY
2016 packaging proposal is based on the
payment packaging principles specified
earlier. We believe that these three APCs
consist of services that are generally
integral, ancillary, supportive,
dependent, or adjunctive to a primary
service. In addition, because this
proposal is for conditional packaging, if
the services are provided alone, the
services would be separately paid. We
also have not stated that more costly
services cannot be packaged into less
costly services.
After consideration of the public
comments we received, we are
finalizing our proposal to conditionally
packaged ancillary services assigned to
APCs 5734, 5673, and 5674 for CY 2016.
The three APCs and their CY 2016 final
status indicators and payment rates are
displayed in Table 11 below.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 11—APCS FOR CONDITIONALLY PACKAGED ANCILLARY SERVICES FOR CY 2016
Renumbered CY
2016 APC

CY 2016 APC title

CY 2016
OPPS status
indicator

5734 .......................
5673 .......................
5674 .......................

Level 4 Minor Procedures ...................................................................................................
Level 3 Pathology ................................................................................................................
Level 4 Pathology ................................................................................................................

Q1
Q2
Q2

The HCPCS codes that we are
conditionally packaging as ancillary
services for CY 2016 are displayed in
Addendum B to this CY 2016 OPPS/
ASC final rule with comment period
(which is available via the Internet on
the CMS Web site). The supporting
documents for the final rule with
comment period are available at the
CMS Web site at: http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
In addition, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39234), we

proposed to continue to exclude certain
services from this ancillary services
packaging policy. As established in CY
2015, preventive services, certain
psychiatric and counseling-related
services, and certain low-cost drug
administration services are separately
payable under the OPPS (79 FR 66819).
Preventable services that would
continue to be exempted from the
ancillary service packaging policy for
CY 2016 were listed in Table 9 of the
proposed rule.
Comment: Several commenters
supported this proposal.

CY 2016
payment rate
$119.58
229.13
459.96

Response: We appreciate the
commenters’ support.
After consideration of the public
comments we received, we are
finalizing our policy to continue to
exempt preventive services from the
ancillary services packaging policy for
CY 2016. Preventive services that will
continue to be exempted from the
ancillary service packaging policy for
CY 2016 and subsequent years are listed
in Table 12 below.

TABLE 12—PREVENTIVE SERVICES EXEMPTED FROM THE ANCILLARY SERVICES PACKAGING POLICY
HCPCS code

Short descriptor

CY 2016
status
indicator

76977 .....................

Us bone density measure ...................................................................................................

S

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5732

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TABLE 12—PREVENTIVE SERVICES EXEMPTED FROM THE ANCILLARY SERVICES PACKAGING POLICY—Continued
HCPCS code

Short descriptor

CY 2016
status
indicator

77078 .....................
77080 .....................
77081 .....................
G0117 ....................
G0118 ....................
G0130 ....................
G0389 ....................
G0404 ....................
Q0091 ....................

Ct bone density axial ...........................................................................................................
Dxa bone density axial ........................................................................................................
Dxa bone density/peripheral ...............................................................................................
Glaucoma scrn hgh risk direc .............................................................................................
Glaucoma scrn hgh risk direc .............................................................................................
Single energy x-ray study ...................................................................................................
Ultrasound exam aaa screen ..............................................................................................
Ekg tracing for initial prev ...................................................................................................
Obtaining screen pap smear ...............................................................................................

S
S
S
S
S
S
S
S
S

jstallworth on DSK7TPTVN1PROD with RULES

(2) Drugs and Biologicals That Function
as Supplies When Used in a Surgical
Procedure
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 74930
through 74939), we finalized a policy at
42 CFR 419.2(b)(16) to unconditionally
package all drugs and biologicals that
function as supplies when used in a
surgical procedure. As noted in that
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,
drugs, biologicals, or
radiopharmaceuticals (78 FR 74390).
When evaluating whether a particular
drug may meet the criteria for packaging
under this policy, we do not consider
low drug product utilization and/or
drug product cost (as compared to the
primary service APC payment) to be
factors in our determination (79 FR
66875). We unconditionally package all
drugs and biologicals that function as
supplies in a surgical procedure (79 FR
74930).
For CY 2016, we conducted a
comprehensive review of CY 2015
separately payable OPPS drugs; that is,
drugs with either a status indicator of
‘‘G’’ or ‘‘K.’’ For each separately payable
drug, we reviewed the FDA-approved
label and conducted a clinical review to
determine whether a drug is indicated
for use in a surgical procedure. Based on
our clinical review, in the CY 2016
OPPS/ASC proposed rule (80 FR 39235),
for CY 2016, we proposed to package
payment for the four drugs that were
listed in Table 10 of the proposed rule
(80 FR 39235) based on their primary
function as a supply in a surgical
procedure, which typically means that
the drug or biological is integral to or

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dependent on or supportive of or
adjunctive to a surgical procedure
(HCPCS code J0583 (Injection,
bivalirudin, 1 mg); HCPCS code J7315
(Mitomycin, ophthalmic, 0.2 mg);
HCPCS code C9447 (Injection,
phenylephrine and ketorolac, 4 ml vial);
and HCPCS code J0130 (Injection
abciximab, 10 mg)). We noted in the
proposed rule that one drug, described
by HCPCS code C9447, whose payment
would otherwise be packaged in CY
2016, currently has pass-through
payment status. Therefore, we did not
propose to package payment for the
drug described by HCPCS code C9447
for CY 2016. Instead, we proposed to
package payment for this drug for CY
2018, after its drug pass-through
payment status has expired.
Comment: A few commenters
requested that CMS not package the
drug described by HCPCS code J7315 as
a surgical supply. One commenter in
particular believed that, because the
drug mitomycin is not necessarily
required in all trabeculectomies, the
packaging regulation for drugs and
biologicals that function as supplies
when used in a surgical procedure
specified at § 419.2(b)(16) of the
regulations should not apply to HCPCS
code J7315.
Response: We addressed a similar
comment and explained this packaging
policy as it applies to HCPCS code
J7315 in the CY 2014 OPPS/ASC final
rule with comment period (78 FR
74938). We are repeating some of the
points made in our response here. First,
HCPCS code J7315 describes a drug.
Second, indication for the drug
described by HCPCS code J7315 is ‘‘for
use as an adjunct to ab externo
glaucoma surgery’’ (emphasis added).
The drugs that function as surgical
supplies packaging policy specified at
§ 419.2(b)(16) applies to all drugs and
biologicals that are either integral or
ancillary or supportive or dependent or
adjunctive to a surgical procedure (78
FR 74938). Because the drug described
by HCPCS code J7315 is an adjunct to

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CY 2016 APC
5521
5522
5521
5732
5732
5521
5531
5731
5731

surgery (the drug’s only indication),
payment for the drug is packaged in CY
2016 in accordance with § 419.2(b)(16).
For purposes of packaging payment, it
does not matter in what percentage of
trabeculectomies the drug described by
HCPCS code J7315 is used. Packaging
policies apply both to products that are
used as a necessary ingredient to a
procedure (meaning that the test or
procedure cannot be performed without
the product) and to products that are
optional and only occasionally used
with a procedure. The frequency of use
relative to overall procedure frequency
is not a factor in determining whether
a drug or biological is packaged under
§ 419.2(b)(16). With packaging of a drug
or biological payment into the
procedure payment, surgeons, hospitals,
and ASCs can weigh the clinical utility
of the product for a particular case
against the cost of the product (because
payment is fixed for the overall
procedure and includes all supplies). If
the clinical utility of a product is high
relative to the cost, hospitals and ASCs
(on an order by a physician) would be
more likely to use the product. If the
opposite is true, they would be less
likely to use a product. Packaging
policies support the medically
necessary use of products and should
restrain use that may be more a matter
of convenience than of medical
necessity. Therefore, we are finalizing
our proposal to package the drug
described by HCPCS code J7315 (and
assign it status indicator ‘‘N’’) for CY
2016 and subsequent years.
Comment: One commenter expressed
concern that mitomycin is overused in
trabeculectomies. The commenter
believed that target intraocular
pressures (IOPs) should be better
tailored to the individual patient rather
than always aiming for very low IOPs
that are achievable with mitomycin. The
commenter stated that the current CMS
payment policy of separate payment for
mitomycin may encourage the use of
mitomycin in trabeculectomy.

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Response: We appreciate this
thoughtful comment. As stated above,
we believe that packaging payment for
mitomycin will require facilities to
focus on the clinical utility of
mitomycin in a particular case because
using the packaged drug will be a cost
that must be covered by the
trabeculectomy procedure payment. On
the contrary, separate payment for drugs
creates a financial incentive for
hospitals and ASCs to use drugs because
they are paid an additional amount at
ASP+6 percent. In addition, if the
facility acquires a drug whose payment
is at less than ASP, the profit for using
the drug is even greater than 6 percent
of the drug’s ASP.
Comment: One commenter requested
that CMS not package the drug
described by HCPCS code C9447
(phenylephrine and ketorolac) as a
surgical supply beginning in CY 2018.
While the commenter did not disagree
that the drug would be subject to the
packaging regulation at § 419.2(b)(16),
the commenter predicted that packaging
of this drug will result in the use of
lower quality alternative drugs. In
addition, the commenter requested that,
if CMS packages payment for the drug
described by HCPCS code C9447, CMS
create a separate APC with higher
payment rates for procedures that use
packaged drugs.
Response: Because the drug described
by HCPCS code C9447 functions as a
surgical supply in cataract surgery,
payment for the drug will be packaged
under § 419.2(b)(16) after its passthrough status expires beginning in CY
2018. Which particular drugs surgeons,
hospitals, and ASCs will employ to
perform cataract surgery is a matter of
choice by the physician and the facility.
Through packaging of the payment for
supplies into the payment for the
procedure, CMS generally leaves
decision-making about which packaged
services to use during a procedure in the
hands of physicians and providers. We
believe that pass-through payment
status should facilitate the use of the
drug described by HCPCS code C9447.
With the packaging of the payment for
the drug described by HCPCS code
C9447 into the cataract surgery
procedure payment, we believe
surgeons, hospitals, and ASCs can
weigh the clinical utility of the product
for a particular case against the cost of
the product (because payment is fixed
for the overall procedure and includes
all supplies). If the clinical utility of the
drug is high relative to its cost, hospitals
and ASCs (on an order by a physician)
would be more likely to use the product.

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If the opposite is true, they would be
less likely to use the product. If
successful cataract surgery depends
upon the use of the drug described by
HCPCS code C9447, we expect that
hospitals and ASCs will bear the
additional cost of the drug. As noted
above, packaging policies support the
medically necessary use of products and
should restrain use that may be more a
matter of convenience than of medical
necessity.
We are finalizing our proposal to
package the drug described by HCPCS
code C9447 (and assign it status
indicator ‘‘N’’) beginning in CY 2018
and subsequent years. We are not
creating a separate APC with a higher
payment for cataract surgery that uses
the drug described by HCPCS code
C9447, as the commenter requested. We
believe that doing so would be
inconsistent with the packaging policy.
The payment for cataract surgery is a
total payment that includes all
necessary equipment and supplies,
including drugs and biologicals that are
employed before, during, and after a
surgery.
Comment: One commenter requested
that CMS not package payment for the
drug described by HCPCS code J0583.
The commenter stated that, because
HCPCS code J0583 describes a specified
covered outpatient drug (SCOD), the
drug cannot be packaged because of the
specific statutory payment methodology
that applies to SCODs. The commenter
also requested that, if CMS finalizes the
proposal to package payment for the
drug described by HCPCS code J0583 as
a surgical supply, CMS should also
package payment for the drugs
described by HCPCS codes J1327
(Eptifibatide) and J3246 (Tirofiban
hydrochloride) to ensure that the
packaging policy is not implemented in
an arbitrary and capricious manner.
Response: We have previously
explained why SCODs can be packaged
in the OPPS (72 FR 66766). The drug
described by HCPCS code J0583 is
indicated for various types of patients
undergoing percutaneous coronary
intervention (PCI), which we consider to
be a surgical procedure for purposes of
this packaging policy. The drugs
described by HCPCS codes J1327 and
J3246 mentioned by the commenter
have other indications besides
facilitating PCI. The drugs described by
HCPCS codes J1327 and J3246 are
indicated for the treatment of acute
coronary syndrome (ACS). These drugs
were not among the drugs proposed to
be packaged as surgical supplies

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because they have nonsurgical
indications.
Comment: A few commenters
requested that CMS revise its packaging
policy to unpackage payment for
diagnostic radiopharmaceuticals, stress
agents, and Cysview. The commenters
believed that packaging payment for
these products limits patient access.
Response: We disagree with the
commenters that packaging limits
patient access to diagnostic
radiopharmaceuticals, stress agents, and
Cysview. We believe that
unconditionally packaging diagnostic
radiopharmaceuticals, stress agents,
Cysview, and other drugs and
biologicals that function as surgical
supplies establishes better incentives to
ensure clinically appropriate patient
care.
As discussed in the CY 2014 OPPS/
ASC final rule with comment period (78
FR 74925 through 74926), 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,
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.
While we continuously examine our
claims data to identify data anomalies or
inconsistencies in billing patterns, we
also welcome and appreciate public
comments that support claims data on
how our packaging policy may
adversely impacts patient access.
After consideration of the public
comments we received, we are
finalizing our proposal to package
payment for the four discussed drugs.
We are not modifying our drug
packaging policy and will continue to
package drugs and biologicals that
function as supplies when used in a
surgical procedure as codified at 42 CFR
419.2(b)(15) and (b)(16). Table 13 below
lists the drugs that we are finalizing as
unconditionally packaged surgical
supplies beginning in the calendar year
indicated in the table.

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TABLE 13—DRUGS PACKAGED AS SURGICAL SUPPLIES

HCPCS code

Descriptor

CY 2015
status
indicator

Primary use in
surgical procedure

J0583 ................

Injection, bivalirudin, 1 mg ............................

K

J7315 ................
C9447 ...............

Mitomycin, ophthalmic, 0.2 mg .....................
Injection, phenylephrine and ketorolac, 4 ml
vial.
Injection abciximab, 10 mg ...........................

G
G

Percutaneous Coronary Intervention[PCI]/
PCTA [percutaneous transluminal coronary angioplasty] procedures.
Glaucoma surgery ........................................
Cataract surgery ...........................................

2016
2018

K

PCI procedure ...............................................

2016

J0130 ................

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(3) Clinical Diagnostic Laboratory Tests
(a) Background
In CY 2014, we finalized a policy to
package payment for most clinical
diagnostic laboratory tests in the OPPS
(78 FR 74939 through 74942 and 42 CFR
419.2(b)(17)). Under current policy,
certain clinical diagnostic laboratory
tests that are listed on the Clinical
Laboratory Fee Schedule (CLFS) are
packaged in the OPPS as integral,
ancillary, supportive, dependent, or
adjunctive to the primary service or
services provided in the hospital
outpatient setting on the same date of
service as the laboratory test.
Specifically, we conditionally package
laboratory tests and only pay separately
for a laboratory test when (1) it is the
only service provided to a beneficiary
on a given date of service; or (2) it is
conducted on the same date of service
as the primary service, but is ordered for
a different diagnosis than the other
hospital outpatient services and ordered
by a practitioner different than the
practitioner who ordered the other
hospital outpatient services. Also
excluded from this conditional
packaging policy are molecular
pathology tests described by CPT codes
in the ranges of 81200 through 81383,
81400 through 81408, and 81479 (78 FR
74939 through 74942), which are
assigned status indicator ‘‘A’’ in
Addendum B to this final rule with
comment period (which is available at
the CMS Web site at: http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
HospitalOutpatientPPS/index.html).
When laboratory tests are not packaged
under the OPPS and are listed on the
CLFS, they are paid at the CLFS
payment rates outside the OPPS under
Medicare Part B.
To implement our packaging policy in
CY 2014, we assigned status indicator
‘‘N,’’ which describes unconditionally
packaged items and services, to all
laboratory tests paid at the CLFS rates
except molecular pathology tests. We
indicated in the CY 2014 OPPS/ASC
final rule with comment period (78 FR

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74939) that hospitals should use the
14X bill type for laboratory tests to bill
and receive separate payment for
laboratory tests that are the only
services provided on a date of service
and laboratory tests provided on the
same date of service as another hospital
outpatient service but ordered for a
different diagnosis than the primary
service and ordered by a different
practitioner than the practitioner who
ordered the other hospital outpatient
service. Therefore, under our final
policy, we relied on hospitals to identify
when laboratory tests should be
separately paid and bill those laboratory
tests on a 14X bill type.
Upon implementation of this final
policy in January 2014, the National
Uniform Billing Committee (NUBC)
expressed concern that the 14X bill type
was not an appropriate choice of bill
type for billing for laboratory tests other
than for laboratory tests on referred
specimens and requested that CMS find
another mechanism for hospitals to bill
for separately payable laboratory tests.
(We refer readers to our Medicare
Learning Network article on this issue
on the CMS Web site at: http://
www.cms.gov/Outreach-and-Education/
Medicare-Learning-Network-MLN/
MLNMattersArticles/Downloads/
SE1412.pdf.) In Transmittal 2971,
Change Request 8776, July 2014 Update
of the Hospital Outpatient Prospective
Payment System (OPPS), which is
available on the CMS Web site at: http://
www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/
downloads/R2971CP.pdf, we
implemented modifier ‘‘L1’’ (Separately
payable laboratory test) to be used in
lieu of the 14X bill type. Specifically,
we stated that hospitals should use the
‘‘L1’’ modifier to indicate when
laboratory tests meet either of the two
exceptions for separate payment
described above.
(b) CY 2016 Laboratory Test Packaging
Proposals and Finalized Policies
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39235 through 39236), for

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First calendar
year packaged
2016

CY 2016 and subsequent years, we
proposed a few revisions to the
laboratory packaging policy. First, with
regard to the particular molecular
pathology tests in the code range
expressly excluded from the previous
policy, we proposed to expand this
exclusion to exclude all molecular
pathology tests from our packaging
policy, including any new codes that
also describe molecular pathology tests.
In our rationale for excluding these
laboratory tests from our final packaging
policy in the CY 2014 OPPS/ASC final
rule with comment period (78 FR
74939), we stated that we did not
propose to package molecular pathology
laboratory tests because we believed
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 stated
in the CY 2016 OPPS/ASC proposed
rule, we believe that this rationale
remains applicable and may be
appropriately extended to any new
molecular pathology tests. Therefore, for
CY 2016, we proposed to assign all
laboratory tests that describe molecular
pathology tests status indicator ‘‘A’’ in
Addendum B to the proposed rule
(which is available via the Internet on
the CMS Web site), which means that
they would be separately paid at the
CLFS rates outside of the OPPS.
Second, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39236), we
proposed for CY 2016 to make separate
payment for preventive laboratory tests
and we assigned them status indicator
‘‘A’’ in Addendum B to the proposed
rule. Laboratory tests that are
considered preventive are listed in
Section 1.2, Chapter 18 of the Medicare
Claims Processing Manual (Pub. 100–
04). We currently make an exception to
conditional packaging of ancillary
services for ancillary services that are
also preventive services (79 FR 66819).
We stated in the proposed rule that, for
consistency, we believe that such an

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
exception should also apply to
laboratory tests that are classified as
preventive services.
Finally, for CY 2016, we proposed in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39236) to modify our current
conditional packaging policy that
laboratory tests are integral, ancillary,
supportive, dependent, or adjunctive to
a primary service or services provided
in the hospital outpatient setting when
those services are provided on the same
date of service as the primary service
and when they are ordered for the same
diagnosis and by the same practitioner
as the practitioner who ordered the
other hospital outpatient service.
Specifically, we proposed to consider
laboratory tests provided during the
same outpatient stay (rather than
specifically provided on a same date of
service as the primary service) as
integral, ancillary, supportive,
dependent, or adjunctive to a primary
service or services, except when a
laboratory test is ordered for a different
diagnosis and by a different practitioner
than the practitioner who ordered the
other hospital outpatient services. In
some cases, outpatient hospital stays
span more than a single date. For
laboratory tests reported on a claim with
a primary service, we stated in the
proposed rule that we do not believe
that a different date of service for the
laboratory test affects whether that test
is integral, ancillary, supportive,
dependent, or adjunctive to the primary
service or services provided in the
HOPD. Further, as we discussed in the
proposed rule, in reviewing our CY
2014 claims data, we observed hospitals
indicating separate payment by
reporting the ‘‘L1’’ modifier for only a
few laboratory tests reported on
different days than another hospital
outpatient service. We concluded that
hospitals generally do not view
laboratory tests occurring on a different
day than a primary service during an
outpatient stay as a reason for separate
payment. Therefore, we proposed to
package laboratory tests that are
reported on the same claim with a
primary service, regardless of the date of
service.
As stated in the proposed rule (80 FR
39236), this proposal does not affect our
existing policy to provide separate
payment for laboratory tests: (1) If they
are the only services furnished to an
outpatient and are the only services on
a claim and have a payment rate on the
CLFS; or (2) if they are ordered for a
different diagnosis than another hospital
outpatient service by a practitioner
different than the practitioner who
ordered the other hospital outpatient
service (78 FR 74942). As indicated in

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the proposed rule, we also plan to
continue to have hospitals report the
‘‘L1’’ modifier to identify any clinically
‘‘unrelated’’ laboratory tests that are
furnished on the same claim as OPPS
services, but are ordered by a different
practitioner and for a different diagnosis
than the other hospital outpatient
service. However, for ease of
administration, we also proposed to
implement claims processing edits
through a new conditional packaging
status indicator ‘‘Q4’’ that would
identify 13X bill type claims where
there are only laboratory HCPCS codes
that appear on the CLFS; automatically
change their status indicator to ‘‘A’’; and
pay them separately at the CLFS
payment rates. For such claims, the
‘‘L1’’ modifier would not be used (80 FR
39236). Status indicator ‘‘Q4’’ is defined
as ‘‘packaged APC payment if billed on
the same claim as a HCPCS code
assigned status indicator ‘‘J1,’’ ‘‘J2,’’
‘‘S,’’ ‘‘T,’’ ‘‘V,’’ ‘‘Q1,’’ ‘‘Q2,’’ or ‘‘Q3,’’
otherwise separately paid, and would
apply to conditionally packaged
laboratory tests. In our CY 2014 claims
data, we observed some claims reporting
laboratory services and no other OPPS
services that were not paid because the
hospital did not appropriately report the
‘‘L1’’ modifier. We further believe that
the status indicator ‘‘N’’ for
unconditional packaging does not
accurately reflect the payment status of
these laboratory tests. These tests may
be eligible to receive separate payment
at the CLFS payment rates in several
circumstances as discussed above. With
the assignment of the proposed ‘‘Q4’’
modifier to laboratory tests, we
proposed that modifier ‘‘L1’’ would only
be used to identify ‘‘unrelated’’
laboratory tests that are ordered for a
different diagnosis and by a different
practitioner than the other hospital
outpatient services on the claim.
We invited public comments on these
proposals.
Comment: Many commenters agreed
with expanding the molecular pathology
test exception to include new molecular
pathology tests, and not only the tests
listed in the CY 2014 OPPS/ASC final
rule with comment period. In addition,
many commenters agreed with the
proposal for separate payment for
preventive laboratory tests.
Response: We appreciate the
commenters’ support for these
proposals.
Comment: A few commenters
disagreed with the assignment of status
indicator ‘‘E’’ (Not paid by Medicare
when submitted on outpatient claims)
for the following CPT codes that
describe new multianalyte assays with
algorithmic analyses (MAAAs):

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• CPT code 81490 (Autoimmune
(rheumatoid arthritis), analysis of 12
biomarkers using immunoassays,
utilizing serum, prognostic algorithm
reported as a disease activity score);
• CPT code 81535 (Oncology
(gynecologic), live tumor cell culture
and chemotherapeutic response by
DAPI stain and morphology, predictive
algorithm reported as a drug response
score; first single drug or drug
combination);
• CPT code 81536 (Oncology
(gynecologic), live tumor cell culture
and chemotherapeutic response by
DAPI stain and morphology, predictive
algorithm reported as a drug response
score; each additional single drug or
drug combination (List separately in
addition to code for primary
procedure)); and
• CPT code 81538 (Oncology (lung),
mass spectrometric 8-protein signature,
including amyloid A, utilizing serum,
prognostic and predictive algorithm
reported as good versus poor overall
survival).
In addition, the commenters agreed
with CMS’ designation of certain other
MAAAs as separately paid molecular
pathology tests, but requested that CMS
also assign status indicator ‘‘A’’ to the
four MAAAs codes listed above. The
commenters believed that the rationale
stated in the proposed rule for not
packaging payment for molecular
pathology laboratory tests (that is, that
‘‘we believed that these relatively new
tests [molecular pathology laboratory
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 . . . package’’
(80 FR 39236)) applies equally to the
four new nonmolecular pathology
MAAAs listed above, and for this
reason, payment for these MAAAs
should also not be packaged.
Response: We agree in part with the
commenters. We agree that the MAAAs
codes in question should not be
assigned status indicator ‘‘E’’ for CY
2016 because there is some local
Medicare coverage for these codes.
However, the proposal was limited to
molecular pathology laboratory tests
and not to any laboratory test that could
possibly fit into the molecular pathology
test exception rationale. While we did
not propose to extend the packaging
exception that applies to molecular
pathology laboratory tests to these
nonmolecular pathology MAAAs
laboratory tests, we may consider
whether additional exceptions to the
OPPS laboratory test packaging policy
should apply to tests other than

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molecular pathology tests in the future.
For CY 2016, the four MAAAs codes
listed above are assigned status
indicator ‘‘Q4.’’
Comment: Many commenters
supported the proposed ‘‘Q4’’ status
indicator for conditionally packaged
laboratory tests. The commenters
expressed their appreciation for the
administrative convenience this policy
will afford hospitals in receiving
separate payment without the use of a
modifier for laboratory tests provided
without other hospital services.
However, some commenters objected to
the associated logic of applying
laboratory test packaging at the claim
level instead of at the date of service
level. These commenters believed that
laboratory tests performed during an
outpatient hospital stay but on a
different date of service might not be
ancillary to a primary service on a
different date of service. Some
commenters also believed that payment
for laboratory tests should not be
packaged into payment for other
conditionally packaged services that are
assigned status indicator ‘‘Q1’’ or ‘‘Q2,’’
because they were concerned that the
cost of some packaged laboratory tests
could exceed the cost of other
conditionally packaged services into
which the laboratory tests are packaged.
Response: We appreciate the
commenters’ support for the proposed
‘‘Q4’’ status indicator. However, we
believe that the ‘‘Q4’’ status indicator
should apply at the claim level. We
believe that it is appropriate to package
payment for laboratory tests that are
provided on a different date of service
than other hospital services. For
example, a patient could be seen in the
emergency room and receive some
laboratory tests prior to midnight and
receive the remainder of the services
after midnight on a different date of
service. This order of services should
not affect whether the laboratory tests
are packaged. Therefore, we believe that
the ‘‘Q4’’ status indicator should
identify packaging of laboratory tests
into procedures on the same claim,
regardless of the date of service, unless
an exception applies. Regarding the
commenters’ concern about costly
laboratory tests possibly being packaged
into less costly services that are
assigned status indicator ‘‘Q1’’ or ‘‘Q2,’’
it is possible that this could happen but,
given the low cost of most laboratory
tests relative to most other hospital
outpatient services, we do not believe
that this would be a common
occurrence. In addition, packaging in
the OPPS is not limited to only ancillary
or subordinate services that are lower
cost than a primary service. In some

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cases, the packaged services can have a
higher cost than the primary service.
After consideration of the public
comments we received, we are
finalizing the changes to the laboratory
test packaging policy as proposed, with
one modification. We are assigning
status indicator ‘‘Q4’’ (instead of ‘‘E’’) to
CPT codes 81490, 81535, 81536, and
81538. Status indicator assignments for
laboratory tests are included in
Addendum B to this final rule with
comment period (which is available at
the CMS Web site at: http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
HospitalOutpatientPPS/index.html).
When laboratory tests are not packaged
under the OPPS and are listed on the
CLFS, they are paid at the CLFS
payment rates outside the OPPS under
Medicare Part B.
4. Calculation of OPPS Scaled Payment
Weights
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39236 through 39237), we
proposed to calculate the relative
payment weights for each APC 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. Prior to CY 2007,
we standardized all of 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 an initial unscaled
relative payment weight for each APC.
Beginning with the CY 2007 OPPS (71
FR 67990), we standardized all of the
relative payment weights to the median
cost of 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
APC because it was the mid-level clinic
visit APC (that is, Level 3 of 5 levels).
We established a policy in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68283) of using geometric
mean-based APC costs rather than
median-based APC costs to calculate
relative payment weights. In the CY
2016 OPPS/ASC proposed rule (80 FR
39236 through 39237), we proposed to
continue this policy for CY 2016 and
subsequent years.
As noted earlier for CY 2012 and CY
2013, outpatient clinic visits were
assigned to one of five levels of clinic
visit APCs, with APC 0606 representing
a mid-level clinic visit. In the CY 2014

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OPPS/ASC final rule with comment
period (78 FR 75036 through 75043), we
finalized a new policy that created
alphanumeric HCPCS code G0463
(Hospital outpatient clinic visit for
assessment and management of a
patient), representing any and all clinic
visits under the OPPS. HCPCS code
G0463 was assigned to APC 0634
(Hospital Clinic Visits). We also
finalized a policy to use CY 2012 claims
data to develop the CY 2014 OPPS
payment rates for HCPCS code G0463
based on the total geometric mean cost
of the levels one through five CPT E/M
codes for clinic visits previously
recognized under the OPPS (CPT codes
99201 through 99205 and 99211 through
99215). In addition, we finalized a
policy to no longer recognize a
distinction between new and
established patient clinic visits.
For the CY 2014 and CY 2015 OPPS
final rules with comment period, we
standardized all of the relative payment
weights to the geometric mean cost of
APC 0634 as discussed in section VII. of
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66823). As
noted in section VII. of the CY 2016
proposed rule, for CY 2016, we
proposed to delete APC 0634 and to
move the outpatient clinic visit HCPCS
code G0463 to APC 0632 (Level 2
Examinations and Related Services) (80
FR 39237). Accordingly, for CY 2016
and subsequent years, we proposed to
standardize all of the relative payment
weights to APC 0632. As stated in the
proposed rule, we believe that
standardizing relative payment weights
to the geometric mean of the APC to
which HCPCS code G0463 is assigned
maintains consistency in calculating
unscaled weights that represent the cost
of some of the most frequently provided
OPPS services. For CY 2016, we
proposed to renumber APC 0632 as APC
5012 (Level 2 Examination and Related
Services). For CY 2016, we proposed to
assign proposed renumbered APC 5012
a relative payment weight of 1.00 and to
divide the geometric mean cost of each
APC by the proposed geometric mean
cost for proposed renumbered APC 5012
to derive the proposed unscaled relative
payment weight for each APC. The
choice of the APC on which to
standardize the proposed relative
payment weights does not affect
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

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aggregate weight under the OPPS for CY
2016 is neither greater than nor less
than the estimated aggregate weight that
would have been made without the
changes. To comply with this
requirement concerning the APC
changes, we proposed to compare the
estimated aggregate weight using the CY
2015 scaled relative payment weights to
the estimated aggregate weight using the
proposed CY 2016 unscaled relative
payment weights.
We did not receive any public
comments on our proposal to use the
geometric mean cost of renumbered
APC 5012 to standardize relative
payment weights. Therefore, we are
finalizing the use of the relative
payment weight of 1.00 for APC 5012 to
derive the unscaled relative payment
weight for each APC.
For CY 2015, we multiplied the CY
2015 scaled APC relative payment
weight applicable to a service paid
under the OPPS by the volume of that
service from CY 2014 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
calculate an estimated aggregate weight
for the year. For CY 2016, we proposed
to apply the same process using the
estimated CY 2016 unscaled relative
payment weights rather than scaled
relative payment weights. We proposed
to calculate the weight scaler by
dividing the CY 2015 estimated
aggregate weight by the unscaled CY
2016 estimated aggregate weight (80 FR
39237).
For a detailed discussion of the
weight scalar 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.
Click on the CY 2016 OPPS final rule
link and open the claims accounting
document link at the bottom of the page.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39237), we proposed to
compare the estimated unscaled relative
payment weights in CY 2016 to the
estimated total relative payment weights
in CY 2015 using CY 2014 claims data,
holding all other components of the
payment system constant to isolate
changes in total weight. Based on this
comparison, we proposed to adjust the
calculated CY 2016 unscaled relative
payment weights for purposes of budget
neutrality. We proposed to adjust the
estimated CY 2016 unscaled relative
payment weights by multiplying them
by a weight scaler of 1.3823 to ensure
that the proposed CY 2016 relative
payment weights are scaled to be budget

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neutral. The proposed CY 2016 relative
payment weights listed in Addenda A
and B to the proposed rule (which are
available via the Internet on the CMS
Web site) were scaled and incorporated
the recalibration adjustments discussed
in sections II.A.1. and II.A.2. of the
proposed rule.
Section 1833(t)(14) of the Act
provides the payment rates for certain
SCODs. Section 1833(t)(14)(H) of the
Act provides 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
2016 OPPS.
We did not receive any public
comments on the proposed weight
scaler calculation. Therefore, we are
finalizing the calculation process
described in the proposed rule without
modification. Using updating final rule
claims data, we are updating the
estimated CY 2016 unscaled relative
payment weights by multiplying them
by a weight scaler of 1.3852 to ensure
that the final CY 2016 relative payment
weights are scaled to be budget neutral.
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
2016 IPPS/LTCH PPS final rule (80 FR
49508), consistent with current law,
based on IHS Global Insight, Inc.’s
second quarter 2015 forecast of the FY
2016 market basket increase, the FY
2016 IPPS market basket update is 2.4
percent. However, sections 1833(t)(3)(F)
and 1833(t)(3)(G)(iv) 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 2016.

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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
2016 IPPS/LTCH PPS final rule (80 FR
49509), we discussed the calculation of
the final MFP adjustment for FY 2016,
which is a 0.5 percentage point
reduction.
In the CY 2016 OPPS/ASC proposed
rule, 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 updated data, if appropriate, to
determine the CY 2016 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 the CY 2016 OPPS/ASC final
rule with comment period. Consistent
with that proposal, and the FY 2016
IPPS/LTCH PPS final rule, we applied
the updated final FY 2016 market basket
percentage increase and the MFP
adjustment to the OPD fee schedule
increase factor for the CY 2016 OPPS.
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 2016,
section 1833(t)(3)(G)(iv) of the Act
provides a ¥0.2 percentage point
reduction to the OPD fee schedule
increase factor under section
1833(t)(3)(C)(iv) of the Act. Therefore, in
accordance with sections
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of
the Act, in the CY 2016 OPPS/ASC
proposed rule, we proposed to apply a
0.2 percentage point reduction to the
OPD fee schedule increase factor for CY
2016.
We note that section 1833(t)(3)(F) of
the Act provides that application of this
subparagraph may result in the OPD fee

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schedule increase factor under section
1833(t)(3)(C)(iv) of the Act being less
than 0.0 percent for a year, and may
result in OPPS payment rates being less
than rates for the preceding year. As
described in further detail below, we are
applying an OPD fee schedule increase
factor of 1.7 percent for the CY 2016
OPPS (which is 2.4 percent, the final
estimate of the hospital inpatient market
basket percentage increase, less the final
0.5 percentage point MFP adjustment,
and less the 0.2 percentage point
additional adjustment).
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. For further
discussion of the Hospital OQR
Program, we refer readers to section
XIII. of this final rule with comment
period.
In the CY 2016 OPPS/ASC proposed
rule, we proposed to amend 42 CFR
419.32(b)(1)(iv)(B) by adding new
paragraph (7) to reflect the requirement
in section 1833(t)(3)(F)(i) of the Act that,
for CY 2016, 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)(iv) 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 0.2
percentage point for CY 2016.
We did not receive any public
comments on our proposed adjustments
to the OPD fee schedule increase factor
or on the proposed changes to the
regulations at 42 CFR
419.32(b)(1)(iv)(B). For the reasons
discussed above, we are adjusting the
OPD fee schedule increase factor and
finalizing the changes to the regulations
as proposed.
To set the OPPS conversion factor for
the CY 2016 proposed rule, we
increased the CY 2015 conversion factor
of $74.173 by 1.9 percent. In accordance
with section 1833(t)(9)(B) of the Act, we
further adjusted the conversion factor
for CY 2016 to ensure that any revisions
made to the wage index and rural
adjustment were made on a budget
neutral basis. We calculated an overall
budget neutrality factor of 0.9993 for
wage index changes by comparing total
estimated payments from our simulation
model using the FY 2016 IPPS wage
indexes to those payments using the FY
2015 IPPS wage indexes, as adopted on
a calendar year basis for the OPPS.

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For the CY 2016 proposed rule, we
maintained the current rural adjustment
policy, as discussed in section II.E. of
this final rule with comment period.
Therefore, we set the budget neutrality
factor for the rural adjustment is 1.0000.
For the CY 2016 proposed rule, we
proposed 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.
Consistent with that policy, we
calculated a CY 2016 budget neutrality
adjustment factor for the cancer hospital
payment adjustment by comparing
estimated total CY 2016 payments under
section 1833(t) of the Act, including the
CY 2016 cancer hospital payment
adjustment, to estimated CY 2016 total
payments using the CY 2015 final
cancer hospital payment adjustment as
required under section 1833(t)(18)(B) of
the Act. The CY 2016 estimated
payments applying the CY 2016 cancer
hospital payment adjustment are
identical to estimated payments
applying the CY 2015 final cancer
hospital payment adjustment. Therefore,
we applied a budget neutrality
adjustment factor of 1.0000 to the
conversion factor for the cancer hospital
payment adjustment.
For the proposed rule, we estimated
that pass-through spending for drugs,
biologicals, and devices for CY 2016
would equal approximately $136.8
million, which represented 0.25 percent
of total projected CY 2016 OPPS
spending. Therefore, the conversion
factor was adjusted by the difference
between the 0.13 percent estimate of
pass-through spending for CY 2015 and
the 0.25 percent estimate of passthrough spending for CY 2016, resulting
in an adjustment for CY 2016 of ¥0.12
percent. Estimated payments for outliers
remained at 1.0 percent of total OPPS
payments for CY 2016. We estimated for
the proposed rule that outlier payments
would be 0.95 percent of total OPPS
payments in CY 2015; the 1.0 percent
for outlier payments in CY 2016 would
constitute a 0.05 percent increase in
payment in CY 2016 relative to CY
2015.
We did not receive any public
comments on our proposed general
methodology for calculating the CY
2016 conversion factor. Therefore, we
are finalizing the methodology in this
final rule with comment period.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39238), we also proposed to
exercise our authority in section
1833(t)(3)(C)(iii) of the Act to further
adjust the conversion factor to eliminate
the effect of coding and classification

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changes that we believe resulted in a
change in aggregate payments that do
not reflect real changes in service-mix
related to our final policy to package
certain clinical diagnostic laboratory
tests in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 74939
through 74942). Below we discuss our
proposed and final adjustment to the
conversion factor to redress the inflation
in the OPPS payment rates for CY 2016
resulting from excess packaged payment
under the OPPS for laboratory tests that
we now understand continue to be paid
separately outside the OPPS.
The current clinical diagnostic
laboratory test packaging policy
packages payment for 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. Under current policy,
payment for a laboratory test is not
packaged when: (1) A laboratory test is
the only service provided to the
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. The laboratory tests falling
under these two exceptions continue to
be paid separately at the CLFS payment
rates outside the OPPS.
In addition, we exclude payment for
molecular pathology tests described by
CPT codes in the ranges of 81200
through 81383, 81400 through 81404,
and 81479 from packaging (78 FR
74939). In section II.A.3.b.(3) of the
proposed rule, we proposed to expand
this exclusion to exclude all molecular
pathology tests from our packaging
policy, including any new codes that
also describe molecular pathology tests.
Finally, we continue to pay separately
for referred specimens billed on a 14X
bill type because these services will
always consist only of laboratory
services. We also make separate (that is,
not packaged) payment for laboratory
tests billed on a 12X (inpatient Part B)
bill type claim when billed for reasons
other than rebilling for a denied Part A
claim, such as inpatient Part B coverage
following exhausted Part A benefits. We
refer readers to section II.A.3.b.(3) of
this final rule with comment period for
a detailed discussion of our laboratory
test packaging policy exceptions and to
review our proposals, and final policy,
to modify our laboratory test packaging
policy in light of current experience
with this policy.
In monitoring aggregate payments for
CY 2014, we observed that OPPS

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spending for hospital outpatient
services experienced double digit
growth in 2014 compared to typical
growth of 6 to 8 percent, due to our CY
2014 final policy to package laboratory
services, without a comparable
reduction in spending for laboratory
services paid at the CLFS payment rates
outside the OPPS. As part of our CY
2014 final policy to package certain
clinical diagnostic laboratory tests, we
both revised the OPPS relative payment
weights to reflect packaged laboratory
services, and we increased the OPPS
relative weight scaler to reflect the
estimated total cost of packaged
laboratory services. In calculating the
appropriate increase to the weight scaler
for CY 2014, we estimated that we spent
approximately $2.4 billion on laboratory
services on 13X type bill claims, and we
incorporated this aggregate amount of
weight into our estimate of the 2013
relative weight when calculating the
budget neutral weight scaler to scale all
relative weights for CY 2014, except
those with a fixed payment amount
such as drugs paid at ASP+6 percent (78
FR 74948 through 74949). An
adjustment to the overall weight scaler
has a comparable effect on final
payment as an adjustment to the
conversion factor. We also assumed that
separate payment would continue for
laboratory services billed on 14X bill
type claims for referred specimens and
for select inpatient Part B claims billed
on a 12X bill type claim. Thus, we
stated that we expected to experience an
increase in OPPS spending due to our
final packaging policy and a
commensurate reduction in overall
payment for Medicare Part B laboratory
tests paid at the CLFS rates outside the
OPPS.
However, as we discussed in the CY
2016 OPPS/ASC proposed rule (80 FR
39239), upon reviewing actual claims
for CY 2014, we observed an
unexpectedly high volume of laboratory
tests associated with $1 billion in
spending for exceptions to our
packaging policy for laboratory tests that
continued to receive separate payment
at the CLFS payment rates outside the
OPPS. We did not observe a significant
change in the overall volume of
laboratory services being furnished.
Specifically, we observed a pronounced
shift in volume from billing on the 13X
bill type claims to the 14X bill type
claims beginning January 1, 2014,
consistent with our final rule policy and
then shifting back to the 13X bill type
claims with an ‘‘L1’’ modifier when our
instructions on billing for laboratory
tests that are excepted from our
laboratory packaging policy were

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implemented in July 2014. (We refer
readers to Transmittal 2971, Change
Request 8776, July 2014 Update of the
Hospital Outpatient Prospective
Payment System (OPPS), which is
available on the CMS Web site at: http://
www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/
downloads/R2971CP.pdf.) Because we
did not observe a significant change in
the number of laboratory services in our
claims data, we concluded that the
changes in aggregate payments under
the OPPS were a result of changes in
pricing alone and did not reflect real
changes in service-mix.
Therefore, we overestimated the
adjustment necessary to account for the
new policy to package laboratory tests
and underestimated the amount of
spending that would continue for
laboratory tests paid at the CLFS rates
outside the OPPS by approximately $1
billion. This $1 billion effectively
resulted in inflation in the OPPS
payment rates resulting from excess
packaged payment under the OPPS for
laboratory tests for all OPPS services
and duplicate payments for certain
laboratory tests because we are paying
the laboratory tests through packaged
payment incorporated into the OPPS
payment rates as well as through
separate payment at the CLFS payment
rates outside the OPPS.
Section 1833(t)(3)(C)(iii) of the Act
specifies that if the Secretary determines
the adjustments for service-mix for a
previous year (or estimates that such
adjustments for a future year) did (or are
likely to) result in a change in aggregate
payments during the year that are a
result of changes in the coding or
classification of covered OPD services
that do not reflect real changes in
service-mix, the Secretary may adjust
the conversion factor for subsequent
years so as to eliminate the effect of
such coding or classification changes.
Based on this authority, we proposed a
reduction of 2.0 percentage points to the
proposed CY 2016 conversion factor to
redress inappropriate inflation in the
OPPS payment rates and prevent CY
2016 payment rates from including $1
billion in excess packaged payment. We
also used the ‘‘L1’’ modifier information
on the CY 2014 claims data that we use
to model the OPPS to identify which
laboratory services should be packaged
into the associated OPPS services when
establishing the proposed CY 2016
relative weights. We proposed this
reduction in order to eliminate the effect
of the coding and classification changes
for payment for laboratory tests that
resulted in changes in aggregate
payments, but which did not result in
real changes in service-mix under the

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OPPS. If we had been able to accurately
forecast the amount of continued
spending on separately payable
laboratory tests that would continue in
CY 2014 at the CLFS rates outside the
OPPS, we would have incorporated a
reduced amount of estimated spending
into our CY 2014 OPPS budget
neutrality calculations in CY 2014
rulemaking.
We conducted several analyses to
better understand the derivation of the
overestimated adjustment made in CY
2014. These efforts included an attempt
to determine how much spending at the
CLFS payment rates outside the OPPS
should have been packaged in CY 2014
with full knowledge of the actual
volume for exceptions to our final
laboratory tests packaging policy now
that CY 2014 claims data are available
for review. This assessment required
some assumptions about what payment
would have been at the CY 2014 CLFS
payment amounts using the CLFS
national limitation amount (NLA) price
or the mode price among jurisdictions
where an NLA did not exist for all
laboratory services in 12X, 13X, and
14X bill type claims less actual
payments for those same services and
the $2.4 billion in packaged payments.
We adjusted our total estimates for
incomplete claims data because the data
that we use to model the proposed rule
are data from CY 2014 claims processed
as of December 31, 2014, estimated at 90
percent based on historical claims data.
As a result of this analysis, we estimated
that we included a gross estimate of
roughly $1.1 billion in excess packaged
payment in the CY 2014 OPPS payment
rates for laboratory tests that were paid
separately, as demonstrated by actual
CY 2014 claims data. We also did a
more straightforward analysis assessing
total payment for our exceptions policy,
in which we looked at the change in
payment on 14X bill type claims for the
first part of CY 2014 along with any
payment for laboratory services billed
with the ‘‘L1’’ modifier. This analysis
resulted in a similar estimate of roughly
$1.003 billion. Because both analyses
resulted in an approximate $1 billion
estimate of spending at the CLFS rates
outside the OPPS that was packaged
into the OPPS, we stated that we believe
that a prospective adjustment to remove
$1 billion from the CY 2016 OPPS
payment rates would realign total
aggregate OPPS payments to reflect the
resources associated with OPPS
services. When we calculated the $1
billion as a percent of actual total
spending for OPPS services in CY 2014
(approximately $50 billion), we
determined an estimated 2.0 percent

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reduction to total spending to be
applied to the conversion factor in CY
2016. Therefore, in the CY 2016 OPPS/
ASC proposed rule, we proposed to
apply a 2.0 percent adjustment to the
proposed CY 2016 conversion factor to
redress the inflation in the OPPS
payment rates resulting from excess
packaged payment under the OPPS for
laboratory tests we now understand
continue to be paid at the CLFS rates
outside the OPPS for CY 2016 and
subsequent years.
We also stated in the proposed rule
that, for the CY 2017 OPPS rulemaking,
we plan to review actual CY 2015
claims data and assess whether our
proposed adjustment for CY 2016
accurately adjusted for the inflation in
the OPPS payment rates under current
policy.
We provided a summary file of our
analysis of separate payment at the
CLFS rates outside the OPPS for
laboratory services that are exceptions
to our packaging policy which is
available in the ‘‘Downloads’’ section of
the CMS Web site accompanying the
proposed rule (http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Hospital-Outpatient-Regulations-andNotices.html). We noted that the ‘‘OPPS
limited data set’’ that we make available
to accompany each proposed and final
rule is not a complete set of institutional
Part B claims, containing only the 12X,
13X, and 14X bill types that we use to
model the OPPS rates and excluding
claims weeded or trimmed as discussed
in our claims accounting document
(http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.html).
For the proposed rule, we also
proposed that hospitals that fail to meet
the reporting requirements of the
Hospital OQR Program would continue
to be subject to a further reduction of 2.0
percentage points to the OPD fee
schedule increase factor. For hospitals
that fail to meet the requirements of the
Hospital OQR Program, we proposed to
make all other adjustments discussed
above, but use a reduced OPD fee
schedule update factor of ¥0.1 percent
(that is, the proposed OPD fee schedule
increase factor of 1.9 percent further
reduced by 2.0 percentage points). This
would result in a proposed reduced
conversion factor for CY 2016 of
$72.478 for hospitals that fail to meet
the Hospital OQR requirements (a
difference of ¥1.451 in the conversion
factor relative to hospitals that meet the
requirements).

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Comment: MedPAC and other
commenters commended CMS for
recognizing that an adjustment to OPPS
payment rates was warranted in light of
the effects of the laboratory services
packaging policy. MedPAC noted that
the proposal to adjust payment rates to
prevent continued excess payment is
consistent with adjustments CMS has
made in IPPS, Medicare Advantage, and
the home health prospective payment
system in the past.
Response: We appreciate the
commenters’ support.
Comment: Several commenters
suggested that the purpose of the
proposed adjustment was to recoup
overpayments in CY 2014 and CY 2015,
and that recouping overpayments made
in prior years was inconsistent with a
prospective payment system.
Response: The proposed ¥2.0 percent
adjustment to the conversion factor
would not recoup ‘‘overpayments’’
made for CYs 2014 and 2015. When we
classified laboratory tests as OPPS
packaged services in 2014, we increased
the conversion factor to account for that
change, which resulted in excess
payment being built into the rates. The
proposal to apply a ¥2.0 percent
adjustment to the conversion factor is
intended to address the effects of the
OPPS classification changes on OPPS
payments for CY 2016 that do not reflect
real changes in service-mix. If we do not
adjust the conversion factor, the excess
payment built into the rates would carry
through to the CY 2016 OPPS rates.
Comment: A few commenters
suggested that the proposed adjustment
to the conversion factor was unfairly
applied across the board to OPPS
services. The commenters suggested that
the adjustment should only apply to
services that have packaged laboratory
tests.
Response: The proposed adjustment
to reduce the conversion factor would
apply to all OPPS services, but we also
established relative weights in a manner
that would target payment effects on
services whose payment rates
previously reflected excess packaged
payment for laboratory services. In
modeling the CY 2016 OPPS, we did not
include costs for laboratory tests that
were billed separately in CY 2014 for
purposes of calculating the relative
weights of all services. This means that
services with excess payment due to
packaged laboratory tests in CYs 2014
and 2015 would have had the additional
weight for those laboratory services
removed from their weight calculation
for CY 2016. With that weight removed,
all other services would have a higher
relative weight than they otherwise
would if the costs for those packaged

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laboratory services had been included in
the model. As a result, the proposed
adjustment to the conversion factor in
conjunction with the relative weights
primarily affects the payment for
services that previously included excess
packaged payment for laboratory tests.
Section 1833(t)(3)(C)(iii) of the Act
authorizes the agency to adjust the
conversion factor, and adjustments to
payment rates such as this are often
applied across the board to all services.
Comment: One commenter questioned
the legality of CMS using section
1833(t)(3)(C)(iii) of the Act as the
authority to make the conversion factor
adjustment because the commenter
viewed the 2.0 percent reduction as a
correction to an error CMS made in CY
2014, not an adjustment for service-mix.
Response: The commenter
misunderstands the basis for the
proposed adjustment. Section
1833(t)(3)(C)(iii) of the Act provides
that, if the Secretary determines that
adjustments for service-mix for a
previous year resulted in (or are likely
to result in) a change in aggregate
payments that are a result of changes in
the coding or classification of covered
OPD services that do not reflect real
changes in service-mix, the Secretary
may adjust the conversion factor for
subsequent years to eliminate the effect
of such coding or classification changes.
This authority applies to the proposed
adjustment.
The increase in aggregate OPPS
payments for CY 2014 did not reflect
real changes in the service-mix for CY
2014, but, rather, was attributable to
classification changes relating to the
packaging of laboratory tests in the
OPPS.
As we noted in the CY 2016 OPPS
proposed rule (80 FR 39239), in our
claims data, we did not observe a
significant change in the overall volume
of laboratory services being furnished in
CY 2014. Because we did not observe
such a change, and because these
services that we packaged continued to
be billed and paid separately, we
concluded, and confirmed based on
several analyses, that the changes in
aggregate payments under the OPPS for
CY 2014 were the result of classification
changes and not real changes in servicemix. In addition, as stated above, the
excess built into the rates for CY 2014
and CY 2015 would carry through to the
CY 2016 OPPS rates in the absence of
an adjustment. Accordingly, we
determined that the classification
changes relating to packaged laboratory
services would likely result in a change
in aggregate payments for CY 2016 that
does not reflect real changes in servicemix. In accordance with section

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1833(t)(3)(C)(iii) of the Act, our proposal
to adjust the conversion factor was
intended to eliminate the effect of the
classification changes for CY 2016.
The Secretary’s adjustment is
consistent with the statute, is
reasonable, and is not arbitrary or
capricious. We note that section
1833(t)(12) of the Act precludes
administrative and judicial review of
the Secretary’s calculations under
section 1833(t)(3) of the Act, including
adjustments under section
1833(t)(3)(C)(iii) of the Act.
Comment: Some commenters
suggested that CMS implement a
transition period for the conversion
factor adjustment so that the adjustment
is phased in over several years.
Response: We recognize that the
adjustment to the conversion factor is
significant for CY 2016, but we do not
believe a transition period for the
adjustment to the conversion factor is
appropriate in this situation because it
would allow the excess packaged
payments built into the rates for CY
2014 and CY 2015 to continue into CY
2016. We believe it is appropriate to
adjust for this excess packaged payment
as soon as possible.
Comment: Several commenters
suggested that CMS present its analysis
of the need for this adjustment to the
Advisory Panel on Hospital Outpatient
Payment (HOP) in the spring of 2016
before implementing this adjustment to
allow the HOP Panel to opine on
whether this adjustment is warranted.
Response: As we indicated earlier, we
believe it is appropriate to make this
adjustment for the CY 2016 payment
rates because otherwise the excess
packaged payments built into the rates
for CY 2014 and CY 2015 would
continue into CY 2016. If we waited to
present this issue to the HOP Panel, we
would not be able to implement this
adjustment until the CY 2017 payment
year.
Comment: One commenter suggested
that the increase in ‘‘unrelated’’
laboratory services paid under the CLFS
in CY 2014 might be a continuation of
the broader trend of inpatient services
transitioning to outpatient services and
might not be related to the laboratory
packaging policy implemented in CY
2014.
Response: Our actuaries’ analyses
included in conjunction with the
proposed rule (80 FR 39239 and the
‘‘Summary Analysis Supporting
Adjustment for Excess Laboratory
Packaging’’ on the OPPS Web site at:
https://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-and-Notices-

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Items/CMS-1633-P.html) indicate that
the total amount of laboratory services
performed in the outpatient setting did
not increase and that the number of
laboratory services performed in the
outpatient setting that were deemed
‘‘unrelated’’ to OPPS services in CY
2014 were greater than we had
estimated they would be with the
implementation of the laboratory
services packaging policy. As a result,
we believe that the higher than expected
number of ‘‘unrelated’’ laboratory
services is reflective of the classification
changes related to the laboratory
packaging policy and not due to services
moving from the inpatient setting to the
outpatient setting.
Comment: Several commenters
suggested that CMS not implement this
adjustment because CMS had not
specified in the CY 2014 OPPS final rule
that $2.4 billion was being included in
the CY 2014 OPPS payment rates to
account for newly packaged laboratory
services. The commentators indicated
that CMS did not specify in the CY 2014
OPPS final rule or in the CY 2016 OPPS
proposed rule whether CMS was
excluding from the $2.4 billion estimate
‘‘unrelated’’ laboratory services that
under CMS’ CY 2014 policy would be
separately paid.
Response: The proposed adjustment
to the conversion factor would affect
OPPS payments for CY 2016, not CY
2014. In the CY 2014 OPPS/ASC final
rule with comment period, we
discussed the incorporation of the
payment weights for outpatient
laboratory tests previously paid at the
CLFS payment rates (78 FR 74948
through 74949). The calculation of the
OPPS relative weights and payment
rates for CY 2014 reflects estimates
attributable to packaged laboratory
services. While we did not specify the
estimated dollar amount ($2.4 billion)
attributable to packaged laboratory
services in the CY 2014 final rule with
comment period, we did specify in the
CY 2016 OPPS/ASC proposed rule that
an estimated $2.4 billion was effectively
added to the OPPS payment system to
account for packaged laboratory services
in the CY 2014 OPPS/ASC final rule
with comment period. Insofar as
hospitals may have received significant
windfalls for CY 2014 and CY 2015,
presumably commenters do not intend
to challenge the payments for those
years (at least with respect to the
incorporation of packaged laboratory
services). With respect to the OPPS
ratesetting process for CY 2016, we
referenced the $2.4 billion estimate in
the CY 2016 OPPS/ASC proposed rule
(as explained above) and thus
commenters had notice of the estimate

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for purposes of commenting on the
proposed adjustment in the CY 2016
OPPS/ASC proposed rule.
Comment: Several commenters
suggested that CMS not implement this
adjustment because the ‘‘Summary
Analysis Supporting Adjustment for
Excess Laboratory Packaging,’’ released
with the CY 2016 OPPS/ASC proposed
rule, included data that were not
publicly available. The commenters
indicated that this summary analysis
included CY 2014 data processed
through May 31, 2015, while the OPPS
limited data set released with the
proposed rule included data processed
through December 31, 2014. In addition,
the commenters noted that the summary
analysis displayed monthly data that are
not available in the OPPS limited data
set. The commenters also noted that
CMS did not detail every assumption
made in calculating the proposed
adjustment, and that without these
details it would be difficult for
commenters to replicate our actuaries’
analysis.
Response: The ‘‘Summary Analysis
Supporting Adjustment for Excess
Laboratory Packaging’’ was provided in
conjunction with the proposed rule to
give stakeholders/commenters
additional information about our
methodology for determining the
amount of the proposed adjustment,
even though the data used for purposes
of the summary analysis were not the
same exact data used for purposes of the
proposed rule. For the supplemental
summary analysis, we used the most
recent data available to us, CY 2014
claims processed through May 31, 2015,
which we estimated to be approximately
98 percent complete. The limited data
set (LDS) used for the proposed rule was
approximately 90 percent complete.
While having 90 percent of claims, as
opposed to 98 percent, may have made
it difficult for stakeholders to exactly
replicate our results, we note that the 90
percent LDS yielded very similar results
to the 98 percent dataset, and we believe
it would have been sufficient to enable
stakeholders to meaningfully comment
on the proposed adjustment. Likewise,
we provided the table in the
supplemental analysis with the data
presented by month because we
believed it would help stakeholders
better understand the proposed
adjustment, even if these data are not
replicable using the LDS. Specifically,
we believed that the monthly
breakdown of unrelated laboratory test
billing would show that unrelated
laboratory test billing was fairly
consistent across CY 2014 and that the
mid-year change in billing methodology

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did not affect billing of unrelated
laboratory tests in CY 2014.
We performed multiple analyses to
better understand the effect of the
classification changes relating to
packaged laboratory services on
aggregate payments, in order to
determine the amount of the proposed
adjustment described in the proposed
rule (80 FR 39239 through 39240). As
mentioned earlier in this section and
explained in the proposed rule, in one
analysis, we analyzed actual claims data
for CY 2014 (using data available for the
CY 2016 proposed rule) to determine an
estimate of the total dollar amount that
‘‘should have been’’ packaged into the
OPPS for laboratory services in CY 2014
if we had had perfect information about
billing patterns of unrelated services
when making our original proposal for
CY 2014. We first estimated how much
we would have paid if all laboratory
services were paid at CLFS NLA rates
and had not been packaged under the
OPPS. To do this, we began with the CY
2014 claims data which we used for the
CY 2016 proposed rule. We identified
the number of billed laboratory services
for each laboratory test and associated
the CY 2014 CLFS NLA payment rate
with that utilization to determine a total
payment amount in CY 2014 for
laboratory services at NLA payment
rates. We would expect final CLFS
payment to be less than total payment
at NLA amounts because the CLFS pays
the ‘‘lesser of’’ the fee schedule amount,
the NLA, or changes (section
1833(a)(1)(D) of the Act). The NLA
establishes a ceiling on possible
payment. We estimated an overall
adjustment factor of 0.88 from the
difference in total estimated NLA
payment in CY 2012 rates and total final
actual CLFS payment on the claims. We
used that factor to adjust estimated total
payment amounts for laboratory services
at NLA payment rates in CY 2014 claims
to better reflect what actual payment
would have been in CY 2014 under
CLFS payment methodologies. In
addition, we adjusted the payment
amounts to account for the difference
between CY 2014 claims data and CY
2012 claims data and to account for the
fact that the CY 2014 claims data was
only 90 percent complete for the CY
2016 proposed rule. Using our standard
methodology, we adjusted these data to
account for what they would have
shown had they been complete at the
time of our analysis. We then examined
actual CY 2014 claims data to estimate
how much was paid separately for
laboratory services in CY 2014. The
difference between these estimates
reflects a reasonable approximation of

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the payment that would have been
packaged into OPPS for laboratory
services in CY 2014 if we had had
perfect information about billing
patterns of unrelated services when
making our original proposal for CY
2014. This analysis indicates that we
included a gross estimate of roughly $1
billion in packaged payment in the CY
2014 OPPS payment rates for laboratory
tests that ultimately were paid
separately in CY 2014 (that is, excess
packaged payment for laboratory
services).
We also performed an analysis to
assess the total payment for laboratory
services that were billed on an OPPS
claim, but were paid separately in CY
2014 because they were unrelated to the
OPPS services. Specifically, using CY
2014 data processed through May 31,
2015, we observed that laboratory
services billed on the 14X claim
increased immediately beginning in
January 2014 (as displayed in the
‘‘Summary Analysis Supporting
Adjustment for Excess Laboratory
Packaging’’ posted with the CY 2016
OPPS/ASC proposed rule)
corresponding with use of the 14X bill
type to report ‘‘unrelated’’ laboratory
services. Beginning in July 2014,
corresponding with the change in
billing policy to bill ‘‘unrelated’’
laboratory services on a 13X bill type
with the ‘‘L1’’ modifier, we observed
most of the increase in 14X billing
shifting to the 13X bill type with the
‘‘L1’’ modifier (again, as displayed in
the ‘‘Summary Analysis Supporting
Adjustment for Excess Laboratory
Packaging’’ posted with the CY 2016
OPPS/ASC proposed rule). Summing
the total increase in 14X billing in CY
2014 (compared to CY 2013) and the
total amount billed on 13X claims with
an ‘‘L1’’ modifier in CY 2014 resulted in
a similar estimate of approximately $1
billion in ‘‘unrelated’’ laboratory
services. Because both analyses resulted
in an approximate $1 billion estimate of
spending at the CLFS rates outside the
OPPS that was packaged into the OPPS,
we stated that we believe that a
prospective adjustment to remove this
$1 billion from the OPPS would realign
total aggregate OPPS payments to reflect
the resources associated with OPPS
services. We calculated the $1 billion as
a percent of $50 billion (the
approximate actual total spending for
OPPS services in CY 2014), which is 2.0
percent. Therefore, based on our
analysis of the effects of the
classification changes for CY 2014, we
proposed a 2.0 percent downward
adjustment to the conversion factor for
CY 2016. In addition to the proposed

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rule itself, we provided a significant
amount of additional information in the
‘‘Summary Analysis Supporting
Adjustment for Excess Laboratory
Packaging,’’ including a description of
our actuaries’ details and methods for
its analysis, the adjustment input
quantities, and outpatient monthly
unrelated laboratory test billing. We
believe the detail included in the
proposed rule and in conjunction with
the proposed rule was sufficient for
stakeholders to be able to understand
CMS’ methodology for determining the
amount of the proposed adjustment.
Comment: Several commenters
suggested that CMS not implement this
adjustment because the CY 2014 data
year was an inappropriate base year for
analysis of the laboratory packing
proposal because of the changing
methodology for reporting ‘‘unrelated’’
laboratory services during CY 2014.
Many of these commenters suggested
that CMS should wait until CY 2015
data are available before making an
adjustment.
Response: As noted in the proposed
rule (80 FR 39239) and illustrated in the
‘‘Outpatient Unrelated Lab Billing Shift
Quantities’’ chart in the ‘‘Summary
Analysis Supporting Adjustment for
Excess Laboratory Packaging’’ files
released in conjunction with the CY
2016 OPPS proposed rule, monthly total
‘‘unrelated’’ laboratory test billing was
very consistent throughout CY 2014,
with most ‘‘unrelated’’ laboratory test
billing shifting from the 14X claim to
the 13X claim with the ‘‘L1’’ modifier in
July 2014. Because monthly total
‘‘unrelated’’ billing was consistent over
the CY 2014 payment year, we do not
believe that the mid-year change in how
providers were to bill for ‘‘unrelated’’
laboratory services led to an increase in
billing for such services in CY 2014. We
believe that the consistency in the CY
2014 ‘‘unrelated’’ billing patterns across
different billing instructions shows that
the change in billing requirements for
reporting unrelated laboratory services
in CY 2014 did not cause a higher than
expected amount of unrelated laboratory
service payments in CY 2014. We
continue to believe that the CY 2014
data regarding ‘‘unrelated’’ billing are
appropriate for purposes of determining
whether an adjustment to the
conversion factor is warranted for CY
2016 and the amount of any adjustment.
We will monitor ‘‘unrelated’’ laboratory
test billing patterns in the CY 2015
OPPS claims data as we establish
ratesetting for the CY 2017 OPPS
payments to confirm this conclusion.
Comment: Several commenters
suggested that CMS not implement this
adjustment because CMS did not specify

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whether the proposed changes to
laboratory test packaging policy in the
CY 2016 OPPS/ASC proposed rule were
factored into the ¥2.0 percent
adjustment to the conversion factor to
address excess packaged payment for
laboratory services.
Response: The proposed adjustment
to the conversion factor for CY 2016 is
based on the effects of the OPPS
classification changes implemented for
CY 2014; the proposed adjustment is not
based on the proposed classification
changes for CY 2016. We did not
propose an adjustment to the conversion
factor based on classification changes
for CY 2016, but we will monitor the
effects of those changes. At this time, we
do not believe that a separate
adjustment to the conversion factor
based on CY 2016 classification changes
is warranted. Our analysis indicates that
the estimated effect of the CY 2016
classification changes on shifts between
aggregate payments for laboratory tests
paid separately using CLFS payment
rates and those packaged under the
OPPS is small and that, if we did make
an adjustment to account for those
changes, it would be a further reduction
to OPPS payments. We will examine CY
2015 claims data when we set CY 2017
OPPS payment rates.
After consideration of the public
comments we received, we are
finalizing our proposal to adjust the CY
2016 conversion factor by -2.0 percent
to eliminate the effects of classification
changes on aggregate payments that do
not reflect real changes in service-mix.
In summary, for CY 2016, we are
finalizing our proposal to amend
§ 419.32(b)(1)(iv)(B) by adding a new
paragraph (7) to reflect the reductions to
the OPD fee schedule increase factor
that are required for CY 2016 to satisfy
the statutory requirements of sections
1833(t)(3)(F) and (t)(3)(G)(iv) of the Act.
We are using a reduced conversion
factor of $72.251 in the calculation of
payments for hospitals that fail to meet
the Hospital OQR Program requirements
(a difference of ¥$1.474 in the
conversion factor relative to hospitals
that meet the requirements).
For CY 2016, we are continuing
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.
As a result of these finalized policies,
the OPD fee schedule increase factor for
the CY 2016 OPPS is 1.7 percent (which
is 2.4 percent, the estimate of the
hospital inpatient market basket
percentage increase, less the 0.5
percentage point MFP adjustment, and

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less the 0.2 percentage point additional
adjustment). For CY 2016, we are using
a conversion factor of $73.725 in the
calculation of the national unadjusted
payment rates for those items and
services for which payment rates are
calculated using geometric mean costs.
That is, the OPD fee schedule increase
factor of 1.7 percent for CY 2016, the
required wage index budget neutrality
adjustment of 0.9992, the cancer
hospital payment adjustment of 0.9994,
the ¥2.0 percent adjustment to the
conversion factor to eliminate the effects
of classification changes that would
otherwise result in an increase in
aggregate OPPS payments (due to excess
packaged payment under the OPPS for
laboratory tests), and the adjustment of
¥0.13 percentage point of projected
OPPS spending for the difference in the
pass-through spending result in a
conversion factor for CY 2016 of
$73.725.
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, in the
CY 2016 OPPS/ASC proposed rule, we
proposed to continue this policy for the
CY 2016 OPPS. We refer readers to
section II.H. of this final rule with
comment period for a description and
an example of how the wage index for
a particular hospital is used to
determine payment for the hospital.
As discussed in section II.A.2.c. of
this final rule with comment period, for
estimating APC costs, we standardize 60
percent of estimated claims costs for
geographic area wage variation using the
same FY 2016 pre-reclassified wage
index that the IPPS uses to standardize
costs. This standardization process

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removes the effects of differences in area
wage levels from the determination of a
national unadjusted OPPS payment rate
and 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 post-reclassified wage
index as the calendar year wage index
for adjusting the OPPS standard
payment amounts for labor market
differences. Therefore, 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 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. In
accordance with section 1886(d)(3)(E) of
the Act, the IPPS wage index is updated
annually.
The Affordable Care Act contained
several provisions affecting the wage
index. These provisions were discussed
in the CY 2012 OPPS/ASC final rule
with comment period (76 FR 74191).
Section 10324 of the Affordable Care
Act added section 1886(d)(3)(E)(iii)(II)
to the Act, which defines a 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. For the CY 2016 OPPS, we
proposed to implement this provision in
the same manner as we have since CY
2011. Under this policy, the frontier
State hospitals would 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.
Because the HOPD receives a wage
index based on the geographic location
of the specific inpatient hospital with
which it is associated, the frontier State
wage index adjustment applicable for
the inpatient hospital also would apply
for any associated HOPD. We refer
readers to the following sections in the
FY 2011 through FY 2016 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: for FY
2011, 75 FR 50160 through 50161; for

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FY 2012, 76 FR 51793, 51795, and
51825; for FY 2013, 77 FR 53369
through 53370; for FY 2014, 78 FR
50590 through 50591; for FY 2015, 79
FR 49971; and for FY 2016, 80 FR
49498.
In addition to the changes required by
the Affordable Care Act, we note that
the FY 2016 IPPS wage indexes
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
2016 IPPS/LTCH PPS final rule (80 FR
49488 through 49508) for a detailed
discussion of all changes to the FY 2016
IPPS wage indexes. 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.
As discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49951
through 49963) and the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49488
through 49513), the Office of
Management and Budget (OMB) issued
revisions to the labor market area
delineations on February 28, 2013
(based on 2010 Decennial Census data),
that included a number of significant
changes such as new Core Based
Statistical Areas (CBSAs), urban
counties that became rural, rural
counties that became urban, and
existing CBSAs that were split apart
(OMB Bulletin 13–01). This bulletin can
be found at: http://
www.whitehouse.gov/sites/default/files/
omb/bulletins/2013/b13-01.pdf. In the
FY 2015 IPPS/LTCH PPS final rule (79
FR 49950 through 49985), we adopted
the use of the OMB labor market area
delineations that were based on the
2010 Decennial Census data.
In the CY 2016 OPPS/ASC proposed
rule, we proposed to use the FY 2016
hospital IPPS post-reclassified wage
index for urban and rural areas as the
wage index for the OPPS to determine
the wage adjustments for both the OPPS
payment rate and the copayment
standardized amount for CY 2016. Thus,
any adjustments that were proposed for
the FY 2016 IPPS post-reclassified wage
index would be reflected in the
proposed CY 2016 OPPS wage index.
(We referred readers to the FY 2016
IPPS/LTCH PPS proposed rule (80 FR
24463 through 24477) and the proposed

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FY 2016 hospital wage index files
posted on the CMS Web site.)
Hospitals that are paid under the
OPPS, but not under the IPPS, do not
have an assigned hospital wage index
under the IPPS. Therefore, for non-IPPS
hospitals paid under the OPPS, it is our
longstanding policy to assign the wage
index that would be applicable if the
hospital were paid under the IPPS,
based on its geographic location and any
applicable wage index adjustments. We
proposed to continue this policy for CY
2016. The following is a brief summary
of the major FY 2016 IPPS wage index
policies and adjustments that we
proposed to apply to these hospitals
under the OPPS for CY 2016. We further
refer readers to the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49488 through
49508) for a detailed discussion of the
final changes to the FY 2016 IPPS wage
indexes.
It has been our longstanding policy to
allow 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)).
Applying this adjustment is consistent
with our policy of adopting IPPS wage
index policies for hospitals paid under
the OPPS. We note that, because nonIPPS hospitals cannot reclassify, they
would be eligible for the out-migration
wage adjustment if they are located in
a section 505 out-migration county. This
is the same out-migration adjustment
policy that would apply if the hospital
were paid under the IPPS. For CY 2016,
we proposed to continue our policy of
allowing non-IPPS hospitals paid under
the OPPS to qualify for the outmigration adjustment if they are located
in a section 505 out-migration county
(section 505 of the MMA).
As stated earlier, in the FY 2015 IPPS/
LTCH PPS final rule, we adopted the
OMB labor market area delineations
issued by OMB in OMB Bulletin No.
13–01 on February 28, 2013, based on
standards published on June 28, 2010
(75 FR 37246 through 37252) and the
2010 Census data to delineate labor
market areas for purposes of the IPPS
wage index. For IPPS wage index
purposes, for hospitals that were located
in urban CBSAs in FY 2014 but were
designated as rural under these revised
OMB labor market area delineations, we
generally assigned them the urban wage
index value of the CBSA in which they
were physically located for FY 2014 for
a period of 3 fiscal years (79 FR 49957
through 49960). To be consistent, we
applied the same policy to hospitals
paid under the OPPS but not under the

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IPPS so that such hospitals will
maintain the wage index of the CBSA in
which they were physically located for
FY 2014 for 3 calendar years (until
December 31, 2017). Thus, for the CY
2016 OPPS, consistent with the FY 2016
IPPS/LTCH PPS final rule (80 FR 49494
through 49496), this 3-year transition
will continue for the second year in CY
2016. For CY 2015, we also finalized a
1-year blended wage index for all
hospitals that experienced any decrease
in their actual payment wage index
exclusively due to the implementation
of the new OMB delineations. In the CY
2015 OPPS/ASC final rule with
comment period, for purposes of the
OPPS, we finalized a policy to apply
this 1-year, 50-percent transition blend
to hospitals paid under the OPPS but
not under the IPPS. Therefore, this oneyear transition blend does not apply for
the CY 2016 OPPS wage index because
it expires at the end of CY 2015.
In addition, for the FY 2016 IPPS, we
extended the imputed floor policy (both
the original methodology and
alternative methodology) for another
year, through September 30, 2016 (80
FR 49497 through 49498). For purposes
of the CY 2016 OPPS, we also proposed
to apply the imputed floor policy to
hospitals paid under the OPPS but not
under the IPPS so long as the IPPS
continues an imputed floor policy.
For CMHCs, for CY 2016, we
proposed to continue to calculate the
wage index by using the postreclassification IPPS wage index based
on the CBSA where the CMHC is
located. As with OPPS hospitals and for
the same reasons, in CY 2015, we
applied a 1-year, 50/50 blended wage
index to CMHCs that would receive a
lower wage index due to the new OMB
labor market area delineations.
However, this blended wage index does
not apply in CY 2016 because it expires
at the end of CY 2015. In addition, as
with OPPS hospitals and for the same
reasons, for CMHCs previously located
in urban CBSAs that were designated as
rural under the new OMB labor market
area delineations, we finalized a policy
to maintain the urban wage index value
of the CBSA in which they were
physically located for CY 2014 for 3
calendar years (until December 31,
2017). Consistent with our current
policy, the wage index that applies to
CMHCs includes both the imputed floor
adjustment and the rural floor
adjustment, but does not include the
out-migration adjustment because that
adjustment only applies to hospitals.
Comment: One commenter noted that
the IPPS wage index does not account
for the difficulty of recruiting health
professionals to rural areas. The

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
commenter suggested that a higher wage
index for rural areas would help these
hospitals recruit professionals from
other areas to underserved rural areas.
Response: 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. We
continue to believe that using the IPPS
wage index as the source of the OPPS
wage index is reasonable and logical,
given the inseparable, subordinate
status of the HOPD within the hospital.
As we discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49951), we
believe that the IPPS wage index reflects
the reality of population shifts and labor
market conditions, and provides an
accurate representation of geographic
variation in wage levels.
After consideration of the public
comment we received, we are finalizing
our proposal, without modification, to
continue to use an OPPS labor-related
share of 60 percent of the national OPPS
payment for the CY 2016 OPPS. We also
are finalizing the use of the final FY
2016 IPPS post-reclassified wage index
for urban and rural areas in its entirety,
including the frontier State wage index
floor, the rural floor, geographic
reclassifications, and all other
applicable wage index adjustments, as
the final CY 2016 wage index for OPPS
hospitals and CMHCs based on where
the facility is located for both the OPPS
payment rate and the copayment
standardized amount, as discussed
above and as set forth in the CY 2016
OPPS/ASC proposed rule (80 FR 39240
through 39242). We refer readers to the
FY 2016 IPPS/LTCH PPS final rule (80
FR 49488 through 49508) and the final
FY 2016 hospital wage index files
posted on the CMS Web site. For nonIPPS hospitals under the OPPS, we are
finalizing our proposal to continue to
assign the wage index that would be
applicable if the hospital were paid
under the IPPS, based on its geographic
location and any applicable wage index
adjustments. We also are finalizing our
proposal to apply the imputed floor
policy to hospitals paid under the OPPS
but not under the IPPS so long as the
IPPS continues an imputed floor policy,
which CMS has extended for an
additional year under the IPPS in the FY
2016 IPPS/LTCH PPS final rule. In
addition, we are finalizing our proposal
to continue our policy of allowing nonIPPS hospitals paid under the OPPS to
qualify for the out-migration adjustment
if they are located in a section 505 outmigration county (section 505 of the

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MMA). The new Table 2 from the FY
2016 IPPS/LTCH PPS final rule
(available via the Internet on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/
index.html) identifies counties eligible
for the out-migration adjustment and
IPPS hospitals that will receive the
adjustment for FY 2016. (We note that
the new FY 2016 IPPS Table 2
consolidates information on counties
eligible for the out-migration adjustment
that was previously issued as Table 4J.)
We are including the out-migration
adjustment information from the new
consolidated Table 2 from the FY 2016
IPPS/LTCH PPS final rule as Addendum
L to this final rule with comment period
with the addition of non-IPPS hospitals
that will receive the section 505 outmigration adjustment under the CY
2016 OPPS. Addendum L is available
via the Internet on the CMS Web site.
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 nonIPPS hospitals paid under the OPPS, we
are not reprinting the final FY 2016
IPPS wage indexes 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 2016 IPPS wage index tables
and Addendum L.
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.
MACs 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 MAC 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, hospitals that have not accepted
assignment of an existing hospital’s
provider agreement, and hospitals that
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

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70359

predetermined ceiling threshold for a
valid CCR) or for hospitals in which the
most recent cost report reflects an allinclusive rate status (Medicare Claims
Processing Manual (Pub. 100–04),
Chapter 4, Section 10.11). In this final
rule with comment period, as we
proposed, we are updating the default
ratios for CY 2016 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.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39242), for CY 2016, 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 2016
OPPS relative payment weights. Table
11 published in the proposed rule (80
FR 39243) listed the proposed CY 2016
default urban and rural CCRs by State
and compared them to the CY 2015
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 lineitems on hospital claims corresponding
to the year of the majority of cost reports
used to calculate the overall CCRs. We
refer readers to the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66680 through 66682) and prior OPPS
rules for a more detailed discussion of
our established methodology for
calculating the statewide average default
CCRs, including the hospitals used in
our calculations and our trimming
criteria.
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

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

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 2015 and CY 2016 are modest and
the few significant changes are
associated with areas that have a small
number of hospitals.
We did not receive any public
comments on our CY 2016 proposal.
Therefore, we are finalizing our
proposal, without modification, 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 final CY
2016 OPPS relative payment weights.
Table 14 below lists the statewide
average default CCRs for OPPS services
furnished on or after January 1, 2016.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 14—CY 2016 STATEWIDE AVERAGE CCRS
State

Urban/rural

ALASKA ....................................................................
ALASKA ....................................................................
ALABAMA .................................................................
ALABAMA .................................................................
ARKANSAS ..............................................................
ARKANSAS ..............................................................
ARIZONA ..................................................................
ARIZONA ..................................................................
CALIFORNIA ............................................................
CALIFORNIA ............................................................
COLORADO .............................................................
COLORADO .............................................................
CONNECTICUT ........................................................
CONNECTICUT ........................................................
DISTRICT OF COLUMBIA .......................................
DELAWARE ..............................................................
FLORIDA ..................................................................
FLORIDA ..................................................................
GEORGIA .................................................................
GEORGIA .................................................................
HAWAII .....................................................................
HAWAII .....................................................................
IOWA ........................................................................
IOWA ........................................................................
IDAHO ......................................................................
IDAHO ......................................................................
ILLINOIS ...................................................................
ILLINOIS ...................................................................
INDIANA ...................................................................
INDIANA ...................................................................
KANSAS ...................................................................
KANSAS ...................................................................
KENTUCKY ..............................................................
KENTUCKY ..............................................................
LOUISIANA ...............................................................
LOUISIANA ...............................................................
MASSACHUSETTS ..................................................
MASSACHUSETTS ..................................................
MAINE ......................................................................
MAINE ......................................................................
MARYLAND ..............................................................
MARYLAND ..............................................................
MICHIGAN ................................................................
MICHIGAN ................................................................
MINNESOTA ............................................................
MINNESOTA ............................................................
MISSOURI ................................................................
MISSOURI ................................................................
MISSISSIPPI ............................................................
MISSISSIPPI ............................................................
MONTANA ................................................................
MONTANA ................................................................
NORTH CAROLINA .................................................
NORTH CAROLINA .................................................
NORTH DAKOTA .....................................................
NORTH DAKOTA .....................................................
NEBRASKA ..............................................................
NEBRASKA ..............................................................
NEW HAMPSHIRE ...................................................
NEW HAMPSHIRE ...................................................

RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
URBAN .....................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................

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E:\FR\FM\13NOR2.SGM

CY 2016
default CCR
0.588
0.269
0.224
0.168
0.223
0.218
0.246
0.170
0.179
0.190
0.366
0.208
0.366
0.257
0.298
0.308
0.170
0.150
0.251
0.199
0.339
0.313
0.305
0.256
0.337
0.459
0.234
0.208
0.314
0.237
0.287
0.209
0.202
0.203
0.256
0.202
0.324
0.330
0.470
0.395
0.277
0.234
0.317
0.319
0.449
0.377
0.238
0.253
0.235
0.169
0.480
0.403
0.229
0.235
0.443
0.355
0.283
0.238
0.306
0.306

13NOR2

Previous default
CCR (CY 2015
OPPS final rule)
0.439
0.294
0.235
0.186
0.262
0.239
0.228
0.181
0.178
0.196
0.410
0.219
0.339
0.273
0.299
0.314
0.180
0.156
0.256
0.211
0.337
0.307
0.321
0.269
0.353
0.463
0.252
0.217
0.334
0.262
0.300
0.231
0.231
0.212
0.272
0.209
0.326
0.333
0.430
0.432
0.296
0.244
0.371
0.320
0.485
0.347
0.267
0.274
0.247
0.181
0.501
0.386
0.280
0.246
0.660
0.395
0.290
0.255
0.362
0.280

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70361

TABLE 14—CY 2016 STATEWIDE AVERAGE CCRS—Continued
Urban/rural

NEW JERSEY ..........................................................
NEW MEXICO ..........................................................
NEW MEXICO ..........................................................
NEVADA ...................................................................
NEVADA ...................................................................
NEW YORK ..............................................................
NEW YORK ..............................................................
OHIO .........................................................................
OHIO .........................................................................
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 ................................................................

URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
URBAN .....................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................
RURAL ......................................................................
URBAN .....................................................................

E. Adjustment for Rural SCHs and
EACHs Under Section 1833(t)(13)(B) of
the Act

jstallworth on DSK7TPTVN1PROD with RULES

CY 2016
default CCR

State

In the CY 2006 OPPS final rule with
comment period (70 FR 68556), we
finalized a payment increase for rural
SCHs of 7.1 percent for all services and
procedures paid under the OPPS,
excluding drugs, biologicals,
brachytherapy sources, and devices paid
under the pass-through payment policy
in accordance with section
1833(t)(13)(B) of the Act, as added by
section 411 of 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
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

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OPPS, we finalized a payment
adjustment for rural SCHs of 7.1 percent
for all services and procedures paid
under the OPPS, excluding separately
payable drugs and biologicals,
brachytherapy sources, and devices paid
under the pass-through payment policy,
in accordance with section
1833(t)(13)(B) of the Act.
In 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, two hospitals are
classified as EACHs, and as of CY 1998,
under section 4201(c) of Pub. L. 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

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0.194
0.280
0.290
0.219
0.146
0.311
0.298
0.295
0.212
0.255
0.192
0.265
0.341
0.277
0.195
0.590
0.290
0.188
0.197
0.367
0.224
0.198
0.177
0.238
0.179
0.493
0.325
0.195
0.233
0.434
0.336
0.349
0.308
0.317
0.296
0.276
0.294
0.433
0.311

Previous default
CCR (CY 2015
OPPS final rule)
0.202
0.296
0.294
0.241
0.149
0.333
0.340
0.317
0.222
0.282
0.203
0.287
0.352
0.283
0.197
0.577
0.297
0.191
0.207
0.286
0.214
0.203
0.188
0.251
0.203
0.481
0.335
0.219
0.241
0.439
0.353
0.300
0.330
0.328
0.294
0.312
0.300
0.429
0.262

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 2015. 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.
For the CY 2016 OPPS, 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,

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excluding separately payable drugs and
biologicals, devices paid under the passthrough payment policy, and items paid
at charges reduced to costs (80 FR
39244).
Comment: Several commenters
supported the proposed policy of a 7.1
percent payment adjustment.
Response: We appreciate the
commenters’ support.
Comment: A few commenters
suggested that CMS perform a new
analysis to determine if a different rural
adjustment amount is warranted. The
commenters noted that they performed
their own analysis which suggested that
a higher adjustment was warranted for
SCHs and that an adjustment was
warranted for small rural hospitals that
were not SCHs. One commenter
suggested that CMS revisit its original
analysis because an adjustment for rural
SCHs may no longer be warranted.
Response: We plan to review whether
a revised analysis is warranted for
future rulemaking.
After consideration of the public
comments we received, we are
finalizing our proposal for CY 2016 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.
F. OPPS Payment to Certain Cancer
Hospitals Described by Section
1886(d)(1)(B)(v) of the Act

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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 the 11 hospitals
that meet the criteria for cancer
hospitals identified in section
1886(d)(1)(B)(v) of the Act under the
OPPS for covered outpatient hospital
services. These cancer hospitals 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 determine
OPPS payments to cancer and children’s
hospitals based on their pre-BBA
payment amount (often referred to as
‘‘held harmless’’).
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

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OPPS and a ‘‘pre-BBA 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 is lower in
amount under the OPPS than the
payment amount 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 the product of the hospital’s
reasonable costs for covered outpatient
services occurring in the current year
and the base payment-to-cost ratio (PCR)
for the hospital defined in section
1833(t)(7)(F)(ii) of the Act. The ‘‘preBBA amount’’ and 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
Cost Report or the Hospital Health Care
Complex Cost Report (Form CMS–2552–
96 or Form CMS–2552–10, respectively)
as applicable each year. Section
1833(t)(7)(I) of the Act exempts TOPs
from budget neutrality calculations.
Section 3138 of the Affordable Care
Act amended section 1833(t) of the Act
by adding a new paragraph (18), which
instructs the Secretary to conduct a
study to determine if, under the OPPS,
outpatient costs incurred by cancer
hospitals described in section
1886(d)(1)(B)(v) of the Act with respect
to APC groups exceed outpatient costs
incurred by other hospitals furnishing
services under section 1833(t) of the
Act, as determined appropriate by the
Secretary. Section 1833(t)(18)(A) of the
Act requires the Secretary to take into
consideration the cost of drugs and
biologicals incurred by cancer hospitals
and other hospitals. Section
1833(t)(18)(B) of the Act provides that,
if the Secretary determines that cancer
hospitals’ costs are greater than other
hospitals’ costs, the Secretary shall
provide an appropriate adjustment
under section 1833(t)(2)(E) of the Act to
reflect these higher costs. In 2011, after
conducting the study required by
section 1833(t)(18)(A) of the Act, we
determined 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 these findings, we finalized
a policy to provide a payment
adjustment to the 11 specified cancer
hospitals that reflects their higher
outpatient costs as discussed in the CY
2012 OPPS/ASC final rule with

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comment period (76 FR 74202 through
74206). Specifically, we adopted a
policy to provide additional payments
to the 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. For CY 2014, the target PCR
for purposes of the cancer hospital
payment adjustment was 0.89. For CY
2015, the target PCR was 0.90, as
discussed in the CY 2015 OPPS/ASC
final rule with comment period
correction notice (80 FR 9629).
2. Payment Adjustment for Certain
Cancer Hospitals for CY 2016
For CY 2016, we proposed to continue
our policy to provide additional
payments to the 11 specified 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 CY 2016 OPPS/
ASC proposed rule (80 FR 39245). To
calculate the proposed CY 2016 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 2016 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 2014 claims data that
we used to model the impact of the
proposed CY 2016 APC relative
payment weights (3,794 hospitals)
because it is appropriate to use the same
set of hospitals that we are using to
calibrate the modeled CY 2016 OPPS.
The cost report data for the hospitals in
this dataset were from cost report
periods with fiscal year ends ranging

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from 2013 to 2014. We then removed
the cost report data of the 47 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 18 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 a proposed analytic file of
3,729 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 90 percent of
reasonable cost (weighted average PCR
of 0.90). Therefore, we proposed that the
payment amount associated with the
cancer hospital payment adjustment to
be determined at cost report settlement
would be the additional payment
needed to result in a PCR equal to 0.90
for each cancer hospital. Table 12
published in the proposed rule
indicated the proposed estimated
percentage increase in OPPS payments
to each cancer hospital for CY 2016 due
to the cancer hospital payment
adjustment policy.
We indicated that the actual amount
of the CY 2016 cancer hospital payment

adjustment for each cancer hospital will
be determined at cost report settlement
and will depend on each hospital’s CY
2016 payments and costs. We noted that
the requirements contained in section
1833(t)(18) of the Act do not affect the
existing statutory provisions that
provide for TOPs for cancer hospitals.
The TOPs will be assessed as usual after
all payments, including the cancer
hospital payment adjustment, have been
made for a cost reporting period.
Comment: Several commenters
supported the proposed cancer hospital
payment adjustment for CY 2016.
Response: We appreciate the
commenters’ support.
After consideration of the public
comments we received, we are
finalizing the proposed methodology for
calculating the cancer hospital payment
adjustment for CY 2016. For this final
rule with comment period, we are using
the most recent cost report data through
September 30, 2015 to update the
adjustment. This update yields a target
PCR of 0.92. We limited the dataset to
the hospitals with CY 2014 claims data
that we used to model the impact of the
CY 2016 APC relative payment weights
(3,781 hospitals) because it is
appropriate to use the same set of
hospitals that we are using to calibrate
the modeled CY 2016 OPPS. The cost
report data for the hospitals in this
dataset were from cost report periods
with fiscal year ends ranging from 2012
to 2015. We then removed the cost
report data of the 49 hospitals located in
Puerto Rico from our dataset because we

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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 11
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 a proposed
analytic file of 3,721 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 92 percent of
reasonable cost (weighted average PCR
of 0.92). Therefore, we are finalizing
that the payment amount associated
with the cancer hospital payment
adjustment to be determined at cost
report settlement would be the
additional payment needed to result in
a PCR equal to 0.92 for each cancer
hospital.
Table 15 below indicates estimates in
percentage terms of the CY 2016
payment adjustment for each cancer
hospital. The actual amount of the CY
2016 cancer hospital payment
adjustment for each cancer hospital will
be determined at cost report settlement
and will depend on each hospital’s CY
2016 payments and costs.

TABLE 15—ESTIMATED CY 2016 HOSPITAL-SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS TO BE PROVIDED
AT COST REPORT SETTLEMENT
Provider No.

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050146
050660
100079
100271
220162
330154
330354
360242
390196
450076
500138

...................
...................
...................
...................
...................
...................
...................
...................
...................
...................
...................

City of Hope Comprehensive Cancer Center .................................................................................
USC Norris Cancer Hospital ...........................................................................................................
Sylvester Comprehensive Cancer Center ......................................................................................
H. Lee Moffitt Cancer Center & Research Institute ........................................................................
Dana-Farber Cancer Institute .........................................................................................................
Memorial Sloan-Kettering Cancer Center .......................................................................................
Roswell Park Cancer Institute .........................................................................................................
James Cancer Hospital & Solove Research Institute .....................................................................
Fox Chase Cancer Center ..............................................................................................................
M.D. Anderson Cancer Center .......................................................................................................
Seattle Cancer Care Alliance ..........................................................................................................

G. Hospital Outpatient Outlier
Payments
1. Background
The OPPS provides outlier payments
to hospitals to help mitigate the
financial risk associated with high-cost
and complex procedures, where a very
costly service could present a hospital

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with significant financial loss. As
explained in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66832 through 66834), we set our
projected target for aggregate outlier
payments at 1.0 percent of the estimated
aggregate total payments under the
OPPS for the prospective year. Outlier
payments are provided on a service-by-

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21.6
21.9
25.1
27.3
51.1
46.9
31.4
35.4
23.7
50.9
57.3

service basis when the cost of a service
exceeds the APC payment amount
multiplier threshold (the APC payment
amount multiplied by a certain amount)
as well as the APC payment amount
plus a fixed-dollar amount threshold
(the APC payment plus a certain amount
of dollars). In CY 2015, the outlier
threshold was met when the hospital’s

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cost of furnishing a service exceeded
1.75 times (the multiplier threshold) the
APC payment amount and exceeded the
APC payment amount plus $2,775 (the
fixed-dollar amount threshold) (79 FR
66834). If the cost of a service exceeds
both the multiplier threshold and the
fixed-dollar threshold, the outlier
payment is calculated as 50 percent of
the amount by which the cost of
furnishing the service exceeds 1.75
times the APC payment amount.
Beginning with CY 2009 payments,
outlier payments are subject to a
reconciliation process similar to the
IPPS outlier reconciliation process for
cost reports, as discussed in the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68594 through
68599).
It has been our policy 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 estimate of total outlier
payments as a percent of total CY 2014
OPPS payment, using CY 2014 claims
available for this final rule with
comment period and the revised OPPS
expenditure estimate for the FY 2016
President’s Budget Mid-Session Review,
is approximately 0.9 percent of the total
aggregated OPPS payments. Therefore,
for CY 2014, we estimate that we paid
0.1 percentage points below the CY
2014 outlier target of 1.0 percent of total
aggregated OPPS payments.
Using CY 2014 claims data and CY
2015 payment rates, we currently
estimate that the aggregate outlier
payments for CY 2015 will be
approximately 0.9 percent of the total
CY 2015 OPPS payments. The
difference between 0.9 percent and the
1.0 percent target is reflected in the
regulatory impact analysis in section
XXI. of this final rule with comment
period. We provide estimated CY 2016
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-Feefor-Service-Payment/
HospitalOutpatientPPS/index.html.
2. Outlier Calculation
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39246), we proposed to
continue our policy of estimating outlier
payments to be 1.0 percent of the
estimated aggregate total payments
under the OPPS. We proposed that a
portion of that 1.0 percent, an amount
equal to 0.49 percent of outlier
payments (or 0.0049 percent of total
OPPS payments) would be allocated to

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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 proposed rule and
this final rule with comment period, we
proposed to continue our longstanding
policy that if a CMHC’s cost for partial
hospitalization services, paid under
either proposed renumbered APC 5851
(Level 1 Partial Hospitalization (3
services) for CMHCs) (existing APC
0172) or proposed renumbered APC
5852 (Level 2 Partial Hospitalization (4
or more services) for CMHCs) (existing
APC 0173), exceeds 3.40 times the
payment rate for proposed renumbered
APC 5852, the outlier payment would
be calculated as 50 percent of the
amount by which the cost exceeds 3.40
times the proposed renumbered APC
5852 payment rate. For further
discussion of CMHC outlier payments,
we refer readers to section VIII.D. of the
proposed rule and this final rule with
comment period.
To ensure that the estimated CY 2016
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 a hospital’s cost of
furnishing a service exceeds 1.75 times
the APC payment amount and exceeds
the APC payment amount plus $3,650.
We calculated the proposed fixeddollar threshold of $3,650 using the
standard methodology most recently
used for CY 2015 (79 FR 66833 through
66834). For purposes of estimating
outlier payments for the proposed rule,
we used the hospital-specific overall
ancillary CCRs available in the April
2015 update to the Outpatient ProviderSpecific File (OPSF). The OPSF
contains provider-specific data, such as
the most current CCRs, which are
maintained by the MACs 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 2016
hospital outlier payments for the
proposed rule, we inflated the charges
on the CY 2014 claims using the same
inflation factor of 1.0985 that we used
to estimate the IPPS fixed-dollar outlier
threshold for the FY 2016 IPPS/LTCH
PPS proposed rule (80 FR 24632
through 24633). We used an inflation
factor of 1.0481 to estimate CY 2015
charges from the CY 2014 charges
reported on CY 2014 claims. The
methodology for determining this
charge inflation factor is discussed in
the FY 2016 IPPS/LTCH PPS proposed

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rule (80 FR 24632). 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, we proposed to apply the
same CCR inflation adjustment factor
that we proposed to apply for the FY
2016 IPPS outlier calculation to the
CCRs used to simulate the proposed CY
2016 OPPS outlier payments to
determine the fixed-dollar threshold.
Specifically, for CY 2016, we proposed
to apply an adjustment factor of 0.9795
to the CCRs that were in the April 2015
OPSF to trend them forward from CY
2015 to CY 2016. The methodology for
calculating this proposed adjustment is
discussed in the FY 2016 IPPS/LTCH
PPS proposed rule (80 FR 24633) and
finalized in the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49784).
To model hospital outlier payments
for the proposed rule, we applied the
overall CCRs from the April 2015 OPSF
after adjustment (using the proposed
CCR inflation adjustment factor of
0.9795 to approximate CY 2016 CCRs) to
charges on CY 2014 claims that were
adjusted (using the proposed charge
inflation factor of 1.0985 to approximate
CY 2016 charges). We simulated
aggregated CY 2016 hospital outlier
payments using these costs for several
different fixed-dollar thresholds,
holding the 1.75 multiple threshold
constant and assuming that outlier
payments would continue to be made at
50 percent of the amount by which the
cost of furnishing the service would
exceed 1.75 times the APC payment
amount, until the total outlier payments
equaled 1.0 percent of aggregated
estimated total CY 2016 OPPS
payments. We estimated that a proposed
fixed-dollar threshold of $3,650,
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. For
CMHCs, we proposed that, if a CMHC’s
cost for partial hospitalization services,
paid under either proposed renumbered
APC 5851 (existing APC 0172) or
proposed renumbered APC 5852
(existing APC 0173), exceeds 3.40 times
the payment rate for proposed

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renumbered 5852, the outlier payment
would be calculated as 50 percent of the
amount by which the cost exceeds 3.40
times the proposed renumbered APC
5852 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 section 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: A few commenters
suggested that the proposed outlier
fixed dollar threshold of $3,650 was too
high for CMS to pay the target aggregate
outlier payment amount of 1.0 percent
of the estimated aggregate total
payments under the OPPS for the
prospective year. The commenters noted
that 2014 and 2015 estimated outlier
payments were below 1.0 percent,
despite a lower fixed-dollar threshold.
Response: As indicated earlier, we
introduced a fixed-dollar threshold in
order to better target outlier payments to
those high-cost and complex procedures
where a very costly service could
present a hospital with significant
financial loss. We maintain the target
outlier percentage of 1.0 percent of
estimated aggregate total payment under
the OPPS and have a fixed-dollar
threshold so that OPPS outlier payments
are made only when the hospital would
experience a significant loss for
supplying a particular service. While
the commenters expressed concern
based on the assumption that OPPS
outlier payments would decrease under
an increased fixed-dollar threshold, we
note that the threshold may increase or
decrease from year to year, to maintain
the 1.0 percent outlier spending target.
The methodology we use to calculate

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the fixed-dollar threshold for the
prospective payment year factors is
based on several data inputs that may
change from prior payment years. For
instance, updated hospital CCR data and
changes to the OPPS payment
methodology influence projected outlier
payments in the prospective year. For
this final rule with comment period, we
used the same methodology for
calculating the outlier fixed-dollar
threshold that we used for the proposed
rule but used updated data. However,
these updated data inputs for this final
rule with comment period do yield a
lower threshold than for the proposed
rule.
3. Final Outlier Calculation
Consistent with historical practice, we
used updated data for this final rule
with comment period for outlier
calculations. For CY 2016, we are
applying the overall CCRs from the July
2015 OPSF file after adjustment (using
the CCR inflation adjustment factor of
0.9701 to approximate CY 2016 CCRs) to
charges on CY 2014 claims that were
adjusted (using the charge inflation
factor of 1.0766 to approximate CY 2016
charges). These are the same CCR
adjustment and charge inflation factors
that were used to set the IPPS fixeddollar thresholds for the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49784). We
simulated aggregated CY 2016 hospital
outlier payments using these costs for
several different fixed-dollar thresholds,
holding the 1.75 multiple threshold
constant and assuming that outlier
payments will 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 2016 OPPS payments. We estimated
that a fixed-dollar threshold of $3,250,
combined with the multiple threshold
of 1.75 times the APC payment rate, will
allocate 1.0 percent of aggregated total
OPPS payments to outlier payments. For
CMHCs, if a CMHC’s cost for partial
hospitalization services, paid under
either renumbered APC 5851 (existing
APC 0172) or renumbered APC 5852
(existing APC 0173), exceeds 3.40 times
the payment rate for renumbered APC
5852, the outlier payment will be
calculated as 50 percent of the amount
by which the cost exceeds 3.40 times
the renumbered APC 5852 payment rate.
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

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forth in existing regulations at 42 CFR
part 419, subparts C and D. For this CY
2016 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 2016 scaled weight for the APC
by the CY 2016 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.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39247 through 39249), we
demonstrated the steps on 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: ‘‘J1,’’ ‘‘J2,’’
‘‘P,’’ ‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘Q4,’’ ‘‘R,’’ ‘‘S,’’
‘‘T,’’ ‘‘U,’’ or ‘‘V’’ (as defined in
Addendum D1 to the proposed rule,
which is available via the Internet on
the CMS Web site), in a circumstance in

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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, 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, in the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66799), we
created new status indicator ‘‘J1’’ to
reflect the comprehensive APCs
discussed in section II.A.2.e. of this
final rule with comment period. We also
note that we deleted status indicator
‘‘X’’ as part of the CY 2015 packaging
policy for ancillary services, discussed
in section II.A.3. of this final rule with
comment period. In the CY 2016 OPPS/
ASC proposed rule, we proposed to
create new status indicator ‘‘J2’’ to
reflect the new C–APC 8011
(Comprehensive Observation Services)
and new status indicator ‘‘Q4’’ to reflect
conditionally packaged laboratory tests.
In this CY 2016 OPPS/ASC final rule
with comment period, we are finalizing
the new status indicators ‘‘J2’’ and ‘‘Q4’’
as proposed, as discussed in sections
II.A.2.e.(2) and II.A.3.b.(3) of this final
rule with comment period, respectively.
We did not receive any public
comments on these steps under the
methodology that we included in the
proposed rule to determine the APC
payments for CY 2016. Therefore, we
are using the steps in the methodology
specified below, as we proposed, to
demonstrate the calculation of the final
CY 2016 OPPS payments using the same
parameters.
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

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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 2016 OPPS fee schedule increase
factor.
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
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. We note
that under the CY 2016 OPPS policy for
continuing to use the OMB labor market
area delineations based on the 2010
Decennial Census data for the wage
indexes used under the IPPS, a hold
harmless policy for the wage index may
apply, as discussed in section II.C. of
this final rule with comment period.
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 2016 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 2016 IPPS wage indexes, as applied
to the CY 2016 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.

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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 2016
IPPS, which are listed in Table 2 in the
FY 2016 IPPS/LTCH PPS final rule (80
FR 49326) and available via the Internet
on the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatient
PPS/index.html. This step is to be
followed only if the hospital is not
reclassified or redesignated under
section 1886(d)(8) or section 1886(d)(10)
of the Act.
Step 4. Multiply the applicable wage
index determined under Steps 2 and 3
by the amount determined under Step 1
that represents the labor-related portion
of the national unadjusted payment rate.
The formula below is a mathematical
representation of Step 4 and adjusts the
labor-related portion of the national
unadjusted payment rate for the specific
service by the wage index.
Xa is the labor-related portion of the
national unadjusted payment rate
(wage adjusted).
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, as 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.

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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 are providing 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 35614. This provider bills one
service that is assigned to renumbered
APC 5072 (Level 2 Excision/Biopsy/
Incision and Drainage) (previously APC
0019). The CY 2016 full national
unadjusted payment rate for APC 5072
is approximately $480.64. The reduced
national unadjusted payment rate for
renumbered APC 5072 for a hospital
that fails to meet the Hospital OQR
Program requirements is approximately
$471.03. This reduced rate is calculated
by multiplying the reporting ratio of
0.980 by the full unadjusted payment
rate for renumbered APC 5072.
The FY 2016 wage index for a
provider located in CBSA 35614 in New
York is 1.2991. The labor-related
portion of the full national unadjusted
payment is approximately $374.64 (.60
* $480.64 * 1.2991). The labor-related
portion of the reduced national
unadjusted payment is approximately
$367.15 (.60 * $471.03 * 1.2991). The
nonlabor-related portion of the full
national unadjusted payment is
approximately $192.26 (.40 * $480.64).
The nonlabor-related portion of the
reduced national unadjusted payment is
approximately $188.41 (.40 * $471.03).
The sum of the labor-related and
nonlabor-related portions of the full
national adjusted payment is
approximately $566.90 ($374.64 +
$192.26). The sum of the portions of the
reduced national adjusted payment is
approximately $555.56 ($367.15 +
$188.41).

jstallworth on DSK7TPTVN1PROD with RULES

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

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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
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 2016 OPPS/ASC proposed
rule (80 FR 39249), for CY 2016, 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, 2016, were shown in

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Addenda A and B to the proposed rule
(which are available via the Internet on
the CMS Web site). As discussed in
section XIII.E. of the proposed rule and
this final rule with comment period, for
CY 2016, the 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 note 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 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).
In the CY 2004 OPPS final rule with
comment period (68 FR 63459), we
adopted a new methodology to calculate
unadjusted copayment amounts in
situations including reorganizing APCs,
and we finalized the following rules to
determine copayment amounts in CY
2004 and subsequent years.
• When an APC group consists solely
of HCPCS codes that were not paid
under the OPPS the prior year because
they were packaged or excluded or are
new codes, the unadjusted copayment
amount would be 20 percent of the APC
payment rate.
• If a new APC that did not exist
during the prior year is created and
consists of HCPCS codes previously
assigned to other APCs, the copayment
amount is calculated as the product of
the APC payment rate and the lowest
coinsurance percentage of the codes
comprising the new APC.
• If no codes are added to or removed
from an APC and, after recalibration of
its relative payment weight, the new
payment rate is equal to or greater than
the prior year’s rate, the copayment
amount remains constant (unless the
resulting coinsurance percentage is less
than 20 percent).
• If no codes are added to or removed
from an APC and, after recalibration of
its relative payment weight, the new
payment rate is less than the prior year’s
rate, the copayment amount is
calculated as the product of the new
payment rate and the prior year’s
coinsurance percentage.
• If HCPCS codes are added to or
deleted from an APC, and, after

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recalibrating its relative payment
weight, holding its unadjusted
copayment amount constant results in a
decrease in the coinsurance percentage
for the reconfigured APC, the
copayment amount would not change
(unless retaining the copayment amount
would result in a coinsurance rate less
than 20 percent).
• If HCPCS codes are added to an
APC, and, after recalibrating its relative
payment weight, holding its unadjusted
copayment amount constant results in
an increase in the coinsurance
percentage for the reconfigured APC, the
copayment amount would be calculated
as the product of the payment rate of the
reconfigured APC and the lowest
coinsurance percentage of the codes
being added to the reconfigured APC.
We noted in that CY 2004 OPPS final
rule with comment period that we
would seek to lower the copayment
percentage for a service in an APC from
the prior year if the copayment
percentage was greater than 20 percent.
We noted that this principle was
consistent with section 1833(t)(8)(C)(ii)
of the Act, which accelerates the
reduction in the national unadjusted
coinsurance rate so that beneficiary
liability will eventually equal 20
percent of the OPPS payment rate for all
OPPS services to which a copayment
applies, and with section 1833(t)(3)(B)
of the Act, which is consistent with the
Congressional goal of achieving a 20percent copayment percentage when
fully phased in and gives the Secretary
the authority to set rules for determining
copayment amounts for new services.
We further noted that the use of this
methodology would, in general, reduce
the beneficiary coinsurance rate and
copayment amount for APCs for which
the payment rate changes as the result
of the reconfiguration of APCs and/or
recalibration of relative payment
weights (68 FR 63459). We believe the
proposed reorganization of APCs
discussed in section III.D. of the
proposed rule and finalized under
section III.D. of this final rule with
comment period hastens this movement
toward copayments equal to 20 percent
of an APC for reorganized APCs that
previously had copayment percentages
greater than 20 percent.
We did not receive any comments on
the copayment percentage. For the
reasons set forth in this final rule with
comment period, we are finalizing our
proposed CY 2016 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

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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 renumbered APC 5072
(previously APC 0019), $96.13 is
approximately 20 percent of the full
national unadjusted payment rate of
$480.64. 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
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
are effective January 1, 2016, are shown
in Addenda A and B to this final rule

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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 2016 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
CPT and Level II HCPCS codes are
used to report procedures, services,
items, and supplies under the hospital
OPPS. Specifically, CMS recognizes the
following codes on OPPS claims:
• Category I CPT codes, which
describe surgical procedures and
medical services;
• Category III CPT codes, which
describe new and emerging
technologies, services, and procedures;
and
• Level II HCPCS codes, which are
used primarily to identify products,
supplies, temporary procedures, and
services not described by CPT codes.
CPT codes are established by the
American Medical Association (AMA)
and the Level II HCPCS codes are
established by the CMS HCPCS
Workgroup. These codes are updated
and changed throughout the year. CPT
and HCPCS code changes that affect the
OPPS are published both through the
annual rulemaking cycle and through
the OPPS quarterly update Change
Requests (CRs). CMS releases new Level
II HCPCS codes to the public or
recognizes the release of new CPT codes
by the AMA and makes these codes
effective (that is, the codes can be
reported on Medicare claims) outside of
the formal rulemaking process via OPPS
quarterly update CRs. Based on our
review, we assign the new CPT and
Level II HCPCS codes to interim status
indicators (SIs) and APCs. These interim
assignments are finalized in the OPPS/
ASC final rules. This quarterly process
offers hospitals access to codes that may
more accurately describe items or
services furnished and provides
payment or more accurate payment for
these items or services in a timelier
manner than if we waited for the annual
rulemaking process. We solicit public

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comments on these new codes and
finalize our proposals related to these
codes through our annual rulemaking
process.
We note that, under the OPPS, the
APC assignment determines the
payment rate for an item, procedure, or
service. For those items, procedures, or

services not paid separately under the
hospital OPPS, they are assigned to
appropriate status indicators. Section
XI. of this final rule with comment
period provides a discussion of the
various status indicators used under the
OPPS. Certain payment indicators

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provide separate payment while others
do not.
In Table 16 below, we summarize our
comment process for updating codes
through our OPPS quarterly update CRs,
seeking public comments, and finalizing
the treatment of these new codes under
the OPPS.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 16—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES
OPPS quarterly
update CR

Type of code

Effective date

April 1, 2015 ......................

Level II HCPCS Codes .....

April 1, 2015 ......................

CY 2016 OPPS/ASC proposed rule.

July 1, 2015 .......................

Level II HCPCS Codes .....

July 1, 2015 ......................

CY 2016 OPPS/ASC proposed rule.

July 1, 2015 ......................

CY 2016 OPPS/ASC proposed rule.

October 1, 2015 ................

Category I (certain vaccine
codes) and III CPT
codes.
Level II HCPCS Codes .....

October 1, 2015 ................

January 1, 2016 ................

Level II HCPCS Codes .....

January 1, 2016 ................

Category I and III CPT
Codes.

January 1, 2016 ................

CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC proposed rule.

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 2016 OPPS/ASC proposed
rule or whether we are soliciting public
comments in this CY 2016 OPPS/ASC
final rule with comment period. We
note that we sought public comments in
the CY 2015 OPPS/ASC final rule with
comment period on the interim APC
and status indicator assignments for
new CPT and Level II HCPCS codes that
were effective January 1, 2015. We also
sought public comments in the CY 2015
OPPS/ASC final rule with comment
period on the interim APC and status
assignments for new Level II HCPCS
codes that became effective October 1,
2014. These new and revised codes,
with an effective date of October 1,
2014, or January 1, 2015, 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 2015
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, and were subject to public
comment following publication of the
CY 2015 OPPS/ASC final rule with
comment period. We are responding to
public comments and finalizing our

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Comments sought

interim OPPS treatment of these codes
in this CY 20165 OPPS/ASC final rule
with comment period.
Further, we received public
comments on some new codes that were
assigned to comment indicator ‘‘NI’’ in
Addendum B of the CY 2015 OPPS/ASC
final rule with comment period. We also
received public comments on new CPT
codes that will be effective January 1,
2016, that were assigned to comment
indicator ‘‘NP’’ in Addendum B of the
CY 2016 OPPS/ASC proposed rule. We
respond to those comments in section
III.C. of this CY 2016 OPPS/ASC final
rule with comment period.
1. Treatment of New CY 2015 Level II
HCPCS and CPT Codes Effective April
1, 2015 and July 1, 2015 for Which We
Solicited Public Comments in the CY
2016 OPPS/ASC Proposed Rule
Through the April 2015 OPPS
quarterly update CR (Transmittal 3217,
Change Request 9097, dated March 13,
2015), and the July 2015 OPPS quarterly
update CR (Transmittal 3280, Change
Request 9205, dated June 5, 2015), we
recognized several new HCPCS codes
for separate payment under the OPPS.
Effective April 1, 2015, we made
effective eight new Level II HCPCS
codes and also assigned them to
appropriate interim OPPS status
indicators and APCs. Through the April
2015 OPPS quarterly update CR, we
allowed separate payment for eight new

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When finalized
CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.
CY 2017 OPPS/ASC final
rule with comment period.
CY 2017 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.

Level II HCPCS codes. Specifically, as
displayed in Table 14 of the CY 2016
proposed rule (80 FR 39251), we
provided separate payment for HCPCS
codes C2623, C9445, C9448, C9449,
C9450, C9451, C9452, and Q9975. We
note that HCPCS code C9448 was
deleted on June 30, 2015, and replaced
with HCPCS code Q9978, effective July
1, 2015.
In the CY 2016 OPPS/ASC proposed
rule, we solicited public comments on
the proposed APC and status indicator
assignments for the Level II HCPCS
codes implemented on April 1, 2015
and listed in Table 14 of the proposed
rule (80 FR 39251). Specifically, we
solicited public comments on HCPCS
codes C2623, C9445, C9448, C9449,
C9450, C9451, C9452, and Q9975. We
note that HCPCS code C9448 was
deleted on June 30, 2015, and replaced
with HCPCS code Q9978, effective July
1, 2015. We indicated that the proposed
payment rates for these codes, where
applicable, could be found in
Addendum B to the proposed rule
(which is available via the Internet on
the CMS Web site).
For the CY 2016 update, the HCPCS
Workgroup replaced the temporary drug
HCPCS C-codes and Q-codes that were
listed in Table 14 of the proposed rule
with permanent HCPCS J-codes effective
January 1, 2016. Because the
replacement HCPCS J-codes describe the

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same drugs with the same dosage
descriptors as their predecessor HCPCS
C-codes and Q-codes, they will continue
to receive pass-through payment status
in CY 2016. Therefore, we are assigning
the replacement HCPCS J-codes to the
same APCs and status indicators as their

predecessor HCPCS codes, as shown in
Table 17 below.
We did not receive any public
comments on the proposed APC and
status indicator assignments for the new
Level II HCPCS codes implemented in
April 2015. Therefore, we are finalizing
the proposed APC assignments and

status indicators for the new Level II
HCPCS codes implemented in April
2015, as indicated in Table 17 below.
The final payment rates for these codes,
where applicable, can be found in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).

TABLE 17—FINAL CY 2016 STATUS INDICATORS AND APC ASSIGNMENTS FOR THE NEW LEVEL II HCPCS CODES THAT
WERE IMPLEMENTED IN APRIL 2015
CY 2015
CPT/HCPCS
code

CY 2016
CPT/HCPCS
code

C2623 ..........
C9445 ..........
C9448 * ........
C9449 ..........
C9450 ..........
C9451 ..........
C9452 ..........
Q9975 ** ......

C2623
J0596
J8655
J9039
J7313
J2547
J0695
J7205

..........
..........
..........
..........
..........
..........
..........
..........

CY 2016 long descriptor

Final CY 2016
status
indicator

Catheter, transluminal angioplasty, drug-coated, non-laser ................................
Injection, c1 esterase inhibitor (recombinant), Ruconest, 10 units .....................
Netupitant 300 mg and palonosetron 0.5 mg ......................................................
Injection, blinatumomab, 1 microgram .................................................................
Injection, fluocinolone acetonide intravitreal implant, 0.01 mg ............................
Injection, peramivir, 1 mg .....................................................................................
Injection, ceftolozane 50 mg and tazobactam 25 mg ..........................................
Injection, factor viii fc fusion (recombinant), per iu ..............................................

H
G
G
G
G
G
G
G

Final CY 2016
APC
2623
9445
9448
9449
9450
9451
9452
1656

jstallworth on DSK7TPTVN1PROD with RULES

* HCPCS code C9448 was deleted on June 30, 2015, and replaced with HCPCS code Q9978, effective July 1, 2015.
** HCPCS code C9136 (Injection, factor viii, fc fusion protein (recombinant), per i.u.) was deleted on March 31, 2015 and replaced with HCPCS
code Q9975.

Effective July 1, 2015, we made
effective several new CPT and Level II
HCPCS codes and also assigned them to
appropriate interim OPPS status
indicators and APCs. Through the July
2015 OPPS quarterly update CR
(Transmittal 3280, Change Request
9205, dated June 5, 2015), we assigned
interim OPPS status indicators and
APCs for two new Category III CPT
codes and eight Level II HCPCS codes
that were made effective July 1, 2015.
Specifically, as displayed in Table 15 of
the CY 2016 proposed rule (80 FR
39252), we made interim OPPS status
indicators and APC assignments for
Category III CPT codes 0392T and
0393T, and Level II HCPCS codes
C2613, C9453, C9454, C9455, Q5101,
Q9976, Q9977, and Q9978. We note that
CPT code 0392T replaced HCPCS code
C9737 (Laparoscopy, surgical,
esophageal sphincter augmentation with
device (e.g., magnetic band)), beginning
July 1, 2015. Because CPT code 0392T
describes the same procedure as HCPCS
code C9737, we proposed to assign the
CPT code to the same APC and status
indicator as its predecessor HCPCS Ccode, as shown in Table 15 of the
proposed rule.
Table 15 of the proposed rule (89 FR
39252) listed the CPT and Level II
HCPCS codes that were implemented on
July 1, 2015, along with the proposed
status indicators, proposed APC
assignments, and proposed payment

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rates, where applicable, for CY 2016. We
solicited public comments on the
proposed APC and status indicator
assignments.
One commenter addressed CPT code
0392T which relates to gastrointestinal
procedures and services and which
replaced HCPCS code C9737. We have
responded to this comment in section
II.A.2.e. of this final rule with comment
period. We did not receive any public
comments on the proposed APC and
status indicator assignments for
Category III CPT code 0393T and Level
II HCPCS codes C2613, C9453, C9454,
C9455, Q9976, Q9977, and Q9978 for
CY 2016.
In this final rule with comment
period, we are adopting as final, without
modification, the proposed APC and
status indicator assignments for CPT
code 0393T and for Level II HCPCS
codes C2613, C9453, C9454, C9455,
Q9976, Q9977, Q9978. However, we are
finalizing the APC and status indicator
assignments for HCPCS code Q5101
(Zarxio) with modification. Specifically,
we are assigning HCPCS code Q5101 to
APC 1822 and status indicator ‘‘G’’
(pass-through drugs and biologicals).
We noted in the CY 2016 OPPS/ASC
proposed rule (80 FR 39252) that Zarxio
(the drug described by HCPCS code
Q5101) was currently not being
marketed. However, once pricing
information was made available, the
drug would be paid separately under the
OPPS. Zarxio was marketed on

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September 3, 2015, and therefore, we
began making separate payments under
the OPPS beginning on this date. From
September 3, 2015, through December
31, 2015, HCPCS code Q5101 is
assigned status indicator ‘‘K’’ (Nonpassthrough drugs and nonimplantable
biologicals, including therapeutic
radiopharmaceuticals). Because Zarxio
has been approved for pass-through
status beginning January 1, 2016, we are
changing its OPPS status indicator from
‘‘K’’ to ‘‘G’’ beginning January 1, 2016.
For the CY 2016 update, the HCPCS
Workgroup replaced temporary HCPCS
codes C9453, C9454, C9455, and Q9978
with permanent HCPCS J codes effective
January 1, 2016. Because the
replacement HCPCS J- codes describe
the same drugs with the same dosage
descriptors as their predecessor HCPCS
C codes and Q codes, they will continue
to receive pass-through payment status
in CY 2016. Therefore, we are assigning
the replacement HCPCS J-codes to the
same APCs and status indicators as their
predecessor HCPCS codes, as shown in
Table 18 below. Table 18 lists the final
APCs and status indicator assignments
for the new category III CPT and Level
II HCPCS codes that were implemented
on July 1, 2015. The final payment rates
for these codes, where applicable, 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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70371

TABLE 18—FINAL CY 2016 STATUS INDICATORS AND APC ASSIGNMENTS FOR THE NEW CATEGORY III CPT AND LEVEL II
HCPCS CODES IMPLEMENTED IN JULY 2015
CY 2015
CPT/HCPCS
code

CY 2016
CPT/HCPCS
code

C2613 ..........
C9453 ..........
C9454 ..........
C9455 ..........
Q5101 * ........
Q9976 ..........
Q9977 ..........
Q9978 ..........
0392T ..........

C2613 ..........
J9299 ..........
J2502 ..........
J2860 ..........
Q5101* ........
J1443 ..........
Q9977 ** ......
J8655 ..........
0392T ..........

0393T ..........

0393T ..........

Final CY 2016
status
indicator

CY 2016 long descriptor
Lung biopsy plug with delivery system ................................................................
Injection, nivolumab, 1 mg ...................................................................................
Injection, pasireotide long acting, 1 mg ...............................................................
Injection, siltuximab, 10 mg .................................................................................
Injection, Filgrastim (G–CSF), Biosimilar, 1 microgram ......................................
Injection, ferric pyrophosphate citrate solution, 0.1 mg of iron ...........................
Compounded Drug, Not Otherwise Classified .....................................................
Netupitant 300 mg and palonosetron 0.5 mg ......................................................
Laparoscopy, surgical, esophageal sphincter augmentation procedure, placement of sphincter augmentation device (ie, magnetic band).
Removal of esophageal sphincter augmentation device .....................................

Final CY 2016
APC

H
G
G
G
G
E
D
G
J1

2613
9453
9454
9455
1822
N/A
N/A
9448
5362

Q2

5361

* HCPCS code Q5101, which described the drug Zarxio, was approved by the FDA on March 6, 2015. Separate payment for Zarxio was effective September 3, 2015, the date the drug was marketed.
** HCPCS code Q9977 will be deleted December 31, 2015, and a replacement code will not be established.

jstallworth on DSK7TPTVN1PROD with RULES

2. Process for New Level II HCPCS
Codes That Became Effective October 1,
2015 and New Level II HCPCS Codes
That Will Be Effective January 1, 2016
for Which We Are Soliciting Public
Comments in This CY 2016 OPPS/ASC
Final Rule With Comment Period
As has been our practice in the past,
we incorporate those new Level II
HCPCS codes that are effective October
1 and January 1 in the final rule with
comment period thereby updating the
OPPS for the following calendar year.
These codes are released to the public
through the October and January OPPS
quarterly update CRs and via the CMS
HCPCS Web site (for Level II HCPCS
codes). For CY 2016, these codes are
flagged with comment indicator ‘‘NI’’ in
Addendum B 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. Specifically, the status
indicators and the APC assignments for
codes flagged with comment indicator
‘‘NI’’ are open to public comment in this
final rule with comment period, and we
will respond to these public comments
in the OPPS/ASC final rule with
comment period for the next year’s
OPPS/ASC update. In the CY 2016
OPPS/ASC proposed rule (80 FR 39252
through 39253), we proposed to
continue this process for CY 2016.
Specifically, for CY 2016, we proposed
to include in Addendum B to the CY
2016 OPPS/ASC final rule with
comment period the following new
HCPCS codes:
• New Level II HCPCS codes effective
October 1, 2015, that would be
incorporated in the October 2015 OPPS
quarterly update CR;
• New Level II HCPCS codes effective
January 1, 2016, that would be

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incorporated in the January 2016 OPPS
quarterly update CR.
As stated above, the October 1, 2015
and January 1, 2016 codes are flagged
with comment indicator ‘‘NI’’ in
Addendum B to this CY 2016 OPPS/
ASC final rule with comment period to
indicate that we have assigned the codes
an interim OPPS payment status for CY
2016. We are inviting public comments
on the interim status indicator and APC
assignments and payment rates for these
codes, if applicable, that will be
finalized in the CY 2017 OPPS/ASC
final rule with comment period.
3. Treatment of New and Revised CY
2016 Category I and III CPT Codes That
Will Be Effective January 1, 2016, for
Which We Solicited Public Comments
in the CY 2016 OPPS/ASC Proposed
Rule
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66841
through 66844), we finalized a revised
process of assigning APC and status
indicators for new and revised Category
I and III CPT codes that would be
effective January 1. Specifically, for the
new/revised CPT codes that we receive
in a timely manner from the AMA’s CPT
Editorial Panel, we finalized our
proposal to include the codes that
would be effective January 1 in the
OPPS/ASC proposed rules, along with
proposed APC and status indicator
assignments for them, and to finalize the
APC and status indicator assignments in
the OPPS/ASC final rules beginning
with the CY 2016 OPPS update. For
those new/revised CPT codes that were
received too late for inclusion in the
OPPS/ASC proposed rule, we finalized
our proposal to establish and use
HCPCS G codes that mirror the
predecessor CPT codes and retain the
current APC and status indicator

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assignments for a year until we can
propose APC and status indicator
assignments in the following year’s
rulemaking cycle. We noted that even if
we find that we need to create HCPCS
G-codes in place of certain CPT codes
for the MPFS proposed rule, we do not
anticipate that these HCPCS G codes
will always be necessary for OPPS
purposes. We will make every effort to
include proposed APC and status
indicator assignments for all new and
revised CPT codes that the AMA makes
publicly available in time for us to
include them in the proposed rule, and
to avoid establishing HCPCS G codes
and the resulting delay in utilization of
the most current CPT codes. In addition,
we finalized our proposal to make
interim APC and status indicator
assignments for CPT codes that are not
available in time for the proposed rule
and that describe wholly new services
(such as new technologies or new
surgical procedures), solicit public
comments, and finalize the specific APC
and status indicator assignments for
those codes in the following year’s final
rule.
For the CY 2016 OPPS update, we
received the CY 2016 CPT codes from
AMA in time for inclusion in the CY
2016 OPPS/ASC proposed rule. In the
proposed rule (80 FR 39253), we
indicated that the new and revised CY
2016 Category I and III CPT codes can
be found in OPPS Addendum B to the
proposed rule and were assigned to new
comment indicator ‘‘NP’’ to indicate
that the code is new for the next
calendar year or the code is an existing
code with substantial revision to its
code descriptor in the next calendar
year as compared to current calendar
year with a proposed APC assignment
and that comments will be accepted on
the proposed APC assignment and

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status indicator. We refer readers to
section XI.B. of the CY 2016 OPPS/ASC
proposed rule for further discussion on
the proposed new comment indicator
‘‘NP.’’
Further, in the proposed rule, we
reminded readers that the CPT code
descriptors that appear in Addendum B
are short descriptors and do not
accurately describe the complete
procedure, service, or item described by
the CPT code. Therefore, we included
the long descriptors for the new and
revised CY 2016 CPT codes in
Addendum O to the proposed rule
(which is available via the Internet on
the CMS Web site) so that the public
could adequately comment on our
proposed APCs and status indicator
assignments. Because CPT procedure
codes are 5 alpha-numeric characters
and CMS systems only utilize 5character HCPCS codes, we stated that
we developed alternative 5-character
placeholder codes for the proposed rule.
We indicated that the placeholder codes
can be found in Addendum O,
specifically under the column labeled
‘‘CY 2016 OPPS/ASC Proposed Rule 5Digit CMS Placeholder Code,’’ to the
proposed rule. We also indicated that
the final CPT code numbers would be
included in this CY 2016 OPPS/ASC
final rule with comment period. We
note that not every code listed in
Addendum O of the proposed rule was
subject to comment. For the new/
revised Category I and III CPT codes, we
requested public comments on only
those codes that were assigned to
comment indicator ‘‘NP.’’ We indicated
that public comments would not be
accepted for new Category I CPT
laboratory codes that were not assigned
to ‘‘NP’’ comment indicator in
Addendum O to the proposed rule. We
stated that comments to these codes
must be submitted at the Clinical
Laboratory Fee Schedule (CLFS) Public
Meeting, which was scheduled for July
16, 2015.
In summary, we solicited public
comments on the proposed CY 2016
status indicators and APC assignments
for the new and revised Category I and
III CPT codes that will be effective
January 1, 2016. The CPT codes are
listed in Addendum B to the proposed
rule with short descriptors only. We
listed them again in Addendum O to the
proposed rule with long descriptors. We
also proposed to finalize the status
indicator and APC assignments for these
codes (with their final CPT code
numbers) in the CY 2016 OPPS/ASC
final rule with comment period.
Commenters addressed several of the
new CPT codes that were assigned to
comment indicator ‘‘NP’’ in Addendum

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B of the CY 2016 OPPS/ASC proposed
rule. We respond to those comments in
section III.D. of this CY 2016 OPPS/ASC
final rule with comment period.
The final status indicators, APC
assignments, and payment rates for the
new CPT codes that will be effective
January 1, 2016 can be found in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
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 (OPD)
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 that are not
packaged into the payment for the
procedure.
We have packaged into the payment
for each procedure or service within an
APC group the costs associated with
those items and services that are
typically integral, ancillary, supportive,
dependent, or adjunctive to a primary
service. Therefore, we do not make
separate payment for these packaged
items or services. In general, packaged
items and services include, but are not
limited to the items and services listed
in § 419.2(b) of the regulations. A
further discussion of packaged services
is included in section II.A.3. 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

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assigned. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39254), for CY
2016, we proposed that 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 proposed
renumbered APC 5012 (Level 2
Examinations and Related Services)
(existing APC 0632). The APC relative
payment weights were scaled to
proposed renumbered APC 5012
because it is the hospital clinic visit
APC and clinic visits are among the
most frequently furnished services in
the hospital outpatient setting. We
noted that, historically, we have
proposed APC relative payment weights
relative to the hospital costs of services
included in existing APC 0634. In the
proposed rule, we proposed to reassign
HCPCS code G0463 (Hospital outpatient
clinic visit for assessment and
management of a patient) from existing
APC 0634 to proposed renumbered APC
5012 (for CY 2015, this is existing APC
0632). Proposed new APC 5012 includes
other services that are clinically similar
with similar resource costs to the
service described by HCPCS code
G0463, such as HCPCS code G0402
(Initial preventive physical
examination). Accordingly, for the CY
2016 OPPS update, we proposed to
delete existing APC 0634 and replace it
with proposed renumbered APC 5012.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39254), for CY 2016, we
proposed that 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 proposed
renumbered APC 5012 (existing APC
0632).
We did not receive any public
comments on the proposed
reassignment for HCPCS code G0463
from APC 0634 to proposed renumbered
APC 5012. However, some commenters
expressed concern about CMS’ use of a
single clinic visit code (HCPCS G0463)
and a single APC payment for all clinic
Evaluation and Management (E/M)
visits. We refer readers to section VII. of
this CY 2016 OPPS/ASC final rule with
comment period for a discussion of
public comments and our responses and
our finalized policies on payments for
hospital outpatient visits for CY 2016.
In this final rule with comment
period, we are finalizing our proposal,
without modification, to assign HCPCS
code G0463 to APC 5012 and to delete
existing APC 0634 because it will be
replaced with APC 5012, effective
January 1, 2016.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
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 highest cost for an item or service in
the APC group is more than 2 times
greater than the lowest cost for an item
or service within the same APC 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). In determining the
APCs with a 2 times rule violation, we
consider only those HCPCS codes that
are significant based on the number of
claims. We note that, for purposes of
identifying significant procedure codes
for examination under the 2 times rule,
we consider procedure codes that have
more than 1,000 single major claims or
procedure codes that have both greater
than 99 single major claims and
contribute at least 2 percent of the single
major claims used to establish the APC
cost to be significant (75 FR 71832).
This longstanding definition of when a
procedure code is significant for
purposes of the 2 times rule was
selected because we believe that a
subset of 1,000 claims (or less than
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
procedure code for which there are
fewer than 99 single claims and which
comprises less than 2 percent of the
single major claims within an APC will
have a negligible impact on the APC
cost. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39254), for CY
2016, 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 the CY 2016 OPPS, we identified
the APCs with violations of the 2 times
rule. Therefore, we proposed changes to
the procedure codes assigned to these
APCs in Addendum B to the proposed
rule. We noted that Addendum B does
not appear in the printed version of the
Federal Register as part of the CY 2016
OPPS/ASC proposed rule. Rather, it is
published and made available via the
Internet on the CMS Web site at: http://
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HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.html. In these cases, to
eliminate a violation of the 2 times rule
or to improve clinical and resource
homogeneity, we proposed to reassign
these procedure codes to new APCs that
contain services that are similar with
regard to both their clinical and
resource characteristics. In many cases,
the proposed procedure code
reassignments and associated APC
reconfigurations for CY 2016 included
in the proposed rule are related to
changes in costs of services that were
observed in the CY 2014 claims data
newly available for CY 2016 ratesetting.
We also proposed changes to the status
indicators for some procedure codes
that were not specifically and separately
discussed in the proposed rule. In these
cases, we proposed to change the status
indicators for these procedure codes
because we believe that another status
indicator would more accurately
describe their payment status from an
OPPS perspective based on the policies
that we are proposing for CY 2016. In
addition, we proposed to rename
existing APCs or create new clinical
APCs to complement the proposed
procedure code reassignments.
Addendum B to the CY 2016 OPPS/ASC
proposed rule identified with a
comment indicator ‘‘CH’’ those
procedure codes for which we proposed
a change to the APC assignment or
status indicator, or both, that were
initially assigned in the July 1, 2015
OPPS Addendum B Update (available
via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.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 2016
changes compared to the HCPCS codes’
status as reflected in the October 2015
Addendum B update.
3. APC Exceptions to the 2 Times Rule
Taking into account the APC changes
that we proposed for CY 2016, we
reviewed all of the APCs to determine
which APCs would not meet the
requirements of the 2 times rule. We
used the following criteria to evaluate
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

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70373

• Opportunity for upcoding and code
fragments.
Based on the CY 2014 claims data that
were available for the CY 2016 proposed
rule, we identified three APCs with
violations of the 2 times rule. We
applied the criteria as described above
to identify the APCs that we proposed
to make exceptions for under the 2
times rule for CY 2016. We did not
include in that determination those
APCs where a 2 times rule violation was
not a relevant concept, such as existing
APC 0375 (proposed for CY 2016 to be
renumbered APC 5881 (Ancillary
Outpatient Services When Patient
Dies)), which had a proposed APC
payment rate for a single service of
$5,653.37. (We note that, in section
II.A.2.e. of this final rule with comment
period, we are converting renumbered
APC 5881 to a comprehensive APC for
CY 2016. However, the APC cost is still
not relevant to determine whether there
is a violation of the 2 times rule in that
comprehensive APC.) We only
identified those APCs, including those
with criteria-based costs, with violations
of the 2 times rule. 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).
We note that, for cases in which a
recommendation by the Panel appears
to result in or allow a violation of the
2 times rule, we may accept the Panel’s
recommendation because those
recommendations are based on explicit
consideration (that is, a review of the
latest OPPS claims data and group
discussion of the issue) of resource use,
clinical homogeneity, site of service,
and the quality of the claims data used
to determine the APC payment rates.
Table 16 of the proposed rule (80 FR
39255) listed the three APCs that we
proposed to make exceptions for under
the 2 times rule for CY 2016 based on
the criteria cited above and claims data
submitted between January 1, 2014, and
December 31, 2014, and processed on or
before December 31, 2014. We stated in
the proposed rule that, for the final rule
with comment period, we intended to
use claims data for dates of service
between January 1, 2014, and December
31, 2014, that were processed on or
before June 30, 2015, and updated CCRs,
if available. For this final rule with
comment period, after we reassigned
some codes, a violation of the 2 times
rule no longer exists in APCs 5221 and
5673.
We applied the criteria described
earlier to determine whether to make
exceptions to the 2 times rule for three
APCs: APC 5165 (Level 5 ENT
Procedures); APC 5731 (Level 1 Minor

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

Procedures) and APC 5841
(Psychotherapy). Based on our analysis
of the updated CY 2014 claims data
available for this final rule with
comment period (and consideration of
any related finalized changes to APC
assignments), we determined that APCs
5165, 5731 and 5841 meet the
exceptions criteria because these APC
groupings optimize resource and
clinical homogeneity. Therefore, we are
making these three APCs exceptions to
the 2 times rule.
Furthermore, although APC 5165 does
not appear with a 2 times rule indicator
in the 2 times rule document that is
posted with the CY 2016 OPPS/ASC
final rule data files, an exception to the
2 times rule is required so that a
complexity adjustment is not made for
CPT 60252 from APC 5165 to APC 5166.
After consideration of the public
comments we received and our review
of the CY 2014 costs from hospital
claims and cost report data available for
this final rule with comment period, we
are finalizing three exceptions to the 2
times rule: APCs 5165, 5731 and 5841.
We are not finalizing our proposal to
make exceptions for APC 5221 and APC
5673. Table 19 below lists the three
APCs that we are excepting from the 2
times rule for CY 2016 based on the
criteria above and a review of updated
claims data. 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.

TABLE 19—FINAL APC EXCEPTIONS
TO THE 2 TIMES RULE FOR CY 2016
CY 2016
APC

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5165 .......
5731 .......
5841 .......

CY 2016 APC title
Level 5 ENT Procedures.
Level 1 Minor Procedures.
Psychotherapy.

The final 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-Feefor-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.html.

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C. New Technology APCs
1. Background
In the November 30, 2001 final rule
(66 FR 59903), we finalized changes to
the time period a service was eligible for
payment under a New Technology APC.
Beginning in CY 2002, we retain
services within New Technology APC
groups until we gather sufficient claims
data to enable us to assign the service
to an appropriate clinical APC. This
policy allows us to move a service from
a New Technology APC in less than 2
years if sufficient data are available. It
also allows us to retain a service in a
New Technology APC for more than 2
years if sufficient data upon which to
base a decision for reassignment have
not been collected.
Currently, there are 37 New
Technology APC levels, ranging from
the lowest cost band assigned to APC
1491 (New Technology—Level 1A ($0—
$10)) through the highest cost band
assigned to APC 1574 (New
Technology—Level XXXVII ($9,500—
$10,000)). In the CY 2004 OPPS final
rule with comment period (68 FR
63416), we restructured the New
Technology APCs to make the cost
intervals more consistent across
payment levels and refined the cost
bands for these APCs to retain two
parallel sets of New Technology APCs,
one set with a status indicator of ‘‘S’’
(Significant Procedures, Not Discounted
when Multiple. Paid under OPPS;
separate APC payment) and the other set
with a status indicator of ‘‘T’’
(Significant Procedure, Multiple
Reduction Applies. Paid under OPPS;
separate APC payment). These current
New Technology APC configurations
allow us to price new technology
services more appropriately and
consistently. We note that we did not
propose to renumber the New
Technology APCs in the CY 2016 OPPS/
ASC proposed rule.
We note that the cost bands for the
New Technology APCs, specifically,
APCs 1491 through 1574, vary with
increments ranging from $10 to $500.
These cost bands identify the APCs to
which new technology procedures and
services with estimated service costs
that fall within those cost bands are
assigned under the OPPS. Payment for
each APC is made at the mid-point of
the APC’s assigned cost band. For
example, payment for New Technology
APC 1507 (New Technology—Level VII
($500—$600)) is made at $550.
Every year we receive several requests
for higher payment amounts under the
New Technology APCs for specific
procedures paid under the OPPS
because they require the use of

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expensive equipment. We are taking this
opportunity to reiterate our response in
general to the issue of hospitals’ capital
expenditures as they relate to the OPPS
and Medicare.
Under the OPPS, one of our goals is
to make payments that are appropriate
for the services that are necessary for the
treatment of Medicare beneficiaries. The
OPPS, like other Medicare payment
systems, is budget neutral and increases
are limited to the annual hospital
inpatient market basket increase. We
believe that our payment rates generally
reflect the costs that are associated with
providing care to Medicare
beneficiaries, and we believe that our
payment rates are adequate to ensure
access to services.
For many emerging technologies,
there is a transitional period during
which utilization may be low, often
because providers are first learning
about the techniques and their clinical
utility. Quite often, parties request that
Medicare make higher payment
amounts under the New Technology
APCs for new procedures in that
transitional phase. These requests, and
their accompanying estimates for
expected total patient utilization, often
reflect very low rates of patient use of
expensive equipment, resulting in high
per use costs for which requesters
believe Medicare should make full
payment. However, we believe that it is
most appropriate to set payment rates
based on costs that are associated with
providing care to Medicare
beneficiaries. As claims data for new
services become available, we use these
data to establish payment rates for new
technology.
2. Additional New Technology APC
Groups
Currently, there are 37 levels of New
Technology APC groups with two
parallel status indicators; one set with a
status indicator of ‘‘S’’ and the other set
with a status indicator of ‘‘T.’’ To
improve our ability to pay appropriately
for new technology services and
procedures, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39256), we
proposed to expand the New
Technology APC groups by adding 9
more levels, specifically, adding New
Technology Levels 38 through 46. We
proposed this expansion to
accommodate the assignment of the
retinal prosthesis implantation
procedure to a New Technology APC,
which is discussed further below.
Therefore, for the CY 2016 OPPS
update, we proposed to establish a new
set of New Technology APCs 1575
through 1583 (for Levels 38 through 46)
with OPPS status indicator ‘‘S’’ and a

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
new set of New Technology APCs 1585
through 1593 (for Levels 38 through 46)
with OPPS status indicator ‘‘T.’’ These
two new sets of APCs have the same
payment levels with one set subject to
the multiple procedure payment
reduction (status indicator ‘‘T’’) and the
other set not subject to the multiple
procedure payment reduction (status
indicator ‘‘S’’). Each proposed set of
new technology APC groups has
identical group titles, payment rates,
and minimum unadjusted copayments,
but a different status indicator. Table 17
of the proposed rule included the
complete list of the proposed additional
18 New Technology APCs for CY 2016.
Comment: One commenter noted that
the inconsistency in the increment
increases in the new levels for the New
Technology APCs, specifically that
Level 38 through Level 41 increased in
increments of $5,000, while Level 42
through Level 46 increased in
increments of $10,000. The commenter
suggested that increments of $5,000 is
more appropriate and provides more
accurate payment for providers as well
as consistency among payment levels
beginning at Level 38.
Response: As stated above, for CY
2015, there are 37 levels of New
Technology APC groups with two
parallel status indicators; one set with a
status indicator of ‘‘S’’ and the other set
with a status indicator of ‘‘T.’’ The cost
bands for these New Technology APCs
range from $0 to $50 in increments of
$10, from $50 to $100 in increments of
$50, from $100 to $2,000 in increments
of $100, and from $2,000 to $10,000 in
increments of $500. These cost bands
identify the APCs to which new
technology procedures and services
with estimated service costs that fall

within those cost bands are assigned
under the OPPS. Payment for each APC
is made at the mid-point of the APC’s
assigned cost band. For example,
payment for New Technology APC 1530
(New Technology—Level 30 ($6,000$6,500)) is made at $6,250. We believe
that the increments for New Technology
APC Levels 38 through 46 are
appropriate because they maintain a
similar proportionality to the total
payment as the original New
Technology APCs, and they allow us to
price new technology procedures and
services on a temporary basis with
sufficient accuracy without an excessive
and cumbersome number of cost bands.
We will monitor these APCs during our
annual review and establish New
Technology APC cost bands in the
future as warranted.
Comment: Several commenters
supported expanding the New
Technology APCs by adding New
Technology Levels 38 through 46. They
believed that the addition of these new
cost bands provides flexibility for CMS
to properly assign qualifying services
and technologies to the most
appropriate payment level, as well as an
opportunity for the collection of more
accurate claims data to ensure
appropriate payments when the
procedures and services transition out
of the New Technology APC cost bands
to clinical APCs. The commenters also
recommended revising the payment
level descriptions for the New
Technology APCs by adding one dollar
to the lower end of the payment range
(for example, Level 1502 at $51-$100)
for the various levels to avoid pricing
overlap. In addition, the commenters
suggested that CMS remain open to the
idea of creating new payment band

70375

levels in the future, as needed, to
accommodate the growing number of
new procedures, services, and
technologies that can be safely
performed and delivered in the hospital
outpatient setting.
Response: We appreciate the
commenters’ support for our proposal to
add New Technology Levels 38 through
46 for CY 2016. However, because the
payment rate for each New Technology
APC is at the midpoint of the specified
range, we do not believe that revising
the limits of these ranges for the New
Technology APCs is necessary to
eliminate what commenters believe is a
pricing overlap. In addition, when we
lack claims data (as we do for new
services that have not be reported on
hospital outpatient claims), our cost
estimates typically suggest a range as
represented by a New Technology APC
cost band. These estimates are not so
precise that they result in an exact
dollar amount that would correspond to
a dollar amount limit of a New
Technology APC range. We typically
estimate an approximate range that we
believe corresponds to the approximate
cost of the new service and match that
range to the closest New Technology
APC. Therefore, the overlap of the limits
of the ranges of adjacent New
Technology APCs makes no difference.
We agree with the commenters that
adding New Technology APC cost bands
on an as needed basis is appropriate. In
addition to the additional New
Technology APCs that we proposed, we
are establishing two additional New
Technology APC levels (4 new APCs in
total, for which two APCs are assigned
status indicator ‘‘S’’ and two APCs are
status indicator ‘‘T’’). These APCs are
depicted in Table 20.

TABLE 20—ADDITIONAL NEW TECHNOLOGY APCS FOR CY 2016
APC No.

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1584
1585
1598
1599

.............................................
.............................................
.............................................
.............................................

New
New
New
New

Technology—Level
Technology—Level
Technology—Level
Technology—Level

The explanation as to why we are
creating these additional New
Technology APCs is contained below in
the discussion of the New Technology
APC for the retinal prosthesis implant
procedure.

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Status
indicator

APC title

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47
48
47
48

($80,000–$90,000) .......................................................................
($90,000–$100,000) .....................................................................
($80,000–$90,000) .......................................................................
($90,000–$100,000) .....................................................................

After consideration of the public
comments we received, we are
finalizing our proposal, with a
modification, to add New Technology
Levels 38 through 46 for CY 2016. We
also are adding two additional levels,

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New Technology Levels 47 and 48.
Table 21 below includes the final
complete list of the additional 22 New
Technology APC groups for CY 2016.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
TABLE 21—ADDITIONAL NEW TECHNOLOGY APC GROUPS FOR CY 2016

New CY 2016 APC
1575
1576
1577
1578
1579
1580
1581
1582
1583
1584
1585
1589
1590
1591
1592
1593
1594
1595
1596
1597
1598
1599

.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................
.............................................

New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New
New

Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level
Technology—Level

jstallworth on DSK7TPTVN1PROD with RULES

The final payment rates for New
Technology APC groups 1575 through
1598 (with status indicator ‘‘S’’) and
APC groups 1585 through 1599 (with
status indicator ‘‘T’’) can be found in
Addendum A to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
3. Procedures Assigned to New
Technology APC Groups for CY 2016
As we explained in the CY 2002 OPPS
final rule with comment period (66 FR
59902), we generally retain a procedure
in the New Technology APC to which
it is initially assigned until we have
obtained sufficient claims data to justify
reassignment of the procedure to a
clinically appropriate APC. However, in
cases where we find that our initial New
Technology APC assignment was based
on inaccurate or inadequate information
(although it was the best information
available at the time), or where the New
Technology APCs are restructured, we
may, based on more recent resource
utilization information (including
claims data) or the availability of refined
New Technology APC cost bands,
reassign the procedure or service to a
different New Technology APC that
more appropriately reflects its cost (66
FR 59903).
Consistent with our current policy, in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39256), for CY 2016, we
proposed to retain services within New
Technology APC groups until we obtain
sufficient claims data to justify
reassignment of the service to a
clinically appropriate APC. The

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15:13 Nov 12, 2015

Final CY 2016
status
indicator

CY 2016 APC group title

Jkt 238001

38
39
40
41
42
43
44
45
46
47
48
38
39
40
41
42
43
44
45
46
47
48

($10,000–$15,000) .......................................................................
($15,000–$20,000) .......................................................................
($20,000–$25,000) .......................................................................
($25,000–$30,000) .......................................................................
($30,000–$40,000) .......................................................................
($40,000–$50,000) .......................................................................
($50,000–$60,000) .......................................................................
($60,000–$70,000) .......................................................................
($70,000–$80,000) .......................................................................
($80,000–$90,000) .......................................................................
($90,000–$100,000) .....................................................................
($10,000–$15,000) .......................................................................
($15,000–$20,000) .......................................................................
($20,000–$25,000) .......................................................................
($25,000–$30,000) .......................................................................
($30,000–$40,000) .......................................................................
($40,000–$50,000) .......................................................................
($50,000–$60,000) .......................................................................
($60,000–$70,000) .......................................................................
($70,000–$80,000) .......................................................................
($80,000–$90,000) .......................................................................
($90,000–$100,000) .....................................................................

flexibility associated with this policy
allows us to reassign a service from a
New Technology APC in less than 2
years if sufficient claims data are
available. It also allows us to retain a
service in a New Technology APC for
more than 2 years if sufficient claims
data upon which to base a decision for
reassignment have not been obtained
(66 FR 59902).
We did not receive any public
comments related to this proposal.
Therefore, we are finalizing our CY 2016
proposal, without modification, to
retain services within New Technology
APCs until we gather sufficient claims
data to assign the services to a clinically
appropriate APC. Thus, a service can be
assigned to a New Technology APC for
more than 2 years if we have
insufficient claims data to reassign the
service to a clinical APC, or it could be
reassigned to a clinical APC in less than
2 years if we have adequate claims data.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39256), we proposed to
assign two surgical procedures to New
Technology APCs. Specifically, we
proposed to continue to assign HCPCS
code C9740 (Cystourethroscopy, with
insertion of transprostatic implant; 4 or
more implants) to New Technology APC
1564 (New Technology—Level 27
($4,500–$5,000)) and to reassign CPT
code 0100T (Placement of a
subconjunctival retinal prosthesis
receiver and pulse generator, and
implantation of intra-ocular retinal
electrode array, with vitrectomy) from
APC 0673 (Level 2 Intraocular
Procedures) to proposed newly

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S
S
S
S
S
S
S
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S
T
T
T
T
T
T
T
T
T
T
T

established New Technology APC 1593
(New Technology—Level 46 ($70,000–
$80,000) to pay appropriately for the
procedures.
a. Transprostatic Urethral Implant
Procedure
Currently, in CY 2015, there is one
procedure that is receiving payment
through a New Technology APC.
Specifically, the surgical procedure
described by HCPCS code C9740 is
assigned to New Technology APC 1564
(New Technology—Level 27 ($4,500–
$5,000)), with a payment rate of $4,750.
This procedure was assigned to New
Technology APC 1564 on April 1, 2014,
when the HCPCS C-code was
established.
For the CY 2016 OPPS update, based
on our review of the claims data for
HCPCS code C9740 from April through
December 2014, we found 100 single
claims (out of 128 total claims) with a
geometric mean cost of approximately
$5,648. Because there is not a full year
of claims data and only 100 single
claims are in our database for HCPCS
code C9740, in the CY 2016 OPPS/ASC
proposed rule, we proposed to maintain
the assignment of HCPCS code C9740 to
New Technology APC 1564 for CY 2016.
As described in section IV.B. of the
proposed rule, we note that, based on
the costs of the device relative to the
procedure in this APC, the procedures
assigned to APC 1564 would be deviceintensive for CY 2016. The proposed CY
2016 payment rate for HCPCS code
C9740 was included in Addendum B to

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
the proposed rule (which is available
via the Internet on the CMS Web site).
Comment: Several commenters
supported CMS’ proposal to retain
HCPCS code C9740 in New Technology
APC 1564 for CY 2016. The commenters
stated that retaining this surgical
procedure in a new technology APC for
another year will allow CMS to continue
collecting the claims data necessary to
identify an appropriate APC assignment
for the procedure. The commenters also
supported the proposed designation of
APC 1564 as a device-intensive APC so
that the procedure assigned to the APC
can be performed and paid adequately
in the ASC setting. However, one
commenter disagreed with the APC
assignment for HCPCS code C9740. The
commenter believed that, based on the
cost data, HCPCS code C9740 should be
assigned to New Technology APC 1567
(New Technology—Level 30 ($6,000–
$6,500)), with a payment rate of
approximately $6,250.
Response: Based on the latest claims
data used for this final rule with
comment period, which is based on
claims submitted between January 1,
2014, and December 31, 2014, and
processed on or before June 30, 2015,
we are reassigning HCPCS code C9740
from New Technology APC 1564 to New
Technology APC 1565 (New
Technology—Level 28 ($5,000–$5,500)).
Specifically, we found a geometric mean
cost of approximately $5,627 based on
130 single claims (out of 161 total
claims) for HCPCS code C9740, which is
comparable to the payment rate of
$5,250 for New Technology APC 1565.
We note that HCPCS code C9740 is the
only code assigned to New Technology
APC 1565. We do not believe HCPCS
code C9740 should be assigned to either
New Technology APC 1566 (New
Technology—Level 29 ($5500–$6000)),
with a payment rate of approximately
$5,750 or New Technology APC 1567
(New Technology—Level 30 ($6000–
$6500)), with a payment rate of
approximately $6,250) because the
payment rates for these APCs are
significantly higher than the geometric
mean cost of approximately $5,627 for
HCPCS code C9740. Therefore, in this
final rule with comment period, we are
revising the APC assignment for HCPCS
code C9740 to New Technology APC
1565 for CY 2016. We note that HCPCS
code C9740 is the only procedure
assigned to New Technology APC 1565,
which is a device-intensive APC for CY
2016. We anticipate that the CY 2015
claims data (which will be used for CY
2017 ratesetting) for HCPCS code C9740
will be sufficient for the assignment of
the code to a clinical APC in CY 2017.

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Comment: One commenter suggested
that CMS reassign HCPCS code C9739
(Cystourethroscopy, with insertion of
transprostatic implant; 1 to 3 implants),
from clinical APC 5374 (Level 4 Urology
and Related Services) to C–APC 5375
(Level 5 Urology and Related Services).
The commenter believed that, similar to
HCPCS code C9740, HCPCS code C9739
should be assigned to a device-intensive
APC. In addition, the commenter
believed that because both procedures
describe an Urolift implant procedure
and the only difference is that HCPCS
code C9739 involves 1 to 3
transprostatic implants while HCPCS
code C9740 involves 4 or more
implants, both procedure codes should
be assigned to device-intensive APCs.
Response: We agree with the
commenter’s suggestion to assign HCPS
code C9739 to APC 5375. Analysis of
the latest claims data used for this final
rule revealed a geometric mean cost of
approximately $4,263 based on 53
single claims (out of 54 total claims) for
HCPCS code C9739. We believe that the
geometric mean cost for HCPCS code
C9739 is similar to other procedures
assigned to APC 5375, which has a
geometric mean cost of approximately
$3,551. Therefore, for CY 2016, we are
reassigning HCPCS code C9739 to APC
5375.
Comment: One commenter suggested
that a device HCPCS C-code or HCPCS
code L8699 (Prosthetic implant, not
otherwise specified) should be required
on all claims that report HCPCS code
C9739 or C9740. The commenter
reported that, based on the review of the
CY 2016 OPPS/ASC proposed rule
claims data, approximately 50 percent
of the claims did not have a device code
reported, thus making it impossible to
determine the number of implants used.
The commenter requested the
establishment of device edits to ensure
that implant costs are included in the
claims to facilitate ratesetting.
Response: We do not believe that we
should establish device edits for every
procedure code, including HCPCS code
C9739 or C9740. We rely on hospitals to
report procedures, services, and items
accurately. As we have stated in
previous final rules, it is extremely
important that hospitals use all of the
required HCPCS codes to report the
performance of all services they furnish,
consistent with the code descriptors,
CPT and/or CMS instructions, and
correct coding principles, whether
payment for the services is made
separately or packaged. The accuracy of
the OPPS payment rates depends on the
quality and completeness of the claims
data that hospitals submit for the

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70377

services they furnish to Medicare
beneficiaries.
However, in the CY 2016 OPPS/ASC
proposed rule, we proposed to establish
claims processing edits such that a
device HCPCS code must be reported on
the same claim form for any procedure
code assigned to a device-intensive APC
(80 FR 39268). We further stated that
claims submitted with a procedure code
requiring a device that is assigned to a
device-intensive APC but without any
device HCPCS code on the claim would
be returned to the provider. We are
finalizing this proposal for CY 2016.
Specifically, only the procedures that
require the implantation of a device that
are assigned to a device-intensive APC
will require a device code on the claim
and claims processing edits will apply
only to those APCs that are listed in
Table 42 of this final rule with comment
period. Further discussion of this final
policy can be found in section IV.B. of
this final rule with comment period.
Because HCPCS code C9740 is assigned
to a device-intensive APC for CY 2016,
we expect hospitals to report the
appropriate device code with the
implant procedure. In this case, we also
would expect hospitals to report HCPCS
code L8699 when reporting HCPCS code
C9740. This will ensure that device
costs are always reported on the claim
and are appropriately captured in
claims that CMS uses for ratesetting.
In summary, after consideration of the
public comments we received, we are
finalizing our proposals, with
modification. Specifically, we are
reassigning HCPCS code C9740 from
New Technology APC 1564 to New
Technology APC 1565, and reassigning
HCPCS code C9739 from clinical APC
5374 to APC 5375 for CY 2016. We note
that the APC to which HCPCS code
C9740 is assigned is designated as a
device-intensive APC, which will
require reporting the appropriate device
code (in this case, HCPCS code L8699)
when the surgical procedure describing
HCPCS C9740 is reported on the claim.
The final CY 2016 payment rates for
HCPCS codes C9739 and C9740 are
included in Addendum B to this final
rule with comment period (which is
available via the Internet on the CMS
Web site).
b. Retinal Prosthesis Implant Procedure
CPT code 0100T describes the
implantation of a retinal prosthesis.
This surgical procedure is currently
assigned to APC 0673, which has a CY
2015 payment rate of approximately
$3,123. The retinal prosthesis device
that is used in the procedure described
by CPT code 0100T is described by
HCPCS code C1841 (Retinal prosthesis,

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includes all internal and external
components). The first retinal prosthesis
(Argus® II Retinal Prosthesis System)
was approved by the FDA in 2013 for
adult patients with advanced retinitis
pigmentosa. Pass-through status was
granted for HCPCS code C1841
beginning October 1, 2013, and is
proposed to expire on December 31,
2015. We refer readers to section
IV.A.1.b. of this final rule with comment
period for the discussion of the
expiration of pass-through for HCPCS
code C1841.
After pass-through status expires for a
medical device, the payment for the
device is packaged into the payment for
the associated surgical procedure. The
surgical procedure in which the Argus
device (HCPCS code C1841) is
implanted is described by CPT code
0100T. Review of the CY 2014 OPPS
claims data used for the CY 2016 OPPS/
ASC proposed rule showed only one
single claim for CPT code 0100T with
HCPCS code C1841 on the claim. Due to
the newness of this surgical procedure
and its associated implantable device
and the extremely low number of CY
2014 HOPD claims for this procedure, in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39257), we proposed to reassign
CPT code 0100T from existing APC
0673 (Level III Intraocular Procedures)
to proposed newly established New
Technology APC 1593 (New
Technology—Level 46 ($70,000–
$80,000)), with a payment of
approximately $75,000 for CY 2016. We
refer readers to section III.C.2. of the
proposed rule and this final rule with
comment period for a discussion of the
proposed expansion of the New
Technology APC levels. We stated in the
proposed rule (80 FR 39257) that ‘‘[w]e
are proposing a CY 2016 OPPS payment
of approximately $75,000 for proposed
new APC 1593, which would be the
payment for CPT code 0100T (not
including the retinal prosthesis), plus
the proposed maximum FY 2016 IPPS
new technology add-on payment for a
case involving the Argus® II Retinal
Prosthesis System of $72,028.75 (80 FR
24425).’’ In the proposed rule (80 FR
39257), we also stated that we believe
that, given the newness of this
procedure and the severe paucity of
OPPS claims data, this approach
provides a reasonable payment amount
that is similar to the payment for the
same procedure provided in the hospital
inpatient setting. Once we have more
claims data, we indicated that we will
reassess the APC placement of the
retinal prosthesis implantation
procedure in light of our standard rate

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setting methodology. We invited public
comments on this proposal.
Comment: Several commenters
expressed concern over the proposed
payment rate of $75,000 for CPT code
0100T. The commenters reported that
the cost of the Argus II device is
approximately $144,000 while the cost
of the surgical procedure to implant the
device is between approximately $5,000
and $10,000. The commenters urged
CMS to establish a payment rate of
approximately $150,000 to accurately
pay hospitals for the full cost of
providing the procedure and furnishing
the device. Other commenters reported
confusion about the proposed policy.
Based on their reading of the proposal,
the commenters believed that CMS is
proposing to pay (1) $75,000 for New
Technology APC 1593 plus (2) the IPPS
New Technology payment amount of
approximately $72,029, which would
result in a total procedure payment of
approximately $147,029. The
commenters requested clarification on
the proposed total procedure payment.
Another commenter indicated that a
total payment of $75,000 for the device
and surgical procedure is inappropriate
and further disagreed with CMS’ use of
the IPPS new technology add-on
payment as a proxy for the Argus II
procedure cost because this add-on
payment is set at 50 percent of costs of
the new technology.
Response: We appreciate the
commenters’ request for clarification. In
the CY 2016 OPPS/ASC proposed rule,
we proposed to pay for the surgical
implant procedure including the retinal
prosthesis device under newly proposed
New Technology APC 1593. The
following sentence in the proposed rule
(80 FR 39257) may be the source of
some commenters’ confusion: ‘‘[w]e are
proposing a CY 2016 OPPS payment of
approximately $75,000 for proposed
new APC 1593, which would be the
payment for CPT code 0100T (not
including the retinal prosthesis), plus
the proposed maximum FY 2016 IPPS
new technology add-on payment for a
case involving the Argus® II Retinal
Prosthesis System of $72,028.75.’’ What
we meant by that sentence is the
payment amount of $75,000 for APC
1593 would be comprised of the
approximate sum of: (1) The payment
amount for the procedure ($3,123,
which is the CY 2015 payment rate for
the procedure described by CPT code
0100T); and (2) the payment amount for
the device ($72,028.75—the proposed
IPPS payment amount for the device).
That is, the approximate $75,000
payment for APC 1593 is the total
payment amount, which includes

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payment for both the procedure and the
device.
The final rule claims data contain
additional claims data for CPT code
0100T. There are 5 total claims (2 single
claims) with a geometric mean cost of
approximately $95,866. Although this
remains a very low volume of claims,
we prefer to base the cost estimate for
this procedure (which include the cost
of the device) on the hospital outpatient
claims data rather than using the IPPS
new technology add-on payment as a
proxy for the procedure cost. However,
we do not believe that there are a
sufficient number of claims upon which
to base a clinical APC for the retinal
prosthesis procedure. Therefore, we are
creating a New Technology APC (Level
48) for CPT code 0100T with the cost
band range of $90,000 to $100,000 and
a payment amount of $95,000. In
addition, because the proposed
additional New Technology APCs ended
with Level 46 ($70,000–$80,000), we
also are creating a New Technology
Level 47 with the cost band range of
$80,000 to $90,000 and a payment
amount of $85,000 to fill in the gap
between New Technology APC Level 46
and Level 48.
Comment: One commenter
recommended the establishment of a
HCPCS G-code for the Argus implant
procedure and the assignment of this Gcode to a new technology APC with a
payment rate of $150,000.
Response: We disagree with
establishing a HCPCS G-code and
assigning it to a new technology APC
with a payment rate of $150,000 because
CPT code 0100T accurately describes
the procedure associated with
implanting the Argus II device.
Comment: One commenter
recommended, as an alternative to the
New Technology APC payment, that
CMS continue to pay separately for CPT
code 0100T and HCPCS code C1841.
Specifically, the commenter requested
that CMS pay separately for surgical
procedure CPT code 0100T and also
extend the pass-through status for the
device HCPCS code C1841 through
December 31, 2016 because of very
limited claims data.
Response: We stated in the CY 2016
OPPS/ASC proposed rule that passthrough payment status for device
HCPCS code C1841 would expire on
December 31, 2015 because it was
approved for pass-through status
effective October 1, 2013 (80 FR 39264).
We also proposed to package and assign
device HCPCS code C1841 to OPPS
status indicator ‘‘N’’ to indicate that the
payment for this code would be
included in the surgical procedure CPT
code 0100T. We do not agree that

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extending the pass-through status would
be appropriate because we believe it
would be inconsistent with the statutory
pass-through provision. Section
1833(t)(6)(B)(iii) requires that, under the
OPPS, a category of devices be eligible
for transitional pass-through payments
for at least 2 years, but not more than
3 years.
After consideration of the public
comments we received, we are assigning
CPT code 0100T to New Technology
APC 1599, which has a final payment of
$95,000 for CY 2016. This payment rate
includes the payment for the retinal
prosthesis system as well as all other
items and supplies used in the surgical
procedure to implant the device.
Because payment for retinal prosthesis
is included in CPT code 100T, we are
finalizing our proposal to assign HCPCS
code C1841 to OPPS status indicator
‘‘N’’ to indicate that this code is
packaged under the hospital OPPS. We
also are designating APC 1599 as a
device-intensive APC because almost all
of the cost of the implantation
procedure is attributable to the cost of
the device. Because CPT code 0100T is
assigned to a device-intensive APC, a
device HCPCS C-code will be required
on claims with CPT code 0100T
according to the device edit policy
described in section IV. of this final rule
with comment period.
D. OPPS Ambulatory Payment
Classification (APC) Group Policies
Section 1833(t)(9)(A) of the Act
requires the Secretary to review, not less
often than annually, and to revise the
groups, relative payment weights, and
the wage and other adjustments to take
into account changes in medical
practices, changes in technology, the
addition of new services, new cost data,
and other relevant information and
factors. Therefore, every year we review
and revise the APC assignments for
many procedure codes and diagnosis
codes based on our evaluation of these
factors using the latest OPPS claims
data. Although we do not discuss every
APC change in the proposed and final
rules, these changes are listed in the
OPPS Addendum B of the proposed and
final rules. Specifically, procedure and
diagnosis codes with revised APC and/
or status indicator assignments are
identified by comment indicator ‘‘CH’’
(Active HCPCS code in current year and
next calendar year, status indicator and/
or APC assignment has changed) in the
OPPS Addendum B payment file.
In our efforts to improve clinical and
resource homogeneity among the APC
groupings and update the hospital
OPPS, we conducted a comprehensive
review of the current structure of the

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APCs and codes assignments for CY
2015. Consequently, as part of our
broader efforts to thoroughly review,
revise, and consolidate APCs to improve
both resource and clinical homogeneity,
we proposed in the CY 2015 OPPS/ASC
proposed rule (79 FR 40981 through
40983) to restructure the first set of
clinical families, specifically the
ophthalmology and gynecology APCs.
We proposed to restructure the APCs for
these clinical families based on the
following principles:
• Improved clinical homogeneity;
• Improved resource homogeneity;
• Reduced resource overlap in APCs
within a clinical family; and
• Greater simplicity and improved
understanding of the structure of the
APCs.
Based on our review, for CY 2015, we
finalized the APC restructuring for the
ophthalmology and gynecology APCs.
For the complete discussion on the APC
restructuring for the ophthalmology
APCs, we refer readers to the CY 2015
OPPS/ASC final rule with comment
period (79 FR 66857 through 66859).
Similarly, for the complete discussion
on the APC restructuring for the
gynecology APCs, we refer readers to
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66849 through
66851).
For the CY 2016 update, as a part of
our continued review of the structure of
the APCs, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39257), we
proposed to restructure nine APC
clinical families based on the same
principles used for restructuring the
ophthalmology and gynecology APCs
for CY 2015. We discuss below our
proposed restructuring for the nine APC
clinical families. We note that, in
conjunction with the proposed
restructuring, we proposed to renumber
several families of APCs to provide
consecutive APC numbers for
consecutive APC levels within a clinical
family for improved identification of
APCs and ease of understanding the
APC groupings. For example, the seven
APC levels for urology procedures were
proposed to be renumbered as APC 5371
(Level 1 Urology and Related Services),
APC 5372 (Level 2 Urology and Related
Services), APC 5373 (Level 3 Urology
and Related Services), APC 5374 (Level
4 Urology and Related Services), APC
5375 (Level 5 Urology and Related
Services), APC 5376 (Level 6 Urology
and Related Services), and APC 5377
(Level 7 Urology and Related Services).
We stated in the proposed rule that we
believe that consecutive numbering of
the APCs will enhance the public
understanding of the APC groups and
will make it easier for them to

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communicate to the agency about issues
concerning APCs. We note that, under
this initiative, we did not propose to
change the numbering of the composite
APCs or the New Technology APCs for
CY 2016.
Comment: Several commenters
expressed concern about the lack of
detail in the proposed rule on the
proposed consolidation and
restructuring of the nine APC groups.
The commenters stated that CMS
provided few details in the proposed
rule to enable commenters to adequately
assess the full impact of the proposed
APC reconfiguration, and requested a
delay in the implementation of the
proposal until more information is
available. They also stated that CMS did
not provide impact tables to show the
projected impact that the proposed APC
consolidation would have on Medicare
payments by departments or specialties,
or provide the rationale behind the
decisions for each combination of APC
groups, which they believed further
complicated analysis of each proposed
APC group. Some commenters indicated
that they had difficulty analyzing the
impact and interrelationship of the
different proposed policies to
adequately determine Medicare
payments to hospitals. Several
commenters requested that CMS not
finalize the proposal and stated that the
proposed APC groupings do not reflect
clinical or resource homogeneity. Some
commenters believed that CMS should
develop and establish criteria before
finalizing the reconfiguration of the nine
APC groups.
However, many other commenters
supported the consolidation and
restructuring of the nine clinical family
APCs but requested modification to the
APC groupings. In particular, the
commenters requested the reassignment
of several procedures and services to
certain APCs for the final rule. In
addition, several commenters requested
further information in the final rule, and
urged CMS to include a separate impact
analysis for each restructured APC
clinical family showing the
distributional impact of the
restructuring across CMS’ usual
categories (such as urban/rural location,
bed size, type of ownership and
teaching status).
Response: Based on our experience
with the existing APCs under the OPPS,
we believe that establishing more
inclusive categories of procedures and
services is more appropriate for future
ratesetting under the OPPS. Therefore,
we believe that the proposed
restructured APCs have a more
clinically appropriate granularity, while
improving resource similarity. We also

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believe the proposed restructure and
consolidation of APCs more
appropriately categorizes all of the
procedures and services within each of
the nine APC groups such that the
procedures and services within each
proposed newly configured APC are
more comparable with respect to
clinical characteristics and resource use.
In addition, we disagree that we
should delay or not finalize the
proposed consolidation and
restructuring of the nine APC groups
pending provision of the extensive data
that the commenters requested. We
make available a considerable amount of
data for public analysis each year for
both the proposed rule and the final
rule. While we are not developing and
providing the extensively detailed
information that the commenters
requested, we are providing the public
use files of claims and a detailed
narrative description of our data process
that the public can use to perform any
desired analyses (available at https://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.html.
We note that we included the impact
of the CY 2016 OPPS proposals on
payment to different classes of hospitals
in Table 65 of the proposed rule (80 FR
39362 through 39363). We believe our
estimate of the impact of these proposed
changes provided valuable information
to hospitals. We believe that it would be
impractical and nonproductive to
develop impact tables for each of the
primary clinical families that were
proposed to be reorganized. Hospitals
generally do not perform a limited set of
services confined to one clinical family.
Therefore, we believe that impacts
reflecting the interaction and collective
effect of the proposed APC restructuring
best depict how most hospitals will fare
under the proposed reorganization.
Many commenters submitted comments
relating to particular services and were
able to provide detailed analysis in their
comments based on the data and other
information provided with the proposed
rule.
Further, we do not agree that we
should develop and establish additional
criteria before finalizing the proposed
consolidation and restructuring of the
nine APC groups. The OPPS statute
provides that procedures grouped in
APCs must be similar clinically and in
terms of resource use. In various
sections of this final rule with comment
period, we have applied those criteria
and responded to many of the public
comments we received, which included
evaluations of the recommended

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changes to the APC assignments, based
on those criteria. Each year, under the
OPPS, we revise and make changes to
the APC groupings based on the latest
hospital outpatient claims data to
appropriately place procedures and
services in APCs based on clinical
characteristics and resource similarity.
Therefore, after consideration of the
public comments we received, we are
finalizing, with some modifications that
are discussed below in the sections
specific to each clinical family, the
proposed consolidation and
restructuring of the nine clinical
families of APCs for CY 2016. Each of
the nine clinical families, the public
comments we received, and our
responses on those families are
discussed below. The final payment
rates for the nine individual clinical
family APCs are included in Addendum
A to this final rule with comment
period.
1. Airway Endoscopy Procedures
As a part of our CY 2016
comprehensive review of the structure
of the APCs and procedure code
assignments, we examined the APCs
that contain airway endoscopy
procedures. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39257), for CY
2016, we proposed to restructure the
OPPS APC groupings for airway
endoscopy procedures to more
appropriately reflect the costs and
clinical characteristics of the procedures
within each APC grouping in the
context of the OPPS. The current APCs
for airway endoscopy procedures are
divided into upper airway and lower
airway endoscopy APC series. After
reviewing these APCs, we believe that
consolidating the current upper airway
and lower airway APC series into a
single APC grouping for airway
endoscopy procedures would result in
improved resource homogeneity for the
various airway endoscopy procedures,
while maintaining clinical homogeneity.
Therefore, for CY 2016, we proposed to
restructure and consolidate the APCs
that include airway endoscopy
procedures into a single APC grouping.
Table 18 of the proposed rule listed the
current CY 2015 APCs that contain the
airway endoscopy procedures, and
Table 19 of the proposed rule listed the
proposed CY 2016 APCs that would
result from our consolidation and
restructuring of the current airway
endoscopy procedure APCs into a single
APC grouping. The proposed
restructured/renumbered CY 2016
airway endoscopy APCs were: Proposed
APC 5151 (Level 1Airway Endoscopy);
proposed APC 5152 (Level 2 Airway
Endoscopy); proposed APC 5153 (Level

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3 Airway Endoscopy); proposed APC
5154 (Level 4 Airway Endoscopy); and
proposed APC 5155 (Level 5 Airway
Endoscopy.
We invited public comments on this
proposal.
Comment: Several commenters
supported the proposed restructuring of
the airway endoscopy APCs. However,
the commenters submitted a list of
procedure codes (indicated in Table 22
below) that they requested CMS to
reassign to higher-level APCs in the
airway endoscopy grouping based on
greater resource similarity of the
procedures described by the codes listed
by the commenters compared to the
procedures described by the proposed
codes assigned to the proposed APCs. In
addition, the HOP Panel recommended
that CMS reassign the procedures
described by CPT codes 31652 and
31653 from proposed APC 5153 to
proposed APC 5154 because the Panel
agreed with the presenter that the
procedures described by these new
codes are most similar to the procedures
assigned to CPT code 31629, which is
assigned to APC 5154. One commenter
requested that CMS assign the
procedure described by CPT code 31652
to APC 5154 and the procedure
described by CPT code 31653 to APC
5155. Another commenter requested
that CMS reassign the procedure
described by CPT code 31515 from
proposed APC 5152 to proposed APC
5154 because the commenter believed
that this procedure is more clinically
similar to other procedures (described
by CPT codes 31629 and 31645)
assigned to proposed APC 5154. One
commenter requested that CMS create a
Level 6 Airway Endoscopy APC and
assign the procedures described by CPT
codes 31636, 31634, and 31647 to this
newly APC because the costs of these
procedures are not similar to the costs
of other procedures assigned to APC
5155.
Response: We agree in part with the
commenters’ requested code
reassignments and with the Panel’s
recommendation. However, we do not
believe that the procedure described by
CPT code 31515 should be reassigned to
proposed APC 5154, that the procedure
described by CPT code 31653 should be
assigned to proposed APC 5153 instead
of proposed APC 5155, or that we
should create a Level 6 Airway
Endoscopy APC. We are reassigning
seven of the eight recommended
procedure codes (as listed in Table 22
below) to the next higher level airway
endoscopy APC to improve the resource
homogeneity of all the procedures
assigned to the airway endoscopy APCs.
We do not agree with the commenter

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that the procedure described by CPT
code 31515 should be assigned to the
higher level APC 5154 instead of APC
5152. The geometric mean cost of the
procedure described by CPT code 31515
is approximately $444, and the
geometric mean cost of APC 5152 is
approximately $393. The geometric
mean cost of APC 5154 is approximately
$2,084. We believe that, given the
significant difference in resource use
and similarity between the procedure
described by CPT code 31515 and the
procedures assigned to APC 5154,
assigning the procedure described by

CPT code 31515 to APC 5154 would be
an inappropriate APC assignment. We
also believe that, based on the clinical
characteristics of the new airway
endoscopy procedure grouping
described by CPT code 31653, the
procedure is most appropriately
assigned to APC 5154, which is one
level higher than what was proposed. In
addition, we do not believe it is
necessary to create a sixth level to the
Airway Endoscopy APC grouping to
appropriately pay for the procedures
described by CPT codes 31636, 31634,
and 31647. The procedures described by

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these CPT codes are low volume
procedures, and even if the procedures
represented a significant volume in the
CY 2014 claims data, assigning these
procedures to APC 5155 would not
result in a violation of the 2 times rule
for the APC.
Table 22 below shows the airway
endoscopy procedure codes with the
commenters’ specific APC
recommendations and the final CMS
decisions, final APC assignment, and
final status indicator assignment for CY
2016.

TABLE 22—AIRWAY ENDOSCOPY PROCEDURE CODES WITH COMMENTERS’ SPECIFIC APC RECOMMENDATIONS AND FINAL
CMS DECISIONS
CPT/HCPCS
code

Short descriptor

Proposed
CY 2016 SI

31295 ..........
31296 ..........
31297 ..........
31515 ..........
31626 ..........
31628 ..........
31652 * ........
31653 ** .......

Sinus endo w/balloon dil .................
Sinus endo w/balloon dil .................
Sinus endo w/balloon dil .................
Laryngoscopy for aspiration ...........
Bronchoscopy w/markers ...............
Bronchoscopy/lung bx each ...........
Bronch ebus samplng 1/2 node .....
Bronch ebus samplng 3/> node .....

T
T
T
T
T
T
T
T

Proposed
CY 2016
APC

Commenter
requested
APC

5154
5154
5154
5152
5154
5153
5153
5153

5155
5155
5155
5154
5155
5154
5154
5154

CMS
Decision

Final CY
2016 SI

Agree ............
Agree ............
Agree ............
Disagree .......
Agree ............
Agree ............
Agree ............
Agree ............

T
T
T
T
T
T
T
T

Final CY
2016 APC
5155
5155
5155
5152
5155
5154
5154
5154

jstallworth on DSK7TPTVN1PROD with RULES

* CPT code 31652 will be effective January 1, 2016. This code was listed as code 3160A (the 5-digit CMS placeholder code) in Addendum B,
O, and Q2 of the CY 2016 OPPS/ASC proposed rule.
** CPT code 31653 will be effective January 1, 2016. This code was listed as code 3160B (the 5-digit CMS placeholder code) in Addendum B,
O, and Q2 of the CY 2016 OPPS/ASC proposed rule.

Comment: One commenter requested
that CMS assign status indicator ‘‘T’’
(instead of status indicator ‘‘N’’) to new
CY 2016 CPT codes 0406T (Nasal
endoscopy, surgical, ethmoid sinus,
placement of drug eluting implant) and
0407T (Nasal endoscopy, surgical,
ethmoid sinus, placement of drug
eluting implant; with biopsy,
polypectomy or debridement). (We note
that CPT codes 0406T and 0407T were
listed as 040XF and 040XG,
respectively, in Addendum B, O, and
Q2 of the CY 2016 OPPS/ASC proposed
rule.) The commenter suggested, as an
alternative, that these codes be assigned
status indicator ‘‘Q2’’ (T-packaged). In
addition, the commenter recommended
that CMS assign CPT code 0406T to
APC 5153 and CPT code 0407T to APC
5154. The commenter believed that
these procedures should be paid
separately under the OPPS because they
are performed as standalone surgical
procedures according to the code
descriptors.
Response: We disagree with the
commenter that the procedures
described by CPT codes 0406T and
0407T are performed as standalone
procedures. We believe that procedures
describing the placement of a drugeluting sinus implant under the OPPS

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15:13 Nov 12, 2015

Jkt 238001

are performed as part of several more
comprehensive and extensive
endoscopic sinus surgical procedures.
Therefore, we are finalizing our
proposal to package payment for the
procedures described by CPT codes
0406T and 0407T, and to assign these
procedures to status indicator ‘‘N’’ for
CY 2016.
After consideration of the public
comments we received, we are
finalizing the proposed structure of the
airway endoscopy APCs with the code
reassignments shown in Table 22 above.
Table 23 below lists the final CY 2016
APCs that result from our consolidation
and restructuring of the current airway
endoscopy procedure APCs into a single
APC grouping. The procedures assigned
to each APC are listed in Addendum B
to this final rule with comment period,
which is available via the Internet on
the CMS Web site.

TABLE 23—FINAL CY 2016 AIRWAY
ENDOSCOPY APCS
Final CY
2016 APC
5151 .......
5152 .......
5153 .......

PO 00000

CY 2016 APC group title
Level 1 Airway Endoscopy.
Level 2 Airway Endoscopy.
Level 3 Airway Endoscopy.

Frm 00085

Fmt 4701

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TABLE 23—FINAL CY 2016 AIRWAY
ENDOSCOPY APCS—Continued
Final CY
2016 APC
5154 .......
5155 .......

CY 2016 APC group title
Level 4 Airway Endoscopy.
Level 5 Airway Endoscopy.

2. Cardiovascular Procedures and
Services
a. Cardiac Contractility Modulation
(CCM) Therapy
In Addendum B to the CY 2016
OPPS/ASC proposed rule, we proposed
to assign 11 new CY 2016 cardiac
contractility modulation (CCM) therapy
system CPT codes to various APCs,
which are listed in Table 24 below. We
also assigned these codes to comment
indicator ‘‘NP’’ in Addendum B to the
proposed rule to indicate that the codes
are new for CY 2016 with a proposed
APC assignment and that public
comments would be accepted on their
proposed APC assignments. We note
these codes will be effective January 1,
2016. However, in the proposed rule,
the codes were listed as 04XX1 through
04XX (the 5-digit CMS placeholder
code) in Addendum B, O, and Q2 of the
CY 2016 OPPS/ASC proposed rule.

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TABLE 24—PROPOSED CY 2016 OPPS APCS AND STATUS INDICATORS FOR THE CARDIAC CONTRACTILITY MODULATION
CPT PROCEDURE CODES
CY 2016 OPPS/
ASC proposed
rule 5-digit CMS
placeholder
code
04XX1
04XX2
04XX3
04XX4
04XX5
04XX6
04XX7
04XX8
04XX9
04X10
04X11

...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............

Short descriptor

Proposed
CY 2016
OPPS status
indicator

Insj/rplc cardiac modulj sys .......................................................................
Insj/rplc cardiac modulj pls gn ...................................................................
Insj/rplc car modulj atr elt ..........................................................................
Insj/rplc car modulj vnt elt ..........................................................................
Rmvl cardiac modulj pls gen .....................................................................
Rmvl car modulj tranvns elt .......................................................................
Rmvl & rpl car modulj pls gn .....................................................................
Repos car modulj tranvns elt .....................................................................
Reloc skin pocket pls gen .........................................................................
Prgrmg eval cardiac modulj .......................................................................
Interro eval cardiac modulj ........................................................................

J1
J1
J1
J1
J1
Q2
J1
T
T
Q1
Q1

CY 2016 CPT
code

0408T
0409T
0410T
0411T
0412T
0413T
0414T
0415T
0416T
0417T
0418T

...............
...............
...............
...............
...............
...............
...............
...............
...............
...............
...............

Comment: One commenter disagreed
with CMS’ proposed APC assignments
for certain cardiac contractility
modulation (CCM) Category III CPT
codes that are new in CY 2016 and
therefore do not have associated claims
data available. Specifically, the
commenter requested four CPT codes be
reassigned to the following APCs:
• CPT code 408T (Insertion or
replacement of permanent cardiac
contractility modulation system,
including contractility evaluation when
performed, and programming of sensing
and therapeutic parameters; pulse
generator with transvenous electrodes)
to APC 5232 (Level 2 ICD and Similar
Procedures);
• CPT code 0409T (Insertion or
replacement of permanent cardiac
contractility modulation system,
including contractility evaluation when
performed, and programming of sensing
and therapeutic parameters; pulse
generator only) to APC 5231 (Level 1
ICD and Similar Procedures);
• CPT code 0412T (Removal of
permanent cardiac contractility
modulation system; pulse generator

only) to APC 5221 (Level 1 Pacemaker
and Similar Procedures); and
• CPT code 0414T (Removal and
replacement of permanent cardiac
contractility modulation system pulse
generator only) to APC 5231 (Level 1
ICD and Similar Procedures).
The commenter believed that the
three codes for inserting or replacing the
system or pulse generator are more
similar clinically and in device
complexity and resource use to
implantable cardioverter-defibrillators
(ICD) procedures. In addition, the
commenter stated that the procedure
time and device costs for CCM
procedures exceed those for pacemaker
procedures. The commenter believed
the recommended APC assignment for
removal of the CCM pulse generator
codes better aligns with other similar
removal procedure codes.
Response: We agree with the
commenter that there would be greater
homogeneity, both clinically and in
terms of resource use, by reassigning
CCM procedures for insertion and/or
replacement of the CCM device
(described by CPT code 0409T) from the

Proposed
CY 2016
OPPS APC
5223
5223
5222
5222
5222
5221
5224
5181
5054
5741
5741

pacemaker APCs to the ICD APCs. We
also agree with the commenter that
procedures for removal of the CCM
device (described by CPT codes 0412T
and 0414T) are more homogenous
clinically and in terms of resource use
with pacemaker procedures. Therefore,
we are accepting the commenter’s
recommendation to reassign the
procedures described by CPT codes
0409T and 0414T to APC 5231 and to
reassign the procedures described by
CPT code 0412T to APC 5221. However,
we disagree with the commenter’s
recommendation to reassign the
procedure described by CPT 0408T to
APC 5232. Based on the latest available
hospital claims data used for this final
rule with comment period, we believe
that the procedure described by CPT
code 0408T should be assigned to APC
5231 because of its clinical and resource
homogeneity with other procedures
assigned to APC 5231. Table 24 below
summarizes the commenter’s requested
APC assignment for each of the codes
along with our decision and the final
APC and status indicator assignments.

TABLE 24—CARDIAC CONTRACTILITY MODULATION PROCEDURE CODES WITH COMMENTER’S RECOMMENDED SPECIFIC
APC ASSIGMENT, FINAL CMS DECISION, AND FINAL APC AND STATUS INDICATOR ASSIGNMENT
CPT/HCPCS
code

jstallworth on DSK7TPTVN1PROD with RULES

0408T
0409T
0412T
0414T

..........
..........
..........
..........

Short descriptor

Proposed
CY 2016
status
indicator

Insj/rplc cardiac modulj sys ......................
Insj/rplc cardiac modulj pls gn ..................
Rmvl cardiac modulj pls gen ....................
Rmvl & rpl car modulj pls gn ....................

J1
J1
J1
J1

The final status indicator, APC
assignment, and payment rate for these
codes, where applicable, can be found
in Addendum B to this final rule with

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15:13 Nov 12, 2015

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Proposed
CY 2016
APC

Commenter
requested
APC

5223
5223
5222
5224

comment period (which is available via
the Internet on the CMS Web site).

PO 00000

Frm 00086

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5232
5231
5221
5231

CMS
decision

Final CY
2016 status
indicator

Disagree ......
Agree ...........
Agree ..........
Agree ...........

J1
J1
Q2
J1

Final
CY 2016
APC
5231
5231
5221
5231

b. Cardiac Rehabilitation
Currently, there are four established
CPT/HCPCS codes that describe cardiac
rehabilitation services:

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
• CPT code 93797 (Physician or other
qualified health care professional
services for outpatient cardiac
rehabilitation; without continuous ECG
monitoring (per session));
• CPT code 93798 (Physician or other
qualified health care professional
services for outpatient cardiac
rehabilitation; with continuous ECG
monitoring (per session));
• HCPCS code G0422 (Intensive
cardiac rehabilitation; with or without
continuous ECG monitoring with
exercise, per session); and
• HCPCS code G0423 (Intensive
cardiac rehabilitation; with or without
continuous ECG monitoring without
exercise, per session).
In CY 2015, we assigned all four of
these codes to APC 0095 (Cardiac
Rehabilitation), which has a geometric
mean cost of approximately $107. In the
CY OPPS/ASC 2016 proposed rule, we
discussed that the costs for the two
intensive cardiac rehabilitation codes
had increased, such that the geometric
mean costs for the four cardiac
rehabilitation codes that we calculated
based on the CY 2014 hospital claims
data available for the proposed rule
were as follows: For CPT code 93797,
the geometric mean cost was
approximately $102. For CPT code
93798, the geometric mean cost was
approximately $111. For HCPCS code
G0422, the geometric mean cost was
approximately $262). For HCPCS code
G0423, the geometric mean cost was
approximately $493. In the proposed
rule, we stated that if we grouped all
four of these codes into a single APC, a
2 times rule violation would result.
Therefore, we proposed two levels of
cardiac rehabilitation for CY 2016: APC
5771 (Level 1 Cardiac Rehabilitation),
which contained the two standard
cardiac rehabilitation codes (CPT codes
93797 and 93798); and APC 5772 (Level
2 Cardiac Rehabilitation), which
contained the two intensive cardiac
rehabilitation codes (HCPCS codes
G0422 and G0423).
Our analysis of the latest CY 2014
hospital claims data available for this
final rule with comment period revealed
that the geometric mean costs of the
intensive cardiac rehabilitation codes
have decreased to levels that are more
consistent with the prior year’s
geometric mean costs for these codes.
The geometric mean costs for the four
codes, using the latest available final
rule claims data, are as follows: For CPT
code 93797, the geometric mean cost is
approximately $100. For CPT code
93798, the geometric mean cost is
approximately $109. For HCPCS code
G0422, the geometric mean cost is
approximately $149. For HCPCS code

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G0423, the geometric mean cost is
approximately $158. Therefore, because
the geometric mean costs for all four
codes based on the latest available final
rule data are relatively similar, we
believe that the current CY 2015 single
APC configuration for cardiac
rehabilitation is more appropriate than
the two levels we proposed for CY 2016
and ensures that the procedures
assigned to the APC do not cause a
violation of the 2 times rule. Analysis
using the latest available final rule
claims data showed that the 2 time rule
violation that existed with the data for
the proposed rule no longer exists.
Therefore, for CY 2016, we are assigning
all four of the cardiac rehabilitation
codes (CPT codes 93797 and 93798 and
HCPCS code G0422 and G0423) to new
APC 5771 (Cardiac Rehabilitation), with
a geometric mean cost of approximately
$109.
c. Cardiac Telemetry
For CY 2016, we proposed to reassign
the procedure described by CPT code
93229 (External mobile cardiovascular
telemetry with electrocardiographic
recording, concurrent computerized real
time data analysis and greater than 24
hours of accessible ECG data storage
(retrievable with query) with ECG
triggered and patient selected events
transmitted to a remote attended
surveillance center for up to 30 days;
technical support for connection and
patient instructions for use, attended
surveillance, analysis and transmission
of daily and emergent data reports as
prescribed by a physician or other
qualified health care professional) from
APC 0213 (Level 1 Extended EEG, sleep,
and Cardiovascular Studies) to proposed
APC 5722 (Level 2 Diagnostic Tests and
Related Services), with a proposed
payment rate of approximately $220.
Comment: One commenter disagreed
with the proposed APC assignment for
the procedure described by CPT code
93229 to proposed APC 5722. The
commenter stated that the proposed
payment rate for APC 5722 does not
accurately reflect the full cost of
providing the service described by CPT
code 93229. The commenter also stated
that hospitals are miscoding the service,
and as a result, the proposed payment
for this service is significantly
understated. The commenter noted that,
based on its internal analysis, several
hospitals reported costs under $100 for
services described by CPT code 93229.
The commenter stated that when this
service is provided under the MPFS, the
payment is valued at $680.05. The
commenter believed that the true cost of
providing this service is closer to $795,
and recommended that CMS reassign

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70383

the services described by CPT code
93229 to proposed APC 5724 (Level 4
Diagnostic Tests and Related Services),
with a proposed payment rate of
approximately $880.
Response: As we stated in the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66847), CPT
code 93229 became effective January 1,
2009. We believe that 5 years is
sufficient time for hospital coders to
understand the procedure described by
CPT code 93229 and how to
appropriately report this service on
hospital claims. Based on our analysis
of the CY 2014 hospital outpatient
claims data used for this final rule with
comment period, we are unable to
determine whether hospitals are
miscoding the service described by CPT
code 93229. It is generally not our
policy to judge the accuracy of hospital
coding and charging for purposes of
ratesetting (75 FR 71838). We rely on
hospitals to accurately report the use of
HCPCS codes in accordance with their
code descriptors and CPT and CMS
instructions, as applicable, and to report
services on claims and charges and costs
for the services on their Medicare
hospital cost report appropriately.
However, we do not specify the
methodologies that hospitals use to set
charges for this or any other service.
We acknowledge that payment under
the MPFS is made separately for the
procedure described by CPT code
93229. However, the MPFS and the
OPPS are different payment systems
with entirely different ratesetting
methodologies. Each is established
under a different set of regulatory and
statutory principles and the policies
established under the physician fee
schedule do not have bearing on the
payment policies under the OPPS. For
example, the OPPS uses actual annual
hospital claims data to calculate
payment rates, while the MPFS relies on
estimates of relative value units (RVUs)
from the American Medical
Association/Specialty Society Relative
Value Update Committee (RUC).
Furthermore, as has been our practice
since the implementation of the OPPS
in 2000, we review, on an annual basis,
the APC assignments for the procedures
and services paid under the OPPS.
Based on the latest hospital outpatient
claims data used for this final rule with
comment period, our analysis does not
support the assignment of the procedure
described by CPT code 93229 to APC
5724. We examined the latest hospital
outpatient claims data for CPT code
93229 for dates of service between
January 1, 2014, and December 31, 2014,
that were processed on or before June
30, 2014. Our analysis of the claims data

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shows a geometric mean cost of
approximately $170 for CPT code 93229
based on 2,153 single claims (out of
3,554 total claims). We do not believe
that it is appropriate to assign CPT code
93229 to APC 5724 because its
geometric mean cost is approximately
$896, which is significantly higher than
the geometric mean cost of
approximately $170 for CPT code
93229, and assigning CPT code 93229 to
APC 5724 would result in an
overpayment for the procedure. We
believe that APC 5722 is the most
appropriate APC assignment for the
procedure described by CPT code 93229
based on its clinical and resource
homogeneity to the other diagnostic
tests and procedures assigned to this
APC.
After consideration of the public
comment we received, we are finalizing
our proposal, without modification, to
reassign the procedure described by
CPT code 93229 to APC 5722 for CY
2016. The final payment rate for CPT
code 93229 can be found in Addendum
B to this final rule with comment
period, which is available via the
Internet on the CMS Web site.

jstallworth on DSK7TPTVN1PROD with RULES

3. Diagnostic Tests and Related Services
As a part of our CY 2016
comprehensive review of the structure
of the APCs and procedure code
assignments, we examined the APCs
that contain diagnostic tests and related
services. For CY 2016, we proposed to
restructure the OPPS APC groupings for
diagnostic tests and related services to
more appropriately reflect the costs and
clinical characteristics of the services
within each APC grouping in the
context of the OPPS. The current APCs
for diagnostic tests and related services
are divided according to organ system or
physiologic test type. After reviewing
these APCs, we believe that the current
APC structure is based on clinical
categories that do not necessarily reflect
the significant differences in the
delivery of these services in the HOPD.
The current level of granularity for these
APCs results in groupings that are
unnecessarily narrow for the purposes
of a prospective payment system.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39258), for CY
2016, we proposed to restructure and
consolidate the APCs that include
diagnostic tests and related services. We

believe that this proposed restructuring
and consolidation of APCs into larger
APC groupings would more
appropriately reflect a prospective
payment system that is based on
payment groupings and not codespecific payment rates, while
maintaining clinical and resource
homogeneity. Table 20 of the proposed
rule listed the current CY 2015 APCs
that contain nonimaging diagnostic
tests, and Table 21 of the proposed rule
listed the CY 2016 APCs that would
result from our proposed consolidation
and restructuring of the current
diagnostic test and related services
APCs. We invited public comments on
this proposal.
Comment: A few commenters
requested that CMS unpackage the
payment for cochlear implant
procedures described by CPT codes
92601 through 92604, and the
procedures for programming an auditory
brainstem implant described by CPT
code 92640, and to assign these
procedure codes to status indicator ‘‘S’’
instead of status indicator ‘‘Q1.’’ The
commenters stated that these services
are independent evaluations that are
generally not related to other diagnostic
tests or therapeutic services. Instead,
according to these commenters, these
procedures are very specific services
used in the treatment for a limited
population of patients with cochlear
implants. One commenter provided a
summary of an analysis of the claims
data that it believed supports the
position that payment for these services
are often packaged with other unrelated
OPPS services. One commenter
requested that CMS unpackage the
payment for procedures described by
CPT code 92557 (Comprehensive
audiometry threshold evaluation and
speech recognition (92553 and 92556))
because payments for these procedures
are packaged with payment for other
unrelated services a majority of the
time.
Response: We agree with the
commenters regarding the cochlear
implant procedures described by CPT
codes 92601 through 92604 and CPT
code 92640. After further review of the
clinical context in which these services
are performed in the HOPD, we believe
that separate payment (identified by
status indicator ‘‘S’’) for these services
is more appropriate than a conditional

packaged payment triggered by status
indicator ‘‘Q1.’’ Therefore, we are
changing the status indicator
assignments for these five procedure
codes from ‘‘Q1’’ to ‘‘S’’ for CY 2016.
With regard to the procedure
described by CPT code 92557, we
disagree with the commenter. We
believe that audiometry is an ancillary
diagnostic test that is appropriately
conditionally packaged similar to many
other diagnostic tests. Hearing loss has
multiple potential etiologies and an
evaluation of the auditory system is an
important part of various diagnostic
tests. It is not relevant that this service
is performed by an audiologist because
several different kinds of services are
performed in the HOPD by various
health care professionals, depending
upon their area of expertise. In addition,
the professional that performs the
service is not a prerequisite for payment
packaging determinations. We note that,
under the hospital OPPS, when a
conditionally packaged service is
performed on a different date of service
and separate from other services, it is
paid separately.
Comment: One commenter supported
the proposed restructuring of the
diagnostic test APCs. However, the
commenter suggested that, because the
procedures assigned to APC 5761 (Level
1 Audiometry) and APC 5762 (Level 2
Audiometry) are diagnostic tests, these
procedures should be assigned to either
the newly reorganized diagnostic test
APCs or to one of the minor procedure
APCs to which similar procedure are
assigned.
Response: We agree, in principle,
with the commenter that it would be
consistent with the new diagnostic test
APCs structure, which includes all
forms of diagnostic tests except
audiometry, to also assign the
audiometry procedure codes in the two
audiometry APCs to one of the
diagnostic test APCs or, in some cases,
to one of the minor procedure APCs.
Therefore, for CY 2016, we are
reassigning all of the procedures in
APCs 5761 and 5762 as shown in Table
25 below. In addition, we are deleting
APCs 5761 and 5762. In Table 25 below,
we summarize the commenter’s
requested APC assignment for each of
the procedure codes along with our
decision and the final APC assignment.

TABLE 25—REASSIGNMENT OF CODES CURRENTLY ASSIGNED TO LEVEL 1 AND 2 AUDIOMETRY
CPT/HCPCS
code
0208T ..........
0209T ..........

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Proposed CY
2016 APC
5761
5761

15:13 Nov 12, 2015

Commenter/requested APC

CMS decision

No Recommendation .......................................
No Recommendation .......................................

N/A ...................................................................
N/A ...................................................................

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APC
5732
5732

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TABLE 25—REASSIGNMENT OF CODES CURRENTLY ASSIGNED TO LEVEL 1 AND 2 AUDIOMETRY—Continued
CPT/HCPCS
code

jstallworth on DSK7TPTVN1PROD with RULES

0210T
0211T
0212T
92550
92552
92553
92555
92556
92557
92561
92562
92563
92564
92565
92567
92570
92571
92572
92575
92576
92577
92579
92582
92583
92596
92601
92602
92603
92604
92620
92625
92626
92640
92700

..........
..........
..........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

Proposed CY
2016 APC
5761
5761
5762
5762
5762
5762
5761
5761
5762
5762
5762
5761
5761
5761
5761
5762
5761
5762
5761
5761
5762
5762
5762
5761
5761
5762
5762
5762
5762
5762
5762
5762
5762
5761

Commenter/requested APC

CMS decision

No Recommendation .......................................
No Recommendation .......................................
No Recommendation .......................................
5721 .................................................................
5721 .................................................................
No Recommendation .......................................
5732 .................................................................
5732 .................................................................
5721 or 5722 ...................................................
5734 .................................................................
5721 .................................................................
No Recommendation .......................................
No Recommendation .......................................
5732 .................................................................
5732 .................................................................
5721 .................................................................
No Recommendation .......................................
No Recommendation .......................................
No Recommendation .......................................
5732 .................................................................
5721 .................................................................
5721 .................................................................
5721 .................................................................
5732 .................................................................
5732 .................................................................
5721 or 5722 ...................................................
5721 or 5722 ...................................................
5721 or 5722 ...................................................
5721 or 5722 ...................................................
5721 .................................................................
5721 .................................................................
5721 .................................................................
5721or 5722 ....................................................
5732 .................................................................

N/A ...................................................................
N/A ...................................................................
N/A ...................................................................
Agree ...............................................................
Disagree ..........................................................
N/A ...................................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
N/A ...................................................................
N/A ...................................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
N/A ...................................................................
N/A ...................................................................
N/A ...................................................................
Agree ...............................................................
Disagree ..........................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Agree ...............................................................
Disagree ..........................................................

We note that, for each of the
procedure codes with which we
disagree with the commenter’s
requested APC assignment, we believe
that the final APC assignment is more
appropriate based on the greater
similarity of resource use.
Comment: One commenter requested
that CMS reassign the procedures
described CPT codes 95909 (Nerve
conduction studies; 5–6 studies) and
95910 (Nerve conduction studies; 7–8
studies) from APC 5722 to APC 5723
based on the procedures’ similar
resource use when compared to the
resource use for the procedure described
by CPT code 95961 (Functional cortical
and subcortical mapping by stimulation
and/or recording of electrodes on brain
surface, or of depth electrodes, to
provoke seizures or identify vital brain
structures; initial hour of attendance by
a physician or other qualified health
care professional).
Response: We disagree with the
commenter. The procedure described by
CPT code 95909 has a geometric mean
cost of approximately $221 and the
procedure described by CPT code 95910
has a geometric mean cost of
approximately $275. The procedure

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described by CPT code 95961 has a
geometric mean cost of approximately
$2,143 based on 4 single claims. Based
on the latest hospital outpatient claims
data used for this final rule with
comment period, the geometric mean
costs of the procedures described by
CPT codes 95909 and 95910 are not
comparably similar to the geometric
mean cost of the procedure described by
CPT code 95961. Therefore, we are not
reassigning the procedures described by
CPT codes 95909 and 95910 to APC
5723, as the commenter suggested.
Comment: One commenter requested
that the procedures described by CPT
codes 95965 (Magnetoencephalography
(MEG), recording and analysis; for
spontaneous brain magnetic activity
(e.g., epileptic cerebral cortex
localization)) and 95966
(Magnetoencephalography (MEG),
recording and analysis; for evoked
magnetic fields, single modality (e.g.,
sensory, motor, language, or visual
cortex localization)) be reassigned to an
APC other than the proposed APC 5724.
Although the commenter believed that
MEG procedures are not clinically
similar to the other procedures assigned
to APC 5724, the commenter did not

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Final CY 2016
APC
5732
5732
5721
5721
5734
5721
5732
5732
5721
5734
5721
5732
5732
5732
5732
5721
5732
5721
5732
5732
5723
5721
5721
5732
5732
5721
5721
5721
5721
5721
5721
5721
5721
5731

specify to which APC it believed these
procedures should be assigned.
Response: We disagree with the
commenter. MEG procedures are
neurological diagnostic tests and are
assigned to an APC with other
neurological diagnostic tests with
comparably similar geometric mean
costs. In addition, these procedures are
currently assigned to the highest level
APC, specifically APC 5724 (Level 4
Diagnostic Tests and Related Services),
in the diagnostic tests APC series. We
do not believe that there is a more
appropriate APC assignment for MEG
procedures. Therefore, we are finalizing
our proposal to assign the MEG CPT
codes 95965 and 95966 to APC 5724 for
CY 2016.
Comment: One commenter requested
that CMS assign the procedures
described by CPT codes 95800 (Sleep
study, unattended, simultaneous
recording; heart rate, oxygen saturation,
respiratory analysis (e.g., by airflow or
peripheral arterial tone), and sleep time)
and 95806 (Sleep study, unattended,
simultaneous recording of, heart rate,
oxygen saturation, respiratory airflow,
and respiratory effort (e.g.,
thoracoabdominal movement) to APC

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5722 (Level 2 Diagnostic Tests & Related
Services), based on similarities in
clinical characteristics and resource use
to other procedures assigned to APC
5722. The commenter also requested
that CMS assign CPT code 95801 (Sleep
study, unattended, simultaneous
recording; minimum of heart rate,
oxygen saturation, and respiratory
analysis (e.g., by airflow or peripheral
arterial tone)) to APC 5721 (Level 1
Diagnostic Tests & Related Services),
based on similarity in clinical
characteristics and resource use to other
procedures assigned to APC 5721. Other
commenters requested that CMS assign
the procedures described by CPT codes
95805 (Multiple sleep latency or
maintenance of wakefulness testing,
recording, analysis and interpretation of
physiological measurements of sleep
during multiple trials to assess
sleepiness) and 95782
(Polysomnography; younger than 6
years, sleep staging with 4 or more
additional parameters of sleep, attended
by a technologist) to APC 5724 (Level 4
Diagnostic Tests & Related Services),
based on similarities in clinical
characteristics and resource use to the
other procedures assigned to APC 5724.
Response: We agree with the
commenters’ recommendation on the
APC assignment of the procedures
described by CPT codes 95805 and
95782. We believe that APC 5724 is a
more appropriate APC group assignment
for these codes based on similarities in
clinical characteristics and resource use
to the other procedures assigned to APC
5724 (as opposed to the proposed
assignment to APC 5723). However, we
disagree with the commenters’
recommendation for the APC
assignment for CPT codes 95800, 95801,
and 95806; we believe that the proposed
APC assignments are most appropriate
based on similarities in clinical
characteristics and resource use.
After consideration of the public
comments we received, we are
finalizing for CY 2016 the proposed
APC structure for the diagnostic tests
APCs, which is displayed in Table 26
below. The procedures assigned to each
APC are listed in Addendum B to this
final rule with comment period, which
is available via the Internet on the CMS
Web site.

TABLE 26—CY 2016 DIAGNOSTIC
TESTS AND RELATED SERVICES APCS
CY 2016
APC

CY 2016 APC title

5721 .......

Level 1 Diagnostic Tests and Related Services.

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biopsy procedures, and Table 23 of the
TABLE 26—CY 2016 DIAGNOSTIC
TESTS AND RELATED SERVICES proposed rule listed the CY 2016 APCs
that would result from the consolidating
APCS—Continued
CY 2016
APC

CY 2016 APC title

5722 .......

Level 2 Diagnostic Tests and Related Services.
Level 3 Diagnostic Tests and Related Services.
Level 4 Diagnostic Tests and Related Services.

5723 .......
5724 .......

4. Excision/Biopsy and Incision and
Drainage Procedures
As a part of our CY 2016
comprehensive review of the structure
of the APCs and procedure code
assignments, we examined the APCs for
incision and drainage procedures as
well as excision/biopsy procedures. The
current APC structure for these
procedures is organized into two series:
Incision and drainage procedures; and
excision/biopsy procedures.
Based on our evaluation of the current
APC structure and the latest hospital
outpatient claims data available for the
CY 2016 OPPS/ASC proposed rule, in
the proposed rule (80 FR 39259), we
proposed to reconfigure the structure of
these APCs by combining the incision
and drainage procedures with the
excision/biopsy procedures to more
accurately reflect the resource costs and
clinical characteristics of the procedures
within each APC. Many of the
procedures assigned to these two series
are clinically similar. Therefore, we
believe that a single series
encompassing incision and drainage
procedures and excision/biopsy
procedures groups clinically similar
procedures without unnecessary
granularity. We stated in the proposed
rule that we believe that the proposed
consolidation and restructuring of these
APCs would more appropriately reflect
a prospective payment system that is
based on payment for APC groupings
with clinically similar procedures while
maintaining resource homogeneity.
Moreover, we believe that the proposed
APC groupings would more accurately
accommodate and align new services
paid under the hospital OPPS within
clinical APCs that contain services with
similar clinical attributes and resource
costs. Therefore, for CY 2016, we
proposed to consolidate and restructure
the APCs that describe incision and
drainage procedures as well as the
excision/biopsy procedures by
combining these procedures into a
single APC series. Table 22 of the
proposed rule listed the current CY
2015 APCs that contain the incision and
drainage procedures and the excision/

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and restructuring of the APCs into a
single APC series. We invited public
comments on this proposal.
Comment: Commenters generally
supported the proposed APC
reconfiguration and consolidation for
the incision and drainage and excision/
biopsy APCs. However, some
commenters expressed concerns
regarding the APC assignment for the
procedures described by the following
19 CPT codes included in the proposed
reconfiguration:
• CPT code 10080 (Incision and
drainage of pilonidal cyst; simple);
• CPT code 10081 (Drainage of
pilonidal cyst; complicated);
• CPT code 11603 (Excision,
malignant lesion including margins,
trunk, arms, or legs; excised diameter
2.1 to 3.0 cm);
• CPT code 11641 (Excision,
malignant lesion including margins,
face, ears, eyelids, nose, lips; excised
diameter 0.6 to 1.0 cm);
• CPT code 11642 (Excision,
malignant lesion including margins,
face, ears, eyelids, nose, lips; excised
diameter 1.1 to 2.0 cm);
• CPT code 11750 (Excision of nail
and nail matrix, partial or complete
(e.g., ingrown or deformed nail), for
permanent removal);
• CPT code 15782 (Dermabrasion;
regional, other than face;
• CPT code 15999 (Unlisted
procedure, excision pressure ulcer);
• CPT code 21725 (Division of
sternocleidomastoid for torticollis, open
operation; with cast application);
• CPT code 21930 (Excision, tumor,
soft tissue of back or flank,
subcutaneous; less than 3 cm);
• CPT code 23931 (Incision and
drainage, upper arm or elbow area;
bursa);
• CPT code 35206 (Repair blood
vessel lesion);
• CPT code 35226 (Repair blood
vessel, direct; lower extremity);
• CPT code 38300 (Drainage of lymph
node abscess or lymphadenitis, simple);
• CPT code 47399 (Unlisted
procedure, liver);
• CPT code 48999 (Unlisted
procedure, pancreas);
• CPT code 57022 (Incision and
drainage of vaginal hematoma;
obstetrical/postpartum);
• CPT code 62269 (Biopsy of spinal
cord, percutaneous needle);and
• CPT code 69005 (Drain external ear,
abscess or hematoma; complicated).
The commenters recommended that
CMS reassign these 19 procedure codes
to a higher level APC based on
similarity in clinical characteristics.

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Response: Based on our analysis of
the latest hospital outpatient claims data
used for this final rule with comment
period, we agree with the commenters’
recommendations for APC assignment
for the procedures described by the
following CPT codes: 11603; 21930;
23931; 57022; and 62269. However, we
do not agree with the commenters’
recommendations to reassign the
procedures described by the following
CPT codes because our final rule claims
data show that the resource costs of
these procedures are not comparable to
the resource costs of other procedures in
the APCs recommended: 10080; 11641;
11642; 11750; 15999; 21725; 35226;
47399; and 48999.
As indicated above, several of the CPT
codes recommended by the commenters
describe unlisted procedures. We
remind readers that, as a matter of
established OPPS policy described in
the CY 2005 OPPS final rule with
comment period (69 FR 65724 through
65725), we assign all unlisted CPT/
HCPCS codes, such as CPT codes 15999,
47399, and 48999, to the lowest level
APC within the appropriate clinical
category. By definition, ‘‘unlisted,’’
‘‘unclassified,’’ ‘‘not otherwise
specified,’’ or ‘‘not otherwise classified’’
codes do not describe the services being
performed, and the services coded using
‘‘unlisted’’ codes vary over time as new
CPT and HCPCS codes are developed.
Therefore, it is impossible for any level
of analysis of past hospital claims data
to support appropriate assignment of the
service for the upcoming year to an APC
in which there is clinical and resource
integrity of the groupings and relative
weights. We continue to believe that the
appropriate default APC assignment, in
the absence of a code that describes the
service being furnished, is the lowest
level APC within the clinical category to
which the unlisted code is assigned.

The assignment of the unlisted codes to
the lowest level APC in the clinical
category provides a reasonable means
for payment for the service until there
is a code that specifically describes the
procedure or service. In addition, we
believe that this policy encourages the
creation of codes where appropriate and
ensures that overpayment for services
that are not clearly identified on the
claim does not occur. Our assignment of
CPT codes 15999, 47399, and 48999 to
APC 5071 (Level 1 Excision/Biopsy/
Incision and Drainage) is consistent
with this policy. The hospital cost data
for unlisted CPT/HCPCS codes are not
used for ratesetting and, furthermore,
the costs of unlisted CPT/HCPCS codes
are not subject to the 2 times rule. For
further information on the 2 times rule,
we refer readers to sections III.B.2 and
3. of this final rule with comment
period.
Comment: One commenter
specifically recommended that CMS
assign the following CPT codes from
APC 5071 to APC 5073 (Level 3
Excision/Biopsy/Incision and Drainage):
15782 (Dermabrasion; regional, other
than face); 38300 (Drainage of lymph
node abscess or lymphadenitis; simple);
and 69005 (Drainage external ear,
abscess or hematoma; complicated).
Response: As listed in the OPPS
Addendum B of the proposed rule, we
proposed to reassign the procedure
described by CPT code 15782 to APC
5072 (Level 2 Excision/Biopsy/Incision
and Drainage), not to APC 5071 as the
commenter stated. In addition, as listed
in the OPPS Addendum B of the
proposed rule, we proposed to assign
the procedures described by CPT codes
38300 and 69005 to APC 5071.
Based on our analysis of the latest
hospital outpatient claims data used for
this final rule with comment period, we
disagree with the commenter’s

70387

suggested APC assignment. Our analysis
of the latest hospital outpatient claims
data used for this final rule reveal that
these three procedures would be more
appropriately reassigned to APC 5074
(Level 4 Excision/Biopsy/Incision and
Drainage), rather than APC 5071, based
on their clinical and resource
homogeneity to the other procedures
assigned to APC 5074. We note that APC
5074 is the highest level APC within
this group. Consequently, we are
finalizing our proposal, with
modification, to reassign the procedures
described by CPT codes 15782, 38300,
and 69005 to APC 5074 for CY 2016.
Comment: Some commenters
specifically agreed with the proposed
APC assignment for the excision/biopsy
and incision and drainage procedures
described by CPT codes10081 (Incision
and drainage of pilonidal cyst;
complicated) and 35206 (Repair blood
vessel, direct; upper extremity), and
requested that CMS finalize them for CY
2016.
Response: We appreciate the
commenters’ support and are finalizing
our proposed APC assignments for CPT
codes 10081 and 35206 for CY 2016 in
this final rule with comment period.
After consideration of the public
comments we received, we are
finalizing our proposed APC
reconfiguration for the excision/biopsy
and incision and drainage APCs. In
addition, we are finalizing the proposed
APC assignments for the procedures
within the excision/biopsy and incision
and drainage APCs, with modifications
to the APC assignment for CPT codes
11603, 15782, 21930, 23931, 38300,
57022, 62269, and 69005. Table 27
below lists the 19 CPT codes, the
commenters’ requested APC
assignments, CMS’ final decision, the
final status indicators, and the final APC
assignments for CY 2016.

TABLE 27—EXCISION/BIOPSY AND INCISION AND DRAINAGE PROCEDURE CODES WITH COMMENTERS’ SPECIFIC APC
RECOMMENDATIONS, FINAL CMS DECISIONS, FINAL STATUS INDICATORS, AND FINAL APC ASSIGNMENT FOR CY 2016

jstallworth on DSK7TPTVN1PROD with RULES

CPT/HCPCS
code
10080
10081
11603
11641
11642
11750
15782
15999
21725
21930
23931
35206
35226
38300

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........

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Short descriptor

Proposed
CY 2016 SI

Drainage of pilonidal cyst ...............
Drainage of pilonidal cyst ...............
Exc tr-ext mal+marg 2.1–3 cm .......
Exc f/e/e/n/l mal+mrg 0.6–1 ............
Exc f/e/e/n/l mal+mrg 1.1–2 ............
Removal of nail bed ........................
Dermabrasion other than face ........
Removal of pressure sore ..............
Revision of neck muscle .................
Exc back les sc <3 cm ...................
Drainage of arm bursa ....................
Repair blood vessel lesion .............
Repair blood vessel lesion .............
Drainage lymph node lesion ...........

T
T
T
T
T
T
T
T
T
T
T
T
T
T

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Proposed
CY 2016
APC
5071
5072
5072
5072
5072
5071
5072
5071
5071
5073
5071
5182
5072
5071

Fmt 4701

Sfmt 4700

Commenters’
requested
APC
5072
5072
5073
5073
5073
5072
5073
5074
5121
5074
5074
5182
5182
5073

CMS decision

Final CY
2016 SI

Disagree ........
Agree ............
Agree ............
Disagree .......
Disagree .......
Disagree ........
Disagree .......
Disagree .......
Disagree ........
Agree ............
Agree ............
Agree ............
Disagree ........
Disagree ........

T
T
T
T
T
T
T
T
T
T
T
T
T
T

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Final CY
2016 APC
5071
5072
5073
5072
5072
5071
5074
5071
5071
5074
5074
5182
5072
5074

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TABLE 27—EXCISION/BIOPSY AND INCISION AND DRAINAGE PROCEDURE CODES WITH COMMENTERS’ SPECIFIC APC RECOMMENDATIONS, FINAL CMS DECISIONS, FINAL STATUS INDICATORS, AND FINAL APC ASSIGNMENT FOR CY 2016—
Continued
CPT/HCPCS
code
47399
48999
57022
62269
69005

..........
..........
..........
..........
..........

Short descriptor

Proposed
CY 2016 SI

Liver surgery procedure ..................
Pancreas surgery procedure ..........
I & d vaginal hematoma pp ............
Needle biopsy spinal cord ..............
Drain external ear lesion ................

T
T
T
T
T

Proposed
CY 2016
APC
5071
5071
5071
5071
5071

5074
5074
5074
5073
5073

(Level 4 Intraocular Procedures), which
is a C–APC. In the latest final rule CY
2014 claims data, there are 40 total
claims and 39 single claims. This is a
low volume procedure, in part because
most of the cases (like most cataract
surgery) are performed in an ASC.
Comment: One commenter believed
that the significant payment rate
decrease from CY 2015 to the proposed
2016 rate is due to some hospitals
submitting miscoded claims that have
relatively low associated costs. The
commenter asserted that some hospitals
are reporting CPT code 0308T for
procedures other than IMT
TABLE 28—FINAL CY 2016 APCS FOR implantation, and that these miscoded
EXCISION/BIOPSY/INCISION
AND claims have costs that are much lower
than the cost of the procedure described
DRAINAGE PROCEDURES
by CPT code 0308T. The commenters
stated that the evidence to support its
CY 2016
CY 2016 APC group title
assertion is the presence of non-macular
APC
degeneration diagnosis codes on these
5071 ....... Level 1 Excision/Biopsy/Incision purportedly miscoded claims
and Drainage.
(geographic atrophy from end-stage
5072 ....... Level 2 Excision/Biopsy/Incision macular degeneration is the indication
and Drainage.
for the IMT). The commenter also
5073 ....... Level 3 Excision/Biopsy/Incision
believed that the hospitals that
and Drainage.
5074 ....... Level 4 Excision/Biopsy/Incision submitted the miscoded claims do not
perform any IMT surgery. The
and Drainage.
commenter requested that CMS exclude
these miscoded claims from the claims
5. Eye Surgery and Other Eye-Related
data in calculating the CY 2016 payment
Procedures
rate for the procedure described by CPT
a. Implantable Miniature Telescope
code 0308T. Alternatively, the
(CPT Code 0308T)
commenter requested that CMS invoke
CPT code 0308T (Insertion of ocular
the equitable adjustment authority
telescope prosthesis including removal
under section 1833(t)(2)(E) of the Act
of crystalline lens or intraocular lens
and base the payment rate for the
prosthesis) is a relatively new
procedure described by CPT code 0308T
procedure. This code became effective
on the median cost for all of the claims
in CY 2013. The procedure is a cataract
instead of the geometric mean cost. The
(or IOL) extraction with the
commenter believed that, because the
implantation of a special kind of IOL,
median cost is less sensitive to extreme
the Implantable Miniature Telescope
observations (such as claims with very
(IMT), which has the appearance of an
low cost or very high cost), the median
IOL with a thick central optic. The
cost should be used to calculate the
payment rate for this procedure in CY
payment rate for the procedure
2014 was approximately $15,551, and in described by CPT code 0308T, which
CY 2015, the payment rate for this
has a low total claims volume. The
procedure is approximately $23,084.
commenter stated that using the median
The proposed CY 2016 payment rate is
cost instead of the geometric mean cost
approximately $11,680. CPT code 0308T would dampen the negative effect of the
is the only code assigned to APC 5494
claims with very low cost and mitigate
Table 28 below lists the CY 2016
APCs that result from the consolidating
and restructuring of the APCs into a
single APC series. The final payment
rates for the specific CPT codes for
incision and drainage procedures and
excision/biopsy procedures are
included in Addendum B to this final
rule with comment period. The final
payment rates for the specific APCs to
which these procedures are assigned are
included in Addendum A to this final
rule with comment period. Both OPPS
Addenda A and B are available via the
Internet on the CMS Web site.

jstallworth on DSK7TPTVN1PROD with RULES

Commenters’
requested
APC

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CMS decision

Final CY
2016 SI

Disagree ........
Disagree ........
Agree ............
Agree ............
Disagree ........

T
T
T
T
T

Final CY
2016 APC
5071
5071
5074
5073
5074

the payment reduction from CY 2015 for
the procedure described by CPT code
0308T.
Response: We understand that when
there are a very low volume of claims
in the dataset, each claim has a greater
effect on the geometric mean cost, as
compared to a medium or large volume
of claims in the dataset. Regarding the
request that we exclude certain claims
that the commenter argued are
miscoded and contain inaccurate cost
information, we reiterate our position
on this matter in an earlier rule:
‘‘Beyond 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 generally do not remove claims from
the claims accounting when
stakeholders believe that hospitals
included incorrect information on some
claims. Therefore, we are not excluding
claims from the ratesetting calculation
for the procedure described by CPT
code 0308T for CY 2016.
However, we agree with the
commenter that, given the very low
volume of claims for this relatively
high-cost device intensive surgical
procedure (that is the only procedure
assigned to APC 5494), the median cost
would be a more appropriate measure of
the central tendency for purposes of
calculating the cost and the payment
rate for the procedure described by CPT
code 0308T. The median cost is
impacted to a lesser degree than the
geometric mean cost by more extreme
observations. Therefore, for CY 2016, we
are using our equitable adjustment
authority under section 1833(t)(2)(E) of
the Act to use the median cost to
calculate the payment rate for the
procedure described by CPT code
0308T, which is the only code assigned
to APC 5494. The median cost of the
procedure described by CPT code
0308Tis $18,365, and the geometric
mean cost is $13,833. Unlike the retinal
prosthesis procedure, the procedure

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described by CPT code 0308T has a low
volume of claims data upon which to
base a payment rate. This procedure
also differs from other procedures for
which we have not taken further
measures when stakeholders believe
that incorrect hospital coding negatively
affected payment rates, because it is not
grouped to an APC with procedures that
have robust claims data upon which an
APC geometric mean cost can be
calculated. In future rulemaking, we
will consider proposing a general policy
for the payment rate calculation for very
low-volume device-intensive APCs
similar to APC 5494.
b. Other Ocular Procedures
Comment: A few commenters were
concerned that the current structure of
APC 5492 (Level 2 Intraocular
Procedures) results in inadequate
payment for certain procedures assigned
to APC 5492. In particular, these
commenters were primarily concerned
about the procedure described by CPT
code 66180, which, beginning in CY
2015, represented an overall procedure
that was formerly represented by two
separate codes, one code for the shunt
placement and one code for the graft
placement. The commenters requested
that CMS reexamine the intraocular
procedures series of APCs and the code
assignments and consider alternatives
that would provide a payment that was
more reflective of the costs of the higher
cost procedures currently assigned to
APC 5492. Two commenters requested
that CMS create a new APC with a mean
cost between that of APC 5492 and APC
5493, and assign the procedure
described by CPT code 66180 to this
new APC.
Response: We reexamined the
procedure code assignments and latest
claims data for the intraocular
procedures series of four APCs. We do
not agree that an additional APC level
within this series is warranted.
However, we do believe that reassigning
some of the codes that were proposed to
be assigned to APC 5492 into APC 5491
results in a more balanced APC 5491
(Level 1 Intraocular Procedures) and
(Level 2 Intraocular Procedures).
Therefore, we are reassigning all
procedures that were proposed to be
assigned to Level 2 with a mean cost of
less than $3,000 to Level 1. This
reassignment of procedure codes results
in a higher mean cost range for APC
5492 ($3,538 versus $3,438 in the
proposed rule).
Comment: One commenter requested
that CMS reassign CPT code 0207T
(Evacuation of meibomian glands,
automated, using heat and intermittent
pressure, unilateral) from APC 5732

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(Level 2 Minor Procedures) to APC 5502
(Level 2 Extraocular, Repair, and Plastic
Eye Procedures). The commenter stated
that the procedure described by CPT
code 0207T is used for patients with
meibomian gland dysfunction. The
commenter pointed out that, for CY
2016, CPT code 0207T has nine single
claims (29 total claims) with a mean
cost of $82.20; APC 5732 has a mean
cost of $31.93; and APC 5502 has a
mean cost of $728.78. The commenter
asserted that most of the small number
of claims filed for the procedure
described by CPT code 0207T was filed
in error by a hospital that performed a
different procedure with significantly
lower costs than the procedure
described by CPT code 0207T. The
commenter requested that CMS exclude
these claims in our ratesetting
calculation because it believed that
these claims were miscoded. The
commenter believed that if CMS
excluded these incorrectly coded
claims, the mean cost of the procedure
described by CPT code 0207T would be
similar to the mean cost of the
procedures assigned to APC 5502. The
commenter also stated that the
procedure described by CPT code 0207T
is more appropriately assigned to APC
5502 because APC 5502 contains
procedures that focus on the eyelids and
ocular adnexa (as does the procedure
described by CPT code like 0207T),
while APC 5732 contains a variety of
minor procedures, many of which are
not eye-related.
Response: We agree in part with the
commenter. We agree that APC 5732 is
not the most appropriate APC for the
assignment of the procedure described
by CPT code 0207T. However, we
believe that, based on the mean cost of
the claims for the procedure described
by CPT code 0207T, APC 5734 (Level 4
Minor Procedures) is more appropriate
from a resource perspective than APC
5502 (with a mean cost of $728.78),
which is what the commenter requested.
APC 5734 has a mean cost of $95.47,
which is close to the $82.20 mean cost
of the procedure described by CPT code
0207T. Clinically, although APC 5502
does contain primarily eyelid
procedures, these are surgical
procedures assigned to the APC. The
procedure described by CPT code 0207T
is not a surgical procedure. The Minor
Procedure series of four APCs (5731
through 5734) is not limited to a
particular anatomical region of the
body. This series contains some eyerelated procedures as well as many
other types of procedures. All of the
procedures assigned to one of the Minor

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70389

Procedure APCs are minor in nature and
are relatively low cost.
Regarding the request by the
commenter that we not use a subset of
claims in the claims ratesetting
calculation for the procedure described
by CPT code 0207T, we again reiterate
our position: ‘‘Beyond 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). Therefore,
we are not excluding claims from the
ratesetting calculation the procedure
described by CPT code 0207T. For CY
2016, the procedure described by CPT
code 0207T is assigned to APC 5734
(Level 4 Minor Procedures).
6. Gastrointestinal (GI) Procedures
As a part of our comprehensive
review of the structure of the APCs and
procedure code assignments for CY
2016, we examined the APCs that
contain gastrointestinal (GI) procedures.
As explained below, as a result of our
findings from this review, for CY 2016,
in the CY OPPS/ASC proposed rule, we
proposed to restructure the APC
groupings for GI procedures to more
appropriately reflect the costs and the
clinical characteristics of the procedures
within each APC grouping in the
context of the OPPS.
The current APCs for GI procedures
are partially organized according to
location in the GI tract and type of
surgery performed (endoscopy versus
incisional surgery). After reviewing
these APCs for GI procedures, we
believe that the current APC
construction is based on clinical
categories that do not appropriately
represent a consistent set of clinical
categories throughout the entire
spectrum of GI-related procedures. The
current level of granularity for some of
the GI APCs results in groupings that are
unnecessarily narrow for the purposes
of a prospective payment system.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39259 through
39260), for CY 2016, we proposed to
restructure and consolidate the APCs
that contain GI procedures. In the
proposed rule, we stated that we believe
that consolidating these procedures
under broader APC groupings primarily
based on separating upper and lower GI
procedures into two series with
additional APCs containing abdominal
and peritoneal procedures would more
appropriately reflect a prospective
payment system that is based on
payment for clinically consistent APC
groupings rather than code-specific

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payment rates while maintaining
resource homogeneity. Furthermore, we
believe that the proposed APC
groupings would more accurately
accommodate and align new services
within clinical APCs with similar
resource costs. Table 24 of the proposed
rule listed the current CY 2015 APCs
that contain GI procedures, and Table
25 of the proposed rule listed the CY
2016 APCs that would result from the
proposed consolidation and
restructuring of the current GI
procedure APCs into a single APC
series. We invited public comments on
this proposal.
Comment: Several commenters
requested that CMS review the proposed
APC assignment for new CPT code
43210 (Esophagogastroduodenoscopy,
flexible, transoral; with esophagogastric
fundoplasty, partial or complete,
includes duodenoscopy when
performed) (whose predecessor code
was HCPCS code C9724). The
commenters believed that the proposed
assignment of CPT code 43210 to APC
5302 (Level 2 Upper GI Procedures)
does not reflect the resources used to
perform the procedure and that the
proposed payment rate is not adequate
to cover the cost of the equipment,
ancillary supplies and other facility
overhead to perform the procedure. The
commenters requested that CMS assign
CPT code 43210 to one of the following
APCs: (1) C–APC 5362 (Level 2
Laparoscopy), because of the clinical
similarity of the procedure to the
procedure described by HCPCS code

43280 (Laparoscopy, surgical,
esophagogastric fundoplasty (e.g.,
Nissen, Toupet procedures); (2) a New
technology APC; or (3) a new APC for
transoral surgical procedures because of
the uniqueness of the procedure
described by CPT code 43210.
Response: We agree in part with the
commenters. We agree that APC 5302 is
not the most appropriate APC
assignment for the procedure described
by new CPT code 43210 or its
predecessor code, HCPCS code C9724.
However, we do not agree with the
commenters’ request to reassign CPT
code 43210 to proposed C–APC 5362
(Level 2 Laparoscopy) based on its
similar clinical purpose to the
procedure described by HCPCS code
43280. While both of these procedures
are surgical procedures used in the
treatment of gastroesophageal reflux
disease, unlike the procedures assigned
to C–APC 5362, the procedure described
by CPT code 43210 is not a laparoscopy
procedure, and C–APC 5362 is limited
to laparoscopy procedures. Therefore,
the procedure described by CPT code
43210 is not sufficiently clinically
similar to the other procedures assigned
to C–APC 5362 to warrant reassignment
to C–APC 5362. We also disagree with
the commenters’ requests for
reassignment to a new technology APC
or the creation of a new APC for
transoral surgical procedures. The
procedure described by CPT code 43210
(and its predecessor HCPCS code
C9724) is not new because HCPCS
C9724 became effective in CY 2005. In

addition, as we discuss below, we
believe that there is an appropriate
clinical APC to which CPT code 43210
can be assigned. Therefore, it is not
appropriate to assign the code to a New
Technology APC. Regarding the request
for a new, dedicated APC for CPT code
43210, the volume of available claims
for the predecessor code (HCPCS code
C9724) is too low to warrant a separate,
new APC for this procedure. Because
CPT code 43210 is new for CY 2016,
there are no CY 2014 claims, and there
is only one CY 2014 claim for HCPCS
code C9724. We believe that HCPCS
code 43210 is sufficiently similar to the
procedures assigned to C–APC 5331
(Complex GI Procedures) in terms of
resource utilization and clinical
complexity. Therefore, we are assigning
CPT code 43210 and its predecessor
code, HCPCS code C9724, to C–APC
5331 for CY 2016. Because C–APC 5331
is a comprehensive APC, we are
assigning CPT code 43210 to status
indicator ‘‘J1.’’
Comment: Some of the commenters
who supported the restructuring of the
gastrointestinal procedure APCs
requested APC reassignments of several
codes, which are listed in Table 29
below.
Response: We agreed with some of the
requests for reassignments of the codes
to different APCs and disagreed with
other requests. Our determinations for
each code reassignment request are
noted in Table 29 below.

TABLE 29—GASTROINTESTINAL PROCEDURE CODES WITH SPECIFIC COMMENTER APC RECOMMENDATIONS, FINAL CMS
DECISIONS, AND FINAL APC ASSIGNMENTS AND STATUS INDICATORS FOR CY 2016
Short descriptor

Proposed
CY 2016
status
indicator

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........

Egd w/transmural drain cyst ...........
Colonoscopy w/resection ................
Sigmoidoscopy w/resection ............
Colonoscopy w/resection ................
Anoscopy remove for body .............
Proctosigmoidoscopy dilate ............
Sigmoidoscopy w/fb removal ..........
Sigmoidoscopy & decompress .......
Sigmoidoscopy w/tumr remove ......
Sigmoidoscopy w/ablation ..............
Colonoscopy for foreign body .........
Colonoscopy w/snare .....................
Colonoscopy w/dilation ...................
Colonoscopy w/decompression ......
Colonoscopy w/fb removal .............
Colonoscopy w/balloon dilat ...........
Colonoscopy w/ablation ..................
Colonoscopy w/decompression ......
GI tract capsule endoscopy ............

T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T

5303
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5301

91111 ..........

Esophageal capsule endoscopy .....

T

5301

jstallworth on DSK7TPTVN1PROD with RULES

CPT/HCPCS
code
43240
44403
45349
45390
46608
45303
45332
45337
45338
45346
44390
44394
44405
44408
45379
45386
45388
45393
91110

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Proposed
CY 2016
APC

Fmt 4701

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Commenter
requested
APC
5331
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5313
5211/New
APC
5211/New
APC

CMS decision

Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree
Disagree

Final CY
2016 status
indicator

Final CY
2016 APC

........
.......
.......
.......
........
........
........
........
.......
.......
........
........
........
.......
........
........
.......
.......
........

T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T
T

5303
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5312
5301

Disagree .......

T

5301

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70391

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 29—GASTROINTESTINAL PROCEDURE CODES WITH SPECIFIC COMMENTER APC RECOMMENDATIONS, FINAL CMS
DECISIONS, AND FINAL APC ASSIGNMENTS AND STATUS INDICATORS FOR CY 2016—Continued
CPT/HCPCS
code

Short descriptor

Proposed
CY 2016
status
indicator

91112 ..........

GI wireless capsule measure .........

T

5301

91022
91037
91038
43753
43754
43755
43756
C9724

..........
..........
..........
..........
..........
..........
..........
..........

Duodenal motility study ..................
Esoph imped function test ..............
Esoph imped funct test >1hr ..........
Tx gastro intub w/asp .....................
Dx gastr intub w/asp spec ..............
Dx gastr intub w/asp specs ............
Dx duod intub w/asp spec ..............
Eps stomach plic ............................

S
S
S
Q1
Q1
S
Q1
D

5722
5722
5722
5734
5734
5721
5522
5303

43210 ..........

Egd esophagogastrc fndoplsty .......

T

5302

0336T
47370
47371
50542

Lap ablat uterine fibroids ................
Laparo ablate liver tumor rf ............
Laparo ablate liver cryosurg ...........
Laparo ablate renal mass ...............

J1
J1
J1
J1

5362
5362
5362
5362

..........
..........
..........
..........

We disagree with the commenters
who requested that CPT code 43240
(Esophagogastroduodenoscopy, flexible,
transoral; with transmural drainage of
pseudocyst (includes placement of
transmural drainage catheter[s]/stent[s],
when performed, and endoscopic
ultrasound, when performed) be
reassigned from proposed APC 5303
(Level 3 Upper GI Procedures) to C–APC
5331 (Complex GI Procedures). The
geometric mean cost of the procedure
described by CPT code 43240 is
approximately $1,818, and the
geometric mean cost of APC 5303 is
approximately $2,072. The geometric
mean cost of APC 5331 is approximately
$3,781. We believe that, given the
geometric mean costs of APCs 5303 and
5331, APC 5303 is the more appropriate
APC assignment for the procedure
described by CPT code 43240.
We also disagree with the commenters
who requested that lower GI endoscopic
mucosal resection CPT codes (CPT
codes 44403, 45349, and 45390) be
reassigned from APC 5312 (Level 2
Lower GI Procedures) to APC 5313
(Level 3 Lower GI Procedures) based on
resource and clinical homogeneity.
These three CPT codes became effective
in CY 2015. We believe that the current
APC assignment for these codes is
appropriate based on similarity of
clinical characteristics. Once we have
claims data for these CPT codes. we will
reevaluate their APC assignment in
accordance with the yearly review of
APC assignments and determine if a
reassignment is appropriate based on
the claims data.
We also disagree with the commenters
who requested reassignment of the CPT

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Proposed
CY 2016
APC

Commenter
requested
APC
5211/New
APC
5723
5723
5723
5722
5722
5722
5722
New APC/New
Tech
New APC/New
Tech
5352
5352
5352
5352

codes listed in Table 29 above that
represent foreign body removal,
ablation, and decompression of
volvulus, colonoscopy through stoma
and flexible sigmoidoscopy, specifically
CPT codes 44608, 45332, 45337, 45338,
45346, 44390, 44394, 44405, 44408,
45379, 45386, 45388, and 45393 from
APC 5312 (Level 2 Lower GI
Procedures) to APC 5313 (Level 3 Lower
GI Procedures). The commenters stated
that the resource utilization for these
codes is similar to resource utilization
for procedures that employ similar
techniques with proctoscopy that are
assigned to APC 5313. A majority of the
procedures that were requested to be
reassigned to APC 5313 have geometric
mean costs of approximately $880 or
lower, which is significantly lower than
the geometric mean cost of $1,739 for
APC 5313. Therefore, we do not believe
that reassignment of these codes would
be appropriate.
We do not agree with the commenters’
request to reassign CPT codes 91110,
91111, and 91112 from APC 5301 (Level
1 Upper GI Procedures) to APC 5211
(Level 1 Electrophysiologic Procedures)
due to resource use and clinical
dissimilarities with procedures assigned
to APC 5301, which is limited to cardiac
electrophysiology procedures. We also
do not agree that these procedures are
clinically dissimilar enough from other
procedures in APC 5301 to require
creation of a new APC dedicated to
these procedures.
We disagree with the commenters
who requested that the procedure
described by CPT code 91037 be
reassigned to APC 5723 (Level 3
Diagnostic Tests and Related Services)

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CMS decision

Final CY
2016 status
indicator

Disagree ........

T

5301

Agree ............
Disagree ........
Agree ............
Agree ............
Agree ............
Disagree .......
Disagree .......
Disagree ........

S
S
T
S
S
S
S
D

5724
5722
5723
5722
5722
5721
5522
5331

Disagree .......

J1

5331

Disagree
Disagree
Disagree
Disagree

J1
J1
J1
J1

5362
5362
5362
5362

.......
........
.......
.......

Final CY
2016 APC

based on clinical and resource
similarity. The geometric mean cost of
the procedure described by CPT code
91037 is approximately $199, which is
more similar to the geometric mean cost
of APC 5722 (approximately $231) than
the geometric mean cost of APC 5723
(approximately$415). In addition,
assignment of the procedure described
by CPT code 91037 to APC 5723 would
result in a violation of the 2 times rule
in APC 5723. However, we agree with
the commenters that CPT code 91022 is
more appropriately assigned to APC
5724 (Level 4 Diagnostic Tests and
Related Services) based on resource
similarity to other services assigned to
APC 5724.
We disagree with the commenters
who requested that CPT code 43755 be
reassigned from APC 5721 (Level
1Diagnostic Tests and Related Services)
to APC 5722 (Level 2 Diagnostic Tests
and Related Services). The geometric
mean cost of the services described by
CPT code 43755 is approximately $141,
and the geometric mean cost of APC
5721 is approximately $136. The
geometric mean cost of APC 5722 is
approximately $231. We believe that,
given the geometric mean cost of APCs
5721 and 5722, APC 5721 is the more
appropriate APC assignment for the
services described by CPT code 43755.
We disagree with the commenters
who requested that CPT codes 0336T,
47370, 47371, and 50542 from C–APC
5362 (Level 2 Laparoscopy) be
reassigned to APC 5352 (Level 2
Percutaneous Abdominal/Biliary
Procedures and Related Procedures).
These are laparoscopy procedures and
are assigned to an APC to which other

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clinically similar procedures are
assigned.
After consideration of the public
comments we received, we are
finalizing the proposed structure of the
gastrointestinal procedures with the
code reassignments shown in Table 29
above. Table 30 below lists the CY 2016
APCs that result from the consolidation
and restructuring of the current GI
procedure APCs into a single APC
series. The procedures assigned to each
APC are listed in Addendum B to this
final rule with comment period, which
is available via the Internet on the CMS
Web site.

TABLE 30—CY 2016 APCS FOR
GASTROINTESTINAL PROCEDURES
CY 2016
APC
5301
5302
5303
5311
5312
5313
5314
5331
5341

.......
.......
.......
.......
.......
.......
.......
.......
.......

5351 .......
5352 .......
5391 .......

jstallworth on DSK7TPTVN1PROD with RULES

5392 .......

CY 2016 APC group title
Level 1 Upper GI Procedures.
Level 2 Upper GI Procedures.
Level 3 Upper GI Procedures.
Level 1 Lower GI Procedures.
Level 2 Lower GI Procedures.
Level 3 Lower GI Procedures.
Level 4 Lower GI Procedures.
Complex GI Procedures.
Peritoneal and Abdominal Procedures.
Level 1 Percutaneous Abdominal/
Biliary Procedures and Related
Procedures.
Level 2 Percutaneous Abdominal/
Biliary Procedures and Related
Procedures.
Level 1 Tube/Catheter Changes/
Thoracentesis/Lavage.
Level 2 Tube/Catheter Changes/
Thoracentesis/Lavage.

In the CY 2016 OPPS/ASC proposed
rule (80 FR 39260), we proposed to
accept the Panel’s recommendation with
regard to the APC assignment for four
lower endoscopy stent procedures
described by HCPCS codes that were
established in CY 2015. The Panel
recommended that the four CPT codes
listed in Table 26 of the proposed rule
be moved from their currently assigned
APC to C–APC 0384 (GI Procedures
with Stents) (CPT codes 44384
(Ileoscopy, through stoma; with
placement of endoscopic stent (includes
pre- and post-dilation and guide wire
passage, when performed), 44402
(Colonoscopy through stoma; with
endoscopic stent placement (including
pre- and post-dilation and guide wire
passage, when performed), 45347
(Sigmoidoscopy, flexible; with
placement of endoscopic stent (includes
pre- and post-dilation and guide wire
passage, when performed), and 45389
(Colonoscopy, flexible; with endoscopic
stent placement (includes pre- and postdilation and guide wire passage, when

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Jkt 238001

performed). The Panel’s
recommendation was based on an
analysis of the similarities in clinical
characteristics and resource utilization
between the procedures described by
these four CPT codes and the
procedures described by other CPT
codes within existing (CY 2015) APCs
0142, 0143 and 0147. (We note that, in
section II.A.2.e. of the preamble of the
proposed rule, we proposed to
renumber and retitle C–APC 0384 as
‘‘C–APC 5331 (Complex GI Procedures)’’
for CY 2016.)
Comment: Commenters supported the
proposal to assign CPT codes 44384,
44402, 45347, and 45389 to C–APC 5331
(Complex GI Procedures).
Response: We appreciate the
commenters’ support.
We are finalizing our proposal to
reassign CPT codes 44384, 44402,
45347, and 45389 to C–APC 5331
(Complex GI Procedures).
7. Gynecologic Procedures and Services
As listed in Addendum A to the CY
2016 OPPS/ASC proposed rule, we
proposed to add another level to the
existing gynecologic APCs, specifically,
a Level 6 Gynecologic Procedures APC,
and designated it as APC 5416.
Comment: One commenter applauded
CMS for revisiting the gynecologic
procedure APCs and adding APC 5416
(Level 6 Gynecologic Procedures) for CY
2016. The commenter believed that
expanding the number of APCs for the
gynecologic procedures is a positive
change and further suggested that CMS
be open to reassignment of CPT codes
within and across APCs as part of
rulemaking in CY 2016 and in future
years.
Response: We appreciate the
commenter’s support. We believe that
the addition of this new APC groups
gynecologic procedures more
appropriately based on their resource
costs and clinical characteristics.
After consideration of the public
comment we received, we are finalizing
our proposal, without modification, to
add the Level 6 APC 5416 to the existing
gynecologic APC groups. The final CY
2016 payment rate for APC 5416 can be
found in Addendum A to this final rule
with comment period (which is
available via the Internet on the CMS
Web site).
The AMA Editorial Committee
established new CPT code 0404T
(Transcervical uterine fibroid(s) ablation
with ultrasound guidance,
radiofrequency), to be effective on
January 1, 2016. In the CY 2016 OPPS/
ASC proposed rule, we proposed to
assign this new code (which we listed
as code 04XXD (the 5-digit CMS

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placeholder code) in Addendum B, O,
and Q2 to the proposed rule) to APC
5415 (Level 5 Gynecologic Procedures),
with a proposed payment rate of
approximately $3,713. We also
proposed to assign CPT code 0404T to
comment indicator ‘‘NP’’ in Addendum
B to the proposed rule to indicate that
the code is new for CY 2016 with a
proposed APC assignment and that
public comments would be accepted on
the proposed APC assignment.
Comment: One commenter disagreed
with the proposed APC assignment for
new CPT code 0404T for CY 2016, and
requested that the procedure be
reassigned to one of the following APCs:
5362 (Level 2 Laparoscopy); 5192 (Level
2 Endovascular Procedures); or 5416
(Level 6 Gynecologic Procedures). The
commenter believed that the procedure
described by CPT code 0404T is similar,
based on clinical characteristics and
resource costs, to other procedures that
are assigned to APCs 5362, 5192, and
5416. In addition, the commenter stated
that the facility cost to perform this
procedure is approximately $4,850,
which includes the $3,965 single-use
kit.
Response: Under the OPPS, we
generally assign a payment rate to a new
Category III CPT code based on input
from a variety of sources, including, but
not limited to, review of resource costs
and clinical homogeneity of the service
to existing procedures, input from our
medical advisors, and other information
available to us. Based on our
understanding of the procedure, we
agree with the commenter that CPT code
0404T would be more appropriately
assigned to APC 5416 because its
resource costs and clinical homogeneity
is similar to the other procedures in
APC 5416. Therefore, we are not
adopting our proposal to assign CPT
code 0404T to APC 5415 for CY 2016.
Rather, we are assigning CPT code
0404T to APC 5416. The final CY 2016
payment rate for CPT code 0404T can be
found in Addendum B to this final rule
with comment period (which is
available via the Internet on the CMS
Web site).
8. Imaging Services
As a part of our CY 2016
comprehensive review of the structure
of the APCs and procedure code
assignments, we examined the APCs
that contain imaging services. For CY
2016, we proposed to restructure the
OPPS APC groupings for imaging
services to more appropriately reflect
the costs and clinical characteristics of
the procedures within each APC
grouping in the context of the OPPS.
The current APCs for imaging services

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
are divided at the highest level between
diagnostic radiology (for example, x-ray,
CT, MRI, and ultrasound) and nuclear
medicine imaging. After reviewing these
APCs, we believe that the current APC
structure is based on clinical categories
that do not necessarily reflect significant
differences in the delivery of these
services in the HOPD. The current level
of granularity for these APCs results in
groupings that are unnecessarily narrow
for the purposes of a prospective
payment system. This excessive
granularity is especially apparent with
the APCs for x-ray based imaging
services and nuclear medicine imaging
services. Many of these APCs are
currently structured according to organ
or physiologic system that does not
necessarily reflect either significant
differences in resources or how these
services are delivered in the HOPD.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39261), for CY
2016, we proposed to restructure and
consolidate the APCs that include
radiology and nuclear medicine
services. We stated that we believe that
this proposed restructuring and
consolidation would result in APC
groupings that would more
appropriately reflect a prospective
payment system that is based on
payment for clinically consistent APC
groupings and not code-specific
payment rates, while maintaining
clinical and resource homogeneity.
Furthermore, the proposed APC
groupings would more accurately
accommodate and align new services
into clinical APCs with similar resource
costs. Table 27 of the proposed rule
listed the current CY 2015 APCs that
contain radiology and nuclear medicine
services, and Table 28 of the proposed
rule listed the proposed CY 2016 APCs
that would result from the proposed
consolidation and restructuring of the
current radiology and nuclear medicine
services APCs. We invited public
comments on this proposal.
Comment: Many commenters
generally supported the proposed
restructuring of the imaging-related
APCs. However, several commenters
generally disagreed with the proposed
restructuring of the nuclear medicine
and positron emission tomography
(PET) APCs. The commenters
acknowledged that CMS has recognized
the clinical differences between the
imaging modalities and maintained
separate APCs for them since the
implementation of the OPPS. However,
the commenters opposed collapsing the
current 17 nuclear medicine and PET
APCs into three levels (Level 1 through
Level 3 Nuclear Medicine and Related
Services) for CY 2016, and

VerDate Sep<11>2014

15:13 Nov 12, 2015

Jkt 238001

recommended that CMS maintain a
distinct APC for all PET procedures.
Several other commenters, including
nonhospital imaging centers and the
HOP Panel, recommended that CMS
separate PET procedures from the nonPET nuclear imaging tests in proposed
APC 5593 (Level 3 Nuclear Medicine
and Related Services). Commenters
believed that grouping PET procedures
with non-PET procedures (also referred
to as SEPCT) would reduce the payment
for PET procedures below the cost of
PET tests because of the more
significant capital equipment costs for
PET. Further, commenters stated that
the proposed APC grouping of PET
procedures with non-PET procedures
would result in underpayments, and
imaging centers that provide PET-only
services will not be able to offset the
payment reduction by providing nonPET services, some of which CMS
proposed to increase the payment rate
in CY 2016.
Response: We agree with the HOP
Panel’s and the commenters’
recommendation to separate PET tests
into a separate APC because PET
imaging services involve higher
resource costs and are of a clinically
distinct imaging modality from non-PET
or SPECT imaging services. Therefore,
we are adding a fourth level to the
nuclear medicine and related services
APC group (APC 5594 (Level 4 Nuclear
Medicine and Related Services), and are
reassigning the PET procedures that
were proposed to be assigned to APC
5593 (Level 3 Nuclear Medicine and
Related Services) to APC 5594. While
APC 5594 contains all of the PET scan
procedures, it is not necessarily limited
only to PET scan services. It is
established as the fourth and highest
level in the nuclear medicine APC
grouping, and non-PET scan nuclear
medicine tests may be assigned to this
APC as appropriate.
Comment: Some commenters urged
CMS to maintain the existing, separately
payable status indicators (that is, ‘‘S’’ or
‘‘T’’) for several codes within the
proposed nine reconfigured APC
groupings instead of assigning them to
a conditional packaging status indicator
(that is, ‘‘Q1’’ or ‘‘Q2’’). One commenter
provided a list of 70 codes, and
requested that CMS assign them to
separately payable status indicators.
Among the 70 codes are 34 imaging
services codes that, as a result of the
proposed APC restructuring, were
proposed for CY 2016 to be assigned to
one of the following APCs, which are all
three conditionally packaged APCs:
APC 5521 (Level 1 X-Ray and Related
Services); APC 5522 (Level 2 X-Ray and

PO 00000

Frm 00097

Fmt 4701

Sfmt 4700

70393

Related Services); or APC 5531 (Level 1
Ultrasound and Related Services).
Response: Prior to developing our
proposal, we reviewed all of the services
associated with the proposed nine APC
families. We believe that the procedures
and services that we proposed to assign
to a conditional packaging status
indicator are ancillary and dependent in
relation to the other procedures within
the same family groupings with which
they are most commonly furnished.
Therefore, based on our review and
input from CMS clinical staff, we
believe that the codes that we proposed
to conditionally package are
appropriate. In addition, the APCs to
which the 34 codes listed by the
commenter are proposed to be assigned
for CY 2016 are designated as
conditionally packaged APCs. For
example, APC 5521 (Level 1 X-Ray and
Related Services) is the successor APC
to CY 2015 APC 0260 (Level 1 X-Ray &
Related Services), which was designated
in CY 2015 as a conditionally packaged
APC; APC 5522 (Level 2 X-Ray and
Related Services) is the successor APC
to CY 2015 APC 0261 (Level 2 X-Ray &
Related Services), which was designated
in CY 2015 as a conditionally packaged
APC; and APC 5531 (Level 1 Ultrasound
and Related Services) is the successor
APC to CY 2015 APC 0265 (Level 1
Ultrasound & Related Services), which
was designated in CY 2015 as a
conditionally packaged APC. Therefore,
we believe that these 34 imaging
services that are assigned to proposed
new APCs 5521, 5522, and 5531 are
appropriately assigned a conditionally
packaged status indicator. Further,
based on the clinical nature of the
services and our understanding of the
procedures, we believe that assigning
these services to a conditional
packaging status indicator will create
incentives for hospitals and their
physician partners to work together to
establish appropriate protocols that will
eliminate unnecessary services where
they exist and institutionalize
approaches to providing necessary
services more efficiently. Therefore, we
are finalizing our proposal to assign the
34 imaging services procedure codes
identified by the commenter status
indicator ‘‘Q1’’ for CY 2016.
Comment: A few commenters who
supported the restructuring of the
imaging-related procedure APCs
requested APC reassignments of many
specific codes, which are listed in Table
31 below.
Response: We agree with some of the
commenters’ request for APC
reassignments and/or status indicator
reassignments of procedure codes
describing imaging-related procedures.

E:\FR\FM\13NOR2.SGM

13NOR2

70394

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

Our decisions to accept or reject the
recommended code assignments to

APCs also are indicated in Table 31
below.

TABLE 31—IMAGING-RELATED PROCEDURE CODES WITH SPECIFIC COMMENTERS’ RECOMMENDATIONS, FINAL CMS
DECISIONS, FINAL APC ASSIGNMENTS, AND FINAL APC STATUS INDICATORS

jstallworth on DSK7TPTVN1PROD with RULES

CPT/HCPCS
code
70370
71030
72200
76496
72050
72110
72074
77074
74240
76010
72052
74246
76120
74270
74241
70371
77075
74247
49465
73092
70320
74260
70310
74290
74430
74450
74455
74740
C9733
G0120
74445
78457
78456
75807
70190
74210
72040
76101
78458
74470
75898
75827
75872
70470
70482
70488
70492
70496
70498
71275
72127
72130
72133
72191
72194
73202
73206
73702
73706
74170
74175
75574
75635
72126
73201

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
.........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........

VerDate Sep<11>2014

Short descriptor

Proposed
CY 2016
status
indicator

Throat x-ray & fluoroscopy .............
Chest x-ray 4/> views .....................
X-ray exam si joints ........................
Fluoroscopic procedure ..................
X-ray exam neck spine 4/5 vws .....
X-ray exam l-2 spine 4/> vws .........
X-ray exam thorac spine 4/> vw .....
X-rays bone survey limited .............
X-ray upper gi delay w/o kub .........
X-ray nose to rectum ......................
X-ray exam neck spine 6/> vws .....
Contrst x-ray uppr gi tract ...............
Cine/video x-rays ............................
Contrast x-ray exam of colon .........
X-rayupper gi delay w/kub ..............
Speech evaluation complex ............
X-rays bone survey complete .........
Contrst x-ray uppr gi tract ...............
Fluoro exam of g/colon tube ...........
X-ray exam of arm infant ................
Full mouth x-ray of teeth ................
X-ray exam of small bowel .............
X-ray exam of teeth ........................
Contrast x-ray gallbladder ..............
Contrast x-ray bladder ....................
X-ray urethra/bladder ......................
X-ray urethra/bladder ......................
X-ray female genital tract ...............
Non-ophthalmic fva .........................
Colon ca scrn; barium enema ........
X-ray exam of penis .......................
Venous thrombosis imaging ...........
Acute venous thrombus image .......
Lymph vessel x-ray trunk ................
X-ray exam of eye sockets .............
Contrst x-ray exam of throat ...........
X-ray exam neck spine 2–3 vw ......
Complex body section x-ray ...........
Ven thrombosis images bilat ..........
X-ray exam of kidney lesion ...........
Follow-up angiography ...................
Vein x-ray chest ..............................
Vein x-ray skull epidural .................
Ct head/brain w/o & w/dye .............
Ct orbit/ear/fossa w/o & w/dye .......
Ct maxillofacial w/o & w/dye ...........
Ct sft tsue nck w/o & w/dye ............
Ct angiography head ......................
Ct angiography neck .......................
Ct angiography chest ......................
Ct neck spine w/o & w/dye .............
Ct chest spine w/o & w/dye ............
Ct lumbar spine w/o & w/dye .........
Ct angiograph pelv w/o & w/dye ....
Ct pelvis w/o & w/dye .....................
Ct uppr extremity w/o & w/dye .......
Ct angio upr extrm w/o & w/dye .....
Ct lwr extremity w/o & w/dye ..........
Ct angio lwr extr w/o & w/dye ........
Ct abdomen w/o & w/dye ...............
Ct angio abdom w/o & w/dye .........
Ct angio hrt w/3d image .................
Ct angio abdominal arteries ...........
Ct neck spine w/dye .......................
Ct upper extremity w/dye ................

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q2
Q2
Q2
Q2
Q2
S
Q2
S
S
Q2
Q1
Q1
Q1
S
S
Q2
Q2
Q2
Q2
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
S
Q2
Q3
Q3

18:31 Nov 12, 2015

Jkt 238001

PO 00000

Frm 00098

Proposed
CY 2016
APC
5521
5521
5521
5521
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5523
5523
5523
5523
5523
5524
5524
5524
5525
5525
5522
5522
5522
5523
5524
5525
5526
5526
5526
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5572
5572

Fmt 4701

Sfmt 4700

Commenter
requested
APC
5522
5522
5522
5522
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5523
5524
5524
5524
5524
5524
5525
5525
5525
5526
5526
5521
5521
5521
5522
5523
5524
5525
5525
5525
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5572
5571
5571

CMS decision

Final CY
2016
status
indicator

Disagree ........
Disagree ........
Agree ............
Disagree ........
Disagree ........
Disagree .......
Disagree ........
Disagree ........
Disagree .......
Agree ............
Disagree ........
Disagree ........
Disagree ........
Disagree .......
Disagree .......
Disagree ........
Disagree ........
Disagree ........
Disagree .......
Disagree ........
Agree ............
Agree ............
Agree ............
Agree ............
Disagree .......
Disagree ........
Agree ............
Agree ............
Agree ............
Disagree .......
Disagree .......
Disagree ........
Disagree ........
Agree ............
Agree ............
Disagree ........
Disagree ........
Agree ............
Disagree ........
Agree ............
Agree ............
Agree ............
Disagree ........
Disagree .......
Disagree ........
Disagree .......
Disagree .......
Disagree ........
Disagree ........
Disagree ........
Disagree .......
Disagree .......
Disagree ........
Disagree .......
Disagree ........
Disagree .......
Disagree ........
Disagree ........
Disagree ........
Disagree ........
Disagree ........
Disagree ........
Disagree .......
Disagree ........
Disagree ........

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q2
Q2
Q2
Q2
Q2
S
Q2
S
S
Q2
Q1
Q1
Q1
Q1
S
Q2
Q2
Q2
Q2
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
S
Q2
Q3
Q3

E:\FR\FM\13NOR2.SGM

13NOR2

Final CY
2016 APC
5521
5521
5522
5521
5522
5522
5522
5522
5522
5523
5522
5522
5522
5522
5522
5522
5522
5522
5522
5522
5523
5523
5523
5523
5523
5523
5524
5524
5524
5524
5524
5592
5525
5526
5521
5522
5522
5522
5591
5524
5525
5525
5526
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5571
5572
5572

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70395

TABLE 31—IMAGING-RELATED PROCEDURE CODES WITH SPECIFIC COMMENTERS’ RECOMMENDATIONS, FINAL CMS
DECISIONS, FINAL APC ASSIGNMENTS, AND FINAL APC STATUS INDICATORS—Continued
CPT/HCPCS
code

jstallworth on DSK7TPTVN1PROD with RULES

74177
70544
70547
70545
70546
70548
70549
C8902
C8911
C8914
C8920
C8933
C8936
93979
76513
76536
76815
76775
76870
76817
93890
76705
76801
76830
76872
76881
93888
93931
70559
74261
75572
75559
75557
50430
50431
50434
50435
73503
73522
73523
72083
72084
78266
47532
47535
47536
47537
75563
75571

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........

Short descriptor

Proposed
CY 2016
status
indicator

Ct abd & pelv w/contrast ................
Mr angiography head w/o dye ........
Mr angiography neck w/o dye ........
Mr angiography head w/dye ...........
Mr angiograph head w/o & w/dye ..
Mr angiography neck w/dye ...........
Mr angiograph neck w/o & w/dye ...
Mra w/o fol w/cont, abd ..................
Mra w/o fol w/cont, chest ................
Mra w/o fol w/cont, lwr ext ..............
Mra w/o fol w/cont, pelvis ...............
Mra, w/o & w/dye, spinal canal ......
Mra, w/o & w/dye, upper extr .........
Vascular study ................................
Echo exam of eye water bath ........
Us exam of head and neck ............
Ob us limited fetus(s) .....................
Us exam abdo back wall lim ...........
Us exam scrotum ............................
Transvaginal us obstetric ................
Tcd vasoreactivity study .................
Echo exam of abdomen .................
Ob us <14 wks single fetus ............
Transvaginal us non-ob ..................
Us transrectal ..................................
Us xtr non-vasc complete ...............
Intracranial limited study .................
Upper extremity study .....................
Mri brain w/o & w/dye .....................
Ct colonography dx .........................
Ct hrt w/3d image ...........................
Cardiac mri w/stress img ................
Cardiac mri for morph .....................
Njx px nfrosgrm &/urtrgrm ..............
Njx px nfrosgrm &/urtrgrm ..............
Convert nephrostomy catheter .......
Exchange nephrostomy cath ..........
X-ray exam hip uni 4/> views .........
X-ray exam hips bi 3–4 views ........
X-ray exam hips bi 5/> views .........
X-ray exam entire spi 4/5 vw ..........
X-ray exam entire spi 6/> vw ..........
Gastric emptying imag study ..........
Injection for cholangiogram ............
Conversion ext bil drg cath .............
Exchange biliary drg cath ...............
Removal biliary drg cath .................
Card mri w/stress img & dye ..........
Ct hrt w/o dye w/ca test ..................

Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q3
S
S
S
S
S
S
S
Q3
S
Q3
Q3
Q2
Q2
T
T
Q1
Q1
S
S
S
S
Q2
T
T
Q2
S
Q1

We disagree with the commenters
who requested that the procedures
described by CPT codes 70370
(Radiologic examination; pharynx or
larynx, including fluoroscopy and/or
magnification technique), 71030
(Radiologic examination, chest,
complete, minimum of 4 views), and
76496 be elevated from proposed APC
5521 to APC 5522 based on resource
and clinical homogeneity. The
procedure described by CPT code 70370
has a geometric mean unit cost of
approximately $81 and the geometric

VerDate Sep<11>2014

15:13 Nov 12, 2015

Jkt 238001

Proposed
CY 2016
APC
5572
5581
5581
5582
5582
5582
5582
5582
5582
5582
5582
5582
5582
5531
5531
5531
5531
5531
5531
5531
5531
5532
5532
5532
5532
5532
5532
5532
5582
5521
5523
5581
5581
5524
5524
5392
5392
5521
5522
5522
5522
5522
5591
5525
5392
5392
5391
5592
5731

Commenter
requested
APC
5571
5583
5583
5583
5583
5583
5583
5583
5583
5583
5583
5583
5583
5532
5532
5532
5532
5532
5532
5532
5532
5531
5531
5531
5531
5531
5531
5531
5526
5570
5571
5592
5593
5373
5372
5372
5372
5522
5523
5523
5523
5524
5592
5351
5351
5351
5351
5593
5570

mean cost of APC 5521 is approximately
$64. Because the procedure described
by CPT code 70370 is a low-volume
procedure (49 single claims out of 66
total claims) in APC 5521, it is
unnecessary to reassign the procedure
describing CPT code 70370 to APC
5522, which has a geometric mean unit
cost of approximately $105. The
procedure described by CPT code 71030
is appropriately assigned to APC 5521
because of the similarity of clinical
characteristics and resource use with
other chest x-ray procedures assigned to

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Fmt 4701

Sfmt 4700

CMS decision

Final CY
2016
status
indicator

Disagree ........
Disagree ........
Disagree ........
Disagree ........
Disagree ........
Disagree .......
Disagree ........
Disagree ........
Disagree .......
Disagree ........
Disagree ........
Disagree ........
Disagree ........
Agree ............
Agree ............
Agree ............
Agree ............
Agree ............
Agree ............
Agree ............
Agree ............
Disagree ........
Disagree ........
Disagree .......
Disagree ........
Disagree ........
Disagree ........
Disagree ........
Agree ............
Agree ............
Agree ............
Agree ............
Disagree ........
Disagree ........
Agree ............
Agree ............
Agree ............
Agree ............
Disagree ........
Agree ............
Agree ............
Disagree ........
Agree ............
Agree ............
Agree ............
Agree ............
Disagree .......
Agree ............
Disagree ........

Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q3
S
S
S
S
S
S
S
Q3
S
Q3
Q3
Q2
Q2
T
T
Q1
Q1
S
S
S
S
Q2
T
T
Q2
S
Q1

Final CY
2016 APC
5572
5581
5581
5582
5582
5582
5582
5582
5582
5582
5582
5582
5582
5532
5532
5532
5532
5532
5532
5532
5532
5532
5532
5532
5532
5532
5532
5532
5526
5570
5571
5592
5581
5372
5372
5372
5372
5522
5522
5523
5523
5523
5592
5351
5351
5351
5391
5593
5731

APC 5521. CPT code 76496 is an
unlisted fluoroscopic procedure code,
and under our established policy,
unlisted codes are assigned to the
lowest level APC within a clinical
family.
We disagree with the commenters
who requested that CPT codes 72050,
72110, 72074, 77074, 74240, 72052,
74246, 76120, 74270, 74241, 70371,
77075, 74247, 49465, and 73092 that
were proposed to be assigned to
proposed APC 5522 (Level 2 X-Ray and
Related Services) be reassigned to APC

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5523 (Level 3 X-Ray and Related
Services) to improve resource
homogeneity. The geometric mean cost
of these codes range from approximately
$129 to approximately $176, and the
geometric mean cost of APC 5522 is
approximately $105. The geometric
mean cost of APC 5523 is approximately
$201. We believe that, given the
geometric mean cost of APC 5522 and
the clinical similarity of the procedures
described by these codes compared to
other procedures assigned to APC 5522,
these codes are appropriately assigned
to APC 5522.
We disagree with the commenters
who requested that CPT codes 74430
(Cystography, minimum of 3 views,
radiological supervision and
interpretation) and 74450
(Urethrocystography, retrograde,
radiological supervision and
interpretation) that were proposed to be
assigned to proposed APC 5523 (Level
3 X-Ray and Related Services) be
reassigned to APC 5524 (Level 4 X-Ray
and related Services). The geometric
mean cost of CPT code 74430 is
approximately $265. The geometric
mean cost of CPT code 74450 is
approximately $277. The geometric
mean cost of APC 5523 is approximately
$201. The geometric mean cost of APC
5524 is approximately $368. We believe
that, given the geometric mean costs of
APC 5523 and APC 5524, APC 5523 is
a more appropriate APC assignment for
the procedures described by CPT codes
74430 and 74450.
We disagree with the commenter who
requested that the procedures described
by CPT codes G0120 (Colorectal cancer
screening) and 74445 (X-Ray exam of
penis) that were proposed to be assigned
to proposed APC 5524 (Level 4 X-Ray
and Related Services) be reassigned to
APC 5525 (Level 5 X-Ray and Related
Services). The geometric mean cost of
the procedure described by CPT code
G0120 is approximately $330. The
geometric mean cost of the procedure
described by CPT code 74445 is
approximately $532. The geometric
mean cost of APC 5524 is approximately
$368. The geometric mean cost of APC
5525 is approximately $700. We believe
that, given the geometric mean costs of
APC 5524 and APC 5525, APC 5524 is
the more appropriate APC assignment
for the procedures described by CPT
codes G0120 and 74445.
We disagree with the commenter who
requested that the procedure described
by CPT code 78456 (Acute venous
thrombosis imaging, peptide) that was
proposed to be assigned to proposed
APC 5525 (Level 5 X-Ray and Related
Services) be reassigned to APC 5526
(Level 6 X-Ray and Related Services).

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Because the procedure described by
CPT code 78456 is a nuclear medicine
test, we are assigning it to APC 5593.
We also disagree with the commenter
who requested that CPT code 74210 and
CPT code 72040 that were proposed to
be assigned to APC 5522 (Level 2 X-Ray
and Related Services) be reassigned to
APC 5521 (Level 1 X-Ray and Related
Services). The geometric mean cost of
each of the CPT codes is approximately
$90. The geometric mean cost of APC
5522 is approximately $105. The
geometric mean cost of APC 5521 is
approximately $64. We believe that,
given the geometric mean cost of APCs
5521 and 5522, APC 5522 is the more
appropriate assignment for the
procedures described by CPT codes
74210 and 72040, based on similarity in
resource use in relation to other
procedures in these APCs.
We disagree with the commenters
who requested that CPT code 75872
(Venography, epidural, radiological
supervision and interpretation), which
was proposed to be assigned to APC
5526, be reassigned to APC 5525. This
procedure is a very low volume
procedure and is assigned to APC 5526
based on similarity of the clinical test
described by CPT code 75872 to other
clinical tests assigned to the APC.
We disagree with the commenters
who requested that CPT codes 70470;
70482; 70488; 70492; 70496; 70498;
71275; 72127; 72130; 72133; 72191;
72194; 73202; 73206; 73702; 73706;
74170; 74175; 75574; and 75635, which
were proposed to be assigned to APC
5571 (Level 1 Computed Tomography
with Contrast and Computed
Tomography Angiography) be
reassigned to APC 5572 (Level 2
Computed Tomography with Contrast
and Computed Tomography
Angiography). The geometric mean cost
for these codes ranges from
approximately $250 to approximately
$284. The geometric mean cost of APC
5571 is approximately $248. The
geometric mean cost of APC 5572 is
approximately $364. We believe that,
given the geometric mean cost of APC
5571 and 5572, APC 5571 is the more
appropriate APC assignment for the
procedures described by these codes.
We disagree with the commenters
who requested that CPT codes 72126,
73201, and 74177, which were proposed
to be assigned to APC 5572, be
reassigned to APC 5571. The geometric
mean cost for these codes range from
approximately $325 to approximately
$353. The geometric mean cost of APC
5572 is approximately $364. The
geometric mean cost of APC 5571 is
approximately $248. We believe that,
given the geometric mean cost of APCs

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5571 and 5572, APC 5572 is the more
appropriate assignment for the
procedures described by these codes.
We disagree with the commenters
who requested that CPT codes 70544
(Magnetic resonance angiography) and
70547 (Magnetic resonance
angiography, neck; without contrast
material(s)), which were proposed to be
assigned to APC 5581 (Magnetic
Resonance Imaging and Magnetic
Resonance Angiography without
Contrast), be reassigned to a requested
new APC 5583 (Magnetic Resonance
Imaging and Magnetic Resonance
Angiography Without Contrast
Followed by With Contrast). We do not
believe that there is sufficient clinical or
resource dissimilarity in the proposed
APC groupings to warrant the creation
of a third level.
We disagree with the commenters
who requested that CPT codes 70545,
70546, 70548, 70549, C8902, C8911,
C8914, C8920, C8933, and C8936, which
were proposed to be assigned to APC
5582, be reassigned to a requested new
APC 5583 (Magnetic Resonance
Angiography [MRA] Without Contrast
Followed by With Contrast). We do not
believe it is necessary to separate MRA
imaging services from MRI imaging
services by creating an additional APC
within this clinical family. The
aforementioned MRA CPT codes do not
represent clinically distinct imaging
services from MRI CPT codes assigned
to APC 5582 because MRA scans are
often included with a MRI scan.
Further, the resource costs of the
aforementioned MRA CPT codes are not
significantly different, but are very
much in line with the resource costs of
non-MRA imaging services.
We disagree with the commenters
who requested that CPT codes 76705,
76801, 76830, 76872, 76881, 93888, and
93931, which were proposed to be
assigned to APC 5532 (Level 2
Ultrasound and Related Services), be
reassigned to APC 5531 (Level 1
Ultrasound and Related Services). The
geometric mean cost of the procedures
described by these codes ranges from
approximately $122 to approximately
$134. The geometric mean cost of APC
5532 is approximately $161. The
geometric mean cost of 5531 is
approximately $96. We believe that,
given the geometric mean cost of APC
5531 and APC 5532, APC 5532 is the
more appropriate assignment for the
procedures described by these codes.
We disagree with the commenters
who requested that CPT code 75557
(Cardiac magnetic resonance imaging for
morphology and function without
contrast material), which was proposed
to be assigned to APC 5581 (Magnetic

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Resonance Imaging and Magnetic
Resonance Angiography without
Contrast), be reassigned to APC 5592
(Level 2 Nuclear Medicine and Related
Services). The geometric mean cost for
the procedure described by CPT code
75557 is approximately $283. The
geometric mean cost for APC 5581 is
approximately $286. The geometric
mean cost for APC 5592 is
approximately $462. Based on the
geometric mean costs of APC 5581 and
APC 5592, we believe APC 5581 is the
more appropriate assignment for the
procedure described by CPT code
75557. We also disagree with the
commenters regarding their requests for
APC reassignment of CPT codes 78457
and 78458. These two codes describe
nuclear medicine tests and therefore are
being assigned to APCs in that series.
We disagree with the commenters
who requested that we reassign the
following new CY 2016 codes as
indicated:
• CPT code 50430, which was
proposed to be assigned to APC 5524
and requested by the commenters to be
reassigned to APC 5372;
• CPT code 73522, which was
proposed to be assigned to APC 5522
and requested by the commenters to be
reassigned to APC 5523;
• CPT code 72084, which was
proposed to be assigned to APC 5522
and requested by the commenters to be
reassigned to APC 5524; and
• CPT code 47537, which was
proposed to be assigned to APC 5391
and requested by the commenters to be
reassigned to APC 5351.
Under our established policy, for new
codes, we determine APC assignment
based on clinical and resource
similarities to existing codes. Because
the procedures for these codes are not
reflected in available CY 2014 claims
data because of their newness, we
believe that the proposed APCs are
appropriate. We will consider
reassignment of these codes as claims
data become available.
Comment: One commenter requested
that CMS reassign the procedure
described by CPT code 91200 (Liver
elastography, mechanically induced
shear wave (e.g., vibration), without
imaging, with interpretation and report)
from proposed APC 5531 (Level 1
Ultrasound and Related Services) to
proposed APC 5532 (Level II Ultrasound
and Related Services). The commenter
stated that the procedure described by
this code is assigned to APC 0266 (Level
II Diagnostic and Screening Ultrasound)
for CY 2015. The commenter
acknowledged that the CPT code is new
for CY 2015 and that cost information is
not reflected in our CY 2014 claims

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data. Therefore, the commenter believed
that, in the absence of claims data for
CPT code 91200, it is inappropriate for
CMS to propose assignment to a lower
paying APC in CY 2016. In addition, the
commenter requested that CMS change
the proposed assigned status indicator
of ‘‘Q1’’ to ‘‘S’’ because this procedure
is not typically performed with other
procedures of status indicator ‘‘S,’’ ‘‘T,’’
or ‘‘V’’ and therefore should be a
separately payable service.
Response: We agree with the
commenter. Therefore, for CY 2016, we
are reassigning the procedure described
by CPT code 91200 to APC 5532 (Level
II Ultrasound and Related Services) with
status indicator ‘‘S.’’
Comment: One commenter requested
that CMS reassign CPT code 75571
(Computed tomography, heart, without
contrast material, with quantitative
evaluation of coronary calcium) from
proposed APC 5731 (Level 1 Minor
Procedures) to proposed APC 5570
(Computed Tomography without
Contrast) because the commenter
believed that the procedure described
by CPT code 75571 is similar to the
procedure described by CPT code
71250, which was proposed to be
assigned to APC 5570.
Response: Based on the latest
available CY 2014 hospital claims data,
the geometric mean cost of the
procedure described by CPT code 75571
is approximately $13, based on 4,225
single claims. Therefore, we believe that
the procedure described by CPT code
75571 is appropriately assigned to APC
5731.
After consideration of the public
comments we received, we are
finalizing our proposal, with
modification, to reconfigure the
imaging-related procedures into 26
APCs. Table 32 below lists the final CY
2016 APCs that result from the
consolidation and restructuring of the
current radiology and nuclear medicine
services APCs. The final payment rates
for the specific CPT imaging-related
services are included in Addendum B to
this final rule with comment period.
The final payment rates for the specific
APCs to which we are assigning the
imaging-related services are included in
Addendum A to this final rule with
comment period. Both OPPS Addenda
A and B are available via the Internet on
the CMS Web site.

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TABLE 32—CY 2016 IMAGINGRELATED PROCEDURES APCS
CY 2016
APC

CY 2016 APC group title

5521 .......

Level 1 X-Ray and Related Services.
Level 2 X-Ray and Related Services.
Level 3 X-Ray and Related Services.
Level 4 X-Ray and Related Services.
Level 5 X-Ray and Related Services.
Level 6 X-Ray and Related Services.
Level 1 Ultrasound and Related
Services.
Level 2 Ultrasound and Related
Services.
Level 3 Ultrasound and Related
Services.
Level 4 Ultrasound and Related
Services.
Level 1 Echocardiogram with
Contrast.
Level 2 Echocardiogram with
Contrast.
Computed Tomography without
Contrast.
Level 1 Computed Tomography
with Contrast and Computed
Tomography Angiography.
Level 2 Computed Tomography
with Contrast and Computed
Tomography Angiography.
Magnetic Resonance Imaging
and
Magnetic
Resonance
Angiography without Contrast.
Magnetic Resonance Imaging
and
Magnetic
Resonance
Angiography with Contrast.
Level 1 Nuclear Medicine and
Related Services.
Level 2 Nuclear Medicine and
Related Services.
Level 3 Nuclear Medicine and
Related Services.
Level 4 Nuclear Medicine and
Related Services.
Ultrasound Composite.
CT and CTA without Contrast
Composite.
CT and CTA with Contrast Composite.
MRI and MRA without Contrast
Composite.
MRI and MRA with Contrast
Composite.

5522 .......
5523 .......
5524 .......
5525 .......
5526 .......
5531 .......
5532 .......
5533 .......
5534 .......
5561 .......
5562 .......
5570 .......
5571 .......
5572 .......
5581 .......
5582 .......
5591 .......
5592 .......
5593 .......
5594 .......
8004 .......
8005 .......
8006 .......
8007 .......
8008 .......

9. Orthopedic Procedures
As a part of our CY 2016
comprehensive review of the structure
of the APCs and procedure code
assignments, we examined the APCs
that contain orthopedic-related
procedures. For CY 2016, we proposed
to restructure the OPPS APC groupings
for orthopedic surgery procedures to
more appropriately reflect similar costs
and clinical characteristics of the
procedures within each APC grouping

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in the context of the OPPS. The current
APCs for orthopedic-related procedures
are primarily divided according to
anatomy and the type of
musculoskeletal procedure. After
reviewing these APCs, we believe that
the current APC structure is based on
clinical categories that do not
necessarily reflect significant
differences in the delivery of these
services in the HOPD. The current level
of granularity for these APCs results in
groupings that are unnecessarily narrow
for the purposes of a prospective
payment system. For example, we see
no reason for purposes of OPPS
payment to continue to separate
musculoskeletal procedures that do not
involve the hand or foot from
procedures that do include the hand or
foot.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39262), for CY
2016, we proposed to restructure and
consolidate the APCs for orthopedic
surgery procedures. We stated in the
proposed rule that we believe that this
proposed restructuring and
consolidation would result in APC
groupings that would more
appropriately reflect a prospective
payment system that is based on
payment for clinically consistent APC
groupings and not code-specific
payment rates while maintaining
clinical and resource homogeneity.
Table 29 of the proposed rule listed the
current CY 2015 APCs that contain
orthopedic-related procedures, and
Table 30 of the proposed rule listed the
proposed CY 2016 APCs that would
result from the proposed restructuring
and consolidation of the current
orthopedic-related procedures APCs.
We invited public comments on this
proposal.
Comment: Some commenters
generally concurred with the
consolidation and reconfiguration of the
orthopedic-related procedures APCs.
However, many commenters expressed
concern that the ranges of geometric
mean costs for procedures assigned to
the proposed orthopedic-related
procedures APCs are too broad,
resulting in payment misalignments for
certain procedures. Many other
commenters opposed the proposed
restructuring of these APCs and asserted
that the proposed revised
reconfiguration is neither clinically
homogeneous nor resource use
homogeneous. Several of these
commenters recommended that CMS
either delay reconfiguration of the
orthopedic-related procedures or
maintain larger groupings based on
anatomical region.

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Response: In our effort to improve the
similarity in resource use and clinical
characteristics within the orthopedicrelated APC groupings, we proposed to
revise the existing orthopedic-related
procedures APCs for CY 2016. We
believe that the proposed revised
orthopedic-related procedures APCs
more appropriately reflect the resource
costs and clinical characteristics of the
procedures within each APC. We do not
agree that creating orthopedic-related
procedures APCs based on the specific
anatomical region treated by the
procedure is necessary or appropriate.
For example, an orthopedic surgeon
might perform a 1-hour procedure on a
patient’s leg and then perform a 1-hour
procedure using similar instruments
and supplies, among others, on a
different patient’s arm, and the hospital
resources consumed in both cases
would be very similar, which would
support assignment of these procedures
in the same APC. There is no purpose
to group the leg procedure in an APC
dedicated to leg procedures and the arm
procedure in an APC dedicated to arm
procedures if they are both orthopedic
surgeries that consume similar hospital
resources. Likewise, we do not agree
that it is either necessary or appropriate
to create an APC for high-cost, very low
volume orthopedic-related procedures.
We believe that establishing more
inclusive categories of the orthopedicrelated procedures is more appropriate
for future ratesetting under the OPPS
because the restructured APCs have
more clinically appropriate groupings,
while improving resource similarity.
However, we agree with the commenters
who were concerned that the proposed
four levels of musculoskeletal APCs
resulted in extremely wide geometric
mean cost ranges, and in response to
their comments, we have added a fifth
level to the musculoskeletal APC
grouping. Several procedures that were
proposed to be assigned to APC 5123
(Level 3 Musculoskeletal Procedures)
are now reassigned APC 5124 (Level 4
Musculoskeletal Procedures) for CY
2016. Similarly, several procedures that
were proposed to be assigned to APC
5124 (Level 4 Musculoskeletal
Procedures) are now reassigned to new
APC 5125 (Level 5 Musculoskeletal
Procedures) for CY 2016.
Comment: One commenter expressed
concern with the proposed payment for
the services described by CPT code
27279 (Sacroiliac join stabilization for
arthrodesis, percutaneous or minimally
invasive (indirect visualization),
includes obtaining and applying
autograft or allograft (structural or
morselized) when performed, includes

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image guidance when performed (e.g.,
CT or fluoroscopic), which the
commenter considered would result in
an underpayment. The commenter
stated that CPT code 27279 became
effective January 1, 2015 and is the
successor code to CPT code 0334T
(Sacroiliac join 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 (e.g.,
CT or fluoroscopic)), and that the CY
2014 claims data for services described
by CPT code 0334T is appropriate to use
to set the CY 2016 payment rate for
procedures described by CPT code
27279. The commenter stated that the
proposed payment rate for procedures
assigned to APC 5124 (Level 4
Musculoskeletal Procedures) is
approximately $9,266, which is a rate
that does not cover the cost of the
procedure described by CPT code
27279, which had a proposed geometric
mean cost of approximately $16, 816.
The commenter requested that CMS
reassign the procedure described by
CPT code 27279 to an APC that has a
payment rate that is comparable to the
actual cost of the procedure.
Response: As previously mentioned
in response to commenters’ concerns
regarding the wide range of costs
associated with the musculoskeletal
procedures APC group, we revised the
musculoskeletal procedures APC
grouping by adding a fifth level, APC
5125 (Level 5 Musculoskeletal
Procedures). With the addition of APC
5125, we reassigned certain procedures
from Level 4 (APC 5124) in the
proposed rule to new Level 5 based on
the geometric mean costs of the
procedures. Therefore, in this final rule
with comment period, for CY 2015, we
are revising the APC assignment for the
procedure described by CPT 27279 from
APC 5124 to APC 5125. The geometric
mean cost of APC 5125 is approximately
$11,027, which is higher than the
proposed geometric mean cost of APC
5124 of approximately $9,789.
Comment: A few commenters
disagreed with the proposed APC
assignment for kyphoplasty CPT code
22513 (Percutaneous vertebral
augmentation, including cavity creation
(fracture reduction and bone biopsy
included when performed) using
mechanical device (e.g., kyphoplasty), 1
vertebral body, unilateral or bilateral
cannulation, inclusive of all imaging
guidance; thoracic) and CPT code 22514
(Percutaneous vertebral augmentation,
including cavity creation (fracture
reduction and bone biopsy included

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when performed) using mechanical
device (e.g., kyphoplasty), 1 vertebral
body, unilateral or bilateral cannulation,
inclusive of all imaging guidance;
lumbar) to APC 5123 (Level 3
Musculoskeletal Procedures).
Specifically, the commenters stated that
these two kyphoplasty procedure codes
are not clinically homogenous with the
other procedures assigned to APC 5123
and that the proposed APC payment
would underpay facilities for these
procedures, thus negatively affecting
beneficiary access.
Response: We appreciate the
stakeholders’ concern that the proposed
assignment of the procedures described
by CPT codes 22513 and 22514 to APC
5123 will cause outpatient facilities to
stop offering minimally invasive
outpatient procedures for patients with
vertebral compression fractures, forcing
these patients toward more expensive
alternatives. Because CPT codes 22513
and 22514 were established January 1,
2015, our CY 2014 hospital claims data
do not include costs for these
procedures. Therefore, we proposed the
APC assignment for these two codes
based on similarities in resource cost to
former kyphoplasty CPT codes 22523
through 22525. However, as discussed
above, in this final rule with comment
period, we are adding a fifth level to the
musculoskeletal APC groupings (APC
5215) for CY 2016, and are reassigning
the procedures described by CPT codes
22513 and 22514 from proposed APC
5124 (Level 4 Musculoskeletal
Procedures) to APC 5125. We believe
that this reassignment will improve
resource and clinically homogeneity.
However, we will continue to monitor
service utilization trends in the HOPD
for kyphoplasty and other minimally
invasive procedures for patients with
vertebral compression and consider
APC reassignment in future rulemaking.
Comment: A few commenters
believed that CMS used inaccurate CY
2014 claims data for the following
auditory osseointegrated system implant
codes:
• CPT code 69714 (Auditory
osseointegrated device implantation
with attachment to sound processor,
without mastoidectomy);
• CPT code 69715 (Auditory
osseointegrated device implantation
with attachment to sound processor,
with mastoidectomy);
• CPT code 69717 (Removal and
replacement of existing osseointegrated
implant, with attachment to sound
processor, without mastoidectomy); and
• CPT code 69718 (Removal and
replacement of existing osseointegrated
implant, with attachment to sound
processor, with mastoidectomy).

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Specifically, the commenters
expressed skepticism about the low
volume of claims that reported the
above codes and the underreporting of
the device cost described by CPT code
L8690 (Auditory osseointegrated
device). The commenters recommended
that CMS not reduce the APC payment
for these procedures because of
incorrectly coded claims.
Response: As we described in section
II.A. of this final rule with comment
period on the OPPS ratesetting
methodology, ‘‘Beyond 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 use the
latest available hospital claims data for
these procedures to assign these
procedures to APCs. Based on that data,
we are assigning the procedure
described by CPT code 69714 (which
has a geometric mean cost of
approximately $9,483) and by CPT code
69715 (which has a geometric mean cost
of approximately $11,337) to APC 5125
(which has a geometric mean cost of
approximately $11,027). We are
assigning the procedure described by
CPT code 69717 (which has a geometric
mean cost of approximately $5,923) to
APC 5123 (which has a geometric mean
cost of approximately $5,200). We are
assigning the procedure described by
CPT code 69718 (which has a geometric
mean cost of approximately $6,858) to
APC 5124 (which has a geometric mean
cost of approximately $7,392).
Comment: One commenter requested
the reassignment of the procedure
described by CPT code 23397 (Muscle
transfer, any type, shoulder or upper
arm; multiple) from proposed APC 5122
(Level 2 Musculoskeletal Procedures) to
proposed APC 5123 (Level 3
Musculoskeletal Procedures) because of
clinical and resource use homogeneity
with the procedure described by CPT
code 23395 (Muscle transfer, any type,
shoulder or upper arm; single) that is
assigned to APC 5123.
Response: We believe that the
procedure described by CPT code 23397
is appropriately assigned to APC 5122
based on clinical and resource use
homogeneity with other procedures in
the APC. We disagree with the
commenter’s recommendation to
reassign CPT code 23397 from APC
5122 to APC 5123. The geometric mean
cost of the procedure described by CPT
code 22397 is approximately $3,598
based on only one single claim (out of
two total claims) and is higher than the
APC geometric mean cost of APC 5122,

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which is approximately $2,507.
However, the APC geometric mean cost
for APC 5123 is approximately $5,200.
Because of the very low claims volume
for CPT code 23397, it is not appropriate
at this time to reassign the procedure
code to a higher paying APC.
Comment: Several commenters
requested that CMS reassign the services
described by CPT codes 29580
(Strapping; Unna boot), 29581
(Application of multi-layer compression
system; leg (below knee), including
ankle and foot), and 29450 (Application
of clubfoot cast with molding or
manipulation, long or short leg from
proposed APC 5102 (Level 2 Strapping
and Cast Application) to proposed APC
5101 (Level 1 Strapping and Cast
Application) because the services
described by these codes are neither
clinically consistent nor similar in cost
to other procedures assigned to APC
5102.
Response: Based on our review of the
clinical characteristics and resource
costs of the services described by CPT
codes 29580, 29581, and 29450 that are
reflected in the latest claims data, we
agree with the commenters that it would
be more appropriate to group the
procedures described by these codes
with similar procedures assigned to
APC 5101. Therefore, we are reassigning
the services described by CPT codes
29580, 29581, and 29450 from proposed
APC 5102 to APC 5101 for CY 2016.
After consideration of the public
comments we received, we are
finalizing our proposal, with the
modification of adding a Level 5
Musculoskeletal APC, to reconfigure the
orthopedic-related procedures into 10
APCs. Table 33 below lists the final CY
2016 APCs that result from the
restructuring and consolidation of the
current orthopedic-related procedures
APCs. The final payment rates for the
specific CPT orthopedic-related
procedure codes are included in
Addendum B to this final rule with
comment period. The final payment
rates for the specific APCs to which we
are assigning the orthopedic-related
procedures codes are included in
Addendum A to this final rule with
comment period. Both OPPS Addenda
A and B are available via the Internet on
the CMS Web site.

TABLE 33—CY 2016 ORTHOPEDICRELATED PROCEDURES APCS
CY 2016
APC

CY 2016 APC group title

5101 .......

Level 1 Strapping and Cast Application.

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TABLE 33—CY 2016 ORTHOPEDIC-RE- CPT code 88342, which are currently
LATED PROCEDURES APCS—Con- assigned to APC 5673.
Response: We agree with the
tinued
CY 2016
APC

CY 2016 APC group title

5102 .......

Level 2 Strapping and Cast Application.
Level 1 Closed Treatment Fracture and Related Services.
Level 2 Closed Treatment Fracture and Related Services.
Level 3 Closed Treatment Fracture and Related Services.
Level 1 Musculoskeletal Procedures.
Level 2 Musculoskeletal Procedures.
Level 3 Musculoskeletal Procedures.
Level 4 Musculoskeletal Procedures.
Level 5 Musculoskeletal Procedures.

5111 .......
5112 .......
5113 .......
5121 .......
5122 .......
5123 .......
5124 .......

jstallworth on DSK7TPTVN1PROD with RULES

5125 .......

10. Pathology Services
For CY 2016, we proposed to assign
pathology services to one of the
following APCs: APCs 5671, 5672, 5673,
and 5674 (Levels 1 through 4 Pathology,
respectively); APC 5681 (Transfusion
Laboratory Procedures); and APCs 5731,
5732, 5733, and 5734 (Levels 1 through
4 Minor Procedures, respectively). The
packaging of payment for pathology
services is discussed in section II.A.3. of
this final rule with comment period.
Comment: One commenter requested
that CMS reassign the following CPT
codes (that were new in CY 2015 and
currently do not have available
associated claims data) to APC 5673
(Level 3 Pathology):
• CPT code 88344
(Immunohistochemistry or
immunocytochemistry, per specimen;
each multiplex antibody stain
procedure);
• CPT code 88366 (In situ
hybridization (e.g., fish), per specimen;
each multiplex probe stain procedure);
• CPT code 88374 (Morphometric
analysis, in situ hybridization
(quantitative or semi-quantitative),
using computer-assisted technology, per
specimen; each multiplex probe stain
procedure); and
• CPT code 88377 (Morphometric
analysis, in situ hybridization
(quantitative or semi-quantitative),
manual, per specimen; each multiplex
probe stain procedure).
The commenter believed that these
CPT codes should be assigned to the
Level 3 Pathology APC (APC 5673)
because these are multiplex codes and
are inherently more resource intensive
than the corresponding single antibody/
single probe procedures, for example,

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commenters. Therefore, for CY 2016, we
are reassigning CPT codes 88344, 88366,
88374, and 88377 to APC 5673.
Comment: One commenter requested
that CMS reassign CPT code 88121
(Cytopathology, in situ hybridization
(e.g., fish), urinary tract specimen with
morphometric analysis, 3–5 molecular
probes, each specimen; using computerassisted technology) from APC 5672 to
APC 5673 because related CPT code
88120 (Cytopathology, in situ
hybridization (e.g., fish), urinary tract
specimen with morphometric analysis,
3–5 molecular probes, each specimen;
manual) is assigned to APC 5673, the
Level 3 Pathology APC. The commenter
asserted that, because the resources
used for services described by CPT code
88121 are similar to the resources used
for services described by CPT 88120,
both of these two CPT codes should be
assigned to APC 5673.
Response: Analysis of the latest CY
2014 claims data used for this final rule
with comment period shows the
geometric mean cost of services
described by CPT code 88121 is
approximately $132, and the geometric
mean cost of services described by CPT
code 88120 is approximately $154.
Calculation of the geometric mean costs
for the services described by these codes
resulted in CPT code 88121 being
assigned to APC 5672 (Level 2
Pathology) and CPT code 88120 being
assigned to APC 5673 (Level 3
Pathology). The geometric cost of CPT
code 88121 is at the top of the range of
costs services assigned to APC 5672,
and the geometric cost of CPT code
88120 is at the bottom of the range costs
of services assigned to APC 5673. This
situation sometimes occurs even for
somewhat similar services because APC
groupings by definition have boundaries
that divide the levels within an APC
series such as the four levels for
pathology services. We believe that the
services described by CPT code 88121
are appropriately assigned to APC 5672.
Therefore, for CY 2016, we are not
reassigning the services described by
CPT code 88121 from APC 5672 to APC
5673 as the commenter requested.
Comment: Some commenters urged
CMS to maintain the existing, separately
payable status indicators (that is, ‘‘S’’ or
‘‘T’’) for a number of codes within the
proposed nine reconfigured APC
families instead of assigning them to a
conditional packaging status indicator
(that is, ‘‘Q1’’ or ‘‘Q2’’). One commenter
provided a list of 70 codes and
requested that CMS assign them to
separately payable status indicators.

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Among the list of 70 codes provided by
the commenter were 14 pathology
services codes that, as a result of the
APC restructuring policy, were
proposed for CY 2016 to be assigned to
either APC 5681 (Transfusion
Laboratory Procedures) or to APC 5732
(Level 2 Minor Procedures) or APC 5733
(Level 3 Minor Procedures).
Response: Prior to our proposal, we
reviewed all of the services associated
with the proposed nine families. We
believe that the procedures and services
that we proposed to assign to a
conditional packaging status indicator
are ancillary and dependent in relation
to the other procedures within the same
family groupings with which they are
most commonly furnished. Based on our
review and input from CMS clinical
staff, we believe that the codes that we
proposed to conditionally package are
appropriate. In addition, the APC to
which we proposed to assign most of
the 14 pathology services codes for CY
2016, APC 5681 (Transfusion Laboratory
Procedures), is the successor APC to CY
2015 APC 0345 (Level I Transfusion
Laboratory Procedures). APC 0345 was
designated in CY 2015 as an APC for
conditionally packaged ancillary
services (79 FR 66822). In the proposed
rule, 3 of the 14 pathology codes in
question were proposed to be assigned
to either APC 5732 (Level 2 Minor
Procedures) or APC 5733 (Level 3 Minor
Procedures). These APCs are the
successor APCs to the CY 2015 APCs
0340 (Level II Minor Procedures) and
0420 (Level III Minor Procedures),
which were also designated in CY 2015
as APCs for conditionally packaged
ancillary services (79 FR 66822).
Therefore, we believe that the services
assigned to APCs 5681, 5732, and 5733
are appropriately assigned a
conditionally packaged status indicator.
Further, based on the clinical nature of
the services and our understanding of
the procedures, we believe that
assigning them to a conditional
packaging status indicator will create
incentives for hospitals and their
physician partners to work together to
establish appropriate protocols that will
eliminate unnecessary services where
they exist and institutionalize
approaches to providing necessary
services more efficiently. Therefore,
after consideration of the public
comments we received, we are
finalizing our proposal to assign the 14
pathology services codes in question
status indicator ‘‘Q1’’ for CY 2016.

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11. Radiology Oncology Procedures and
Services
a. Therapeutic Radiation Treatment
Preparation

jstallworth on DSK7TPTVN1PROD with RULES

(1) Teletherapy Planning
For CY 2016, we proposed the
following four-level configuration for
the Therapeutic Radiation Treatment
Preparation APCs:
• APC 5611 (Level 1 Therapeutic
Radiation Treatment Preparation);
• APC 5612 (Level 2 Therapeutic
Radiation Treatment Preparation);
• APC 5613 (Level 3 Therapeutic
Radiation Treatment Preparation); and
• APC 5614 (Level 4 Therapeutic
Radiation Treatment Preparation).
Procedures described by CPT codes
77306 (Teletherapy isodose plan; simple
(1 or 2 unmodified ports directed to a
single area of interest), includes basic
dosimetry calculation(s)) and 77307
(Teletherapy isodose plan; complex
(multiple treatment areas, tangential
ports, the use of wedges, blocking,
rotational beam, or special beam
considerations), includes basic
dosimetry calculation(s)) were
considered new codes for CY 2015 and
assigned to APC 0304 (Level I
Therapeutic Radiation Treatment
Preparation) in the CY 2015 OPPS/ASC
final rule with comment period. In the
CY 2016 OPPS/ASC proposed rule, we
proposed to reassign procedures
described by CPT codes 77306 and
77307 to proposed new APC 5611.
Comment: One commenter who
responded to the CY 2015 OPPS/ASC
final rule with comment period and the
CY 2016 OPPS/ASC proposed rule
requested that CMS reassign procedures
described by CPT codes 77306 and
77307 to a higher level APC within the
group of Therapeutic Radiation
Treatment Preparation APCs. The
commenter stated that the procedures
described by these new codes have
greater resource intensity than their
predecessor codes because these
procedures now include services that
were formerly separately reportable.
Response: We agree with the
commenter. We also believe that it is
likely that the procedures described by
the complex code, CPT code 77307,
requires more resources than the
procedures described by CPT code
77306. Therefore, for CY 2016, we are
modifying our proposal and assigning
the procedures described by CPT code
77306 to new APC 5612 and the
procedures described by CPT code
77307 to new APC 5613 for CY 2016.

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(2) Intensity Modulated Radiotherapy
(IMRT) Planning
In the CY 2016 OPPS/ASC proposed
rule, we proposed to assign procedures
described by CPT code 77301 (Intensity
modulated radiotherapy plan, including
dose-volume histograms for target and
critical structure partial tolerance
specifications) was assigned to new APC
5614. We proposed new APC 5614 as
the highest level APC in the group of
Therapeutic Radiation Treatment
Preparation APCs.
Since 2008, CMS has provided coding
guidance for claims reporting CPT code
77301 in the Medicare Claims
Processing Manual, Chapter 4, Section
200.3.2, which states the following:
‘‘Payment for the services identified by
CPT codes 77014, 77280–77295, 77305–
77321, 77331, 77336, and 77370 is
included in the APC payment for IMRT
planning when these services are
performed as part of developing an
IMRT plan that is reported using CPT
code 77301. Under those circumstances,
these codes should not be billed in
addition to CPT code 77301 for IMRT
planning.’’
In addition to this CMS Manual
guidance, there is National Correct
Coding Initiative (NCCI) guidance in the
NCCI Policy Manual for Medicare
Services, Chapter 9, page IX–17, which
states the following: ‘‘12. Intensity
modulated radiotherapy (IMRT) plan
(CPT code 77301) includes therapeutic
radiology simulation-aided field
settings. Simulation field settings for
IMRT should not be reported separately
with CPT codes 77280 through 77295.
Although procedure-to-procedure edits
based on this principle exist in NCCI for
procedures performed on the same date
of service, these edits should not be
circumvented by performing the two
procedures described by a code pair edit
on different dates of service.’’
Comment: A few commenters
requested that CMS clarify its coding
guidance on reporting services
involving IMRT planning on claims.
Several commenters stated that the
service described by CPT code 77290
(Therapeutic radiology simulation-aided
field setting; complex) should be
separately reported from the services
described by CPT code 77301 for
patients receiving IMRT planning.
These commenters believed that the
services described by CPT code 77290
are never performed as part of IMRT
planning services and, therefore, should
be allowed to be reported separately
from the services described by CPT
77301. Another commenter stated that
recent coding guidance issued by the
American Society for Radiation

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70401

Oncology (ASTRO) also has caused
confusion for hospitals and requested
that CMS clarify its reporting guidance
for IMRT planning in light of the recent
ASTRO coding guidance. The
commenter referred to the ASTRO
Coding Guidance Articles, Process of
Care: Treatment Preparation, which is
available on the ASTRO Web site at:
https://www.astro.org/PracticeManagement/Radiation-OncologyCoding/Coding-Guidance/Articles/
Process-of-Care—TreatmentPreparation.aspx. The ASTRO guidance
states in part that ‘‘[I]f IMRT is the
chosen modality for treating the patient,
a simulation code (e.g., CPT code 77290)
cannot be reported separately prior to
completion of the IMRT treatment plan,
even if the two services are performed
on separate days.’’ The commenter
further believed that ASTRO’s guidance
should only apply to physician billing
and not to hospital outpatient billing.
Response: We disagree with these
commenters. We believe that the types
of services included in IMRT treatment
planning include simulation. Although
the commenter believed that simulation
is never included as part of IMRT
planning services, we believe CMS’
longstanding Manual and coding
guidance issued in CY 2008 has been
precise in conveying its policy and
instructions regarding coding for IMRT
services and that, generally, IMRT
services have been properly reported by
hospitals.
It is our policy that payments for the
services identified by CPT codes 77280
through 77295 are included in the APC
payment for IMRT planning services,
and that the services described by these
CPT codes should not be reported
separately from services described by
CPT code 77301, regardless of when the
various services that comprise CPT code
77301 are performed. If a hospital
submits a claim that separately reports
services described by one of these
simulation CPT codes in addition to
separately reporting IMRT planning
services that are performed, we would
consider this reporting to constitute
unbundling of the APC payment, which
is prohibited. We will revise and update
the Medicare Claims Processing Manual
and coding guidance in the near future
to ensure that this policy is more
directly stated. The clarified coding
guidance will state the following:
‘‘Payment for the services identified
by CPT codes 77014, 77280 through
77295, 77305 through 77321, 77331, and
77370 is included in the APC payment
for CPT code 77301 (IMRT planning).
These codes should not be reported in
addition to CPT code 77301 (on either
the same or a different date of service)

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unless these services are being
performed in support of a separate and
distinct non-IMRT radiation therapy for
a different tumor.’’
Comment: One commenter requested
that CMS reassign the services described
by CPT code 77301 to a higher level
APC to reflect the additional resource
utilization involved with CT simulation,
in addition to the resource-intensive
IMRT planning services included as
services described by CPT code 77301.
Response: We proposed to assign the
service described by CPT code 77301 to
new proposed APC 5614, which is the
highest level APC in the Therapeutic
Radiation Treatment Preparation APC
group. We believe that the service
described by CPT code 77301 is a
therapeutic radiation treatment
preparation service and that it clinically
aligns with other services within in the
Therapeutic Radiation Treatment
Preparation APC group. The final
geometric mean cost of the services
described by CPT code 77301 is
approximately $1,125 based on 51,301
single claims (out of 52,016 total
claims), which is comparable to the
final geometric mean cost of
approximately $1,074 for new APC
5614. We also believe that, given the
close proximity of the geometric mean
cost of services described by CPT code
77301 to the geometric mean cost of
new APC 5614, this APC assignment is
appropriate for CPT code 77301. As we
do with all codes annually, next year we
will examine the cost information on
claims reporting services described by
CPT code 77301 and determine if a
change to the APC assignment is
warranted. In addition, if the
clarification of our coding guidance for
IMRT planning services results in a
significant change in the geometric
mean cost of services described by CPT
code 77301 in future years, we will
consider an alternative APC assignment
for the code other than APC 5614.
b. Radiation Therapy (Including
Brachytherapy)
In the CY 2016 OPPS/ASC proposed
rule, we proposed the following five
levels for the Radiation Therapy APC
group:

• APC 5621 (Level 1 Radiation
Therapy);
• APC 5622 (Level 2 Radiation
Therapy);
• APC 5623 (Level 3 Radiation
Therapy);
• APC 5624 (Level 4 Radiation
Therapy); and
• APC 5625 (Level 5 Radiation
Therapy).
We also proposed to create two new
APCs for CY 2016: APC 5631 (Single
Session Cranial Stereotactic
Radiosurgery) and APC 5641
(Brachytherapy). All of these proposed
APCs describe various types of radiation
therapy or radiation delivery.
Comment: One commenter requested
that CMS reassign the procedure
described by CPT code 0394T (High
dose rate electronic brachytherapy, skin
surface application, per fraction,
includes basic dosimetry, when
Performed) from proposed APC 5622 to
proposed APC 5623, and the procedure
described by CPT code 0395T (High
dose rate electronic brachytherapy,
interstitial or intracavitary treatment,
per fraction, includes basic dosimetry,
when performed) from proposed APC
5641 to proposed APC 5624. The
commenter believed that these codes
should be assigned to these higher
paying APCs because the procedures
described by these new codes include
procedures such as dosimetry that were
formerly separately payable under the
OPPS.
Response: CPT codes 0394T and
0395T are new codes for CY 2016. The
procedures described by these new
codes were mapped to new proposed
APCs 5622 and 5641 based on our best
estimate of the likely resource costs for
these procedures. We anticipate that we
will have claims data for the procedures
describing these new CPT codes for the
CY 2018 OPPS rulemaking. At this time,
we do not believe that we have
sufficient information to support
reassigning CPT codes 0394T and 0395T
to the next higher level radiation
therapy APC. Therefore, we are
finalizing, as proposed, the APC
assignments for procedures described by
CPT codes 0394T and 0395T.
Comment: A few commenters
requested that CMS reassign the

procedure described by CPT code 77762
(Intracavitary radiation source
application; intermediate) from
proposed new APC 5622 to proposed
new 5623 because related CPT codes
77761 (Intracavitary radiation source
application; simple) and 77763
(Intracavitary radiation source
application; complex) were both
proposed to be assigned to new
proposed APC 5623 in the CY 2016
OPPS/ASC proposed rule. The
commenters stated that, although CMS
may lack sufficient claims data for the
procedure described by CPT code
77762, the procedure (the intermediate
level of this code series) is similar in
terms of clinical characteristics and
resource use to the procedures
described by CPT codes 77761 and
77763 and, therefore, the procedure
described by CPT code 77762 should be
assigned to the same APC as these other
codes in the intracavitary radiation
source application APC group.
Response: We agree with the
commenters that the procedure
involving intermediate intracavitary
radiation source application should not
be assigned to a lower level APC than
the simple version of this procedure.
After examining claims data for the CPT
codes in this APC group that reported
intracavitary radiation source
application, we found that, although the
number of claims is relatively small, the
geometric mean cost of the procedure
described by CPT code 77763 is more
similar to the geometric mean costs of
procedures assigned to new APC 5624
than that of the procedures assigned to
new APC 5623. Therefore, we are
modifying our proposal and reassigning
the procedure described by CPT code
77762 from proposed APC 5622 to APC
5623, and the procedure described by
CPT code 77763 (the complex code)
from new APC 5623 to APC 5624 for CY
2016. We also believe that it is
appropriate, for consistency and easy
comprehension, to revise the title of
some of the radiation therapy APCs.
Depicted in Table 34 below is a listing
of the finalized titles of the radiation
therapy APCs. The revisions to the titles
of these APCs do not affect the APC
assignment of any of the codes.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 34—FINAL RADIATION THERAPY APC TITLES FOR CY 2016
Proposed CY 2016
APC No.
5621
5622
5623
5641
5624
5625

..........................
..........................
..........................
..........................
..........................
..........................

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Final CY 2016
APC No.

Proposed CY 2016 APC title
Level 1—Radiation Therapy .........................................................
Level 2—Radiation Therapy .........................................................
Level 3—Radiation Therapy .........................................................
Brachytherapy ...............................................................................
Level 4—Radiation Therapy .........................................................
Level 5—Radiation Therapy .........................................................

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5621
5622
5623
5624
5625
5626

.........................
.........................
.........................
.........................
.........................
.........................

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Final CY 2016 APC title
Level
Level
Level
Level
Level
Level

1—Radiation
2—Radiation
3—Radiation
4—Radiation
5—Radiation
6—Radiation

Therapy.
Therapy.
Therapy.
Therapy.
Therapy.
Therapy.

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70403

TABLE 34—FINAL RADIATION THERAPY APC TITLES FOR CY 2016—Continued
Proposed CY 2016
APC No.

Proposed CY 2016 APC title

Final CY 2016
APC No.

5631 ..........................

Single Session Cranial Stereotactic Radiosurgery .......................

5627 .........................

jstallworth on DSK7TPTVN1PROD with RULES

In summary, for CY 2016, the simple
and intermediate intracavitary radiation
source application codes, CPT codes
77761 and 77762, are assigned to new
APC 5623, and the complex
intracavitary radiation source
application code, CPT code 77763, is
assigned to APC 5624.
Comment: Several commenters
requested that CMS estimate costs for
the new CY 2016 high dose rate (HDR)
brachytherapy codes (CPT codes 77767
through 77772) to include the cost of the
dose calculation, which is now a part of
the services described by the HDR
brachytherapy codes. The commenters
believed that if CMS included these
additional costs, the calculations would
result in increased payment rates for the
APCs to which the HDR brachytherapy
codes are assigned.
Response: We believe that these
commenters may have misunderstood
our ratesetting methodology as it applies
to new codes. We generally do not
model costs for new codes and
incorporate modeled cost data into our
payment rate calculations. Instead, we
make an initial APC assignment for new
codes based on predecessor code APC
assignments and other information that
allows for a suitable APC assignment
until claims data is available for the new
codes. We do not believe the
commenters’ suggested approach is
appropriate under our established
ratesetting methodology for new codes.
c. Fractionated Stereotactic
Radiosurgery (SRS)
For CY 2016, we proposed to reassign
the services described by CPT code
77373 (Stereotactic body radiation
therapy, treatment delivery, per fraction
to 1 or more lesions, including image
guidance, entire course not to exceed 5
fractions) from APC 0066 (Level V
Radiation) to APC 5625 (Level 5
Radiation Therapy), with a proposed
payment rate of approximately $1,699.
Comment: Several commenters
disagreed with the proposed APC
assignment of the services described by
CPT code 77373 to APC 5625. In
particular, the commenters were
concerned that the proposed payment
rate for the services described by CPT
code 77373 equates to a reduction of 11
percent in payment when compared to
the payment rate for CY 2015. The
commenters believed that the proposed

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payment is not reflective of the actual
costs of providing fractionated SRS
services. The commenters also
expressed concerns about the accuracy
of the hospital cost data on fractionated
SRS services used to set the proposed
payment rate. They believed that
hospitals have miscoded the service by
reporting CPT code 77372 (Radiation
treatment delivery, stereotactic
radiosurgery (SRS), complete course of
treatment of cranial lesion(s) consisting
of 1 session; linear accelerator based) for
the first fraction, and instead have
reported the services described by CPT
code 77373. Several commenters
requested that CMS increase the
proposed payment rate of approximately
$1,699 for APC 5625 by at least $630 to
more accurately capture the costs of
providing this therapy, or alternatively,
assign services described by CPT code
77373 to a stable APC, such as a new
technology APC, for a period of 3 years
to allow for the reporting of appropriate
claims data to use to calculate a more
appropriate payment. One commenter
recommended that CMS reassign CPT
code 77373 to New Technology—Level
25 ($3,500-$4,000), with a payment rate
of approximately $3,750.
Response: We believe that we have
adequate claims data for services
described by CPT code 77373 because
fractionated/multi-session SRS is not a
new technology. For the CY 2016
ratesetting, there are 59,853 single
claims (out of 64,629 total claims) for
the services described by CPT code
77373, which is an adequate volume for
ratesetting purposes. Although CPT
code 77373 was not recognized under
the OPPS until January 1, 2014, the code
has been in existence since January 1,
2007. Hospital outpatient facilities have
been reporting the SRS CPT codes to
other payers since the codes were
established in 2007. We believe that
hospital outpatient facilities have had
sufficient time to educate themselves on
how to appropriately report the services
described by CPT code 77373. We do
not agree that assigning the services
described by CPT code 77373 to a New
Technology APC is appropriate, given
the robust claims data we have from CY
2014. Miscoding of procedures and
services by hospitals is generally not an
area that we investigate or attempt to
remedy by substituting other payment
rates for the payment rate calculated

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Final CY 2016 APC title
Level 7—Radiation Therapy.

from the claims data according to our
standard methodology.
We note that (as discussed above) the
APC number and title for APC 5625, the
APC to which the services described by
CPT code 77373 are assigned, have been
changed to APC 5626 (Level 6 Radiation
Therapy). In addition, as discussed in
section III.D.15.b. of this final rule with
comment period, because the procedure
codes describing MRgFUS treatment are
being reassigned to other APCs, CPT
code 77373 is the only procedure code
assigned to APC 5626.
In summary, after consideration of the
public comments we received, we are
modifying our proposal and assigning
the services described by CPT code
77373 to APC 5626 for CY 2016. The
final CY 2016 payment rate for the
services described by CPT code 77373
can be found in Addendum B to this
final rule with comment period (which
is available via the Internet on the CMS
Web site).
12. Skin Procedures
As a part of our CY 2016
comprehensive review of the structure
of the APCs and procedure code
assignments, we examined the APCs
that describe skin procedures. Based on
our evaluation of the hospital outpatient
claims data available for the CY 2016
OPP/ASC proposed rule, we proposed
to restructure all of the APCs for skinrelated procedures by combining the
debridement and skin procedures APCs
to more appropriately reflect the
resource costs and clinical
characteristics of the procedures
assigned to each APC. Clinically, the
services assigned to the current
debridement APC grouping are similar
to the services assigned to the current
skin procedures APCs. Therefore, we
believe that the services assigned to
these two APC groupings would be
more appropriately represented by
combining the services into a single
APC grouping described as skin
procedures and related services. We
believe that the proposed consolidation
and restructuring of these APCs more
appropriately categorizes all of the skin
procedures and related services with
different resource use, such that the
services within each proposed newly
configured APC are comparable based
on the homogeneity of clinical
characteristics and resource costs.

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Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39262 through
39263), for CY 2016, we proposed to
consolidate and restructure the skin and
debridement APCs into a single APC
grouping. Table 31 of the proposed rule
listed the current CY 2015 APCs that
contain skin and debridement
procedures, and Table 32 of the
proposed rule listed the proposed CY
2016 APCs that would result from the
proposed consolidation and
restructuring of the current skin
procedures and related services APCs
into a single APC grouping. We invited
public comments on this proposal.
We received several public comments
related to the proposed APC
assignments for certain skin-related
services and procedures and one
comment specifically relating to the
proposed restructuring of the skin
procedures APCs. A summary of the
public comments and our responses are
below.
Comment: Some commenters
expressed concern with CMS’ proposal
to consolidate the skin substitute and
skin debridement APCs, and stated that
the proposed reconfiguration reduces
the clinical cohesiveness of the
procedures assigned to the APC
grouping and could negatively impact
payments for these services. One
commenter stated that the proposed
reconfigured APC 5051 (Level 1 Skin
Procedures) and APC 5053 (Level 3 Skin
Procedures) combine simple and
complex procedures under the APCs
that make no distinctions in the clinical
characteristics and resource costs for
certain procedures. The commenter
requested that CMS reconsider its
proposal and work with clinical experts
to refine the structure of these APCs that
reflects the clinical cohesiveness and
resource use associated with these
services. Another commenter disagreed
with CMS’ rationale that the proposed
restructuring and consolidation of these
APCs would more appropriately reflect
the comparable costs and clinical
characteristics of the procedures
assigned to each APC and stated that
combining the debridement and skin
procedure APCs produces broad
categories with wide payment
variations, which creates inappropriate
resource distinctions for certain
procedures.
Response: We disagree with the
commenters. We believe that the
reconfigured skin procedure APCs all
include clinically similar procedures
with similar resource costs. We also
believe that the range of procedure costs
in each of the skin procedure APCs is
appropriate, and there are no violations
of the 2 times rule within these APCs.

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The CY 2015 APC structure separated
skin procedures from debridement and
destruction procedures, which resulted
in procedures that were otherwise
similar skin procedures being assigned
to different APCs (if the procedures also
were debridement and destruction
procedures). The CY 2015 structure
resulted in similar procedures involving
the skin procedure being assigned to
different APCs based on a procedure
being labelled either debridement/
destruction or a skin procedure.
Debridement of skin is a skin procedure;
therefore, assignment to a skin
procedure APC is appropriate. We do
not believe this distinction is the most
appropriate way to distinguish
procedures involving the skin because
debridement of skin is a skin procedure.
Therefore, we believe that the services
assigned to these two APC groups are
more appropriately classified as skin
procedures and related services in a
single APC group. We believe that the
proposed consolidation and
restructuring of these APCs more
appropriately categorizes all of the
similar skin procedures and related
services with different resource use,
such that the services within each
proposed newly configured APC are
comparable based on the homogeneity
of clinical characteristics and resource
costs. We also believe that restructuring
the APC groupings decreases
overlapping cost ranges among APCs in
a series and, consequently, allows CMS
to pay for these procedures and services
through a skin procedures APC series
that is more clinically homogeneous and
that contain procedures with similar
costs.
Comment: One commenter stated that
the proposed payment rate for APC 5053
would result in substantial
underpayment for procedures and
services involving the low-cost skin
substitute products compared to
procedures and services involving the
high-cost skin substitute products.
Specifically, the commenter indicated
that facilities using the low-cost skin
substitute products would experience a
reduction in payment between
approximately $274 and $290 per
treatment session. The commenter
believed that the potential
underpayment associated with the use
of low-cost skin substitute products
would ultimately incentivize the use of
the high-cost skin products, and result
in greater overall expenditures to the
Medicare program. Therefore, the
commenter recommended that CMS
create a new APC level in addition to
the APC Level 3 and APC Level 4 for the
skin procedures and related services

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APC grouping to eliminate this
perceived incentive and discrepancy.
Response: We again reviewed all of
the skin procedures and related services
and the APC assignments for this final
rule with comment period. Based on our
evaluation of the latest hospital
outpatient claims data used for this final
rule with comment period, we are
revising the proposed APC assignments
for several skin procedures within the
Skin Procedures APC grouping.
Specifically, we are modifying our
proposal by reassigning certain
procedures from proposed APC 5053 to
APC 5052 (Level 2 Skin Procedures) to
more appropriately reflect the
homogeneity of the resource costs
associated with the other procedures
assigned to APC 5052. In light of this
modification, we do not believe that
creating a new level within the skin
procedures and related services APC
groupings is necessary. We believe that
the reassignment of certain procedures
results in improved clinical
homogeneity and resource costs for all
of the skin procedures within the skin
procedures groups.
Comment: Some commenters urged
CMS to maintain the existing, separately
payable status indicator assignments
(that is, status indicators ‘‘S’’ or ‘‘T’’) for
several procedure codes included
within the proposed nine reconfigured
APC grouping, instead of assigning
these procedures to a status indicator
that would generate a conditionally
packaged payment (that is, either status
indicator ‘‘Q1’’ or ‘‘Q2’’). One
commenter provided a list of 70
procedure codes and requested that
CMS reassign the listed procedures to
status indicators that would generate
separate payment for the services
described by those procedure codes.
Among the listed 70 procedure codes in
the commenter’s request, 36 describe
skin procedures that, as a result of the
proposed APC restructuring and
consolidation, were proposed for CY
2016 to be reassigned to APC 5051.
Response: Prior to developing our
proposal, we reviewed all of the
procedures and services associated with
the proposed reconfigured nine APCs
skin procedures and related services
groupings. Based on our review and
input from CMS clinical staff, we
believe that the proposed assignment of
the procedures and services to a status
indicator that indicates them as
conditionally packaged is appropriate
because these services are considered
ancillary and dependent in relation to
the other procedures with which they
are most commonly furnished. In
addition, the APC to which the 36
procedure codes listed by the

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
commenter were proposed to be
assigned for CY 2016, APC 5051, is the
successor APC to the CY 2015 APC 0012
(Level I Debridement & Destruction).
APC 0012 was designated in CY 2015 as
an APC containing procedures that are
considered ancillary services for which
payment is conditionally packaged.
Therefore, we believe that the
procedures and services proposed to be
reassigned to APC 5051 also should be
appropriately assigned to a status
indicator that conditionally packages
payment for these services. Further,
based on the clinical nature of the
services and our understanding of the
procedures, we believe that the
proposed assignments for these
procedures and services to a status
indicator indicating conditional
packaging will create incentives for
hospitals and their physician partners to
work together to establish appropriate
protocols that will eliminate providing

unnecessary services where these
instances exist and institutionalize
approaches to providing necessary
services more efficiently. Therefore, in
this final rule with comment period, we
are assigning status indicator ‘‘Q1’’ to
the 36 skin procedure codes identified
by the commenter in the nine
reconfigured APC groupings for CY
2016.
After consideration of the public
comments we received, we are
finalizing our proposal to restructure
and consolidate the skin procedures and
related services APCs, with one
modification. We are revising the APC
assignment for several procedures,
which are listed in Addendum B to this
final rule with comment period, by
reassigning them from APC 5053 to APC
5052 to appropriately reflect the
resource costs associated with the
procedures. We also are assigning the 36
procedure codes describing skin
procedure and related services

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identified by the commenter to status
indicator ‘‘Q1’’ for CY 2016.
a. Negative Pressure Wound Therapy
(NPWT) Services
As listed in Addendum B to the CY
2016 OPPS/ASC proposed rule, we
proposed to reassign the NPWT services
to two separate APCs. Specifically, as
listed in Table 35 below, we proposed
to reassign the durable medical
equipment (DME)-related NPWT CPT
codes 97605 and 97606 from APC 0012
(Level I Debridement & Destruction) and
APC 0015 (Level II Debridement &
Destruction), respectively, to proposed
APC 5051 (Level 1 Skin Procedures),
with a proposed payment rate of
approximately $120, and the disposable
NPWT CPT codes 97607 and 97608
from APC 0015 to proposed APC 5052
(Level 2 Skin Procedures), with a
proposed payment rate of approximately
$166.

TABLE 35—PROPOSED APC ASSIGNMENT FOR THE NPWT SERVICES FOR CY 2016
CY 2015
CPT/HCPCS
code
97605 ............

97606 ............

97607 ............

jstallworth on DSK7TPTVN1PROD with RULES

97608 ............

Long descriptor

Negative pressure wound therapy (e.g., vacuum assisted drainage
collection), including topical application(s), wound assessment, and
instruction(s) for ongoing care, per session; total wound(s) surface
area less than or equal to 50 square centimeters.
Negative pressure wound therapy (e.g., vacuum assisted drainage
collection), including topical application(s), wound assessment, and
instruction(s) for ongoing care, per session; total wound(s) surface
area greater than 50 square centimeters.
Negative pressure wound therapy, (e.g., vacuum assisted drainage
collection), utilizing disposable, non-durable medical equipment including provision of exudate management collection system, 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.
Negative pressure wound therapy, (e.g., vacuum assisted drainage
collection), utilizing disposable, non-durable medical equipment including provision of exudate management collection system, topical application(s), wound assessment, and instructions for ongoing
care, per session; total wound(s) surface area greater than 50
square centimeters.

We note that the DME-related NPWT
CPT codes 97605 and 97606 were
effective January 1, 2005. The
disposable NPWT CPT codes 97607 and
97608 were effective January 1, 2015.
However, the predecessor codes for the
CY 2015 disposable NPWT procedure
codes, specifically HCPCS codes G0456
and G0457, became effective January 1,
2013, and were deleted on December 31,
2014, when the NWPT replacement CPT
codes became effective.
Comment: Some commenters
disagreed with CMS’ proposal to assign

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OPPS
status
indicator

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Proposed
CY 2016
OPPS
status
indicator

Proposed
CY 2016
OPPS APC

Q1

0012

Q1

5051

T

0015

Q1

5051

T

0015

T

5052

T

0015

T

5052

the procedures described by DMErelated NPWT CPT codes 97605 and
97606 to OPPS status indicator ‘‘Q1.’’
The commenters believed that these
procedures should be treated as
independent clinical procedures and
not ancillary services, and requested
that CMS not finalize its proposal to
assign these procedures to OPPS status
indicator ‘‘Q1.’’
Response: We believe that the
commenters may have misunderstood
the meaning of OPPS status indicator
‘‘Q1.’’ Assigning a procedure to OPPS

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CY 2015
OPPS APC

status indicator ‘‘Q1’’ indicates that
payment for the service is conditionally
packaged under the OPPS. A criterion
under the conditional packaging policy
is that payment for a service is packaged
when it is provided in combination with
a significant procedure on the same date
of service, but the service is separately
paid when it is reported on the claim
without a significant procedure. Below
is an excerpt from Addendum D1 to the
CY 2016 OPPS/ASC proposed rule that
shows the definition of status indicator
‘‘Q1.’’

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jstallworth on DSK7TPTVN1PROD with RULES

ADDENDUM D1—PROPOSED OPPS PAYMENT STATUS INDICATORS FOR CY 2016
Status
indicator

Item/code/service

OPPS payment status

Q1 ................

STV-Packaged Codes ...............................

Paid under OPPS; Addendum B displays APC assignments when services are separately payable.
(1) Packaged APC payment if billed on the same date of service as a HCPCS code
assigned status indicator ‘‘S,’’ ‘‘T,’’ or ‘‘V.’’
(2) In other circumstances, payment is made
through a separate APC payment.

In the case of the procedures
described by CPT codes 97605 and
97606, payment for these procedures is
included in the payment for the
significant procedure when these
procedures are reported in combination
with HCPCS codes that are assigned to
either status indicators ‘‘S,’’ ‘‘T,’’ or
‘‘V.’’ Alternatively, the procedures are
separately paid when performed alone,
or when they are reported in
combination with HCPCS codes that
described procedures assigned to a
status indicator other than ‘‘S,’’ ‘‘T,’’ or
‘‘V.’’ We believe that ‘‘Q1’’ is the most
appropriate status indicator assignment
for the DME-related NPWT CPT codes
97605 and 97606 because the services
described by these codes are often
provided in combination with other
wound treatments and procedures.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to assign DME-related
NPWT CPT codes 97605 and 97606 to
OPPS status indicator ‘‘Q1’’ for CY
2016. The complete list of the OPPS
payment status indicators and their
definitions for CY 2016 is displayed in
Addendum D1 to this final rule with
comment period, which is available on
the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.html. In addition, we are
finalizing our proposal, without
modification, to reassign the DMErelated NWPT CPT codes 97605 and
97606 from CY 2015 APCs 0012 and
0015, respectively, to APC 5051 for CY
2016. The final CY 2016 payment rate
for the procedures described by CPT
codes 97605 and 97605 can be found in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
Comment: Several commenters
opposed CMS’ proposal to reassign the
disposable NWPT procedures,
specifically the procedures described by
the disposable NWPT CPT codes 97607
and 97608 from CY 2015 APC 0015 to
APC 5052 for CY 2016. The commenters

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believed that the claims data used to set
the payment rates for these two
procedures are flawed and do not reflect
the actual costs incurred by hospitals for
providing this treatment. The
commenters opined that, because of the
confusion related to the accurate coding
of the procedures described by the
predecessor HCPCS G-codes (HCPCS
codes G0456 and G0457), hospitals have
continuously miscoded this service in
CY 2013 and CY 2014 by reporting
charges for the DME-related NPWT CPT
codes 97605 and 97606 instead of
charges for the disposable NWPT CPT
codes 97607 and 97608 when these
services were actually provided. Some
commenters stated that the resource
costs associated with the disposable
NPWT procedures, which require the
use of disposable NPWT supplies, is
significantly higher than the resource
costs associated with the DME-related
NPWT service, which requires the use
of a device that is not paid for under the
OPPS, but rather is paid based on the
DMEPOS fee schedule. One commenter
indicated that, based on its internal
analysis, the costs of disposable NPWT
devices may be as low as $200 and as
high as over $800. Another commenter
noted that if an average acquisition cost
is approximately $194 for a particular
disposable NPWT device, a provider
may incur costs ranging from
approximately $312 to $358 to provide
this treatment. The commenters
believed that the proposed payment rate
for APC 5052 does not reflect the cost
of the disposable NWPT supplies used
in furnishing the service. Therefore, the
commenters urged CMS not to finalize
the proposed reassignment of these
procedures to APC 5052 and, instead,
reassign the procedures to APC 5053
(Level 3 Skin Procedures), which the
commenters believed more
appropriately compare to the actual
resource costs associated with providing
the service. Another commenter
requested that CMS reassign the
disposable NWPT CPT codes to an
appropriate APC based on an estimated
payment rate of $305.10 for the
procedure. One commenter suggested
that, if the alternative of reassigning the

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disposable NWPT CPT codes to APC
5053 was not achievable, CMS consider
creating a sixth skin procedures APC
that would be comprised of clinically
homogenous wound care services
proposed for reassignment to APCs 5052
and 5053. The commenter believed that
creating this new APC would eliminate
any potential violations of the 2 times
rule within proposed APC 5052 or APC
5053.
Response: As reflected in Table 16 of
the CY 2016 OPPS/ASC proposed rule
(80 FR 39258), there are no violations of
the 2 times rule within APC 5052. For
CY 2016, our analysis of the CY 2014
claims data available for the proposed
rule did not show any violations of the
2 times rule within APC 5052 (which
included the proposed reassigned
disposable NPWT procedures) because
the lowest cost of a procedure described
by a CPT code with significant claims
data assigned to APC 5052 was
approximately $158 (for CPT code
36471), while the highest cost of a
procedure described by a CPT code with
significant claims data was
approximately $277 (for CPT code
96913). We note that the geometric
mean cost for the procedure described
by HCPCS code G0456 (which became
CPT code 97607, effective January 1,
2015) was approximately $176 based on
6,655 single claims (out of 8,826 total
claims) and approximately $203 for the
procedure described by HCPCS G0457
(which became CPT code 97608,
effective January 1, 2015) based on 409
single claims (out of 779 total claims).
The CY 2016 OPPS/ASC proposed rule
claims data was based on claims
submitted between January 1, 2014,
through December 31, 2014, and
processed on or before December 31,
2014.
For this final rule with comment
period, the claims data is based on the
same CY 2014 claims data updated to
include those claims that were
processed on or before June 30, 2015.
Our analysis of the final rule claims data
initially showed a violation of the 2
times rule within APC 5053. To
eliminate the violation of the 2 times
rule, we reassigned some of the

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procedures at the lower end of the cost
range of APC 5053 to APC 5052. After
modifying the proposed reassignment of
a few codes from APC 5053 to 5052, the
disposable NPWT procedures remain
appropriately assigned to APC 5052
based on the comparability of the
geometric mean costs. Specifically, our
final rule claims data show a geometric
mean cost of approximately $174 for
procedures described by HCPCS code
G0456 based on 7,301 single claims (out
of 9,699 total claims) and approximately
$216 for procedures described by
HCPCS code G0457 based on 449 single
claims (out of 858 total claims). The
lowest cost of a procedure described by
a CPT code with significant claims data
assigned to APC 5052 is approximately
$163 (for CPT code 36471), while the
highest cost of a procedure described by
a CPT code with significant claims data
is approximately $299 (for CPT code
10120). The geometric mean costs of
approximately $174 (for HCPCS code
G0456) and $216 (for HCPCS code
G0457) fall within this range without
creating any violations of the 2 times
rule. However, if we modify our
proposal and reassign the procedures
described by HCPCS codes G0456 and

G0457 to APC 5053, a violation of the
2 times rule would exist. In addition, we
do not believe that it is appropriate or
necessary to create a sixth level within
the skin procedures APC groupings. The
geometric mean cost of APC 5052 is
approximately $236 and the geometric
mean cost of APC 5053 is approximately
$449. We believe that these levels
represent a meaningful separation
between geometric mean costs without
creating a wider range of costs between
adjacent levels in an APC series.
Regarding the commenters’ assertions
that hospitals are miscoding claims or
are not appropriately charging for
disposable NPWT services and supplies
and their requests that we disregard the
claims data, we repeat our general
policy: ‘‘Beyond 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). Therefore, because we do not
judge the accuracy of hospital coding
and charging, we will not disregard any
claims data for services involving
disposable NPWT procedures and
supplies in calculating the payment rate

70407

for these procedures. In addition, it is
not our policy to use any information
(such as invoices, statements from
companies who sell the medical devices
used in the procedure, various reports
from consultants, among others) other
than hospital claims data for
determining payment rates. As we do
every year, we will reevaluate the APC
assignment for the procedures involving
disposable NPWT services and supplies
in preparation for the CY 2017
rulemaking cycle. We remind hospitals
that we review, on an annual basis, the
APC assignments for all services and
items paid under the OPPS.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification. Specifically, we are
reassigning the disposable NWPT CPT
codes 97607 and 97608 to APC 5052 for
CY 2016. Table 36 below lists the final
OPPS status indicator and APC
assignments for CPT codes 97605,
97606, 97607, and 97608 for CY 2016.
The final CY 2016 payment rates for
these codes can be found in Addendum
B to this final rule with comment period
(which is available via the Internet on
the CMS Web site).

TABLE 36—FINAL APC ASSIGNMENT FOR THE NPWT SERVICES FOR CY 2016
CY 2016
CPT/HCPCS
code
97605 ............

97606 ............

97607 ............

97608 ............

Long descriptor

Negative pressure wound therapy (e.g., vacuum assisted drainage
collection), including topical application(s), wound assessment, and
instruction(s) for ongoing care, per session; total wound(s) surface
area less than or equal to 50 square centimeters.
Negative pressure wound therapy (e.g., vacuum assisted drainage
collection), including topical application(s), wound assessment, and
instruction(s) for ongoing care, per session; total wound(s) surface
area greater than 50 square centimeters.
Negative pressure wound therapy, (e.g., vacuum assisted drainage
collection), utilizing disposable, non-durable medical equipment including provision of exudate management collection system, 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.
Negative pressure wound therapy, (e.g., vacuum assisted drainage
collection), utilizing disposable, non-durable medical equipment including provision of exudate management collection system, topical application(s), wound assessment, and instructions for ongoing
care, per session; total wound(s) surface area greater than 50
square centimeters.

jstallworth on DSK7TPTVN1PROD with RULES

b. Platelet Rich Plasma (PRP)
As listed in Addendum B to the CY
2016 OPPS/ASC proposed rule, we
proposed to assign HCPCS code G0460
(Autologous platelet rich plasma for
chronic wounds/ulcers, including
phlebotomy, centrifugation, and all
other preparatory procedures,

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CY 2016
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status
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Final CY
2016 OPPS
status
indicator

Final CY
2016 OPPS
APC

Q1

5051

Q1

5051

Q1

5051

Q1

5051

T

5052

T

5052

T

5052

T

5052

administration and dressings, per
treatment) to APC 5053 (Level 3 Skin
Procedure), with a proposed payment
rate of approximately $305.
Comment: Some commenters
disagreed with CMS’ proposed
assignment of HCPCS code G0460 to
APC 5053 and recommended that CMS

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Proposed
CY 2016
OPPS APC

consider assigning the code to either
APC 1511 (New Technology—Level 11
($900–$1000)) or 1548 (New
Technology—Level 11 ($900–$1000)),
with a proposed payment rate of
approximately $950. One commenter
stated that the proposed payment rate
for APC 5053 is inadequate and does not

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take into account the full components of
providing the service described by
HCPCS code G0460 and the Coverage
with Evidence Development (CED)
complexity associated with HCPCS code
G0460. In addition, the commenter
believed that a violation of the 2 times
rule exists within APC 5053 when
HCPCS code G0460 is assigned to this
APC and, therefore, urged CMS to
consider assigning HCPCS code G0460
to New Technology APC 1511 rather
than APC 5053. Further, the commenter
opined that the repeated payment
adjustment for this service is causing
significant confusion in the market
place and hampering the success of
Medicare’s CED protocol. The
commenter stated that assigning HCPCS
code G0460 to either APC 1511 or APC
1548 would provide participating
hospitals and sponsored sites
predictability in payment levels for the
service described by HCPCS code
G0460.
Response: Table 16 of the CY 2016
OPPS/ASC proposed rule (80 FR 39255)
listed the three APCs that violated the
2 times rule for ratesetting and which
we proposed to except from the 2 times
rule for CY 2016. APC 5053 does not
appear on that list. For CY 2016, our
analysis of the CY 2014 claims data
available for the proposed rule showed
that no violations of the 2 times rule
existed within APC 5053 because the
geometric mean cost for the service
described by HCPCS code G0460 did
not fall outside of the acceptable
significant costs range. For purposes of
identifying significant HCPCS codes for
examination under the 2 times rule, we
consider those 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
policy of when a HCPCS code is
considered significant for purposes of
the 2 times rule was based on the
premise that we believe a subset of
1,000 claims is negligible within the set
of approximately 120 million single
procedure or single session claims we
use for establishing geometric mean
costs. Similarly, procedures described
by a HCPCS code for which there are
fewer than 99 single claims or which
comprises less than 2 percent of the
single major claims within an APC will
have a negligible impact on the APC
geometric mean cost.
Based on our analysis of the claims
data used for the proposed rule, there
was no violation of the 2 times rule
within APC 5053 when HCPCS code
G0460 was assigned to this APC.

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Specifically, our data revealed that the
lowest cost procedure with significant
claims data ($305 for CPT code 11042)
and the highest cost procedure with
significant claims data ($595 for HCPCS
code C5271) met the 2 times rule for
APC 5053 whose geometric mean cost
was approximately $322.
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.
Consistent with the requirements set
forth in section 1833(t)(9), 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 acknowledge the commenters’
concerns. However, based on our
analysis of the claims data available for
this final rule with comment period, we
believe that the services described by
HCPCS code G0460 more appropriately
align with the other services assigned to
APC 5054 (Level 4 Skin Procedures)
than services assigned either to APC
1511 or APC 1548. We note that the
proposed rule claims data was based on
claims submitted between January 1,
2014, through December 31, 2014, and
processed on or before December 31,
2014. However, for this final rule with
comment period, the cost data also
includes claims that were processed on
or before June 30, 2015. Specifically, our
claims data show a geometric mean cost
of approximately $1,579 based on 35
single claims (out of 52 total claims) for
HCPCS code G0460. We believe that the
geometric mean cost of the service
described by HCPCS code G0460
(approximately $1,579) is comparable to
the geometric mean cost of APC 5054.
Therefore, after consideration of the
public comments we received, we are
finalizing our proposal to assign the
service described by HCPCS code G0460
to one of the reconfigured skin
procedure APCs, with one modification.
We are assigning the service described
by HCPCS code G0460 to APC 5054
(rather than proposed APC 5053) for CY
2016. The final CY 2016 payment rate

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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). We
remind the commenters that, as we do
every year, we will again review the
APC assignment for all items,
procedures, and services, for the CY
2017 rulemaking cycle.
In summary, after consideration of the
public comments we received, we are
finalizing our proposed APC
reconfiguration for the skin procedures
and related services APCs, with the
modifications described earlier. Table
37 below lists the final CY 2016 APCs
that result from the consolidation and
restructuring of the current skin
procedures and related services APCs
into a single APC grouping. The final
payment rates for the specific CPT or
Level II HCPCS skin procedure codes
can be found in Addendum B to this
final rule with comment period, while
the final payment rates for the specific
APCs to which the skin procedures and
related services are assigned can be
found in Addendum A to this final rule
with comment period. Both OPPS
Addenda A and B are available via the
Internet on the CMS Web site.

TABLE 37—CY 2016 APCS
ASSIGNMENT FOR SKIN PROCEDURES
CY 2016 APC
5051
5052
5053
5054
5055

..................
..................
..................
..................
..................

CY 2016 APC title
Level
Level
Level
Level
Level

1
2
3
4
5

Skin
Skin
Skin
Skin
Skin

Procedures.
Procedures.
Procedures.
Procedures.
Procedures.

13. Urology and Related Services
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39263), for the CY 2016
OPPS update, based on our evaluation
of the latest hospital outpatient claims
data used for the proposed rule, we
proposed to revise all of the APCs for
urology and related services APCs to
more appropriately reflect the resource
costs and clinical characteristics of the
procedures assigned to each APC.
Currently, several of the urology and
related services APCs are differentiated
based on resource costs of the
procedures and services rather than the
clinical similarity when compared to
the other procedures and services
assigned to the APC. We believe that
establishing more inclusive categories of
the urology and related services is more
appropriate for future ratesetting under
the OPPS because the proposed
restructured APCs have a more
clinically appropriate granularity, while
improving the balance of resource
similarities for all of the procedures

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
assigned to these APCs. In addition, we
believe that this proposed revision and
consolidation of APCs would more
appropriately categorize all of the
urology and related services within an
APC grouping such that the services and
procedures assigned to each proposed
newly configured APC are most
appropriately comparable with respect
to clinical characteristics and resource
use. Therefore, for CY 2016, we
proposed to restructure and consolidate
the urology and related services APCs
into a single APC grouping. Table 33 of
the proposed rule listed the CY 2015
urology and related services APCs and
status indicator assignments, and Table
34 of the proposed rule listed the CY
2016 APCs that would result from the
proposed consolidation and
restructuring of the current urology and
related services APCs into a single APC
grouping. We invited public comments
on this proposal.
Comment: Some commenters
supported the proposed consolidation
and reconfiguration of the urology and
related services APCs, but expressed
concern that the significant differences
between the APC payment rates for the
procedures and related services
assigned to the proposed APCs are too
broad, which could result in payment
misalignments for certain procedures
and services that utilize expensive
supplies and equipment. Many other
commenters disagreed with the
proposed consolidation because they
believed that the proposed APC
reconfigurations and procedure
reassignments are neither clinically or
resource homogeneous. Several
commenters stated that, although the
existing urology APC 0163 (Level IV
Cystourethroscopy and Other
Genitourinary Procedures) is also
diverse, similar to the proposed revised
urology APCs, the procedures are based
on expensive technology and single
disease treatments. In addition, several
commenters expressed concern with the
proposed payment for the shockwave
lithotripsy procedure described by CPT
code 50590 (Lithotripsy, extracorporeal
shock wave). The commenters stated
that shockwave lithotripsy is grouped in
APC 5374 (Level 4 Urology and Related
Services) with other procedures that are
non-lithotripsy related and do not have
the same capital expenditures. The
commenters believed that assigning the
shockwave lithotripsy procedure to the
proposed reconfigured urology and
related services APC 5374 would
significantly underpay providers for the
cost of the procedure and noted that the
resources used to perform shockwave
lithotripsy procedures are significantly

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greater than the resources used to
perform many of the other procedures
assigned to APC 5374. The commenters
explained that the shockwave
lithotripsy procedure involves the use of
highly specialized capital equipment
that cost approximately $50,000 with an
additional $80,000 to $100,000 per year
contract maintenance, as well as the
assistance of a certified technician. The
commenters suggested that CMS
consider modifying its proposal for
restructuring and reconfiguring the
urology and related services APCs by
assigning the shockwave lithotripsy
procedure to its own APC, separating
APC 5374 into two APCs and grouping
the APCs based on disease process (for
example, BPH and stone extraction,
among others). The commenters
believed that these changes would
simplify the APC groupings and create
an APC structure that is more rational.
Another commenter recommended
separating APC 5374 into two APCs:
One APC that has lower cost/resource
use, with a payment rate of
approximately $2,150; and the other
APC with higher cost/resource use, with
a payment rate of approximately $3,091.
The commenter believed that such a
change to the structure and
configuration of APC 5374 would
improve the distribution of the urology
and related services procedures
assigned to this APC and reduce
overpayments and underpayments for
the services and procedures that are
currently proposed to be assigned to the
proposed APCs.
Response: As part of our overall effort
to improve the homogeneity of resource
costs and clinical characteristic within
the APC groupings, we proposed to
revise the existing urology and related
services APCs for CY 2016. We believe
that the proposed restructuring and
reconfiguration of the urology and
related services APCs more
appropriately reflect the homogeneity of
resource costs and clinical
characteristics of the procedures
assigned within each APC.
Although we do not agree with the
commenters’ suggestion that creating
urology and related services APCs based
on the specific disease treated by the
procedure is necessary or appropriate,
we understand some of the commenters’
concerns. We continue to believe that
establishing more inclusive categories of
urology and related services is more
appropriate for future ratesetting under
the OPPS because the restructured APCs
are comprised of more clinically
appropriate groupings, while improving
the balance of resource similarities for
all of the procedures assigned to these
APCs. However, in response to the

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70409

concerns raised by the commenters, we
are modifying our proposal by
reassigning some of the procedures to
APC 5374 to APC 5373 (Level 3 Urology
and Related Services) and APC 5375
(Level 5 Urology and Related Services)
rather than reassigning them to APC
5374. Specifically, the procedures that
are being reassigned to APC 5375 are
assigned status indicator ‘‘J1’’ because
APC 5375 is a C–APC, and one of the
procedures reassigned to APC 5375 is
the shockwave lithotripsy procedure
(described by CPT code 50590).
Based on the commenters’ feedback
and our analysis of the latest hospital
outpatient claims data used for this final
rule with comment period, we believe
that the procedure described by CPT
code 50590 is more appropriately
assigned to APC 5375 than APC 5374.
The geometric mean cost for the
procedure described by CPT code 50590
is approximately $3,243 based on
44,088 single claims (out of 44,403 total
claims), which is comparable to the
geometric mean cost of approximately
$3,551 for APC 5375. Because we have
modified our proposal and are
reassigning certain procedures from
APC 5374 to APCs 5373 and 5375, we
do not believe that it is necessary or
appropriate to divide APC 5374 into two
separate APCs. We believe that the
modifications to our proposal to
restructure and reconfigure APCs 5373,
5374, and 5375 appropriately group the
urology and related services based on
the homogeneity of the clinical
characteristics and resource use.
Comment: One commenter requested
that CMS reassign the following two
laser vaporization procedures used to
treat benign prostatic hyperplasia from
APC 5374 to APC 5375:
• CPT code 52647 (Laser coagulation
of prostate, including control of
postoperative bleeding, complete
(vasectomy, meatotomy,
cystourethroscopy, urethral calibration
and/or dilation, and internal
urethrotomy are included if performed);
and
• CPT code 52648 (Laser vaporization
of prostate, including control of
postoperative bleeding, complete
(vasectomy, meatotomy,
cystourethroscopy, urethral calibration
and/or dilation, internal urethrotomy
and transurethral resection of prostate
are included if performed)).
The commenter believed that these
two procedures are similar to the
procedure described by CPT code 52649
(Laser enucleation of the prostate with
morcellation, including control of
postoperative bleeding, complete
(vasectomy, meatotomy,
cystourethroscopy, urethral calibration

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and/or dilation, internal urethrotomy
and transurethral resection of prostate
are included if performed)), which was
proposed to be reassigned to APC 5375.
Response: Based on input from our
clinical advisors and analysis of the
latest hospital outpatient claims data
used for this final rule with comment
period, we agree with the commenter
that the procedures described by CPT
codes 52647 and 52648 would be more
appropriately reassigned to APC 5375.
Our claims data show that the geometric
mean cost of the procedure described by
CPT code 52647 is approximately
$3,296 based on 392 single claims (out
of 393 total claims), and the geometric
mean cost of the procedure described by
CPT code 52648 is approximately
$3,696 based on 20,813 single claims
(out of 21,015 total claims). Based on
our latest review, we believe that the
geometric mean costs for procedures
described by CPT codes 52647 and
52648 are similar to the geometric mean
cost of other procedures assigned to
APC 5375, whose geometric mean cost
is approximately $3,551.
Therefore, after consideration of the
public comments received, we are
finalizing our proposal, with
modification, to reassign CPT codes
52647 and 52648 to APC 5375. The final
CY 2016 payment rates for the
procedures described by CPT codes
52647, 52648, and 52649 can be found
in Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
Comment: One commenter noted that,
although the proposed reconfiguration
of the urology and related services APCs
would increase the payment rates for
some services, the proposed
reconfiguration would also decrease the
payment rates for other procedures. In
particular, the commenter expressed
concern that the proposed reassignment
would result in underpayment for the
following CPT codes:
• 51741 (Complex uroflowmetry (e.g.,
calibrated electronic equipment));
• 55700 (Biopsy, prostate; needle or
punch, single or multiple, any
approach); and
• 52000 (Cystourethroscopy (separate
procedure)).
The commenter stated that the
proposed restructuring would decrease
the payment rate for the procedure
described by CPT code 51741 by 18
percent within a single year. The
commenter added that, similarly,
payment rates for the procedures
described by CPT codes 55700 and
52000 would experience a decrease of 8
percent and 5 percent, respectively. The
commenter expressed concern with the
instability in payment rates, which the

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commenter suggested would hinder a
hospital’s ability to negotiate with
suppliers and manufacturers on the
purchase price of certain devices and
services. Specifically, the commenter
stated that, in order for hospitals to be
able to forecast for the future and invest
in technologies that are essential for
providing high quality care, they need
to be able to rely on stable and
predictable payment rates.
Response: We appreciate the
commenter’s input. Based on our review
of the latest hospital outpatient claims
data used for this final rule with
comment period, we believe that
reassigning CPT code 51741 to APC
5721 (Level 1 Diagnostic Tests and
Related Services) improves the
homogeneity of resource use and
clinical characteristics of the procedures
in this APC. In addition, we believe that
the proposed APC assignments for the
procedures described by CPT codes
55700 and 52000 are optimal. Our
claims data reveal that CPT code 55700
has a geometric mean cost of
approximately $1,475, which is
comparable to the geometric mean cost
of approximately $1,576 for APC 5373
(Level 3 Urology and Related Services).
We also believe that the procedure
described by CPT code 55700 is
appropriately grouped in APC 5373
with clinically similar procedures.
Further, we believe that CPT code
52000, whose geometric mean cost is
approximately $574, is more
appropriately assigned to APC 5372
(Level 2 Urology and Related Services),
whose geometric mean cost is
approximately $549. We do not believe
that we should assign CPT code 52000
to the next higher level in the urology
and related services APC, which is APC
5373 (Level 3 Urology and Related
Services) and has a geometric mean cost
of approximately $1,576, as this would
result in a significant overpayment for
the procedure. Moreover, reassigning
CPT code 52000 from APC 5372 to APC
5373 would create a violation of the 2
times rule within APC 5373.
Overall, we believe that the proposed
restructuring and reconfiguration of the
urology and related services APCs
appropriately reflect the similar
resource costs and clinical
characteristics of the procedures within
each APC. We also believe that
establishing broader categories of
urology and related services APCs (as
compared to CY 2015) is more
appropriate for future ratesetting under
the OPPS because the restructured APCs
support greater similarities in clinical
characteristic and resource use of
procedures assigned to APCs, while

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improving the homogeneity of the APC
structure.
In addition, 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.
Consistent with the requirements set
forth in section 1833(t)(9) of the Act, 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. Consequently, as we do
every year for all services and
procedures under the OPPS, we will
again review the claims data for the
procedures described by CPT codes
51741, 52000, and 55700 for the CY
2017 rulemaking cycle.
Therefore, after consideration of the
public comments received, we are
finalizing our proposal for CPT codes
55700 and 52000 to APC 5373 and 5372,
respectively. However, we are finalizing
our proposal for CPT code 51741 with
modification by reassigning this
procedure from APC 5734 to APC 5721
based on clinical and resource
homogeneity within APC 5721. The
final CY 2016 payment rate for CPT
codes 51741, 55700, and 52000 can be
found in Addendum B to this final rule
with comment period (which is
available via the Internet on the CMS
Web site).
Comment: One commenter expressed
concern with the volume of procedures
proposed to be reassigned to proposed
APC 5374. In addition, the commenter
was concerned that the proposed
payment rates would result in
underpayments for the following three
CPT codes:
• 50590 (Lithotripsy, extracorporeal
shock wave);
• 52601 (Transurethral
electrosurgical resection of prostate,
including control of postoperative
bleeding, complete (vasectomy,
meatotomy, cystourethroscopy, urethral
calibration and/or dilation, and internal
urethrotomy are included); and
• 52648 (Laser vaporization of
prostate, including control of

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jstallworth on DSK7TPTVN1PROD with RULES

postoperative bleeding, complete
(vasectomy, meatotomy,
cystourethroscopy, urethral calibration
and/or dilation, internal urethrotomy
and transurethral resection of prostate
are included if performed).
Response: As we discussed above, we
are modifying our proposed APC
assignments for the procedures
described by CPT codes 50590 and
52648 by reassigning the procedures
from APC 5374 to APC 5375 for CY
2016, based on our evaluation of the
latest hospital outpatient claims data
used for this final rule with comment
period. Similarly, we examined our
latest claims data for CPT code 52601
and found that its geometric mean cost
is comparable to that of APC 5375.
Specifically, our claims data revealed
that the procedure described by CPT
code 52601 has a geometric mean cost
of approximately $3,529 based on
27,568 single claims (out of 27,864 total
claims), which is comparable to the
geometric mean cost of approximately
$3,551 for APC 5375.
Therefore, after consideration of the
public comments received, we are
finalizing our proposal, with
modification, by reassigning the
procedures described by CPT codes
50590, 52601, and 52648 to APC 5375
for CY 2016. The final CY 2016 payment
rate for CPT codes 50590, 52601, and
52648 can be found in Addendum B to
this final rule with comment period
(which is available via the Internet on
the CMS Web site).
We are finalizing our proposal, with
modification, to reconfigure the urology
and related services into seven APCs.
Table 38 below lists the final CY 2016
APCs that result from the consolidation
and restructuring of the current urology
procedures APCs into a single APC
grouping. The final payment rates for
the specific CPT or Level II HCPCS
urology and related services codes are
included in Addendum B to this final
rule with comment period. The final
payment rates for the specific APCs to
which we are reassigning the urology
and related services codes are included
in Addendum A to this final rule with
comment period. Both OPPS Addenda
A and B are available via the Internet on
the CMS Web site.

TABLE 38—CY 2016 APCS ASSIGNED
TO UROLOGY AND RELATED SERVICES
CY 2016
APC
5371 ............
5372 ............

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CY 2016 APC title
Level 1 Urology and Related
Services.
Level 2 Urology and Related
Services.

15:13 Nov 12, 2015

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70411

TABLE 38—CY 2016 APCS ASSIGNED (Thrombectomy, open, arteriovenous
TO UROLOGY AND RELATED SERV- fistula without revision, autogenous or
nonautogenous dialysis graft (separate
ICES—Continued
CY 2016
APC
5373 ............
5374 ............
5375 ............
5376 ............
5377 ............

CY 2016 APC title
Level 3 Urology
Services.
Level 4 Urology
Services.
Level 5 Urology
Services.
Level 6 Urology
Services.
Level 7 Urology
Services.

and Related
and Related
and Related
and Related
and Related

14. Vascular Procedures (Excluding
Endovascular Procedures)
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39263 through 39264), for
the CY 2016 OPPS update, based on our
evaluation of the latest hospital
outpatient claims data available for the
proposed rule, we proposed to
restructure all of the vascular
procedure-related APCs (excluding
endovascular procedures) to more
appropriately reflect the costs and
clinical characteristics of the procedures
within each APC. We stated in the
proposed rule that we believe that this
proposed restructuring of APCs for
vascular procedures more accurately
categorizes all of the vascular
procedures within an APC group, such
that the services within each proposed
newly configured APC are more
comparable clinically and with respect
to resource use. Table 35 of the CY 2016
OPPS/ASC proposed rule (80 FR 39263)
lists the vascular procedures APCs for
CY 2015, and Table 36 of the CY 2016
OPPS proposed rule (80 FR 39264) lists
the proposed vascular procedures APCs
for CY 2016. We invited public
comments on this proposal.
Comment: One commenter noted that
CPT code 93503 (Insertion and
placement of flow directed catheter
(e.g., Swan-Ganz) for monitoring
purposes) and CPT code 93505
(Endomyocardial biopsy) are proposed
to be assigned to APC 5181 (Level 1
Vascular Procedures), and stated that
the codes are not clinically
homogenous. The commenter believed
that the APC assignment for these two
codes could destabilize the APC and
recommended a delay in
implementation of these restructured
APCs. In addition, the commenter stated
that the procedures described by CPT
codes 36818 (Arteriovenous
anastomosis, open; by upper arm
cephalic vein transposition), 36821
(direct, any site (e.g., Cimino type)
(separate procedure)) and 36831

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procedure)) are proposed to be assigned
to APC 5182 (Level 2 Vascular
Procedures) but all of the procedures
described by these codes have a
significant volume of claims (that is,
greater than 1,000) and would be
substantially underpaid under their
APC assignment relative to their
geometric mean costs. For these codes,
the commenter suggested a delay in
implementation or reassignment to APC
5183 (Level 3 Vascular Procedures).
Another commenter recommended that
four cardiac procedures that were
proposed to be assigned to APC 5181,
specifically CPT 33215 (Repositioning
of previously implanted transvenous
pacemaker or implantable defibrillator
(right atrial or right ventricular)
electrode), CPT 33226 (Repositioning of
previously implanted cardiac venous
system (left ventricular) electrode
(including removal, insertion and/or
replacement with existing generator)),
CPT 93503, and CPT 93505, instead be
assigned to APC 5188 (Diagnostic
Cardiac Catheterization). The
commenter also recommended the
reassignment of the following CPT
codes to APC 5183: CPT code 36222
(Selective catheter placement, common
carotid or innominate artery, unilateral,
any approach, with angiography of the
ipsilateral extracranial carotid
circulation and all associated
radiological supervision and
interpretation, includes angiography of
the cervicocerebral arch, when
performed); CPT code 36223 (Selective
catheter placement, common carotid or
innominate artery, unilateral, any
approach, with angiography of the
ipsilateral intracranial carotid
circulation and all associated
radiological supervision and
interpretation, includes angiography of
the extracranial carotid and
cervicocerebral arch, when performed);
and CPT code 36225 (Selective catheter
placement, subclavian or innominate
artery, unilateral, with angiography of
the ipsilateral vertebral circulation and
all associated radiological supervision
and interpretation, includes
angiography of the cervicocerebral arch,
when performed). The commenter
believed that these procedures, which
were proposed to be assigned to APC
5526 (Level 6 X-Ray and Related
Services), would better align with the
procedures assigned to APC 5183
because they are similar procedures
with similar clinical characteristics.
Another commenter suggested that
the procedures described by CPT 37799

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(Unlisted procedure, vascular surgery),
and CPT 93505 be reassigned from APC
5181 to 5182; that the procedure
described by CPT 37501 (Unlisted
vascular endoscopy procedure) be
reassigned from APC 5181 to APC 5183;
and that the procedure described by
CPT 36566 (Insertion of tunneled
centrally inserted central venous access

device, requiring 2 catheters via 2
separate venous access sites; with
subcutaneous port(s)) and CPT 36861
(External cannula declotting (separate
procedure; with balloon catheter) be
reassigned from APC 5182 to APC 5183.
The commenter believed that these
suggested revisions would be more

appropriate clinically and with respect
to resource use.
Response: We agree with some of the
comments on the APC assignment
change requests and disagree with
others. Table 39 below lists all codes
that were commented on and our
decision on the final APC assignment.

TABLE 39—VASCULAR PROCEDURES WITH SPECIFIC COMMENTER RECOMMENDATIONS, FINAL CMS DECISIONS, FINAL
APC ASSIGNMENT AND FINAL STATUS INDICATORS
CPT/HCPCS
code

jstallworth on DSK7TPTVN1PROD with RULES

33215
36222
33226
36223
36225
36566
36818
36821
36831
36861
37501
37799
93503
93505

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........

Short descriptor

Proposed
CY 2016
OPPS
status
indicator

Reposition pacing-defib lead ..........
Place cath carotid/inom art .............
Reposition l ventric lead .................
Place cath carotid/inom art .............
Place cath subclavian art ...............
Insert tunneled cv cath ...................
Av fuse uppr arm cephalic ..............
Av fusion direct any site .................
Open thrombect av fistula ..............
Cannula declotting ..........................
Vascular endoscopy procedure ......
Vascular surgery procedure ...........
Insert/place heart catheter ..............
Biopsy of heart lining ......................

T
Q2
T
T
Q2
T
T
T
T
T
T
T
T
T

All of the APCs proposed for the
codes listed in Table 39 above and all
of the APCs suggested by commenters
contain procedures involving the
vascular system. For the codes with
which we agree with the commenters,
there is greater resource similarity
between the procedure in question and
the procedures in the APC requested by
the commenter than the procedures in
the proposed APC. In most cases where
we disagree with the commenter in
Table 39 above, the opposite is true, and
resource similarity is greater for the
proposed APC. By greater resource
similarity, we mean that the geometric
mean cost of the procedure is closer to
the geometric mean cost of the APC to
which we are assigning the code than it
is to the APC to which the commenter
requested assignment of the code.
For CPT code 33215, we do not agree
that the code should be reassigned from
APC 5181to 5188. The final geometric
mean cost of the procedure described by
CPT code 33215 is approximately
$1,575 and the final geometric mean
cost of APC 5181 is approximately $903.
The final geometric mean cost of APC
5188 is approximately $2,668. We
believe that, given the significant
resource dissimilarity between CPT
code 33215 and APC 5188, APC 5188 is
not an appropriate APC assignment.

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Proposed
CY 2016
OPPS APC
5181
5526
5181
5526
5526
5182
5182
5182
5182
5182
5181
5181
5181
5181

Commenter
requested
APC
5188
5183
5188
5183
5183
5183
5183
5183
5183
5183
5183
5182
5188
5182 or 5188

For the procedure described by CPT
code 36222, we do not agree that the
procedure code should be reassigned
from proposed APC 5526 to APC 5183.
The final geometric mean cost of the
procedure described by CPT code 36222
is approximately $2,677, and the final
geometric mean cost of APC 5526 is
approximately $2,845. The final
geometric mean cost of APC 5183 is
approximately $3,971. We believe that,
given the significant resource
dissimilarity between CPT code 36222
and APC 5183, APC 5183 is not an
appropriate APC assignment.
For the procedure described by CPT
code 33226, we do not agree that the
procedure should be reassigned from
proposed APC 5181 to APC 5188. The
final geometric mean cost of the
procedure described by CPT code 33226
is approximately $2,190 and the final
geometric mean cost of APC 5181 is
approximately $903. The final geometric
mean cost of APC 5188 is approximately
$2,667. Upon further evaluation, based
on resource use and clinical similarity
to other assigned procedures, we believe
that the appropriate APC assignment for
CPT code 33226 is APC 5182, which has
a final geometric mean cost of
approximately $2,352.
For the procedure described by CPT
code 36225, we do not agree that it
should be reassigned from proposed

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CMS decision

Disagree ........
Disagree ........
Disagree .......
Agree ............
Disagree ........
Agree ............
Disagree .......
Disagree .......
Disagree ........
Agree ............
Disagree ........
Disagree ........
Disagree ........
Agree with
5182.

Final CY
2016 OPPS
status
indicator
T
Q2
T
Q2
Q2
T
T
T
T
T
T
T
T
T

Final CY
2016 OPPS
APC
5181
5526
5182
5183
5526
5183
5182
5182
5182
5183
5181
5181
5181
5182

APC 5526 to APC 5183. The final
geometric mean cost of the procedure
described by CPT code 36225 is
approximately $2,717 and the final
geometric mean cost of APC 5526 is
approximately $2,845. The final
geometric mean cost of APC 5183 is
approximately $3,971. We believe that,
given the significant resource
dissimilarity between the procedure
described by CPT code 36225 and the
procedures assigned to APC 5183, APC
5183 is not an appropriate APC
assignment.
For the procedure described by CPT
code 36818, we do not agree that it
should be reassigned from proposed
APC 5182 to APC 5183. The final
geometric mean cost of the procedure
described by CPT code 36818 is
approximately $2,960 and the final
geometric mean cost of APC 5182 is
approximately $2,352. The final
geometric mean cost of APC 5183 is
approximately $3,971. We believe that,
given the significant resource
dissimilarity between the procedure
described by CPT code 36818 and the
procedures assigned to APC 5183, APC
5183 is not an appropriate APC
assignment.
For the procedure described by CPT
code 36821, we do not agree that it
should be reassigned from proposed
APC 5182 to APC 5183. The final

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geometric mean cost of the procedure
described by CPT code 36821 is
approximately $2,880 and the final
geometric mean cost of APC 5182 is
approximately $2,352. The final
geometric mean cost of APC 5183 is
approximately $3,971. We believe that,
given the significant resource
dissimilarity between the procedure
described by CPT code 36821 and the
procedures assigned to APC 5183, APC
5183 is not an appropriate APC
assignment.
For the procedure described by CPT
code 36831, we do not agree that it
should be reassigned from proposed
APC 5182 to APC 5183. The final
geometric mean cost of the procedure
described by CPT code 36831 is
approximately $2,961 and the final
geometric mean cost of APC 5182 is
approximately $2,352. The final
geometric mean cost of APC 5183 is
approximately $3,971. We believe that,
given the significant resource
dissimilarity between the procedure
described by CPT code 36831and the
procedures assigned to APC 5183, APC
5183 is not an appropriate APC
assignment.
Regarding CPT codes 37799 and
37501, these are unlisted procedure
codes, and according to our established
policy, these codes are always assigned
to the lowest level APC within a group.
For the procedure described by CPT
code 93503, we do not agree that it
should be reassigned from proposed
APC 5181 to APC 5188. The final
geometric mean cost of the procedure
described by CPT code 93503 is
approximately $1,460 and the final
geometric mean cost of APC 5181 is
approximately $903. The final geometric
mean cost of APC 5188 is approximately
$2,667. We believe that, given the
significant resource dissimilarity
between the procedure described by
CPT code 93503 and the procedures
assigned to APC 5188, APC 5188 is not
an appropriate APC assignment.
After considering the public
comments we received on the
reorganization and restructuring of the
vascular procedures APC family, we are
finalizing the proposed APC structure
depicted in Table 40 below and the
proposed code assignments with the
exception of those codes noted in Table
40 for which we are finalizing APC
assignments that differ from the
proposed rule in response to public
comments. The final payment rates for
the vascular procedure codes are
included 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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TABLE 40—CY 2016 VASCULAR
PROCEDURES APCS
CY 2016
APC

CY 2016 APC group title

5181 .............
5182 .............
5183 .............

Level 1 Vascular Procedures.
Level 2 Vascular Procedures.
Level 3 Vascular Procedures.

15. Other Procedures and Services
a. Ear, Nose, Throat (ENT) Procedures
For CY 2016, as a part of our review,
restructuring, and reorganization of the
OPPS APCs, we proposed to consolidate
the APCs for ear, nose, and throat (ENT)
procedures from seven levels in CY
2015 to six levels for CY 2016.
Comment: One commenter believed
that the proposed consolidation of the
ENT procedure APCs into six levels
results in APC groups that contain a
volume of procedures that is too large.
The commenter requested that CMS add
an APC grouping between proposed
Level 4 and Level 5. The commenter did
not provide any discussion regarding
any problem caused by our proposed
consolidation of the ENT APCs.
Response: We disagree with the
commenter that the ENT APC groups are
too large. The cost ranges for the
procedures within this APC series are
within the 2 times rule limit. Moreover,
many of the services assigned to these
APC groups are low-volume services.
Therefore, we do not believe that it is
necessary to create a seventh level in the
ENT procedures APC group for a small
number of low-volume procedures. We
will continue to monitor this APC
grouping, and we will consider any
adjustments as the need arises in the
future.
b. Magnetic Resonance-Guided Focused
Ultrasound Surgery (MRgFUS)
In the CY 2016 OPPS/ASC proposed
rule, we proposed to assign new CY
2016 CPT code 0398T (Magnetic
resonance image guided high intensity
focused ultrasound (MRgFUS),
stereotactic ablation lesion, intracranial
for movement disorder including
stereotactic navigation and frame
placement when performed) to APC
5625 (Level 5 Radiation Therapy), with
a proposed payment of approximately
$1,699. We also assigned CPT code
0398T to comment indicator ‘‘NP’’ in
Addendum B to indicate that the code
is new for CY 2016 with a proposed
APC assignment and that public
comments would be accepted on the
proposed APC assignment for the new
code. The procedure described by CPT
code 0398T involves treatment of an
essential tremor using an MRgFUS

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70413

procedure. We note that CPT code
0398T will be effective January 1, 2016.
However, this code was listed as 03XXA
(the 5-digit CMS placeholder code) in
Addendum B, O, and Q2 of the CY 2016
OPPS/ASC proposed rule. We invited
public comments on our proposed APC
assignment for CY 2016.
In addition to proposing to assign the
procedure described by CPT code 0398T
to APC 5625, we also proposed to
reassign the existing MRgFUS
procedures to APC 5625, specifically the
procedures described by following CPT/
HCPCS codes:
• CPT code 0071T (Focused
ultrasound ablation of uterine
leiomyomata, including mr guidance;
total leiomyomata volume less than 200
cc of tissue);
• CPT code 0072T (Focused
ultrasound ablation of uterine
leiomyomata, including mr guidance;
total leiomyomata volume greater or
equal to 200 cc of tissue); and
• HCPCS code C9734 (Focused
ultrasound ablation/therapeutic
intervention, other than uterine
leiomyomata, with magnetic resonance
(mr) guidance).
Comment: Commenters disagreed
with the proposed assignment of the
procedure described by CPT code 0398T
to APC 5625, and requested that CMS
not finalize the proposed APC
assignment. The commenters believed
that the resources associated with the
procedure described by CPT code 0398T
are significantly different from the
resources associated with MRgFUS
procedures that are also being proposed
for reassignment to APC 5625.
Specifically, the commenters stated that
the resource costs associated with
MRgFUS procedures for the treatment of
essential tremor are significantly greater
than the resource costs for the treatment
of uterine fibroids (described by CPT
codes 0071T and 0072T) or pain
palliation for metastatic bone cancer
(described by HCPCS code C9734)
because procedures involving MRgFUS
treatment for essential tremor requires
additional unique resources that are not
required with either uterine fibroids or
pain palliation MRgFUS treatments. The
commenters further explained that,
while MRgFUS has been approved by
the FDA for the treatment of uterine
fibroids and pain palliation for
metastatic bone cancer, it has not been
approved for the treatment of essential
tremor. The commenters also indicated
that MRgFUS treatment for essential
tremor is still in the clinical trial stage.
Therefore, the commenters believed that
it would be inappropriate to assign CPT
code 0398T to APC 5626, which is the
same APC that the existing MRgFUS

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procedures are being proposed to be
reassigned.
Furthermore, the commenters
believed that CMS’ proposal to assign
the procedure described by CPT code
0398T to an APC without any available
claims data could undervalue the
payment for the procedure and
ultimately prevent hospitals from
furnishing the procedure to Medicare
beneficiaries once it becomes FDAapproved. Another commenter noted
that approval of the equipment
associated with the MRgFUS procedure
for the treatment of an essential tremor
would not be approved by the FDA until
the end of 2016. Therefore, the
commenter stated that it would be
unlikely that any Medicare beneficiaries
would be eligible for the MRgFUS
treatment for essential tremor before CY
2017. To ensure an accurate APC
assignment, the commenters requested
that CMS not finalize an APC
assignment for the procedure described
by CPT code 0398T, and instead wait
until additional data become available
for ratesetting purposes Another
commenter stated that assigning the
procedure described by CPT code 0398T
to APC 5625 is inappropriate because
the APC’s title, ‘‘Level 5 Radiation
Therapy’’ indicates that procedures
assigned to this APC describe
procedures involving radiation
therapies, and that MRgFUS procedures,
including the procedure described by
CPT code 0398T, do not involve the
delivery of radiation or radiation
therapy and, therefore, cannot be
considered ‘‘radiation therapies.’’
Response: We acknowledge that the
FDA-approved indication for use and
approval of the necessary equipment
used in association with the procedure
described by CPT code 0398T may not
be granted during CY 2016, and that
there are no claims data available for
ratesetting purposes. Therefore, we
agree with the commenters that it would
be more appropriate to not finalize the
APC assignment for the procedure
described by CPT code 0398T at this
time. As a result, this procedure code
will be assigned to OPPS status
indicator ‘‘E,’’ effective January 1, 2016,
to indicate that the service is not paid
by Medicare under the OPPS. Once the
procedure and associated equipment
involved with the MRgFUS treatment
for essential tremor has received FDA
approval and we have available claims
data to use for ratesetting purposes, we
will reevaluate the APC assignment for
CPT code 0398T.
Comment: One commenter believed
that, based on the APC title, APC 5625
describes procedures involving the
delivery of radiation or radiation

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therapies, which does not adequately
describe the procedures described by
CPT codes 0071T and 0072T and
HCPCS code C9734. Consequently, the
commenter requested that CMS reassign
CPT codes 0071T and 0072T to C–APC
5376 (Level 6 Urology and Related
Services) and HCPCS code C9734 to C–
APC 5124 (Level 4 Musculoskeletal
Procedures). The commenter indicated
that it performed its own internal
analysis of the associated cost of
providing these services and, based on
its findings, believed that the resource
use associated with these procedures
(CPT codes 0071T and 0072T and
HCPCS code C9734) is similar to the
resource use associated with the
procedures assigned to APC 5376 and
APC 5124.
Response: CPT codes 0071T and
0072T became effective January 1, 2005,
and HCPCS code C9734 became
effective April 1, 2013. Based on our
analysis of the latest hospital outpatient
claims data used for this final rule with
comment period, which are claims
submitted between January 1, 2014, and
December 31, 2014, and processed on or
before June 30, 2015, we do not have
any single claims that reported any of
the three MRgFUS procedures.
Therefore, we agree with the commenter
that APC 5625 is not the most
appropriate APC assignment for these
three MRgFUS procedures based on
clinical characteristics because these
three MRgFUS procedures do not
involve the delivery of radiation or
radiation therapy. In addition, given the
lack of single claims data for the
procedures described by CPT codes
0071T and 0072T and HCPCS code
C9734, we do not agree with the
commenters’ suggested APC
assignments for these procedures. We
believe that the clinical characteristics
of the three MRgFUS procedures are
significantly similar to the clinical
characteristics of the procedures
assigned to APCs 5414 (Level 4
Gynecologic Procedures) and 5122
(Level 2 Musculoskeletal Procedures).
Therefore, we are reassigning the
procedures described by CPT codes
0071T and 0072T to APC 5414, and the
procedures described by HCPCS code
C9734 to APC 5122.
After consideration of the public
comments we received, we are
modifying our proposals and
reassigning the procedures described by
CPT codes 0071T and 0072T to APC
5414 and the procedures described by
HCPCS code C9734 to APC 5122. In
addition, we are not finalizing our
proposed APC assignment for the
procedure described by CPT code 0398T
because the equipment associated with

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the performance of the procedure has
not received FDA approval. As we
previously stated, CPT code 0398T is
assigned to OPPS status indicator ‘‘E’’
(Not paid by Medicare when submitted
on outpatient claims (any outpatient bill
type), effective January 1, 2016, to
indicate that the service is not paid by
Medicare under the OPPS. Once the
procedure involving MRgFUS treatment
for essential tremor receives FDA
approval and we have available claims
data for ratesetting purposes, we will
reevaluate the APC assignment for CPT
code 0398T. The final CY 2016 payment
rate for CPT codes 0071Tand 0072T and
HCPCS code C9734 can be found in
Addendum B to this final rule with
comment period (which is available via
the Internet on the CMS Web site).
c. Stem Cell Transplant
For CY 2016, we proposed to continue
to pay for stem cell transplant
procedures as we have done for many
years through APCs 5271 (Blood
Product Exchange) and 5281 (Apheresis
and Stem Cell Procedures). Specifically,
we proposed to assign the procedure
described by CPT code 38240
(Hematopoietic progenitor cell (HPC);
allogenic transplantation per donor) to
APC 5281 (Apheresis/Stem Cell and
Related Services), for which we
proposed a CY 2016 geometric mean
cost of approximately $3,217.
Comment: Commenters opposed the
proposed payment rate for the
procedure described by CPT code
38240. The commenters stated that the
current CY 2015 outpatient payment
rate does not provide adequate payment
for the total cost of an hematopoietic
cell transplants (HCT), particularly
donor cell acquisition costs.
Commenters asked that CMS consider
changing its payment methodology for
donor cell acquisition costs and made
the following specific requests of CMS
to: (1) Create a separate, dedicated cost
center line for HCT, similar to how it
established the cost center line for
Implantable Devices, MRIs, CT Scans,
and Cardiac Catheterizations; (2) work
with the NUBC to release a new,
dedicated revenue code for providers to
use when reporting their HCT donor
search and cell acquisition charges; (3)
create payment parity for the donor
search and cell acquisition component
of HCT between the inpatient and
outpatient settings; (4) recognize the
search and procurement costs associated
with HCT transplant and develop a
reasonable cost basis solution for HCT
that mimics the acquisition cost
procedures for solid organ
transplantation; (5) if CMS chooses not
to consider number (4) request, find a

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way to incorporate the donor search and
cell acquisition charges reported
through revenue code 819 into the
overall outpatient transplant APC rate
(The commenters suggested that CMS
could incorporate this suggested change
by creating a Composite APC whereby it
identifies the allogenic transplant CPT
code and a revenue code 0819 and
creates an appropriate payment rate, or
that CMS could study applying the C–
APC concept to HCT.); (6) require
transplant centers to submit their actual
cost information on the UB–04s for
patients receiving both allogeneic
related and unrelated transplants; and
(7) instruct providers to report their
actual cost on the revenue code 0819
claim line item in order for CMS to
apply a default CCR of 1.0 for claims
reporting outpatient allogeneic HCT
procedures (This would be defined by
the presence of an outpatient allogeneic
CPT procedure code.). In addition, one
commenter asked that CMS describe
clearly in the preamble to the final rule
that it is incumbent on hospitals to
report their entire donor search and cell
acquisition charges on the recipient’s
transplant claim.
Response: We continue to believe that
the procedure described by CPT code
38240 is appropriately assigned to APC
5281 because its geometric mean cost
and clinical characteristics are similar to
other procedures assigned to APC 5281.
We note the commenters’ concerns that
donor acquisition cost is not
appropriately captured in the current
payment methodology for HCT
procedures. As we have previously
stated, allogeneic harvesting procedures,
which are performed not on the
beneficiary but on a donor, cannot be
paid separately under the OPPS because
hospitals may bill and receive payment
only for services provided to the
Medicare beneficiary who is the
recipient of the HCT procedure, and
whose illness is being treated with the
transplant. We stated in the CY 2010
OPPS/ASC final rule with comment
period (74 FR 60575) and in section
231.11 of Chapter 4 of the Medicare
Claims Processing Manual (Pub. 100–
04) that payment for allogeneic stem cell
acquisition services (such as harvesting
procedures and donor evaluation) is
packaged into the payment for the
transplant procedure (either the
Medicare Severity Diagnosis Related
Group (MS–DRG) when the transplant is
performed on an inpatient basis, or the
APC when the transplant is performed
on an outpatient basis). Hospitals
should report all allogeneic outpatient
HCT procedure acquisition charges on
the recipient’s outpatient claim as

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uncoded charges under revenue code
0819.
In response to comments concerning
the creation of a dedicated cost center
and/or revenue code for HCT
procedures, payment parity for the
donor search and cell acquisition
component of HCT procedures between
the inpatient and outpatient settings,
requiring transplant centers to submit
their actual cost information on the UB–
04s for both allogeneic related and
unrelated transplant patients, and
applying a default CCR of 1.0 for
outpatient allogeneic HCT claims, we
note that we did not make any such
proposals in the CY 2016 OPPS/ASC
proposed rule. Therefore, we consider
these comments outside the scope of the
proposed rule and are not responding to
them in this final rule with comment
period. We will take these suggestions
into consideration for future
rulemaking.
While converting the outpatient stem
cell transplant APCs to composite APCs
or C–APCs would reduce to a small
degree the differential between the
OPPS payment rate and the costs as
represented in the public comment we
received, it would only provide a
relatively modest increase in payment,
consistent with our previous data
studies on this issue. We believe that we
need to further examine the costs
associated with outpatient stem cell
transplant services and how their costs
could best be captured for ratesetting
purposes in the OPPS. These transplant
services remain low-volume in the
HOPD. However, we will continue to
monitor this issue and the volume of
outpatient allogeneic transplant
services.
After consideration of the public
comments we received, we are
finalizing our CY 2016 proposal, and
continuing to assign the services
described by CPT code 38240 to APC
5281, for which the final CY 2016
geometric mean cost is approximately
$3,155.
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
sets forth the period for which a device
category eligible for transitional passthrough payments under the OPPS may
be in effect. The implementing
regulation at 42 CFR 419.66(g) provides
that this pass-through payment
eligibility period begins on the date
CMS establishes a particular transitional

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70415

pass-through category of devices. The
eligibility period is for at least 2 years
but no more than 3 years. We may
establish a new device category for passthrough payment in any quarter. Under
our established policy, we base the passthrough status expiration date for a
device category on the date on which
pass-through payment is effective for
the category; that is, the date CMS
establishes a particular category of
devices eligible for transitional passthrough payments. We propose and
finalize the dates for expiration of passthrough 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.
b. CY 2016 Policy
As stated earlier, section
1833(t)(6)(B)(iii) requires that, under the
OPPS, a category of devices be eligible
for transitional pass-through payments
for at least 2 years, but not more than
3 years. There currently are four device
categories eligible for pass-through
payment: HCPCS code C1841 (Retinal
prosthesis, includes all internal and
external components) was established
effective October 1, 2013. HCPCS code
C2624 (Implantable wireless pulmonary
artery pressure sensor with delivery
catheter, including all system
components) was established effective
January 1, 2015. HCPCS code C2623
(Catheter, transluminal angioplasty,
drug-coated, non-laser) was established
effective April 1, 2015. HCPCS code
C2613 (Lung biopsy plug with delivery
system) was established effective July 1,
2015. The pass-through payment status
of the device category for HCPCS code
C1841 will end on December 31, 2015.
Therefore, in accordance with our
established policy, in the CY 2016
OPPS/ASC proposed rule (80 FR 39264),
we proposed, beginning with CY 2016,
to package the costs of the HCPCS code
C1841 devices into the costs related to
the procedures with which the device is
reported in the hospital claims data.
We stated in the proposed rule that if
we create any new device categories for
pass-through payment status during the
remainder of CY 2015 or during CY
2016, we will propose future expiration
dates in accordance with § 419.66(g).
We did not receive any public
comments on this proposal. Therefore,

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we are finalizing our proposal to expire
device pass-through payments for the
device described by HCPCS code C1841,
effective January 1, 2016.

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2. Annual Rulemaking Process in
Conjunction With Quarterly Review
Process for Device Pass-Through
Payment Applications
a. Background
Section 1833(t)(6)(B) of the Act
requires payment to be made on a ‘‘passthrough’’ basis for designated medical
devices. As part of implementing the
statute through regulations, we have
continued to believe that it is important
for hospitals to receive pass-through
payments for devices that offer
substantial clinical improvement in the
treatment of Medicare beneficiaries to
facilitate access by beneficiaries to the
advantages of the new technology.
Conversely, we have noted that the need
for additional payments for devices that
offer little or no clinical improvement
over previously existing devices is less
apparent. In such cases, these devices
can still be used by hospitals, and
hospitals will be paid for them through
appropriate APC payment. Moreover, a
goal is to target pass-through payments
for those devices where cost
considerations might be most likely to
interfere with patient access (66 FR
55852; 67 FR 66782; and 70 FR 68629).
As specified in regulations at 42 CFR
419.66(b)(1) through (b)(3), to be eligible
for transitional pass-through payment
under the OPPS, a device must meet the
following criteria: (1) If required by
FDA, the device must have received
FDA approval or clearance (except for a
device that has received an FDA
investigational device exemption (IDE)
and has been classified as a Category B
device by the FDA), or another
appropriate FDA exemption; (2) the
device must be determined reasonable
and necessary for the diagnosis or
treatment of an illness or injury or to
improve the functioning of a malformed
body part, as provided under section
1862(a)(1)(A) of the Act; and (3) the
device must be an integral part of the
service, 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. A device is not
eligible if it is any of the following, as
specified at § 419.66(b)(4): Equipment,
an instrument, apparatus, implement, or
item of this type for which depreciation
and financing expenses are recovered as
depreciation assets as defined in
Chapter 1 of the Medicare Provider
Reimbursement Manual (CMS Pub. 15–

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1); or a material or supply furnished
incident to a service (for example, a
suture, customized surgical kit, or clip,
other than a radiological site marker).
Separately, we use the following
criteria, as set forth under § 419.66(c), to
determine whether a category of devices
should be established. The device to be
included in the category must—
• Not be appropriately described by
an existing category or by any category
previously in effect established for
transitional pass-through payments, and
was not being paid for as an outpatient
service as of December 31, 1996;
• Have an average cost that is not
‘‘insignificant’’ relative to the payment
amount for the procedure or service
with which the device is associated as
determined under § 416.66(d); and
• Demonstrate a substantial clinical
improvement, that is, substantially
improve the diagnosis or treatment of an
illness or injury or improve the
functioning of a malformed body part
compared to the benefits of a device or
devices in a previously established
category or other available treatment.
More details on the requirements for
device pass-through payment
applications are included on the CMS
Web site in the application form itself
at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/passthrough_
payment.html, in the ‘‘Downloads’’
section.
The current OPPS process for
applying for a new device category for
transitional pass-through payment is
subregulatory; that is, device or
implantable biological or skin substitute
manufacturers, hospitals, or other
interested parties may apply to the
agency through an application process
available online. The application
determination process is handled
outside of rulemaking. Applications are
accepted by CMS on a rolling basis and
determinations are made on a quarterly
basis. Decisions by CMS to approve an
application for a device for pass-through
payment under the OPPS are announced
quarterly through a subregulatory
process via program transmittal and are
communicated directly to the applicant.
Approvals are then referenced in our
annual rulemaking as a means to
establish payment periods. Currently,
denials of applications for devices for
pass-through payment status under the
OPPS are communicated directly to the
applicant and not announced publicly
through rulemaking, program
transmittal, or other public forum.
Applicants for pass-through payment for
a device whose application is denied
may submit a reconsideration request to
CMS. The applicant must send a written

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letter that explains the reasons for the
request for reconsideration of CMS’
decision, along with any additional
information or evidence that may not
have been included with the original
application that may further support the
reconsideration request. Currently,
reconsiderations of denials of devices
for pass-through payment under the
OPPS are handled similarly to previous
denials through direct communication
with the applicant.
Over the years, stakeholders have
opined that the current OPPS device
pass-through payment application
process lacks transparency and
consistent approval standards. That is,
stakeholders have suggested that the
unavailability to the public of specific
information about application decisions
makes it difficult to determine if there
are consistent approval standards
because there is no public knowledge
regarding which applications are
rejected and which criteria are not met.
Likewise, for approved applications,
there is a lack of the specific
information available to the public that
led to approval of the application. Some
stakeholders have requested that CMS
increase transparency in the device
pass-through payment application
process by notifying the public, through
rulemaking, of the number of
applications received each year in
aggregate and, for each application,
include in rulemaking the preliminary
decision, any additional details
included in follow-up with the
applicant, and the final decision,
including the rationale for the approval
or denial of the application.
Stakeholders also have requested that
CMS consult with industry and other
stakeholders during the application
review process.
We agree with stakeholders that the
current OPPS device pass-through
payment application process could
benefit from increased transparency and
stakeholder input. Therefore, in the CY
2016 OPPS/ASC proposed rule (80 FR
39265), for CY 2016, we proposed
changes to the OPPS device passthrough payment application process to
help achieve the goals of increased
transparency and stakeholder input. We
proposed to align a portion of the OPPS
device pass-through payment
application process with the already
established Hospital Inpatient
Prospective Payment System (IPPS)
application process for new medical
services and new technology add-on
payments. (We refer readers to sections
1886(d)(5)(K) and (d)(5)(L) of the Act
and 42 CFR 412.87 and 412.88 for
additional information on the IPPS
process for approval of new medical

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services and technologies for new
technology add-on payment under the
IPPS.) Frequently, an applicant will
apply for both device pass-through
payments under the OPPS and for new
technology add-on payments under the
IPPS. Both the OPPS and the IPPS
require that the applicant demonstrate
that the technology represents a
substantial clinical improvement
relative to existing technologies.
Approvals and denials of applications
for new technology add-on payments
under the IPPS are finalized through
annual rulemaking. We discuss the
specific changes that we proposed for
the transitional medical device passthrough payment application process
under the OPPS in the section below.

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b. Revisions to the Application Process
for Device Pass-Through Payments
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39265), we proposed,
beginning in CY 2016, to add a
rulemaking component to the current
quarterly device pass-through payment
application process. That is, we
proposed to supplement the quarterly
process by including a description of
applications received (whether they are
approved or denied) as well as our
rationale for approving or denying the
application in the next applicable OPPS
proposed rule. This proposed revised
process would include providing
information related to the establishment
of the new device category, the cost
thresholds, and the substantial clinical
improvement criterion. For applications
that are approved during the quarterly
review process, based on public
comments received in response to
proposed rulemaking, we proposed that
we would either continue to maintain
device pass-through payment status or
finalize a policy to discontinue passthrough payment status. In the rare case
in which an applicant is approved
during the quarterly process and then a
decision is made in rulemaking to
reverse the approval, the applicant
could reapply with new information, in
advance of the following year’s
proposed rule, assuming that the device
would still be considered new, as
described in the section below. A
summary description of the application
would be included in the proposed rule,
along with a proposal to approve or
deny device pass-through payment
status and a final decision would be
provided in the final rule after
consideration of public comments. The
information requested in the device
pass-through payment application itself
would not change as a result of the
proposed process changes.

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For applications that we deny during
the quarterly review process, we
proposed to include the same type of
information that we include for
approved devices in the next applicable
OPPS proposed rule and, after
consideration of public comments
received, could revisit our decision and
either uphold the original decision of
denial or approve the application based
on additional evidence submitted
through the rulemaking process. The
final decision would be published in the
appropriate final rule. In lieu of the
informal reconsideration process that
has been in place prior to CY 2016 for
denied applications, we would only
provide opportunity to reconsider
applications that are denied through the
rulemaking process. We proposed to
allow applicants whose applications are
denied through the quarterly review
process to withdraw their applications if
they do not wish to go through the
rulemaking process. If such a decision is
made, the quarterly review decision to
deny device pass-through payment for
the application would be considered
final and there would be no further
reconsideration process available. By
providing an opportunity for public
comment, we believe that we would not
only make the device pass-through
payment application and review process
more transparent, but also would assure
that applicants have the benefit of
public input on the ultimate decision to
approve or deny an application for
device pass-through payments under the
OPPS.
Currently, the deadline for device
pass-through payment application
submission is the first business day in
March, June, September, and December
of a year for consideration for the next
quarter (at the earliest) of the calendar
year. For example, under our proposal,
CMS’ decision on an application that is
submitted by the first business day in
March would likely be presented in that
calendar year’s OPPS proposed rule
(assuming the application that is
submitted is complete). Decisions on
applications received after the first
business day in March would be
included in the OPPS proposed rule for
the following calendar year.
In response to requests for more
transparency and public input on the
device pass-through payment
application process, we considered
moving entirely to a yearly process
through rulemaking and eliminating
quarterly submissions. However, in an
effort to maintain flexibility under the
OPPS process for device pass-through
payment applications, we believe that
maintaining the quarterly process in
addition to adding the annual

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rulemaking process may be beneficial
because applications approved on a
quarterly basis would be granted access
to pass-through payments as soon as
possible for approved devices. In
addition, all applications would be
considered through the rulemaking
process, which would provide increased
transparency and allow public input
that would be considered in making a
final determination. We invited public
comments on this proposed approach as
well as on whether moving to a
rulemaking process entirely would be
more helpful to further increase
transparency and further align the
review of applications submitted under
both the IPPS and the OPPS.
Comment: Commenters generally
supported the addition of an annual
rulemaking process, while maintaining
a quarterly submission process. The
commenters, in particular, supported
the increased transparency and
stakeholder input that would occur with
an annual rulemaking component
because it would increase both equity
and predictability in the process. In
addition, the commenters supported
providing the industry with necessary
information regarding approval
standards and the opportunity for
Medicare beneficiaries to have access to
this important information.
Response: We appreciate the
commenters’ support. We agree that our
proposal to add a rulemaking element to
the device pass-through process will
increase transparency and stakeholder
input in the device pass-through
process. We also believe that seeking
public comment through rulemaking on
pass-through applications will allow for
a more rigorous review of applications
and will enable prospective applicants
to gain insights to help with the
development of their applications.
Comment: Some commenters
suggested that CMS publicize all final
decisions and their rationale on a
quarterly basis, in addition to the yearly
rulemaking process.
Response: Under our current quarterly
review process, we include information
about proper coding for applications
that are approved for pass-through
payment in the quarterly transmittals
called ‘‘change requests’’ (CRs). We do
not currently publish any information
about applications that are not
approved. We do not believe it is
necessary to notify the public of
submitted applications and our
decisions outside of the annual
rulemaking process. That is, we believe
that notifying the public annually of
applications under review for
rulemaking and, ultimately our
decisions on pass-through payment

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status in the final rule, provides
sufficient transparency and is consistent
with most other payment
determinations. However, we will
continue to publish coding information
for applications approved on a quarterly
basis through our quarterly CRs. In
addition, we are finalizing in this final
rule with comment period a policy that
applicants whose applications are not
approved through the quarterly review
process may elect to withdraw their
application from consideration in the
next applicable rulemaking cycle.
Comment: Several commenters
expressed concern that, under the
proposed process with respect to
applications that are denied upon
quarterly review, the ability of
submitters to have their applications
reconsidered in a timely manner is
limited. In addition, the commenters
believed that having a reconsideration
process moved to annual rulemaking
(instead of having opportunity on a
quarterly basis) would lead to lengthy
gaps between receipt of a denial and the
ability to submit additional
documentation. The commenters were
particularly concerned about timeliness
in light of the proposal to more strictly
define ‘‘newness’’ for device passthrough applications. One commenter
also believed that there was potential for
a backlog of applications by moving to
an annual decision-making process. One
commenter suggested that CMS evaluate
reconsiderations quarterly for cases in
which new data became available and
allow for a 60-day public comment
period through a separate Federal
Register publication process, outside of
the annual rulemaking process.
Response: We are sensitive to the
commenters’ concern about the
timeliness of review of denied quarterly
applicants. However, we do not believe
that a quarterly reconsideration process
with a 60-day comment period in
addition to notice-and-comment
rulemaking is necessary. As noted
earlier, the public has been supportive
of the benefits of having device passthrough payment applications go
through a public rulemaking process.
While we appreciate the comment about
a potential backlog of applications, we
do not anticipate a backlog based on the
prior and current volume of
applications received.
In response to the commenters’
concerns about applications that are
denied upon quarterly review not
having the ability to be reconsidered on
a quarterly basis, we note that, as
described in the section below, the
proposed newness period only applies
to the date upon which an application
must be submitted through the quarterly

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application process. Therefore, a
quarterly denial should not impact the
ability of an application from being
considered through the next applicable
annual rulemaking cycle, so long as the
quarterly application was submitted
within 3 years of the initial FDA
approval or clearance. Nonetheless, in
response to comments articulating
concerns about applications that receive
a denial upon quarterly review, we are
modifying our proposal in this final rule
with comment period. Specifically,
rather than denying an application
based on quarterly review, for
applications that we do not approve
based upon the evidence available
during the quarterly review process, we
will instead seek public comment on the
application in the next applicable
rulemaking cycle. No special
reconsideration process would be
necessary, as no decision would be
made until the rulemaking process is
complete. Applicants could submit new
data, such as clinical trial results
published in a peer-reviewed journal,
for consideration in advance of the
following year’s proposed rule and
during the public comment period
under the rulemaking process.
Comment: Several commenters
expressed concern about the possibility
of quarterly approvals being reversed
through the rulemaking process. The
commenters emphasized that there
should be a high bar to reversing
quarterly approved applications and
believed that such a reversal would
cause disruption for Medicare
beneficiaries who may anticipate
utilizing the device. One commenter
suggested that, if a quarterly approved
device pass-through applicant is denied
in the final rule, CMS should consider
any subsequent reapplication for that
application on a quarterly basis.
Response: As we stated in our
proposed rule, we expect that it would
be a rare case where an application that
was approved for device pass-through
payment under the quarterly review
process is reversed in the annual
rulemaking process. However, we will
consider all public comments on each
application, including clinical evidence
that may not have been available upon
the quarterly review of the application.
Individuals, including the
manufacturers of devices under review
for device pass-through payment, also
would be able to submit public
comments demonstrating how the
device meets the device pass-through
payment criteria. As stated previously
in this section, we do not believe that
a quarterly reconsideration process in
addition to notice-and-comment
rulemaking is necessary. We note that,

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in the case in which an applicant is
approved during the quarterly process
and then a decision is made in
rulemaking to reverse the approval, the
applicant could reapply with a new
quarterly application that provides new
information, in advance of the following
year’s proposed rule, assuming that the
device is still new, which would be the
case if the new quarterly application is
submitted within 3 years of the initial
FDA approval or clearance.
After consideration of the public
comments we received, we are
finalizing our proposal for processing
applications for new device passthrough payments with one
modification. Specifically, beginning in
CY 2016, we are adopting a policy that
all device pass-through payment
applications submitted through the
quarterly subregulatory process will be
subject to notice-and-comment
rulemaking in the next applicable OPPS
annual rulemaking cycle. However,
rather than denying an application
based on quarterly review, for
applications that we do not approve
based upon the evidence available
during the quarterly review process, we
will instead seek public comment on the
application in the next applicable
annual rulemaking cycle. Under this
final policy, all applications that are
approved upon quarterly review will
automatically be included in the next
applicable OPPS annual rulemaking
cycle, while submitters of applications
that are not approved upon quarterly
review will have the option of being
included in the next applicable OPPS
annual rulemaking cycle or
withdrawing their application from
consideration entirely. No special
reconsideration process would be
necessary, as no denial decision would
be made except through the annual
rulemaking process. Applicants will be
able to submit new data, such as clinical
trial results published in a peerreviewed journal, for consideration
during the public comment process for
the proposed rule. This process allows
those applications that we are able to
determine meet all the criteria for
device pass-through payment under the
quarterly review process to receive
timely pass-through payment status,
while still allowing for a transparent,
public review process for all
applications.
c. Criterion for Newness
Since the inception of transitional
pass-through payments for medical
devices on April 7, 2000, we have not
had any specific criteria to evaluate the
newness of the device for purposes of
determining eligibility and receiving

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
device pass-through payment under the
OPPS. We believe that one
consideration in determining whether a
new category is warranted should be
whether or not the device seeking such
new category status is itself new. We
believe that transitional pass-through
payments for devices under the OPPS
are intended as an interim measure to
allow for adequate payment for new
innovative technology while we collect
the necessary data to incorporate the
costs for these devices into the base APC
rate (66 FR 55861). Typically, there is a
lag of 2 to 3 years from the point when
a new device is first introduced on the
U.S. market (generally on the date that
the device receives FDA approval) until
it is reflected in our claims data.
Existing regulations at § 419.66(b)(1)
specify that, if required by the FDA, the
device must have received FDA
approval or clearance (except for a
device that has received an FDA
investigational device exemption (IDE)
and has been classified as a Category B
device by the FDA in accordance with
§§ 405.203 through 405.207 and 405.211
through 405.215 of the regulations), or
meet another appropriate FDA
exemption. This existing regulatory
provision does not address the issue of
how dated these device approvals,
clearances, or exemptions may be. As a
result, a device that has received FDA
approval, clearance, or exemption, and
has been available on the U.S. market
for several years, could apply for and
possibly be approved for pass-through
payments for a new device category if
the device is not described by any of the
existing (either currently active or
expired) categories established for
transitional device pass-through
payments. Over the years, we have
received applications for device passthrough payment for devices that have
been on the U.S. market for several
years. We do not believe that this is
consistent with the intent of the
regulation. Therefore, in the CY 2016
OPPS/ASC proposed rule (80 FR 39266),
we proposed to modify the medical
device eligibility requirement at
§ 419.66(b)(1) to provide that, not only
must a device, if required, receive FDA
premarket approval or clearance (except
for a device that has received an FDA
investigational device exemption (IDE)
and has been classified as a Category B
device by the FDA in accordance with
§§ 405.203 through 405.207 and 405.211
through 405.215 of the regulations) or
meet another appropriate FDA
exemption from premarket approval or
clearance, but also that, beginning with
applications submitted on or after
January 1, 2016, CMS will consider only

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applications for a medical device
submitted within 3 years from the date
of the initial FDA approval or clearance.
That is, we proposed to add a
requirement to ensure that medical
devices falling under § 419.66(b)(1) and
seeking device pass-through payment
must be ‘‘new.’’ This proposed
adjustment also would further align the
OPPS device pass-through process with
the IPPS process for new medical
services and new technology add-on
payments (42 CFR 412.87(b)(2) and 78
FR 50570) by adding the requirement
that the device be new. Specifically, we
proposed to reflect in § 419.66(b)(1) that,
beginning with applications submitted
on or after January 1, 2016, a device will
only be eligible for transitional passthrough payment under the OPPS if, in
cases where the device requires FDA
approval, clearance, or exemption, the
device meets the newness criterion; that
is, the date of original or initial FDA
approval or clearance and U.S. market
availability is within 3 years from the
date of the application for transitional
pass-through payment. We invited
public comments on this proposal.
Comment: Some commenters
supported the proposed newness
criterion. They believed that the
proposed newness criterion would
provide greater certainty for applicants
and that it would more closely align
with the IPPS new technology add-on
criteria.
Response: We appreciate the
commenters’ support. We agree that this
criterion will provide additional clarity
for device pass-through applicants.
Comment: Several commenters
opposed the proposed addition of the
newness criterion. They believed that
the criterion was unnecessary. Other
commenters offered alternative
proposals for defining newness that
mirror the FDA approval processes.
Specifically, some commenters
suggested that any application that was
approved by the FDA under the 510(k)
or PMA process should be considered
new, and some commenters suggested
that any technology, for which the FDA
establishes a new product code, be
considered ‘‘new’’ for purposes of
device pass-through payments. In
addition, the commenters who opposed
the newness criterion stated that it may
have unforeseen and unintended
consequences that could result in
limiting beneficiary access to beneficial
new technologies, with specific concern
about delay in availability on the U.S.
market or to limited sales that would
prevent generation of adequate claims
data.
Response: We believe that the
payment adjustment for transitional

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pass-through payments for devices
under the OPPS is intended as an
interim measure to allow for adequate
payment of a new innovative technology
while we collect the necessary data to
incorporate the costs for these devices
into the base APC rate (66 FR 55861).
We believe that instituting a newness
criterion will help to ensure that only
those devices that are truly new and that
could not have already been sufficiently
reflected in our claims data are eligible
to receive these enhanced payments. In
our experience, we have received
applications for devices that received
FDA approval several years prior to the
submission of the pass-through payment
application. Sometimes these devices
have not been well-adopted by the
medical community due to issues such
as changes in device ownership or
difficulties with coding and payment.
However, we believe that the primary
intent of transitional pass-through
payments is to address dissemination of
new technology. We believe that
adopting a newness criterion will help
ensure that applications that represent
devices newly available on the market
that have not had time to be
incorporated into the OPPS claims data
will be considered for the additional
pass-through payments.
In response to suggestions to use the
FDA definitions for newness, although
FDA approval or clearance is required
for a device pass-through payment
application to be considered (unless the
device is exempt, as described in
§ 419.66(b)(1)), we do not believe that a
new product code from the FDA, which
is used by FDA to classify and track a
medical device, is relevant in CMS’
consideration of whether the device is
new for the purposes of device passthrough payment. A new device, as
designated by the FDA, may be
substantially similar to an existing
technology. That is, even if a technology
receives a new FDA approval, it may not
be necessarily considered ‘‘new’’ for
purposes of device pass-through
payments under the OPPS because a
substantially similar product has been
approved by the FDA and has been on
the U.S. market for more than 2 to 3
years. Given the length of time that a
substantially similar product has been
on the U.S. market, its costs would
already be incorporated into the base
APC rate. Lastly, we note that the
newness criterion only applies to the 3year window in which an applicant can
apply for device pass-through payments
and does not affect the amount of time
that a new device would be eligible for
pass-through payments should it be
approved.

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Comment: One commenter suggested
that, similar to the IPPS new technology
add-on payment process, CMS should
follow a timeline for FDA approval of a
device by a date that coincides with the
ability to include the application in the
proposed rule. Specifically, the
commenter suggested that applicants be
required to have received FDA approval
by no later than the first business day
in June, in order to be considered in that
calendar year rulemaking process.
Response: We proposed to
supplement the quarterly device passthrough review process by adding a
yearly rulemaking process. Under this
proposed policy, which we are
finalizing in this final rule with
comment period, all applicants will
have already undergone a quarterly
review process prior to consideration in
the annual rulemaking. Under existing
policy, devices are already required to
have FDA approval or clearance, with
exceptions as noted at § 419.66(b)(1),
before a review can be completed.
Therefore, we do not believe that FDA
approval or clearance by a June 1 date
is necessary for the annual rulemaking
process.
We wish to clarify that we specified
‘‘initial’’ FDA clearance or approval in
§ 419.66(b)(1) because, in some cases,
the FDA will provide supplemental
approvals or clearances for a device
after the initial approval or clearance.
We intended to convey that the 3-year
timeframe for submitting a device passthrough payment application would be
triggered by the FDA initial approval or
clearance, and not by any subsequent
FDA approvals or clearances.
Comment: Some commenters noted
that new products frequently experience
delays in approval by FDA before these
technologies are available on the U.S.
market and recommended that the
period of newness begin with the date
of first sale. One commenter opposed
the proposed newness criterion but
requested that, if the agency finalized
the proposal, CMS develop necessary
exceptions to the newness criterion for
situations in which the 3-year newness
window would be ‘‘unreasonable.’’
Response: We understand the
commenters’ concerns about delays in
approved devices being available on the
U.S. market. We also note that the IPPS
new technology add-on process
recognizes a date later than the FDA
approval as the appropriate starting date
for ‘‘newness’’ if there is a documented
delay in market availability (69 FR
49002 through 49003). For the OPPS, we
believe that the payment adjustment for
transitional pass-through payments for
devices is intended as an interim
measure to allow for adequate payment

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of new innovative technology while we
collect the necessary data to incorporate
the costs for these devices into the base
APC rate (66 FR 55861). Typically, there
is a lag of 2 to 3 years from the point
when a new device is first introduced
on the U.S. market (generally on the
date that the device receives FDA
approval) until it is reflected in our
claims data. However, we recognize
that, in some cases, FDA approval or
clearance may not correspond to the
date upon which the device becomes
available on the U.S. market. That is, we
recognize that there may be cases where
the product initially is unavailable to
Medicare beneficiaries following FDA
approval, such as in cases of a delay in
bringing the product to the U.S. market
(for instance, manufacturing issues or
other Federal regulatory issues, such as
a national coverage determination of
noncoverage in the Medicare
population). Therefore, we are
modifying our proposal and will
consider newness to begin on the later
of initial FDA approval or clearance
date or U.S. market availability if there
is a documented, verifiable delay in
market availability.
Comment: One commenter suggested
that CMS delay the newness criterion
until CY 2017 rulemaking to allow for
more information and clarity.
Response: We believe that we have
received useful stakeholder input on
this proposal, and we are modifying our
proposal in response to concerns raised
by a number of commenters. We do not
agree that there is a need for delay in
implementation.
After consideration of the public
comments we received, we are
finalizing our proposal to add a newness
criterion (under the regulations at
§ 419.66(b)(1)) for CY 2016 for approval
of new device pass-through payments,
with a modification that newness will
begin on the later of the initial FDA
approval or clearance date or U.S.
market availability if there is a
documented, verifiable delay in market
availability.
3. 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

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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
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 passthrough payment amount for the eligible
device. 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. In the unusual
case where the device offset amount
exceeds the device pass-through
payment amount, the regular APC rate
would be paid.
We published a list of all procedural
APCs with the CY 2015 portions (both
percentages and dollar amounts) of the
APC payment amounts that we
determined 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 January 1, 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 pass-

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through process and payment
methodology only (74 FR 60476).
Beginning January 1, 2015, skin
substitutes are evaluated for passthrough status and payment using the
device pass-through evaluation process
(79 FR 66888).
b. CY 2016 Policy
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39267), we proposed to
continue, for CY 2016, 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 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
that are packaged into the existing APC
structure are associated with the new
category, we proposed to deduct the
device APC offset amount from the passthrough 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 addition, we proposed to update
the list of all procedural APCs with the
final CY 2016 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-Feefor-Service-Payment/
HospitalOutpatientPPS/index.html so
that this information is available for use
by the public in developing potential
CY 2016 device pass-through payment
applications and by CMS in reviewing
those applications.
In response to the CY 2016 OPPS/ASC
proposed rule, we received a few public
comments that related to aspects of the
pass-through device policy on which we
did not propose changes. The comments
addressed highly technical and
operational matters and pertained to
matters that are addressed in
subregulatory guidance. Therefore, we
believe these public comments are
outside of the scope of the proposed

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rule, and we are not addressing them in
this final rule with comment period. We
note that the public may contact us via
other means to discuss these types of
issues.
In this final rule with comment
period, we are finalizing the proposed
pass-through device policy for reducing
transitional pass-through payments to
offset costs packaged into APC groups,
without modification.
B. Device-Intensive Procedures
1. Background
Under the OPPS, device-intensive
APCs are defined as those APCs with a
device offset greater than 40 percent (79
FR 66795). In assigning device-intensive
status to an APC, the device costs of all
of the procedures within the APC are
calculated and the geometric mean
device offset of all of the procedures
must exceed 40 percent. Almost all of
the procedures assigned to deviceintensive APCs utilize devices, and the
device costs for the associated HCPCS
codes exceed the 40-percent threshold.
The no cost/full credit and partial credit
device policy (79 FR 66872 through
66873) applies to device-intensive APCs
and is discussed in detail in section
IV.B.3. of this final rule with comment
period. A related device policy is the
requirement that procedures assigned to
certain (formerly device-dependent)
APCs require the reporting of a device
code on the claim (79 FR 66795).
2. Changes to the Device Edit Policy
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66795), we
finalized a policy and implemented
claims processing edits that require any
of the device codes used in the previous
device-to-procedure edits to be present
on the claim whenever a procedure code
assigned to any of the APCs listed below
in Table 41 (the formerly devicedependent APCs) is reported on the
claim.

TABLE 41—APCS THAT REQUIRE A
DEVICE CODE TO BE REPORTED ON
A CLAIM WHEN A PROCEDURE ASSIGNED TO ONE OF THESE APCS IS
REPORTED FOR CY 2015
CY 2015
APC
0039
0061
0083
0084
0085
0086
0089
0090
0107

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.......
.......
.......
.......
.......
.......
.......
.......
.......

CY 2015 APC title
Level
Level
Level
Level
Level
Level
Level
Level
Level

Frm 00125

III Neurostimulator.
II Neurostimulator.
I Endovascular.
I EP.
II EP.
III EP.
III Pacemaker.
II Pacemaker.
I ICD.

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70421

TABLE 41—APCS THAT REQUIRE A
DEVICE CODE TO BE REPORTED ON
A CLAIM WHEN A PROCEDURE ASSIGNED TO ONE OF THESE APCS IS
REPORTED FOR CY 2015—Continued
CY 2015
APC
0108
0202
0227
0229
0259
0293
0318
0319
0384
0385
0386
0425
0427
0622
0648
0652
0655

.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......

CY 2015 APC title
Level II ICD.
Level V Gynecologic Procedures.
Implantation of Drug Infusion.
Level II Endovascular.
Level VII ENT Procedures.
Level IV Intraocular.
Level IV Neurostimulator.
Level III Endovascular.
GI Procedures with Stents.
Level I Urogenital.
Level II Urogenital.
Level V Musculoskeletal.
Level II Tube/Catheter.
Level II Vascular Access.
Level IV Breast Surgery.
Insertion of IP/Pl. Cath.
Level IV Pacemaker.

There are 10 APCs listed in Table 41
that are not device-intensive APCs; that
is, their device offsets do not exceed 40
percent. As discussed in the CY 2016
OPPS/ASC proposed rule (80 FR 39267),
we do not believe that we should
continue to require device codes on
claims for procedures that are not
assigned to device-intensive APCs
because the relative device costs do not
exceed the device-intensive threshold of
40 percent. Unlike with deviceintensive APCs, we believe it is not
necessary to require the reporting of a
device code for reporting device charges
on a claim because the relative device
costs are much less significant than
those associated with device-intensive
APCs. We believe that device code
reporting requirements should only
apply to the device-intensive APCs
because these APCs have significant
device costs that are associated with
particular devices. We noted that, in CY
2015 (79 FR 66794 through 66795), we
applied the device code reporting
requirements to those formerly devicedependent APCs that also met the
device-intensive APC definition.
However, as stated in the CY 2016
OPPS/ASC proposed rule (80 FR 39268),
after further consideration, we no longer
believe it is appropriate to restrict the
application of this policy to only the
subset of device-intensive APCs that
were formerly device-dependent and
now believe the device code reporting
requirements should apply to all deviceintensive APCs, regardless of whether or
not the APC was formerly devicedependent. We believe that the device
coding requirement should apply to

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procedures assigned to all deviceintensive APCs because these are the
APCs with significant device costs.
Therefore, for CY 2016, we proposed
that only the procedures that require the
implantation of a device that are
assigned to a device-intensive APC
would require a device code on the
claim. The list of device-intensive APCs
was listed in Table 38 of the CY 2016
OPPS/ASC proposed rule (80 FR 39268).
In the CY 2016 OPPS/ASC proposed
rule, we proposed that the claims
processing edits are such that any
device code, when reported on a claim
with a procedure assigned to an APC
listed in Table 38 of the proposed rule
(80 FR 39268), would satisfy the edit.
Claims submitted with a procedure code
requiring a device assigned to an APC
listed in Table 38 of the proposed rule,
but without any device code reported on
the claim, would be returned to the
provider.
Comment: A number of commenters
supported CMS’ proposal to apply
device code reporting requirements to
procedures that require the implantation
of a device and that are assigned to a
device-intensive APC. One commenter
who supported the proposal
recommended that CMS continue to
monitor claims to evaluate the need to
reinstate all device edits. Other
commenters urged CMS to reinstate
device-to-procedure edits. One
commenter expressed concern that
removal of procedure-to-device code
edits could potentially cause device-toprocedure code mismatches in the CY
2015 claims data, which, ultimately,
could result in incorrect APC payment
rates. One commenter requested that
CMS require device coding for any
procedure that has a device offset of
greater than 40 percent, regardless of
whether the procedure is assigned to a
device-intensive APC. A few
commenters requested that CMS remove
APC 5221 from the ‘‘device intensive’’
APC list because the procedures
described by the HCPCS codes assigned
to APC 5221 represent procedures for
device removal, revision, and repair,
which do not require or include the
device itself.
Response: We appreciate the
commenters’ support. We will continue
to monitor the claims data to ensure that
hospitals continue reporting appropriate
device codes on the claims for deviceintensive APCs. We continue to believe
that the elimination of device-toprocedure edits and procedure-to-device
edits is appropriate due to the
experience hospitals now have in
coding and reporting these claims fully.
For the more costly devices, we believe
the C–APCs will reliably reflect the cost

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of the device if charges for the device
are included anywhere on the claim. We
remind the 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. We also remind the
commenters that, as with all other items
and services recognized under the
OPPS, we expect hospitals to code and
report their device costs appropriately,
regardless of whether there are claims
processing edits in place. We do not
believe that our proposed policy will
result in device-to-procedure code
mismatches, which would require
miscoding by hospitals. We continue to
expect hospitals to use an appropriate
device code consistent with correct
coding in order to ensure that device
costs are always reported on the claim
and that costs are appropriately
captured in claims that CMS uses for
ratesetting.
In response to the commenter’s
request that CMS require device coding
for any procedure that has a device
offset of greater than 40 percent,
regardless of whether the procedure is
assigned to a device-intensive APC, we
note that we did not propose such a
policy change. However, we will take
this comment into consideration for
future rulemaking. We also note that
APC 5221 does not have a final device
offset of greater than 40 percent.
Therefore, we are not finalizing it as a
device-intensive APC for CY 2016.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, that, beginning in CY
2016, only the procedures that require
the implantation of a device that are
assigned to a device-intensive APC will
require a device code on the claim. We
also are finalizing, without
modification, our proposal that the
claims processing edits are such that
any device code, when reported on a
claim with a procedure assigned to an
APC listed in Table 42 below will
satisfy the edit.
Table 42 below lists the CY 2016
device-intensive APCs.

TABLE 42—CY 2016 DEVICEINTENSIVE APCS
Renumbered
CY 2016
APC
1565 .......
1599 .......

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CY 2016 APC title

New
Technology—Level
($5,000–$5,500).
New
Technology—Level
($90,000–$100,000).

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28
48

TABLE 42—CY 2016 DEVICEINTENSIVE APCS—Continued
Renumbered
CY 2016
APC
5125 .......
5166 .......
5192 .......
5193 .......
5222 .......
5223 .......
5224 .......
5231 .......
5232 .......
5377 .......
5462 .......
5463 .......
5464 .......
5471 .......
5493 .......
5494 .......

CY 2016 APC title

Level 5 Musculoskeletal Procedures.
Level 6 ENT Procedures.
Level 2 Endovascular Procedures.
Level 3 Endovascular Procedures.
Level 2 Pacemaker and Similar
Procedures.
Level 3 Pacemaker and Similar
Procedures.
Level 4 Pacemaker and Similar
Procedures.
Level 1 ICD and Similar Procedures.
Level 2 ICD and Similar Procedures.
Level 7 Urology and Related
Services.
Level 2 Neurostimulator and Related Procedures.
Level 3 Neurostimulator and Related Procedures.
Level 4 Neurostimulator and Related Procedures.
Implantation of Drug Infusion Device.
Level 3 Intraocular Procedures.
Level 4 Intraocular Procedures.

3. Adjustment to OPPS Payment for No
Cost/Full Credit and Partial Credit
Devices
a. Background
To ensure equitable OPPS payment
when a 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 were instructed to report no
cost/full credit device cases on the
claim 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,
hospitals are instructed to report a token
device charge of less than $1.01. In
cases in which the device being inserted
is an upgrade (either of the same type
of device or to a different type of device)
with a full credit for the device being
replaced, hospitals are instructed to
report as the device charge the
difference between the hospital’s usual
charge for the device being implanted
and the hospital’s usual charge for the

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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 were
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’’ modifiers
payment adjustment policies (72 FR
66743 through 66749).
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75005
through 75007), beginning in CY 2014,
we modified our 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 had 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
reduced OPPS payment, for the
applicable APCs, by the full or partial
credit a hospital receives for a replaced
device. Specifically, under this
modified policy, hospitals are required
to report on the claim 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 that is 50
percent or greater than the cost of the
device. For CY 2014, we also limited the
OPPS payment deduction for the
applicable APCs to the total amount of
the device offset when the ‘‘FD’’ value
code appears on a claim. For CY 2015,
we continued 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 and to use the three
criteria established in the CY 2007
OPPS/ASC final rule with comment
period (71 FR 68072 through 68077) for
determining the APCs to which our CY
2015 policy will apply (79 FR 66872
through 66873).
b. Policy for CY 2016
For CY 2016 and subsequent years, in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39268), we proposed to continue
our existing policy of reducing OPPS
payment for specified APCs when a

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hospital furnishes a specified device
without cost or with a full or partial
credit. Specifically, for CY 2016, we
proposed to continue to reduce the
OPPS payment, for the device-intensive
APCs listed in Table 38 of the proposed
rule (80 FR 39268), by the full or partial
credit a provider receives for a replaced
device. Under this proposed policy,
hospitals would continue to be required
to report on the claim the amount of the
credit in the amount portion for value
code ‘‘FD’’ when the hospital receives a
credit for a replaced device that is 50
percent or greater than the cost of the
device. In CY 2015 and prior years, we
specified a list of costly devices to
which this APC payment adjustment
would apply. As discussed in the CY
2016 OPPS/ASC proposed rule (80 FR
39269), upon further consideration of
our existing value code ‘‘FD’’ APC
payment adjustment policy and the
ability to deduct the actual amount of
the device credit from the OPPS
payment, regardless of the cost of the
individual device, instead of a
percentage of the device offset, we no
longer believe it is necessary to restrict
the application of this policy to a
specific list of costly devices (most
recently listed in Table 27 of the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66873)) as was
necessary under the ‘‘FB’’/‘‘FC’’
modifier payment adjustment policy,
which made APC payment adjustments
as a percentage of the applicable device
offset amount. Under the CY 2015
policy, the actual amount of the device
credit can be appropriately reported in
the amount portion of value code ‘‘FD’’
and deducted from the OPPS payment
for all no cost/full credit and partial
credit devices furnished in conjunction
with a procedure assigned to a deviceintensive APC. Therefore, for CY 2016
and subsequent years, we proposed to
no longer specify a list of devices to
which the OPPS payment adjustment
for no cost/full credit and partial credit
devices would apply. Instead, we
proposed to apply this APC payment
adjustment to all replaced devices
furnished in conjunction with a
procedure assigned to a device-intensive
APC when the hospital receives a credit
for a replaced specified device that is 50
percent or greater than the cost of the
device.
For CY 2016 and subsequent years, in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39269), we also proposed to
continue using the three criteria
established in the CY 2007 OPPS/ASC
final rule with comment period for
determining the APCs to which our
proposed CY 2016 policy would apply

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70423

(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 APC must be device-intensive; that
is, the device offset amount must be
significant, which is defined as
exceeding 40 percent of the APC cost.
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. As noted earlier in this
section, APCs with a device offset that
exceed the 40-percent threshold are
called device-intensive APCs.
Comment: A number of commenters
supported CMS’ proposed policy. One
commenter recommended that CMS
continue to provide lists of both the
device-intensive APCs and the device
HCPCS codes for which a credit would
need to be reported.
Response: We appreciate the
commenters’ support. As stated in the
proposed rule (80 FR 39269), we no
longer believe it is necessary to restrict
the application of this policy to a
specific list of costly devices as was
necessary under the ‘‘FB’’/‘‘FC’’
modifier payment adjustment policy.
Therefore, we no longer believe it is
necessary to specify a list of devices to
which the OPPS payment adjustment
for no cost/full credit and partial credit
devices would apply.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to reduce the
OPPS payment, for the device-intensive
APCs (listed in Table 42 of this final
rule with comment period), by the full
or partial credit a provider receives for
a replaced device. We also are finalizing
our proposal, without modification, to
no longer specify a list of devices to
which the OPPS payment adjustment
for no cost/full credit and partial credit
devices would apply and instead, apply
this APC payment adjustment to all
replaced devices furnished in
conjunction with a procedure assigned

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to a device-intensive APC when the
hospital receives a credit for a replaced
specified device that is 50 percent or
greater than the cost of the device. In
addition, we are finalizing our proposal,
without modification, to continue using
the three criteria established in the CY
2007 OPPS/ASC final rule with
comment period for determining the
APCs to which the CY 2016 device
intensive policy will apply.
As discussed in the CY 2016 OPPS/
ASC proposed rule (80 FR 39269), we
examined the offset amounts calculated
from the CY 2016 claims data and the
clinical characteristics of the CY 2016
APCs to determine which APCs meet
the criteria for CY 2016. The full list of
device-intensive APCs to which the
payment adjustment policy for no cost/
full credit and partial credit devices
would apply in CY 2016 is included in
Table 42 of this final rule with comment
period.
4. Adjustment to OPPS Payment for
Discontinued Device-Intensive
Procedures
It has been our longstanding policy to
instruct hospitals to use an appropriate
modifier on a claim to report when a
procedure is discontinued, partially
reduced, or canceled. Specifically, when
appropriate, hospitals are instructed to
append modifiers ‘‘73,’’ ‘‘74,’’ and ‘‘52’’
to report and be paid for expenses
incurred in preparing a patient for a
procedure and scheduling a room for
performing the procedure where the
service is subsequently discontinued
(Medicare Claims Processing Manual
(Pub. 100–04, Chapter 4, Section 20.6.4).
The circumstances identifying when it
is appropriate to append modifier ‘‘73,’’
‘‘74,’’ or ‘‘52’’ to a claim are detailed
below.
Modifier ‘‘73’’ is used by the hospital
to indicate that a procedure requiring
anesthesia was terminated due to
extenuating circumstances or to
circumstances that threatened the wellbeing of the patient after the patient had
been prepared for the procedure
(including procedural pre-medication
when provided), and been taken to the
room where the procedure was to be
performed, but prior to administration
of anesthesia. For purposes of billing for
services furnished in the HOPD,
anesthesia is defined to include local,
regional block(s), moderate sedation/
analgesia (‘‘conscious sedation’’), deep
sedation/analgesia, or general
anesthesia. Modifier ‘‘73’’ was created
so that the costs incurred by the hospital
to prepare the patient for the procedure
and the resources expended in the
procedure room and recovery room (if
needed) could be recognized for

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payment even though the procedure was
discontinued. Modifier ‘‘73’’ results in a
payment rate of 50 percent of the full
OPPS payment for the procedure.
Modifier ‘‘74’’ is used by the hospital
to indicate that a procedure requiring
anesthesia was terminated after the
induction of anesthesia or after the
procedure was started (for example, the
incision made, the intubation started,
and the scope inserted) due to
extenuating circumstances or to
circumstances that threatened the wellbeing of the patient. This modifier may
also be used to indicate that a planned
surgical or diagnostic procedure was
discontinued, partially reduced, or
canceled at the physician’s discretion
after the administration of anesthesia.
For purposes of billing for services
furnished in the HOPD, anesthesia is
defined to include local, regional
block(s), moderate sedation/analgesia
(‘‘conscious sedation’’), deep sedation/
analgesia, or general anesthesia.
Modifier ‘‘74’’ was created so that the
costs incurred by the hospital to initiate
the procedure (preparation of the
patient, procedure room, and recovery
room) could be recognized for payment
even though the procedure was
discontinued prior to completion.
Modifier ‘‘74’’ results in a payment rate
of 100 percent of the full OPPS payment
for the procedure.
Modifier ‘‘52’’ was revised in CY 2012
and is used by the hospital to indicate
partial reduction, cancellation, or
discontinuation of services for which
anesthesia is not planned. (We refer
readers to the January 2012 Update of
the Hospital Outpatient Prospective
Payment System (OPPS), Transmittal
2386, Change Request 7672, dated
January 13, 2012.) The modifier
provides a means for reporting reduced
services without disturbing the
identification of the basic service.
Modifier ‘‘52’’ results in a payment rate
of 50 percent of the full OPPS payment
for the procedure.
When a procedure assigned to a
device-intensive APC is discontinued
either prior to administration of
anesthesia or for a procedure that does
not require anesthesia, we presume that,
in the majority of cases, the device was
not used and remains sterile such that
it could be used for another case. In
these circumstances, under current
policy, hospitals could be paid twice by
Medicare for the same device, once for
the initial procedure that was
discontinued and again when the device
is actually used. Accordingly, for CY
2016, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39269 through
39270), we proposed that, for
procedures involving implantable

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devices that are assigned to a deviceintensive APC (defined as those APCs
with a device offset greater than 40
percent), we would reduce the APC
payment amount for discontinued
device-intensive procedures, where
anesthesia has not been administered to
the patient or the procedure does not
require anesthesia, by 100 percent of the
device offset amount prior to applying
the additional payment adjustments that
apply when the procedure is
discontinued. We proposed to restrict
the policy to device-intensive APCs so
that the adjustment would not be
triggered by the use of an inexpensive
device whose cost would not constitute
a significant portion of the total
payment rate for an APC. We did not
propose to deduct the device offset
amount from a procedure that was
discontinued after anesthesia was
administered (modifier ‘‘74’’) because
we believe that it may be more likely
that devices involved with such
procedures may no longer be sterile,
such that they could be restocked and
used for another case. However, we
solicited public comments on how often
the device becomes ineligible for use in
a subsequent case and whether we
should deduct the device offset amount
from claims with modifier ‘‘74’’ as well.
In addition, we proposed to amend the
existing regulations at 42 CFR 419.44(b)
accordingly.
Comment: Commenters generally
opposed the proposal. The commenters
disagreed with CMS’ assumption that
devices involved in discontinued
procedures were able to be used for
another case. One commenter noted, for
example, that a nurse may unpack and
breach the sterility of implantable
devices and other sterile supplies prior
to the decision to proceed with the
surgery and before the administration of
anesthesia. The commenters also noted
that companies do not routinely provide
information on how to resterilize the
devices after the packaging has been
opened. The commenters urged CMS
not to finalize the proposals, absent a
study or evidence that showed that
devices remain sterile in discontinued
procedures.
Response: We note that the
commenters did not provide a clinical
reason for why an implantable device
would need to be opened in advance of
a procedure. Although we acknowledge
that some hospitals may choose to open
devices prior to the start of the surgery,
we do not believe that this practice is
necessary. We continue to believe that,
in the majority of cases, supplies for a
procedure can be arrayed in advance of
the procedure, and that implantable
devices that are assigned to a device-

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
intensive APC could be opened when
ready for insertion. Further, in the case
of a device that became unsterile but
was not ultimately used in a procedure,
in addition to information that is
already available from the FDA about
resterilizing reusable medical devices,
we note that the manufacturer may
provide information on how to
‘‘resterilize’’ such a device. We would
expect that the hospital would take
necessary steps to avoid having to throw
away an unused device, especially in
circumstances involving expensive
devices.
Comment: Some commenters
supported CMS’ existing policy to
reduce the APC payment for procedures
that were discontinued, but requested
that CMS not reduce any of the device
cost associated with the procedure.
Specifically, the commenters requested
that CMS: (1) Reduce the full APC
payment amount by the device offset;
(2) apply the discontinued procedure
reduction; and (3) add back to the full
device offset amount the reduced
payment rate to arrive a payment rate
that incorporates the cost of the
discarded device and supplies related to
the procedure.
Response: We continue to believe that
device costs are not incurred when the
device remains unopened and sterile.
While there may be some scenarios
under which a device is opened prior to
the decision to cancel the procedure, the
OPPS is based on a system of averages,
and we believe that, overall, those
instances will be balanced by those
cases where the device that would have
been used is not opened prior to the
decision to cancel the procedure. As
discussed later in this section, we are
not finalizing our proposal with respect
to cases for which anesthesia is not
planned (modifier ‘‘52’’). Accordingly,
the device offset amount will not be
deducted from device-intensive
procedures involving modifier ‘‘52.’’
Comment: Several commenters urged
CMS to review the use of revenue code
0278 for claims that included modifier
‘‘52’’ or ‘‘73.’’ One commenter noted
that, because the OPPS is a system
based on averages, if the number of
discontinued procedures under
Medicare is small, payment for device
costs associated with such procedures
where the device is opened but unused
is likely to be balanced out by other
cases involving the device.
Another commenter stated that, in the
absence of a study or other evidence
that demonstrated that devices remain
sterile in procedures with modifiers
‘‘52’’ and ‘‘73’’ appended to the claim,
it is inappropriate to implement the
proposed payment reductions. Several

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commenters cited to an external
analysis of 1,500 claims that had a
device-intensive procedure code
reporting either modifier ‘‘52’’ or ‘‘73’’
where approximately two-thirds of the
time, these claims also contained a
charge using revenue code 0278. Some
commenters requested that CMS
conduct a more detailed analysis of the
proposed policy to better understand
whether devices can be used for another
case. One commenter requested that
CMS provide information in the final
rule on the number of claims for deviceintensive procedures on which modifier
‘‘52’’ or ‘‘73’’ is appended.
Another commenter suggested that a
hospital could apply a token charge for
the device as a mechanism to note that
the device was opened on a canceled
procedure because the use of modifier
‘‘52’’ or ‘‘73’’ does not provide specific
information on whether or not the
device was opened. The commenter
believed that the token charge would
provide a mechanism for gathering
information that would inform whether
the use of these modifiers should reduce
the overall APC payment by the full
offset amount and the 50-percent
reduction in payment.
Some commenters noted that, because
the APC payment is based on the
average cost of all cases, the APC
weights should already reflect a reduced
cost for the unused device based on the
mechanics of CMS’ costing methodology
and, therefore, this policy may penalize
the hospital twice.
Response: In response to commenters’
request, we analyzed Medicare claims
data from CY 2014. We found that,
among those claims that contained
modifier ‘‘52’’ or ‘‘73,’’ charges under
revenue code 0278 (Implantable Device)
for device-intensive procedures were
rare. Specifically, we found that, for
device-intensive procedures, there were
597 claims on which modifier ‘‘52’’ was
appended, and 116 claims on which
modifier ‘‘73’’ was appended. Based on
a total of 527,138 device-intensive
procedures performed in CY 2014, we
determine that approximately 0.14
percent of device-intensive procedures
are canceled prior to anesthesia or do
not require anesthesia.
In response to the comments
regarding use of revenue code 0278, we
remind the commenters that a charge
under revenue code 0278 should only
be posted when the cost associated with
an implantable device is incurred. With
respect to the suggestion to require a
token charge for devices that were
compromised in canceled procedures,
we note that we are already able to
gather information regarding canceled
procedures through the use of revenue

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70425

code 0278 on claims that also contain
modifier ‘‘52,’’ ‘‘73,’’ or ‘‘74.’’ Therefore,
we disagree that there is a need to add
a token charge for the purpose of
identifying when a device was opened
on a canceled procedure.
With respect to the comment that the
APC relative weights already reflect the
cost of canceled procedures, we note
that, to the extent that a device is
unused for the canceled procedure and
is instead used on another case, the APC
payment rate may be inappropriately
inflated because the cost of the unused
device may be included in the canceled
procedure case (as evidenced by charges
on the claim for the device). Therefore,
we continue to believe that it is
appropriate to deduct the device offset
for discontinued procedures reported on
claims to which modifier ‘‘73’’ is
appended. As discussed below, we are
not finalizing our proposal to deduct the
device offset amount from the APC
payment amount for device procedures
for which modifier ‘‘52’’ is appended to
the claim.
Comment: One commenter asked
CMS to clarify the use of modifier ‘‘52’’
on claims for device-intensive
procedures because the commenter
believed it would be a rare occurrence
that an implantable device would be
used for a procedure for which
anesthesia was not planned.
Response: Our analysis of CY 2014
Medicare claims data confirms that
modifier ‘‘52,’’ which is used for
procedures for which anesthesia was
not planned, is rarely appended with a
device-intensive procedure. We agree
with the commenter that it would be
rare that an implantable device would
be used for procedures for which
anesthesia was not planned because
anesthesia is commonly used in
procedures that involve surgically
implanting a device. Accordingly, we
are not finalizing our proposal to deduct
the device offset amount from deviceintensive APC payment amounts for
discontinued procedures involving
modifier ‘‘52.’’
Comment: Commenters supported
CMS’ decision not to include the use of
modifier ‘‘74’’ under the proposed
policy. The commenters stated that, in
cases in which the device implantation
is canceled after receipt of anesthesia, it
was likely that sterile devices would
have been opened and rendered useless
for another patient and the facility will
have incurred the full cost of the device.
Response: We appreciate the insights
offered in response to our solicitation
for comment on whether to deduct the
device offset amount when a device
procedure case is canceled after

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administration of anesthesia (modifier
‘‘74’’).
After consideration of the public
comments we received, we are
finalizing our proposed policy, with
modification, under the regulation at
§ 419.44(b). Specifically, for procedures
involving implantable devices that are
assigned to a device-intensive APC
(defined as those APCs with a device
offset greater than 40 percent), we will
reduce the APC payment amount for
discontinued device-intensive
procedures, where anesthesia has not
been administered to the patient (as
evidenced by the presence of modifier
‘‘73’’), by 100 percent of the device
offset amount prior to applying the
additional payment adjustments that
apply when the procedure is
discontinued. As discussed earlier in
this section, we are not finalizing this
policy for procedures for which
anesthesia is not planned and the
procedure is discontinued (as evidenced
by the presence of modifier ‘‘52’’).
V. OPPS Payment Changes for Drugs,
Biologicals, and Radiopharmaceuticals

jstallworth on DSK7TPTVN1PROD with RULES

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.
Throughout this final rule with
comment period, the term ‘‘biological’’
is used because this is the term that
appears in section 1861(t) of the Act.
‘‘Biological’’ as used in this final rule
with comment period includes (but is
not necessarily limited to) ‘‘biological
product’’ or ‘‘biologic’’ as defined in the
Public Health Service Act. 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; 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 Medicare 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

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‘‘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. CY 2016
pass-through drugs and biologicals and
their designated APCs are assigned
status indicator ‘‘G’’ in Addenda A and
B to this final rule with comment
period, which are available via the
Internet on the CMS Web site.
Section 1833(t)(6)(D)(i) of the Act
specifies that the pass-through payment
amount, in the case of a drug or
biological, is the amount by which the
amount determined under section
1842(o) of the Act for the drug or
biological exceeds the portion of the
otherwise applicable Medicare OPD fee
schedule that the Secretary determines
is associated with the drug or biological.
If the drug or biological is covered
under a competitive acquisition contract
under section 1847B of the Act, the
pass-through payment amount is
determined by the Secretary to be equal
to the average price for the drug or
biological for all competitive acquisition
areas and the year established under
such section as calculated and adjusted
by the Secretary. However, we note that
the Part B drug competitive acquisition
program (CAP) has been postponed
since CY 2009, and such a program has
not been reinstated for CY 2016.
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

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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 Payment Status in CY
2015
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39270), we proposed that
the pass-through status of 12 drugs and
biologicals would expire on December
31, 2015, as listed in Table 39 of the
proposed rule (80 FR 39271). 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, 2015. These
drugs and biologicals were approved for
pass-through status on or before January
1, 2014. With the exception of those
groups of drugs and biologicals that are
always packaged when they do not have
pass-through status (specifically,
anesthesia drugs; drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure (including diagnostic
radiopharmaceuticals, contrast agents,
and stress agents); 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 $100 for CY 2016), as
discussed further in section V.B.2. of the
proposed rule and 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 proposed
to 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 proposed to provide
separate payment at the applicable
relative ASP-based payment amount
(which is ASP+6 percent for CY 2016,
as discussed further in section V.B.3. of
the proposed rule and this final rule
with comment period).
Comment: A few commenters
recommended that CMS continue pass-

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
through payment status for new drugs,
specifically diagnostic
radiopharmaceuticals and contrast
agents, for a full 3 years. The
commenters asserted that providing
pass-through payment status for 3 years
would help provide a more current and
accurate data set on which to base
payment amounts of the procedure
when the diagnostic
radiopharmaceutical or contrast agent is
subsequently packaged. The
commenters further recommended that
CMS expire pass-through payment
status for drugs and biologicals on a
quarterly as opposed to an annual basis.
Response: We appreciate the
commenters’ recommendation that we
authorize OPPS pass-through payment
for new drugs, including contrast agents
and diagnostic radiopharmaceuticals,
for 3 full years and that we expire passthrough status on a quarterly basis.
While we are not accepting this
recommendation for CY 2016, we will
take it under consideration as we review
our OPPS pass-through payment policy
for CY 2017.

However, for CY 2016, as we stated in
the CYs 2012 through 2015 OPPS/ASC
final rules with comment period (76 FR
74287; 77 FR 68363; 78 FR 75010; and
79 FR 66875, respectively), 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 years, but not more
than 3 years, after the product’s first
payment as a hospital outpatient service
under the OPPS. 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
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
payment status proposed and finalized
through the annual rulemaking process.
Each year, when proposing to expire the
pass-through payment status of certain
drugs and biologicals, we examine our
claims data for these products. We

70427

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
payment 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 passthrough payment status, which is at
least 2 but no more than 3 years, is
appropriate for CMS to collect the
sufficient amount of data to make a
packaging determination.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to expire the pass-through
payment status of the 12 drugs and
biologicals listed in Table 43 below.
Table 43 lists the drugs and biologicals
for which pass-through payment status
will expire on December 31, 2015, the
status indicators, and the assigned APCs
for CY 2016.

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TABLE 43—DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH PAYMENT STATUS EXPIRES DECEMBER 31, 2015
CY 2016
HCPCS code

CY 2016 long descriptor

Final CY 2016
status
indicator

A9520 ..........
C9132 ..........
J1556 ..........
J3060 ..........
J7315 ..........
J7316 ..........
J9047 ..........
J9262 ..........
J9354 ..........
J9400 ..........
Q4122 .........
Q4127 .........

Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries ................................................
Prothrombin complex concentrate (human), Kcentra, per i.u. of Factor IX activity ......................
Injection, immune globulin (Bivigam), 500 mg ...............................................................................
Injection, taliglucerase alfa, 10 units ..............................................................................................
Mitomycin, ophthalmic, 0.2 mg ......................................................................................................
Injection, Ocriplasmin, 0.125mg .....................................................................................................
Injection, carfilzomib, 1 mg ............................................................................................................
Injection, omacetaxine mepesuccinate, 0.01 mg ...........................................................................
Injection, ado-trastuzumab emtansine, 1 mg .................................................................................
Injection, Ziv-Aflibercept, 1 mg ......................................................................................................
Dermacell, per square centimeter ..................................................................................................
Talymed, per square centimeter ....................................................................................................

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

3. Drugs, Biologicals, and
Radiopharmaceuticals With New or
Continuing Pass-Through Payment
Status in CY 2016
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39271), we proposed to
continue pass-through payment status
in CY 2016 for 32 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, 2015.
These drugs and biologicals, which
were approved for pass-through status
between January 1, 2013, and July 1,
2015, were listed in Table 40 of the
proposed rule (80 FR 39272). The APCs
and HCPCS codes for these drugs and
biologicals approved for pass-through
status through July 1, 2015 were

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assigned status indicator ‘‘G’’ in
Addenda A and B to the proposed rule.
Addenda A and B to 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

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Final CY 2016
APC
N/A
9132
9130
9294
N/A
9298
9295
9297
9131
9296
N/A
N/A

consistent with the statute to propose to
continue to provide payment for drugs
and biologicals with pass-through status
at a proposed rate of ASP+6 percent in
CY 2016, which is the amount that
drugs and biologicals receive under
section 1842(o) of the Act.
Therefore, for CY 2016, 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 2016. We proposed that a
$0.00 pass-through payment amount
would be paid for most pass-through
drugs and biologicals under the CY 2016
OPPS because the difference between
the amount authorized under section
1842(o) of the Act, which was proposed
at ASP+6 percent, and the portion of the

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otherwise applicable OPD fee schedule
that the Secretary determines is
appropriate, which was proposed at
ASP+6 percent, is $0.
In the case of policy-packaged drugs
(which include the following: Contrast
agents; diagnostic radiopharmaceuticals;
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), we proposed that
their pass-through payment amount
would be equal to ASP+6 percent for CY
2016 because, if not for their passthrough 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 2016 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 68632
through 68635).
In CY 2016, as is consistent with our
CY 2015 policy for diagnostic and
therapeutic radiopharmaceuticals, we
proposed to provide payment for both
diagnostic and therapeutic
radiopharmaceuticals that are granted
pass-through payment 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 payment status during CY 2016,
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
was proposed at 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 pass-through drugs
and biologicals without ASP
information. If WAC information also is
not available, we proposed to provide
payment for the pass-through
radiopharmaceutical at 95 percent of its
most recent AWP.
Comment: Several commenters
supported CMS’ proposal to provide
payment at ASP+6 percent for drugs,
biologicals, contrast agents, and
radiopharmaceuticals that are granted
pass-through payment status. A few
commenters requested that CMS

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provide an additional payment for
radiopharmaceuticals that are granted
pass-through payment status.
Response: As discussed above, the
statute provides that mandated passthrough payment for pass-through drugs
and biologicals for CY 2015 equals the
amount determined under section
1842(o) of the Act minus the portion of
the otherwise applicable APC payment
that CMS determines is associated with
the drug or biological. Therefore, the
pass-through payment is determined by
subtracting the otherwise applicable
payment amount under the OPPS
(ASP+6 percent for CY 2015) from the
amount determined under section
1842(o) of the Act (ASP+6 percent).
Regarding the commenters’ request
that CMS provide an additional
payment for radiopharmaceuticals that
are granted pass-through payment
status, we note that, for CY 2016,
consistent with our CY 2015 payment
policy for diagnostic and therapeutic
radiopharmaceuticals, we proposed to
provide payment for both diagnostic
and therapeutic radiopharmaceuticals
with pass-through payment status based
on the ASP methodology. As stated
above, the ASP methodology, as applied
under the OPPS, uses several sources of
data as a basis for payment, including
the ASP, the WAC if the ASP is
unavailable, and 95 percent of the
radiopharmaceutical’s most recent AWP
if both the 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 payment status
during CY 2016, we proposed to follow
the standard ASP methodology to
determine its pass-through payment rate
under the OPPS to account for the
acquisition and pharmacy overhead
costs, including compounding costs. We
continue to believe that a single
payment is appropriate for diagnostic
radiopharmaceuticals with pass-through
payment status in CY 2016, and that the
payment rate of ASP+6 percent (or WAC
or AWP if ASP is not available) is
appropriate to provide payment for both
a radiopharmaceutical’s acquisition cost
and any associated nuclear medicine
handling and compounding costs. We
refer readers to section V.B.3. of this
final rule with comment period for
further discussion of payment for
therapeutic radiopharmaceuticals based
on ASP information submitted by
manufacturers. We also refer readers to
the CMS Web site at: https://
www.cms.gov/Medicare/Medicare-Feefor-ServicePayment/Hospital
OutpatientPPS/Hospital-Outpatient-

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Regulations-and-Notices-Items/CMS1633-P.html.
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
payment status based on the ASP
methodology. If a diagnostic or
therapeutic radiopharmaceutical
receives pass-through payment status
during CY 2016, 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 also is 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 the proposed rule and this
final rule with comment period, we
implemented a policy whereby payment
for the following nonpass-through items
is packaged into payment for the
associated procedure: Policy-packaged
drugs that include drugs, biologicals,
and radiopharmaceuticals that function
as supplies when used in a diagnostic
test or procedure (including but not
limited to contrast agents, stress agents,
and diagnostic radiopharmaceuticals),
anesthesia drugs; and drugs and
biologicals that function as supplies
when used in a surgical procedure (for
example, skin substitutes). 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 payment
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 policy-packaged drug
APC offset amounts is described in more
detail in section V.A.4. 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
also would offset from payment for the

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
drug or biological if a payment offset
applies) of the total OPPS payment for
those drugs and biologicals, therefore,
would be accounted for in the
copayment for the associated clinical
APC in which the drug or biological is
used. Section 1833(t)(8)(E) of the Act
provides that 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 2015, we proposed to
continue to set the associated
copayment amount to zero for CY 2016
for pass-through drugs and biologicals
that would otherwise be packaged if the
item did not have pass-through payment
status. The 32 drugs and biologicals that
we proposed to continue to have passthrough payment status for CY 2016 or
have been granted pass-through
payment status as of July 2015 were
shown in Table 40 of the proposed rule
(80 FR 39272).
Comment: Commenters supported the
proposal to continue to set to zero the

associated copayment amounts for passthrough diagnostic
radiopharmaceuticals and contrast
agents that would otherwise be
packaged if the product did not have
pass-through payment status for CY
2016. The commenters noted that this
policy is consistent with statutory
requirements and provides cost-saving
benefits to Medicare beneficiaries.
Response: We appreciate the
commenters’ support. As discussed in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39271 through 39272), we
believe that, for drugs and biologicals
that are ‘‘policy-packaged,’’ the
copayment for the nonpass-through
payment portion of the total OPPS
payment for this subset of drugs and
biologicals is accounted for in the
copayment of the associated clinical
APC in which the drug or biological is
used. Section 1833(t)(8)(E) of the Act
provides that the amount of copayment
associated with pass-through items is
equal to the amount of copayment that
would be applicable if the pass-through

70429

adjustment was not applied. Therefore,
we believe that the copayment amount
should be zero for drugs and biologicals
that are ‘‘policy-packaged,’’ including
diagnostic radiopharmaceuticals and
contrast agents. We also believe that the
copayment amount should be zero for
pass-through anesthesia drugs that
would otherwise be packaged if the item
did not have pass-through payment
status.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to set the
associated copayment amount for passthrough diagnostic
radiopharmaceuticals, contrast agents,
and anesthesia drugs that would
otherwise be packaged if the item did
not have pass-through payment status to
zero for CY 2016 and for future years.
The 38 drugs and biologicals that
continue pass-through payment status
for CY 2016 or have been granted passthrough payment status as of January
2016 are shown in Table 44 below.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 44—DRUGS AND BIOLOGICALS WITH PASS-THROUGH PAYMENT STATUS IN CY 2016
CY 2015
HCPCS
code

CY 2016
HCPCS
code

CY 2016 long descriptor

CY 2016
status
indicator

A9586 ....
C9025 ....
C9026 ....
C9027 ....
C9349 ....
C9442 ....
C9443 ....
C9444 ....
C9445 ....
C9446 ....
C9447 ....
C9449 ....
C9450 ....
C9451 ....
C9452 ....
C9453 ....
C9454 ....
C9455 ....
C9497 ....
C9022 ....
Q9970 ....
J1446 .....
C9023 ....
C9134 ....
C9133 ....
C9135 ....
J7508 .....
C9021 ....
J9371 .....
Q4121 ....
Q9975 ....
Q9978 ....
C9456 ....
C9457 ....
N/A .........
N/A .........
N/A .........
Q5101 ....

A9586 ....
J9035 .....
J3380 .....
C9027 ....
C9349 ....
J9032 .....
J0875 .....
J2407 .....
J0596 .....
J3090 .....
C9447 ....
J9039 .....
J7313 .....
J2547 .....
J0695 .....
J9299 .....
J2502 .....
J2860 .....
C9497 ....
J1322 .....
J1439 .....
J1446 .....
J3145 .....
J7181 .....
J7200 .....
J7201 .....
J7508 .....
J9301 .....
J9371 .....
Q4121 ....
J7205 .....
J8655 .....
J1833 .....
Q9950 ....
C9458 ....
C9459 ....
C9460 ....
Q5101 ....

Florbetapir f18, diagnostic, per study dose, up to 10 millicuries ....................................
Injection, ramucirumab, 5 mg ..........................................................................................
Injection, vedolizumab, 1 mg ..........................................................................................
Injection, pembrolizumab, 1 mg ......................................................................................
PuraPly, and PuraPly Antimicrobial, any type, per square centimeter ...........................
Injection, belinostat, 10 mg .............................................................................................
Injection, dalbavancin, 5 mg ...........................................................................................
Injection, oritavancin, 10 mg ...........................................................................................
Injection, c-1 esterase inhibitor (human), Ruconest, 10 units ........................................
Injection, tedizolid phosphate, 1 mg ...............................................................................
Injection, phenylephrine and ketorolac, 4 ml vial ............................................................
Injection, blinatumomab, 1 mcg ......................................................................................
Injection, fluocinolone acetonide intravitreal implant, 0.01 mg .......................................
Injection, peramivir, 1 mg ................................................................................................
Injection, ceftolozane 50 mg and tazobactam 25 mg .....................................................
Injection, nivolumab, 1 mg ..............................................................................................
Injection, pasireotide long acting, 1 mg ..........................................................................
Injection, siltuximab, 10 mg .............................................................................................
Loxapine, inhalation powder, 10 mg ...............................................................................
Injection, elosulfase alfa, 1mg .........................................................................................
Injection, ferric carboxymaltose, 1 mg ............................................................................
Injection, TBO-Filgrastim, 5 micrograms .........................................................................
Injection, testosterone undecanoate, 1 mg .....................................................................
Factor XIII (antihemophilic factor, recombinant), Tretten, per i.u ...................................
Factor ix (antihemophilic factor, recombinant), Rixubus, per i.u ....................................
Factor ix (antihemophilic factor, recombinant), Alprolix, per i.u .....................................
Tacrolimus, Extended Release, Oral, 0.1 mg .................................................................
Injection, obinutuzumab, 10 mg ......................................................................................
Injection, Vincristine Sulfate Liposome, 1 mg .................................................................
Theraskin, per square centimeter ...................................................................................
Injection, factor viii, fc fusion protein, (recombinant), per i.u ..........................................
Netupitant (300mg) and palonosetron (0.5 mg) ..............................................................
Injection, isavuconazonium sulfate, 1 mg .......................................................................
Injection, sulfur hexafluoride lipid microsphere, per ml ..................................................
Florbetaben F18, diagnostic, per study dose, up to 8.1 millicuries ................................
Flutemetamol F18, diagnostic, per study dose, up to 5 millicuries ................................
Injection, cangrelor, 1 mg ................................................................................................
Injection, Filgrastim (G–CSF), Biosimilar, 1 microgram ..................................................

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

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13NOR2

CY 2016
APC
1664
1488
1489
1490
1657
1658
1659
1660
9445
1662
1663
9449
9450
9451
9452
9453
9454
9455
9497
1480
9441
1477
1487
1746
1467
1486
1465
1476
1466
1479
1656
9448
9456
9457
9458
9459
9460
1822

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

4. Provisions for Reducing Transitional
Pass-Through Payments for PolicyPackaged Drugs and Biologicals To
Offset Costs Packaged Into APC Groups

jstallworth on DSK7TPTVN1PROD with RULES

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 and
radiology 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 non-pass-through diagnostic
radiopharmaceuticals and contrast
agents were packaged as a matter of
policy.
Beginning in CY 2014, in the CY 2014
OPPS/ASC final rule with comment
period (78 FR 74925), we finalized a
policy to package nonpass-through
drugs, biologicals, and
radiopharmaceuticals that function as
supplies when used in a diagnostic test
or procedure. This category includes
diagnostic radiopharmaceuticals,
contrast agents, stress agents, and other
diagnostic drugs. In addition, beginning
in CY 2014, we finalized the packaging
of all drugs and biologicals that function
as supplies when used in a surgical
procedure (including but not limited to
skin substitutes and implantable
biologicals). These packaging policies
are codified at 42 CFR 419.2(b).
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. Because a payment offset is
necessary in order to provide an
appropriate transitional pass-through
payment, we deduct from the passthrough payment for diagnostic
radiopharmaceuticals an amount
reflecting the portion of the APC
payment associated with predecessor

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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. 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 2016, as we did in CY 2015, we
proposed to continue to apply the
diagnostic radiopharmaceutical offset
policy to payment for pass-through
diagnostic radiopharmaceuticals. In the
proposed rule, we indicated that, for CY
2016, there will be three diagnostic
radiopharmaceuticals with pass-through
payment status under the OPPS: (1)
HCPCS code A9586 (Florbetapir f18,
diagnostic, per study dose, up to 10
millicuries); (2) HCPCS code C9458
(Florbetaben F18, diagnostic, per study
dose, up to 8.1 millicuries); and (3)
HCPCS code C9459 (Flutemetamol F18,
diagnostic, per study dose, up to 5
millicuries). We currently apply the
established radiopharmaceutical
payment offset policy to pass-through
payment for these products.
Table 41 of the proposed rule (80 FR
39273) displayed the proposed APCs to
which nuclear medicine procedures
would be assigned in CY 2016 and for
which we expect that an APC offset
could be applicable in the case of
diagnostic radiopharmaceuticals with
pass-through status.
We did not receive any public
comments on our proposed policy.
Therefore, we are finalizing our
proposal, without modification, to
continue to apply the diagnostic
radiopharmaceutical offset policy to
payment for pass-through diagnostic
radiopharmaceuticals. We will continue
to reduce the payment amount for

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procedures in the APCs listed in Table
45 in this final rule with comment
period by the full policy-packaged offset
amount appropriate for diagnostic
radiopharmaceuticals. Table 45 below
displays the APCs to which nuclear
medicine procedures are assigned in CY
2016 and for which an APC offset may
be applicable in the case of diagnostic
radiopharmaceuticals with pass-through
status.

TABLE 45—APCS TO WHICH A DIAGNOSTIC
RADIOPHARMACEUTICAL
OFFSET MAY BE APPLICABLE IN CY
2016
CY 2016
APC
5591 .......
5592 .......
5593 .......
5594 .......

CY 2016 APC title
Level 1 Nuclear Medicine
Related Services.
Level 2 Nuclear Medicine
Related Services.
Level 3 Nuclear Medicine
Related Services.
Level 4 Nuclear Medicine
Related Services.

and
and
and
and

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. Because a payment offset is
necessary in order to provide an
appropriate transitional pass-through
payment, we deduct from the passthrough payment for contrast agents an
amount reflecting the portion of the
APC payment associated with
predecessor contrast agents in order to
ensure 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
attributed to the cost of predecessor
contrast agents when considering new
contrast agents for pass-through
payment (74 FR 60482 through 60484).
Specifically, we use the policy-packaged
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 policypackaged 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, in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39273), we proposed to multiply
the policy packaged drug offset fraction

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jstallworth on DSK7TPTVN1PROD with RULES

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
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 pass-through contrast agent by this
amount. For CY 2016, as we did in CY
2015, we proposed to continue to apply
our standard contrast agents offset
policy to payment for any pass-through
contrast agents (we refer readers to the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66879) for the
final CY 2015 policy and the CY 2016
OPPS/ASC proposed rule (80 FR 39273)
for the proposed CY 2016 policy).
There is currently one contrast agent
with pass-through payment status under
the OPPS. HCPCS code Q9950
(Injection, sulfur hexafluoride lipid
microsphere, per ml) was granted passthrough payment status beginning
October 1, 2015. We currently apply the
established pass-through payment offset
policy to pass-through payment for this
product. For CY 2016, 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 41 of
the proposed rule, and these APCs were
displayed in Table 42 of the proposed
rule. The methodology used to
determine a proposed 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 (74 FR 60483 through
60484). For CY 2016 and subsequent
years, we proposed to continue to
recognize that when a contrast agent
with pass-through status is billed with
any procedural APC listed in Table 42
of the proposed rule (80 FR 39273
through 39274), 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.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our proposal for CY
2016 without modification. We will
continue to recognize that when a
contrast agent with pass-through
payment status is billed with any
procedural APC listed in Table 46
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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70431

TABLE 46—APCS TO WHICH A CON- supplies when used in a diagnostic test
TRAST AGENT PAYMENT OFFSET or procedure and drugs and biologicals
that function as supplies when used in
ARE APPLICABLE FOR CY 2016

a surgical procedure. As a part of this
policy, we specifically finalized that
CY 2016 APC title
skin substitutes and stress agents used
in myocardial perfusion imaging (MPI)
5181 ....... Level 1 Vascular Procedures and be policy packaged in CY 2014, in
Related Services.
addition to diagnostic
5182 ....... Level 2 Vascular Procedures and
radiopharmaceuticals, contrast agents,
Related Services.
5183 ....... Level 3 Vascular Procedures and and anesthesia drugs (78 FR 75019).
Because a payment offset is necessary in
Related Services.
5188 ....... Diagnostic Cardiac Catheteriza- order to provide an appropriate
transitional pass-through payment, we
tion.
5191 ....... Level 1 Endovascular Proce- finalized a policy for CY 2014 to deduct
dures.
from the pass-through payment for skin
5192 ....... Level 2 Endovascular Proce- substitutes and stress agents an amount
dures.
reflecting the portion of the APC
5193 ....... Level 3 Endovascular Procepayment associated with predecessor
dures.
5351 ....... Level 1 Percutaneous Abdominal/ skin substitutes and stress agents in
Biliary Procedures and Related order to ensure no duplicate skin
substitute or stress agent payment is
Services.
5352 ....... Level 2 Percutaneous Abdominal/ made (78 FR 75019).
Biliary Procedures and Related
In CY 2014, we established a policy
Services.
to estimate the portion of each APC
5523 ....... Level 3 X-Ray and Related Servpayment rate that could reasonably be
ices.
5524 ....... Level 4 X-Ray and Related Serv- attributed to the cost of predecessor skin
substitutes or stress agents when
ices.
5525 ....... Level 5 X-Ray and Related Serv- considering a new skin substitute or
stress agent for pass-through payment
ices.
5526 ....... Level 6 X-Ray and Related Serv- (78 FR 75019). Specifically, in the case
ices.
of pass-through skin substitutes, we use
5561 ....... Level 1 Echocardiogram With the policy-packaged drug offset fraction
Contrast.
for skin substitute procedural APCs,
5562 ....... Level 2 Echocardiogram With
calculated as 1 minus the following: The
Contrast.
5571 ....... Computed
Tomography
With cost from single procedure claims in the
Contrast and Computed To- APC after removing the cost for policypackaged drugs divided by the cost from
mography Angiography.
5582 ....... Magnetic Resonance Imaging single procedure claims in the APC.
and
Magnetic
Resonance Because policy-packaged
Angiography With Contrast.
radiopharmaceuticals also would be
5881 ....... Ancillary
Outpatient
Service included in the drug offset fraction for
When Patient Expires.
the APC to which MPI procedures are
8006 ....... CT and CTA With Contrast Comassigned, in the case of pass-through
posite.
8008 ....... MRI and MRA With Contrast stress agents, we use the policypackaged drug offset fraction for the
Composite.
procedural APC, calculated as 1 minus
the following: The cost from single
d. Payment Offset Policy for Drugs,
procedure claims in the APC after
Biologicals, and Radiopharmaceuticals
removing the cost for policy-packaged
That Function as Supplies When Used
in a Diagnostic Test or Procedure (Other drugs excluding policy-packaged
diagnostic radiopharmaceuticals
Than Diagnostic Radiopharmaceuticals
divided by the cost from single
and Contrast Agents and Drugs and
procedure claims in the APC. To
Biologicals That Function as Supplies
determine the actual APC offset amount
When Used in a Surgical Procedure)
for pass-through skin substitutes and
Section 1833(t)(6)(D)(i) of the Act
pass-through stress agents that takes
specifies that the transitional passinto consideration the otherwise
through payment amount for passapplicable OPPS payment amount, we
through drugs and biologicals is the
multiply the policy-packaged drug offset
difference between the amount paid
fraction by the APC payment amount for
under section 1842(o) of the Act and the the procedure with which the passotherwise applicable OPD fee schedule
through skin substitute or pass-through
amount. In the CY 2014 OPPS/ASC final stress agent is used and, accordingly,
rule with comment period (78 FR
reduce the separate OPPS payment for
74925), we finalized our policy to
the pass-through skin substitute or passpackage drugs, biologicals, and
through stress agent by this amount (78
radiopharmaceuticals that function as
FR 75019). In the CY 2016 OPPS/ASC
CY 2016
APC

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70432

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

jstallworth on DSK7TPTVN1PROD with RULES

proposed rule (80 FR 39274), for CY
2016, as we did in CY 2015, we
proposed to continue to apply the skin
substitute and stress agent offset policy
to payment for pass-through skin
substitutes and stress agents.
In the proposed rule, we indicated
that, for 2016, there will be two skin
substitutes (HCPCS codes Q4121 and
C9349) with pass-through payment
status under the OPPS. We will apply
the skin substitute payment offset policy
to pass-through payment for these
products. Table 43 of the CY 2016
OPPS/ASC proposed rule (80 FR 39274)
displayed the proposed APCs to which
skin substitute procedures would be
assigned in CY 2016 and for which we
expect that an APC offset could be
applicable in the case of skin substitutes
with pass-through status.
Although there are currently no stress
agents with pass-through status under
the OPPS, we believe that a payment
offset is necessary in the event that a
new stress agent is approved for passthrough status during CY 2016 in order
to provide an appropriate transitional
pass-through payment for new stress
agents. Table 44 of the CY 2016 OPPS/
ASC proposed rule (80 FR 39274)
displayed the proposed APCs to which
MPI procedures would be assigned in
CY 2016 and for which we expect that
an APC offset could be applicable in the
case of a stress agent with pass-through
status.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing our
proposal, without modification, to
recognize that when a skin substitute
with pass-through payment status is
billed with any procedural APC listed in
Table 47 below, a specific offset 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 passthrough payment status is billed with
any procedural APC listed in Table 48
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 47—APCS TO WHICH A SKIN
SUBSTITUTE PAYMENT OFFSET ARE
APPLICABLE FOR CY 2016
CY 2016
APC
5054 .......
5055 .......

CY 2016 APC title
Level 4 Skin Procedures.
Level 5 Skin Procedures.

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encourages hospital efficiencies and
TABLE 48—APCS TO WHICH A
STRESS AGENT PAYMENT OFFSET also enables hospitals to manage their
resources with maximum flexibility.
ARE APPLICABLE FOR CY 2016
CY 2016
APC

CY 2016 APC title

5722 .......

Level 2 Diagnostic Tests and Related Services.
Level 3 Nuclear Medicine and
Related Services.

5593 .......

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.
B. OPPS Payment for Drugs, Biologicals,
and Radiopharmaceuticals Without
Pass-Through Payment Status
1. Background
Under the policies that we established
for the CY 2013 OPPS, we currently pay
for drugs, biologicals, and
radiopharmaceuticals that do not have
pass-through payment status in one of
two ways: (1) As a packaged payment
included in the payment for the
associated service, or (2) 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.
Packaging costs into a single aggregate
payment for a service, procedure, or
episode-of-care is a fundamental
principle that distinguishes a
prospective payment system from a fee
schedule. In general, packaging the costs
of items and services into the payment
for the primary procedure or service
with which they are associated

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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 $95 for CY
2015 (79 FR 66882).
Following the CY 2007 methodology,
for the CY 2016 OPPS/ASC proposed
rule (80 FR 39275), 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
2016 and rounded the resulting dollar
amount ($100.22) to the nearest $5
increment, which yielded a figure of
$100. 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.
Based on the calculations described
above, we proposed a packaging
threshold for CY 2016 of $100. 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).
Following the CY 2007 methodology,
for this CY 2016 OPPS/ASC final rule
with comment period, we used the most
recently available four quarter moving
averaging PPI levels to trend the $50

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threshold forward from the third quarter
of CY 2005 to the third quarter of CY
2015 and rounded the resulting dollar
amount ($97.22) to the nearest $5
increment, which yielded a figure of
$100. 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) series code WPUSI07003)
from CMS’ Office of the Actuary
(OACT). Therefore, for this CY 2016
OPPS/ASC final rule with comment
period, using the CY 2007 OPPS
methodology, we are establishing a
packaging threshold for CY 2016 of
$100.
b. Cost Threshold for Packaging of
Payment for HCPCS Codes That
Describe Certain Drugs, Certain
Biologicals, and Therapeutic
Radiopharmaceuticals (‘‘ThresholdPackaged Drugs’’)
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39275), to determine the
proposed CY 2016 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 2014 and were
paid (via packaged or separate payment)
under the OPPS. We used data from CY
2014 claims processed before January 1,
2015 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 the following policy-packaged items
that we proposed to continue to package
in CY 2016: Anesthesia drugs; contrast
agents; stress agents; diagnostic
radiopharmaceuticals; 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.
In order to calculate the per day costs
for drugs, biologicals, and therapeutic
radiopharmaceuticals to determine their
proposed packaging status in CY 2016,
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 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

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drugs and biologicals for CY 2016, as
discussed in more detail in section
V.B.3.b. of the proposed rule) to
calculate the CY 2016 proposed rule per
day costs. We used the manufacturer
submitted ASP data from the fourth
quarter of CY 2014 (data that were used
for payment purposes in the physician’s
office setting, effective April 1, 2015) to
determine the proposed rule per day
cost.
As is our standard methodology, for
CY 2016, we proposed to use payment
rates based on the ASP data from the
fourth quarter of CY 2014 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, 2015. 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
2014 hospital claims data to determine
their per day cost.
We proposed to package items with a
per day cost less than or equal to $100,
and identify items with a per day cost
greater than $100 as separately payable.
Consistent with our past practice, we
cross-walked historical OPPS claims
data from the CY 2014 HCPCS codes
that were reported to the CY 2015
HCPCS codes that we displayed in
Addendum B to the proposed rule
(which is available via the Internet on
the CMS Web site) for proposed
payment in CY 2016.
Comment: The majority of the
commenters opposed the continuation
of the OPPS packaging threshold of
$100 for CY 2016. The commenters
believed that, over several years, CMS
has rapidly increased the packaging
threshold, which contradicts
congressional intent. As such, the
commenters recommended that CMS
eliminate the packaging threshold and
provide separate payment for all drugs
with HCPCS codes or freeze the
packaging threshold at the current level
($95).
Response: The commenters did not
specify how they believed our policy is
inconsistent with congressional intent.
However, as we 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

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70433

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
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
commenters’ recommendations to pay
separately for all drugs, biologicals, and
radiopharmaceuticals for CY 2016, or to
eliminate the packaging threshold, or to
freeze the packaging threshold at $95.
After consideration of the public
comments we received, and consistent
with our methodology for establishing
the packaging threshold using the most
recent PPI forecast data, we are adopting
a CY 2016 packaging threshold of $100.
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
CY 2016 OPPS/ASC final rule with
comment period, we used ASP data
from the first quarter of CY 2015, 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, 2015,
along with updated hospital claims data
from CY 2014. We note that we also
used these data for budget neutrality
estimates and impact analyses for this
CY 2016 OPPS/ASC 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 third
quarter of CY 2015. These data are the
basis for calculating payment rates for
drugs and biologicals in the physician’s
office setting using the ASP
methodology, effective July 1, 2015.
These payment rates will then be
updated in the January 2016 OPPS
update, based on the most recent ASP
data to be used for physician’s office
and OPPS payment as of January 1,
2016. For items that do not currently

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

have an ASP-based payment rate, we
recalculated their mean unit cost from
all of the CY 2014 claims data and
updated cost report information
available for this CY 2016 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 the CY 2016
OPPS/ASC proposed rule may be
different from the same drug HCPCS
code’s packaging status determined
based on the data used for this CY 2016
OPPS/ASC final rule with comment
period. Under such circumstances, we
proposed to continue to follow the
established policies initially adopted for
the CY 2005 OPPS (69 FR 65780) in
order to more equitably pay for those
drugs whose cost fluctuates relative to
the proposed CY 2016 OPPS drug
packaging threshold and the drug’s
payment status (packaged or separately
payable) in CY 2015. Specifically, for
CY 2016, 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 2015 and that were proposed for
separate payment in CY 2016, and that
then have per day costs equal to or less
than the CY 2016 final rule drug
packaging threshold, based on the
updated ASPs and hospital claims data
used for the CY 2016 final rule, would
continue to receive separate payment in
CY 2016.
• HCPCS codes for drugs and
biologicals that were packaged in CY
2015 and that were proposed for
separate payment in CY 2016, and that
then have per day costs equal to or less
than the CY 2016 final rule drug
packaging threshold, based on the
updated ASPs and hospital claims data
used for the CY 2016 final rule, would
remain packaged in CY 2016.
• HCPCS codes for drugs and
biologicals for which we proposed
packaged payment in CY 2016 but then
have per day costs greater than the CY
2016 final rule drug packaging
threshold, based on the updated ASPs
and hospital claims data used for the CY
2016 final rule, would receive separate
payment in CY 2016.
We did not receive any public
comments on our proposed policy to
apply the established policies initially
adopted for the CY 2005 OPPS (69 FR

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65780) in order to more equitably pay
for those drugs whose cost fluctuates
relative to the CY 2016 OPPS drug
packaging threshold and the drug’s
payment status (packaged or separately
payable) in CY 2016. Therefore, we are
finalizing our proposal, without
modification, for CY 2016.
c. High Cost/Low Cost Threshold for
Packaged Skin Substitutes
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 74938), we
unconditionally packaged skin
substitute products into their associated
surgical procedures as part of a broader
policy to package all drugs and
biologicals that function as supplies
when used in a surgical procedure. As
part of the policy to finalize the
packaging of skin substitutes, we also
finalized a methodology that divides the
skin substitutes into a high cost group
and a low cost group, in order to ensure
adequate resource homogeneity among
APC assignments for the skin substitute
application procedures (78 FR 74933).
For the CY 2014 update, assignment to
the high cost or low cost skin substitute
group depended upon a comparison of
the July 2013 ASP+6 percent payment
amount for each skin substitute to the
weighted average payment per unit for
all skin substitutes. The weighted
average was calculated using the skin
substitute utilization from the CY 2012
claims data and the July 2013 ASP+6
percent payment amounts. The high
cost/low cost skin substitute threshold
for CY 2014 was $32 per cm2. Skin
substitutes that had a July 2013 ASP+6
percent amount above $32 per cm2 were
classified in the high cost group, and
skin substitutes that had a July 2013
ASP+6 percent amount at or below $32
per cm2 were classified in the low cost
group. Any new skin substitutes
without pricing information were
assigned to the low cost category until
pricing information was available to
compare to the $32 per cm2 threshold
for CY 2014. Skin substitutes with passthrough payment status were assigned
to the high cost category, with an offset
applied as described in section V.A.4.d.
of the CY 2015 OPPS/ASC proposed
rule (79 FR 40996).
As discussed in the CY 2015 OPPS/
ASC proposed rule (79 FR 40998
through 40999) and final rule with
comment period (79 FR 66882 through
66885), after the effective date of the CY
2014 packaging policy, some skin
substitute manufacturers brought the
following issues to our attention
regarding the CY 2014 methodology for
determining the high cost/low cost
threshold:

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• Using ASP to determine a product’s
placement in the high or low cost
category may unfairly disadvantage the
limited number of skin substitute
products that are sold in large sizes (that
is, above 150 cm2). Large size skin
substitute products are primarily used
for burns that are treated on an inpatient
basis. These manufacturers contended
that nonlinear pricing for skin substitute
products sold in both large and small
sizes results in lower per cm2 prices for
large sizes. Therefore, the use of ASP
data to categorize products into high
and low cost categories can result in
placement of products that have
significant inpatient use of the large,
lower-priced (per cm2) sizes into the
low cost category, even though these
large size products are not often used in
the hospital outpatient department.
• Using a weighted average ASP to
establish the high/low cost categories,
combined with the drug pass-through
policy, will lead to unstable high/low
cost skin substitute categories in the
future. According to one manufacturer,
under our CY 2014 policy,
manufacturers with products on passthrough payment status have an
incentive to set a very high price
because hospitals are price-insensitive
to products paid with pass-through
payments. As these new high priced
pass-through skin substitutes capture
more market share, the weighted
average ASP high cost/low cost
threshold could escalate rapidly,
resulting in a shift in the assignment of
many skin substitutes from the high cost
category to the low cost category.
We agreed with stakeholder concerns
regarding the potential instability of the
high/low cost categories associated with
the drug pass-through policy, as well as
stakeholder concerns about the
inclusion of large-sized products that
are primarily used for inpatients in the
ASP calculation, when ASP is used to
establish the high cost/low cost
categories. As an alternative to using
ASP data, in the CY 2015 OPPS/ASC
final rule with comment period, we
established the high cost/low cost
threshold using an alternative
methodology (that is, the weighted
average mean unit cost (MUC) for all
skin substitute products from claims
data) that we believed may provide
more stable high/low cost categories and
resolve the issue associated with large
sized products because the MUC will be
derived from hospital outpatient claims
only. We indicated that the threshold
was based on costs from hospital
outpatient claims data instead of
manufacturer reported sales prices that
would not include larger sizes primarily
used for inpatient burn cases.

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As discussed in the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66884), after consideration of the
public comments we received on the CY
2015 OPPS/ASC proposed rule, we
finalized a policy for CY 2015 to
maintain the high cost/low cost APC
structure for skin substitute procedures
in CY 2015, and we revised the existing
methodology used to establish the high/
low cost threshold with the alternative
MUC methodology. We also finalized
for CY 2015 the policies that skin
substitutes with pass-through payment
status would be assigned to the high
cost category, and that skin substitutes
with pricing information but without
claims data to calculate an MUC would
be assigned to either the high cost or
low cost category based on the product’s
ASP+6 percent payment rate. If ASP is
not available, we stated we would use
WAC+6 percent or 95 percent of AWP
to assign a product to either the high
cost or low cost category. We also
finalized a policy for CY 2015 that any
new skin substitutes without pricing
information will be assigned to the low
cost category until pricing information
is available to compare to the CY 2015
threshold. We stated that new skin
substitute manufacturers must submit
pricing information to CMS no later
than the 15th of the third month prior
to the effective date of the next OPPS
quarterly update. For example, for a
new skin substitute with new pricing
information to be included in the July
1, 2015 OPPS update and designated as
included in the high cost group,
verifiable pricing information must have
been provided to CMS no later than
April 15, 2015.
We stated in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66884) that we would evaluate the per
day cost (PDC) methodology and
compare it to the MUC methodology in
CY 2016 once CY 2014 claims data were
available. As discussed in the CY 2016
OPPS/ASC proposed rule (80 FR 39277),
for CY 2016, we analyzed CY 2014
claims data to calculate a threshold
using both the MUC and PDC methods.
To calculate a per patient, per day cost
for each skin substitute product, we
multiplied the total units by the mean
unit cost and divided the product by the
total number of days. We posted a file
on the CMS Web site that provides
details on the CY 2016 high/low cost

status for each skin substitute product
based on a MUC threshold (rounded to
the nearest $1) of $25 per cm2 and a
PDC threshold (rounded to the nearest
$1) of $1,050. The file is available on the
CMS Web site at: https://www.cms.gov/
apps/ama/license.asp?file=/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/Downloads/
CMS-1633-P-OPPS-Skin-Substitute.zip.
For CY 2016, based on these
calculations, we proposed to determine
the high/low cost status for each skin
substitute product based on either a
product’s geometric MUC exceeding the
geometric MUC threshold or the
product’s PDC exceeding the PDC
threshold. As discussed in the CY 2016
OPPS/ASC proposed rule (80 FR 39277),
skin substitutes that exceed either of
these thresholds would be assigned to
the high cost group and all other
products would be assigned to the low
cost group. As demonstrated in the
aforementioned file that we posted on
the CMS Web site, we noted that the
majority of high cost products remain
high cost under both methodologies.
The products shifting to the high-cost
category from the low-cost category
varied in size. Observing fairly
consistent results with both
methodologies, we stated in the
proposed rule that we believe that,
together, both thresholds constitute a
more robust methodology for identifying
high cost skin substitute products.
We indicated in the CY 2016 OPPS/
ASC proposed rule (80 FR 39277) that
we would continue to assign skin
substitutes with pass-through payment
status to the high cost category, and skin
substitutes with pricing information but
without claims data to calculate a
geometric MUC or PDC will be assigned
to either the high cost or low cost
category based on the product’s ASP+6
percent payment rate as compared to the
MUC threshold. If ASP is not available,
we would use WAC+6 percent or 95
percent of AWP to assign a product to
either the high cost or low cost category.
New skin substitutes without pricing
information would be assigned to the
low cost category until pricing
information is available to compare to
the CY 2016 MUC threshold.
For CY 2016, we also proposed to
remove all implantable biologicals from
the skin substitute cost group list
because these products are typically

70435

used in internal surgical procedures to
reinforce or repair soft tissue, and are
not typically used to promote healing of
wounds on the skin. The implantable
biologicals that we proposed to remove
for the skin cost group were identified
in Table 45 of the CY 2016 OPPS/ASC
proposed rule (80 FR 39277).
Implantable biologicals are treated as
packaged surgical supplies under the
OPPS, which are captured under 42 CFR
419.2(b)(4).
Comment: Several commenters
supported CMS’ proposal to revise the
methodology used to establish the high/
low cost threshold from using only a
geometric mean unit cost methodology
(GMUC) to using either a GMUC
methodology or a per day cost (PDC)
methodology for all skin substitutes
using CY 2014 claims data. The
commenters agreed that either
methodology would promote stability of
assignment to the high and low cost
categories and not disadvantage skin
substitute products that are sold in large
sizes. Commenters also supported using
available pricing data for skin
substitutes without claims data.
Response: We appreciate the
commenters’ support. We believe that
adopting a policy of using either a
GMUC methodology or a PDC
methodology will stabilize cost group
assignment.
Comment: A few commenters
supported CMS’ proposal to remove
implantable biologicals from the skin
substitute cost group list. However, one
commenter asked that CMS not remove
HCPCS code Q4107 (GraftJacket)
because, while this code describes an
implantable biological, the biological
does have dual usage as a skin
substitute.
Response: Based on information
provided by the commenter on the
duality of use for GraftJacket, we agree
that HCPCS code Q4107 should remain
on the skin substitute list.
After consideration of the public
comments we received, we are
finalizing our proposal to remove the
implantable biological products
(excluding the proposed removal of
HCPCS code Q4107 included in the
proposed rule) identified in Table 49
below from the skin substitute cost
group list for CY 2016.

TABLE 49—IMPLANTABLE BIOLOGICALS FOR REMOVAL FROM SKIN SUBSTITUTE COST GROUP LIST
CY 2016
HCPCS code

CY 2016
short descriptor

CY 2016
status
indicator

C9358 ..........

SurgiMend, fetal .........................................................................................................................................................

N

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TABLE 49—IMPLANTABLE BIOLOGICALS FOR REMOVAL FROM SKIN SUBSTITUTE COST GROUP LIST—Continued
CY 2016
short descriptor

CY 2016
status
indicator

SurgiMend, neonatal ..................................................................................................................................................
Arthroflex ....................................................................................................................................................................
Strattice TM ................................................................................................................................................................
Xcm biologic tiss matrix 1cm .....................................................................................................................................

N
N
N
N

CY 2016
HCPCS code
C9360
Q4125
Q4130
Q4142

..........
.........
.........
.........

Table 46 of the CY 2016 OPPS/ASC
proposed rule (80 FR 39278) showed the
proposed CY 2016 high cost/low cost
status for each product based on our
combined threshold methodology. As
noted earlier, for the proposed rule we
posted a file on the CMS Web site that
provides more information on the high
cost/low cost disposition of each
product for each threshold
methodology. We stated in the proposed
rule that, for this CY 2016 OPPS/ASC
final rule with comment period, we
would update the MUC and PDC
threshold amounts using the most
recently available CY 2014 claims data
and CY 2015 pricing information. The
final CY 2016 high cost/low cost status
for each skin substitute product is based
on a weighted average geometric mean
unit cost threshold of $26, and a
weighted average per day cost threshold
of $773.
We proposed that a skin substitute
that is assigned to the high cost group
in CY 2015 and exceeds either the MUC

or PDC in the proposed rule for CY 2016
would be assigned to the high cost
group for CY 2016, even if it no longer
exceeds the MUC or PDC CY 2016
thresholds based on updated claims
data and pricing information used in
this CY 2016 final rule with comment
period.
After consideration of the public
comments we received, we are
finalizing our proposal to maintain the
high/low cost APC structure for skin
substitute procedures in CY 2016, and
our proposal to revise the current
methodology used to establish the high/
low cost threshold with methodology
based on either the geometric mean unit
cost or a per day cost. We also are
finalizing our proposal that, for CY
2016, skin substitutes with pass-through
payment status will be assigned to the
high cost category. Skin substitutes with
pricing information but without claims
data to calculate an MUC will be
assigned to either the high cost or low
cost category based on the product’s

ASP+6 percent payment rate. If ASP is
not available, we will use WAC+6
percent or 95 percent of AWP to assign
a product to either the high cost or low
cost category. We also are finalizing our
proposal that any new skin substitutes
without pricing information will be
assigned to the low cost category until
pricing information is available to
compare to the CY 2016 threshold. New
skin substitute manufacturers must
submit pricing information to CMS no
later than the 15th of the third month
prior to the effective date of the next
OPPS quarterly update. For example, for
a new skin substitute with new pricing
information to be included in the July
1 OPPS update and designated as
included in the high cost group,
verifiable pricing information must be
provided to CMS no later than April 15.
Table 50 below shows the skin
substitute assignments to high cost and
low cost groups for CY 2016.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 50—SKIN SUBSTITUTE ASSIGNMENTS TO HIGH COST AND LOW COST GROUPS FOR CY 2016

HCPCS
Code
dosage

CY 2016
HCPCS code

CY 2016 Short descriptor

C9349 * ........
C9363 ..........
Q4100 ..........
Q4101 ..........
Q4102 ..........
Q4103 ..........
Q4104 ..........
Q4105 ..........
Q4106 ..........
Q4107 ..........
Q4108 ..........
Q4110 ..........
Q4111 ..........
Q4115 ..........
Q4116 ..........
Q4117 ..........
Q4119 ..........
Q4120 ..........
Q4121 * ........
Q4122 ..........
Q4123 ..........
Q4124 ..........
Q4126 ..........
Q4127 ..........

PuraPly, PuraPly antimic ..............................................................
Integra Meshed Bil Wound Mat ....................................................
Skin Substitute, NOS ....................................................................
Apligraf ..........................................................................................
Oasis Wound Matrix ......................................................................
Oasis Burn Matrix .........................................................................
Integra BMWD ...............................................................................
Integra DRT ...................................................................................
Dermagraft ....................................................................................
GraftJacket ....................................................................................
Integra Matrix ................................................................................
Primatrix ........................................................................................
Gammagraft ..................................................................................
Alloskin ..........................................................................................
Alloderm ........................................................................................
Hyalomatrix ...................................................................................
Matristem Wound Matrix ...............................................................
Matristem Burn Matrix ...................................................................
Theraskin .......................................................................................
Dermacell ......................................................................................
Alloskin ..........................................................................................
Oasis Tri-layer Wound Matrix .......................................................
Memoderm/derma/tranz/integup ...................................................
Talymed .........................................................................................

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1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2

CY 2016
status
indicator

CY 2015
high/low
status based
on weighted
MUC

CY 2016
high/low
status based
on weighted
MUC or
weighted
PDC

G
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
G
N
N
N
N
N

High .............
High .............
Low .............
High .............
Low ..............
Low .............
High .............
High .............
High .............
High .............
High .............
High .............
Low ..............
Low ..............
High .............
Low .............
Low ..............
Low .............
High .............
High .............
High .............
Low .............
High .............
High .............

High.
High.
Low.
High.
Low.
High.
High.
High.
High.
High.
High.
High.
Low.
Low.
High.
Low.
Low.
High.
High.
High.
High.
Low.
High.
High.

...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70437

TABLE 50—SKIN SUBSTITUTE ASSIGNMENTS TO HIGH COST AND LOW COST GROUPS FOR CY 2016—Continued

HCPCS
Code
dosage

CY 2016
HCPCS code

CY 2016 Short descriptor

Q4128 ..........
Q4129 ..........
Q4131 ..........
Q4132 ..........
Q4133 ..........
Q4134 ..........
Q4135 ..........
Q4136 ..........
Q4137 ..........
Q4138 ..........
Q4140 ..........
Q4141 ..........
Q4143 ..........
Q4146 ..........
Q4147 ..........
Q4148 ..........
Q4150 ..........
Q4151 ..........
Q4152 ..........
Q4153 ..........
Q4154 ..........
Q4156 ..........
Q4157 ..........
Q4158 ..........
Q4159 ..........
Q4160 ..........
Q4161 ** ......
Q4162 ** ......
Q4163 ** ......
Q4164 ** ......
Q4165 ** ......

Flexhd/Allopatchhd/Matrixhd .........................................................
Unite Biomatrix ..............................................................................
Epifix ..............................................................................................
Grafix Core ....................................................................................
Grafix Prime ..................................................................................
hMatrix ...........................................................................................
Mediskin ........................................................................................
Ezderm ..........................................................................................
Amnioexcel or Biodexcel, 1cm ......................................................
Biodfence DryFlex, 1cm ................................................................
Biodfence 1cm ..............................................................................
Alloskin ac, 1cm ............................................................................
Repriza, 1cm .................................................................................
Tensix, 1CM ..................................................................................
Architect ecm, 1cm .......................................................................
Neox 1k, 1cm ................................................................................
Allowrap DS or Dry 1 sq cm .........................................................
AmnioBand, Guardian 1 sq cm .....................................................
Dermapure 1 square cm ...............................................................
Dermavest 1 square cm ................................................................
Biovance 1 square cm ..................................................................
Neox 100 1 square cm .................................................................
Revitalon 1 square cm ..................................................................
MariGen 1 square cm ...................................................................
Affinity 1 square cm ......................................................................
NuShield 1 square cm ..................................................................
Bio-Connekt per square cm ..........................................................
Amnio bio and woundex flow ........................................................
Amnion bio and woundex sq cm ..................................................
Helicoll, per square cm .................................................................
Keramatrix, per square cm ...........................................................

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2
cm2

CY 2016
status
indicator

CY 2015
high/low
status based
on weighted
MUC

CY 2016
high/low
status based
on weighted
MUC or
weighted
PDC

N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N
N

High .............
High .............
High .............
High .............
High .............
High .............
Low ..............
Low ..............
High .............
High .............
High .............
High .............
Low ..............
Low ..............
High .............
High .............
High .............
Low ..............
High .............
High .............
High .............
High .............
Low .............
Low .............
High .............
High .............
N/A ..............
N/A ..............
N/A ..............
N/A ..............
N/A ..............

High.
Low.
High.
High.
High.
Low.
Low.
Low.
High.
High.
High.
High.
Low.
Low.
High.
High.
High.
Low.
Low.
High.
Low.
Low.
Low.
Low.
High.
High.
Low.
Low.
Low.
Low.
Low.

...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

*Pass-through status in CY 2016.
**New HCPCS code for CY 2016.

jstallworth on DSK7TPTVN1PROD with RULES

d. 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. 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 2010 OPPS/ASC final rule
with comment period (74 FR 60490
through 60491), we finalized a policy to
make a single packaging determination
for a drug, rather than an individual

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HCPCS code, when a drug has multiple
HCPCS codes describing different
dosages because we believed that
adopting the standard HCPCS codespecific packaging determinations for
these codes could lead to inappropriate
payment incentives for hospitals to
report certain HCPCS codes instead of
others. We continue to believe that
making packaging determinations on a
drug-specific basis eliminates payment
incentives for hospitals to report certain
HCPCS codes for drugs 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 2016 OPPS/ASC proposed
rule (80 FR 39279), we proposed to
continue our policy to make packaging
determinations on a drug-specific basis,
rather than a HCPCS code-specific basis,
for those HCPCS codes that describe the
same drug or biological but different
dosages in CY 2016.
For CY 2016, in order to propose a
packaging determination that is
consistent across all HCPCS codes that

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describe different dosages of the same
drug or biological, we aggregated both
our CY 2014 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 the CY 2016
OPPS/ASC proposed rule and, as is our
current policy for determining the
packaging status of other drugs, we used
the mean unit cost available from the
CY 2014 claims data to make the
proposed packaging determinations for
these drugs: HCPCS code J3471
(Injection, hyaluronidase, ovine,
preservative free, per 1 usp unit (up to
999 usp units)) and HCPCS code J3472
(Injection, hyaluronidase, ovine,
preservative free, per 1000 usp units).
For all other drugs and biologicals
that have HCPCS codes describing
different doses, we then multiplied the
proposed weighted average ASP+6

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70438

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

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 $100 (so that all HCPCS codes
for the same drug or biological would be
packaged) or greater than $100 (so that

all HCPCS codes for the same drug or
biological would be separately payable).
The proposed packaging status of
each drug and biological HCPCS code to
which this methodology would apply in
CY 2016 was displayed in Table 47 of
the CY 2016 OPPS/ASC proposed rule
(80 FR 39279 through 39280).
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our CY 2016 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. Table
51 below displays the packaging status
of each drug and biological HCPCS code
to which our methodology applies for
CY 2016.

TABLE 51—HCPCS CODES TO WHICH THE CY 2016 DRUG-SPECIFIC PACKAGING DETERMINATION METHODOLOGY
APPLIES
CY 2016
HCPCS code
C9257
J9035
J1020
J1030
J1040
J1070
J1080
J1460
J1560
J1642
J1644
J1850
J1840
J2788
J2790
J2920
J2930
J3120
J3130
J3471
J3472
J7050
J7040
J7030
J7515
J7502
J8520
J8521
J9250
J9260

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........

CY 2016 Long descriptor

CY 2016
SI

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, 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, 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 = 1 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 .....................................................................................................................................

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

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

jstallworth on DSK7TPTVN1PROD with RULES

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

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payment was made on a pass-through
basis on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the
Act, certain drugs and biologicals are
designated as exceptions and are not
included in the definition of 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

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for that year as determined by the
Secretary, subject to any adjustment for
overhead costs and taking into account
the hospital acquisition cost survey data
collected by the Government
Accountability Office (GAO) in CYs
2004 and 2005, and later periodic
surveys conducted by the Secretary as
set forth in the statute. If hospital
acquisition cost data are not available,
the law requires that payment be equal
to payment rates established under the
methodology described in section
1842(o), section 1847A, or section
1847B of the Act, as calculated and
adjusted by the Secretary as necessary.
Most physician Part B drugs are paid at
ASP+6 percent pursuant to section
1842(o) and section 1847A of the Act.
Section 1833(t)(14)(E)(ii) of the Act
provides for an adjustment in OPPS

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jstallworth on DSK7TPTVN1PROD with RULES

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
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 2016
OPPS/ASC proposed rule (80 FR 39280),
we proposed to apply section
1833(t)(14)(A)(iii)(II) of the Act to all
separately payable drugs and
biologicals, including SCODs. Although
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

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estimated aggregate ASP dollars for
separately payable drugs and
biologicals, using the ASP as a proxy for
average acquisition cost (70 FR 68642
through 68643). We referred to this
methodology as our standard drug
payment methodology. 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’’ in CY
2010 (an internal adjustment of the data)
by redistributing cost from coded and
uncoded packaged drugs and biologicals
to separately payable drugs in order to
provide more appropriate payments for
drugs and biologicals in the HOPD. We
continued this methodology, and we
further refined it in CY 2012 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).
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, in the CY 2013 OPPS/
ASC final rule with comment period (77
FR 68386), 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. 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), 1847A, or
1847B of the Act. We refer to this
alternative methodology as the
‘‘statutory default.’’ 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
for a drug in the year established under
section 1842(o), 1847A, or 1847B of the
Act, as the case may be, in determining
payment for SCODs. Pursuant to

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70439

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 and, therefore, 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 (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 biologicals for
CY 2013 (77 FR 68389). We continued
our final policy of paying the statutory
default for both CY 2014 and CY 2015.
b. CY 2016 Payment Policy
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39281), for CY 2016 and
subsequent years, we proposed to
continue our CY 2015 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 (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.
Comment: Commenters supported
CMS’ proposal to pay for separately
payable drugs and biologicals based on
the statutory default rate of ASP+6
percent. A few commenters supported
CMS’ proposal, but recommended that
CMS examine ways to compensate
hospitals for the unique, higher
overhead and handling costs associated
with therapeutic radiopharmaceuticals.
Response: We appreciate the
commenters’ support. We continue to

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believe that ASP+6 percent based on the
statutory default is appropriate for
hospitals for CY 2016 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 2016.
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 2016. In addition, we are finalizing
our proposal 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 (available via the
Internet on the CMS Web site), which
illustrate the final CY 2016 payment of
ASP+6 percent for separately payable
non-pass-through drugs and biologicals
and ASP+6 percent for pass-through
drugs and biologicals, reflect either ASP
information that is the basis for
calculating payment rates for drugs and
biologicals in the physician’s office
setting effective October 1, 2015, or
WAC, AWP, or mean unit cost from CY
2014 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 2016
payment rates. This is because payment
rates for drugs and biologicals with ASP
information for January 2016 will be
determined through the standard
quarterly process where ASP data
submitted by manufacturers for the
fourth quarter of 2015 (October 1, 2015
through December 31, 2015) are used to
set the payment rates that are released
for the quarter beginning in January
2016 near the end of December 2015. 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 2015 are based on

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mean unit cost in the available CY 2014
claims data. If ASP information becomes
available for payment for the quarter
beginning in January 2016, we will price
payment for these drugs and biologicals
based on their newly available ASP
information. Finally, there may be drugs
and biologicals that have ASP
information available for this final rule
with comment period (reflecting
October 2015 ASP data) that do not have
ASP information available for the
quarter beginning in January 2016.
These drugs and biologicals will then be
paid based on mean unit cost data
derived from CY 2014 hospital claims.
Therefore, the payment rates listed in
Addenda A and B to this final rule with
comment period are not for January
2016 payment purposes and are only
illustrative of the CY 2016 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 2015, 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 2016.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39281), we
proposed for CY 2016 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 2014 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

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updating the payment rates for
separately payable drugs and biologicals
on a quarterly basis if updated ASP
information is available. For a complete
history of the OPPS payment policy for
therapeutic radiopharmaceuticals, we
refer readers to the CY 2005 OPPS final
rule with comment period (69 FR
65811), the CY 2006 OPPS final rule
with comment period (70 FR 68655),
and the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60524).
The proposed CY 2016 payment rates
for nonpass-through separately payable
therapeutic radiopharmaceuticals were
included in Addenda A and B to the
proposed rule (which are available via
the Internet on the CMS Web site).
Comment: Several 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 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

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separately payable therapeutic
radiopharmaceuticals 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 that we
believe would be inappropriate.
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 also are finalizing
our proposal to continue to rely on CY
2014 mean unit cost data derived from
hospital claims data for payment rates
for therapeutic radiopharmaceuticals for
which ASP data are unavailable. The CY
2016 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 Adjustment Policy for
Radioisotopes Derived From NonHighly Enriched Uranium Sources
Radioisotopes are widely used in
modern medical imaging, particularly
for cardiac imaging and predominantly
for the 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 United States would like 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 Tc99m without HEU are technologically
and economically viable, and
conversion to such production has
begun and is expected to be completed
by CY 2017. 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 by non-HEU
sources (77 FR 68323). 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

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certified by the hospital to be at least 95
percent derived from non-HEU sources.
The time period for this additional
payment was not to exceed 5 years from
January 1, 2013 (77 FR 68321).
We stated in the 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. As
discussed in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66892), we reassessed this payment for
CY 2015 and did not identify any new
information that would cause us to
modify payment. We stated that we
were continuing the policy of providing
an additional $10 payment for
radioisotopes produced by non-HEU
sources for CY 2015. We also stated that,
although we will reassess this policy
annually, consistent with the original
policy in the CY 2013 OPPS/ASC final
rule with comment period (77 FR
68321), we do not anticipate that this
additional payment would extend
beyond CY 2017.
We reassessed this payment for CY
2016 and did not identify any new
information that would cause us to
modify payment. Therefore, in the CY
2016 OPPS/ASC proposed rule (80 FR
39282), for CY 2016, we proposed to
continue to provide an additional $10
payment for radioisotopes produced by
non-HEU sources.
Comment: A few commenters
requested that CMS extend payment for
HCPCS code Q9969 to CY 2017 and
beyond.
Response: 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
reassessed this payment for CY 2016
and have not identified any new
information that would cause us to
modify payment at this time. We are
continuing the policy of providing an
additional $10 payment for
radioisotopes produced by non-HEU

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70441

sources for CY 2016. Although we will
reassess this policy annually, consistent
with the original policy in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68321), we do not
anticipate that this additional payment
would extend beyond CY 2017.
6. Payment for Blood Clotting Factors
For CY 2015, we provided payment
for blood clotting factors under the same
methodology as other non-pass-through
separately payable drugs and biologicals
under the OPPS and continued paying
an updated furnishing fee (79 FR
66893). That is, for CY 2015, 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 2015 updated
furnishing fee was $0.197 per unit.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39282), for CY 2016, 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
applied in the physician office and
inpatient hospital setting. These
methodologies were 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-Fee-for-Service-Part-B-Drugs/

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McrPartBDrugAvgSalesPrice/
index.html.
Comment: Commenters supported
CMS’ proposal to continue to apply the
furnishing fee for blood clotting factors
provided in the OPD. The commenters
also supported CMS’ proposal to pay for
separately payable drugs at ASP+6
percent based on the statutory default
for CY 2016.
Response: We appreciate the
commenters’ support.
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.
7. Payment for Non-Pass-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
statutory provision that dictated
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

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radiopharmaceuticals. Beginning in CY
2008 and continuing through CY 2015,
we implemented a policy to provide
payment for new drugs and biologicals
with HCPCS codes (except those that are
policy-packaged), but which did not
have pass-through status and were
without OPPS hospital claims data, at
an amount consistent with the final
OPPS payment methodology for other
separately payable non-pass-through
drugs and biologicals for the given year.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39282), for CY 2016, we
proposed to continue this policy and
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 2016
payment methodology for other
separately payable non-pass-through
drugs, biologicals, and therapeutic
radiopharmaceuticals, which was
proposed to be ASP+6 percent as
discussed earlier in this section. We
stated that we believe this proposed
policy would ensure that new nonpassthrough drugs, biologicals, and
therapeutic radiopharmaceuticals would
be treated like other drugs, biologicals,
and therapeutic radiopharmaceuticals
under the OPPS.
For CY 2016, we also proposed to
continue to package payment for all new
nonpass-through policy-packaged
products (diagnostic
radiopharmaceuticals; contrast agents;
stress 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 proposed CY 2016 HCPCS
codes that do not replace predecessor
HCPCS codes). This is consistent with
the CY 2014 final packaging policy for
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 this final
rule with comment period.
In accordance with the OPPS ASP
methodology, in the absence of ASP
data, for CY 2016 and subsequent years,
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

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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
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 proposed ASP-based amount
(proposed for CY 2016 at ASP+6
percent) for items that have not been
granted pass-through status. This
proposed policy, which utilizes the ASP
methodology 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 also are
unavailable, we proposed to make
payment for new therapeutic
radiopharmaceuticals at 95 percent of
the products’ most recent AWP because
we would not have mean costs from
hospital claims data upon which to base
payment. As we proposed with new
drugs and biologicals, we proposed to
continue our policy of assigning status
indicator ‘‘K’’ to HCPCS codes for new
therapeutic radiopharmaceuticals
without OPPS claims data for which we
have not granted pass-through status.
Consistent with other ASP-based
payment, for CY 2016, we proposed to
announce any changes to the payment
amounts for new drugs and biologicals
in this CY 2016 OPPS/ASC final rule
with comment period and also on a
quarterly basis on the CMS Web site
during CY 2016 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

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the new CY 2016 HCPCS codes for
drugs, biologicals, and therapeutic
radiopharmaceuticals were not available
at the time of development of the
proposed rule. However, these drugs,
biologicals, and therapeutic
radiopharmaceuticals are included in
Addendum B to this CY 2016 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 2016 OPPS/
ASC final rule with comment period.
There are several nonpass-through
drugs and biologicals that were payable
in CY 2014 and/or CY 2015 for which
we did not have CY 2014 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 2016, 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 1 day in the hospital
outpatient setting. This rationale was
first adopted in the CY 2006 OPPS/ASC
final rule with comment period (70 FR
68666 through 68667).
We proposed to package items for
which we estimated the per day
administration cost to be less than or
equal to $100 and to pay separately for
items for which we estimated the per
day administration cost to be greater

than $100 (with the exception of
diagnostic radiopharmaceuticals;
contrast agents; stress 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 continue to package
regardless of cost) in CY 2016. We also
proposed that the CY 2016 payment for
separately payable items without CY
2014 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
per day and status indicators for these
items were displayed in Table 48 of the
proposed rule (80 FR 39284).
Finally, there were 33 drugs and
biologicals, shown in Table 49 of the
proposed rule (80 FR 39284), that were
payable in CY 2014 but for which we
lacked CY 2014 claims data and any
other pricing information for the ASP
methodology for the CY 2016 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

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became available mid-year for the ASP
methodology.
For CY 2016, as we finalized in CY
2015 (79 FR 66894), we proposed to
continue to assign status indicator ‘‘E’’
to drugs and biologicals that lack CY
2014 claims data and pricing
information for the ASP methodology.
All drugs and biologicals without CY
2014 hospital claims data or data based
on the ASP methodology that were
assigned status indicator ‘‘E’’ on this
basis at the time of the proposed rule for
CY 2016 were displayed in Table 49 of
the proposed rule (80 FR 39284). We
also proposed to continue our policy to
assign the products status indicator ‘‘K’’
and pay for them separately for the
remainder of CY 2016 if pricing
information becomes available.
We did not receive any specific public
comments regarding our proposed
payment for nonpass-through drugs,
biologicals, and radiopharmaceuticals
with HCPCS codes, but without OPPS
hospital claims data. Many commenters
supported our proposal to pay for
separately payable drugs at ASP+6
percent under the statutory default.
However, these comments were not
specific to new drugs and biologicals
with HCPCS codes but without OPPS
claims data.
After consideration of the public
comments we received, we are
finalizing our CY 2016 proposal without
modification, including our proposal to
assign drug or biological products status
indicator ‘‘K’’ and pay for them
separately for the remainder of CY 2015
if pricing information becomes
available. Table 52 below shows the
drugs and biologicals without CY 2014
claims data. Table 53 shows the drugs
and biologicals without CY 2014 claims
data and without pricing information for
the ASP methodology.

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TABLE 52—DRUGS AND BIOLOGICALS WITHOUT CY 2014 CLAIMS DATA
Estimated
average
number of
units per day

CY 2016
HCPCS code

CY 2016 long descriptor

90581 ...........
C9293 ..........
J0215 ...........
J0630 ...........
J1324 ...........
J1556 ...........
J2670 ...........
J3060 ...........
J3355 ...........
J3489 ...........
J7191 ...........
J7196 ...........
J7316 ...........
J7513 ...........
J8650 ...........

Anthrax vaccine, for subcutaneous or intramuscular use .................................
Injection, glucarpidase, 10 units ........................................................................
Injection, alefacept, 0.5 mg ...............................................................................
Injection, calcitonin salmon, up to 400 units .....................................................
Injection, enfuvirtide, 1 mg ................................................................................
Inj, Imm Glob Bivigam, 500mg ..........................................................................
Tolazoline hcl injection ......................................................................................
Inj, Taliglucerace Alfa 10 u ................................................................................
Injection, urofollitropin, 75 IU .............................................................................
Injection, Zoledronic Acid, 1mg .........................................................................
Factor VIII (porcine) ...........................................................................................
Injection, antithrombin recombinant, 50 IU ........................................................
Inj, Ocriplasmin, 0.125 mg .................................................................................
Daclizumab, parenteral ......................................................................................
Nabilone, oral, 1 mg ..........................................................................................

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E:\FR\FM\13NOR2.SGM

1
400
29
2
169
78
1
479
2
4
8,500
268
3
5
4

13NOR2

CY 2016
status
indicator
N
K
K
K
K
K
K
K
K
K
K
K
K
K
K

CY 2016 APC

N/A
9293
1633
1433
1361
9130
1457
9294
1741
1356
1464
1332
9298
1612
1424

70444

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
TABLE 52—DRUGS AND BIOLOGICALS WITHOUT CY 2014 CLAIMS DATA—Continued
Estimated
average
number of
units per day

CY 2016
HCPCS code

CY 2016 long descriptor

J9047 ...........
J9262 ...........
J9306 ...........
J9354 ...........
J9400 ...........
Q2050 ..........

Injection, carfilzomib, 1 mg ................................................................................
Inj, omacetaxine mep, 0.01mg ..........................................................................
Injection, pertuzumab, 1 mg ..............................................................................
Inj, Ado-trastuzumab Emt 1mg ..........................................................................
Inj, ziv-aflibercept, 1mg ......................................................................................
Injection, Doxorubicin Hydrochloride, Liposomal, Not Otherwise Specified, 10
mg.
Injection, Interferon Beta-1a, 1 mcg For Intramuscular Use .............................

Q3027 ..........

CY 2016
status
indicator

CY 2016 APC

57
481
450
262
326
7

K
K
K
K
K
K

9295
9297
1471
9131
9296
7046

3

K

1472

TABLE 53—DRUGS AND BIOLOGICALS WITHOUT CY 2014 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE
ASP METHODOLOGY
CY 2016 long descriptor

CY 2016
status
indicator

Diphtheria antitoxin, equine, any route ......................................................................................................................
Adenovirus vaccine, type 7, live, for oral use ............................................................................................................
Rotavirus vaccine, human, attenuated, 2 dose schedule, live, for oral use .............................................................
Injection, biperiden lactate, per 5 mg ........................................................................................................................
Injection, alglucerase, per 10 units ............................................................................................................................
Injection, anistreplase, per 30 units ...........................................................................................................................
Injection, aprotonin, 10,000 kiu ..................................................................................................................................
Injection, arbutamine hcl, 1 mg .................................................................................................................................
Injection, cephapirin sodium, up to 1 gm ...................................................................................................................
Epoetin Beta, non-esrd ..............................................................................................................................................
Injection, dyphylline, up to 500 mg ............................................................................................................................
Inj Ferric Pyrophosphate Cit ......................................................................................................................................
Injection, estrone, per 1 mg .......................................................................................................................................
Injection, fomivirsen sodium, intraocular, 1.65 mg ....................................................................................................
Injection, immune globulin (vivaglobin), 100 mg .......................................................................................................
Injection, tinzaparin sodium, 1000 iu .........................................................................................................................
Injection, itraconazole, 50 mg ....................................................................................................................................
Injection, pentastarch, 10% solution, 100 ml .............................................................................................................
Injection, protirelin, per 250 mcg ...............................................................................................................................
Injection, somatrem, 1 mg .........................................................................................................................................
Injection, spectinomycin dihydrochloride, up to 2 gm ................................................................................................
Injection, triflupromazine hcl, up to 20 mg .................................................................................................................
Muromonab-cd3, parenteral, 5 mg ............................................................................................................................
Fludarabine phosphate, oral, 10 mg ..........................................................................................................................
Injection, denileukin diftitox, 300 micrograms ............................................................................................................
Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu .......................................................................
Injection, gemtuzumab ozogamicin, 5 mg .................................................................................................................
Injection, sermorelin acetate, 1 microgram ................................................................................................................
Hyaluronan or derivative, GenVisc 850, for intra-articular injection, 1 mg ................................................................

E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E
E

CY 2016
HCPCS code
90296
90477
90681
J0190
J0205
J0350
J0365
J0395
J0710
J0888
J1180
J1433
J1435
J1452
J1562
J1655
J1835
J2513
J2725
J2940
J3320
J3400
J7505
J8562
J9160
J9215
J9300
Q0515
Q9980

..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
.........
.........

jstallworth on DSK7TPTVN1PROD with RULES

C. Self-Administered Drugs (SADs)
Technical Correction
Sections 1861(s)(2)(A) and (s)(2)(B) of
the Act define covered ‘‘medical and
other health services’’ to include both
‘‘services and supplies’’ and ‘‘hospital
services’’, which both, in turn, include
drugs and biologicals not usually selfadministered by the patient. Our
regulations at 42 CFR 410.29 set forth
limitations on payment of drugs and
biologicals under Medicare Part B, and
capture the description of selfadministered drugs noted in sections
1861(s)(2)(A) and (s)(2)(B) of the Act. In
our review of § 410.29, which defines
exclusions to Medicare Part B payment
for drugs and biologicals, we noted that

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paragraph (a), as currently written,
excludes payment for any drug or
biological that can be self-administered.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39285), we proposed to
make a technical correction that would
amend the description of these drugs
and biologicals at § 410.29(a) to more
appropriately reflect the statutory
language. Specifically, we proposed to
delete the phrase ‘‘any drug or
biological that can be self-administered’’
and replace it with the phrase ‘‘any drug
or biological which is usually selfadministered by the patient’’.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our proposed technical

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correction to § 410.29 to amend the
description of self-administered drugs
and biologicals to more appropriately
reflect the statutory language.
D. OPPS Payment for Biosimilar
Biological Products
1. Background
The Affordable Care Act authorized
an abbreviated pathway for the licensing
of biosimilar biological products. Under
this abbreviated pathway, a proposed
biological product that is demonstrated
to be biosimilar to a reference product
can rely on certain existing scientific
knowledge about the safety, purity, and
potency of the reference product to
support licensure. Section 3139 of the

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jstallworth on DSK7TPTVN1PROD with RULES

Affordable Care Act amended section
1847A of the Act to add the definition
of biosimilar biological product and set
forth a payment methodology for
biosimilar biological products. In 2010,
CMS published regulations for the
payment for biosimilar biological
products that are administered in a
physician’s office (75 FR 73393 through
73394). However, at that time, it was not
clear how or when the new Food and
Drug Administration (FDA) approval
pathway would be implemented or
when biosimilar products would be
approved.
The FDA approved the first biosimilar
under the new pathway on March 6,
2015. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39285), we stated
that by the end of 2015, we anticipated
that the FDA may approve several more
biosimilar biological products,
including products that have a common
previously licensed reference product.
Although we described our Medicare
Part B payment policy for biosimilar
biological products when administered
in the physician office setting in the CY
2011 MPFS final rule with comment
period, we did not describe how
payment would be made for these
products when administered in the
hospital outpatient department.
2. Payment Policy for Biosimilar
Biological Products
Section 1833(t)(14)(A)(iii) of the Act
defines payment policy for separately
covered outpatient drugs (SCODs), and
currently, CMS pays for SCODs under
the payment methodology set forth at
section 1833(t)(14)(A)(iii)(II) of the Act
(the statutory default). Through
rulemaking, CMS adopted this payment
methodology to apply to separately
payable drugs and biologicals that are
not SCODs. Under this authority, the
payment rate for SCODs and applicable
separately payable drugs and biologicals
is determined in accordance with
sections 1842(o) and 1847A of the Act,
which generally equates to average sales
price (ASP) plus 6 percent.
As noted above, the Affordable Care
Act amended section 1847A of the Act
to add the definition of biosimilar
biological product and set forth a
payment methodology for biosimilar
biological products. Since the statutory
authority under section
1833(t)(14)(A)(iii)(II) of the Act
authorizes payment in accordance with
section 1847A of the Act, and provides
additional discretionary authority for
such payments to be calculated and
adjusted by the Secretary as necessary,
we believe that it is reasonable to adopt
a policy to pay for biosimilar biological
products as provided under section

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1847A(b)(8) of the Act. Therefore, in the
CY 2016 OPPS/ASC proposed rule (80
FR 39285), we proposed to extend the
application of the methodology for
determining the amount of payment
applicable to SCODs authorized by
section 1833(t)(14)(A)(iii)(II) of the Act,
which, through rulemaking, is
applicable to separately paid drugs and
biologicals, to biosimilar biological
products provided under the OPPS.
This equates to a payment determined
under section 1847A of the Act. That is,
we proposed to pay for biosimilar
biological products based on the
payment allowance of the product as
determined under section 1847A of the
Act. In addition, we proposed that
nonpass-through biosimilar biological
products would be subject to our
threshold-packaged policy as described
in section V.B.2. of the proposed rule
and this final rule with comment
period.
Consistent with our established OPPS
drug, biological, and
radiopharmaceutical payment policy,
we proposed that HCPCS coding and
modifiers for biosimilar biological
products will be based on policy
established under the CY 2016 MPFS
rule. We stated in the proposed rule that
public comments on HCPCS codes and
modifiers for biosimilar biological
products should be submitted in
response to the CY 2016 MPFS
proposed rule.
We received several public comments
on the proposed HCPCS coding and
modifiers for biosimilar biological
products. As proposed, under the OPPS,
we will use the HCPCS codes and
modifiers for biosimilar biological
products based on policy established
under the CY 2016 MPFS final rule with
comment period. Therefore, we are
considering the public comments
received on biosimilar biological
product HCPCS coding and modifiers in
response to the CY 2016 OPPS/ASC
proposed rule to be outside the scope to
the proposed rule and we are not
addressing them in this CY 2016 OPPS/
ASC final rule with comment period.
We refer readers to the CY 2016 MPFS
final rule with comment period.
We are finalizing our proposal,
without modification, to pay for
biosimilar biological products based on
the payment allowance of the product as
determined under section 1847A of the
Act. In addition, we are finalizing our
proposal, without modification, to
subject nonpass-through biosimilar
biological products to our annual
threshold-packaged policy.

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70445

3. OPPS Transitional Pass-Through
Payment Policy for Biosimilar Biological
Products
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 hospital outpatient
department fee schedule amount.
Because section 1842(o)(1)(C) of the Act
cross references section 1847A of the
Act, we believe that it is reasonable to
infer that biosimilar biological products
are eligible for transitional pass-through
payment, and that such payment
amount may be set as the difference
between the amount paid under section
1842(o) of the Act (that is, the payment
allowance of the product determined
under section 1847A(b)(8) of the Act)
and the otherwise applicable hospital
outpatient department fee schedule
amount. Therefore, in the CY 2016
OPPS/ASC proposed rule (80 FR 39285),
we proposed to extend pass-through
payment eligibility to biosimilar
biological products and to establish
pass-through payment based on the
difference between the amount paid
under section 1842(o) of the Act (that is,
the payment allowance of the product
determined under section 1847A(b)(8)
of the Act) and the otherwise applicable
hospital outpatient department fee
schedule amount.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39285), we solicited public
comments on our proposed payment
policies for biosimilar biological
products, including whether biosimilar
biological products should be eligible
for transitional pass-through payment,
and the appropriate methodologies for
determining payment for biosimilar
biological products eligible for
transitional pass-through payment.
Comment: Commenters supported our
proposed policy to extend pass-through
payment eligibility to biosimilar
biological products.
Response: We appreciate the
commenters’ support. We clarify that
pass-through payment will be made to
the first eligible biosimilar biological
product to a reference product.
Subsequent biosimilar biological
products to a reference product will not
meet the newness criterion at 42 CFR
419.64, and therefore will be ineligible
for pass-through payment.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to extend pass-through
payment eligibility to biosimilar
biological products and to establish

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

pass-through payment based on the
difference between the amount paid
under section 1842(o) of the Act (that is,
the payment allowance of the product
determined under section 1847A(b)(8)
of the Act) and the otherwise applicable
hospital outpatient department fee
schedule amount.

jstallworth on DSK7TPTVN1PROD with RULES

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 2016
entails estimating spending for two
groups of items. The first group of items
consists of device categories that are
currently eligible for pass-through
payment and that will continue to be
eligible for pass-through payment in CY
2016. 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 2015 or beginning in CY
2016. The sum of the CY 2016 passthrough estimates for these two groups

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of device categories equals the total CY
2016 pass-through spending estimate for
device categories with pass-through
status. We base the device pass-through
estimated payments for each device
category on the amount of payment as
established in section 1833(t)(6)(D)(ii) of
the Act, and as outlined in previous
rules, including the CY 2014 OPPS/ASC
final rule with comment period (78 FR
75034 through 75036). 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) use the device passthrough process and payment
methodology (74 FR 60476). As has
been our past practice (76 FR 74335), in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39286), for CY 2016, we
proposed to include an estimate of any
implantable biologicals eligible for passthrough payment in our estimate of
pass-through spending for devices.
Similarly, we finalized a policy in CY
2015 that applications for pass-through
payment for skin substitutes and similar
products be evaluated using the medical
device pass-through process and
payment methodology (76 FR 66885 to
66888). Therefore, as we did beginning
in CY 2015, for CY 2016, we also
proposed to include an estimate of any
skin substitutes and similar products in
our estimate of pass-through spending
for devices.
We did not receive any public
comments on our proposed
methodology or the proposed estimate
for pass-through spending for devices.
Therefore, we are finalizing our
proposal to base the pass-through
estimate for devices on our established
methodology, as described above.
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

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not been reinstated for CY 2016.
Because, as we proposed to pay for most
non-pass-through separately payable
drugs and biologicals under the CY 2016
OPPS at ASP+6 percent, as we
discussed in section V.B.3. of the
proposed rule and this final rule with
comment period, which represents the
otherwise applicable fee schedule
amount associated with most passthrough drugs and biologicals, and
because, as we proposed to pay for CY
2016 pass-through drugs and biologicals
at ASP+6 percent, as we discussed in
section V.A. of the proposed rule, our
estimate of drug and biological passthrough payment for CY 2016 for this
group of items is $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, we policy-package 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, as discussed in
section II.A.3. of this final rule with
comment period. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39286), we
proposed that all of these policypackaged drugs and biologicals with
pass-through status would be paid at
ASP+6 percent, like other pass-through
drugs and biologicals, for CY 2016.
Therefore, our estimate of pass-through
payment for policy-packaged drugs and
biologicals with pass-through status
approved prior to CY 2016 is not $0, as
discussed below. In section V.A.4. of
this final rule with comment period, we
discuss our 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 proposed to offset the amount of
pass-through payment for the policypackaged 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 policypackaged drug or biological receiving

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jstallworth on DSK7TPTVN1PROD with RULES

pass-through payment, we proposed to
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 2016. 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 2015 or
beginning in CY 2016. The sum of the
CY 2016 pass-through estimates for
these two groups of drugs and
biologicals equals the total CY 2016
pass-through spending estimate for
drugs and biologicals with pass-through
status.
B. Estimate of Pass-Through Spending
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39286), we proposed to set
the applicable pass-through payment
percentage limit at 2.0 percent of the
total projected OPPS payments for CY
2016, consistent with section
1833(t)(6)(E)(ii)(II) of the Act, and our
OPPS policy from CY 2004 through CY
2015 (79 FR 66897 through 66898).
For the first group, consisting of
device categories that are currently
eligible for pass-through payment and
will continue to be eligible for passthrough payment in CY 2016, there are
three active categories for CY 2016. For
CY 2015, we established one new device
category subsequent to the publication
of the CY 2015 OPPS/ASC proposed
rule, HCPCS code C2624 (Implantable
wireless pulmonary artery pressure
sensor with delivery catheter, including
all system components), that was
effective January 1, 2015. We estimated
in the proposed rule that HCPCS code
C2624 will cost $50.5 million in passthrough expenditures in CY 2016.
Effective Apri1 1, 2015, we established
that HCPCS code C2623 (Catheter,
transluminal angioplasty, drug-coated,
non-laser) will be eligible for passthrough payment. We estimated that
HCPCS code C2623 will cost $73
million in pass-through expenditures in
CY 2016. Effective July 1, 2015, we
established that HCPCS code C2613
(Lung biopsy plug with delivery system)
will be eligible for pass-through
payment. We estimated that HCPCS
code C2613 will cost $3.3 million in
pass-through expenditures in CY 2016.
Based on the three device categories of
HCPCS codes C2624, C2623, and C2613,
in the CY 2016 OPPS/ASC proposed
rule (80 FR 39287), we proposed an

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estimate for the first group of devices of
$126.8 million.
We did not receive any public
comments on our proposed estimate for
the first group of devices that included
HCPCS codes C2624, C2623 and C2613.
Therefore, we are finalizing the
proposed estimate for this first group of
devices of $126.8 million for CY 2016.
In estimating our proposed CY 2016
pass-through spending for device
categories in the second group, we
included: Additional device categories
that we estimated could be approved for
pass-through status subsequent to the
development of the proposed rule and
before January 1, 2016; and contingent
projections for new device categories
established in the second through fourth
quarters of CY 2016. In the CY 2016
OPPS/ASC proposed rule (80 FR 39287),
we proposed to use the general
methodology described in the CY 2008
OPPS/ASC final rule with comment
period (72 FR 66778), while also taking
into account recent OPPS experience in
approving new pass-through device
categories. For the proposed rule, the
estimate of CY 2016 pass-through
spending for this second group of device
categories was $10 million.
We did not receive any public
comments on our proposed estimate for
the second group of devices. Therefore,
we are finalizing the proposed estimate
for this second group of devices of $10
million for CY 2016.
To estimate proposed CY 2016 passthrough spending for drugs and
biologicals in the first group,
specifically those drugs and biologicals
recently made eligible for pass-through
payment and continuing on passthrough payment status for CY 2016, we
proposed to use the most recent
Medicare physician claims 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 2016 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 payment
status in CY 2016, we estimate the passthrough payment amount as the
difference between ASP+6 percent and
the payment rate for nonpass-through
drugs and biologicals that will be

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70447

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 pass-through status, we proposed to
include in the CY 2016 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 determine that the
policy-packaged drug or biological
approved for pass-through payment
resembles a predecessor drug or
biological already included in the costs
of the APCs that are associated with the
drug receiving pass-through payment.
For the proposed rule, using the
proposed methodology described above,
we calculated a CY 2016 proposed
spending estimate for this first group of
drugs and biologicals of approximately
$5.2 million.
We did not receive any public
comments on our proposed
methodology for calculating the
spending estimate for the first group of
drugs and biologicals.
For this final rule with comment
period, using the methodology
described above, we calculated a final
CY 2016 spending estimate for the first
group of drugs and biologicals of
approximately $12.8 million.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39287), we also estimated
proposed CY 2016 pass-through
spending for drugs and biologicals in
the second group (that is, drugs and
biologicals that we knew at the time of
development of the proposed rule were
newly eligible for pass-through payment
in CY 2016, additional drugs and
biologicals that we estimated could be
approved for pass-through status
subsequent to the development of the
proposed rule and before January 1,
2016, and projections for new drugs and
biologicals that could be initially
eligible for pass-through payment in the
second through fourth quarters of CY
2016). We proposed to use utilization
estimates from pass-through applicants,
pharmaceutical industry data, clinical
information, recent trends in the per
unit ASPs of hospital outpatient drugs,
and projected annual changes in service
volume and intensity as our basis for
making the CY 2016 pass-through
payment estimate. We also proposed to
consider the most recent OPPS
experience in approving new passthrough drugs and biologicals. Using
our proposed methodology for
estimating CY 2016 pass-through
payments for this second group of

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drugs, we calculated a proposed
spending estimate for this second group
of drugs and biologicals of
approximately $4.6 million.
We did not receive any public
comments on our proposed
methodology for calculation of the
spending estimate of the second group
of drugs and nonimplantable
biologicals, and therefore are finalizing
its use in this final rule with comment
period for CY 2016.
For this final rule with comment
period, using our finalized methodology
for estimating CY 2016 pass-through
payments for this second group of
drugs, we calculated a spending
estimate for this second group of drugs
and biologicals of approximately $11.2
million. Our CY 2016 estimate for total
pass-through spending for drugs and
biologicals (spending for the first group
of drugs and biologicals ($12.8 million)
plus spending for the second group of
drugs and biologicals ($11.2 million))
equals approximately $24 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 2016 and those
device categories, drugs, and biologicals
that first become eligible for passthrough payment during CY 2016 will
be approximately $160.8 million
(approximately $136.8 million for
device categories and approximately
$24 million for drugs and biologicals),
which represents 0.26 percent of total
projected OPPS payments for CY 2016.
Therefore, we estimate that passthrough spending in CY 2016 will not
amount to 2.0 percent of total projected
OPPS CY 2016 program spending.

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VII. OPPS Payment for Hospital
Outpatient Visits
A. Payment for Hospital Outpatient
Clinic and Emergency Department Visits
Since April 7, 2000, we have
instructed hospitals to report facility
resources for clinic and emergency
department (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
does 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

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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 in past
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 has been broadly
endorsed by the stakeholder
community.
With respect to outpatient clinic
visits, in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75036
through 75045), we finalized a policy
that created alphanumeric HCPCS code
G0463 (Hospital outpatient clinic visit
for assessment and management of a
patient) for hospital use only,
representing any and all clinic visits
under the OPPS, and assigned HCPCS
code G0463 to APC 0634 (Hospital
Clinic Visits). We also finalized a policy
to use CY 2012 claims data to develop
the CY 2014 OPPS payment rates for
HCPCS code G0463 based on the total
geometric mean cost of the levels one
through five CPT E/M codes for clinic
visits (five levels for new patient clinic
visits and five levels for established
patient clinic visits) previously
recognized under the OPPS (CPT codes
99201 through 99205 and 99211 through
99215). In addition, we finalized a
policy to no longer recognize a
distinction between new and
established patient clinic visits.
With respect to ED visits, in the CY
2014 OPPS/ASC final rule with
comment period (78 FR 75036 through
75043), we also stated our policy that
we would 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 to establish the
OPPS payment under our established
standard process. We refer readers to the
CY 2014 OPPS/ASC final rule with
comment period for a detailed
discussion of the public comments and

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our rationale for the CY 2014 policies
(78 FR 75036 through 75043).
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39287 through 39288), for
CY 2016, we proposed to continue the
current policy, adopted in CY 2014, for
clinic and ED visits. HCPCS code G0463
(for hospital use only) will represent
any and all clinic visits under the OPPS.
As part of our broader initiative to
restructure APCs across the OPPS to
collectively group services that are
clinically similar and have similar
resource costs within the same APC, we
proposed to reassign HCPCS code
G0463 from existing APC 0634 to
renumbered APC 5012 (Level 2
Examinations and Related Services),
formerly APC 0632. Renumbered APC
5012 includes other services that are
clinically similar with similar resource
costs to HCPCS code G0463, such as
HCPCS code G0402 (Initial preventive
physical examination). We proposed to
use CY 2014 claims data to develop the
CY 2016 OPPS payment rate for HCPCS
code G0463 based on the total geometric
mean cost of HCPCS code G0463, as CY
2014 is the first year for which claims
data are available for this code. Finally,
as we established in the CY 2014 OPPS/
ASC final rule with comment period (78
FR 75042), there is no longer a policy
to recognize a distinction between new
and established patient clinic visits.
Comment: A few commenters
requested that CMS discontinue the
single HCPCS G-code for reporting
clinic visits and return to a reporting
structure that recognizes differences in
clinical acuity and resource utilization.
The commenters expressed concern that
CMS’ clinic visit coding policy creates
a payment bias that unfairly penalizes
certain providers, such as cancer
hospitals, which provide care for more
severely ill Medicare beneficiaries. One
commenter believed that utilization of
the single HCPCS G-code for reporting
clinic visits does not provide a
distinction between new and
established patients and is
administratively burdensome, as HCPCS
G-codes are only recognized by
Medicare.
Response: 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 believe the proposed payment
rate for APC 5012 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
5012, the payment remains appropriate
to the hospital delivering a variety of

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clinic visits. The high volume of claims
used for ratesetting for HCPCS code
G0463 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 complex case-mix, we note
that the relatively low estimated cost of
clinic visits overall would result in
lesser underpayment or overpayment for
hospitals that may serve a population
with a more complex case-mix. In
addition, past stakeholder and
commenter support for eliminating
distinctions for new and established
patients (78 FR 75040 through 75041)
suggests that hospitals prefer the
administrative ease of not tracking new
or established patients. Consistent with
our longstanding practice, we will
continue to monitor clinic visit costs
under the OPPS.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to continue to use HCPCS
code G0463 (for hospital use only) to
represent any and all clinic visits under
the OPPS for CY 2016. In addition, we
are finalizing our proposal to reassign
HCPCS code G0463 from existing APC
0634 to renumbered APC 5012 and to
use CY 2014 claims data to develop the
CY 2016 OPPS payment rate for HCPCS
code G0463 based on the total geometric
mean cost of HCPCS code G0463, as CY
2014 is the first year for which claims
data are available for this code. We note
again that, as we established in the CY
2014 OPPS/ASC final rule with
comment period (78 FR 75042), we no
longer have a policy to recognize a
distinction between new and
established patient clinic visits.
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75040), we
stated that additional study was 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
patients, and that we believed it was
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. At this time, we
continue to believe that additional study
is needed to assess the most suitable
payment structure for ED visits.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39288), we did not
propose any change in ED visit coding.
Rather, for CY 2016, we proposed to
continue to use our existing
methodology to recognize the existing
five CPT codes for Type A ED visits as
well as the five HCPCS codes that apply

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to Type B ED visits, and to establish the
proposed CY 2016 OPPS payment rates
using our established standard process.
We stated that we may propose changes
to the coding and APC assignments for
ED visits in future rulemaking.
Comment: Commenters supported
CMS’ proposal to continue its current
methodology to recognize the existing
five CPT codes for Type A ED visits, as
well as the five HCPCS codes for Type
B ED visits for CY 2016, and to establish
the associated CY 2016 OPPS payment
rates using its standard process. One
commenter urged CMS to develop
standard ED visit guidelines for a 5-level
E/M system for the ED.
Response: We appreciate the
commenters’ support. As we have in the
past (76 FR 74345 through 74346), we
acknowledge that it would be desirable
to many hospitals to have national ED
visit guidelines for a 5-level E/M system
for the ED. However, we also
understand that it would be disruptive
and administratively burdensome to
other hospitals that have successfully
adopted internal guidelines to have to
implement new national guidelines,
particularly while we address the
problems that would inevitably arise
with the implementation of a new set of
guidelines being applied by thousands
of hospitals.
Comment: One commenter
recommended, as an alternative to our
proposed policy, that CMS develop, on
a short-term basis, a set of three
trauma-specific HCPCS codes for all
trauma patients for whom a trauma team
is activated. The commenter also
recommended that CMS consider a
long-term restructuring of payment for
trauma care, developed by specifically
taking the following steps:
• CMS should rigorously evaluate
historical trauma cases data to better
understand the precise nature of trauma
care and how it is reimbursed.
• Armed with this understanding,
CMS should develop a complete valuebased reimbursement model for trauma
care, distinct from the fee-for-service
reimbursement for ED visits, based on
the conceptual framework of the
Trauma Center Association of America
(TCAA).
• CMS should test its value-based
reimbursement model through a pilot
program or simulation to ensure that it
accurately compensates trauma centers
for providing an appropriate level of
care.
• CMS should incorporate its
restructured model into the hospital
OPPS as expeditiously as possible.
Response: We appreciate the
alternatives presented by the
commenter. We will take this

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recommendation into consideration as
we continue to study and fully consider
the most appropriate payment structure
for Type A and Type B ED visits.
After consideration of the public
comments we received, we are
finalizing our proposals, without
modification, to 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 to
establish the CY 2016 OPPS payment
rates using our established standard
process. We intend to further explore
the issues described above related to ED
visits, including concerns about
excessively costly patients, such as
trauma patients. We note that we may
propose changes to the coding and APC
assignments for ED visits in the future
rulemaking.
B. Payment for Critical Care Services
For the history of the payment policy
for critical care services, we refer
readers to the CY 2014 OPPS/ASC final
rule with comment period (78 FR
75043). In the CY 2014 OPPS/ASC final
rule with comment period, we
continued to use 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
example electrocardiograms, chest Xrays, and pulse oximetry. Critical care
services are described by CPT codes
99291 (Critical care, evaluation and
management of the critically ill or
critically injured patient; first 30–74
minutes) and 99292 (Critical care,
evaluation and management of the
critically ill or critically injured patient;
each additional 30 minutes (List
separately in addition to code for
primary service)).
Since CY 2013, we have stated that
we would continue to monitor the
hospital claims data for CPT code 99291
in order to determine whether revisions
to our current payment policy for
critical care services are warranted
based on changes in hospitals’ billing
practices. Because the CY 2011 through
CY 2014 claims data (used for CY 2013
through CY 2016 ratesetting,
respectively) do not demonstrate any
significant change in hospital billing
practices for critical care services, we
continue to believe that it would be
inappropriate to pay separately for the
ancillary services that hospitals
typically report in addition to CPT
codes for critical care services. Based on
this pattern of billing practices, we
continue to believe that packaging
ancillary services into critical care

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jstallworth on DSK7TPTVN1PROD with RULES

services is appropriate. Therefore, in the
CY 2016 OPPS/ASC proposed rule (80
FR 39288), for CY 2016 and subsequent
years, we proposed to continue our
policy (that has been in place since CY
2011) 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: One commenter opposed
the claims processing edits
conditionally packaging payment for the
ancillary services that are reported on
the same date of service as critical care
services. The commenter also
encouraged CMS to use recent data in
setting the rates for critical care.
Response: As we stated in the
proposed rule (80 FR 39288), because
the CY 2011 through CY 2014 claims
data (used for CY 2013 through CY 2016
ratesetting, respectively) do not
demonstrate any significant change in
hospital billing practices for critical care
services, we continue to believe that it
would be inappropriate to pay
separately for the ancillary services that
hospitals typically report in addition to
CPT codes for critical care services.
Based on this pattern of billing
practices, we continue to believe that
packaging ancillary services into critical
care services is appropriate. We note
that CY 2014 claims data used for CY
2016 ratesetting represents the most
recent complete year of available claims
data.
After consideration of the public
comments we received, we are
finalizing our proposals, without
modification, to continue our policy to
recognize the existing CPT codes for
critical care services and establish a
payment rate based on historical claims
data, and 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.
C. Payment for Chronic Care
Management Services
In the CY 2015 OPPS/ASC final rule
with comment period, we assigned CPT
code 99490 to APC 0631 (Level 1
Examinations and Related Services),
with a payable status indicator of ‘‘V,’’
under general physician supervision.
(We note that in the CY 2016 OPPS/ASC
proposed rule (80 FR 39288), for CY
2016 and subsequent years, we
proposed to renumber APC 0631 as APC

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5011.) The current code descriptor for
CPT code 99490 is ‘‘Chronic care
management services (CCM), at least 20
minutes of clinical staff time directed by
a physician or other qualified health
care professional, per calendar month),
with the following required elements:
• Multiple (two or more) chronic
conditions expected to last at least 12
months, or until the death of the patient;
• Chronic conditions place the
patient at significant risk of death, acute
exacerbation/decompensation, or
functional decline; and
• Comprehensive care plan
established, implemented, revised, or
monitored.’’
CPT code 99490 is a physiciandirected service, where the physician is
directing the clinical staff time spent on
care management for a specific patient.
As a physician-directed service,
payment under the OPPS for services
described by CPT code 99490 is made
to the hospital when the hospital’s
clinical staff furnishes the service at the
direction of the physician (or other
appropriate nonphysician practitioner)
who meets all the requirements to bill
for services described by CPT code
99490 under the MPFS. The billing
physician or nonphysician practitioner
directing the CCM services must meet
the requirements to bill CPT code 99490
under the MPFS. These requirements
are the same, regardless of whether the
services described by CPT code 99490
are furnished in the office or in the
HOPD.
While the services described by CPT
code 99490 has been payable under the
OPPS since January 1, 2015, we have
received questions about specific
requirements for hospitals to bill this
code beyond those requirements
discussed in the CY 2015 MPFS final
rule with comment period (79 FR
67721). In response to these questions,
we posted frequently asked questions
(FAQs) and answers on the CMS Web
site on May 8, 2015. These FAQs can be
accessed on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/. In reviewing
the questions from hospitals on billing
of CCM services, we identified several
issues that we believe need to be
clarified. Therefore, in the CY 2016
OPPS/ASC proposed rule (80 FR 39289),
for CY 2016 and subsequent years, we
proposed additional requirements for
hospitals to bill and receive OPPS
payment for CMM services described by
CPT code 99490. These proposed
requirements, discussed below, are in
addition to those already required under
the OPPS for billing for services

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described by CPT code 99490 in CY
2015.
In accordance with the CPT code
descriptor for CPT code 99490, a
hospital can only bill CMM services
described by CPT code 99490 and
receive payment under the OPPS for
furnishing clinical staff services under a
physician’s or other appropriate
nonphysician practitioner’s direction to
a patient that has multiple (two or more)
chronic conditions expected to last at
least 12 months or until the death of the
patient, and that place the patient at
significant risk of death, acute
exacerbation/decompensation, or
functional decline. While we have
always expected the hospital furnishing
the clinical staff portion of CCM
services, as described by CPT code
99490, to have an established
relationship with the patient and to
provide care and treatment to the
patient during the course of illness (that
is, the chronic conditions that are
expected to last at least 12 months), we
have not previously specified through
notice-and-comment rulemaking that
the hospital must have an established
relationship with the patient as a
requirement for billing and OPPS
payment for CMM services described by
CPT code 99490. Therefore, for CY 2016
and subsequent years, we proposed that
a hospital would be able to bill CPT
code 99490 for CCM services only when
furnished to a patient who has been
either admitted to the hospital as an
inpatient or has been a registered
outpatient of the hospital within the last
12 months and for whom the hospital
furnished therapeutic services. Section
20.2, Chapter 4 of the Medicare Claims
Processing Manual (Pub. 100–04)
defines a hospital outpatient as a person
who has not been admitted by the
hospital as an inpatient but is registered
on the hospital records as an outpatient
and receives services (other than
supplies alone) from the hospital. We
believe that hospitals furnishing
services described by CPT code 99490
are, in all likelihood, already meeting
this requirement because they are
providing CCM services described by
CPT code 99490 to patients for whom
they already provide care and treatment.
However, we proposed to adopt the
relationship requirement as an explicit
condition for billing and payment of
CCM services under the OPPS.
As outlined in the CY 2015 MPFS
final rule with comment period (79 FR
67721 through 67722), practitioners
furnishing and billing CCM services as
described by CPT code 99490 under the
MPFS are required to (1) inform the
beneficiary about the availability of the
CCM services from the practitioner and

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obtain his or her written agreement to
have the service(s) provided; (2)
document in the beneficiary’s medical
record that all elements of the CCM
service(s) were explained and offered to
the beneficiary, noting the beneficiary’s
decision to accept or decline the service;
and (3) inform the beneficiary that only
one practitioner can furnish and be paid
for these services during the calendar
month service period. For CY 2016 and
subsequent years, we proposed to adopt
analogous requirements for billing
services described by CPT code 99490
under the OPPS. Specifically, we
proposed, for CY 2016 and subsequent
years, that hospitals furnishing and
billing services described by CPT code
99490 under the OPPS would be
required to have documented in the
hospital’s medical record the patient’s
agreement to have the services provided
or, alternatively, to have the patient’s
agreement to have the CCM services
provided documented in a beneficiary’s
medical record that the hospital can
access. In addition, for CY 2016 and
subsequent years, we proposed to
require hospitals furnishing and billing
for the CCM services described by CPT
code 99490 under the OPPS to have
documented in the hospital medical
record (or beneficiary medical record
that the hospital can access) that all
elements of the CCM services were
explained and offered to the beneficiary,
including a notation of the beneficiary’s
decision to accept or decline the
services. If the hospital is billing for the
CCM services, we would expect the
physician or practitioner under whose
direction the services are furnished to
have discussed with the beneficiary that
hospital clinical staff will furnish the
services and that the beneficiary could
be liable for two separate copayments
from both the hospital and the
physician. Consistent with the MPFS
requirement that only one practitioner
can furnish and be paid for services
described by CPT code 99490 during the
calendar month service period, we
proposed, for the OPPS for CY 2016 and
subsequent years, that only one hospital
can furnish and be paid for services
described by CPT code 99490 during the
calendar month service period. The
physician or other appropriate
nonphysician practitioner directing the
CCM services should inform the
beneficiary that only one hospital can
furnish and be paid for these services
during the calendar month service
period. These proposed requirements
are consistent with and support the
MPFS requirements set forth in the CY
2015 MPFS final rule with comment
period (79 FR 67728).

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Comment: Commenters generally
supported CMS’ proposed policy to
adopt billing requirements for CMM
services described by CPT code 99490
analogous to those required for billing
under the MPFS for CY 2016 and
subsequent years. A few commenters
encouraged CMS to continue to actively
work with stakeholders to ensure that
the implementation of these codes will
not be administratively burdensome.
Another commenter requested that CMS
clarify in the final rule whether one
hospital (paid under OPPS) and one
practitioner (paid under the MPFS) may
furnish and be paid for services
described by CPT code 99490 during a
calendar month, or whether only one
provider across all care settings may be
paid for the service. One commenter
requested that CMS amend the hospital
claim form so that the ‘‘place of service’’
code can be noted to permit better data
capture and monitoring of the settings
in which CCM services are provided.
Response: We appreciate commenters’
support for our proposal. We look
forward to hearing from stakeholders
about the administrative requirements
associated with hospital billing of CMM
services described by CPT code 99490.
We reiterate that one hospital (paid
under the OPPS) and one practitioner
(paid under the MPFS) may furnish and
be paid for services described by CPT
code 99490 during a calendar month
when CCM services are furnished by a
physician in an HOPD to an eligible
patient. Specifically, in this scenario,
the physician or nonphysician
practitioner may bill Medicare for
services described by CPT code 99490
under the MPFS and report the hospital
outpatient setting as the place of service.
The hospital also may bill for the
services described by CPT code 99490
under the OPPS. The physician or
nonphysician practitioner would be
paid under the MPFS at the facility rate,
and the hospital would be paid under
the OPPS.
Comment: With respect to the
proposed requirement that a patient
must have either been admitted to the
hospital as an inpatient or have been a
registered outpatient of the hospital and
received therapeutic services from the
hospital within the last 12 months, one
commenter requested that CMS permit a
hospital to bill for services described by
CPT 99490 if the physician or
nonphysician practitioner providing
general supervision previously
furnished CCM services for the
beneficiary, but the physician’s or
nonphysician practitioner’s practice was
subsequently acquired by a hospital that
does not have an established
relationship with the patient.

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Response: Because only one hospital
may furnish CCM services to a patient
during a billing period and the patient’s
consent to have such services furnished
must be documented in the medical
record, we believe it is necessary for the
hospital to have an established
relationship with the patient, as we
proposed. We note that a physician or
other qualified nonphysician
practitioner who previously billed CCM
services for a patient under the MPFS at
the nonfacility rate could continue to do
so (assuming that all requirements for
billing under the MPFS are met).
However, if the place of service becomes
a hospital outpatient department,
payment under the MPFS would be
made. We also believe, given that
patients who receive CCM services have
multiple chronic conditions, patients
would be likely to have an established
relationship with the hospital.
Accordingly, we do not believe that we
should modify this requirement at this
time.
Comment: Commenters requested that
CMS: (1) Classify the services described
by CPT code 99490 as a preventive
service; and (2) allow for billing and
separate payment of complex chronic
care codes (CPT 99487 and 99489) at
similar rates to the AMA Relative Value
Scale Update Committee’s (RUC’s)
recommended values.
Response: The services described by
CPT code 99490 are not preventive
services because they do not have a
USPSTF rating of A or B, nor are they
explicitly defined as a preventive
service in the statute. In addition, the
complex CCM services described by
CPT codes 99487 and 99489 are
currently eligible to be reported when
performed in the outpatient hospital
setting and are assigned status indicator
‘‘N,’’ which indicates that payment is
packaged for these services. We may
consider separate payment for complex
CMM services described by CPT codes
99497 and 99489 in future rulemaking.
After consideration of the public
comments we received, we are
finalizing, without modification, our
proposal to require hospitals, in order to
bill and receive OPPS payment for CMM
services described by CPT code 99490,
to have documented in the hospital’s
medical record the patient’s agreement
to have the services provided or,
alternatively, to have the patient’s
agreement to have the CCM services
provided documented in a beneficiary’s
medical record that the hospital can
access. In addition, for CY 2016 and
subsequent years, we are requiring
hospitals furnishing and billing for the
CCM services described by CPT code
99490 under the OPPS to have

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documented in the hospital medical
record (or beneficiary medical record
that the hospital can access) that all
elements of the CCM services were
explained and offered to the beneficiary,
including a notation of the beneficiary’s
decision to accept or decline the
services. In addition, only one hospital
under the OPPS (in addition to only one
practitioner under the MPFS) can
furnish and be paid for services
described by CPT code 99490 during the
calendar month service period.
In addition, a number of scope of
service elements for CCM services were
finalized as requirements to bill for
CCM services described by CPT code
99490 in the CY 2015 MPFS final rule
with comment period (79 FR 67715
through 67728). For CY 2016 and
subsequent years, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39289
through 39290), we proposed to require
analogous scope of service elements for
the CCM services, listed below, to be
met in order for hospitals to bill and
receive OPPS payment for furnishing
CCM services described by CPT code
99490. Specifically, we proposed to
require a hospital that bills and receives
OPPS payment for their clinical staff
furnishing CCM services described by
CPT code 99490 under the direction of
a physician or other qualified
nonphysician practitioner to provide—
• Structured recording of
demographics, problems, medications,
medication allergies, and the creation of
a structured clinical summary record. A
full list of problems, medications, and
medication allergies in the electronic
health record (EHR) must inform the
care plan, care coordination, and
ongoing clinical care.
• Access to care management services
24 hours a day/7 days a week (providing
the beneficiary with a means to make
timely contact with health care
providers to address his or her urgent
chronic care needs, regardless of the
time of day or day of the week).
• Continuity of care with a designated
practitioner or member of the care team
with whom the beneficiary is able to get
successive routine appointments.
• Care management for chronic
conditions, including systematic
assessment of the beneficiary’s medical,
functional, and psychosocial needs;
system-based approaches to ensure
timely receipt of all recommended
preventive care services; medication
reconciliation with review of adherence
and potential interactions; and oversight
of beneficiary self-management of
medications.
• Documentation of the creation of a
patient-centered care plan based on a
physical, mental, cognitive,

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psychosocial, functional, and
environmental assessment or
reassessment and an inventory of
resources and supports (a
comprehensive care plan for all health
issues). Electronically capture care plan
information, make this information
available on a 24 hour/7 day a week
basis to all practitioners furnishing CCM
services, and electronically share, as
appropriate, with other practitioners
and providers.
• A written or electronic copy of the
care plan provided to the beneficiary,
and document its provision in the
electronic medical record using certified
information technology (IT).
• Management of care transitions
between and among health care
providers and settings, including
referrals to other clinicians; follow-up
after an emergency department visit;
and follow-up after discharges from
hospitals, skilled nursing facilities, or
other health care facilities. Electronic
transmission of a clinical summary
created using certified health IT to
support care transitions.
• Coordination with home-based and
community-based clinical service
providers required to support the
patient’s psychosocial needs and
functional deficits. Communication to
and from home-based and communitybased providers regarding these patient
needs must be documented in the
patient’s medical record.
• Enhanced opportunities for the
beneficiary and any caregiver to
communicate with the practitioner
regarding the beneficiary’s care through
not only telephone access, but also
through the use of secure messaging,
internet, or other asynchronous nonface-to-face consultation methods.
Lastly, with respect to the EHR, for
CY 2016 and subsequent years, we
proposed to adopt the requirements set
forth in the CY 2015 MPFS final rule
with comment period (79 FR 67723
through 67724) and detailed below for
billing services described by CPT code
99490 under the OPPS. Specifically, for
CY 2016 and subsequent years, we
proposed to require the use of EHR
technology that has been certified under
the ONC Health Information Technology
(IT) Certification Program as requisite
for hospitals furnishing and receiving
payment under the OPPS for the clinical
staff portion of CCM services, to ensure
that hospitals have adequate capabilities
to allow members of the
interdisciplinary care team to have
timely access to the most updated
information informing the care plan. We
proposed, for hospital payment under
the OPPS, that the CCM services as
described by CPT code 99490 must be

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furnished using, at a minimum, the
Edition(s) of certification criteria that is
acceptable for purposes of the EHR
Incentive Programs as of December 31 of
the calendar year preceding each MPFS
payment year to meet the following core
technology capabilities: Structured
recording of demographics, problems,
medications, medication allergies, and
the creation of a structured clinical
summary. We also proposed to require
hospitals to use certified IT to fulfill the
CCM scope of service requirements
whenever the requirements reference a
health or medical record. This would
ensure that requirements for billing
CCM services under the MPFS and the
OPPS are consistent throughout each
MPFS and OPPS payment year, and are
automatically updated according to the
certification criteria required for the
EHR Incentive Programs. For payment
for CCM services under the OPPS in CY
2016, this policy would allow hospitals
to use EHR technology certified to, at a
minimum, the 2014 Edition of
certification criteria to meet the final
core capabilities for CCM services and
to fulfill the scope of service
requirements for CCM services
whenever the requirements reference a
health or medical record. The CY 2015
MPFS final rule with comment period
(79 FR 67728) includes a detailed table
summarizing when certified health IT is
required to support the scope of service
requirements. We remind stakeholders
that, for all electronic sharing of
beneficiary information under our final
CCM services policies, HIPAA standards
apply in the usual manner.
Comment: One commenter urged
CMS to avoid placing overly
burdensome requirements for billing
and payment for services described by
CPT code 99490. The commenter
recommended that CMS eliminate the
requirement for use of certified EHRs
because current certified EHRs do not
include standards and capabilities
supporting chronic care management
that are core services for CCM. Another
commenter asked that CMS end its tacit
acceptance of information blocking in
Federal programs. The commenter
encouraged CMS to create demand side
pressure on vendors by limiting billing
for the CCM services to only those
providers who use systems that do not
limit information exchange as defined
in the ONC report to Congress. Some
commenters encouraged CMS to allow
the care plan to be shared with
community providers through facsimile
methods when electronic options are
not available.
Response: We disagree with the
commenter’s assertion that the
requirement for use of a certified EHR

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when performing CCM services is overly
burdensome and reiterate our belief that
the use of certified health IT is an
important tool for delivering several
core elements of CCM services. We
recognize that certified health IT does
not currently possess all of the
capabilities needed to deliver CCM
services, and accordingly, we have
restricted requirements around the use
of certified EHRs to a narrow set of
elements. We also have provided
flexibility with respect to the technology
needed to support elements such as the
transmission of clinical summaries
created using certified health IT.
We appreciate the comments
regarding the challenges that
information blocking is likely to pose to
providers furnishing CCM services that
are required to deliver care coordination
services for beneficiaries. While we did
not include any proposal to tie the
ability to bill for CCM services to
information blocking in the proposed
rule, we may consider such action in the
future. For further information, we refer
readers to ONC’s April 2015 Report to
Congress on health information
blocking, which is available on the Web
site at: http://www.healthit.gov/sites/
default/files/reports/info_blocking_
040915.pdf.
We believe it is important that
providers furnishing CCM services are
able to share care plan information
electronically with other providers to
support robust care coordination. We
note that we did not identify any
specific electronic tool or format for
sharing care plan information, and we
encourage providers furnishing CCM
services to explore a range of innovative
solutions in this area. In the future, we
may consider issuing subregulatory
guidance providing an exception to the
requirement to transmit clinical
summaries and care plan information
electronically by a means other than
facsimile, when the receiving
practitioner or provider is not billing
Medicare for the CCM service and is
only able or willing to receive the
required information by facsimile.
Comment: One commenter asked
CMS to clarify whether the required
EHR system used for CCM is one that
has been certified as an inpatient EHR
or as an ambulatory EHR. The
commenter also asked CMS to clarify
whether the required EHR system must
be able to generate a specific form of the
clinical summary (such as that specified
for the Transitions of Care—create and
transmit transition of care/referral
summaries certification criterion—at 45
CFR 170.314(b)(2)) or if there is
discretion for a hospital to use a
different format for and the content of

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the clinical summary other than a
summary that contains any particular
structured content. The commenter
asked if there was any particular
prescription for the content and
specification of the clinical summary,
including whether such are limited to
those required for certification under
§ 170.314(b)(2).
Response: In the proposed rule, we
did not identify a specific type of
certification for the system used by a
provider furnishing CCM services. We
are clarifying that the technology
certified for either the inpatient setting
or the outpatient setting may be used to
furnish CCM services, provided it meets
the relevant requirements. Furthermore,
we proposed that providers must
support care transitions using electronic
transmission of a clinical summary
created using certified health IT, but we
did not identify the specific certification
criteria that provider technology must
meet. We are clarifying that, as long as
the clinical summary has been created
using certified health IT and is
electronically transmitted, providers can
meet the CCM requirements. For
instance, the clinical summaries
currently generated by EHR systems in
accordance with the 2014 Edition
certification criterion for inpatient
settings at § 170.314(b)(2) of the
regulations would meet the
requirements to bill for CCM services.
After consideration of the public
comments we received, we are
finalizing, without modification, our
proposal to require analogous scope of
service elements for the CCM services to
be met in order for hospitals to bill and
receive OPPS payment for furnishing
CCM services described by CPT code
99490.
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

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70453

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
PHP is a program furnished by a
hospital to its outpatients or by a 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 CMHC 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

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median per diem costs have been used
to calculate the relative payment
weights for PHP APCs.
From CY 2003 through CY 2006, the
median per diem costs for CMHCs
fluctuated significantly from year to
year, while the median per diem costs
for hospital-based PHPs remained
relatively constant. We were concerned
that CMHCs may have increased and
decreased their charges in response to
Medicare payment policies. Therefore,
we began efforts to strengthen the PHP
benefit through extensive data analysis
and policy and payment changes
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 under APC 0172
(Level 1 Partial Hospitalization) and a
higher amount for days with 4 or more
services under APC 0173 (Level 2
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.

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For CY 2010, we retained the twotiered payment approach for PHP
services and used only hospital-based
PHP data in computing the PHP APC
per diem costs, upon which PHP APC
per diem payment rates are based. We
used only hospital-based PHP data
because we were concerned about
further reducing both PHP APC per
diem payment rates without knowing
the impact of the policy and payment
changes we made in CY 2009. Because
of the 2-year lag between data collection
and rulemaking, the changes we made
in CY 2009 were reflected for the first
time in the claims data that we used to
determine payment rates for the CY
2011 rulemaking (74 FR 60556 through
60559).
In CY 2011, in accordance with
section 1301(b) of the Health Care and
Education Reconciliation Act of 2010
(HCERA 2010), we amended the
description of a PHP in our regulations
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 1 and Level 2 services) and
two for hospital-based PHPs (for Level
1 and Level 2 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

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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.
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 1 and Level 2
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 costs and then adding
that number to the CY 2011 final CMHC
median costs. 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, 2011 WL
3102049 (W.D.Tex. 2011), aff’d, 684
F.3d 527 (5th Cir. 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

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Act requires that such relative payment
weights be based on cost data derived
solely from hospitals. As discussed
above, section 1833(t)(2)(C) of the Act
requires CMS to establish relative
payment weights for covered OPD
services (and any groups of such
services) based on hospital costs.
Numerous courts have held that ‘‘based
on’’ does not mean ‘‘based exclusively
on.’’ On July 25, 2011, the District Court
dismissed the plaintiffs’ complaint and
application for 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 subjectmatter jurisdiction and found that the
Secretary’s payment rate determinations
for PHP services are not a facial
violation of a clear statutory mandate
(Paladin, 684 F.3d at 533).
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 hospital-

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based and CMHC-based settings, only
on the basis of hospital data.
Subsequently, from CY 2003 through CY
2008, the relative payment weights for
PHP services were based on a
combination of hospital and CMHC
data. For CY 2009, we established new
APCs for PHP services based exclusively
on hospital data. Specifically, we
adopted a two-tiered APC methodology
(in lieu of the original APC 0033) under
which CMS paid one rate for days with
3 services (APC 0172) and a different
payment rate for days with 4 or more
services (APC 0173). These two new
APCs were established using only
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
use data on claims from 1996 and use
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

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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 2014 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 mean costs rather than on the
median costs. For CY 2014, we
established the four PHP APC per diem
payment rates based on geometric mean
cost levels calculated using the most
recent claims and cost data for each
provider type. We refer readers to the
CY 2014 OPPS/ASC final rule with
comment period for a more detailed
discussion (78 FR 75047 through
75050).
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66902
through 66908), we continued to apply
our established policies to calculate the
four PHP APC per diem payment rates
based on PHP APC geometric mean per
diem costs using the most recent claims
and cost data for each provider type.
B. PHP APC Update for CY 2016
1. PHP APC Geometric Mean per Diem
Costs
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39290 through 39299), for
CY 2016, we proposed to continue 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 and cost data for each provider
type. We proposed to compute CMHC
PHP APC geometric mean per diem
costs for Level 1 (3 services per day) and
Level 2 (4 or more services per day) PHP
services using only CY 2014 CMHC
claims data and the most recent cost
data, and hospital-based PHP APC
geometric mean per diem costs for Level
1 and Level 2 PHP services using only
CY 2014 hospital-based PHP claims data
and the most recent cost data. These
proposed geometric mean per diem
costs were shown in Tables 50 and 51
of the CY 2016 OPPS/ASC proposed
rule (80 FR 39295). To prevent
confusion, we referred to the per diem
information listed in Tables 50 and 51
of the CY 2016 OPPS/ASC proposed
rule as the proposed PHP APC per diem
costs or the proposed PHP APC
geometric mean per diem costs, and the
per diem information listed in
Addendum A to the CY 2016 OPPS/ASC
proposed rule as the proposed PHP APC
per diem payment rates or the proposed
PHP APC geometric mean per diem

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payment rates. The PHP APC per diem
costs are the provider-specific costs
derived from the most recent claims and
cost data. The PHP APC per diem
payment rates are the national
unadjusted payment rates calculated
after applying the OPPS budget
neutrality adjustments described in
sections II.A.4. and II.B. of the CY 2016
OPPS/ASC proposed rule and this final
rule with comment period.
As part of the effort to increase the
accuracy of the PHP per diem costs, we
completed an extensive analysis of the
claims and cost data, which included
provider service usage, coding practices,
and the ratesetting methodology. As part
of our analysis, we also identified
aberrant data from several providers that
impacted the calculation of the
proposed PHP geometric mean per diem
costs. Aberrant data are claims and/or
cost data that are so abnormal that they
skew the resulting geometric mean per
diem costs. For example, we found
claims with excessive CMHC charges
resulting in CMHC geometric mean
costs per day that were approximately
the same as or more than the daily
payment for inpatient psychiatric
facility services. For an outpatient
program like PHP, because it does not
incur room and board costs such as an
inpatient stay would, these costs per
day were excessive. In addition, we
found some CMHCs had very low costs
per day (less than $25 per day). We
stated in the CY 2016 OPPS/ASC
proposed rule (80 FR 39293) that
without using a trimming process, the
data from these providers would
inappropriately skew the geometric
mean per diem cost for Level 2 CMHC
PHP services. Without the trim, the
CMHC PHP APC geometric mean per
diem cost was $172.62 for Level 2
services, which significantly diverges
from the median cost per day of
$148.14. When data are not skewed and
are normally distributed, measures of
central tendency such as the median
and geometric mean will be very similar
to each other. The differences between
these two measures for CMHCs
suggested skewing. Further analysis of
the data confirmed that there were a few
providers with extreme cost per day
values, which led us to propose using a
±2 standard deviation trim.
During our claims and cost data
analysis, we also found aberrant data
from some hospital-based PHP
providers. Nearly all hospital-based
PHPs recorded their costs using cost
center 9000 (‘‘Clinic’’) as the source for
the CCR for individual or group therapy
services, psychiatric testing, and
education/training services. These
services comprise the majority of the

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PHP services provided. The existing
OPPS ±3 standard deviation trim
removed very extreme CCRs for cost
center 9000, which were less than
0.0206 or greater than 28.3446, by
defaulting two providers that failed this
trim to their overall hospital ancillary
CCR. However, the calculation of the ±3
standard deviations used to define the
trim for cost center 9000 was influenced
by these two providers, which had very
extreme CCRs of 178.0224 and
272.4451. Because these two hospitalbased PHP providers remained in the
data when we calculated the boundaries
of the OPPS ±3 standard deviation trim,
the upper limit of the trim boundaries
was fairly high, at 28.3446. As such,
some aberrant CCRs for cost center 9000
were not trimmed out, and still had high
values ranging from 6.3840 to 19.996.
We note in section II.D. of the CY 2016
OPPS/ASC proposed rule that OPPS
defines a biased CCR as one that falls
outside the predetermined ceiling
threshold for a valid CCR; using CY
2014 cost report data, that threshold is
1.5. The hospital CCR ceiling thresholds
or upper limits are available online at
http://www.cms.gov/Medicare/Medicare
-Fee-for-Service-Payment/Hospital
OutpatientPPS/Annual-Policy-FilesItems/2015-Annual-Policy-Files.html?
DLPage=1&DLEntries=10&DLSort=0&DL
SortDir=ascending.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39293), we stated that we
are concerned that including aberrant
data in the calculation of the hospitalbased PHP per diem payment rates
would inappropriately skew these
payment rates. When we included these
aberrant CCRs, which ranged from
6.3840 to 19.996, in hospital-based PHP
cost modeling, the geometric mean per
diem costs were $267.04 for Level 1
services and $223.39 for Level 2
services. We noted that the geometric
mean per diem cost of the hospitalbased PHP Level 1 APC was greater than
that of the hospital-based PHP Level 2
APC, despite fewer services being
provided. This occurred because a
relatively higher share of high-CCR
service days was reported for hospitalbased PHP Level 1 services compared to
hospital-based PHP Level 2 services.
Due to the low volume of hospital-based
PHP Level 1 services, the effect of the
high-CCR service days on the resulting
proposed geometric mean per diem
costs was relatively greater than the
effect of the high-CCR service days on
the resulting proposed Level 2
geometric mean per diem costs. As
such, the hospital-based Level 1 PHP
APC geometric mean per diem costs
were higher than the proposed

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geometric mean per diem costs for the
hospital-based Level 2 PHP APC.
In order to reduce or eliminate the
impact of including aberrant data
received from a few CMHCs and
hospital-based PHP providers in the
claims data used for ratesetting, in the
CY 2016 OPPS/ASC proposed rule (80
FR 39293), we proposed to use a ±2
standard deviation trim for CMHCs and
to apply a CCR greater than five (CCR>5)
hospital service day trim for hospitalbased PHP providers for CY 2016 and
subsequent years.
Under the ±2 standard deviation trim
proposal, we proposed to exclude any
CMHC when the CMHC’s cost per day
is more than ±2 standard deviations
from the geometric mean cost per day
for all CMHCs. Our proposed trim on
total CMHC costs per day is performed
before stratifying the data by payment
tiers (Level 1 and Level 2 CMHC PHP
APCs), and affects both CMHC payment
tiers. For example, based on our CY
2014 claims data used for the proposed
CY 2016 ratesetting, the geometric mean
cost per day for all CMHCs before
trimming is $168.16. Using the ±2
standard deviation trim, three providers
with geometric mean costs per day
ranging from as low as $23.50 to as high
as $996.71 were excluded from the
ratesetting for CY 2016. Excluding
providers with extremely low or
extremely high costs per day protects
CMHCs from having those extreme costs
per day inappropriately skew the CMHC
PHP APC geometric mean per diem
costs. In addition, we proposed to use
a ±2 standard deviation trim because,
when we used this methodology, it
aligned the geometric mean and median
per diem costs for the CMHC Level 2
PHP APC payment tier, which also
indicates that the trim removed the
skewing in the data caused by the
inclusion of aberrant data received from
the three providers. We stated that we
believe that the ±2 standard deviation
trim would exclude CMHCs with
aberrant data from the ratesetting
process while allowing for the use of as
much data as possible. In addition, we
stated that implementing a ±2 standard
deviation trim on CMHCs would target
these aberrancies without limiting
overall per diem cost increases. A ±2
standard deviation trim also is an
accepted statistical approach for
objectively mitigating extreme data. For
normally distributed data, ±2 standard
deviations from the mean capture
approximately 95 percent of the data.
In the proposed rule, we applied the
±2 standard deviation trim to the
geometric mean costs per day at the
CMHC level. This application would
exclude those CMHCs with costs per

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day ±2 standard deviations from the
geometric mean cost per day for all
CMHCs. Under this proposal, three
CMHCs with aberrant data would be
removed from the ratesetting
calculations. The exclusion of these
three CMHCs removed from modeling
2,296 CMHC claims out of 25,383 total
CMHC claims. We believe that removing
aberrant data from modeling helps
prevent inappropriate fluctuations in
the payment rates. The resulting
proposed CMHC Level 2 PHP APC
geometric mean per diem costs would
be $147.51. The CMHC Level 1 PHP
APC geometric mean per diem costs
actually increased slightly when the
trim was applied, from $103.10 to
$105.82.
We determined that proposing to use
a higher trim level, such as ±2.5 or ±3
standard deviations from the geometric
mean, did not reduce the skewing
caused by the inclusion of data from a
few CMHC providers. In other words,
using a higher trim level did not remove
the CMHCs with aberrant data from the
ratesetting process. Further, we stated
that we believe that using a trim level
lower than ±2 standard deviations
would remove too much data. If a data
distribution is approximately normally
distributed, approximately 68 percent of
the data fall within ±1 standard
deviation of the mean, and
approximately 95 percent of the data fall
within ±2 standard deviations of the
mean. Our goal was to remove outliers
while using as much of the CMHC data
as possible.
We did not propose the CCR>5
service day trim for CMHCs, because
longstanding PHP OPPS methodology
defaults any CMHC CCR>1 to the
statewide hospital ancillary CCR (we
refer readers to the following section for
a review of the PHP OPPS ratesetting
methodology). Hospital statewide CCRs
have been less than 1 and are available
on the CMS Web site at: http://www.
cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatient
PPS/Annual-Policy-Files-Items/2015Annual-Policy-Files.html?DLPage=1&
DLEntries=10&DLSort=0&DLSortDir=
ascending. In our CY 2016 proposed
ratesetting process, we identified only
one CMHC that had a CCR>1. This
CMHC’s CCR was 1.019, and was
defaulted to its appropriate hospital
statewide CCR for CY 2016 ratesetting
purposes.
We considered applying the ±2
standard deviation trim to hospitalbased PHP providers as well. However,
the ±2 standard deviation trim would
have removed 25 hospital-based PHP
providers with aberrant data out of 387
hospital-based PHP providers. We were

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concerned about removing data from
that many providers, and sought an
alternative that allowed for use of more
of the data. Therefore, we proposed a
trim on CCRs, which we believe would
be more effective in removing aberrant
data and allowing the use or retention
of more data. Trims on hospital and
CMHC CCRs are already used with the
OPPS system, but due to the two very
extreme outlier CCRs for cost center
9000 previously mentioned, the OPPS ±
3 standard deviation trim on hospital
cost center 9000 CCRs had a higher
upper limit than usual, and therefore
did not trim all the claims with aberrant
CCRs. As such, claims with aberrant
data remained for some hospital-based
PHPs. Therefore, for hospital-based
PHPs, we proposed to apply a trim on
hospital service days when the CCR>5
at the cost center level.
Under our proposal, the CCR>5
hospital service day trim would remove
hospital-based PHP service days that
use a CCR>5 to calculate costs for at
least one of their component services.
Unlike the ±2 standard deviation trim,
which excludes CMHC providers that
fail the trim, the CCR>5 trim would
exclude any hospital-based PHP service
day where any of the services on that
day are associated with a CCR>5. For
example, assume a hospital-based PHP
had a claim with a service day with one
individual therapy service, two group
therapy services, and one occupational
therapy service. Assume that the
hospital-based PHP’s cost center CCRs
associated with these services were 0.6,
0.6, 0.6, and 6.7, respectively. Because
the CCR associated with the
occupational therapy service is greater
than 5, this particular day, and all other
days for this provider where
occupational therapy services were
provided, would be excluded from the
data used in ratesetting. Applying this
trim removed service days from seven
hospital-based PHP providers. After
applying the CCR>5 trim, the Level 1
hospital-based PHP APC geometric
mean per diem cost changed from
$267.04 to $195.73, and the Level 2
hospital-based PHP geometric mean per
diem cost changed from $223.39 to
$218.93. Without including the aberrant
CCR service days in the data used to
calculate the proposed hospital-based
PHP APC geometric mean per diem
costs, the Level 1 hospital-based PHP
APC geometric mean per diem cost is
less than the Level 2 hospital-based PHP
APC geometric mean per diem cost.
As an alternative to these proposals
for CMHCs and hospital-based PHPs, we
considered proposing a 15-percent cap
on changes in the geometric mean per
diem costs. This cap would limit the

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increase or the decrease in the geometric
mean per diem costs from one year to
the next by capping the change at 15
percent. This cap also would protect
providers from fluctuations in PHP APC
per diem payment rates due to large
increases or declines in the geometric
mean per diem costs. However, we did
not propose this alternative because we
believe that establishing such a cap
would not specifically target aberrant
data from a minority of providers,
which was the purpose of our proposals.
Targeting aberrant data is important
in order to help stabilize the PHP APC
geometric mean per diem costs for both
CMHCs and hospital-based PHP
services. As we receive updated claims
and cost files, and as we continue
analyzing PHP data, it is possible that
the PHP trims that we proposed may
need refinement. We stated in the CY
2016 OPPS/ASC proposed rule (80 FR
39294) that we would propose any
changes to the methodology that we
finalize later this year through future
notice-and-comment rulemaking.
Therefore, for CY 2016 and
subsequent years, we proposed to
exclude any CMHC when the CMHC’s
costs per day are more than ±2 standard
deviations from the geometric mean cost
per day for all CMHCs (Level 1 and
Level 2), and to exclude hospital-based
PHP service days when a CCR>5 is used
to calculate costs for at least one of their
component services (Level 1 and Level
2).
The CY 2016 proposed PHP APC
geometric mean per diem costs for
CMHCs calculated under the proposed
CY 2016 methodology using CY 2014
claims data and the most recent cost
data were $105.82 for Level 1 (3 services
per day) CMHC PHP services, and were
$147.51 for Level 2 (4 or more services
per day) CMHC PHP services.
The CY 2016 proposed PHP APC
geometric mean per diem costs for
hospital-based PHPs calculated under
the proposed CY 2016 methodology
using CY 2014 claims data and the most
recent cost report data were $195.73 for
Level 1 (3 services per day) hospitalbased PHP services, and were $218.93
for Level 2 (4 or more services per day)
hospital-based PHP services. As we
stated in the CY 2016 OPPS/ASC
proposed rule (80 FR 39295), we
recognize that several factors may cause
a fluctuation in the PHP APC per diem
payment rates, including direct changes
to the PHP APC per diem costs (for
example, establishing separate APCs
and associated per diem payment rates
for CMHCs and hospital-based providers
based on the provider type’s costs),
changes to the OPPS (for example,
basing the relative payment weights on

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geometric mean costs), and providerdriven changes (for example, a
provider’s decision to change its mix of
services or to change its charges and
clinical practice for some services). We
refer readers to a more complete
discussion of this issue in the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75049).
The proposed CY 2016 PHP APC
geometric mean per diem costs for the
CMHC and hospital-based PHP APCs
were shown in Tables 50 and 51 of the
CY 2016 OPPS/ASC proposed rule (80
FR 39295). We noted that Tables 50 and
51 of the proposed rule displayed the
proposed PHP APC renumbering that is
part of the proposed reorganization of
OPPS APCs described in section III.D. of
the proposed rule. Specifically, we
proposed to renumber the four PHP
APCs, that is, APCs 0172, 0173, 0175,
and 0176, as APCs 5851, 5852, 5861,
and 5862, respectively. As noted earlier
in this section, we referred readers to
Addendum A to the proposed rule
(which is available at: https://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/HospitalOutpatient-Regulations-andNotices.html) for the proposed PHP APC
payment rates. We invited public
comments on these proposals.
Comment: Commenters supported the
proposed increase in the PHP payment
rates based on the geometric mean per
diem costs calculated using CY 2014
claims data. One commenter validated
the accuracy of the payment rates by
replicating CMS’ cost calculations using
the CY 2014 claims data. The
commenter agreed with the proposed
trimming methodologies to remove
aberrant data and believed that these
methodologies would help mitigate
inappropriate fluctuations in payment
rates which have occurred in recent
years. One commenter noted that
service utilization seems to have
stabilized after several years of decrease,
and thanked CMS for the work it has
done on PHP payment policies. Another
commenter supported removing
aberrant data, but believed that the same
trims should have been used for
determining the geometric mean per
diem costs for both CMHCs and
hospital-based PHPs.
Response: We appreciate the
commenters’ support of the proposed
PHP APC payment rates based on the
geometric mean per diem costs
calculated using the most recent claims
and cost report data and the proposed
trimming methodologies. As discussed
below, we are finalizing our proposed
trimming methodologies without
modification for CY 2016 and

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subsequent years. We also are finalizing
our methodology for calculating the two
CMHC PHP APC geometric mean per
diem costs without modification, but are
finalizing our methodology for
calculating the two hospital-based PHP
APC geometric mean per diem costs
with modification so that we pay a
higher payment rate for the PHP APC for
Level 2 services than the PHP APC for
Level 1 services, as discussed below.
We agree with the commenter that
PHP utilization has stabilized, and that
the trimming methodologies we
proposed and are finalizing in this final
rule with comment period may help to
stabilize the PHP APC payment rates by
mitigating fluctuations in payment rates
caused by extremely low or high costs
that inappropriately skew the geometric
mean per diem costs. We believe that
our inclusion of the detailed PHP
ratesetting methodology in the CY 2016
OPPS/ASC proposed rule (80 FR 39295
through 39299) and in this final rule
with comment period will lead to
greater accuracy in provider reporting of
claims and cost data, and thereby lead
to greater accuracy in ratesetting and
more stability in the PHP APC per diem
costs. We encourage all PHP providers
to review their accounting and billing
processes to ensure that their costs are
included in the data used for PHP
ratesetting.
With regard to the commenter’s
concern that the same trims should be
used for both CMHCs and hospitalbased PHPs, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39293), we
proposed to use a ±2 standard deviation
trim for CMHCs and to apply a CCR>5
hospital service day trim for hospitalbased PHP providers for CY 2016 and
subsequent years. As noted in section
VIII.B.2. of this final rule with comment
period, there are differences in the
ratesetting process between hospitalbased PHPs and CMHCs, which are
largely due to differences between the
hospital cost reports and the CMHC cost
reports, and we believe that having
different trims more appropriately
targets aberrant data for each provider
type. We did not propose the CCR>5
service day trim for CMHCs because the
longstanding PHP OPPS methodology
defaults any CMHC CCR>1 to the
statewide hospital ancillary CCR, and
hospital statewide CCRs have been less
than 1. In our CY 2016 final ratesetting
process, we identified only one CMHC
that had a CCR>1. This CMHC’s CCR
was 1.019, and was defaulted to its
appropriate hospital statewide CCR for
CY 2016 ratesetting purposes. We
considered applying the ±2 standard
deviation trim to hospital-based PHP
providers. However, as stated in the CY

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2016 OPPS/ASC proposed rule (80 FR
39294), the ±2 standard deviation trim
would have removed 25 hospital-based
PHP providers with aberrant data out of
387 hospital-based PHP providers.
Using updated data for this final rule
with comment period, this ±2 standard
deviation trim would have removed 22
hospital-based PHP providers with
aberrant data out of 388 hospital-based
PHP providers. We are concerned about
removing data from that many
providers, and the alternative we
proposed and are finalizing allows for
use of more data from hospital-based
providers. We believe the trim on CCRs
will be more effective in removing
aberrant data and will allow for the use
and retention of more data. For these
reasons, we continue to believe the
trims that we proposed and are
finalizing in this final rule with
comment period are appropriate and
effective for each provider type. We
plan to review the trims annually, and
would propose any changes to the
trimming methodologies in future
rulemaking as needed.
For this CY 2016 OPPS/ASC final rule
with comment period, we used updated
claims and cost data from the final June
2015 update of the CY 2014 Standard
Analytic File (SAF) outpatient claims,
the June 2015 update of the HCRIS (for
development of hospital and statewide
CCRs), and the July 2015 update of the
OPSF (for development of CMHC CCRs).
There were 66 CMHCs based on
updated CY 2014 claims data in these
files, and all 66 of these providers had
CCR data reported in the July 2015
OPSF. We used each CMHC’s most
recent CCR from the OPSF. As stated
previously, only one CMHC was
defaulted to its statewide ancillary CCR
because it had a CCR greater than 1.
Two CMHCs were excluded from
modeling because their CCRs failed the
OPPS-wide ±3 standard deviation trim.
These two providers had CCRs that were
extremely low (CCRs of 0.001 and 0).
The CMHC per diem cost calculations
were based upon the actual charges
CMHCs reported on their claims,
multiplied by the CCRs calculated from
the actual costs reported on their cost
reports. The data showed that there
were some extreme costs per day that
ranged from a low of $10.50 per day to
a high of $2,213.83 per day. The ±2
standard deviation trim removed
CMHCs with costs below $39.47 per day
or above $640.29 per day from the cost
calculations, resulting in the exclusion
of two CMHCs. In addition, three
CMHCs were removed because all of
these CMHCs’ service days had zero
payments reported. The final CY 2016
geometric mean per diem costs are

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$98.88 for CMHCs Level 1 PHP services
and $149.64 for CMHC Level 2 PHP
services, after we apply the ±2 standard
deviation trim and follow the existing
OPPS ratesetting procedures.
For this CY 2016 OPPS/ASC final rule
with comment period, there were 400
hospital-based PHPs based on updated
claims and cost data. We used the CCRs
calculated at the departmental level
from the most recent hospital cost
reports, following the revenue-code-tocost-center crosswalk described in
section VIII.B.2 of the CY 2016 OPPS/
ASC proposed rule and of this final rule
with comment period. Hospital-based
PHPs without a valid CCR calculated
from costs in the primary, secondary, or
tertiary cost centers of the crosswalk
were defaulted to their hospital’s overall
ancillary CCR. Ninety-eight hospitalbased PHPs had at least one PHP
revenue center CCR defaulted to the
overall ancillary CCR. We excluded
service days for 6 hospital-based PHPs
that failed the proposed CCR>5 trim
(before the trim, the CCRs ranged
between 0.0116 and 19.9996), which
resulted in excluding all of these 6
providers’ service days. We also
excluded service days for 2 hospitalbased PHPs that failed the longstanding
OPPS trim based on service days with
costs per day greater than ±3 standard
deviations from the geometric mean.
Again, this resulted in excluding all the
service days for 2 hospital-based PHPs.
Finally, 12 hospital-based PHPs were
excluded because all their service days
had zero payments reported, reducing
the total population by 20 providers. As
a result, 380 total hospital-based PHPs
were used for modeling.
The hospital-based PHP per diem cost
calculations were based upon the actual
charges hospital-based PHPs reported
on their claims, multiplied by the CCRs
calculated from the actual costs reported
on their cost reports, after applying the
proposed trim based on service days
with a CCR>5 and following the usual
OPPS ratesetting procedures. Using the
most updated data, the resulting
hospital-based PHP geometric mean per
diem costs showed an inversion, with
the hospital-based PHP Level 1
geometric mean per diem costs equaling
$218.46 and the hospital-based PHP
Level 2 geometric mean per diem costs
equaling $198.43. While our proposed
trim of service days with a CCR>5 was
effective in removing service days
associated with aberrant CCRs, it does
not address low or high costs per day
that result when a non-aberrant CCR is
multiplied by low or high charges. The
inverted geometric mean per diem costs
were influenced by two large-volume
hospital-based PHP providers of Level 2

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PHP services, which had low costs of
$93 per day, and three large-volume
hospital-based PHP providers of Level 1
PHP services, which had high costs
ranging between $631 and $1,732 per
day. We evaluated the hospital-based
Level 1 and Level 2 service day
utilization to determine if Level 1
services included more individual
therapy, which is more costly than
group therapy, and which could explain
higher Level 1 costs in spite of
providing fewer services. However,
based on updated data, we found that
hospital-based PHP Level 2 services had
a slightly higher percentage of more
costly individual therapy days than
hospital-based PHP Level 1 services.
The percentage of hospital-based PHP
Level 1 group therapy days was nearly
identical to the percentage of hospitalbased PHP Level 2 group therapy days.
Therefore, we believe that the inversion
is due to the influence of a few large
volume providers.
We also examined the data without
applying any trim and after applying the
±2 standard deviation trim to the
updated hospital-based PHP data as we
did for CMHCs. Under both of these
scenarios, the inversion existed. When
we did not apply any trim, we
continued to have a problem with
aberrant data significantly skewing the
geometric mean per diem costs. When
we applied the ±2 standard deviation
trim, the resulting geometric mean per
diem costs were not as extreme, but the
trim would have removed 22 hospitalbased PHPs from the data, which we
believe would have removed too many
providers. Further, the five large volume
providers discussed above with low or
high costs were still present in the data
after these adjustments had been made.
Therefore, we believe that our
proposed CCR>5 trim is the most
appropriate and effective methodology
for removing aberrant data while
allowing for the use and retention of
data from hospital-based PHP providers.
Although the inversion in the rates
exists with this trim, we believe it was
due to five hospital-based PHPs that had
costs per day that were either low or
high relative to other providers, but
these costs are not what we would
consider aberrant. Therefore, we are
finalizing this policy without
modification. We encourage all hospitalbased PHP providers to review the
revenue to cost-center crosswalk to
ensure accurate recording of their PHP
costs and to ensure that the relationship
between hospital-based PHP charges
and hospital-based PHP costs is
accurately reflected in the hospitalbased PHP CCRs.

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However, we are concerned about the
PHP APC geometric mean per diem
costs, which are the basis for the PHP
APC payment rates, being lower for the
provision of more services. As such, we
are making an adjustment to the
hospital-based PHP APC geometric
mean per diem costs to more equitably
and appropriately pay for hospital-based
PHP services. Section 1833(t)(2)(E) of
the Act states that the Secretary shall
establish, in a budget neutral manner,
other adjustments as determined to be
necessary to ensure equitable payments.
The authority granted to the Secretary
under this provision is broad. We
believe that it is not appropriate or
equitable to pay a lower payment rate
for the hospital-based PHP APC for
Level 2 services, under which 4 or more
services are provided, than for the
hospital-based PHP APC for Level 1
services, under which 3 PHP services
are provided. Using the authority set
forth in section 1833(t)(2)(E) of the Act,
we are making an equitable adjustment
to correct the inversion in the data for
CY 2016.
While we considered various methods
to equitably adjust these rates, we
ultimately decided to adjust the
inverted per diem costs by first
calculating the average percent
difference between Level 1 and Level 2
per diem costs for the last 3 years. The
method we chose is equitable in that it
adjusts the inverted Level 1 and Level
2 per diem costs by the same factor, to
result in a percent difference between
these two per diem costs that is the
same as the historical 3-year average. To
make the adjustment, we first calculated
the average percent difference between
the hospital-based PHP APC per diem
costs for Level 1 and Level 2 services
from CY 2013 to CY 2015. We believe
a 3-year timeframe is sufficient to reflect
recent cost trends. We calculated the
percent difference in hospital-based per
diem costs for Level 1 and for Level 2
services using the per diem costs
presented in the CY 2013, CY 2014, and
CY 2015 OPPS/ASC final rules with
comment period. For each of these 3
calendar years, we subtracted the
hospital-based PHP Level 1 per diem
cost from the hospital-based PHP Level
2 per diem cost, and then divided that
result by the hospital-based PHP Level
1 per diem cost to calculate the percent
difference. We then took the average of
these three percent differences, which
equaled 15.96 percent, based on the CY
2013 to CY 2015 final per diem costs.
We then decreased the actual CY 2016
hospital-based PHP APC geometric
mean per diem costs for Level 1 and
increased the actual CY 2016 hospital-

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based PHP APC geometric mean per
diem costs for Level 2 hospital-based by
the same factor, to result in a 15.96
percent difference.

To equitably adjust the inverted per
diem costs, we calculate this unknown
factor by which to increase or decrease
the inverted per diem costs to result in

a 15.96 percent difference between
those per diem costs. We used the
following formula to solve for this
factor:

When we use the above formula with
the hospital-based PHP APC geometric

mean per diem costs with the inversion
and the equitable adjustment factor ‘‘x’’

to correct the inversion, the formula and
resulting calculation become:

We then solve for the value of ‘‘x’’
using algebra, to result in a factor of
12.1525 percent. If we increase the CY
2016 inverted hospital-based PHP APC
geometric mean per diem costs for Level
2 services by 12.1525 percent, and
decrease the CY 2016 hospital-based
PHP hospital-based PHP APC geometric
mean per diem costs for Level 1 services
by 12.1525 percent, the resulting CY
2016 hospital-based PHP APC per diem
cost for Level 1 services is $191.91 and
the resulting CY 2016 hospital-based
PHP APC per diem cost for Level 2
services is $222.54. The percentage
difference between these two equitably
adjusted per diem costs is 15.96 percent.
We are finalizing these equitably
adjusted hospital-based PHP APC per
diem costs for CY 2016.
Comment: One commenter was
concerned about the small sample size
of CMHCs and data used for calculating
the geometric mean per diem costs, and
noted that CMHCs with annual revenues
of less than $100,000 are not required to
file a full cost report. The commenter
also stated that CMS does not collect
salary information from CMHCs on their
cost reports. One commenter believed
that CMHCs are being unfairly
penalized for providing more cost
effective services than hospital-based
PHPs. Another commenter expressed
concern regarding the continued
establishment of CMHC payment rates
at levels that are below average
geometric mean costs.
Response: As discussed previously in
this final rule with comment period,
there were 66 CMHCs based on updated
CY 2014 claims data in these files, and
all 66 of these providers had entries
with CCR data reported in the July 2015
OPSF. We used each CMHC’s most
recent CCR from the OPSF. As stated
previously, only one CMHC was
defaulted to its statewide ancillary CCR
because it had a CCR greater than 1.
Two CMHCs were excluded from

modeling because their CCRs failed the
OPPS-wide ±3 standard deviation trim.
These two providers had CCRs that were
extremely low (CCRs of 0.001 and 0).
The ±2 standard deviation trim removed
CMHCs with costs below $39.47 per day
or above $640.29 per day from the cost
calculations, resulting in the exclusion
of two CMHCs. In addition, three
CMHCs were removed because all of the
CMHCs’ service days had zero payments
reported. Therefore, we removed a total
of seven CMHCs from the ratesetting
modeling. We do not believe that the
exclusion of these seven providers with
aberrant data excessively reduced the
CMHC population, but rather it allowed
for the per diem cost determination to
be based upon reasonable costs from
nearly all CMHCs. Further, only two of
these CMHCs were excluded based on
the ±2 standard deviation trim; the
others were removed under our current
policies.
We acknowledge that, although all
facilities must file a cost report, MACs
have established thresholds that they
use in determining a facility’s eligibility
to file less than a full cost report. MACs
may authorize a CMHC to file less than
a full cost report when they experience
low or no Medicare utilization in a
reporting period and receive
correspondingly low interim payment
which, in the aggregate, appears to
justify making a final settlement for that
period based on less than a normally
required full cost report. In these
instances, the MAC will require the
CMHC to furnish the applicable
information in accordance with 42 CFR
413.24(h) and Section 110, Chapter 1 of
the Provider Reimbursement Manual—
Part 2 (CMS Pub. 15–2). However,
because CMHC geometric mean per
diem costs are the basis for CMHC
ratesetting, we encourage any CMHC
that has been authorized by its MAC to
file less than a full cost report to instead
file a full cost report.

In response to the comment that
CMHCs are being unfairly penalized for
providing more cost effective services
than hospital-based PHPs, we disagree.
We consider the effects of exclusions on
the modeling population for both
CMHCs and hospital-based PHPs, and
we review the data that we receive to
ensure that we pay appropriately for
PHP services furnished by both types of
providers. We do not favor either
provider type. Our cost determinations
are based upon the data provided by
hospitals and CMHCs using objective
mathematical methods. The PHP APC
per diem rates based on PHP APC per
diem costs, and because CMHC PHP
APC costs are lower than hospital-based
PHP APC costs, CMHC geometric mean
per diem rates are lower than hospitalbased PHP geometric mean per diem
rates.
With respect to the commenters’
concerns that the CMHC per diem
payment rates are below the geometric
mean per diem costs, the CMHC
calculated per diem rates are based on
the actual reported costs of CMHCs used
in modeling. Those actual reported costs
are used to calculate the CMHC CCRs,
which are applied to the charges
CMHCs report on their claims, and that
result in estimated CMHC costs.
Therefore, the rates reflect the data
provided by CMHCs. Those costs should
include allowable salary costs. The
commenter who stated that CMS does
not collect salary costs on CMHC cost
reports is mistaken. The CMHC cost
report provides a column for salaries for
the following categories: Drugs &
Biologicals; Occupational Therapy;
Psychiatric/Psychological Services;
Individual Therapy; Group Therapy;
Individualized Activity Therapies;
Family Counseling; Diagnostic Services;
Patient Training & Education; and
Other. These categories may include
salaries for a nurse or social worker, but
we do not identify these specific

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practitioners with their own cost
centers. However, the CMHC cost report
must not include the professional
services of physicians, physician
assistants, or clinical psychologists if
those services are separately billable.
CMHCs should review the cost reporting
instructions, which are available online
in CMS Pub. 15–2, Chapter 18, at:
https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/PaperBased-Manuals.html.
Our review of the updated data for
calculating the final geometric mean per
diem costs highlights the importance of
all PHPs following the cost reporting
and claims accounting procedures
discussed in section VIII.B.2. of this
final rule with comment period. CMHCs
that do not include allowable salary
costs in their cost reports are
inadvertently removing appropriate
costs from the ratesetting process.
Likewise, hospital-based PHPs that do
not follow the revenue-code-to-costcenter crosswalk when determining
their costs may inadvertently remove
appropriate costs from the ratesetting
process, as the OPPS modeling for
hospitals follows the crosswalk
hierarchy. Finally, we note that errors in
revenue and HCPCS coding on claims,
which occurred almost exclusively on
hospital-based PHP claims, also may
result in removing appropriate costs
from ratesetting. We estimate that,
overall, hospital-based PHP costs were
approximately $1.50 per day less than
the costs would have been if PHP
providers had used the proper coding as
specified in the Claims Processing
Manual.
Comment: Several commenters
expressed concern regarding beneficiary
access to PHP services. One commenter
questioned whether the proposed
changes would ensure continued
beneficiary access and strengthen the
PHP benefit when most CMHCs have
ceased providing PHP services and
many CMHCs have ceased doing
business altogether. Two commenters
stated that CMS’ expressed concern for
paying hospital-based PHPs at a lower
rate than their cost structure could lead
to closures and possible access
problems. These two providers stated
that CMS statement about hospitalbased PHPs offering the widest access to
PHP services because they are located
throughout the country implies a strong
bias on behalf of hospitals and a
discriminatory stance towards CMHCs.
Response: We acknowledge the
commenters’ concerns regarding
beneficiary access to PHP services. The
final PHP APC per diem costs for CY
2016 reflect the costs of what providers
expend to maintain such programs, as

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reported on their claims and cost
reports. In comparison to the CY 2015
geometric mean per diem costs, the final
CY 2016 geometric mean per diem costs
decreased by 1.3 percent for Level 1
PHP services provided by CMHCs.
However, only 5 percent of CMHC
service days are billed as Level 1 PHP
services. The final CY 2016 geometric
mean per diem costs increased
substantially for Level 2 PHP services
provided by CMHCs, by 26.2 percent.
Compared to the CY 2015 geometric
mean per diem costs for hospital-based
PHPs, the final CY 2016 equitably
adjusted hospital-based PHP per diem
costs increased by 3.2 percent for Level
1 PHP services, and increased by 9.6
percent for Level 2 PHP services. We
believe that these per diem costs, which
are the basis for the payment rates,
support continued beneficiary access
and strengthen the PHP benefit. Our
PHP methodology provides for a stable
rate structure, and we do not believe
that it favors one provider type over
another or diminishes access to PHP
services. While we recognize that
CMHCs and hospital-based PHPs
provide the same services, our payment
methodology requires that we make
payments based upon provider costs.
Hospital-based PHPs have higher costs
than CMHCs, as evidenced by their cost
report data, which is the reason
hospital-based PHPs have higher
geometric mean per diem costs than
CMHCs.
We disagree with the commenters
who believed CMS is demonstrating
bias against CMHCs with respect to
access to PHP services by referencing
CMS’ language in the proposed rule
regarding hospital-based PHPs offering
the widest access to care because they
are located across the country. While it
is true that hospital-based PHPs offer
the widest access to PHP services
because they are located across the
country, we greatly value the access to
PHP services provided by CMHCs as
well. We want to ensure that CMHCs
remain a viable option as providers of
mental health care. We are concerned if
any payment rate would contribute to
providers ceasing operations. We have
demonstrated our commitment to
stabilize and ensure accuracy in
payment for PHP services in part by our
extensive analysis of the PHP payment
data, and our publishing a detailed
review of the PHP payment
methodology for both CMHCs and
hospital-based PHPs. We appreciate the
services that all PHPs provide to those
individuals with mental health issues,
and remain committed to strengthening

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access to both CMHC PHP services and
hospital-based PHP services.
Comment: One commenter expressed
concern and objections regarding the
continuing use of four PHP APC per
diem payment rates based on geometric
mean per diem costs for each provider
type, and the adverse impact the
proposed rates for CY 2016 will have
again on few remaining CMHC
providers across the country.
Response: The OPPS system pays for
outpatient services provided, such as
and including partial hospitalization
services. This system bases payment on
the geometric mean costs of providing
services using provider data from claims
and cost reports. We calculate the PHP
APC per diem payment rates based on
the data provided for each type of
provider in order to pay for services. We
believe this system provides appropriate
payment for partial hospitalization
services based on provider costs. The
final PHP APC per diem costs for CY
2016 reflect the costs of what providers
expend to maintain such programs, as
reported on their claims and cost
reports. With regard to CMHC rates
specifically, as stated previously, in
comparison to the CY 2015 geometric
mean per diem costs, the final CY 2016
geometric mean per diem costs
decreased by 1.3 percent for Level 1
PHP services provided by CMHCs.
However, only 5 percent of CMHC
service days are billed as Level 1 PHP
services. The final CY 2016 geometric
mean per diem costs increased
substantially for Level 2 PHP services
provided by CMHCs, by 26.2 percent.
Therefore, we believe that the CY 2016
rates will be viewed positively by
CMHCs across the country.
With respect to the continued use of
four PHP APC per diem payment rates,
we refer readers to the CY 2011 OPPS/
ASC final rule with comment period (75
FR 71991 through 71994) where we
implemented this policy. Because the
cost of providing PHP services differs
significantly by site of service, we
implemented differing PHP payment
rates for hospital-based PHPs and
CMHCs. The resulting rates reflect the
cost of what providers expend to
maintain such programs based on data
provided by these types of providers,
which we believe is an improvement
over the two-tiered methodology
calculated using only hospital-based
data.
With respect to rates based on
geometric mean per diem costs, we refer
readers to the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68406
through 68412) where we established
the geometric mean rather than the
median as the measure upon which to

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base the relative payment weights that
underpin the OPPS APCs, including the
four PHP APCs. We believe that the use
of geometric mean costs represents an
improvement to our cost estimation
process compared to the median. The
geometric mean compared to the
median allows inclusion of some
extreme but not aberrant observations in
developing the relative payment weights
and captures a wider range of service
costs, which we believe leads to more
accurate relative payment weights. In
addition to better incorporating those
cost values that surround the median
and, therefore, describing a broader
range of cost patterns, basing the
relative payment weight on geometric
mean costs also may promote better
stability in the payment system by
making OPPS payments more reflective
of the range of costs associated with
providing services. Further, applying
the geometric mean to the PHP APCs
helps ensure that the relativity of the
OPPS payment weights is properly
aligned.
Comment: One commenter suggested
that CMS consider paying PHPs using a
quality-based payment system, and that
CMS use value-based purchasing.
Response: We responded to a similar
public comment in the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66906) and refer readers to a
summary of that comment and our
response. Sections 1833(t)(2) and
1833(t)(9) of the Act set forth the

requirements for establishing and
adjusting OPPS rates, which include
PHP rates. Section 1833(t)(17) of the Act
authorizes the Hospital OQR Program,
which applies a payment reduction to
subsection (d) hospitals that fail to meet
program requirements. In the CY 2015
OPPS/ASC proposed rule (79 FR 41040),
we considered future inclusion of, and
requested comments on, the following
quality measures addressing PHP issues
that would apply in the hospital
outpatient setting: (1) 30-Day
Readmissions; (2) Group Therapy; and
(3) No Individual Therapy. We refer
readers to the CY 2015 OPPS/ASC final
rule with comment period (79 FR 66957
through 66959) for a more detailed
discussion of PHP measures considered
for inclusion in the Hospital OQR
Program in future years. The Hospital
OQR Program does not apply to CMHCs.
Further, currently, there is no statutory
language explicitly authorizing a valuebased purchasing program for PHPs.
After consideration of the public
comments we received, we are
finalizing our proposals to update the
four PHP APC per diem costs and
payment rates based on geometric mean
cost levels calculated using the most
recent claims and cost data for each
provider type. However, for hospitalbased PHP APCs, we are making an
equitable adjustment to the actual
geometric mean per diem costs by
increasing the Level 2 per diem costs
and decreasing the Level 1 per diem

costs by the same factor, to result in a
percentage difference equal to the
average percent difference between
hospital-based PHP Level 1 and Level 2
services from CY 2013 through CY 2015.
For CY 2016 and subsequent years, we
also are finalizing the proposed
trimming methodologies. Specifically,
we are excluding any CMHC when the
CMHC’s costs per day are more than ±2
standard deviations from the geometric
mean cost per day (Level 1 and Level 2),
and excluding hospital-based PHP
service days when a CCR>5 is used to
calculate costs for at least one of their
component services (Level 1 and Level
2). We plan to review the trims
annually, and would propose any
changes to the trimming methodologies
in future rulemaking as needed.
The CMHC PHP Level 1 geometric
mean per diem costs are $98.88, and the
CMHC PHP Level 2 geometric mean per
diem costs are $149.64, after applying
the ±2 standard deviation trim to
CMHCs. The equitably adjusted
hospital-based PHP Level 1 per diem
costs are $191.91, and the equitably
adjusted hospital-based PHP Level 2 per
diem costs are $222.54, after applying
the CCR>5 trim to affected service days.
Table 54 below displays the final CY
2016 PHP APC geometric mean per
diem costs for CMHC PHP services, and
Table 55 below displays the final PHP
APC equitably adjusted geometric mean
per diem costs for hospital-based PHP
services.

TABLE 54—CY 2016 PHP APC GEOMETRIC MEAN PER DIEM COSTS FOR CMHC PHP SERVICES
PHP APC
geometric
mean per
diem costs

Renumbered CY
2016 APC

Group title

5851 ..................
5852 ..................

Level 1 Partial Hospitalization (3 services) for CMHCs .......................................................................................
Level 2 Partial Hospitalization (4 or more services) for CMHCs .........................................................................

$98.88
149.64

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TABLE 55—CY 2016 PHP APC EQUITABLY ADJUSTED GEOMETRIC MEAN PER DIEM COSTS FOR HOSPITAL-BASED PHP
SERVICES
PHP APC
equitably
adjusted
geometric
mean per
diem costs

Renumbered
CY 2016 APC

Group title

5861 ..................
5862 ..................

Level 1 Partial Hospitalization (3 services) for hospital-based PHPs ..................................................................
Level 2 Partial Hospitalization (4 or more services) for hospital-based PHPs ....................................................

2. PHP Ratesetting Process
While PHP services are part of the
OPPS, PHP ratesetting has some unique
aspects. To foster understanding and
transparency, as we did in the CY 2016
OPPS/ASC proposed rule (80 FR 39295

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through 39299), we are providing the
following detailed explanation of the
PHP APC ratesetting process. The OPPS
ratesetting process includes various
steps as part of its data development
process, such as CCR determination and
calculation of geometric mean per diem

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$191.91
222.54

costs, identification of allowable
charges, development of the APC
relative payment weights, calculation of
the APC payment rates, and
establishment of outlier thresholds. We
refer readers to section II. of the
proposed rule and this final rule with

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comment period and encourage readers
to review these discussions to increase
their overall understanding of the entire
OPPS ratesetting process. We also refer
readers to the OPPS Claims Accounting
narrative, which is a supporting
document to the CY 2016 OPPS/ASC
proposed rule and this final rule with
comment period, available on the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Hospital-Outpatient-Regulations-andNotices.html; click on the link to the CY
2016 OPPS/ASC proposed rule or the
final rule with comment period to find
the Claims Accounting narrative. We
encourage CMHCs and hospital-based
PHPs to review their accounting and
billing processes to ensure that they are
following these procedures, which
should result in greater accuracy in
setting the PHP payment rates.
We limit our discussion here
primarily to the data development
process and calculation of PHP APC
geometric mean per diem costs used for
PHP ratesetting. Our discussions focus
on five major phases in modeling the
data, which result in the development of
PHP APC geometric mean per diem
costs, and on the importance of correct
coding and reasonable charges for PHP
services, and include: (a) Development
of PHP claims; (b) determination of
CCRs for CMHCs and hospital-based
PHPs; (c) identification of PHP
allowable charges; (d) determination of
PHP APC per diem costs; (e)
development of service days and cost
modeling; and (f) issues regarding
correct coding and reasonable charges.
a. Development of PHP Claims
We use outpatient claims from the
national claims history file for the most
recent available calendar year that were
processed through December 31 of that
year (that is, the calendar year that is 2
years before the calendar year at issue)
to calculate the geometric mean per
diem costs of APCs that underpin the
relative payment weights for the
calendar year at issue. It is important to
note that this is not the population of
claims paid under the OPPS, but all
outpatient claims as explained in
further detail in section II.A.2.a. of this
final rule with comment period.
We then exclude the following claims
from OPPS ratesetting. These are claims
where:
• No payment is made;
• There are more than 300 lines; or
• Services were furnished in
Maryland, Guam, the U.S. Virgin
Islands, American Samoa, or the
Northern Mariana Islands (these
providers are not paid under the OPPS).

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From these outpatient claims, we
extract all hospital outpatient PHP
claims and all CMHC claims. PHP
claims are extracted based on their
specific bill types: 12X or 13X, with
condition code 41, for hospital-based
PHPs; and 76X for CMHCs. For
example, for the CY 2016 OPPS/ASC
proposed rule, we used data from the
CY 2014 hospital outpatient PHP and
CMHC PHP claims from the national
claims history file that were processed
through December 31, 2014, to calculate
the PHP APC geometric mean per diem
costs that underpin the proposed PHP
APC relative payment weights for CY
2016. For this final rule with comment
period, we used the final CY 2014 SAF
outpatient claims as of June 2015, the
June 2015 update of HCRIS (for
development of hospital and statewide
CCRs), and the July 2015 update of the
OPSF (for the development of CMHC
CCRs).
As noted in section II.A.2.c. of the CY
2016 OPPS/ASC proposed rule and this
final rule with comment period and in
the Claims Accounting narrative, we
exclude hospital-based PHP claims if—
• They were submitted by critical
access hospitals;
• They reported obviously erroneous
units (for example, more than 100,000
units for a single service);
• They reported charge amounts
equal to the payment received;
• They did not report at least one
HCPCS code, because OPPS APCs are
based upon HCPCS codes; or
• They only contained flu or
pneumonia vaccine services, which are
paid separately outside of OPPS.
At the end of this process, we
identified the PHP claims that are
appropriate and available to use to
calculate PHP APC geometric mean per
diem costs. These claims include data
on dates of service, revenue codes,
HCPCS codes for services provided,
charges, and the payments Medicare
made (the PHP APC geometric mean per
diem rates).
b. Determination of CCRs for CMHCs
and Hospital-Based PHPs
Next, we determine and assess each
provider’s CCR. This ratio, along with
the charges from the claims, is used to
estimate the costs, which are then used
to determine the geometric mean per
diem costs. There are specific policies
we follow in determining which CCR to
use in estimating costs, which differ for
CMHCs and for hospital-based PHPs,
largely due to differences in the data
required for claims and cost reports for
these two types of PHP providers. We
encourage PHP providers to review
section II.A.1.c. of the CY 2016 OPPS/

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70463

ASC proposed rule and this final rule
with comment period rule and section
10.11, Chapter 4, of the Medicare Claims
Processing Manual (internet-only
manual (IOM), Pub. 100–04), which is
available on the CMS Web site at:
http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/
Downloads/clm104c04.pdf) for more
specific discussion of CCRs used in PHP
ratesetting.
(1) Calculation and Assessment of
CMHC CCRs
As noted in section VIII.A. of the CY
2016 OPPS/ASC proposed rule and this
final rule with comment period and
section 10.11.9, Chapter 4 of the
Medicare Claims Processing Manual
(Pub. 100–04), the CMHC CCR is
calculated using the provider’s most
recent full year cost report, Form CMS
2088–92, and Medicare cost and charges
from Worksheet C, Page 2. We divide
costs from line 39.01, Column 3 by
charges from line 39.02, Column 3 to
calculate an overall CMHC CCR. The
CMHC cost report forms and cost
reporting instructions are available on
the CMS Web site at: http://
www.cms.gov/Regulations-andGuidance/Guidance/Manuals/PaperBased-Manuals-Items/
CMS021935.html?DLPage=1&DLSort
=0&DLSortDir=ascending.
The most recent CMHC CCRs are
posted to the OPSF. We assess those
CMHC CCRs within that file in
preparation for use in cost estimation in
the following manner:
• We use the most recent CMHCspecific CCR from the OPSF. If the CCR
is not available (for example, the CMHC
is a new provider with less than 12
months data), we use the hospital
ancillary CCR associated with the
provider’s urban/rural designation and
their state location. The statewide urban
and rural hospital CCRs are available on
the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient
PPS/Annual-Policy-Files.html.
• As described in Section 10.11.9,
Chapter 4, of the Medicare Claims
Processing Manual, for any CMHC with
a CCR greater than 1, we use the
hospital ancillary CCR associated with
its urban/rural designation and its State
location.
Once we have a CCR for each CMHC,
we calculate the geometric mean of all
CMHC CCRs. As described in the OPPS
Claims Accounting narrative, we apply
the existing OPPS ±3 standard deviation
trim to the CMHC CCRs; this trim
excludes any CMHC with a CCR that is
± 3 standard deviations from the
geometric mean of all CMHC CCRs. At

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the end of this process, we identified a
CCR for all CMHCs that have not been
excluded.
(2) Calculation and Assessment of
Hospital-Based PHP CCRs
Unlike CMHCs where there is one
CCR calculated for each CMHC,
hospital-based PHPs have CCRs for each
cost center that is associated with PHP
services. For hospital-based PHPs, we
use the provider’s most recent full year
hospital cost report, whether tentatively
settled or final settled, to identify CCRs,
using the HCRIS file. The CCRs for
hospital-based PHPs are calculated by
cost center on hospital cost report
Worksheet C, Part I, Column 9. The
overall hospital CCR is calculated by the
MAC, and is posted in the ProviderSpecific File. The hospital cost report
form CMS–2552–10 and cost reporting
instructions are in Chapter 40 of the
Provider Reimbursement Manual—Part
2, which is available on the CMS Web
site at: http://www.cms.gov/Regulations
-and-Guidance/Guidance/Manuals/
Paper-Based-Manuals-Items/CMS02
1935.html?DLPage=1&DLSort=0&DLSort
Dir=ascending.
We assess the hospital-based PHP
CCRs as described in section II.A.2.a. of
the CY 2016 OPPS/ASC proposed rule
and this final rule with comment period
and in the OPPS Claims Accounting
narrative, by applying the existing OPPS
±3 standard deviation trim to hospital-

based PHP CCRs within each cost center
and to the overall hospital ancillary
CCR. To perform this ±3 standard
deviation trim, we follow the following
process. Each PHP revenue code is
associated with particular cost centers
on the cost report. The revenue-to-cost
center crosswalk identifies the primary,
secondary (if any), and tertiary (if any)
cost centers that are associated with
each PHP revenue code, and which are
the source for the CCRs used in PHP
ratesetting. The PHP portion of that
OPPS crosswalk is shown in Table 56
below (Table 52 of the proposed rule).
Based on the revenue code, we first look
for a CCR calculated from the primary
cost center; if none exists or the CCR
fails the ±3 standard deviation trim, we
look for a CCR calculated from the
secondary cost center. If there is no CCR
calculated from the secondary cost
center or the CCR fails the ±3 standard
deviation trim, we look for a CCR
calculated from the tertiary cost center.
If there is no CCR calculated from the
tertiary cost center or the CCR fails the
±3 standard deviation trim, we look to
the hospital’s overall ancillary CCR. If
the hospital’s overall ancillary CCR fails
the ±3 standard deviation trim, we
exclude the hospital from ratesetting.
For example, for revenue code 0900,
the primary cost center is 3550
‘‘Psychiatric/Psychological Services.’’ If
the CCR associated with this cost center
passes the ±3 standard deviation trim,

we retain that CCR for use in ratesetting.
If the CCR associated with primary cost
center 3550 fails the trim, it is deleted,
and we then move to cost center 9000
‘‘Clinic’’ to assess the provider’s CCR. If
that CCR passes the ±3 standard
deviation trim, it is retained for use in
ratesetting. If the CCR fails the ±3
standard deviation trim, it is deleted,
and we then would consider the CCR
calculated from the tertiary cost center.
However, for revenue code 0900, there
is no tertiary cost center. If the primary,
secondary (if any), and tertiary (if any)
cost centers’ CCRs fail the trim, we
assess the hospital’s overall ancillary
CCR. If that overall ancillary CCR passes
the ±3 standard deviation trim, we
retain it for use in ratesetting. If the
overall ancillary CCR fails the ±3
standard deviation trim, we exclude the
provider from ratesetting. This process
of assessing the CCRs with a ±3 standard
deviation trim is repeated for each
revenue code’s associated cost centers.
After applying this ±3 standard
deviation trim, we obtain a file with
trimmed CCRs for use in ratesetting.
The revenue-to-cost center crosswalk
for all services paid under the OPPS is
available on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/Annual-PolicyFiles.html. We are providing an excerpt
of the PHP portion of the OPPS
crosswalk below.

TABLE 56—REVENUE-TO-COST CENTER CROSSWALK FOR PHP ALLOWABLE REVENUE CODES
Primary
cost center
source
for CCR

Revenue code

Description

0250 ..................
0430 ..................
0900, 0914,
0915, 0916, or
0918.

Pharmacy ....................................
Occupational Therapy .................
Psychiatric/Psychological Treatment: Individual, Group, and
Family Therapy; Psychological
testing.
Psychiatric/Psychological Treatment: Activity Therapy.
Other
Therapeutic
Services:
Education/Training.

0904 * ................
0942 ..................

Secondary
cost center
source
for CCR

Primary
cost center
name

7300
6700
3550

Drugs Charged to Patients.
Occupational Therapy.
Psychiatric/ .......................
Psychological Services ....

3580

Recreational Therapy .......

9000

Clinic.

Secondary
cost center name

9000

Clinic.

3550

Psychiatric/
Psychological Services.

jstallworth on DSK7TPTVN1PROD with RULES

* Although not listed in this table, revenue code 0904 is the only PHP revenue code with a tertiary cost center serving as a source for the
CCR, which is cost center 9000, ‘‘Clinic.’’

c. Identification of PHP Allowable
Charges
We use the PHP claims derived under
the methodology discussed in section
VIII.B.2.a. of this final rule with
comment period to identify which
charges are allowable for PHP
ratesetting. Each revenue code line on
the PHP claim must report a HCPCS
code and a charge (except for revenue
code 0250, which only requires that the

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charge be reported). Allowable charges
are those charges for the HCPCS codes
which are associated with PHP
allowable revenue codes; PHP allowable
revenue codes are revenue codes
allowable for OPPS PHP ratesetting
purposes. As discussed in the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68412 to 68418), we
updated the PHP allowable revenue
codes and PHP allowable HCPCS codes

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for CY 2013 and subsequent years. The
allowable revenue and PHP HCPCS
codes are included in Section 260,
Chapter 4, of the Medicare Claims
Processing Manual (IOM Pub. 100–04),
which is available on the CMS Web site
at: http://www.cms.gov/Regulationsand-Guidance/Guidance/Manuals/
Downloads/clm104c04.pdf) and are
shown in Table 57 below (Table 53 of
the proposed rule, 80 FR 39297):

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70465

TABLE 57—PHP ALLOWABLE REVENUE AND HCPCS CODES
Revenue code

Description

HCPCS code
Not required.
G0129.
90791 or 90792.
G0176.
90785, 90832, 90833, 90834, 90836, 90837, 90838, 90845,
90865, or 90880.
G0410 or G0411.
90846 or 90847.
96101, 96102, 96103, 96116, 96118, 96119, or 96120.
G0177.

0250
043X
0900
0904
0914

...................
...................
...................
...................
...................

Drugs and Biologicals ..............................................................
Occupational Therapy ..............................................................
Behavioral Health Treatment/Services ....................................
Activity Therapy (Partial Hospitalization) .................................
Individual Psychotherapy .........................................................

0915
0916
0918
0942

...................
...................
...................
...................

Group Therapy .........................................................................
Family Psychotherapy ..............................................................
Psychiatric Testing ...................................................................
Education Training ...................................................................

The HCPCS codes shown in Table 56
above are those which are used in the
four renumbered PHP APCs 5851, 5852,
5861, and 5862 (existing APCs 0172,
0173, 0175, and 0176), and are also
shown in Appendix C–a and Appendix
P of the Integrated Outpatient Code
Editor (IOCE) Specifications. As
described in section III.D. of this final
rule with comment period, as we
proposed, we are finalizing our proposal
to renumber some of the OPPS APCs,
and have shown both the renumbered
APCs and the existing APCs for partial
hospitalization services above. The
IOCE is available on the CMS Web site
at: http://www.cms.gov/Medicare/
Coding/OutpatientCodeEdit/
OCEQtrReleaseSpecs.html.

jstallworth on DSK7TPTVN1PROD with RULES

d. Determination of PHP APC Per Diem
Costs
The PHP CCRs described in section
VIII.B.2.b. of this final rule with
comment period are applied to the PHP
claim charges described in section
VIII.B.2.c. of this final rule with
comment period to determine the PHP
APC geometric mean per diem costs.
Costs for each service line reported on
CMHC claims are calculated by
multiplying each service line charge by
the CCR associated with the claim’s
provider. Costs for each service line
reported on the hospital-based PHP
claims are calculated by multiplying the
service line charge by the CCR
associated with the provider’s service
line’s revenue code (using the revenueto-cost center crosswalk hierarchy
described in section VIII.B.2.b. of this
final rule with comment period). For
both CMHCs and hospital-based PHPs,
charges are set to zero for services
reporting revenue codes, which are not
included in the listing of PHP allowable
revenue codes shown in Table 57 above
(Table 53 of the proposed rule (80 FR
39297)).

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e. Development of Service Days and
Cost Modeling
Only the claims service lines
containing PHP allowable HCPCS codes
(shown in Table 57 above; Table 53 of
the proposed rule (80 FR 39297)) from
the remaining hospital-based PHP and
CMHC claims are retained for PHP cost
determination. The costs, payments, and
service units for all service lines
occurring on the same service date, by
the same provider, and for the same
beneficiary are summed to calculate the
PHP APC geometric mean per diem cost,
per diem payment rate, and per diem
service volume for each PHP service
day. Any service days with zero per
diem payments are removed.
Because the PHP costs calculated
above include the effects of geographic
variation in wages, we use the wage
index data to wage neutralize PHP APC
per diem costs prior to the APC
geometric mean per diem cost
calculation. This removes the effects of
geographic variation in costs used in the
OPPS APC ratesetting process. Service
days with no per diem costs or with no
wage index values are removed. PHP
service days with fewer than 3 service
units are deleted and not considered for
PHP cost modeling.
As discussed in section VIII.B.1. of
the CY 2016 OPPS/ASC proposed rule
and this final rule with comment
period, there were several PHP
providers with aberrant data. As such,
we proposed and are finalizing a
trimming methodology to exclude
CMHCs that have a per diem cost that
is ±2 standard deviations from the
overall CMHC geometric mean per diem
cost, beginning in CY 2016. This trim
excluded from the ratesetting process
any CMHCs with extreme costs per day.
We also proposed and are finalizing a
trimming methodology to exclude
service days with extreme hospitalbased PHP CCR values which were not
removed by the ± 3 standard deviation
trim discussed above, if those service
days have a CCR>5, beginning in CY
2016. Therefore, we excluded hospital-

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based PHP service days where the
CCR>5.
PHP service days from CMHCs and
from hospital-based PHPs with exactly 3
service units, or with 4 or more service
units (based on allowable HCPCS codes
shown in Table 53 of the proposed rule
(80 FR 39297); Table 57 of this final rule
with comment period) are assigned to
Level 1 or Level 2 PHP APCs as follows:
(We note that we are finalizing our
proposal to renumber some of the OPPS
APCs, and are showing both the
renumbered APCs and the existing
APCs for partial hospitalization services
below.)
• Level 1 Partial Hospitalization,
renumbered APC 5851 (existing APC
0172): CMHC service days with exactly
3 service units;
• Level 2 Partial Hospitalization,
renumbered APC 5852 (existing APC
0173): CMHC service days with 4 or
more service units;
• Level 1 Partial Hospitalization,
renumbered APC 5861 (existing APC
0175): hospital-based PHP service days
with exactly 3 service units; and
• Level 2 Partial Hospitalization,
renumbered APC 5862 (existing APC
0176): hospital-based PHP service days
with 4 or more service units.
PHP service days with costs ±3
standard deviations from the geometric
mean costs within each APC are deleted
and removed from modeling. The
remaining PHP service days are used to
calculate the geometric mean per diem
cost for each PHP APC.
For CY 2016, we also made an
equitable adjustment to the hospitalbased PHP geometric mean per diem
costs, to remove an inversion in the per
diem costs. The finalized PHP APC
geometric mean per diem costs or PHP
APC equitably adjusted per diem costs
undergo several more steps, as noted
below, before becoming budget neutral
PHP APC per diem payment rates. The
PHP APCs are part of the larger OPPS.
As discussed in section II.A. of the CY
2016 OPPS/ASC proposed rule and this
final rule with comment period, OPPS
APC geometric mean per diem costs

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jstallworth on DSK7TPTVN1PROD with RULES

(including PHP APC geometric mean
per diem costs) are divided by the
geometric mean per diem costs for
renumbered APC 5012 (Level 2
Examinations and Related Services) to
calculate each PHP APC’s unscaled
relative payment weight. An unscaled
relative payment weight is one that is
not yet adjusted for budget neutrality.
Budget neutrality is required under
section 1833(t)(9)(B) of the Act, and
ensures that the estimated aggregate
weight under the OPPS for a calendar
year is neither greater than nor less than
the estimated aggregate weight that
would have been made without the
changes. To adjust for budget neutrality
(that is, to scale the weights), we
compare the estimated aggregated
weight using the scaled relative
payment weights from the previous
calendar year at issue. For example, to
adjust for budget neutrality (that is, to
scale the weights) in the CY 2016 OPPS/
ASC proposed rule and this final rule
with comment period, we compared the
estimated aggregated weight using the
CY 2015 scaled relative payment
weights to the estimated aggregate
weight using the CY 2016 unscaled
relative payment weights. We refer
readers to the ratesetting procedures
described in Part 2 of the OPPS Claims
Accounting narrative and in section II.
of this final rule with comment period
for more information on scaling the
weights, and for details on the final
steps of the process that lead to PHP
APC per diem payment rates.
f. Issues Regarding Correct Coding and
Reasonable Charges
PHP claims with revenue codes other
than those listed as allowable in Table
57 above (Table 53 of the proposed rule
(80 FR 39297)), but which are associated
with allowable PHP HCPCS codes, may
still be paid, as described in the OPPS
Claims Accounting narrative. The OPPS
does not include charges associated
with revenue codes that are not
allowable for ratesetting purposes. In
reviewing CY 2013 and CY 2014 claims,
we noticed CMHCs were using correct
revenue coding for nearly all claims, but
hospital-based PHPs were occasionally
using other revenue codes, particularly
revenue codes 0912 and 0913. Revenue
codes 0912 and 0913 are not on the
allowable list of PHP revenue codes. As
such, the charges associated with those
two revenue codes are not included in
ratesetting, even when revenue code
0912 or 0913 is associated with a PHP
allowable HCPCS code. For the most
accurate ratesetting, it is imperative that
providers follow coding guidelines for
all revenue codes and all CPT and Level
2 HCPCS codes in a manner consistent

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with their descriptors, instructions, and
correct coding principles. We also refer
readers to the coding instructions given
in the Claims Processing Manual.
Following the correct coding guidelines
will help ensure that we include all PHP
costs in ratesetting.
Finally, it appears that a few PHPs
may not be reporting reasonable charges
for their services on their claims. When
this occurs with CMHCs or hospitalbased PHPs that provide a high number
of services during the year, the data
used for ratesetting may be
inappropriately skewed. Therefore, we
remind PHPs of the regulations at 42
CFR 413.53 and existing CMS guidance
related to charges, which is found in
Chapter 22 of the Provider
Reimbursement Manual, Part 1, which
is available on the CMS Web site at:
http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/PaperBased-Manuals-Items/
CMS021929.html?DLPage=1&
DLSort=0&DLSortDir=ascending.
In section 2202.4, we define
‘‘Charges,’’ as the regular rates
established by the provider for services
rendered to both beneficiaries and to
other paying patients. Charges should be
related consistently to the cost of the
services and uniformly applied to all
patients whether inpatient or outpatient.
We also state in section 2204, ‘‘Medicare
Charges,’’ that the Medicare charge for
a specific service must be the same as
the charge made to non-Medicare
patients (including Medicaid,
CHAMPUS, private, etc.) must be
recorded in the respective income
accounts of the facility, and must be
related to the cost of the service. In
section 2203, ‘‘Provider Charge
Structure as Basis for Apportionment,’’
we state that each facility should have
an established charge structure which is
applied uniformly to each patient as
services are furnished to the patient,
and which is reasonably and
consistently related to the cost of
providing the services, so that its
charges may be allowable for use in
apportioning costs under the program.
The Medicare program cannot dictate to
a provider what its charges or charge
structure may be. However, the program
may determine whether or not the
charges are allowable for use in
apportioning costs under the program.
We received one comment regarding the
ratesetting process.
Comment: One commenter supported
the CMS recommendation that CMHCs
and hospital-based PHPs review their
accounting and billing processes to
ensure that they are following
procedures properly, with the goal of
obtaining greater accuracy in setting

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PHP payment rates. The commenter
committed to working with its members
to help ensure correct recording of costs
and claims coding.
Response: We appreciate the
commenter’s support and commitment.
C. 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
the 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
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 2016 OPPS/ASC proposed
rule (80 FR 39299), we proposed to
continue to designate 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 2016, excluding outlier
payments. In the CY 2016 OPPS/ASC
proposed rule, we stated that CMHCs
are projected to receive 0.04 percent of
total OPPS payments in CY 2016,
excluding outlier payments. Therefore,
we proposed to designate 0.49 percent
of the estimated 1.0 percent outlier

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
target amount for CMHCs, and establish
a threshold to achieve that level of
outlier payment. Based on our
simulations of CMHC payments for CY
2016, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39299), we
proposed to continue to set the
threshold for CY 2016 at 3.40 times the
highest CMHC PHP APC payment rate
(that is, renumbered APC 5852 (Level 2
Partial Hospitalization) (existing APC
0173). 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 2016, we proposed to
continue to pay 50 percent of CMHC
APC geometric mean per diem costs
over the threshold. In section II.G. of the
CY 2016 OPPS/ASC proposed rule, for
the hospital outpatient outlier payment
policy, we proposed to set a dollar
threshold in addition to an APC
multiplier threshold. 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, in the CY 2016 OPPS/
ASC proposed rule, we proposed to
establish that if a CMHC’s cost for
partial hospitalization services, paid
under either renumbered APC 5851
(existing APC 0172) or renumbered APC
5852 (existing APC 0173), exceeds 3.40
times the payment rate for renumbered
APC 5852, the outlier payment is
calculated as 50 percent of the amount
by which the cost exceeds 3.40 times
the renumbered APC 5852 payment rate.
We invited public comments on these
proposals.
We did not receive any public
comments on our proposed outlier
policy. Therefore, we are finalizing our
proposal for CY 2016 to set a separate
outlier threshold for CMHCs without
modification. 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 0.36 percent of outlier
payments, or 0.0036 percent of total
estimated OPPS payment, to CMHCs for
PHP outlier payments. For CY 2016, as
proposed, we are setting the CMHC

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outlier threshold at 3.40 multiplied by
renumbered APC 5852 (existing APC
0173) payment rate and the CY 2016
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 renumbered APC 5851 (existing
APC 0172) or APC 5852 (existing APC
0173) exceeds 3.40 times the payment
rate for renumbered APC 5852 (existing
APC 0173), the outlier payment will be
calculated as 50 percent of the amount
by which the cost exceeds 3.40 times
the renumbered APC 5852 (existing 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 only list)
and, therefore, will not be paid by
Medicare under the OPPS, and on the
criteria that we use to review the
inpatient only list each year to
determine whether or not any
procedures should be removed from the
list.
B. Changes to the Inpatient Only List
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39299 through 39300), for
the CY 2016 OPPS, we proposed to use
the same methodology (described in the
November 15, 2004 final rule with
comment period (69 FR 65834)) of
reviewing the current list of procedures
on the inpatient only 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.
3. The procedure is related to codes
that we have already removed from the
inpatient only 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.

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70467

Using this methodology, for the
proposed rule, we identified seven
procedures that could potentially be
removed from the inpatient only list for
CY 2016. We reviewed the clinical
characteristics and related evidence for
these procedures for removal from the
inpatient only list and found them to be
appropriate candidates.
In the CY 2016 OPPS/ASC proposed
rule, for CY 2016, we proposed to
remove the following procedures from
the inpatient only list:
• CPT code 0312T (Vagus nerve
blocking therapy (morbid obesity);
laparoscopic implantation of
neurostimulator electrode array, anterior
and posterior vagal trunks adjacent to
esophagogastric junction (EGJ), with
implantation of pulse generator,
includes programming);
• CPT code 20936 (Autograft for
spine surgery only (includes harvesting
the graft); local (e.g., ribs, spinous
process, or laminar fragments) obtained
from the same incision);
• CPT code 20937 (Autograft for
spine surgery only (includes harvesting
the graft); morselized (through separate
skin or fascial incision));
• CPT code 20938 (Autograft for
spine surgery only (includes harvesting
the graft); structural, bicortical or
tricotical (through separate skin or
fascial incision));
• CPT code 22552 (Arthrodesis,
anterior interbody, including disc space
preparation, discectomy,
osteophytectomy and decompression of
spinal cord and/or nerve roots; cervical
below C2, each additional interspace);
• CPT code 54411(Removal and
replacement of all components of a
multi-component inflatable penile
prosthesis through an infected field at
the same operative session, including
the irrigation and debridement of
infected tissue); and
• CPT code 54417 (Removal and
replacement of non-inflatable (semirigid) or inflatable (self-contained)
penile prosthesis through an infected
field at the same operative sessions,
including irrigation and debridement of
infected tissue).
The seven procedures that we
proposed to remove from the inpatient
only list for CY 2016 and their CPT
codes, long descriptors, proposed APC
assignments, and proposed status
indictors were displayed in Table 54 of
the proposed rule (80 FR 39300). We
invited public comments on the
proposed removal of these seven
procedures from the inpatient only list.
Comment: Several commenters
supported CMS’ proposal to remove
CPT codes 0312T, 20936, 20937, 20938,

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22552, 54411, and 54417 from the
inpatient only list.
Response: We appreciate the
commenters’ support.
Comment: One commenter requested
that the procedures described by CPT
codes 27477 (Arrest, epiphyseal, any
method (e.g., epiphysiodesis); tibia and
fibula, proximal) and 27485 (Arrest,
hemiepiphyseal, distal femur or
proximal tibia or fibula (e.g., genu varus
or valgus)) also be removed from the
inpatient only list based on the
similarity of these procedures to CPT
codes 27475 (Arrest, epiphyseal, any
method (e.g., epiphysiodesis); distal
femur) and 27479 (Arrest, epiphyseal,
any method (e.g., epiphysiodesis);
combined distal femur, proximal tibia
and fibula), which are not on the
inpatient only list.
Response: We agree with the
commenter that procedures described
by CPT codes 27477 and 27485 are
similar to the procedures described by
CPT codes 27475 and 27479. CPT codes
27477 and 27485 also describe
procedures that stop leg growth.
However, these procedures either are
performed on a different part of the leg
(CPT code 27477) or utilize a variation
of the surgical method used to perform
this type of procedure (CPT code
27485). The differences between these
two procedures do not prevent either of
the procedures from being performed
safely in the outpatient setting.
Therefore, we agree with the commenter
that the procedures described by CPT
codes 27477 and 27485 meet the
criterion of being a procedure that is
related to codes that we have already
removed from the inpatient only list
(criterion 3 listed above) and are
removing these two codes from the
inpatient only list for CY 2016.
Comment: Another commenter
requested that the procedures described
by CPT codes 22630 (Arthrodesis,
posterior interbody technique, including
laminectomy and/or discectomy to
prepare interspace (other than for
decompression), single interspace;
lumbar), 22633 (Arthrodesis, combined
posterior or posterolateral technique
with posterior interbody technique
including laminectomy and/or
discectomy sufficient to prepare
interspace (other than for
decompression), single interspace and
segment; lumbar), and 63267
(Laminectomy for excision or occlusion
of arteriovenous malformation of spinal

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cord; lumber) be removed from the
inpatient only list. The commenter
stated that, based on its experience with
these three procedures, the three
procedures can be safely performed in
the outpatient setting and therefore
should be removed from the inpatient
only list.
Response: While the commenters
asserted that the procedures can be
safely performed in the outpatient
setting, we are not confident that an
inpatient hospitalization would not be
required for these procedures. We
examined the clinical characteristics of
the procedures described by CPT codes
63267, 22630, and 22633 and compared
them to other procedures both included
on the inpatient only list and not
included on the inpatient only list. For
the procedures described by CPT codes
22630 and 22633, the interbody
technique is more extensive than the
posterior or posterolateral described by
CPT code 22612, which is not on the
inpatient only list. We believe that the
associated recovery and monitoring
would also be more extensive for
procedures described by CPT codes
22630 and 22633 than for the procedure
described by CPT code 22612 and,
therefore, the procedures described by
CPT codes 22630 and 22633 should be
retained on the inpatient only list for CY
2016. For the procedure described by
CPT code 63267, we believe that
patients would likely require inpatient
monitoring for possible postoperative
bleeding in the spinal canal, which
could result in paralysis (a devastating
complication). We examined recent
Medicare utilization data for these codes
by site of service. Based on our
examinations, we have determined that
these three procedures do not meet any
of the criteria listed above for removal
from the inpatient only list. Therefore,
we are not removing them from the
inpatient only list for CY 2016.
Comment: One commenter opposed
the removal of the procedures described
by CPT codes 54411 and 54417 from the
inpatient only list based on the
indication of the presence of an
‘‘infected field’’ in the code description
and the commenter’s belief that patients
on which these procedures are
performed will require close monitoring
and a period of IV antibiotics, and will
likely need cultures obtained at the time
of surgery that require a minimum of 48
hours to return with the sensitivity
report to know the appropriate IV

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antibiotic(s). The commenter believed
that, for patient safety, the procedures
described by these two codes should not
be performed in the outpatient setting.
Response: We disagree with the
commenter that the procedures
described by CPT codes 54411 and
54417 should be retained on the
inpatient only list. After consulting with
physicians who routinely perform these
procedures, we believe that properly
trained surgeons can safely perform
these procedures in the outpatient
setting. In addition, the term ‘‘infected
field’’ as used in the code descriptors
encompasses a range of infections from
mild to severe. We remind the
commenter and the public that removal
of a code from the inpatient only list
does not mean that all procedures
described by the code or even a majority
of procedures must or should be
performed in the outpatient setting.
Removal of a procedure from the
inpatient only list only means that the
procedure is no longer precluded from
being paid under the OPPS if it is
performed in the outpatient setting. Not
all procedures described by a code are
the same, and we want to afford
physicians and hospitals the maximum
flexibility in choosing the most
clinically appropriate site of service for
the procedure, as long as the
characteristics of the procedure are
consistent with the criteria listed above.
In the case of the procedures described
by CPT codes 54411 and 54417, we
believe that it is possible for surgeons to
perform them in the less severe cases in
the HOPD.
After consideration of the public
comments we received, we are
finalizing our proposal to remove
procedures described by CPT codes
0312T, 20936, 20937, 20938, 22552,
54411, and 54417 from the inpatient
only list for CY 2016. In addition, we
are removing the procedures described
by CPT codes 27477 and 27485 from the
inpatient only list for CY 2016, as
recommended by the commenter. The
nine procedures and their CPT codes,
long descriptors, APC assignments, and
status indictors for CY 2016 are
displayed in Table 58 below.
The complete list of codes that will be
paid by Medicare in CY 2016 only as
inpatient procedures is included as
Addendum E to this final rule with
comment period (which is available via
the Internet on the CMS Web site).

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70469

TABLE 58—PROCEDURES REMOVED FROM THE INPATIENT ONLY LIST FOR CY 2016
CPT/HCPCS
code

Long descriptor

0312T ..........

Vagus nerve blocking therapy (morbid obesity); laparoscopic implantation of neurostimulator
electrode array, anterior and posterior vagal trunks adjacent to esophagogastric junction
(EGJ), with implantation of pulse generator, includes programming.
Autograft for spine surgery only (includes harvesting the graft); local (e.g., ribs, spinous process, or laminar fragments) obtained from same incision.
Autograft for spine surgery only (includes harvesting the graft); morselized (through separate
skin or fascial incision).
Autograft for spine surgery only (includes harvesting the graft); structural bicortical or tricortical
(through separate skin or fascial incision).
Arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy
and decompression of spinal cord and/or nerve roots; cervical below C2, each additional
interspace.
Arrest epiphyseal, any method (e.g., epiphysiodesis); tibia and fibula, proximal .........................
Arrest, hemiepiphyseal, distal femur or proximal tibia or fibula (e.g., genu varus or valgus) .......
Removal and replacement of all components of a multi-component inflatable penile prosthesis
through an infected field at the same operative session, including irrigation and debridement
of infected tissue.
Removal and replacement of non-inflatable (semi-rigid) or inflatable (self-contained) penile
prosthesis through an infected field at the same operative session, including irrigation and
debridement of infected tissue.

20936 ..........
20937 ..........
20938 ..........
22552 ..........
27477 ..........
27485 ..........
54411 ..........
54417 ..........

jstallworth on DSK7TPTVN1PROD with RULES

X. Nonrecurring Policy Changes
A. Advance Care Planning Services
For CY 2015, the CPT Editorial Panel
created two new codes describing
advance care planning (ACP) services:
CPT code 99497 (Advance care planning
including the explanation and
discussion of advance directives such as
standard forms (with completion of
such forms, when performed), by the
physician or other qualified health
professional; first 30 minutes, face-toface with the patient, family member(s)
and/or surrogate) and an add-on CPT
code 99498 (Advance care planning
including the explanation and
discussion of advance directives such as
standard forms (with completion of
such forms, when performed), by the
physician or other qualified health
professional; each additional 30 minutes
(List separately in addition to code for
primary procedure)). In Addendum B of
the CY 2015 OPPS/ASC final rule with
comment period, we assigned CPT
codes 99497 and 99498 an OPPS interim
final status indicator of ‘‘N’’ (Paid under
OPPS; payment is packaged into
payment for other services. Therefore,
there is no separate APC payment.). In
Addendum B of the CY 2016 OPPS/ASC
proposed rule (which is available via
the Internet on the CMS Web site), we
also proposed to continue assignment of
status indicator ‘‘N’’ to CPT codes 99497
and 99498 for CY 2016.
Comment: Several commenters asked
that separate OPPS payment be made for
the services described by CPT codes
99497 and 99498 when these services
are provided in the HOPD by auxiliary
hospital staff. The commenters noted

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CY 2016 APC
assignment

that separate payment for services
described by these codes was proposed
under the MPFS for CY 2016 (80 FR
41773). The commenters believed that
nurses and other medical staff currently
provide these services to hospital
outpatients and that separate OPPS
payment is warranted because the
hospital incurs additional costs when it
provides this counseling. The
commenters also reported that some
hospitals are currently coding this
service with HCPCS code G0463
(Hospital outpatient clinic visit for the
assessment and management of a
patient). In addition, the Panel
recommended at its summer 2015
meeting that CMS separately pay for
advance care planning in the OPPS and
assign the service to an APC. The Panel
agreed with a presenter that if hospitals
are providing this service to patients,
separate payment for the service is
warranted.
Response: We agree in part with the
commenters that separate OPPS
payment should be made for the service
described by CPT code 99497, but only
under limited circumstances. We
believe that payment for the service
described by CPT code 99497 is
appropriately packaged in the OPPS
except when the service is the only
service provided to the patient.
Therefore, we are modifying our
proposal to unconditionally package
payment for CPT code 99497 and
instead are conditionally packaging
payment for the service described by
this code and assign it status indicator
‘‘Q1’’ (instead of status indicator ‘‘N’’).
The service described by CPT code

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CY 2016
status
indicator

5464

J1

N/A

N

N/A

N

N/A

N

N/A

N

5122
5122
5377

T
T
J1

5377

J1

99497 is assigned to APC 5011 (Level 1
Examinations and Related Services)
based on expected similarity in resource
use to other services assigned to this
APC. CPT code 99498 is an add-on code
and therefore payment for the service
described by this code is
unconditionally packaged (assigned
status indicator ‘‘N’’) in the OPPS in
accordance with 42 CFR 419.2(b)(18).
We also note that the CPT code
descriptors for CPT code 99497 and
99498 describe advance care planning
as services provided by a ‘‘physician or
other qualified health professional.’’
Therefore, based on the code
descriptors, we expect that physicians
or qualified nonphysician practitioners
(as defined at 42 CFR 410.27(g)) will be
involved (beyond just providing direct
supervision of hospital staff) in
providing these services to patients in
the hospital outpatient setting.
In the CY 2016 MPFS final rule,
advance care planning (described by
CPT codes 99497 and 99498) is being
added as an optional element of the
Annual Wellness Visit (AWV). We refer
readers to the CY 2016 MPFS final rule
with comment period for a discussion of
this policy. Payment for the AWV, and
the advance care planning described by
CPT codes CPT codes 99497 and 99498
when furnished as a part of the AWV,
is excluded under the OPPS in
accordance with 42 CFR 419.22(t).
However, payment for the AWV, and
the advance care planning described by
CPT codes 99497 and 99498 when
furnished as a part of the AWV, is made
under the MPFS when these services are
furnished in a hospital outpatient

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department (75 FR 72016). (We refer
readers to section 1833(a)(2)(H) of the
Act.)
B. Changes for Payment for Computed
Tomography (CT)
Section 218(a)(1) of the Protecting
Access to Medicare Act of 2014 (PAMA)
(Pub. L. 113–93) amended section 1834
of the Act by establishing a new
subsection 1834(p). Effective for
services furnished on or after January 1,
2016, section 1834(p) of the Act reduces
payment for the technical component
(TC) of applicable computed
tomography (CT) services paid under
the MPFS and applicable CT services
paid under the OPPS (a 5-percent
reduction in 2016 and a 15-percent
reduction in 2017 and subsequent
years). The applicable CT services are
identified by HCPCS codes 70450
through 70498; 71250 through 71275;
72125 through 72133; 72191 through
72194; 73200 through 73206; 73700
through 73706; 74150 through 74178;
74261 through 74263; and 75571
through 75574 (and any succeeding
codes) for services furnished using
equipment that does not meet each of
the attributes of the National Electrical
Manufacturers Association (NEMA)
Standard XR–29–2013, entitled
‘‘Standard Attributes on CT Equipment
Related to Dose Optimization and
Management.’’ Section 1834(p)(4) of the
Act specifies that the Secretary may
apply successor standards through
rulemaking.
Section 1834(p)(6)(A) of the Act
requires that information be provided
and attested to by a supplier and an
HOPD that indicates whether an
applicable CT service was furnished
using equipment that was not consistent
with the standard set forth in section
1834(p)(6) of the Act (currently the
NEMA CT equipment standard) and that
such information may be included on a
claim and may be a modifier. Section
1834(p)(6)(A) of the Act also provides
that such information must be verified,
as appropriate, as part of the periodic
accreditation of suppliers under section
1834(e) of the Act and hospitals under
section 1865(a) of the Act. Section
218(a)(2) of the PAMA made a
conforming amendment to section
1833(t) of the Act by adding a new
paragraph (20), which provides that the
Secretary shall not take into account
reduced expenditures that result from
the application of section 1834(p) of the
Act in making any budget neutral
adjustments under the OPPS.
To implement this provision, in the
CY 2016 OPPS/ASC proposed rule (80
FR 39300 through 39301), we proposed
to establish a new modifier to be used

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on claims that include CT services
furnished using equipment that does not
meet each of the attributes of the NEMA
Standard XR–29–2013. We proposed
that, beginning January 1, 2016,
hospitals and suppliers would be
required to use this modifier on claims
for CT scans described by any of the
HCPCS codes identified above (and any
successor codes) that are furnished on
non-NEMA Standard XR–29–2013compliant CT scans. We stated that the
use of the proposed modifier would
result in the applicable payment
reduction for the CT service, as
specified under section 1834(p) of the
Act.
We invited public comments on our
proposal.
Comment: Many commenters
endorsed the use of quality incentives to
improve patient safety and optimize the
use of radiation when providing CT
diagnostic imaging services. Several
commenters supported CMS’ proposal
to establish a modifier to identify
services furnished using equipment that
does not meet each of the attributes of
the NEMA Standard XR–29–2013.
Response: We appreciate the
commenters’ support.
Comment: Several commenters asked
that CMS delay implementation of
section 1834(p)(2) of the Act to allow
hospitals additional time to comply
with the statutory provision before the
payment reduction becomes effective.
Response: The statutory provision
under section 1834(p)(2) of the Act
refers to computed tomography services
that are furnished on or after January 1,
2016. Given this statutory date, we
believe that we must implement this
provision beginning January 1, 2016.
Health care providers have identified
radiation overdose from CT scanners as
a public health problem. The payment
reduction is 5 percent in CY 2016 and
increases to 15 percent in subsequent
years. Hospitals providing services that
are noncompliant as of January 1, 2016,
will be subject to a 5-percent payment
reduction for those services during CY
2016, and have the opportunity to
upgrade their CT scanners before the 15percent reduction takes effect in CY
2017.
Comment: Several commenters
requested clarification regarding the
reduction in the payment amount for CT
services furnished with equipment that
does not meet the CT equipment
standard. Commenters specifically
inquired about the application of the
payment reduction to CT services that
are packaged into comprehensive or
composite APCs.
Response: We will be applying the
payment reduction to the services

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described by the CT scan CPT codes
(and any successor codes) listed in the
statutory provision when the modifier is
included on the claim. We cannot apply
the payment reduction when the service
described by an applicable CT scan code
is packaged because there is no payment
amount associated with the packaged
CT scan code. Therefore, the payment
reduction will only be applied when the
service for a code is paid separately.
Comment: One commenter cited
section 1834 (p)(4) of the Act, which
specifies that, through rulemaking, the
Secretary may apply successor
standards for CT equipment and
requested that CMS develop successor
standards that exempt CT scans
performed on cone beam CT (CBCT)
scanners that are FDA cleared only for
imaging of the head from the
requirement for Automatic Exposure
Control (AEC) capability. The
commenter indicated that its request
was based on the fact that AEC
capability is unavailable on CBCT
scanners.
Response: Section 1834(p) of the Act
is a new provision. Our proposal was for
the initial implementation of the NEMA
Standard XR–29–2013. We would like
to gain some experience with the
statutory standard before adopting a
successor standard. Therefore, we are
not currently planning to adopt a
successor standard to the NEMA
Standard XR–29–2013.
After consideration of the public
comments we received, we are
finalizing the establishment of the new
CT modifier. This 2-digit modifier will
be added to the HCPCS annual file as of
January 1, 2016, with the label ‘‘CT’’
and the long descriptor ‘‘Computed
tomography services furnished using
equipment that does not meet each of
the attributes of the National Electrical
Manufacturers Association (NEMA) XR–
29–2013 standard’’.
Beginning January 1, 2016, hospitals
and suppliers will be required to report
the ‘‘CT’’ modifier on claims for CT
scans described by any of the HCPCS
codes identified above (and any
successor codes) that are furnished on
non-NEMA Standard XR–29–2013compliant CT scanners. The use of this
modifier will result in the applicable
payment reduction for the CT service, as
specified under section 1834(p) of the
Act.
C. Lung Cancer Screening With Low
Dose Computed Tomography
On February 5, 2015, CMS issued a
National Coverage Determination (NCD)
for the coverage of lung cancer
screening with low dose computed
tomography (LDCT) under Medicare.

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This coverage includes a lung cancer
screening counseling and shared
decision-making visit, and, for
appropriate beneficiaries, annual
screening for lung cancer with LDCT as
an additional preventive service under
Medicare if certain criteria are met. The
decision memorandum announcing the
NCD is available on the CMS Web site
at: http://www.cms.gov/medicarecoverage-database/details/nca-decisionmemo.aspx?NCAId=274.
The HCPCS codes that describe these
services are HCPCS code G0296
(Counseling visit to discuss need for
lung cancer screening (LDCT) using low
dose CT scan (service is for eligibility
determination and share decision
making)) (listed as HCPCS code GXXX1
in the proposed rule) and HCPCS code
G0297 (Low dose CT scan (LDCT) for
lung cancer screening) (listed as HCPCS
code GXXX2 in the proposed rule). In
the CY 2016 OPPS/ASC proposed rule
(80 FR 39301), for the CY 2016 OPPS,
we proposed to assign HCPCS code
G0296 to APC 5822 (Level 2 Health and
Behavior Services) and HCPCS code
G0297 to APC 5570 (Computed
Tomography without Contrast).
Comment: Commenters supported
CMS’ February 2015 NCD regarding
coverage of lung cancer screening with
LDCT and the counseling visit to
discuss the need for lung cancer
screening using LDCT, as well as CMS’
proposal to establish HCPCS codes for
payment of these services under the
OPPS. However, the majority of the
commenters recommended that CMS
make the new HCPCS G-codes for lung
cancer screening effective on February
5, 2015 (the effective date of the NCD)
and extend the 1-year claims filing
deadline by at least an additional
quarter in CY 2016 to allow hospitals
adequate time to file the claims.
One commenter supported CMS’
proposed assignment of HCPCS code
G0297 to APC 5570. Other commenters
believed that the proposed payment rate
amounts for the counseling visit and for
LDCT lung cancer screening were
insufficient to cover the costs of this
new preventive health service. One
commenter recommended that CMS
assign the services described by HCPCS
code G0296 to APC 5012 (Level 2
Examinations and Related Services),
similar to the APC assignment of the
services described by HCPCS code
G0402 (Initial preventive exam, 30
minute intra-serve time).
Response: We appreciate the
commenters’ support. We agree that
new HCPCS codes G0296 and G0297
should be effective for services
furnished on or after the February 5,
2015 NCD effective date. We believe

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that hospitals will have sufficient time
to file claims prior to the 1-year
deadline.
We also appreciate the commenter’s
support of our proposed assignment of
HCPCS code G0297 to APC 5570, and
continue to believe that HCPCS codes
G0296 and G0297 are appropriately
assigned to APCs 5822 and 5570,
respectively, based on clinical and
expected resource similarity with the
procedures currently assigned to those
APCs. As is our standard practice, when
claims data become available for these
two codes, we will evaluate the claims
data in relation to the APC assignment
for services described by these codes
and will propose a different APC
through future rulemaking if such a
change is warranted based on the claims
data.
Comment: A few commenters asked
CMS to clarify that a medically
necessary evaluation and management
(E/M) service on the same day as a
shared counseling visit for lung cancer
screening with LDCT is allowed when it
is clinically appropriate. Another
commenter urged CMS to clarify that,
similar to the policy that cost-sharing
does not apply to lung cancer screening,
the policy on cost-sharing will not apply
to the shared decision-making
discussion on screening.
Response: We note that a medically
necessary E/M service on the same day
as a shared counseling visit for lung
cancer screening with LDCT is allowed
when it is clinically appropriate and the
same day E/M service should be
separately reportable with modifier
‘‘25’’ to identify a significant, separately
identifiable E/M service on the same
day. We also note that OPPS costsharing (that is, the coinsurance or
deductible) does not apply to either the
lung cancer screening with LDCT or the
counseling visit to discuss the need for
lung cancer screening using LDCT.
Comment: A few commenters also
addressed issues on the following
subject-matter areas: Telemedicine;
post-payment review; acceptable
provider types; practitioners who can
provide the counseling services;
frequency limitations; and
documentation requirements.
Response: These comments pertain to
issues for which we did not include any
proposals in the proposed rule.
Therefore, we believe these comments
are outside the scope of the proposed
rule, and we are not addressing them in
this final rule with comment period.
After consideration of the public
comments we received, we are
finalizing our proposal to assign HCPCS
code G0296 (Counseling visit to discuss
need for lung cancer screening (LDCT)

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using low dose CT scan (service is for
eligibility determination and shared
decision making)), to APC 5822 (Level
2 Health and Behavior Services) and
HCPCS code G0297 (Low dose CT scan
(LDCT) for lung cancer screening), to
APC 5570 (Computed Tomography
without Contrast). These new codes and
APC assignments are effective as of the
February 5, 2015 NCD effective date and
may be billed under the OPPS beginning
January 1, 2016. A waiver of the
coinsurance and deductible applies to
HCPCS codes G0296 and G0297 because
the services described by these codes
are identified as additional preventive
services, as stated in the NCD.
D. Payment for Procurement of Corneal
Tissue Used in Procedures Performed in
the HOPD and the ASC
1. Background
We have a longstanding policy of
making separate payment for the
acquisition or procurement of corneal
tissue used in procedures performed in
both the HOPD and the ASC. When
corneal tissue is used in procedures
performed in the HOPD, we make
separate payment outside of the OPPS
based on hospitals’ reasonable costs to
procure corneal tissue (65 FR 18448
through 18449). When corneal tissue is
used in procedures performed in the
ASC, we pay separately for corneal
tissue procurement as a covered
ancillary service when it is furnished
integral to the performance of an ASCcovered surgical procedure based on
invoiced costs for the acquisition costs
of corneal tissue (72 FR 42508 through
42509 and 42 CFR 416.164(b)(3)).
HCPCS code V2785 (Processing,
preserving and transporting corneal
tissue) is used to report the acquisition
or procurement of corneal tissue used in
procedures performed in both the HOPD
and the ASC.
The original use (and currently the
primary use) of corneal tissue is in
corneal transplant surgery. Because
corneal transplants are the primary
procedures in which corneal tissue is
used, in prior rulemaking discussions of
the corneal tissue payment policy in
both the HOPD and the ASC, we
focused on the costs associated with
corneal tissue when used in corneal
transplants (65 FR 18448 through 18449
and 72 FR 42508 through 42509).
However, we have not expressly limited
the corneal tissue payment policy to
only corneal tissue used in corneal
transplants. When corneal tissue is used
in procedures in the HOPD, we have
stated that we will make separate
payment, based on the hospital’s
reasonable costs incurred to acquire

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corneal tissue (65 FR 18450). Moreover,
corneal tissue acquisition costs are
excluded from the determination of
OPPS payment rates under 42 CFR
419.2(c)(8). Section 419.2(c)(8) of the
regulation was amended in the CY 2002
OPPS final rule (66 FR 59922) and the
phrase ‘‘incurred by hospitals that are
paid on a reasonable cost basis’’ was
deleted. For corneal tissue used in
procedures performed in the ASC, as
stated above, we include corneal tissue
procurement in the scope of ASC
services as a covered ancillary service
when it is furnished integral to the
performance of an ASC covered surgical
procedure and pay separately for this
service. Therefore, payment is not
packaged into the ASC payment for the
associated covered surgical procedure
(72 FR 42509).
In early 2015, a stakeholder asked
whether the acquisition of corneal tissue
used as grafting material in glaucoma
shunt surgery could be reported with
HCPCS code V2785 and separately paid
under the ASC payment system. In
reviewing our longstanding policy on
separate payment for corneal tissue
acquisition when furnished integral to a
covered ASC surgical procedure, we
determined that the current language
does not limit separate payment for the
acquisition of corneal tissue to corneal
transplants. Accordingly, we included
an instruction in the April 2015 ASC
quarterly update (Transmittal 3234,
Change Request 9100) that states that
ASCs can bill for the acquisition of
corneal allograft tissue used for coverage
(using CPT code 66180) or revision
(using CPT code 66185) of a glaucoma
aqueous shunt with HCPCS code V2785.
In Change Request 9100, we also stated
that contractors pay for corneal tissue
acquisition reported with HCPCS code
V2785 based on acquisition/invoice
cost. The April 2015 ASC Change
Request is available on the CMS Web
site at: http://www.cms.gov/Regulationsand-Guidance/Guidance/Transmittals/
Downloads/R3234CP.pdf. Since the
publication of the April 2015 ASC
instruction, stakeholders have disagreed
with the different payment policies for
corneal tissue used for patch grafting
(which is paid separately) versus
noncorneal tissue (sclera and
pericardium, among others) used for
patch grafting (which is packaged).
2. CY 2016 Change to Corneal Tissue
Payment Policy in the HOPD and the
ASC
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39301 through 39302), for
CY 2016, we proposed to limit the
separate payment policy for acquisition
costs of corneal tissue used in

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procedures performed in the HOPD and
the ASC to only corneal tissue that is
used in a corneal transplant procedure.
Under our proposal, the acquisition
costs for corneal tissue used in
procedures performed in the HOPD
setting would be separately paid only
when the corneal tissue is used in a
corneal transplant procedure.
Otherwise, the corneal tissue would be
a packaged surgical supply in the OPPS
under the regulation at 42 CFR
419.2(b)(4). We proposed that corneal
tissue procurement for use in
procedures performed in the ASC would
be included as a covered ancillary
service only when it is furnished
integral to the performance of a corneal
transplant procedure that is an ASC
covered surgical procedure, and we pay
separately for covered ancillary services
under the ASC payment system. We also
stated that we would provide a specific
list of corneal transplant procedure
HCPCS codes with which HCPCS code
V2785 may be reported in the January
2016 OPPS and ASC updates through
change requests. We stated that this
would mean that, for corneal tissue used
in procedures performed in the HOPD
and the ASC, we would not make
separate payment for corneal tissue
when it is used in any nontransplant
procedure (payment for the corneal
tissue in that instance would be
packaged with the surgical procedure).
We also stated that we would make
packaged payment for all tissues used as
patch grafts in glaucoma shunt surgery.
We did not propose to change any other
aspect of the policy for payment for
corneal tissue used in procedures
performed in either the HOPD or the
ASC.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39302), we stated that we
believe limiting separate payment for
corneal tissue to corneal transplants
only is warranted for the following
reasons:
• The public comments summarized
in the CY 2000 OPPS final rule with
comment period (65 FR 18448 through
18449) and referenced in the CY 2008
ASC final rule (72 FR 42508 through
42509) by the Eye Bank Association of
America (EBAA) and the study report
submitted by the EBAA focused on
corneal tissue acquisition for corneal
transplants. These comments and the
study were significant factors in the
finalized corneal tissue separate
payment policy that addressed corneal
tissue acquisition costs associated with
corneal tissue used in corneal
transplants.
• Corneal tissue for transplantation
requires more specialized and more
costly processing than corneal tissue

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used as glaucoma shunt-tube patch
grafts because of the fragility and
importance of the corneal endothelium,
of which the health and preservation are
necessary for successful transplantation
but not for scleral patch grafting.
• Unlike corneas used for corneal
transplantation, in which there is
currently no substitute, there are
multiple different tissue types, each
with their own costs and relative
benefits and detriments, available for
glaucoma shunt surgery patch grafting.
• Given the numerous tissue options
for patch grafting, we believe that
Medicare beneficiaries will continue to
have access to patch grafting in
glaucoma shunt surgery in both the
hospital setting and the ASC setting.
In the proposed rule, we also
proposed to revise the related
regulations at 42 CFR 416.164(b)(3) and
419.2(c)(8) to specify that payment
would be made for corneal tissue
acquisition or procurement costs for
corneal transplant procedures.
We invited public comments on these
proposals.
Comment: Many commenters
supported the proposals. The
commenters believed that the payment
for the glaucoma surgery described by
HCPCS code 66180 (Aqueous shunt to
extraocular equatorial plate reservoir,
external approach; with graft) with any/
all of the various grafting materials
(corneal tissue, sclera, or pericardium)
that is packaged into the payment for
the surgery is adequate for payment for
procedures performed in both the HOPD
and the ASC.
Response: We appreciate the
commenters’ support.
Comment: Several other commenters
opposed the proposals. The commenters
urged CMS to continue separate
payment for corneal tissue. They
believed that, without separate payment
for corneal tissue for use as a graft in
glaucoma surgery, ASCs would not
permit glaucoma surgeons to perform
this procedure in the ASC because the
total cost of the procedure, including
the shunt and the grafting material,
would exceed the payment (if any or all
grafting materials are packaged into the
surgical procedure).
Response: We disagree with these
commenters. We believe that the total
payment for the procedure described by
HCPCS 66180 (with any or all grafting
materials packaged) is adequate when
procedures are performed in both the
HOPD and the ASC. Therefore, for CY
2016, we are packaging payment for
corneal tissue used in all applicable
procedures except when used in corneal
transplant surgery. In addition, we
believe that our reassignment of some of

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the intraocular procedures from APC
5492 (Level 2 Intraocular Procedures) to
APC 5491 (Level 1 Intraocular
Procedures), as described in section
III.D.5 of this final rule with comment
period, should help alleviate the
concerns of the commenters relating to
the sufficiency of payment for glaucoma
surgery with patch grafting because this
change will result in an increase in the
payment for this procedure.
After consideration of the public
comments we received, we are
finalizing our proposals, without
modification. Under the ASC payment
system, procurement or acquisition of
corneal tissue for use in procedures
performed in the ASC will be included
as a covered ancillary service only when
it is furnished integral to the
performance of a corneal transplant
procedure that is an ASC covered
surgical procedure. Under the OPPS,
procurement or acquisition of corneal
tissue will be paid separately only when
it is used in corneal transplant
procedures. Specifically, corneal tissue
will be separately paid when used in
procedures performed in the HOPD and
the ASC only when the corneal tissue is
used in a corneal transplant procedure
described by one of the following CPT
codes: 65710 (Keratoplasty (corneal
transplant); anterior lamellar); 65730
(Keratoplasty (corneal transplant);
penetrating (except in aphakia or
pseudophakia)); 65750 (Keratoplasty
(corneal transplant); penetrating (in
aphakia)); 65755 (Keratoplasty (corneal
transplant); penetrating (in
pseudophakia)); 65756 (Keratoplasty
(corneal transplant); endothelial); 65765
(Keratophakia); 65767 (Epikeratoplasty);
and any successor code or new code
describing a new type of corneal
transplant procedure that uses eye
banked corneal tissue. This list of
corneal transplant procedures with
which corneal tissue is separately
payable also will appear in the January
2016 OPPS and ASC updates through
change requests. We also are finalizing
the proposed changes to
§§ 416.164(b)(3) and 419.2(c)(8) of the
regulations, without modification.

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XI. CY 2016 OPPS Payment Status and
Comment Indicators
A. CY 2016 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

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OPPS policies apply to the code. The
complete list of the payment status
indicators and their definitions for CY
2016 is displayed in Addendum D1 to
this final rule with comment period,
which is available on the CMS Web site
at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html. The
CY 2016 payment status indicator
assignments for APCs and HCPCS codes
are shown in Addendum A and
Addendum B, respectively, to this final
rule with comment period, which are
available on the CMS Web site at:
http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39302), for CY 2016, we
proposed to create two new status
indicators:
• ‘‘J2’’ to identify certain
combinations of services that we
proposed to pay through new proposed
C–APC 8011 (Comprehensive
Observation Services). We refer readers
to section II.A.2.e. of this final rule with
comment period for a detailed
discussion of this change and any
public comments that we received.
• ‘‘Q4’’ to identify conditionally
packaged laboratory tests. We refer
readers to section II.A.3. of this final
rule with comment period for a detailed
discussion of this new status indicator
and any public comments that we
received.
We note that, as discussed in sections
II.A.2.e. and II.A.3. of this final rule
with comment period, we are finalizing
the two new status indicators ‘‘J2’’ and
‘‘Q4’’.
B. CY 2016 Comment Indicator
Definitions
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39302), for the CY 2016
OPPS, we proposed to use three
comment indicators. Two comment
indicators, ‘‘CH’’ and ‘‘NI,’’ which were
in effect in CY 2015, would continue in
CY 2016. In the proposed rule, we
proposed to create new comment
indicator ‘‘NP’’ that would be used in
the proposed rule to identify a new code
for the next calendar year or an existing
code with substantial revision to its
code descriptor in the next calendar
year as compared to current calendar
year proposed APC assignment, and
would also indicate that comments will
be accepted on the proposed APC
assignment for the new code.
• ‘‘CH’’—Active HCPCS code in
current and next calendar year, status
indicator and/or APC assignment has
changed; or active HCPCS code that will

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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.
• ‘‘NP’’—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
proposed APC assignment; comments
will be accepted on the proposed APC
assignment for the new code.
We proposed to use the ‘‘CH’’
comment indicator in the CY 2016
OPPS/ASC proposed rule to indicate
HCPCS codes for which the status
indicator or APC assignment, or both,
are proposed for change in CY 2016
compared to their assignment as of June
30, 2015. We stated that we believe
using the ‘‘CH’’ indicator in the
proposed rule would facilitate the
public’s review of the changes that we
proposed for CY 2016. We proposed to
use the ‘‘CH’’ comment indicator in the
CY 2016 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 2016 compared to their
assignment as of December 31, 2015.
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 2016 OPPS/ASC final rule with
comment period.
For CY 2016, we proposed that any
existing HCPCS codes with substantial
revisions to the code descriptors for CY
2016 compared to the CY 2015
descriptors would be labeled with
comment indicator ‘‘NI’’ in Addendum
B to the CY 2016 OPPS/ASC final rule
with comment period (80 FR 39302).
However, in order to receive the
comment indicator ‘‘NI,’’ the CY 2016
revision to the code descriptor
(compared to the CY 2015 descriptor)
must be significant such that the new
code descriptor describes a new service
or procedure for which the OPPS
treatment may change. We proposed to
use comment indicator ‘‘NI’’ to indicate
that these HCPCS codes would be open
for comment as part of the CY 2016
OPPS/ASC final rule with comment
period. Like all codes labeled with
comment indicator ‘‘NI,’’ we would
respond to public comments and
finalize their OPPS treatment in the CY
2017 OPPS/ASC final rule with
comment period.

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In accordance with our usual practice,
we proposed that CPT and Level II
HCPCS codes that are new for CY 2016
and that are included in Addendum B
to the CY 2016 OPPS/ASC final rule
with comment period also would be
labeled with comment indicator ‘‘NI’’ in
Addendum B to the CY 2016 OPPS/ASC
final rule with comment period.
We proposed that CPT codes that are
new for CY 2016 and any existing
HCPCS codes with substantial revisions
to the code descriptors for CY 2016
compared to the CY 2015 descriptors
that were included in Addendum B to
the CY 2016 OPPS/ASC proposed rule
would be labeled with new comment
indicator ‘‘NP’’ in Addendum B to
indicate that these CPT codes would be
open for comment as part of the CY
2016 OPPS/ASC proposed rule. We
would respond to public comments and
finalize their OPPS assignment in the
CY 2016 OPPS/ASC final rule with
comment period.
Comment: One commenter did not
believe the comment indicator ‘‘NP’’
was necessary because CMS has already
been using comment indicator ‘‘NI.’’
The commenter suggested that the two
comment indicators were redundant.
Moreover, the commenter recommended
that CMS pare back the number of status
and comment indicators, given the
complexity that they add to the claims
process.
Response: We appreciate the
commenter’s recommendation to
simplify the claims process. However,
we disagree that comment indicators
‘‘NP’’ and ‘‘NI’’ are redundant and
complicate claims processing. The ‘‘NP’’
comment indicator was proposed to be
used in OPPS Addendum B, which also
includes the proposed APC assignment
of the code, to identify a new code or
an existing code with substantial
revision to its code descriptor in the
next calendar year as compared to
current calendar year. The ‘‘NP’’
comment indicator is intended to notify
the public in the proposed rule that
public comments will be accepted on
the proposed APC assignment for the
new code and considered in that year’s
final rule. On the other hand, comment
indicator ‘‘NI’’ is only used in the OPPS
final rule with comment period
Addendum B to identify a new code or
existing code with substantial revision
to its code descriptor in the next
calendar year interim APC assignment
for which comments will be accepted on
the interim APC assignment for the new
code. We believe that the creation of
comment indicator ‘‘NP’’ will simplify
the process of identification of new
codes added in time for the proposed
rule, as opposed to those that are new

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or substantially revised in the final rule
with comment period.
After consideration of the public
comments we received, we are
finalizing, without modification, the
proposed new comment indicator ‘‘NP’’
for CY 2016.
The CY 2015 definitions of comment
indicators ‘‘CH’’ and ‘‘NI’’ continue to
be appropriate, and we are continuing to
use them for CY 2016.
The definitions of the OPPS comment
indicators for CY 2016 are listed in
Addendum D2 to this final rule with
comment period, which is available on
the CMS Web site at: http://
www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/
HospitalOutpatientPPS/index.html.
For further discussion on the
treatment of new CY 2016 CPT codes
that will be effective January 1, 2016, for
which we solicited public comments in
the CY 2016 OPPS/ASC proposed rule,
we refer readers to section III. of this
final rule with comment period.
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
For a detailed discussion of the
legislative history and statutory
authority related to payments to ASCs
under Medicare, 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), the CY 2013 OPPS/ASC
final rule with comment period (77 FR
68434 through 68467), the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75064 through 75090),
and the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66915
through 66940).
2. Policies Governing Changes to the
Lists of Codes and Payment Rates for
ASC Covered Surgical Procedures and
Covered Ancillary Services
Under 42 CFR 416.2 and 416.166 of
the Medicare 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 for which standard medical
practice dictates that the beneficiary

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would not typically 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 procedures in the CPT
surgical range that we have determined
do not pose a significant safety risk, that
we would not expect to require an
overnight stay when performed in ASCs,
and that are separately paid under the
OPPS (72 FR 42478).
In the August 2, 2007 final rule (72 FR
42495), 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 payment 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. In the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66932 through 66934), we expanded
the scope of ASC covered ancillary
services to include certain diagnostic
tests within the medicine range of CPT
codes for which separate payment is
allowed under the OPPS when they are
provided integral to an ASC covered
surgical procedure. Covered ancillary
services are specified in § 416.164(b)
and, as stated previously, are eligible for
separate ASC payment. 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
proposed and final rulemaking process
to update the OPPS and the ASC
payment system (§ 416.173; 72 FR

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
42535). We base ASC payment and
policies for most covered surgical
procedures, drugs, biologicals, and
certain other covered ancillary services
on the OPPS payment policies, and we
use quarterly change requests to update
services covered under the OPPS. We
also provide quarterly update change
requests (CRs) for ASC covered surgical
procedures and covered ancillary
services throughout the year (January,
April, July, and October). CMS releases
new and revised Level II HCPCS codes
and recognizes the release of new and
revised CPT codes by the AMA and
makes these codes effective (that is, the
codes are recognized on Medicare
claims) via these ASC quarterly update
CRs. CMS releases new and revised
Category III CPT codes in the July and
January CRs. These updates implement
newly created and revised Level II
HCPCS and Category III CPT codes for
ASC payment and update the payment
rates for separately paid drugs and
biologicals based on the most recently
submitted ASP data. New and revised
Category I CPT codes, except vaccine
codes, are released only once a year, and
are implemented only through the
January quarterly CR update. New and
revised Category I CPT vaccine codes
are released twice a year and are
implemented through the January and
July quarterly CR updates. We refer
readers to Table 41 in the CY 2012
OPPS/ASC proposed rule for an
example of how this process was used
to update 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 codes, and codes
with revised descriptors, 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 many
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 and Revised Codes
1. Background on Current Process for
Recognizing New and Revised 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 items,
supplies, temporary procedures, and
services not described by CPT codes.
We finalized a policy in the August 2,
2007 final rule (72 FR 42533 through
42535) to evaluate each year all new and
revised 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. In
addition, we identify new and revised
codes as ASC covered ancillary services
based upon the final payment policies
of the revised ASC payment system. In
prior rulemakings, we refer to this
process as recognizing new codes;
however, this process has always
involved the recognition of new and
revised codes. We consider revised
codes to be new when they have
substantial revision to their code
descriptors that necessitate a change in
the current ASC payment indicator. To
clarify, we refer to these codes as new
and revised in the CY 2016 OPPS/ASC
proposed rule and this final rule with
comment period.
We have separated our discussion
below based on when the codes are
released and whether we proposed to
solicit public comments in the proposed
rule (and respond to those comments in
this CY 2016 OPPS/ASC final rule with
comment period) or whether we will be
soliciting public comments in this CY
2016 OPPS/ASC final rule with
comment period (and responding to
those comments in the CY 2017 OPPS/
ASC final rule with comment period).
We note that we sought public
comments in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66918) on the new and revised Category
I and III CPT and Level II HCPCS codes
that were effective January 1, 2015. We

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70475

also sought public comments in the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66918) on the
new and revised Level II HCPCS codes
effective October 1, 2014. These new
and revised codes, with an effective date
of October 1, 2014 or January 1, 2015,
were flagged with comment indicator
‘‘NI’’ in Addenda AA and BB to the CY
2015 OPPS/ASC final rule with
comment period to indicate that we
were assigning them an interim
payment status and payment rate, if
applicable, which were subject to public
comment following publication of the
CY 2015 OPPS/ASC final rule with
comment period. In the proposed rule
(80 FR 39304), we stated that we will
respond to public comments and
finalize the treatment of these codes
under the ASC payment system in this
CY 2016 OPPS/ASC final rule with
comment period.
2. Treatment of New and Revised Level
II HCPCS Codes and Category III CPT
Codes Implemented in April 2015 and
July 2015 for Which We Solicited Public
Comments in the CY 2016 OPPS/ASC
Proposed Rule
In the April 2015 and July 2015
Change Requests (CRs), we made
effective for April 1, 2015 and July 1,
2015, respectively, a total of 13 new
Level II HCPCS codes and two new
Category III CPT codes that describe
covered ASC services that were not
addressed in the CY 2015 OPPS/ASC
final rule with comment period.
In the April 2015 ASC quarterly
update (Transmittal 3234, CR 9100,
dated April 15, 2015), we added one
new device Level II HCPCS code and
seven new drug and biological Level II
HCPCS codes to the list of covered
ancillary services. Table 55 of the CY
2016 OPPS/ASC proposed rule (80 FR
39304) listed the new Level II HCPCS
codes that were implemented April 1,
2015, along with their proposed
payment indicators for CY 2016.
In the July 2015 ASC quarterly update
(Transmittal 3279, CR 9207, dated June
5, 2015), we added one new device
Level II HCPCS code and four new drug
and biological Level II HCPCS codes to
the list of covered ancillary services.
Table 56 of the CY 2016 OPPS/ASC
proposed rule (80 FR 39305) listed the
new Level II HCPCS codes that were
implemented July 1, 2015. The
proposed payment rates, where
applicable, for these April and July
codes can be found in Addendum BB to
the proposed rule (which is available
via the Internet on the CMS Web site).
Through the July 2015 quarterly
update CR, we also implemented ASC
payment for two new Category III CPT

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codes as ASC covered surgical
procedures, effective July 1, 2015. These
codes are listed in Table 57 of the CY
2016 OPPS/ASC proposed rule (80 FR
39305), along with their proposed
payment indicators. The proposed
payment rates for these new Category III
CPT codes can be found in Addendum
AA to the proposed rule (which is
available via the Internet on the CMS
Web site).
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39304), we invited public
comments on these proposed payment
indicators and the proposed payment

rates for the new Category III CPT code
and Level II HCPCS codes that were
newly recognized as ASC covered
surgical procedures or covered ancillary
services in April 2015 and July 2015
through the quarterly update CRs, as
listed in Tables 55, 56, and 57 of the
proposed rule. We proposed to finalize
their payment indicators and their
payment rates in this CY 2016 OPPS/
ASC final rule with comment period.
We did not receive any public
comments regarding the proposed ASC
payment indicators and payment rates.
Therefore, we are adopting as final the

CY 2016 proposed ASC payment
indicators and payment rates for the
ASC covered surgical procedures and
covered ancillary services described by
the new Level II HCPCS codes
implemented in April 2015 and July
2015 through the quarterly update CRs
as shown below, in Tables 59, 60 and
61, respectively. The final CY 2016 ASC
payment rates for these codes can be
found in ASC Addendum AA and BB of
this OPPS/ASC final rule with comment
period.

TABLE 59—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES
IMPLEMENTED IN APRIL 2015
CY 2015
HCPCS code

CY 2016 Long descriptor

Final CY 2016
payment
indicator

Catheter, transluminal angioplasty, drug-coated, non-laser ......................................................
Injection, c1 esterase inhibitor (recombinant), Ruconest, 10 units ...........................................
Netupitant 300 mg and palonosetron 0.5 mg ............................................................................
Injection, blinatumomab, 1 microgram ......................................................................................
Injection, fluocinolone acetonide intravitreal implant, 0.01 mg .................................................
Injection, peramivir, 1 mg ..........................................................................................................
Injection, ceftolozane 50 mg and tazobactam 25 mg ...............................................................
Injection, factor viii fc fusion (recombinant), per iu ...................................................................

J7
K2
K2
K2
K2
K2
K2
K2

CY 2016
HCPCS code

C2623 ................
C9445 ................
C9448 * ..............
C9449 ................
C9450 ................
C9451 ................
C9452 ................
Q9975 ...............

C2623
J0596
J8655
J9039
J7313
J2547
J0695
J7205

..........
...........
...........
...........
...........
...........
...........
...........

* HCPCS code C9448 was deleted June 30, 2015 and replaced with HCPCS code Q9978 effective July 1, 2015.

TABLE 60—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2015
CY 2015
HCPCS code

CY 2016 Long descriptor

Final CY 2016
payment
indicator

Lung biopsy plug with delivery system ......................................................................................
Injection, nivolumab, 1 mg .........................................................................................................
Injection, pasireotide long acting, 1 mg .....................................................................................
Injection, siltuximab, 10 mg .......................................................................................................
Netupitant 300 mg and palonosetron 0.5 mg ............................................................................

J7
K2
K2
K2
K2

CY 2016
HCPCS code

C2613 ................
C9453 ................
C9454 ................
C9455 ................
Q9978 * .............

C2613
J9299
J2502
J2860
J8655

..........
...........
...........
...........
...........

* HCPCS code Q9978 replaced HCPCS code C9448 effective July 1, 2015.

TABLE 61—NEW CATEGORY III CPT CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES
IMPLEMENTED IN JULY 2015
CY 2016
CPT code

CY 2016 Long descriptor

0392T ................

0392T ...........

0393T ................

0393T ...........

Laparoscopy, surgical, esophageal sphincter augmentation procedure, placement of sphincter augmentation device (ie, magnetic band).
Removal of esophageal sphincter augmentation device ..........................................................

3. Process for Recognizing New and
Revised Category I and Category III CPT
Codes That Will Be Effective January 1,
2016
jstallworth on DSK7TPTVN1PROD with RULES

Final CY 2016
payment
indicator

CY 2015
CPT code

a. Current Process for Accepting
Comments on New and Revised CPT
Codes That Are Effective January 1
Historically, we have not received
new and revised Category I and
Category III CPT codes that take effect
at the beginning of a calendar year in
time to include them in the proposed

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rule for that calendar year. Therefore,
under the ASC payment system, the
current process we have used is to
incorporate new and revised Category I
and Category III CPT codes that are
effective January 1 in the final rule with
comment period thereby updating the
ASC payment system for the following
calendar year. These codes are released
to the public by the AMA via the annual
CPT code books and electronic CPT
code file. In addition, we include these

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G2
G2

codes in the January ASC quarterly
update CR, and we list the codes in ASC
Addendum AA and BB of the OPPS/
ASC final rule with comment period.
All of the new codes are flagged with
comment indicator ‘‘NI’’ in Addendum
AA and Addendum 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. In addition, existing
CPT codes that have substantial revision

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
to their code descriptors that necessitate
a change in the current ASC payment
indicator are assigned to comment
indicator ‘‘NI.’’ 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. For example,
the new CPT codes that were effective
January 1, 2014 were assigned to
comment indicator ‘‘NI’’ in Addendum
AA and Addendum BB to the CY 2014
OPPS/ASC final rule with comment
period. We responded to public
comments received on the CY 2014
OPPS/ASC final rule with comment
period and finalized the payment
indicator assignments for these codes in
the CY 2015 OPPS/ASC final rule with
comment period; and we included the
final ASC payment indicator
assignments in Addendum AA and
Addendum BB to that final rule with
comment period.
Several stakeholders, including
consultants, device manufacturers, drug
manufacturers, as well as specialty
societies and hospitals, have expressed
concern with the process we use to
recognize new and revised CPT codes.
They believe that we should publish
proposed ASC payment indicators for
the new and revised CPT codes that will
be effective January 1 in the OPPS/ASC
proposed rule for the prior year, and
request public comments prior to
finalizing them for the January 1
implementation date. Further, the
stakeholders believe that seeking public
input on the ASC payment indicator
assignments for these new and revised
codes would assist CMS in assigning the
CPT codes to appropriate payments
under the ASC payment system. We
were informed of similar concerns
regarding our process for assigning
interim payment values for revalued
and new and revised codes under the
MPFS and the OPPS. Consequently, we
included proposed policies to address
those concerns in the CY 2015 MPFS
proposed rule (79 FR 40359 through
40364), and in the CY 2015 OPPS/ASC
proposed rule (79 FR 40977 through
40979). Based on the comments that we
received to the proposed rules, we
finalized the policies in the CY 2015
MPFS final rule (79 FR 67602 through
67609) and the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66841 through 66844).
Like the MPFS and the OPPS, the
ASC payment system relies principally
upon the Current Procedural
Terminology (CPT®) coding system

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maintained by the AMA for billing.
CPT® is the standard code set adopted
under the Health Insurance Portability
and Accountability Act of 1996 (HIPAA)
for outpatient services. The AMA CPT
Editorial Panel’s coding cycle occurs
concurrently with our calendar year
rulemaking cycle for the OPPS and the
ASC payment system. The OPPS/ASC
proposed rules have historically been
published prior to the publication of the
CPT codes that are generally made
public in the fall, with a January 1
effective date, and therefore, we have
not historically been able to include
these codes in the OPPS/ASC proposed
rules.
b. Modification of the Current Process
for Accepting Comments on New and
Revised Category I and III CPT Codes
That Are Effective January 1
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39305 through 39307), we
proposed to make changes in the
process we use to establish ASC
payment indicators for new and revised
Category I and Category III CPT codes.
As discussed above, we finalized similar
revisions under the MPFS and the OPPS
for establishing payment indicators for
new and revised CPT codes that take
effect each January 1. Because we are
following this new process for the OPPS
where new and revised codes that are
received in time for the proposed rule
are assigned proposed payment
indicators and proposed APC
assignments in the OPPS, we also
needed to propose a corresponding
process for payment rates and payment
indicators in the ASC for those codes
that are ASC covered surgical
procedures and covered ancillary
services. The proposed revised process
would eliminate our current practice of
assigning interim payment indicators for
the vast majority of new and revised
CPT codes that take effect on January 1
each year.
Consequently, in the CY 2016 OPPS/
ASC proposed rule (80 FR 39305
through 39307), we proposed that we
would include new and revised
Category I and III CPT codes that we
receive from the AMA CPT Editorial
Panel in time for the proposed rule and
their proposed ASC payment indicators
in the OPPS/ASC proposed rule and
finalize the ASC payment indicator
assignments in the OPPS/ASC final rule
with comment period. We proposed
that, for new and revised Category I and
III CPT codes that can be cross-walked
to current codes for which ASC
payment assignments are already
established that we receive from the
AMA CPT Editorial Panel too late for
inclusion in the proposed rule for a

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70477

year, we would delay adoption of these
new and revised codes for that year and,
instead, adopt coding policies and
payment rates that conform, to the
extent possible, to the policies and
payment rates in place for the previous
year. We proposed to adopt these
conforming coding and payment
policies (by creating G codes that mirror
existing codes that are the predecessor
codes to the untimely new and revised
CPT codes) on an interim basis pending
the result of our specific proposals for
these new and revised codes through
notice—and—comment rulemaking in
the OPPS/ASC proposed rule for the
following year. However, if certain CPT
codes are revised in a manner that
would not affect the cost of inputs (for
example, a grammatical change to CPT
code descriptors), we would use these
revised codes and continue to assign
those codes to their current ASC
payment indicator and APC unless a
policy change was being proposed for
the codes. For example, under this
proposed process, if a single CPT code
was separated into two codes and we
did not receive those codes until May
2016, we would assign each of those
codes to interim payment indicator
‘‘B5’’ (Alternative code may be
available; no payment made) in the final
rule with comment period, to indicate
that an alternate code is recognized
under the ASC payment system. ASCs
could not use those two new CPT codes
to bill Medicare for ASC services the
first year after the effective date of the
codes. Instead, we would create a
HCPCS G-code with the same descriptor
as the single predecessor CPT code, and
continue to use the same ASC payment
indicator for that code during the year.
We would propose payment indicators
for the two new CPT codes during
rulemaking in CY 2017 for payment
beginning in CY 2018. We recognize
that the use of HCPCS G-codes may
place an administrative burden on those
ASCs that bill for services under the
ASC payment system. We are optimistic
based on what has occurred in CY 2015
that the AMA CPT Editorial Panel
ultimately will be able to adjust its
timelines and processes so that most, if
not all, of the annual coding changes
can be addressed in the OPPS/ASC
proposed rule.
As stated previously, for new or
revised codes, including new codes that
describe wholly new services, we would
make every effort to work with the AMA
CPT Editorial Panel to ensure that we
received the codes in time to propose
payment rates in the proposed rule.
However, if we do not receive the code
for a wholly new service in time to

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include proposed ASC payment
indicator assignments in the proposed
rule for a year, we would establish
interim ASC payment indicator
assignments for the initial year. We
proposed to establish the initial ASC
payment indicator assignments for
wholly new services as interim final
assignments, and to follow our current
process to solicit and respond to public
comments and finalize the ASC
payment indicator assignments in the
subsequent year. We proposed to
finalize and implement the revised CMS
process for establishing ASC payment
indicator assignments for new and
revised codes for CY 2016.
In summary, we proposed to include
in the OPPS/ASC proposed rule the
proposed ASC payment indicators for
the vast majority of new and revised
CPT codes before they are used for
payment purposes under the ASC
payment system. We would address
new and revised CPT codes for the
upcoming year that are available in time
for the proposed rule by proposing ASC
payment indicators for the codes.
Otherwise, we would delay adoption of
the new and revised codes that can be
cross-walked to current codes for which
ASC payment assignments are already
established for a year while using
methods (including creating G-codes
that describe the predecessor codes) to
maintain the existing ASC payment
indicators until the following year when
we would include proposed
assignments for the new and revised
codes in the proposed rule. In the case
of a new CPT code that describes a
wholly new service (such as a new
technology or new surgical procedure)
that has not previously been addressed
under the ASC payment system for
which we do not receive timely
information from the AMA, we
proposed to establish interim ASC
payment indicators in that year’s OPPS/
ASC final rule with comment period, as
is our current process, and to follow our
current process to respond to public
comments and finalize the ASC
payment indicator assignments in the
OPPS/ASC final rule with comment
period for the subsequent year. The
proposed revised process would
eliminate our current practice of
assigning interim ASC payment
indicators for the vast majority of new
and revised CPT codes that take effect
on January 1 each year. We invited
public comment on these proposals.
As stated in the CY 2016 OPPS/ASC
proposed rule (80 FR 39306), for the CY
2016 ASC update, we received the CY
2016 Category I and III CPT codes from
the AMA in time for inclusion in the CY
2016 OPPS/ASC proposed rule. The

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new and revised CY 2016 Category I and
III CPT codes were included in ASC
Addenda AA and BB to the CY 2016
OPPS/ASC proposed rule (which are
available via the Internet on the CMS
Web site) and were assigned to
proposed new comment indicator ‘‘NP’’
to indicate that the code is new for the
next calendar year or the code is an
existing code with substantial revision
to its code descriptor in the next
calendar year as compared to current
calendar year with a proposed ASC
payment indicator and that comments
will be accepted on the proposed
payment indicator. In the CY 2016
OPPS/ASC proposed rule, we solicited
public comments on the proposed CY
2016 ASC payment indicators for the
new and revised Category I and III CPT
codes that would be effective January 1,
2016.
Comment: One commenter
recommended that CMS refrain from
creating temporary HCPCS G-codes
when CPT codes are available in order
to avoid confusion and parallel coding
inconsistencies. The commenter further
recommended that CMS rely solely on
the use of CPT codes for procedures and
services under both the OPPS and the
ASC payment system.
Response: We appreciate the
commenter’s recommendations.
However, we do not agree that we
should refrain from creating temporary
HCPCS G-codes when CPT codes are
available or that we should rely solely
on the use of CPT codes for procedures
and services under both the OPPS and
the ASC payment system. We intend to
the extent possible to include new and
revised Category I and III CPT codes and
their proposed payment indicators in a
proposed rule and finalize the payment
indicators in the final rule with
comment period for the same year. We
will delay the adoption of new and
revised Category I and III CPT codes that
can be cross-walked to current codes for
which ASC payment assignments are
already established that are available too
late for a current proposed rule for a
year. Instead, we will use G-codes that
mirror the predecessor CPT codes that
are scheduled for deletion in the
upcoming year to maintain the existing
ASC payment indicators until the
following year. In the following year, we
will include proposed assignments for
these new and revised Category I and III
CPT codes in the OPPS/ASC proposed
rule, and finalize the payment
indicators for these codes in the OPPS/
ASC final rule with comment period. In
the case of a new Category I or III CPT
code that describes a wholly new
service (such as a new technology or
new surgical procedure) that has not

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previously been addressed under the
ASC payment system for which we do
not receive timely information from the
AMA, we will establish interim ASC
payment indicators in that year’s OPPS/
ASC final rule with comment period, as
is our current process, and follow our
current process to respond to public
comments and finalize the ASC
payment indicator assignments in the
OPPS/ASC final rule with comment
period for the subsequent year. We
believe this new process aligns the
reporting requirements for the same
codes under all three payment systems:
MPFS, OPPS, and the ASC payment
system. This creates coding consistency
and less confusion amongst all three
Medicare payment systems.
Comment: Some commenters
supported and commended CMS for
proposing a comment period for new
CPT codes before they are used for
payment purposes under the ASC
payment system. The commenters stated
that requesting public input prior to use
of new and revised codes will encourage
reliable and accurate payments. One
commenter believed that the inclusion
of new and revised CPT codes in the
proposed rule represents a significant
improvement. The commenters
requested that CMS adopt its proposal
to allow for comments on new and
revised CPT codes prior to usage for
payment purposes.
Response: We appreciate the
commenters support for our proposal.
We believe that publishing our
proposed ASC payment indicators for
the new and revised Category I and III
CPT codes prior to their implementation
on January 1 whenever possible will
help ensure that correct ASC payment
indicators for new and revised codes are
effective January 1, and that ASCs are
paid appropriately when the codes are
implemented.
After consideration of the public
comments we received, we are
finalizing our proposal without any
modification. First, for new and revised
Category I and III CPT codes that we
receive timely from the AMA CPT
Editorial Panel, we are finalizing our
proposal to include these codes that will
be effective January 1 in the OPPS/ASC
proposed rules with proposed ASC
payment indicators, and finalize their
assignments in the OPPS/ASC final
rules with comment period. Secondly,
for those new and revised Category I
and III CPT codes that can be crosswalked to current codes for which ASC
payment assignments are already
established that cannot be included in
the OPPS/ASC proposed rules, we are
finalizing our proposal to delay
adoption of these codes for a year while

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using methods, including creating Gcodes that describe the predecessor
codes, to maintain the existing ASC
payment indicators as interim ASC
payment indicator assignments until the
following year when we will include
proposed payment indicator
assignments for the codes in the OPPS/
ASC proposed rule, and finalize these
payment indicator assignments in the
OPPS/ASC final rule with comment
period. We note that we will assign the
HCPCS G-codes to interim ASC
payment indicator assignments for one
year, and assign the Category I and III
CPT codes to ASC payment indicator
‘‘B5’’ to indicate that another HCPCS
code should be reported to Medicare.
However, if certain Category I and III
CPT codes are revised in a manner that
would not affect the cost of inputs (for
example, a grammatical change to CPT
code descriptors), we will use these
revised codes and continue to assign
those codes to their current ASC
payment indicator and APC unless a
policy change was being proposed for
the codes. Thirdly, for Category I and III
CPT codes that describe wholly new
services that have not previously been
addressed under the ASC payment
system for which we do not receive
timely information from the AMA, we
will establish interim ASC payment
indicators for these CPT codes for the
initial year in the OPPS/ASC final rule
with comment period in which we will
solicit public comments on these
interim payment indicators, and
respond to those comments and finalize

the ASC payment indicator assignments
in the subsequent year OPPS/ASC final
rule with comment period, as is our
current practice.
4. Process for New and Revised Level II
HCPCS Codes That Are Effective
October 1, 2015 and January 1, 2016 for
Which We Are Soliciting Public
Comments in This CY 2016 OPPS/ASC
Final Rule With Comment Period
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39307), although we
proposed to revise our process for
requesting public comments on the new
and revised Category I and III CPT
codes, we did not propose any change
to the process for requesting public
comments on the new and revised Level
II HCPCS codes that would be effective
October 1 and January 1.
As has been our practice in the past,
we incorporate those new and revised
Level II HCPCS codes that are effective
January 1 in the final rule with
comment period, thereby updating the
ASC payment system for the following
calendar year. These codes are released
to the public via the CMS HCPCS Web
site, and also through the January ASC
quarterly update CRs. In the past, we
also released new and revised Level II
HCPCS codes that are effective October
1 through the October ASC quarterly
update CRs and incorporated these new
and revised codes in the final rule with
comment period, thereby updating the
ASC for the following calendar year. All
of these codes are flagged with comment
indicator ‘‘NI’’ in Addenda AA and BB

70479

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 2016 OPPS/ASC proposed
rule (80 FR 39307), we proposed to
continue this process for CY 2016.
Specifically, the Level II HCPCS codes
that will be effective October 1, 2015
and January 1, 2016 would be flagged
with comment indicator ‘‘NI’’ in
Addendum AA and BB to the CY 2016
OPPS/ASC final rule with comment
period to indicate that we have assigned
the codes an interim ASC payment
status for CY 2016. We also stated that
we will be inviting public comments on
the proposed payment indicators and
payment rates for these codes, if
applicable, that would be finalized in
the CY 2017 OPPS/ASC final rule with
comment period.
In Table 62 below, we summarize the
CY 2016 process described in section
XII.B. of the proposed rule for updating
codes through our ASC quarterly update
CRs, seeking public comments, and
finalizing the treatment of these new
and revised codes under the ASC
payment system.

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TABLE 62—PROPOSED COMMENT TIMEFRAME FOR CY 2016 FOR NEW OR REVISED CATEGORY I AND III CPT CODES AND
LEVEL II HCPCS CODES
ASC
quarterly update CR

Type of code

Effective date

April 1, 2015 ......................

Level II HCPCS Codes .....

April 1, 2015 ......................

CY 2016 OPPS/ASC proposed rule.

July 1, 2015 .......................

Level II HCPCS Codes .....

July 1, 2015 ......................

CY 2016 OPPS/ASC proposed rule.

July 1, 2015 ......................

CY 2016 OPPS/ASC proposed rule.

October 1, 2015 ................

Category I (certain vaccine
codes) and III CPT
codes.
Level II HCPCS Codes .....

October 1, 2015 ................

January 1, 2016 ................

Level II HCPCS Codes .....

January 1, 2016 ................

Category I and III CPT
Codes.

January 1, 2016 ................

CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC proposed rule.

We invited public comments on this
proposed process. We did not receive
any public comments related to our

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Comments sought

proposal. Therefore, we are finalizing
our proposal to assign the Level II
HCPCS codes that will be effective

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When finalized
CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.
CY 2017 OPPS/ASC final
rule with comment period.
CY 2017 OPPS/ASC final
rule with comment period.
CY 2016 OPPS/ASC final
rule with comment period.

October 1, 2015 and January 1, 2016 to
comment indicator ‘‘NI’’ in Addendum
AA and BB of this CY 2016 OPPS/ASC

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final rule with comment period to
indicate that we have assigned the codes
an interim ASC payment indicator for
CY 2016. We note that 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.
C. Update to the List of ASC Covered
Surgical Procedures and Covered
Ancillary Services
1. Covered Surgical Procedures
a. Covered Surgical Procedures
Designated as Office-Based
(1) Background
In the August 2, 2007 ASC final rule,
we finalized our policy to designate as
‘‘office-based’’ those procedures that are
added to the ASC list of covered
surgical procedures in CY 2008 or later
years that we determine are performed
predominantly (more than 50 percent of
the time) in physicians’ offices based on
consideration of the most recent
available volume and utilization data for
each individual procedure code and/or,
if appropriate, the clinical
characteristics, utilization, and volume
of related codes. In that rule, we also
finalized our policy to exempt all
procedures on the CY 2007 ASC list
from application of the office-based
classification (72 FR 42512). The
procedures that were added to the ASC
list of covered surgical procedures
beginning in CY 2008 that we
determined were office-based were
identified in Addendum AA to that rule
by payment indicator ‘‘P2’’ (Officebased surgical procedure added to ASC

list in CY 2008 or later with MPFS
nonfacility PE RVUs; payment based on
OPPS relative payment weight); ‘‘P3’’
(Office-based surgical procedures added
to ASC list in CY 2008 or later with
MPFS nonfacility PE RVUs; payment
based on MPFS nonfacility PE RVUs); or
‘‘R2’’ (Office-based surgical procedure
added to ASC list in CY 2008 or later
without MPFS nonfacility PE RVUs;
payment based on OPPS relative
payment weight), depending on whether
we estimated the procedure 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
covered surgical procedures eligible for
payment in ASCs, each year we identify
covered surgical procedures as either
temporarily office-based (these are new
procedure codes with little or no
utilization data that we have determined
are clinically similar to other
procedures that are permanently officebased), permanently office-based, or
nonoffice-based, after taking into
account updated volume and utilization
data.
(2) Changes for CY 2016 to Covered
Surgical Procedures Designated as
Office-Based
In developing the CY 2016 OPPS/ASC
proposed rule, we followed our policy
to annually review and update the
covered 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 2014 volume and
utilization data and the clinical

characteristics for all covered surgical
procedures that are assigned payment
indicator ‘‘G2’’ (Nonoffice-based
surgical procedure added in CY 2008 or
later; payment based on OPPS relative
payment weight) in CY 2015, as well as
for those procedures assigned one of the
temporary office-based payment
indicators, specifically ‘‘P2,’’ ‘‘P3,’’ or
‘‘R2’’ in the CY 2015 OPPS/ASC final
rule with comment period (79 FR 66921
through 66923).
Our review of the CY 2014 volume
and utilization data resulted in our
identification of two covered surgical
procedures, CPT codes 43197
(Esophagoscopy, flexible, transnasal;
diagnostic, including collection of
specimen(s) by brushing or washing,
when performed (separate procedure))
and 43198 (Esophagoscopy, flexible,
transnasal; with biopsy, single or
multiple) that we believe meet the
criteria for designation as office-based.
The data indicate that these procedures
are performed more than 50 percent of
the time in physicians’ offices and we
believe the services are of a level of
complexity consistent with other
procedures performed routinely in
physicians’ offices. The two CPT codes
we proposed to permanently designate
as office-based are listed in Table 59 of
the CY 2016 OPPS/ASC proposed rule
(80 FR 39308).
We invited public comment on this
proposal.
We did not receive any public
comments on this proposal. Therefore,
we are finalizing our proposal, without
modification, to designate the
procedures described by CPT codes
43197 and 43198 as permanently officebased for CY 2016, as set forth in Table
63 below.

TABLE 63—ASC COVERED SURGICAL PROCEDURES NEWLY DESIGNATED AS PERMANENTLY OFFICE-BASED FOR CY 2016
CY 2016 CPT
code

CY 2016 long descriptor

43197 ................

Esophagoscopy, flexible, transnasal; diagnostic, including collection of
specimen(s) by brushing or washing, when performed (separate procedure).
Esophagoscopy, flexible, transnasal; with biopsy, single or multiple ..........

43198 ................

CY 2015 ASC
payment
indicator

Proposed CY
2016 ASC
payment
indicator

Final CY 2016
ASC payment
indicator *

G2

P3

P3

G2

P3

P3

jstallworth on DSK7TPTVN1PROD with RULES

* Final payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS
final rates. Current law specifies a 0.5 percent update to the MPFS payment rates for CY 2016. For a discussion of the MPFS rates, we refer
readers to the CY 2016 MPFS final rule with comment period.

We also reviewed CY 2014 volume
and utilization data and other
information for six procedures finalized
for temporary office-based status in
Table 47 in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66922 through 66923). Among these six

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procedures, there were very few claims
in our data or no claims data for five
procedures: CPT code 0099T
(Implantation of intrastromal corneal
ring segments); CPT code 0299T
(Extracorporeal shock wave for
integumentary wound healing, high

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energy, including topical application
and dressing care; initial wound); 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); CPT

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
code 10030 (Image-guided fluid
collection drainage by catheter (e.g.,
abscess, hematoma, seroma,
lymphocele, cyst), soft tissue (e.g.,
extremity, abdominal wall, neck),
percutaneous); 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, in the CY
2016 OPPS/ASC proposed rule (80 FR
39308 through 39309) we proposed to
maintain the temporary office-based
designations for these five codes for CY
2016. We listed all of these codes in
Table 60 of the proposed rule (80 FR
39309), except for HCPCS code 0099T.
HCPCS code 0099T was assigned
payment indicator ‘‘R2’’ in the CY 2015
OPPS/ASC final rule with comment
period (79 FR 66922), but this code is
being replaced with a new CPT code
currently identified with a CMS 5-digit

placeholder code of 657XG. Table 61 of
the proposed rule (80 FR 39309)
reflected the new CY 2016 codes for
ASC covered surgical procedures with
proposed temporary office-based
designations.
For CPT code 64617
(Chemodenervation of muscle(s); larynx,
unilateral, percutaneous (e.g., for
spasmodic dysphonia), includes
guidance by needle electromyography,
when performed), claims data indicate
these procedures are performed more
than 50 percent of the time in
physicians’ offices, and we believe the
services are of a level of complexity
consistent with other procedures
performed routinely in physicians’
offices. Therefore, we proposed to make
the office-based designation for CPT
code 64617 permanent.
The proposed CY 2016 payment
indicator designations for the
procedures that were temporarily
designated as office-based in CY 2015
were displayed in Table 60 of the

70481

proposed rule. The procedures for
which the proposed office-based
designations for CY 2016 are temporary
also are indicated by asterisks in
Addendum AA to the proposed rule
(which is available via the Internet on
the CMS Web site).
We invited public comment of these
proposals.
Comment: One commenter supported
CMS’ proposal to designate HCPCS code
C9800 as temporarily rather than
permanently office-based, allowing for
additional utilization data to be
collected.
Response: We appreciate the
commenter’s support.
After consideration of the public
comments we received, for CY 2016 we
are finalizing our proposal, without
modification, to designate the four
procedures listed in Table 64 as
temporarily office-based and one
procedure listed in Table 64 as
permanently office-based.

TABLE 64—CY 2016 PAYMENT INDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY
OFFICE-BASED IN THE CY 2015 OPPS/ASC FINAL RULE WITH COMMENT PERIOD
CY 2016 CPT
code

CY 2016 long descriptor

0299T ...............

Extracorporeal shock wave for integumentary wound healing, high energy, including topical
application and dressing care; initial wound.
Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS) and provision of
Radiesse or Sculptra dermal filler, including all items and supplies.
Image-guided fluid collection drainage by catheter (e.g., abscess, hematoma, seroma,
lymphocele, cyst), soft tissue (e.g., extremity abdominal wall, neck), percutaneous.
Chemodenervation of muscle(s); larynx, unilateral, percutaneous (e.g., for spasmodic
dysphonia), includes guidance by needle electromyography, when performed.
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.

C9800 ...............
10030 ................
64617 ................
67229 ................

CY 2015 ASC
payment
indicator

CY 2016 ASC
payment
indicator **

R2 *

R2 *

R2 *

R2 *

P2 *

P2 *

P3 *

P3

R2 *

R2 *

* If designation is temporary.
** Final payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS
final rates. Current law specifies a 0.5 percent update to the MPFS payment rates for CY 2016. For a discussion of the MPFS rates, we refer
readers to the CY 2016 MPFS final rule with comment period.

jstallworth on DSK7TPTVN1PROD with RULES

For CY 2016, we also proposed to
designate certain new CY 2016 codes for
ASC covered surgical procedures as
temporary office-based, displayed in
Table 61 of the proposed rule (80 FR
39309). After reviewing the clinical
characteristics, utilization, and volume
of related codes, we determined that the
procedures described by these new CPT
codes would be predominantly
performed in physicians’ offices.

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However, because we had no utilization
data for the procedures specifically
described by these new CPT codes, we
proposed that the office-based
designations be temporary rather than
permanent and we will reevaluate the
procedures when data become available.
The procedures for which the proposed
office-based designations for CY 2016
are temporary also are indicated by
asterisks in Addendum AA to the

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proposed rule (which is available via
the Internet on the CMS Web site).
We invited public comment on these
proposals.
We did not receive any public
comment on our proposal. Therefore, for
CY 2016, we are finalizing our proposal
without modification to designate the
four procedures listed in Table 65 as
temporarily office-based.

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TABLE 65—CY 2016 PAYMENT INDICATORS FOR NEW CY 2016 CPT CODES FOR ASC COVERED SURGICAL
PROCEDURES DESIGNATED AS TEMPORARILY OFFICE-BASED
Final CY 2016
OPPS/ASC
Proposed Rule
5-digit
CMS
placeholder
code ***

CY 2016
CPT code

Final CY 2016 long descriptor

6446A ...............

64461 ..........

6446C ...............

64463 ..........

03XXB ..............

0402T ..........

657XG ..............

65785 ..........

Paravertebral block (PVB) (paraspinous block), thoracic; single injection site (includes imaging guidance, when performed).
Paravertebral block (PVB) (paraspinous block), thoracic; continuous infusion by catheter (includes imaging guidance, when performed).
Collagen cross-linking of cornea (including removal of the corneal epithelium and
intraoperative pachymetry when performed).
Implantation of intrastromal corneal ring segments ...................................................................

Final CY 2016
ASC payment
indicator **

P3 *
P3 *
R2 *
R2 *

* If designation is temporary.
** Final payment indicators are based on a comparison of the final rates according to the ASC standard ratesetting methodology and the MPFS
final rates. Current law specifies a 0.5 percent update to the MPFS payment rates for CY 2016. For a discussion of the MPFS rates, we refer
readers to the CY 2016 MPFS final rule with comment period.
*** New CPT codes (with CMS 5-digit placeholder codes) that will be effective January 1, 2016. The final ASC payment rate for this code can
be found in ASC Addendum AA, which is available via the Internet on the CMS Web site.

b. ASC Covered Surgical Procedures
Designated as Device-Intensive—
Finalized Policy for CY 2015 and
Finalized Policy for CY 2016

jstallworth on DSK7TPTVN1PROD with RULES

(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. According to that
modified ASC payment methodology,
we apply the device offset percentage
based on the standard OPPS APC
ratesetting methodology to the OPPS
national unadjusted payment to
determine the device cost included in
the OPPS payment rate for a deviceintensive ASC covered surgical
procedure, which we then set as equal
to the device portion of the national
unadjusted ASC payment rate for the
procedure. We then calculate the service
portion of the ASC payment for deviceintensive procedures by applying the
uniform ASC conversion factor to the
service (nondevice) portion of the OPPS
relative payment weight for the deviceintensive procedure. Finally, we sum
the ASC device portion and ASC service
portion to establish the full payment for
the device-intensive procedure under
the revised ASC payment system. For
CY 2015, we implemented a
comprehensive APC policy under the
OPPS under which we created C–APCs

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to replace most of the then-current
device-dependent APCs and a few
nondevice-dependent APCs under the
OPPS, which discontinued the devicedependent APC policy (79 FR 66798
through 66810). We did not implement
C–APCs in the ASC payment system.
Therefore, in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66925), we provided that all separately
paid covered ancillary services that are
provided integral to covered surgical
procedures that mapped to C–APCs
continue to be separately paid under the
ASC payment system instead of being
packaged into the payment for the C–
APC as under the OPPS. To avoid
duplicating payment, we provided that
the CY 2015 ASC payment rates for
these C–APCs are based on the CY 2015
OPPS relative payments weights that
had been calculated using the standard
APC ratesetting methodology for the
primary service instead of the relative
payment weights that are based on the
comprehensive bundled service. For the
same reason, under the ASC payment
system, we also used the standard OPPS
APC ratesetting methodology instead of
the comprehensive methodology to
calculate the device offset percentage for
C–APCs for purposes of identifying
device-intensive procedures and to
calculate payment rates for deviceintensive procedures assigned to C–
APCs. Because we implemented the C–
APC policy and, therefore, eliminated
device-dependent APCs under the OPPS
in CY 2015, we revised our definition of
ASC device-intensive procedures to be
those procedures that are assigned to
any APC (not only an APC formerly
designated as device-dependent) with a
device offset percentage greater than 40

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percent based on the standard OPPS
APC ratesetting methodology.
We also provided that we would
update the ASC list of covered surgical
procedures that are eligible for payment
according to our device-intensive
procedure payment methodology,
consistent with our modified definition
of device-intensive procedures,
reflecting the APC assignments of
procedures and APC device offset
percentages based on the CY 2013 OPPS
claims and cost report data available for
the CY 2015 OPPS/ASC proposed rule
and final rule with comment period.
(2) Changes to List of ASC Covered
Surgical Procedures Designated as
Device-Intensive for CY 2016
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39310), for CY 2016, we
proposed to continue our CY 2015
policies. Specifically, for CY 2016, we
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 our
proposed modified definition of deviceintensive procedures, reflecting the
proposed APC assignments of
procedures and APC device offset
percentages based on the CY 2014 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 2016 are listed in
Table 62 of the proposed rule (80 FR
39311 through 39314). The CPT code,
the CPT code short descriptor, the
proposed CY 2016 ASC payment
indicator, the proposed CY 2016 OPPS

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
APC assignment, the proposed CY 2016
OPPS APC device offset percentage, and
an indication if the full credit/partial
credit (FB/FC) device adjustment policy
would apply are also listed in Table 62
of the proposed rule. All of these
procedures are included in Addendum
AA to the proposed rule (which is
available via the Internet on the CMS
Web site).
We invited public comment on these
proposals.
Comment: One commenter requested
that CMS make ASC payment for CPT
code 19296 (Placement of radiotherapy
afterloading expandable catheter (single
or multichannel) into the breast for
interstitial radioelement application
following partial mastectomy, includes
imaging guidance; on date separate from
partial mastectomy) under a deviceintensive designation. The commenter
noted that the code, due to prior
designation as an office-based
procedure, continued to be assigned an
office-based ASC payment indicator,
even though the other procedures
assigned to the same OPPS APC would
qualify for device-intensive status in CY
2016. The commenter further requested
that codes that qualify for both deviceintensive and office-based status be
designated as device-intensive prior to
application of the office-based payment
comparison.
Response: Our current policy, as
described in the CY 2012 OPPS/ASC
final rule with comment period (76 FR
74409), is for the device-intensive status
to supersede the assignment of the
office-based designation. Therefore, CPT
code 19296 will be a device-intensive
procedure and will be assigned ASC
payment indicator ‘‘J8’’ (deviceintensive procedure; paid at adjusted
rate) for CY 2016 under the ASC
payment system.
Comment: Commenters supported
CMS’ assignment of the procedure
described by CPT code C9740
(Cystourethroscopy, with insertion of
transprostatic implant; 4 or more
implants) to a device-intensive APC,
which they believed would lead to more
appropriate payment. One commenter
also requested that the procedure
described by CPT code C9739 be
designated a device-intensive
procedure.
Response: We appreciate the
commenters’ support. An ASC deviceintensive procedure is a procedure that
is assigned to any APC (not only an APC
formerly designated as devicedependent) with a device offset
percentage greater than 40 percent based
on the standard OPPS APC ratesetting
methodology. CPT code C9739 is not
assigned to an APC with a device offset

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percentage greater than 40 percent based
on the standard OPPS APC ratesetting
methodology. Therefore, it will not be
considered a device-intensive procedure
for CY 2016 under the ASC payment
system. For a more detailed discussion
of these codes, we refer readers to
section III.D.13. of this final rule with
comment period.
Comment: Commenters noted that
APC 0105 (Level 1 Pacemaker and
Similar Procedures), which was
proposed to be renumbered to APC
5221, was designated as a deviceintensive APC even though the APC
only consists of device removal,
revision, or repair procedures and,
therefore, would not necessarily include
a device. The commenters believed that
the designation was inaccurately
applied because it would inaccurately
apply edits for device codes to
procedures that would not require them.
The commenters requested that the
device designation for the APC and its
procedure be removed.
Response: As stated previously, an
ASC device-intensive procedure is a
procedure that is assigned to any APC
(not only an APC formerly designated as
device-dependent) with a device offset
percentage greater than 40 percent based
on the standard OPPS APC ratesetting
methodology. For the CY 2016 OPPS/
ASC proposed rule, APC 5221 had a
device offset percentage greater than 40
percent. Using CY 2016 OPPS/ASC final
rule claims and cost report data, APC
5221 does not have a final device offset
percentage of greater than 40 percent.
Therefore, any procedure assigned to
APC 5221 will not be an ASC deviceintensive procedure. For a discussion of
device-intensive procedures under the
OPPS, we refer readers to section IV.B.
of this final rule with comment period.
After consideration of the public
comments we received, we are
designating the ASC covered surgical
procedures displayed in Table 66 below
as device-intensive and subject to the
device-intensive procedure payment
methodology for CY 2016. The CPT
code, the CPT code short descriptor, the
final CY 2016 ASC payment indicator
(PI), the final CY 2016 OPPS APC
assignment, the final CY 2016 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 66 below.
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).

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(3) Solicitation of Comments on DeviceIntensive Policy for ASCs
As discussed previously, prior to CY
2015, ASC device-intensive procedures
were 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 implemented the
comprehensive APC policy and,
therefore, eliminated device-dependent
APCs under the OPPS in CY 2015, we
redefined ASC device-intensive
procedures for CY 2015 as those
procedures that are assigned to any APC
with a device offset percentage greater
than 40 percent based on the standard
OPPS APC ratesetting methodology (79
FR 66923 through 66925).
Payment rates for ASC deviceintensive procedures are based on a
modified payment methodology. As
described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66829), under that modified payment
methodology, we apply the device offset
percentage based on the standard OPPS
APC ratesetting methodology to the
OPPS national unadjusted payment to
determine the device cost included in
the noncomprehensive OPPS
unadjusted payment rate for a deviceintensive ASC covered surgical
procedure, which we then set as equal
to the device portion of the national
unadjusted ASC payment rate for the
procedure. We then calculate the service
portion of the ASC payment for deviceintensive procedures by applying the
uniform ASC conversion factor to the
service (non-device) portion of the
OPPS relative payment weight for the
device-intensive procedure, which is
then scaled for ASC budget neutrality.
Finally, we sum the ASC device portion
and the ASC service portion to establish
the full payment for the deviceintensive procedure under the revised
ASC payment system.
We recognize that, in some instances,
there may be a procedure that contains
high-cost devices but is not assigned to
a device-intensive APC. Where an ASC
covered surgical procedure is not
designated as device-intensive, the
procedure would be paid under the ASC
methodology established for that
covered surgical procedure, through
either an MPFS nonfacility PE RVUbased amount or an OPPS relative
payment weight based methodology,
depending on the ASC status indicator
assignment.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39310), in response to
stakeholder concerns regarding the
situation where procedures with highcost devices are not classified as device-

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jstallworth on DSK7TPTVN1PROD with RULES

intensive under the ASC payment
system, we solicited public comments
for alternative methodologies for
establishing device-intensive status for
ASC covered surgical procedures.
Comment: Several commenters
requested that CMS calculate device
intensity at the HCPCS level. The
commenters believed that designating
device intensity at the HCPCS level
would be appropriate because the
current method of calculating device
intensity at the APC level does not take
into account device similarity within an
APC. Other commenters requested that
CMS adopt additional changes to the
device-intensive policy to encourage the
migration of services to ASCs from other
settings. Another commenter requested
that CMS lower the threshold for device
intensity such that the estimated device
cost of 30 percent or greater of the
procedural cost. One commenter
suggested that correctly coded claims be
used to calculate device intensity, codes
assigned to New Tech APCs be allowed
designation of an interim deviceintensity percentage, and comments be
solicited on codes with fluctuations of
greater than 10 percent in device
intensity from year-to-year as measured
by the estimated device cost relative to
the estimated APC cost.
Response: We appreciate the
thoughtful comments that stakeholders
have provided and will take them into
consideration for future rulemaking.
c. 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 OPPS policy that
was in effect until CY 2014. The
established ASC policy reduces
payment to ASCs when a specified
device is furnished without cost or with
full credit or partial credit for the cost
of the device for those ASC covered
surgical procedures that are assigned to
APCs under the OPPS to which this
policy applies. We refer readers to the
CY 2009 OPPS/ASC final rule with
comment period for a full discussion of
the ASC payment adjustment policy for
no cost/full credit and partial credit
devices (73 FR 68742 through 68744).
As discussed in section IV.B. of the
CY 2014 OPPS/ASC final rule with
comment period (78 FR 75005 through
75006), we finalized our proposal to
modify our former policy of reducing
OPPS payment for specified APCs when
a hospital furnishes a specified device
without cost or with a full or partial
credit. Formerly, under the OPPS, our

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policy was 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 (but less than 100
percent) of the cost for the specified
device. In the CY 2014 OPPS/ASC final
rule with comment period, we finalized
our proposal to reduce OPPS payment
for applicable APCs by the full or partial
credit a provider receives for a replaced
device, capped at the device offset
amount.
Although we finalized our proposal 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, in that
final rule with comment period (78 FR
75076 through 75080), we finalized our
proposal to maintain our 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 finalized our proposal in the
CY 2014 OPPS/ASC final rule with
comment period to continue to reduce
ASC payments by 100 percent or 50
percent of the device offset amount
when an ASC furnishes a device
without cost or with full or partial
credit, respectively.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39310 through 39314), we
proposed to update the list of ASC
covered device-intensive procedures,
based on the revised device-intensive
definition finalized last year, which
would be subject to the no cost/full
credit and partial credit device
adjustment policy for CY 2016. Table 62
of the proposed rule (80 FR 39311
through 39314) displayed 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 2016.
Specifically, when a procedure that is
listed in Table 62 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

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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 62 of the
proposed rule that are subject to the no
cost/full credit or partial credit device
adjustment policy by one-half of the
device offset amount that would be
applied if a device was provided at no
cost or with full credit, if the credit to
the ASC is 50 percent or more (but less
than 100 percent) 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 62 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 (but less than 100 percent) of the
cost of a device. In order to report that
they received a partial credit of 50
percent or more (but less than 100
percent) of the cost of a new device,
ASCs would have the option of either:
(1) Submitting the claim for the device
replacement procedure to their
Medicare contractor after the
procedure’s performance but prior to
manufacturer acknowledgment of credit
for the device, and subsequently
contacting the contractor regarding a
claim adjustment once the credit
determination is made; or (2) holding
the claim for the device implantation
procedure until a determination is made
by the manufacturer on the partial credit
and submitting the claim with the ‘‘FC’’
modifier appended to the implantation
procedure HCPCS code if the partial
credit is 50 percent or more (but less
than 100 percent) of the cost of the
replacement device. Beneficiary
coinsurance would continue to be based
on the reduced payment amount. As
finalized in the CY 2015 OPPS/ASC
final rule with comment period, in order
to ensure that our policy covers any
situation involving a device-intensive
procedure where an ASC may receive a
device at no cost/full credit or partial
credit, we apply our FB/FC policy to all
device-intensive procedures (79 FR
66926).
We invited public comment on these
proposals.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing our
proposals without modification.
Specifically, we will apply our FB/FC

E:\FR\FM\13NOR2.SGM

13NOR2

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
policy to all device-intensive
procedures in CY 2016. The deviceintensive procedures for CY 2016 are
listed in Table 66 below. For CY 2016,
we will reduce the payment for the
procedures listed in Table 66 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 66
below when the device is furnished
without cost or with full credit. In
addition, for CY 2016, we will reduce
the payment for the procedures listed in
Table 66 below by one-half of the device
offset amount if a device is provided
with partial credit, if the credit to the

70485

ASC is 50 percent or more (but less than
100 percent) of the device cost. The ASC
must append the HCPCS ‘‘FC’’ modifier
to the HCPCS code for a surgical
procedure listed in Table 66 when the
facility receives a partial credit of 50
percent or more (but less than 100
percent) of the cost of a device.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 66—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE-INTENSIVE FOR CY 2016, INCLUDING ASC
COVERED SURGICAL PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY
HCPCS code

Short descriptor

Final CY 2016
ASC payment
indicator

Final CY 2016
OPPS APC

Final CY 2016
device offset
percentage

Final FB/FC
policy will
apply

0100T ................
0171T ................
0238T ................
0282T ................
0283T ................
0302T ................
0303T ................
0304T ................
0308T ................
0316T ................
0387T ................
0408T * ..............
0409T * ..............
0410T * ..............
0411T * ..............
0414T * ..............
19296 ................
19298 ................
19325 ................
19342 ................
19357 ................
20696 ................
21243 ................
22551 ................
22554 ................
23616 ................
24361 ................
24362 ................
24363 ................
24366 ................
24370 ................
24371 ................
24410 ................
24435 ................
24545 ................
24546 ................
24587 ................
25441 ................
25442 ................
25444 ................
25446 ................
27279 ................
27356 ................
27438 ................
27440 ................
27441 ................
27442 ................
27446 ................
27870 ................
28420 ................
28705 ................
28715 ................
28735 ................
29889 ................
33206 ................
33207 ................
33208 ................

Prosth retina receive&gen ................................................
Lumbar spine proces distract ...........................................
Trluml perip athrc iliac art ................................................
Periph field stimul trial ......................................................
Periph field stimul perm ...................................................
Icar ischm mntrng sys compl ...........................................
Icar ischm mntrng sys eltrd ..............................................
Icar ischm mntrng sys device ..........................................
Insj ocular telescope prosth .............................................
Replc vagus nerve pls gen ..............................................
Leadless c pm ins/rpl ventr ..............................................
Insj/rplc cardiac modulj sys ..............................................
Insj/rplc cardiac modulj pls gn .........................................
Insj/rplc car modulj atr elt .................................................
Insj/rplc car modulj vnt elt ................................................
Rmvl & rpl car modulj pls gn ...........................................
Place po breast cath for rad ............................................
Place breast rad tube/caths .............................................
Enlarge breast with implant .............................................
Delayed breast prosthesis ...............................................
Breast reconstruction .......................................................
Comp multiplane ext fixation ............................................
Reconstruction of jaw joint ...............................................
Neck spine fuse&remov bel c2 ........................................
Neck spine fusion .............................................................
Treat humerus fracture ....................................................
Reconstruct elbow joint ....................................................
Reconstruct elbow joint ....................................................
Replace elbow joint ..........................................................
Reconstruct head of radius ..............................................
Revise reconst elbow joint ...............................................
Revise reconst elbow joint ...............................................
Revision of humerus ........................................................
Repair humerus with graft ................................................
Treat humerus fracture ....................................................
Treat humerus fracture ....................................................
Treat elbow fracture .........................................................
Reconstruct wrist joint ......................................................
Reconstruct wrist joint ......................................................
Reconstruct wrist joint ......................................................
Wrist replacement ............................................................
Arthrodesis sacroiliac joint ...............................................
Remove femur lesion/graft ...............................................
Revise kneecap with implant ...........................................
Revision of knee joint .......................................................
Revision of knee joint .......................................................
Revision of knee joint .......................................................
Revision of knee joint .......................................................
Fusion of ankle joint open ................................................
Treat/graft heel fracture ...................................................
Fusion of foot bones ........................................................
Fusion of foot bones ........................................................
Fusion of foot bones ........................................................
Knee arthroscopy/surgery ................................................
Insert heart pm atrial ........................................................
Insert heart pm ventricular ...............................................
Insrt heart pm atrial & vent ..............................................

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
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8
J8

1599
5125
5193
5462
5464
5223
5222
5222
5494
5464
5193
5231
5231
5222
5222
5231
5093
5093
5093
5093
5093
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5125
5223
5223
5223

91.62
53.97
60.36
56.19
86.79
68.66
73.05
73.05
84.55
86.79
60.36
77.67
77.67
73.05
73.05
77.67
40.84
40.84
40.84
40.84
40.84
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
53.97
68.66
68.66
68.66

Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

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E:\FR\FM\13NOR2.SGM

13NOR2

70486

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

TABLE 66—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE-INTENSIVE FOR CY 2016, INCLUDING ASC
COVERED SURGICAL PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY—Continued
Short descriptor

Final CY 2016
ASC payment
indicator

Final CY 2016
OPPS APC

Final CY 2016
device offset
percentage

Final FB/FC
policy will
apply

Insert electrd/pm cath sngl ...............................................
Insert card electrodes dual ..............................................
Insert pulse gen sngl lead ................................................
Insert pulse gen dual leads ..............................................
Upgrade of pacemaker system ........................................
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/dual leads ............................................
Insrt pulse gen w/mult leads ............................................
Removal of pm generator ................................................
Insrt pulse gen w/singl lead .............................................
Insj/rplcmt defib w/lead(s) ................................................
Rmvl& replc pulse gen 1 lead ..........................................
Rmvl & rplcmt dfb gen 2 lead ..........................................
Rmvl & rplcmt dfb gen mlt ld ...........................................
Ins/rep subq defibrillator ...................................................
Insj subq impltbl dfb elctrd ...............................................
Implant pat-active ht record .............................................
Iliac revasc w/stent ...........................................................
Fem/popl revas w/ather ...................................................
Fem/popl revasc w/stent ..................................................
Fem/popl revasc stnt & ather ...........................................
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 same ............................................
Vasc embolize/occlude venous ........................................
Vasc embolize/occlude artery ..........................................
Vasc embolize/occlude organ ..........................................
Removal of kidney stone .................................................
Removal of kidney stone .................................................
Kidney endoscopy & treatment ........................................
Male sling procedure ........................................................
Insert tandem cuff ............................................................
Insert uro/ves nck sphincter .............................................
Remove/replace ur sphincter ...........................................
Treat penis lesion graft ....................................................
Insert semi-rigid prosthesis ..............................................
Insert self-contd prosthesis ..............................................
Insert multi-comp penis pros ............................................
Remove/replace penis prosth ..........................................
Remv/repl penis contain pros ..........................................
Cryoablate prostate ..........................................................
Insrt/redo neurostim 1 array .............................................
Implant neurostim arrays .................................................
Revise/remove neuroreceiver ..........................................
Insert spine infusion device .............................................
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 ...................................................

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
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
J8
J8

5222
5222
5222
5223
5223
5222
5222
5224
5223
5222
5223
5224
5231
5232
5222
5231
5232
5231
5231
5232
5232
5222
5222
5192
5192
5192
5193
5192
5193
5193
5193
5192
5192
5192
5192
5192
5376
5376
5376
5376
5376
5377
5377
5376
5376
5377
5377
5377
5377
5376
5463
5464
5462
5471
5471
5471
5462
5463
5462
5462
5464
5462
5462
5462
5462
5464
5462
5462

73.05
73.05
73.05
68.66
68.66
73.05
73.05
72.72
68.66
73.05
68.66
72.72
77.67
80.72
73.05
77.67
80.72
77.67
77.67
80.72
80.72
73.05
73.05
50.76
50.76
50.76
60.36
50.76
60.36
60.36
60.36
50.76
50.76
50.76
50.76
50.76
53.73
53.73
53.73
53.73
53.73
69.61
69.61
53.73
53.73
69.61
69.61
69.61
69.61
53.73
85.68
86.79
56.19
80.14
80.14
80.14
56.19
85.68
56.19
56.19
86.79
56.19
56.19
56.19
56.19
86.79
56.19
56.19

Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

jstallworth on DSK7TPTVN1PROD with RULES

HCPCS code
33210
33211
33212
33213
33214
33216
33217
33221
33224
33227
33228
33229
33230
33231
33233
33240
33249
33262
33263
33264
33270
33271
33282
37221
37225
37226
37227
37228
37229
37230
37231
37236
37238
37241
37242
37243
50080
50081
50557
53440
53444
53445
53447
54112
54400
54401
54405
54410
54416
55873
61885
61886
61888
62360
62361
62362
63650
63655
63663
63664
63685
64553
64555
64561
64565
64568
64569
64575

................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................
................

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70487

TABLE 66—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE-INTENSIVE FOR CY 2016, INCLUDING ASC
COVERED SURGICAL PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY—Continued
Short descriptor

Final CY 2016
ASC payment
indicator

Final CY 2016
OPPS APC

Final CY 2016
device offset
percentage

Final FB/FC
policy will
apply

Implant neuroelectrodes ...................................................
Implant neuroelectrodes ...................................................
Insrt/redo pn/gastr stimul .................................................
Implant temple bone w/stimul ..........................................
Temple bne implnt w/stimulat ..........................................
Implant cochlear device ...................................................
Cysto impl 4 or more .......................................................

J8
J8
J8
J8
J8
J8
J8

5463
5462
5463
5125
5125
5166
1565

85.68
56.19
85.68
53.97
53.97
83.04
65.18

Y
Y
Y
Y
Y
Y
Y

HCPCS code
64580
64581
64590
69714
69715
69930
C9740

................
................
................
................
................
................
................

jstallworth on DSK7TPTVN1PROD with RULES

* New CPT codes that will be effective January 1, 2016.

d. Adjustment to ASC Payments for
Discontinued Device-Intensive
Procedures
As discussed in section IV.B.4. of this
final rule with comment period, we
proposed to modify the calculation of
OPPS payment when modifiers on the
claim indicate that the procedure was
discontinued. When a procedure
assigned to a device-intensive APC is
discontinued either prior to
administration of anesthesia or for a
procedure that does not require
anesthesia, we presume that, in the
majority of cases, the device was not
used and remains sterile such that it
could be used for another case. In these
circumstances, under current policy,
providers are being paid twice by
Medicare for the same device, once for
the initial procedure that was
discontinued and again when the device
is actually used. We believe that, in
cases where the procedure was not
performed, it would be appropriate to
remove the estimated cost of the device
because the device would have
presumably not been used.
We believe these same issues exist in
the ASC setting. Therefore, in the CY
2016 OPPS/ASC proposed rule (80 FR
39314 through 39315), we proposed that
this alternative payment calculation,
where the device offset is removed
before applying any standard downward
payment adjustments because a full
procedure was not performed, would
also apply to device-intensive
procedures in the ASC payment system
beginning in CY 2016, with modifiers
‘‘52’’ (reduced services) and ‘‘73’’
(Discontinued outpatient procedure
prior to anesthesia administration).
These are the same modifiers proposed
for use in the OPPS. Modifier ‘‘52’’ is
used to indicate certain circumstances
in which a procedure is partially
reduced or eliminated. Modifier ‘‘73’’ is
used when a service is canceled prior to
the surgical preparation due to
circumstances that may threaten the

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well-being of a patient. Under this
proposed methodology, any adjustment
policies reducing payment would only
apply to the procedural portion of the
service, based on ASC payment after the
device offset is removed. Use of
modifiers ‘‘52’’ or ‘‘73’’ would thus
result in 50 percent of ASC payment for
the service, after the device offset has
first been subtracted from the standard
ASC payment amount. We proposed to
restrict the policy to ASC deviceintensive procedures so that the
adjustment would not be triggered by
the use of an inexpensive device whose
cost would not constitute a significant
portion of the total payment rate.
Similar to the OPPS, we did not
propose to deduct the device offset
amount from a procedure that was
discontinued after anesthesia was
administered (modifier ‘‘74’’) because
we believe that it may be more likely
that devices involved with such
procedures are no longer sterile and
could not be restocked and used for
another case. However, we solicited
public comments on how often the
device becomes ineligible for use in a
subsequent case and whether we should
deduct the device offset amount from
claims with modifier ‘‘74’’ as well. We
proposed to revise 42 CFR 416.172 to
reflect this proposal.
We invited public comment on this
proposal and this proposed codification.
Comment: Commenters generally
disagreed with the proposal to modify
the calculation of payment when device
intensive procedures with modifiers
‘‘52’’ and ‘‘73.’’ The commenters
suggested that the current calculation or
alternatives such as full payment of the
device cost were preferable. One
commenter also questioned the
magnitude of the issue, noting that
removing the estimated cost of the
device would incentivize the
continuation of a procedure at possible
risk to the beneficiaries.

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Response: We have a longstanding
policy of appending modifiers to track
discontinued procedures and reducing
payment. We believe that the payment
adjustment that we proposed for these
discontinued device intensive
procedures is appropriate for expenses
incurred in these cases. While we note
that these occur in special
circumstances and therefore the
frequency with which they occur is
limited, we would expect that providers
who furnish services to Medicare
beneficiaries would not expose
beneficiaries to health risk due to
financial incentives related to this
policy. We believe that the ASC
payment adjustment we have proposed
better represents the estimated cost of
these procedures.
However, in the case of procedures
involving modifier ‘‘52’’ where
anesthesia is not planned, we now
believe that it would be rare that an
implantable device would be used based
on the feedback commenters have
provided and an examination of the
claims data. Accordingly, we are not
finalizing our proposal to remove the
device offset from services furnished in
the ASC that are billed with modifier
‘‘52.’’
After consideration of the public
comments we received, we are
finalizing our proposed policy with
modification. For device-intensive
procedures (defined as those APCs with
a device offset greater than 40 percent),
we will reduce the ASC payment
amount for discontinued deviceintensive procedures billed with
modifier ‘‘73,’’ where anesthesia is
planned but is discontinued after the
patient is prepared for surgery and taken
to the room where the procedure is to
be performed but before anesthesia is
induced, by 100 percent of the device
offset amount prior to application of any
additional payment adjustments
associated with discontinued
procedures. We are revising 42 CFR

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jstallworth on DSK7TPTVN1PROD with RULES

416.172 to reflect this policy. We also
note that we inadvertently used the
word ‘‘copayment’’ instead of
‘‘coinsurance’’ in the proposed
codification of 42 CFR 416.172(f)(2) and
have made this technical change to the
final regulation.
e. Additions to the List of ASC Covered
Surgical Procedures
We conducted a review of HCPCS
codes that currently are paid under the
OPPS, but not included on the ASC list
of covered surgical procedures, to
determine if changes in technology and/
or medical practice affected the clinical
appropriateness of these procedures for
the ASC setting. Based on this review,
we proposed to update the list of ASC
covered surgical procedures by adding
11 procedures to the list for CY 2016.
We determined that these 11 procedures
would not be expected to pose a
significant risk to beneficiary safety
when performed in an ASC, and would
not be expected to require active
medical monitoring and care of the
beneficiary at midnight following the
procedure. Therefore, we proposed to
include them on the list of ASC covered
surgical procedures for CY 2016.
The 11 procedures that we proposed
to add to the ASC list of covered
surgical procedures, including their
HCPCS code long descriptors and
proposed CY 2016 payment indicators,
were displayed in Table 63 of the
proposed rule (80 FR 39315).
We invited public comment on this
proposal.
Comment: Several commenters
supported the proposal to add 11
procedures to the CY 2016 list of ASC
covered surgical procedures.
Response: We appreciate the
commenters’ support. As indicated later
in this section, we are finalizing our
proposal to add these procedure codes
to the list of ASC covered procedures in
addition to six other procedure codes
requested by commenters.
Comment: One commenter requested
that CMS include all surgical and
ancillary procedures that are currently
paid in the HOPD setting on the ASC
covered surgical procedures list.
Response: We are not adopting this
commenter’s request. As stated in our
final policy, which is discussed in detail
in the August 2, 2007 final rule (72 FR
42476 through 42486; 42 CFR 416.2 and
416.166), we believe that it is
inappropriate to exclude only those
surgical procedures on the OPPS
inpatient list from ASC payment and
have established criteria to determine
whether a procedure should be
excluded from the ASC covered surgical
procedures list (42 CFR 416.2 and

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416.166). Including all of the procedures
that are currently paid in the HOPD
setting on the ASC covered surgical
procedures list is inconsistent with our
goal of only excluding those procedures
from ASC payment that are unsafe for
performance in ASCs or are expected to
require an overnight stay. Typically,
HOPDs are able to provide much higher
acuity care than ASCs. ASCs have
neither patient safety standards
consistent with those in place for
hospitals, nor are they required to have
the trained staff and equipment needed
to provide the breadth and intensity of
care that hospitals are required to
maintain. Therefore, there are some
procedures that we believe may be
appropriately provided in the HOPD
setting that are unsafe for the
performance in ASCs. Thus, we did not
adopt a final policy to exclude only
those surgical procedures on the OPPS
inpatient list from ASC payment under
the ASC payment system.
Comment: Some commenters
requested that CMS include several
additional CPT/HCPCS codes on the list
of ASC covered surgical procedures that
were not proposed to be added to the
list. The commenters stated that codes
that describe instrumentation and bone
grafting are key components of many
spine procedures that have been added
to the ASC covered surgical procedures
list in recent years and requested that
those codes be added to the list as well.
The commenters also stated that some of
the procedures described by these codes
were performed on non-Medicare
patients in the ASC setting with positive
outcomes. Some commenters believed
that, because Medicare makes facility
payments for unlisted CPT codes under
the OPPS, CMS should also allow ASCs
to use unlisted CPT codes to report
procedures. The list of codes that
commenters requested to be added in
addition to those that were proposed to
be added is shown in Table 67 below.

TABLE 67—PROCEDURES REQUESTED
FOR ADDITION TO THE CY 2016 LIST
OF ASC COVERED SURGICAL PROCEDURES
CY 2016
CPT/HCPCS
code
17999 ...........
19307 ...........
20999 ...........
22840* ..........
22842* ..........
22845* ..........
22851 ...........
22856 ...........
23470 ...........
23473 ...........

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Short descriptor
Skin tissue procedure.
Mast mod rad.
Muscoskeletal surgery.
Insert spine fixation device.
Insert spine fixation device.
Insert spine fixation device.
Apply spine prosth device.
Cerv artific diskectomy.
Reconstruct shoulder joint.
Revis reconst shoulder joint.

Fmt 4701

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TABLE 67—PROCEDURES REQUESTED
FOR ADDITION TO THE CY 2016 LIST
OF ASC COVERED SURGICAL PROCEDURES—Continued
CY 2016
CPT/HCPCS
code
28805
28899
29799
29868
29999
31599
31600
32551
33244
35045
35471
35903
37191
37193

...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

37241 ...........
37242
37243
37799
38207
38214
38999

...........
...........
...........
...........
...........
...........

39400
41899
43280
43281
43499

...........
...........
...........
...........
...........

43770
43999
44180
44799
44970
49659
46999
47379
49329
49406
49999
53899
54332
54336
54535
54650

...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

55899
57282
57283
57425
60252
60260
60271
63011
63012
63015
63016
63017
63035
63040
63046
63048

...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

63055 ...........
63057 ...........

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Short descriptor
Amputation thru metatarsal.
Foot/toes surgery procedure.
Casting/strapping procedure.
Meniscal trnspl knee w/scpe.
Arthroscopy of joint.
Larynx surgery procedure.
Incision of windpipe.
Insertion of chest tube.
Remove eltrd transven.
Repair defect of arm artery.
Repair arterial blockage.
Excision graft extremity.
Ins endovas vena cava filtr.
Rem endovas vena cava filter.
Vasc embolize/occlude venous.
Vasc embolize/occlude artery.
Vasc embolize/occlude organ.
Vascular surgery procedure.
Cyropreserve stem cells.
Volume deplete of harvest.
Blood/lymph system procedure.
Mediastinoscopy incl biopsy.
Dental surgery procedure.
Laparoscopy fundoplasty.
Lap paraesophag hern repair.
Esophagus surgery procedure.
Lap place gastr adj device.
Stomach surgery procedure.
Lap enterolysis.
Unlisted px small intestine.
Laparoscopy appendectomy.
Laparo proc hernia repair.
Anus surgery procedure.
Laparoscope procedure liver.
Laparo proc abdm/per/oment.
Image cath fluid peri/retro.
Abdomen surgery procedure.
Urology surgery procedure.
Revise penis/urethra.
Revise penis/urethra.
Extensive testis surgery.
Orchiopexy (Fowler-Stephens).
Genital surgery procedure.
Colpopexy intraperitoneal.
Colpopexy extraperitoneal.
Laparoscopy surg colpopexy.
Removal of thyroid.
Repeat thyroid surgery.
Removal of thyroid.
Removal of spinal lamina.
Removal of spinal lamina.
Removal of spinal lamina.
Removal of spinal lamina.
Removal of spinal lamina.
Spinal disk surgery add-on.
Laminotomy single cervical.
Remove spine lamina 1 thrc.
Remove spinal lamina addon.
Decompress spinal cord thrc.
Decompress spine cord addon.

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
TABLE 67—PROCEDURES REQUESTED
FOR ADDITION TO THE CY 2016 LIST
OF ASC COVERED SURGICAL PROCEDURES—Continued
CY 2016
CPT/HCPCS
code
63064
63075
63076
64999
66999

...........
...........
...........
...........
...........

Short descriptor
Decompress spinal cord thrc.
Neck spine disk surgery.
Neck spine disk surgery.
Nervous system surgery.
Eye surgery procedure.

jstallworth on DSK7TPTVN1PROD with RULES

*CPT codes on the OPPS inpatient list for
CY 2015

We reviewed all of the codes that
commenters requested for addition to
the ASC list of covered surgical
procedures. Of the 75 codes requested
for addition to the ASC list, we did not
consider the three procedures that are
reported by CPT codes (22840, 22842,
and 22845) that are on the inpatientonly list (identified with one asterisk in
Table 67). The three codes that are
currently on the inpatient-only list are
not eligible for addition to the ASC list
of covered surgical procedures (72 FR
42476 through 42486; 42 CFR 416.166).
We have, however, evaluated these
three codes for removal from the
inpatient-only list, and we do not
believe that any of the codes meet the
criteria to be safely performed in the
hospital outpatient setting.
Of the remaining 72 procedures
described by codes in Table 67 that
commenters requested be added to the
list of ASC covered surgical procedures,
there are procedures described by six
codes (CPT codes 37241, 37242, 37243,
49406, 63046, and 63055) that we agree
should be added to the list for CY 2016.
These procedures are similar to other
procedures that we have previously
added to the ASC list and are described
below.
We are adding the procedures
described by: (1) CPT code 37241
(Vascular embolization or occlusion,
inclusive of all radiological supervision
and interpretation, intraprocedural
roadmapping, and imaging guidance
necessary to complete the intervention;
venous, other than hemorrhage (e.g.,
congenital or acquired venous
malformations, venous and capillary
hemangiomas, varices, varicoceles)); (2)
CPT code 37242 (Vascular embolization
or occlusion, inclusive of all
radiological supervision and
interpretation, intraprocedural
roadmapping, and imaging guidance
necessary to complete the intervention;
arterial, other than hemorrhage or tumor
(e.g., congenital or acquired arterial
malformations, arteriovenous
malformations, arteriovenous fistulas,

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aneurysms, pseudoaneurysms)); and (3)
CPT code 37243 (Vascular embolization
or occlusion, inclusive of all
radiological supervision and
interpretation, intraprocedural
roadmapping, and imaging guidance
necessary to complete the intervention;
for tumors, organ ischemia, or
infarction) to the ASC list of covered
procedures for CY 2016. The procedures
described by these codes are similar to
the stent placement procedures
described by codes in the CPT code
372XX series that are payable in the
ASC setting. We are adding the
procedure described by CPT code 49406
(Image-guided fluid collection drainage
by catheter (e.g., abscess, hematoma,
seroma, lymphocele, cyst); peritoneal or
retroperitoneal, percutaneous) because
of this procedure’s similarity to the
procedure described by CPT code 49407
(Image-guided fluid collection drainage
by catheter (e.g., abscess, hematoma,
seroma, lymphocele, cyst); peritoneal or
retroperitoneal, transvaginal or
transrectal), which is included on the
ASC list of covered surgical procedures.
We also believe that the procedure
described by CPT code 63046
(Laminectomy, facetectomy, and
foraminotomy (unilateral or bilateral
with decompression of spinal cord,
cauda equine and/or nerve root(s), eg
spinal or lateral recess stenosis, single
vertebral segment; thoracic) should be
included on the ASC list of covered
surgical procedures. This procedure
described by this code is similar to the
procedures described by CPT code
63045 (Laminectomy, facetectomy and
foraminotomy (unilateral or bilateral
with decompression of spinal cord,
cauda equina and/or nerve root[s], [e.g.,
spinal or lateral recess stenosis]), single
vertebral segment; cervical) and CPT
code 63047 (Laminectomy, facetectomy
and foraminotomy (unilateral or
bilateral with decompression of spinal
cord, cauda equina and/or nerve root[s],
[e.g., spinal or lateral recess stenosis]),
single vertebral segment; lumbar),
which are on the ASC covered
procedures list. We also believe that the
procedure described by CPT code 63055
(Transpedicular approach with
decompression of spinal cord, equine
and/or nerve root(s) (e.g., herniated
intervertebral disc), single segment;
thoracic) should be added to the ASC
list of covered surgical procedures
because this procedure is similar to the
procedure described by CPT code 63056
(Transpedicular approach with
decompression of spinal cord, equina
and/or nerve root(s) (e.g.,
herniatedintervertebral disc), single
segment; lumbar (including transfacet,

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70489

or lateral extraforaminal approach) (e.g.,
far lateral herniated intervertebral disc)),
which is on the ASC covered
procedures list.
Regarding the comment about
unlisted codes being noncovered in the
ASC, we have a longstanding ASC
policy that procedures described by all
unlisted codes are noncovered in the
ASC because we are unable to
determine (due to the nondescript
nature of unlisted procedure codes) if a
procedure that would be reported with
an unlisted code would not be expected
to pose a significant risk to beneficiary
safety when performed in an ASC, and
would not be expected to require active
medical monitoring and care of the
beneficiary at midnight following the
procedure. We continue to believe it
would not be appropriate to provide
ASC payment for procedures described
by unlisted CPT codes in the surgical
range, even if payment may be provided
under the OPPS. ASCs do not possess
the breadth and intensity of services
that hospitals must maintain to care for
patients of higher acuity, and we would
have no way of knowing what specific
procedures reported by unlisted CPT
codes were provided to patients in order
to ensure that they are safe for ASC
performance. Therefore, we are not
adding the procedures describe by the
22 unlisted CPT codes requested to the
ASC list of covered surgical procedures.
We do not agree that any of the 44
remaining procedures described by
these codes should be added to the list
of ASC covered surgical procedures
because they do not meet our criteria for
inclusion on this list. Under 42 CFR
416.2 and 416.166, 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 safety when
performed in an ASC, and would not be
expected to require active medical
monitoring and care of the beneficiary at
midnight following the procedure. 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 42 CFR 419.22(n); can only be
reported using a CPT unlisted surgical
procedure code; or are otherwise
excluded under 42 CFR 411.15 (we refer

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readers to 42 CFR 416.166). Procedures
that do not meet the criteria set forth in
§ 416.166 would not be added to the list
of ASC covered surgical procedures. We
note that we have evaluated many of
these procedures in previous years (79
FR 66918 through 66921; 78 FR 75067
through 75070) and did not add the

procedures to the ASC list due to
similar concerns regarding beneficiary
safety. The commenters provided no
specific information regarding the safety
of these procedures in the ASC setting.
After consideration of the public
comments we received, we are
finalizing our proposal to add the 11

procedures that we proposed to add to
the ASC list of covered surgical
procedures. In addition, we are adding
six procedures recommended by
commenters as discussed above. The
HCPCS code long descriptors and CY
2016 payment indicators for these codes
are displayed in Table 68.

TABLE 68—ADDITIONS TO THE LIST OF ASC COVERED SURGICAL PROCEDURES FOR CY 2016
Final CY 2016 long descriptor

0171T ...............

Insertion of posterior spinous process distraction device (including necessary removal of bone or ligament
for insertion and imaging guidance), lumbar; single level.
Insertion of posterior spinous process distraction device (including necessary removal of bone or ligament
for insertion and imaging guidance), lumbar; each additional level.
Vascular embolization or occlusion, inclusive of all radiological supervision and interpretation, intraprocedural
roadmapping, and imaging guidance necessary to complete the intervention; venous, other than hemorrhage (e.g., congenital or acquired venous malformations, venous and capillary hemangiomas, varices,
varicoceles).
Vascular embolization or occlusion, inclusive of all radiological supervision and interpretation, intraprocedural
roadmapping, and imaging guidance necessary to complete the intervention; arterial, other than hemorrhage or tumor (e.g., congenital or acquired arterial malformations, arteriovenous malformations,
arteriovenous fistulas, aneurysms, pseudoaneurysms).
Vascular embolization or occlusion, inclusive of all radiological supervision and interpretation, intraprocedural
roadmapping, and imaging guidance necessary to complete the intervention; for tumors, organ ischemia,
or infarction.
Image-guided fluid collection drainage by catheter (e.g., abscess, hematoma, seroma, lymphocele, cyst);
peritoneal or retroperitoneal, percutaneous.
Colpocleisis (Le Fort type) ....................................................................................................................................
Closure of urethrovaginal fistula ...........................................................................................................................
Vaginal hysterectomy, for uterus 250 g or less ...................................................................................................
Vaginal hysterectomy, for uterus 250 g or less; with removal of tube(s), and/or ovary(s) ..................................
Laparoscopy, surgical, supracervical hysterectomy, for uterus greater than 250 g ............................................
Laparoscopy, surgical, supracervical hysterectomy, for uterus greater than 250 g; with removal of tube(s)
and/or ovary(s).
Laparoscopy, surgical, with vaginal hysterectomy, for uterus greater than 250 g ..............................................
Laparoscopy, surgical, with vaginal hysterectomy, for uterus greater than 250 g; with removal of tube(s) and/
or ovary(s).
Laparoscopy, surgical, with total hysterectomy, for uterus greater than 250 g; with removal of tube(s) and/or
ovary(s).
Laminectomy, facetectomy, and foraminotomy (unilateral or bilateral with decompression of spinal cord,
cauda equine and/or nerve root(s), eg spinal or lateral recess stenosis, single vertebral segment; thoracic.
Transpedicular approach with decompression of spinal cord, equine and/or nerve root(s) (e.g., herniated
intervertebral disc), single segment; thoracic.

0172T ...............
37241 ................

37242 ................

37243 ................
49406 ................
57120
57310
58260
58262
58543
58544

................
................
................
................
................
................

58553 ................
58554 ................
58573 ................
63046 ................
63055 ................

f. ASC Treatment of Surgical Procedures
That Are Removed From the OPPS
Inpatient List for CY 2016

jstallworth on DSK7TPTVN1PROD with RULES

Final CY 2016
ASC payment
indicator

Final CY 2016
HCPCS code

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-only
list for possible inclusion on the ASC
list of covered surgical procedures. We
evaluated each of the seven procedures
we proposed to remove from the OPPS
inpatient-only list for CY 2016
according to the criteria for exclusion
from the list of covered ASC surgical
procedures. The CPT codes for these
seven procedures and their long
descriptors are listed in Table 64 of the

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proposed rule (80 FR 39315 through
39316). We invited public comment on
the continued exclusion of these codes
from the ASC list of covered surgical
procedures. Based on commenters’
requests, we are also removing CPT
codes 27477 and 27485 found in Table
69 below from the CY 2016 inpatientonly list. We believe that these nine
procedures should continue to be
excluded from the ASC list of covered
surgical procedures for CY 2016 because
they would be expected to pose a
significant risk to beneficiary safety or
to require an overnight stay in ASCs.
Comment: Some commenters
requested that CMS add CPT codes
0312T, 20936, 20937, 20938, 22552,
54411, and 54417 that were proposed to
be removed from the inpatient-only list
for CY 2016 to the CY 2016 list of ASC
covered surgical procedures to allow

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J8

J8

J8
G2
G2
G2
G2
G2
G2
G2
G2
G2
G2
G2
G2

these procedures to be performed in the
ASC setting as well as the hospital
outpatient setting. One commenter
stated that the procedure described by
CPT code 0312T can be compared to
other laparoscopic procedures allowed
to be performed in an ASC such as
laparoscopic cholecystectomy (CPT
47562 or 47563) or laparoscopic
adjustable gastric band placement (CPT
43770). In addition, the commenter
mentioned that the majority of patients
who participated in clinical trials of the
device used in the procedure were
discharged the same day they received
their implant.
Response: We are not adding these
CPT codes to the list of ASC covered
surgical procedures. Under 42 CFR
416.2 and 416.166, subject to certain
exclusions, covered surgical procedures
in an ASC are surgical procedures that

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
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 would
not be expected to require active
medical monitoring and care of the
beneficiary at midnight following the
procedure. Although we believe that the
procedures proposed to be removed
from the inpatient-only list for CY 2016
may be appropriately provided in the
HOPD setting based on ability of HOPDs

to provide extended monitoring and
higher acuity care for the management
of complications, based on our
evaluation of these codes, we maintain
the belief that these procedures are
unsafe for performance in ASCs. Also,
although the commenter noted that
patients who participated in clinical
trials of the device used in CPT code
0312T were discharged the same day
they received their implant, this has not
been replicated outside of the

70491

experimental setting. Further, CPT
codes 20936, 20937, 20938, and 22552
are not separately payable under the
OPPS, which also makes these
procedures ineligible for payment under
the ASC payment system.
After consideration of the public
comments we received, we are
finalizing our proposal without
modification to continue to exclude
these codes from the ASC list of covered
surgical procedures.

TABLE 69—PROCEDURES EXCLUDED FROM THE ASC LIST OF COVERED SURGICAL PROCEDURES FOR CY 2016 THAT
ARE REMOVED FROM THE CY 2016 OPPS INPATIENT LIST
CPT code

Long descriptors

0312T ...............

Vagus nerve blocking therapy (morbid obesity); laparoscopic implantation of neurostimulator electrode array, anterior and posterior vagal trunks adjacent to esophagogastric junction (EGJ), with implantation of pulse generator, includes programming.
Autograft for spine surgery only (includes harvesting the graft); local (e.g., ribs, spinous process, or laminar fragments) obtained from same incision.
Autograft for spine surgery only (includes harvesting the graft); morselized (through separate skin or fascial incision).
Autograft for spine surgery only (includes harvesting the graft); structural bicortical or tricortical (through separate skin or
fascial incision).
Arthrodesis, anterior interbody, including disc space preparation, discectomy, osteophytectomy and decompression of spinal
cord and/or nerve roots; cervical below C2, each additional interspace.
Arrest epiphyseal, any method (e.g., epiphysiodesis); tibia and fibula, proximal.
Arrest, hemiepiphyseal, distal femur or proximal tibia or fibula (e.g., genu varus or valgus.
Removal and replacement of all components of a multi-component inflatable penile prosthesis through an infected field at the
same operative session, including irrigation and debridement of infected tissue.
Removal and replacement of non-inflatable (semi-rigid) or inflatable (self-contained) penile prosthesis through an infected field
at the same operative session, including irrigation and debridement of infected tissue.

20936 ................
20937 ................
20938 ................
22552 ................
27477 ................
27485 ................
54411 ................
54417 ................

2. Covered Ancillary Services

jstallworth on DSK7TPTVN1PROD with RULES

a. List of Covered Ancillary Services
Consistent with the established ASC
payment system policy, in the CY 2016
OPPS/ASC proposed rule (80 FR 39316),
we proposed to update the ASC list of
covered ancillary services to reflect the
proposed payment status for the
services under the CY 2016 OPPS.
Maintaining consistency with the OPPS
may result in proposed changes to ASC
payment indicators for some covered
ancillary services because of changes
that are being proposed under the OPPS
for CY 2016. For example, a covered
ancillary service that was separately
paid under the revised ASC payment
system in CY 2015 may be proposed for
packaged status under the CY 2016
OPPS and, therefore, also under the
ASC payment system for CY 2016.
To maintain consistency with the
OPPS, we proposed that these services
also would be packaged under the ASC
payment system for CY 2016. We
proposed to continue this reconciliation
of packaged status for subsequent
calendar years. Comment indicator
‘‘CH,’’ discussed in section XII.F. of the
proposed rule, is used in Addendum BB
to the proposed rule (which is available
via the Internet on the CMS Web site)
to indicate covered ancillary services for
which we proposed a change in the ASC

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payment indicator to reflect a proposed
change in the OPPS treatment of the
service for CY 2016.
All ASC covered ancillary services
and their proposed payment indicators
for CY 2016 were included in
Addendum BB to the proposed rule. We
invited public comment on this
proposal.
Comment: Commenters expressed
appreciation for CMS’ adding the
service described by CPT code 91035
(Esophagus, gastroesophageal reflux
test; with mucosal attached telemetry
pH electrode placement, recording,
analysis and interpretation) to the list of
covered ancillary services. The
commenters also requested that passthrough payment status be granted to
this device.
Response: We appreciate the
commenters’ support. The code is not a
pass-through device under the OPPS
and, therefore, is not assigned ASC
payment indicator ‘‘J7’’ (OPPS passthrough device paid separately when
provided integral to a surgical
procedure on ASC list; payment
contractor-priced). The designation of a
device as having pass-through status
only applies in the OPPS. We note that
there is a process for applying for passthrough device payment under the
OPPS, which is described in detail in

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section IV.A.2. of this final rule with
comment period.
After consideration of the public
comments we received, 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 2016 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).
b. Exclusion of Corneal Tissue
Procurement from the Covered
Ancillary Services List When Used for
Nontransplant Procedures
We refer readers to section X.D. of this
final rule with comment period for a
discussion of our final policy regarding
the inclusion of corneal tissue
procurement as a covered ancillary
service only when it is provided integral
to the performance of a corneal
transplant procedure that is an ASC
covered surgical procedure.
c. Removal of Certain Services from the
Covered Ancillary Services List That
Are Not Used as Ancillary and Integral
To A Covered Surgical Procedure
As stated in 42 CFR 416.2 and
416.164(b), covered ancillary services

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are ancillary items and services that are
integral to a covered surgical procedure
performed in an ASC for which separate
payment may be made. It has come to
our attention that we include codes for
services on our covered ancillary
services list that are not provided as
ancillary and integral to an ASC covered
surgical procedure. In some cases, codes
on the ASC covered ancillary services
list are not provided in the ASC setting
due to clinical practice. In examining
the current ancillary services list and
claims data available to us for CY 2016
proposed ASC rulemaking, we noted
several services that are not and have
not been historically furnished in the
ASC setting as integral and ancillary to
an ASC covered surgical procedure.
Several radiation therapy treatment
services, including Co-60 stereotactic
radiosurgery (SRS), are most frequently
provided in the hospital outpatient
setting and paid through the OPPS and
also are furnished, but also somewhat
less frequently, in freestanding radiation
therapy centers and paid under the PFS.
Only four claims for SRS treatment
services were included in the CY 2014
ASC claims data. Two of these four
claims were denied and the other two
claims were paid in error. SRS delivery
is a stand-alone radiation treatment and
is not furnished integral and ancillary to
an ASC covered surgical procedure.
Thus, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39316), we
proposed to remove radiation treatment
codes for SRS treatment services from
the list of ASC covered ancillary
services. Specifically, we proposed to
remove CPT codes 77371 (Radiation
treatment delivery, stereotactic
radiosurgery (srs), complete course of
treatment of cranial lesion(s) consisting
of 1 session; multi-source cobalt 60
based), 77372 (Radiation treatment
delivery, stereotactic radiosurgery (srs),
complete course of treatment of cranial
lesion(s) consisting of 1 session; linear
accelerator based), and 77373
(Stereotactic body radiation therapy,
treatment delivery, per fraction to 1 or
more lesions, including image guidance,
entire course not to exceed 5 fractions)
from the list of ASC covered ancillary
services for CY 2016 and subsequent
years.
We invited public comment on this
proposal.
Comment: Commenters requested that
CMS include the stereotactic
radiosurgery codes on the covered
ancillary services list, with one
commenter specifically focusing on CPT
code 77371. One commenter noted that
several ASCs provide the service and
requested that CMS reevaluate available

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data to confirm that the service was
being provided in the ASC setting.
Response: We reviewed the available
claims data and, as stated previously,
only four claims for SRS treatment
services were included in the CY 2014
ASC claims data—two of which were
denied and two of which were paid in
error. Based on these claims data, we
continue to believe that SRS delivery is
a standalone radiation treatment and is
not furnished integral and ancillary to
an ASC covered surgical procedure.
Therefore, SRS treatment services
should not be on the list of ASC covered
ancillary services. With respect CPT
code 77371, clinically, it is not
performed integral to an ASC covered
surgical procedure. It is a stand-alone
form of radiation therapy. Therefore, it
should not be on the ASC covered
ancillary services list.
After consideration of the public
comments we received, we are
finalizing our proposed policy without
modification to remove CPT codes
77371, 77372, and 77373 from the ASC
covered ancillary services list for CY
2016 and subsequent years.
D. ASC Payment for Covered Surgical
Procedures and Covered Ancillary
Services
1. ASC Payment for Covered Surgical
Procedures
a. Background
Our ASC payment policies for
covered surgical procedures under the
revised ASC payment system are fully
described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR
66828 through 66831). Under our
established policy for the revised ASC
payment system, we use the ASC
standard ratesetting methodology of
multiplying the ASC relative payment
weight for the procedure by the ASC
conversion factor for that same year 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,
therefore, were 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 office-based designation.
The rate calculation established for
device-intensive procedures (payment
indicator ‘‘J8’’) is structured so that the

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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 2015 OPPS/
ASC final rule with comment period (79
FR 66915 through 66940), we updated
the CY 2014 ASC payment rates for ASC
covered surgical procedures with
payment indicators of ‘‘A2,’’ ‘‘G2,’’ and
‘‘J8’’ using CY 2013 data, consistent
with the CY 2015 OPPS update. We also
updated payment rates for deviceintensive procedures to incorporate the
CY 2015 OPPS device offset percentages
calculated under the standard APC
ratesetting methodology as discussed
earlier in this section.
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 2016
MPFS proposed rule) or the amount
calculated using the ASC standard
ratesetting methodology for the
procedure. In the CY 2015 OPPS/ASC
final rule with comment period, we
updated the payment amounts for
office-based procedures (payment
indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) using
the most recent available MPFS and
OPPS data. We compared the estimated
CY 2015 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 2015
payment rate for the procedure under
our final policy for the revised ASC
payment system (§ 416.171(d)).
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75081), we
finalized our proposal to calculate the
CY 2014 payment rates for ASC covered
surgical procedures according to our
established methodologies, with the
exception of device removal procedures.
For CY 2014, we finalized a policy to
conditionally package payment for
device removal codes under the OPPS.
Under the OPPS, a conditionally
packaged code (status indicators ‘‘Q1’’
and ‘‘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 covered
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, device
removal procedures are conditionally
packaged and, therefore, would be
packaged under the ASC payment

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system. There would be no Medicare
payment made when a device removal
procedure is performed in an ASC
without another surgical procedure
included on the claim; therefore, no
Medicare payment would be made if a
device was removed but not replaced.
To address this concern, for the device
removal procedures that are
conditionally packaged in the OPPS
(status indicator ‘‘Q2’’), we assigned the
current ASC payment indicators
associated with these procedures and
continued to provide separate payment
in CYs 2014 and 2015.
b. Update to ASC Covered Surgical
Procedure Payment Rates for CY 2016
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39317), we proposed to
update ASC payment rates for CY 2016
and subsequent years using the
established rate calculation
methodologies under § 416.171 and
using our established modified
definition of device-intensive
procedures, as discussed above. Because
the proposed OPPS relative payment
weights are based on geometric mean
costs for CY 2016 and subsequent years,
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 and, for
device-intensive procedures, using our
established modified definition of
device-intensive procedures, as
discussed above. Therefore, we
proposed to update the payment amount
for the service portion of the deviceintensive procedures using the ASC
standard ratesetting methodology and
the payment amount for the device
portion based on the proposed CY 2016
OPPS device offset percentages that
have been calculated using the standard
OPPS APC ratesetting methodology.
Payment for office-based procedures
would be at the lesser of the proposed
CY 2016 MPFS nonfacility PE RVUbased amount or the proposed CY 2016
ASC payment amount calculated
according to the ASC standard
ratesetting methodology.
As we did for CYs 2014 and 2015, for
CY 2016 and subsequent years, we
proposed to continue our policy for
device removal procedures such that
payment for device removal procedures

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that are conditionally packaged in the
OPPS (status indicators ‘‘Q1’’ and ‘‘Q2’’)
would be assigned the current ASC
payment indicators associated with
these procedures and would continue to
be paid separately under the ASC
payment system.
We invited public comment on these
proposals.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing our
proposed policies, without
modification, to calculate the CY 2016
payment rates for ASC covered surgical
procedures according to our established
methodologies using the modified
definition of device-intensive
procedures. For those covered surgical
procedures where the payment rate is
the lower of the final rates under the
ASC standard ratesetting methodology
and the MPFS final rates, the final
payment indicators and rates set forth in
this final rule with comment period are
based on a comparison using the MPFS
rates effective January 1, 2016. For a
discussion of the MPFS rates, we refer
readers to the CY 2016 MPFS final rule
with comment period.
c. Waiver of Coinsurance and
Deductible for Certain Preventive
Services
Section 1833(a)(1) and section
1833(b)(1) of the Act waive the
coinsurance and the Part B deductible
for those preventive services under
section 1861(ddd)(3)(A) of the Act as
described in section 1861(ww)(2) of the
Act (excluding electrocardiograms) that
are recommended by the United States
Preventive Services Task Force
(USPSTF) with a grade of A or B for any
indication or population and that are
appropriate for the individual. Section
1833(b) of the Act also waives the Part
B deductible for colorectal cancer
screening tests that become diagnostic.
In the CY 2011 OPPS/ASC final rule
with comment period, we finalized our
policies with respect to these provisions
and identified 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 2016.
We identify the specific services with a
double asterisk in Addenda AA and BB
to this final rule with comment period

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(which are available via the Internet on
the CMS Web site).
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 (e.g., 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.
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66931), we
finalized our proposals under the OPPS
that the services described by CPT code
33249, the primary code for CRT–D
services, continue to be assigned to APC
0108 (Level II ICD and Similar
Procedures), and that payment for the
services described by CPT code 33225
be packaged under the OPPS. We also
finalized our proposals under the ASC
payment system that services described
by CPT code 33249, the primary code
for CRT–D services, will continue to be
assigned to APC 0108, and payment for
services described by CPT code 33225
will be packaged into the payment for
the primary covered surgical procedure
(for example, CPT code 33249). In the
CY 2016 OPPS/ASC proposed rule (80
FR 39317 through 39318), we did not
propose any changes to our ASC
payment policies for cardiac
resynchronization therapy services for
CY 2016. However, we note that, in the
proposed rule, we proposed to
renumber APC 0108 as APC 5232 (Level
2 ICD and Similar Procedures).
We did not receive any public
comments on our proposal to renumber
APC 0108 as APC 5232, and therefore as
discussed in section II.A. of this final
rule with comment period, are finalizing

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the renumbering for the APC beginning
in CY 2016.
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 be assigned to APC 0651 (in
the proposed rule, proposed to be
renumbered APC 5641). When not
performed on the same day as the
service described by CPT code 77778,
the service described by CPT code
55875 will be assigned to APC 0162 (in
the proposed rule, proposed to be
renumbered APC 5374). 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 2016 OPPS/ASC proposed rule (80
FR 39318), we did not propose any
changes to our current policy regarding
ASC payment for LDR prostate
brachytherapy services for CY 2016. We
did not receive any public comments on

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our proposal to renumber APC 0162 as
APC 5374, and therefore as discussed in
section II.A. of this final rule with
comment period, are finalizing the
renumbering for the APC beginning in
CY 2016.
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 rulemaking (77 FR 45169; 77 FR
68457 through 68458), 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
(except for device removal codes as
discussed in section XII.D.1.a. of this
final rule with comment period). 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

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comment period (75 FR 72050),
payment indicators for all nuclear
medicine procedures (defined as CPT
codes in the range of 78000 through
78999) that are designated as radiology
services that are paid separately when
provided integral to a surgical
procedure on the ASC list are set to
‘‘Z2’’ so that payment is made based on
the ASC standard ratesetting
methodology rather than the MPFS
nonfacility PE RVU amount, regardless
of which is lower.
Similarly, we also finalized our policy
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 using the ASC
standard ratesetting methodology and,
therefore, will 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.
Our ASC policies also provide
separate payment for: (1) Certain items
and services that CMS designates as
contractor-priced, including, but not
limited to, the procurement of corneal
tissue; and (2) certain implantable items
that have pass-through payment status
under the OPPS. These categories do not
have prospectively established ASC
payment rates according to the final
policies for the revised ASC payment
system (72 FR 42502 and 42508 through
42509; 42 CFR 416.164(b)). Under the
revised ASC payment system, we have
designated corneal tissue acquisition
and hepatitis B vaccines as contractorpriced. Corneal tissue acquisition is
contractor-priced based on the invoiced
costs for acquiring the corneal tissue for
transplantation. Hepatitis B vaccines are
contractor-priced based on invoiced
costs for the vaccine.
Devices that are eligible for passthrough payment under the OPPS are
separately paid under the ASC payment
system and are contractor-priced. Under
the revised ASC payment system (72 FR
42502), payment for the surgical
procedure associated with the passthrough device is made according to our
standard methodology for the ASC
payment system, based on only the
service (nondevice) portion of the

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procedure’s OPPS relative payment
weight if the APC weight for the
procedure includes other packaged
device costs. We also refer to this
methodology as applying a ‘‘device
offset’’ to the ASC payment for the
associated surgical procedure. This
ensures that duplicate payment is not
provided for any portion of an
implanted device with OPPS passthrough payment status.
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66933
through 66934), we finalized that,
beginning in CY 2015, certain diagnostic
tests within the medicine range of CPT
codes for which separate payment is
allowed under the OPPS are covered
ancillary services when they are integral
to an ASC covered surgical procedure.
We finalized that diagnostic tests within
the medicine range of CPT codes
include all Category I CPT codes in the
medicine range established by CPT,
from 90000 to 99999, and Category III
CPT codes and Level II HCPCS codes
that describe diagnostic tests that
crosswalk or are clinically similar to
procedures in the medicine range
established by CPT. In the CY 2015
OPPS/ASC final rule with comment
period, we also finalized our policy to
pay for these tests 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 (79 FR
66933 through 66934). We finalized that
the diagnostic tests for which the
payment is based on the ASC standard
ratesetting methodology be assigned to
payment indicator ‘‘Z2’’ and revised the
definition of payment indicator ‘‘Z2’’ to
include reference to diagnostic services
and those for which the payment is
based on the MPFS nonfacility PE RVUbased amount be assigned payment
indicator ‘‘Z3,’’ and revised the
definition of payment indicator ‘‘Z3’’ to
include reference to diagnostic services.
b. Payment for Covered Ancillary
Services for CY 2016
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39319 through 39320), for
CY 2016 and subsequent years, we
proposed to update the ASC payment
rates and to 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 2016
OPPS and ASC payment rates and
subsequent year payment rates. We also
proposed to continue to set the CY 2016
ASC payment rates and subsequent year
payment rates for brachytherapy sources
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biologicals equal to the proposed OPPS
payment rates for CY 2016.
Consistent with established ASC
payment policy (72 FR 42497), we
proposed that the CY 2016 payment for
separately payable covered radiology
services be based on a comparison of the
proposed CY 2016 MPFS nonfacility PE
RVU-based amounts (we refer readers to
the CY 2016 MPFS proposed rule) and
the CY 2016 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). We
made this same proposal for subsequent
years. For CY 2016 and subsequent
years, we also proposed that payment
for a radiology service would be
packaged into the payment for the ASC
covered surgical procedure if the
radiology service is packaged or
conditionally packaged under the OPPS.
The payment indicators in Addendum
BB to the proposed rule (which is
available via the Internet on the CMS
Web site) indicate whether the proposed
payment rates for radiology services are
based on the MPFS nonfacility PE RVUbased 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 in CY
2016 and subsequent years are assigned
payment indicator ‘‘Z2’’ (Radiology or
diagnostic 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 be assigned
payment indicator ‘‘Z3’’ (Radiology or
diagnostic 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 using the ASC
standard ratesetting methodology (rather
than the MPFS nonfacility PE RVUbased amount, regardless of which is
lower) and, therefore, will include the

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cost for the diagnostic
radiopharmaceutical. We proposed to
continue this modification to the
payment methodology for CY 2016 and
subsequent years and, therefore,
proposed to assign the payment
indicator ‘‘Z2’’ to 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 using the ASC standard
ratesetting methodology and, therefore,
will include the cost for the contrast
agent. We proposed to continue this
modification to the payment
methodology for CY 2016 and
subsequent years and, therefore,
proposed to assign the payment
indicator ‘‘Z2’’ to radiology services that
use contrast agents.
We proposed to not make separate
payment as a covered ancillary service
for procurement of corneal tissue when
used in any nontransplant procedure
under the ASC payment system. For
more detail on this CY 2016 proposal,
we refer readers to section X.C. of the
proposed rule and section X.D. of this
final rule with comment period. We
proposed, for CY 2016 ASC payment
purposes, to continue to designate
hepatitis B vaccines as contractor-priced
based on the invoiced costs for the
vaccine, and corneal tissue acquisition
as contractor-priced based on the
invoiced costs for acquiring the corneal
tissue for transplant.
Consistent with our established ASC
payment policy, we proposed that the
CY 2016 payment for devices that are
eligible for pass-through payment under
the OPPS are separately paid under the
ASC payment system and would be
contractor-priced. Currently, the three
devices that are eligible for pass-through
payment in the OPPS are described by
HCPCS code C1841 (Retinal prosthesis,
includes all internal and external
components), HCPCS code C2623
(Catheter, transluminal angioplasty,
drug-coated, non-laser) and, beginning
on July 1, HCPCS code C2613 (Lung
biopsy plug with delivery system). As
finalized in the CY 2015 OPPS/ASC
final rule with comment period, HCPCS
code C1841 will no longer be eligible for
pass-through payment in the OPPS for
CY 2016 (79 FR 66870 through 66871),
and thus the costs for devices described
by HCPCS code C1841 would 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

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relative payment weights that will be
used to establish ASC payment rates for
CY 2016. Payment amounts for HCPCS
codes C2623 and C2613 under the ASC
payment system would be contractorpriced for CY 2016. Consistent with our
current policy, we proposed that
payment for the surgical procedure
associated with the pass-through device
is made according to our standard
methodology for the ASC payment
system, based on only the service
(nondevice) portion of the procedure’s
OPPS relative payment weight, if the
APC weight for the procedure includes
similar packaged device costs.
Consistent with our current policy,
we proposed that certain diagnostic
tests within the medicine range of CPT
codes (that is, all Category I CPT codes
in the medicine range established by
CPT, from 90000 to 99999, and Category
III CPT codes and Level II HCPCS codes
that describe diagnostic tests that
crosswalk or are clinically similar to
procedures in the medicine range
established by CPT) for which separate
payment is allowed under the OPPS are
covered ancillary services when they are
provided integral to an ASC covered
surgical procedure. We would pay for
these tests 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 (79 FR
66933 through 66934). As discussed in
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66934), for CY
2015, we identified one diagnostic test
that is within the medicine range of CPT
codes and for which separate payment
is allowed under the OPPS: CPT code
91035 (Esophagus, gastroesophageal
reflux test; with mucosal attached
telemetry pH electrode placement,
recording, analysis and interpretation).
We added this code to the list of ASC
covered ancillary services and finalized
separate ASC payment as a covered
ancillary service for this code beginning
in CY 2015 when the test is provided
integral to an ASC covered surgical
procedure. We stated that we would
expect the procedure described by CPT
code 91035 to be integral to the
endoscopic attachment of the electrode
to the esophageal mucosa. There are no
additional codes that meet this criterion
for CY 2016.
In summary, for CY 2016, we
proposed to continue the methodologies
for paying for covered ancillary services
established for CY 2015. Most covered
ancillary services and their proposed
payment indicators for CY 2016 are
listed in Addendum BB to the proposed
rule (which is available via the Internet
on the CMS Web site).

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We discuss our OPPS and ASC
payment policies for nontransplant
corneal tissue in section X.D. of this
final rule with comment period.
We did not receive public comments
on our policy proposals regarding
payment for covered ancillary services
(other than on the corneal tissue
procurement policy, which we discuss
and finalize in section X.D. of this final
rule with comment period), and
therefore are finalizing these policies as
proposed for CY 2016 and subsequent
years. For those covered ancillary
services where the payment rate is the
lower of the final rates under the ASC
standard ratesetting methodology and
the MPFS final rates, the final payment
indicators and rates set forth in this
final rule with comment period are
based on a comparison using the MPFS
rates effective January 1, 2016. For a
discussion of the MPFS rates, we refer
readers to the CY 2016 MPFS final rule
with comment period.

• In the final rule updating the ASC
and OPPS payment rates for the
following calendar year, we—
++ Provide a list of determinations
made as a result of our review of all new
NTIOL class requests and public
comments;
++ When a new NTIOL class is
created, 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.
++ Set the date of implementation of
a payment adjustment in the case of
approval of an IOL as a member of a
new NTIOL class prospectively as of 30
days after publication of the ASC
payment update final rule, consistent
with the statutory requirement.
++ Announce the deadline for
submitting requests for review of an
application for a new NTIOL class for
the following calendar year.

E. New Technology Intraocular Lenses
(NTIOLs)

2. Requests To Establish New NTIOL
Classes for CY 2016
We did not receive any requests for
review to establish a new NTIOL class
for CY 2016 by March 2, 2015, the due
date published in the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66935).

New Technology Intraocular Lenses
(NTIOLs) are intraocular lenses that
replace a patient’s natural lens that has
been removed in cataract surgery and
that also meet the requirements listed in
42 CFR 416.195.
1. NTIOL Application Cycle
Our process for reviewing
applications to establish new classes of
NTIOLs is as follows:
• 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
42 CFR 416.185(b), the deadline for
receipt of public comments is 30 days
following publication of the list of
requests in the proposed rule.

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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 2016.
4. Newness Criterion
Since the inception of the NTIOL
policy in 1999, there has not been any
specific criterion provided to evaluate
the newness of a candidate IOL for new
technology payment under the ASC
payment system. Absence of any
specific criterion means that, regardless
of when an IOL was originally FDA
approved and available on the U.S.
market, the IOL could be established as
a new NTIOL class if it satisfies the
requirements of 42 CFR 416.195. We
believe that because the NTIOL payment
adjustment under the statute was
specifically created for IOLs that are
‘‘new,’’ the regulations at § 416.195
should include a newness criterion.
Therefore, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39320), we
proposed that, beginning in CY 2016,

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any application for a new NTIOL class
must fulfill an additional criterion.
Specifically, we proposed that,
beginning January 1, 2016, an NTIOL
application will only be evaluated by
CMS for a new IOL class if the IOL has
received initial FDA premarket approval
within the 3 years prior to the NTIOL
application submission date. Without
this proposed requirement, there is
nothing in the existing regulations that
would preclude an applicant from
applying for and possibly being granted
NTIOL status, despite U.S. market entry
many years ago, which would be
contrary to the plain meaning of ‘‘new’’
technology IOLs. We proposed to revise
§ 416.195(a)(1) of the regulations to
reflect this proposal. We invited public
comments on this proposal.
Comment: Two commenters
supported the proposed newness
criterion for NTIOL candidate lenses.
Response: We appreciate the
commenters’ support.
Comment: One commenter believed
that the current regulations are
sufficient and that this proposal was not
necessary.
Response: We disagree with the
commenter. Without the proposed
newness criterion, old IOLs that have
been on the market for many years
could apply for NTIOL status.
Furthermore, a lack of recent NTIOL
applications does not obviate the need
for this new regulation.
After consideration of the public
comments we received, we are
finalizing our proposal to establish a
newness criterion for NTIOL
applications. Beginning January 1, 2016,
an NTIOL application will only be
evaluated by CMS for a new NTIOL
class if the IOL has received initial FDA
approval within the 3 years prior to the
NTIOL application submission date. We
are revising 42 CFR 416.195 to reflect
this change, and in this final rule with
comment period we are deleting the
unnecessary phrase ‘‘under this
provision’’ from the proposed revised
regulation text.
5. Announcement of CY 2016 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 2017, requests
for review of applications for a new
class of new technology IOLs must be
received at CMS by 5 p.m. EST, on
March 1, 2016. Send requests to ASC/
NTIOL, Division of Outpatient Care,
Mailstop C4–05–17, Centers for
Medicare and Medicaid Services, 7500

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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.
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’’
also is 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). We
indicated that in the CY 2016 OPPS/
ASC final rule with comment period, we
will respond to public comments and
finalize the ASC treatment of all codes
that are labeled with comment indicator

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‘‘NI’’ in Addenda AA and BB to the CY
2015 OPPS/ASC final rule with
comment period.
The ‘‘CH’’ comment indicator is used
in Addenda AA and BB to the proposed
rule (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 the 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 2016 OPPS/ASC proposed
rule (80 FR 39321), for CY 2016 and
subsequent years, we proposed to
continue using the current comment
indicators of ‘‘NI’’ and ‘‘CH.’’ For CY
2016, there are new and revised
Category I and III CPT codes, as well as
new and revised Level II HCPCS codes.
Therefore, we proposed that Category I
and III CPT codes that are new and
revised for CY 2016 and any new and
existing Level II HCPCS codes with
substantial revisions to the code
descriptors for CY 2016 compared to the
CY 2015 descriptors that are included in
ASC Addendum AA and BB to the CY
2016 OPPS/ASC proposed rule would
be labeled with proposed new comment
indicator ‘‘NP’’ to indicate that these
CPT and Level II HCPCS codes are open
for comment as part of the CY 2016
OPPS/ASC proposed rule. Proposed
new comment indicator ‘‘NP’’ means a
new code for the next calendar year or
an existing code with substantial
revision to its code descriptor in the
next calendar year as compared to
current calendar year; comments will be
accepted on the proposed ASC payment
indicator for the new code.
For the CY 2016 update, we also
proposed to add ASC payment indicator
‘‘B5’’ (Alternative code may be
available; no payment made) to ASC
Addendum DD1 to the proposed rule
(which is available via the Internet on
the CMS Web site). This code indicates
that an alternative code is recognized
under the ASC payment system. We
proposed to add this payment indicator
for situations where we receive new and
revised Category I and Category III CPT
codes too late for inclusion in a
proposed rule, as discussed in section
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our proposed process for accepting
comments on new and revised Category
I and III CPT codes that are effective
January 1. We stated that we would
respond to public comments and
finalize their ASC assignment in the CY
2016 OPPS/ASC final rule with
comment period. We refer readers to
Addenda DD1 and DD2 to the 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 2016
update.
We did not receive any public
comments on the ASC payment and
comment indicators and therefore are
finalizing their use as proposed without
modification.

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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 being 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

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distinction was important for the CY
2008 ASC budget neutrality model that
considered payments across the OPPS,
ASC, and MPFS payment systems.
However, because coinsurance is almost
always 20 percent for ASC services, this
interpretation of expenditures has
minimal impact for subsequent budget
neutrality adjustments calculated within
the revised ASC payment system.
In the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66857
through 66858), we set out a step-bystep illustration of the final budget
neutrality adjustment calculation based
on the methodology finalized in the
August 2, 2007 final rule (72 FR 42521
through 42531) and as applied to
updated data available for the CY 2008
OPPS/ASC final rule with comment
period. The application of that
methodology to the data available for
the CY 2008 OPPS/ASC final rule with
comment period resulted in a budget
neutrality adjustment of 0.65.
For CY 2008, we adopted the OPPS
relative payment weights as the ASC
relative payment weights for most
services and, consistent with the final
policy, we calculated the CY 2008 ASC
payment rates by multiplying the ASC
relative payment weights by the final
CY 2008 ASC conversion factor of
$41.401. For covered office-based
surgical procedures, 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. of the
proposed rule), and certain diagnostic
tests within the medicine range that are
covered ancillary services, 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, deviceintensive 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 IPPS hospital wage
indexes 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

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when calculating individual ASC
payments by applying the pre-floor and
pre-reclassified hospital wage index
values that CMS calculates for payment
under the IPPS, using updated Core
Based Statistical Areas (CBSAs) issued
by OMB in June 2003.
The reclassification provision in
section 1886(d)(10) of the Act is specific
to hospitals. We believe that using the
most recently available pre-floor and
pre-reclassified IPPS hospital wage
indexes results in the most appropriate
adjustment to the labor portion of ASC
costs. We continue to believe that the
unadjusted hospital wage indexes,
which are updated yearly and are used
by many other Medicare payment
systems, appropriately account for
geographic variation in labor costs for
ASCs. Therefore, the wage index for an
ASC is the pre-floor and pre-reclassified
hospital wage index under the IPPS of
the CBSA that maps to the CBSA where
the ASC is located.
On February 28, 2013, OMB issued
OMB Bulletin No. 13–01, which
provides the delineations of all
Metropolitan Statistical Areas,
Metropolitan Divisions, Micropolitan
Statistical Areas, Combined Statistical
Areas, and New England City and Town
Areas in the United States and Puerto
Rico based on the standards published
on June 28, 2010 in the Federal Register
(75 FR 37246 through 37252) and 2010
Census Bureau data. (A copy of this
bulletin may be obtained at: http://
www.whitehouse.gov/sites/default/files/
omb/bulletins/2013/b-13-01.pdf). In the
FY 2015 IPPS/LTCH PPS final rule (79
FR 49951 through 49963), we
implemented the use of the CBSA
delineations issued by OMB in OMB
Bulletin 13–01 for the IPPS hospital
wage index beginning in FY 2015. In the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66937), we
finalized a 1-year transition policy that
we applied in CY 2015 for all ASCs that
experienced any decrease in their actual
wage index exclusively due to the
implementation of the new OMB
delineations. This transition does not
apply in CY 2016.
For CY 2016, the proposed CY 2016
ASC wage indexes fully reflect the new
OMB labor market area delineations.
We note that, in certain instances,
there might be urban or rural areas for
which there is no IPPS hospital that has
wage index data that could be used to
set the wage index for that area. For
these areas, our policy has been to use
the average of the wage indexes 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

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border). For example, for CY 2014, we
applied a proxy wage index based on
this methodology to ASCs located in
CBSA 25980 (Hinesville-Fort Stewart,
GA) and CBSA 08 (Rural Delaware).
When all of the areas contiguous to
the urban 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 indexes 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 indexes 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), CY 2013 (77 FR 68463), and CY
2014 (78 FR 75086) 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 indexes is still a sound one. We
continue to believe that the unadjusted
hospital wage indexes, 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 XII.G.2.b.
of this final rule with comment period.
2. Calculation of the ASC Payment Rates

jstallworth on DSK7TPTVN1PROD with RULES

a. Updating the ASC Relative Payment
Weights for CY 2016 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). In the CY 2016
OPPS/ASC proposed rule (80 FR 39322
through 39323), consistent with our
established policy, we proposed to scale
the CY 2016 relative payment weights
for ASCs according to the following
method. Holding ASC utilization, the

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ASC conversion factor, and the mix of
services constant from CY 2014, we
proposed to compare the total payment
using the CY 2015 ASC relative
payment weights with the total payment
using the CY 2016 ASC relative
payment weights to take into account
the changes in the OPPS relative
payment weights between CY 2015 and
CY 2016. We proposed to use the ratio
of CY 2015 to CY 2016 total payment
(the weight scaler) to scale the ASC
relative payment weights for CY 2016.
The proposed CY 2016 ASC scaler is
0.9180 and scaling would apply to the
ASC relative payment weights of the
covered surgical procedures, covered
ancillary radiology services, and certain
diagnostic tests within the medicine
range of CPT codes which are covered
ancillary services for which the ASC
payment rates are based on OPPS
relative payment weights.
Scaling would not apply in the case
of ASC payment for separately payable
covered ancillary services that have a
predetermined national payment
amount (that is, their national ASC
payment amounts are not based on
OPPS relative payment weights), such
as drugs and biologicals that are
separately paid or services that are
contractor-priced or paid at reasonable
cost in ASCs. Any service with a
predetermined national payment
amount would be included in the ASC
budget neutrality comparison, but
scaling of the ASC relative payment
weights would not apply to those
services. The ASC payment weights for
those services without predetermined
national payment amounts (that is,
those services with national payment
amounts that would be based on OPPS
relative payment weights) would be
scaled to eliminate any difference in the
total payment between the current year
and the update year.
For any given year’s ratesetting, we
typically use the most recent full
calendar year of claims data to model
budget neutrality adjustments. At the
time of this final rule with comment
period, we have available 98 percent of
CY 2014 ASC claims data.
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 2014 ASC
claims by ASC and by HCPCS code. We
used the National Provider Identifier for
the purpose of identifying unique ASCs
within the CY 2014 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

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on the CMS Web site at: http://
www.cms.gov/Research-Statistics-Dataand-Systems/Files-for-Order/
LimitedDataSets/
ASCPaymentSystem.html.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply
a budget neutrality adjustment for
provider level changes, most notably a
change in the wage index values for the
upcoming year, to the conversion factor.
Consistent with our final ASC payment
policy, for the CY 2016 ASC payment
system and subsequent years, 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 2016, we
calculated this proposed adjustment for
the ASC payment system by using the
most recent CY 2014 claims data
available and estimating the difference
in total payment that would be created
by introducing the proposed CY 2016
ASC wage indexes. Specifically, holding
CY 2014 ASC utilization and servicemix and the proposed CY 2016 national
payment rates after application of the
weight scaler constant, we calculated
the total adjusted payment using the CY
2015 ASC wage indexes (which reflect
the new OMB delineations and include
any applicable transition period) and
the total adjusted payment using the
proposed CY 2016 ASC wage indexes
(which would fully reflect the new OMB
delineations). 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 2015 ASC wage
indexes to the total adjusted payment
calculated with the proposed CY 2016
ASC wage indexes and applied the
resulting ratio of 1.0014 (the proposed
CY 2016 ASC wage index budget
neutrality adjustment) to the CY 2015
ASC conversion factor to calculate the
proposed CY 2016 ASC conversion
factor.
Section 1833(i)(2)(C)(i) of the Act
requires that, if the Secretary has not
updated amounts established under the
revised ASC payment system in a
calendar year, the payment amounts
shall be increased by the percentage
increase in the Consumer Price Index
for all urban consumers (U.S. city
average) as estimated by the Secretary
for the 12-month period ending with the
midpoint of the year involved.
Therefore, the statute does not mandate
the adoption of any particular update
mechanism, but it requires the payment

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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 10year 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
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

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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. We refer readers to the CY
2011 OPPS/ASC final rule with
comment period (75 FR 72062 through
72064) for examples of how the MFP
adjustment is applied to the ASC
payment system.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39323 through 39324), based
on IHS Global Insight’s (IGI’s) 2015 first
quarter forecast with historical data
through 2014 fourth quarter, for the 12month period ending with the midpoint
of CY 2016, the CPI–U update was
projected to be 1.7 percent. Also, based
on IGI’s 2015 first quarter forecast, the
MFP adjustment for the period ending
with the midpoint of CY 2016 was
projected to be 0.6 percent. We finalized
the methodology for calculating the
MFP adjustment 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).
As we discussed in the CY 2011
MPFS final rule with comment period,
section 1833(i)(2)(D)(v) of the Act, as
added by section 3401(k) of the
Affordable Care Act, requires that any

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annual update to the ASC payment
system after application of the quality
adjustment 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 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). Historical published data on the
measure of MFP is available on the
Bureau of Labor Statistics’ (BLS) Web
site at http://www.bls.gov/mfp.
MFP is derived by subtracting the
contribution of labor and capital inputs
growth from output growth. The
projection of the components of MFP
are currently produced by IHS Global
Insight, Inc. (IGI), a nationally
recognized economic forecasting firm
with which CMS contracts to forecast
the components of MFP. To generate a
forecast of MFP, IGI replicates the MFP
measure calculated by the BLS using a
series of proxy variables derived from
IGI’s U.S. macroeconomic models. In
the CY 2011 and CY 2012 MPFS final
rules with comment period (75 FR
73394 through 73396, 76 FR 73300
through 73301), we set forth the current
methodology to generate a forecast of
MFP. We identified each of the major
MFP component series employed by the
BLS to measure MFP as well as
provided the corresponding concepts
determined to be the best available
proxies for the BLS series.
Beginning with the CY 2016
rulemaking cycle, the MFP adjustment
is calculated using a revised series
developed by IGI to proxy the aggregate
capital inputs. Specifically, IGI has
replaced the Real Effective Capital Stock
used for Full Employment GDP with a
forecast of BLS aggregate capital inputs
recently developed by IGI using a
regression model. This series provides a
better fit to the BLS capital inputs, as
measured by the differences between
the actual BLS capital input growth
rates and the estimated model growth
rates over the historical time period.
Therefore, we are using IGI’s most
recent forecast of the BLS capital inputs
series in the MFP calculations beginning
with the CY 2016 rulemaking cycle. A
complete description of the MFP
projection methodology is available on
CMS Web site at: http://www.cms.gov/
Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/
MedicareProgramRatesStats/
MarketBasketResearch.html. Although
we discuss the IGI changes to the MFP

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
proxy series in the CY 2016 OPPS/ASC
proposed rule and in this final rule with
comment period, in the future, when IGI
makes changes to the MFP
methodology, we will announce them
on our Web site rather than in the
annual rulemaking.
For CY 2016, we proposed to reduce
the CPI–U update of 1.7 percent by the
MFP adjustment of 0.6 percentage point,
resulting in an MFP-adjusted CPI–U
update factor of 1.1 percent for ASCs
meeting the quality reporting
requirements. Therefore, we proposed to
apply a 1.1 percent MFP-adjusted CPI–
U update factor to the CY 2015 ASC
conversion factor for ASCs meeting the
quality reporting requirements. The
ASCQR Program affected payment rates
beginning in CY 2014 and, under this
program, there is 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 1.7 percent by 2.0
percentage points for ASCs that do not
meet the quality reporting requirements
and then apply the 0.6 percentage point
MFP reduction. Therefore, we proposed
to apply a ¥0.9 percent quality
reporting/MFP-adjusted CPI–U update
factor to the CY 2015 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 2016
CPI–U update and MFP adjustment), we
would use such data, if appropriate, to
determine the CY 2016 ASC update for
the final rule with comment period.
For CY 2016, we also proposed to
adjust the CY 2015 ASC conversion
factor ($44.058) by the proposed wage
index budget neutrality factor of 1.0014
in addition to the MFP-adjusted CPI–U
update factor of 1.1 percent discussed
above, which results in a proposed CY
2016 ASC conversion factor of $44.605
for ASCs meeting the quality reporting
requirements. For ASCs not meeting the
quality reporting requirements, we
proposed to adjust the CY 2015 ASC
conversion factor ($44.058) by the
proposed wage index budget neutrality
factor of 1.0014 in addition to the
quality reporting/MFP-adjusted CPI–U
update factor of ¥0.9 percent discussed
above, which results in a proposed CY
2016 ASC conversion factor of $43.723.
We invited public comment on these
proposals.
Comment: Some commenters
suggested that CMS replace the CPI–U
as the update mechanism for ASC
payments with the hospital market
basket. The commenters stated that the
CPI–U measures inflation in a basket of
consumer goods atypical of what ASCs

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purchase. In addition, the commenters
stated that the Affordable Care Act
requires CMS to reduce the update by a
measure of productivity gains, which
inappropriately subjects ASCs to two
productivity adjustments:
Improvements reflected in the price of
consumer purchased goods; and the
additional statutorily required
reduction. While the commenters
maintained that the hospital market
basket would be the most appropriate
update for ASCs, they suggested that
there are various alternatives within the
CPI–U that CMS could explore that
more accurately reflect the economic
climate in the ASC environment.
MedPAC acknowledged that there may
be a burden associated with requiring
ASCs to submit cost reports, but
recommended that CMS collect some
sort of ASC cost data, to determine
whether an existing Medicare index is a
good proxy or if there should be an ASC
specific market basket.
Response: As we have stated in
response to similar comments in the
past (for example, 77 FR 68465; 78 FR
75088 through 75089; 79 FR 66939), we
continue to believe that, while
commenters argued that the items
included in the CPI–U index may not
adequately measure inflation for the
goods and services provided by ASCs,
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 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 will
continue to explore the feasibility of
collecting ASC cost data. However,
based on our past experience, we do not
believe that collecting such data through
surveys would be productive. We
appreciate the commenter’s suggestion
to adjust the CPI–U, for productivity
and will take this suggestion into
consideration if we propose changes to
the ASC update factor in the future.

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After consideration of the public
comments we received, we are applying
our established methodology for
determining the final CY 2016 ASC
conversion factor. Using more complete
CY 2014 data for this final rule with
comment period than were available for
the proposed rule, we calculated a wage
index budget neutrality adjustment of
0.9997. Based on IGI’s 2015 third
quarter forecast, the CPI–U for the 12month period ending with the midpoint
of CY 2016 is now projected to be 0.8
percent, while the MFP adjustment (as
finalized in the CY 2012 MPFS final
rule with comment period (76 FR 73300
through 73301) and revised as discussed
above) is 0.5 percent, resulting in an
MFP-adjusted CPI–U update factor of
0.3 percent for ASCs that meet the
quality reporting requirements. The
final ASC conversion factor of $44.177,
for ASCs that meet the quality reporting
requirements, is the product of the CY
2015 conversion factor of $44.058
multiplied by the wage index budget
neutrality adjustment of 0.9997 and the
MFP-adjusted CPI–U payment update of
0.3 percent. For ASCs that do not meet
the quality reporting requirements, we
are reducing the CPI–U update of 0.8
percent by 2.0 percentage points and
then we are applying the 0.5 percentage
point MFP reduction, resulting in a
¥1.7 percent quality reporting/MFPadjusted CPI–U update factor. The final
ASC conversion factor of $43.296 for
ASCs that do not meet the quality
reporting requirements is the product of
the CY 2015 conversion factor of
$44.058 multiplied by the wage index
budget neutrality adjustment of 0.9997
and the quality reporting/MFP-adjusted
CPI–U payment update of ¥1.7 percent.
3. Display of CY 2016 ASC Payment
Rates
Addenda AA and BB to this CY 2016
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 2016 for covered surgical procedures
and covered ancillary services,
respectively. For those covered surgical
procedures and covered ancillary
services where the payment rate is the
lower of the final rates under the ASC
standard ratesetting methodology and
the MPFS final rates, the payment
indicators and rates set forth in this rule
are based on a comparison using the
MPFS rates that effective January 1,
2016. For a discussion of the MPFS
rates, we refer readers to the CY 2016
MPFS final rule with comment period.
The payment rates included in these
addenda reflect the full ASC payment
update and not the reduced payment

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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 2016 payment rates.
Specifically, in Addendum AA, a ‘‘Y’’ in
the column titled ‘‘Subject to Multiple
Procedure Discounting’’ indicates that
the surgical procedure would 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 2016. Display
of the comment indicator ‘‘NI’’ in the
column titled ‘‘Comment Indicator’’
indicates that the code is new (or
substantially revised) and that
comments will be accepted on the
interim APC assignment for the new
code. Display of the comment indicator
‘‘NP’’ in the column titled ‘‘Comment
Indicator’’ indicates that the code is new
(or substantially revised) and that
comments will be accepted on the
proposed payment indicator
assignments for the new code.
The values displayed in the column
titled ‘‘CY 2016 Payment Weight’’ are
the relative payment weights for each of
the listed services for CY 2016. The
relative payment weights for all covered
surgical procedures and covered
ancillary services where the ASC
payment rates are based on OPPS
relative payment weights were scaled
for budget neutrality. Therefore, scaling
was not applied to the device portion of
the device-intensive procedures,
services that are paid at the MPFS
nonfacility PE RVU-based amount,
separately payable covered ancillary
services that have a predetermined
national payment amount, such as drugs
and biologicals and brachytherapy
sources that are separately paid under
the OPPS, or services that are
contractor-priced or paid at reasonable
cost in ASCs.
To derive the CY 2016 payment rate
displayed in the ‘‘CY 2016 Payment
Rate’’ column, each ASC payment
weight in the ‘‘CY 2016 Payment

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Weight’’ column was multiplied by the
CY 2016 conversion factor of $44.177.
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.G.2.b. of this final rule with
comment period).
In Addendum BB, there are no
relative payment weights displayed in
the ‘‘CY 2016 Payment Weight’’ column
for items and services with
predetermined national payment
amounts, such as separately payable
drugs and biologicals. The ‘‘CY 2016
Payment’’ column displays the CY 2016
national unadjusted ASC payment rates
for all items and services. The CY 2016
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 2015.
Addendum EE provides the HCPCS
codes and short descriptors for surgical
procedures that are excluded from
payment in ASCs for CY 2016.
XIII. Requirements for the Hospital
Outpatient Quality Reporting (OQR)
Program
A. Background
1. Overview
CMS seeks to promote higher quality
and more efficient healthcare for
Medicare beneficiaries. In pursuit of
these goals, CMS has implemented
quality reporting programs for multiple
care settings including the quality
reporting program for hospital
outpatient care, known as the Hospital
Outpatient Quality Reporting (OQR)
Program, formerly known as the
Hospital Outpatient Quality Data
Reporting Program (HOP QDRP). The
Hospital OQR Program has generally
been modeled after the quality reporting
program for hospital inpatient services
known as the Hospital Inpatient Quality
Reporting (IQR) Program (formerly
known as the Reporting Hospital
Quality Data for Annual Payment
Update (RHQDAPU) Program).
In addition to the Hospital IQR and
Hospital OQR Programs, CMS has
implemented quality reporting programs
for other care settings that provide
financial incentives for the reporting of
quality data to CMS. These additional
programs include reporting for 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));

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• 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 (LTCH QRP) 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.
In addition, CMS has implemented
several value-based purchasing
programs, including the Hospital ValueBased Purchasing (VBP) Program and
the End-Stage Renal Disease (ESRD)
Quality Incentive Program (QIP), 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 (NQS) and the CMS
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 various quality
reporting programs. As appropriate, we
will consider the adoption of measures
with electronic specifications to enable
the collection of this information as part
of care delivery.
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68467 through 68469) for
a discussion on the principles
underlying consideration for future
measures that we intend to use in
implementing this and other quality
reporting programs.
While we did not propose any
changes, we received a comment on the
general principles we outlined above.
Comment: One commenter supported
CMS’ mission to promote higher quality
and more efficient health care for
Medicare beneficiaries through the
alignment of various quality reporting
programs for multiple care settings,
including the quality reporting program
for hospital outpatient care.

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Response: We thank the commenter
for its support. We will continue to seek
opportunities, as appropriate, to align
our quality reporting programs.
2. Statutory History of the Hospital OQR
Program
We refer readers to the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72064 through 72065) for
a detailed discussion of the statutory
history of the Hospital OQR Program.
B. Hospital OQR Program Quality
Measures

jstallworth on DSK7TPTVN1PROD with RULES

1. Considerations in the Selection of
Hospital OQR Program Quality
Measures
We refer readers to the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74458 through 74460) for
a detailed discussion of the priorities we
consider for the Hospital OQR Program
quality measure selection. In the CY
2016 OPPS/ASC proposed rule (80 FR
39325), we did not propose any changes
to our measure selection policy.
However, we received several comments
on the priorities we consider for the
Hospital OQR Program quality measure
selection.
Comment: Many commenters urged
CMS to streamline and refocus the
measure set for the Hospital OQR
Program to ensure alignment with
concrete national priority areas for
improvement across the entire
healthcare system. The commenters also
expressed concern that program
measures have proliferated in the
Hospital OQR Program without a wellarticulated link to national priorities or
goals. The commenters recommended
that CMS consider adopting the
recommendations outlined in the
Institute of Medicine’s (IOM) Vital Signs
Report 1 for streamlining and focusing
national quality measurement efforts.
Response: We thank the commenters
for their suggestions and will take them
under consideration. We disagree that
Hospital OQR Program measures are not
streamlined or aligned with concrete
national priority areas for improvement
across the entire healthcare system.
Guided by NQS priorities,2 we focus on
measures appropriate to HOPDs that
reflect the level of care and the most
important areas of service and measures
for that provider category. In future
rulemaking, we may consider strategies
1 Institute of Medicine. Vital Signs: Core Metrics
for Health and Health Care Progress. April 2015.
https://iom.nationalacademies.org/∼/media/Files/
Report%20Files/2015/Vital_Signs/VitalSigns_
RB.pdf.
2 National Strategy for Quality Improvement in
Health Care. March 2011. http://www.ahrq.gov/
workingforquality/nqs/nqs2011annlrpt.pdf.

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outlined in the IOM’s Vital Signs
Report 3 for streamlining and focusing
national quality measurement efforts as
well. We continuously work with
stakeholders to improve and revise the
Hospital OQR Program measure set to
develop and implement measures that
appropriately measure quality of care
with the goal of improving health
outcomes. Furthermore, to the extent
feasible, we adopt measures that are
appropriate for multiple care settings to
promote alignment across programs.
Comment: One commenter generally
expressed concern that the proposed
rule lacked sufficient detail, analysis,
and rationale for a complete
understanding of the policies and its
impact such that hospitals would not be
ready to implement many of the
changes.
Response: We disagree with the
commenter; we believe that the
proposals were fully articulated such
that they can be implemented by
HOPDs. However, we will continue to
contact hospitals through our outreach
and education programs to ensure
hospitals are ready to comply with the
Hospital OQR Program’s requirements.
Comment: Another commenter urged
CMS to reexamine its approach in
selecting measures for adoption into the
Hospital OQR Program.
Response: We strive to select
measures that are appropriate for the
Hospital OQR Program that further our
goals under the NQS and CMS Quality
Strategy, and we welcome specific
feedback from stakeholders on ways we
can improve this process. As stated
above, we focus on measures
appropriate to HOPDs that reflect the
level of care and the most important
areas of service and measures for that
provider category. We continuously
work with stakeholders to improve and
revise the Hospital OQR Program
measure set to develop and implement
measures that appropriately measure
quality of care with the goal of
improving health outcomes.
Comment: A few commenters
recommended that additional measures
considered for adoption be endorsed by
the National Quality Forum (NQF) or
identified by national consensus
building entities to assure that CMS
achieves its goal of aligning national
quality measures across reporting
programs, improving patient safety, and
supporting the NQS goals.
Response: To the extent practical and
feasible, we propose and adopt
3 Institute of Medicine. Vital Signs: Core Metrics
for Health and Health Care Progress. April 2015.
https://iom.nationalacademies.org/∼/media/Files/
Report%20Files/2015/Vital_Signs/VitalSigns_
RB.pdf.

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70503

measures endorsed by NQF or other
consensus-based entities, but are not
required to do so under section
1833(t)(17)(C)(i) of the Act. We believe
that consensus among affected parties
can be achieved by means other than
endorsement by a national consensus
building entity, including through the
measure development process, through
stakeholder input via Technical Expert
Panel (TEP), through broad acceptance
and use of the measure(s), and through
public comment. It is our priority to
ensure that all of our measures achieve
CMS and NQS goals.
Comment: One commenter
recommended that CMS use quality
measures that can be used for both the
Hospital OQR and ASCQR Programs.
Response: We thank the commenter
for the recommendation to adopt
measures that are applicable to both the
Hospital OQR and ASCQR Programs.
Because outpatient surgical services are
provided in both settings and in order
to foster alignment among quality
reporting programs, to the extent
feasible, we aim to adopt measures that
are also appropriate for the ASC setting
and can be proposed for the ASCQR
Program. However, under section
1833(t)(17)(C)(i) of the Act, we have a
statutory obligation to develop measures
that the Secretary determines to be
appropriate for the measurement of the
quality of care (including medication
errors) furnished by hospitals in
outpatient settings and that reflect
consensus among affected parties and,
to the extent feasible and practicable,
shall include measures set forth by one
or more national consensus building
entities. We have a responsibility to
measure quality in the OPD setting
according to this standard, and
measures may not always overlap with
the ASC setting.
2. Retention of Hospital OQR Program
Measures Adopted in Previous Payment
Determinations
We previously adopted a policy to
retain measures from the previous year’s
Hospital OQR Program measure set for
subsequent years’ measure sets in the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68471). Quality
measures adopted in a previous year’s
rulemaking are retained in the Hospital
OQR Program for use in subsequent
years unless otherwise specified. We
refer readers to that rule for more
information. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39325 through
39326), we did not propose any changes
to our retention policy for previously
adopted measures.

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3. Removal of Quality Measures From
the Hospital OQR Program Measure Set
a. Considerations in Removing Quality
Measures from the Hospital OQR
Program
In the FY 2010 IPPS/LTCH PPS final
rule for the Hospital IQR Program, we
finalized a process for immediate
retirement, which we later termed
‘‘removal’’ (74 FR 43863), of Hospital
IQR Program measures based on
evidence that the continued use of the
measure as specified raised patient
safety concerns. We adopted the same
immediate measure retirement policy
for the Hospital OQR Program in the CY
2010 OPPS/ASC final rule with
comment period (74 FR 60634 through
60635). We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68472 through 68473) for
a discussion of our reasons for changing
the term ‘‘retirement’’ to ‘‘removal’’ in
the Hospital OQR Program. In the CY
2016 OPPS/ASC proposed rule (80 FR
39326), we did not propose any changes
to our policy to immediately remove
measures as a result of patient safety
concerns.
In the CY 2013 OPPS/ASC final rule
with comment period, we finalized a set
of criteria for determining whether to
remove measures from the Hospital
OQR Program. We refer readers to the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68472 through
68473) for a discussion of our policy on
removal of quality measures from the
Hospital OQR Program. The benefits of
removing a measure from the Hospital
OQR Program will be assessed on a
case-by-case basis (79 FR 66941 through
66942). We note that, under this caseby-case approach, a measure will not be
removed solely on the basis of meeting
any specific criterion.
The following criteria will be used to
determine whether to remove a measure
from the Hospital OQR Program: (i)
Measure performance among hospitals
is so high and unvarying that
meaningful distinctions and
improvements in performance can no
longer be made (‘‘topped-out’’
measures); (ii) performance or
improvement on a measure does not
result in better patient outcomes; (iii) a
measure does not align with current
clinical guidelines or practice; (iv) the
availability of a more broadly applicable
(across settings, populations, or
conditions) measure for the topic; (v)
the availability of a measure that is more
proximal in time to desired patient
outcomes for the particular topic; (vi)

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the availability of a measure that is more
strongly associated with desired patient
outcomes for the particular topic; and
(vii) collection or public reporting of a
measure leads to negative unintended
consequences such as patient harm.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39326), we did not propose
any changes to our measure removal
policy. However, we received two
general comments about removing
measures.
Comment: One commenter
recommended that CMS holistically
examine the quality measurement
portfolio and remove measures that are
overly burdensome for hospitals and
focus on measures that provide the most
value for both patients and hospitals.
Response: We focus on measures
appropriate for HOPDs that reflect the
level of care and the most important
areas of service for that provider
category. At this time, we continue to
believe there is value in collecting and
reporting on each of the measures in the
Hospital OQR Program measure set.
Moreover, as is currently done, we will
continuously evaluate the utility of the
measures as we engage in future
rulemaking. As stated above, we
evaluate measures based on many
factors. We also consider the burden on
hospitals and the value for both patients
and hospitals associated with every
measure adopted.
Comment: One commenter suggested
that when NQF removes its
endorsement of a measure, that measure
should be considered for removal from
the Hospital OQR Program, in order that
the full set of Hospital OQR Program
measures does not become unwieldy.
Response: Regarding removal of
measures to the Hospital OQR Program
based upon NQF endorsement, section
1833(t)(17)(C)(i) of the Act requires the
Secretary to develop measures that the
Secretary determines to be appropriate
for the measurement of the quality of
care (including medication errors)
furnished by hospitals in outpatient
settings and that reflect consensus
among affected parties and, to the extent
feasible and practicable, shall include
measures set forth by one or more
national consensus building entities.
Although NQF endorsement is a
significant consideration in the
selection of measures for the Hospital
OQR Program, this provision does not
require that the measures we adopt be
endorsed by any particular entity. In
some cases, we believe that consensus
among affected parties can be achieved
by other means, including through the

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measure development process, through
stakeholder input via TEPs, through
broad acceptance and use of the
measure(s), and through public
comment. Therefore, loss of NQF
endorsement would not necessitate
removal of a measure. However, we will
consider loss of NQF endorsement in
the ongoing evaluation of adopted
measures for the Hospital OQR Program.
b. Criteria for Removal of ‘‘Topped-Out’’
Measures
As provided above, quality measures
may be removed from the Hospital OQR
Program when they are ‘‘topped-out.’’
We refer readers to CY 2015 OPPS/ASC
final rule with comment period where
we finalized our proposal to refine the
criteria for determining when a measure
is ‘‘topped-out’’ (79 FR 66942). In the
CY 2016 OPPS/ASC proposed rule (80
FR 39326), we did not propose any
changes to our ‘‘topped-out’’ criteria
policy. However, we received one
comment on our current ‘‘topped-out’’
measure policy.
Comment: One commenter suggested
that hospitals should not be penalized
for not reporting ‘‘topped-out’’ measures
under the Hospital OQR Program, but
these measures should continue to be
separately reported until CMS deems it
likely that quality care is not being
sacrificed in the absence of incentive
payments.
Response: We expect hospitals to
always follow appropriate standards-of
care and clinical guidelines, regardless
of whether a quality measure exists. We
believe that HOPDs are committed to
providing quality care to patients, and
we do not have any indication that
HOPDs will stop doing so when
measures are removed. However, we
must balance the burdens and costs of
continued monitoring of a successful
measure with high levels of
performance with the adoption of other
measures where there are opportunities
for improvement in clinical quality. We
will consider the need for refinement of
the criteria for removal of ‘‘topped-out’’
measures for the Hospital OQR Program
and, if we determine changes are
necessary, we will propose such
changes in future rulemaking.
4. Hospital OQR Program Quality
Measures Adopted in Previous
Rulemaking
The previously finalized measure set
for the Hospital OQR Program CY 2017
payment determination and subsequent
years is listed below.

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70505

HOSPITAL OQR PROGRAM MEASURE SET PREVIOUSLY ADOPTED FOR THE CY 2017 PAYMENT DETERMINATION AND
SUBSEQUENT YEARS
NQF #

Measure name

N/A ..........
0288 ........
0290 ........
0286 ........
0289 ........
0514 ........
N/A ..........
N/A ..........
0513 ........
N/A ..........

OP–1: Median Time to Fibrinolysis.
OP–2: Fibrinolytic Therapy Received Within 30 Minutes of ED Arrival.
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–8: MRI Lumbar Spine for Low Back Pain.
OP–9: Mammography Follow-up Rates.
OP–10: Abdomen CT—Use of Contrast Material.
OP–11: Thorax CT—Use of Contrast Material.
OP–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–20: Door to Diagnostic Evaluation by a Qualified Medical Professional.
OP–21: Median Time to Pain Management for Long Bone Fracture.
OP–22: ED- Left Without Being Seen.
OP–23: 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 ED Arrival.
OP–25: Safe Surgery Checklist Use.
OP–26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures.*
OP–27: Influenza Vaccination Coverage among Healthcare Personnel.
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.
OP–31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.***

0669 ........
N/A ..........
N/A ..........
N/A ..........
0496 ........
N/A ..........
0662 ........
N/A ..........
0661 ........
N/A ..........
N/A ..........
0431 ........
0658 ........
0659 ........
1536 ........

* OP–26: Procedure categories and corresponding HCPCS codes are located at: https://www.qualitynet.org/dcs/ContentServer
?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244.
** Measure we proposed for removal.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).

In the CY 2015 OPPS/ASC final rule
with comment period, we finalized one
new measure beginning with the CY
2018 payment determination: OP–32:

Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient
Colonoscopy (NQF #2539) (79 FR 66948
through 66955). The previously

finalized measure set for the Hospital
OQR Program CY 2018 payment
determination and subsequent years is
listed below.

jstallworth on DSK7TPTVN1PROD with RULES

HOSPITAL OQR PROGRAM MEASURE SET PREVIOUSLY ADOPTED FOR THE CY 2018 PAYMENT DETERMINATION AND
SUBSEQUENT YEARS
NQF #

Measure name

N/A ..........
0288 ........
0290 ........
0286 ........
0289 ........
0514 ........
N/A ..........
N/A ..........
0513 ........
N/A ..........

OP–1: Median Time to Fibrinolysis.
OP–2: Fibrinolytic Therapy Received Within 30 Minutes of ED Arrival.
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–8: MRI Lumbar Spine for Low Back Pain.
OP–9: Mammography Follow-up Rates.
OP–10: Abdomen CT—Use of Contrast Material.
OP–11: Thorax CT—Use of Contrast Material.
OP–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–20: Door to Diagnostic Evaluation by a Qualified Medical Professional.
OP–21: Median Time to Pain Management for Long Bone Fracture.
OP–22: ED—Left Without Being Seen.
OP–23: 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 ED Arrival.
OP–25: Safe Surgery Checklist Use.
OP–26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures.*
OP–27: Influenza Vaccination Coverage among Healthcare Personnel.

0669 ........
N/A ..........
N/A ..........
N/A ..........
0496 ........
N/A ..........
0662 ........
N/A ..........
0661 ........
N/A ..........
N/A ..........
0431 ........

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HOSPITAL OQR PROGRAM MEASURE SET PREVIOUSLY ADOPTED FOR THE CY 2018 PAYMENT DETERMINATION AND
SUBSEQUENT YEARS—Continued
NQF #

Measure name

0658 ........
0659 ........

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.
OP–31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.***
OP–32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy

1536 ........
2539 ........

jstallworth on DSK7TPTVN1PROD with RULES

* OP–26: Procedure categories and corresponding HCPCS codes are located at: https://www.qualitynet.org/dcs/ContentServer?c=Page&
pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244
** Measure we proposed for removal.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).

We note that we proposed one new
measure for the CY 2018 payment
determination and subsequent years in
section XIII.B.6.a. of the CY 2016 OPPS/
ASC proposed rule (80 FR 39328).
A number of commenters expressed
views on previously adopted Hospital
OQR Program measures.
Comment: Some commenters
supported previously adopted measures,
and some commenters recommended
changing measure specifications for
some measures. Other commenters
requested that CMS consider removing
previously added measures from the
Hospital OQR Program, specifically,
OP–1 and OP–20, noting that these two
chart-abstracted measures look at
processes of care and not clinical
outcomes of care, which the
commenters believed should be CMS’
main focus. A few commenters urged
CMS to remove OP–4, OP–5, OP–9, OP–
10, OP–14, OP–20, OP–22, OP–25 from
the Hospital OQR Program because
these measures are no longer NQFendorsed, are not recommended by the
MAP, or are, the commenters believed,
unsuitable for public reporting. A few
commenters did not support the
continued inclusion of OP–32 in the
Hospital OQR Program, stating concerns
related to the validity, reliability, and
necessity of the measure.
Response: We thank the commenters
for their suggestions. At this time, we
are not removing or modifying any of
the measures suggested by the
commenters. There is no scientific
evidence that continued use of the
measures as specified raises patient
safety concerns that would require
immediate removal of the measures
based on our established policies. We
refer readers to the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66941 through 66942) for more
information about those policies. We
continue to believe there is value in
collecting and reporting these measures;
however, we will consider these
comments in developing policy for
future rulemaking.

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Comment: A few commenters
recommended that the Influenza
Vaccination Coverage among Healthcare
Personnel measure (NQF #0431) should
be maintained in the Hospital OQR
Program for the CY 2018 payment
determination and subsequent years.
Response: As previously discussed, in
the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68471), we
finalized a policy that, beginning CY
2013, when we adopt measures for the
Hospital OQR Program, these measures
are automatically adopted for all
subsequent years’ payment
determinations, unless we propose to
remove, suspend, or replace the
measures. The OP–27: Influenza
Vaccination Coverage among Healthcare
Personnel (HCP) measure (NQF #0431)
was finalized for the Hospital OQR
Program in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75097
through 75099). Therefore, OP–27
continues to be adopted in the Hospital
OQR Program measure set for all
subsequent years’ payment
determinations, unless we propose to
remove, suspend, or replace the
measure.
Comment: One commenter suggested
that, for OP–29 and OP–30, CMS
provide specifications in a manner and
format consistent with other chartabstracted measures including defined
initial patient population, acceptable
sampling methods, measure algorithms
complete with exclusions, and defined
alpha data dictionary with abstraction
guidelines.
Response: We thank the commenter
for the suggestion. However, we believe
our measure specifications are
sufficiently detailed to facilitate
reporting that is feasible for most HOPD
settings. While other chart-abstracted
measures (for example, OP–18: Median
Time from ED Arrival to ED Departure
for Discharged ED Patients (NQF #0496)
and OP–20: Door to Diagnostic
Evaluation by a Qualified Medical
Professional (76 FR 74481 through
74482)) utilize the CMS Abstraction and

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Reporting Tool for Outpatient
Department measures (CART–OPD) or
third-party vendors for data submission,
both OP–29 and OP–30 use a CMS Webbased Tool (QualityNet Web site). Thus,
data must be abstracted from charts,
aggregated, and submitted via the
QualityNet Web site. Because the data
for measures submitted via a Web-based
tool are reported in aggregate, measure
algorithms complete with exclusions
and defined alpha data dictionary with
abstraction guidelines are not currently
provided. However, sampling
approaches and specifications defining
initial patient populations are included.
We refer readers to our Specifications
Manual and the ‘‘Template for
Collecting OP–29 and OP–30 Endoscopy
and Polyp Surveillance Data’’ located at:
http://www.qualityreportingcenter.com/
wp-content/uploads/2015/02/OQR_
Template-for-Collecting-OP29-andOP30-Data_FINAL.pdf. Because the data
for OP–29 and OP–30 are reported in
aggregate and submitted via a Webbased tool, specifications as listed by
commenter are not provided by CMS as
is consistent with other chart-abstracted
measures submitted via a Web-based
tool, such as OP–22 ED- Patient Left
Without Being Seen (76 FR 74457
through 74458).
Comment: One commenter urged
CMS to consider developing a cloudbased registry for measures OP–29 and
OP–30 to grant providers faster access to
data.
Response: The National Institute of
Standards and Technology (NIST)
defines cloud computing as, ‘‘a model
for enabling ubiquitous, convenient, ondemand network access to a shared pool
of configurable computing resources
(e.g., networks, servers, storage,
applications, and services) that can be
rapidly provisioned and released with
minimal management effort or service
provider interaction.’’ 4 Based upon this
4 Special Publication 800–145: The NIST
Definition of Cloud Computing. Recommendations
of the National Institute of Standards and

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definition, we interpret ‘‘cloud-based
registry’’ to mean an on-demand
network providing access to a shared
pool of measure data. At this time, we
are operationally unable to develop a
cloud-based registry for measure data,
but we may consider this in the future.
5. Hospital OQR Program Quality
Measure Removed for the CY 2017
Payment Determination and Subsequent
Years
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39327 through 39328), we
proposed to remove one measure from
the Hospital OQR Program quality
measure set beginning with the CY 2017
payment determination and subsequent
years: OP–15: Use of Brain Computed
Tomography (CT) in the Emergency
Department for Atraumatic Headache.
The inclusion of OP–15 in the Hospital
OQR Program consistently has
generated concerns from stakeholders
since its adoption in the CY 2011 OPPS/
ASC final rule with comment period (75
FR 72077 through 72082). In the CY
2012 OPPS/ASC final rule with
comment period, we deferred the public
reporting of OP–15 (76 FR 74456). We
extended the postponement of public
reporting for this measure in the CY
2013 and CY 2014 OPPS/ASC final rules
with comment period (77 FR 68478 and
78 FR 75096). In addition, as we noted
in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66963), we
did not propose any changes to this
policy. Public reporting for OP–15
continues to be deferred, and this
deferral has no effect on any payment
determinations (79 FR 66963).
Since deferring the measure, we have
continued to evaluate OP–15. In CY

2011, we conducted a dry run of the
measure and received many suggestions
for refinements to the measure. Our
technical expert panel examined the
suggestions we received regarding the
measure during the dry run as well as
the comments we received during the
maintenance process for this measure.
Based on these comments, CMS refined
the measure specifications for OP–15 to
address most stakeholder concerns.
Nevertheless, as discussed below, given
the continued inconsistency of current
clinical practice guidelines on which
the measure is based, we proposed to
remove OP–15 for the CY 2017 payment
determination and subsequent years.
Based on our analysis, OP–15 meets
the following criterion (iii) for removal:
The measure does not align with current
clinical guidelines or practice. We refer
readers to the CY 2013 OPPS/ASC final
rule with comment period (77 FR
68472) and the discussion above for a
list of criteria we consider when
determining whether to remove quality
measures from the Hospital OQR
Program. In peer-reviewed literature,
headache guidelines have either
excluded older adults or recommended
a lower threshold for the use of CT
scans.5 Furthermore, stakeholders have
expressed concern that this measure is
influenced significantly by case-mix,
patient severity, and clinician behavior,
and thus, fails to represent
appropriateness or efficiency
accurately.6 Based upon guidelines for
use of CT scans published in peerreviewed literature, we believe that OP–
15,7 as currently adopted in the Hospital
OQR Program, does not align with the
most updated clinical guidelines or

70507

practice, satisfying removal criterion
(iii).
For the reason stated above, we
proposed to remove the OP–15: Use of
Brain Computed Tomography (CT) in
the Emergency Department for
Atraumatic Headache measure from the
Hospital OQR Program beginning with
the CY 2017 payment determination.
We invited public comment on this
proposal.
Comment: Commenters supported
removal of OP–15, stating that the
measure does not align with the most
updated clinical guidelines or practice
and it is not NQF-endorsed. In addition,
the commenters observed that removing
this measure would simplify and reduce
administrative burden.
Response: We thank the commenters
for their support.
Comment: One commenter noted that
there should be a focus on the
incorporation of other measures for
which the evidence regarding
appropriate use of CTs is much more
robust.
Response: We thank the commenter
for the suggestion. We will consider
incorporating other measures focused
on CTs in future rulemaking.
After consideration of the public
comments we received, we are
finalizing the removal of the OP–15: Use
of Brain Computed Tomography (CT) in
the Emergency Department for
Atraumatic Headache measure for the
CY 2017 payment determination and
subsequent years as proposed. Set out in
the table below is the measure we are
removing for the CY 2017 payment
determination and subsequent years.

HOSPITAL OQR PROGRAM MEASURE REMOVAL FOR THE CY 2017 PAYMENT DETERMINATION AND SUBSEQUENT YEARS
NQF #
N/A ..........

Measure
OP–15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache.

jstallworth on DSK7TPTVN1PROD with RULES

6. New Hospital OQR Program Quality
Measures for the CY 2018 and CY 2019
Payment Determinations and
Subsequent Years
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39328 through 39334), we
proposed to adopt a total of two new
measures for the Hospital OQR Program:
(1) A Web-based quality measure for the
CY 2018 payment determination and
Technology. September, 2011. Available at: http://
csrc.nist.gov/publications/nistpubs/800-145/SP800145.pdf.
5 Available at: http://www.acepnow.com/article/
proposed-measures-ct-scans-cause-concern/2/.
6 Ibid.

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subsequent years; and (2) a Web-based
quality measure for the CY 2019
payment determination and subsequent
years. These measures are discussed in
detail below.

a. New Quality Measure for the CY 2018
Payment Determination and Subsequent
Years: OP–33: External Beam
Radiotherapy (EBRT) for Bone
Metastases (NQF #1822)
Bone metastases are a common
manifestation of malignancy. Some
cancer types have a bone metastasis
prevalence as high as 70 to 95 percent.8
EBRT is a widely used modality 9 to

7 Hartsell W, et al. Randomized Trial of ShortVersus Long-Course Radiotherapy for Palliation of
Painful Bone Metastases. Journal of the National
Cancer Institute, 2005: 97 (11): 798–804.
8 Coleman RE. Metastatic bone disease: Clinical
features, pathophysiology and treatment strategies.
Cancer Treat Rev. 2001;27:165–176.

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9 Chow E, Zeng L, Salvo N, Dennis K, Tsao M,
Lutz S. Update on the Systematic Review of
Palliative Radiotherapy Trials for Bone Metastases.
Clin Onc. 2012;24:112–124. doi:10.1016/
j.clon.2011.11.004.

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jstallworth on DSK7TPTVN1PROD with RULES

provide pain relief in 50 to 80 percent
of patients with painful bone
metastases.10 In October 2009, the
American Society for Radiation
Oncology (ASTRO) organized a Task
Force to perform an assessment of
existing recommendations in order to
address a lack of palliative radiotherapy
guidelines. Based on a review of the
literature, the Task Force recommended
the following EBRT dosing schedules
for patients with previously
unirradiated painful bone metastases: 30
Gy over the course of 10 fractions; 24 Gy
over the course of 6 fractions; 20 Gy
over the course of 5 fractions; and a
single 8 Gy fraction.11 Despite the
recommendations, the actual doses
applied for EBRT continue to include
dosing schedules as high as 25
fractions.12 An international survey of
radiation oncologists, of which 3⁄4 of the
respondents were members of ASTRO,
found more than 100 different dose
schedules in use.13 Measure testing by
ASTRO noted nearly a 20 percent
performance gap. Many studies support
the conclusion that shorter EBRT
schedules produce similar pain relief
outcomes when compared to longer
EBRT schedules, and that patients
prefer shorter EBRT schedules because
of their convenience, increased
tolerability, and reduced side effects.14
In addition, the ASTRO Task Force
found that the frequency and severity of
side effects associated with a single
fraction were the same or less than those
associated with multiple fraction
regimens, indicating that shorter
treatment schedules may be
preferable.15
To address concerns associated with
unnecessary exposure to radiation and a
desire for shorter and less painful
treatment options, we proposed to adopt
one new Web-based quality measure for
the CY 2018 payment determination and
subsequent years: OP–33: External Beam
Radiotherapy for Bone Metastases (NQF
#1822). This measure assesses the
10 Lutz S, Berk L, Chang E, et al. Palliative
radiotherapy for bone metastases: An ASTRO
evidence-based guideline. Int J Radiat Oncol Biol
Phys. 2011;79(4):965–976.
11 Ibid.
12 Available at: http://www.qualityforum.org/
Measure_Evaluation_Form/Cancer_Project/
1822.aspx.
13 Fairchild A, Barnes E, Ghosh S, et al.
International Patterns of Practice in Palliative
Radiotherapy for Painful Bone Metastases:
Evidence-Based Practice? Int J Radiat Oncol Biol
Phys. 2009;75(5):1501–1510.
14 Available at: http://www.qualityforum.org/
Measure_Evaluation_Form/Cancer_Project/
1822.aspx.
15 Lutz S, Berk L, Chang E, et al. Palliative
radiotherapy for bone metastases: An ASTRO
evidence-based guideline. Int J Radiat Oncol Biol
Phys. 2011;79(4):965–976.

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‘‘[p]ercentage of patients (all-payer) with
painful bone metastases and no history
of previous radiation who receive EBRT
with an acceptable dosing schedule.’’ 16
The measure numerator includes all
patients with painful bone metastases
and no previous radiation to the same
site who receive EBRT with any of the
following recommended fractionation
schemes: 30Gy/10fxns; 24Gy/6fxns;
20Gy/5fxns; or 8Gy/1fxn. The measure
denominator includes all patients with
painful bone metastases and no
previous radiation to the same site who
receive EBRT. The following patients
are excluded from the denominator:
Patients who have had previous
radiation to the same site; patients with
femoral axis cortical involvement
greater than 3 cm in length; patients
who have undergone a surgical
stabilization procedure; and patients
with spinal cord compression, cauda
equina compression, or radicular pain.
Detailed specifications for this measure
may be found at: https://
www.qualityforum.org/QPS/1822. We
note that this measure is currently
undergoing an annual update. In the FY
2015 IPPS/LTCH PPS final rule (79 FR
50278 through 50279), the PCHQR
Program adopted the EBRT measure for
the FY 2017 program and subsequent
years.
We believe that this measure will
reduce the rate of EBRT services
overuse, support our commitment to
promoting patient safety, and support
the NQS priority of Making Care Safer.
Specifically, the proposed External
Beam Radiotherapy for Bone Metastases
measure seeks to address the
performance gap in treatment variation,
ensure appropriate use of EBRT, and
prevent the overuse of radiation
therapy. We believe that this measure is
necessary to support patient preferences
for shorter EBRT schedules as well as to
ensure patient safety, given that shorter
treatment courses show similar or fewer
side effects while producing similar
clinical outcomes. The measure also
takes into account the effective schedule
for relieving pain from bone metastases,
patient preferences and time and cost
effectiveness.17
In compliance with section
1890A(a)(2) of the Act, this measure was
included in the publicly available
document: ‘‘List of Measures under
16 Available at: http://www.qualityforum.org/
Measure_Evaluation_Form/Cancer_Project/
1822.aspx.
17 Measure Submission and Evaluation
Worksheet. Available at: http://
www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=70374.

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Consideration for December 1, 2014.’’ 18
The Measure Applications Partnership,
a multi-stakeholder group convened by
the NQF, reviews the measures under
consideration for the Hospital OQR
Program, among other Federal programs,
and provides input on those measures to
the Secretary. The MAP’s 2015
recommendations for quality measures
under consideration are captured in the
‘‘Spreadsheet of MAP 2015 Final
Recommendations.’’ 19
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. The MAP
supported this proposed measure,
stating that ‘‘External beam radiation
can help provide patients with pain
relief . . . this measure has a
demonstrated performance gap and
would begin to expand cancer care
measurement to settings beyond the
PPS-exempt cancer hospitals.’’ 20
Furthermore, we believe that this
measure meets the requirement under
section 1833(t)(17)(C)(i) of the Act,
which states that the Secretary shall
develop measures that reflect consensus
among affected parties and, to the extent
feasible and practicable, shall include
measures set forth by one or more
national consensus building entities. We
believe that this proposed measure
reflects consensus among the affected
parties because it is NQF-endorsed and
recommended by the MAP.
We invited public comment on the
proposal to include this measure in the
Hospital OQR Program for the CY 2018
payment determination and subsequent
years.
Comment: Most commenters
supported adoption of this measure
because doing so supports alignment
across hospital quality reporting
programs (since the measure was
previously adopted by the PCHQR
Program), and because the measure
targets the important topic of
unnecessary radiation exposure.
Response: We thank the commenters
for their support.
Comment: Several commenters
expressed concern that the measure
should be subject to additional testing
prior to nationwide implementation and
recommended that CMS delay
implementation until additional data
18 ‘‘List of Measures under Consideration for
December 1, 2014.’’ Available at: http://
www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=78318.
19 ‘‘Spreadsheet of MAP 2015 Final
Recommendations.’’ Available at: http://
www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=78711.
20 Ibid.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
becomes available from the PCHQR
Program to avoid issues through lessons
learned from that program. One
commenter urged CMS to ensure that
data collection for this measure is
feasible in the HOPD setting, stating that
CMS should further test the measure in
HOPDs to determine whether facilities
are able to capture all of the exclusions
called for in the measure.
Response: Because unnecessary
radiation exposure is such an important
topic, as outlined above, we believe that
it is of sufficiently broad scope and
priority to merit inclusion in the
Hospital OQR Program beginning with
the CY 2018 payment determination,
and we do not that believe we should
delay adopting this measure. However,
we will work with the PCHQR Program
to simultaneously identify any lessons
learned as the measure is implemented.
Furthermore, we do not believe the
measure requires further testing to
determine whether facilities are able to
capture all of the exclusions called for
in the measure; rather, we believe this
measure is specified for immediate
implementation. This measure has been
rigorously tested, is NQF-endorsed, and
is supported by the MAP for
implementation in the HOPD setting.
For more specifics on the testing of OP–
33 (for example, specifically in
reference to best practices, dosing
outliers, and validation of medical
records), we refer readers to the measure
specifications for evidence and
supporting documents for quality
improvement purposes at: http://
www.qualityforum.org/QPS/1822. This
measure was last updated on October 2,
2014, and as stated above, we note that
it is currently undergoing an annual
update. The measure steward has
maintained this specific measure to
address best clinical practices.
Comment: Some commenters urged
CMS to reassess whether this measure
addresses an issue of sufficiently broad
scope and priority to merit inclusion in
the Hospital OQR Program. One
commenter stated that this measure is
insufficient to drive meaningful quality
improvement for cancer care in the
outpatient setting.
Response: We believe that the
measure is sufficiently broad in scope,
because it was tested in outpatient
settings and not limited to only cancer
hospitals. In addition, the measure was
supported by the MAP for
implementation in the outpatient setting
and endorsed by the NQF. Furthermore,
as stated in the measure description
above, we believe that this is a priority
area as the measure would reduce the
rate of EBRT services overuse, support
our commitment to promoting patient

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safety, and support the NQS priority of
Making Care Safer. Specifically, OP–33
seeks to address the performance gap in
treatment variation, ensure appropriate
use of EBRT, and prevent the overuse of
radiation therapy. We believe that this
measure supports patient preferences
for shorter EBRT schedules, as well as
ensures patient safety, given that shorter
treatment courses show similar or fewer
side effects while producing similar
clinical outcomes. The measure also
takes into account the effective schedule
for relieving pain from bone metastases,
patient preferences and time and cost
effectiveness.21 We believe that
adoption of a national quality measure
will encourage hospitals and physicians
to be more cognizant of and to
reevaluate their current EBRT dosing
schedules. For these reasons, we believe
the measure would be sufficient to drive
meaningful quality improvement for
cancer care in the outpatient setting.
Comment: A few commenters
expressed concern that the measure
specifications are not sufficiently
detailed to assess impact on resources to
collect and report data on the measure
and recommended delaying data
collection until details of the
specifications are published to allow
hospitals adequate time to shift
resources to collect and report data on
the measure. Other commenters asserted
that measures should apply to a unique
patient population that is easily defined
and believed that this measure includes
vague terminology and exclusions.
Response: We believe that this
measure, as currently specified, is
sufficiently detailed and can assess
impact on resources to collect and
report data on the measure. We believe
that the measure is ready for immediate
implementation in the outpatient
setting. We have been collaborating
closely and frequently with the measure
steward (American Society for Radiation
Oncology) in implementing this
measure for the PCHQR Program. For
more details of the EBRT algorithm and
acceptable dosing please refer to the
measure steward’s specifications
manual as well as to the specifications
that PCHQR program has adopted:
https://www.qualitynet.org/dcs/Content
Server?c=Page&pagename=
QnetPublic%2FPage%2FQnet
Tier2&cid=1228774479863.
In addition, measure specification
2a1.34–35 22 indicates that this measure
21 Measure Submission and Evaluation
Worksheet. Available at: http://
www.qualityforum.org/WorkArea/linkit.aspx?Link
Identifier=id&ItemID=70374.
22 Measure Submission and Evaluation
Worksheet. Available at: http://www.qualityforum.

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70509

was specified and tested for the
following settings: Ambulatory Care:
Clinician Office, Hospital/Acute Care
Facility. The testing results indicated
that the facilities had sufficient
resources to collect and report the data.
The average number of patients at the
testing facilities ranged between 250
and 1,000 patients per month.
Therefore, this measure has been and
continues to be specified for and tested
in both the Hospital outpatient setting
and the cancer hospital setting.
Furthermore, the measure was
supported by the MAP for
implementation in the outpatient setting
and endorsed by the NQF. We believe
that this measure applies to a unique
patient population that is easily defined,
and we disagree that this measure
includes vague terminology and
exclusions. For detailed specifications,
we refer readers to the specifications
posted on QualityNet at: https://www.
qualitynet.org/dcs/ContentServer?c=
Page&pagename=QnetPublic%2FPage
%2FQnetTier2&cid=1228774479863.
Comment: One commenter cautioned
against utilization of uniform
fractionation schemes for all patients
with bone metastases called for by this
measure, because personalized
treatment plans allow for more
appropriate balancing of the risks and
benefits associated with EBRT.
Response: Although we agree that all
treatment plans should be decided
within the context of the providerpatient relationship and tailored to each
patient, testing of the measure and many
studies as cited in the NQF Measure
Evaluation Form,23 support the
org/WorkArea/linkit.aspx?LinkIdentifier=id&
ItemID=70374.
23 Nine randomized studies were included in the
body of evidence in the guideline. These studies
compared single fraction (8Gy/1) with multiple
fractionation schemes. References: 1. Jeremic B,
Shibamoto Y, Acimovic L, et al. A randomized trial
of three single-dose radiation therapy regimens in
the treatment of metastatic bone pain. Int J Radiat
Oncol Biol Phys 1998;42:161–167. NQF #1822
External Beam Radiotherapy for Bone Metastases
See Guidance for Definitions of Rating Scale:
H=High; M=Moderate; L=Low; I=Insufficient;
NA=Not Applicable 6 2. Bone Pain Trial Working
Party. 8 Gy single fraction radiotherapy for the
treatment of metastatic skeletal pain: Randomized
comparison with a multifraction schedule over 12
months of patient follow-up. Radiother Oncol
1999;52:111–121. 3. Roos D, Turner S, O’Brien P,
et al. Randomized trial of 8 Gy in 1 versus 20 Gy
in 5 fractions of radiotherapy for neuropathic pain
due to bone metastases (Trans-Tasman Radiation
Oncology Group, TROG 96.05). Radiother Oncol
2005;75: 54–63. 4. Hartsell W, Konski A, Scott C,
et al. Randomized trial of short versus long-course
radiotherapy for palliation of painful bone
metastases. J Natl Cancer Inst 2005;97:798–804. 5.
Kaasa S, Brenne E, Lund J–A, et al. Prospective
randomized multicentre trial on single fraction
radiotherapy (8Gy/1) versus multiple fractions
(3Gy/10) in the treatment of painful bone

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

conclusion that, in general, shorter
EBRT schedules produce similar pain
relief outcomes with fewer side effects
when compared to longer EBRT
schedules.24
After consideration of the public
comments we received, we are
finalizing the adoption of the OP–33:
NQF #
1822 ........

External Beam Radiotherapy for Bone
Metastases (NQF #1822) measure for the
CY 2018 payment determination and
subsequent years as proposed with a
modification to the manner of data
submission. We refer readers to section
XIII.D.4.b. of this final rule with

comment period for detailed data
submission requirements, including the
modification. The table below sets forth
the measure we are finalizing in this
final rule with comment period for the
CY 2018 payment determination and
subsequent years.

New measure for the CY 2018 payment determination and subsequent years
OP–33: External Beam Radiotherapy for Bone Metastases.

The complete list of finalized
measures for the CY 2018 payment

determination and subsequent years are
listed below.

HOSPITAL OQR PROGRAM MEASURE SET FOR THE CY 2018 PAYMENT DETERMINATION AND SUBSEQUENT YEARS
NQF #

Measure name

N/A ..........
0288 ........
0290 ........
0286 ........
0289 ........
0514 ........
N/A ..........
N/A ..........
0513 ........
N/A ..........

OP–1: Median Time to Fibrinolysis.
OP–2: Fibrinolytic Therapy Received Within 30 Minutes of ED Arrival.
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–8: MRI Lumbar Spine for Low Back Pain.
OP–9: Mammography Follow-up Rates.
OP–10: Abdomen CT—Use of Contrast Material.
OP–11: Thorax CT—Use of Contrast Material.
OP–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–17: Tracking Clinical Results between Visits.
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: Median Time to Pain Management for Long Bone Fracture.
OP–22: ED—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–25: Safe Surgery Checklist Use.
OP–26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures.*
OP–27: Influenza Vaccination Coverage among Healthcare Personnel.
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.
OP–31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.**
OP–32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy.
OP–33: External Beam Radiotherapy for Bone Metastases.***

0669 ........
N/A ..........
N/A ..........
0496 ........
N/A ..........
0662 ........
N/A ..........
0661 ........
N/A ..........
N/A ..........
0431 ........
0658 ........
0659 ........
1536 ........
2539 ........
1822 ........

jstallworth on DSK7TPTVN1PROD with RULES

* OP–26: Procedure categories and corresponding HCPCS codes are located at: https://www.qualitynet.org/dcs/ContentServer?c=Page&page
name=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244.
** Measure voluntarily collected as set forth in section XIII.D.3.b. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).
*** New measure for the CY 2018 payment determination and subsequent years.

metastases. Radiother Oncol 2006;79:278–284. 6.
Foro A, Fontanals A, Galceran J, et al. Randomized
clinical trial with two palliative radiotherapy
regimens in painful bone metastases: 30 Gy in 10
fractions compared with 8 Gy in single fraction.
Radiother Oncol 2008;89:150–155. 7. Sande T,
Ruenes R, Lund J, et al. Long-term follow-up of
cancer patients receiving radiotherapy for bone

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metastases: Results from a randomised multicentre
trial. Radiother Oncol 2009;91:261–266. 8. Nielsen
O, Bentzen S, Sandberg E, et al. Randomized trial
of single dose versus fractionated palliative
radiotherapy of bone metastases. Radiother Oncol
1998;47:233–240. 9. Steenland E, Leer J, van
Houwelingen, et al. The effect of a single fraction
compared to multiple fractions on painful bone

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metastases: A global analysis of the Dutch Bone
Metastasis Study. Radiother Oncol 1999;52:101–
109.
24 Available at: http://www.qualityforum.org/
Measure_Evaluation_Form/Cancer_Project/
1822.aspx.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
In the CY 2016 OPPS/ASC proposed
rule, OP–4: Aspirin at Arrival (NQF
#0286) was inadvertently omitted from
tables for the CY 2018 and CY 2019
Payment Determination and Subsequent
Years (80 FR 39329 and 80 FR 39334).
We would like to clarify that OP–4 has
not been removed from the Hospital
OQR Program measure set and data for
OP–4 should be submitted for the CY
2018 payment determination and
subsequent years as previously
finalized.
b. Proposed New Hospital OQR Program
Quality Measure for the CY 2019
Payment Determination and Subsequent
Years: OP–34: Emergency Department
Transfer Communication (EDTC) (NQF
#0291)
In the proposed rule, we proposed to
adopt OP–34: Emergency Department
Transfer Communication (EDTC) (NQF
#0291) to address concerns associated
with care transitions when patients are
transferred from Emergency
Departments to other facilities.
Communication problems
significantly contribute to adverse
events in hospitals, accounting for 65
percent of sentinel events (patient safety
events not primarily related to the
natural course of the patient’s illness or
underlying condition that result in
death, permanent harm, or severe
temporary harm where intervention is
required to sustain life) tracked by The
Joint Commission.25 In addition,
information deficits frequently result
when patients transfer between
hospitals and primary care physicians
in the community 26 and between
hospitals and long-term care facilities.27
According to patient safety studies,28
the highest percentage of preventable
and negligent adverse events within a

hospital occurs in the Emergency
Department.29 The prevention of
medical errors in the Emergency
Department setting is gaining attention
throughout the nation,30 but
performance measures for Emergency
Department care are lacking.31
Effective and timely communication
of a patient’s clinical status and other
relevant information at the time of
transfer from the hospital is essential for
supporting appropriate continuity of
care. Establishment of an effective
transition from one treatment setting to
another is enhanced by providing the
receiving providers and facilities with
sufficient information regarding
treatment during hospitalization.
Studies have shown that readmissions
can be prevented by providing detailed,
personalized information about patients
at the time they are transferred to home
or any other site.32
To address concerns associated with
care when patients are transferred from
Emergency Departments to other
facilities, we proposed to adopt one new
Web-based quality measure for the
Hospital OQR Program effective with
the CY 2019 payment determination and
subsequent years: OP–34: Emergency
Department Transfer Communication
(EDTC) (NQF #0291).
We proposed to implement this
measure beginning with the CY 2019
payment determination and subsequent
years instead of the CY 2018 payment
determination and subsequent years in
order to give hospitals adequate time to
implement the proposed measure. We
believe hospitals will require
approximately 3 to 6 months in order to
familiarize themselves with the
implementation protocol and tools
related to the EDTC measure and to
make associated improvements prior to

70511

the first reporting deadline. If we were
to propose and finalize this measure
beginning with the CY 2018 payment
determination, we believe that hospitals
may not have adequate time to put the
processes and procedures in place
necessary to collect this measure.
The EDTC measure captures the
‘‘[p]ercentage of patients transferred to
another healthcare facility whose
medical record documentation
indicated that administrative and
clinical information was communicated
to the receiving facility in an
appropriate time frame.’’ 33 This
measure is designed to prevent gaps in
care transitions caused by inadequate or
insufficient information that lead to
avoidable adverse events. Such events
cost CMS approximately $15 billion due
in part to avoidable patient
readmissions.34 The measure has been
rigorously peer reviewed and
extensively tested with field tests from
2004 to 2014 across 16 States in 249
hospitals.35
The measure consists of seven
subcomponents: (a) Administrative data;
(b) patient information; (c) vital signs;
(d) medication; (e) physician
information; (f) nursing information;
and (g) procedure and test results. The
subcomponents are further comprised of
a total of 27 elements, illustrated in the
table below. We note that the EDTC
measure does not require hospitals to
submit patient data on each of these
elements. Rather, hospitals would be
required to answer yes or no as to
whether these clinical indicators were
recorded and communicated to the
receiving facility prior to departure
(Subsection 1) or within 60 minutes of
transfer (Subsections 2 through 7).

NUMERATOR ELEMENTS FOR OP–34—EMERGENCY DEPARTMENT TRANSFER COMMUNICATION (EDTC) MEASURE (NQF
#0291)

jstallworth on DSK7TPTVN1PROD with RULES

Administrative communication (EDTC-Subsection 1):
Nurse to nurse communication
Physician to physician communication
Patient information (EDTC-Subsection 2):
Name
25 Available at: http://www.jointcommission.org/
Improving_Americas_Hospitals_The_Joint_
Commissions_Annual_Report_on_Quality_and_
Safety_-_2007/.
26 Kripalani, S., LeFevre, F., Phillips, C. et al.
Deficits in Communication and Information
Transfer between Hospital-Based and Primary Care
Physicians: Implications for Patient Safety and
Continuity of Care. JAMA 297(8):831–841, 2007.
27 Cortes T., Wexler S. and Fitzpatrick J. The
transition of elderly patients between hospitals and
nursing homes. Improving nurse-to-nurse
communication. Journal of Gerontological Nursing.
30(6):10–5, 2004.
28 Leape, L., Brennan, T., Laird, N. et al. The
Nature of Adverse Events in Hospitalized Patients.

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Results of the Harvard Medical Practice Study II.
New England Journal of Medicine 324:377–384,
1991.
29 Thomas, E., Studdert, D., Burstin, H. et al.
Incidence and Types of Adverse Events and
Negligent Care in Utah and Colorado. Medical Care
38:261–271, 2000.
30 Schenkel, S. Promoting Patient Safety and
Preventing Medical Error in Emergency
Departments. Academic Emergency Medicine
7:1204–1222, 2000.
31 Welch, S., Augustine, J., Camago, C. and Reese,
C. Emergency Department Performance Measures
and Benchmarking Summit. Academic Emergency
Medicine, 13(10):1074–1080, 2006.

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32 Jack BW, Chetty VK, Anthony D, et al. A
reengineered hospital discharge program to
decrease rehospitalization. Ann Intern Med 2009;
150:178–187.
33 Available at: http://www.qualityforum.org/
QPS/0291.
34 Medicare Payment Advisory Commission.
Promoting Greater Efficiency in Medicare. June
2007. Available at: http://www.medpac.gov/
documents/reports/Jun07_EntireReport.pdf.
35 Refining and Field Testing a Relevant Set of
Quality Measures for Rural Hospitals Final Report
June 30, 2005. Available at: http://rhrc.umn.edu/
wp-content/files_mf/rh_ruralmeasuresfinalreport_
063005.pdf.

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NUMERATOR ELEMENTS FOR OP–34—EMERGENCY DEPARTMENT TRANSFER COMMUNICATION (EDTC) MEASURE (NQF
#0291)—Continued
Address
Age
Gender
Significant others contact information
Insurance
Vital signs (EDTC—Subsection 3):
Pulse
Respiratory rate
Blood pressure
Oxygen saturation
Temperature
Glasgow score or other neuro assessment for trauma, cognitively altered or neuro patients only
Medication information (EDTC—Subsection 4):
Medications administered in ED
Allergies
Home medications
Physician or practitioner generated information (EDTC—Subsection 5):
History and physical
Reason for transfer and/or plan of care
Nurse generated information (EDTC—Subsection 6):
Assessments/interventions/response
Sensory Status (formerly Impairments)
Catheters
Immobilizations
Respiratory support
Oral limitations
Procedures and tests (EDTC—Subsection 7):
Tests and procedures done
Tests and procedure results sent

We proposed to use a scoring
methodology by which the facility score
is reported as the percentage (0–100
percent) of all cases with a perfect score
of ‘‘7.’’ To calculate this score, hospitals
assign a value of ‘‘0’’ or ‘‘1’’ to each of
the seven subcomponents for each case.
In order to achieve a value of ‘‘1’’ for
each subcomponent, the hospital must
have recorded and transferred patient

data pertaining to all of the elements
that comprise that particular
subcomponent; if data for any element
fails to be recorded or transferred, then
the value assigned to that
subcomponent would be ‘‘0.’’ Next,
subcomponent scores are added
together, for a total ranging from ‘‘0’’ to
‘‘7’’ per case. Finally, the facility score
is calculated by adding all of the cases

that achieved a perfect score of ‘‘7’’ and
dividing that number by the total
number of cases to reflect the percentage
of all cases that received a perfect score.
Example 1 below illustrates a case in
which all patient data elements were
recorded and transferred to the
receiving facility.

jstallworth on DSK7TPTVN1PROD with RULES

EXAMPLE 1 OF CALCULATION FOR OP–34—EMERGENCY DEPARTMENT TRANSFER COMMUNICATION (EDTC) MEASURE
(NQF #0291) BY CASE
Administrative communication (EDTC—Subsection 1):
Y—Nurse to nurse communication
Y—Physician to physician communication
Sub-1 Score = 1.
Patient information (EDTC—Subsection 2):
Y—Name
Y—Address
Y—Age
Y—Gender
Y—Significant others contact information
Y—Insurance
Sub-2 Score = 1.
Vital signs (EDTC—Subsection 3):
Y—Pulse
Y—Respiratory rate
Y—Blood pressure
Y—Oxygen saturation
Y—Temperature
Y—Glasgow score or other neuro assessment for trauma, cognitively altered or neuro patients only
Sub-3 Score = 1.
Medication information (EDTC—Subsection 4):
Y—Medications administered in ED
Y—Allergies
Y—Home medications
Sub-4 Score = 1.

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70513

EXAMPLE 1 OF CALCULATION FOR OP–34—EMERGENCY DEPARTMENT TRANSFER COMMUNICATION (EDTC) MEASURE
(NQF #0291) BY CASE—Continued
Physician or practitioner generated information (EDTC—Subsection 5):
Y—History and physical
Y—Reason for transfer and/or plan of care
Sub-5 Score = 1.
Nurse generated information (EDTC—Subsection 6):
Y—Assessments/interventions/response
Y—Sensory Status (formerly Impairments)
Y—Catheters
Y—Immobilizations
Y—Respiratory support
Y—Oral limitations
Sub-6 Score = 1.
Procedures and tests (EDTC—Subsection 7):
Y—Tests and procedures done
Y—Tests and procedure results sent
Sub-7 Score = 1.
(Sub-1 (1) + Sub-2 (1) + Sub-3 (1) + Sub-4 (1) + Sub-5 (1) + Sub-6 (1) + Sub-7 (1) = 7.
‘‘7’’ equals a perfect score; therefore, TOTAL SCORE FOR THIS CASE = 7.

Example 2 below illustrates a case in
which some patient data elements failed

to be recorded and/or transferred to the
receiving facility.

jstallworth on DSK7TPTVN1PROD with RULES

EXAMPLE 2 OF CALCULATION FOR OP–34—EMERGENCY DEPARTMENT TRANSFER COMMUNICATION (EDTC) MEASURE
(NQF #0291) BY CASE
Administrative communication (EDTC—Subsection 1):
Y—Nurse to nurse communication
Y—Physician to physician communication
Sub-1 Score = 1.
Patient information (EDTC—Subsection 2):
Y—Name
Y—Address
Y—Age
Y—Gender
Y—Significant others contact information
Y—Insurance
Sub-2 Score = 1.
Vital signs (EDTC—Subsection 3):
Y—Pulse
Y—Respiratory rate
Y—Blood pressure
Y—Oxygen saturation
Y—Temperature
N—Glasgow score or other neuro assessment for trauma, cognitively altered or neuro patients only
Sub-3 Score = 0.
Medication information (EDTC—Subsection 4):
Y—Medications administered in ED
Y—Allergies
N—Home medications
Sub-4 Score = 0.
Physician or practitioner generated information (EDTC—Subsection 5):
Y—History and physical
Y—Reason for transfer and/or plan of care
Sub-5 Score = 1.
Nurse generated information (EDTC—Subsection 6):
Y—Assessments/interventions/response
Y—Sensory Status (formerly Impairments)
Y—Catheters
Y—Immobilizations
Y—Respiratory support
Y—Oral limitations
Sub-6 Score = 1.
Procedures and tests (EDTC—Subsection 7):
Y—Tests and procedures done
Y—Tests and procedure results sent
Sub-7 Score = 1.
(Sub-1 (1) + Sub-2 (1) + Sub-3 (0) + Sub-4 (0) + Sub-5 (1) + Sub-6 (1) + Sub-7 (1) = 5.
‘‘5’’ does not equal a perfect score of ‘‘7’’; therefore, TOTAL SCORE FOR THIS CASE = 0.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

For more information on this
measure, including its specifications,
we refer readers to the Current
Emergency Department Transfer
Communication Measurement
Specifications, Data Definitions, and
Data Collection Tool at: http://
rhrc.umn.edu/2012/02/ed-transfersubmission-manual.
Additional information on this
measure is also available at: http://
www.qualityforum.org/QPS/0291.
As discussed above, the proposed
EDTC measure seeks to address gaps in
care coordination, by ensuring that vital
patient information is both recorded and
shared with the subsequent provider.
We believe that the EDTC measure
would increase the quality of care
provided to patients, reduce avoidable
readmissions, and increase patient
safety. More timely communication of
vital information results in better care,
reduction of systemic medical errors,
and improved patient outcomes. In
addition, we believe that this measure
will promote the NQS priority of
Effective Communication and
Coordination of Care. As articulated by
HHS, ‘‘Care coordination is a conscious
effort to ensure that all key information
needed to make clinical decisions is
available to patients and providers. It is
NQF #

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0291 ........

defined as the deliberate organization of
patient care activities between two or
more participants involved in a patient’s
care to facilitate appropriate delivery of
health care services.’’ 36 Critically, the
availability of the transfer record to the
next level provider within 60 minutes
after departure supports more effective
care coordination and patient safety,
since a delay in communication can
result in medication or treatment errors.
In compliance with section
1890A(a)(2) of the Act, this measure was
included in the publicly available
document: ‘‘List of Measures under
Consideration for December 1, 2014.’’ 37
As stated above, the MAP reviews the
measures under consideration for the
Hospital OQR Program, among other
federal programs, and provides input on
those measures to the Secretary. The
MAP’s 2015 recommendations for
quality measures under consideration
are captured in the ‘‘Spreadsheet of
MAP 2015 Final Recommendations.’’ 38
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. The MAP
supported this measure, stating that
‘‘This measure would help to address a
previously identified gap around

Proposed measure for the CY 2019 payment determination and subsequent years
OP–34: Emergency Department Transfer Communication Measure.

The public comments we received on
the EDTC measure and our responses
are set forth below.
Comment: Commenters supported the
concept of improving care transitions,
but the majority of commenters did not
support the adoption of this measure for
three primary reasons. First,
commenters asserted that this measure
overlaps significantly with the EHR
Incentive Program Meaningful Use Stage
2 Core Objective—Transition of Care
Requirements since 20 of the 27
elements in OP–34 are also collected as
part of the Stage 2 Eligible Hospital and
Critical Access Hospital (CAH)
Meaningful Use Core Objectives.
Second, many commenters expressed
concern that chart-abstraction for this
measure would be overly burdensome
on hospitals, and particularly
burdensome on hospitals that do not
have fully operational Electronic Health

Records (EHRs). Lastly, other
commenters also had concerns that the
scoring methodology relied upon overly
complex calculations and set an
unrealistically stringent standard. As a
result, a few commenters expressed
concern that implementation of this
measure should be delayed beyond the
CY 2019 payment determination
because additional time and training
would be necessary to develop new
systems and processes to ensure the
measure was correctly documented.
Response: The EHR Incentive Program
Health Information Exchange Objective
for 2015 through 2017 (80 FR 62806)
requires that the Eligible Professional
(EP), eligible hospital, or Critical Access
Hospital (CAH) who transitions their
patient to another setting of care or
provider of care or refers their patient to
another provider of care provides a
summary care record for each transition

36 U.S. DHHS. ‘‘National Healthcare Disparities
Report 2013.’’ Available at: http://www.ahrq.gov/
research/findings/nhqrdr/nhdr13/chap7.html.
37 ‘‘List of Measures under Consideration for
December 1, 2014.’’ Available at:

www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=78318.
38 MAP. February 2015. ‘‘Spreadsheet of MAP
2015 Final Recommendations’’. Available at:
http://www.qualityforum.org/WorkArea/
linkit.aspx?LinkIdentifier=id&ItemID=78711.

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improving care coordination and would
help ensure vital information is
transferred between sites of care. The
EDTC measure set consists of seven
components that focus on
communication between facilities
around the transfer of patients. The
measure set assists in filling the
workgroup identified priority gap of
enhancing care coordination efforts.’’ 39
In addition, as stated above, the
proposed measure addresses the NQS
priority of Communication and Care
Coordination.
We believe this measure meets the
requirement under section
1833(t)(17)(C)(i) of the Act, which states
that the Secretary shall develop
measures that reflect consensus among
affected parties and, to the extent
feasible and practicable, shall include
measures set forth by one or more
national consensus building entities. We
believe this proposed measure reflects
consensus among the affected parties,
because it is NQF-endorsed and
supported by the MAP.
We invited public comment on the
proposal to include the following
measure in the Hospital OQR Program
for the CY 2019 payment determination
and subsequent years.

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of care or referral in order to
successfully demonstrate meaningful
use. For this objective, CMS is also
maintaining the requirements for the
data elements included in the summary
of care documents at 80 FR 62805. We
recognize the proposed OP–34 would
require hospitals to evaluate elements
that would indeed overlap with
information already collected as part of
the EHR Incentive Program 40 The
overlapping elements, as defined by the
measure steward, during measure
development can be found in the OP–
34 measure specifications at Appendix
C: Emergency Department Transfer
Communication Measures: Crosswalk
with Meaningful Use Stage Two
Requirements (http://
www.stratishealth.org/documents/ED_
Transfer_Data_Collection_Guide_
Specifications.pdf).
39 Ibid.
40 Stage 2 Eligible Hospital and Critical Access
Hospital (CAH) Meaningful Use Core and Menu
Objectives Table of Contents. October 2015. http://
www.gpo.gov/fdsys/pkg/FR-2015-10-16/pdf/201525595.pdf.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
We note that this document,
Appendix C: Emergency Department
Transfer Communication Measures:
Crosswalk with Meaningful Use Stage
Two Requirements, was developed prior
to publication of The EHR Incentive
Program Health Information Exchange
Objective for 2015 through 2017
summary of care documents (80 FR
62805). The overlapping data elements
found in the OP–34 measure
specifications were based upon
standards set forth in The EHR Incentive
Program Meaningful Use Stage 2 Core
Objective—Transition of Care (77 FR
53970). However, the data elements
submitted under the transition of care
standards as part of the Meaningful Use
Stage Two Requirements remain
unchanged in The EHR Incentive
Program Health Information Exchange
Objective for 2015 through 2017
summary of care documents (80 FR
62805). Therefore, the overlapping data
elements found in the OP–34 measure
specifications remain the same.
Currently, 95 percent of hospitals
attest to successful electronic clinical
quality measure reporting under the
EHR Incentive Program (80 FR 49694).
As a result, we agree that adopting OP–
34 would significantly overlap with the
Meaningful Use Stage 2 requirements
diverting attention and resources away
from another CMS priority and
potentially adding additional costs to
hospitals in order to re-specify EHR
systems to comply with both programs’
requirements.
Also, we recognize that the burden
associated with chart-abstracting for 27
elements associated with this measure
presents a significant burden for
hospitals and that the scoring
methodology is complex and sets a very
high standard. Initially, we intended
that delaying implementation of this
measure until the CY 2019 payment
determination would allow facilities
additional time to implement the
proposed measure (that is, to put the
necessary processes and procedures in
place), to familiarize themselves with
the implementation protocol, tools, and
scoring methodology related to the
EDTC measure, and to make associated
improvements prior to the first reporting
deadline. However, in light of these
comments, delayed implementation
may not sufficiently address these
concerns. In general though, we do not
agree that hospitals without fully
operational EHRs would be
disadvantaged in chart-abstracting data
for measures compared to hospitals with
operational EHRs. Other measures in the
Hospital OQR Program also require
chart abstraction and do not distinguish

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between hospitals with fully operational
EHRs versus those without.
Therefore, after considering the
comments and for the reasons discussed
above, we are not finalizing our
proposal to adopt OP–34 for the CY
2019 payment determination and
subsequent years as proposed.
Comment: Some commenters
questioned whether the measure is
necessary and asked if there is evidence
that hospitals are failing to sufficiently
report and transfer patient data. One
commenter stated that the references
cited in the proposed rule that indicate
that the highest percentage of
preventable and negligent adverse
events occurring within hospital
emergency departments are inaccurate
and based on limited and outdated data.
Response: As stated in the measure
background above, the proposed EDTC
measure seeks to address gaps in care
coordination, by ensuring that vital
patient information is both recorded and
shared with the subsequent provider.
More timely communication of vital
information results in better care,
reduction of systemic medical errors,
and improved patient outcomes. We
believe that an EDTC measure would
increase the quality of care provided to
patients, reduce avoidable readmissions,
and increase patient safety. In addition,
we believe that a transfer
communication measure would promote
the NQS priority of Effective
Communication and Coordination of
Care. As articulated by HHS, ‘‘Care
coordination is a conscious effort to
ensure that all key information needed
to make clinical decisions is available to
patients and providers. It is defined as
the deliberate organization of patient
care activities between two or more
participants involved in a patient’s care
to facilitate appropriate delivery of
health care services.’’ Critically, the
availability of the transfer record to the
next level provider supports more
effective care coordination and patient
safety, since a delay in communication
can result in medication or treatment
errors. Furthermore, the MAP supported
this measure, stating that, ‘‘[t]his
measure would help to address a
previously identified gap around
improving care coordination and would
help ensure vital information is
transferred between sites of care.’’ In
addition, we believe that references
cited are accurate as of the time of
measure development and the proposed
rule. However, as discussed above, we
are not finalizing this measure, but will
take these comments into consideration
in developing future policy.

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70515

Comment: Several commenters
suggested that CMS consider adopting
this measure as an eCQM.
Response: We did not propose this
measure as an eCQM because it is not
currently electronically specified.
However, because we believe care
coordination in the emergency
department setting is an important
aspect for quality measurement, if the
measure is electronically specified in
the future, we may consider proposing
it or a similar electronic measure
addressing this topic in future
rulemaking.
Comment: A few commenters
supported adopting the measure as
proposed. One commenter suggested
that CMS include at least one
companion, NQF-endorsed measure that
captures communication of medication
information. This commenter also
recommended that CMS include OP–17:
Tracking Clinical Results between Visits
(former NQF measure #0491; NQF
endorsement removed April 8, 2014) in
patient care plans, noting that this
measure is significant and very
important to patient safety and clinical
outcomes.
Response: We thank the commenters
for their support. However, for the
reasons stated above, we have decided
not to finalize this measure. We will
consider these suggestions if we decide
to propose a similar measure in future
rulemaking.
Comment: Many commenters
requested clarification on various
technical aspects of the measure, such
as the definition of ‘‘communication’’
and how to report data for John/Jane
Doe patients, patients that are
unresponsive, or information that is
otherwise unknown.
Response: In the CY 2016 OPPS/ASC
proposed rule (80 FR 39334), we
directed readers to the following Web
site for a complete listing of the measure
specifications: http://
www.qualityforum.org/QPS/0291.
Documents available on this Web site
provide detailed definition of
‘‘communication’’ and answers to the
commenter’s concerns regarding how to
report data for John/Jane Doe patients,
patients that are unresponsive, or
information that is otherwise unknown.
According to the measure specifications,
a hospital would not be penalized for
missing information as long as
information, even if the information for
a particular element is documented as
‘‘unknown,’’ is transferred to the
receiving facility. However, as discussed
above, we are not finalizing this
measure but will take these comments
into consideration in developing future
policy.

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After considering the public
comments we received, we are not
finalizing the OP–34: Emergency
Department Transfer Communication

(EDTC) measure (NQF #0291) for the CY
2019 payment determination and
subsequent years as proposed.

The finalized measures for the CY
2019 payment determination and
subsequent years are listed below.

HOSPITAL OQR PROGRAM MEASURE SET FOR THE CY 2019 PAYMENT DETERMINATION AND SUBSEQUENT YEARS
NQF #

Measure name

N/A ..........
0288 ........
0290 ........
0286 ........
0289 ........
0514 ........
N/A ..........
N/A ..........
0513 ........
N/A ..........

OP–1: Median Time to Fibrinolysis.
OP–2: Fibrinolytic Therapy Received Within 30 Minutes of ED Arrival.
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–8: MRI Lumbar Spine for Low Back Pain.
OP–9: Mammography Follow-up Rates.
OP–10: Abdomen CT—Use of Contrast Material.
OP–11: Thorax CT—Use of Contrast Material.
OP–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–17: Tracking Clinical Results between Visits.
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: Median Time to Pain Management for Long Bone Fracture.
OP–22: ED-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–25: Safe Surgery Checklist Use.
OP–26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures.*
OP–27: Influenza Vaccination Coverage among Healthcare Personnel.
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.
OP–31: Cataracts—Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery.**
OP–32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy.
OP–33: External Beam Radiotherapy for Bone Metastases.***

0669 ........
N/A ..........
N/A ..........
0496 ........
N/A ..........
0662 ........
N/A ..........
0661 ........
N/A ..........
N/A ..........
0431 ........
0658 ........
0659 ........
1536 ........
2539 ........
1822 ........

* OP–26: Procedure categories and corresponding HCPCS codes are located at: https://www.qualitynet.org/dcs/ContentServer?c=Page&page
name=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244.
** Measure voluntarily collected as set forth in section XIII.D.3.b. of the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
through 66947).
*** New measure for the CY 2018 payment determination and subsequent years.

As stated above, we reiterate that in
the CY 2016 OPPS/ASC proposed rule,
OP–4: Aspirin at Arrival (NQF #0286)
was inadvertently omitted from tables
for the CY 2018 and CY 2019 Payment
Determination and Subsequent Years
(80 FR 39329 and 80 FR 39334). We
would like to clarify that OP–4 has not
been removed from the Hospital OQR
Program measure set and data for OP–
4 should be submitted for the CY 2018
payment determination and subsequent
years as previously finalized.

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7. Hospital OQR Program Measures and
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
(health IT), care coordination, patient
safety, and volume. In the CY 2016
OPPS/ASC proposed rule (80 FR 39335),
we stated that for future payment
determinations, we are considering

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expanding these measure areas and
creating measures in new areas.
Specifically, we are exploring electronic
clinical quality measures (eCQMs) and
whether, in future rulemaking, we
would propose that hospitals have the
option to voluntarily submit data for
OP–18: Median Time from ED Arrival to
ED Departure for Discharged ED Patients
(NQF #0496) electronically beginning
with the CY 2019 payment
determination. Hospitals would
otherwise still be required to submit
data for this measure through chart
abstraction.
We believe all patients, their families,
and their healthcare providers should
have consistent and timely access to
their health information in a
standardized format that can be securely
exchanged between the patient,
providers, and others involved in the
patient’s care.41 To that end, we are
41 HHS August 2013 Statement, ‘‘Principles and
Strategies for Accelerating Health Information
Exchange.’’ Available at: http://www.healthit.gov/

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committed to accelerating health
information exchange (HIE) through the
use of electronic health records (EHRs)
and other types of health IT across the
broader care continuum through a
number of initiatives including: (1)
Alignment of incentives and payment
adjustments to encourage provider
adoption and optimization of health IT
and HIE services through Medicare and
Medicaid payment policies; (2) adoption
of common standards and certification
requirements for interoperable health
IT; (3) support for privacy and security
of patient information across all HIEfocused initiatives; and (4) governance
of health information networks. More
information on the governance of health
information networks and its role in
facilitating interoperability of health
information systems can be found at:
http://www.healthit.gov/sites/default/
files/ONC10yearInteroperabilityConcept
Paper.pdf.
sites/default/files/acceleratinghieprinciples_
strategy.pdf.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
We believe that HIE and the use of
certified EHR technology can effectively
and efficiently help providers improve
internal care delivery practices, support
management of patient care across the
continuum, and support the reporting of
electronically specified clinical quality
measures. On March 30, 2015, ONC
published in the Federal Register a
proposed rule (80 FR 16804) that
proposes a new 2015 Edition Base EHR
definition, as well as modifications to
the ONC Health IT Certification Program
to make it open and accessible to more
types of health IT and health IT that
supports various care and practice
settings. It also proposes to establish the
capabilities and specifications that
certified EHR technology (CEHRT)
would need to include, at a minimum,
to support the achievement of
meaningful use by eligible professionals
and hospitals under the Medicare and
Medicaid EHR Incentive Programs (EHR
Incentive Programs) when such edition
is required for use under these
programs. More information on the 2015
Edition EHR Certification Criteria
proposed rule can be found at: http://
healthit.gov/policy-researchersimplementers/standards-andcertification-regulations.
In the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50807 through 50810), the
Hospital IQR Program finalized a policy
to allow hospitals to voluntarily
electronically report at least one quarter
of CY 2014 quality measure data for
each measure in one or more of four
measure sets (STK, VTE, ED, and PC). In
the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50241 through 50246 and 50249
through 50253), the Hospital IQR
Program finalized a policy that hospitals
may voluntarily report any 16 of 28
Hospital IQR Program electronic clinical
quality measures that align with the
Medicare EHR Incentive Program as
long as those measures span three
different NQS priority areas. Most
recently in the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49698), the Hospital
IQR Program finalized a policy to make
reporting of electronic clinical quality
measures required rather than
voluntary. Under that finalized policy,
hospitals will be required to submit
only one quarter of data for either Q3
(July 1–September 30) or Q4 (October 1–
December 31) of 2016 for at least 4
electronic clinical quality measures.
We anticipate that as EHR technology
evolves and more health IT
infrastructure is operational, we will
begin to accept electronic reporting of
many measures from EHR technology
certified under the ONC Health IT
Certification Program. We are working
diligently toward this goal. We believe

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that this progress would significantly
reduce the administrative burden on
hospitals under the Hospital OQR
Program to report chart-abstracted
measures.
In the CY 2011 OPPS/ASC final rule
with comment period (75 FR 72074), we
finalized OP–18: Median Time from ED
Arrival to ED Departure for Discharged
ED Patients (NQF #0496), the only
measure in our current measure set
which is specified as an eCQM, or especified. The e-specification for this
measure is available at: http://
www.cms.gov/Regulations-andGuidance/Legislation/
EHRIncentivePrograms/Downloads/
2014_eCQM_Specs_for_EH.zip in the
folder entitled: EH_CMS32v2_
NQF0496_ED3_MedianTime.
The same measure, Median Time from
ED Arrival to ED Departure for
Discharged ED Patients (NQF #0496),
was adopted by the Medicare and
Medicaid EHR Incentive Program for
Eligible Hospitals and Critical Access
Hospitals (CAHs) as one of 29 clinical
quality measures available for reporting
under the program beginning with
Federal fiscal year 2014 (77 FR 54086
through 54087).
For the reasons stated above, we
believe it is important to encourage
providers to submit this measure
electronically. In addition, allowing
submission of OP–18 as an eCQM will
begin to align the Hospital OQR
Program with the Medicare EHR
Incentive Program for Eligible Hospitals
and CAHs in a manner similar to our
policies for the Hospital IQR Program
(80 FR 50319 through 50321). Therefore,
we stated in the CY 2016 OPPS/ASC
proposed rule (80 FR 39335) that we are
considering proposing a policy in future
rulemaking that would give hospitals an
option to voluntarily submit data for
this measure electronically for the
Hospital OQR Program beginning with
the CY 2019 payment determination.
Hospitals that chose not to submit
electronically would still be required to
submit data though chart abstraction.
We invited public comment on our
intention to make this proposal in the
future.
Comment: Most commenters
supported voluntary electronic
submission of data for OP–18: Median
Time from ED Arrival to ED Departure
for Discharged ED Patients beginning
with the CY 2019 payment
determination. In addition to voluntary
electronic submission of OP–18, one
commenter suggested that CMS
transition OP–20 to electronic reporting
in order to align ED through-put
measures. A few commenters urged that
proposed reporting requirements for

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70517

eCQMs be aligned with the
requirements and timelines as much as
possible with other eCQM initiatives
across care settings, specifically, the
Medicare EHR Incentive Program
clinical quality data reporting criteria
for demonstrating Meaningful Use of
EHRs. With respect to voluntary
submission of data for OP–18 as an
eCQM, one commenter requested
clarification on three points: (1)
Whether the latest version of the
measure specification would be
required as is the case for other
electronically reported measures; (2)
whether measure reporting would count
toward the hospital’s reporting
requirements for the EHR Incentive
Program; and (3) whether CMS could
provide a more detailed description of
the timeframe for voluntary reporting
(for example, calendar year, quarters,
etc.). This commenter also suggested
that submission timeframes be
consistent between EHR Incentive
Program Meaningful Use requirements
and the Hospital IQR Program.
Response: We thank the commenters
for their support and will take these
comments into consideration for future
rulemaking. Ideally, we would aim to
align the Hospital OQR Program
timeframes with those for the EHR
Incentive Program and the Hospital IQR
Program in order to reduce burden for
hospitals. We are evaluating eCQM
implementation in the Hospital IQR
Program and will take any lessons
learned, including those related to
aligned requirements across CMS
programs, submission timeframes, and
general overlap with the EHR Incentive
Program, into consideration in crafting
policy for the Hospital OQR Program.
We aim to ease the transition to
reporting of electronic clinical quality
measures, but any policies regarding the
specific timelines and requirements
related to the voluntary submission of
data for OP–18: Median Time from ED
Arrival to ED Departure for Discharged
ED Patients as an eCQM would be
proposed in future rulemaking.
Comment: Some commenters did not
support the option to report eCQMs in
quality reporting programs, because
they believed that such requirement
might create a duplicative penalty for
hospitals unable to meet Meaningful
Use Requirements. Several commenters
urged CMS to not require eCQM
reporting for OP–18, noting that
hospitals should have the option to
continue to submit data via chart
abstraction if they determine this
method to be more feasible.
Response: As we stated in the CY
2016 OPPS/ASC proposed rule (80 FR
39335), we are considering proposing a

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policy in future rulemaking that would
give hospitals an option to voluntarily
submit data for OP–18 electronically
beginning with the CY 2019 payment
determination. Hospitals that chose not
to submit electronically would still have
the option of submitting data though
chart abstraction. As a voluntary option,
no penalty would be incurred by
hospitals choosing not to submit data
for OP–18 electronically. However, we
have observed the successes of hospitals
meeting the Meaningful Use
requirements and our data show that 95
percent of hospitals already attest to
successful eCQM reporting under the
EHR Incentive Program.
We anticipate that, as EHR technology
evolves and more health IT
infrastructure is operational, we will
begin to accept electronic reporting of
many measures from EHR technology
certified under the ONC Health IT
Certification Program. We believe it is
important to encourage providers to
submit measures electronically, and we
expect that, if proposed and finalized,
the option to voluntarily submit data for
OP–18 electronically beginning with the
CY 2019 payment determination will
begin the gradual transition toward
electronic reporting on measures. As
noted above, if we choose to allow
voluntary electronic submission of OP–
18, we will propose this policy in future
rulemaking.
Comment: One commenter supported
CMS’ commitment to eCQMs, but
cautioned that disparate information
systems and conflicting data elements
may result in potentially inconsistent
data that fail to accurately reflect care.
Another commenter suggested that no
electronically reported measures be
used for public reporting of data or for
determinations in financial incentive/
disincentive programs until the issues of
comparability, completeness, and
accuracy are fully addressed. A few
commenters stated that there is
currently no validation process in place
to confirm the accuracy of eCQM data
and urged CMS to develop a validation
process for eCQMs that will allow for
future public reporting of these
measures. One commenter
recommended continued reporting of
manually abstracted measures in
parallel with eCQMs and simultaneous
expansion of the eCQM pilot process,
using manually abstracted measures as
a control, to allow for evidence-based
comparison data, in order to address
concerns that removal of manual
measures in favor of immature eCQM
technology might yield poor quality
performance.
Response: We thank the commenters
for their suggestions. Similar concerns

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about disparate information systems and
conflicting data elements resulting in
issues of comparability, completeness,
and accuracy of eCQM data were also
expressed by commenters in the FY
2016 IPPS/LTCH PPS final rule under
the Hospital IQR Program (80 FR 49695
through 49698). We anticipate that as
EHR technology evolves and more
health IT infrastructure is operational,
in cooperation with the efforts of the
ONC Health IT Certification Program,
data elements and information systems
requirements will become more
standardized. Reliable, accurate data
and electronic reporting are all
important priorities to us. We believe
that, with the advancement of
technology and the use of electronic
measures, even more precise, accurate,
and reliable data will be captured for
analysis. We are working diligently
toward this goal.
The development of a validation
process for eCQMs is also a suggestion
we will consider if we decide to move
forward with the proposal to allow OP–
18 to be electronically reported in future
rulemaking. We note that a validation
pilot is currently under way in the
Hospital IQR Program and the results of
that pilot are pending, as described in
the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50269 through 50273). We will
take into consideration lessons learned
in the Hospital IQR Program before
developing Hospital OQR Program
policies. In regard to the suggestion of
a simultaneous expansion of the eCQM
pilot process, using manually abstracted
measures as a control, to allow for
evidence-based comparison data, we
will consider these recommendations if
we decide to move forward with the
proposal in future rulemaking.
Comment: While supporting the
concept of using data collected from
electronic health records, one
commenter expressed concern that CMS
might have direct access to a facility’s
EHR for data abstraction, adding that
requirements for electronic submission
of data may be premature and there is
little confidence that health care
providers are prepared to do so with
great accuracy.
Response: We thank the commenter
for its support. Matters of patient
privacy and medical record integrity are
of utmost importance, and we will give
those issues serious consideration prior
to proposing any electronic reporting in
future rulemaking. However, we note
that it is extremely unlikely that we
would propose to access a facility’s EHR
system directly for data abstraction
purposes.

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We also received several general
comments regarding future measures for
the Hospital OQR Program.
Comment: Several commenters
suggested the inclusion of more
outcome-based measures into the
Hospital OQR Program measure set.
Another commenter expressed concern
that outcome-based measures unfairly
penalize HOPDs because most follow-up
care is not provided by HOPDs.
Response: We will consider adopting
more outcome-based measures in the
future, and in doing so, we will be
mindful of the concerns the commenters
have about these measures.
Comment: A few commenters
suggested that CMS include additional
immunization performance measures in
the Hospital OQR Program to help
ensure vaccines are routinely offered
and administered to patients in the
outpatient setting.
Response: We thank the commenters
for their suggestion. We will take this
suggestion into consideration for future
rulemaking.
8. Maintenance of Technical
Specifications for Quality Measures
CMS maintains technical
specifications for previously adopted
Hospital OQR Program measures. These
specifications are updated as we
continue to develop the Hospital OQR
Program. The manuals that contain
specifications for the previously
adopted measures can be found on the
QualityNet Web site at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&pagename
=QnetPublic%2FPage%
2FQnetTier2&cid=1196289981244.
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68469 through 68470), for
a discussion of our policy for updating
Hospital OQR Program measures, the
same policy we adopted for updating
Hospital IQR Program measures, which
includes the subregulatory process for
making updates to the adopted
measures (77 FR 53504 through 53505).
This policy expanded upon the
subregulatory process for updating
measures that we finalized in the CY
2009 OPPS/ASC final rule with
comment period (73 FR 68766 through
68767). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39335 through
39336), we did not propose any changes
to these policies.
9. Public Display of Quality Measures
We refer readers to the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75092) for our finalized
public display policy. A more robust
discussion of our policy for the

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
publication of Hospital OQR Program
data on the Hospital Compare Web site
and noninteractive CMS Web sites can
be found in the CY 2014 OPPS/ASC
proposed rule (78 FR 43645). In the CY
2016 OPPS/ASC proposed rule (80 FR
39336), we did not propose any changes
to our public display policy. However,
we received one comment on these
policies.
Comment: While stating support for
the public display of outpatient quality
data on Hospital Compare, one
commenter expressed concerns about
the outpatient categories on the Web
site, noting that while these particular
categories may be meaningful to health
care providers and others with a
professional interest in health care
services, health care policy, or health
care economics, the categories are less
meaningful to the average consumer/
patient.
Response: We thank the commenter
for its observation. To the extent feasible
and practical, we work with as many
stakeholders as possible to ensure data
are accurately reported and displayed
on Hospital Compare and other CMS
Web sites. In the future, we will
continue working with stakeholders to
improve the display of data in such a
way that is more accessible and
meaningful to the public.
C. Administrative Requirements
1. QualityNet Account and Security
Administrator
The QualityNet security administrator
requirements, including setting up a
QualityNet account and the associated
timelines, are unchanged from those
adopted in the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75108
through 75109). In that final rule with
comment period, we codified these
procedural requirements at 42 CFR
419.46(a). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39336), we did not
propose any changes to these
requirements.

jstallworth on DSK7TPTVN1PROD with RULES

2. Requirements Regarding Participation
Status
We refer readers to the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75108 through 75109) for
requirements for participation and
withdrawal from the Hospital OQR
Program. In that final rule with
comment period, we codified
procedural requirements at 42 CFR
419.46(b).
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39336), we proposed to
make one change to the requirements
regarding participation in the Hospital
OQR Program beginning with the CY

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2017 payment determination. Currently,
a participating hospital may withdraw
from the Hospital OQR Program any
time from January 1 to November 1 (42
CFR 419.46(b)) of the year prior to the
affected annual payment update by
submitting a withdrawal form to CMS
via the secure portion of the QualityNet
Web site at: https://www.qualitynet.org/
dcs/ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetBasic&
cid=1192804525137.
We proposed that beginning with the
CY 2017 payment determination,
hospitals must submit a withdrawal
form to CMS via the QualityNet Web
site up to and including August 31 of
the year prior to the affected annual
payment update. For example, for the
CY 2017 payment determination, the
withdrawal deadline would change
from November 1, 2016 to any time up
to and including August 31, 2016 under
this proposal.
The change to the withdrawal
deadline is consistent with the ASCQR
Program withdrawal deadline described
in section XIV.C.2. of this final rule with
comment period and in 42 CFR
416.305(b). We believe aligning
deadlines across programs will reduce
provider burden by streamlining
processes and procedures.
In addition, as we discussed in
section XIII.D.1. of the CY 2016 OPPS/
ASC proposed rule (80 FR 39336
through 39337) and finalized in section
XIII.D.1. of this final rule with comment
period, we proposed to move the
timeline for when we make annual
percentage update (APU)
determinations to allow both CMS and
stakeholders more time to review the
APU determinations before the
beginning of the calendar year. To
ensure the correct hospitals are
included in the APU determinations, we
also need to know at an earlier date
which hospitals have withdrawn from
the Hospital OQR Program.
We also proposed to make a
conforming revision to 42 CFR 419.46(b)
which currently states that the hospital
may withdraw any time from January 1
to November 1 of the year prior to the
affected annual payment updates to
state that the hospital may withdraw
any time up to and including August 31
of the year prior to the affected annual
payment updates.
We invited public comment on our
proposals to change the withdrawal
deadline and to revise 42 CFR 419.46(b)
to reflect this change.
Comment: One commenter supported
the proposed change of the withdrawal
deadline from the Hospital OQR
Program from November 1 to August 31,
noting that this change fosters alignment

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70519

and consistency with the ASCQR
Program.
Response: We thank the commenter
for its support.
After consideration of the public
comment we received, we are finalizing
our proposals to change the withdrawal
deadline for the Hospital OQR Program
from November 1 to August 31 and to
revise 42 CFR 419.46(b) to reflect this
change as proposed.
D. Form, Manner, and Timing of Data
Submitted for the Hospital OQR
Program
1. Change Regarding Hospital OQR
Program Annual Percentage Update
(APU) Determinations
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75110
through 75111), we specify that our data
submission deadlines will be posted on
QualityNet at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&
pagename=QnetPublic%
2FPage%2FQnetBasic&
cid=1205442058760.
The data submission requirements
document, Hospital OQR Quality
Measures and Timelines for CY 2016
and Subsequent Payment
Determinations,42 explains that the
chart-abstracted data on which we base
APU determinations is quarter 3 of the
2 years prior to the payment
determination through quarter 2 of the
year prior to the payment
determination. For example, we base
our APU determinations for the CY 2016
Hospital OQR Program on chartabstracted data from quarter 3, 2014,
through quarter 2, 2015. Chartabstracted data from quarter 2, 2015
must be submitted by November 1,
2015. APU determinations are applied
to payments beginning in January of the
following year, providing less than 2
months between the time the data on
which we base APU determinations is
submitted for validation and the
beginning of the payments that are
affected by this data. This timeline
creates compressed processing issues for
CMS, and compressed timelines for
hospitals to review their APU
determination decisions.
To ease this burden for both CMS and
hospitals, in the CY 2016 OPPS/ASC
42 The Hospital OQR Quality Measures and
Timelines for CY 2016 and Subsequent Payment
Determinations. Available at: https://
www.qualitynet.org/dcs/BlobServer?blobkey=id&
blobnocache=true&blobwhere=1228890446207&
blobheader=multipart%2Foctet-stream&blobheader
name1=Content-Disposition&blobheadervalue1=
attachment%3Bfilename%3DHOQR_CY2016_
MsrTmlns_0315.pdf&blobcol=urldata&
blobtable=MungoBlobs.

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jstallworth on DSK7TPTVN1PROD with RULES

proposed rule (80 FR 39336 through
39337), we proposed to change the
timeframe on which we base APU
determinations for the Hospital OQR
Program. As stated above, we currently
base APU determinations on chartabstracted data from patient encounter
quarter 3 of 2 years prior to the payment
determination through patient
encounter quarter 2 of the year prior to
the payment determination. We
proposed to change that timeframe to
patient encounter quarter 2 of the 2
years prior to the payment
determination through patient
encounter quarter 1 of the year prior to
the payment determination beginning
with the CY 2018 payment
determination and for subsequent years.
Because the deadline for hospitals to
submit chart-abstracted data for quarter
1 is August 1, this will afford both CMS
and hospitals additional time to review
the APU determinations before they are
implemented in January. Current and
detailed information about data
validation requirements and deadlines
is posted on QualityNet at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&
cid=1228758729356.
To facilitate this process, we proposed
to transition to the newly proposed
timeframe for the CY 2018 payment
determination and subsequent years and
use only three quarters of data for
determining the CY 2017 payment
determination as illustrated in the tables
below. However, we noted that data
submission deadlines will not be
changing.

PROPOSED CY 2018 PAYMENT DETER- has to be applied to the following year.
Furthermore, testing and preview time
MINATION AND SUBSEQUENT YEARS

for public reporting require additional
time. Therefore, because of the time
required for: (1) Claims data to be
Clinical data
finalized; (2) data analysis; and (3) the
Patient encounter quarter
submission
deadline
preview period prior to public
reporting, operationally, we are not able
Q2 2016 (April 1–June 30) ...
11/1/2016 to close the gap between reporting and
Q3 2016 (July 1–Sept. 30) ...
2/1/2017
payment adjustment. However, we will
Q4 2016 (Oct. 1–Dec. 31) ....
5/1/2017
Q1 2017 (Jan. 1–March 31)
8/1/2017 take these comments into consideration
in developing future policy. We may
We refer readers to section XIII.D.6. of also consider incorporating more
measures based on clinical and registry
the CY 2016 OPPS/ASC proposed rule
(80 FR 39339) (inadvertently referenced data in future rulemaking.
After consideration of the public
in the proposed rule as section
XIII.D.8.), where we proposed to update comments we received, we are
finalizing our proposal to shift the
our validation processes to also reflect
quarters upon which the Hospital OQR
these changes. In addition, we refer
Program APU determinations are based
readers to section XIII.D.6. of this final
as proposed.
rule with comment period where those
proposals are finalized.
2. Requirements for Chart-Abstracted
We invited public comment on our
Measures Where Patient-Level Data Are
proposals.
Submitted Directly to CMS
Comment: Most commenters
supported the proposed change to the
The following previously finalized
timeframe for APU determinations for
Hospital OQR Program chart-abstracted
the Hospital OQR Program, noting that
measures require patient-level data to be
the change will ease the burden on
submitted for the CY 2018 payment
hospitals and allow them additional
determination and subsequent years:
time to review APU determinations
• OP–1: Median Time to Fibrinolysis;
prior to their impact on payments.
• OP–2: Fibrinolytic Therapy
Response: We thank the commenters
Received Within 30 Minutes of ED
for their support.
Arrival (NQF #0288);
Comment: One commenter expressed
• OP–3: Median Time to Transfer to
concern about the inherent 2-year gap
Another
Facility for Acute Coronary
between the reporting and payment
Intervention (NQF #0290);
adjustment periods for claims-based
• OP–4: Aspirin at Arrival (NQF
measures because the delay limits the
#0286);
effectiveness of measures as a tool for
• OP–5: Median Time to ECG (NQF
quality improvement. Alternatively, the
#0289);
commenter encouraged CMS to
incorporate more measures based on
• OP–18: Median Time from ED
APU Determination Transition
clinical and registry data.
Arrival to ED Departure for Discharged
Response: We thank the commenter
ED Patients (NQF #0496);
CY 2016 PAYMENT DETERMINATION
for its suggestion. We refer readers to
• OP–20: Door to Diagnostic
the CY 2014 OPPS/ASC final rule with
[Current State]
Evaluation by a Qualified Medical
comment period (78 FR 75111 through
Professional;
Clinical data
75112) for a discussion of the general
• OP–21: ED—Median Time to Pain
Patient encounter quarter
submission
claims-based measure data submission
Management for Long Bone Fracture
deadline
requirements for the CY 2015 payment
(NQF #0662); and
Q3 2014 (July 1–Sept. 30) ...
2/1/2015 determination and subsequent years.
• OP–23: ED—Head CT Scan Results
Q4 2014 (Oct. 1–Dec. 31) ....
5/1/2015 The timeframe required to finalize
for Acute Ischemic Stroke or
claims
is
about
4
months.
Processing
Q1 2015 (Jan. 1–March 31)
8/1/2015
Hemorrhagic Stroke who Received Head
Q2 2015 (April 1–June 30) ...
11/1/2015 and matching of claims takes several
months as well. A majority of claims are CT Scan Interpretation Within 45
Minutes of Arrival (NQF #0661).
processed within the full year allowed
PROPOSED CY 2017 PAYMENT
We refer readers to the CY 2013
for timely filing under the OPPS (78 FR
OPPS/ASC final rule with comment
DETERMINATION
75111). For the current claims-based
period (77 FR 68481 through 68484) for
measures for example, the reporting
[Future state—transition period]
a discussion of the form, manner, and
period is July 1, 2013 through June 30,
timing for data submission requirements
2014. Using this timeframe, these data
Clinical data
of these measures for the CY 2014
Patient encounter quarter
submission
affect the CY 2016 payment
deadline
determination and are publicly reported payment determination and subsequent
years.
in July 2015. Payment adjustments for
Q3 2015 (July 1–Sept. 30) ...
2/1/2016
the
Hospital
OQR
Program
are
based
on
In the CY 2016 OPPS/ASC proposed
Q4 2015 (Oct. 1–Dec. 31) ....
5/1/2016
the
calendar
year.
Thus,
if
there
is
any
rule
(80 FR 39337), we did not propose
Q1 2016 (Jan. 1–March 31)
8/1/2016
overlap into another year, the payment
any changes to these policies.

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3. Claims-Based Measure Data
Requirements
We refer readers to the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75111 through 75112) for
a discussion of the general claims-based
measure data submission requirements
for the CY 2015 payment determination
and subsequent years. We note that, in
section XIII.B.5. of this final rule with
comment period, we are removing OP–
15: Use of Brain Computed Tomography
(CT) in the Emergency Department for
Atraumatic Headache, beginning with
the CY 2017 payment determination and
subsequent years. Therefore, for the CY
2017 payment determination and
subsequent years, there will be a total of
seven claims-based measures:
• OP–8: MRI Lumbar Spine for Low
Back Pain (NQF #0514);
• OP–9: Mammography Follow-Up
Rates;
• OP–10: Abdomen CT—Use of
Contrast Material;
• OP–11: Thorax CT—Use of Contrast
Material (NQF #0513);
• OP–13: Cardiac Imaging for
Preoperative Risk Assessment for NonCardiac Low Risk Surgery (NQF #0669);
• OP–14: Simultaneous Use of Brain
Computed Tomography (CT) and Sinus
Computed Tomography (CT); and
• OP–32: Facility 7-Day RiskStandardized Hospital Visit Rate after
Outpatient Colonoscopy (NQF #2539).
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39337), we did not propose
any changes to our claims-based
measure data submission requirements.
4. Data Submission Requirements for
Measure Data Submitted via a WebBased Tool

jstallworth on DSK7TPTVN1PROD with RULES

a. Previously Finalized Measures
The following Web-based quality
measures previously finalized and
retained in the Hospital OQR Program
require data to be submitted via a Webbased tool (CMS’ QualityNet Web site or
CDC’s NHSN Web site) for the CY 2018
payment determination and subsequent
years:
• OP–12: The Ability for Providers
with HIT to Receive Laboratory Data
Electronically Directly into their ONCCertified EHR System as Discrete
Searchable Data (via CMS’ QualityNet
Web site);
• OP–17: Tracking Clinical Results
between Visits (via CMS’ QualityNet
Web site);
• OP–22: ED—Left Without Being
Seen (via CMS’ QualityNet Web site);
• OP–25: Safe Surgery Checklist Use
(via CMS’ QualityNet Web site);
• OP–26: Hospital Outpatient Volume
on Selected Outpatient Surgical

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Procedures (via CMS’ QualityNet Web
site); and
• OP–27: Influenza Vaccination
Coverage among Healthcare Personnel
(via the CDC NHSN Web site) (NQF
#0431).
In addition to these measures, the
following chart-abstracted measures
previously finalized and retained in the
Hospital OQR Program require data to
be submitted via the Web-based tool for
the CY 2017 payment determination and
subsequent years:
• OP–29: Endoscopy/Polyp
Surveillance: Appropriate Follow-up
Interval for Normal Colonoscopy in
Average Risk Patients (NQF #0658); and
• OP–30: Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps—Avoidance of Inappropriate
Use (NQF #1536).
We note that, in the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66962 through 66963), we
categorized OP–29 and OP–30 as chartabstracted measures. However, unlike
other chart-abstracted measures, OP–29
and OP–30 are submitted through a
Web-based tool (CMS’ QualityNet Web
site).
We refer readers to the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75112 through 75115) for
a discussion of the requirements for
measure data submitted via the CMS
QualityNet Web site (https://
www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&
cid=1205442125082) for the CY 2016
payment determination and subsequent
years. In addition, we refer readers to
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75097 through
75100) for a discussion of the
requirements for measure data
submitted via the CDC NHSN Web site.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39337 through 39338), we
proposed to make one change to the
data submission requirements for
measures submitted via the CMS Webbased tool (QualityNet Web site)
beginning with the CY 2017 payment
determination. This proposal does not
affect OP–27, which is submitted via the
CDC NHSN Web site. Previously, we
finalized that for measures reported via
the CMS Web-based tool, hospitals must
report data between July 1 and
November 1 of the year prior to the
payment determination with respect to
the encounter period of January 1 to
December 31 of 2 years prior to the
payment determination year (78 FR
75112).
Beginning with the CY 2017 payment
determination, however, we proposed

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70521

that hospitals must report data between
January 1 and May 15 of the year prior
to the payment determination with
respect to the encounter period of
January 1 to December 31 of 2 years
prior to the payment determination
year. For example, for the CY 2017
payment determination, the data
submission window would be January
1, 2016 through May 15, 2016 for the
January 1, 2015 to December 31, 2015
encounter period.
We proposed this new data
submission period to be consistent with
the data submission deadlines proposed
by the ASCQR Program in section
XIV.D.3. of the CY 2016 OPPS/ASC
proposed rule (80 FR 39345) and to
align with the submission deadline for
OP–27: Influenza Vaccination Coverage
among Healthcare Personnel, reported
via the CDC NHSN Web site. We have
determined that aligning all Web-based
tool data submission deadlines with this
May 15 deadline would allow for
streamlined hospital submissions,
earlier public reporting of that measure
data—possibly as soon as October of the
data submission year—and reduced
administrative burden associated with
tracking multiple submission deadlines
for these measures.
We invited public comment on our
proposal to change the data submission
period for measures submitted via the
CMS Web-based tool.
Comment: One commenter supported
the change in the deadline for the
measures that are reported via the CMS
Web-based tool (QualityNet Web site) to
conform to the deadline for the National
Healthcare Safety Network (NHSN)
measure reporting, noting that the
change will help avoid confusion
resulting from multiple reporting dates.
Response: We thank the commenter
for its support.
Comment: One commenter expressed
concern over competing data
submission requirements in the first
part of the year with other quality
reporting programs as well as the
current timing for the release of
measurement specifications and updates
for OP–26.
Response: While we acknowledge that
hospitals will no longer have deadlines
spread over a wider period of time for
measures submitted via a Web-based
tool, we believe that aligning these data
submission deadlines will ultimately
streamline and reduce administrative
burden on hospitals. The release of
measure specifications and updated
CPT (Current Procedural Terminology)
codes for OP–26 was delayed for the CY
2017 payment determination. Ideally,
we planned to release CPT codes for the
CY 2017 payment determination prior to

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the beginning of CY 2015. CPT codes
were published in the Specifications
Manual 8.0a supplemental document
posted on QualityNet on April 1, 2015
and are available at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&
pagename=QnetPublic%2FPage%
2FQnetTier3&cid=1228774592819.
However, we do not anticipate future
delays. Future releases of measure
specifications and updated codes for
OP–26 are anticipated to be made
available in November for the
subsequent program year. Therefore, we
do not believe that hospitals will have
difficulty submitting these data by May
15.
Comment: One commenter expressed
concerns about ongoing issues with
access and functionality of the NHSN
Web site for reporting CMS-required
measures, adding that CMS should work
to ensure that the NHSN has the
resources it needs to maintain the
proper infrastructure to support the
growing role it plays in quality
reporting.
Response: We appreciate the
commenter’s concerns. The NHSN Web
site is not maintained by CMS.
However, we will share these concerns
with the CDC NHSN program.
Comment: One commenter
recommended that measures submitted
via a Web-based tool be subject to a
validation process.
Response: We thank the commenter
for the suggestion. Due to limited
resources and the time needed to update
our systems, at this time, operationally
we are not able to validate measures
submitted through the Web-based tool.
We will take this recommendation into
consideration in developing future
policy.
After consideration of the public
comments we received, we are
finalizing our proposal to change the
deadline for the measures that are
reported via the CMS Web-based tool
(QualityNet Web site) to conform to the
deadline for the NHSN measure
reporting as proposed. The deadline for
these measures beginning with the CY
2017 payment determination will be
May 15 of the year prior to the payment
determination. We note that the ASCQR
Program is not finalizing the May 15
deadline in section XIV.D.3. of this final
rule with comment period due to
commenters’ concerns specific to the
ASC setting. However, we believe that
aligning with the NHSN measure
submission deadline serves our goals of
streamlining hospital submissions,
earlier public reporting of measure data,
and reduced administrative burden
associated with tracking multiple

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submission deadlines for these
measures.
b. Data Submission Requirements for
Web-Based Measure OP–33: External
Beam Radiotherapy (EBRT) for Bone
Metastases (NQF #1822) for the CY 2018
Payment Determination and Subsequent
Years
As discussed in section XIII.B.6.a. of
the CY 2016 OPPS/ASC proposed rule
(80 FR 39328 through 39330), we
proposed one new Web-based measure
for the CY 2018 payment determination
and subsequent years, OP–33: External
Beam Radiotherapy (EBRT) for Bone
Metastases (NQF #1822). As discussed
in section XIII.B.6.a. of this final rule
with comment period, we are finalizing
this measure.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39338), for data submission
for the CY 2018 payment determination
and subsequent years, we proposed that
hospitals can either: (1) Report OP–33
beginning with services furnished on
January 1, 2016 in accordance with the
data submission requirements for
measure data submitted via the CMS
Web-based tool (QualityNet Web site) as
proposed in section XIII.D.4.a. of the CY
2016 OPPS/ASC proposed rule (80 FR
39337 through 39338); or (2) submit an
aggregate data file (for example, a file in
comma separated value (csv) format or
other format as will be specified in the
data submission requirements on
QualityNet 43) for this measure through
a vendor (via QualityNet infrastructure)
containing aggregated data at the
hospital level. The aggregate data file
would combine all patient information,
rather than reporting individual patient
level data. The data submission
deadline for either method would be
May 15. We stated our belief that giving
hospitals the option to submit data via
vendors would help to streamline
processes and procedures. Detailed
information about format and
submission requirements will be posted
on QualityNet at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&
pagename=QnetPublic%2FPage%
2FQnetTier2&cid=1191255879384.
We invited public comment on our
proposal.
Comment: Some commenters
expressed concern that chart-abstracted
quality measures submitted via a CMS
Web-based tool impose a heavy
administrative burden on providers.
One commenter suggested that CMS
43 Data Submission Requirements will be
available at: https://www.qualitynet.org/dcs/
ContentServer?c=Page&
pagename=QnetPublic%2FPage%
2FQnetTier2&cid=1228775181731.

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consider limiting data collection to
radiation oncology sites. In addition,
this commenter noted that an
abundance of data is readily available
through Tumor Registry services and
suggested that CMS should consider
using this source for needed data, rather
than implementing another manually
abstracted measure.
Response: While we understand the
commenters’ concerns about the
additional administrative burden of
reporting data for the new measure, we
have weighed any associated burden of
reporting this data against the benefit of
having data. We believe that OP–33
provides valuable data that will enable
us to address concerns associated with
unnecessary exposure to radiation and a
desire for shorter and less painful
treatment options sufficient to justify its
adoption into the Hospital OQR
Program measure set. In addition, as
noted in section XIII.B.6.a. of this final
rule with comment period, because
unnecessary radiation exposure is such
an important topic, we believe that this
measure is of sufficiently broad scope
and priority to merit inclusion in the
Hospital OQR Program and not be
limited to only radiation oncology sites.
Furthermore, we note that the MAP
supported this measure, stating that
‘‘External beam radiation can help
provide patients with pain relief . . .
this measure has a demonstrated
performance gap and would begin to
expand cancer care measurement to
settings beyond the PPS-exempt cancer
hospitals.’’ 44
However, we will take into
consideration commenters’ suggestions
for future rulemaking and may consider
using data available through registry
services as a source of data for the
Hospital OQR Program provided there
are no associated costs for data
submission or membership.
Comment: One commenter requested
clarification regarding whether this is a
chart-abstracted measure or if data will
be collected by other means. The
commenter suggested that, if this
measure is a chart-abstracted measure,
CMS provide specifications in a manner
and format consistent with other chartabstracted measures including defined
initial patient population, acceptable
sampling methods, measure algorithms
complete with exclusions, and defined
alpha data dictionary with abstraction
guidelines.
Response: In previous rulemaking (77
FR 68483 and 77 FR 68530), we have
referred to measures in which data are
submitted via a Web-based tool on a
CMS Web site under our quality data
44 Ibid.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
reporting programs as structural
measures (measures concerned with
attributes of where care occurs, such as
material resources, human resources,
and organizational structures).45 For
example, OP–12: The Ability for
Providers with HIT to Receive
Laboratory Data Electronically Directly
into their ONC-Certified EHR System as
Discrete Searchable Data, is a structural
measure. However, because measures
for which data are submitted via a Webbased tool on a CMS Web site may or
may not, in fact, be structural (for
example, the Hospital IQR Program
chart abstracted, process of care
measure PC–01: Elective Delivery Prior
to 39 Completed Weeks Gestation (NQF
#0469) is submitted via a Web-based
tool, but measures quality-of-care rather
than structural elements (79 FR 50059)),
we clarified our terminology to refer to
the mode of data submission as Webbased (78 FR 75112).
In particular, the source of the data for
OP–33: External Beam Radiotherapy
(EBRT) for Bone Metastases is via charts
gathered by chart-abstraction. However,
unlike some other chart-abstracted
measures in the Hospital OQR Program
(OP–18: Median Time from ED Arrival
to ED Departure for Discharged ED
Patients (NQF #0496) and OP–20: Door
to Diagnostic Evaluation by a Qualified
Medical Professional (76 FR 74481
through 74482)) which utilize either the
CART–OPD or third-party vendors for
data submission, for OP–33, the data
submission method will be via a CMS
Web-based Tool (QualityNet Web site).
Thus, data must be abstracted from
charts, aggregated, and submitted via
the QualityNet Web site. Because the
data for measures submitted via a Webbased tool are reported in aggregate,
measure algorithms complete with
exclusions, and defined alpha data
dictionary with abstraction guidelines
are not currently provided. However,
sampling approaches and specifications
defining initial patient population are
included. We refer readers to our
Specifications Manual at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&
cid=1196289981244.
Comment: One commenter suggested
that patient-level data be collected for
this measure as opposed to aggregatelevel data.
Response: We thank the commenter
for its suggestion. At this time, we
believe it is less burdensome for
hospitals to report aggregate-level data
45 Maintz, J. Defining and Classifying Clinical
Indicators for Quality Improvement, Inter J Quality
Health Care (2003) 15(6), 523–530).

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as opposed to patient-level data. In
addition, for this particular measure, we
are not aware of any quality
improvement benefits that collecting
patient-level data would provide. If we
determine that it would be beneficial to
collect patient-level data for this
measure, weighed against the associated
burden, we may consider proposing to
do so in future rulemaking.
Furthermore, as discussed above, we
proposed to allow hospitals to submit
these data through a vendor because we
believed this submission method would
further decrease burden. After analyzing
this option further, we do not believe
that we will be able to accept data
operationally using this method for CY
2018 as our IT systems cannot feasibly
collect and provide hospitals timely and
relevant submission and measure rate
feedback. If operationally we are able to
accept data through vendors in the
future, we may propose to do so through
rulemaking.
After consideration of the public
comments we received, we are
finalizing a modified version of our
proposals. We are finalizing that
hospitals report OP–33 beginning with
services furnished on January 1, 2016 in
accordance with the data submission
requirements for measure data
submitted via the CMS Web based tool
(QualityNet Web site) as proposed.
However, we are not finalizing our
second proposal that hospitals can
submit an aggregate data file for this
measure through a vendor (via the
QualityNet infrastructure) containing
aggregated data at the hospital level for
reasons discussed above.
c. Proposed Data Submission
Requirements for Web-Based Measure
OP–34: Emergency Department Transfer
Communication (EDTC) Measure for the
CY 2019 Payment Determination and
Subsequent Years
As discussed in section XIII.B.6.b. of
the CY 2016 OPPS/ASC proposed rule
(80 FR 39330 through 39334), we
proposed one new Web-based measure
for the CY 2019 payment determination
and subsequent years, OP–34:
Emergency Department Transfer
Communication (EDTC) Measure (NQF
#0291). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39338), for data
submission for the CY 2019 payment
determination and subsequent years, we
proposed that hospitals can either: (1)
Report OP–34 beginning with January 1,
2017 outpatient encounter dates in
accordance with the data submission
requirements for measure data
submitted via the CMS Web-Based Tool
(QualityNet Web site) as proposed in
section XIII.D.4.a. of the proposed rule

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70523

(80 FR 39337 through 39338); or (2)
submit an aggregate data file (for
example, a file in comma separated
value (csv) format or other format as
will be specified in the data submission
requirements on QualityNet 46) for this
measure through a vendor (via
QualityNet infrastructure) containing
aggregated data at the hospital level.
The aggregate data file shall combine all
patient information, rather than
reporting individual patient level data.
The data submission deadline for either
method would be May 15. We stated our
belief that also giving hospitals the
option to submit data via vendors will
help to streamline processes and
procedures. Detailed information about
format and submission requirements
will be posted on QualityNet at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&
pagename=QnetPublic%2
FPage%2FQnetTier2&cid=
1191255879384.
We invited public comment on our
proposals.
Comment: Many commenters
expressed concern that the proposed
manner of data submission for this
measure would be overly burdensome
for hospital abstractors. Several
commenters suggested that patient-level
data be collected for this measure as
opposed to aggregate-level data,
specifically through using a CART–OPD
module. One commenter recommended
that the required data elements be
tailored based on the patient’s clinical
presentation, noting that not all
elements are relevant to all individual
patients.
Response: As proposed, the EDTC
measure does not require hospitals to
submit patient data on each of the 27
elements listed. Rather, hospitals would
be required to answer yes or no as to
whether these clinical indicators were
recorded and communicated. Initially,
we intended that delaying
implementation of this measure until
the CY 2019 payment determination
would allow facilities additional time to
implement the proposed measure (that
is, to put the necessary processes and
procedures in place), to familiarize
themselves with the implementation
protocol, tools, and scoring
methodology related to the EDTC
measure, and to make associated
improvements prior to the first reporting
deadline. However, in light of
commenters’ concerns, we acknowledge
that delayed implementation may not
46 Data Submission Requirements will be
available at: https://www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&
cid=1228775181731.

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sufficiently address these concerns. We
refer readers to section XIII.B.6.b. of this
final rule with comment period, for our
discussion regarding not finalizing the
EDTC measure for the CY 2019 payment
determination and subsequent years.
Regardless, we will take these
comments into consideration in
developing future policy.
After consideration of the public
comments we received, we are not
finalizing the data submission methods
for the EDTC measure as proposed,
because we are not finalizing the EDTC
measure, as discussed in section
XIII.B.6.b. of this final rule with
comment period.

jstallworth on DSK7TPTVN1PROD with RULES

5. Population and Sampling Data
Requirements for the CY 2018 Payment
Determination and Subsequent Years
We refer readers to the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72100 through 72103) and
the CY 2012 OPPS/ASC final rule with
comment period (76 FR 74482 through
74483) for discussions of our policy that
hospitals may voluntarily submit
aggregate population and sample size
counts for Medicare and non-Medicare
encounters for the measure populations
for which chart-abstracted data must be
submitted.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39338), we did not propose
any changes to our population and
sampling requirements.
6. Hospital OQR Program Validation
Requirements for Chart-Abstracted
Measure Data Submitted Directly to
CMS for the CY 2018 Payment
Determination and Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68484 through 68487) and
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66964 through
66965) for a discussion of finalized
policies regarding our validation
requirements. We codified these
policies at 42 CFR 419.46(e). Currently,
validation is based on four quarters of
data (validation quarter 2, validation
quarter 3, validation quarter 4, and
validation quarter 1) (75 FR 72104 and
79 FR 66965).
As discussed in section XIII.D.1. of
the CY 2016 OPPS/ASC proposed rule
(80 FR 39336 through 39337), we
proposed to make conforming changes
to our validation scoring process to
reflect proposed changes in the APU
determination timeframes. For the CY
2017 payment determination, we
proposed that validation be based on
three quarters of data (validation quarter
2, validation quarter 3, and validation
quarter 4 of 2015). In addition, for the

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CY 2018 payment determination and
subsequent years, we proposed that
validation again be based on four
quarters of data. However, those
quarters are validation quarter 1,
validation quarter 2, validation quarter
3, and validation quarter 4. We note that
the data submission deadlines will
remain unchanged. Detailed information
about data validation requirements and
deadlines will be posted on QualityNet
at: https://www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&
cid=1228758729356.
Finally, we also proposed to make one
editorial correction to 42 CFR
419.46(e)(2) to replace the term ‘‘fiscal
year’’ with the term ‘‘calendar year.’’
We invited public comment on our
proposals.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing changes to
our validation scoring process to reflect
changes in the APU determination
timeframes and correcting 42 CFR
419.46(e)(2) to replace the term ‘‘fiscal
year’’ with the term ‘‘calendar year’’ as
proposed.
7. Extension or Exemption Process for
the CY 2018 Payment Determination
and Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68489), the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75119 through 75120), the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66966), and 42
CFR 419.46(d) for a complete discussion
of our extraordinary circumstances
extension or exception process under
the Hospital OQR Program.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39339), we proposed to fix
a typographical error to correct the
name of this process from extension and
exception to extension and exemption
(inadvertently presented as a process
name change). We also proposed to
make corresponding typographical error
corrections (inadvertently presented as a
name change) to the regulation text at 42
CFR 419.46(d). These proposed
corrections align the Hospital OQR
Program policies with those of the
Hospital IQR Program (79 FR 50101)
and ASCQR Program (79 FR 66987). We
would like to clarify that we are not
renaming this process, but rather we are
proposing to fix a typographical error to
correct the name of this process from
extension and exception to extension
and exemption. We invited public
comment on our proposals.
We did not receive any public
comments on these proposals.

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Therefore, we are finalizing the
correction of this typographical error at
42 CFR 419.46(d) to extension and
exemption as proposed.
8. Hospital OQR Program
Reconsideration and Appeals
Procedures for the CY 2018 Payment
Determination and Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68487 through 68489) and
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75118 through
75119) for a discussion of our
reconsideration and appeals procedures.
We codified this process by which
participating hospitals may submit
requests for reconsideration at 42 CFR
419.46(f). We also codified 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.
Currently, 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
(78 FR 75118 through 75119). In the CY
2016 OPPS/ASC proposed rule (80 FR
39339), we proposed that beginning
with the CY 2018 payment
determination, hospitals must submit a
reconsideration request to CMS via the
QualityNet Web site by no later than the
first business day on or after March 17
of the affected payment year.
We proposed this new
reconsideration submission deadline to
be consistent with the proposed ASCQR
Program reconsideration submission
deadline in section XIV.D.8. of the CY
2016 OPPS/ASC proposed rule (80 FR
39347) and finalized in section XIV.D.8.
of this final rule with comment period.
As stated above, we believe that aligning
deadlines across programs leads to
decreased provider burden by
streamlining processes and procedures.
We also proposed to make a
conforming change to 42 CFR
419.46(f)(1) to reflect the above change
in submission deadline from the first
business day of the month of February
of the affected payment year to the first
business day on or after March 17 of the
affected payment year.
In addition, we proposed to make an
editorial correction to 42 CFR
419.46(f)(1) to replace the term ‘‘fiscal
year’’ with the term ‘‘calendar year.’’
We invited public comment on these
proposals.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing these
policies as proposed.

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jstallworth on DSK7TPTVN1PROD with RULES

E. Payment Reduction for Hospitals
That Fail To Meet the Hospital
Outpatient Quality Reporting (OQR)
Program Requirements for the CY 2016
Payment Determination
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,
specified 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. Hospitals that
meet the reporting requirements receive
the full OPPS payment update without
the reduction. For a more detailed
discussion of how this payment
reduction 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
payment 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 the proposed rule,
which is available via the Internet on
the CMS Web site): ‘‘J1,’’ ‘‘J2,’’ ‘‘P,’’
‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’
or ‘‘U.’’ We note that we proposed to
adopt status indicator ‘‘J2’’ for certain
comprehensive services furnished to
beneficiaries who receive at least 8
hours of observation services in the
hospital outpatient department; more
information about this status indicator
may be found in section XI.A. of this
final rule with comment period.
Payment for all services assigned to
these status indicators will be subject to

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the reduction of the national unadjusted
payment rates for hospitals that fail to
meet Hospital OQR Program
requirements, 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.
The OPD fee schedule increase factor
is an input into the OPPS conversion
factor, which is used to calculate OPPS
payment rates. 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
payment weights by the reduced
conversion factor. For example, 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
reporting ratio to both the minimum
unadjusted copayment and national
unadjusted copayment for services
provided by 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

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70525

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 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.
Similarly, OPPS outlier payments made
for high cost and complex procedures
will continue to be made when outlier
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. 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 this final
rule with comment period.
2. Reporting Ratio Application and
Associated Adjustment Policy for CY
2016
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39340), 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
2016 annual payment update factor. For
the CY 2016 OPPS, the proposed
reporting ratio is 0.980, calculated by
dividing the proposed reduced
conversion factor of $72.478 by the
proposed full conversion factor of
$73.929. We proposed to continue to
apply the reporting ratio to all services
calculated using the OPPS conversion
factor. For the CY 2016 OPPS, we
proposed to apply the reporting ratio,
when applicable, to all HCPCS codes to
which we have proposed status
indicator assignments of ‘‘J1,’’ ‘‘J2,’’ ‘‘P,’’
‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’

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and ‘‘U’’ (other than new technology
APCs to which we have proposed status
indicator assignment of ‘‘S’’ and ‘‘T’’).
We note that, discussed in sections
II.A.2.e. of the CY 2015 OPPS/ASC final
rule with comment period (79 FR
66962), we finalized our proposal to
develop status indicator ‘‘J1’’ as part of
our CY 2015 comprehensive APC
policy, 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 comments on these
proposals.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing our
proposal to apply the Hospital OQR
Program reduction in the manner
described above. We also are finalizing
our proposal to reflect the CY 2016
OPPS status indicators to which the
adjustment would apply. For the CY
2016 OPPS, the final reporting ratio is
0.980, calculated by dividing the final
reduced conversion factor of $72.251 by
the final full conversion factor of
$73.725.
XIV. Requirements for the Ambulatory
Surgical Center Quality Reporting
(ASCQR) Program
A. Background
1. Overview

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We refer readers to section XIII.A.1. of
this final rule with comment period for
a general overview of our quality
reporting programs.
2. Statutory History of the Ambulatory
Surgical Center 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
74494) for a detailed discussion of the
statutory history of the ASCQR Program.

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3. Regulatory History of the ASCQR
Program
We refer readers to section XV.A.3. of
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75122) for an
overview of the regulatory history of the
ASCQR Program, and to section XIV.4.
of the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66966
through 66987) for subsequently
enacted policies.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39340), we proposed to
establish a new Subpart H under 42 CFR
part 416 to codify many of the
administrative policies regarding the
ASCQR Program. We proposed to codify
our statutory authority for the ASCQR
Program in new proposed 42 CFR
416.300(a). In that proposed section, we
state that section 1833(i)(2)(D)(iv) and
(i)(7) of the Act authorizes the Secretary
to implement a revised ASC payment
system in a manner so as to provide for
a 2.0 percentage point reduction in any
annual update for an ASC’s failure to
report on quality measures in
accordance with the Secretary’s
requirements. In new proposed 42 CFR
416.300(b), we state that this subpart
contains the specific requirements and
standards for the ASCQR Program. We
note that we have previously referenced
the statutory basis for the ASCQR
Program in 42 CFR part 416, subpart F
(42 CFR 416.160(a)) and the 2
percentage point reduction for ASCs
that do not meet ASCQR Program
requirements at 42 CFR
416.171(a)(2)(iii).
We invited public comment on our
proposals to codify the scope and basis
for the ASCQR Program.
Comment: Several commenters
supported CMS’ proposals to codify the
scope and basis for the ASCQR Program.
Some commenters expressed concerns
that codification was not warranted for
a program that was still under
development and that codification
could make program changes in the
future more difficult.
Response: We thank the commenters
that supported our proposals to codify
the scope and basis for the ASCQR
Program. While some commenters
believe codification could make
program changes in the future more
difficult, we assure these commenters
that future program changes to codified
ASCQR Program regulatory text is not
more difficult than updating noncodified regulatory policies. Codified
regulatory text can be and is modified
through the rulemaking process, which
for the ASCQR Program, occurs on an
annual basis.

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After consideration of the public
comments we received, we are
finalizing our proposals to establish a
new Subpart H under 42 CFR part 416
to codify many of the administrative
policies regarding the ASCQR Program,
and to codify the scope and basis of the
ASCQR Program in 42 CFR 416.300.
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
period (77 FR 68493 through 68494) for
a detailed discussion of the priorities we
consider for ASCQR Program quality
measure selection. In the CY 2016
OPPS/ASC proposed rule (80 FR 39341),
we did not propose any changes to this
policy. However, we received several
comments on our priorities for measure
selection.
Comment: One commenter stated that
outcome reporting is the most direct
way to measure clinical improvements
in the quality of care provided to
patients and expressed support for the
ASCQR Program’s use of outcome
measures.
Response: We thank the commenter
for its support. We also believe that
outcome measures are important and are
a direct way to measure clinical
improvement.
2. Policies for Retention and Removal of
Quality Measures From the ASCQR
Program
We previously adopted a policy that
quality measures adopted for an ASCQR
Program measure set for a previous
payment determination year be retained
in the ASCQR Program for measure sets
for subsequent payment determination
years, except when they are removed,
suspended, or replaced as indicated (76
FR 74494 and 74504; 77 FR 68494
through 68495; 78 FR 75122; 79 FR
66967 through 66969). In the CY 2016
OPPS/ASC proposed rule (80 FR 39341),
we did not propose any changes to this
policy. However, we proposed to codify
this policy at proposed new 42 CFR
416.320(a).
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66967
through 66969), we finalized a process
for removing adopted measures.
Specifically, in cases where we believe
that the continued use of a measure as
specified raises patient safety concerns,
we will immediately remove a quality
measure from the ASCQR Program. In
these situations, we will promptly
notify ASCs and the public of the
removal of the measure and the reasons
for its removal through the ASCQR

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
Program ListServ and the ASCQR
Program QualityNet Web site. We will
confirm the removal of the measure due
to patient safety concerns in the next
ASCQR Program rulemaking. In the CY
2016 OPPS/ASC proposed rule (80 FR
39341), we did not propose any changes
to this process. However, we proposed
to codify this process at proposed new
42 CFR 416.320(b).
As stated in the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66968), unless a measure as specified
raises patient safety concerns, we will
use the regular rulemaking process to
remove, suspend, or replace quality
measures in the ASCQR Program to
allow for public comment. In these
situations, we will use the following
criteria to determine whether to remove
a measure from the ASCQR Program: (1)
Measure performance among ASCs is so
high and unvarying that meaningful
distinctions and improvements in
performance can no longer be made
(‘‘topped-out’’ measures); (2) availability
of alternative measures with a stronger
relationship to 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 other than patient harm.
The benefits of removing a measure
from the ASCQR Program will be
assessed on a case-by case basis. We
intend for all the criteria to apply to all
measures to the extent possible. A
measure will not be removed solely on
the basis of meeting any specific
criterion.
As provided above, one of the criteria
to determine whether to remove a
measure from the ASCQR Program is
when it is ‘‘topped-out’’ (that is, when
measure performance among ASCs is so
high and unvarying that meaningful
distinctions and improvements in

performance can no longer be made).
For purposes of the ASCQR Program, a
measure is considered to be topped-out
when it meets both of the following
criteria: (1) Statistically
indistinguishable performance at the
75th and 90th percentiles (defined as
when the difference between the 75th
and 90th percentiles for an ASC’s
measure is within two times the
standard error of the full data set); and
(2) a truncated coefficient of variation
less than or equal to 0.10 (79 FR 66968
through 66969). In the CY 2016 OPPS/
ASC proposed rule (80 FR 39341), we
did not propose any changes to this
process for measure removal,
suspension, or replacement. However,
we proposed to codify this measure
removal criterion at proposed new 42
CFR 416.320(c).
We invited public comment on our
proposals to codify these existing
policies.
We did not receive any public
comments on the proposals to codify
our policies for the retention and
removal of quality measures from the
ASCQR Program and, therefore, are
finalizing them as proposed in 42 CFR
416.320.
3. 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 implemented the
ASCQR Program effective with the CY
2014 payment determination. In the CY
2012 OPPS/ASC final rule with
comment period (76 FR 74496 through
74511), we adopted five claims-based
measures for the CY 2014 payment
determination and subsequent years,
two measures with data submission
directly to CMS via an online Webbased tool for the CY 2015 payment
determination and subsequent years,
and one process of care, preventive
service measure submitted via an
online, Web-based tool to CDC’s
National Health Safety Network (NHSN)
for the CY 2016 payment determination
and subsequent years. In the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75124 through 75130), we
adopted three chart-abstracted measures

70527

with data submission to CMS via an
online Web-based tool for the CY 2016
payment determination and subsequent
years. In the CY 2015 OPPS/ASC final
rule with comment period (79 FR 66984
through 66985), we excluded one of
these measures, ASC–11: Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following
Cataract Surgery (NQF #1536), from the
CY 2016 payment determination
measure set and allowed for voluntary
data collection and reporting for the CY
2017 payment determination and
subsequent years. In the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66970 through 66979), we adopted
one additional claims-based measure for
the CY 2018 payment determination and
subsequent years.
Most of the quality measures adopted
for use by the ASCQR Program are NQFendorsed, although such endorsement is
not an ASCQR Program requirement for
adopting a measure. Two measures
previously adopted for the ASCQR
Program are not currently NQFendorsed and were not endorsed when
adopted for the program (ASC–6: Safe
Surgery Checklist Use and ASC–7: ASC
Facility Volume Data on Selected ASC
Surgical Procedures). Further, ASC–12:
Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient
Colonoscopy (NQF #2539) was not
NQF-endorsed at the time it was
adopted for the ASCQR Program, but
now is NQF-endorsed. Recently, NQF
removed endorsement from ASC–5:
Prophylactic Intravenous (IV) Antibiotic
Timing (formerly NQF #0264).47 We
continue to believe that ASC–5 is
appropriate for measurement of the
quality of care furnished by ASCs and
should be retained by the ASCQR
Program; the measure is supported by
clinical evidence 48 and the measure
steward will be continuing to support
the measure.49 We will continue to
evaluate the appropriateness of this
measure for the ASCQR Program as we
do other measures.
The previously finalized measure set
for the ASCQR Program CY 2017
payment determination and subsequent
years is listed below.

jstallworth on DSK7TPTVN1PROD with RULES

ASCQR PROGRAM MEASURE SET PREVIOUSLY FINALIZED FOR THE CY 2017 PAYMENT DETERMINATION AND
SUBSEQUENT YEARS
ASC #

NQF #

ASC–1 .......................................

0263 .........................................

47 Available at: http://www.qualityforum.org/
Publications/2015/02/NQF-Endorsed_Measures_
for_Surgical_Procedures.aspx.

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Measure name
Patient Burn.

48 Burke J. Maximizing appropriate antibiotic
prophylaxis for surgical patients: an update from
LDS Hospital, Salt Lake City. Clin Infect Dis.
2001;33(Suppl 2):S78–83.

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49 Available at: http://ascquality.org/documents/
ASC_QC_ImplementationGuide_3.0_January_
2015.pdf.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

ASCQR PROGRAM MEASURE SET PREVIOUSLY FINALIZED FOR THE CY 2017 PAYMENT DETERMINATION AND
SUBSEQUENT YEARS—Continued
ASC #

NQF #

Measure name

.......................................
.......................................
.......................................
.......................................
.......................................
.......................................

0266 .........................................
0267 .........................................
0265 .........................................
N/A ...........................................
N/A ...........................................
N/A ...........................................

ASC–8 .......................................
ASC–9 .......................................

0431 .........................................
0658 .........................................

ASC–10 .....................................

0659 .........................................

ASC–11 .....................................

1536 .........................................

Patient Fall.
Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant.
All-Cause Hospital Transfer/Admission.*
Prophylactic Intravenous (IV) Antibiotic Timing.
Safe Surgery Checklist Use.
ASC Facility Volume Data on Selected ASC Surgical Procedures
Procedure categories and corresponding HCPCS codes are located at: http://
qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2
FPage%2FQnetTier2&cid=1228772475754.
Influenza Vaccination Coverage among Healthcare Personnel.
Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients.
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate Use.
Cataracts: Improvement in Patient’s Visual Function within 90 Days Following
Cataract Surgery.**

ASC–2
ASC–3
ASC–4
ASC–5
ASC–6
ASC–7

* This measure was previously titled ‘‘Hospital Transfer/Admission.’’ According to the NQF Web site, the title was changed to better reflect what
is being measured. We have updated the title of this measure to align it with the NQF update to the title.
** Measure voluntarily collected effective beginning with the CY 2017 payment determination as set forth in section XIV.E.3.c. of the CY 2015
OPPS/ASC final rule with comment period (79 FR 66984 through 66985).

The previously finalized measure set
for the ASCQR Program CY 2018

payment determination and subsequent
years is listed below.

ASCQR PROGRAM MEASURE SET PREVIOUSLY FINALIZED FOR THE CY 2018 PAYMENT DETERMINATION AND
SUBSEQUENT YEARS
ASC #

NQF #

Measure name

.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................

0263 .........................................
0266 .........................................
0267 .........................................
0265 .........................................
N/A ...........................................
N/A ...........................................
N/A ...........................................

ASC–8 .......................................
ASC–9 .......................................

0431 .........................................
0658 .........................................

ASC–10 .....................................

0659 .........................................

ASC–11 .....................................

1536 .........................................

ASC–12 .....................................

2539 .........................................

Patient Burn.
Patient Fall.
Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant.
All-Cause Hospital Transfer/Admission.*
Prophylactic Intravenous (IV) Antibiotic Timing.
Safe Surgery Checklist Use.
ASC Facility Volume Data on Selected ASC Surgical Procedures.
Procedure categories and corresponding HCPCS codes are located at: http://
qualitynet.org/dcs/ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&cid=1228772475754.
Influenza Vaccination Coverage among Healthcare Personnel.
Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal
Colonoscopy in Average Risk Patients.
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoidance of Inappropriate Use.
Cataracts: Improvement in Patient’s Visual Function within 90 Days Following
Cataract Surgery.**
Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient
Colonoscopy.***

ASC–1
ASC–2
ASC–3
ASC–4
ASC–5
ASC–6
ASC–7

jstallworth on DSK7TPTVN1PROD with RULES

* This measure was previously titled ‘‘Hospital Transfer/Admission.’’ According to the NQF Web site, the title was changed to better reflect what
is being measured. We have updated the title of this measure to align it with the NQF update to the title.
** Measure voluntarily collected effective beginning with the CY 2017 payment determination as set forth in section XIV.E.3.c. of the CY 2015
OPPS/ASC final rule with comment period (79 FR 66984 through 66985).
*** New measure finalized for the CY 2018 payment determination and subsequent years in the CY 2015 OPPS/ASC final rule with comment
period (79 FY 66970 through 66979).

Several commenters expressed views
on previously adopted ASCQR Program
measures.
Comment: Some commenters
supported previously adopted measures,
and some commenters recommended
changing measure specifications for
some measures. Other commenters
requested that CMS consider removing
previously added measures from the
ASCQR Program, specifically ASC–5,

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ASC–9, ASC–10, and ASC–12, because
these measures are no longer NQFendorsed, and the commenters believed
that they are inappropriate for ASCs due
to concerns about measure reliability or
validity, or are too burdensome for
ASCs. Some of these commenters
expressed ongoing concerns about the
ASC–12 measure. They requested that
CMS conduct additional analyses of the
reliability and validity of the measure as

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specified for the ASCQR Program and
implemented during the dry run, and
provide those results to the ASC
community.
Response: We thank the commenters
for their suggestions. At this time, we
have not made any proposals to remove
or modify any of the measures suggested
by commenters. Further, there is no
evidence that continued use of the
measures as specified raises patient

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safety concerns that would require
immediate removal of the measures
based on the process we finalized in the
CY 2015 OPPS/ASC final rule with
comment period (79 FR 66967 through
66969). However, we will take these
suggestions into consideration in future
years using our measure removal
criteria. We continue to believe there is
value in collecting and reporting these
measures. We thank commenters for
these suggestions regarding the current
ASCQR Program measures and will
share them with the measure stewards.

jstallworth on DSK7TPTVN1PROD with RULES

4. ASCQR Program Quality Measures for
the CY 2018 Payment Determination
and Subsequent Years
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39343), we did not propose
to adopt any additional measures for the
ASCQR Program for the CY 2018
payment determination and subsequent
years.
5. ASCQR Program Measures for Future
Consideration
In the CY 2013 OPPS/ASC final rule
with comment period, we set forth our
approach to future measure selection
and development (77 FR 68493 through
68494). We seek to develop a
comprehensive set of quality measures
to be available for widespread use for
making informed decisions and quality
improvement in the ASC setting (77 FR
68496). We also seek to align these
quality measures with the National
Quality Strategy (NQS), the CMS
Strategic Plan (which includes the CMS
Quality Strategy), and our other quality
reporting and VBP programs, as
appropriate. Accordingly, as we stated
in the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66979), in
considering future ASCQR Program
measures, we are focusing on the
following NQS and CMS Quality
Strategy measure domains: Make care
safer; strengthen person and family
engagement; promote effective
communication and coordination of
care; promote effective prevention and
treatment; work with communities to
promote best practices of healthy living;
and make care affordable. We did not
propose any changes to this policy.
However, we received one comment on
our priorities for measure selection.
Comment: One commenter supported
alignment of the ASCQR Program with
the NQS, the CMS Strategic Plan, and
other quality reporting and value-based
purchasing programs. The commenter
also recommended that CMS focus on
the NQS and CMS Quality Strategy
measure domains of: (1) Make care safer,
(2) strengthen person and family
engagement, and (3) promote effective

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communication and coordination of
care, because these domains fall within
the scope of an ASC’s accountability.
This commenter asserted that the
remaining three domains (promote
effective prevention and treatment;
work with communities to promote best
practices of healthy living; and make
care affordable) are more the
responsibility of the primary care
provider, not ASCs.
Response: We thank the commenter
for these suggestions. We seek to align
our programs as much as possible, and
we believe that it is important to have
measures that encompass each of the
NQS priority areas. We have and will
continue to consider whether our
current and future measures are
actionable by ASCs.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39343), we also invited
public comment on two measures
developed by the ASC Quality
Collaboration for inclusion in the
ASCQR Program in the future.
a. Normothermia Outcome
The first measure under consideration
is the Normothermia Outcome measure
which assesses the percentage of
patients having surgical procedures
under general or neuraxial anesthesia of
60 minutes or more in duration who are
normothermic within 15 minutes of
arrival in the post-anesthesia care unit.
This issue is of interest to the ASCQR
Program because impairment of
thermoregulatory control due to
anesthesia may result in perioperative
hypothermia. Perioperative
hypothermia is associated with
numerous adverse outcomes, including:
Cardiac complications; 50 surgical site
infections; 51 impaired coagulation; 52
and colligation of drug effects.53 When
intraoperative normothermia is
maintained, patients experience fewer
adverse outcomes and their overall care
costs are lower.54 This measure is also
of interest to the ASCQR Program
50 Frank SM, Fleisher LA, Breslow MJ, et al.
Perioperative maintenance of normothermia
reduces the incidence of morbid cardiac events: A
randomized clinical trial. JAMA. 1997;277(14):
1127–1134.
51 Kurz A, Sessler DI, Lenhardt R. Perioperative
normothermia to reduce the incidence of surgicalwound infection and shorten hospitalization: Study
of wound infection and temperature group. N Engl
J Med. 1996;334(19): 1209–1215.
52 Rajagopalan S, Mascha E, Na J, Sessler DI. The
effects of mild hypothermia on blood loss and
transfusion requirements during total hip
arthroplasty. Lancet. 1996;347(8997):289–292.
53 Kurz A. Physiology of thermoregulation. Best
Pract Res Clin Anaesthesiol.2008;22(4):627–644.
54 Mahoney CB, Odom J. Maintaining
intraoperative normothermia: A meta-analysis of
outcomes with costs. AANA Journal. 1999;67(2):
155–164.

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because many surgical procedures
performed at ASCs involve anesthesia;
therefore, it is an outcome measure of
significance for ASCs.55 It also
addresses the MAP-identified priority
measure area for the ASCQR Program of
anesthesia-related complications.56
The specifications for this measure for
the ASC setting can be found at: http://
ascquality.org/documents/ASC_QC_
ImplementationGuide_3.0_
January_2015.pdf.
b. Unplanned Anterior Vitrectomy
The second measure under
consideration for future payment
determination years is the Unplanned
Anterior Vitrectomy measure. This
measure assesses the percentage of
cataract surgery patients who have an
unplanned anterior vitrectomy (removal
of the vitreous present in the anterior
chamber of the eye). Cataracts are a
leading cause of blindness in the United
States, with 24.4 million cases in
2010.57 Each year, approximately 1.5
million patients undergo cataract
surgery to improve their vision.58 An
unplanned anterior vitrectomy is
performed when vitreous inadvertently
prolapses into the anterior segment of
the eye during cataract surgery. While
unplanned anterior vitrectomy rates are
relatively low, this procedure
complication may result in poor visual
outcomes and other complications,
including retinal detachment.59 This
measure is of interest to the ASCQR
Program because cataract surgery is a
procedure commonly performed at
ASCs; therefore, it is an outcome
measure of significance for ASCs.60 It
also addresses the MAP-identified
priority measure area of procedure
55 MAP

Hospital Workgroup Transcript.
Quality Forum. MAP 2015
Considerations for Selection of Measures for
Federal Programs: Hospitals. Rep. National Quality
Forum, Feb. 2015. Available at: http://
www.qualityforum.org/Publications/2015/02/
MAP_Hospital_Programmatic_Deliverable__Final_Report.aspx.
57 National Eye Institute. ‘‘Cataracts.’’ Cataracts.
National Institutes of Health, n.d. Available at:
https://www.nei.nih.gov/eyedata/cataract#1.
58 ‘‘Measure Application Partnership Hospital
Workgroup’’, National Quality Forum. Dec. 2014,
Transcript. Available at: http://
www.qualityforum.org/
ProjectMaterials.aspx?projectID=75369.
59 Chen M, Lamattina KC, Patrianakos T,
Dwarakanathan S. Complication rate of posterior
capsule rupture with vitreous loss during
phacoemulsification at a Hawaiian cataract surgical
center: A clinical audit. Clin Ophthamlol. 2014 Feb
5;8:375–378.
60 ‘‘Measure Application Partnership Hospital
Workgroup’’, National Quality Forum. Dec. 2014,
Transcript. Available at: http://
www.qualityforum.org/
ProjectMaterials.aspx?projectID=75369.
56 National

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complications for the ASCQR
Program.61
The specifications for this measure for
the ASC setting can be found at: http://
ascquality.org/documents/
ASC_QC_ImplementationGuide_
3.0_January_2015.pdf.
Both measures have received
conditional support from the MAP,
pending the completion of reliability
testing and NQF endorsement. A
summary of the MAP recommendations
can be found at: http://
www.qualityforum.org/
setting_priorities/partnership/
measure_applications_partnership.aspx
under the title ‘‘Spreadsheet of MAP
2015 Final Recommendations.’’
We invited public comment on the
possible inclusion of these measures in
the ASCQR Program measure set in the
future. As stated previously, we did not
propose to adopt any new measures for
the CY 2018 payment determination or
subsequent years in the CY 2016 OPPS/
ASC proposed rule.
Comment: Many commenters
supported future adoption of the
Normothermia Outcome measure in the
ASCQR Program, because it would help
promote quality care in ASCs and
because public reporting of these data
would serve as a key measure to assist
patients, policymakers, and researchers
in comparing quality among ASCs. One
commenter noted that the measure’s
reliability testing in the ASC setting was
very strong, and that the measure is
already in use in the ASC Quality
Collaboration’s quarterly public
reporting program, which is a voluntary
reporting program that collects data
from ASCs and provides quarterly
aggregated performance data for ASC
facility-level quality measures
developed by the ASC Quality
Collaboration. One commenter
recommended that CMS adopt the
Normothermia Outcome measure in the
future and retire the measure once there
is validation of sustained normothermia
among ASCs. Another commenter noted
that the NQF’s 2015 Surgical Standing
Committee recently approved a change
in the definition of normothermia from
96.8 degrees Fahrenheit (36 degrees
Celsius) to 95.9 degrees Fahrenheit (35.5
degrees Celsius) and urged CMS to
ensure that any future measure on
normothermia adopt this updated
definition in order to maintain
61 National Quality Forum. MAP 2015
Considerations for Selection of Measures for
Federal Programs: Hospitals. Rep. National Quality
Forum, Feb. 2015. Available at: http://
www.qualityforum.org/Publications/2015/02/
MAP_Hospital_Programmatic_Deliverable__Final_Report.aspx.

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uniformity in anesthesia quality
improvement efforts across programs.
A number of commenters did not
support future adoption of the
Normothermia Outcome measure for the
ASCQR Program. The commenters
asserted that the measure
implementation guide states there is no
evidence of a performance gap in
hypothermia for ASC providers. Other
commenters requested that CMS
provide additional information
regarding the gap or variation in care
that justifies future adoption of the
Normothermia Outcome measure, the
risk adjustment methodology used
under the measure, and the measure’s
reliability testing data. The commenters
recommended CMS perform reliability
and field testing of the Normothermia
Outcome measure, submit the measure
to NQF for endorsement, and resubmit
the measure to the MAP for review
before proposing to add this measure to
the ASCQR Program measure set.
Some commenters requested
additional information regarding the
Normothermia Outcome measure. One
commenter requested additional
information regarding the volume of
postoperative hypothermia events
captured under the Normothermia
Outcome measure, how CMS intends to
collect data for the measure, and how
CMS will calculate this measure.
Response: We thank the commenters
for sharing their comments and
recommendations regarding future
inclusion of the Normothermia Outcome
measure in the ASCQR Program. We
will take these suggestions and concerns
into consideration if we propose to
adopt the Normothermia Outcome
measure in the future.
Comment: The majority of
commenters supported future adoption
of the Unplanned Anterior Vitrectomy
measure for the ASCQR Program. One
commenter noted that the measure’s
reliability testing in the ASC setting was
very strong, and that the measure is
already in use in the ASC Quality
Collaboration’s public reporting
program. The commenter further stated
the measure does not require NQF
endorsement because the requirement of
the ASCQR Program to reflect consensus
among affected parties has been met
through the measure developer’s
collaboration with the ASC industry.
Some commenters recommended CMS
perform reliability and field testing of
the Unplanned Anterior Vitrectomy
measure, submit the measure to NQF for
endorsement, and resubmit the measure
to the MAP for review before proposing
to add this measure to the ASCQR
Program measure set. One commenter
requested additional information

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regarding the volume of unplanned
anterior vitrectomies captured under the
Unplanned Anterior Vitrectomy
measure, how CMS intends to collect
data on the measures, and how CMS
will calculate this measure.
Response: We thank the commenters
for their comments and
recommendations regarding future
inclusion of the Unplanned Anterior
Vitrectomy measure in the ASCQR
Program. We will take these comments
and recommendations into
consideration if we propose to adopt the
Unplanned Anterior Vitrectomy
measure for the ASCQR Program in the
future.
Comment: One commenter
recommended that CMS consider the
measure topic of Equipment
Reprocessing (for patient safety, highlevel disinfection and sterilization, with
a particular emphasis on endoscope
reprocessing) for the ASCQR Program.
Response: We thank the commenter
for this recommendation and will
consider this measure topic for the
ASCQR Program in future years.
Comment: One commenter
recommended CMS consider including
additional quality measures covering
vaccine preventable disease for the
ASCQR Program.
Response: We thank the commenter
for this recommendation. We agree that
quality measures covering vaccine
preventable disease are important; the
ASCQR Program currently contains one
measure on influenza immunizations,
ASC–8: Influenza Vaccination Coverage
among Healthcare Personnel (NQF
#0431). We will consider adopting
additional measures in this measure
topic for the ASCQR Program in future
years.
Comment: One commenter expressed
concern about the MAP, specifically the
public comment process and the
practice of submitting measure concepts
for consideration.
Response: We thank the commenter
for expressing this concern. As we
stated in the CY 2015 OPPS/ASC final
rule with comment period (79 FR
66980) in response to similar concerns,
we invite the commenter to submit its
MAP-specific concerns directly to the
NQF, which convenes the MAP.
Comment: One commenter
recommended that, to the extent
feasible, CMS adopt measures that can
be used for both the Hospital OQR and
ASCQR Programs.
Response: We thank the commenter
for the recommendation to adopt
measures that are applicable to both the
Hospital OQR and ASCQR Programs.
We agree that because outpatient
surgical services are provided in both

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settings, measures that apply to both
settings should be adopted to the extent
feasible. We note that we have adopted
the following for both settings: ASC–6/
OP–25 Safe Surgery Checklist Use;
ASC–7/OP–26 ASC/Hospital Outpatient
Volume on Selected ASC/Outpatient
Surgical Procedures; ASC–8/OP–27
Influenza Vaccination Coverage among
Healthcare Personnel (NQF #0431);
ASC–9/OP–29 Endoscopy/Polyp
Surveillance: Appropriate Follow-Up
Interval for Normal Colonoscopy in
Average Risk Patients (NQF #0658);
ASC–10/OP–30 Endoscopy/Polyp
Surveillance: Colonoscopy Interval for
Patients with a History of Adenomatous
Polyps-Avoidance of Inappropriate Use
(NQF #0659); ASC–11/OP–31 Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following
Cataract Surgery (NQF #1536); and
ASC–12/OP–32 Facility 7-Day RiskStandardized Hospital Visit Rate after
Outpatient Colonoscopy (NQF #2539).
Comment: One commenter stated that
it would welcome opportunities to work
with CMS to explore alternative
reporting options for measures that cut
across CMS quality reporting programs,
particularly measures that are included
in both the ASCQR Program and PQRS.
Response: We thank the commenter
for the offer to collaborate with us on
alternative reporting options. We will
continue to look for opportunities to
work with ASC community stakeholders
to continuously improve the ASCQR
Program, including alternate reporting
options for cross-cutting measures.
Comment: One commenter expressed
support for the establishment of a VBP
program for ASCs, and recommended
that the Secretary seek legislative
authority from Congress to implement
an ASC VBP program. The commenter
noted that the ASCQR Program could
lay the foundation for a future ASC VBP
program if modifications were made to
the existing measure set.
Response: We thank the commenter
for these recommendations.
6. Maintenance of Technical
Specifications for Quality Measures
We refer readers to the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74513 through 74514),
where we finalized our proposal to
follow the same process for updating the
ASCQR Program measures that we
adopted for the Hospital OQR Program
measures, including the subregulatory
process for making updates to the
adopted measures. In the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68496 through 68497), the
CY 2014 OPPS/ASC final rule with
comment period (78 FR 75131), and the

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CY 2015 OPPS/ASC final rule with
comment period (79 FR 66981), we
provided additional clarification
regarding the ASCQR Program policy in
the context of the previously finalized
Hospital OQR Program policy, including
the processes for addressing
nonsubstantive and substantive changes
to adopted measures.
We maintain technical specifications
for previously adopted ASCQR Program
measures in the ASCQR Program
Measures Specifications Manual. These
specifications are updated as we
continue to develop the ASCQR
Program. We maintain the technical
specifications for the measures adopted
for the ASCQR Program by updating this
Specifications Manual. The versions of
the Specifications Manual that contain
specifications for the previously
adopted measures can be found on the
QualityNet Web site at: https://
www.qualitynet.org/dcs/
ContentServer?c=Page&pagename=
QnetPublic%2FPage%2FQnetTier2&
cid=1228772475754.
As stated in the CY 2014 OPPS/ASC
final rule with comment period (78 FR
75131), we will determine what
constitutes a substantive versus a
nonsubstantive change to a measure’s
specifications on a case-by-case basis. If
we determine that a change to a measure
previously adopted in the ASCQR
Program is nonsubstantive, we will use
a subregulatory process to revise the
ASCQR Program Specifications Manual
so that it clearly identifies the updates
to that measure and provide links to
where additional information on the
changes can be found. We will provide
notification of the measure specification
update on the QualityNet Web site and
in the ASCQR Program Specifications
Manual, and will provide sufficient lead
time for ASCs to implement the
revisions where changes to the data
collection systems are necessary. We
will continue to use rulemaking to
adopt substantive updates to measures
in the ASCQR Program. In the CY 2016
OPPS/ASC proposed rule (80 FR 39343
through 39344), we did not propose any
changes to these policies. However, we
proposed to codify these policies at
proposed new 42 CFR 416.325.
We previously finalized a policy to
post technical specifications on a CMS
Web site in addition to posting this
information on QualityNet because we
believed doing so would increase ASC
awareness of our technical
specifications in our outreach and
education (76 FR 74514). However, we
now believe that posting technical
specifications on QualityNet alone is
preferable to prevent possible
inconsistencies associated with

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70531

accessing multiple sites for information
and to reduce burden. We believe that
posting this information on a single site
is a more efficient process that still
provides ASCs with complete access to
the technical specifications for ASCQR
Program purposes. Therefore, we are not
posting the technical specifications on a
CMS Web site but will continue to post
this information on QualityNet for the
ASCQR Program.
We invited public comment on our
proposal to codify our existing policies.
Comment: One commenter expressed
concern that, moving forward, CMS will
only post technical specifications on the
QualityNet Web site, asserted that many
ASCs are more comfortable accessing
the CMS Web site, and, therefore,
recommended that CMS continue to
post information about the ASCQR
Program technical specifications on
both the CMS and QualityNet Web sites.
Response: We thank the commenter
for this recommendation. However, we
believe that ASCs should be comfortable
accessing the QualityNet Web site
because they currently use the
QualityNet Web site’s secure portal to
submit data under the ASCQR Program.
Furthermore, we believe the
commenter’s concerns regarding the use
of a single Web site to post technical
specifications are outweighed by the
benefits—providing this information on
a single site is a more efficient process;
it could prevent potential
inconsistencies associated with
accessing multiple sites for information;
and it reduces burden.
After consideration of the public
comments we received, we are not
displaying the technical specifications
for the ASCQR Program on the CMS
Web site but will continue to display
the technical specifications for the
ASCQR Program on the QualityNet Web
site. In addition, we are finalizing our
proposal to codify our policies regarding
the maintenance of technical
specifications for the ASCQR Program at
42 CFR 416.325.
7. Public Reporting of ASCQR Program
Data
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. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39344), we
proposed to codify this existing policy
at proposed new 42 CFR 416.315.
We also finalized a policy to display
these data at the CMS Certification
Number (CCN) level in the CY 2012

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OPPS/ASC final rule with comment
period (76 FR 74514 through 74515).
However, in the CY 2016 OPPS/ASC
proposed rule (80 FR 39344), we
proposed to change this policy. ASCs
typically report quality measure data to
CMS using their National Provider
Identifier (NPI), which is their billing
identifier on the CMS–1500 form as
non-institutional billers. Further,
payment determinations are made by
NPI. Because an ASC CCN can have
multiple NPIs, publication of data by
CCN can aggregate data for multiple
facilities, thereby reducing
identification of individual facility
information. To allow for identification
of individual facility information,
beginning with any public reporting that
occurs on or after January 1, 2016, we
proposed to display the data by the NPI
when data are submitted by the NPI. We
believe identifying data by the NPI
would enable consumers to make more
informed decisions about their care
because the public would be able to
distinguish between ASCs. Further, it
would help ASCs to better understand
their performance on measures collected
under the ASCQR Program. We also
proposed, beginning with any public
reporting that occurs on or after January
1, 2016, to display data by the CCN
when data are submitted by the CCN.
When data are submitted by the CCN,
all NPIs associated with the CCN would
be assigned the CCN’s value because we
would not be able to parse the data by
the NPI. For example, in the case of
ASC–8: Influenza Vaccination Coverage
among Healthcare Personnel measure
(NQF #0431), the one ASCQR Program
measure where data are submitted by
the CCN as this is the identifier used by
the CDC’s NHSN Healthcare Personnel
Vaccination Module, we would not be
able to parse the data by the NPI. Thus,
the data displayed for ASC–8 would be
the same for all of the NPIs under the
same CCN. We proposed to codify this
proposal at proposed new 42 CFR
416.315.
We invited public comment on our
proposal to display data by the NPI if
the data are submitted by the NPI and
to display data by the CCN if the data
are submitted by the CCN beginning
with any public reporting that occurs on
or after January 1, 2016, and to codify
this policy and our existing policies.
Comment: Some commenters did not
support CMS’ proposal to assign all
NPIs associated with a CCN the CCN’s
value when the data are submitted by
CCN for that reporting. These
commenters asserted that doing so is not
statistically valid and may misrepresent
an individual ASC’s performance. The
commenters recommended that CMS

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instead publicly report data using the
identifier it is reported under; that is, by
NPI when the data are submitted by
NPI, and by CCN when data are
submitted by CCN.
Response: We thank the commenters
for their recommendation. We recognize
that attributing data reported under a
CCN to all NPIs associated with that
CCN has the potential to misrepresent
ASC’s performance on a quality
measure. For this reason, we are not
finalizing the proposal to assign all NPIs
associated with a CCN the CCN’s value
for reporting when data are submitted
by CCN. Instead, as proposed, beginning
with any public reporting that occurs on
or after January 1, 2016, we will
publicly report data under the identifier
used to submit that data; that is,
reporting by NPI when the data are
submitted by NPI, and reporting by CCN
when the data are submitted by CCN.
However, we are not finalizing our
proposal to assign the CCN’s value to all
NPIs associated with that CCN when
data are submitted by CCN.
Comment: Some commenters
supported allowing ASCs to report data
for the ASCQR Program by either their
NPI or CCN, depending upon the
collection requirements of the measure.
Response: We thank the commenters
for their support. However, we note that
our proposal was to attribute data
submitted at the CCN level to all NPIs
associated with that CCN, not just to
report data by CCN when the data are
submitted by CCN. As discussed above,
we are not finalizing this proposed
policy because of the potential
unintended negative effects of
attributing the CCN’s data to all NPIs
associated with that CCN.
Comment: One commenter
recommended that CMS work toward
collecting all facility data under the
facility NPI because reporting at this
level would ensure that consumers can
distinguish performance at the
individual facility level and thereby
better inform consumer decisionmaking. Specifically, the commenter
recommended that CMS work with the
CDC to modify the reporting tools for
ASC–8, the only current ASCQR
Program measure collected by CCN, to
allow facilities to report data using their
NPI for future payment determinations.
The commenter further stated that,
because the public reporting policy
should be revised to allow ASCs to
report all data by NPI, the current public
reporting policy should not be codified
at this time.
Response: We thank the commenter
for the recommendation to modify ASC–
8 to allow facilities to report data for
this measure using their NPI in the

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future. We will take this
recommendation into consideration as
we continue to refine the public
reporting policies for the ASCQR
Program so that data accuracy and
transparency are maximized to the
extent possible.
We also thank the commenter for
sharing its concerns regarding the
codification of our current public
reporting policy when changes may be
made to this policy in future
rulemaking. Again, we assure the
commenter that making future program
changes to codified ASCQR Program
regulatory text is not more difficult.
Codified regulatory text can be and is
modified through the rulemaking
process, which, for the ASCQR Program,
occurs on an annual basis. In addition,
for some users, codified regulatory text
is both easier to access and easier to
understand than programmatic policies
found only in preamble text. Thus, we
believe it is appropriate to codify our
currently public reporting policy at this
time and incorporate any future changes
to this policy after they are finalized
through notice-and-comment
rulemaking.
Comment: Commenters encouraged
CMS to make ASC data publicly
available as soon as possible to help
patients, policymakers, and researchers
compare quality among facilities. The
commenters also urged CMS to ensure
that the public reporting Web site for
ASCQR Program data is developed for
use by the average consumer or patients.
Response: We thank the commenters
for these comments. We agree that it is
important to make data collected under
the ASCQR Program publicly available
and are working to do so. In addition,
we are working to ensure that the data
publicly reported for the ASCQR
Program will be presented in a format
that is easily understood by consumers
and patients and is user-friendly.
Comment: One commenter urged
CMS to further specify its policies
regarding the public reporting of
ASCQR Program data through future
rulemaking. Specifically, the commenter
recommended that CMS provide ASCs
with more notice of the preview period;
provide ASCs with more time in which
to review their data; and establish a
means either for ASCs to correct
erroneous data or for CMS to suppress
clearly incorrect data. In the absence of
a correction or suppression process, this
commenter further recommended that
CMS make preview reports available to
ASCs well in advance of the withdrawal
deadline for the ASCQR Program so that
an ASC with erroneous data has
sufficient opportunity to determine if it
would like to withdraw from the

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ASCQR Program, because, it stated, this
would be its only recourse to avoid
publication of incorrect quality data.
Response: We thank the commenters
for their comments and
recommendations, and will take these
recommendations into consideration
during future policy development
efforts. We note that ASCs can edit any
measure data submitted via an online
data submission tool until the data
submission deadline for that measure.
In addition, although we understand
that ASCs cannot currently change
claims-based data submitted for the
ASCQR Program once submitted, or edit
measure quality data submitted via an
online data submission tool after the
submission deadline for the measure
has passed, we believe it is the
responsibility of each ASC to ensure
that its data, as reported to CMS, are
accurate. We will continue looking for
ways to address any data inaccuracies in
the future. Regarding the length of time
available to preview data prior to public
release, we agree that sufficient time to
do so is important and will consider
proposals for this in future rulemaking.
Comment: One commenter urged
CMS to maintain its established practice
of reporting data as ‘‘Not Available’’ for
ASCs with denominators greater than 0
and less than 11 for a given measure
when publicly reporting data for the
ASCQR Program.
Response: We thank the commenter
for its comment. We note that,
consistent with the CMS Policy for
Privacy Act Implementation & Breach
Notification, 2007, CMS, statistical,
aggregate, or summarized information
created as a result of analysis conducted
using identifiable CMS data obtained
under CMS-approved projects/studies
may only be disclosed if the data are not
individual-specific and the data are
aggregated to a level where no data cells
contain 10 or fewer individuals (https://
www.cms.gov/Research-Statistics-Dataand-Systems/CMS-InformationTechnology/SystemLifecycleFramework/
downloads/privacypolicy.pdf). Thus,
when case numbers are at issue, we will
publicly report data only for those
measures for which an ASC had a
numerator greater than or equal to 11.
However, this data reporting
requirement does not apply to data
expressed as a rate or percentage.
After consideration of the public
comments we received, we are
finalizing our proposal to publicly
display data by the NPI when the data
are submitted by the NPI and to publicly
display data by the CCN when the data
are submitted by the CCN, but are not
finalizing our proposal to attribute data
submitted by the CCN to all NPIs

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associated with the CCN. We are
finalizing our proposal to codify the
CCN and NPI display policy at 42 CFR
416.315, with the modification
discussed above. We also are finalizing
without modification our proposal to
codify our existing policies at 42 CFR
416.315.
C. Administrative Requirements
1. Requirements Regarding QualityNet
Account and Security Administrator
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75132
through 75133), we finalized our
requirements regarding QualityNet
accounts and QualityNet security
administrators under the ASCQR
Program for the CY 2016 payment
determination and subsequent years.
Under these requirements, ASCs must
maintain a QualityNet account in order
to submit quality measure data to the
QualityNet Web site for all Web-based
measures submitted via a CMS online
data submission tool. Further, a
QualityNet security administrator is
necessary to set up a QualityNet user
account to be able to enter data via an
online tool located on the QualityNet
Web site. The registration process for
the QualityNet security administrator is
described on the QualityNet Web site.
We recommend that ASCs submit
documentation required for the creation
of a QualityNet Account at least 4 to 6
weeks prior to any quality measure data
submission deadline for the ASCQR
Program. The QualityNet security
administrator typically fulfills a variety
of tasks related to quality reporting for
ASCs, such as creating, approving,
editing, and terminating QualityNet user
accounts, and monitoring QualityNet
usage to maintain proper security and
confidentiality. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39344), we
did not propose any changes to these
policies. We proposed to codify these
existing requirements at proposed new
42 CFR 416.310(c)(1)(i).
We invited public comment on our
proposal to codify our existing
requirements.
We did not receive any public
comments on the proposal to codify the
administrative requirements regarding
maintenance of a QualityNet account
and security administrator for the
ASCQR Program and, therefore, are
finalizing it as proposed at 42 CFR
416.310(c)(1)(i).
2. Requirements Regarding Participation
Status
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53639 through 53640), we
finalized our participation policy.

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Under this policy, an ASC is considered
as participating in the ASCQR Program
once the ASC submits any quality
measure data to the ASCQR Program.
Further, once an ASC submits any
quality measure data and is considered
participating in the ASCQR Program, an
ASC would still be considered
participating in the ASCQR Program,
regardless of whether the ASC continues
to submit quality measure data, unless
the ASC withdraws from the ASCQR
Program.
An ASC may withdraw from the
ASCQR Program by submitting to CMS
a withdrawal of participation form that
can be found in the secure portion of the
QualityNet Web site, indicating that it is
withdrawing and the initial payment
determination year to which the
withdrawal applies. Once the ASC has
withdrawn, an ASC will incur a 2.0
percentage point reduction in its ASC
annual payment update for that
payment determination year and any
subsequent payment determinations in
which it is withdrawn.
An ASC will be considered as
rejoining the ASCQR Program if it
begins to submit any quality measure
data again to the ASCQR Program. In the
CY 2014 OPPS/ASC final rule with
comment period (78 FR 75133 through
75135), for the CY 2016 payment
determination and subsequent years, we
finalized our policies that all program
requirements would apply to all ASCs
designated as open in the Certification
and Survey Provider Enhanced
Reporting (CASPER) system for at least
4 months prior to the beginning of data
collection for a payment determination
and that an ASC may withdraw from the
ASCQR Program any time up to and
including August 31 of the year
preceding a payment determination. For
example, an ASC can withdraw from the
ASCQR Program at any time up to and
including August 31, 2016 for the CY
2017 payment determination. In the CY
2016 OPPS/ASC proposed rule (80 FR
39344 through 39345), we did not
propose any changes to these policies.
However, we proposed to codify these
existing requirements at proposed new
42 CFR 416.305(a) and (b).
As finalized in the CY 2014 OPPS/
ASC final rule with comment period (78
FR 75135 through 75137), for the CY
2016 payment determination and
subsequent years, ASCs with fewer than
240 Medicare claims (Medicare primary
and secondary payer) per year during an
annual reporting period for a payment
determination year are not required to
participate in the ASCQR Program for
the subsequent annual reporting period
for that subsequent payment
determination year. For example, an

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ASC with fewer than 240 Medicare
claims in CY 2016 (payment
determination year 2018) would not be
required to participate in the ASCQR
Program in CY 2017 (payment
determination year 2019). We did not
propose any changes to these existing
requirements. However, we proposed to
codify these existing requirements at
proposed new 42 CFR 416.305(c).
We invited public comment on our
proposal to codify our existing policies.
We did not receive any public
comments on the proposals to codify the
requirements regarding participation
status for the ASCQR Program and,
therefore, are finalizing them as
proposed at 42 CFR 416.305(a), (b), and
(c).
D. Form, Manner, and Timing of Data
Submitted for the ASCQR Program
We received public comments on
alternate methods for submitting data
for the ASCQR Program.
Comment: One commenter
recommended that CMS allow ASCs to
meet the requirements of the ASCQR
Program using registry-based reporting,
noting that using a registry is an option
under the PQRS and that other registries
are already in existence. The commenter
also recommended that ASCs should
have the option of submitting quality
data to CMS through an EHR-based
reporting mechanism, as there are ASCs
that have implemented this technology
and could benefit from this option.
Response: We thank the commenter
for these suggestions, and agree that it
could reduce burden to have a registrybased mechanism for data submission
because a registry would enable ASCs to
contract with a vendor that would
collect and report quality data on the
ASC’s behalf. We have not proposed a
registry-based reporting option because,
currently, there is not a registry in place
that is collecting information on the
quality measures that we have adopted
for this program. If registry-based
reporting of the ASC quality measures
adopted for the ASCQR Program
becomes 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. If such measures do exist, we
would need to understand the level of
EHR adoption and capabilities of ASCs
to utilize this method at that time before
proposing their adoption in the ASCQR
Program. As we discussed in the CY

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2014 OPPS/ASC final rule with
comment period (78 FR 75124 through
75126), in a recent environmental scan,
which included an assessment of the
readiness of ASCs to electronically
report quality data, we found evidence
of low levels of EHR use by ASCs. We
believe that ASCs continue to be slow
to adopt EHRs because many of these
facilities are small and the cost of EHRs
may pose a barrier to adoption.
Comment: One commenter requested
a batch-processing data submission
option for entities that own multiple
ASCs.
Response: We thank the commenter
for this request. We agree that a batch
submission approach, which would
allow ASCs to report data for multiple
facilities at once using their preexisting
or a new information technology
infrastructure, has merit, especially for
entities that own multiple ASCs, and are
considering how to implement this
capability into our data submission
process. In the event this method can be
available for data submission, we would
issue proposals through future
rulemaking for ASCQR Program
implementation.
1. Requirements Regarding Data
Processing and Collection Periods for
Claims-Based Measures Using Quality
Data Codes (QDCs)
In the CY 2013 OPPS/ASC final rule
with comment period (77 FR 68497
through 68498), we finalized our data
processing and collection policies for
the claims-based measures using QDCs
for the CY 2015 payment determination
and subsequent years. Specifically,
ASCs 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 claims-based quality
measures reported using QDCs is the
calendar year 2 years prior to the
payment determination year. Only
claims for services furnished in each
calendar year paid by the MAC by April
30 of the following year of the ending
data collection time period will be
included in the data used for the
payment determination. In the CY 2016
OPPS/ASC proposed rule (80 FR 39345),
we did not propose any changes to these
existing requirements. However, we
proposed to codify these existing
requirements at proposed new 42 CFR
416.310(a)(1) and (2).
We invited public comment on our
proposal to codify our existing policies.
We did not receive any public
comments on the proposal to codify the
requirements regarding data processing

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and collection periods for claims-based
measures using QDCs for the ASCQR
Program and, therefore, are finalizing it
as proposed at 42 CFR 416.310(a)(1) and
(2).
2. Minimum Threshold, Minimum Case
Volume, and Data Completeness for
Claims-Based Measures Using QDCs
The requirements for minimum
threshold, minimum case volume, and
data completeness for participation in
the ASCQR program for the CY 2015
payment determination and subsequent
years are set forth in the CY 2013 OPPS/
ASC final rule with comment period (77
FR 68498 through 68499) and the CY
2014 OPPS/ASC final rule with
comment period (78 FR 75135 through
75137). As stated in the CY 2013 rule,
for ASCQR Program purposes, data
completeness for claims-based measures
using QDCs is 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 that
meet measure specifications, but do not
have the appropriate QDCs on the
submitted Medicare claims. For the CY
2016 payment determination and
subsequent years, the minimum
threshold for successful reporting is that
at least 50 percent of Medicare claims
meeting measures specifications contain
the appropriate QDCs. ASCs that meet
this minimum threshold are regarded as
having provided complete data for the
claims-based measures using QDCs for
the ASCQR Program. In the CY 2016
OPPS/ASC proposed rule (80 FR 39345),
we did not propose any changes to these
existing requirements. However, we
proposed to codify these existing
requirements at proposed new 42 CFR
416.310(a)(3).
We invited public comment on our
proposal to codify our existing policies.
Comment: One commenter
recommended that CMS raise the 50percent threshold for claims meeting
measure specifications containing
QDCs, noting that many of the issues in
the early years of the program that led
to this standard have been resolved. In
addition, the commenter did not
support codifying the current 50-percent
threshold for claims meeting measure
specifications containing QDCs because,
the commenter stated, CMS has
previously expressed its intent to
modify this threshold and, the
commenter stated, regulatory text
should be reserved for permanent
policies.
Response: We thank the commenter
for the recommendation. While we did
not propose any changes to our QDC use

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threshold in this rulemaking, we will
consider this comment as we move
forward with program planning as ASCs
now have experience in submitting data
in this manner. We note that the
threshold is a minimum and holding at
this level can enable an ASC that
encounters reporting issues during the
year to recover and still meet
requirements.
We also thank the commenter for
sharing its concerns about the ASCQR
Program’s proposal to codify this policy
in regulatory text. However, we note
that codified regulatory text is regularly
revised to reflect changes in policy or
position on a given issue. In addition,
for some users, codified text is both
easier to access and easier to understand
than programmatic policies found only
in preamble text. Therefore, we believe
it is appropriate to codify programmatic
policies, such as the minimum data
threshold, and incorporate any future
changes to those policies when they are
finalized through notice-and-comment
rulemaking.
After consideration of the public
comments we received, we are
finalizing our proposal to codify our
policies regarding the minimum
threshold and data completeness for
claims-based measures using QDCs for
the ASCQR Program at 42 CFR
416.310(a)(3). We codified our policy
regarding the minimum case volume at
42 CFR 416.305(c), as discussed it in
section XIV.C.2. of this final rule with
comment period.
3. Requirements for Data Submitted Via
an Online Data Submission Tool
In the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75137
through 75139), we finalized the data
collection time period for quality
measures for which data are submitted
via a CMS online data submission tool
as services furnished during the
calendar year 2 years prior to the
payment determination year. We also
finalized our policy that these data will
be submitted during the time period of
January 1 to August 15 in the year prior
to the affected payment determination
year.
We established a different time period
for data collection and submission for
ASC–8: Influenza Vaccination Coverage
among Healthcare Personnel (NQF
#0431), which is submitted via the
CDC’s NHSN rather than a CMS online
data submission tool. For ASC–8, the
data collection for the CY 2016 payment
determination is from October 1, 2014
through March 31, 2015 (the 2014–2015
influenza season data) (76 FR 74510),
and for the CY 2017 payment
determination and subsequent years is

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from October 1 of the year 2 years prior
to the payment determination year to
March 31 of the year prior to the
payment determination year (79 FR
66986), and the submission deadline is
May 15 of the year when the influenza
season ends (79 FR 66985 through
66986).
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39345 through 39346), we
proposed to implement a May 15
submission deadline for all data
submitted via a CMS Web-based tool in
the ASCQR Program for the CY 2017
payment determination and subsequent
years. This proposal currently would
include the following measures: ASC–6:
Safe Surgery Checklist Use; ASC–7: ASC
Facility Volume Data on Selected ASC
Surgical Procedures; ASC–9:
Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658); ASC–10:
Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous Polyps—
Avoidance of Inappropriate Use (NQF
#0659); and ASC–11: Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following
Cataract Surgery (NQF #1536).62
Therefore, we proposed that data
collected for a quality measure for
which data are submitted via a CMS
online data submission tool must be
submitted during the time period of
January 1 to May 15 in the year prior to
the payment determination year for the
CY 2017 payment determination and
subsequent years. We proposed this
change because we believe that aligning
all Web-based tool data submission
deadlines with the end date of May 15
would allow for earlier public reporting
of measure data and reduce the
administrative burden for ASCs
associated with tracking multiple
submission deadlines for these
measures.
We also proposed to codify these
proposed and existing requirements at
proposed new 42 CFR 416.310(c)(1)(ii)
and (2).
We invited public comment on our
proposal to change the data submission
time period beginning with the CY 2017
payment determination for measures for
which data are submitted via a CMS
online data submission tool, and our
proposal to codify this proposed policy
and our existing policy.
62 We note that ASC–11 is a voluntary measure
for the CY 2017 payment determination and
subsequent years. This proposal would mean that
ASCs that choose to submit data for this measure
also would need to submit such data between
January 1 and May 15 for the CY 2018 payment
determination and subsequent years.

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Comment: Commenters did not
support CMS’ proposal to implement a
May 15 submission deadline for all data
submitted via a CMS online data
submission tool. The commenters
asserted that a May 15 deadline would
increase ASC administrative burden by
giving ASCs less time to collect and
report data. The commenters also noted
that the current August 15 deadline was
extended for the CY 2016 payment
determination due to technical issues,
and expressed concern that similar
issues may arise each time new
measures are added in the future. For
these same reasons, the commenters did
not support CMS’ proposal to codify the
May 15 submission deadline for all data
submitted via a CMS online data
submission tool. The commenters
recommended that, if CMS wishes to
align the deadlines for submission of the
Web-based measures, it use an August
15 deadline instead.
Response: We thank the commenters
for their comments regarding the
increased administrative burden
associated with changing the
submission deadline for all data
submitted via an online data submission
tool from August 15 to May 15. We seek
to reduce the administrative burden of
participation in the ASCQR Program on
ASCs where feasible and practicable.
For this reason, we have decided not to
finalize the proposal to change the
deadline at this time. We will instead
maintain the August 15 submission
deadline for all measures submitted via
a CMS online data submission tool.
However, we note that we are not
changing the May 15 submission
deadline for ASC–8, which is submitted
via a non-CMS online data submission
tool. As stated in the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66986), we finalized a submission
deadline of May 15 for ASC–8 in order
to enable ASCs to use data summarizing
the results of their previous influenza
vaccination campaign to set targets and
make plans for the next influenza
season; to enable us to post and for the
public to review the summary data
before the start of the next influenza
season; and to align this measure’s
submission deadline with the Hospital
IQR and OQR Programs. We continue to
believe that the May 15 submission
deadline is appropriate for ASC–8, and
therefore are not changing the
submission deadline for this measure to
August 15 at this time. We will consider
whether there is another way to reduce
ASC burden and expedite public
reporting of these data in the future.
After consideration of the public
comments we received, we are not
finalizing the proposal to implement a

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May 15 submission deadline for data
submitted using a CMS online data
submission tool. Instead, the ASCQR
Program will continue to use the
currently adopted submission deadlines
for these measures; that is, the August
15 submission deadline for ASC–6,
ASC–7, ASC–9, ASC–10, and ASC–11.
The ASCQR Program also will continue
to use the currently adopted May 15
submission deadline for ASC–8, which
is submitted via a non-CMS online data
submission tool (the CDC’s NHSN Web
site). Furthermore, consistent with the
policy we are finalizing above regarding
the August 15 submission deadline, we
are codifying our policies for quality
measures for which data are submitted
via a CMS online data submission tool
with the August 15 submission deadline
at 42 CFR 416.310(c)(1)(ii) instead of
May 15 as originally proposed. In
addition, we are finalizing our proposal
to codify our existing policies regarding
the data collection time periods for
measures involving online data
submission and the deadline for data
submission via a non-CMS online data
submission tool at 42 CFR 416.310(c)(2).
However, we proposed to include the
word ‘‘calendar’’ in the proposed
codification of this policy at 42 CFR
416.310(c)(2). This word was not part of
the finalized policy and we believe this
word is unnecessary. We have made a
technical change to not include this
word in the final regulation.
4. Claims-Based Measure Data
Requirements for the ASC–12: Facility
7-Day Risk-Standardized Hospital Visit
Rate After Outpatient Colonoscopy
Measure for the CY 2018 Payment
Determination and Subsequent Years
In the CY 2015 OPPS/ASC final rule
with comment period (79 FR 66970
through 66979), we adopted ASC–12:
Facility 7-Day Risk-Standardized
Hospital Visit Rate after Outpatient
Colonoscopy (NQF #2539) in the
ASCQR Program for the CY 2018
payment determination and subsequent
years. At the time we adopted this
measure, it was not NQF-endorsed; it
has subsequently been endorsed by the
NQF. Unlike the other claims-based
measures adopted for the ASCQR
Program, this claims-based measure
does not require any additional data
submission, such as QDCs. In the CY
2015 OPPS/ASC final rule with
comment period (79 FR 66985), we
finalized the policy to use paid
Medicare fee-for-service (FFS) claims
from the calendar year 2 years before the
payment determination year. In the CY
2016 OPPS/ASC proposed rule (80 FR
39346), we proposed to align our policy
regarding the paid claims to be included

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in the calculation for claims-based
measures not using QDCs with our
policy regarding the paid claims to be
included for the claims-based measures
using QDCs.
Therefore, beginning with the CY
2018 payment determination, we
proposed to use claims for services
furnished in each calendar year that
have been paid by the MAC by April 30
of the following year of the ending data
collection time period to be included in
the data used for the payment
determination. We believe that this
claim paid date would allow ASCs
sufficient time to submit claims and at
the same time allow CMS sufficient time
to complete required data analysis and
processing to make payment
determinations and to supply this
information to the MACs. For example,
for the CY 2018 payment determination,
for calculating ASC–12, we would use
claims for services furnished in CY 2016
(January 1, 2016 through December 21,
2016) that were paid by the MAC by
April 30, 2017.
We proposed to codify this policy at
proposed new 42 CFR 416.310(b).
We invited public comment on our
proposal regarding the paid claims to be
included in the data used for ASC–12
beginning with the CY 2018 payment
determination, and our proposal to
codify this proposal and our existing
policies.
We did not receive any public
comments on these proposals.
Therefore, we are finalizing our policy
regarding paid claims to be included in
the calculation for claims-based
measures not using QDCs, and codifying
this proposal and our existing policies
at 42 CFR 416.310(b). We inadvertently
did not include the word ‘‘paid’’ in the
proposed codification of this policy at
42 CFR 416.310(b) and have made this
technical change to the final regulation.
5. Indian Health Service (IHS) Hospital
Outpatient Departments Not Considered
ASCs for the Purpose of the ASCQR
Program
Indian Health Service (IHS) hospital
outpatient departments are able to bill
Medicare for ASC services and be paid
based on the ASC rates for services
under the ASC payment system as
described in Section 40.2.1, Chapter 19
of the Medicare Claims Processing
Manual and Section 260.1, Chapter 15
of the Medicare Benefit Policy Manual
(http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/
Downloads/clm104c19.pdf, http://
www.cms.gov/Regulations-andGuidance/Guidance/Manuals/
downloads/bp102c15.pdf). We have
considered these entities to be ASCs for

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purposes of the ASCQR Program due to
their payment under the ASC payment
system. These entities are included
under Section 260.1 (Definition of
Ambulatory Surgical Centers), Chapter
15 of the Medicare Benefit Policy
Manual.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39346), we proposed that
these facilities not be considered ASCs
for purposes of the ASCQR Program,
beginning with the CY 2017 payment
determination. As stated in the manuals,
in order to bill for ASC services, these
IHS hospital outpatient departments
must meet the conditions of
participation for hospitals defined in 42
CFR part 482 and are not certified as
separate ASC entities. Because these
IHS hospital outpatient departments are
required to meet the conditions of
participation for hospitals, which state
that the hospital’s governing body must
ensure that its quality assessment and
performance improvement program
involves all hospital departments and
services, they should be included in the
hospitals’ ongoing, hospital-wide, datadriven quality assessment and
performance improvement programs (42
CFR 482.21), which we believe ensures
that these IHS hospital outpatient
departments engage in continuous
quality improvement efforts outside of
participation in CMS’ quality reporting
programs. For these reasons, we
proposed that IHS hospital outpatient
departments that bill Medicare for ASC
services under the ASC payment system
are not to be considered as ASCs for the
purposes of the ASCQR Program. These
facilities would not be required to meet
ASCQR Program requirements and
would not receive any payment
reduction under the ASCQR Program.
We proposed to codify this proposal at
proposed new 42 CFR 416.305(d).
We invited public comment on this
proposal and our proposal to codify it.
We did not receive any public
comments on the proposal not to
consider IHS hospital outpatient
departments ASCs for the purposes of
the ASCQR Program or the proposal to
codify this policy and, therefore, are
finalizing and codifying this policy as
proposed at 42 CFR 416.305(d).
6. ASCQR Program Validation of
Claims-Based and CMS Web-Based
Measures
We refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53641
through 53642) for a complete
discussion of our policy not to require
validation of claims-based measures
(beyond the usual claims validation
activities conducted by our MACs) or
Web-based measures for the ASCQR

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Program. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39346 through
39347), we did not propose any changes
to this policy.

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7. Extraordinary Circumstances
Extensions or Exemptions for the CY
2018 Payment Determination and
Subsequent Years
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53642 through 53643) and
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75140 through
75141), we adopted procedures for
extraordinary circumstance extensions
or exemption requests for the
submission of information required
under the ASCQR Program.63
Specifically, CMS may grant an
extension or exemption for the
submission of information in the event
of extraordinary circumstances beyond
the control of an ASC, such as when an
act of nature affects an entire region or
locale, or a systematic problem with one
of our data collection systems directly
or indirectly affects data submission.
We may grant an extension or
exemption as follows:
(1) Upon request by the ASC. Specific
requirements for submission of a request
for an extension or exemption are
available on the QualityNet Web site; or
(2) At the discretion of CMS. CMS
may grant extensions or exemptions to
ASCs that have not requested them
when CMS determines that an
extraordinary circumstance has
occurred.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39347), we did not propose
any changes to these requirements.
However, we proposed to codify these
existing procedures at proposed new 42
CFR 416.310(d). We invited public
comment on our proposal to codify our
existing policies.
We did not receive any public
comments on the proposal to codify our
policies regarding extraordinary
circumstances extensions or exceptions
in the ASCQR Program and, therefore,
are finalizing it as proposed at 42 CFR
416.310(d).
8. ASCQR Program Reconsideration
Procedures
In the FY 2013 IPPS/LTCH PPS final
rule (77 FR 53643 through 53644) and
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75141), we set
forth our requirements for an informal
reconsideration process. Specifically, an
63 In the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66987), we stated that we
will refer to the process as the ‘‘Extraordinary
Circumstances Extensions or Exemptions’’ process
rather than the ‘‘Extraordinary Circumstances
Extensions or Waivers’’ process.

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ASC may request reconsideration of a
decision by CMS that it has not met the
requirements of the ASCQR Program for
a particular payment determination year
by submitting a reconsideration request
(signed by a person who has authority
to sign on behalf of the ASC) to CMS by
March 17 of the affected payment
determination year. A reconsideration
request must contain the following
information:
• ASC CCN and related NPI(s);
• The name of the ASC;
• The CMS-identified reason for not
meeting the requirements of the ASCQR
Program for the affected payment
determination year as provided in any
CMS notification to the ASC;
• The ASC’s basis for requesting
reconsideration. The ASC must identify
its specific reason(s) for believing it met
the ASCQR Program requirements for
the affected payment determination year
and should not be subject to the reduced
ASC annual payment update;
• The ASC-designated personnel
contact information, including name,
email address, telephone number, and
mailing address (must include physical
mailing address, not just a post office
box); and
• A copy of all materials that the ASC
submitted to comply with the
requirements of the affected ASCQR
Program payment determination year.
With regard to information on claims,
ASCs are not required to submit copies
of all submitted claims, but instead may
focus on the specific claims at issue. For
these claims, ASCs should submit
relevant information, which could
include copies of the actual claims at
issue.
Upon receipt of a request for
reconsideration, CMS will do the
following:
• Provide an email acknowledgement,
using the contact information provided
in the reconsideration request, notifying
the ASC that the request has been
received; and
• Provide a formal response to the
ASC contact, using the information
provided in the reconsideration request
notifying the ASC of the outcome of the
reconsideration process.
For those ASCs that submit a timely
reconsideration request, the
reconsideration determination is the
final ASCQR Program payment
determination. For ASCs that do not
submit a timely reconsideration request,
the CMS determination is the final
payment determination. There is no
appeal of any final ASCQR Program
payment determination.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39347), we proposed one
change to these requirements. Under our

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70537

current reconsideration procedures,
ASCs are required to submit
reconsideration requests by March 17 of
the affected payment determination year
(77 FR 53643 through 53644). However,
we recognize that, in some payment
years, March 17 may fall outside of the
business week. Therefore, we proposed
that, beginning with the CY 2017
payment determination, ASCs must
submit a reconsideration request to CMS
by no later than the first business day
on or after March 17 of the affected
payment year . We proposed to codify
these existing procedures and the
proposed change to the deadline at
proposed new 42 CFR 416.330.
We invited public comment on our
proposal to change the reconsideration
request submission deadline and our
proposal to codify our existing policies.
We did not receive any public
comments on the proposal to change the
reconsideration request submission
deadline for the ASCQR Program or the
proposal to codify this policy and our
existing reconsideration policies and,
therefore, are finalizing them at 42 CFR
416.330. We are making a technical
change to add the word ‘‘timely’’ at 42
CFR 416.330(d) to clarify that the
reconsideration determination is the
final ASCQR Program payment
determination for an ASC that submits
a timely reconsideration request.
E. Payment Reduction for ASCs That
Fail To Meet the ASCQR Program
Requirements
1. Statutory Background
We refer readers to section XV.C.1. of
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75131 through
75132) for a detailed discussion of the
statutory background regarding payment
reductions for ASCs that fail to meet the
ASCQR Program requirements.
2. Reduction to the ASC Payment Rates
for ASCs That Fail To Meet the ASCQR
Program Requirements for a 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

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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 will be reduced by 2.0
percentage points for ASCs that fail to
meet the reporting requirements of the
ASCQR Program. This reduction
applied 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
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,’’ and ‘‘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, certain radiology services

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and diagnostic tests where payment is
based on the MPFS nonfacility PE RVUbased 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) are paid at the
lesser of the MPFS nonfacility PE RVUbased amounts or the amount calculated
under the standard ASC ratesetting
methodology. Similarly, in section
XII.D.2.b. of the CY 2015 OPPS/ASC
final rule with comment period (79 FR
66933 through 66934), we finalized our
proposal that payment for the new
category of covered ancillary services
(that is, certain diagnostic test codes
within the medical range of CPT codes
for which separate payment is allowed
under the OPPS and when they are
integral to an ASC covered surgical
procedure) will be at the lesser of the
MPFS nonfacility PE RVU-based
amounts or the rate calculated according
to the standard ASC ratesetting
methodology. In the CY 2013 OPPS/
ASC final rule with comment period (77
FR 68500), we finalized our proposal
that the standard ASC ratesetting
methodology for this type of 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 these
procedures or services is consistent for
each HCPCS code regardless of whether
payment is based on the full update
conversion factor or the reduced update
conversion factor.
For ASCs that receive the reduced
ASC payment for failure to meet the
ASCQR Program requirements, we
believe that it is both equitable and
appropriate that a reduction in the
payment for a service should result in
proportionately reduced coinsurance
liability for beneficiaries. Therefore, in
the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68500), we
finalized our proposal that the Medicare
beneficiary’s national unadjusted
coinsurance for a service to which a
reduced national unadjusted payment

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rate applies will be based on the
reduced national unadjusted payment
rate.
In that final rule with comment
period, 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 (77 FR 68500). 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 and CY 2015 OPPS/
ASC final rules with comment periods
(78 FR 75132 and 79 FR 66981 through
66982), we did not make any changes to
these policies. In the CY 2016 OPPS/
ASC proposed rule (80 FR 39347
through 39348), we did not propose any
changes to these policies.
XV. Short Inpatient Hospital Stays
A. Background on the 2-Midnight Rule
In the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50943 through 50954), we
discussed CMS’ longstanding policy on
how Medicare contractors review
inpatient hospital and CAH admissions
for payment purposes. In that final rule,
we discussed previously existing
Medicare policy contained in the
Section 10, Chapter 1 of the Medicare
Benefit Policy Manual (MBPM) that
stated that when a beneficiary receives
a minor surgical procedure or other
treatment in the hospital that is
expected to keep him or her in the
hospital for only a few hours (less than
24 hours), the services generally should
be billed as outpatient hospital services,
regardless of the hour the beneficiary
comes to the hospital, whether he or she
uses a bed, and whether he or she
remains in the hospital past midnight.
We noted that we have been clear that
this billing instruction does not override
the clinical judgment of the physician to
keep the beneficiary at the hospital, to
order specific services, or to determine
appropriate levels of nursing care or
physical locations within the hospital.
Rather, this instruction provided a
benchmark to ensure that all
beneficiaries received consistent
application of their Medicare Part A
benefit to whatever clinical services
were medically necessary.

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However, due to persistently large
improper payment rates in short-stay
hospital inpatient claims, requests to
provide additional guidance regarding
the proper billing of those services, and
concerns about increasingly long stays
of Medicare beneficiaries as outpatients
due to hospital uncertainties about
payment, we modified and clarified our
general rule in the regulations with
respect to Medicare payment for
inpatient hospital admissions.
Specifically, in the FY 2014 IPPS/LTCH
PPS final rule, we provided guidance for
payment purposes that specified that,
generally, a hospital inpatient
admission is considered reasonable and
necessary if a physician or other
qualified practitioner (collectively,
‘‘physician’’) orders such admission
based on the expectation that the
beneficiary’s length of stay will exceed
2 midnights or if the beneficiary
requires a procedure specified as
inpatient-only under § 419.22 of the
regulations. We finalized at § 412.3(d)(1)
of the regulations that services
designated under the OPPS as inpatient
only procedures would continue to be
appropriate for inpatient hospital
admission and payment under Medicare
Part A. In addition, we finalized a
benchmark providing that surgical
procedures, diagnostic tests, and other
treatments would be generally
considered appropriate for inpatient
hospital admission and payment under
Medicare Part A when the physician
expects the patient to require a stay that
crosses at least 2 midnights and admits
the patient to the hospital based upon
that expectation. Conversely, when a
beneficiary enters a hospital for a
surgical procedure not specified as
inpatient-only under § 419.22(n), a
diagnostic test, or any other treatment,
and the physician expects to keep the
beneficiary in the hospital for only a
limited period of time that does not
cross 2 midnights, the services would be
generally inappropriate for payment
under Medicare Part A, regardless of the
hour that the beneficiary came to the
hospital or whether the beneficiary used
a bed.
We finalized a policy at § 412.3(d)(2)
(originally designated as § 412.3(e)(2)
and later redesignated as § 412.3(d)(2))
of the regulations that if an unforeseen
circumstance, such as beneficiary death
or transfer, results in a shorter
beneficiary stay than the physician’s
reasonable expectation of at least 2
midnights, the patient may still be
considered to be appropriately treated
on an inpatient basis for payment
purposes, and the hospital inpatient

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payment may be made under Medicare
Part A.
In addition to the new hospital
admission guidance, we also finalized
two distinct, although related, medical
review policies, a 2-midnight
‘‘benchmark’’ and a 2-midnight
‘‘presumption,’’ effective for admissions
on or after October 1, 2013. The 2midnight benchmark, which is
described in more detail below,
represents guidance to reviewers to
identify when an inpatient admission is
generally appropriate for Medicare
coverage and payment, while the 2midnight presumption relates to
instructions to medical reviewers
regarding the selection of claims for
medical review. Specifically, under the
2-midnight presumption, inpatient
hospital claims with lengths of stay
greater than 2 midnights after the formal
admission following the order are
presumed to be appropriate for
Medicare Part A payment and are not
the focus of medical review efforts,
absent evidence of systematic gaming,
abuse, or delays in the provision of care
in an attempt to qualify for the 2midnight presumption.
With respect to the 2-midnight
benchmark, the starting point is when
the beneficiary begins receiving hospital
care either as a registered outpatient or
after inpatient admission. That is, for
purposes of determining whether the 2midnight benchmark is met and,
therefore, whether an inpatient
admission is appropriate for Medicare
Part A payment, we consider the
physician’s expectation including the
total time spent receiving hospital
care—not only the expected duration of
care after inpatient admission, but also
any time the beneficiary has spent
(before inpatient admission) receiving
outpatient services, such as observation
services, treatments in the emergency
department, and procedures provided in
the operating room or other treatment
area. From the medical review
perspective, while the time the
beneficiary spent as an outpatient before
the admission order is written is not
considered inpatient time, it is
considered during the medical review
process for purposes of determining
whether the 2-midnight benchmark was
met and, therefore, whether payment is
appropriate under Medicare Part A. For
beneficiaries who do not arrive through
the emergency department or are
directly receiving inpatient services (for
example, inpatient admission order
written prior to admission for an
elective admission), the starting point
for medical review purposes is when the
beneficiary starts receiving medically
responsive services following arrival at

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the hospital. For Medicare payment
purposes, both the decision to keep the
patient at the hospital and the
expectation of needed duration of the
stay must be supported by
documentation in the medical record
based on factors such as beneficiary
medical history and comorbidities, the
severity of signs and symptoms, current
medical needs, and the risk of an
adverse event during hospitalization.
With respect to inpatient stays
spanning less than 2 midnights after
admission, we instructed contractors
that, although such claims would not be
subject to the presumption, the
admission may still be appropriate for
Medicare Part A payment because time
spent as an outpatient should be
considered in determining whether
there was a reasonable expectation that
the hospital care would span 2 or more
midnights. In other words, even if an
inpatient admission was for only 1
Medicare utilization day, medical
reviewers are instructed to consider the
total duration of hospital care, both preand post-inpatient admission, when
making the determination of whether
the inpatient stay was reasonable and
necessary for purposes of Medicare Part
A payment.
We continue to believe that use of the
2-midnight benchmark gives
appropriate consideration to the
medical judgment of physicians and
also furthers the goal of clearly
identifying when an inpatient
admission is appropriate for payment
under Medicare Part A. More
specifically, as we described in the FY
2014 IPPS/LTCH PPS final rule (78 FR
50943 through 50954), factors such as
the procedures being performed and the
beneficiary’s condition and
comorbidities apply when the physician
formulates his or her expectation
regarding the need for hospital care,
while the determination of whether an
admission is appropriately billed and
paid under Medicare Part A or Part B is
based upon the physician’s medical
judgment regarding the beneficiary’s
expected length of stay. We have not
identified any circumstances where the
2-midnight benchmark restricts the
physician to a specific pattern of care
because the 2-midnight benchmark, like
the previous 24-hour benchmark, does
not prevent the physician from ordering
or providing any service at any hospital,
regardless of the expected duration of
the service. Rather, this policy provides
guidance on when the hospitalized
beneficiary’s care is appropriate for
coverage and payment under Medicare
Part A benefits as an inpatient, and
when the beneficiary’s care is
appropriate for coverage and payment

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under Medicare Part B benefits as an
outpatient.
On the other hand, we also
acknowledge that certain procedures
may have intrinsic risks, recovery
impacts, or complexities that would
cause them to be appropriate for
inpatient coverage under Medicare Part
A regardless of the length of hospital
time the admitting physician expects a
particular patient to require. We believe
that the OPPS inpatient-only list of
procedures identifies those procedures
and, therefore, procedures on that list
are not subject to the 2-midnight
benchmark for purposes of inpatient
hospital payment. We explained in the
FY 2014 IPPS/LTCH PPS final rule (78
FR 50943 through 50954) that we might
specify additional exceptions to the
generally applicable benchmark through
subregulatory guidance, including
manual instructions. Accordingly, since
publication of the final rule, we have
accepted and considered suggestions
from stakeholders regarding potential
‘‘rare and unusual’’ circumstances
under which an inpatient admission
that is expected to span less than 2
midnights would nonetheless be
appropriate for Medicare Part A
payment.
In January 2014, we identified newly
initiated mechanical ventilation (when
medically necessary and excluding
anticipated intubations related to minor
surgical procedures or other treatment)
as the first such rare and unusual
exception to the 2-midnight benchmark.
We announced this exception by
posting it on the CMS Web site. In the
FY 2015 IPPS/LTCH PPS final rule (79
FR 50147), we invited further feedback
on suggested exceptions to the 2midnight benchmark, in recognition that
there could be additional rare and
unusual circumstances that we have not
identified that justify payment as an
inpatient admission under Medicare
Part A, absent an expectation of care
spanning at least 2 midnights.
With respect to the 2-midnight
benchmark, we have been clear that this
instruction does not override the
clinical judgment of the physician
regarding the need to keep the
beneficiary at the hospital, to order
specific services, or to determine
appropriate levels of nursing care or
physical locations within the hospital.
Rather, as with the previous 24-hour
benchmark in the MBPM, this
instruction provides a benchmark to
ensure that all beneficiaries receive
consistent application of their Medicare
Part A benefit to medically necessary
clinical services.
As part of our efforts to provide
education to stakeholders on the 2-

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midnight rule, CMS has hosted
numerous ‘‘Open Door Forums,’’
conducted national provider calls, and
shared information and answers to
frequently asked questions on the CMS
Web site at: http://www.cms.gov/
Research-Statistics-Data-and-Systems/
Monitoring-Programs/Medicare-FFSCompliance-Programs/Medical-Review/
InpatientHospitalReviews.html.
In addition, we instructed MACs to
conduct a ‘‘Probe and Educate’’ process
for inpatient claims with dates of
admission on or after October 1, 2013
through September 30, 2014, to assess
provider understanding and compliance
with the new policy. We also prohibited
Recovery Auditor post-payment medical
reviews of inpatient hospital patient
status for claims with dates of
admission between October 1, 2013 and
September 30, 2014. On April 1, 2014,
the Protecting Access to Medicare Act of
2014 Pub. L. 113–93) was enacted.
Section 111 of Pub. L. 113–93 permitted
CMS to continue medical review
activities under the MAC Inpatient
Probe and Educate process through
March 31, 2015. The same law also
extended the prohibition on Recovery
Auditor reviews of inpatient hospital
patient status for claims with dates of
admission through March 31, 2015,
absent evidence of systematic gaming,
fraud, abuse, or delays in the provision
of care by a provider of services. On
April 16, 2015, the Medicare Access and
CHIP Reauthorization Act of 2015 (Pub.
L. 114–10) was enacted. Section 521 of
Pub. L. 114–10 permitted CMS to
further extend the medical review
activities under the MAC hospital Probe
and Educate process for inpatient claims
through September 30, 2015, and
extended the prohibition of Recovery
Auditor reviews of inpatient hospital
patient status for claims with dates of
admission through September 30, 2015.
CMS announced in August 2015 that it
will not approve Recovery Auditors to
conduct patient status reviews for dates
of admission of October 1, 2015 through
December 31, 2015. (We refer readers to
the CMS Web site at: https://
www.cms.gov/Research-Statistics-Dataand-Systems/Monitoring-Programs/
Medicare-FFS-Compliance-Programs/
Medical-Review/
InpatientHospitalReviews.html for more
information on this announcement.)
MACs have completed the first and
second rounds of probe reviews and
provider education and were instructed
to complete a third round of probe
reviews on or before September 30,
2015. Throughout the Probe and
Educate process to date, we have seen
positive effects and improved provider

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understanding of the 2-midnight rule.
For example, the second round of probe
and educate denial rates were lower
than those in the first round, which may
reflect improved provider
understanding of the 2-midnight rule
after the implementation of the first
round of provider education. In
addition, anecdotal reports indicate that
providers found that the education
provided as a result of probe reviews
was effective in promoting a better
understanding of the policy.
In response to industry feedback,
including suggestions to alter the
Recovery Audit Program, on December
30, 2014, we announced a number of
changes to the Recovery Audit Program.
To address hospitals’ concerns that they
do not have the opportunity to rebill for
medically necessary Medicare Part B
inpatient services by the time a medical
review contractor has denied a Medicare
Part A inpatient claim, we changed the
Recovery Auditor ‘‘look-back period’’
for patient status reviews to 6 months
from the date of service in cases where
a hospital submits the claim within 3
months of the date that it provides the
service. We established incrementally
applied Additional Documentation
Request (ADR) limits for providers that
are new to Recovery Auditor reviews
and will establish limits on ADRs that
are based on a hospital’s compliance
with Medicare rules and that are
diversified across all claim types of a
facility. We also indicated that we plan
to establish a requirement that Recovery
Auditors must complete complex
reviews within 30 days, and failure to
do so will result in the loss of the
Recovery Auditor’s contingency fee,
even if an error is found. Finally, we
plan to require Recovery Auditors to
wait 30 days before sending a claim to
the MAC for adjustment to allow the
provider to submit a discussion period
request to the Recovery Auditor before
the MAC makes any payment
adjustments. We plan to complete
implementation of these changes
through modifications to the current
Recovery Auditor contracts.
B. Policy Change for Medical Review of
Inpatient Hospital Admissions Under
Medicare Part A
While we have been clear that the 2midnight benchmark does not override
the clinical judgment of the physician
regarding the need to keep the
beneficiary at the hospital, to order
specific services, or to determine
appropriate levels of nursing care or
physical locations within the hospital,
some stakeholders have argued that the
2-midnight benchmark removes
physician judgment from the decision to

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admit a patient for inpatient hospital
services. We disagree. We continue to
believe that the 2-midnight benchmark
provides, for payment purposes, clear
guidance on when a hospital inpatient
admission is appropriate for Medicare
Part A payment, while respecting the
role of physician judgment. However,
we believe the concerns raised by
stakeholders merit continued
consideration.
In light of the aforementioned
stakeholder concern and in our
continued effort to develop the most
appropriate and applicable framework
for determining when payment under
Medicare Part A is appropriate for
inpatient admissions, in the CY 2016
OPPS/ASC proposed rule (80 FR 39350
through 39351), we proposed to modify
our existing ‘‘rare and unusual’’
exceptions policy to allow for Medicare
Part A payment on a case-by-case basis
for inpatient admissions that do not
satisfy the 2-midnight benchmark, if the
documentation in the medical record
supports the admitting physician’s
determination that the patient requires
inpatient hospital care despite an
expected length of stay that is less than
2 midnights. For payment purposes, the
following factors, among others, would
be relevant to determining whether an
inpatient admission where the patient
stay is expected to be less than 2
midnights is nonetheless appropriate for
Part A payment:
• The severity of the signs and
symptoms exhibited by the patient;
• The medical predictability of
something adverse happening to the
patient; and
• The need for diagnostic studies that
appropriately are outpatient services
(that is, their performance does not
ordinarily require the patient to remain
at the hospital for 24 hours or more).
We noted that, under the existing rare
and unusual policy, only one
exception—prolonged mechanical
ventilation—has been identified to date.
Upon further consideration and based
on feedback from stakeholders, we
stated our belief that there may be other
patient-specific circumstances where
certain cases may nonetheless be
appropriate for Part A payment, absent
an expected stay of at least 2 midnights,
and that such circumstances should be
determined on a case-by-case basis. We
proposed a revised policy under which,
for purposes of Medicare payment, an
inpatient admission would be payable
under Part A if the documentation in
the medical record supports either the
admitting physician’s reasonable
expectation that the patient will require
hospital care spanning at least 2
midnights, or the physician’s

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determination based on factors such as
those identified above that the patient
requires formal admission to the
hospital on an inpatient basis.
Accordingly, we proposed to revise
§ 412.3(d)(1) of the regulations to reflect
this modification. Existing § 412.3(d)(1)
specifies, in relevant part, that if the
physician expects to keep the patient in
the hospital for only a limited period of
time that does not cross 2 midnights, the
services are generally inappropriate for
inpatient admission and inpatient
payment under Medicare Part A,
regardless of the hour that the patient
came to the hospital or whether the
patient used a bed. We proposed to
revise § 412.3(d) to state that when the
admitting physician expects a hospital
patient to require hospital care for only
a limited period of time that does not
cross 2 midnights, the services may be
appropriate for payment under
Medicare Part A if the physician
determines and documents in the
patient’s medical record that the patient
requires a reasonable and necessary
admission to the hospital as an
inpatient. We noted that, in general, we
would expect that with most inpatient
admissions where the stay is expected
to last less than the 2-midnight
benchmark, the patient will remain in
the hospital at least overnight. However,
we acknowledged that the patient can
be unexpectedly discharged or
transferred to another hospital and not
actually use a hospital bed overnight.
We proposed that cases for which the
physician determines that an inpatient
admission is necessary, but that do not
span at least 1 midnight, would be
prioritized for medical review. In
addition to the proposed substantive
changes discussed earlier in this
section, we also proposed to revise
existing paragraphs (d)(1) and (d)(2) for
clarity.
Under the proposed policy change, for
stays for which the physician expects
the patient to need less than 2
midnights of hospital care and the
procedure is not on the inpatient only
list or on the national exception list, an
inpatient admission would be payable
on a case-by-case basis under Medicare
Part A in those circumstances under
which the physician determines that an
inpatient stay is warranted and the
documentation in the medical record
supports that an inpatient admission is
necessary.
We did not propose any changes for
hospital stays that are expected to be
greater than 2 midnights; that is, if the
physician expects the patient to require
hospital care that spans at least 2
midnights and admits the patient based
on that expectation, the services are

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generally appropriate for Medicare Part
A payment. (We note that this policy
applies to hospital admissions where
the patient is reasonably expected to
stay at least 2 midnights, and payment
will still be appropriate where the
medical record supports the admitting
physician’s reasonable expectation that
the patient would stay at least 2
midnights, but the actual stay was less
due to unforeseen circumstances, such
as unexpected patient death, transfer,
clinical improvement, or departure
against medical advice.) We also did not
propose to change the 2-midnight
presumption.
Our existing policy provides for
payment under Part A based upon the
admitting physician’s clinical judgment
that a patient will require hospital care
that is expected to span at least 2
midnights. The proposed change would
also allow for payment under Part A on
a case-by-case basis for stays expected to
last less than the 2-midnight
benchmark, based upon the admitting
physician’s clinical judgment that
inpatient hospital admission is
appropriate. Consistent with
longstanding Medicare policy, the
decision to formally admit a patient to
the hospital is subject to medical
review.
Under our proposed revision to the
policy for cases not meeting the 2midnight benchmark, where the medical
record does not support a reasonable
expectation of the need for care crossing
at least 2 midnights, and for inpatient
admissions not related to a surgical
procedure specified by Medicare as
inpatient-only under § 419.22(n) or for
which there was not a national
exception (currently, there is an
exception for new onset mechanical
ventilation), payment of the claim under
Medicare Part A will be subject to the
clinical judgment of the medical
reviewer. Consistent with our current
practices, under our proposed revised
policy, the medical reviewer’s clinical
judgment would involve the synthesis
of all submitted medical record
information (for example, progress
notes, diagnostic findings, medications,
nursing notes, and other supporting
documentation) to make a medical
review determination on whether the
clinical requirements in the relevant
policy have been met. In addition,
Medicare review contractors must abide
by CMS policies in conducting payment
determinations, but are permitted to
take into account evidence-based
guidelines or commercial utilization
tools that may aid such a decision.
While Medicare review contractors may
continue to use commercial screening
tools to help evaluate the inpatient

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admission decision for purposes of
payment under Medicare Part A, such
tools are not binding on the hospital,
CMS, or its review contractors. This
type of information also may be
appropriately considered by the
physician as part of the complex
medical judgment that guides his or her
decision to keep a beneficiary in the
hospital and formulation of the
expected length of stay. Some members
of the hospital industry have argued that
Medicare should adopt specific criteria
for medical review entities to use when
reviewing short-stay hospital claims. We
invited public comments on whether
specific medical review criteria should
be adopted for inpatient hospital
admissions that are not expected to span
at least 2 midnights and, if so, what
those criteria should be.
Although CMS reviewers will take
into consideration the physician’s
decision to admit a beneficiary, the
admission must be reasonable and
necessary and supported by clear
documentation in the patient’s medical
record in order to be covered under
Medicare Part A. Likewise, in order to
be covered under Medicare Part A, the
care furnished must also be reasonable
and necessary. Section 1862(a)(1) of the
Act prohibits payment under the
Medicare program for services that are
not reasonable and necessary for the
diagnosis or treatment of illness or
injury. In cases where CMS reviewers
find that an inpatient admission is not
medically reasonable and necessary and
thus not appropriate for payment under
Medicare Part A, we note that the
beneficiary’s patient status remains
‘‘inpatient’’ as of the time of the
inpatient admission, and is not changed
to outpatient, because 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, as stated
in CMS Ruling 1455–R (78 FR 16617).
In these cases, the hospital will not
receive payments for the beneficiary
under Medicare Part A but may be able
to submit a Medicare Part B inpatient
claim for the Part B services that would
have been payable to the hospital had
the beneficiary originally been treated as
an outpatient.
We note that our proposed change in
policy for payment of hospital care
expected to last less than 2 midnights
does not negate another longstanding
policy, recognizing that there are certain
situations in which a hospital inpatient
admission is rarely appropriate for
Medicare Part A payment. We continue
to believe, as stated above and as stated
in the MBPM, that when a beneficiary
receives a minor surgical procedure or

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other treatment in the hospital that is
expected to keep him or her in the
hospital for only a few hours (less than
24 hours), the services should generally
be billed as outpatient hospital services,
regardless of the hour the beneficiary
comes to the hospital, whether he or she
uses a bed, and whether he or she
remains in the hospital past midnight
(Section 10, Chapter 1 of the MBPM).
Accordingly, we would expect it to be
rare and unusual for a beneficiary to
require inpatient hospital admission
after having a minor surgical procedure
or other treatment in the hospital that is
expected to keep him or her in the
hospital for only a few hours and not at
least overnight. We stated in the
proposed rule that we will monitor the
number of these types of admissions
and plan to prioritize these types of
cases for medical review.
Comment: Several commenters
expressed appreciation for CMS’
proposal and stated their belief that the
proposal is more reflective of the
agency’s longstanding policy that
recognizes the important role of
physician judgment and individual
patient needs in the hospital admission
decision-making process. Commenters
in support of the proposed policy also
expressed appreciation that CMS did
not propose a change to the 2-midnight
presumption, which maintains the
certainty that patient stays of 2
midnights or longer after admission are
presumptively appropriate as inpatient
cases.
Response: We appreciate the
commenters’ support and agree that our
proposed policy continues to recognize
the important role of physician
judgment and individual patient needs
in the hospital admission decisionmaking process while also maintaining
the certainty that patient stays of 2
midnights or longer after admission are
generally appropriate for payment under
Medicare Part A and will generally only
be selected for review in circumstances
of fraud or gaming.
Comment: A number of commenters
who supported the proposal requested
that CMS provide hospitals with the
important details, tools, and time
necessary to effectively implement
changes to the 2-midnight policy the
agency may finalize. Some commenters
making this request specifically asked
that CMS consider a March 31, 2016
enforcement date, for potential changes
to the 2-midnight policy. A few
commenters who supported the
proposal asked CMS to clarify in the
final rule if this proposal means CMS
intends to return to its policy position
prior to the implementation of the 2midnight rule, with the exception of

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cases where the patient stays 2
midnights after admission and is
presumed to be a medically necessary
inpatient.
Response: Consistent with our annual
rulemaking process, we believe that
there is sufficient time between the date
the final rule becomes available (on or
before November 1, 2015) to the public
and the effective date of the policy
(January 1, 2016) for hospitals to
become familiar with and adopt any
changes necessitated by the final
policies outlined in this final rule with
comment period, including adoption of
our proposed changes to the 2-midnight
rule, and therefore do not see a reason
to delay the effective date of this policy
beyond January 1, 2016. We also believe
that the details pertinent to the final
policy on 2-midnights are sufficiently
set forth in this final rule with comment
period and its supporting documents
and guidance and that all tools
necessary for the effective
implementation of the final policy have
been made available to hospitals,
physicians and other stakeholders.
In response to comments requesting
that we clarify whether the proposed
policy is a return to the policy that was
in effect prior to the implementation of
the 2-midnight rule (with the exception
of cases where the patient stays 2
midnights and is presumed to be a
medically necessary inpatient), we
explicitly note that our proposal is not
a return to the policy prior to the
adoption of the 2-midnight rule. The
proposed policy continued to employ
the 2-midnight rule (both the 2midnight benchmark and the 2midnight presumption) and proposed to
allow for greater flexibility in
determining when an admission that
does not meet the 2-midnight
benchmark should nonetheless be
payable. This is distinct from the policy
that was in effect prior to the adoption
of the 2-midnight rule in the form of
manual guidance that stated that when
a beneficiary receives a minor surgical
procedure or other treatment in the
hospital that is expected to keep him or
her in the hospital for only a few hours
(less than 24 hours), the services
generally should be billed as outpatient
hospital services, regardless of the hour
the beneficiary comes to the hospital,
whether he or she uses a bed, and
whether he or she remains in the
hospital past midnight.
Comment: Several commenters,
including MedPAC and the American
Medical Association (AMA),
recommended that CMS rescind the 2midnight rule in its entirety. Some of
the commenters stated that any timebased admission policy would interfere

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with physician judgment. In addition,
MedPAC expressed concern that the 2midnight rule may provide hospitals
with an incentive to lengthen hospital
stays in order to avoid scrutiny and that
longer stays generally increase costs and
expose Medicare beneficiaries to greater
physical risk while also conflicting with
the general incentives of the prospective
payment system to reduce hospital
lengths of stay. MedPAC also stated that
the Commission recommended that
CMS withdraw the 2-midnight rule
because it becomes redundant in light of
MedPAC recommendations related to
the Recovery Audit Program. The AMA
expressed concern that the 2-midnight
rule places considerable burden on the
admitting physician and erodes the
ability of physicians and providers to
improve health outcomes through
personalized, evidence-based clinical
care because it detracts from admission
criteria that depend upon clinical
judgment.
Response: We appreciate this
comment from MedPAC and others but
we do not believe that rescinding the 2midnight rule is the best course of
action at this time. Specifically, we
continue to believe that it is prudent
and essential to continue to maintain
the 2-midnight presumption whereby
cases with an actual length of stay of at
least 2 midnights after admission would
generally not be selected for medical
review. We note that stakeholders and
commenters in support of the proposed
policy, including several major hospital
associations, have cited their support for
maintaining the 2-midnight
presumption because it affords hospitals
and physicians some certainty that
inpatient admissions spanning at least 2
midnights after admission will generally
be considered to be appropriate for
Medicare payment under Part A and
will not be selected for medical review,
absent evidence of systematic gaming,
abuse, or delays in the provision of care.
This provision of the 2-midnight rule
would no longer be valid if the 2midnight rule was rescinded in entirety.
We understand MedPAC’s concern that
hospitals may lengthen hospital stays to
avoid scrutiny and will continue to
monitor the claims data to detect any
shifts in hospital practices pertaining to
beneficiaries’ length of stay, or any
evidence of systematic gaming, abuse, or
delays in the provision of care in an
attempt to qualify for the 2-midnight
presumption. We are cognizant of
concerns related to unnecessarily
elongated hospital admissions, and will
be monitoring for such patterns of
systematic delays indicative of fraud or
abuse. If a hospital is unnecessarily

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holding beneficiaries to qualify for the
2- midnight presumption, CMS and/or
its contractors may conduct review on
any of its inpatient claims, including
those which surpassed 2 midnights after
admission. In addition, as we have
stated above, the 2-midnight rule does
not override the clinical judgment of the
physician regarding the need to keep the
beneficiary at the hospital, to order
specific services, or to determine
appropriate levels of nursing care or
physical locations within the hospital.
We also believe that the documentation
requirements for admitting physicians
are not overly burdensome because they
are consistent with Medicare’s
longstanding documentation
requirements, which predated the
adoption of the 2-midnight rule.
With respect to MedPAC’s comment
that the 2-midnight rule may not be
necessary in light of its recommended
changes to the Recovery Audit Program,
we believe that the planned changes to
the Recovery Audit Program will help
reduce provider concerns within this
arena, but should be accompanied by
the outlined changes to the 2-midnight
policy.
Comment: Several commenters asked
that CMS not adopt any changes to the
2-midnight rule. Many of these
commenters expressed concern that
further changes to the existing policy
would cause confusion. Many
commenters requested that CMS not
adopt the ‘‘physician judgment’’
exception to the 2-midnight rule
without explicit instructions and
detailed case examples to help them
understand when physician judgment
can override the 2-midnight
expectation. Another commenter
believed that the proposed policy will
likely be used by the QIOs and RACs as
a way to deny appropriate inpatient
claims, thus increasing the
administrative burden on providers and
worsening the appeals backlog. One
commenter expressed concern that the
proposed policy could create an
opportunity for gaming by creating a
market for independent parties to create
and sell ‘‘exception’’ letters to hospitals
that could be used to inappropriately
‘‘document’’ case-by-case exceptions to
the 2-midnight rule.
Response: While we understand
commenters’ desire to not have CMS
adopt any changes to the current 2midnight rule and recognize that the
proposed policy allows for added
discretion in determining when
inpatient admission is appropriate for
payment under Medicare Part A, we
believed it was appropriate to address
concerns raised by hospital and
physician stakeholders that the current

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70543

policy potentially had the unintended
consequence of interfering with the
practice of medicine. We maintain that
neither our current policy nor the policy
being adopted in this final rule
interferes with the practice of medicine,
but rather both policies address
Medicare payment and medical review
for purposes of Medicare payment. We
believe that allowing greater flexibility
for determining when an admission that
does not meet the benchmark should
nonetheless be payable is appropriate
and is supported by several hospital
organizations.
In response to the commenter who
suggested that the proposed policy will
likely be used by the QIOs and Recovery
Auditors as a way to deny appropriate
inpatient claims, we note that, under the
proposed modification to the existing
exceptions policy, we would allow
Medicare Part A payment on a case-bycase basis for inpatient admissions that
do not satisfy the 2-midnight
benchmark, to acknowledge other
patient-specific circumstances where
certain admissions may nonetheless be
appropriate for Medicare Part A
payment. We would expect such
circumstances to be supported in the
medical documentation, which would
be subject to medical review. Further,
under the ‘‘2-midnight presumption,’’
inpatient hospital claims with lengths of
stay greater than 2 midnights after the
formal admission following the order
are presumed to be appropriate for
Medicare Part A payment and will not
be the focus of medical review efforts,
absent evidence of systematic gaming,
abuse, or delays in the provision of care
in an attempt to qualify for the 2midnight presumption. We do not
believe that the proposed policy will be
used by any medical review contractors
as a way to deny appropriate inpatient
claims. Contractors are instructed to
issue claim decisions that are consistent
and compliant with all applicable
policies and instructions, including the
2-midnight regulations.
In addition, we intend to educate all
medical review entities, including the
QIOs (who assumed responsibility of
patient status reviews as of October 1,
2015), CERT contractor, Recovery
Auditors, MACs, Supplemental Medical
Review Contractor, and appeals
contractors, of final policy changes and
anticipate that the new policy will be
interpreted consistently. CMS typically
provides this type of education to its
contractors through the use of
interactive calls/clinical discussions or,
as appropriate, technical direction. We
also intend to continue to monitor our
contractors through both internal and
independent third party ‘‘accuracy

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reviews’’ of the medical review
decisions and will provide education to
the review entities if areas of
inconsistency in medical review
decision-making or policy interpretation
are identified.
In response to comments about the
proposed policy increasing the appeals
backlog, we believe the additional
flexibility provided by the proposed
policy could potentially result in fewer
denials and therefore fewer appeals. The
proposed policy would allow for claims
that may have been denied under the
previous rule to be paid if certain
criteria are met, despite not meeting the
2-midnight benchmark. However, we do
not anticipate a significant impact on
the volume of appeals as a result of the
proposed policy.
In response to the commenters’
concern that the proposed policy would
create an opportunity for gaming, we
will continue to monitor hospital
admission practices and look for any
evidence of gaming. In the event that
evidence of gaming is found, CMS will
take appropriate action against that
provider.
Comment: A number of commenters
supported a proposal for a 1-midnight
rule under which any Medicare
beneficiary who required overnight
hospital care (other than a patient in the
ED or routine recovery following
surgery or a procedure) would be
admitted and the hospital paid by
diagnosis related group (DRG) under
Medicare Part A. The ‘‘1-midnight rule’’
proposal also called for the creation of
an ‘‘extended outpatient evaluation’’
APC to replace outpatient observation,
and for admission orders to become
effective at midnight on the day the
order was given, except in the case of
late ED arrivals, for which the order
would not be effective until the second
midnight. These commenters also
suggested that the admission order
should not be required to be
authenticated prior to discharge and
instead recommended that it be
authenticated prior to the claim being
submitted. In addition, the ‘‘1midnight’’ proposal suggested that the
inpatient only list would no longer be
necessary because any surgical patient
who required a medically necessary
overnight stay following routine
recovery would be admitted and those
patients who were stable before
midnight post-surgery would be billed
as outpatients. In addition, these
commenters suggested that, in order to
address more beneficiaries paying the
inpatient deductible amount under the
suggested 1-midnight rule, the inpatient
deductible could be reduced such that
a beneficiary would pay one-third of the

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deductible for the first night, two-thirds
for two nights and the full inpatient
deductible for three nights or more.
Response: While we appreciate this
alternative policy option put forth by
the commenters, we believe that a ‘‘1midnight rule’’ would present several
challenges. Generally, patients who are
seen and appropriately treated and
discharged without requiring an
overnight stay in the hospital represent
the lowest acuity patients receiving
treatment in an HOPD. We are
concerned that a ‘‘1-midnight rule,’’ as
outlined by the commenters, could
potentially create a negative incentive
for hospitals to hold such low acuity
patients in the hospital longer to receive
higher inpatient payment under
Medicare Part A and could be prone to
gaming, especially in light of the
suggested comments that would make
changes to the inpatient order
requirements. We believe that the ‘‘1midnight’’ rule, as put forth by the
commenters, would create opportunities
for relatively low acuity patients who
would otherwise not appropriately
qualify for Medicare Part A payment, to
potentially be eligible for Medicare Part
A payment. We note that this is
additionally troublesome due to the
high volume of the aforementioned
relatively low acuity patients currently
treated in the hospital outpatient setting
that could potentially be held in the
hospital longer to receive higher
inpatient payment under Medicare Part
A.
In addition, this proposal could result
in additional costs to the Medicare
program as all overnight hospital stays
(other than a patient in the ED or
routine recovery following surgery or a
procedure) would be newly eligible for
Part A payment. In order to account for
the additional costs that the program
would incur under this approach, we
might determine that it would be
appropriate to make an even greater
downward adjustment to payment rates
than the original ¥0.2 percent
adjustment currently in effect. We are
not prepared to propose a further
adjustment at this time, as we are still
evaluating claims data to determine the
impact of the original ¥0.2 percent
adjustment. In addition, due to statutory
differences in cost sharing under
Medicare Part A versus Part B, the
substantial influx of cases that would be
newly eligible for Part A payment under
this ‘‘1-midnight rule’’ proposal would
potentially subject Medicare
beneficiaries to greater cost-sharing
requirements, as the inpatient
deductible could be higher than the Part
B copayment that would be applied if
the services had been billed as

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outpatient services under Part B. The
commenter’s suggested fractional
deduction of the inpatient deductible
(one-third for 1 night, two-thirds for 2
nights, and the full deductible for a stay
of 3 nights or more) is not permitted
under existing statute.
In light of all of the challenges
associated with this proposal for a 1midnight rule, we are not accepting this
alternative to our proposal. Moreover, as
we did not propose any changes to our
existing policy requiring a physician’s
order for hospital admission, the
changes to that policy prescribed in this
‘‘1-midnight rule’’ proposal are outside
the scope of the proposed rule.
Comment: Other commenters
presented individual alternatives to the
proposal such as: (1) CMS could
eliminate the classification of hospital
stays into observation or inpatient days
and classify all medically necessary
hospital stays on a hospital floor as
inpatient stays; (2) CMS could
automatically deem any beneficiary in a
hospital setting, including emergency
room or observation, an inpatient after
24 hours and cap beneficiary liability at
the Part A inpatient deductible amount;
(3) CMS could automatically deem any
beneficiary in observation greater than
72 hours an inpatient and pay hospitals
an MS–DRG payment; and (4) CMS
could define an inpatient as a patient
who requires a bed in a hospital beyond
the normal recovery time or for
extended testing that cannot be safely
performed in a lower level of care
outside the hospital, and could make
certain related payment adjustments.
Response: While we appreciate the
various alternatives to our proposal
presented by the commenters, we note
that all four of the alternative proposals
would allow for an inpatient hospital
admission without a signed physician
order. It is our current policy that a
hospital admission must be initiated by
a signed physician order to admit the
patient as an inpatient. We did not
propose nor are we finalizing any
changes to that policy at this time.
Therefore, we are not accepting any of
the individual alternatives to our
proposal suggested by the commenters.
Comment: One commenter suggested
that CMS (1) clarify that inpatient
hospital admissions with expected
lengths of stay less than 2 midnights are
neither rare nor unusual; (2)
reemphasize that inpatient care and
observation services are not the same
level of care and, therefore, inpatient
hospital admissions are not appropriate
as a substitute for lengthy (greater than
2 midnights) outpatient hospital stays;
(3) allow the 2-midnight benchmark to
serve exclusively as a medical review

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threshold to determine the general
appropriateness for claim payment; and
(4) realign its policy with existing
guidance by asserting that, regardless of
the expected length of stay,
documentation of the medical necessity
as well as the need for inpatient hospital
care is the requisite component of every
inpatient admission appropriately paid
under Medicare Part A.
Response: In light of this comment,
we would like to clarify that our
proposed modification to the current
exceptions process does not define
inpatient hospital admissions with
expected lengths of stay less than 2
midnights as rare and unusual. Rather,
it modifies our current ‘‘rare and
unusual’’ exceptions policy to allow
Medicare Part A payment on a case-bycase basis for inpatient admissions that
do not satisfy the 2-midnight
benchmark. This modification
acknowledges other patient-specific
circumstances where certain cases may
nonetheless be appropriate for Part A
payment, in addition to continuing to
provide an opportunity for Part A
payment in ‘‘rare and unusual’’
circumstances for which there is a
national exception.
In addition, as previously stated in
this final rule, we continue to expect it
to be rare and unusual for a beneficiary
to require inpatient hospital admission
after having a minor surgical procedure
or other treatment in the hospital that is
expected to keep him or her in the
hospital for only a few hours and not at
least overnight, and thus such
admissions will be prioritized for
medical review.
With respect to the comment about
hospital level of care, we note that while
we do not refer to ‘‘level of care’’ in
guidance regarding hospital inpatient
admission decisions, but, rather, have
consistently provided physicians with
the aforementioned time-based
guidelines regarding when an inpatient
hospital admission is payable under
Part A, we do note that, by definition,
there are differences between
observation services furnished in the
outpatient setting and services
furnished to hospital inpatients.
Specifically, observation services, as
defined in Section 290 of Chapter 4 of
the Medicare Claims Processing Manual,
are a well-defined set of specific,
clinically appropriate services, which
include ongoing short-term treatment,
assessment, and reassessment, that are
furnished while a decision is being
made, regarding whether patients will
require further treatment as hospital
inpatients or if they are able to be
discharged from the hospital.

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In response to the request that the 2midnight benchmark be used
exclusively for determining the
appropriateness of Part A payment, we
note that we continue to believe that the
2-midnight benchmark and the 2midnight presumption are effective
tools in determining general
appropriateness for Medicare Part A
payment and whether a claim should be
subject to medical review, respectively.
As stated earlier, we also believe that
there may be other patient-specific
circumstances where certain cases may
nonetheless be appropriate for Part A
payment, and, therefore, we will allow
Medicare Part A payment on a case-bycase basis for inpatient admissions that
do not satisfy the 2-midnight
benchmark, if the documentation in the
medical record supports the admitting
physician’s determination that the
patient requires inpatient hospital care,
despite an expected length of stay that
is less than 2 midnights.
In response to the commenter’s
request that CMS realign its policy with
existing guidance by asserting that
regardless of the expected length of stay,
documentation of the medical necessity,
as well as the need for inpatient hospital
care, are the requisite components of
every inpatient admission appropriately
paid under Medicare Part A, we note
that, consistent with our longstanding
policy, all inpatient admissions must be
medically reasonable and necessary and
be supported by documentation in the
patient’s medical record.
Comment: Commenters also
commented on the following subject
areas in their comments: Selfadministered drugs; long observation
stays; hospital admission orders;
outpatient observation notice; and the 3day inpatient stay requirement for
Medicare skilled nursing facility (SNF)
coverage.
Response: We did not include any
proposals relating to these areas in the
proposed rule. Therefore, we consider
these comments to be outside the scope
of the proposed rule and are not
addressing them in this final rule.
After consideration of the public
comments we received, we are
finalizing, without modification, our
proposal to revise our previous ‘‘rare
and unusual’’ exceptions policy to allow
for Medicare Part A payment on a caseby-case basis for inpatient admissions
that do not satisfy the 2-midnight
benchmark, if the documentation in the
medical record supports the admitting
physician’s determination that the
patient requires inpatient hospital care
despite an expected length of stay that
is less than 2 midnights. Accordingly,
we also are finalizing our proposal to

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revise § 412.3(d) to reflect the above
policy modification and to increase
clarity.
C. Announcement Regarding Change in
Medical Review Responsibilities
Shortly after adopting the 2-midnight
rule, we instructed the MACs to engage
in a Probe and Educate process under
the 2-midnight rule from October 2013
through September 2015. We indicated
in the CY 2016 OPPS/ASC proposed
rule that, regardless of whether we
finalize the policy proposals outlined
under section XV.B. of this final rule
with comment period, no later than
October 1, 2015, we would be changing
the medical review strategy and planned
to have QIO contractors, rather than the
MACs, conduct these reviews of short
inpatient stays. Among the QIO’s
statutory duties is the review of some or
all of the professional activities of
providers and practitioners in the QIO’s
service area, subject to the terms of the
QIO contracts, in the provision of health
care items or services to Medicare
beneficiaries. Such QIO reviews are for
the purposes of determining whether
providers and practitioners are
delivering services that are reasonable
and medically necessary, whether the
quality of services meets professionally
recognized standards of care, and, for
inpatient services, whether the services
could be effectively furnished on an
outpatient basis or in a different type of
inpatient facility. Section 1154(a)(1) of
the Act authorizes QIOs to review
whether services and items billed under
Medicare are reasonable and medically
necessary and whether services that are
provided on an inpatient basis could be
appropriately and effectively provided
on an outpatient basis, while section
1154(a)(2) of the Act provides for
payment determinations to be made
based on these QIO reviews. Section
1154(a)(18) of the Act includes
provisions that involve broad authority
for the Secretary to direct additional
activities by QIOs to improve the
effectiveness, efficiency, economy, and
quality of services under the Medicare
program. These reviews are integral to
the determination of whether items and
services should be payable under the
Medicare program.
In addition to the reviews to ensure
coverage in accordance with Medicare
standards under sections 1154(a)(1) and
(a)(2) of the Act, QIO case review work
is an effort to measurably improve the
quality of health care for Medicare
beneficiaries as well as all individuals
protected under the Emergency Medical
Treatment and Labor Act (EMTALA)
and to provide peer review. QIOs have
longstanding program experience in

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addressing beneficiary complaints,
provider-based notice appeals,
violations of EMTALA, Higher
Weighted Diagnosis Related-Group
(HWDRG) coding reviews, and other
related responsibilities as articulated in
the Act. Further, in the performance of
their current quality improvement
activities and medical reviews, QIOs
routinely collaborate and interact with
State survey agencies, MACs, and
Qualified Independent Contractors
(QICs).
In addition to their expedited appeal
and quality of care review expertise,
QIOs currently perform both coding and
medical necessity reviews. For example,
when conducting HWDRG coding
reviews, QIOs already analyze claims
submitted by hospitals with proposed
changes to billing codes that would
allow the hospital to receive a higher
weighted DRG payment for the care
delivered. In these HWDRG reviews,
QIOs ensure that the clinical
circumstances in which the care was
provided accurately matches the
provider’s claim for payment. Further in
those instances when the HWDRG
review involves a service provided
during a short inpatient stay, QIOs also
perform a corresponding medical review
to validate adherence to the current 2midnight policy. QIOs also currently
perform reviews to confirm that all
services and items provided were
reasonable and medically necessary,
consistent with section 1862(a)(1) or
1862(a)(9) of the Act.
As previously mentioned in this
section, we are changing our medical
review strategy for short hospital stays
and will have QIO contractors conduct
reviews of short inpatient stays. QIO
contractors are well-suited to conduct
these short-stay inpatient reviews
because these reviews fit within the
scope of the QIO statutory functions and
because their quality improvement
programs are aligned with the HHS’
National Quality Strategy objective to
provide ‘‘better care and better health at
lower cost.’’ QIOs, by their design, are
groups of regional and national health
quality experts, clinicians, and
consumers organized to improve the
care delivered to people with Medicare.
As indicated previously, QIOs manage a
variety of beneficiary complaints and
quality of care case reviews to ensure
consistency in health care delivery and
practice in the inpatient and outpatient
setting while taking into consideration
clinical practice guidelines and other
local factors important to beneficiaries,
providers, and practitioners, and the
Department. These capabilities will be
useful in making case-by-case review
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To mitigate the perception of a
potential conflict of interest between
medical review and quality
improvement functions of the QIOs, on
August 1, 2014, the QIO program
separated medical case review from its
quality improvement activities in each
State under two types of regional
contracts. These include Beneficiary
and Family Centered Care QIOs (BFCC–
QIOs) contractors who perform medical
case review, and Quality Innovation
Network QIOs (QIN–QIOs) contractors
who perform quality improvement
activities and provide technical
assistance to providers and
practitioners. In addition, the
restructured QIO program uses a nonQIO a contractor to assist CMS in the
monitoring and oversight of the BFCC–
QIO case review activities.
Under the new short-stay inpatient
medical review process that we adopted
beginning on October 1, 2015, BFCC–
QIOs began to transition to reviewing a
sample of post-payment claims and
making a determination of the medical
appropriateness of the admission as an
inpatient. As mentioned earlier in this
section, we continue to believe that
when a beneficiary receives a minor
surgical procedure or other treatment in
the hospital that is expected to keep him
or her in the hospital for only a few
hours (less than 24 hours), the services
should generally be billed as outpatient
hospital services, regardless of the hour
the beneficiary comes to the hospital,
whether he or she uses a bed, and
whether he or she remains in the
hospital past midnight (Section 10,
Chapter 1 of the MBPM). Accordingly,
we would expect it to be rare and
unusual for a beneficiary to require
inpatient hospital admission after
having a minor surgical procedure or
other treatment in the hospital that is
expected to keep him or her in the
hospital for a period of time that is only
for a few hours and does not span at
least overnight. We will monitor the
number of these types of admissions
and plan to prioritize these types of
cases for medical review.
BFCC–QIOs have begun to conduct
post-payment reviews of claims and
refer findings to the MACs for payment
adjustments. Providers’ appeals of
denied claims will be addressed under
the provisions of section 1869 of the Act
and procedures in 42 CFR part 405.
BFCC–QIOs will educate hospitals
about claims denied under the 2midnight policy and collaborate with
these hospitals in their development of
a quality improvement framework to
improve organizational processes and/or
systems. Under the QIO short-stay
inpatient review process, those

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hospitals that are found to exhibit a
pattern of practices, including, but not
limited to: Having high denial rates and
consistently failing to adhere to the 2midnight rule (including having
frequent inpatient hospital admissions
for stays that do not span one midnight),
or failing to improve their performance
after QIO educational intervention, will
be referred to the Recovery Auditors for
further medical review.
In addition to the formal QIO medical
review process mentioned above, we
intend to continuously monitor and
evaluate the changes to the 2-midnight
payment policy and medical review
strategy. We will specifically examine
and evaluate applicable claims data and
any other data available in order to
determine whether any patterns of caseby-case exceptions exist that might be
appropriately announced as uniform,
national exceptions, to examine the
effect of the revised policy on short-stay
inpatient claims and long outpatient
observation stays, and to observe any
other trends which might affect
beneficiary access, outcomes, and
quality of care. We also will monitor
applicable data for signs of systematic
gaming of this policy. We will continue
to assess the 2-midnight payment policy
in future years, and, as with all
Medicare payment policies, may make
future payment modifications based on
the trends observed.
As mentioned earlier in this section,
section 521 of Pub. L. 114–10 extended
the prohibition on Recovery Auditor
patient status reviews for claims with
dates of admission of October 1, 2013
through September 30, 2015. Under
current law, Recovery Auditors may
resume such reviews for dates of
admission of October 1, 2015 and later.
CMS announced in August 2015 that it
will not approve Recovery Auditors to
conduct patient status reviews for dates
of admission of October 1, 2015 through
December 31, 2015. (We refer readers to
the CMS Web site at: https://
www.cms.gov/Research-Statistics-Dataand-Systems/Monitoring-Programs/
Medicare-FFS-Compliance-Programs/
Medical-Review/
InpatientHospitalReviews.html for more
information on this announcement.) As
announced in the proposed rule, the
Recovery Auditors will conduct patient
status reviews focused on those
providers that are referred from the
QIOs based on their high denial rates.
The number of claims that a Recovery
Auditor will be allowed to review for
patient status will be based on the claim
volume of the hospital and the denial
rate identified by the QIO. We stated in
the proposed rule that we would adopt
this new medical review strategy

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regardless of whether the 2-midnight
rule remains unchanged or is modified.
As stated earlier, one of the reasons
we adopted the 2-midnight rule was
because of concerns about the growing
trend of long outpatient hospital stays.
We note that preliminary data suggest
that the 2-midnight rule as it relates to
hospital stays spanning at least 2
midnights has been effective in reducing
long outpatient hospital stays.
Specifically, our data show that the
proportion of outpatient long-stay
encounters (more than 2 days) involving
observation services decreased by 11
percent in FY 2014 compared to FY
2013. The trend in these data is
consistent with our adoption of the 2midnight rule on October 1, 2013.
As noted previously, we did not
propose to change the 2-midnight
presumption for purposes of medical
review. That is, inpatient stays for
which the patient remained in the
hospital at least 2 midnights following
formal admission to the hospital will
continue to be presumed appropriate for
inpatient hospital payment under
Medicare Part A and will generally not
be selected for medical review of patient
status absent evidence of systematic
gaming, abuse, or delays in the
provision of care.
Comment: In response to whether
CMS should adopt specific national
criteria for medical review of inpatient
hospital admissions, and what those
criteria tools should be, several
commenters stated that they would
support criteria that took into
consideration the severity of the signs
and symptoms exhibited by the patient
and other evidence that would be
relevant in determining whether an
inpatient admission that was shorter
than 2 midnights would nonetheless be
appropriate for Part A payment.
Several commenters did not believe
that CMS should adopt national medical
review standards at this time, given the
differences in clinical presentation and
individualized treatments for patients
requiring hospital care. Other
commenters suggested that medical
review tools, such as InterQual or
Milliman, were useful for documenting
a patient’s vital signs and condition at
a moment in time, but would not be
useful for retrospective review of the
appropriateness of a hospital admission.
The commenters also noted that these
tools were expensive and proprietary for
hospitals to use and that selection of
one tool over another would impose
administrative burdens on hospital
facilities.
Some commenters recommended that
QIO review criteria take into
consideration special populations of

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patients, treatment locations within the
hospital facility, or specific clinical
situations generally considered to be at
higher risk for adverse patient
outcomes.
Response: We appreciate the
thoughtful comments submitted in
response to our comment solicitation on
medical review criteria. However, even
among those commenters who stated
that they would support the adoption of
national medical review criteria, we
note that no commenters recommended
specific national criteria that could be
applied to medical review of all shortstay hospital cases. We agree with the
commenters that, given the unique
clinical circumstances of Medicare
beneficiaries who require hospital care,
it is difficult to adopt a set of clinical
standards that are universally applicable
based on diagnostic conditions and may
be appropriately utilized on a
retrospective basis. While we
acknowledge that some providers may
consider this type of commercial
product useful in clinical practice, we
are not adopting such guidelines as
binding policy for medical review
purposes. Rather, we believe that the 2midnight benchmark captures the
individualities and clinical conditions
of Medicare beneficiaries, by focusing
on the physician’s medical judgment in
forecasting an expected plan of care and
corresponding hospital duration.
Accordingly, we are not adopting
national medical review criteria at this
time.
QIOs will conduct ‘‘Revised
Determination Reviews’’ (42 CFR
405.980) on hospital short-stay
Medicare Part A claims. QIOs will
conduct patient status reviews to
determine the appropriateness of
Medicare Part A payment for these
short-stay inpatient hospital admissions,
in accordance with section 1862(a)(1)(A)
of the Act. In conducting these reviews,
QIOs will use the information
documented in the patient’s medical
record, and may use evidence-based
guidelines and other relevant clinical
decision support materials as
components of their review activity (we
refer readers to 42 CFR 476.100 relating
to setting standards for QIO reviews).
Comment: One commenter suggested
that CMS create a tracking mechanism,
such as a condition code, to allow
hospitals to attest that they used
nationally recognized criteria (such as
InterQual or Milliman) to determine that
inpatient admission was warranted.
Alternatively, one commenter proposed
that CMS adopt an identifier to append
to the claim which would alert the
medical reviewers that an inpatient only
procedure had been performed.

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Response: We appreciate the
thoughtful claims processing
recommendations. Because we are not
adopting a national set of criteria at this
time, we do not believe a tracking
mechanism to identify use of criteria
tools would be helpful for hospitals or
review entities. We acknowledge the
difficulties in identifying inpatient only
procedures during medical review
(because inpatient only procedures are
identified by the national code set used
by hospital outpatient departments
whereas inpatient claims are billed
using a separate code set) and will
consider the proposed resolution in the
future.
Comment: Several commenters
supported the QIO medical review
strategy. However, many commenters
urged CMS to delay QIO medical review
activity until January 1, 2016, or later,
to align with the new policy that would
be adopted for CY 2016. Other
commenters expressed concern whether
the QIOs had the needed operational
resources, such as review staff
qualifications and experience, training,
electronic record transfer capability, and
MAC points of contact, to competently
conduct the reviews. One commenter
stated the need for timeliness measures
associated with the review process.
Response: As stated in the proposed
rule, we announced that the QIOs
would begin to conduct medical review
on October 1, 2015, regardless of
whether we finalized the policy
proposals articulated in the proposed
rule. Accordingly, QIOs assumed
responsibility for medical review
activities on October 1, 2015, as it
relates to the 2-midnight rule that is
currently in effect. We anticipate that it
will take time for QIOs to transition and
they will incrementally increase their
review activities to be fully operational
with regard to these reviews early next
year. Beginning January 1, 2016, QIOs
will conduct medical review of short
hospital stay claims under the revised 2midnight policy adopted in this final
rule with comment period.
Comment: Several commenters stated
the need for transparency and for more
detailed information regarding the types
of claims that would be subject to QIO
review, claim sample sizes, the
frequency of reviews, the claim look
back periods, ADR limits, and
administrative burden.
Response: We will address the
technical medical review questions
posed by commenters in subregulatory
guidance. We expect to release this
information on the CMS Web site at:
https://www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/QualityImprovementOrgs/

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index.html?redirect=/
qualityimprovementorgs/ no later than
December 31, 2015.
Comment: Several commenters
recommended that CMS provide
education and detailed information
regarding the revised medical review
criteria and documentation
requirements. One commenter
recommended mandatory
documentation instruction for
physicians in residency programs
because Medicare funds graduate
medical education programs.
Response: QIOs have a longstanding
history of provider education and
engagement, through the use of provider
meetings, learning and action networks,
provider discussion forums, and posting
educational materials to their Web sites.
QIOs may use these and other methods
to educate providers about the review
process. We will address technical
medical review questions posed by
commenters in subregulatory guidance.
We expect to release this information on
the CMS Web site at: https://
www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/QualityImprovementOrgs/
index.html?redirect=/
qualityimprovementorgs/ no later than
December 31, 2015.
Comment: Some commenters
recommended that the QIOs provide a
discussion period prior to making
referral to the MACs or Recovery
Auditors.
Response: After conducting medical
review, QIOs will evaluate provider
performance and provide interventions
that are aligned with those outcomes.
Every provider will receive written
claim-specific information and any
corresponding denial reasons that will
give the provider the opportunity to
review the QIO’s claim decision. The
written notification will include a
specific phone number and/or point of
contact for use by providers to request
or schedule a QIO education session.
Through the QIO education session,
providers will have the opportunity to
have one-on-one telephonic conferences
to ask questions and receive feedback
with a QIO clinician knowledgeable of
the reviewed claims. After the education
session, the QIO will provide a final
results letter to the provider. At the
completion of these activities, the QIO
will refer any denied claims to the MAC
for payment adjustment and, when
appropriate, make a referral to the
Recovery Auditors for those providers
requiring further review.
Comment: Several commenters
supported transitioning hospital patient
status reviews to the QIOs, while
directing Recovery Auditors to limit

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their patient status reviews to those
providers with ‘‘high denial rates.’’
Tailoring the scope of Recovery Auditor
reviews aligns with MedPAC’s
recommendation in its June 2015 report,
which suggested that the extent of
audits be correlated with a hospital’s
excessive use of short inpatient stays.
Other commenters expressed
concerns that the standard to which
claims would be assessed was unclear,
and that the Recovery Audit Program’s
contingency fee payment structure
could potentially incentivize
inappropriate claim denials, making
such referrals inappropriate.
Many commenters stated the need for
transparency in the medical review
process and requested additional
information regarding clinical decisionmaking, as well as QIO operations and
the process for identifying providers
deemed to be appropriate for Recovery
Auditor referral.
Response: We will address technical
medical review questions posed by the
commenters in subregulatory guidance.
We expect to release this information on
the CMS Web site at: https://
www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/QualityImprovementOrgs/
index.html?redirect=/
qualityimprovementorgs/ no later than
December 31, 2015.
Comment: A few commenters
suggested that, in the QIO’s assessment
and measurement of provider denial
rates, factors such as the number of
short-stay inpatient admissions
occurring within a given hospital and
the acuity of populations served by the
hospital be taken into consideration.
One commenter recommended that
QIOs implement or use a review test
period in order to any identify national
trends in provider denials.
Response: We will address technical
medical review questions posed by the
commenters in subregulatory guidance.
We expect to release this information on
the CMS Web site at: https://
www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/QualityImprovementOrgs/
index.html?redirect=/
qualityimprovementorgs/ no later than
December 31, 2015.
After consideration of the public
comments we received, we are not
adopting national medical review
criteria at this time. As announced in
the proposed rule, QIOs assumed
medical review responsibilities of short
hospital stay claims on October 1, 2015
based on the existing 2-midnight policy
in effect for 2015. Beginning on January
1, 2016, QIOs will conduct these
medical reviews based on the revised 2-

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midnight policy adopted in this final
rule with comment period. In
conducting these reviews, QIOs will use
the information documented in the
patient’s medical record, and may use
evidence-based clinical guidelines, and
other relevant clinical decision support
materials as components of their review
activity in order to determine whether
an inpatient admission where the
patient stay is expected to be less than
2 midnights is nonetheless appropriate
for Medicare Part A payment.
As mentioned previously, in response
to industry feedback, including
suggestions to limit the Recovery Audit
Program, on December 30, 2014, we
announced a number of changes to the
Recovery Audit Program. We received
numerous comments about the Recovery
Audit Program and have summarized
and included our responses to them
below.
Comment: Several commenters
responded to the proposed rule’s
announcements related to the changes
to be implemented in the Recovery
Audit Program and the Recovery
Auditor’s role in conducting patient
status reviews of those providers
referred by the QIOs for having high
denial rates associated with hospital
short stay claims for payment. Several
commenters also provided additional
recommendations for programmatic
improvement or requested more
information regarding the operational
details of the Recovery Audit medical
review processes. In addition, some
commenters recommended delays in the
proposed timeframe for Recovery
Auditors to begin conducting patient
status reviews.
Response: We note that, while we
consider these public comments to be
outside the scope of the proposed rule,
we appreciate the thoughtful feedback
provided for our consideration.
Providers wishing to provide any
additional suggestions or feedback may
do so by emailing them to RAC@
cms.hhs.gov. Any future changes or
additional information related to the
Recovery Audit Program would be
identified through subregulatory
instruction and posted on the Recovery
Audit Program Web site at: https://
www.cms.gov/Research-Statistics-Dataand-Systems/Monitoring-Programs/
Medicare-FFS-Compliance-Programs/
Recovery-Audit-Program/.
Comment: Some commenters
recommended that enforcement of the 2midnight provision remain under the
purview of the Recovery Auditors, as it
is a payment provision, rather than a
quality improvement activity.
Response: We consider these public
comments to be outside the scope of the

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proposed rule because we neither
proposed nor sought comments on the
announced changes in medical review
activities. However, we point out that
QIOs have previous experience in
hospital reviews, and we believe their
positive working relationships with
hospitals will be beneficial in helping to
educate providers on how to comply
with the revised 2-midnight rule
guidance. Recovery Auditors will
review those providers that fail to
comply with CMS’ payment policy and,
as appropriate, send claims to the MAC
for adjustment.
Comment: One commenter mentioned
the positive experiences it has had with
the Provider Relations Coordinator
established by CMS in June 2014, and
suggested that the role of the
coordinator would be well-suited to
assist providers in the implementation
of the new referral structure.
Response: We consider this comment
to be outside the scope of the proposed
rule. However, we appreciate the
suggestion and will consider the
feedback in the future. We encourage
providers to utilize the Provider
Relations Coordinator and support
expanding this role throughout the
medical review process.
D. Comment Solicitation on Potential
Short-Stay Payment Policies
We again welcomed stakeholder
comments on potential short-stay
payment policies. The most frequent
comment received in response to the
proposed rule was that a 1-midnight
policy would eliminate the need for a
short-stay payment policy. Comments
on the issue of short stay payment
policies ranged from paying the IPPS
amount to paying an amount in between
the IPPS and OPPS payment to paying
the OPPS amount. Most commenters did
not provide specifics as to how the
payment amount should be determined.
As in past comment solicitations on this
issue, there was again no consensus
among the commenters who chose to
respond.
We have requested public comment
on three different occasions on issues
related to when services are
appropriately billed and paid under
Medicare Part A as inpatient services or
under Medicare Part B as outpatient
services, including potential payment
policy options to address this issue. The
public comment process has not
produced any consensus on a
recommended payment policy.
We again thank the commenters for
their suggestions on the issue of shortstay payment policies. We did not
propose any short-stay payment policy,
but will take these comments into

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account in any potential future
rulemaking on the issue.
XVI. Transition for Former MedicareDependent, Small Rural Hospitals
(MDHs) Under the Hospital Inpatient
Prospective Payment System
A. Background on the MedicareDependent, Small Rural Hospital (MDH)
Program
Section 1885(d)(5)(G) of the Act
provides special payment protections
under the hospital inpatient prospective
payment system (IPPS) to Medicaredependent, small rural hospitals
(MDHs). Section 1886(d)(5)(G)(iv) of the
Act defines an MDH as a hospital that
is located in a rural area, has not more
than 100 beds, is not a sole community
hospital (SCH), and has a high
percentage of Medicare discharges (that
is, not less than 60 percent of its
inpatient days or discharges either in its
1987 cost reporting year or in 2 of its
most recent 3 settled Medicare cost
reporting years). MDHs are paid for their
hospital inpatient services based on the
higher of the Federal rate or a blended
rate based, in part, on the Federal rate
and, in part, on the MDH’s hospitalspecific rate. Specifically, the blended
rate is calculated using the Federal rate
payment plus 75 percent of the amount
by which the Federal rate payment is
exceeded by the MDH’s hospitalspecific rate payments. For additional
information on the MDH program and
the payment methodology, we refer
readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684).
As discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50022),
under prior law, as specified in section
5003(a) of Pub. L. 109–171 (DRA 2005),
the MDH program was to be in effect
through the end of FY 2011 only. The
program has since been extended
several times. Most recently, section 205
of the Medicare Access and CHIP
Reauthorization Act (MACRA) of 2015
(Pub. L. 114–10), enacted April 16,
2015, provided for an extension of the
MDH program through FY 2017.
Specifically, section 205 of the MACRA
amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act by
striking the April 1, 2015 end date for
the MDH program and replacing it with
October 1, 2017.
B. Implementation of New OMB
Delineations and Urban to Rural
Reclassification
On February 28, 2013, OMB issued
OMB Bulletin No. 13–01, which
established revised delineations for
Metropolitan Statistical Areas (MSAs),
Micropolitan Statistical Areas, and

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Combined Statistical Areas, and
provided guidance on the use of the
delineations of these statistical areas.
These delineations are based on 2010
decennial Census data. In the FY 2015
IPPS/LTCH PPS final rule (79 FR 49950
through 49991), we adopted the new
OMB labor market area delineations
beginning in FY 2015. Consequently,
there were 105 counties that were
previously located in rural areas that
became urban under the new OMB
delineations (79 FR 49953). As noted
above, under section 1886(d)(5)(G)(iv) of
the Act, an MDH must be located in a
rural area.
The transition of certain counties
from rural to urban under the new OMB
delineations required MDHs in those
counties to apply for rural status in
order to retain their MDH classifications
and avoid losing the special payment
protections provided to MDHs. In order
to be approved for a rural
reclassification, a hospital that is
located in an urban area must meet one
of the following four criteria under
section 1886(d)(8)(E)(ii) of the Act
(codified at 42 CFR 412.103):
(1) The hospital is located in a rural
census tract of an MSA, as determined
under the most recent version of the
Goldsmith Modification, the RuralUrban Commuting Area (RUCA) codes;
(2) The hospital is located in an area
designated by any law or regulation of
such State as a rural area or is
designated by such State as a rural
hospital;
(3) The hospital would qualify as a
rural referral center (RRC) or a sole
community hospital (SCH) if the
hospital were located in a rural area;
and
(4) The hospital meets such other
criteria as the Secretary may specify.
In addition, under section
1886(d)(8)(E) of the Act, in order for a
hospital to reclassify from an urban area
to a rural area, the State in which the
hospital is located must have a rural
area. In other words, a hospital may not
reclassify from urban to rural under
section 1886(d)(8)(E) of the Act in an
all-urban State, which, as of October 1,
2014 (when the new OMB delineations
became effective), included New Jersey,
Delaware, and Rhode Island. Currently,
the all-urban States continue to be New
Jersey, Delaware, and Rhode Island.
MDHs that shifted from rural to urban
under the new OMB delineations may
apply for rural reclassification under
§ 412.103. In a situation where a
hospital could not reclassify to a rural
area under § 412.103 because it is now
located in an all-urban State, the
hospital would have lost its MDH status
and would be paid for hospital inpatient

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services at the Federal rate, which may
be substantially lower than the MDH’s
hospital-specific rate. Given that the
MDH program was scheduled to expire
April 1, 2015, but was extended to
expire effective October 1, 2017 by
section 205 of the MACRA, we stated in
the CY 2016 OPPS/ASC proposed rule
(80 FR 39354) that we believe it would
be appropriate to provide a prospective
payment rate transition period for
MDHs that cannot retain such status due
to their location in a newly redesignated
urban area located in an all-urban State
and, therefore, the lack of a rural area
within their State into which they could
reclassify.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39354), we proposed that,
effective January 1, 2016, payments to
hospitals that lost their MDH status
because they are no longer in a rural
area due to the adoption of the new
OMB delineations and are now located
in all-urban States would transition
from payments based, in part, on the
hospital-specific rate to payments based
entirely on the Federal rate. As stated
earlier, currently, an MDH receives the
higher of the Federal rate or the Federal
rate payment plus 75 percent of the
amount by which the Federal rate
payment is exceeded by its hospitalspecific rate payment. We proposed
that, for discharges occurring on or after
January 1, 2016, and before October 1,
2016, a former MDH in an all-urban
State would receive the Federal rate
plus two-thirds of 75 percent of the
amount by which the Federal rate
payment is exceeded by its hospitalspecific rate payment. For FY 2017, that
is, for discharges occurring on or after
October 1, 2016, and before October 1,
2017, we proposed that such a former
MDH would receive the Federal rate
plus one-third of 75 percent of the
amount by which the Federal rate
payment is exceeded by the hospital’s
hospital-specific rate. Beginning FY
2018, that is, for discharges occurring on
or after October 1, 2017, we proposed
that these former MDHs would be paid
solely based on the Federal rate.
Payment based on 100 percent of the
Federal rate beginning October 1, 2017
would align with the statutory
expiration of the MDH program on
October 1, 2017.
We stated in the proposed rule that
we believe it is appropriate to apply
these proposed transitional payments
for hospitals formerly located in rural
areas and formerly classified as MDHs
that are now located in all-urban States,
given the potentially significant
payment impacts for these hospitals and
the fact that a hospital may not
reclassify from urban to rural under

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section 1886(d)(8)(E) of the Act in an
all-urban State. Allowing a transition for
such hospitals from payments based, in
part, on the hospital-specific rate to
payments based solely on the Federal
rate would minimize the negative
impact of our adoption of the new OMB
delineations which caused certain rural
hospitals to lose their MDH status.
We invited public comments on our
proposal.
Comment: Commenters supported the
proposed payment transition for former
MDHs in all-urban States. One
commenter stated that CMS’ proposal
would provide a much needed
transition period for hospitals losing
MDH status due to location in all-urban
States and would be consistent with
longstanding CMS policy to adopt
transition periods to mitigate significant
payment impacts accompanying policy
changes.
Response: We appreciate the
commenters’ support of our proposal.
Comment: One commenter who
supported the proposed transition urged
CMS to also provide such a transition to
all hospitals that lost MDH status as a
result of implementation of the new
OMB delineations which, for reasons
other than location in an all-urban State,
were ineligible for reclassification. The
commenter noted that only one MDH
was located in an all-urban State
following implementation of the new
OMB delineations, and that being in an
all-urban State is only one reason why
a hospital cannot qualify for
reclassification under § 412.103 of the
regulations. The commenter stated that
the other hospitals that cannot reclassify
under § 412.103, if not provided with a
transition period, face the same
circumstances that CMS is proposing to
allow other identically situated
hospitals to avoid. The commenter
argued that providing payment
transition exclusively for that one
hospital and not for all hospitals that are
similarly unable to reclassify to a rural
area to maintain MDH status is arbitrary
and capricious. The commenter also
questioned why CMS did not provide
similar protection for FY 2015 for MDHs
repositioned from rural to urban areas as
a result of implementation of the new
OMB delineations that could not qualify
for reclassification under § 412.103
when that protection was requested in
public comments submitted in response
to the FY 2015 IPPS/LTCH PPS
proposed rule.
Response: Our rationale behind our
proposal to allow for transitional
payment to former MDHs that are
located in all-urban States due to the
adoption of the OMB delineations in FY
2015 was that these hospitals did not

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have the option to reclassify from urban
to rural under the regulations at
§ 412.103 due to the lack of a rural area
in their States into which they could
reclassify. This is in contrast to other
hospitals that lost MDH status due to
becoming urban and are located in
States with both urban and rural areas
in that these hospitals have the option
to apply for rural reclassification under
§ 412.103. We acknowledge that, in
response to the FY 2015 IPPS/LTCH
PPS proposed rule, this same
commenter requested that hospitals
losing MDH status as a result of
becoming urban under the new OMB
delineations be afforded the 2-year
transition period of deemed rural status
provided for CAHs. In the FY 2015
IPPS/LTCH PPS final rule, we explained
that we did not believe that applying a
2-year transition period of deemed rural
status was necessary for provider types
other than CAHs (79 FR 49983). While
we agreed that there were potential
payment consequences for a CAH, SCH,
or MDH located in an urban area as a
result of the new OMB delineations, we
considered the payment consequences
to be greater for CAHs because, unlike
SCHs and MDHs, CAHs are entirely
excluded from the IPPS and generally
receive payments based on 101 percent
of reasonable cost. We stated that, in
addition, given the different conditions
of participation (CoPs) for CAHs, and
that it would be generally more difficult
for a CAH to have to meet the hospital
CoPs instead of the CAH CoPs, only a
CAH also faces the potential loss of its
ability to continue to participate in the
Medicare and Medicaid programs.
Furthermore, we note that, at the time
of the FY 2015 IPPS/LTCH PPS final
rule, the MDH program was set to expire
halfway through FY 2015, on March 31,
2015. However, after consideration of
this public comment and due to the fact
that the MDH program has been
extended through FY 2017, we believe
it is appropriate to apply a transition
payment to all newly urban, former
MDHs. We recognize that, regardless of
whether the option to apply for
reclassification is available to a hospital
that lost MDH status as a result of
becoming urban due to implementation
of the new OMB delineations in FY
2015, a hospital that cannot reclassify
from urban to rural for any reason may
face financial hardship as a result of
losing MDH status. This would be the
case if the hospital was in an all-urban
State without a rural area into which it
could reclassify or if the hospital could
not meet the requirements for rural
reclassification under § 412.103. We
also note that the regulations for rural

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
reclassification under § 412.103 do not
allow MDHs, in contrast to rural referral
centers (RRCs) and SCHs, to be
approved for reclassification by virtue of
meeting the requirements for MDH
status other than being located in a rural
area. For these reasons, and after
consideration of the public comments
we received, we are finalizing our
proposed payment transition to former
MDHs with a modification. We are
providing for a transition for all former
MDHs now located in an urban area as
a result of implementation of the new
OMB delineations in FY 2015 and that
have not reclassified to a rural area
under the regulations at § 412.103 by
January 1, 2016. We believe that this
expanded payment transition will help
ensure financial stability and
uninterrupted patient care for all
hospitals that lost MDH status due to
implementation of the new OMB
delineations.
Comment: One commenter supported
CMS’ proposal for transition payments
for MDHs but encouraged CMS to
retroactively extend the transition
payments for the entire FY 2016 rather
than beginning January 1, 2016. The
commenter pointed to the various
extensions of the MDH program as
examples of situations where CMS has
implemented the law retroactively.
Response: We appreciate the
commenter’s request to extend the
transition period to include all of FY
2016. However, we note that the various
extensions of the MDH program referred
to by the commenter as an example of
a retroactive implementation are
distinguishable from our proposal
because the MDH extensions were
mandated by statute. Therefore, we are
finalizing the time period for the
transition as proposed, beginning
January 1, 2016.
Comment: One commenter questioned
the impact estimate of $9 million for the
proposed transition payments and
requested clarification of CMS’
methodology.
Response: After further examination
of the data and the methodology upon
which we based our impact estimate, we
found that the $9 million estimated cost
of the proposed transition payments
included in the proposed rule was
overstated because we did not account
for the fact that the transition period
would be effective beginning the second
quarter of FY 2016 (that is, on January
1, 2016), and would not include 12
months of transition payments. We refer
the reader to section XXI.A.4.g. of this
final rule with comment period for an
updated estimated impact that reflects 9
months of MDH transition payments in
the first year of the transition, as

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finalized above, and a description of the
methodology used to calculate that
estimate.
In summary, after consideration of the
public comments we received, we are
finalizing a policy that, effective January
1, 2016, payments to hospitals that (1)
lost their MDH status because they are
no longer in a rural area due to the
implementation of the new OMB
delineations in FY 2015 and (2) have
not reclassified from urban to rural
under the regulations at § 412.103 before
January 1, 2016, will transition from
payments based, in part, on the
hospital-specific rate to payments based
entirely on the Federal rate. For
discharges occurring on or after January
1, 2016, and before October 1, 2016,
these former MDHs will receive the
Federal rate plus two-thirds of 75
percent of the amount by which the
Federal rate payment is exceeded by the
hospital’s hospital-specific rate
payment. For FY 2017, that is, for
discharges occurring on or after October
1, 2016, and before October 1, 2017,
these former MDHs will receive the
Federal rate plus one-third of 75 percent
of the amount by which the Federal rate
payment is exceeded by the hospital’s
hospital-specific rate. For FY 2018, that
is, for discharges occurring on or after
October 1, 2017, these former MDHs
will be paid based solely on the Federal
rate.
XVII. Final Rule: Appropriate Claims
in Provider Cost Reports;
Administrative Appeals by Providers
and Judicial Review
A. Proposed Changes Included in the FY
2015 IPPS/LTCH PPS Proposed Rule
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28206 through
28217; CMS–1607–P), we proposed to
revise the Medicare cost reporting
regulations in 42 CFR part 413, subpart
B, by requiring a provider to include an
appropriate claim for a specific item in
its Medicare cost report in order to
receive or potentially qualify for
Medicare payment for the specific item.
If the provider’s cost report does not
include an appropriate claim for a
specific item, we proposed that payment
for the item will not be included in the
notice of program reimbursement (NPR)
issued by the Medicare administrative
contractor (MAC) (formerly known as
fiscal intermediary and herein referred
to as ‘‘contractor’’) or in any decision or
order issued by a reviewing entity (as
defined in 42 CFR 405.1801(a)) in an
administrative appeal filed by the
provider. In addition, we proposed to
revise the appeals regulations in 42 CFR
part 405, subpart R, by eliminating the

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70551

requirement that a provider must
include an appropriate claim for a
specific item in its cost report in order
to meet the dissatisfaction requirement
for jurisdiction before the Provider
Reimbursement Review Board (Board).
The proposal also specified the
procedures for Board review of whether
the provider’s cost report meets the
proposed substantive reimbursement
requirement of an appropriate cost
report claim for a specific item. We also
proposed technical revisions to other
Board appeals regulations to conform
those regulations to the main revisions
(described above) to the cost reporting
regulations and the provider appeals
regulations, and proposed similar
revisions to the Part 405, Subpart R
regulations for appeals before the
contractor hearing officers.
We received numerous public
comments in response to our proposals
to revise the Medicare cost reporting
and provider appeals regulations.
Commenters raised concerns about the
breadth of the proposed provisions and
questioned the interpretations we
provided in the preamble to the FY 2015
IPPS/LTCH proposed rule. To allow us
proper time to evaluate and respond to
most of these public comments, in the
FY 2015 IPPS/LTCH PPS final rule, we
decided to finalize only certain related
general provisions and to address the
more specific public comments at a later
time, in a subsequent rulemaking
document, as appropriate. In section
XVII.B. of this final rule, we summarize
the changes we made in the FY 2015
IPPS/LTCH PPS final rule. In section
XVII.C. of this final rule, we discuss the
various provisions of the FY 2015 IPPS/
LTCH PPS proposed rule that we did
not include in the FY 2015 IPPS/LTCH
PPS final rule, present summaries of the
public comments we received and our
responses to those comments, and
specify our finalized policies.
B. Summary of Related Changes
Included in the FY 2015 IPPS/LTCH
PPS Final Rule
In the FY 2015 IPPS/LTCH PPS final
rule (79 FR 50199 through 50201), we
made related revisions to the provider
appeals regulations that were, or were
not, included in the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28206
through 28217), as follows:
• In the FY 2015 IPPS/LTCH PPS
proposed rule, we proposed to conform
the terminology in Part 405, Subpart R
and all subparts of Part 413 from
‘‘intermediary’’ or ‘‘fiscal intermediary’’
to ‘‘contractor’’ pursuant to sections
1816, 1874A and 1878 of the Act. We
did not receive any public comments on
our proposal. Therefore, we finalized

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our proposal in the FY 2015 IPPS/LTCH
PPS final rule.
• We revised § 405.1835 of the
regulations to eliminate provider
dissatisfaction as a requirement for
Board jurisdiction over appeals based
on untimely contractor reimbursement
determinations. This revision was
simply a technical correction to amend
§ 405.1835 to conform the regulations to
the provisions in section 1878(a)(1)(B)
of the Act for Board appeals based on
an untimely contractor determination.
In effect, this amendment to § 405.1835
restored the full conformity of the
regulations with the statutory
requirements for Board jurisdiction over
appeals based on untimely contractor
determinations—a conformity that
obtained before a 2008 final rule (73 FR
30190) inadvertently imposed a
provider dissatisfaction requirement for
Board appeals based on untimely
contractor determinations. Moreover, in
order to maintain consistency between
the regulations for Board appeals and
the rules for contractor hearing officer
appeals, we also revised § 405.1811 of
the regulations to eliminate provider
dissatisfaction as a requirement for
contractor hearing officer jurisdiction
over appeals based on untimely
contractor determinations.
We found good cause to waive noticeand-comment rulemaking requirements
under section 553(b) of the
Administrative Procedure Act (APA) (5
U.S.C. 553(b)) for these revisions
because the revisions were simply
technical corrections that brought
§ 405.1835 of the Board appeals
regulations into full conformity with
section 1878(a)(1)(B) of the Act, and
maintained consistency between
§ 405.1811 of the contractor hearing
officer appeals regulations and
§ 405.1835 of the Board appeals
regulations. The revisions did not
represent changes in policy, nor did
they have a substantive effect, and the
public interest was best served by
timely correction of these technical
errors.
The technical correction to § 405.1835
of the Board appeals regulations and the
corresponding revision to § 405.1811 of
the contractor hearing officer appeals
regulations apply to appeals, based on
an untimely contractor determination,
that were pending or filed on or after the
October 1, 2014 effective date of the FY
2015 IPPS/LTCH PPS final rule. These
revisions also apply, subject to the rules
of administrative finality and reopening
in § 405.1807 and § 405.1885 of the
regulations, to appeals pending or filed
on or after the August 21, 2008 effective
date of the 2008 final rule (73 FR
30190). We determined that fixing the

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applicability date, subject to the rules of
administrative finality and reopening in
§ 405.1807 and § 405.1885 of the
regulations, of these amendments by
reference to the August 21, 2008
effective date of the 2008 final rule, was
not impermissibly retroactive in effect
because the amendments simply
corrected and clarified longstanding
agency policy and practice, and were
procedural in nature. We explained that
if the above-described amendments to
§ 405.1811 and § 405.1835 were deemed
a retroactive application of a substantive
change to a regulation, section
1871(e)(1)(A) of the Act 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
determined that any retroactive
application of these amendments to
§ 405.1811 and § 405.1835 was
necessary to ensure full compliance
with the statutory provisions for Board
appeals based on untimely contractor
determinations (under section
1878(a)(1)(B) of the Act), and that it was
in the public interest to apply these
amendments, subject to the rules of
administrative finality and reopening in
§ 405.1807 and § 405.1885 of the
regulations, to Board appeals and
contractor hearing officer appeals that
were initiated or pending on or after the
August 21, 2008 effective date of the
2008 final rule.
C. Specific Provisions of the FY 2015
IPPS/LTCH PPS Proposed Rule
We have completed our consideration
of the public comments on the proposed
revisions to the cost reporting
regulations and the provider appeals
regulations in the FY 2015 IPPS/LTCH
PPS proposed rule cited in section
XVII.A. of this final rule. Below we
present appropriate background for and
summaries of each proposed provision,
respond to the public comments on
those proposals, and explain our
finalized policies for the revisions that
we are adopting in this final rule. We
refer readers to the specified sections of
the FY 2015 IPPS/LTCH proposed rule
for a more extensive description of the
proposals that were contained in the
proposed rule.
1. Background for Payments and Cost
Reporting Requirements
For cost reporting years beginning
before October 1, 1983, all providers
were reimbursed on a reasonable cost
basis for Medicare Part A (hospital
insurance) covered items and services

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that were furnished to Medicare
beneficiaries. Reasonable cost is defined
at section 1861(v)(1)(A) of the Act and
implementing regulations at 42 CFR part
413. In the Social Security Amendments
of 1983 (Pub. L. 98–21), Congress added
section 1886(d) to the Act, which,
effective with cost reporting periods
beginning on or after October 1, 1983,
changed the payment method for
inpatient hospital services furnished by
short-term acute care hospitals to a
prospective payment system (PPS). In
accordance with section 1886(d) of the
Act and implementing regulations at 42
CFR part 412, a PPS payment is made
at a predetermined specific rate for each
hospital discharge (classified according
to a list of diagnosis-related groups
(DRGs)), excluding certain costs that are
paid on a reasonable cost basis.
Later statutory amendments expanded
the types of providers and services that
are subject to a PPS. The various PPSs
for inpatient hospital services are
summarized in § 412.1 of the
regulations. Other PPSs for different
types of providers and services are
summarized in §§ 413.170, 413.300,
413.330, and 419.1 of the regulations.
As explained in § 413.1(b) of the
regulations, if a service is not subject to
a PPS when it is furnished, the provider
is paid on the basis of reasonable cost.
(For ease of reference, we will use the
terms ‘‘reimbursement’’ and ‘‘payment’’
interchangeably unless a particular
context calls for the use of one of these
terms instead of the other.)
Before October 1, 2005, payments to
providers were ordinarily made through
private organizations known as fiscal
intermediaries, under contracts with the
Secretary. Section 1874A of the Act, as
enacted by section 911 of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003, authorized
the Secretary to enter into contracts
with entities known as MACs. After a 6year transition period (§ 421.400(a)), the
claims processing and payment
functions of the fiscal intermediaries are
now performed by MACs, under
contracts with the Secretary.
For covered items and services paid
on a reasonable cost basis, the
contractor pays a provider during its
cost reporting period interim payments
that approximate the provider’s actual
costs. Under a PPS, providers are
generally paid for each patient discharge
after a bill is submitted.
Sections 1815(a) and 1833(e) of the
Act provide that no payments will be
made to a provider unless it has
furnished the information, requested by
the Secretary, needed to determine the
amount of payments due the provider
under the Medicare program. In general,

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providers submit this information
through annual cost reports that cover a
12-month period of time.
All providers participating in the
Medicare program are required under
§ 413.20(a) to maintain sufficient
financial records and statistical data for
proper determination of costs.
Moreover, providers must use
standardized definitions and follow
accounting, statistical, and reporting
practices that are widely accepted in the
hospital and related fields. Under the
provisions of §§ 413.20(b) and 413.24(f),
providers are required to submit cost
reports annually, with the reporting
period based on the provider’s
accounting year. For cost years
beginning on or after October 1, 1989,
section 1886(f)(1) of the Act and
§ 413.24(f)(4) of the regulations require
hospitals to submit cost reports in a
standardized electronic format, and the
same requirement was later imposed for
other types of providers. In addition,
§ 412.52 of the regulations requires all
PPS hospitals to meet the recordkeeping
and cost reporting requirements of
§§ 413.20 and 413.24, which include the
requirement that the provider must
submit a cost report that generally
covers a 12-month period of the
provider’s operations.
2. Background for Administrative
Appeals by Providers and Judicial
Review
Upon receipt of a provider’s cost
report, the contractor reviews or audits
the cost report, makes any necessary
adjustments to the provider’s Medicare
reimbursement for the cost reporting
period, and finally determines the total
amount of payment due the provider.
This year-end reconciliation of
Medicare payment for the provider’s
cost reporting period constitutes a
contractor determination, as defined in
§ 405.1801(a). Under §§ 405.1801(a)(1)
and (a)(2) and 405.1803, the contractor
must give the provider written notice of
the final contractor determination for
the cost period in a notice of the total
amount of program reimbursement. This
notice, the NPR, is an appealable
determination, and the contractor
determination is final and binding
unless it is revised on appeal or
reopening (§ 405.1807).
Under section 1878(a) of the Act, a
provider that has submitted a timely
cost report may appeal to the Board a
final determination of program
reimbursement made by a contractor, as
well as certain final determinations by
the Secretary involving payment under
the IPPS. The Secretary’s delegate, the
Administrator of CMS, may review
certain Board decisions under section

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1878(f)(1) of the Act and § 405.1875 of
the regulations. The final decision of the
Board or the Administrator is subject to
judicial review under section 1878(f)(1)
of the Act and § 405.1877 of the
regulations. In addition, by regulation,
providers are given the right to appeal
to the Board or to contractor hearing
officers certain other determinations. A
CMS reviewing official may review
some contractor hearing officer
decisions under § 405.1834 of the
regulations, but there is no judicial
review of decisions by contractor
hearing officers or a CMS reviewing
official.
Under section 1878(a)(1)(A), (a)(2),
and (a)(3) of the Act, and § 405.1835(a)
of the regulations, a provider may obtain
a Board hearing on a final contractor or
Secretary determination if: (1) The
provider is ‘‘dissatisfied’’ with a final
determination of the contractor or the
Secretary; (2) the amount in controversy
is at least $10,000; and (3) the provider
files a request for a hearing to the Board
within 180 days of notice of the final
determination of the contractor or the
Secretary. The same jurisdictional
requirements govern provider appeals to
contractor hearing officers under
§ 405.1811(a) of the regulations, except
that the amount in controversy
requirement is at least $1,000 but less
than $10,000. Under section
1878(a)(1)(A), (a)(3), and (b) of the Act
and §§ 405.1835(a) and 405.1837(a) of
the regulations, the same jurisdictional
requirements also apply to group
appeals to the Board, except the amount
in controversy for a group appeal is at
least $50,000.
However, as explained in section
XVII.B. of this final rule, the statutory
requirements for Board jurisdiction are
somewhat different if the provider does
not receive a final determination of the
contractor on a timely basis. Under
sections 1878(a)(1)(B), (a)(2), (a)(3), and
(b) of the Act, a provider may obtain a
Board hearing if: (1) The provider does
not receive a final determination of the
contractor on a timely basis, after the
provider filed a cost report that
complied with the cost reporting
regulations; (2) the amount in
controversy is at least $10,000 (at least
$50,000 for a group appeal); and (3) the
provider files a request for a hearing to
the Board within 180 days after notice
of the contractor’s final determination
would have been received if such
contractor determination had been
issued on a timely basis. Moreover,
§ 405.1835(c)(1) of the regulations (as
amended in the FY 2015 IPPS/LTCH
PPS final rule) provides that a
contractor determination is not timely if
it is not issued, through no fault of the

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70553

provider, within 12 months of the
contractor’s receipt of the provider’s
perfected cost report or amended cost
report (as specified in § 413.24(f) of the
regulations). The same jurisdictional
requirements govern provider appeals to
contractor hearing officers, based on an
untimely contractor determination,
under § 405.1811(c) (as amended in the
final FY 2015 IPPS/LTCH PPS final
rule), except that the amount in
controversy requirement is at least
$1,000 but less than $10,000.
3. Background for Appropriate Claims
in Provider Cost Reports
Under longstanding Medicare policy
as set forth in § 413.24 of the regulations
and Section 115 of the Provider
Reimbursement Manual (PRM), Part 2
(CMS Pub. 15–2), a provider must make
an appropriate cost report claim for a
specific item in order to be reimbursed
for the item, whether through the NPR
issued by the contractor or as the result
of an administrative appeal or judicial
review. For example, as set forth in
§ 413.24, providers receiving payment
on the basis of reimbursable cost are
required to provide adequate cost data
to the contractor to support payments
made for services furnished to
beneficiaries. In addition, as set forth in
Section 115 of the PRM, Part 2, we
require that providers make a specific
claim for an item in its cost report, in
order to meet the dissatisfaction
requirement for Board jurisdiction. The
Medicare cost report has always
included particular ‘‘lines’’ for specific
allowable costs such as interest expense
and depreciation. If a provider makes a
cost report claim for a cost that is
allowable, and reimbursement is
claimed in accordance with Medicare
payment policy, the NPR will include
appropriate reimbursement for the cost.
(For ease of reference, we use the terms
‘‘specific item’’ or ‘‘item’’ to refer to a
particular aspect of reasonable costbased payment or a specific aspect of
payment under a PPS unless a particular
context calls for the use of more specific
terms (for example, the term ‘‘allowable
cost’’ as used in determining reasonable
cost-based payment).)
If the NPR does not include
reimbursement for a specific item
claimed in the cost report or if the
provider believes it should have
received more reimbursement for the
item, the provider can request a hearing
before the Board (if the amount in
controversy is at least $10,000) or the
contractor hearing officers (if the
amount in controversy is at least $1,000
but less than $10,000). However, our
longstanding policy is that an
appropriate cost report claim is a

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jurisdictional requirement for an appeal
to the Board or the contractor hearing
officers. As explained earlier, section
1878(a)(1)(A) of the Act provides for a
hearing before the Board if the provider
has filed a timely cost report with the
contractor, and the provider is
‘‘dissatisfied’’ with a final determination
of the contractor or the Secretary. Our
view has been that, in order for a
provider to be dissatisfied with a
specific aspect of the contractor
determination, the provider must have
included an appropriate cost report
claim for the specific item so that the
contractor can respond to the provider’s
claim in the NPR and thereby
potentially produce a specific
reimbursement result about which the
provider is dissatisfied.
Thus, under our policy for Board
jurisdiction, a provider has to make a
specific claim for an item in its cost
report and not be paid in accordance
with that claim in order to meet the
dissatisfaction requirement for Board
jurisdiction. Previously, we did not
permit a provider to ‘‘self-disallow’’ a
specific item, even if the Medicare
contractor had no discretion to award
payment for the item. (In selfdisallowing an item, the provider
submits a cost report that complies with
Medicare policy for the item and then
appeals the item to the Board; the
contractor’s NPR then would not
include any disallowance of the item,
and therefore the provider would
effectively self-disallow the item.)
However, the Supreme Court rejected
our longstanding policy in Bethesda
Hospital Association v. Bowen, 485 U.S.
399 (1988). The Court held that, despite
the providers’ failure to claim all the
reimbursement they believed should
have been made, the plain language of
the dissatisfaction requirement in
section 1878(a)(1)(A) of the Act
supported Board jurisdiction because
the contractor had no authority to award
reimbursement in excess of a regulation
by which it was bound, and thus it
would have been futile for the providers
to try to persuade the contractor
otherwise. The Court also stated in
dicta, however, that the dissatisfaction
requirement might not be met if
providers were to ‘‘bypass a clearly
prescribed exhaustion requirement or
. . . fail to request from the
intermediary reimbursement for all
costs to which they are entitled under
applicable rules’’ (Bethesda Hospital
Association v. Bowen, 485 U.S. at 404–
05).
Following the Bethesda decision, we
no longer required providers to make a
cost report claim for reimbursement of
items for which the contractor did not

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have the discretion to award payment
due to a regulation or manual provision.
However, consistent with the dicta in
the Bethesda decision, we continued to
require providers to include cost report
claims for allowable costs. Our policy,
as revised in response to the Bethesda
decision, was also challenged in the
courts, and a ‘‘circuit split’’ resulted.
Compare Little Co. of Mary Hosp. v.
Shalala, 165 F.3d 1162 (7th Cir. 1999)
(sustaining our interpretation of the
statutory dissatisfaction requirement for
Board jurisdiction) with Loma Linda
Univ. Med. Ctr. v. Leavitt, 492 F.3d 1065
(9th Cir. 2007) (rejecting our
interpretation of the dissatisfaction
requirement); Maine General Med. Ctr.
v. Shalala, 205 F.3d 493 (1st Cir. 2000)
(same).
In response to the Supreme Court’s
Bethesda decision and the ensuing
circuit split, we then addressed the
dissatisfaction requirement in noticeand-comment rulemaking. In a 2008
final rule, we revised § 405.1811(a)(1)
and § 405.1835(a)(1) for contractor and
Board hearings, respectively (73 FR
30190, 30195 through 30200, 30244
through 30245, and 30249 through
30250). Under the revised regulations,
in order to preserve its appeal rights, a
provider must either claim an item in its
cost report where it is seeking
reimbursement that it believes to be in
accordance with Medicare policy, or
self-disallow the item if it is seeking
reimbursement that it believes may not
comport with Medicare policy (for
example, where the contractor does not
have the discretion to award the
reimbursement sought by the provider).
In order to self-disallow an item, the
provider must follow the applicable
procedures for filing a cost report under
protest, which are contained currently
in Section 115 of the PRM, Part 2.
As explained in the preamble to the
2008 final rule, we believe the revised
dissatisfaction policy set forth in
§ 405.1835(a)(1) is a reasonable
interpretation of the dissatisfaction
requirement for Board jurisdiction in
section 1878(a)(1)(A) of the Act (73 FR
30195 through 30200). The
dissatisfaction requirement in
§ 405.1835(a)(1) comports with the
Supreme Court’s statement (discussed
above) that the statutory dissatisfaction
requirement might not be met if a
provider bypassed a clearly prescribed
exhaustion requirement or failed to ask
the contractor for reimbursement of all
costs to which it is entitled under
applicable rules (Bethesda Hospital
Association v. Bowen, 485 U.S. at 404–
05; see also Little Co. of Mary Hosp. v.
Shalala, 165 F.3d 1162 (7th Cir. 1999)
(sustaining our interpretation of the

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statutory dissatisfaction requirement for
Board jurisdiction on the basis of the
forgoing statements by the Supreme
Court); Little Co. of Mary Hosp. v.
Shalala, 24 F.3d 984 (7th Cir. 1994)
(same)).
Upon further reflection, however, we
determined that the requirement that a
provider either claim reimbursement for
a specific cost, or expressly selfdisallow the cost, in its cost report is
more appropriately treated as a cost
reporting requirement under sections
1815(a) and 1833(e) of the Act, as the
agency cannot make payments to a
provider without sufficient information
on all claims for which the provider
believes it should be paid. Indeed, it is
eminently reasonable for the Secretary
to require a provider to make an
appropriate cost report claim for a
specific item if the provider wants to be
paid for the item. As we explain in
detail in the next section, requiring a
cost report claim for full reimbursement
or an express self-disallowance of the
cost enables the contractor to review
and audit the claim, make any
adjustments that seem appropriate, and
include any final payment for the cost
as part of the NPR. Accordingly, in the
FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28209 through 28212 and 28306
through 28307), we proposed to revise
the cost reporting regulations in Part
413, Subpart B by adding the
substantive reimbursement requirement
that a provider must include an
appropriate claim for an item in its cost
report. We proposed that the failure to
account appropriately for the item in the
provider’s cost report would foreclose
payment for the item in the NPR issued
by the contractor and in any decision,
order, or other action by a reviewing
entity (as defined in § 405.1801(a) of the
regulations) in an administrative appeal
filed by the provider.
However, as explained in the FY 2015
IPPS/LTCH PPS proposed rule (79 FR
28208), we recognized that the proposed
addition to the cost reporting
regulations of the substantive
reimbursement requirement of an
appropriate cost report claim for a
specific item would be potentially
duplicative of the existing jurisdictional
requirement in the Board appeals
regulations of an appropriate cost report
claim. In order to avoid such
duplication, we also proposed in the FY
2015 IPPS/LTCH PPS proposed rule (79
FR 28212 through 28213 and 28297) to
revise the appeals regulations in Part
405, Subpart R by eliminating the
requirement that a provider must
include an appropriate claim for an item
in its cost report in order to meet the

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dissatisfaction requirement for Board
jurisdiction.
As explained in section XVII.B. of this
final rule, we subsequently included, in
the FY 2015 IPPS/LTCH PPS final rule,
a technical correction to § 405.1835 of
the regulations, in which we eliminated
provider dissatisfaction as a
requirement for Board jurisdiction over
appeals based on untimely contractor
reimbursement determinations. As a
result of this final revision to
§ 405.1835, the proposed revisions to
this Board appeals regulation in the FY
2015 IPPS/LTCH PPS proposed rule
have effectively been pared down.
Under that proposed rule, the Board
jurisdiction requirement of an
appropriate cost report claim, which
now applies only to appeals of a final
contractor determination (under
§ 405.1835(a) of the regulations), would
be eliminated. The FY 2015 IPPS/LTCH
PPS proposed rule further provided that
our longstanding requirement of an
appropriate cost report claim would be
made a substantive reimbursement
requirement in the cost reporting
regulations. These proposed revisions to
the cost reporting regulations and the
provider appeals regulations would
apply, on a prospective only basis, to
provider cost reporting periods
beginning on or after the effective date
of a final rule.

jstallworth on DSK7TPTVN1PROD with RULES

D. Addition to the Cost Reporting
Regulations of the Substantive
Reimbursement Requirement of an
Appropriate Cost Report Claim
1. Proposed Provisions (New § 413.24(j))
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28209 through
28212, 28306 through 28307), we
proposed to add a new paragraph (j) to
§ 413.24 of the regulations. Proposed
paragraph (j)(1) of § 413.24 provided
that in order to receive or potentially
qualify for payment for a specific item,
the provider must include in its cost
report an appropriate claim for the
specific item. In order to make an
appropriate claim for an item in its cost
report, the provider must either claim
payment for the item in its cost report
where it is seeking payment that it
believes is consistent with Medicare
policy, or self-disallow the item if the
provider is seeking payment that it
believes may not comport with
Medicare policy (for example, where the
contractor does not have the authority
or discretion to award the payment
sought by the provider). In order to selfdisallow a specific item, the provider
would have to follow the applicable
procedures for filing a cost report under
protest, which are now contained in

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Section 115 of the PRM, Part 2 and were
included in proposed paragraph (j)(2) of
§ 413.24. Specifically, the provider
would have to include an estimated
payment amount for each selfdisallowed item in the ‘‘protested
amount’’ line of the cost report, and
attach a worksheet explaining why a
self-disallowance is necessary (instead
of claiming payment for the item in its
cost report) and describing how it
determined the estimated payment
amount for each self-disallowed item.
Proposed paragraph (j)(3) of § 413.24
specified the procedures for
determining whether there is an
appropriate cost report claim for a
specific item. The default rule is that the
question of whether the provider’s cost
report includes an appropriate claim for
the specific item must be determined by
reference to the cost report that the
provider submits originally to, and is
accepted by, the contractor, unless one
of three exceptions applies. The first
exception is that if the provider submits
an amended cost report that is accepted
by the contractor, the question of
whether there is an appropriate cost
report claim for the specific item must
be determined by reference to such
amended cost report, unless one of the
two remaining exceptions applies. The
second exception is that if the
contractor adjusts the provider’s cost
report, as submitted originally by the
provider and accepted by the contractor
or as amended by the provider and
accepted by the contractor, whichever is
applicable, with respect to the specific
item, the question of whether there is an
appropriate cost report claim for the
specific item must be determined by
reference to the provider’s cost report,
as such cost report is adjusted for the
specific item in the contractor’s final
determination (as defined in
§ 405.1801(a)), unless the remaining
exception applies. The third exception
is that if the contractor reopens either
the final contractor determination for
the provider’s cost reporting period (in
accordance with § 405.1885) or a revised
contractor determination for such
period (issued in accordance with
§ 405.1889) and adjusts the provider’s
cost report with respect to the specific
item, the question of whether there is an
appropriate cost report claim for the
specific item must be determined by
reference to the provider’s cost report,
as such cost report is adjusted for the
specific item in the contractor’s most
recent revised contractor determination
for such period.
In the proposed rule, we stated that
providers should make every effort to
comply with the default rule set forth in
proposed paragraph (j)(3) of § 413.24,

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70555

even though one of the exceptions to the
default rule might come into play later.
In order to ensure compliance with the
substantive requirement of an
appropriate cost report claim for a
specific item, we stated that the
provider should either claim full
payment for, or properly self-disallow,
the item in the cost report that the
provider submits originally to the
contractor. However, we indicated that
failure to include an appropriate claim
for the specific item in the provider’s
original ‘‘as submitted’’ cost report
would not necessarily foreclose any
further opportunity to meet the
requirement of an appropriate cost
report claim for the specific item. Under
the first exception to the default rule
under proposed paragraph (j)(3), the
provider could include an appropriate
cost report claim for the specific item in
an amended cost report, but the
contractor has discretion whether to
accept an amended cost report by the
provider. Under the second and third
exceptions to the default rule under
proposed paragraph (j)(3), the
requirement of an appropriate cost
report claim could be met through the
contractor’s adjustment of the provider’s
cost report, either in the contractor’s
final determination for the provider’s
cost reporting period (as defined in
§ 405.1801(a)) or, if the final contractor
determination is reopened, in the
contractor’s revised determination.
However, in preparing the final
contractor determination for a
provider’s cost reporting period, the
contractor would have the discretion as
to whether to adjust the provider’s cost
report with respect to the specific item
and, if so, how to adjust the cost report
for such item. Similarly, after the final
contractor determination is issued, the
contractor would have the discretion as
to whether to reopen the final contractor
determination and, if the specific item
is reopened, whether to adjust the cost
report for such item and how to make
any such adjustment.
In order to exemplify the workings of
proposed paragraph (j)(3) of § 413.24,
we included the following in the
proposed rule: Consider a hospital that
seeks a Medicare DSH payment
adjustment that, on the provider’s view,
should be calculated on the basis of
2,000 Medicaid-eligible patient days in
the numerator of the DSH Medicaid
fraction (42 CFR 412.106(b)(4)). If the
hospital’s as submitted cost report
claimed only 1,000 Medicaid-eligible
patient days for the numerator of the
DSH Medicaid fraction, and the number
of Medicaid-eligible patient days was
not changed in an amended cost report

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by the provider or through adjustments
to the cost report by the contractor, the
hospital would have made an
appropriate cost report claim for only
1,000 Medicaid-eligible patient days
(instead of 2,000 such days). However,
if the provider submitted, and the
contractor accepted, an amended cost
report that claimed a total of 1,500
Medicaid-eligible patient days, the
provider would have made a valid cost
report claim for 1,500 Medicaid-eligible
patient days (instead of 2,000 such
days). However, if the hospital asked the
contractor, during the contractor’s
review and settlement of the provider’s
cost report, to count 250 more
Medicaid-eligible patient days, and the
contractor agreed to consider those days
in the contractor’s final determination,
the provider would have made a valid
cost report claim of 1,750 Medicaideligible patient days (instead of 2,000
such days). Finally, if the provider next
requested, or the contractor initiated on
its own motion, the reopening of the
final contractor determination on the
specific issue of the number of
Medicaid-eligible patient days for the
DSH Medicaid fraction’s numerator, and
the contractor did reopen for that
specific issue and it agreed to consider
still another 250 Medicaid-eligible
patient days in the contractor’s revised
determination, the provider would have
a valid cost report claim of 2,000
Medicaid-eligible patient days.64 At that
juncture, the hospital would have met
the requirement of an appropriate cost
report claim for all of the 2,000
Medicaid-eligible patient days, which is
the number of such days that the
provider believed from the outset
should be used in determining the
numerator of the DSH Medicaid
fraction.
We stated in the proposed rule our
belief that proposed paragraph (j)(3) of
§ 413.24 appropriately reflects the usual
process in which a cost report claim that
is first made in the cost report that is
submitted originally to, and accepted
by, the contractor, might be altered
through an amended cost report by the
provider (if the amended cost report is
accepted by the contractor) or through
adjustments of the provider’s cost report
claim that are made in the contractor’s
final determination or, in the event of a
reopening, in the contractor’s revised
64 In the preamble of the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28209 through 28210), this
sentence inadvertently omitted the additional point
regarding the contractor’s acceptance of an
additional 250 Medicaid-eligible patient days
through a reopening and revised final contractor
determination that finally resulted in the provider
claiming a total of 2,000 Medicaid-eligible patient
days.

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final determination. This process
enables a provider to ensure compliance
with the substantive requirement of an
appropriate cost report claim for a
specific item, by including in the cost
report that the provider submits
originally to, and is accepted by, the
contractor, either a full claim for
payment for a specific item or a proper
self-disallowance of the item. In
addition, this process gives a provider
additional opportunities to meet the
requirement of an appropriate cost
report claim through an amended cost
report by the provider (if the amended
cost report is accepted by the contractor)
and adjustments to the provider’s cost
report claim that are included in the
contractor’s final contractor
determination or, if there is a reopening,
in the revised final contractor
determination. Unlike with the
provider’s original as submitted cost
report, however, the contractor has
discretion whether to accept an
amended cost report; whether to include
particular cost report claim adjustments
in the final contractor determination
and, if so, how to determine such
adjustments; and whether to reopen a
contractor determination and, if there is
a reopening, how to determine any cost
report claim adjustments that may be
included in the revised final contractor
determination. We stated that this ‘‘back
and forth’’ process between the provider
and the contractor, which is reflected in
proposed paragraph (j)(3) of § 413.24,
facilitates appropriate determinations of
program payment and enhances
administrative efficiency. Each of the
Medicare contractors has substantial
experience in reviewing and auditing
cost reports and in properly determining
payment amounts. The back and forth
process between the provider and the
contractor eliminates, or minimizes and
sharpens, potential disagreements,
which obviates the need to file some
administrative appeals or narrows the
issues in many cases.
In addition, proposed paragraph (j)(4)
of § 413.24 included a provision that, to
the extent a provider fails to claim a
specific item appropriately in its cost
report, the final contractor
determination (as defined in
§ 405.1801(a)) may not include payment
for the item. However, if the contractor
determines that the provider made an
appropriate cost report claim for a
specific item but the contractor
disagrees with material aspects of the
provider’s claim for the item, the
contractor must make appropriate
adjustments to the provider’s cost report
and include payment for the specific
item in the final contractor

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determination in accordance with the
contractor’s adjustments to the cost
report and to the extent permitted by
program policy.
We proposed under proposed
paragraph (j)(5) of § 413.24 that if a
party to an administrative appeal
questions whether the provider’s cost
report included an appropriate claim for
the specific item under appeal, the
reviewing entity (as defined in
§ 405.1801(a)) must follow the
procedures (which we discuss in detail
below) that are set forth in proposed
§ 405.1873 (if the appeal was filed
originally with the Board), or the
procedures in § 405.1832 (if the appeal
was filed initially with the contractor),
for review of whether the substantive
reimbursement requirement of an
appropriate cost report claim for the
specific item is satisfied. Those
regulations require the reviewing entity
to follow the procedures (discussed
above) that are set forth in paragraph
(j)(3) of this section for determining
whether the provider’s cost report
included an appropriate claim for the
specific item under appeal. Also, the
reviewing entity may permit payment
for the specific item under appeal solely
to the extent authorized by § 405.1873(f)
(if the appeal was filed originally with
the Board) or by § 405.1832(f) (if the
appeal was filed initially with the
contractor).
2. Statutory Authority and Rationale for
Proposed § 413.24(j)
In the FY 2015 IPPS/LTCH PPS
proposed rule, we stated that we believe
the Medicare statute provides ample
authority for the proposal (described in
the preceding section of this final rule)
to add a new paragraph (j) to § 413.24
of the regulations. This proposal is well
within the Secretary’s general
rulemaking authority under sections
1102 and 1871 of the Act. Moreover,
proposed § 413.24(j) is an appropriate
exercise of the Secretary’s broad
authority under sections 1815(a),
1833(e), and 1886(f)(1) of the Act to
require providers to furnish the
information needed to determine the
amount of payment due a provider
under the Medicare program. As
described above, we have relied on
these particular statutory provisions in
adopting regulations that require
providers to submit annual cost reports;
specify the requisite contents of cost
reports; and impose various procedural
requirements for cost reports (such as
time periods for timely submission of
cost reports and certification
requirements for cost reports).
Moreover, we have invoked the same
statutory provisions in requiring

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providers to report other specific
information as a condition for Medicare
payment; we refer readers to, for
example, Community Hospital of
Monterey Peninsula v. Thompson, 323
F.3d 782, 790, 795–800 (9th Cir. 2003)
(sustaining Medicare’s policy that
providers must bill ‘‘crossover bad
debts’’ to the State Medicaid agency
because 42 U.S.C. 1395g(a) (that is,
section 1815(a) of the Act) specifically
granted the Secretary broad discretion
as to what information to require as a
condition of payment to providers
under the Medicare program; see also
Maine Med. Ctr. v. Burwell, 775 F.3d
470, 480 (1st Cir. 2015) (the Secretary is
authorized by 42 U.S.C. 1395g(a) (that
is, section 1815(a) of the Act) to require
a provider to furnish such information
as the agency may request). Indeed, as
explained above, the Secretary’s broad
discretion with respect to cost reporting
requirements is also reflected in the
Board appeals provisions of section
1878(a) of the Act, which makes
provider compliance with cost reporting
requirements a prerequisite of Board
jurisdiction.
In addition to the plainly sufficient
statutory authority for proposed
§ 413.24(j), we believe there are sound
policy reasons for requiring a provider
to include an appropriate claim for an
item in its cost report by either claiming
payment for the item (where the
provider believes such claim would
comport with Medicare policy), or by
self-disallowing the item (if the provider
is seeking payment that it believes may
not be consistent with Medicare policy).
This proposal has three main parts, each
of which we addressed in the proposed
rule.
First, we believe that if a cost is
allowable and the provider does not
disagree with how Medicare determines
payment for the cost, the provider’s cost
report should include a claim for full
payment of the cost in accordance with
the program’s payment policy. In such
cases, a cost report claim for full
payment of the cost enables the
contractor to review the claim, make
any adjustments that seem appropriate,
and include final payment for the cost
as part of the NPR. Requiring a cost
report claim for full payment of
allowable costs (where the provider
does not disagree with how Medicare
determines payment for the cost)
facilitates the contractor’s discharge of
some of its principal responsibilities,
which include using the contractor’s
expertise and experience to review and
audit payment claims, making any
necessary adjustments, and including
final payment for the cost in the NPR.
Absent some misstep by the contractor

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in reviewing such a cost report claim
and determining final payment for the
item, there would be no need for the
provider to later request reopening or to
file an administrative appeal regarding
the item. Even if the provider disagreed
with some aspect of the contractor’s
payment determination for the specific
item, any such disagreement would be
narrowed and delineated more precisely
because our proposal, to require a full
cost report claim for payment of
allowable costs, will give the contractor
an opportunity to review and audit the
claim and determine the extent to which
(if at all) to include payment for the
claim in the NPR. Therefore, we believe
that the interests of administrative
finality and efficiency will be advanced
if providers are required to include a
cost report claim for full payment of
allowable costs.
The proposed requirement under
proposed § 413.24(j) of a cost report
claim for full payment of allowable cost
also comports with the division of
responsibilities between the contractors
and the Board and the other reviewing
entities (as defined in § 405.1801(a)). At
present, there are 12 contractors, each of
which has a fairly large staff with
substantial experience and expertise in
reviewing and auditing cost reports and
determining final payment in
accordance with Medicare policy. By
contrast, the Board has only five
members and a relatively small staff. We
believe it is a waste of scarce resources
and very inefficient for a provider to
first raise a clearly allowable cost in an
appeal to the Board when the contractor
could have considered and finally
determined payment for such an
allowable cost in the NPR, if the
provider had simply made a timely cost
report claim for full payment of the
allowable cost. As indicated by the very
name of the Provider Reimbursement
Review Board, it is a ‘‘review board’’ or
administrative appeals tribunal, not the
Medicare program’s front line auditors
charged with making the final
determination of program
reimbursement for such allowable costs.
Second, there are also sound policy
reasons for proposing, under a new
paragraph (j) in § 413.24, that a provider
must self-disallow a specific item if it is
seeking payment that it believes may
not comport with Medicare policy (for
example, because the provider believes
the contractor does not have the
discretion to make the payment sought
by the provider), by following the
applicable procedures for filing a cost
report under protest (procedures that, as
explained above, are now contained in
Section 115 of the PRM, Part 2, and
would be set forth in proposed

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paragraph (j)(2) of § 413.24). When a
provider self-disallows an item by
accounting for it appropriately in the
‘‘protested amount’’ line of the cost
report (instead of claiming payment for
the item), the contractor has an
opportunity to correct any
misconceptions that the provider may
have had about the item. For example,
the contractor could determine, contrary
to the provider’s apparent
understanding in self-disallowing a
specific item, that the item in question
is actually an allowable cost that is
reimbursable in accordance with
program policy. Another example
would be that the contractor might
determine, despite the provider’s
understanding of Medicare policy and
its concomitant self-disallowance, that
program policy has changed and the
item is now an allowable cost or a new
payment policy now applies that
permits the payment methodology used
by the provider in support of its selfdisallowance of the item; we refer
readers to, for example, 75 FR 50275
through 50286 (discussing CMS Ruling
1498–R, which revised Medicare DSH
payment policy in response to adverse
judicial precedent, and made such
revisions applicable to open cost reports
and certain pending administrative
appeals). In such cases, the contractor’s
extensive expertise and experience and
its resources can be brought to bear in
reviewing self-disallowed items, making
any necessary corrections, and finally
allowing payment for corrected items in
the NPR. Indeed, these kinds of
contractor actions comport with section
1874A(a)(4) of the Act and § 413.20(b) of
the regulations, which require the
contractors to furnish providers with
consultative services, education,
training, information and instructions,
and technical assistance regarding the
interpretation and application of
payment principles and other program
policies; be available to address
provider questions and problems on a
daily basis; and facilitate
communication between the agency and
providers. Accordingly, we believe our
proposed addition of a self-disallowance
requirement to the cost reporting
regulations will facilitate exhaustion of
administrative remedies through the
contractor’s review and final settlement
of the provider’s cost report, and when
the contractor corrects errors in a
provider’s self-disallowance, the need to
appeal to the Board or request reopening
could be obviated; we refer readers to
Little Co. of Mary Hospital v. Shalala,
165 F.3d 1162, 1165 (7th Cir. 1999) (the
Secretary’s requirement of an
appropriate cost report claim for an item

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ensures that the contractor will have the
‘‘first shot’’ at determining any
reimbursement for the item, before any
appeal to the Board need be filed).
By requiring the self-disallowance of
items that providers believe may not
comport with Medicare policy,
proposed § 413.24(j) also would
contribute importantly to other aspects
of program administration. For example,
we believe that this proposal would
facilitate provider compliance with the
existing requirements in § 413.24(f) that
each provider submit a complete,
accurate, and timely cost report, and
that the provider’s administrator or
chief financial officer certify that the
submitted cost report is complete and
accurate. We believe our proposed selfdisallowance requirement also would
enhance CMS’ ability to accurately
estimate the program’s potential
liabilities (for example, for purposes of
the agency’s preparation of required
financial statements). Similarly, we
believe that this proposal would
improve the contractors’ ability to
establish audit and other workload
priorities. In addition, we believe that
the proposed addition of a selfdisallowance requirement (for items that
providers believe may not comport with
Medicare policy) to the cost reporting
regulations would enable us to better
monitor Medicare policy and potentially
adjust our policies in response to a
pattern of provider self-disallowances of
a given item. Indeed, the importance of
requiring complete and accurate cost
report information is highlighted by the
fact that we use cost report data for a
wide variety of purposes such as setting
and refining prospective payment rates;
establishing hospital market basket
weights; calculating Medicare and total
facility margins; determining payment
for graduate medical education (GME)
and indirect medical education (IME);
creating projections for the President’s
annual budget and for the annual
Medicare Trustees Report; for various
research projects; and for responding to
requests from the public, the Congress,
OMB, and other parts of the
Administration.
Third, we believe there also are sound
reasons for our proposal that, under a
new § 413.24(j), if a provider fails to
account appropriately for an item in its
cost report (by making a full claim for
payment for the item or self-disallowing
the item if the provider believes a
payment claim would not comport with
Medicare policy), the NPR issued by the
contractor may not include payment for
the item and payment also may not be
permitted in any decision, order, or
other action by a reviewing entity (as
defined in § 405.1801(a)) in an

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administrative appeal filed by the
provider. Under existing
§§ 405.1835(a)(1) and 405.1840(b)(3),
the consequence of not making an
appropriate cost report claim for an item
is that the Board would not have
jurisdiction over the provider’s appeal
of the item. (Similarly, under
§§ 405.1811(a)(1) and 405.1814(b)(3),
the contractor hearing officers would
lack jurisdiction for an item if the
provider did not make an appropriate
cost report claim for the item.) As
explained below, however, we proposed
the elimination of the jurisdictional
requirement of an appropriate cost
report claim in existing
§§ 405.1835(a)(1) and 405.1840(b)(3) for
Board appeals (and the corresponding
jurisdictional requirement in
§§ 405.1811(a)(1) and 405.1814(b)(3) for
contractor hearing officer appeals),
because we believe it is a requirement
more appropriately placed in the cost
reporting regulations. Given our
longstanding policy of requiring an
appropriate cost report claim for an
item, proposed paragraph (j) of § 413.24
is a natural place to spell out the
consequences of not abiding by this cost
reporting requirement. In this regard, we
note that the proposed addition of a new
paragraph (j) to § 413.24 is like the
existing paragraph (e) in § 413.20, which
provides for the suspension of Medicare
payments if a provider fails to maintain
the records necessary for proper
determination of Medicare
reimbursement. Similarly, if a provider
fails to include an appropriate claim for
an item in its cost report, the NPR
issued by the contractor will not include
payment for the item and payment also
will not be permitted in any decision,
order, or other action by a reviewing
entity (as defined in § 405.1801(a)) in an
administrative appeal filed by the
provider.
3. Summary of Public Comments, CMS
Responses, and Statement of Finalized
Policies for § 413.24(j)
The following public comments were
received in response to the FY 2015
IPPS/LTCH PPS proposed rule (79 FR
28206 through 28217). As explained
below, we are finalizing various
revisions to the cost reporting
regulations and the provider appeals
regulations. These final revisions will
apply, on a prospective only basis, to
provider cost reporting periods
beginning on or after the effective date
of this final rule, and to provider
appeals regarding provider cost
reporting periods that begin on or after
the effective date of this final rule.
Comment: Several commenters
questioned the legitimacy of CMS’

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policy justifications. The commenters
stated that the agency’s policy
justifications do not constitute a rational
basis for the proposed new cost report
requirements.
Response: As explained in the
proposed rule (and as discussed earlier
in this final rule), we believe there are
several compelling policy justifications
for the requirement in proposed
§ 413.24(j) that a provider include an
appropriate claim for an item in its cost
report by either claiming payment for
the item (where the provider believes
such claim would comport with
Medicare policy), or by self-disallowing
the item (if the provider is seeking
payment that it believes may not be
consistent with Medicare policy).
First, we believe that requiring a cost
report claim for full payment of an
allowable cost advances the agency’s
interest in administrative finality and
efficiency. If a cost is allowable and the
provider does not disagree with how
Medicare determines payment for the
item, the requirement of an appropriate
cost report claim facilitates the
contractor’s settlement of the claim. The
requirement of a cost report claim for
full payment of an allowable cost also
helps preserve the distinct roles of the
contractor and the Board, and conserves
Board resources by avoiding Board
appeals involving claims that could
have been considered and settled by the
contractor, if the provider had simply
made a timely cost report claim for full
payment of the allowable cost in the
cost report.
We also believe that the requirement
in proposed § 413.24(j), that a provider
self-disallow a specific item if it is
seeking payment that it believes may
not comport with Medicare policy, will
facilitate exhaustion of administrative
remedies. It has been our experience
that providers are sometimes mistaken
in their belief that payment is not
allowable. This could occur, for
example, where the provider
misinterprets the applicable payment
policies, where the policies have
changed without the provider’s
knowledge, or where the provider has
some other reason to believe (albeit
erroneously) that a particular payment
will be deemed not allowable. We
believe that requiring a provider to selfdisallow a specific item if it is seeking
payment that it believes may not
comport with Medicare policy ensures
that the contractor will have the
opportunity to employ its expertise and
correct any misconceptions in the first
instance, potentially avoiding
unnecessary appeals and narrowing the
issues in dispute. Even if the provider
is correct in its belief that payment is

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not allowable, the contractor may still
facilitate resolution of the provider’s
claim through consultation, discussion,
and education about the applicable
Medicare policies.
In addition, we believe that the
addition of a self-disallowance
requirement to the cost reporting
regulations will advance other aspects
of program administration by facilitating
provider compliance with other cost
report requirements, enhancing the
agency’s ability to estimate potential
liabilities, improving contractors’ ability
to establish audit and other workload
priorities, and allowing the agency to
better monitor Medicare policy and
potentially adjust policy in response to
a pattern of provider self-disallowances.
Lastly, as explained in the proposed
rule, we believe the requirement of an
appropriate cost report claim is more
appropriately placed in the cost report
regulations than in its current inclusion
in the provider appeals regulations. We
believe that proposed § 413.24(j) reflects
our longstanding policy of requiring an
appropriate cost report claim for items
and that this provision is the natural
place to spell out the consequences of
not abiding by this cost reporting
requirement.
Comment: Several commenters
questioned whether the ‘‘back and
forth’’ process between the provider and
the contractor as described in the
proposed rule reflects the reality of the
cost report process. Commenters also
questioned whether contractors are
equipped and prepared to engage in the
type of back and forth process described
in the proposed rule.
Response: We believe that the back
and forth process between the provider
and contractor, as described in the
proposed rule (79 FR 28209 through
28210), does reflect the reality of the
cost report process, and contractors
regularly engage in the type of back and
forth process described in the proposed
rule. In addition to claims processing
functions, contractors regularly engage
with providers to furnish consultative
services, education, training,
information and instructions, and
technical assistance regarding the
interpretation and application of
payment principles and other program
policies. Contractors also address
providers’ questions and problems on a
daily basis and facilitate communication
between the agency and providers. We
selected the specific scenario involving
a hospital seeking a Medicare DSH
adjustment based on additional
Medicaid-eligible patient days to
exemplify the commonplace interaction
between the provider and contractor. As
several commenters acknowledged,

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contractors frequently engage with
providers in determining whether to
accept amended cost reports or requests
for reopening under this specific
circumstance. The regularity of this
interaction between the contractor and
the provider is reflected by the sheer
volume of cost report amendments and
reopening requests accepted by
contractors. Contractors accepted 76
percent of requests from providers to
amend cost reports during FY 2014 and
77 percent during FY 2013. In addition,
as a result of a contractor reopening,
2,311 revised NPRs were issued during
FY 2014 and 3,636 revised NPRs were
issued during FY 2013.
Comment: Several commenters
questioned whether contractors would
work with providers to identify
situations in which a hospital may have
mistakenly claimed an item under
protest, instead of affirmatively claiming
payment for that item through the cost
report. The commenters stated that if a
contractor determines that a hospital
may have mistakenly claimed an item
under protest instead of affirmatively
claiming payment for that item, because
there is no CMS requirement directing
the contractor to add that item to the
allowable claims in the hospital’s cost
report, the contractor is free to use that
error against the hospital by not
reimbursing the hospital for the item in
question and opposing any subsequent
appeal on the ground that the protest
was not proper.
Response: Contractors have been
directed to work with providers to
identify self-disallowed items that may
actually be reimbursable in accordance
with program policy. If a provider seeks
payment that it mistakenly believes may
not comport with Medicare policy, and
follows the procedures for selfdisallowing the specific item as set forth
in proposed paragraph (j)(2) of § 413.24
by accounting for it appropriately in the
‘‘protested amount’’ line of the cost
report, the provider has fulfilled the
substantive reimbursement requirement
of an appropriate cost report claim and
may receive or potentially qualify for
reimbursement for the specific item. If
the item in question is an allowable cost
that is reimbursable in accordance with
Medicare policy, the contractor has the
obligation to pay the provider
accurately. We believe that the
contractor’s correction of errors in the
provider’s self-disallowance would
obviate the need for the provider to
request a contractor reopening or Board
hearing. If the contractor does not
correct the error, the provider could
seek relief through the administrative
appeals process.

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Comment: Several commenters stated
that the proposed rule assumes a cost
reporting and appeal structure that does
not reflect the reality of the hospital
reimbursement process. The
commenters alleged that the proposed
rule ignores that providers often lack
access to the information necessary to
complete their cost reports in a timely
fashion or otherwise may be unaware of
a payment error, through no fault of
their own, when the cost report is filed.
Response: We respectfully disagree
with the commenters’ characterization
of the proposed rule. Providers have
ample time, 5 months after the close of
the cost reporting period, to submit cost
reports with appropriate cost report
claims. In most cases, the information a
provider needs to make appropriate cost
report claims is easily ascertainable and
may be found in the provider’s own
records. Therefore, in most instances,
providers should not have any difficulty
obtaining the information necessary to
complete and submit a cost report with
appropriate claims for each specific
item.
We have identified only one
circumstance where a provider may
have difficulty obtaining sufficient
information to make an appropriate cost
report claim within the allotted time for
cost report submission. This
circumstance may occur if a hospital
experiences difficulty obtaining
sufficient information from State
agencies for the purpose of claiming
DSH Medicaid-eligible patient days.
Therefore, as explained below in our
response to the next comment, we will
instruct contractors, in this limited
circumstance, that they must accept one
amended cost report submitted within a
12-month period after the hospital’s cost
report due date, solely for the specific
purpose of revising a claim for DSH by
using updated Medicaid-eligible patient
days, after a hospital receives updated
Medicaid eligibility information from
the State.
Moreover, for situations in which a
provider may be unaware of a payment
error when its cost report is submitted,
we believe that proposed § 413.24(j)(3)
offers providers several opportunities to
meet the requirement of an appropriate
cost report claim. As detailed in
proposed paragraph (j)(3) of § 413.24, a
provider may satisfy the requirement of
an appropriate cost report claim through
submission of an amended cost report
(if the amended cost report is accepted
by the contractor), through adjustments
of the cost report claim that are made in
the contractor’s final determination or,
in the event of a reopening, through cost
report adjustments made in the
contractor’s revised determination.

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Moreover, proposed § 413.24(j)(5)
provides for Board review of provider
compliance with the appropriate cost
report claim requirement in accordance
with the procedures set forth in new
proposed § 405.1873.
Comment: Commenters recommended
that the proposed rule include an
exception for hospitals that rely on
information from State agencies
regarding Medicaid-eligible patient
days, for the purpose of calculating DSH
payments. The commenters stated that
hospitals are not able to determine a
final and complete count of Medicaideligible patient days until well after the
deadline for submission of the cost
report to the contractor because of State
delays in providing such information.
Several commenters cited retroactive
State eligibility determinations and
Medicaid expansion populations as
complicating factors beyond a hospital’s
control that could substantially impact
DSH payments. The commenters also
pointed out that CMS has not
promulgated any standards affirmatively
requiring States to make Medicaid
eligibility information available to
hospitals for the purpose of completing
the cost report, or requiring States to
make this information available within
any specific timeframe. One commenter
stated that the proposal does not
provide for an alternative of requiring
States to provide accurate, timely and
complete information to enable
hospitals to include the Medicaideligible patient days in their timely
submitted cost reports.
Many commenters pointed out that
acceptance of an amended cost report or
a reopening for the purpose of adding
additional Medicaid-eligible patient
days to calculate DSH payments is at the
discretion of the contractor. Several
commenters observed that currently,
contractors typically exercise their
discretion in favor of accepting
amended cost reports. However,
commenters also claimed that the
exercise of contractor discretion under
the proposal may keep a hospital from
receiving the appropriate amount of
payment for DSH and impede its right
to appeal contractor DSH payment
determinations that inappropriately
omit some Medicaid-eligible patient
days for a cost reporting period.
Another commenter expressed
concern that the proposal may also
affect payments for uncompensated care
by skewing the distribution of the pool
of insured low income days if additional
DSH Medicaid-eligible patient days
were in the calculation for some
hospitals but not for other hospitals due
to the sole discretion of the contractor.

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Response: In claiming DSH payments,
hospitals use State eligibility
determinations and reporting for the
purpose of calculating Medicaid-eligible
patient days. In calculating the number
of Medicaid-eligible patient days, the
hospital must determine whether the
patient was eligible for Medicaid under
a State plan approved under Title XIX
of the Act on the day of service by using
the State’s informational retrieval
systems used in the administration of
Title XIX of the Act, as required by CMS
to provide timely and accurate data (42
CFR part 433, subpart C). The
responsibility for collecting, verifying,
and reporting Medicaid eligibility as
part of the cost reporting process lies
solely with providers. States are
obligated to provide this information,
although hospitals bear the burden of
proof with respect to DSH Medicaideligible patient days claimed on the cost
report. Hospitals cannot claim
Medicaid-eligible patient days that have
not been verified by State records. We
believe that it is reasonable to continue
to place the burden of furnishing the
information necessary to prove
eligibility for each Medicaid patient day
for DSH calculation purposes on
hospitals because they are best situated
to provide and verify Medicaid
eligibility information. Because the
hospital has provided inpatient care for
which they billed the relevant payers,
including State Medicaid plans, they
will necessarily already be in possession
of much of the required information. We
continue to believe that the mechanisms
currently in place enable hospitals to
obtain Medicaid-eligible patient days
necessary to calculate DSH payments. In
addition, we believe there is no need to
modify State Medicaid plan regulations
to require that State plans verify
Medicaid eligibility for hospitals within
a certain time period.
However, we recognize that, in certain
limited circumstances, when the
hospital submits the Medicare cost
report, it may not possess sufficient
information from a State agency for the
purpose of reporting the total number of
Medicaid-eligible patient days due to
factors beyond that hospital’s control. In
such situations, as one commenter
observed, contractors usually accept
amended cost reports to account for
delays a provider may have experienced
in obtaining requisite information from
State agencies. We will continue to
afford providers the opportunity to
submit amended cost reports and will
instruct contractors, with new
instructions in CMS Pub. 100–6,
Chapter 8, that they must accept one
amended cost report submitted within a

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12-month period after the hospital’s cost
report due date, solely for the specific
purpose of revising Medicaid-eligible
patient days in order to calculate DSH
payments after a hospital receives
updated Medicaid-eligible patient days
from the State. Furthermore, as we
anticipate that, under this process,
providers will be able to more
accurately account for Medicaid-eligible
patient days on their cost reports, there
is little risk that the distribution pool of
insured low-income days will become
skewed and payments for
uncompensated care will not be
affected.
Comment: Several commenters
pointed out that the 2008 final rule (73
FR 30190) indicated that necessary
information is not always available to
providers when they submit their cost
reports. The commenters characterized
the existing regulations as explicitly
recognizing the provider’s right to
appeal based on information that was
not available or was not known to the
provider until after its cost report was
submitted. The commenters stated that
when the Board appeal regulations were
revised in 2008, the agency
acknowledged that there may be
situations where a provider is uncertain
about whether Medicare payment is
correct because it does not have access
to necessary information (for example,
Medicaid eligibility information from a
State agency) (73 FR 30194). The
commenters stated that this admission
in the 2008 rule is incompatible with
the new cost report requirements in
proposed § 413.24(j), which would limit
reimbursement to only those items for
which an ‘‘appropriate claim’’ or
‘‘protest’’ is included on the cost report.
Response: We do not see any
inconsistency between our statements in
the 2008 final rule and the cost report
claim requirement in proposed
§ 413.24(j). In the 2008 rule, we stated
that there may be instances where a
provider does not have access to
underlying data (for example, Medicaid
eligibility information from a State
agency) sufficient to ascertain whether
Medicare payment (for example, the
DSH payment) is incorrect. Consistent
with the 2008 rule, we have
acknowledged in this final rule the one
circumstance where hospitals must rely
on information from State agencies
about Medicaid eligibility in order to
make an appropriate DSH payment
adjustment claim in its cost report. To
address this limited circumstance, as
discussed above, we will instruct
contractors that they must accept one
amended cost report submitted within a
12-month period after the hospital’s
original cost report due date, solely for

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the specific purpose of revising and
making an appropriate cost report claim
for DSH Medicaid-eligible patient days
after a hospital receives updated
information about Medicaid-eligible
patient days from the State.
Comment: Commenters expressed
concern that the SSI fraction of the DSH
payment determination, which is
calculated by CMS, is not released until
after the cost report is filed.
Response: The proposal will not have
any effect on the process that CMS uses
to calculate SSI fractions for acute care
hospitals. CMS and its contractors will
continue to use the data matching
process that was referred to in CMS
Ruling 1498–R and finalized at 75 FR
50275 through 50286, including all
relevant provisions regarding the timing
of the match process, to calculate
relevant SSI fractions for acute care
hospitals. Moreover, while relevant
Federal fiscal year SSI ratios may not be
published until after a cost report is
filed, providers may use, and Medicare
contractors must accept, the latest
available SSI ratios that have been
published to process claims, submit cost
reports, and make tentative settlements
(42 CFR 412.106(b)(2) and 413.64(e) and
(f)), until CMS publishes the relevant
Federal fiscal year SSI ratio which shall
be used to issue a final determination in
an NPR. In addition, the hospital could
seek relief by requesting a reopening of
the final contractor determination or by
filing an administrative appeal.
Comment: Several commenters stated
that the time period of 5 months
between the end of a hospital’s fiscal
year and its cost report due date is too
short for a hospital to capture all data
necessary for direct GME and IME
payments. One commenter expressed
concern that direct GME or IME fulltime equivalent (FTE) data relating to a
prior year and/or penultimate year
could be excluded from a hospital’s
calculation of GME or IME payments
under the requirement of an appropriate
cost report claim in proposed
§ 413.24(j). This commenter suggested
that, under the proposal, if the FTE
residents in a prior year’s cost report are
changed upon the audit or reopening of
a cost report, and the current year cost
report is filed using the original prior
year FTE count in the IME and direct
GME calculations, the 3-year rolling
average and the prior year resident to
bed ratio would be impacted. The
commenter stated that if the contractor
does not correct the current year’s
incorrect number upon the audit or
reopening of a cost report, under the
proposal, a hospital would have no
recourse through the Board.

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Response: We respectfully disagree
with the commenters’ assertion that the
time period of 5 months between the
end of a hospital’s fiscal year and its
cost report due date is too short for a
hospital to capture all data necessary for
GME and IME payments. Under the
proposed rule, direct GME or IME FTE
data relating to a prior year and/or
penultimate year would not be excluded
from a hospital’s calculation of direct
GME or IME payments. A hospital
would be able to successfully resolve
this issue with the contractor without
needing to seek recourse through the
Board.
Because 42 CFR 412.52 specifies that
all hospitals participating in the
prospective payment systems must meet
the recordkeeping and cost reporting
requirements of §§ 413.20 and 413.24,
hospitals are required to maintain
sufficient financial records and
statistical data for proper determination
of costs payable under the Medicare
program, which would include direct
GME and IME payments. Accordingly,
such information should be maintained
by the hospital and be easily
ascertainable. With regard to
determining FTE counts, hospitals
should be able to determine FTE counts
for the cost reporting year that just
ended based on predetermined rotation
schedules for each approved residency
training program. In addition, bed
counts for the IME payment and
Medicare utilization for the direct GME
payment are available to the hospital
based on a combination of its own
patient census records and on the
Provider Statistical and Reimbursement
System, which the hospital uses to
complete its Medicare cost report after
each fiscal year end. Therefore, we
believe that hospitals have all the
information necessary to accurately
complete worksheets E, Part A, and E–
4 of the Medicare cost report within the
5-month time period between the end of
a hospital’s fiscal year and its cost
report due date.
Furthermore, if a contractor makes an
adjustment to a direct GME or IME
payment on a cost report for a given
year, the contractor should bring
forward the audit adjustment made in
the prior cost year prospectively to the
current cost year and make the
adjustment in the NPR for the current
cost year. If the hospital learned of the
adjustment to the prior year shortly after
filing its cost report, it could submit an
amended cost report based on the
contractor’s adjustment. Although the
acceptance of the amended cost report
would ultimately be at the discretion of
the contractor, such an amendment
reflecting a prior year adjustment by the

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contractor should be accepted, as it is
the contractor’s responsibility to ensure
that the prior year adjustment is applied
prospectively. If the hospital receives an
NPR where the prior adjustment is not
reflected in the current cost year, it
could request that the NPR be reopened.
Although requests for reopening are also
at the discretion of the contractor, such
a request resulting from an adjustment
proposed by the contractor to a prior
cost report should be granted, given the
contractor’s responsibility to ensure that
the prior year adjustment be applied
prospectively. Also, the hospital could
seek relief by filing an administrative
appeal.
Comment: Commenters stated that the
time period of 5 months between the
end of a provider’s fiscal year and its
cost report due date is too short for a
provider to capture all data necessary
for bad debt payments. Several of these
commenters stated that providers may
not know all of their bad debt accounts
at the time they initially file their cost
reports and they rely on the ability to
file cost report amendments to ensure
accurate reimbursement.
Response: We respectfully disagree
with the commenters’ assertions that the
time period of 5 months between the
end of a provider’s fiscal year and its
cost report due date is too short for a
provider to capture all data necessary to
claim payment for bad debts. Medicare
‘‘bad debts’’ arise from uncollectible
accounts and notes receivable that are
created or acquired in the process of
providing services to a Medicare patient
(42 CFR 413.89). These uncollectible
deductibles and coinsurance amounts
are recognized as allowable bad debts in
the reporting period in which the debts
are determined to be worthless. Because
bad debts are uncollectible accounts
receivable and notes receivable, the
provider should have the usual accounts
receivable records (ledger cards and
source documents) to support its claim
for a bad debt for each account included
in the cost report. Examples of the types
of information to be retained by a
provider may include, but are not
limited to, the beneficiary’s name and
health insurance number; admission/
discharge dates for Medicare Part A bills
and dates of services for Medicare Part
B bills; date of bills; date of write-off;
and a breakdown of the uncollectible
amount by deductible and coinsurance
amounts. This type of information
should be easily ascertainable by the
provider because it is expected to be
maintained by the provider in the
course of normal business in accordance
with § 413.20. Because uncollectible
deductibles and coinsurance amounts
are recognized as allowable bad debts in

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the cost reporting period in which the
debts are determined to be worthless by
providers under § 413.89, by definition
providers should have sufficient
information to claim reimbursement for
bad debts for a particular cost report
year within that cost report year, and
thus well within the 5-month time
period between the close of the cost
reporting year and the providers’ cost
report submission date. If all
information needed to establish that a
debt is worthless is not available within
a given cost year, the account may not
properly be claimed as a Medicare debt
within that period, but might qualify as
a bad debt in a later year.
The same is true for bad debts of
dually eligible beneficiaries whose
Medicaid eligibility is determined upon
submission of a bill by the provider. In
that situation, a provider is required to
obtain a remittance advice from the
State to document the liability of a
State’s Medicaid program for the unpaid
deductible and coinsurance before a
claim for bad debt can be submitted to
Medicare. In this regard, providers
should have the information to claim
reimbursement for bad debts for a
dually eligible beneficiary for a
particular cost report year within the 5month time period between the close of
the cost reporting year and the
providers’ cost report submission date.
In all situations, if for some reason the
provider learns of bad debt that should
have been claimed on its cost report
after cost report submission, the
provider may still follow the existing
procedures for submitting an amended
cost report to the contractor or
submitting a request for reopening to the
contractor. The acceptance of an
amended cost report and granting of the
request for reopening remain at the
discretion of the contractor. However,
the provider could also seek relief by
filing an administrative appeal.
Comment: Many commenters asserted
that the proposed rule would
inappropriately limit providers’
capacity to file appeals based on the
discretion of the contractor. The
commenters observed that, under the
proposal, the question of whether the
provider’s cost report includes an
appropriate claim for a specific item
must be determined by reference to the
cost report that the provider submits
originally to, and is accepted by, the
contractor, unless one of three
exceptions apply. Noting the three
exceptions in § 413.24(j)(3) of the
proposed rule, several commenters
stated that, under the proposal, a
provider’s right to appeal is dependent
on the contractor’s exercise of
nonreviewable discretion. The

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commenters pointed out that the
acceptance of an amended cost report or
the issuance of a reopening is entirely
at the discretion of the contractor under
current Medicare regulations and a
contractor’s rejection of an amended
cost report or a reopening request is not
subject to judicial review. As a result,
the commenters criticized the proposal
as vesting contractors with overly broad
authority and discretion over hospitals’
right to appeal items on the cost report.
Several commenters also asserted that
the proposed rule would prevent
providers from correcting items on their
cost reports. The commenters noted that
if a hospital does not correctly list an
item on its cost report, its only avenue
for correction would be to file an
amended report or request reopening
and hope that the contractor accepts the
amended cost report or reopening
request. The commenters stated that if
the contractor rejects the amended cost
report or reopening request, the hospital
would have no further administrative
remedy under the proposed rule. The
commenters stated that contractors
routinely decline to accept amended
cost reports or requests for reopening,
often based on workload and resources.
The commenters were concerned with
the exercise of contractor discretion
under the proposal and recommended
that CMS develop clear and uniform
standards for contractors to use in
determining whether to accept an
amended cost report or issue a
reopening. In addition, the commenters
recommended that CMS explain how it
will monitor and enforce the
contractors’ exercise of authority to
make such decisions about providers’
requests to amend or reopen cost reports
to ensure that the contractors are fairly
and consistently applying the standards
for all providers. The commenters also
recommended that the proposal include
an exception for instances where a
provider later discovers information that
should have been reported on the cost
report.
Response: We acknowledge the
commenters’ concerns. However, as we
explain in detail below in section
XVII.E.1. of this final rule, we do not
agree that the exercise of contractor
discretion under the proposed rule
would limit a provider’s right to file an
administrative appeal. The proposed
rule eliminates the jurisdictional
requirement in §§ 405.1835(a) and
405.1811(a) of an appropriate cost report
claim, which makes it easier for a
provider to meet the jurisdictional
requirements for an appeal to the Board
or the contractor, respectively. While
the proposed § 413.24(j) imposes the
requirement of an appropriate cost

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report claim as a general substantive
requirement for payment, § 413.24(j)
does not impose any limitations on a
provider’s administrative appeal rights.
On the contrary, proposed § 413.24(j)(5)
specifically addresses administrative
appeals where a party questions
provider compliance with the
substantive reimbursement requirement
of an appropriate cost report claim.
We proposed to require that providers
include an appropriate claim for a
specific item in their Medicare cost
reports in order to receive or potentially
qualify for Medicare payment for the
specific item. In most situations, at the
time of filing, the provider should
possess all information needed to file an
appropriate claim. We believe that, for
the most part, providers should not have
any significant difficulty identifying
items that they believe should be paid
by Medicare. Therefore, under this
proposal, the question of whether the
provider’s cost report includes an
appropriate claim for a specific item
will be determined by reference to the
cost report that the provider submits
originally to, and is accepted by, the
contractor. There may be instances
where a provider learns of new and
material information or needs to correct
an error after filing the cost report, and
in such situations, the provider may
submit an amended cost report or
request that the cost report be reopened.
Therefore, the proposal in § 413.24(j)(3)
includes exceptions where the
contractor accepts an amended cost
report or reopens the cost report.
We recognize that the acceptance of
amended cost reports and requests for
reopening is at the discretion of the
contractor and not reviewable
(§§ 413.24(f) and 405.1885(a)(6)).
Accordingly, we understand the
commenters’ concerns about the
potential effects of contractor discretion
under the proposed rule. However, we
believe that the contractors currently
exercise discretion with regard to the
acceptance of amended cost reports and
reopening requests in an equitable and
consistent manner. We respectfully
disagree that contractors routinely reject
amended cost reports and reopening
requests based on workload and
resources. This is reflected by the sheer
volume of cost report amendments and
reopening requests accepted by
contractors. Contractors accepted 1,828
amended cost reports during FY 2014
and 1,725 amended cost reports during
FY 2013. In addition, as a result of a
contractor reopening, 2,311 revised
NPRs were issued during FY 2014 and
3,636 revised NPRs were issued during
FY 2013. We anticipate that the
contractors will continue to exercise

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
discretion in an equitable and consistent
manner under this proposal. Therefore,
we see no reason to develop any new
standards beyond the current guidance
we provide to contractors. We also do
not see a need to increase monitoring of
contractor activity beyond the current
monitoring that is performed as part of
annual contract reviews.
Comment: One commenter alleged
that the proposed rule prevents
contractors from making positive
adjustments to cost reports and
eliminates a provider’s ability to receive
payments for claims that the provider
may fail to include in its cost report.
Response: The proposed rule does not
include any provision that would
prevent a contractor from making a
positive adjustment to a cost report if
such an adjustment is warranted. On the
contrary, proposed paragraph (j)(4) of
§ 413.24 provides that if the contractor
determines that the provider made an
appropriate cost report claim for a
specific item and that all other
substantive reimbursement
requirements for the specific item are
satisfied, the final contractor
determination must include
reimbursement for the item to the extent
permitted by Medicare policy.
Similarly, if the contractor finds an
appropriate cost report claim but it
disagrees with material aspects of the
provider’s claim for the item, the
contractor must make appropriate
adjustments to the provider’s cost report
and include payment for the specific
item in the final contractor
determination in accordance with the
contractor’s adjustment to the cost
report and to the extent permitted by
program policy. Such adjustments could
be monetarily favorable, unfavorable, or
have no reimbursement effect for the
provider.
Proposed paragraph (j)(4) of § 413.24
also provides that, to the extent a
provider fails to claim a specific item
appropriately in its cost report, the final
contractor determination may not
include payment for the item. However,
a provider’s failure to include an
appropriate claim for a specific item in
the provider’s original ‘‘as submitted’’
cost report does not necessarily
foreclose any further opportunity for the
provider to meet the requirement of an
appropriate cost report claim. A
provider could seek to remedy such an
omission by submitting an amended
cost report, if the amended cost report
is accepted at the discretion of the
contractor. The requirement of an
appropriate cost report claim could also
be met through the contractor’s
adjustment of the provider’s cost report,
either in the final contractor

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determination for the provider’s cost
reporting period or, if the final
contractor determination is reopened at
the discretion of the contractor, in the
contractor’s revised final determination.
Moreover, the provider could seek relief
by filing an administrative appeal.
Comment: Commenters stated that the
proposed rule would prohibit providers
from pursuing appeals in order to
correct errors by CMS that are not
known at the time the provider files the
cost report. The commenters
recommended that the proposal include
an exception for situations in which
errors in CMS calculations, which are
previously unknown to the provider, are
subsequently discovered after filing of
the cost report.
Response: We respectfully disagree
with commenters’ statement that the
proposed rule prohibits providers from
pursuing appeals to correct errors that
CMS may make in payment
calculations. Assuming for the sake of
argument that the agency made an error,
and that such error was not known or
discoverable until after the provider
submitted its cost report, the proposed
rule would not curtail the provider’s
right to file an appeal to the Board. On
the contrary, proposed paragraph (j)(5)
of § 413.24 provides for Board review of
such an alleged CMS error in
accordance with the procedures in
proposed § 405.1873. The provider
could first seek Board review of whether
its cost report included an appropriate
claim for the specific item under
proposed § 405.1873(a). Proposed
§ 405.1873(b)(1) provides that the
parties to the appeal must be given an
adequate opportunity to submit factual
evidence and legal argument on the
question of whether the provider
complied with the general
reimbursement requirement of an
appropriate cost report claim; the Board
must make findings of fact and
conclusions of law regarding that
question; and those findings and
conclusions of the Board must be
included in the administrative record
and they must be included in certain
overall Board decisions regarding the
appeal.
As the question of whether a provider
made an appropriate cost report claim
for a specific payment item is a mixed
question of law and fact, it is well
within the Board’s decisional authority.
However, the provider in this situation
might also be raising a facial challenge
to the lawfulness of a governing
regulation for the payment item, in
which case the Board would have no
authority to decide that legal question.
As a result, the provider could request
expedited judicial review (EJR) of its

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facial challenge to the lawfulness of the
specific payment regulation. Under
proposed § 405.1873(d)(2), if the Board
grants EJR regarding a question of law
that is relevant to the matters at issue,
its EJR decision must include the
Board’s findings of fact and conclusions
of law (if any) about whether the
provider’s cost report included an
appropriate claim for the matter at issue,
and any such findings and conclusions
are subject to the same provisions in
§ 405.1842(g)(1), (g)(2), (h)(1), and (h)(3)
(regarding further review and finality) as
‘‘apply to the other parts of the Board’s
EJR decision.’’ Similarly, proposed
§ 405.1873(f)(2) addresses the potential
reimbursement effects of an EJR
decision that both grants EJR regarding
a question of law that is relevant to the
matters at issue, and also includes the
Board’s findings of fact and conclusions
of law (if any) about whether the
provider’s cost report included an
appropriate claim for the matter at issue.
After consideration of the public
comments we received, we are
finalizing our proposal, without
modification, to amend § 413.24 by
reserving paragraph (i) and adding new
paragraph (j). New § 413.24(j) requires a
provider to include an appropriate
claim for a specific item in its Medicare
cost report in order to receive or
potentially qualify for Medicare
payment for the specific item. In order
to make an appropriate claim for an
item in its cost report, the provider must
either claim payment for the item in its
cost report if it is seeking payment that
it believes is consistent with Medicare
policy, or self-disallow the item if the
provider is seeking payment that it
believes may not comport with
Medicare policy. If the provider’s cost
report does not include an appropriate
claim for a specific item, payment for
the item will not be included in the NPR
issued by the contractor or in any
decision or order issued by a reviewing
entity (as defined in 42 CFR
405.1801(a)) in an administrative appeal
filed by the provider.
We have identified only one
circumstance where a provider may
have difficulty obtaining sufficient
information to make an appropriate cost
report claim. This circumstance may
exist when a hospital experiences
difficulty obtaining sufficient
information from State agencies about
Medicaid-eligible patient days, which is
necessary to claim a DSH payment
adjustment. Of course, providers have
the right to submit amended cost
reports. Moreover, in this limited
circumstance, we will instruct
contractors, through new instructions in
CMS Pub. 100–6, Chapter 8, that they

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must accept one amended cost report
submitted within 12 months after the
due date for the hospital’s cost report
(which is 5 months after the last day of
the hospital’s fiscal year), solely for the
specific purpose of revising the number
of Medicaid-eligible patient days (after a
hospital receives updated Medicaideligible patient days from the State) in
order to make an appropriate cost report
claim for a DSH payment adjustment. In
our experience, we believe an additional
12 months is sufficient time for States
to make Medicaid eligibility
determinations and for hospitals to
revise its number of Medicaid-eligible
patient days in order to make an
appropriate cost report claim for a DSH
payment adjustment. In submitting such
an amended cost report, the hospital
must include: (1) The number of
additional Medicaid-eligible patient
days that the hospital is seeking to
include in the DSH calculation; (2) a
description of the process that the
hospital used to identify and
accumulate the Medicaid-eligible
patient days that were reported and
filed in the hospital’s Medicare cost
report at issue; and (3) an explanation
of why the additional Medicaid-eligible
patient days at issue could not be
verified by the State by the time the
hospital’s cost report was submitted.
E. Revisions to the Provider
Reimbursement Appeals Regulations

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1. Elimination of the Jurisdictional
Requirement of an Appropriate Cost
Report Claim
a. Proposed Revisions to §§ 405.1835
and 405.1840
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28212 through
28213, and 28297 through 28298), we
proposed to eliminate the requirement
in existing §§ 405.1835(a)(1) and
405.1840(b)(3) of the regulations that a
provider must include an appropriate
claim for an item in its cost report in
order to meet the dissatisfaction
requirement for Board jurisdiction. We
explained that there is a sound basis in
law and policy for this proposal. We
stated that our proposal to eliminate an
appropriate cost report claim as a
requirement for Board jurisdiction is
well within the Secretary’s general
rulemaking authority under sections
1102 and 1871 of the Act. Moreover, we
explained that this specific proposal is
a reasonable interpretation of the
‘‘dissatisfied’’ provision in section
1878(a)(1)(A) of the Act. In our view,
this statutory provision is ambiguous
and the interpretation in the existing
appeals regulations, which requires
providers to make appropriate cost

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report claims in order to meet the
dissatisfaction prerequisite of Board
jurisdiction with respect to a specific
item, is a permissible interpretation of
the statute. As described above,
however, providers have challenged our
interpretation of the statutory
dissatisfaction provision in litigation
spanning more than 30 years, and in
public comments on existing
§§ 405.1835(a)(1) and 405.1840(b)(3) of
the regulations that were adopted in the
2008 final rule (73 FR 30195 through
30200; CMS’ response to public
comments on the proposed Board
appeals regulations, which were based
on our interpretation of the statutory
dissatisfaction provision). Providers
have maintained throughout this
litigation and in the referenced public
comments that the statutory
dissatisfaction provision does not
support our policy of requiring an
appropriate cost report claim as a
prerequisite of Board jurisdiction. We
continue to disagree with this view of
the statute, and still believe that the
existing regulations for Board appeals of
timely final contractor or Secretary
determinations are based on a
permissible interpretation of the
statutory dissatisfaction provision in
section 1878(a)(1)(A) of the Act. As
explained above, existing
§ 405.1835(a)(1) comports with the
Supreme Court’s statement that the
statutory dissatisfaction requirement
might not be met if a provider bypassed
a clearly prescribed exhaustion
requirement or failed to ask the
contractor for payment of all costs to
which it is entitled under applicable
rules (Bethesda Hospital Association v.
Bowen, 485 U.S. at 404–405).
Furthermore, the U.S. Court of Appeals
for the Seventh Circuit has twice
sustained our interpretation of the
statutory dissatisfaction provision, on
the basis of the foregoing statements by
the Supreme Court (Little Co. of Mary
Hosp., 165 F.3d 1162; Little Co. of Mary
Hosp., 24 F.3d 984). Nonetheless, we
believe our proposal, to eliminate
§ 405.1835(a)(1)’s jurisdictional
requirement of an appropriate cost
report claim, certainly does not conflict
with the ‘‘dissatisfied’’ provision in
section 1878(a)(1)(A) of the Act.
Moreover, as we stated in the
proposed rule, this particular proposal
is supported by section 1878(a)(1)(B) of
the Act, which authorizes certain Board
appeals if the provider does not receive
a final contractor reimbursement
determination on a timely basis.
(Section 405.1835(c) of the existing
regulations specifies the time period
and other conditions for Board appeals

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where the provider does not receive a
final contractor determination on a
timely basis.) Section 1878(a)(1)(B) of
the Act does not include a
dissatisfaction provision. Indeed, as
explained earlier in section XVII.B. of
this final rule, this was a basis for our
revision of § 405.1835 of the regulations
in the FY 2015 IPPS/LTCH PPS final
rule (79 FR 50199 through 50201 and
50350 through 50351) to eliminate
provider dissatisfaction as a
requirement for Board jurisdiction over
appeals based on untimely contractor
reimbursement determinations. This
revision was simply a technical
correction inasmuch as the amendment
to § 405.1835 conformed the regulations
to the provisions in section
1878(a)(1)(B) of the Act for Board
appeals based on an untimely contractor
determination. In effect, this
amendment to § 405.1835 restored the
full conformity of the regulations with
the statutory requirements for Board
jurisdiction over appeals based on
untimely contractor determinations—a
conformity that obtained before the
2008 final rule (73 FR 30195 through
30199) inadvertently imposed a
provider dissatisfaction requirement for
Board appeals based on untimely
contractor determinations.
As a result of our elimination, in the
FY 2015 IPPS/LTCH PPS final rule, of
the dissatisfaction requirement for
Board jurisdiction over appeals based
on untimely contractor reimbursement
determinations, providers no longer
have to submit an appropriate cost
report claim as a requirement for Board
jurisdiction over such appeals. Our
proposal to eliminate the requirement
under § 405.1835(a)(1) of an appropriate
cost report claim in order to meet the
‘‘dissatisfied’’ jurisdictional provision in
section 1878(a)(1)(A) of the Act would
make uniform this aspect of Board
jurisdiction over both appeals of timely
final contractor and Secretary
determinations and appeals based on
untimely final contractor
determinations. Specifically, an
appropriate cost report claim would no
longer be required for Board jurisdiction
over appeals of timely final contractor
and Secretary determinations just as the
same jurisdictional requirement, of an
appropriate cost report claim, was
previously eliminated (in the FY 2015
IPPS/LTCH PPS final rule) for appeals
based on untimely final contractor
determinations.
We stated in the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28212) that,
in addition to the sufficient statutory
authority for our proposed elimination
of an appropriate cost report claim as a
requirement for Board jurisdiction, there

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are sound policy reasons for this
proposal. As explained in section
XVII.D. of this final rule, we believe
that, by requiring appropriate cost
report claims in proposed § 413.24(j),
complete and accurate determinations
of provider reimbursement will be
facilitated as will many other important
aspects of program administration.
Thus, because we would require an
appropriate cost report claim in
proposed § 413.24(j), it is reasonable to
eliminate the Board jurisdiction
requirement in existing
§§ 405.1835(a)(1) and 405.1840(b)(3) of
an appropriate cost report claim. We
note that once this amendment to the
Board appeals regulations becomes
effective, this proposal will facilitate an
orderly end to any litigation regarding
the Board jurisdiction requirement of an
appropriate cost report claim.
As explained above, our proposed
revisions to the cost reporting
regulations and the provider appeals
regulations would apply on a
prospective only basis, to provider cost
reporting periods beginning on or after
the effective date of this final rule. Until
these proposed regulations take effect,
however, the requirement of an
appropriate cost report claim in
§§ 405.1835(a)(1) and 405.1840(b)(3) of
the regulations will continue to be a
requirement for Board jurisdiction over
appeals of timely final contractor
reimbursement determinations. Thus,
until the proposed regulations become
effective, the Board and the
Administrator of CMS will continue to
determine Board jurisdiction over
appeals of timely final contractor
determinations by reference to the
appropriate cost report claim
requirements of §§ 405.1835(a)(1) and
405.1840(b)(3), along with other
applicable jurisdictional provisions of
section 1878 of the Act and §§ 405.1835
and 405.1840 of the regulations. We
believe that, because it is essential to
require appropriate cost report claims
for the various reasons that we
discussed above, it is necessary and
proper to continue to require an
appropriate cost report claim as a
prerequisite of Board jurisdiction under
§§ 405.1835(a)(1) and 405.1840(b)(3)
over appeals of timely final contractor
determinations until the proposed
addition to the cost reporting
regulations, of the substantive
reimbursement requirement of an
appropriate cost report claim, takes
effect.
b. Summary of Public Comments and
Our Responses and Finalized Policies
Comment: Some commenters stated
that the proposed revisions to

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§ 405.1835 are contrary to section
1878(a)(1)(B) of the Act, which provides
for appeals to the Board if a final
contractor determination is not issued
timely (as specified in the Secretary’s
regulations at § 405.1835 (c) and (d))
and all jurisdictional requirements are
satisfied. The commenters further stated
that this statutory provision does not
require provider dissatisfaction for
appeals based on untimely final
contractor determinations, and the
Secretary has conceded this point in
litigation.
Response: We do not believe the FY
2015 IPPS/LTCH PPS proposed rule is
inconsistent with section 1878(a)(1)(B)
of the Act. Under this statutory
provision, a provider may appeal to the
Board if a final contractor determination
is not issued timely (as specified in the
Secretary’s regulations) and all
jurisdictional requirements are satisfied.
Section 1878(a)(1)(B) of the Act does not
make provider dissatisfaction a
jurisdictional requirement for Board
appeals based on untimely final
contractor determinations. By contrast,
section 1878(a)(1)(A) of the Act does
impose a provider dissatisfaction
requirement for Board jurisdiction over
appeals of a timely final contractor or
Secretary determination.
As explained in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50200), a
provider dissatisfaction jurisdictional
requirement, for appeals based on
untimely final contractor
determinations, was inadvertently
added to the Board appeals regulations
in a 2008 final rule (73 FR 30190)—not,
as the commenters asserted, in the FY
2015 IPPS/LTCH PPS proposed rule.
Instead, based on the FY 2015 IPPS/
LTCH PPS proposed rule and this final
rule, we are eliminating our
longstanding interpretation of the
statutory dissatisfaction requirement for
Board jurisdiction over appeals of a
timely final contractor or Secretary
determination, an interpretation that
required the provider to establish its
dissatisfaction by submitting an
appropriate cost report claim. Under the
FY 2015 IPPS/LTCH PPS proposed rule
and this final rule, we are making an
appropriate cost report claim a general
substantive requirement for Medicare
payment (in new § 413.24(j)), in
addition to eliminating (in
§ 405.1835(a)) an appropriate cost report
claim as a prerequisite of Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination under section
1878(a)(1)(A) of the Act.
In effect, the FY 2015 IPPS/LTCH PPS
final rule addressed the commenters’
concerns here about whether the

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regulations for Board appeals based on
untimely final contractor
determinations are consistent with
section 1878(a)(1)(B) of the Act. As
explained in section XVII.B. of this final
rule, in the FY 2015 IPPS/LTCH PPS
final rule, we made a technical
correction to § 405.1835 of the Board
appeals regulations that eliminated the
dissatisfaction jurisdictional
requirement for appeals based on
untimely final contractor
determinations. Under paragraph (c) of
§ 405.1835, provider dissatisfaction is
no longer required for appeals based on
untimely final contractor
determinations. As a result of this
technical correction, the regulations for
Board appeals based on untimely final
contractor determinations are consistent
with section 1878(a)(1)(B) of the Act.
Furthermore, given the amendments to
§ 405.1835(a)(1) in this final rule and
the prior technical correction that added
paragraph (c) to § 405.1835, an
appropriate cost report claim is no
longer required for Board jurisdiction
over any appeal.
Comment: Commenters asserted that
the proposed elimination of the
dissatisfaction requirement for Board
jurisdiction is inconsistent with section
1878(a)(1)(A) of the Act, which provides
for appeals of a timely final contractor
or Secretary determination if all
jurisdictional requirements are satisfied.
The commenters stated that the
Supreme Court held in Bethesda
Hospital Association v. Bowen, 485 U.S.
399 (1988) that provider dissatisfaction
is a jurisdictional requirement for Board
appeals based on 42 U.S.C.
1395oo(a)(1)(A) (that is, section
1878(a)(1)(A) of the Act).
Response: We did not propose in the
FY 2015 IPPS/LTCH PPS proposed rule,
and we are not effectuating in this final
rule, the elimination of provider
dissatisfaction as a requirement for
Board jurisdiction over appeals of a
timely final contractor or Secretary
determination under section
1878(a)(1)(A) of the Act. As the
Supreme Court held in Bethesda
Hospital Association, section
1878(a)(1)(A) of the Act plainly makes
provider dissatisfaction a requirement
for Board jurisdiction. Also, this
statutory prerequisite of Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination is clearly reiterated in the
existing text of paragraph (a)(1) of
§ 405.1835, and in the preambles for
both the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28207 through
28208 and 28212 through 28213) and
the technical correction provision in the

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FY 2015 IPPS/LTCH PPS final rule (79
FR 50199 through 50200).
While we are not eliminating the
provider dissatisfaction requirement for
Board jurisdiction over appeals of a
timely final contractor or Secretary
determination, we nonetheless can see
some potential for confusion about this
matter due to the specific text of
proposed § 405.1835. In the FY 2015
IPPS/LTCH PPS proposed rule (79 FR
28297), paragraph (a) of § 405.1835
retains (and renumbers the current
paragraphs for) the amount in
controversy and timely filing
requirements for Board jurisdiction, but
the statutory dissatisfaction requirement
was not stated in paragraph (a). This
does not mean, however, that we
proposed to eliminate the provider
dissatisfaction requirement for Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination. As explained above, the
preamble for the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28207
through 28208 and 28212 through
28213) plainly states that provider
dissatisfaction is a prerequisite for
Board jurisdiction. Also, under that
proposed rule (79 FR 28297), paragraph
(b)(2) of § 405.1835 requires the
provider to explain why it ‘‘disagrees
with’’ specific aspects of the final
contractor or Secretary determination.
We believe the reference in paragraph
(b)(2) to ‘‘disagrees with’’ is
synonymous with the references to ‘‘is
dissatisfied with’’ in section
1878(a)(1)(A) of the Act. Moreover,
proposed paragraph (b)(2)(iii) (79 FR
28297) would require the provider’s cost
report to include specific details about
each specific item that ‘‘the provider
self-disallows.’’ Under our prior
interpretation of the statutory
dissatisfaction requirement for Board
jurisdiction (existing paragraph (a)(1) of
§ 405.1835), a provider must include a
self-disallowance in its cost report for a
specific item that it believes may not be
allowable under Medicare payment
policy.
Although we did not propose the
elimination of the provider
dissatisfaction requirement for Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination in the FY 2015 IPPS/
LTCH PPS proposed rule, we have
concluded, based on consideration of
the public comments we received, that
technical revisions to the proposed text
of paragraph (a) of § 405.1835 are
warranted in order to avoid potential
confusion about this matter.
Accordingly, in this final rule, we are
revising the proposed introductory text
of paragraph (a) of § 405.1835 (79 FR

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28297) by eliminating the proposed
reference to items ‘‘claimed in its cost
report,’’ a technical revision that further
clarifies our proposed elimination of an
appropriate cost report claim as a
requirement for Board jurisdiction.
Moreover, we are revising the proposed
text of paragraph (a)(1) of § 405.1835 (79
FR 28297) by revising the dissatisfaction
provision in the existing text of
paragraph (a)(1) so that the provider
dissatisfaction requirement for Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination in § 405.1835(a)(1) will
track closely the references to ‘‘is
dissatisfied with’’ in section
1878(a)(1)(A) of the Act. As a result of
these technical revisions to the
proposed introductory text of paragraph
(a) of § 405.1835 and to the proposed
text of paragraph (a)(1), § 405.1835(a)
will state that the provider has a right
to a Board hearing with respect to a final
contractor or Secretary determination if
the provider is dissatisfied with the
contractor’s final determination of the
total amount of reimbursement due the
provider, as set forth in the contractor’s
written notice under § 405.1803, and the
other requirements for Board
jurisdiction (discussed below) are also
satisfied.
We also are adding paragraph (a)(1)(i)
to § 405.1835, which is a technical
conforming amendment to the revised
dissatisfaction provision in
§ 405.1835(a)(1). Under paragraph (a)(1),
a provider could be dissatisfied with
any number of the specific aspects of
Medicare payment that are finally
determined in the contractor’s original
NPR under § 405.1803. However, under
our longstanding ‘‘issue specific’’
interpretation of the reopening
regulations, Board jurisdiction over an
appeal involving a reopening is limited
under §§ 405.1887(d) and 405.1889(b) to
the specific matters that were reopened
and revised in the contractor’s revised
NPR. We refer readers, for example, to
HCA Health Services of Oklahoma v.
Shalala, 27 F.3d 614 (D.C. Cir. 1994)
(the reopening regulations are based on
the Secretary’s general rulemaking
authority, and the issue specific
interpretation of the reopening rules is
reasonable and supportive of
administrative finality). As a technical
conforming amendment to the revised
dissatisfaction provision in
§ 405.1835(a)(1), the issue specific
reopening regulations are crossreferenced in paragraph (a)(1)(i) of
§ 405.1835, to specify that if a final
contractor determination is reopened
under § 405.1885, any review by the
Board must be limited solely to those

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matters that are specifically revised in
the contractor’s revised final
determination (§§ 405.1887(d) and
405.1889(b), and the ‘‘Exception’’ under
proposed § 405.1873(c)(2)(i)). The
referenced ‘‘Exception’’ in
§ 405.1873(c)(2)(i) is a similar crossreference in new § 405.1873, which is
addressed in section XVII.E.2.a. of this
final rule.
However, we are not finalizing the
proposed revisions (79 FR 28297) to
paragraphs (a)(2) and (a)(3) of
§ 405.1835. First, our adoption of the
above-described technical revision to
the dissatisfaction jurisdictional
requirement in current paragraph (a)(1)
of § 405.1835, obviates any need to
renumber either the amount in
controversy jurisdictional requirement
in current paragraph (a)(2) or the timely
filing jurisdictional requirement in
paragraph (a)(3). Second, similarly
unnecessary are the proposed revisions
to the text of current paragraph (a)(3),
which would have reiterated (in
proposed § 405.1835(a)(2)(ii)) our
longstanding policy for determining
whether a final contractor determination
was issued timely for purposes of a
Board appeal based on section
1878(a)(1)(B) of the Act. This policy is
now stated appropriately in
§ 405.1835(c), a regulation we adopted
in the technical correction provisions of
the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50350 through 50351).
Comment: One commenter stated that
proposed § 405.1835(a)(2)(ii) conflicts
with the Medicare contractor manual
instructions in CMS Pub. 100–6, chapter
8, sections 10.3 and 90. The commenter
stated that proposed § 405.1835(a)(2)(ii)
includes a 12-month period for issuance
of a timely NPR by the contractor, but
the two manual sections together
instruct the Medicare contractor to issue
an NPR within a 13-month period. The
commenter recommended that CMS
revise the proposed rule by adopting the
same 13-month period for determining
the timeliness of the contractor’s NPR.
The commenter also suggested an
alternative approach that would change
the proposed rule’s beginning date for
the 12-month period for determining the
timeliness of the contractor’s NPR.
Response: We respectfully disagree
with the commenter’s assertion that the
two manual sections require the
Medicare contractor to issue an NPR
within a 13-month period. Our
longstanding policy is that if the
contractor does not issue an NPR within
12 months after the date of its receipt of
the provider’s perfected or amended
cost report, the provider may appeal to
the Board within 180 days after the
expiration of the 12-month period for

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timely issuance of the NPR. As
explained in our response to the
immediately preceding comment, this
policy is now stated appropriately in
§ 405.1835(c), a regulation we adopted
in the technical correction provisions of
the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50350 through 50351).
Accordingly, we do not see any reason
to make any of the revisions suggested
by the commenter.
Comment: A number of commenters
stated that the proposed rule conflicts
with section 1878(d) of the Act, which
authorizes the Board to address the full
range of reimbursement matters covered
by a provider’s cost report regardless of
whether the Medicare contractor
considered a particular matter in its
final determination. The commenters
asserted that the proposal of making an
appropriate cost report claim a
substantive prerequisite of
reimbursement imposes a new limit on
both the Board’s authority and
providers’ appeal rights that is contrary
to the Medicare statute.
Response: We respectfully disagree
with the commenters for three reasons.
First, based on the FY 2015 IPPS/LTCH
PPS proposed rule and this final rule,
we are eliminating our longstanding
interpretation of the statutory
dissatisfaction requirement for Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination, an interpretation that
required the provider to establish its
dissatisfaction by submitting an
appropriate cost report claim. As
explained above, the elimination of our
prior interpretation of the dissatisfaction
prerequisite of Board jurisdiction under
section 1878(a)(1)(A) of the Act, as
requiring an appropriate cost report
claim, will make it easier for a provider
to establish that it meets the
requirements for Board jurisdiction
under section 1878(a) of the Act. The
Supreme Court held in Bethesda
Hospital Association that the Board’s
powers under section 1878(d) of the Act
are contingent on the provider first
meeting the threshold requirements for
Board jurisdiction as set forth in section
1878(a) of the Act. We see no reason
why the Board’s contingent powers
under section 1878(d) of the Act would
somehow be narrowed by our making it
easier for a provider to meet the
threshold jurisdictional requirements
imposed by section 1878(a) of the Act.
Second, in the preamble to the 2008
final rule (73 FR 30225 through 30226),
we addressed the Supreme Court’s
holding in Bethesda Hospital
Association that the Board’s powers
under section 1878(d) of the Act are
contingent on the provider first meeting

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all the requirements for Board
jurisdiction in section 1878(a) of the
Act. We also revised § 405.1869 of the
regulations (73 FR 30261) to track
closely the Supreme Court’s
interpretation of section 1878(d) in the
Bethesda Hospital Association decision.
However, we did not propose any
revisions to § 405.1869 in the FY 2015
IPPS/LTCH PPS proposed rule, and we
did not receive public comments
suggesting specific revisions to that
regulation. We believe that if there were
a serious question about whether this
final rule would somehow narrow the
Board’s contingent powers under
section 1878(d) of the Act, commenters
presumably would have suggested
specific revisions to § 405.1869 in order
to address any concerns about the
purported effect of the FY 2015 IPPS/
LTCH PPS proposed rule on the Board’s
powers under section 1878(d) of the
Act. Given that this final rule does not
narrow the Board’s powers under
section 1878(d) of the Act, we do not
believe that revisions to § 405.1869 are
necessary.
Third, as discussed below, we are
adopting a new § 405.1873, which
addresses in detail Board review of a
provider’s compliance with the general
reimbursement requirement of an
appropriate cost report claim (as
prescribed in new § 413.24(j)). Section
405.1873 does not narrow the Board’s
powers under either section 1878(d) of
the Act or the corresponding provisions
of § 405.1869, which is not referenced in
§ 405.1873. Section 405.1873 provides
for full review by the Board of a
provider’s compliance with the general
reimbursement requirement of an
appropriate cost report claim. Paragraph
(a) of § 405.1873 provides for such
Board review if any party to an appeal
questions whether the provider’s cost
report included an appropriate claim for
a specific item. Under paragraph (b)(1)
of § 405.1873, the parties must be given
an adequate opportunity to submit
factual evidence and legal argument on
the question of whether the provider
complied with the general
reimbursement requirement of an
appropriate cost report claim; the Board
must make findings of fact and
conclusions of law regarding that
question; and those findings and
conclusions of the Board must be
included in the administrative record
and they must be included in certain
overall Board decisions regarding the
appeal. Moreover, assuming that the
provider’s appeal meets the
requirements for Board jurisdiction
under section 1878(a) of the Act and
§ 405.1835 of the regulations, there is no

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70567

indication in § 405.1873 that the Board’s
contingent powers under section
1878(d) of the Act and § 405.1869 of the
regulations would somehow not apply
fully for purposes of Board review of
whether the provider complied with the
general reimbursement requirement of
an appropriate cost report claim.
Comment: Several commenters stated
that the proposed rule is inconsistent
with section 1878(f)(1) of the Act, which
authorizes EJR if the requirements for
Board jurisdiction are satisfied and the
Board lacks the authority to decide a
question of law that is relevant to a
matter at issue in the provider’s appeal.
The commenters stated that the purpose
of the EJR statute is to avoid
unnecessary delay in adjudicating
payment disputes where the Board and
the Medicare contractor lack the power
to decide the matter at issue. The
commenters further stated that, to the
extent the Board and the contractor lack
the power to decide a relevant legal
question, it is arbitrary and capricious to
require the provider to protest the
matter in its cost report in order to
preserve its statutory right to obtain
expedited judicial review.
Response: We respectfully disagree
with these comments for a number of
reasons. The FY 2015 IPPS/LTCH PPS
proposed rule did not propose to require
a provider to protest a matter in its cost
report in order to preserve its statutory
right to request EJR. Under section
1878(f)(1) of the Act and § 405.1842 of
the regulations, the Board must have
jurisdiction over the provider’s appeal
before EJR can be granted as to a legal
question that is relevant to a matter at
issue but is beyond the Board’s
decisional authority. We are now
eliminating our longstanding
interpretation of the statutory
dissatisfaction requirement for Board
jurisdiction, an interpretation that
required the provider to establish its
dissatisfaction by submitting an
appropriate cost report claim. As
explained above, this revision makes it
easier for a provider to demonstrate that
it meets the requirements for Board
jurisdiction. Given that Board
jurisdiction must be established before
EJR can be granted, we see no reason
why the elimination of our prior
interpretation of the statutory
dissatisfaction requirement for Board
jurisdiction (as requiring an appropriate
cost report claim) would somehow
impede or constrain a provider’s right to
seek EJR. We believe that the
elimination of our prior interpretation of
the statutory dissatisfaction requirement
for Board jurisdiction (as requiring an
appropriate cost report claim) should
facilitate a provider’s exercise of its

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right to seek EJR because this final rule
makes it easier for a provider to meet
the threshold Board jurisdiction
prerequisite of any request for EJR.
We also do not believe that the FY
2015 IPPS/LTCH PPS proposed rule
would undermine the purpose of the
EJR statute by causing improper delay in
the adjudication of payment disputes
where the Board lacks the authority to
decide a relevant legal question. Under
section 1878(f)(1) of the Act and
§ 405.1842 of the regulations, a grant of
EJR does not necessarily resolve the
entire Board appeal. Rather, section
1878(f)(1) of the Act authorizes EJR if
the requirements for Board jurisdiction
are satisfied, and the provider’s appeal
‘‘involves a question of law or
regulations relevant to the matters in
controversy’’ and the Board determines
‘‘that it is without authority to decide
the question.’’ While the Board might
lack the authority to decide one legal
question ‘‘relevant to the matters at
issue,’’ the Board could also have full
decisional authority over other
questions that are also relevant to the
matters at issue. For example, the Board
has no authority to decide a facial
challenge to the lawfulness of a
provision of a payment regulation (42
CFR 405.1867), but the Board can
decide the separate question of whether
other undisputed provisions of the same
payment regulation were applied
properly by the contractor. The latter
issue (that is, whether the payment
regulation was applied properly) is a
mixed question of law and fact that is
within the Board’s decisional authority,
even though the Board lacks the
authority to decide the former question
of whether a provision of the same
payment rule is lawful.
As discussed below, we are adopting
as final the proposed new § 405.1873,
which addresses Board review of a
provider’s compliance with the general
reimbursement requirement of an
appropriate cost report claim (as
prescribed in new § 413.24(j)). The
question of whether a provider made an
appropriate cost report claim for a
specific payment item is a mixed
question of law and fact that is well
within the Board’s decisional authority.
If the provider’s appeal also raises a
facial challenge to the lawfulness of the
governing regulation for the same
payment item, the Board has no
authority to decide that legal question.
However, the mixed question of law and
fact (that is, whether the provider made
an appropriate cost report claim for the
specific payment item at issue), which
is plainly within the Board’s decisional
authority, is just as ‘‘relevant to the
matters in controversy’’ (section

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1878(f)(1) of the Act) as the question of
law (that is, whether the payment
regulation is lawful) that is beyond the
Board’s decisional authority. Thus, the
provider’s statutory right to request EJR
of its facial challenge to the lawfulness
of the specific payment regulation is not
improperly impeded or delayed by the
Board’s discharge of its authority to
review and decide the mixed question
of law and fact of whether the provider
complied with the general
reimbursement requirement of an
appropriate cost report claim for the
same payment item (as prescribed in
new § 413.24(j)).
Indeed, the foregoing principles are
clearly reflected in new § 405.1873.
Under paragraph (d)(2) of § 405.1873, if
the Board grants EJR regarding a
question of law that is relevant to the
matters at issue, its EJR decision must
include the Board’s findings of fact and
conclusions of law (if any) about
whether the provider’s cost report
included an appropriate claim for the
matter at issue, and any such findings
and conclusions are subject to the same
provisions in § 405.1842(g)(1), (g)(2),
(h)(1), and (h)(3) (regarding further
review and finality) as ‘‘apply to the
other parts of the Board’s EJR decision.’’
Similarly, paragraph (f)(2) of § 405.1873
addresses the potential reimbursement
effects of an EJR decision that both
grants EJR regarding a question of law
that is relevant to the matters at issue,
and also includes the Board’s findings
of fact and conclusions of law (if any)
about whether the provider’s cost report
included an appropriate claim for the
matter at issue.
Comment: One commenter asserted
that the proposed rule interferes with a
provider’s right to introduce evidence in
a hearing before the Board.
Response: We respectfully disagree
with this comment. Under section
1878(c) of the Act, a provider may be
represented by counsel at a Board
hearing, and introduce evidence and
examine and cross-examine witnesses at
such hearing. The regulations elaborate
on these hearing rights (§§ 405.1845
through 405.1851, 405.1859, and
405.1861) and establish additional
rights to pre-hearing discovery and
subpoenas (§§ 405.1853 and 405.1857).
We do not believe the FY 2015 IPPS/
LTCH PPS proposed rule interferes with
a provider’s right to introduce evidence
in a Board hearing or with any of the
provider’s Board procedural rights that
are elaborated on, or established in, the
above-referenced regulations.
None of the foregoing Board
procedural regulations is mentioned in
revised § 405.1835 or in new § 405.1873.
As explained above, the elimination (in

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§ 405.1835(a)) of our longstanding
interpretation of the statutory
dissatisfaction requirement for Board
jurisdiction (an interpretation that
required the provider to establish its
dissatisfaction by submitting an
appropriate cost report claim) makes it
easier for a provider to demonstrate that
it meets the requirements for Board
jurisdiction. We believe this revision to
§ 405.1835(a), which makes it easier for
the provider to establish Board
jurisdiction, has no bearing on a
provider’s Board procedural rights
under section 1878(c) of the Act or the
above-referenced regulations. More
specifically, we see no reason why
revisions to the regulations that make it
easier for a provider to establish Board
jurisdiction would somehow interfere
with the provider’s Board procedural
rights under section 1878(c) of the Act
or the above-referenced regulations.
We believe the same is true of our
adoption of new § 405.1873, which
addresses in detail Board review of a
provider’s compliance with the general
reimbursement requirement of an
appropriate cost report claim (as
prescribed in new § 413.24(j)). Far from
interfering with a provider’s right to
introduce evidence in a Board hearing
(under section 1878(c) of the Act) or
with any of the provider’s Board
procedural rights that are elaborated on,
or established in, the regulations,
§ 405.1873 provides for full review by
the Board of provider compliance with
the general reimbursement requirement
of an appropriate cost report claim (as
prescribed in new § 413.24(j)). Under
paragraph (b)(1) of § 405.1873, the
parties must be given an adequate
opportunity to submit factual evidence
and legal argument on the question of
whether the provider complied with the
general reimbursement requirement of
an appropriate cost report claim; the
Board must make findings of fact and
conclusions of law regarding that
question; and those findings and
conclusions of the Board must be
included in both the administrative
record and in certain overall Board
decisions regarding the appeal. Thus,
given the broad scope of the Board’s
review under new § 405.1873, we see no
reason to believe that this regulation
would somehow interfere with a
provider’s right to introduce evidence in
a Board hearing or with any of the
provider’s Board procedural rights that
are elaborated on, or established in, the
above-referenced regulations.
Comment: Commenters asserted that
shifting the dissatisfaction provision
from a Board jurisdiction requirement
(in § 405.1835) to a cost reporting
requirement (in new § 413.24) is

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inconsistent with the PPS payment
provisions of section 1886 of the Act.
The commenters stated that most Board
appeals now raise PPS issues, which do
not involve cost-based reimbursement.
The commenters further stated that the
documentation of costs in provider cost
reports is not relevant to PPS payment,
which is set without regard to a
provider’s costs.
Response: We did not propose
shifting the dissatisfaction provision
from a Board jurisdiction requirement to
a cost reporting requirement, and we are
not adopting such provisions in this
final rule. As explained above, the
Supreme Court held in Bethesda
Hospital Association that section
1878(a)(1)(A) of the Act clearly makes
provider dissatisfaction a requirement
for Board jurisdiction. This statutory
prerequisite of Board jurisdiction over
appeals of a timely final contractor or
Secretary determination is plainly stated
in the current text of paragraph (a)(1) of
§ 405.1835, and in the preambles for
both the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28207 through
28208 and 28212 through 28213) and
the technical correction provision in the
FY 2015 IPPS/LTCH PPS final rule (79
FR 50199 through 50200). Moreover, in
this final rule, we are making a
technical revision to the dissatisfaction
provision in current paragraph (a)(1) of
§ 405.1835 so that the provider
dissatisfaction requirement for Board
jurisdiction over appeals of a timely
final contractor or Secretary
determination in this regulation will
track closely the references to ‘‘is
dissatisfied with’’ in section
1878(a)(1)(A) of the Act.
Based on the provisions of the FY
2015 IPPS/LTCH PPS proposed rule and
this final rule, we are eliminating (in
§§ 405.1835(a)(1) and 405.1840(b)(3)) an
appropriate cost report claim as a
prerequisite of Board jurisdiction over
appeals of a timely final contractor or
Secretary determination under section
1878(a)(1)(A) of the Act. Furthermore,
we are making an appropriate cost
report claim a general substantive
requirement for Medicare payment (in
new § 413.24(j)).
We understand that many Board
appeals now present payment issues
under a PPS. Also, many PPS payments
are determined without reference to a
provider’s own costs. However, we
respectfully disagree that the adoption
of an appropriate cost report claim as a
general substantive requirement for
Medicare payment (in new § 413.24(j))
is improper simply because some PPS
appeals are filed with the Board and
some PPS payments are determined
without reference to a provider’s own

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costs. This notion is at odds with the
statute and regulations, and with the
actual workings of the Medicare
program.
In accordance with 42 CFR 412.52,
our longstanding policy is that hospitals
subject to a PPS must meet the cost
reporting and recordkeeping
requirements of §§ 413.20 and 413.24.
This policy fully comports with the
Medicare statute. Section 1815(a) of the
Act generally provides that no payments
shall be made to any provider unless it
has furnished such information as the
Secretary may request. In addition,
section 1878(a) of the Act makes Board
appeal rights generally contingent on
the provider having filed a required cost
report within the time specified in
regulations. More specifically, section
1878(a)(1)(A)(ii) of the Act provides that
if a hospital receives payment under
subsection (b) and (d) of section 1886 of
the Act (that is, the PPS statute) and it
submits such reports as the Secretary
may require, the hospital may obtain a
Board hearing with respect to such
payment.
Contrary to the commenters’
assertion, some payments to PPS
hospitals are determined on a
reasonable cost basis. For example, PPS
hospitals are reimbursed on a
reasonable cost basis for organ
acquisition services (§ 412.113(d)).
Because PPS hospitals receive both
prospectively determined payments and
cost-based payments, the requisite
annual cost report accounts for both
types of payment. Upon reviewing the
hospital’s cost report, the contractor’s
final determination is issued in a
written NPR. The definition of
‘‘contractor determination’’ (in
§ 405.1801(a)) and the requirements for
the NPR (in § 405.1803(a)) each refer
specifically to both PPS payments and
cost-based payments. Given the abovedescribed systematic integration of PPS
payments and cost-based payments
under the statute and regulations and in
the actual workings of the Medicare
program, we believe it is entirely
reasonable to make the general
substantive payment requirement of an
appropriate cost report claim (in new
§ 413.24(j)) apply to PPS payments as
well as cost-based payments.
Comment: Some commenters stated
that the proposed rule should only
apply to appeals of a final contractor
determination in an NPR, and not to
challenges of final payment
determinations by the Secretary such as
those published in the Federal Register.
The commenters cited IPPS rate
determinations as an example, stating
their belief that the statute provides a
separate avenue of appeal for the

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70569

Secretary’s IPPS determinations under
section 1886(d) of the Act, and the
proposed rule should not apply to
appeals from a notice of an IPPS rate
determination. The commenters further
stated that the U.S. Court of Appeals for
the District of Columbia Circuit ruled in
Washington Hospital Center v. Bowen,
795 F.2d 139 (D.C. Cir. 1986) that the
filing of a cost report is not required for
Board jurisdiction over an appeal of an
IPPS rate determination.
Response: We respectfully disagree
with these comments. First, the
proposed rule does not impose new
requirements for Board jurisdiction or
otherwise impede Board jurisdiction.
On the contrary, the propose rule
eliminates our longstanding
interpretation (in §§ 405.1835(a)(1) and
405.1840(b)(3)) of the dissatisfaction
prerequisite of Board jurisdiction, as
requiring an appropriate cost report
claim, which makes it easier for
providers to meet the requirements for
Board jurisdiction. Moreover, our
elimination of this interpretation of the
dissatisfaction requirement for Board
jurisdiction applies to PPS appeals
based on clause (ii) of section
1878(a)(1)(A) of the Act, as well as other
appeals under clause (i) of that statutory
provision. Also, we are establishing an
appropriate cost report claim as a
general substantive requirement for
payment (in new § 413.24(j)), but this
regulation does not pertain to the
requirements for Board jurisdiction.
Second, for the reasons set forth in
our response to the immediately
preceding comment, we do not believe
that the general substantive payment
requirement of an appropriate cost
report claim (in new § 413.24(j)) should
apply solely to cost-based payments but
not PPS payments. By definition (in
§ 405.1801(a)), a final contractor
determination encompasses both PPS
payments and cost-based payments, and
the term ‘‘contractor determination’’ is
synonymous with the phrases
‘‘intermediary’s final determination’’
and ‘‘Secretary’s final determination’’ in
clauses (i) and (ii), respectively, of
section 1878(a)(1)(A) of the Act.
Similarly, the requirements for the NPR
(in § 405.1803(a)) include specific
information about PPS payments as well
as information regarding cost-based
payments. These regulations comport
with the actual workings of the
Medicare program inasmuch as PPS
hospitals receive some payments that
are determined on a reasonable cost
basis (§ 412.113(b)), in addition to
receiving prospectively determined
payments.
Third, we recognize that clause (ii) of
section 1878(a)(1)(A) of the Act provides

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for appeal to the Board of the Secretary’s
final determination of PPS payment, but
this does not mean that the general
substantive payment requirement of an
appropriate cost report claim (in new
§ 413.24(j)) should not apply to PPS
payments. Clause (ii) provides for a
Board hearing with respect to the
Secretary’s final determination of PPS
payment, but such Board hearings are
contingent on the hospital’s submission
of ‘‘such reports within such time as the
Secretary may require in order to make
payment under such section’’ (that is,
under the PPS statute). Under § 412.52,
hospitals subject to PPS must satisfy the
same cost reporting and recordkeeping
requirements as apply to other providers
pursuant to §§ 413.20 and 413.24.
Moreover, the substantive payment
requirement of an appropriate cost
report claim (in new § 413.24(j)) is
especially well-suited for some PPS
payments. For example, the PPS
payment adjustment for hospitals that
serve a significantly disproportionate
share of low income patients is
determined on the basis of information
about patients’ eligibility for Medicaid
benefits and their entitlement to
Supplemental Security Income (SSI)
benefits (§ 412.106(b)), but the requisite
Medicaid and SSI information is not
available until after the close of the
hospital’s cost reporting period and so
this information is properly included in
the hospital’s cost report for such
period.
Fourth, in the Washington Hospital
Center decision, the U.S. Court of
Appeals for the District of Columbia
Circuit held that a hospital could appeal
its target amount (or hospital-specific
rate) to the Board under clause (ii) of
section 1878(a)(1)(A) of the Act. The
court reasoned that because the hospital
received notice of the target amount
before its cost reporting period began, it
could appeal that notice under clause
(ii) without waiting for the end of its
fiscal period; submission of its cost
report; and receipt of the contractor’s
NPR. However, the target amount
applied during the short transition
period from cost-based reimbursement
to IPPS. As explained above, hospitals
subject to PPS are still paid on a
reasonable cost basis for some items
such as the direct medical education
costs of interns and residents in an
approved program (§ 412.113(b)). Under
PPS, hospitals can also receive certain
payments that are determined on the
basis of information that is not available
until after the close of the hospital’s cost
reporting period and so such
information is properly included in the
hospital’s cost report for such period

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(§ 412.106(b); determination of the
payment adjustment for PPS hospitals
that serve a significantly
disproportionate share of low income
patients is based on information about
patients’ eligibility for Medicaid
benefits and their entitlement to SSI
benefits but such information is not
available until after the end of the
hospital’s cost reporting period).
Fifth, we understand that other PPS
payment matters could arise where a
hospital believes that, as with the target
amount notice in Washington Hospital
Center, it should be allowed to appeal
to the Board under clause (ii) of section
1878(a)(1)(A) of the Act without
awaiting the end of its fiscal year,
submission of its cost report, and receipt
of the contractor’s NPR. However, we
believe that, instead of trying to identify
specific PPS payment matters that are
arguably similar to the target amount
notice in Washington Hospital Center, it
is more efficient for the Board to review
disputes about whether there was an
appropriate cost report claim for a
specific PPS item in accordance with
the procedures established in new
§ 405.1873. Under § 405.1873, if a party
to an appeal questions whether there
was an appropriate cost report claim for
a specific PPS item, the Board must take
evidence and argument on that
question; issue findings of fact and
conclusions of law on such matter; and
include those findings and conclusions
in both the administrative record and
certain types of overall Board decisions.
Comment: One commenter questioned
whether the proposed rule would
foreclose repayment for a claim that,
based on a post-payment review, was
deemed an overpayment and recouped
by a contractor, but, on appeal, there
was a full reversal of the overpayment
determination. The commenter stated
that it is a provider that is reimbursed
under the periodic interim payment
(PIP) method. The commenter further
stated that specific claims were denied
by a Medicare recovery audit contractor
(RAC), and the MAC then recouped the
overpayments for such claims by
withholding future Medicare payments
that otherwise would have been paid to
the provider. The commenter also stated
that when specific claim denials and
overpayment determinations were
reversed as a result of its administrative
appeals, the MAC then reprocessed the
specific claims but it did not repay the
provider for the overpayment amounts
on the claim denials because it is a PIP
provider. The commenter stated that in
order to obtain repayment of the
overpayment amounts, its only option is
to appeal the matter to the Board. The
commenter further stated that, due to

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the time necessary for administrative
review and reversal of the specific claim
denials and overpayment
determinations, it would be too late for
the provider to make an appropriate
claim in its cost report for repayment of
the overpayment amounts on the
specific claims, and so the proposed
rule would foreclose any repayment of
the specific claims. The commenter also
stated that the proposed rule should be
revised to facilitate payment pursuant to
a prior decision in an appeal and, if
necessary, the filing of a Board appeal.
Response: We do not agree that the
proposed rule would foreclose
repayment for a claim that, based on a
post-payment review, was deemed an
overpayment and recouped by the MAC,
but, on appeal, there was a full reversal
of the overpayment determination. The
situation described by the commenter
involved individual claims for Medicare
benefits, which are subject to a separate
system of claims determination
procedures and administrative and
judicial review under section 1869 of
the Act and Subpart I of 42 CFR part
405. Under this Medicare administrative
appeals process, the MAC issues an
initial determination regarding coverage
and any payment for a claim for
Medicare benefits. If the provider is
dissatisfied with the initial
determination, the provider may pursue
the Medicare administrative appeals
process and judicial review of any final
agency decision (§ 405.904(a)(2)). The
initial determination is final and
binding unless changed through an
appeal (§ 405.928). Similarly, each
decision in the administrative appeals
process is final and binding unless
altered through further administrative or
judicial review (§§ 405.958, 405.978,
405.1048, and 405.1130).
The situation described by the
commenter apparently involved the
reopening of initial determinations for
specific benefit claims; review and
denial of the specific claims by a RAC;
issuance by the MAC of revised
determinations for the specific claims
and demands for repayment of the
overpayment for each claim (§§ 405.980
and 405.982). The commenter stated
that after the overpayment amounts
were recouped from the provider, the
overpayment determinations for the
specific claims were reversed at some
stage of the administrative appeals
process (§ 405.984).
When an overpayment determination
for a specific claim is reversed in full
through the Medicare administrative
appeals process, the contractor must
implement the binding and final
appeals decision in accordance with the
Medicare statute and regulations. In

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situations like those described by the
commenter, the contractor would revise
the overpayment determination and
credit the provider for the total
overpayment amount plus interest (if
any) that was recouped previously from
the provider (§ 405.379(d)(8)). When
crediting the provider, the contractor
would not necessarily repay the
provider at that time. For example, if the
provider had not repaid or successfully
appealed an overpayment determination
for a second, different individual benefit
claim, the overpayment amount for the
first claim (that is, the overpayment
determination that was completely
reversed through the administrative
appeals process) would be applied
against the unpaid overpayment amount
and accrued interest (if any) that might
be owing for the second claim, before
any excess amount is released to the
provider (§§ 405.378(j) and
405.379(g)(1)(i) and (g)(4)). Thus,
because the provider would receive this
full credit for the recouped overpayment
amount and interest (if any) that was
later reversed in full through the
administrative appeals process for
individual benefit claims (under section
1869 of the Act and Subpart I of 42 CFR
part 405), the provider would not need
to appeal to the Board (under section
1878 of the Act and Subpart R of 42 CFR
part 405) in order to receive full credit
for the overpayment determination that
had already been reversed in full
through the separate appeals process for
individual benefit claims.
Moreover, there are strong incentives
for the contractor to promptly give the
provider full credit for the previously
recouped overpayment amount and
interest (if any) after the overpayment
determination is reversed in full
through the administrative appeals
process. For example, interest might
accrue on the overpayment amount
(§ 405.378(b) and (j)). Also, the
contractor’s performance review under
its contract with CMS could be affected
negatively (§§ 421.120(a) and
421.122(a)).
We recognize that a provider in the
situation described by the commenter
still might appeal to the Board in order
to ensure that the provider will receive
full credit for the recouped overpayment
amount and interest (if any) that was
reversed in full through the Medicare
administrative appeals process for
individual benefit claims pursuant to
section 1869 of the Act and Subpart I of
42 CFR part 405. However, we believe
that our proposed new § 405.1873 and
other Board appeals regulations are
sufficient for Board review and decision
in such appeals. Under proposed new
§ 405.1873, if a party to such a Board

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appeal were to question the provider’s
compliance with the general substantive
reimbursement requirement of an
appropriate cost report claim (under
new § 413.24(j)), the Board would have
to receive factual evidence and legal
argument on such question; issue
specific findings of fact and conclusions
of law on that matter; and include those
findings and conclusions in the
administrative record and in any
hearing decision or EJR decision (if EJR
is granted) regarding the matter at issue.
As explained above, the statute and
regulations require Medicare contractors
to fully credit the provider for any
previously recouped overpayment
amount and interest (if any) that is later
reversed in full through the separate
appeals process for individual benefit
claims, and we see no reason why a
contractor would not comply with these
requirements. As a result, we do not
believe the provider would need to
appeal to the Board in order to receive
such credit, and our proposed new
§ 405.1873 and other Board appeals
regulations are sufficient for Board
review and decision in such appeals.
Moreover, we note that the Subpart R
regulations address these kinds of issues
in the context of cost reports and NPRs,
similarly to how the above-described
provisions in the Subpart I regulations
apply to individual benefit claim
determinations and appeals.
Specifically, § 405.1803(d) provides
that, for each final administrative appeal
decision or final judicial judgment on
the merits of a reimbursement issue that
stems from a cost report and NPR, the
contractor must determine the effect of
the final administrative or judicial
decision on program reimbursement for
the fiscal period at issue; issue any
revised final contractor determination;
and make any additional payment or
recoup or offset any program payment
that might be due for the fiscal year at
issue.
We believe that, given the similar
requirements (discussed above) for
contractor implementation of final
administrative decisions on individual
benefit claims, there is no need for a
provider to appeal to the Board in order
to receive full credit for an earlier final
decision on such specific claims.
However, if the provider still appealed
to the Board, we believe our proposed
new § 405.1873 and other Board appeals
regulations would be sufficient for
Board review and decision in such
appeals.
Comment: One commenter questioned
CMS’ decision to continue enforcement
of the Board jurisdictional requirement
(in current §§ 405.1835(a)(1) and
405.1840(b)(3)) of an appropriate cost

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70571

report claim until the effective date of
a final rule that makes an appropriate
cost report claim a general substantive
reimbursement requirement.
Response: In the preambles for both
the FY 2015 IPPS/LTCH PPS proposed
rule (79 FR 28207 through 28208 and
28212 through 28213) and this final
rule, we have explained at length the
importance of requiring an appropriate
cost report claim for each payment
matter. Under this final rule, we are
establishing (in new § 413.24(j)) an
appropriate cost report claim as a
general substantive reimbursement
requirement that will apply to each
specific payment item. However, that
general reimbursement requirement will
not apply until the prospective effective
date of this final rule. In order to
maintain our longstanding policy of
requiring an appropriate cost report
claim, our only recourse is to continue
enforcement of the Board jurisdictional
requirement (in current
§§ 405.1835(a)(1) and 405.1840(b)(3)) of
an appropriate cost report claim until
this final rule takes effect.
After consideration of the public
comments we received, we are
finalizing our proposals as follows. We
are adopting our proposal to eliminate
our interpretation (in §§ 405.1835(a)(1)
and 405.1840(b)(3)) that a provider must
make an appropriate cost report claim
for an item in order to meet the
dissatisfaction requirement for Board
jurisdiction over appeals of a timely
final contractor determination or
Secretary determination. More
specifically, we are adopting technical
revisions to the proposed introductory
text for paragraph (a) of § 405.1835 and
to proposed paragraph (a)(1) of
§ 405.1835 so that the dissatisfaction
requirement in the regulations will more
closely track the text of the
dissatisfaction requirement in section
1878(a)(1)(A) of the Act for Board
jurisdiction over appeals of a timely
final contractor determination or
Secretary determination. We also are
adding a new conforming amendment
(that is, paragraph (a)(1)(i)) to
§ 405.1835), which is a necessary crossreference to certain reopening
regulations (§§ 405.1887(d) and
405.1889(b)) and to a provision in new
§ 405.1873 (that is, paragraph (c)(2)(i))
that cross-references the same reopening
regulations. In addition, we are
finalizing without modification our
proposal (79 FR 28298) to amend
§ 405.1840 by removing paragraph
(b)(3).
We are not adopting the proposed
revisions (79 FR 28297) to either of the
other two requirements for Board
jurisdiction over appeals of a timely

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final contractor or Secretary
determination. Our adoption of the
above-described technical revision to
proposed paragraph (a)(1) of § 405.1835
obviates any need to renumber the
amount in controversy jurisdictional
requirement in current paragraph (a)(2)
or the timely filing jurisdictional
requirement in current paragraph (a)(3).
The proposed revisions to the text of
current paragraph (a)(3) of § 405.1835
are not necessary because the essential
provisions of such proposal are now
contained appropriately in
§ 405.1835(c), a regulation we adopted
in the technical correction provisions of
the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50350 through 50351).
We are finalizing without
modification the proposed revisions (79
FR 28297) to paragraphs (b)(1), (b)(2)
introductory text, and (b)(2)(iii) of
§ 405.1835. Also, we are adopting a
technical conforming revision to current
paragraph (b)(3) of § 405.1835.
Specifically, we are adding the term
‘‘final’’ before the phrase ‘‘contractor or
Secretary determination’’ in paragraph
(b)(3). This technical revision is
necessary to conform paragraph (b)(3) of
§ 405.1835 to our revision in this final
rule of the definition of ‘‘contractor
determination’’ in § 405.1801(a)
(discussed in section XVII.E.4.b. of this
final rule).
We also are adopting, in paragraphs
(e)(1) and (e)(2) of § 405.1835, the same
text that we proposed (79 FR 28297) as
revisions to paragraphs (c)(1) and (c)(2)
of § 405.1835. When the proposed rule
was published, paragraph (c) of
§ 405.1835 addressed the addition of
issues to a pending Board appeal.
However, paragraph (c) was later
redesignated as paragraph (e) of
§ 405.1835 in the technical correction
provisions of the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50350 through
50351). Accordingly, we are adopting
the text of the proposed amendments (to
paragraphs (c)(1) and (c)(2) of
§ 405.1835) in paragraphs (e)(1) and
(e)(2) of § 405.1835 which now
addresses the addition of issues to a
pending Board appeal. However, we are
not finalizing the proposed revision (79
FR 28297) to paragraph (c)(3) of
§ 405.1835, because the essential
provisions of such proposal are now
contained appropriately in
§ 405.1835(e)(3), a regulation we
adopted in the technical correction
provisions of the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50350 through
50351).

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2. Board Review of Compliance With
Cost Report Claim Requirements Under
§ 413.24(j)
a. Proposed Addition of New § 405.1873
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28213 through
28215 and 28298 through 28300), we
proposed to add a new § 405.1873 to the
Board appeals regulations, which would
address how the Board should proceed
when any party to an appeal questions
whether a provider made an appropriate
cost report claim (as required by
proposed § 413.24(j)) for a specific item
under appeal. We explained that this
new regulation is necessary to forestall
potential confusion about how the
substantive reimbursement requirement
in proposed § 413.24(j) of an appropriate
cost report claim for a specific item will
pertain to Board appeals of the same
item.
Under paragraph (b)(1) of proposed
new § 405.1873, the Board would
consider timely submitted factual
evidence and legal argument on, and
then prepare written specific findings of
fact and conclusions of law regarding,
the question of whether the provider’s
cost report complied with proposed
§ 413.24(j). The Board would give these
written specific factual findings and
legal conclusions to each party to the
appeal, and they must be included in
the record of administrative proceedings
for the appeal. Paragraph (b)(2) of
proposed § 405.1873 provides that,
upon giving the parties to the appeal the
Board’s written factual findings and
legal conclusions on the question of
whether the provider’s cost report
included an appropriate cost claim for
the specific item under appeal, the
Board then must proceed to issue one of
four types of overall decisions with
respect to such item. As discussed
below, paragraph (d) of proposed
§ 405.1873 provides that, if the Board
issues either of two types of overall
Board decisions regarding the specific
item under appeal (that is, a hearing
decision or an expedited judicial review
(EJR) decision where EJR is granted), the
Board’s written specific factual findings
and legal conclusions (reached under
proposed § 405.1873(b)) about whether
there was an appropriate cost report
claim for the item, must be included in
such overall Board decision regarding
the specific item, along with the other
matters that are already required for a
Board hearing decision or a Board EJR
decision where EJR is granted. However,
under paragraph (e) of proposed
§ 405.1873, if the Board issues either of
two other types of overall Board
decisions regarding the specific item
under appeal (that is, a jurisdictional

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dismissal decision or an EJR decision
where EJR is denied), the Board’s
written specific factual findings and
legal conclusions (pursuant to proposed
§ 405.1873(b)) must not be included in
the overall Board decision regarding the
specific item. In any event, the Board’s
factual findings and legal conclusions
about whether there was an appropriate
cost report claim for the item must be
included in the record of administrative
proceedings for the appeal in
accordance with § 405.1865 of the
regulations.
We believe that, in order to ensure
full and appropriate implementation of
both the addition of the substantive
reimbursement requirement of an
appropriate cost report claim (in
proposed § 413.24(j)) and the
elimination of the Board jurisdiction
requirement of an appropriate cost
report claim (in existing
§§ 405.1835(a)(1) and 405.1840(b)(3)), it
is necessary to foreclose certain types of
Board decisions, orders, and other
actions. Accordingly, in order to give
full force and effect to our proposed
elimination of the Board jurisdiction
requirement of an appropriate cost
report claim, paragraph (c)(1) of new
§ 405.1873 would prohibit a denial of
jurisdiction, a declination to exercise
jurisdiction, the imposition of a
sanction, and various other actions by
the Board, if any such jurisdictional
decision, order, sanction, or other
specified action is based on (in whole or
in part) the Board’s determination that
the provider’s cost report did not meet
the proposed substantive
reimbursement requirement under
proposed § 413.24(j) of an appropriate
cost report claim for the specific item.
In some cases, the Board jurisdiction
requirement of an appropriate cost
report claim has been addressed in
different but related terms. For example,
Board jurisdiction has been denied
based on the absence, in the final
contractor determination or Secretary
determination under appeal, of an
adjustment, revision, correction, or
other change to the specific item under
appeal. Another example is that Board
jurisdiction also has been denied due to
the lack of a particular determination by
the contractor or the Secretary regarding
the specific item under appeal, in the
final contractor determination or
Secretary determination under appeal.
We believe that, in order to give full
force and effect to the proposed
elimination of the Board jurisdiction
requirement of an appropriate cost
report claim, it is also necessary to
address related terms such as the
absence of specific adjustments and the
lack of particular determinations

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regarding the specific item under
appeal. Accordingly, paragraph (c)(2) of
proposed new § 405.1873 would
prohibit a denial of jurisdiction, a
declination to exercise jurisdiction, the
imposition of a sanction, and various
other actions by the Board, if any such
jurisdictional decision, sanction, or
other specified action is based on (in
whole or in part) the absence, in the
final contractor determination or
Secretary determination under appeal,
of an adjustment, revision, correction, or
other change to the specific item under
appeal, or the lack of a particular
determination by the contractor or the
Secretary regarding the specific item in
the final contractor determination or
Secretary determination under appeal.
However, paragraph (c)(2)(i) of proposed
new § 405.1873 includes an important
exception: if the provider’s appeal of the
specific item is based on the reopening
of such item (under § 405.1885 of the
regulations) where the specific item is
not revised, adjusted, corrected, or
otherwise changed in a revised final
contractor determination or Secretary
determination, the Board must deny
jurisdiction over the specific item under
appeal (as specified in §§ 405.1887(d)
and 405.1889(b) of the regulations). The
reopening regulations are an exercise of
the Secretary’s general rulemaking
authority under sections 1102 and 1872
of the Act, and we believe this
exception (in proposed
§ 405.1873(c)(2)(i)) is necessary to
ensure consistency with the abovereferenced reopening regulations, our
longstanding ‘‘issue specific’’
interpretation of the reopening
regulations, and the interests of
administrative finality and efficiency.
We refer readers, for example, to HCA
Health Services of Oklahoma v. Shalala,
27 F.3d 614 (D.C. Cir. 1994) (the
reopening regulations are based on the
Secretary’s general rulemaking
authority, and the issue specific
interpretation of the reopening rules is
reasonable and supportive of
administrative finality).
Under paragraph (d) of proposed
§ 405.1873, there are two types of Board
decisions that must include any specific
findings of fact and conclusions of law
by the Board (reached under paragraph
(b) of proposed § 405.1873), on the
question of whether the provider’s cost
report included an appropriate claim for
the specific item under appeal. First,
paragraph (d)(1) of proposed § 405.1873
provides that, if the Board issues a
hearing decision on the specific item
under appeal (under § 405.1871 of the
regulations), the Board’s specific
findings of fact and conclusions of law

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about whether there was an appropriate
cost report claim for the specific item,
must be included in such a hearing
decision along with the other matters
prescribed in existing § 405.1871(a). A
Board hearing decision addresses
whether the provider has established
that it should receive relief on the
matter at issue (as specified in
§ 405.1871(a)(3)). Under proposed
§ 413.24(j), the requirement of an
appropriate cost report claim is a
substantive prerequisite of any payment
for the specific item, which applies in
addition to other payment requirements
for the particular item (for example, the
specific requirements for payment of
interest expense under § 413.153 of the
regulations). We believe that, because a
Board hearing decision addresses
whether the provider has established
that it meets the substantive
requirements for payment of the item
under appeal whereas an appropriate
cost report claim is a substantive
prerequisite of any payment for the
specific item (under proposed
§ 413.24(j)), any factual findings and
legal conclusions about whether there
was an appropriate cost report claim
should be included in any hearing
decision that might be issued by the
Board regarding the specific item. In
addition, we note that if the Board elects
to issue a hearing decision that also
includes factual findings and legal
conclusions about whether the other
payment requirements for the specific
item were satisfied (in addition to the
Board’s findings and conclusions about
whether there was an appropriate cost
report claim for the item), such a
hearing decision (addressing all the
substantive reimbursement
requirements for the specific item) will
safeguard against piecemeal proceedings
before the Board and potentially before
the Administrator of CMS and a Federal
court. However, paragraph (d)(1)(ii) of
proposed § 405.1873 provides that, if
the Board determines that the provider’s
cost report did not include an
appropriate claim for the specific item
under appeal, the Board has discretion
whether or not to address in its hearing
decision whether the other substantive
reimbursement requirements for the
specific item are also satisfied.
Second, paragraph (d)(2) of proposed
§ 405.1873 provides that, if the Board
issues an EJR decision where EJR is
granted regarding the specific item
under appeal (as provided for under
§ 405.1842(f)(1) of the regulations), any
specific findings of fact and conclusions
of law by the Board (reached under
paragraph (b) of proposed § 405.1873)
about whether there was an appropriate

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70573

cost report claim for the specific item,
must be included in such an EJR
decision. Section 1878(f)(1) of the Act
and § 405.1842 of the regulations
authorize EJR if the requirements for
Board jurisdiction over a specific item
are satisfied, and the Board determines
that it lacks the authority to decide a
legal question that is relevant to the
specific item under appeal. The
Administrator of CMS may review the
Board’s determination as to whether
there is Board jurisdiction over the
specific item, but the Administrator may
not review the Board’s determination as
to whether it has the authority to decide
a relevant legal question. We believe
that paragraph (d)(2) of proposed
§ 405.1873 will also safeguard against
piecemeal proceedings before the Board,
the Administrator of CMS, and a Federal
court. By requiring a Board EJR decision
that grants EJR to include any factual
findings and legal conclusions (reached
under proposed § 405.1873(b)) about
whether there was an appropriate cost
report claim for the specific item under
appeal, along with the Board’s
determinations that the two
requirements for EJR were satisfied (that
is, a finding of Board jurisdiction plus
the Board’s determination that it lacks
the authority to decide a legal question
relevant to the specific item under
appeal), piecemeal proceedings would
be minimized or eliminated because the
Board EJR decision will encompass both
the question of whether there was an
appropriate cost report claim for the
specific item and the relevant legal
question for which EJR was granted (and
for which the Board determined that it
has no authority to decide such legal
question). Piecemeal proceedings before
the Administrator of CMS would also be
minimized or eliminated because, under
proposed § 405.1875(a)(2)(v) (which we
discuss separately below), if the
Administrator reviews and issues an EJR
decision on the question of whether
there is Board jurisdiction over the
specific item under appeal, the
Administrator will also review, and any
decision will address, the Board’s
specific findings of fact and conclusions
of law about whether there was an
appropriate cost report claim for the
specific item. In turn, our proposal to
require an EJR decision that grants EJR
to include any specific factual findings
and legal conclusions under proposed
§ 405.1873(b) would ensure that when a
Federal court exercises its EJR authority
under section 1878(f)(1) of the Act and
§ 405.1842 of the regulations by
reviewing a relevant legal question (for
which the Board determined it has no
decisional authority), the court’s review

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can also potentially encompass the final
specific findings of fact and conclusions
of law by the Board or the
Administrator, as applicable, about
whether there was an appropriate cost
report claim for the specific item. If it
is determined, in a final EJR decision
that grants EJR, that there was an
appropriate cost report claim for the
specific item under appeal, the court
may have no occasion to review the
final specific findings of fact and
conclusions of law on the question of
whether there was an appropriate cost
report claim for the specific item.
However, if it is instead determined, in
a final EJR decision that grants EJR, that
the provider’s cost report did not
include an appropriate claim for the
specific item under appeal, the court
can potentially review in one
proceeding the final specific findings of
fact and conclusions of law about
whether there was an appropriate cost
report claim for the specific item, along
with the relevant legal question for
which EJR was granted (and for which
the Board determined that it has no
authority to decide such legal question).
However, paragraph (e) of proposed
new § 405.1873 would provide that
there are two other types of Board
decisions that must not include any
specific findings of fact and conclusions
of law by the Board (reached under
proposed § 405.1873(b)), on the question
of whether the provider’s cost report
included an appropriate claim for the
specific item under appeal. On the one
hand, paragraph (e)(1) of proposed new
§ 405.1873 would provide that if the
Board issues a jurisdictional dismissal
decision on the specific item under
appeal (under § 405.1840(c)), the
Board’s specific findings of fact and
conclusions of law about whether there
was an appropriate cost report claim for
the specific item must not be included
in such a jurisdictional dismissal
decision. When the Board issues a
jurisdictional dismissal decision on a
specific item under appeal, the Board’s
denial of jurisdiction obviates any need
to address the question of whether the
substantive reimbursement
requirements that are specific to the
particular item (for example, the
specific requirements for payment for
certain depreciation under § 413.134)
are satisfied. Because the requirement of
an appropriate cost report claim for each
specific item is also a substantive
prerequisite of any payment for the
specific item (as prescribed in proposed
§ 413.24(j)), a denial of jurisdiction over
the specific item also obviates any need
to address the substantive
reimbursement requirement of an

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appropriate cost report claim in the
Board’s jurisdictional dismissal
decision.
Similarly, under paragraph (e)(2) of
proposed new § 405.1873, if the Board
issues an EJR decision where EJR is
denied on the specific item under
appeal (under § 405.1842(f)(2)), the
Board’s specific findings of fact and
conclusions of law (reached under
paragraph (b) of proposed new
§ 405.1873) about whether there was an
appropriate cost report claim for the
specific item, must not be included in
such an EJR decision. If EJR is denied
solely because the Board determines
that it does have the authority to decide
the legal question relevant to the
specific item under appeal, the Board
would conduct further proceedings and
issue another decision (as specified in
§ 405.1842(h)(2)(i)). If such further
decision is a hearing decision, under
proposed § 405.1873(d)(1), the Board’s
factual findings and legal conclusions
(under proposed § 405.1873(b)) about
whether there was an appropriate cost
report claim must be included in the
Board’s hearing decision; if the Board
elects to also include in the hearing
decision its factual findings and legal
conclusions about whether the other
reimbursement requirements for the
specific item are satisfied, piecemeal
proceedings before the Board and
potentially before the Administrator of
CMS and a Federal court would be
minimized or eliminated. However, if
EJR is denied because the Board lacked
jurisdiction over the specific item under
appeal, the Board’s factual findings and
legal conclusions about whether there
was an appropriate cost report claim
must not be included in such an EJR
decision; as explained above regarding
Board jurisdictional dismissal decisions,
the denial of Board jurisdiction in such
an EJR decision obviates the need to
address the substantive reimbursement
requirement of an appropriate cost
report claim, just as there is no need to
consider other payment requirements
for the particular item under appeal.
Paragraph (f) of proposed new
§ 405.1873 addresses the various effects
of the Board’s factual findings and legal
conclusions (reached under paragraph
(b) of proposed § 405.1873) regarding
whether there was an appropriate cost
report claim in the two types of Board
decisions where such factual findings
and legal conclusions must be
included—Board hearing decisions, and
Board EJR decisions where EJR is
granted. An appropriate cost report
claim for a specific item is a necessary,
but not sufficient, condition for
Medicare payment for the specific item.
This is because the requirement of an

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appropriate cost report claim for each
specific item is a substantive
prerequisite of any payment for the
specific item (as prescribed in proposed
§ 413.24(j)), but all other payment
requirements (for example, the
particular requirements for payment for
certain bad debts under § 413.89) also
must be satisfied. Accordingly, under
paragraph (f)(1) of proposed new
§ 405.1873, if the Board determines, as
part of a final hearing decision, that the
provider’s cost report included an
appropriate claim for the specific item
under appeal (as prescribed in
§ 413.24(j)), payment for the specific
item would be made in accordance with
Medicare policy, but only if the Board
further determines in such hearing
decision that all the other substantive
reimbursement requirements for the
specific item are also satisfied.
Conversely, if the Board determines, in
a final hearing decision, that the cost
report lacked an appropriate claim for
the specific item under appeal, payment
for the specific item would not be made,
regardless of whether the Board further
determines in such hearing decision
that the other substantive
reimbursement requirements for the
specific item are satisfied.
Similarly, paragraph (f)(2) of proposed
new § 405.1873 provides that, if the
Board or the Administrator of CMS (as
applicable) determines, as part of a final
EJR decision where EJR is granted, the
provider’s cost report included an
appropriate claim for the specific item
under appeal (as prescribed in
§ 413.24(j)), payment for the specific
item would be made in accordance with
Medicare policy, but only to the extent
permitted by the final decision of a
Federal court under the EJR provisions
of section 1878(f)(1) of the Act (see also
§§ 405.1842 and 405.1877) regarding the
legal question that is relevant to the
specific item (but for which the Board
determined it has no decisional
authority). By contrast, if the Board or
the Administrator of CMS (as
applicable) determines, in a final EJR
decision where EJR is granted, that the
cost report lacked an appropriate claim
for the specific item under appeal,
payment for the specific item would not
be made unless: (i) The specific factual
findings and legal conclusions by the
Board or the Administrator of CMS, as
applicable, about whether there was an
appropriate cost report claim for the
specific item are reversed or modified
by the final decision of a Federal court
(in accordance with section 1878(f)(1) of
the Act and § 405.1877 of the
regulations)); and (ii) only to the extent
permitted by the final decision of a

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Federal court under the EJR provisions
of section 1878(f)(1) of the Act (see also
§§ 405.1842 and 405.1877 of the
regulations) regarding the legal question
that is relevant to the specific item (but
for which the Board determined it has
no decisional authority).
b. Summary of Public Comments and
Our Responses and Finalized Policies
Following are summaries of public
comments that were received in
response to the FY 2015 IPPS/LTCH
PPS proposed rule (79 FR 28206
through 28217).
Comment: One commenter stated that
the proposed addition of § 405.1873
would result in an inappropriate
intrusion into the Board’s decision
making process. The commenter stated
that proposed § 405.1873 would hamper
the Board’s ability to serve an
independent role by imposing strict
requirements on the scope and content
of Board review.
Response: We respectfully disagree
with this comment. Section 405.1873
authorizes full Board review of provider
compliance with the general substantive
reimbursement requirement of an
appropriate cost report claim (as
prescribed in new § 413.24(j)). The
criteria for Board review of such matters
are set forth in § 413.24(j), but this is no
different than the Board having to
review a specific reimbursement claim
by reference to the particular standards
set forth in the pertinent payment
regulation. For example, the Board must
apply the specific requirements for
reimbursement of interest expense
pursuant to § 413.153, in order to fully
consider and decide whether the
specific requirements for interest
expense reimbursement are satisfied.
New § 413.24(j) adds the general
substantive reimbursement requirement
of an appropriate cost report claim,
which also must be satisfied for
reimbursement of interest expense or
any other item. While the Board must
review questions about compliance with
the general substantive reimbursement
requirement of an appropriate cost
report claim in accordance with the
procedures in proposed § 405.1873, the
other provisions of section 1878 of the
Act and 42 CFR part 405, subpart R also
generally apply to Board review of
questions about whether there was an
appropriate cost report claim just as
those other statutory and regulatory
provisions generally apply to Board
review of the specific reimbursement
requirements for a particular item like
interest expense.
Paragraph (b)(1) of proposed
§ 405.1873 does not impose specific
limitations on the Board’s findings of

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fact and conclusions of law regarding
the provider’s compliance with the
general substantive reimbursement
requirement of an appropriate cost
report claim (as prescribed in new
§ 413.24(j)). However, after the Board
reaches such factual findings and legal
conclusions, paragraph (c) of proposed
§ 405.1873 would impose certain limits
on the Board’s actions with respect to
those findings and conclusions.
However, the restrictions on the Board’s
actions in paragraph (c) are simply
aimed at ensuring that the requirement
of an appropriate cost report claim (as
prescribed in new § 413.24(j)) is applied
as a general substantive reimbursement
requirement instead of as a
jurisdictional requirement that might
otherwise underlie a potential
jurisdictional dismissal decision or a
declination of the exercise of
jurisdiction by the Board.
The foregoing point is underscored by
paragraph (e)(1) of proposed § 405.1873,
which states that if the Board issues a
jurisdictional dismissal decision, such a
decision must not include the Board’s
findings of fact and conclusions of law
regarding the provider’s compliance
with the general substantive
reimbursement requirement of an
appropriate cost report claim. We
believe that proposed paragraph (e)(1)
should further ensure that the
requirement of an appropriate cost
report claim (as prescribed in
§ 413.24(j)) is applied as a general
substantive reimbursement requirement
instead of as a jurisdictional
requirement that might otherwise
underlie a potential jurisdictional
dismissal decision or a declination of
the exercise of jurisdiction by the Board.
Comment: Some commenters stated
that if a provider does not include an
appropriate claim for a specific item in
its cost report, it would not receive
payment for that item and it also would
lose the ability to appeal that item to the
Board. The commenters stated that the
Board should maintain the ability to
make final determinations regarding
claims disagreements.
Response: We believe that proposed
new § 413.24(j) and proposed new
§ 405.1873 clearly state that a provider
can appeal a specific item to the Board,
even if the contractor previously
determined that the cost report did not
include an appropriate claim for the
particular item. Also, under proposed
§ 405.1873(f)(1)(i), reimbursement for
the specific item would be supported if
the Board issues a hearing decision on
the merits of the provider’s appeal, and
the Board rules that the provider
complied with § 413.24(j) and all the

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70575

specific requirements for payment of the
particular item.
As discussed above, § 413.24(j)(4)
states that if a provider’s cost report
does not include an appropriate claim
for a specific item, the final contractor
determination should not include
payment for the item. However,
§ 413.24(j)(5) states that if the provider
appeals a specific item to the Board and
any party then questions the provider’s
compliance with the general substantive
reimbursement requirement of an
appropriate cost report claim for the
item, the Board should review such
questions in accordance with the
procedures set forth in § 405.1873.
Paragraph (d)(1) of proposed
§ 405.1873 provides that if the Board
issues a hearing decision on the merits
of the provider’s appeal, the hearing
decision must include the Board’s
factual findings and legal conclusions
regarding compliance with the general
substantive reimbursement requirement
of an appropriate cost report claim.
Moreover, paragraph (f)(1)(i) of
proposed § 405.1873 states that if the
Board determines in such hearing
decision that the provider’s cost report
included an appropriate claim for the
specific item at issue, and that the
provider satisfied all the other
substantive reimbursement
requirements for such item, the specific
item at issue is reimbursable in
accordance with Medicare policy. Thus,
a Board hearing decision can support
reimbursement for a specific item, even
if the final contractor determination did
not include reimbursement for the item
because the contractor determined that
an appropriate cost report claim was not
made.
Comment: One commenter stated that
Board jurisdiction over the appeal of an
item would depend on whether the
contractor accepted the provider’s
specific reporting of the item in its cost
report.
Response: We respectfully disagree
with this comment. As a result of our
revisions to § 405.1835(a)(1) and
removal of § 405.1840(b)(3), an
appropriate cost report claim for a
specific item is no longer a
jurisdictional requirement for Board
appeals. Moreover, as explained in our
response to the preceding comment, we
believe that, under new § 413.24(j) and
new § 405.1873, a provider can appeal
a specific item to the Board, even if the
contractor previously determined that
an appropriate cost report claim for the
item was not made. Indeed, proposed
§ 405.1873(f)(1)(i) provides that
reimbursement for the specific item
would be supported if the Board issues
a hearing decision on the merits of the

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provider’s appeal, and concludes that
there was an appropriate cost report
claim for the item at issue and that all
the specific reimbursement
requirements for the particular item
were satisfied.
Comment: Some commenters stated
that the procedures in proposed
§ 405.1873 for Board review of
compliance with the general substantive
reimbursement requirement of an
appropriate cost report claim would
promote piecemeal litigation instead of
avoiding it.
Response: We continue to believe that
proposed § 405.1873 would facilitate the
avoidance of piecemeal litigation. Under
paragraph (d) of § 405.1873, the Board’s
factual findings and legal conclusions
about compliance with the general
substantive reimbursement requirement
of an appropriate cost report claim
under new § 413.24(j) must be included
in any hearing decision or EJR decision
where EJR is granted. Hearing decisions,
and EJR decisions where EJR is granted,
end the Board’s consideration of the
specific item at issue (§§ 405.1842(h)(1)
and 405.1871(b)(1)). Moreover, if the
Administrator of CMS reviews the
Board’s hearing decision or the Board
jurisdiction component of the two-part
EJR decision (§ 405.1875(a)(2)), the
Administrator’s decision ends the
administrative appeals proceedings
regarding the specific item unless the
matter is remanded to the Board for
further proceedings
(§ 405.1875(e)(4)(iii)). In any event,
piecemeal litigation would be avoided.
Paragraph (e) of § 405.1873 provides
that if the Board issues a jurisdictional
dismissal decision, or an EJR decision
where EJR is denied, regarding the
specific matter at issue, the Board’s
factual findings and legal conclusions
about compliance with the general
substantive reimbursement requirement
of an appropriate cost report claim
under new § 413.24(j) must not be
included in the jurisdictional dismissal
decision or the EJR decision where EJR
is denied. A jurisdictional dismissal
decision regarding the specific item is
final and binding unless the decision is
reversed or modified by the CMS
Administrator or a Federal court
(§ 405.1840(c)(3)). If the Board’s
jurisdictional dismissal decision were
reversed or modified on review, the
matter would typically be remanded for
further proceedings on the merits of the
reimbursement matter at issue. This
comports with the general
administrative law principle that a
remand is the usual remedy when one
issue is finally resolved on
administrative or judicial review, but

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other issues still must be decided in the
same case.
If the Board denies EJR on
jurisdictional grounds, our statements in
the preceding paragraph about
jurisdictional dismissal decisions would
also apply to EJR decisions where EJR
is denied on jurisdictional grounds. If
EJR is denied because the Board
determines that it has the requisite
authority to decide all aspects of the
matter at issue, the denial of EJR is an
interlocutory decision
(§ 405.1842(h)(2)). If the Board later
issues a hearing decision on the specific
item, its factual findings and legal
conclusions regarding compliance with
the general substantive reimbursement
requirement of an appropriate cost
report claim under new § 413.24(j) must
be included in the hearing decision. As
explained above, a Board hearing
decision or a final decision by the CMS
Administrator, as applicable, would end
the administrative appeals proceedings
regarding the specific item. In any
event, piecemeal litigation would be
avoided.
Comment: One commenter stated that
it is not clear whether the Board’s
specific findings of fact and conclusions
of law relating to § 413.24(j) are subject
to judicial review.
Response: We believe that, under
proposed § 405.1873, the Board’s
specific findings of fact and conclusions
of law regarding compliance with
§ 413.24(j) are subject to judicial review.
First, § 405.1873(b)(1) provides that the
Board’s factual findings and legal
conclusions must be included in the
administrative record. Judicial review of
a final agency decision would be based
on the administrative record under
section 1878(f)(1) of the Act, which
incorporates the ‘‘whole record’’
provision for judicial review under the
Administrative Procedure Act (APA) (5
U.S.C. 706).
As explained above, the Board’s
specific findings of fact and conclusions
of law regarding compliance with
§ 413.24(j) must be included in any
hearing decision or EJR decision where
EJR is granted. In either case, the final
agency decision of the Board or the CMS
Administrator, as applicable, is subject
to judicial review under section
1878(f)(1) of the Act (§ 405.1877(a)).
Under proposed § 405.1873(e), the
Board’s specific findings of fact and
conclusions of law regarding
compliance with the general substantive
reimbursement requirement of an
appropriate cost report claim (under
new § 413.24(j)) must not be included in
a jurisdictional dismissal decision or an
EJR decision where EJR is denied.
However, a final jurisdictional dismissal

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decision by the Board or the CMS
Administrator, as applicable, is subject
to judicial review. If a Federal court
reverses or modifies a final
jurisdictional dismissal decision, the
merits of the specific payment item at
issue would be remanded. If such
remand proceedings were to end with a
final hearing decision or an EJR decision
where EJR is granted, the Board’s
specific findings of fact and conclusions
of law regarding compliance with
§ 413.24(j) would be included in such
hearing decision or EJR decision under
proposed § 405.1873(d). A final hearing
decision or a final EJR decision where
EJR is granted, including the Board’s
factual findings and legal conclusions
regarding compliance with § 413.24(j),
would be subject to judicial review
under section 1878(f)(1) of the Act
(§ 405.1877(a)).
After consideration of the public
comments we received, we are
finalizing new § 405.1873 as proposed
without modification.
3. Related Revisions to § 405.1875
Regarding Administrator Review
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28215 through
28216 and 28300), we proposed two
revisions to § 405.1875 of the
regulations, which provides for review
by the Administrator of CMS of certain
Board decisions, orders, and other
actions. We believe these revisions will
facilitate the full and appropriate
implementation of our proposals
(discussed above) to add the substantive
reimbursement requirement of an
appropriate cost report claim (in
proposed § 413.24(j)), to eliminate the
Board jurisdiction requirement of an
appropriate cost report claim (in
existing §§ 405.1835(a)(1) and
405.1840(b)(3)), and to add specific
procedures for Board review of
questions about compliance with the
substantive reimbursement requirement
of an appropriate cost report claim (in
proposed new § 405.1873).
First, under existing § 405.1875(a)(2)
of the regulations, the Administrator
may review a Board hearing decision, a
Board dismissal decision, the Board’s
jurisdictional determination in an EJR
decision (but not the Board’s
determination, in an EJR decision, of
whether it has the authority to decide a
relevant legal question), and any other
Board decision or action deemed to be
final by the Administrator. We proposed
to add a new paragraph (a)(2)(v) to
§ 405.1875, which would provide that if
the Administrator reviews a Board
hearing decision, or the jurisdictional
component of a Board EJR decision
where EJR is granted, regarding a

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specific item, the Administrator’s
review of such a hearing decision or
such an EJR decision, as applicable, will
include, and any decision issued by the
Administrator under § 405.1875(e) of
the regulations will address, the Board’s
specific findings of fact and conclusions
of law in such hearing decision or EJR
decision (as prescribed in proposed
§ 405.1873(b) and (d)) on the question of
whether the provider’s cost report
included an appropriate claim for the
specific item under appeal (as
prescribed in § 413.24(j)). We explained
that this proposed revision to
§ 405.1875(a)(2) is an important
additional safeguard against piecemeal
proceedings in the administrative
appeals process and potentially before a
Federal court. As explained above with
respect to proposed § 405.1873(d)(1), if
the Board elects to issue a hearing
decision that also includes factual
findings and legal conclusions about
whether the other payment
requirements for the specific item were
satisfied (in addition to the Board’s
findings and conclusions about whether
there was an appropriate cost report
claim for the item), all of the payment
requirements for the specific item
would be presented in one Board
hearing decision for purposes of any
review by the Administrator (under
proposed § 405.1875(a)(2)(v)) and a
Federal court. Moreover, for the specific
reasons set forth above regarding
proposed § 405.1873(d)(2), our proposal
to require that the Board’s factual
findings and legal conclusions about
whether there was an appropriate cost
report claim for the item be included in
an EJR decision where EJR is granted
would also minimize or eliminate
piecemeal proceedings before the Board
and, given the proposed addition of
§ 405.1875(a)(2)(v), before the
Administrator of CMS and a Federal
court.
Second, existing § 405.1875(a)
requires the Board to promptly send
copies of hearing decisions and EJR
decisions to the Office of the Attorney
Advisor. Although the Board often
(perhaps typically) sends copies of
dismissal decisions to the Office of the
Attorney Advisor, the Board is not
required to so. We proposed to amend
the last sentence of paragraph (a) of
§ 405.1875 by requiring the Board to
promptly send copies of dismissal
decisions to the Office of the Attorney
Advisor. We stated that this proposed
revision will facilitate the
Administrator’s exercise of his
discretion under § 405.1875(a)(2)(ii) as
to whether to review specific Board
dismissal decisions. Also, given our

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proposals to eliminate the Board
jurisdiction requirement of an
appropriate cost report claim (in current
§§ 405.1835(a)(1) and 405.1840(b)(3))
and to add procedures for Board review
of compliance with the substantive
reimbursement requirement of an
appropriate cost report claim (in new
§ 405.1873)), we stated that our further
proposal to require the Board to
promptly send copies of dismissal
decisions to the Office of the Attorney
Advisor will enhance the
Administrator’s ability to ensure full
and appropriate implementation of our
proposed revisions to the Board appeals
regulations.
We did not receive any public
comments on our proposed revisions to
§ 405.1875. Accordingly, we are
finalizing our proposed revisions to
§ 405.1875 without modification.
4. Conforming Changes to the Board
Appeals Regulations and Corresponding
Revisions to the Contractor Hearing
Regulations
a. Technical Corrections to 42 CFR Part
405, Subpart R and All Subparts of 42
CFR Part 413
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28216 through
28217), we proposed a number of
technical revisions and conforming
changes to various provisions in part
405, subpart R and part 413. We
proposed a general technical revision of
certain terminology that recurs
throughout 42 CFR part 405 subpart R
and all subparts of 42 CFR part 413.
Specifically, we proposed to conform
the terminology in 42 CFR part 405
subpart R and all subparts of 42 CFR
part 413, by replacing the term
‘‘intermediary’’ and its various
permutations with the term ‘‘contractor’’
and its own permutations, in
accordance with sections 1816, 1874A,
and 1878 of the Act. We did not receive
any public comments on this proposal.
Accordingly, we adopted this proposal
as final in the FY 2015 IPPS/LTCH PPS
final rule (79 FR 50199 and 50351).
b. Technical Corrections and
Conforming Changes to §§ 405.1801 and
405.1803
In accordance with the abovedescribed general technical revision
proposal (that is, to replace the term
‘‘intermediary’’ and its various
permutations with the term ‘‘contractor’’
and its own permutations throughout 42
CFR part 405 subpart R and all subparts
of 42 CFR part 413), we specifically
proposed (79 FR 28216) to replace the
term ‘‘intermediary determination’’ in
§ 405.1801(a) with the term ‘‘contractor

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70577

determination.’’ As a result of our
ensuing adoption in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50199 and
50351) of the above-described general
technical revision in terminology, the
term ‘‘intermediary determination’’ has
been replaced by the term ‘‘contractor
determination’’ in both § 405.1801(a)
and § 405.1803(a).
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28216), we also
proposed to revise the definition of
‘‘intermediary determination’’ (now
called ‘‘contractor determination’’) in
§ 405.1801(a), to clarify that such
contractor determinations are final as
set forth in section 1878(a) of the Act.
Moreover, we proposed to revise the
cross-reference in § 405.1801(b), from
the existing § 413.24(f) to § 413.24
generally, a revision that we believe is
appropriate due to the proposed
addition of paragraph (j) to § 413.24. We
also proposed to revise § 405.1803(a) to
refer to the final contractor (instead of
intermediary) determination as set forth
in § 405.1801(a).
We did not receive any public
comments on any of the abovedescribed proposals. Accordingly, in
this final rule, we are adopting as final
the proposal to revise the definition of
‘‘intermediary determination’’ (now
called ‘‘contractor determination’’) in
§ 405.1801(a), to clarify that such
contractor determinations are final as
set forth in section 1878(a) of the Act.
Also, in this final rule, we are adopting
as final the proposal to revise
§ 405.1801(b) to include a crossreference to § 413.24 generally.
Moreover, in this final rule, we are
adopting as final the proposal to revise
§ 405.1803(a) to refer to the final
contractor determination as set forth in
§ 405.1801(a).
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28216 and 28295),
we proposed to revise the first crossreference in § 405.1803(a) from
paragraph (a)(3) of § 405.1835 to
proposed paragraph (a)(2)(ii) of
§ 405.1835. Although we did not receive
any public comments on this proposal,
we are not adopting the proposal in this
final rule.
As explained in section XVII.E.1.b. of
this final rule, we are not finalizing
proposed § 405.1835(a)(2)(ii), which
would have reiterated our longstanding
policy for determining whether a final
contractor determination was issued
timely for purposes of a Board appeal
based on section 1878(a)(1)(B) of the
Act. This policy is now stated
appropriately in § 405.1835(c), a
regulation we adopted in the technical
correction provisions of the FY 2015

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IPPS/LTCH PPS final rule (79 FR 50350
through 50351).
However, we are adopting in this final
rule a conforming amendment to
§ 405.1803(a). Specifically, we are
revising the first cross-reference in
current § 405.1803(a) from paragraph
(a)(3) of § 405.1835 to current paragraph
(c)(1) of § 405.1835.
c. Technical Corrections and
Conforming Changes to §§ 405.1811,
405.1813, and 405.1814
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28216), we also
proposed revisions to the existing
regulations for contractor hearing officer
appeals, which are similar to the
proposed revisions to the Board appeals
regulations. Specifically, we proposed
to eliminate an appropriate cost report
claim as a jurisdictional requirement for
contractor hearing officer appeals (in
existing §§ 405.1811(a)(1) and
405.1814(b)(3)). As discussed in the
next section, we also proposed to add a
new § 405.1832 that (like new
§ 405.1873 for Board appeals) would
detail the procedures for contractor
hearing officer review of compliance
with the substantive reimbursement
requirement of an appropriate cost
report claim (as prescribed in proposed
§ 413.24(j)). In addition, we proposed a
technical revision to the existing crossreferences in § 405.1813(a) and (b), in
order to reflect the proposed revisions to
§ 405.1811. As explained in the
proposed rule, the above-described
revisions to the regulations for
contractor hearing officer appeals
comport with our usual practice of
adopting similar regulations for both
Board appeals and for contractor
hearing officer appeals unless there is a
sufficient reason to do otherwise.
We did not receive any public
comments on these technical correction
proposals to the existing regulations for
contractor hearing officer appeals. In
this final rule, we are revising the
contractor hearing provisions of
§§ 405.1811 and 405.1814 to track very
closely the revisions we are adopting (in
section XVII.E.1. of this final rule) to the
Board hearing provisions of §§ 405.1835
and 405.1840. Accordingly, we are
adopting our proposal to eliminate our
interpretation (in §§ 405.1811(a)(1) and
405.1814(b)(3)) that a provider must
make an appropriate cost report claim
for an item in order to meet the
dissatisfaction requirement for
contractor hearing officer jurisdiction
over appeals of a timely final contractor
determination or Secretary
determination. More specifically, we are
adopting technical revisions to the
proposed introductory text for

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paragraph (a) of § 405.1811 and to
proposed paragraph (a)(1) of § 405.1811
for contractor hearing officer appeals
that will closely track our technical
revisions to the proposed introductory
text for paragraph (a) of § 405.1835 and
to proposed paragraph (a)(1) of
§ 405.1835 for Board appeals. Also, as
with our adoption of the conforming
amendment in paragraph (a)(1)(i) of
§ 405.1835 for Board appeals, we are
adopting a very similar conforming
amendment in paragraph (a)(1)(i) of
§ 405.1811. As with the corresponding
technical revisions and conforming
changes in the proposed introductory
text for paragraph (a) of § 405.1835 and
to proposed paragraphs (a)(1) and
(a)(1)(i) of § 405.1835(a), these technical
revisions and conforming amendment to
§ 405.1811(a) will dispel potential
confusion about the dissatisfaction
jurisdictional requirement for contractor
hearing officer appeals of a timely final
contractor or Secretary determination.
In addition, we are finalizing without
modification our proposal to amend
§ 405.1814 by removing paragraph
(b)(3), just as we are removing paragraph
(b)(3) of § 405.1840 for Board appeals.
In this final rule, we are similarly
revising various other contractor hearing
officer regulations to track very closely
the revisions we are adopting (in section
XVII.E.1. of this final rule) to the Board
appeals regulations. We are not
adopting the proposed revisions (79 FR
28295) to either of the other two
requirements for contractor hearing
officer jurisdiction over appeals of a
timely final contractor or Secretary
determination. Our adoption of the
above-described technical revision to
proposed paragraph (a)(1) of § 405.1811
obviates any need to renumber the
amount in controversy jurisdictional
requirement in current paragraph (a)(2)
or the timely filing jurisdictional
requirement in current paragraph (a)(3).
The proposed revisions to the text of
current paragraph (a)(3) of § 405.1811
are not necessary because the essential
provisions of such proposal are now
contained appropriately in
§ 405.1811(c), a regulation we adopted
in the technical correction provisions of
the FY 2015 IPPS/LTCH PPS final rule
(79 FR 50350 through 50351).
We are finalizing without
modification the proposed revisions (79
FR 28297) to paragraphs (b)(1), (b)(2)
introductory text, and (b)(2)(iii) of
§ 405.1811. Moreover, as with our
adoption of a technical revision to
current paragraph (b)(3) of § 405.1835,
we are adding the term ‘‘final’’ before
the phrase ‘‘contractor or Secretary
determination’’ in paragraph (b)(3) of
§ 405.1811.

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We also are adopting, in paragraphs
(e)(1) and (e)(2) of § 405.1811, the same
text that we proposed (79 FR 28295) as
revisions to paragraphs (c)(1) and (c)(2)
of § 405.1811. When the proposed rule
was published, paragraph (c) of
§ 405.1811 addressed the addition of
issues to a pending contractor hearing
officer appeal. However, paragraph (c)
was later redesignated as paragraph (e)
of § 405.1811 in the technical correction
provisions of the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50349 through
50350). Accordingly, we are adopting
the text of the proposed amendments (to
paragraphs (c)(1) and (c)(2) of
§ 405.1811) in paragraphs (e)(1) and
(e)(2) of § 405.1811 which now
addresses the addition of issues to a
pending contractor hearing officer
appeal. However, we are not finalizing
the proposed revision (79 FR 28295) to
paragraph (c)(3) of § 405.1811, because
the essential provisions of such
proposal are now contained
appropriately in § 405.1811(e)(3), a
regulation we adopted in the technical
correction provisions of the FY 2015
IPPS/LTCH PPS final rule (79 FR 50349
through 50350).
d. Addition of New § 405.1832
In the FY 2015 IPPS/LTCH PPS
proposed rule, we proposed to add new
§ 405.1832, which would detail the
procedures for contractor hearing officer
review of compliance with the
substantive reimbursement requirement
of an appropriate cost report claim (as
prescribed in proposed § 413.24(j)). We
did not receive any public comments on
this proposal. Accordingly, in order to
maintain uniformity with our adoption
in new § 405.1873 of similar procedures
for Board appeals, we are adopting in
this final rule proposed new § 405.1832
as final without modification.
e. Revisions to § 405.1834
In the FY 2015 IPPS/LTCH PPS
proposed rule, we proposed to amend
current § 405.1834, which provides for
review of contractor hearing officer
decisions by the CMS reviewing official.
Specifically, in accordance with
proposed new paragraph (b)(2)(iii) of
§ 405.1834, the CMS reviewing official
will review, and address in any
decision, the specific factual findings
and legal conclusions of contractor
hearing officers regarding compliance
with the substantive requirement of an
appropriate cost report claim (as
prescribed in proposed § 413.24(j)), as
part of the CMS reviewing official’s
review of a contractor hearing decision.
We did not receive any public
comments on this proposal.
Accordingly, in this final rule, we are

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adopting as final the proposed addition
of new paragraph (b)(2)(iii) to
§ 405.1834.
f. Technical Corrections and
Conforming Changes to §§ 405.1836,
405.1837, and 405.1839
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28217 and 28297),
we proposed technical corrections and
conforming changes to the Board
appeals regulations at §§ 405.1836,
405.1837, and 405.1839. We explained
that these technical revisions are
necessary and appropriate to maintain
consistency with our principal
proposals (discussed above) to add the
substantive reimbursement requirement
of an appropriate cost report claim (in
proposed § 413.24(j)); eliminate the
Board jurisdiction requirement of an
appropriate cost report claim (in
existing §§ 405.1835(a)(1) and
405.1840(b)(3)); and add procedures for
Board review of compliance with the
substantive reimbursement requirement
of an appropriate cost report claim (in
proposed § 405.1873)).
We did not receive any public
comments on the proposed revisions to
§§ 405.1836 and 405.1839, which would
revise the cross-references in each of
these rules to § 405.1835. However, we
are not adopting either of those
proposals. As explained above, we are
adopting a technical revision and a
conforming change to existing
paragraph (a)(1) of § 405.1835, in order
to avoid any potential confusion about
the dissatisfaction jurisdictional
requirement for Board appeals of a
timely final contractor or Secretary
determination. Because we are revising
the provider dissatisfaction requirement
in existing paragraph (a)(1) of
§ 405.1835, we are not adopting the
proposed renumbering (79 FR 28297) of
the amount in controversy and timely
filing requirements in existing
paragraphs (a)(2) and (a)(3),
respectively. As a result, it is not
necessary to revise the existing crossreferences in § 405.1836(a) and (b) to the
timely filing provisions of
§ 405.1835(a)(3), and thus we are not
adopting the proposed revisions to
§ 405.1836(a) and (b).
For the same reason, it is not
necessary to revise the cross-references
in § 405.1839(a)(1) to the amount in
controversy provisions in existing
§ 405.1835(a)(2) (for Board appeals) and
§ 405.1811(a)(2) (for contractor hearing
officer appeals).
However, we believe other technical
revisions to the cross-references in
§§ 405.1836 and 405.1839 are necessary.
As explained in section XVII.B. of this
final rule, the FY 2015 IPPS/LTCH PPS

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final rule included a technical
correction to the Board appeals
regulations (79 FR 50199 and 50351)
that eliminated the jurisdictional
requirement of provider dissatisfaction
for appeals based on untimely final
contractor or Secretary determinations
pursuant to section 1878(a)(1)(B) of the
Act. We added paragraphs (c) and (d) to
§ 405.1835, which govern Board appeals
based on untimely final contractor or
Secretary determinations. The good
cause extensions provisions of
§ 405.1836 and the amount in
controversy provisions of § 405.1839
apply to Board appeals based on
untimely final contractor or Secretary
determinations (under paragraphs (c)
and (d) of § 405.1835) as well as appeals
of timely final contractor or Secretary
determinations (under paragraphs (a)
and (b) of § 405.1835). Accordingly, we
believe it is necessary to add, in
§ 405.1836(a) and (b), cross-references to
the timely filing provisions of
§ 405.1835(c)(2), in addition to the
corresponding cross-references to
§ 405.1835(a)(3). For the same reason,
we believe it is necessary to add, in
§ 405.1839(a)(1), cross-references to the
amount in controversy provisions in
existing § 405.1835(c)(3) (for Board
appeals) and § 405.1811(c)(3) (for
contractor hearing officer appeals), in
addition to the corresponding crossreferences to § 405.1835(a)(2) and
§ 405.1811(a)(2).
In the FY 2015 IPPS/LTCH PPS
proposed rule (79 FR 28217 and 28297
through 28298), we also proposed
technical corrections and conforming
changes to the Board group appeal
provisions of § 405.1837.
Comment: Two commenters
questioned the proposed revision to
paragraph (a)(1) of § 405.1837, which
states that, in order to participate in a
group appeal, a provider must satisfy
individually the requirements for a
Board hearing under § 405.1835(a)(1).
The commenters noted that, under the
proposed revisions to § 405.1835, the
$10,000 amount in controversy
requirement for a single provider appeal
would be renumbered as paragraph
(a)(1) (instead of its existing designation
as paragraph (a)(2)). However, section
1878(b) of the Act states that the amount
in controversy requirement for a single
provider appeal of $10,000 or more does
not apply to group appeals; instead, the
amount in controversy requirement for
a group appeal is $50,000 or more in the
aggregate.
Response: We agree that, under
section 1878(b) of the Act, the amount
in controversy requirement for a single
provider appeal of $10,000 or more does
not apply to each group member

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individually; rather, the amount in
controversy requirement for a group
appeal is $50,000 or more in the
aggregate. Therefore, in this final rule,
we are not adopting the proposed
revision to paragraph (a)(1) of
§ 405.1837. Moreover, we believe that
existing paragraphs (a)(1) and (a)(3) of
§ 405.1837 track the amount in
controversy provisions for group
appeals in section 1878(b) of the Act,
and therefore no revision to paragraphs
(a)(1) and (a)(3) of § 405.1837(a) is
necessary.
However, we believe a technical
conforming revision to the introductory
text of paragraph (a) of § 405.1837 (for
group appeals) is warranted in order to
conform this provision to our technical
revision to the proposed introductory
text of paragraph (a) of § 405.1835 (for
single provider appeals). As explained
above in section XVII.E.1. of this final
rule, we are revising the proposed
introductory text of paragraph (a) of
§ 405.1835 (79 FR 28297) by eliminating
the reference to items ‘‘claimed in its
cost report,’’ a technical revision that
further clarifies our elimination of an
appropriate cost report claim as a
requirement for Board jurisdiction. We
are making a technical conforming
revision to the introductory text of
paragraph (a) of § 405.1837 by
eliminating its similar reference to items
‘‘claimed for a cost reporting period,’’
which we believe is necessary to further
clarify that our elimination of an
appropriate cost report claim as a
requirement for Board jurisdiction
applies to group appeals just like single
provider appeals. Under paragraph
(a)(1) of § 405.1837, the jurisdictional
requirements for a group appeal are the
same as the jurisdictional requirements
for a single provider appeal, except for
the different amount in controversy
requirements for the two types of Board
appeals. Thus, our technical revision to
the proposed text of paragraph (a)(1) of
§ 405.1835(a), which will now state that
the provider has a right to a Board
hearing with respect to a final contractor
or Secretary determination if the
provider is dissatisfied with the
contractor’s final determination of the
total amount of reimbursement due the
provider, applies to group appeals as
with single provider appeals. We
believe that conforming the introductory
text of paragraph (a) of § 405.1837 (for
group appeals) to the introductory text
of paragraph (a) of § 405.1835 (for single
provider appeals) will further clarify
that our elimination of an appropriate
cost report claim as a Board jurisdiction
requirement applies to group appeals as
well as single provider appeals.

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In addition, we believe a technical
revision to a cross-reference in the text
of proposed paragraphs (a)(1) and (e)(4)
of § 405.1837 is necessary. As explained
in section XVII.B. of this final rule, the
FY 2015 IPPS/LTCH PPS final rule
included a technical correction to the
Board appeals regulations (79 FR 50199
and 50351) that eliminated the
jurisdictional requirement of provider
dissatisfaction for appeals based on
untimely final contractor or Secretary
determinations pursuant to section
1878(a)(1)(B) of the Act. We added
paragraphs (c) and (d) to § 405.1835,
which govern Board appeals based on
untimely final contractor or Secretary
determinations. However, the group
appeal provisions of § 405.1837 apply to
Board appeals based on untimely final
contractor or Secretary determinations
(under paragraphs (c) and (d) of
§ 405.1835) as well as appeals of timely
final contractor or Secretary
determinations (under paragraphs (a)
and (b) of § 405.1835). Accordingly, in
this final rule, we are adding, in
paragraphs (a)(1) and (e)(4) of
§ 405.1837, a cross-reference to
§ 405.1835(c), in addition to the current
cross-reference to § 405.1835(a).

jstallworth on DSK7TPTVN1PROD with RULES

F. Collection of Information
Requirements
This document does not impose
information collection requirements,
that is, reporting, recordkeeping or
third-party disclosure requirements.
Consequently, there is no need for
review by the Office of Management and
Budget under the authority of the
Paperwork Reduction Act of 1995 (44
U.S.C 3501 through 3521).
G. Impact of Requiring Appropriate
Claims in Provider Cost Reports and
Eliminating That Requirement for
Administrative Appeals by Providers
In section VIII. of the preamble to the
FY 2015 IPPS/LTCH PPS proposed rule
(79 FR 28206 through 28217), we
discussed our proposal to revise the
Medicare cost report regulations by
requiring a provider to include an
appropriate claim for an item in its cost
report, which would be a general
substantive requirement for payment in
the Medicare contractor’s final
determination and in any decision by a
reviewing entity in an administrative
appeal. We also discussed our proposal
to revise the Medicare provider appeals
regulations by eliminating the
requirement of an appropriate cost
report claim in order to meet the
dissatisfaction requirement for Provider
Reimbursement Review Board
jurisdiction. In Appendix A of the FY
2015 IPPS/LTCH PPS proposed rule (79

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FR 28369), we set out our analyses of
the impact of these proposals.
As discussed in section XVII.D. and
XVII.E. of this final rule, we are
finalizing our proposals to revise the
Medicare cost report regulations by
requiring a provider to include an
appropriate claim for an item in its cost
report, and to eliminate an appropriate
cost report claim as a requirement for
Provider Reimbursement Review Board
jurisdiction. There is no impact to the
provider resulting from these finalized
revisions.

APC numbers to the proposed new CY
2016 APC numbers (80 FR 39354).
However, we now do not believe that
Addenda O and Q are necessary for this
CY 2016 OPPS/ASC final rule with
comment period. Therefore, we are not
including them in the files available on
the CMS Web site for this final rule with
comment period.

XVIII. Files Available to the Public via
the Internet
The Addenda to the OPPS/ASC
proposed rules and the final rules with
comment period are published and
available only via the Internet on the
CMS Web site. To view the Addenda to
this final rule with comment period
pertaining to CY 2016 payments under
the OPPS, we refer readers to the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/
Hospital-Outpatient-Regulations-andNotices.html; select ‘‘1633–FC’’ from the
list of regulations. All OPPS Addenda to
this final rule with comment period are
contained in the zipped folder entitled
‘‘2016 OPPS 1633–FC Addenda’’ at the
bottom of the page. To view the
Addenda to this final rule with
comment period pertaining to the CY
2016 payments under the ASC payment
system, we refer readers to the CMS
Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/ASCRegulations-and-Notices.html; select
‘‘1633–FC’’ from the list of regulations.
All ASC Addenda to this final rule with
comment period are contained in the
zipped folders entitled ‘‘Addendum AA,
BB, DD1, DD2, and EE’’.
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39253, 39211, and 39354),
we proposed to add new Addenda as
supporting documents for the ease of
readers in comprehending the changes
we were proposing: Addendum O,
which listed the new and revised CY
2016 Category I and III CPT codes and
their proposed assignment to new
comment indicator ‘‘NP’’ to indicate
that the code is new for the next
calendar year or the code is an existing
code with substantial revision to its
code descriptor in the next calendar
year as compared to current calendar
year with a proposed APC assignment
and that comments would be accepted
on the proposed APC assignment and
status indicator (80 FR 39253); and
Addendum Q, which included a
crosswalk from the existing CY 2015

Under the Paperwork Reduction Act
of 1995, we are required to provide 60day 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 2016 OPPS/ASC proposed
rule (80 FR 39355 through 39358), we
solicited public comments on each of
the issues outlined above for the
information collection requirements
discussed below.

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XIX. Collection of Information
Requirements
A. Legislative Requirements for
Solicitation of Comments

B. Associated Information Collections
Not Specified in Regulatory Text
In the CY 2016 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 proposed
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 (76 FR
74451). We refer readers to the CY 2011
OPPS/ASC final rule with comment
period (75 FR 72111 through 72114), the

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jstallworth on DSK7TPTVN1PROD with RULES

CY 2012 OPPS/ASC final rule with
comment period (76 FR 74549 through
74554), the CY 2013 OPPS/ASC final
rule with comment period (77 FR 68527
through 68532), the CY 2014 OPPS/ASC
final rule with comment period (78 FR
75170 through 75172), and the CY 2015
OPPS/ASC final rule with comment
period (79 FR 67012 through 67015) for
detailed discussions of Hospital OQR
Program information collection
requirements we have previously
finalized. The information collection
requirements associated with the
Hospital OQR Program are currently
approved under OMB control number
0938–1009.
Below we discuss only the changes in
burden resulting from the provisions in
this final rule with comment period.
a. Estimated Burden of Hospital OQR
Program Finalized Policies for the CY
2017 Payment Determination and
Subsequent Years
In section XIII. of this final rule with
comment period, we are finalizing the
adoption of several changes to the
Hospital OQR Program for the CY 2017
payment determination and subsequent
years. Specifically, we are finalizing our
proposals to: (1) Remove the OP–15: Use
of Brain Computed Tomography (CT) in
the Emergency Department for
Atraumatic Headache measure, effective
January 1, 2016 (no data for this
measure will be used for any payment
determination); (2) change the deadline
for withdrawing from the Hospital OQR
Program to August 31 and revise 42 CFR
419.46(b) to reflect this change; (3) shift
the quarters on which we base payment
determinations; (4) change the data
submission timeframe for measures
submitted via the CMS Web-based tool
(QualityNet Web site) to January 1
through May 15; (5) fix a typographical
error to correct the name of our
extension and exception policy to
extension and exemption policy; (6)
change the deadline for submitting a
reconsideration request to the first
business day on or after March 17 of the
affected payment year and make a
conforming change to 42 CFR
419.46(f)(1) to reflect this change; and
(7) amend 42 CFR 419.46(f)(1) and 42
CFR 419.46(e)(2) to replace the term
‘‘fiscal year’’ with the term ‘‘calendar
year’’. While there is burden associated
with filing a reconsideration request,
section 3518(c)(1)(B) of the Paperwork
Reduction Act of 1995 (44 U.S.C.
3518(c)(1)(B)) excludes collection
activities during the conduct of
administrative actions such as
reconsiderations. We do not believe that
any of these changes will increase
burden, as further discussed below.

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In addition, we are finalizing
conforming changes to our validation
scoring process to reflect proposed
changes in the APU determination
timeframes. For the CY 2017 payment
determination, we are finalizing that
validation will be based on three
quarters of data (quarter 2, quarter 3,
and quarter 4 of 2015). For this
transition year, we estimate that the
burden associated with validation
reporting will be reduced by 25 percent
because hospitals will submit validation
data for three quarters instead of four.
(1) Measure Removed for the CY 2017
Payment Determination and Subsequent
Years
As discussed in section XIII.B.5. of
this final rule with comment period, we
are finalizing our proposal to remove
the OP–15: Use of Brain Computed
Tomography (CT) in the Emergency
Department for Atraumatic Headache
measure beginning with the CY 2017
payment determination. OP–15 is a
claims-based measure. As we noted in
the CY 2013 OPPS/ASC final rule with
comment period (77 FR 68530), we
calculate claims-based measures using
Medicare FFS claims data that do not
require additional hospital data
submissions. In addition, public
reporting of OP–15 has been deferred
since the CY 2013 OPPS/ASC final rule
with comment period (76 FR 74456 and
http://www.qualitynet.org/dcs/
ContentServer?c=
Page&pagename=QnetPublic%
2FPage%2FSpecsManualTemplate&
cid=1228774991461 under 1.6—Imaging
Efficiency, ‘‘OP–15 Use of Brain
Computed Tomography (CT) in the
Emergency Department for Atraumatic
Headache’’). Therefore, we estimate that
there will be no change in burden based
on finalizing the removal of this
measure.
(2) Changes to Reporting Requirements
for the CY 2017 Payment Determination
and Subsequent Years
In section XIII.E. of this final rule
with comment period, we are finalizing
the adoption of several changes to the
reporting requirements for the Hospital
OQR Program. Specifically, we are
finalizing our proposals to: (1) Change
the deadline for withdrawing from the
program to up to and including August
31 and revise 42 CFR 419.46(b) to reflect
this change; (2) shift the quarters on
which we base payment determinations;
(3) change the data submission
timeframe for measures submitted via
the CMS Web-based tool (QualityNet
Web site) to January 1 through May 15;
(4) fix a typographical error to correct
the name our extension and exception

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70581

policy to extension and exemption
policy; and (5) change the deadline for
submitting a reconsideration request to
the first business day on or after March
17 of the affected payment year and
make a conforming change to 42 CFR
419.46(f)(1) to reflect this change.
Although we are finalizing the adoption
of our proposals to change deadlines,
these date changes do not change the
amount of time required to enter data.
Therefore, the hourly burden and
resultant financial impact will remain
the same.
In addition, we are finalizing the
adoption of conforming changes to our
validation scoring process to reflect
changes in the APU determination
timeframes. For prior payment
determinations, we sampled 500
hospitals for validation and estimated
that it would take each hospital 12
hours to comply with the data
submission requirements for four
quarters. For the CY 2017 payment
determination, we are transitioning to a
new payment determination timeframe;
as a result, only three quarters of data
will be used for determining the CY
2017 payment determination, as
opposed to four quarters as previously
required. Specifically, for the CY 2017
payment determination, validation is
based on data from validation quarter 2,
validation quarter 3, and validation
quarter 4 of 2015. Therefore, we
estimate that data submission for three
quarters reduces the number of hours
required by 25 percent (from 12 hours
to 9 hours per hospital). Consistent with
prior years (79 FR 67013), we estimate
that a hospital pays an individual
approximately $30 per hour to abstract
and submit these data. We estimate a
total burden of approximately 4,500
hours (500 hospitals × 9 hours/hospital)
and a total financial impact of $135,000
($30/hour × 4,500 hours) for the CY
2017 payment determination. This is a
reduction of 1,500 hours and $45,000
across all hospitals from last year’s
estimate attributable to changes in our
validation scoring process.
b. Estimated Burden of Hospital OQR
Program Finalized Policies for the CY
2018 Payment Determination and
Subsequent Years
For the CY 2018 payment
determination and subsequent years, we
are finalizing the adoption of two new
proposals, with a modification to the
manner of data submission for one
proposal. First, in section XIII.B.6.a. of
this final rule with comment period, we
are finalizing the adoption of one new
measure for the CY 2018 payment
determination and subsequent years:
OP–33: External Beam Radiotherapy

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(EBRT) for Bone Metastases (NQF
#1822). In the CY 2016 OPPS/ASC
proposed rule (80 FR 39338), we
proposed that hospitals could either: (1)
Report aggregate-level data for OP–33
submitted via a CMS Web-based tool
(QualityNet Web site); or (2) submit an
aggregate data file for OP–33 through a
vendor (via the QualityNet
infrastructure). As we further explain in
section XIII.D.4.b. of this final rule with
comment period, we are finalizing only
one mode of data submission for this
measure: data for OP–33 may only be
submitted at an aggregate-level via a
CMS Web-based tool (QualityNet Web
site).
Consistent with prior years (78 FR
75171), we believe that submitting a
measure through a CMS Web-based tool
has two burden components: First, the
time required to abstract the measure
data; and second, the time required to
enter these data into a CMS Web-based
tool. In the CY 2015 OPPS/ASC final
rule with comment period (79 FR
67013), we estimated that it would take
hospitals approximately a total of 35
minutes to collect chart-abstracted data
for 12 Web-based measures. To calculate
the burden associated with a collecting
chart-abstracted data for a single Webbased measure, we divided the total
number of minutes previously estimated
(35 minutes) by the number of measures
(12 measures). Therefore, we estimated
the burden to collect chart-abstracted
data for a single Web-based measure to
be 2.92 minutes (or 0.049 hours.). Based
on our most recent data (Quarter 4
2013–Quarter 3 2014) for Hospital OQR
Program measures, we estimate that the
average hospital will submit 48 cases
per year for OP–33. Therefore, we
believe that the average hospital will
spend 2.352 hours (0.049 hours/
measure/case × 48 cases) chartabstracting data for this measure.
In addition, consistent with prior
years (78 FR 75171 through 75172), we
estimate that each participating hospital
will spend 10 minutes (0.167 hours) per
measure per year to collect and submit
the data via a CMS Web-based tool.
Therefore, we estimate that, in total, the
proposed measure will increase burden
by 2.519 hours (2.352 hours + 0.167
hours) per year. Consistent with prior
years (79 FR 67013), we believe that
approximately 3,300 hospitals will
participate in the Hospital OQR Program
for the CY 2018 payment determination.
Therefore, we estimate a total increase
in burden across all participating
hospitals of approximately 8,312.7
hours (2.519 hours/hospital × 3,300
hospitals) per year. Finally, consistent
with prior years (79 FR 67013), we
estimate that a hospital pays an

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individual approximately $30 per hour
to abstract and submit these data.
Therefore, we estimate a total financial
increase in burden to be $75.57 per
hospital (2.519 hours × $30/hour) or
$249,381 (8,312.7 hours × $30/hour)
across all participating hospitals as a
result of adopting OP–33 for the CY
2018 payment determination and
subsequent years.
Second, for the CY 2018 payment
determination and subsequent years, we
are finalizing that validation again be
based on four quarters of data. However,
those quarters are validation quarter 1,
validation quarter 2, validation quarter
3, and validation quarter 4. For payment
determinations prior to CY 2017, we
sampled 500 hospitals for validation
and estimated that it would take each
hospital 12 hours to comply with the
data submission requirements for four
quarters. Therefore, we estimate a total
burden of approximately 6,000 hours
(500 hospitals × 12 hours/hospital) and
a total financial impact of $180,000
($30/hour × 6,000 hours) in burden
associated with the data validation
process for the CY 2018 payment
determination and subsequent years.
This is an increase of 1,500 hours and
$45,000 across all hospitals from the CY
2017 estimate because we will be
sampling four quarters, as we had in
prior years, instead of three quarters.
Therefore, we estimate a total
financial increase in burden of $89.21
(2.97 hours × $30/hour) per hospital or
$294,390 (9,813 hours × $30/hour)
across all participating hospitals as a
result of the proposals that we are
finalizing for the CY 2018 payment
determination and subsequent years.
c. Estimated Burden of Hospital OQR
Program Finalized Policies for the CY
2019 Payment Determination and
Subsequent Years
We are not finalizing the adoption of
any new proposals for the CY 2019
payment determination and subsequent
years. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39330), we
proposed to add one new measure for
the CY 2019 payment determination and
subsequent years: OP–34: Emergency
Department Transfer Communication
(EDTC) (NQF #0291). As stated in
section XIII.B.6.b. of this final rule with
comment period, we are not finalizing
that proposed measure. Thus, because
we are not finalizing any changes
specifically for the CY 2019 payment
determination and subsequent years, we
expect the burden to be unchanged for
the CY 2019 payment determination as
compared to the CY 2018 payment
determination and subsequent years as
discussed above.

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We invited public comment on the
burden associated with the proposed
information collection requirements
which we are finalizing. We did not
receive any public comments on these
requirements.
2. ASCQR Program Requirements
a. Background
We refer readers to the CY 2012
OPPS/ASC final rule with comment
period (76 FR 74554), the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53672), the
CY 2013 OPPS/ASC final rule with
comment period (77 FR 68532 through
68533), the CY 2014 OPPS/ASC final
rule with comment period (78 FR 75172
through 75174), and the CY 2015 OPPS/
ASC final rule with comment period (79
FR 67015 through 67016) for detailed
discussions of the ASCQR Program
information collection requirements we
have previously finalized.
b. Policy Proposals Finalized Effective
Beginning With the CY 2017 Payment
Determination
We are finalizing our proposals to
codify a number of existing policies
related to program participation and
withdrawal, data collection and
submission, public reporting, retention
and removal of quality measures,
measures maintenance, extraordinary
circumstances extensions or waivers,
and the reconsideration process. We are
codifying only existing policies, with
the exception of the finalized policy
proposals discussed below. For existing
policies for which we are finalizing
codification, we do not anticipate any
additional burden to ASCs affecting the
CY 2017 payment determination or
subsequent years because there are no
changes to these policies.
We are not finalizing our proposal to
implement a submission deadline with
an end date of May 15 for all data
submitted via a Web-based tool
beginning with the CY 2017 payment
determination. Instead, we are
maintaining the previously finalized
August 15 submission deadline for the
following measures: ASC–6: Safe
Surgery Checklist Use; ASC–7: ASC
Facility Volume Data on Selected ASC
Surgical Procedures; ASC–9:
Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658); ASC–10:
Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous PolypsAvoidance of Inappropriate Use (NQF
#0659); and ASC–11: Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
Cataract Surgery (NQF #1536). We note
that ASC–8: Influenza Vaccination
Coverage among Healthcare Personnel
(NQF #0431) will continue under the
May 15 submission deadline previously
finalized for this measure. We do not
anticipate additional burden because
the data collection and submission
requirements have not changed.
We are finalizing our proposal,
beginning with the CY 2017 payment
determination, to not consider IHS
hospital outpatient departments that bill
as ASCs to be ASCs for purposes of the
ASCQR Program. This final policy will
eliminate the burden associated with
participation in the ASCQR Program for
six IHS hospital outpatient departments
that currently are required to participate
in the ASCQR Program or be subject to
a possible reduction in payment.
We are finalizing our proposal to
make a minor change to the
reconsideration request deadline to
ensure our deadline for these requests
will always fall on a business day
effective beginning with the CY 2017
payment determination. We do not
anticipate that there will be any
additional burden because the materials
to be submitted are unchanged and the
deadline does not result in reduced time
to submit a reconsideration request.
We are finalizing our proposal to
publicly display data by the NPI when
the data are submitted by the NPI and
to publicly display data by the CCN
when the data are submitted by the
CCN, but are not finalizing our proposal
to attribute data submitted by the CCN
to all NPIs associated with the CCN. We
are codifying this new revised policy at
42 CFR 416.315. Again, we do not
anticipate any additional burden
because this final policy does not alter
the administrative or reporting
requirements governing an ASC’s
participation in the ASCQR Program.
Finally, we are finalizing our
proposal, for claims-based measures not
using QDCs, to use claims for services
furnished in each calendar year that
have been paid by the MAC by April 30
of the following year of the ending data
collection time period in the measure
calculation for the payment
determination year beginning with the
CY 2018 payment determination. We do
not anticipate any additional burden to
ASCs based on this final policy affecting
the CY 2017 payment determination or
subsequent years because it does not
alter the administrative or reporting
requirements governing an ASC’s
participation in the ASCQR Program.

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c. Claims-Based Measures for the CY
2018 Payment Determination and
Subsequent Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68532), the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75172 through 75174),
and the CY 2015 OPPS/ASC final rule
with comment period (79 FR 67015
through 67016) for detailed discussions
of the information collection
requirements for the six previously
adopted claims-based ASCQR Program
measures (five outcome measures and
one process measure). The six
previously adopted measures are: ASC–
1: Patient Burn (NQF #0263); ASC–2:
Patient Fall (NQF #0266); ASC–3:
Wrong Site, Wrong Side, Wrong Patient,
Wrong Procedure, Wrong Implant (NQF
#0267); ASC–4: Hospital Transfer/
Admission (NQF #0265); ASC–5:
Prophylactic Intravenous (IV) Antibiotic
Timing; and ASC–12: Facility 7-Day
Risk-Standardized Hospital Visit Rate
after Outpatient Colonoscopy. The first
five of these measures require the
reporting of Quality Data Codes (QDCs),
but the sixth measure, ASC–12, while
utilizing data from paid Medicare FFS
claims, does not require ASCs to submit
QDCs. For the reasons we discussed in
the CY 2014 OPPS/ASC final rule with
comment period (78 FR 75172 through
75173) and the CY 2015 OPPS/ASC
final rule with comment period (79 FR
67016), we estimate that the reporting
burden to report QDCs for the five
claims-based outcome measures that
utilize QDCs will be nominal. We do not
anticipate that ASC–12 will create any
additional burden to ASCs for the CY
2018 payment determination and for
subsequent years because no additional
data are required from ASCs; only
information necessary for Medicare
payment is utilized for calculating this
measure.
d. Web-Based Measures for the CY 2018
Payment Determination and Subsequent
Years
We refer readers to the CY 2013
OPPS/ASC final rule with comment
period (77 FR 68532) and the CY 2014
OPPS/ASC final rule with comment
period (78 FR 75172 through 75174) for
detailed discussions of the information
collection requirements for the five
previously-adopted Web-based
measures, excluding ASC–11, which we
proposed for voluntary inclusion in the
ASCQR Program for the CY 2017
payment determination and subsequent
years. The five previously adopted
measures are: ASC–6: Safe Surgery
Checklist Use; ASC–7: ASC Facility

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Volume Data on Selected ASC Surgical
Procedures; ASC–8: Influenza
Vaccination Coverage Among
Healthcare Personnel (NQF #0431);
ASC–9: Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658); and ASC–10:
Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous PolypsAvoidance of Inappropriate Use (NQF
#0659).
For the reasons we discussed in the
CY 2014 OPPS/ASC final rule with
comment period (78 FR 75173 through
75174), we estimate that the reporting
burden for the ASC–6: Safe Surgery
Checklist Use and the ASC–7: ASC
Facility Volume measures will be 1,757
hours (5,260 ASCs × 2 measures × 0.167
hours per ASC) and $52,710 (1,757
hours × $30.00 per hour) annually for
the CY 2018 payment determination and
for subsequent years.
For the reasons discussed in the CY
2014 OPPS/ASC final rule with
comment period (78 FR 75173 through
75174), we estimate that the reporting
burden for the ASC–8: Influenza
Vaccination Coverage Among
Healthcare Personnel (NQF #0431)
measure will be 18,005 hours (5,260
ASCs × 0.083 hours per facility = 437
hours for NHSN registration, and 5,260
ASCs × 0.167 hours per response for 20
workers per facility = 17,568 hours for
data submission) and $540,150 (18,005
hours × $30.00 per hour) annually for
the CY 2018 payment determination and
for subsequent years.
For the reasons discussed in the CY
2014 OPPS/ASC final rule with
comment period (78 FR 75173 through
75174), we estimate that the reporting
burden for ASCs with a single case per
ASC for the chart-abstracted ASC–9:
Endoscopy/Polyp Surveillance:
Appropriate Follow-Up Interval for
Normal Colonoscopy in Average Risk
Patients (NQF #0658) and ASC–10:
Endoscopy/Polyp Surveillance:
Colonoscopy Interval for Patients with a
History of Adenomatous PolypsAvoidance of Inappropriate Use (NQF
#0659) measures will be 3,067 hours
(5,260 ASCs × 0.583 hours per case per
ASC) and $92,010 (3,067 hours × $30.00
per hour) annually for the CY 2018
payment determination and for
subsequent years.
In the CY 2015 OPPS/ASC final rule
with comment period, we finalized our
proposal that data collection and
submission be voluntary for the CY
2017 payment determination and
subsequent years for ASC–11: Cataracts:
Improvement in Patient’s Visual
Function within 90 Days Following

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Cataract Surgery (NQF #1536); that is,
we will not subject ASCs to a payment
reduction with respect to this measure
during the period of voluntary reporting
(79 FR 66984 through 66985). For the
reasons discussed in the CY 2015 OPPS/
ASC final rule with comment period (79
FR 67016), we estimate the total burden
for this measure for ASCs with a single
case per ASC to be 613 hours (1,052
ASCs × 0.583 hours per case per ASC)
and $18,390 (613 hours × $30.00 per
hour) annually for the CY 2018 payment
determination and subsequent years.
e. Extraordinary Circumstances
Extension or Exemptions Process
For a complete discussion of our
‘‘Extraordinary Circumstances
Extension or Waiver’’ process under the
ASCQR Program, which we retitled as
the ‘‘Extraordinary Circumstances
Extensions or Exemptions’’ process in
the CY 2015 OPPS/ASC final rule with
comment period (79 FR 66987), we refer
readers to the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53642 through 53643)
and the CY 2014 OPPS/ASC final rule
with comment period (78 FR 75140). In
the CY 2016 OPPS/ASC proposed rule
(80 FR 39347), we did not propose to
make any changes to this process.

jstallworth on DSK7TPTVN1PROD with RULES

f. Reconsideration
In section XIV.D.8. of this final rule
with comment period, we are finalizing
our proposal to make a minor change to
the reconsideration request deadline to
ensure our deadline for these requests
will always fall on a business day. We
do not anticipate that there will be any
additional burden because the materials
to be submitted are unchanged and the
deadline does not result in reduced time
to submit a reconsideration request. We
also are finalizing our proposal to codify
our reconsideration request process at
42 CFR 416.330.
While there is burden associated with
filing a reconsideration request, section
3518(c)(1)(B) of the Paperwork
Reduction Act of 1995 (44 U.S.C.
3518(c)(1)(B)) excludes collection
activities during the conduct of
administrative actions such as
reconsiderations.
We invited public comments on the
burden associated with these
information collection requirements. We
did not receive any public comments on
these requirements.
XX. 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

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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.
XXI. Economic Analyses
A. Regulatory Impact Analysis
1. Introduction
We have examined the impacts of this
final rule with comment period, as
required by Executive Order 12866 on
Regulatory Planning and Review
(September 30, 1993), Executive Order
13563 on Improving Regulation and
Regulatory Review (January 18, 2011),
the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
(March 22, 1995, Pub. L. 104–4),
Executive Order 13132 on Federalism
(August 4, 1999), and the Contract with
America Advancement Act of 1996
(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 for CY 2016.
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, this final rule with
comment period has been reviewed by
the Office of Management and Budget.
We have prepared a regulatory impact
analysis that, to the best of our ability,
presents the costs and benefits of this
final rule with comment period. We
solicited comments on the regulatory
impact analysis in the CY 2016 OPPS/
ASC proposed rule (80 FR 39359), and
we address the public comments we
received in this section below and in
other sections of this final rule with
comment period as appropriate.

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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 2016. 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, 2014, through and including
December 31, 2014 and processed
through June 30, 2015, and updated cost
report information.
This final rule with comment period
also is necessary to update the ASC
payment rates for CY 2016, 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 2016. Because ASC
payment rates are based on the OPPS
relative payment weights for the
majority of the procedures performed in
ASCs, the ASC payment rates are
updated annually to reflect annual
changes to the OPPS relative payment
weights. In addition, 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.
3. Overall Impacts for the OPPS and
ASC Payment Provisions
We estimate that the total decrease in
Federal government expenditures under
the OPPS for CY 2016 compared to CY
2015 due to the changes in this final
rule with comment period will be
approximately $133 million. Taking into
account our estimated changes in
enrollment, utilization, and case-mix,
we estimate, based on the Midsession
Review of the President’s FY 2016
Budget, that gross Federal Government
OPPS expenditures for CY 2016 will be
approximately $4.1 billion higher
relative to expenditures in CY 2015.
This estimate reflects changes in
enrollment, utilization, and case-mix,
but does not include the 2.0 percent
reduction to the conversion factor to

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
address the inflation in OPPS payment
rates resulting from excess packaged
payment under the OPPS for laboratory
tests that are excepted from our final CY
2014 laboratory packaging policy, as
discussed in section II.B. of this final
rule with comment period, or other
payment changes implemented in this
final rule with comment period.
Because this final rule with comment
period rule is economically significant
as measured by the threshold of an
additional $100 million in expenditures
in 1 year, we have prepared this
regulatory impact analysis that, to the
best of our ability, presents its costs and
benefits. Table 70 displays the
distributional impact of the CY 2016
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 2016) will
decrease total OPPS payments by 0.3
percent in CY 2016. The changes to the
APC weights, the changes to the wage
indexes, 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,
these updates will change the
distribution of payments within the
budget neutral system. We estimate that
the total change in payments between
CY 2015 and CY 2016, considering all
payments, including the adjustment to
the conversion factor to address the
inflation in OPPS payment rates
resulting from excess packaged payment
under the OPPS for laboratory tests,
changes in estimated total outlier
payments, pass-through 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 decrease
total estimated OPPS payments by 0.4
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 Medicare
expenditures under the ASC payment
system for CY 2016 compared to CY
2015 to be approximately $128 million.
Because the provisions for the ASC
payment system are part of a final rule
with comment period that is
economically significant as measured by
the $100 million threshold, we have

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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
this final rule with comment period.
Table 71 and Table 72 of this final rule
with comment period display the
redistributive impact of the CY 2016
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 of OPPS Changes in This
Final Rule With Comment Period
(1) Limitations of Our Analysis
The distributional impacts presented
here are the projected effects of the CY
2016 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 2016 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–1633–FC’’ from
the list of regulations and notices. The
hospital-specific file layout and the
hospital-specific file are listed with the
other supporting documentation for this
final rule with comment period. We
show hospital-specific data only for
hospitals whose claims were used for
modeling the impacts shown in Table
70 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
have not made adjustments for future
changes in variables such as service
volume, service-mix, or number of
encounters. In the CY 2016 OPPS/ASC
proposed rule (80 FR 39360), 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

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sections of the final rule with comment
period that discuss the specific policies.
(2) Estimated Effects of OPPS Changes
on Hospitals
Table 70 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. We now include
a second line for all hospitals, excluding
permanently held harmless hospitals
and CMHCs.
We present separate impacts for
CMHCs in Table 70, 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 2016, we are finalizing our
proposal to continue to pay CMHCs
under renumbered APC 5851 (existing
APC 0172) (Level 1 Partial
Hospitalization (3 services) for CMHCs)
and renumbered APC 5852 (existing
APC 0173) (Level 2 Partial
Hospitalization (4 or more services) for
CMHCs). We also are finalizing our
proposal to pay hospitals for partial
hospitalization services under
renumbered APC 5861 (existing APC
0175) (Level 1 Partial Hospitalization (3
services) for hospital-based PHPs) and
APC 5862 (existing APC 0176) (Level 2
Partial Hospitalization (4 or more
services) for hospital-based PHPs).
However, as discussed in section
VIII.B.1. of this final rule with comment
period, we are making an equitable
adjustment to the actual geometric mean
per diem costs so that we pay a higher
payment rate for Level 2 services than
Level 1 services. We also are finalizing
our proposal to use a ±2 standard
deviation trim for CMHCs and to apply
a CCR greater than 5 (CCR>5) hospital
service day trim for hospital-based PHP
providers for CY 2016 and subsequent
years.
The estimated decrease in the total
payments made under the OPPS is
determined largely by the increase to
the conversion factor under the
statutory methodology and the
adjustment to the conversion factor to
address the inflation in OPPS payment
rates resulting from excess packaged
payment under the OPPS for laboratory
tests. The distributional impacts
presented do not include assumptions
about changes in volume and servicemix. The conversion factor is updated
annually by the OPD fee schedule
increase factor as discussed in detail in

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section II.B. of this final rule with
comment period. Section
1833(t)(3)(C)(iv) of the Act provides that
the OPD fee schedule increase factor is
equal to the market basket percentage
increase applicable under section
1886(b)(3)(B)(iii) of the Act, which we
refer to as the IPPS market basket
percentage increase. The IPPS market
basket percentage increase for FY 2016
is 2.4 percent (80 FR 49510). Section
1833(t)(3)(F)(i) of the Act reduces that
2.4 percent by the multifactor
productivity adjustment described in
section 1886(b)(3)(B)(xi)(II) of the Act,
which is 0.5 percentage point for FY
2016 (which is also the MFP adjustment
for FY 2016 in the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49510)); and
sections 1833(t)(3)(F)(ii) and
1833(t)(3)(G)(iv) of the Act further
reduce the market basket percentage
increase by 0.2 percentage point,
resulting in the OPD fee schedule
increase factor of 1.7 percent. We are
using the OPD fee schedule increase
factor of 1.7 percent in the calculation
of the CY 2016 OPPS conversion factor.
We also are applying a reduction of 2.0
percent to address the inflation in OPPS
payment rates resulting from excess
packaged payment under the OPPS for
laboratory tests. 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 2016 estimates
in Table 70.
To illustrate the impact of the CY
2016 changes, our analysis begins with
a baseline simulation model that uses
the CY 2015 relative payment weights,
the FY 2015 final IPPS wage indexes
that include reclassifications, and the
final CY 2015 conversion factor. Table
70 shows the estimated redistribution of
the increase or decrease in payments for
CY 2016 over CY 2015 payments to
hospitals and CMHCs as a result of the
following factors: The impact of the
APC reconfiguration and recalibration
changes between CY 2015 and CY 2016
(Column 2); the wage indexes and the
provider adjustments (Column 3); the
combined impact of all of the changes
described in the preceding columns
plus the 1.7 percent OPD fee schedule
increase factor update to the conversion
factor and the ¥2.0 percent adjustment
to the conversion factor to address the
inflation in OPPS payment rates
resulting from excess packaged payment
under the OPPS for laboratory tests
(Column 4); and the estimated impact

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taking into account all payments for CY
2016 relative to all payments for CY
2015, including the impact of changes
in estimated outlier payments, the
frontier State wage adjustment, and
changes to the pass-through payment
estimate (Column 5).
We did not model an explicit budget
neutrality adjustment for the rural
adjustment for SCHs because we are
finalizing our proposal to maintain the
current adjustment percentage for CY
2016. 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
2016 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 2015 and CY 2016 by various groups
of hospitals, which CMS cannot
forecast.
For hospital-based PHP APCs, the per
diem rates calculated from the equitable
adjustment will be budget neutral
within all of the OPPS. Section
1833(t)(2)(E) of the Act states that the
Secretary shall establish, in a budget
neutral manner, other adjustments as
determined to be necessary to ensure
equitable payments. The authority
granted to the Secretary under this
provision is broad. It would not be
appropriate or equitable to pay a lower
payment rate for the PHP APC for Level
2 services, under which 4 or more
services are provided, than for the PHP
APC for Level 1 services, under which
3 PHP services are provided. As a result,
we included the equitably adjusted
hospital-based PHP APC Level 1 per
diem cost of $191.91, and the equitably
adjusted hospital-based PHP APC Level
2 per diem cost of $222.54 in the budget
neutrality process. The CMHC PHP APC
Level 1 geometric mean per diem costs
are $98.88, and the CMHC PHP APC
Level 2 geometric mean per diem costs
are $149.64.
Overall, we estimate that the rates for
CY 2016 will decrease Medicare OPPS
payments by an estimated 0.4 percent.
Removing payments to cancer and
children’s hospitals because their

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payments are held harmless to the preOPPS ratio between payment and cost
and removing payments to CMHCs
results in an estimated 0.4 percent
decrease in Medicare payments to all
other hospitals. These estimated
payments will not significantly impact
other providers.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 70
shows the total number of facilities
(3,953), including designated cancer and
children’s hospitals and CMHCs, for
which we were able to use CY 2014
hospital outpatient and CMHC claims
data to model CY 2015 and CY 2016
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 2015 or CY 2016
payment and entities that are not paid
under the OPPS. The latter entities
include CAHs, all-inclusive hospitals,
and hospitals located in Guam, the U.S.
Virgin Islands, Northern Mariana
Islands, American Samoa, and the State
of Maryland. This process is discussed
in greater detail in section II.A. of this
final rule with comment period. At this
time, we are unable to calculate a
disproportionate share hospital (DSH)
variable for hospitals that are not also
paid under the IPPS, since DSH
payments are only made to hospitals
paid under 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 (3,830),
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 the 57 CMHCs at the bottom
of the impact table and discuss that
impact separately below.
Column 2: APC Recalibration—All
Changes
Column 2 shows the estimated effect
of APC recalibration. Column 2 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 no

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change, with the impact ranging from an
increase of 0.3 percent to a decrease of
0.6 percent, depending on the number
of beds. Rural hospitals will experience
a 0.1 percent increase, with the impact
ranging from an increase of 0.5 percent
to a decrease of 0.1 percent, depending
on the number of beds. Major teaching
hospitals will experience an increase of
0.4 percent overall.

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Column 3: New Wage Indexes and the
Effect of the Provider Adjustments
Column 3 demonstrates the combined
budget neutral impact of the APC
recalibration; the updates for the wage
indexes with the fiscal year (FY) 2016
IPPS post-reclassification wage indexes;
the cancer hospital adjustment and the
rural 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
indexes for each year, and using a CY
2015 conversion factor that included the
OPD fee schedule increase and a budget
neutrality adjustment for differences in
wage indexes.
Column 3 reflects the independent
effects of the updated wage indexes,
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 5.
We did not model a budget neutrality
adjustment for the rural adjustment for
SCHs because we are finalizing our
proposal to continue the rural payment
adjustment of 7.1 percent to rural SCHs
for CY 2016, as described in section II.E.
of this final rule with comment period.
We modeled the independent effect of
updating the wage indexes by varying
only the wage indexes, holding APC
relative payment weights, service-mix,
and the rural adjustment constant and
using the CY 2016 scaled weights and
a CY 2015 conversion factor that
included a budget neutrality adjustment
for the effect of the changes to the wage
indexes between CY 2015 and CY 2016.
The FY 2016 wage policy results in
modest redistributions.
We are finalizing the CY 2016 cancer
hospital payment adjustment
methodology as proposed. Using
updated data, the payment-to-cost ratio
target is 0.92. This results in a 0.1
decrease to the ‘‘all hospitals’’ category,
because IPPS-exempt cancer hospitals
are not included in the all hospitals
category.

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Column 4: All Budget Neutrality
Changes Combined With the Market
Basket Update and the Adjustment To
Address Excess Packaged Payment for
Laboratory Tests
Column 4 demonstrates the combined
impact of all of the changes previously
described, the update to the conversion
factor of 1.7 percent, and the 2.0 percent
reduction due to the adjustment to the
conversion factor to address the
inflation in OPPS payment rates
resulting from excess packaged payment
under the OPPS for laboratory tests.
Overall, these changes will decrease
payments to urban hospitals by 0.4
percent and to rural hospitals by 0.6
percent. Most classes of hospitals will
receive a decrease in line with the 0.4
percent overall decrease after the update
and the adjustment to the conversion
factor to address excess packaged
payment for laboratory tests are applied
to the budget neutrality adjustments.
Column 5: All Changes for CY 2016
Column 5 depicts the full impact of
the CY 2016 policies on each hospital
group by including the effect of all of
the changes for CY 2016 and comparing
them to all estimated payments in CY
2015. Column 5 shows the combined
budget neutral effects of Column 2 and
3; 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.
Of those hospitals that failed to meet
the Hospital OQR Program reporting
requirements for the full CY 2015
update (and assumed, for modeling
purposes, to be the same number for CY
2016), we included 59 hospitals in our
model because they had both CY 2014
claims data and recent cost report data.
We estimate that the cumulative effect
of all of the changes for CY 2016 will
decrease payments to all facilities by 0.4
percent for CY 2016. We modeled the
independent effect of all of the changes
in Column 5 using the final relative
payment weights for CY 2015 and the
relative payment weights for CY 2016.
We used the final conversion factor for
CY 2015 of $74.173 and the CY 2016
conversion factor of $73.725 discussed

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in section II.B. of this final rule with
comment period.
Column 5 contains simulated outlier
payments for each year. We used the 1year charge inflation factor used in the
FY 2016 IPPS/LTCH PPS final rule (80
FR 49783 through 49784) of 3.7 percent
(1.037616) to increase individual costs
on the CY 2014 claims, and we used the
most recent overall CCR in the July 2015
Outpatient Provider-Specific File
(OPSF) to estimate outlier payments for
CY 2015. Using the CY 2014 claims and
a 3.7 percent charge inflation factor, we
currently estimate that outlier payments
for CY 2015, using a multiple threshold
of 1.75 and a fixed-dollar threshold of
$2,775 will be approximately 0.9
percent of total payments. The
estimated current outlier payments of
0.9 percent are incorporated in the
comparison in Column 5. We used the
same set of claims and a charge inflation
factor of 7.7 percent (1.076647) and the
CCRs in the July 2015 OPSF, with an
adjustment of 0.9701, to reflect relative
changes in cost and charge inflation
between CY 2014 and CY 2016, to
model the CY 2016 outliers at 1.0
percent of estimated total payments
using a multiple threshold of 1.75 and
a fixed-dollar threshold of $3,250. The
charge inflation and CCR inflation
factors are discussed in detail in the FY
2016 IPPS/LTCH PPS final rule (80 FR
49783 through 49784).
We estimate that the anticipated
change in payment between CY 2015
and CY 2016 for the hospitals failing to
meet the Hospital OQR Program
requirements will be negligible. Overall,
we estimate that facilities will
experience a decrease of 0.4 percent
under this final rule with comment
period in CY 2016 relative to total
spending in CY 2015. This projected
decrease (shown in Column 5) of Table
70 reflects the 1.7 percent OPD fee
schedule increase factor, less 2.0
percent for the adjustment to the
conversion factor to address the
inflation in OPPS payment rates
resulting from excess packaged payment
under the OPPS for laboratory tests, less
0.13 percent for the change in the passthrough estimate between CY 2015 and
CY 2016, plus 0.1 percent for the
difference in estimated outlier payments
between CY 2015 (0.9 percent) and CY
2016 (1.0 percent). We estimate that the
combined effect of all of the changes for
CY 2016 will decrease payments to
urban hospitals by 0.4 percent. Overall,
we estimate that rural hospitals will
experience a 0.6 percent decrease as a
result of the combined effects of all of
the changes for CY 2016, with the
greater decrease relative to urban

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hospitals primarily a result of wage
index changes in CY 2016.
Among hospitals by teaching status,
we estimate that the impacts resulting
from the combined effects of all changes
will result in an increase of 0.1 percent
for major teaching hospitals and a

decrease of 0.7 percent for nonteaching
hospitals. Minor teaching hospitals will
experience an estimated decrease of 0.5
percent.
In our analysis, we also have
categorized hospitals by type of
ownership. Based on this analysis, we

estimate that voluntary hospitals will
experience a decrease of 0.3 percent,
proprietary hospitals will experience a
decrease of 1.1 percent, and
governmental hospitals will experience
a decrease of 0.3 percent.

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TABLE 70—ESTIMATED IMPACT OF THE CY 2016 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT
SYSTEM

Number of
hospitals

APC recalibration
(all changes)

New wage index
and provider
adjustments

All budget neutral
changes (combined cols. 2, 3)
with market basket update and
adjustment to address excess
packaged payment for laboratory tests

(1)

(2)

(3)

(4)

ALL FACILITIES * ....................................................
ALL HOSPITALS (excludes hospitals permanently
held harmless and CMHCs) .................................
URBAN HOSPITALS ...............................................
LARGE URBAN (GT 1 MILL) ...........................
OTHER URBAN (LE 1 MILL.) ..........................
RURAL HOSPITALS ................................................
SOLE COMMUNITY .........................................
OTHER RURAL ................................................
BEDS (URBAN):
0–99 BEDS .......................................................
100–199 BEDS .................................................
200–299 BEDS .................................................
300–499 BEDS .................................................
500 + BEDS ......................................................
BEDS (RURAL):
0–49 BEDS .......................................................
50–100 BEDS ...................................................
101–149 BEDS .................................................
150–199 BEDS .................................................
200 + BEDS ......................................................
REGION (URBAN):
NEW ENGLAND ...............................................
MIDDLE ATLANTIC ..........................................
SOUTH ATLANTIC ...........................................
EAST NORTH CENT ........................................
EAST SOUTH CENT ........................................
WEST NORTH CENT .......................................
WEST SOUTH CENT .......................................
MOUNTAIN .......................................................
PACIFIC ............................................................
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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All changes

(5)

3,953

0.0

0.0

¥0.3

¥0.4

3,830
2,980
1,641
1,339
850
380
470

0.0
0.0
0.0
¥0.1
0.1
0.1
0.0

¥0.1
0.0
0.0
0.0
¥0.4
¥0.4
¥0.4

¥0.4
¥0.4
¥0.3
¥0.5
¥0.6
¥0.6
¥0.7

¥0.4
¥0.4
¥0.3
¥0.5
¥0.6
¥0.6
¥0.7

1,054
847
458
406
215

¥0.6
¥0.3
¥0.2
0.0
0.3

¥0.4
0.0
0.1
0.0
0.0

¥1.2
¥0.6
¥0.4
¥0.3
¥0.1

¥1.3
¥0.6
¥0.4
¥0.3
¥0.1

338
311
113
48
40

0.5
0.0
¥0.1
0.1
0.1

¥0.5
¥0.3
¥0.3
¥0.4
¥0.6

¥0.3
¥0.6
¥0.8
¥0.6
¥0.9

¥0.2
¥0.6
¥0.7
¥0.7
¥1.0

150
349
472
481
185
185
530
200
379
49

0.6
¥0.2
¥0.1
¥0.1
¥0.1
0.1
0.0
0.0
¥0.2
¥2.5

¥0.7
0.4
0.0
0.1
¥0.5
¥0.5
¥0.4
0.0
0.7
¥1.3

¥0.4
¥0.1
¥0.5
¥0.4
¥0.9
¥0.8
¥0.7
¥0.4
0.2
¥4.0

¥0.4
0.0
¥0.6
¥0.4
¥1.0
¥0.7
¥0.8
¥0.5
0.3
¥4.1

22
56
125
121
163
103
176
60
24

0.9
0.3
¥0.3
¥0.2
0.1
0.3
0.1
0.3
¥0.1

¥0.6
¥1.0
0.3
¥0.2
¥0.6
¥0.7
¥1.3
0.0
1.0

¥0.1
¥1.1
¥0.3
¥0.7
¥0.9
¥0.7
¥1.6
0.0
0.5

0.1
¥0.7
¥0.4
¥0.7
¥1.0
¥0.5
¥1.7
¥0.3
0.5

2781
718
331

¥0.3
¥0.1
0.4

¥0.1
0.0
0.0

¥0.7
¥0.4
0.1

¥0.7
¥0.5
0.1

20
341
299
661
1120
806

¥1.3
¥0.6
¥0.2
¥0.3
0.0
0.2

0.1
0.0
¥0.1
¥0.1
¥0.1
0.1

¥1.5
¥1.0
¥0.6
¥0.7
¥0.4
0.0

¥1.6
¥1.0
¥0.6
¥0.7
¥0.5
0.0

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

70589

TABLE 70—ESTIMATED IMPACT OF THE CY 2016 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT
SYSTEM—Continued

Number of
hospitals

APC recalibration
(all changes)

New wage index
and provider
adjustments

All budget neutral
changes (combined cols. 2, 3)
with market basket update and
adjustment to address excess
packaged payment for laboratory tests

(1)

(2)

(3)

(4)

DSH NOT AVAILABLE ** ..................................
URBAN TEACHING/DSH:
TEACHING & DSH ...........................................
NO TEACHING/DSH ........................................
NO TEACHING/NO DSH ..................................
DSH NOT AVAILABLE ** ..................................
TYPE OF OWNERSHIP:
VOLUNTARY ....................................................
PROPRIETARY ................................................
GOVERNMENT ................................................
CMHCs .....................................................................

All changes

(5)

583

4.5

¥0.2

3.9

3.6

954
1453
19
554

0.1
¥0.4
¥1.3
4.3

0.0
¥0.1
0.1
¥0.1

¥0.2
¥0.8
¥1.5
3.9

¥0.2
¥0.8
¥1.6
3.5

2010
1304
516
57

0.0
¥0.3
0.2
24.5

0.0
¥0.3
¥0.1
¥0.6

¥0.3
¥1.0
¥0.3
23.4

¥0.3
¥1.1
¥0.3
23.1

Column (1) shows total hospitals and/or CMHCs.
Column (2) includes all CY 2016 OPPS policies and compares those to the CY 2015 OPPS.
Column (3) shows the budget neutral impact of updating the wage index by applying the FY 2016 hospital inpatient wage index, including all
hold harmless policies and transitional wages. The final rural adjustment continues our current policy of 7.1 percent so the budget neutrality factor is 1. The budget neutrality adjustment for the cancer hospital adjustment is 0.9994 because the payment-to-cost ratio is 0.92 for the CY 2016
OPPS.
Column (4) shows the impact of all budget neutrality adjustments and the addition of the 1.7 percent OPD fee schedule update factor (2.4 percent reduced by 0.5 percentage points for the productivity adjustment and further reduced by 0.2 percentage point in order to satisfy statutory requirements set forth in the Affordable Care Act). Column 4 also includes the -2.0 percent adjustment to the conversion factor to address the inflation in OPPS payment rates resulting from excess packaged payment under the OPPS for laboratory tests.
Column (5) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated
outlier payments, and applying the frontier State wage adjustment.
* These 3,953 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
hospitals.

jstallworth on DSK7TPTVN1PROD with RULES

(3) Estimated Effects of OPPS Changes
on CMHCs
The last line of Table 70 demonstrates
the isolated impact on CMHCs, which
furnish only partial hospitalization
services under the OPPS. In CY 2015,
CMHCs are paid under two APCs for
these services: existing APC 0172 (Level
1 Partial Hospitalization (3 services) for
CMHCs) (renumbered APC 5851 for CY
2016) and existing APC 0173 (Level 2
Partial Hospitalization (4 or more
services) for CMHCs) (renumbered APC
5852 for CY 2016). Hospitals are paid
for partial hospitalization services under
existing APC 0175 (Level 1 Partial
Hospitalization (3 services) for hospitalbased PHPs) (renumbered APC 5861 for
CY 2016) and existing APC 0176 (Level
2 Partial Hospitalization (4 or more
services) for hospital-based PHPs)
(renumbered APC 5862 for CY 2016).
We use our standard ratesetting
methodology to derive the payment
rates for each APC based on the cost
data derived from claims and cost data
for the provider-type-specific APC. For
CY 2016, we are finalizing our proposal
to continue the provider-type-specific

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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 2014 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. We estimate that
CMHCs will experience an overall 23.1
percent increase in payments from CY
2015 (shown in Column 5). We note that
this includes the trimming methodology
described in section VIII.B. of this final
rule with comment period.
Column 3 shows that the estimated
impact of adopting the FY 2016 wage
index values will result in a small
decrease of 0.6 percent to CMHCs.
Column 4 shows that combining this
OPD fee schedule increase factor,
adjustment to the conversion to address
the inflation in OPPS payment rates
resulting from excess packaged payment
under the OPPS for laboratory tests,
along with changes in APC policy for

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CY 2016 and the FY 2016 wage index
updates, will result in an estimated
increase of 23.4 percent. Column 5
shows that adding the changes in outlier
and pass-though payments will result in
a total 23.1 percent increase in payment
for CMHCs. This reflects all changes to
CMHCs for CY 2016.
(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,
section 1833(t)(8)(C)(i) of the Act limits
beneficiary liability for copayment for a
procedure performed in a year to the
hospital inpatient deductible for the
applicable year.
We estimate that the aggregate
beneficiary coinsurance percentage will

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70590

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

be 19.3 percent for all services paid
under the OPPS in CY 2016. The
estimated aggregate beneficiary
coinsurance reflects general system
adjustments, including the recalibration
of the APC relative payment weights,
APC reorganization, change in the
portion of OPPS payments dedicated to
pass-through payments, and the CY
2016 comprehensive APC payment
policy discussed in section II.A.2.e. of
this final rule with comment period.
(5) Estimated Effects of OPPS Changes
on Other Providers
The relative payment weights and
payment amounts established under the
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 a decrease of $133
million in program payments for OPPS
services furnished in CY 2016. The
effect on the Medicaid program is
expected to be limited to 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 XXI.A. of this
final rule with comment period.
(7) Alternative OPPS Policies
Considered
Alternatives to the OPPS changes we
are finalizing and the reasons for our
selected alternatives are discussed
throughout this final rule with comment
period. In this section, we discuss some
of the significant issues and the
alternatives considered.

jstallworth on DSK7TPTVN1PROD with RULES

• Alternatives Considered for the
Methodology for Assigning Skin
Substitutes to High or Low Cost Groups
We refer readers to section V.B.2.c. of
this final rule with comment period for
a discussion of our proposal to
determine the high/low cost status for
each skin substitute product based on
either a product’s mean unit cost (MUC)
exceeding the MUC threshold or the
product’s per day cost (PDC) exceeding
the PDC threshold. As discussed in that
section, we also considered, but did not
propose, to determine high/low cost
status for each skin substitute using just
MUC or just PDC instead of both.

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• Alternatives Considered for
Application of the Device Offset for
Discontinued Procedures for Device
Intensive Procedures
We refer readers to section IV.B.4. of
this final rule with comment period for
a discussion of our proposal to deduct
the device offset amount for procedures
in device-intensive APCs that are
discontinued. As discussed in that
section, we considered finalizing the
policy as proposed, but instead are
finalizing to only apply the policy to
device intensive procedures with
modifier 73 (Discontinued procedure
prior to anesthesia administration).
b. Estimated Effects of CY 2016 ASC
Payment System Policies
Most 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
2016 ASC relative payment weights by
scaling the CY 2016 OPPS relative
payment weights by the ASC scaler of
0.9332. The estimated effects of the
updated relative payment weights on
payment rates are varied and are
reflected in the estimated payments
displayed in Tables 71 and 72 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
2016 payment determinations will be
based on the application of a 2.0
percentage points reduction to the
annual update factor, which currently is
the CPI–U. We calculated the CY 2016
ASC conversion factor by adjusting the
CY 2015 ASC conversion factor by
0.9997 to account for changes in the prefloor and pre-reclassified hospital wage
indexes between CY 2015 and CY 2016
and by applying the CY 2016 MFPadjusted CPI–U update factor of 0.3
percent (projected CPI–U update of 0.8
percent minus a projected productivity
adjustment of 0.5 percentage point). The
CY 2016 ASC conversion factor is
$44.177.

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(1) Limitations of Our Analysis
Presented here are the projected
effects of the changes for CY 2016 on
Medicare payment to ASCs. A key
limitation of our analysis is our inability
to predict changes in ASC service-mix
between CY 2014 and CY 2016 with
precision. We believe that the net effect
on Medicare expenditures resulting
from the CY 2016 changes will be small
in the aggregate for all ASCs. However,
surgical specialty groups may be
affected differently as ASCs continue to
provide services to beneficiaries under
the 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 ASC Payment
System Policies on ASCs
Some ASCs are multispecialty
facilities that perform a wide range 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 of the
update to the CY 2016 payments on an
individual ASC 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 2016 updates to
the ASC payment system on Medicare
payments to ASCs, assuming the same
mix of services as reflected in our CY
2014 claims data. Table 71 depicts the
estimated aggregate percent change in
payment by surgical specialty or
ancillary items and services group by
comparing estimated CY 2015 payments
to estimated CY 2016 payments, and
Table 72 shows a comparison of
estimated CY 2015 payments to
estimated CY 2016 payments for
procedures that we estimate will receive
the most Medicare payment in CY 2015.
Table 71 shows the estimated effects
on aggregate Medicare payments under
the ASC payment system by surgical
specialty or ancillary items and services
group. We have aggregated the surgical
HCPCS codes by specialty group,
grouped all HCPCS codes for covered
ancillary items and services into a single
group, and then estimated the effect on
aggregated payment for surgical

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
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
71.
• 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 2015 ASC
Payments were calculated using CY

2014 ASC utilization (the most recent
full year of ASC utilization) and CY
2015 ASC payment rates. The surgical
specialty and ancillary items and
services groups are displayed in
descending order based on estimated CY
2015 ASC payments.
• Column 3—Estimated CY 2016
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 2016 compared to CY 2015.
As seen in Table 71, for the six
specialty groups that account for the
most ASC utilization and spending, we
estimate that the update to ASC rates for
CY 2016 will result in a 1-percent
increase in aggregate payment amounts
for eye and ocular adnexa procedures, a
2-percent increase in aggregate payment

70591

amounts for digestive system
procedures, a 1-percent decrease in
aggregate payment amounts for nervous
system procedures, a 4-percent decrease
in aggregate payment amounts for
musculoskeletal system procedures, a 1percent increase in aggregate payment
amounts for genitourinary system
procedures, and a 2-percent increase in
aggregate payment amounts for
integumentary system procedures.
Also displayed in Table 71 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 remain at $21 million for CY 2016.

TABLE 71—ESTIMATED IMPACT OF THE CY 2016 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE CY 2016
MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP
Surgical specialty group

Estimated CY
2015 ASC
payments
(in millions)

Estimated CY
2016 percent
change

(1)

(2)

(3)

Total .........................................................................................................................................................................
Eye and ocular adnexa ............................................................................................................................................
Digestive system ......................................................................................................................................................
Nervous system .......................................................................................................................................................
Musculoskeletal system ...........................................................................................................................................
Genitourinary system ...............................................................................................................................................
Integumentary system .............................................................................................................................................
Respiratory system ..................................................................................................................................................
Cardiovascular system ............................................................................................................................................
Ancillary items and services ....................................................................................................................................
Auditory system .......................................................................................................................................................
Hematologic & lymphatic systems ...........................................................................................................................

Table 72 below shows the estimated
impact of the updates to the revised
ASC payment system on aggregate ASC
payments for selected surgical
procedures during CY 2016. The table
displays 30 of the procedures receiving
the greatest estimated CY 2015 aggregate
Medicare payments to ASCs. The
HCPCS codes are sorted in descending

order by estimated CY 2015 program
payment.
• Column 1—CPT/HCPCS code.
• Column 2—Short Descriptor of the
HCPCS code.
• Column 3—Estimated CY 2015 ASC
Payments were calculated using CY
2014 ASC utilization (the most recent
full year of ASC utilization) and the CY

$3,893
1,534
807
617
485
176
135
55
42
21
14
6

0
1
2
¥1
¥4
1
2
3
0
2
5
¥5

2015 ASC payment rates. The estimated
CY 2015 payments are expressed in
millions of dollars.
• Column 4—Estimated CY 2016
Percent Change reflects the percent
differences between the estimated ASC
payment for CY 2015 and the estimated
payment for CY 2016 based on the
update.

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 72—ESTIMATED IMPACT OF THE CY 2016 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS
FOR SELECTED PROCEDURES
CPT/HCPCS
code

Short descriptor

(1)

(2)

66984
43239
45380
45385

................
................
................
................

VerDate Sep<11>2014

Estimated
CY 2015
ASC payment
(in millions)

(4)

Cataract surg w/iol 1 stage .......................................................................................................
Egd biopsy single/multiple ........................................................................................................
Colonoscopy and biopsy ..........................................................................................................
Colonoscopy w/lesion removal .................................................................................................

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Estimated
CY 2016
percent
change

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13NOR2

$1,092
177
181
117

2
2
¥3
¥3

70592

Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations

jstallworth on DSK7TPTVN1PROD with RULES

TABLE 72—ESTIMATED IMPACT OF THE CY 2016 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS
FOR SELECTED PROCEDURES—Continued
Estimated
CY 2015
ASC payment
(in millions)

CPT/HCPCS
code

Short descriptor

(1)

(2)

66982 ................
64483 ................
62311 ................
45378 ................
66821 ................
64493 ................
G0105 ...............
64635 ................
63650 ................
G0121 ...............
64590 ................
15823 ................
63685 ................
29827 ................
64721 ................
29881 ................
29824 ................
29880 ................
43235 ................
62310 ................
29823 ................
52000 ................
G0260 ...............
45384 ................
67042 ................
26055 ................

Cataract surgery complex .........................................................................................................
Inj foramen epidural l/s .............................................................................................................
Inject spine lumbar/sacral .........................................................................................................
Diagnostic colonoscopy ............................................................................................................
After cataract laser surgery ......................................................................................................
Inj paravert f jnt l/s 1 lev ...........................................................................................................
Colorectal scrn; hi risk ind ........................................................................................................
Destroy lumb/sac facet jnt ........................................................................................................
Implant neuroelectrodes ...........................................................................................................
Colon ca scrn not hi rsk ind .....................................................................................................
Insrt/redo pn/gastr stimul ..........................................................................................................
Revision of upper eyelid ...........................................................................................................
Insrt/redo spine n generator .....................................................................................................
Arthroscop rotator cuff repr ......................................................................................................
Carpal tunnel surgery ...............................................................................................................
Knee arthroscopy/surgery .........................................................................................................
Shoulder arthroscopy/surgery ...................................................................................................
Knee arthroscopy/surgery .........................................................................................................
Egd diagnostic brush wash ......................................................................................................
Inject spine cerv/thoracic ..........................................................................................................
Shoulder arthroscopy/surgery ...................................................................................................
Cystoscopy ...............................................................................................................................
Inj for sacroiliac jt anesth ..........................................................................................................
Colonoscopy w/lesion removal .................................................................................................
Vit for macular hole ..................................................................................................................
Incise finger tendon sheath ......................................................................................................

(3) Estimated Effects of ASC Payment
System Policies on Beneficiaries
We estimate that the CY 2016 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 2016. First, other than certain
preventive services where coinsurance
and the Part B deductible is waived to
comply with section 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 under the OPPS, where the
beneficiary is responsible for
copayments that range from 20 percent
to 40 percent of the procedure payment
(other than for certain preventive
services). 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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(4)

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 under the
MPFS compared to the ASC. However,
for those additional procedures that we
are designating as office-based in CY
2016, the beneficiary coinsurance
amount under the ASC payment system
generally will be no greater than the
beneficiary coinsurance under the
MPFS because the coinsurance under
both payment systems generally is 20
percent (except for certain preventive
services where the coinsurance is
waived under both payment systems).
(4) Alternative ASC Payment Policies
Considered
• Alternatives Considered for
Application of the Device Offset for
Discontinued Procedures for Device
Intensive Procedures
We refer readers to section XII.C.1.d.
of this final rule with comment period
for a discussion of our proposal to
deduct the device offset amount for
device intensive procedures that are
discontinued before applying any

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Estimated
CY 2016
percent
change

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95
94
75
69
65
53
46
50
52
43
44
33
54
50
30
28
21
24
24
23
13
22
22
20
22
21

2
¥11
¥11
¥4
1
25
17
¥3
4
17
¥7
2
2
5
3
14
¥44
14
2
¥11
¥44
¥3
¥11
¥3
5
21

standard downward payment
adjustment. We proposed that this
would apply to device-intensive
procedures in the ASC payment system
beginning in CY 2016 with modifier
‘‘52’’ (reduced services) and modifier
‘‘73’’ (discontinued outpatient
procedure prior to anesthesia
administration). As discussed in that
section, we considered finalizing the
policy as proposed, but, based on
stakeholder comments, are finalizing the
policy to only apply to device-intensive
procedures with modifier ‘‘73.’’
c. Accounting Statements and Tables
As required by OMB Circular A–4
(available on the Office of Management
and Budget Web site at: https://
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 73
below, illustrates the classification of
expenditures for the CY 2016 estimated
hospital OPPS incurred benefit impacts
associated with the CY 2016 OPD fee
schedule increase, based on the
Midsession Review of the President’s
FY 2016 Budget, and the adjustment to
the conversion factor to address the

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inflation in OPPS payment rates
resulting from excess packaged payment
under the OPPS for laboratory tests. The
second accounting statement, Table 74
below, illustrates the classification of

expenditures associated with the 0.3
percent CY 2016 update to the ASC
payment system, based on the
provisions of this final rule with
comment period and the baseline

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spending estimates for ASCs in the
Midsession Review of the President’s
FY 2016 Budget. Lastly, the tables
classify most estimated impacts as
transfers.

TABLE 73—ACCOUNTING STATEMENT: CY 2016 ESTIMATED HOSPITAL OPPS TRANSFERS FROM CY 2015 TO CY 2016
ASSOCIATED WITH THE CY 2016 HOSPITAL OUTPATIENT OPD FEE SCHEDULE INCREASE AND THE ADJUSTMENT TO
ADDRESS EXCESS PACKAGED PAYMENT FOR LABORATORY TESTS
Category

Transfers

Annualized Monetized Transfers ..............................................................
From Whom to Whom ..............................................................................

¥$133 million
Federal Government to outpatient hospitals and other providers who
receive payment under the hospital OPPS.

Total ...................................................................................................

¥$133 million.

TABLE 74—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2015 TO CY 2016 AS A
RESULT OF THE CY 2016 UPDATE TO THE ASC PAYMENT SYSTEM
Category

Transfers

Annualized Monetized Transfers ..............................................................
From Whom to Whom ..............................................................................
Total ...................................................................................................

jstallworth on DSK7TPTVN1PROD with RULES

d. Effects of Requirements for the
Hospital OQR Program
We refer readers to CY 2015 OPPS/
ASC final rule with comment period (79
FR 67018) for the estimated effects of
previously finalized OPPS changes on
hospitals for the CY 2017 payment
determination. In section XIII. of this
final rule with comment period, we are
finalizing the adoption of changes to
policies affecting the Hospital OQR
Program. Of the 3,292 hospitals that met
eligibility requirements for the CY 2015
payment determination, we determined
that 113 hospitals did not meet the
requirements to receive the full OPD fee
schedule increase factor (79 FR 67018).
Most of these hospitals (71 of the 113)
chose not to participate in the Hospital
OQR Program for the CY 2015 payment
determination. We estimate that
approximately 115 hospitals will not
receive the full OPD fee schedule
increase factor for the CY 2018 payment
determination and subsequent years.
In section XIII. of this final rule with
comment period, we are finalizing the
adoption of our proposals to make
several changes to the Hospital OQR
Program for the CY 2017 payment
determination and subsequent years and
the CY 2018 payment determination and
subsequent years. For the CY 2017
payment determination and subsequent
years, we are finalizing our proposals to:
(1) Remove OP–15: Use of Brain
Computed Tomography (CT) in the
Emergency Department for Atraumatic
Headache measure, effective January 1,

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$10 million.
Federal Government to Medicare Providers and Suppliers.
$10 million.

2016 (no data for this measure will be
used for any payment determination);
(2) change the deadline for withdrawing
from the program to August 31 and
revise 42 CFR 419.46(b) to reflect this
change; (3) shift the quarters on which
we base payment determinations; (4)
change the data submission timeframe
for measures submitted via the CMS
Web-based tool (QualityNet Web site) to
January 1 through May 15; (5) fix a
typographical error to correct the name
of our extension and exception policy to
extension and exemption policy; (6)
change the deadline for submitting a
reconsideration request to the first
business day on or after March 17 of the
affected payment year and make a
conforming change to 42 CFR
419.46(f)(1) to reflect this change; and
(7) amend 42 CFR 419.46(f)(1) and 42
CFR 419.46(e)(2) to replace the term
‘‘fiscal year’’ with the term ‘‘calendar
year.’’ While there is burden associated
with filing a reconsideration request,
section 3518(c)(1)(B) of the Paperwork
Reduction Act of 1995 (44 U.S.C.
3518(c)(1)(B)) excludes collection
activities during the conduct of
administrative actions such as
reconsiderations. We do not believe that
any of the other changes we are
finalizing will increase burden, as
further discussed below.
In addition, we are finalizing the
adoption of our proposals to make
conforming changes to our validation
scoring process to reflect changes in the
APU determination timeframes. For the
CY 2017 payment determination, we are

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finalizing our proposal that validation
be based on three quarters of data
(validation quarter 2, validation quarter
3, and validation quarter 4 of 2015), as
opposed to four quarters as previously
required. For the CY 2017 transition
year, we estimate that the burden
associated with validation reporting will
be reduced by 25 percent because
hospitals will submit validation data for
three quarters instead of four quarters.
For prior payment determinations, we
sampled 500 hospitals for validation
and estimated that it would take each
hospital 12 hours to comply with the
data submission requirements for four
quarters. We estimate that data
submission for three quarters will
reduce the number of hours required by
25 percent (from 12 hours to 9 hours per
hospital). Consistent with prior years
(79 FR 67013), we estimate that a
hospital pays an individual
approximately $30 per hour to abstract
and submit these data. Therefore, we
estimate a total burden of approximately
4,500 hours (500 hospitals × 9 hours/
hospital) and a total financial impact of
$135,000 ($30/hour × 4,500 hours) for
the CY 2017 payment determination.
This is a reduction of 1,500 hours and
$45,000 across all hospitals from last
year’s estimate attributable to changes in
our validation scoring process.
For the CY 2018 payment
determination and subsequent years, we
are finalizing two changes to the
program. First, we are finalizing the
adoption of one new measure: OP–33:
External Beam Radiotherapy (EBRT) for

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Bone Metastases (NQF #1822). As we
further explain in section XIII.D.4.b. of
this final rule with comment period, we
are finalizing only one mode of data
submission for this measure: data for
OP–33 may only be submitted at an
aggregate-level via a CMS Web based
tool (QualityNet Web site). As discussed
in section XIX.B.1.b. of this final rule
with comment period, we believe that
this measure will result in a total
increase in burden across all
participating hospitals of 8,312.7 hours
or $249,381 per year. Second, for the CY
2018 payment determination and
subsequent years, we are finalizing that
validation again be based on four
quarters of data. However, those
quarters are validation quarter 1,
validation quarter 2, validation quarter
3, and validation quarter 4. For payment
determinations prior to CY 2017, we
sampled 500 hospitals for validation
and estimated that it would take each
hospital 12 hours to comply with the
data submission requirements for four
quarters. Therefore, we estimate a total
burden of approximately 6,000 hours
(500 hospitals × 12 hours/hospital) and
a total financial impact of $180,000
($30/hour × 6,000 hours) in burden
associated with validation for the CY
2018 payment determination and
subsequent years. This increase in
burden associated with the validation
process is 1,500 hours and $45,000
across all hospitals from the CY 2017
estimate because we will be sampling
four quarters, as we had in prior years,
instead of three quarters.
For the CY 2019 payment
determination and subsequent years, we
are not making any changes to the
program. We are not finalizing the
proposed adoption of OP–34:
Emergency Department Transfer
Communication (EDTC) (NQF #0291).
Thus, because we have not adopted any
new measures or policy changes for the
CY 2019 payment determination and
subsequent years, we expect the burden
to be unchanged for the CY 2019
payment determination as compared to
the CY 2018 payment determination and
subsequent years as discussed above.
We refer readers to the information
collection requirements in section
XIX.B.1. of this final rule with comment
period for a detailed discussion of the
financial and hourly burden of the
additional requirements for submitting
data to the Hospital OQR Program.
e. Effects of Requirements for the
ASCQR Program
As discussed in section XIV. of this
final rule with comment period, we are
finalizing our proposals to adopt
policies affecting the ASCQR Program.

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For the CY 2015 payment
determination, of the 5,260 ASCs that
met eligibility requirements for the
ASCQR Program, 116 ASCs did not
meet the requirements to receive the full
annual payment update.
We are not adding any quality
measures to the ASCQR measure set for
the CY 2018 payment determination.
We do not believe that the other
measures we previously adopted will
cause any additional ASCs to fail to
meet the ASCQR Program requirements.
(We refer readers to the CY 2015 OPPS/
ASC final rule with comment period (79
FR 66978 through 66979) for a list of
these measures.) In addition, we do not
believe that any of the other proposals
we are finalizing in this final rule with
comment period will increase the
number of ASCs that do not receive a
full annual payment update for the CY
2018 payment determination. We expect
a reduction in the number of ASCs that
do not receive a full annual payment
update for the CY 2018 payment
determination due to our finalizing our
proposal that IHS hospital outpatient
departments billing as ASCs will no
longer be considered ASCs for the
purposes of the ASCQR Program. Thus,
because CY 2016 and CY 2017 payment
determination information is not yet
available, using the CY 2015 payment
determination numbers as a baseline,
we estimate that approximately 115
ASCs will not receive the full annual
payment update in CY 2018 due to
failure to meet the ASCQR Program
requirements.
Based on the previously finalized
policies for the ASCQR program and the
proposals we are finalizing in this final
rule with comment period, we estimate
a total burden of approximately 4.34
hours per ASC for facilities not
submitting data for ASC–11 ([1,757
hours for ASC–6 and ASC–7 + 18,005
hours for ASC–8 + 3,067 hours for ASC–
9 and ASC–10]/5,260 ASCs = 4.34 hours
per ASC for all required measures) and
approximately 4.92 hours for facilities
voluntarily reporting data for ASC–11 65
(4.34 hours for reporting all required
measures + [613 hours for ASC–11/
1,052 ASCs] = 4.92 hours), or
approximately 23,442 hours (1,757
hours for ASC–6 and ASC–7 + 18,005
hours for ASC–8 + 3,067 hours for ASC–
9 and ASC–10 + 613 hours for ASC–11
= 23,442 hours) across all ASCs
associated with participating in the
ASCQR Program for the CY 2018
payment determination. We further
65 As noted in the CY 2015 OPPS/ASC final rule
with comment period, we anticipate that
approximately 20 percent of ASCs, or 1,052
facilities, would elect to report ASC–11 on a
voluntary basis (79 FR 67016).

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estimate a resulting total financial
burden of $130 per ASC for facilities not
submitting data for ASC–11 ([$52,710
for ASC–6 and ASC–7 + $540,150 for
ASC–8 + $92,010 for ASC–9 and ASC–
10]/5,260 ASCs = $130 per ASC for all
required measures) and approximately
$148 per ASC for facilities voluntarily
reporting data under ASC–11 ($130 for
all required measures + [$18,390/1,052
ASCs] = $148), or $703,260 ($52,710 for
ASC–6 and ASC–7 + $540,150 for ASC–
8 + $92,010 for ASC–9 and ASC–10 +
$18,390 for ASC–11 = $703,260) across
all ASCs.
We refer readers to the information
collection requirements in section
XIX.B.2. of this final rule with comment
period for a detailed discussion of the
financial and hourly burden of the
ASCQR Program’s current and newly
finalized requirements.
We invited public comment on the
burden associated with these proposals.
We did not receive any public
comments on these proposals.
f. Impact of the Policy Change for
Medical Review of Inpatient Hospital
Admissions Under Medicare Part A
As discussed in section XV. of this
final rule with comment period, we are
finalizing a policy change for medical
review of inpatient hospital admissions
under Medicare Part A. In this section,
we discuss the estimate by our actuaries
of the overall impact of the policy
change described in section XV. of this
final rule with comment period.
In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27649 through
27650), we discussed our actuaries’
estimate that our current 2-midnight
policy would increase IPPS
expenditures by approximately $220
million in FY 2014. These additional
expenditures were expected to result
from a net increase in hospital inpatient
encounters due to some outpatient
encounters spanning more than 2
midnights moving to the IPPS from the
OPPS, and some inpatient encounters of
less than 2 midnights moving from the
IPPS to the OPPS. We also proposed to
use our exceptions and adjustments
authority under section 1886(d)(5)(I)(i)
of the Act to offset this estimated $220
million in additional expenditures with
a ¥0.2 percent adjustment to the IPPS
rates. As discussed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50952
through 50954), after considering the
public comments we received, our
actuaries continued to estimate that
there would be approximately $220
million in additional expenditures
resulting from the 2-midnight rule and
we adopted the ¥0.2 percent
adjustment beginning in FY 2014.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
In the CY 2016 OPPS/ASC proposed
rule (80 FR 39369 through 39370), we
discussed our actuaries’ estimate that
overall IPPS expenditures would not be
significantly different under our
proposed policy change for the medical
review of inpatient hospital admissions
under Medicare Part A. For example,
our actuaries did not assume any
significant additional shifts between the
inpatient setting and the outpatient
setting as a result of the proposed policy
change relative to the shifts that had
been modeled for the original ¥0.2
percent estimate nor did they assume
any change in the assumption regarding
the 30-percent outpatient/inpatient
payment differential.
Although we received many public
comments questioning the validity of
the original ¥0.2 percent estimate and
some commenters asserted that we
should remove the ¥0.2 percent
adjustment in light of the proposed
policy change, none of these public
comments specifically addressed the
issue of whether or not the proposed
policy change that we are adopting for
the medical review of inpatient hospital
admissions under Medicare Part A
described in section XV. of this final
rule with comment period would have
a differential impact on expenditures
compared to the original policy.
As a result, after consideration of the
public comments we received, our
actuaries do not assume any significant
additional shifts between the inpatient
setting and the outpatient setting as a
result of the policy change we are
adopting for the medical review of
inpatient hospital admissions under
Medicare Part A described in section
XV. of this final rule with comment
period. In addition, after reviewing the
public comments we received, our
actuaries determined that there is no
change in the assumption regarding the
30-percent outpatient/inpatient
payment differential at the current time.
Therefore, our actuaries continue to
estimate that overall IPPS expenditures
would not be significantly different
under the policy change we are
adopting, and we are not changing the
¥0.2 percent adjustment at this time.
Regarding the public comments we
received questioning the validity of the
original ¥0.2 percent estimate, we note
that this issue has been the subject of
continuing litigation in Shands v.
Burwell, No. 14–263 (D.D.C.) and
consolidated cases. Since the CY 2016
OPPS/ASC proposed rule was
published, the court in Shands has
remanded the issue of the validity of the
original ¥0.2 percent estimate to the
Agency for further proceedings. Those
proceedings will include publication of

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a notice with comment period,
consideration of public comments, and
publication of a final notice. As a result,
we will soon be addressing the same
issues regarding the validity of the
original ¥0.2 percent adjustment in the
Shands remand proceedings that we
discussed in the proposed rule and on
which we invited public comments. We
do not believe it is efficient to separately
respond to two sets of public comments
on essentially the same issue—once
now and then once again as part of the
Shands remand proceedings. Therefore,
we will respond to all public comments
regarding the validity of the original
¥0.2 percent adjustment that we
received in response to the proposed
rule as part of the Shands remand
proceedings. Commenters are invited to
submit public comments as part of the
Shands remand proceedings if they
wish, whether or not they submitted
public comments in response to the CY
2016 OPPS/ASC proposed rule.
Commenters do not need to resubmit
public comments regarding the validity
of the original ¥0.2 percent adjustment
in the Shands remand proceedings that
they submitted in response to the
proposed rule. Again, we will respond
to all such public comments, in addition
to public comments submitted in the
Shands remand proceedings, as part of
those proceedings.
As we indicated in the CY 2016
OPPS/ASC proposed rule, our actuaries
will continue to review the claims
experience under the 2-midnight rule,
and we will take those reviews into
account during future rulemaking,
including potential future rulemaking
on the issue of whether or not the
proposed policy change that we are
adopting for the medical review of
inpatient hospital admissions under
Medicare Part A described in section
XV. of this final rule with comment
period would have a differential impact
on expenditures compared to the
original policy.
g. Impact of Transition for Former
MDHs Under the IPPS
In section XVI. of this final rule with
comment period, we are finalizing, with
modification, our proposed policy
relating to a transition period under the
IPPS for hospitals that lost their MDH
status because they are no longer in a
rural area as a result of the
implementation of the new OMB labor
market area delineations. A hospital is
eligible for designation as an MDH only
if it is either physically located in a
rural area or has been reclassified to a
rural area under 42 CFR 412.103. In the
CY 2016 OPPS/ASC proposed rule (80
FR 39354), we proposed to provide a

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transition period only for hospitals that
lost their MDH status because they are
no longer in a rural area due to the
implementation of the new OMB labor
market area delineations and are now
located in an all-urban State. After
consideration of the public comments
we received, in this final rule with
comment period, we are finalizing a
policy that, effective January 1, 2016,
payments to hospitals that (1) lost their
MDH status because they are no longer
in a rural area due to the
implementation of the new OMB
delineations in FY 2015 and (2) have
not reclassified from urban to rural
under the regulations at § 412.103 before
January 1, 2016, will transition from
payments based, in part, on the
hospital-specific rate to payments based
entirely on the Federal rate. For
discharges occurring on or after January
1, 2016, and before October 1, 2016,
these former MDHs will receive the
Federal rate plus two-thirds of 75
percent of the amount by which the
Federal rate payment is exceeded by the
hospital’s hospital-specific rate
payment. For FY 2017, that is, for
discharges occurring on or after October
1, 2016, and before October 1, 2017,
these former MDHs will receive the
Federal rate plus one-third of 75 percent
of the amount by which the Federal rate
payment is exceeded by the hospital’s
hospital-specific rate payment. For FY
2018, that is, for discharges occurring on
or after October 1, 2017, these former
MDHs will be paid based solely on the
Federal rate.
We are aware of eight providers that
were classified as MDHs prior to the
implementation of the new OMB
delineations on October 1, 2014, that
did not reclassify as rural under the
regulations at § 412.103. In order to
estimate the cost associated with the
transition period for these eight
providers, we used 12 months of FY
2014 MedPAR claims data and the FY
2016 payment rates. We estimated two
sets of payments for affected hospitals,
one calculated with MDH status in
which payment is calculated based on
the Federal rate plus 75 percent of the
amount by which the Federal rate
payment is exceeded by the hospitalspecific payment (referred to as the
hospital-specific payment add-on) and
the other without MDH status where
payment is based solely on the Federal
rate. We then took the difference
between these two payments to arrive at
the FY 2016 hospital-specific payment
add-on, that is, 75 percent of the amount
by which the Federal rate payment is
exceeded by the hospital-specific rate
payment. For the first year of the

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transition, we multiplied the hospitalspecific payment add-on amount by
three-quarters because the payment
transition is only effective for threequarters of FY 2016. We then multiplied
that product by two-thirds to calculate
the MDH transition payment for
discharges on or after January 1, 2016,
and before October 1, 2016. For the
second year of the transition, we
multiplied the hospital-specific
payment add-on amount by one-third to
calculate the MDH transition payment
for discharges on or after October 1,
2016, and before October 1, 2017. We
then added the transition payments
from the first and second year to arrive
at the total estimate of the costs
associated with the transition period for
affected former MDHs. We estimate the
costs to the Government associated with
the transition period for these hospitals
to be approximately $9 million.

jstallworth on DSK7TPTVN1PROD with RULES

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 $38.5
million or less in any single year or by
the hospital’s not-for-profit status. Most
ASCs and most CMHCs are considered
small businesses with total revenues of
$15 million or less in any single year.
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 649 small rural hospitals.
Therefore, we have prepared a
regulatory impact analysis that includes
the effects of the rule on small rural
hospitals. The full impact analysis is
reflected in Table 70 under section

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XXI.A. of this final rule with comment
period.
The analysis above, together with the
remainder of this preamble, provides a
regulatory flexibility analysis and a
regulatory impact analysis.

the estimated distributional impact
among ASC surgical specialties of the
MFP-adjusted CPI–U update factor of
0.3 percent for CY 2016.

C. Unfunded Mandates Reform Act
Analysis
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. That threshold
level is currently approximately $144
million. This final rule with comment
period does not mandate any
requirements for State, local, or tribal
governments, or for the private sector.

Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
costs on State and local governments,
preempts State law, or otherwise has
Federalism implications. We have
examined the OPPS and ASC provisions
included in this final rule with
comment period in accordance with
Executive Order 13132, Federalism, and
have determined that they will not have
a substantial direct effect on State, local
or tribal governments, preempt State
law, or otherwise have a Federalism
implication. As reflected in Table 70 of
this final rule with comment period, we
estimate that OPPS payments to
governmental hospitals (including State
and local governmental hospitals)
would decrease payment by 0.3 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
would 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.

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 2015. Table 70 demonstrates the
estimated distributional impact of the
OPPS budget neutrality requirements
that would result in a 0.4 percent
decrease in payments for all services
paid under the OPPS in CY 2016, after
considering all of the changes to APC
reconfiguration and recalibration, as
well as the OPD fee schedule increase
factor, adjustment to the conversion
factor to address the inflation in OPPS
payment rates resulting from excess
packaged payment under the OPPS for
laboratory tests, 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 would experience more
significant gains or losses in OPPS
payments in CY 2016.
The updates to the ASC payment
system for CY 2016 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 71 demonstrates

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XXII. Federalism Analysis

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.

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
42 CFR Part 413
Health facilities, Kidney diseases,
Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 416
Health facilities, Health professions,
Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 419
Hospitals, Medicare, Reporting and
recordkeeping requirements.
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
Subpart R—Provider Reimbursement
Determinations and Appeals
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 405.1801 is amended by—
a. Amending paragraph (a) by revising
the definition of ‘‘Contractor
determination’’.
■ b. Revising paragraph (b)(1).
The revisions read as follows:
■
■

jstallworth on DSK7TPTVN1PROD with RULES

§ 405.1801

Introduction.

(a) * * *
Contractor determination means the
following:
(1) With respect to a provider of
services that has filed a cost report
under §§ 413.20 and 413.24 of this
chapter, the term means a final
determination of the amount of total
reimbursement due the provider,
pursuant to § 405.1803 following the
close of the provider’s cost reporting
period, for items and services furnished
to beneficiaries for which
reimbursement may be made on a
reasonable cost basis under Medicare for
the period covered by the cost report.
(2) With respect to a hospital that
receives payments for inpatient hospital
services under the prospective payment
system (part 412 of this chapter), the
term means a final determination of the
total amount of payment due the
hospital, pursuant to § 405.1803
following the close of the hospital’s cost
reporting period, under that system for
the period covered by the final
determination.
(3) For purposes of appeal to the
Provider Reimbursement Review Board,

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the term is synonymous with the
phrases ‘‘intermediary’s final
determination,’’ ‘‘final determination of
the organization serving as its fiscal
intermediary,’’ ‘‘Secretary’s final
determination’’ and ‘‘final
determination of the Secretary,’’ as
those phrases are used in section
1878(a) of the Act, and with the phrases
‘‘final contractor determination’’ and
‘‘final Secretary determination’’ as those
phrases are used in this subpart.
(4) For purposes of § 405.376
concerning claims collection activities,
the term does not include an action by
CMS with respect to a compromise of a
Medicare overpayment claim, or
termination or suspension of collection
action on an overpayment claim, against
a provider or physician or other
supplier.
*
*
*
*
*
(b) * * *
(1) Providers. In order to be paid for
covered services furnished to Medicare
beneficiaries, a provider must file a cost
report with its contractor as specified in
§ 413.24 of this chapter. For purposes of
this subpart, the term ‘‘provider’’
includes a hospital (as described in part
482 of this chapter), hospice program (as
described in § 418.3 of this chapter),
critical access hospital (CAH),
comprehensive outpatient rehabilitation
facility (CORF), renal dialysis facility,
Federally qualified health center
(FQHC), home health agency (HHA),
rural health clinic (RHC), skilled
nursing facility (SNF), and any other
entity included under the Act. (FQHCs
and RHCs are providers, for purposes of
this subpart, effective with cost
reporting periods beginning on or after
October 1, 1991).
*
*
*
*
*
■ 3. Section 405.1803 is amended by
revising the paragraph (a) introductory
text to read as follows:
§ 405.1803 Contractor determination and
notice of amount of program
reimbursement.

(a) General requirement. Upon receipt
of a provider’s cost report, or amended
cost report where permitted or required,
the contractor must within a reasonable
period of time (as specified in
§ 405.1835(c)(1)), furnish the provider
and other parties as appropriate (see
§ 405.1805) a written notice reflecting
the contractor’s final determination of
the total amount of reimbursement due
the provider. The contractor must
include the following information in the
notice, as appropriate:
*
*
*
*
*
■ 4. Section 405.1811 is amended by
revising paragraphs (a), (b)(1), (b)(2)

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70597

introductory text, (b)(2)(iii), (b)(3), (e)(1),
and (e)(2), to read as follows:
§ 405.1811 Right to contractor hearing;
contents of, and adding issues to, hearing
request.

(a) Right to hearing on final contractor
determination. A provider (but no other
individual, entity, or party) has a right
to a contractor hearing, as a single
provider appeal, with respect to a final
contractor or Secretary determination
for the provider’s cost reporting period,
if—
(1) The provider is dissatisfied with
the contractor’s final determination of
the total amount of reimbursement due
the provider, as set forth in the
contractor’s written notice pursuant to
§ 405.1803. Exception: If a final
contractor determination is reopened
under § 405.1885, any review by the
contractor hearing officer must be
limited solely to those matters that are
specifically revised in the contractor’s
revised final determination
(§§ 405.1887(d), 405.1889(b), and the
‘‘Exception’’ in § 405.1832(c)(2)(i)).
(2) The amount in controversy (as
determined in accordance with
§ 405.1839) must be at least $1,000 but
less than $10,000.
(3) Unless the provider qualifies for a
good cause extension under § 405.1813,
the date of receipt by the contractor of
the provider’s hearing request must be
no later than 180 days after the date of
receipt by the provider of the final
contractor or Secretary determination.
(b) * * *
(1) A demonstration that the provider
satisfies the requirements for a
contractor hearing as specified in
paragraph (a) of this section, including
a specific identification of the final
contractor or Secretary determination
under appeal.
(2) For each specific item under
appeal, a separate explanation of why,
and a description of how, the provider
is dissatisfied with the specific aspects
of the final contractor or Secretary
determination under appeal, including
an account of all of the following:
*
*
*
*
*
(iii) If the provider self-disallows a
specific item (as specified in § 413.24(j)
of this chapter), an explanation of the
nature and amount of each selfdisallowed item, the reimbursement
sought for the item, and why the
provider self-disallowed the item
instead of claiming reimbursement for
the item.
(3) A copy of the final contractor or
Secretary determination under appeal
and any other documentary evidence
the provider considers necessary to
satisfy the hearing request requirements

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of paragraphs (b)(1) and (b)(2) of this
section.
*
*
*
*
*
(e) * * *
(1) The request to add issues complies
with the requirements of paragraphs (a)
and (b), or paragraphs (c) and (d), of this
section as to each new specific item at
issue.
(2) The specific items raised in the
initial hearing request and the specific
items identified in subsequent requests
to add issues, when combined, satisfy
the amount in controversy requirements
of paragraph (a)(2) or paragraph (c)(3) of
this section.
*
*
*
*
*
§ 405.1813

[Amended]

5. In § 405.1813, paragraphs (a) and
(b) are amended by removing the crossreference ‘‘§ 405.1811(a)(3) of this
subpart’’ and adding in its place the
cross-reference ‘‘§ 405.1811(a)(3) or
§ 405.1811(c)(2)’’.

■

§ 405.1814

[Amended]

6. Section 405.1814 is amended by
removing paragraph (b)(3).
■ 7. A new § 405.1832 is added to read
as follows:
■

jstallworth on DSK7TPTVN1PROD with RULES

§ 405.1832 Contractor hearing officer
review of compliance with the substantive
reimbursement requirement of an
appropriate cost report claim.

(a) General. In order to receive or
potentially qualify for reimbursement
for a specific item, the provider must
include in its cost report an appropriate
claim for the specific item (as prescribed
in § 413.24(j) of this chapter). If the
provider files an appeal to the
contractor seeking reimbursement for a
specific item and any party to such
appeal questions whether the provider’s
cost report included an appropriate
claim for the specific item, the
contractor hearing officer(s) must
address such questions in accordance
with the procedures set forth in this
section.
(b) Summary of procedures—(1)
Preliminary steps. The contractor
hearing officer(s) must give each party
to the appeal an adequate opportunity to
submit factual evidence and legal
argument regarding the question of
whether the provider’s cost report
included an appropriate claim for the
specific item under appeal. Upon
receipt of timely submitted factual
evidence and legal argument (if any),
the contractor hearing officer(s) must
review such evidence and argument,
and prepare written specific findings of
fact and conclusions of law on the
question of whether the provider’s cost
report complied with, for the specific

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item under appeal, the cost report claim
requirements prescribed in § 413.24(j) of
this chapter. In reaching such specific
factual findings and legal conclusions,
the contractor hearing officer(s) must
follow the procedures set forth in
§ 413.24(j)(3) of this chapter for
determining whether the provider’s cost
report included an appropriate claim for
the specific item under appeal. The
contractor hearing officer(s) must
promptly give a copy of such written
specific factual findings and legal
conclusions to each party to the appeal,
and such factual findings and legal
conclusions must be included in the
record of administrative proceedings for
the appeal (as prescribed in § 405.1827).
(2) Limits on contractor hearing
officer(s) actions. The contractor hearing
officer(s)’s specific findings of fact and
conclusions of law (in accordance with
paragraph (b)(1) of this section) must
not be invoked or relied on by the
contractor hearing officer(s) as a basis to
deny, or decline to exercise, jurisdiction
over a specific item or take any other of
the actions specified in paragraph (c) of
this section. Upon giving the parties to
the appeal the contractor hearing
officer(s)’s written specific factual
findings and legal conclusions
(pursuant to paragraph (b)(1) of this
section) on the question of whether the
provider’s cost report included an
appropriate cost report claim for the
specific item under appeal, the
contractor hearing officer(s) must
proceed to issue one of the two types of
overall decisions specified in
paragraphs (d) and (e) of this section
with respect to the specific item. If the
contractor hearing officer(s) issues an
overall contractor hearing decision (as
specified in paragraph (d) of this
section) regarding the specific item
under appeal, the contractor hearing
officer(s)’s written specific factual
findings and legal conclusions (in
accordance with paragraph (b)(1) of this
section) must be included in such
overall contractor hearing decision
regarding the specific item, along with
the other matters that are required by
the regulations for an overall contractor
hearing decision. However, if the
contractor hearing officer(s) issues an
overall jurisdictional dismissal decision
(as specified in paragraph (e) of this
section) regarding the specific item
under appeal, the contractor hearing
officer(s)’s written specific factual
findings and legal conclusions (in
accordance with paragraph (b)(1) of this
section) must not be included in the
overall jurisdictional dismissal decision
regarding the specific item. The
contractor hearing officer(s) may permit

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reimbursement for the specific item
under appeal, as part of an overall
contractor hearing decision, but such
reimbursement may be permitted only
to the extent authorized by paragraph (f)
of this section.
(c) Prohibition of certain types of
decisions, orders, and other actions. (1)
If the contractor hearing officer(s)
determines, in its findings of fact and
conclusions of law (as prescribed by
paragraph (b)(1) of this section), that the
provider’s cost report did not include an
appropriate claim for the specific item
under appeal, the contractor hearing
officer(s) may not—
(i) Deny jurisdiction over the specific
item under appeal, based on (in whole
or in part) the contractor hearing
officer(s)’s factual findings and legal
conclusions (reached under paragraph
(b)(1) of this section);
(ii) Decline to exercise jurisdiction
over the specific item under appeal,
based on (in whole or in part) the
contractor hearing officer(s)’s factual
findings and legal conclusions (reached
under paragraph (b)(1) of this section);
or
(iii) Impose any sanction or take any
other action against the interests of any
party to the appeal except as provided
in paragraph (f) of this section, based on
(in whole or in part) the contractor
hearing officer(s)’s factual findings and
legal conclusions (in accordance with
paragraph (b)(1) of this section).
(2) Regardless of whether the
contractor hearing officer(s) determines,
in its findings of fact and conclusions of
law (as prescribed by paragraph (b)(1) of
this section), that the provider’s cost
report did or did not include an
appropriate claim for the specific item
under appeal, the contractor hearing
officer(s) may not—
(i) Deny jurisdiction over the specific
item under appeal, based on (in whole
or in part) the absence, in the final
contractor or Secretary determination
under appeal, of an adjustment,
revision, correction, or other change to
the specific item under appeal, or the
lack of a particular determination by the
contractor or the Secretary regarding the
specific item. Exception: If the
provider’s appeal of the specific item is
based on a reopening of such item
(pursuant to § 405.1885) where the
specific item is not revised, adjusted,
corrected, or otherwise changed in a
revised final contractor or Secretary
determination, the contractor must deny
jurisdiction over the specific item under
appeal (as prescribed in §§ 405.1887(d)
and 405.1889(b));
(ii) Decline to exercise jurisdiction
over the specific item under appeal,
based on (in whole or in part) the

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
absence, in the final contractor or
Secretary determination under appeal,
of an adjustment, revision, correction, or
other change to the specific item under
appeal, or the lack of a particular
determination by the contractor or the
Secretary regarding the specific item; or
(iii) Impose any sanction or take any
other action against the interests of any
party to the appeal except as provided
in paragraph (f) of this section, based on
(in whole or in part) the absence, in the
final contractor or Secretary
determination under appeal, of an
adjustment, revision, correction, or
other change to the specific item under
appeal, or the lack of a particular
determination by the contractor or the
Secretary regarding the specific item.
(d) Contractor hearing decision must
include any factual findings and legal
conclusions under paragraph (b)(1) of
this section. If the contractor hearing
officer(s) issues a hearing decision
regarding the specific item under appeal
(pursuant to § 405.1831), any specific
findings of fact and conclusions of law
by the contractor hearing officer(s)
(reached under paragraph (b)(1) of this
section), on the question of whether the
provider’s cost report included an
appropriate claim for the specific item,
must be included in such hearing
decision along with the other matters
prescribed by § 405.1831. The contractor
hearing officer(s)’s factual findings and
legal conclusions (in accordance with
paragraph (b)(1) of this section) about
whether there was an appropriate cost
report claim for the specific item under
appeal are subject to the provisions of
§ 405.1833 just as those provisions
apply to the other parts of the contractor
hearing decision. If the contractor
hearing officer(s) determines that the
provider’s cost report—
(1) Included an appropriate claim for
the specific item under appeal (as
prescribed in § 413.24(j) of this chapter),
the contractor hearing decision also
must address whether the other
substantive reimbursement
requirements for the specific item are
also satisfied; or
(2) Did not include an appropriate
claim for the specific item under appeal,
the contractor hearing officer(s) has
discretion whether or not to address in
the contractor hearing decision whether
the other substantive reimbursement
requirements for the specific item are
also satisfied.
(e) Contractor jurisdictional dismissal
decision must not include factual
findings and legal conclusions under
paragraph (b)(1) of this section. If the
contractor hearing officer(s) issues a
jurisdictional dismissal decision
regarding the specific item under appeal

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(in accordance with § 405.1814(c)), the
contractor hearing officer(s)’s specific
findings of fact and conclusions of law
(in accordance with paragraph (b)(1) of
this section) on the question of whether
the provider’s cost report included an
appropriate claim for the specific item
must not be included in such
jurisdictional dismissal decision.
(f) Effects of the contractor hearing
officer(s)’s factual findings and legal
conclusions under paragraph (b)(1) of
this section when part of a final
contractor hearing decision. If the
contractor hearing officer(s) determines,
as part of a final and binding contractor
hearing decision (pursuant to § 405.1833
and paragraphs (b)(1) and (d) of this
section), that the provider’s cost
report—
(1) Included an appropriate claim for
the specific item under appeal (as
prescribed in § 413.24(j) of this chapter),
the specific item is reimbursable in
accordance with Medicare policy, but
only if the contractor hearing officer(s)
further determines in such final
contractor hearing decision that all the
other substantive reimbursement
requirements for the specific item are
also satisfied; or
(2) Did not include an appropriate
cost report claim for the specific item
under appeal, the specific item is not
reimbursable, regardless of whether the
contractor hearing officer(s) further
determines in such final contractor
hearing decision that the other
substantive reimbursement
requirements for the specific item are or
are not satisfied.
■ 8. Section 405.1834 is amended by
adding a new paragraph (b)(2)(iii) to
read as follows:
§ 405.1834 CMS reviewing official
procedure.

*

*
*
*
*
(b) * * *
(2) * * *
(iii) If the CMS reviewing official
reviews a contractor hearing decision
regarding a specific item, then the CMS
reviewing official’s review of such a
contractor hearing decision will
include, and any decision issued by the
CMS reviewing official (under
paragraph (e) of this section) will
address, the contractor hearing
officer(s)’s specific findings of fact and
conclusions of law in such contractor
hearing decision (as specified in
§ 405.1832(b)(1) and (d)) on the question
of whether the provider’s cost report
included an appropriate claim for the
specific item under appeal (as specified
in § 413.24(j) of this chapter).
*
*
*
*
*

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70599

9. Section 405.1835 is amended by
revising paragraphs (a), (b)(1), (b)(2)
introductory text, (b)(2)(iii), (b)(3), (e)(1),
and (e)(2), to read as follows:

■

§ 405.1835 Right to Board hearing;
contents of, and adding issues to, hearing
request.

(a) Right to hearing on final contractor
determination. A provider (but no other
individual, entity, or party) has a right
to a Board hearing, as a single provider
appeal, with respect to a final contractor
or Secretary determination for the
provider’s cost reporting period, if—
(1) The provider is dissatisfied with
the contractor’s final determination of
the total amount of reimbursement due
the provider, as set forth in the
contractor’s written notice specified
under § 405.1803. Exception: If a final
contractor determination is reopened
under § 405.1885, any review by the
Board must be limited solely to those
matters that are specifically revised in
the contractor’s revised final
determination (§§ 405.1887(d),
405.1889(b), and the ‘‘Exception’’ in
§ 405.1873(c)(2)(i)).
(2) The amount in controversy (as
determined in accordance with
§ 405.1839) must be $10,000 or more.
(3) Unless the provider qualifies for a
good cause extension under § 405.1836,
the date of receipt by the Board of the
provider’s hearing request must be no
later than 180 days after the date of
receipt by the provider of the final
contractor or Secretary determination.
(b) * * *
(1) A demonstration that the provider
satisfies the requirements for a Board
hearing as specified in paragraph (a) of
this section, including a specific
identification of the final contractor or
Secretary determination under appeal.
(2) For each specific item under
appeal, a separate explanation of why,
and a description of how, the provider
is dissatisfied with the specific aspects
of the final contractor or Secretary
determination under appeal, including
an account of all of the following:
*
*
*
*
*
(iii) If the provider self-disallows a
specific item (as specified in § 413.24(j)
of this chapter), an explanation of the
nature and amount of each selfdisallowed item, the reimbursement
sought for the item, and why the
provider self-disallowed the item
instead of claiming reimbursement for
the item.
(3) A copy of the final contractor or
Secretary determination under appeal
and any other documentary evidence
the provider considers necessary to
satisfy the hearing request requirements

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of paragraphs (b)(1) and (b)(2) of this
section.
*
*
*
*
*
(e) * * *
(1) The request to add issues complies
with the requirements of paragraphs (a)
and (b), or paragraphs (c) and (d), of this
section as to each new specific item at
issue.
(2) The specific items raised in the
initial hearing request and the specific
items identified in subsequent requests
to add issues, when combined, satisfy
the amount in controversy requirements
of paragraph (a)(2) or paragraph (c)(3) of
this section.
*
*
*
*
*
§ 405.1836

[Amended]

10. In § 405.1836, paragraph (a) is
amended by removing the crossreference ‘‘§ 405.1835(a)(3) of this
subpart’’ and adding in its place the
cross-reference ‘‘§ 405.1835(a)(3) or
§ 405.1835(c)(2)’’; and paragraph (b) is
amended by removing the crossreference ‘‘§ 405.1835(a)(3)’’ and adding
in its place the cross-reference
‘‘§ 405.1835(a)(3) or § 405.1835(c)(2)’’.
■ 11. Section 405.1837 is amended by
revising paragraphs (a) introductory
text, (a)(1), (c)(2) introductory text,
(c)(2)(iii), (c)(3), and (e)(4) to read as
follows:
■

jstallworth on DSK7TPTVN1PROD with RULES

§ 405.1837

Group appeals.

(a) Right to Board hearing as part of
a group appeal: Criteria. A provider (but
no other individual, entity, or party) has
a right to a Board hearing, as part of a
group appeal with other providers, with
respect to a final contractor or Secretary
determination for the provider’s cost
reporting period, only if—
(1) The provider satisfies individually
the requirements for a Board hearing
under § 405.1835(a) or § 405.1835(c),
except for the $10,000 amount in
controversy requirement in
§ 405.1835(a)(2) or § 405.1835(c)(3).
*
*
*
*
*
(c) * * *
(2) An explanation (for each specific
item at issue) of each provider’s
dissatisfaction with the final contractor
or Secretary determination under
appeal, including an account of—
*
*
*
*
*
(iii) If the provider self-disallows a
specific item (as specified in § 413.24(j)
of this chapter), an explanation of the
nature and amount of each selfdisallowed item, the reimbursement
sought for the item, and why the
provider self-disallowed the item
instead of claiming reimbursement for
the item.

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(3) A copy of each final contractor or
Secretary determination under appeal,
and any other documentary evidence
the providers consider to satisfy the
hearing request requirements of
paragraphs (c)(1) and (c)(2) of this
section, and a precise description of the
one question of fact or interpretation of
law, regulations, or CMS Rulings that is
common to the particular matter at issue
in the group appeal.
*
*
*
*
*
(e) * * *
(4) A provider may submit a request
to the Board to join a group appeal any
time before the Board issues one of the
decisions specified in § 405.1875(a)(2).
By submitting a request, the provider
agrees that, if the request is granted, the
provider is bound by the Board’s actions
and decision in the appeal. If the Board
denies a request, the Board’s action is
without prejudice to any separate
appeal the provider may bring in
accordance with § 405.1811, § 405.1835,
or this section. For purposes of
determining timeliness for the filing of
any separate appeal and for the adding
of issues to such appeal, the date of
receipt of the provider’s request to form
or join the group appeal is considered
the date of receipt for purposes of
meeting the applicable 180-day period
prescribed in § 405.1835(a)(3) or
§ 405.1835(c)(2).
*
*
*
*
*
§ 405.1839

[Amended]

12. In § 405.1839, paragraph (a)(1) is
amended by removing the crossreference ‘‘§ 405.1811(a)(2) of this
subpart’’ and adding in its place the
cross-reference ‘‘§ 405.1811(a)(2) or
§ 405.1811(c)(3)’’; and by removing the
cross-reference ‘‘§ 405.1835(a)(2) of this
subpart’’ and adding in its place the
cross-reference ‘‘§ 405.1835(a)(2) or
§ 405.1835(c)(3)’’.

■

§ 405.1840

[Amended]

13. Section 405.1840 is amended by
removing paragraph (b)(3).
■ 14. A new § 405.1873 is added to read
as follows:
■

§ 405.1873 Board review of compliance
with the reimbursement requirement of an
appropriate cost report claim.

(a) General. In order to receive or
potentially receive reimbursement for a
specific item, the provider must include
in its cost report an appropriate claim
for the specific item (as prescribed in
§ 413.24(j) of this chapter). If the
provider files an appeal to the Board
seeking reimbursement for the specific
item and any party to such appeal
questions whether the provider’s cost

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report included an appropriate claim for
the specific item, the Board must
address such question in accordance
with the procedures set forth in this
section.
(b) Summary of procedures—(1)
Preliminary steps. The Board must give
the parties an adequate opportunity to
submit factual evidence and legal
argument regarding the question of
whether the provider’s cost report
included an appropriate claim for the
specific item under appeal. Upon
receipt of timely submitted factual
evidence or legal argument (if any), the
Board must review such evidence and
argument and prepare written specific
findings of fact and conclusions of law
on the question of whether the
provider’s cost report complied with, for
the specific item under appeal, the cost
report claim requirements prescribed in
§ 413.24(j) of this chapter. In reaching
such specific factual findings and legal
conclusions, the Board must follow the
procedures set forth in § 413.24(j)(3) of
this chapter for determining whether the
provider’s cost report included an
appropriate claim for the specific item
under appeal. The Board must promptly
give a copy of such written specific
factual findings and legal conclusions to
each party to the appeal, and such
factual findings and legal conclusions
must be included in the record of
administrative proceedings for the
appeal (as prescribed in § 405.1865).
(2) Limits on Board actions. The
Board’s specific findings of fact and
conclusions of law (pursuant to
paragraph (b)(1) of this section) must
not be invoked or relied on by the Board
as a basis to deny, or decline to exercise,
jurisdiction over a specific item or take
any other of the actions specified in
paragraph (c) of this section. Upon
giving the parties to the appeal the
Board’s written specific factual findings
and legal conclusions (pursuant to
paragraph (b)(1) of this section) on the
question of whether the provider’s cost
report included an appropriate cost
report claim for the specific item under
appeal, the Board must proceed to issue
one of the four types of overall decisions
specified in paragraphs (d) and (e) of
this section with respect to the specific
item. If the Board issues either of two
types of overall Board decisions (as
specified in paragraph (d) of this
section) regarding the specific item
under appeal, the Board’s written
specific factual findings and legal
conclusions (pursuant to paragraph
(b)(1) of this section) must be included
in such overall Board decision regarding
the specific item, along with the other
matters that are required by the
regulations for the pertinent type of

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Federal Register / Vol. 80, No. 219 / Friday, November 13, 2015 / Rules and Regulations
overall Board decision. However, if the
Board issues either of two other types of
overall Board decisions (as specified in
paragraph (e) of this section) regarding
the specific item under appeal, the
Board’s written specific factual findings
and legal conclusions (pursuant to
paragraph (b)(1) of this section) must
not be included in the overall Board
decision regarding the specific item.
The Board may permit reimbursement
for the specific item under appeal, as
part of one of the two types of overall
Board decisions that are specified in
paragraph (d) of this section, but such
reimbursement may be permitted only
to the extent authorized by paragraph (f)
of this section.
(c) Prohibition of certain types of
decisions, orders, and other actions. (1)
If the Board determines, in its findings
of fact and conclusions of law (as
prescribed by paragraph (b)(1) of this
section), that the provider’s cost report
did not include an appropriate claim for
the specific item under appeal, the
Board may not—
(i) Deny jurisdiction over the specific
item under appeal, based on (in whole
or in part) the Board’s factual findings
and legal conclusions (reached under
paragraph (b)(1) of this section);
(ii) Decline to exercise jurisdiction
over the specific item under appeal,
based on (in whole or in part) the
Board’s factual findings and legal
conclusions (reached under paragraph
(b)(1) of this section); or
(iii) Take any of the actions set forth
in § 405.1868(b), (c), or (d), impose any
sanction, or take any other action
against the interests of any party to the
appeal, except as provided in paragraph
(f) of this section, based on (in whole or
in part) the Board’s factual findings and
legal conclusions (reached under
paragraph (b)(1) of this section).
(2) Regardless of whether the Board
determines, in its findings of fact and
conclusions of law (as prescribed by
paragraph (b)(1) of this section), that the
provider’s cost report did or did not
include an appropriate claim for the
specific item under appeal, the Board
may not—
(i) Deny jurisdiction over the specific
item under appeal, based on (in whole
or in part) the absence, in the final
contractor determination or Secretary
determination under appeal, of an
adjustment, revision, correction, or
other change to the specific item under
appeal, or the lack of a particular
determination by the contractor or the
Secretary regarding the specific item.
Exception: If the provider’s appeal of the
specific item is based on a reopening of
such item (pursuant to § 405.1885)
where the specific item is not revised,

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adjusted, corrected, or otherwise
changed in a revised final contractor or
Secretary determination, the Board must
deny jurisdiction over the specific item
under appeal (as prescribed in
§§ 405.1887(d) and 405.1889(b));
(ii) Decline to exercise jurisdiction
over the specific item under appeal,
based on (in whole or in part) the
absence, in the final contractor
determination or Secretary
determination under appeal, of an
adjustment, revision, correction, or
other change to the specific item under
appeal, or the lack of a particular
determination by the contractor or the
Secretary regarding the specific item; or
(iii) Take any of the actions set forth
in § 405.1868(b), (c), or (d), impose any
sanction, or take any other action
against the interests of any party to the
appeal, except as provided in paragraph
(f) of this section, based on (in whole or
in part) the absence, in the final
contractor determination or Secretary
determination under appeal, of an
adjustment, revision, correction, or
other change to the specific item under
appeal, or the lack of a particular
determination by the contractor or the
Secretary regarding the specific item.
(d) Two types of Board decisions that
must include any factual findings and
legal conclusions under paragraph
(b)(1) of this section—(1) Board hearing
decision. If the Board issues a hearing
decision regarding the specific item
under appeal (pursuant to § 405.1871),
any specific findings of fact and
conclusions of law by the Board (in
accordance with paragraph (b)(1) of this
section), on the question of whether the
provider’s cost report included an
appropriate claim for the specific item,
must be included in such hearing
decision along with the other matters
prescribed by § 405.1871(a). The Board’s
factual findings and legal conclusions
(reached under paragraph (b)(1) of this
section), about whether there was an
appropriate cost report claim for the
specific item under appeal, are subject
to the provisions of § 405.1871(b) just as
those provisions apply to the other parts
of the Board’s hearing decision. If the
Board determines that the provider’s
cost report—
(i) Included an appropriate claim for
the specific item under appeal (as
prescribed in § 413.24(j) of this chapter),
the Board’s hearing decision must also
address whether the other substantive
reimbursement requirements for the
specific item are also satisfied; or
(ii) Did not include an appropriate
claim for the specific item under appeal,
the Board has discretion whether or not
to address in the Board’s hearing
decision whether the other substantive

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70601

reimbursement requirements for the
specific item are also satisfied.
(2) Board expedited judicial review
(EJR) decision, where EJR is granted. If
the Board issues an EJR decision where
EJR is granted regarding a legal question
that is relevant to the specific item
under appeal (in accordance with
§ 405.1842(f)(1)), the Board’s specific
findings of fact and conclusions of law
(reached under paragraph (b)(1) of this
section), on the question of whether the
provider’s cost report included an
appropriate claim for the specific item,
must be included in such EJR decision
along with the other matters prescribed
by § 405.1842(f)(1). The Board’s factual
findings and legal conclusions (in
accordance with paragraph (b)(1) of this
section) about whether there was an
appropriate cost report claim for the
specific item under appeal are subject to
the provisions of § 405.1842(g)(1), (g)(2),
(h)(1), and (h)(3) in the same manner as
those provisions apply to the other parts
of the Board’s EJR decision.
(e) Two other types of Board decisions
that must not include the Board’s
factual findings and legal conclusions
under paragraph (b)(1) of this section—
(1) Board jurisdictional dismissal
decision. If the Board issues a
jurisdictional dismissal decision
regarding the specific item under appeal
(pursuant to § 405.1840(c)), the Board’s
specific findings of fact and conclusions
of law (in accordance with paragraph
(b)(1) of this section), on the question of
whether the provider’s cost report
included an appropriate claim for the
specific item, must not be included in
such jurisdictional dismissal decision.
(2) Board expedited judicial review
(EJR) decision, where EJR is denied. If
the Board issues an EJR decision where
EJR is denied regarding a legal question
that is relevant to the specific item
under appeal (in accordance with
§ 405.1842(f)(2)), the Board’s specific
findings of fact and conclusions of law
(in accordance with paragraph (b)(1) of
this section), on the question of whether
the provider’s cost report included an
appropriate claim for the same item,
must not be included in such EJR
decision. If the Board conducts further
proceedings and issues another decision
(as specified in § 405.1842(h)(2)(i)), the
Board’s specific findings of fact and
conclusions of law (in accordance with
paragraph (b)(1) of this section)—
(i) Must be included in any further
hearing decision or EJR decision where
EJR is granted regarding the specific
item under appeal (as specified in
paragraph (d) of this section); but
(ii) Must not be included in any
further jurisdictional dismissal decision
or EJR decision where EJR is denied

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regarding the specific item under appeal
(as prescribed in paragraph (e) of this
section).
(f) Effects of the Board’s factual
findings and legal conclusions under
paragraph (b)(1) of this section in two
types of final decisions—(1) When part
of a final hearing decision. If the Board
determines, or the Administrator of
CMS determines (pursuant to
§ 405.1875(a)(2)(v)), as applicable, in a
final and binding hearing decision (in
accordance with § 405.1871(b) and
paragraphs (b)(1) and (d)(1) of this
section), that the provider’s cost
report—
(i) Included an appropriate claim for
the specific item under appeal (as
prescribed in § 413.24(j) of this chapter),
the specific item is reimbursable in
accordance with Medicare policy, but
only if the Board further determines in
such final hearing decision that all the
other substantive reimbursement
requirements for the specific item are
also satisfied; or
(ii) Did not include an appropriate
cost report claim for the specific item
under appeal, the specific item is not
reimbursable, regardless of whether the
Board further determines in such final
hearing decision that the other
substantive reimbursement
requirements for the specific item are or
are not satisfied.
(2) When part of a final EJR decision
that grants EJR. If the Board determines
or the Administrator of CMS determines
(pursuant to § 405.1875(a)(2)(v)), as
applicable, in a final and binding EJR
decision that grants EJR regarding a
legal question that is relevant to the
specific item under appeal (in
accordance with § 405.1842(g)(1) and
paragraphs (b)(1) and (d)(2) of this
section), that the provider’s cost
report—
(i) Included an appropriate claim for
the specific item under appeal (as
prescribed in § 413.24(j) of this chapter),
the specific item is reimbursable in
accordance with Medicare policy, but
only to the extent permitted by the final
decision of a Federal court pursuant to
the EJR provisions of section 1878(f)(1)
of the Act (refer also to §§ 405.1842 and
405.1877); or
(ii) Did not include an appropriate
claim for the specific item under appeal,
the specific item is not reimbursable,
unless—
(A) The specific factual findings and
legal conclusions (in accordance with
paragraph (b)(1) of this section) of the
Board or the Administrator, as
applicable, on the question of whether
the provider’s cost report included an
appropriate claim for the specific item
under appeal, are reversed or modified

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by the final decision of a Federal court
(in accordance with section 1878(f)(1) of
the Act and § 405.1877); and
(B) Only to the extent otherwise
permitted by the final decision of a
Federal court pursuant to the EJR
provisions of section 1878(f)(1) of the
Act (refer also to §§ 405.1842 and
405.1877) and by Medicare policy.

■

15. Section 405.1875 is amended by
revising the last sentence of paragraph
(a) introductory text and adding a new
paragraph (a)(2)(v) to read as follows:

■

■

§ 405.1875

Administrator review.

(a) * * * The Board is required to
send to the Office of the Attorney
Advisor a copy of each decision
specified in paragraphs (a)(2)(i), (ii), and
(iii) of this section upon issuance of the
decision.
*
*
*
*
*
(2) * * *
(v) If the Administrator reviews a
Board hearing decision regarding a
specific item, or for a Board EJR
decision the question of whether there
is Board jurisdiction over a specific
item, the Administrator’s review of such
a hearing decision or EJR decision, as
applicable, will include, and any
decision issued by the Administrator
(under paragraph (e) of this section) will
address, the Board’s specific findings of
fact and conclusions of law in such
hearing decision or EJR decision (as
prescribed in § 405.1873(b)(1) and (d))
on the question of whether the
provider’s cost report included an
appropriate claim for the specific item
under appeal (as prescribed in
§ 413.24(j) of this chapter).
*
*
*
*
*
PART 410—SUPPLEMENTARY
MEDICAL INSURANCE (SMI)
BENEFITS
16. The authority citation for Part 410
continues to read as follows:

■

Authority: Secs. 1102, 1834, 1871, and
1893 of the Social Security Act (42 U.S.C.
1302, 1395m, 1395hh, and 1395ddd).

17. Section 410.29 is amended by
revising paragraph (a) to read as follows:

■

§ 410.29 Limitations on drugs and
biologicals.

*

*
*
*
*
(a) Except as provided in § 410.28(a)
for outpatient diagnostic services and
§ 410.63(b) for blood clotting factors,
and except for EPO, any drug or
biological which is usually selfadministered by the patient.
*
*
*
*
*

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PART 412—PROSPECTIVE PAYMENT
SYSTEMS FOR INPATIENT HOSPITAL
SERVICES
18. The authority citation for Part 412
continues to read as follows:

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh), sec. 124 of Pub. L. 106–113 (113
Stat. 1501A–332), sec. 1206 of Pub. L. 113–
67, and sec 112 of Pub. L. 113–93.

19. Section 412.3 is amended by
revising paragraph (d) to read as
follows:

§ 412.3

Admissions.

*

*
*
*
*
(d)(1) Except as specified in
paragraphs (d)(2) and (3) of this section,
an inpatient admission is generally
appropriate for payment under
Medicare Part A when the admitting
physician expects the patient to require
hospital care that crosses two
midnights.
(i) The expectation of the physician
should be based on such complex
medical factors as patient history and
comorbidities, the severity of signs and
symptoms, current medical needs, and
the risk of an adverse event. The factors
that lead to a particular clinical
expectation must be documented in the
medical record in order to be granted
consideration.
(ii) If an unforeseen circumstance,
such as a beneficiary’s death or transfer,
results in a shorter beneficiary stay than
the physician’s expectation of at least 2
midnights, the patient may be
considered to be appropriately treated
on an inpatient basis, and payment for
an inpatient hospital stay may be made
under Medicare Part A.
(2) An inpatient admission for a
surgical procedure specified by
Medicare as inpatient only under
§ 419.22(n) of this chapter is generally
appropriate for payment under
Medicare Part A, regardless of the
expected duration of care.
(3) Where the admitting physician
expects a patient to require hospital care
for only a limited period of time that
does not cross 2 midnights, an inpatient
admission may be appropriate for
payment under Medicare Part A based
on the clinical judgment of the
admitting physician and medical record
support for that determination. The
physician’s decision should be based on
such complex medical factors as patient
history and comorbidities, the severity
of signs and symptoms, current medical
needs, and the risk of an adverse event.
In these cases, the factors that lead to
the decision to admit the patient as an
inpatient must be supported by the

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medical record in order to be granted
consideration.
PART 413—PRINCIPLES OF
REASONABLE COST
REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE
SERVICES; OPTIONAL
PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED
NURSING FACILITIES
20. The authority citation for Part 413
continues to read as follows:

■

Authority: Secs. 1102, 1812(d), 1814(b),
1815, 1833(a), (i), and (n), 1861(v), 1871,
1881, 1883 and 1886 of the Social Security
Act (42 U.S.C. 1302, 1395d(d), 1395f(b),
1395g, 1395l(a), (i), and (n), 1395x(v),
1395hh, 1395rr, 1395tt, and 1395ww); and
sec. 124 of Pub. L. 106–113 (113 Stat. 1501A–
332), sec. 3201 of Pub. L. 112–96 (126 Stat.
156), sec. 632 of Pub. L. 112–240 (126 Stat.
2354), and sec. 217 of Pub. L. 113–93.

21. Section 413.24 is amended by
adding and reserving paragraph (i), and
adding a new paragraph (j), to read as
follows:

■

§ 413.24
finding.

Adequate cost data and cost

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*

*
*
*
*
(i) [Reserved]
(j) Substantive reimbursement
requirement of an appropriate cost
report claim—(1) General requirement.
In order for a provider to receive or
potentially qualify for reimbursement
for a specific item for its cost reporting
period, the provider’s cost report,
whether determined on an as submitted,
as amended, or as adjusted basis (as
prescribed in paragraph (j)(3) of this
section), must include an appropriate
claim for the specific item, by either—
(i) Claiming full reimbursement in the
provider’s cost report for the specific
item in accordance with Medicare
policy, if the provider seeks payment for
the item that it believes comports with
program policy; or
(ii) Self-disallowing the specific item
in the provider’s cost report, if the
provider seeks payment that it believes
may not be allowable or may not
comport with Medicare policy (for
example, if the provider believes the
contractor lacks the authority or
discretion to award the reimbursement
the provider seeks for the item), by
following the procedures (set forth in
paragraph (j)(2) of this section) for
properly self-disallowing the specific
item in the provider’s cost report as a
protested amount.
(2) Self-disallowance procedures. In
order to properly self-disallow a specific
item, the provider must—
(i) Include an estimated
reimbursement amount for each specific

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self-disallowed item in the protested
amount line (or lines) of the provider’s
cost report; and
(ii) Attach a separate work sheet to the
provider’s cost report for each specific
self-disallowed item, explaining why
the provider self-disallowed each
specific item (instead of claiming full
reimbursement in its cost report for the
specific item) and describing how the
provider calculated the estimated
reimbursement amount for each specific
self-disallowed item.
(3) Procedures for determining
whether there is an appropriate cost
report claim. Whether the provider’s
cost report for its cost reporting period
includes an appropriate claim for a
specific item (as prescribed in paragraph
(j)(1) of this section) must be determined
by reference to the cost report that the
provider submits originally to, and was
accepted by, the contractor for such
period, provided that none of the
following exceptions applies:
(i) If the provider submits an amended
cost report for its cost reporting period
and such amended cost report is
accepted by the contractor, then
whether there is an appropriate cost
report claim for the specific item must
be determined by reference to such
amended cost report, provided that
neither of the exceptions set forth in
paragraphs (j)(3)(ii) and (iii) of this
section applies;
(ii) If the contractor adjusts the
provider’s cost report, as submitted
originally by the provider and accepted
by the contractor or as amended by the
provider and accepted by the contractor,
whichever is applicable, with respect to
the specific item, then whether there is
an appropriate cost report claim for the
specific item must be determined by
reference to the provider’s cost report,
as such cost report claim is adjusted for
the specific item in the final contractor
determination (as defined in
§ 405.1801(a) of this chapter) for the
provider’s cost reporting period,
provided that the exception set forth in
paragraph (j)(3)(iii) of this section does
not apply;
(iii) If the contractor reopens either
the final contractor determination for
the provider’s cost reporting period
(pursuant to § 405.1885 of this chapter)
or a revised final contractor
determination for such period (issued
pursuant to § 405.1889 of this chapter)
and the contractor adjusts the provider’s
cost report with respect to the specific
item, then whether there is an
appropriate cost report claim for the
specific item must be determined by
reference to the provider’s cost report,
as such cost report claim is adjusted for
the specific item in the most recent

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70603

revised final contractor determination
for such period.
(4) Reimbursement effects of
contractor’s determination of whether
there is an appropriate cost report
claim. If the contractor determines that
the provider’s cost report included an
appropriate claim for a specific item (as
specified in paragraphs (j)(1), (2), and
(3) of this section) and that all the other
substantive reimbursement
requirements for the specific item are
also satisfied, the final contractor
determination (as defined in
§ 405.1801(a) of this chapter) must
include reimbursement for the specific
item to the extent permitted by
Medicare policy. If the contractor
determines that the provider made an
appropriate cost report claim for a
specific item but the contractor
disagrees with material aspects of the
provider’s claim for the specific item,
the contractor must make appropriate
adjustments to the provider’s cost report
and include reimbursement for the
specific item in the final contractor
determination in accordance with such
cost report adjustments and to the
extent permitted by program policy. If
the contractor determines that the
provider did not make an appropriate
cost report claim for a specific item, the
final contractor determination must not
include any reimbursement for the
specific item, regardless of whether the
other substantive reimbursement
requirements for the specific item are or
are not satisfied.
(5) Administrative review of whether
there is an appropriate cost report
claim. If the provider files an
administrative appeal (pursuant to Part
405, Subpart R of this chapter) seeking
reimbursement for a specific item and
any party to such appeal questions
whether the provider’s cost report
included an appropriate claim for the
specific item under appeal (as specified
in paragraphs (j)(1), (2), (3), and (4) of
this section), the reviewing entity (as
defined in § 405.1801(a) of this chapter)
must follow the procedures prescribed
in § 405.1873 of this chapter (if the
appeal was filed originally with the
Board), or the procedures set forth in
§ 405.1832 of this chapter (if the appeal
was filed initially with the contractor),
for review of whether the substantive
reimbursement requirement of an
appropriate cost report claim for the
specific item under appeal is satisfied.
The reviewing entity must follow the
procedures set forth in paragraph (j)(3)
of this section in determining whether
the provider’s cost report included an
appropriate claim for the specific item
under appeal. The reviewing entity may
permit reimbursement for the specific

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item under appeal solely to the extent
authorized by § 405.1873(f) of this
chapter (if the appeal was filed
originally with the Board) or by
§ 405.1832(f) of this chapter (if the
appeal was filed initially with the
contractor).
PART 416—AMBULATORY SURGICAL
SERVICES
22. The authority citation for Part 416
continues to read as follows:

■

Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).

23. Section 416.164 is amended by
revising paragraph (b)(3) to read as
follows:

■

§ 416.164

Scope of ASC services.

*

*
*
*
*
(b) * * *
(3) Certain items and services that
CMS designates as contractor-priced,
including, but not limited to, the
acquisition or procurement of corneal
tissue for corneal transplant procedures;
*
*
*
*
*
■ 24. Section 416.172 is amended by
revising paragraph (f) to read as follows:
§ 416.172 Adjustments to national
payment rates.

jstallworth on DSK7TPTVN1PROD with RULES

*

*
*
*
*
(f) Interrupted procedures. (1) Subject
to the provisions of paragraph (f)(2) of
this section, when a covered surgical
procedure or covered ancillary service is
terminated prior to completion due to
extenuating circumstances or
circumstances that threaten the wellbeing of the patient, the Medicare
program payment amount and the
beneficiary coinsurance amount are
based on one of the following:
(i) The full program and beneficiary
coinsurance amounts if the procedure
for which anesthesia is planned is
discontinued after the induction of
anesthesia or after the procedure is
started;
(ii) One-half of the full program and
beneficiary coinsurance amounts if the
procedure for which anesthesia is
planned is discontinued after the
patient is prepared for surgery and taken
to the room where the procedure is to
be performed but before the anesthesia
is induced; or
(iii) One-half of the full program and
beneficiary coinsurance amounts if a
covered surgical procedure or covered
ancillary service for which anesthesia is
not planned is discontinued after the
patient is prepared and taken to the
room where the service is to be
provided.
(2) Beginning CY 2016, if the covered
surgical procedure is a device-intensive

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procedure, the full device portion of the
ASC device-intensive procedure is
removed prior to determining the
Medicare program payment amount and
the beneficiary coinsurance amount
identified in paragraph (f)(1)(ii) of this
section.
*
*
*
*
*
■ 25. Section 416.195 is amended by
revising paragraph (a)(1) to read as
follows:
§ 416.195 Determination of membership in
new classes of new technology IOLs.

(a) * * *
(1) The IOL is considered new. CMS
will evaluate an application for a new
technology IOL only if the IOL type has
received initial FDA premarket approval
within the 3 years prior to the new
technology IOL application submission
date.
*
*
*
*
*
■ 26. Subpart H is added to read as
follows:
Subpart H—Requirements Under the
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
Sec.
416.300 Basis and scope of subpart.
416.305 Participation and withdrawal
requirements under the ASCQR Program.
416.310 Data collection and submission
requirements under the ASCQR Program.
416.315 Public reporting of data under the
ASCQR Program.
416.320 Retention and removal of quality
measures under the ASCQR Program.
416.325 Measure maintenance under the
ASCQR Program.
416.330 Reconsiderations under the ASCQR
Program.

Subpart H—Requirements Under the
Ambulatory Surgical Center Quality
Reporting (ASCQR) Program
§ 416.300

Basis and scope of subpart.

(a) Statutory basis. Section
1833(i)(2)(D)(iv) and (i)(7) of the Act
authorizes the Secretary to implement a
revised ASC payment system in a
manner so as to provide for a 2.0
percentage point reduction in any
annual update for an ASC’s failure to
report on quality measures in
accordance with the Secretary’s
requirements.
(b) Scope. This subpart contains
specific requirements and standards for
the ASCQR Program.
§ 416.305 Participation and withdrawal
requirements under the ASCQR Program.

(a) Participation in the ASCQR
Program. Except as provided in
paragraph (c) of this section, an
ambulatory surgical center (ASC) is
considered as participating in the
ASCQR Program once the ASC submits

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any quality measure data to the ASCQR
Program and has been designated as
open in the Certification and Survey
Provider Enhanced Reporting system for
at least four months prior to the
beginning of data collection for a
payment determination.
(b) Withdrawal from the ASCQR
Program. (1) An ASC may withdraw
from the ASCQR Program by submitting
to CMS a withdrawal of participation
form that can be found in the secure
portion of the QualityNet Web site.
(2) An ASC may withdraw from the
ASCQR Program any time up to and
including August 31 of the year
preceding a payment determination.
(3) Except as provided in paragraph
(c) of this section, an ASC will incur a
2.0 percentage point reduction in its
ASC annual payment update for that
payment determination year and any
subsequent payment determinations in
which it is withdrawn.
(4) An ASC will be considered as
rejoining the ASCQR Program if it
begins to submit any quality measure
data again to the ASCQR Program.
(c) Minimum case volume for program
participation. ASCs with fewer than 240
Medicare claims (Medicare primary and
secondary payer) per year during an
annual reporting period for a payment
determination year are not required to
participate in the ASCQR Program for
the subsequent annual reporting period
for that subsequent payment
determination year.
(d) Indian Health Service hospital
outpatient department participation.
Beginning with the CY 2017 payment
determination, Indian Health Service
hospital outpatient departments that bill
Medicare under the Ambulatory
Surgical Center payment system are not
considered ASCs for the purposes of the
ASCQR Program. These facilities are not
required to meet ASCQR Program
requirements and will not receive
payment reductions under the ASCQR
Program.
§ 416.310 Data collection and submission
requirements under the ASCQR Program.

(a) Requirements for claims-based
measures using quality data codes
(QDCs). (1) ASCs 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.
(2) The data collection period for
claims-based quality measures reported
using QDCs is the calendar year 2 years
prior to the payment determination
year. Only claims for services furnished
in each calendar year paid by the
Medicare Administrative Contractor

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(MAC) by April 30 of the following year
of the ending data collection time
period will be included in the data used
for the payment determination year.
(3) For ASCQR Program purposes,
data completeness for claims-based
measures using QDCs is 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 that meet measure
specifications, but do not have the
appropriate QDCs on the submitted
Medicare claim. The minimum
threshold for successful reporting is that
at least 50 percent of Medicare claims
meeting measure specifications contain
the appropriate QDCs. ASCs that meet
this minimum threshold are regarded as
having provided complete data for the
claims-based measures using QDCs for
the ASCQR Program.
(b) Requirements for claims-based
measures not using QDCs. The data
collection period for claims-based
quality measures not using QDCs is paid
Medicare fee-for-service claims from the
calendar year 2 years prior to the
payment determination year. Only
claims for services furnished in each
calendar year paid by the MAC by April
30 of the following year of the ending
data collection time period will be
included in the data used for the
payment determination.
(c) Requirements for data submitted
via an online data submission tool—(1)
Requirements for data submitted via a
CMS online data submission tool—(i)
QualityNet account for Web-based
measures. ASCs must maintain a
QualityNet account in order to submit
quality measure data to the QualityNet
Web site for all Web-based measures
submitted via a CMS online data
submission tool. A QualityNet security
administrator is necessary to set-up
such an account for the purpose of
submitting this information.
(ii) Data collection requirements. The
data collection time period for quality
measures for which data are submitted
via a CMS online data submission tool
is for services furnished during the
calendar year 2 years prior to the
payment determination year. Data
collected must be submitted during the
time period of January 1 to August 15
in the year prior to the payment
determination year.
(2) Requirements for data submitted
via a non-CMS online data submission
tool. The data collection time period for
ASC–8: Influenza Vaccination Coverage
Among Healthcare Personnel is from
October 1 of the year 2 years prior to the
payment determination year to March

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31 during the year prior to the payment
determination year. Data collected must
be submitted by May 15 in the year
prior to the payment determination
year.
(d) Extension or exemption. CMS may
grant an extension or exemption for the
submission of information in the event
of extraordinary circumstances beyond
the control of an ASC, or a systematic
problem with one of CMS’ data
collection systems directly or indirectly
affects data submission. CMS may grant
an extension or exemption as follows:
(1) Upon request of the ASC. Specific
requirements for submission of a request
for an extension or exemption are
available on the QualityNet Web site; or
(2) At the discretion of CMS. CMS
may grant extensions or exemptions to
ASCs that have not requested them
when CMS determines that an
extraordinary circumstance has
occurred.
§ 416.315 Public reporting of data under
the ASCQR Program.

Data that an ASC submitted for the
ASCQR Program will be made publicly
available on a CMS Web site after
providing the ASC an opportunity to
review the data to be made public. CMS
will publicly display ASC data by the
National Provider Identifier (NPI) when
data are submitted by the NPI. CMS will
publicly display ASC data by the CMS
Certification Number (CCN) when data
are submitted by the CCNs.
§ 416.320 Retention and removal of quality
measures under the ASCQR Program.

(a) General rule for the retention of
quality measures. Quality measures
adopted for an ASCQR Program measure
set for a previous payment
determination year are retained in the
ASCQR Program for measure sets for
subsequent payment determination
years, except when they are removed,
suspended, or replaced as set forth in
paragraphs (b) and (c) of this section.
(b) Immediate measure removal. In
cases where CMS believes that the
continued use of a measure as specified
raises patient safety concerns, CMS will
immediately remove a quality measure
from the ASCQR Program and will
promptly notify ASCs and the public of
the removal of the measure and the
reasons for its removal through the
ASCQR Program ListServ and the
ASCQR Program QualityNet Web site.
CMS will confirm the removal of the
measure for patient safety concerns in
the next ASCQR Program rulemaking.
(c) Measure removal, suspension, or
replacement through the rulemaking
process. Unless a measure raises
specific safety concerns as set forth in

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70605

paragraph (b) of this section, CMS will
use the regular rulemaking process to
remove, suspend, or replace quality
measures in the ASCQR Program to
allow for public comment.
(1) Criteria for removal of quality
measures. (i) CMS will use the
following criteria to determine whether
to remove a measure from the ASCQR
Program:
(A) Measure performance among
ASCs is so high and unvarying that
meaningful distinctions and
improvements in performance can no
longer be made (topped-out measures);
(B) Availability of alternative
measures with a stronger relationship to
patient outcomes;
(C) A measure does not align with
current clinical guidelines or practice;
(D) The availability of a more broadly
applicable (across settings, populations,
or conditions) measure for the topic;
(E) The availability of a measure that
is more proximal in time to desired
patient outcomes for the particular
topic;
(F) The availability of a measure that
is more strongly associated with desired
patient outcomes for the particular
topic; and
(G) Collection or public reporting of a
measure leads to negative unintended
consequences other than patient harm.
(ii) The benefits of removing a
measure from the ASCQR Program will
be assessed on a case-by-case basis. A
measure will not be removed solely on
the basis of meeting any specific
criterion.
(2) Criteria to determine topped-out
measures. For the purposes of the
ASCQR Program, a measure is
considered to be topped-out under
paragraph (c)(1)(i)(A) of this section
when it meets both of the following
criteria:
(i) Statistically indistinguishable
performance at the 75th and 90th
percentiles (defined as when the
difference between the 75th and 90th
percentiles for an ASC’s measure is
within two times the standard error of
the full data set); and
(ii) A truncated coefficient of
variation less than or equal to 0.10.
§ 416.325 Measure maintenance under the
ASCQR Program.

(a) Measure maintenance under the
ASCQR Program. CMS follows different
procedures to update the measure
specifications under the ASCQR
Program based on whether the change is
substantive or nonsubstantive. CMS will
determine what constitutes a
substantive versus a nonsubstantive
change to a measure’s specifications on
a case-by-case basis.

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(b) Substantive changes. CMS will
continue to use rulemaking to adopt
substantive updates to measures in the
ASCQR Program.
(c) Nonsubstantive changes. If CMS
determines that a change to a measure
previously adopted in the ASCQR
Program is nonsubstantive, CMS will
use a subregulatory process to revise the
ASCQR Program Specifications Manual
so that it clearly identifies the changes
to that measure and provide links to
where additional information on the
changes can be found. When a measure
undergoes subregulatory maintenance,
CMS will provide notification of the
measure specification update on the
QualityNet Web site and in the ASCQR
Program Specifications Manual, and
will provide sufficient lead time for
ASCs to implement the revisions where
changes to the data collection systems
would be necessary.

jstallworth on DSK7TPTVN1PROD with RULES

§ 416.330 Reconsiderations under the
ASCQR Program.

(a) Reconsiderations of ASCQR
Program decisions. An ASC may request
reconsideration of a decision by CMS
that it has not met the requirements of
the ASCQR Program for a particular
payment determination year. An ASC
must submit a reconsideration request
to CMS by no later than the first
business day on or after March 17 of the
affected payment year.
(b) Requirements for reconsideration
requests. A reconsideration request
must contain the following information:
(1) The ASC CCN and related NPI(s);
(2) The name of the ASC;
(3) The CMS-identified reason for not
meeting the requirements of the ASCQR
Program for the affected payment
determination year as provided in any
CMS notification to the ASC;
(4) The ASC’s basis for requesting
reconsideration. The ASC must identify
its specific reason(s) for believing it met
the ASCQR Program requirements for
the affected payment determination year
and should not be subject to the reduced
ASC annual payment update;
(5) The ASC-designated personnel
contact information, including name,
email address, telephone number, and
mailing address (must include physical
mailing address, not just a post office
box); and
(6) A copy of all materials that the
ASC submitted to comply with the
requirements of the affected ASCQR
Program payment determination year.
With regard to information on claims,
ASCs are not required to submit copies
of all submitted claims, but instead may
focus on the specific claims at issue. For
these claims, ASCs should submit
relevant information, which could

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include copies of the actual claims at
issue.
(c) Reconsideration process. Upon
receipt of a request for reconsideration,
CMS will do the following:
(1) Provide an email
acknowledgement, using the contact
information provided in the
reconsideration request, notifying the
ASC that the request has been received;
and
(2) Provide a formal response to the
ASC contact using the information
provided in the reconsideration request
notifying the ASC of the outcome of the
reconsideration process.
(d) Final ASCQR Program payment
determination. For an ASC that submits
a timely reconsideration request, the
reconsideration determination is the
final ASCQR Program payment
determination. For an ASC that does not
submit a timely reconsideration request,
the CMS determination is the final
payment determination. There is no
appeal of any final ASCQR Program
payment determination.
PART 419—PROSPECTIVE PAYMENT
SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES
27. The authority citation for Part 419
continues to read as follows:

■

Authority: Secs. 1102, 1833(t), and 1871
of the Social Security Act (42 U.S.C. 1302,
1395l(t), and 1395hh).

28. Section 419.2 is amended by
revising paragraph (c)(8) to read as
follows:

■

§ 419.2

Basis of payment.

*

*
*
*
*
(c) * * *
(8) Corneal tissue acquisition or
procurement costs for corneal transplant
procedures.
■ 29. Section 419.32 is amended by
adding new paragraph (b)(1)(iv)(B)(7) to
read as follows:
§ 419.32 Calculation of prospective
payment rates for hospital outpatient
services.

*

*
*
*
*
(b) * * *
(1) * * *
(iv) * * *
(B) * * *
(7) For calendar year 2016, a
multifactor productivity adjustment (as
determined by CMS), and 0.2 percentage
point.
*
*
*
*
*
■ 30. Section 419.44 is amended by
revising paragraph (b) to read as follows:
§ 419.44 Payment reductions for
procedures.

*

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(b) Interrupted procedures. (1) Subject
to the provisions of paragraph (b)(2) of
this section, when a procedure is
terminated prior to completion due to
extenuating circumstances or
circumstances that threaten the wellbeing of the patient, the Medicare
program payment amount and the
beneficiary copayment amount are
based on—
(i) The full program and beneficiary
copayment amounts if the procedure for
which anesthesia is planned is
discontinued after the induction of
anesthesia or after the procedure is
started;
(ii) One-half the full program and the
beneficiary copayment amounts if the
procedure for which anesthesia is
planned is discontinued after the
patient is prepared and taken to the
room where the procedure is to be
performed but before anesthesia is
induced; or
(iii) One-half of the full program and
beneficiary copayment amounts if a
procedure for which anesthesia is not
planned is discontinued after the
patient is prepared and taken to the
room where the procedure is to be
performed.
(2) Beginning CY 2016, if a procedure
involves an implantable device assigned
to a device-intensive APC, the full
device portion of the device-intensive
APC procedure payment is removed
prior to determining the program and
beneficiary copayment amounts
identified in paragraph (b)(1)(ii) of this
section.
■ 31. Section 419.46 is amended by
revising paragraphs (b), (d), (e), and
(f)(1) to read as follows:
§ 419.46 Participation, data submission,
and validation requirements under the
Hospital Outpatient Quality Reporting
(OQR) Program.

*

*
*
*
*
(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 up to and including August 31
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
participation form in order to
participate in any future year of the
Hospital OQR Program.
*
*
*
*
*

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jstallworth on DSK7TPTVN1PROD with RULES

(d) Exemption. CMS may grant an
extension or exemption 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
exemption as follows:
(1) Upon request by the hospital.
Specific requirements for submission of
a request for an extension or exemption
are available on the QualityNet Web
site.
(2) At the discretion of CMS. CMS
may grant extensions or exemptions 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(t)(17)(C) of the Act by reviewing
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

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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 calendar
year if it achieves at least a 75-percent
reliability score, as determined by CMS.
(f) * * *
(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 calendar 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 on or after March 17
of the affected payment year as
determined using the date the request
was mailed or submitted to CMS.
*
*
*
*
*
■ 32. Section 419.66 is amended by
revising paragraph (b)(1) to read as
follows:
§ 419.66 Transitional pass-through
payments: Medical devices.

*

*
*
*
*
(b) * * *
(1) If required by the FDA, the device
must have received FDA premarket

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approval or clearance (except for a
device that has received an FDA
investigational device exemption (IDE)
and has been classified as a Category B
device by the FDA in accordance with
§§ 405.203 through 405.207 and 405.211
through 405.215 of this chapter), or
meet another appropriate FDA
exemption for premarket approval or
clearance. Under this provision, the
pass-through payment application for a
medical device must be submitted
within 3 years from the date of the
initial FDA approval or clearance, if
required, unless there is a documented,
verifiable delay in U.S. market
availability after FDA approval or
clearance is granted, in which case CMS
will consider the pass-through payment
application if it is submitted within 3
years from the date of market
availability.
*
*
*
*
*
Dated: October 23, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare
and Medicaid Services.
Dated: October 26, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human
Services.
[FR Doc. 2015–27943 Filed 10–30–15; 4:15 pm]
BILLING CODE 4120–01–P

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